Message from the CEO

Dear Shareholders,

Inter RAO is pleased to present its performance results for 2019. During the reporting period, the Company continued its commitment to improving efficiency, bolstering its financial, economic, and production results, introducing modern management technologies to ensure reliable power supply to consumers, increasing shareholder value, and maintaining a leading position in the Russian electric power industry. All the decisions and actions taken by management were implemented in accordance with the Company’s strategic objectives and in the interests of shareholders.

Boris Kovalchuk Chief Executive Officer

Modernizing facilities

In 2019, the Company’s activities largely focused on preparations for a new investment cycle in the Russian electric power industry – the Thermal Power Plant Modernization Program Based on Capacity Delivery Agreements. Thanks to the timely and thorough preparation of projects for competitive capacity delivery as part of the modernization program for 2022-2025, the Group won almost half of the total capacity offered by the program. This means that more than 6.7 GW will be upgraded at eight of the Group’s power plants over the next five years.

Inter RAO management also devoted a great deal of attention to developing and improving the quality of its assets, which had a major impact on growth in key performance indicators.

Generation in the Russian Federation and Engineering

Electric power generation in 2019 amounted to 120.5 bln kWh, which is right around the same level as the previous year. The utilization rate of installed generating capacity at the Group’s power plants in Russia continues to be among the highest in the industry at 47.4%. Thermal power output from collectors amounted to 40 mln Gcal/h, down by 3.6% compared with 2018. The implementation of the CDA Investment Program in previous years and the decommissioning of obsolete facilities significantly boosted the efficiency of the Group’s key segment – its power generating assets in Russia.

A major state-sponsored project in partnership with the company ROSNEFTEGAZ to ensure energy security in the Kaliningrad Region resulted in the commissioning of the third and largest power plant of the project in 2019 – the Pregolskaya TPP with total capacity of 455 MW. This means that the construction of a gas-fired generating facility in the region has now been completed. The construction of the last coal-fired power plant – Primorskaya TPP with capacity of 195 MW – is currently proceeding as scheduled.

Installed capacity utilization factor in 2019, %

Supply

There have been some major successes in supply activities. The Group has bolstered its leadership on the Russian retail electric power market and increased its share to 18.3%. This growth resulted from the effective work of new guaranteed suppliers in the Vladimir and Vologda Regions as well as the expansion of the customer base in the entire Inter RAO supply segment.

All the Group’s supply companies implemented measures to improve services as part of requirements for the activities of guaranteed suppliers. This is the result of many years of systematic work to improve the efficiency of client services.

In an effort to increase the transparency of payments in the housing and utilities sector, Inter RAO and the regional executive authorities continued to set up unified information and settlement centers (UISCs). In addition to the UISCs that are already functioning in the Moscow and Leningrad Regions, new centers opened in the Tomsk Region and Republic of Bashkortostan.

Trading

Significant achievements were also made in the trading segment, especially with respect to electricity exports. As a result of tactical advantages on the Russian and foreign electricity markets, the favorable pricing environment, and other factors, exports increased by 15.7% in 2019 and amounted to 19.3 bln kWh, primarily as a result of exports to such destinations as Lithuania and Georgia. Revenue in the segment topped RUB 77 bln for the first time.

Transactions with Russian and foreign assets

In 2019, Inter RAO effectively terminated its participation in Kazakhstan’s Ekibastuzskaya TPP 2 as well as in Turkey’s Trakya Elektrik project. In addition, the Group consolidated a 100% stake in JSC Tomskenergosbyt following the completion of the buyback process from minority shareholders.

Financial result

Comprehensive efforts in all business segments over the course of the year helped push the Group’s annual revenue over RUB 1 trillion for the first time in its history. EBITDA increased by 16.7% and amounted to RUB 141.5 bln. Net profit amounted to RUB 81.9 bln, an increase of 14.3% compared with the previous year.

This year, the Company faces the challenge of boosting its key production and financial indicators.

Strategic objectives

In the medium term, Inter RAO will implement a new strategy until 2030 that is supposed to be approved in the first half of 2020. This document is based on the goal of maintaining leading positions in the Russian electric power industry and developing new businesses as well as digital business transformation.

These new challenges will be met by devoting special attention to matters concerning social responsibility and sustainable development, which will ensure the Company’s further growth and effective work for the next decade.

Changes in key financial results, RUB bln