We run.
We hurry.
Leaving our traces in history.
With endless spin of powerful turbines.
We turn DARK into LIGHT.
We dream.
We aspire.
We reach.
We generate optimism.
Energy specialist is the most important job.
For ENERGY is our LIFE.
Alina Karpova,
Head of sanitary-industrial laboratory of Serovskaya GRES
3.4
Market Overview
Branch-wise overview
Consumption and generation of electricity
In 2020, the electricity generation by power plants of UES of Russia amounted to 1,047.0 billion kW*h, which is 3.1% lower than the level of 2019. In 2020, the electricity consumption amounted to 1,033.7 billion kW*h, which is 2.4% lower than the level of 2019.
Installed capacity
As of the end of 2020, the installed capacity of the power plants in the UES of Russia amounted to 245,313.25 MW, which is 0.4% lower than in 2019. This is due to decommissioning of generating capacities and relabeling of existing equipment with a reduction in installed capacity.
In 2020, the number of hours of using the installed capacity of power plants as a whole across the UES of Russia amounted to 4,238 hours or 48.25% of the calendar time (installed capacity utilization factor – ICUF).
Prospects for capacity modernization for the period of 2022–2031
One of the main tasks of the reform of the Russian power industry in the 2000s is a significant investment in the industry in the construction of new and modernization of existing generation facilities. The main mechanism for the implementation of the task has been the conclusion of capacity supply agreements (CSA). Since the beginning of this program in 2010, OGK-2 has commissioned 4,169 MW of new capacity under the CSA.
By the end of 2020, the bulk of the capacities under the CSA program was commissioned
(OGK-2 completed this process as early as in 2019). The program can be assessed as the main driver supporting the profitability of Russian generation companies, providing for an average of 62% of EBITDA in the thermal generation segment between 2015 and 2020. According to calculations of some investment bank analysts, for OGK-2 the contribution of payments under the CSA will eventually amount to 70% of EBITDA. However, it means that the contribution of the CSA to profits of Russian generation companies will reduce over the next five years.
The CSA-2 modernization program for Russia as a whole:
- 41 GW of thermal power
- 1.9 trillion rubles of investment over 10 years
- Guaranteed 14% of profitability
According to the Ministry of Energy, up to half of the capacity in Russia may require either decommissioning or modernization in the coming years. At the same time, as the CSA expires, the tariff component can be redistributed for modernization as part of the CSA-2 program.
On January 25, 2019, the Government of the Russian Federation approved the modernization program for generating facilities of thermal power plants (CCTMod) developed by the Ministry of Energy of Russia. This project will upgrade almost 41 GW of installed capacity of generating facilities, which is about 16% of the installed capacity of UES of Russia.
It is assumed that the modernization program will be valid until 2031, and investors will gain access to the long-term market – the contracts for the supply of capacity under CCTMod provide for a capacity delivery period of 192 months (16 years). According to the Russian Ministry of Energy, the modernization program will attract up to 1.9 trillion rubles of private investment over 10 years.
The first competitive selections were held in April 2019, with capacity delivery starting in 2022–2024. In December 2020, the System Operator of the UES published a preliminary list of selected modernization projects for 2026 under the CSA-2 program. 15 projects with a total capacity of 3,804 MW were listed, with 3,020 MW pertaining to the first price zone and the rest – to the second one. The single-rate price was between 1,797 and 2,417 rubles per MW*h. The selection of projects using localized high-capacity gas turbines was postponed to 2021 and the commissioning of capacity was shifted from 2026–2028 to 2027–2029.
Modernization of obsolete capacities will reduce annual gas consumption to 17 billion m3 and coal to 16 million tons.
Source: Calculations of VTB Capital.
Industry Position
The main direction of increasing the efficiency of the Company in 2020 was to improve sales profitability by responding flexibly to changing market conditions for electricity sales, as well as by reducing production costs, including maximizing the potential for diversifying the fuel balance and improving the quality of contractual work with coal suppliers.
The main directions with regard to the Company’s future activities associated with the sale of heat, electricity and capacity include:
- modernizing the main generating equipment, including through attraction of borrowed funds;
- optimizing the fuel balance and equipment operation mode, reducing electricity and heat production costs and, consequently, the prime cost of the products;
- reducing the negative financial consequences caused by payment discipline violations by electricity and heat consumers in the wholesale and retail market, respectively;
- enhancing customer focus.
Competitive Review
| Capitalization as of December 31, 2020, billion rubles | Average daily trading volume in 2020, million rubles | Dividend yield, 2019, % | EBITDA for 2020, million rubles | EBITDA profitability in 2020, % | EV/EBITDA for 2020 | Р/Е for 2020 |
OGK-2 | 80.94 | 152.81 | 10.79 | 31.57 | 26.16 | 3.1 | 5.4 |
Mosenergo | 82.34 | 49.29 | 5.33 | 30.47 | 16.84 | 2.7 | 8.8 |
TGK-1 | 42.85 | 99.28 | 10.10 | 21.94 | 24.68 | 2.4 | 5.0 |
Enel Russia | 31.91 | 61.35 | 8.40 | 9.02 | 20.48 | 4.4 | 7.3 |
Unipro | 176.35 | 240.12 | 8.34 | 26.41 | 35.06 | 6.9 | 12.3 |
Inter RAO | 555.09 | 1,472.78 | 4.64 | 122.30 | 12.40 | 1.0 | 5.2 |
RusHydro | 345.76 | 1,471.31 | 6.69 | 120.30 | 28.00 | 4.2 | 6.5 |
Key competitors in the electricity and capacity market
The main competitors of OGK-2 in the electricity and capacity market are companies that own large generating facilities in Russia.
* According to companies (information from open sources), OGK-2. By generation facilities in the Russian Federation.
** The controlling stakes in TGK-1 PJSC and OGK-2 JSC belong to Gazprom Energoholding Group.
*** Including the Boguchanskaya HPP.
Competition in the electric power industry is limited by the price zones in which the power plants are located. The main competitors of OGK-2 are power plants located in one zone and neighboring regions connected by high-voltage lines.
Sales regions | Branch OGK-2 | Principal competitors | Competitive advantages | Forecast of electricity demand based on an analysis of schemes and development programs of the UES of Russia for the period until 2024 |
North-Western UPS | Kirishskaya GRES | North-West CHPP (Inter RAO – Power Generation JSC), Leningrad NPP (Rosenergoatom Concern JSC), stations of TGK-1 PJSC |
| Based on the analysis of the scheme and development program of the Unified Energy System of Russia for 2020–2026, electricity consumption is expected to increase due to the growth and development of mining, machine building and other industries in the North-Western UPS. An increase in the share of transport in the structure of electric energy consumption is forecasted. |
Pskovskaya GRES | North-West CHPP (Inter RAO – Power Generation JSC), Leningrad NPP (Concern Rosenergoatom JSC), stations of TGK-1 PJSC |
| ||
Central UPS | Ryazanskaya GRES | Kostromskaya GRES and Cherepetskaya GRES (Inter RAO – Power Generation JSC), Shaturskaya GRES and Smolenskaya GRES (Unipro PJSC), Konakovskaya GRES (Enel Russia PJSC). In addition, the 500 kV network also receives energy from the Novovoronezhskaya, Kalininskaya and Smolenskaya NPPs (Concern Rosenergoatom JSC), Volzhskaya HPP (RusHydro PJSC) and energy from the Mid-Volga Region UPS and the Ural UPS |
| Based on the analysis of the scheme and development program of the Unified Energy System of Russia for 2020–2026, an increase in electricity demand in Moscow and the Moscow Region is expected in the Central UPS. There will also be an increase in demand in the Belgorod Region due to the expansion of existing enterprises. |
Cherepovetskaya GRES | Stations associated with the district by a 500 kV transmission line, namely: Kostromskaya GRES (Inter RAO – Power Generation JSC) and Konakovskaya GRES (Enel Russia PJSC), as well as Kalininskaya NPP (750 kV transmission line, basic schedule) (Concern Rosenergoatom JSC) |
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Southern UPS | Novocherkasskaya GRES | Rostovskaya NPP (Concern Rosenergoatom JSC), Nevinnomysskaya GRES (Enel Russia PJSC) |
| In accordance with the scheme and development program of the Unified Energy System of Russia for 2020–2026, relatively high growth rates of electricity consumption are expected in the Southern UPS. The increase in demand is primarily due to the implementation of a number of large-scale investment projects driven by the development of existing industrial enterprises. |
Stavropolskaya GRES | Nevinnomysskaya GRES (Enel Russia PJSC), Krasnodarskaya CHPP (LUKOIL-Kubanenergo LLC) |
| ||
Adlerskaya TPP | Sochinskaya TPP (Inter RAO – Power Generation JSC), Nevinnomysskaya GRES (Enel Russia PJSC), Krasnodarskaya CHPP (LUKOIL-Kubanenergo LLC) |
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Groznenskaya TPP | The HPP of North Caucasus of RusHydro PJSC (Dagestan branch, Kabardino-Balkarian branch, Karachayevo-Cherkess branch, North-Ossetian branch) |
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Ural UPS | Surgutskaya GRES-1 | Nizhnevartovskaya GRES (Inter RAO – Power Generation JSC), Surgutskaya GRES-2 (Unipro PJSC), Urengoiskaya GRES and Nyaganskaya GRES (Fortum PJSC) |
| In accordance with the scheme and development program of the Unified Energy System of Russia for 2020–2026, a relatively low growth rate of demand is expected in the Ural UPS, which is determined by the development of the economy and, first of all, by the development features of the oil, gas and metallurgy primary industries. |
Troitskaya GRES | Reftinskaya GRES (Siberian Generating Company LLC), South-Ural GRES (Inter RAO – Power Generation JSC), and Kurganskaya CHPP (Fortum PJSC) |
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Serovskaya GRES | Yaivinskaya GRES (Unipro PJSC), Nizhneturinskaya GRES (T PLUS PJSC) |
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Branches | Sales Regions / Unified Power Systems (UPS) | Market share, % | Comments on changing market share | |||
Share in the UPS by electricity, % | Share in the UPS by capacity, % | |||||
2019 | 2020 | 2019 | 2020 | |||
Kirishskaya GRES | North-Western UPS | 8.68 | 5.07 | 13.92 | 14.53 | The decrease in the share of electric energy generation is associated with the initiatives of the System Operator in the context of the balance-sheet situation of the North-Western UPS, as well as with the decommissioning of the power plant unit and repair of the generating equipment. The increase in the share in the North-Western UPS in terms of capacity is due to the decommissioning of the Leningrad NPP unit with an installed capacity of 1,000 MW. |
Pskovskaya GRES | 0.22 | 0.18 | 2.36 | 2.5 | The decrease in the share of electricity generation is due to the operation of the power plant in the context of the schematic and balance situation in the North-Western UPS, at the initiative of the System Operator. The increase in the share in the North-Western UPS in terms of capacity is due to the decommissioning of the Leningrad NPP unit with an installed capacity of 1,000 MW. | |
Ryazanskaya GRES | Central UPS | 0.65 | 0.66 | 5.95 | 5.84 | The demand for coal generation in the Central UPS remains at a rather low level. The decrease in installed capacity is due to the decommissioning of a unit at GRES-24. |
Cherepovetskaya GRES | 1.42 | 1.23 | 2.05 | 2.06 | The decrease in the share of electric energy production is associated with the current schematic and balance situation in the Central UPS. The share of installed capacity has remained almost at the same level. | |
Novocherkas-skaya GRES | Southern UPS | 7.50 | 6.67 | 9.08 | 8.70 | The decrease in the share of electric energy production is associated with the current schematic and balance situation in the Southern UPS. The decrease in the installed capacity share is associated with the commissioning of new generating capacities in the Southern UPS. |
Stavropolskaya GRES | 4.90 | 3.99 | 9.75 | 9.34 | The decrease in the share of electric energy production is associated with the current schematic and balance situation in the Southern UPS. The decrease in the installed capacity share is associated with the commissioning of new generating capacities in the Southern UPS. | |
Groznenskaya TPP | 0.65 | 1.27 | 1.45 | 1.39 | The increase in electricity generation is due to an increase in equipment utilization at the initiative of the System Operator in the context of the schematic and balance situation in the Southern UPS. | |
Adlerskaya TPP | 1.66 | 1.82 | 1.48 | 1.41 | The increase in the share of electric energy production is associated with the schematic and balance situation in the Southern UPS. | |
Troitskaya GRES | Ural UPS | 0.46 | 0.38 | 2.45 | 2.44 | The decrease in the share of electricity generation is due to the operation of the power plant under the schematic and balance conditions in the Ural UPS, at the initiative of the System Operator. |
Serovskaya GRES | 1.07 | 1.23 | 0.84 | 0.84 | The increase in the share of electricity generation is due to the current pattern and balance situation in the Ural UPS, namely, the reduced generation of the HPP. | |
Surgutskaya GRES-1 | 7.02 | 6.48 | 6.21 | 6.24 | The decrease in the share of electric energy generation by the Ural UPS is associated with repairs of the generating equipment. | |
Indicators of installed capacity and power generation of OGK-2 plants in comparison with the main competitors as of December 31, 2020.
* Approximate value given on the official website: http://kubanenergo.lukoil.ru/ru/
** Dagestan branch, Kabardino-Balkarian branch, Karachayevo-Cherkess branch, North-Ossetian branch.
* Taking into account South-Ural GRES-2.