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Unified Energy System

June 10, 2004

RAO "UES of Russia" has published its Annual Report for 2003 on its website

Moscow. 10 June 2004. Pursuant to the provisions of the Russian laws, RAO "UES of Russia" has published its Annual Report for 2003 on its website twenty days before the AGM.

The draft Report was approved by the Board of Directors at the meeting held 21 May 2004. The Board resolved to submit the draft Annual Report for approval by the AGM scheduled to be held in Zelenograd on 30 June 2004.

As is stated in the Annual Report, for RAO "UES of Russia", 2003 has become a year of practical implementation of the electricity industry reform. In an environment of transformations taking place in the sector, RAO "UES of Russia" was able to preserve stability while improving its business results. The Company's capitalization grew 2.1 times in 2003 to USD11,980 million from USD5,614 million.

At its meeting held on 21 May, the Board of Directors of RAO "UES of Russia" recommended that the AGM of shareholders approve the aggregate dividend amount to be paid in respect of 2003 at RUB2,398,134,000, up 20.6% on 2002, including RUB1,091,749,000 on the shares held by the State (increase of 36% compared to 2002). The recommended amount of dividend on ordinary shares is RUB1,924,858,261.85, or RUB0.0469 per share, whereas the dividend amount recommended for preferred shares is RUB473,756,604.37, or RUB0.2283 per share.

According to the data contained in the Company's Annual Report, in 2003 the installed capacity of the power plants of RAO "UES of Russia" grew 1,300 MW to 156,600 MW after new power plants had been commissioned.

During the year, the Holding Company's power plants generated 635.8 billion kWh of electricity, including 520.6 billion kWh produced by TPPs and 115.2 billion kWh by HPPs. Thus, the electricity output by the Holding Company's entities grew 3.0% on 2002, which is higher than the growth rate of electricity generation throughout Russia. In 2003, the power plants of RAO "UES of Russia" accounted for 69.4% of electricity production in the country. Heat generation during the year amounted to 468.8 million Gcal, about the same as last year. RAO UES enterprises accounted for 32.4% of all heat supplied to Russia's consumers.

Fuel supply to the power plants of RAO "UES of Russia" was stable throughout 2003 in all regions of the country. The targets established by the Russian Government for the accumulation of fuel inventories in preparation for the autumn-winter period were fully met by 1 October 2003. RAO UES entities were able to pay for the current fuel supplies in time, and to repay part of the fuel payment arrears.

Throughout RAO UES Holding, the coal purchases grew in 2003 7.9% on 2002. The amount of fuel oil procured also increased by 6.1%. The fuel consumption rate for the whole of RAO "UES of Russia" was 335.3 g/kWh for electricity and 145.1 kg/Gcal for heat supplied, down 1.2 g/kWh and 0.3 kg/Gcal respectively on 2002. In 2003, this resulted in fuel economy of 690,000 tonnes of equivalent fuel.

In 2003, the repairs and maintenance program for all categories of principal equipment was implemented in full. During the year, repairs were carried out on generators with an aggregate capacity of 40.9 thousand MW, power boilers with the steam capacity of 169,700 t/h, hot-water boilers with a total heat capacity of 10,200 Gcal/h; 722.5 km of heating network pipelines were replaced. As a result of these efforts, all enterprises of RAO "UES of Russia" obtained their 2003/2004 winter readiness passports with respect to fuel stocks and equipment preparation.

The level of payment the electricity and heat supplied by Holding's energy enterprises in 2003 was 101%, including the settlement of debts of the previous years. The consumers' indebtedness to the energy company decreased 15.2% to RUB67.73 billion from RUB79.91 billion. All main groups of consumers, except for households, paid for the energy supplied to them in due time.

As is stated in the Annual Report of RAO "UES of Russia", in 2003, the UES of Russia operated 100% of calendar time within the average AC frequency of 50.00 Hz, which corresponds to the standards of the West European energy pool, - UCTE (50.00±0.05 Hz). It should be noted that the energy systems of Azerbaijan, Belarus, Georgia, Kazakhstan, Latvia, Lithuania, Moldova, Mongolia, Ukraine, and Estonia operated parallel with the UES of Russia. The energy systems of the Central Asia–Uzbekistan, Kirghizia, Turkmenistan, and Tajikistan–operated parallel with the UES of Russia through the energy system of Kazakhstan.

In 2003, within the framework of the sector reform in Russia significant changes occurred in the organization of foreign economic activities. Pursuant to the resolutions of the Board of Directors of RAO "UES of Russia", the Company formed an entity on the basis of ZAO "Inter RAO UES" that is new for the Russian energy market, namely, operator of electricity exports and imports. Shareholders of this new company are RAO "UES of Russia" (60% of the authorized capital) and the second major player of the domestic energy market, Rosenergoatom (40% of the authorized capital).

According to the Annual Report of RAO "UES of Russia", the aggregate amount of electricity exported from Russia by RAO "UES of Russia" and ZAO "Inter RAO UES" in 2003 was 20.7 billion kWh, or 118.3% on 2002, whereas the export revenues totalled US$485.3 million. The main destinations of exports were Azerbaijan, Belarus, Georgia, Kazakhstan, Moldova, Ukraine, Finland, Latvia, Norway, and China.

In 2003, RAO "UES of Russia" commissioned 45 turbine generating units with an aggregate capacity of 2,087.9 MW. The most important among them were the first and second hydro generating units at Bureyskaya HPP with the total capacity of 370 MW, the second generating unit at Nizhnevartovskaya TPP in Tyumen Region (800 MW), two 25-MW generating units at Mutnovskaya GeoTPP in Kamchatskaya Region, a DPP in the settlement of Deputatsky and Eldikanskaya DPP with an aggregate capacity of 22.7 MW in the Republic of Yakutia.

The amount of investments utilized throughout RAO "UES of Russia" Holding Company in 2003 totalled RUB79.21 billion (in current prices). In the reporting period, the implementation of investments grew 24.9% in comparable prices from 2002. The investments funded with the Company's own resources reached RUB16.43 billion in 2003, up RUB5.44 billion from the previous year. The amount of investments in 2003, including those made by OAO "UES FGC" and OAO "UES SO-CDA", totalled RUB25.8 billion.

According to the Annual Report, the sales of products, goods, and services by the Company in 2003 totalled RUB51,666.8 million, down 1.8% on 2002. The decrease in revenues by RUB924 million was due to the reduction in the amount of RAO UES subscription fee after separate tariffs were set for OAO "UES FGC" and OAO "SO-CDA".

In 2003, the Company's sales profit made RUB30,813.7 billion, which represents a decrease of 4.8% compared to 2002. At the same time, the Company's debt servicing costs decreased by RUB3,098.5 million (or 4.7 times); the income from idle cash investment grew 2.5 times, whereas income from investments rose 1.7 times.

The revenues from the sale of products, works, and services throughout RAO "UES of Russia" Holding Company calculated in accordance with the Russian Accounting Standards in 2003 totalled RUB724,864.0 million, an increase of RUB145,855.9 million or 25% compared to 2002. The sales profit of RAO "UES of Russia" Holding in the reporting year totalled RUB84,557.2, which ensured a return on sales of 11.7%. The Holding Company's net profit in 2003 was RUB32,485.3 million, up RUB6.4 billion, or 25% compared to 2002.

According to the Annual Report of RAO "UES of Russia", the regional energos' sales revenue grew RUB102.9 billion, or 21.7%, on 2002, whereas the sales revenue of AO-power plants increased RUB19.7 billion, or 43.1%. The regional energos' electricity sales revenue grew RUB83.2 billion (22.7%), and AO-power plants' sales rose RUB15.9 billion (40.7%).

From December 2002 to December 2003, electricity and heat tariffs increased 113.9% compared to the average price index for Russia's industry of 113.1%. The energy tariffs for households grew at a much faster rate than the tariffs for industrial consumers. However, the actual average annual tariff established for households, taking into account the benefits (56.35 kopecks per kWh, exclusive of VAT), are still much lower than those of large industrial consumers (75.95 kopecks per kWh). This suggests that, despite the decrease in the level of cross-subsidization, this problem remains serious.

For the third consecutive year, RAO "UES of Russia" enterprises are successfully carrying out cost control programs. As a result of these programs, the Holding Company's entities were able to cut costs by RUB18.7 billion. At the same time, the structure of cost reduction also changed during the year. The reduction of labour costs accounted for 30% in 2003. Fuel cost saving (24%) and repairs and supplies (17%) accounted for a bigger part of cost reduction; this was achieved by taking technological measures and holding procurement tenders. Measures to cut costs on the "Energy Loss" item is also very important in cost reduction structure (14%).

The property complex of RAO "UES of Russia" includes shareholdings in 242 companies, power grid assets and operational dispatch facilities (those not transferred to OAO "UES FGC" and OAO "UES SO-CDA"), and the property of six power plants.

RAO "UES of Russia" is a shareholder in 73 regional energos, 44 AO-power plants (including 8 power plants under construction), 6 management energy companies, 54 research and development institutes, and some other companies.

Performance highlights of RAO "UES of Russia" activities

  

2001

2002

2003

Installed capacity of TPPs of the Holding Company, million kW

156.2

155.3

156.6

Electricity generated by the Holding Company's entities, billion kWh

626.8

617.4

635.8

Heat produced by the Holding Company's entities, million Gcal

479.6

469.8

468.8

Average number of employees of the Holding Company

664,796

631,866

577,637

Average number of employees in the Company's divisions

16,269

13,146

3,157

Total length of the Holding Company's power transmission lines, thousand km

2,501.6

2,501.9

2,496.9

Total length of the Holding Company's backbone power transmission lines, thousand km

144.3

144.5

144.7

Company's net revenues from sale of goods, products, works and services, RUB million

38,614

52,591

51,667

The Company's profit from sales, RUB million

25,951

32,371

30,814

Company's earnings before taxes, RUB million

23,614

44,695

32,636

Company's net (undistributed) profit, RUB million

12,777

31,079

24,605

Dividend per ordinary share, RUB

0.0260

0.0337

0.0469*

Dividend per preferred share, RUB

0.1185

0.2916

0.2283*

* Submitted for approval by the shareholder meeting

 

 

 

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