Message from the Chairman of the Management Board

Address of the Chairman

For Samruk-Energy JSC, 2014 was a period of new challenges proving the need for further implementation of the Company’s long-term development strategy. The Management Board focused on implementing the production investment program and projects, as well as building up assets.

The Company’s total consolidated income over the reporting period surpassed 252.2 billion tenges, a 77% increase on actual income in 2013 (142.9 billion tenges). The consolidated final profit for the reporting period reached 15,947 million tenges, 75% more than the planned amount.

Financial indicators are associated with changes in the tenge exchange rate, the completed transaction for acquiring a 50% interest in EGRES-1, and the general decline in commercial demand for electricity. Moreover, the sudden drop of the ruble exchange rate had an impact on coal export income and led to suspension of electricity supplies to the RF in Q4.

The Company’s strategy received practical approval during the period of recession and negative trends in the global economy. Controlling the energy resources, Samruk-Energy JSC promptly responded to the market situation and contributed to electricity depreciation for consumers.

In February 2015, EGRES-1 LLP, followed by SEGRES-2 JSC, reduced selling prices (previously set according to specific rates) from 8.8 to 8.65 tenges per kW/h. This measure will make it possible to encourage consumption in the industrial and retail sector on the domestic market and compensate losses from decline in electricity exports.

A capacity surplus is currently recorded in Kazakhstan’s generation sector; although a critical gap between installed and available capacities was observed a few years ago. The 2009 introduction of cap rates provided EPO Group of Companies with an adequate mechanism for implementing long-term investment projects to modernize the generating equipment. In 2015, the Company’s investments under the program “Rates in Exchange for Investments” reached 500 billion tenges.

Under this program, from 2009 to 2014 power units No. 2 and No. 8 with a capacity of 500 MW were put into operation at EGRES-1 and the surface of boiler units was replaced at EGRES-2. Apart from restoring generating facilities, cap rates helped implement projects curbing adverse environmental effects. For example, coal ash emissions at Ekibastuz SDPP-1 fell sixfold and the dust index is now below 400 mg/m3 instead of a previous 620 mg/m3.

Therefore, the cap rate program yielded positive results permitting to preserve the existing capacities at production facilities and save electricity costs, reduce emissions of harmful substances into the environment and increase labor productivity.

The company continues to pay close attention to occupational safety and maintain a good psychological climate. A significant decline in the number of technological accidents and injuries was recorded in 2014. Social stability rating indicators also improved from 63% in 2013 to 69% in 2014, remaining above average in the rank scale.

As of forecasts for the economic situation in 2015, the company plans to optimize investment costs totaling 28,146 million tenges (23%) and current expenses amounting to 10,824 million tenges (6%). The reduction of the investment program will not affect the implementation of major and important projects of FIID-2 SP, the Nurly Zhol program and EXPO-2017 exhibits.

This reduction means optimizing our costs and postponing some investment projects. In general, this will not affect the reliability of plant performance and is conformant to the business transformation program.

Optimization will not affect social stability measures, either. The number of jobs at the Samruk-Energy Group of Companies will be preserved in 2015 and the employer’s obligations under concluded collective agreements on personnel social security will be discharged in full.

Regardless of the market and economic situation, the Company pays regular attention to supporting social institutions in the areas where it operates, ensuring environmental protection, and encouraging the development of young generations.

Almassadam Maidanovich Satkaliyev, 

Chairman of Samruk-Energy JSC

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