CONTENTS
Statement of Сhairman of the Board of Directors
Statement of Chairman of the Management Board
Key Events
Key Events after the Reporting Date (2012)
2
4
8
13
1
2
ABOUT THE COMPANY
OPERATIONS OVERVIEW
1.1. General information, operating and financial indicators
1.2 Role in Russia’s energy strategy
1.3 The Company’s geographic reach and market survey
1.4 Risk management system
1.5 Anti-corruption activities
1.6 Investment community about us
3
INFORMATION FOR SHAREHOLDERS
AND INVESTORS
3.1 Investments and innovations
3.1.1 Investment activity
3.1.2 Innovative development
3.2 Financial performance overview
3.2.1 Financial performance
3.2.2 Tariff regulation
3.2.3 Cost optimization
3.2.4 Debt portfolio
3.3 Corporate governance
3.3.1 Corporate governance principles
3.3.2 Management and control bodies
3.3.3 Remuneration to management bodies
3.3.4 Internal control system
3.4 Share capital
3.4.1 Share capital structure
3.4.2 Stock market
3.4.3 Dividend policy
3.4.4 Investor relations
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25
28
29
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49
55
61
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64
66
67
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85
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90
91
2.1 Electricity transmission and technological connections
2.2 Improving the reliability of UNEG facilities
and repair operations
2.3 Improving energy efficiency and minimizing losses
2.4 Telecommunications and IT system development
2.5 Procurement
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33
41
43
47
4
SOCIAL RESPONSIBILITY
4.1 Social responsibility principles
4.2 HR policy
4.3 Environment
4.4 Production safety
CONTACTS
GLOSSARY
APPENDICES. PART 1
Compliance with the Code of Corporate Governance
Implementation of the assignments of the President
and the Government of the Russian Federation
APPENDICES. PART 2
See Book 2
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95
102
103
105
106
107
113
STATEMENT OF CHAIRMAN
OF THE BOARD OF DIRECTORS
DEAR SHAREHOLDERS,
In July 2011, I was elected Chairman of the Federal Grid Com-
pany’s Board of Directors, following an instruction by the Rus-
sian President to replace government officials with independent
directors on corporate Boards of Directors. I am not new to
the Company; I first joined as an independent director in 2008.
During this time, I have seen the Company change for the better
and I have tried my best to make it even more successful, fast-
growing and open, both in Russia and internationally.
As our principal shareholder, the State has set strategic priorities
to develop and ensure the reliable operation of Russia’s national
electric grid. These challenges seem daunting, unless we
increase our transparency level. Transparency is an important
priority for all of our shareholders, whowant to be well-informed
about the Company’s performance; we also want to receive their
feedback on our work. My key goal as Chairman of the Board of
Directors is to transform Federal Grid Company into the most
open and transparent company in the market.
In this respect, 2011 marked a new stage in corporate develop-
ment. Federal Grid Company is the largest publicly traded elec-
tricity transmission company in the world by the length of high
voltage lines and installed transformer capacity. Therefore, its
liquidity and awareness on global markets are key management
concerns. Completing our listing on the London Stock Exchange
(LSE) in March of last year marked a major step forward for
the Company. We view the global depository receipt (GDR) list-
ing as the basis for raising additional funds to upgrade the UNEG.
Investors’ high degree of confidence in the Company is illus-
trated by oversubscription for 2011 bond issues.
To enhance operational transparency, we focus on shareholder
interests and look to strengthen the Board of Directors’ role in
the decision-making process. In 2011, we held 29 meetings of
the Board; of these, three meetings were held in person. In
the longer term, the role of the Board of Directors will continue to
be enhanced.
We did a good job boosting corporate investment appeal. In par-
ticular, we brought the Company’s corporate governance in line
with best international practice, approved a new Code of Corpo-
rate Ethics (developed in accordance with best standards),
updated the organizational structure and enhanced business
operating transparency by streamlining procurement. We suc-
cessfully expedited preparing accounting reports (under both
RAS and IFRS) to promptly disclose corporate information. Dur-
ing the reporting year, we have developed and successfully
implemented the Company’s anti-corruption policy covering all
corporate units. In addition, we engaged Morgan Stanley
(a global investment bank) as our corporate broker.
We engaged in serious efforts to foster international coopera-
tion. Last year, the Company entered into agreements with top
power equipment manufacturers, which have brought their pro-
ducts to Russia. It is an important step forward, both for the Com-
pany which will receive new equipment and for Russian regions.
Constructing large industrial projects will positively affect
the regional economy and will create new jobs.
Consolidating and integrating the electric grids of Russia and its
neighboring countries is another important international coopera-
tion issue. We have signed an agreement on the parallel operation
of unified energy systems of Russia, Belorussia and Ukraine and
have promoted cooperation with BRELL (Belarus, Russia, Estonia,
Latvia and Lithuania) energy companies. The Company is negotiat-
ing the possibility of synchronizing Russia and Mongolia’s energy
systems and including Western Mongolia in parallel operation with
Russia’s Unified Energy System. We will soon be prepared to act as
a liaison between Western and Eastern energy systems.
In 2012, we will continue to pursue contacts with the global busi-
ness community and make our best effort to boost the Compa-
ny’s investment attractiveness, which contributes significantly to
the Russian economy.
2
ERNESTO FERLENGHI
Chairman of the Board
of Directors of Federal Grid
Company
3
About the CompanyOperations overviewInformation for shareholders and investorsSocial responsibilityAppendices STATEMENT OF CHAIRMAN
OF THE MANAGEMENT BOARD
DEAR SHAREHOLDERS,
2011 was a year of new opportunities and significant decisions
for the Russian power industry, including for our Company.
Thanks to our team’s responsible professional work and support
from the Russian government, we have maintained confident
forward momentum and have managed to fulfill all shareholder
objectives.
potential and introducing the most advanced technologies. Dur-
ing the reporting year, under the Company’s innovative develop-
ment program, we collaborated with the Russian Academy of
Sciences (RAS) and leading Russian research institutes. In
2011, the Company channeled a total of RUR1.9 billion to
research and development.
The Company’s main priority is to provide reliable and stable
electric supply to consumers. We have done everything possible
to upgrade national electric grid reliability and create an addi-
tional safety margin for all its components. Investment and repair
programs have been fulfilled in full; the emergency reserve has
been fully staffed and new equipment has been purchased. One
important result of this work was that Russia’s backbone electric
grid has operated under normal conditions without failures dur-
ing the 2011-2012 autumn-winter season.
To ensure reliable operation of the Russian electric grid, active
work has been done to renovate and develop the Unified National
Electric Grid (UNEG) on the basis of a new generation backbone
Domestic and foreign manufacturers of electrical equipment,
including Power Machines, Hyundai Heavy Industries, Toshiba
and Alstom, are involved in research and innovative develop-
ment. In 2011, our company entered into several long-term
cooperation agreements to localize electrical equipment produc-
tion from leading countries on Russian territory.
Developing backbone electric grids in Russian regions, deliver-
ing the capacity of new power units at generating facilities and
upgrading the reliability of the electric supply to Moscow, St.
Petersburg and the Tyumen Region are the Company’s main
activities. During the reporting year, we energized 84 power
facilities with a total transformer capacity of 18,501 MVA.
Our Company’s key priority is to provide reliable electric energy
supply to the consumers. The Company successfully accomplished
its tasks in 2011 owing to professional work of its employees.
electric grid – the smart grid. The project will allow us to reduce
network losses across all voltage classes 25 %, increase
the capacity of transmission lines, smooth out generation sched-
ules and provide a 30 % reduction in the probability of electric
grid accidents. The total economic effect of creating the new
generation grid for UES of Russia will be RUR50 billion per year.
We are carrying out projects to utilize high-temperature super-
conducting cable lines and high-capacity storage batteries, as
well as to change overhead power lines for cable versions in
large cities. In December 2011, the second phase of a pilot digi-
tal sub-station was commissioned in Moscow. Currently, we are
actively working to create pilot regional smart grid clusters in
various Russian regions.
Federal Grid Company is carrying out the technical re-equip-
ment of the UNEG in close collaboration with the scientific com-
munity. Together with leading research institutes and design
organizations, we are monitoring global innovative develop-
ments, implementing measures to develop Russia’s scientific
The total length of energized power lines was 2,963 km. Techno-
logical connection services, with a total capacity of 1,086 MW,
were fully rendered for consumers’ power receivers.
In 2011, large-scale work was conducted as part of providing
electric supply for major government projects, such as: the APEC
Summit (scheduled for September 2012), the 2014 Sochi Winter
Olympics and the Eastern Siberia – Pacific Ocean oil pipeline.
That opens the way for Russian businesses to penetrate
the Asian-Pacific markets. Implementing these projects will not
only positively impact Russian economic development, but it will
also strengthen Russia’s position in the international arena.
In the past year, we have strengthened our company’s financial
position and achieved all planned targets. At the end of 2011,
sales revenue from ordinary activities increased 24.43 % year-
on-year. The main growth drivers were extra revenue from elec-
tricity transmission services and consumers’ technological con-
nections to the UNEG, as well as implementation of the Cost
4
OLEG BUDARGIN
Chairman of
the Management Board of
Federal Grid Company
5
About the CompanyOperations overviewInformation for shareholders and investorsSocial responsibilityAppendices Management Program that reduced the Company’s 2011 ope-
rating costs RUR2 billion. Next year, we will continue to imple-
ment the Program aimed at increasing the proportion of open
competitive procedures and optimizing purchase costs via stan-
dardizing design solutions and increasing the share of pur-
chased standard equipment.
We have developed a package of measures to modernize elec-
tric grid infrastructure. The Company’s management has
decided to raise funds to implement this program, in particular,
via the placement of bonds and loans with major Russian and
Western banks. In this regard, during the past year, Federal Grid
Company has been active on capital markets and has carried
out activities aimed at increasing investment attractiveness.
Among our key achievements in this area is a listing of deposi-
tory receipts (DRs) on the London Stock Exchange (LSE), as
well as four successful bond issues.
Complying with high corporate governance standards has tradi-
tionally been one of Federal Grid Company’s main priorities.
Effective interaction between corporate management and
the Board of Directors enables the Company to successfully
address the tasks facing the Company.
Federal Grid Company considers socially responsible business
to be a systemic value. Sponsorship and charity and the promo-
insurance programs and a non-state pension fund scheme. We
take care of our employees and their families’ health, allocating
funds for various employee rehabilitation programs, organizing
their holidays and providing quality health care.
Our company pays particular attention to personnel reserve
care. To date, Federal Grid Company has signed partnership
agreements with more than 45 leading educational establish-
ments across Russia. We announced that 2011 was the Year of
the Young Professional. Young power engineers and students
were trained in a joint educational program between Federal
Grid Company and the SKOLKOVO Moscow Management
School. Individuals participated in a panel discussion “Smart
networks are future projects. The youth aspect.” The final event
of the Year of the Young Professional was the “Leaders of
the new generation” forum held in Skolkovo. This was attended
by more than a hundred of the Company’s young employees
who had an excellent opportunity to develop and upgrade their
professional skills.
The power industry is rightfully considered to be a life-support-
ing industry. It provides a reliable electric supply to millions of
consumers, production facilities, social infrastructure and trans-
portation and communication facilities. Today, Federal Grid
Company makes every effort to establish the safe and smooth
operation of Russia’s backbone energy complex. Next year,
In 2011, against the background of the recessionary trends,
the Company focused on cost optimization, reducing its operating
costs by RUR2 billion, and getting the aggregate energy saving effect
of 137.69 million kWh.
tion of various projects in national culture, science, education
and sports are integral corporate priorities. Federal Grid Com-
pany fully meets its social obligations to all employees – from
industry veterans to young employees. The Company offers
a decent wage, various social programs and non-material incen-
tives. Significant attention is paid to maintaining professional
power engineering dynasties, maintaining and enhancing
the best labor traditions and transferring expertise and experi-
ence from generation to generation. The Company has a long-
term housing improvement program, employee life and health
the Company will continue to work on implementing nationally
important, large-scale innovative projects, maintaining the reli-
able and efficient operation of electric grid facilities and develop-
ing and increasing corporate capitalization, as well as broaden-
ing the range of investors.
I would like to express my appreciation to our shareholders, part-
ners, customers and employees for their trust, and I also thank
you for our mutually beneficial long-term cooperation and for
the joint contribution to Federal Grid Company development.
6
During the past year, we have been active on capital markets,
carrying out a listing of depository receipts on the London Stock
Exchange (LSE), as well as four successful bond issues.
The attracted funds will be used for financing of the program
of modernization of the grid infrastructure allowing to increase
the reliability and efficiency of electricity supply.
7
About the CompanyOperations overviewInformation for shareholders and investorsSocial responsibilityAppendices KEY EVENTS
MAJOR INVESTMENT PROJECTS
SOCHI 2014
Federal Grid Company builds, modernizes and reconstructs electric grid facilities for the Sochi 2014 Olympics Winter Games to supply large spa resorts and sports facilities –
the Sochi Olympic Stadium, the Ice Arena, the Olympic Oval, the Ice Curling Arena and the Krasnaya Polyana Mountain Cluster.
Key Investment Projects, page 52
5 September
Construction of the 110 kV Imeretinskaya –
Ice Arena cable line was completed.
8 November
11 November
The Company completed putting under working voltage
the 110 kV Mzymta sub-station and the 110 kV Rose
Farm – Mzymta cable power line in the Krasnaya Polyana
Mountain Cluster.
Federal Grid Company finished putting under working
voltage the 110 kV Mzymta – Laura cable electric energy
transmission line in the Krasnaya Polyana Mountain
Cluster.
POWER SUPPLY ESPO OIL PIPELINE
We have taken part in the largest projects in recent decades – laying the strategic Eastern Siberian – Pacific Ocean oil pipeline (ESPO), which will transport Russian oil to
the promising Asian-Pacific region markets. Constructing and reconstructing main power facilities for connection to the electric grids of ESPO facilities in areas of the Sakha
Republic (Yakutia), the Jewish Autonomous and Amur Regions, and the Khabarovsk and Primorsk Regions, are within the scope of reference for the Company.
Key Investment Projects, page 52
22 July
12 December
Installation of electricity transmission line towers
for the 220 kV high-voltage line for power supply
of pump stations 40 and 41 of the pipeline system,
Eastern Siberian – Pacific Ocean (ESPO)-2,
was completed.
The 220 kV Lesozavodsk- NPS-38 transmission line
for external power supply at pumping station 38 of
the ESPO pipeline was energized. During construction
of the transmission line, 323 towers and 62 km of
conductors and fiber optic lines were installed.
POWER OUTPUT OF BOGUCHANSKAYA HPP
The Boguchanskaya HPP is the largest new project in the Russian hydro-power engineering sphere with a capacity of 3 thousand MW, which is part of the Angara Cascade. To transmit
power from the Boguchanskaya HPP, the Company is constructing 220 kV facilities in the Krasnoyarsk Region and acting as a technical agent fro construction of 500 kv facilities.
Key Investment Projects, page 53
20 January
20 May
The construction of 220 kV network to transmit power
of Boguchanskaya HPP (the Krasnoyarsk Region) was
completed. New power facilities are fully prepared to work
and will be energized after putting into operation of HPP.
Construction of 500 kV power line Boguchanskaya HPP –
Ozernaya was started. Putting into operation of the new
line, scheduled for the end of 2012, will strengthen
the connection between the electric energy systems of
the Krasnoyarsk and the Irkutsk Regions.
8
THE 2012 APEC SUMMIT
The Asian-Pacific Economic Cooperation (APEC) Summit will be held in Vladivostok in 2012. Federal Grid Company constructs and reconstructs the main power facilities
in the Primorsk Region to ensure uninterrupted power supply to APEC Summit facilities.
Key Investment Projects, page 52
11 July
25 August
5 September
Laying the high voltage cable, 8 km in length, along
the bottom of the Eastern Bosphorus Strait was
completed. This was the first time that the underwater
cabling technology was used in Russia.
the 220 kV Vladivostok – Green Ugol transmission line,
with a length of 64.9 km, was energized.
Equipment of the new 220 kV Green Ugol sub-
station was energized.
26 September
10 October
12 December
Equipment of the new 220 kV Russkaya sub-station
was energized.
New equipment of the 220 kV Volna sub-station
was energized.
the 220 kV Vladivostok TPP (VTPP)-2 – Green Ugol power
line, with a length of 15.4 km, was energized.
THE 330 KV ELECTRIC GRID RING IN ST. PETERSBURG
Federal Grid Company is constructing the 330 kV electric grid ring in St. Petersburg to ensure reliable power supply to the City’s northern areas,
its large industrial enterprises and cultural Centers, as well as to create conditions to connect St. Petersburg users to the grid.
Key Investment Projects, page 53
30 June
6 October
330 kV Vostochnaya – Volkhov-Severnaya, 330 kV
Severnaya – Vostochnaya overhead power lines, as well as
330 kV Volkhov – Severnaya – Ilyich Plant, 330 kV Ilyich
Plant-Vasileostrovskaya and 330 kV Vasileostrovskaya –
Severnaya cable power lines were put into service.
Comprehensive reconstruction of the Volkhov-Severnaya
sub-station, which was put into service in 1923 as
part of the GOELRO plan, was completed. Next to
the existing sub-station, Company built a new power
facility with the use of innovative equipment – gas-
insulated switchgear (GIS). The total investment in
the reconstruction of the sub-station was RUR5.6 billion.
RECONSTRUCTION OF OVERHEAD ELECTRIC ENERGY TRANSMISSION LINES IN THE CABLE DESIGN
TO CLEAR A SPACE TO CONSTRUCT THE SKOLKOVO INNOVATION CENTRE FACILITIES
AND TO ARRANGE POWER DELIVERY TO THE SKOLKOVO INNOVATION CENTRE FACILITIES
Federal Grid Company reconstructs 500, 220, 110 kV overhead electric energy transmission lines in the cable design to clear a space to construct the Skolkovo Innovation Centre
facilities and building Skolkovo and Skolkovo-2S (Smirnovo) 220 kV underground sub-stations.
Key Investment Projects, page 53
15 January
The Company began works on transferring 110, 220 and
500 kV overhead power lines in the cable design for
the power supply of Skolkovo Innovation Centre.
20 March and 1 July
Federal Grid Company began constructing the Skolkovo
and Skolkovo 2 (Smirnovo) 220 kV underground
sub-stations with gas-insulated power transformers,
ensuring greater reliability, compactness and fire safety
facility operation.
POWER OUTPUT OF POWER UNIT #4 OF KALININ NPP
The Company has been actively involved in addressing energy shortage in the north-west of the Moscow Region through the construction of over 600 km of 220-750 kV power lines
and putting into operation of more than 8,400 MVA of transformer capacity for transferring power of the fourth power unit of the Kalinin NPP to the Moscow electric grid.
Key Investment Projects, page 53
23 November
13 December
The Company completed the next stage of expansion of
750 kV sub-station Belozerskaya by putting into operation
the new autotransformer AT 500/220 kV with the capacity
of 501 MVA.
Federal Grid Company began commissioning procedures
at the power distribution units of the Kalinin nuclear power
plant. Use of innovative approaches allowed carrying out
the design and construction of facilities twice ahead of
statutory deadline.
9
About the CompanyOperations overviewInformation for shareholders and investorsSocial responsibilityAppendices INNOVATIVE DEVELOPMENT AND MODERNIZATION
8 February
7 April
17 June
Federal Grid Company’s Board of Directors at its meeting
approved the Regulations on Engineering Policy,
identifying the most advanced technical requirements and
solutions in the field of capital construction and electric
grid facility operation, as well as basic directions for UNEG
innovation and the future development.
Federal Grid Company’s Board of Directors approved
the Company’s Innovative Development Program till
2016, with a view to 2020. The Program's main objective
is improving the reliability, quality and efficiency of
customers’ power supply by upgrading the electric grid of
UES of Russia based on innovative technologies.
Improving the reability of UNEG facilities, page 33
9 September
According to the agreement between Federal Grid Company
and Hyundai Heavy Industries to build a power equipment
company with localized production in Russia, building
of the Hyundai Plant started up in the Primorsk Region.
The future plant is designed to produce up to 350 cells of
gas-insulated switchgears (GIS) per annum that will meet
up to 50 % of Federal Grid Company’s needs for this type of
equipment.
Federal Grid Company and Rostelecom signed
a general agreement on the provision of complex
telecommunications services in the interests of Russian
energy companies. The parties agreed to establish
a digital transportation network for the electrical
energy industry based on the network infrastructure
of both companies and its further development under
the operational control of Rostelecom.
Telecommunications and IT System Development, page 41
28 September
Federal Grid Company and Megafon signed a cooperation
agreement. The telecom operator will provide new
fiber-optic cabling on the basis of Federal Grid Company’s
electric energy resources.
Telecommunications and IT System Development, page 41
10
CORPORATE GOVERNANCE AND SECURITIES
1 February
28 March
28 April
CJSC STATUS began maintaining Federal Grid Company’s
share register. The decision to transfer the share register
was made by the Company’s Board of Directors on
14 December 2010 based on tender results conducted
among companies that provide share registrar services.
11 May
Stock Market, page 88
29 June
Shares of all generating companies were transferred
from the balance of Federal Grid Company in exchange
for shares of JSC INTER RAO UES (except AO ECO
GruzRosenergo). The transmitted block of shares was
valued at RUR100.8 billion. As a result of the deal Federal
Grid Company Group owns 19.95 % shares of JSC INTER
RAO UES.
The Company’s Annual General Meeting of Shareholders
decided on ordinary shares dividend payments based on
2010 results in the amount of RUR0.0020523650155 per
ordinary Company share. The total dividend payout was
RUR2,577,664 thousand. 30 August 2011 – Federal Grid
Company paid dividends to shareholders for 2010 in full.
Dividend Policy, page 90
There was a depository receipts listing for the Company
on the main board of the London Stock Exchange and
trading of Federal Grid Company depository receipts
started up.
The Board of Directors of Federal Grid Company decided
to place the series of bonded loans for a total amount not
to exceed RUR125 billion and approved the prospectus of
the Company.
5 July
Federal Grid Company successfully placed 10-year local
ruble bonds issue worth RUR10 billion. It was the first
Russian market issue of the local bonds of the corporate
sector, placed for a period of 10 years in the post-crisis
period.
21 July
1 August
21 September
Federal Grid Company successfully completed placement
of series 19 bonds worth RUR20 billion. Duration of
securities is 12 years with 7-year put-option. Bookbuilding
was carried out against the backdrop of volatility in global
financial markets; however, the deal aroused great interest
from the investment community.
First in the history of Federal Grid Company Independent
Chairman of the Board of Directors was elected. New
chairman Ernesto Ferlenghi, head of the Italian group
ENI in Russia and the CIS, is a member of the Board of
Directors of Federal Grid Company as an independent
director since 2008.
The new edition of the Corporate Ethics Code, approved by
the Board of Directors, entered into force. The document
was developed taking into account best international
practices in corporate governance and aims at upgrading
corporate culture across all Federal Grid Company
departments.
Board of Directors, page 70
27 October
12 December
28 December
Federal Grid Company placed series 15 bonds worth
RUR10 billion.
Federal Grid Company placed series 18 bonds worth
RUR15 billion.
Federal Grid Company summed up the results of
pre-emptive right to acquire additional shares. Total
placement was 4,438,498,226 shares at the offering price
of RUR0.50 to the total amount of RUR2,219 million.
Received money will be channeled to the implementation
of the Company's investment program.
11
About the CompanyOperations overviewInformation for shareholders and investorsSocial responsibilityAppendices INTERNATIONAL COOPERATION
30 May
8 June
18 June
A Federal Grid Company delegation visited Norway and
took part in a meeting with Polycomtec representatives;
Polycomtec manufactures composite tower bodies for
electricity transmission lines. Meeting participants
discussed the opportunity to use composite tower bodies
to replace outdated ones in the Company’s grids, as
well as the idea to launch an appropriate manufacturing
facility in Russia’s North-West. Theuse of the newest
tower bodies will reduce capital costs, provide high speed
and quality construction and installation work during
the building of electricity transmission lines and improve
electric energy supply quality.
Meeting of the U.S. Secretary of Energy Steven Chu with
the Chairman of the Board of Federal Grid Company, Oleg
Budargin. In the course of talks, the sides discussed
issues of managing the grid line system, especially
the transfer of electricity over long distances and
the development of new technologies and strategy
to ensure Russia’s long-term electricity needs, and
the technological and regulatory challenges of today's
electricity industry.
Federal Grid Company and Morgan Stanley & Co.
International Plc signed a cooperation agreement on
the development and implementation of long-term
relationship development with the investment community
to achieve the target market value with maximum
shareholder benefit.
20 June
21 June
22 September
Federal Grid Company and Cisco signed a memorandum
of understanding on building the smart network in
Russia
Innovative Development, page 55
Federal Grid Company and TESMEC S.p.A. (Italy) have
ratified the Cooperation Agreement in the field of UNEG
modernization and innovation. In accordance with
the Agreement, the parties plan to expand scientific
and technological cooperation, aimed at improving
the technology of installation jobs in the construction
of transmission lines, as well as ensuring reliable
operation of the main electric energy grid and its
progressive development.
Innovative Development, page 55
Federal Gird Company conducted negotiations with
Alstom Grid, one of the three largest international
manufacturers of electric energy supply and distribution
equipment, on the first results of joint work within
the framework of the two companies’ strategic
cooperation agreement. Alstom Grid representatives
reported on the Company’s newest developments in
there lay protection and automation sphere, described
features of Network Management Solutions and
presented their vision on building the smart grid
cluster in UES of Volga. Moreover, meeting participants
discussed future projects related to DC links and
reactive power compensation.
12
SOCIAL RESPONSIBILITY AND ENVIRONMENT
30 April
15 December
16 December
Federal Grid Company specialists started to implement
measures to reproduce the aquatic biological resources of
the Primorsk Region, releasing into the pond of Izvestkovy
Spring 250,000 salmon fry grown from eggs laid during
last autumn’s reproduction period. Therefore, the Company
compensated for effects on the aquatic environment from
cabling the 220 kV Green Ugol – Russkaya transmission line
through the Bosphorus Strait.
Young professionals from all branches of Federal Grid
Company attended the Youth Innovation Forum “Leaders
of the New Generation”, organized jointly by Federal Grid
Company and the SKOLKOVO Moscow Management
School. The main objectives of the forum were
the improvement of professional skills of young power
engineers, the identification of talented professionals with
leadership skills, development of team working methods.
Federal Grid Company received a certificate for
conforming to the environmental management system
of the Executive Office and its branch –the Backbone
Electric Networks (MES) of the South with international
standard ISO 14001:2004. The certificate shows Federal
Grid Company’s commitment to principles of improving
environmental performance and confirms the competence
of the Company’s environmental policy.
Environment, page 102
HR Policy, page 95
Environment, page 102
22 June
Federal Grid Company and the SKOLKOVO Moscow
Management School completed a joint training
program for young power engineers, aimed at raising
the audience’s awareness about the project to create
the smart electrical network in Russia.
HR Policy, page 95
KEY EVENTS AFTER THE REPORTING DATE (2012)
12 January
7 February
12 March
Six 220 kV transmission lines and four 220 kV
sub-stations in the Primorsk and Khabarovsk Regions for
providing external power supply facilities for the second
stage of the ESPO – 2 oil pipeline (oil pumping stations
36, 38, 40 and 41) were energized.
At the 500 kV Beskudnikovo sub-station, the Company has
completed individual tests of two production prototypes
for the first static asynchronized reactive-power
compensators (SARPC) in the world. The introduction
of this innovative development by Russian scientists is
designed to upgrade the capital's energy grid stability and
reduce the risk of system blackouts.
SO UES and Federal Grid Company forwarded a jointly
developed scheme and program for 2012-2018 Russia’s
Unified Energy System (UES) development to the Russian
Ministry of Energy for approval.
22 March
The Russian Federal Financial Markets Service registered
the report on the results of the additional share issue by
Federal Grid Company (the State registration number of
the issue 1-01-65018-D-103 D. Date of State Registration –
8 September 2011). The placement of securities was
launched 29 September 2011 and was completed 3 February
2012. In total, during the additional issue, 43 % of the shares
of the additional issue (4,438,530,347 shares in the amount
of RUR2,219,265,173.50) were placed. Funds raised from
the float would be channeled to implementing the Company's
investment program.
13
About the CompanyOperations overviewInformation for shareholders and investorsSocial responsibilityAppendices The share of electric energy
transmitted through Federal Grid
Company grids stands at
50 %
of all Russian
energy consumption
Electric energy transmission
is carried out across a territory
spanning more than
13 million square km
1
ABOUT THE COMPANY
14
1.1. GENERAL INFORMATION,
OPERATIONAL AND FINANCIAL HIGHLIGHTS
Federal Grid Company is unique infrastructure, forming the phys-
ical backbone of the Russian economy. It is a key company in
the country’s energy sector.
The main focus of the Company is to manage the Unified
National Electric Grid (UNEG) and to maintain its sustainable
operation.
Federal Grid Company is:
• A natural monopoly on the Russian energy transmission
market present in 73 Russian regions spanning 13.6 million
square kilometers;
• Russia’s largest energy company by market capitalization;
• The top publicly traded electric grid company by transmission
line length and installed transformer capacity in the world;
• The top blue chip company on the Russian equity market.
Investment Community about Us, page 29
Core business areas of Federal Grid Company include:
• UNEG management;
• Offering services to transmit energy and connect the electric
grid to wholesale energy market players;
The Unified National (all-Russian) Electric Grid is
a network of electric grids and other energy facilities
ensuring stable energy supply to users, wholesale market
operation and the parallel operation of the Russian
energy system and the energy systems of foreign states.
The nominal voltage type, transmission capacity, energy
flow reversibility and other technical specifications of
energy grid facilities included in the UNEG shall be subject
to approval by the Russian Government.
• Maintaining electric grids in proper condition.
• Providing technical supervision and maintenance of Unified
National Electric Grid facilities (UES of Russia)
The Company’s revenues are mostly generated via energy transmis-
sion tariffs approved by the Russian Federal Tariff Service under RAB
regulation methodology.
Key consumers include: regional distribution companies, sales com-
panies and large industrial enterprises.
KEY OPERATIONAL HIGHLIGHTS
Sub-stations, units*
Length of energy transmission lines, total thousand km**
Energy supply to distribution companies, to direct consumers and independent energy joint stock
companies, net balance (million kWh)
Energy supply by the UNEG to neighboring states, net balance (million kWh)
Declared capacity (MW)***
Energy losses within the UNEG (million kWh)
* Including leased facilities and open-type-bus-and-switch arrangements and units of other owners' sub-stations.
2009
804
121.1
2010
805
121.7
2011
854
124.6
452,662.172
470,648.072
484,663.552
13,628.309
15,716.33
19,284.808
95,545
91,179
90,937
22,120.61
22,525.621
22,553.172
** Including leased transmission lines.
*** Capacity that has been requested by consumers.
KEY FINANCIAL HIGHLIGHTS (RUR MILLION)
Revenue
Adjusted EBITDA*
Adjusted EBIT**
Profit (loss) before tax
Net profit (loss)
Adjusted net profit ***
Net assets value
Market capitalization
2009
85,078
40,379
16,962
-54,049
-59,866
665,714
367,971
2010
111,085
67,405
34,723
67,312
57,082
794,470
452,717
2011
138,137
84,683
43,905
11,444
-2,468
853,801
351,163.1
* Adjusted EBITDA = Earnings before taxes + Interest payable – Interest receivable + Depreciation charges for the reporting period + Change in valuation reserves for the reporting
period – Change in the value of long term financial investments having current market value as a result of a value adjustment for the reporting period – Fixed assets revaluation
charges – Revenues from technological connection services. To calculate this indicator, the amount of earnings before taxes is adjusted with regard to the change in valuation
reserves and the revaluation of listed stock, including the amount of profit/loss from previous years that emerged as a result of writing off/charging reserves that are not taken into
consideration.
** Adjusted EBIT = Earnings before taxes + Interest payable – Interest receivable + Change in valuation reserves for the reporting period – Change in the value of long term financial
investments having current market value as a result of a value adjustment for the reporting period – Fixed assets revaluation charges – Revenues from technological connection
services. To calculate this indicator, the amount of earnings before taxes is adjusted with regard to the change in valuation reserves and the revaluation of listed stock, including
the amount of profit/loss from previous years that emerged as a result of writing off/charging reserves that are not taken into consideration.
*** Adjusted net profit = Adjusted for gain on disposal of available-for-sale investments and investments in associates, loss on re-measurement of assets held for sale,non-specific
impairment of PPE, impairment of available-for-sale investments, loss on dilution of share in associates.
15
SWOT ANALYSIS
THE COMPANY’S STRENGTHS:
• Leading positions in the Russian energy market;
• High capitalization level;
• Favorable tariff regulation regime (RAB);
• The Company’s weight in the Russian economy and extensive government
support (79.55 % of Company’s shares are owned by Federal Property
Management Agency (Rosimuschestvo);
• Country-wide reliable and continuous energy transmission;
• Implementation of the cost management program; and
• Financial sustainability: enhancing financial discipline, preventing conflicts of
interests in financial and economic areas, development of the planning and
budgeting system, accounting and tax policy and efficient capital leveraging.
COMPANY’S WEAKNESSES:
• Demand for large-scale investment in renovating fixed assets due to
the depreciation of grid assets; and
• Challenged coordination of grid equipment maintenance and repairs due to
the large territory covered by the Company.
MARKET OPPORTUNITIES:
MARKET THREATS:
• Guaranteed return on investments due to converting to RAB regulation;
• Asset growth resulting from grid construction to supply energy to developing
regions and new infrastructure facilities;
• Risk of increased load on sub-stations and energy transmission lines
resulting from the expected growth in energy demand under Russian
economy best case scenarios;
• Introduction of the smart network and other innovative technologies; and
• Implementation of sophisticated technologies and risk management in
• Deficit of free cash flow due to large-scale investment programs; and
• Regulatory risks related to updated RAB regulation parameters.
environmental protection.
THE COMPANY’S STRATEGIC PRIORITIES
Federal Grid Company is a backbone, reliable, efficient and fast-
growing company focused on maintaining UNEG integrity, pro-
viding consistent, quality services to consumers and enhancing
the welfare of its shareholders and investors.
Our mission
To reliably operate and develop the Unified National Electric Grid
to boost Russia’s economic growth and to ensure uninterrupted
power supply to all regions country-wide.
Strategic priorities
responsible approach
Reliability
• Reliable energy supply is our key strategic priority. We take
reliable energy
from
to
a
transmission as
the normal operation of
the availability of lighting in each home;
to maintaining
it determines Russia’s well-being,
industrial enterprises
large
• Our updated engineering policy is aimed at further enhancing
the reliability of operated equipment by upgrading existing
facilities and introducing sophisticated technologies;
• The life and wellness of our employees and the industrial and
environmental safety of our companies are critically important to
the Company. We continuously enhance industrial safety and
consumer protection levels and apply new technologies for
environmental protection.
16
Innovation
• We are committed to upgrading the quality of energy supply
for consumers and to creatively introducing sophisticated
technologies and equipment. Within the innovative growing
Russian environment, the Company is focused on gradually
converting the Unified National Electric Grid into a new smart
electric grid which will ensure reliable, high quality and efficient
cooperation between energy consumers and suppliers;
• The state of the UNEG affects Russia’s economic growth
rates. We, therefore, seek to bring the electric grid up to a new
technological level by upgrading obsolete equipment and
introducing change.
Efficiency
• New technologies and the professional excellence of our staff
members are the key factors in our efficiency. We upgrade our
equipment and improve management practices and work
efficiency to boost our economic and production performance;
• Our wide-ranging business and monopoly position on
the market offer sizeable advantages, such as financial
sustainability, stable growth and an efficient risk management
system. We use our strengths to enhance the Company’s
operating efficiency;
• We seek to follow best global corporate governance practices.
Strict compliance with corporate governance standards and
HR investment enables our shareholders and employees to
make their own contributions to general corporate success;
• The strategy to maximize shareholder value is rooted in our
wide-ranging business operations which are increasingly
expanding due to our ambitious investment program and
regulation,
steady demand. The conversion
streamlining capital structure and the new dividend policy also
contribute to shareholder value growth.
to RAB
Our values
Corporate values are fundamental to Federal Grid Company; and
they are our milestones in meeting objectives.
Federal Grid Company’s VALUE RING demonstrates how we use
our corporate values (the inner ring) to meet our strategic goals
(the outer ring); of all corporate values, our employees are our
most precious asset.
Energy supply to the regions, the largest industrial enterprises,
cities and towns relies on their seamless, committed and some-
times even selfless work. We provide all staff members equal
opportunities for successful work and professional and career
growth. We encourage professional continuity across generations
and empower our veterans to share their experience, skills and
traditions with younger employees.
ORGANIZATIONAL STRUCTURE
The Company’s highest management body is the General Meet-
ing of Shareholders. The Board of Directors is responsible for
Company’s growth strategy and supervision of the Management
Board. The Management Board is responsible for the Company’s
day-to-day management.
Corporate Governance, page 69
R E L I A BILITY
e
c
Perform a n
respo
n
s
i
b
il
i
t
EMPLOYEES
professio n a li s
m
g
r
o
w
t
h
I
N
N
O
V
A
T
I
O
N
y
st
tru
Y
C
N
E
EFFICI
17
About the CompanyOperations overviewInformation for shareholders and investorsSocial responsibilityAppendices As of 31 December 2011, Federal Grid Company includes
50 regional branches:
• 8 branches of the Backbone Electric Grid (MES);
• 41 branches of the Backbone Electric Grid Transmission Line
Companies (PMES);
• 1 Special Purpose Production Center Bely Rast.
EXECUTIVE
GENERAL MEETING OF SHAREHOLDERS
BOARD OF DIRECTORS
Chairman of the Management Board
MANAGEMENT BOARD
ADMINISTRATION
FEDERAL GRID COMPANY’S REGIONAL BRANCHES – BACKBONE ELECTRIC GRIDS (MES)
MES Center
MES North-West
MES Volga
MES South
MES Urals
MES West Siberia
MES Siberia
MES East
FEDERAL GRID COMPANY’S – BACKBONE ELECTRIC GRID TRANSMISSION LINE COMPANIES (PMES)
Valdaiskoye
Bryanskoye
Lower Volga
Kaspiyskoye
Permskoye
Vyborgskoye
Mid-Volga
Kubanskoye
Sverdlovskoye
Eastern
Central
Zabaikalskoye
Amurskoye
West Siberia
Primorskoye
Karelskoye
Samarskoye
Rostovskoye
South Urals
Southern
Krasnoyarskoye
Khabarovskoye
Upper Don
Volga-Don
Volga-Okskoye
Leningradskoye
Nizhegorodskoye
Stavropolskoye
Orenburgskoye
Moscow
Novgorodskoye
Sochinskoye
Yamalo-
Nenetskoye
Priokskoye
North
Chernozemnoye
Special Purpose
Production Center
Bely Rast
Kuzbasskoye
Omskoye
Tomskoye
Khakasskoye
SUBSIDIARIES AND BRANCHES DIRECTLY SUBORDINATED TO THE COMPANY (SHARE IN THE CHARTER CAPITAL)
SRC FGC UES (100 %)
Severovostokenergo (49 %)
UC ENERGETIKA (100 %)
Elektrosetservice UNEG (100 %)
Glavsetservice UNEG (100 %)
MUS Energetika (100 %)
Nurenergo (77 %)
GruzRosenergo (50 %)
ESSK UES (100 %)
CIUS EES (100 %)
Chitatekhenergo (100 %)
Mobile GTES (100 %)
Tomsk Backbone Grids (52.025 %)
IT Energy Service (39.99 %)
ENIN (38.24 %)
UEUK (33.33 %)
Energotechkomplekt (48.99 %)
Volgaenergosnabkomplekt (100 %)
CNII NPKenergo (100 %)*
* In March 2012, an entry regarding the company's dissolution was made in the Unified State Register of Legal Entries.
APBE (100 %)
GVC Energetiki (50 %)
MES Kuban (48.99 %)
Index of Energy-FGC UES (100 %)
As of 31 December 2011, Federal Grid Company has 23 SDCs
operating in different sectors, including electric grid facility main-
tenance. Two subsidiaries – Tomsk Backbone Grids and MES
Kuban – are backbone grid companies.
For detailed information on the Company’s participation in SDCs
and other organizations see Appendices.
18
1.2
ROLE IN RUSSIA’S ENERGY STRATEGY
Subject to the 2030 Russian Energy Strategy (approved by Rus-
sian Government Order No.1715-r from 13 November 2009),
energy industry development shall be focused on the following:
• Auditing the electric grid sector and developing a monitoring
system for electric grid distribution in terms of ensuring their
reliable quality and efficient transmission capacity;
• Streamlining the configuration and enhancing the transmission
capacity of backbone and distribution electric grids;
• Reducing the deterioration of electric grids to the average
level seen in developed countries;
• Cutting losses in the electric grids and enhancing energy
transmission efficiency;
• Raising private equity to fund the distribution energy sector for
further growth, upgrading and renovating electric grids and
fostering the reliability of energy supply to end-users for
the long term;
• Ensuring the mass transition from administrative to economic
incentives to boost the performance of electric grid companies;
for
distribution grids across Russian regions, including licensing
business operations to transmit and distribute energy; and
• Developing consolidation management mechanisms
• Imposing more economic responsibility on power generation
and grid companies for complying with guaranteed standards
of reliability and service quality.
The Company views its Energy Strategy as a benchmark for
adjusting its operations. We use the Energy Strategy to define
UNEG growth priorities with a view towards government policy
goals and objectives.
The Company’s baseline document, which regulates the UNEG
development, is the Layout and Program of Unified Energy Sys-
tem (UES) development in Russia for a seven year period (here-
inafter, the Layout and Program). The document is focused on
developing grid infrastructure and generating facilities and meet-
ing long- and medium-term demand for energy and capacity.
The 2011-2017 Layout and Program was approved by Russian
Ministry of Energy Order No. 380 on 29 September 2011.
19
About the CompanyOperations overviewInformation for shareholders and investorsSocial responsibilityAppendices 1.3
THE COMPANY’S GEOGRAPHIC REACH AND MARKET SURVEY
Federal Grid Company electric grid facilities are located in
73 Russian regions, covering the territory of more than 13.6 mil-
lion square kilometers. The total length of transmission lines is
more than 124 thousand kilometers. The area of our reach is
divided into zones, each under the control of one of the Compa-
ny’s branches – Backbone Electric Grids (MES; PMES).
The Chukotka, Kamchatka, Taimyr, Yakutia, Magadan and
Sakhalin Regions are not yet covered by the UNEG, as there are
no economic conditions to set up backbone transmission lines
and large sub-stations due to low population density and the lack
of large end-users.
Regional Presence
Регионы присутствия
Регионы покрытия
MARKET SURVEY
Russian Energy Industry Structure
NPP
HPP
Russian Energy and Capacity Market
Energy and capacity market infrastructure:
• Non-Commercial
for
the Organization of Efficient Wholesale and Retail Energy and
Capacity Sales System” (NP Market Council);
Partnership
“Market
Council
• Administrator of the Wholesale Market Trade System (ATS);
• Federal Grid Company;
• System Operator of Unified Energy System (SO UES); and
• Financial Settlement Center (FSC).
МЭС Северо-Запада
МЭС Западной Сибири
МЭС Востока
20
МЭС Центра
МЭС Волги
МЭС Урала
МЭС Сибири
Сравнение ФСК с зарубежными компаниями-
аналогами по итогам 2011 года
Federal Grid Company compared with foreign peers based on 2011 indicators, € million
5,000
4,000
3,000
2,000
1,000
0
0
.
5
1
3
,
3
2
.
2
3
0
,
2
6
.
5
3
6
,
1
0
.
7
3
6
,
1
5
.
1
7
0
,
1
6
.
0
0
2
,
1
0
.
8
3
4
6
.
7
0
7
0
.
2
3
4
,
4
7
.
9
2
2
,
1
0
.
5
1
2
,
1
5
.
3
0
9
2
.
4
0
6
0
.
5
7
2
8
.
2
0
1
0
.
0
2
2
,
1
0
.
9
8
8
0
.
7
8
9
0
.
6
7
4
1
.
5
0
3
6
.
1
4
2
Revenues
EBITDA
CAPEX
Federal Grid Company
TERNA
RED ELECTRICA
POWER GRID
CTEEP
FINGRID
STATNETT
* Power Grid data quoted
for 9 months of 2011
COMPANY
Terna SpA (Italy)
KEY INDICATORS
Public company with government participation through Cassa Deposit e Pestiti Spa (29.99 % participation in Terna)
Red Eléctrica Corporación S.A. (Spain)
Public company with government participation (20 %)
Tariff regulation – RAB
Free float – 61.8 %
Credit ratings: S&P (AA-); Moody’s (A2); Fitch (A)
Tariff regulation – RAB
Free float – 80 %
Credit ratings: S&P (AA-); Moody’s (A2)
PowerGrid Corporation (India)
Public company with private participation (13.6 %)
CTEEP (Brazil)
Public company with 100 % private capital
Tariff regulation – RAB
Free float – 13.6 %
Tariff regulation – RAB
Free float – 27.25 %
Fingrid (Finland)
Public company with government participation (12 %)
Tariff regulation – RAB
Credit ratings: S&P (A+);Moody’s (A1); Fitch(AA-)
Statnett SF (Norway)
State-owned company reporting to the Energy and Fuel Ministry
Сравнение с российскими компаниями-аналогами по итогам 2011 года
Comparison with Russian peers based on 2011 indicators, RUR billion
Tariff regulation – RAB
Credit ratings: S&P (А+); Moody’s (А2)
200
150
100
50
0
4
1
.
8
3
1
5
5
.
6
2
1
3
1
.
8
0 6
4
.
7
4
0
4
.
4
6
0
4
.
2
5
1
0
.
7
3
8
6
.
4
8
8
6
.
9
3
1
7
.
4
8
1
0
6
.
9
4
Federal Grid Company
Moscow United
Electric Grid Company (MOESK)
Tyumenenergo
MRSK Center
MRSK Center and Volga Regions
MRSK Siberia
Lenenergo
1
8
.
1
1
7
7
.
3
1
8
0
.
0
1
2
0
.
9
3
6
.
8
4
6
.
7
1
7
5
.
3
1
7
2
.
2
1
0
3
.
1
1
9
9
.
4
1
Revenues
EBITDA
CAPEX
COMPANY
MRSK Center
KEY INDICATORS
Public company with government participation through OJSC Holding MRSK.
Major shareholders: OJSC Holding MRSK – 50.23 %, Jamica Ltd -15.9 %, The Bank Of New York Mellon –
7.01 %
Others – 26.86 %
Moscow United Electric Grid Company
(MOESK)
Public company with government participation through OJSC Holding MRSK. Major shareholders: OJSC
Holding MRSK
Major shareholders: OJSC Holding MRSK – 51 %, OJSC GAZPROM – 31 %, Moscow Government – 8 %,
Others – 10 %
21
About the CompanyOperations overviewInformation for shareholders and investorsSocial responsibilityAppendices
COMPANY
TYUMENENERGO
KEY INDICATORS
Public company with government participation through OJSC Holding MRSK
Sole shareholder – OJSC Holding MRSK – 100 %
MRSK Center and the Volga Region
Public company with government participation through OJSC Holding MRSK
Major shareholders: OJSC Holding MRSK – 50.4 %
Jamica Ltd – 16.82 %, Others – 31.78 %
MRSK Siberia
Public company with government participation through OJSC Holding MRSK
Major shareholders: OJSC Holding MRSK – 52.88 %
CJSC MRSK – 28.05 %, Others – 19.07 %
Lenenergo
Public company with government participation through OJSC Holding MRSK
Major shareholders: OJSC Holding MRSK – 45.7 %, KUGI SpB – 22.9 %, VTB Group – 10.1 %,
Others – 37.89 %
GOVERNMENT REGULATION
IN THE ENERGY INDUSTRY
As a natural monopoly, the Company is a strategically important
entity for national defense and security.
The Company’s business is governed by statutory documents
issued by authorized federal executive bodies focused on
the government regulation of the energy industry, which includes:
• The Russian Energy Ministry (Minenergo) is responsible for
developing the State policy and legal regulation in the energy
sector;
• The Russian Federal Tariff Service (FTS) is responsible for
establishing pricing (tariff rates) for energy transmission and
technical connection services within
the UNEG and
supervising prices (tariffs) and their application; and
• The Federal Service for Ecological, Technological and Atomic
Supervision (Rostechnadzor) is responsible for carrying out
State environmental due diligence via technical supervision
and the control of the energy industry, licensing specific
activities and checking legal compliance.
tor and ensuring the common commitment of wholesale and retail
market operators to prepare documents regulating the energy
industry; organization of the self-regulated wholesale and retail
energy trade, the capacity and other products eligible for trading on
the wholesale and retail markets for the purposes of Russian
energy security, the unity of the economic environment, free eco-
nomic activity and competition on the wholesale and retail markets,
balance interests of producers and buyers of energy and capacity
and meet public demand for reliable and sustainable energy
supply.
THE COMPANY’S ELECTRIC ENERGY GRID ASSETS
Federal Grid Company maintains more than 124.6 thousand
kilometers of transmission lines and 854 sub-stations with a total
installed capacity exceeding 322,500 MVA.
INTERNATIONAL BUSINESS
The Company participates in the wholesale energy and capacity
market (WECM), which has been organized by the Non-Profit Part-
nership Council for Organizing Efficient System of Trading at
Wholesale and Retail Electricity and Capacity Market (NP Market
Council). The key business areas of the NP Market Council include:
ensuring the operation of the market’s commercial infrastructure,
efficient relationships between the wholesale and retail markets,
creating favorable conditions to raise investment in the energy sec-
Количественная структура ВЛ ОАО «ФСК ЕЭС» по классу напряжения на 31.12.2011
The Company operates as an energy carrier across the Russian
customs border and the technical contractor under all commercial
contracts for export/import WECM players. We offer services to
transmit energy to the Russian State border subject to agreements
with JSC INTER RAO UES and JSC TGC-1 via electric grid facilities
included in the UNEG and owned or otherwise legally held by Fed-
eral Grid Company.
Quantity of Federal Grid Company's transmission lines by voltage class as of 31 December 2011*
3
6
2
1
2
0,4 kV
6
6 kV
* Including leased facilities.
5
5
0
1
0
7
1
9
3
1
9
0
2
3
4
1
1
10 kV
35 kV
110 kV
150 kV
220 kV
330 kV
400 kV
500 kV
750 kV
800 kV
1,500
1,200
900
600
300
0
22
Протяженность ЛЭП ОАО «ФСК ЕЭС» по трассе на 31.12.2011, км
Length of Federal Grid Company's electricity transmission lines as of 31 December 2011, km*
50,000
40,000
30,000
20,000
10,000
0
1
5
9
.
3
7
7
,
3
7
9
9
4
.
6
6
1
,
4
3
9
5
7
.
1
3
1
6
.
6
3
2
5
7
.
4
8
1
4
2
7
.
8
5
1
0
0
.
0
5
1
,
1
6
0
9
.
0
9
6
7
.
6
6
5
,
0
1
6
3
.
6
2
1
9
7
6
.
5
7
0
,
3
5
8
8
.
7
7
3
8
.
8
4
9
0,4 kV
6 kV
10 kV
35 kV
110 kV
150 kV
220 kV
330 kV
400 kV
500 kV
750 kV
800 kV
1,150 kV
* Including leased facilities.
Federal Grid Company's sub-station capacity as of 31 December 2011, MVA*
Мощность подстанций ОАО «ФСК ЕЭС» по трассе на 31.12.2011, МВА
7
0
.
5
1
7
,
3
4
1
2
5
8
.
7
3
1
,
1
3
1
9
.
5
3
3
4
0
.
1
3
4
,
1
Количество подстанций ОАО «ФСК ЕЭС» по трассе на 31.12.2011
6
2
7
.
0
9
9
,
6
1
1
8
7
6
5
4
2
.
8
7
7
,
4
3
5
.
7
2
8
,
2
2
3
9
.
7
6
0
,
1
6
2
.
2
0
5
150,000
120,000
90,000
60,000
30,000
0
5
7
.
6
4
10 kV
35 kV
110 kV
220 kV
330 kV
400 kV
500 kV
750 kV
1 150 kV
Open-type-
bus-and-switch
arrangements
* Including leased facilities and open-type-bus-and-switch arrangements and units of other owners' sub-stations.
2
Количество подстанций ОАО «ФСК ЕЭС» по трассе на 31.12.2011
Number of Federal Grid Company's sub-stations as of 31 December 2011*
220 kV
500 kV
330 kV
110 kV
10 kV
750 kV
Open-type-bus-and-switch arrangements
35 kV
1,150 kV
400 kV
6 kV
* Including leased facilities and open-type-bus-and-switch arrangements
and units of other owners' sub-stations.
8
7
6
5
4
3
2
1
2
3
4
5
6
7
8
9
10
11
220 kV
500 kV
330 kV
110 kV
10 kV
750 kV
35 kV
1,150 kV
400 kV
6 kV
Open-type-bus-and-switch arrangements
1
2
3
4
5
6
7
8
9
10
11
9
10
11
1
604
99
66
37
20
8
8
7
3
1
1
9
10
11
1
604
99
66
37
20
8
8
7
3
1
1
23
About the CompanyOperations overviewInformation for shareholders and investorsSocial responsibilityAppendices
We collect and process information of energy transmission along
137 international energy transmission lines (IETL) based on data
provided by commercial energy metering equipment. To supply
energy to the Bryansk, Pskov and Kaliningrad Regions, we have
entered into agreements on paid energy transit services via the elec-
tric grids of Latvia, Lithuania, Estonia and Belarus with the relevant
companies of the above-mentioned states.
Currently, there are 5 agreements on the parallel operation of UES of
Russia with the energy systems of foreign states executed between
Federal Grid Company and economic entities of Georgia, Mongolia,
Kazakhstan, the Baltic States and Belarus, as well as an inter-sys-
tem agreement with Finland. The Company signed agreements with
Ukraine, Belarus and Azerbaijan on maintaining said parallel opera-
tion. Federal Grid Company also cooperates with the State Electric
Grid Corporation of China.
Subject to the Maintenance Agreement on the Parallel Operation of
the unified energy systems of Russia and the Republic of Kazakh-
stan, we signed the energy transit agreement under which the Com-
pany pays for energy transit across Kazakhstan from May 2010 to
supply energy to Russian consumers.
Under the Agreement between the Governments of the Russian
Federation and the Republic of Kazakhstan on the parallel operation
of UES of Russia and UES of Kazakhstan, Federal Grid Company
and KEGOC entered into an agreement to execute commercial con-
tracts to settle deviations from the approved schedules of net power
flows (based on hourly commercial metering data).
In 2011, the Company concluded agreements on energy and capac-
ity transfer via the following IETLs:
• 330 kV Derbent – Khachmaz high voltage line (Azerbaijan);
• 110 kV Beliji – Yalama high voltage line (Azerbaijan);
• 110 kV С-457/С-458 Khandagayty – Ulangom high voltage
line (Mongolia);
• 330 kV Yuzhnaya – Rostovskaya high voltage line (Ukraine);
• 500 kV Amurskaya – Heihe high voltage line (China);
We have managed to bring integration of the electric
grids of Russia and bordering countries to a new level.
Electric grid consolidation presents an opportunity to fully
unlock the potential of Europe, Russia and the Pacific
Rim. The integration of the electric grids of Russia and
its bordering countries is a top priority for Federal Grid
Company.
Ernesto Ferlenghi,
Chairman of the Board of Directors
Currently, the parties have settled all issues that define energy volume
to be transmitted across the state borders of the Russian Federation.
The Treaty on Access to Natural Monopoly Services in the Energy
Industry signed by the Governments of the Russian Federation,
the Republic of Kazakhstan and the Republic of Belarus, including
pricing and tariff policy in 2012 shall become the basis for inter-state
energy transmission among Common Free Market Zone countries,
including grids of UES of Russia.
We cooperate with foreign energy systems on harmonizing energy
laws and energy market establishment and synchronization under
inter-state campaigns (CIS ES and its committees, including COTC),
the Energy System Committee for BRELL (Agreement on the parallel
operation of energy systems of Belarus, Russia, Estonia, Latvia and
Lithuania); the Integration Committee of EURASEC; working groups
on the Executive Committee of CIS ES and Fingrid, Finland, KEGOC,
Kazakhstan, Belenergo, Belarus and under the Russia-EU energy dia-
logue program and relations with Asian countries (China and South
Korea).
24
1.4
RISK MANAGEMENT SYSTEM
The Company applies the risk management system. The risk
management system is focused on ensuring sustainable and
consistent corporate operations and growth by appropriate iden-
tification, assessment and efficient risk management which
threaten the Company’s business operations and goodwill,
employee health and the environment and property interests of
shareholders and investors.
Parties to the Risk Management System:
• The Management Board;
• Deputy Chairman of the Management Board;
• Managers of the Company’s units;
• Managers of the Branches.
The Risk Management System defines:
1. Risk identification methods
The risks shall be identified by applying methods based on
ISO/IES 31010 and COSO (analysis, threat assessment,
expert evaluation and event tree analysis).
2. Risk assessment criteria
Risk assessment criteria include: probability, financial impact
and risk manageability. Probability and financial impact
define risk relevance. Risk relevance may be higher if
the Company is intolerant to said risk or if several executive
units of the Company, its branches or affiliates are exposed
to said risk.
3. Risk response
Risk response methods are viewed by us as follows: risk
acceptance; minimizing the effects; risk transfer to the third
party; risk avoidance; and combined methods. The Strategy
is agreed upon with the Internal Control Department and
approved by the Management Board.
4. Procedures and dates for risk reporting
Risk owners shall submit quarterly risk reports to the Internal
Control Department, which makes necessary updates and
agrees on them with risk owners. We use the submitted and
updated reports to prepare the Risk Matrix and Action Plan
for risk mitigation (which are then submitted to the Manage-
ment Board for approval).
Scheme of interaction between
risk management system's participants
Risk Owners
(Heads of Divisions,
Directors)
3
2
5
1
4
5
Management Board
Internal Control Division
1а
2а
Structural Departments
of the EO
(Executive Office)
6
1
1а
2
2а
3
4
5
6
Risk identification and evaluation, reporting on risks
and providing information about realized risks;
Analysis of risk reports, amendments to risk reports,
the discussion and approval of changes with risk owners;
Discussion and approval of reports with corresponding heads
of the EO Departments and directors;
Amendments to reports following discussion
and approval with Heads of the EO Departments and directors;
Preparation of the Risk matrix and the Set of Risks and Minimization Measures,
their submission for the Management Board approval, including control
over the implementation of already approved risk-influencing measures
and risk evaluation of performance analysis;
Approval of the Risk Matrix and the set of Risks and Minimization Measures;
Distribution of approved risk minimization measures;
Implementation of approved risk minimization measures.
25
About the CompanyOperations overviewInformation for shareholders and investorsSocial responsibilityAppendices Main Risks and Risks Minimizing Actions
1.
2.
2.1.
PRODUCTION RISKS
Inadequate operation of
the RPE & ECA
RISK TYPE
GLOBAL (STRATEGIC) RISKS
RISK DESCRIPTION
EFFORTS TO MINIMIZE RISK
Considering the need to ensure reliable UNEG operation and growth, global (strategic) risks shall include: risks of accidents and failures within the UNEG
which involves the risk of safety and emergency control system failure, loss of energy quality and electrical blackouts.
The risk arises in case of the inadequate operation of the RPE & ECA
Monitoring RPE & ECA operation;
2.2.
Energy quality
impairment
The risk arises when energy quality performance is impaired and gives
rise to consumer claims against energy transmission
2.3.
Impaired reliability of
the energy supply to
consumers
The risk arises in energy blackouts, emergency consumer curtailment
and claims filed by consumers against energy transmission
2.4.
Risks related to
innovative development
and enhancing energy
efficiency
This type of risk may be related to changes in regulatory body
requirements and the inefficient actions of any third parties engaged
for program implementation. Risk events may result in penalties
imposed on the Company and any negative reputation consequences
which may increase the cost of fundraising.
3.
4.
4.1.
SOVEREIGN RISKS
Federal Grid Company does not consider sovereign and regional risks as relevant to its operations.
INDUSTRY RISKS
Risk related to
government tariff
regulation
This risk is related to tariff adjustments to meet established
parameters of tariff regulation.
4.2.
Default risk of investment
program financing
schedule
This risk is related to the possible establishment (or adjustment for
the following periods) of tariffs for Federal Grid Company services
at a rate inadequate to cover the Company’s actual costs. Such
risks may occur in the case of default on the investment program
caused by the violation of project financing schedules; adding new
projects not contemplated by the investment program; actual costs
of investment program projects exceeding the planned cost and
the lack of fundraising required for the Company’s investment program
implementation.
Failure to implement the investment program may result in a relevant
tariff decrease for the following periods.
4.3.
Risk of default on
the asset growth plan
This risk may be caused by improperly adding projects to
the investment program due to wrongly identifying projects limiting
the grid performance on the background of increasing energy
demand. The effects of such risk occurrences include possible tariff
reductions for the following periods in proportion to unspent amounts
resulting from improperly adding projects. Besides, there may be lost
profit due to the failure to provide energy transmission services and
the loss of goodwill due to the failure to implement important projects.
26
RPE & ECA operation analysis;
Issuing operational instructions
for the RPE & ECA.
Improving the reliability of UNEG
facilities, page 33
Updating legal framework;
Amendments made to the agreements on
energy transmission services;
Making technical efforts.
Production Safety, page 103
Updating the legal framework to ensure
the reliability of energy supply to
consumers; and
Making technical efforts (in terms of
the replacement of obsolete equipment,
monitoring and equipment troubleshooting).
Development and approval of rules for
relationships among structural units to
implement the investment program;
Innovative Development, page 55
Introduction of data collection and
review systems to monitor program
implementation; and
to carry out
Plans
the program.
technical audit of
Consistent implementation of RAB
regulation parameters and preparing
well-balanced and economically feasible
proposals
Tariff Regulation, page 64
A comprehensive cost cutting program
Cost Optimization, page 66
A binding procedure for approving and
controlling amendments and addenda to
agreements with contractors and vendors;
Regular reports on capital investment
financing and meeting timeframes for work
performance;
Investment Activity, page 49
Diversification of financing sources,
including agreements to open loan facilities
and bond issue;
Debt Portfolio, page 67
Properly amending the Investment Program
to include new facilities;
Adjusting the program, if needed
Investment Activity, page 49
RISK TYPE
RISK DESCRIPTION
EFFORTS TO MINIMIZE RISK
5.
LEGAL RISKS
The Company views as fundamental the risks of third party claims and
actions related to any disputes and the risks of claims and actions filed
by Federal Grid Company against third parties.
6.
ENVIRONMENTAL RISKS
Environmental safety and the rational use of natural resources are the main focus of Federal Grid
Company. In case of any violations of environmental protection laws, the Company may incur
penalties in accordance with federal laws. This risk exposure is considered insignificant.
7.
FINANCIAL RISKS
7.1.
Currency risk
99.9 % of the Company’s cash flow is generated in rubles, and
its current loan liabilities are denominated in Russian rubles.
The Company’s financial status, liquidity, financial sources and
performance results are not exposed to major currency risks.
7.2.
Liquidity risk
The current liquidity level makes the Company confident that it is not
exposed to any material risk of default on its obligations in full and
in due time. Servicing loans and borrowings is carried out in strict
compliance with established schedules.
7.3.
Interest rate risk
This risk is related to loan facilities and caused by the volatility of
interest rates on bank loans. In case of any interest rate increase,
the costs of the credit portfolio service will rise.
Prejudicial settlement procedures;
Settlement agreements during judicial
proceedings;
Supporting a legal position aimed
at dismissing a claim.
Implementation of the Company’s
2011-2013 Environmental Program.
Environment, page 102
Changing plans to purchase imported
equipment under the investment program
in case of any material foreign currencies
exchange growth.
Procurement, page 45
Controlling the debt burden and credit
worthiness of the Company in accordance
with Federal Grid Company’s Regulations
on Credit Policy.
Financial Performance, page 61
Generate a diversified credit portfolio for
the Company in terms of instruments and
maturity dates.
Financial Performance, page 61
7.4.
Inflation risk
The current inflation rate has no material effect on the Company’s financial status. Subject to inflationary outlooks, it will not
affect the Company’s ability to re-pay its liabilities. The critical inflation rate for the Company exceeds 30 %.
7.5.
Counter-party risk
Financial Performance, page 61
Among credit risks, the Company highlights financial risks related
to counter-parties’ activities. The aggravated financial status of
counter-parties and the failure to meet their contractual obligations
cause exposure to risks related to violating timeframes for investment
program implementation.
Reviewing the financial status of
counter-agents at the procurement stage
and further monitoring at the stage of
performing contractual obligations;
Setting up the Company’s executive
bodies to minimize financial risks related to
counter-parties; and
Hedging risks related to default on
contractual obligations and the failure to
repay the extended advance payments by
claiming relevant financial security from
counter-parties.
Financial Performance, page 61
27
About the CompanyOperations overviewInformation for shareholders and investorsSocial responsibilityAppendices 1.5
ANTI-CORRUPTION
ACTIVITIES
Fighting corruption is a top priority of government policy. The Com-
pany supports the State policy aimed at reducing corruption and
voluntarily commits itself to developing and implementing the anti-
corruption policy to minimize the Company’s corruption risks and to
foster anti-corruption awareness. In 2011, the Company developed
and approved the Program for Fighting Corruption and Settling
Conflicts of Interest.
and branches. DACE also carries out an anti-corruption expert sur-
vey of the organization and management documents and their pro-
jects, as well as documents executed for transactions and prepares
proposals on improving anti-corruption activities under the Pro-
the Commission’s
gram and controls
assignments.
the performance of
We formed the Compliance Commission for Corporate Ethics and
Conflict of Interest Settlement, as a collegial body responsible for
generating the Company’s anti-corruption policy and controlling
Program implementation.
DACE assessed possible effects of the 2010 Bribery Act enacted in
Great Britain (1 July 2011) on companies listed on the London
Stock Exchange. In accordance with the above-mentioned review,
the Company updated applicable organizational and management
documents and adjusted its efforts to fight corruption.
In addition, the Company established the Division for Anti-Corrup-
tion Efforts (DACE), an independent structural unit of executive
bodies responsible for anti-corruption efforts, including the devel-
opment of anti-corruption documents, anti-corruption monitoring
and relationships with all structural units within the executive bodies
To perform tasks set by the Russian Prime Minister, the Company
has collected and analyzed the certificates of property status for
senior managers of executive bodies, branches, DSCs, as well as
for their spouses, parents, children and close relatives.
28
1.6
INVESTMENT COMMUNITY ABOUT US
Распределение рекомендации брокеров, %
Brokers’ recommendations for 12 months
42
62
64
44
38
30
24
7
93
7
93
5
95
5
95
13
87
76
70
63
56
58
38
36
100
80
60
40
20
0
0
1
c
e
D
1
1
n
a
J
1
1
b
e
F
1
1
r
a
M
1
1
r
p
A
1
1
y
a
M
1
1
n
u
J
1
1
l
u
J
1
1
g
u
A
Buy
1
1
p
e
S
1
1
t
k
O
1
1
v
o
N
Hold
Source: Brokers’ reports, Bloomberg as of 9 December 2011
Individual comments of top energy investment bank ana-
lysts and the appeal of the Company’s shares:
• In November 2011, HSBC analysts carried out a financial
review of Russian energy companies giving preference to
Federal Grid Company shares, noting a 50 % growth potential;
• According to a Merrill Lynch report published November 2011,
“protective” qualities transformed Federal Grid Company
shares into high quality securities compared with EEMEA peer
energy companies;
• In November 2011, Morgan Stanley favored Federal Grid
Company shares due to a low share of the Company in
consumers’ end-tariff rates, a high profit margin and strong
financial performance.
Federal Grid Company in 2011 is a truly public company
running one of the most advanced energy businesses
based on RAB regulation. It is transparent and open.
Our investors’ response is the best evidence of our efforts.
Andrey Kazachenkov,
First Deputy Chairman of the Management Board
Last year, the Company successfully strengthened its positions
on the financial markets: our depository receipts are listed on
the London Stock Exchange (LSE) and we started cooperating
with Morgan Stanley, a globally renowned investment bank,
which acts as corporate broker for Federal Grid Company.
The Company’s share price was uneven in 2011 due to general
global capital market trends. However, share performance of
Federal Grid Company looked significantly better than MICEX
Energy index performance. This was possible due to the “pro-
tective” properties of shares and sustainable strong perfor-
mance of Federal Grid Company’s financial indicators.
In 2011, brokerage houses had a generally optimistic outlook on
the Company’s shares: out of 22 top brokers only one recom-
mended to hold, whereas others recommended buying the Com-
pany’s shares. This is the maximum number of buy recommen-
dations during the last two years.
International and major local brokers' recommendations*
BROKER
DATE
RECOM-
MENDATION
TARGET
PRICE, RUR
FORWARD
PREMIUM
UBS
17.11.11
Neutral
Goldman Sachs
10.08.11
Buy
Morgan Stanley
11.11.11
Overweight
MACQUARIE
20.10.11
Outperform
Deutsche Bank
VTB Capital
03.10.11
09.12.11
Renaissance Capital
15.11.11
Buy
Buy
Buy
JP Morgan
Merrill Lynch
AVERAGE PRICE
Current price*
13.10.11
Overweight
11.11.11
Buy
0.36
0.6
0.38
0.48
0.40
0.63
0.61
0.31
0.41
0.46
0.31
18 %
96 %
24 %
57 %
31 %
106 %
99 %
1 %
34 %
52 %
* Source: Brokers’ reports, Bloomberg as of 9 December 2011.
29
About the CompanyOperations overviewInformation for shareholders and investorsSocial responsibilityAppendices
The aggregate energy
saving effect for 2011
137.7 million kWh
2011 electric energy output
485 billion kWh
2
OPERATIONS OVERVIEW
30
2.1
ELECTRICITY TRANSMISSION
Compared with 2009, the volume of the Company’s electricity
transmission services grew 68 % in 2011:
The share of the Company’s major consumers in revenues
Доля наиболее крупных потребителей услуг ОАО «ФСК ЕЭС», %
generated by UNEG electricity transmission services in 2011
Electricity transmission
Услуги по передаче
services, RUR thousand
электроэнергии, млн руб.
Количество контрагентов
Number
of contractors
9
4
.
5
7
8
,
4
3
1
8
2
.
0
1
5
,
9
0
1
2
3
.
3
7
1
,
0
8
160,000
120,000
80,000
40,000
0
200
150
100
50
0
0
5
1
8
5
1
1
2
1
5
0
1
2009
2010
2011
2008
2009
2010
2011
Распределение потребителей по категориям
(доля в общем количестве), %
2011 Federal Grid Company service consumers
5
4
3
1
2
3
4
5
DGCs
ESCs
IGCs
Major consumers
Electric energy exporters
Company service consumers are categorized as follows:
• Distribution Grid Companies (DGCs);
• Independent Grid Companies (IGCs);
• Energy sales companies (ESCs)
• Major enterprises, electric energy consumers;
• Electric energy exporters.
5
.
0
1
3
.
8
12
10
8
6
4
2
0
0
.
5
7
.
4
6
.
4
5
.
3
5
.
3
0
.
3
5
.
2
4
.
2
r
e
t
n
e
C
K
S
R
M
o
g
r
e
n
e
n
e
L
o
g
r
e
n
e
n
a
b
u
K
K
S
R
D
o
g
r
e
n
e
s
s
a
b
z
u
K
i
–
a
i
r
e
b
S
K
S
R
M
–
s
l
a
r
U
K
S
R
M
o
g
r
e
n
e
b
a
y
l
e
h
C
i
–
a
i
r
e
b
S
K
S
R
M
o
g
r
e
n
e
k
s
r
a
y
o
n
s
a
r
K
o
g
r
e
n
e
n
e
m
u
y
T
c
i
r
t
c
e
l
E
d
e
t
i
n
U
w
o
c
s
o
M
)
K
S
E
O
M
(
y
n
a
p
m
o
C
d
i
r
G
l
o
g
r
e
n
e
v
o
d
r
e
v
S
–
s
l
a
r
U
K
S
R
M
1
2
34
27
20
18
1
nections to the UNEG, satisfying judgments pertaining to con-
cluding direct contracts with contractors and gradually
terminating the last mile mechanism.
Pursuant to Russian law, UNEG electricity transmission services
are classified as a monopolistic activity regulated by the State.
The price of electricity transmission services is determined by cor-
responding rates set for different subjects of the Russian Federa-
tion by the Russian Federal Tariff Service taking into account pro-
cess losses of energy during electricity transmission over
the UNEG. The rates approved by the Russian Ministry of Energy
are set as follows:
• The price of electricity transmission services to maintain
UNEG electric facilities;
• The price of normative process electricity losses in the UNEG.
Our Company purchases electric energy and capacity on the whole-
sale market in Russian territories, united in price areas and non-
price areas to compensate for UNEG losses.
Since 1 January 2011, our Company has purchased electric energy
and capacity at free (unregulated) prices in accordance with Whole-
sale Market Rules for Electric Energy and Capacity, approved by
the Russian Government Regulation № 1172 dated 27 December
2010.
In 2011, the number of UNEG-connected Company consumers
stood at 158 organizations. The number of Company contrac-
tors grows in part due to implementing new technological con-
Detailed information about tariffs is presented in the sub-section
Tariff regulation.
Tariff Regulation, page 64
31
Technological connections are an integrated service rendered
by the Company to consumers to make the consumption (out-
put) of electric energy possible, implying the actual connection
of consumer energy receivers (power installations) to power
facilities of grid organizations. The technological connection
service is rendered to new, as well as to existing, consumers in
need of increases in electricity demanded.
technological
The major
the following:
• Large-scale business (oil, steelmaking and construction
consumers are
connection
material production, etc.);
• Construction and reconstruction of complex real estate
property;
• Distribution grid companies.
The largest share of the Company’s technological connection ser-
vices consists of technological connections to power installations
of more than 750 kW.
Доля заключенных договоров, приходящаяся
на каждый диапазон мощности, %
Share of agreements concluded for each power range, %
100
80
60
40
20
0
up to 15 kW
physical persons
15-100 kW
100-750 kW
Over 750 kW
Federal Grid Company number
IDGC number
The number of technological connection agreements concluded and the growth in volume for maximum power per agreements
concluded by the Company in 2009-2011:
FEDERAL GRID COMPANY BRANCH
2009
2010
2011
MES Center
MES Siberia
MES East
MES Urals
MES South
MES Volga
MES North-West
MES West Siberia
The executive office
Total
*TC – technological connection.
NUMBER OF TC
AGREEMENTS*
MAXIMUM
POWER, MW
NUMBER OF TC
AGREEMENTS*
MAXIMUM
POWER, MW
NUMBER OF TC
AGREEMENTS*
MAXIMUM
POWER, MW
2
5
5
2
4
8
8
5
5
44
7.64
16.02
18.02
33.02
15.99
38.12
111.37
204.29
574.90
1,019.36
6
8
37
3
7
6
14
8
8
97
41.38
48.65
25.03
44.70
60.45
143.62
136.25
172.87
1,378.95
2,051.89
16
14
20
5
8
12
12
34
14
135
253.03
81.41
197.32
107.16
46.17
195.32
167.97
285.54
3,115.93
4,519.02
32
2.2
IMPROVING THE RELIABILITY
OF UNEG FACILITIES
The Company pays significant attention to upgrading the functional reliability of the UNEG. The list and scale
of measures to prepare the Company’s facilities for the winter season has been considerably expanded.
The planned improvement of production assets from the point-of-view of technology and staffing is under way,
together with implementing innovations and preventing disturbances.
Specific accident rate
Actual value of the limitation of consumers with regard
to electricity supply via the grid, %
потребителей относительно величины, %
8
7
.
2
8
1
.
3
4
6
.
2
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0
7
1
0
0
.
0
3
1
0
0
.
0
4
0
0
0
.
0
0.0020
0.0016
0.0012
0.0008
0.0004
0
2009
2010
2011
Number of disturbances per 1,000 specific units
2009
2010
2011
All of the above-mentioned resulted in a decrease in the acci-
dent rate and the volume of under-supplied energy, while
increasing the fleet of operated equipment.
Maintaining the normative condition of electric grid facilities,
constructing new facilities and reconstructing existing one and
upgrading employee competence provided
reliability
improvement in the Company’s grids.
for
From 2009 to 2011, under abnormal environmental conditions,
Federal Grid Company ensured the required reliability of electric
grid facilities and stable UNEG operation, having fulfilled its obli-
gations pertaining to reliable power supply to consumers, pre-
venting the following:
• Emergencies related to the disruption of power supplied to
The new Engineering Policy is essentially a revolutionary
document that allows the Company to launch a new
development stage for the unified grid complex using the most
advanced equipment and technologies. The new Policy
determines the most advanced engineering solutions and
equipment parameters to be used by the Company during
UNEG renovation and re-equipment. The new Policy gives
a clear signal to domestic machine tool and electrical products
manufacturers to start manufacturing equipment which meets
today’s high standards, in regard to both quality and energy
efficiency.
major cities and regions;
Oleg Budargin,
• Imposition of mass limitations on power consumption in
Chairman of the Management Board
Russian subjects;
• Division of UES of Russia into parts (separation of UES).
NEW ENGINEERING POLICY
The Company’s New Engineering Policy was adopted in February
2011. The Policy is intended to determine the most advanced engi-
neering requirements and solutions in the capital construction and
operation of UNEG facilities, and to set basic priorities for
the UNEG’s innovative and prospective development. Adhering to
the Policy will enable the Company to optimize the use of the exist-
ing investment resources, to improve the efficiency of the operation
of the electric grid complex, to lower the operating costs, to improve
systemic reliability of the UNEG operation and to satisfy growing
energy demand.
Adoption of the New Engineering Policy encouraged higher reno-
vation levels. The New Engineering Policy determines the innova-
tive course taken by the Company, with the establishment of an all-
Russian Smart Grid being the highest priority.
33
Operations overviewAbout the CompanyInformation for shareholders and investorsSocial responsibilityAppendices FIXED ASSETS RENOVATION PROGRAM
2009, 2010 and 2011 implementation of the Fixed Assets
Renovation Program, RUR million
Исполнение Программы реновации основных фондов
в 2009, 2010 и 2011 гг., млн руб.
The Company’s Management Board approved the Fixed Assets
Renovation Program for the period till 2017 on 24 December
2010. The Program is intended to provide for the reliable and effi-
cient operation of the electric grid complex.
The Program includes the following:
• Commissioning facilities with total capacity of 69,147 MVA;
• Reconstructing 3,862 km of the electric energy transmission
lines.
In 2011, the Program’s financing plan amounted to RUR27,721 mil-
lion, or 96.2 % of planned volume.
40,000
30,000
20,000
10,000
0
4
.
2
9
4
,
5
3
5
6
.
3
0
7
,
3
3
3
3
.
1
1
8
,
8
2
1
3
.
1
2
7
,
7
2
5
0
.
5
0
1
,
7
2
6
2
.
7
5
7
,
3
2
2009
2010
2011
Planned
Actual
Technical re-equipment and equipment replacement per the 2011 Fixed Assets Renovation Program
EQUIPMENT ITEM
Power (automatic) transformers
Reactive power compensators (reactors, capacitor banks and static compensators)
High voltage circuit breakers
Current transformers
Voltage transformers
Over-voltage suppressors (including line over-voltage suppressors)
Relay protection devices (boards)
Emergency control automatics (boards)
UNEG sub-station equipment
VOLTAGE CLASS
QUANTITY/
COMPLETE UNITS
-
110-500 kV
110-750 kV
110-500 kV
110-500 kV
35-500 kV
-
-
-
105
14
827
722
401
995
1,234
669
182
The volume subject to technical re-equipment and replacement
of UNEG facilities equipment has been determined based on
titles of reconstruction for Federal Grid Company’s 2011 Fixed
Assets Renovation Program (taking into account Targeted
Investment Programs).
In 2012, the Program’s planned financing will amount to
RUR41,650 million with the power of the reconstructed facilities
exceeding 3,331 MVA.
PROGRAMS FOR UPGRADING THE RELIABILITY
OF UNEG FACILITIES
The experts predict an increasing energy deficit in Russia in
the near future, as the economy’s demand for power rises.
Therefore, the issue of transmitting power within the UNEG will
become urgent, resulting in increased loads for sub-stations and
electric energy transmission lines. To resolve the problem,
the Company has decided to form and implement the following
programs for reliability upgrades:
1. 110-750 kV air and the oil circuit breakers replace-
ment program
According to the Company’s data, approximately 19 % of
the total number of disturbances registered at sub-stations in
2011 was caused by circuit breaker failures. A considerable
number of circuit breakers are past their normative service life
as determined by manufacturers. In addition, subjecting air and
oil circuit breakers to overhaul will force the sub-stations to oper-
ate in a weakened “under repair” mode. The maintenance period
for SF 6 circuit breakers to be installed by the Company is
12 years. Therefore, the reliability of sub-stations and the grid
will improve, simplifying repairs, reducing costs and decreasing
the probabili-ty of accidents. The program calls for replacing
3,802 complete circuit breaker units.
2. Overhead lines lightning-surge protection im-
provement program
According to 2011 statistics, 42 % of the total number of overhead
line-related disturbances was caused by thunderstorm electro-
magnetic activity damaging insulators, supports and wires and
34
Federal Grid Company's management takes serious
measures aimed at gaining momentum to increase
reliability of the UNEG. We expanded unprecedentedly
the range and scale of work on preparation of
the Company's facilities for the winter. We strengthen our
operating units, implement innovative solutions, use all
our efforts and resources to prevent failures.
Valery Chistyakov,
First Deputy Chairman of the Management Board
resulting in faults in the ground, arc overvoltage and automatic
cutoffs. The overhead lines lightning-surge protection improve-
ment program calls for upgrading some 2,500 kilometers of over-
head lines, installing 18,500 over-voltage suppressors and estab-
lishing an automated information and measurement system to
control ice load on the overhead lines of MES South.
3. 10-750 kV current and the voltage measurement
transformer replacement program
The failures of current measurement transformers (CMT) and of
voltage transformers (VT) caused more than 5 % of the total
number of sub-station disturbances. CMTs and VTs that have
operated for more than 30 years fail to supply automated infor-
mation and commercial metering systems data required for
accuracy and may damage SS equipment and cause accidents.
To prevent this from happening, the Company plans to replace
2,534 CMTs and 1,867 VTs.
4. Upgrading the power transmission lines and
the re-equipment program
The share of electric energy transmission lines (EETL) that have
operated for more than 40 years comprises 29.2 % of the total
length of EETLs owned by the Company, whereas 8.9 % of
the total length of the EETL is made up of lines that have operated
in excess of 50 years. The program calls for implementing up-to-
date technologies and innovative solutions, contributing to
the
increasing
throughput.
the EETL operation and
improvement of
5. AT replacement program
The program is intended to renovate the transformer fleet, which
has operated for 40 or more years and to decrease the number
of disturbances related to power transformer operation. The pro-
gram also envisages upgrading the reliability of UNEG equip-
ment, decreasing the ageing rate and increasing transformer
power.
6. Instrumentation modernization program
Measurement instruments used to operationally monitor network
and equipment parameters and process in sub-stations, which
have reached their wear limit, are being modernized as part of this
program. Modernized instrumentation provides for the control of
parameters being measured to ensure measurement uniformity
within and beyond the scope of State regulation. The Program
calls for replacing measurement instruments at 520 sub-stations.
The program will reduce the operating costs of measurement
instruments with the wear limit, improve the accuracy and reliabil-
ity of measurement results, increase equipment reliability and
reduce the risk of operating personnel malfunctions.
7. Monitoring and electric energy control program
(MEECP)
The monitoring and electric energy control program is created
to ensure that the quality of electric energy transmitted through
the UNEG to customers, including grid companies with differ-
ent voltage classes, complies with regulations and standards.
The MEECP will ensure that electric energy quality is complied
with and maintained in the generation, transformation and dis-
tribution processes, that technological losses in the Federal
Grid Company network are reduced and that the overall reli-
ability of consumers’ electric supply is increased.
8. Fire safety improvement program
The Company has developed this program to upgrade fire safety
equipment at the Company’s facilities. Implementing this pro-
gram will decrease the number and scale of accidents.
The probability of fires at equipment operated by the Company
will also decrease.
9. Formation of an emergency reserve, and the pur-
chase of equipment, materials, specialized machinery
and accessories
This program is aimed at forming reserves of materials and
equipment, upgrades and uploads of vehicles and the special
vehicle fleet to provide timely repair work, speeding up accident
recovery work.
TECHNICAL SUPERVISION OVER ELECTRIC
GRID FACILITY CONDITIONS
The Company has a system of internal multi-level technical super-
vision (hereinafter, referred to as ITSS) consisting of a set of orga-
nizational, technical, information, supervisory and preventive
measures implemented in corporate branches to upgrade
the operating reliability of equipment and advance the qualifica-
tion of personnel to decrease the accident rate and the number of
fires and injuries. The top level of the ITSS hierarchy is the Com-
pany’s Technical Supervision and Audit Department.
35
Operations overviewAbout the CompanyInformation for shareholders and investorsSocial responsibilityAppendices Measures implemented in 2011 to improve ITSS efficiency
included the following:
• Continuous training of corporate employees in supervisory
activities;
• A targeted program for the diagnostics of equipment and
facilities in a degraded condition. In 2011, this program was
used to perform diagnostics for 127 units of essential
equipment.
• Revising the existing normative documents on methodological,
informational and organizational support for the ITSS and
the development of new ones;
• Revising the system for assessing ITSS efficiency.
In 2011, the Technical Supervision and Audit Department per-
formed technical supervision and audited the Company’s
branches. The results of these measures were used to plan and
implement the elimination of deficiencies identified in accor-
dance with the deficiency lists.
POWER GRID EQUIPMENT DIAGNOSTICS
Electric grid equipment diagnostics form the basis for the Com-
pany’s decisions concerning the operation, reconstruction and
maintenance of technical conditions of power installations
according to the norms. Electric grid equipment diagnostics is
implemented in the form of regulatory diagnostics, special (tar-
geted) diagnostics and online diagnostics.
1. Regulatory diagnostics
Regulatory diagnostics includes tests and measurements con-
ducted in accordance with existing regulatory documents.
During 2011, the Company performed regulatory tests and mea-
surements on the following high voltage equipment:
• 17,277 power and automatic transformers;
• 2,040 shunt reactors;
• 15,572 high voltage circuit breakers;
• 10,277 current transformers;
• 4,469 voltage transformers.
2. Special diagnostics
To control the technical condition of electric grid equipment not
covered by regulatory diagnostics, and to assess the level and
nature of the development of defects revealed by regulatory diag-
nostics, special (targeted) diagnostics are carried out. The spe-
cial diagnostics involve the following programs:
• A targeted program for the complex inspection of overhead
lines using express diagnostics to assess the condition of key
elements of overhead line supports that have operated in
excess of their normative service life. In 2011, this program
was used to inspect 12,482 overhead line supports;
• A targeted program for the complex inspection of sub-station
grounding equipment. In 2011, this program was used to
inspect 39 sub-stations;
3. Automated diagnostics
The Company uses automatic diagnostic systems to improve
the timeliness and immediacy of diagnostics for costly power
equipment, such as automatic power transformers and shunt
reactors.
On 31 December 2011, the total number of power equipment
units controlled by automatic diagnostic systems stood at 374,
with total installed power of 50,379 MVA (277 units) and
7,414 MVAr (97 units).
4. Additional diagnostic control
The complex inspection of power equipment conducted with
the participation of equipment manufacturers is intended to
assess technical condition, load capacity and the remaining lifes-
pan of equipment. In 2011, the Company inspected 666 power
equipment units, including equipment manufactured by Elektro-
zavod, Tolyattinsky Transformator and Energetichesky Standart.
The renewal and completion of the Company’s diagnostic sys-
tems is accomplished to improve diagnostic quality and timeli-
ness. In 2011, the Company laboratories were equipped with new
diagnostic equipment (65 diagnostic devices for chemical labora-
tories, 42 diagnostic devices for electric engineering laboratories
and 146 units to perform diagnostics on the overhead line com-
ponents). In addition, the Company put into operation six mobile
electric engineering laboratories.
CONTINUOUS PROCESS-ENABLED CONTROL
The main function of continuous process-enabled control imple-
mented by the Company is to provide power supply to market
entities, meeting quality and reliability requirements and mini-
mizing losses during the transfer of power over the UNEG.
The Company’s achievements during the reporting year from
successfully implementing the continuous process-enabled
control include the following:
• In 2011, no violations of the standard for the excess of
permitted voltage levels in the UNEG were registered;
• In 2011, the number of disturbances caused by errors made by
operating personnel was 12 (compared with 32 in 2009 and
19 in 2010);
• The Company identified 134 “bottlenecks” which limit “normal”
and “under repair” grid operation modes;
36
• The Company finished forming Electric Grid Control Centers
(EGCC) in the corporate branches. Operative functions were
granted to the EGCCs of the Priokskoye and Vologodskoye
branches;
• The Company approved the procedure for planning and
controlling the schedules of EETL and the 1150-110 kV sub-
station dumping for the purpose of repairs, reconstructions
and implementation of target programs;
• The Company developed and approved a Standard Instruction
for operating personnel to maintain required voltage levels in
the UNEG;
• In the event of accidents and emergencies, Federal Grid
Company staff work as the coordinating authorities;
• To organize the exchange of operational information on
emergencies, information exchange agreements have been
made with SAC Minenergo, the State Hydro-meteorological
Center of Russia and Megafon;
• As part of the process of providing the Situation and Analytical
Centers with up-to-date software and hardware, MES North-
West and MES South have been equipped with mobile situation
and analytical Centers (MSAC) during the reporting year.
• The Company signed agreements
information
exchange process with major generating contractors
(RusHydro, Rosatom and KES Holding);
the
for
• The Company finished unifying dispatch names of the 330-
750 kV EETL.
The Company actively commissions new generation sub-sta-
tions equipped with advanced automated control systems, mak-
ing the unattended operation of sub-stations possible. This will
reduce maintenance costs and shorten the time for eliminating
disturbances, allowing for the simultaneous analysis of the situ-
ation at the facility and on the adjacent grid. In 2011, the Com-
pany adopted unified Key Principles for the Organization of
Transfers on new generation sub-stations. The principles were
adopted jointly with SO UES and IDGC Holding.
SITUATION AND ANALYTICAL MANAGEMENT
The main objective of the Company’s Situation and Analytical
Management is to develop measures and corrective actions to
prevent and eliminate accidents, emergencies and
their
consequences.
This year, we have achieved the following results:
• Monitoring and analyzing special work periods, as well as
emergency situations at the Company’s facilities, have been
performed;
REPAIR OPERATIONS
The Company performs repairs to maintain the required reliabil-
ity of UNEG electric grids, to improve the efficiency of equipment
operation and to effectively use resources to maintain UNEG
electric grids.
The Company’s program is based on a year-by-year rolling plan
for the five year period.
The Company’s 2011 repair campaign included the following
accomplishments:
• Stubbing out 23,424 hectares of overhead line paths;
• The hacking down of 147,468 trees in danger of falling;
• The replacement of 45,558 insulators, 60 km of ground wire,
6,934 vent fingers; 121 inputs and 3,964 post insulators of
disconnect links and bus-type supports;
• The repair of 8,750 foundations, 338 automatic transformer/
transformer phases, 44 shunt reactor phases, 1,980 circuit
breakers, 9,737 disconnect link phases and 154 compressors.
The yearly repair program, as well as timely and thorough prepa-
ration for special operation periods, allows the Company to
maintain the normative state of equipment. Optimal mainte-
nance and repair planning and cost reduction allows the Com-
pany to retain physical maintenance volumes and repair work at
the necessary level to maintain reliability.
Repair of switching equipment, units
Ремонт коммутационного
оборудования, шт
Transformer repair, units
Ремонт трансформаторов, шт
7
1
7
,
1
1
9
9
5
,
9
4
4
7
,
8
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
0
8
6
,
3
400
300
200
100
0
1
8
1
1
8
2
2
0
3
8
3
3
2008
2009
2010
2011
2008
2009
2010
2011
37
Operations overviewAbout the CompanyInformation for shareholders and investorsSocial responsibilityAppendices To ensure improved and efficient after-sales servicing of sub-
station equipment, the Company concludes service agreements
with equipment manufacturers for the entire service life of
equipment.
The Company’s basic Targeted programs implemented in
2011 included the following:
• The program to replace high-voltage inputs filled with T-750 oil
at the sub-stations;
• The program for reliability improvement of post insulators;
• The program to replace worn-out insulators on overhead lines;
• The program to replace ground wire at 220-500 kV overhead
lines;
• The program to stub out overhead line paths;
• The complex inspection of grounding equipment;
• The complex inspection of overhead lines using express
diagnostic methods;
• The special diagnostics program for degraded equipment or
facilities;
• The in-depth assessment of technical conditions of degraded
equipment;
• The servicing of electric equipment.
While accomplishing the targeted programs, during the reporting
year, the Company stubbed out 29,857 hectares of overhead line
paths, replaced 164,304 insulators, 1,851 km of grounding wire,
644 inputs and 27,631 post insulators. The Program’s accom-
plishment for servicing electric equipment involved the repair of
74 compressors.
COMPANY PERFORMANCE DURING SPECIAL
PERIODS
influence
Weather and climatic conditions considerably
the Company’s performance. Therefore, we have to be prepared
for peak loads on the grid during the autumn and winter seasons
well in advance. The same applies to flood, fire and thunder-
storm seasons.
During the 2011 flood season, the intensity of water level rises
ranged from medium to low. In general, the level of water in
the rivers corresponded to average long-term values, with
excess levels registered in certain districts in the European part
of Russia and in Siberia and the Far East. The Company per-
formed all mandatory and additional measures to ensure the reli-
able operation of grid facilities during the flood season. There-
fore, after the flood season ended, sub-station equipment,
overhead electric energy transmission lines and buildings and
erections were in working condition.
In 2011, intense thunderstorm activity was observed in the Li-
petsk, Bryansk, Rostov, Volgograd, Sverdlovsk and Irkutsk
38
The infrastructure of Federal Grid Company survived
natural catastrophes during recent years successfully.
Nevertheless, we had to make our systemic conclusions
on the necessity of improving operational reliability of
the domestic energy system and to improve the safety of
all system components.
Valery Chistyakov,
First Deputy Chairman of the Management Board
Regions, as well as in the Republics of Buryatia and the Mari El.
Mandatory measures ensuring the reliable operation of sub-sta-
tion equipment and electric energy transmission lines were per-
formed fully, so the intense thunderstorm activity did not lead to
any increase in the number of emergency outages for sub-sta-
tion equipment. Meanwhile, in certain regions, a slight increase
in the number of emergency outages of electric energy transmis-
sion lines was registered.
Based on the 2010 dry summer, the Company developed and
implemented basic, as well as additional measures, to upgrade
fire safety at electric grid facilities.
The fires that did occur on the overhead lines did no damage to
supports, wires, insulators and line accessories. No equipment
damage caused by the fire was registered. Mandatory and addi-
tional fire prevention measures let the Company minimize
the impact that fires have on sub-station equipment and electric
energy transmission lines.
For the first time in corporate history, we have performed a two-
stage preliminary check of the readiness of electric grid facilities
to be prepared for the 2011-2012 heating season and to ensure
reliable UNEG operation. The first stage of the check involved
a preliminary commission check and the development of mea-
sures to eliminate major risks, whereas the second stage
involved eliminating all cases of non-compliance and assessed
the readiness of the Company’s branches for the heating sea-
son. In September and October, all Company branches and affil-
iated and dependent companies were checked for their heating
season readiness; corresponding certificates were then issued.
The Company’s preparation for the 2011-2012 heating season
was checked 8-11 November 2011 by the Commission of
the Russian Ministry of Energy with the participation of repre-
sentatives of JSC SO UES, Rostekhnadzor and JSC UES Tech-
nical Inspection. This resulted in the issue of the No. 1 prepara-
tion certificate for the Company (11 November 2011).
2.3
IMPROVING ENERGY EFFICIENCY AND MINIMIZING LOSSES
The 2011 Program to minimize UNEG power losses developed
within the framework of the Company’s Program for Energy Sav-
ing and Improving Energy Efficiency for the 2010-2014 period
includes three main priorities:
1. Optimizing schematic and operating mode parameters under
conditions of operation and continuous control of electric grids
The Company maintained optimal operation modes concerning
reactive power and voltage, shut down the electric grid equip-
ment (transformers and overhead lines) operated under light
loads and reduced the duration of maintenance and repair for
primary grid equipment. All these measures resulted in saving
56,840.7 thousand kWh.
2. Decreasing energy consumption spent on the sub-stations’ in-house
needs
Measures to implement this priority task included the following:
optimizing the duration and number of operated transformer and
automatic transformer cooling fans; optimizing the operation of
heating and lighting systems in the sub-stations control rooms; pro-
viding for the automatic operation of heating systems used to heat
the tanks and electric drives of oil-filled circuit breakers; installing
energy-saving lamps and lights in outdoor switchgears and improv-
ing the energy efficiency of buildings. All these measures contrib-
uted to a decrease in energy consumption for the sub-stations’ in-
house needs by 58,653.2 kWh.
3. Construction, reconstruction and development of electric grids.
Commissioning energy-saving equipment
The Company equipped existing sub-stations with reactive
power compensators, replaced the overloaded transformers
and commissioned additional power transformers. We also opti-
mized electric grid loads by constructing new overhead lines and
in saving
sub-stations. All
22,196.6 kWh.
these measures
resulted
In 2011, the technological effect from implementing measures
to
aimed at decreasing UNEG power
137,690.5 kWh.
losses amounted
Energy-saving measures implemented by the Company in 2011
IMPLEMENTED POWER-SAVING MEASURES
Годовые объемы потерь эл-ии,
млн кВт/ч
Annual power loss volumes, million kWh
6
2
5
,
2
2
3
5
5
,
2
2
1
2
1
,
2
2
6
6
8
,
1
2
22,800
22,600
22,400
22,200
22,000
21,800
21,600
21,400
2008
2009
2010
2011
The structure of 2011 UNEG power losses
The structure of 2011 UNEG power losses
7
6
5
4
3
2
1
2
3
4
5
6
7
1
58.9
24.3
7.2
4.6
2.3
1.2
1.6
Losses related to loads
Losses related to overhead line crowns
Losses related to automatic and power transformers
Losses related to sub-station in-house needs
Losses related to shunt reactors
Losses related to contact devices
Other losses
Optimization of electric grid operating modes (concerning reactive power and voltage)
Shutting down of electric grid equipment under low loads
Reduction in the duration of maintenance for primary equipment (power lines, transformers), including the duration of work
performed under voltage
Decreasing energy consumption for the sub-stations’ in-house needs
Installing and commissioning reactive power compensators
Replacing overloaded transformers and installing and commissioning additional power transformers at existing sub-stations
Replacing measuring current transformers
Optimizing grid loads via the construction of new sub-stations and lines
Total for all measures
QUANTITATIVE EFFECT
ON 31 DECEMBER 2011,
THOUSAND KWH
42,067.0
14,698.7
75.0
58,653.2
410.8
12,063.3
1,400.5
8,322.0
137,690.5
39
Operations overviewAbout the CompanyInformation for shareholders and investorsSocial responsibilityAppendices The Company plans to perform an energy audit in compliance
with its Program of Energy Saving and Increases in Energy Effi-
ciency. We will identify facilities with the highest energy losses,
develop additional measures to further decrease UNEG power
losses and correct existing planned indicators based on
the energy audit.
INFORMATION ABOUT THE AMOUNT OF FUEL
AND ENERGY RESOURCES USED BY THE COMPANY
In 2011, the Company used the following fuel and energy
resources (FER): electricity, heat, fuels and lubricants (petrol
and diesel).
Measures taken to reduce heat, electric energy and fuel con-
sumption allowed the Company to save RUR147,965.67, exclud-
ing VAT, in 2011.
Volumes of fuel and energy resource consumption (in terms of indicators recorded in the program)
INDICATOR
Technological electric energy consumption in the UNEG
Electric energy consumption in buildings
Heat consumption in buildings
Petrol consumption
Diesel consumption
Achieved technological effect (type of FER)
INDICATOR
Reducing the technological consumption of electric energy when it is transmitted over the UNEG through
loss reduction measures
Reducing electric energy consumption in buildings
Reducing heat consumption in buildings
Reducing petrol consumption by automotive transport
Reducing diesel consumption by automotive transport
Achieved economic effect
INDICATOR
Implementation of measures aimed at reducing losses in the UNEG
Electric energy consumption
Heat consumption
Petrol consumption
Diesel consumption
UNIT OF MEASUREMENT
thousand KWh
thousand KWh
thousand Gcal
thousand liters
thousand liters
VOLUME
22,553,171.97
29,195.59
41.44
9,325.91
7,332.59
UNIT OF MEASUREMENT
TECHNOLOGICAL EFFECT
thousand KWh
137,690.55
thousand KWh
thousand Gcal
thousand liters
thousand liters
1,703.34
3.96
65.40
21.08
UNIT OF MEASUREMENT
ECONOMIC EFFECT
RUR thousand
excluding VAT
137 139,79
5,616.49
3,298.78
1,454.82
455.80
40
2.4
TELECOMMUNICATIONS AND IT SYSTEM DEVELOPMENT
The Company’s IT priority is to upgrade production efficiency, as well as finances, and to optimize costs associ-
ated with using different information systems. As a nation-wide operator implementing a range of projects and
performing different activities involving a variety of business processes, the implementation of advanced informa-
tion technologies is extremely vital.
AUTOMATED PROCESS CONTROL SYSTEM
An Automated Process Control System (APCS) is a unified dis-
tributed hierarchical system which integrates the means and
sub-systems of existing independently developing automatic
and automated control systems. APCS implementation will
enable Electric Grid Control Centers to perform operational and
non-operational functions.
The focus on innovations and technological
breakthroughs is a national priority, and as a systemic
company, Federal Grid Company should become
a leader in the movement. This also applies to information
technologies, which are in fact the driving force behind
innovations. I am convinced that this weighted and
forward-looking approach will form the prerequisites for
effective corporate development in the near future.
In 2011, the following activities were performed in relation to
the APCS:
• H&SP (ADTMS) projects were put into operation at the Grid
Control Centers (GCC) of the Kuzbass, Vologda and Prioksky
PMES, representing continuing work on creating Grid Control
Centers
regarding
transfer operational
management facilities from SO UES;
functions
to
• H&SP (ADTMS) project of the Head Grid Control Center
(HGCC) of the North-West, including: implementing SCADA
functions, analyzing calculations and analytical problems
(EMS) and extending the H&SP functionality for operative
technological management. The operator’s simulator was also
put into operation.
• H&SP of SCADA for the first stages of the MES Center, MES
Siberia and MES East was commissioned; design
documentation for the second stage of SCADA of the MES
South, MES Volga, MES Western Siberia, and MES Urals was
developed.
• Measures to improve the observability of the UNEG facilities
were taken in MES Siberia and communication channels have
been commissioned at 79 sub-stations.
AUTOMATED PROCESS OPERATIONS CONTROL
SYSTEM (APOCS)
The Automated Process Operations Control System (APOCS) is
a hardware and software system intended to collect, analyze,
visualize, store and transfer process information and to automati-
cally control the operation of sub-station equipment. The system
is equipped with an interface allowing personnel to control SS
process operations implemented in line with interactions with
the hardware and software complex.
Dmitry Gurevich,
Deputy Chairman of the Management Board
AUTOMATED INFORMATION AND MEASUREMENT
SYSTEM FOR THE COMMERCIAL METERING OF
ENERGY (AIMS CME)
The AIMS CME is intended to collect and register current and
accurate data on the exchange of energy (power) among the Com-
pany’s grid facilities, to confirm the accuracy of the data and to
use data supplied by adjacent AIMS CMEs for settlements with
wholesale energy market participants and with JSC ATS.
The AIMS CME is a territorially distributed multi-level information
and measurement system with centralized control and centralized
collection, processing, storage and transfer of metering data, with
a distributed energy metering function.
UNEG AIMS CME developments achieved in 2011 included
the following:
• The 1PK software complex (upper level) was commissioned,
with 2PK software complex (upper level) put to a production
test of the AIMS CME of the UNEG;
• The 3PK software complex (SS level) of the UNEG SS AIMS
CME was put to a production test;
• The Company proceeded with replacing current and voltage
metering transformers and upgrading of secondary circuits for
330-750 kV sub-stations.
DEVELOPMENT OF CORPORATE INFORMATION
TECHNOLOGIES (ERPS)
In 2011, APOC systems were implemented at 88 UNEG sub-sta-
tions. Presently, the Company is actively implementing the APOC
systems based on MEK 61850 protocol. Innovative projects
involving the establishment of digital sub-stations are under way.
In 2011, Federal Grid Company commissioned the following
business management systems as part of ERPS project
development:
41
Operations overviewAbout the CompanyInformation for shareholders and investorsSocial responsibilityAppendices • Automated reference information control system (ARICS);
• Automated system “Design and estimate documentation
archive of Federal Grid Company and Construction
Management and Engineering Center (AS DEDA);”
• Automated system for property complex management in
SDCs (AS Property in SDCs);
• Automated system for managing development projects and
changes in the productive systems of Federal Grid Company’s
ERPS based on SAP Solution Manager products;
• Automated emergency reserve control system for the Federal
Grid Company (AERCS);
• Automated system “Register of the UNEG facilities on SAP/
R3 platform;
• Automated system “Formation of the Federal Grid Company’s
investment program”.
THE ENERGY SYSTEM’S UNIFIED PROCESS
COMMUNICATIONS NETWORK
The Energy System’s Unified Process Communications Network
(ESUPCN) is a communications network used to support
the operation of electric grid facilities and to control production
processes across all levels, providing for a guaranteed exchange
of all types of data (audio, video, etc.). The Company builds
the ESUPCN by deploying fiber-optic (FOCN) and radio relay
(RRCN) communication networks, upgrading high-frequency
communications, deploying satellite communication systems
and mobile digital radio communication systems, using WDM
equipment, the synchronous digital hierarchy (SDH), and also by
using TDM and IP protocol technologies.
The general plan for the establishment and development of
the ESUPCN for the period till 2015 has been approved by Fe-
deral Grid Company’s Management Board and by the Govern-
mental Commission for Federal Communications.
Fiber-optics Communication Network
The fiber-optics communication network (FOCN) is the basic
energy system’s communication network built using a fiber-optic
cable suspended on overhead electric energy transmission
lines. In addition, the Company extensively utilizes services pro-
vided by major communication operators rendered on the basis
of long-term ongoing lease agreements.
In 2011, measures carried out by the Company to develop
the FOCN included:
• The Company commissioned the second and third Moscow–
Rostov-on-Don FOCN startup complexes (2,200 km in length),
connecting 38 facilities;
• The Company organized the transfer of voice messages and
data over the FOCN connecting Krasnoyarsk (MES Siberia),
Yekaterinburg (MES Urals), Samara (MES Volga) and Moscow
(Executive Office of Federal Grid Company).
ESUPCN fiber-optic communication lines development for the period till 2015
Murmansk
Loukhi
Severodvinsk
Arkhangelsk
Salekhard
Pechora
Yamburg
Urengoy
Tarko-Sale
Nadym
Syktyvkar
Kholmogory
Noyabrsk
Petrozavodsk
Vyborg
St.Petersburg
Cherepovets
Vologda
Novgorod
Galich
Rybinsk
Kingisepp
Pskov
Manturovo
Kirov
Perm
Sosva
Khanty-Mansiysk
Surgut
Nizhnevartovsk
Nizhny
Tagil
Tyumen
Tobolsk
Knyazhevo
Bologoye
Udomlya
Tver
Rzhev
Moscow
Vyazma
Smolensk
Kaluga
Bryansk
Orel
Yaroslavl
Kostroma
Ivanovo
Votkinsk
Izhevsk
Ioshkar Ola
Nizhny Novorod
Казань
Yekaterinburg
Vladimir
Arzamas
Ryazan
Saransk
Tula
Cheboksary
Naberezhnye Chelny
Ulyanovsk
Ufa
Chelyabinsk
Sterlitamak
Beloretsk
Tambov
Syzran
Magnitogorsk
Lipetsk
Penza
Kursk
Voronezh
Stary Oskol
Frolovo
Belgorod
Samara
Saratov
Orenburg
Orsk
Tomsk
Kurgan
Tatarsk
Novosibirsk
Kemerovo
Omsk
Barabinsk
Karasuk
Razdolinsk
Boguchany
Yst-Ilimsk
Krasnoyarsk
Tayshet
Nizhneudinsk
Tulun
Bratsk
Zima
Angarsk
Severobaikalsk
Irkutsk
Novokuznetsk
Abakan
Barnaul
Minusinsk
Mysovaya
Ulan Ude
Chita
Rubtsovsk
Biysk
Choya
Gorno-Altaisk
Sayanogorsk
Kyzyl
Gusinoozersk
Petrovsk-Zabaikalsky
Yakutsk
Kuranakh
Neryungri
Tynda
Mogocha
Skovorodino
Kholbon
Magdagachi
Svobodny
Blagoveshchensk
Komsomolsk-on-Amur
Belogorsk
Bureya
Sovetskaya Gavan
Birobidzhan
Khabarovsk
Luchegorsk
Vladivostok
Ussuriysk
Artem
Nakhodka
Shakhty
Taganrog
Volgograd
Volgodonsk
Rostov-on-Don
Elista
Astrakhan
Tikhoretsk
Krasnodar
Stavropol
Novorossyisk
Sochi
Cherkessk
Vladikavkaz
Nazran
Pyatigorsk
Grozny
Yuzhno-Sukhumsk
Makhachkala
Derbent
42
2005–2008
2009–2010
2011–2015
Therefore, by the end of 2011, the total length of long-distance
and distribution FOCN operated by the Company comprised
more than 33,500 km, composed of the following:
• 18,500 km – built by the Company;
• 8,500 km – resources obtained in exchange for “the right of
way” along electric energy transmission lines;
• 6,500 km – resources obtained in exchange for and leased
from third party organizations.
Radio and Relay Communication Networks
Radio and radio-relay communication is used in the long-dis-
tance and distributed fixed-line USUPCN networks, in case lay-
ing the FOCN is not economically feasible or when a communi-
cation network needs to be deployed in a short time.
In 2011, the Company received 15 permissions from the Federal
Service for Supervision in the Sphere of Telecom, Information
Technologies and Mass Communications (Roskomnadzor) to
use radio frequencies or radio frequency channels for 4 radio
relay communication
lines. The Company also received
68 expert conclusions on the possibility of utilizing radio fre-
quencies or radio frequency channels for radio electronic
devices mounted on overland mobile units, radio-relay lines,
fixed
telephony and user overland stations of satellite
communications.
Satellite Communication Network
To improve the reliability and visibility of electric grid facilities,
the Company has established a satellite communications network. In
2011, the Company organized and commissioned satellite communi-
cation channels from electric grid facilities located on the territories of
MES Siberia and MES South, equipped mobile analytical Centers of
MES North-West and MES South with satellite communication sys-
tems, provided video surveillance over progress in constructing new
electric grid facilities, established the Skolkovo Innovation Centre
and the output of power from the Boguchanskaya HPP.
Mobile Radio Communication Network
The TETRA mobile communication network is used to organize
line operation communication in the interests of personnel ser-
vicing the overhead lines and to provide for back-up dispatch
communication.
Currently, the Company’s TETRA network includes three com-
munications Centers and 129 base stations.
In 2011, the Company purchased protected communication
equipment for personnel servicing the overhead lines in all cor-
porate branches. The equipment
includes
1,285 GSM/GPRS cell phones, 203 satellite phones and
1,683 VHF radio stations.
in question
High frequency communication systems
Данные о системах высокочастотной связи...
put into operation in 2011
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
4
1
4
,
6
3
6
4
,
4
6
6
1
Number of HF
communication
systems put
into operation
in 2011
Total number
of HF communication
systems on
1 January 2012
2
8
1
Number of HF
communication
channels put
into operation
in 2011
Total number
of HF channels
on 1 January 2012
High Frequency Communication Lines
Presently, high frequency communication lines form the Compa-
ny’s key communication network – providing for dispatch tele-
phone communication and the transfer of remote control and
AIMS CME data, as well as relay protection and emergency con-
trol commands. The high frequency communication network is
made up of phase wires and wire ropes of the overhead lines, or
wires and shields of cable electric energy transmission lines.
In 2011, the Company upgraded outdated and unreliable high
frequency communication systems and put some of them out of
service by commissioning new FOCNs.
Telephone Communication Network
The Energy System Telephone Communication Network
(ESTCN) is a hub network communicating with the process net-
work of the Systems Operator and for other energy market
participants.
In 2011, the Company’s branches (MES) were equipped with
more than 70 digital private automatic branch exchange (PABX)
units and systems to register operative personnel communica-
tions, as well as the DECT wireless systems and the speaker
phone and radio paging systems. Moreover, to upgrade the effi-
ciency of data transfer on disturbances in the operation of elec-
tric grid components, the Company’s MES North-West was used
to test the hardware and software complex for recording dis-
patch communications.
43
Operations overviewAbout the CompanyInformation for shareholders and investorsSocial responsibilityAppendices SYSTEMS BASED ON THE GLOBAL NAVIGATION
SATELLITE SYSTEM (GLONASS) TECHNOLOGY
The transportation monitoring system based on GLONASS/GPS
technology is used to obtain real time information on the location
of transportation vehicles and to control the fulfillment of assign-
ments, as well as mileage and fuel consumption.
In 2011, the Company established two pilot GLONASS/GPS
transportation monitoring systems from different manufacturers.
The systems were deployed on the territory of two corporate
branches – MES South and MES Volga. In Q4 2011, the Com-
pany conducted a tender for the right to equip transportation
vehicles of MES North-West and MES Volga with GLONASS/
GPS equipment.
44
2.5
PROCUREMENT
The Company is in the process of reducing its expenses in line
with the Presidential directive to reduce the cost of purchasing
goods, work and services. The Company’s procurement activity
principles are the main tool to accomplish this reduction.
Expenses are optimized at the cost of reducing price factors (via
tender procedures and negotiations with contractors), subject to
the strict observance of physical indicators for the production
program, keeping them at the level required to ensure reliability.
In 2011, the Company’s procurement activities were performed
in accordance with the Policy on the procedure for the regulated
purchase of goods, work and services for in-house needs of
Federal Grid Company. The Policy in question provides for orga-
nizing the purchases of goods, work and services based on
a unified method involving the use of up-to-date purchasing for-
mats, primarily tender-based. The procedural regulation of pur-
chases is intended to ensure the targeted and efficient spending
of funds, as well as economically feasible costs.
The Company’s procurement activities are based on the follow-
ing principles:
• Transparency
The rules for purchase organization can be publicly accessed
on the Company’s web site. Information on the violations of
these rules can be sent to the Company’s Central Tender
Commission (CTC). CTC members include representatives of
Russia’s Ministry of Energy and the Federal Anti-monopoly
Service. The Company’s annual procurement program is pub-
lished on the Company web site and on TZS-Elektra e-com-
merce site. A considerable share of purchasing is made via
open tenders and other open competitive procedures, with
related information published on the Company web site,
the e-commerce site and in the mass media.
• Competitiveness
The Company prefers open tenders as they provide for maxi-
mal competitiveness. Any competition limits require serious
substantiation and collective decisions by the Company’s
authorizing bodies. In case a purchase is made from a sole
supplier, these decisions can only be made by the Company’s
Central Tender Commission.
• Substantiation
The rules set by the Company require that each decision
should be substantiated and confirmed in writing. This not
only improves purchasing efficiency, but prevents corruption
as well.
Types and conditions of regulated purchases of goods, work and services for the in-house needs of Federal Grid Company
Open tender
The most preferred type, which is used without any conditions
Open request for offers
This type is selected if the purchase does not exceed RUR10 million (including VAT). Mostly used to purchase simple
products.
Open request for quote
This type is selected if the purchase does not exceed RUR5 million (including VAT). Used for purchasing simple products
Open competitive negotiations
In most cases, this type is used for purchasing especially sophisticated products
Sole supplier
Closed procedures
A decision on supplier section is made by the Company’s Central Purchasing Body, based on customer information from
a market analysis
Closed procedures may be used only if the direct targeted attraction of participants is used to preserve confidentiality,
required in customer interests
The Company’s Central Tender Commission approved TZS Elek-
tra as an e-commerce site recommended for use by Federal Grid
Company and its SDCs. The site is intended to organize and con-
duct competitive and regulated non-competitive purchases car-
ried out by the Company using Internet technologies.
The agreements for financial services listed in Article 18 of
the Russian Federal Law No 135-FZ On the Protection of Compe-
tition, dated 26 June 2006, are concluded via open electronic
auctions using the e-commerce site operated by Sberbank-AST.
In 2011, competitive purchasing accounted for 93.21 % of the total
number of purchases made by the Company. Competitive pur-
chases totaled RUR350,216,417.1 thousand.
Доля закупок..., %
Share of purchases based on open procedures
100
80
60
40
20
0
3
9
0
6
3
7
2009
2010
2011
45
Operations overviewAbout the CompanyInformation for shareholders and investorsSocial responsibilityAppendices 2011 Structure of Regulated Purchases by Type
2011 structure of regulated purchases by type
7
6
5
4
3
2
1
2
3
4
5
6
7
Open auction
Open tender
Open request for a quote
Sole supplier
Open competitive negotiations
Closed request for a quote
Open request for price
46.66
34.74
9.33
6.79
2.36
0.09
0.02
IMPROVING PROCUREMENT ACTIVITY IN 2012
To improve procurement activity and to fulfill directives from
the Russian Government to reduce the cost of purchasing goods
(work and services) by at least 10 %, on 15 February 2012,
the Company published Order No 75 “On improving procure-
ment activity and the procedure for the proposal of issues for
consideration by the Central Tender Commission.” The Order in
question restricts purchases made from a sole supplier and
establishes responsibility for the decisions of the coordinating
persons proposing issues for consideration by the Central Ten-
der Commission.
Pursuant to the Russian Federal Law “On purchasing goods,
work and services by certain categories of legal entities, natural
monopolies,” State-owned companies (corporations) and com-
panies with State participation of at least 50 % of authorized cap-
ital should exercise their purchasing activities in strict compli-
ance with the law in question beginning 1 January 2012. To
observe the legal requirements in question, on 27 January 2012,
the Company’s Board of Directors approved the Policy for
the purchase of goods, work and services for in-house needs of
Federal Grid Company.
The new Policy contains the following modifications:
• Reducing the purchasing price cap;
46
• Introducing brand new types of purchasing, together with
related procedures and conditions – an auction, a simple
purchase (up to RUR2.5 million) and a minor purchase (up to
RUR500 thousand);
• Obliging the customer to publish on the Company’s site and
on www.zakupki.gov.ru, an all-Russian official site (beginning
1 July 2012), information on all competitive purchasing
procedures amounting to at least RUR500 thousand, financed
using any expense item from the Company’s budget;
1
• Identifying cases for lodging appeals with Russia’s Federal
Anti-monopoly Service concerning purchasing procedures
and tender results;
• Possibility to apply for preferential amendments in case
Russian goods (work, services) will be made a priority by
the Russian Government, etc.
IMPORT SUBSTITUTION POLICY
The Company’s import substitution policy is based on the follow-
ing principles
• Decreasing the dependence on imported equipment;
• Implementing innovative energy efficient technologies;
• Developing and upgrading domestic industrial production;
• Developing production and scientific potential;
• Ensuring Russia’s required level of energy and industrial
safety;
• Improving the technological level of production;
• Providing new employment opportunities.
To implement import substitution measures, the Company con-
cluded agreements on cooperation in developing and using
advanced technologies and equipment at electric grid facilities.
The agreements were concluded with 77 domestic equipment
manufacturers, including 72 Russian companies.
Furthermore, the Company confirmed its plan to implement
measures on developing energy machine tools in the Russian
Federation. The Company also developed essential conditions
for a standard long-term supply agreement (LTSA), concerning
the supply of electric equipment localized in Russia.
The first LTSA signed by the Company during the reporting year
include the following:
• On 15 August 2011, the Company signed a long-term
agreement with HK Elektrozavod for the supply of transformer
equipment manufactured by HK Elektrozavod. The planned
purchase volume will comprise at least 3,628 MVA in 2012,
2,511 MVA in 2013 and 4,035 MVA in 2014;
• On 9 September 2011, the Company signed a long-term
agreement for the supply of electric products with Hyundai
Electrosystems. The supply of switchgear for secondary
distribution systems will commence in 2013, with supply scope
standing at 180-240 cells per annum;
2011 actual equipment supplies
2011 actual equipment supplies, %
Planned increase in equipment supplies by 2014
Planned increase in equipment supplies by 2014
100
80
60
40
20
0
100
80
60
40
20
0
s
r
o
t
c
a
e
r
t
n
u
h
S
s
r
e
m
r
o
f
s
n
a
r
t
c
i
t
a
m
o
t
u
A
s
r
o
t
c
a
e
r
t
n
u
h
s
d
e
l
l
o
r
t
n
o
C
s
r
e
k
a
e
r
b
t
i
u
c
r
i
C
s
e
h
c
t
i
w
s
t
c
e
n
n
o
c
s
i
D
s
r
e
m
r
o
f
s
n
a
r
t
t
n
e
r
r
u
C
s
r
e
m
r
o
f
s
n
a
r
t
e
g
a
t
l
o
V
s
e
l
b
a
c
d
e
t
a
l
u
s
n
I
s
m
e
t
s
y
s
n
o
i
t
u
b
i
r
t
s
i
d
y
r
a
d
n
o
c
e
s
r
o
f
r
a
e
g
h
c
t
i
w
S
s
r
o
t
c
a
e
r
t
n
u
h
S
s
r
e
m
r
o
f
s
n
a
r
t
c
i
t
a
m
o
t
u
A
s
r
o
t
c
a
e
r
t
n
u
h
s
d
e
l
l
o
r
t
n
o
C
s
r
e
k
a
e
r
b
t
i
u
c
r
i
C
s
e
h
c
t
i
w
s
t
c
e
n
n
o
c
s
i
D
s
r
e
m
r
o
f
s
n
a
r
t
t
n
e
r
r
u
C
s
r
e
m
r
o
f
s
n
a
r
t
e
g
a
t
l
o
V
s
e
l
b
a
c
d
e
t
a
l
u
s
n
I
s
m
e
t
s
y
s
n
o
i
t
u
b
i
r
t
s
i
d
y
r
a
d
n
o
c
e
s
r
o
f
r
a
e
g
h
c
t
i
w
S
• On 28 September 2011, the Company concluded a long-term
agreement for the supply of electric products localized in
Russia with Power Machines. Toshiba became a partner of
Power Machines
transformer
manufacturing plant. The planned scope of supply will
comprise 5,014 MVA in 2014, 5,544 MVA in 2015, 5,544 MVA
in 2016, 5,544 MVA in 2017 and 5,544 MVA in 2018.
constructing
the
for
The share of imported equipment purchased by the Company
comprised 65 % by the end of 2011. By 2014, we plan to decrease
the share of purchased imported equipment to 46 %.
47
Operations overviewAbout the CompanyInformation for shareholders and investorsSocial responsibilityAppendices
The 2011 investment program
financing volume
RUR 184.7 billion
The 2011 cost optimization effect
RUR 2,000 million
INFORMATION FOR SHAREHOLDERS
AND INVESTORS
3
48
3.1
INVESTMENTS AND INNOVATIONS
3.1.1 INVESTMENT ACTIVITY
One of the Company’s priorities is implementing a global investment program intended to upgrade the electric
power grid, to implement advanced technologies across all UNEG control levels and to provide for the Russian
economy’s growing power demand.
In 2010, the Russian government, represented by the Russian
Ministry of Energy, approved a large-scale investment program
for Federal Grid Company for the period from 2010 to 2014.
The program, which has an unprecedented scale in the post-
Soviet period, involves financing in an amount exceeding
RUR952 billion.
RUR65.8 billion in innovations, upgrading energy efficiency and
developing process control. Investments to implement the gov-
ernmental programs will comprise RUR161.82 billion. To provide
power from the NPPs, HPPs and TPPs and to fulfill agreements
with regional administrations (except for Moscow, St. Petersburg
and Tyumen), the Company plans to spend RUR196.57 billion.
The tasks of Federal Grid Company’s investment program:
• To provide for renovating the Company’s grid assets;
• To implement electric grid facility construction projects that
are of the highest national priority (the APEC Summit,
the ESPO pipeline,
the 2014 Sochi Olympic Games,
the Skolkovo Innovation Centre and improving the reliability of
power supply to Moscow and St. Petersburg, etc.);
• To fulfill agreements concluded with regional administrations
to provide for consumers’ power supply;
• To provide power from the generating units of the NPPs, HPPs
and TPPs put in to operation;
• To implement innovation and energy efficiency programs;
to provide
• To establish
for
the functioning of the competitive electric energy and capacity
market.
infrastructure
the process
The investment program is financed by the Company’s own
funds and funds obtained via the additional issue of the Com-
pany shares, federal budgetary funds and funds generated from
the sale of RAO UES of Russia assets. To finance the program
in 2010-2011, the Company attracted RUR105 billion by placing
the Company’s bonds on Russian financial markets. The pay-
ments for technological connections, loans and credits are also
used by the Company to implement the investment program.
To renovate fixed assets of the electric grid complex, we plan to
spend RUR216.26 billion. To develop the grids which did not
conclude any agreements with the regions, the Company will
spend RUR248.96 billion. To improve the reliability of power
supply to Moscow, St. Petersburg and Tyumen, the Company
invest
will spend RUR90.37 billion. The Company will
Implementation of the Company’s 2011-2014 Investment Pro-
gram will result in putting in to operation 74,310 MVA transformer
capacity and 16,377.6 km of electric energy transmission lines.
Структура инвестиционной программы, млрд руб.
Investment Program structure, RUR billion
6
5
4
3
1
2
3
4
5
6
Development of grids which did not conclude any agreements
with the regions
Renovation of the fixed assets of the grid complex
Providing power generated by NPPs, HPPs and TPPs (over 32 GW)
and fullfillment of agreements with regions
National programs (ESPO pipeline, target program
for the Far East and Trans-Baikal, Sochi, APEC)
Improving the reliability of power supply
of Moscow, St. Petersburg and Tyumen
Innovations, improvement of energy efficiency
and process control development
Federal Grid Company’s 2010-2014 investment volumes and priorities, RUR billion
THE MAIN PRIORITIES OF FEDERAL GRID COMPANY’S 2010-2014 INVESTMENT
PROGRAM
2010
2011
2012
2013
2014
TOTAL
FOR
2010-2014
Federal Grid Company’s 2010-2014 Investment Program
Asset development
Asset maintenance
Technological connection
170.5
109.9
57.1
3.5
189.6
122.1
62.2
5.2
194.6
120.7
69.7
4.2
197.8
130.5
65.5
1.8
199.9
140.8
59.1
0.0
952.4
624.1
313.6
14.7
1
2
248.96
216.26
196.57
161.82
90.37
65.8
%
100
65.5
32.9
1.6
49
2011 main investment priorities
ITEM
Total
Retrofitting and reconstruction
Provision of power generated by NPPs, HPPs and TPPs
Improvement of power supply reliability for Moscow, St. Petersburg and Tyumen
Grid facilities included in agreements with regional administrations (except for Moscow, St. Petersburg
and Tyumen)
Development of grids which did not conclude any agreements with the regions
Technological connections
Renovation of Federal Grid Company’s fixed assets
New construction
Power provision facilities: NPPs, HPPs and TPPs
Facilities to improve power supply reliability for Moscow, St. Petersburg, Tyumen and the Sochi Region
Facilities included in the agreements with regional administrations (except for Moscow, St. Petersburg
and Tyumen)
Development of grids which did not conclude any agreements with regional administrations
Development of process control, IT technologies and additional target programs
Facilities included in the Federal Target Program “Economic and Social Development of Far East and
Trans-Baikal for the Period till 2013”
The program for the development of power networks in the Sochi Region for the 2008-2014 period,
providing power to the Olympic sporting facilities
Purchase of facilities for production purposes
Innovations and energy efficiency
Other
Design and survey work (future years)
Ввод электросетевых мощностей в 2011-2014 гг*.
2011 FINANCING
FACILITIES TO BE
PUT IN TO OPERATION
RUR MILLION
189,566.16
59,736.21
820,77
16,253.90
701.53
3,401.34
6,455.81
32,102.86
129,829.95
20,291.58
6,075.07
11,630.30
44,125.71
6,430.35
11,227.96
KM
3,200.32
589.70
0,00
241.20
172.00
0.00
51.50
125.00
2,610.62
543.20
90.00
749.60
873.00
0.00
246.52
MVA
17,284.78
11,300.00
1 376,00
3,132.00
0.00
200.00
1,410.00
5,182.00
5,984.78
1,502.00
125.00
2,195.00
1,375.00
0.00
378.00
7,231.01
108.30
409.78
12,185.40
4,128.29
5,910.02
594.26
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Electric grid facilities to be put into operation in 2011-2014*
Implementation of the 2011 Investment Program
The Company’s 2011 investment plans were implemented meet-
ing all key criteria. The number of sub-stations and electric
energy transmission lines connected to voltage in 2011 were
84 power
transformer capacity of
18,501 MVA, which is twice the figure for the similar indicator in
2010. The total length of electric energy transmission lines con-
nected to voltage was 2,963 kilometers.
facilities with a
total
30,000
25,000
20,000
15,000
10,000
5,000
0
6
4
8
,
3
2
9
3
5
,
3
2011
7
8
6
,
0
2
8
5
5
,
2
2
8
7
8
,
6
9
1
2
,
7
8
8
1
,
3
2
7
7
,
2
2012
(planned)
2013
(planned)
2014
(planned)
Power transmission lines, km
Transformer capacity, MVA
* The planned performance indicators for 2012-2014 may be changed after
the Company’s 2012-2014 investment program is approved by the Russian
Ministry of Energy.
50
Динамика исполнения
инвестиционной программы
ОАО «ФСК ЕЭС» в 2010–2011 годах
2010-2011 Federal Grid Company investment program
implementation dynamics, RUR billion
Объем финансирования НИОКР по годам, млрд. руб.
The volume of planned and actual investment financing,
RUR billion
7
.
4
8
1
0
.
7
6
1
8
.
4
0
2
4
.
1
3
1
250
200
150
100
50
0
Per the volume of financing
Per the investments
2
0
.
6
5
1
4
0
.
6
0
1
200
150
100
50
0
1
5
.
0
7
1
3
0
.
7
6
1
7
5
.
9
8
1
2
7
.
4
8
1
2010
2011
2009
2010
2011
Planned
Actual
Key Investment Projects
The country has recently implemented numerous large-scale projects.
Russia won the right to host the 2014 Winter Olympics. The nation will
also host the 2012 APEC Summit. The second stage of the ESPO
pipeline construction has been launched, making the dynamically
developing markets of Asia and the Pacific Region accessible for Rus-
sian businesses. The Skolkovo Innovation Centre is also under con-
struction. An up-to-date, reliable electric grid infrastructure constructed
and maintained by the Company is one of the key factors contributing
to the success of these projects.
Federal Grid Company Key Investment Projects Map
Construction of
infrastructure to
supply power for
the 2014 Sochi Winter
Olympics
Commissioning period –
2013
1,000 MW
Provision of power
generated by
Power Unit No4 of
the Kalininskaya NPP
Commissioning
period – 2012
Power supply facilities
for the ESPO pipeline
Commissioning period –
2012
Construction of power
supply facilities in
the Elginskoye Coal
Field
Commissioning period –
2013
Construction of electricity
transmission line from
the Zeiskaya HPP to
the Russian-Chinese border
Commissioning period –
2011–2012
1,150 MW
Provision of power generated
by Power Unit No1 of
the Novovoronezhskaya NPP-2
Commissioning period – 2013
Transfer of HVL to cable
lines and the construction
of the 220 kV sub-
station for the Skolkovo
Innovation Centre
Commissioning period –
2012
1,000 МW
Provision of power for
the start-up system of
the Boguchanskaya HPP
Commissioning period –
2012–2013
Construction of infrastructure
to supply power for the 2012 APEC
Summit in Vladivostok
Commissioning period – 2011–2012
Electric energy transmission lines (220kV, 330kV, 500kV and 750kV)
Electric energy transmission lines and sub-stations
51
Information for shareholders and investorsAbout the CompanyOperations overviewSocial responsibilityAppendices Sochi-2014
To prepare for the 2014 Winter Olympics in Sochi, the Company
is working on constructing, modernizing and reconstructing
24 electric grid facilities with a total capacity of 1,774.3 MVA.
The total length of electric energy transmission lines in the Sochi
Region comprises 283.63km. Work is being done in compliance
with Russian Government Decree No. 991 “On the Program of
Constructing Olympic Games Facilities and Developing Sochi
as a Mountain Resort” (dated 29 December 2007).
In 2011, facilities commissioned by the Company included
the following:
• The 110 kV Imeretinskaya sub-station, the 110 kV Ledovy
Dvorets sub-station and 110 kV Mzymta sub-station;
• The 220 kV overhead transmission lines to provide power
from the Adler CHP plant;
• The 110 kV cable and overhead transmis sion lines in
the Imeretinskaya Plain (17.2 km);
• The 10 kV distribution power supply networks of the Roza
Khutor Alpine skiing resort (with a total length of 50.5 km);
• The 110 kV cable and overhead transmission lines in
the Imeretinskaya Plain (17.2 km);
• The 110 kV cable and overhead transmission lines in the Roza
Khutor Plateau area (3.3 km).
In addition, a decision was made to include construction in Kras-
naya Polyana of the new 110 kV 80 MVA Sportivnaya sub-station
in the Company’s investment program to provide for standby
power supply for Olympic facilities of the Roza Khutor Alpine ski-
ing resort and Olympic Village infrastructure in the mountains.
The new sub-station will be located in the piste finishing zone in
the vicinity of the sporting events. The total amount invested to
construct the new sub-station will be RUR881 million.
The total amount to be invested in constructing Olympic facilities
in Sochi till 2014 will exceed RUR28 billion.
The ESPO Pipeline
The East Siberian – Pacific Ocean (ESPO) pipeline is constructed
to transport Russian oil to the promising markets of the Asian-
Pacific Region. The Company is tasked with providing a reliable
power supply. To do so, the Company will proceed with construct-
ing and reconstructing electric grid facilities all across the Far
East.
ESPO power supply facilities commissioned by the Company in
2011 included the following:
• The 220 kV sub-stations for OPS-38, OPS-40 and OPS-41;
• The 220 kV transmission lines from the Primorskaya SDPP –
OPS 38; OPS – 38 – Lesozavodsk; Dalnevostochnaya – OPS-
40; Dalnevostochnaya – OPS-41; OPS-40 – OPS-41; OPS-
36 – Primorskaya SDPP.
According to adjustments approved by the Russian Ministry of
Energy during the reporting year, the Company’s investment pro-
gram was complemented by six new ESPO electric grid facilities
in the total amount of RUR2,079.59 million.
The total amount allocated by the investment program to finance
the ESPO power supply facilities in 2010-2014 will comprise
RUR42,175.6 million.
The APEC Summit
The eight major facilities to be constructed by the Company for
the APEC Summit (which will be held in Vladivostok in 2012)
include: four 220 kV sub-stations with a total capacity of
430 MVA and four 220 kV electric energy transmission lines with
a total length of 150 km.
To implement the above-mentioned project during the reporting
year, the Company has put into operation three sub-stations
(the 220 kV Aeroport sub-station, the 220 kV Zeleny Ugol sub-sta-
tion with 220 kV HVL overhangs and the 220 kV Russkaya sub-sta-
tion), Zeleny Ugol – Russkaya HVL going Eastern Bosphorus Strait,
the 220 kV HVL Artyomovskaya CHP plant – Vladivostok and
the 220 kV HVL Vladivostokskaya CHP plant – Zeleny Ugol – Volna.
Other facilities put in to operation in 2011 include: the 220 kV Patrokl
sub-station and the 220 kV HVL Vladivostok – Zeleny Ugol (a sec-
tion of the 220 kV HVL Artyomovskaya CHP plant – Zeleny Ugol).
To prepare for the APEC Summit, the Company is building
a 220 kV double-circuit HVL Zeleny Ugol – Russkaya,
16.8 km long. This sophisticated engineering project
involves the installation of two cable lines on the mainland
and on Russky Island and laying a 2.2 km cross-linked
polyethylene three-phase cable along the Eastern Bosphorus
Strait seabed. The Company was the first in Russia to use
the underwater cable laying technology in July 2011.
The 220 kV three-wire cable insulated by cross-linked
polyethylene is a unique innovation for the power sector.
Different from the usual oil-filled cables, the new cable is light
weight and environmentally friendly. To provide for process
communications and line operation parameters monitoring,
12 optical fibers are integrated in the cable shield. The cable
design features a reinforced metal armor to decrease
the risk of cable damage during seismic activity typical for
the region. The cableis manufacturedin factory length swith
no connecting collars, therefore it is very reliable.
52
The Skolkovo Innovation Centre
The Boguchanskaya HPP
The Skolkovo Innovations Centre is a large-scale national pro-
ject for establishing an advanced scientific and engineering
complex for the development and commercial use of new tech-
nologies. The Centre will concentrate on five priorities, including:
energy, information technologies, telecommunications, bio-
medical and nuclear
technologies. Skolkovo will house
the departments and laboratories of leading universities and
companies from Russia and other countries. The scientists will
conduct academic research, teach post-graduate students and
implement innovative campaigns. The Centre will also make
room for hi-tech production facilities.
The Boguchanskaya HPP is Russia’s largest hydro-power plant
currently under construction. The Boguchanskaya HPP is inte-
grated into the Angarsk chain of hydro-power stations. The first
hydro-power units of the HPP are to be put in to operation in April
2012, with the rest to be commissioned after April 2013.
The Company builds new and reconstructs existing electric grid
facilities in the Krasnoyarsk Region to provide for the output of
power from the Boguchanskaya HPP to the unified electric grid
of Siberia. Furthermore, the Company also acts as the agent for
constructing the 500 kV grid facilities.
For the 2011 till 2014 period, the Company will construct and
reconstruct nine electric grid facilities of the Skolkovo Innovation
Centre. During the reporting year, the Company was busy with
re-arranging the 500 kV electric energy transmission line and
transforming the overhead line into a cable one. The Company
also constructed two 220 kV underground sub-stations in
Skolkovo and Smirnovo. The total capacity of the sub-stations
stands at 252 MVA.
In 2011, the Company finished constructing the 220 kV networks
to provide power from the Boguchanskaya HPP. Other activities
included renovating the 125 MVA AT-3, 220/110/10 kV Primary
Distribution Feeder (PDF) (220kV PDF Kodinskaya) and con-
structing the 500 kV Boguchanskaya HPP – Ozernaya transmis-
sion line (first stage).
Facilities constructed through Federal Grid Company’s invest-
ment program
The total amount allocated under the Company’s investment
program to finance electric grid facilities of the Skolkovo Innova-
tion Centre from 2010-2014 is RUR13.53 billion.
FACILITY
The 330 kV Electric Energy Ring in St. Petersburg
The Company is an active participant in constructing the 330kV
electric energy ring in St. Petersburg. Historically, the energy
system of the Northern Capital was developed radially. Today’s
technology makes it possible to construct a new cable-overhead
direct current line which will connect the southern and northern
parts of the city across the Gulf, thus creating an electric energy
ring. The solution will improve the reliability of the city’s power
supply, minimizing the probability of major emergencies and
phased blackouts.
Construction of the electric energy ring was launched in
2007 and will be finished in 2012. The ring will incorporate five
sub-stations, two overhead and three cable electric energy
transmission lines.
During the reporting year, the Company has put in to operation
the 330kV Vostochnaya – Volkhov-Severnaya overhead trans-
mission line and the 330 kV Volkhov-Severnaya – Zavod Ilyicha
cable transmission line. In addition, in 2011, the Company fin-
ished reconstructing and retro-fitting the 220 kV Volkhov-Sever-
naya sub-station, the 330kV Vostochnaya sub-station and
the 220kV Zavod Ilyicha sub-station.
The total amount of financing for the project is RUR32.3 billion.
FULL COST OF
THE FACILITY
ACCORDING
TO THE 2010-
2014 INVESTMENT
PROGRAM,
RUR MILLION
8,818.60
985.0
1,708.6
10,000.0
The 220 kV HVL Boguchanskaya HPP –
the Priangarskaya sub-station
The 220 kV Priangarskaya sub-station
The 220 kV HVL Priangarskaya sub-station –
the Razdolinskaya sub-station
The 220 kV Razdolinskaya sub-station
The 220 kV switchgear for secondary distribution
systems of the Boguchanskaya HPP
Reconstruction of the 220/110/10 kV Primary
Distribution Feeder (220 kV PDF Kodinskaya)
Construction of the 500 kV HVL Boguchanskaya
HPP – Ozernaya
The Kalininskaya NPP
The Kalininskaya NPP located in the Tver Region is a major
energy producer in the central part of Russia. The first and
the second power units of the NPP were put in to operation in
1985-1987. The construction of the remaning two power was
suspended in 1991. The developing Russian economy needed
new generating facilities and the third power unit of the NPP was
put in to operation in 2005, while construction of the fourth 1 GW
power unit was launched two years later.
The Company’s responsibility here is to provide for the transmis-
sion of electric energy from new power units. The construction of
a transmission line equipped with the new generation 750 kV
53
Information for shareholders and investorsAbout the CompanyOperations overviewSocial responsibilityAppendices will provide for the output of power from the Zeyskaya HPP and
will increase the volume of energy exported to China.
During the reporting year, we finished constructing the first stage
of the 152.8 km long 240 MVAr 500 kV HVL Zeyskaya HPP –
Amurskaya – State Border. The second stage will be constructed
in 2012.
The Elginskoye Coal Field Power Supply Facilities
The Elginskoye Coal Field is the biggest coking coal deposit in
the Far East. The field is located in the south of the Republic of
Sakha (Yakutia). This is the Company’s first project involving
the establishment of a smart grid territorial cluster in the Far East.
To supply power to the Elginskoye coal field, the Company con-
structs three 220 kV sub-stations (Elgaugol, “A” and “B”) and two
220 kV electric energy transmission lines. Each of the lines will be
268 km long. In addition, the Company is engaged in reconstructing
the existing 220 kV Prizeyskaya sub-station.
The Company’s newly constructed facilities will initiate numerous
pilot projects, including the equipment of standard automatic pro-
cess control systems used at sub-stations with systems based on
optical fiber cables to transfer digital data, and the application of
Smart Sphere technology to control the main parameters of power
transmission in real time.
In 2011, the Company launched preparatory work to construct elec-
tric grid facilities for external power supply. The construction will be
accomplished in two stages. The first stage, to be accomplished by
2013, will involve the Company reconstructing the 220 kV Prizeys-
kaya sub-station in the Amur Region. The Company will also build
three new 220 kV sub-stations and the 268 km long 220 kV Prizeys-
kaya – Elgaugol transmission line. Work connected with the exten-
sion of the 220 kV distribution gear at the Prizeyskaya sub-station
will be accomplished by 2015, together with construction of the sec-
ond 220 kV Prizeyskaya – Elgaugol transmission line and installa-
tion of the 125 MVA automatic transformer at the 220 kV Elgaugol
sub-station.
Gribovo sub-station and the 500 kV Dorokhovo sub-station will
eliminate existing limitations on connecting new consumers and
improving the reliability and stability of the regional power supply
system on the whole. The length of electric energy transmission
lines will exceed 700 km. The total amount invested in the pro-
ject will exceed RUR34.5 billion.
In 2011, the Company finished the next stage of extending
the 750 kV Belozerskaya sub-station and initiated start-up work at
power generation facilities of the Kalininskaya NPP. The amount
invested
totaled
RUR15,411 million.
reporting year
the project
the
in
in
The Novovoronezhskaya NPP-2
Further development of the Novovoronezhskaya NPP (NVNPP)
will be in the form of newly constructed power units – advanced
energy generating facilities complying with international safety
standards. The first power unit of the NVNPP-2 will be put in to
operation in 2013. The Company is engaged in constructing
facilities intended to provide power from the first power unit of
the NVNPP-2, including the rearrangement of the 220-500 kV
electric energy transmission lines.
In 2011, work performed by the Company included the design
and organization of the construction of 220 kV CL No1 Novovo-
ronezhskaya NPP-2 – Novaya and 220 kV CL No 2 Novovorone-
zhskaya NPP-2 – Novaya. Corporate specialists also recon-
structed the 220 kV HVL Novovoronezhskaya NPP – Liski
3.4 and the 220 kV HVL Novovoronezhskaya NPP – Latnaya.
Construction of the Zeyskaya HPP – Russian-Chinese
Border Line
Pursuant to the Federal Target Program for economic and social
development of the Far East and Trans-Baikal for the period till
2013, the Company is engaged in constructing the 500 kV Amur-
skaya – Heihe inter-state electricity transmission line which will
become the key facility exporting energy from Russia to China.
Putting in to operation the inter-state electricity transmission line
54
3.1.2 INNOVATIVE DEVELOPMENT
During the reporting year, the Company has adopted and
approved the Innovative Development Program (the Program)
for the period till 2020.
The main goal of the Program is improved reliability, efficiency
and safety of the electric grid facilities and the energy sector by
applying innovative technologies and solutions for turning them
into a smart (active-adaptive) Center of technological infrastruc-
ture for the energy industry.
The Program’s implementation, in coordination with industry
and corporate documents, is aimed at achieving Federal Grid
Company’s strategic objectives:
• Ensuring Russia’s energy security and sustainable
development;
• Meeting the required reliability of electric energy transmission
services;
• Participating in the free functioning of the electricity market;
• Upgrading UNEG functioning and development;
• Providing for production personnel safety;
• Upgrading environmental standards.
The Program’s objectives:
• Creating a target vision of the smart energy system based on
an active-adaptive grid;
• Developing and
testing new
technologies,
including
breakthroughs in all innovative areas;
• Preparing and implementing integrated pilot projects to create
the active-adaptive grid;
• Commercializing new technologies;
• Developing new services on the energy markets based on
new technologies;
• Developing, modernizing and enhancing UNEG energy
efficiency;
• Creating a production base for UNEG modernization;
• Upgrading business processes and
implementing new
management methods;
• Establishing an effective innovation management system that
enables the integration of all key participants in the innovation
process, as well as providing projects with necessary
resources within the program.
Smart Grid Operation Scheme
Generation and alternative
energy sources
Industrial installations
Micro-turbines
and energy
storage
facilities
Consumers
HVL
Smart grid
Smart grid element
Transmission and storage
of energy (storage
batteries)
55
Information for shareholders and investorsAbout the CompanyOperations overviewSocial responsibilityAppendices The smart grid is understood to be a qualitatively new grid state,
constructed on the basis of new principles and technologies in
electricity transmission and transformation, which allows for:
• Integrating all forms of generation and all consumer types for
the situational management of demand for their services and
for actively participating in grid operation;
• Changing grid parameters and topology in real-time for current
operations, preventing the emergence and development of
failures;
• Expanding market opportunities through the mutual rendering
of a wide range of services by market entities and infrastructure;
losses, enhancing self-diagnosis and self-
correcting systems under conditions of reliability and power
quality;
• Minimizing
• Integrating the electric grid and information infrastructure to
create an all-mode control system with full information support.
As part of the Program, the Company implements work related
to modernizing and developing the UNEG, forming conceptual,
technological and industrial bases and conditions for construct-
ing a smart grid based on an active-adaptive grid and improving
the Company’s business processes and organizational mecha-
nisms to provide for innovative development tasks. From
the standpoint of achieving these objectives, the following main
areas of Federal Grid Company’s innovative activities under
the Program during the reporting year have been singled out:
1. Developing a Smart Grid Concept based on an active-
adaptive grid;
2. Developing and testing new technologies;
3. Commercializing new technologies;
4. Developing and implementing new Federal Grid Company
services in energy markets;
5. Implementing integrated pilot projects to create the active-
adaptive grid;
Now, we may follow two paths toward modernization.
The first path is to use equipment which is being used
now, and current technologies which we used in recent
years. But, there is a second way – to implement new
technological solutions which have not been used in
our electric grids before, and which may lead to a better
effect. Our Company selected the second path – the way
of innovative development.
Roman Berdnikov,
Deputy Chairman of the Management Board
6. Developing, modernizing and enhancing UNEG energy
efficiency;
7. Creating a production base for UNEG modernization;
8. Upgrading business processes and implementing new
management methods;
9. Developing a system for Federal Grid Company innovative
activities;
10. Developing the Program’s management mechanism.
During the reporting year, these areas of Federal Grid Compa-
ny’s innovative activities yielded specific significant results,
which had been planned in the 2011 Program, and involved sig-
nificant practical effects, both in the short- and long-term.
The Program implies the fulfillment of target efficiency indicators
for the Company’s innovative development in the period till 2020.
The Program’s key performance indicators that characterize innovative activity achievements during the reporting year:
INDICATOR GROUP
KEY PERFORMANCE INDICATOR
INDICATOR UNIT
INDICATOR VALUE
Energy saving and energy
efficiency
The share of under-supplied energy in the total volume of energy
output from the UNEG
Improving the usability of services
rendered
Number of patents on the balance sheet by year end,
resulting from R&D activities
Efficiency of innovations
Number of patents on the balance sheet by year end,
resulting from R&D activities
TARGET
INDICATOR
VALUE FOR 2011
2011 INDICATOR
VALUE
4.8
4.65
0.0028
0.0004
%
%
units
27
35
56
Research and Development (R&D) Activities
An important trend in the Company’s Innovative Development
Program was developing, testing and implementing break-
through innovative technologies at UNEG facilities, including:
energy accumulation, digital sub-station, high temperature super
conductivity and the transmission of energy using direct
current.
The R&D program has been designed to fulfill orders of the Rus-
sian President (Minutes № Pr-22 from 4 January 2010) to ensure
sustainable long-term funding for the development of new tech-
nologies, equipment and instruments within Federal Grid Com-
pany’s Investment Program and is aimed at creating a smart grid
and ensuring the sustainable innovative development of the Uni-
fied National Electric Grid (UNEG).
The purpose of the R&D program is to conduct a package of
research, development and technological work aimed at upgrad-
ing the reliability, quality and efficiency of power supply through
the modernization of UES of Russia’s electric grids transforming
them into the smart (active-adaptive) core of electric power
industry technological infrastructure.
Creating a smart grid with an active-adaptive grid (SG AAG),
a new technological level of domestic energy development, with
a dynamic positive multiplier effect for Russian industrial devel-
opment and activities is the target result of R&D activities.
Creating a SG AAG within the framework of the R&D program
involves developing and introducing new technical resource
control principles, network unit control systems and electric grid
control systems in stationary and post-emergency modes and
reliable and durable electrical equipment and automation sys-
tems, based on new scientific developments, technologies and
UES operation principles.
The Federal Grid Company favors the Smart Energy
development model, as this model will empower us to meet
today’s challenges – exclusive standards for reliability and
energy quality, the development of distributed energy and
consumer demand management practices.
Roman Berdnikov,
Deputy Chairman of the Management Board
• Developing new types of power equipment for sub-stations
and electric energy transmission lines for the smart grid
system;
• Developing new types of control equipment, automation,
protection and measurement systems for the smart grid
system;
• Developing a control system for the smart grid system;
• Developing a system for monitoring and protecting the grid
from external impacts;
• Providing for the reliable and safe operation of the UNEG and
maintaining high quality power transmission services;
• Improving the energy efficiency of the electric grids.
To implement the R&D program, the Company concluded
57 agreements and considered 215 finished R&D stages in
2011 implemented by 29 organizations. Among these compa-
nies were.
• eight academic and industrial research institutes (Research
and Development Center Federal Grid Company UES, United
Institute for High Temperatures at the Russian Academy of
Sciences, All-Russian Electronic Technical Institute, ENIN etc.);
• two higher education establishments (the Moscow Power
Engineering Institute (MPEI), and the Kazan State Power
Engineering University (KSPEU);
The main R&D priorities within the frameworks of the Company’s
Innovative Development Program include the following:
• Developing the concept and theoretical foundations for
• seven design organizations (Institute Energosetproyekt,
the Non-profit Partnership Engineering and Innovation Center,
Company ORGRES, STRI AB, etc.);
the smart grid system;
R&D Financing, RUR billion
R&D financing, RUR billion
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0
1
.
3
9
.
1
0
.
1
9
3
.
0
4
1
.
0
2008
2009
2010
2011
2012
• 12 production and research organizations (Electrozavod,
The Korolev Rocket and Space Corporation Energia, Streamer
Scientific and Production Union, etc.).
To improve the efficiency of the system controlling the Compa-
ny’s innovative activities and to implement R&D results, the Com-
pany established a Scientific and Technical Council (STC).
The STC established in conjunction with the Russian Academy
of Sciences (RAS) is chaired by Vladimir Fortov, Academician-
Secretary of the Department of Energy, Machine Tools, Mechan-
ics and Control Processes of the RAS, the Director of the Joint
High Temperatures Institute of the RAS. Responsibilities of
the STC include the coordination of innovative, technical and
operational policy pertaining to UNEG modernization, the prepa-
ration of suggestions on actualizing the main priorities of
the R&D program and recommendations on implementing inno-
57
Information for shareholders and investorsAbout the CompanyOperations overviewSocial responsibilityAppendices vative technologies, materials and equipment at UNEG facilities.
The STC also contributes to formulating concepts of the Com-
pany’s policy on innovations and technologies and assesses
the efficiency of fundamental scientific research on issues
related to corporate operations. Other STC responsibilities
include preparing suggestions on the use of international
advanced technologies and best practices in resolving produc-
tion problems and on variants for improving resources used for
the Company’s innovative activities.
In general, the Innovative Development Program will upgrade
Russian energy potential efficiency, ensuring the full integration
of UES of Russia into the global energy market, promoting
the development of new innovative technologies, ensuring
the development of the country’s industry,reducing the share of
imported equipment and creating conditions for obtaining
the greatest benefit to the Russian economy, as well as positive
technological and socio-economic results.
Technological Effects
PROGRAM AREAS
EFFECTS
1. Technologies to improve UES
of Russia system reliability
2. Technologies to create a smart
grid (increased grid flexibility and
manageability):
3. Reduced electrical grid
operating costs
4. Reduced value of modern,
reliable and highly efficient
equipment
Increased lightning-proof for overhead power lines (reduced accidents 25-30 %);
Increased explosion safety for electrical equipment (prevention of fires and accidents like in the Chagino sub-station in
2005, the AT explosion followed by a breakdown of a 220/110 kV gas-insulated complete switchgear in 2008);
Short circuit current limitation in metropolitan areas (cost savings in the installation of additional equipment at sub-stations
1.5-2 times);
Increased grid throughput while reducing weight and size properties (HTS technology, new types of overhead wires).
Development of electrical equipment with controlled electrical characteristics (FACTS, STATCOM, CSR, etc.);
Technology development for self-restoring electrical equipment and grid infrastructure;
Development of power electronics-based electrical equipment (including for converting and controlling electricity
transmission);
Using energy storage systems (generation and consumption optimization, saving up to RUR15 billion per annum).
Increased grid automation (preventive management, changes in grid performance and topology in the automatic mode);
Reduced installation and repair time for electrical grid components (digital sub-stations, a 30 % reduction).
Reduced equipment cost (including a 2-3 % per annum decline in equipment prices for equipment based on semiconductor
power electronics).
Comprehensive Social and Economic Effects
PROGRAM AREAS
1. Ecology
2. Efficiency
3. Reliability
4. Systemic effect for UES of
Russia
EFFECTS
More than 3.5 GW capacity delivered by power plants generating renewable energy-based electricity (including HPPs);
A 2.5 million ton decline in CO2 emissions by reducing energy losses;
Over 2,000 hectares of land released in metropolitan areas from the grid infrastructure
Relative energy losses reduced in backbone grids from 4.8 % to 3.6 %;
New services introduced for consumers (three-four comprehensive services to consumers within the next five years);
Reduced electric energy under-supply to consumers.
Reduced indoor feeding Centers from 251 to 43 units;
Smoothing the load through the use of high-capacity electric power storage systems;
Decline in the growth of grid and generating equipment (saving an increase in the installed capacity of power plants 3-5 %
by reducing the required power reserve since 2014).
5. Socio-economic
Development of new areas, electrification of the country’s remote areas (deposits and transportation systems of Siberia and
the Far East);
Increased tax revenues to the country’s budget by launching new production;
About 11,000 new jobs created;
Development of the country's industry and related industries ensuring the development and introduction of new technical
devices with qualitatively new characteristics, the establishment of a domestic industrial base;
Development and opening of new actual areas of research and development (including breakthrough ones), basic research
and research projects.
58
Work performed by the Company during the reporting year in
line with innovative activities’ priorities includes the following:
1. A SES AAG concept (a strategic document, the long-term
targeted vision of Russia’s power system) has been
developed in cooperation with leading universities and
research centers in Russia. The document has been
approved by the joint Scientific and Technical Council of
Federal Grid Company and the Russian Academy of
Sciences;
2. Advanced
for UNEG
modernization and the transition to the SES AAG have been
created and are now being tested. These include:
that are crucial
technologies
• the second stage of the Digital Sub-Station testing ground and
the synchronized vector measurement device as the basis for
multi-agent control system technology which have been
manufactured and implemented at JSC Research and
Development Center of Federal Grid Company;
• model samples for the experimental sample of the short circuit
current and transient recovery voltage limiting system in 110-
220 kV networks based on vacuum-controlled lightning
arrestors, etc., which have been developed and tested;
3. Commercialization processes of innovative development
results have been initiated and are active now. 35 patents
and certificates of registration (including 5 foreign ones) on
various inventions and utility models in the electricity sector
have been obtained, 4 licensing agreements have been
made,
implementing
technologies
commercialization events have been defined. In particular,
Federal Grid Company has received a profit of more than
RUR10 million from licensing agreements made in 2011.
top-priority
for
gas infrastructure, the reservation of schemes for power
provision and an increase in the throughput of electricity
transit. We will be able to identify merits, demerits and
the synergetic effect of using various technologies while
for subsequent
constructing a smart energy system
replication in UES of Russia. Pilot projects of MES North-
West will increase the reliability of power supply to big cities,
create an effective grid
infrastructure and provide
a reservation of electricity transit. The implementation of
these pilot projects will provide a high level of reliability of
electric supply to St. Petersburg, Komi Republic and
Arkhangelsk electric grids, as well as the provision of
generating capacity to the electric grids of the Murmansk
Region and the Republic of Karelia.
4. A joint scientific and technical council between Federal Grid
Company and the Russian Academy of Sciences has been
established to coordinate and serve as an expert support to
the Company’s innovation and technical and operational
policies.
5. A new unique mechanism of Federal Grid Company’s
interaction with universities and research organizations has
been developed to conduct breakthrough research, create
advanced technologies and train personnel – innovation
competence Centers. These activities are necessary to
develop the Company’s innovative activities, in particular,
the expansion of the Russian scientific and engineering
base, including: involving foreign partners and cooperating
with Russian higher education institutions.
6. An approach
to managing
implementation of
the Program based on road maps, which meets best
international practices, has been developed.
the
As of the end of the reporting year, Federal Grid Company’s intel-
lectual property portfolio includes property rights for intellectual
activities certified by 159 patents and certificates of registration.
Patenting technological and technical innovations, as well as pre-
paring for the commercialization of Federal Grid Company’s intel-
lectual property based on licensing, has been done since 2003.
The strong importance of the achieved developments is con-
firmed by the number of patents received from foreign intellectual
property services, including the German Patent Office.
1. New services are developed and implemented, both for
existing and promising markets.
2. Developing and testing the business model for the installation
and operation of Grid Energy Storage System (GESS) are
being developed and tested. Two GESS pilot projects are
being implemented (start-up operations have been carried
out and the equipment is ready for pilot production with grid
testing).
3. Work on creating the energy clusters of the smart energy
system in IES of the East – integrated SES AAG pilot
projects is underway. The eastern Russian pilot projects will
provide a reliable power supply to deposit facilities, oil and
8.
7. To increase the Company’s transparency, an innovative
activities’ section has been created on Federal Grid
Company’s web site (in Russian), and proposals on
increasing the degree of corporate transparency in its
innovative activities have been prepared. Federal Grid
Company’s Innovative Development Program until 2016 with
a prospect till 2020 is shown in this section in full. Also, this
section covers promising R&D innovative activities.
In 2011, the Company actively participated in the activities
of the Smart Energy System technological platform (TP
SES)1, the work of which was aimed at drawing attention to
problems of creating Russia’s smart energy system and to
organizational registration of the community of public and
private companies that are interested in the intellectualization
of the energy sector, as well as innovative development
issues. TP SES participants initiated several scientific and
industrial projects as part of scientific and technical
cooperation on the Platform’s operating activities. New TP
SES participants have been attracted. In general, working
out the TP SES organizational structure has been finalized.
In 2012, it is planned to complete the organization of the TP
SES working bodies’ activities (committees, working
1 The technological platform is аform of a public-private partnership in the innovative field. The Company and the Federal Unitary Enterprise Russian Energy Agency are initiators of
creation of the Smart Energy System technological platform (TP SES).
59
Information for shareholders and investorsAbout the CompanyOperations overviewSocial responsibilityAppendices groups), the development of road maps to achieve the TP’s
objectives, as well as the development and launching of
a strategic research program of the technological platform.
Regulatory and Technical Provisions
In 2011, regulatory and technical documentation was actively
supplemented and updated. Fifty-two regulatory and technical
documents were approved and registered as organizational
standards. Another 11 documents were prepared for approval.
Fourteen documents were under development. The Regulatory
and Technical Documents section and an electronic library of
documents are regularly updated on the Company’s corporate
information web site.
Equipment, Technology and Material Certification
Our Company regularly assesses the possibility and feasibility of
using various equipment, technologies and materials from both
domestic and foreign manufacturers at the Company’s facilities.
The certification procedure is carried out based on the verification
of their manufacturing conditions, compliance with standards and
sector-specific and corporate regulatory and technical documenta-
tion, taking into account operating experience from similar
equipment.
In 2011, we reviewed 650 applications for certification and the exten-
sion of the certification committee’s opinions which had expired. As
a result, the Company issued and recommended for use 228 posi-
tive opinions. A negative expert opinion was issued for 75 types of
equipment.
60
3.2
FINANCIAL PERFORMANCE OVERVIEW
The budget structure consisting of the hierarchical budget system
is the Federal Grid Company’s main financial management tool.
The business performance analysis system is based on compar-
ing planned figures and actual performance.
In order to establish its financial management system in compli-
ance with today’s corporate governance practice, Federal Grid
Company made the following efforts:
• To introduce the process management model, the Company
reviewed and regulated its business processes and identified
Business Planning and Budgeting;
• Established the financial structure based on identified financial
responsibility Centers;
• Created the cash flow control system;
• Developed and
introduced
the management accounting
system;
• Introduced the system of budget management which involves
responsibilities of the Company’s management bodies and
branches to prepare and review draft budgets, approve and
execute budgets, control their execution, carry out budget
accounting and prepare, audit, review and approve budget
accounting.
Cash flow management is based on centralized cash flow genera-
tion from the operational business, financial and investment activ-
ities and the further allocation of funds to finance operational and
investment activities. Operational business activities are financed
by distributing funds across the Company’s branches.
In 2011, the Company’s financial management bodies focused on
maintaining reasonable financial stability within the limits of its
debt position.
The Company’s financial policy was focused on cost optimization
programs to reduce operational costs per conventional unit of
equipment without the impairment of performance and reliable
grid maintenance.
3.2.1 FINANCIAL PERFORMANCE
Federal Grid Company demonstrated the following 2011 year-end financial results:
INDICATOR, RUR MILLION
Revenue
Production cost
Sales profit (loss)
Other income
Other expenses
Profit (loss) before taxes
Deferred tax assets
Deferred tax liabilities
Current profit tax
Mandatory charges
Net profit (loss)
Adjusted net profit (loss)
from Company’s main
Indicators for the reviewed period (2009-2011) show sustainable
growth in revenues of Federal Grid Company. In 2011, sales re-
increased
venues
RUR27,052 million or 24.4 % y-o-y. Main growth drivers include:
transmission services by
• revenue growth
RUR25,365 million or 23.2 % due to rise of production facilities
in connection with UNEG expansion and increased tariffs for
2011 against 2010.
from energy
business
• revenue growth from the technical connection of consumers
to the UNEG by RUR1,483 million or 2.3 times from 2010 due
to the expanded scope of services provided to newly
connected consumers.
In 2011, the cost of Company services (without administrative
expenses) increased RUR8,494 million (11.2 %) year-on-year
2009
85,078
64,080
15,870
113,770
183,688
-54,049
-180
-722
-4,876
-39
-59,866
9,427
2010
111,085
75,680
28,584
144,907
111,763
67,312
-33
-1,181
-9,264
249
57,082
25,812
2011
138,137
84,174
45,236
171,434
209,463
11,444
46
-5,545
-8,390
-25
-2,468
33,687
due to the increased scope of serviced equipment on the back of
commissioned new facilities and depreciation charges resulting
from the revaluation of fixed assets.
The cost of production growth rate (11.2 %) is well below the re-
venue growth rate (24.4 %).
The 2011 financial and business results of the Company
recorded losses of RUR2,468 million (a RUR57,082 million net
profit recorded in 2010). 2011 losses resulted from:
• A negative difference from the revaluation of financial
investments in market-quoted shares;
• A negative difference from the revaluation of fixed assets; and
• Recording accrual and the reversal of a bad debt provision.
61
Information for shareholders and investorsAbout the CompanyOperations overviewSocial responsibilityAppendices Adjusted net profit (profit excluding losses from asset revaluation
and accrual and the reversal of bad debt provision and securities
impairment provision) is RUR33,687 million, a RUR7,875 million
increase (30.5 %) from 2010. In 2011, important drivers of
adjusted net profit growth were:
• A 23 % increase in additional revenue received by the Company
from energy transmission services and an increase in technical
consumer connections and, thus, an additional profit of
RUR1.5 billion compared with 2010 (a 2.5 times growth);
• Implementing the cost management program which led to
operational cost cutting by RUR2 billion (at 2010 prices), a two
time excess over planned figures;
• In 2011, purchased energy cost decreased RUR2 billion
compared with 2010 and the share of purchased energy costs
fell to 13 % from 17 %. The financial result of loss reduction
was RUR1.6 billion, a RUR1.3 billion increase compared with
the 2010 level.
In the context of the April 2011 tariff change and the unstable
international financial markets, the Federal Grid Company per-
formance in 2011 may be viewed as positive.
The dynamics of the above balance sheet indicators show
a clear growth trend. During 2009-2011, the Company’s total
assets and liabilities saw a material growth on the back of non-
current assets and long-term liabilities increases and a simulta-
neous reduction in the short-term share.
In 2011, the main factors affecting non-current assets:
• Increased in fixed assets and construction in progress due to
investment program and
Federal Grid Company’s
the revaluation of the fixed assets value; and
• Decline in long-term financial investments resulting from
INTER RAO UES shares being revalued at market value as of
year-end.
We view 2011 Federal Grid Company performance
as positive. The Company has maintained stable
financial positions and ensured 100 % financing of its
2011 investment program. A transparent investment
planning system under RAB regulation resulted in positive
growth performance of the Unified National Energy Grid.
Andrey Kazachenkov,
First Deputy Chairman of the Management Board
Динамика доходов, расходов и чистой прибыли за 2009-2011 гг.,
млрд руб.
Dynamics of revenue, expenses and net profit
in 2009-2011, RUR million
150
120
90
60
30
0
-30
-60
1
.
8
3
1
2
.
4
8
1
.
1
1
1
7
.
5
7
1
.
7
5
1
.
5
8
1
.
4
6
2009
2010
2011
5
.
2
-
9
.
9
5
-
Revenue
Product cost Net profit (loss)
Key assets, equity and liabilities indicators according to the financial statement for Federal Grid Company’s 2011 performance
AS OF 31 DECEMBER
2009
AS OF 31 DECEMBER
2010
AS OF 31 DECEMBER
2011
746,667
588,425
158,242
746,667
665,436
7,440
73,791
902,110
767,152
134,958
902,110
794,192
52,668
55,250
1,037,493
919,501
117,992
1,037,493
853,526
138,166
45,801
INDICATOR, RUR MILLION
Total assets
Non-current assets value
Current assets value
Total liabilities
Shareholder equity
Long-term liabilities
Short-term liabilities
62
The following circumstances affected the change in current
assets:
• Reduction
to
the redemption of promissory notes and the allocation of funds to
finance the Company’s investment program;
investments due
in short-term
financial
• Reduction in short-term accounts receivable due to the accrual of
provisions for doubtful debt resulting from the revaluation of
INTER RAO UES shares recorded on the balance of Energy
Industry Index – FGC UES, increased advance payments for
repairs and consumer debt on the UNEG energy transmission
agreements;
• Inventory increase from more raw materials required to maintain
and repair fixed assets and an increased emergency reserve;
and
• Increased cash on the Company’s current accounts.
The Company’s capital growth in 2011 is associated with
an increase in share capital due to the RUR11,193 million addi-
tional share issue offered in 2010, which was registered in March
2011; increases in the additional capital on the back of fixed
assets
loss on
2011 performance.
revaluation and a RUR2,468 million
The increase in long-term liabilities in 2011 is driven by receiving
borrowed funds in the amount of RUR80 billion (a RUR25 billion
loan and a RUR55 billion bond placement).
Changes in short-term liabilities during the reporting year were
driven by such factors as:
• Reduced accounts payable;
2009-2011 Company’s Financial Indicators
INDICATOR
LIQUIDITY RATIOS*
Absolute liquidity ratio
Short-term liquidity ratio
Current liquidity ratio
CAPITAL STRUCTURE RATIOS**
Equity to total assets ratio
Debt to equity ratio
PROFIT MARGIN RATIOS
EBITDA margin***, %
Profit margin***, %
Return on assets***, %
Assets turnover
Dynamics of change in assets in 2009-2011, RUR billion
9
.
6
4
4
6
.
9
8
3
8
.
5
8
3
1
.
6
7
2
0
.
5
3
1
0
.
8
1
1
0
.
7
7
2
0
.
3
4
2
2
.
8
5
1
500,000
400,000
300,000
200,000
100,000
0
2009
2010
2011
Fixed assets
Current assets
Construction in progress
• Writing-off the debt of shareholders on the additional share
issue;
• Increased accrued debt on taxes and levies; and
• Increased liabilities to suppliers and contractors under
the investment program.
In 2011, the Company carried out a procedure to increase its
share capital. Consequently, other short-term liabilities recorded
in the financial statements include current debt to the sharehold-
ers on contributions to share capital, which is officially re-regis-
tered into share capital upon registration of the report on
the additional share issue with the Federal Financial Market Ser-
vice. The amount recorded on the 2011 financial statements was
RUR2,219 million (RUR11,193 million in 2010) compared with
RUR40,178 million in the 2009 financial statement.
DECEMBER 31,
2009
DECEMBER 31,
2010
DECEMBER 31,
2011
2.41
5.91
6.66
094
0.07
47.5
11.1
1.3
0.11
1.3
4.9
5.3
0.89
0.12
61.5
23.2
2.7
0.12
1.0
4.0
4.4
0.82
0.22
61.3
24.4
3.2
0.13
* For the purpose of calculating the above indicators, accounts payable exclude debt to shareholders on assets contributed to pay for the issued shares; and short-term accounts
receivable record advance payments for non-current assets.
**To calculate the above-mentioned indicators, the equity includes debt to shareholders on assets contributed to pay for the issued shares.
*** For the purpose of calculating the above-mentioned indicator, the EBITDA (net profit) amount includes no factors external to the Company’s management competency.
63
Information for shareholders and investorsAbout the CompanyOperations overviewSocial responsibilityAppendices In 2011, liquidity indicators for Federal Grid Company’s 2011 per-
formance showed the Company’s ability to repay its short-term
liabilities. The above-mentioned indicators show a relatively
high liquidity and solvency level.
The decrease in current, quick and absolute liquidity ratios is
associated with decreased short-term financial investments
(the repayment of VTB Bank and Alfa-Bank promissory notes).
The equity to total assets ratio shows equity share in assets and
the level of financial independence from debtors. The addressed
period saw an insignificant reduction in the equity to total assets
ratio driven by growth in the Company’s loan portfolio (raising
loans and bonded loans to finance the investment program.)
Nevertheless, the ratio is good and shows the strong financial
sustainability of Federal Grid Company.
On the whole, Federal Grid Company maintains a high liquidity
level and good equity to total assets ratio; its equity constitutes
82 % of assets.
2009-2011 net profit distribution, RUR million
DISTRIBUTION AREAS
Retained earnings (losses) for the reporting period:
Allocate to:
Reserve fund
Development
Coverage for losses brought forward and remuneration to the Board of Directors
Dividends
* Approved by Federal Grid Company’s general meeting of shareholders.
3.2.2 TARIFF REGULATION
Energy transmission tariffs are subject to State regulation and
are approved by the Russian Federal Tariff Service (Russian
FTS).
Key Principles on Using Available Cash
Available cash management is based on ensuring the maximum
efficiency of investment and the optimal risk/returns ratio.
Returns on financial investments were generated from investing
available corporate cash into Russia’s top banks with the high-
est reliability level. The banks were selected based on assess-
ing their financial operations and establishing the risk limit.
The main investment instruments relied on the investment term
and included bank deposits, current accounts balance and bank
notes.
In 2011, the Company’s good performance was driven by rea-
sonable liquidity management and streamlining the investment
structure in terms of returns on investment and minimizing risks.
Net Profit Distribution
The profit of Federal Grid Company after tax (net profit) defined
by financial statements is the source for reserve fund accrual
and dividend payments. According to Federal Grid Company’s,
FY 2011 performance, the Company recorded losses of
RUR2,468 million driven by the revaluation of financial invest-
ments in market-quoted shares and recording the accrual and
reversal on provisions for doubtful debt.
2009
-59,866
0
0
0
0
PERIOD
2010*
58,088
2,904
18,578
34,028
2,577.7
2011
-2,468
0
0
0
0
• Government Decree No. 1220 (dated 31 December 2009) on
for
tariff rates on
defining applicable
tariffs
the reliability and quality of goods and services provided;
long-term
• Russian FTS Decree No. 56-e/1 on
the approval of
methodological guidelines to calculate energy transmission
tariffs via the Unified National (all-Russian) Electric Grid;
Key regulations governing tariff rates applicable to UNEG energy
transmission include:
• Federal Law No. 35-FZ on the Energy Industry (dated
• Russian FTS Decree No. 231-e (dated 26 June 2008) on
the approval of methodological guidelines for the return on
invested capital method;
26 March 2003);
• Government Decree No. 109 (dated 26 February 2004) on
pricing policy applicable to electric and thermal energy within
the Russian Federation applicable till 1 January 2012;
• Government Decree No. 1178 (dated 29 December 2011) on
pricing policy applicable to regulated prices (tariffs) in
the energy industry;
• Russian FTS Decree No. 347-e/4 (dated 4 December 2009)
on the approval of the rate of return on invested capital to
calculate tariffs on energy transmission tariffs via the Unified
National (all-Russian) Electric Grid; and
• Government Decree No. 1172 (dated 27 December 2010) on
rules and
to
related
the approval of wholesale energy market
to some Government orders
amendments
the wholesale energy market;
64
Before 2010, the UNEG energy transmission tariff rates for Fe-
deral Grid Company were established by the economically rea-
sonable cost method.
Since 2010, as part of measures to upgrade the investment
attractiveness of the electricity industry, Federal Grid Company
has had rates for electricity transmission services over the UNEG
established based on the return on invested capital (RAB regula-
tion) method. The payment for standard process losses of elec-
trical energy (capacity) in the UNEG is made at rates set by
the Russian FTS in a differentiated manner based on the spe-
cific Russian region.
To determine the tariff for each year of the regulated accounting
period, required gross proceeds are calculated by summing
the values of return, return on invested capital and the value of
expenditures required to carry out regulated activities.In order to
avoid a sharp rise in rates as a result of RAB regulation,
a smoothing mechanism is provided. This mechanism involves
re-distributing required gross proceeds during the long-term
regulatory period.
Russian FTS Order No. 347-e/4 dated 4 December 2009 (as
amended and re-stated by Russian FTS Order No. 217-e/4 dated
1 September, 2010) establishes the basic tariff regulation para-
meters for 2010-2014 for Federal Grid Company:
INDICATOR*
Rate of return on capital invested as of 1 January 2010
Rate of return on capital invested after 1 January 2010
Invested capital return term, years
Initial RAB base, RUR billion
2010
3.9 %
11.0 %
35
647.6
2011
5.2 %
2012
6.5 %
2013
7.8 %
11.0 %
11.0 %
10.0 %
35
35
35
2014**
9.1 %
10.0 %
35
* 2012-2014 indicators may be changed after the regulator approves new tariffs and tariff parameters.
** In compliance with the Russian Government's Decree N 1178 dated 29 December 2011 (version dated 23 March 2012) “On Price Setting in the Sphere of Regulated Prices (Tariffs)
in Electric Energy Industry” (jointly with the Basics of Price Setting in the Sphere of Regulated Prices (Tariffs) in Electric Energy Industry and the Rules of State Regulating (Review,
Application) of Prices (Tariffs) in Electric Energy Industry), the rate of return during the first long term period of regulating, excluding the last year, may be set on a case by case basis
with regard to the capital invested until switch to RAB regulation and with regard to the capital created after switch to RAB regulation.
By Russian FTS Order № 552-e/2 (dated 29 December 2009)
(as amended by Russian FTS Order № 325-e/1 dated 6 Decem-
ber 2011) for Federal Grid Company’s tariffs for electric power
transmission to the UNEG from 1 January 2012 to 1 July 2012 are
set at 2011 tariff levels.
Federal Grid Company tariffs on energy transmission
services and electric facilities maintenance
for 2009-2011 period, RUR/MW/month
Тарифы...
By Russian Government Regulation № 1178 (dated 29 Decem-
ber 2011), “On pricing with regard to regulated prices (tariffs) in
the electric power industry,” the Federal Tariff Service (FTS) is
instructed:
• Until 1 April 2012, to decide on the tariff level for electric power
transmission over the Unified National (all-Russian) Electric
Grid (UNEG) by the management organization of the Unified
National (all-Russian) Electric Grid for 2012 – 2014 from 1 July
2012;
120,000
100,000
80,000
60,000
40,000
20,000
0
1
0
.
9
5
1
,
8
5
%
7
.
0
2
+
2
5
.
2
8
7
,
6
1
1
%
9
.
2
3
+
5
3
.
3
8
0
,
1
1
1
%
4
.
6
2
+
7
7
.
8
6
8
,
7
8
%
1
.
1
5
+
• In conjunction with the Russian Ministry of Economic
Development and the Ministry of Energy, before 1 April 2012 to
prepare and submit to the Russian Government proposals on
regulations,
making changes
providing a
for changing (indexing)
regulated prices (tariffs) in the electric power industry from
1 January to 1 July starting from 2013.
to Russian Government
time displacement
2009
2010
Q1 2011
Q2-Q4 2011
Tariff regulation based on long-term tariff rates with a view to
the return on invested capital involves the Company’s compli-
ance with service reliability and quality performance set forth by
the Russian Energy Ministry.
For 2010, tariffs for the North Caucasus Republics and the Stav-
ropol Territory were set in the amount of RUR37,845.23 / MW
per month; for 2011 – RUR43,783.55 / MW per month.
Order No. 296 of Russia’s Ministry of Energy dated 29 June
2010 establishes methods to calculate the reliability and quality
of provided goods and services for the organization operating
65
Information for shareholders and investorsAbout the CompanyOperations overviewSocial responsibilityAppendices
the Unified National (all-Russian) Electric Grid (UNEG) and ter-
ritorial grid organizations.
The FTS decision to establish 2011-2014 tariffs involves planned
service reliability and quality indicators for the UNEG-operating
organization for the 2011-2014 period.
The performance list includes indicators of energy transmission
reliability characteristics for technical failures and their effects
on consumers and service quality provided to consumers which,
in particular, describes the technical connection capacity.
Russia’s FTS Order No. 254-e/1 (26 October 2010) established
the methodological guidelines for the calculation and application of
multiplying (decreasing) factors for compliance with tariff rates set
for organizations that are involved in regulated activity with the reli-
ability and quality levels of provided goods and services. Subject
to the above-mentioned Guidelines, the Company’s revenues will
be subject to multiplying or decreasing factors within the 3 % limit.
The FTS decision to establish the 2011-2014 tariffs involves
planned service reliability and quality indicators for the UNEG-
operating organization for 2011-2014.
INDICATOR*
Service reliability level
Service quality level
In 2011, the actual reliability and quality levels of services pro-
vided by Federal Grid Company were:
• Service reliability level – 0.0346;
• Service quality level – 1.1983.
The switch of Federal Grid Company to RAB regulation ensured ade-
quate financial potential to meet large-scale challenges in investment
activities. The approved investment program will enable the Com-
pany to enhance stable energy supply to customers, as well as
the generation capacity of power plants, upgrade its grid and imple-
ment a range of important government projects. Moreover, RAB reg-
ulation defines a brand new approach to cost management in terms
of established operational expenses performance (2 % per year for
Federal Grid Company).
REGULATION PERIOD
2011
0.0490
1.2599
2012
0.0483
1.2410
2013
0.0475
1.2224
2014
0.0468
1.2040
* 2012-2014 indicators may be changed after the regulator approves new tariffs and tariff parameters.
3.2.3 COST OPTIMIZATION
In order to increase business efficiency, streamline volumes and
structure production and administrative costs, while also under-
taking anti-crisis efforts, the Federal Grid Company Manage-
ment Board has approved the integrated program aimed at cost
cutting in 2009-2011.
In 2011, the Company proposed the Cost Management Program.
In 2011, the nominal cumulative effect of cutting costs for the pro-
duction and sales of goods (work/services) under the Cost Man-
agement Program was RUR1,996 million (which was twice as
much as the planned level).
Key objectives of the Cost Management Program in 2011 were:
• Reducing energy losses in the UNEG;
• Cutting material costs;
• Optimizing the cost of repairs and third party services to
maintain grids and distribution facilities;
• Reducing employee costs by implementing an efficient human
resource policy; and
• Decreasing general business and other expenses.
No doubt, we will continue our work to manage costs
with a view to the Company’s scope, regional specifics
and the potential of the investment program to enhance
performance. We believe that the Company may pursue
a lot of options to optimize its costs and unlock reserves.
Andrey Kazachenkov,
First Deputy Chairman of the Management Board
• Introducing innovative methods for UNEG operation, repairs
and maintenance; and
• Employing the relevant number of highly qualified specialists
to support Federal Grid Company business operations with
optimal personnel costs.
Cost cutting is the Company’s main priority in coming years.
The Company has developed an action plan to cut costs in 2011-
2014, which will enhance business performance and reduce
service costs.
In terms of cost cutting, the Company’s focus involves:
• Cutting the per-unit purchase costs of goods, work and
services by at least 10 percent per annum in real terms;
• Increasing performance by cutting operational expenses,
nominal operating costs and losses within the UNEG;
The action plan’s economic effect will depend on increased pro-
curement efficiency, reduced energy consumption by sub-sta-
tions and reduced prices for maintenance and repairs carried
out by external contractors, as long as the physical scope of
work is sustained.
66
3.2.4 DEBT PORTFOLIO
2011 Bond Issues
By the end of 2011, Federal Grid Company’s debt portfolio grew to
RUR130 billion on the back of the public placement of bonds and
raising credit from Gazprombank. At the same time, the Company
has met its obligations on servicing its debt portfolio and debt repay-
ment in full and on time.
The Company’s debt portfolio as of 31 December 2011:
TYPE OF LOAN
Bond issues
Gazprombank credit
Total
AMOUNT,
RUR BILLION
105
25
130
MATURITY
2.5-10 years
3 years
—
In addition, the Company has revolving credit facilities opened
by Alfa-Bank with a RUR20 billion limit, Sberbank of Russia with
a RUR75 billion limit, Gazprombank with a RUR25 billion limit,
Bank Saint Petersburg with a RUR6 billion limit, ACB Russia
with a RUR6.5 billion limit and a non-revolving credit facility at
Raiffeisenbank for RUR10 billion. The credit facilities are valid
for 5 to 15 years.
We plan to increase our debt portfolio in order to finance
the 2012-2014 investment program and to refinance current
debt.
The Company intends to cover cash shortages from existing
and scheduled credit facilities and by offering bond issues on
Russian and foreign markets. The use of specific loan instru-
ments will depend on market conditions.
The Company’s outstanding bond issues:
On 7 June 2011, the Federal Financial Markets Service (FFMS) regi-
stered the securities prospectus of Federal Grid Company for
RUR125 billion. The decision to place bonds was made by the Board
of Directors 29 April 2011. Under the above-mentioned prospectus,
the Company placed Series 13, 19, 15, and 18 bonds for a total of
RUR55 billion.
The bonds were placed via public subscription on the MICEX Stock
Exchange to a broad-based group of investors. The funds raised
were allocated to finance the investment program.
On 6 October 2011, the Company redeemed Series 4 bonds in
Тарифы...
the amount of RUR6 billion.
2009-2011 debt portfolio performance, RUR million
150
120
90
60
30
0
5
2
5
0
1
6
5
3
1
as of
31 December 2009
as of
31 December 2010
as of
31 December 2011
Bond issues
Credits
SERIES
Type of securities
Registration number
Issue, RUR million
Number, million bonds
Denominated currency
Maturity period
Interest rate
Issue State registration date
Issue report registration date
Placement date
Maturity / option date
Coupon yield per 1 bond
Stock exchange
Quotation lists
Outstanding issue of 1 January 2011, RUR million
Outstanding issue as of 31 December 2011, RUR million
Outstanding issue as of 31 December 2011, RUR million
6
7
8
9
Documentary interest-bearing non-convertible bonds kept on centralized deposit
with a call and put options
4-06-65018-D
4-07-65018-D
4-08-65018-D
4-09-65018-D
outstanding
outstanding
outstanding
outstanding
10,000
10
5,000
10
10,000
10
5,000
10
1,000 RUR
1,000 RUR
1,000 RUR
1,000 RUR
10 years
7.15 %
05.11.2009
05.11.2009
05.10.2010
28.09.2010
26.09.2013
35.65
MICEX
B
10,000
10,000
10 years
7.50 %
05.11.2009
05.11.2009
17.11.2010
29.10.2010
27.10.2015
37.4
MICEX
B
5,000
5,000
10 years
7.15 %
05.11.2009
05.11.2009
05.10.2010
28.09.2010
26.09.2013
35.65
MICEX
B
10,000
10,000
10 years
7.99 %
05.11.2009
05.11.2009
17.11.2010
29.10.2010
24.10.2017
39.84
MICEX
B
5,000
5,000
67
Information for shareholders and investorsAbout the CompanyOperations overviewSocial responsibilityAppendices
Company’s outstanding bond issues (continued)
SERIES
Type of securities
Registration number
Issue, RUR million
Number, million bonds
Denominated currency
Maturity period
Interest rate
Issue State registration date
Issue report registration date
Placement date
Maturity / option date
Coupon yield per 1 bond
Stock exchange
Quotation lists
Outstanding issue of 1 January 2011, RUR million
Outstanding issue as of 31 December 2011,
RUR million
Credit Ratings
10
11
13
15
18
19
Documentary interest-bearing non-convertible bonds kept on centralized deposit with a call and put options
4-10-65018-D
4-11-65018-D
4-13-65018-D
4-15-65018-D
4-18-65018-D
4-19-65018-D
outstanding
outstanding
outstanding
outstanding
outstanding
outstanding
10,000
10
10,000
10
10,000
10,000
15,000
20,000
1,000 RUR
1,000 RUR
1,000 RUR
1,000 RUR
1,000 RUR
1,000 RUR
10 years
7.75 %
05.11.2009
05.10.2010
28.09.2010
24.09.2015
38.64
MICEX
B
10,000
10,000
10 years
7.99 %
05.11.2009
17.11.2010
29.10.2010
24.10.2017
39.84
MICEX
B
10,000
10,000
10 years
8.5 %
07.06.2011
26.07.2011
05.07.2011
22.06.2021
42.38
MICEX
B
0
12 years
8.75 %
07.06.2011
03.11.2011
27.10.2011
23.10.2014
43.63
MICEX
B
0
12 years
8.5 %
07.06.2011
23.12.2011
12.12.2011
09.06.2014
42.38
MICEX
B
0
12 years
7.95 %
07.06.2011
26.07.2011
21.07.2011
18.07.2018
39.64
MICEX
B
0
10,000
10,000
15,000
20,000
12 May 2011 – At its annual rating review, Moody’s confirmed
Federal Grid Company’s credit ratings at Baa2 with a stable out-
look, as well as its national scale rating at Aaa.ru.
18 January 2011 – Standard&Poor’s confirmed Federal Grid
Company’s credit ratings: long-term international scale credit
rating at BBB, outlook Stable and a national scale rating at
ruAAA.
18 June 2010 – Standard & Poor’s confirmed Federal Grid Com-
pany’s credit ratings: long-term international scale credit rating at
BBB, outlook Stable and national scale rating at ruAAA.
22 December 2009 – Standard & Poor’s changed its rating out-
look on Federal Grid Company from Negative to Stable. At
the same time, it confirmed the Company’s long-term interna-
tional scale credit rating at BBB, outlook Stable and national
scale rating at ruAAA.
14 April 2009 – Standard & Poor’s confirmed Federal Grid Com-
pany’s credit ratings: long-term international scale credit rating at
BBB, outlook Stable and national scale rating at ruAAA with
a Negative outlook.
The high level of the Company’s creditworthiness and its finan-
cial sustainability are confirmed by ratings assigned by top inter-
national rating agencies. The current credit ratings are in
the investment category and show that the Company’s key per-
formance indicators are in compliance with the level required for
the full and timely performance of financial obligations.
Credit ratings as of 31 December 2011:
RATING AGENCY
RATING
INTERNATIONAL SCALE NATIONAL SCALE
Standard&Poor's
Moody's
BBB/Stable
Baa2/Stable
ruAAA
Aаа.ru
Federal Grid Company credit ratings during the last three years:
23 September 2011 – Standard&Poor’s confirmed Federal Grid
Company’s credit ratings: long-term international scale credit
rating at BBB, outlook Stable and a national scale rating of
ruAAA.
68
3.3
CORPORATE GOVERNANCE
3.3.1 CORPORATE GOVERNANCE PRINCIPLES
The corporate governance system established by the Company complies with best international practice and
is based on principles set forth in the Russian Corporate Conduct Code, the Company’s internal Corporate
Conduct Code and Principles of Corporate Governance from the Organization for Economic Cooperation and
Development (OECD).
The Company follows corporate governance principles by mak-
ing efforts aimed at profit generation, focusing its business activ-
ity on the long-term, complying with applicable legal require-
ments and
rights, maintaining
operational transparency, protecting the environment, meeting
safety rules and maintaining the social security system for its
employees.
respecting shareholders’
The Company has approved and applied internal documents
which regulate the structure, procedures and practices of corpo-
rate governance.
The full list of internal documents is available on our corporate web
site (Investors / Corporate Governance / Corporate Documents).
In 2011, we approved the Articles of Association as amended
and re-stated to record changes in the Company’s charter capi-
tal and made several technical amendments related to the Com-
pany’s branches.
The Company’s SDCs are managed in accordance with the Reg-
ulations on SDCs Management. These Regulations govern
the execution by the Company of its shareholder’s (member’s)
rights at General Meetings of Shareholders (members),
the Board of Directors and Audit Commissions of the SDCs and
set forth general conditions of the corporate relations between
the Company and its SDCs.
Corporate Governance Principles
We acknowledge the rights
of all stakeholders as provided
for by laws and seek to cooperate
with them to facilitate the Comrany’s
growth and financial sustainability.
The Bord of Directors is accountable to
all shareholders in compliance with
applicable laws.
RESPONSIBILITY
ACCOUNTABILITY
We ensure prompt disclosure
of all essential facts related
to our operations, including
our financial status, social and
environmental performance,
operations results, ownership
structure and Company
management. The Company
makes this information available
to any whom it may concern.
TRANSPARENCY
FAIRNESS
We are committed to protect
shareholders’ rights and treat
all shareholders equally.
The Board of Directors provides
all shareholders with effective
remedies in case of any violation
of said rights.
69
Information for shareholders and investorsAbout the CompanyOperations overviewSocial responsibilityAppendices 3.3.2 MANAGEMENT AND CONTROL BODIES
The Company’s corporate management system has a well-
developed structure with a seamless mechanism of relation-
ships between management and control bodies.
Organizational Structure of the Company’s Management Bodies
Audit Commision
election
General Shareholders
Meeting
election
election
Independed External
Auditor
election
reports
recommendations
Committees:
Audit Committees
HR and Remuneration
Committees
Strategy Committees
Investment Committees
control
election
reports
recommendations
Board of Directors
Internal Audit
control
election
preparation
of materials
appointment
and control
reports
recommendations
Chairman
Management Board
performance
monitoring
reports
Specialized Internal
Audit Bodies
Branches
reports
removal
of revealed
disadvantage
The General Meeting of Shareholders shall be the Company’s
highest management body. The Board of Directors outlines
the general focus on corporate development and supervises
operations of the Company’s Management Board, which is
responsible for managing the Company on a day-to-day basis.
The Chairman of the Management Body is the chief executive
officer (CEO) of the Company. The Board of Directors estab-
lished committees which are aimed at improving the perfor-
mance of the Board of Directors. The Company employs an effi-
cient control system, both externally by shareholders
(the independent auditor and the Audit Commission) and inter-
nally (special-purpose units for internal audit and control).
General Meeting of Shareholders
In 2011, the Company held two General Meetings of Sharehold-
ers. At the Extraordinary General Meeting on 23 March, the share-
holders approved the transaction to acquire additional shares of
INTER RAO UES. The Annual General Meeting of Shareholders
on 29 June made a resolution on dividend payment on ordinary
shares for 2010 and approved the 2010 annual report and finan-
cial statement, the Articles of Association as amended and re-
stated, as well as elected the Board of Directors and the Audit
Commission and approved the Company’s Auditor.
Board of Directors
The Board of Directors is elected by the General Meeting of
Shareholders via cumulative voting for one year terms and is
made up of 11 members (six of these members must represent
the State in accordance with the Company’s Articles of Associa-
tion). The Company’s Articles of Association stipulate member-
ship of Market Council representatives, a non-profit organization
incorporated as a non-profit partnership uniting power sector
companies and large energy consumers on a membership basis.
Four independent directors are elected to the Board of Directors,
including the Chairman of the Board of Directors, to ensure
an unbiased decision-making process and balanced interests
for different shareholder groups.
Operations of the Board of Directors shall be governed by
the Federal Law “On Joint Stock Companies”, Russian laws and
internal corporate documents.
70
Composition of the Board of Directors acting from 29 June 2010 to 29 June 2011
NAME
Sergey Shmatko, Chairman of
the Board of Directors
Boris Ayuev
Oleg Budargin
Alexey Makarov
Andrey Malyshev, Deputy Chairman
of the Board of Directors
Dmitry Ponomarev
Rashid Sharipov, independent
director
Ernesto Ferlenghi, independent
director
Georgy Kutovoy
Igor Khvalin,
independent director
BORN
1966
1957
1960
1937
1958
1967
1968
1968
1937
1974
Yuri Solovyev, independent director
1970
EDUCATION
Higher
POSITION
Russian Minister of Energy
Higher
Higher
Higher
Higher
Higher
Higher
Higher
Higher
Higher
Higher
Chairman of the Management Board, member of the Board of Directors
of SO UES
Chairman of the Management Board and member of the Company’s
Board of Directors
Director of the Energy Research Institute of the Russian Academy of
Sciences; Member of the Russian Academy of Sciences
Member of the Management Board, Deputy Chairman of the Management
Board of ROSNANO
Chairman of the Management Board of NCP Market Council; Chairman of
the Management Board of ATS
Deputy General Director of KFK-Consult
Head of the Representative Office of Eni in the Russian Federation and
the CIS
Advisor on the Power Sector to the President of United Metallurgical
Company
General Director of Volga Engineering Group
First Deputy President – Chairman of the Management Board of VTB Bank
Composition of the Board of Directors in office from 29 June 2011
(positions indicated as of the election date)
Ernesto Ferlenghi
Positions in other organizations
Position in the Company: Chairman of the Board of Directors Independent Director
NAME OF ORGANIZATION
Born: 1968
Education: Tor Vergata University of Rome, Department of Mathematics, Physics and
Natural Sciences, holds a degree in physics
Member of the Company’s Board of Directors since 2008.
Holds no shares in the Company.
Eni S.p.A. (Italy)
Eni (Russian Federation
and CIS)
ORGANIZATION'S
REGISTERED ADDRESS
Piazzale Enrico Mattei
1, 00144, Rome, Italy
10 Bolshoy Levshinsky
Lane, Building 1,
Moscow, Russia,
1119034
POSITION
Vice President
Head of
the Representative
Office
Igor Khvalin
Positions in other organizations
Position in the Company: Independent Director, Chairman of the Strategy Committee
and member of the Committees for Investments, Audit, HR and Remuneration.
NAME OF ORGANIZATION
ORGANIZATION'S
REGISTERED ADDRESS
POSITION
Born: 1974
Education: Moscow Aviation Institute (State Technical University), Moscow State
Pedagogical University, PhD. in history
Member of the Company’s Board of Directors since 2010.
Holds no shares in the Company.
Closed Joint Stock
Company Engineering
Group “Volga”
12 Goncharnaya Street,
Building 6, Moscow,
Russia, 109240
Chief Executive
Officer, Chairman
of the Board
of Directors
Commission attached
to the President of
the Russian Federation
on modernization
and the technological
development of
the Russian economy
Open Joint Stock
Company “Holding
of the Inter-regional
Distribution Grid
Companies”
12, Elizavetinsky Lane,
Building 1, Moscow,
Russia, 105005
Member of
the Working Group
on Energy Efficiency
5A Akademika
Chelomeya Street,
Moscow, Russia,
117630
Member of
the Board of
Directors
71
Information for shareholders and investorsAbout the CompanyOperations overviewSocial responsibilityAppendices Boris Ayuev
Positions in other organizations
Position in the Company: Member of the Board of Directors
Born: 1957
Education: Ural Polytechnic Institute with a degree in electric power plants, holds
a PhD. in technical sciences.
Member of the Company’s Board of Directors since 2004.
Participation share in the Company’s share capital: 0.007196 %
Share of the Company’s ordinary stock: 0.007196 %
NAME OF ORGANIZATION
Open Joint Stock
Company “System
Operator of Unified Energy
System”
ORGANIZATION'S
REGISTERED ADDRESS
7 Kitaigorodsky Passage,
Building 3, Moscow,
Russia, 109074
POSITION
Chairman of
the Management
Board, Member
of the Board of
Directors
Open Joint Stock Company
“Administrator of the Trading
System of the Wholesale
Electricity Market”
12 Krasnopresnenskaya
Embankment, Floor
8, Moscow, Russia,
123610
Member of
the Board of
Directors
Joint Stock Company
“Financial Settlement
Centre “
Closed Joint Stock
Company “Agency for
Balance Forecasting in
the Electric Power Industry”
Non-profit partnership
“Russian National
Committee of CIGRE
(International Council on
Large High Voltage Electric
Systems)
12 Krasnopresnenskaya
Embankment, Entrance
7, Floors 7-8, Moscow,
Russia, 123610
Member of
the Board of
Directors
22 Andropov Avenue,
Moscow, Russia,
115533
Member of
the Board of
Directors
Chairman
7 Kitaigorodsky
Passage, Building
3, Moscow, Russia,
109074
Oleg Budargin
Positions in other organizations
Position in the Company: Chairman of the Management Board, Member of the Board of
Directors
NAME OF ORGANIZATION
Born: 1960
Education: Norilsk Industrial Institute, cum laude degree in industrial and civil
engineering
Member of the Company’s Board of Directors since 2010.
Participation share in the Company’s share capital: 0.000234 %
Share in the Company’s ordinary stock: 0.000234 %
Open Joint Stock
Company “All-Russian
Regional Development
Bank”
Open Joint Stock
Company “INTER RAO
UES”
ORGANIZATION'S
REGISTERED ADDRESS
65 Suschevsky Val,
Block 1, Moscow,
Russia, 1129594
POSITION
Member of
the Supervisory
Board
27 Bolshaya
Pirogovskaya Street,
Building 3, Moscow,
Russia, 119435
Member of
the Board of
Directors
Kirill Lyovin
Positions in other organizations
Position in the Company: Member of the Board of Directors, Member of the Strategy
and Audit Committees
NAME OF ORGANIZATION
ORGANIZATION'S
REGISTERED ADDRESS
POSITION
Born: 1968
Education: Moscow Aviation Institute (MAI), majoring in economics and research and
design management
Member of the Company’s Board of Directors since 2011.
Holds no shares in the Company
Open Joint Stock
Company “Aeroflot –
Russian Airlines”
Open Joint Stock
Company “Russian
Agricultural Bank”
10 Arbat Street,
Moscow, Russia,
119002
3 Gagarin Lane,
Moscow, Russia,
119034
Alexey Makarov
Positions in other organizations
Position in the Company: Member of the Board of Directors, Member of the Strategy
and Investment Committees
NAME OF ORGANIZATION
Born: 1937
Education: Leningrad Polytechnic Institute, PhD degree in economics (1970), professor
(1974); an expert on power industry system research, the development of power sector
policy and forecasts in the fuel and power energy sector. Member of the Russian
Academy of Sciences (RAS).
Russian Academy of
Sciences
ORGANIZATION'S
REGISTERED ADDRESS
14 Leninsky prosp.,
Moscow, Russia
Member of the Company’s Board of Directors since 2008.
Holds no shares in the Company
72
Federal State Budget-
Financed Scientific
Organization “Energy
Research Institute of
the Russian Academy of
Sciences”
31 Nagornaya Street,
Building 2, Moscow,
Russia, 117186
Member of
the Board of
Directors
Member of
the Management
Board, Deputy
Chairman of
the Management
Board
POSITION
Fellow of the Rus-
sian Academy of
Sciences for Power
Engineering, Me-
chanical Engineer-
ing, Mechanical Sci-
ences and Control
Processes
Director
Andrey Malyshev
Positions in other organizations
Position in the Company: Member of the Board of Directors, Chairman of the Investment
Committee
NAME OF ORGANIZATION
Born: 1959
Education: Moscow Power Engineering University, with a degree in heat power
automation as a heat power engineer. Ph.D. in sociology and technical sciences.
Member of the Company’s Board of Directors since 2008.
Holds no shares in the Company.
Closed Joint Stock
Company “Prepreg-SKM”
Closed Joint Stock
Company “TREKPOR
TEKHNOLODGI”
Closed Joint Stock
Company “Galileo
Nanotech”
Limited Liability Company
“SITRONICS-Nano”
Open Joint Stock
Company “RusHydro”
ORGANIZATION'S
REGISTERED ADDRESS
14 Krzyzanovskyi
Street, Building 3,
Moscow, Russia,
14117218
3G Priborostroiteley
Street, Dubna,
the Moscow Region,
Russia, 141980
1, Zavodskaya Street,
Khotkovo, the Sergiev-
Posad District,
the Moscow Region,
Russia, 141371
12 Zapadny Lane,
Building 1, Zelenograd,
Moscow, Russia,
1124460
51 Respubliki
Street, Krasnoyarsk,
the Krasnoyarsk
Region, Russia, 660075
POSITION
Chairman
of the Board of
Directors
Deputy Chairman
of the Board
of Directors
Chairman
of the Board of
Directors
Chairman
of the Board
of Directors
Member of
the Board of
Directors, Chairman
of the Strategy
Committee
Limited Liability Company
“Lithium-ion Technologies”
Joint Stock Company
“Plakart”
94 Khmelnitsky
Street, Novosibirsk,
the Novosibirsk Region,
Russia, 94630110
Chairman of
the Board of
Directors
50 Kommunisticheskaya
Street, Novosibirsk,
Russia, 6300070
Chairman
of the Board
of Directors
Limited Liability
Company “Hematological
Corporation”
34/63, Obrucheva
Street, Building 2,
Moscow, Russia,
117342
Limited Liability Company
“NT-Pharma”
50 Zhivopisnaya Street,
Russia, 123098
Joint Stock Company
“Fiber-optic systems”
5 Svetotekhnikov
Highway, Saransk,
the Republic of Mordo-
via, Russia,430034
Chairman of the
Board of Directors
Chairman of
the Board of Direc-
tors
Member of the Board
of Directors
Fund for Infrastructure
Education Programs
10 60-Letiya Oktyabrya
Prospect, Moscow,
Russia, 117036
Member
of the Management
Board
Limited Liability Company
“SinBio”
55/1 Leninsky prosp,
Building 2, Moscow,
Russia, 119333
Chairman
of the Board
of Directors
Open Joint Stock Com-
pany “ROSNANO”
12A Nametkina Street,
Moscow, Russia,117420
Member
of the Management
Board, Deputy Chair-
man of the Manage-
ment Board
73
Information for shareholders and investorsAbout the CompanyOperations overviewSocial responsibilityAppendices Dmitry Ponomarev
Positions in other organizations
Position in the Company: Member of the Board of Directors, Member of the Strategy
Committee
NAME OF ORGANIZATION
Born: 1967
Education: the International Law Department of the Moscow State Institute of Foreign
Affairs (under the Ministry of Internal Affairs) and the Economics Department of
the C.E.P. Paris Institute of Political Sciences
Member of the Company’s Board of Directors since 2008.
Holds no shares in the Company.
Open Joint Stock
Company “Administrator
of the Trading System of
the Wholesale Electricity
Market”
ORGANIZATION'S
REGISTERED ADDRESS
12 Krasnopresnenskaya
Embankment, Entrance
7, Floor 8, Moscow,
Russia, 123610
POSITION
Member of
the Board of
Directors
Open Joint Stock
Company “System
Operator of Unified Energy
System”
7 Kitaigorodsky
Passage, Building
3, Moscow, Russia,
109074
Member of
the Board of
Directors
Joint Stock company
“Financial Settlement
Centre”
12 Krasnopresnenskaya
Embankment, Entrance
7, Floors 7-8, Moscow,
Russia, 123610
Member of
the Board of
Directors
Yuri Solovyev
Positions in other organizations
Position in the Company: Member of the Board of Directors (Independent Director),
Member of the Investment and Strategy Committees
NAME OF ORGANIZATION
Born: 1970
Education: Plekhanov Russian Academy of Economics; London Business School, МВА
Member of the Company’s Board of Directors since 2010.
VTB Bank (Open Joint
Stock Company)
ORGANIZATION'S
REGISTERED ADDRESS
29 Bolshaya Morskaya
Street, St. Petersburg,
Russia
POSITION
First Deputy
President –
Chairman of
the Management
Board
Holds no shares in the Company.
Denis Fedorov
Positions in other organizations
Position in the Company: Member of the Board of Directors, Chairman of the Committee
for HR and Remuneration and member of the Audit Committee
NAME OF ORGANIZATION
Born: 1978
Education: Bauman Moscow State University, majoring in Economic Management;
completed post-graduate course at the Moscow Power Engineering Institute majoring
in Economics and the Industrial Energy Sector. Ph.D. in Economics.
Open Joint Stock Company
“Centrenergyholding”
ORGANIZATION'S REGIS-
TERED ADDRESS
16 Nametkina Street,
Moscow, Russia,
117997
Member of the Company’s Board of Directors since 2011.
Holds no shares in the Company.
Open Joint Stock Company
“Tsentrenergokholding”
Limited Liability Company
“Gazprom energoholding”
101 Prosp. Vernadsk-
ogo prospect, Building
3, Moscow, Russia,
119526
16 Nametkina Street,
Moscow, Russia,
117997
UAB “Fortis Energy”
(CJSC “Fortis Energy”)
Justiniškių g. 64 ,
Vilnius, Lithuania
Fund for the Development
of Education, Science and
Engineering “Nadezhda”
17 Krasnokazarmen-
naya Street, Moscow,
United Institute for High
Temperatures of the
RAS, National Heat and
Mass Transfer Commit-
tee of the RAS
POSITION
Head of the De-
partment for the
Development of the
Power Sector and
Marketing in Power
Engineering
General Director,
Member of the
Board of Directors
General Director
Member of the
Management Board
Member of the
Management Board
Open Joint Stock Company
for Power Engineering and
Electrification “Mosenergo”
101 Prosp. Vernadsk-
ogo , Building 3, Mos-
cow, Russia, 119526
Open Joint Stock Com-
pany “ Second Generation
Company of the Wholesale
Electricity Market”
Open Joint Stock Com-
pany “Sixth Generation
Company of the Wholesale
Electricity Market”
The Solnechnodolsk
Settlement, the Izo-
bilnensky District, the
Stavropol Region, Rus-
sia, 356128
101 Prosp. Vernadsk-
ogo , Building 3, Mos-
cow, Russia, 119526
Open Joint Stock Com-
pany “Territorial Generation
Company № 1”
1 Marsovo Pole, St.
Petersburg, Russia,
1191186
Joint Stock Company
Kaunas Heat and Power
Plant
Taykos av. 147, LT-
51142, Kaunas, Lithu-
ania
Member of the
Board of Directors
Chairman of the
Board of Directors
Chairman of the
Board of Directors
Member of the
Board of Directors
Member of the
Management Board
74
Closed Joint Stock Com-
pany “Mezhregionenergo-
stroy”
2/1 Semenovskaya
Embankment, Moscow,
Russia, 105094
Chairman of the
Board of Directors
Joint Stock Company “Me-
zhregionenergostroy”
2 Energetikov Lane,
Kaliningrad, Russia,
236034
Chairman of the
Board of Directors
Open Joint Stock Company
“Heat Energy Company
Mosenergo”
5 Golianovskaya Street,
Building 9, Moscow,
Russia, 105094
Member of the
Board of Directors
Open Joint Stock Company
“Tyumen Retail Supplier”
Non-Profit Partnership “The
Council of Electric Power
Producers and Strategic In-
vestors in the Power Indus-
try” (NPP “Energy Producer
Council”)
CJSC “Kaunas Heat-
Electric Generating Plant”
(CJSC “Kauno termofikat-
sine electrine”)
3 Nizhnevartovskoye
Highway, Building 7,
Surgut, the Khanty-
Mansiysk Autonomous
Okrug-Yugra the Tyumen
Region, Russia, 628406
28 B Balaklavsky Bou-
levard, Building Б, Mos-
cow, Russia, 117452
Chairman of the
Board of Directors
Member of the Su-
pervisory Board
147, Taykos Street,
LT-3031, Kaunas, Lithu-
ania
Member of the
Management Board
Open Joint Stock Company
“Holding of Inter-regional
Distribution Grid Companies”
5A Akademika Che-
lomeya Street, Moscow,
Russia, 117630
Member of the
Board of Directors
Open Joint Stock Company
“INTER RAO UES”
12 Krasnopresnens-
kaya Embankment,
Entrance 7, Moscow,
Russia, 123610
Member of the
Board of Directors
Rashid Sharipov
Positions in other organizations
Position in the Company: Member of the Board of Directors (Independent Director),
Chairman of the Audit Committee, member of the HR and Remuneration Committee
NAME OF ORGANIZATION
Born: 1968
Education: Moscow State University of Foreign Affairs, graduated in 1991, degree in
international affairs and international law. California Western Scholl of Law, 1993, LL.M
degree
Member of the Company’s Board of Directors since 2008.
Holds no shares in the Company.
ORGANIZATION'S
REGISTERED ADDRESS
3 Smolensk Square,
Office 650, Moscow,
Russia, 121099
POSITION
Deputy General
Director
Member of
the Board of
Directors
Limited Liability Company
“KFK-Consult”
Open Joint Stock
Company “System
Operator of Unified Energy
System”
7 Kitaigorodsky
Passage, Building
3, Moscow, Russia,
109074
Open Joint Stock
Company “All-Russian
Regional Development
Bank”
Irkutsk Joint Stock
Company for Power and
Electrification
65 Suschevsky Val,
Block 1, Moscow,
Russia, 1129594
Member of
the Supervisory
Board
3 Sukhe-Bator Street,
Irkutsk, the Irkutsk
Region, Russia,
3664025
Member of
the Board of
Directors
Open Joint Stock
Company “Federal Hydro
Generating Company –
RusHydro”
51 Respubliki
Street, Krasnoyarsk,
the Krasnoyarsk
Region, Russia, 660099
Member of
the Board of
Directors, Chairman
of the Audit
Committee
On 29 June 2011, Vladimir Furgalsky, Corporate Governance
and Strategic Communications Director, was elected Secretary
of Federal Grid Company’s Board of Directors.
Vladimir Furgalsky
Position in the Company: Secretary of the Board of Directors
Year of Birth: 1977
Education: St. Petersburg University of Economics and Finance, University of Arkansas,
USA (degree: Master of Business Administration (MBA)
Holds the position of Corporate Governance and Strategic Communications Director,
Federal Grid Company.
Election year: 2011
Holds no shares in the Company.
75
Information for shareholders and investorsAbout the CompanyOperations overviewSocial responsibilityAppendices Board of Directors Activities
In 2011, the Company’s Board of Directors held 29 meetings
(three of them were held in the form of joint attendance) and made
resolutions on 130 issues. The Board of Directors approved long-
term Company development programs, including: the Innovative
DevelopmentProgram, the Options Program, the Insurance Pro-
gram, the 2011 and long-term Cost Management Program and
Resolutions on Liability Insurance for the Company’s Manage-
ment Bodies and Executive Officers and Engineering Policy.
The Board made decisions defining the main areas of corporate
operations: localizing production within the Russian Federation
with Power Machines, Hyundai Electric Systems and ELEKTRO-
ZAVOD and the 2011-2013 program to reduce investment costs.
Committees of the Board of Directors
The committees aim to upgrade the performance of the Board of
Directors by addressing the most important issues falling under
the competence of the Board of Directors and developing rec-
ommendations on said issues.
Strategy Committee
The Committee’s functions include: addressing and developing
recommendations for the Board of Directors on issues related to
the development of the Russian Unified Energy System.
Composition
• Igor Khvalin, Chairman of the Committe; General Director of
Структура потери эл-ии в сети ЕНЕС...
The structure of issues addressed at 2011
Board of Directors meetings
6
5
4
3
2
1
2
3
4
5
6
Day-to-day operation of the Company
Interested party transactions
The Company’s business priorities
Position of the Company’s representatives
in the management bodies of affiliated entites
Human Resourses
Reports of the Management Board
1
65
23
16
15
7
4
• Maria Tikhonova, Director of the Economic Regulation and
Property Relations Department at the Fuel and Energy Sector
of the Russian Ministry of Energy;
• Vladimir Fortov, Member of the Presidium of the Russian
Volga Engineering Group;
Academy of Sciences;
• Roman Berdnikov, Deputy Chairman of the Management
• Nikolay Shulginov, First Deputy Chairman of the Management
Board of Federal Grid Company;
Board of SO UES.
• Anatoly Dyakov, President of the Unified Energy Complex of
Russia and the Non-Profit Partnership Scientific and Technical
Council of UES;
• Viktor Kudryavy, Advisor to the President of Eurocement
Group;
• Igor Kozhukhovsky, Director General of APBE;
• Natalia Zaikina, Deputy Chairman of the Board of Directors at
NCP Market Council;
• Kirill Lyovin, Deputy Chairman of the Management Board of
Russian Agricultural Bank;
• Yuri Lipatov, Chairman of the Power Energy Committee of
the Russian State Duma;
• Alexey Makarov, Director of the Energy Research Institute of
the Russian Academy of Sciences;
• Valentin Mezhevich, First Deputy Chairman of the Commission
for Natural Monopolies of the Federation Council of the Russian
Federal Assembly;
Committee’s 2011 Activities
The Strategy Committee held four meetings, two of them in the form
of the joint attendance. The meetings reviewed the Innovative
Development Program until 2020 and Specifications to Develop
the Company’s Growth Strategy until 2025.
Investment Committee
The Committee is responsible for reviewing and submitting to
the Board of Directors recommendations on the Company’s
investment policy and advising the Board of Directors on any
investment risks.
Composition
• Andrey Malyshev, Chairman of
the Committe; Deputy
Chairman of the Management Board of ROSNANO;
• Alexander Ilyenko, Director for UES Asset Management of SO
• Dmitry Ponomarev, Chairman of the Management Board of
UES;
NCP Market Council;
• Roman Berdnikov, Deputy Chairman of the Management
• Alexander Rogov, Head of the Energy Sector Development
and Marketing Office at the Energy Sector Development and
Marketing Department of JSC Gazprom;
Board of Federal Grid Company;
• Vladimir Mayorov, Director General of ECMC UES;
• Yelena Povolotskaya, Financial Director at the NCP Market
• Yuri Solovyev, First Deputy President – Chairman of
Council;
the Management Board of VTB Bank;
• Alexey Makarov, Director of the Energy Research Institute of
76
RAS;
• Vasily Nikonov, Director of the Electric Power Industry
Development Department at the Russian Ministry of Energy;
• Yuri Solovyev, First Deputy President – Chairman of
the Management Board of VTB Bank;
• Igor Khvalin, General Director of Volga Engineering Group;
• Denis Fedorov, Head of the Energy Sector Development and
Marketing Office in the Department for Marketing and Gas and
Liquid Hydro-carbon Processing at Gazprom;
• Sergey Serebryannikov, Rector of the State Educational
• Kirill Lyovin, Deputy Chairman of the Management Board of
Institution of Higher Professional Education MPEI (TU);
Russian Agricultural Bank.
• Alexander Rogov, Head of Energy Sector Development and
the Marketing Office at the Department for Energy Sector
Development and Marketing at Gazprom;
• Vladimir Fortov, Member of the Presidium of the Russian
Academy of Sciences (RAS);
• Igor Khvalin, Director General of Volga Engineering Group.
2011 Activities
The Audit Committee held four meetings, two of them in the form
of joint attendance. The meetings approved and issued a recom-
mendation to the Board of Directors on approving the Compa-
ny’s 2012 Insurance Program.
2011 Activities
The Investment Committee held 13 meetings, two of them in
the form of joint attendance. The meetings approved recommen-
dations for the Board of Directors on the following issues:
• Implementing the 2011 Investment Program;
• Adjusting the 2011 Investment Program and the 2010-
HR and Remuneration Committee
The HR and Remuneration Committee is responsible for preparing
recommendations to the Board of Directors related to remuneration
and incentive schemes for the Company’s top managers and
the Audit Commission and defining candidate selection criteria for
the Company’s management bodies.
2014 Investment Program;
• Approving the methods of calculation and the assessment of
the key performance indicator “cost cutting for the purchase of
goods (work/services) per product in real terms by at least
10 percent annually within three years;” and
• Approving the Regulations on the Acquisition of Goods, Work
Composition
• Denis Fedorov, Chairman of
the Committe; Head of
the Energy Sector Development and Marketing Office in
the Department for Marketing and Gas and Liquid Hydro-
carbon Processing at Gazprom;
and Services for Company Needs.
Audit Committee
The Committee is responsible for preparing recommendations
to the Board of Directors on selecting an independent audit
organization and improving the Company’s reporting system
and internal control.
• Rashid Sharipov, Deputy General Director of KFK-Consult;
• Igor Khvalin, General Director of Volga Engineering Group.
2011 Activities
The HR and Remuneration Committee held four meetings, two
of them in the form of joint attendance and approved recommen-
dations to the Board of Directors on the following issues:
• Approving amendments to the Regulations on the Non-State
Composition
• Rashid Sharipov, Chairman of the Committe; Deputy General
Pension Scheme for the Company’s Top Managers; and
• Approving
the report on meeting
the Company’s key
Director of KFK-Consult;
performance indicators (KPIs) in H1 2011.
Board of Directors' members attendance at 2011 meetings of the Board of Directors and its Committees
BOARD OF DIRECTORS
AUDIT
COMMITTEE
STRATEGY
COMMITTEE
HR AND
REMUNERATION
COMMITTEE
INVESTMENT
COMMITTEE
NAME OF BOD MEMBER
ATTENDANCE AT MEETINGS (TOTAL MEETINGS / ATTENDED)
Boris Ayuev
Oleg Budargin
Georgy Kutovoy
Kirill Lyovin
Alexey Makarov
Andrey Malyshev
Dmitry Ponomarev
Yuri Solovyev
Denis Fedorov
Ernesto Ferlenghi
Igor Khvalin
Rashid Sharipov
Sergey Shmatko
29/28
29/29
15/15
14/14
29/25
29/29
29/21
29/28
14/13
29/29
29/28
29/25
15/15
2/2
2/2
2/2
4/4
4/4
4/4
2/0
2/2
2/2
2/2
2/2
2/2
2/2
4/2
13/8
13/13
13/13
13/12
77
Information for shareholders and investorsAbout the CompanyOperations overviewSocial responsibilityAppendices Management Board
Day-to-day operations of Federal Grid Company are managed
by the Chairman of the Management Board and the Manage-
ment Board, which are accountable to the General Shareholders
Meeting and the Board of Directors.
The Management Board operations are governed by the Federal
Law on Joint Stock Companies, laws of the Russian Federation
and internal corporate documents.
The Chairman of the Management Board is the chief executive
officer (CEO).
Information on the Management Board’s 2011 operations
Management Board members in office from 7 September 2010
to 11 August 2011
1. Oleg Budargin, Chairman
2. Dmitry Troshenkov
3. Valery Chistyakov
4. Dmitry Gurevich
5. Roman Berdnikov
6. Andrey Kazachenkov
7. Yuri Mangarov
8. Alexander Bobrov
9. Evgeny Zhuykov
10. Pavel Romanov
11. Dmitry Gvozdev
of the following Management Board members: Dmitry Troshenkov
and Pavel Romanov;
• The Resolution of the Board of Directors from 11 August 2011
(Minutes No. 139 of the Board of Directors) appointed the following
members of the Management Board: Andrey Cherezov (Deputy
Chairman of the Management Board, Chief Engineer at
the Company) and Samuil Zilberman (General Director at
the Siberian Main Electric energy transmission lines, a branch of
Federal Grid Company).
Management Board members in office from 11 August to 26 December
2011
1. Oleg Budargin, Chairman;
2. Valery Chistyakov
3. Dmitry Gurevich
4. Roman Berdnikov
5. Andrey Kazachenkov
6. Yuri Mangarov
7. Alexander Bobrov
8. Evgeny Zhuykov
9. Dmitry Gvozdev
10. Andrey Cherezov
11. Samuil Zilberman
Changes in the Management Board:
• The Resolution of the Board of Directors from 26 December
2011 (Minutes No. 150 of the Board of Directors) terminated
the powers of Alexander Bobrov (First Deputy Chairman of
the Management Board) and Dmitry Gvozdev (Deputy
Chairman of the Management Board).
Changes in the Management Board:
• The Resolution of the Board of Directors from 11 August 2011
(Minutes No. 139 of the Board of Directors) terminated the powers
Management Board members in office from 26 December, 2011
Oleg Budargin
Positions in other organizations
Chairman of the Management Board,
member of the Board of Directors.
Born 16 November 1960, Mr.
Budargin graduated from the Norilsk
Industrial Institute in 1982 with
a cum laude degree in industrial and
civil engineering. From 1984-1995,
he worked at Norilskstroi PSMO
(Production Construction and Assembly
Association), Promstroi Trust of
Norilsk Mining and Metallurgical Work
(NGMK), the Capital Construction
Department of NGMK and also served
as the Deputy CEO of NGMK. Mr.
Budargin was the Mayor of Norilsk
from 2000–2002, and the Governor
of the Taimyr (Dolgano-Nenets)
Autonomous District from 2003–2006.
In 2007, he was appointed assistant to
the Plenipotentiary Representative of
the Russian President in the Siberian
Federal District. On 11 July 2009,
the Federal Grid Company Board of
Directors appointed Mr. Budargin Acting
Chairman of the Management Board,
NAME OF ORGANIZATION
Open Joint Stock
Company “INTER RAO
UES”
Open Joint Stock
Company “All-Russian
Regional Development
Bank”
Non-profit Partnership
“Association of Solar
Energy Enterprises”
ORGANIZATION'S
REGISTERED ADDRESS
12 Krasnopresnenskaya
Embankment, Floors
7-8, Moscow, Russia,
123610
POSITION
Member of
the Board of
Directors
65 Suschevsky Val,
Block 1, Moscow,
Russia, 1129594
Member of
the Supervisory
Board
22, Krasnaya Presnya
Street, Moscow,
123376
Chairman of
the Supervisory
Board
and on 27 October 2009, he was elected
Chairman of the Federal Grid Company’s
Management Board by an Extraordinary
General Meeting of Shareholders.
Participation interest in the Company’s
share capital: 0.000234 %
Share in the Company’s ordinary stock:
0.000234 %
78
Valery Chistyakov
First Deputy Chairman of
the Management Board
Born 18 May 1955, Mr. Chistyakov
graduated from the Vladimir Polytechnic
Institute in 1977 with a degree in
mechanical engineering, and from
the Financial Academy under Russian
Government in 1996 with a degree in
economics. In 2003, he completed MBA
in business management at the State
Management University. He holds a PhD.
in Economics. From 1999–2009, he
held various positions in the energy
Andrey Kazachenkov
First Deputy Chairman of
the Management Board
Born 24 April 1980, Mr. Kazachenkov
graduated cum laude from Saint
Petersburg State Engineering and
Economic University with a degree
in engineering plant economics and
management. He also holds an MBA
from the University of Wisconsin
(Madison, USA) and was trained at IMD
(Switzerland) and INSEAD (France)
Business Schools under special
economics and finance programs.
He started his career in 2004 with
Lenenergo as an Advisor to the Finance
Director, and later was appointed
Deputy Director for Finance. In 2005,
Mr. Kazachenkov joined OGK-1 as Head
of the Corporate Finance Department.
Since October 2009, he has been
the Advisor to the Chairman of Federal
Grid Company’s Management Board.
Since November 2009, Mr. Kazachenkov
Positions in other organizations
no positions held in other companies
sector, including Deputy CEO for Sales at
Vladimirenergo, CEO at Udmurtenergo,
Director of the Upper Volga Branch of
IDGC Center and North Caucasus, CEO at
Lenenergo and First Deputy CEO at UES
Engineering Center. In September 2009,
he was appointed Deputy Chairman of
the Management Board of Federal Grid
Company and was elected as a member
of the Management Board of Federal
Grid Company in October 2009. Mr.
Chistyakov has served as First Deputy
Chairman of the Management Board of
Federal Grid Company since November
2009.
Participation interest in the Company’s
share capital: 0.000232 %
Share in the Company’s ordinary stock:
0.000232 %
Positions in other organizations
NAME OF ORGANIZATION
Open Joint Stock
Company “Construction
Management and
Engineering Center of
Unified Energy System”
Non-government
Pension Fund for Power
Engineering (non-profit
organization)
ORGANIZATION’S
REGISTERED ADDRESS
5A Akademika
Chelomeya Street,
Moscow, Russia,
117630
POSITION
Member of
the Board of
Directors
16, Bersenevskaya
Embankment, Building
16, Moscow, 119072
Member of the Fund
Board
has been Deputy Chairman of Federal
Grid Company’s Management Board. Mr.
Kazachenkov was elected a Member of
the Company’s Management Board in
September 2010. In May 2012, he was
appointed First Deputy Chairman of the
Company’s Management Board.
Participation interest in the Company’s
share capital: 0.00023 %
Share in the Company’s ordinary stock:
0.00023 %
Roman Berdnikov
Positions in other organizations
Deputy Chairman of the Management
Board, member of the Investment and
Strategy Commitees.
Born 14 August 1973, Mr. Berdnikov
graduated from the Moscow Power
Engineering Institute in 1998 with
a degree in electric power plants.
From 1997 to 1998, he worked as
chief electrician at Mosenergo. From
1998 to 1999, he worked in the Tariffs
and Technical and Economic Indicators
Department of SO CDU UES of Russia.
From 1999 to 2002, Mr. Berdnikov
worked with RAO UES of Russia, where
he was employed as specialist in
the Department of SDC of the Federal
National Wholesale Electric Power
Market and made a career as a leading
specialist in the Electric Power Market
Development Department. In October
2002, he joined Federal Grid Company
as the main specialist in the Strategic
Planning Department. In 2003, he was
appointed Deputy Head of the Strategic
Planning Department; and in 2005,
he took over as Head of the Service
and Grid Reliability Improvement
NAME OF ORGANIZATION
ORGANIZATION’S
REGISTERED ADDRESS
POSITION
Joint Stock Company
Interconnected Energy
System “GruzRosenergo”
2 Marshal Gelovani
Street, Tbilisi, Georgia,
20159
Member of
the Board of
Directors
Open Joint Stock
Company “The G.M.
Krzhyzhanovskiy Energy
Institute”
Non-profit partnership
“Market Council for
Effective Wholesale and
Retail Trade”
19 Leninsky Boulevard,
Moscow, Russia,
117927
Member of
the Board of
Directors
12 Krasnopresnenskaya
Embankment, Floors
7-8, Moscow, Russia,
123610
Member of
the Supervisory
Board
Department, which afterwards was
restructured as the Customer and
Market Relations Department. In
2009, he took over the position of
Development and Customer Relations
Director of Federal Grid Company.
Mr. Berdnikov was elected a Member
of the Management Board of Federal
Grid Company in October 2009. Since
February 2010, he has been Deputy
Chairman of Federal Grid Company’s
Management Board.
Participation interest in the Company’s
share capital: 0.0000001968 %
Share in the Company’s ordinary stock:
0.0000001968 %
79
Information for shareholders and investorsAbout the CompanyOperations overviewSocial responsibilityAppendices Dmitry Gurevich
Positions in other organizations
Deputy Chairman of the Management
Board
Born 22 July 1971, Mr. Gurevich
graduated from the Bonch-Bruyevich
Leningrad Electro-Technical Institute in
1993 with a degree in radio engineering.
In 1997, he obtained an MBA from St.
Petersburg International Institute of
Management (IMISP) and a Master
Certificate from D. Washington
University in Project Management. After
graduation, he jointed AT&T (Lucent
Technologies). In 1997, Mr. Gurevich
was appointed Project Director of CJSC
no positions held in other companies
Lucent Technologies. In 2003, he joined
Rostelecom, where he became Head
of the Project Management Director
and was Deputy General Director and
a Member of the Management Board.
In February 2008, he was appointed
Telecommunications Director of
Federal Grid Company; in October
2009, Mr. Gurevich was appointed
Telecommunications and IT Director of
Federal Grid Company. In October 2009,
Mr. Gurevich was elected a Member of
the Company’s Management Board.
Mr. Gurevich holds no shares in
the Company.
Evgeny Zhuykov
Positions in other organizations
Deputy Chairman of the Management
Board, General Director at
the Company’s MEG of Urals branch
Born 13 May 1961, in 1990, Mr. Zhuykov
graduated from the Sverdlovsk Institute
of the National Economy with a degree
in economics and logistics planning,
majoring in economics. He is a graduate
of the Presidential Program of Executive
Staff Training for National Economy
Enterprises specializing in finance and
lending (2000). Mr. Zhuykov holds
a PhD. in Economic. For 13 years, he
worked for Western Electric Grids
POEiE Sverdlovenergo: from 1987 to
no positions held in other companies
1990, he was Head of the Procurements
Department and from 1990-2000,
he was the Deputy Director. From
2001-2002, he was Head of Logistics at
Uralplastic (Yekaterinburg). In 2002, he
was appointed Deputy General Director
for Economics and Finance and acting
General Director of MES of Urals. In
June 2010, Mr. Zhuykov was appointed
General Director of MES of Volga. Since
September 2010, he has been a Member
of Federal Grid Company’s Management
Board. Since July 2011, he has been
appointed Deputy Chairman of Federal
Grid Company’s Management Board.
In December 2011, Mr. Zhuykov was
appointed General Director of MES of
Urals.
Participation interest in the Company’s
share capital: 0.0000001603 %
Share in the Company’s ordinary stock:
0.0000001603 %
Samuil Zilberman
Positions in other organizations
Member of the Management Board,
General Director at MES of Siberia
Born 3 May 1946, he graduated
from the Krasnoyarsk Polytechnic
Institute with a degree in electrical
systems and grids. He holds a PhD. in
Technical Sciences and is a member
of the Russian Engineering Academy.
From 1997 to 2002, he was employed
as the General Director at a Territorial
Special Unit of RAO UES of Russia –
the Siberian Intra-system Electric Grids.
In 2002, he was appointed General
no positions held in other companies
Director at MES of Siberia, a Federal
Grid Company branch. In August 2011,
Mr. Zilberman was elected a Member of
the Management Board of Federal Grid
Company.
Participation interest in the Company’s
share capital: 0.000294 %
Share in the Company’s ordinary stock:
0.000294 %
80
Yuri Mangarov
Positions in other organizations
Deputy Chairman of the Management
Board
Born 6 November 1956, Mr. Mangarov
graduated from the Plekhanov Moscow
Institute of National Economy with
a degree in economic cybernetics.
During 26 years, he worked in
the mining and metals industry. He
started his career as an engineer
with Norilsk Mining and Metallurgical
Works and became Director of Norilsk
Integrated Plant. In 2003, Mr. Mangarov
was appointed Deputy HR and Social
Policy Director with Mining and
Metallurgical Company Norilsk Nickel;
and later held the offices of Deputy
Director for Employment Relations and
Salary and the Head of the Director
Secretariat. In August 2009, he joined
Federal Grid Company as Deputy Head of
the Financial Control and Internal Audit
NAME OF ORGANIZATION
Open Joint
Stock Company
“Energostroysnabkomplekt
UES”
Open Joint Stock
Company “Construction
Management and
Engineering Center of
Unified Energy System”
ORGANIZATION’S
REGISTERED ADDRESS
49 a Michurinskiy
Pr., Moscow, Russia,
119607
5A Akademika
Chelomeya Street,
Moscow, Russia,
117630
POSITION
Member of
the Board of
Directors
Member of
the Board of
Directors
Division. In October 2009, Mr. Mangarov
was appointed Director for Control and
Audit Operations. Since March 2010, he
has been Deputy Chairman of Federal
Grid Company’s Management Board.
In September 2010, Mr. Mangarov was
elected a Member of the Management
Board of Federal Grid Company.
He holds no shares in the Company.
Andrey Cherezov
Positions in other organizations
Deputy Chairman of the Management
Board, Chief Engineer
Mr. Cherezov, born 12 October 1967 in
the Kemerovo Region, graduated from
Altay State Technical University in
1993 with a degree in power supply.
Here, he also completed the government
training course for executive officers
employed at national business entities,
majoring in economics and corporate
management. His 18-year career
developed from a relay protection and
automation service engineer to top
executive positions. In 2006, he was
no positions held in other companies
appointed Director at the Western
Siberian company for maintenance
and repairs of Federal Grid Company’s
branch, M&R MEN of Siberia (Barnaul).
From May 2007, he was employed as
First Deputy General Director and Chief
Engineer of MES Siberia, a Federal
Grid Company branch. In 2009, he
was appointed Deputy Chief Engineer
at Federal Grid Company and Deputy
Chairman of the Management Board.
In July 2011, he was appointed Chief
Engineer of Federal Grid Company. In
August 2011, he was elected a Member
of the Federal Grid Company’s
Management Board.
He holds no shares in the Company.
Transactions with the Company’ shares concluded by
members of the management bodies in 2011
• On 2 August 2011, Oleg Budargin, a member of the Board of
Directors and Chairman of the Management Board, acquired
2,668,400 registered non-documentary ordinary shares in
Federal Grid Company; and
• On 29 August 2011, Valery Chistyakov, First Deputy Chairman of
the Management Board, acquired 2,930,000 registered non-
documentary ordinary shares in Federal Grid Company.
81
Information for shareholders and investorsAbout the CompanyOperations overviewSocial responsibilityAppendices 3.3.3 REMUNERATION TO MANAGEMENT BODIES
The Board of Directors
Remuneration to members of the Board of Directors is paid in
accordance with Regulations on Compensation and Remuneration
to Members of Federal Grid Company’s Board of Directors
approved by the Annual General Meeting of Shareholders
on29 June 2010 (Minutes No. 9 dated 2 July 2010).
The amount of remuneration payable to each member of the Board
of Directors for his/her involvement in the work of the Board of
Directors is calculated with a view to the total number of Board of
Directors meetings held during the corporate year, the number of
Board of Directors meetings attended by said member and revenue
for the relevant financial year.
Remuneration is payable to members of the Board of Directors’
Committees in accordance with Regulations on Compensation and
Remuneration to Members of the Board of Directors’ Committees
approved by a resolution of the Federal Grid Company’s Board of
Directors dated 16 December 2010 (Minutes No. 120).
Remuneration paid in 2011 for the period 29 June 2010 – 29 July 2011
REMUNERATION FOR ATTENDED
BOARD OF DIRECTORS MEETINGS,
RUR THOUSAND
OTHER PERSONAL PAYMENTS,
INSURANCE PREMIUM UNDER
THE VPLI *, RUR THOUSAND
TOTAL, RUR THOUSAND
0
667.58
712.09
761.54
707.14
675.00
801.10
771.43
801.10
0
0
0
568.69
6,465.67
0
280.42
280.42
280.42
280.42
280.42
280.42
280.42
280.42
0
0
0
280.42
2,523.78
0
948.00
992.51
1,041.96
987.56
955.42
1,081.52
1,051.85
1,081.52
0
0
0
849.11
8,989.45
Details on remuneration, benefits and cost compensation
payable to members of Federal Grid Company’s Management
Board, including the chief executive officer (CEO), in 2011
(RUR thousand):
Salary
Bonuses
Commissions
Benefits
Other personal payments (voluntary personal liability
insurance)
Total
179,836
232,884
0
0
3,376
416,096
NAME
Sergey Shmatko
Boris Ayuev
Dmitry Ponomarev
Ernesto Ferlenghi
Alexey Makarov
Alexey Makarov
Andrey Malyshev
Yuri Solovyev
Igor Khvalin
Oleg Budargin
Denis Fedorov
Kirill Lyovin
Georgy Kutovoy
TOTAL:
* VPLI – voluntary personal liability insurance
Remuneration to the Management Board
According to the Regulations on Employment Agreements and
Compensation and Remuneration to Top Managers of Federal
Grid Company, approved by the Board of Directors on 24 Decem-
ber 2009 (Minutes No. 52), monthly remuneration payable to top
managers is established by their employment agreements. This
remuneration is based on a fixed rate (salary) and a variable rate
(bonus). The bonus amount depends on the top managers meet-
ing key performance indicators (KPIs). The target KPIs and
the methods of calculation and assessment of their performance
are subject to annual approval by the Board of Directors.
The remuneration structure for top managers (fixed to variable
ratio) complies with established global practices.
82
Details of remuneration, benefits and cost compensation
payable to the chief executive officer (CEO) of Federal Grid
Company in 2011 (RUR thousand):
Salary
Bonuses
Commissions
Benefits
Other personal compensations (voluntary personal liability
insurance)
Total
13,134
29,522
0
0
569
43,225
Details of remuneration paid to members of the Company’s
Board of Directors and the Management Board are recorded in
the Issuer’s quarterly report for the Q1 as of the end of the report-
ing financial year. The Company’s quarterly reports are also
posted on the Federal Grid Company’s official web site.
The connection between remuneration to members of the highest
governing body, top executive representatives and senior managers and
the results of the Company’s operations
Payments to the Company’s top managers are made based on
locally approved regulations and imply that key performance indi-
cators (KPIs) for the Company’s operational results have been
met. The structure, calculation method and target values for KPIs
for top managers of Federal Grid Company are approved by
the Board of Directors. In 2011, the following KPI structure was
used (an excerpt from the Minutes No 140 of the Meetings of
the Board of Directors (№ 140 dated 19 August 2011):
Mid-year payments:
• Relative number of restrictions on electricity transmission
services, %;
• No fatal accidents or group accident, if there is an injured
person in grave condition;
• Compliance with the target limit for current liquidity;
• Meeting schedules for funding and developing the investment
program with progressive totals from the beginning of the year, %.
Annual payments:
• EBITDA, RUR million;
• Efficient implementation of the Cost Management Program
(CMP), %;
• No major accidents;
• Electric energy losses in the grid used by Federal Grid
Company to provide electricity transmission services, %;
• Fulfillment of schedules for commissioning power facilities
and plans for financing and development, %.
The approved target KPIs for half-year and full year for the Com-
pany’s top managers, in general, have been fully achieved.
3.3.4 INTERNAL CONTROL SYSTEM
The Company’s internal control system is focused on revealing
and mitigating the risk of events which may negatively affect
the Company’s ability to meet its objectives and cause damages;
the safekeeping of assets; the efficient use of resources and
compliance with Russian laws, resolutions of management bodi-
es and internal corporate documents.
Audit Commission
The Audit Commission is elected annually by the General Meet-
ing of Shareholders to control the Company’s financial and busi-
ness activity.
The competence of the Audit Commission includes:
• Confirming the validity of information recorded in the annual
report, balance sheet and the Company’s profit and loss
account;
• Analyzing the Company’s financial status, revealing reserves
to improve its financial status and developing recommendations
for management bodies; and
• Carrying out inspections (audits) of the Company’s financial
and business activities
Members of the operative Audit Commission elected at Federal
Grid Company’s General Meeting of Shareholders held 29 June
2011:
NAME
Vladimir Raspopov
Alexander Ganin
Andrey Kolyada
Victor Lebedev
POSITION AND FULL-TIME EMPLOYMENT*
Chairman of the Audit Commission
Head of the Information Resources Division at the Russian Federal Property Management Agency (Rosimuschestvo)
Deputy Director of the Power Sector Development Department at the Russian Ministry of Energy
Deputy Head of the Division for Fuel and Energy and Coal Industries of the Administration for Infrastructural Sectors and
Organizations of the Military-Industrial Complex of the Russian Federal Property Management Agency
Deputy Director of the Department for State Tariff Regulation, Infrastructural Reforms and Power Efficiency at the Russian
Ministry of Economic Development and Trade
Maria Tikhonova
Director of the Department for Economic Regulation and Property Relations at the Russian Ministry of Energy
* Positions are indicated as of the moment of election.
Audit Commission members hold no shares in the Company.
83
Information for shareholders and investorsAbout the CompanyOperations overviewSocial responsibilityAppendices Relationships among participants of the internal control
system at different levels
The Company’s Internal Control Units
Board of Directors
Audit Commission
Audit Committee
Chairman of the Management Board
The Company has adopted the Regulations on Internal Control
System which establishes the following units:
• The Control and Audit Department responsible for controlling
the financial and business operations of the Company and its
affiliated entities;
• The Internal Control Department responsible for organizing
4
1
and implementing internal control procedures;
Special-purpose internal control bodies:
Control and Audit Department
Internal Control Office
Technical Supervision and Audit Department
Reliability and Analysis Unit of the Production Control Department
• The Technical Supervision and Audit Department responsible
for the technical supervision of the operative energy facilities
and their maintenance and repair quality;
• The Investment Program Support Department responsible for
for
funds allocated
controlling
the Company’s Investment Program; and
the appropriate use of
3
2
• Reliability and Analysis Unit of the Department for the Control
of Maintenance and Repairs of Equipment and Grid Facilities.
In accordance with established internal control procedures, in
2011, the internal control units of Federal Grid Company carried
out inspections subject to approved annual plans to the extent of
their competence.
Remuneration to Control Units
Remuneration to the Audit Commission
No remuneration is payable to Audit Commission members.
Remuneration to Auditor
Remuneration (including VAT) payable to the Auditor of Federal
Grid Company, both for carrying out mandatory audits of
the Company’s financial statements, prepared in accordance
with RAS, and for auditing Group Federal Grid Company’s com-
bined and consolidated statements, prepared under IFRS is:
• For 2010 – RUR49.56 million;
• For 2011 – RUR47.79 million.
Functional Auditors (members of structural units)
External Auditors
1
2
3
4
Establishing internal control goals and objectives;
Organizing and inspecting the internal control system;
Assessing control procedure performance;
Strategically managing and assessing internal control procedures.
Auditor
The Annual General Meeting of Shareholders held 29 June
2011, approved PricewaterhouseCoopers Audit (PwC Audit
CJSC), closed joint stock company, as the Company’s auditor
for the purpose of carrying out a mandatory audit of the Compa-
ny’s financial statements. The Auditor is a member of the Rus-
sian Non-Commercial Partnership Audit Chamber and is
involved in many other professional organizations, business
unions and associations.
PwC is registered with the Public Company Accounting Over-
sight Board (PCAOB) and the relevant professional supervision
bodies in the UK, Luxembourg and Ireland.
84
3.4
SHARE CAPITAL
3.4.1 SHARE CAPITAL STRUCTURE
In accordance with the Articles of Association, as of 31 December,
2011, the share capital of Federal Grid Company stood at
RUR627,974,064,196.5, divided into 1,255,948,128,393 ordinary
registered non-documentary shares with a nominal value of
RUR0.50 per share.
The number of authorized shares is 90,857,695,438 ordinary regis-
tered shares with a nominal value of RUR0.50 per share, worth
a total of RUR45,428,847,719 at their nominal value. Authorized ordi-
nary shares have the same rights as issued ordinary shares.
No preferred shares were placed.
On 3 February 2012, placement of an additional issue of ordinary
shares at a price of RUR0.50 per share was completed. In total, dur-
ing the additional issue 4,438,530,347 shares were placed, which
represents 43 % of the total number of securities of the additional
issue to be placed. As a result of the placement, the Company
received funds amounting to RUR2.219 billion.
Структура акционерного капитала на 31.12.2011
(с учетом размещенных акций дополнительного выпуска)
Share capital structure as of 31 December 2011*, %
3
2
1
2
3
1
79.55
19.66
0.79
Russian Federal Agency for State Property Management (Rosimuschestvo)
Legal entities including nominee holders
Individuals
* including additionally issued shares placed
Share Capital History
STATE REGISTRATION
NUMBER FOR
THE ISSUE
STATE
REGISTRATION
DATE FOR
THE ISSUE
PLACEMENT PRICE
PLACEMENT METHOD
1-01-65018-D
10.09.2002
RUR0.5
1-01-65018-D-001D 21.03.2006
RUR
1-01-65018-D-002D 23.08.2007
RUR0.59
distribution among
founders
closed subscription
placement to RAO UES of
Russia
closed subscription
placement to RAO UES
of Russia and the Federal
Agency for State Property
Management
NUMBER OF ISSUED
SHARES
TOTAL NUMBER OF
SHARES (FOLLOWING
THE ADDITIONAL
SHARE ISSUE)
REGISTRATION
DATE FOR
REPORTING ON
ISSUE RESULTS
243,214,483,559
243,214,483,559
10.09.2002
118,167,724,361
361,382,207,920
15.05.2007
114,965,254,235
476,347,462,155
18.04.2008
1-01-65097-D-097D 03.06.2008
1-01-65098-D-098D 03.06.2008
–
–
1-01-65018-D-101D 25.12.2008
1-01-65018-D-102D 12.08.2010
1-01-65018-D-103D 08.09.2011
RUR0.51 for open
subscription
RUR0.5 for entities with
pre-emptive rights
RUR0.5 for open
subscription
RUR0.5 for entities with
pre-emptive rights
RUR0.5 for open
subscription
RUR0.5 for entities with
pre-emptive rights
* 94,576,384,089 shares were redeemed (annulled).
conversion upon merger
737,588,491,911
1,153 514,196,362
12.08.2008
conversion upon merger
34,154,626,385
1,153 514,196,362*
12.08.2008
open subscription
80,047,137,190
1,233,561,333,552
26.01.2010
open subscription
22,386,794,841
1,255,948,128,393
01.03.2011
open subscription
4,438,530,347
1,260,386,658,740
22.03.2012
85
Information for shareholders and investorsAbout the CompanyOperations overviewSocial responsibilityAppendices The Russian Federation, which bought shares amounting to
RUR2.218 billion, was the main participant in the additional issue.
The remainder of outstanding shares in the amount of RUR1.37 mil-
lion was acquired by minority shareholders.
Funds received from placed shares will be used to ensure reliable
operation and upgrade the efficiency of the Unified National (all-Rus-
sian) Electric Grid, as part of the Company’s investment program.
On 11 April 2012, changes were recorded in the Company’s Articles
of Association, under which share capital is RUR630,193,329,370
(six hundred and thirty billion one hundred ninety-three million three
hundred and twenty-nine thousand three hundred and seventy
rubles).
Shareholder Database Analysis
In June 2011, the Company analyzed the list of its shareholders,
identifying key shareholder groups, holders of ordinary shares
and depository receipts. The Company’s free float stood at
20.52 %.
Core free float holders are institutional investors and holding
structures.
The Company’s major shareholders, owning more than 1 % of
Federal Grid Company shares (according to the shareholder
register as of 29 July 2011 – the date of compiling the list of per-
sons having the pre-emptive right to acquire additional shares
via a public offering) are:
• Sberbank of Russia (1.1503 %) – a professional securities
market participant that conducts transactions with securities
of the most reliable and investment-attractive issuers;
• Centrenergykholding (2.6628 %);
• Index of Energy FGC UES (1.0929 %)
Most investors view the Company’s securities as growth shares,
with revenue growth rates typically outperforming industry peers.
Growth investors are followed by sovereign wealth funds, which in
2011 saw a distinct increase in their share compared with the pre-
vious year. Value investors, focused on undervalued corpora-
tions, account for more than 5 % of the Company’s free float, with
index investors coming in next.
List of registered entities that hold more than 2 % of shares in individual accounts as of 31 December 2011
NO.
REGISTERED ENTITY TYPE
NAME
NUMBER OF SHARES
PERCENTAGE OF
THE TOTAL NUMBER
OF SHARES PLACED
1
2
3
4
5
Owner
Nominee holder
Nominee holder
Nominee holder
Nominee holder
The Russian Federation, represented by the Russian Federal Agency for
State Property Management (Rosimuschestvo)
1,002,651,902,686
79.55
Depository and Corporate Technologies
Depository Clearing Company
National Settlement Depository
ING BANK (EURASIA) CJSC
73,798,484,242
64,061991,484
53,086,348,107
36,276,995,535
5.86
5.08
4.21
2.89
86
Распределение институциональных инвесторов
по горизонтам инвестирования в процентах от free-float.
Institutional investor breakdown by investment style,
% of free float
Распределение институциональных инвесторов
Institutional investor breakdown by geography,
по географическому признаку в процентах от free-float.
% of free float
6
3
1
2
3
1
54
40
6
Long-term (investment horizon greater than 2 years)
Medium-term (investment horizon between 1 and 2 years)
Short-term (investment horizon up to 1 year)
The Company’s shareholders are predominantly long-term
investors, with low portfolio turnover exceeding two years.
Распределение институциональных инвесторов
по применяемой стратегии инвестирования
в процентах от free-float.
Institutional investor breakdown by investment style,
% of free float
6
5
4
3
1
2
3
4
5
6
7
USA and other American countries
Norway and Sweden
Great Britain
Other European countries
Germany
Cyprus
Other countries
6
5
4
3
1
2
3
4
5
6
Growth strategy
Sovereign funds
Value strategy
Index funds
Hedge funds
Dividend yield strategy
1
2
29.1
23.3
18.9
16.8
8.4
3.5
This growth and value investment mix is typical for most electricity
sector shares, largely due to their strong upside, combined with low
valuations based on assets and cash flow performance.
1
2
30.3
25.8
16
11.2
7
4.9
4.8
87
Information for shareholders and investorsAbout the CompanyOperations overviewSocial responsibilityAppendices 3.4.2 STOCK MARKET
Federal Grid Company shares trade on the “B” quotation list of
the MICEX Russian stock exchange. The fundamental appeal of
the Company’s stock is underpinned by its inclusion in Russian
and foreign indices.
Federal Grid Company’s share weighting in key stock indices,
% (data as of the end of year)
INDEX
MSCI Russia
MSCI Emerging Markets
MICEX
MicexPWR
MicexLC
RTSI
RTSeu
Russian Traded Index (Vienna Stock Exchange)
The RTX Energy (Vienna Stock Exchange)
Company’s share highlights
SHARE CATEGORY
Nominal value
MICEX ticker symbol
LSE ticker symbol
ISIN
Bloomberg code
2011 Share Performance
2011
1.41
0.09
1.60
14.68
2.10
1.56
20.78
2.35
24.30
2010
1.48
0.045
1.51
14.33
1.97
1.66
18.99
-
-
ORDINARY REGISTERED
NON-DOCUMENTARY
SHARES
RUR0.50 per share
FEES
FEES
RU000A0JPNN9
FEES RM
looks at emerging economies, losing 20.4 %. The key downside
factors for markets were the end of the second round of quantita-
tive easing (QE2) in the United States, the unfolding European
debt crisis, the downgrade in the United States’ sovereign rating
and mounting concerns over a double dip recession in the global
economy.
The Russian market lost 16.9 % off the MICEX index, despite oil
prices picking up 13.3 %. Throughout the year, investors were
cautious about their exposure to emerging markets in general and
Russian assets in particular. The result was capital outflow from
Russia, which at year end stood at nearly USD85 billion. At
the end of the year, the Russian market faced pressure from grow-
ing political instability linked to State Duma elections.
Electricity sector equities were major under-performers, as all of
2011 was marked by pressure from tariff decisions by the industry
regulator.
Federal Grid Company’s share price decline as of the end of
the year was only 23.8 %, strongly outperforming the electricity
sector company index. Industry analysts, many of whom prefer
Federal Grid Company over its sector peers, note that the Com-
pany’s equities will be less prone to negative fallout from regula-
tory decisions, as Federal Grid Company is only a minor contribu-
tor to eventual tariff growth rates.
As of 30 December 2011, Federal Grid Company’s share price on
MICEX stood at RUR0.2811, which is 68 % below analysts’ con-
sensus, pointing to further upside potential for the Company’s
shares.
Global equity markets closed lower in 2011, with MSCI World,
a developed markets index, down 7.6 % and MSCI EM, which
MICEX is the main trading platform for the Company’s shares and
accounts for more than 90 % of market deal volume.
Сектор электроэнергетики, акции ОАО "ФСК ЕЭС"
Electricity sector, Federal Grid Company shares
30
20
10
0
-10
-20
-30
-40
-50
88
-16.9 %
-23.8%
--40.2%
0
1
.
2
1
.
0
3
1
1
.
1
0
.
1
3
1
1
.
2
0
.
8
2
1
1
.
3
0
.
1
3
1
1
.
4
0
.
0
3
1
1
.
5
0
.
1
3
1
1
.
6
0
.
0
3
1
1
.
7
0
.
9
2
1
1
.
8
0
.
1
3
1
1
.
9
0
.
0
3
1
1
.
0
1
.
1
3
1
1
.
1
1
.
0
3
1
1
.
2
1
.
0
3
MICEX
MicexPWR
Federal Grid Company
Federal Grid Company Share Performance on MICEX
Volume
2011
2010
units 476,111,513,800 307,017,566,700
RUR 159,370,754,044 105,717,431,921
Number of deals
units
2,043,606
1,137,379
Source: MICEX web site
Key Parameters of MICEX Share Trading
2011
0.21111
0.481
0.2811
2010
0.282
0.389
0.369
Low
High
Period end
Number of shares
Capitalization at year end
RUR
RUR
RUR
mln
shares
RUR,
mln
As of 31 December 2011, the GDR Program had 3.7 million
receipts, representing 0.1485 % of the Company’s share capital.
The maximum number of GDRs the Company is allowed to issue
is 2,511,896,256.
GDR Program as a percentage of the Company’s
share capital
Information about trading in the Company’s depository receipts
is available on its web site (Investors / Share Information / GDR
Program).
1,255,948
1,233,561
351,163.1
452,717.01
Updates about the GDR program are also available on the LSE
web site at www.londonstockexchange.com under Federal Grid
Company’s ticker symbol FEES.
GDR Program highlights
Ratio
1 GDR: 500 shares
1 GDR: 500 shares
REGULATION S
RULE 144A
International code
Price per GDR at year
end
Number of GDRs as of
31 December 2011
ISIN: US3133542015
Common Code:
036273577
ISIN: US3133541025
Common Code:
0362733372
USD 4.401
-
3,632,686
97,296
Detailed information on trading in the Company’s shares and
depository receipts is available on its web site (Investors / Share
Information / Interactive Stock Chart).
Global Depository Receipt (GDR) Program
On 30 June 2008, the Company launched a Global Depository
Receipt (GDR) Program, which was not listed under Regulation
S and Rule 144A. The Program’s depository bank is Deutsche
Bank.
In 2011, the Company successfully completed a technical listing
procedure on the Main Market of the London Stock Exchange
(LSE), which began trading Federal Grid Company GDRs on
28 March.
Объем программы депозитарных расписок
GDR Program as a percentage of the Company’s share capital
5
7
2
.
0
2
7
2
.
0
0
6
2
.
0
8
0
2
.
0
8
0
2
.
0
7
1
2
.
0
7
0
2
.
0
4
9
1
.
0
3
3
1
.
0
3
3
1
.
0
8
4
1
.
0
8
7
6
5
4
3
2
1
0
1
1
.
1
0
.
1
3
1
1
.
2
0
.
8
2
1
1
.
3
0
.
1
3
1
1
.
4
0
.
0
3
1
1
.
5
0
.
1
3
1
1
.
6
0
.
0
3
1
1
.
7
0
.
1
3
1
1
.
8
0
.
1
3
1
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.
9
0
.
0
3
1
1
.
0
1
.
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3
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1
.
1
1
.
0
3
0,3
0,2
0,1
0
8
4
1
.
0
1
1
.
2
1
.
0
3
RegS
Rule 144A
Program’s volume as a percentage of share capital,%
89
Information for shareholders and investorsAbout the CompanyOperations overviewSocial responsibilityAppendices
Динамика стоимости и объемов торгов ГДР на Лондонской фондовой бирже
GDR price and trading volume, LSE
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
8
7
6
5
4
3
2
1
1
.
3
0
.
8
2
1
1
.
4
0
.
1
0
1
1
.
5
0
.
3
0
1
1
.
6
0
.
1
0
1
1
.
7
0
.
1
0
1
1
.
8
0
.
1
0
1
1
.
9
0
.
1
0
1
1
.
0
1
.
3
0
1
1
.
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1
.
1
0
1
1
.
2
1
.
1
0
1
1
.
2
1
.
0
3
DR Trading Volume, receipts DR Price on the LSE, USD
Adjusted posted DR price at the end of trading on MICEX
The General Meeting of Shareholders makes decisions on pay-
ing dividends based on recommendations of the Board of Direc-
tors. The amount of dividends is determined based on financial
results, balancing the interests of the Company and its
shareholders.
2011 Dividends
In accordance with Clause 2 of Article 42 of the Federal Law №
208-FZ “On Joint Stock Companies” (dated 26 December 1995)
and Clause 7.5 of Article 7 of Federal Grid Company’s Articles of
Association, the source of the dividend payment is the Company’s
net profit determined based on the Company’s accounting
statements.
According to Federal Grid Company’s 2011 accounting statements,
there was a loss of RUR2,468,359 thousand. The main reasons for
the loss were a negative margin on the revaluation of financial
investments in shares listed on the stock market and a reflection of
activities on the accrual and recovery of bad debt provisions.
In 2012, the Company’s Annual General Meeting of Shareholders
will make a resolution to pay 2011 dividends. Shareholders are
invited to make a decision not to pay 2011 dividends on the Com-
pany’s ordinary shares.
3.4.3 DIVIDEND POLICY
The Company’s dividend policy is determined by the Regula-
tions on the Dividend Policy, approved by the Board of Directors
on 16 December 2010. In accordance with the Regulations,
the minimum payout rate is set at 10 % of net profit under RAS
(after compulsory deductions to the reserve fund), adjusted for
the amount of profit from the revaluation of financial investments,
the recovery of the bad debt provisions and non-recurring
income from the sale of securities and other assets to finance
the investment program.
The Company’s Dividend History
Total amount of accrued
Всего начислено дивидендов,
млн руб.
dividends, RUR thousand
Dividends
per share, RUR
6
6
.
7
7
5
,
2
5
6
3
2
5
0
2
0
0
.
0
4
6
6
6
2
6
1
0
0
.
0
7
3
7
7
9
7
0
0
0
.
0
0.0025
0.0020
0.0015
0.0010
0.0005
0
0
0
5
8
.
7
8
5
0
0
.
0
8
3
0
0
2006
2007
2008
2009
2010
2006
2007
2008
2009
2010
3,000
2,000
1,000
0
90
3.4.4 INVESTOR RELATIONS
In 2011, the Company continued developing investor relations
and enhancing information transparency to position Federal
Grid Company as one of the leaders in the power sector.
• Federal Grid Company continued its efforts to broaden analyst
coverage. In particular, in 2011, Federal Grid Company
secured analyst coverage from Macquarie Capital, HSBC and
ING;
The Company’s key achievements in IR building:
• In 2011, the Company successfully listed its depository
receipts on the Main Market of the London Stock Exchange,
marking a corporate milestone for investor relations;
• In 2011, Federal Grid Company started working towards
improving its investment appeal to individual investors,
meeting individual minority shareholders in Samara and
Rostov-on-Don;
• In 2011, Federal Grid Company first published its 2010 financial
statements under IFRS within four months after the financial
year ended, meeting best disclosure practices for public
companies, as well as requirements of the UK’s Financial
Services Authority (FSA);
• on 18 June 2011, as part of the Saint Petersburg International
Economic Forum, Federal Grid Company and Morgan Stanley
signed a cooperation agreement, making Morgan Stanley
the Company’s corporate broker;
• Together with Morgan Stanley, in 2011, the Company rolled
out a set of measures aimed at upgrading its IR practices. One
of the innovations was offsite investor meetings involving
Federal Grid Company managers to discuss IFRS financial
statements for H1 2011;
• On 24 October 2011, an event run by Bloomberg (London)
hosted a round table called “Investing in Modernization and
Protecting Shareholder Value,” which was organized by
Federal Grid Company.
the Chairman of
the Company’s Board of Directors Ernesto Ferlenghi,
representatives of the leading investment banks, funds and
European power sector companies, including National Grid;
involved
It
• The Company’s 2010 annual report won Best Annual Report
in the Electricity Sector category at the 14th annual federal
contest for annual reports organized by RTS and MICEX
trading exchanges. The report was also recognized by
an annual federal contest for annual reports and corporate
web sites run by Securities Market, an industry magazine and
the Russian Ministry of Finance.
Next year, we will continue to work to improve our relationships
with the Company’s investment community. Priorities in this area
will include: upgrading the liquidity of the Company’s shares and
depository receipts on MICEX and LSE and expanding analyst
coverage. We will also expand the shareholder and investor base,
including via specialized funds that invest in power companies
and developing cooperation with individual minority shareholders.
Upgrading corporate governance practices and interacting with
the investment community will allow our Company to strengthen
its status as a leading Russian energy sector “blue chip.”
91
Information for shareholders and investorsAbout the CompanyOperations overviewSocial responsibilityAppendices In 2011, the overall average number
of employees that received
corporate training stood at
42 %
The number of injured
employees declined
2.75 times in 2011
4
SOCIAL RESPONSIBILITY
92
4.1
SOCIAL RESPONSIBILITY PRINCIPLES
Our company endorses sustainable development principles, striking the right balance between meeting
its business targets and fulfilling social and environmental objectives.
At the core of Federal Grid Company’s corporate social respon-
sibility is ensuring reliable undisrupted electricity supply to
the Unified National Electric Grid (UNEG). We are responsible
for bringing electricity to consumers across the country, continu-
ously working to upgrade the UNEG facilities, developing and
introducing innovative solutions for the UNEG’s improved energy
efficiency and ensuring that State funds invested in the Com-
pany are used transparently and effectively.
Other crucial aspects of the Company’s corporate social respon-
sibility include:
• Responsibility toward communities – to reduce the environ-
mental footprint;
• Responsibility toward suppliers and contractors – creating
a transparent competitive environment and market-based
pricing;
• Responsibility toward employees – providing favorable labor
conditions and opportunities to foster professional and
personal growth.
Corporate social responsibility (CSR) of Federal Grid Company
is a set of commitments the Company has to its stakeholders
concerning its impact on the environment, communities and
the economy at large. The Company undertakes to honor these
commitments voluntarily, interacting with all stakeholders and
working to ensure corporate sustainable development and strat-
egy implementation. The Company’s public plans and commit-
ments and the progress it makes are available in Federal Grid
Company’s Annual Social Responsibility and Corporate Sus-
tainability reports.
Social Responsibility and the Corporate Sustainability
Reports
To improve corporate governance, boost investment appeal,
enhance credibility for shareholders and adhere to best global
corporate governance practices, Federal Grid Company has
been publishing Social Responsibility and Corporate Sustain-
ability reports annually since 2008.
In our social reporting, we are guided by international non-finan-
cial disclosure standards, including the GRI (G3) guidelines,
the GRI Energy Protocol and the AA 1000 SES standard. We
also engage in dialogues with stakeholders to discuss the key
theme(s) of each report we prepare. Prior to being released,
the final version of the report goes through public discussion at
a set of hearings held in person or in absentia.
Federal Grid Company reports are included in the National Reg-
istry of Corporate Non-Financial Reports, created by the Rus-
sian Union of Industrialists and Entrepreneurs (RUIE). Our
2010 Social Responsibility and Corporate Sustainability Report
successfully completed the public endorsement procedure at
the RUIE Board. Full versions of Federal Grid Company’s Social
Responsibility and Corporate Sustainability Reports are avail-
able on our website at http://www.fsk-ees.ru/about/corporate_
social_responsibility/ (in Russian).
Interaction with Stakeholders
Maintaining dialogue with key interested parties is a crucial part
of our CSR efforts, helping our reporting encompass information
about the Company’s performance that is relevant to our stake-
holders, along with the Company’s views on important develop-
ments and problems.
The Company’s stakeholders include:
• Government authorities, including tariff regulatory bodies;
• Government authorities
regions and
in Russian
local
governments;
• Large industrial consumers;
• The investment community, including minority shareholders
and Russian and global strategic investors;
• Generation companies;
• The Company’s management;
• The Company’s personnel;
• Contractors and equipment producers;
• Community groups.
In 2011, we organized activities to interact with:
• Shareholders and
(General Meetings of
Shareholders; meetings between the Company’s managers
and investment analysts; consultative meetings with individual
minority shareholders);
investors
• Local authorities in Russian regions and energy companies
(signing Cooperation Agreements to develop the UNEG and
coordinate development plans);
• Personnel (events held as part of the Year of the Young
Specialist,
the Dynasty Program, Open Doors Day,
the Summer and Winter Olympics and summer student
groups);
• Suppliers and contractors (signing agreements with Hyundai
Industries Ltd, Morgan Stanley, VTB Capital,
Heavy
Rostelecom, Profotech, Hevel and RTSoft).
In 2011, the Company was among the participants in the Saint
Petersburg International Economic Forum and the International
93
Social responsibilityAbout the CompanyOperations overviewInformation for shareholders and investorsAppendices Investment Forum Sochi 2011, signing more than ten coopera-
tion agreements with leading global companies.
Charity
In 2011, we donated approximately RUR143 million to help
numerous sports, cultural, scientific and charitable organiza-
tions, and we also allocated more than RUR5.2 million to provid-
ing assistance to individuals.
In 2011, key developments in sustainable development and cor-
porate social sustainability included:
• Adoption of the new Corporate Ethics Code;
• Approval of Federal Grid Company’s Quantitative
Environmental Targets for 2013 to 2015;
• Efforts as part of strategically important projects to ensure
electricity supplies to the 2014 Winter Olympics in Sochi,
the 2012 APEC Summit in Vladivostok and the second stage
of the East Siberian – Pacific Ocean (ESPO) pipeline
construction;
• Approval of Federal Grid Company’s Innovative Development
Program for the period till 2016 and potentially till 2020;
• Public endorsement of Federal Grid Company’s 2010 Social
Responsibility and Corporate Sustainability Report by
the Board of the RUIE;
• Approval of a long-term program for corporate assistance to
upgrade housing conditions for Federal Grid Company
employees.
94
4.2
HR POLICY
Our HR policy is aimed at ensuring that the Company has highly skilled personnel at its disposal whenever
needed and at creating a favorable environment for effectively developing and utilizing human resources.
Our people are our core value. Thanks to their coordinated,
conscientious and selfless – when needed – efforts, it is
possible to bring undisrupted electricity supplies to our
country's regions and largest companies.
An excerpt from the Corporate Ethics Code
of Federal Grid Company
One cannot implement any strategy, even the kindest one,
without a close-knit professional team on hand. We have such
a team consisting of thousands of our employees. It boasts
skilled and experienced professionals who successfully meet
targets within their scope of responsibility, working towards
our shared objective of ensuring reliable electricity supplies to
consumers across Russia’s vast territory.
Ernesto Ferlenghi,
Chairman of the Board of Directors
Power sector modernization targets bring about new personnel
training requirements in the industry. Our HR policy is an integrated
system of personnel interaction to ensure the optimal utilization of
personnel potential, the improvement of the shared corporate cul-
ture and the promotion of effective employee motivation and profes-
sional development. We aim to recruit only the best trained person-
nel, work hard to provide professional growth opportunities to our
employees, improve our system for creating a succession pool of
candidates, foster corporate culture and maintain positive morale
and psychological environment within the Company.
Primary principles of Federal Grid Company’s HR policy:
• Effective organizational design and head count planning based on
the existing staff and the Company’s current and strategic plans;
• Creating and maintaining motivational schemes to improve
labor interest and satisfaction;
• Improving personnel utilization efficiency, matching personnel
expenses to results achieved, including employee skills
improvement;
• HR management enhancement to maximize the efficiency of
the Company’s personnel utilization;
• Compliance with HR policy basics and HR management
procedures as laid out by corporate regulatory documents for
all employees regardless of their position;
• Ongoing improvement in personnel management techniques
to reflect the latest HR management concepts, while observing
the Company’s specific features and corporate standards;
• Complying with applicable Russian laws
Key elements of the Company’s HR policy:
• Upgrading the organizational and managerial structure and
head count planning;
• Employee remuneration and motivation system;
• Personnel training and development;
• Development of a succession pool of candidates;
• Social assistance;
• Performance management;
• Labor relations;
• Administrative support;
• Corporate communications and corporate culture promotion.
Head Count and Qualitative Composition
of the Personnel
As of 31 December 2011, Federal Grid Company had a head count
of 24,603.
In 2011, the reason for the 8.6 % increase year-on-year in corporate
personnel was the improved quality of equipment maintenance and
repair, along with efforts to create new jobs in electric grid facilities
commissioned under the Company’s investment program. Additional
jobs were also created as part of an integrated electric grid develop-
ment program in the Sochi Region and to ensure the reliable perfor-
mance of the Company’s Olympic facilities.
Key Investment Projects, page 51
95
Social responsibilityAbout the CompanyOperations overviewInformation for shareholders and investorsAppendices Динамика списочной численности Компании, чел.
Head count dynamics, persons
2
5
7
,
5
6
0
4
,
5
7
6
7
,
2
6,000
5,000
4,000
3,000
2,000
1,000
0
7
0
1
,
1
8
3
8
4
9
9
2
8
4
,
2
9
7
1
,
2
7
4
2
,
1
1
8
2
,
2
3
2
6
,
2
1
1
2
,
2
7
6
0
,
1
9
7
4
,
1
3
8
7
7
8
7
,
2
8
4
8
,
2
6
0
6
,
1
8
7
8
,
1
3
0
9
,
1
7
2
6
,
1
1
7
9
,
1
0
7
7
,
1
1
4
9
6
0
8
4
2
8
,
3
2
8
9
,
3
Executive Office
MES Center
MES North-West
MES Volga
MES South
MES Urals
MES Siberia
MES West Siberia
MES East
As of 31 December 2009
As of 31 December 2010
As of 31 December 2011
Qualitative composition of the Company’s personnel, persons
PERSONNEL CATEGORY
Total
Including:
administrative and managerial personnel
Personnel breakdown by activity type, persons
PERSONNEL CATEGORY
Operating personnel
Including: production and industrial personnel
Maintenance personnel
Mechanization and transportation employees
Структура персонала по категориям, полу, образованию и возрасту
REPORTING PERIOD
2010
22,188
5,359
REPORTING PERIOD
2010
15,602
9,312
7,021
0
2009
11,933
4,640
2009
11,418
6,900
2
513
2011
24,603
6,605
2011
15,992
9,370
8,611
0
Personnel breakdown by category and gender, %
Employee breakdown by age and education
6
5
4
3
1
3
5
2
4
6
Workers
Specialists/Clerks
Managers
96
Throughout 2011, the Company’s personnel composition saw no
major changes compared with 2010.
1
2
Part of the reason driving effective growth and technical mainte-
nance of the Company’s electric grids, improved reliability and
successful implementation of the corporate investment program
is our employees’ strict skill and qualification standards. In 2011,
the share of Federal Grid Company employees with a vocational
higher education stood at 33 %; 56 % of personnel had a univer-
sity degree (up 3 %).
Мale
Female
92
64
87
8
36
13
Over the past several years, we have seen a trend toward
a decline in our employees’ age. Between 2010 and 2011,
the average age of our employees fell to 38.7 years old (as of
31 December 2011). A majority of them (56 %) are employees of
the most productive age, both economically and socially, i.e.
below 40 years old. This combination of young ambitious
employees and experienced professionals with extensive exper-
tise ensures sharing knowledge and skills and is the optimal age
structure for personnel.
Personnel Retention and Churn
At Federal Grid Company, we pay special attention to attracting
and retaining highly qualified professionals that are supremely
valuable to the Company. In 2011, we rolled out an employee
motivation system aimed at retaining key personnel, ensuring
the effective succession in key jobs and attracting young profes-
sionals. In 2011, the annual personnel churn totaled 6.2 %.
In 2011, the Regulation on Adaptation for Newly Hired Staff was
adopted.
Material Incentives for Personnel
Our balanced corporate system of employee remuneration and
motivation relies on a set of indicators, i.e. personnel category
and performance results for specific branches and structural
units, as well as regional labor market specifics. Salaries and
wages of our employees are shaped by the complexity and
responsibility of their work, their own skills and the impact that
they have on the Company’s key performance results.
For employee remuneration and motivation, Federal Grid Com-
pany adheres to the following principles:
• Utilizing a unified approach toward remuneration for all
employees;
Industry title and 14 employees who were named Honorary
Power Engineers; 68 employees
received Honorary
Certificates and 55 employees were named Honorable
Mentions;
• 56 individuals received awards from the All-Russian Industrial
Union of Power
including seven
Industry Employers,
employees who won the Veteran of the Electricity Industry title
for their many years of productive work in the electricity sector;
• 980 employees received corporate awards for their contribution
to Federal Grid Company; of this number, two employees
received the supreme corporate award for their outstanding
achievements for the benefit of the Company – the Honorary
Employee of Federal Grid Company award. 120 employees
received various titles and recognitions, with their names
appearing on the Company’s Honors Board. 418 employees
received Honorary Certificates and 440 individuals were
named Honorable Mentions;
• 12 employees of our subsidiaries and affiliates received
awards from the Russian Ministry of Energy and 18 employees
were recognized by awards from the All-Russian Industrial
Union of Power Industry Employers. 257 employees of
the Company’s subsidiaries, affiliates and contractors
received corporate awards from Federal Grid Company.
Personnel Training and Development
• Ensuring that our regional and industry-specific salary
package is competitive on the labor market;
• Creating an employee remuneration system that encompasses
both material and non-material needs and employee interests.
The Company’s personnel training initiatives are aimed at strik-
ing the right balance between maintaining the professional level
of employees to meet day-to-day targets and improving and
growing their skills to pursue longer-term objectives.
To refine Federal Grid Company’s standing on the labor market,
we completed a study in 2011 looking into the salary and wage
levels of key employees at rival companies in regional markets.
The results proved that the employee pay offered by the Com-
pany is within the market average.
Awards Policy
To celebrate their contribution to the State, the power industry,
the electricity sector and our Company, we recognize employ-
ees who have strongly succeeded in their efforts to maintain,
construct and upgrade power industry facilities, mastered and
introduced new devices and technologies, and fostered and fol-
lowed our corporate values:
• Five employees of Federal Grid Company received the title of
the Russian Federation
Honorary Power Engineers of
following Decrees by the Russian President in 2011;
• 101 Federal Grid Company employees received official
appreciation from the Russian Government, recognizing their
effective contribution to providing undisrupted electricity
supplies to consumers across Russia in 2011;
• 140 employees received awards from the Russian Ministry of
Energy for their services to the power industry, including three
employees that obtained the Honorary Employee of the Power
In 2011, various corporate training involved a total of 9,811 peo-
ple, or 42.05 % of the Company’s overall average head count.
Throughout 2011, the Company continued the programs it initi-
ated in 2010, while also developing and rolling out new training
projects:
• Operating personnel at new generation sub-stations;
• Grid control Center (GCC) operators at new generation
sub-stations;
• Training the personnel of relay protection and automation,
emergency controls and automatic process control system
services of equipment providers;
• Training on the subject “Energy Inspections as a Way to
Improve Energy Efficiency and Energy Saving;”
• Production personnel training under programs developed by
the Russian Federal Environmental Industrial and Nuclear
Supervision Service.
We are convinced that the high level of professional training
demonstrated by our employees is one of the cornerstones
underpinning the UNEG. In line with this, in September 2011, we
rolled out a chain of Personnel Training Centers (PTCs) across
the Company’s branches – Backbone Electric Grids (MES). By
employing unified training standards and programs based on
97
Social responsibilityAbout the CompanyOperations overviewInformation for shareholders and investorsAppendices advanced equipment and specialized electric grid test fields
across all regions of our presence, we hope to further improve
the Company’s professional HR potential.
Following the PTCs launch, 1,328 people used its educational and
practical training capacities in Q4 2011, including 1,227 production
personnel.
In 2011, we developed 28 sample programs for production person-
nel training. Each program is designed for a specific employee cat-
egory: operating, dispatch and maintenance personnel, directors
and chief engineers of backbone electric grid enterprises (PMES),
sub-station directors and chemical laboratory staff, etc. The num-
ber of programs is set to grow in the future to include a larger num-
ber of personnel categories, while simultaneously upgrading teach-
ing quality and level.
Our Company launched a project to develop a training simulator
facility offering energy system mode control and operating switch-
ing functions for the PTC of every branch. In 2011, a training simula-
tor facility was developed for executives and Federal Grid Company
branches: MES Volga and MES Urals. Until 2012, there are plans in
place to develop and introduce training simulator facilities with
an energy system mode control and operating switching functions
across all of the Company’s MES branches.
The Company’s Personnel Training Centers
Investing in production personnel training is just as
important as investing in production equipment upgrades.
These two processes are closely intertwined and cannot
exist without each other. If we are rolling out modernizations
and opening new generation sub-stations, we should have
highly skilled trained professionals to operate them.
Andrey Cherezov,
Deputy Chairman of the Management Board – Chief Engineer
In April 2011, we launched a personnel training project called
Knowledge Days, which were designed as a comprehensive ongo-
ing skills improvement tool for corporate employees, an initiative to
teach our employees professional mobility, help new employees
settle into the Company and create a knowledge management sys-
tem. Each Thursday, our experts share their knowledge and experi-
ence with colleagues via video conferences, allowing all Federal
Grid Company branches to be engaged in the project.
In the reporting year, we also started working towards creating
a distance learning framework at Federal Grid Company. A pilot
project launched to date has focused on two areas: introducing
MES North-West
Training classes
Training equipment class
Electric grid testing ground
MES West Siberia
Training classes
Training equipment class
Electric grid testing ground
MES East
Training classes
Training equipment class
Electric grid testing ground
MES Center
Training classes
Training equipment class
Electric grid testing ground
St.Petersburg
Moscow
Samara
Surgut
Yekaterinburg
Pyatigorsk
MES South
Training classes
Training equipment class
Electric grid testing ground
MES Urals
Training classes
Training equipment class
Electric grid testing ground
MES Volga
Training classes
Training equipment class
Electric grid testing ground
MES Siberia
Training classes
Training equipment class
Electric grid testing ground
98
Krasnoyarsk
Khabarovsk
In our Company aimed at growth the volume of
requirements to knowledge was increasing consistently,
and the educational market did not make the comparable
progress. Eventually we realized that we needed to create
a system which we could manage ourselves establishing
and controlling educational standards and quality. We are
moving forward quickly, implement innovative projects, and
for this we need highly professional specialists at all levels.
Yelizaveta Nikolova,
Chief of Personnel Training Center
an electronic document management system and eliminating tech-
nical violations at our production facilities. In the future, we plan to
expand the number of distance learning programs. Our 2010 plans
include: launching new programs for production and technical per-
sonnel, holding intensive courses for managers and offering
a course on information technology.
YEAR OF THE YOUNG SPECIALIST
2011 was officially declared the Year of the Young
Specialist at our Company, reflecting our understand-
ing that it is only by attracting highly trained profes-
sionals with expertise in cutting-edge equipment and
technologies that we can successfully meet global
targets that we are faced with.
Our special focus during the reporting year was the corporate
succession pool of candidates. We approved Federal Grid
Company’sYouth Policy and the Young Specialist Charter. One of
the key areas in our Youth Policy is upgrading relationships with
universities and inspiring university and vocational college stu-
dents to choose Federal Grid Company as their future employer.
2011 was announced to be the Year of the Young Specialist.
In 2011, we organized numerous corporate activities to create
opportunities for our younger employees to fulfill their potential
and develop professionally, as well as to attract new young pro-
fessionals and to support educational facilities.
• As part of Federal Grid Company’s involvement in the Saint
in 2011, we
International Economic Forum
Petersburg
organized “Smart Grids – Projects of the Future: Youth
Perspective,” a round table that attracted 70 participants,
including students in their last years at university, post
graduates and young professors from the Moscow Power
Engineering Institute and the Saint Petersburg Polytechnic
University, young scientists and young promising Federal Grid
Company employees;
• In July 2011,
together with
the SKOLKOVO Moscow
Management School, we launched a new training program
called Changes Leaders, aimed at training the Company’s
mid-level managers using an integrated joint program. We
completed two training modules in the reporting year and are
extending the program into 2012;
• In December 2011, we organized Leaders of the New
Generation, a youth innovation forum, in conjunction with
the SKOLKOVO Moscow Management School. The event
attracted more than 100 young professionals representing all
branches of Federal Grid Company. During the forum’s first
session, participants worked on scientific projects led by
the Company’s executives and improved their public speaking
and presentation skills. The second module of the forum
focused on helping young participants discover their creative
potential, offering them the opportunity to prepare individual
stage performances;
• In 2011, the Company continued to interact with more than
50 prestigious higher and vocational-technical education
institutions; these institutions carried out specialized training
for the Company’s profile professions;
• The practice of organizing student construction brigades,
which resumed in 2010, continues. During the 2011 work
season, more than 350 students (this is a sevenfoldincrease
against 2010) from seven universities worked at Federal Grid
Company facilities in 10 Russian regions;
• In spring 2011, profiled universities organized the Federal Grid
Company Day, engaging approximately 10,000 students and
professors. At a meeting with students, our executives and
branch managers outlined the Company’s key development
lines, innovative projects with strong upside potential and
demand for new employees;
• In accordance with the Regulation on Undergraduate Training
and Employment Procedures approved during the reporting
year, more than 550 university students completed their
undergraduate production training at our facilities;
• Under the Cooperation Agreement signed between our
Company and the Moscow Power Engineering Institute (MPEI)
in 2010, we carried out the following joint events during
the reporting year:
– The Company’s employees contributed
improving
the structure and content of the educational program for
bachelor’s and master’s degrees and for power engineering
curricula. They also assisted in developing and delivering
further training courses for corporate personnel;
to
We want young graduates to believe in the power sector and
develop a strong bond with our profession.
Oleg Budargin,
Chairman of the Management Board
99
Social responsibilityAbout the CompanyOperations overviewInformation for shareholders and investorsAppendices Our joint training project with the SKOLKOVO Moscow
Management School is of great importance to the
Company, involving our most talented, proactive and
promising employees. The task they now have in front of
them is an ambitious one: to develop unique breakthrough
projects in the Company’s five key operational areas based
on best global practices and their intellectual and creative
abilities.
Practice shows that most students make their decisions
about potential jobs during their second and third year.
Therefore, the Company focuses attention on first year
university students.
Natalya Ozhegina,
Natalya Ozhegina,
Deputy Chairman of the Management Board
Deputy Chairman of the Management Board
– In 2011, Federal Grid Company helped organize a contest
for the best scientific and academic manuscript for power
engineering students and a contest for the best scientific
paper among MPEI students focused on the important area
of backbone electric grids. As a result of the contest, six
training aids, two textbooks, one reference book, and two
production and practical editions have been published;
– A contest for the best scientific paper among MPEI students
focused on the important area of backbone electric grids.
As part of the Company’s participation in the 2011 St.
Petersburg International Economic Forum, contest winners
for the best student scientific papers were awarded at
the Federal Grid Company’s corporate stand;
– In 2011, MPEI employees and students took part in a strategic
session aimed at creating Federal Grid Company’s Innovative
Development Program; the priority R&D subjects that they
proposed were included in the Company’s 2011 R&D plan;
– In summer 2011, Federal Grid Company’s subsidiary MES
Center and MPEI professors organized the Young Engineers
School – theoretical and practical courses for students in
their last years at the Moscow Power Engineering Institute
and the Ivanovo State Power Engineering University;
• In 2011, our technical experts, in conjunction with professors
from the Relay Protection and Automation Department at
the Ivanovo State Energy University, developed a special
educational program for fifth year students focused on
adapting graduates' skills and knowledge to Company
requirements.
• We upgraded the building of the Power Engineering College in
Kaspiysk, equipping it with electric technology laboratories,
including modern machinery and simulators and providing
necessary teaching literature and arranged computer classes;
Together with the Government of the Primorsk Region and
Hyundai Heavy Industries, our Company opened the Power
Engineering College in Vladivostok. Its graduates will be able
to work at Federal Grid Company facilities in the Far East and
at a gas-insulated switchgear (GIS) plant currently being built
by Hyundai Heavy Industries. Our Company took part in
100
reconstructing the college’s building, while also providing
modern equipment and simulators to its laboratories;
• We supplied a new electric
to
the Nevinnomyssk Power Engineering College with modern
simulators that imitate as closely as possible equipment used
by Federal Grid Company across its facilities.
technology
laboratory
PERSONNEL EVALUATION
In the reporting year, we developed a new concept for creating
a succession pool (SP) of candidates for the Company, helping
us to pursue the following targets:
• Improvement of the Company's key indicator – reliable grid
operation – by doubling the functions of the core production
division heads;
• Creating a comprehensive SP management system based on
candidates’ nomination to the SP, in accordance with
evaluation results, defining individual development plans (IDP)
for everyone in the succession pool and controlling their IDP
progress using additional evaluation tools;
• Develop a SP to fill the post of Heads and Deputy Heads of
structural units in the following areas of the Company’s
operations:
– Relay protection and automated equipment;
– Sub-station equipment operations;
– Information technology systems;
– Operating and technological management;
– Power lines;
– Electric mode service.
• Forming a model of a candidate’s professional and technical
competencies to qualify for the SP;
• Developing a mentorship system to include the evaluation of
potential SP candidates, training sessions for mentors helping
them share their professional experience and key performance
indicators for mentors.
• To upgrade the efficiency of interactions between mentors and
for
the Company developed a “workbook”
candidates,
candidates, which provides all
educational programs for this worker category.
information
related
to
In 2011, evaluation activities for potential SP candidates and
mentor training programs were tested in the pilot branches: MES
Center and MES North-West. A total of 227 people took part in
the evaluations for the SP and 34 employees signed up for
the mentor training program. Relying on results of the pilot proj-
ects, we decided to extend the concept to all of the Company’s
branches in 2012. A detailed description of the stages of work
and basic elements of the method are included in Regulations
on Mentorship and Regulations on Personnel Reserve, which
were approved in 2011.
NON-GOVERNMENTAL PENSION PROVISION
The non-governmental pension provision program in place is
based on a differentiated approach to the non-governmental
pension amount and aims to help the Company retain its highly
skilled personnel.
from
Since the program launch, non-governmental pension from Fe-
deral Grid Company funds has been provided to 3,220 employ-
ees. In 2011, 527 employees qualified for non-governmental pen-
In accordance with norms of
sions
the Regulation on Non-Governmental Pension Provision to Fe-
deral Grid Company employees, a total of RUR383,432,587 was
transferred to the non-governmental pension fund of the power
industry.
the Company.
HOUSING IMPROVEMENT PROGRAM
In June 2011, our Company adopted and launched the Long-Term
Corporate Assistance Program for Housing Improvement for Fe-
deral Grid Company Employees, striving to attract and retain per-
sonnel categories that play a key role in ensuring undisrupted
electricity supplies to consumers and upgrading UNEG reliability.
CORPORATE CULTURE ENHANCEMENT
The Corporate Culture at our Company involves values, work
and behavior standards that shape employees’ impression
about the Company, inspire feelings of reliability, enhance
the understanding of succession and help to properly respond to
corporate developments while creating a sense of security.
Together, we have defined a circle of values which matter to us
all as members of one team sharing one challenging cause: sup-
plying electricity across all Russian regions.
We created an evaluation system that has 80 %
of all evaluated parameters focused on determining
the level of employees’ professional and technical
competencies described with support from the Company’s
leading experts. The system only marginally looks at
the managerial and administrative skills of employees.
When creating test assignments and evaluation procedure
as such, we relied on the broadest range of proposals
from leading experts in the Company’s central office,
executives of the MES and the PMES, and experts at
different levels representing three of our branches –
MES Center, MES North-West and MES Volga.
Alexander Solod, Deputy Chief Engineer, Head of the task group
creating an evaluation system for employees wanting to become
part of the succession pool of candidates
As part of corporate culture development, we carried out the fol-
lowing activities in 2011:
• We adopted the new Corporate Ethics Code for Federal Grid
Company, as our ideological platform for building all corporate
policies and defining all production and social relationships
within the Company, while also shaping criteria for our
relationships with business partners and communities;
• We carried out Federal Grid Company’s Winter Olympiad, with
the finals attracting more than 150 employees;
• We carried out Federal Grid Company’s Summer Olympiad;
the number of Company employees in the finals reached 189;
• Under the Veteran Project, the Company provided financial
assistance to power industry veterans in the form of payments
marking special dates and healthcare allowances. Festivities
for the veterans were organized twice per year: on Victory Day
and on Power Engineers Day. Cultural activities were a regular
feature, including theater and museum visits. Throughout
the year, the Company actively helped the Veteran Council of
the Electricity Sector;
• We supported the children of MES employees who participated
in the Song of the Year contest held by Angelina Vovk's
Foundation. Fifty children took part in the contest's final gala
performance and then spent their holidays at the Orlyonok All-
Russian Children's Center.
• For the children of our employees, we organized trips to
Federal Grid Company facilities and ran a contest among
them, dedicating it to the subject “I Am the Future of the Power
Industry,” under Federal Grid Company’s Dynasty program.
101
Social responsibilityAbout the CompanyOperations overviewInformation for shareholders and investorsAppendices 4.3
ENVIRONMENT
A responsible approach to environmental protection and caring about nature and natural resources is at the core
of our environmental policies.
Environmental protection is among our most important objec-
tives and is a strong contributor to our reputation as a socially
responsible company. Electricity transmission has a signifi-
cantly smaller environmental impact compared with other power
industry branches. Emissions, discharges and waste products
are not the result of the technological process of electricity trans-
mission but appear as a result of production operations and are
characterized by very low levels of maximum permissible val-
ues. Environmental footprint is also insignificant. In 2011, con-
tamination levels across all of Federal Grid Company’s sub-sta-
tions were extremely low, with total emissions into the atmosphere
was 90.4 tons, waste discharge into superficial waters reached
62,700 cubic meters, and the volume of waste products for I-V
classes stood at 12,900 tons. Still, our Company continues
efforts to minimize its environmental footprint.
In 2011, all Federal Grid Company branches underwent environ-
mental audits to control compliance with environmental legisla-
tion, the availability and condition of environmental documents
and the technical condition of environmental facilities. The Com-
pany analyzed problems arising in the process of the branches’
environmental protection activities. Based on audit results,
the Company developed programs of measures to upgrade
the efficiency of environmental protection activities (for both
the Company and its branches).
In 2011, the Company conducted environmental training of per-
sonnel under the following programs:
• Appropriate handling of I-IV class hazardous waste – 170
employees;
• Environmental protection and safety training for executives
and specialists – 59 employees;
In 2010, we approved the Implementation Program for Federal
Grid Company’s Environmental Policies for 2011-2013, and on
30 December 2011, we approved Target Environmental Para-
meters for Federal Grid Company for 2013-2015.
• Introduction of environmental management systems under
ISO 14001:2004 requirements – 75 employees;
• Internal audit of environmental management systems under
ISO 14001:2004 requirements – 22 employees.
As part of the program to implement its environmental policies,
our Company has activities in place helping to mitigate the impact
of its production operations on the environment, including:
• Technical activities:
– Replacement of equipment that contains dangerous and toxic
substances, including trichlorodiphenyl (713 static condenser
jars with a total weight of 42.8 tons were utilized in 2011);
– Repairs of systems and oil container devices (the systems and
devices at a total of 44 energy facilities were repaired in 2011);
landfill sites (arranged at
– Organization of
temporary
55 facilities in 2011);
– Construction and modernization of sewage and waste
treatment systems (work completed at 98 facilities in
the reporting year).
• Administrative activities:
– Introducing an environmental management system that is
compliant with ISO 14001 international standard;
– Upgrading the environmental production control system and
conducting environmental audits;
– Providing personnel with environmental training;
– Developing regulatory documents as needed;
– Upgrading documentary support
for environmental
protection activities.
The Company’s grid construction and upgrade projects are sub-
ject to statutory review and undergo public hearings assessing
their environmental impact. During construction and upgrading
of electric grids, new environmentally friendly equipment is
installed and new design and construction technologies are
introduced for power lines.
102
In 2011, the Executive Office of Federal Grid Company and MES
South successfully introduced an environmental management
system, which later received ISO 14001:2004 certification.
Federal Grid Company’s principal objectives in environmental
protection include:
• Introducing and certifying an ISO 14001:2004 compliant
environmental management system at Federal Grid
Company’s MES North-West branch, and ensuring optimal
performance of the existing environmental management
system at the Company’s Executive Office and MES South;
• Utilizing de-installed equipment containing trichlorodiphenyl;
• Planning and implementing technical and administrative
environmental protection activities aimed at mitigating
the Company’s negative environmental impact and at meeting
the Company’s current target environmental indicators;
in environmental
• Conducting internal environmental audits at Federal Grid
Company branches to identify non-compliance with and
violations
legislation and developing
appropriate measures to address them;
training
the Company’s
executives and specialists to ensure compliance with Russian
environmental legislation and improving the personnel’s
environmental awareness;
• Setting up environmental
for
• Developing a register of specially protected natural areas in
the vicinity of Federal Grid Company electric grid facilities to
create a database of environmentally valuable areas and thus
reduce the environmental footprint of electric grid facilities as
early as the design and maintenance stage.
4.4
PRODUCTION SAFETY
In the electric power industry, production safety is a matter of paying close attention to issues that the lives and
health of people depend on. Our Company employs a systemic approach to addressing all safety issues.
LABOR PROTECTION
INDUSTRIAL SAFETY
Two years ago, corporate management developed a new OSH
management system based on the detailed allocation of person-
nel responsibilities, incident registration and analysis and the pos-
sibility to quickly prevent future recurrences. The Company’s ma-
nagement believes that work on upgrading labor safety should be
carried out continuously, providing a responsible attitude for
employees in this sphere.
To improve employee safety and performance, we have deve-
loped a set of organizational, technical and preventive measures
that we are heavily investing in. In 2011, labor protection spending
per employee grew 55.6 % year-on-year, driven mainly by larger
expenses on the purchases of certified professional clothing and
footwear to protect personnel from industrial electromagnetic field
frequency and thermal risks of an arc flash.
In 2011, labor accident reduction efforts at each PMES were
based on the results of an injury risk evaluation at the Company’s
facilities and were in line with a set of objectives outlined by
the Council
internal
documents.
for Protection and
the Company’s
For the first time in a decade, Federal Grid Company’s industrial
accident frequency rate saw a marked decline. For FY 2011,
the number of incidents fell two-fold compared with 2010, and
the number of injured employees declined 2.75 times.
To improve labor safety, we carried out the following measures:
• A two-week labor protection program prior to the 2011 repair
campaign, allowing brigades to work at power facilities;
• A unified Labor Protection Day with the subject “Risk
Management and Injury Prevention in Working with High
Voltage Lines;”
• A month-long initiative on road traffic safety;
• Improvement of personnel interaction measures, including
preparation for error-free actions;
• Introduction of ongoing control and analysis of safe working
practices at the Company’s facilities;
• Efficiency evaluation of violation prevention systems for
facilities, with proposals
personnel working at power
developed to improve its performance.
The Company continued working towards creating psychological
rehabilitation rooms at sub-stations, complementing the ten exist-
ing ones with three new rooms during the reporting period. Fe-
deral Grid Company also completed a pilot project to acquire
17 mobile labor protection offices to teach employees safe work-
ing practices in line with modern requirements, taking into account
the remoteness of our production personnel.
In 2011, Federal Grid Company operated 339 hazardous industrial
facilities (HIFs) registered with the State Register.
To ensure safe operation of the HIFs and to prevent incidents and
enhance the readiness to contain and eliminate such accidents,
the Company carried out the following measures in 2011:
• Registration/exclusion/re-registration of HIFs with the State
Register;
• Obtaining License No. VP-00-012816 (dated 24 June 2011), to
operate explosive and flammable production facilities;
• Developing and introducing documents that regulate HIF
operations
identified by obtaining, using, storing and
transporting hazardous substances: action plans for accident
situations, prevention and elimination measures for oil and oil
product spills, safety passports;
• Receiving a positive industrial safety report from Russia’s
Federal Environmental Industrial and Nuclear Supervision
Service confirming that the Company’s facilities comply with
regulatory requirements;
• Liability insurance for damage to the life, health or property of
third parties and the environment in case of an accident at
HIFs;
• Industrial safety training and testing for personnel.
The Company also introduced production control to make sure
industrial safety norms are observed in HIF operations. To do so,
we developed the Regulation on Production Control of Industrial
Safety Compliance at Federal Grid Company Hazardous Indus-
trial Facilities.
FIRE SAFETY
Federal Grid Company suffered one fire outbreak in 2011 – at
Control Center No.1 of the 220 kV sub-station of the MES Center’s
is estimated at
from
Vologda branch. Damage
RUR13.563 million.
the
fire
The reason for the marked decline in the number of fires associ-
ated with technological breaches of sub-station equipment at
the Company’s facilities is the implementation of a set of addi-
tional measures as part of preparing for the 2010 fire-hazard
period (creating a 25 m fire break along the sub-station perimeter,
purchasing fire pumps and buying fire hoses to extinguish fire on
the approach to the sub-station up to 25 meters from the fence,
etc.).
103
Social responsibilityAbout the CompanyOperations overviewInformation for shareholders and investorsAppendices In 2011, the Program to enhance and upgrade fire safety at Fe-
deral Grid Company facilities was implemented. Its objectives are:
• Introducing modern fire protection systems;
facilities
• Bringing
line with current
fire safety
in
the
requirements;
• Complying with orders imposed by regulatory authorities of
the Russian Emergencies Ministry.
In 2011, fire safety standards were developed, taking into account
current requirements for the design, construction, repair and
maintenance of fire safety systems at corporate facilities.
As part of personnel fire safety training, every six months, fire
drills and exercises are held, including in conjunction with fire
departments.
Пожарная безопасность
Distribution of technological breaches leading to fire outbreaks at sub-station equipment included in Federal Grid Company
Branches – MES 2009-2011 statistics
5
4
3
2
1
0
2
1
5
1 1
1
1 1
1
1
1
1
2
22
MES East
MES Siberia
MES Urals
MES West Siberia
MES Volga
MES Center
MES North-West
MES South
2009
2010
2011
Distribution of technological breaches leading to fire outbreaks at transmission lines included
in Federal Grid Company Branches – MES 2009-2011 statistics
1
MES East
MES Siberia
MES Urals
MES West Siberia
MES Volga
MES Center
MES North-West
MES South
2009
2010
2011
1.00
0.75
0.50
0.25
0
104
CONTACTS
Addresses, telephone numbers, contact persons, bank details,
the Company’s web site address, brief information on the audi-
tor, the registrar and the depositor responsible for maintaining
the Company’s securities:
Information on the organization(s) registering the rights for
the Company’s securities
The registrar, maintaining the register of the Company’s
securities
Federal Grid Company:
Actual and mailing address: 5A Akademika Chelomeya Street,
Moscow, Russia, 117630
Telephone: +7 495 710 9000
Fax: +7 495 710 9655
E-mail: info@fsk-ees.ru
The Company’s web site address: www.federal-grid.com
Telephone line for shareholders: +7 800 200 1881
Contact information for institutional investors and analysts:
Investor Relations & Equity Capital Markets Department
Telephone: +7 495 710 9064
E-mail: ir@fsk-ees.ru
Information on Federal Grid Company’s auditor conducted
2011 independent audit of the accounting/financing reporting
Full name of the company: Closed Joint Stock Company Price-
waterhouseCoopers Audit
Abbreviated company name: PwC Audit
Location: 10 Butyrsky Val Street, Moscow, Russia, 125407
INN: 7705051192
OGRN: 1027700148431
Telephone: +7 495 967 6000
Fax: +7 495 967 6001
E-mail: hotline@ru.pwc.com
Information on the auditor’s membership in self-regulated
organizations
Organization’s full name: Not-for-Profit Partnership Audit Cham-
ber of Russia
Location: Building 9, Block 2 3rd Syromyatnichesky Lane, Mos-
cow, Russia, 105120
Information on the registrar:
Since February 2011, the Company’s Registrar has been
STATUS Registrar Company, which was selected via an open
tender.
Full name of the company: Closed Joint Stock Company
STATUS Registrar Company
Abbreviated company name: STATUS
Location: 32, Block 1 Novorogozhskaya Street, Moscow, Rus-
sia, 109544
Mailing address: 32, Block 1 Novorogozhskaya Street, Moscow,
Russia, 109544
Telephone: +7 495 974 8350
Fax: +7 495 678 7110
E-mail: info@rostatus.ru
License number: 10-000-1-00304
Issue date: 12 March 2004
License term: indefinite
Issuing authority: Russia’s Federal Financial Markets Service
Information on the depository responsible for the centralized keeping of
the Company’s bonds:
Full name of the company: Non-Banking Credit Organization-
Closed Joint Stock Company National Settlement Depository
Abbreviated company name: NSD
Location: 1/13 Sredny Kislovsky Lane, Building 4, Moscow,
Russia
Information on the license to perform depository activities on
the securities market:
License number: 177-12042-000100
Issue date: 19 February 2009
Expiration date: unlimited
Issuing authority: Russia’s Federal Financial Markets Service
105
About the CompanyOperations overviewInformation for shareholders and investorsSocial responsibilityAppendices GLOSSARY
Different names for Federal Grid Company and its branches
Federal Grid Company,
The Company
Branches
Head Office (EO)
Abbreviations
Open Joint Stock Company “Federal Grid Company of Unified Energy System” (Federal Grid Company)
The branches of Federal Grid Company – Backbone Electric Grid (MES), Enterprise of the Backbone Electric Grid (PMES)
The headoffice of Federal Grid Company
Abbreviation – Full name
DCT – Direct Current Transmission
ACPP – Annual Complex Purchase
Program
DDTS – Digital Data Transmission
System
NGO – Non-governmental
organization
NPP – Nuclear Power Plant
UES – Unified Energy System
UES of Russia – Unified Electrical
System of Russia
AIMS CMEE – Automated
Information and Measurement
System for the Commercial
Metering of Electrical Energy
AL – Aerial Line
AS – Automated System
AS CFFC – Asynchronized
Synchronous Cross-Field
Frequency Converter
AS MMR – Automated System for
Managing Maintenance and Repairs
ASC – Asynchronized Synchronous
Compensator
ASCMEE – Automated System for
Commercial Metering of Electric
Energy
ASDEC – Automated System for
Dispatch and Engineering Control
ASDFC – Automated System for
Document Flow Control
ASEC – Automated System for
Engineering Control
ASPC – Automated System for
Process Control
AT – Automatic Transformer
AWP – Autumn-Winter Period
BBS – Back-to-Back Station
BGC – Bulk Grid Company
BPS-2 – Baltic Pipeline System-2
CB – Capacitor Bank
CGIS – Corporate Governance
Information System
DECS – Dispatch and Engineering
Control System
ODM – Operational Dispatch
Management
UNEG – Unified National
(all-Russian) Electric Grid
URARP – Universal Regulator
of Active and Reactive Power
USCD – Uncontrolled Series
Compensation Device
VRG – Vacuum-Reactor Groups
WMEPC – Wholesale Market for
Electrical Power and Capacity
DC – Distribution Company
OS – Outdoor Switchgear
EBIT – Earnings Before Interest
and Taxes
EBITDA – Earnings Before
Interest, Taxes, Depreciation and
Amortization
ECA – Emergency Control
Automatics
EDATS – Engineering Data
Acquisition and Transmission
System
ESO – Energy Supply Organization
ESPO – Eastern Siberia-Pacific
Ocean Pipeline
FACTS – Flexible Alternating
Current Transmission Systems
FOCL – Fiber-Optic Communication
Line
GCC – Grid Control Center
HFCS – High Frequency
Communication System
HPP – Hydro Power Plant
HPS – Heat Power Station
PS – Phase Shifter
PSD – Power System Disturbance
EETL – Electric energy transmission
line
RAB – Regulatory Asset Base
RAD – Research and Advanced
Development
ROIP – Reliability and Observability
Improvement Program
RPA – Relay Protection and
Automatics
RPEA – Relay Protection and
Emergency Automatics
RRL – Radio Relay Lines
RS – Requirement Specifications
SC – Synchronous Compensator
SCRPBVC – Static Compensator
for Reactive Power Based on
Voltage Converter
SDCs – Subsidiaries and
Dependent Companies
HTSCL – High Temperature Super-
conductor Cable Line
HTSM – High Temperature Super-
conductor Materials
IECS – Internal Engineering Control
System
SDPP – State District Power Plant
SHT – Software and Hardware
Tools
SSDS – Switchgear for Secondary
Distribution Systems
STC – Static Thyristor Compensator
KPI – Key Performance Indicator
TC – Technological Connection
CSCD – Controlled Series
Compensation Device
LNPP – Leningrad Nuclear Power
Plant
CSR – Controlled Shunt Reactor
CT – Communication Tools
CTC – Central Tender Commission
DATS – Data Acquisition and
Transmission System
LTSM – Low Temperature Super-
conductor Materials
MCST – Multi-Chamber Switching
Tube
MR – Maintenance and Repairs
TR – Technical Requirements
UEEDCN – Unified Electrical
Energy Digital Communications
Network
UEEECN – Unified Electrical Energy
Engineering Communications
Network
106
APPENDICES. PART 1
COMPLIANCE WITH THE CODE OF CORPORATE GOVERNANCE
№
CCG ARTICLE
GENERAL SHAREHOLDERS MEETING
COMPLIANT/
NON-COMPLIANT
NOTE
Notifying shareholders about the General Shareholders
Meeting at least 30 days prior to the meeting date
irrespective of items included on the agenda, unless
a longer notice is stipulated by legislation.
Compliant
Shareholders' opportunity to examine the list of
persons authorized to participate in the General
Shareholders Meeting, starting from the notification
date for the General Shareholders Meeting through to
closing the internal General Shareholders Meeting, and
in case of a meeting held in absentia till the date for
receiving voting ballots expires.
Shareholders' opportunity to examine information
(materials) which are to be submitted during
preparation for the General Shareholders Meeting, via
electronic communication, including the Internet.
Compliant
Compliant
Partially
compliant
Shareholders’ opportunity to submit an issue for
the agenda of the General Shareholders Meeting
or to demand calling a General Shareholders
Meeting without giving an extract from the register of
shareholders if their rights to shares are registered
in the register of shareholders, and the sufficiency
of an extract from the depo account for executing
the above-mentioned rights if their rights to shares are
registered on the depo account.
Provision in the Articles of Association or internal
documents of the joint stock company to require
the obligatory presence of the General Director,
members of the Management Board, members
of the Board of Directors, members of the Audit
Commission and the auditor of the joint stock company
at the General Shareholders Meeting.
The obligatory presence of candidates during
the consideration of issues related to electing members
of the Company’s Board of Directors, the General
Director, members of the Management Board,
members of the Audit Commission, as well as the issue
on approving the auditor of the joint stock company at
the General Shareholders Meeting.
1
2
3
4
5
6
7
According to p. 11.4 of Article 11 of the Company Articles of Association
the 30 days notice on the General Shareholders Meeting shall be sent (or
handed over) to each person included into the list of persons authorized to
participate in the General Shareholders Meeting. The notice shall also be
published in the Rossiyskaya Gazeta newspaper.
Any person holding at least 1 percent of votes is entitled to this. Document
data and postal addresses for individuals included on this list are provided
only at the consent of these individuals.
According to p. 11.5 of Article 11 of the Company’s Articles of Association,
the shareholders are entitled to within 20 days prior to the General Meeting,
and within 30 days prior to the General Meeting in case the General
Shareholders Meeting includes an agenda item on reorganizing
the Company, to examine materials for the General Shareholders Meeting
on the Internet. The information is published on the Company’s web site at
http://fsk-ees.ru/, in the Shareholders and Investors section.
In accordance with p. 4.7 of the Regulations on the Procedure for Preparing
and Holding the General Shareholders Meeting, when an issue is submitted
to the agenda or when an Extraordinary General Shareholders Meeting
is called, a shareholder’s possession of shares, the rights to which are
considered according to the deposit account in the depository, is confirmed
by providing an extract from the depo account.
Partially
compliant
Paragraph 7.2 of the Regulations on the Procedure for Preparing and
Holding the General Shareholders Meeting requires that the Chairman of
the Board of Directors or members of the Board of Directors be present.
Non-compliant
This requirement is not provided for by any corporate internal documents,
but the candidates to the specified positions may be present at
the Company’s General Shareholders Meeting
A registration procedure for participants in the General
Shareholders Meeting in the internal documents of
the joint stock company.
Compliant
Paragraph.5.1 of Article 5 of the Regulations on the Procedure for
Preparing and Holding the General Shareholders Meeting of Federal Grid
Company
BOARD OF DIRECTORS
8
9
10
11
Provision in the Articles of Association of the joint
stock company for the Board of Directors’ authority to
approve on an annual basis the financial and economic
plan of the joint stock company.
Compliant
In accordance with p.p.33 and 15.1 of Article 15 of the Company’s
Articles of Association, the areas of competency for the Board of Directors
includes approving the business plan and targets for the Company’s key
performance indicators.
A risk management procedure for the joint stock
company approved by the Board of Directors
Provision in the Articles of Association of the joint stock
company regarding the right of the Board of Directors
to make a decision on suspending the authority
of the General Director appointed by the General
Shareholders Meeting
Provision in the Articles of Association of the joint
stock company of the right of the Board of Directors
to establish requirements for professional skills and
remuneration for the General Director, members of
the Management Board and heads of the primary
structural divisions of the joint stock company
Non-compliant
Not applicable
Partially
compliant
This procedure was not approved by the Company’s Board of Directors as
a separate document.
Functions of the Company’s sole executive body are performed by
the Chairman of the Company’s Management Board. In accordance with
Sub-paragraph 10 of paragraph 10.1 of Article 10 of the Company’s Articles
of Association, the Chairman’s election and early termination is an area that
falls under the competency of the Company’s General Shareholders Meeting
In accordance with Sub-paragraphs 10 and 37 of Paragraph 15.1 of Article
15 of the Company’s Articles of Association, areas of competency that fall
under the Company’s Board of Directors include establishing remuneration
and compensation for the Chairman and the members of the Company’s
Management Board
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COMPLIANT/
NON-COMPLIANT
NOTE
Compliant
Compliant
Provision in the Articles of Association of the joint
stock company of the right of the Board of Directors to
approve contract terms with the General Director and
members of the Management Board
Provision in the Articles of Association or internal
documents of the joint stock company for the requirement
stating that votes of members of the Board of Directors
who are either the General Director or members of
the Management Board are not taken into account when
voting to approve contract terms with General Director (a
management organization or the managing director) and
members of the Management Board
Presence on the Board of Directors of the joint stock
company of at least three independent directors that
meet requirements of the Corporate Conduct Code
Compliant
Sub-paragraph 37 of Paragraph 15.1 of Article 15 of the Company’s
Articles of Association -the Board of Directors approves contract terms with
the General Director and members of the Management Board
According to p. 18.10 of the Company’s Articles of Association when
deciding on the issue stipulated by p.p. 37 and 15.1 of the Company’s
Articles of Association the votes of the members of the Board of Directors
who are the members of the Company’s sole executive body at the same
time, are not taken into account
In accordance with a decision of Federal Grid Company's Annual General
Shareholders Meeting on 29 June, 2011, the following directors meeting
independence requirements were included on the Company’s Board of
Directors: Rashid Sharipov, Igor Khvalin, Ernesto Ferlenghi and Yuri Soloviev
Absence in the composition of the Board of Directors
of the joint stock company of persons who were found
guilty of committing crimes in the sphere of economic
activities or crimes against the government, interests
of public service and service to local government
institutions or who had administrative punishments
applied to them for violations of the law in the area of
entrepreneurial activity or in the area of finance, tax
and tax collection and securities market
Absence in the composition of the Board of Directors
of the joint stock company of persons who are
participants, the General Director (managing director),
member of a regulatory body or employee of a legal
entity that competes with the joint stock company
Requirement in the Articles of Association of the joint
stock company to elect the Board of Directors via
cumulative voting
Provision in the internal documents of the joint stock
company of the obligation of members of the Board
of Directors to withdraw from actions that lead or
potentially lead to a conflict between their interests
and the interests of the joint stock company; obligation
to disclose information on this conflict to the Board of
Directors in case it occurs
Provision in the internal documents of the joint stock
company of members of the Board of Directors duty to
notify the Board of Directors in writing of their intention
to make transactions with securities of the joint stock
company, if they are members of the Board of Directors
of this joint stock company or its subsidiaries or
dependent companies, as well as to disclose information
about the transactions with such securities made by them
Provision in the internal documents of the joint stock
company of the requirement to hold at least one meeting of
the Board of Directors every six weeks
Meetings of the Board of Directors of the joint stock
company during the year which is the subject of
the annual report of the joint stock company are carried
out regularly, at least one meeting every six weeks
Provision in the internal documents of the joint stock
company of a procedure for holding meetings of
the Board of Directors
Provision in the internal documents of the joint
stock company of regulations on the necessity
of the Company’s Board of Directors approving
transactions in an amount of 10 percent and more
of the cost of the Company’s assets, except for
transactions made as part of the Company’s day-to-
day economic activity
Compliant
There are no such persons in the composition of the Company’s Boards of
Directors valid throughout 2011.
Compliant
There are no such persons in the composition of the Company’s Boards of
Directors valid throughout 2011.
Compliant
Compliant
Compliant
According to p. 10.9 of Article 10 of the Company’s Articles of Association
during cumulative voting the number of votes owned by each shareholder is
multiplied by the number of persons to be elected to the Board of Directors.
According to p.p. 4.1.6 of p.4.1 of p.4 of the Company’s Code of Corporate
Governance the members of the Company’s Board of Directors shall
refrain from actions which may result in a conflict between their interests
and the interests of the Company. In case such conflict arises, a member
of the Company’s Board of Directors shall inform the other members of
the Board of Directors and also refrain from voting on related issues
According to p. 16.9 of Article 16 of the Company’s Articles of Association,
and p. 3 of the Regulation of the Company’s Board of Directors, and
p.p. 7.2 and 7.3 of the Insider Information Policy, and pp. 4.1.6 and
4.1. of the Company’s Code of Corporate Governance, the members of
the Company’s Board of Directors are obliged to disclose the information
on the sale (disposal) and (or) the purchase of the Company securities
Non-compliant
According to p. 6.4 of Article 6 of the Regulation of the Board of Directors,
the meetings of the Board of Directors are conducted as necessary, but at
least once in every quarter
Compliant
On average in 2011, meetings of the Company’s Board of Directors were
held at least once per month or more.
Compliant
Partially
compliant
The Company has an established Regulation of the Board of Directors,
approved by the resolution of the Company’s Annual General Shareholders
Meeting dated 30 June 2009 (Minutes No7, dated 10 June 2009)
Sub-item 27 (a) of Item 15.1 of Article 15 of the Company’s Articles of
Association stipulates that the Board of Director grants preliminary approval
for corporate transactions that have the non-current assets worth more
than 10 percent of the balance value as the object of the transactions.
№
12
13
14
15
16
17
18
19
20
21
22
23
108
№
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
CCG ARTICLE
COMPLIANT/
NON-COMPLIANT
NOTE
Provision in the internal documents of the joint stock
company of the right of members of the Board of
Directors to receive information required to perform
their functions from executive bodies and heads of
the Company’s main structural divisions, as well as
responsibility for the failure to provide such information
The existence of a Strategic Planning Committee of
the Board of Directors or another committee assigned
with said functions (except for the Audit Committee and
the Human Resources and Remuneration Committee)
The existence of a committee of the Board of Directors
(the Audit Committee) which recommends the auditor
for the joint stock company to the Board of Directors
and cooperates with the auditor and the Audit
Commission of the joint stock company.
Presence of only independent and non-executive
directors on the Audit Committee
The Audit Committee is managed by an independent
director
Provision in internal documents of the joint stock
company of the right of all members of the Audit
Committee to access any documents and information
of the joint stock company provided that they do not
disclose confidential information
Establishing a committee of the Board of Directors
(the Human Resources and Remuneration Committee)
with the function of defining recruitment criteria for
candidates applying for positions of members of
the Board of Directors and developing the joint stock
company’s remuneration policy
Compliant
Compliant
Compliant
Compliant
Compliant
Compliant
Compliant
In accordance with Section 3 of the Regulations on the Board of Directors,
members of the Company’s Board of Directors are entitled to receive
information about the Company’s operations, including commercial secrets,
and access all constituent, normative, reporting, accounting, contractual
and other corporate documents.
Establishing the Strategy Committee was approved by a decision of
the Company’s Board of Directors as of 15 May 2008 (Minutes No. 62).
Operation procedures are laid out by the Regulations on the Strategy
Committee of Federal Grid Company
Establishing the Audit Committee was approved by a decision of
the Company’s Board of Directors as of 15 February, 2008 (Minutes No. 54).
Operation procedures are laid out by the Regulations on the Audit Committee
of the Board of Directors of Federal Grid Company.
The Audit Committee consists only of independent and non-executive
directors.
The Audit Committee of the Company’s Board of Directors is managed by
independent director Rashid Sharipov.
Section 3 and 4 of the Regulations on the Audit Committee of the Board of
Directors of Federal Grid Company.
The HR and Remuneration Committee was established by a decision of
the Company’s Board of Directors as of 15 February, 2008 (Minutes No. 54).
The procedure for the Committee’s operations is laid out by the Regulations
on the HR and Remuneration Committee of the Board of Directors of Federal
Grid Company.
The Human Resources and Remuneration Committee
is managed by an independent director
The absence of officials of the joint stock company on
the Human Resources and Remuneration Committee
Compliant
Compliant
Paragraph 5.2 of the Regulations on the HR and Remuneration Committee
of the Board of Directors of Federal Grid Company.
Paragraph 5.2 of the Regulations on the HR and Remuneration Committee
of the Board of Directors of Federal Grid Company.
Establishing the Risk Committee under the Board
of Directors or assigning these functions to another
committee (except for the Audit Committee and
the Human Resources and Remuneration Committee)
Establishing the Corporate Conflicts Settlement Committee
of the Board of Directors or assigning these functions to
another committee (except for the Audit Committee and
the Human Resources and Remuneration Committee)
The absence of joint stock company officials on
the Corporate Conflicts Settlement Committee
The Corporate Conflicts Settlement Committee is
managed by an independent director
Provisions in internal documents of the joint stock
company of procedures for establishing and operating
Board of Directors’ Committees, approved by
the Board of Directors
Provision in the Articles of Association of the joint
stock company on the process for defining the quorum
for the Board of Directors, allowed to provide for
the obligatory participation of independent directors in
Board of Directors’ meetings
Non-compliant
The Committee was not established.
Non-compliant
The Committee was not established.
Not applicable
The Committee was not established.
Not applicable
The Committee was not established.
Compliant
Regulations: On the Audit Committee, On the HR and Remuneration
Committee, On the Reliability Committee of the Board of Directors, On
the Strategy Committee, On the Investment Committee.
Non-compliant
According to p. 18.2 of the Company’s Articles of Association the quorum
to conduct the meeting of the Board of Directors is composed of at least
half of the total number of the elected members of the Board of Directors
EXECUTIVE BODIES
39
40
Provision of the collegial executive body (Management
Board) of the joint stock company
Compliant
Compliant
Provision in the Articles of Association or internal
documents of the joint stock company on regulations
on the necessity of the Management Board’s approval
of transactions with real estate and loans taken out by
the joint stock company provided that said transactions
are not deemed major transactions and are not part
of day-to-day economic activities of the joint stock
company
According to p.20.1 of Articles 20 and 21 of the Company’s Articles of
Association the running activities of the Company are managed also by
the Company’s Management Board, the collegial executive body
In accordance with p.15.1 of Article 15 of the Company’s Articles of
Association, it is an area of competency under the Board of Directors. At
the same time, however, in accordance with Item 6.1 of the Regulations
on the Preparation of Materials for the Management Board’s Meetings, all
questions submitted for consideration to the Company’s Board of Directors
are subject to mandatory preliminary considerations by the Company’s
Management Board.
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41
42
43
44
45
46
47
48
CCG ARTICLE
COMPLIANT/
NON-COMPLIANT
NOTE
Provision in the internal documents of the joint stock
company of the procedure for approving operations
beyond the financial and economic plan of the joint
stock company
Partially
compliant
This requirement is not provided for by the Company’s Articles of
Association or any other documents.
In part, these questions are outlined by the Regulations on the Procedure
for Placing Temporarily Disposable Free Funds of Federal Grid Company
(approved by the Management Board of Federal Grid Company, Minutes
No. 528 as of 24 April, 2008) and by the Regulations on Debt Management
Procedure (approved by the Company’s Board of Directors, Minutes No.
44 as of 29 May, 2007).
Absence in the composition of executive bodies of
persons who are either participants, the General
Director (managing director), members of
the management body or employees of a legal entity
that competes with the joint stock company
Absence in the structure of the executive bodies of
the joint stock company of persons who were found
guilty of committing crimes in the area of economic
activities or crimes against the government, interests
of public service and service in local government
institutions, or of persons who experienced
administrative punishments for violations in the area
of business activity or in the area of finance, taxes,
fiscal charges and the securities market. If functions
of the sole executive body are carried out by
a management organization or a managing director,
the General Director and members of the Management
Board of the management organization or the managing
director must meet the requirements of the General
Director and members of the Management Board of
the joint stock company
Provision in the Articles of Association or internal
documents of the joint stock company to prohibit
the management organization (managing director) from
carrying out similar functions in a competing company,
as well as to be in any other material relationship with
the joint stock company, besides rendering services of
the management organization (managing director)
Provision in internal documents of the joint stock
company of the duties of executive bodies to withdraw
from actions leading or potentially leading to a conflict
of interest and the interests of the joint stock company,
and duties to inform the Board of Directors if such
a conflict occurs
Provision in the Articles of Association or internal
documents of the joint stock company of criteria for
electing the management organization (managing
director)
The joint stock company’s executive bodies present
monthly performance reports to the Board of Directors
Non-compliant
Liability for infringing on provisions for using
confidential and proprietary information stated in
contracts concluded by the joint stock company with
the General Director (management organization,
managing director) and members of the Management
Board
Compliant
Compliant
There are no such persons in the executive body.
Compliant
There are no such persons in the executive body.
Non-compliant
This prohibition is not provided for by the Company’s the Articles of
Association or by any other documents.
Compliant
Non-compliant
According to p. 4.2.7 of the Company’s Code of Corporate Governance
the Chairman and the members of the Management Board shall refrain
from actions which may result in a conflict between their interests and
the interests of the Company. In case such conflict arises, the Chairman or
a member of the Company’s Management Board shall inform the Board of
Directors and also refrain from discussing and voting on related issues
The Company’s Articles of Association or any other documents do
not contain any selection criteria for management organizations, as
the Company has no intentions to attract one to perform the functions of
the Company’s sole executive body
Reports by the Chairman of the Company’s Management Board are
provided on a quarterly basis (Sub-paragraph 14 of paragraph 22.1 of
Article 22 of the Company's Articles of Association).
Contracts signed by the Company with the Chairman of the Management
Board and members of the Management Board outline the liability
for violations of provisions on the use of confidential and proprietary
information.
COMPANY SECRETARY
Presence in the joint stock company of a special official
(the Company Secretary) whose task is to ensure
the compliance of bodies and officials of the joint stock
company with procedural requirements guaranteeing
the execution of rights and legitimate interests of
the Company’s shareholders
The process of appointing (electing) the Company
Secretary and his/her duties are stipulated by
the Articles of Association or internal documents of
the joint stock company
Compliant
The function is performed by the Secretary of the Company’s Board of
Directors.
Compliant
Article 4 of the Regulations on the Board of Directors
49
50
110
№
51
CCG ARTICLE
Provision in the Articles of Association of the joint
stock company for requirements for candidates for
the Company Secretary position
MATERIAL CORPORATE ACTIONS
COMPLIANT/
NON-COMPLIANT
NOTE
Non-compliant
There are no such requirements.
52
53
54
55
56
57
Requirement in the Articles of Association or internal
documents of the joint stock company to approve
a major transaction prior to its fulfillment
Obligatory involvement of an independent appraiser
in evaluating the market value of property which is
the subject of a major transaction
Presence in the Articles of Association of the joint
stock company a prohibition to undertake any action
when acquiring (taking over) a large stake of shares of
the joint stock company (takeover) aimed at protecting
the interests of executive bodies (members of these
bodies) and members of the Board of Directors of
the joint stock company, as well as actions worsening
the shareholders’ position compared to their existing
position (in particular, a prohibition against the Board of
Directors on making decisions on the issue of additional
shares, the issue of securities that are convertible into
shares or securities enabling a person to purchase
shares of the Company before the termination of
the Prospectus even if the right to make these decisions
is granted by the Articles of Association)
Requirement in the Articles of Association of the joint
stock company of the obligatory involvement of
an independent appraiser to estimate the current market
share price and possible changes in the share price as
the result of a takeover
Absence in the Articles of Association of the joint stock
company of the release of a purchaser from their duty
to make an offer to shareholders to sell their ordinary
shares (securities issue that is convertible into ordinary
shares) during a takeover
Presence in the Articles of Association or
internal documents of the joint stock company of
the requirement for the obligatory involvement of
an independent appraiser in defining the share
conversion ratio during reorganization
INFORMATION DISCLOSURE
58
59
60
61
62
An internal document approved by the Board of
Directors that outlines rules and approaches of the joint
stock company to information disclosure (Regulations
on the Information Policy)
Existence of internal documents of the joint stock
company that require the disclosure of information
about the purpose of the share issue, about persons
intending to purchase shares to be issued, including
a large shareholding and about whether executives
of the joint stock company participate in purchases of
the Company’s shares to be issued
Existence of a list of information, documents and data
in internal documents of the joint stock company which
should be given to shareholders for making decisions on
items submitted to the General Shareholders Meeting
A web site of the joint stock company on the Internet
that regularly discloses information on the joint stock
company (on the web site)
Presence in internal documents of the joint stock
company of the requirement to disclose information
about transactions of the joint stock company
made with persons who according to the Articles of
Association are among executives of the joint stock
company, as well as about transactions of the joint
stock company made with organizations in which
executives of the joint stock company hold, directly
or indirectly, 20 percent of the authorized capital of
the joint stock company and above or which can be
essentially influenced by said persons
Compliant
Sub-paragraph 16 of paragraph 10.2 of Article 10 and Sub-paragraph 20 of
paragraph 15.1 of Article 15 of the Company's Articles of Association.
Compliant
Said deals involve the services of an independent appraiser.
Non-compliant
This prohibition is not provided for by the Company's Articles of
Association.
Non-compliant
This requirement is not provided for by the Company's Articles of
Association. But in case the Company is re-organized, the decision
on reorganization will be based, among other things, on the results of
the estimation of the current market price of the Company property and
shares
Compliant
This norm is not provided for by the Company's Articles of Association.
Compliant
According to p. 26.2 of Article 26 of the Company’s Articles of Association
in case the General Shareholders Meeting decides to reorganize
the Company, an independent appraiser shall be involved to define
the share conversion ratio
Compliant
The Regulations on the Information Policy were approved by
the Company’s Board of Directors on February 28, 2008 (Minutes No. 55).
Non-compliant
This requirement is not provided for by the Company's Articles of
Association or any other documents.
Compliant
A list of information (materials) is defined by the Company’s Board of Directors
based on Articles 11 and 12 of the Company’s Articles of Associations, p.
7 of the Regulations on the Information Policy and p. 4 of the Procedure for
the Preparation and Holding of the General Shareholders Meeting
Compliant
http://www.fsk-ees.ru/
Compliant
In accordance with p.5.2.8 of the Regulations on the Information Policy
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63
64
CCG ARTICLE
COMPLIANT/
NON-COMPLIANT
NOTE
Presence in internal documents of the joint stock
company the requirement to disclose information about
all transactions which can influence the market price of
the Company’s shares
An internal document approved by the Board
of Directors on using essential information on
the operations of the joint stock company, shares and
other corporate securities and transactions with them
which are not public and the disclosure of which could
materially influence the market price of shares and
other securities of the joint stock company
Compliant
In accordance with Items 5.1 and 5.2.10 of the Company’s Regulations on
the Information Policy.
Compliant
The Regulations on Insider Information were approved by the resolution of
the Board of Directors as of 06 October 2011 (Minutes No 144)
CONTROL OVER FINANCIAL AND ECONOMIC ACTIVITY
Internal control procedures over the financial and
economic activity of the joint stock company are
approved by the Company’s Board of Directors
Compliant
A special division of the joint stock company which
enforces the execution of internal control procedures
(supervision and auditing service)
Compliant
The Provisions on the Audit Commission as approved by the resolution
of the Company’s Board of Directors on 21 October 2002 (Minutes No).
The Regulations on the Company’s Internal Control System as approved by
the Company’s Board of Directors on 28 February 2008 (Minutes No 55)
The Company’s divisions responsible for the internal control procedures
include the following:
Control and Audit Department – controls the financial, production and
economic activities of the Company divisions, branches and dependent
companies;
Internal Control Directorate – performs running control and analysis of
the efficiency of accounting in the Company and dependent companies;
Technical Surveillance and Auditing Department – performs auditing
checks of production and engineering activities of the divisions and
branches of the Company
The Audit Commission
The Company's Regulations on the Internal Control System outlines
participants in the internal control system, structural divisions of
the Company responsible for controlling and auditing the Company’s
financial, economic and investment activities.
Compliant
Compliant
There are no such persons in the Company’s supervision and auditing
services.
Compliant
There are no such persons in the Company’s supervisory and auditing
services
Compliant
Paragraph 7 of the Regulations on the Audit Commission.
Compliant
According to p. 4 of the Regulations on the Audit Commission if any
abuse by the officials of their powers is revealed, as well as any
misappropriations, embezzlement, shortages and illegal expenditures in
cash and material assets, an intermediate statement shall be drawn and
inform the Board of Directors of such occurrences immediately.
Non-compliant
This requirement is not provided for by the Company's Articles of
Association
Non-compliant
This procedure is not laid out by internal documents.
The presence in internal documents of a requirement by
the Board of Directors of the joint stock company about
defining the structure and composition of the supervisory
and auditing services of the joint stock company
Absence in the supervisory and auditing services of
persons who were found guilty of committing crimes
in the area of economic activities or crimes against
the government, interests of public service and service
of local government institutions, or persons who had
administrative punishments applied to them for violations
in the area of business activity or in the areas of finance,
taxes, fiscal charges and the securities market
Absence in the composition of the supervisory and
auditing services of persons who are members of any
executive body of the joint stock company, and persons
who are participants, the General Director (managing
director), members of management bodies or
employees of a legal entity that competes with the joint
stock company.
Presence in internal documents of the joint stock
company of a timeframe for presenting documents
and data to the supervisory and auditing services for
estimating the financial and economic operations carried
out, and the responsibility of officials and employees
of the joint stock company for their failure to present
documents and data within the specified timeframe
Presence in the internal documents of the joint stock
company of the supervisory and auditing services’
duty to inform the Audit Committee about revealed
infringements, and in case of the latter’s absence,
presence of a duty to inform the Board of Directors of
the joint stock company of said infringements
Presence in the Articles of Association of the joint
stock company of the requirement for a preliminary
estimation by the supervisory and auditing services of
the feasibility of operations not included in the financial
and economic plan of the joint stock company (non-
standard operations)
Presence in the internal documents of the joint stock
company a coordinated procedure for non-standard
operations with the Board of Directors
65
66
67
68
69
70
71
72
73
112
№
74
75
CCG ARTICLE
COMPLIANT/
NON-COMPLIANT
NOTE
An internal document approved by the Board of
Directors that defines the Audit Commission ’s
inspection procedure for the joint stock company’s
financial and economic activity
Compliant
The Audit Committee’s evaluation of the Auditor’s
Report prior to its presentation to shareholders at
the General Shareholders Meeting
Compliant
The Regulations on the Audit Commission as approved by the resolution
of JSC RAO UES of Russia’s Board of Directors on 21 October 2002
(Minutes No 2), the Regulations on the Company’s Internal Control System
as approved by the Company’s Board of Directors on 28 February 2008
(Minutes No 55)
According to p.2.1.4. of p.2 of the Regulations on the Audit Committee
approved by the Company’s Board of Directors, the framework of reference
of the Audit Committee includes preliminary assessment of book-keeping
reports
DIVIDENDS
76
77
78
An internal document approved by the Board of
Directors and used by the Board of Directors as
guidelines for approving recommendations on dividend
amount (Dividend Policy Regulations)
Presence in the Dividend Policy Regulations on
rules defining the minimum share of the joint stock
company’s net profit allocated to dividend payments,
and conditions for the non-payment or partial payment
of dividends on preferred shares, which have dividend
size outlined in the Articles of Association of the joint
stock company.
Publication on information about the joint stock
company’s dividend policy and amendments to it in
the periodic publication outlined by the Articles of
Association of the joint stock company for publishing
information about the General Shareholders Meeting,
and publication of said data on the joint stock
company’s web site on the Internet.
Compliant
Compliant
The Company’s Regulations on the Dividend Policy approved by a decision
of Federal Grid Company's Board of Directors as of December 16, 2010
(Minutes No. 120).
The procedure for the determination of a minimal share of the Company’s
net profit allocated to dividend payment is outlined in p. 4.3 of
the Regulations on the Dividend Policy
Compliant
The Company’s Regulations on the Dividend Policy are published on
the Company’s official website at http://www.fsk-ees.ru/investors_
corporate_doc.html
IMPLEMENTATION OF THE ASSIGNMENTS OF THE PRESIDENT AND THE GOVERNMENT
OF THE RUSSIAN FEDERATION
REGISTRATION DETAILS
ASSIGNMENT SUMMARY
PERFORMANCE STATUS
PERFORMANCE RESULT
№
1
ASSIGNMENT
ISSUED BY
The Government
of the Russian
Federation
VЗ-P13-6294
As of 23 July
2009
2
The Government
of the Russian
Federation
ISH-P13-2232 As of 8 April
Contained in Section 3,
“Information for shareholders
and investors,” pp.3.3. “Corporate
governance”
(3.3.1. – “Management Bodies”,
3.3.3. “Remuneration Payment
to Management Bodies”).
Contained in Section 3,
“Information for shareholders
and investors,”
pp.3.3. “Corporate governance”
(3.3.2. – “Management Bodies”,
3.3.3. “Remuneration Payment
to Management Bodies”).
Forming special
committees under
the Board of Directors
(Supervisory Board) and
the introduction of key
performance indicators of
the Company’s activity
Making payments
(remunerations) to
the managerial personal
of the Company (sole
executive body / chairman
of the collegial executive
body, the Deputy of
the sole executive body /
members of the collegial
executive body, the heads
of departments, members
of the Board of Directors
(Supervisory Board)
which are entitled to
receive remuneration
In 2009 the following Committees
under the Board of Directors
were formed in the Company:
Investment Committee,
Committee on Human Resources
and Remuneration, Strategy
Committee, Audit Committee).
The composition of the KPI is
approved every year by the Board
of Directors.
The Board of Directors (as
of 14 May 2010) considered
the draft Provision on payment
remunerations and compensations
to the members of the Board of
Directors (Supervisory Board) in
a new version and recommended
the Annual General Shareholders
Meeting to approve it. 29 June
2010 the Annual General
Shareholders Meeting approved
a new version of the Provision
on payment remunerations and
compensations to the members of
the Board of Directors (Supervisory
Board).
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AppendicesAbout the CompanyOperations overviewInformation for shareholders and investorsSocial responsibility 3
4
The Government
of the Russian
Federation
ISH-P9-3772
As of 18 June
Implementing
the Company’s strategy
in the field of energy
conservation and energy
efficiency
Federal Property
Management
Agency
GN-13/7796
As of 3 April
2009
Conducting procurement
of products made in
Russia
5
The Government
of the Russian
Federation
ISH-P13--8685 As of
17 December
2010
Realizing measures
aimed at ensuring
the transparency of
procurement and
transition to electronic
procurement, including
provisions regulating
the procurement
procedures of goods,
works and services.
The Program to reduce electric
energy losses in the Unified
National Energy Grid in 2011,
has been developed as a part
of the Program for energy
conservation and improvement of
energy efficiency of Federal Grid
Company for 2010-2014, approved
by the Management Board of
Federal Grid Company on 27July
2011
Federal Grid Company carried out
work to optimize the Company's
investment program for 2009-2011.
In applying cheaper engineering
solutions in the construction
(reconstruction) of electricity
supply network facilities, including
the increase in procurement
of equipment made in Russia
based on analyzing the possible
replacement of equipment imported
for the equipment of domestic
producers.
The Company has developed
and submitted for consideration
by the Board of Directors
the following issues: 1. On
approval of the Procedure for using
preferences during the regulated
procurement in Federal Grid
Company. 2. On improving
the procurement activities of
Federal Grid Company. 3. On
approving the Procedure for
the implementation of measures
in identifying facts of abnormally
low price tendering during
the competitive procurement
procedures 4. Posting of
information on the planned
procurement, including the cost
of goods (works, services)
and concluded agreements on
the official website of Federal Grid
Company
Contained in Section 2,
“Operational Overview,”
pp.2.3. “Improving the reliability
of UNEG facilities”.
Contained in Section 2,
“Operational Overview”,
pp. 2.6. “Organization of
procurement activities”.
The Board of Directors (as of
19 August 2011, Minutes No 140)
made the following decisions: 1.
Approved Procedure for using
preferences during the regulated
procurement.2. The Company set
the minimum number of electronic
auctions with the use of re-auction
procedure using e-commerce
at a level not less than 95 % of
the total number of competitive
procurement. 3. Central Tender
Committee of the Company was
charged to identify a list of mass
media to publish all transparent
procurement procedures therein.4.
Approved form of a report
on procurement activities. 5.
Approved the Procedure for
the implementation of measures
in identifying facts of abnormally
low price tendering during
the competitive procurement
procedures.6.Approved a report
form for posting information
on concluded agreements
on the official website of
the Company. 7. Set a term of
posting information on concluded
agreements on the official website
of the Company: no later than
the 10th day of each month.
8. Assigned the Management
Board to post information on
concluded agreements on
the official website of the Company
up to the introduction of ACS
'Agreements' See Section 2,
“Operational Overview”, pp.
2.5. “Organization of procurement
activities”.
114
6
The Government
of the Russian
Federation
KA-P13-8297
As of 4
December
2010
Details on decisions
aimed at improving
the wage system for
the Company workers
7
The President
of the Russian
Federation
Pr-846
As of 2 April
2011
Ensuring government-
linked Companies make
decisions to reduce
the cost of purchases of
goods (works, services)
per unit by not less than
10 % per year during three
years in real terms.
Contained in Section 3,
“Information for shareholders
and investors,” pp.3.3. “Corporate
governance” (3.3.3. “Remuneration
payment to the management
bodies”).
Contained in Section 2,
“Operational Overview”, pp.
2.5. “Organization of procurement
activities”. Provision on
procurement of goods, works and
services for the needs of Federal
Grid Company, approved by
the Board of Directors (Minutes
No 151/1 as of 27 January 2012)
from 07 January 2012 posted on
the Company’s website http://www.
fsk-ees.ru/suppliers/procurement_
management/ (in Russian).
Assignment was
a recommendation in terms of
developing a system of material
incentives for both business
executives (top managers) and
other employees and if the current
system of material incentives
has been previously approved
by the Board of Directors of
the Company a new one was
not necessary. In terms of
the disclosure of more complete
information on incentive payments
received by top managers in
the reporting year, the information
was fully disclosed in the Annual
Report of the Company.
In order to improve the procurement
activities and performance of
assignment of the Russian
Government to reduce the cost of
purchases of goods (works, services)
by not less than 10 % per year, on
15 February 2012, Federal Grid
Company published an order No
75 “On Improving the procurement
activities and the regulation
procedures of submitting issues for
consideration of the Central Tender
Committee (CTC)” providing for
restriction of cases of purchases
from a single source and establishing
the responsibility of individuals
who agree these decisions for
decision-making in submitting
issues for consideration of CTC.
On 27 January 2012, the Board of
Directors approved the Provision on
the procurement procedure of goods,
works and services for the needs
of Federal Grid Company which
contains the following new features:
reduction of procurement price
cap; procurement procedures and
conditions of use – auction, simple
(up to RUR2.5 million) and small (up
to RUR500 thousand); imposition
upon customer the duty of posting
information about all competitive
procurement procedures, worth
RUR500 thousand, funding by all
budget items of the Company on
the website of the Company, and
from 1 July 2012 – on the official
national website www.zakupki.gov.ru.
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