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Boris Kovalchuk briefed the President on the company’s current activities.

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President of Russia Dmitry Medvedev: Mr Kovalchuk, I have signed an executive order on [open joint stock company] INTER RAO UES’s future development, which envisages the transfer to it of federally owned shares in a number of large companies as payment towards the company’s charter capital increase. At the same time the order addresses a number of legal aspects. I hope that this will help to develop INTER RAO UES as a big player on the energy market. This growth is important not just for the company but for the entire country and for all of our people, and this growth makes sense for our people only if it results in a tariff policy that is clear, transparent, and predictable. 

I know that you are working on energy efficiency and are involved in a number of projects that should ultimately have an impact on energy efficiency and on tariff setting and the energy situation in general. I therefore hope that the order I have just signed will develop this work. What are your plans?

chairman of Inter Rao Ues Management Board Boris Kovalchuk: Mr President, let me say a few words about the situation in the company and about our progress in consolidating our assets. INTER RAO today is a rather fast-growing company with total installed production capacity of around 18,000 megawatts, in Russia and abroad. The company is Russia’s main electricity exporter and importer and works actively in these areas with the neighbouring countries. In particular, after the accident at the Sayano-Shushenskaya Hydroelectric Power Station, we imported electricity from Kazakhstan so as to cover our consumers’ needs.

In 2007–2008, when INTER RAO was in its formative stage, we took control of four generating enterprises within the Russian Federation. In 2009, our company was appointed trustee manager of the OGK-1 company, which had not been privatised during the reform of RAO UES. Over this last year, we have doubled the OGK-1’s cash flow and have raised funds for carrying out large-scale investment programmes there. In particular, just a week ago, we completed a 21 billion-ruble issue in favour of Vnesheconombank for the construction of a new generating unit at Novy Urengoy state regional power station (GRES). 

International cooperation is our big priority, however. We have signed agreements with practically all the leading global companies. Our biggest priority at the moment is our partnership with Electricite de France, Europe’s biggest energy company, and with the Enel and Fortum companies. I will say more on the specific agreements and deals we have concluded later. 

In order to enter international markets we are trying to build alliances with other Russian companies, including Rosatom. We have plans to work in partnership with them on building a nuclear power plant in Turkey and also building the Baltic Nuclear Power Plant, which will have an export focus on the Baltic states, Poland and Belarus.

In Russia, although neither INTER RAO nor OGK-1 carried out additional share issues or has a strategic investor, we have taken on contractual commitments to provide production capacity of up to 2,500 megawatts by 2015. This is a large amount and it will require investment, but we have already identified potential investment sources.

Last year, we brought a 330-megawatt generating unit on line at the Kashirskaya GRES, and also an 80-megawatt unit at the Sochi Power Station to supply power to the Olympic facilities. We have already signed all of the loan agreements for the construction of a 500-megawatt coal-fuelled Ekibastuz GRES-2 power station in Kazakhstan, and this work will begin this year.

The company is also working actively on energy efficiency. You mentioned the issue of keeping tariffs down, and in this respect we have launched a pilot project in one of the country’s regions. We signed an agreement that sets out two goals: first, to keep tariffs for consumers from rising, and second, to carry out a large-scale energy efficiency programme.

Dmitry Medvedev: Which region is this?

Boris Kovalchuk: Volgograd Region.

We are now taking over the management of lighting assets, and we have our sales companies, which work with ultimate consumers in terms of setting electricity prices and also helping to implement energy conservation measures. We are now establishing a joint venture with Rosatom in this area. We have set up a joint venture with Fenice, an EDF subsidiary, and are already working together on energy service contracts. INTER RAO will soon acquire stakes in companies producing LED light bulbs in Russia. Based on our sales potential and the companies we have set up, we hope to develop a clear infrastructure in this area in the next few years and move forward on the energy efficiency and energy conservation market.

Engineering is another main area of activity for our company, because often on the international markets we run up against the problem of our equipment not being competitive enough. We have therefore made technology transfers a separate area of activity within our business. We already have a joint venture with WorleyParsons, one of the world’s leading engineering companies. We are also actively engaged at the moment on establishing a joint venture with General Electric to produce 75-megawatt capacity gas turbines. They are ready to transfer the technology here on a highly localised basis, working with our boilermaker partners, with EMAlyans company, on boiler equipment. Ultimately, this will give us the chance to sell abroad not just specific types of equipment but entire combined cycle (CHP) units, and this will make our offers more competitive.

Dmitry Medvedev: I see.

These projects are all important undertakings, big projects that you, as our main company working on international energy cooperation, are engaged in, but I very much hope that the commercial side of your business will be rationally balanced with an innovative component, with the innovative projects that will ultimately ensure development, and that also require investment. 

Boris Kovalchuk: Yes, we will do this too.

Dmitry Medvedev: That is settled then.