Sistema JSFC Oil and Energy BU Capital Markets Day October 20, 2009
Alexander KORSIK Senior Vice-President, Head of Oil and Energy Business Unit
Disclaimer
Certain statements in this presentation may contain assumptions or forecasts in respect to forthcoming events within JSFC Sistema. The words “expect”, “estimate”, “intend”, “will”, “could” and similar expressions identify forward-looking statements. We wish to caution you that these statements are only predictions and that actual events or results may differ materially. We do not intend to update these statements to reflect events and circumstances occurring after the above-mentioned date or to reflect the occurrence of unanticipated events. Many factors could cause the actual Sistema’s results to differ materially from those contained in our projections or forward-looking statements, including, among others, deteriorating economic and credit conditions, our competitive environment, risks associated with operating in Russia, rapid technological and market change in our industries, as well as many other risks specifically related to Sistema and its operations.
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1.1. Rationale for BashTEK Acquisition
Diversification of JSFC Sistema portfolio Vision of JSFC Sistema: Oil industry has a significant
Creation and
potential for value growth
growth of Good price = real opportunity to increase value Cash-flow generation Good timing: strong downstream assets have a significant
shareholders value
competitive advantage within Russian taxation framework
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1.2. BashTEK Ownership Structure JSFC Sistema
Minority shareholders
Bashneft
Production: 12 Mtn pa Reserves:
Four
Bashkir-
refineries
nefteproduct
Capacity:
25 Mtn pa
Number of stations: 322
320 Mtn (Russian classification)
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1.3. Position of BashTEK in the Key Industry Sectors Reserves (2P) of major vertically integrated oil companies Mboe 40 000 35 000 30 000 25 000 20 000 15 000 10 000 5 000 0
32 556
Production forecast of major vertically integrated oil companies in 2009
34 911
18 000 8 281 5 952
Lukoil Лукойл
Rosneft Роснефть
TNK-BP ТНК-ВР
* Reserves С1 + ½С2
Gazprom Газпром Neft нефть
2 322 *
Tatneft BashTEK Татнефть Башнефть
Oil refining of major vertically integrated oil companies in 2009 (forecast) Mtn 50 45 40 35 30 25 20 15 10 5 0
43,3
Mboe 1 000 900 800 700 600 500 400 300 200 100 0
831
875
583
237
83
Lukoil Лукойл
Rosneft Роснефть
Refining depth 31,4
TNK-BP ТНК-ВР
Gazprom Татнефть Tatneft Башнефть BashTEK Газпром Neft нефть
Retail sales of petroleum products through own petroleum stations networks in 2009 (forecast) Mtn 7,0
44,9
192
6,0
6,22 5,61
4,66
5,0
28,3 21,6
3,67
4,0
Share of oil products, sold through own retail network as % of total light products volume produced
3,0 2,0 4,9
0,88
1,0
0,22
0,0
Lukoil Лукойл
Rosneft Роснефть
TNK-BP ТНК-ВР
Gazprom Газпром Neft нефть
62,30%
66,90%
65,00%
75,20%
Russneft BashTEK Русснефть Башнефть 62,00%
85,40%
Lukoil Лукойл 25,7%
Rosneft Роснефть TNK-BP ТНК-ВР 14,4%
38,8%
Gazprom Russneft Башнефть BashTEK Газпром Русснефть Neft нефть 25,7%
9,8%
6,5%
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1.4. What BashTEK is? «+»
«–» • Production not sufficient to load refineries • Production declining for many years • High watercut • Depleted reserves
UPSTREAM
• 12 Mtn production • Forecast: untapped potential of some oilfields
REFINING
• Refineries are considered to be among the best in Russia • Some modernisation programs aimed • Major modernisation programs aimed at Euro-3, 4-5 are still outstanding at Euro-3, 4-5 are accomplished
RETAIL
• More than 300 retail stations
MARKETING • Being developed – capturing value BUSINESSPROCESSES
• Huge potential to be captured through business processes
• Small part of oil products is sold through own network • Did not exist • Not strong enough 6
1.5. BashTEK Strategy Strategy is being developed Strategy consists of: • Short-term measures to increase value (picking “low-hanging fruit”)
• Long-term strategy options identification and valuation Major challenges: • Shall we balance Upstream and Downstream? • Is Upstream organic growth sufficient? • Are Upstream assets available in the market? • What to do if these assets are not available? • How to ensure direct access to customers? 7
1.6. Short-term Priorities • General
• Marketing
–
Best people
–
Creation of modern marketing division
–
Proper business-planning & monitoring
–
Transition from tolling scheme to
–
Proper investment planning & monitoring
• Upstream
BashTEK own refining
• Business-development
–
New field development plans
–
Upstream acquisitions
–
New technologies
–
New greenfields – through tenders
–
Outsourcing of services
–
Acquisitions
• Downstream –
Optimal utilisation of refineries
–
Review of remaining modernization programs
–
Implementation of approved modernization
• Strategy –
Valuating opportunities
–
Finalising strategy
programs 8
1.7. Targets
To create the vertically integrated oil company with efficiency of the best Russian oil companies To capture the huge potential of BashTEK oil assets
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1.8. Bashkirenergo The assets were part of the deal Very good assets: • Installed capacity – electricity – 4 624.2 MVt – heat energy – 15 690.92 Gcal/h • About 3% of electricity production in Russia • Good condition of assets • No investment obligations to the Government (almost every other company has these obligations) • Good base for M&A activities
Strategy: • Short-term – picking “low-hanging fruit” • Long-term – looking for a way to radically increase value through M&A process
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THANK YOU ! YOUR QUESTIONS, PLEASE Alexander KORSIK Senior Vice-President, Head of Oil and Energy Business Unit
Investor Relations Department Tel. +7 (495) 692 2288 www.sistema.com
[email protected]
October 20, 2009
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