Procurement activities system [GRI 103Management Approach: Procurement system. ]

Inter RAO’s Procurement Policy is determined by the Company’s Board of Directors. The basic principles of procurement activities are approved in the Regulation on the Procedure for Conducting the Regulated Procurement of Goods, Work, and Services for the Needs of PJSC Inter RAO Minutes No. 262 dated Dece mber 23, 2019. . A collective body, the Central Procurement Committee (CPC), coordinates the supply system at the Company’s units.

The Group has a Specialized Procurement Organization (SPO) called LLC Inter RAO – Procurement Management Center that is authorized to conduct procurements and/or organize the supply of goods, perform work, and render services. The SCO ensures uniform demand for the same type of products and creates a unified information space for the supply system, which plans, accounts for, conducts, and monitors procurements. Modern information and telecommunication technologies as well as e-commerce and electronic document management tools are used in conjunction with other information systems to organize procurements.

The SPO sets up an accreditation committee that serves as the Group’s specialized accrediting body. The Committee accredits suppliers and contractors in order to certify their expertise and compliance with the set requirements for the quality and safety of products, production processes, work, and services.

The Group employs electronic trading platforms to ensure it meets the requirements of the laws of the Russian Federation and other regulatory legal acts of the Russian Federation, the Procurement Regulation as well as corporate standards concerning procurement, and also complies with the laws of the countries where foreign subsidiaries operate.

The Company ensures the rational and justified use of measures to support subsidiaries that are specifically established to perform maintenance, repair, innovation, and engineering tasks as well as tasks to ensure energy efficiency, and gives preferences to suppliers and contractors taking into account the requirements of the laws of the Russian Federation and the legislation of the countries where foreign subsidiaries operate.

Transparency of procurement activities

The high level of transparency in procurement activities at the Group has been confirmed by the National Procurement Transparency Rating, an independent analytical center that specializes in the economic and legal analysis of the Russian state and corporate procurement market.

Since 2015, Inter RAO has had an advisory body on the efficiency of procurements by the Group’s companies, which includes representatives of regional authorities, public organizations, and other members. The advisory body drafts proposals that aim to improve the efficiency of procurement activities, including expanding the access of small and medium-sized enterprises (SMEs) to procurements conducted by Inter RAO companies.

Supplier Day

Inter RAO annually holds a ‘Supplier Day’ that is dedicated to making procurements more accessible to organizations and entrepreneurs, involving domestic manufacturers in the high-tec h equipment production program, developing cooperation in industry and science for the application of innovative solutions, import substitution, and raising awareness about measures to support small and medium business.

Corporate Online Store

The Inter RAO Corporate Online Store (COS) functions on the basis of the Unified Electronic Trading Platform (Roseltorg) for procurements of up to RUB 500,000. The Company views the development of the COS service as a promising way to simplify procurement procedures.

Conducting procurements through the COS ensures a high level of transparency and the effectiveness of procurement activities and significantly reduces labor costs for certain procurement activities in the interests of the Group’s companies.

In 2018, Order No. IRAO/247 of PJSC Inter RAO dated June 7, 2018 approved the regulations for the simplified procurement procedure. Revisions were made to the Regulations on the CPC regarding the use of the electronic document management system and process automation. Utilizing a unified process resulted in improvements in indicators, namely a decrease in the overall duration of the CPC’s work.

Requirements for contractors regarding management systems, industrial safety, and environmental protection

As part of their proposals, procurement participants must provide valid certificates confirming that their enterprises have the following:

  • A procurement participant and/or producer of the procured goods
  • A properly organized quality control system
  • Compliance with technological processes (input control, a control system during production processes, output control, a certified quality management system based on ISO 9001 standards, an ISO 14001 certified environmental management system, an OHSAS 18001 certified occupational safety system, and an ISO 50001/GOST R ISO 50001 certified energy management system)

The guidelines for the conclusion of EPC (engineering, procurement, and construction) agreements for the construction of Inter RAO energy generating facilities contain provisions on contractors’ obligations to comply with all requirements of regulatory acts related to industrial, environmental, and fire safety during the performance of contractual work.

Contractors are also required to comply with applicable laws, including environmental laws and legislation on environmental protection.

Procurement assessment system

Pursuant to Directives of the Federal Agency for State Property Management No. DP 11/17668 dated May 5, 2016 and June 29, 2016, the PJSC Inter RAO Board of Directors Minutes No.173 dated July 4, 2016. approved the Action Plan for the Standardization of the Procurement of Goods, Work, and Services to Meet the Needs of PJSC Inter RAO (hereinafter the Plan).

In accordance with item 4 of the Plan, monitoring of the Company’s procurement activities has been conducted annually starting from 2017 (including as regards compliance with the approved annual comprehensive procurement program (ACPP) and standard costs for certain types of goods, work, and services for the needs of PJSC Inter RAO), with the subsequent inclusion of information about the monitoring results in the Company’s annual report.

Procurements by the Company during the 2019 reporting year were carried out in accordance with the approved standards and established limits
Procurement statistics 2019, RUB thousand
Tenders, other procurement methods (lots), and procurements from a sole supplier (contractor), including: 152,555,827
Tenders and other procurement methods (lots), including: Tenders and other procurement methods (lots), including: 121,804,478
Services 103,123,662
Materials and resources 18,680,816
Contracts concluded 142,479,480
Information about suppliers 2019
Total number of suppliers applying to take part in the Group’s procurement procedures 9,944
Number of suppliers accredited in accordance with the ‘Regulation on the Procedure for Accrediting Suppliers of Goods, Work, and Services’ at the end of the period 81
Value of procurements, excluding agency commissions and intra-group procurements, RUB bln
Value of procurements, excluding agency commissions and intra-group procurements, RUB bln
Reduction in expenses on the ACPP compared with the planned expenses, %
2017 2018 2019
PJSC Inter RAO 5.5 3.2 4.6
Generating assets 4.8 4.6 5.0
Supply assets 6.5 3.7 3.9
Other assets 4.0 5.5 4.2

Import substitution [GRI 204–1]

The Group’s companies that are subject to Federal Law No. 223-FZ have prioritized goods of Russian origin as well as work and services performed by Russian entities in the procurement of goods, work, and services through a tender, auction, or other procurement method, except for procurements from a sole supplier (contractor) for goods originating from a foreign state or work or services performed by foreign entities.

In 2017, according to Directive No. 830p-P13 of the Government of the Russian Federation dated February 6, 2017, PJSC Inter RAO finalized and approved the Inter RAO Group’s Corporate Import Substitution Plan Minutes No. 208 dated Septe mber 18, 2017. , which is an integral part of the Strategy/Long-Term Development Program.

Import substitution: The responsible choice

Risk appetite: Inter RAO strictly adheres to the import substitution program.

Starting from 2017, the fulfillment of the approved plan is evaluated on the basis of an integral indicator The integral indicator is calculated in accordance with the Guidelines for the Preparation of KPI approved by Order 219R-AU of the Russian Ministry of Economic Development dated August 11, 2016. that specifies the share of foreign products in procurements. Based on the 2019 procurements results, the actual value of the integral indicator did not exceed the planned value, which indicates that the Group’s dependence on foreign products declined. In addition, the proportion of foreign products in the total volume of procurements decreased in 2019 compared with 2018, both during the procurement planning stage and upon completion of the procurement procedures.

Indicator Planned value, % Actual value, %
2017 2018 2019 2017 2018 2019
Integral indicator describing the share of foreign products in procurements 16.57 21.38 13.80 12.95 15.77 11.77

In an effort to develop cooperation in such areas as industry and science for the import substitution of equipment and technologies in the energy sector, PJSC Inter RAO signed agreements with the Governments of the Tomsk, Yaroslavl, and Sverdlovsk Regions.

The Ecosreda functional services project was launched within a special section of the Inter RAO electronic platform in 2019. Ecosreda will help develop new solutions for general market problems, offer the professional community the best procurement practices, and promote the development of domestic production and the economy as a whole.

Manufacturing of power equipment in Russia

Inter RAO is involved in a joint venture called LLC Russian Gas Turbines between the Inter RAO Group and General Electric for the manufacturing of gas turbine units in the Russian Federation. The joint venture is implementing a program to increase the degree of localization of gas turbine production with features that correspond to the best world analogues.

Cooperation with small and medium-sized businesses

In 2019, LLC Inter RAO – Procurement Management Center carried out work to achieve the target indicators for the implementation of the Strategy for the Development of Small and Medium Enterprises in the Russian Federation until 2030, which was approved by Decree No. 1083-r of the Government of the Russian Federation dated June 2, 2016.

Agreements were concluded with the administrations of the Altai, Primorsky, and Khabarovsk Territories as well as the Kaliningrad Region in 2019 to provide support measures to SMEs, including the targeted acceleration of SMEs that manufacture domestic products, stimulate the innovative and import-substituting activities of SMEs, and develop competitive manufacturing SMEs.

Procurements from small and medium-sized enterprises, %
Procurements from small and medium-sized enterprises,