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Unified Energy System

December 5, 2003

RAO UES Board holds its regular meeting on 5 December 2003

Moscow, 5 December 2003. At its regular meeting held today, the Board of Directors of RAO "UES of Russia" heard the information on the development of competitive procurement by the entities of RAO UES Holding using internet-based technologies and e-trading systems and approved the work being done by RAO "UES of Russia" in that area.

The Board of Directors noted that the technologies employed in the information and trading systems "B2B-energo " and "tzs.elektra.ru enhance the information content and transparency of the market while ensuring development of competition and implementation of new forms of procurement tendering (auctions). The system also helps cut the costs of organizing the process and reduce the time needed to procure the necessary goods and services.

The Board of Directors declared the use of e-procurement as a top priority in developing the RAO UES procurement system and gave the Management Board of RAO "UES of Russia" a task to ensure that, beginning in 2004, competitive procurement for RAO UES Holding's entities is effected primarily through the e-trading systems.

Today, over 930 organizations are registered users of B2B-energo. These include over 80 regional energos and AO-power plants, which allocate an aggregate of RUB100 billion in funds for maintenance, support and rehabilitation of the principal production assets annually.

Since B2B-energo went live in October 2002, RUB800 million worth of goods and services have been procured through the system. Over the last two months the volume of sales through B2B-energo grew twofold.

Transition to the e-trading system will help cut procurement costs by 50% and bring down the prices of goods and services by 5%-30%.

The Board of Directors decided to consider the expansion of competitive procurement by companies of RAO "UES of Russia".

The Board of Directors noted the information on the co-foundation of Territorial Generation Companies (TGCs) by several regional energos, and the proposals regarding the TGC structure.

The Board of Directors charged the Management Board and the Strategy and Reform Committee to revise the procedure for the TGC co-founding by several regional energos and the mechanisms to be used to minimize risks inherent in the process, including the following:

  • risk that the proposal to merge the company spun off from the corresponding regional energo with and into the corresponding TGC is not approved;
  • issues of interregional tariff regulation;
  • the issues of non-compliance with the applicable laws and regulations of the Russian Federation governing the electricity reform.

The Board of Directors instructed the Management Board of RAO "UES of Russia" to submit a request to the Ministry of Economic Development and Trade of Russia and the Ministry of Antimonopoly Policy of Russia to develop antimonopoly regulations for TGCs which might occupy a dominant position on the electricity market, and to submit the item of business "Co-founding of TGC by several regional energos. Proposals on TGC structure" for consideration at the meeting the Board of RAO "UES of Russia" in February 2004.

In order to ensure tariff regulation for TGC operating in several constituent territories of the Russian Federation, the Management Board of RAO "UES of Russia" has been given the task to bring up the issue of developing a procedure for interregional tariff regulation with the Russian Government's Electricity Reform Commission.

The Board of Directors instructed the Management Board and the Strategy and Reform Committee of the Board of Directors of RAO "UES of Russia" to develop the procedure for agreeing the TGC structure with shareholders.

The Board of Directors gave the Management Board of RAO "UES of Russia the task to submit proposals to the Government of the Russian Federation regarding the TGC configuration and the criteria for their formation.

The Board of Directors of RAO "UES of Russia" reviewed the restructuring plan of OAO "Stavropolenergo" envisaging:

  • reorganization of OAO "Stavropolenergo" through spin-off of the following companies (preserving the current capital structure): OAO "Stavropol Management Company", OAO "Stavropol Electricity Generation Company", OAO "Stavropol Heat Generation Company", OAO "Stavropolenergosbyt" (energy retail company).
  • establishment by OAO "Stavropolenergo" of a wholly-owned subsidiary, OAO "Stavropolsetenergoremont";

The Board of Directors has resolved that the power distribution networks that are not part of the Unified National (All-Russian) Power Grid (UNPG) remain the property of OAO "Stavropolenergo".

The Board of Directors approved the transfer of the functions of the one-man management bodies (i.e. CEOs) of OAO "Stavropol Heat Generation Company", OAO "Stavropolenergo", OAO "Stavropolenergosbyt", and OAO "Stavropol Electricity Generation Company" (until it is consolidated into the wholesale generation company) to OAO "Stavropol Management Company".

The Board instructed RAO UES representatives to vote for the approval of the items of business of Board meetings and shareholder meeting of OAO "Stavropolenergo", and shareholder meetings of the newly established companies, that are required to ensure implementation of the reorganization plan of OAO "Stavropolenergo".





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