Sustainable business model: TAIF sums up the results of 2017
TAIF Group net revenue increased by 10,2% compared to 2016
Apparently, one of the largest diversified holdings in Russia — TAIF Group — managed to form an effective business model. Such conclusions can be made by examining the annual report of TAIF Group for the last year. Thus, in 2017 the net revenue amounted to 593,4 billion rubles. The group of companies paid 52,6 billion rubles of taxes and fees to the budgets of all levels and extra-budgetary funds, including about 17,6 billion rubles to the budget of Tatarstan. Read about these and many other financial, economic and production results of TAIF Group in the detailed review of Realnoe Vremya.
Net revenue of TAIF Group exceeded by 10,2% the result of 2016
According to the annual report, last year TAIF Group received a net income, including indirect taxes, in the amount of 687,1 billion rubles. The net revenue reached 593,4 billion rubles, which is by 10,2% higher than in 2016. The share of balanced revenue amounted to 10% of the regional value. Its growth was due to an increase in output volume, optimization of the structure of commodity products, as well as due to a growth of quotations for oil and oil products. In 2017, the main part of the net income in the amount of 503,4 billion rubles (73,3%) was received by the oil refining, petrochemical and energy complexes of TAIF Group. EBITDA amounted to 109 billion rubles.
''Last year, the companies of TAIF Group made maximum efforts to reduce the negative impact of the global crisis on the activities of our enterprises. The main efforts were aimed at mobilizing all available resources, optimizing costs and improving efficiency in all areas of activity. In 2017, the companies of TAIF Group did not reduce the pace of development, demonstrating a successful financial and operating performance,'' Director General of TAIF PSC Albert Shigabutdinov commented on the results of the previous year on pages of the reporting documents.
The total contribution of TAIF Group in the country's development, including taxes, social payments, charity, environmental protection and industrial safety costs, as well as investments for 2017, amounted to 166,9 billion rubles. From the funds earned by the group of companies to the budgets of all levels and extra-budgetary funds it was paid 52,6 billion rubles, including about 17,6 billion rubles to the budget of Tatarstan.
Investments in production – 73,9 billion rubles
In 2017, TAIF Group continued to implement investment projects of strategic importance for the economy of Tatarstan and Russia as a whole. The total volume of investments made last year in the construction of new and renovation of existing production facilities amounted to 73,9 billion rubles, the main part — investments in the sphere of oil and gas processing, petrochemistry, chemistry and energy. In total, 567 billion rubles, or 15,7 billion US dollars, were invested in fixed assets in the period from 1995 to 2017.
One of the priority strategic investment projects of the oil refining industry is the construction of the Heavy Residue Conversion Complex, focused on the implementation of the main task — to increase the production of light oil products from heavy high-sulfur oil — TAIF-NK PSC implements at the Nizhnekamsk industrial site.
Leading position in petrochemical market
TAIF Group holds the leading positions in the Russian and regional markets of petrochemical products. According to the results of 2017, the share of TAIF Group in the total production in the Russian Federation was 41,4% for plastics, 68,8% for rubbers, and 42% for ethylene. Last year, the share of TAIF Group reached 54% in the volume of production of oil products, petrochemicals and energy in the region in total.
Assets of TAIF Group increased 1,5 times since 2015
Due to investments and high quality of asset management, TAIF Group has demonstred high performance of financial and economic activities from year to year. As of the end of 2017, the assets of TAIF Group amounted to 767,1 billion rubles, increasing 1,5 times compared to 2015. Net assets reached a record value of 462,7 billion rubles, an increase of 1,3 times compared to 2015.
The assets of the parent company — TAIF PSC — increased in comparison with 2016 by 18,1 billion rubles, or 15,7%, and amounted to 133,3 billion rubles. The value of net assets at the end of 2017 reached 71 billion rubles. Last year, the company's liabilities reached 133,3 billion rubles, including capital and reserves — 71 billion rubles, the company's liabilities amounted to 62,3 billion rubles, including a portfolio of loans and borrowings — 36,9 billion rubles. Thus, the sources of formation of assets of TAIF PSC for 2017 year are equities at 53% and the company's liabilities at 47%.
More than 1,8 trillion rubles of net revenue by 2030
Growth prospects of TAIF Group are defined by Development Strategy of TAIF Group until 2030. According to the document, the implementation of capital-intensive industrial investment projects requires investments in the amount of 2,1 trillion rubles, 0,3 trillion rubles of which were implemented from 2012 to 2017. Annual growth of production and financial and economic results of TAIF Group will ensure a growth of net revenue to the level of 1,8 trillion rubles by 2030 and a multiple increase in output volume; tax payments will increase to 180 billion rubles a year.
The existing Development Strategy of TAIF Group until 2030 includes projects such as Heavy Residue Conversion Complex at TAIF-NK PSC, construction of two stages of 600,000 tonnes of ethylene a year each (1st and 3rd stages) and derivatives (2nd and 4th stages) at Nizhnekamskneftekhim PJSC, which will increase the annual production of ethylene to 1,8 million tonnes, of polymers — 3 times, rubbers — at least 1 million tonnes. At the moment, the work on the second stage is underway — configuring the products of the first stage.
The programme of construction of gas processing plant with a capacity of up to 27 billion cubic metres of natural gas, as well as the construction of a petrochemical complex that will improve the provision of Kazanorgsintez with ethylene raw materials by 1,8 million t/year, are developed to provide the new ethylene production facilities of Kazanorgsintez PJSC with ethylene raw material. Also, it is planned a project to increase the production of ethane at Gazprom Dobycha Orenburg PLC and the construction of a petrochemical complex in cooperation with Gazprom PJSC up to 1 million tonnes.
To ensure stable supply of electric energy in 2017, the gas turbine unit (GTU) with an electric capacity of 405,6 MW, which is currently the most modern and efficient in Russia and one of the best in the world, was put into operation on the territory of Kazan CHPP-3 (a branch of TGC-16). Also, in the future TAIF Group plans to create new energy capacities with a total installed capacity of 895 MW.
Sales revenues of TAIF-NK increased to 195,2 billion rubles
A special place in the structure of TAIF Group is taken by Nizhnekamsk oil and gas processing complex — TAIF-NK PSC. TAIF-NK PSC includes the Oil refinery with a design capacity of 7,3 million tonnes of processed oil per year, Gasoline plant with a design capacity of 1 million tonnes a year and Heavy Residue Conversion Complex (HRCC) with a design capacity for processing of ''heavy'' raw materials (tar, vacuum gas oil, fuel oil) up to 3,7 million tonnes.
Investments in the Heavy Residue Conversion Complex and modernization of related industries of TAIF-NK PSC at the end of 2017 amounted to 119 billion rubles, or 2,1 billion US dollars. Capital investments in the construction of the HRCC increased the assets of the company to 197,5 billion rubles, sales revenues of TAIF-NK JSC to 195,2 billion rubles. Tax payments to the budgets of all levels amounted to 22,6 billion rubles.
TAIF-NK PSC operates in difficult market conditions, different from those in which the majority of Russian oil refineries, part of vertically integrated companies, operate. In the absence of own oil and gas production, oil and gas condensate are purchased in the market of hydrocarbon raw materials in the conditions of constant price increase and loss of quality. In 2017, the price growth for raw material exceeded the growth in prices of petroleum products by 14% compared to 2014.
The utilization of capacities for primary processing of oil and gas raw materials in 2017 amounted to 98%, which is much higher than the average level of capacity utilization for Russian refineries for the past year, which amounted to 86,8%. Despite the annual deterioration in the quality of processed oil, TAIF-NK PSC stabilized the depth of processing of incoming raw materials: in the reporting year, the figure was 74,9%.
The company is a leader in Tatarstan by production of motor fuels. When using 50,3% of oil and gas raw materials processed in the region in 2017, the share of TAIF-NK PSC in the production of motor gasoline and diesel fuel last year amounted to 85,3% and 59,6%, respectively.
In 2017, TAIF-NK produced 8 million tonnes of products, including 4,8 million tonnes of light oil products. The company received 0,5 million tonnes of motor gasoline, 2,2 million tonnes of diesel fuel, 1,5 million tonnes of straight-run gasoline and stable gas gasoline, 0,6 million tonnes of kerosene and other light oil products. Out of 3,2 million tonnes of dark oil products, 2 million tonnes of fuel oil, 1,2 million tonnes of vacuum gas oil and other dark oil products were obtained.
HRCC launch and new pipeline
Certainly, TAIF-NK PSC links development prospects with the Heavy Residue Conversion Complex. In 2017, the company completed the construction and installation works at the HRCC, consistently put the main and auxiliary production facilities into the mode of integrated testing with the involvement of them in the process of processing of vacuum gas oil, technological modes have been debugged, new high-quality products have been obtained (propane fraction, butane fraction, naphtha), hydrotreated vacuum gas oil and motor fuel (diesel fuel), fully consistent with modern environmental standards Euro 5. Full completion of commissioning works is scheduled for this year.
This year, it is planned to put into operation a diesel fuel booster pipeline from the oil refinery to the main pumping station Nizhnekamsk-2 of Transneft PJSC. This pipeline is a complex engineering structure with a pumping station, pig traps and numerous stop valve stations and connections. The length of the pipeline is 8,3 km. The construction works have been underway since 2015. Taking into account the launch of HRCC and the growth of diesel fuel production, the volume of its acceptance into the system of main pipeline transport will be increased from 1,7 to 3,2 million tonnes per year, which will lead to the optimization of logistics costs to end users.
A strategically important project for the company is the construction of a gas stable gasoline reformer unit. Its implementation will allow TAIF-NK PSC to produce a high-octane fraction, with which the company will continue to produce environmentally friendly gasoline of K5 class, corresponding to the quality of the best international standards, without the involvement of expensive high-octane components purchased from the outside. It is important that the unit will additionally provide with an important component used to produce benzene at the production facilities of Nizhnekamskneftekhim PJSC.
Revenue of Nizhnekamskneftekhim PJSC and Kazanorgsintez PJSC since joining TAIF increased 8,6 times
The spheres of chemistry and petrochemistry of TAIF Group are represented by Nizhnekamskneftekhim PJSC and Kazanorgsintez PJSC. Investments of TAIF petrochemical group in measures to increase production capacity, improve the stability of their load and quality of products, as well as the expansion of product portfolio allow to strengthen the position in the global and domestic markets, to achieve annual growth of production results, to ensure positive dynamics of financial results of TAIF Group.
To date, the above-mentioned companies produce more than 200 types of products, including synthetic rubbers, various grades of polyethylene, polypropylene, polycarbonate and styrene plastics. The products are in great demand abroad, as evidenced by a wide geography of exports, including 67 countries located on all continents of the globe.
The implementation of production modernization programmes from 2000 to 2017 allowed Kazanorgsintez PJSC and Nizhnekamskneftekhim PJSC to repeatedly increase the capacity of main products, including of ethylene — 1,5 times, of polymers — 3,4 times. From 2000 to 2017, an increase in the capacity utilization for ethylene production was achieved from 90% to 97%, for polymers — from 82% to 98%.
In 2017, Nizhnekamskneftekhim PJSC and Kazanorgsintez PJSC produced 1,198 tonnes of ethylene. The share of TAIF Group in Russian ethylene production was 42%, which is 1,6 times more than in 2000. During the same period, other enterprises of the Russian Federation increased ethylene production 1,4 times.
The result of the construction of new capacities, modernization and reconstruction of existing capacities of pyrolysis of hydrocarbon raw material for ethylene and propylene, as well as raw material loading of rubber capacities was a four-fold increase in the production of polymers by companies of TAIF Group in the period from 2000 to 2017, while their production by other petrochemical enterprises in Russia increased only 2,2 times. Thus, the share of polymers of TAIF Group in the total Russian production volume increased from 33% in 2000 to 47% in the reporting year. In the period from 2000 to 2017, rubber production in Russia increased 2 times, 97% of the increase in rubber production was provided by the companies of TAIF Group.
Development strategy of TAIF Group allowed the enterprises of chemical and petrochemical industries to increase revenues since the inclusion of Kazanorgsintez PJSC and Nizhnekamskneftekhim PJSC in TAIF Group 8,6 times and bring it to 249 billion rubles. The net revenue of Nizhnekamskneftekhim PJSC and its subsidiaries in 2017 reached 177 billion rubles, EBITDA — 35,7 billion rubles, Kazanorgsintez PJSC — 72 billion rubles and 22,8 billion rubles, respectively.
TAIF Group successfully continues to work on the implementation of the project of Nizhnekamskneftekhim PJSC on the construction of a new olefin complex, which is the basis of the company's development strategy until 2025. In June 2017 in the framework of St. Petersburg International Economic Forum, TAIF Group and LINDE AG signed a memorandum on strategic cooperation. The first step for the implementation of the memorandum was the signing between Nizhnekamskneftekhim PJSC and LINDE AG of the Basic agreement on the implementation of contracts (licensing, design, purchase and supply of equipment, provision of technical services) for the construction of the new ethylene plant EP-600 for a total amount of 868 million euros.
Continuing the tradition of signing agreements at the St Petersburg forum, in 2018 Director General of Nizhnekamskneftehim PJSC Azat Bikmurzin and Chief Executive Officer of Deutsche Bank in Europe, Middle East and Africa Ashok Aram in the presence of Tatarstan President Rustam Minnikhanov and Director General of TAIF PSC Albert Shigaboutdinov signed a long-term loan agreement to finance the project on construction of the olefin complex. The agreement with the support of the export credit agency Euler Hermes is designed for 807 million euros and will be valid until 2032. Five German banks will act as lenders: in addition to Deutsche Bank, funds will be provided by UniCredit Bank AG, Bayerische Landesbank, Landesbank Baden-Württemberg, DZ BANK AG.
The launch of GTU increased power generation by 33%
TAIF Group pays much attention to industry such as energy. The main purpose of the energy complex of TAIF Group is reliable power supply to enterprises and the population of the republic. The activities of TAIF Group in the field of energy are represented by the energy company TGC-16, which includes Nizhnekamsk CHPP (PTK-1) and Kazan CHPP-3.
In 2017, TGC-16 JSC put into commercial operation one of the world's most powerful gas turbine units (GTU) produced by General Electric — 9NA.01 – with electric power of 405,6 MW with generation of electric and thermal energy in the combined cycle. According to the results of the implementation of this GTU at Kazan CHPP-3, the installed electric power of the station was increased to 789,6 MW, installed thermal power of the station was brought to the level of 2,390 Gcal/h.
Power generation of TGC-16 in 2017 amounted to 7,9 billion kWh and increased by 33% compared to 2015. The growth of electricity generation in the combined mode is primarily due to the introduction of the GTU at KCHPP-3. Heat energy output of TGC-16 amounted to 20,93 million Gcal and increased by 5% compared to 2015, due to the growth of industrial steam consumption of over 13 kgf/cm2 due to the introduction of new production facilities by TAIF Group.
By the end of 2017, the largest volume of electrical power was produced at the branch of Nizhnekamsk CHPP (PTK-1) with a share in the total electricity generation of 59% at TGC-16. The largest volume of thermal energy in 2017 was also released at Nizhnekamsk CHPP (PTK-1). Its share in the total volume of heat supply for TGC-16 was 85%. The total revenue of TAIF Group companies in the field of energy in 2017 amounted to 27,8 billion rubles (without VAT), an increase from the level of 2016 by 17%.
According to the annual report of TAIF Group, the expenses of TGC-16 in 2017 for the modernization, reconstruction and overhaul of fixed production assets (investment in fixed assets) amounted to 9 billion rubles. The volume of sales of thermal energy in 2017 for TGC-16 JSC amounted to 20,93 million Gcal.
The sale of thermal energy and heat carriers to consumers during the reporting period was carried out at regulated rates established by the State Committee of the Republic of Tatarstan on Tariffs. For Kazan, the average annual tariff for thermal energy in hot water on sources of Tatenergo JSC for 2017 (within the approved tariffs by the State Committee of RT on Tariffs) was 756,6 rubles/Gcal without VAT. At the same time, the average annual tariff for thermal energy in hot water at the collectors of the source TGC-16 was approved at the amount of 532,1 rubles/Gcal without VAT, which is by 29,7% lower than that of Tatenergo JSC. In case of heat energy supply for heating and hot water supply of Kazan only from Kazan CHPP-3, the average annual tariff for the final consumer of Kazan, including the population, can be reduced by 19,9%.
As for Nizhnekamsk, the average annual tariff for thermal energy in hot water at the collectors of the source Nizhnekamsk CHPP PLC for 2017 (within the approved tariffs of the State Committee of RT on Tariffs) was 513,6 rubles/Gcal without VAT. While the average tariff for thermal energy in hot water at reservoirs of the source TGC-16 JSC (NKCHPP (PTK-1)) is approved in the amount 492,7 rub/Gcal without VAT, which is by 4,1% lower than of Nizhnekamsk CHPP PLC. In the case of heat supply for heating and hot water supply of Nizhnekamsk only from Nizhnekamsk CHPP (PTK-1), the average annual tariff for the end user of Nizhnekamsk, including the population, can be reduced by 3,5%.
Investments in social projects — 46,2 billion rubles
TAIF Group shares the principles of social responsibility adopted in most developed countries and seeks to apply them in practice in all areas of activity. Thus, the total amount of social investments amounted to 46,2 billion rubles in 2017.
Last year, TAIF Group continued financing the restoration and construction works in the ancient city of Bolgar, including the construction of a hotel with a bath complex, the Islamic Academy, and the Cathedral of the Kazan Icon of the Mother of God in Kazan. The total amount allocated by the group's companies for these purposes amounted to 1,4 billion rubles in 2017, and since 2012 — more than 2,8 billion rubles. TAIF Group also continues to participate in the financing of renovation and improvement of the forest park Lebyazhye.
In total, TAIF Group allocated 10,5 billion rubles for charity and sponsorship activities in 2017. TAIF Group is responsible for ensuring the operation of social facilities: health resorts, recreation centres, children's health camps, swimming pools, ice arenas. In the reporting period, 2 billion rubles were allocated for the maintenance of social and cultural facilities.
The social policy of TAIF Group is aimed at improving the lives of employees and their families. The average wage at enterprises of TAIF Group has increased along with the growth of economic indicators of the group of companies. In 2017, it reached 48,000 rubles, an increase compared to last year was 7% and exceeded the same figure in Tatarstan by 48% and in Russia by 23%. Taking into account all social payments and benefits, the average income of employees in the reporting year amounted to 50,700 rubles per month.
Realizing high importance of activities in the field of environmental protection, industrial safety and labour protection, TAIF Group allocated more than 11,4 billion rubles for these activities in 2017 — 5,3 billion rubles for environmental protection, 4,3 billion rubles for industrial safety, and 1,8 billion rubles for labour protection.
Another area of social responsibility of TAIF Group is the support of professional sport in Tatarstan. Rubin and Neftekhimik football clubs, hockey clubs Neftekhimik and Dinamo (field hockey), Sintez water polo club, racing teams TAIFmotosport and MX-Avtosport thanks to the support of TAIF Group successfully defended the honour of the Republic of Tatarstan at Russian and international competitions. In 2017, TAIF Group allocated more than 7,6 billion rubles to support mass and professional sport, as well as to promote healthy lifestyle.
The successful implementation of social projects is facilitated by stable and sustainable development of TAIF Group, which is supported by a verified development strategy and sustainable business model of the company. Its viability has been tested by negative impact of the global financial crisis and strengthening of sanctions against Russia. The work of TAIF Group on implementation of important projects continues to contribute to the development of the economy of both Tatarstan and Russia as a whole, to ensure environmental safety, improve the quality of life and well-being of all residents of the country.