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Strategy SE NPC Ukrenergo 2019-2028

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Strategy SE NPC Ukrenergo 2019-2028.

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Strategy SE NPC Ukrenergo 2019-2028

  1. 1. STRATEGY Driving the power of change 2019-2028 SE NPC UKRENERGO
  2. 2. Vision, Mission, Strategic Goals 1 Program objectives Vision Ukrenergo is a certified transmission system operator synchronously interconnected with ENTSO-E Continental Europe, holding leading positions among Eastern European TSOs in terms of reliability, effectiveness, energy security level, efficiency and technological development. Ukrenergo will serve as a platform for implementation of new technologies in the power sector (smart grid, demand response, V2G etc.) Create conditions for the sustainable development of the Ukrainian economy by ensuring the functioning of a competitive, liberal and transparent electricity market, single with EU countries, and providing equal opportunities to all market participants, including renewable energy sources regarding unrestricted continuous access to the transmission system. Mission Ensure long-term reliable operation and development of the transmission system Create conditions for interconnection of the Ukrainian electricity market with the European electricity market and integration of the IPS of Ukraine into ENTSO-E Ensure stable and balanced operation of the IPS of Ukraine Minimize the cost of company services in the long run Reduce the price of electricity transmission for consumers by investing in infrastructure development, improving management efficiency, optimizing the use of funds Strategic Goals 2
  3. 3. Forecast of environment changes by 2028 ECONOMIC FACTORS SOCIAL FACTORS 3 * V2G -Vehicle-to-Grid DR – Demand response TECHNOLOGICAL FACTORSPOLITICAL FACTORS 1. Corporate governance reform in the public sector of economy 2. Growth of political uncertainty and instability n the world 3. Increased confrontation between countries - key global players in the energy sector 4. Strengthening the isolation trends in the energy sector on the global level 1. Advancement and cheapening of Smart Grid, V2G, DR* technologies for balancing of the power system 2. Sharp increase in the share of RES generation with the stochastic generation schedule within the total primary energy supply mix 3. Technological development of industrial storage of energy 4. Emerging of a new type of market participant that is simultaneously a producer and a consumer (Prosumer) 5. Increased cyber threats 1. Renewed economic growth in Ukraine 2. Further integration of EU energy markets. 3. Possible exchange rate fluctuations 4. Introduction of a new electricity market in Ukraine 5. Change in the structure of power generation and growing role of renewable energy sources 1. Growth in the welfare of households 2. Decentralization and community empowerment 3. Globalization of the labor market. Increase in pay for qualified specialists and their approximation to the salaries in the countries of Eastern Europe 4. Move towards corporate financing of the educational sector from the public financing
  4. 4. 3 SWOT ANALYSIS 1. Access to IFI resources (long-term low-cost lending) 2. Introduction of a new competitive electricity market 3. Increased demand for electricity in neighboring EU countries 4. Development of demand-side power system balancing technologies 5. Switch to incentive-based tariff setting (RAB-tariff) WEAKNESSES THREATS 1. Significant depreciation of power lines and substation equipment 2. Outdated technologies for management of substations and dispatching facilities 3. Shortage of high-speed technological communication channels 4. Insufficient infrastructure security 5. Limited automation of managerial processes 6. Insufficient staff engagement 1. Lack of TSO certification due to factors independent from the company 2. Lack of support on Ukrenergo integration to ENTSO-E by key European decision makers 3. Attacks on the grid (physical and cyber attacks) 4. Insufficient development of the internal service market for high- voltage grids 5. Possible political influence on the Company's activities 6. Gap in development of ancillary services market and RES development OPPORTUNITIES S W O T 4 1. Availability of an extensive asset base 2. Company's public and transparent status 3. Guaranteed coverage of operational costs at the expense of the tariff 4. Strong financial position 5. Company’s public and transparent status 6. Availability of existing interconnectors with large capacity 7. Modern structure of corporate governance STRENGTHS
  5. 5. 4 Elements of the Strategy Strategy of Ukrenergo Transmission Grid System operation IT Electricity Market Finance Integration into ENTSO-E Personnel Communications RES Integration 5 Corporate social responsibility, Safety and Environment
  6. 6. 4 Transmission Grid (1/3) Set up remote control at each substation Rehabilitation of 220kV Berezan SS completed 220kV Berezan SS, 750kV Kakhovska SS 18 60 All (103*) Implement the technology of life works (with power on) Crew for line repairs is created Implementation of several pilot projects for life works Life works are introduced in each regional power system Life works is carried out by all life crews involved in the asset management of the transmission system Harmonize Ukrainian technical standards in the electricity sector with the European regulatory framework Technical policies is updated The concept of automated substation control is developed Ukrainian technical standards in part of substation automation, diagnostics and operation are harmonized with the European counterparts Ukrainian technical standards are 100% harmonized with the European counterparts Separate the functions of grid maintenance and grid repairs to improve efficiency Repair functions in the Southwest PS prepared for separation Pilot project is ready for implementation Pilot project has been tested Separation of repair function from maintenance is completed Ukrenergo is an active participant – consumer of the repair services market Reliability of the grid Incl. planned 0.96. Incl. non-planned outages 0.9998 Incl. planned outages 0.973. Incl. non-planned outages 0.99982 Incl. planned outages 0.975. Incl. non-planned outages 0.99983 Incl. planned outages 0.977. Incl. non-planned outages 0.99984 Incl. planned outages 0.98. Incl. non- planned outages 0.99985 2019 2020 – 2021 2022-2024Baseline 2018 4 2025-2028 6 * Excluding the SSs in the zone of the combined forces’ operation
  7. 7. Implement a programme to improve the security of electricity supply of the eastern region Design and cost documentation for all projects is developed. Project for construction of SS 500 kV Kreminska is implemented Completed projects: Reconstruction of the LuTES - Yuvileyna 220 kV PTL. Transfer of 220 kV Azov SS to 330 kV Projects for construction of 330 kV SS Slobozhanska. Construction of Kurakhovskaya TPP - Bilitskaya 330 kV PTL. Construction of 330 kV PTL Kupiansk - Kreminska. Reconstruction of 220kV SS Yuvileina Implement a programme to remove grid congestions Design and cost documentation on key projects is developed. Active construction phase in previously initiated projects Completed projects: Construction of 330 kV SS Zakhidna. Reconstruction of 330 kV SS Brovarska together with the installation of AT-3 Completed projects: Construction of 330 kV SS Skhidna. Construction of a 330 kV PTL Pobuzka-Talne-Polyana with 330 kV SS Talne. Construction of 330 kV PTL Dniestrovska PSPS - Vinnitska. Construction of 330 kV PTL Lutsk Pivnichna - Ternopil. Construction of 330 kV PTL Ternopilska - Chernivetska. Project of construction of 330 kV PTL Novovolynsk – Yavoriv is implemented Completed projects: Construction of 750 kV SS Primorsk. Construction of 750 kV PTL Primorska - Kakhovska Implement a programme for transmission system development for RES integration A draft proposal prepared for the MFIs regarding the feasibility of implementing a project for the development of electricity transmission networks of the southern region of the IPS of Ukraine, including solar and wind energy on credit. Bankable Feasibility Study Design and cost documentation prepared for the project of development of power grids in the southern region of the IPS of Ukraine, including solar and wind power. Contracts for project implementation concluded Implemented project of development of power grids in the southern region of the IPS of Ukraine, including solar and wind power (New construction of 330 kV Melitopol - Mirna. Construction of 330 kV SS Krivorizka TPP - Trykhaty at 330 kV SS Mykolaivska) Implement a rehabilitation programme for transmission lines Programme developed and approved. 70 km of PTLs rehabilitated Design and cost documentation developed; 620 km of PTLs rehabilitated 1570 km of PTLs rehabilitated 3000 km of PTLs rehabilitated 4 Transmission Grid (2/3) 2019 2020 – 2021 2025-20282022 – 2024 7
  8. 8. Strengthening the security of power supplies and transmission system at the level of European TSOs Eliminate “bottlenecks” of the transmission system Ensuring network configuration, which will make it possible to integrate new market players (generators and consumers) into Ukraine’s IPS Reduced costs for maintaining the transmission system 4 Transmission Grid (3/3) Ukrenergo's investment activity is based on the implementation of provisions of the Ten-Year Network Development Plan (TYNDP). The main tasks defining the transmission system development will be: To accomplish these tasks, a number of programmes aimed at improving technological processes, improving efficiency, ensuring reliability and reducing technological losses of electric energy for its transmission, are being implemented. Moreover, Ukrainian electricity standards will be brought in line with European regulatory frameworks. As part of the reduction of the transmission system asset management costs, a programme will be implemented for separation the operation functions from the functions of asset management, resulting in the annual reduction of operational expenses (ОРЕХ). 448
  9. 9. 4 System Operation (1/2) To optimize equipment control The unified structure of dispatch control over the transmission system equipment was approved Control over the equipment of 220 kV SS Berezan and 750kV SS Kakhovska of the South region was transferred to the level of DDC (regional dispatching centers) Control over the equipment of automated substations was transferred to the level of DDC Control over the equipment of automated substations was transferred to the level of the central dispatching point To optimize regime control 2 levels: Central dispatching point (CDP) and dispatching points of power systems (PS) Database creation is provided for adequate functioning of SCADA. Implementation of the functions of operating modes dispatcher of the Ukrainian Energy System and Balancing Market Management Dispatcher Training of the personnel of the Central Dispatching Service (CDS) under programmes for analysis of the regional-level electric regimes The staff of the CDS is trained for the regime work with electric regimes of regional grids One-level regime management process introduced To ensure the compliance of dispatching standards with requirements of the Codes and ENTSO-E Operation Handbook Operational agreement on the creation of a common regulation unit within the power systems of Ukraine and the Republic of Moldova was developed and concluded. System operation agreement was developed and signed with TSOs of Poland, Romania, Slovakia and Hungary Business processes of the dispatching function are reorganized. 6 Operation Handbook policies (P1-P5, P8) are introduced All ENTSO-E policies and codes are implemented To develop a new modern format for a dispatcher workplace Current location renovated. A new building being constructed to accommodate the dispatchers of the central dispatching point Commissioning and launch of the control center for the Western region in Lviv. Adjustment and approval of the project for reconstruction of the RCC for the South region Control centers of the Dnipro, North, South and Central regions (Kyiv) modernized. The central dispatching point constructed in Kyiv, and its complete replica in Vinnytsia 9 2019 2020 – 2021 2025-2028Baseline 2018 2022 – 2024
  10. 10. 4 System Operation (2/2) Within the next 10 years, the following is envisaged: Implementation of the new unified SCADA system to replace outdated inefficient systems at the national control center and regional dispatching centers. One-level model of substation equipment dispatch control from the central dispatching point Transition to a one-level dispatching model with the control over substation equipment from the central dispatching point. Rehabilitation of the central dispatching point, as well as the dispatching points of power systems to ensure their reliable operation with a possibility to transfer the control over the IPS of Ukraine at the RDC (district dispatching center) level Unconditional fulfillment of the requirements of reliable operation of the IPS of Ukraine with due regard to criterion N-1 within a functioning competitive electricity market. 10
  11. 11. 4 Information Technology (1/2) 2019 2022 – 2024 2025-2028Baseline 2018 2020 – 2021 11 IT solutions for reliable dispatching of the IPS of Ukraine Tender for the introduction of the modern SCADA/AGC/EMS/DTS and WAMS announced. South, Southwest and West PSs are ready to transmit technical information using 104 protocol at substation level and higher. North PS - an agreement for ASCTP modernization concluded Platform for the exchange of technological information with related organizations established. At least 80% of the SSs transmit information using 104 protocol "Big SCADA" (SCADA/AGC/EMS/DTS) and WAMS implemented. Technological portal is introduced into industrial operation 100% of information is exchanged with all related organizations (generators, distribution companies, foreign TSOs) and between substations using 104 protocol. ASCTP at all substations is modernized and ready for remote control Automation of business processes ERP implemented in accordance with the defined terms. EAMS - ToR developed, tender announced, qualification of tender offers at the final stage ERP introduced into commercial operation EAMS introduced into commercial operation All management processes are automated Cybersecurity Department of Information Security created, staff trained. SIEM tendered. SIEM implemented. Security Operational Center (SOC) created. At the access level, the distribution of corporate and technological networks is complete Migration of services and users into a new secure infrastructure. New technological network secured from cybernetic threats. Single point of access to all information systems of the enterprise introduced. ISO 27001 compliance confirmed. Accredited Key Certification Center (AKCC) created Sectoral SOC is created. Ukrenergo is active participant in process of its creation.
  12. 12. 4 Information Technology (2/2) 2019 2022 – 2024 2025-2028Baseline 2018 2020 – 2021 12 To ensure reliable IT infrastructure and transfer of technological information Two data processing centers (DPCs): a number of projects for the development of optical basic network and radio-relay communication are under way. Tenders announced for the purchase of 17 DWDMs that will cover the existing optical network, and the purchase of MPLS for the construction of the transport network throughout Ukraine. FOCL provided for 83 facilities (1548 km) Two DPCs created. FOCL feeders provided at 22 facilities of the Company and related entities (2500 km of own FOCL). DWDM equipment installed at minimum 17 facilities of the Company and its related entities (generation). Switch to IP telephony completed. FOCL feeders provided at 40 facilities of the Company and its related entities (4500 km of own FOCL). New transport network created. Server facilities and services consolidated. DWDM equipment installed 30 facilities of the Company and its related entities (generation). 3rd Data Processing Center created. FOCL feeders provided at 68 facilities of the Company and related entities (not less than 7,000 km of own FOCL). DWDM equipment installed at 39 facilities of the Company and its related entities (generation). MPLS equipment installed at 151 facilities. FOCL feeders provided at 92 facilities of the Company and related entities (not less than 10,000 km of own FOCL). DWDM equipment installed at 46 facilities of the Company and its related entities (generation). MPLS equipment installed at 175 facilities. Complete phase-out of copper communication cables. Each Ukrenergo facility connected to the network by at least one designated communication channel and has backup channels. To build a service- oriented organization of IT processes Single catalogue of IT services developed. 4 out of 8 processes for centralized IT functions completed and approved through respective orders All 8 processes for centralizing IT functions completed and approved. The service catalogue developed and agreed upon SLAs agreed upon. Сore processes under ITIL introduced. IT function centralized All processes running effectively SIEM - Security information and event management SLA – Service level agreement ITIL – Information Technology Infrastructure Library ERP - Enterprise Resource Planning EAMS - The Enterprise Asset Management System MPLS - multiprotocol label switching DWDM - Dense Wavelength Division Multiplexing
  13. 13. 4 Market (1/2) To introduce a balancing market, the ancillary services market, registration of bilateral agreements Basic regulations approved. Software procured to ensure the functioning of the balancing market, the market of ancillary services. Preparedness of the TSO to perform functions in the part of the balancing market and the market of ancillary services starting July 01, 2019. TSO performs functions in the part of the balancing market and the market of ancillary services Ensuring stable operation of the market to facilitate the isolated mode of operation of the IPS of Ukraine, preparation to transition to parallel work with the ENTSO-E Market coupling with the markets of neighboring ENTSO-E member countries To ensure performance of the functions of Commercial Metering Administrator (CMA) and Settlements Administrator (SA) on the electricity market Сollection of information to fill the commercial metering register implemented. ToR for DataHub developed, technical requirements prepared, tender published in accordance with the World Bank procedure Preparedness to perform CMA and SA functions. Tender for DataHub held TSO performs the functions of SA and CMA DataHub tested as a platform to collect information DataHub provides basis for calculations for each commercial electricity metering point (along the perimeter of Ukrenergo) in Ukraine SA and CMA operational processes and corresponding software optimized. DataHub covers all points of electricity supply To arrange allocation cross- border capacities and introduce ITC-mechanisms Rules for long-term allocation, Rules of daily distribution agreed upon, algorithm of calculation of compensation for limitations defined Development of relevant documentation and the Joint Distribution Agreement separately with each ENTSO-E TSO and Moldelectrica. Enabling joint auctions in 2020 Common auctions held with neighboring TSOs in ENTSO-E and Moldova; ITC-mechanism implemented in compliance with EU Regulations Common auctions held with the zones of neighboring ENTSO-E TSOs and Moldova, an improved ITC-mechanism in compliance with EU Regulations Regulatory and contractual frameworks prepared for the implementation of a coordinated allocation based on the JAO centralized platform, or Ukrenergo's own platform Since 2026, common auctions on the JAO platform or the Ukrenergo own platform have been implemented and applied. To ensure market inclusivity, active involvement of consumers, flexibility The law provide on the possibility to participate in the market of bilateral agreements, day-ahead market, intra- day market Active participation of consumers in the market of bilateral agreements and the day-ahead market Regulatory framework established to implement pilot projects Demand Response and Vehicle-to-Grid Technological base created. Demand Response and Vehicle-to-Grid technologies developed, regulatory framework established to involve consumers in regulation through aggregators Implementation of flexibility technology with direct involvement of end consumers to balance the power system 2019 2020 – 2021 2025-2028Baseline 2018 2022 – 2024 13
  14. 14. 4 Market (2/2) Development of the electricity market in Ukraine is defined by the adoption in 2017 of the respective Law of Ukraine During 2019-2028, the energy sector will transform to competitive basis. A “single buyer” model (SE Energorynok) will be replaced by a model with numerous buyers and sellers. In order to ensure the functioning of a new competitive electricity market, SE NPC Ukrenergo will perform the functions of settlements administration (in a balancing market and an ancillary services market) and the Commercial Metering Administrator. Allocation of cross-border capacity of interstate grids to ensure the exchange of electricity will be performed at competitive auctions among market participants. The target model specifies that the electricity market of Ukraine will be fully integrated into the European market, which, in turn, should ensure optimal tariff setting for internal consumers. On March 14, 2018, NEURC approved secondary legislation required for the functioning of a new electricity market. 14
  15. 15. 4 Finance (1/2) 15 2019 2020 – 2021 2025-2028 Base of 2018 2022 – 2024 To apply stimulating pricing (RAB-tariff) Tariff is calculated using the methodology “costs plus” The tariff is determined according to the "cost +" methodology. The company provided to NEURC suggestions and comments to the draft methodology for introducing the RAB-tariff. NEURC is expected to make a decision. Introduction of RAB- tariff and compliance with the established regulation parameters Introduction of RAB-tariff and compliance with the established regulation parameters To optimize operational costs Operating costs (ОРЕХ): 2017 - 3 822 mln UAH 2018 - 4 114 mln UAH Increase (by 7.6%) within the actual inflation index for 2018 (109.8%) The costs are set by the Regulator at the level + 5,05% of the actual achieved level of 2018 (50% from the inflation index for 2019) Programme for reducing OPEX has been developed for 2020-2028 Decrease of the level of controlled costs by at least 1% OPEX (in 2018 prices) Annually reduced minimum by 1 percent OPEX in the part of controlled costs (in 2018 prices) Controllable costs decreased by 8% - 9.5% (in 2018 prices) Minimizing the cost of services * of the company to consumers in the long run The tariff is determined according to the "cost +" methodology and constitutes 4,779 kop/kWh (0,15 eurocent) The approved tariff is less than 0.2 eurocent (5,926 kop/kWh, or 0,19 eurocent as of 12.02.19) Annual reduction of the forecast tariff to the target level *per kWh of electricity transmitted
  16. 16. Finance (2/2) EBITDA Income tax ROE Ukrenergo offers alternative methodology for calculations RAB 12.5% and Cost+, based on the company's cost of capital (WACC) as a rate of return (RR) on assets - 9.45% WACC (9,45%) method is more profitable because: - rate of return on equity higher compared to Cost+ - smaller monetary burden on the end user compared to RAB 12.5% method used by NEURC Key indicators (mln UAH) Net financial result Cost+WACC (9,45%)RAB (12,5%) 6 8 10 12 14 16 18 2020 2021 2022 2023 2024 2025 2026 2027 2028 1.0 1.5 2.0 2.5 2020 2021 2022 2023 2024 2025 2026 2027 2028 0.0 2.0 4.0 6.0 8.0 10.0 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 7% 17% 27% 37% 47% 57% 2020 2021 2022 2023 2024 2025 2026 2027 2028 Settlements with contractors under current investment projects are to be completed by 2025. Consequently, the current loan portfolio does not envisage disbursement of loan funds starting 2025. The financial condition of the Company will be determined by several factors: Maximally balanced structure of own and borrowed capital for financing investment projects.
  17. 17. 4 Personnel (1/2) To increase labor productivity 81 USD equipment/ unit staff * + 20% to the base value +80% to basic value +170% to basic value To increase engagement of the personnel 28% The concept and program for increasing the involvement for 3 years is approved. Engagement is 38% 60% 70% To improve the remuneration system An effective instrument of approximation of wages to the market level has been introduced, which makes it possible to attract and retain the best specialists. The system of annual salary revisions based on employee ratings according to the performance and сcorrespondence to market salary level. Revision of the grading system. Improving the quality of KPI planning and assessment Grading remuneration system and KPI are implemented for the entire company. The remuneration system provides 100% compliance with "market" wage rates. To implement a long-term personnel development system A program for developing key business competencies for executives and specialists of all levels and functions has been introduced. 112 trainings held, 1978 employees were trained (1059 managers, 919 specialists) Career Progression System. Corporate Automated Knowledge Base. Formation of individual development plans. Introduction of corporate values system. Start of implementation of a system of assessment and development of competencies Establishment of a corporate automated base of learning materials and test assignments. Development of a training program for all production professions on the basis of training centers. Introduction of a career development system. Introduction of gaming methods of training and assessment (gamification) Training is mainly focused on the development of competences, implementation of innovations and practical improvement of technical skills. Training process are maximally automated and conducted in a remote format. Introduce staff diversification policy Company employee ratio: women = 23% men = 77% up to 30 years = 9% over 50 years old = 34% Policies and procedures for gender, age and nationality diversification are developed. Certain ratio for creating conditions for age and gender diversification, employer values for candidates are created. Diversification policies are implemented in the recruitment process (including increasing the representation of women in senior positions at different levels). The target ratio of employees is: women = 30%, men = 70%. up to 30 years = 12% over 50 years old = 30% The target ratio of employees is: women = 33%, men = 67% up to 30 years = 17% over 50 years old = 27% The target ratio of employees is: women = 35%, men = 65% up to 30 years = 20% over 50 years old = 25% *- in accordance with the current methodology of calculation of equipment units 2019 2020 – 2021 2022-2024 Base of 2018 2025-2028 17
  18. 18. 4 Personnel (2/2) LABOR PRODUCTIVITY To increase labor productivity at the expense of simplifying the organizational structure, automation of substations and automation of management processes INVOLVEMENT The purpose is to achieve the status of the best place of work for the best professionals. A perfect system of selection and hiring of personnel, when the company employs only motivated people, will mark the beginning of this. To create a corporate culture of high engagement, including the development of managerial qualities and skills of management, effective internal communications, proper organization of workspace, examination and satisfaction of the requirements of employees, etc. FIXED PART OF REMUNERATION (SALARY) To make internal and external fairness, simplicity and transparency the main principles of a new remuneration system. VARIABLE PART REMUNERATION (BONUSES) Each process has to be characterized by a system of efficiency indicators, which will be balanced together and compliant with strategic goals. The system of bonuses must really promote the encouragement of employees to achieve strategic and operational goals. DEVELOPMENT AND TRAINING To make the systemic examination of needs, planning and assessment of results the basis of the training system. To implement innovative tools to make training interesting and effective in terms of influence on knowledge, skills and budget. Development of competencies is a priority. 18
  19. 19. To achieve readiness of the IPS of Ukraine to work in the isolated mode 15% Power units tests of IPS of Ukraine for operation in synchronous mode from ENTSO-E conducted. A service contract for conducting researches on confirming the dynamic stability was signed. All technological requirements for synchronization with ENTSO-E fulfilled Stress tests performed successfully. 100% readiness to synchronization To become a member of ENTSO-E Not a member of ENTSO-E. The agreement on the conditions of the future interconnection of the power systems of Ukraine and Moldova with the power system of Continental Europe was signed. Application for certification of the transmission system operator. Signing a 3-year agreement on participation in the Cooperation Beyond Membership Programme Certified TSO -Associated member of ENTSO-E Membership To achieve the level of implementation and harmonization of national legislation with European acquis 30% 60-70% 100% 100% 100% To achieve a level of capacity exchange between the IPS of Ukraine and ENTSO-E Export 885 MW Import 1450 МW Export 885 MW Import 1450 MW Export 885 МW Import 1450 МW 2200 МW 3400 МW* To implement the program of interconnector development (implementation of PMI- projects) Approval of DED for projects Construction of OHL 330 kV Novoodeska – Artsyz and Rehabilitation of the OHL 400 kV Mukacheve-Velke Kapusany Interstate OHL 400 kV Mukacheve-Velke Kapusany (Slovakia) reconstructed. At SS 400 kV Mukacheve АТ-3 installed and commissioned Recommencing of the interstate OHL 750 kV Khmelnytska NPP – Rzeszow (Poland) Construction of OHL 330 kV Novoodeska – Artsyz completed Completed the project on the construction of 400 kV “wing” of SS 750 kV Prymorska and installation of АТ 750/400 kV with two-circuit electric power line 400 kV OHL Prymorska – Isaccea (Romania) Integration into ENTSO-E (1/2) 2019 2025-2028 Base of 2018 2020-2021 2022-2024 * 4000 МW subject to the removal of "bottlenecks" from the side of Romania 20
  20. 20. 4 Integration into ENTSO-E (2/2) Several stages of this process are planned: Integration of the IPS of Ukraine into ENTSO-E aims at transiting to the parallel operation with its grid and acquiring its membership by Ukrenergo. 1. To meet technological and regulation requirements for becoming a member (from the Catalogue of measures that constitutes an appendix to the Agreement on membership) 2. To operate separately from the IPS/UPS of CIS countries 3. To accomplish gaining the membership and integration into ENTSO-E Parallel operation with ENTSO-E provides not only for the possibility for the IPS of Ukraine to increase the reliability of electricity transmission at the expense of connecting to a big and stable power system, but for the stengthening of competition in the internal market. That is why the volume of maximum transmission of electricity between the IPS of Ukraine and ENTSO-E within a 5-year perspective will increase three times, while in a 10-year perspective it will increase 4.5 times. 20
  21. 21. 4 Integration of renewable energy sources into the IPS of Ukraine (1/2) 2019 2022-2024 Base of 2018 To ensure the availability of enough flexible reserves to balance the grid Report on the adequacy of generation was developed. The "Procedure for the Construction of New Generating Capacities" prepared and submitted to the Ministry for approval. The feasibility study for the 200 MW storage capacity "Energy Storage" project completed. The volume of available flexible reserves to balance the grid is 700MW The volume of available flexible reserves to balance the grid is 1500 MW The volume of available flexible reserves to balance the grid up to 2500 MW To implement the generation from RES forecast system Developed: Report on the adequacy of generation and Transmission system development plan, which contains suggestions on the locations of construction sites for new RES facilities Amendments to existing legislative acts on the support of the development of RES facilities Development of terms of reference for the creation of RES operation forecast system RES forecast system developed and introduced To create and expand possibilities for RES connection 2100 MW 3500 МW 5500 МW 7000 МW 9000 МW Implementation of Demand Response instrument In fact there are no Demand Response instruments and mechanisms, except for the possibility of calculating the cost of electricity at the time of day (zoning) for households Program for Demand Response in Ukraine with the participation of Ukrenergo has been developed Installed Demand Response capacity - 200 MW Installed Demand Response capacity - 350 MW Installed Demand Response capacity - 500 MW 2020-2021 2025-2028 21
  22. 22. 4 The maximum installed capacity of SPP and WPP possibly accepted by the IPS of Ukraine without serious deviations in operation. It is necessary to arrange control over and structuring of RES construction by means of implementing “green” auctions, on which quotas for the introduction of certain types of renewable energy sources will be offered. 4750 МВт* In 2020 according to calculations of Ukrenergo and Tetra Tech ES research ! 22 The development of "green" energy requires high level of transmission system reliability, so appropriate conditions for ensuring integration of "green" generation and building reserves for its balancing must be created. Ukrenergo supports the course on RES development and relevant legislative initiatives to achieve its goals, namely: introduction of auctions change of market "rules" - responsibility of "green" generation for imbalances - holding tenders for the construction of new generating capacities development of trade with neighboring countries Taking into account the experience of progressive countries in the renewable energy sector, it is expected in the near future to implement a mechanism for attracting consumers to regulate the daily schedule of loads, which will significantly optimize the cost of TSO for the acquisition of related services, as well as promote the development of relevant technologies and increase competition in the electricity market. Since “green” generation requires implementation of a forecasting system and provision of high-maneuvering reserve capacities with a reliable operation schedule, a long-term task for Ukrenergo is to arrange flexible reserve (gas reciprocating stations, HPSPP) with the capacity of up to 2500 MW. This will increase the basic load of NPP and decrease the load on TPP with their partial suspension. Demand response regulation system and ancillary services market will also contribute to balancing the power system at the first stages of “green” integration Integration of Renewable Energy Sources into the IPS of Ukraine (2/2)
  23. 23. 4 COMMUNICATIONS (1/2) To improve the system of internal communications Corporate portal created. Published 472 news for the year. Corporate magazine “50 Hz” is published (5 issues prepared). More than 100 internal events were organized (30% - Kiev, 70% - regions) Coordinated and implemented program of employee involvement. The average number of contacts with one information occasion is 80% of employees. Communication campaign for the introduction of corporate values Development and strengthening of corporate culture, the formation of uniform standards of behavior. Employees' awareness of corporate values and culture (LMS) at 90% The brand loyalty management system is built. Employee satisfaction with the quality of internal communications is up to 80% The brand loyalty management system is built, which corresponds to the best European standards. The internal customer loyalty index (NPS) is 7 points out of 10 To improve publicity The information environment analytics tools were introduced (press clipping, media audit, benchmarking). Proactive position in social networks and media. Systematic cooperation with journalists, opinion leaders and other target audiences of key stakeholders Reputational audit is introduced Increased presence in regional media. Improved direct communications with stakeholders (Ukraine, Europe). The informational products of the corporate Think Tank were brought to the media space. (TSO news) The development of employer brand #1 among state-owned companies and socially-oriented company brands. Joint communication and social projects with European TSOs Formation of Ukrenergo's reputation as a leading Eastern European TSO. Improving the reputation management system. Singling out of corporate ThinkTank to a separate analytical and consulting center Reputation management of Ukrenergo as a leading European TSO. Ukrenergo is one of the leaders in communications among system operators in Europe To improve the system of international communications Cooperation with foreign TSOs has been established and deepened: SEPS, a.s., RTE, Israel Electric Corporation, TenneT, National Grid, Energinet.dk. Implemented joint projects with 50 Hertz and Elia Grid International. Formed a reputation as a reliable partner among international financial institutions. The interest of potential investors in the company’s activities has increased, and support has been received from foreign institutes for company reforms Started ENTSO-E Cooperation Beyond Membership Program. The cooperation between Ukrenergo and a number of European TSOs (France and Germany) has been transferred to the intergovernmental level. Received technical assistance from the German side for the implementation of the project "The integration of renewable energy sources in Ukraine". Communication with foreign media has begun regarding the integration of Ukrenergo into ENTSO-E. Implemented a project on key trends in the electricity sector Completed participation in the ENTSO-E Cooperation Beyond Membership Program. Deepening cooperation with ENTSO-E Secretariat. Established mutually beneficial partnerships with foreign TSO Ukrenergo is a full-fledged European transmission system operator with a widely developed communication system with international partners Formation of Ukrenergo's reputation as a leading European TSO 2019 2022-2024Base 2018 2020-2021 2025-2028 23
  24. 24. 4 COMMUNICATIONS (2/2) Today, there is an active communication with key international partners, as well as cooperation with system operators in other countries. The strategic task is to turn Ukrenergo into a company that has a reputation as a full-fledged system operator in the EU, with a well-developed system of communications and contacts with foreign partners. Development of the internal communications system, which will contribute to the maximum involvement of employees in the process of implementing the strategy, maintain team cohesion and efficiency and, as a result, contribute to the achievement of the Company's business goals. From the lack of a systematic approach to covering the Company's activities and responding to events mainly ad hoc (that is, in fact), through the approval of a new information policy, which includes ensuring proactive response and coverage of the Company's positions in the media, the maximum publicity of its activities, along with a shift in emphasis with only coverage of events to their full communication with the public, the Company will be transformed into a leader in openness and predictability in the energy sector. INTERNATIONAL COMMUNICATIONS INTERNAL COMMUNICATIONS PUBLICITY WORK (MASS MEDIA, EXPERTS, OPINION LEADERS, ETC.) Three components of the Company's Communications 24
  25. 25. 4 CORPORATE SOCIAL RESPONSIBILITY, SAFETY AND ECOLOGY (1/3) 2019 2020 – 2021 2025-2028Base 2018 2022 – 2024 To establish a system of corporate social responsibility (CSR) CSR unit created, social and environmental management and CSR policies developed. CSR strategy approved and implemented. The company implements CSR activities that are innovative and unique in their field. CSR activities are basic priority for Ukrenergo as a leader of the corporate and public sector. The system of corporate social responsibility complies with the best European standards. To form a request for new sectoral knowledge Launch of pilot programs in two universities (KhNUOG and NTUU KPI). Specialized educational programs created in cooperation with universities. The company is the initiator of the development of new education standards in the energy sector In Ukrenergo created space to provide and elaborate practical knowledge of the energy sector There is a platform around Ukrenergo for the formation of new managers who are able to initiate and implement changes in the public sector To improve the image of state enterprises among young people According to the results of the “Battle of the projects” in the framework of “Ukrenergo Laboratories" 5 people were employed at Ukrenergo. Ukrenergo is the first state-owned company that supported the release of Ukrainian children's film The implemented project "Ukrenergo Laboratories" as a sustainable brand, represents Ukrenergo as a leading employer in the industry Promotion of sustainable development ideas among youth that the company is implementing Created programs for the formation of responsible energy consciousness among young people Ukrenergo is the #1 employer brand for youth among state- owned companies To improve an environmental policy The Company's environmental policy is aimed only at fulfilling the requirements of environmental legislation. The process of restructuring the environmental unit begun, taking into account the requirements of environmental management. Approved and implemented social and environmental policy of the company The introduction of initiatives aimed at increasing responsibility for the environment Innovative environmental projects implemented The company is a leader in environmental programs in the electricity sector 25
  26. 26. NEW SPACE OF KNOWLEDGE The Company will initiate a number of educational projects aimed at developing new knowledge and skills among young people planning to work in the sector. Such initiatives will include master degree programs organized jointly with higher educational establishments. On the basis of their implementation, jointly with other market participants and HEEs, the Company will initiate the development of new educational standards in the sector. NEW IMAGE OF THE STATE CORPORATE SECTOR Ukrenergo will establish a new cognition of the state corporate sector among Ukrainian society, public, experts and youth. Ukrenergo Laboratories, the project successfully implemented in 2017, will form a basis for the further communication of Ukrenergo with talented youth and will become an independent brand associated with positive changes in the energy sector. The Company will organize a generation of new managers able to initiate and implement changes in the state sector. NEW ENVIRONMENTAL POLICY The Company will develop a new environmental policy covering new initiatives and pilot projects. It will also become a leader in implementing environmental programs in the energy sector. The key goal is to implement a set of measures that will change the attitude of society, in particular youth, towards state-owned companies and the public sector, and also create a new knowledge space around Ukrenergo. 26 CORPORATE SOCIAL RESPONSIBILITY, SAFETY AND ECOLOGY (2/3)
  27. 27. 4 2019 2020 – 2021 2025-2028Base 2018 2022 – 2024 Create HSE* management system As part of the restructuring, the labor safety and fire safety activities were centralized. The occupational health and safety system operates in accordance with OHSAS 18001 Integrated health and safety management system was implemented according to ISO 45001, international certificate of conformity was obtained New models of risk management and risk- based approaches Introduced and implemented The company successfully operates an automated program for predicting, preventing and minimizing risks The company is a recognized leader in labor safety issues in the state and a regular participant in programs and projects of the International Labor Organization Create a new model of fire safety management system Effective preventive measures are systematized taking into account their priority and economic expediency Concept of the development and operation of the fire safety management system based on risk-oriented approaches was introduced in the company "Smart" reforms were implemented, new tools, projects and programs were introduced Unified methodology for assessing, ranking and analyzing risks of emergency situations was introduced Operation of an improved fire protection model of the company, corresponding to the European level 27 NEW RISK MANAGEMENT MODELS Taking into account that the main value of the company is the life and health of personnel, Ukrenergo will create radically new HSE management systems, which will enable the qualitative prediction, prevention and minimization of risks, as well as prevention of various emergencies. * Health and Safety Executive - Health and Safety Management SAFETY FIRST A consistent policy on labor safety and fire safety in Ukrenergo, aimed at increasing the level of development of a safety culture at work, will form a conscious attitude among employees to both personal safety and the safety of others. Key goal is to reduce to “zero’ the probability of allowing fatal and complex consequences of accidents, as well as the occurrence of emergency situations at company’s facilities. CORPORATE SOCIAL RESPONSIBILITY, SAFETY AND ECOLOGY (3/3)

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