Interview of the Director General

Interview of the Director General

What are the main achievements and results of the Company operation in the reporting year?

In the reporting year, the Company celebrated its 10th anniversary and, despite the difficult economic situation, it successfully fulfilled the tasks set by the shareholders and main stakeholders.

The business plan was fulfilled in its entire scope. The net profit according to the 2015 year-end results was 9,247 mln rubles with the planned value being 9,224 mln rubles; EBITDA was 41,954 mln rubles with the planned indicator being 40,967 mln rubles.

The reliability of electric power supply to consumers in the Moscow region was improved significantly. According to the year-end results, the total rate of incident occurrence in the electric grids was reduced by 19% in 2015.

The Company fulfilled its repair and investment programs for 100%, with 47.6% of repair activities being performed using the Company’s own resources.

Due to the timely implementation of the repair program, the Company was fully prepared for the autumn and winter period.

In the framework of investment program, new transformation capacities were launched in Moscow with the power rating of 897 MVA (99% of the plan), in Moscow region with the power rating of 695 MVA (110% of the plan). New electric power lines with all voltage levels were commissioned with the total line length of 6,206 km (117% of the plan), including 1,825 km in Moscow and 4,381 km in Moscow region.

The Company fully complied with the requirements of regulatory authorities in terms of electric power supply reliability. The reliability factor estimated according to the methods of Ministry of Energy department in Moscow (including New Moscow) in 2015 was 0.000245 against the planned value of 0.000484 (Order of Regional Energy Committee of Moscow No. 90 dated May 16, 2012). For the Moscow region, this indicator in 2015 was 0.004200 against the planned value of 0.073412 (Ordinance of Moscow Region Pricing and Tariffing Committee No. 88-R dated October 1, 2012).

The customer service quality was also improved significantly. The functionality of electronic application submission was implemented. All such applications are registered in the same manner as the official paper documents and processed within the established timeframe.

In 2015, over 30% of applications were received by the Company in the electronic format. A new interactive option was introduced in the framework of “Zero Visits” program development: online connection in the full scope, arrangement of voltage supply to the client facility without the need to physically visit our client offices. Currently, this service is provided to MOESK clients with the power rating requirements up to 150 kW, including the privileged category (up to 15 kW) with the contract value of 550 rubles. The work on expansion of service scope and functionality of the Client Area on the Company’s web site is continued. MOESK has sufficient in-house competences and is able to provide this service online via the Internet.

Due to the interactive capabilities, the service delivery processes have become transparent and simple for our clients.The Company pays much attention to consumer awareness both in terms of legal changes and in terms of innovative services, programs, and information base updates.

Due to the interactive capabilities, the service delivery processes have become transparent and simple for our clients.

The Company pays much attention to consumer awareness both in terms of legal changes and in terms of innovative services, programs, and information base updates.

Using the information portal dedicated to MOESK technological connections, the consumers can sign up to get sms/email notifications about the scheduled shutdown of power facilities in Moscow and Moscow Region, obtain expert opinions of other users through the open Forum on Electrical Connections (EC), access the FAQ section, view the detailed video guidelines on how to use the Client Area.

In January 2016, Internet acquiring capabilities were implemented on the public section of the EC portal (utp.moesk.ru), i.e., payment for electrical connections by bankcards.

The average timeframe for performance of contracts on technological connections (for the applicants with up to 150 kW capacity requirements) in the previous year was 89.4 days (excluding the applicant’s waiting time). The average timeframe for connection to the grid according to the applications for technological connections, excluding the activities of the power grid company (for the applicants with up to 150 kW capacity requirements), was 29.6 days (excluding the applicant’s waiting time).

The average timeframe for performance of contracts on technological connections for the applicants with power capacity requirements from 150 kW to 670 kW was 166 days. The average performance period for the contracts classified as Doing Business was 68 days.

The significant achievements of the Company in the field of technological connection in 2015 were also confirmed by the World Bank rating Doing Business-2016.

Absolutely right. This rating confirmed that the process of connection to the electric grids in Russia was simplified considerably. Our country made a significant breakthrough in the category “Getting Electricity” by being upgraded to rank 29, which is 24 points higher than in 2014. The achievements of MOESK were recognized not only by the leaders of the country and energy sector but also by the representatives of small and medium enterprises as well (according to the surveys of the Work Bank experts). Moscow received 8 of 8 possible points on the reliability of supply and transparency of tariffs index. It should be pointed out in this regard that maximum points were awarded to 18 out of 189 participating countries only.

Which factor had the greatest effect for improvement of the Company efficiency?

Throughout the reporting year, the Company managed to optimize its operating costs. According to the year-end results, the operating and other costs paid out of profit as per the approved business plan for 2015 were reduced by 1.57 bln rubles.

Considerable changes were implemented in the Company structure: a new branch — Moscow HV Grids — was established through the merger of Central Electric Networks branch and HV Cable Networks branch. Due to this, the Company can more efficiently develop its main grids.

How would you describe the sustainable development prospects of the Company for 2016 and the following years?

In terms of the cornerstone strategic targets in the Company development, we make a special emphasis on maintaining the high level of economic efficiency and capitalization relative to the average industry level; achievement of reliability level indicators as required by the regulatory authorities; provision of high quality service in the field of technological connections.

In view of these targets, consolidation of electric grid companies in Moscow region will be performed to ensure the economic advantages for MOESK, which will eliminate the duplicating functions of dispatching control and enable transition to the unified centralized operational and process management (OPM). This process will contribute to the improvement of electric power supply reliability; ensure better quality of grid development planning. The investment costs will be reduced due to centralization of investment planning functions. As a result, the administrative and management costs will be lowered. Availability of technological connections will be provided for any location in Moscow and Moscow region.

The high quality of electric power supply is a basis for national economy and business development. Therefore, our key objective for the current year is to ensure high reliability of electric power supply to consumers. According to the results of the year 2015, we managed to reduce the average power supply recovery time for the Company in general by 4 minutes, i.e. from 65 to 61 minutes. Our goal for the year 2016 is to further decrease this period by 5 minutes. By 2017, the Company plans to reduce the average time required to recover technological violations within the new Moscow boundaries to 50 minutes.

Another priority area for the Company is development of electric grid complex in New Moscow. The new territories will be used by federal and municipal authorities, world financial center buildings, R&D and innovations cluster, with the total scope of planned construction activities being 105 mln sq. m and the expected population growth of 2 mln people. Therefore, according to our estimations, the demand for power capacity will increase from 1,800 MVA to 4,250 MVA. Construction of 220 kV Khovanskaya station of PJSC MOESK is one of the promising investment projects of the Company, which will be implemented in New Moscow in the near future. The installed transformation capacity of the future power supply center will be 700 MVA. The station will supply electric power to the residential buildings in Troitsky and Novomoskovsky Administrative Districts and to the Administration and Business Center in Kommunarka town of Novomoskovsky Administrative District.

Для поддержания высокого уровня надежности ПАО «МОЭСК» намерено реализовать ряд сравнительно не капиталоемких проектов, направленных на оптимизацию затрат по эксплуатации сети при одновременном повышении надежности. В частности, в результате внедрения системы управления основными фондами и реализации проекта «Мобильные бригады» ожидается снижение удельной аварийности минимум на 10%.

Will the Company seek to optimize its investment costs and electric power losses considering the existing economic situation?

Surely, optimization of investment costs is an important long-term objective. A complex of activities will be implemented for this purpose, including development of prospective development scheme for the electric grid in Moscow region. In the framework of this strategic initiative, by the year 2020, the Company plans to reduce the capital costs by 30% to the level of 2012 (in RUB per physical unit — km, MVA).

A project was launched to ensure the transparency of Company activities in various functional fields. The Company plans to identify its resources and improve the visibility of internal and external processes. Thus, regarding the investment activities, the action plan provides for update of report forms, establishment of unified IT environment, which will be used to record and monitor the information on investment project implementation as well as overall business process standardization activities

In terms of loss reduction measures, the Company’s key strategy will be transition from the activities, which have the accompanying effect in the form of loss reduction to the target activities, which are directly aimed at energy efficiency improvement. The following indicators are planned for 2020: electric power losses in Moscow — 7.34%; electric power losses in Moscow region — 6.83%.

Additional services sales growth is expected due to development of promising income-generating fields. By 2020, the share of earnings from additional services in the overall revenue structure is expected to reach 3%, with the planned sales profitability for additional services being 44%.

The workforce productivity by 2020 shall be increased by 15% against the indicator of the year 2014.

We already discussed the improvement of technological connection procedure. As we know, at the current stage the Company processes are already advanced, for example, the clients are now able to submit their applications for electrical connection online. Is there still some room for improvement here?

The process of consumer service and loyalty enhancement can be continuous.

The Company developed a logterm action plan for improvement of client relationship. Thus, the Company plans to expand the scope of services available in the web-based Client Area due to deeper integration with the client area of PJSC “Mosenergosbyt”, use of digital signature for the final connection acceptance reports.

MOESK analyzes the needs of all applicant categories. Soon, our clients will be able to directly edit their profiles in the Client Area.

Special functionality for submission of multiple applications from the system customers in the Moscow region was developed for the category “professional proxies”. In cooperation with Moscow authorities, the Company started a new project to enable submission of electronic applications via the Public Services Portal (pgu.mos. ru) for the sake of the client’s convenience and in the framework of integration with external information systems.

Most importantly, the entire approach to the consumer relations is changing. Currently, the Company is implementing a CRM system, which will give us the opportunity to manage the history of applications made by every client. This is a completely new level of work. With the personalized approach we can better understand the consumer problems and track the dynamics of consumer interaction with the Company.

In order to improve the application processing quality and response time, we recently adopted the concept of Integrated Contact Center which will handle all the applications submitted to the Company (including complaints). In this regard, I am happy to say that in 2015 the number of complaints was reduced by 35%, which speaks volumes.

Special attention is paid to phone service functionality because over 60% of all applications are submitted over the phone. In 2016, the Company will implement an interactive voice response system and automatic voice calls to consumers informing them in case of emergency and scheduled shutdown of electrical facilities.

In the framework of its efforts aimed at improvement of technological connection process efficiency, the Company plans to reduce the time period required for business proposal preparation: to 3 days for electric power units rated up to 150 kW; and to 5 days for electric power units rated from 150 kW to 670 kW. The timeframe for connection of all consumer categories will not exceed the regulatory period.

What large-scale trends will impact the prospective development of the Company?

First of all, the long-term planning should be performed with consideration of slower growth dynamics of electric power demand from consumers in the region of presence. The Company development will surely be impacted by implementation of nation-wide policy for energy-saving, improvement of energy and environmental efficiency.

Additionally, activities aimed at consolidation of management of the main and distribution electric grids in the Russian Federation which are being implemented in compliance with the Russian Federation President Order No. 1567 dated November 21, 2012 On Open Joint Stock Company “Russian Grids” will also have a long-term impact on the development of the electric grid complex in the Russian Federation. Thus, the Russian Federation Government issued Ordinance No. 511-r dated April 3, 2013 to approve the Strategy for Development of the Power Grid Complex in the Russian Federation.

The Company has set ambitious goals for itself. I am confident that successful achievement of these goals will further improve the quality and reliability of electric power supply to consumers.

P. A. Sinyutin,
Director General at PJSC MOESK

My Report

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