Conversation with Alexey Bobrov, President of IDGC of Urals. Topic: Economic Crisis (OTV, «Accent», 4 February 2009)

05 February 2009

- How did economic crisis affect your company? Do you have to reconsider any plans?

Aktsent- We work just like everybody else, we are also part of the economy, society and we have to reconsider our plans. But I should say that power industry is an inert sector and we don't feel any changes right away, things tend to be smoother. We cannot earn money out of surges but we are less vulnerable than some other sectors in the current economic crisis.

- You mean you don't make any changes in your plans because you didn't feel the recession or do you think you will still have to do it?

- Of course, we felt a drop in power consumption. But it is not so ominous unlike stopped construction projects, laid off plants, terminated projects. We work as usual; we feel the consumption decreased by 15% in comparison with last January. It is considerable and it means we have to be persistent to cope with our expenses and gather ourselves up.

- We've always talked that in general it's possible, there is electric power shortage, and we've always talked about it. Maybe today everything's ok?

- There is a movie where one of the characters said: ‘Please notice, it was said not by me'. I never speak about consumption shortage. This isn't our first meeting, we know and we talked that we need 4 times as much electric power, somebody interrupted to say we need 5, 10 times as much. I have never said so, let's not talk like populists. No country ever needed it and we will never need it. I'm not saying that I expected the crisis. Yes, there will be economic recovery, everybody will take heart, but the economy never needs any sudden growth.

- The word ‘default' disappeared from our speech many years ago. What about now?

- We react badly to it, at present, on Friday our accounts receivable are about 3 billion rubles. It's a very considerable amount for us. Our debtors are three regions: Sverdlovsk, Chelyabinsk and Perm, mainly, Sverdlovsk region, unfortunately. Here I'd like to add that non-payment arise due to misconduct and lack of professionalism of top management.

- How about a connection fee?

- I'll be coherent but here we should name some points. First, I'd like to agree with Edward Rossel that there should be a law, as it's not just our desire or whim of power industry. If once there were connection fee norms we followed them and thought it was necessary. Second, at the moment there is a resolution reducing the fee to the minimum. It is so and we will follow it. There are still two points here, first is what I mentioned, there are no clients who want to be connected. Last three months the submitted requests were 95% withdrawn. Those who transferred pre-payment claim it back, those who don't pay cancel their requests and that's it. That's why it's immoral to sell services which are not in demand and quote unacceptable prices. The other point is if it is free, in a year or a couple of years when the services are in demand again the same thing will happen to it as it happened to free roads, free medical care, free education.      

- Do you mean that it won't be of the same quality or anything else?

- There will be no free services provided, the activity will be latent. I mean if we receive 100 or 200 requests while our limit is 10 consumers, we will be sued, there will be court proceedings, and press will have a field day. Nevertheless the essence remains the same, you see, physical laws are more accurate than allegations. The Federal Antimonopoly Service will set claims to such electric power companies; there will be legal proceedings, lawsuits filed for the inability to connect consumers. Apparently the public prosecutor's office will handle the case.

- Are you going to change your investment projects during the crisis?

- Of course, you see, I always say that there are no investments for investments. Remember, we asked to give us 10 billion or better 25 billion of investments. It makes no sense, it's immoral. If our services are not in demand, if nobody needs any new power stations now, if our metal-makers and our industry cut back their production plans, there is no sense to spend the money of our customers in vain. That's why we, of course, adjust our investment plan, but I emphasize that it's not just our whim or desire, we adjust our program according to our customers. I mean that if a certain group of businessmen or some district head tells us to launch a certain project two years later, why should we spend money now? This is a financial burden on the power industry and our customers. I mean that we will have everything which is necessary, everything we've paid for or everything we need. All these power stations will be commissioned and there will be no deficit. However if we observe some recession, construction or development slowdown I think we shouldn't turn the blind eye to it. I think it's necessary to react somehow and save money.

- You said that the power sector is still inert. If we imagine that there will be a sudden growth, I'd like to hope so, will you be able to reform in order to satisfy the demand?

- I think yes because we do not lay off our work. At present we carry out projects, all the preparation works which are not obvious, they don't require huge investments but still they take much time. And I should add that we shouldn't paint the devil blacker than he is. I feel that February will be quite good for metal industry. I shared plans with my colleagues and they say things are going to improve. There is some demand, all the stocks are over and it's impossible to return to the previous volumes. But the shock is in the past, life is going on and the world economy demands the Russian production, that's why I think everything will be ok.

- Will you improve the quality and reliability of your services, I mean, will you keep the same maintenance level and equipment?

- It goes without saying! It's a privileged part of our business. The investments on reliability and production processes will not be anyhow restricted. There will be no changes in certain necessary plans as well as personnel will not be affected anyhow, we plan no downsizing or payroll cuts. These expenses remain unchanged, we cannot touch such issues. They should be the same as ever.

- I'd like to say that today's talk has been one of the few optimistic ones, that's why I'd like to thank you very much.

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