RESULTS OF ACCOMPLISHMENT OF KEY STRATEGIC TASKS

The Board of Directors approved “Samruk-Energy” JSC Development Strategy for 2018–2020 on August 28, 2018 (BOD Minutes No. 08/18).

While implementing the Strategy, “Samruk-Energy” JSC adheres to the principles of sustainable development set out in the United Nations Global Compact, “Samruk-Energy” JSC Sustainable Development Guidelines and “Samruk-Energy” JSC Corporate Governance Code.

Strategic objectives and tasks of the Company were set on the basis of PESTEL analysis, the study of macroeconomic and industry trends, as well as analysis of the internal environment.

KEY CHALLENGES

Today the Company faces a number of key external and internal challenges, which are a consequence of the current situation of the Company, the characteristics of the external environment and trends in its development.

Key external challenges

  • Capacity market

    It is planned to ensure the construction of new and retrofit, reconstruction of existing facilities by attracting investments. Expectations on reducing the deterioration level of generating equipment for uninterrupted operation of existing power plants of “Samruk-Energy” JSC.

  • Establishment of the EEU common electricity market

    As a result of the formation of the common electricity market of the EEU, the Republic of Kazakhstan will not only have simplified access to the markets of the member countries of the Union, but will also increase the openness of the domestic market for external electricity suppliers.

  • Decrease in coal sales volumes

    The decrease in loading of own stations operating on Ekibastuz coal negatively affects coal sales volumes. The growth potential of Ekibastuz coal consumption by third-party consumers in Kazakhstan is little. The volumes of supplies to the Russian Federation are variable in nature and this is because of an increase in electricity consumption in the RF. At the same time, Russia continues pursuing its policy regarding the partial conversion of Russian coal-fired power plants to domestic producers’ coal or natural gas.

  • Toughening of environmental legislation requirements

    Currently, there is a steady trend in the world to reduce the level of environmental pollution. The commitments made by the Republic of Kazakhstan, as an active participant in international relations in environmental field, and “Samruk-Energy” JSC, as an environmentally and socially responsible company, determine the need for a proactive response to trends in the field of environmental protection.

  • Changes in the regulatory environment for the development of RES

    The mechanism of auction tenders for the construction of renewable energy facilities was introduced. Auction are held on the principle of reducing the price of electricity, starting from the established ceiling auction prices, for participation in which it is necessary to provide a collateral.

  • Business digitization

    Currently, there is a trend in the world for digitization of production and operational processes, which contributes to optimization of time costs, increase of operational efficiency and development of analytical data obtained in automated mode.

Key internal challenges

  •  

    The need to ensure the sale of the Company’s assets as part of a comprehensive privatization plan for 2016–2020 at a fair market price.

  •  

    The need for significant improvement of the Company’s operations

SWOT ANALYSIS OF “SAMRUK-ENERGY’S” JSC STANDING

Achievement of strategic KPI

No.

Description

2018 actual

2019 actual

2020 actual

2021 forecast

2022 forecast

1

Net income, bn tenge

3,241

6,835

8,008

10,604

56,829

2

Debt/EBITDA (ratio)

3.18

3.31

2.67

3.23

1.90

3

ROACE, %

2.99

3.43

3.60

3.98

9.53

4

Net asset value (NAV), bn KZT

385,304

392,073

400,623

403,255

460,084

5

Corporate governance rating

BB

–

 

BBB

 

6

Electricity market in the RK, %

29.7

28.5

29.0

28.4

28.8

7

LTIFR*

0.28

0.33

0.27

0.36

0.33
*was included in the list of strategic KPI from 2019

In general, Strategic indicators of the Company tend to improve from 2018–2022. The main factors of growth are an increase in the volume of sales of electricity and capacity in the domestic market, obtaining individual tariffs for capacity, reducing the unit consumption of fuel and water for process needs, reducing costs for fuel and energy conservation, as well as reducing the debt burden.

STRATEGIC OBJECTIVES

Ensuring reliable competitive energy supplies in the markets of presence

Increase of the value of share capital

Sustainable development

STRATEGIC INITIATIVES

Increase of profitability of sales

Improvement of the efficiency of activities

Effective implementation of the investment program

Corporate Governance and Sustainability

OBJECTIVES

Increase of sales of electricity and coal on the domestic market

Improvement of the operational efficiency of existing facilities

Implementation
of investment projects 

Implementation of sustainable development initiatives

Ensuring the supply of electricity to consumers of the Fund’s group of companies

  • the supply of electricity to consumers of the Fund’s group of companies in the amount of 5.4 bn kWh was ensured

Implementation of measures to reduce the level of losses of electrical energy

  • ASCAPC and SCADA projects are implemented

Implementation of the project “Expansion and reconstruction of Ekibastuz SDPP-2 JSC with the installation of power unit No. 3”

  • The acceptance of the equipment was completed, and the adjustment of design and estimate documentation began

Effective interaction with stakeholders

  • Integrated Annual Report on “Samruk-Energy” JSC operating results for 2019 was published
  • Comprehensive activities with the media are underway

Ensuring the supply of electricity to energy-intensive industries (mining, DPC)

  • the supply of electricity to energy-intensive industries (mining, DPC) for 1.376 bn kWh is provided

Innovative development and digitalization

  • Implementation of the project “Digital Power Plant”
  • Implementation of the project “Digital Coal mine”

Implementation of the project “Expansion and reconstruction of the capacities of the Ekibastuz SDPP-1 (Reconstruction of unit No. 1)”

  • Design and estimate documentation corrected. Internal procedures are underway to conclude an investment agreement

Improvement of the efficiency of corporate governance

  • The Action Plan to improve corporate governance is being successfully implemented

Coal sales, including by driving out competitors

  • 33.4 mln tons of coal sold in the Kazakhstan market. An increase due to over-planned deliveries to northern consumers in the Republic of Kazakhstan, as well as due to an increase in consumption by major energy producing organizations

Implementation of the project “ Boiler firing technology for burning high-ash coals of the Ekibastuz deposit (R&D)”

  • Experimental studies have been carried out on the combustion of high-ash Ekibastuz coal and its enrichment wastes on an complex fluidized bed installation and circulating fluidized bed. The data obtained confirming the possibility of efficient combustion. Technical proposals for the concept of industrial and power boilers have been developed

Implementation of the project for the transition to a cyclical-and-continuous method of mining, transportation, blending and loading of coal at the Bogatyr open pit (CCM)

  • More than 80 % of the equipment was delivered and construction and installation works continued

Human capital development

  • The following activities are being implemented: Leadership development; Corporate culture development; Development of HR competencies

Assessment of potential new directions for export of electricity and coal

  • As part of monitoring the needs of potential electricity and coal sales markets, an analysis of the markets of Turkey, Tajikistan, Pakistan, and the Republic of Belarus was carried out

Increasing the financial stability of the Company

  • All financial covenants of the Company’s creditors are respected.The international agency Fitch has affirmed the Company’s long-term ratings at BB with a stable forecast as well as raised its standalone rating from “b” to “b+”

Implementation of the project “Construction of 50 MW wind farm near in the vicinity of Ereymentau city”

  • Construction and installation work have commenced

Increase in sales of electricity and coal on foreign markets

  • 859 mln kWh of electricity was exported to the Republic of Uzbekistan and Kyrgyzstan. Coal exports to Russia amounted to 10 mln. tons

Implementation of the Company’s transformation program

  • All planned activities on the Roadmap for the implementation of the Digital Transformation Program were completed on time

Implementation of the project “Construction of 60 MW wind farm in Shelek corridor including a possible increase in capacity up to 300 MW”

  • The process of construction and installation work has begun, equipment is being supplied