To optimize the expenditures in 2002 году in JSC "Tatenergo" the work was started to minimize the costs. The gained profit is the sign of successful activity of the company. The profit may be increased either by increasing the price of the products or by decreasing the costs of products production.

The Republic Energy Commission of Republic of Tatarstan set the tariffs at the limit-minimal level with minimal profitability. However, the JSC "Tatenergo" on basis of reduction of the own production costs, provides the required profit and is the stable company.

In 2002 there were developed the standards of development, approval and control of the Construction and Installation Works and since April 2005 the Cost Management Program (CMP) of the holding is developed on basis of respective Programs of the branches. CMP in the holding includes the events for reduction of costs, comprising 12 basic dimensions.

In 2006 the Program was added the new direction "Reduction of Chemical Reagents". CMP has special fro branches dimensions:

• in JSC "Generation Company" - reduction of costs of fuel reduction of costs of chemical reagents;
• in JSC "Grid Company" - reduction of technological loses and thefts in grids;
• oin JSC "Kazan Thermal Grid Company" - reduction of technological loses in thermal grids.

Total volume of decrease of the costs through realization of CIW in 2006 was 1.4 % of total cost.

Fuel

In view of the fact that in the expenses structure of JSC "Tatenergo" fuel takes the basic share, this dimension is made a special focus.

JSC "Tatenergo" saved in 2005 - 308/4 th. t. of reference fuel; in 2006 - 188.2 th. t. of reference fuel.

Repairs

The second significant works in structure of cost and demanded finds are the repair works. Decrease of repair costs is reached trough recycling of the materials, increase of the inter-repair period, decommissioning of the non-efficient equipment. To continue the works started in 2003-2004 at the companies of the holding as part of the Program of reforming of repair business, the conversion from doing works by own forces to contract from of doing works as more efficient, has been done.

Reduction of level of losses

Big work of CMP is done in reduction of thefts. Apart from the organizational actions (raids, inspections, penalties etc), the meters of accuracy class 2.5 were replaced with the meters of accuracy class 2.0, the heat consumption meters were installed.

Reduction of technological losses in thermal and electrical grids was reached through the energy consumption decrease for the own needs, replacement of insulation on the heat lines, equipment reconstruction, switch-off of the transformers at the substations with the seasonal load. In 2006 for the first time in Tatarstan there continued the laying of the heat lines on basis of the new technology using the pipes with foam- polyurethane insulation. The life of such heat lines is over 30 years, and the loses in transporting the heat are minimal. The trends of decreasing the thefts and technological losses are reflected in developing the profit part of the budget of JSC "Tatenergo".

Other dimensions in costs decrease

In JSC "Тatenergo" and branches the tasks were set to reduce the managerial costs and services of the non-production nature on basis of reduce of the expenses not directly related to production. Decrease of the costs for environmental protection is implemented through recycling of the raw materials and materials in construction, production, installation of the meters for metering the wastes and emissions, implementation of the new technologies allowing to decrease the payments to budget.

The process of assets management continued. Decrease of the expenses for maintaining the non-core divisions is reached trough transfer of the number of division to the municipal ownership, sale or leasing of the non-used property.

Since 2004 the Program of costs management included the dimension of decrease of the expenses for the court procedures. The active inclusion of the arbitration clause in the concluded contracts allowed to realize the actions to consider the court disputes in the Court of referees as the alternative to Arbitration court., and decrease the court expenses in 2005 by 1.3 million rubles.

The new,12-th dimension - reduction of costs of chemical reagents was realized in JSC "Generation Company". Economical effect from realization of the dimension constituted in 2006 above 16 m. rubles. Basic factors promoting the savings of chemical reagents were: timely optimization of facilities operation, increased generation of desalted water, change of fresh water quality.

Reduction of costs in 2006 constituted 1.4% оf total prime cost, it is reserve that allows to save the money and use them for realization of JSC "Тatenergo" prospects.

Since 2004 each line of the Costs Program management was reflected in the assets or liability part of the budget of JSC "Tatenergo". The amount of centralized financing of costs for implementation of major activity, allocated to the branches, is decreased by the amount of the projected task for costs decrease. The branches are interested in realizing the projected task, as in case of the failure to implement it the company shall itself find the funds to cover the deficiency of the allocated amount of financing.

CIW is a means of optimization of the cash-flow and enhances the branches interest in timely realization of the task fro the costs decrease

Program with the aim of enhancing the effectiveness of resources use, as a result of implementation of actions, reached its maximum in 2005. From formation and realization of CMP the actions were used that resulted in optimization of equipment operation, reduction of assets surplus, and other improvements in the holding and branches, as a result, beginning from 2006 the tendency towards reduction appeared.

Putting the task of reduction of costs for generation of 1 kW/h of electricity and reaching advantages both on wholesale and retail market, today the Tatarstan power engineering specialists actively attract external investors for fixed assets upgrading.

JSC "Tatenergo" pursues the policy of reliable and uninterrupted energy supply to consumers in Republic of Tatarstan with attractive price policy aimed at the decrease of cost of electricity and heat. Such approach allows the power system of Republic of Tatarstan be competitive at the wholesale market of electricity, remaining the guaranteeing supplier of electricity and heat on the retail market of Republic of Tatarstan.