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Organizational Structure of RAO UES Executive Administration During Reform Period. 22 March 2004. 1998 – 2003. 2004 – 2008. Key Goals. Key Goals. Significant improvement of the SDCs' financial and operational activities through
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Organizational Structure of RAO UES Executive Administration During Reform Period 22 March 2004
1998 – 2003 • 2004 – 2008 Key Goals Key Goals • Significant improvement of the SDCs' financial and operational activities through • implementing common principles for the SDCs' credit, accounting, sales, corporate, and production policies • Implementing the Industry Reform • Market liberalization • Creation of new players in the energy sector • Changing the governance system; further privatisation of the sector • Increasing the efficiency of power companies • Increasing the energy companies' investment attractiveness • Ensuring reliable power supply to customers • Completing the move from administrative governance system to the methods of corporate governance • Governance System • • • Creating a strict vertical subordination in the Holding's governance system • Functional management of the vertically integrated business in a stable environment • Governance System • The new governance system must meet the following criteria: • Managing different business lines within a single company • Increasing efficiency of building new business lines through making executives personally responsible for the results (creation of new companies and increasing their efficiency; project-based approach to most aspects of the reform) • Single center of responsibility to the outer world • Need to organize new subdivisions within RAO UES executive administration to perform the functions of creating and running new lines of business.
Tasks set before RAO "UES of Russia" • Finalizing the reform procedure, e.g., which assets are to be auctioned and when; which assets are to be transferred to which spin-off companies, etc. • Preparing the SDCs and newly established (spin-off) companies for independent work (legal procedures, efforts to shape the processes, develop executives' skills, etc.) • Development and implementation of a mechanism for the collaboration among companies in the value chain until they are transferred to new owners. • Increasing operational efficiency (e.g., reduction of procurement, R&M costs, etc.) • Enhancing the efficiency of the head office (e.g., conduct of an functional audit) • Control over budgets, fuel inventories, repair periods and volumes, etc. , • Support from the viewpoint of investment process (as needed) Successful implementation of the reform program according to schedule • New goals in the context of reforms Maximizing the shareholder value of all available assets. Increasing efficiency of assets • … and old priorities which may not be left unattended Ensuring reliable work of the sector during the transition period
RAO "UES of Russia" to move to a new sector structure after 2008 • RAO "UES of Russia" • FGC • IDC • Thermal generation-based WGCs • Hydrogenera-tion-based WGCs • Holding of guaranteed suppliers, isolated regional energos • System Operator • Territorial Generation Companies • 14–16 • 1 • 5 • 6 • 4 • ~70 • 1 • The challenge lies in the unique scope and deadlines for the announced reforms. • Unbundling of over 60 integrated regional energos currently engaged in electricity generation, transmission, distribution, and sales, to be followed by integration of the divided assets. • Creation of over 100 new companies, recruiting managerial staff for these companies, and introduction of governance procedures. • Transfer of ownership of over 90 GW of generating capacities • Creation of a competitive wholesale market, and companies starting to work in a new environment • Liquidation of a single operation administering the sector • Defining a new tariff policy for all lines of business • Creating of a new infrastructure and rules and regulations for the industry
Principal elements of governance: best international practices • Examples • Comments • •RWE • Enel • Endesa • Ontario Hydro • Detroit Edison • Pacific Gas and Electric • Enel • Endesa • Single center of responsibility for a specific line of business • Focus on the definite result (incl. efficiency) • Executives bear personal responsibility • Single center for controlling quality/compliance with deadlines for reform implementation • Ensuring transparency of results/using the best experience Organization based on business units specialized by lines of business Reform Management Center to develop and implement the sector reform
Chairman of the Management Board • Management Board • Corporate Center • Reform Management Center • Business Units • FGC • System Operator • Other Definition • Central administrative functions of RAO "UES of Russia" • Ensuring efficient interaction between RAO "UES of Russia" and shareholders, authorities, mass media, etc. • Strategy and control (e.g., strategic planning, monitoring of financial performance • Several project teams under common management; work to promote the reform • Reform strategy and implementation • Departments of RAO UES executive administration, which have their own budgets and responsibility for a specific line of business (FGC and SO have separate legal personalities, whereas others do not). • Creation of new companies in line with the reform • Control over activities of the newly established companies • Spread of governance culture and standards, and principal business processes. Functions
Head of Corporate Center • CFO • Head of Investment Planning Unit • Head of Economic Planning • Head of Administrative Department • Head of PR Division • Head of GR Division • Head of Security and Internal Audit • Head of Capital Management • Head of Legal Service • Head of IT • Tax accounting • Corporate policy • Accounting and reporting • Human Resource Management • Corporate finance • Administrative Department • Treasury • Logistics Department • Procurement * The organizational structure is to be further elaborated
Head of RMC • Deputy Head of RMC • Deputy Head of RMC • Establishment / control over the establishment of new companies • Key areas** • Strategy and target structure of the power industry • Design and launch of the market • Restructuring of the regional energos • Restructuring of the parent company; sale of assets • Main projects*** • Wholesale markets for the transition period • Targeted wholesale market • Retail market • Restructuring methodology • Unbundling of regional energos • Procedures to establish new companies (TGCs, WGCs, IGC, etc.) and exercise control over the process of their establishment • Holding auctions in respect of WGCs • Restructuring of the parent company • Possibility of restructuring the regional energos/ isolated regional energos • Targeted structures of interregional companies • Program to restructure the repair and maintenance businesses * The organizational structure is to be further elaborated ** Work may organized on a project basis or full-time employment of some specialists *** Project teams will be formed by the RMC to accomplish particular tasks of the reform
Business Units • The lines of business will be grouped into 6 business units • Business Units • Carry out day-to-day control over the key aspects of the companies' activities (fuel inventories, etc.) to ensure uninterrupted operation • Determine efficiency targets for the companies under management and help improve their efficiency • Recruit key personnel for the newly established companies under their management • Work to build the governance structure for the new companies (management, managerial processes, etc.) • System Operator • FGC, IGC, foreign assets, and exports • Hydro-WGCs 1, 2, 3, 4 • Thermal WGCs 1, 2, 3; TGCs 7-10, and regional energos 20-25 • Thermal WGCs 4, 5, 6; TGCs 4-7, and regional energos 45-50 • R&M, R&D, Construction Entities
Top-managers' personal responsibility for the results in their business lines • Concentration and specialization of units by line of business • Corporate Center to focus on the performing their functions with the least costs • Strengthening the Reform Management Center to ensure coordination of efforts to reform the sector