Ready, Steady,
Gazprom Energy Day 2010
Denis Fedorov General Director, Gazprom Energoholding
September 2010 Disclaimer
The information contained herein has been prepared using information available to Gazprom Energoholding (or the Group) at the time of preparation of the presentation. External or other factors may have impacted on the business of Gazprom Energoholding and the content of this presentation, since its preparation. In addition all relevant information about Gazprom Energoholding may not be included in this presentation. No representation or warranty, expressed or implied, is made as to the accuracy, completeness or reliability of the information.
Any forward looking information herein has been prepared on the basis of a number of assumptions which may prove to be incorrect . Forward looking statements, by the nature, involve risk and uncertainty and Gazprom Energoholding cautions that actual results may differ materially from those expressed or implied in such statements. Reference should be made to the most recent Annual Report for a description of the major risk factors.
This presentation does not constitute or form part of any advertisement of securities, any offer or invitation to sell or issue or any solicitation of any offer to purchase or subscribe for, any shares in Gazprom Energoholding, nor shall it or any part of it nor the fact of its presentation or distribution form the basis of, or be relied on in connection with, any contract or investment decision.
22 2009 Results Highlights
Consolidation of Assets Maintenance of Strong Results
Achieved controlling stakes in 4 generating companies. In spite of difficult economic conditions, the Group’s generating companies demonstrated strong operating and financial results 1:
Company 2008 2009 2008 2009 Change,%
OGK-2 44,5% 50,3% Electricity output, bnkWh* 179,8 164,6 -8 OGK-6 42,9% 50,3% Heat output, mln. Gcal 94,4 99,1 5 Mosenergo 53,5% 53,5% Revenue, bnRR 211,2 236,6 12 TGC -1 28,7% 51,8% EBITDA , bn RR 11,8 30,5 159 * Due to decrease in electricity consumption in the Russian Federation. Approval of Investment Program Launch of the Long-term Capacity Market
Investment Program of the generating companies was approved. Main According to Government resolution #238 dated 13.04.2010 price characteristics of the Program are the following 1: characteristics for the long-term capacity market have been defined. These include: 2 Total installed capacity, GW 8,9 Calculated capital expenditures for capacity commissioning - commissioned, GW 1,86 Calculated service expenses Total cost, bn RR 365,5 Calculated payback period -financed, bnRR 153,9 (1) Group’s company data. Basic level of the rate of return on invested capital (2) Excluding Kaliningrad TTP-2. 3 Structure of the Group’s Energy Assets
100%
Core generating assets
53,5 % 51 ,8% 50 ,3% 50 ,3%
Non-core generating assets 3,7% 8,5% 10,5% 10,5% 5,0% 5,3% FSK UES of Inter RAO MRSK RAO Far East Energy TGC-5 OGK-5 Russia UES Holding Systems
4 Gazprom Energoholding – a Large Power Generation Player in Russia and the World
Installed Capacity of the World’s Largest1 Installed Capacity of Russian Generating Generating Companies, GW 1 Companies, GW 1
135 36 95 25,4 24,2 19,5 73 73 64 50 11,9 44 43 40 39 39 9,9 9,1 36 8,7 8,7 8,6 8,4 6,3 20 5,9 4,4 3,4
Electricity Output by the World’s Largest Generating Electricity Output by the Group’s Companies, bn kWh 1 Companies, bn kWh 1 1 619 OGK-6 407 29,0 320 Mosenergo 296 268 187 186 185 61,7 165 143 137 83 81
OGK-2 47,2
TGC-1 (1) Company 2009’ annual reports 26,7
5 1H 2010 Operating and Financial Results
Improvement of Operating and Financial Results Electricity Output, bn kWh 1 Total83,3 Total 86,0 Total 85,4 The company successfully overcame the recession period 13,1 16,4 16,7
Actual 1H 2010 operating and financial results were higher than 23,8 23,3 23,7 expected 14,2 14,4 13,5
Positive dynamics are expected in the future 32,2 31,9 31,5
6 m 2009 6 m 2010 6 m 2010 Plan
Revenue, bn RR (IFRS) 1 EBITDA, bn RR (IFRS) 1
Total 149,5 Total 20,6 Total 20,8 Total 120,7 Total 136,2 2,1 Total 16,8 22,7 4,1 22,6 3,1 20,4 24,9 2,1 1,8 2,3 21,8 5,6 19,4 27,2 4,7 23,0 4,5 21,2
9,7 10 8,2 74,7 59,7 68,8
6 m 2009 6 m 2010 6 m 2010 Plan 6 m 2009 6 m 2010 6 m 2010 Plan
(1) Group’s company data
6 Gazprom Group is Russia’s Most Responsible Investor in Power Generation
Complete and Timely Execution of Investment Э Installed Capacity of the Program, GW 1 Program Investment Program will be fully executed within the specified 8,9 time-frame Program Total All changes are economically reasonable and have been formally approved Commissioned as of The Group held first place in Russia for capacity 1,86 30.06.10 commissioning in 2008-2009 As of 2Q2010 38.6% of the Program has been financed (1) Excluding Kaliningradskaya TPP -2. The Group’s Share in Russian Capacity Cost of the Program, bn RR 1 Commissioning in 2008-2009, MW 1
Other generating 365,5 companies 43% GEH Program Total 57% 153,9 Financed as of 30.06.10
In 2010 the Group plans to install circa 2 GW of capacity
(1) Group’s company data 7 Long-Term Capacity Market
Main Price Characteristics Share of Capacity under Power Supply Agreements in Revenues from Capacity Sales, % According to Government Resolution #238 dated 13.04.2010 the following main price characteristics for capacity under Power Supply Mosenergo Agreements have been established: 11,9 35,6 Calculated capital expenses for 28,8-41,9 for gas generation New capacity capacity installation, thousand 88,1 RR / kW 49,2-53,5 for coal generation 64,4 Old capacity
Calculated maintenance 80 for gas generation expenses, thousand RR / MW 123 for coal generation 2008 2009 monthly Calculated maintenance expenses are subject to TGC-1 annual indexation 3,7 71-79 for gas generation 15,6 Share of capital expenditures New capacity compensated by capacity sales, 80 for coal generation 96,3 % The remaining part is compensated by the sale of 84,4 Old capacity electricity
2008 2009 15 for the capacity suppliers that did not issue Basic level of invested capital additional shares rate of return, % 14 for the remaining capacity suppliers Established price characteristics of Power Supply Agreements give advantages to generating companies and allow capital expenses to be Calculated payback period 10 Years paid back in a reasonable period of time
8 Main Strategic Directions for Gazprom Energoholding Development
Execution of Investment Program Reliability and Efficiency of Electricity Production
The Ministry of Energy forecasts growth of electricity demand An increased level of production reliability will be in Russia proven as the number of accidents decrease Increasing demand underlines necessity of new capacity Production efficiency will be shown via commissioning performance, high operating results and an increase in energy efficiency The Group plans to increase installed capacity from 36 GW to 44,8 GW (1) by 2020
Improvement of Management Efficiency Business Architecture Development
Administrative measures to centralize the management Consolidation of the current assets system will be performed at the Gazprom Energoholding Consolidation of OGK-2 and OGK-6 2 level Transition to the unified share Implementation of the management system based on the world’s best practices will allow GEH to improve operating Gazprom Energoholding IPO management efficiency
(1) Excluding capacity decommissioning (2) Corporate decisions on the consolidation are being discussed
9 Investment Program Execution
Planned Increase of Installed Capacity under Cost of the Investment Program, bn RR Capacity Delivery Contracts (DPM), GW
Total 365, 5 bn RR Financed Total 44,8 * 153, 9 Amount to be 42 % financed Total 36 211, 6 58 % 13,5 1 11,9 Electricity demand, bn kWh 2000 7,8 1860 6,3 1700 1710 1619 10,6 1400 1426 1388 1553 8,7 1419 1197 1100 1151 1288 985 1127 10,6 980 994 9,1 800 2,3 2006 2010 2015 2020 2025 2030 Maximum Current installed capacity Planned installed capacity (1) According to data from the Ministry of Basis Energy, July 2010 * Excluding capacity decommissioning General scheme (4,1 %) The Russian Ministry of Energy forecasts growth in electricity demand. Increasing demand underlines the necessity of new capacity commissioning 10 Reliability and Efficiency of Electricity Production
Energy efficiency is one of the measures to increase production efficiency
• Prioritize safety and ensure efficiency during production planning and allocation of investments to new construction and the refurbishment of generating assets • Prioritize efficient use of energy resources. • Systematic approach to increasing energy efficiency and ecological safety - correlation between targets, programs and execution methods
Fuel rate
Current equipment: After modernization: Novocherkasskaya GRES: Fuel rate – 324 gr/kWh Novocherkasskaya GRES: • The fuel rate will decrease with the Commissioning year – 2014 Fuel rate – 374 gr/kWh modernization of equipment Kirishskaya GRES: Kirishskaya GRES: • Power Supply Agreements for modernized Fuel rate – 222 1 gr/kWh Fuel rate - 348 gr/kWh objects have a big role in power sector Commissioning year – 2011 development
(1) For the new energy block CCGT-800 Production efficiency increase is expressed through operating results improvement
11 Improvement in Management Efficiency
Centralization of corporate functions at a corporate centre level and service centre level
Implementation of long-term planning with unified standards and a unified long- term financial model
Analysis, systematization and distribution of best practice among generating companies
Implementation of a unified ERP - system (SAP)
12 Business Architecture Development
Gazprom Energoholding has completed the first stage at this point
IPO Transition to unified share Consolidation of OGK-2 and OGK-6 Consolidation of current assets
Each stage of the business architecture is aimed at increasing the Company’s value
13 Consolidation of OGK-2 and OGK-6
Expected installed capacity after consolidation of OGK-2 and OGK-6 30 25 Installed capacities of Russia’s largest generating companies as of May 2010, GW 20 OGK-2 and OGK-6 consolidation 15 8,7 25,3 23,2 will allow the joint company to 10 become one of the largest power 11,9 (1) 5 9,1 9,9 8,7 8,6 8,5 7,5 generation companies in Russia 0
Increase of • OGK-2 and OGK-6 have a mutually complementary geographic position of assets: – The joint company will be represented in most of Russia’s Unified Energy Systems business scope – Enhanced positions in Unified Energy Systems of the North-West and South of Russia
• Reduction of general administrative and managerial expenses as a result of economies of scale and elimination of overlapping functions Synergy • Centralization of purchases, including fuel purchases • Centralized planning and implementation of a joint Investment Program • Introduction of consistent corporate governance standards
Corporate decisions upon this consolidation are being discussed. (1) Total installed capacities of Inter RAO UES stations, excluding OGK-1. 14 Key Results
Gazprom’s presence in power generation is one of the necessary conditions to achieving leadership in the global energy markets
Gazprom Group’s strategy in power generation is based on a long-term Program aimed at improvement of production and management efficiency as well as market capitalization growth
As a result of asset consolidation, Gazprom Energoholding has become the largest generation company in Russia in terms of installed capacity and financial results
The target structure for Gazprom Energoholding is a vertically integrated generation company with a single operating centre and a presence throughout the production chain
This model will improve operating efficiency and significantly reduce costs, which is one of the factors affecting market capitalization growth. Another key growth driver is the execution of M&A projects and the commission of new efficient capacities in both Russia and abroad
15 Market Concerns regarding Gazprom as the Major Shareholder
Market Concerns Mitigating concerns
• Gas sales to Gazprom Energoholding • According to Government Resolution gas is companies are at a higher price sold to Gazprom Energoholding companies at prices established by the Government
• Gazprom does not account for minority • Consolidation of OGK-2 and OGK-6 will be shareholder interests performed in partnership with leading investment banks in a transparent process
Advantages of Gazprom being the Major Shareholder
• The Group’s companies have the advantage of access to debt financing
• Execution of investment liabilities is guaranteed by main shareholder
• Operating efficiency improvement
• Gas supplies are guaranteed and stable Gazprom is an effective and responsible owner, which is interested in the market capitalization growth of Gazprom Energoholding companies
16 Appendix
17 TGC-1 (1/2)
Description Shareholder structure TGC-1 is a key power generation company and supplier of electricity and heat in the Northwestern 22,6% Federal District 51,8% The company operates in 4 regions of the Russian Federation: Saint-Petersburg, Leningrad and GEH Murmansk regions and the Republic of Karelia. TGC-1 includes 55 power generation stations. Generating assets consist of power generation Fortum Power and heat stations of different types: heat, hydro, diesel and combined. Share of Hydro Power Plants in total electricity output is about 50%. 25,7% Others Number of employees – more than 9 thousand people. Average year of capacity commissioning – 1973. Location of Assets Asset Details
Station Elecricity capacity MW Heat capacity Commissioning Gcal/h year Kolskiy branch Murmansk TPP Centralnaya TPP 78,5 1 414 1897 Electricity capacity – 12 MW Electricity capacity – 1 912 MW Pravoberezhnaya TPP-5 244 1 432 1922, 2006 Heat capacity – 1 111 Gcal/h Heat capacity – 735 Gcal/h Vasileostrovskaya TPP-7 85 1 084 1932,2009 Pervomayskaya TPP-14 330 1638 1957 Yuzhnaya TPP-22 800 2 250 1978 Avtovskaya TPP-15 321 1 833 1956,2007 Vyborgskaya TPP-17 255 1 060 1954 Severnaya TPP-21 500 1 185 1975 Dubrovskaya TPP-8 192 185 1933 Narvskaya TPP 125 - 1955 Cascade of Vuoksinskiye HPPs 195 - 1949,2009 Cascade of Ladozhskiye HPPs 342 - 1926-1956 Luzhskaya HPP-2 0,5 - 1954 Petrozavodskaya TPP 280 689 1976 Cascade of Vygskiye HPPs 240 - 1956-1967 Karelskiy branch Cascade of Kemskiye HPPs 330 - 1967-1991 Cascade of Sunskiye HPPs 51 - 1929-1954 Electricity capacity – 915 MW The group of small HPPs 12 - 1903-1947 Nevskiy branch Heat capacity – 689 Gcal/h Diesel Power plant 2 - 2005 Electricity capacity – 3 427,8 MW Cascade of Nivskiye HPPs 578 - 1934-1964 Heat capacity – 12 073 Gcal/h Cascade of Tulomskiye HPPs 324 - 1937-1965 Cascade of Pazskiye HPPs 188 - 1950-1970 Cascade of Serebryanskiye HPPs 512 - 1970-1987 Apatitskaya TPP 323 735 1959 Source: Group’s companies data Murmanskaya TPP 12 1 111 1934 TGC-1 6 315 14 362 18 TGC-1 (2/2)
MainMain Operating operating Results results Fuel Balance and Rate
27.0 100% Coal 26.8 90% Fuel oil 80% 4% 26.6 70% 7% 301 48,9% 49,8% 60% 26.4 41,9% 139 50% 26.2 40% 26.0 30% 20% 25.8 Gas 26,126,7 26,9 26,3 26,8 26,9 10% electricity, heat, 25.6 0% 89% g per kWh kg per Gcal 2007 2008 2009 Electricity output, Heat output, Installed capacity bn kWh mln Gcal utilization factor, % MainMain Financial financial Resultsresults Investment Program Project Capacity (increase), Commissioning 45.0 19,8% 20% MW date 40.0 LesogorskayaHPP-10 6 31 December 2011 35.0 15% LesogorskayaHPP-11 6 31 December 2012 30.0 9,0% LesogorskayaHPP-12 6 31 December 2013 25.0 10% PervomayskayaTPP-14 180 1 July 2010 20.0 8,8% 15.0 PervomayskayaTPP-14 180 1 July 2011 10.0 7,6 5% Pravoberezhnaya TPP-5 450 31 December 2012 3,4 5.0 2,3 2,8 SvetogorskayaHPP-11 7,25 31 December 2010 26,20,1 31,10,2 38,4 0.0 0% SvetogorskayaHPP-12 7,25 31 December 2011 2007 2008 2009 SvetogorskayaHPP-13 7,25 31 December 2012 Revenue, bn RR EBITDA, bn RR CentralnayaTPP 100 31 December 2015 Net profit, bn RR EBITDA margin, % Source: Group’s companies data, RSA financial statements YuzhnayaTPP-22 450 31 December 2010 19 Mosenergo (1/2)
Description Shareholder Structure
Mosenergo is one of the largest regional generating companies in Russia 20,1% Power plants of OJSC Mosenergo supply about 70% of electricity consumed in Moscow 53,5% GEH region and 66% of heat consumed in Moscow OJSC Mosenergo includes 15 Power Plants Moscow property Number of employees – more than 13 thousand people Department Average year of capacity commissioning - 1985 26,5% Others
Location of Assets Asset Details
Station Elecricity capacity MW Heat capacity Gcal/h Commissioning year Mosenergo HPP-1 95 951 1897 • Electricity capacity – 11 924 MW Heatcapacity – 34 865 Gcal/h GRES-3 604 480 1914 TPP-8 605 2 192 1930 TPP-9 210 560 1933 TPP-11 330 1 011 1931 TPP-12 418 2 031 1941 TPP-16 360 1 484 1945 TPP-17 192 712 1950 TPP-20 730 2 400 1952 TPP-21 1 800 4 958 1964 TPP-22 1 310 3 606 1960 TPP-23 1 420 4 530 1966 TPP-25 1 370 4 088 1976 TPP-26 1 420 3 986 1979 TPP-27 1 060 1 876 1996 Source: Group’s companies data Mosenergo 11 924 34 865 20 Mosenergo (2/2)
Main Operating Results Fuel Balance and Rate
66.0 100% 90% 65.0 68% 65% 80% Fuel oil Coal 64.0 59% 70% 0,6% 1,4% 63.0 60% 245 50% 166 62.0 40% 61.0 30% 20% 60.0 63,765,6 64,3 62,4 61,7 65,4 10% 59.0 0% electricity, heat, Gas g per kWh kg per Gcal 2007 2008 2009 98% Electricity output, Heat output, Installed capacity bn kWh mln Gcal utilization factor, % Main Financial Results Investment Program
120.0 20% Capacity (increase), Project Commissioning date 100.0 MW 15,9% 15% 80.0 TPP-12 220 31 December 2013 8,6% 60.0 10% TPP-16 420 31 December 2013 7,9% 40.0 5% 17,8 TPP-20 420 30 November 2014 20.0 6,2 8,1 1,4 4,5 78,00,7 94,4 112,1 TPP-26 420 30 November 2010 0.0 0% 2007 2008 2009 Revenue, bn RR EBITDA, bn RR TPP-9 61,5 30 June 2012 Net profit, bn RR EBITDA margin, % Source: Group’s companies data, RSA financial statements 21 OGK-2 (1/2)
Description Shareholder Structure
About 70% of generating capacity of OGK-2 is located in the Ural Federal District. 50,3% OGK-2 includes 5 Power Plants situated in Pskovskaya (Pskovskaya OJSC GRES), Sverdlovskaya (Serovskaya GRES), Chelyabinskaya (Troitskaya), Stavropolskiy Centrenrgoholding, (Stavropolskaya GRES) and Khanty-Mansiyskiy (Surgutskaya GRES) regions. MRG Ltd 1 49,7% 2nd place for installed capacity utilization factor among other OGKs. Others Number of employees – about 5 thousand people Average year of capacity commissioning– 1975. (1) 99% of OJSC Centrenergoholding is owned by Gazprom Energoholding Location of Assets Asset Details Serovskaya GRES Electricity capacity – 538 MW Pskovskaya GRES Heat capacity – 110 Gcal/h Electricity capacity – 430 MW Heat capacity – 121 Gcal/h Station Electricity Heat Commissio Surgutskaya GRES-1 capacity, MW capacity ning date Electricity capacity – 3 280 MW Gcal/h Heat capacity – 958 Gcal/h Pskovskaya GRES 430 121 1993
StavropolskayaGRES 2400 145 1975
TroitskayaGRES 2059 315 1960
Serovskaya GRES 538 110 1954 Troitskaya GRES Electricity capacity – 2 059 MW Stavropolskaya GRES Heat capacity – 315 Gcal/h SurgutskayaGRES-1 3280 958 1972 Electricity capacity – 2 400 MW Heat capacity – 145 Gcal/h OGK-2 8707 1649
Source: Group’s companies data
22 OGK-2 (2/2)
Main Operating Results Fuel Balance and Rate
60.0 100% 90% Coal Gas 50.0 80% 63% 65% 62% 23,7% 76% 40.0 70% 60% Fuel oil 30.0 50% 0,3% 347 40% 152 20.0 30% 10.0 20% 48,02,5 49,8 2,5 47,2 2,4 10% 0.0 0% electricity, heat, 2007 2008 2009 g per kWh kg per Gcal Electricity output, Heat output, Installed capacity bn kWh mln Gcal utilization factor, % Main Financial Results Investment Program
45.0 20% Capacity (increase), 40.0 Project Commissioning date 35.0 15% MW 30.0 Troitskaya GRES 660 30 November 2014 25.0 10% 8,9% 20.0 Serovskaya GRES 420 30 November 2014 15.0 5% 3,6% 10.0 -0,7% Stavropolskaya GRES 420 30 November 2016 3,6 5.0 1,7 0% 33,81,2 40,5 40,3 0,0 -0,3 -1,4 0.0 AdlerskayaTPP 180 31 October2012 -5.0 2007 2008 2009 -5% Revenue, bn RR EBITDA, bn RR AdlerskayaTPP 180 31 December2012 Net profit, bn RR EBITDA margin, % Source: Group’s companies data, RSA financial statements 23 OGK-6 (1/2)
Description Shareholder Structure
About 40% of generating capacity of OGK-6 is located in Unified Energy System Centre 50,3% 40,1% OGK-6 includes 6 GRES and operates in the following regions: Rostovskaya (Novocherkasskaya OJSC GRES), Leningradskaya (Kirishskaya), Ryazanskaya (Ryazanskaya GRES), Vologodskaya Centrenergoholding (Cherepovetskaya GRES) and Krasnoyarskaya (Krasnoyarskaya GRES-2) OJSC FSK UES Holds the 1st and 2nd places among other OGKs for installed electrical and heat capacity respectively Others Number of employees – more than 6 thousand people 9,6% Average year of capacity commissioning– 1975. Location of Assets Asset Details
Kirishskaya GRES Cherepovetskaya GRES Ryazanskaya GRES Station Electricity Heat capacity Commissioning Electricity capacity – 2 100 MW Electricity capacity – 630 MW Electricity capacity – 3 070 MW capacity, MW Gcal/h date Heat capacity – 1 234 Gcal/h Heat capacity – 39 Gcal/h Heat capacity – 180 Gcal/h Kirishskaya GRES 2 100 1 234 1965
CherepovetskayaGRES 630 39 1976
Ryazanskaya GRES 3 070 180 1974
Novocherkasskaya GRES 2 112 75 1965
KrasnoyarskayaGRES-2 1250 1176 1961
Novocherkasskaya GRES Krasnoyarskaya GRES-2 Electricity capacity – 2 112 MW Electricity capacity – 1 250 MW OGK-6 9162 2704 Heat capacity – 75 Gcal/h Heat capacity – 1 176 Gcal/h
Source: Group’s companies data 24 OGK-6 (2/2)
Main Operating Results Fuel Balance and Rate
45.0 100% 90% 40.0 Coal 366 35.0 80% 48% 30.0 70% 49% 60% Gas 152 25.0 43% 37% 50% 51% 20.0 40% 15.0 30% 10.0 Fuel oil 4,3 4,4 4,4 20% electricity, heat, 5.0 34,1 38,9 29,0 10% 1% 0.0 0% g per kWt/h kg per Gcal 2007 2008 2009 Electricity output, Heat output, Installed capacity bn kWh mln Gcal utilization factor, % Main Financial Results Investment Program 45.0 20% 40.0 Capacity (increase), 35.0 15% Project Commissioning date 12,5% MW 30.0 12,2% 10% Kirishskaya GRES 540 30 November 2011 25.0 3,8% 20.0 5% Novocherkasskaya GRES 330 30 November 2014 15.0
10.0 0% CherepovetskayaGRES 420 30 November2014 4,4 5,1 2,8 5.0 1,9 1,6 0,8 35,3 42,3 41,9 Ryazanskaya GRES 60 30 November 2014 0.0 -5% 2007 2008 2009 Novocherkasskaya GRES 36 31 December 2012 Revenue, bn RR EBITDA, bn RR Net profit, bn RR EBITDA margin, % Source: Group’s companies data, RSA financial statements 25