Company Overview

Irkutskenergo is the second largest regional power generation company in Russia. The company’s key advantage is that 70% of its 13.000 MW capacity is hydroelectric. The other 30% is from 13 coal-fired thermal plants that cogenerate electricity and heat. Irkutskenergo, with full control over 41.25 kWh of hydroelectric capacity, is also the only Russian power generation company with excess hydroelectric capacity. Irkutskenergo provides more than 5% of all energy in Russia. In 1998 (?) a team of international experts led by Power Technologies, Inc., (PTI) a prominent U.S. consulting firm, inspected most of Irkutskenergo’s thermal and hydroelectric plants and found them to be well maintained and in good condition. Additionally, the company was evaluated in 1996 by “American Appraisal” The Company employs more than 21,000 people. Total length of electric lines is 55,000 miles.

Sector Overview

Looking at the Energy sector, you will notice that after the crisis of August 1998, Russian energy companies are at big advantage over their foreign rivals due to cheap and well trained labor force and extremely cheap natural resources.

Production Costs

Because of its competitive hydro plants, Irkutskenergo is the lowest-cost producer of electricity in Russia. Tariff levels are the best indicator of Russian energy companies, as they are based on a “cost-plus” formula. The Company’s tariffs are less than one-quarter of the Russian average, and are also low compared to those of international power utilities.


Based on the technical assessment by PTI, analysts believe the Company’s current capital outlay of $75 million is sufficient for the next three to five years. The equipment has been recently replaced and there is no big need for capital investment.


Irkutskenergo also owns and operates the regional high-voltage grid and distributes electricity and heat directly to 325,000 customers in the Irkutsk region. The regional power base is heavily weighted toward export-oriented commodity producers: aluminum smelters, pulp and paper manufacturers, refineries and chemical producers accounted for 61% of the Company’s revenues in 1998(?). The major customers generate 70% of total revenues, including the Unified Energy Systems (UES) grid (which resells to industrial customers in nearby regions), and the Erdenet copper mining facilities in Mongolia and China which pay bills in hard currency.

Demand outlook

Regional demand is expected to stabilize in 1999 and then begin to rise with an upturn in industrial production. However, more than 45% and 20% of electricity and heat demand, respectively, is from cyclical industries. In the medium to long term, management expects volume growth to come mainly from rising electricity demand, with competitive energy costs acting as an incentive for the development of substantial titanium, coal and gold deposits in the region. The greatest potential for volume growth is from increased deliveries in the UES–operated national power grid, currently at 13 kWh per year. Irkutskenergo could increase deliveries to a maximum of 18 bn kWh per year.

Financial Performance

A recent International Accounting Standards (IAS) restatement confirmed Irkutskenergo’s strong balance sheet, with book value at mid-year 1998(?) of $5,000 million (over $1 per share) and financial debt of only $7,000 million. The Company therefore retains a huge untapped borrowing capacity for future expansion projects.

During the first quarter of 1999 the company had an increase in hard currency reserves up to $1 bn. The Company’s revenues increased by 100% in the first half of 1999 to $40 mln.

Shareholders’ Structure

Russian Government 40%

Various Companies 52%

(including 39% of foreign entities)

Private Investors 8%

(including the Company’s management 6%)

Recently Irkutskenergo has issued Eurobonds for DM125 ml. In April 1999 the Company paid interest of DM 15.6 ml.

In January 1997 Irkutskenergo issued its first ADRs of first level. Currently ADRs are traded at MMVB, FSE, BerSE, SSE and OTC.