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March 21, 2013

Effect from Gazpromís cost optimization in power industry exceeds RUB 7 billion in 2012

The Gazprom Management Committee took note of the information concerning the power generating assets development strategy as well as the efficiency indicators of the Company's investments into power generating facilities in Russia and abroad.

It was mentioned at the meeting that Gazprom was Russia's largest power generating assets owner and the unchallenged leader in terms of the total installed capacity among the power market players Ė 38 GW. In addition, Gazprom is the major investor in the Russian power industry.

In 2012 Gazprom completed several large-scale projects. The most powerful combined cycle gas turbine unit with the capacity of 800 MW was commissioned at the Kirishi SDPS. It is the largest heat generating facility commissioned over the last 30 years, which operates as a single unit. In addition, a 450 MW combined cycle gas turbine unit was commissioned at the Pravoberezhnaya CHPP in Saint Petersburg providing for the increase in the reliability of the city's power network. In early 2013 Sochi saw the commissioning of the Adler CHPS with the output of 360 MW. It will be the key power generating facility in the city and the adjacent areas as well as supply heat and electricity to the Olympic venues.

Thus, with the account of past years, the total commissioning volume of Gazprom's power generating assets exceeded 5 GW, which is 57 per cent of the total scope of obligations Gazprom Group assumed when entering the power industry.

Currently, Gazprom is engaged in a number of high-priority power generating projects. The following facilities are currently under construction: a new 660 MW coal-fired generating unit at the Troitsk SDPS, gas-fired generating units with the aggregate capacity of 1,060 MW at CHPP-12, CHPP-16 and CHPP-20 in Moscow. The Company is also implementing Russia's unique project for building a 330 MW coal-fired generating unit with the use of CFB technology at the Novocherkassk SDPS.

In order to provide the increase in power generating assets value, Gazprom is taking measures on raising their operating costs, executing cost optimization programs and implementing activities to improve financial statements. This, in particular, allowed optimizing costs by more than RUB 7 billion in 2012.

The Company continues exploring the opportunities of the power business development in foreign markets. The key element of this strategy is expanded consumption of Russian natural gas. In addition, participation in the European power sector is one of the ways for Gazprom to cover possible risks related to changes in gas prices as it will allow offsetting them by returns on electricity sales.

The strategy attaches great importance to promotion of regulatory measures that will improve the situation, among other things, in gas-fired power generation. What is meant here is the support of European decisions aimed at increasing the investment appeal of gas-fired power generation, first of all, by means of the capacity payment mechanism.

At the moment, Gazprom is addressing the possibility of purchasing state-of-the-art combined cycle power plants in some European markets where the status of gas-fired power generation looks most attractive.




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