Russian Prime Minister Mikhail Mishustin meets with Chairman of the Board of Inter RAO PJSC Boris Kovalchuk
The results of the work of the Inter RAO Group in 2022 were discussed, including the increase in exports to Asia, activities to create an engineering center, import substitution, and replacement of generating capacities.
Mikhail Mishustin: Dear Boris,
The Inter RAO Group of Companies is the country's largest producer of electricity and heat and provides all regions of our country with these critical resources.
Today, the industry is operating in new, difficult conditions: we are under unprecedented sanctions pressure; we had to rebuild logistics chains, analyze sales markets in a new way, see what can be sold, what can be redistributed to the domestic market, to friendly countries. You and your team have done this great work. Of course, Inter RAO also continues to interact with a number of foreign countries that carry out export deliveries. But, like other producers of electricity and heat, the company is mainly focused on the domestic market, and therefore less dependent on external shocks.
Tell us more about the work of the company in the past year, what are your plans for today.
Boris Kovalchuk: Dear Mikhail,
I will report on the results of the work of the Inter RAO Group in 2022, and also dwell on the trends that are taking place in the Russian and global energy sector.
In terms of financial and economic results, based on the confirmed results of three quarters, we showed growth in all key indicators - revenue and profit. The indicator of gross and marginal profit before taxes, interest, depreciation, depreciation increased: the growth rate of this indicator was twice as large as the growth of the revenue indicator. This was a result of the work carried out to improve operational efficiency and reduce costs.
We also rebalanced income within the Inter RAO Group. As you know, since June 2022, we have completely stopped commercial deliveries to the EU countries. But at the same time, we significantly increased exports to the People's Republic of China and Mongolia. At the end of 2022, a historical maximum in terms of the volume of sold kilowatt-hours in these areas will be set.
In addition, in May 2021, we acquired construction companies to increase the relevant competencies in the group. To date, order portfolio of our engineering divisions exceeds 150 billion rubles, which makes our engineering business the largest in the Russian thermal power industry. We, as a contractor, are building a significant part of the network infrastructure of the Eastern Test Site, as well as connecting large backbone enterprises in Siberia and the Far East. Because of this work, a full cycle engineering business was created. In this regard, we are ready to implement any projects in the electric power sector.
These two factors - increasing exports to the Asian direction and the work of the group's engineering departments - fully compensated for the shortfall in income from the cessation of exports to the western direction.
I will dwell separately on our power engineering business. In November 2022, we acquired two key assets from Siemens. The first is Voronezh Transformer Plant, which produces transformers up to 330 kV with a share of the Russian market of about 25%. In addition, the second asset is the STGT Company, which is engaged in the production and service of key components of gas turbines. This unique enterprise has no analogues in our country. But it is important to note the following. Due to the rather strong sanctions pressure on Siemens, these enterprises have actually ceased their activities since April 2022. Shipment of finished products to customers was stopped. There are serious risks of loss of key competencies and loss of production data. In addition, I would like to thank the Government of the Russian Federation, the Ministry of Energy, the Ministry of Industry, and other authorities for the prompt resolution of issues related to our obtaining approvals for these transactions.
Also, in accordance with your decisions, the Inter RAO Group is the responsible organization for the implementation of the end-to-end project in the field of electricity metering. We found relevant specialists in Russia, signed a cooperation agreement with them, and provided the necessary methodological support. As a result, a completely new, modern plant for the production of electrical energy metering devices was built in the Vologda region in a year. It is able to provide more than 40% of the needs of the Russian Federation for this type of equipment.
Mikhail Mishustin: What is the volume of output in absolute terms?
Boris Kovalchuk: From 1.2 million to 2 million. The first production lines have now been launched.
Mikhail Mishustin: Is this the annual volume?
Boris Kovalchuk: Yes, this is an annual volume. The total demand is now at the level of 3–4 million. As the Federal Law № 522 is implemented, the volumes will increase accordingly.
Mikhail Mishustin: This is very important. Several years ago we discussed the need to build our own, and you started this work on import substitution three years ago, I think.
Boris Kovalchuk: Yes. As part of our innovation activities, we try to support such enterprises and support people who are able to make high-tech projects of this type. At the same site, a domestic microcontroller has already been developed and launched into mass production.
With our other partner, we are actively moving forward in the field of creating a digital control system for power plants. We are talking about the technological processes of the steam-gas, steam-power and direct gas turbine cycles, which is extremely important in the current conditions.
In addition, in less than a year, we launched the first of five municipal waste processing complexes in St. Petersburg as part of the ongoing waste reform with a capacity of 200 thousand tons per year.
As an operator of export-import operations, we are constantly monitoring the situation with prices on the European energy markets; we are seeing an ongoing unprecedented increase in the cost of electricity. So, in our traditional markets where we used to work – the Baltic States and Finland – the price in August reached 825 euros per MWh, and pre-Christmas prices in December were at the level of 300-400 euros per MWh. And all this is happening against the backdrop of a significant reduction in consumption and the introduction of austerity in these countries. In Russia, on the contrary, according to the results of 2022, consumption growth will be about 1.5%, and the increase in the single-rate price of electricity in terms of generation at generation facilities will be only 4.6%. That is, in two years, the cost of electricity produced at generation facilities lagged behind inflation by more than 11%. Therefore, just like a year ago, we confidently assert that the electric power industry is one of the key factors in curbing inflation in our country.
In conclusion, I would like to say that the Inter RAO Group, as a socially responsible company, made a number of decisions in 2022 on additional indexation of the remuneration of our employees.
Mikhail Mishustin: I would like to say that I was very pleased with the activities of the company to create an engineering center. In general, everything related to domestic engineering today is the most important direction in achieving the national development goals set by the President. You know, on behalf of the head of state, we are developing 30 engineering schools in the country. I have a request to you - to look at this project. And, since you are seriously investing in this area, think about which institutions, universities could be of interest for such a symbiosis. So that young people, receiving education, including at energy faculties, are involved in practical activities from the initial courses and take an active part in the scientific and technical developments carried out by your company.
As for the financial results (we met regularly and discussed the situation), they are high quality and effective. I want to thank the team in your person, all your colleagues, who managed to carefully balance everything and achieve good results in this difficult time.
But many energy companies, in the context of unprecedented sanctions, faced rather complicated logistics, lack of equipment, and the inability to order something, including problems related to solving issues of software and hardware systems import substitution. After all, many systems and equipment depend on solutions, cloud solutions, software and hardware systems that they use in one way or another.
How are things going with the use of homegrown innovation and production? You spoke about factories - there is a whole range of equipment that needs to be produced. How are things going with this in general and with the software and hardware complex in particular?
Boris Kovalchuk: Mikhail, we are carrying out relevant work in accordance with the decision of the President and the Government.
If we talk about specific projects, then as Russian analogues of ERP systems on which the enterprise management system is built, we took 1C as a basis and are implementing relevant projects on this site. And the operating system will be Astra Linux on free software. As for services related to text editors and similar things, we chose "P7-Office" as a result of the analysis. If we talk about billing systems that our sales companies need - and Inter RAO owns the largest electricity sales holding in Russia - then we are switching to Postgres products, which is also included in the register of domestic software. Plant control systems, all technological things - here our partner is Incontrol, which has been present on this market for a long time and provides domestic solutions. This is probably the main contour of our counterparties in the field of transition to domestic software.
Mikhail Mishustin: This very important work needs to be continued, dear Boris, because the replacement of critical software and hardware on all Russian units and systems that operate in the energy sector will ensure and strengthen the energy security of the country.
Another question. On behalf of the President, a serious replacement of generating capacities in the country is underway. Your company is involved in this, changing a lot of things, building new units. How are things going with this?
B. Kovalchuk: The Inter RAO Group is the largest participant in this program launched by the President and approved by the Government as regulations. Of the 25 thousand MW that have been upgraded or under new construction, at the moment more than 10 thousand are projects of the Inter RAO Group. About 40% of this entire program fell on the share of our company.
If we talk about specific beginning of operation, then by the end of 2022, the total volume of commissioning of electric power facilities amounted to about 1.5 thousand MW. These are two units of 330 MW each at Kostromskaya GRES, two units of 200 MW each at Gusinoozyorskaya GRES, in Omsk - 100 MW, and recently we launched a 316 MW unit at Karmanovskaya GRES in the Republic of Bashkortostan. Here I would outline exactly two 200 MW units at the Gusinoozyorskaya plant located in the Republic of Buryatia, in view of the fact that this plant works to supply, among other things, the railway and the Far East in general. And in conditions of increased load and growth of trade turnover in the eastern direction, these capacities turned out to be the most in demand.
Mikhail Mishustin: I would like to thank you and say again that the achievement of technological sovereignty, which we are working on, is impossible without a full cycle in all critical areas of work. Including, of course, in the field of energy.
Boris Kovalchuk: Mikhail, thank you very much for your support. We will continue to work further.
INFOLine, IA (according to the Government of the Russian Federation)