Power industry is the basic infrastructure branch of the economy, which influence on the operation of industrial sector, services sector, and the quality of life of the population of the Republic of Kazakhstan.
The Company faces the challenge of creating a balanced development model that includes the optimal ratio of energy supply to domestic consumers and exports, combining high economic efficiency, innovative improvement and advanced standards of social responsibility. The Company officials, employees and bodies take decisions in compliance with the development strategy.
In 2018 “Samruk-Energy” JSC approved the new Development Strategy for 2018–2028 in connection with changes in the internal and external environment, including: the postponement of introduction of capacity market in Kazakhstan to 2019, the change in the regulatory environment in renewable energy sector, the adjustment of the state program on privatization, the change in the list and key criteria of investment projects, the postponement of commissioning of energy-intensive production facilities, the new trend in digitization of production and operational processes.
The Strategy takes into account the state policy in the field of strategic planning of the national energy security system, meets the main strategic directions, goals and objectives of the Fund and is developed in accordance with the Corporate Standard for Strategic and Business Planning at “Samruk-Kazyna” JSC group of companies.
When preparing the Strategy, “Samruk-Energy” adheres to, but is not limited to, the principles of sustainable development set out in the United Nations Global Compact.
SWOT-analysis of “Samruk-Energy” JSC standing
Today the Company faces a number of key external and internal challenges, which are a consequence of the current situation of the Company, the characteristics of the external environment and trends in its development.
Key external challenges
1. Introduction of the capacity market
According to the data of the System Operator, as of January 1, 2018, the total installed capacity of thermal power plants was 18,845 MW, of which 10,052 MW or 53.3 % are over 30 years old, the installed capacity of hydropower plants is 2,671.1 MW, of which 1,840 MW or about 69.1 % are more than 30 years old.
To reduce the level of depreciation of the generating equipment, it is necessary to introduce capacity market, which will allow the construction of new and modernization, reconstruction of existing facilities. With the introduction of the capacity market, the existing tariff for electricity will be divided into two parts:
1) the tariff for electricity – a variable part, which ensures the recoupment of costs for the production of electricity;
2) capacity tariff is a constant part that ensures the return of investments in the construction of new and renewal, modernization, reconstruction, expansion of existing power facilities.
The Single Buyer will be introduced in the capacity market, which will carry out a centralized purchase of the service for maintaining the readiness of electric capacity and centralized provision of services to ensure the readiness of capacity to carry the load.
2. Establishment of the EEU common electricity market
The introduction of common electricity market of EEU involves the creation of a system of relations between the entities of the wholesale electricity markets of the member states of the Union based on the parallel operating power systems associated with the purchase and sale of electricity (capacity).
The introduction of the common market is expected from July 1, 2019 after the signing of the International Treaty. However, until the creation of a common gas market (2025), the common electricity market will be operated by parties, which will be authorized by the member states of the Union.
As a result of the establishment of the common electricity market of the EEU, the Republic of Kazakhstan will not only have simplified access to the markets of the member countries of the Union, but will also increase the openness of the domestic market for external electricity suppliers.
3. Availability of free capacities
There has been a steady increase in demand for electricity, about 5–7 % since 2016. The current excess capacity is about 4 GW.
The main excess is concentrated in the Northern energy zone – the key area of the Company's operations. This leads to increased competition and an increased role of competencies for work in a competitive environment, currently limited at “Samruk-Energy” JSC.
4. Decrease in coal sales volumes
The decrease in loads of own stations operating on Ekibastuz coal negatively affects the volumes of coal sales. The potential for an increase in Ekibastuz coal consumption by Kazakhstani third-party consumers is little, and the volumes of supplies to Russia are declining, including due to the partial transfer of Russian coal-fired power plants to domestic coal or natural gas.
5. Tougher environmental requirements
Currently, there is a steady trend in the world to reduce the level of environmental pollution. The commitments made by the Republic of Kazakhstan, as an active participant in international relations in environment field, and Samruk-Energy, as an environmentally and socially responsible company, determine the need for a proactive response to trends in the field of environmental protection.
6. Changes in the regulatory environment for the development of renewable energy sources
In 2017, the state policy in supporting the use of renewable energy has been dramatically changed. The mechanism of auction tenders for the construction of renewable energy facilities was introduced. Auction are held on the principle of reducing the price of electricity, starting from the established ceiling auction prices, for participation in which it is necessary to provide a collateral.
7. Digitization of business
Currently, there is a trend in the world for digitization of production and operational processes, which contributes to optimization of time costs, increase of operational efficiency and development of analytical data obtained in automated mode.
Key internal challenges
- Implementation of the RK Government plans for privatization of the Company's assets. As part of a comprehensive privatization plan for 2016–2020, a part of the assets across “Samruk-Energy” JSC group of companies is planned to be privatized. To maintain the value of the Company, it is necessary to take a number of actions on ensuring the sale of these assets at a fair market price.
- The need for significant improvement of the Company's operations and growth of the ROACE indicator.
- High level of debt burden on the Company, due to the implementation of the investment program.
- Lack of portfolio / project management at “Samruk-Energy” JSC.
Achievement of the mission and vision of the company will be secured through the implementation of three STRATEGIC GOALS:
- Ensuring reliable competitive
power supply in markets where the Company operates
- Maximizing shareholder value
- Sustainable development
Following the achievement of three strategic goals, it is planned to ensure the achievement of strategic results:
- Sustainable leadership in the electricity and power generating coal market of the Republic of Kazakhstan.
- Entry and gain a foothold in the new export markets.
- Increase income flow and improve financial standing.
- Creation of a sound basis for effective management of various types of generation facilities.
- The status of the leader of innovation, sustainable development, corporate governance and a responsible employer.
To achieve the Company's vision and achieve its strategic goals, the Company will focus on the implementation of four STRATEGIC INITIATIVES:
- Increase the profitability of sales:
- Increased sales of electricity and coal in the domestic market.
- Increased sales of electricity and coal in foreign markets
- Development of the product line and price options for the sale of electricity and coal
- Increasing the efficiency of operations:
- Increasing the operational efficiency of existing facilities
- Innovative development and digitization.
- Improvement of financial stability
- Effective implementation of investment programs
- Corporate Governance and Sustainable Development
- Effective Corporate Governance
- Development of human capital
- Implementation of sustainable development initiatives