Situation in the Economy and the Energy Industry
GDP growth in 2012 slowed to 3.4 % from 4.3 % in 2011. In 2012, development of the Russian economy was characterized by a slowdown in investment and consumer demand, amid rising negative trends in the global economy and weakening external demand. That being said, the main factor of economic growth in 2012 remained the domestic demand for goods and services, supported by the growth in real earnings, bank lending and an increase in employment.
Overall, industrial production grew by 2.6 % in 2012 compared to 2011, including the production and distribution of electric power, gas and water, which grew by 1.2 %.
Consumer price inflation in 2012 was 6.6 %, exceeding the projected level of 6.0 % and last year's figure of 6.1 %. The projected rate was exceeded due to drought, crop failure and the global wave of rising grain prices.
The inflation of remaining costs in 2012 was more moderate due to the increase of regulated prices on energy sources in the middle of the year and the restricted growth of regulated tariffs of electric power by the level of anticipated inflation.
By the end of 2012, the total installed capacity of unified power system (UPS) of Russia power plants amounted to 223,070.8 MW. The increase was due to the installation of new generating equipment at 6,134.3 MW, as well as the modernization of existing equipment at 339.1 MW. Generating equipment with a capacity of 1,911.4 MW has been decommissioned. The installed capacity of North-West interconnected power system (IPS) stood at 23,389.9 MW on 01.01.2013, increasing by 4.1 % compared with the level in 2011.
Electricity generation by power stations in the UPS of Russia, including the production of electricity at industrial enterprise stations, amounted to 1,032.3 billion kWh in 2012 (growth from 2011 – 1.3 %): CHPPs – 699.5 billion kWh (increase of 1.2 %); HPPs – 155.4 billion kWh (decrease of 0.1 %); NPPs – 177.4 billion kWh (increase of 2.6 %). Generation by OGC power plants amounted to 352 billion kWh (an increase of 0.6 % from 2011) and TGC power stations was 255.3 billion kWh (decrease of 0.9 %).
The volume of electric power generation by North-West IPS in 2012 was 104,921.5 million kWh, or 10.2 % of total production by UPS of Russia. The decrease in generation by North-West IPS in 2012 in comparison to 2011 is 0.9 %. CHPPs and HPPs generation increased by 3.5 % and 12.5 % respectively, NPPs generation fell by 11.1 %, and generation by industrial enterprise power stations grew by 3.0 %.
Actual consumption of electricity by the UPS of Russia in 2012 amounted to 1,016,497.7 million kWh (including cross-border trade in the energy systems of Murmansk Oblast, the city of Saint Petersburg, and Leningrad Oblast totalling 753.7 million kWh), which is 1.6 % higher than 2011. Consumption by the North-West IPS increased by 0.7 % and amounted to 93,209.6 million kWh.
The annual maximum consumption by UPS of Russia was detected on 21 December 2012 at 10:00 (Moscow time) at a frequency of 50.00 Hz and amounted to 157,425 MW. At the same time, the load of UPS of Russia power plants was 158,986 MW.
Competitive Environment
Heat Market
TGC-1 conducts business by selling and distributing heat in Saint Petersburg, Leningrad Oblast (Nevsky Branch), Murmansk Oblast (Kolsky Branch, Murmanskaya CHPP) and the Republic of Karelia (Karelsky Branch).
Saint Petersburg
Currently, the main producers of heat in Saint Petersburg are as follows:
- TGC-1;
- GUP TEC of St. Petersburg;
- Peterburgteploenergo LLC;
- Severo-Zapadnaya TPP Branch of INTER RAO-Electrogeneratsiya JSC.
In addition, there are a number of heat producers in Saint Petersburg with an annual output of less than 1,000 thousand GCal per year, the total share of which does not exceed 5 % of useful output.
Leningrad Oblast
In Leningrad Oblast, TGC-1 sells heat in the Kirov, Vsyevolozhk and Lodeynopolsky Districts.
The Dubrovskaya CHPP of TGC-1's Nevsky Branch is the sole source of heat providing to Kirovsk city in Leningrad Oblast.
In the Lodeynopolsky District, all heat produced by electric boilers belonging to TGC-1 is sold to wholesale buyer-resellers Lodeynopolskaya Teploset LLC for providing heating to consumers in the town of Svirstroy.
The Severnaya CHPP of TGC-1's Nevsky Branch is the sole source of heat providing heating to consumers in the village of Novoe Devyatkino in Leningrad Oblast.
In summary, one can say that TGC-1 currently has no competitors in providing heat in Leningrad Oblast.
Murmansk Oblast
The Apatitskaya CHPP of TGC-1's Kolsky Branch is the only source of heat for Apatity city and its adjacent industrial zones.
Since 2011, TGC-1 has been implementing a project for the construction of heating mains from the Apatitskaya CHPP to Kirovsk city in Murmansk Oblast, in cooperation with the Government of Murmansk Oblast and Apatit JSC. The implementation of this project will expand TGC-1's zone of power supply and increase production at the Apatitskaya CHPP, which has a considerable power reserve. Completion of the project's construction is planned for the beginning of the 2013 – 2014 heating season.
Apart from the Apatitskaya CHPP, TGC-1's subsidiary company Murmanskaya CHPP provides heating output in Murmansk Oblast as the main supplier for consumers in Murmansk.
Currently, Murmanenergosbyt JSC can be considered to be the Murmanskaya CHPP's only competitor.
The Republic of Karelia
The Petrozavodskaya CHPP of TGC-1's Karelsky Branch provides about 80 % of consumers' heat in Petrozavodsk.
That being said, 98 % of heat is sold to wholesale buyer-resellers of Petrozavodsk Utility Systems JSC for further delivery to consumers.
Electricity and Capacity Market
The main sector of competitive activities in the wholesale electricity and capacity market for TGC-1 is the day-ahead market (DAM). As the situation currently stands, the closest competitor in terms of main production and technological cycles in the free wholesale market sector of the North-West IPS is the Kirishkaya TPP (Leningrad Oblast), which forms part of OGK-2.
The main competitive advantages of TGC-1 are:
- the cost advantage of the Company's CHPPs in terms of combined output (compared to TPP);
- large share of output by HPPs in the total production of electricity and the cost advantage of HPPs compared to thermal power plants;
- the possibility for rapid change of active load at HPPs and the supply of electricity under intended System Operator conditions;
- the geographical locations of the Company's stations, enabling the export of energy.
Apart from TGC-1, activities for generating electricity and power in Saint Petersburg, the Republic of Karelia, Leningrad Oblast and Murmansk Oblast are also carried out by the Rosenergoatom Concern (represented by the Leningradskaya and Kolskaya Nuclear Power Stations), OGK-2 (represented by the Kirishkaya TPP), as well as Inter RAO – Electrogeneratsiya (the Severo-Zapadnaya TPP Branch), which supplies electricity for export.
