Title pageStrategic OverviewEngineering Division Strategy and its Implementation
GRI:
Interview with Director for Organization Development Read

1.1.Engineering Division Strategy and its Implementation

Meeting the NPP construction deadlines and cost requirements for both contracted and future projects is the Company’s absolute business priority.

The strategy of the Engineering Division’s activities was approved in 2014 and is focused on achieving Rosatom State Corporation’s strategic goals.

According to the implemented organizational changes, A.M. Lokshin, First Deputy Director General for Operations Management of Rosatom State Corporation was appointed as Head of the Engineering Division from December 08, 2018. This appointment will allow maximum synchro-nization of the strategic priorities of Rosatom State Corporation and the Engineering Division.

One of Rosatom State Corporation’s strategic goals is growth of its share on the international markets, the prerequisite of which is strict fulfillment of the Engineering Division’s contracts within the established parameters. Meeting the NPP construction deadlines and cost requirements for both contracted and future projects is the Company’s absolute business priority. This target is achieved by:

  • Continuous improvement of operational and project management processes;
  • Application of efficient digital tools and information systems throughout the whole project life cycle from the stage of pre-contractual works up to NPP commissioning;
  • Improvement of quality at each stage of NPP construction;
  • Development of the core personnel.

Besides, the strategic objectives of the Engineering Division and the State Corporation as a whole include reducing the production costs and time period of NPP construction. The Company’s objectives are as follows:

  • Capability to deliver to the market the NPP projects that are competitive in terms of the cost of rated capacity kilowatt and LCOE;
  • Readiness to design and implement NPP construction projects within the established cost parameters.

Construction of high power NPPs is an absolute priority for the Company that is why the development of Multi-D digital technologies ensuring the design and construction of complex capital projects within the established time and cost parameters is so important. As part of the Common Digital Strategy of Rosatom State Corporation, we implement industrial “NPP Construction Process Digitalization” program that is strategically focused on improvement of NPP construction quality with application of digital technologies.

The “NPP Construction Process Digitalization” program of the Engineering Division includes 5 main areas of activity:

  • Quality assurance of design is ensured owing to creation of NPP digital modeling tools.
  • Digitalization of combined intrafunctional and intradivisional production chains means building of chains of data transmission between systems at various stages of the construction life cycle.
  • NPP construction management — construction and site IT-structure management.
  • Development of Multi-D digital platform is aimed atdeveloping a digital platform for NPP construction processes management.
  • NPP construction cost management means implementation of a complex system of time and cost management for NPP construction.

Based on analytical information about the trends on the priority markets, about the state of the macroeconomic environment, competitive analysis, new partner patterns, taking into account the priorities of the Shareholders’ activity, mid- and long-term plans of the organization’s activity and key performance indicators are confirmed and updated on an annual basis. Respective decisions are taken at strategic sessions with the shareholders’ participation, not less than 2 times a year (the KPI sessions are held on a quarterly basis, in order to check that the established targets are achieved and the risk control is implemented). The business priorities are identified at the Company’s level on a collegiate basis as part of internal sessions with participation of the Company’s top management.

Changes in the priorities are reflected in the Company’s business plan which is verified and, if needed, updated on an annual basis and in the updated strategic Company’s materials.

During generation of strategies, long- and mid-term plans and development programs, the Company applies the market analytical data that reflect the trends of the most important markets (in terms of technology) and the regions of operation, a competitive analysis and benchmarking of the main players at the prioritized markets and regions of operation. The sources of this information are:

  • Daily reviews of the public sources of information, such as mass media, companies’ publications etc.;
  • Periodical reviews on the regions of presence that are generated by partners’ organizations (the periodicity is determined depending on the region of presence);
  • holding of and participation in major industry forums, seminars with leading companies;
  • OASIS industrial information system systematizing the data on key partners, customers etc.

The Russian Federation implements a full-scale program of nuclear power development. The established goals are achieved by expanded reproduction of Russian nuclear industry products based on the development of the nuclear power industrial and research potential and nuclear and radiation safety system, preservation of unity of the process chains on the basis of innovation development.

As part of implementation of the objective aimed at establishing itself as the leader of the global market of nuclear technologies and services, Rosatom State Corporation builds up the projects portfolio of NPPs abroad.

As part of the core business, the Engineering Division of Rosatom State Corporation’s plans to construct NPPs in Russia are established according to the investment program of Rosenenergoatom JSC related to NPP construction in Russia. The Engineering Division of Rosatom State Corporation implements NPP construction projects abroad based on the Russian technologies by making a considerable contribution to global expanding of Rosatom State Corporation’s core business, since the Division accounts for about 90% of the State Corporation’s NPP construction projects abroad.

1.1.1. NPP Engineering and Construction Market

11 %
Nuclear power accounted for about 11% of total energy consumption in 2018
102-6

Following the results of 2018, Rosatom State Corporation retains leadership on the global NPP construction market.

Nuclear power accounted for about 11% of total energy consumption in 2018. According to IAEA data, 30 countries in the world have nuclear electrical generating capacity and 13 of them depend on the nuclear electricity production by more than 1/4. The countries with the largest share of nuclear electricity production are France (71.6%), Ukraine (55.1%), Slovakia (54%), Hungary (50%) and Belgium (49.9%).

In 2018, the amount of operational nuclear power reactors on the territory of Russia, including those recently connected to the grid, amounted to 37 units with a total capacity of 30.1 GW. In 2018, while competing with the world nuclear generating companies, Rosatom State Corporation was globally ranked as the second company coming next to the French EDF in terms of installed power capacity (see below).

The main type of globally operating reactors are light water reactors (such as VVER, PWR, BWR, LWGR) that accounted for 85.5% of the global market. The heavy water reactors of PHWR (CANDU) type accounted for 11%.

Total portfolio of for NPP construction projects, % (PU)

201037% (23)33% (21)14% (9)8% (5)8% (5)63Power Units RosatomState Corporation1 China KEPCO EDF/AREVA Westinghouse
201857% (42)16% (12)12% (9)7% (5)5% (4)3% (2)74Power Units RosatomState Corporation China KEPCO EDF/AREVA Westinghouse Other21
1 The following was not taken into account: power units put into operation in 2018 (power units of Rostov NPP and Leningrad-2 NPP), FNHPP.
2 4 Turkish units in SINOP (agreement with MHI).

Portfolio of oveseas NPP construction projects, % (PU)

25Power Units48% (12)16% (4)16% (4)16% (4)4% (1)2010RosatomState Corporation1 China KEPCO EDF/AREVA Westinghouse
RosatomState Corporation China KEPCO EDF/AREVA Westinghouse Other2150Power Units72% (36)8% (4)8% (4)8% (4)4% (2)2018
1 The following was not taken into account: power units put into operation in 2018 (power units of Rostov NPP and Leningrad-2 NPP), FNHPP.
2 4 Turkish units in SINOP (agreement with MHI).

Total number of reactors under construction, % (PU)

43% (23)27% (14) 10% (5)10% (5)10% (5)2010RosatomState CorporationChina KEPCO EDF/AREVA Westinghouse
53% (31)20% (12)15% (9)8% (5)3% (2)2018RosatomState CorporationChina KEPCO EDF/AREVA Westinghouse

Number of overseas reactors under construction, % (PU)

RosatomState CorporationChina EDF/AREVA Westinghouse36% (5)29% (4)28% (4)7% (1)2010
RosatomState CorporationChina KEPCO Westinghouse71% (25)11% (4)11% (4)6% (2)2018

Currently, Asian countries prevail in the demand for NPP construction due to fast-growing need in electric energy in this region. Being the major global player in terms of the number of NPP construction projects in the overseas portfolio, Rosatom State Corporation strengthens its presence abroad.

The leading global analytic agencies forecast a considerable growth of installed capacity in nuclear power. By 2035 the International Energy Agency,, UxConsulting and the World Nuclear Association expect the increase of operational nuclear power units capacity under the basic scenario and by various estimates, from 450 to 500 GW.

Leading countries in terms of operational nuclear power reactors
9858424637USAFranceChinaJapanRussia
Nuclear power reactors in the world (% of the total amount of operational nuclear power units)
66163114PWR and VVERBWRPHWRLWGROther

The Engineering Division of Rosatom State Corporation is the leader of the global NPP construction market. At the same time, the Company’s main strategic goal is to retain until 2030 the leading position on the global market in terms of power units to be constructed and the market share taking into account the market growth trends in absolute terms and under the competition strengthened between the well-established and the emerging players (with China and Korea becoming more active). At the same time, besides the growing competition between the market players, the pressure caused by other sources of generation is intensified.

The prioritized task for the Engineering Division is to implement the program aiming to reduce the NPP construction time and cost including optimization of the physical/natural project parameters and application of up-to-date construction technologies.

Among the main competitors in the segment of NPP construction, we must acknowledge French companies that have significant references. Chinese and Korean companies are rated as new competitors that have no significant references yet are capable of showing a high competitive potential in terms of the technologies cost.

Business Model

The updated Company’s business model was presented and approved at the meeting chaired by A.E. Likhachev, Director General of Rosatom State Corporation, on 16.10.2017. In order to implement the business model, in 2018 the Engineering Division introduced several organizational changes, namely, new structural divisions and functions, new processes, the previous processes were updated. Respective changes are stipulated in the organization’s local normative acts. The changes are made known via internal measures aiming primarily at employee’s familiarization with them and at external events carried out by the Engineering Division including ATOMEXPO, dialogues with stakeholders and business meetings.

Realizing the significance of its own business for the economy and the society, the Engineering Division identifies business sustainable development as its primary goal, also by means of increasing of its aggregate cost/value for the shareholders, a wide range of stakeholders and society on the whole. The term “cost/value” does not imply only products manufactured or services rendered or financial results, but a combination of the Company’s economic, social and ecological impact on the society and the environment. The chain of the Engineering Division value creation (in the main business core) is a component part of the uniform value chain of the nuclear industry. The Division defines its business model as a system creating value within short-, mid- and long-term perspective and aiming to achieve strategic goals. The Company’s business model is based on its long-term strategy.

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Engineering and Construction of high-power NPP with Pressurized Water Reactors

Reactor type
VVER-1000

Safety generation III

Factory type
The last power unit of this series, Rostov NPP Power Unit 4 was handed over for commercial operation in 2018
1,000 MW

Electric power

3,000 MW

Thermal capacity

Emissions of greenhouse gases and pollutants, annually:

СО — 8.3 tons/year
CO2 — absent
SO2 — 1.2 tons/year
Reactor type
VVER-1200

Safety generation III+

Factory type
full-scale
1,200 MW

Electric power

3,212 MW

Thermal capacity

Emissions of greenhouse gases and pollutants, annually:

СО — 3.2 tons/year
CO2 — absent
SO2 — 1.1 tons/year
303-3

Water intake by VVER-1200 reactor NPP (with the recycling system):

  • surface waters, including swamps, rivers, lakes and oceans — 120,000 thous. m3
  • underground waters (service and drinking water) — 1,300 thous. m3
  • rain water collected and stored by the company — 430 thous. m3
Reactor type
VVER-TOI

Safety generation III+

Factory type
In 2018 “first concrete” for Power Unit 1 of Kursk NPP-2 was poured — the first plant in the territory of Russia to be erected in compliance with the state-of-the-art national design — VVER-TOI
1,255 MW

Electric power

3,300 MW

Thermal capacity

NPP design within the frame-work of Proryv Project

Reactor type
BR-1200
Stage of works:
design
1,200 MW

Rated electrical power

2,800 MW

Heat power

Reactor type
Brest-300 (low and medium capacity NPPs)
Stage of works:
design
300 MW

Rated electrical power

700 MW

Heat power

Multi-D digital platform, national digital platform, etc.
bm-enConstruction of high-power NPPs on EPC,EPC(M) terms andconditionsDesign(full-scale)of high-powerNPPsDigital technologiesfor managementof complexengineeringfacilities basedon Multi DFinance management Strategic management Risk management Information systems management Corporate governancе
2017
2018
Revenue 
175.2 bln RUR
201.9 bln RUR
EBITDA 
13.9 bln RUR
16.8 bln RUR
Net profit 
5.59 bln RUR
21.51 bln RUR
Investments 
2.71 bln RUR
7.75 bln RUR
Payroll budget and social payments 
17,116 mln RUR
22,361 mln RUR
Expenses for occupational health and safety 
264.13 mln RUR
263.30 mln RUR
Expenditures for environmental protection 
0.02 bln RUR
0.02 bln RUR
Integral investment efficiency indicator 
98.9 %
103.9 %
Expenditures for personnel training 
167.99 mln RUR
195.64 mln RUR
2017
2018
No incidents according to INES scale of level 2 and higher 
Yes
Yes
Quality Management System 
ISO 9001-2015
ISO 9001-2015
The amount of procurement contractual obligations 
409.8 bln RUR
685.5 bln RUR
Share of equipment procurement from Russian manufacturers  
91 %
96 %
Amount of power units in the portfolio 
33
31
Number of “Rosatom Production System” projects 
75
Common economic effect from implementation of RPS-projects 
~100
2017
2018
Investments in R&D 
0.08 bln RUR
0.10 bln RUR
RF patents of invention, useful models 
5
15
Foreign states’ patents, including decisions to issue patents 
11
Certificates for computer software and databases 
26
12
Submitted national and regional claims for inventions 
106
112
Amount of avant-projects 
8
Design as part of Proryv Project 
Yes
Yes
2017
2018
Average head count 
14,463 pers.
19,191 pers.
404-1
Average amount of training hours per employee 
28.4
34.4
Share of employees covered by collective agreements 
57 %
41 %
Share of employees younger than 35 years 
40 %
44 %
LTIFR 
0.06
0.05
2017
2018
Share of transparency (open procurement published at the Electronic Trading Platform) 
94.93 %
95.35 %
Taxes and fees imposed on and paid by organizations of the Engineering Division  
6.24 bln RUR
15.43 bln RUR
Creation of new jobs 
3,678
6,852
Amount of charity funds 
0.27 bln RUR
0.51 bln RUR
2017
2018
303-3
Water intake during NPP construction:
Surface waters, including swamps, rivers, lakes and oceans 
27.6 thous. m3
76.9 thous. m3
CO emissions during NPP construction 
12.04 tons
8.62 tons
Underground waters 
11.6 thous. m3
10.6 thous. m3
Municipal and other water supply systems 
121.3 thous. m3
158.9 thous. m3
306-2
Amount of generated waste during NPP construction 
4.73 thous. tons
5.55 thous. tons
303-3
Division’s power consumption during NPP construction:
Electrical power 
32.4 GWh
63.2 GWh
Thermal power 
158.3 thous. TJ
170.4 thous. TJ
Surface of reclaimed soils, (2015-2017) 
351.8 thous. m3

Explanation of symbols

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Stakeholder Group:
UN Sustainable Development Goals:

Process model of the Engineering Division