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Investor Day at IDGC Holding


IDGC Holding held an Investor Day in Moscow on August 3, 2011. At the event, the Company’s top management presented to investors and analysts its vision of how and where IDGC Holding’s business would grow.

“IDGC Holding acts as the Government’s agent for operation of the Russian electricity distribution and its’ role is core in distribution grid sector,” noted Nikolay Shvets in his report. “As a strategically important company, IDGC Holding must achieve industry-wide objectives through subsidiaries controlled by the Company, set future operating benchmarks for all industry players and ensure development and promotion of best industry regulation practices.” Nikolay Shvets noted problems related to increase of territorial grid companies’ share in regions of operations and “last mile” issues as key in distribution grids. IDGC Holding is focused on resolving of these problems, since strategic development of the company depends on it.

Nikolay Shvets, Director General of IDGC Holding, emphasized that “at present, the key objective is to enhance financial and operating efficiency of distribution grid companies. To achieve this objective, we are applying active efforts to cut down electricity losses, reduce the wear of key assets, streamline capital expenditure, and improve tariff regulation. We also specifically focus on enhancing service quality and reliability.”

Nikolay Shvets underlined that in terms of tariff regulation IDGC Holding management is focused on full implementation of long-term tariff regulation. “RAB-regulation remains a priority in our pricing policy,” underlined Nikolay Shvets, “for IDGC Holding will be unable to implement its large-scale investments unless the new pricing methodology is used to accumulate the necessary funds.” IDGC Holding CEO emphasized that fulfillment of RAB parameters is extremely important both for IDGC Holding and company’s shareholders.

According to Nikolay Shvets, both the entry to international electricity distribution markets and acquisition of new electricity distribution grid assets in Russia are attractive in terms of geographic business expansion, while IDGC Holding will pursue both goals.

“The first goal is to enter new regions of Russia and CIS countries. The second goal is to enter new European markets, including Western Europe, which will give us access to totally new management experience and cutting-edge technologies. To achieve this goal, we should consider exchange of assets with our European partners while taking advantage of the predominant position of IDGC Holding in the Russian market in negotiations,” said Nikolay Shvets.

Director General of IDGC Holding reminded the audience that it is planned to transfer the management of its subsidiaries Moscow United Electric Grid Company (MOESK) and Tomsk Distribution Company (TDC) to Russia’s Gazprombank and France’s electric utility ERDF in 2011.

The main purpose of placing the operating companies under the management of Russian and international partners is to acquire new management experience and technologies in operating distribution grid companies.

“Further reforms of the industry structure will depend on the outcome of such operation of grid companies by our Russian and international partners,” noted Nikolay Shvets. “If the pilot projects are successfully implemented and issues related to the retail market, tariff regulation and economic incentives are solved, we envisage that one or two IDGCs may be privatized in the mid-term.”

The chief executives of IDGC Holding’s operating entities toward which investors show a high appetite—IDGC of the Center, IDGC of the South, Lenenergo, and IDGC of the Volga—participated in a constructive dialogue with representatives of the investors’ community.

A conference of the executive management and managers of operating companies of IDGC Holding was held in Moscow on the first day as part of the Investor Day. Analysts from investment banks, including Alfa Bank, Troika Dialog, Otkritie, UniCredit, Gazprombank, Credit Suisse, Morgan Stanley, Goldman Sachs, VTB Capital, UBS, Renaissance Capital, UralSib, TKB BNP Paribas, noted that such involvement of the top management of IDGC Holding and IDGCs in the discussion of the most urgent issues related to the tariff regulation of the distribution gird sector made it possible to understand better the Company’s business model and outlooks of further cooperation.

Speeches delivered at the conference included those by Deputy Director General for Corporate Governance and Property of IDGC Holding Aleksey Perepyolkin, Deputy Director General for Economic Affairs and Finance of IDGC Holding Aleksey Demidov, and executives of IDGC Holding’s companies.

The Investor Day will continue tomorrow. A visit to Tver is scheduled for August 4, 2011, for a meeting with representatives of Tver Region executive authorities in charge of utilities and electricity.

The main purpose of Investor Day of IDGC Holding was to inform investors regarding current aspects of IDGC Holding activity and maintenance of distribution grid complex transparency.

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