1.9. Procurement
the Procurement
Director
How does the Company’s procurement function contribute to the operational excellence and creation of additional value of the business for shareholders?
The primary objective of Unipro PJSC’s procurement activities is to ensure efficient spending of the Company’s funds, which is the absolute guide for decision-making and the exercise of duties at all operational levels of procurement units.
High operational excellence and additional value result from meticulous day-to-day efforts of each and every responsible purchaser: ensuring the best economic effect of tender procedures, improving the components of the process “from requisition to payment” on an ongoing basis, and optimising the warehousing logistics processes. This work is the cornerstone of all the key performance indicators for the entire procurement process “cascaded” to the employees at all levels of the procurement function, from the Executive Office (Moscow Representative Office) to branch employees.
Does the procurement function make use of Uniper Group’s practices?
Obviously, the Group’s procurement policies and best practices have been incorporated in the Company’s procurement activities. This concerns both the fundamental principles and the nuances of the procurement process.
However, modelling the Company’s procurement practices on Uniper’s policies and processes without any changes would be unjustified. We need to adapt them to the requirements of Russian law, customary business practices, procurement experiences, peculiarities of local markets, and, obviously, the local mindset. I think that our Company has a successful experience with this approach: Unipro PJSC’s policy, procurement processes and controls enable us to combine the best practices of Russian regulated purchases with the Group’s European approach, which is more business-oriented while maintaining sufficient flexibility and mobility for our internal customers. The configuration of our Company’s procurement function proves its worth both according to our in-house evaluation and in the opinion of our colleagues from Uniper.
Please assess the Company’s impact on the development of domestic manufacturers and regions of its presence through procurement from local suppliers.
Historically, procurement in the electric power industry is more focused on domestic manufacturers than in other industries. The share of regional purchases as they concern steam power equipment and non-production purchases has been consistently high for many years and we do not expect any changes in this trend. Our Company has stable longstanding partnerships with suppliers of Russian-made boiler, turbine, and auxiliary equipment. Our Company’s new construction and modernisation projects (both recently completed and longer-term projects) are fully structured around Russian-made equipment and Russian contractors. As we mention this, I would like to stress the improvements in the quality of regional contractors. Our Company has exceptional requirements for the quality of equipment and works, including in the area of occupational health and production safety. I would like to emphasise both major improvements in the levels of compliance and responsibility of the counterparties cooperating with Unipro PJSC or just expressing their interest in taking part in our procurement procedures, and their commitment to continuous growth and development up to the level of the most advanced standards in the industry.
The share of Unipro PJSC’s purchases from SME entities in 2018 amounted to 56.5%. Is the Company planning to develop cooperation with SME entities and increase the share of purchases from this category of suppliers?
Similar to the previous question, I can say that our Company has strong cooperation ties with SME entities and there are no indications that this balance might change. We can make certain correlations between specific categories of purchases and the relevant categories of suppliers and the procurement environment based on this correlation. Our Company’s activities are not governed by any special procurement legislation. Therefore, we do not have any obligations to increase the share of purchases from SME entities.
Instead, our procurement strategy prioritises selecting the best-quality products, developing local suppliers in the regions of our power plants’ location (obviously, based on the optimum quality-price combination), and preventing situations where any supplier secures a monopoly position. In my opinion, it is the latter consideration that enables us to maintain a high share of purchases from small- and medium-sized enterprises. Our commitment to the principles of transparency and competitiveness during the competitive procurement procedures forces these companies to develop and come up with the most beneficial and competitive proposals. On our end, we are consistently open to mutually beneficial cooperation and developing such suppliers.
