STRATEGIC REPORT

2.1. Power Markets

The electric power industry is a basic branch of the Russian economy, providing electric and heat power to the national economic enterprises and the population, as well as exporting electric power to the CIS countries and far abroad.

The Unified Energy System of Russia (UES of Russia) consists of 7 integrated power systems (IPSs): the East, Siberia, the Urals, the Mid-Volga Region, the South, the Centre and the North-West. The list of isolated power systems includes the Chukotka Autonomous Area, the Kamchatka Territory, the Sakhalin and Magadan regions, the Norilsk-Taimyr and Nikolaevsk power regions, and the power systems of the central and northern parts of the Republic of Sakha (Yakutia).

The total installed capacity of power plants in the UES of Russia at year-end 2019 amounted to 246,342.45 MW, with 67% accounted for by thermal power plants (TPPs).

According to SO UES JSC, the electric power consumption in the UES of Russia amounted to 1,059.4 bln kWh in 2019, which is 0.4% higher than the consumption in 2018.

Electric power output in the UES of Russia amounted to 1,080.6 bln kWh in 2019 (0.9% more than in 2018), with 63% accounted for by thermal power plants.

Electric power and capacity market

The Russian electric power and capacity market is divided into two levels — the wholesale market and the retail market. Wholesale market participants are generation companies (retailers of electric power and capacity), sales companies, grid companies, and large consumers (buyers of electric power and capacity). Electric power in the retail market is traded under free bilateral contracts with consumers.

Unipro PJSC operates in the wholesale electric power and capacity market.

Electric power and capacity are bought and sold in accordance with the Rules of the Wholesale Electric Power and Capacity Market Operation and the Agreement on Adherence to the Wholesale Electric Power and Capacity Market Trading System established by Resolution of the Government of the Russian Federation No. 1172 dated 27 December 2010.

According to the legislation, electric power and capacity volumes to be supplied to households and equivalent consumer categories under regulated contracts were stipulated for each seller in the wholesale market.

The remaining generated electric power and capacity volumes are supplied at non-regulated prices in the wholesale market.

Tariffs for the supply of electric power and capacity under regulated contracts are set by the federal executive body for tariff regulation.

Pursuant to Resolution of the Government of the Russian Federation No. 1178 dated 29 December 2011 “On pricing in regulated prices (tariffs) in the electric power industry”, a tariff-setting procedure with calendar breakdown was introduced from 2012, based on the principle of non-exceedance of the prices (tariffs) value and their limits in the first half of the next annual regulatory period over the value of corresponding prices (tariffs) and their limits in the second half of the previous annual regulatory period. When setting tariffs, growth indices were applied according to the socio-economic development forecast approved by the Ministry of Economic Development of the Russian Federation.

Dynamics of tariffs on electric power set for Unipro PJSC power plants, RUB/MWh

The regulated tariffs for electric (heat) power (capacity) set for Unipro PJSC power plants vary considerably depending on a number of factors, including performance, location, fuel used, investment plans and when the regulation period commences. Smolenskaya GRES and Shaturskaya GRES have historically had higher tariffs compared to the power plants located in the Ural Federal District, the Volga Federal District, and the Siberian Federal District, where gas and coal prices are lower than in Central Russia.

Dynamics of capacity tariffs set for Unipro PJSC power plants, RUB/MWh per month

The bulk of the Company’s output is sold in the free sectors of the electric power and capacity markets. Within its own power hubs, the main competitors of Unipro PJSC’s power plants are similar generating capacities: other state district power stations, which do not have a significant share of heat power output.

The demand for the Company’s power plants also depends on:

• characteristics of the energy zones where they are located;
• structure of the electric power produced depending on a type of power plant (thermal, steam-turbine, nuclear, and hydroelectric power plants);
• reliability of the system’s conditions (grid and system limitations);
• repair operations for generating and electrical grid equipment, carried out between the autumn and winter periods.

Seasonal factors have a considerable influence on the performance of Unipro PJSC. Thus, snow floods in spring and rainfall floods in summer, which increase the electric power production at the hydroelectric power plants located in the same region where Berezovskaya GRES operates, have an impact on the level of demand for its production capacities.

In recent years, the impact of electrical grid equipment repairs on demand for electric power has increased significantly. In the case where there is an excess of generating capacity in certain regions of the power system, repairs of power grids can significantly restrict the transmission of electric power to regions in short supply and bring down the market price for the regions with excess energy supplies.

Structure of electricity and capacity sales by market sector

In 2019, electricity sales by Unipro PJSC power plants amounted to 50.9 bln kWh, which is 2.5% more than in 2018.

The capacity sales remained at the level of 2018 and amounted to 9,901 MW per month.

In 2019, regulated contracts accounted for 21.0% of electricity sales and for 26.0% of power sales.

The revenue from sales of electric power and capacity in the regulated segment of market amounted to RUB 14 bln (14% of the total revenue from electric power and capacity sales by Unipro PJSC).

The entire margin from electric power sales was secured by operation in the competitive sectors of the wholesale market. The Company is constantly improving its business strategy for the competitive sectors of the market in order to gain maximum profit.

Heat power market

The sale of heat energy in accordance with legislation of the Russian Federation is a fully regulated type of activity.

Heat tariffs are set by executive authorities of Russia’s constituent entities that deal with state tariff regulation.

The price of heat power is a significant public concern in the regions where power plants are located. That is why the affordability of this product and the consumer’s solvency are taken into account in the regulation process.

Dynamics of tariffs on heat power set for Unipro PJSC power plants, RUB/thousand Gcal

Heat generation and sales are not the key business area for Unipro PJSC. Following the results of 2019, revenue from heat power sales was about 1.8% of the Company’s total revenue. Nevertheless, Unipro PJSC devotes a lot of attention to ensuring the reliability and continuity of the heat power supply, as this is essential to support local consumers living in the nearby communities.

Consumers of heat power produced at the branches of Unipro PJSC are the general population, local industry, as well as enterprises and entities funded from budgets at all levels. The material terms and conditions of contracts with consumers for unified heat-supplying organisations (UHSOs) are specified on the corporate website of the Company at http://www.unipro.energy/en/.

Sales of heat power, thousand Gcal

The amount of heat supplied to consumers in 2019 was 7% less than in 2018. The lower net output was due to weather conditions.

Regulatory support and development of power markets

Unipro PJSC carries out its activities in an environment of in-depth statutory regulation of the Company’s target markets consisting of federal laws, Russian Government decrees, orders of federal executive authorities, etc.

It is the statutory regulation that determines the rules and procedures for the Company’s operation in the market, which in turn affects its financial performance.

As part of the regulatory work, the Company’s subject matter specialists and lawyers take part in the drafting and discussion of regulatory legal acts to ensure that Unipro PJSC interests are taken into account.

Comprehensive legal review by Unipro PJSC legal function makes it possible to identify risks in a timely manner, eliminate or reduce them as early as at the public debate stage and to ensure a comfortable regulatory environment for the Company’s business.

Unipro PJSC actively engages in public and social debates in compliance with legal requirements:*

In 2019, a large-scale programme was launched to modernise the generation assets of thermal power plants. This is a new mechanism, and therefore, it was quite natural to expect that the implementation process would reveal the aspects requiring adjustments, both at the level of the Wholesale Electricity and Capacity Market Procedures and at the level of the Resolution of the Government of the Russian Federation. Unipro PJSC energy markets function is proactively involved in working groups and initiates necessary changes and adjustments in this programme.

In 2019, all branches of Unipro PJSC (except for Surgutskaya GRES-2) supplied heat power directly to consumers under direct contracts or through entities providing housing and utility services. Surgutskaya GRES-2 supplies heat power to Surgut City Grid LLC.

To supply consumers with adequate quality heat, the Company repairs and upgrades its heat supply systems on a regular basis.

Unipro PJSC modernisation projects have successfully passed the competitive selection for 2022−2025. Preparations for and participation in the selection is a multi-stage process that requires involvement of the majority of the Company’s functions. The energy markets function administers this area and ensures the mitigation of regulatory risks at the stages of selection, construction, commissioning and future operation of facilities to be modernised.

The most notable RLAs in the electric power industry adopted in 2019 that were drafted with contribution from Unipro PJSC specialists are as follows:

1. Resolution of the Government of the Russian Federation No. 43 dated 25 January 2019 “On Selecting Power Plants' Generation Assets for Modernisation Projects”;
2. Resolution of the Government of the Russian Federation No. 1211 dated 18 September 2019 “On Amending Clause 1 of Resolution of the Government of the Russian Federation No. 1509 dated 26 December 2014”;
3. Resolution of the Government of the Russian Federation No. 1654 dated 12 December 2019 “On Amending Clause 40 of the Rules of Wholesale Electricity and Capacity Market”;
4. Resolution of the Government of the Russian Federation No. 1655 dated 12 December 2019 “On Amending Clause 278 of the Rules of Wholesale Electricity and Capacity Market”;
5. Resolution of the Government of the Russian Federation No. 287 dated 20 March 2019 “On Amending Certain Acts of the Government of the Russian Federation Regarding Operation of Demand Management Aggregators for Electric Power in the Unified Energy System of Russia and Enhancement of the Mechanism for Price Responsive Reduction of Electricity Consumption and Provision of System Reliability Assurance Services”.

2.2. Strategy and Prospects of Development

The development strategy of Unipro PJSC is aimed at maximising the shareholder value while ensuring that generating equipment has a high level of reliability and ensuring strict compliance with OHS standards.

Implementation of the Company’s business priorities in 2019

Modernisation projects for Surgutskaya GRES-2 power units

Siberia AIP Investment Project in the Sharypovsky District

The project provides for the erection of a year-round greenhouse complex to grow vegetables under cover, poultry processing facilities, and advanced wheat processing factories in Siberia Agro-Industrial Park. The project is part of the Yenisey Siberia Integrated Investment Project and is supposed to be implemented in the Sharypovsky District where Berezovskaya GRES is located.

For the purpose of this project, Unipro PJSC established a subsidiary (Siberia Agro-Industrial Park LLC) responsible for attracting investors for the construction of agro-industrial enterprises in the Sharypovsky energy hub and stimulating the creation of an agro-industrial park in the Krasnoyarsk Territory. In addition, the Company conducted a comprehensive consulting review of the prerequisites for successful operation of an agro-industrial cluster in the Sharypovsky District on a pro bono basis, and is willing to provide investors with the necessary infrastructure in the vicinity of Unipro PJSC Berezovskaya GRES branch on concessionary terms.

The Company is interested in promoting agricultural production in Sharypovo with a view to developing the overall level of development in the region. Creation of new production facilities will help reduce the drain of young people from the district and will consequently ensure an increase in consumption of the heat and electric power produced by Berezovskaya GRES.

On the sidelines of the Krasnoyarsk Economic Forum 2019, Maxim Shirokov, CEO of Unipro PJSC, presented the project to Dmitry Kozak, Deputy Prime Minister of the Russian Federation.

2.4. Finance and Economics*

Since the Company produces and sells electric power and capacity in Russia using the Russian rouble as its payment currency, the EBITDA and EBIT are taken net of volatile factors, in particular, of currency differences, which ensures the most accurate assessment of Unipro PJSC performance.

2.4.1. Revenue

Profit indicators

Electric power and capacity sales revenue

At year-end 2019, the revenue from electric power and capacity sales increased by 4.5% to RUB 82.9 mln as compared to 2018 (RUB 79.4 mln).

The revenue from electric power and capacity sold in the regulated market (net of capacity supply agreements) as a share of Unipro PJSC total revenue declined slightly in 2019 (by 0.7%) and amounted to RUB 11.8 bln (share in the total revenue — 14%). At that, the share of sales revenue from the competitive sector reduced by 1 p. p. to 84%, amounting to RUB 71.1 bln.

A higher revenue from electric power and capacity sales in 2019 is primarily due to a higher revenue from electric power sales resulting from the price increase in the day-ahead market (DAM) caused by:

• lack of electric power imports from Kazakhstan to Russia;
• increase in electric power exports from Russia to Finland and Baltic states;
• lower transmission constraints in Siberia and in the Urals;
• indexing of natural gas and coal prices.

Heat power sales revenue

At year-end 2019, the revenue from heat power sales grew by 2.7% as compared to 2018 and amounted to RUB 1.4 bln. A higher revenue was due to larger sales of heat transportation services, in particular, on the part of Shaturskaya GRES and Berezovskaya GRES. Overall at year-end 2019, the revenue from heat power sales accounted for 1.7% of the Company’s total revenue.

Other income

At year-end 2019, the Company’s other income (from commercial and non-commercial sales) contracted by 25.7% to RUB 424 mln (as compared to RUB 570 mln in 2018). This was due to lower income from contractor rental services and lower income from rated primary frequency control (RPFC) system services in the market of system reliability assurance services.

At year-end 2019, the other income accounted for 0.5% of Unipro PJSC total revenue.

2.4.2. Costs

Fuel expenses

In 2019, fuel expenses accounted for 57.1% of the Company’s operating expenses. In general, fuel expenses in 2019 decreased by RUB 203 mln (-0.6%) as compared to 2018 and amounted to RUB 34.3 bln (excluding the cost of fuel used for commissioning and recovery work). At that, the annual fuel indexing affected the increase of natural gas and coal prices (by 1.4% and 4% accordingly as compared to 2018).

Despite the rising prices for the key energy sources in Russia, the decline in the Company’s fuel expenses in 2019 as compared to 2018 was due to the following factors:

• a 0.5% decline in electric power generation;
• a 0.7% decline in specific fuel consumption for electric power output due to higher utilisation of efficient power units (CCGTs) and operation of equipment in a more efficient mode.

Gas expenses (for electric and heat power production) accounted for 91.3% of the Company’s total fuel expenses. Coal expenses (for electric and heat power production) accounted for 7.9% of the Company’s total fuel expenses.

Other material expenses

Other material expenses included: structural maintenance costs for buildings, construction and equipment, M&R costs of new power units, cost of procuring electricity and power, cost of raw materials and materials for operational and economic needs, transport and office equipment maintenance, and purchase of materials for health and safety in the workplace.

At year-end 2019, other material expenses of Unipro PJSC amounted to RUB 8.3 bln or 14% of the Company’s total expenses. The increase in expenses by 21.6% as compared to 2018 was due to higher expenses on electric power and capacity.

Market operator service fees

Market operator service fees include the Company’s contractual payments to the Grid Operator, Trading System Administrator, Centre of Financial Settlements.

At year-end 2019, Unipro PJSC expenses on the market operator service fees rose slightly as compared to 2018 (RUB 1.4 bln as compared to RUB 1.3 bln in 2018). In 2019, expenses on the market operator service fees as a share of the Company’s total costs remained at the 2018 level (2%).

Labour costs

Labour costs include all costs associated with salaries, including estimated liabilities.

At year-end 2019, the Company’s labour costs dropped by 7.6% as compared to 2018, amounting to RUB 5.3 bln (RUB 5.7 bln in 2018).

The labour costs accounted for 8.8% of the Company’s total costs in 2019.

Contributions to non-budgetary funds

Contributions to non-budgetary funds include social and pension contributions to Russian state funds.

In 2019, total contributions to non-budgetary funds, including estimated liabilities, amounted to RUB 1.4 bln (2.3% of the Company’s total costs).

Taxes and levies

Unipro PJSC is one of the largest taxpayers in Russia.

Taxes and levies paid by the Company comprise property tax, transport tax, land tax, water tax, and mineral-extraction tax, as well as levies covering the use of water bodies, environmental pollution, and duties. Full information about the Company’s tax payments is provided below in Clause 2.4.7.

At year-end 2019, the Company’s tax charges contracted by 39.7% as compared to 2018 and amounted to RUB 1.0 bln (against RUB 1.7 bln in 2018) due to lower property tax charges resulting from removal of movable property from the asset subject to tax and lack of adjusted declarations for back property taxes for past years in 2019. In 2019, the property tax charges amounted to RUB 771 mln (as compared to RUB 1,485 mln in 2018).

In 2019, taxes and levies accounted for 1.7% of the Company’s operating expenses.

Depreciation

Depreciation of the Company’s fixed assets is calculated on the straight-line basis over the useful life of assets.

At year-end 2019, Unipro PJSC depreciation accruals declined by 2.5% to RUB 6.3 bln (against RUB 6.4 bln in 2018). In 2019, the Company’s depreciation charges accounted for 10.4% of the Company’s operating expenses.

Other costs

Other costs include expenses on communication and data transmission services, IT services, staff training, utility services for business needs, security, insurance and other administrative and managerial expenses.

At year-end 2019, Unipro PJSC other costs virtually remained at the 2018 level, amounting to RUB 2.2 bln (0.7% below the 2018 level). In 2019, the Company’s other costs accounted for 3.6% of the total operating expenses.

2.4.3. EBITDA

At year-end 2019, Unipro PJSC earnings before interests, taxes and depreciation amounted to RUB 29.2 bln, 1.3% higher than in 2018 (RUB 28.8 bln). EBITDA rose in 2019 due to higher revenue from electric power sales, primarily at the expense of higher electric power prices in the DAM and reduction of variable expenses caused by lower generation volumes. As a result, despite a 4.2% increase in revenue in 2019, the cost of sales was kept at the 2018 level.

The 2019 EBIDTA margin remains high at 34.5%.

2.4.4. EBIT

At year-end 2019, Unipro PJSC earnings before interests and taxes amounted to RUB 23.0 bln, 2.4% higher than in 2018 (RUB 22.4 bln). The 2019 EBIT dynamics is due to the same factors as the EBITDA dynamics.

The 2019 EBIT margin is 27.1%.

2.4.5. Net Profit

In 2019, the Company’s net profit amounted to RUB 18.6 bln, which is 1.4% below the net profit figures for 2018. In 2018, Unipro PJSC net profit amounted to RUB 18.9 bln.

At year-end 2019, Unipro PJSC net profit margin was equal to 22.0% (against 23.2% in 2018).

2.4.6. Taxation and Contributions to State and Non-budgetary Funds

2.4.7. Significant Changes in the Assets Profile

In 2019, the assets of Unipro PJSC increased by 4.4% and amounted to RUB 144.9 bln. This increase is caused by the following changes.

The non-current assets of the Company as of the date of the Report for 2019 grew by 7.0% to RUB 125.4 bln from RUB 117.4 bln as of 1 January 2019. The Company is building new facilities and is reconstructing the existing ones. The increase in the non-current assets in 2019 vs. 2018 is mostly caused by a 44.3% growth of assets in the Construction in Progress line — up to RUB 51.8 bln vs. RUB 35.9 bln as of 1 January 2019. The significant growth in the Construction in Progress line is caused by the increase in capital construction on the project for repair and refurbishment at Power Unit No. 3 of Berezovskaya GRES and construction of the new Fuel Receiving Station (FRS). After the FRS commissioning, coal will be supplied continuously to the three units of Berezovskaya GRES at once. All production processes at the new FRS will be fully automated and, once it is commissioned, integrated with the new fuel supply process control system at Berezovskaya GRES.

The Other Non-Current Assets line reflects recurring major repair expenses on power units arising after certain long intervals. The 15.2% growth of assets in the Other Non-Current Assets line in 2019 vs. 2018 up to RUB 3.5 bln from 3.0 bln as of 1 January 2019 is caused by reflection of capitalised repairs (mostly overhaul of power unit No. 6 in Surgutskaya GRES-2 branch).

The current assets of the Company as of 31 December 2019 decreased by 9.0% - to RUB 19.5 bln from RUB 21.5 bln as of 1 January 2019. The decrease in the current assets is mostly related to: the reduction of short-term financial investments by 16% - to RUB 0.9 bln from RUB 1.1 bln as of 1 January 2019 as the result of repayment of the loan granted to Unipro Engineering LLC, a subsidiary company; the reduction of current assets in the Cash and Cash Equivalents line by 35.2% - to RUB 3.0 bln from RUB 4.7 bln as of 1 January 2019, which is related to the dividend payment in 2019 and the implementation of the Company’s investment programme, including the project of Repair and Refurbishment at Power Unit No. 3 of Berezovskaya GRES.

2.4.8. Significant Changes in the Liabilities Profile

In 2019, Unipro liabilities increased by 4.4% to RUB 144.9 mln.

The change in the liabilities profile is caused by the following changes.

As of the date of the Report for 2019, the Company’s capital and reserves increased by 3.8% - up to RUB 129.6 bln from RUB 124.9 bln as of 1 January 2019; this growth was caused by an increase in the retained earnings of RUB 4.7 bln, resulting from the net profit in the reporting year.

As of the date of the Report for 2019, the Company’s long-term liabilities dropped by 6.6% - to RUB 5.9 bln from RUB 6.4 bln as of 1 January 2019, resulting from decrease in the deferred tax liabilities of the Company.

The Company’s short-term liabilities. Most changes in the Company’s liabilities profile in 2019 vs. 2018 are related to an increase in the short-term liabilities of 23.3% - to RUB 9.4 bln from RUB 7.6 bln as of 1 January 2019. The growth of the short-term liabilities was caused by receiving a loan from Uniper SE in the amount of RUB 2.5 bln. However, as of the reporting date of 2019, the payables decreased by 13.6% to RUB 5.5 bln from RUB 6.3 bln as of 1 January 2019, resulting from decrease in the taxes and levies payable as well as decrease in the payables to suppliers.

2.4.9. Liquidity and Equity Capital

Financial stability at Unipro PJSC is ensured by the positive value of the Company’s working capital, the absence of borrowed funds, as well as the high share in the Company’s own capital, ensuring financial independence and an absence of significant financial risks. Balance liquidity is currently positive.

The significant increase of capital expenditures in 2019 is mainly related to electric and heat power generation, as well as upgrades to the existing generating assets within the framework of the approved Investment Programme of the Company.

2.5. Operations

2.5.1. Key Performance Indicators for 2019

Installed capacity

As of 1 January 2019, the installed capacity of the power plants of Unipro PJSC was 11,228.5 MW. During the reporting year, the total installed capacity increased by 16.6 MW, and as of 31 December 2019 it amounted to 11,245.1 MW.

The increase in the installed capacity of the Company is caused by capacity requalification, resulting from successful tests of the combined cycle gas turbine plant (CCGT) of Power Unit No. 7 of Shaturskaya GRES from 1 January 2019 (an increase of 6.6 MW) and the CCGT of Power Unit No. 8 of Surgutskaya GRES-2 from 1 July 2019 (an increase of 10 MW).

Electric power generation

In 2019, Unipro PJSC power plants generated 46,433 mln kWh of electric power, which is by 0.5% (216 mln kWh) below the 2018 output.

The main factors that influenced the change in electric power generation is the result of shutdowns of generating equipment to cold reserve in accordance with dispatching the System Operator of power units with steam power units (SPUs) of Surgutskaya GRES-2, Shaturskaya GRES, and Smolenskaya GRES, as well as extension of the repair site due to unscheduled repair of the T-5 unit transformer of Yaivinskaya GRES.

Heat power output

The total volume of heat power output from Unipro PJSC headers in the reference period was 2,053 thousand Gcal, which is 7.5% (166 thousand Gcal) higher than the result of 2018.

The decrease in heat output is determined by the increase in the average outdoor temperature during the heating period in all the regions where the Company’s branches are located. The highest decrease in the heat output took place in Berezovskaya GRES (by 66.6 thousand Gcal or 9.3%).

2.5.2. Fuel Mix Structure

Unipro PJSC power plants use gas, coal, and fuel oil as the process fuel.* The main share of fuel in the Company’s balance sheet is gas, the consumption of which in 2019 amounted to 83.87% of the total volume of fuel consumption.

The amount of fuel used by Unipro PJSC power plants in 2019

2.5.3. Investment Programme

Unipro PJSC investment activities are implemented based on economic feasibility of projects, maintaining the Company’s competitiveness and equipment operational reliability.

Goals of the investment activity:

1. Provision for equipment compliance with the requirements of the regulatory documentation in terms of industrial safety, improvement of the occupational safety and industrial safety level.
2. Improvement of economic efficiency of equipment operation (reduction of specific fuel equivalent consumption, reduction of auxiliary electric power and capacity consumption by the plants, reduction of water charges, optimisation of repair and maintenance costs, reduction of transmission heat losses).
3. Reduction of losses on the capacity market, resulting from unscheduled non-availability of power units.
4. Reduction of losses on the day-ahead market resulting from utilisation of power units in the periods when the day-ahead price does not cover the fuel costs.
5. Provision for power units' participation in the ancillary services market.

Main areas of the investment activity:

• investments in occupational health, industrial safety and information security systems to meet the requirements of the law and improve the labour conditions in terms of safety;
• investments in existing equipment:
  • replacement of life-expired equipment items;
  • replacement of equipment items with improved ones in order to enhance operational efficiency.
• construction of boiler houses, making it possible to reduce the number of generating equipment items required to sustain the heat load in the period of low day-ahead prices;
• modernisation of automatic control systems and information systems, making it possible to participate in the ancillary services market;
• equipment modernisation in the course of competitive selections of modernisation projects.

199 projects are included in the investment programme of Unipro PJSC production section in 2019.

Berezovskaya GRES 67 projects; Surgutskaya GRES-2 43 projects; Yaivinskaya GRES 39 projects; Shaturskaya GRES 24 projects; Smolenskaya GRES 26 projects.

Construction of the Fuel Receiving Station at Berezovskaya GRES

The station is designed to receive coal from Berezovsky Open-Pit via the main conveyors and distribute it to the coal depot or to the power units of the power plant.

The currently functioning temporary fuel supply scheme has open areas, and the most critical elements operate without a backup and are technically obsolete. In this regard, there is a threat of disrupting the shipment of coal and, as a result, stopping the operation of the entire plant.

Commissioning of the Fuel Receiving Station (FRS) will allow for:

• providing the necessary technological backup of each element of the fuel supply system;
• round-the-clock acceptance of fuel with its simultaneous shipment both to the operating units and to the coal storage facility;
• eliminating open areas of the system and reducing the amount of fuel loss with mechanical entrainment;
• ensuring a high level of automation of the fuel supply and distribution, as well as compliance with the current fire safety and labour safety standards.

The Fuel Receiving Station has been under construction since 16 July 2012. Currently, 72% of the total work scope has been completed. The construction of the facility is expected to be completed 20 months after approval of the type of fire-retardant coating for the steel structures of the building and approval of key project parameters.

The following milestones of construction of the station were completed in 2019:

• floor levelling works (arrangement of safe passages);
• engineering survey of the FRS building structures.

In June 2019, all the branches of Unipro were certified for heat-resistant steel welding. R91 heat-resistant martensitic steels are used in piping systems of power generating equipment and are intended for high-temperature operating conditions. Now the branches may weld steam and hot water pipelines with a working steam pressure above 0.07 MPa and water temperature above 115 °C. The certificate issued by the National Agency of NDT and Welding (NAKS) is valid until 2023.

In addition, in 2019 works related to the installation of metal structures for additional protection of bunkers, sealing of passages through the FRS building frame structures were completed; drawbacks in the metal structures of the FRS building envelop and the coal dust protection structures were eliminated. Currently, the works for facility construction have been suspended until approval of the updated key parameters of the project.

Plans for 2020:

• approval of the key project parameters;
• start of work with the updated project parameters:
  • installation of dust protection metal structures in the outer part of the FRS building bunker space;
  • reinforcement of wall envelop framing of the FRS building;
  • works related to dismantling/installation of electrical equipment and instrumentation preventing from fire retardant application to metal structures of the FRS building;
  • fire and corrosion protection of the FRS building metal structures;
  • installing the steel structures of additional service platforms;
  • installing aspiration systems in the FRS building.

R&M milestones in 2019

Retooling and modernisation of the existing operating facilities

The results of implementation of the retooling and modernisation of the existing production facilities in 2019 are caused by the postponement of a number of investment projects to the subsequent years due to the need for elaboration of the technical solutions planned to be applied.

Implementation of the R&M programme in 2019

Capital investments

In 2019, the Company’s capital investments in the implementation of the investment and repair programme amounted to more than RUB 19.2 bln, including in the following areas:

• retooling and modernisation — 15%;
• new construction — 0%;
• repair and refurbishment of Power Unit No. 3 at Berezovskaya GRES — 80%;
• capitalised repairs — 5%.

2.5.4. Repairs

Maintenance in conjunction with timely and quality repairs of the generating equipment at the power plant ensures its reliable and safe operations and extend its service life.

In connection therewith, Unipro PJSC on an ongoing basis improves the quality of repairs, increases the reliability of equipment and contributes to the reduction of accidents. The Company drafts, approves and implements the repair programmes for main production facilities on an annual basis.

The Company is implementing a 6-year maintenance cycle for all power units and has introduced a maintenance planning system based on the assessment of financial risks related to the emergency shut-down of equipment. This system of repair arrangements makes it possible to adapt repairs to the conditions for the Company’s activities in the competitive electricity market, reduce time and money spent on repairs and minimise the risk of emergency shutdowns of equipment during the overhaul period. This approach to planning helps to optimise shutdowns of power units to perform repairs and carry out works to extend the life of technical devices; perform repairs of equipment affecting load bearing, and also exposed to the greatest wear during operation.

Since 2018, all plants of the Company have expanded the list of contracts to be concluded with a three-year implementation period. In 2019, 24 procurement procedures took place. The impact of saving resulting from conclusion of three-year contracts can be estimated as RUB 25−56 mln (8−18 mln in the average annual terms) or 3.5−7.5%. The advantages of multi-year contracts are:

• reduction of the time for procurement procedures, which involve specialists from both the production and procurement departments;
• getting additional “economy of scale” (additional discounts due to enhancement of the scope);
• fixing the fixed rates for a long-term period (minimisation of the inflation impact);
• guaranteed presence of high-skilled contractors for performance of works;
• labour saving;
• contractor’s commitment to high-quality of the works;
• establishment of physical infrastructure by the contractor at the customer’s site to reduce the time for fabrication and supply of the required equipment and materials.

The schedule of repairs at Unipro PJSC branches is based on preliminary surveys of the technical state of production facilities, applicable regulations, as well as long-term experience in operating the equipment. The repair programme is created in an automated mode in the equipment maintenance and repair module (SAP ТОРО) based on the analysis of the full range of identified defects and the need to eliminate the root causes of their occurrence.

In accordance with the annual schedule of repairs, power units with a total capacity of 11,228.5 MW were repaired in 2019, including overhaul — 1,360 MW, intermediate maintenance — 1,170 MW, and current repairs — 7,898.5 MW. Reconstruction works are underway at Power Unit No. 3 of Berezovskaya GRES to eliminate the consequences of the accident having occurred in 2016 — 800 MW.

The total amount of repair works costs at Unipro PJSC power plants amounted to RUB 3.848 bln in 2019, including the current production — RUB 3.053 bln, and new production — RUB 0.795 bln. All the scheduled repairs have been made in full.

47% of repairs was done using the Company’s own resources, and 53% through contractors. The contractors were selected through tenders in order to ensure that contracted terms and conditions were most favourable for the Company.

Significant events related to repair works in 2019

During the repair campaign of the reference period, in addition to the typical scope of equipment repair, a number of significant works were performed.

Berezovskaya GRES

As a part of the project for Power Unit No. 3 reconstruction capital repair of turbine No. 3 was completed. The turbine set was installed for rotor barring, welding wheels were grinded. Depreservation was completed and the auxiliary equipment of the turbine unit (heat, electrical) was checked in operation. Equipment readiness for commissioning and further start-up of power unit No. 3 was provided for. Start-up of the power unit is scheduled for 1 August 2020.

Yaivinskaya GRES

In the course of the scheduled overhaul of Power Unit No. 1, the works for repair of rotors: low-pressure rotors with neck boring and balancing were arranged; high pressure with neck boring and balancing at the contractor’s production facilities. Repeated lining of seven out of eight turbine bearings was arranged. During the CCGT No. 5 power unit repair unit transformer overhaul was carried out.

Smolenskaya GRES

During the period of scheduled repairs, the following main works were performed:

• overhaul of the PEN-3А PE-380−185/3 feed pump with modernisation of the flow part;
• standard repairs of boiler screens in Power Units No. 1 and 3;
• replacement of the expansion joints (DN 1,600 mm) of the circulation water piping — 4 ea (2 ea in unit No. 3, 1 ea in unit No. 2, 1 ea in unit No. 1).

Shaturskaya GRES

In accordance with the scheduled repair programme, overhaul of generators in Power Unit No. 1 and No. 3 was arranged with rotor removal and retaining rings revision. The TU-3 IPC distributor was replaced, the protective and strengthening layer was applied to working blades of stages 27 and 31 of TU-1, the TU-3 control stage was replaced. In the course of scheduled repair of the power unit of CCGT No. 7 full rewedging of the generator stator was arranged.

Based on the results of NDT during the scheduled repair defective, weld joints in steam supply pipes of the RSP in the power unit of CCGT No. 7. Unscheduled repair of weld joints was arranged to eliminate all the defects.

Plans for 2020

For the next reference period, the overhaul, intermediate maintenance or current repairs of all the power units of the branches are scheduled according to the repairs schedule.

At STU units:

Berezovskaya GRES:

Intermediate (extended) maintenance of Power Unit No. 1 is planned to include the following works exceeding standard ones:

• replacement of the pipeline from the inlet header to PSH-2 and from PSH-2 to PSH-3;
• repair of BSA composite joints;
• replacement of the convection reheater.

Surgutskaya GRES-2:

• electro-spark alloying of the blades of LPR-1,2,3 low pressure rotors of TG-5;
• replacement of low pressure desuperheater of the upper part of stage No. 4 boiler;
• replacement of low pressure desuperheater of the upper part of stage No. 5 boiler;
• replacement of the 4th pass coils in the HP CSH-2 of unit No. 5;
• replacement of the 4RVP-B bearing pedestal; 5RVP-A, B;
• replacement of the 4RVP-B, 5RVP-A, B pilot bearing;
• replacement of couplings of induced-draft fans-A, B, Power Unit No. 5.

Shaturskaya GRES:

• overhaul of TG-2 generator with rotor removal and revision of rotor retaining rings;
• overhaul of TG-5 generator with rotor removal and revision of rotor retaining rings; Replacement of the rotor retaining ring on the turbine side is also planned;
• replacement of stage 13 blades of TU-5;
• replacement of TU-2 control valves;
• replacement of diaphragms 2, 7, 9 of the TU-5 HPC;
• replacement of the TU-5 IPC distributor;
• color marking of the equipment of power units No. 2 and No. 5.

Yaivinskaya GRES:

Overhaul of Power Unit No. 2 is planned to include the following works exceeding standard ones:

• safety expert review of the boiler drum, hot reheat, main, and cold reheat steam pipes and the bleeder lines;
• replacement of gas ducts;
• replacement of steam piping headers.

For other power units standard repairs are planned.

Smolenskaya GRES:

• preparatory works are planned for the purpose of safety expert review and metal control of Power Units No. 1, 2, and 3 and the common plant equipment in accordance with the approved schedules;
• overhaul of the PEN-1A PE-380−185/3 electrical feed pump with adjustment of the 11-stage pump to the 10-stage version;
• overhaul of piston compressor No. 2;
• repair of the standby stator of the induced-draft fan electrical motor.

At CCGT units:

• borescopic inspection of Power Unit No. 6 of Surgutskaya GRES-2;
• inspection of hot gas circuit No. 2 of Power Unit No. 7 of Surgutskaya GRES-2;
• borescopic inspection (in 16,000 hours after the ITGG), PK, TR of auxiliary equipment of Power Unit No. 7 of Shaturskaya GRES;
• minor inspection of the gas turbine, overhaul of the circulating pump of Power Unit No. 5 of Yaivinskaya GRES.

Colour marking

In the course of the repair campaign, colour marking of the plant equipment is used in accordance with the Regulation on the Rules of Colour Marking of Work Places and Equipment in the Branches of Unipro PJSC. Colour marking (marking paint) is applied in order to provide for consistent visual perception and identification of control and service work places by the personnel based on the associated perception of colours with respect to operational and dispatching numbering of the equipment. Bright lines seen from a distance are required to designate and mark the equipment storage places as well as to make personnel’s movements safer.

2.6. Information Technologies

Significant of information technologies for the Company

Digitisation in the energy sector where enhanced requirements to accessibility, reliability, and quality of power supply exist will become an absolute must in the near future.

In Unipro PJSC, digitisation includes both implementation of new digital technologies using modern gadgets and running routine business processes with connection of programme robots and automation of end-to-end integrated chains of business process on the basis of the Microsoft Dynamics 365 modern information platform.

To be a success and retain the leading positions, the Company needs much more than just to automate its business processes and implement modern digital tools. The global trend of performance improvement in all the industries, including the energy sector, is building a “digital enterprise”.

Results of implementation and improvement of informational technologies in 2019

Smart monitoring of the Company’s critical information systems using the RPA (robotic process automation) was launched to restore system operation in case of a failure. This made it possible to reduce the system downtime.

A pilot of the IT Hotline Chat Bot project was launched to improve the service level of the internal Company users and, in the long run, to improve the quality and reduce the time of serving requests.

In order to improve production safety and occupational health automation of receiving instructions and control of this process was introduced.

Productivity of the automated system of commercial dispatching was improved due to an increase in the data volume processed by the system.

Internal workflow processes were automated by means of digitisation. As a result of the project implementation, full cancellation of paper documents for some processes became possible. Functional prototype of incoming correspondence automated recording was implemented in Unipro PJSC for the Headquarters.

In addition, the functionality of document exchange using the rated primary frequency control with SO UES was developed and implemented.

In the Unified Automated Control System of Financial and Economic Activities (UACS FEA) was implemented the functionality providing for semi-automatic closure to make it possible to shorten the reporting period closure timelines and reduce the labour cost.

In Shaturskaya GRES, the Control Map Analysis project was launched to provide for use of additional tools for factor analysis of burnouts. Implementation of this project will make it easier to understand the reasons for burnouts and provide for the ability to respond to them quickly in order to improve fuel efficiency.

Plans for 2020

In order to form a modern process digital platform for further business development, improvement of efficiency of business processes due to their standardisation and optimisation using the best practices introduction of the Microsoft Dynamics 365 integrated information system is planned.

To avoid the risks related to the expected termination of vendor support and to ensure conditions for enhancement of opportunities of working with information systems transition of budgeting process to the IBM Planning Analytics platform is planned.

Digitisation of the operational and dispatching control is planned by means of implementation of the information system of electronic operations logs. To achieve this, in the reporting period, apart from preparation of the proposal, procurement procedures were initiated and completed, the control for system implementation was agreed and signed, and delivery of licenses for specialised software was completed.

As a part of implementation of speech analytics system for operational and dispatching communication of the operational personnel, in 2019, analysis of the market of speech analytics systems for operational and dispatching communication of the operational personnel was carried out to determine the candidate companies having the required competences for participation in the pilot project. The system prototype was developed and tested.

The works for transition of a number of digital technologies proven at the pilot stages are planned.

2.7. Procurement

To support its activities, Unipro PJSC strives to organise a professional, responsible and transparent procurement management system.

The main document regulating the Company’s procurement activities is the Regulation on Procurement of Unipro PJSC. This document defines the standard business process for ensuring efficient procurement procedures conducted primarily on a competitive basis, and contains references to other internal documents.

Unipro PJSC publishes information on planned purchases of goods, works and services, places up-to-date data on purchases, material terms in competitive purchases and other information on the Company’s website, as well as on the B2B-Centre electronic trading platform (ETP).

Responsibility for implementing procurement processes in the Company rests with the Procurement Unit, which whose main functions include planning, organisation and implementation of procurement procedures. Moreover, the Procurement Unit implements measures for strengthening the market position by consolidating needs and ensuring the unification of procurement processes, as well as implements a single model of behaviour in the competitive environment.

The model contract of Unipro PJSC includes a number of special conditions regarding the mandatory execution by contractors of the requirements of labour protection, fire safety, environmental protection and rational use of territories.

The model contract also includes a clause on the prevention of violations by the contractor/supplier of the UN Global Compact Principles, which, since 2008, Unipro PJSC has recognised as mandatory for compliance. The Regulation on compliance with the UN Global Compact Principles is published on the Company’s website.

Results of development of the procurement activities in 2019

As part of improving the purchasing function management system, Unipro PJSC pays great attention to expanding the competitive environment, increasing transparency, as well as automating procurement and building a unified, continuous process linking all stages of purchasing products (goods, works and services).

The procure-to-pay (P2P) chain organised in the Company provides for the division of responsibility between the applicant unit, procurement unit, financial unit and accounting unit, and also allows for maximum automation of controls, eliminating duplicate operations and ultimately increasing the efficiency of procurement function.

In 2019, Unipro PJSC conducted 6,061 purchases for a total amount of RUB 8,934,334.99 thousand (without VAT). Of this amount 13.7% of procurement procedures were implemented by the procurement from a single supplier (in the amount of RUB 1,226,603.73 thousand), all other purchases were carried out through open competitive procedures. The share of competitive purchases in a closed form was less than 1%.

The Company is constantly expanding the use of the electronic trading platform, actively using new means of visualisation and tracking of key performance indicators. In the reference period, the share of purchases made through the ETP grew by 1.1 p. p. and amounted to 14.22%.

ACPP procurement structure by areas of activity in 2019

Unipro PJSC ACPP key performance indicators in 2019