3.2 Operations and Procurement Management

3.2.1 Optimization and increase of operating activities efficiency

A significant contribution to the positive results of the RusHydro Group in 2016 was made by consistent management efforts aimed at optimizing all manageable operating expenses of the Group and selling large assets that do not affect the Group’s core business.

In the reporting year a five-year program to optimize the operating expenses of the RusHydro Group was adopted with special attention paid to maintaining a high level of reliability and safety. The optimization of capital expenditures for 2016-2019 is almost 60 billion rubles.

The target value of the indicator «Decrease in operating costs (expenses)» is at least 2 % annually for the period 2015-2019, while in accordance with the directive of the Government of the Russian Federation from 04.07.2016 No. 4750p-P13, the target value of the KPI «Decrease in operating costs (expenses))» for 2016 is not less than 10 %. The KPI in the reporting year was fulfilled by 11 percent: the actual effect of PJSC RusHydro from the implementation of measures to reduce operating expenses in 2016 amounted to 3.7 billion rubles (-15.4 % of the level of 2015 taking into account inflation 5.4 % according to data Rosstat).

For the Group’s operating expenses and the factors that affected the change see Section 2.3 Financial Results.

In pursuance of the Action Plan of the Government of the Russian Federation aimed at ensuring the stable social and economic development of Russia in 2016 approved by the Government of the Russian Federation on 01.03.2016, the Directive of the Government of the Russian Federation No. 3795p-P13 of 01.06.2016 and the decisions of the Board of Directors of PJSC RusHydro (Minutes of 23.06.2016 No. 239) according to the technical assignment approved by the Ministry of Economic Development of the Russian Federation for auditing the costs of the RusHydro Group and developing the action plan for their optimization, an audit of costs was carried out.

The audit was conducted in the areas with the greatest potential to reduce costs:

  • operating expenses,
  • management model and the reduction in administrative and management costs,
  • investment activities.

The plan of measures to optimize costs based on the results of an external independent audit of the Company’s costs taking into account the subsidiaries is approved by the decision of the Board of Directors (Minutes No. 244 of 23.11.2016).

3.2.2 Procurement Management


JSC RusHydro in the conduct of purchases of goods, works and services is guided by the requirements of the legislation of the Russian Federation in particular by the requirements of the Federal Law of 18.07.2011 No. 223-FL «About procurements of goods, works, services by Individual Types of Legal Entities» and also by the procurement policy for the needs of PJSC RusHydro (approved in a revised version by the decision of the Board of Directors of PJSC RusHydro of 23.06.2006 No. 239, as amended). The Policy have been developed with a view to timely and qualitatively providing the Company with goods, works, services and economical expenditure of funds of the Customer based on the principles of transparency and competition in full compliance with Russian law.

For monitoring and coordination of procurement activities the Company has established a collegial permanent body – the Central Procurement Commission (CPC). The functional of the CPC includessolving of disputes and complaints during the implementation of regulated purchases, monitoring compliance with the requirements of the legislation of the Russian Federation, normative documents of PJSC RusHydro in conducting regulated purchases.

For direct organization and conduct of procurement procedures the CPC appoints permanent procurement commission. The procurement commissions according to powers are allocated to commissions of the 1st and 2nd level, as well as specially created procurement commissions.

The procurement function is structured in the following way: in the staff of the Executive body of PJSC RusHydro the procurement is carried out by the Purchasing, Marketing and Pricing Department, and in the staff of branches – by the offices for procurement.

In 2016 1,034 competitive procurement in electronic form were hold in the amount of 21, 672.18 thousand rubles which is 88.45 % at a cost of conducted competitive procurement procedures.

PJSC RusHydro publishes information about planned purchases of goods, works and services of the Company, places current official procurement publications containing the name of the purchase (subject of procurement), significant conditions for competitive procurements and other information on procurement on the official website of the Russian Federation, as well as on the electronic trading platforms и According to the results of the procurement there is published information on the results of the procurement with an indication of the bid winner and the price of the winner’s bid of the competitive procedure.

In accordance with Order No. 180 of 21.03.2016 «On the centralization of procurement activities and the system of supply of goods, work, services of enterprises of the RusHydro Group» by the Chairman of the Management Board – CEO N. Shulginov and for the purpose of centralization and raising the efficiency of procurement practices and supplying the Group with goods and services a special entity of JSC RusHydroSnabzheniye (JSC RHS) was created. Its activities were started by the Chairman of the Management Board – CEO N. Shulginov on 2016, August 9.

Current goals of JSC RHS:

  • ensuring the transparency of procurement practices,
  • ensuring the optimal quality of the purchased goods and services,
    increasing the speed of procurement and supplies.

Current functions of JSC RHS:

  • development of the procurement and supply function of the Group,
  • support of the procurement planning process and the work of the CPC,
  • approval of the documents necessary for the start of the procurement procedures,
    market analysis,
  • organization and realization of the procurement procedures,
  • analysis of the pricing documents,
  • approval of contracts and additional contracts,
  • inspections of the economic safety,
  • other support functions for the procurement management of the Group’s companies.


Implementation of an annual comprehensive program by types of procurement


Procurements from a single source



On the website of the Unified Information System in the field of procurement and on the website of PJSC RusHydro there is a list of goods, works, services, purchases of which are carried out by small and medium-sized businesses.

As a result of 2016, the share of purchases from small and medium-sized businesses amounted to 73.78 %, including purchases from small and medium-sized businesses based on the results of bids, in which small and medium-sized business entities are participants the only in procurement (56.8 %).

In 2017, PJSC RusHydro plans to purchase from small and medium-sized businesses in the amount of not less than 18 % of the total volume of purchases, including at least 10 % of purchases conducted with the participation of small and medium-sized businesses only.