Director for Investment Management and Operational Excellence
– What is ROSATOM guided by in building up and optimising its investment project portfolio?
– The nuclear industry is now in a period of a large-scale renovation of production capacities, bringing new products to allied markets and scientific infrastructure development as the basis of future technological solutions. All these determine the current structure of the investment project portfolio and possible ways to optimise it.
In 2013, the budget portfolio consisted 56 % of commercial projects (“profitable”), with the reminder being “unprofitable”. The share of commercial projects was 9 % greater than in 2012. It is a very good result for us. It should be understood that the main part of the “unprofitable” projects are the technical retrofitting and modernisation projects at the existing capacities and that of renovation of the scientific infrastructure. In other words, we obtain the main economic benefits of such projects either in the framework of operational activities (through the reduction of the total cost of ownership and, ultimately, through the reduction of the self-cost) or, in the mid- and long-term, through obtaining a new technologically complex product from research. Besides, some “unprofitable” projects are aimed at ensuring the unconditional safety of the sector organisations’ operation.
Optimisation is not just a reduction of the share of “unprofitable” projects; this is also the improvement of portfolio quality through review and searching for optimal technological solutions in terms of economics and safety. We carry out technical and economic audits of projects being implemented on pilot sites. In the framework of such audits, we carry out analyses of project budgets and seek engineering and technological solutions, which is necessary to achieve our goals.
– What are the main results of 2013?
– In the reporting year, the integral KPIs on profitability and results of the portfolio were established for managers. Automated processes allow us to controll portfolio results and development in a more effective and regular manner.
The regulatory requirements for preparation of project materials are renewed. The de-bureaucratisation process is under way; a list of mandatory documents for review has been shortened, but it is still being given more scrutiny.
The main investment decision-making processes have been regulated. A system of subcommittees has been established to complete the investment decision-making system, specifically to increase the quality of decisions and the speed of making them. A pool of sectoral experts has been formed for analysis of and preparing statements on projects; it includes representatives of related structural units of the Corporation and sectoral organisations who have proved that they have necessary competences.
Lastly, the transition to regular post-investment monitoring of projects is under way; it is a means of verification of actually obtained results for their conformance with plans and a source of information for the analysis of performance and search for potential improvements.
As a result of all these activities, the consolidated profitability of the commercial projects within the portfolio last year grew by 5.6 %. The result speaks for itself.
– What investment areas will be priorities in 2014 and in the mid-term?
– In 2014 and in the coming 3-5 years, the investment priorities will remain the same. These are safety, modernisation of production assets, new businesses and scientific infrastructure and innovations.
Approach to management of ROSATOM’s investments
- collective decision-making on investments by the Investment Committee of ROSATOM and investment committees of entities (the decision-making level depends on the strategic significance of a project);
- building up the Corporation’s annual and mid-term Projects Portfolio as a combination of projects of sectoral entities and its annual updating;
- control of departures from the project implementation plan in the sectoral entities at the level of the Corporation;
- decision-making on key milestones of all projects significant to the Corporation and control of their implementation at the level of the Corporation;
- application of the “gate” approach in implementing and controlling projects;
- collection and analysis of expert statements to improve the quality of investment decision-making on projects.
Main results of 2013:
- ROSATOM’s Projects Portfolio has been updated to 2018;
- an efficiency assessment of the Corporation’s Projects Portfolio was carried out to set forth the required yield of the projects and increase the transparency of the investment decision-making;
- a system of incentives that motivates improving performance indicators of the Corporation’s Projects Portfolio was developed; target KPIs of the investment activity were set forth for the top sectoral managers;
- a mechanism for the comprehensive audit of projects that enables producing recommendations for better planning and implementation of projects was defined; a random technical and economic audit of the progress of ten projects was conducted, and a post-investment audit of 106 projects of ROSATOM and its entities completed in 2011-2013 was carried out;
- the Uniform Sectoral Investment Policy of ROSATOM was introduced;
- the Uniform Sectoral Regulations for the “Corporation and its Entities’ Projects Portfolio Management”, which set forth the stages and procedures for investment planning, monitoring and controlling procedures for this process was introduced, along with a list of ROSATOM’s experts with defined functions and areas of responsibility;
- the Uniform Sectoral Interaction Procedure for decision-making on a project of ROSATOM and its entities, which regulates, among other things, the procedure and timing of reviews of functioning and which provides for mandatory consideration of expert opinions and that of the parties concerned with the project.
Table. Financing of the investment activities of the Corporation’s entities
|Main activity areas||Actual volume of project funding VAT inclusive*|
|Nuclear Weapons Complex
|Nuclear Power Complex
|Uranium Оne Holding
|Sales and trading
|Machine Engineering Division
|Power Generation Division
|Construction in Russia
|Back-end of lifecycle
|JSC Rusatom Overseas**
* Civil projects.
** Including “Radiation Technologies”.
Main problems of investment management
Table. Main problems of investment management and solutions
|A deficit in investment resources, which limits opportunities for the Corporation’s Projects Portfolio and forces the financing of liabilities first of all.
||Incentives to attract external funding.
Optimisation of the Corporation’s Projects Portfolio.
Optimisation of budgets of ongoing projects.
|A lack of automation for investment activity management.
||Implementation of the information system for management of the Projects Portfolio in the sectoral organisations.
|Project implementation outcomes do not meet the customer’s expectations.
||Improvement of project managers’ skills.
Changes in the project incentive system.
Formalisation of roles in and responsibilities for project implementation.
Plans for 2014 and on the mid-term horizon
In the short- and mid-term, it is planned to carry out activities aimed at improving the efficiency of the Corporation’s Projects Portfolio through development of the management system and enhancement of project documentation quality, including:
- development (detailisation and specialisation) of the regulatory and methodological documentation of project management processes, formalising responsibilities within the project activities;
- standardisation of the investment decision-making process on a project at its different stages and for different types of projects;
- improvement of the system of control over the targeted and efficient use of funds invested in projects;
- preparation of proposals and initiating changes to ROSATOM’s incentive system as related to motivation in project-related activity, duplication of the solution for automating the reporting system in the field of investing;
- establishment of a consolidated storage of knowledge in the field of investment and project management and providing access to it to the Corporation and its organisations’ employees;
- advancement of competences of investment project activity participants;
- adjustment of the current processes and refinement of the existing framework of the regulatory and methodological documents with account taken of the above said changes in ROSATOM.
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