Investment activity

Long-term investment program

The long-term investment program of Lenenergo for 2014-2019 (hereinafter — the Program) was formed on behalf of the Ministry of Energy of Russia (Minutes #09-1183pr of 03.12.2013) taking into account the extension of the tariff regulation period until 2019 and approved by Order of the Ministry of Energy of Russia #562 of 29.08.2014. In April 2014, hearings on the draft long-term investment program were held at the Open Government of the Russian Federation, following which the Program was pre-approved and recommended for approval.

In accordance with the action Plan (“road map”) “Improving access to energy infrastructure” approved by Decree of the Government of the Russian Federation #1459-R of 17.08.2013, hearings were held in the Public Advisory Councils under Committees on tariffs of St. Petersburg and the Leningrad Region, during which the draft investment program for 2014-2019 received positive conclusions.

Main objectives of the investment program of Lenenergo

The investment program was developed in accordance with the following documents:

• The general scheme of placing power grid facilities till 2020 with a perspective until 2030 approved by the Government of the Russian Federation (extract from the Minutes of the meeting of the RF Government of 03.06.2010, #24);
• The scheme and program of development of the regions in 2012-2018 approved by Order of the Ministry of Energy of Russia of 13.08.2012, #387;
• The scheme and program of development of the power industry of St. Petersburg in 2012-2016 approved by Decree of the Government of St. Petersburg of 23.04.2012, #51;
• The scheme and program of development of the power industry of the Leningrad Region in 2011-2015 approved by Decree of the Government the Leningrad Region of 28.12.2011, #466;
• Decree of the Government of the Russian Federation of 20.06.2013, #518 “About the program of preparation for FIFA World Cup to be held in 2018 in the Russian Federation”;
• The program of innovative development of Lenenergo for 2011-2017 approved by the Board of Directors, Minutes #8 of 27.08.2012.

CAPEX by areas in dynamics, RUB mln (w/o VAT)

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Input of capacity in dynamics, MVA

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Input of capacity in dynamics, km

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According to the approved investment program, CAPEX in 2014-2019 will amount to RUB 157,280 mln w/o VAT. The volume of financing is approved in the amount of RUB 188,773 mln (VAT included).

Priority areas of investment are technical re-equipment and reconstruction of grid facilities due to the high percentage of wear of the capital equipment: this area accounts for more than 65% of the total investment. Remaining 35% of the investment will be spent on new construction.

Following the implementation of the investment program in 2014-2019, fixed assets will be increased by RUB 166,799 mln. Additional transformer capacity will be created in the amount of 7,573 MVA, the length of transmission lines will be expanded by 6,358 km, which will enable to increase capacity, to reduce accidents, to improve quality and reliability of the power supply system and to ensure technological connection to electrical networks.

Implementation of the investment program in 2014

The investment program of Lenenergo for 2014 was approved in the structure of the innovative development program for 2014-2019 by Order #562 of the Ministry of Energy of Russia dated 29.08.2014 in accordance with Decree #977 of the Government of the Russian Federation dated 01.12.2009. CAPEX amounted to RUB 23.4 bn.

Dynamics of CAPEX, RUB mln (w/o VAT)

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Dynamics of capacity input, MVA

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Dynamics of capacity input, km

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In the reporting period, CAPEX increased by 25% up to RUB 23,411 mln. Commissioning of capacity into fixed assets in terms of money increased by 30%.

The increase in CAPEX and commissioning of fixed assets in 2014 was caused by:

• works under contracts on technological connection according under accumulated obligations, including towards a preferential category of applicants;
• implementation of measures to ensure the renovation of network assets;
• preparations for the autumn-winter period 2013-2014.

Plans for the investment program of Lenenergo in 2014 were executed for 91% on the volume of investment, for 84% — on commissioning of fixed assets, and for 78% — in terms of funding. The Company introduced 1,450 MVA of transformer capacity at the plan of 1,992 MVA and 2,490 km of transmission lines at the plan of 2,604 km.

The deviation of actual indicators from the plan was due to the early implementation and financing of works on a number of directions in 2013, a change of work schedule with regard to the issuance of permits, and a shift in timing of works at subscribers under the contracts for technological connection and the specification of physical parameters of the objects of distribution networks 0.4–10 kV. Besides, negative influence on implementation of the program was rendered by the deterioration of macroeconomic conditions and emergence of deficiency of liquidity at the Company’s basic bank.

Funding sources of CAPEX in 2014, %

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Debt funds, additional issue of shares, payment for technological connection and calculations by property were the main funding sources of CAPEX of Lenenergo in 2014.

Technological connection accounted for the largest share of financing of the investment program in 2014 — 48.1%. The costs of retrofitting and reconstruction amounted to 18.8%, 7.7% of total funding was spent on the programs of special importance, and on new construction — 4.7%. The share of other programs was 20.7% of all funds.

Areas and structure of CAPEX

Expenses on retrofitting and reconstruction of facilities in the structure of CAPEX in 2014 amounted to 50.9%, on new construction — 48.7%, on other costs — 0.4% of factually deployed CAPEX.

The prevalence of reconstruction in the structure of CAPEX was related to the implementation of measures to ensure the renovation of network assets.

During the reporting period, CAPEX of new construction was reduced by 6% (RUB 771 mln), which was associated with the transition to the final stage of the target program “Renovation of cable lines 6-110 kV”.

The reduction of expenses on application of innovative technologies and equipment was due to the exclusion of R&D activities from the investment program by the decision of Rosseti, and with the adjusted schedule of production under AIMS CEM of the retail market due to the restriction of access of contractors’ electrical installations for works of public utilities and homeowners.

On to the directions of investment in 2014, technological connection accounted for the greatest weight in the total volume of CAPEX (51%) — one of the main directions of investment activity of the Company, the purpose of which is the execution of accumulated obligations on technological connection, including towards a preferential category of applicants of St. Petersburg and the Leningrad Region.

The volume of investments on the programs of special importance in 2014 amounted to RUB 1,446 mln, or 6%. The programs of special importance are as follows:

• the program of renovation of cable lines 6-110 kV, funded using Federal funds;
• the project of construction of cable line 110 kV Krestovskaya — Vasileostrovskaya within the Program of preparation for the FIFA World Cup 2018 in Russia.

Retrofitting and reconstruction of facilities 35-110 kV in 2014 amounted to RUB 4,079 mln (17%), new construction of facilities 35-110 kV — RUB 1,002 mln (4%), development of distribution networks 0.4–10 kV — RUB 1,527 mln (7%), the program of process management automation — RUB 606 mln (3%), the program for implementation of the automated system — RUB 289 mln (1%).

Dynamics of CAPEX by areas, RUB mln

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The structure of the executed investment program in 2014, %

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The program of Renovation of cable networks 6-110 kV in St. Petersburg

The program of priority actions on the renovation of cable lines 6-110 kV, financed with budgetary funds, has been developed with a view of reliability augmentation of work of cable networks in St. Petersburg and ensuring uninterrupted power supply of the city’s districts.

By the end of 2014, the implementation of the CAPEX plan under the program of renovation of cable lines 6-110 kV was 105%. The deviation from planned targets was caused by the increasing cost of cables due to the increase in foreign currency exchange rates.

In 2014, within implementation of the program of Renovation of cable lines 6-110 kV input of CL 110 kV K-128, K-129, CL 35 kV K-29, K-30 (CL 110 kV substation 18A — TPS1), CL 35 kV KS-3, KS-4, KS-5, substation #86 — substation #21 for the total length of 38.75 km was carried out in the districts of St. Petersburg.

Performance of the projects has strengthened the reliability of power supply of the central part of St. Petersburg, Vasileostrovsky, Kirov, Moscow districts of the city, socially significant objects (SPB SUE Gorelektrotrans, SUE Petersburg Subway), and the city’s medical institutions, objects of power structures, office buildings, kindergartens, schools and hospitals in Kronstadt and in St. Petersburg, and allowed to create the conditions for connection of additional load. The share of equipment with service life above permitted standard after implementation of the projects accounted for 0% at the indicator before implementation of the project of 100%.

The most significant objects

New distribution substation 110kV with OTL-110 kV for connection of new substations 110kV of Kamennogorsk-tyagovaya, 12 km, 29 km, 46 km of FSUE Joint Customer Group of the Federal Agency of Railway Transport

Reconstruction of external power supply networks of the sea trade port Ust-Luga

Reconstruction of substation 110 kV #294

Reconstruction of outdoor switchgear 110 kV at substation #89 (replacement of the block circuit of OS 110 kV on bridge circuit with side-tracking of the existing OTL-110 kV) in the part (Reorganization of OTL-110 kV of PRU-3)

Substation #124A with CL 110kV

Reconstruction of CL 6-110 kV in part of CL 35 kV K-29, K-30 (CL 110kV of substation 18A-TPS1)

Reconstruction of CL 6–110 kV in part of CL 110 kV K-128, K-129

Reconstruction of CL 6-110 kV in part of CL 35 kV KS-5, KS-3, KS-4, construction of new CL 35 kV substation #86 — substation #21 instead of CL 35 kV KU-1, KU-2, KU-3

Results of the investment program in 2014

Following the implementation of the investment program in 2014 the following targets were achieved:

• decrease in specific cost in comparison with 2011:

  substations 110 kV (HV) by 4.7%;

  CL 110 kV (HV) by 8.9%;

  CL 3-10 kV by 8%;

  OTL 0.4 kV by 19.6%;

• decrease in the share of equipment with service life above permitted standard in 2014 compared to 2013 by 1.6% (in 2014 — 56.4%, in 2013 — 58%);
• decrease in specific breakdown rate in 2014 compared to 2013 by 44%: from 13.59% to 7.62%;
• growth of losses in electric networks by 1% to the beginning of 2015 (in absolute value — 11.06% versus 10.11%) due to changes in the method for determining the amount of supply in the grid in the section Lenenergo — FGC UES;
• the level of physical depreciation of fixed assets in 2014 compared to 2013 decreased and amounted to 61% for the whole Company, in 2013 — 62%;
• the load of capacity in 2014 amounted to 28% (4,191 MVA from installed capacity of 14,895 MVA), the growth of outdoor power centers — 1 unit (substation Ust-Luga);
• the number of completed contracts for technological connection in 2014 totaled 14,953, including 10,691 contracts towards a preferential category of applicants;
• the volume of completed contracts for technological connection in 2014 totaled 0.7 GW, including 0.13 GW towards a preferential category of applicants.