“SAMRUK-ENERGY” JSC | Integrated ANNUAL REPORT

TRANSFORMATION

Primary target of “Samruk-Energy” JSC Transformation program is cutting operating costs, enhancing export potential of the market, environmental protection and introduction of new approaches to asset management.

“Samruk-Energy” JSC Business transformation program aims to ensure the Company’s transformation to a technological, highly profitable and efficient corporate entity, as well as it focuses on creation of reliable platform that will enable “Samruk-Energy” JSC to accomplish its strategic development goals set out in “Samruk-Energy” JSC Development Strategy for 2018–2028.

Transformation program is based on concurrent work in five key directions:

  1. Reengineering of business processes – implementation of integrated systems for resource management, integrated planning and corporate management in all organizations of the perimeter of transformation projects.
  2. Digitalization – the formation of a digital business model based on automated production and management systems
  3. Simplification of the legal structure of the Company – assets privatization in line with the Comprehensive Privatization Plan of “Samruk-Kazyna” Fund.
  4. People transformation – comprehensive development of corporate culture at the Company, the introduction of leadership development program, an employee’s compliance assessment system. Implementation of program for succession planning, personnel reserve for key positions, young professionals development program “Zhas Orken”. Application of the service model at routine processes, the implementation of the program for recognition of employees’ outstanding results. Development of up-to-date HR-analytics tools, automated human resource management processes.
  5. The introduction of change and project approach management – application of project and change management standards; ensuring that every executive of the Company has the competence such as change and project approach management. Development and application of the methodology for change and project approach management are included key performance indicators of the company and key staff of the Company.

The results of Transformation Program will be both certain financial performance (benefits, savings) and quality results, which will allow enhancing the value of the Company’s assets as a whole.

“Samruk-Energy” JSC Transformation program’s project portfolio comprises 12 projects, two of which were launched this year: “Introduction of portfolio management” and “Introduction of the new risk management model”.

According to the results of 2018, one project of the Transformation Program was completed.

Effective money and debt management

The project “Implementation of the new model of corporate finance”

The project was completed. The new corporate finance model was introduced.

Cash and debt management processes are among the key for the Company. The project aims to centralize liquidity management, which is consistent with international best practices.

The project introduced cash pooling instrument at the Company as a unique method for payments optimization.

The projected benefits from the project until 2021 are expected to be in the amount of 8,7 bln. tenge. The project is transferred to the Company’s operations.

Not stopping on the achieved results, the Company continues implementing the Transformation Program projects.

Sales and trading functions centralization

The project “Development of sales processes and implementation of trading processes”

Phase 4 “Monitoring and Support”. New sales and trading process was introduced

The process of single center of SA electricity sales functions was launched in 2018 at the premises of the Head Office (Trade house).

The trade house became a profit center, responsible for the income from the sale of subsidiaries and affiliates’ electricity. It is engaged in the sale of electricity to all consumers in Kazakhstan, participation in activities planning of power plants, centralized participation in the Centralized Electricity Auction. Owing to the introduction of sales processes, the financial benefits from the project for the incomplete 2018 amounted to 3.5 bln. tenge.

Organizational flexibility for the company’s effective response to changing economic conditions

The project “Business Initiatives Portfolio Management”

The project has started. Phase 0 “Project launch”

The built business processes in the framework of “Business Initiatives Portfolio Management” project will ensure the passage and coordination of only highly efficient projects and will bring real benefits to the Company by minimizing future costs. To achieve the objectives, it is scheduled to implement the plan for changing the business, including organizational and process changes, development of methodological documentation for managing a portfolio of capital and long-term financial investments.

Improvement of current risk management system

The project “Introduction of the new risk management model”

Phase 0 “Project Launch” was completed

The project on introducing a new risk management model is aimed at achieving an increase in the efficiency rating of the corporate risk management system based on the results of independent diagnostics of corporate governance of the group of companies of “Samruk-Energy” JSC. The organizational perimeter of the first wave until 2019 included the Corporate Center and “Ekibastuz SDPP-1” LLP. In the second wave from 2020 to 2021 – “Shardarinsk HPP” JSC, “Moynak HPP” JSC and “APP” JSC.

The Сompany governance improvement by building a clear hierarchy

The project “Transition to the target organizational structure”

Phase 4 “Monitoring and Support” of the project’s 2nd wave was completed

The transition to the target organizational structure at the Head Office, “Ekibastuz SDPP-1” JSC was completed. The work on changing functions in accordance with target business processes being implemented, functional distribution of responsibility areas and introduction of the new vertical of posts was performed. The grading system has been developed as well as Job Matching assessment has been carried out. The project has been implemented in “Almaty Power Stations” JSC since October 2018.

IT development strategy. ITSM implementation. IT processes automation

The project “Implementation of the new IT management model”

Phase 3 “Preparation and processes launch” was completed.

The project team has developed and described (based on international practice) targeted IT business processes, project documentation and materials on the establishment of an IT SSC (more than 150 documents).

The GLPI software product for the development of the IT Services Management Information System (hereinafter referred to as the System), designed to automate IT management processes was developed.

The IT infrastructure monitoring subsystem was refined and implemented (at "Samruk-Energy" JSC, “APP” JSC, “Energy Solutions Center” LLP, “Ekibastuz SDPP-1 named after B. Nurzhanov”, “Moynak HPP named after Kantaev”, “Shardarinsk HPP” JSC). The IT Service Management information system was put into trial operation at “Samruk-Energy” JSC, “Energy Solutions Center” LLP, "Ekibastuz SDPP-1” LLP.

Zero tolerance for accidents at work

The project "Introduction of the new integrated security management model"

Phase 3 “Preparation and processes launch” was completed

“Samruk-Energy” JSC declared zero tolerance for accidents at work. The project team conducted a primary audit to determine the current state of the integrated safety management system (“Samruk-Energy” JSC, “Moynak HPP named after Kantayev”, “Ekibastuz SDPP-1 named after B.Nurzhanov” LLP; “Shardarinskaya HPP” JSC ).

New standards were developed  in accordance with the target model and international standards in the field of integrated security: The Golden Rules of Security; Methods for determining the root causes of accidents; Accounting for potentially dangerous accidents. reports of dangerous / safe behavior; Safety analysis of work in the issuance of work permit; Staff motivation for safe behavior.

Corresponding trainings have been conducted for employees and senior management of the Corporate Center and “Samruk-Energy” JSC group of companies.

Reduction of the Company’s operating expenses owing to the introduction of category procurement management

The project “Category Procurement Management”

Phase 4 “Monitoring and Support” of 5th wave of the project was completed

The project aims to improve the procurement system. The categorization of the purchased goods, works and services has been carried out. 8 purchasing category strategies have been developed and are being implemented. Contracts were concluded in the categories “Rolled metal products”, “OTR”, “Protective clothing”, “Oils and lubricants” and “Spare parts for special equipment and rolling stock”. By 2022, it is planned to implement 20 procurement category strategies covering 80 % of the annual costs of managed categories.

Benefits of more than 3,1 bln. tenge are expected to be obtained from the project implementation.  In addition to the financial benefit, it is expected to create a broad and reliable supplier base, improve the quality of products, works as well as services delivered.

IPS is the basis for annual and medium term planning

The project “Integrated Planning System”

Phase 2 “Implementation” is about to complete

Implementation of the IPS tool on IBM software at “Samruk-Energy” JSC and “Samruk-Energy” JSC group of companies (“Ekibastuz SDPP-1” LLP, “Ekibastuz SDPP-2 Plant” JSC, “Moynak HPP” JSC, “Shardarinsk HPP” JSC, “Bogatyr Komir” LLP) will allow to calculate quickly and model multiple scenarios of the Company’s development as well as offers the best possible scenario based on the most reliable data (standards. ratios. passport details. etc.)

The actual benefits from the introduction of IPS project during 2018 at Ekibastuz SDPP-1 plant alone amounted to 910.6 mln. tenge. These benefits were obtained as a result of the work of the power units of the station in the optimal mode, calculated from the IPS, as well as the provision of services for regulation of capacity by the power plant.

Planned benefits of IPS project from 2018 through 2021 make 3.3 bln. tenge.

Information Security

The project “Implementation of the management system and information security”

The first wave is completed

In order to implement the Presidential Decree “Third Modernization of Kazakhstan: Global Competitiveness”, the country embarked on a course of developing the Cyber Security Concept (“Cybershield of Kazakhstan”), aimed at ensuring the information security of society and the state in the field of information and communications.

The goal of the project is the introduction of new software for monitoring vulnerabilities and threats, improvement of efficiency of protection protection of “Samruk-Energy” JSC data and information in the face of modern threats to information security, increasing the maturity of information security processes, ensuring control and analysis of malicious activity using tools for monitoring vulnerabilities and threats to the Company and “Samruk-Energy” JSC group of companies.

The implementation and introduction of the Project will create a unified Security Operation Center in the future.

Following the results of 2018, a significant reduction in violations of internal regulatory documents in the field of information security of “Samruk-Energy” JSC compared with previous years was achieved and disclosure of confidential information was not allowed.

As part of the implementation of Strategic Initiatives, the Company launched two new projects during the reporting period.

Digitization

Projects are at the stage of creation

A separate direction of “Samruk-Energy” JSC Transformation Program is participation in the implementation of the State Program “Digital Kazakhstan”. The Company’s Road Map for 2018–2021 includes digitization activities. A digitization office conducted a preliminary survey at “Ekibastuz SDPP-1” LLP for determining its readiness for the implementation of digitization projects.

At the same time, memorandums on engaging specialists in mathematics and computer science were signed with Kazakhstani universities in order to develop a mathematical model of production data on a gratuitous basis. At present, memoranda are concluded with the University of International Business (UIB) and with the Almaty University of Power Engineering and Communications.

The implementation of digitization projects in the future is aimed at improving the overall performance, competitiveness and value of “Samruk-Energy” JSC group of companies.

Automation of business processes

The project “Implementation of target processes”

The project has started. Phase 0 “Project launch”

Introduction of targeted processes in SAP S4 / HANA system, which allows supporting support from 5–6 or more complex business processes simultaneously, providing optimization. control and transparency of processes and costs.

The project started at “APP” JSC.