Interview with Alexey Bobrov, President of IDGC of Urals. Topic: Business During Crisis (Channel 4, «Stend», 3 February 2009)

04 February 2009

- Good evening! Tonight our guest here at ‘Stend' is Alexey Bobrov, President of IDGC of Urals. Good evening, Alexey Olegovich! How are you doing?

- Thank you, very well, thank goodness.IMGi0279

- What about the crisis?

- Same here, like everybody else. It was mentioned in the papers, we read them, and I watched TV.

- How is it affecting your business?

- Just like other companies, but I should say that we are more inert and cannot earn money out of surges and depreciation, that's why collapses affect us less as well. No doubt, our production has slumped by 15% in comparison with the figures of last January. Nevertheless I'm not going to give a dramatic turn to this and say that it is crisis, it's bad.

- Do you mean that power sales dropped by 15%?

- Yes, power transit dropped by 15% in comparison with January 2008.

- What if we compare it with 2006 or 2007?

- I didn't compare the figures, but the level is somewhere equal to that in 2006-2007.

- But this means it's not crisis, because in 2006-2007 we were all satisfied, happy and looked ahead full of cheer.

- This is just what I'm saying - I'm not going to exaggerate the situation from the point of view of power sector, grid sector. Unlike our colleagues whose projects are being closed, terminated or whose production, unfortunately, slumped, like in our metal industry, by nearly twice as low, sure, we feel better.

- Do you adjust your development plans?

- Of course. Development plans are not our invention, our whim. This is our response to consumer demand. If there is no demand, why should we run ahead of time? It means just wasting consumers' money. Both our consumers and our company don't need it.

- But how quickly will you be able to develop these plans again? The crisis will be over; production will recover and plants will be already constructed. They will turn on their furnaces in order to melt down metal and will inform you they need power. So, will you be able to produce it?

- Sure, there is no problem here. We will easily reach the previous volumes. And if we speak about fundamental stepping stones I think that maybe we use this time more efficiently as one can freely handle managerial issues, development and preparation. It always takes much time and efforts but no so much investment, that's why it's useful for us to launch some extra projects and make our plans more specific.

- I remember that during the previous crisis periods people often didn't pay for services, including electric power. Can it happen now?

- I think it is in our genes. Unfortunately, it is gaining momentum now.

- Is it referred to legal entities or physical persons?

- You know, it's difficult to identify the type as it's a point of sales, those who sell electric power don't pay us. Perhaps neither a particular sector, nor industry or physical persons matter here, because what is crucial is self-discipline and professional qualities of people in charge of companies regardless of any sector. Unfortunately, if executives do not cut back their company production plans and proceed to produce the same goods which are non-demanded on the market they waste resources, make employees do useless work. Of course, it's nonsense. And while I'm here I'd like to thank all responsible consumers who constitute the majority and who were adequate in screening the market situation and lowering production programs by consuming less, which is honest, than running into debts and provoking dispute. It is absolutely reasonable that's why in my opinion it's not a point of a certain sector; it's a point of personal responsibility and professional skills of top management.

- But if the sales sector doesn't pay you, how do you resolve the situation?

- Consumers who cooperate with us directly, that is, they have a contract with our company, are aluminum producers, some big and medium-sized industrial enterprises. We don't have any problems with them. As a rule, these are people who choose modern business model and are more responsible, more professional, they know how much they can spend so there is no conflict between us. It is dealer companies, in particular, Sverdlovenergosbyt who seem to be in a squeeze. I don't think that Sverdlovsk region suffers more than our neighboring regions, but it happens that we don't have any signed contract precisely with Sverdlovenergosbyt.

- It resembles Russia-Ukraine gas situation when dispute escalated due to the lack of a contract.

- No, everything is pretty simple, we don't have any unresolved issues, we don't blame each other. I understand our colleagues very well when they want to pay 2 months later than consumers do under the contract. I understand them perfectly because they need circulating funds. But our position is different, we would like more simultaneous processes, so that consumer payments and payments to us are transferred at the same time. That's why we don't reproach and blame each other for dishonesty. Here it's a simple dialogue which always exists.

- Can such a dialogue be interrupted just like that of Russia and Ukraine if, due to the lack of a proper contract, you turn the switch off and cut off power intended for Sverdlovenergosbyt and consumers respectively?

- No way. Yes, our current situation with Sverdlovenergosbyt is pretty tense, their debt is considerable, Sverdlovenergosbyt ows us more than one billion of rubles. And I think we'll offer them to limit their consumption.

- How?

- They have offices, production facilities and it won't affect consumers.

- You mean it will be just Sverdlovenergosbyt who will have no power?

- Yes and we have a lawful right to do so. By the way, today I should address its management in writing as stipulated by law and offer them to reduce their own consumption.

- What is your solution in coping with default? Or will you just wait until everything settles?

- The solution is quite simple. I liked the answer given by Vladimir Putin when one of the top-notch businessmen asked how they could help him. He answered that nothing here can help, there is no need to help. I cannot quote the phrase but the meaning is the same - no help, one should pay and that's it. This is the solution, nothing's going to be resolved itself. We should understand that we'll have to pay our debts the sooner the better. The longer we delay payments the worse the situation is going to be, and it can be very bad.

- Are you going to change the connection fee now when the number of connections plummeted in comparison with last year?

- Yes, here we've made drastic changes. To start with, the statement that the number of connections plummeted is not quite right, today we have none at all. Those who wanted to connect did it, those who planned to connect this year undergo production slump. So, there is no demand in it, first. Second, the government enacted the resolution that the today's connection fee should be just nominal, it is not free but in terms of money it is similar to it. So there is no problem here and I think that price rise is not reasonable as there is no sense in offering and selling the goods which are not-demanded at present as well as to frighten people with high prices, it's inhuman. The second issue is a grave problem which arises when the service is in demand again because, as you remarked, this is not our first crisis period and free services and goods vanish without leaving trace. The connection will be free just like free roads, free medical care.

- You mean that there will be nothing to connect to as all the money will be invested into something else?

- Of course. We won't be properly financed, we have just discussed that there is no sense in giving benefits not backed up by financing. We remember that those suffered from Chernobyl disaster, as well as former Afghanistan militants received benefits and now many people are concerned where these benefits are. Similar thing can happen with power connection.

- Can electric power quality deteriorate due to crisis or processes connected with it?

- No and on this point we are adamant. We don't discuss and don't plan any changes; we our production unchanged in order to provide the same reliable and proper supply of our consumers. That's why we don't changes our headcount or somehow take steps that affect the current power supply system. We don't make negative any changes connected with our personnel, their social security plans, payroll or the number of corporate activities!

- How do you perceive future?

- As always. You see, the poor are more optimistic as they have nothing to lose.

- Thank you very much. Tonight we've talked to Alexey Bobrov, President of IDGC of Urals. Good-bye.

 

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