Federal Grid Company:
Driving Economic Growth
through Reliable Energy
Transmission
2
3
Federal Grid Company
of Unified Energy System
Annual Report
ФСК — ИТОГИ
10 ЛЕТ РАБОТЫ
2
3
Federal Grid Company:
Driving Economic Growth
through Reliable Energy
Transmission
Federal Grid Company
of Unified Energy System
2
32
3
Annual Report
2
3
Interactive online version
Contents
Federal Grid
Company –
Ten-year Results
The Company’s history 6
10 years of corporate results 8
The Company’s 2012 achievements10
STATEMENT OF THE CHAIRMAN OF
THE BOARD OF DIRECTORS 12
STATEMENT OF THE CHAIRMAN OF
THE MANAGEMENT BOARD 14
ABOUT THE COMPANY 16
Market Overview 16
The Company’s Mission and Strategy 24
Key Company Data 26
The Risk Management System 36
Operations
Overview
05
41
Electricity Transmission 42
Technological Connection 46
Technical losses minimization 48
Upgrading reliability 50
Investment activities 58
Telecommunications and IT System
Development 72
Social
Responsibility
and Sustainable
Development
General Sustainable Development Policy
and Social Responsibility Principles 83
HR Policy 84
THE COMPANY’S IMPACT ON RUSSIAN
REGIONAL DEVELOPMENT 96
Social Aspect 96
Economic Aspect 103
Environmental Aspects 113
81
2
3
Financial
Performance
Overview
Financial Performance 119
Tariff Regulation 125
Cost Optimization 129
Debt Portfolio 131
Credit Ratings134
117
Corporate
Governance
Report
137
Share Capital
Corporate Governance Principles 138
The Company’s Information Policy 140
Management and Control Bodies 142
Management Bodies’
Remuneration 167
The Internal Control System 170
Anti-Corruption Activities 176
Share capital structure 183
Stock market 185
2012 Share Performance 186
Dividend policy 189
Investor relations policy 190
181
CONTACTS 191
GLOSSARY 194
Information on compliance with the FCSM
corporate code of conduct
Implementation of the assignments of the
President and the Government of the
Russian Federation
Management discussion and analysis
(MD&A)
2012 financial statements (according to
IFRS)
2012 annual financial statement in
compliance with disclosure and transpar-
ency rules (management report 2012)
Information on transactions performed by
JSC Federal Grid Company in 2012,
recognized by russian federation laws as
interested party transactions, and which
are subject to the approval of the
company’s authorized management body
Conclusion of JSC Federal Grid Company’s
audit commission
2013 investor calendar
Appendices*
* Available in electronic
format, see enclosed
USB drive.
4
1 Federal Grid
Company –
Ten-year Results
Federal
Grid Company
of Unified
Energy System
FEDERAL GRID COMPANY
TEN-YEAR RESULTS
10 years
Federal Grid Company was established in the course of Russian
electric power sector reform. The reform was aimed at
upgrading the UNEG (Unified National Electric Grid) economic
efficiency and creating conditions to attract investments in the
power industry. The Company was created and unified to
manage electric grid facilities that were part of the UNEG.
2002
2003
2004
2005
2006
2007
The inter-regional
backbone electric
grid companies
(MMSKs) were
established.
State registration of JSC Federal Grid
Company took place. The Company
started to provide power
transmission and technological
connection services to consumers.
The Company was entered in the register
of natural monopolies for the energy and
fuel sector, which are regulated and
controlled by the State, and in the list of
commercial organizations – the Federal
Wholesale Electricity and Capacity Market
(WECM) entities.
6
44 backbone electric grid
companies (MSKs) were
established on the basis of
Federal Grid Company and
46 distribution electric grid
companies (RSKs);
A decision was made to
transfer inter-regional
distribution grid companies’
shares to the Company’s
management.
The UNEG
consolidation
process was
effectively
completed.
The Company
approved its first
Regulations on
Technical Policy.
A decision was made
to re-organize the
Company by taking
over JSC RAO UES of
Russia, JSC State
Holding, JSC Minority
Holding FGC UES, 56
MSKs and 7 MMSKs.
10 years A five-year Investment Program for 2008-2012
was approved;
The Company was listed on the RTS and MICEX
Stock Exchanges, and trading started. To
increase the liquidity of securities and protect
the rights of foreign shareholders of RAO UES of
Russia, a global depositary receipts (GDR)
program for the Company was launched;
The Company's 2010-2014
Investment Program was
approved.
The Company’s new
Technical Policy that
established general
directions for the UNEG’s
prospective development,
including commissioning
new facilities and
reconstructing outdated
facilities, was adopted;
The Company’s Board of Directors
confirmed the Regulations on Unified
Technical Policy in Russian power grid
complex, which were also approved by
the IDGC Holding and the System
Operator;
Transmission lines
131,600 km
Revenue from electricity
transmission services
Total transformer capacity
136,581RUR, million
334.8
2012
thousand MVA
2008
2009
2010
2011
The final phase of consolidation took place:
backbone electric grid companies, JSC RAO
UES of Russia, JSC State Holding and JSC
Minority Holding FGC UES were merged into
the Company. Shares of the re-organized
companies were converted into shares of
Federal Grid Company. The number of Federal
Grid Company shareholders exceeded 470,000.
The Company received
the title "Energy
Company of the Year" for
its successful work in
modernizing the
country's backbone
electric grid complex,
using short-term
innovation;
Russian FTS approved
RAB-tariffs for Federal
Grid Company for the
2011-2014 period.
The Federal Grid
Company’s Innovative
Development Program
was adopted; the
Program aims to upgrade
electric grids on the basis
of innovative
technologies,
transforming them into
the smart core of the
power industry’s
technological
infrastructure;
Federal Grid Company’s
depositary receipts were
listed on the main Market
of London Stock
Exchange and depositary
receipt trading began.
Russian Federal Tariff Service (FTS) approved
parameters for the Company’s transition to
RAB-regulation for the 2010-2012 period;
The Company's shares were included in the
stock indices of MSCI Russia and MSCI Emerging
Markets.
Federal Grid Company was appointed
as the sole executive body of JSC IDGC
Holding;
On 31 October 2012, the Russian
Ministry of Energy approved the
Company’s 2013-2017 investment
program. Total financing for the
investment program for 2013-2017 will
stand at more than RUR775.5 billion;
On 22 November 2012, Russian
President Vladimir Putin signed a
Decree #1567 "On Joint Stock
Company Russian Grids.” The Decree
stipulates re-naming JSC IDGC
Holding as JSC Russian Grids and
contributing to the share capital of
Russian Grids the State's share in
Federal Grid Company, which amounts
to 79.55%;
The Company placed its debut
Eurobond issue.
Drop in failures due to employees’ incorrect or faulty actions35% FEDERAL GRID COMPANY
TEN-YEAR RESULTS
10 Years of
Corporate Results
Over the past decade, we have significantly expanded the scope
of our activities, substantially increased the reliability of
backbone electric grids and made great efforts to modernize
production via innovative technologies.
Long-term investment
planning
Adoption of a unified
technical policy
Smart grid
construction
Completion of key investment
projects
Introduction of innovations
Social responsibility
8
Transition to RAB regulation, as well as a five-year
investment program, which enables the
maintenance of a balanced structure of funding
sources.
The Company’s transition to a
new stage of grid complex
development based on the
latest technology and modern
equipment.
Adoption of the Innovative Development Program
to upgrade electric grids with their transformation
into the smart core of Russia’s electric power
infrastructure.
Providing a reliable power supply to
Siberia (2009-2010);
Power supply to Skolkovo
Innovations Center (2011-2014);
Power supply to the Island of
Valaam (2009);
Power supply to the Olympics
facilities in Sochi (2009-2014).
Power supply to Vladivostok and the
APEC Summit (2012);
Using superconductivity technologies;
Commissioning digital substations;
Implementing current-limiting devices.
Development of vocational
training, support for education
institutions;
Revival of student construction
teams;
Launch of the Residential
Program.
FEDERAL GRID COMPANY
TEN-YEAR RESULTS
The Company’s 2012
achievements
29%
OVER-FULFILLMENT OF
COMMISSIONING PLANS
During our anniversary year, we commissioned many important
power facilities, were actively involved in the large-scale
reconstruction and implementation of innovations, and made
numerous important decisions to upgrade efficiency and reduce
costs. We also made progress in corporate governance and
increasing corporate transparency. These achievements are due
to the great work and professionalism of our staff.
Production progress
In 2012, commissioning plans were
exceeded by 29%: the Company
energized production facilities at 75
sites, and commissioned 3,643 km of
transmission lines and 17,827 MVA of
transformer capacity.
Progress in introducing
innovations
Federal Grid Company entered the Top 5
companies in the quality rating of
innovation development programs for
State corporations and State-owned
companies. The ratings were compiled
by the "Expert RA" rating agency;
The Company organized the first
international forum "Electric grid
complex. Development. Innovation.
UPGrid” to foster dialogue on innovative
development within the country’s energy
sector. The forum was attended by
approximately 5,000 delegates who
examined the innovative developments
of 200 member companies; within the
framework of UPGrid, 15 cooperation
agreements were signed.
Service quality improvement
We launched a unique information
portal "Technological connection
services" that promotes corporate
interactions with consumers to a new
level;
The number of consumers for the
Company’s electric energy transmission
services grew 31% and the number of
technological connection contracts
increased 50%, compared with 2011.
10
Capital market progress
Our Company placed its first Eurobond
issue on the Irish Stock Exchange in the
amount of RUR17.5 billion;
The Company joined the United
Kingdom Investor Relations Society to
enhance cooperation with foreign
partners and to promote the Company
internationally;
Our Company received recognition from
capital market participants: Federal
Grid Company was named one of the
top-5 large cap companies in Russia by
IR Magazine Russia & CIS, in the
category of “Best Investor Relations by a
CFO, Large Cap”, and was awarded the
"Issuer of the Year" prize by Cbonds
news agency:
In 2012, Federal Grid Company was the
first Russian electric energy company to
place a 10-year inflation-protected
ruble-denominated bond issue.
Advances in corporate governance
and transparency
The Russian Institute of Directors
completed an independent analysis of
the Company’s corporate governance
and assigned a score of "7+" on the
national corporate governance scale,
which corresponds to a "Developed
Corporate Governance Practice";
Our Company placed fifth in the
information transparency ranking of
Russian companies, which was
compiled by the Agency for Political and
Economic Communications, due to the
high level of the Company’s information
interactions with its customers, as well
as its strict adherence to all relevant
disclosure requirements;
Fulfilling the Russian President’s order
to reduce the cost of purchased goods,
work and services; we have tightened
our procurement requirements. This led
to a significant increase in 2012 in the
volume of competitive procurements,
which amounted to 91% of total
purchases during the reporting period.
Our Company has been assigned a
“High Transparency” score by the
National Procurement Transparency
Rating 2012, which was organized by the
National Association of Electronic
Commerce;
We have developed and approved new
Regulations on the Company’s internal
control, based on best international
practices and standards, including the
COSO Concept.
17.5
RUR, BILLION
DEBUT EUROBOND ISSUE ON
THE IRISH STOCK EXCHANGE
7+
SCORE ON THE RUSSIAN
NATIONAL CORPORATE
GOVERNANCE SCALE
DEAR SHAREHOLDERS,
In 2012, the Company continued
operating in accordance with the
corporate development strategy and
goals set by shareholders. Goals
included: providing for stable power
supply and the systemic reliability of the
entire Russian grid and ensuring
balanced advanced development of the
power grid infrastructure and the
qualitative modernization and innovative
development of the national power
industry. Summing up the results of the
reporting year, we are fully confident that
the management team’s successful
implementation of planned actions
enabled the Company to achieve positive
operational and financial results.
The Company’s management team paid
significant attention to further enhancing
the long-term financial and economic
policy, which results in greater financial
stability. Standard & Poor’s confirmation
of the Company’s BBB (forecast: Stable)
long-term credit rating proves that we
have chosen the right strategy.
During 2012, we were very successful in
the corporate governance sphere; the
Company received a 7+ rating in the
national corporate governance ranking,
which corresponds to a “Developed
Corporate Governance Practice”
indicator.
Ernesto
Ferlenghi
Chairman of the Board
of Directors
12
Statement of the Chairman
of the Board of Directors
across-the-board commitment to high ethical
standards for conducting open and fair
business and maintaining good standing.
We pay significant attention to environmental
protection. The design documents for new
facilities contain special sections on
environmental protection, which are developed
in compliance with all Russian legal
requirements on environmental protection. All
projects related to the construction and
re-construction of power grid facilities go
through a State environmental assessment,
with public hearings on future environmental
impacts.
BBB
LONG-TERM CREDIT RATING
ASSIGNED BY STANDARD &
POOR'S
(STABLE OUTLOOK)
We are consistent in upgrading the
transparency of corporate operations. We
tightened the requirements set for purchase
procurement participants (related to
information disclosure about beneficiaries),
while maintaining a high degree of competition
due to an increased number of open tenders
carried out using e-commerce facilities. This
resulted in a 3% increase in procurement
efficiency, compared with 2011.
Having studied the world’s best anti-corruption
practices, we launched implementation of the
Company’s compliance system in 2012. We
have developed a legal framework that
includes the Company’s Code of Conduct, the
Anti-Corruption Policy, the Compliance Policy
and the Program for fighting corruption and
resolving conflicts of interest for the 2012 to
2014 period, as well as some additional
documents. Systemic to protect against
corruption confirms the Company’s
Our employees are the Company’s most valuable asset
and we are concerned about retaining
and developing the Company’s HR potential.
Our employees are the Company’s most
valuable asset and we are concerned about
retaining and developing the Company’s HR
potential. Training specialists on advanced
technologies and efficient production practices
is one of the Company’s priorities. The
Company’s management pays significant
attention to occupational health and labor
safety, dedicating funds to finance different
employee health programs, employee holidays
at recreation facilities and appropriate medical
care.
The Board of Directors sets complex tasks for
the Company; and to implement these tasks in
the midst of dynamic changes occurring in the
electric energy sector will require full
mobilization of the Company’s strategic,
managerial and financial potential. Federal
Grid Company is stable and strong enough to
develop and foster its positions; and the
Company’s Board of Directors shares the
values and development views of the
Company’s management team.
I’m confident that Federal Grid Company’s
highly qualified management and staff will
succeed in resolving 2013 tasks, providing for
the Company’s sustainable development under
new conditions.
FEDERAL GRID COMPANY
TEN-YEAR RESULTS
DEAR SHAREHOLDERS,
The past year was a successful year for
Federal Grid Company, marked by the
successful achievement of all strategic
tasks set by shareholders. The
Company demonstrated steady growth
across all key parameters.
The Company’s priority during the past
year, as well as during all recent years,
focused on ensuring the stable electric
power transmission with upgraded
reliability. We achieved this task through
a growing fleet of equipment in
operation; the number of disturbances
decreased and the specific transmission
networks’ emergency rate fell 16%.
Implementing a set of preparatory
actions ensured the maximal
preparation of power grid facilities for
the performance of emergency recovery
work during the autumn-winter periods.
During the past year, as well as
previously, the Company made every
effort to fulfill tasks set by the Russian
Government related to power industry
infrastructure modernization and
development, to further upgrade power
grid complex reliability and to provide
the technological basis for Russian
economic development. The Company’s
2012 investment program was
successfully fulfilled. The Company has
accomplished numerous major projects
that are essential for the social and
economic development of Russian
regions. The Company commissioned in
a timely manner infrastructure power
facilities in the Primorsky Region, and
also for the first stage of the ESTO
pipeline, which is the Russian
government’s top priority infrastructure
project. Other accomplishments
included the timely commissioning of
the 4th power unit at the Kalininskaya
NPP. Projects related to the power
supply of the Vankorskaya Group of
fields and the 2014 Sochi Olympics, etc.
were also implemented on schedule.
Oleg Budargin
Chairman
of the Management Board
14
Statement of the Chairman
of the Management Board
In 2012, the Company activated energy
production at 75 facilities, including 12
facilities that were energized ahead of
schedule. The Company commissioned
3,643.2 km of power transmission lines and
17,827 MVA of transformer capacity. Funds
spent on facility commissioning stood at
RUR186,833 million, a 33% increase. During
investment program, implementation,
significant attention was paid to the efficiency
of purchasing operations. In 2012, the
Company saved in excess of 10% on
commissioned facilities.
In 2012, Federal Grid Company efficiently
implemented its financial and economic
policy. The Company’s investment
attractiveness is growing steadily, along with
a strengthening of the economic foundation
needed to provide the financial resources
required to implement established goals. The
Company has developed a long-term
balanced structure of financing sources for
its investment program.
Implementation of the innovative development
policy involved the qualitative modernization of
the national power industry and upgraded
energy efficiency. The Company also focused
on optimizing the UNEG infrastructure, as well
as diversification and quality improvement of
services. Transitioning to a smart energy
system based on an active-adaptive grid
remains one of the Company’s top priorities. In
2012, the Company’s innovative development
program became one of the top three
innovative development programs adopted by
Russian companies.
In accordance with decisions of the Russian
Government, Federal Grid Company has
successfully performed the functions of the
Sole Executive Body of JSC IDGC Holding.
Beginning from July 2012, the Company has
made numerous key decisions pertaining to
organizational, managerial and corporate
issues, focused on developing unified
principles for the governing backbone and
the distribution grid facilities. These
decisions resulted in improved controllability
of the domestic power grid complex, thus,
ensuring the reliable operation of all Russian
power grids.
Development of a complex approach to
training and attracting professionals and
retaining young specialists is one of the
Company’s strategic priorities. Currently, the
Company cooperates with more than 60
secondary and higher education institutions
from across the country.
The Company actively implements different
social programs in the regions in which the
Company operates, including implementing
national projects and complex social programs.
Special attention is paid to occupational
development and labor conditions
improvement, as well as material incentives for
employees, who have an opportunity to access
high quality medical services.
The Company assists its employees in
resolving their housing problems. As part of
this, we launched a program to construct
housing for corporate employees. The
program, approved by the Russian
government, helped more than 1,000
employees upgrade their housing conditions.
Furthermore, these programs also attracted
young specialists to key corporate facilities.
2012 was a special year for the Company,
marking its 10th anniversary. The Company’s
success can be attributed to the professional and
personal contributions made by each employee.
Today, the Company’s staff is made up of a
collaborative team of young specialists (in 2012,
the Company hired more than 1,800 young
professionals) and industry veterans. Youthful
energy coupled with veteran experience of
enables the Company to adequately respond to
today’s challenges and to successfully address
large-scale tasks. These are the values that the
Company will take care of in the future.
I’d like to thank the Company’s shareholders,
partners, customers and employees for their
trust and fruitful cooperation, and for their
contribution to Federal Grid Company
ongoing development.
16%
DECREASE IN SPECIFIC
TRANSMISSION NETWORKS’
EMERGENCY RATE
33%
INCREASE IN INVESTMENTS
IN FACILITY COMMISSIONING
FEDERAL GRID COMPANY
TEN-YEAR RESULTS
Market Overview
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The Situation in the Industry
The growth of power consumption started from 1998 during the
recovery and development of the Russian economy (except for 2009,
when the global financial crisis resulted in an energy consumption
decrease). In 2012, energy consumption reached 1,016 billion kWh,
while the achievement of the historical maximum of 1,073.8 kWh
(1990) is expected in 2014. On 2 February 2012, the Unified Energy
System of Russia registered one more record in power consumption
comprising 155,226 MW, which is the maximum consumption in the
entire modern history of Russia, evidencing the growth in energy and
power consumption.
Forecast of energy consumption across the
Russian UES for the period till 2019, billion kWh*
947.3 968.8 989.7 946.5 989
1,000.1
1,016
1,045.51,076.4 1,103.7 1,129.91,154.8 1,175.3
2006
2007
2008
2009
2010
2011
2012
2013
forecast
2014
2015
2016
2017
2018
*According to the Scheme and 2012-2018 Russian UES Development Program approved by Order # 387
of the Russian Ministry of Energy, dated 13 August 2012
2012 was a very important year in respect to the development of the
electric energy industry. The Russian Ministry of Energy approved two
crucial documents providing for the reliability and safety of the sector for
a few decades: the Program for the Modernization of the Energy Industry
till 2020 and the Basic Rules of Price Formation in the Heat Supply
Sphere. Moreover, Russian Government’s Decree #442 providing new
rules for the functioning of retail markets of the electric energy and
capacity for the protection of suppliers’ and consumers’ interests and the
creation of competitiveness and reliability of electric energy supply was
put into effect.
16
To develop Russia’s electric grid complex, coordinate management of the
complex, and to restrain tariff growth for end consumers of electric
energy, in November 2012, the Russian President signed a Decree “On
Open Joint Stock Company Russian Grids,” providing for the re-naming
of IDGC Holding as Russian Grids and the contribution of the State’s
79.55% stake in Federal Grid Company to Russian Grids’ share capital.
The decrease in dependence on the
power sector will be accompanied by
qualitative changes in the role of the
fuel and energy complex in the national
economy. The Russian power sector
will maintain its influence on the social
situation in the country, as the level of
energy comfort and the availability of
energy resources define the standards
of living of Russian citizens in many
respects.
17%
RUSSIA’S FORECAST ENERGY
CONSUMPTION GROWTH FOR
2012-2018
The development of the national energy
sector is based on the scenario of
innovative economic development. In
accordance with the Energy Strategy of
Russia for the period till 2030, as
approved by the Russian government, it
is expected that during implementation
of the Strategy the dependence of the
national economy on the energy sector
will diminish due to the priority
development of innovative
energy-saving sectors, and the
implementation of the technologic
potential of energy saving. This will be
expressed in an almost two-fold
decrease in the share of the fuel and
energy complex in the Gross Domestic
Product by 2030 (compared with 2005).
At the same time, the energy sector
will maintain its key role in making
essential strategic decisions pertaining
to the national development. First of
all, this is so in regard to the
construction of new power
infrastructure that will enable
accelerated social and economic
development of the Eastern Siberia and
Far East, and overcoming
infrastructural gaps among numerous
regions, thus forming new territorial
and production clusters based on the
development of energy-generating and
processing facilities.
JSC Russian Grids
FEDERAL GRID COMPANY
TEN-YEAR RESULTS
Power Grid Complex (PGC)
Development Trends
Based on the PGC Development Strategy (5+5 Strategy) adopted in
2006, there were three priorities formulated for the governmental
policy on the Russian power grid complex, namely the following:
Russian PGC Development Priorities
Investment
attractiveness
Slowing down
tariff growth rates
without prejudice
to reliability
Improving
reliability and
customer service
quality
18
The power grid complex of Russia
underwent a number of essential
changes recently. Considerable
investments in the grid infrastructure
helped eliminate lags from the nineties,
decreasing the degree of wear to the
grids and improving reliability. The
implementation of RAB-regulation
provided for additional investments in
the industry. The implementation of
economic responsibility of power grid
companies for the quality servicing of
customers and their timely connection
to power grids contributed to
improvements in service quality and
increased reliability of grid operations.
However, there are some tasks in the
industry, such as the increase in the
capitalization of sector companies that
are still pending as they were put aside
due to numerous different reasons,
including: the economic crisis and
increasing energy product prices.
Furthermore, the PGC has some more
pending issues, such as:
cross-subsidizing, insufficient
operations, the investment efficiency of
companies and the last mile problem,
etc. Taking these into account, it was
decided to integrate major PGC
companies, meaning JSC IDGC Holding
and Federal Grid Company. A decree on
the establishment of JSC Russian Grids
was signed in November 2012. The new
company is tasked with the
implementation of an integrated PGC
policy, the development of a common
plan for the development of backbone
and distribution grids, and control over
the unified tariff rate and PGC
management.
FEDERAL GRID COMPANY
TEN-YEAR RESULTS
State Regulation
in the Power Industry
The Russian government controls the power industry in accordance with
the Federal Law #35-FZ “On the Electric Power Industry”, dated
26.03.2003.
The federal authorities empowered by the Russian government to exercise the State
regulation of the power industry include the following:
— The Ministry of Energy of the Russian
Federation (the Russian Ministry of
Energy), tasked with the functions of
developing a State policy on normative
regulation in the sphere of the fuel and
energy complex, including electric
power issues;
— The Federal Service for Environmen-
tal, Technological and Nuclear Supervi-
sion (Rostechnadzor), engaged in control
and supervision over the power industry,
as well as licensing individual activities,
and checking for compliance with
Russian laws on the power industry.
The Company’s Role in Russia’s Energy Strategy
The Russian 2030 Energy Development
Strategy approved by Decree #1715-r of
the Government of the Russian
Federation, dated 13 November 2009, is
one of the key landmarks for corporate
development.
The 2012-2018 Plan and Program for the Development of the Unified
Energy System of Russia were submitted to the Russian Government by
Federal Grid Company and JSC SO UES on 1 February 2012. The new
document takes into account 2011 actual energy and capacity
consumption dynamics, the volume of power distributed pursuant to
the installed power agreements concluded in 2011 and the
commissioning of generating grid equipment and the adjusted plans of
the power industry subjects for the construction of new facilities, and a
number of other factors impacting the development of the Russian
power industry. The 2012-2018 Plan and Program contains a separate
section describing the development of the Moscow and the Moscow
Region’s energy system, characterized by the highest energy
consumption rate. On 13 August 2012, the Plan and program were
approved by Russia’s Ministry of Energy.
20
Planning the future development
of the power industry
Decree #823 of the Government of the Russian Federation
“On Plans and Programs of the Future Development of the Power Industry”,
dated 17 November 2009
The Russian Ministry
of Energy,
JSC SO UES,
Federal Grid Company
The General Scheme for the Arrangement of
Power Industry Facilities for a 15-year Period
(to be adjusted at least once every three years)
The adjustment of the General Scheme
for the arrangement of power industry
facilities till 2020, in view of 2030, as
approved by the Russian Government
(an excerpt from Minutes #24 of the
meeting of the Russian Government,
dated 03.06.2010b)
Federal Grid Company’s
results for 2012
2012-2018 Plan and Program for the
development of the Russian UES,
including the development of the 220 kV
and higher Unified National
(all-Russian) Electric Grid (UNEG), as
approved by Order #387 of the Russian
Ministry of Energy, dated 13.08.2012
Federal Grid Company,
JSC SO UES
The administrations
of Russia’s
constituent territories
2013-2017 Investment Program of
Federal Grid Company as approved by
Order #531 of the Russian Ministry of
Energy, dated 31.10.2012.
UES Development Plan
(including the UNEG Development Plan)
for a period of 7 years (annually, till 1 March)
Russia’s constituent territory’s
Power Industry Development Plan
based on the social and economic development
forecast for a period of 5 years (annually till 1 May)
Investment programs of power industry entities
Federal Grid Company’s
results for 2013
Projects of the Plan and Program for
the development of the Russian UES
and Federal Grid Company’s investment
program for 2013-2018
The Company, jointly with SO UES,
develops and submits to the Russian
Government the Plan and Program for
the development of the Russian UES for
a 7-year period. The key task of this
document is to contribute to the
development of grid infrastructure and
generating facilities and to meet
long-term and mid-term demand for
electric energy and capacity.
FEDERAL GRID COMPANY
TEN-YEAR RESULTS
Key tasks of the Plan for the Development
of the Unified Energy System of Russia
Decreased number of
closed main substations
Providing consumers with the opportunity of technological
connections;
Increased reliability of electric energy supply to consumers;
Improved quality of provided services.
Enlarged free power
transfer zones
Development of electric capacity market;
Providing for competitiveness;
Optimizing the tariff burden for consumers.
Priority development of
electric grid infrastructure
Implementation of plans for the social and economic
development of regions;
Stimulating development of undeveloped deposits;
Contributing to the economic and social growth of the country.
Providing power from
generating plants
Fulfilling the government’s plans for the supply of capacity to
the market;
Providing demand for electric energy;
Removing technologic constraints between energy systems.
Renovating fixed assets
Increased reliability of electric energy supply to consumers;
Replacing outdated and inefficient equipment;
Reducing expenses for the maintenance and repair;
Reducing negative environmental effects;
Increasing the efficiency of assessing fixed assets’ status.
The 2012-2018 Plan and Program for
the Development of the Russian UES
implies the commissioning of 44
thousand kilometers of 220kV and
higher overhead power transmission
lines, including 27 thousand kilometers
of 220 kV overhead power transmission
lines and 17 thousand kilometers of
330 kV and higher overhead power
transmission lines. Other goals
include: commissioning 168.2
thousand MWA of 200 kV and higher
power transformer equipment at
substations.
22
Regional development of the 220 kV and
higher UNEG grids till 2018
(length in thousand km)
51.2
40.9
40
34.3
32.6
28.7
16.9
12.0
24.5
15
North-West
19
21.8
Center
15.5
17.5
Ural
Far East
Volga
Siberia
South
Actual
2018, forecast
FEDERAL GRID COMPANY
TEN-YEAR RESULTS
The Company’s Mission and Strategy
Our
Mission
Our
Strategy
Federal Grid Company is a strategically important, reliable, efficient and
dynamically developing company focused on maintaining the UNEG
integrity, providing uninterrupted and high quality services to consumers
and promoting both shareholder and investor prosperity.
The Company’s mission is to ensure reliable Unified National Electric Grid
(UNEG) operation and development for the economic growth of Russia and
uninterrupted power supply to consumers across all Russian regions.
Company Priorities
Results
Reliability
Quality of services
A 19.5% decrease in the specific accident rate
(for every 1,000 cases) compared with 2008
Upgrading reliability, page 50
An increase in the number of consumers for
energy transmission services and in the
number of technological connection contracts
with customers and distribution grid
companies by 50% respectively, compared
with 2011
Technological Connection, page 46
Development of PGC scientific potential
RUR2.9 billion invested in R&D in 2012
R&D, page 113
Grid infrastructure development
Competitive tariff rates
Adequate ROI for investors
Commissioning 3,643 km of overhead power
transmission lines and of 17,827 MWA of
transformer capacity in 2012
Investment Activities, page 58
Conservative 11% tariff growth in 2012
(starting 1 July) and by 9% in 2013-2014
(annually starting 1 July).
Tariff Regulation, page 127
The return on initially invested capital grew
from 3.9% in 2010 to 6.5% in 2012
Tariff Regulation, page 127
1.
2.
3.
4.
5.
6.
24
19.5%
DECREASE IN THE
SPECIFIC ACCIDENT
RATE IN 2012
(COMPARED WITH
2008)
The Company’s strategic goals to upgrade reliable UNEG operation
include the following:
Ensuring the preparedness of power
transmission lines and UNEG
equipment for reliable consumer power
supply; provisions for the functioning of
the wholesale electricity and capacity
market, and for the parallel operation of
the UNEG of Russia and foreign energy
systems;
Ensuring the UNEG reliability and
efficiency due to the visibility and
controllability of all grid elements;
Increasing the response and reducing
the time required to eliminate accidents
and other extraordinary conditions at
UNEG facilities;
Developing a diagnostic system for
UNEG facilities;
Developing the structure for operating
and engineering control over UNEG
facilities;
Ensuring efficient UNEG operation due
to the justified optimization of main
electrical connection schemes and a
reduction in areas occupied by facilities,
as well as a decrease in auxiliary power
consumption;
Overcoming the tendency for the aging
of power grids and power grid
equipment via modernization of the
above, the optimization of
re-construction work and technical
re-equipment, and by using extended
service life of equipment;
Accomplishing the automation of UNEG
substations, the implementation and
development of advanced technical
condition control systems, of automated
systems for diagnostics and the
monitoring of process equipment and of
relay protection and emergency
automatics;
Upgrading operation processes,
maintenance and repair; providing
occupational training for operations and
repair personnel, taking into account the
implementation of new technologies and
innovative equipment;
Implementing the Unified Technical Policy
in the PGC of the UNEG, to improve power
supply reliability to end consumers, to cut
capital invested in facilities, and to reduce
costs associated with achieving the
Company’s strategic goals.
The Company’s
Competitive Advantages
… Translate into Achieving
the Company’s Strategic Goals:
Vast experience in the field of
successful corporate governance and
operations management;
A team of experienced power industry
managers;
Adequate risk management;
State support;
Successful experience cooperating with
market regulators;
Strong connections with equipment
suppliers and contractors.
Competitive electric energy
transmission tariff rate;
Power supply reliability;
Infrastructure development for
economic growth;
Increasing investment attractiveness;
Technological development;
Sustainable development.
FEDERAL GRID COMPANY
TEN-YEAR RESULTS
Key Company Data
OUR FACILITIES ARE
LOCATED IN
75
RUSSIAN REGIONS
The Unified National (all-Russian) Electric Grid (UNEG) is a complex of
electric power grids and other electric grid facilities, providing for the
reliable supply of power to consumers, for the functioning of the wholesale
electricity and capacity market and for the parallel operation of Russian
and foreign energy systems. The rated voltage class, the throughput
capacity and energy flow reversibility, as well as other process
characteristics of the power grid facilities integrated into the UNEG, are
subject to approval by the Russian Government.
Federal Grid Company was established
in 2002, in accordance with Russia’s
power sector reform package. The
Company’s operational priority lies in
transmitting electric power via
backbone grids. The Company is a
natural monopoly in this sphere. The
Company is also included in the list of
strategic organizations.
The Company has a unique infrastructure that forms the physical
backbone of Russia’s domestic economy:
Large scale: power grid facilities are
located in 75 Russian regions, with an
area totaling 14.8 million square
kilometers. Half of Russia’s total energy
consumption is provided for using energy
transmitted across the Company grids;
Stable financial condition: the largest
share of the Company’s receipts is
generated via tariffs for energy
transmission, as approved by the
Federal Tariff Service (FTS), using the
RAB-regulation method.
The Company’s key activities
UNEG control
Proper maintenance
and technical
supervision of grid
facilities
Rendering power
transmission and
technological connection
services for wholesale
electricity and capacity
market entities
Investment activities
to develop the UNEG
26
Key Performance Indicators
2008
2009
2010
2011
Number of substations.*
800
804
805
854
2012
891
Length of power
transmission lines, total,
thousand km**
Electric energy supplied to
the grids of the distribution
grid companies, to direct
consumers and to the
independent JSC-Energo,
net (kWh, billion)
Electric energy supplied via
UNEG grids to bordering
states, net (kWh, billion)
Customer contract demand
(MW)
Electric energy losses in the
UNEG grids (kWh, million)
121.5
121.1
121.7
124.6
131.6
471,958.118 452,662.172 470,648.072 484,663.552 498,287.684
16,704.763
13,628.309
15,716.33
19,284.808
15,768.826
90,042
94,636
91,179
90,937
90,744
21,866
22,121
22,526
22 553
21,946
* Taking into account leased facilities and outdoor switchgear and cells on the SS owned by other entities.
** Including leased transmission lines
*** According to the WECM data.
891SUBSTATIONS
Key Financial Indicators (RUR million)
Revenue (net) from the sales
of goods, products, and
services
Adjusted EBITDA*
2008
2009
2010
2011
2012
68,485
85,078
111,085
138,137
138,836
RUR138,836
MILLION
32,718
40,379
67,405
84,683
82,847
REVENUE (NET) FROM SALES
Profit (loss) before tax
6,177
- 54,049
67,312
11,444
14,232
Net (retained) profit (loss)
4,465
- 59,866
57,082
-2,468
-24,502
Adjusted net profit*
7,772
9,427
25,702
33,687
13,413
Net asset value
Market capitalization
666,471
141,882
579,746
367,971
794,470
452,717
853,801
351,138
849,877
253,905
* Without the loss from the revaluation of assets and the accrual and recovery of doubtful debt provisions
and provisions for securities.
FEDERAL GRID COMPANY
TEN-YEAR RESULTS
The Company’s
Business Model
The UNEG Development Strategy and Plan
CONTROL AND DEVELOPMENT PROCESSES
STATE AUTHORITIES
(the Russian
Government, the
Ministry Of Energy, the
Federal Tariff Service)
Strategic management
Planning and budgeting
Control
Approval of tariffs
Approval of investments
Mission,
Strategy,
Tasks
Transmission of
electric energy
Customer contract demand
and maximal capacity
GENERATING
FACILITIES
Supply of
electric energy
and capacity
WHOLESALE MARKET
FOR ELECTRIC
ENERGY AND
CAPACITY
Tech. connections
CORE PROCESSES
Transmission of electric energy
Technological connections
Investment and innovation management
Purchase of
electric energy
and capacity to
compensate for
losses
Demands
Material
and technical
resources
Technological
connections
Application for
technological
connection(s)
New construction
and re-construction,
and new
technologies
Maintenance
and repair
RESOURCE AND AUXILIARY PROCESSES
Maintenance and repairs
Purchasing operations
Corporate governance, SDC control,
legal provisions, etc.
Environment
Labor and industrial safety
Financial management
HR management
Social sphere
Training,
job
opportunities
ENVIRONMENT,
NATURE
Environment protection
measures
28
Experience, skills
Motivation, charity
and social projects
CITIES
Transmission of
electric energy
Customer contract demand
and maximal capacity
MAJOR CONSUMERS OF
ELECTRIC ENERGY
(grid companies, factories, and
the Russian Railways, etc.)
UNEG FACILITIES
SUPPLIERS AND
CONTRACTORS
(electric equipment
manufacturers (ABB, Hitachi,
etc.), construction companies,
banks, stock exchanges, and
insurance companies, etc.)
Supply of equipment, construction
services, financing, etc.
Equipment certification
and innovations
R&D FACILITIES,
CERTIFICATION AND
EDUCATION ORGANIZATIONS
SOCIETY, INCLUDING
THE COMPANY’S HR
Training,
job
opportunities
FEDERAL GRID COMPANY
TEN-YEAR RESULTS
The Company’s
Organizational Structure
The Company’s supreme governing body is the General Shareholders
Meeting. The Board of Directors determines the Company’s development
strategy and controls the activities of the Management Board. The
Management Board controls the Company’s operations.
General Meeting of Shareholders
Board of Directors
Chairman of the Management Board
Executive
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
Eastern
Zabaikalskoye
Amurskoye
Vyborgskoye
Mid-Volga
Kubanskoye
Sverdlovskoye
Central
West Siberia
Primorskoye
Karelskoye
Samarskoye
Rostovskoye
South Urals
Southern
Krasnoyarskoye
Khabarovskoye
Leningradskoye
Nizhegorodskoye
Stavropolskoye
Orenburgskoye
Yamalo-
Nenetskoye
Novgorodskoye
Sochinskoye
North
Kuzbasskoye
Omskoye
Tomskoye
Khakasskoye
Upper Don
Volga-Don
Volga-Okskoye
Moscow
Priokskoye
Chernozemnoye
Special Purpose
Production
Center Bely Rast
Technical
Supervision
Center
30
As of 31 December 2012, the Company incorporates 51 regional branches, including:
8 backbone electric grids (MES)
1 dedicated production base “Bely Rast”
41 backbone electric grid transmission
line companies (PMES)
1 Technical Supervision Center
Subsidiaries and branches directly subordinated to the company (share in the charter capital)
SRC FGC UES (100%)
UC ENERGETIKA (100%)
ESSK UES (100%)
CIUS EES (100%)
Elektrosetservice UNEG (100%)
Chitatekhenergo (100%)
Glavsetservice UNEG (100%)
Mobile GTES (100%)
MUS Energetika (100%)
Volgaenergosnabkomplekt (100%)
Tomsk Backbone Grids (52,025%)
CNII NPKenergo (100%)*
Severovostokenergo (49%)
Nurenergo (76,99%)
Energotechkomplekt (48,99%)
GruzRosenergo (50%)
ENIN (38,24%)
UEUK (33,33%)
IT Energy Service (39,99%)
APBE (100%)
Index of Energy-FGC UES (100%)
GVC Energetiki (50%)
MES Kuban (48,99%)
* In March 2012, an entry regarding the company's dissolution was made in the Unified State Register of Legal Entries.
As of 31 December 2012, Federal Grid
Company has 22 subsidiary and
dependent companies operating in
different industries, including support-
ing electric grid facilities. Two subsidiar-
ies (JSC Tomsk Backbone Grids and JSC
Kuban Backbone Grids) are backbone
grid companies.
Detailed information on the Company’s
participation in subsidiary and depend-
ent companies (SDC) is available in the
Appendix “Information on the Participa-
tion of JSC Federal Grid Company in the
Operations of Subsidiary and Dependent
Companies (SDCs), and in the Opera-
tions of Other Companies in 2012”.
FEDERAL GRID COMPANY
TEN-YEAR RESULTS
The Company’s
Geographical Scope
The Company operates in 75 Russian regions, encompassing 14.8 million
square kilometers. The territory housing the Company’s facilities is
divided into zones of responsibility for corporate branches, meaning
backbone grid companies, known as the MES and PMES.
Underpopulated territories with no major consumers, such as Chukotka,
Kamchatka, the Magadan Region and Sakhalin, are not integrated into
the UNEG due to the lack of economic conditions necessary to lay
backbone energy transmission grids and establish major substations.
MES NORTH-WEST
MES CENTER
MES URALS
MES WESTERN
SIBERIA
MES VOLGA
MES EAST
MES SIBERIA
MES SOUTH
Total area spanned
1
1480000
0
square km
32
The Company’s Power Grid Assets
Federal Grid Company provides for the operation of more than 131
thousand kilometers of power transmission lines and 891 substations
with a total transformer capacity exceeding 334.8 thousand MVA.
The quantitative structure as of the Company's
PTL per voltage class on 31.12.2012*
The length of the Company's electricity
translmission lines as of 31 December 2012, km*
0,4
16
6
10
118
10
35
12
110
98
150
1
147
230
220
330
400
500
750
3
15
800
1
1150
3
kV
1,349
0.4
12.158
6
10
35
44.463
254.205
160.156
110
1,205.850
150
0.906
220
330
10,984.735
400
126.360
500
750
3,330.583
800
377.885
1150
948.800
kV
77 540,931
36,596.027
* Taking into account leased facilities
* Taking into account leased facilities
Number of the Company's substations
as of 31 December 2012*
The Company's substations capacity as of 31
December 2012, MVA*
220 kV
330 kV
612
68
1
400 kV
500 kV
103
9
8
3
1
44
750 kV
800 kV
1150 kV
Cells
on substations
7
35
10 kV
35 kV
110 kV
10
97.31
35
39.37
110
1,354.99
220
330
400
500
148,743.33
31,371.36
4,778.20
10 984,735
120,532.47
750
126,360
26,823.76
1,150
1,055.33
Cells on
substations
1.26
kV
* Taking into account leased facilities, outdoor switchgears and
cells on substations owned by other entities
* Taking into account leased facilities, outdoor switchgears and
cells on substations owned by other entities
FEDERAL GRID COMPANY
TEN-YEAR RESULTS
Comparing Federal Grid Company with similarly-sized
Russian companies for 2012
Revenue
EBITDA
CAPEX
179.90
BILLION RUBLES
FEDERAL GRID’S CAPEX
Federal Grid
Company
MOESK
IDGC of the Center
IDCG of the Center
and Volga Region
IDGC of the Urals
IDGC of Siberia
Tyumenenergo
Lenenergo
36.27
138.84
118.01
82.85
41.21
69.40
59.89
51.33
49.71
47.07
12.30
9.71
4.42
5.45
8.20
9.90
37.42
19.19
10.87
9.84
5.80
14.19
16.00
179.90
RUR billion
OR
Comparing Federal Grid Company with similarly-sized
foreign companies for 2012
4,507.8
MILLION EURO,
FEDERAL GRID’S CAPEX
Federal Grid
Company
Terna
RED Electrica
Power Grid
CTEEP
FinGrid
Statnett
Revenue
EBITDA
CAPEX
3,478.9
2,075.9
4,507.8
1,806.0
1,755.2
1,390.0
1,235.0
1,299.2
723.6
2,265.1
1,929.6
221
1,123.9
586.9
501.6
522.1
713.9
170.3
302.5
139.0
412.9
€ million
34
International Operations
Federal Grid Company functions as the
carrier of electric energy over Russia’s
customs border, as well as the technical
contractor involved in performing all
commercial contracts for importers and
exporters on the Wholesale Electric
Energy and Capacity Market. Pursuant
to conditions of agreements concluded
with JSC Inter RAO UES and JSC TGC-1,
the Company accomplishes the
transmission of electric power to the
Russian borders via power grid facilities
that are integrated into the UNEG and
legally owned by the Company. Besides,
the Company is engaged in acquiring
and processing information on power
transmission along the 139 inter-State
power transmission lines. The
information is based on data supplied by
energy metering devices.
The Company has concluded contracts
for paid energy transit services using
the power grids of Latvia, Lithuania,
Estonia and the Republic of Belarus to
supply electric power to Russian
consumers in the Bryansk, Pskov, and
Kaliningrad Regions. The Company also
pays for energy transit through the
territory of Kazakhstan pursuant to an
inter-governmental agreement on
measures providing for the parallel
operation of the unified energy systems
of Kazakhstan and Russia.
According to the inter-governmental
agreement concluded by and between
the governments of Russia, the Republic
of Kazakhstan, and the Republic of
Belarus to provide access to the
services of natural monopolies in the
power industry, including price
formation and tariff policy basics, in
2012, it became possible to transmit
electric energy across the participating
states, including transmission via the
Russian UES grids.
There are currently five agreements in
force, stipulating the parallel operation
of the Russian UES with energy systems
of foreign states. The parties to these
agreements include: the Federal Grid
Company, and the economic entities of
Georgia, Mongolia, Kazakhstan, the
Baltic countries, and the Republic of
Belarus. The Company also concluded
an Inter-system Agreement with
Finland. Besides, the Company
concluded agreements for the technical
provisions of parallel operation with
Ukraine, the Republic of Belarus and
Azerbaijan.
The Company actively harmonizes
power industry legal frameworks,
forming and synchronizing markets for
electric energy and capacity in
accordance with inter-State initiatives
(the CIS Power Systems and attached
commissions, including the Commission
for Operating and Engineering
Coordination), the BRELL Energy
Systems Committee, the Euro-Asian
Economic Community Integration
Committee, and task forces in the CIS
Power Systems Executive Committee,
Fingrid (Finland), KEGOC (Kazakhstan),
Belenergo (Belarus) and the Russia –
EU Energy Dialogue. The Company also
cooperates with Asian countries (China
and South Korea), developing
cooperation with the Chinese State
Power Grid Corporation.
At the St. Petersburg Economic Forum
in June 2012, the Company signed an
agreement of intent with JSC Inter RAO
UES, enabling the parties to initiate,
promote, develop and implement new
infrastructure projects between Russia
and foreign states, and among foreign
states and on their territories.
FEDERAL GRID COMPANY
TEN-YEAR RESULTS
The Risk Management System
The Company has an established risk management system intended to
provide for the sustainable and continuous operation and development
of the Company via the timely identification, assessment and efficient
management of risks that threaten the efficient economic operation
and good standing of the Company, the health of the Company’s
employees, the environment and the property interests of its
shareholders and investors.
The risk management system is regulated by the following
documents:
A Procedure for the use of the
Company’s Risk Management System,
as approved by Order #997, dated 28
December 2010. The Procedure
contains practical recommendations on
the identification and assessment of
risks.
A Provision on the System of Internal
Control, as approved by the Board of
Directors of Federal Grid Company,
Minutes #170, dated 3 August 2012.
According to the Provision, the risk
management system is an integral part
of the Company’s system of internal
control;
The Company’s Risk Management
Policy as approved by Order #229,
dated 7 April 2010. The Policy sets forth
the goals and elements of the risk
management system;
The Management Board
Internal Control Division
3
2
5
1
1а
2а
Structural Departments
of the Executive Body
6
4
5
Risk owners
(Head of Units, Directors)
36
The Risk Management System determines the following:
1.
2.
Risk identification methods.
The identification of risks is performed
using methods based on ISO/IES 31010
and COSO standards (analysis, threat
assessment, expert assessment, and the
event tree).
Risk Assessment Criteria
The risk assessment criteria include:
probability, financial impact and risk
controllability. The probability and
financial impact of the risk determines
its significance. The significance can
become higher in case the Company is
intolerant to the particular risk, or in
case some of the departments of the
Company’s Executive Body, or its
branches or SDC, are prone to said risk.
3.
Risk Response Methods
The risk response methods include: risk
taking, minimizing risk consequences,
transferring risk to a third party,
avoiding risk and other combined
actions. The choice of strategy is agreed
on with the Internal Control Department
and is approved by the Management
Board.
4.
Procedures and terms for the
submission of risk reports
Risk owners submit their risk reports to
the Internal Control Division on a
quarterly basis. If necessary, the Division
adjusts the reports and coordinates the
amendments with risk owners. Based on
the adjusted reports, the Company
prepares the Risk Matrix and the Risk
Minimization Actions Summary. These
documents are subject to the approval of
the Company’s Management Board.
1
1а
2
2а
3
4
5
6
Identification and assessment of risks, submission of the risk reports and information on
risks that actually occurred
Analysis and adjustment of risk reports, coordinating amendments
with risk owners
Coordinating risk reports with the heads of the corresponding departments of the
Executive Body and with the directors
Adjustment of reports depending on the results of coordinating efforts involving the heads
of departments of the Executive Body and the directors
Preparation of the Risk Matrix and of the Risk Summary, and risk minimization actions.
Submission of the above to the Management Board for approval, control over the
implementation of previous risk minimization actions and the analysis of risk assessment
dynamics
Approval of the Risk Matrix and Risk Summary and of risk minimization actions
Re-working the approved risk minimization actions
Implementing the approved risk minimization actions
FEDERAL GRID COMPANY
TEN-YEAR RESULTS
Principal Risks and Company-wide
Risk Mitigation Actions
RISK TYPE AND DESCRIPTION
EFFORTS TO MINIMIZE RISKS
RESULTS OF IMPLEMENTING RISK
MITIGATION POLICY
Operation risks
Power system disturbance
risk (equipment damage,
incorrect operation of the
relay protection and
emergency automatics (RP
and EA), resulting or
potentially resulting in the
disconnection of power
transmission lines and/or
substations, and in
de-energizing power
consumers)
Risk of employee injury at
the Company facilities,
resulting in damages to
health or death
Risk related to government
tariff regulation (changes in
the tariffs or parameters of
tariff regulation)
Risks of the nonfulfillment
of plans for the timely
commissioning of
investment program
facilities
Risk of income gap due to
the difference between the
customer contract
demand, taken into account
during tariff formation and
power actually consumed
Risk of the non-fulfillment
of liabilities by
counter-parties
— Implementation of the investment program in regard to the complex
re-construction and construction of new facilities and the program for
the improvement of lightning-surge protection and the widening of
clearings for overhead power transmission lines (OPTLs);
— Implementation of maintenance and repair plans, and of targeted
programs pertaining to the replacement of outdated OPTL and SS
equipment;
— Cooperation with manufacturers pertaining to servicing and eliminating
defects in supplied equipment;
In the autumn-winter period of maximal loads in 2012, the
Company reduced the specific accident rate at UNEG
facilities by 33%, compared with 2011.
Signing cooperation agreements with equipment
manufacturers, telecommunication companies, participating
in the restoration of the certification system, the appraisal
system and testing equipment, as well as developing and
implementing new technologies.
— Improving the operability of the equipment and advancing the
Operations Overview/Upgrading Reliability p. 47
qualifications of OPTL and SS personnel;
— Accomplishing emergency prevention training and a field audit of the
Company branches;
— Closely investigating accidents;
— Introducing changes in the legal framework, intended to ensure the
reliable supply of power to consumers;
— Operations monitoring, certification of new RP and EA devices and sets
— Developing and updating the legal framework on labor safety and injury
In 2012 the injury rate fell by 14.3%.
prevention;
— Implementing measures intended to assess the condition of labor safety
and its improvement at the Company’s facilities.
Social Responsibility and Sustainable Development /Social
Aspect – Production Safety p. 85
Industry risks
— Consistently implementing RAB regulation parameters and preparing
well-balanced and economically feasible proposals;
— Preparing high quality materials as a rationale for establishing/reviewing
In May 2012, the rate of growth of tariffs for 2012-2014 and
the Company’s investment program were simultaneously
adjusted.
tariffs.
Tariff Regulation p. 108
Cost Optimization p. 112
— Setting priorities for the investment programs;
— Controlling the implementation of the plan for financing investments and
complying with the operating schedule;
— Financial provisions for counter-parties’ liabilities.
In 2012, our plans for commissioning overhead transmission
lines were 91% realized (3,643 km against the planned 4,023
km), and plans for commissioning substations were exceeded
by 26% (17,827 MVA against the planned 14,152 MVA).
Operations Overview/Investment activities p. 54
— Including customer contract demand into agreements with contractors,
this customer contract demand was accounted for by the Federal Tariff
Service (FTS) during tariff formation;
The supply of electric energy to distribution grid companies’
grids, direct consumers and the independent JS-energo
increased 2.8% compared with 2011
— Imposing sanctions on contractors for the excess of the maximal actually
consumed power by more than 10% of the value of customer contractor
demand;
— Expertly assessing contractor information about customer contract
demand and the submission of this information to the Federal Tariff
Service to set a justified tariff.
Financial risks
Operations Overview/Electricity Transmission p. 39
— Settling overdue accounts receivable (court reclamation of debts, setting
Decreased level of accounts receivable for 2012.
off claims, debt re-structuring, charge offs);
Financial Performance Overview p. 103
— Reviewing the financial status of counter-agents at the procurement
stage and conducting further monitoring at the stage of performing
contractual obligations;
— Providing financial provisions for counter-parties’ liabilities;
— Monitoring debt status by the managers responsible for contracts,
prejudicial interactions with counter-parties in accordance with Federal
Grid Company’s Rules for receivables and payables management.
38
EFFORTS TO MINIMIZE RISKS
RESULTS OF IMPLEMENTING RISK
MITIGATION POLICY
— Diversifying debt financing sources and instruments;
— Building relationships with major Russian and foreign banks;
— Opening credit lines in the largest reliable banks with maximal
amounts of loans and long-term maturity;
In 2012, Federal Grid Company’s investment program had
100% debt financing sources. The Company fulfilled the
resolution of the Board of Directors on diversifying investment
program’s financing sources dated 27 April 2012 in full:
— The prospectus for the RUR125 billion bond issue was
registered; bonds for RUR45 billion were placed on MICEX.
— The prospectus for the RUR100 billion exchange bonds for
a 3-year period was registered; bonds for RUR10 billion were
placed on MICEX.
— The international prospectus for the RUR100 billion
Eurobonds was registered; bonds for RUR17.5 billion were
placed on the Irish Stock Exchange.
In 2012, Federal Grid Company became the first Russian
electric energy company that placed 10-year inflation
protected bonds.
Financial Performance Overview/Debt Portfolio p. 113
RISK TYPE AND DESCRIPTION
Risks of insufficient
financing of the Investment
Program
— Controlling the payments level and the Company’s liabilities in
Concluding long-term contracts with fixed price.
foreign currencies
The Company’s financial status, liquidity, financial sources and
performance results are not exposed to major currency risks.
The Company does not have liabilities denominated in foreign
currencies.
Financial Performance Overview/Debt Portfolio p. 113
Foreign Exchange risk
— Controlling the debt burden and creditworthiness of the Company in
accordance with Federal Grid Company’s Regulations on Credit
Policy;
Federal Grid’s international credit ratings are placed in the
investment category; loan servicing is held in strict
compliance with approved schedules.
— Retaining a high level of unspent credit limits at major Russian and
Financial Performance Overview/Debt Portfolio p. 113
Liquidity risk
foreign banks;
— Forming the Company’s diversified credit portfolio in respect to
instruments and terms.
— Attracting financing with fixed interest rates
95% of the Company’s credit portfolio is formed via loans and
borrowings with fixed interest rates
Financial Performance Overview/Debt Portfolio p. 113
Interest rate risk
Corporate risks
— Implementing pre-court settlement procedures;
— Concluding amicable settlement agreements during court
proceedings;
— The Company’s legal position is to refuse to satisfy claims and
actions;
— Satisfying claims;
— Actually performing obligations and restoring violated rights.
The claims settled out of court amounted to some RUR16
million (for the Company’s branches). The amount collected
according to the Company’s actions in 2012 comprised
RUR230 million, with actions refused in the amount of RUR635
million.
Some RUR737 million were collected in favor of the Company
(including the settlement of an amicable agreement in favor of
the Company).
Risk of claims and actions
presented to the Company
or by the Company
— Analyzing references to the Company in mass media;
— Distributing press releases and other information material intended
No cases of negative references to the Company in the mass
media were registered in 2012.
to form positive information coverage for the Company;
Social Responsibility and Sustainable Development p. 72
Risk of damaging the
Company’s business
reputation as the result of
inefficient communication
— Conducting press conferences, briefings and other events for the
mass media;
— Participating in major forums and exhibitions;
— Communicating the Company’s policy on strategic communications
and the Company’s Anti-corruption Policy to the employees;
— Applying the Company’s unified corporate design standards.
OPERATIONAL
OVERVIEW
THE LENGTH OF OUR TRANSMISSION LINES
IS 131.6 THOUSAND KM. THIS IS EQUIVALENT
TO A SPACESHIP ORBITING THE EARTH
FOUR TIMES.
40
Operations
Overview
Federal
Grid Company
of Unified
Energy System
01
0
6
1
3
1
M
K
OPERATIONAL
OVERVIEW
Electricity
Transmission
Electricity transmission through the Unified National
(all-Russian) Electric Grid (UNEG) is one of the
biggest tasks of the country’s energy sector and the
main activity of our Company. Payments for electricity
transmission services are the primary revenue source
for Federal Grid Company.
According to Russian law, the UNEG electricity transmission services
are the domain of Federal Grid Company, which manages the UNEG.
The UNEG electricity transmission services are classified as a
monopolistic activity regulated by the State.
P U R C H A S I N G E L E C T R I C
E N E R G Y A N D C A P A C I T Y T O
C O M P E N S A T E F O R
L O S S E S
WECM
Wholesale Electricity
and Capacity Market
S A L E S
G E N E R A T I N G C O M P A N I E S
42
109
The price of electricity transmission services is determined by
corresponding rates set for different constituent territories of the
Russian Federation by the Russian Federal Tariffs Service (FTS),
taking into account process losses of energy during electricity
transmission over the UNEG. 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.
C O N S U M E R S
D I S T R I B U T I O N
T R A N S M I S S I O N
E L E CT R I C I T Y
T R A N S M I S S I O N
PAY M E N T S FO R E L E C -
T R I C I T Y T R A N S M I S S I O N
S E R V I C E S
In 2012, the Company supplied its consumers with 517,130.7 million
kWh.
Our Company independently purchases electric energy on the
Wholesale Electricity and Capacity Market (WECM) to compensate for
actual UNEG losses, after deducting losses recorded and paid for by
WECM participants at equilibrium prices.
ФСК — ИТОГИ
OPERATIONAL
10 ЛЕТ РАБОТЫ
OVERVIEW
01
0
0
1
3
4
1
8
5
6
3
1
S
E
C
I
V
R
E
S
N
O
S
S
M
S
N
A
R
T
Y
T
I
C
R
T
C
E
L
E
M
O
R
F
E
U
N
E
V
E
R
S
E
L
B
U
R
I
I
I
,
Electricity Transmission Services
In 2012, the volume of electricity transmission
services amounted to RUR136,581,431 thousand.
109,510,275
66,128,765
80,173,317
2008
2009
2010
Number of the Company's Contractors
Furthermore, the number of contractors with which the Company
signed agreements for electricity transmission through the UNEG has
significantly increased during the 2008-2012 period. It is predicted that
in the next few years, the number of Company contractors will continue
to grow due to the implementation of new technological connections to
the UNEG, satisfying judgments that require the Company to enter into
direct contracts with contractors and gradually terminating the last
mile* mechanism.
121
150
158
207
2009
2010
2011
2012
105
2008
* "The Last Mile" is a type of cross-subsidization, under which large industrial users connected directly to
Federal Grid Company’s backbone grids also pay the tariffs of the IDGC Holding’s distribution networks to
which part of the Company’s grid facility was leased (the "last mile").
44
134,875,494
136,581,431
2011
2012
The share of the Company's largest consumers in 2012
revenues from UNEG-based electricity transmission
services
52.2%
SHARE OF THE COMPANY’S
LARGEST CONSUMERS IN
2012 REVENUES
Tyumenenergo
10.5%
9.8%
IDGC of the Center
9%
MOESK
47.8%
4.8%
IDGC of the Urals’ branch –
Sverdlovenergo
4.5%
3.2%
3.3%
Lenenergo
Kubanenergo
Other
consumers
IDGC of the Urals’ branch –
Chelyabenergo
OPERATIONAL
OVERVIEW
Technological
Connection
Technological connection is an integrated service rendered by the
Company to provide for the actual connection of consumer energy
receivers (power installations) of potential contractors to the power
facilities of grid organizations. Technological connection services are
provided to new, as well as to existing, consumers if electricity demand
increases.
The structure of major technological connection
consumers
54% 41%
Distribution grid companies
Consumers (large-scale businesses – fuel and
energy industry, steelmaking, and construction)
5%
Other
Business processes - technological connection
Time limits:
15 days (up to 9
month to the UNEG)
30 days (up to 11
month to the UNEG) 6 month — 2(4) yearth
30 days
Total: from 6 month
to 2(4) yearth
Concluding the
technological
connection
agreement
1. Establishing
payment for
technological
connections;
2. Sending offers on
technological
connections.
Execution
of work
Protocols
Energy supply
1. Adjustment of the
1. Registration of
investment
program;
2. Receipt of
permission for
construction;
electricity meters;
2. Approval of the
technical and
backup reserve;
3. Approval of balance
3. Tender.
Construction and
assembly.
inventory and
operational
responsibility;
4. Sending the
technological
connection
protocol.
Application
Approval of technical
specifications and
design
1. Development of
technical
specifications;
2. Adjustment of the
investment
program;
3. Tender. Design
development;
4. Resolving
land-related
formalities;
5. Appraisal of project
documents.
46
The Company concluded 376 technological connection agreements during the
reporting period, which is 50% more than in 2011, with the maximum amount of
power per technological connections agreements with consumers and distribution
grid companies set at 2.78 GW, a 23% increase over the previous year's level.
In 2012, the Company implemented the following major technological
connection projects:
Technological connection of mining and
processing facilities:
Technological connection of
manufacturing companies:
— ESPO-I, II Expansion, Russia’s Far
East (133.7 MW);
— The Seversk Pipe Plant, the
Sverdlovsk Region (18 MW);
— RN-Yuganskneftegaz, the Tyumen
— The Hyundai Plant, the Primorsky
Region (12.9 MW).
Region (3,5 MW);
Technological connection of residential
projects:
— RGS Real Estate, St. Petersburg
(34 MW, Stage 1).
— Tulacement, the Tula Region (40 MW);
— The Eurocement Group plant, the
Voronezh Region (37 MW);
— The Serebryansk Cement Plant, the
Ryazan Region (33,6 MW);
— NLMK-Kaluga electrometallurgical
plant, the Kaluga Region (42 MW).
We are actively participating in the important Russian problem of
increasing accessibility to the energy infrastructure, carrying out an
action plan "Improving accessibility to energy infrastructure," which
was approved by the Russian Government. It provides for reducing
the timing and stages for technological connections. Our task is to
synchronize the development of the industry in different Russian
regions with the potential of the backbone electric grid complex.
To raise the awareness of the
applicants and to ensure the trans-
parency of technological connection
services, our Company has launched a
new information portal, "Technologi-
cal connection services", where
potential applicants can get online
access to information on technological
connections, learn about the
geographical location of the main
substations and apply for technologi-
cal connections. Launching the portal
was another step towards developing
long-term planning and real-time
interaction in coordinating with
regional authorities the need to
expand power grid capacity and to
avoid over-investment risks.
06.12.2012
Our Company has
completed the
technological connection of
the State corporation
Olympstroy’s electrical
installations to the 110 kV
Imeretinskaya sub-station.
Thus, we have provided
electricity supply to the
eight-million-viewer
Adler-Arena Skating
Center, which will hold
speed-skating
competitions.
OPERATIONAL
OVERVIEW
Technical Losses
Optimization
The 2012 Program to reduce energy loss in the UNEG was developed
within the framework of Federal Grid Company’s Energy Saving and Power
Efficiency Program for the 2010-2014 period and included three key areas:
Optimizing the schematic and
operating mode parameters
under conditions of both
operation and continuous
control of electric grids
— Maintaining optimal operational
— Reducing the duration of the
modes concerning reactive power
and voltage;
maintenance and repair for primary
grid equipment.
— Shutting down electric grid
equipment operated under low loads;
Decreasing energy
consumption spent on
in-house substation needs
— Optimizing the duration and number
of operated transformer and
automatic transformer cooling fans;
tanks and electric drives of oil-filled
circuit breakers;
— Installing energy-saving lamps and
— Optimizing the operation of heating
lights in outdoor switchgears;
and lighting systems in the SS control
rooms;
— Providing for the automatic operation
of heating systems used to heat the
— Upgrading the energy efficiency of
buildings.
Constructing,
re-constructing and
developing electric grids.
— Installing reactive power
— Optimizing electric grid loads by
compensators;
— Replacing overloaded transformers
and commissioning additional power
transformers at existing substations.
constructing new overhead lines and
substations.
48
2012 Technological effect, thousand KWh
Annual volumes of electric energy loss, mln of KWh
In 2012, the total economic
In 2012, the total economic effect
of implementing measures aimed
effect of implementing
at reducing UNEG losses reached
214,019.1 thousand kWh. The
measures aimed at
electric energy loss reduced by 3%
and stood at 21,945.8 million kWh.
reducing UNEG losses
reached 214,019.1
thousand kWh. The electric
energy loss reduced by 3%
and stood at 21,945.8
million kWh.
2008
2009
2010
2011
2012
21,86622,12122,52622,55321,945.8 OPERATIONAL
OVERVIEW
Upgrading
reliability
Reliable and stable power supply guarantees the well-being and
prosperity of any country, but in Russia, with its harsh northern
climate, electricity supply reliability is strategically important. We
understand the great responsibility that rests on us and we do our
best to ensure that electricity reaches our consumers in a stable
manner, without power setbacks and in compliance with all technical
parameters.
In 2011-2012, thanks to planned work to
maintain the normative condition of
electric grid facilities, constructing new
facilities and re-constructing existing
ones and upgrading employee
competence, the under-supply of
electric energy to consumers has been
reached at a stable low level.
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 obligations for reliable power supply
to consumers, the following were
prevented:
Measures adopted by our Company have reduced the specific
(per 1,000 units) failure rate by 20%, compared with 2008:
100
2008
97
2009
95
2010
92
2011
80
2012
82%
2013
forecast
50
Decrease in failures that occurred due to
operational flaws
Upgrading the quality of equipment handling;
Improving corporate culture;
Analyzing accidents.
Decrease in failures that occurred due to
the incorrect or faulty actions of
employees
Increasing executors’ responsibility level;
Upgrading the level of responsibility for specialists and
managers who control work progress;
Increasing staff motivation;
Releasing documents and information emergency
materials.
Decrease in the number of failures that have
occurred through damage to support insulators
100
84
71
42
27%
2008
2009
2010
2011
2012
Implementing targeted investment programs to
replace obsolete equipment
Decrease in the number of failures due to faulty
high voltage circuit breakers
Modernizing outclated equipment at the Company’s
facilities
60%
35%
73%
35%
15910020092008131201055201140%201211010020092008136201068201165%201214710020092008114201098201165%2012 OPERATIONAL
OVERVIEW
Technical policy
The Company’s Regulations on
Technical Policy were adopted in
February 2011. The Policy is intended to
determine the most advanced
engineering 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
Regulations on Technical Policy will
enable the Company to optimize the use
of the existing investment resources, to
improve the efficiency of electric grid
complex operation, to lower operating
costs, to improve systemic reliability of
the UNEG’s operation and to satisfy
growing energy demand.
In November 2012, the Company’s Board of Directors approved the
Regulations on the Unified Technical Policy in Russia’s electrical grid
complex. These Regulations will be submitted to the Board of Directors
of JSC IDGC Holding for approval.
The Unified Technical Policy in Russia’s
electrical grid complex is aimed at
determining the main technical areas
that enhance the reliability and
efficiency of Russia’s electrical grid
complex in the short- and
medium-term with appropriate
industrial and environmental safety
based on innovative development
principles that provide
non-discriminatory access to electric
grids for all market participants.
Expected effect from the implementation of the Unified Technical Policy
30% reduction in
the likelihood of
system failures
Reduction in
electricity losses
compared with
existing figures
Load leveling
Multiple decline in
the area occupied
by substations
We continue to cooperate with JSC IDGC
Holding. Our mutual work during the
year resulted in the adoption of rules of
information exchange between
branches of Federal Grid Company -
MES and SDC JSC IDGC Holding. These
rules allow us to obtain data on the
time, place and circumstances of
accidents in real time. In addition, we
have developed a joint operation
scheme for electrical grid facilities of
Federal Grid Company and JSC IDGC
Holding. We are also creating a unified
database for emergency reserves and a
joint main office for the electrical grid
complex. In addition, together with JSC
IDGC Holding, we have launched "hot
lines" for round-the-clock operative
response and information interactions
with the public, electricity consumers
and other electric power industry
agents, as well as executive agencies on
issues that concern reliable electric
power supply.
52
Scheme of Federal Grid Company and JSC IDGC Holding’s joint efforts
to ensure the reliable operation of the electric grid system in the event
of an interruption of power supply to consumers and other contingency
situations
RosHydroMet
Russian Ministry
of Energy’s CAS
PGC Head Office headed by Federal
Grid Company’s Chairman of the
Management Board
Federal Grid’s CAS/ JSC IDGC
Holding’s OSC
Governmental
authorities
Russian Emergency
Ministry’s National Crisis
Center
8 Federal Grid
Company’s Head Offices
SAC/MGMC of MES
14 Head Offices of JSC
IDGC Holding’s Subsidiaries
OSC of IDGC
Holding’s branches
41 Regional Offices
(PMES) of Federal Grid
SAC/GMC of PMES
59 Offices of JSC IDGC
Holding’s Subsidiaries
GMC of RSKs
SAC – Situational and
Analytical Center
OSC – Operational and
Situational Center
PGC – Power grid complex
MGMC - Main Grid
Management Center
GMC - Grid Management
Center
OPERATIONAL
OVERVIEW
Fixed Assets
Renovation Program
On 31 October 2012, the Russian Ministry of Energy approved the Fixed
Assets Renovation Program in the Company's 2013-2017 Investment
Program. The Renovation Program, aimed at ensuring the reliable and
efficient operation of the electric grid complex, provides for
commissioning facilities with a total capacity of 31,357 MVA and
reconstructing 1,231 km of electric energy transmission lines.
During the reporting year, as part of this
program, we energized 23 key
comprehensive facilities and 20 key
facilities of non- comprehensive
reconstruction. Among the most
important renovation facilities are: the
220 kV Irtysh, the 220 kV Taksimo and
the 500 kV Arzamasskaya substations.
For the period from 2013 to 2017, total
program financing amounted to
RUR194,703 million. As part of complex
reconstruction, 154 substations and 95
electric energy transmission lines are
planned to be modernized.
By increasing capital investment in new
construction and renovation and
implementing special programs to
enhance safety, we managed to reverse
the aging trend for both facilities and
equipment.
Estimated and predicted aging of lines, taking into account changes in
the steady operation of the power grid* (the expected renovation time
for lines subject to new construction is 40 years, the length is more than
120,000 km)
73%
70%
68%
65%
Aging (without renovation)
61.1%
59.3%
57.0%
57.9%
Aging (subject to actual and projected
commissioning/repairs under the
2013-2017 Investment Program)
63%
60%
55.6% 56.6%
58%
54.7%
55%
53.5%
50%
53%
52.2%
2008
2009
2010
2011
2012
2013
FORECAST
2014
2015
2016
2017
* When Federal Grid Company’s 2013-2017 Investment Program, approved by Order #531 of the Russian
Ministry of Energy (dated 31.10.12.2012), is implemented.
In 2013, we plan to invest RUR41,208,76
million to refurbish fixed assets as part
of the Company’s Renovation Program.
The volume of commissioned facilities
for complex reconstruction will amount
to 8,170 MVA.
54
Repair program
The annual repair program, as well as the timely and thorough
preparation for special operation periods, allows the Company to
maintain the normative state of equipment.
The Company’s program is based on a year-by-year rolling plan for
the five-year period.
Based on 2012 results, Federal Grid Company’s repair program was
realized at 103% of the planned figure. The plan for stubbing out the
overhead line paths was carried out at 101%.
103%
FULFILLMENT OF THE FEDERAL
GRID COMPANY’S REPAIR
PROGRAM
Repair of transformers and reactors that
are 110 kV and above, phases
Stubbing out of the overhead line
paths, thousand hectares
216
225
212
214
202
53.4
49.7
50
49.6
44.9
2009
2010
2011
2012
2013
FORECAST
2009
2010
2011
2012
2013
FORECAST
OPERATIONAL
OVERVIEW
Work during
special periods
In 2008-2012, the Company achieved the target reliability level for the
electric grid complex and ensured the stable operation of UES of Russia
in conditions of abnormal natural phenomena (such as weather
conditions). 2010 had a remarkably long hot spell, extensive forest fires
and heavy icy rain in Moscow and the Moscow Region just before the New
Year. During the summer of the reporting period, torrential rains resulted
in a disaster in the Krasnodar Region, and December 2012 was the
coldest one (December) in 70 years. Twenty-three temperature lows were
set in that month. Beforehand, we prepared for peak loads in the
electrical network during the autumn-winter period, seasonal floods,
fires, storms, and how to prevent emergency situations related to power
outages in major cities and regions.
As a result of this successful work, on
9 November, the Company received a
certificate of readiness for operation
during the 2012-2013 autumn-winter
period. This certificate certifies the
timely and proper execution of a range
of measures aimed at upgrading the
reliability of power supply to consumers.
During the 2012-2013 autumn-winter
peak load period, we reduced the
specific accident rate in the UNEG by
11.9% compared with the 2011-2012
autumn-winter period.
That was made possible due to special
measures undertaken by the Company
aimed at making more intensive
preparations for the special periods in
2012, including: a two-stage preliminary
check for the readiness of electric grid
facilities to work during the high load
period. The General Directors of the
Company’s branches - MES and JSC
IDGC Holding’s subsidiaries prepared
and approved a joint operational
scheme for electric grid facilities and
optimized resource allocation.
17.07.2012
We completed all major power
supply restoration work in the
Tuapse District of the
Krasnodar Region, which was
affected by the flooding. In the
first place, 6-10 kV power
facilities that provided
electricity transmission to
ultimate consumers were
restored. Then, the 0.4 kV
consumer network was
repaired. The Company’s
220-500 kV power lines and
substations were not affected
by the disaster and were
operating normally. However,
to ensure the high reliability of
power facilities during the
restoration period, line team
specialists held off-schedule
inspections on a daily basis.
56
Operational and process
management
Operational and process management
of Federal Grid Company is intended to
ensure the reliable operation of UNEG
facilities and the fulfillment of
technological modes set by the System
Operator’s control centers. Our task is
to comply with quality and safety
requirements when we operate UNEG
facilities. We are actively working to
reduce the number of process
disturbances due to operating
personnel errors, and are developing
and carrying out UNEG development
programs in collaboration with the
System Operator’s control centers.
Moreover, we are commissioning new
generation substations with modern
automated equipment control systems.
This enables us not to have our
operational staff on duty at substations
and delegates their functions to
specialists at the network control
centers. These innovations reduced
maintenance costs and led to shorter
elimination times for process
disturbances.
voltage levels 0
There have been no violations of
the standard for allowable
In 2012, we successfully resolved the problems of operational and process
management, which has enabled us to achieve the following results:
Reducing the number of process disturbances
related to the faulty actions of operating
personnel:
There have been no violations of the standard for
allowable voltage levels in the UNEG for two
consecutive years:
82
61
32
2009
19
2010
57
16
2008
57
12
2011
39
9
2012
Process disturbances
related to the faulty actions
of all types of personnel
Process disturbances
related to the faulty actions
of operating personnel
71
9
3
3
2007
2008
2009
2010
0 0
2012
2011
OPERATIONAL
OVERVIEW
Investment
activities
The Company’s Investment Program is one of the most large-scale,
ambitious programs in the industry. Key provisions of the UNEG
development plan and the general scheme of power industry facilities
with planned generation inputs form its basis. Investing in the UNEG
development is of great national importance, so part of the program is
paid for with federal budgetary funds. Other funding sources for the
program include: the Company’s own funds, proceeds from additional
shares, proceeds from payments for technological connections, bond
issues and loans.
The 2012 Investment Program
In 2012, as part of the Investment
Program, we completed numerous
major projects of great importance for
the socio-economic development of
Russia’s regions. The energy
infrastructure facilities of the
Primorsky Region, the first phase of
the ESPO pipeline (Stage I – Expansion
and Stage II) and power provision
facilities for the 4th power unit of the
Kalininskaya NPP were commissioned
in a timely manner.
26%
over-fulfillment of
commissioning plans for
substations
Our investment plans in 2012 were almost completed. Plans for
commissioning overhead transmission lines were 91% realized (3,6543 km
against the planned 4,023 km), and plans for commissioning substations
were exceeded by 26% (17,827 MVA against the planned 14,152 MVA). Capital
investments were implemented at 103% (RUR192,684).
58
3,643
KM TRANSMISSION LINES
PUT INTO OPERATION IN 2012
Principal areas of investments in 2012
(Factual data as of 31 December 2012)
Power provision facilities: NPPs,
HPPs and TPPs
64,808 MVA, 767,4 km
Facilities to upgrade power supply
reliability for Moscow, St.
Petersburg, and Tyumen
3,402 MVA, 621,1 km
Facilities included in the
agreements with regional
administrations (except for Moscow,
St. Petersburg, and Tyumen)
626 MVA, 889,8 km
Development of backbone grids,
which did not enter into any
agreements
902 MVA, 1387,6 km
Facilities for technological
connections
9.2 km
Renovation Program for Federal
Grid Company’s fixed assets
7,009 MVA, 82,1 km
RUR14,191 million
RUR7,290 million
RUR379 million
RUR11,501 million
RUR10,915 million
RUR18,486 million
RUR12,612 million
RUR7,902 million
Investments
RUR179,899 million
RUR789 million
Development of process control, IT
technologies and additional target
programs
Facilities included in the Federal
Target Program “Economic and
Social Development for the 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 Olympic sporting facilities
432 MVA, 28 km
RUR48,512 million
RUR4,656 million
RUR4,908 million
RUR398 million
Purchases of facilities for
production purposes
RUR4,327 million
Innovations and energy
efficiency
RUR33,584 million
RUR4,360 million
Other
RUR111 million
Design and survey work (future
years)
New construction
Retro-fitting and re-construction
0
19268400000 RUBLES
1
Capital investments
implemented in 2012
OPERATIONAL
OVERVIEW
Investment dynamics
for 10 years
For the most recent ten years, our Company has put into operation
13,990.82 km overhead electricity transmission lines and 79,765 MVA of
transformer capacity:
Electricity transmission lines, km
3,563.10
2,963.00
Transformer capacity, MVA
18502 17933
2,187.20
1,387.30
1,047.00
705.50
637.47
563.04
591.80
265.51
10314
10416
7946
6351
4124
2352
792
1051
2003
2004 2005
2006
2007
2008
2009
2010
2011
2012
2003
2004 2005
2006
2007
2008
2009
2010
2011
2012
KM OVER 10 YEARS
13911
,
MVA OVER 10 YEARS
79780
,
Our gradual approach to investment
program implementation generates
clear positive results: in respect to all
operating facilities of the backbone
grids, the length of transmission lines
grows approximately 3% per annum,
and the annual increase in transformer
capacity stands at 6%.
60
The 2013-2017 Investment
Program
On 31 October 2012, the Russian Ministry of Energy approved the
investment program for our Company for the period from 2013 to 2017.
Total financing for the Company’s Investment Program for the 2013-2017
period will amount to more than RUR775.5 billion.
As part of the Investment Program, we
plan to spend RUR194.7 billion for the
renovation of fixed assets of the electric
grid complex, and RUR22.21 billion - for
technological connections. To develop
the grids which did not conclude any
agreements with the regions, the
Company will spend RUR256.8 billion. To
upgrade the reliability of power supply
to Moscow, St. Petersburg and Tyumen,
the Company will spend RUR48.8 billion.
The Company will invest RUR112.61
billion in innovations, upgrading energy
efficiency and developing process
control, design and survey work for
future years, and the protection of
electric power facilities and other
projects. Investments to implement the
governmental programs will comprise
RUR64.2 billion. Investments to provide
power from the NPPs, HPPs and TPPs
will amount to RUR57.65 billion. To
fulfill agreements with regional
administrations (except for Moscow, St.
Petersburg and Tyumen), the Company
plans to spend RUR20.36 billion.
AGGREGATE AMOUNT
2013-2017 ГГ:
BILLION RUBLES
OF PLANNED INVESTMENTS
775.5
OF FACILITY COMMISSIONING
MVA
66,869.86
16,984.65
KM
Federal Grid Company’s 2013-2017 Investment Program, RUR billion
Developing process control, innovations and energy
efficiency, design and survey work for future years,
protection of electric power facilities
and other projects.
Governmental programs
included in the Federal Target
Program “Economic and
Social Development of the
Far East and Trans-Baikal for
the Period till 2013”, Sochi
Olympic games
2,554.6 km; 2,007 MVA
62.4
8%
112.61
15%
57.65
7%
48.8
6%
20.36
3%
Provision of power from NPPs,
HPPs and TPPs
1,798.19 km; 1,527 MVA
Facilities to upgrade power supply
reliability for Moscow,
St. Petersburg, and Tyumen
203.3 km; 10,125 MVA
Agreements with regional
administrations, except those for
power supply to Moscow,
St. Petersburg, and Tyumen)
610.3 km; 1,000 MVA
Renovation Program for Federal
Grid Company’s fixed assets
1,231.37 km; 31,357.6 MVA
194.7
25%
Technological connections
373.4 km; 1,382.26 MVA
22.21
3%
256.8
33%
Development of backbone grids
which did not enter into any
agreements
10,210.99 km; 19,471 MVA
OPERATIONAL
OVERVIEW
Federal Grid Company’s 2013-2017 investment
volumes and priorities (planned), RUR billion
102.45
109.27
114.62
114.6
117.68
41.21
39.24
37.19
40.12
36.94
11.52
6.08
3.33
0.78
0.5
2013
2014
2015
2016
2017
Asset development
Renovation of fixed assets
Technological connections
Realization of the Company’s 2013-2017 Investment Program will result
in putting into operation 66,869.86 MVA of transformer capacity and
16,984.65 km of electric energy transmission lines.
Electric Grid Facilities to Be Put in Operation
in 2013-2017
17,034
16,576
14,994
9,932
8,334
3,358
4,397
3,690
3,112
2,428
2013
2014
2015
2016
2017
Electric energy transmission lines, km
Transformer capacity, MVA
62
Key investment
projects
Our Company is actively involved in the construction and
reconstruction of energy infrastructure for major Russian projects,
including: international forums and major sporting events, oil
transportation projects, and development programs in Russian
regions. We understand the importance of these projects and are
doing our best to build and reconstruct grid facilities on time and in
accordance with the highest standards.
Sochi-2014
The Kalininskaya NPP
Power supply to the Skolkovo
Innovations Center
Power supply to the
APEC Summit
The 330 kV Electric Energy
Ring in St. Petersburg
The ESPO Pipeline
OPERATIONAL
OVERVIEW
Federal Grid Company’s
Key Investment Projects Map
Construction of the 330 kV Electric
Energy Ring in St. Petersburg
Commissioning period – 2012
Provision of power (1,000MW)
generated by Power Unit #4
of the Kalininskaya NPP
Commissioning period – 2012
Provision of power (1,170MW)
generated by Power Unit #1
of the Leningradskaya NPP-2
Commissioning period – 2014
Construction of power supply facilities
in the Zapolyarie-Purpe pipeline
Commissioning period – 2016
Provision of power (450 MW)
generated by the Urengoyskaya SDPP
Commissioning period – 2012
Provision of power
(1,150MW)
generated by
Power Unit #1 of the
Novovoronezhskaya NPP-2
Commissioning period – 2012
Construction of infrastructure to supply power
for the 2014 Sochi Winter Olympics
Commissioning period – 2010-2013
Transfer of HVL to cable lines
and construction of the 220 kV
substation for the Skolkovo
Innovations Center
Commissioning period – 2012
64
Federal Grid Company’s
Key Investment Projects Map
Construction of power supply facilities
in the Vankorskoye Field
Commissioning date – 2013-2014
Construction of power supply
facilities in the
Elginskoye Coal Field
Commissioning date – 2012-2013
Construction of the 500 KV
electricity transmission line
from the Zeiskaya HPP
to the Amurskaya State border
Commissioning period – 2012
Power supply facilities
for the ESPO pipeline
Commissioning period –
2012-2014
Infrastructure construction
to supply power for the 2012
APEC Summit (Vladivostok)
Commissioning period –
2011-2012
Provision of power (1,000 MW)
for the start-up system
of the Boguchanskaya HPP
Commissioning period –
2012-2013
Construction of the 220 KV
electricity transmission line from
the Neryungrinskaya SDPP to
Nizhniy Kuranakh – Tommot –
Maya and the 220 kV Tommot SS
and the 220 kV Maya SS
Commissioning period – 2015
Electric energy transmission lines
(220 kV, 330 kV, 500 kV and 750 kV)
Electric energy transmission lines
and substations
OPERATIONAL
OVERVIEW
Sochi-2014
Construction of infrastructure for the
2014 Sochi Winter Olympics is one of
Russia’s most important investment
projects. Not only does our country’s
prestige during the Winter Olympics,
but also the further development of the
region, as well as Russia’s sports and
tourism industries, depend on
uninterrupted power supply to sports
facilities. Work on this ambitious
project began in 2009 and includes:
the construction, modernization and
re-construction of 33 backbone electric
grid facilities in the Sochi Region.
We are working quickly to meet the
highest international standards and
relevant deadlines. Work progress is
controlled by the International Olympic
Committee Commission. By the end of
2012, we had provided power supply to
eight Olympic facilities, including: the
Ledovy Sports Palace for figure skating
and short-track speed skating, the
Krytiy Skating Center, the bobsled
track at Krasnaya Polyana, and a
five-star hotel to accommodate
representatives of the International
Olympic Committee.
During the reporting year, as part of this project, we completed
construction of two substations, the 110 kV Izumrudnaya substation with
the 110 kV Psou – Izumrudnaya cable- overhead transmission line, which
is 12.5 km in length, and the 110 kV Vremennaya substation with the 110
kV Ledovy Dvorets – Vremennaya cable transmission line with a length
of 2.5 km. The total capacity of this power supply facility is 120 MVA.
In addition, we have put into operation the 110 kV 160 MVA Veseloye
substation. In 2012, we also began construction of power facilities for the
Olympics, including: the 220 kV Chernomorskiy distribution center and
the new 500 kV Vardane substation, as well as the 220 kV overhead
transmission lines to transmit power from the Dzhubginskaya TPP and
110 KV cable power lines that are 8.3 km long. They will connect the 110
kV Ledovy Dvorets, Imeretinskaya and Veseloye substations with the
power generation facility of the Adlerskaya TPP.
33FACILITIES TO BE RECONSTRUCTED,
MODERNIZED OR BUILT
66
The Kalininskaya NPP
The Kalininskaya NPP is a major energy
producer in the central part of Russia.
The Russian economy needs new power
generating facilities. The Company’s
responsibility here is to provide for the
transmission of electric energy from
new power units. In 2012, our Company
commissioned all facilities for power
provision from the Kalininskaya NPP.
This greatly increases the reliability of
the power supply not only to consumers
from western areas near Moscow and
the Moscow Region, but to those
throughout Central Russia. One of the
key facilities is the Gribovo substation,
which is the largest one in Europe. Here
we have used the most advanced
domestic and foreign developments,
which in the near future will allow us to
integrate this facility into the unified
smart grid system. Technical solutions
introduced at the substation will be
applied across the country.
OPERATIONAL
OVERVIEW
Power supply to the Skolkovo
Innovations Center
Switchgears for the secondary
distribution systems in the
Skolkovo substation
Gas insulated transformer
in the Skolkovo substation
The Skolkovo substation
The Skolkovo Innovations Center, which
is under construction, is designed to
create favorable conditions for the
modernization of the Russian economy.
Leading scientists, designers,
engineers and business people
together with participants from
educational projects will be working to
integrate new technologies into the
Russian economy and to create
world-class competitive developments
in five areas: energy efficiency and
savings, nuclear technology, space
technology and telecommunications,
biomedical technology, and strategic
computer technologies and software.
Our Company is working on providing
power supply to the Center. In
particular, we are constructing and
re-constructing nine electric grid
facilities.
The power supply project of the
Skolkovo Innovations Center is unique
in its complexity and technological
density. In developing the project, it
was decided to use technologies that
would make it possible to compactly
and safely fit power facilities into
almost any area which is dense with
residential or industrial buildings. The
Company has decided to build
underground substations and lay
underground cables lines made of
cross-linked polyethylene.
In 2012, we completed the conversion of seven sections of overhead lines
that go on the territory of IC "Skolkovo" with a total length of 256 km for
the cable- overhead lines. Furthermore, we put into operation 235 km of
the 110-500 kV cable transmission lines. The overhead lines in the area
of IC "Skolkovo" have been cut-off and dismantled.
We are in the construction of two power
supply centers of IC "Skolkovo":
Skolkovo and Soyuz substations. Their
total installed capacity will be 252 MVA.
The substations will be equipped with
the latest electrical equipment that has
a high operational reliability and
complies with modern environmental
requirements.
In particular, the 220/20 kV
gas-insulated autotransformers that are
specifically designed for underground
urban substations, complete gas
insulated switchgears, and new
communication systems will be
installed.
68252MVA
TOTAL INSTALLED CAPACITY OF
THE SUBSTATIONS
Power supply to the
APEC Summit
The Asia-Pacific Economic Cooperation Forum (APEC) is an international
economic organization, which was created to develop integrated links
between Pacific countries. It unites 21 countries. In September 2012, Russia
hosted the latest APEC Summit in Vladivostok. Preparations for such a
large-scale event took a lot of time and required considerable investment.
As part of the sub-program "Developing Vladivostok as a center for
international cooperation in the Asia-Pacific Region" and the Federal Target
Program “Economic and Social Development of Far East and the
Trans-Baikal for the Period till 2013”, the Company provided for the
complete readiness of the electric grid complex for reliable power supply to
the Summit and also for the high-quality and smooth operation of the
electric grid during the international forum.
150KM
TOTAL LENGTH OF TRANSMISSION
LINES
We have built and put into operation
eight backbone electrical grid
facilities: the 220 kV Aeroport, the
Russkaya, the Zeleniy Ugol, and the
Patrokl substations, and overhead and
cable transmission lines with a total
length of 150 km. On Russkiy Island,
the main site of the APEC Summit, we
continue to work on a territorial
cluster of the energy system with an
active-adaptive network. Innovative
technologies and modern equipment
used for its development will be the
basis for reliable power supply for the
entire infrastructure of the Far
Eastern Federal University and for
residents of the island portion of
Vladivostok.
OPERATIONAL
OVERVIEW
The 330 kV Electric Energy Ring
in St. Petersburg
Another project of national importance
that we have been working on since
2007 is the construction of the 330 kV
electric energy ring in St. Petersburg.
Historically, the energy system of the
Northern Capital has 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. Using a ring circuit allows a
two-way feed to each of the electrical
grid facilities of the ring, which will
upgrade the reliability of the city’s
power supply, minimizing the
probability of major emergencies and
phased blackouts.
In early 2012, we completed re-construction of the 220 kV Vostochnaya –
Volkhov-Severrnaya double-circuit transmission line, which is 16.32 km
long with a voltage of 330 kV. Now, the comprehensive re-construction of
two substations: the 220 KV Zavod Ilyich substation with subsequent
switching to the 330 kV class and the 330 kV Vostochnaya substation,
which are being completed.
5
SUBSTATIONS TO BE PART
OF THE ELECTRIC
ENERGY RING
IN ST. PETERSBURG
70
In the electrical energy ring in St.
Petersburg, there will be five 330 kV
substations: the Vostochnaya, the
Volkhov-Severnaya, the Zavod Ilyich, the
Vasileostrovskaya and the Severnaya
substations. In addition, two overhead
transmission lines (the 330kV
Vostochnaya-Volkhov-Severnaya and the
330kV Severnaya–Vostochnaya) and
three cable transmission lines (the 330
kV Volkhov-Severnaya – Zavod Ilyich, the
330 kV Zavod Ilyich- Vasileostrovskaya
and the 330 kV Vasileostrovskaya-
Severnaya) will be part of the ring.
The ESPO Pipeline
The East Siberian – Pacific Ocean
(ESPO) pipeline system is the pipeline
that connects oil fields in Western and
Eastern Siberia with the Pacific port of
Kozmino in Nakhodka Bay. It aims to
provide a port for Russian oil to reach
markets of the Asia-Pacific Region.
The Russian State-owned company
Transneft is the ESPO’s operator.
Our Company is constructing and
re-constructing the backbone power
facilities to connect to the electrical
grids the ESPO pipeline facilities on
the territory of the Republic of Sakha
(Yakutia), the Jewish Autonomous and
Amur Regions, and the Khabarovsk
and Primorsky Territories.
During the reporting year, we have energized six 220 KV transmission
lines and four 220 KV substations in the Primorsky and Khabarovsk
Territories for the external power supply to the second stage facilities of
the pipeline "Eastern Siberia - Pacific Ocean" (ESPO-2) - pump stations
36, 38, 40 and 41. In addition, we have provided external power supply to
the oil pumping station (OPS) -24 by building a new 220 kV substation
with a transformer capacity of 50 MVA.
OPERATIONAL
OVERVIEW
Telecommunications
and IT System
Development
The UNEG development, the building of a smart grid and the effective
management of the Company’s business is based on utilizing advanced
and modern telecommunications and information technologies. Our
Company operates the Energy System’s Unified Process Communications
Network (hereinafter - ESUPCN), which is designed to provide process
control in the production, transmission and distribution of electricity,
maintenance control and electric power operations.
The main direction of ESUPCN
development is digitalizing the network
and making it smart, which will enable
existing services to be administered and
new services to be created via
standardized tools. This is achieved
through the construction of fiber-optic
communication networks (FOCN),
deploying satellite communication
systems, mobile digital radio
communication systems and the
widespread introduction in electrical
grid facilities of communication systems
and modern switchgear equipment,
promising technologies, and next
generation multi-service networks.
Fiber-optics Communication Network (FOCN)
The fiber-optics communication
network (FOCN) is the basic energy
system’s communication network,
which is built using a fiber-optic cable
suspended on overhead electric energy
transmission lines. Apart from the
construction of the new FOCN, we are
working on the implementation of
large-scale resources provided for by
major communication operators and
rendered on the basis of long-term
ongoing lease agreements.
72
Prospective scheme for the Company’s FOCN
for the period till 2015
Finland
St. Petersburg
Moscow
Surgut
Ukraine
Ekaterinburg
Samara
Pyatigorsk
Kazakhstan
2012
2013 —2020
Completion and projected volume
of FOSN construction, km
Krasnoyarsk
Khabarovsk
до 2011
2012
2013-2015
33,087
7,211
24,702
In 2012, we completed construction of
the FOCN in the following areas of
electric energy transmission:
— The Pyatigorsk – Mineralnye Body –
Nalchik – Vladikavkaz (670 km);
— The Lipetsk – Voronezh – Belgorod
(750 km);
— The Krasnoyarsk – Khabarovsk in the
territory in which the MES East
operates (750 km).
29.06.2012
Our Company completed
construction of the fiber-optic
telecommunications line the
Lipetsk-Voronezh-Belgorod
with a 750 km length. The new
line will allow for the more
efficient management of
electric grid facilities, and
increased reliability of electric
energy supply in this region.
OPERATIONAL
OVERVIEW
Satellite Communications Network
To upgrade the reliability and visibility of
electric grid facilities, the Company is
building a satellite communications
network based on VSAT-technology.
In 2013, the Company plans to complete
equipping substations with satellite
communication installations. While the
FOCN-based communication network is
formed, the satellite communications
network will be used as a backup network.
The switch-over of satellite channels to the
mode of operating availability will
significantly reduce communication costs.
High Frequency Communication Lines
High frequency communication lines are
the electric system’s technological
communication network that transmits
through its channels voice, tele-mechan-
ics data, and the Automated System for
Commercial Metering of Electric Energy,
as well as relay protection and emergen-
cy control commands needed for process
control in the power industry (under both
normal and emergency conditions). It is a
specific type of wire channel, where
phase wires and cables of overhead
transmission lines are used as a
signal-carrying medium. In 2012, as part
of the new construction and re-construc-
tion of electrical grid facilities, the
Company upgraded high frequency
communication systems and put
obsolete equipment out of service due to
commissioning the FOCNs.
The Telephone Communications Network
Built on the hub network basis, the
power industry’s telephone
communications network provides for
interactions with the process network of
the System Operator and other
electricity market participants. The
development strategy of the telephone
network provides for VoIP technology,
along with traditional services.
74
Equipping UNEG substations with digital switching
equipment for telephone communication systems
188
Total number of substations
2010
2011
2012
115124
104
87
82
76
62
80
53
44
33
104
7879 80
83
114
66
4752
84
67
42
34
26
43
29
MES
Center
MES
South
MES
Volga
MES
Urals
MES
West
Siberia
MES
Siberia
MES
East
97
81
62
52
MES
North-
West
Systems Based on the Global Navigation Satellite
System (GLONASS) Technology
Used in corporate branches, the
transportation monitoring system based
on GLONASS/GPS technology is intended
to obtain real time information on the
location of transportation vehicles to
control the fulfillment of assignments, as
well as to monitor mileage and fuel
consumption. The implemented
transportation monitoring systems are
integrated with geographic information
systems and an automated
transportation operation accounting
system. The number of corporate
transportation vehicles equipped with
GLONASS is growing. During the
reporting year, 724 vehicles were
equipped with this system, and in 2013,
we plan to increase the number of
transportation vehicles equipped with
GLONASS equipment by more than 100%.
The Company plans to increase the number
of transportation vehicles equipped with GLONASS
3,224
2,628
724
1,701
2012
2013
FORECAST
2014
FORECAST
2015
FORECAST
OPERATIONAL
OVERVIEW
14.03.2012
Federal Grid Company
completed installation of the
Automated Information and
Measurement System for the
Commercial Metering of
Electrical Energy (AIMS CMEE)
at the 110 KV Vremennaya
substation in the Sochi Region.
It will be the main source of
power supply for the Media
Center of the 2014 Winter
Olympics (Sochi).
Implementation of the AIMS
CMEE will enable the
Company to receive full
operational parameter data for
the substation network and
transmit it in real time via the
satellite channel to the data
acquisition and processing
center of the MES South and
to Federal Grid Company’s
Executive Office.
Automated Process Control System
The Automated Process Control System (APCS) is a unified distributed
hierarchical system which allows both operational and non-operational
functions to be performed by Electric Grid Control Centers, improves UEG
mode control efficiency due to the high level of visibility, prevents outages
and reduces the time for decision-making and the probability of
erroneous actions by operational staff in emergency conditions.
As the UNEG functional control system,
the APCS integrates means and
sub-systems of existing independently
developing automatic and automated
control systems (the Automated System
of Technological Process Management,
the Data Acquisition and Transmission
System, the Automated System for
Dispatch and Engineering Control, the
Relay Protection and Automatics, the
Automated Information and
Measurement System for Commercial
Metering of Electrical Energy), providing
a sufficient interface for control systems
of the System Operator, the Distribution
Electric Grid Companies.
As the UNEG operational and
development control system, the APCS
integrates automation equipment and
systems for dispatch & processing and
production & technical activities of
Federal Grid Company and the MES and
PMES services.
As part of the Sozdanie APCS project, the Company is
working on implementing:
— The Automated Dispatch and
Engineering Control System of Electric
Grid Control Centers for (ADECS EGCC)
PMES and MES. Within this framework,
during the reporting year, we put into
operation the Software and Hardware
Complex of the Automated Dispatch
and Engineering Control System of Grid
Control Centers for the Primorsky
PMES to provide uninterrupted power
supply to the APEC Summit;
The Automated Process Control
System (APCS) is a hardware and
software system intended to collect,
analyze, visualize, store and transfer
process information and to
automatically control the operation of
substation equipment.
— Programs to improve the reliability and
visibility of the UNEG (at the facility
level). In 2012, Company specialists
implemented measures to upgrade the
visibility of UNEG facilities at 41
substations.
Currently, the Company is actively
implementing the APCS systems based
on the MEK 61859 protocol. Innovative
projects involving the establishment of
digital substations are under way. 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.
76
Putting into operation
the APOC system
37
38
35
47
40
19
10
20
MES
Volga
MES
East
14
9
6
20
13
6
25
19
MES
West
Siberia
MES
North-
West
MES
Siberia
MES
Urals
MES
Center
MES
South
2017
2016
2015
2014
2013
2012
Commissioning data acquisition and transmission
systems at the UNEG substations
14
8
7
6
17
10
7
3
11
11
5
7
4
4
2
1
4
2
1
1
1
MES
Volga
MES
East
MES
West
Siberia
MES
North-
West
MES
Siberia
MES
Urals
MES
Center
MES
South
2010
2011
2012
OPERATIONAL
OVERVIEW
Development of corporate and technological
information systems
For the reporting period, we successfully fulfilled the following work and
put into operation the following systems:
Within the framework of the Program for the automation
of investment activities:
— The Automated project management
system based on Oracle Primavera
was implemented as a part of
Automated system for investment
activities management;
— The Automated system “Design and
estimate documentation” was
implemented;
— The project aimed at developing the
Automated system “Formation of the
investment program” was completed
in respect to the functions of forming
a quarterly financing plan on the
approved investment program until
15 December of the year preceding
the planned year. The Company also
implemented the function of
adjustments in the plan for the
current quarter and the next quarters
until the end of the year.
Within the framework of the Program
for the automation of managing UNEG assets:
— The first stage of the project for
— The Automated system for repair and
creating a budgetary and regulatory
base for transmission lines and the
electric equipment of substations of
the UNEG was implemented;
— The software providing for the
formation and approval of repair and
maintenance plans was developed
and implemented;
maintenance records was
modernized in respect to planning
repair and maintenance actions
made in-house, and the formation
and analysis of the respective
records.
Within the framework of the Program
for the automation of corporate resources:
— The analytical personnel
management system based on SAP
HR and SAP BI was implemented;
— The automated system “Record
keeping for counter-parties” was
implemented.
78
Within the framework of the Program for the automation of operating
management and grid monitoring:
— Replication of the Automated system
of recordkeeping and analysis of
disturbances for the Company’s
branches was completed.
Within the framework of the Program for the automation of asset
management:
— The Automated system of contracts
management was put into operation;
— The IFRS accounting and reporting
system was put into operation.
Within the framework of the Program for IT/Infrastructure development:
— The basic models of the Corporate
Information Management System
were modernized. The Company
switched to an upgraded version of
SAP R/3.
Within the framework of the Program for the automation of interactions
with customers and the market:
— To provide for the compliance of the
Automated system of control and
record-keeping for energy resources
in substations with WECM’s
requirements, the Company
received 435 Passports of
compliance with Class C for the
System and the Passport of
compliance of the Automated
system for control and
record-keeping for energy resources
in the UNEG with the same Class C.
SOCIAL RESPONSIBILITY
AND SUSTAINABLE DEVELOPMENT
19.5%
DECREASE IN THE
SPECIFIC ACCIDENT
RATE IN 2012
(COMPARED WITH
2008)
14.3%
INJURY RATE
REDUCTION
84
Social Responsibility
and Sustainable
Development
Federal
Grid Company
of Unified
Energy System
SOCIAL RESPONSIBILITY
AND SUSTAINABLE DEVELOPMENT
General Sustainable Development
Policy and Social Responsibility
Principles
The Company’s position on corporate social responsibility (CSR) issues
is based on the awareness that the key aspect of the Company’s CRS
consists in providing for the reliable and uninterrupted supply of power
to UNEG facilities. We have voluntary obligations before stakeholders,
concerning the management of the Company’s impact on the
environment, the public and the economy. We strive to fulfill these
obligations in cooperation with stakeholders. The Company’s priorities
in this respect include: sustainable development and implementation of
the corporate strategy.
Prevention and rapid
elimination of violations
Responsibility to the
environmental community
Development and
implementation of innovations
RESPONSIBILITY TO THE
STATE AND CONSUMERS
Mitigation of negative
environmental impacts
Transparent and efficient
investment
Timely modernization of
UNEG facilities
— Minimization of UNEG
management and development
costs;
— Balancing the grid’s available
potential and domestic
economic needs.
Federal Grid Company
Responsibility to personnel
Establishment of decent labor
conditions and providing
opportunities for occupational
and personal development
Responsibility to suppliers
and contractors
Establishment of a transparent
competitive environment and
market pricing mechanisms
Since 2008, the Company has published
annual reports on social responsibility
and corporate sustainability, informing
shareholders, investors, employees,
partners, customers and local
communities on the Company’s strategy
for corporate social responsibility, and
disclosing the efficiency of
socially-significant corporate projects
and their influence on the social and
economic situation in the regions in
which the Company operates. The
Company’s social responsibility reports
are prepared in accordance with
disclosure standards for non-financial
statements, and GRI (G3) Guidelines, the
GRI’s industry energy protocol, and AA
1000 SES standard. Annual Report
preparation involves discussions with
stakeholders pertaining to the key topic
of the Report and the collection of
disclosure requests. Prior to
publication, the text of the Report is
discussed publicly in the form of
hearings held either in absentia or in
person.
82
The Company’s reports are registered in
the National Registry for Corporate
Non-Financial Reports, which is
maintained by the Russian Union of
Industrialists and Entrepreneurs (RUIE).
The Company’s 2011 Social
Responsibility and Sustainability Report
won “The Best Corporate Social
Responsibility and Sustainable
Development Report” category at the XV
Annual Federal Annual Reports Contest.
The full text of the social responsibility
and corporate sustainability reports of
Federal Grid Company are available on
the Company’s website at
http://www.fsk-ees.ru/about/corporate_
social_responsibility/
Stakeholder Relations
We are well aware of the importance of
our business in a dynamically changing
world, as well as of the impact that it has
on the economy, the environment and
social development, in general. As one of
the leading energy companies, we
consider stakeholder interactions to be a
means to consolidate resources to resolve
problems and to achieve common goals.
While interacting with stakeholders, we
inform them about the Company’s key
activities, sharing our views on events
and facts. Understanding and analyzing
key stakeholders’ expectations in regard
to issues that are vital for the Company
have formed the basis for upgrading
corporate social responsibility
processes.
The Company’s interactions with stakeholders
INITIATIVES IMPLEMENTED IN 2012
State Authorities
Conclusion of cooperation agreements pertaining to the UNEG development and the improvement of the
efficiency and reliability of power grids and power grid facilities
Generating companies
Major industrial consumers
Investment community and
shareholders
Company employees
Emergency response hot lines for information feedback from energy consumers, the launch of the new
“Technological Connection Services” Information Portal
General Shareholders Meeting, meetings of the management with analysts, briefings with physical
persons, minority shareholders
Young specialists’ attraction and retention program, the Dynasty program, the Days of Open Doors, the
Olympics and the organization of student teams
Contractors and suppliers
Signing agreements with major partners, including: INVENT Ltd., MICEX-RTS, Vneshekonombank, the
Eurasian Development Bank and Alstom Grid
SOCIAL RESPONSIBILITY
AND SUSTAINABLE DEVELOPMENT
HR Policy
The Company’s HR Policy is an integrated system of HR management
intended to ensure the Company’s investment attractiveness and to
balance the optimal use of the employees’ performance results, the
achievement of corporate strategic goals, and the provision of social
benefits and guarantees in line with employees’ needs and
expectations. One of the priorities of the Company’s HR Policy is
rotating and retaining the quantitative and qualitative characteristics of
personnel to ensure the reliable functioning and dynamic development
of the power grid complex.
HR Policy goals
Efficient organizational planning
Comprehensive management of
HR properties
Management of HR development
Management of the HR number
HR efficiency management
The Company’s HR Policy
elements
Organizational planning
Compensation and motivation
system
HR development and training
HR reserve
Social support
Labor relations
Internal communications and
corporate culture development
84
25,103TOTAL NUMBER OF
CORPORATE EMPLOYEES AS OF
31 DECEMBER 2012
The number and qualitative
composition of personnel
The Company’s total head count on 31 December 2012 was 25 103
employees. This figure represents a two percent increase in the total
number of employees compared with the previous year, due to new job
creation at corporate facilities (primarily to ensure the reliable
operation of Olympic power facilities), and to implement the Company’s
investment program.
On the whole, the number of employees grew 11% during the 2010-2012
period. This can be attributed to commissioning and energizing new
UNEG facilities.
Changes in the Company’s head count over the three
year period, employees
22,623
on 31.12.2010
on 31.12.2011
on 31.12.2012
+9%
24,603
+2%
25,103
Personnel Structure by Category and Gender
Employee category
Total
Employees
Of them:
Men
Employees %
Women
Employees %
TOTAL NUMBER
25,103
20,109
4,994
Management
3,902
3,404
17
498
Specialists/Employees
10,087
6,462
32
3,625
Laborers
11,114
10,243
51
871
10
73
17
SOCIAL RESPONSIBILITY
AND SUSTAINABLE DEVELOPMENT
Personnel Structure
by Education and Age
The Company sets strict requirements as to the education level and
qualification of its employees and this pays off. For example, in 2012, the
share of employees with higher education grew 2% (vis-à-vis 2011) and
stood at 58%.
Changes in the
share of employees
with higher
education
58%
Employees’ Education Level
Secondary general education
10%
56%
32%
Secondary,
elementary and
vocational education
58%
Higher education
During recent years, the Company’s
personnel structured broken down by
age demonstrates a marked tendency
towards a decrease in the number of
middle-aged employees and a
rejuvenation of manpower. During the
2010-2012 period, the average employee
age fell from 39.8 to 38.8 years (as of
31 December 2012). The majority of the
Company’s employees (56%) are people
in their prime, meaning younger than 40
years old. Therefore, the Company
maintains balance, attracting young and
motivated employees and retaining
experienced and highly qualified
personnel, ensuring the transfer of
professional knowledge and skills
across generations.
53%
2010
2011
2012
86
58%
SHARE OF EMPLOYEES WITH
A HIGHER EDUCATION
Personnel Dynamics
The Company pays significant attention to managing the number of
employees, as this management is instrumental to resolving the
problem of filling key occupational positions and attracting young
specialists. The Company actively cooperates with higher education
establishments and schools. We concluded cooperation agreements
with 45 Russian specialized education institutions. In 2012, the
Company’s target scholarship program covered 86 students who will be
offered job opportunities in different corporate divisions after
graduation.
Number of participants in scholarship programs
34
2010
2011
2012
The Company’s staffing level is rather
high, standing at 97% of its target
strength as of 31 December 2012. From
2008 to 2012, the personnel flow index
fell 1.5%, to 6%.
78
86
SOCIAL RESPONSIBILITY
AND SUSTAINABLE DEVELOPMENT
Monetary Incentives
The Company’s labor compensation system takes into account the
position category, the performance results of the Company’s subsidiaries
and divisions, and peculiarities of the regional labor markets, as well as
the individual contributions of each employee. Furthermore, we have
conducted a survey of compensation received by employees occupying
key positions in competing companies, to prove that the compensation
paid by the Company corresponds to the middle segment of the labor
market. To maintain and increase monetary incentives, the Company’s
subsidiaries perform an annual indexation of compensation (tariff rates)
for employees, increasing compensation by the value of the actual
growth in the consumer price index in the Russian Federation, which
forms the basis for a stable increase in labor compensation.
Fixed share
Variable share
Employee income structure
60%
Position salary/rate/tariff (37%)
Increments to earnings
— Working conditions
— Duty schedule
— Length of service
— Other
40% Bonuses
— Monthly bonuses
— Quarterly bonuses
— Annual bonuses
— Non-recurrent
bonuses
Changes in the average salary of the
Company’s employees, RUR
+6.4%
58,032
+8%
53,695
50,450
2008
2010
2012
88
58,032
RUBLES – AVERAGE (MONTHLY) SALARY
FOR THE COMPANY’S EMPLOYEES
Employment benefits are another tool that the Company utilizes to
improve employee motivation.
OBJECTIVES
EMPLOYMENT BENEFITS
Motivating personnel for
long-term employment
— Pension plan
— Support programs for Company veterans
— Rewards scheduled for anniversary and retirement dates
— Rewards for pensioners scheduled for professional and anniversary dates
Efficient rotation and
relocation of personnel
Contributing to the health
and operating efficiency of
personnel
— Housing rent compensation
— Voluntary medical insurance
— Accident insurance
— Compensation for wages lost due to temporary disability
— Sanitarium and health resort treatment
— Financial assistance related to illness
Social support of personnel
— Financial assistance connected with scheduled leaves, marriages, childbirth, and funerals
— Additional leave
— Monthly payments to employees with many children or children with disabilities
I
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L
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G
H
F
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N
O
I
T
N
E
T
E
R
D
N
A
N
O
I
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C
A
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T
T
A
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N
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S
R
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P
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F
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A
U
Q
I
I
Forming an HR Reserve
and Personnel Assessment
The Company’s concept of production and the technical HR reserve
formation (which was developed in 2011) enabled the Company to
comprehensively deal with the personnel reserve, forming a model of
competencies used to determine the knowledge level, and managerial
experience and skills of candidates for the reserve. This was
complemented by developing the mentorship system.
During 2011-2012, personnel
assessment initiatives for reserve
candidates were implemented in all
branches of the Company, while mentor
training programs were implemented in
the MES Center, MES North-West, and
MES Volga. The total number of reserve
candidates was 1 497 employees, with
478 of them enrolled in the tactical
reserve and 143 employees participating
in the mentor training program.
During the reporting year, the Company
developed guidelines to assess the
competencies of the Company’s branch
management, looking for candidates for
the PMES facility director. The
assessment covered 29 employees from
the Company’s HR reserve and 38 actual
PMES directors. All assessment
participants and PMES directors
received feedback based on assessment
results.
SOCIAL RESPONSIBILITY
AND SUSTAINABLE DEVELOPMENT
7
8
9
,
1
1
EMPLOYEES
PARTICIPATING IN EDUCATIONAL
PROGRAMS IN 2012
Personnel Training and Development
Personnel training, employees
Trained personnel
Personnel planned for training
Production personnel
12,692
11,987
10,018
10,367
4,614
3,461
2008
4,905
3,725
2009
8,670
2010
8,947
2011
9,657
2012
11,105
2013
PLANNED
Corporate personnel’s strong professionalism is a key factor driving
reliable UNEG operation.
In 2012, 11,987 employees took part in educational programs, including
9,657 operational employees. 6,713 employees took courses in the
Company’s own Personnel Training Centers (PTCs).
Federal Grid PTCs
External
contractors
Equipment
suppliers
Rostekhnadzor
training center
6,713 employees
56%
3,510 employees
29%
1,014 employees
750 employees
9%
6%
In all regions where Federal Grid Company
operates, we have created a network of
education centers. It allows us to
successfully resolve the problem of forming
an integrated educational space for our
personnel and to increase the standards
and enhance the quality of training.
All PTCs are equipped with training
simulators developed for each branch,
which imitate the dispatcher's operating
and information complex. In 2013, we will
complete construction of electric grid
training areas with initial substation
equipment, fragments of transmission
lines (transformers, switches,
disconnecting devices, and supports) and
micro-processor panels of RP and EA.
90
In the reporting year, together with the
Center of National Film, a film studio,
we completed production of a series of
educational films dedicated to the most
topical activities of the Company.
The educational films allow us to
standardize training, to improve quality.
Moreover, they let us hold distance
education and self-education.
In 2012, in line with our cooperation with Moscow Management School
"Skolkovo", we implemented the following programs:
— Youth round tables held as a part of the St. Petersburg International Economic
Forum – 2012 and the Baikal Economic Forum;
— Joint educational program “Integration of Federal Grid Company’s and IDGC
Holding’s innovative development programs;
— Integrated program “Federal Grid Company’s Strategic Personnel Reserve”.
In 2012, we continued the personnel
training project called Knowledge
Days launched in April 2011. The
project is aimed at comprehensively
improving ongoing skills for corporate
employees and our employees’
professional mobility, as well as on
enhancing new employees’ ability to
settle into the Company and creating a
knowledge management system.
10,011 employees of the Company
took part in the projects’ events; in
2013, IDGC Holding’s personnel joined
the project.
As a part of the system of forming the integrated system of personnel
training of Federal Grid Company and IDGC Holding, we undertook the
following measures in 2012:
— Joint training within the framework of the Knowledge Days project, which is
dedicated to reviewing and analyzing technological disturbances that have
occurred due to personnel’s incorrect actions;
— Joint emergency protection training, which involved the personnel of Federal Grid
Company’s PTC, operating and repair employees of MES Volga, MES Ural and IDGC
Holding;
— Joint training related to fire protection, labor protection, preventing disturbances
in the operations of transmission lines, and enhancing procurement activities,
media relations and interactions with personnel.
SOCIAL RESPONSIBILITY
AND SUSTAINABLE DEVELOPMENT
21.04.2012
On 21 April 2012, to celebrate the
upcoming Victory Day, more than
1500 employees of the
Company’s administration, MES
Center and the Company’s
subsidiary and dependent
companies (SDCs), including
corporate veterans came out to
clean up the territory of the Hill
of Respectful Salutation Moscow
Memorial and to lay the
foundation for the Alley of Power
Engineers. After finishing work,
a ceremony took place to honor
the veterans and place a floral
tribute at the Eternal Light. The
Company hosted traditional
celebrations for veterans
dedicated to memorable dates
(Victory Day, the Power
Engineers’ Day). Cultural
programs for these veterans
included visits to Moscow’s best
theaters and museums.
Strengthening Corporate Culture
The Company’s corporate culture joins employees together as a united
team, providing motivation for fruitful work, mobilizing their initiatives and
facilitating communication. The Company has an established range of
values which are essential for members of the corporate team, who are
engaged in the major and complex business of supplying electric power to
all Russian regions.
In 2012, which marks the Company’s
10th anniversary, significant attention
has been paid to corporate culture
development.
The Company has published the
“Federal Grid Company. Ten Years”
photo album, which contains works of
the best Russian photographers. It was
an initiative realized jointly with the
Moscow Photography House. A jubilee
exhibition and the presentation of the
album took place 27 June 2012 in the
Moscow Photography House. On the eve
of the Power Engineers’ Day in
December 2012, photographs from the
album were exhibited in the Russian
Parliament.
The “Dynasty” program launched by the
Company in 2010 to foster labor
traditions serves to familiarize children
of employees with production facilities,
and to organize drawing contests such
as “Unified Grid – Unified Country”, a
contest which has been organized for
the children of Company employees, as
well as for those of employees of JSC
IDGC Holding. The program also helps
to organize New Year’s festivities for
children of Company employees.
The Company promotes healthy
lifestyles, supporting sports and
physical activities. In 2012, Company
employees participated in Winter and
Summer Olympics organized by Federal
Grid Company. In October 2012, a
second Chess Tournament (in memory
of Mikhail Botvinnik) was held. The
Tournament, attended by power
industry professionals, was organized
by the Company and JSC R&D Center of
Federal Grid Company. Tournament
participants included 26 teams
representing Federal Grid Company and
other grid companies.
92
Non-governmental
Pension Programs
A non-governmental pension program for corporate employees was
approved in 2004, to attract and retain the best industry professionals and
to provide social support to employees, even after retirement.
Employees eligible for the NGPP
Full-time Company employees with at least 10 years of uninterrupted
service prior to the date that the labor pension right is acquired
A personal account for an employee is opened with the
Fund on the following dates:
The date that the labor pension right
is acquired in compliance with the
law (60 years for men and 55 years
for women), or at an earlier date
(subject to beneficial conditions)
The date a labor pension due to
disability is acquired
The number of employees who received non-governmental pensions
funded by Federal Grid Company during the Program’s lifecycle was 3 628.
In 2012, the Company transferred RUR320,735,413 to the
Non-governmental Pension Fund of the Power Industry.
320735413
RUBLES TRANSFERRED TO THE NON-GOVERNMENTAL
PENSION FUND OF THE POWER INDUSTRY IN 2012
SOCIAL RESPONSIBILITY
AND SUSTAINABLE DEVELOPMENT
The Housing Program
Last year, the Company launched a long-term corporate assistance
program to upgrade employees’ housing conditions. The program helps
employees either to rent housing that can be used while the employee
works at the Company, or to purchase an apartment of their own.
In 2011-2012, the Program helped 708
Company employees, including 282
young specialists, purchase various
housing options of their own.
During the reporting year, the Company
began to develop its own housing stock.
The Company provided 275 apartments
in the Sochi Region for employees who
are working to ensure the reliability of
power facilities at the Sochi 2014
Olympics.
In addition, the Company compensates
its employees the cost of housing for
one year. Young specialists are eligible
for this benefit for a period of up to
three years. In the reporting year, the
number of employees renting various
accommodations with corporate
support was 653.
COMPANY EMPLOYEES
PURCHASED VARIOUS
HOUSING OPTIONS IN
2011-2012 WITHIN THE
FRAMEWORK OF THE
CORPORATE HOUSING
PROGRAM
94
2,124COMPANY EMPLOYEES WERE
AWARDED WITH “TEN YEARS
OF FEDERAL GRID COMPANY”
ANNIVERSARY BADGES
The Awards Policy
Company employees are entitled to awards if they are distinguished in:
their services to the State, the fuel and power industry and the Company,
as well as if they demonstrate high production and management efficiency,
achieving best practice results in the operation, construction and
re-construction of power grid facilities.
The number of Company
employees who received
awards during the reporting
year was 4,585,
including 171 employees who were
awarded by the Russian Ministry of
Energy for their services to the industry.
Sixty-eight employees were recognized
by the All-Russian Association of
Employers of the Power Industry. Other
honors, including honorary titles and
badges, were granted to 141 employees.
Recipients of the Diploma of Merit
totaled 625 employees, with another 583
employees receiving letters of honor. In
addition, 2,124 Company employees
were awarded with “Ten Years of
Federal Grid Company” jubilee badges
in 2012, to commemorate the tenth year
of the Company’s establishment.
SOCIAL RESPONSIBILITY
AND SUSTAINABLE DEVELOPMENT
The Company’s Impact
On Russian Regional
Development
Federal Grid operates in 75 Russian regions. We are aware of the Company’s
significant role in resolving problems (both economic and social) that are
essential for the regions. Thus, we make every effort to enhance our
contribution to the regions’ economies, to establish new and to maintain
existing employment opportunities, to heighten the education level of people
living in the regions and to participate in environmental protection activities.
Social Aspect –
Educational Programs
Power engineering is a responsible business and the industry needs highly
qualified young specialists. We do everything in our power to train industry
professionals in all regions in which the Company operates.
Educational initiatives implemented in 2012 included the following:
— The traditional annual Day of Federal
Grid Company was attended by some
1700 students from regional higher
education institutions. Topics
discussed with students by Company
specialists included: production,
corporate culture, and
Company-specific operations. The
specialists also answered different
questions that attendees were
interested in;
— From April to June 2012, the
Company hosted a second contest for
students and post-graduates from
industry higher education institutions
to find the best research paper on
main power transmission lines. The
winners were awarded at the Youth
Round Table (which the Company
organized in Saint Petersburg);
— On 18 April 2012, the Company
organized an All-Russian Conference
entitled “New Generation for the New
Power Industry”. The Conference was
attended by 300 managers of higher
and secondary occupational
education institutions from across
Russia. The Conference agenda was
dedicated to the need to
comprehensively modify existing
relationships between institutions
engaged in educating specialists, and
production facilities that are busy
with large-scale technical renovation;
— In 2012, the Company organized
excursions to its production facilities
for more than 760 students. Nine
teachers from higher education
institutions underwent production
training at the Company’s facilities;
— On 20 June 2012, a ceremonial
opening of the Center for the
Advanced Training and Re-training of
Power Grid Complex Specialists was
held. The Center was organized on
the basis of the Saint Petersburg
State Polytechnic University, which
was equipped and re-constructed
with support from the Company;
— The Company provided charitable
assistance to the North Caucasus
Federal University to upgrade
equipment in the electro-technical
laboratory. Similar assistance was
provided to the Oil Technical
University in Grozny, where the
Company has funded the purchase of
equipment for the Department of
Secondary Occupational Education,
namely for classrooms and
laboratories that provide education
on electric power plants, grids and
systems and relay protection and the
automation of energy systems, as
well as on power supply.
96
The Company continues to employ the best students from industry
education institutions and makes every effort to retain promising young
specialists in the Company.
During the reporting year, the Company
also moved forward with developing the
tradition of having student construction
teams work at Company facilities. In
July-August 2012, employment was
provided for 745 students (twice as
many as compared with 2011) from
28 higher and 3 secondary education
institutions. They worked at 41 Company
facilities under construction. In three
years, the geography of facilities using
student labor has widened considerably:
Territorial Distribution of the Company’s Facilities Using the Services of
Student Construction Teams
2010
2011
East
1
1
Siberia
West
Siberia
1
Center
4
Siberia
West
Siberia
Urals
3
South
2
North-West
3
Center
2012
East
5
5
1
4
6
Volga
Center
10
2
North-
West
8
South
The number of students completing practical training at the Company’s
facilities grows year-on-year. In 2012, this number stood at more than
720 students.
2010
2011
2012
527
551
722
STUDENTS COMPLETED
PRACTICAL TRAINING AT THE
COMPANY’S FACILITIES
SOCIAL RESPONSIBILITY
AND SUSTAINABLE DEVELOPMENT
Social Aspect –
Charity Projects
3700000
The amount spent by the Company to provide aid to physical persons
in 2012 comprised RUR3.7 million.
138355000
The amount spent on aid projects to organizations during the
reporting year stood at RUR138.355 million.
2413800
Twenty employees of the Kuban MTPL facility (one of the Company’s
branches) who had properties suffered from the Krymsk flood received
non-repayable subsidies to upgrade their housing conditions. The total
amount of non-repayable subsidies comprised RUR24.138 million.
Furthermore, Company employees collected RUR5.2 million to aid the
people of Krymsk.
98
Social Aspect –
Import Substitution
Localizing the manufacturing of electro-technical equipment on Russian
territory will contribute to the domestic economy, thus improving the
country’s social situation.
The Company cooperates with leading
construction, engineering and other
contractor organizations, including:
suppliers of highly efficient
electro-technical equipment from
across the country. The Company signed
cooperation agreements with 72
domestic equipment manufacturers.
The total number of employees working
in these organizations amounts to more
than 160 thousand. We are sure that our
collaboration will contribute to
preserving these jobs, as well as to
stimulating the establishment of new
job opportunities. According to our
estimates, import substitution initiatives
will contribute to establishing more than
3000 new jobs in the 2012-2014 period.
2413800
1
0
SOCIAL RESPONSIBILITY
AND SUSTAINABLE DEVELOPMENT
Social Aspect –
Production Safety
14.3%
INJURY RATE REDUCTION
Labor Safety
The Company’s labor safety policy is intended to prevent production
accidents and occupational deaths, as well as to provide for the safe behavior
of employees engaged in production, to develop accident prevention skills
and to ensure improved labor conditions on an ongoing basis.
Based on the analysis of previous
performance, we have adjusted labor
safety management during the
reporting year. In 2012, each PMES
implemented procedures to decrease
the employee accident rate based on the
assessment of safety risks at its
facilities, and in compliance with a set of
goals formulated by resolutions of the
Labor Safety Committee and by the
organizational and administrative
documents of Federal Grid Company.
In 2012, the number of accidents fell
14.3% (from 7 to 6 accidents), with the
number of injured employees falling
12.5% (from 8 to 7 employees), whereas
the number of lethal accidents grew
33% (from 3 to 4 employees). It was the
first year in the Company’s ten year
history when the accident rate fell (to its
minimum).
General and Lethal Accident Rates at the
Company’s Facilities
1.2
0.8
0.4
General Accident Rate Ratio
Lethal Accident Rate Ratio
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
To improve production safety, the Company implements labor safety
procedures prior to the start of the repair campaign, assessing employee
safety risks and developing corrective actions. The Company also creates
instructional films that reflect safe methods of work and controls and
analyzes the safe performance of work by repair teams.
100
In addition, labor safety initiatives implemented during the reporting year
have included the following:
— A project on the use of mobile video
— Further operation of 13 psychological
recorders to register the most
dangerous actions of personnel
working at the power plants;
— A changed focus of Labor Protection
Days to increase efficiency and
prevent disturbances which can lead
to accidents;
— Organizing the operation of 50
stationary and 17 mobile safety
instruction units to promote safe
labor conditions and to train
personnel on safe methods of work,
based on up-to-date requirements;
rehabilitation units intended for
operating personnel at substations;
— Developing standardized
requirements for the certification of
workplaces in regard to work
conditions and the summing up
process, followed by granting benefits
and compensation to employees;
— Further continuation of the “A PMES
Best in Labor Safety” and of the “A
MES Best in Labor Safety” contests.
Industrial Safety
In 2012, the Company operated 342 Hazardous Production Facilities (HPFs)
that were registered in the State Registry. To provide for the safe operation
of the HPFs and to prevent accidents and to ensure preparation for the
liquidation of said accidents, the Company has implemented the following:
— Registration/exclusion/re-registration
of the HPFs in the State Registry;
— Development and putting into effect
documents that regulate the safe
operation of the HPFs;
— Reception of positive industrial safety
expert conclusions concerning
emergency localization and liquidation
plans and concerning documents
related to the transportation of
hazardous substances. The
conclusions obtained from the
Russian Federal Service for
Environmental, Technological and
Nuclear Supervision are registered
under #08-ID-(Т)1272-2012 and
#08-ID-(Т)1240-2012, respectively;
— Insurance of general liability against
harm done as the result of an
accident at the HPFs;
— Training and certification of personnel
on industrial safety.
In 2012, the Company approved Guidelines for the certification of technical
equipment used at the Company’s HPFs to regulate the procedures for the
certification, diagnostics and expert assessment of said equipment.
SOCIAL RESPONSIBILITY
AND SUSTAINABLE DEVELOPMENT
Fire Safety
No fires were registered at the Company’s facilities or within the
Company’s overhead lines guard zones. The only disturbance involving fire
that was registered in 2012 occurred at the Kolpino 330 kV SS. The fire
occurred due to the damaged input of the 330 kV automatic transformer,
which resulted in the emission and inflammation of transformer oil.
Damages resulting from the fire amounted to RUR1.63 million.
The decrease in the number of fires at
Company facilities caused by substation
equipment disturbances is the result of
instituting additional fire safety
measures during preparation for the
fire hazard period, and also due to
implementing the Program to upgrade
and enhance fire safety at the UNEG and
Federal Grid Company. The RUR1,059.7
million assigned for the
above-mentioned purposes for the
2011-2017 period are to be generated by
the Company’s economic and
investment activities. The considerable
growth in fire safety costs is caused by
the need to replace worn elements of
the main firefighting systems.
IN 2012 MEASURES UNDERTAKEN BY THE COMPANY TO
REDUCE THE CONSUMPTION OF THERMAL AND ELECTRIC
POWER RESULTED IN A SAVINGS OF
20852147
RUBLES (EXCL. VAT)
1
0
102
Economic Aspect –
Improving Energy Efficiency
Energy efficiency is one of the priorities of Russia’s technological
development. Pursuant to the Russian Federal law “On Energy Saving and
Improving Energy Efficiency,” the Company developed a program for
energy saving and improving energy efficiency (for the 2010-2014 period).
The Program is intended to provide for the economic and rational use of
fuel and energy resources by upgrading the energy efficiency of the
Company’s equipment and facilities.
THE GOALS OF THE PROGRAM FOR ENERGY SAVING AND ENERGY EFFICIENCY FOR THE 2010-2014 PERIOD
Cutting down the
consumption of resources
Equipping Company facilities
with energy and other
resource metering devices
and collecting data from
these devices
Minimizing losses
associated with electric
energy transmission
Enhancing energy cost
control mechanisms
Data on the Volume of Technological Power Consumption in the UNEG and
Fuel and Energy Resources Used by the Company
In 2012, fuel and energy resources used by the Company
included: electric and heat power, and fuels and lubricants
(petroleum and diesel fuel).
Fuel and Energy Consumption Volumes (as accounted for by the Program)
Index
Volume
Technological Effect of
the Company’s efforts
aimed at the reduction
of energy/fuel
consumption
Economic Effect of the
Company’s efforts aimed
at the reduction of
energy/fuel consumption,
RUR thousand, excl. VAT
Technological consumption of
electric energy within the UNEG
Electric energy consumed in
buildings
Thermal energy consumed in
buildings
21,945,800,740 kWh
214,019,110 kWh
199,300.87
31,470,170 kWh
860,860 kWh
2,666.16
46,250 Gcal
2,940 Gcal
Consumption of petroleum
9,044,710 liters
105,740 litres
Consumption of diesel fuel
7,450,120 liters
41,710 litres
2,776.97
2,701.27
1,076.20
SOCIAL RESPONSIBILITY
AND SUSTAINABLE DEVELOPMENT
Economic Aspect –
Import Substitution
The Company strives to minimize its import dependence by developing the
manufacture of electro-technical equipment domestically and by
increasing the share of Russian equipment in the Company’s investment
program, as well as in repair and targeted programs.
In pursuit of the above-mentioned goal, the
Company has signed 95 cooperation
agreements, with 77 agreements concluded
with manufacturers of electro-technical
equipment.
Seventy-two of these are domestic
manufacturers. All agreements are
intended to facilitate cooperation in the field
of development and the use of the most
innovative technologies and equipment.
The Company’s cooperation with regional enterprises
THE SVERDLOVSK REGION
THE KALUGA REGION
THE REPUBLIC OF INGUSHETIA
THE REPUBLIC OF MORDOVIA
Manufacture of components
for Siemens equipment
Construction of the HVL,
substation construction,
development of cable
manufacturing
Development of high precision
equipment and component
materials manufacture
Development of manufacturing
for new products and widening
the range of existing products
(high temperature wires,
overhead protection with optical
cables)
THE REPUBLIC OF DAGESTAN
THE CHECHEN REPUBLIC
THE REPUBLIC OF TATARSTAN
Construction of a substation,
the use of high precision
equipment at Company
facilities, the establishment of
the Electro-technical College
Construction of a substation,
development of production
facilities
Development of wire and cable
manufacturing facilities
The results of the Company’s import substitution initiatives implemented
during the reporting year are as follows:
— JSC Elektrozavod launched the
manufacture of 100-500 kV transformer
equipment, pursuant to a long-term
agreement to supply electrical products
to the Company’s facilities;
— The 110-500 kV SF6 insulated
manufacturing facility was constructed
by Hyundai Electrosystems LLC (in the
city of Artyom). The supply of SF6
insulated equipment to the Company’s
facilities will commence in 2013,
pursuant to the long-term agreement
for the supply of electrical products,
which the Company concluded with
Hyundai Electrosystems LLC;
— Izhora Transformers LLC, a company
engaged in the construction of a
transformer manufacturing facility in
Kolpino, was established in cooperation
with JSC Power Machines. The
manufacture and supply of 110-500 kV
transformers will start in 2014;
— The first power and distribution
transformers were supplied to the
Company’s facilities, pursuant to a
supply agreement concluded with JSC
Elektrozavod.
104
Economic Aspect –
Procurement Activities
The Company is actively making purchases in all regions in which the
Company operates. The Company’s procurement activities are designed to
purchase equipment and services on the competitive market.
Procurements are made using funds from the Company’s investment,
repair and targeted programs.
The Principles of the Company’s Procurement Activities
THE OPENNESS PRINCIPLE
THE COMPETITIVENESS PRINCIPLE
THE FEASIBILITY PRINCIPLE
The rules require that every decision be
verified for feasibility and documented
in order to increase purchasing
efficiency and to prevent corruption
The regulation system gives preference
to open tenders that provide maximum
competition. Any limitation of
competition, especially procurements
from a “last resort” supplier should be
well-grounded and decided upon
collectively. In critical cases, such
decisions are made by the Company’s
CTC exclusively, subject to follow-up
approval by the Company’s Management
Board.
The rules for the organization of
procurement activities are publicly
accessible. Information on the violations
of said rules can be sent to the
Company’s Central Tender Committee
(CTC). Information on CTC membership
is also available on the Company’s
website. CTC members include:
representatives of the Russian Ministry
of Energy and the Federal Anti-Monopoly
Service. Therefore, the decisions taken
are in line with the position of State
authorities. The majority of purchases
are made using open tenders.
Information about tenders is available on
the websites of the companies and in
the mass media as well.
The Goals of Procurement Activities
1
2
3
Reduction in the Company’s costs due to savings resulting
from product procurement (goods, work and services)
Supply of products for the Company:
— Of required quality
— At minimal cost
— On time
Optimizarion of the procurement control system on
advanced practices
SOCIAL RESPONSIBILITY
AND SUSTAINABLE DEVELOPMENT
The Procurement System Model
The Board of Directors of Federal Grid Company
The approval of the Procurement Policy, and the Chairman of
Federal Grid Company
The development of guidelines for
procurement activities, the reconciliation of
purchases from the “last resort” supplier,
the approval of additional agreements to
contracts, the approval of the Annual
Procurement Program of the executive body,
the approval of the Annual Procurement
Program in regard to non-tender purchases
in excess of RUR100 million, the review of
reports on the implementation of the Annual
Procurement Program
The approval of procurement plans involving
investments and technical maintenance and
repairs within the existing terms of
reference
The Chairman of the Management Board
The Company’s CTC
The Department of Consolidated Planning and
Procurement Organization
The Permanent Tender Commission on
Investments
The Permanent Tender Commission on
Production Activities
Purchaser, preparation of technical
documents, assessment of the procurement
participants’, documents, contracts
Procurement commissions equivalent to
Executive Body commissions
Ongoing control over the procurement
activities of the Company’s branches, and
the formation of procurement commissions
JSC ESSK – the organizer of procurement
procedures
The Engineering and Construction Control
Center, ESS, the Company’s branches
Permanent Tender Commissions of the
Company’s branches
Procurement Departments
Procurement commissions
Suppliers of products (goods, work and
services)
Signing Industrial Guidelines pertaining to purchasing activities
and detailing the Procurement Policy. Preparation and review of
consolidated reports on procurement activities and the reports
on “last resort suppliers”. Approval of final protocols, or the
delegation of authorities to approve such protocols by the
Deputy Chairmen of the Management Board and by the General
Directors of corporate branches
Methodological and operational control, the preparation of
organizational and administrative documents on procurement
activities, the organization of the work of the CTC and the
Permanent Tender Commission, the organization of
procurement planning, the control of procurement activities,
reports and analysis. Automating and enhancing the
procurement process. Managing JSC ESKK UES
Deciding on the selection of an agent of EB Federal Grid
Company and major purchases of the Company’s branches
The performance of procurement procedures, documenting,
archiving, and maintaining a price database based on market
research, preparing consolidated reports on the Company’s
procurement activities, the owner of Purchases, the corporate
integrated control system, the development of an e-commerce
website
Demand Planning, the formation of permanent tender
commissions, preparation for procurement procedures
performed by the Company’s branches, reporting
Selecting winners in regard to purchases in excess of RUR100
million
As early as 2008, long before State and
municipal orders for open and
competitive procedures went
electronic, the Company started to
implement procurement procedures
using an e-commerce system called
TZS Electra. Beginning in October
2012, the Company placed its orders on
the official all-Russian website
www.zakupki.gov.ru. To encourage
competition, the Company also
approved the use of two more
e-commerce websites,
www.etp.roseltorg.ru (owned by JSC
EETP) and www.sberbank-ast.ru
(owned by Sberbank-AST).
The main document regulating the
Company’s procurement activities is the
Policy on the procedure for the
regulated purchases of goods, work and
services. The Policy provides for
organizing the purchases of goods,
work and services based on unified
guidelines, using advanced
procurement procedures (which are
mostly tender-based).
The share of tender-based purchases
made by the Company in 2012 was
traditionally high, amounting to
RUR158,526,746.2 million, or 91% of
total corporate procurements.
The Structure of 2011 Regulated Procurements by Type
61.8%
OT – Open Tender
106
0.0%
OP – Ordinary Purchase
LRS – The Last
Resort Supplier
19.9%
9.0%
7.5%
ОА – Open Auction
MP – Minor Purchases
0.1%
ORQ – Open
Request for Quote
0.2%
OKN – Open
Competitive
Negotiations
1.5%
ORO – Open Request
for Offer
Economic Aspect —
Innovations
The use of innovative technologies in the national economy, including the
power industry, is one of the ways to ensure the country’s energy security
and sustainable development. Innovations used in the power industry
directly influence living standards, driving the development of the country
and society as a whole. One of the Company’s priorities involves
implementing innovations, as this process is of paramount importance to
the economic growth of Russia and its regions.
During the reporting year, the Company
proceeded with implementing the
Innovative Development Program for the
period till 2016, with a view till 2020.
Within the framework of the Program,
we have made steps to modernize and
develop the UNEG, and to form the
conceptual, technological and
manufacturing basics and terms of
development for the smart energy system
based on the active adaptive system (SES
AAS), to implement pilot projects, and to
enhance business processes and
organizational mechanisms of the
Company to accomplish innovative
development tasks.
The smart energy system – a new era in the electric energy sector:
century19th
20th
century
21st
century
BEGINNING OF ELECTRIFICATION
COAL ERA
UNSTABLE ENERGY SYSTEM
WIDESPREAD PRODUCTION OF
ELECTRIC ENERGY
FOSSIL FUEL ERA
UNSTABLE ENERGY SYSTEM
NEW ERA OF ELECTRIFICATION
ERA OF SMART GRIDS
STABLE ENERGY SYSTEM
Local production of electric
energy
Electric energy supply in isolated
systems with random traffic
Generation corresponds with traffic
Traffic corresponds with generation
Integrated grid, centralized generation
of electric energy, forecast traffic,
mono-directional energy exchange
Centralized and decentralized generation,
management via ICT, two way energy
exchange
Fossil fuel, water resources
Fossil fuel, water, wind, and solar
resources and nuclear energy
“Pure” coal, gas, nuclear energy
Excluding the environmental factor
Environmental protection
ICT – information and communications technologies
SOCIAL RESPONSIBILITY
AND SUSTAINABLE DEVELOPMENT
Smart grid
operation scheme
A smart grid (a part of the active-adaptive grid) uses new principles and
technologies for electric energy transmission and conversion which leads to:
— High rate of active elements in the
grid, which changes the topological
parameters of the grid;
— Large number of sensors measuring
current regime parameters to assess
the grid’s status in various regimes of
energy system operations;
— System of data collection and
processing (software and hardware)
and a system of active grid elements
and consumer electric energy devices
management;
— Existence of required executive
bodies and mechanisms providing for
the on-line adjustment of grid
topology changes and allowing for
interactions with adjoining energy
facilities;
— Tools for the automatic evaluation of
the current situation and
development forecasts of the grid’s
operations, high processing speed of
the management system and
information exchange.
WIND TURBINES
TRANSMISSION GRIDS
PHASOR MEASUREMENT UNIT
SUBSTATION
BILATERAL
COMMUNICATIONS
GENERATING
FACILITIES
SYSTEM OPERATOR CONTROL
AND DATA CENTER
108
FACTORY
ELECTRIC ENERGY
DISTRIBUTION SYSTEM
OFFICES
SMART
SWITCH
SMART METER
SMART APPLIANCES
ELECTRIC VEHICLES
HOME AREA NETWORK
Home monitoring
of electicity data
SOCIAL RESPONSIBILITY
AND SUSTAINABLE DEVELOPMENT
We are confident that the Company’s Innovative Development Program
will contribute to the more efficient use of Russia’s energy potential,
providing for the fully-featured integration of UES of Russia into the
global energy market, contributing to the development of innovative
technologies and ensuring the development of the domestic industry,
which will result in all of the positive technological and socio-economic
effects listed below:
Program Priorities
Technological Effects
Technologies upgrading the system
reliability of UES of Russia
Improving the lightning-surge protection of overhead lines (decreasing the fault rate by 25-30%);
Improving the explosion protection of electric equipment;
Limiting short-circuit currents in mega-cities (saving on the installation of additional equipment at
substations by 1.5-2 times);
ncreasing grid throughput capacity while reducing mass and dimension parameters (using high temperature
super-conductor technologies, and new types of overhead line wires).
Smart grid technologies (improving
grid flexibility and controllability)
Developing electric equipment that have controllable electric characteristics (FACTS, STATKOV, controllable
shunt reactors, etc.);
Cutting electric energy grid
operating costs
Reducing the cost of up-to-date
reliable and highly efficient
equipment
Developing equipment and grid infrastructure self-recovery technologies;
Developing electric equipment based on power electronics;
Using power storage systems (optimizing generation and consumption and saving up to RUR15 billion a year).
Improving grid automation (preventive control and automatic changes in grid characteristics and topology);
Cutting down the duration of installation and grid element repair.
Reducing equipment cost (including the cost of equipment based on semi-conductor electronics by 2-3% per
annum).
Priorities
Comprehensive Socio-Economic Effect
Environmental protection
Providing for power distribution in excess of 3.5 GW by power plants generating power from renewable
sources;
Efficiency
Reliability
Systemic Effect
for the Russian UES
Reducing atmospheric СО2 emissions by 2.5 million tons due to minimizing power losses;
Freeing more than 2,000 hectares of land from the grid infrastructure in mega-cities.
Cutting down the relative losses of power in main grids from 4.8% to 4%.
Implementing new services for consumers;
Decreasing consumer under-supply 2 times.
Reducing the number of closed power supply centers from 251 to 43;
Equalizing the load schedules through the use of large capacity power storage systems;
Lowering the growth rate for grid and generating equipment (saving 3-5% on the growth rate of the
installed power of power plants due to reducing the required power reserve starting from 2014).
Socio-economic Effect
Developing new territories by electrification of the country’s remote locations (mineral deposits and
transportation systems in Siberia and the Far East);
Increasing the amount of taxes returned to the country’s budget via the launch of new production
facilities;
Creating some 10,000 new jobs;
Developing the domestic industry and adjacent sectors, providing for the development and
implementation of new devices that have new characteristics, and establishing a domestic production
base;
Developing and discovering new R&D, and fundamental research trends.
110
Research and Development (R&D)
In accordance with the Company’s
2013-2017 Investment Program, in
2012, the Company plans to spend
RUR2.9 billion to implement the R&D
Program; this is 50% more than in 2011.
The Company’s Innovative Development
Program includes performing Research
and Development (R&D) work intended
to develop, test and implement
“breakthrough” and “improving”
innovative technologies at UNEG
facilities. These technologies include:
electric energy storage systems,
“digital” substations, high temperature
super-conductor technologies and
direct current power transmission
technologies.
R&D Financing Broken Down by Year, RUR billion.
0.14
0.39
1
2008
2009
2010
2011
2012
R&D Priorities
Improving the energy
efficiency of power grids
New types of automation
control systems
2
6
Разработка концепции
и теоретических основ
создания умной сети
9
14
25
1.9
2.9RUR, billions
R&D Financing Structure
The small and
medium sized
enterprises
sector
Design
organizations
Higher education
institutions
8%
5%
9%
14%
Academic
institutions
Production
organizations
2%
Monitoring power
grids for external
impacts
2
Smart grid control
systems
New types of power
equipment for
substations and power
transmission lines
Industry R&D
institutions
62%
SOCIAL RESPONSIBILITY
AND SUSTAINABLE DEVELOPMENT
39USEFUL MODEL
PATENTS RECIEVED IN 2012
In 2012, our specialists developed and produced more than 10 prototypes
for innovative equipment, including:
— A model of a blast resistant
— A new type of quick-operating
transformer (the technology will allow
for safe operations of UNEG facilities,
to exclude deformation of the
transformer with the leaking and
ignition of transformer oil and further
damage of substation equipment);
current-limiting 220kV (which allows
to limit short circuit currents in the
220kV electric grids);
— A multi-polar multi-pole valve
inverter for ice melting at high
voltage overhead transmission lines;
— A high-voltage impulse generator.
Within the framework of the R&D Program, in 2012, we received 39 useful
model patents (including 6 international ones), 6 patents for invention and
19 certificates for software.
As a part of implementing priority pilot
projects in UES of the East (territorial energy
clusters), we developed a management
system project for four substations of the
Elgaugol Cluster, as well as a unique
program and method for testing.
We also formed Federal Grid Company’s
Architectural Committee under the support
of the Russian Academy of Science. The
Committee is responsible for the
development of smart grid architecture.
Among Committee members are
representatives of various energy
organizations and industry experts.
112
Environmental Aspects –
Environmental Protection
The Company is responsible in its approach to environmental protection
issues. The Company’s approach is intended to heighten the level of
environmental safety, and to provide for reliable and environmentally safe
power transmission and distribution.
The Company operates in compliance
with its own Environmental Policy,
which includes technical and
organizational initiatives intended to
minimize the negative impact of the
Company’s production activity on the
environment.
Federal Grid Company’s Environmental Policy
Technical Initiatives
Organizational Initiatives
Replacing equipment containing
hazardous and toxic substances
Implementing the Environmental
Management System
complying with ISO 01:2004
requirements
Repairing oil drain systems and
equipment
Upgrading current production
control systems and performing
environmental audits
Organizing temporary waste
storage sites
Environmental trainig
of personnel
Constructing and re-constructing
sewage systems
and treatment plants
Developing required normative and
technical documents and improving
environmental document provisions
SOCIAL RESPONSIBILITY
AND SUSTAINABLE DEVELOPMENT
The design of new facilities involves the
development of special sections
dedicated to environmental protection,
that take into account all requirements
of Russian environmental protection
laws. The construction and
re-construction of power grid facilities
in accordance with the
above-mentioned designs involves
installing new environmentally-friendly
equipment and implementing new
technologies for laying and
constructing power transmission lines.
In an effort to upgrade its
environmental activities, in July 2012,
the Company established a department
to implement environmental policy. The
new department will develop
guidelines for the Company’s
environmental activities, including:
compliance with State policy and
corporate requirements on
environmental safety, and the
implementation and operation of the
environmental management system,
as well as representation of the
Company’s environmental interests
while interacting with State
authorities, non-governmental
organizations and rating agencies.
The Company’s main activity, which
consists of power transmission, is
much less harmful for the
environment, compared with other
power industry sectors, as emissions,
discharges and wastes are not the
result of the Company’s production
processes, occurring in the course of
the Company’s production activities
and being the least harmful.
In 2012, the Company’s negative environmental impact indicators were
traditionally low:
— The aggregate volume of atmospheric emissions – 114.7 tons;
— The volume of discharge to surface water bodies – 88.34 thousand
cubic meters;
— The volume of I-V hazardous class wastes – 13.3 thousand tons.
Nonetheless the Company does its best
to further minimize the impact of the
Company’s facilities on the
environment, spending greater
amounts to finance environmental
initiatives in each coming year.
The cost of environmental protection initiatives implemented in 2008-2012,
RUR million
57.75
63.87
37.21
43.64
32.8
35.64
9.13
6.16
1.27
19.73
5.17
20.30
21.78
1.56
16.51
4.26
2009
2010
2011
2012
Including the cost
of protecting
bodies of water
The cost of protecting
atmospheric air
The cost of production and
consumption waste treatment
20.42
5.8
11.44
1.95
2008
Total
114
63.87
MILLION RUBLES
SPENT ONENVIRONMENTAL
PROTECTION INITIATIVES
IMPLEMENTED IN 2012
7,726
ITEMS OF EQUIPMENT
CONTAINING TRICHLORDIPHENYL
WERE HANDED OVER FOR
DISPOSAL IN 2012
The Stockholm Convention signed and
ratified by the Russian Federation
requires that polychlorinated biphenyl
not be used in equipment by 2025. In
line with Convention requirements, the
Company is proceeding to implement a
program for the disposal and
replacement of equipment containing
trichlordiphenyl, a highly resistant
environmental contaminant. Such
equipment is replaced as soon as it
wears out, or during the re-construction
and modernization of substations. The
dismantled equipment is handed over
for disposal to specialized
organizations.
The price and quantity of equipment containing trichlordiphenyl handed
over for disposal
39,380
18,166
2009
7,200
4,036
2010
2,398
713
2011
21,049
7,726
2012
Quantity, pcs.
Price, RUR
thousand
2012 initiatives implemented pursuant to the Environmental Policy
Implementation Program include the following:
— Repair of oil drainage systems and equipment at 56
substations;
— Organization of temporary waste storage sites at 188
substations;
— Re-construction of sewage systems and household and rain
water treatment plants at 28 substations.
In 2012, MES North-West, a branch of
the Company, successfully implemented
an environmental management system.
The system’s compliance with ISO
14001:2004 has been certified.
Furthermore, a supervisory audit
confirming the compliance of
environmental activities with the
above-mentioned standard was
conducted at the executive body of the
Company and also at MES South,
another branch of the Company.
1
122299500000RUBLES
0
FEDERAL GRID COMPANY’S 2012
TOTAL ASSETS
116
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8
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6
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I
Financial
Performance
Overview
Federal
Grid Company
of Unified
Energy System
FINANCIAL PERFORMANCE
REVIEW
Financial
Performance
Overview
Federal Grid Company’s financial and economic management system is
based on budgetary management that has been built in accordance with
the hierarchical budget system rule.
In 2012, we approved the Budget Code -
a fundamental document that regulates
the long-term, medium-term and
short-term financial and economic
planning of the Company. The Budget
Code defines fundamental
methodological and organizational
principles for creating and utilizing the
system of financial and economic
planning for the Company’s operations.
The Company’s other regulatory
documents concerning financial and
economic planning and budget
management are developed and
adopted in Budget Code development.
FEDERAL GRID COMPANY’S BUDGET SYSTEM
Long-term planning
horizon
Medium-term
planning horizon
Short-term planning
horizon
Current plan based on the
budget with a one-year
planning horizon and a
one-quarter planning step
based on target values.
Financial plan with one-year
planning horizon
— Determination of target
values for financial and
production performance
in the long-run;
— Development of a
production program and
determination of
necessary resources to
accomplish it.
Business plan with a
three-year planning horizon
and a one-year planning
step:
— Determination of target
values for financial and
production performance
in the medium-run;
— Development of the
production program and
determination of
necessary resources to
accomplish it.
During the reporting year, priority tasks of our financial and economic management
system included:
— Maintaining an optimal level of financial discipline;
— Developing the planning system and budget management;
— Developing accounting and tax policies;
— Effectively utilizing borrowed capital to finance the Company's investment
program;
— Successfully operating via RAB regulation.
118
Financial
Performance
Federal Grid Company demonstrated the following
2012 year-end financial results:
Indicator
2008
2009
2010
2011 2012
Revenue
68,485
85,078
111,085
138,137 138,836
Production cost
58,977
64,080
75,680
84,174
106,618
Sales profit (loss)
5,156
15,870
28,584
45,236
22,364
Other income
38,377
113,770
144,907
175,671 113,556
Other expenses
37,356
183,688
111,763
209,463 150,152
Profit (loss) before taxes
6,177
-54,049
67,312
11,444
-14,232
Deferred tax assets
7
Deferred tax liabilities
-217
-180
-722
-33
46
-62
-1,181
-5,545
-8,736
Current profit tax
-3,225
-4,876
-9,264
-8,390
-1,471
Other similar mandatory charges
1,724
-39
249
-25
-0.3
Net profit (loss) for the reporting period
4,465
-59,866
57,082
-2,468
-24,502
Adjusted net profit
7,772
9,427
25,702
33,687
13,413
Indicators for the reviewed period
(2010-2012) show sustainable growth in
the revenues of Federal Grid Company. In
2012, sales revenues from the
Company’s main business increased
RUR699.9 million compared with the
same period from the previous year.
Main growth drivers include: tariff
revision in April 2011 and the change in
the time for switching over to an annual
tariff from 1 January to 1 July, resulting
in 4% growth in revenues generated from
electric energy transmission in 2012.
However, the 4% revenue growth was
offset by the impact of factors beyond
the Company’s control - lower revenue
from other areas of regulated activities:
— Revenue from compensating
technological losses (-21%) due to a
lower fixed rate of losses (from 4.84%
in 2011 to 4.49% in 2012);
— Revenue from technological
connection (-49%).
FINANCIAL PERFORMANCE
REVIEW
In 2012, the prime cost of the Company’s services (without administrative
expenses) increased RUR24,444 million (26.7%) year-on-year due to
increased depreciation charges on the newly commissioned UNEG
facilities, as part of the Company’s investment program (depreciation
charges amounted to RUR60,241 million in 2012 and RUR40,778 million
as of the end of 2011).
The Company’s 2012 financial and business results recorded losses of RUR24,502
million (a RUR2,468 million loss was recorded in 2011). The losses resulted from:
— Reflection of a negative difference
resulting from the revaluation of
financial investments (mainly JSC Inter
RAO UES shares) at market value in
the amount of RUR17,031.5 million.
— The negative balance for the
establishment and recovery of
financial investments impairment
reserves (which market value is not
established), which amounted to
RUR9,564.24 million, including
RUR8,610.4 million from
ENERGO-Finance LLC bills and
RUR953.6 million on financial
investments in JSC Mobilnye GTES
shares;
— The negative balance for the
establishment and recovery of bad
debt reserve in the amount of
RUR9,977.2 million, including
RUR6,904 million from Index
Energetiki – FSK LLC bills (due to
revaluation of shares on the
Company’s balance sheet in
accordance with current market
value), RUR4,621 million as a reserve
on interest accrued from
ENERGO-Finance LLC bills and from
electric energy transmission services
agreements with JSC Yantarenergo,
JSC DRSK and JSC Dagenergoset.
— Reflection of revaluation of fixed
assets which made a negative effect in
the amount of RUR1,380.2 million.
Adjusted net profit (profit without losses from asset revaluation and operations
involving the establishment and recovery of bad debt reserves and securities
impairment reserve) is RUR13,413 million, a RUR20,274 million decrease from 2011.
2008-2012 dynamics of revenue, expenses and net
profit, RUR million
138,137
138,836
84,174
106,618
111,085
75,680
57,082
68,485
58,977
85,078
64,080
4,465
2008
2009
2010
2011
-2,468
2012
-24,502
-59,866
Revenue
Prime cost
Net profit (loss)
120
1
122299500000RUBLES
0
FEDERAL GRID COMPANY’S 2012
TOTAL ASSETS
2008-2012 key assets, equity and liability indicators,
according to the Company’s financial statement
Name of indicator, RUR million
as of 31
December
2008
as of 31
December
2009
as of 31
December
2010
as of 31
December
2011
as of 31
December
2012
Total assets
696,988
746,667
902,110
1,037,493
1,122,995
Non-current assets value
518,471
588,425
767,152
919,501
1,011,667
Current assets value
178,516
158,242
134,958
117,992
111,329
Total liabilities
Shareholder equity
Long-term liabilities
Short-term liabilities
696,988
746,667
902,110
1,037,493
1,122,995
639,329
665,436
794,192
853,526
849,602
18,518
7,440
52,668
138,166
209,481
39,141
73,791
55,250
45,801
63,912
The dynamics of the above-mentioned balance sheet indicators show a clear growth
trend. During 2010-2012, the Company’s total assets and liabilities saw a material
growth due to an increase in non-current assets and a growth in long-term and
medium-term liabilities.
In 2012, Federal Grid Company’s total assets increased RUR85,502 million (+8.24%) to
amount to RUR1,222,995 million, as of 31 December 2012.
Non-current assets increased 10% to
amount to 1,011,667 million, which was
due to:
— An increase in fixed assets
Current assets decreased 5.6% to
amount to RUR111,328 million. The
following circumstances affected the
change in current assets:
commissioned in 2012 as part of
Federal Grid Company’s investment
program;
— Inventory decreases due to the
optimization of the Company's
inventory;
— Decline in financial investments
— Reduction in short-term financial
(-35.64%), resulting from them being
revalued at market value.
investments due to the allocation of
some part of funds to finance the
Company’s investment program;
The Company's capital reduction of RUR3,923 million during the reporting year was
due to recording a RUR24,502 million loss, which was partially offset by a RUR2,219
million increase in Federal Grid Company’s authorized capital owing to the
registration of the 2011 additional equity issue with the Federal Financial Markets
Service, and as a result of reflecting the annual fixed asset revaluation in the amount
of RUR17,726 million (+8.9%).
In 2012, Federal Grid Company’s borrowings increased RUR83,815 million
compared with the same period of last year to amount to RUR215,589
million. This was due to raising long-term loans and bond issues to
finance Federal Grid Company’s investment program.
2008 — 2012 structural asset changes, RUR million
902,110
696,988
746,667
1,037,493
1,122,995
Other
Current assets
Long-term financial
investments
Advances on non-current
assets
Work-in-progress
Fixed assets
2008
2009
2010
2011
2012
Liquidity indicators for Federal Grid
Company’s 2012 performance showed
the Company’s ability to re-pay its
short-term liabilities. The
above-mentioned indicators show a
relatively high level of liquidity and
solvency.
FINANCIAL PERFORMANCE
REVIEW
122
2008-2012 Corporate Financial Indicators
Indicator
Liquidity ratios*
as of 31
December
2008
as of 31
December
2009
as of 31
December
2010
as of 31
December
2011
as of 31
December
2012
Absolute liquidity ratio
1.42
2.43
1.32
1.02
0.69
Short-term liquidity ratio
2.48
4.02
2.74
2.27
1.60
Current liquidity ratio
2.61
4.15
2.90
2.56
1.76
Capital structure ratios**
Equity to total assets ratio
0.92
0.83
0.88
0.82
0.76
Debt to equity ratio
0.09
0.07
0.12
0.21
0.32
Profit margin ratios
EBITDA margin***, %
47.8%
47.5%
60.7%
61.3%
59.7%
Profit margin***, %
11.3%
11.1%
22.4%
24.4%
9.7%
Return on assets***, %
Asset turnover
1.1%
0.10
1.4%
0.12
2.8%
0.12
3.2%
1.2%
0.13
0.12
Despite the decline, the liquidity ratios
that are presented as of 31 December
2012 are within a normal range. The
decrease in current, quick and absolute
liquidity ratios is associated with
decreased short-term financial
investments.
The addressed period saw an
insignificant reduction in the equity to
total assets ratio, which was 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 a
good equity to total assets ratio; its
equity constitutes 76% of assets.
* For the purpose of calculating
the above-mentioned
indicators, accounts payable
exclude debt to shareholders
on contributions to authorized
capital;
** To calculate the
above-mentioned indicators,
equity includes debt to
shareholders on monetary
assets contributed to pay for
the issued shares.
*** For the purpose of calculating
the above-mentioned
indicators, EBITDA (net profit)
includes no factors that are
external to the Company’s
management competency.
FINANCIAL PERFORMANCE
REVIEW
Key Principles on Using Available Cash
Available cash management is based on ensuring the maximum
efficiency of investment and an optimal risk/return ratio.
In 2012, the Company’s good
performance was driven by reasonable
liquidity management and streamlining
the investment structure (in terms of
returns on investment and minimizing
risks).
In the reporting year, returns on
financial investments were generated
from investing available corporate cash
into Russia’s top banks with the
highest reliability level. The banks were
selected based on an assessment of
their financial operations and the
establishment of a risk limit. The main
investment instruments relied on the
investment term and included bank
deposits, current account balances and
bank notes.
Net Profit Distribution
The after-tax profit (net profit) of
Federal Grid Company defined by
financial statements is the source for
reserve fund accrual and dividend
payments. According to Federal Grid
Company, looking at 2011 FY
performance, the Company recorded
losses of RUR24,502 million driven by
the revaluation of financial investments
in market-quoted shares and the
recording of the accrual and reversal on
provisions for doubtful debt.
2008-2012 Net Profit Distribution, RUR million
2008
2009
2010
2011
2012
4,465
-59,866
58,088
-2,468
-24,502
223
4,242
0
0
0
0
0
0
2,904
18,578
34,028
0
0
0
2,578
0
0
0
0
0
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
124
Tariff
Regulation
Energy transmission tariffs are subject to State
regulation and are approved by the Russian Federal
Tariff Service (FTS).
Key regulations governing tariff rates applicable to the UNEG energy transmission
include:
— Federal Law No. 35-FZ on the
— Russian FTS Decree #56-e/1 on the
Russian Energy Industry (dated 26
March 2003);
— Government Decree #1178 (dated 29
December 2011) on the pricing policy
applicable to regulated prices (tariffs)
in the energy industry;
— Government Decree #1220 (dated 31
December 2009) on defining
applicable tariff rates on long-term
tariffs for the reliability and quality of
goods and services provided;
— Government Decree #1172 (dated 27
December 2010) on the approval of
wholesale electricity and capacity
market rules and amendments to
some Government orders related to
the wholesale electricity and capacity
market;
approval of methodological guidelines
to calculate energy transmission
tariffs via the Unified National
(all-Russian) Electric Grid;
— Russian FTS Decree # 228-e (dated
30 March 2012) on the approval of
methodological guidelines to regulate
tariffs using the return on invested
capital (RAB-regulation) method;
— Russian FTS Decree #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;
Before 2010, the UNEG energy transmission tariff rates for Federal Grid
Company were established by the economically reasonable cost method.
Since 2010, as a part of measures to
upgrade the investment attractiveness of
the electricity industry, Federal Grid
Company has had rates for electricity
transmission services across the UNEG
established based on the return on
invested capital (RAB-regulation) method.
To determine the tariff for each year of
the regulated accounting period, required
gross proceeds are calculated by
summing the values of the return, the
return on invested capital and the value of
expenditures required to render
electricity transmission services across
the UNEG. To avoid a sharp rise in rates
as a result of the RAB-regulation, a
smoothing mechanism is provided. This
mechanism involves re-distributing
required gross proceeds during the
long-term regulatory period.
FINANCIAL PERFORMANCE
REVIEW
* In compliance with the Basics of
Pricing Setting in the Sphere of
Regulated Prices (Tariffs) in the
Electric Energy Industry, which
were adopted by the Russian
Government Decree #1178 dated
29 December 2011 "On Price
Setting in the Sphere of Regulated
Prices (Tariffs) in the 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
capital invested until the switch to
RAB-regulation and with regard to
capital created.
** In connection with the adoption of
the Russian Government Decree
#1178 dated 29 December 2011
"On Price Setting in the Sphere of
Regulated Prices (Tariffs) in the
Electric Energy Industry", and the
switch since 2012 to the recording
of facilities on the basis of
invested capital as they are
commissioned, to calculate the
required gross revenue for each
year of the long-term regulation
period, the actual cost of facilities
put into operation in 2011, and the
cost of facilities planned to be
commissioned in 2012-2013 is
reduced by the value of assets
under construction, recorded in
the cost of invested capital when
Federal Grid Company switches to
RAB-regulation in the amount of
RUR205.6 billion, which is
distributed for 3 years.
For the first long-term regulatory period (2010-2014), the
Russian FTS established the following basic long-term tariff
regulation parameters for Federal Grid Company based on the
return on invested capital method.
Indicator
2010
2011
2012
2013
2014
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
Amount of capital invested
by Federal Grid Company,
RUR billion**
3.9 %
5.2 %
6.5 %
7.8 %
10 %
11.0 %
11.0 %
11.0 %
10.0 %
10.0 %
35
35
647.6
-
35
-
35
-
35
-
The Government of the Russian
Federation decided to postpone the
indexation of prices (tariffs) for goods
(services) of natural monopolies,
including electric grid companies from 1
January to 1 July of the next calendar
year. Based on this, the Management of
the Russian FTS made the decision to
set Federal Grid Company’s tariffs for
electric power transmission to the
UNEG for H1 2012 at 2011 tariff levels.
In accordance with the Basics on Price
Setting, Russian FTS Decree #113-e/1
(dated 21 May 2012) adjusted the rate of
return on "old" capital, established for
2014: the rate of return on old capital in
2014 is set at the rate of return on "new
capital" and is 10%.
For the North Caucasus Republics and the Stavropol Territory, the tariffs
for electric power transmission and the maintenance of UNEG power
facilities were set in the following amounts:
For 2010 – RUR37,845.23/MW per month;
For the period of 1 December – 31 March 2011 – RUR46, 029.88/MW per month;
For the period of 1 April 2011 – 30 June 2012 – RUR43,783.55/MW per month;
For the period of 1 July 2012 – 30 June 2013 – RUR48,540.01/MW per month;
126
Federal Grid Company Tariffs on Energy Transmission Services
and UNEG Electric Facilities Maintenance for the 2008-2012
Period (RUR/MW/month)
48,170
58,159
87,869
2008
2009
2010
01.01.2011—31.03.2011
01.04.2011—30.06.2012
01.07.2012—30.06.2013
116,783
111,083
123,328
The Russian FTS Order #254-e/1 (dated
26 October 2010) established
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 reliability 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.
Tariff regulation based on long-term
tariff rates with a view to the return on
invested capital involves the Company’s
compliance with service reliability and
quality performance as set forth by the
Russian Federal Tariff Service (FTS).
Order #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 the
Unified National (all-Russian) Electric
Grid (UNEG) and territorial grid
organizations.
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, describe the technical
connection capacity.
FINANCIAL PERFORMANCE
REVIEW
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.
Indicator
Regulation Period
Service reliability level
0.0490
0.0483
0.0475
0.0468
2011
2012
2013
2014
Service quality level
1.2599
1.2410
1.2224
1.2040
In 2012, the actual reliability and quality levels of services provided by
Federal Grid Company were:
Service
reliability level
Service
quality level
0.0241 1.2101
The transition of Federal Grid
Company to RAB-regulation ensured
adequate financial potential to meet
large-scale challenges in investment
activities. The approved investment
program will enable the Company to:
enhance stable energy supply to
customers, provide the generation
capacity of power plants, upgrade its
grid and implement a range of
important government projects.
Moreover, RAB-regulation defines a
brand new approach to cost
management in terms of established
operational expense performance (2%
per annum for Federal Grid Company).
128
Cost
Optimization
As part of the Russian Federation President’s and Government’s
order to cut the per-unit purchase costs of goods, work and
services by at least 10 percent per annum over three years, as
well as of the Ministry of Energy’s instruction to ensure a 10%
cost reduction from 2010 expenditure levels, Federal Grid
Company carries out the Cost Management Program.
The total expected effect from implementing the 2009-2012
Cost Management Program was RUR8,620 million.
RUR 8,620 million
The effect of implementing the Cost Management Program
for 2012 was RUR2,164.65 million, indicating a 6.6%
decrease in the Company’s costs in 2012 (compared with the
2010 expenditure level).
RUR 2,164.65 million
2009-2012 Changes in Reducing Operating Expenses, RUR million
2009
2010
2011
2012
-1,760
-1,760
-2,613
-2,083
-2,028
-4,373
Reduction in
operating
expenses for
the current year
Aggregate effect
from reduction in
operating
expenses
-6,456
-8,484
FINANCIAL PERFORMANCE
REVIEW
Cost optimization is one of the Company’s key objectives to
reduce the tariff burden on consumers and lower expectations in
the economy, while maintaining the required level of reliability
and quality of goods supplied. In circumstances where tariff
growth rates are constrained by regulating authorities, cost
reduction is one of the main tools for upgrading the Company’s
economic performance.
The Cost Management Program covers the entire production cycle of
the Company, from procurement to losses in electric grids when
electric energy is distributed.
In terms of cost cutting in 2013-2015, 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;
— Employing the relevant number of
highly qualified specialists to support
Federal Grid Company business
operations with optimal personnel
costs.
12250000000
130
Debt Portfolio
By the end of 2012, Federal Grid Company’s debt portfolio grew to
RUR212.5 billion. It occurred due to: placing bond issues, raising
credit from Gazprombank and placing Eurobonds on the Irish
Stock Exchange. The Company meets its obligations on servicing
its debt portfolio and debt re-payment in full and on time.
The Company’s debt portfolio as of 31 December 2012:
Type of debt
Bond issues
Gazprombank loan
Eurobonds
Total
Amount, RUR billion
Maturity
160
35
17.5
212.5
2.5-10 years
3-5 years
6.25 years
-
In addition, the Company has revolving and non-revolving credit facilities opened with
major Russian banks (Sberbank of Russia, Gazprombank, Alfa-Bank, NOMOS-Bank,
Raiffeisenbank, ACB Russia, and Bank Saint Petersburg) with a maturity of 5-15 years.
As of 31 December 2012, the total free limit of the credit facilities amounted to
RUR122.5 billion.
We will continue to use all available tools
to attract funding - bonds, Eurobonds
and bank loans to finance the 2013-2017
investment program and to re-finance
current debt. Furthermore, our
Company plans to primarily use
market-based instruments that provide
lesser funding costs with longer
borrowing terms.
The Company intends to cover cash
shortages from existing and scheduled
credit facilities and by offering bond
issues on both Russian and foreign
markets. The use of specific loan
instruments will depend on market
conditions.
1
12250000000
0
RUBLES
TOTAL FREE LIMIT OF THE COMPANY’S
CREDIT FACILITIES
FINANCIAL PERFORMANCE
REVIEW
2012 Bond Issues
On 6 June 2012, the MICEX Stock
Exchange assigned registration
numbers to eight issues of the
Company’s debut stock bonds, totaling
RUR100 billion.
On 21 June 2012, the Federal Financial
Markets Service of Russia (FFMS)
registered the securities prospectus of
Federal Grid Company for RUR125
billion.
The decision to place bonds and the
Company’s stock bonds was made by
the Board of Directors on 27 April 2012.
In 2012, as part of adopted programs,
the Company placed Bond Series 22, 21,
25, and BO-01 for a total of RUR45
billion.
As part of the previously approved 2011
program, the Company placed Bond
Series 12 in the amount of RUR10
billion.
In 2012, the total amount of funding raised from the placement of
bonds amounted to 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.
The Company's bonds fully comply with
the Bank of Russia’s requirements in
order to be included in the Lombard List
of the Bank of Russia and the list of
securities accepted as collateral under
re-purchase agreements.
132
Eurobonds
In 2012, Federal Grid Company entered
the international borrowing market. The
decision to place Eurobonds was made
by the Board of Directors 27 April 2012.
On 13 December 2012, the placement of
Federal Grid Company’s inaugural issue
of Eurobonds in the amount of RUR17.5
billion with a coupon rate of 8.446% per
annum and a maturity in 2019 occurred.
The securities were listed and admitted
to trading on the Irish Stock Exchange.
The Eurobond issue was assigned ratings from the leading rating
agencies, Standard & Poor's and Moody's, at the Company’s
ratings - BBB and Baa3.
Issuer
Issue
Outstanding issue
Maturity date
Federal Grid
Finance Limited
RUR17.5 billion
RUR17.5 billion
13.03.2019
Coupon rate
Coupon payment period
Rating
ISIN
8.446%
Two times per
year
Moody's: Baa3
S&P: BBB
XS0863439161
Debt Portfolio Performance
35
17,5
160
25
105
15
18
31.12.2008
56
13
31.12.2009
31.12.2010
31.12.2011
31.12.2012
Loans
Eurobonds
Bond issues
FINANCIAL PERFORMANCE
REVIEW
Credit Ratings
The high level of the Company’s creditworthiness and its financial
sustainability are confirmed by ratings assigned by top
international rating agencies. The current credit ratings are in
the investment category and show that the Company’s key
performance indicators (KPIs) are in compliance with the level
required for the full and timely performance of financial
obligations
Credit ratings as of 31 December 2012:
Standard & Poor’s
Moody’s
International Scale
BBB/Stable
National Scale
ruAAA
International Scale
Baa3/Stable
National Scale
Aaa.ru
134
Federal Grid Company’s 2009-2012 credit ratings:
23.11.2012
18.01.2011
РStandard & Poor's confirmed Federal
Grid Company’s credit ratings:
long-term international scale credit
rating at BBB, with a stable outlook and
a national scale rating at ruAAA.
18.06.2010
Standard & Poor's confirmed Federal
Grid Company’s credit ratings:
long-term international scale credit
rating at BBB, with a stable outlook and
a national scale rating at ruAAA.
Moody's assigned Federal Grid
Company an international scale credit
rating at Baa3, with a stable outlook.
The national scale rating was confirmed
at the same level - Aaa.ru. A downgrade
in Moody's rating from Baa2 to Baa3
was caused by planned changes in the
ownership structure of the Company, in
accordance with the Russian President’s
Decree #1567 (dated 22 November
2012) "On Joint Stock Company Russian
Grids”. The Company’s financial rating
has remained unchanged.
11.10.2012
Standard & Poor's confirmed Federal
Grid Company’s credit ratings:
long-term international scale credit
rating at BBB, with a stable outlook and
a national scale rating of ruAAA.
23.09.2011
Standard & Poor's confirmed Federal
Grid Company’s credit ratings:
long-term international scale credit
rating at BBB, with a stable outlook and
a national scale rating of ruAAA.
12.05.2011
At its annual ratings review, Moody's
confirmed Federal Grid Company’s
credit ratings at Baa2 with a stable
outlook, as well as its national scale
rating at Aaa.ru.
136
TransparencyAccountabilityResponsibility Fairness Corporate
Governance
Report
Federal
Grid Company
of Unified
Energy System
FINANCIAL PERFORMANCE
REVIEW
Corporate Governance
Report
Corporate Governance
Principles
Acknowledging the need to maintain high corporate governance
standards and business ethics for the successful conduct of
operations, as well as the importance of ensuring shareholder
rights, we have assumed liability to follow generally recognized
Russian and international corporate governance principles, as
stated in the Company’s Corporate Governance Code, and to
continuously upgrade corporate governance practices.
Company’s Corporate Governance Principles
Accountability
Fairness
The Company protects the rights of
shareholders and ensures the equal
treatment of shareholders owning the
same quantity of shares of the same
type (category).
The Board of Directors gives all
shareholders the opportunity to obtain
effective protection in case their rights
are violated.
Responsibility
The Company acknowledges the rights
of all shareholders and all interested
parties as provided for by Russian laws,
and seeks to cooperate with
shareholders and all interested parties
for the purpose of its own growth and
financial sustainability.
The Board of Directors is accountable to
all shareholders in compliance with
Russian legislation.
The Board and the Chairman of the
Board are accountable to the General
Shareholders Meeting and to the Board
of Directors.
Transparency
The Company provides for the prompt
disclosure of complete and valid
information about all salient facts
related to its operations, including: its
financial status, social and
environmental indices, performance, the
Company’s ownership and governance,
as well as free access to such
information for shareholders and all
other interested parties.
The Company ensures the
implementation of an independent audit
in order to obtain an external objective
assessment of the preparation and
submission of the Company’s annual
financial reporting.
138
The full text of these
documents can be found on
the corporate website:
http://www.fsk-ees.ru/shareho
lders_and_investors/corporate
_governance/constituent_and_
internal_documents/
We constantly upgrade our corporate governance system by introducing integrated
standards and management practices in all structural divisions, branches and subsidiaries
and dependent companies. We also constantly monitor legislative amendments to bring the
Company’s constituent instruments, the documents regulating the activities of operating
control, and other internal documents that ensure the effectiveness of the corporate
governance system, in line with such amendments. All that boosts the Company’s
competitiveness and investor confidence, in view of the interests of a wide range of people,
and helps ensure the most efficient use of capital by the Company, which, in the final
analysis, beneficially impacts the Company’s steady advances and enhances Russia’s
overall investment climate.
by the Board of Directors in person,
includes new sections and definitions
particularly describing issues such as
(potential) conflicts of interest of
members of the Board of Directors with
the interests of the Company, and the
requirement that a member of the
Board of Directors have an impeccable
reputation. In addition, the new Code
contains additional information about
the Company’s auditor.
Interactions of the Company with its
subsidiaries and dependent companies
(SDCs) are based on internal
regulations, including:
— Regulations on the governance of
subsidiaries and dependent
companies;
— The order of the interaction of
Federal Grid Company of Unified
Energy System with its subsidiaries
and dependent companies;
— Standard of the formation and
submission by structural divisions of
Federal Grid Company of positions
and assignments to representatives
of Federal Grid Company in the
General Meetings of Shareholders
and the Boards of Directors of
subsidiaries and dependent
companies.
The quality of the management of SDCs
is growing due to the increased
effectiveness of the Company’s
representatives in participating in the
governance and control bodies of SDCs.
The effectiveness of the Company's
corporate governance is ensured by the
following internal documents:
— Regulations on the Procedures for
Preparing and Holding the General
Meeting of Shareholders;
— Regulations on Activities of the Board
of Directors;
— Regulations on the Management
Board;
— Regulations on the Audit
Commission;
— Regulations on the Board of
Directors’ Audit Committee;
— Regulations on the Personnel and
Remuneration Committee of the
Board of Directors;
— Regulations on the Strategy
Committee;
— Regulations on the Investment
Committee;
— Code of Corporate Management;
— Regulations on the Dividend Policy;
— Regulations on the Information
Policy;
— Regulations on Insider Information;
— Regulations on the Internal Control
System;
— The Code of Corporate Ethics.
In 2012, our Company adopted a new
Code of Corporate Governance which
contained provisions significantly
affecting both the quality of the
Company's Corporate Governance in
general, and its external assessment by
shareholders, investors and other
interested parties. The new Code
expands the range of issues addressed
CORPORATE GOVERNANCE
REPORT
The Company’s Information Policy
Our Information Policy includes fundamental information
disclosure principles related to the Company's operations:
Regularity and
Efficiency
Information is disclosed on a regular
basis to interested parties and in the
shortest possible time.
Completeness and
Credibility of
Disclosed Information
Provided information is valid, and the
Company does not avoid disclosing
negative information about itself.
Accessibility of
Information
Utilized channels and modes of
information dissemination provide for
the free, non-burdensome and
non-selective method of information
disclosure to interested parties.
Maintaining
a Reasonable Balance
Between the Company’s
Openness and Adherence
to its Commercial
Interests
It is the prerequisite to protect
information that constitutes commercial,
State or other secrets protected by law,
and the observance of rules for the use
and dissemination of insider
information.
In accordance with the Russian Federal Law "On Natural Monopolies", as well as with
the Standards of Information Disclosure by players on the wholesale and retail
electricity and capacity markets, our Company, which is a natural monopoly entity
and a player on the Wholesale Electricity and Capacity Market (WECM) provides free
access to information about its activities, including:
— On the rates for services with regard
to those for which State regulation is
applied;
— On key indicators of financial and
economic activity;
— On the main consumer specifications
of regulated services;
— On the technical feasibility of access
to regulated services;
— On the registration and processing of
the implementation of applications
for technological connections to the
Company’s infrastructure;
— On the conditions for rendering
regulated services;
— On a procedure for performing the
technological, technical, and other
activities related to technological
connections to the Company's
infrastructure;
— On investment programs, projects
and their implementation;
— On the modes of purchase, cost, and
on the amount of goods required for
rendering regulated services.
140
u
r
.
s
e
e
-
k
s
f
.
Our Company discloses fully to the
utmost information about themselves in
both Russian and English on the
corporate website, www.fsk-ees.ru. This
information includes: salient events,
quarterly and annual reports,
statements in accordance with Russian
and international standards, and
information on management and control
bodies, etc.
In addition to publishing significant
information on its website, the Company
discloses information on the website of
Interfax agency
http://www.e-disclosure.ru/portal/comp
any.aspx?id=379, on the home page of
the London Stock Exchange in the
section Home Page/Prices and
Markets/JSC Federal and in the print
edition of “Rossiyskaya Gazeta”.
Information Policy in the Field of the Long-term
Development Process
Federal Grid Company manages the
UNEG. To ensure the most efficient
UNEG development, the Company’s
activities must be coordinated with
other controlling bodies of the Russian
electric power industry.
The Company’s Information
Transparency Policy, within the process
of the UNEG long-term development, is
based on maximum information for
current and potential customers about
the existing procedures of long-term
development and about the possibilities
of clients participating in these
procedures.
Interaction efficiency and the fullness of information exchange
with electric-power entities are ensured by virtue of the following
principles:
Transparency in managerial
decision-making in the area of
the Grid’s long-term
development
Transparency of the process
for the Grid’s long-term
development, i.e. clarity and
transparency of the given
process for Russia’s
electric-power entities.
Transparency in the funding of
projected measures for the
Grid’s long-term development
w
w
development. w
Regular submission to the
Grid’s economic entities and to
other interested parties of
prompt and reliable
information on projected
measures related to the UNEG
CORPORATE GOVERNANCE
REPORT
To provide various electric-power entities with access to information on the Grid’s
long-term development, we have undertaken the following measures:
— Regular announcements of events
— Providing information on the
related to the long-term development
of the UNEG on the Company’s
corporate website and the publication
of information on such events in
periodicals;
long-term development of the UNEG
at requests of electric-power entities
of the Russian Federation, and
federal and regional State bodies of
executive power;
— Joint provision with JSC SO UES of
draft documents on long-term
development to relevant State bodies
and other Russian electric-power
entities;
— Formation of a single information
space with electric-power entities of
the Russian Federation involved in
the process of planning the Grid’s
long-term development (a single
database, single type of modes, etc.).
Management and Control Bodies
The Company’s corporate management system has a
well-developed structure with a seamless mechanism of
interactions between management and control bodies.
Organizational Structure
of the Company’s Management Bodies
Audit
Comission
election
General Shareholders
Meeting
election
Independent
external auditor
control/election
reports /recomendation
Board of Directors
appointment and control
control/
electiion
preparation
of materials
election
reports /
recomendations
Internal
Audit
Chairman
election
reports /
recommendations
Management Board
Committees:
— Audit Committee
— HR and Ramuniration
Committee
— Strategy Committee
— Investment
Commiittee
perfomance
monitoring
Branches
reports
Special-purpose
Body of Internal
Control
reports on elimination of revealed shortcomings
142
The Company's highest management body is the General Meeting of Shareholders.
The Board of Directors sets the overall direction of corporate development and
supervises the operations of the Company’s Management Board, which carries out
the Company’s operational management. The Chairman of the Management Board is
the Chief Executive Officer (CEO) of the Company. Under the Board of Directors, there
are committees aiming to improve the effectiveness and quality of the Board of
Directors. The Company employs an efficient control system, both externally by
shareholders (the Independent Auditor and the Audit Commission) and internally
(special-purpose bodies for internal audit and control).
General Meeting of Shareholders
Each common share grants shareholder the same scope of
rights in accordance with current legislation.
A shareholder is entitled to:
— Participate personally or through
his/her representatives in the
General Meeting of Shareholders
with the right to vote on all issues
within his/her competence;
— Make proposals for the agenda of the
General Meeting of Shareholders in
accordance with existing Russian
legislation and the Company’s
Charter;
— Receive information on the
Company’s operations and to
examine documents in accordance
with Article 91 of the Russian Federal
Law "On Joint Stock Companies";
— Receive dividends declared by the
Company;
— Engage in the pre-emptive purchase
of additional shares and equity
securities placed by open
subscription convertible into shares
in a quantity that is proportional to
the number of owned shares of this
category (type);
— Receive a part of the Company’s
property in case of its liquidation;
— Carry out other rights as stipulated
by Russian legislation.
Shareholder(s) owning at least 2 percent
of the voting shares of the Company
shall be entitled to propose issues to the
agenda of the annual General Meeting
of Shareholders and nominate
candidates to the Board of Directors,
the Audit Commission, and a candidate
for the position of the sole executive
body of the Company (CEO). Submission
of proposals to the agenda of the annual
General Meeting of Shareholders must
be received by the Company not later
than 90 days after 31 December of the
previous year.
Shareholder(s) owning at least 10
percent of voting shares, may call for
the mandatory convening of an
Extraordinary General Meeting of
Shareholders.
In 2012, the Company held one General Meeting of Shareholders. The Annual General
Meeting of Shareholders on 29 June approved the 2011 annual report and financial
statement, also approved a new version of the Regulations on the Audit Commission
and the Regulations on the payment of remuneration and compensation to the Board
of Directors, as well as elected the Board of Directors and the Audit Commission,
approved the Company’s Auditor, and approved an interested party transaction. Also,
the shareholders decided not to pay dividends on common shares for 2011, since
based on results of the reporting period the Company incurred a loss.
http://www.fsk-ees.ru/
shareholders_and_
investors/information_
for_shareholders/
shareholders_39_meeting/
CORPORATE GOVERNANCE
REPORT
The Board of Directors
The Board of Directors carries out
General Governance of the Company
except for issues that fall under the
competency of the General Meeting of
Shareholders according to either the
Federal Law “On Joint Stock
Companies” or the Charter of Federal
Grid Company to the competency of the
General Meeting of Shareholders. In its
operations, the Board of Directors is
guided by the Federal Law “On Joint
Stock Companies”, Russian legislation
and internal corporate documents.
The Board of Directors shall be elected
by the General Meeting of Shareholders
via cumulative voting for a period of one
year. The Board shall include 11
members, 6 of whom should be
representatives of the State according to
the Company's Charter. The Company's
Charter stipulates compulsory
membership of representatives of the
Market Council, a non-profit
organization incorporated as a
non-profit partnership unifying electric
power industry entities and large
electric and thermal energy consumers
on a membership basis.
Four independent directors are elected to the Board of Directors
to ensure an unbiased decision-making process and to maintain
balanced interests for different shareholder groups.
Composition of the Board of Directors acting from
29 June 2011 to 29 June 2012 (positions are indicated
as of the election date):
1. Ernesto Ferlenghi - Chairman of the Board of Directors;
2. Andrey Malyshev - Deputy Chairman of the Board of Directors;
3. Boris Ayuev;
4. Oleg Budargin;
5. Alexey Makarov;
6. Kirill Lyovin;
7. Dmitry Ponomarev;
8. Yuri Solovyev – Independent Director;
9. Denis Fedorov;
10. Igor Khvalin – Independent Director;
11. Rashid Sharipov – Independent Director.
144
Composition of the Board of Directors
acting from 29 June 2012
(positions are indicated as of the election date):
Ernesto Ferlenghi
Chairman of the Board of Directors
Born: 1968
Education: in 1994, he graduated the Tor
Vergata University of Rome, the Department
of Mathematics, Physics and Natural
Sciences.
HOLDS THE FOLLOWING POSITIONS:
— Vice President of Eni S.p.A. (Italy);
— Head of the representative office of Eni (Russian
Federation and CIS).
Oleg Budargin
Born: 1960
Education: in 1982, he graduated cum
laude from the Norilsk Industrial
Institute, majoring in Industrial and Civil
Construction.
Chairman of the Management Board
since 2009, and a member of the Board
of Directors of Open Joint Stock
Company Federal Grid Company of
Unified Energy System, since 2010.
HOLDS THE FOLLOWING POSITIONS:
— Member of the Supervisory Board, Open Joint
— Chairman of the Board of Directors, Open
Stock Company All-Russian Regional
Development Bank;
Joint Stock Company Moscow Joint Electric
Grid Company;
— Member of the Board of Directors, Open Joint
— Chairman of the Board of Directors, Open
Stock Company Inter RAO UES;
— Member of the Supervisory Board, non-profit
partnership Association of Solar Energy
Enterprises;
— Chairman of the Board of Directors, Open
Joint Stock Company of Energy and
Electrification of Kuban;
Joint Stock Company Inter-regional
Distribution Grid Company of Siberia;
— Chairman of the Management Board, Open
Joint Stock Company Holding of the
Inter-regional Distribution Grid Companies
Member of the Board of Directors
since 2008, and the Chairman of
the Board of Directors since 2011.
Holds no shares of the Company.
Participation share in the
Company’s share capital:
0.000644%
Share in the Company’s
ordinary stock: 0.000644%
CORPORATE GOVERNANCE
REPORT
Member of the Board of
Directors since 2012.
Holds no shares of the
Company.
Boris Kovalchuk
Born: 1977
Education: in 1999, he graduated St.
Petersburg State University, majoring in
Law, and in 2010, he graduated from the
Federal State Agency of Additional
Professional Education at the Institute of
Advanced Training for Executives and
Fuel and Energy Specialists, and the
non-profit partnership Corporate
Educational and Research Center of UES.
HOLDS THE FOLLOWING POSITIONS:
— Chairman of the Management Board, member
of the Board of Directors, Open Joint Stock
Company Inter RAO UES;
— Chairman of the Board of Directors, Open
Joint Stock Company United Energy Trade
Company;
— Member of the Management Board, Russian
Union of Manufacturers and Entrepreneurs;
— Member of the Management Board, Russian
Union of Manufacturers and Entrepreneurs;
— Member of the Board of Directors, Open Joint
Stock Company Third Generating Company of
the Wholesale Electricity Market;
— Member of the Board of Directors, Open Joint
Stock Company Financial Settlements Center;
— Member of the Board of Directors, Open Joint
Stock Company All-Russian Regional
Development Bank.
— Chairman of the Board of Directors, Open
Joint Stock Company First Generating
Company of the Wholesale Electricity Market;
— “Chairman of the Board of Directors, Closed
Joint Stock Company Kambarata Hydro
Power Plant – 1;
— Member of the Board of Directors, Limited
Liability Company InterRAO WorleyParsons;
— Chairman of the Board of Directors, Open
Joint Stock Company Mosenergosbyt;
— Member of the Board of Directors, Open Joint
Stock Company Petersburg Off-Load
Company;
— Member of the Board of Directors, Open Joint
Stock Company Federal Hydro-generator
Company – RusHydro;
— Member of the Board of Directors, Irkutsk
Open Joint Stock Company of Energy and
Electrification;
146
Member of the Company’s
Board of Directors since 2004
Participation share in the
Company’s share capital:
0.007158%
Share of the Company’s
ordinary stock: 0.007158%
Member of the Board of
Directors since 2012.
Holds no shares of the
Company.
Boris Ayuev
Born: 1957
Education: in 1979, he graduated from the
Ural Polytechnic Institute, with a major in
Electric Power Plants.
HOLDS THE FOLLOWING POSITIONS:
— Chairman of the Management Board, Member of
the Board of Directors, Open Joint Stock Company
Central Dispatch of the System Operator of Unified
Energy System;
— Member of the Board of Directors, Open Joint
Stock Company Administrator of the Trading
System of the Wholesale Electricity Market;
— Member of the Board of Directors, Joint Stock
Company Financial Settlements Center;
— Chairman, non-profit partnership Russian National
Committee of CIGRE (International Council on
Large High Voltage Electric Systems);
— Member of the Board of Directors, Open Joint
Stock Company Federal Hydro-generator
Company – RusHydro.
Vyacheslav Kravchenko
Independent Director
Born: 1967
Education: in 1995, he graduated from
Lomonosov Moscow State University with
a degree in Law.
HOLDS THE FOLLOWING POSITIONS:
— Chairman of the Management Board, member of
the Supervisory Board, non-profit partnership
Council of the Market for the Organization of an
Efficient System of Wholesale and Retail Trade of
Electric Energy and Power;
— Member of the Board of Directors, Joint Stock
Company Financial Settlements Center;
— Chairman of the Board of Directors, Chairman of
the Management Board, Open Joint Stock
Company Administrator of the Wholesale
Electricity Market Trading System;
— Member of the Board of Directors, Open Joint
Stock Company Inter RAO UES;
— Member of the Board of Directors, Open Joint
Stock Company Holding of Inter-regional
Distribution Grid Companies;
— Member of the Board of Directors, Open Joint
Stock Company System Operator of Unified Energy
System.
CORPORATE GOVERNANCE
REPORT
Andrey Malyshev
Member of the Company’s
Board of Directors since
2008. He also serves as
Chairman of the Investment
Committee.
Holds no shares in the
Company.
Deputy Chairman
of the Board of Directors
Born: 1959
Education: in 1982, he graduated from
the Moscow Power Engineering
University with a degree in heat power
automation (as a heat power automation
engineer).
HOLDS THE FOLLOWING POSITIONS:
— President, member of the Board of Directors,
Open Joint Stock Company GROUP E4;
— Member of the Board of Directors, Closed
Joint Stock Company Novomet – Perm;
— Chairman of the Strategy Committee,
— Chairman of the Board of Directors, Limited
Liability Company Nanoelectro
Research-and-Production Enterprise;
— Chairman of the Board of Directors, Limited
Liability Company PET-Technology;
— Member of the Board of Directors, Limited
Liability Company RosnanoMedInvest;
— Member of the Board of Directors, Limited
Liability Company Ecoalliance;
— Member of the Board of Directors, Open Joint
Stock Company Ruspolymet.
member of the Board of Directors, Open Joint
Stock Company Federal Hydro-generator
Company – RusHydro;
— Chairman of the Board of Directors, Closed
Joint Stock Company Prepreg – Modern
Composite Materials;
— Chairman of the Board of Directors, Limited
Liability Company SITRONICS-Nano;
— Deputy Chairman of the Board of Directors,
Closed Joint Stock Company TREKPOR
TEKHNOLODGI;
— Chairman of the Board of Directors, Limited
Liability Company Lithium-ion Technologies;
— Chairman of the Board of Directors, Closed
Joint Stock Company Plakart;
— Chairman of the Board of Directors, Limited
Liability Company NT-Pharma;
— Member of the Board of Directors, Closed
Joint Stock Company Fiber-Optic Systems;
— Chairman of the Board of Directors, Limited
Liability Company SinBio;
— Member of the Board of Directors, Closed
Joint Stock Company Composite Holding
Company;
148
Vladimir Rashevsky
Independent Director
Born: 1973
Education: in 1995, he graduated from
the Finance Academy under the
Government of the Russian Federation,
and in 1999, he completed a
post-graduate course at the Finance
Academy under the Government of the
Russian Federation, with a Ph.D. in
Economics (focused on world
economics).
HOLDS THE FOLLOWING POSITIONS:
— General Director, Chairman of the Management
Board, member of the Board of Directors, member
of the Strategy Committee, Open Joint Stock
Company “Siberian Coal Energy Company”;
— Chairman of the Management Board, non-profit
organization “Fund of Socio-Economic Support of
the Regions SUEK-REGIONAM;
— Member of the Management Board, the
All-Russian Association of Employers the Russian
Union of Manufacturers and Entrepreneurs;
— Member of the Board of Directors, Limited Liability
Company Siberian Generating Company.
Member of the Company’s
Board of Directors since 2012.
Holds no shares in the
Company
Elena Titova
Independent Director
Born: 1967
Education: in 1989, she graduated from
the Lomonosov Moscow State University,
with a degree in Economics, as an
economist and a professor of political
economy.
HOLDS THE FOLLOWING POSITIONS:
— Member of the Board of Directors, CEO, Chairman
of the Management Board, Morgan Stanley Bank
LLC;
— President, Open Joint Stock Company All-Russian
Regional Development Bank;
— Member of the Board of Directors, Open Joint
Stock Company Holding of Inter-regional
Distribution Grid Companies.
Member of the Company’s
Board of Directors since 2012.
Holds no shares in the
Company.
CORPORATE GOVERNANCE
REPORT
Member of the Company’s
Board of Directors since
2011. He also serves as the
Chairman of the HR and
Remuneration Committee,
and as a member of the
Audit Committee.
Holds no shares in the
Company.
Denis Fedorov
Born: 1978
Education: in 2001, he graduated from
the Bauman Moscow State University,
with a degree in Economics
Management; in 2003, he completed a
post-graduate course at the Moscow
Power Engineering Institute, majoring in
Economics and the Industrial Energy
Sector. He holds a Ph.D. in Economics.
HOLDS THE FOLLOWING POSITIONS:
— Head of the Department, Open Joint Stock
Company Gazprom;
— Member of the Board of Directors, Limited
Liability Company Heat Supply Company;
— General Director, Limited Liability Company
— Chairman of the Board of Directors, Open
Joint Stock Company Tyumen Energy Retail
Supplier;
— Member of the Management Board, Fund for
the Development of Education, Science and
Engineering Nadezhda;
— Member of the Board of Directors, Open Joint
Stock Company Holding of Inter-regional
Distribution Grid Companies.
Gazpromenergoholding;
— General Director, member of the Board of
Directors, Open Joint Stock Company
Tsentrenergokholding;
— Member of the Management Board, Closed
Joint Stock Company Fortis Energy;
— Chairman of the Board of Directors, Open
Joint Stock Company Second Generating
Company of the Wholesale Electricity Market;
— Member of the Board of Directors, Open Joint
Stock Company Territorial Generating
Company #1;
— Member of the Management Board, Open
Joint Stock Company Kaunas Heat-Electric
Generating Plant;
— Member of the Board of Directors, Open Joint
Stock Company Mosenergo;
— Member of the Management Board, Closed
Joint Stock Company Kaunoelectrine;
— Member of the Board of Directors, Open Joint
Stock Company Inter RAO UES;
150
Rashid Sharipov
Independent Director
Born: 1968
Education: in 1991, he graduated from
the Moscow State University of Foreign
Affairs, with a degree in international
affairs and international law. In 1993, he
graduated from the California Western
School of Law, with an LL.M degree.
HOLDS THE FOLLOWING POSITIONS:
— Deputy General Director, Limited Liability Company
KFK – Consult;
— Member of the Board of Directors, Open Joint
Stock Company System Operator of Unified Energy
System;
— Member of the Supervisory Board, Open Joint
Stock Company All-Russian Regional Development
Bank;
— Member of the Board of Directors, Open Joint
Stock Company Federal Hydro-generator Company
– RusHydro;
— Member of the Fund Board of the
non-governmental pension fund Neftegarant.
Member of the Company’s
Board of Directors since
2008. He also serves as the
Chairman of the Audit
Committee, and as a member
of the HR and Remuneration
Committee.
Holds no shares in the
Company.
CORPORATE GOVERNANCE
REPORT
Member of the Company’s
Board of Directors since 2012.
Holds no shares in the
Company.
Holds the position of Deputy
Chairman of the Manage-
ment Board, Open Joint
Stock Company Federal Grid
Company.
Holds no shares in the
company.
152
Ilya Scherbovich
Independent Director
Born: 1974
Education: in 1995, he graduated from
the Plekhanov Russian Economic
Academy, with a degree in Economics
and production management.
HOLDS THE FOLLOWING POSITIONS:
— President, Limited Liability Company United
Capital Partners Advisory;
— President, United Capital Partners (UCP) Group of
Companies;
— Member of the Board of Directors, Limited Liability
Company Uralmash Oil and Gas Equipment
Holding;
— Member of the Board of Directors, Open Joint
Stock Company Rosneft Oil Company;
— Member of the Board of Directors, Open Joint
Stock Company Joint stock oil transportation
company Transneft;
— Member of the Board of Directors, United Capital
Partners Advisory LLC.
Vladimir Furgalsky
Secretary of the Board of
Directors
Born: 1977
Education: in 2000, he graduated from
the St. Petersburg University of
Economics and Finance, from 1999 till
2001, he studied at the University of
Arkansas (USA) (degree: Master of
Business Administration (MBA)).
Board of Directors
Activities
In 2012, the Board of Directors held 34 meetings, 6 of which were
held in the form of joint attendance, and made resolutions on
148 issues. The Board of Directors considered and approved
long-term corporate development programs, including:
— The non-core Asset Management
— Anti-corruption Policy;
Program;
— The Innovative Development
Program;
— Regulations on the Unified Technical
Policy in the Electric Grid Complex of
the Russian Federation;
— The Insurance Protection Program;
— New Corporate Governance Code;
— The 2012 Cost Management Program
and Forecast Activities for 2013-2014;
— Regulations on the Internal Control
System;
— Regulations on the Energy Policy;
— Regulations on the Procedures for
Procuring Goods, Work and Services
for the Needs of JSC Federal Grid
Company.
The Board of Directors made the following decisions: on the establishment of a
branch of Federal Grid Company (Center of Technical Supervision) and on the
adjustment of the 2012 Investment Program of Federal Grid Company.
Structure of Issues Addressed at 2012 Board of Directors Meetings
Priority areas
of the Company’s
operations
Human Resources
Management Board
Reports
13/148
11/148
5/148
10/148
The appointment
of corporate representatives
to SDCs’ management
bodies
31/148
Interested party
transactions
78/148
Day-to-day
operations of the
Company
CORPORATE GOVERNANCE
REPORT
Committees of the
Board of Directors
The Committees’ activities aim to boost the performance of the
Board of Directors by preliminarily examining the most important
issues falling under the competence of the Board of Directors
and developing recommendations on such issues.
Four Committees of the Board of Directors
operated in 2012:
— The Strategy Committee;
— The Investment Committee;
— The Audit Committee;
— The HR and Remuneration
Committee.
The activities of all Committees shall be governed by relevant Provisions on the
Committees that define the composition, competence and operational procedures,
as well as the rights and obligations of members of the Committees.
154
The Strategy Committee
The functions of the Committee include addressing and making
recommendations to the Board of Directors on issues related to
the development of Russia’s Unified Energy System.
Composition of the Committee:
1. Vyacheslav Kravchenko
— Independent Director
6.
Igor Kozhukhovsky
— General Director of CJSC APBE.
— Chairman of the Committee,
7. Evgeny Miroshnichnko
member of the Board of Directors
of JSC Federal Grid Company;
— Chairman of the Management
Board, member of the Supervisory
Board of the Non-Profit
Partnership Market Council.
2. Andrey Malyshev
— Director of Strategic Development
of the Strategy and Investment
Alliance of JSC Inter RAO UES.
8. Andrey Naryshkin
— Deputy Chief of Staff of the
Chairman of the Board of Directors of
JSC Federal Grid Company.
— Deputy Chairman of the Board of
Directors of JSC Federal Grid
Company;
9. Alexey Sukhov
— Deputy Chairman of the
Management Board of JSC ATS.
— President, member of the Board of
10. Alexander Rogov
Directors of JSC GROUP E4.
3. Roman Berdnikov
— First Deputy Chairman of the
Management Board of JSC Federal
Grid Company.
4. Sergey Vasilyev
— Director of the Department of
Electric Power Industry Development
for the Russian Ministry of Energy.
5. Anatoly Dyakov
— President of the Unified Energy
Complex of the Russian Corporation
and the Non-Profit Partnership
Scientific and Technical Council of UES.
— Head of the Energy Sector
Development Department at the
Energy Sector and Energy Marketing
Development Division of JSC Gazprom.
11. Vladimir Fortov
— Member of the Presidium of the
Russian Academy of Sciences (RAS).
12. Igor Khvalin
— Deputy Strategy Executive Director
of JSC Holding of the Inter-regional
Distribution Grid Companies.
13. Nikolay Shulginov
— First Deputy Chairman of the
Management Board of JSC SO UES.
The Committee’s 2012 Activities
The Strategy Committee held two meetings in the form of joint attendance. The
meetings prepared the Committee’s work plan, reviewed the issue on subsidiaries
and dependent companies, and also gave recommendations to the Board of Directors
on activities aimed at increasing the value of JSC Federal Grid Company shares
considering a realization of decisions of the Russian Government on the privatization
of shares starting from 2012.
CORPORATE GOVERNANCE
REPORT
The 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 of the Committee:
1. Andrey Malyshev
— Chairman of the Committee;
— Deputy Chairman of the Board of
Directors of JSC Federal Grid
Company;
— President, member of the Board
of Directors of JSC GROUP E4.
2. Alexander Ilyenko
— Director for UES Asset
Management of SO UES.
3. Roman Berdnikov
— First Deputy Chairman of the
Management Board of JSC Federal
Grid Company.
4. Andrey Mourov
— First Deputy Chairman of the
Management Board of JSC Federal
Grid Company.
5. Valery Goncharov
— Deputy Chairman of the
Management Board of JSC Federal
Grid Company.
6. Sergey Vasilyev
— Director of the Department of
Electric Power Industry
Development for the Russian
Ministry of Energy.
7. Vyacheslav Kravchenko
— Independent Director
— Member of the Board of Directors
of JSC Federal Grid Company;
— Chairman of the Management
Board, member of the Supervisory
Board of the Non-Profit Partnership
Market Council.
8.
Ilnar Mirsiyapov
— Member of the Management
Board, Head of Strategy and
Investment Alliance of JSC Inter RAO
UES.
9. Andrey Naryshkin
— Deputy Chief of Staff of the
Chairman of the Board of Directors
of JSC Federal Grid Company.
10. Alexander Rogov
— Head of the Energy Sector
Development Department at the
Energy Sector and Energy Marketing
Development Division of JSC
Gazprom.
11. Sergey Serebrennikov
— Rector of the State Education
Institution of Higher Professional
Education MPEI (TU).
12. Vladimir Fortov
— Member of the Presidium of the
Russian Academy of Sciences (RAS).
The Committee’s 2012 Activities
The Investment Committee held 8 meetings, including one in the form of joint
attendance. The meetings made recommendations to the Board of Directors, related
to the approval of the 2012-2014 investment program, its adjustments and approval of
the long-term 2013-2017 investment program.
156
The Audit Committee
The Committee is responsible for preparing recommendations to
the Board of Directors on selecting an independent audit
organization and on upgrading the Company’s reporting system
and internal control.
Composition of the Committee:
1. Rashid Sharipov
— Independent Director
— Chairman of the Committee;
— Member of the Board of Directors of
JSC Federal Grid Company;
— Deputy General Director of LLC KFK
– Consult.
2. Vladimir Rashevsky
— Independent Director
— Member of the Board of Directors of
JSC Federal Grid Company;
— General Director, Chairman of the
Management Board of JSC Siberian
Coal Energy Company.
5.
3. Elena Titova
— Independent Director
— Member of the Board of Directors of
JSC Federal Grid Company;
— President, Chairman of the
Management Board of JSC All-Russian
Regional Development Bank.
4. Denis Fedorov
— Member of the Board of Directors of
JSC Federal Grid Company;
— Head of a Division of JSC Gazprom;
— General Director of LLC
Gazpromenergoholding;
— General Director of JSC
Tsentrenergoholding.
Ilya Scherbovich
— Independent Director;
— Member of the Board of Directors of
JSC Federal Grid Company;
— President of LLC United Capital
Partners Advisory;
— President of the United Capital
Partners (UCP) Group of Companies.
The Committee’s 2012 Activities
The Audit Committee held nine meetings, including three in the form of joint
attendance. The meetings approved and issued recommendations to the Board of
Directors on approving the Regulations on Securing Insurance Protection and the
Company’s 2013 Insurance Protection Program. The Committee also reviewed the
report on the Company’s securities transactions by insiders, of the Company and the
process for calculating profit tax taken into account while developing the Company’s
2012 Business Plan and forecast indices for 2013-2014.
CORPORATE GOVERNANCE
REPORT
The HR and Remuneration
Committee
The HR and Remuneration Committee is in charge of preparing
recommendations to the Board of Directors related to
remuneration and incentive schemes for the Company’s and the
Audit Commission’s top executives, and for outlining candidate
selection criteria for the Company’s management bodies.
Ilya Scherbovich
— Independent Director;
— Member of the Board of Directors
of JSC Federal Grid Company;
— President of LLC United Capital
Partners Advisory;
— President of the United Capital
Partners (UCP) Group of Companies.
Composition of the Committee:
1. Denis Fedorov
3.
— Chairman of the Committee;
— Member of the Board of Directors
of JSC Federal Grid Company;
— Head of a Division of JSC Gazprom;
— General Director of LLC
Gazpromenergoholding;
— General Director of JSC
Tsentrenergoholding.
2. Elena Titova
— Independent Director;
— Member of the Board of Directors
of JSC Federal Grid Company;
— President, Chairman of the
Management Board of JSC All-Russian
Regional Development Bank.
The Committee’s 2012 Activities
The HR and Remuneration Committee held six meetings in the form of joint
attendance and made recommendations to the Board of Directors on approving the
methodology for calculating and assessing the achievement of key performance
indicators (KPIs) by top managers of JSC Federal Grid Company, as well as on the
approval of the report on the accomplishments of the Company’s KPIs for H1 2012.
158
Board of Directors’ Members Attendance at 2012 Meetings of the
Board of Directors and Its Committees
Name of BoD member
The Board of
Directors
Audit
Committee
Strategy
Committee
HR and
Remuneration
Committee
Investment
Committee
Boris Ayuev
Oleg Budargin
Boris Kovalchuk
Vyacheslav Kravchenko
97%
97%
89%
78%
Kirill Lyovin
Alexey Makarov
Andrey Malyshev
Dmitry Ponomarev
Vladimir Rashevsky
Yuri Solovyev
Elena Titova
Denis Fedorov
Ernesto Ferlenghi
Igor Khvalin
Rashid Sharipov
100%
100%
100%
100%
0%
0%
100%
100%
100%
100%
100%
100%
86%
100%
100%
100%
100%
100%
86%
100%
33%
100%
81%
97%
6%
89%
94%
89%
91%
100%
88%
70%
Ilya Scherbovich
100%
100%
CORPORATE GOVERNANCE
REPORT
The Management Board
Day-to-day operations of the Company are managed by the
Chairman of the Management Board and by the Management
Board, which are accountable to the General Shareholders
Meeting and to the Board of Directors. In its own operations, the
Management Board is governed by the Federal Law “On Joint
Stock Companies”, Russian legislation and other internal
corporate documents.
The Chairman of the Management Board is the Chief Executive
Officer (CEO).
Information on the Management Board’s
Compositions in 2012
The Management Board composition below is effective from
1 January 2012 till 11 September 2012:
1. Oleg Budargin – Chairman of the Management Board;
2. Roman Berdnikov;
3. Andrey Cherezov;
4. Valery Chistyakov;
5. Dmitry Gourevich;
6. Andrey Kazachenkov;
7. Yuri Mangarov;
8. Samuil Zilberman;
9. Evgeny Zhuykov.
Changes in the Management Board as of 11 September
2012 (Board of Directors’ Meeting Minutes #172):
— A Resolution of the Board of Directors
terminated the authorities of: Evgeny
Zhuykov, Samuil Zilberman and
Dmitry Gourevich;
— A Resolution of the Board of Directors
appointed: Andrey Mourov (First
Deputy Chairman of the Management
Board), Sergey Sergeyev (Deputy
Chairman of the Management Board),
Vladimir Shukshin (Deputy Chairman
of the Management Board) and
Nikolay Varlamov (Deputy Chairman
of the Management Board) as
members of the Management Board.
160
The below Management Board Composition is effective from
11 September 2012 till 20 October 2012:
1. Oleg Budargin – Chairman of the Management Board;
2. Roman Berdnikov;
3. Andrey Cherezov;
4. Valery Chistyakov;
5. Andrey Kazachenkov;
6. Andrey Mourov;
7. Yuri Mangarov;
8. Sergey Sergeyev;
9. Vladimir Shukshin;
10. Nikolay Varlamov.
Changes in the Management Board as of 20 October 2012:
— In accordance with the Russian
Federal law “On Joint Stock
Companies” and the Charter of JSC
Federal Grid Company, due to
expiration of the employment
contract, the authority of Valery
Chistyakov was terminated as of 20
October 2012.
CORPORATE GOVERNANCE
REPORT
Participation share in the
Company’s share capital:
0.000644%
Share in the Company’s
ordinary stock: 0.000644%
Participation interest in the
Company’s share capital:
0.0000001957%
Share in the Company’s
ordinary stock:
0.0000001957%
162
Management Board Composition,
effective from 20 October 2012 onwards
Oleg Budargin
Chairman of the Management Board, member of the Board of Directors
Born: 1960
Education: in 1982, he graduated cum laude from
the Norilsk Industrial Institute, with a major in
Industrial and Civil Construction.
Biographical Background: From 1984 till 1995, he
worked at Norilskstroi PSMO (Production
Construction and Assembly Association),
Promstroi Trust, the General Construction
Division of the Norilsk Mining and Metallurgical
Complex (NGMK), and he also served as the
Deputy General Director of JSC NGMK. From
2000 to 2002, he served as the Mayor of Norilsk.
From 2003 till 2006, he served as the Governor of
the Taymyr (Dolgano-Nenets) Autonomous
District. From 2007 till 2009, he was appointed
Assistant Plenipotentiary Representative of the
Russian President in the Siberian Federal
District. In July 2009, by a resolution of the Board
of Directors of JSC Federal Grid Company, he
was appointed Acting Chairman of the
Management Board, and as of October 2009, he
was elected Chairman of the Management Board
by an Extraordinary General Meeting of
Shareholders.
HOLDS THE FOLLOWING POSITIONS IN
OTHER ORGANIZATIONS:
— Member of the Supervisory Board, Open Joint
Stock Company All-Russian Regional
Development Bank;
— Member of the Board of Directors, Open Joint
Stock Company Inter RAO UES;
— Member of the Supervisory Board, non-profit
partnership Association of the Solar Energy
Enterprises;
— Chairman of the Board of Directors, Open Joint
Stock Company of Energy and Electrification of
Kuban;
— Chairman of the Board of Directors, Open Joint
Stock Company Moscow Joint Electric Grid
Company;
— Chairman of the Board of Directors, Open Joint
Stock Company Inter-regional Distribution Grid
Company of Siberia;
— Chairman of the Management Board, Open Joint
Stock Company Holding of the Inter-regional
Distribution Grid Companies.
Roman Berdnikov
First Deputy Chairman of the Management Board
Born: 1973
Education: in 1998, he graduated from the
Moscow Power Engineering Institute, with a
major in electric power plants.
Biographical Background: He started his
working career at JSC Mosenergo, then worked
at JSC SO CDU UES of Russia. From 1999 to
2002, he worked at RAO UES of Russia. He
joined Federal Grid Company in 2002. In 2009, he
was elected as a Member of the Management
Board, and since 2010, he has served as the
Deputy Chairman of the Management Board. In
October 2012, he was appointed First Deputy
Chairman of the Management Board.
HOLDS THE FOLLOWING POSITIONS IN
OTHER ORGANIZATIONS:
— Chairman of the Supervisory Board, Joint Stock
Company United Energy System
GruzRosenergo;
— Member of the Supervisory Board, Non-Profit
Partnership The Market Council for the Efficient
System of Wholesale and Retail Trade;
— Member of the Board of Directors, Closed Joint
Stock Company EnergoRynok (Energo Market);
— Member of the Board of Directors, Open Joint
Stock Company Tyumenenergo;
— Member of the Board of Directors, Open Joint
Stock Company Inter-regional Distribution Grid
Company of the North Caucasus;
— Member of the Board of Directors, Open Joint
Stock Company Inter-regional Distribution Grid
Company of the Urals;
— Member of the Management Board, Open Joint
Stock Company Holding of the Inter-regional
Distribution Grid Companies.
Andrey Kazachenkov
First Deputy Chairman of the Management Board
Born: 1980
Education: He graduated cum laude from the St.
Petersburg State Engineering and Economic
University, majoring in engineering plant
economics and management. He also received an
MBA from the University of Wisconsin (Madison,
USA), and completed courses for numerous
specialized programs in Economics and Finance
at the business schools at IMD (Switzerland) and
INSEAD (France).
Biographical Background: He started his career
in 2004 at JSC Lenergo, in 2005, he worked at
JSC OGK -1. He has been at Federal Grid
Company since 2009, holding the position of
Deputy Chairman of the Management Board, he
was elected as a member of the Management
Board in 2010, and as of May 2012, he was
appointed First Deputy Chairman of the
Management Board.
HOLDS THE FOLLOWING POSITIONS IN
OTHER ORGANIZATIONS:
— Member of the Fund Board, Non-government
Pension Fund for Power Engineering (non-profit
organization);
— Member of the Board of Directors, Open Joint
Stock Company Realty EC UES;
— Member of the Board of Directors, Open Joint
Stock Company Inter-regional Distribution Grid
Company of the Center;
— Member of the Board of Directors, Open Joint
Stock Company of Energy and Electrification
Lenenergo.
Andrey Mourov
First Deputy Chairman of the Management Board
Born: 1970
Education: In 1993, he graduated from the
Legal Department of St. Petersburg State
University, majoring in Jurisprudence. In 1998,
he participated in a specialized re-training
course in Financial Management at the
Inter-disciplinary Institute of Professional
Development and Refresher Courses for
Executives; and, in 2009, he graduated from
the State University of Civil Aviation, majoring
in Freight Regulation and Air Transport
Management, holding a Ph.D. in Economics.
Biographical Background: He worked at the St.
Petersburg City Bar Association, then at JSC
ICN October. From 2000 to 2004, he worked in
the telecommunications and construction
industries. From 2004 to 2012, he held
executive positions at the Federal State Unitary
Enterprise Pulkovo Airport and at JSC Pulkovo
Airport. In 2012, he moved from JSC Holding of
the Inter-regional Distribution Grid Companies
to Federal Grid Company. In June 2012, he was
appointed First Deputy Chairman of the
Management Board, and in September 2012,
he was elected as a member of the Company’s
Management Board. He also currently holds
the post of Executive Director of JSC Holding of
the Inter-regional Distribution Grid
Companies.
HOLDS THE FOLLOWING POSITIONS IN
OTHER ORGANIZATIONS:
— Executive Director, Open Joint Stock Company
Holding of the Inter-regional Distribution Grid
Companies;
— Chairman of the Board of Directors, Open Joint
Stock Company Inter-regional Distribution Grid
Company of Volga;
— Chairman of the Board of Directors, Open Joint
Stock Company Inter-regional Distribution Grid
Company of the Center;
— Member of the Board of Directors, Open Joint
Stock Company of Energy and Electrification of
Kuban;
— Chairman of the Board of Directors, Open Joint
Stock Company of Energy and Electrification
Lenenergo;
— Member of the Board of Directors, Open Joint
Stock Company Moscow Unified Electric Grid
Company;
— Chairman of the Board of Directors, Open Joint
Stock Company Inter-regional Distribution Grid
Company of the North-West;
— Member of the Management Board, Open Joint
Stock Company Holding of the Inter-regional
Distribution Grid Companies.
Participation interest in the
Company’s share capital:
0.0000005524%
Share in the Company’s
ordinary stock:
0.0000005524%
Holds no shares in the
Company.
CORPORATE GOVERNANCE
REPORT
Holds no shares in the
Company.
Holds no shares in the
Company.
164
Nikolay Varlamov
Deputy Chairman of the Management Board
Does not hold positions in other
organizations.
Born: 1974
Education: In 1996, he graduated from the Asia
and Africa Institute of the Lomonosov Moscow
State University, and in 2000, he graduated from
the Finance Academy under the Government of
the Russian Federation with a master’s degree in
Economics.
Biographical Background: He started his career
at the Central Bank of the Russian Federation;
and, in 2002, he moved to the Financial
Monitoring Committee of the Russian Federation
(subsequently – The Federal Financial Monitoring
Service). From 2007 to 2008, he worked as an
assistant to the Prime Minister of the
Government of the Russian Federation. In 2008,
he was appointed Secretary of State as Deputy
Head of the Federal Financial Monitoring Service.
Since 2011, he has worked in Federal Grid
Company, as the Deputy Chairman of the
Management Board. In September 2012, he was
elected as a member of the Company’s
Management Board.
Yuri Mangarov
Deputy Chairman of the Management Board – Chief of Staff
Born: 1956
Education: In 1978, he graduated from the
Plekhanov Moscow Institute of the National
Economy, majoring in Economic Cybernetics.
Biographical Background: He worked in the
mining and metallurgical industry for 26 years.
In 2009, he joined Federal Grid Company, as the
Deputy Head of Financial Control and Internal
Audit. In October 2009, he was appointed
Director for Internal Control and Auditing
Activities, and in March 2010, he became the
Deputy Chairman of the Company’s Management
Board. In September 2010, he was elected as a
member of the Company’s Management Board.
From June 2012, he has served as the Deputy
Chairman of the Management Board – the Chief
of Staff.
HOLDS THE FOLLOWING POSITIONS IN
OTHER ORGANIZATIONS:
— Member of the Board of Directors, Open Joint
Stock Company Tyumenenergo;
— Member of the Board of Directors, Open Joint
Stock Company of Energy and Electrification
Yantarenergo;
— Deputy Executive Director – Chief of Staff, Open
Joint Stock Company Holding of the
Inter-regional Distribution Grid Companies.
Valery Sedunov
General Director, JSC Federal Grid Company subsidiary –
MES Center (Transmission Grid of The Center),
member of the Management Board
Born: 1950
Education: In 1972, he graduated from the
Ivanovo Energy Institute, with a degree in the
Automation of Electric Energy Production and
Distribution.
Biographical Background: He has worked in the
electric energy industry since 1972, first at the
Volga substation of the Division for the Operation
of Distant Electric Energy Transmission, then, he
continued at MES Center, where he went from
engineer to General Director. In December 2012,
he was elected as a member of the Management
Board.
HOLDS THE FOLLOWING POSITIONS IN
OTHER ORGANIZATIONS:
— Member of the Board of Directors, Open Joint
Stock Company IDGC of the Center;
— Member of the Board of Directors, Open Joint
Stock Company IDCG of the Center and Volga
Regions;
— Member of the Board of Directors, Open Joint
Stock Company MOESK.
Sergey Sergeyev
Deputy Chairman of the Management Board
HOLDS THE FOLLOWING POSITIONS IN
OTHER ORGANIZATIONS
— General Director, member of the Boards of
Directors, Open Joint Stock Company
Engineering and Construction Management
Center of the Unified Energy System;
— Member of the Board of Directors, Open Joint
Stock Company Energostroysnabcomplect UES.
Born: 1976
Education: In 1998, he graduated cum laude
from the Novocherkassk State Technical
University, majoring in Industrial and Civil
Construction.
Biographical Background: He started his career
in 1998 at LLC Soyuzstroy in Rostov-on-Don.
Since 2000, he has worked in enterprises within
OJSC Transneft Inc. Since 2009, he has worked
at Federal Grid Company. In 2010, he was
appointed Deputy Chairman of the Management
Board. Since April 2012, he has worked as the
General Director of JSC “Engineering and
Construction Management Center of the Unified
Energy System”. In September 2012, he was
elected as a member of the Company’s
Management Board.
Participation interest in the
Company’s share capital:
0.0000274868%
Share in the Company’s
ordinary stock:
0.0000274868%
Holds no shares in the
Company.
CORPORATE GOVERNANCE
REPORT
Andrey Cherezov
Chairman of the Management Board, Chief Engineer
Born: 1967
HOLDS THE FOLLOWING POSITIONS:
Education: In 1993, he graduated from Altay State
Technical University, majoring in Power Supply.
He completed the executive training program for
Russian national economy enterprises for
professional administration in economics and
corporate management.
Biographical Background: He has worked in the
electric energy industry for more than 18 years.
He has held executive positions at Federal Grid
Company’s subsidiaries, and has also worked as
the Company’s Deputy Chief Engineer. In 2011, he
was appointed Deputy Chairman of the
Management Board and Chief Engineer and was
elected as a member of the Management Board.
Holds no shares in the
Company.
— Member of the Board, Non-profit Partnership to
Aid the Development of the Quality and Safety of
Construction Work, Self-Regulatory
Organization Inzhspetsstroy – Electrosetstroy.
Vladimir Shukshin
Deputy Chairman of the Management Board
HOLDS THE FOLLOWING POSITIONS IN
OTHER ORGANIZATIONS:
— Chairman of the Boards of Directors, Open Joint
Stock Company Inter-regional Distribution Grid
Company of the North Caucasus;
— Deputy Executive Director for Security, Open
Joint Stock Company Holding of the
Inter-regional Distribution Grid Companies.
Born: 1959
Education: In 1991, he graduated from the State
Central Institute of Physical Training, and in
1999, he graduated from the Russian Academy
of the Federal Security Service. In 2003, he
graduated from the Russian Academy of
Government Services under the President of the
Russian Federation, with a Ph.D. in Politics.
Biographical Background: He served in the
Soviet Armed Forces, working within security
and law enforcement agencies. He has also
worked in the Moscow Mayor’s Office. In 2012,
he worked as the Deputy General Director for
Security at OJSC Holding of the Inter-regional
Distribution Grid Companies. Since June 2012,
he has worked as the Deputy Chairman of the
Management Board at Federal Grid Company, in
September 2012, he was elected as a member of
the Company’s Management Board. This is in
addition to the job of Deputy Executive Director
for Security at OJSC Holding of the
Inter-regional Distribution Grid Companies.
Holds no shares in the
Company.
166
Information on transactions with the
Company’s shares as carried out by members
of management bodies in 2012
Name of the member of the
Company’s Management Bodies
Transaction
Date
Number of Shares
Covered by a
Transaction
Change in Shares
After a
Transaction
Oleg Budargin
Chairman of the Management
Board, Member of the Board of
Directors
Andrey Kazachenkov
Member of the Management
Board, First Deputy Chairman
of the Management Board
25.05.2012
5,210,000
0.0000008278%
28.05.2012
4,100,000
0.0010008132%
Management Bodies’ Remuneration
The Company does not offer remuneration to persons in respect to
whom Russian legislation restricts or prohibits the receipt of any
payments from commercial organizations.
The Board of Directors
The payment of remuneration to members of the Board of Directors is based on
Regulations on Remuneration and Compensation Payments to members of the Board
of Directors of JSC Federal Grid Company, as approved by the Annual General Meeting
of Shareholders on 29 June 2012 (Meeting Minutes #12 as of 7 July 2012).
The total remuneration for each
member of the Board of Directors, given
all premiums, cannot exceed RUR900
thousand.
Since the Company incurred a loss for
the 2012 fiscal year, in accordance with
the Regulation, a decision was made not
to pay remuneration to the Board of
Directors.
The amount of remuneration to each
member of the Board of Directors for
his/her contribution to the operations of
the Board of Directors is calculated
given the total number of Board of
Directors meetings held during the
previous corporate year, the number of
Board of Directors meetings attended
by the member and corporate revenues
for the respective fiscal year.
Remuneration for the Chairman of the
Board of Directors is increased 30%.
Compensation for expenses to
members of the Board of Directors is
not provided. Allowances are also set for
members of the Board for their work in
Committees: the Chairman of the
Committee receives a 20% bonus, and a
Committee member receives 10%.
CORPORATE GOVERNANCE
REPORT
Committees of the Board of Directors
The payment of remuneration to members of the Committees of the Board of
Directors is based on a separate Regulation on remuneration to members of the
Committees of the Board of Directors of JSC Federal Grid Company, as approved by a
decision of the Board of Directors on 16 December 2010 (Meeting Minutes #120).
The Regulation does not apply to
members of the Committee(s) who are
members of the Board of Directors, or
members of the executive body and/or
the sole executive body of the Company
(CEO).
On a quarterly basis, Committee
members shall be paid remuneration
for each time that they participate in a
meeting. The amount of remuneration
is equal to three minimum monthly
wage rates for a first category worker.
Remuneration to the Chairman of the
Committee increases 50%.
The Management Board
According to Regulations on Employment Agreements and Compensation and
Remuneration to Top Executives of JSC Federal Grid Company, approved by the Board
of Directors on 17 June 2010 (Minutes #105), the monthly payroll for the Company’s
top executives is set by their employment agreements. This remuneration is based on
a fixed rate (salary) and a variable rate (bonus). The bonus depends on the top
executives meeting key performance indicators (KPIs). The target KPIs and the
methods for calculating and assessing their performance are subject to annual
approval by the Company’s Board of Directors. In 2012, the following KPIs were
applied to these individuals:
Semi-annual KPIs:
Annual KPIs:
— Relative number of restrictions on
electricity transmission services (in %);
— No fatal accidents or group
accidents, if there is a casualty that
results in a serious injury to an
individual;
— Financial stability indicator, i.e. the
financial leverage ratio;
— Meeting schedules for funding and
developing the investment program
with progressive totals up from the
beginning of the year (in %).
— Cost reduction for the acquisition of
goods (work, services) per unit of
output of not less than 10% per year
within three years in real terms;
— EBITDA, RUR million;
— Efficient implementation of the Cost
Management Program (CMP),%;
— No major emergencies;
— Electric energy losses in the grid
used by Federal Grid Company to
provide electricity transmission
services (in %);
— Meeting schedules bringing on line
power facilities and implementing
plans for financing and development
(in %).
The approved target semi-annual and annual KPIs for the Company’s top executives in
2012 have been achieved in full.
168
Details on 2012 remuneration, benefits and expenses
that members of the Management Board, including the
Chief Executive Officer (CEO), received as compensation
(RUR thousand):
Remuneration for contributions to the Management Board’s operations
Salary
Bonuses
Commissions
Benefits
Other types of remuneration
TOTAL
0
145,299
173,461
0
0
22,444
341,204
Details on 2012 remuneration, benefits and expenses paid
to the Chief Executive Officer (CEO) (RUR thousand):
Remuneration for contributions to the Management Board’s operations
Salary
Bonuses
Commissions
Benefits
Other types of remuneration
TOTAL
0
17,022
26,502
0
0
61
43,585
CORPORATE GOVERNANCE
REPORT
The Internal Control System
The Company’s internal control system is focused on detecting and
mitigating the risk of events that may adversely affect the Company’s
ability to achieve set objectives and which will lead to losses; at
safeguarding assets and efficiently utilizing resources; and at
ensuring compliance with Russian legislation, the decisions of the
management bodies and internal corporate documents.
The Internal
Control System Chart
The Audit Committee
The Board
of Directors
Chairman of the
Management Board
The Audit
Commission
Internal Control Office
Department of Control
and Audit
Department of Technical
Supervision and Audit
Department of Investment
Planning and Reporting
Department of Reliability
and Analysis
Control Procedures
Owners sub-divisions
Business Process Owners
Risk Owners
Control Procedure Owners
Control Procedure Executives
170
Upper levels of the Internal
Control System (ICS) –
Level of Strategic
Management
(Principles of ICS
performance)
and monitoring of the ICS
Special-purpose bodies
of the ICS –
level of implementation,
maintenance
and monitoring of the
efficiency
of ICS performance
Control Procedure
Owners –
level of introduction,
implementation
of risk management
activities / control
procedures and
monitoring its efficiency
The Audit Commission
The Audit Commission is elected annually by the General Meeting of
Shareholders to control the Company’s financial and business operations.
The Audit Commission’s terms of competence cover:
— Confirming the credibility of statistics in the annual report, the
accounting balance sheet and the Company’s profit and loss statement;
— Analyzing the Company’s financial status, identifying reserves to
upgrade the financial position and elaborating on recommendations for
management bodies;
— Verifying (audits) of the Company’s financial and business operations.
The current composition of the Audit Commission, elected at the annual General Meeting of
Shareholders on 29 June 2012 (the positions are indicated as of the election date):
4. Vladimir Raspopov
Chairman of the Commission;
Deputy Head of a Division of the Federal
Agency on State Property Management;
5. Maria Tikhonova
Member of the Board of Directors in
numerous companies.
1. Anna Drokovа
Deputy Head of the Department of
fuel-and-energy and coal industry
enterprises of the Federal Agency on
State Property Management;
2. Andrey Kolyada
Head of the Department of
fuel-and-energy and coal industry
enterprises at the Division of
Infrastructure Sectors and
military-industrial enterprises of the
Federal Agency on State Property
Management;
3. Victor Lebedev
Assistant to the Deputy Prime Minister
of the Government of the Russian
Federation;
Audit Commission members hold no shares in the Company.
CORPORATE GOVERNANCE
REPORT
Auditor
To conduct the compulsory audit of the Company’s accounting statements,
the General Meeting of Shareholders approves the Auditor.
According to this requirement,
PriceWaterhouseCoopers CJSC was
appointed as the auditor for Federal
Grid Company’s consolidated financial
statements for 2012, which were
prepared in compliance with IFRS (as
adopted in the EU).
The Annual General Meeting of the
Shareholders on 29 June 2012 approved
the candidacy of LLC “RSM Top-Audit”,
as suggested by the Board of Directors.
The Auditor is a full member of RSM
International (RSM) and a member of
the self-regulatory organization of
auditors, the Non-Profit Partnership
“Russian Chamber of Auditors”.
The selection of the Auditor was made
among organizations licensed to
conduct a general audit, which are not
connected with the Company via
property interests, and which are
non-affiliated with the Company and/or
with its affiliates, and was based on a
tender procedure, which took into
account the Auditor’s professional
competence and the service cost.
Moreover, according to the terms of the
dealer agreement in respect to the bond
issue program concluded by JSC
Federal Grid Company and Federal Grid
Finance Limited, one of the following
companies – PriceWaterhouseCoopers,
Ernst & Young, Deloitte, KPMG – or one
of its affiliates shall be appointed as an
auditor for Federal Grid Company’s IFRS
consolidated financial statements.
172
The Company’s Internal Control Units
In 2012, the Company passed a new edition of Regulations on the
Internal Control System and approved a draft of the Strategy (Concept) of
Internal Control System Improvement, which will be implemented in
2013-2014. In addition, the Company paid attention to the development of
the Internal Control System in subsidiaries and dependent companies
(SDCs), where a process of upgrading risk management, internal control
and audits has been started.
The following are key objectives of upgrading the Internal Control System:
— Integrating the Internal Control
— Introducing a risk-oriented internal
audit, also stipulating the planning of
inspection procedures based on risk
assessment – to focus on the most
vulnerable facilities and activity
sectors.
System and risk management into a
single management system for the
prevention, timely detection and
prompt responses to risks and
threats;
— Building effective working business
processes unified throughout the
entire command chain, including the
minimum necessary control
procedures, which are developed
considering implementation costs
and its effectiveness;
Within the framework of the Internal Control Systems, the
following types of control are carried out:
Preliminary (Preventive) Control
The prevention of ineffective (unreasonable) and illegal activities is performed by
Special-Purpose Control Bodies and Structural Units of the Company in a process of
optimizing and regulating business processes, and by the Internal Control Office and
Structural Units of the Company through risk detection and assessment.
Current Control
The timely detection and immediate removal of shortcomings is performed by
Special-Purpose Control Bodies and Structural Units of the Company, by fulfilling
control functions within the framework of their key responsibilities.
Follow-up Control
The detection of shortcomings and violations in terms of the Company's financial,
economic and production operations is performed by the Department of Control and
Audit, the Department of Technical Supervision and the Audit Committee.
CORPORATE GOVERNANCE
REPORT
Internal Control System development is performed by the
following sub-divisions:
— The Internal Control Commission;
— The Department of Technical
— The Internal Control Office;
— The Reliability and Analysis Unit of
the Production Control Department;
Supervision and Audit;
— The Department of Investment
Planning and Reporting;
In addition, in the Company, an Internal Control Commission operates – this is a
collegial body whose task is to review materials and audit results carried out by
supervisory departments of the Company and external control (supervision)
authorities, and to develop a coordinated position and proposals to eliminate
violations and identify shortcomings.
During 2012, specialized internal control
agencies conducted 120 inspections.
AUDITED ENTITIES
The Company’s Executive
Office’s divisions
The Company’s branches
The Company’s subsidiary
and dependent companies
JSC IDGC Holding and its
SDC (as a part of execution
of functions of the sole
executive body of JSC IDGC
Holding
AUDIT TYPES
Internal audit of business
processes
Audit of financial and
operating activities
Technical audit (complex and
target audits)
Audit of facilities’
preparedness to operate in
autumn-winter period and in
special conditions
Internal complex and target audits (including investment projects
implementation, fulfillment of budgets, programs and plans,
execution of agreements etc)
174
Based on the results of control measures, corrective actions have been developed
and are being implemented to address revealed shortcomings and their resulting
consequences, and to improve the reliability and failure-free operation of the UNEG,
as well as to implement preventive measures to reduce the risk of inefficiency for
Federal Grid Company.
Remuneration to Members of the
Control Units
The Audit Commission
The General Meeting of Shareholders
approved the Regulations on the
payment of remuneration and
compensation to members of the Audit
Commission of JSC Federal Grid
Company (Meeting Minutes # 5 as of 4
July 2008). The above-mentioned
Regulations do not provide for
compulsory payments to members of
the Audit Commission. In 2012,
remuneration was not paid to members
of the Audit Commission.
The Auditor
To audit the Company’s accounting
statements (based on Russian
Accounting Standards (RAS)), the
Auditor's 2012 fee is approved by the
Board of Directors in an amount not to
exceed RUR25 Million, including VAT.
CORPORATE GOVERNANCE
REPORT
Anti-Corruption Activities
To maintain the reputation of Federal Grid Company as a company that
seeks to continually improve its anti-corruption policies and to adhere to
best international practices to prevent and fight corruption, within the
Company, a need to create Compliance emerged.
To achieve the goals, objectives and
principles that are stated in the
Company’s Anti-Corruption policy, the
Company developed an integrated
system for its implementation - the
2012-2014 Program for Fighting
Corruption and Settling Conflicts of
Interest, which is the second most
important legal document in the Federal
Grid Company and which was approved
by the Company’s Board (Minutes #1105
of 05.10.2012).
The third most important document in
the field of combating corruption is the
Company's Program Implementation
Plan for the corresponding year, which
is approved by the Chairman of the
Board and which contains instructions
for anti-corruption measures for the
current year to be performed by various
Anti-Corruption Policy entities.
The text of the Anti-Corruption Policy
and a list of the regulatory framework in
the field of fighting corruption can be
found in a special section of the
Company’s official website.
The compliance system is designed to
diagnose problems at an early stage,
preventing the possibility of corruption
cases. The development and
implementation of the compliance
system is carried out by a specially
established unit, the Department of the
Implementation of Corporate and
Anti-Corruption Compliance
Procedures, which reports directly to
the Company’s Chairman of the
Management Board.
In 2012, apart from changes in the
organizational structure, there were
changes in the Company’s regulatory
framework which regulates
anti-corruption activities.
Thus, the Board of Directors approved
the Company's Anti-Corruption Policy
(Minutes #171 dated 24.08.2012), which
is the first most important and
fundamental document in the field of
combating corruption, and defining
main objectives, principles and areas of
anti-corruption activities.
The Anti-Corruption Policy’s tasks
include: forming a uniform
understanding of the Company's
position on the rejection of corruption,
minimizing the risk of employee
involvement in corrupt activities, and
generating corporate anti-corruption
awareness, as well as creating a legal
mechanism that prevents bribery of
Anti-Corruption Policy entities.
176
In addition, we have changed the management system for anti-corruption activities,
which is based on the following hierarchy and includes:
The Company’s Anti-Corruption Activities
Management Chart
THE BOARD OF DIRECTORS
Definition the Anti-Corruption
Policy and Controlling Its
Implementation
Reporting
on Anti-Corruption Policy
Implementation
THE CENTRAL COMISSION FOR
COMPLIANCE WITH CORPORATE
ETHIC NORMS AND THE SETTLEMENT
OF CONFLICTS OF INTEREST
Reviewing Issues on
Anti-Corruption Policy
Implementation
CHAIRMAN OF THE
MANAGEMENT BOARD
Implementation of the
Anti-Corruption Policy
DEPARTMENT OF
IMPLEMENTATION
OF CORPORATE AND
ANTI-CORRUPTION PROCEDURES
Preventing, reviewing and addressing
cases of corruption and conflicts of
interests
GENERAL DIRECTORS OF SDCS
GENERAL DIRECTORS OF
BRANCHES
STRUCTURAL SUB-DIVISIONS
Compliance and Implementation of Principles and Requirements of the Anti-Corruption Policy
CORPORATE GOVERNANCE
REPORT
The Company’s Anti-Corruption Policy
We are constantly making efforts to
prevent corruption. So, in order to
exclude the possibility of including in the
documents provisions that contribute to
corrupt practices on the part of the
Company's employees, and create
conditions for their formal legality, the
Department employees conduct an
anti-corruption survey of organizational
and administrative documents (OADs)
and their drafts.
In 2012, there was a positive trend to
reduce the inclusion of corruption
factors in OAD drafts. The trend may be
indicative of a change in and the
formation of anti-corruption awareness
among OAD originators.
To prevent the misuse of funds and corruption in the procurement of
goods and services for the needs of the Company, Department employees
are carrying out anti-corruption control over procurement.
In addition, a positive result was the
ability to remove administrative barriers
in the registration of rights for land
plots used for the construction of UNEG
facilities. The economic effect of the
measures to perform anti-corruption
control in procurement activities
amounted to RUR116.9 million.
Anti-corruption control over
procurement made it possible to reveal
violations connected to illegal recovery
from the Company of large monetary
funds presented for payment by owners
of land plots, on which Federal Grid
Company’s power facilities were being
constructed, and abuse on the part of
the officials responsible for making
decisions on land and legal activities.
Our engagement and the work of legal
enforcement agencies solved this
problem by creating the Inter-agency
Working Group under the Prosecutor
General of the Russian Federation, the
work of which has resulted in initiating
criminal prosecutions against abuse of
office, fraud, abuse of authority, forgery,
the manufacture or sale of counterfeit
documents, State awards, stamps,
seals, and forms.
178
More information on the
implementation of the
Company’s
Anti-Corruption Policy
can be found on the
corporate website.
Interacting with our contractors was one of the key areas of the 2012
Anti-Corruption Policy.
As part of developing the
Anti-Corruption Policy’s area of
managing conflicts of interest, aimed at
excluding the possibility of Company's
employees, their families and close
relatives obtaining material and (or)
personal gain through abuse(s) of office,
we have formed the Central Compliance
Commission for Corporate Ethics and
the Settlement of Conflicts of Interest of
Federal Grid Company and JSC IDGC
Holding. In addition, we approved the
document that reveals the concept of
conflict(s) of interest, scope of their
occurrence and a procedure for settling
pre-conflict situations and identifying
conflicts of interest.
To prevent corruption, for legal
education and the foundation of
law-abiding behavior of the Company’s
employees, we conduct
awareness-raising activities,
particularly training seminars, training,
and consultations with the Company's
employees, as well as participating in
international forums, summits,
conferences, and round tables devoted
to fighting corruption. Such events
contribute to a common understanding
of anti-corruption policy, and also form
a positive reputation for the Company in
the anti-corruption field.
To perform orders from the Minutes of
the Government Commission on the
development of the electricity industry
and instructions of the Prime Minister
of the Government of the Russian
Federation on the transparency of
financial and economic activity,
including the prevention of conflicts of
interest among managers, we have
organized the collection and analysis of
information from our counter-parties
across the whole chain of their owners
(including end beneficiaries).
In addition to the collection,
consolidation and monthly transfer of
information about counter-parties’
owners to the competent authorities,
the Department of the Corporate and
Anti-Corruption Compliance Procedures
analyzes this information, as well as
reviews and settles contract
supervisors’ complaints, should the
counter-party refuse to disclose
information. In order to regulate this
work, the Department employees made
out a draft internal document that
establishes the procedure for such
information to be collected, verified,
analyzed, evaluated and transferred to
the competent authorities. An
automated system, "Accounting for
Federal Grid Company counter-parties’
beneficiaries”, has been created to
summarize, analyze, and verify
information on counter-parties’ owners.
We seek to build business relationships
with the counter-parties that support
the Anti-Corruption Policy and do their
business in an open and honest way,
without resorting to corrupt practices.
In this regard, we have developed an
Anti-Corruption Clause, which is
included in all contracts entered into by
the Company with legal entities and
State and municipal authorities, with
the exception of technical connection
contracts.
180
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Share Capital
Federal
Grid Company
of Unified
Energy System
SHARE
CAPITAL
Share Capital
In accordance with the Company’s Articles
of Association, as of 31 December 2012, the
share capital of Federal Grid Company stood
at RUR630,193,329,370, divided into
1,260,386,658,740 ordinary registered
non-documentary shares with a nominal
value of RUR0.50 per share.
The Russian Federation, which bought
shares amounting to RUR 3.247 billion,
was the main participant in the issue.
In addition, an electrical grid facility
included in the Register of UNEG
facilities and located within the common
ownership of the Khabarovsk Territory
and the Komsomolsky Municipal District
of the Khabarovsk Territory, with a value
of RUR126.8 million, was given in return
for shares of the Company’s additional
issue. The remainder of the outstanding
shares, in the amount of RUR3.1 million,
was acquired by minority shareholders.
In November 2012, the Board of
Directors decided to increase the
Company’s share capital by issuing
additional ordinary registered shares
for a total of RUR4,082,034,991.5 via
public subscription. In December 2012,
the additional issue was registered by
the Russian FFMS under No.
1-01-65018-D-104D. The Company
provided its shareholders with the
pre-emptive right to acquire shares of
the additional issue. The major part of
the additional issue was paid for from
federal budgetary funds.
On 11 March 2013, placement of an
additional issue of ordinary shares at a
price of RUR0.50 per share was
completed. In total, during the additional
issue, 6,754,357,256 shares were
placed, which represents 82.7% of the
total number of securities of the
additional issue to be placed. As a result
of the placement, the Company received
funds in the amount of RUR3,377.2
million.
Information about the share
capital history is presented on
the Company's website:
http://www.fsk-ees.ru/
shareholders_and_investors/
information_on_shares/
history_of_share_capital/
The number of authorized shares is 86,419,165,091 ordinary registered
shares with a nominal value of RUR0.50 per share, worth a total of
RUR43,209,582,545.5, at their nominal value. Authorized ordinary shares
have the same rights as issued ordinary shares.
No preferred shares were placed.
182
Share capital structure
The Company has more than 400,000 shareholders. The Russian
Federation, represented by the Federal Agency for State Property
Management (Rosimushchestvo), which owns 79.55% of the share capital,
is the largest shareholder.
Minority
shareholders
Rosimuschestvo
For the purpose of improving interactions with shareholders, 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 20.45%. The main minority shareholders of
the Company are institutional investors and holding structures, with retail
investors accounting for 2.14%.
The Company’s largest minority shareholders, owning more than 1% of Federal Grid
Company shares, are:
— Tsentrenergokholding (2.6534%);
— Rusenergo Fund Limited (1.6922%) –
Russia's largest fund in the energy
sector, whose funds are invested in
stocks of Russian electricity
generators and electric grid
companies;
— Sberbank of Russia (1.1252%) –
a professional securities market
participant that deals with securities
of the most reliable and
investment-attractive issuers;
— Index of Energy FGC UES (1.0891%)
SHARE
CAPITAL
20% of the Company’s free float includes: foreign institutional
investors, such as major funds focused primarily on Russia,
whose assets under management exceed USD 1 billion: Market
Vectors ETF Trust Russia ETF (USD 1.8 billion), the East Capital
Russian Fund (USD 1.5 billion), Swedbank Robur (USD 1.2 billion),
and BlackRock funds.
Investor Breakdown by Geography
USA
37%
Germany
9%
7%
Switzerland
United Kingdom
6%
4%
Other
37%
Scandinavia
As before, American and Scandinavian
shareholders account for the largest
share (37%) of foreign investments.
The Company’s shareholders are
predominantly long-term investors, with
low portfolio turnover, and holdings that
(on average) exceed two years.
Investor Breakdown by Investment Horizons
Long-Term
Investors
64%
184
Medium-Term
Investors
30.4%
Short-Term
Investors
5.6%
Stock market
Federal Grid Company shares trade on the “B” quotation list of the MICEX
Russian Stock Exchange, which is a member of JSC Moscow Stock
Exchange Group. The fundamental appeal of the Company’s stock is
underpinned by its inclusion in both Russian and foreign indices.
Federal Grid Company’s Share Weighting in Key
Stock Indices, % (as of 31.12.2012)
Index
2012
2011
2010
MSCI Russia
MSCI Emerging
Markets
MICEX
MicexPWR
Micex10
RTSI
0.816
0.049
1.11
14.16
8.53
1.11
1.41
0.09
1.54
14.41
-
1.56
Russian Traded Index
(Vienna Stock
Exchange)
1.34
2.35
The RTX Energy (Vienna
Stock Exchange)
23.17
24.30
1.48
0.045
1.51
14.33
-
1.66
-
-
Company’s Share Highlights
Share category
Nominal value
MICEX ticker symbol
Ordinary registered
non-documentary
shares
RUR
0.50
FEES
LSE ticker symbol
ISIN
Bloomberg code
FEES
RU000A0JPNN9
FEES RM
SHARE
CAPITAL
2012 Share Performance
Global equity markets closed higher in 2012, with MSCI World, a developed
market index, up 13.2% and MSCI EM, which looks at emerging
economies, gaining 15.1%. The key upside market factor was that the
world's largest Central Banks adopted an active policy, aimed at
stimulating the global economy. In particular, the ECB and the People's
Bank of China cut interest rates, the U.S. Federal Reserve launched a new
quantitative easing program, the ECB announced the unlimited
redemption of Euro-zone countries’ government bonds, and the Central
Banks of England and Japan expanded their asset re-purchase programs.
Electricity sector equities were major
under-performers; the 2012 MicexPWR
industry index decreased 16.8%. The
indicator’s decline, which was large
compared with the market, was due to
continued regulatory pressure and
uncertain prospects within the sector.
Resolving the Greek problem has also
positively influenced market dynamics - the
second tranche of aid to Greece and
domestic government reforms removed the
threat of Greece being removed from the
Euro-zone, the consequences of which
experts compared to the Lehman Brothers’
collapse that triggered the previous global
financial crisis.
The Russian market grew 5.2% on the basis
of the MICEX index, which is far below the
growth rate of the MSCI World and MSCI EM
indices. The market faced pressure from
weak oil prices which at year end rose 3.5%,
as well as from the deterioration of Russian
economic prospects.
Electricity sector, Federal Grid Company’s shares
30%
20%
10%
0%
-10%
5.2%
MICEX
-16.8%
Micex PWR
-20%
Federal
Grid
Company
-30%
-40%
-28.5%
31.01.12
30.03.12
31.05.12
31.07.12
28.09.12
30.11.12
28.12.12
186
Federal Grid Company’s share prices were subject to fluctuations during the year due
to continued regulator uncertainty and the year ended with a substantial decline in the
share price, 28.5%. In the beginning of the year, the Company’s stock dynamics looked
much better than the MICEXPWR index, as the Company showed a strong trend with
financial indicators, as well as due to the fact that its share in final energy tariffs was
minimal. Negative dynamics in April-May 2012 were the result of news flow on the
establishment of the National Electrical Grid Company and the participation of
Rosneftegaz in unifying grid assets, as well as the decision to place the Company in
the list of strategic companies.
As of 28 December 2012, Federal Grid
Company’s share price on the Stock
Exchange stood at RUR0.20104, which is
19% below analyst consensus, pointing to
further upside potential for the Company’s
shares.
Further volatile dynamics for the Company’s
stock price could be attributed to reduced
risks of grid company consolidation on the
basis of Rosneftegaz and continued
uncertainty surrounding the final scenario
for the merger between Federal Grid
Company and IDGC Holding till
mid-November, when the Russian
President signed an order to establish JSC
Russian Grids, which resulted in a partial
recovery of the Company’s stock quotation.
In late December, the discussion of delay in
privatization process affected quotation of
the Company’s shares.
Federal Grid Company Share Performance
2012
2011
2010
Volume
units 619,919,120,000
476,111,513,800
307,017,566,700
RUR 147,513,331,183
159,370,754,044
105,717,431,921
Number of deals
units 2,698,318
2,043,606
1,137,379
Key Parameters of Federal Grid Company Share Trading
Low
High
Period end
RUR
RUR
RUR
2012
0.1513
0.3768
0.20104
2011
0.21111
0.481
0.2811
2010
0.282
0.389
0.369
Number of shares
million shares 1,260,387
1,255,948 1,233,561
Capitalization
at year end
RUR, million 253,904.89 351,163.1
452,717.01
Detailed information on trading in the Company’s shares and depository receipts is
available on its web site in Investors / Share Information / Performance Chart
Source: JSC Moscow
Stock Exchange
(http://rts.micex.ru/)
Source: JSC Moscow
Stock Exchange
(http://rts.micex.ru/)
SHARE
CAPITAL
Information about trading in the
Company’s depository receipts is
available on its web site in
Investors/Share Information/Global
Depository Receipts at
http://www.fsk-ees.ru/shareholders
_and_investors/information_on_
shares/global_depository_receipts/.
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.
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.
As of 31 December 2012, the GDR
Program had 1.4 million depository
receipts, representing 0.058% of the
Company’s share capital. The maximum
number of GDRs that the Company is
allowed to issue is 2,511,896,256.
GDR Program Highlights
Regulation S
Rule 144A
СRatio
1 GDR: 500 shares
1 GDR: 500 shares
International code
ISIN: US3133542015
ISIN: US3133541025
Common Code: 036273577 Common Code: 0362733372
Price per GDR at year end
USD 3.009
Number of GDRs
as of 31 December 2012
1,369,120
-
97,330
GDR Program as a Percentage of the Company’s Share Capital
GDR Program volume, million receipts
Program’s volume as a percentage of share capital,%
0.148%
0.128%
0.110%
0.100%
0.059% 0.058%
0.061%
0.061%
0.060%
0.057%
0.060%
0.058%
31.01.12
31.03.12
31.05.12
31.07.12
30.09.12
30.11.12
GDR Price and Trading Volume, LSE
Program’s volume as
a percentage of share capital,%
144А
RegS
DR Trading Volume, receipts
DR Price on the LSE, USD
Adjusted posted DR price
at the end of trading on MICEX
3
2
1
0
1 800 000
1 600 000
1 400 000
1 200 000
1 000 000
800 000
600 000
400 000
200 000
0
DR Trading
Volume,
receipts
188
0.2
0.15
0.1
0.05
0
7.0
6.0
5.0
4.0
3.0
2.0
03.01.12
01.03.12
01.05.12
02.07.12
03.09.12
01.11.12
USD
Dividend policy
The Company’s dividend policy is determined by the Regulations on
Dividend Policy, which were approved by the Company’s 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 bad
debt provisions and non-recurring income from the sale of securities and
other assets to finance the investment program.
The General Meeting of Shareholders
makes decisions on paying dividends
based on recommendations of the
Company’s Board of Directors.
Dividends are determined based on
financial results, balancing the interests
of the Company and its shareholders.
The Company’s Dividend History
Accrued dividends, RUR thousand
Dividends per ordinary share, RUR
2,577,664
0.002052365
0.001626664
0.000797737
587,847.4
380,000
0
0
2006
2007
2008
2009
2010
0
2011
0
0
2006
2007
2008
2009
2010
0
2011
2012 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 dividend
payments is the Company’s net profit,
which is determined based on the
Company’s accounting statements.
According to Federal Grid Company’s
2012 accounting statements, there was
a net loss of RUR24,502 million. 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 2013, the Company’s Annual General
Meeting of Shareholders will make a
resolution to pay 2012 dividends.
Shareholders are invited to make a
decision not to pay 2012 dividends on
the Company’s ordinary shares.
SHARE
CAPITAL
Investor relations policy
Federal Grid Company is a public company, and is one of the leading "blue
chips" in the Russian energy sector. We are committed to maintaining
strong communication with the investment community, paying significant
attention to communicating with analysts and investors, both in
investment forums and conferences, and in personal meetings (either
one-on-one or in groups).
During the reporting year, we held two
road shows. The first road show was
held in April in London, Zurich and
Geneva, and was dedicated to our 2011
IFRS financial results. Our staff met
with international investment funds,
including: BlackRock, Charlemagne
Capital, Baring AM, JP Morgan AM,
Nomura AM, Pictet, and T Rowe Price.
The second road show was in November
following the publication of our H1 2012
IFRS financial statements. We held
meetings with representatives of: UBS,
BlackRock, Baring Asset Management,
Fidelity, Charlemagne Capital, Pioneer
Investments, Nomura Asset
Management, Renaissance Investment
Management, HSBC Global Asset
Management, and Credit Suisse.
During 2012, the Company's
management actively participated in
conferences and forums (including:
"Russia Calling!”, Adam Smith, the
APEC Summit, and others) and met with
representatives of the (relevant) stock
exchanges and investment fund
analysts. In particular, in October, the
Chairman of the Company’s Board of
Directors Ernesto Ferlenghi took part in
the Russian-European Economic Forum
"Investments in modern Russia. IPO,
stocks and bonds", which was held in
Milan, Italy. On 26 November 2012,
Federal Grid Company’s delegation
(headed up by the Chairman of the
Management Board Oleg Budargin) paid
an official visit to the London Stock
Exchange (LSE). In December 2012, we
conducted our first social event with
analysts and investment institutions,
where we summed up year-end results.
The active work of our investor relations staff was greatly appreciated by the
investment community. Thus, in July 2012, Federal Grid Company entered the top 5
best companies (among large caps) according to IR Magazine Russia & CIS. In
September, our Company became a member of the UK Investor Relations Society. In
December 2012, the rating agency "Expert RA" awarded our annual report a
top-ranking, in terms of preparation quality and information disclosure among 100
annual reports of Russia’s largest companies from 2011.
190
Contacts
Addresses, telephone numbers, contact persons, bank details, the
Company’s website address, brief information on the auditor, the
registrar and the depository responsible for maintaining the Company’s
securities:
Federal Grid Company:
Address: 5A Akademika Chelomeya Street, Moscow, Russia,
117630
Telephone of the unified information center: 8 800 200 1881
Fax: +7 495 710 9655
E-mail: info@fsk-ees.ru
Website: http://fsk-ees.ru
Contact information for institutional investors and analysts:
Investor Relations
Telephone: +7 495 710 9064
E-mail: ir@fsk-ees.ru
SHARE
CAPITAL
According to the terms of the dealer agreement in respect to the bond issue program concluded by JSC
Federal Grid Company and Federal Grid Finance Limited, one of the following companies -
PriceWaterhouseCooper, Ernst&Young, Deloitte, KPMG - or one of its affiliates shall be appointed as an
auditor for Federal Grid Company IFRS consolidated financial statements. According to this requirement,
PriceWaterhouseCooper CJSC was appointed as the auditor for Federal Grid Company's consolidated
financial statements for 2012, wich were prepared in compliance with IFRS (as adopted in the EU).
Full name of the company: Closed Joint Stock Company
PricewaterhouseCoopers 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 Chamber of
Russia
Location: Building 9, Block 2, 3rd Syromyatnichesky Lane, Moscow,
Russia, 105120
Information on Federal Grid Company’s auditor that conducted the
2012 independent audit of the accounting/financing reporting
(according to RAS and IFRS):
Full name of the company: RSM Top-Audit Limited Liability
Company
Abbreviated company name: RSM Top-Audit LLC
Location: 4 Pudovkin Street, Moscow, Russia, 119285
INN: 7722020834
OGRN: 1027700257540
Telephone: +7 (495) 363-2848
Fax: +7 (495) 981-4121
E-mail: mail@top-audit.ru
Information on the auditor’s membership in self-regulated
organizations:
Organization’s full name: self-regulated auditors organization, the
“Russian Body of Auditors”
Location: 1/3 2nd Goncharny Lane, Moscow, Russia, 115172
192
Information on the organization(s) registering the rights for the
Company’s securities:
The registrar, maintaining the register of the Company’s registered
securities
Information on the registrar:
Full company name: STATUS Registrar Company, Closed Joint Stock
Company
Abbreviated company name: CJSC STATUS
АLocation: 32/1 Novorogozhskaya Street, Moscow, Russia, 109544.
Tel.: +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: Russian’s Federal Financial Markets Service
Information on the depository responsible for the centralized
maintenance of corporate bonds:
Full company name: Non-Banking Credit Organization Closed Joint
Stock Company National Settlement Depository
Abbreviated company name: NSD
Location: 1/13 Sredny Kislovsky Lane, Building 8, Moscow, Russia
License number: 177-12042-000100
Issue date: 19 February 2009
License term: indefinite
Issuing authority: Russian’s Federal Financial Markets Service
Glossary
Different names for Federal Grid Company and
its branches
Federal Grid Company,
FGC, the Company
Open Joint Stock Company “Federal Grid Company of
Unified Energy System (JSC FGC UES)
Branches
The branches of Federal Grid Company – Backbone
Electric Grid (MES), Backbone Electric Power Grid
Company (PMES)
Head Office (EO)
The head office of Federal Grid Company
Abbreviation
Abbreviation
Full name
Automated Dispatch and Engineering Control System
Automated Process Control System
Automatic Transformer
Committee of Sponsoring Organizations of the Treadway Commission
Corporate Social Responsibility
Earnings Before Interest and Tax
Earnings Before Interest, Tax, Depreciation and Amortization
Eastern Siberia-Pacific Ocean Pipeline
Energy System’s Unified Process Communications Network
Federal Financial Markets Service
Fiber-Optic Communications Network
Federal Tariff Service
Grid Management Center
Hydro-Power Plant
Hazardous Production Facility
Key Performance Indicator
Backbone Electric Grid
Main Grid Management Center
Nuclear Power Plant
Non-Governmental Pension Program
Organizational and Administrative Documents
Operational and Situational Center
Backbone Electric Grid Transmission Line Company
Power Grid Complex
Personnel Training Center
ADECS
APCS
AT
COSO
CRS
EBIT
EBITDA
ESPO
ESUPCN
FFMS
FOCN
FTS
GMC
HPP
HPF
KPI
MES
MGMC
NPP
NGPP
OAD
OSC
PMES
PGC
PTC
194
RAB
R&D
SAC
SDC
SDPP
SS
TPP
UES
Regulatory Asset Base
Research and Development
Situational and Analytical Center
Subsidiary and Dependent Companies
State District Power Plant
Sub-station
Thermal Power Plant
Unified Energy System
UES of Russia
Unified Electrical System of Russia
UNEG
WECM
Unified National (all-Russian) Electric Grid
Wholesale Electricity and Capacity Market
196
2
3
Appendices
Federal
Grid Company
of Unified
Energy System
Contents
Information on compliance with the FCSM Сorporate Сode of Сonduct
Implementation of the assignments of the President and the Govern-
ment of the Russian Federation
Management discussion and analysis (MD&A)
2012 financial statements (according to IFRS)
2012 annual financial statement in compliance with disclosure and
transparency rules (management report 2012)
Information on transactions performed by JSC Federal Grid Company
in 2012, recognized by Russian Federation laws as interested party
transactions, and which are subject to the approval of the Company’s
authorized management body
Conclusion of JSC Federal Grid Company’s audit commission
2013 Investor calendar
2
12
15
26
70
91
96
97
APPENDIX
Information on Compliance with the FCSM
Corporate Code of Conduct
№
CCC Article
General Shareholders Meeting
Compliant/
Non-compliant
Note
1
2
3
4
5
6
7
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
Compliant
Compliant
Partially
compliant
Partially
compliant
Non-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.
Shareholders’ opportunity to submit an issue for
inclusion on the agenda of the General
Shareholders Meeting or to demand that a
General Shareholders Meeting be called 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 depository
account for executing the above-mentioned
rights if their rights to shares are registered on
the depository account.
Provision in the Articles of Association or internal
documents of the joint stock company that
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, and members of the Audit
Commission, as well as the issue of approving
the auditor of the joint stock company at the
General Shareholders Meeting.
A registration procedure for participants at the
General Shareholders Meeting in the internal
documents of the joint stock company.
Compliant
2
According to p. 11.4 of Article 11 of the Company’s
Articles of Association, the 30-day notice on the
General Shareholders Meeting shall be sent (or
handed over) to each person included in 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 re-organizing the Company, to
examine materials for the General Shareholders
Meeting on the Internet. The information is published
on the Company’s website 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 based on the deposit account in the
depository, is confirmed by providing an extract from
the depository account.
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 the Deputy Chairman of the Board of
Directors, or any member of the Board of Directors
as assigned by shareholders to be present at the
GSM) be Chairman of the GSM.
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 of approving the auditor of the joint stock
company at the General Shareholders Meeting is not
stipulated in the Company’s internal documents, but
the candidates for specific positions may be present
at the Company’s General Shareholders Meeting.
Paragraph.5.1 of Article 5 of the Regulations on the
Procedure for Preparing and Holding the General
Shareholders Meeting of Federal Grid Company.
Compliant/
Non-compliant
Note
Compliant
Non-compliant
Not applicable
Partially
compliant
Compliant
Compliant
Compliant
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 (KPIs).
This procedure was not approved by the Company’s
Board of Directors as a separate document.
The 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 members of
the Company’s Management Board.
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 members of the Board of
Directors, who are simultaneously members of the
Company’s sole executive body, are not taken into
account.
In accordance with a decision of Federal Grid
Company's Annual General Shareholders Meeting
on 29 June 2012 (Minutes #12 as of 02.07.2012),
the following directors meeting independence
requirements were included in the Company’s
Board of Directors: R.R Sharipov, V.V. Rashevsky,
E.B. Titova and I.V. Scherbovich.
There are no such persons in the composition of
the Company’s Boards of Directors valid
throughout 2012.
№
8
9
10
11
12
13
14
15
CCC Article
Board of Directors
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.
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,
as 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 the heads of the primary structural
divisions of the joint stock company
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 the 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 (independence)
requirements of the Corporate Conduct Code
Absence in the composition of the Board of
Directors of the joint stock company of persons
who have been 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 areas of finance, tax and tax collections and
the securities market
APPENDIX
№
CCC Article
16
17
18
19
20
21
22
23
24
25
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 that members of the Board of
Directors have the 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 are 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 to approve
transactions that amount to 10 percent or more
of the cost of the Company’s assets, except for
transactions made as part of the Company’s
day-to-day economic activity
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 the 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)
4
Compliant/
Non-compliant
Note
Compliant
There are no such persons in the composition of
the Company’s Boards of Directors valid
throughout 2012.
Compliant
Compliant
Compliant
Non-compliant
Compliant
Compliant
Partially
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 Company’s 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,
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 a 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, members of the Company’s Board of
Directors are obliged to disclose information on the
sale (disposal) and (or) purchase of Company
securities.
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 every quarter.
On average in 2012, meetings of the Company’s
Board of Directors were held at least once per
month or more.
The Company has an established Regulation of the
Board of Directors, approved by a resolution of the
Company’s Annual General Shareholders Meeting
dated 30 June 2009 (Minutes #7, 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 Directors grants preliminary approval
for corporate transactions that have non-current
assets worth more than 10 percent of the balance
value as the object of the transactions.
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 to access all
constituent, normative, reporting, accounting,
contractual and other corporate documents.
The establishment of the Strategy Committee was
approved by a decision of the Company’s Board of
Directors as of 15 May 2008 (Minutes #62).
Operational procedures are laid out by the
Regulations on the Strategy Committee of Federal
Grid Company.
№
26
27
28
29
30
31
32
33
34
35
36
37
38
CCC Article
Compliant/
Non-compliant
Note
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.
Compliant
The presence of only independent and
non-executive directors on the Audit Committee
Compliant
The Audit Committee is managed by an
independent director
Compliant
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 about 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
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
Compliant
Compliant
The establishment of the Audit Committee was
approved by a decision of the Company’s Board of
Directors as of 15 February 2008 (Minutes #54).
Operational procedures are laid out by the
Regulations on the Audit Committee of the Board
of Directors of Federal Grid Company.
Pursuant to a decision of the Company’s Board of
Directors dated 11.09.2012 (Minutes #172 as of
12.09.2012), the Audit Committee consists only of
independent and non-executive directors.
Pursuant to a decision of the Company’s Board of
Directors dated 11.09.2012 (Minutes #172 as of
11.09.2012), the Audit Committee of the Company’s
Board of Directors is managed by independent
director R.R. Sharipov.
Sections 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 #54).
The procedure for the Committee’s operations is
laid out by Regulations on the HR and
Remuneration Committee of the Board of Directors
of Federal Grid Company.
Pursuant to a decision of the Company’s Board of
Directors dated 11.09.2012 (Minutes #172 as of
12.09.2012), the HR and Remuneration Committee
is managed by the independent director D.V.
Fyodorov.
Pursuant to a decision of the Company’s Board of
Directors dated 11.09.2012 (Minutes #172 as of
12.09.2012), the HR and Remuneration Committee
consists of persons holding no official positions in
the 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
Provisions in the Articles of Association of the
joint stock company on the process for defining
the quorum for the Board of Directors, providing
for the obligatory participation of independent
directors in Board of Directors’ meetings
Non-compliant
The Committee has not been established.
Non-compliant
The Committee has not been established.
Not applicable
The Committee has not been established.
Not applicable
The Committee has not been established.
Compliant
Non-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
and on the Reliability Committee.
According to p. 18.2 of the Company’s Articles of
Association, the quorum to conduct a meeting of
the Board of Directors is composed of at least half
of the total number of elected members of the
Board of Directors.
APPENDIX
№
39
40
41
42
43
44
CCC Article
Executive bodies
Compliant/
Non-compliant
Note
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 the
day-to-day economic activities of the joint stock
company
Provision in the internal documents of the joint
stock company on the procedure for approving
operations beyond the financial and economic
plan of the joint stock company
Partially
compliant
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, which is 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.
The Regulation on the Company’s internal control
(as approved by a decision of the Company’s Board
of Directors, Minutes #170 as of 02.08.2012)
envisages the establishment in the Company of an
efficient internal control system and the setting of
a procedure for the interaction of the Company’s
control departments integrated into the internal
control system, with responsibilities strictly
assigned. 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 #528 as of 24 April
2008) and by the Regulations on Debt Management
Procedure (approved by the Company’s Board of
Directors, Minutes #44 as of 29 May 2007).
Compliant
There are no such persons in the executive body.
Compliant
There are no such persons in the executive body.
Non-compliant
Compliant
This prohibition is not provided for by the
Company’s Articles of Association or by any other
documents.
Absence in the composition of the executive
bodies of persons who are either participants,
the General Director (the 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 areas 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 (the 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 the services of the
management organization (the managing
director)
6
№
45
46
47
48
49
50
51
52
CCC Article
Compliant/
Non-compliant
Note
Provision in internal documents of the joint stock
company of the duties of the 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
Non-compliant
Provision in the Articles of Association or internal
documents of the joint stock company of criteria
for electing the management organization (the
managing director)
Non-compliant
The joint stock company’s executive bodies
present monthly performance reports to the
Board of Directors
Liability for infringing on the provisions for using
confidential and proprietary information stated in
contracts concluded by the joint stock company
with the General Director (the management
organization, the managing director) and
members of the Management Board
Compliant
Compliant
According to p. 4.2.7 of the Company’s Code of
Corporate Governance, the Chairman and
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 a conflict arises, the
Chairman or a member of the Company’s
Management Board shall inform the Board of
Directors and shall 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.
Compliant
The function is performed by the Secretary of the
Company’s Board of Directors.
Non-compliant
Article 4 of the Regulations on the Board of
Directors.
Compliant
There are no such requirements.
Compliant
This prohibition is not provided for by the
Company's Articles of Association.
Company Secretary
Presence in the joint stock company of a specific
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 the 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
Provision in the Articles of Association of the
joint stock company for requirements for
candidates for the position of the Company’s
Secretary
Material Corporate Actions
Presence in the Articles of Association of the
joint stock company of 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’ positions compared with 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)
APPENDIX
№
53
54
55
56
57
58
59
60
61
62
CCC Article
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 the
property which is the subject of the major
transaction
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 re-organization
Information Disclosure
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 website of the joint stock company on the
Internet that regularly discloses information on
the joint stock company (on the website)
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/
Non-compliant
Note
Non-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.
Non-compliant
Said deals involve the services of an independent
appraiser.
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
re-organization will be based, among other things,
on the results of the estimation of the current
market price of the Company’s 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 re-organize the
Company, an independent appraiser shall be
involved to define the share conversion ratio.
Non-compliant
The Regulations on the Information Policy were
approved by the Company’s Board of Directors on
28 February 2008 (Minutes #55).
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.
63
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
8
Compliant
In accordance with Items 5.1 and 5.2.10 of the
Company’s Regulations on the Information Policy.
№
64
65
66
CCC Article
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/
Non-compliant
Note
Compliant
The Regulations on Insider Information were
approved by a resolution of the Board of Directors
as of 6 October 2011 (Minutes #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 services)
Compliant
The current Regulation on the Company’s Audit
Commission has been approved by a decision of
the AGM on 29.06.2012 (Minutes #12 as of
02.07.2012), while the current Regulation on the
Company’s internal control system has been
approved by a decision of the Company’s Board of
Directors, dated 02.08.2012 (Minutes #170 as of
02.08.2012).
The Company’s divisions responsible for the
internal control procedures include the following:
The Control and Audit Department, responsible for
the selective control of financial, production and
economic activities of the Company’s divisions and
of the executive body, and of the Company’s
subsidiaries and dependent companies. The
Department is also responsible for control over
compliance with the strategic development level
and for the efficiency of the Company’s information
technologies. Other responsibilities include:
identifying and mobilizing the Company’s internal
economic potential and profit generating reserves;
the investigation of cases of abuse by legal and
physical persons resulting in damage done to the
Company’s interests; and interactions with senior
internal control bodies.
The Internal Control Division responsible for
developing and updating the Company’s internal
control system, taking into account changes in the
scale of the Company’s operations and governance
structure. Other responsibilities include: the
analysis of the organization of business processes
in regard to the efficiency of control procedures
applied, the optimization of the allocation of
responsibilities among the Company’s divisions,
the exclusion of redundant/double functions and
the identification and analysis of risks and the
development of a risk matrix.
The Technical Supervision and Audit Department is
responsible for the technical audit of the
Company’s key production and economic activities,
including the analysis of technical supervision
results pertaining to the re-construction and
technical re-equipment of the Company’s facilities
and newly constructed facilities. The analysis is
performed by the technical supervision
departments of corporate branches. Other
responsibilities include: controlling the process of
timely and proper investigation of disturbances, as
well as a selective control of the efficiency of
production and technical operations of the
structural units of the Company’s executive body
and the Company’s subsidiary and dependent
companies, including the internal technical control
system, assessing the compliance of the above
with requirements.
APPENDIX
№
CCC Article
Compliant/
Non-compliant
Note
The Investment Planning and Reporting
Department is responsible for controlling
compliance with the investment operations budget,
controlling the implementation of the Company’s
investment program in regard to timely financing
and achieving the control points of the priority
investment projects. Other responsibilities include:
controlling the grounds for the appreciation of the
Company’s investment program projects, by using
independent expertise.
The Reliability and Analysis Unit of the Production
Control Department is responsible for controlling
the validity of reporting information on the
implementation of the Company’s repair program,
the quality assurance of maintenance and repair
work and diagnostics for substation and power
transmission line equipment. Other responsibilities
include: controlling implementation terms for the
overall quantity of maintenance and repair work
and selective control over compliance with the
Company’s current Industrial Guidelines, as
assigned by the Company’s management team.
The Company's Regulations on the Internal Control
System (approved by a decision of the Company’s
Board of Directors, Minutes #170, dated 02.08.2012)
sets a structure for the Company’s internal control
bodies with individual competencies and
responsibilities. The structure consists not only of
the Company’s management and controlling bodies,
such as the Board of Directors, the Chairman of the
Management Board, the Audit Commission,
responsible for defining the basic principles of the
operation of the Company’s internal control system,
but also of specialized internal control departments
intended to support and monitor the efficiency of
the operation of the internal control system.
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
Compliant
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 the 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 (the 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, the presence of a duty to inform
the Board of Directors of the joint stock company
of said infringements
10
Compliant
There are no such persons in the Company’s
supervisory 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 of power by officials is
revealed, as well as any misappropriations,
embezzlement, shortages and illegal expenditures in
cash and material assets, an intermediate statement
shall be drawn up and the Board of Directors shall be
informed of such occurrences immediately.
67
68
69
70
71
№
72
73
74
75
76
77
78
CCC Article
Compliant/
Non-compliant
Note
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
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
The Audit Committee’s evaluation of the Auditor’s
Report prior to its presentation to shareholders
at the General Shareholders Meeting
Compliant
Non-compliant
This requirement is not provided for by the
Company's Articles of Association.
Non-compliant
This procedure is not laid out in the Company’s
internal documents.
Compliant
The Regulations on the Audit Commission as
approved by the resolution of JSC RAO UES of
Russia’s Board of Directors on 29.06.2012 (Minutes
#12 as of 02.07.2012), the Regulations on the
Company’s Internal Control System as approved by
the Company’s Board of Directors on 02.08.2012
(Minutes #170, as of 02.08.2012).
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 terms of reference for the
Audit Committee includes preliminary assessment
of book-keeping reports.
Dividends
An internal document approved by the Board of
Directors and used by the Board of Directors as
guidelines for approving recommendations on
the 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 a 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 Internet
website
Compliant
The Company’s Regulations on the Dividend Policy
approved by a decision of Federal Grid Company's
Board of Directors as of 16 December 2010
(Minutes #120).
Compliant
Compliant
The procedure for the determination of the
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
The Company’s Regulations on its Dividend Policy
are published on the Company’s official website at
http://www.fsk-ees.ru/investors_corporate_doc.ht
ml
APPENDIX
Implementation of the assignments of the
President and the Government of the Russian
Federation
№
1.
Assignment
Issued By
Registration
Details
The President
of the Russian
Federation
Pr-3668 dated
06.12.2011
Assignment Summary
Performance Status
Performance Result
On undertaking measures
to optimize property owned
by State-owned joint stock
companies
Federal Grid Company prepared
the draft Non-Core Assets
Management Program that
establishes the criteria for
attributing real estate property
and shares of SDCs and other
entities owned by the Company to
non-core assets, as well as the
order and formats for keeping
the register of non-core assets,
approaches to establishing value
and basic rules for non-core
asset disposal.
The Board of Directors of Federal Grid
Company approved the Company’s
Non-Core Assets Management
Program (Minutes #178 dated
16.11.2012).
2.
The President
of the Russian
Federation
Pr-3291 dated
03.11.2012
On implementing the
principles of co-investing in
Russian and international
venture funds for joint stock
companies partially or fully
owned by the State
1. Federal Grid Company
prepared and sent to Russia’s
Ministry of Economic
Development a proposal for
Federal Grid Company’s
investment in Russian and
international venture funds;
2. Federal Grid Company
submitted proposals on removing
obstacles for the Company to
invest in venture funds.
The Company’s Innovative
Development Program till 2016
with an outlook till 2020 was
approved by the Board of
Directors of Federal Grid
Company (Minutes #128 dated
07.04.2011).
3.
The President
of the Russian
Federation
Pr-3291 dated
03.11.2012
Joint stock companies
partially or fully owned by
the State with approved
innovative development
programs that are in
compliance with the
Commission’s resolution
shall publish in open
sources passports of the
above-mentioned programs
and the lists of innovative
projects and areas of R&D
developments that will be
implemented from
2011-2020.
The Management Board of Federal Grid
Company made a decision to
recommend that the Company’s Board
of Directors make a resolution on the
following issue (Minutes #1146/2 dated
21.02.2013):
- To consider Federal Grid Company’s
participation in venture funds via
co-investing its property rights for
innovative technologies developed
within the framework of the Company’s
R&D Program as expedient.
A meeting of the Company’s Board of
Directors to consider this issue will be
held in mid-April 2013.
The passport for the Company’s
Innovative Development Program till
2016 with an outlook till 2020 and the
Prospect Innovative R&D Directions
required for smart grid development
were placed on the Company’s web
site (www.fsk-ees.ru) within the
Innovative Development section (in
Russian).
12
№
Assignment
Issued By
Registration
Details
4.
The President
of the Russian
Federation
Pr-1092 dated
27.04.2012
5.
The
Government
of the Russian
Federation
VP-P13-9308
dated
28.12.2011
VP-P24-1269
dated
05.03.2012
6.
The
Government
of the Russian
Federation
VP-P13-9308
dated
28.12.2011
Assignment Summary
Performance Status
Performance Result
On selling core assets in
economic sectors with a
sufficient level of
competition (for providing
for the maximal involvement
of small- and medium-sized
companies in
manufacturing appropriate
products) by State
corporations and entities for
which more than 50% of
shares are owned by the
Russian Federation.
Federal Grid Company explored
the issue and analyzed the
practicality of core asset disposal
in economic sectors with a
sufficient level of competition (for
providing for the maximal
involvement of small- and
medium-sized companies in
manufacturing appropriate
products).
The Company collected
information about income,
property and property-related
liabilities, of members of the
Board of Directors and their
close relatives (spouse, of-age
and underage children, parents
and siblings).
On submitting full
information about income,
property and the
property-related liabilities of
joint stock companies’
managers (including
members of the Board of
Directors/the Supervisory
Board, their close relatives
(spouse, of-age and
underage children, parents
and siblings) to the federal
executive body responsible
for the coordination and
legal regulation of the
companies’ activities, as
well as to Russia’s Federal
Tax Service and the Federal
Financial Monitoring
Service.
The Board of Directors of Federal
Grid Company made the following
decision (Minutes #174 dated
20.09.2012):
- due to the fact that electric energy
transmission services are attributed
to the activities of natural monopoly
entities (according to the Federal
Law #147-FZ “On Natural
Monopolies” dated 17.08.1995), the
disposal of the Company’s core
assets represented by electric grid
facilities and other property used by
the Company during its operations
was recognized as inexpedient.
By 01.04.2012, documents that
included information about income,
property and property-related
liabilities for members of the Board
of Directors, their close relatives
(spouse, of-age and underage
children, parents and siblings) were
submitted to the federal executive
body responsible for the coordination
and legal regulation of the
companies’ activities, as well as to
Russia’s Federal Tax Service and the
Federal Financial Monitoring Service.
On providing for the
transparency of operating
and financial activities
(including avoiding conflicts
of interests and abuses of
office), including providing
for the mandatory
disclosure of information
about counterparties’
owners (including
beneficiaries, among these
final beneficiaries) and
submitting this information
to Russia’s Federal Tax
Service, the Ministry of
Energy and the Federal
Financial Monitoring
Service.
The Company collected
information about existing and
potential counterparties’ owners
(data about the owners and the
owners of the entities, in case
the owners were represented by
entities), including beneficiaries
(among these final beneficiaries),
and about counterparties’
executive bodies (hereinafter
referred to as Information about
owners). The Company developed
an internal regulatory base,
organized a process for the
automated collection of data, the
analysis of Information about
owners and submitted it to
authorized state organizations.
The Company checked Information
about owners in respect to the
fullness of disclosed information (up
to providing data about individuals),
the veracity of information about
individuals and entities, conflicts of
interests, and their connections and
the abuse of office connected with
potential persons taking posts in
Federal Grid Company and its SDCs.
Consolidated Information about
owners is submitted to the
authorized State organization(s)
within the established time limit.
APPENDIX
14
Management Discussion and Analysis
(MD&A)
Overview of Federal Grid Company’s
Financial Condition as of 31 December 2012
and 2012 Operations
This Report contains an overview of the financial performance and
operations and the financial performance of Federal Grid Company
(hereinafter referred to as the “Company”). The Report should be
reviewed in conjunction with the Company’s 2012 financial statements
prepared in accordance with corresponding Russian legislation (Russian
Accounting Standards (RAS)), including a corresponding explanatory note.
1. General overview of the Company’s operations
Since 2010, tariffs for electricity transmission over the UNEG by Federal Grid
Company have been set using the RAB-regulation method, to upgrade the investment
attractiveness of the energy sector.
As of 31 December 2012, the Company consisted of regional branches, including 8
Main Electric Grids (MES), 41 Backbone Electric Grid Transmission Line Companies
(PMES) and one Bely Rast Specialized Production Base.
In 2011, the volume of power transmission services rendered by the Company
amounted to RUR136,581.43 million.
The Company makes considerable investments in fixed assets to provide for the
development and reliable operation of the UNEG. In 2012, expenditures on
construction, re-construction and renovation of the Company’s fixed assets amounted
to RUR179,898.9 million (compared with RUR184.716 million in 2011).
The Company financed its 2012 investments from the following sources:
- Revenues generated by power transmission services – 34.4%;
- Borrowed funds, including federal budgetary finds for the current year – 34.4%;
- Funds generated by VAT returns – 14.7%;
- Other sources (including payments for technological connections) – 3.2%.
1.1. Main factors influencing the performance of Federal Grid Company
In 2012, the principal factors influencing the Company’s performance include the
following:
1. Postponement of the period for setting and revising tariffs from 1 January to 1 July
of the next calendar year (Russian Federation Governmental Regulation #1178 dated
29.12.2011) and the establishment of rates for H1 2012 at the level of tariffs set for
2011 (FTS of Russia’s Order #325/e-1 dated 6 December 2011);
2. Modification of the RAB-regulation methodology that means changing to
determining a base of invested capital based on the value of assets that have been
commissioned within the framework of the investment program. Starting from 1 July
2012, the increase in the average rate of network maintenance amounts to 11% (FTS
of Russia’s Order #114-e/2 dated 21.05.2012), with an average annual tariff growth
amounting to 4% in 2012. The tariff will grow 9.4% from 07.01.2013 and 9.4% from
01.07.2014;
3. Successful implementation of the cost management program, which reduced the
Company’s operating costs;
APPENDIX
4. A write-off of negative differences resulting from the mark-to-market revaluation
of securities that are listed on the market (primarily JSC Inter RAO UES shares);
5. Accrual of provisions for the devaluation of financial investments (not subject to
revaluation at market value) (bills owned by LLC Energo-Finans, equity investments in
the shares of JSC Mobile GTES);
6. A negative balance of operations involving the establishment and recovery of the
bad debt reserve (mainly due to revaluation, at current market value, of energy
companies’ shares which were on the balance of the Index of Energy of Federal Grid
Company and accrued interest on LLC Energo-Finans’ bills);
7. Reflection of the revaluation of fixed assets.
2. The Company’s financial results
2.1. Key financial results
Revenues and expenses related to usual business
operations
2012
2011
Change,
RUR million
Change, %
Revenues from core operations,
Including:
Power transmission services
Other operations
Prime cost of core operations,
Including:
Power transmission services
Other operations
Administrative costs
Sales profit
Other income and expenses
Interest receivable
Interest payable
Income from participation in other organizations
Other income
Other expenses
Profit (loss) before taxation
Postponed tax assets
Postponed tax liabilities
Current profit tax
Other similar mandatory payments
Adjusted profit tax for the preceding periods
Net profit (loss) for the period
Adjusted net profit
16
138,836.49
138,136.62
699.87
0.51%
136,581.43
134,875.49
2,255.06
3,261.12
1,705.94
-1,006.06
1.26%
-30.85%
-106,617.78
-84,174.33
-22,443.45
26.66%
-105,606.53
-83,201.43
-22,405.10
-1,011.25
-9,855.05
22,363.66
4,198.54
-
181.40
109,176.48
-150,152.17
-14,232.10
-62.49
-8,736.34
-1,470.68
-0.30
-
-24,501.92
13,413.35
26.93%
3.94%
12.94%
5.72%
-
-31.51%
-36.32%
-28.32%
-22,872.59
-50.56%
-972.90
-8,726.03
45,236.25
3,971.45
-
264.86
-38.35
-1,129.02
227.09
-
-83.47
171,434.39
-62 257.91
-209,462.53
59,310.36
11,444.41
-25,676.51
2.24 times
46.16
-5,544.81
-8,389.54
-3.37
-21,21
-2,468.36
33,686.63
-108.65
-3,191.53
6,918.86
3.07
-21,21
2.36 times
57.56%
-82.47%
-91.01%
100%
-22,033.56
8.92 times
-20,273.28
-60.18%
2.2. Revenues generated by power transmission services
Revenues generated by power transmission
services
Including:
Payments for the maintenance of UNEG power
facilities
Payments for normative in-process losses in
the UNEG
2012
2011
Change,
RUR million
Change, %
136,581.43
134,875.49
1,705.94
1.26%
125,671.68
120,993.70
4,677.98
10,909.75
13,881.80
-2,972.05
3.87%
-21.41%
An analysis of the 2011-2012 period demonstrates increased revenues generated by
power transmission services.
Compared with 2011, revenues generated by power transmission services in 2012
grew RUR1.706 million, including:
— A RUR4,677.98 million increase in revenues related to power grid facility
maintenance, mainly due to the growth in tariffs for power transmission through the
UNEG starting from 01.01.2012;
— A RUR2, 972.05 million decline in revenues for the compensation of normative
losses, due to a reduction in loss limits that are compensable to consumers, from
4.84% to 4.49%.
In 2012, revenues generated by the Company’s core regulated operations (excluding
revenues from technological connections) made up 98.38% of the Company’s total
revenues.
2.3. The prime cost of core operations
Cost element
Depreciation of fixed assets
Purchase of energy and capacity
Labor compensation costs and social
expenses
Repair and maintenance
Costs related to the purchase
of raw stuff and materials
Costs related to property insurance
Lease costs
Costs related to security provisions
Electric energy transit services
Other costs
Total prime cost
2012
58,993.16
11,662.11
18,070.83
5,446.32
2,702.35
893.58
1,189.54
1,692.98
1,740.50
4,226.41
% of
the total
2011
55%
11%
17%
5%
3%
1%
1%
2%
2%
4%
39,784.23
12,183.17
15,836.01
5,291.12
2,423.74
848.04
1,092.19
1,527.49
1,329.47
3,858.87
% of
the total
47%
14%
19%
6%
3%
1%
1%
2%
2%
5%
106,617.78
100%
84,174.33
100%
Change, %
48%
-4%
14%
3%
11%
5%
9%
11%
31%
10%
27%
APPENDIX
2.3.1. Depreciation of fixed assets
Compared with 2011, depreciation charges grew 48% in 2012.
The 2012 growth in depreciation costs occurred due to accrued depreciation from
new power grid facilities commissioned within the framework of implementing the
Company’s investment program and the revaluation of fixed assets.
2.3.2. Purchase of energy and capacity
In 2012, costs related to the purchase of energy and capacity fell 4% compared with
the similar period in the preceding year. This was due to the optimization of power
flows and the ongoing energy saving program, which enabled the actual percentage of
losses in Federal Grid Company’s networks to be reduced to 4.24% and resulted in a
RUR521 million decline in the costs related to the purchase of electric energy and
capacity to compensate for transmission losses, compared with 2011.
2.3.3. Labor compensation costs and social expenses
The 14% growth in labor compensation costs and social expenses occurred due to: (1)
an increase in the number of employees employed to ensure the functioning of
commissioned electric grid facilities and (2) the quarterly indexation of production
employees’ salaries, which are performed in accordance with the actual growth in the
consumer price index, in accordance with Tariff Agreement adopted by the Company
and the policy of maintaining employees’ real income level and (3) an increase in
insurance premiums due to legislative changes (increased regulatory framework
from RUR463 thousand to RUR512 thousand and the establishment of insurance
premiums at a rate of 10% of the payments in excess of the limit value of the
framework).
2.3.4. Repair and maintenance
The 3% increase in repair and maintenance costs in 2012 compared with 2011
occurred due to inflationary factors, as adjusted by savings via procurement
procedures.
2.3.5. Cost of raw stuff and materials
In 2012, costs related to the purchase of raw stuff and materials grew 11% compared
with 2011, which occurred due to increased costs for raw stuff and materials, fuel for
vehicles due to inflationary factors, and the cost of work clothing, because of the
growth in production staff, including for newly commissioned electric grid facilities.
2.3.6. Property insurance costs
In 2012, property insurance costs increased 5% due to the expansion of the list of
insured production equipment (due to commissioning), as well as insurance for
assets under construction.
2.3.7. Lease costs
In 2012, lease costs increased 9% compared with 2011. This was primarily due to an
increase in lease payments under the contract for utilizing electric grid facilities of
JSC Yantarenergo, a growth in the property lease costs for commissioned wireless
communication networks. Also, there was an increase in land lease fees due to tariff
indexation by local authorities.
18
2.3.8. Costs related to security provisions
The 11% year-on-year growth in costs related to security provisions was caused by an
increase in the number of protected facilities, including for newly commissioned
ones, as part of the Company’s large-scale investment program, upgrading the
physical security of facilities, introducing the Integrated Automated Security
Management System (IASMS) at the Company’s power facilities and Unified Security
Control Center (USCC) and by implementing a program to protect UNEG facilities
against terrorism.
2.3.9. Expenditures on electric energy transit services
In 2012, expenditures on electric energy transit services grew 31% compared with
2011, which was due to increased power flow through foreign energy systems, as well
as a significant 16% indexation of tariffs for electric energy transit through the UES
grids of Kazakhstan.
2.3.10. Other costs
In 2012, other costs grew 10% as compared with 2011, due to conducting a power
survey (power audit) of electric grid facilities in the reporting year within the
framework of the energy saving and efficiency program, as well as due to measures
to establish protective zones.
% of total
2011
% of total
Change, %.
2.4. Administrative costs
Cost element
Labor compensation costs and social expenses
Insurance premiums
Information services and software-related
costs
2012
2,240.30
309.11
1,250.34
23%
3%
13%
Depreciation of fixed and
non-tangible assets
Property tax
General production services
Tangible costs
Lease costs
Insurance costs
Costs related to security provisions
Telecommunication services
Consultancy services
R&D costs
Other costs
Total administrative costs
Administrative costs excluding depreciation
charges
1,247.54
13%
1,286.99
13%
764.90
392.18
668.22
6.66
52.13
367.31
115.90
142.84
1,010.63
9,855.05
7,320.52
8%
4%
7%
0.1%
0.5%
4%
1%
1%
10%
100%
2,269.88
181.12
1,199.94
993.70
795.40
667.40
335.80
543.80
6.30
40.90
303.30
302.50
201.90
884.09
8,726.03
6,936.93
26%
2%
14%
11%
9%
8%
4%
6%
0.1%
0.5%
3%
3%
2%
10%
100%
-1.3%
71%
4%
26%
62%
15%
17%
23%
5.7%
27%
21%
-62%
-29%
14%
13%
6%
APPENDIX
2.4.1. Labor compensation costs and social expenses
РLabor compensation costs fell 1.3% in 2012 compared with 2011 due to optimizing
the number of managerial staff.
2.4.2 Insurance premiums
In 2012, insurance premiums grew 71% as compared with 2011 due to legislative
changes (an increase in the regulatory framework for insurance premiums from
RUR463 thousand to RUR512 thousand and the establishment of insurance
premiums at the rate of 10% of the payments in excess of the limit value of the
framework).
2.4.3. Information services and software-related costs
During the reporting year, costs related to information services grew 4% due to
commissioning new information programs that provide control over the Company’s
obligations and their compliance with financing limits.
2.4.4. Depreciation of fixed and non-tangible assets
The 26% increase in depreciation costs was caused by fixed asset revaluation.
2.4.5. Property tax
The 62% increase in property tax (compared with 2011) was caused by commissioning
new UNEG facilities and revaluing fixed assets (in accordance with the accounting
policy, the cost item in question fully reflects property tax, including the tax imposed
on the Company’s production assets).
2.4.6. Production services
The 15% growth in costs related to production services was caused by an increase in
transportation costs not related to the transport of goods, legal services, with a
simultaneous reduction in audit services at the end of competitive procedures, as well
as advertising costs, including participation in exhibitions and fairs.
2.4.7. Tangible costs
The 17% growth in tangible costs in 2012 (compared with 2011) was caused by an
increase in operating costs to maintain the backup data processing center, as well as
intercom and video-conferencing maintenance costs.
2.4.8. Lease costs
The 23% increase in lease costs in 2012 compared with 2011 was due to increased
spending on counter-lease contracts for fiber-optic communications and the change
in contractual relationships with the owner of the leased building (9 Bolshoy
Nikolovorobinskiy Lane), in terms of increasing the number of leased areas and their
sub-leasing to JSC ECMC UES.
2.4.9. Insurance costs
The 5.7% growth in insurance costs compared with 2011 was caused by increased
costs of liability insurance, associated with increased personal responsibility for
members of the Board of Directors, members of the Management Board, the Chief
Accountant and officials of Federal Grid Company, due to the planned implementation
of numerous strategic transactions.
2.4.10. Communication services
The 21% increase in communication costs in 2012 compared with 2011 was caused by
indexing communication operators’ tariffs and commissioning new satellite
communication systems.
2.4.11. Consulting services
The 62% decrease in consulting services occurred due to a reduction in the number
of consulting companies involved and the performance of necessary work in-house by
corporate employees.
20
2.4.12. Research and development (R & D) costs
The 29% decrease in R&D costs in 2012 (compared with 2011) was caused by a
one-time write-off of R&D in 2011 with a positive result, on which patents were not
issued.
2.4.13. Other administrative costs
The 14% increase in other administrative costs in 2012 (compared with 2011) was
primarily caused by an increase in costs related to medical insurance and non-State
retirement insurance to upgrade employees’ social protection.
The growth of administrative costs (excluding depreciation charges and property tax)
at the end of 2012 amounted to 6% compared with 2011, which corresponds to the
inflation rate.
2.5. Profits from core operations
The 50.5% decrease in profits from core operations in 2012 compared with 2011 was
caused by maintaining the Company's revenues at the 2011 level (an increase of
0.51%), which was due to the postponement of tariff indexation for electricity
transmission from 1 January to 1 July, with a simultaneous growth rate in prime cost
and administrative costs primarily due to increased costs, associated with the
ownership of property - depreciation charges and property tax.
2.6. Interest receivable and interest payable
Interest receivable is composed of income generated by debt financing and revenues
generated by depositing free cash in bank accounts and deposits. In 2012, the amount
of interest income increased 5.7% compared with 2011 as a result of measures aimed
at upgrading the efficiency of the Company’s current assets management, which
generated additional revenue in the amount of RUR227 million compared with 2011.
Due to changes in the Company’s accounting policy, interest costs have been
capitalized and included in the cost of construction titles since 2010. This explains
why interest payable is not reflected in the corresponding line of the report.
APPENDIX
2.7. Other income
Description
Discharge of bills
Income from the withdrawal of financial
investments
Income from bad debt
reserve recovery
Income from financial investment reserve
recovery
Charges, fines, penalties
Previous years’ earnings revealed in the
reporting year
Reserve recovery
from a decrease in software
licensing costs
Revenues in the form of the cost of material
assets, which were derived from the
liquidation of fixed assets
Extraordinary income from insured events
Income from the revaluation of fixed assets
Income from the realization of material assets
Other income
Total other income
2012
96,734.8
-
2011
77,486.0
78,669.8
19,248.8
-78,669.8
Change, RUR million
Change, %
9,378.1
8 424.1
954.0
37.8
776.3
769.4
-
2,892.4
-2,854.6
771.4
110.0
4.9
659.4
661.2
-661.2
-100.0%
24.8%
-100.0%
11.3%
-98.7%
0.6%
599.2%
563.3
410.9
152.4
37.1%
96.5
414.3
222.7
183.28
986.5
679.7
156.2
186.19
-890.0
-265.4
66.6
-3.1
109,176.48
171,434.39
-62,257.9
-90.2%
-39.0%
42.6%
-1.7%
-36.3%
In 2012, the Company’s other income decreased 36.3% compared with 2011, mainly
due to the fact that the sale/exchange of generating companies’ shares for shares of
JSC Inter RAO UES was reflected in 2011 operations.
22
2011
Change, RUR million
Change, %
79,186.7
-79,186.7
-100%
25%
-4%
-31%
501%
-20%
2.4 times
9 times
5.8 times
39%
42%
27%
-33%
-28%
2.8. Other costs
Description
Costs associated with the withdrawal of
financial investments
Discharge of bills
Bad debt reserves
Negative difference from the mark-to-market
revaluation of shares
Reserve for the devaluation of financial
investments
Costs associated with the revaluation of fixed
assets
Write-off of fixed assets and construction in
progress
Losses associated with emergency conditions
Previous years’ earnings revealed in the
reporting year
Costs of securities issue and servicing
Reserve for decreasing the cost of material
assets
Depreciated cost of write-offs and
construction in progress and the cost of
writing-off
2012
-
96,734.8
19,355.3
17,031.5
77,501.5
20,151.3
24,822.9
19,233.3
-796.0
-7 791.4
9,564.2
1,590.9
7,973.4
1,794.5
2,247.3
-452.8
1,735.4
698.1
1 037.3
864.4
734.1
308.3
208.9
94.2
125.9
221.4
146.7
33.6
26.4
770.2
608.2
86.8
62.2
7.1
Other costs
Total other costs
1,787.17
2,649.23
-862.1
150,152.17
209,462.53
-59,310.4
In 2012, the Company’s other costs decreased 28% compared with 2011 mainly due to
the fact that the transaction involving the sale/exchange of generating companies’
shares for shares of JSC Inter RAO UES were reflected in 2011, as well as the
revaluation difference for the Company’s financial investments, as reflected at the end
of the reporting periods.
2.9. Income/ expense associated with the withdrawal of financial investments
In 2012, there was no financial results from the re-payment of third party bills (in
2011, expenses in the consolidated expression amounted to RUR516.8 million, mainly
due to the fact that 2011 reflected a transaction involving the exchange of generating
companies’ shares for shares of JSC Inter RAO UES).
2.10. Revaluation of financial investments
In 2012, the Company reflected a negative difference from the mark-to-market
revaluation of shares. The negative difference amounted to RUR17,031.5 million. This
was mainly due to the revaluation of OJSC Inter RAO UES shares, which were on the
Company’s balance at market value.
In addition, in 2012, the Company undertook measures to establish/recover a reserve
for the devaluation of financial investments (not subject to revaluation at market
value). The balance was RUR9,526.4 million (mostly on LLC Energo-Finans’ bills and
equity investments in shares of JSC Mobile GTES).
APPENDIX
Index
2.11. Provisions for the impairment of accounts receivable
ВIn 2012, based on an evaluation of accounts receivable and the probability that these
accounts would be re-paid, the Company established a bad debt reserve in the amount of
RUR19.355 million and also recovered a reserve in the amount of RUR9.378 million, which had
been established in 2011. A negative financial result from the above-mentioned operations
amounted to RUR9.977 million, including:
The balance of the establishment and the recovery of the reserve for bills owned by LLC Index
of Energy of Federal Grid Company, which amounted to (+) RUR6.904 million;
A reserve for interest on bills owned by LLC Energo-Finans in the amount of (+) RUR4.621
million was established;
The balance of the establishment and recovery of the reserves mainly for the service contracts
for electricity transmission through the UNEG, which amounted to (-) RUR1.548 million.
In 2011, the financial result from the recovery and establishment of bad debt reserves
amounted to RUR11,727.19 million (the recovered reserve was RUR8,424.10 million, whereas
the established reserve totaled RUR20,151.29 million).
2.12. Current profit tax
Compared with the previous year, in 2012, total profit tax fell 82.5% to amount to RUR1,470.68
million. The change in profit tax was caused by an increase in the value of depreciation
charges, which are deductible in tax accounting, due to the large inputs of power grid facilities
in fixed assets.
2.13. Net profit (loss) in the reporting period
The Company’s FY 2012 loss amounted to RUR24,501.9 million (whereas, the 2011 loss was
RUR2,468.4 million). The Company’s loss occurred due to the following factors:
— A write-off of negative difference resulting from the revaluation of securities, listed on the
market, at market value (mostly JSC Inter RAO UES) in the amount of RUR17,031.5 million;
— A negative balance of operations involving the establishment and recovery of reserves for
the devaluation of financial investment (not subject to revaluation at the market value),
which amounted to RUR9,526.4 million (mostly on bills owned by LLC Energo-Finans and
equity investments in the shares of JSC Mobile GTES);
— A negative balance of operations involving the establishment and recovery of bad debt
reserves in the amount of RUR9,977.2 million (mainly due to the revaluation of energy
companies’ shares which were on the balance of the Index of Energy of Federal Grid
Company and interest on LLC Energo-Finans’ bills).
3. The Company’s net assets
According to accounting report data, in 2012, the value of Federal Grid Company’s net assets
decreased RUR3,923.7 million compared with the similar period in 2011 and by RUR2,895.6
million, according to an evaluation based on assumptions.
2011
2012
Nominal*
Taking into account
contributions to
authorized capital**
Nominal*
Taking into account
contributions to
authorized capital**
Value of net assets, RUR million
853,801.14
856,020,4
849,877.49
853,124.79
*Evaluation based on data from the accounting reports;
** In 2011 and 2012, the authorized capital of Federal Grid Company increased via the issue of additional shares. This led to the inclusion of running debts to
founding members in regard to contributions to the authorized capital into accounts payable reflected in accounting reports among other short-term liabilities.
Once the report on the issue of additional shares is registered with the Russian Federal Financial Markets Services, the debt in question will be included in the
Company’s authorized capital. Evaluation of the value of net assets is specified taking into account the inclusion of debt in regard to contributions to authorized
capital in the Company’s own capital. Debt amounted to RUR2,219.2 million in 2011 and RUR3,247.3 million in 2012.
24
4. Cash flow
4.1. General information on the Company’s cash flow generated by core,
investment and financial operations
On 31 December 2012, the Company’s total cash was RUR17,527.6 million (compared with
RUR17,247.7 million on 31 December 2011).
The receipts and expenses analysis below was based on management accounting of corporate
cash flow, taking into account mutually exclusive turnovers on deposits and dissolved contracts
for electric energy transmission services.
In 2012, the Company physically received cash in the amount of RUR313.794 million, which is
RUR20.246 million less than 2011. Compared with 2011, actual payments effected by the
Company decreased RUR14.523 million to stand at RUR313.513 million.
The table below contains information on the Company’s cash flows associated with core,
investment and financial operations during the corresponding periods.
Total
For type of activity
Business operations
Investments
Financing
Indices
Receipts
Payments
Balance
2012
2011
2012
2011
2012
2011
313,794
334,040
167,696
169,738
61,475
82,752
313,513
328,036
67,220
70,544
234,639
246,493
2012
84,623
11,654
281
6,004
100,476
99,194
-173,164
-163,741
72,969
2011
81,551
10,999
70,552
The financing of investment programs for other power grid facility owners (based on
contractor agreements) in 2012 amounted to RUR363 million, expenses for the
purchase of fixed assets for production needs amounted to RUR852 million, whereas
expenses for the purchase of financial investments during the year to deposit
temporarily free cash amounted to RUR52.009 million. Dividends were not paid out
for the year.
4.2. Cash from running operations
During FY 2012, cash received from running operations decreased RUR2.042 million
(-1.2%) compared with the preceding year.
The decrease was mainly due to a RUR2,855 million decline in refunds from
previously paid taxes (VAT) in 2012 compared with 2011, as well as a cutback in the
amounts paid by consumers for corporate services and factors presented in the
Section entitled, “Receipts from power transmission services”.
In 2012, the amount of cash spent to finance running operations decreased RUR3.324
million (-4.7%) compared with 2011. This occurred due to a reduction in profit tax
payments by RUR8.008 million, a decline in the payment for electric energy to cover
losses for its transmission by RUR1.016 million and an increase in the payments for
operating expenses by RUR5.700 million, including property tax.
4.3. Cash used in investment operations
Cash received from investment operations decreased RUR21.277 million in 2012
compared with 2011, due to a decline in receipts associated with the withdrawal of
short-term financial investments (bills).
Compared with 2011, cash payments associated with investment operations
decreased RUR11.854 million, including RUR7.266 million to finance the Company’s
investment budget (including RUR4,817.4 million to finance the investment program).
The main directions of financing and the financing sources for the investment
program are presented in the "Investments" section.
Also in 2011, 2010 dividends in the amount of RUR2.578 million were paid out to
Company shareholders. In 2011, the Company had a loss. Dividends were not paid out
in 2012.
JSC “FGC UES”
CONSOLIDATED FINANCIAL STATEMENTS
PREPARED IN ACCORDANCE WITH
INTERNATIONAL FINANCIAL REPORTING STANDARDS AS ADOPTED BY THE EU
FOR THE YEAR ENDED 31 DECEMBER 2012
CONTENTS
Independent Auditor’s Report
Consolidated Statement of Financial Position....................................................................................................................... 4
Consolidated Statement of Comprehensive Income............................................................................................................. 5
Consolidated Statement of Cash Flows ................................................................................................................................. 6
Consolidated Statement of Changes in Equity...................................................................................................................... 7
Notes to the Consolidated Financial Statements
Note 1. JSC “FGC UES” and its operations ............................................................................................................ 9
Note 2. Basis of preparation .................................................................................................................................... 9
Note 3. Summary of significant accounting policies ............................................................................................. 11
Note 4. Principal subsidiaries ................................................................................................................................ 17
Note 5. Balances and transactions with related parties.......................................................................................... 17
Note 6. Property, plant and equipment .................................................................................................................. 19
Note 7. Intangible assets........................................................................................................................................ 21
Note 8. Investments in associates .......................................................................................................................... 22
Note 9. Available-for-sale investments ................................................................................................................. 22
Note 10. Promissory notes..................................................................................................................................... 23
Note 11. Other non-current assets ......................................................................................................................... 23
Note 12. Cash and cash equivalents ...................................................................................................................... 23
Note 13. Bank deposits.......................................................................................................................................... 24
Note 14. Accounts receivable and prepayments.................................................................................................... 24
Note 15. Inventories .............................................................................................................................................. 25
Note 16. Equity...................................................................................................................................................... 25
Note 17. Income tax .............................................................................................................................................. 28
Note 18. Non-current debt..................................................................................................................................... 31
Note 19. Retirement benefit obligations................................................................................................................ 32
Note 20. Current debt and current portion of non-current debt ............................................................................. 34
Note 21. Accounts payable and accrued charges................................................................................................... 34
Note 22. Revenue .................................................................................................................................................. 34
Note 23. Operating expenses ................................................................................................................................. 35
Note 24. Disposal of available-for-sale investments and investments in associates.............................................. 35
Note 25. Finance income....................................................................................................................................... 36
Note 26. Finance costs........................................................................................................................................... 36
Note 27. Earnings per ordinary share for profit attributable to shareholders of FGC UES ................................... 36
Note 28. Contingencies, commitments and operating risks................................................................................... 36
Note 29. Financial instruments and financial risks................................................................................................ 37
Note 30. Capital risk management ........................................................................................................................ 40
Note 31. Segment information .............................................................................................................................. 41
Note 32. Events after the reporting period............................................................................................................. 43
JSC “FGC UES”
Consolidated Statement of Comprehensive Income
(in millions of Russian Roubles unless otherwise stated)
Notes
Year ended
31 December 2012
Year ended
31 December 2011
Revenues
Other operating income
Operating expenses
Gain on disposal of available-for-sale investments
Loss on re-measurement of assets held for sale
Reversal of impairment / (impairment) of property, plant and
equipment, net
Operating profit
Finance income
Finance costs
Impairment of available-for-sale investments
Impairment of promissory notes, net
Reversal of impairment of investments in associates
Share of result of associates
Profit before income tax
Income tax
Profit for the year
Other comprehensive income
Change in fair value of available-for-sale investments
Accumulated gain on available-for-sale investments recycled to
profit or loss
Impairment of available-for-sale investments recycled to profit
or loss
Change in revaluation reserve for property, plant and
equipment in associates
Foreign currency translation difference
Income tax recorded directly in other comprehensive income
Other comprehensive loss for the year, net of income tax
Total comprehensive income for the year
Profit / (loss) attributable to:
Shareholders of FGC UES
Non-controlling interest
Total comprehensive income / (loss) attributable to:
Shareholders of FGC UES
Non-controlling interest
Earning per ordinary share for profit attributable to the
shareholders of FGC UES – basic and diluted (in Russian
Roubles)
22
22
23
24
24
6
25
26
9
10
8
8
17
9, 16
24
9, 16
8
8
17
27
27
140,313
3,543
(110,630)
-
-
53
33,279
4,113
(214)
(18,941)
(9,772)
313
21
8,799
(1,756)
7,043
(19,362)
-
18,941
209
(50)
84
(178)
6,865
7,103
(60)
6,925
(60)
0.006
139,571
7,793
(100,750)
31,115
(4,718)
(1,174)
71,837
3,957
(278)
(12,661)
-
-
8
62,863
(13,875)
48,988
(24,952)
(31,115)
12,661
-
66
8,372
(34,968)
14,020
49,139
(151)
14,171
(151)
0.040
The accompanying notes on pages 9 to 43 are an integral part of these Consolidated Financial Statements
5
JSC “FGC UES”
Consolidated Statement of Cash Flows
(in millions of Russian Roubles unless otherwise stated)
CASH FLOWS FROM OPERATING ACTIVITIES:
Profit before income tax
Adjustments to reconcile profit before income tax to net cash
provided by operations
Depreciation of property, plant and equipment
Loss / (gain) on disposal of property, plant and equipment
Amortisation of intangible assets
(Reversal of impairment) / impairment of property, plant and
equipment, net
Impairment of available-for-sale investments
Impairment of promissory notes, net
Reversal of impairment of investments in associates
Gain on disposal of available-for-sale investments
Loss on re-measurement of assets held for sale
Share of result of associates
(Reversal) / accrual of allowance for doubtful debtors
Write-off of accounts payable
Share-based compensation
Finance income
Finance costs
Other non-cash operating expense
Operating cash flows before working capital changes and
income tax paid
Working capital changes:
Increase in accounts receivable and prepayments
Increase in inventories
Increase in other non-current assets
Increase in accounts payable and accrued charges
Increase in retirement benefit obligations
Income tax paid
Net cash generated by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment
Proceeds from disposal of property, plant and equipment
Purchase of intangible assets
Purchase of promissory notes
Redemption of promissory notes
Investment in bank deposits
Redemption of bank deposits
Dividends received
Interest received
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from share issuance
Proceeds from non-current borrowings
Proceeds from current borrowings
Repayment of current borrowings
Repayment of lease
Dividends paid
Interest paid
Net cash generated by financing activities
Net (decrease) / increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Notes
Year ended
31 December 2012
Year ended
31 December 2011
8,799
62,863
23
23
23
6
9
10
8
24
24
8
23
22
16, 23
25
26
16
12
12
43,908
1,210
571
(53)
18,941
9,772
(313)
-
-
(21)
(1,405)
(51)
605
(4,113)
214
14
78,078
(8,293)
(689)
(288)
2,951
517
(1,970)
70,306
(150,431)
1,309
(2,917)
(52,000)
55,535
(3,520)
3,724
20
2,569
(145,711)
3,247
82,500
-
(105)
(150)
-
(11,658)
73,834
(1,571)
25,627
24,056
33,187
(617)
865
1,174
12,661
-
-
(31,115)
4,718
(8)
4,305
(2,753)
1,342
(3,957)
278
69
83,012
(6,828)
(753)
(12)
2,662
447
(9,883)
68,645
(153,471)
1,431
(1,649)
(52,300)
75,098
(6,386)
9,808
45
2,681
(124,743)
2,220
80,000
105
(6,505)
(126)
(2,543)
(4,999)
68,152
12,054
13,573
25,627
The accompanying notes on pages 9 to 43 are an integral part of these Consolidated Financial Statements
6
JSC “FGC UES”
Consolidated Statement of Changes in Equity
(in millions of Russian Roubles unless otherwise stated)
Attributable to shareholders of FGC UES
Notes
Share
capital
Share
premium
Treasury
shares Reserves
Accumu-
lated deficit
Total
Non-
controlling
interest
Total
equity
As at 1 January 2012
Comprehensive income for the year
Profit / (loss) for the year
Other comprehensive income, net of related income tax
Change in revaluation reserve for property, plant and
equipment
Change in revaluation reserve for property, plant and
equipment of associates
Change in fair value of available-for-sale investments
Accumulated loss on available-for-sale investments recycled
to profit or loss
Foreign currency translation difference
Total other comprehensive income / (loss)
Total comprehensive income / (loss) for the year
Transactions with shareholders of FGC UES recorded
directly in equity
Issue of share capital
Share-based compensation
Total transactions with shareholders of FGC UES
16
8, 16
9, 16
9, 16
8, 16
16
16
627,974
10,501
(5,522)
314,323
(49,962)
897,314
793
898,107
-
-
-
-
-
-
-
-
2,219
-
2,219
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
605
605
209
(15,489)
15,152
(50)
(1,206)
(1,206)
-
-
-
-
7,103
7,103
(60)
7,043
(1,028)
1,028
-
209
(15,489)
15,152
(50)
(178)
6,925
-
-
-
-
1,028
8,131
-
-
-
2,219
605
2,824
-
-
-
-
-
-
(60)
-
-
-
-
209
(15,489)
15,152
(50)
(178)
6,865
2,219
605
2,824
As at 31 December 2012
630,193
10,501
(4,917)
313,117
(41,831)
907,063
733
907,796
The accompanying notes on pages 9 to 43 are an integral part of these Consolidated Financial Statements
7
JSC “FGC UES”
Consolidated Statement of Changes in Equity
(in millions of Russian Roubles unless otherwise stated)
As at 1 January 2011
Comprehensive income for the year
Profit / (loss) for the year
Other comprehensive income, net of related income tax
Change in revaluation reserve for property, plant and
equipment
Change in fair value of available-for-sale investments
Change in revaluation reserve for property, plant and
equipment of associates (previously classified as non-
current assets held for sale)
Accumulated gain on available-for-sale investments
recycled to profit or loss
Foreign currency translation difference
Total other comprehensive income / (loss)
Total comprehensive income / (loss) for the year
Transactions with shareholders of FGC UES recorded
directly in equity
Issue of share capital
Dividends declared
Share-based compensation
Total transactions with shareholders of FGC UES
Attributable to shareholders of FGC UES
Notes
Share
capital
Share
premium
Treasury
shares Reserves
Accumu-
lated deficit
Total
Non-
controlling
interest
Total
equity
616,781
10,501
(6,864)
361,267
(108,525)
873,160
944
874,104
-
-
-
-
-
-
-
-
11,193
-
-
11,193
16
9, 16
16, 24
16, 24
8, 16
16
16
16
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,342
1,342
-
49,139
49,139
(151)
48,988
(1,227)
(19,961)
1,227
-
-
(19,961)
(10,749)
10,749
-
(15,073)
66
(46,944)
(46,944)
-
-
(15,073)
66
11,976
(34,968)
-
-
-
-
-
-
-
(19,961)
-
(15,073)
66
(34,968)
61,115
14,171
(151)
14,020
-
-
-
-
-
(2,552)
-
(2,552)
11,193
(2,552)
1,342
9,983
-
-
-
-
11,193
(2,552)
1,342
9,983
As at 31 December 2011
627,974
10,501
(5,522)
314,323
(49,962)
897,314
793
898,107
The accompanying notes on pages 9 to 43 are an integral part of these Consolidated Financial Statements
8
JSC “FGC UES”
Notes to the Consolidated Financial Statements
(in millions of Russian Roubles unless otherwise stated)
Note 1. JSC “FGC UES” and its operations
Joint-Stock Company “Federal Grid Company of Unified Energy System” (“FGC UES” or the “Company”) was
established in June 2002 for the purpose of operating and managing the electricity transmission grid
infrastructure of the Russian Unified National Electric Grid (the “UNEG”). As at 31 December 2012, FGC UES
is 79.55% owned and controlled by the Government of the Russian Federation (the “RF”), the remaining shares
are traded on MICEX-RTS and as Global depository receipts on the London Stock Exchange.
FGC UES and its subsidiaries (the “Group”) act as the natural monopoly operator for the UNEG. The Group’s
principal operating activities consist of providing electricity transmission services, providing connection to the
electricity grid, maintaining the electricity grid system, technical supervision of grid facilities and investment
activities in the development of the UNEG. Majority of the Group’s revenues is generated via tariffs for
electricity transmission, which are approved by the Russian Federal Tariff Service (the “FTS”) based on
Regulatory Asset Base (“RAB”) regulation. FGC UES's main customers are distribution grid companies
(“IDGCs”), certain large commercial end customers and retail electricity supply companies.
On 11 July 2012, an agreement was signed whereby the Executive functions of OJSC “IDGC Holding” (renamed
to OJSC “Russian Grids” in April 2013) were transferred to FGC UES. Due to the regulated nature of business
of OJSC “IDGC Holding” and since there is no transfer of risk and rewards from this assignment, OJSC “IDGC
Holding” is not consolidated with the Group.
The registered office of the Company is located at 5A Akademika Chelomeya Street, Moscow 117630, Russian
Federation.
Relationships with the state. The Government of the RF is the majority owner of FGC UES and the ultimate
controlling party. The Government directly affects the Group's operations via regulation over tariff by the FTS
and its investment program is subject to approval by both the FTS and the Ministry of Energy. Ultimately the
Government supports the Group due to its strategic position in the Russian Federation. The Government's
economic, social and other policies could have a material impact on the Group’s operations.
Business environment. The Group's operations are located in the Russian Federation. Consequently, the Group
is exposed to the economic and financial markets of the RF, which display characteristics of an emerging market.
The legal, tax and regulatory framework continue to develop, but are subject to varying interpretations and
frequent changes which contribute to the challenges faces by entities operating in the RF (Note 28). These
consolidated financial statements (“Consolidated Financial Statements”) reflect management's assessment of the
impact of the Russian business environment on the operations and financial position of the Group. The future
business environment may differ from management's assessment.
Note 2. Basis of preparation
Statement of compliance. These Consolidated Financial Statements have been prepared in accordance with, and
comply with, International Financial Reporting Standards (“IFRS”) and its interpretations as adopted by the
European Union (the “EU”).
Until 31 December 2011 the Group prepared its consolidated financial statements in accordance with IFRS as
issued by the International Accounting Standards Board (the “IASB”). For the reporting periods beginning on or
after 1 January 2012, the Group will also prepare the consolidated financial statements in accordance with IFRS
as adopted by the EU for filing with EU regulatory organisations. Any differences between IFRS as issued by the
IASB and IFRS as adopted by the EU do not have material effect on the Group’s consolidated financial
statements, therefore the consolidated financial statements prepared in accordance with IFRS as adopted by the
EU is a continuation of the consolidated financial statements prepared in accordance with IFRS as issued by the
IASB; IFRS 1 “First time adoption of IFRS” is not applicable.
Each enterprise of the Group individually maintains its own books of accounts and prepares its statutory
financial statements in accordance with the Regulations on Accounting and Reporting of the RF (“RAR”). The
accompanying Consolidated Financial Statements are based on the statutory records and adjusted and
reclassified for the purpose of fair presentation in accordance with IFRS.
Certain reclassifications have been made to prior year data to conform to the current year presentation. These
reclassifications are not material.
Functional and presentation currency. The Russian Rouble (“RR”) is functional currency for FGC UES and the
currency in which these Consolidated Financial Statements are presented. All financial information presented in
RR have been rounded to the nearest million, unless otherwise stated.
9
JSC “FGC UES”
Notes to the Consolidated Financial Statements
(in millions of Russian Roubles unless otherwise stated)
Note 2. Basis of preparation (continued)
New accounting developments. There are no new standards, interpretations or amendments to standards and
interpretations that are effective for annual periods beginning on or after 1 January 2012 and would be expected
to have a material impact on the Group.
There are a number of new standards, interpretations and amendments that are effective for annual periods
beginning on or after 1 January 2013 and have not been applied in preparing these Consolidated Financial
Statements. None of these is expected to have a significant effect on these Consolidated Financial Statements,
except the following:
Amendment to IAS 1 “Financial statement presentation”, regarding other comprehensive income. The
change requires the grouping of items presented in other comprehensive income on the basis of whether
they are subsequently potentially reclassifiable to profit or loss.
IFRS 10 “Consolidated financial statements”, builds on existing principles by identifying the concept of
control as the determining factor whether an entity should be consolidated. The standard provides
additional guidance to assist in the determination of control. The Group has yet to assess full impact of
IFRS 10 and intends to adopt the standard no later than 1 January 2014.
IFRS 13 “Fair value measurement”, aims to improve consistency and reduce complexity by providing a
precise definition of fair value and a single source of value measurement and disclosure requirements for
use across IFRSs.
There are no other standards or interpretations that are not yet effective and would be expected to have a material
impact on the Group.
Going concern. These Consolidated Financial Statements have been prepared on a going concern basis, which
contemplates the realisation of assets and the satisfaction of liabilities in the normal course of business.
Critical accounting estimates and assumptions. Management makes a number of estimates and assumptions
that are continually evaluated and may differ from the related actual results. The estimates and assumptions that
have the most significant effect on the amounts recognised in these Consolidated Financial Statements and
estimates that can cause a significant adjustment to the carrying amount of assets and liabilities within the next
financial year include:
Carrying value of property, plant and equipment. The Group uses the revaluation model for property, plant and
equipment. The last external valuation was performed as at 31 December 2009 (Note 6). This valuation using the
depreciated replacement cost methodology was capped by the income approach. Since there have been no
significant changes in the income projections for the Group, no current valuation has been performed.
Carrying value of investment in OJSC “INTER RAO UES”. As at 31 December 2012 the Group owns 18.57% of
the voting shares of OJSC “INTER RAO UES” (“INTER RAO”). Management has assessed the level of
influence that the Group has on INTER RAO, taking into account its inability to obtain any additional financial
information which may be required to execute this influence, and determined that it did not amount to significant
influence. Consequently, this investment is classified as available-for-sale investment (Note 9).
Decline in the fair value of available-for-sale equity investments (Note 9). The Group determines that available-
for-sale equity investments are impaired when there has been a significant or prolonged decline in the fair value
below its cost. The determination of what is significant or prolonged requires judgement. In making this
judgement, the Group evaluates, among other factors, the volatility in share price and trend in share price
movements during the period of analysis. As at 31 December 2012, the decline in fair value of INTER RAO
shares below cost is considered significant and prolonged and therefore the Group recorded an impairment of
RR 18,941 million in the Consolidated Statement of the Comprehensive Income.
Carrying value of LLC “ENERGO-finance” promissory notes (Note 10). As at 31 December 2012 management
re-assessed the recoverable amount of long-term promissory notes issued by LLC “ENERGO-finance” and
guaranteed by Rusenergo Fund Ltd, which invests in the Russian utilities stock market. The recoverability of
these promissory notes depends on the performance of the underlying Russian utilities’ stocks. Actual 2012
stock market returns significantly underperformed resulting in reduction of net assets of Rusenergo Fund Ltd and
worsening its future cash flow projections. Therefore, management concluded that these promissory notes were
not recoverable as at 31 December 2012 and accordingly were fully impaired.
Tax contingencies. Russian tax legislation is subject to varying interpretations and changes, which can occur
frequently. Where the Group management believes it is probable that their interpretation of the relevant legislation and
the Group’s tax positions cannot be sustained, an appropriate amount is accrued in the consolidated financial
statements. The possible tax claims in respect of certain open tax positions of the Group companies are disclosed in
Note 28.
10
JSC “FGC UES”
Notes to the Consolidated Financial Statements
(in millions of Russian Roubles unless otherwise stated)
Note 3. Summary of significant accounting policies
Principles of consolidation. Subsidiaries are all entities (including special purpose entities) over which the
Group has the power to govern the financial and operating policies generally accompanying a shareholding of
more than one half of the voting rights. The existence and effect of potential voting rights that are currently
exercisable or convertible are considered when assessing whether the Group controls another entity. The Group
also assesses existence of control where it does not have more than 50% of the voting power but is able to
govern the financial and operating policies by virtue of de-facto control.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-
consolidated from the date that control ceases.
Purchases of subsidiaries from parties under common control. Purchases of subsidiaries from parties under
common control are accounted for using the predecessor values method. Under this method the consolidated
financial statements of the combined entity are presented as if the businesses had been combined from the
beginning of the earliest period presented or, if later, the date when the combining entities were first brought
under common control. The assets and liabilities of the subsidiary transferred under common control are at the
predecessor entity’s carrying amounts. The predecessor entity is considered to be the highest reporting entity in
in the
which the subsidiary’s IFRS financial
predecessor entity’s original acquisitions is also recorded in the consolidated financial statements. Any
difference between the carrying amount of net assets, including the predecessor entity's goodwill, and the
consideration for the acquisition is accounted for in the consolidated financial statements as an adjustment to
retained earnings within equity.
information was consolidated. Related goodwill
inherent
Associates. Associates are entities over which the Company has significant influence (directly or indirectly), but
not control, generally accompanying a shareholding of between 20 and 50 percent of the voting rights.
Investments in associates are accounted for using the equity method of accounting and are initially recognised at
identified on acquisition and is reduced by
cost. The carrying amount of associates includes goodwill
accumulated impairment losses, if any. The Group discontinues the use of the equity method of accounting from
the date when it ceases to have significant influence in the associate.
The Group’s share of the post-acquisition profits or losses of associates is recorded in profit or loss, and its share
of other comprehensive income of associates is recognised in the Group’s other comprehensive income. When
the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other
unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made
payments on behalf of the associate.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s
interest in the associates; unrealised losses are also eliminated unless the transaction provides evidence of an
impairment of the asset transferred. Accounting policies of associates have been changed where necessary to
ensure consistency with the policies adopted by the Group.
Classification of financial assets. The Group holds financial assets of the following measurement categories:
loans and receivables and available-for-sale financial assets.
Loans and receivables are unquoted non-derivative financial assets with fixed or determinable payments other
than those that the Group intends to sell in the near term.
All other financial assets are included in the available-for-sale category, which includes investment securities
which the Group intends to hold for an indefinite period of time and which may be sold in response to needs for
liquidity or changes in interest rates, exchange rates or equity prices.
Classification of financial liabilities. The Group’s financial liabilities are carried at amortised cost.
Initial recognition of financial instruments. The Group’s financial instruments are initially recorded at fair
value plus transaction costs. Fair value at initial recognition is best evidenced by the transaction price. A gain or
loss on initial recognition is only recorded if there is a difference between fair value and transaction price which
can be evidenced by other observable current market transactions in the same instrument or by a valuation
technique whose inputs include only data from observable markets.
Derecognition of financial assets. The Group derecognises financial assets when (a) the assets are redeemed or
the rights to cash flows from the assets otherwise expired or (b) the Group has transferred the rights to the cash
flows from the financial assets or entered into a qualifying pass-through arrangement while (i) also transferring
substantially all the risks and rewards of ownership of the assets or (ii) neither transferring nor retaining
substantially all risks and rewards of ownership but not retaining control. Control is retained if the counterparty
does not have the practical ability to sell the asset in its entirety to an unrelated third party without needing to
impose additional restrictions on the sale.
11
JSC “FGC UES”
Notes to the Consolidated Financial Statements
(in millions of Russian Roubles unless otherwise stated)
Note 3. Summary of significant accounting policies (continued)
Available-for-sale investments. The Group classifies investments as available-for-sale at the time of purchase.
Available-for-sale investments are carried at fair value. Dividends on available-for-sale equity instruments are
recognised in profit or loss when the Group’s right to receive payment is established and it is probable that the
dividends will be collected. All other elements of changes in the fair value are recognised in other
comprehensive income until the investment is derecognised or impaired at which time the cumulative gain or
loss is reclassified from other comprehensive income to profit or loss for the period.
Impairment losses are recognised in profit or loss when incurred as a result of one or more events (“loss events”)
that occurred after the initial recognition of available-for-sale investments.
Any change in fair value of equity instruments is initially accumulated in other comprehensive income.
A significant or prolonged decline in the fair value of an equity security below its cost is an indicator that it is
impaired. If asset is considered to be impaired at the reporting date, the cumulative impairment loss (measured as
the difference between the acquisition cost and the current fair value, less any impairment loss on that asset
previously recognised in profit or loss) is removed from other comprehensive income and recognised in profit or
loss. Impairment losses on equity instruments are not reversed through profit or loss.
Foreign currency. Monetary assets and liabilities, which are held by the Group entities and denominated in
foreign currencies at the end of the reporting period, are translated into Russian Roubles at the official exchange
rates prevailing at that date. Foreign currency transactions are accounted for at the exchange rates prevailing at
the date of the transaction. Gains and losses resulting from the settlement of such transactions and from the
translation of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.
As at 31 December 2012, the official rate of exchange as determined by the Central Bank of the Russian
Federation, between the Russian Rouble and the US Dollar was RR 30.37:US Dollar 1.00 (31 December 2011:
RR 32.20:US Dollar 1.00); between the Russian Rouble and Euro: RR 40.23:Euro 1.00 (31 December 2011:
RR 41.67:Euro 1.00).
Property, plant and equipment. Property, plant and equipment are stated at revalued amounts less any
subsequent accumulated depreciation and any subsequent accumulated impairment losses, where required.
Property, plant and equipment are subject to revaluation on a regular basis to ensure that the carrying amount
does not differ materially from that which is determined using the fair value at the end of the reporting period.
The frequency of revaluation depends upon the movements in the fair values of the assets being revalued.
Increases in the carrying amount arising on revaluation of property, plant and equipment are credited to other
comprehensive income and increase the revaluation reserve in equity; the increase is recognised in current period
profits to the extent that it reverses previously recognised impairment loss of the same assets.
Decreases that offset previous increases of the same asset are recognised in other comprehensive income and
decrease the previously recognised revaluation reserve in equity; all other decreases are recognised in profit or
loss for the period. Any accumulated depreciation at the date of revaluation is eliminated against the gross
amount of the assets, and the net amount is restated to the revalued amount of the asset.
The revaluation reserve in respect of an item of property, plant and equipment is transferred directly to retained
earnings when the item is derecognised (on the retirement or disposal of the asset).
Renewals and improvements are capitalised and the assets replaced are retired. The cost of minor repair and
maintenance are expensed as incurred. Gains and losses arising from the retirement of property, plant and
equipment are included in profit or loss as incurred.
Depreciation on property, plant and equipment is calculated on a straight-line basis over the estimated useful life
of the asset when it is available for use. The useful lives are reviewed at each financial year end and, if
expectations differ from previous estimates, the changes are recognised prospectively.
The useful lives, in years, of assets by type of facility are as follows:
Buildings
Electric power transmission grids
Substations
Other
Useful lives
25-60
30-50
15-35
5-20
12
JSC “FGC UES”
Notes to the Consolidated Financial Statements
(in millions of Russian Roubles unless otherwise stated)
Note 3. Summary of significant accounting policies (continued)
At each reporting date the management assess whether there is any indication of impairment of property, plant
and equipment. If any such indication exists, the management estimates the recoverable amount, which is
determined as the higher of an asset’s fair value less costs to sell and its value in use. The carrying amount is
reduced to the recoverable amount and the impairment loss is recognised as current period loss to the extent it
exceeds the previous revaluation surplus in equity on the same asset. An impairment loss recognised for an asset
in prior years is reversed if there has been a change in the estimates used to determine the asset’s value in use or
fair value less costs to sell.
Intangible assets. All of the Group’s intangible assets have definite useful lives and primarily include capitalised
computer software and licences.
Acquired computer software and licences are capitalised on the basis of the costs incurred to acquire and bring
them to use. Costs that are directly associated with the production of identifiable and unique software products
controlled by the Group, and that will probably generate economic benefits, are recognised as intangible assets.
After initial recognition, intangible assets are carried at cost less accumulated amortisation and any accumulated
impairment losses. Amortisation of intangible assets is calculated on a straight-line basis over the useful lives.
At each reporting date the management assesses whether there is any indication of impairment of intangible
assets. If impaired, the carrying amount of intangible assets is written down to the higher of value in use and fair
value less cost to sell.
Research costs are recognised as an expense as incurred. Costs incurred on development projects are recognised
as intangible assets only when the Group can demonstrate the technical feasibility of completing the intangible
asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset,
how the asset will generate future economic benefits, the availability of resources to complete and the ability to
measure reliably the expenditure incurred during the development. Other development expenditures are
recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised
as an asset in a subsequent period. The carrying value of development costs is reviewed for impairment annually.
Cash and cash equivalents. Cash comprises cash in hand and cash deposited on demand at banks. Cash
equivalents comprise short-term highly liquid investments that are readily convertible into cash and have a
maturity of three months or less from the date of origination and are subject to insignificant changes in value.
Cash and cash equivalents are carried at amortised cost using the effective interest method.
Bank deposits. Bank deposits comprise cash deposited at banks with a maturity date of more than three months
from the acquisition date. Bank deposits are carried at amortised cost using the effective interest method.
Promissory notes. Promissory notes are financial assets with fixed or determinable cash flows recognised
initially at fair value and subsequently carried at amortised cost using the effective interest method.
Trade and other receivables. Trade and other receivables are recorded inclusive of value added tax (VAT).
Trade and other receivables are initially recognised at fair value and subsequently carried at amortised cost using
the effective interest method.
Impairment of financial assets carried at amortised cost. Impairment losses are recognised in profit or loss
when incurred as a result of one or more events (“loss events”) that occurred after the initial recognition of the
financial asset and which have an impact on the amount or timing of the estimated future cash flows of the
financial asset or group of financial assets that can be reliably estimated. The primary factors that the Group
considers in determining whether a financial asset is impaired are its overdue status and realisability of related
collateral, if any.
If the terms of an impaired financial asset held at amortised cost are renegotiated or otherwise modified because
of financial difficulties of the counterparty, impairment is measured using the original effective interest rate
before the modification of terms.
Impairment losses are always recognised through an allowance account to write down the asset’s carrying
amount to the present value of expected cash flows (which exclude future credit losses that have not been
incurred) discounted at the original effective interest rate of the asset. The calculation of the present value of the
estimated future cash flows of a collateralised financial asset reflects the cash flows that may result from
foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is probable.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively
to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating),
the previously recognised impairment loss is reversed by adjusting the allowance account in profit or loss.
13
JSC “FGC UES”
Notes to the Consolidated Financial Statements
(in millions of Russian Roubles unless otherwise stated)
Note 3. Summary of significant accounting policies (continued)
Uncollectible assets are written off against the related impairment loss provision after all the necessary
procedures to recover the asset have been completed and the amount of the loss has been determined.
Subsequent recoveries of amounts previously written off are credited to impairment loss account in profit or loss.
Prepayments. Prepayments are carried at cost less provision for impairment. A prepayment is classified as non-
current when the goods or services relating to the prepayment are expected to be obtained after one year, or when
the prepayment relates to an asset which will itself be classified as non-current upon initial recognition. If there is
an indication that the assets, goods or services relating to a prepayment will not be received, the carrying value of
the prepayment is written down accordingly and a corresponding impairment loss is recognised in profit or loss.
Inventories. Inventories mostly include repair materials and spare parts for transmission assets. Inventories are
valued at the lower of cost and net realisable value. Cost of inventory is determined on the weighted average
basis. Net realisable value is the estimated selling price in the ordinary course of business, less selling expenses.
Value added tax. Output value added tax related to sales is payable to tax authorities on the earlier of (a) collection
of receivables from customers or (b) delivery of goods or services to customers. Input VAT is generally
recoverable against output VAT upon receipt of the VAT invoice. The tax authorities permit the settlement of
VAT on a net basis. VAT related to sales and purchases is recognised in the consolidated statement of financial
position on a net basis and disclosed as an asset or liability. Where provision has been made for impairment of
receivables, impairment loss is recorded for the gross amount of the debtor, including VAT.
Non-current assets classified as held for sale. Non-current assets and disposal groups (which may include both
non-current and current assets) are classified in the consolidated statement of financial position as ‘non-current
assets held for sale’ if their carrying amount will be recovered principally through a sale transaction (including
loss of control of a subsidiary holding the assets) within twelve months after the reporting period. Assets are
reclassified when all of the following conditions are met: (a) the assets are available for immediate sale in their
present condition; (b) the Group’s management approved and initiated an active programme to locate a buyer;
(c) the assets are actively marketed for a sale at a reasonable price; (d) the sale is expected within one year; and
(e) it is unlikely that significant changes to the plan to sell will be made or that the plan will be withdrawn.
Non-current assets or disposal groups classified as held for sale in the current period’s consolidated statement of
financial position are not reclassified or re-presented in the comparative consolidated statement of financial
position to reflect the classification at the end of the current period.
A disposal group is a group of assets (current or non-current) to be disposed of, by sale or otherwise, together as
a group in a single transaction, and liabilities directly associated with those assets that will be transferred in the
transaction.
Held for sale disposal groups as a whole are measured at the lower of their carrying amount and fair value less
costs to sell. Reclassified non-current financial instruments and deferred taxes are not subject to the write down
to the lower of their carrying amount and fair value less costs to sell.
Income taxes. Income taxes have been provided for in these Consolidated Financial Statements in accordance
with Russian legislation enacted or substantively enacted by the end of the reporting period. The income tax
charge comprises current tax and deferred tax and is recognised in the profit or loss unless it relates to
transactions that are recognised, in the same or a different period, in other comprehensive income.
Current tax is the amount expected to be paid to or recovered from the taxation authorities in respect of taxable
profits/losses for the current and prior periods. Taxes other than on income are recorded as operating expenses.
Deferred income tax is provided using the balance sheet liability method for tax loss carry forwards and
temporary differences arising between the tax bases of assets and liabilities and their carrying amounts for
financial reporting purposes. In accordance with the initial recognition exemption, deferred taxes are not
recorded for temporary differences on initial recognition of an asset or a liability in a transaction other than a
business combination if the transaction, when initially recorded, affects neither accounting nor taxable profit.
Deferred tax balances are measured at tax rates enacted or substantively enacted at the end of the reporting
period which are expected to apply to the period when the temporary differences will reverse or the tax loss carry
forwards will be utilised. Deferred tax assets and liabilities are netted only within the individual companies of
the Group. Deferred tax assets for deductible temporary differences and tax loss carry forwards are recorded only
to the extent that it is probable that future taxable profit will be available against which the deductions can be
utilised.
Deferred income tax is provided on post acquisition retained earnings and other post acquisition movements in
reserves of subsidiaries, except where the Group controls the subsidiary’s dividend policy and it is probable that
the difference will not reverse through dividends or otherwise in the foreseeable future.
14
JSC “FGC UES”
Notes to the Consolidated Financial Statements
(in millions of Russian Roubles unless otherwise stated)
Note 3. Summary of significant accounting policies (continued)
The Group's uncertain tax positions are reassessed by management at each end of the reporting period. Liabilities
are recorded for income tax positions that are determined by management as more likely than not to result in
additional taxes being levied if the positions were to be challenged by the tax authorities. The assessment is
based on the interpretation of tax laws that have been enacted or substantively enacted by the end of the
reporting period and any known court or other rulings on such issues. Liabilities for penalties, interest and taxes
other than on income are recognised based on management’s best estimate of the expenditure required to settle
the obligations at the end of the reporting period.
Trade accounts payable and accrued charges. Trade accounts payable are stated inclusive of value added tax.
Trade payables are accrued when the counterparty performed its obligations under the contract. Accounts
payable are initially recognised at fair value and subsequently carried at amortised cost using the effective
interest method.
Advances received. Advances received are primarily a deferred income for the future connection services and are
stated at nominal amount.
Debt. Debt is recognised initially at its fair value plus transaction costs that are directly attributable to its issue.
Fair value is determined using the prevailing market rates of interest for similar instruments, if significantly
different from the transaction price. In subsequent periods, debt is stated at amortised cost using the effective
interest method; any difference between the fair value of the proceeds (net of transaction costs) and the
redemption amount is recognised in profit or loss as an interest expense over the period of the debt obligation.
Borrowing costs are expensed in the period in which they are incurred if not related to purchase or construction
of qualifying assets. Borrowing costs directly attributable to the acquisition, construction or production of assets
that necessarily take a substantial time to get ready for intended use or sale (qualifying assets) are capitalised as
part of the costs of those assets. The commencement date for capitalisation is when the Group (a) incurs
expenditures for the qualifying asset; (b) incurs borrowing costs; and (c) undertakes activities that are necessary
to prepare the asset for its intended use or sale. Capitalisation of borrowing costs continues up to the date when
the assets are substantially ready for their use or sale. The Group capitalises borrowing costs that could have
been avoided if it had not made capital expenditure on qualifying assets. Borrowing costs capitalised are
calculated at the Group’s average funding cost (the weighted average interest cost is applied to the expenditures
on the qualifying assets), except to the extent that funds are borrowed specifically for the purpose of obtaining a
qualifying asset. Where this occurs, actual borrowing costs incurred less any investment income on the
temporary investment of those borrowings are capitalised.
Pension and post-employment benefits. In the normal course of business the Group makes mandatory social security
contributions to the Pension Fund of the RF on behalf of its employees. These contributions are expensed when
incurred and included in employee benefit expenses and payroll taxes in profit or loss.
In addition, the Group maintains a number of post-employment and other long-term benefit plans which are defined
benefit in nature. These plans include life pension, lump sum upon retirement, financial support after retirement,
jubilee and death benefits and cover majority of the Group’s employees. Under the pension plan amount of pension
benefits that an employee will receive after retirement dependents on his date of birth, number of years of service,
position, salary and presence of awards. The Group settles its liability to provide life pension through a non-state
pension fund. However, the assets held in the non-state pension fund do not meet definition of plan assets in
accordance with IAS 19. These assets are accounted for as other non-current assets. Other benefits, apart from life
pension payable via the non-state pension fund, are provided when they are due directly by the Group.
The liability recognised in the consolidated statement of financial position in respect of the defined benefit pension
plans is the present value of the defined benefit obligation at the end of the reporting period together with
adjustments for unrecognised actuarial gains or losses and past service cost. The defined benefit obligations are
calculated using the projected unit credit method. The present value of the defined benefit obligations is determined
by discounting the estimated future cash outflows using interest rate of government bonds that have terms to
maturity approximating the terms of the related pension liabilities.
With regard to post-employment benefits, actuarial gains and losses in excess of 10% of the defined benefit
obligation are recognised as an expense over the average remaining working life of employees. Past service costs
are recognised immediately as an expense in the consolidated statement of comprehensive income to the extent that
the benefits have vested, and are otherwise recognised on a straight-line basis over the average period until the
benefits vest.
Actuarial gains and losses and past service costs related to other long-term employee benefits are recognised as an
expense in the consolidated statement of comprehensive income when they arise.
15
JSC “FGC UES”
Notes to the Consolidated Financial Statements
(in millions of Russian Roubles unless otherwise stated)
Note 3. Summary of significant accounting policies (continued)
Share-based compensation. The Group operates an equity-settled, share-based compensation plan, under which the
Group receives services from employees as consideration for equity instruments (options) of FGC UES. The fair
value of options granted to employees is recognised as an employee benefit expense, with a corresponding increase
in equity, over the period that employees become unconditionally entitled to the options (vesting period). At the end
of each reporting period the Group revises its estimates of the number of options that are expected to vest based on
the non-market vesting conditions. The impact of the revision to original estimates, if any, is recognised in the
profit or loss, with a corresponding adjustment to equity.
Operating leases. Where the Group is a lessee in a lease which does not transfer substantially all the risk and
rewards incidental to ownership from the lessor to the Group, the total lease payments, including those on
expected termination, are charged to profit or loss on a straight-line basis over the period of the lease.
Finance lease liabilities. Where the Group is a lessee in a lease which transferred substantially all the risks and
rewards incidental to ownership to the Group, the assets leased are capitalised in property, plant and equipment
at the commencement of the lease at the lower of the fair value of the leased asset and the present value of the
minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to
achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of future
finance charges, are included in debts. The interest cost is charged to profit or loss over the lease period using the
effective interest method. The assets acquired under finance leases are depreciated over their useful life or the
shorter lease term if the Group is not reasonably certain that it will obtain ownership by the end of the lease term.
Treasury shares. Treasury shares are stated at weighted average cost. Any gains or losses arising on the disposal
of treasury shares are recorded directly in shareholders’ equity.
Dividends. Dividends are recognised as a liability and deducted from equity at the end of the reporting period
only if they are declared (approved by shareholders) before or on the end of the reporting period. Dividends are
disclosed when they are declared after the end of the reporting period, but before the consolidated financial
statements are authorised for issue.
Non-controlling interest. Non-controlling interest represents minority’s proportionate share of the equity and
comprehensive income of the Group’s subsidiaries. This has been calculated based upon the non-controlling
interests’ ownership percentage of these subsidiaries. Specific rights on liquidation for preference shareholders
of subsidiaries are included in the calculation of non-controlling interests. The Group uses the ‘economic entity’
approach to the recognition of non-controlling interest. Any gains or losses resulting from the purchases and
sales of the non-controlling interests are recognised in the consolidated statement of changes in equity.
Revenue recognition. Revenue amounts are presented exclusive of value added tax. Revenue from rendering the
electricity transmission services is recognised in the period when the services are provided. Revenue from sales of
electricity is recognised on the delivery of electricity. Revenue from connection services represents a non-refundable
fee for connecting the customer to the electricity grid network and is recognised when the customer is connected to
the grid network.
Share capital. Ordinary shares with discretionary dividends are classified as equity upon completion of share issue
and registration of the issue in the Federal Financial Markets Service. Any excess of the fair value of consideration
received over the par value of shares issued is recorded as share premium in equity.
Earnings per share. Earnings per share are determined by dividing the profit or loss attributable to owners of the
Company by the weighted average number of participating shares outstanding during the reporting period.
16
JSC “FGC UES”
Notes to the Consolidated Financial Statements
(in millions of Russian Roubles unless otherwise stated)
Note 4. Principal subsidiaries
All subsidiaries are incorporated and operate in the Russian Federation.
The principal subsidiaries as at 31 December 2012 and 31 December 2011 are presented below:
Name
Transmission companies:
OJSC “The Kuban trunk grids”
OJSC “The Tomsk trunk grids”
Other companies
OJSC “Nurenergo”
OJSC “Mobile gas-turbine electricity plants”
OJSC “Research and development centre of FGC
UES”
OJSC “Dalenergosetproject”
OJSC “Specialised electricity transmission service
company of the UNEG”
OJSC “Engineering and construction management
centre of Unified Energy System”
LLC “Index energetiki – FGC UES”
31 December 2012
31 December 2011
Ownership, % Voting, % Ownership, % Voting, %
49.0
52.0
77.0
100.0
100.0
100.0
100.0
100.0
100.0
49.0
59.9
77.0
100.0
100.0
100.0
100.0
100.0
100.0
49.0
52.0
77.0
100.0
100.0
100.0
49.0
59.9
77.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
Transmission companies. OJSC “The Kuban trunk grids” and OJSC “The Tomsk trunk grids” own the UNEG
assets which are maintained and operated by the Company.
OJSC “Nurenergo” performs electricity distribution and sale activity in the Republic of Chechnya. Due to the
difficult operating environment in the Republic of Chechnya, OJSC “Nurenergo” has negative net assets.
OJSC “Mobile gas-turbine electricity plants”. The primary activity of the company is generating and sale of
electricity provided by mobile gas-turbine electricity plants used in power deficient points of the power system
or in peak periods as temporary source of additional capacity.
OJSC “Research and development centre of FGC UES” is a research and development project institution in the
sphere of electric power.
OJSC “Dalenergosetproject” is a grid engineering company.
OJSC “Specialised electricity transmission service company of the UNEG”. The main activities of this company
are technical inspection, maintenance and regular and emergency repairs of power grids and other electric power
facilities of the UNEG.
OJSC “Engineering and construction management centre of Unified Energy System”. The main activity of this
company is functioning as a customer-developer
in capital construction projects associated with the
reconstruction and technical modernisation of electricity supply facilities and infrastructure.
LLC “Index energetiki – FGC UES” (“Index Energetiki”) owns minority shares in OJSC “INTER RAO UES”
and OJSC “Russian Grids” (former OJSC “IDGC Holding”).
Note 5. Balances and transactions with related parties
Government-related entities. In the normal course of business the Group enters into transactions with
government-related entities – entities, controlled,
jointly controlled or significantly influenced by the
Government of the RF. Large portion of the Group's primary activity – transmission services are rendered to
government-related entities at the regulated tariffs. The Group borrows funds from government-related banks at
the prevailing market rates. Taxes are accrued and settled in accordance with Russian tax legislation.
During the years ended 31 December 2012 and 31 December 2011 the Group had the following significant
transactions with government-related entities:
Transmission revenue
Electricity sales
Connection services
Purchased electricity for production needs
Year ended
31 December 2012
119,024
726
212
6,615
Year ended
31 December 2011
120,247
876
373
6,910
17
JSC “FGC UES”
Notes to the Consolidated Financial Statements
(in millions of Russian Roubles unless otherwise stated)
Note 5. Balances and transactions with related parties (continued)
Significant balances with government-related entities are presented below:
Cash and cash equivalents
Bank deposits
Long-term promissory notes
Short-term promissory notes
Loans given
Trade receivables
31 December 2012
9,637
300
101
17,264
9
31 December 2011
20,464
390
3,836
14,680
430
(net of allowance for doubtful debtors of RR 2,508 million as at
31 December 2012 and RR 3,931 million as at 31 December 2011)
Available-for-sale investments
Advances to construction companies and suppliers of property, plant and
equipment (included in construction in progress)
Accounts payable to the shareholders of FGC UES
Non-current debt
Current debt
Accounts payable and accrued charges
15,806
50,617
2,106
(3,257)
(35,700)
(183)
(15,137)
10,161
69,979
2,764
(2,275)
(25,778)
(227)
(11,503)
As at 31 December 2012 the Group had long-term undrawn committed financing facilities with government-
related banks of RR 70,000 million (as at 31 December 2011: 60,000) (Note 18). There were no short-term
undrawn committed financing facilities with government-related banks as at 31 December 2012 (as at
31 December 2011: RR 15,000 million) (Note 20).
Tax balances and charges are disclosed in Notes 17, 21 and 23. Tax transactions are disclosed in the
Consolidated Statement of Comprehensive Income.
Directors’ compensation. Compensation is paid to the members of the Management Board for their services in
full time management positions. The compensation is made up of a contractual salary, non-cash benefits, and a
performance bonus depending on results for the period according to Russian statutory financial statements. Also,
additional medical coverage is provided to the members of Management Board and their close family members.
Fees, compensation or allowances to the members of the Board of Directors for their services in that capacity
and for attending Board meetings are paid depending on results for the year. Fees, compensation or allowances,
are not paid to the members of the Board of Directors who are government employees.
Total remuneration in the form of salary, bonuses and non-cash benefits (social security contributions are not
included) provided to the members of the Management Board for the year ended 31 December 2012 and 31
December 2011 was as follows:
Short-term compensation, including salary and bonuses
Post-employment benefits and other long-term benefits
Share-based compensation
Total
Year ended
31 December 2012
Year ended
31 December 2011
341
10
326
677
416
12
638
1,066
The amount of the short-term compensation to members of the Management Board represents remuneration
accrued during the respective period, including bonuses based on the results of the preceding financial year.
No remuneration was provided to the members of the Board of Directors for the year ended 31 December 2012
(for the year ended 31 December 2011: RR 7 million).
18
JSC “FGC UES”
Notes to the Consolidated Financial Statements
(in millions of Russian Roubles unless otherwise stated)
Note 6. Property, plant and equipment
Buildings
Power trans-
mission grids
Substations
Construction
in progress
Other
Total
Appraisal value or cost
Balance as at 1 January 2012
Additions
Transfers
Disposals
Reversal of impairment provision
16,173
1,360
1,603
(5)
-
481,535
180
73,267
(114)
-
Balance as at 31 December 2012
19,131
554,868
Including PPE under finance lease
-
-
Accumulated depreciation and impairment
Balance as at 1 January 2012
Depreciation charge
Impairment loss
Disposals
(487)
(502)
-
-
Balance as at 31 December 2012
Including PPE under finance lease
(989)
-
(33,387)
(21,721)
(116)
18
(55,206)
-
200,419
1,341
85,700
(1,917)
-
285,543
2,273
(26,552)
(17,633)
-
529
(43,656)
(1,110)
325,009
155,300
(164,649)
(883)
384
23,460
4,051
4,079
(240)
-
1,046,596
162,232
-
(3,159)
384
315,161
31,350
1,206,053
-
914
3,187
(1,310)
-
(155)
-
(1,465)
-
(4,183)
(4,052)
(60)
93
(8,202)
(125)
(65,919)
(43,908)
(331)
640
(109,518)
(1,235)
Net book value as at 1 January 2012
15,686
448,148
173,867
323,699
19,277
980,677
Net book value as at 31 December
2012
18,142
499,662
241,887
313,696
23,148
1,096,535
Buildings
Power trans-
mission grids
Substations
Construction
in progress
Other
Total
Appraisal value or cost
Balance as at 1 January 2011
Additions
Transfers
Disposals
Balance as at 31 December 2011
Including PPE under finance lease
8,257
6,022
1,905
(11)
16,173
-
Accumulated depreciation and impairment
Balance as at 1 January 2011
Depreciation charge
Impairment loss
Disposals
(213)
(276)
-
2
Balance as at 31 December 2011
Including PPE under finance lease
(487)
-
437,535
231
43,909
(140)
481,535
-
(16,151)
(17,249)
-
13
(33,387)
-
134,401
452
67,453
(1,887)
200,419
2,273
(13,256)
(13,577)
-
281
(26,552)
(1,051)
289,934
152,589
(116,905)
(609)
13,171
6,779
3,638
(128)
883,298
166,073
-
(2,775)
325,009
23,460
1,046,596
-
914
3,187
(332)
-
(1,127)
149
(1,310)
-
(2,118)
(2,085)
(47)
67
(4,183)
(53)
(32,070)
(33,187)
(1,174)
512
(65,919)
(1,104)
Net book value as at 1 January 2011
8,044
421,384
121,145
289,602
11,053
851,228
Net book value as at 31 December
2011
15,686
448,148
173,867
323,699
19,277
980,677
Borrowing costs of RR 12,969 million for the year ended 31 December 2012 were capitalised within additions
(for the year ended 31 December 2011: RR 5,833 million). A capitalisation rate of 8.4% was used for the year
ended 31 December 2012 (for the year ended 31 December 2011: 7.7%) to determine the amount of borrowing
costs eligible for capitalisation, representing the weighted average of the borrowing costs applicable to the
borrowings of the Group that were outstanding during the periods.
Construction in progress is represented by the carrying amount of property, plant and equipment that has not yet
been put into operation and advances to construction companies and suppliers of property, plant and equipment.
As at 31 December 2012 such advances amounted to RR 53,757 million net of specific impairment of RR 103
million (as at 31 December 2011: RR 69,504 million net of specific impairment RR 525 million).
19
JSC “FGC UES”
Notes to the Consolidated Financial Statements
(in millions of Russian Roubles unless otherwise stated)
Note 6. Property, plant and equipment (continued)
Other property, plant and equipment include motor vehicles, computer equipment, office fixtures and other
equipment. Land plots are classified together with items of property, plant and equipment located on them.
Revaluation. Property, plant and equipment was revalued at 31 December 2009. The revaluation was performed
by independent appraisers on a depreciated replacement cost basis, except for most of administrative buildings
which were valued on the basis of recent market transactions involving similar assets on arm’s length terms. The
replacement cost for most power transmission lines, substations and construction in progress is based on their
technical capabilities, construction costs and construction cost estimates. The cost to replace the majority of the
Group’s equipment is measured on the basis of purchase agreements and manufacturers’ and selling companies’
price-lists. The depreciated replacement cost was tested for impairment using a profitability test with respect to
each cash generating unit. The Group’s Transmission segment (Note 31) was considered as a single cash
generating unit.
Recoverable amount of property, plant and equipment. The Group assessed the recoverable amount for
transmission business at 31 December 2012. The following assumptions have been made as part of the
impairment test for the companies involved in transmission activity:
Revenue projections are based on the Group’s expectations of an increase of the rate of return on capital
employed in view of the transfer to Regulatory Asset Base tariff regulation – up to 10% in 2014;
The amount of expenditure for the period from 2013 through 2030 required for the maintenance of the
current property, plant and equipment is assumed to be equal to the amount of such expenditure
determined as allowable for the purpose of tariff regulation;
A nominal pre-tax discount rate of 10.24% was determined based on the weighted average cost of
capital.
The recoverable amount assessed for property, plant and equipment
involved in transmission activity
approximates its carrying value. Therefore, neither revaluation nor impairment of property, plant and equipment
was recorded as at 31 December 2012. If the discount rate would be 0.5% higher the carrying amounts of
property, plant and equipment would exceed the recoverable amount by approximately 1.4%.
For each class of property, plant and equipment stated at revalued amount in these Consolidated Financial
Statements, the carrying amount that would have been recognised had the assets been carried under the historical
cost basis is as follows:
Net book value as at
31 December 2012
Net book value as at
31 December 2011
Net book value as at
31 December 2010
Power
transmission
grids
Buildings
Substations
Construction
in progress
Other
Total
15,278
235,457
257,819
341,017
24,711
874,282
12,826
164,818
179,641
374,811
20,623
752,719
4,519
118,145
106,065
373,238
11,816
613,783
Impairment. For the year ended 31 December 2012 the Group recognised a net reversal of an impairment of
property, plant and equipment in the amount of RR 53 million, which consisted of a net reversal of an
impairment of RR 368 million related to advances to construction companies and suppliers of property, plant and
equipment, an impairment of RR 188 million related to property, plant and equipment of OJSC “Nurenergo” and
a specific impairment of RR 127 million related to construction in progress which cost is not expected to be
recovered.
For the year ended 31 December 2011 the Group recognised a net impairment of property, plant and equipment
in the amount of RR 1,174 million, which consisted of an impairment of RR 442 million related to advances to
construction companies and suppliers of property, plant and equipment, an impairment of RR 302 million related
to property, plant and equipment of OJSC “Nurenergo” and a specific impairment of RR 430 million related to
construction in progress which cost is not expected to be recovered.
Leased property, plant and equipment. Included in property, plant and equipment are certain items under
finance leases. As at 31 December 2012 the net book value of leased property, plant and equipment was RR
1,952 million (as at 31 December 2011: RR 2,083 million). The leased equipment is pledged as security for the
lease obligations.
20
JSC “FGC UES”
Notes to the Consolidated Financial Statements
(in millions of Russian Roubles unless otherwise stated)
Note 6. Property, plant and equipment (continued)
Operating leases. The Group leases a number of land areas owned by the local government under operating
lease. The expected lease payments due are determined based on the lease agreements and payable as follows:
Under one year
Between one and five years
Over five years
Total
31 December 2012
717
1,503
8,588
10,808
31 December 2011
413
1,146
7,627
9,186
The above lease agreements are usually signed for period of 1 to 49 years and may be extended for a longer
period. The lease payments are subject to review on a regular basis to reflect market rent prices.
As at 31 December 2012 the carrying value of property, plant and equipment leased out under operating lease
was RR 4,142 million (as at 31 December 2011: RR 2,988 million).
Note 7. Intangible assets
Corporate
information
management system
(SAP R/3)
Other
intangible
assets
Cost as at 1 January 2011
Accumulated amortisation
Accumulated impairment
Carrying value
as at 1 January 2011
Additions
Disposals - cost
Disposals - accumulated amortisation
Amortisation charge
Write-off of previously impaired assets
Carrying value
as at 31 December 2011
Cost as at 31 December 2011
Accumulated amortisation
Accumulated impairment
Carrying value
as at 31 December 2011
Cost as at 1 January 2012
Accumulated amortisation
Carrying value
as at 1 January 2012
Additions
Disposals - cost
Disposals - accumulated amortisation
Amortisation charge
Carrying value
as at 31 December 2012
Cost as at 31 December 2012
Accumulated amortisation
Carrying value
as at 31 December 2012
4,722
(1,021)
(661)
3,040
309
(661)
-
(320)
661
3,029
4,370
(1,341)
-
3,029
4,370
(1,341)
3,029
547
(66)
66
(84)
3,492
4,851
(1,359)
3,492
4,870
(1,721)
-
3,149
1,401
(157)
96
(545)
-
3,944
6,114
(2,170)
-
3,944
6,114
(2,170)
3,944
2,389
(291)
272
(487)
5,827
8,212
(2,385)
Total
9,592
(2,742)
(661)
6,189
1,710
(818)
96
(865)
661
6,973
10,484
(3,511)
-
6,973
10,484
(3,511)
6,973
2,936
(357)
338
(571)
9,319
13,063
(3,744)
The Corporate information management system (SAP R/3) consists of several modules (parts) and related
licences. As at 31 December 2012 only certain modules (parts) were placed in operation and are subject to
amortisation. These modules are amortised during 5 years, on a straight-line basis. SAP R/3 includes
development costs of RR 2,631 million as at 31 December 2012 (as at 31 December 2011: RR 2,496 million).
21
5,827
9,319
JSC “FGC UES”
Notes to the Consolidated Financial Statements
(in millions of Russian Roubles unless otherwise stated)
Note 7. Intangible assets (continued)
Other intangible assets include capitalised software development costs that meet the definition of an intangible
asset of RR 1,515 million as at 31 December 2012 (as at 31 December 2011: RR 2,483 million).
As at 31 December 2012 and 31 December 2011 management assessed the recoverable amount of non-current
assets of Transmission segment (Note 6), which includes most of the intangible assets of the Group. As a result
of the assessment performed no impairment was identified as at those dates.
Note 8. Investments in associates
The movements in the carrying value of investments in associates are as follows:
Carrying value as at 1 January
Share of result of associates
Reversal of impairment of investments in associates
Property, plant and equipment revaluation reserve
Translation difference
Transfer from non-current assets held for sale
Carrying value as at 31 December
The carrying value of investments in associates is as follows:
JSC UES “GruzRosEnergo”
Other associates
Total investments in associates
Year ended
31 December 2012
910
21
313
209
(50)
-
1,403
Year ended
31 December 2011
348
8
-
-
66
488
910
31 December 2012
1,036
367
1,403
31 December 2011
557
353
910
in JSC UES “GruzRosEnergo”. In 2007,
Remeasurement of the investment
the Group recognised an
impairment of the investment in JSC UES “GruzRosEnergo” in the amount of RR 241 million. In 2010, this
investment was reclassified as held for sale under IFRS 5 “Non-current assets held for sale and discontinued
operations” (Note 24) and re-measured downwards by RR 72 million. In 2011, following its exclusion from the
transaction with INTER RAO, the investment was reclassified back from assets held for sale to investments in
associates.
In 2012, the Group received the results of an independent appraisal of property, plant and equipment of JSC UES
“GruzRosEnergo”. According to it, the fair value of the Group’s interest in net assets of the entity increased,
therefore the impairment provision in the total amount of RR 313 million was reversed. The remaining part of
the increase (less share of result for the period and translation difference) was recognised as revaluation reserve
for property, plant and equipment of the associate.
Note 9. Available-for-sale investments
1 January 2012
Additions
Change in
fair value**
Impairment
charge
31 December 2012
OJSC “INTER RAO UES”
OJSC “Russian Grids”*
Total
67,077
2,902
69,979
-
-
-
-
(421)
(421)
(18,941)
-
(18,941)
48,136
2,481
50,617
1 January 2011
Additions
Change in
fair value**
Impairment
charge
31 December 2011
OJSC “INTER RAO UES”
OJSC “Russian Grids”*
Total
2,674
6,857
9,531
79,387
-
79,387
(2,323)
(3,955)
(6,278)
(12,661)
-
(12,661)
67,077
2,902
69,979
* Former OJSC “IDGC Holding”.
** For the year ended 31 December 2012 change in fair value of these available-for-sale investments in the total
amount of RR 19,362 million was recognised in other comprehensive income (for the year ended 31 December
2011: RR 18,939 million). The amount of RR 18,941 million was reclassified from other comprehensive income
to profit or loss for the year ended 31 December 2012 (for the year ended 31 December 2011: RR 12,661 million).
22
JSC “FGC UES”
Notes to the Consolidated Financial Statements
(in millions of Russian Roubles unless otherwise stated)
Note 9. Available-for-sale investments (continued)
Available-for-sale investments valuation. The fair value of the available-for-sale financial instruments was
determined based on the quoted market prices.
Impairment of investment in OJSC “INTER RAO UES”. During the year ended 31 December 2012 the fair
value of shares in INTER RAO continued to decline below cost. Management assessed these investments for
impairment as at 31 December 2012 and concluded that there was evidence of a significant and prolonged
decline in the fair value of equity investments below their cost. The fall in fair value of these investments during
the reporting period amounted to RR 18,941 million, and the impairment recognised in other comprehensive
income was recycled from equity to profit or loss.
Note 10. Promissory notes
Long-term promissory notes
Bank promissory notes
Non-bank promissory notes
Total long-term promissory notes
Short-term promissory notes
Bank promissory notes
Non-bank promissory notes
Total short-term promissory notes
Effective
interest rate
Due
31 December
2012
31 December
2011
7.3%-12.6%
8.9%-12.6%
2014-2015
2014-2038
6.1%-9.01%
8.9%-12.6%
2013
2012-2013
928
529
1,457
18,768
4,612
23,380
1,794
13,134
14,928
20,071
666
20,737
All promissory notes are denominated in Russian Roubles. As at 31 December 2012 and 31 December 2011 the
fair value of promissory notes, determined using valuation technique, was RR 24,869 million and RR 35,731
million respectively. The valuation was mainly based on discounting of the future expected cash flows at the
current market interest rate available for debtors with similar level of credit risk.
Included in long-term non-bank promissory notes are promissory notes of LLC “ENERGO-finance” which are
fully impaired (carrying value as at 31 December 2011: RR 9,197 million) (Note 29). The amount of impairment
provision was RR 12,022 million as at 31 December 2012 (as at 31 December 2011: RR 2,825 million).
Note 11. Other non-current assets
Long-term trade receivables
(net of allowance for doubtful debtors of RR 580 million as at
31 December 2012 and RR 108 million as at 31 December 2011)
Total financial assets
VAT recoverable
Other non-current assets
Total other non-current assets
Note 12. Cash and cash equivalents
Cash at bank and in hand
Cash equivalents
Total cash and cash equivalents
Cash at bank and in hand
OJSC “Gazprombank”
OJSC “Alfa-Bank”
OJSC "Bank “ROSSIYA”
OJSC “Sberbank”
Other banks
Cash in hand
Total cash at bank and in hand
Rating
ВВB-
BB+
BB-
Ваа1
Rating agency
Standard & Poor's
Standard & Poor's
Standard & Poor's
Moody’s
31 December 2012
31 December 2011
3,382
3,382
121
995
4,498
116
116
216
707
1,039
31 December 2012
31 December 2011
20,022
4,034
24,056
18,925
6,702
25,627
31 December 2012
7,857
6,297
4,000
1,745
118
5
31 December 2011
150
1,065
4,000
13,654
51
5
20,022
18,925
23
JSC “FGC UES”
Notes to the Consolidated Financial Statements
(in millions of Russian Roubles unless otherwise stated)
Note 12. Cash and cash equivalents (continued)
Cash equivalents include short-term investments in certificates of deposit:
Bank deposits
OJSC “Sberbank”
OJSC “VTB bank”
OJSC “Gazprombank”
Total certificates of deposit
Interest rate Rating
Ваа1
5.3%-6.9%
BBB
7.8%-8.3%
ВВB-
7.6%-8.0%
Rating agency
Moody’s
Standard & Poor's
Standard & Poor's
31 December 2012
3,539
379
35
3,953
31 December 2011
5,420
690
550
6,660
There were no certificates of deposit denominated in foreign currency included in cash equivalents as at
31 December 2012 and 31 December 2011.
Note 13. Bank deposits
OJSC “Alfa-Bank”
OJSC “Sberbank”
OJSC “Gazprombank”
OJSC “VTB bank”
Total bank deposits
Interest rate
6.0%-9.3%
8.3%
8.6%-8.7%
5.6%
Rating
BB+
Ваа1
ВВB-
BBB
Rating agency
Standard&Poor's
Moody’s
Standard&Poor's
Standard&Poor's
31 December 2012
680
210
90
-
980
31 December 2011
794
190
-
200
1,184
The carrying amount of bank deposits approximates their fair value.
There were no bank deposits denominated in foreign currency as at 31 December 2012 and 31 December 2011.
Note 14. Accounts receivable and prepayments
Trade receivables
(net of allowance for doubtful debtors of RR 4,839 million as at
31 December 2012 and RR 6,570 million as at 31 December 2011)
Other receivables
(net of allowance for doubtful debtors of RR 689 million as at
31 December 2012 and RR 908 million as at 31 December 2011)
Total financial assets
VAT recoverable
Advances to suppliers
(net of allowance for doubtful debtors of RR 2,020 million as at
31 December 2012 and RR 2,033 million as at 31 December 2011)
Tax prepayments
Total accounts receivable and prepayments
31 December 2012
31 December 2011
20,512
12,036
1,504
22,016
14,034
2,685
73
38,808
932
12,968
16,597
2,764
615
32,944
Trade and other receivables are not interest-bearing and are largely due in 30 to 90 days. Given the short period
of the trade and other receivables repayment, the fair value of such receivables approximates their book value.
Tax prepayments will be settled against future tax liabilities.
Management has determined the provision for doubtful debtors based on specific customer identification,
customer payment trends, subsequent receipts and settlements and analyses of expected future cash flows. The
effects of discounting are reflected in the doubtful debtor allowance and expense. Management believes that
Group entities will be able to realise the net receivable amount through direct collections and other non-cash
settlements, and that therefore the recorded value of receivables approximates their fair value.
The movement of the provision for doubtful debtors is shown below:
Year ended
31 December 2012
As at 1 January
Provision accrual
Provision reversal
Debt written-off
Amortisation of discount
Reclassifications
As at 31 December
Long-term trade
receivables
108
488
-
-
(16)
-
580
Short-term
trade receivables
6,570
1,963
(3,643)
(32)
(9)
(10)
4,839
Other short-term
receivables
908
71
(262)
(25)
(4)
1
689
Advances to
suppliers
2,033
3
(25)
-
-
9
2,020
Total
9,619
2,525
(3,930)
(57)
(29)
-
8,128
24
JSC “FGC UES”
Notes to the Consolidated Financial Statements
(in millions of Russian Roubles unless otherwise stated)
Note 14. Accounts receivable and prepayments (continued)
Year ended
31 December 2011
As at 1 January
Provision accrual
Provision reversal
Debt written-off
Amortisation of discount
Reclassifications
As at 31 December
Long-term trade
receivables
224
2
-
-
(13)
(105)
108
Short-term trade
receivables
2,900
4,059
(98)
(3)
(314)
26
6,570
Other short-term
receivables
695
447
(172)
(13)
(14)
(35)
908
Advances to
suppliers
1,874
67
(22)
-
-
114
2,033
Total
5,693
4,575
(292)
(16)
(341)
-
9,619
As at 31 December 2012 the overdue accounts receivable for which the provision had not been recorded
amounted to RR 4,772 million (as at 31 December 2011: RR 3,210 million). The ageing analysis is shown
below:
Less than 3 months
3 to 6 months
6 to 12 months
1 year to 3 years
Total
31 December 2012
3,626
192
451
503
31 December 2011
2,576
378
64
192
4,772
3,210
The analysis of overdue accounts receivable for which the provision had been recorded is shown below, gross of
allowance for doubtful debtors:
Less than 3 months
3 to 6 months
6 to 12 months
1 year to 3 years
3 to 5 years
More than 5 years
Total
Note 15. Inventories
Spare parts
Repair materials
Other inventories
Total inventories
31 December 2012
268
786
875
2,630
840
30
31 December 2011
317
843
1,624
3,216
873
5
5,429
6,878
31 December 2012
2,326
1,651
3,030
7,007
31 December 2011
2,232
1,462
2,626
6,320
The cost of inventories is shown net of an obsolescence provision for RR 71 million as at 31 December 2012 (as
at 31 December 2011: RR 73 million). As at 31 December 2012 and 31 December 2011 the Group had no
inventories pledged as security under loan and other agreements.
Note 16. Equity
Share capital
Number of shares issued and fully paid
31 December 2012
31 December 2011
31 December 2012
31 December 2011
Ordinary shares
1,260,386,658,740
1,255,948,128,393
630,193
627,974
As at 31 December 2012 the authorised share capital comprised 1,346,805,824 thousand ordinary shares with a
nominal value of RR 0.5 per share.
Additional issue of shares. In March 2012, FGC UES completed and registered the additional share issue. The
amount of RR 2,219 million received for shares issued was included as at 31 December 2011 in the Consolidated
Statement of Financial Position as accounts payable to the shareholders of FGC UES. As a result of this issue,
the share capital was increased to RR 630,193 million.
25
JSC “FGC UES”
Notes to the Consolidated Financial Statements
(in millions of Russian Roubles unless otherwise stated)
Note 16. Equity (continued)
In November 2012, FGC UES started an additional share issue. The placement process started in December, but
was only completed after the year end (Note 32). The amount of RR 3,247 million received for shares issued was
included as at 31 December 2012 in the Consolidated Statement of Financial Position as accounts payable to the
shareholders of FGC UES.
Treasury shares. The Group through a subsidiary holds 13,727,165 thousand ordinary shares in treasury at a
total cost of RR 4,917 million (as at 31 December 2011: 5,522 million).
In 2012, treasury shares decreased by RR 605 million with the corresponding recognition of expense relating to
share-based compensation (see below), since management plans to use treasury shares for the share option plan.
Reserves. Reserves include Revaluation reserve for property, plant and equipment and available-for-sale
investments and Foreign currency translation reserve. The Foreign currency translation reserve relates to the
exchange differences arising on translation of the net assets of foreign associate.
Reserves comprise the following:
Revaluation reserve (net of tax) for:
- property, plant and equipment (Note 6)
- available-for-sale investments (Note 9)
Foreign currency translation reserve
Total reserves
Reserves for the year ended 31 December 2012 (net of tax):
31 December 2012
31 December 2011
311,479
1,588
50
313,117
312,298
1,925
100
314,323
Total
reserves
Revaluation reserve for:
property,
plant and
equipment
(Notes 6, 8)
available-
for-sale
investments
(Note 9)
Foreign
currency
translation
reserve
(Note 8)
As at 1 January 2012
Change in revaluation reserve for property, plant and
equipment
Change in revaluation reserve for property, plant and
equipment of associates
Change in fair value of available-for-sale investments
Accumulated loss on available-for-sale investments
recycled to profit or loss
Foreign currency translation difference
As at 31 December 2012
312,298
1,925
100
314,323
(1,028)
-
209
-
-
-
311,479
-
(15,489)
15,152
-
1,588
-
-
-
-
(50)
50
(1,028)
209
(15,489)
15,152
(50)
313,117
The total reduction in fair value of available-for-sale investments recognised in other comprechensive income in
2012 was RR 19,362 million including related deferred tax of RR 3,873 million.
26
JSC “FGC UES”
Notes to the Consolidated Financial Statements
(in millions of Russian Roubles unless otherwise stated)
Note 16. Equity (continued)
Reserves for the year ended 31 December 2011 (net of tax):
Revaluation reserve for:
property,
plant and
equipment
(Note 6)
available-
for-sale
investments
(Note 9)
Amounts recognised in
other comprehensive
income and accumulated
in equity relating to
non-current assets held
for sale
Foreign
currency
translation
reserve
(Note 8)
Total
reserves
361,267
(1,227)
(19,961)
(10,749)
(15,073)
-
-
-
-
-
As at 1 January 2011
Change in revaluation reserve
for property, plant and
equipment
Change in fair value of
available-for-sale investments
Change in revaluation reserve
for property, plant and
equipment of associates
(previously classified as non-
current assets held for sale)
Accumulated loss / (gain) on
available-for-sale investments
recycled to profit or loss
Amounts relating to available-
for-sale investments previously
classified as non-current assets
held for sale
Foreign currency translation
difference
313,525
7,257
(1,227)
-
(15,151)
40,485
-
(4,810)
-
(10,749)
9,819
(24,892)
-
-
-
-
-
-
-
(34)
-
-
34
66
100
-
66
314,323
As at 31 December 2011
312,298
1,925
The total reduction in fair value of available-for-sale investments recognised in other comprehensive income in
2011 was:
Decline in fair value of available-for-sale investments
classified as non-current assets held for sale
Decline in fair value of available-for-sale investments
within accumulated reserve
Decline in fair value of available-for-sale investments
below cost
Total
Notes
16
9, 18
9
Amount of
reduction
Related
deferred tax
Amount of
reduction net
of deferred tax
6,013
6,278
12,661
24,952
(1,203)
(946)
(2,842)
(4,991)
4,810
5,332
9,819
19,961
Dividends. The annual statutory accounts of the parent company, FGC UES, form the basis for the annual profit
distribution and other appropriations. The specific Russian legislation identifies the basis of distribution as the
net profit. For the year ended 31 December 2012, the net loss of FGC UES, as reported in the published statutory
financial statements, was RR 24,502 million (for the year ended 31 December 2011: RR 2,468 million). At the
Annual General Meeting in June 2012 the decision was approved not to declare dividends for the year ended
31 December 2011.
Share-based compensation. In February 2011, the Board of Directors approved an Option program (“the
Program”) in which the members of the Management Board and other employees of the Company can
participate. In March 2011, 13,569,041,046 options to purchase the Company’s ordinary shares were allocated
under the Program. In July 2012, additional 549,086,611 options were allocated.
Options granted vest over the period of three years and are exercisable during two years from the vesting date. In
case of terminating employment at the initiative of the Company due to breaching certain employment duties by
the employee the Program participant will lose his right to purchase the shares.
All options were granted with an exercise price of RR 0.4065 per share. The total grant date fair value of stock
options granted allowing updated forfeiture rate was RR 2,859 million, including RR 38 million related to
options granted in July 2012.
27
JSC “FGC UES”
Notes to the Consolidated Financial Statements
(in millions of Russian Roubles unless otherwise stated)
Note 16. Equity (continued)
The Black-Scholes option valuation model is used for estimating the fair value of options. The significant inputs
into the option valuation model were as follows:
Share price
Expected volatility
Risk-free interest rate
Expected options life
Awards granted during the year ended
31 December 2012
RR 0.237
45%
7.59%
5 years
31 December 2011
RR 0.412
45%
7.58%
5 years
Accounts payable to shareholders of FGC UES. Accounts payable to shareholders of FGC UES include
dividends payable and payables for shares issued:
Dividends payable
Accounts payable for shares issued
Total accounts payable to shareholders of FGC UES
Note 17. Income tax
Income tax expense comprises the following:
Current income tax charge
Deferred income tax charge
Total income tax expense
31 December 2012
9
3,248
3,257
31 December 2011
55
2,220
2,275
Year ended
31 December 2012
(1,629)
(127)
(1,756)
Year ended
31 December 2011
(8,588)
(5,287)
(13,875)
During the years ended 31 December 2012 and 31 December 2011 most entities of the Group were subject to tax
rates of 20 percent on taxable profit.
In accordance with Russian tax legislation, tax losses in different Group companies may not be offset against
taxable profits of other Group companies. Accordingly,
tax may be accrued even where there is a net
consolidated tax loss.
Profit before income tax for financial reporting purposes is reconciled to income tax expenses as follows:
Profit before income tax
Theoretical income tax charge at the statutory tax rate of 20 percent
Tax effect of items which are not assessable / (deductible) for
taxation purposes
Movement in unrecognised deferred tax assets
Total income tax
Year ended
31 December 2012
8,799
(1,760)
Year ended
31 December 2011
62,863
(12,573)
25
(21)
(1,756)
(1,245)
(57)
(13,875)
Deferred income tax. Differences between IFRS and Russian statutory taxation regulations give rise to certain
temporary differences between the carrying value of certain assets and liabilities for financial reporting purposes
and for income tax purposes. Deferred income tax assets and liabilities were measured at 20 percent as at
31 December 2012 and 31 December 2011, the rates expected to be applicable when the asset or liability will
reverse.
28
JSC “FGC UES”
Notes to the Consolidated Financial Statements
(in millions of Russian Roubles unless otherwise stated)
Note 17. Income tax (continued)
Deferred income tax assets and liabilities for the year ended 31 December 2012:
Deferred income tax liabilities
Property, plant and equipment
Investments in associates
Available-for-sale investments
Other deferred tax liabilities
Total deferred income tax liabilities
Deferred income tax assets
Property, plant and equipment
Intangible assets
Long-term promissory notes
Accounts receivable and prepayments
Retirement benefit obligation
Current and non-current debt
Accounts payable and accruals
Other deferred tax assets
Tax losses
Unrecognised deferred tax assets
Total deferred income tax assets
Deferred income tax liabilities, net
Movements for the year
Recognised in
profit or loss
Recognised in
other compre-
hensive income
1 January 2012
31 December 2012
79,676
74
6,186
60
85,996
(1,462)
(593)
(3,529)
(1,438)
(428)
(156)
(231)
(520)
(1,439)
4,415
(5,381)
80,615
6,570
3
(3,789)
(3)
2,781
59
(74)
(2,033)
(1,171)
(37)
14
(52)
(356)
975
21
(2,654)
127
-
-
(84)
-
(84)
-
-
-
-
-
-
-
-
-
-
-
(84)
73,106
71
10,059
63
83,299
(1,521)
(519)
(1,496)
(267)
(391)
(170)
(179)
(164)
(2,414)
4,394
(2,727)
80,572
The current portion of net deferred tax liabilities as at 31 December 2012 equaled RR 3,321 million and
represented the amount of deferred tax liabilities to be settled during the year ended 31 December 2013 (as at
31 December 2011: RR 1,315 million).
Unrecognised deferred tax assets include deferred income tax assets on tax losses carried forward in the amount
of RR 4,415 million and deferred income tax assets on temporary differences arising in respect of loss-making
subsidiaries. These deferred tax assets are not recognised because it is not probable that sufficient taxable profits
will be available against which the deferred tax assets can be utilised.
Tax losses carried forward in respect of which deferred tax assets were not recognised are presented by
companies in the table below:
OJSC “Mobile gas-turbine electricity plants”
OJSC “Nurenergo”
Others
Total tax losses carried forward
31 December 2012
3,620
3,226
348
7,194
31 December 2011
2,670
8,876
524
12,070
The tax losses expire 10 years after their origination. The Group’s tax losses expire mostly with term over
5 years (in 2018-2022) – RR 5,868 million, RR 1,326 million expire with terms from 2 to 5 years (during 2014-
2017) and nil expire during the year 2013.
During the year ended 31 December 2012 OJSC “Nurenergo” reassessed the amount of the taxable profit
recorded in 2011 and the amount of the tax losses recorded in 2004-2010. As a result of this reassessment, the
tax loss of RR 2,462 million recorded in 2011 was reversed and the taxable profit of RR 1,881 million was
recognised. Tax losses carried forward in the amount of RR 1,881 million unrecognised in the previous years
were utilised against this taxable profit. Tax losses carried forward relating to 2004-2010 were also reassessed
and decreased by RR 1,439 mln. As a result of this reassessment, the total amount of unrecognised tax losses
carried forward was decreased by RR 5,781 million.
29
JSC “FGC UES”
Notes to the Consolidated Financial Statements
(in millions of Russian Roubles unless otherwise stated)
Note 17. Income tax (continued)
Deferred income tax assets and liabilities for the year ended 31 December 2011:
Deferred income tax liabilities
Property, plant and equipment
Investments in associates
Available-for-sale investments
Accounts receivable and prepayments
Non-current assets held for sale
Other deferred tax liabilities
Total deferred income tax liabilities
Deferred income tax assets
Property, plant and equipment
Intangible assets
Long-term promissory notes
Accounts receivable and prepayments
Retirement benefit obligation
Current and non-current debt
Accounts payable and accruals
Other deferred tax assets
Tax losses
Unrecognised deferred tax assets
Total deferred income tax assets
Deferred income tax liabilities, net
Movements for the year
Recognised in
profit or loss
Recognised in
other compre-
hensive income
1 January 2011
31 December 2011
73,106
71
10,059
-
-
63
83,299
(1,521)
(519)
(1,496)
(267)
(391)
(170)
(179)
(164)
(2,414)
4,394
(2,727)
80,572
3,667
1
10,499
(241)
(8,139)
31
5,818
29
(388)
76
561
(1)
(170)
56
30
(781)
57
(531)
5,287
-
-
(946)
-
(7,426)
-
(8,372)
-
-
-
-
-
-
-
-
-
-
-
(8,372)
69,439
70
506
241
15,565
32
85,853
(1,550)
(131)
(1,572)
(828)
(390)
-
(235)
(194)
(1,633)
4,337
(2,196)
83,657
30
JSC “FGC UES”
Notes to the Consolidated Financial Statements
(in millions of Russian Roubles unless otherwise stated)
Note 18. Non-current debt
Currency
Effective
interest rate
Due date
Option date
31 December
2012
31 December
2011
Certified interest-bearing non-convertible bearer bonds:
Series 19
Series 25
Series 18
Series 22
Series 10
Series 06
Series 08
Series 21
Series 15
Series 12
Series 11
Series 13
Series 09
Series 07
7.95%
8.60%
8.50%
9.00%
7.75%
7.15%
7.15%
8.75%
8.75%
8.10%
7.99%
8.50%
7.99%
7.50%
RR
RR
RR
RR
RR
RR
RR
RR
RR
RR
RR
RR
RR
RR
06.07.2023
14.09.2027
27.11.2023
21.07.2027
15.09.2020
15.09.2020
15.09.2020
06.10.2027
12.10.2023
19.04.2019
16.10.2020
22.06.2021
16.10.2020
16.10.2020
18.07.2018
04.10.2016
17.06.2014
03.08.2022
24.09.2015
26.09.2013
26.09.2013
26.04.2017
28.10.2014
28.04.2016
24.10.2017
-
24.10.2017
27.10.2015
Stock Exchange authorised certified interest-bearing non-convertible bearer bonds:
Series BO-01
21.10.2015
8.10%
29.04.2015
RR
Loan participation notes (LPNs):
Series 01
RR
Bank loans:
OJSC “Gazprombank”
OJSC “Gazprombank”
OJSC “Gazprombank”
Finance lease:
Finance lease liabilities
Total non-current debt
RR
RR
RR
RR
8.45%
13.03.2019
9.50%
9.50%
9.75%
13.10.2014
21.11.2014
13.06.2017
9.50%
23.03.2018
-
-
-
-
-
Less: current portion of non-current bonds and LPNs
Less: current portion of non-current bank loans
Less: current portion of finance lease liabilities
Non-current debt
20,719
15,318
15,073
10,358
10,206
10,190
10,190
10,163
10,161
10,146
10,144
9,998
5,072
5,068
10,151
17,578
15,023
10,016
10,016
778
216,368
(23,035)
(55)
(78)
193,200
20,710
-
15,066
-
10,202
10,186
10,186
-
10,156
-
10,140
9,993
5,070
5,066
-
-
15,000
10,000
-
849
132,624
(1,775)
-
(71)
130,778
The bondholders have the option to redeem the bonds for cash instead of accepting the revised terms. Interest is
payable every six months during the term of the bonds.
As at 31 December 2012 the estimated fair value of the non-current debt (including the current portion) was
RR 213,721 million (as at 31 December 2011: RR 129,200 million), which was estimated using the market
prices for quoted FGC UES bonds.
As at 31 December 2012 the Group had long-term undrawn committed financing facilities of RR 122,500
million (as at 31 December 2011: RR 102,500 million) which could be used for the general purposes of the
Group.
31
JSC “FGC UES”
Notes to the Consolidated Financial Statements
(in millions of Russian Roubles unless otherwise stated)
Note 18. Non-current debt (continued)
Finance lease. Minimum lease payments under finance leases and their present values are as follows:
Minimum lease payments as at 31 December 2012
Less future finance charges
Present value of minimum lease payments as at
31 December 2012
Minimum lease payments as at 31 December 2011
Less future finance charges
Present value of minimum lease payments as at
31 December 2011
Due in
1 year
Due between
1 and 5 years
Due after
5 years
150
(72)
78
150
(79)
71
906
(206)
700
749
(271)
478
-
-
-
307
(7)
300
Total
1,056
(278)
778
1,206
(357)
849
Leased assets with carrying amount disclosed in Note 6 are effectively pledged for finance lease liabilities as the
rights to the leased asset revert to the lessor in the event of default.
Note 19. Retirement benefit obligations
Net liability as at 1 January
Net periodical cost
Benefits paid by the plan
Net liability as at 31 December
Year ended
31 December 2012
Year ended
31 December 2011
4,686
944
(466)
5,164
4,318
879
(511)
4,686
The Group’s post-employment benefits policy includes the employee pension scheme and various post-
employment, retirement and jubilee payments. The post-employment and retirement benefit system is a defined
benefit program as part of which every participating employee receives benefits calculated in accordance with
certain formula or rules. The program’s core element is the corporate pension scheme implemented by the Group
in cooperation with the Non-State Pension Fund of Electric Power Industry.
The Group also pays various long-term post-employment benefits, including lump sum benefits in case of death
of employees or former employees receiving pensions, lump sum benefits upon retirement and in connection
with jubilees.
Additionally, financial aid in the form of defined benefits is provided to former employees who have state,
industry or corporate awards. Such financial aid is provided both to employees entitled and not entitled to non-
state pensions.
The most recent actuarial valuation was performed as at 31 December 2012.
The tables below provide information about benefit obligations and actuarial assumptions as at 31 December
2012 and 31 December 2011.
The amounts recognised in the Consolidated Statement of Financial Position are determined as follows:
31 December 2012
31 December 2011
Total present value of defined benefit obligations
Net actuarial (losses) / gains not recognised in the Consolidated
Statement of Financial Position
Unrecognised past service cost
Liability recognised in the Consolidated Statement of Financial
Position
6,849
(1,511)
(174)
5,164
4,735
445
(494)
4,686
32
JSC “FGC UES”
Notes to the Consolidated Financial Statements
(in millions of Russian Roubles unless otherwise stated)
Note 19. Retirement benefit obligations (continued)
The amounts recognised in profit or loss are as follows:
Interest cost
Current service cost
Net actuarial losses / (gains) recognised in the period
Recognised past service cost
Net cost recognised in the Consolidated Statement of
Comprehensive Income
Year ended
31 December 2012
Year ended
31 December 2011
380
340
2
222
944
401
308
(24)
194
879
Changes in the present value of the Group’s retirement benefit obligation are as follows:
Year ended
31 December 2012
Year ended
31 December 2011
Defined benefit obligations as at 1 January
Benefits paid by the plan
Current service costs
Interest cost
Net actuarial losses / (gains)
Past service cost
Present value of defined benefit obligations as at 31 December
Principal actuarial assumptions (expressed as weighted averages) are as follows:
4,735
(466)
340
380
1,959
(99)
6,849
5,148
(511)
308
401
(611)
-
4,735
(i)
Financial assumptions
Discount rate
Inflation rate
Future salary increases
(ii)
Demographic assumptions
31 December 2012
31 December 2011
7.1%
5.1%
5.1%
8.1%
5.1%
5.1%
Withdrawal rates assumption is as follows: expected staff turnover rates depends on past service – around 10%
for employees with 2 years of service going down to 4% for employees with 10 or more years of service.
Retirement ages assumption is as follows: average retirement ages are 60.5 years for men and 56 years for
women.
Mortality table: Russian population mortality table 1998.
The contributions under voluntary pension programs in 2013 are expected in the amount of RR 249 million.
Experience adjustments on benefit obligation are as follows:
31 December
2012
31 December
2011
31 December
2010
31 December
2009
31 December
2008
31 December
2007
Total present value of
defined benefit obligations
Deficit in plan
Experience adjustment on
defined benefit obligations
6,849
(6,849)
4,735
(4,735)
5,148
(5,148)
4,544
(4,544)
4,262
(4,262)
3,841
(3,841)
890
123
(197)
323
808
376
33
JSC “FGC UES”
Notes to the Consolidated Financial Statements
(in millions of Russian Roubles unless otherwise stated)
Note 20. Current debt and current portion of non-current debt
Third party non-bank loans
Current portion of non-current borrowings (Note 18)
Effective
interest rate
7.0-17.0%
Total current debt and current portion of non-current debt
31 December 2012
31 December 2011
50
23,168
23,218
156
1,846
2,002
As at 31 December 2012 the Group had no short-term undrawn committed financing facilities (as at
31 December 2011: RR 15,000 million which could be used for the general purposes of the Group).
Note 21. Accounts payable and accrued charges
31 December 2012
31 December 2011
Accounts payable to construction companies
and suppliers of property, plant and equipment
Trade payables
Accrued liabilities
Other creditors
Total financial liabilities
Advances received
Accounts payable to employees
Taxes other than on income payable
Other provisions for liabilities and charges
Total accounts payable and accrued charges
Note 22. Revenue
Transmission fee
Electricity sales
Connection services
Grids repair and maintenance services
Total revenue
15,533
14,653
115
1,141
31,442
12,842
1,162
910
460
46,816
16,699
12,374
12
1,556
30,641
11,013
1,172
1,707
441
44,974
Year ended
31 December 2012
Year ended
31 December 2011
136,559
2,251
1,079
424
140,313
134,754
2,246
2,178
393
139,571
Other operating income primarily includes income from non-core activities.
Communication services
Penalties and fines
Rental income
Research and development services
Design works
Insurance compensation
Write-off of accounts payable *
Other income
Total other operating income
Year ended
31 December 2012
Year ended
31 December 2011
863
780
578
392
317
131
51
431
3,543
1,088
772
450
434
553
986
2,753
757
7,793
* Accounts payable in the amount of RR 2,747 million relating to OJSC “Nurenergo” were written off during the
year ended 31 December 2011 as these amounts had been recognised in 2003-2006 years and the relevant
limitation period had expired in 2011, according to Russian legislation. There were no claims to OJSC
“Nurenergo” concerned with these payables.
34
JSC “FGC UES”
Notes to the Consolidated Financial Statements
(in millions of Russian Roubles unless otherwise stated)
Note 23. Operating expenses
Depreciation of property, plant and equipment
Employee benefit expenses and payroll taxes
Purchased electricity
Repairs and maintenance of equipment (by contractors)
Materials for repair
Business trips and transportation expenses
Electricity transit via foreign countries
Taxes, other than on income
Security services
Rent
Other materials
Subcontract works
Consulting, legal and auditing services
Loss / (gain) on disposal of property, plant and equipment
Information system maintenance
Insurance
Communication service
Utilities and maintenance of buildings
Amortisation of intangible assets
Research and development
(Reversal) / accrual of allowance for doubtful debtors
Other expenses
Year ended
31 December 2012
Year ended
31 December 2011
43,908
26,311
13,320
3,732
2,429
2,166
1,903
1,880
1,870
1,815
1,565
1,418
1,302
1,210
1,066
964
735
573
571
544
(1,405)
2,753
33,187
24,046
13,781
3,666
2,326
2,143
1,350
1,141
1,680
1,678
1,843
1,267
1,223
(617)
1,046
972
674
487
865
799
4,305
2,888
Total operating expenses
110,630
100,750
Employee benefit expenses and payroll taxes include the following:
Wages and salaries
Social security contributions to the Pension Fund
Social security contributions to other state non-budgetary funds
Pension costs – defined benefit plans (Note 19)
Share-based compensation (Note 16)
Total employee benefit expenses and payroll taxes
Year ended
31 December 2012
Year ended
31 December 2011
20,083
3,604
1,075
944
605
26,311
17,926
2,995
904
879
1,342
24,046
Note 24. Disposal of available-for-sale investments and investments in associates
As at 31 December 2010 all available-for-sale investments, except for shares of OJSC “Russian Grids” (former
OJSC “IDGC Holding”) and OJSC “INTER RAO UES”, in the total amount of RR 44,278 million and most of
investments in associates, such as OJSC “WGC-1”, OJSC “TGC-6”, OJSC “TGC-11”, OJSC “Volzhskaya
TGC” and JSC UES “GruzRosEnergo”, in the total amount of RR 53,227 million, were reclassified as held for
sale under IFRS 5 “Non-current assets held for sale and discontinued operations” as the management of the
Company had committed to a plan to transfer these assets during 2011 year to INTER RAO in exchange for
ordinary shares of INTER RAO. In March and May 2011 all the above-mentioned investments, except for JSC
UES “GruzRosEnergo”, were transferred to INTER RAO in exchange for 1,883,043,160,666 its ordinary shares.
In accordance with the provisions of IFRS 5, non-current assets held for sale were re-measured at the date of de-
recognition (transfer) to reflect the change in the value less costs to sell. A loss of RR 4,718 million and
corresponded deferred tax of RR 944 million was recognised in profit or loss in respect of re-measurement of
investments in associates classified as held for sale. Decline in fair value of available-for-sale investments
classified as held for sale was recognised in other comprehensive income in the amount of RR 4,810 million net
of corresponding deferred tax in the amount of RR 1,203 million.
35
JSC “FGC UES”
Notes to the Consolidated Financial Statements
(in millions of Russian Roubles unless otherwise stated)
Note 24. Disposal of available-for-sale investments and investments in associates (continued)
At the dates of the transaction, cumulative income recognised in other comprehensive income and related to the
disposed assets held for sale amounting to RR 31,115 million was transferred to profit or loss as a gain on
disposal of available-for-sale investments. A related deferred tax change in the amount of RR 6,223 million was
recognised in the income tax expense for the year.
Note 25. Finance income
Interest income
Foreign currency exchange differences
Dividends
Other finance income
Total finance income
Note 26. Finance costs
Interest expense
Foreign currency exchange differences
Other finance costs
Total finance cost
Less capitalised interest expenses on borrowings related to qualifying
assets (Note 6)
Total finance cost recognised in profit or loss
Year ended
31 December 2012
Year ended
31 December 2011
3,987
90
20
16
4,113
3,834
61
45
17
3,957
Year ended
31 December 2012
Year ended
31 December 2011
13,051
55
77
13,183
(12,969)
214
5,895
72
144
6,111
(5,833)
278
Note 27. Earnings per ordinary share for profit attributable to shareholders of FGC UES
Weighted average number of ordinary shares
(millions of shares)
Profit attributable to shareholders of FGC UES
(millions of RR)
Weighted average earning per share – basic and diluted (in RR)
Year ended
31 December 2012
Year ended
31 December 2011
1,246,807
1,242,513
7,103
0.006
49,139
0.040
The Group has no dilutive potential ordinary shares; therefore, the diluted earnings per share equal the basic
earnings per share.
Note 28. Contingencies, commitments and operating risks
Political environment. The operations and earnings of the Group continue, from time to time and in varying
degrees, to be affected by the political, legislative, fiscal and regulatory developments, including those related to
environmental protection, in Russian Federation.
Insurance. The Group held limited insurance policies in relation to its assets, operations, public liability or other
insurable risks. Accordingly, the Group is exposed to those risks for which it does not have insurance.
Legal proceedings. In the normal course of business the Group entities may be a party to certain legal
proceedings. In the opinion of management, currently there are no existing legal proceedings or claims
outstanding or final dispositions which will have a material adverse effect on the financial position of the Group.
As at 31 December 2012 the Group's subsidiary, OJSC ”Nurenergo” was engaged in a number of litigations
involving claims amounting in total to RR 7,433 million (as at 31 December 2011: RR 4,947 million), for
collection of amounts payable for electricity purchased by OJSC ”Nurenergo”. The amount is recorded within
accounts payable. No additional provision has been made as the Group's management believes that these claims
are unlikely to result in any further liabilities.
36
JSC “FGC UES”
Notes to the Consolidated Financial Statements
(in millions of Russian Roubles unless otherwise stated)
Note 28. Contingencies, commitments and operating risks (continued)
In September 2012, the Commercial Court of the Republic of Chechnya commenced the observation procedure
in respect of OJSC “Nurenergo”. In accordance with Russian legislation on bankruptcy, all the above-mentioned
litigations were suspended. In March 2013, the Federal Commercial Court of the North Caucasus District
granted a cassational appeal filed by OJSC “Nurenergo”, annuled the original court decision, and remitted the
case for a new trial.
Tax contingency. Russian tax and customs legislation is subject to varying interpretation when being applied to
the transactions and activities of the Group. Consequently, tax positions taken by management and the formal
documentation supporting the tax positions may be successfully challenged by the relevant regional and federal
authorities. Russian tax administration is gradually strengthening, including the fact that there is a higher risk of
review of tax transactions without a clear business purpose or with tax incompliant counterparties. Fiscal periods
remain open to review by the authorities in respect of taxes for three calendar years preceding the year of
decision to perform tax review. Under certain circumstances reviews may cover longer periods.
As at 31 December 2012 management believes that its interpretation of the relevant legislation is appropriate and
the Group’s tax, currency and customs positions will be sustained.
Environmental matters. The enforcement of environmental regulation in the Russian Federation is evolving and
the enforcement posture of government authorities is continually being reconsidered. Group entities periodically
evaluate their obligations under environmental regulations.
Potential liabilities might arise as a result of changes in legislation and regulation or civil litigation. The impact
of these potential changes cannot be estimated, but could be material. In the current enforcement climate under
existing legislation, management believes that there are no significant liabilities for environmental damage, other
than any amounts which have been accrued in these Consolidated Financial Statements.
Capital commitments related to construction of property, plant and equipment. Future capital expenditures for
which contracts have been signed amount to RR 222,912 million as at 31 December 2012 (as at 31 December
2011: RR 351,189 million) including VAT. These amounts include accounts payable to construction companies
and suppliers of property, plant and equipment in the amount of RR 15,533 million as at 31 December 2012 (as
at 31 December 2011: RR 16,699 million) (Note 21).
Note 29. Financial instruments and financial risks
Financial risk factors. The Group’s ordinary financial and business activities expose it to a variety of financial
risks, including but not limited to the following: market risk (foreign exchange risk, interest rate risks related to
changes in the fair value of the interest rate and the cash flow interest rate, and price risk), credit risk, and
liquidity risk. Such risks give rise to the fluctuations of profit, reserves and equity and cash flows from one
period to another. The Group’s financial management policy aims to minimise or eliminate possible negative
consequences of the risks for the financial results of the Group. The Group could use derivative financial
instruments from time to time for such purposes as part of its risk management strategy.
37
JSC “FGC UES”
Notes to the Consolidated Financial Statements
(in millions of Russian Roubles unless otherwise stated)
Note 29. Financial instruments and financial risks (continued)
Financial instruments by categories:
Loans and
receivables
Investments
available for
sale
Other financial
liabilities
31 December 2012
Financial assets
Available-for-sale investments (Note 9)
Long-term promissory notes (Note 10)
Other non-current assets (Note 11)
Cash and cash equivalents (Note 12)
Bank deposits (Note 13)
Short-term promissory notes (Note 10)
Loans given
Accounts receivable (Note 14)
Total financial assets
Financial liabilities
Non-current debt (Note 18)
Accounts payable to the shareholders
of FGC UES (Note 16)
Current debt and current portion
of non-current debt (Note 20)
Accounts payable and accrued charges
(Note 21)
Total financial liabilities
31 December 2011
Financial assets
Available-for-sale investments (Note 9)
Long-term promissory notes (Note 10)
Other non-current assets (Note 11)
Cash and cash equivalents (Note 12)
Bank deposits (Note 13)
Short-term promissory notes (Note 10)
Loans given
Accounts receivable (Note 14)
Total financial assets
Financial liabilities
Non-current debt (Note 18)
Accounts payable to the shareholders
of FGC UES (Note 16)
Current debt and current portion
of non-current debt (Note 20)
Accounts payable and accrued charges
(Note 21)
Total financial liabilities
(а) Market risk.
-
1,457
3,382
24,056
980
23,380
38
22,016
75,309
-
-
-
-
-
50,617
-
-
-
-
-
-
-
50,617
-
-
-
-
-
-
14,928
116
25,627
1,184
20,737
448
12,968
76,008
-
-
-
-
-
69,979
-
-
-
-
-
-
-
69,979
-
-
-
-
-
193,200
193,200
3,257
3,257
23,218
23,218
31,442
251,117
31,442
251,117
Total
50,617
1,457
3,382
24,056
980
23,380
38
22,016
125,926
Total
69,979
14,928
116
25,627
1,184
20,737
448
12,968
145,987
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
130,778
130,778
2,275
2,002
30,641
165,696
2,275
2,002
30,641
165,696
Loans and
receivables
Investments
available for
sale
Other financial
liabilities
(i) Foreign exchange risk. The Group operates within the Russian Federation. The major part of the Group’s
purchases is denominated in Russian Roubles. Therefore, the Group’s exposure to foreign exchange risk is
insignificant.
(ii) Interest rate risk. The Group’s operating profits and cash flows from operating activity are not largely
dependent on the changes in market interest rates. As at 31 December 2012 the interest rates on the borrowing
are fixed.
38
JSC “FGC UES”
Notes to the Consolidated Financial Statements
(in millions of Russian Roubles unless otherwise stated)
Note 29. Financial instruments and financial risks (continued)
(iii) Price risk. Equity price risk arises from available-for-sale investments. Management of the Group monitors
its investment portfolio based on market indices. Material investments within the portfolio are managed on an
individual basis and all buy and sell decisions are taken by the management of the Group. The primary goal of
the Group’s investment strategy is to maximise investment returns in order to meet partially the Group’s
investment program needs. Transactions in equity products are monitored and authorised by the Group’s
corporate finance department. The total amount of investments available-for-sale exposed to the market risk
equals RR 50,617 million. As at 31 December 2012, if equity prices at that date had been 10% higher (lower),
with all other variables held constant, the Group’s comprehensive income and revaluation reserve in equity
would increase (decrease) by RR 248 million before tax, and profit before tax would increase (decrease) by
RR 4,814 million. As at 31 December 2011, if equity prices at that date had been 10% higher (lower) with all
other variables held constant, the Group’s comprehensive income and revaluation reserve in equity would
increase (decrease) by RR 290 million before tax, and profit before tax would increase (decrease) by RR 6,708
million.
(b) Credit risk.
The amounts exposed to credit risk are as follows:
31 December 2012
Not overdue, not impaired
Not overdue, but impaired:
- gross amount
- less impairment provision
Overdue, but not impaired
Overdue and impaired:
- gross amount
- less impairment provision
Total amount
31 December 2011
Not overdue, not impaired
Not overdue, but impaired:
- gross amount
- less impairment provision
Overdue, but not impaired
Overdue and impaired:
- gross amount
- less impairment provision
Total amount
Long-term
promisso-
ry notes
(Note 10)
1,457
-
12,022
(12,022)
-
-
-
-
1,457
Long-term
promisso-
ry notes
(Note 10)
5,731
9,197
12,022
(2,825)
-
-
-
-
14,928
Other
non-cur-
rent assets
(Note 11)
3,382
-
580
(580)
-
-
-
-
3,382
Other
non-cur-
rent assets
(Note 11)
100
-
90
(90)
16
-
18
(18)
116
Cash and
cash equi-
valents
(Note 12)
24,056
-
-
-
-
-
-
-
24,056
Cash and
cash equi-
valents
(Note 12)
25,627
-
-
-
-
-
-
-
25,627
Bank
deposits
(Note
13)
Short-term
promissory
notes
(Note 10)
Loans
given
980
-
-
-
-
-
-
-
980
Bank
deposits
(Note
13)
1,184
-
-
-
-
-
-
-
1,184
22,938
-
-
-
442
-
-
-
23,380
17
-
-
-
21
-
-
-
38
Short-term
promissory
notes
(Note 10)
Loans
given
20,737
-
-
-
-
-
-
-
20,737
5
-
-
-
443
-
15
(15)
448
Accounts
receivable
(Note 14)
17,244
-
99
(99)
4,772
-
5,429
(5,429)
22,016
Accounts
receivable
(Note 14)
9,758
-
600
(600)
3,210
-
6,878
(6,878)
12,968
As at 31 December 2012 the amount of
risk, was
RR 75,309 million (as at 31 December 2011: RR 76,008 million). Although collection of receivables could be
influenced by economic factors, management of the Group believes that there is no significant risk of loss to the
Group beyond the provision for impairment of receivables already recorded.
financial assets, which were exposed to credit
The Group’s trade debtors are quite homogenous as regards their credit quality and concentration of credit risk.
They are primarily comprised of large, reputable customers, most of which are controlled by, or related to the
Government of the RF. Historical data, including payment histories during the recent credit crisis, would suggest
that the risk of default from such customers is very low.
39
JSC “FGC UES”
Notes to the Consolidated Financial Statements
(in millions of Russian Roubles unless otherwise stated)
Note 29. Financial instruments and financial risks (continued)
Credit risk is managed at the Group level. In most cases the Group does not calculate their customers’ credit
status but rates their creditworthiness on the basis of the financial position, prior experience and other factors.
The cash has been deposited in the financial institutions with no more than minimal exposure to the default risk
at the time of account opening. Promissory notes are generally from Russian banks with minimum credit rating
not below BB- by Standard & Poor's or Ва3 by Moody’s. Although some of the banks and companies have no
international credit rating, management believes that they are reliable counterparties with a stable position on the
Russian market.
(c) Liquidity risk. Liquidity risk is managed at the Group level and includes maintaining the appropriate volume
of monetary funds, conservative approach to excess liquidity management, and access to financial resources by
securing credit facilities and limiting the concentrations of cash in banks. The table below analyses the Group’s
financial liabilities into relevant maturity groupings based on the remaining period at the end of the reporting
period to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash
flows. Balances due within 12 months equal their carrying balances, as the impact of discounting is not
significant.
Less than
1 year
1 to 2
years
2 to 5
years
Over 5
years
Total
As at 31 December 2012
Non-current and current debt and interest payable
(Notes 18, 20)
Accounts payable to the shareholders
of FGC UES (Note 16)
Accounts payable and accrued charges (Note 21)
Total as at 31 December 2012
As at 31 December 2011
Non-current and current debt and interest payable
(Notes 18, 20)
Accounts payable to the shareholders
of FGC UES (Note 16)
Accounts payable and accrued charges (Note 21)
Total as at 31 December 2011
40,649
65,210
111,748
67,233
284,840
3,257
31,442
75,348
-
-
-
-
-
-
3,257
31,442
65,210
111,748
67,233
319,539
32,735
60,431
46,331
37,245
176,742
2,275
30,641
65,651
-
-
-
-
-
-
2,275
30,641
60,431
46,331
37,245
209,658
(d) Fair value. Management believes that the fair value of financial assets and liabilities is not significantly
different from their carrying amounts. The carrying value of trade receivables less provision for doubtful debtors
is assumed to approximate their fair value due to the short-term nature of the receivables. The fair value of
financial liabilities for disclosure in the consolidated financial statements is estimated by discounting future
contractual cash flows at the current market interest rate that is available for Group for similar financial
instruments.
The financial instruments of the Group carried at fair value represent available-for-sale investments (Note 9).
The fair value of the available-for-sale investments is determined by the quoted prices in active markets for
identical financial assets.
Note 30. Capital risk management
The Group’s management of the capital of its entities aims to comply with the capital requirements established
by the legislation of the Russian Federation for joint stock companies, in particular:
share capital cannot be lower than RR 100 thousand;
in case the share capital of an entity is greater than statutory net assets of the entity, such entity must
reduce its share capital to the value not exceeding its statutory net assets;
in case the minimum allowed share capital exceeds the entity’s statutory net assets, such entity is
subject for liquidation.
As at 31 December 2012 several companies of the Group namely OJSC “Nurenergo”, OJSC “Mobile gas-turbine
electricity plants”, OJSC “The Kuban trunk grids”, OJSC “Engineering and construction management centre of
Unified Energy System” and OJSC “The principle electricity transmission service company of Unified National
Electrical Grid” were not in compliance with all requirements mentioned above. Management of the Group is
currently implementing measures to ensure compliance with all legislation requirements within a short period.
Management considers that a breach of above mentioned requirements will not have material effect on the
Group’s consolidated financial statements.
40
JSC “FGC UES”
Notes to the Consolidated Financial Statements
(in millions of Russian Roubles unless otherwise stated)
Note 30. Capital risk management (continued)
The Group’s capital management objectives are to ensure that its operations be continued at a profit for the
shareholders and with benefits for other stakeholders, and to maintain the optimal capital structure with a view to
reduce the cost of capital. In order to maintain or adjust the capital structure, the Group can adjust the dividends
paid to the shareholders or their contributions to the authorised capital by issuing new shares or by selling assets
to reduce debts.
The Group monitors capital ratios, including the gearing ratio, calculated on the basis of figures of financial
statements prepared under the RAR. The Group should ensure that its gearing ratio, being the total debt divided
by the total equity, does not exceed 0.50. As at 31 December 2012 the Company’s gearing ratio calculated under
RAR was 0.25 (as at 31 December 2011: 0.15).
Note 31. Segment information
The Group operates wihin one operating segment. The Group’s single primary activity is provision of electricity
transmission services within the Russian Federation which is represented as Transmission segment. This
segment comprises JSC “FGC UES”, LLC “Index energetiki – FGC UES”, OJSC “The Kuban trunk grids”,
OJSC “The Tomsk trunk grids”, and maintenance (service) subsidiaries – OJSC “The principle electricity
transmission service company of the UNEG” and OJSC “Specialised electricity transmission service company of
the UNEG” which are engaged in maintenance services (repair and restoration) for the UNEG.
The Board of Directors of the Company has been determined as chief operating decision maker (the “CODM”)
of the Group which generally analyses information relating to Transmission segment. The Board of Directors
does not evaluate financial information of other components of the Group to allocate resources or assess
performance and does not determine these components as segments. The key indicator of the transmission
segment performance is return on equity ratio (ROE). It is calculated based on the statutory financial statements
prepared according to RAR as net profit divided by net assets. Accordingly, the measure of transmission
segment profit or loss analysed by the CODM is net profit of segment based on the statutory financial statements
prepared according to RAR. The other information provided to the CODM is also based on statutory financial
statements prepared according to RAR.
Revenue from external customers
Intercompany revenue
Total revenue
Depreciation and amortisation *
Interest income
Interest expenses
Current income tax
Loss for the year
Capital expenditure
Total reportable segment assets
Total reportable segment liabilities
Transmission segment – based on statutory financial
statements prepared according to RAR
Year ended
31 December 2012
139,257
355
Year ended
31 December 2011
137,450
337
139,612
60,111
4,409
59
1,529
(31,601)
164,394
137,787
40,092
4,253
69
8,413
(15,597)
166,582
31 December 2012
31 December 2011
1,151,565
323,824
1,072,677
233,819
* Depreciation charge under RAR is based on useful lives determined by statutory regulations.
Total revenue from segment (RAR)
Reclassification between revenue and other income
Non-segmental revenue
Elimination of intercompany revenue
Year ended
31 December 2012
139,612
(1,427)
2,483
(355)
Year ended
31 December 2011
137,787
(367)
2,488
(337)
Total revenue (IFRS)
140,313
139,571
41
JSC “FGC UES”
Notes to the Consolidated Financial Statements
(in millions of Russian Roubles unless otherwise stated)
Note 31. Segment information (continued)
Loss for the year (RAR)
Property, plant and equipment
Adjustment to the carrying value of property, plant and equipment
Reversal of impairment / (impairment) of property, plant and equipment
Financial instruments
Reversal of re-measurement of available-for-sale investments and
investments in associates
Adjustment to the gain on disposal of available-for-sale investments and
investments in associates
Impairment of available-for-sale investments
Reversal of impairment of investments in associates
Loss on re-measurement of assets held for sale
Discounting of promissory notes
Reversal of impairment of promissory notes
Consolidation
Reversal of impairment of investments in subsidiaries
Reversal of impairment of intercompany promissory notes
Reversal of re-measurement of treasury shares
Other
Write-off of research and development to expenses
Share of result of associates
Adjustment to allowance for doubtful debtors
Share-based compensation
Accrual of retirement benefit obligations
Deferred tax adjustment
Other adjustments
Non-segmental other operating loss
Profit for the year (IFRS)
Total reportable segment liabilities (RAR)
Netting of VAT recoverable and payable
Netting of advances and payables
Recognition of finance lease liabilities
Accrual of retirement benefit obligations
Deferred tax liabilities adjustment
Accrual of payables recognised in another accounting period
Other adjustments
Non-segmental liabilities
Elimination of intercompany balances
Total liabilities (IFRS)
Year ended
31 December 2012
Year ended
31 December 2011
(31,601)
(15,597)
18,372
512
22,870
-
(18,941)
313
-
(493)
3,460
916
6,904
1,073
(351)
21
(298)
(605)
(130)
8,231
500
(3,710)
7,043
8,129
(808)
36,645
28,927
(12,661)
-
(4,718)
(764)
-
1,518
13,037
1,200
(656)
8
(4,316)
(1,342)
(236)
614
306
(298)
48,988
31 December 2012
31 December 2011
323,824
(3,976)
(46)
778
4,919
63,229
126
65
18,559
(55,033)
352,445
233,819
(6,701)
(1,043)
849
4,495
71,515
769
136
17,659
(55,928)
265,570
42
JSC “FGC UES”
Notes to the Consolidated Financial Statements
(in millions of Russian Roubles unless otherwise stated)
Note 31. Segment information (continued)
Total reportable segment assets (RAR)
Property, plant and equipment
Adjustment to the carrying value of property, plant and equipment
Reversal of impairment of property, plant and equipment
Recognition of property, plant and equipment under finance lease
Financial instruments
Adjustment to cost of investments in associates
Adjustment to cost of available-for-sale investments
Discounting of promissory notes
Consolidation
Reversal of impairment of investments in subsidiaries
Reversal of impairment of intercompany promissory notes
Reversal of re-measurement of treasury shares
Unrealised profit adjustment
Elimination of investments in subsidiaries
Elimination of intercompany balances
Other
Write-off of research and development to expenses
Adjustment to allowance for doubtful debtors
Deferred tax assets adjustment
Netting of VAT recoverable and payable
Netting of advances and payables
Other adjustments
Non-segmental assets
31 December 2012
31 December 2011
1,151,565
1,072,677
147,674
549
790
431
5,658
(900)
8,014
23,607
(2,765)
(3,448)
(23,462)
(55,033)
(2,611)
2,511
(6,151)
(3,976)
(46)
800
17,034
147,661
37
861
(62)
(3,881)
(3,867)
7,098
16,703
(3,838)
(2,020)
(23,462)
(55,928)
(2,260)
2,809
(3,895)
(6,701)
(1,043)
1,163
21,625
Total assets (IFRS)
1,260,241
1,163,677
The main differences between financial information prepared in accordance with IFRS and the financial
information reported to the chief operating decision-maker related to profit or loss, and assets and liabilities
results from the differences in the accounting methods under IFRS and RAR. Financial information on segments
reported to the CODM under RAR does not reflect the adjustments made in accordance with IFRS.
Non-segmental revenue, non-segmental other operating loss, non-segmental assets and non-segmental liabilities
represent corresponding revenue, loss (profit), assets and liabilities of components (subsidiaries) that are not
determined as segments by the CODM.
Information on revenue for separate services and products of the Group is presented in Note 22.The Group
performs most of its activities in the Russian Federation and does not have any significant revenue from foreign
customers or any non-current assets located in foreign countries.
The major customers of the Group are government-related entities. The amounts of revenue from such entities are
disclosed in Note 5. The Group has no other major customers with turnover over 10 percent of the Group revenue.
Note 32. Events after the reporting period
Additional share issue. In March 2013, the Company completed and registered an additional share issue. As the
result of this share issue 6,754,357,256 ordinary shares with a nominal value of RR 0.5 per share were placed for
a consideration of RR 3,250 million in cash and other assets at the cost of RR 127 million. As a result of the
exercise of the state’s pre-emptive rights during the share issue, the interest of the state in the Company
increased from 79.55 to 79.64 per cent. Cash proceeds from the share issue will be used for financing of the
investment program of the Company.
Bonds issue. In January 2013, the Group issued certified interest-bearing non-convertible bearer bonds of Series
24 with a total nominal value of RR 10,000 million, an interest rate fixed for the first 14 coupons at 8.0 percent,
maturity in January 2028, and embedded put option in January 2020. The interest is payable every six months
during the terms of the bonds.
Repayment of debt. In January and March 2013, the Group made a full early repayment of two loans issued by
OJSC “Gazprombank” in the amount of RR 10,000 million each.
43
APPENDIX
Federal
Grid Company
of Unified
Energy System
Joint Stock Company
“Federal Grid Company of Unified Energy System”
ANNUAL FINANCIAL
REPORT FOR 2012
In accordance with
UK Disclosure and
Transparency Rules
April 2013
Moscow
70
Key 2012 Results
Key production indicators
Number of substations*
Total transmission grid length, thousand
km **
Electricity transmitted from the the UNEG
to distribution grid companies, direct
private consumers on the wholesale
energy market, and independent power
industry JSCs (million kWh)
Electricity transmitted from the the UNEG
to neighboring countries (million kW)
2010
805
121.7
2011
854
124.6
2012
891
131.6
470,648.072
484,663.552
498,287.684
15,716.33
19,284.808
15,768.826
Declared capacity (MW)
91,179
Total actual electricity losses (million kWh)
22,526
90,937
22,553
90,492
21,946
* Taking into account rented sites as well as switchgears and units at substations of other owners.
**Taking into account rented high voltage transmission lines.
Key financial indicators (RUR million)
Revenues
Adjusted EBITDA**
Adjusted operating profit **
Adjusted profit for the period **
Net debt **
Capitalisation
2010*
113,330
67,717
29,941
27,910
(3,838)
2011
2012
139,571
140,413
83,760
46,614
38,241
85,232
82,096
33,520
29,956
168,002
253,905
452,717
351,163
* Based on comparative information presented in the 2011 audited consolidated financial statements of the
Company
** Calculations are presented in the «Financial results» section of this Report
APPENDIX
About the Company
Federal Grid Company was founded in 2002 during the reform of the Russian power
industry. The main directions of the Company's activities are the transmission of
electric energy through main electric grids and technological connection. Our
Company is included in the list of strategically important companies and has a status
of natural monopoly.
During its 10 year history, the Company has become the largest power industry
company in Russia in terms of market capitalization and is one of Russia’s leading
“blue chips” on the Russian stock market.
The Company employs more than 25,000 individuals, which ensures the sustainable
operation of more than 131 thousand kilometers of electric energy transmission lines
and 891 substations.
As of 31 December 2012, the Company has 51 regional branches, including:
— 8 branches – Main Power Transmission Lines (MES);
— 41 branches – Main Power Transmission Line Companies (PMES);
— 1 branch – Special Production Plant Bely Rast;
— 1 branch – Center of Technical Supervision.
Detailed information about the Company’s structure and history can be found at the
official website in the section About Us / About company.
Corporate Governance
Federal Grid Company observes all corporate governance principles focused on
long-term goals, ensuring the transparency of its activities, environmental protection,
labor safety and the social protection of its employees.
The Company’s supreme management body is the General Meeting of Shareholders.
The Board of Directors determines the strategy of the Company’s development and
also supervises the activities of the Management Board. The Management Board is
entrusted with operational management of the Company.
Committees are formed under the Board of Directors, the activities of which are
aimed at upgrading the effectiveness and quality of work of the Board of Directors.
Current activities of Federal Grid Company are managed by the Management Board,
which is headed by the Chairman. The Management Board is accountable to the
General Meeting of Shareholders and to the Board of Directors.
The Chairman of the Management Board is the sole executive management body.
The Company has an effective control system. The external control system,
introduced to protect the interests of shareholders, is represented by an independent
auditor and the Audit Commission.
The internal control system includes both audit and control divisions.
We have developed and implemented numerous normative documents that regulate
corporate governance principles and procedures. Particularly, in 2012, our Company
adopted a new Corporate Governance Code, which reflects provisions that
significantly improve the Company’s corporate governance quality.
Detailed information on the Company’s corporate governance is available at the
official website in the section About Us / Corporate Governance.
72
Share Capital
As of 31 December 2012, the share capital of Federal Grid Company amounted to
630,193,329,370 rubles divided into 1,260,386,658,740 ordinary shares with a nominal
value of 50 kopecks each.
As of 31 December 2012, the number of authorised shares amounted to
1,346,805,823,831 ordinary shares with a nominal value of 50 kopecks each and a
total nominal value of 673,402,911,915.5 rubles. Authorised ordinary shares have the
same rights as outstanding ordinary shares.
No preferred shares have been issued.
In November 2012, the Company’s Board of Directors adopted a resolution to increase
the Company’s share capital by a placement of additional ordinary shares with the
total value of 4,082,034,991.5 rubles via open subscription. On 11 March 2013, an
additional ordinary share issue was completed with a price of 50 kopecks per share.
During the additional share issue, 6,754,357,256 shares (82.7% of the total number of
securities from the additional issue subject to placement) were placed. As a result of
the placement, the Company received 3,250 million rubles in cash and other assets at
the cost of 127 million rubles. The main participant in the additional share issue was
the Russian Federation, which invested in the Company’s share capital in the amount
of 3,247 million rubles.
As of 31 December 2012, 79.55% of the Company’s shares were owned by the
Government of the Russian Federation, represented by the Federal Agency for State
Property Management;
18.31% of shares were owned by legal entities; and 2.14% were owned by individuals.
Market quotations for the Company’s shares
In 2012, shares of the power industry sector performed significantly worse than the
market as a whole, with the industry indicator MicexPWR decreasing by 16.8% during
the reporting period. The negative dynamics with the indicator outpacing the market
as a whole is related to continuing regulatory pressure and the uncertainty of
development prospects for the power industry sector. The Company’s shares were
subject to fluctuation during the year due to continuing regulatory uncertainty and
concluded the year with a significant decline in quoted prices – 28.5% for the year.
The price of Federal Grid Company’s shares on the stock exchange as of 28 December
2012 amounted to 0.20104 rubles, which is 19% lower than the consensus analyst
forecast, which indicates the growth potential for the Company’s shares.
Detailed information on the Company’s shares is available at the official website in the
section Investors / Share Information.
Depository receipts program
On 30 June 2008, Federal Grid Company launched a Depository Receipts Program
(GDR), not subject to listing procedures (Regulation S and Rule 144A). In 2011, the
Company performed a technical listing of depository receipts on the primary
exchange of the London Stock Exchange, where trading of Federal Grid Company’s
GDRs was launched on 28 March 2011.
As of 31 December 2012, the volume of the depository receipts program amounted to
1.4 million receipts, or 0.058% of the Company’s charter capital. The maximum
number of GDR’s which the Company can issue stands at 2,511,896,256.
Detailed information on trading of the Company’s depository receipts is available at
the official website in the section Investors / Share Information / GDR Program.
Current information on the GDR program can also be accessed at the official website
of the London Stock Exchange at www.londonstockexchange.com, under Federal Grid
Company ticker symbol – FEES.
APPENDIX
Dividend policy
In accordance with Russian legislation and the Charter of Federal Grid Company, the
source for dividend payments is the Company’s net profit, which is determined on the
basis of the Company’s annual statutory accounts.
According to 2012 published statutory financial statements of Federal Grid Company,
the Company’s net loss for the reporting year amounted to 24,502 million rubles. The
main factors behind this loss were negative results from the revaluation of financial
investments into stock with market quotations, accrual of allowance for doubtful
debtors and impairment of promissory notes.
A resolution on the payment of dividends for 2012 will be adopted by the Company’s
Annual General Meeting of Shareholders in 2013. The shareholders have proposed to
adopt a resolution not to pay dividends on the Company’s ordinary shares for 2012.
Detailed information on dividends paid by the Company is available at the official
website in the section Investors / Dividends.
Operating Activities
Electric energy transmission services
The principal activity of Federal Grid Company is the transmission of electricity via the
Russian Unified National Electric Grid (the “UNEG”). Payments for this type of
services are the main financing source for the revenue side of the Company’s budget.
According to Russian legislation, electric energy transmission services through the
the UNEG are monopoly-type activities and are regulated by the Russian Government.
The price for electric energy transmission services is determined via respective
tariffs set by the Russian Federal Tariff Service, taking into account normative
technological losses of energy during the UNEG transmission for the respective
subject of the Russian Federation, as adopted by the Russian Ministry of Energy.
Since 2010, within the framework of measures to upgrade investor attractiveness for
the power industry, tariffs for Federal Grid Company on services related to the
transmission of electric energy via the the UNEG are set based on the method of
return on invested capital (RAB regulation). The change in method ensured a
significant increase in the tariff growth rate.
Over four years, the volume of electric energy transmission services provided by the
Company increased more than 100%, reaching 136,558,888 thousand rubles in 2012,
according to the Company’s IFRS consolidated financial statements.
The number of our customers constantly increases. In 2012, the number of
consumers for electric energy transmission services provided by the Company
amounted to 207 organisations (having connections to the the UNEG).
Detailed information on electric energy transmission services, provided by the
Company, is available at the official website in the section Operations / Energy
transmission.
74
Technological connection services
Technological connections are a complex service that provides for the actual
connection of energy receiving devices (power units) to electric grid system objects.
We provide technological connection services to new consumers as well as to existing
customers, who need to increase power consumption.
The main consumers of technological connection services include:
— Large businesses (the oil and metallurgical industry, the production of
construction materials, etc.);
— Construction and reconstruction of complex immovable property objects;
— Distribution grid companies.
— In 2012, the Company concluded 376 agreements on the provision of technological
connection services; the overall volume of maximum capacity under the
agreements amounted to 2,78 GW.
Detailed information on technological connection services provided by the Company is
available at the official website in the section Operations / Technological connection.
Development Outlook for the Company
Investments
On 31 October 2012, the Russian Ministry of Energy adopted the Company’s
2013-2017 investment program. The overall volume of investment program financing
for 2013-2017 will amount to more than 775.5 billion rubles.
Tasks of Federal Grid Company’s investment program:
— Renewal of the Company’s grid assets;
— Implementation of projects in the field of electric grid construction that have State
importance (APEC, ESPO, Olympics-2014 in Sochi, the Skolkovo Innovation Center,
increased energy supply reliability to Moscow, St. Petersburg, etc.);
— Fulfillment of agreements concluded with regional administrations for electricity
supply to consumers;
— Capacity output for commissioned power units at NPPs, HPPs and TPPs;
— Implementation of innovative projects and energy efficiency programs;
— Creation of technological infrastructure for the functioning of the competitive
electricity and capacity market.
Investment in the UNEG development has significant State importance; hence, part of
the program is financed from federal budgetary funds. Other program financing
sources include: Company’s own funds, funds received from the additional share
issue, funds received from payments for technological connection, bond issues and
loans.
Within the framework of implementing the Company’s 2013-2017 investment
program, the Company plans to put into operation 66,869.86 MVA of transformer
capacity and 16,984.65 km of electricity transmission lines.
APPENDIX
The Company’s 2012 investment plans were practically fulfilled. Specifically, plans on
the introduction of high voltage lines were fulfilled at 91% (3,643 km against 4,023
planned km), whereas, the plans on the introduction of substations were over-fulfilled
by 26% (17,852 MVA against 14,152 planned MVA). The volume of the application of
funds steadily exceeds financing volume. At the same time, a significant (33%)
over-fulfillment of the indicator for the placement of objects into operation for the
first time in Company history allowed for a decrease in the volume of
construction-in-progress compared with the previous year and confirmed the
effectiveness of regulation based on long-term parameters.
Detailed information about the Company’s investment program is available at the
official website in the section Operations / Investments.
Innovation
During the reporting period our Company adopted and approved the Program of
Innovative Development until 2020. The main objective of the Program is to increase
the reliability, efficiency and safety of the main electric grid complex and the power
industry as a whole via innovative technologies and solutions.
Our program provides for the achievement of key effectiveness indicators for the
Company’s innovative development till 2020. In 2012, for the Company, most of the key
effectiveness indicators for innovative development reached targeted values and in
some cases, even exceeded them.
In 2012, the volume of financing for research and development reached 2.9 billion
rubles.
Financial Results
This chapter contains selected financial information which has been derived from the
Group’s audited consolidated financial statement as at and for the year ended 31
December 2012, prepared in accordance with International Financial Reporting
Standards (IFRS) and its interpretations as adopted by the European Union. The
selected financial and operating data below should be read in conjunction with the
Group’s consolidated financial statement prepared in accordance with IFRS.
Summary of results
For the years ended 31 December 2012 and 2011, our revenue amounted to
RUR140,313 million and RUR139,571 million, respectively.
For the years ended 31 December 2012 and 2011, our profit for the period amounted
to RUR7,043 million and RUR48,988 million, respectively.
76
Year ended
Year ended
31 December 2012
31 December 2011
(in millions of rubles)
Revenues
Other operating income
Operating expenses
140,313
3,543
(110,630)
Gain on disposal of available-for-sale
investments
Loss on re-measurement of assets held
for sale
Reversal of impairment / (impairment) of
property, plant and equipment, net
-
-
53
Operating profit
Finance income
Finance costs
Impairment of available-for-sale
investments
Impairment of promissory notes, net
Reversal of impairment of investments in
associates
Share of result of associates
Profit before income tax
Income tax
Profit for the year
33,279
4,113
(214)
(18,941)
(9,772)
313
21
8,799
(1,756)
7,043
139,571
7,793
(100,750)
31,115
(4,718)
(1,174)
71,837
3,957
(278)
(12,661)
-
-
8
62,863
(13,875)
48,988
APPENDIX
Consolidated Statement
of Financial Position (IFRS)
(in millions of rubles)
ASSETS
Non-current assets
31 December
2012
31 December
2011
Property, plant and equipment
1,096,535
980,677
Intangible assets
Investments in associates
Available-for-sale investments
Long-term promissory notes
Other non-current assets
Total non-current assets
Current assets
Cash and cash equivalents
Bank deposits
Short-term promissory notes
Loans given
Accounts receivable and prepayments
Income tax prepayments
Inventories
Total current assets
TOTAL ASSETS
EQUITY AND LIABILITIES
Equity
Share capital: Ordinary shares
Treasury shares
Share premium
Reserves
Accumulated deficit
9,319
1,403
50,617
1,457
4,498
6,973
910
69,979
14,928
1,039
1,163 829
1,074,506
24,056
980
23,380
38
38,808
2,143
7,007
96,412
25,627
1,184
20,737
448
32,944
1,911
6,320
89,171
1,260,241
1,163,677
630,193
(4,917)
10,501
313,117
(41,831)
627,974
(5,522)
10,501
314,323
(49,962)
897,314
793
898,107
Equity attributable to shareholders of FGC UES
907,063
Non-controlling interest
Total equity
733
907,796
78
(in millions of rubles)
Non-current liabilities
Deferred income tax liabilities
Non-current debt
Retirement benefit obligations
Total non-current liabilities
Current liabilities
Accounts payable to shareholders of FGC UES
Current debt and current portion of
non-current debt
Accounts payable and accrued charges
Income tax payable
Total current liabilities
Total liabilities
31 December
2012
31 December
2011
80,615
193,200
5,164
278,979
3,257
23,218
46,816
175
73,466
352,445
80,572
130,778
4,686
216,036
2,275
2,002
44,974
283
49,534
265,570
TOTAL EQUITY AND LIABILITIES
1,260,241
1,163, 677
Summary of the Consolidated Statement
of Cash Flows (IFRS)
(in millions of rubles)
Year ended
31 December
2012
Year ended
31 December
2011
Net cash generated by operating activities
70,306
68,645
Net cash used in investing activities
(145,711)
(124,743)
Net cash generated by financing activities
73,834
Net (decrease) / increase in cash and cash
equivalents
(1,571)
68,152
12,054
APPENDIX
Non-IFRS Financial Information
(in millions of rubles, except for margins and
ratios in %)
Year ended
31 December
2012
Year ended
31 December
2011
EEBITDA
EBITDA margin (1)
Adjusted EBITDA
Adjusted EBITDA margin (1)
Adjusted operating profit (2)
Adjusted operating profit margin (1)
Adjusted profit for the period (3)
Return on assets (4)
Return on equity (5)
49,379
35.2%
82,133
58.5%
33,520
23.9%
29,956
2.5%
3.3%
93,236
66.8%
83,760
60.0%
46,614
33.4%
38,241
3.4%
4.3%
(1) Margins are calculated as EBITDA, adjusted EBITDA and adjusted operating profit divided by the
total revenue for the period;
(2) Adjusted operating profit is calculated as operating profit adjusted for gain on disposal of
available-for-sale investments (only in 2011)), loss on re-measurement of assets held for sale (only in
2011), and non-specific impairment of property, plant and equipment;
(3) Adjusted profit for the period is calculated as profit for the period adjusted for gain on disposal of
available-for-sale investments (only in 2011), loss on re-measurement of assets held for sale (only in
2011), non-specific impairment of property, plant and equipment, impairment of available-for-sale
investments, impairment of promissory notes (only in 2012), and reversal of impairment of investments
in associates (only in 2012) (including respective deferred income tax);
(4) Return on assets is calculated as adjusted profit for the period divided by the average total assets for
the period;
(5) Return on equity is calculated as adjusted profit for the period divided by the average total equity for
the respective period. For the purpose of this ratio, amounts received from shareholders of Federal Grid
Company for the additional share issues prior to the registration of these issues (recorded as accounts
payable to shareholders of Federal Grid Company) are treated as an element of equity.
The indicators presented above are not financial performance measures that are
required by, or presented in accordance with IFRS. Accordingly, they should not be
considered as alternatives to profit for the period as a measure of operating
performance or to cash flows from operating activities as a liquidity measure. Our
calculation of these ratios may be different from calculations used by other
companies and therefore comparability may be limited. We believe that EBITDA and
Adjusted EBITDA provide useful information to investors, because they are indicators
of the strength and performance of our ongoing business operations and indicators of
our ability to fund discretionary spending, such as: capital expenditures, the
acquisition of subsidiaries and other investments and our ability to incur and service
debt. While depreciation and amortisation are considered operating costs under IFRS,
these expenses primarily represent non-cash current period allocations of costs
associated with long-lived assets that have been acquired or constructed in prior
periods.
80
Adjusted profit for the period
Adjusted profit for the period is used to calculate the return on assets and the return
on equity indicators. The following table sets forth a reconciliation of adjusted profit
for the period to profit for the periods indicated:
(in millions of rubles)
Profit for the period
Year ended
31 December
2012
Year ended
31 December
2011
7,043
48,988
Adjustments to profit for the period:
Gain on disposal of available-for-sale
investments
Loss on re-measurement of assets held for sale
-
-
Non-specific impairment of property, plant and
equipment
241
(31,115)
4,718
303
Impairment of available-for-sale investments
18,941
12,661
Impairment of promissory notes
Reversal of impairment on investments in
associates
Deferred income tax on adjustments (1)
Adjusted profit for the period (1)
9,772
(313)
(5,728)
29,956
-
-
2,687
38,241
(1) Unaudited.
EBITDA and adjusted EBITDA
EBITDA represents profit for the period before income tax, finance income and costs,
depreciation and amortisation. Adjusted EBITDA represents EBITDA adjusted to
exclude gain on disposal of available-for-sale investments (only in 2011), loss on
re-measurement of assets held for sale (only in 2011), non-specific impairment of
property, plant and equipment, impairment of available-for-sale investments,
impairment of promissory notes (only in 2012), reversal of impairment of investments
in associates (only in 2012), and to include finance income.
APPENDIX
The following table sets forth a reconciliation of profit for the period to EBITDA and
adjusted EBITDA for the periods indicated:
(in millions of rubles)
Profit for the period
Add back:
Income tax
Finance income
Finance costs
Depreciation and amortisation
EBITDA (1)
Adjustments to EBITDA:
Gain on disposal of available-for-sale
investments
Loss on re-measurement of assets held for
sale
Non-specific impairment of property, plant
and equipment
Year ended
31 December
2012
Year ended
31 December
2011
7,043
48,988
1,756
(4,113)
214
44,479
49,379
-
-
241
13,875
(3,957)
278
34,052
93,236
(31,115)
4,718
303
Impairment of available-for-sale investments
18,941
12,661
Impairment of promissory notes
Reversal of impairment of investments of
associates
Add back:
Finance income
Adjusted EBITDA (1)
(1) Unaudited.
9,772
(313)
4,113
82,133
-
-
3,957
83,760
Liquidity ratios and other measures
(in millions of rubles, except for
ratios)
Current liquidity ratio (1)
Cash liquidity ratio (2)
Total equity / Total assets ratio (3)
As at 31
December 2012
As at 31
December 2011
1.37
0.69
0.72
1.89
1.01
0.77
Net debt (4)
168,002
85,232
82
(1) Current liquidity ratio is calculated as total current assets divided by total current liabilities. For the
purpose of this ratio, the amounts received from shareholders of Federal Grid Company for the
additional share issues prior to the registration of these issues (recorded as accounts payable to
shareholders of Federal Grid Company) are excluded from current liabilities;
(2) The cash liquidity ratio is calculated as a sum of cash and cash equivalents, short-term bank deposits
and short-term promissory notes divided by total current liabilities. For the purpose of this ratio, the
amounts received from shareholders of Federal Grid Company for the additional share issues prior to
the registration of these issues (recorded as accounts payable to shareholders of Federal Grid
Company), are excluded from current liabilities;
(3) For the purpose of this ratio, the amounts received from shareholders of Federal Grid Company for
the additional share issues before the registration of these issues (recorded as accounts payable to
shareholders of Federal Grid Company) are treated as an element of equity;
(4) Net debt represents non-current and current debt reduced by cash and cash equivalents, short-term
bank deposits and short-term promissory notes.
Revenues
The Group's revenues are derived primarily from the provision of electricity
transmission services. Changes in this type of revenues are primarily dependent on
changes in tariffs set by the FTS. The Group also earns revenues from the sale of
electricity generated and sold to third parties by the Group’s subsidiaries.
The Group's revenues increased by RUR742 million, or 0.5%, from RUR139,571
million for the year ended 31 December 2011 to RUR140,313 million for the year
ended 31 December 2012.
The table below sets out the Group's revenues for the periods indicated:
(in millions of rubles,
except for percentages)
Year ended
31 December
2012
Percentage
of total
revenue
Year ended
31 December
2011
Percentage
of total
revenue
Percentage
change between
the years ended
31 December
2012 and 2011
Transmission fee
136,559
97.3%
134,754
Electricity sales
Other revenues
Total revenues
2,251
1,503
1.6%
1.1%
2,246
2,571
96.6%
1.6%
1.8%
1.3%
0.2%
(41.5)%
140,313
100.0%
139,571
100.0%
0.5%
Transmission fee
The Group's revenue from electricity transmission services increased RUR1,805
million, or 1.3%, from RUR134,754 million for the year ended 31 December 2011 to
RUR136,559 million for the year ended 31 December 2012, primarily as a result of an
increase in tariffs for transmission services established by the FTS (from 01.07.2012)
which was partially compensated by a decrease in revenues from compensation of
normative technologic electricity losses.
Electricity sales
The Group's revenue from electricity sales slightly increased by RUR5 million, or
0.2%, from RUR2,246 million for the year ended 31 December 2011 to RUR2,251
million for the year ended 31 December 2012.
APPENDIX
Other revenues
Other revenues include revenues from connection services and grid repair and
maintenance services. The Group's other revenues decreased by RUR1,068 million,
or 41.5%, from RUR2,571 million for the year ended 31 December 2011 to RUR1,503
million for the year ended 31 December 2012.
Other operating income
Other operating income primarily includes income from non-core activities. The
Group's other operating income decreased by RUR4,250 million, or 54.5%, from
RUR7,793 million for the year ended 31 December 2011 to RUR3,543 million for the
year ended 31 December 2012 primarily due to one-off effects in 2011: write-off of
accounts payable of OJSC “Nurenergo” in the amount of RUR2,747 million and
insurance compensation for the accident at Chagino substation.
Percentage
change between
the years ended
31 December
2012 and 2011
Operating expenses
The table below sets out the Group's operating expenses
for the periods indicated.
(in millions of rubles,
except for percentages)
Depreciation of property,
plant and equipment and
amortisation of intangible
assets
Employee benefit expenses
and payroll taxes
Year ended
31 December
2012
Percentage
of total
revenue
Year ended
31 December
2011
Percentage
of total
revenue
44,479
40.2%
34,052
33.8%
30.6%
26,311
23.8%
24,046
23.9%
9.4%
Purchased electricity
Repair and maintenance
services
13,320
3,732
12.0%
13,781
13.7%
(3.3)%
3.4%
3,666
3.6%
1.8%
(Reversal) / accrual of
allowance for doubtful
debtors
Other expenses
Total operating expenses
(1,405)
(1.3)%
4,305
4.3%
-
24,193
110,630
21.9%
20,900
20.7%
15.8%
100.0%
100,750
100.0%
9.8%
(1) As presented in comparative information in the 2012 audited consolidated financial statements.
The Group's operating expenses increased by RUR9,880 million, or 9.8%, from
RUR100,750 million for the year ended 31 December 2011 to RUR110,630 million for
the year ended 31 December 2012.
84
Depreciation of property, plant and equipment and
amortisation of intangible assets
The Group's depreciation and amortisation expenses increased by RUR10,427 million,
or 30.6%, from RUR34,052 million for the year ended 31 December 2011 to
RUR44,479 million for the year ended 31 December 2012, primarily due to new
property, plant and equipment put into operation..
Employee benefit expenses and payroll taxes
The Group's employee benefits expenses and payroll taxes expenses increased by
RUR2,265 million, or 9.4%, from RUR24,046 million for the year ended 31 December
2011 to RUR26,311 million for the year ended 31 December 2012. The growth is
primarily explained by an increase in the average number of employees by 4.4% and
an increase in average salaries due to indexation of remuneration. The increase was
partially compensated by a decrease in recognition of share-based compensation in
accordance with the Option program (by RUB 737 million) due to oncoming vesting
date.
Purchased electricity
Federal Grid Company purchases electricity to compensate electricity losses which
occur during transmission. The Group’s electricity purchases dropped by RUR461
million, or 3.3%, from RUR13,781 million for the year ended 31 December 2011 to
RUR13,320 million for the year ended 31 December 2012. The decrease in purchased
electricity expenses was due to a reduction of actual volumes of electricity losses
during transmission owing to increased the UNEG efficiency as well as a result of
decreased wholesale electricity prices.
Repair and maintenance services
The Group's expenses for repair and maintenance services obtained from external
contractors slightly increased by RUR66 million, or 1.8%, from RUR3,666 million for
the year ended 31 December 2011 to RUR3,732 million for the year ended 31
December 2012.
(Reversal) / accrual of allowance for doubtful debtors
After a detailed analysis of accounts receivable as at 31 December 2012, the Group
recognised a net reversal of the allowance for doubtful debtors in the amount of
RUR1,405 million for the year ended 31 December 2012. This amount includes a
reversal of the previously impaired receivables for transmission services from OJSC
“IDGC of Siberia” in the amount of RUR2,714 million. For the year ended 31 December
2011, the Group recognised a net accrual of the allowance in the amount of RUR4,305
million.
Gain on disposal of available-for-sale investments
The gain of RUR31,115 million recognised in 2011 resulted from accumulated gain on
available-for-sale investments recycled to profit or loss, in connection with the
one-off transfer of shares in electricity generating companies to OJSC “INTER RAO
UES” (“INTER RAO”).
APPENDIX
Loss on re-measurement of assets held for sale
In 2011, all investments previously classified as non-current assets held for sale,
except for JSC UES “GruzRosEnergo”, were transferred to INTER RAO. Loss on
re-measurement of these assets amounted to RUB 4,718 million.
Reversal of impairment / (impairment) of property, plant and
equipment
For the year ended 31 December 2012 the Group recognised a net reversal of an
impairment of property, plant and equipment in the amount of RUR53 million. For the
year ended 31 December 2011 the Group recognised a net impairment of property,
plant and equipment in the amount of RUR1,174 million, which primarily consisted of
an impairment of advances to construction companies and suppliers of property,
plant and equipment.
Finance income
Finance income increased by RUR156 million, or 3.9%, from RUR3,957 million for the
year ended 31 December 2011 to RUR4,113 million for the year ended 31 December
2012, primarily due to an increase in interest income.
Financial costs
Finance costs decreased by RUR64 million, or 23.0%, from RUR278 million for the
year ended 31 December 2011 to RUR214 million for the year ended 31 December
2012, primarily due to a decrease of loss on initial recognition of promissory notes.
Impairment of available-for-sale investments
Impairment of available-for-sale investments increased by RUB 6,280 million, or
49.6%, from RUR12,661 million for the year ended 31 December 2011 to RUR18,941
million for the year ended 31 December 2012. The loss recognised in both years was
attributable to an impairment of shares in INTER RAO due to a significant and
prolonged decline in the fair value of these equity investments below their cost. The
increase in impairment loss was due to the fact that shares in INTER RAO were held
by the Group for the whole year of 2012 and only for nine months in 2011.
Impairment of promissory notes
In the year ended 31 December 2012 the Group fully impaired long-term promissory
notes issued by LLC “ENERGO-finance” which resulted in recognition of a net
impairment of promissory notes in the amount of RUR9,772 million.
Reversal of impairment of investments in associates
For the year ended 31 December 2012 the Group received the results of an
independent appraisal of property, plant and equipment of JSC UES
“GruzRosEnergo”. According to it, the fair value of the Group’s interest in net assets of
the entity increased, therefore the impairment provision accrued in 2007 and 2011 in
the total amount of RUR313 million was reversed.
86
Share of results of associates
The share of results of associates increased by RUR13 million, or 162.5%, from a net
income of RUR8 million for the year ended 31 December 2011 to a net income of
RUR21 million for the year ended 31 December 2012.
Profit before income tax
Profit before income tax decreased by RUR54,064 million, or 86.0%, from RUR62,863
million for the year ended 31 December 2011 to RUR8,799 million for the year ended
31 December 2012.
Income tax
Income tax expense decreased by RUR12,119 million, or 87.3%, from RUR13,875
million for the year ended 31 December 2011 to RUR1,756 million for the year ended
31 December 2012. Change in income tax expense was caused by a decrease of
current income tax in the amount of RUR6,959 million, as a result of reduction the tax
base, as well as a decrease of deferred income tax in the amount of RUR5,160 million.
Profit for the period
As a result of the above-mentioned factors, profit for period decreased by RUR41,945
million, or 85.6%, from RUR48,988 million for the year ended 31 December 2011 to
RUR7,043 million for the year ended 31 December 2012.
Liquidity and Capital Resources
The Group's primary sources of liquidity are cash generated via operating activities
and debt and equity financing. Future requirements for the Group's business needs,
including those to fund additional capital expenditures in accordance with its business
strategy, are expected to be financed by a combination of cash flows generated by the
Group's operating activities, as well as external financing sources and funds from the
Russian Government.
Capital requirements
The electricity transmission business is capital-intensive and many of the Group's
facilities are aging and require regular maintenance and upgrades. Expenditures to
maintain, expand and increase the efficiency and size of the transmission grid are,
accordingly, an important priority and have a significant effect on the Group's cash
flows and future operating results.
APPENDIX
The table below sets out total additions to property, plant and equipment for the periods
indicated.
(in millions of rubles)
Total additions to property, plant and
equipment
Year ended
31 December
2012
Year ended
31 December
2011
162,232
166,073
Liquidity and working capital
ГThe Group relies on cash from its operating activities, debt financing and proceeds
from the issuance of additional shares of the Company as its main sources of liquidity
and working capital.
Historical cash flows
The table below summarizes the Group's cash flows for the periods indicated.
(in millions of rubles)
Net cash generated by operating activities
Net cash used in investing activities
Net cash generated by financing activities
Net (decrease) / increase in cash and cash
equivalents
Year ended
31 December
2012
Year ended
31 December
2011
70,306
(145,711)
73,834
(1,571)
68,645
(124,743)
68,152
12,054
Net cash generated by operating activities
Net cash generated by the Group's operating activities increased by RUR1,661
million, or 2.4%, from RUR68,645 million for the year ended 31 December 2011 to
RUR70,306 million for the year ended 31 December 2012. This happened primarily
due to a decrease in income tax payments which was partially offset by a decrease in
operating cash flows before working capital changes and income tax paid.
Net cash used in investing activities
Net cash used in the Group's investing activities increased by RUR20,968 million, or
16.8%, from RUR124,743 million for the year ended 31 December 2011 to RUR145,711
million for the year ended 31 December 2012. This happened primarily due to a
decrease in proceeds received from redemption of promissory notes by RUR19,563
million and redemption of bank deposits by RUR6,084 million.
88
Net cash generated by financing activities
Net cash generated by the Group's financing activities increased by RUR5,682 million,
or 8.3%, from RUR68,152 million for the year ended 31 December 2011 to RUR73,834
million for the year ended 31 December 2012. This happened primarily due to a
decrease in repayment of current borrowings (by RUB 6,400 million) and in dividends
paid (by RUB 2,543 million) as well as an increase in proceeds from non-current
borrowings (by RUB 2,500 million), which was partially compensated by an increase in
interest paid (by RUB 6,659 million).
Debt
As at 31 December 2012, the Group's total debt amounted to RUR216,418 million as
compared with RUR132,780 million as at 31 December 2011.
The following table sets out the Group’s current debt and non-current debt for the
periods indicated.
(in millions of rubles)
Current debt and current portion of
non-current debt
Non-current debt
Total debt
As at
31 December
2012
As at
31 December
2011
23,218
2,002
193,200
216,418
130,778
132,780
As at 31 December 2012, the Group's non-current debt amounted to RUR193,200
million and was comprised of certified interest-bearing non-convertible
ruble-denominated bearer bonds with an aggregate nominal value of RUR130,000
million, Stock Exchange authorised certified interest-bearing non-convertible
ruble-denominated bearer bonds with a nominal value of RUR10,000 million, loan
participation notes with a nominal value of RUR17,500 million, long-term bank loans
from OJSC “Gazprombank” in the total amount of RUR35,000 million, and a long-term
portion of finance lease liabilities of RUR700 million.
APPENDIX
Disclaimer
This Annual Financial Report has been prepared for shareholders of Joint Stock
Company "Federal Grid Company of Unified Energy System" (the Company) as a body
and for no other persons. The Company, its directors, employees, agents or advisers
do not accept responsibility for any other person to whom this document is shown or
into whose hands it may reach and any such responsibility or liability is expressly
disclaimed against.
By their very nature, statements concerning risks and uncertainties that the Company
faces in this Annual Financial Report involve uncertainty since future events and
circumstances can cause results and developments to differ materially from those
that are anticipated. The forward-looking statements contained in this Annual
Financial Report reflect knowledge and information that were available at the date of
preparing this Annual Financial Report and the Company undertakes no obligation to
update these forward-looking statements. Further, nothing in this Annual Report
should be construed as a profit forecast".
Responsibility Statement
I hereby confirm that to the best of my knowledge:
(а) the consolidated financial statements, prepared in accordance with International
Financial Reporting Standards, give a true and fair value of the assets, liabilities,
financial position and profit or loss of Federal Grid Company UES Group, and the
undertakings included in the consolidation taken as a whole (the "Group"); and
(b) the management report includes a fair review of the development and
performance of the business and the position of the Group, together with a
description of the principal risks and uncertainties that are faced.
Andrey Kazachenkov,
First Deputy Chairman of the
Management Board,
Member of the Management Board
23 April 2013
90
INFORMATION ON TRANSACTIONS PERFORMED BY JSC
FEDERAL GRID COMPANY IN 2012, RECOGNIZED BY RUSSIAN
FEDERATION LAWS AS INTERESTED PARTY TRANSACTIONS,
AND WHICH ARE SUBJECT TO THE APPROVAL OF THE
COMPANY’S AUTHORIZED MANAGEMENT BODY:
1. The approval of the Agreement on Process Information Exchange concluded by and
between JSC Federal Grid Company and JSC RusHydro. The Agreement contains no
monetary obligations and does not stipulate the transfer of any property (property rights)
(Minutes #151 of the Company’s Board of Directors, dated 27.01.2012);
2. The approval of the Agreement on the termination concluded by and between JSC
Federal Grid Company and JSC Kubanenergo and terminating the lease of locations for
the installation of electric energy metering equipment and devices entitled AIMS CMEE
of the external perimeter and internal generation of JSC Kubanenergo, dated 21.04.2008,
#233. The price of the Agreement is not determined, based on the nature of the
transaction (Minutes #156 of the Company’s Board of Directors, dated 23.03.2012);
3. The approval of Additional Agreement #9 to the Construction Customer Agreement
concluded by and between JSC Federal Grid Company and JSC CIUS UES, dated
01.04.2008, #C/01. The price of the Additional Agreement, taking into account the fixed
and variable parts, should not exceed RUR2 732 000 000 (two billion, seven hundred and
thirty-two million), plus VAT (18%), in accordance with Russian Federation laws, thus
totaling RUR491 760 000 (four hundred and ninety-one million, seven hundred and sixty
thousand) (Minutes #160 of the Company’s Board of Directors, dated.05.2012);
4. The approval of the Agreement for the lease of non-residential premises, concluded by
and between JSC Federal Grid Company and JSC CIUS UES. The lease payment per the
Agreement amounts to RUR113 591 (one hundred and thirteen thousand, five hundred
and ninety-one) and 72 kopecks (Minutes #160 of the Company’s Board of Directors,
dated 11.05.2012);
5. The approval of the Agreement for the lease of non-residential premises, concluded by
and between JSC Federal Grid Company and JSC CIUS UES. The lease payment per the
Agreement amounts to RUR13 219 866 (thirteen million, two hundred and nineteen
thousand, eight hundred and sixty-six), including VAT (18%) in the amount of RUR2 016
589 (two million, sixteen thousand, five hundred and eighty-nine) and 74 kopecks
(Minutes #160 of the Company’s Board of Directors, dated 11.05.2012);
6. The approval of the additional agreements to the Agreement on the Use of
Organizational Standards, dated 23 May 2011. Due to the fact that the conclusion of
additional agreements to the Agreement on the Use of Organizational Standards as of
23.05.2011 does not and cannot involve any monetary obligations, and stipulates no
transfer of property (property rights), the price of additional agreements #1 and #2 is
not determined (Minutes #160 of the Company’s Board of Directors, dated 11.05.2012);
7. The approval of the services agreement pertaining to accessing the electronic
document flow system of the Corporate Information System of the Electronic Signature
Verification Center, concluded by and between JSC Federal Grid Company and JSC CIUS
UES. The price of the Agreement is determined based on the volume of services
pertaining to the manufacture of a key. The price amounts to RUR5 849 (five thousand,
eight hundred and forty-nine) and 35 kopecks (including VAT) (Minutes # 160 of the
Company’s Board of Directors, dated 11.05.2012);
8. The approval of the Agreement on the transfer and safekeeping of Information that
makes up a trade secret for JSC Federal Grid Company, concluded by and between JSC
Federal Grid Company and JSC CIUS UES. Due to the fact that the agreement contains
no monetary obligations and stipulates no transfer of property (property rights), the
price of the Agreement between JSC Federal Grid Company and JSC CIUS UES
described above is not determined (Minutes #160 of the Company’s Board of Directors,
dated 11.05.2012);
9. The approval of the Liability Insurance Agreement pertaining to insuring the liability
of members of the Board of Directors, members of the Management Board and the
Chief Accountant of JSC Federal Grid Company. The insurance premium per the
Agreement does not exceed RUR15 000 000 (fifteen million) (VAT exempt) (Minutes
#162 of the Company’s Board of Directors, dated 25.05.2012);
APPENDIX
10. The approval of additional agreement #10 to the Construction Customer Agreement
concluded by and between JSC Federal Grid Company and JSC CIUS UES, dated 01.04.2008,
#C/01. The price of the additional agreement taking into account the fixed and variable parts
should not exceed RUR2 930 000 000 (two billion, nine hundred and thirty million), plus VAT
(18%), in accordance with Russian Federation laws, thus amounting to RUR527 400 000 (five
hundred and twenty-seven million, four hundred thousand) (Minutes #163 of the Company’s
Board of Directors, dated 07.06.2012);
11. The approval of the additional agreement to Agreement #20/10 “Life tests and the
adaptation of the high temperature super-conductor of 200m long cable lines and a
cryo-system for the pilot industrial operation at the 110 kV Dynamo SS”, concluded by and
between JSC Federal Grid Company and JSC ENIN. The additional agreement makes no
changes in the price of the Agreement (Minutes #163 of the Company’s Board of Directors,
dated 07.06.2012);
12. The approval of the conclusion of the Agreement of Intent by and between JSC Federal
Grid Company and JSC DVEUK to consolidate electric power facilities on Russky Island. Due to
the nature of the transaction, the price of the Agreement between JSC Federal Grid Company
and JSC DVEUK is not set (Minutes #163 of the Company’s Board of Directors, dated
07.06.2012);
13. The approval of the agreement for operational servicing, repair, maintenance and
diagnostic inspection of power grid facilities, concluded by and between JSC Federal Grid
Company and JSC DVEUK. The price of the Agreement amounts to RUR3 182 763 (three
million, one hundred and eighty-two thousand, seven hundred and sixty-three) and 28
kopecks, including VAT (Minutes #163 of the Company’s Board of Directors, dated 07.06.2012);
14. The approval of the agreement for the lease of real estate property concluded by and
between JSC Federal Grid Company and JSC CIUS UES. The price of the agreement for the
entire duration of the lease of real estate property concluded between JSC Federal Grid
Company and JSC CIUS UES amounts to RUR8 910 036 (eight million, nine hundred and ten
thousand and thirty-six) and 41 kopecks, including VAT (Minutes #166 of the Company’s Board
of Directors, dated 28.06.2012);
15. On the approval of the agreement for the lease of real estate property concluded by and
between JSC Federal Grid Company and JSC CIUS UES. The price of the agreement for the
entire duration of the lease of real estate property amounts to RUR8 910 036 (eight million,
nine hundred and ten thousand, thirty-six) and 41 kopecks (Minutes #166 of the Company’s
Board of Directors, dated 02.07.2012);
16. On the approval of the agreement on the transfer of authorities of a sole executive body of
the Joint Stock Company Inter-regional Distribution Grid Holding, concluded by and between
JSC IDGC Holding and JSC Federal Grid Company. The price of the Agreement is equal to
remuneration to the Management Organization, as calculated in accordance with the
procedure set by the Agreement. Till the Board of Directors approves the KPI system and the
procedure for setting remuneration for the Management Organization, remuneration to the
Management Organization amounts to RUR3 300 000 (three million, and three hundred
thousand) per month (Minutes #168 of the Company’s Board of Directors, dated 09.07.2012);
17. On the approval of Additional Agreement #3 to the Agreement on the Use of
Organizational Standards, dated 23 May 2011. The transaction contains no monetary
obligations, therefore no price is determined (Minutes #171 of the Company’s Board of
Directors, dated 24.08.2012);
18. On the approval of the conclusion of the agreement between Kovalchuk Boris Yurievich, a
member of the Company’s Board of Directors, and the Company. The agreement is intended
to regulate the relationships between the Company and a member of the Company’s Board of
Directors, stipulating that the amount, the procedure and the conditions for paying
remuneration and cost compensation (the price of the agreement specified in this decision)
paid to members of the Board of Directors of JSC Federal Grid Company (hereinafter referred
to as the Company) in accordance with p.2 of Article 64 of the Russian Federal Law “On Joint
Stock Companies” is determined by a decision of the General Shareholders Meeting (Minutes
#172 of the Company’s Board of Directors, dated 11.09.2012);
92
19. On the approval of the conclusion of the agreement between Kracvhenko Vyacheslav
Mikhailovich, a member of the Company’s Board of Directors, and the Company. The
agreement is intended to regulate the relationships between the Company and a member of
the Company’s Board of Directors, stipulating that the amount, the procedure and the
conditions for paying remuneration and cost compensation (the price of the agreement
specified in this decision) paid to members of the Board of Directors of JSC Federal Grid
Company (hereinafter referred to as the Company) in accordance with p.2 of Article 64 of the
Russian Federal Law “On Joint Stock Companies” is determined by a decision of the General
Shareholders Meeting (Minutes #172 of the Company’s Board of Directors, dated 11.09.2012);
20. On the approval of the conclusion of the agreement between Rashevsky Vladimir
Valerievich, a member of the Company’s Board of Directors, and the Company. The agreement
is intended to regulate the relationships between the Company and a member of the
Company’s Board of Directors, stipulating that the amount, the procedure and the conditions
for paying remuneration and cost compensation (the price of the agreement specified in this
decision) paid to members of the Board of Directors of JSC Federal Grid Company (hereinafter
referred to as the Company) in accordance with p.2 of Article 64 of the Russian Federal Law
“On Joint Stock Companies” is determined by a decision of the General Shareholders Meeting
(Minutes #172 of the Company’s Board of Directors, dated 11.09.2012);
21. On the approval of the conclusion of the agreement between Titova Elena Borisovna, a
member of the Company’s Board of Directors, and the Company. The agreement is intended
to regulate the relationships between the Company and a member of the Company’s Board of
Directors, stipulating that the amount, the procedure and the conditions for paying
remuneration and cost compensation (the price of the agreement specified in this decision)
paid to members of the Board of Directors of JSC Federal Grid Company (hereinafter referred
to as the Company) in accordance with p.2 of Article 64 of the Russian Federal Law “On Joint
Stock Companies” is determined by a decision of the General Shareholders Meeting (Minutes
#172 of the Company’s Board of Directors, dated 11.09.2012);
22. On the approval of the conclusion of the agreement between Scherbovich Ilya Viktorovich,
a member of the Company’s Board of Directors, and the Company. The agreement is intended
to regulate the relationships between the Company and a member of the Company’s Board of
Directors, stipulating that the amount, the procedure and the conditions for paying
remuneration and cost compensation (the price of the agreement specified in this decision)
paid to members of the Board of Directors of JSC Federal Grid Company (hereinafter referred
to as the Company) in accordance with p.2 of Article 64 of the Russian Federal Law “On Joint
Stock Companies” is determined by a decision of the General Shareholders Meeting (Minutes
#172 of the Company’s Board of Directors, dated 11.09.2012);
23. On the approval of the conclusion of the agreement between Ayuev Boris Ilyich, a member
of the Company’s Board of Directors, and the Company. The agreement is intended to regulate
the relationships between the Company and a member of the Company’s Board of Directors,
stipulating that the amount, the procedure and the conditions for paying remuneration and
cost compensation (the price of the agreement specified in this decision) paid to members of
the Board of Directors of JSC Federal Grid Company (hereinafter referred to as the Company)
in accordance with p.2 of Article 64 of the Russian Federal Law “On Joint Stock Companies” is
determined by a decision of the General Shareholders Meeting (Minutes #172 of the
Company’s Board of Directors, dated 11.09.2012);
23. On the approval of the conclusion of the agreement between Ayuev Boris Ilyich, a member
of the Company’s Board of Directors, and the Company. The agreement is intended to regulate
the relationships between the Company and a member of the Company’s Board of Directors,
stipulating that the amount, the procedure and the conditions for paying remuneration and cost
compensation (the price of the agreement specified in this decision) paid to members of the
Board of Directors of JSC Federal Grid Company (hereinafter referred to as the Company) in
accordance with p.2 of Article 64 of the Russian Federal Law “On Joint Stock Companies” is
determined by a decision of the General Shareholders Meeting (Minutes #172 of the
Company’s Board of Directors, dated 11.09.2012);
24. On the approval of the conclusion of the agreement between Malyshev Andrey Borisovich,
a member of the Company’s Board of Directors, and the Company. The agreement is intended
to regulate the relationships between the Company and a member of the Company’s Board of
Directors, stipulating that the amount, the procedure and the conditions for paying
remuneration and cost compensation (the price of the agreement specified in this decision)
paid to members of the Board of Directors of JSC Federal Grid Company (hereinafter referred
to as the Company) in accordance with p.2 of Article 64 of the Russian Federal Law “On Joint
Stock Companies” is determined by a decision of the General Shareholders Meeting (Minutes
#172 of the Company’s Board of Directors, dated 11.09.2012);
25. On the approval of the conclusion of the agreement between Ernesto Ferlenghi, a member
of the Company’s Board of Directors, and the Company. The agreement is intended to
regulate the relationships between the Company and a member of the Company’s Board of
Directors, stipulating that the amount, the procedure and the conditions for paying
remuneration and cost compensation (the price of the agreement specified in this decision)
paid to members of the Board of Directors of JSC Federal Grid Company (hereinafter referred
to as the Company) in accordance with p.2 of Article 64 of the Russian Federal Law “On Joint
Stock Companies” is determined by a decision of the General Shareholders Meeting (Minutes
#172 of the Company’s Board of Directors, dated 11.09.2012);
26. On the approval of Additional Agreement #1 to the agreement on the transfer of the
authorities of a sole executive body of Joint Stock Company Inter-regional Distribution
Companies Holding #1007, dated 10.07.2012. The price of the Additional Agreement is equal
to the price of remuneration due to the Management Organization, said remuneration
calculated in accordance with Appendix #1 to the Additional Agreement, and the Procedure
for the Calculation of Remuneration and Payment for the Services of the Management
Organization (Appendix #1 to the Minutes). The amount of remuneration due to the
Management Organization calculated and paid in accordance with the Agreement shall not
comprise 2 (two) or more percent of the Company’s net book value on the last reporting date
prior to the conclusion of the Agreement (Minutes #173 of the Company’s Board of Directors,
dated 17.09.2012);
APPENDIX
94
27. On the approval of the agreement for the sub-lease of real-estate property, concluded by and
between JSC Federal Grid Company and JSC CIUS UES. The lease payment set by the Parties in the
amount of RUR6 179 587 (six million, one hundred and seventy-nine thousand, five hundred and
eighty-seven) and 53 kopecks monthly for the fixed part, in accordance with Appendix #2 to the
Sub-lease Agreement, plus VAT in the amount of RUR1 112 325 (one million, one hundred and twelve
thousand, three hundred and twenty-five) and 75 kopecks. The variable part of the lease payment shall
be determined on the basis of invoices presented by utility services to the Lessee for services pertaining
to the functioning and maintenance of the building containing non-residential premises transferred to
the sub-lease per the Agreement (Minutes #177 of the Company’s Board of Directors, dated 09.11.2012);
28. On the approval of the agreement pertaining to the provision of special expert assessment services,
concluded by and between JSC Federal Grid Company and JSC Inter RAO UES. The price of the
Agreement amounts to RUR50 000 (fifty thousand), including VAT (18%) in the amount of RUR7 627
(seven thousand, six hundred and twenty-seven) and 12 kopecks (Minutes #177 of the Company’s Board
of Directors, dated 09.11.2012);
29. On the approval of the agreement pertaining to the provision of special expert assessment services,
concluded by and between JSC Federal Grid Company and the Market Council Non-Commercial
Partnership. The price of the Agreement amounts to RUR50 000 (fifty thousand), including VAT (18%) in
the amount of 7 627 (seven thousand, six hundred and twenty-seven) and 12 kopecks (Minutes #177 of
the Company’s Board of Directors, dated 09.11.2012);
30. On the approval of the conclusion of the Compensation Agreement (220/35/10 kV Poshekhonye
Substation) for the complex technical re-equipment and reconstruction of the 220 kV Poshekhonye
Substation), concluded by and between JSC Federal Grid Company and JSC IDGC of Center. The amount
of the compensation due is set in accordance with p.3.1 and Appendix # 2 to the Compensation
Agreement. The compensation amounts to RUR21 145 389 (twenty-one million, one hundred and
forty-five thousand, three hundred and eighty-nine) and 39 kopecks, including VAT (18%) in the amount
of RUR3 225 567 (three million, two hundred and twenty-five thousand, five hundred and sixty-seven) and
87 kopecks (Minutes #182 of the Company’s Board of Directors, dated 29.11.2012);
31.On the approval of the sales agreement entitled “The Purchase of Power Grid Facilities on Valaam
Island from JSC IDGC Holding”, concluded by and between JSC Federal Grid Company and JSC IDGC of
North-West. The price of the Agreement amounts to RUR14 111 620.00 (fourteen million, one hundred
and eleven thousand, six hundred and twenty), including VAT (18%) in the amount of RUR2 152 620 (two
million, one hundred and fifty-two thousand, six hundred and twenty) (Minutes #183 of the Company’s
Board of Directors, dated 25.12.2012);
APPENDIX
Audit Commission Conclusion on the Audit
of Operational and Financial Activities
of Federal Grid Company for 2012
Appendix No. 2
to the Minutes of the Meeting
of the Audit Commission
No. 6 dated 30 April 2013
Moscow
30 April 2013
In compliance with Federal Law No.208-FZ "On Joint Stock Companies" dated 24
November 1995, the Articles of Association of Federal Grid Company, and the Plan of
Audit of Federal Grid Company’s operational and financial activities for 2012 (Minutes
of Meeting No.1 dated 30 July 2012 and Minutes of Meeting No.3 dated 20 January
2013 respectively), an audit has been conducted of the 2012 annual report by the
Company.
Based on this audit, and taking into account the findings of the audit of Federal Grid
Company’s financial (bookkeeping) accounts by RSM Top-Audit (No.EL-489 dated 18
March 2013) for 2012, the following conclusions were reached:
— Information contained in the Federal Grid Company's Annual Report and annual
financial accounts for 2012 can be considered accurate in every significant respect;
— No evidence has been found of any violations of accounting procedures or financial
reporting regulations, as stipulated by Russian laws.
Considering the above, the Audit Commission of Federal Grid Company has sufficient
grounds to confirm the veracity, in every significant respect, of data contained in the
Annual Report of Federal Grid Company and the Company's 2012 annual statements
in all significant accounts.
This Conclusion has been made in three copies: the first copy has been enclosed in
the Audit Commission’s file; the second copy has been sent to the Company’s
Chairman of the Management Board; and the third copy has been sent to the Board of
Directors of the Company.
Chairman of the Audit
Commission of Federal
Grid Company
Members of the Audit
Commission
V. Raspopov
A. Kolyada
A. Drokova
96
2013 Investor Calendar
23-25 January
Sector-Russia Investment Conference organized
by Deutsche Bank (London)
20 March
Publication of 2012 RAS Financial Statements
23 April
Publication of Financial Statements according to
the FSA’s requirements, including 2012 IFRS
Financial Statements
6 May
Publication of Q1 2013 RAS Financial
Statements
13 June
27 June
Meeting with Minority Shareholders
The Annual General Shareholders Meeting
1 August
Publication of H1 2013 RAS Financial
Statements
2 September
Publication of H1 2013 IFRS Financial
Statements
1 November
Publication of Q3 2013 RAS Financial
Statements
APPENDIX
98