Inter RAO Group updates 2020 development strategy

The Board of JSC Inter RAO approved the updated 2020 Development Strategy. The document is focused on one major goal-making Inter RAO a global enterprise, a key player in the global energy market, and the leader of the Russian energy industry maximizing the efficiency of asset management, deploying innovations and increasing energy efficiency.

Inter RAO adopted the 2015 Corporate Development Strategy with Outlook 2020 in December 2010 and significantly improved its key performance indicators over the last three years. Inter RAO Group significantly increased its perimeters and adopted a targeted asset management and ownership system. A series of investment projects for new generation and rehabilitation of existing power generation facilities is underway, including several projects under Capacity Delivery Agreements. Environmental risks of projects are minimal. Inter RAO Group also develops its new businesses including engineering services, equipment deliveries, energy efficiency services, coal business, as well as maintenance and repair services.

At the same time, Inter RAO Group faced new challenges over the last three years, including but not limited to the instability of European economies; the integration of energy markets causing price convergence; the risk that certain countries stop operating concurrently with the Russian unified energy system; the uncertainty of long-term market rules; aging core power plant equipment and heating infrastructures; reduced efficiency of electricity export; emergence of small generators; increased energy efficiency of manufacturing processes; and the potential for development of innovative technologies.

All these factors led Inter RAO Group to updating its 2020 vision. The new key strategic targets include ensuring sustainable long-term growth of shareholder value, securing leadership among Russian energy enterprises, efficient management of diversified asset portfolio, expansion to target foreign markets, and promotion of Russian energy solutions and practices in the international arena, including promotion through partnerships in engineering, equipment delivery, energy supply, energy efficiency, fuel sufficiency and new market development with the world-largest energy enterprises.

By 2020, Inter RAO is planning to generate at least 97 million RUB of EBITDA (excluding intersegment sales as per IFRS guidelines) from its current asset portfolio. Deployment of new power generation units and retirement of inefficient legacy equipment should increase the installed power generation capacity to 34.6 GW by 2020. Retail sales companies of the Group are tasked to secure at least 16% share of the Russian retail market by 2020. Since the relevant changes are implemented in applicable laws, dividend payout ratio should be at least 25% of IFRS net income. By 2020, Inter RAO is planning to increase its EBITDA by a factor of 2.2 relative to 2014, increase net electricity supply by 15%, reduce operating costs by 15%, reduce equivalent specific fuel consumption by at least 15 grams, and optimize headcount by at least 11%.

However, the 2020 Development Strategy still allows using free investment resources to purchase core business assets (including power generation facilities and sales businesses) and to build new power generation as long as these projects are financially sound and approved by the corporate management team. This scenario may generate additional 20 billion RUB of EBITDA, increase the installed capacity by 2 GW and secure up to 20% share of retail market by 2020.

"The updated 2020 Development Strategy of Inter RAO Group sets ambitious goals for our management team," commented JSC Inter RAO Chief Executive Boris KOVALCHUK. "We will need to accept all challenges of the Russian and global electric power industry, and to prove that we are ready to make Inter RAO the industry leader in Russia by management efficiency. I would like to stress that we believe that all targets incorporated in the updated strategy are absolutely realistic, fair and conducive to meeting every goal of our shareholders and the Russian energy policy."

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Inter RAO Group is a diversified energy holding serving various segments of Russian and international electric power industry. The Group is the leading exporter and importer of electricity in Russia actively increasing electricity generation and sales, and developing new lines of business. The strategy of Inter RAO focuses on creating a global energy enterprise and a key player in the global energy market. Inter RAO Group owns and operates 34 GW of installed power generation capacity. www.interrao.ru


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