Sistema JSFC Oil and Energy BU Capital Markets Day

Sistema JSFC Oil and Energy BU Capital Markets Day October 20, 2009 Alexander KORSIK Senior Vice-President, Head of Oil and Energy Business Unit Di...
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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

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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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