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Mosenergo. A Leader In The Russian Electricity Sector. Contents. Mosenergo - A Leader In The Russian Electricity Sector Mosenergo On The Verge Of Restructuring Reforming Moscow’s Electricity Sector Appendices. Mosenergo - A Leader In The Russian Electricity Sector.

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mosenergo

Mosenergo

A Leader In The Russian Electricity Sector

slide2

Contents

  • Mosenergo - A Leader In The Russian Electricity Sector
  • MosenergoOn The Verge Of Restructuring
  • Reforming Moscow’s Electricity Sector
  • Appendices
slide3

Mosenergo - A Leader In The

Russian Electricity Sector

slide4

Russia’s Largest Regional Energo

  • By Electricity Production
  • By Heat Production
  • By Size Of Territory Served
  • Mosenergo has an installed electricity capacity of 15,020 MW, or 7% of Russia’s
  • total.
  • In 2001, the company generated 71.4 billion kWh, or 8% of Russia’s total.
  • Mosenergois one of the largest heat producers in the world.
  • The company has an installed heat capacity of 34,800 Gcal/h.
  • In 2001, the company produced 69.1 million Gcal of heat, or nearly 5% of
  • Russia’s total.
  • Mosenergosupplies electricity & heat to the Moscow region, which has an area
  • of 47,000 square metres and a population of 16 million people.
  • The company serves in excess of 4 million customers.
russia s largest regional energo
Russia’s Largest Regional Energo
  • By Composition & Asset Base Value
  • By Key Economic Indicators
  • Mosenergo’sasset base includes 21 power stations, including Russia’s only hydro

pump station located in Zagorsk.

  • The company’s fixed assets are valued at US$ 3.2 billion.
  • The average life of the company’s generation assets is about 15 years, with an

operational useful life of 30-35 years.

  • In 2001, Mosenergo’s net revenues were US$1,487 million, including US$985 million

from electricity sales and US$448 million from heat sales.

company structure
Company Structure

GENERAL DIRECTOR

12 Power

Plants

Electricity

Generation

13 Electricity

Transmission

Line Units

3 Repair &

Maintenance

Units

Heat Transmission

Network

10 Services

Units

Electricity Supply

8 Non-core

Units

strong reputation in the international investment community
Strong Reputation In The International Investment Community

Depositary Receipts

The first Russian company to place ADRs in 1995, with total proceeds of US$22.5 million.

EBRD-MFK US$50 million loan for financing of construction of Zagorsk hydro pump station; maturity date – August 2009.

Foreign Loans

In 1997, the company issued a 5-year eurobond in the amount of US$200 million. Mosenergo has met all its eurobond obligations.

Eurobonds

An international credit rating of B-/Stable outlook by Standard & Poor’s.

International Credit Rating

Publication of annual US GAAP financials and independent audits since 1995, аs well as semi-annual unaudited financials.

International Audit

shareholder structure
Shareholder Structure

Mosenergo’s charter capital stands at

RUB28,267,726,000

and includes

28,267,726,000 common shares

Mosenergo has over 25,000

shareholders

slide9

Mosenergo:

On The Verge Of Restructuring

tariff forecasts
Tariff Forecasts

CURRENT TARIFF-SETTING MECHANISM

Residential tariffs are considered by Moscow City & Moscow Region Governments

REC’s expert group analyses the data & gives its conclusion to RECs

RECs consider proposed

tariff

increases

The company provides its costs data to the REC

RECs approve tariff increases

FORTHCOMING CHANGES

Setting of economically sound tariffs, stimulating the development of energy-saving technologies

TERMINATION OF

CROSS-SUBSIDISATION

The Federal government implements tariff reform

TARIFF REFORM

CREATION OF A

UNIFIED TARIFF-SETTING UNIT

Removal of political influence on tariff setting

consumption forecast
Consumption Forecast

Electricity Consumption Forecast

Heat Consumption Forecast

cost forecast
Cost Forecast

Cost Structure Type of Costs ForecastComments

Fuel Gas tariff increases are regulated by FEC;

Mosenergo strives to optimise its fuel balance

by reducing losses

40.4%

WageThe company has controlled its wage Costs;

staff reductions

17.8%

Materials & Spare PartsContract prices; increase in share of purchases by tender

12.0%

11.5%

Repair & MaintenancePrice determined by tender

DepreciationEquipment reaching end of useful life

7.1%

11.2%

Other costsCost control; cost optimisation

necessity for restructuring
Necessity For Restructuring
  • Fixed Assets Wearing Out: up to 50% wear-out level of key

equipment

  • Insufficient Level of Investment: absence of private investment

- lack of economic incentives

  • Cost-plus Price-setting Mechanism
  • Lack of cost reduction incentive as a result of absence of

competition & current imperfect tariff-setting mechanism

  • Cross-subsidising
slide15

Reform & Restructuring of the

Moscow Region Electricity Sector

mosenergo s restructuring strategy
Mosenergo’s Restructuring Strategy
  • Strategic Goals
  • Create a high level of competitiveness in the electricity, capacity and services markets
  • Expand client base by attracting consumers from other regions
  • Create conditions that attract investment into the company, and insure investor profits
  • Ensure stable electricity and heat supplies to Moscow region consumers
implementing restructuring
Implementing Restructuring

KEY TASKS

To Be

Completed

Prior To

Launch Of

Reforms

Eurobond Redemption

Necessary legal condition for Mosenergo’s re-organisation

Reaching an Agreement

With Minority Shareholders

Protecting the rights & interests of Mosenergo minority shareholders

Tariff Reform

Creating positive economic conditions for the split of Mosenergointo core companies

Define the legal & economic conditions and the order of transferring Mosenergo’s assets

Creating Asset Transfer Mechanism

stages of restructuring
Stages Of Restructuring

OPTIMISATION

(Preparatory)

By 2003

REORGANISATION

(Structural Changes)

By 2004

INTEGRATION

After 2004

  • Introduction of separate accounting by line of business
  • Selling (transfer) of social sector assets
  • Exiting non-core businesses
  • Registration of ownership rights
  • Decreasing payables & receivables
  • Elimination of non-core expenses
  • Implementing restructuring by way of separation of generation, supply, repair & maintenance, & services companies
  • Distribution of receivables & payables among the newly created companies
  • Participation in the formation of the Federal Grid Company
  • Organisation of the management process & creation of new economic relations
  • Participation of the newly created companies in the inter-regional integration
  • Participation in the formation of the structure of the System Operator
mosenergo restructuring model

Moscow

Transmission

Company

Supply Companies

Generation Companies

Supply Company 1

(based on Energosbyt)

Supply Company 2

Moscow City Generation Company

Service Companies

Moscow Region Generation Company

Mosenergoremservice

Mosenergoproyekt

Assets To Be Included

In The Wholesale Gencos

Non-core Companies

(Agriculture, Trade, etc)

Assets To Be Included In

Federal Grid Company

Mosenergo Restructuring Model
generation restructuring
Generation Restructuring

UES - 50.87%

Separation with distribution of

shares on a pro rata basis

Separation with distribution

of shares on a pro rata basis

Minority Shareholders 49.13%

Moscow Region Generation Company

Installed capacity

5,341 MW

Moscow City

Generation Company

Installed capacity

9,758.8 MW

Separation with distribution of shares on a pro rata basis

Assets to be included in wholesale gencos

?

restructuring of supply transmission businesses
Restructuring of Supply & Transmission Businesses

UES – 50.87%

Separation with distribution of

shares on a pro rata basis

Separation with distribution of

shares on a pro rata basis

Minority Shareholders 49.13%

Supply Company 1

To be formed based on

Energosbyt’s assets &

organisational structure

Supply Company 2

Create competition conditions

Separation with distribution of shares on a pro rata basis

Transmission Company

To be formed based on the transmission line assets (except for assets to be transferred to the FGC), heat network

summary of moscow electricity system restructuring
Summary Of Moscow Electricity System Restructuring
  • Creation of the Moscow retail electricity market infrastructure
  • Creation of economically efficient & financially stable energy companies, attractive for direct and portfolio investors
  • Creation of conditions for development of energy supply business in the region
  • Attract customers in a competitive market by offering them high quality products & services at lower prices
  • Retaining government, corporate, & administrative control over the functioning of the Moscow region energy sector
  • Growth in the market capitalisation of energy companies
timeline for moscow electricity system restructuring
Timeline For Moscow Electricity System Restructuring

INTEGRATION

PREPARATORY

MACROECONOMIC PARAMETERS

REORGANISATION

STAGES OF RESTRUCTURING

russia s largest regional energo1
Russia’s Largest Regional Energo

Mosenergo

Russia Total

Installed Electricity Capacity, MW ‘000213.9 15 7%

Electricity Production, kWh bln875.8 71.4 8 %

Heat Production, Gcal mln1,451 69.1 5 %

Structure of Generation Assets

Gas Turbines – 4%

Hydro Pump

Stations – 8%

Steam Turbines –

21%

Thermal Power

Plants – 67%

electricity production supply
Electricity Production & Supply

Demand in the Moscow region has been growing in the past two years, thanks to increasing consumption in the industrial & residential sectors.

Production & Supply Dynamics, kWh bln

heat production supply
Heat Production & Supply

Production & Supply Dynamics, Gcal mln

key balance sheet figures
Key Balance SheetFigures

US GAAP Consolidated Balance Sheet, US$ mln

key cash flow statement figures
Key Cash Flow Statement Figures

US GAPP Cash Flow Statement, US$ mln

key us gaap financial results
Key US GAAP Financial Results

US GAAP Income Statement, US$ mln

financial debt
Financial Debt

Rouble Debt

  • RUB300 million – loans from Russian banks
  • RUB2,041.98 million – other long-term loans
  • Redemptiondate – December 2005

Foreign Currency Loans

  • US$39.35 million.Redemption by 2009
  • EUR3.8 million. Redemption by August 2003

Eurobonds

  • US$109.97 million
  • Redemption Date - October 2002

Mosenergo services its debt obligations fully & on time

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