Regular Meeting of JSC RusHydro Board of Directors
The Board of Directors of JSC RusHydro has considered the issue of an "Integrated System of Measures for Reducing Investment Costs and Raising the Efficiency of the Company's Investment Projects for 2009-2011," and resolved as follows:
1. To take note of information on the list of measures to reduce investment expenses and the expected volume of cost optimization for 2009-2011.
2. To take only those measures that do not lead to reductions in the system reliability of the Company's facilities and energy system.
3. To submit to the Company Management Board a report on implementing an appropriate list of measures to reduce the 2009 investment costs and on the impact of implementing an appropriate integrated system of cost reduction measures on the unit cost of one KW of installed capacity, within the scope of the 2009 investment program implementation report.
The JSC RusHydro Investment Program for 2009-2011, with a total value of 206 billion roubles, was reviewed by the RF Government on 09 April 2009.
Following the 23 January 2009 instructions of the JSC RusHydro Board of Directors, an integrated program of measures to reduce investment costs was developed to help implement the Investment Program. Work on the new version of the investment costs reduction program began as early as the autumn of 2008.
The projected optimization of investment costs under the JSC RusHydro Investment Program for 2009-2011 will, according to preliminary estimates, amount to 18.5 billion roubles, or 10% of the total volume of investments, including more than 5 billion roubles, or 8% of the total volume of investments, through the end of 2009.
Millions of roubles
Cost optimization under the JSC RusHydro Investment Program was carried out under the conditions of maintaining the specified technical parameters of HPPs under construction while keeping to the schedules for their commissioning.
Planned optimization of the 2009-2011 investment costs for the Boguchanskaya HPP, a high-priority RusHydro project, will total 2.283 billion roubles (779.15 million roubles through the end of 2009).
In the first quarter of 2009, 124 supplemental agreements to active contracts were signed to reduce work costs by 10%, along with 239 supplemental agreements to defer payments under active contracts by 65 days and reduce the amounts of advance payments. Currency risk hedging resulted in saving 42 million roubles in investment outlays. By optimizing design solutions for equipment at the Zagorskaya PSPP-2 (with a 10-percent increase in PSPP capacity), savings of 515 million roubles were achieved. The cost of new equipment was reduced by 848 million roubles by holding secondary rounds of bidding.
The Board of Directors of JSC RusHydro discussed the issue of "Raising the Efficiency of the Company's Operating Activities" and resolved as follows:
1. To take note of the guidelines for raising the efficiency of the Company's operating activities.
2. The Company's Management Board shall implement measures in 2009 to cut operating costs by at least 5% of expenditures actually incurred in 2008 (in comparable prices) in compliance with the Company's business plan approved for 2009.
For the purpose of overcoming the consequences of the global financial and economic crisis that has affected the Company in the form of:
JSC RusHydro has worked out a program of measures in 2009 to optimize operating expenses. The program will help the Company cut expenses in 2009 by at least 5% or 2.8 billion rubles (in comparable conditions).
Also, JSC RusHydro is continuing to implement its earlier launched projects and programs to raise the efficiency of its operations with the aim of achieving long-term effects, including the following:
These initiatives will yield an additional 5.8 billion rubles during the three-year period of 2010-2012 or 18.8% of the 2009 expenses (in comparable conditions).
The Board of Directors of JSC RusHydro has considered the issue of "Examining the Company Business Plan for 2009-2012 (Including the 2009 Investment Program)" and resolved as follows:
1. To confirm the Company Business Plan figures for 2009, including those of the JSC RusHydro 2009 Investment Program, contained in the Company Business Plan for 2009-2012.
On 27 February 2009, the Board of Directors approved the RusHydro Business Plan for 2009 and reviewed the forecast indicators of the 2010-2011 business plan. The figures of the approved business plan were put together in accordance with the 2009 Company Investment program providing for financing in the amount of 79.4 billion roubles, approved by the Company Board of Directors' resolution of 23 January 2009 (Minutes No. 71).
On 9 April 2009, the Government of the Russian Federation approved the JSC RusHydro Investment Program for 2009 in the amount of 64.9 billion roubles, a reduction of 14.5 billion roubles from the amount approved earlier by the Board of Directors. The Investment Program provides for the commissioning of 74 MW capacity and the launching of an integrated program for investment costs optimization in the amount of 18.5 billion roubles in the period of 2009-2001, including 5 billion roubles in 2009. The above changes were taken into account in putting together the updated Company Business Plan for 2009-2012.
2. To approve the forecast indicators of the Company Business Plan for 2010-2012, including those of the RusHydro 2009 Investment Program, contained in the Company Business Plan for 2009-2012.
3. To confirm the values of the Company's annual and quarterly key performance indicators (KPIs) for 2009, contained in the Company Business Plan for 2009-2012.
4. To recognize as null and void the Board of Directors' resolution (Minutes No. 62 of 26 September 2008) on Item 4, "Approving the values of the Company's annual and quarterly key performance indicators (KEIs) for 2009."
The Board of Directors of JSC RusHydro has considered the issue of "Approving Related Party Transactions with Members of the Board of Directors," and resolved to approve the contracts made between JSC RusHydro and the following members of the Board of Directors: Anatoly Ballo, Sergei Beloborodov, Vadim Belyaev, Boris Vainzikher, Eduard Volkov, Viktor Danilov-Daniliyan, Sergei Maslov, Sergei Serebryannikov, Vladimir Tatsiy, and Andrei Sharonov.
The contract lays down the general rights and duties of members of the Board of Directors, as provided for under regulatory and legal acts, the Company's Articles of Association and internal documents.
The Board of Directors of JSC RusHydro has approved an equipment lease agreement between JSC RusHydro and JSC Zaramagskiye HPPs as a related party transaction. The monthly rental fee shall be 2,306.75 roubles, plus VAT.
The agreement provides for the installation of processing equipment of the JSC RusHydro corporate network's remote node.
At the end of 2008, a fixed-asset facility - the corporate network's remote node - was commissioned to provide for data exchange between the executive bodies of JSC RusHydro and JSC Zaramagskiye HPPs. The remote node's equipment was deployed on the territory of JSC Zaramagskiye HPPs.
The Board of Directors of JSC RusHydro has approved an immovable property (nonresidential premises) lease agreement between JSC RusHydro and JSC UES SO as a related party transaction. The monthly rental fee shall be 2,081.29 roubles, plus VAT.
The lease agreement for immovable property (nonresidential premises) located in a building of the Zhigulevskaya HPP administrative block shall provide for deployment of personnel of the Regional company Volgaenergotekhnadzor, an affiliate of JSC UES SO. This affiliate performs the oversight duties for the Zhigulevskaya HPP.
The nonresidential premises provided for temporary tenancy and occupancy are not used in the HPP's production process.
The Board of Directors has approved an agreement for the gratuitous transfer of property between JSC RusHydro and the City of Kizelyurt Municipality, the subject of which shall be the gratuitous transfer of property (property rights) to third parties. JSC RusHydro gratuitously transfers the following immovable property: the buildings and other structures of the Energetik kindergarten which is a noncore asset on the balance sheet of JSC RusHydro's Dagestan Affiliate. The book value of this property is 16,436,911.67 roubles.