Re-Equipment of Generating Facilities
The following are the key areas of the Company's development within the framework of the investment activity:
- completion of the priority investment projects that are in progress;
- maintaining the balance of connected load and installed capacity of CHPPs after decommissioning of obsolete machinery;
- providing prospective heat supply to areas adjacent to TGC-1's CHPPs;
- implementation of the energy saving programme and improvement of energy efficiency, which will provide for modernization of outdated generating facilities and application of equipment with higher performance efficiency and totally different reliability level, in compliance with international standards;
- replacement of hydropower facilities that have reached marginal technical condition;
- implementation of projects for environmental protection, improvement of economic and ecological safety of power facilities.
In the period until 2016, the increase of new capacities and, consequently, the supply of electric power by members of the wholesale power market are limited by Capacity Supply Agreements. In Saint Petersburg, TGC-1 has built highly efficient up-to-date CCGT units with a total capacity of 1,280 MW. In 2010 – 2012, 2 180-MW CCGT units were brought into operation at the Pervomayskaya CHPP, a 450 MW CCGT unit at the Yuzhnaya CHPP, and a 450 MW CCGT unit at the Pravoberezhnaya CHPP. In addition, TGC-1 is working on renovation and retrofitting of main equipment at HPPs in the Republic of Karelia, Leningrad Oblast, and Murmansk Oblast, and commissioning of up-to-date process control systems, telemechanics and communication systems. By 2016, the Company plans to commission over 1,600 MW of new electric capacities.
In addition to the commissioning of new capacities, TGC-1 has begun to consistently decommission not only individual outdated units but also whole plants. The history of the Krasny Oktyabr power plant in Saint Petersburg is now over, the first CHPP built under the GOELRO plant plan. The next ones will be the exhausted power units of the Pervomayskaya and Central CHPPs. In order to cover existing and prospective heat load when the exhausted CHPP facilities are phased out, the Company is considering building boiler facilities similar to the construction of the integrated auxiliary building at the Pervomayskaya CHPP.
Grid Business Modernization
The heating grid business of the Company will face changes in the near future. The heating capacities urgently require renovation. Despite the connection of new consumers to TGC-1's power sources, heating consumption is unlikely to change due to the development of city programmes for energy saving and energy efficiency optimization. In order to ensure reliable and high quality heating supply to consumers of Saint Petersburg and Leningrad Oblast, taking into account future heat loads, the Company intends to optimize costs, attract external investors, and improve the efficiency of heating grids.
In Saint Petersburg and Leningrad Oblast, the heating grid business of the Company is operated by St. Petersburg Heating Grid (75 % of the share capital belongs to TGC-1 and 25 %, to GUP TEC of St. Petersburg), which delivers heat for sources at TGC-1 to end users. The main business of St. Petersburg Heating Grid is improving the reliability of the heat supply system and expanding TGC-1's heating supply area through construction of new heating pipelines, in order to connect the buildings of new residential quarters, and transferring consumers, who are currently using other heat sources with an expired life cycle, to the centralized heating supply from TGC-1's power sources.
In 2012, construction of the heating mains from the Apatitskaya CHPP to the Central Transformer Station in the city of Kirovsk in Murmansk Oblast continued. The heating mains are scheduled for commissioning in 2013, which will enable heat transfer from the Apatitskaya CHPP to heating grids of the towns of Apatity and Kirovsk. The project is implemented by Hibiny Heat Company JSC, which is owned in equal shares by TGC-1 and Apatit JSC, by investments in the authorized capital and borrowed funds of HHC.
Raising the Efficiency of Operations
A priority of the Company's business in the near future is raising the efficiency of its operations. Work in this area started in 2011 in cooperation with the international consultant Booz&Company. In 2012, the Programme for Raising Shareholder Value (Raising the Efficiency of Operations) was approved by the Board of Directors, and its development continues.
The main initiatives of the Company are the following:
- broad implementation of lean production tools at power plants of TGC-1; economy of fuel, energy, and natural resources, reduction of the duration and cost of repairs, and raising the productivity of operation and repair staff;
- optimization by evaluation of the economic efficiency of fixed costs;
- raising the share of competitive purchases and their efficiency by maximum use of market conditions;
- increasing the rate of collection of payments for heat and electric power;
- reducing and eliminating overdue accounts payable for delivered electric power and heating;
- sale of inefficient and non-core assets;
- reducing and eliminating inefficient stocks of trade and material stores.
In 2012 – 2014, implementation of lean production initiatives will raise the efficiency of operations (an additional RUR 363 million of EBITDA).
In 2012 – 2014, operation costs will be reduced by RUR 106 million. Efficient implementation of the competitive purchase programme will save RUR 581 million in operation costs and RUR 493 million in investment costs. In 2012, due to competitive purchasing, the cost of operation purchases was reduced by 9 % compared to the planned amount. The greatest efficiency in 2012 was achieved in the purchase of industrial services.
In 2012 – 2014, the effect of continuous work on collection of overdue accounts payable is estimated to reach RUR 200 million.
Sale of non-core assets is the main effect within implementation of the programme for raising operation efficiency. The total effect of the sale of non-core assets accounts for 57 % of the total programme. The largest parts of disposed non-core assets are: the car company, old parts of decommissioned CHPPs, and power plant switchgear.
In 2012, the total additional effect of the implementation of initiatives in the Programme for Raising the Efficiency of Operations amounted to RUR 1,358 million. The planned effect in 2013 – 2014 is RUR 1,618 million.
