POWER LINE FOR
DEVELOPMENT
ANNUAL REPORT
Federal Grid Company is a unique
infrastructure company that provides reliable and
uninterrupted electric power transmission through
backbone electric grids in the Russian Federation,
and a world leader among public electric
grid companies in terms of the length of power
transmission lines and transformer capacity —
135,000 km and 332,000 MWA
respectively.
We ensure reliable, uninterrupted
and safe supply of electricity to our customers
by continuous investments in improving and
expanding the electric power infrastructure using
advanced innovative technologies. The amount
of capital investments deployed in 2013 was
RUB174.8 billion.
We are a customer-oriented company
that provides customers with high-quality services
and we strive to constantly enhance the quality
of interactions with all our stakeholders in order
to maintain sustainability of our long-term
development.
Federal Grid Company is a public company
whose securities are traded on Russian and foreign
stock exchanges. As of 2013, the Company’s
revenues came to RUB155 billion, market
capitalisation amounted to RUB115 billion.
Information on Annual Report
This Annual Report contains 2013 performance results of Joint Stock Company “Federal Grid Company of Unified
Energy System” (‘JSC FGC UES’, ‘Federal Grid Company’, ‘Federal Grid’ or ‘the Company’).
The Annual Report was preliminary approved by the Board of Directors of Federal Grid Company, Minutes No. 215
dated 15.05.2014.
Chairman of the Management Board
A. Murov
Chief Accountant
A. Noskov
Power Line for Development
In mathematical economics, a turnpike is the trajectory of economic growth
characterised by maximum speed and balance. In other words, a turnpike is
the trajectory of ideally balanced growth. In Russian, this term is synonymous
with “power line” in that context.
A strategic priority for Federal Grid Company is to maintain and develop the
Unified National Electric Grid – the electric grid power line infrastructure
to support the economic growth in Russia and provide an uninterrupted power
supply to the consumers in all regions of the country
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Contents
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36
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46
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52
57
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67
74
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87
88
92
95
96
Statement from the Chairman
of the Board of Directors
Statement from the Chairman
of the Management Board
Key Performance Indicators
Key events in 2013
ST R AT EG I G OV ERV I E W
Company profile
Business Model
Geography
Market overview
Development strategy
Strategy in the context
of sustainable development
PER FO R M A N C E
R ES U LTS
Operating performance overview
Electricity transmission
Technological connection
Improving reliability
Reducing losses
Development of communication
networks and IT-systems
Procurement
Investments and innovative
development
Investment activities
Innovative development
programme
Management’s
Discussion
and Analysis
Overview
Financial performance
Cash flow
Financial position
Tariff regulation
Debt portfolio
Credit ratings
100
104
115
117
118
120
126
126
128
149
149
151
151
159
160
161
162
164
164
166
170
171
172
174
175
176
S O C I A L R ES P O N S I B I L I T Y A N D
S U STA I N A B L E D E V ELO PM EN T
Sustainable development policy
and social responsibility principles
HR Policy
Social policy
Industrial safety
Energy saving and energy efficiency
Environment
C O R P O R AT E
G OV ER N A N C E
Governance System
Corporate governance principles
Governing and control bodies
Key performance indicators
Remuneration to the governing
bodies
Control System
Internal control and Risk
management
Audit Commission
Auditor
Managing subsidiaries and
associates
Anti-Corruption activities
Share capital
Share capital structure
Stock market
Dividend policy
Information policy
Investor relations
A D D I T I O N A L I N FO R M AT I O N
Disclaimer
Contacts
Glossary
A PPEN D I C ES
on the memory stick attached
I N FO R M AT I O N M AT ER I A L S
on the memory stick attached
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reliability and efficiency, we intend to improve our financial
performance.
We will continue to improve our corporate governance
framework and develop relations with the Company’s
stakeholders. An important incentive for our work in this
area will be the adoption of a new Russian Code of Corpo-
rate Governance and new listing rules which will soon come
into effect. As a large public company, we will have to make
our internal documents, rules and procedures consistent
with the new governance requirements and recommenda-
tions in order to improve the efficiency of the Company’s
operations and competitiveness, and strengthen consumer
and investor confidence.
The implementation of social projects remains one of our
priorities. We will continue to improve housing conditions
for our employees, provide benefits to young specialists,
cooperate with higher-education institutions in Russia and
support young researchers and the academic community.
A detailed discussion of Federal Grid Company’s achieve-
ments in sustainable development is available in the Social
Responsibility and Corporate Sustainability Report, which
is published annually.
In 2014, our tasks include the further development of Fed-
eral Grid Company and the implementation of our invest-
ment projects. We will have to commission new and re-
constructed grid facilities in accordance with agreed-upon
schedules, and improve the efficiency of our core business
processes. We have all the necessary resources for doing
so, as well as the support and confidence of shareholders
and the government, a professional team of employees and
clear and well-defined strategic goals.
I am sure that future decisions of the Board of Directors and
initiatives of our management will contribute to the further
strengthening of the electricity grid infrastructure and to in-
creasing the reliability of our customers’ electricity supply.
Oleg Budargin
Chairman of the Board of Directors
STATEMENT FROM THE CHAIRMAN OF THE BOARD OF DIRECTORS
Statement
from the Chairman
of the Board
of Directors
Power Line
for Developement
Dear shareholders!
Oleg Budargin
Chairman of the Board of Directors
The global economic situation in 2013 affected, to some
extent, the largest electricity consumers, and many of them
had to adjust their production plans downwards. Howev-
er, despite all external circumstances, the volume of power
transmission services provided by the Company increased
by 0.6%, or by more than 2.9 million kWh.
In 2013, we continued to improve the reliability of the Unified
National Electric Grid’s operations. We managed to reduce
the accident rate by 12%, and our actual power losses were
below the targets that had been approved by the Russian
Ministry of Energy.
Federal Grid Company delivered power that was essential
for the implementation of major industrial and infrastruc-
ture projects in Russia. They included commissioning the
energy ring in St Petersburg that ensures energy balance
and a reliable electricity supply to the northern capital, the
construction and reconstruction of facilities required for
the provision of a stable electricity supply to major interna-
tional events within Russia, important industrial enterpris-
es, community facilities and citizens. We commissioned an
upgraded 220 kV Zarechnaya substation in Nizhny Novgo-
rod designed to become one of the main power sources
for facilities at the 2018 FIFA World Cup; reconstructed
the 330 kV Chudovo substation, which is one of the key
supply centres for the Novgorod oblast; commissioned,
prior to the scheduled date, a 500 kV Pomary–Udmurt-
skaya power line that enhanced connection between the
Middle Volga and the Ural regions and ensured a reliable
electricity supply for the 2013 World Summer Universiade
in Kazan.
We should also say that Federal Grid Company made a
considerable contribution to the development of the ener-
gy infrastructure of the city of Sochi. We have successfully
completed construction of transmission lines and substa-
tions that ensured a reliable electricity supply for the Winter
Olympic Games.
A systemic change in the way the electric grid complex
is managed became a milestone event for Federal Grid
Company in 2013. The consolidation of transmission and
distribution assets within the Russian Grids group fol-
lowed by the implementation of uniform technical stand-
ards and the creation of a unified emergency system
opened up new opportunities to improve the reliability
and efficiency of the electricity supply and the quality of
services we provide.
In 2013, the Development Strategy for the Russian Electric
Grid Complex was approved. This document enables us
to make our planning process more exact and transparent
and to align our operations with those of the whole energy
system of Russia. These and other aspects will be reflected
in the Company Development Strategy that we expect to
approve in 2014.
Our strategic priorities in the short term will remain broad-
ly unchanged. While improving the electric grid complex’s
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STATEMENT FROM THE CHAIRMAN OF THE MANAGEMENT BOARD
Statement from the
Chairman of the
Management Board
Infractructure
for the economy
Andrey Murov, Chairman of the Management Board of
Federal Grid Company, describes the key 2013 results and
the Company’s prospects.
Operational
and Financial Results
Last year, 2013, presented major challenges and tasks for
Federal Grid Company. Our main achievements were the
implementation of the power supply project for the Sochi
Olympic and Paralympic Games, the absence of power fail-
ures caused by flooding in the Far East, the construction of
facilities for the Kazan Universiade and a number of projects
that are less noticeable though equally important for our
customers and UNEG’s reliability.
Our Company has completed its investment programme.
The commissioning value was 120%, or RUB169.4 billion.
We commissioned 3,690 km of electricity transmission
lines and 10,793 MVA of transformer capacity. In 2013, we
connected large industrial facilities, improved the reliability
of the electricity supply to metropolises and worked in the
most remote areas of the country.
The volume of electricity transmission services has in-
creased. In 2013, Federal Grid transmitted 520 billion kWh,
which is 0.55% more than the previous year.
DA for 2013 amounted to RUB96.3 billion, which is 16%
above that of the previous year. Our debt burden remains at
an acceptable level.
In October, the international rating agency Fitch Ratings Ltd
assigned Federal Grid Company a Long-term foreign cur-
rency Issuer Default Rating of ‘BBB’ (similar to sovereign),
which confirmed our security on capital markets.
Investments and Development
Federal Grid Company will continue to build an infrastructure
to support the development of Russia’s economy. We have
gained valuable experience that will help us to achieve new
ambitious targets. Our investment programme up to 2019
includes the construction of the electric grid infrastructure
for Transsib and BAM with an enhanced transfer capacity,
power supply of facilities for the East Siberia–Pacific Ocean
oil pipeline, the Polyus Gold facilities in the Amur River region
and Udokan Mining & Refining Plant facilities in Transbai-
kal. New energy infrastructure facilities will be constructed
for major international sport events, including the 2018 FIFA
World Cup and the 2019 Krasnoyarsk Universiade.
It is important that Federal Grid Company demonstrate fi-
nancial stability even while dealing with a heavy workload
conditions. Our consolidated revenues grew by 12% as
compared to the previous reporting period. Adjusted EBIT-
As before, our key investment priorities will reflect the de-
velopment priorities of the Russian economy and society
at large. Traditionally, Federal Grid Company has invested
in increasing the reliability and safety of the power supply.
Improving customer satisfaction, facilitating technical con-
nection and enhancing the accessibility of electric grid fa-
cilities are at the forefront of this. In terms of geographical
position, particular importance is given to East Siberia and
the Russian Far East, which were named among the areas
of fastest economic growth. Human capital development
and opportunities for young professionals are among our
social policy priorities.
The Company is committed to open and transparent invest-
ment planning and performance analysis. In particular, the
draft of Federal Grid Company’s investment programme for
2015–2019 has undergone a public hearing procedure and
the document has been made publicly available for the first
time on the Russian Ministry of Energy’s website. This is
one more way for us to make the Company’s operations
more efficient at all stages.
Electricity transmission grids make up an underlying system
of the economy. Their reliable and uninterrupted operation
is fundamental to the country’s energy security. While im-
proving efficiency, we need to seek a balance between eco-
nomic expediency and security.
***
I firmly believe that we will be able to ensure the successful
and sustainable long-term development of the Company by
adhering to the principles of responsibility, professionalism
and mutual trust and by building strong relations within the
Company and with its customers, partners, shareholders,
prospective investors and other stakeholders.
Andrey Murov
Chairman of the Management Board
I would like to especially focus on innovations and techno-
logical development. Our completed projects include doz-
ens of new process solutions. One of the 2013 outcomes in
this area was a reference architecture template for a smart
electric energy system that will be the core element for up-
grading electric grids. Federal Grid Company intends to use
the most sophisticated, efficient technologies and encour-
age and rely on home-grown solutions.
The development of equipment manufacturing in Russia
is of material significance for us. The share of domestical-
ly made equipment procured by Federal Grid Company
reached 38% in 2013, and we intend to increase it to at
least 50% by the end of 2014. By using this approach, we
will contribute to the achievement of strategic goals that are
important for Russia, such as lowering dependence on im-
ports, reforming the Russian industrial sector, developing
the research community and creating new jobs.
Efficiency and Rationality
The current social and economic situation and the re-
striction on tariff growth dictate terms: the Company has
planned major efforts to improve its performance. We ex-
pect a 25% reduction in operating expenses by 2017 (to the
2012 level) and a 30% reduction in construction costs (i.e.
unit capital costs).
It will allow us to retain volumes of investment (i.e. com-
missioning new capacities by constructing new power lines
and substations) and to maintain the Company’s financial
stability. In 2014, we expect revenue and the EBITDA mar-
gin to be at the level of 2013, provided that the net debt level
remains below thresholds set by the Board of Directors.
We are looking for new sources of finance. A number of
amendments to our regulatory documents have been
adopted that will allow us to distribute the cost of construc-
tion of major technological connection facilities more fairly.
The Company enjoys strong support from the government
and is exploring the possibility of government financing for
priority investment projects, including the development of
the electric grid infrastructure for BAM and Transsib. We
also plan to drive major consumer demand, including via a
co-financing facility.
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MAIN FIGURES / KEY PERFORMANCE INDICATORS
Key Performance Indicators
Electricity supply to distribution grid
companies, direct customers and
independent energy joint stock
companies, net
mln kWh
452,662
470,648
484,664
498,288
509,737
2.3%
units
2009
2010
2011
2012
2013
increase
2013/2012
Electricity supply via UNEG to
neighbouring states, net1
mln kWh
13,628
15,716
19,285
15,769
12,974
-17.7%
Financial highlights
Electricity losses within UNEG
mln kWh
22,121
22,526
22,553
21,946
22,262
1.4%
Revenues
RUB mln
85,078
111,085
138,137
138,836
155,352
11.9%
Accident rate2
units
2.78
3.20
2.64
2.29
1.95
-14.9%
Cost (excluding management
expenses)
RUB mln
64,080
75,680
84,174
106,650
120,725
13.2%
Adjusted EBITDA
RUB mln
40,379
67,405
84,683
82,8091
96,296
16.3%
Profit (loss) before tax
RUB mln
-54,049
67,312
11,444
-14,2701
-17, 672
-23.8%
Net profit (loss)
RUB mln
-59,866
57,082
-2,468
-24,5321
-25,898
-5.6%
Number of process disturbances
caused by human errors
Actual implementation
of the investment programme
units
82
61
57
39
19
-51.3%
RUB bn
106.0
167.0
184.7
179.9
149.7
-16.8%
Commissioning
of electricity transmission lines
thou-
sand km
1.4
2.2
3.0
3.6
3.7
1.3%
Adjusted net profit (loss)
RUB mln
9,427
25,702
33,687
13,3831
16,758
25.2%
Commissioning of new capacities
MVA
7,946
10,416
18,502
17,827
10,793
-39.5%
Adjusted net profit per share
RUB
0.0082
0.0208
0.0268
0.0106
0.0132
24.5%
Credit portfolio
RUB mln
13,000
56,000
130,000
212,500
282, 349
32.8%
1 According to the WECM data
2 Number of accidents per 1,000 units in maintenance.
Market capitalisation
RUB mln
367,971
452,717
351,138
253,905
114,600
-54.9%
Return on equity
Return on net assets
%
%
1.4
2.2
3.3
3.8
4.1
5.4
1.6
1.7
2.0
4.0
0.4 pp
2.3pp
Financial leverage
0.12
0.14
0.22
0.32
0.44
37.5%
Operating highlights
Number of substations2
units
804
805
854
891
919
3.1%
Length of electricity transmission lines
including leased lines
thousand
km
121.1
121.7
124.6
131.6
135.1
2.7%
Transformer capacity of substations
including leased substations
MVA
306,422
311,008
322,533
334,7973
332,009
2.4%
Declared capacity
MW
95,545
91,179
90,937
90,492
91,398
1.0%
1 According to 2013 accounting statements (2012 data was subject to retrospective changes)
2 Including leased facilities and outdoor switchgear and cells on the SS owned by other entities
3 In 2012, transformer capacity of substations was reported with account of the capacity of boosting and regulating trans-
formers. If the latter is excluded, the transformer capacity in 2012 was 324,672 МVA
Events in 2013
January
Innovations Federal Grid Company will build in Skolkovo
an intelligent electricity supply network based on Smart-
Grid innovative technology. This project will be implement-
ed under the Cooperative Agreement that Federal Grid and
Skolkovo Foundation signed on 17 January.
Promotion of R&D Federal Grid Company and the Coor-
dinating Council for Young People’s Affairs in Science and
Education at the Presidential Council for Science, Technol-
ogies and Education held a nationwide competition, “En-
ergy Breakthrough”, of science-intensive and innovating
projects. Its objectives were to promote the creative capa-
bilities of students majoring in energy, and proactively in-
volve them in the Company’s R&D.
February
March
Energy efficiency At the Krasnoyarsk Economic Forum,
Federal Grid presented the key ways of improving energy
efficiency of the Unified National Electric Grid: it discussed
energy-saving technologies that are available to the Rus-
sian electric grid network, as well as international practices
of reducing power transmission losses and their impact on
the final tariff for customers.
Seasonal readiness The Company’s repair teams had
been brought to a state of increased readiness for a period
of spring high-water river floods. These teams have the nec-
essary special equipment and means of communication for
dealing with any emergency situations at power facilities.
On-schedule and off-schedule inspections of substation
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MAIN FIGURES / EVENTS IN 2013
equipment and foundations of buildings and facilities were
held in all branches of the Company, and the conditions of
emergency reserves were inspected.
Smart grids For the first time, Federal Grid Company par-
ticipated in the fifth meeting of the Executive Committee of
the International Smart Grid Action Network (ISGAN). Our
participation in its work is based on the Company’s large-
scale efforts to build a smart power grid in Russia. This
smart grid should improve the efficiency and competitive-
ness of the Russian grid system based on new innovative
solutions and technologies.
ferred 79.64% of Federal Grid’s shares to JSC Russian
Grids, a unified management company which manages
the Russian electric grid complex and will from now on
supervise all electricity transmission and distribution
grids.
Building HR Capacity A conference of young researchers,
“Energy of the Unified Network”, was held as part of the St.
Petersburg Economic Forum. It discussed issues pertain-
ing to the development of new electricity transmission tech-
nologies and mechanisms for involving young researchers
in this process.
Risk management Federal Grid hosted a seminar, “Internal
Control and Risk Management System as a Tool for Improv-
ing Management Efficiency”, for the heads of its structural
units and subsidiaries. The main goal of this seminar was to
integrate internal control in the daily management process
and present the best international practices of risk manage-
ment and internal audit
Infrastructure bonds The first tranche of Series 23 and
Series 28 infrastructure bonds in the total amount of RUB30
billion with a maturity of 35 years, issued by Federal Grid
Company, was placed at the Moscow Stock Exchange.
The main investor was Vnesheconombank, which acts as
a State management company that is a trust manager of
pension savings.
April
July
Power system reliability A Russia-wide meeting of electric
power companies was held. The meeting acknowledged suc-
cessful performance in the autumn and winter period of 2012
and 2013: equipment and grids performed reliably despite
harsh weather conditions, the number of accidents at the Com-
pany’s facilities dropped by 5.3% as compared to the previous
autumn and winter period, the specific accident rate was down
by almost 10% and injuries were also reduced.
May
New technologies For the first time in southern Russia,
Federal Grid used an electrical conductor with cast insu-
lation at 110 kW at the Stekolnaya substation (Republic of
Dagestan). This helps to reduce transmission losses sub-
stantially, strengthen the transmission line and increase its
service life significantly (to 40 years).
Building HR Capacity Federal Grid Company and St. Pe-
tersburg State Polytechnic University signed an agreement
of cooperation in the area of professional training of mid-level
technical specialists. The university-based polytechnic col-
lege Radiopolytechnicum will start enrolling students onto
the “Electric Power Stations, Networks and Systems” course.
June
Changes in the ownership structure The Russian
Federation, represented by Rosimushchestvo, trans-
Energy supply to the Universiade Federal Grid ensured
the 27th World Summer Universiade held in Kazan on
6–17 July 2013 had a reliable electric power supply. Before
sporting events began, the Company’s specialists con-
ducted engineer inspections of power transmission lines
and equipment of substations that supply electric power
to Kazan. The 500 kV Pomary–Udmurtskaya transmission
line was commissioned ahead of schedule. It strength-
ened the systemic 500 kV line connecting the Middle Vol-
ga and Ural regions.
Federal Grid launched pilot projects that are part of the
Russia-wide Programme for the Development of Charg-
ing Infrastructure for Electric Vehicles in Russia. The pro-
gramme includes the building of a commercial network
that will have 100 charging stations in Moscow and in the
Kaluga oblast.
Liquidity of securities As of 1 July 2013, the Bank of New
York Mellon replaced Deutsche Bank Trust Company Amer-
icas as the depository of the Company’s global depository
receipts (GDR) programme.
Electricity supply to IC Skolkovo. SS 220/20 20
kV Soyuz and SS 220/20 20 kV Skolkovo were com-
missioned to supply electric power to IC Skolkovo.
These are the first underground substations in Rus-
sia; they have advanced innovative equipment includ-
ing high-capacity batteries that accumulate power for
substations’ in-house needs, and SF6 gas- insulated
transformers.
August
Infrastructure bonds Federal Grid raised a new tranche
of long-term financing for its investment programme via is-
suance of Series 26 and 27 infrastructure bonds, to a total
amount of RUB26 billion, with a maturity of 35 years.
Ensuring reliability The Company’s specialists took part in
the remedial work after flooding in the Russian Far East. Its
main efforts focused on additional technical maintenance
and the repair of power facilities in the flooded area, and
on the procurement of equipment, special machinery and
materials that were necessary to reduce flood losses.
September
Liquidity of securities VTB Capital was appointed as
Federal Grid Company’s market maker to work at the LSE’s
Main Market, with a view to strengthening investor relations
and increasing the liquidity of GDRs.
Development of the customer-oriented approach Fed-
eral Grid established the Customer Council in order to take
customers’ opinions into account in its corporate deci-
sion-making process on improving accessibility of energy
infrastructure, efficiency of operations and investments,
customer-oriented approach, and social and information
openness.
October
Consistency with the quality standards The Company’s
executive team successfully passed the second audit of
environmental management system. The compliance audit
was held by Russian Register, a certification organisation.
Its findings confirmed the consistency of the Company’s
environmental management system with the requirements
of international standard ISO 14001:2004.
Credit rating International rating agency Fitch Ratings as-
signed the Company long-term foreign and local currency
Issuer Default Ratings (IDRs) of BBB with a Stable outlook.
elected Andrey Murov as Chairman of the Management
Board. Before his election, Mr Murov was First Deputy
Chairman of the Management Board. On 28 November
the Company’s Board of Directors terminated the powers
of four Management Board members and appointed new
members.
Decision about issuance On 12 November, the Board of
Directors made a decision to increase the Company’s char-
ter capital by placing 9,431,399,773 additional common
registered shares with the nominal value of 50 kopecks
each, to a total amount in excess of RUB4.7 billion.
Innovations Power accumulation systems with high-capac-
ity batteries were commissioned for the first time in Russia
at SS Psou and SS Volkhov-Severnaya.
December
Preparedness for the Olympic Games Federal Grid Com-
pany fully met its obligations to prepare energy infrastruc-
ture facilities in Sochi to the Winter Olympics. The Company
completed construction, in a timely way and to a high qual-
ity, of systemic power facilities in the region: 36 electric grid
facilities including 326.6 km of cable transmission lines and
14 substations with a total capacity of 1,715 MVA.
Reliable and uninterrupted operations Federal Grid com-
pleted a three-year pilot testing of bunches of multi-cham-
ber insulator-arresters that are radically new devices for
the protection of power transmission lines during thunder-
storms. The outcomes of these tests reaffirmed that these
innovative devices will increase lightning-surge protection
of the Company’s facilities.
Environmental protection Federal Grid Company and
the World Wildlife Fund (WWF) signed a cooperative
agreement that envisages cooperation in such areas as
improvement of efficiency and environmental safety of
the Company’s facilities, promotion of renewable sources
of energy, protection of biodiversity, support to specially
protected natural areas in Russia and sustainable forest
management.
Infrastructure bonds The Company received the second
tranche of long-term funding by issuing Series 29 infra-
structure bonds in the total amount of RUB20 billion, with a
maturity of 35 years.
Technical Policy The Federal Grid’s Board of Directors ap-
proved the Regulation of JSC Russian Grids on the Unified
Technical Policy in the Electric Grid Complex as the Com-
pany’s internal document.
November
Renewal of the Management Board An extraordinary
General Meeting of Shareholders held on 11 November
Infrastructure bonds Federal Grid Company received a
new tranche of long-term financing for its investment pro-
gramme through issuance of Series 30 and 34 infrastruc-
ture bonds, to a total amount of RUB24 billion, with a ma-
turity of 35 years.
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13
MAIN FIGURES / EVENTS IN 2013
Events after the Reporting Date
Federal Grid Company’s Awards in 2013
January 2014
Investment Programme The Federal Grid’s Management
Board approved the draft adjustments to the Investment
Programme for 2014 and the Investment Programme for
2015-2019 in the amount of RUB675.9 billion. According
to this programme, the Company should put into operation
more than 20,000 km of transmission lines and capacity of
more than 71,000 MVA.
February 2014
Code of Corporate Conduct and a number of best interna-
tional practices.
March 2014
Consumers Federal Grid’s Consumer Council that has
been created according to the RF President’s instruction
held its first meeting in Moscow. The Council is designed
to take into account the consumer opinions when making
decisions that affect the prices of products and services of
Federal Grid Company as a natural monopoly.
Transparency of investment planning Open hearings of
Federal Grid’s Investment programme for 2015–2019 were
successfully completed in the Russian Ministry of Energy.
Corporate Governance Rating The Russian Institute of
Directors (RID) confirmed Federal Grind’s National Corpo-
rate Governance Rating at 7+. This rating proves that the
Company complies with the Russian corporate legislation,
follows the majority of recommendations of the Russian
Environment Federal Grid took part in a worldwide event
Earth Hour organised by the World Wide Fund for Nature
(WWF). The Company turned off power for one hour at
more than 200 facilities.
Building HR Capacity A new Personnel Training Centre
was opened in St. Petersburg at the 220 kW Volkhov-Sev-
ernaya substation. This Centre is one-of-a-kind in the region
with a potential to train more than 1,500 people annually.
• Winner of the RUIE’s annual national competition
“The Best Russian Companies: Dynamics, Efficiency
and Responsibility – 2012” in the category “Building
HR Capacity”
• Winner of the “Environment and Environmental Man-
agement” nomination in the competition among 100
best Russian organisations during the Seventh Annu-
al National Conference “Environment and Production:
Prospects for Development of Economic Tools for En-
vironmental Protection”
• Winner of the National Annual Prize “IT LEADER
–2013” among nominees in “Energy Companies”. The
prize was awarded for innovative operations, high
achievements in IT, substantial contribution to the de-
velopment of the national energy sector and its inte-
gration in the global community
• Winner of the prize “Leader of Competitive Procure-
ment – 2013” organised by B2B Centre, an interna-
tional centre of electronic trade, in the category “For
Contribution to the Advancement and Promotion of
Competitive Procurement”
•
Federal Grid Company is one of three leaders among
State-owned companies in terms of compliance with the
federal rules of procurement and consistency with the
best business practices in this area (findings of a survey
conducted by Expert RA rating agency at the request of
the National Association of Procurement Institutions)
• A long-term programme of corporate assistance for the
improvement of Company employees’ housing condi-
tions and an innovative education project “Leaders of
Change” (training employees for strategic succession
pool) were acknowledged by the Russian Ministry of
Energy at the Fourth Russian Personnel Conference
“Human Capital in the Fuel and Energy Sector: A Strat-
egy of Changes”
•
•
The Company’s 2012 Annual Report won the “The
Best Annual Report (Non-financial Sector)” category
at the 15th competition of annual reports held by Ex-
pert RA rating agency
The interactive version of the Company’s annual report
won the third prize at the 16th annual federal competi-
tion of annual reports and websites, held by the Secu-
rities Market magazine and social network INVESTOR.
RU in partnership with the CBR’s Financial Markets
Service
• Winner at the “CNews Forum 2013: Information Tech-
nologies Tomorrow” in the category “Cybersecurity in
the Energy Sector” for building a company-wide cyber-
security system
•
The Company’s IR practice was acknowledged to be
among the three best practices of mid-capitalisation
companies in the categories “Best Investor Relations
by a CEO” and “Best Investor Relations by a CFO” of
IR magazine (Russia & CIS)
NATIONAL CORPORATE GOV-
ERNANCE RATING OF FEDERAL
GRID COMPANY WAS CON-
FIRMED AT
7+LEVEL
14
15
16
STRATEGIC OVERIEW / COMPANY PROFILE
Company Profile
Federal Grid Company has a unique infrastructure that
ensures a reliable and uninterrupted electric power trans-
mission via backbone electric grids throughout the Russian
Federation.
•
Federal Grid was established in 2002, in accordance
with Russia’s electric power industry reform , as the
management organisation of the Unified National
(All-Russia) Electric Grid (“UNEG”) for the purpose of
its maintenance and development.
• UNEG includes a network of transmission lines that
cover most of Russia.
•
•
•
•
The Company’s electric grid facilities (transmission
lines and substations) are located in 75 Russian re-
gions covering a total area of more than 14.8 million
square kilometres.
Federal Grid Company is the largest publicly traded
grid company in the world in terms of the length of its
transmission lines (135.1 kilometres) and transformer
capacity (332.01 MVA).
The Company’s key activity is the electricity transmis-
sion via transmission grids. Over a half of all power
consumption in Russia is of electric power transmitted
via the Company’s grids
Federal Grid Company is a natural monopoly in the
area of electricity transmission. It is included in a list
of systemically important organisations of strategic im-
portance to Russia.
•
•
•
•
The largest share of the Company’s revenue is generat-
ed from RAB-based tariffs for electricity transmission,
as approved by the Federal Tariff Service (the ‘FTS’).
In terms of organisational structure, Federal Grid Com-
pany consists of an Executive Office and 51 branches
with more than 23,000 employees in total.
Federal Grid is a public company; its securities are
traded on Russian and foreign stock markets, includ-
ing the Moscow Stock Exchange and the London
Stock Exchange.
The Company’s major shareholder that owns 80.6% of
its common stock is the state-owned company Rus-
sian Grids (Rosseti).
The Company’s Key Activities
2005
What is UNEG?
What is WECM?
UNEG, or the Unified National (all-Russian) Elec-
tric Grid, is a network of electric power grids and
other electric grid facilities that provides a sus-
tainable supply of electric power to customers
and ensures the proper functioning of the whole-
sale market and the parallel operation of power
systems in Russia and other countries.
WECM, or the Wholesale Electricity and Capac-
ity Market, is a market for trading very specific
goods, i.e. electric power and capacity, within
the Unified Energy System and on the economic
territory of the Russian Federation, with the par-
ticipation of large producers and buyers of elec-
tricity and capacity, as well as other entities that
have the status of a wholesale market member.
Key Milestones
in the Company’s History
2002
2009
• State registration of Federal Grid Company took
place. The Company began providing electricity
transmission and technological connection services
to customers
•
•
The Federal Tariff Service approved the parameters of
the Company’s transition to RAB-regulation for 2010–
2012
The Company’s shares were included in the MSCI
Russia and MSCI Emerging Markets stock indices
2003
•
The Company was included in the register of natural
monopolies and a list of commercial organisations that
are the WECM members
2004
•
Inter-regional backbone electric grid companies
(MMSKs) were established
•
Forty-four backbone electric grid companies (MSKs)
were established on the basis of JSC-Energo and for-
ty-six regional grid companies.
• A decision was made to place inter-regional distribu-
tion grid companies’ shares in trust of Federal Grid
Company
2006
•
The UNEG consolidation process was completed and
Regulation on the Technical Policy of Federal Grid
Company was approved for the first time
2007
• A decision was made to re-organize the Company by
taking over JSC RAO UES of Russia, JSC State Hold-
ing, JSC Minority Holding FGC UES, 56 MSKs and 7
MMSKs
2010
•
•
The Company received the Energy Company of the
Year award for rapidly introducing a successful, inno-
vations-based modernisation of the national electric
grid complex.
The FTS approved RAB-based tariffs for Federal Grid
Company for 2011-2014
2011
•
•
The Company adopted a new Technical Policy and an
Innovative Development Programme that outlined the
fundamental areas of WECM development in the long
term.
The Company’s GDRs were listed and their trading
started on the London Stock Exchange’s main market.
2012
•
•
•
•
Federal Grid Company was appointed as a sole exec-
utive body of JSC IDGC Holding.
The Russian Ministry of Energy approved the Com-
pany’s investment programme for 2013–2017 for
RUB775.5 billion.
Joint-stock company Russian Grids (Rosseti) was es-
tablished by the decree of the President of the Russian
Federation. The State’s share in Federal Grid Compa-
ny (79.55%) was vested in the share capital of Russian
Grids.
The Company placed its debut issue of Eurobonds.
2008
2013
•
•
The Company was listed on the RTS and MICEX Stock
Exchanges, and trading started. A global depositary
depository receipts (GDR) programme for the Compa-
ny was launched
The final stage of consolidation: shares of taken-over
MSKs, JSC RAO UES of Russia, JSC State Holding
and JSC Minority Holding FGC UES were converted
into shares of Federal Grid Company
•
The Russian Government approved the Development Strate-
gy of the Russian Electric Grid Complex until 2030
• Regulation on the Unified Technical Policy in the Electric Grid
Complex of the Russian Federation was approved as the
Company’s internal document
• State-owned company Russian Grids became Federal Grid
Company’s majority shareholder, owning 80.6% of its com-
mon stock
18
19
STRATEGIC OVERIEW / BUSINESS MODEL
Business Model
STRATEGIC OVERIEW / GEOGRAPHY
Geography
The Company operates in 75 Russian regions covering an area of more than 14.8 million square kilometres. The territory in which
the Company’s facilities are located is divided into zones of responsibility for corporate branches, known as backbone grid com-
panies, and their local enterprises (or MES and PMES). Underpopulated territories with no large customers – such as Chukotka,
Kamchatka, Magadan oblast and Sakhalin – are not integrated into UNEG because they do not have economic conditions nec-
essary for laying electricity transmission lines and establishing large substations.
STRATEGIC OVERIEW / GEOGRAPHY
Subsidiaries and Associates
As of 31 December 2013, Federal Grid Company had 21
subsidiaries and associates that operate in different in-
dustries, including those that support electric grid facili-
ties (core subsidiaries and associates). Two subsidiaries
and associates (JSC Tomsk Trunk Grids and JSC Kuban
Trunk Grids) are backbone grid companies.
Core companies in which Federal Grid Company has equity shares
JSC Mobile Gas-Turbin
Power Plant
100% JSC ESSK EES
100% JSC Tomsk Trunk Grids
52.025%
JSC MUS Energetiki
100% JSC Elektrosetservis UNEG
100% AO OES GruzRosenergo
50%
JSC R&D Centre
of FGC UES
100%
Index Energetiki – FGC
UES LLC
100% JSC Kuban Trunk Grids
48.999%
JSC CIUS EES
100% JSC DESP
1 share*
JSC Inter RAO
14.0749%
* the remaining shares are owned by JSC R&D Centre of FGC UES
For further details on the management
of subsidiaries and associates see section
Corporate Governance / Control System /
Managing subsidiaries and associates
of the Report (p. 161)
Detailed information about Federal Grid Com-
pany’s holdings in subsidiaries, associates and
other organisations can be found in Appendix
to the Annual Report on the memory stick
attached
International Operations
Federal Grid Company facilitates the transit of electric pow-
er over Russia’s customs border and operates as a techni-
cal contactor under commercial contracts of importers and
exporters on the WECM.
Pursuant to contracts with JSC Inter-RAO UES and JSC
TGC-1, our Company provides services on electricity trans-
mission throughout Russia and right up to its borders via
electric grid facilities that are integrated into UNEG and le-
gally owned by the Company.
140
CROSS-BORDER ELECTRICITY
TRANSMISSION LINES
AS PART OF UNEG
Cross-border Electricity Transmis-
sion Lines
mon Economic Space is a supra-national regional econom-
ic community of the three Customs Union states - Belarus,
Kazakhstan and Russia.
Electricity transmission lines that cross the state border of
the Russian Federation meet the criteria of treating electric
grid facilities as UNEG facilities as per Resolution No. 41 of
the Government of the Russian Federation dated 26 Janu-
ary 2006.
Work of Russia’s Unified Energy
System in parallel with electric
power systems of the other
countries
Federal Grid Company collects and processes information
about electricity transmission along 140 cross-border elec-
tricity transmission lines based on data supplied by com-
mercial metering devices.
To supply electricity to Russian customers in Bryansk,
Pskov and Kaliningrad oblasts, the Company entered into
contracts with the relevant organisations of Latvia, Lithua-
nia, Estonia and the Republic of Belarus to paid electricity
transit services through the electric grids of these countries.
Pursuant to an agreement dated 20 November 2009 and
signed by the governments of the Russian Federation and
the Republic of Kazakhstan about measures to ensure the
parallel operation of the unified energy systems of Kazakh-
stan and Russia, the Company entered into a contract for
the transit of electricity. As of May 2010, under this contract,
Federal Grid has paid for the transit of electricity through
the territory of Kazakhstan to supply electricity to its Rus-
sian customers.
According to an agreement by and between the govern-
ments of the Russian Federation, the Republic of Kazakh-
stan and the Republic of Belarus about access to the
services of natural monopolies in the electricity industry,
including basic principles of pricing and tariff policy, it has
become possible since 2012 to transmit electricity across
the member states of the Common Economic Space , in-
cluding transmission via the Russian UES grids. The Com-
There are currently several agreements in force, stipulating
parallel operation of the Russian UES with the electric power
systems of foreign states. The parties to these agreements
are Federal Grid Company and economic entities of Geor-
gia, Kazakhstan, the Baltic countries and the Republic of
Belarus. The Company also signed an Inter-system Agree-
ment with Finland. It also signed agreements on technical
support of parallel operations with Ukraine, the Republic of
Belarus, Azerbaijan and Mongolia.
Being a management organisation of UNEG and cross-bor-
der electricity transmission lines of all voltage classes, Fed-
eral Grid Company:
•
•
coordinates commercial contracts for the import/ex-
port of electricity and provides their engineering sup-
port
arranges and implements commercial metering of
electricity transmitted along cross-border electricity
transmission lines
• measures actual volumes of electricity that has been
transmitted across the State border, and arranges for
their customs clearance (declaration).
In order to measure the volume of electricity transmitted
trough each cross-border transmission line, Federal Grid
Company and foreign counterparts signed agreements
24
25
STRATEGIC OVERIEW / GEOGRAPHY
400 kV Vyborgskaya SS
Thanks to the equipping of the 400 kV Vyborgskaya SS in Leningrad Oblast with the DC link, a technical capability has
been gained in 2013 to import electricity from Finland to Russia.
concerning the metering of cross flows via a particular
cross-border transmission line. Under these agreements,
the Company and electric power systems of 11 countries
exchange commercial metering data.
• CIS Electric Power Council (CIS EPC) and its commis-
sions, including the Commission for Operating and En-
gineering Coordination of Collective Operation of CIS
and Baltics Energy Systems (COTC)
The agreement between the Russian Federation and the
Republic of Kazakhstan regarding the parallel operations of
Russian and Kazakhstan UES includes an understanding
between Federal Grid Company and JSC KEGOC concern-
ing commercial contracts for the settlement of deviations
from the agreed schedule of flow balances based on hourly
data provided by commercial metering. Similar agreements
with Ukraine and Belarus were drafted and approved in
2013.
•
task forces including Fingrid (Finland), KEGOC (Kazakh-
stan) and Belenergo (Belarus)
• BRELL Power Systems Committee (its members are
Belarus, Russia, Estonia, Latvia and Lithuania)
•
Integration Committee of Eurasian Economic Commu-
nity (EurAsEC)
• Russia-EU Energy Dialogue
International Cooperation
Federal Grid Company continually modifies and improves its
systems in relation to those of foreign power systems on is-
sues pertaining to the harmonisation of legislation / regulations
within the global electricity industry, as well as to form and syn-
chronise the electricity and capacity markets in accordance
with intergovernmental initiatives. This work is done with:
26
Market Overview
Federal Grid Company is the infrastructural lynchpin of the
Russian electricity market. In terms of industry classifica-
tion, managing the electric grid complex is a separate elec-
tricity industry segment in which the Company has a mo-
nopoly. As a natural monopoly, the Company is subject to
government regulation. This is why it is Federal Grid Com-
pany and its performance that drive the development of the
Russian electric grid complex.
Today, a moderate increase (up to 2% per year) of electric-
ity demand is what drives the development of the power
industry in Russia and determines the further development
of electric grid complex.
The Russian Ministry of Energy estimates that the total de-
mand for electricity across the Russian UES will reach about
1,153.6 billion KWh by the end of 2019, which is 137.1 billion
kWh above the 2012 level. It is estimated that consumption
in 2019 will exceed 2012 levels by 13.5%, with an average
annual growth of 1.82%. The planned expansion and reno-
vation of operating facilities and the expected commissioning
of new facilities at large manufacturing plants are expected
to increase power consumption across the Russian UES in
2014–2017. However, it is expected that this demand will
decrease after 2017 following the anticipated technological
modernisation of industrial facilities, particularly energy-in-
tensive metallurgical facilities, and the increased develop-
ment and use of energy-saving technologies.
These growth rates are explained by the gradual improve-
ment of energy efficiency. In the coming 10–15 years, Rus-
sia will implement technologies that are being used in the
electric grids of the developed countries. In particular, Rus-
sia will install smart grid technologies that will help to in-
crease the transfer capacity and stability of power supply,
and reduce losses and costs associated with the technical
and commercial metering of customer facilities.
The continued development of the national energy sector is
based on the scenario of innovation-based economic de-
velopment. According to the Energy Strategy of Russia until
2030, as approved by the Russian Government, the nation-
al economy’s dependence on the energy sector is expected
to weaken following priority being given to the development
of innovative energy-saving sectors and the implementation
of energy-saving technologies. As a result, the fuel and en-
ergy complex’s share of gross domestic product will almost
halve by 2030 (compared with 2005).
At the same time, the energy sector will maintain its key
role in making fundamental strategic decisions pertaining
to national development. This is particularly true of the con-
struction of a new power infrastructure that will accelerate
the social and economic development of Eastern Siberia
and the Russian Far East, help to overcome infrastructural
imbalances between regions and form new territorial and
production clusters based on energy-generating and -pro-
cessing facilities.
The lessening dependence of the economy on the energy
sector will be accompanied by qualitative changes in the
role of the fuel and energy complex in the national econo-
my. The Russian energy sector will maintain its influence on
the social situation in the country because the level of en-
ergy comfort and the availability of energy resources define
Russian citizens’ living standards in many respects.
INCREASE IN ELECTRICITY
DEMAND IN RUSSIA
UP TO 2 %
PER YEAR
The medium-term development of the Russian electric en-
ergy sector will be driven by:
the electricity industry’s pricing pressure on the nation-
al economy being transformed into intensified compe-
tition for tariff revenues among all participants in the
process of electricity production, distribution and sale;
unequal electricity consumption across Russia be-
cause of the major differences between various re-
gions in terms of capacity and current development of
industrial and economic growth;
customers pressing for more reliable and better-quality
energy supply on the back of rising prices for electricity
in general;
•
•
•
27
STRATEGIC OVERIEW / MARKET OVERVIEW
improvement of competition on the wholesale electric-
ity market as a result of commissioning new sophisti-
cated generating capacities under regulated contracts
for capacity supply;
• Contract for Connection to the Wholesale Market Trad-
ing System and Wholesale Market Procedures (these
are appendices to the Contract for Connection to the
Wholesale Market Trading System).
Development
Strategy
3,690 kM
COMMISSIONING OF
ELECTRICITY TRANS-
MISSION LINES
•
•
increase in demand for technological connection as
procedures for it are simplified and its costs lowered
under the Government’s Technological Connection
Road Map.
Government Regulation in the Electric Power Industry
The Russian Government implements its mandate in gov-
ernment regulation and control of the electric power in-
dustry in compliance with Federal Law “On Electric Power
Industry” No. 35-FZ dated 26 March 2003.
The following federal executive authorities have mandates
for government regulation of the electric power industry:
•
The Russian Ministry of Energy, which formulates
government policy and regulates the national fuel and
energy system, including the electric power industry.
The Federal Service for Environmental, Technological and
Nuclear Supervision (Rostekhnadzor), which exercises
control and oversight in the electric power industry, issues
licences for certain activities and inspects compliance
with the Russian laws on electricity.
Federal Grid Company at WECM
Since 1 January 2006, Federal Grid Company, on its own,
has been purchasing electricity on the WECM to compen-
sate for actual UNEG losses net of losses that have been
measured and paid for in equilibrium prices by the WECM
participants. In these operations Federal Grid is guided by
the following laws and regulations:
•
Federal Law “On Electric Power Industry” No. 35-FZ
dated 26 March 2003
• Rules on Non-Discriminatory Access to Electricity
Transmission Services and Delivery of These Services
approved by Resolution of the Russian Government
No. 861 dated 27 December 2004
• Rules on the Wholesale Electricity and Capacity Mar-
ket approved by Resolution of the Russian Govern-
ment No. 1172 dated 27 December 2010
Federal Grid purchases electricity and capacity on the
wholesale market in member regions of the Russian
Federation that are pooled into pricing and non-pricing
zones. These purchases are made to compensate for
UNEG losses.
Since 1 January 2011, Federal Grid has been purchasing
electricity and capacity at free (non-regulated) prices in
accordance with the wholesale market’s rules. Purchas-
es of electricity and capacity on the wholesale market for
compensation of losses in the non-pricing zones are made
under quadripartite contracts by and between JSC FGC
UES, JSC ATS, JSC CFR and the seller of electricity and
capacity.
The price of electricity and capacity that Federal Grid pur-
chased to compensate for the 2013 losses amounted to
RUB12.29 billion net of VAT, including RUB5.30 billion (net
of VAT) for electricity and RUB6.99 billion (net of VAT) for
capacity.
Development of grid infrastructure
2013 TARGET
2013 ACTUAL
2014 TARGET
Commissioning of electricity transmission lines, km
Commissioning of new capacities, MVA*
3,235
14,586
3,690
10,793
4,291
9,985
Areas and benchmarks of the Company’s strategic devel-
opment are based on Russia’s Electric Grid Complex Strat-
egy until 2030 which was approved by the Russian Govern-
ment in 2013.
The main goal of Russia’s electric grid complex is to of-
fer a reliable, high-quality and accessible energy supply for
customers in the Russian Federation in the long term by
establishing the most efficient grid infrastructure possible
that conforms to global standards. This supply should also
offer affordable electricity prices to consumers, based on
sensible power transmission tariffs, and be an attractive in-
vestment opportunity (by offering an adequate rate of return
on capital) in the industry.
The Company’s Mission
Reliable operation and development of the
Unified National Electric Grid with a view to
supporting economic growth in Russia and
providing an uninterrupted electricity supply
to customers in all regions of the Russian
Federation.
Federal Grid’s strategic priorities as a transmission grid
company are to support and develop an electric grid in-
frastructure that would ensure the delivery of capacity
to stations and electricity transmission to the distribution
grids, and to ensure the country’s energy integrity and
security.
The Company’s
Strategic Objectives
•
•
•
•
•
•
To ensure a reliable power supply to customers.
To ensure a quality service for customers.
To develop infrastructure to support economic growth
in Russia.
To maintain a competitive level of electricity tariffs for
the development of the industrial sector.
To develop capacity for research and innovations.
To ensure a rate of return on invested capital that is
attractive to investors.
Drafting and subsequently implementing appropriate
functional policies and development programmes are
crucial corporate elements for achieving strategic objec-
tives.
* The analysis of actual commissioning figures should take
Commissioning plan – 2013
14,586 MVA
into account the capacity that has been commissioned ahead
of schedule (before 2013) at the facilities included in the 2013
plan, and the capacity that was postponed for commissioning
because of circumstances beyond the Company’s control.
Therefore, while calculating the completion rate, figures in-
cluded in the 2013 plan should be adjusted by the volume of
capacity that had been commissioned earlier and postponed.
Commissioned before 01.01.2013
2,627 MVA
Postponed for 2014
365 MVA
Adjusted plan for 2013
11,594 MVA
Actual 2013 data
10,793 МVА
% of completion, including pre-schedule
and postponed commissions
93%
28
29
STRATEGIC OVERIEW / DEVELOPMENT STRATEGY
Strategic Priorities – 2017 Targets
1. To reduce inflation-adjusted operating costs per unit of
maintained electric grid equipment by 15% against the
2012 level adjusted for inflation.
2. To improve investment efficiency on average by 30%
against the 2012 level per one physical unit (kilometre
and/or MVA).
3. To achieve a sustainable growth of market share in
the segment of electricity transmission services in the
“commingled” revenues received from the regional
electricity consumers.
4. To achieve capitalisation growth over five years after the
implementation of measures to stabilise the regulation
regime at the level of at least 60–80% of invested capital.
5. To achieve a sustainable improvement of reliability and
quality of services to an economically sound level.
Development Prospects
The Company’s development prospects are set in the
Scheme and Russian UES Development Programme for
the next seven years, a projection that is revised annually
by the Federal Grid Company and UES System Operator,
JSC SO UES, and approved by the Russian Government.
The main goal of this document is to promote the develop-
ment of grid infrastructure and generating capacities and
to meet medium- and long-term demand for electricity
IN 2013-2019, IT IS
PLANNED TO COMMIS-
SION MORE THAN 40,000
KM OF TRANSMISSION
LINES AND MORE THAN
137,000 MVA OF CAPAC-
ITY
and capacity. The Scheme and UES Development Pro-
gramme is used as the basis for the Company’s invest-
ment programme.
The Scheme and UES Development Programme for 2013–
2019 was drafted in 2013. Under this programme, the Com-
pany is to commission 40,607 kilometres of transmission
lines (voltage class 220 kV and above) and substations with
a total capacity of 137,736 MVA.
2013–2019 Plan of Commissioning Transmission Lines
and 220 kV and Higher Capacities
(Net of figures of the automatic transformers replacement programme)
2013-2019
2013
MES North-West
MES Centre
MES South
MES Volga
MES Ural
MES Siberia
MES Western Siberia
MES East
Km
3,103
2,294
2,213
1,429
1,766
5,976
2,128
3,768
MVA
7,686
22,502
7,593
6,979
6,011
13,292
6,538
3,704
Km
98
136
501
296
339
555
543
768
MVA
896
4,694
2,197
1,751
450
2,416
1,502
480
30
31
STRATEGIC OVERIEW / DEVELOPMENT STRATEGY
Long-Term
Infrastructure Projects
Project
Objectives
Financing
Development of backbone electric grids
Strengthen inter-system transits in
order to increase reliability of electricity
supply to customers
190 investment projects
Total cost: RUB660.361 billion
Development of OSC RZD’s
Eastern tracks, i.e. BAM and Transsib
Funding in 2014: RUB38.033 billion
25 investment projects
Total cost: RUB179.361 billion
Funding in 2014: RUB1.216 billion
Provide additional capacity for
technological connection of new
customers
Create the capacity for optimal load of
heat plants and hydro stations in order
to reduce the cost of electricity for end
customers
Ensure technological connection of an
additional load from JSC RZD on the
Eastern railway tracks
Improve reliability of electricity supply
to existing customers
Ensure on-schedule or emergency
repairs without limits on load
Normalise voltage levels
Compensatory actions
Ensure reliable operations of UES
North-West in cases where parallel
operations of UES of Russian and
the Baltics UES grid systems are
interrupted
11 investment projects
Total cost: RUB42.714 billion
Funding in 2014: RUB1.115 billion
Electricity supply to new power facilities
in the Taman Peninsula
Provide electricity supply to the
existing and projected seaport facilities
in the Taman Peninsula
4 investment projects
Total cost: RUB9.003 billion
Infrastructure for the 2018 FIFA World
Cup in Russia
Funding in 2014: RUB0.231 billion
16 investment projects
Total cost: RUB35.017 billion
Funding in 2014: RUB3.944 billion
Provide reliable electricity supply to the
sports facilities of the 2018 FIFA World
Cup and supporting infrastructure
facilities
Commission 5,165 MVA of transformer
capacity and 129.8 km of transmission
lines
Strategy in the Context
of Sustainable Development
Traditionally, sustainable development is based on the
ambition to meet the needs of the existing generation
without threatening the needs of future generations. This
can only be done if all stakeholders’ positions are taken
into account, with continuous communication with these
stakeholders and integration of these practices in all of the
Company’s business processes.
structive cooperation between the Company and a broad
range of stakeholders. These include suppliers, contrac-
tors, project and R&D think tanks, distribution electric grid
companies, IDGCs, customers, generators, infrastructure
regulators, labour unions, government authorities, public
and environmental organisations and the expert commu-
nity.
Owing to its specific role in the energy sector, economy
and social development, Federal Grid expands and com-
plements the traditional concept of sustainability in its op-
erations.
As a monopoly operator of UNEG, we transmit electricity
via backbone electric grids and are responsible for pro-
viding a reliable power supply for consumers across the
Russian Federation.
Our Company is mandated to develop the electric grid
infrastructure in Russia and outstripping growth rates in
order to meet the increasing demand of the public and
national economy in the future. This is our strategic goal,
i.e. to set out on the turnpike (power line) for develop-
ment.
The Company’s responsibility for the efficient adminis-
tration and development of UNEG is not only to ensure
a safe, reliable and uninterrupted electricity supply but
also to provide non-discriminatory access to its grid ser-
vices that should be provided in a transparent, honest
(corruption-free) and innovations-based manner. This
is why one of the Company’s most important tasks in
terms of philosophy and values of corporate social re-
sponsibility and sustainable development is to contin-
uously seek the balance between public and economic
interests in our work.
Federal Grid Company, as one of the largest electric pow-
er companies in Russia, is responsible for the condition of
UNEG, the lynchpin of the national grid system and a vital
public infrastructure. Having assessed existing problems
and prospective threats, the Company developed and be-
gan implementing a package of programmes and policies
aimed at the renovation, modernisation and innovative
development of UNEG. These are long-term programmes
and policies, and their success largely depends on con-
Strategic Priorities of Federal
Grid’s Sustainable Development
•
•
•
To build mechanisms and practices for the synchroni-
sation of stakeholder plans that envisage the develop-
ment and expansion of UNEG.
To achieve import substitution for the purposes of
the innovative development of the national energy
sector.
To form a pool of human resources (HR) for the smart
energy sector.
•
To develop responsible HR management practices.
•
To improve labour protection and industrial safety.
•
•
•
To strengthen environmental protection and improve
the energy efficiency of grid operations.
To ensure a fair distribution of economic value and as-
sess the economic expediency of implementing inno-
vations and new technologies.
To integrate Corporate Social Responsibility (CSR)
strategy in internal business processes.
32
33
34
35
PERFORMANCE RESULTS / OPERATING PERFORMANCE OVERVIEW
Operating performance overview
Electricity transmission
2013 TARGET
2013 ACTUAL
2014 TARGET
Consumers of electricity transmission services
283
292
470
Electricity losses in UNEG, %
Major accidents
4.48*
4.28
4.47*
0
0
0
Relative restrictions on the electricity transmission service, %w
0.0028
0.0006
0.0027
Reduction of procurement costs per unit of goods (works, servic-
es) by at least 10% a year over three years, in real terms
10
10.25
10
* regulatory standard of process losses
+ 2,852 mln kWh
+ RUB16,1 bn
INCREASE IN THE
VOLUME OF ELECTRICITY
TRANSMISSION SERVICES
IN 2013
36
The core activity and main revenue source for Federal Grid
Company is the electricity transmission through the Unified
National Electric Grid (‘UNEG’).
In accordance with Russian laws, Federal Grid’s services of
electricity transmission via UNEG are monopoly operations
regulated by the State.
•
•
the cost of electricity transmission for the maintenance
of UNEG grid facilities that are part of UNEG;
the cost of regulatory process losses of electricity in
UNEG in the Russian regions.
The cost of electricity transmission services is based on
tariffs that are set by the Russian Federal Tariff Service (the
‘FTS’) and includes:
In 2013, the volume of electricity transmission services by
Federal Grid Company amounted to 519,983 million kWh,
up by 0.55% from 2012.
Federal Grid’s Key Operating Results in 2013
Federal Grid’s branches
Sales from the grid network to customers and related territorial
network organisations within balance sheet and operational
attribution, mln kWh
Losses
mln kWh
%
MES Centre
MES North-West
MES Volga
MES South
MES Ural
MES Western Siberia
MES Siberia
MES East
Total
123,366
60,764
42,278
44,765
76,027
66,110
88,329
18,344
519,983
5,054
4.10%
3,119
5.13%
2,118
5.01%
1,740
3.89%
2,825
3.72%
3,082
4.66%
3,075
3.48%
1,248
6.80%
22,262
4.28%
Changes in the Volume of Electricity Transmission Services provided
by Federal Grid, 2012-–2013
mln kWh
RUB mln
2012
517,131
136,581
Change 2013/2012
+ 2,852
+ 16,128
0.55%
11.8%
2013
519,983
152,709
37
PERFORMANCE RESULTS / OPERATING PERFORMANCE OVERVIEW
The Company enters into direct contracts with customers in all Russian regions where it has grid facilities. The number of
counterparties has been increasing steadily as a result of new technological connections to UNEG and phased discontinua-
tion of the “last mile” principle.*
Technological Connection
Share of Federal Grid’s Largest Customers in Terms of Revenues
from Electricity Transmission Services, 2013
Technological Connections, by Customers
Technological connection is a service package which our
Company offers to connect electricity consumers’ power re-
ceivers, electricity producing facilities and grid facilities to Fed-
eral Grid’s electric grids. We provide technological connection
services to new and existing customers if the latter need to
change the operating parameters of their power facilities.
In 2013, Federal Grid entered into 652* contracts for tech-
nological connection, up by 63% from 2012. The total
maximum capacity was 2.3 GW for technological con-
nection of consumers and distribution grid companies in
the reporting year, and 1.4 GW for electricity production
facilities.
Federal Grid’s Major Technological Connection Projects in 2013
and Capacity Consumption, MW
Abinsk Electromechanical Plant,
Krasnodar Territory
200
Gazprom Neft Omsk Oil Processing Plant,
Omsk oblast
Plant of Ural Mining and Metallurgical Company,
Tyumen oblast
120
Oil pumping stations, Krasnodar Territory
Taganrog Metallurgical Works, Rostov oblast
107
Angara rocket base, Arkhangelsk oblast
Mikheevsky Mining & Processing Plant,
Chelyabinsk oblast
Eurocement Group plant, Voronezh oblast
40
37
Chemical weapons destruction facility,
Udmurt Republic
32
28
14
6
* The “last mile” principle is a form of cross-subsidization where large industrial customers that are connected directly
to Federal Grid Company’s transmission grids cover an additional tariff for distribution grids of IDGCs to which some
of the Company’s capacity (the “last mile”) are let
* The number of contracts with direct consumers, regional grid companies and electricity production facilities.
38
39
PERFORMANCE RESULTS / OPERATING PERFORMANCE OVERVIEW
Our customer-oriented approach is aimed at improving the
transparency and accessibility of technological connection
to the Federal Grid’s electric grids. We implement the action
plan “Better Accessibility of Power Infrastructure” that was ap-
proved by the Russian Government and requires shorter peri-
ods and stages of technological connection. Our objective is
to synchronise the development of industry across the country
with the potential of the backbone electric grid complex.
Our customers have interactive access to the
Technological Connection Portal at www.
fsk-ees.ru, which provides full and up-to-date
information about technological connection to
customers. The launching of this portal was a
step towards better communication with the
regional authorities on issues pertaining to the
increase of grid capacity and the avoidance of
risks related to excessive investments.
Improving Reliability
The Methodological Guidelines on the Estimation of Relia-
bility and Quality of Supplied Goods and Services for the
Organisation that Manages the Unified National (all-Russia)
Electric Grid and Territorial Grid Organisations were ap-
proved by the Order of the Russian Ministry of Energy No.
296 dated 29 June 2010.
The list of indicators includes those that measure the re-
liability of electricity transmission and characterise the
emergence of process violations and their implications for
customers; and those that measure the quality of customer
service and characterise, in the first place, the capacity for
technological connection.
Federal Grid Company’s enhanced level of responsibility
in providing reliable and stable electricity supply in Russia
is related to specific features and the diversity of climates
across the country. We are fully aware of the great respon-
sibility that is imposed on us, and will do our best to deliver
electricity to our customers in a stable and uninterrupted
manner and in compliance with all technical specifications.
In 2013, we continued to take regular efforts to reduce the
accident rate and have achieved visible results in this area.
Service Reliability and Quality Indicators Set by FTS Plan for 2011–2014
Number of Accidents at Federal Grid’s Facilities in 2009–2013
and Achieved by Federal Grid in 2013
2011
2012
2013
Federal Grid
2013
2014
Service reliability level
0.0490
0.0483
0.0475
0.0199 *
0.0468
Service quality level
1.2599
1.2410
1.2224
1.1088
1.2040
* Performance over and above the target is downside deviation of the actual length of electricity outages from the planned
value (in 2013) owing to the efficient operation of UNEG and the reduced time for dealing with process disturbances.
Federal Grid Company met the FTS’s service reliability and
quality targets in 2013.
The FTS will set service quality targets for technological
connection for the next period of regulation (2015–2019)
when making decisions about tariffs for that period.
15%
ANNUAL REDUCTION
IN SPECIFIC ACCIDENT
RATE OVER THE PAST
THREE YEARS
The accident rate at Federal Grid’s facilities went down by
11.7% in 2013, although the maintenance workload (num-
ber of electric facilities) has been increasing.
Actions taken by the Company have resulted in reduc-
ing per-unit accident rates (number of accidents to the
maintenance workload ratio) over the past three years, on
average, by 15% a year. Accident rate has been reduced
because of the following actions:
•
Implementation of maintenance and repair plans and
target programmes.
•
Implementation of equipment renovation programmes.
•
Implementation of a package of measures to ensure
the top-level preparedness for emergency situations.
• Personnel professional development.
40
41
PERFORMANCE RESULTS / OPERATING PERFORMANCE OVERVIEW
Accident Rate at Federal Grid’s Facilities in 2009–2013
( number of accidents per 1,000 units in maintenance)
Technical Policy
Fixed Assets Renovation
Programme
In 2013, the Federal Grid’s Board of Directors implement-
ed the Regulations on the Unified Technical Policy in the
Power Grid Complex (that had been earlier approved by
the Board of Directors of JSC Russian Grids) as an internal
document.
The Unified Technical Policy is the key instrument for op-
timising and reducing the full costs of ownership of the
electric grid complex facilities with a sound level of UNEG’s
reliability. Its aim is to identify the key technical areas that
enhance the electric grid complex’s reliability and efficiency
in the short and medium terms with an appropriate industri-
al and environmental safety based on innovative principles
that provide non-discriminatory access to electric grids for
all market participants.
Implementation of the Unified Technical Policy will help
us to improve the electric grid complex’s efficiency, re-
duce its operational costs, strengthen the system-wide
reliability of UNEG and meet the increasing demand for
electricity.
The Fixed Assets Renovation Programme is aimed at ensuring
the reliable and efficient functioning of the electric grid com-
plex. It was included in the Company’s Investment Programme
for 2015–2019 as an investment programme for 2014.
The draft Renovation Programme stipulates the commis-
sioning of facilities with a total capacity of 22,739 MVA and
reconstruction of 2,739 km of transmission lines.
The total funding for the Programme in 2014–2019 will amount
to RUB185.9 billion. RUB27.4 billion will be spent on renovation
in 2014. The total capacity to be commissioned at the fully
renovated facilities will amount to 1,841 MVA and 136.8 km.
In 2013, the total commissioned capacity was 564 MVA at
the fully renovated facilities and 362 MVA at reactive power
facilities.
In order to improve UNEG’s reliability, the Company ener-
gised 70 key partially reconstructed facilities in the reporting
year, which is 3.5 times above the 2012 level.
versiade in Kazan, test competitions in Sochi, and other
major events.
Based on its experience of operation in special periods, in
2013 the Company approved mandatory measures related
to preparation for, and operation in special periods for all
MES and PMES, as well as additional measures to ensure
the reliable operation of electric grid facilities.
Forty-nine duty stations work on a permanent basis in
Federal Grid’s branches in order to maintain the reliable
operation of the electric grid complex during disruptions
of electricity supply to customers and in other contingen-
cy situations. Branch representatives take part in the work
of duty stations that maintain electricity supply safety in
the federal subjects of the Russian Federation. Federal
Grid Company entered into 136 cooperative agreements
with contractors that are involved, whenever necessary,
in emergency and recovery efforts at the grid facilities. It
also entered into 62 agreements with the local offices of
RosHydroMet and 86 agreements with the local offices of
the Russian Ministry of Emergency Situations.
The Company has a sufficient emergency reserve includ-
ing a pool of major units. We take the following efforts in
order to provide for better management of the electric
grid facilities:
•
•
•
The Company and subsidiaries of JSC Russian Grids
arranged regular sharing of information about the ex-
isting emergency reserve and its locations.
The status of transmission lines is video-archived dur-
ing their inspections, walk-arounds and fly-arounds.
The Company has 251 diesel-driven generators with
total capacity of 60.8 MW to cover its own electricity
needs at substations and in administrative buildings.
Repairs
The main goal of Federal Grid’s repair programme is to en-
sure the reliability of UNEG operations.
The 2013 maintenance and repair plan was fully implement-
ed. The Company completed the following work at its grid
facilities:
• We cleared 50,254 hectares of high-voltage electricity
transmission line paths.
• We cut down 76,111 trees that threatened to fall on
overhead lines.
• We replaced 104,889 insulators, 1,674 km of ground
wires, 5,264 distance pieces, 293 inputs, 989 support
bar insulators, replaced and strengthened 2,144 bus
supports.
• We replaced, repaired and strengthened 11,017 foot-
ings, repaired 320 phases of autotransformers / trans-
formers, 39 phases of shunt reactors, 2,157 on-/off
switches, 12,279 phases of disconnecters and 152
compressors.
Moreover, in the reporting year the Company implemented
the following targeted repair programmes that helped to re-
duce the number of accidents caused by damaged inputs
and mast and rod insulation:
• Replacement of 409 high voltage inputs with T-750 oil
at substations.
•
Improvement of reliability of 27,853 mast and rod insu-
lators at substations.
• Replacement of 175,746 overaged porcelain insulators
on overhead transmission lines.
Operations in Special Periods
Weather and climatic conditions make a strong impact
on the Company’s operations, so we prepare electric
grid equipment and facilities in advance for operation un-
der low temperatures and peak loads during the autumn/
winter period, and in case of natural anomalies during
periods of river floods, fires and thunderstorms. These
are called “special periods” in our operations.
In 2013, Federal Grid Company ensured reliable work of
the electric grid facilities during the St. Petersburg Inter-
national Economic Forum, the 27th World Summer Uni-
42
43
PERFORMANCE RESULTS / OPERATING PERFORMANCE OVERVIEW
Operational Process Control
Operational process control in the Company is designed to
ensure the reliable operation of the UNEG facilities and adher-
ing to the operating modes that are set by the System Oper-
ator’s control centres. Our task is to comply with the quality
and safety requirements when we operate the UNEG facilities.
We have been taking proactive measures to reduce the
number of process disturbances that are due to operating
employee errors, and we are developing and implement-
ing UNEG development programmes in cooperation with
the System Operator’s control centres.
The function of Situation Management was delegated to
the Operational Process Control Department in 2013 in
order to prevent and deal with contingency and emer-
gency situations at the Company’s facilities. The task of
Situation Management is to monitor the operational envi-
ronment and provide information and analytical support
to the Company’s executives when they are making de-
cisions to prevent or deal with incidents and emergency
situations.
In the reporting year, the Company successfully met its key
performance indicators, such as the rates of process dis-
turbances (RPDs) caused by operating employee errors and
outage schedule implementation rate (OSIR).
Target and Actual Values of Process Disturbances
Caused by Operating Employee Errors in 2009–2013
Targets and Actual Values of Outage Schedule
Implementation Rate in 2011–2013
Number of Process Disturbances Caused by Employee Errors in 2009-2013
82
80
60
40
20
0
44
45
PERFORMANCE RESULTS / OPERATING PERFORMANCE OVERVIEW
Reducing Losses
Actual electricity losses in the Company’s grids amount-
ed to 22,261.5 million kWh in 2013, or 4.28% of electricity
supplied from the grids.
•
construction, reconstruction and development of
electric grids, and commissioning of energy-saving
equipment.
Measures to reduce electricity losses for the reporting pe-
riod were approved as part of the Programme for Energy
Saving and Improving Energy Efficiency of Federal Grid
Company. They were implemented in three key areas:
•
•
optimisation of scheme and mode parameters in the
process of the running and operational management
of electric grids;
cutting of electricity consumption for substation
needs;
As a result of the above actions electricity losses were
reduced by 98.7 million kWh in 2013.
An increase in relative value of the process electricity
consumption was due to the change in electric modes of
UNEG operations resulted in the increase in load losses,
as well as to commissioning of new electric grid equip-
ment that led to an increase in conventional constant
electricity losses. The amount of actual electricity losses
did not exceed the regulatory standard set by the Rus-
sian Ministry of Energy in 2013.
Development of Communication Networks
and IT Systems
The development of UNEG, building a smart grid and
managing of the Company’s business efficiently are based
on advanced and modern information and communica-
tions technology. Our Company has been building the En-
ergy System’s Unified Process Communications Network
(ESUPCN), which is designed to manage the technological
processes involved in the production, transmission and
distribution of electricity, and for dispatch management
and support of operations in the electricity industry.
The ESUPCN focuses on the digitalisation of the network
and on making it smart. This is achieved through the in-
stallation of widespread and sophisticated multiservice
communications networks at the grid facilities, the con-
struction of a fibre-optic communications network (FOCN),
and the deployment of satellite communications systems,
mobile digital radio communication systems and other for-
ward-looking technologies.
In order to improve the observability of the grid network
and operational dispatch and process management, the
Company identified the digitalisation of its communica-
tions channels at the level “Object – Dispatch Centre /
Networks Management Centre” as its strategic priority.
Actual Electricity Losses in 2012–2013
Digitalisation of the Federal Grid’s Electric Grid Facilities in 2011-2013
2012
2013
Change
Federal Grid’s branches
mln kWh
%
mln kWh
%
mln kWh
p.p
MES Centre
5,217.6
4.28%
5,054.0
4.10%
–163.5
–0.18
MES North-West
3,158.9
5.11%
3,119.2
5.13%
–39.7
–0.02
MES Volga
2,007.4
4.70%
2,118.0
5.01%
110.6
0.31
MES South
1,810.5
4.02%
1,740.9
3.89%
–69.6
–0.13
MES Ural
2,668.9
3.43%
2,824.8
3.72%
155.9
0.28
MES Western Siberia
3,102.8
4.74%
3,081.7
4.66%
–21.2
–0.08
MES Siberia
2,857.6
3.35%
3,075.0
3.48%
217.4
0.13
MES East
1,122.1
6.53%
1,247.8
6.80%
125.8
0.28
Total
21, 945.8
4.24%
22,261.5
4.28%
315.7
0.04
46
47
PERFORMANCE RESULTS / OPERATING PERFORMANCE OVERVIEW
Fibre-optic communications network
The fibre-optic communications network (FOCN) is the ba-
sic communications network for the energy system. It is
based on the use of a fibre-optic cable which is suspend-
ed on overhead electricity transmission lines. In addition to
building new FOCNs, we are working on the large-scale
implementation of resources that are provided by major tel-
ecommunications operators based on long-term, ongoing
lease agreements.
Prospective Scheme for the Company’s FOCN until 2020
Federal Grid’s FOSN length
increase in 2011–2013, km
Satellite Communications Network
In order to improve reliability and observability of the electric
grid facilities, we installed VSAT-based satellite communica-
tions equipment at the Company’s substations in 2013.
As the FOCN-based communications network is built, the
satellite communications network will serve as the backup
network. This will substantially reduce the communications
costs.
High-Frequency (HF)
Communications
via Electricity Transmission Lines
An HF network is the electricity system’s technological com-
munications network that transmits information required for
the management of technological processes in the both
normal and emergency modes. It is a specific type of wire
channels which uses phase wires and cables of overhead
transmission lines to carry signals.
In 2013, as part of new construction and renovation of the
electric grid facilities, Federal Grid upgraded some HF com-
munications system facilities and decommissioned some
other equipment because when FOCNs were operational-
ised.
In 2013, Federal Grid Company completed construction of
FOCNs on transmission lines at the following facilities:
• Samara – Orenburg – Orsk in the responsibility areas of
MES Volga and MES Ural branches (520 km)
•
•
220 KV Razdolinskaya – Nazarovskaya Hydropower
Plant substation in the responsibility area of MES Sibe-
ria branch (555 km)
•
Vologda – Arkhangelsk, in the responsibility area of
MES Centre and MES North-West branches (1,050
km)
Tyumen – Surgut – Nizhnevartovsk – Noyabrsk – Khan-
ty-Mansiiysk, in the responsibility area of MES Western
Siberia branch (2,200 km) (start-up facilities 1, 3, 4, 5)
• St. Petersburg – Petrozavodsk – Murmansk, in the
responsibility area of MES North-West branch (1,200
km).
48
49
INCREASE IN FED-
ERAL GRID’S FOSN
LENGTH
IN 2013
+8,570 km
Mobile Radio Network
Line personnel of overhead line services in PMES branches
have cellular, satellite and USB radio equipment in order to
maintain a reliable communications network.
In 2013, during preparations for the Sochi 2014 Winter Olym-
pic and Paralympic Games, the number of line teams in So-
chi PMES was increased to 101 and included additional staff
members relocated from the Company’s other branches. The
larger line teams of Sochi PMES were fully equipped with all
necessary mobile communications devices. In order to im-
prove the reliability of USB communications, the teams re-
ceived 88 additional DMR radio stations connected to JSC
Kubanenergo’s radio communications network, and 50 TET-
RA radio stations connected to the Federal Communications
Agency’s radio network..
Commissioning of HF
Communications Systems at UNEG
Electric Grid Facilities in 2011–2013
PERFORMANCE RESULTS / OPERATING PERFORMANCE OVERVIEW
Telephone
Communications Network
Based on the radial and hub network principle, the power
industry’s telephone communications network provides for
interaction with the process network of the System Opera-
tor and other electricity market participants. The telephone
communications development strategy includes the digi-
talisation of the network and the implementation of VoIP
technology alongside traditional services.
In 2013, Federal Grid installed more than 80 PABXs at its elec-
tric grid facilities, as well as systems for recording operational
personnel communication, DECT wireless communications
systems and loudspeaker and radio searching communica-
tions systems.
GLONASS-Based Systems
Automated Process Control System
GLONASS-based systems that are installed in the Compa-
ny’s branches to monitor automotive and special vehicles
and pedestrian personnel are designed to obtain real-time
information about the location of the monitored vehicles /
people, controlling the fulfilment of assignments, and for
monitoring mileage and fuel consumption. These systems
are integrated with a geographic information system and an
automated system that monitors vehicle operations.
In 2013, GLONASS-based monitoring devices were installed
on 563 automotive and special vehicles. The Company in-
tends to equip more than 2,000 automotive and special vehi-
cles with these devices in 2014-–2015.
The automated process control system (APCS) is a Compa-
ny-wide distributed hierarchical system that allows both op-
erational and non-operational functions to be performed by
Electric Grid Control Centres, improves the efficiency of UNEG
mode control by allowing a high level of observability, prevents
outages and reduces the time for decision-making and the
likelihood of errors by operational employees in emergency
situations.
APCS is a system for the management of UNEG operations
and development, so it integrates the devices and systems for
the automated dispatch, processing and operational activities
of the Company’s administration and MES / PMES services.
In 2013 , the Company implemented measures to increase the
observability of the UNEG facilities at 71 substations.
Installation of Digital Equipment
of Telephone Communications
Systems at UNEG Substations
Federal Grid’s Automotive
and Special Vehicles Equipped
with GLONASS-Based System
Installation of Data Input
and Sharing Systems at UNEG
Substations in 2011—2013
Development of Corporate Informa-
tion-Based Management System
Business applications in APCS are a set of IT systems that are
integrated in terms of methodology and equipment by spe-
cial-purpose software integration technologies aimed to im-
prove the Company’s efficiency.
Federal Grid Company has a Consolidated Plan of IT Strategy
Implementation. In the short term, to achieve its objectives the
Company will:
•
•
draft and implement an action plan to mitigate risks
related to its IT strategy;
adjust a portfolio of IT projects in accordance with Fed-
eral Grid’s updated corporate objectives.
In 2013, the Company automated business processes re-
lated to investment activities, UNEG asset management,
financial and economic operations, general corporate ser-
vices and customer relations.
In accordance with its corporate IT strategy, in 2014 the
Company will implement multiple projects of automated
management of its industrial assets, IT integration and IT
infrastructure, automation of general corporate services,
financial and economic operations, management of in-
vestment activities and capital construction, automation of
customer relations, situation management, management of
business processes and HR.
50
51
PERFORMANCE RESULTS / OPERATING PERFORMANCE OVERVIEW
Procurement
The Company makes purchases proactively in all regions
where it operates. Its procurement activities are targeted
at purchasing the necessary equipment and services on
the competitive market within its corporate investment pro-
gramme, and at fulfilling its annual repairs and target pro-
grammes.
The main document which regulates corporate procure-
ment by Federal Grid is Regulations on the Procedure for
Regulated Procurement of Goods, Works and Services.
This is a fundamental document for the organisation of reg-
ulated procurement on methodological basis, with up-to-
date, competition-based forms of purchases that are most-
ly made through tenders.
Principles of Procurement
Openness
Competitiveness
The rules that regulate the organisation of procurement are publicly available at www.fsk-ees.ru.
Information about violations of these rules can be sent to Federal Grid’s Central Tender
Commission. Most purchases are made through open tenders. Information about tenders is
published on the corporate website and in the printed media.
Procurement is regulated in such a way that priority is given to open tenders that provide the
highest possible level of competition. Any limitation on competition, particularly sole source
purchases , must be fully justified and agreed to collectively. In certain cases such decisions
are made by the Central Tender Commission (CTC) only, subject to follow-up approval by the
Company’s Management Board.
Justification
The procurement rules require every decision to be justified and documented in order to increase
the efficiency of purchases and to prevent corruption.
Federal Grid’s Key Objectives in Procurement
RUB
140.4
bn
VOLUME
OF PURCHASES MADE
THROUGH COMPETITIVE
TENDERING IN 2013
• Reduce the Company’s costs by saving funds
during the procurement of goods, works and
services
• Supply quality goods, works and services to the
Company at minimal costs and strictly on time
• Optimise the procurement management system
by pursuing best practices in this field
91.8%
OF THE TOTAL VOLUME
OF PURCHASES OF
FEDERAL GRID COMPA-
NY
2013 Regulated Procurements by Type
Value of purchases made
under procurement proce-
dures, RUB billion
Number of procedures
Share in the total value of pur-
chases made under procure-
ment procedures, %
Open tender
Open request for quote
Open request for proposals
Open competition-based
bargaining
Open auction
Minor purchase
Ordinary purchase
Sole source
Total
109.2
0.3
28.5
0.9
1.0
0.9
0.5
12.5
152.9
1,069
243
2,389
8
1
3,253
509
802
8,274
71.5%
0.2%
18.6%
0.6%
0.001%
0.6%
0.3%
8.2%
100%
Federal Grid has experience in building a procurement
system; this is why, in 2013, it was invited by the Gov-
ernment and by non-government organisations to con-
tribute to the drafting and refining of legislative acts on
procurement. In the reporting year, it also continued to
develop its internal procurement system. In 2013, Fed-
eral Grid began drafting the documents that improve
access to its corporate procurement system for small
and medium-size businesses. This work was done in
accordance with the Roadmap for Support of Small and
Medium-Size Business approved by the Russian Gov-
ernment.
52
53
PERFORMANCE RESULTS / OPERATING PERFORMANCE OVERVIEW
Procurement
54
55
PERFORMANCE RESULTS / OPERATING PERFORMANCE OVERVIEW
Import Substitution Policy
The Company is taking actions to support and develop do-
mestic manufacture of electrical equipment and increase
the share of Russian-made equipment in supplies under its
corporate investment programme.
The Company entered into 97 cooperative agreements with
electric engineering companies, including 79 agreements
with the manufacturers of electrical equipment; 74 of them
are Russian companies
Principles of Import Substitution
Policy in Federal Grid Company
• Reduction of reliance on imports
•
Implementation of innovative energy-efficient technol-
ogies
• Development and upgrade of Russian industrial pro-
duction
• Development production and research capacity
• Maintaining the country’s energy security and indus-
trial integrity
• Raising the process level of production
• Creating new jobs.
Long-Term Supply Contracts between Federal Grid
and Electric Manufacturers
JSC Power Machines
Hyundai Electrosystems LLC
High-Voltage Transformers Plant, a transformer producer of Power Machines
Toshiba LLC, began operations on 15 November 2013. Supply of transformers
for nominal voltage of 110-750 to Federal Grid’s facilities are scheduled to begin
in 2014. According to the approved schedule, the localisation level should be 35%
in 2014 and 55% by the end of 2018.
A plant in Artem opened on 25 January 2013. It will produce 110-–500 kW gas
insulated switchgear cubicles. This equipment is undergoing certification in ac-
cordance with Federal Grid requirements, so that it could be used at the Compa-
ny’s facilities. According to the approved schedule, the localisation level should be
13.5% in 2014 and 56.7% by the end of 2017.
JSC Holding Company Electric Plant
The plant has been supplying transformers for nominal voltage of 110-750 kW
to Federal Grid’s facilities since 2012.
Siemens Transformers LLC
Under a long-term supply contract, the plant supplies transformers for nominal
voltage under 220 kW. This equipment is made in Voronezh and has successfully
passed certification for consistency with Federal Grid‘s technical requirements.
According to the approved schedule, the localisation level should be 77.5%
in 2014–2017
In the near future we intend to draft a Comprehensive Programme for Substitution of Imported Equipment, Materials
and Technologies for 2015–2020.
56
Investments and Innovative Development
Investment programme financing, RUB bn
Commissioning, RUB bn
Meeting the investment financing plan targets, %
Meeting the capital investments deployment plan targets, %
Meeting the industrial capacity commissioning plan targets, %
Meeting plan targets for the commissioning of power lines, %
2013 TARGET
2013 ACTUAL
2014 TARGET
156.6
149.7
113.0
140.6
169.4
118.5
100
100
100
100
96
118
93
114
100
100
100
100
R&D investment, RUB mln
1,685.4
1,654.1
704.0
Investment Activities
The main objectives of Federal Grid Company’s investments
are modernisation and improving reliability of the unified en-
ergy system operations, required to provide uninterrupted
power supply to the consumers. As part of its investment
activities, the Company implements projects on the con-
struction of new electrical grid infrastructure facilities and
reconstruction of existing ones.
As of 2013, the volume of capital investment remains high-
er than the financing. Additionally, exceeding the facilities
commissioning plan targets by 21% resulted in a lower,
relative to the previous year, volume of construction in pro-
gress and confirmed the effectiveness of regulation based
on long-term parameters.
TOTAL VOLUME OF
INVESTMENT
PLANNED FOR
2014–2018
RUB
577.8bn
57
PERFORMANCE RESULTS / INVESTMENTS AND INNOVATIVE DEVELOPMENT
Basic parameters of the Federal Grid’s investment programme for 2013
Federal Grid capacity commissioning trend for 2009 –2013
Financing, RUB billion (including VAT)
Deployment of capital investments, RUB bn (including VAT)
Conversion of construction in progress into fixed assets, RUB bn
Deployment of industrial capacities
target
156.6
148.5
140.6
actual
149.7
174.8
169.4
MVA
km
MVA *
km
14,586 (com-
missioning of
power facilities)
3,235
10,793
3,690
* The analysis of actual commissioning figures should take
Commissioning plan – 2013
14,586 MVA
into account the capacity that has been commissioned ahead
of schedule (before 2013) at the facilities included in the 2013
plan, and the capacity that was postponed for commissioning
because of circumstances beyond the Company’s control.
Therefore, while calculating the completion rate, figures in-
cluded in the 2013 plan should be adjusted by the volume of
capacity that had been commissioned earlier and postponed.
Commissioned before 01.01.2013
2,627 MVA
Postponed for 2014
365 MVA
Adjusted plan for 2013
11,594 MVA
Actual 2013 data
10,793 МVА
% of completion, including pre-schedule
and postponed commissions
93%
Overall, Federal Grid has met the 2013 investment pro-
gramme plan targets. In particular, its performance was
96% for financing, 118% for development, 121% for con-
version of construction in progress into fixed assets, 93%
for commissioning transformer capacities (as adjusted), and
114% for commissioning of transmission lines.
Investment financing trend for 2009–2013, RUB bn
The main reasons for deviations from the targets in 2013
were frugal consumption following facility commissioning,
applicant’s refusal to be connected to the grid, the need to
adjust the design documentation, as well as, in some cas-
es, the absence of an executed agreement to perform the
necessary work at the facility.
220 kV Shagol – Novometallurgicheskaya HVL to the
newly constructed 220 kV DS of the Chelyabinskaya
GRES (State District Power Plant): failure to complete
was caused by the need to postpone the commission-
ing based on consultation with the administration of
the generating facility – the Chelyabinskaya GRES.
Below are the projects where the greatest deviations occurred
in terms of commissioning new capacities and financing:
•
•
220 kV approach lines to the Vladimirskaya-2 CHP
(Combined Heat and Power) plant and electrical grid
connection of JSC “TGC-6”: the lag in financing and
development was caused by the need to change the
technical aspects of the project implementation due
to the passage through a protected natural area, as
well as the need to seek approval for the passage of
the line from the local administration.
• Construction of a daisy chain approach line on the 220
kV DS (Distribution Substation) of the Novokuznet-
skaya STTPP (Steam Turbine Thermal Power Plant) as
part of the reconstruction of the 220 kV Elanskaya –
Ferrosplavnaya HVL and the 220 kV Ferrosplavnaya –
NAP (Novokuznetsk Aluminum Plant) HVL: failure to
complete was caused by the unavailability of the infra-
structure of the generating facility – the Kuznetskaya
CHPP, modules No. 14 and 15.
• Construction of the approach lines for the 220 kV
Tsinkovaya – Novometallurgicheskaya HVL and the
220 kV Rostovskaya NPP – Volgodonsk DS HVL with
220 kV Volgodonsk DS and 220 kV HV approach lines
of Volgodonskaya-2 CHPP – Zimovniki: failure was
caused by the need to postpone the commissioning
based on consultation with the administration of the
generating facility – Rostovskaya NPP
Furthermore, the overall performance in terms of capacity
commissioning in 2013 was affected by the postponement
until 2014 of the following power facilities that had been
scheduled for commissioning:
• New construction of the 220 kV Stupino SS with ap-
proach lines to 220 kV Kashira – Pakhra HVL: in con-
sultation with the applicant for the grid connection, the
commissioning was postponed until 2014.
•
Two 220 kV Prizeyskaya – Elgaugol HVL with 220 kV El-
gaugol SS, the 220 kV “A” and “B” SS’s, and an extension
of the 220 kV Prizeyskaya SS 220 kV open switchgear:
the commissioning was postponed until 2014 due to the
need to adjust the project because of the changes in the
technical parameters and solutions in the infrastructure of
the applicant.
58
59
PERFORMANCE RESULTS / INVESTMENTS AND INNOVATIVE DEVELOPMENT
Federal Grid capital investments by project for 2014 – 2018, RUB bn
the expansion of the capacity of BAM and the Trans-Si-
berian Railway; as well as other projects)
• Removing grid restrictions, ensuring the quality and
accessibility of services for electricity transmission and
technological connection for the consumers
• Synchronisation of the development programmes with
the generating facilities and distribution grids
•
•
Improving the efficiency of the backbone electric grids
by reducing the costs and implementing energy effi-
ciency programmes
Establishing an effective system for the management
of UNEG operations to improve the observability of the
electric grid facilities
In this five-year period under consideration, the total amount
of investment planned for 2014 – 2018 is RUB577.8 billion,
which will be used to introduce 64,300 MVA of capacity
and 17,600 km of transmission lines into the fixed assets of
Federal Grid.
Financing of the investment programmes will be carried out
using Federal Grid’s own funds, loans and lines of credit,
as well as other sources. The programmes provide for a
uniform distribution of the investment costs over the 5-year
period, which will enable the Company to maintain a bal-
anced structure of its financing sources.
Long-term
Investment Programme
The investment plan for the next five years is presented by
the draft adjustments to the investment programme of Fed-
eral Grid Company for 2014 and the investment programme
for the period of 2015 – 2019. The draft investment pro-
grammes have been submitted to the Ministry of Energy
of the Russian Federation in accordance with the “Rules
for approval of investment programmes for electric power
companies that include the State as a participant in their
authorised share capital and grid companies”, adopted by
the Resolution of the Russian Government No. 977 dated
1 December 2009.
During the work on the draft investment programmes, pro-
ject cost indicators were also further adjusted based on the
results of expert evaluation of the projects, and the financ-
ing for the projects was adjusted accordingly.
The investment programmes were drafted taking into
account the assignment of the Chairman of the Govern-
ment of the Russian Federation No. DM-P13-6323 dated
4 September 2013, on the preparation of investment pro-
grammes of natural monopolies based on a forecast of
prices for services of natural monopolies remaining level
in 2014 relative to 2013, and the assignment of paragraph
2 of the protocol of the meeting hosted by the office of the
Deputy Minister of Energy V. M. Kravchenko No. VK-428pr
dated October 15, 2013, for the scenario of tariff and credit
constraints.
The main goals of the long-term Federal Grid’s investment
programme are:
• Modernisation and reliability improvement of the uni-
fied energy system to ensure uninterrupted electricity
supply to the consumers
•
Ensuring electricity supply to the facilities of national
significance (to ensure reliable operation of UES Rus-
sia working separately from the energy systems of the
Baltic States, in order to compensate the effects of
reduced capacity of the electrical connections of IPS
(Integrated Power System) Centre and IPS North-West
and change the operating modes of the BRELL ener-
gy ring; the Eastern Siberia – Pacific Ocean pipeline,
the Skolkovo innovation centre, as well as the devel-
opment of the electrical grid infrastructure in Eastern
Siberia and the Far East, including that associated with
RUB bn
Structure of Federal Grid’s capital investments for 2013 – 2018, RUB bn
60
61
PERFORMANCE RESULTS / INVESTMENTS AND INNOVATIVE DEVELOPMENT
Key Investment Projects
Federal Grid Company is most actively involved in the con-
struction and reconstruction of the largest Russian energy
infrastructure projects, such as international forums and
major sporting events, oil transportation projects, and de-
velopment programmes for Russian regions. We under-
stand the importance of these projects and do everything
possible to build or reconstruct the grid facilities on time
and to the highest standards.
Successful completion of the trans-
mission grid development projects
for electricity supply to the facilities
of the 2014 Winter Olympics
As part of the Programme for the Development of Electric
Grids in the Sochi Region for 2008 – 2014, aimed to ensure
the functionality of the Olympic sports facilities, Federal
Grid built and reconstructed a total of 36 electric grid facil-
ities, including 14 substations with a total capacity of 1,715
MVA and 326.6 km of transmission lines.
Over the fiscal year, as part of the Sochi project, a 110
kV Sportivnaya substation was built with a capacity of 80
MVA to provide backup power to the Olympic facilities of
the Rosa Khutor Alpine Resort and the Olympic mountain
village infrastructure. Additionally, in 2013, a 220 kV Cher-
nomorskaya distribution substation was built.
In accordance with the Russian Government Resolution “On
introducing amendments to the construction programme of
the Olympic venues and development of the city of Sochi as
a mountain resort”, the scope of Federal Grid responsibility
was expanded to include 3 new power facilities supplying
electricity to the Gornaya Karusel sports and tourism com-
plex and the K-125/K-95 ski jumping complex.
To ensure a reliable electricity supply for the 2014 Olympics, the
plan included the construction of 4 additional facilities not in-
cluded in the Olympic programme. In particular, Federal Grid
Company completed the reconstruction of the 220 kV Dagomys
substation, increasing its capacity by 70% to 472 MVA. Also
underway is the reconstruction of the 220 kV Shepsi substation
and the 220 kV Shepsi – Dagomys electricity transmission lines.
By the start of 2014, Federal Grid’s obligations to prepare
the energy infrastructure of Sochi for the Winter Olympics
had been 100% fulfilled.
To ensure the uninterrupted operation of the Sochi power
system during Olympic Games we engaged about 2,000
employees and more than 250 units of equipment of
Preparation of the power infrastructure of the city of
Sochi for the 2014 Winter Olympics
Number of projects under the investment
programme
Designed capacity
27
1,715 МVА
326.6 km
Implementation timeframe
2008–2014
Number of electric grid facilities
36
Cost of the projects completed
33.4 RUB bn
Readiness of the facilities
100%
Federal Grid Company, its subsidiaries and associates.
The “Olympic” team of Federal Grid included about 1,300
people trained in what to do in various emergency situations.
In the event of an emergency where the maximum con-
sumption exceeds the total available capacity of the power
sources of the Sochi district, the excess demand was de-
signed to be met by the mobile gas turbine power plants
with a capacity of 202.5 MW and by additional power out-
put from the TPP of the Tuapse oil refinery of up to 100 MW.
BY THE START
OF 2014, FEDERAL
GRID’S OBLIGATIONS
TO PREPARE THE ENERGY
INFRASTRUCTURE OF
SOCHI FOR THE WINTER
OLYMPICS HAD BEEN
100%
FULFILED
Poselkovaya substation
in the mountain area of Krasnaya Polyana
220 kV Poselkovaya SS was constructed in a mountainous area with the use of advanced technologies. It provided
electricity supply to all sporting venues of the mountain cluster of 2014 Olympics, including bobsleigh track, ski and
biathlon centres, ski jumps and Mountain Olympic Village. Besides, commissioning of Poselkovaya substation en-
abled the connection of about 100 new facilities to the electric grid, including such unique ones as Kavkaz biosphere
reserve, native plant nursery, and ornithological reserve.
New technologies
at the Olympic facilities
In the course of the work on the Olympics re-
lated electric power facilities, new technical
solutions are being actively deployed:
• Overhead cable lines with XLPE insula-
tion connecting the 110 kV substations
under construction, are more environ-
mentally friendly, safe, and reliable in op-
eration compared to the traditional over-
head lines.
•
•
The use of gas-insulated switchgear
(GIS) sets will significantly reduce the
area of the substations, render their op-
eration silent, minimise the impact on the
environment, and protect the equipment
from external forces.
To combat icing, the electricity transmis-
sion lines are equipped with a unique ice
load control system, which creates the
conditions for stable operation in the nor-
mal mode and a reliable energy supply to
the consumers.
62
63
Development of the electric grids
of the Far East and Transbaikal
Amur Oblast As part of the Federal Target Programme
“Economic and social development of the Far East and
Transbaikal for the period through 2013”, one of the major
projects of the Federal Grid investment programme was
completed in the fiscal year – the construction of the 500
kV Zeyskaya HPP – Amurskaya – National Border HVL
(2nd stage of the 500 kV Zeyskaya HPP – Amurskaya No.
2 HVL). The facility is being commissioned in the Amur
Oblast and is designed to increase the grid capacity in
an easterly direction and arrange for export of electricity
from the IPS East electric grid to the People’s Republic
of China. By the time the project was completed, more
than 363 km of high-voltage transmission lines had been
commissioned.
Republic of Buryatia Another project is being implement-
ed in the Pribaykalsky District of the Republic of Buryat-
ia: the design and construction of the dual-circuit 220 kV
Tataurovo – Goryachinsk – Barguzin HVL with the 220 kV
Goryachinsk SS and 220 kV Barguzin SS, as well as the
reconstruction of the 220 kV open switchgear at the 220 kV
Tataurovo SS. The project is scheduled to be implemented
over the 2010 – 2019 period, and the total cost of the con-
struction will be RUB7.6 billion. The construction is being
financed with Federal Grid’s own investment funds as well
as those from the Federal Budget.
The new energy facilities will supply electricity to the fa-
cilities under construction in the Baikal Harbor special
economic zone, such as the Centre for Eastern Medicine,
port, as well as sports and recreation and hotel complex-
es. Additionally, there will be a significant increase in
the reliability of the electricity supply to the Barguzinsky,
Kurumkansky, and Pribaykalsky Districts of the Repub-
lic with a population of 72 thousand people, as well as
the East-Siberian Railway and the Pribaykalsky National
Park.
Yakutia As part of the effort to improve the reliabili-
ty of electricity supply to the districts of South Yaku-
tia, our company is building a 220 kV Neryungrinskaya
GRES – Nizhny Kuranakh – Tommot-Maya HVL with
220 kV Tommot SS and 220 kV Maya SS. Implemen-
tation of the project is scheduled for 2009 – 2016, and
the total cost of the construction will be RUB19.3 billion,
to be financed, among other sources, from the Federal
Budget.
Facilities of the first (275 km) and the second stage (480
km, 440 MVA, and 200 Mvar, 275 km) were commissioned
in 2011; commissioning of the 434.6 km was carried out in
2013; introduction of 440 MVA and 45.5 km is planned for
2016.
Implementation of this project will enable to connect the
isolated central power district of Yakutia to the IPS East
electric grid and to abandon the costly independent pow-
er supply sources. In addition, conditions will be created
for connecting new consumers and economic develop-
ment of South Yakutia.
Programme to contain the fallout
from the accident at the Saya-
no-Shushenskaya HPP
Additionally, we have completed the third stage of the de-
ployment of transformer capacity under the project “Re-
construction of the GPP-220/110/10 kV substation”.
Enabling power delivery from the
Kalininskaya NPP
Federal Grid continues to implement projects enabling elec-
tricity transmission from power unit No. 4 with a capacity of
1,000 MW of the Kalininskaya NPP. In 2013, the project
“500 kV Gribovo – Dorokhovo HVL with a 500 kV Dorokho-
vo SS and 220 kV HV approach lines” was completed. The
Gribovo – Dorokhovo line is the first segment of the second
energy ring around Moscow. Over the fiscal year, 1,502
MVA of transformer capacity and 81 km of transmission
lines were commissioned.
As part of the programme to contain the fallout from the acci-
dent at the Sayano-Shushenskaya HPP, in 2013 Federal Grid
Company deployed 501 MVA of transformer capacity under
the project “Expansion of the 500 kV Ishim (Zarya) SS”.
The upgraded substation serves to improve the reliability of
electricity supply to the consumers of the Omsk power sys-
tem and the southern Tyumen Oblast, and also connects the
systems via the 500 kV Kurgan – Vityaz and Vityaz – Voskhod
overhead lines, necessary to increase the maximum flow of
the IPS Siberia – IPS Ural unified power system.
Development of the electric grids
in the Krasnoyarsk Krai
To deliver power from the Boguchanskaya HPP and ease
the energy shortage in the Boguchansky and Motyginski
Districts of the Krasnoyarsk Krai, as well as to enable in-
tegrated development of the Lower Priangarye area, our
Company has completed the construction of the 500 kV
Boguchanskaya HPP – Ozernaya HVL 330 km in length.
64
65
PERFORMANCE RESULTS / INVESTMENTS AND INNOVATIVE DEVELOPMENT
Basic parameters of the key investment projects
Innovative Development Programme
Project implementation
timeframe
start
completion
Commissioned in
2013
Design capacity
Total cost of
the construc-
tion, RUB bn
The goal of the Federal Grid innovative development is to im-
prove reliability, quality, and cost efficiency of the energy sup-
plied to the consumers through modernisation of electric grids
of the Unified Energy System of Russia based on innovative
technologies that are then transformed into the intellectual core
of the technological infrastructure of the electricity industry.
Project
Construction of the 500 kV
Zeyskaya HPP – Amurskaya
– National Border HVL power
bridge
Design and construction of the
dual-circuit 220 kV Tataurovo –
Goryachinsk – Barguzin HVL,
220 kV Goryachinsk SS, and
220 kV Barguzin SS
Reconstruction of the 220 kV
open switchgear at the 220 kV
Tataurovo SS
Construction of the 220 kV
Neryungrinskaya – Nizhny
Kuranakh – Tommot-Maya
HVL, 220 kV Tommot SS, and
220 kV Maya SS
Expansion of the 500 kV Ishim
(Zarya) SS, to be subsequently
renamed Vityaz SS (construc-
tion of a 500 kV wing)
Construction of the 500 kV
Boguchanskaya HPP – Ozer-
naya HVL
Reconstruction of the GPP-
220/110/10 kV substation
Construction of the 500 kV
Gribovo –Dorokhovo HVL and
500 kV Dorokhovo SS with
220 kV HV approach lines
2010
2013
363 km
(2nd stage of the
500 kV Zeyskaya
HPP – Amurskaya
No. 2 HVL)
1st stage – 152.76
km, 180 Mvar
2nd stage – 362,4
km, 6х60 Mvar,
1х60 Mvar
2010
2018
—
2009
2015
435 km
1st stage – 2х125
MVA, 132.3 km
2nd stage – 2х25
MVA, 119.9 km
1st stage – 275
km,
2nd stage – 45.5
km, 434.6 km.
2х63 MVA, 2х125
MVA, 2х16 MVA,
2х16 MVA, 2х100
Mvar
14.9
11.1*
19.3*
2010
2014
501 MVA
501 MVA
4.5
2010
2014
330 km
329.9 km, 180
Mvar
10.0
2010
2014
1,502 MVA
81 km
500 kV HVL 85 km,
2х501 MVA, ap-
proach lines 2х12
km, 2х250 MVA
9.8
* the construction will be financed, among other sources, from the federal budget.
Federal Grid innovative development initiatives
The Management Board and the Strategy Committee un-
der the Board of Directors of Federal Grid Company have
approved the main provisions of the Federal Grid Innovative
Development and Modernisation Policy, implementation of
which will result in the creation of a smart grid based on
innovative solutions.
Our innovation policy is comprehensive in nature and in-
cludes the following areas: setting innovative development
goals and objectives; developing effective methods and
means to achieve these goals; selection and organisation
of personnel able to undertake the innovation tasks.
Programme for 2013–2017 was developed, with an outlook
through 2020, covering the following main areas:
With regard to the development of new technologies
and launching innovative products:
• Development of the concept of a smart power system
based on an active-adaptive grid
• Development and testing of new technologies of Fed-
eral Grid Company
• Commercialisation of new technologies
• Development of new Federal Grid services for the en-
To achieve the goals and objectives of the innovation poli-
cy, a comprehensive Federal Grid Innovative Development
ergy markets
Energy efficiency improvement programme
•
66
67
PERFORMANCE RESULTS / INVESTMENTS AND INNOVATIVE DEVELOPMENT
• Programme to improve the environmental impact of
Federal Grid Company
• Collaboration with institutions of higher education and
scientific organisations
• Programmes to develop partnerships with innovative
•
•
small and medium enterprises
Interaction with venture capital firms
Interaction with the Skolkovo Institute of Science and
Technology
With regard to the deployment of new technologies:
•
Integrated pilot projects to create an active-adaptive
grid
• Development, modernisation, and improvement of en-
ergy efficiency of UNEG
• Building a production base for modernisation of UNEG
With regard to innovative business processes:
•
Improving business processes and introducing new
management methods
• Development of a system of innovation activity at Fed-
eral Grid Company
The key outcome for the system of implementation of the
Programme in 2013 was the continued emphasis on inno-
vation activity of Federal Grid Company in implementing in-
novations and related activities. This was possible due to
the fact that during 2010 – 2012, as part of the R&D pro-
jects and programmes, significant results were achieved that
met the requirements of innovativeness (including in terms
of implementation of the smart grid Concept), as well as in
connection with the objective necessity for practical testing
and deployment of innovative solutions at the UNEG facilities.
Maintaining a focus on innovative development in the elec-
tric grid complex and choosing to focus on deployment ac-
tivities enabled an increase in spending on the Innovative
Development Programme for the year despite the cutbacks
in the investment programme. Instead of the planned RUB
9,907.9 billion, RUB 12,165.8 billion was allocated to the
implementation of the Programme. Adequate resource al-
location in conjunction with the improved efficiency of the
innovation activity enabled Federal Grid Company to meet
all the performance targets of the Innovative Development
Programme for the fiscal year.
Meeting key performance targets of Federal Grid’s Innovative Development
Programme through 2017 with an outlook through 2020, in 2013
Actual value as of
the end of the year
preceding the fiscal
year
Target value
set in the Innova-
tive Development
Programme for the
fiscal year
Actual value as
of the end of the
fiscal year
Indicator
2012 actual
2013 target
2013 actual
Assessment
of whether or
not the target
indicator has
been met
Trend of reducing the cost of repair of a unit
of grid equipment relative to the cost level of
2010, %
Share of the spending on equipment pur-
chased from domestic manufacturers in the
total spending on equipment purchasing, %
Share of electricity lost in the total volume of
electricity transmitted through the grid, %
1.2
39
1
34
1
Met
38
Met
4.24
4.48
4.28
Met
Number of company staff per 100 km of
power transmission lines (number of people)
Area of land in metropolitan areas freed from
the grid infrastructure, ha
16.4
105
16
200
14.76
200
Met
Met
Share of undersupply of electricity to
consumers in the total volume of electricity
transmitted through UNEG, %
Number of exclusive rights documents (pat-
ents and registration certificates) obtained
through the R&D work for the year
Number of technologies and products devel-
oped and introduced into production through
the R&D work, pcs.
The share of R&D expenditure at the own
expense of JSC “FGC UES” relative to the
revenue , %
Share of funds secured from external sourc-
es in the total financing, %
Share of expenditures on R&D performed by
universities relative to the total R&D expend-
iture, %
0.0006
0.0028
0.0006
Met
64
5
2.1
11
1.5
35
2
1.1
2.0
1.0
55
4
1.1*
3
2.4
Met
Met
Met
Met
Met
* revenue from electricity transmission through UNEG
Detailed information on the projects implemented in 2013 under the Federal Grid innovative development initia-
tive is set out in Appendix to the Annual report on the memory stick attached.
INVESTMENT
IN R&D IN 2013
RUB 1,654 mln
68
69
PERFORMANCE RESULTS / INVESTMENTS AND INNOVATIVE DEVELOPMENT
Smart (Active-adaptive) Grid
In the long term, the result of the implementation of the
Innovative Development Programme should be the cre-
ation of an electric power system with a smart grid that
differs from the existing grid because of its innovative
features: automated energy consumption management
systems, active grid elements with variable parameters,
a current grid status assessment system, and automat-
ed real-time systems that support operation of the pow-
er system within the prescribed limits as part of a uni-
fied analysis and decision making system. The basis for
the smart grid structure and the power system man-
agement principles is prioritisation of the system factors
and conditions – reliability and efficiency of the system
as a whole.
Smart grid schema
FOSN LINES
WIND TURBINE S
Energy usage
data mnitoring
Electronic switch
INDUSTRIAL
BUILDINGS
GRID
GRID
CONTROL
CONTROL
CENTER
OFFICE
BUILDINGS
SUBSTATION
ACTIVE
ELEMENTS
HOME
NETWORK
New principles and technologies
underlying the construction
of the smart grid
•
The grid is saturated with active elements that allow
changing the topological parameters of the grid
• Sufficient number of sensors measuring the current oper-
ating parameters to assess the status of the grid in differ-
ent modes of operation of the power system
• A system for collection and processing of data and con-
trols for the active elements of the grid and electric instal-
lations of the consumers
• Presence of the necessary control devices and mech-
anisms that enable real-time changes to the topological
parameters of the grid and interaction with the connected
energy facilities
• Mechanisms for automatic assessment of the current sit-
uation and forecasting of the grid operation
• High performance control system and high-speed infor-
tive-adaptive Grid (approved by Resolution of the joint Sci-
entific and Technical Council of Federal Grid Company and
the Russian Academy of Sciences in 2011).
Research and Development,
Industrial and Experimental,
and Technological Activities
(“R&D Activities”)
The Innovative Development Programme includes R&D ac-
tivities that involve designing and testing of “breakthrough”
and “improvement” innovative technologies. Breakthrough
technologies include the digital substation technologies,
technologies for building electric equipment based on
high-temperature superconductivity (of cables, fault current
limiters, etc.), multi-agent control systems, and electricity
storage technologies.
The target of the R&D Programme is creating a technologi-
cal basis for a smart energy system with an active-adaptive
grid (smart grid). The main areas of the R&D activities of
the Company for the period covered by the Programme are:
mation exchange
• Development of the concept of a smart energy system
Detailed information about the projects implemented in
2013 related to the Federal Grid innovation development
is presented in the “Basic provisions of the Concept of
the Smart Electric Power System of Russia with an Ac-
based on an active-adaptive grid
• New types of electric power equipment for substations
and electricity transmission lines for the smart grid
R&D funding trend for 2009-2013, RUB bn
ÒSMARTÓ
COUNTER
POWER
GENERATORS
INFORMATIONAL
STREAMS
DISTRIBUTIO N
GRID
GRID
ELECTRIC CA R
70
71
PERFORMANCE RESULTS / INVESTMENTS AND INNOVATIVE DEVELOPMENT
Innovation activity cost structure for 2013 by section of the Federal Grid’s
investment programme for 2010–2014
including those developed by universities, research
and design organisations, and innovative small and
medium enterprises;
•
development and promotion of public documents and
Internet resources on the subject of innovation devel-
opment of the Company, targeting its partners and
contractors, reflecting the goals, objectives, key re-
quirements and technologies, and other important in-
formation regarding modernisation of UNEG, creation of
smart grids, and other areas of the Company’s innova-
tion development;
•
•
•
ensuring further development of the tools of innova-
tive competency centres created with the participation
or support of the Company at university laboratories,
departments, and faculties, small innovative subsidiary
enterprises of universities, and innovation competitions;
developing the mechanisms for cooperation between
the public and private sectors;
development of tools to manage the knowledge, competen-
cies, and the Company’s production base, in order to max-
imise the use of internal innovative development resources.
• New types of control, automation, protection, and
measurement system mechanisms for the smart grid
• Smart grid control systems
• Systems for monitoring and protection of electric grids
from external forces
• Development, modernisation, and improved energy
efficiency
In accordance with the investment programme, in 2013 our
Company allocated RUB1.7 billion to the R&D Programme,
which is 1.1% of the Federal Grid revenue. The decrease in
funding for R&D relative to the previous year is due to the
adjustment of the investment programme in connection to
the changes in tariff increase scenario for electricity trans-
mission services as well as the aforementioned focus on
testing and implementation of innovative solutions.
Under the R&D Programme, in 2013 we obtained 32 utility
model patents (including 3 international patents) and 8 in-
vention patents.
Detailed information on the R&D projects com-
pleted in 2013 is provided in Appendix to the
annual report on the memory stick attached.
To overcome the limitations of funding in future years, we
plan to address the following:
1. Growing the quality and efficiency of the planning and
implementation of the R&D Programme in order to offset
the decline in the resources allocated by the Company’s
Investment Programme and to focus on the most ad-
vanced and the most critical areas of innovation activity.
2. Mainstreaming “open innovation” tools to work with
our partners on the Federal Grid innovation develop-
ment, including:
•
growing the quality and efficiency of managing the re-
quirements for the creation and production of the nec-
essary innovative technologies and solutions by the
Company’s partners (with the subsequent purchase
and use of those solutions);
•
exploring the options to create a corporate R&D Fund
to support promising developments and technologies,
An element of the bunch
of multi-chamber insulator-arresters
In 2013, Federal Grid completed a three-year pilot testing of bunches of multi-chamber insulator-arresters that are rad-
ically new devices for the protection of power transmission lines during thunderstorms. Application of this novel device
will minimise power outages caused by thunderstorms, eliminating the need for a grounding wire and thus reducing the
Company’s operating costs.
72
73
PERFORMANCE RESULTS / MANAGEMENT’S DISCUSSION AND ANALYSIS
Management’s Discussion and Analysis
1. Overview
Adjusted EBITDA, RUB mln
Financial leverage
Efficiency of Cost Management Programme, %
2013 TARGET
2013 ACTUAL
2014 TARGET
91,037
96,296
91,543
0.38
10.0
0.44
13.8
0.41
15.0
The following review of the financial position and results of operations of Federal Grid Company as of 31 December 2013
should be considered in conjunction with our RAS financial statements for the year 2013 and the notes thereto.
Forward-looking statements
This report contains forward-looking statements regarding the financial position and results of operations of Federal Grid
Company and its consolidated entities. All statements other than statements of historical fact are forward-looking statements.
Forward-looking statements are statements of future expectations based on the management’s current views and assump-
tions that are subject to risks and uncertainties that could cause actual results and events to differ materially from those ex-
pressed in or implied by these forward-looking statements.
Forward-looking statements include, among other things, statements of possible market risks that may affect our business
and statements of the management’s expectations, predictions, estimates, forecasts, plans and assumptions. Such for-
ward-looking statements can be identified by the use of conditional or forward-looking terminology such as “imply”, “an-
ticipate”, “assume”, “may”, “estimate”, “expects”, “intend”, “could be”, “plan”, “goals”, “view”, “likely”, “project”, “will”, “strive”,
“achieve”, “risks”, “tasks”, “should” or similar words and expressions.
There are a number of factors that could affect our future activities and cause actual results to differ materially from those
contained in the forward-looking statements, including but not limited to: (а) environmental and financial risks; (b) change in
demand for the Company’s products; (c) change in currency exchange rates; (d) risks associated with failure to find appropri-
ate property and assets for acquisition and to succeed in negotiations and complete such transactions; (e) reserve evaluation;
(f) loss of market share and industry competition; (g) economical and financial market conditions in various countries and
regions; (h) political risks, delay or acceleration of project implementation, cost estimation; and (i) change in trade conditions.
0.44
As of 31 December 2013, Federal Grid Company has re-
gional branches, including: eight backbone electric grids
(MES); 41 backbone electric grid enterprises (PMES); one
branch – Special-purpose Production Centre Bely Rast;
one branch –Technical Supervision Centre.
Federal Grid’s financial management system is based on
budgetary management that has been built in accordance
with the hierarchical budget system rule.
The Company’s financial management is accomplished
through financial plans differentiated by planning hori-
zons:
• A long-term programme of activities is developed for
a long-term period; long-term planning involves iden-
tifying focus areas for implementation of the Govern-
ment’s policy with respect to managing UNEG and
elaboration of Federal Grid’s strategic plans given the
acceptable level of financial risks and maintaining the
Company’s financial stability.
•
Federal Grid’s mid-term business plan is developed
with a five-year planning horizon and a one-year plan-
ning interval.
• Short-term planning implies annual budgeting of Fed-
eral Grid Company.
Our financial performance in 2013 reflects both internal
and external factors affecting our operational results, in-
cluding:
1.
Implementation of a сost management programme
that ensures reduction of the Company’s operating
expenses.
2. A write-off of negative differences from the mark-to-
market revaluation of quoted securities (mainly shares
of JSC Inter RAO UES).
3. Accrual of provisions for the impairment of financial
investments not subject to mark-to-market revaluation
(promissory notes issued by Energo-Finance LLC).
4. A negative balance of accrual/reversal of provision for
doubtful debts (mainly owing to the mark-to-market re-
valuation of shares on the books of Energy–FGC LLC
and interests accrued on the promissory notes of En-
ergo-Finance LLC).
5. Reporting the results of property, plant and equipment
revaluation.
The increase in revenues by RUB16,515 million was
primarily due to transmission tariff growth and the in-
crease in rates for electricity loss compensation. Fur-
thermore, there was an increase in revenues from grid
repair and maintenance services, technical supervision
services and property lease. However, the revenues
from technological connection to UNEG decreased by
RUB91 million.
As of the end of the reporting year, Federal Grid Company
incurred a loss of RUB25,898 million following the revalua-
tion of financial assets and the provisions for doubtful debts
and impairment of financial investments.
Adjusted net profit (excluding non-cash expenses related
to provisions for doubtful debts and revaluation of fixed
assets) in 2013 was RUB16,758 million, which exceeded
the amount of the previous year by RUB3,375 million.
The increase was mainly due to higher operating earn-
ings resulting from the Company’s cost-saving initiatives.
Federal Grid makes considerable investments in fixed as-
sets to provide for the development and reliable operation
of UNEG. In 2013, expenditures on construction, re-con-
struction and renovation of the Company’s property, plant
and equipment amounted to RUB149,696 million, includ-
ing VAT.
In 2013, the Company financed its investments from the
following sources:
•
Electricity transmission tariffs – 45.8%
• Borrowings, including federal budget funds and funds
raised through infrastructure bond placement – 42.0%
•
VAT refund – 4.8%
• Other sources (including payment for technological
connections) – 7.4%.
Federal Grid Company is characterised as a financially
sound company with a high level of liquidity and solvency
and a low level of financial dependence.
74
75
PERFORMANCE RESULTS / MANAGEMENT’S DISCUSSION AND ANALYSIS
2. Financial Performance
Corporate key financial performance indicators in 2009–2013, RUB million
Income and expenses
relating to ordinary oper-
ations
2009
2010
2011
2012
2013
Change
in 2013
Change
in 2013, %
2014
forecast
Revenues, including:
85,078
111,085
138,137
138,836
155,352
16,515
11.9%
161,714
Electric power trans-
mission services
80,173
109,510
134,875
136,581
152,710
16,128
11.8%
157,212
Other operations
4,904
1,574
3,261
2,255
2,642
387
17.2%
4,502
Production cost, including:
–64,080
–75,680
–84,174
–106,650 –120,725
–14,075
–13.2% –135,660
Electric power trans-
mission services
–62,732
–74,856
–83,201
–105,639 –119,468
–13,829
–13.1% – 134,785
Other operations
–1,348
–824
–973
–1,011
–1,257
–246
–24.3%
– 875
Management expenses
–5,128
–6,821
–8,726
–9,860
–12,223
–2,363
–24.0% – 14,571
Sales profit
15,870
28,584
45,236
22,326
22,404
77
0.4%
11,484
Other income*
113,770
150,765
175,670
113,556
61,125
–52,431
–46.2%
8,916
Other expenses**
–183,689 –112,037 –209,463 –150,152 –101, 201
48,952
32.6%
–5,430
Profit (loss) before tax
–54,049
67,312
11,444
–14,270
–17,672
–3,402
–23.8%
14,970
Deferred tax assets
–180
–33
46
–55
1,776
1,831
—
Deferred tax liabilities
–722
–1,181
–5,545
–8,736
–9,977
–1,241
–14.2% – 11,216
Revenues, expenses and net profit in 2009–2013, RUB million
11.9%
REVENUE
GROWTH
IN 2013
2.1. Revenues
During 2009–2013, Federal Grid Company demonstrated
a sustainable growth in revenues. In 2013, the rate of rev-
enue growth increased considerably compared to 2012 –
from 0.5 to 11.9%.
This growth was primarily due to the increase in revenue
from electricity transmission services.
Current profit tax
–4,876
–9,264
–8,390
–1,471
–5
43
–3
–0.3
—
–5
–1,471
–5
—
—
—
– 77
—
—
–34
206
–21
—
–20
–20
–59,866
57,082
–2,468
–24,532
–25,898
–1,365
–5.57%
3,677
Other similar mandatory
payments
Profit tax adjustment for
the previous periods
Net profit (loss) for the
period
Adjusted net profit
9,427
25,702
33,687
13,383
16,758
3,375
25.22%
* Other income includes income from participation in other organisations and interests receivable
** Other expenses include interests payable
76
77
PERFORMANCE RESULTS / MANAGEMENT’S DISCUSSION AND ANALYSIS
Revenue structure in 2009–2013, RUB million
2009
2010
2011
2012
2013
Change in
2013
Change in
2013, %
Revenues
85,078
111,085
138,137
138,836
155,352
16,515
11.9%
80,173
109,510
134,875
136,581
152,710
16,128
11.8%
66,681
94,950
120,994
125,672
139,075
13,403
10.7%
Revenues from electricity
transmission services,
including:
Payments for the
maintenance of UNEG grid
facilities
Payments for normative
electricity losses
Revenues from
technological connection
services
Revenues from other
operations
In 2013, revenues generated by the Company’s core regulat-
ed operations (excluding revenues from technological con-
nections) made up 98.3% of the Company’s total revenues.
Compared to 2012, revenues generated by electricity trans-
mission services in 2013 grew by RUB16,129 million, including:
•
a RUB13,403 million increase in revenues related
to grid maintenance, mainly owing to a 9.4% growth
in tariffs for electricity transmission through UNEG
since 01.07.2012, as well as the increase in the volume
of services provided;
•
•
•
a RUB2,725 million increase in revenues for com-
pensation of normative losses, owing to an increase
in transmission volumes and tariff indexation since
1 January 2013;
revenues from connection services decreased owing
to a reduction in the scope and cost of work under
contracts in 2013 as compared to 2012;
a RUB478 million increase in revenues from other oper-
ations was due to an increase in demand for grid repair
and maintenance services, technical supervision ser-
vices and property leasing.
13,492
14,561
13,882
10,910
13,634
2,725
25.0%
2.2. Cost
3,053
609
2,127
1,077
986
–91
–8.5%
1,852
965
1,135
1,178
1,656
478
40.6%
Revenues in 2009–2013, RUB million
Cost of services rendered by Federal Grid Company in
2013 (excluding management expenses) increased by
RUB14,075 million compared to the previous year. The in-
crease was primarily due to increases in depreciation and
amortisation charges, wages, salaries and social security
contributions.
Cost of services in 2009–2013, RUB million
Cost elements
2009
2010
2011
2012
2013
Change
in 2013
Change
in 2013, %
Depreciation of property, plant
and equipment
Purchase of electricity and
capacity
Labour costs and social security
contributions
Repair and maintenance
services
Expenses on raw and other
materials
22,562
31,727
39,784
58,993
69,669
10,676
18.1%
13,433
14,183
12,183
11,662
12,285
622
5.3%
7,028
13,926
15,836
18,103
20,244
2,141
11.8%
14,127
5,984
5,291
5,446
5,464
18
0.3%
410
2,246
2,424
2,702
3,147
445
16.4%
Property insurance costs
1,094
Lease costs
Security costs
772
766
849
926
848
894
975
1,092
1,190
1,223
1,105
1,527
1,693
1,862
Electricity transmission services
422
784
1329
1,741
1,728
Other expenses
3,466
3,950
3,859
4,226
4,128
81
33
169
–13
–98
9.1%
2.8%
10.0%
–0.7%
–2.3%
Total cost
64,080
75,680
84,174
106,650
120,725
14,075
13.2%
78
79
PERFORMANCE RESULTS / MANAGEMENT’S DISCUSSION AND ANALYSIS
2.2.1. Depreciation of property, plant and equipment
2.2.7. Lease Expenses
2.3. Cost optimisation
An increase of 18% in depreciation expenses for 2013 com-
pared with 2012 was due to an accrued depreciation for
facilities commissioned within the Company’s investment
programme and the revaluation of fixed assets.
2.2.2. Purchase of electricity and capacity
In 2013, costs for purchasing electricity and capacity in-
creased by 5% compared to the previous year, owing to an
increase in the volume of electricity purchased on WECM to
compensate for transmission losses.
2.2.3. Labour costs and social security contributions
An increase of 12% in labour costs and social security con-
tributions was due to the following reasons:
•
•
an increase in the number of employees engaged to
ensure the operation of the commissioned electric grid
facilities;
a quarterly indexation of wages for operational per-
sonnel in accordance with the actual consumer price
growth based on the Tariff Agreement and the policy of
maintaining employee income levels;
In 2013, lease expenses increased by 3% compared to
2012. The increase was primarily due to lease payment
growth under the contracts for utilising electric grid facili-
ties, an increase in lease expenses for commissioned wire-
less communication networks property and land lease pay-
ment growth related to tariff indexation by local authorities.
2.2.8. Security Costs
An increase of 10% in security costs in 2013 compared to
2012 was due to an increase in the number of protected fa-
cilities, stepping up physical security measures, implemen-
tation of the Integrated Automated Security Management
System (IASMS) at the Company’s power facilities and the
Unified Security Control Centre and to the implementation
of the programme aimed at protecting the UNEG facilities
against terrorism.
2.2.9. Electricity Transmission Costs
In 2013, electricity transmission costs remained at the 2012
level – the deviation was a mere 0.7%. It was due to a de-
crease in electric energy cross-flow through the electric
grids of Kazakhstan.
•
an increase in insurance premiums.
2.2.10. Other expenses
A decrease of 2.3% in other expenses in 2013 was due
to the implementation of the Company’s cost-saving pro-
gramme.
2.2.4. Repair and Maintenance
Despite an increase in facility maintenance, the related
costs in 2013 remained at the 2012 level because of the
Company’s cost-saving programme.
2.2.5. Expenses of Raw and other Materials
In 2013, an increase in the expenses of raw and other
materials was 16.4% compared to 2012, owing to price
increases for raw and other materials, transport fuel (be-
cause of inflation) and increase in expenses for working
clothes because of an increase in the size of the work-
force.
2.2.6. Property Insurance Costs
In 2013, property insurance costs increased by 9%, ow-
ing to an expansion of the list of insured production fa-
cilities.
The Cost Management Programme has been running in our
Company since 2010. It is aimed at reducing Federal Grid’s
expenses through reducing prices for contractors’ works
and implementing competitive procurement procedures,
while maintaining actual work volumes.
The total saving of the Cost Management Programme for
2013 was RUB 4,540 million. (excluding the energy-saving
programme).
Federal Grid’s Energy Saving and Energy Efficiency Pro-
gramme involves measures aimed at reducing energy loss-
es. In 2013, the Company fully implemented measures to
reduce losses within UNEG grids. The total economic effect
of measures implemented within the Energy Saving and En-
ergy Efficiency Programme in 2013 was RUB 108.85 million
(excluding VAT).
In 2014, Federal Grid Company will continue to reduce op-
erating and investment expenses. In conditions of limited
opportunities to improve Company performance, owing to
external factors of pricing, a key challenge is to increase
internal efficiency and ensure profitability at the required
level by optimising internal business processes. This task
was emphasised in the Strategy of the Electric Grid Com-
plex Development of the Russian Federation and the Plan
of Measures to Limit the Final Cost of Goods and Services
of Infrastructure Companies.
Reduction in operating expenses, %
Item
2010
2011
2012
2013
Reduction in expenses resulting from the Cost
Management Programme/calculation basis (total operating
expenses for 2010)
6.1%
6.4%
6.6%
13.8%
THE TOTAL EFFECT
OF COST SAVING
IN 2013
RUB 4,540 mln
80
81
PERFORMANCE RESULTS / MANAGEMENT’S DISCUSSION AND ANALYSIS
2.4. Management Expenses
In 2013, management expenses increased by 24%, which was primarily due to a RUB2,349 million increase in property tax
payments.
Management Expenses in 2012–2013, RUB million
Cost elements
2012
% of total
2013
% of total
Change, %
Labour costs and social security con-
tributions
2,246
22.8%
2,328
19.0%
3.7%
Insurance premiums
309
3.1%
357
2.9%
15.5%
Information services and software
costs
Depreciation of property, plant
and equipment and amortisation
of intangible assets
1,250
12.7%
1,480
12.1%
18.4%
1,248
12.7%
1,175
9.6%
–5.8%
Property tax
1,287
13.1%
3,636
29.7%
182.5%
General production services
Material expenses
Lease costs
Insurance costs
Security costs
Communication services
Consulting services
R&D costs
765
392
668
7
52
367
116
143
7.8%
4.0%
6.8%
0.1%
0.5%
3.7%
1.2%
1.4%
Other management expenses
1,011
10.2%
686
459
723
8
56
373
124
61
757
5.6%
3.8%
5.9%
0.1%
0.5%
3.1%
1.0%
0.5%
6.2%
–10.3%
17.2%
8.2%
13.8%
7.6%
1.5%
7.2%
–57.2%
–25.1%
In 2013, the increase of management expenses (exclud-
ing property tax growth resulting from the phased can-
cellation from 01.01.2013 of tax benefits for owning power
transmission line property in accordance with the Federal
Law “On Introducing Amendments to the Second Part of
the Tax Code of the Russian Federation” No. 202-FZ dat-
ed 29.11.2012) was a mere 0.17%. The level of 2012 was
retained due to the Company’s measures on reducing ad-
ministrative and management expenses.
2.4.1. Labour costs and Social Security Contributions
In 2013, our labour costs increased by 3.7% compared to
2012. This was mainly due to changing the organisational
structure of the Company’s Executive Office.
2.4.2. . Insurance Premiums
Insurance premiums increased by 15.5% in 2013, owing
to changes in the legislation related to an increase in the
normative base for insurance premiums taxable at the rate
of 30% from RUB512 thousand to RUB568 thousand.
2.4.3. Information Services and Software Costs
Costs for information services increased by 18.4% in
2013, owing to the implementation of new and the up-
grading of existing software systems.
2.4.4. Depreciation of Fixed Assets and Amortisation
of Intangible Assets
In 2013, depreciation/amortisation expenses decreased
by 5.8% compared with 2012.
2.4.5. Property Tax
increased almost threefold compared
Property tax
from
the phased cancellation,
to 2012, owing
01.01.2013, of tax benefits for power transmission lines
property. In accordance with Federal Grid Company’s
accounting policy, property tax expenses for the whole
Company are recorded in management expenses.
to
2.4.6. General Production Services
Costs
for general production services decreased
by 10.3% as a result of cost optimisation for legal servic-
es, transportation and advertising.
2.4.7. Material Expenses
A growth of 17.2% in material expenses compared to
2012 was prompted by an increase in maintenance costs
for the backup data processing centre, intercom teleph-
ony and video-conferencing.
2.4.8. Lease Costs
In 2013, lease costs increased by 8.2% compared to
2012, owing to changes of lease contract conditions and
indexation of land lease rates.
2.4.9. Insurance Costs
A growth of 13.8% in insurance costs compared to 2012
was due to an increase in costs for civil liability insurance.
2.4.10. Communication Services
In 2013, costs for communication services increased by
1.5%, owing to tariff indexation by communications ser-
vice providers and the Company’s commissioning new
satellite communication systems.
2.4.11. Consulting Services
Costs for consulting services increased by 7.2% because
of the entry into a contract for rendering services on im-
plementing control regulations over transfer pricing in the
Federal Grid Company’s Group.
2.4.12. R&D Costs
R&D costs decreased by 57.2% compared to 2012, ow-
ing to a one-time write-off of R&D with a positive result,
on which patents were not issued.
2.4.13. Other management expenses
For 2013, other management expenses decreased
by 25.1% compared to 2012. This decrease mainly
arose from the cost optimisation driven by the im-
plementation of the Company’s Cost Management
Programme.
2.5. Profit on Sales
Total
9,860
100%
12,223
100%
24.0%
In 2013, profit on sales from core operations increased slightly – by 0.4%.
82
83
PERFORMANCE RESULTS / MANAGEMENT’S DISCUSSION AND ANALYSIS
2.6. Interest receivable and interest payable
“Interest receivable” refers to income from investment, in-
cluding income from the placement of available funds in
bank and deposit accounts. In 2013, interest income in-
creased by 19% compared to 2012, owing to measures
aimed at improving the Company’s current assets man-
agement efficiency, which generated additional revenues of
RUB801 million.
In the income statement for 2013, we reported interest pay-
able of RUB1,448 million, which was not recorded in 2012.
Part of the funds received from the infrastructure bond
placement in 2013 is earmarked to finance the Company’s
investment programme in subsequent periods. In accord-
ance with the Company’s accounting policy, interests on
borrowings are capitalised as part of the cost of fixed assets
in case they are allocated to finance the Company’s invest-
ment programme.
Composition of Other Expenses, RUB million
Description
2012
2013
Change in
2013
Change in
2013, %
Payment of promissory notes
96,735
49,317
–47 418
–49,0%
Provision for doubtful debts
19,355
21,714
2,359
12.2%
Provision for impairment of financial investments
9,564
659
–8,905
–93.1%
Net book value of written-off fixed assets and
construction in progress, and the cost of writing-off
1,735
1,401
–334
–19.3%
2.7. Other income
2.8. Other Expenses
Provision for impairment of inventories
209
216
7
3.5%
The Company’s other income decreased by RUB53,169
million, owing to payment of promissory notes and reducing
the amounts of reversed provisions for doubtful debts.
The Company’s other expenses decreased by RUB 50,400
million, owing to a reduction in costs for payment of prom-
issory notes and provision for impairment of financial invest-
ments.
Costs of revaluation of fixed assets
1,795
1,416
–378
–21.1%
Negative difference from the mark-to-market
revaluation of shares
17,031
22,079
5,049
29.6%
Others
Total
3,728
2,949
–780
–20.9%
150,152
99,752
–50,400
–33.6%
Composition of Other Income in 2012–2013, RUB million
Description
2012
2013
Change in
2013
Change in
2013, %
Payment of promissory notes
96,735
49,317
–47,418
–49.0%
Income from reversal of provision for doubtful debts
9,378
2,269
–7,109
–75.8%
Income from reversal of provision for financial
investments
Extraordinary income from insured events
Income from revaluation of fixed assets
Other income
Total
38
97
414
2,515
29
437
915
3,041
–9
340
501
526
–24.2%
352.7%
120.8%
20.9%
109,176
56,007
–53,169
–48.7%
2.9. Gain/Loss from disposal of investments
In 2013, the Company entered into promissory note pur-
chase and sale transactions in the amount of RUB49,317
million, which is RUB47,418 million less than the amount
of similar transactions in 2012.
2.10. Revaluation of financial investments
In 2013, a negative difference from the mark-to-market re-
valuation of shares (mainly shares of JSC Inter RAO UES)
in the amount of RUB22,079 million was reported in other
expenses.
In addition, in 2013, we reported a negative balance of ac-
crual/reversal of provisions for impairment of financial invest-
ments not subject to mark-to-market revaluation in the amount
of RUB630 million, including: RUB72 million for Energo-Fi-
nance LLC promissory notes; RUB296.5 million for JSC IDGC
of Northern Caucasus promissory notes; and RUB290.4 mil-
lion for equity investments in shares of subsidiaries and asso-
ciates (JSC Nurenergo, JSC Mobile Gas Turbine Power Plant,
JSC Tomsk Trunk Grids and JSC Kuban Trunk Grids).
84
85
PERFORMANCE RESULTS / MANAGEMENT’S DISCUSSION AND ANALYSIS
2.11. Provision for doubtful debts
(for impairment of receivables and advances paid)
Upon the analysis of receivables by age group and prob-
ability of collection, an accrual/reversal of provisions for
doubtful debts was made in 2013. A negative balance
from the above operations is RUB19,445 million, includ-
ing RUB9,983 million for Index Energetiki – FGC UES LLC
promissory notes (through a mark-to-market valuation of
shares which are on the Company’s balance), RUB1,617
million – provision for accrued interests on Energo-Finance
promissory notes and service contracts for electricity trans-
mission through UNEG (JSC Lenenergo, JSC Yantarener-
go, JSC Kubanenergo, JSC Far Eastern Distribution Grid
Company, JSC IDGR South and JSC Dagenergoset.
2.12. Current income tax
Net Profit Distribution in 2009–2013, RUB million
Item
31.12.2009
31.12.2010
31.12.2011
31.12.2012
31.12.2013
Retained earnings (loss) in the reported period:
–59,866
58,088
–2,468
–24,532
–25,898
Allocate to:
Reserve Fund
Development
Cover of losses of previous years, remuneration
to the Board of Directors
—
—
—
—
2,904
18,578
34,028
2,578
—
—
—
—
—
—
—
—
—
—
—
—
The Company has no income tax liability for 2013; in 2012,
the total amount of income tax was RUB1,471 million. The
change was mainly due to an increase in depreciation/am-
ortisation charges, which are deductible in tax accounting.
Dividends
2.13. Net profit (loss) in the reporting period
For 2013, Federal Grid Company recorded a loss in the
amount of RUB25,898 million (in 2012 the amount of loss
was RUB24,532 million). The loss occurred because of the
following factors:
•
•
recognition of a loss on mark-to-market revaluation of
shares (mainly JSC Inter RAO shares) in the amount of
RUB22,079 million;
a negative balance of accrual/reversal of provision for
doubtful debts in the amount of RUB19,445 million,
owing to the mark-to-market revaluation of shares on
the books of Index of Energy–FGC LLC, interests ac-
crued on the promissory notes of Energo-Finance LLC
and on service contracts for electricity transmission
through UNEG;
•
a negative balance of accrual/reversal of provision
for impairment of financial investments not subject to
mark-to-market revaluation in the amount of RUB630
million, including Energo-Finance LLC promissory
notes, JSC IDGR Northern Caucasus and equity in-
vestments in subsidiaries and associates;
•
recognition of a loss on revaluation of property, plant
and equipment in the amount of RUB501 million.
3. Cash Flow
3.1. General information on the Company’s cash flow from core,
investment and financial operations
As at 31 December 2013, the Company’s cash balance
was RUB14,332 million, which is RUB3,196 million less than
on 31 December 2012.
The following analysis of receipts and payments was made
based on the Company’s cash flow statements with due
account being taken of mutually exclusive turnovers on de-
posits and terminated contracts for providing electricity
transmission services.
Cash flows in 2012–2013, RUB million
Total
By type of activities
2012
2013
Operating
Investment
Financial
2012
2013
2012
2013
2012
2013
313,794
325,765
167,696
182,830
61,475
22,594
84,623
120,341
313,513
328,961
67,220
74,449
234,639
189,795
11,654
64,717
281
–3,196
100,476
108,381
–173,164
–167,201
72,969
55,624
Receipts
Payments
Balance
An actual volume of receipts in 2013 was RUB325,765 mil-
lion, which exceeds the receipt value of 2012 by RUB11,971
million.
Actual payments in 2013 increased by RUB15,448 million
to RUB328,961 million compared to 2012.
86
87
PERFORMANCE RESULTS / MANAGEMENT’S DISCUSSION AND ANALYSIS
3.2. Net cash from operating activities
Cash receipts from operating activities in 2013 increased
by RUB15,134 million compared to 2012. The increase
was primarily due to revenue from rendering the electricity
transmission services.
In 2013, payments within operating activities exceeded
payments in 2012 by RUB7,229 million, including an in-
crease in VAT payment by RUB2,284 million, property
tax payment by RUB1,865 million, payments to cover
electricity transmission losses by RUB794 million and
payments for operating expenses by RUB2,286 million.
3.3. Net cash used in investment activities
Key indicators of property, equity and liabilities for 2009–2013, RUB million
31.12.2009
31.12.2010
31.12.2011
31.12.2012
31.12.2013
Total assets
746,667
902,110
1,037,493
1,122,995
1,214,291
Non-current assets value
588,425
767,152
919,501
1,011,667
1,092,629
Current assets value
158,242
134,958
117,992
111,329
121,662
Total liabilities
746,667
902,110
1,037,493
1,122,995
1,214,291
Shareholders’ equity
665,436
794,192
853,079
849,125
842,975
In 2013, cash receipts from investment activities decreased
by RUB38,881 million compared to 2012. The high value in
2012 was due to receipts from the disposal of short-term fi-
nancial investments (promissory notes).
Payments from investment activities in 2013 decreased
by RUB44,844 million compared to payments in 2012, which
was mainly due to a reduction in the amount of financing
from the Company’s investment programme.
Long-term liabilities
7,440
52,668
138,054
209,361
282,429
Short-term liabilities
73,791
55,250
46,360
64,509
88,887
4. Financial Position
4.1. Assets and liabilities
The balance sheet ratios suggest that the tendency of
asset growth is preserved. For the year ended 31 De-
cember 2013, the Company’s total assets exceeded the
relevant amount in 2012 by 8%, because of the following:
the same time, in 2013, the Company’s authorised capital
was increased by RUB3,247 million by registration of an
additional share issue of 2012, and the fixed assets value
increased by RUB15,398 million upon annual revaluation.
•
•
an increase of 8% in the value of non-current assets,
owing to large-scale investments in the construction
of fixed assets commissioned in 2013 as part of the
Company’s investment programme, and a decrease
in investments resulting from the mark-to-market re-
valuation;
an increase of 9.3% in current assets, owing to an
increase in stocks of raw and other materials, and
an increase in short-term financial investments upon
allocating a cash balance not used in 2013 and re-
ceived from an infrastructure bond placement. As
at 31 December 2013, the asset structure has not
changed compared to 31 December 2012: the shares
of non-current and current assets were 90% and
10%, respectively.
As at 31 December 2013, the Company’s equity de-
creased by 0.7%, owing to the recognition of a loss at
the end of 2013 in the amount of RUB25,898 million. At
As at 31 December 2013, the following changes occurred
in the aggregate liabilities structure compared to the struc-
ture as at 31 December 2012: the share of equity capital
decreased from 76 to 70% and the share of aggregate
liabilities increased from 24 to 30%.
The total value of long-term liabilities increased by
RUB73,068 million as at 31 December 2013 compared to
that value as at 31 December 2012. The increase was due
to the following:
•
an increase of RUB64,850 million in long-term cred-
its and loans resulting from attracting the amount of
RUB110,000 million through corporate bond place-
ment, including infrastructure bonds for RUB100,000
million; JSC Gazprombank credit repayment in the
amount of RUB35,000 million; and transforming the
short-term liabilities into long-term ones;
•
an increase in deferred tax liabilities of RUB8,201 million.
An increase of RUB24,653 million in short-term liabilities
mainly reflected an increase of RUB18,034 million in ac-
counts payable to suppliers and contractors and an in-
crease of RUB6,398 million in short-term credits and loans.
Asset structure in 2009–2013, RUB million
According to the accounting statements for 2013, the Compa-
ny’s net asset value decreased by RUB6,425 million, and by
RUB5,916 million according to the evaluation with account to
contributions to the authorised capital.
88
89
PERFORMANCE RESULTS / MANAGEMENT’S DISCUSSION AND ANALYSIS
Net asset value in 2009–2013, RUB million
4.2. Financial indicators
in 2009-2013
2009
2010
2011
2012
2013
Nominal*
Indicator
With
account
to contri-
butions
to the au-
thorised
capital **
Nominal*
With
account
to contri-
butions
to the au-
thorised
capital **
Nominal*
With
account
to contri-
butions
to the au-
thorised
capital **
Nominal*
With
account
to contri-
butions
to the au-
thorised
capital **
Nominal*
With
account
to contri-
butions
to the au-
thorised
capital **
Net asset value
665,714 705,892 794,470 805,617 853,354 855,573 849,400 852,647 842,975 846,731
*Evaluation on the basis of annual accounts with retrospective adjustment.
** In 2009 and 2013, the authorised capital of Federal Grid Company was increased through an additional share issue.
It led to the reporting of accounts payable to the shareholders on their contributions to the authorised capital in the
Company’s accounting statements. Upon registration of the placement report with the Russian FFMS, these accounts will
be included in the Federal Grid Company’s authorised capital. An evaluation of net asset value was made with regard to
this inclusion: in the amount of RUB 40,177.9 million for 2009, RUB 11,194 million for 2010, RUB 2,219 million for 2011,
RUB 3,247 million for 2012 and RUB 3,762 million for 2013.
Indicator
Liquidity indicators
Absolute liquidity ratio
Quick asset ratio
Current liquidity ratio
Financial soundness indicators
Equity to total assets ratio
Total debt/EBITDA*
Current assets coverage ratio
Profitability indicators
2009
2010
2011
2012
2013
2014
forecast
2.43
4.02
4.15
0.83
0.04
0.66
1.32
2.74
2.90
0.88
0.7
0.61
1.02
2.27
2.56
0.82
1.3
0.57
0.69
1.60
1.76
0.76
2.4
0.41
0.68
1.30
1.43
0.70
2.8
0.30
0.12
0.73
0.86
0.71
2.7
0.26
Return on equity (ROE)*
1.4%
3.3%
4.1%
1.6%
2.0%
0.001%
Return on total assets (ROTA)*, on income
before tax
2.0%
3.4%
4.4%
1.3%
2.8%
0.93%
EBITDA margin*
47.5%
60.7%
61.3%
59.7%
62.0%
56.6%
Business activity indicators
Receivables/payables growth ratio
Total receivables/payables ratio
Most liquid receivables/payables ratio
2.17
1.11
0.83
1.27
1.48
0.62
1.45
1.42
0.51
1.47
1.52
1.12
1.16
0.92
0.53
1.27
1.85
2.31
* To calculate this indicator EBITDA (net profit, income before tax) includes no external factors that affect the Company’s man-
agement competency.
Actual liquidity ratios as at 31 December 2013 are within
standard values. It proves the Company’s ability to dis-
charge its short-term liabilities by using its current assets.
An increase in profitability ratios is due to an increase in
the Company’s adjusted net profit as of the end of 2013
compared to 2012.
Equity to total assets ratio proves that the Company’s de-
pendence on external loans is within a normal range, the
risk of insolvency is low, and there is no cash deficiency risk.
Federal Grid Company is characterised as a financially
sound company with a high level of liquidity and solvency
and low level of financial dependence.
90
91
PERFORMANCE RESULTS / MANAGEMENT’S DISCUSSION AND ANALYSIS
5. Tariff regulation
5.1. Federal Grid Company’s Tariff Policy
5.2. Tariffs for electricity
transmission services
Tariffs for electricity transmission services are subject to state
regulation and are approved by the Federal Tariff Service (FTS).
regulation) was introduced to set electricity transmis-
sion tariffs.
Tariff rates for electricity transmission services to maintain electric grid facilities,
RUB/MW/month and their previous period growth
The list of basic legislative acts regulating the
tariff setting for electricity transmission over
UNEG is given in Appendix to the Annual Re-
port on the memory stick attached.
In 2010, measures were taken to improve the invest-
ment attractiveness of the electric power industry, and
a new method for a return on invested capital (RAB
To calculate tariffs for each year of the regulatory period, the
required gross revenue is determined by summing a return
value, return on invested capital and expenses required to
provide services on electricity transmission through UNEG.
In order to avoid a sharp increase in tariff rates the RAB-
based method provides a smooth-running mechanism,
which involves redistributing the required gross revenue
during the long-term regulatory period.
The gross revenue required for electricity transmission services in 2009–2013
The required gross revenue of Federal Grid
Company approved by the FTS, RUB mln
66,047
93,781
118,509
125,770
141,908
Increase, %
—
142.0
126.4
106.1
112.8
2009
2010
2011
2012
2013
Key long-term parameters for Federal Grid’s RAB regulation approved
by the FTS for 2010–2014 regulatory periods
Indicator
2010
2011
2012
2013
2014
Rate of return for capital invested before
01.01.2010, %*
Rate of return for capital invested after
01.01.2010, %
39
5.2
6.5
7.8
10
11.0
11.0
11.0
10.0
10.0
Invested capital payback period, years
35
Amount of Federal Grid’s invested capital,
RUB bn **
647.6
35
—
35
—
35
—
35
644.7
In accordance with Government Resolution No. 1045 dated 12 December 2009, differential tariff rates are set for electricity
transmission services to maintain electric grid facilities within UNEG for the North Caucasus Republics and Stavropol Territory.
The table below includes tariffs and their growth rates:
* In accordance with the basic principles of pricing in the area of regulated prices (tariffs) in the electric power industry, ap-
proved by Government Resolution “On pricing in regulated areas (tariffs) in the electric power industry” No. 1178 dated 29
December 2011, the rate of return during the first long-term regulatory period, excluding the last year, may be set on a case-
by-case basis with regard to capital invested before the switch to RAB regulation and to capital created after the switch to RAB
regulation.
** Upon the adoption of Government Resolution “On pricing in regulated areas (tariffs) in the electric power industry” No. 1178
dated 29 December 2011, 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 regulatory period, the actual cost of
facilities commissioned 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 switched to RAB-regulation
in the amount of RUB205.6 billion, which is distributed for three years..
92
93
PERFORMANCE RESULTS / MANAGEMENT’S DISCUSSION AND ANALYSIS
Period
2010
01.01.2011–31.03.2011
01.04.2011–30.06.2012
01.07.2012–30.06.2013
01.07.2013–30.06.2014
01.07.2014 *
RUB/MW*month
Growth rate
37,845.23
46,029.88
43,783.55
48,540.01
53,119.60
52,923.13
—
21.6%
–4.9%
10.9%
9.4%
–0.37%
RAB regulation involves the Company’s obligation to comply with the reliability and service quality parameters
set by the FTS. The FTS’s decision to establish 2011–2014 tariffs includes targets for reliability and service qual-
ity indicators for the UNEG-operating organisation for the 2011–2014 period (see section Operational Perfor-
mance / Technological connection on our website)
5.3. Tariffs for technological connection
According to the guidelines for calculating fees for techno-
logical connection to the UNEG facilities, the FTS set a pro-
cedure for applying two calculation methods: approval of
an individual fee for an applicant and formula calculation
using a standard tariff rate R1 (excluding investment costs).
According to the FTS, Decree No. 914-e dated 25 Decem-
ber 2012, a technological connection fee for Federal Grid
Company was approved as a formula using a standard tariff
rate R1 in the amount of 27.56 RUB/kW, excluding VAT.
The Guidelines for Federal Grid Company do not provide
for the differentiation of a standard rate S1 for 1 kW of
connecting power by voltage level, power range, catego-
ry of electric power supply of applicants, by territories of
citizens of the Russian Federation. Standard tariff rate R1
is uniform throughout the Russian Federation.
You can find information on the standard tariff
rate approved by FTS Decree No. 914-e dated
25 December 2012, in Appendix to the Annual
Report on the memory stick attached.
In 2013, an individual technological connection fee was set
for two customers in the amount of RUB1,426 million, ex-
cluding VAT.
* In accordance with Government Resolution No. 1307 dated 30 December 2013, the revision was made of the amount
of invested capital of Federal Grid Company upon exclusion of the value of facilities located in the territory of Kaliningrad
oblast, which do not meet the criteria for inclusion in UNEG, and of tariffs for electricity transmission services rendered by
Federal Grid Company since 1 July 2014 on the assumption that they do not exceed the tariffs as at 30 June 2014.
94
6. Debt Portfolio
By the end of 2013, Federal Grid’s debt portfolio grew to
RUB282.35 billion, primarily owing to placing infrastructure
bond issue in the amount of RUB100 billion and placing
bonds of Series 24 in the amount of RUB10 billion, which
were used to refund credit of JSC Gazprombank. In ad-
dition, the Company repaid bank credits in the amount of
RUB25 billion in order to optimise its debt portfolio. Upon
bond offerings (Series 06 and 08) in 2014 bonds in the total
amount of RUB14.85 billion (the initial amount was RUB20
billion) remained outstanding (repayment in 2020). In case
of financing requirements and positive market trends, the
Company can place a repurchased portion of the bond is-
sues through secondary bond placement. The Company
meets its obligations on servicing its debt portfolio and debt
repayment in full and on time.
the 2015–2019 investment programme and to refinance the
current debt. Furthermore, our Company plans to primarily
use market-based instruments that provide lesser funding
costs with longer borrowing terms. The use of specific in-
struments will depend on market conditions.
Bond issues in 2013
In 2013, within the adopted programme, the Company
placed bonds of Series 23, 26, 27, 28, 29, 30 and 34 with a
total value of RUB100 billion (infrastructure bonds). As part
of the previously approved 2012 programme, bonds of Se-
ries 24 were placed in the amount of RUB10 billion.
In addition, the Company has revolving and non-revolving
credit facilities opened with major Russian banks (Sberbank
of Russia, Gazprombank, Alfa-Bank, NOMOS-Bank, Raif-
feisenbank, Promsvyazbank, AB Russia and Bank Saint
Petersburg) with a maturity of 5–15 years. As of 31 Decem-
ber 2013, the total free limit of the credit facilities amounted
to RUB157.5 billion.
In 2013, the total amount of funds raised from the bond
placement was RUB110 billion.
The bonds were placed by public subscription on the
MICEX Stock Exchange among a wide range of investors.
The funds raised were allocated to finance the Company’s
investment programme.
The Company does not plan to increase its debt load in
2014. We will continue to use all available tools to attract
financing (bonds, Eurobonds and bank loans) to finance
The Company’s bonds fully comply with Bank of Russia’s
requirements for inclusion to Bank of Russia’s Lombard list
and the list of securities acceptable as repo collateral.
Federal Grid’s Debt Portfolio as at 31 December 2013
Type of debt
Bond issue
Infrastructure bonds
Eurobonds
Total
Amount, RUB bn
Repayment period
2.5–9 yeas
33–35 years
6.25 years
—
164.85
100
17.5
282.35
95
PERFORMANCE RESULTS / MANAGEMENT’S DISCUSSION AND ANALYSIS
Dynamics of debt portfolio
Credit ratings as at 31 December 2013
Rating Agency
International Scale
National Scale
Latest Rating Date
Standard & Poor’s
Moody’s
Fitch Ratings
ВВВ/Stable
Ваа3/Stable
ВВВ/Stable
ruAAA
Aaa.ru
AAA(rus)
17.10.2013
23.11.2012
25.10.2013
7. Credit Ratings
The high level of the Company’s creditworthiness and its fi-
nancial sustainability are confirmed by ratings assigned by top
international ratings agencies. The current credit ratings are
in the investment category and show that the Company’s key
performance indicators (KPIs) comply with the level required
for the full and timely performance of financial obligations.
Information on 2010–2013 credit ratings
25 October 2013 – Fitch Ratings assigned a Long-term
foreign currency Issuer Default Ratings of “BBB”. The Out-
look is Stable. Long-term National Rating was assigned an
“AAA(rus)” with Stable Outlook.
17 October 2013 – 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.
When assigning ratings, both agencies rely on similar
factors. The Long-term foreign currency IDRs include a
two-notch uplift to reflect moderately strong links with
its majority indirect shareholder, Russian Federation
(BBB/Stable) through JSC Russian Grids. Federal Grid
Company’s standalone rating (BB+) takes into account
the Company’s monopoly position as the owner and op-
erator of the country’s national electricity transmission
grid, as well as its high level of profitability and liquidity.
At the same time, the rating agencies note factors that
could have a negative impact on the rating, including
uncertainty and low predictability inherent in the Russian
regulatory framework, as well as financial risks relating
to the implementation of an extensive investment pro-
gramme.
23 November 2012 – Moody’s assigned Federal Grid Com-
pany an international scale credit rating at Baa3, with a sta-
ble 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 changes in the ownership
structure of the Company, in accordance with the Russian
President’s Decree “On Joint Stock Company Russian
Grids” No 1567 dated 22 November 2012. The Company’s
financial rating has remained unchanged.
96
97
Federal Grid Company’s Social Respon-
sibility and Sustainability Reports are
available in the Investors/Annual Reports
section of our website www.fsk-ees.ru
SOCIAL RESPONSIBILITY AND SUSTAINABLE DEVELOPMENT / SUSTAINABLE DEVELOPMENT POLICY
2013
TARGET
2013
ACTUAL
2014
TARGET
Average level of customer satisfaction with technological
connection services, grade
10
9.3
10
Charitable assistance (to individuals and organisations),
RUB mln
200
104
150
Frequency rate of fatal and non-fatal workplace injuries or group
accidents because of poor performance/non-performance of job
duties, per 1,000 people
0.49
0.32
0.40
Environmental costs, RUB mln
82.5
80.5
88.6
Economic effect of measures within the Energy Saving and
Energy Efficiency Programme, RUB mln, net of VAT
101.3
114.5
111.0
Sustainable Development Policy
and Social Responsibility Principles
Our commitment to social responsibility and sustainable
development principles is based on the Company’s mis-
sion and strategy. Business priorities set out in our strategy
reflect our vision of the further sustainable development of
the energy industry in the future.
The main principle of Federal Grid Company’s policy in the
area of sustainable development is that in our activities we
are constantly seeking a balance between social and eco-
nomic interests.
Federal Grid Company understands corporate social re-
sponsibility to mean doing business responsibly and re-
sponding to the sustainable development agenda, which
is set and updated following regular communication with
stakeholders.
Since 2008, Federal Grid has published annual reports on
social responsibility and corporate sustainability (Social Re-
port) that inform stakeholders of the efficiency of the Com-
pany’s socially important 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 international standards for non-finan-
cial statement disclosure: GRI (G3) Guidelines, the GRI
energy protocol, AA 1000 SES standard. As part of pre-
paring the Social Report, the Company discusses its key
topic with stakeholders and collects 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.
Our Social Reports are registered with the National Reg-
istry of Corporate Non-Financial Reports, which is main-
tained by the Russian Union of Industrialists and Entre-
preneurs. The Company’s 2012 Social Responsibility and
Sustainability Report became a platinum winner in the
“Annual Report on Social Responsibility” category at the
international competition in the area of corporate commu-
nications MarCom Awards (USA).
100
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SOCIAL RESPONSIBILITY AND SUSTAINABLE DEVELOPMENT / SUSTAINABLE DEVELOPMENT POLICY
Stakeholder Relations
Stakeholder Interactions in 2013
Being one of the leading energy companies, Federal Grid
builds relationships of trust with all stakeholders through an
open and constructive dialogue with them. We consider stake-
holder interaction to be a way of consolidating resources, to
meet challenges and to achieve common goals. Understand-
ing and analysing key stakeholders’ expectations and posi-
tions on the issues that are vital for the Company underpins
the improvement of corporate social responsibility processes.
Shareholders and investment community
General Meeting of Shareholders
Public authorities of RF subjects and energy
companies
Meetings of the Company’s managers with investment
analysts
Consultative meetings with individual minority shareholders
Cooperation agreements on UNEG development and
improvement of the efficiency and reliability of electric grids
and electric grid facilities of UNEG
Personnel
Young specialists’ attraction and retention programmes
The Dynasty Programme
Doors Open Days
Summer and Winter Olympics
Student Teams
Suppliers and contractors
Signing agreements with major partners, including:
InventLLC, MICEX-RTS, Vnesheconombank, the Eurasian
Development Bank and Alstom Grid
B+
GRI APPLICA-
TION LEVEL
2012 SOCIAL RESPONSIBILITY AND
CORPORATE SUSTAINABILITY RE-
PORT OF FEDERAL GRID COMPANY
102
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SOCIAL RESPONSIBILITY AND SUSTAINABLE DEVELOPMENT / HR POLICY
HR Policy
Personnel structure
Our employees are our most valuable asset. Federal Grid
Company’s integrated system of HR management is aimed
at ensuring the balance between the optimal use of em-
ployees’ performance results, the achievement of corporate
strategic goals and the provision of attractive social benefits
and guarantees. One of the priorities of the Company’s HR
policy is rotating and retaining the quantitative and qual-
itative characteristics of personnel to ensure the reliable
performance and dynamic development of the electric grid
complex.
In 2013, the implementation of our HR policy ensured the
availability of a skilled workforce with the minimum level of
employee turnover and the development of a corporate cul-
ture and conditions that promoted the optimal use of work-
force capacity.
2013 Employee Headcount per Branch
In 2013, the implementation of HR policy ensured the availability of a skilled workforce with the minimum level of employee turn-
over and the development of a corporate culture and conditions that promoted the optimal use of HR capacity
Federal Grid Company employed, on average, 25,123 peo-
ple in 2013.
Dynamics of Employee Headcount
in 2011–2013
A 3% increase in the total number of employees compared
with the previous year was caused by the creation of new
jobs to ensure the reliable operation of Olympic power fa-
cilities, improving repair and maintenance quality as well as
implementing plans for commissioning and energising new
UNEG facilities.
Measures aimed at improving labour efficiency and effec-
tiveness of business processes resulted in a 5% decrease
of the number of administrative and managerial employees.
The employee turnover rate increased by 1.5% to 7.8%
compared with 2012.
The Company’s staffing level is rather high, standing at 98.2%
of its target value as of 31 December 2013.
104
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SOCIAL RESPONSIBILITY AND SUSTAINABLE DEVELOPMENT / HR POLICY
Staff Sufficiency in 2011–2013, %
Personnel Structure by Categories
in 2011—2013,%
Material incentives
We have developed a compensation system that takes into
account the position categories, performance results of the
Company’s branches and structural divisions, specifics of re-
gional labour markets and the individual contribution of each
employee.
We continue to meet our commitments on wage indexation
for our workers by the value of actual growth in the con-
sumer price index in accordance with the provisions of the
Sectoral Tariff Agreement of the Russian Federation Energy
Sector for 2013–2015..
We develop measures that take into account the labour
market as well as social and economic conditions in the
domestic economy to maintain the level of our employees’
wages and salaries.
Employment benefits are another effective tool that the
Company uses to increase the Company’s social attrac-
tiveness and improve employee motivation.
Over the last few years, the number of employees who have been through higher education has increased because we
have raised the skill and qualification requirements for employees.
During 2013, the average employee age was 39 years. 69% of our employees are younger than 40 years old.
Average wage/salary
in 2011—2013, RUB
Employee income structure
Personnel Structure by Educational
Level in 2011—2013, %
Personnel Structure
by Age in 2011—2013,%
106
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SOCIAL RESPONSIBILITY AND SUSTAINABLE DEVELOPMENT / HR POLICY
Availability of managerial personnel
reserve as of the end of 2013
(% of positions covered)
Personnel Reserves
of Federal Grid Company
Two types of personnel reserve have been created in the
Company: “tactical” and “strategic”. A tactical personnel
reserve for the production and technical facilities of Federal
Grid — MES (backbone electric grids),was created to improve
the reliability of grid facilities and to establish a succession
pool of qualified candidates for vacant positions.
The HR reserve for the position of PMES’ director was creat-
ed to minimise HR risks related to professional level of direc-
tors of PMESs (backbone electric grid enterprises).
In order to develop the professional competencies of can-
didates from the tactical personnel reserve, a mentorship
programme was launched which required each candidate to
complete his individual training plan under the supervision of
his mentor. At the end of 2013, 243 employees have complet-
ed their individual training plan.
Since 2011, as a part of our activities on the development of
strategic personnel reserve we have implemented, together
with the Skolkovo Moscow Management School, an educa-
tion project aimed at training mid-level managers. In 2013,
46 mid-level managers received training under the second
integrated programme, “Leaders of Change”, and 40 manag-
ers who were trained under the first programme took part in
the Foresight Sessions on development management in the
Company.
Type of personnel reserve
Number of reservists
in 2013, persons
Number of reservists appointed to superior
positions
target positions
others
Tactical personnel reserve for production
and technical facilities of Federal Grid –
MES
Personnel reserve for the position of
PMES’s Director
459
96
36
4
65
14
108
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SOCIAL RESPONSIBILITY AND SUSTAINABLE DEVELOPMENT / HR POLICY
Personnel Training and Development
Having personnel with a high level of professional qualifi-
cation is one of the key factors driving the reliable opera-
tion of UNEG.
In 2013, 16,154 employees were involved in various types
of training, which is 63% of the Company’s overall work-
force.
Share of employees trained in 2013, and training costs/salary budget ratio, %
Employee training in 2013 – breakdown by employee categories
In June 2013, a Personnel Training Centre of the Compa-
ny’s Sochinskoe PMES was opened to provide profession-
al training for employees engaged in ensuring the reliable
power supply during the Sochi 2014 Winter Olympics and
Paralympics. Since then, it has trained 1,103 employees
within the following areas: standard programme of ad-
vanced training; specific training courses; training on team-
work skills in emergency situations, stress-resistance skills
and managerial skills.
All employees sent to Sochi from the Company’s branch-
es – MES received the mandatory advanced training aimed
at developing their professional knowledge and skills, as
well as testing by the methods of integrated diagnostics and
professional stress correction.
To build its HR capacity in the energy sector, Federal Grid
implements activities aimed at providing young employ-
ees with opportunities for professional growth and aims to
attract talented younger people to address the long-term
issues involved in the innovative development and modern-
isation of the electric grid complex. In 2013, 77 employees
of MESs, as well as students and post-graduates from spe-
cialised higher-education institutions, took part in the Youth
Round Table “Accessible Grids: Investment attractiveness
or social infrastructure? Youth dimension” held within the
2013 St. Petersburg Youth Economic Forum.
For detailed information on training and retraining
of Federal Grid Company employees in 2013 see
Appendix to the Annual Report.on the memory stick
attached
IN 2013
8,297
EMPLOYEES
WERE TRAINED
IN PERSONNEL
TRAINING CENTRES
OF FEDERAL
GRID COMPANY
Having personnel with a high level of professional qualifica-
tion is one of the key factors driving the reliable operation
of UNEG.
In 2013, 16,154 employees were involved in various types
of training, which is 63% of the Company’s overall work-
force.
Executive Office, MES Volga, MES East, MES Western
Siberia, MES North-West, MES Siberia, MES Ural, MES
Centre, MES South
In all regions where Federal Grid operates, we have created
a network of training centres. Personnel Training Centres
include a set of special facilities: training simulators, lab-
oratories with relay protection and emergency automatic
equipment, and electric grid training areas with prototype
equipment of various voltage levels. It allows us to organise
emergency response exercises and to offer our employees
both theoretical knowledge and hands-on skills.
In 2013, 8,297 persons were trained in the Company’s Per-
sonnel Training Centres, and 257 emergency response ex-
ercises were organised.
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SOCIAL RESPONSIBILITY AND SUSTAINABLE DEVELOPMENT / HR POLICY
Strengthening Corporate Culture
Non-Governmental Pension Programme
They came out to clean up the socially important territories
of Moscow city.
A non-governmental pension programme for the Compa-
ny employees was approved in 2004.
Implementing this programme had a great motivational
effect on our employees, rejuvenating them, and provid-
ed our employees with decent non-governmental pen-
sions, which in turn retained highly qualified personnel.
In 2013, RUB306 million was allocated for the non-gov-
ernmental pension fund. Since the programme launch,
a non-governmental pension from Federal Grid funds has
been granted to 4,072 employees.
The Company’s corporate culture brings employees to-
gether as a united team, providing motivation for fruitful
work, encouraging their initiatives and facilitating commu-
nications.
Our Company holds various activities within the Dynas-
ty Programme aimed at fostering labour traditions and
ensuring generational continuity. In 2013,we organised
visits of our employees’ children to the Company’s
production facilities, where they took part in a draw-
ing contest, “Energy of Olympics”, and celebrations for
veterans dedicated to Victory Day and the Power En-
gineers’ Day.
On 20 April 2013, more than one thousand employees of
the Company’s administration together with their families
took part in a second annual Voluntary Saturday Work.
We promote a healthy lifestyle, sport and physical activities
among our employees, offering them partial reimbursement of
gym membership. The Company’s volleyball and indoor soc-
cer teams participate regularly in competitions for corporate
leagues, including the annual Fuel and Energy Complex Cup.
Every year, our employees’ team takes part in a chess tourna-
ment in memory of Mikhail Botvinnik organised among power
industry professionals by JSC R&D Centre of FGC UES.
In 2013, the Company organised the first Winter Olympics
for electric grid complex staff in Sochi. Those employees
who demonstrated the best results in the competitions
were included in the list of participants of the Sochi 2014
Olympic Torch Relay.
Employees eligible for the NGPP: full-time employees with at least 10 years of uninterrupted service prior to the date
when the right to labor pension is acquired
In 2013, the Company organised the first Winter Spartakiada Games for electric grid complex staff in Sochi. Besides the teams
from Federal Grid branches, there were teams from the distribution grid companies of JSC Russian Grids that took part in the
Spartakiada. Those employees who demonstrated the best results in the competitions were included in the list of participants of
the Sochi 2014 Olympic Torch Relay.
112
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SOCIAL RESPONSIBILITY AND SUSTAINABLE DEVELOPMENT / HR POLICY
Housing Policy
Our Housing policy is an important tool for attracting and
retaining the Company’s key personnel.
The Company has a Corporate Housing Programme that
allows us to address the ever-present issue of attracting
personnel to remote power facilities.
We also have a long-term programme aimed at providing
corporate assistance to improve employees’ housing con-
ditions. The programme includes compensation of mort-
gage interests, loaning and furnishing securities for loans.
Furthermore, our Company compensates the employees’
rental costs during a year when their activities involve mov-
ing to another place. Young employees are eligible for this
benefit during the first three years of their employment.
Awards Policy
Our employees are entitled to awards if they have rendered
great service to the State, to the fuel and power industry or
to the Company, and if they demonstrate high production
and management efficiency, or achieve great results in the
operation, construction and re-construction of electric grid
facilities.
Awards were given to 2051 employees of the Company and
its subsidiaries and associates during the reporting year,
including 80 employees who were awarded by the Russian
Ministry of Energy for their services to the industry. Twen-
ty-one employees received State awards of the Russian
Federation for their services to the State. Four employ-
ees were given the title “Honoured Power Engineer of
the CIS” for their services to developing integrated pro-
cesses in the power industries of CIS countries.
ALLOCATED TO
CHARITY IN 2013
RUB 104 MLN
Social Policy
Youth Policy Implementation
In cooperation with educational institutions, the Company is
addressing the issue of finding and supporting young and
promising professionals.
Working with students, we focus on assisting them to ob-
tain skills directly at the Company’s facilities and involving
them in innovative research. During the reporting year, more
than 1,200 students and teachers took guided tours of the
Company’s production facilities. Seven hundred and fif-
ty students underwent practical training at the facilities of
Federal Grid Company; temporary jobs were created for
200 of them.
In 2013, the traditional annual Day of Federal Grid Company
was organised in the industry-specific institutions with par-
ticipation of more than 2,500 students from 40 higher-edu-
cation institutions.
In October 2013, a showcase of innovative solutions of high-
er-education institutions – Federal Grid’s partners — was
held within the UPGrid-2013 International Electric Power
Forum.
The Company supports institutions’ initiatives on improving
the structure and content of bachelor-level and master-level
programmes, as well as educational programmes for power
engineers with a view to adapt them to up-to-date produc-
tion requirements. Our qualified professionals assist, upon
request, higher-education institutions in developing topics
for yearly essays and degree theses considering the spe-
cifics of electric grids. Seventeen employees of the Com-
pany’s branches are members of Thesis Boards and State
Examination Boards.
We also contributed to upgrading laboratory facilities of
higher-education institutions, providing equipment needed
for research. In 2013, a charitable donation for these pur-
poses was provided to Siberian Federal University, National
Research University Moscow Power Engineering Institute
(MPEI) and the Development Fund of MPEI.
In 2013, Federal Grid together with its Research & De-
velopment Centre held a nationwide youth contest, “En-
ergoproryv”(Energy Breakthrough), of innovative projects
and developments in the field of smart energy. There
were 120 applications from across the country, and the
best projects were presented at a scientific/practical
conference.
From 30 June to 6 July 2013, the Company’s specialists
took part in an innovative forum of young power engineers,
“Forsazh-2013”, held in Kaluga oblast.
The Youth Round Table “Accessible Grids: Investment at-
tractiveness or social infrastructure? Youth dimension” was
held in June 2013 within the XVII St Petersburg Economic
Forum with the participation of Federal Grid.
Our Company contributes to the development of indus-
try-specific secondary vocational education and interacts
with 14 specialised secondary schools providing assis-
tance in equipping their laboratories and organising practi-
cal training. We pay particular attention to our relations with
Far Eastern Power Engineering College (in Vladivostok) and
the Power Engineering College in Makhachkala.
We continued our tradition of promoting student construc-
tion teamwork at the Company’s facilities. During the re-
porting year, more than 900 students (63 teams) from 35
higher-education institutions and three specialised second-
ary schools worked at 50 facilities.
Charity Projects
In 2013, Federal Grid Company spent RUB104 million on
charitable projects. The spending limits for charitable pur-
poses are approved by the Company’s Board of Directors in
the annual business plan.
Health and safety
Our health and safety measures are aimed at eliminating
workplace injuries and occupational diseases, promoting
safe conduct and developing accident-prevention skills
among employees, as well as at continuously improving
working conditions.
In 2013, the number of accidents remained on the level of
2012 (six accidents). The number of fatal accidents fell by
half compared with the previous year.
To improve production safety, we take precautions to safe-
guard our employees before conducting any kind of repair
work. We assess risks to employee safety and develop
114
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SOCIAL RESPONSIBILITY AND SUSTAINABLE DEVELOPMENT / SOCIAL POLICY
corrective actions, produce health and safety films and
conduct regular safety checks on work carried out by our
repair teams. Furthermore, during the reporting year we im-
plemented the following health and safety initiatives:
• A project on the use of mobile video recorders aimed
at recording the most dangerous actions of employees
working on electrical installations with further correc-
tive actions.
• A focus of Labour Protection Days was changed to in-
crease efficiency and prevent violations of safety rules.
•
The Road Traffic Safety Month was organised.
• Operation of 50 permanent and 17 mobile health and
safety offices was organised to promote safe working
conditions and to train personnel to use safe practices.
• Stress-release rooms for substation personnel were
retained.
• A review competition was conducted for the best
organisation of work in the area of health and safety
among the Company’s branches.
Industrial Safety
In 2013, Federal Grid Company operated 278 hazardous
industrial facilities (HIFs) registered with the State Registry.
To ensure safe operation of HIFs, to prevent accidents and
to ensure emergency preparedness, we have taken the fol-
lowing measures:
•
•
drafting and implementing documents that regulate the
safe operation of HIFs
insurance of civil liability for causing harm caused by to
an accident at an HIF
•
registration/exclusion/re-registration of HIFs with the
State Register
•
industrial safety training and testing of personnel
Injury and Fatality Rates at the Company’s Facilities
Fire Safety
During 2013, two fires occurred at the Company’s substa-
tions owing to defects of high-voltage bushings of the au-
totransformers. No fires occurred in the protected zones
of high-voltage power lines.
Fires at the Company’s facilities in 2009–2013
116
117
The energy saving and energy efficiency initiatives for 2013
approved under the Programme include the following key
areas:
Process electricity consumption in
UNEG
22,261.5 mln
kWh
98.7 mln kWh
108,852
Results of implementation of the Energy Saving
and Energy Efficiency Programme in 2013
Volume
Process impact of the mea-
sures taken to reduce the
consumption of energy/fuel
Economic impact of the
measures taken to reduce the
consumption of energy/fuel
• Reducing the process energy consumption in UNEG
Electricity consumption in buildings
35.7 mln kWh
0.8 mln kWh
Thermal energy consumption in
buildings
50.6 thousand
Gcal
1.8 thousand Gcal
Gasoline consumption
9.1 mln liters
26.3 thousand liters
Diesel consumption
7.1 mln liters
18.6 thousand liters
2,519
1,823
727
541
SOCIAL RESPONSIBILITY AND SUSTAINABLE DEVELOPMENT / ENERGY SAVING AND ENERGY EFFICIENCY
Energy Saving
and Energy Efficiency
Energy saving and improving energy efficiency are some of
the top priorities in Russia’s technological development. To
comply with the Federal Law “On Energy Saving and Improv-
ing Energy Efficiency” No. 261-FZ dated 23 November 2009,
our Company has developed an Energy Saving and Energy
Efficiency Programme for 2010–2014.* The purpose of this
Programme is to ensure saving and rational use of energy
resources by improving the energy efficiency of Federal Grid
facilities and equipment.
The Federal Grid energy saving and energy efficiency initia-
tives in 2013 were organised in accordance with the following
documents:
•
Federal Law “On Energy Saving and Improving Ener-
gy Efficiency, and on Introducing Amendments into
Certain Legislative Acts of the Russian Federation”
No. 261-FZ
• Resolution of the RF Government “On the Procedure for
Establishing Requirements for Energy Saving and En-
ergy Efficiency Programmes of Organisations Engaged
in Regulated Activities” No. 340 dated 15 May 2010
• Decree of the Federal Tariff Service (FTS of Russia)
“On Establishing the Requirements for Energy Saving
and Energy Efficiency Programme of JSC FGC UES for
2010 – 2014” No. 401-e dated 25 August 2010
•
Energy Saving and Energy Efficiency Programme
of Federal Grid Company for 2010 – 2014 (hereinafter,
the “Program”)
•
Fitting the buildings, structures, and installations that
are part of Federal Grid facilities with metering devices
for all types of energy and energy carriers, including
water, natural gas, thermal energy, and electrical en-
ergy
• Reducing the electrical and thermal energy consump-
tion in buildings, structures, and installations owned by
Federal Grid
• Reducing the consumption of fuel and lubricants used
by Federal Grid to provide the electricity transmission
services through UNEG, per 1 km of distance traveled
by motor vehicles, as well as the consumption of motor
fuels by vehicles.
To ensure implementation of the Programme at the Ex-
ecutive Office and the branches of Federal Grid (MES)
a Decree of Federal Grid Company No. 750 was issued
on 6 December 2013 “On Organising the Implementation
of the Energy Saving and Energy Efficiency Programme
of JSC FGC UES for 2013 – 2014 and Developing the Pro-
gramme for 2015 – 2019”.
By decrees of the branches, leaders were appointed re-
sponsible for the coordination, implementation, and mon-
itoring of the Programme implementation activities, and
taskforces were formed to analyze implementation of the
Programme and develop solutions based on the analysis.
Federal Grid pilot projects on energy saving and energy
efficiency:
1. AT 1 heat
recovery at
the Nizhegorodskaya
500/220/10 kV SS
2. Optimising operation of the transformer cooling sys-
tems
3. Using plasma lamps for lighting of the open switch-
gear
4. Using “light tubes” for lighting of office buildings
5. Automation of the lighting system controls
6.
7.
Introduction of an automated heating station
Improving energy efficiency of the lighting installations
at the administrative building of the Upper Don PMES.
Detailed information on the Federal Grid pilot
projects on energy saving and energy effi-
ciency is available in Appendix to the Annual
Report on the memory stick attached
Federal Grid continues to implement the energy manage-
ment system compliant with the international standard ISO
50001:2011 “Energy management systems — require-
ments with guidance for use”. To ensure compliance with
that standard, the Company is currently conducting work
on the development, improvement, and certification of the
corporate energy management system of the Executive
Office and two branches of Federal Grid – MES Volga and
Samarskoe PMES.
ECONOMIC
EFFECT FROM
THE IMPLEME-
NTATION
OF THE ENERGY
SAVING AND
ENERGY EFFICIENCY
PROGRAMME
RUB114.5 MLN
* The Programme was approved by resolution of the Management Board of Federal Grid
(minutes No. 979/2 dated 27 July 2011)
118
119
SOCIAL RESPONSIBILITY AND SUSTAINABLE DEVELOPMENT / ENVIRONMENT
Environment
Our Company is pursuing a responsible approach to en-
vironmental protection which aims to increase environ-
mental safety levels and to ensure the reliable and envi-
ronmentally safe transmission and distribution of power.
We operate in compliance with our Environmental Policy,
which includes technical and organisational measures in-
tended to mitigate the negative environmental impact of
the Company’s operations.
In 2013, a new version of the Environmental Policy of
Federal Grid Company was drafted and approved by the
Management Board, and in 2014 it will be submitted for
approval to the Board of Directors.
the Environmental Doctrine and the Development Strat-
egy of the Russian Electric Grid Complex until 2030,
the Concept was approved by the Company’s Manage-
ment Board and the Technical Council of the electric
grid complex.
To ensure a high level of environmental management, we
are committed to embed voluntary international environ-
mental standards in our practices. Since 2011, the Com-
pany’s Executive Office and MESs have been working on
the systematic implementation and certification of the
Environmental Management System (EMS) for compli-
ance with the requirements of the international standard
ISO 14001:2004.
To define methods of and approaches to the implemen-
tation of the Environmental Policy, in 2013 we prepared
a Concept of Environmental Development of the Elec-
tric Grid Complex which describes the principles and
tools of environmental activities, mid- and long-term
milestones, environmental risks and risk mitigation solu-
tions. Prepared in accordance with the requirements of
In 2013, the EMS was developed, successfully imple-
mented and certified for compliance with ISO 14001:2004
in the Company’s major branch –MES Centre. Auditors
from the independent certification company SGS Vostok
Limited confirmed its efficiency, effectiveness and suita-
bility for continuous improvement. During the reporting
period, a compliance audit of the Environmental Man-
Environmental Costs in 2009–2013, RUB million
Air Emissions in 2009–2013, tonnes
agement Systems of the Company’s Executive Office and
the branches MES South and MES North-West was also
performed, and their certification status was confirmed.
The Company’s main activity, which is the electricity
transmission, is much less harmful to the environment
compared with other power industry sectors, as the
Company’s technological processes do not produce any
emissions, discharges or waste; these occur only in the
course of operational activities and so their harmful effect
is kept to a minimum.
The total amount of the Company’s environmental costs
and investments in 2013 was RUB203.53 million, of
which RUB73.1 for current environmental costs, includ-
ing costs for the EMS implementation and environmental
personnel training.
Every year charges for negative impact on the environ-
ment for all of the Federal Grid Company increase slight-
ly owing to the commissioning of new facilities and the
standardisation of new previously unrecorded sources
of emissions and discharges. In 2013, these charges in-
creased by 6% to RUB7.54 million. At the same time, one
should note an annual decrease of overcharges result-
ing from the receipt of necessary permits for almost all
branches of the Company.
Total volume of air emissions in 2013 increased owing to
an increase in the emission of gaseous and liquid pollut-
ants, which is driven by the extended inventory of sourc-
es of emissions (transformers, welding stations, garages,
workshops, etc.) in the Ural, South, Volga, North-West
and Western Siberia MESs.
Water at the Company’s facilities is consumed main-
ly through the centralised water supply. We also use
imported water and draw it from both surface and un-
derground water sources. The decrease in water con-
sumption in 2013was a result of measures taken for the
maintenance, repair and reconstruction of water supply
facilities in the Company’s branches – MESs and PMESs,
and the subsequent reduction of water loss.
In the course of operations of the Company’s branches –
MESs and PMESs–wastes of I-VI hazard classes are gen-
erated. The increase of waste generation volumes is due
to the commissioning of new facilities, as well as mainte-
nance and repair activities, including construction waste
and the removal of outdated equipment in all branches.
120
121
SOCIAL RESPONSIBILITY AND SUSTAINABLE DEVELOPMENT / ENVIRONMENT
Water Consumption in 2009–2013, million m3
Waste Generation Volume in 2009–2013, thousand tonnes
•
The IV All-Russian Environmental Congress.
• At the end of the year, the Chairman of the Com-
pany’s Management Board, Andrey Murov, and the
Russian Representative Office of the World Wildlife
Fund (WWF) signed a cooperative agreement that
envisages cooperation in such areas as improvement
of efficiency and environmental safety of the Com-
pany’s facilities, promotion of renewable sources of
energy and protection of biodiversity. It is the first
time in history that an agreement with a non-govern-
ment environmental organisation has been signed
by a Russian electric grid company.
Our major tasks for 2014 in the environmental area are as
follows:
• Development of the long-term programme for the
environmental development of Federal Grid for the
period up to 2030.
•
Inclusion of environmental requirements and criteria
to the list of indicators for the Company’s strategic
programmes, such as the Unified Technical Policy
of the Electric Grid Complex, the Innovation Pro-
gramme and the Investment Programme.
•
•
Improvement of environmental control and report-
ing.
Implementation and certification of the Environmen-
tal Management System of MES East, confirmation
of certification status of the Executive Office and the
branches MES South, MES North-West and MES
Centre, and preparation to be made for the certifica-
tion of the Company.
• Revision of the Company’s corporate standards
for environmental safety of electric grid facilities.
The year 2013 was officially declared the Year of Ecological
Culture and Environmental Protection in the Russian Fed-
eration. Federal Grid took an active part in activities held
within the year such as:
•
•
•
The VII All-Russian Conference “Ecology and Pro-
duction”, where Federal Grid Company was declared
a winner of the “100 best organisations of Russia”
competition in the “Environment and environmental
management” category
The X World Conference on Sport and Environment
held by the IOC in Sochi
The I International Ecological EU–Russia Forum held
in Marbella, Spain
• World Environment Day (4 June), when Federal Grid
Company held a videoconference with represent-
atives from the Ministry of Energy and the Ministry
of Natural Resources, and environmental commu-
nities
122
123
124
125
CORPORATE GOVERNANCE / GOVERNANCE SYSTEM
Governance system
Corporate Governance Rating
TARGET
2013
7+
ACTUAL
2013
7+
TARGET
2014
7+
Corporate governance principles
Corporate Governance Rating
In December 2012, the Russian Institute of Directors as-
signed a National Corporate Governance Rating Score of
7+ to Federal Grid Company. This rating proves that the
Company complies with Russian corporate legislation, fol-
lows the majority of recommendations of the Russian Code
of Corporate Conduct* and a number of best international
practices and its owners have a low risk of experiencing
losses related to the quality of corporate governance.
During the reporting period, the Company demonstrated its
adherence to high standards of corporate governance, meet-
ing liabilities to shareholders and other interested parties.
In February 2014, Federal Grid Company’s National
Corporate Governance Rating was confirmed at a 7+
level.
Federal Grid is committed to maintaining a high level
of corporate governance, so we intend to continue work
in this direction. A main task for us in this field will be bring-
ing our internal documents, rules and procedures in line
with new corporate governance requirements and recom-
mendations following the adoption of a new Russian Code
of Corporate Governance and the new listing rules of the
Moscow Stock Exchange.
Our corporate governance system is based on strict com-
pliance with Russian law and the principles set down in
the Russian Code of Corporate Conduct and in the Com-
pany’s Corporate Governance Code. We also aim to keep
up with the best Russian and international corporate gov-
ernance standards, including the globally recognised prin-
ciples developed by the Organisation for Economic Coop-
eration and Development (OECD).
Recognising the need to improve corporate governance
systems in order to ensure the Company’s competitive-
ness, sustainability and attractiveness to investors, we
constantly monitor and implement good governance
standards in all structural divisions, branches, subsidiaries
and associates of Federal Grid Company.
The following principles underlie Federal Grid’s corporate
governance policies and procedures:
•
•
Transparency – we are committed to the timely and
accurate disclosure of all material information on the
Company’s business, including its financial status,
social and environmental indicators, operating re-
sults, ownership and governance structure. Federal
Grid makes this information freely accessible for all
interested parties.
Accountability – our Board of Directors is accounta-
ble to all shareholders in accordance with the applica-
ble legislation, and the Company’s executive bodies
are accountable to the General Meeting of Sharehold-
ers and the Board of Directors.
•
Fairness – we are committed to protecting share-
holder rights and treating all shareholders, owning the
same quantity of shares of the same type (category),
equally.
• Responsibility – Federal Grid recognise the rights of
all stakeholders, as provided for by applicable legisla-
tion, and aims to cooperate with them for the purpose
of the Company’s growth and financial stability
Federal Grid’s Code of Corporate Governance, approved
by the Board of Directors in November 2012, is a frame-
work document aimed at improving the systematisation of
corporate governance, ensuring greater transparency and
confirming the Company’s readiness to comply with the
highest standards in this area. The Company also adopted
the Code of Corporate Ethics focused on improving the
level of corporate culture in all its structural divisions.
Federal Grid Company has adopted internal documents
which regulate activities of the governing and control bod-
ies and other issues of the Company’s corporate govern-
ance system.
CORPORATE
GOVERNANCE PRINCIPLES
OF FEDERAL GRID COMPANY
TRANSPARENCY
ACCOUNTABILITY
FAIRNESS
RESPONSIBILITY
The full set of internal documents is available
on our website, www.fsk-ees.ru, and the
Investors / Corporate Governance / Cor-
porate Documents section
* Information on compliance with the Russian Code of Corporate Conduct is contained
in Appendix to the Annual Report on the memory stick attached
126
127
CORPORATE GOVERNANCE / GOVERNANCE SYSTEM
Governing and control bodies
Federal Grid Company has a well-developed organisational
structure of governing and control bodies that interact well
with each other. The General Meeting of Shareholders is
the supreme governing body of Federal Grid Company. The
Board of Directors is responsible for overall leadership and
providing strategic guidance, as well as for supervising the
Company’s Management Board, which is in charge of the
day-to-day management of Federal Grid. The Chairman of
the Management Board is the Company’s Chief Executive
Officer. Committees under the Board of Directors aim to im-
prove the efficiency and quality of the Board’s performance.
Federal Grid has an efficient control system, both externally
(independent external auditor and Audit Commission) and
internally (Company’s divisions of internal audit and control).
Organisational Structure of Governing and Control Bodies
of Federal Grid Company
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e
e
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o
r
t
n
o
c
d
n
a
d
n
a
s
t
r
o
p
e
r
s
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o
i
t
a
d
n
e
m
o
c
c
e
r
General Meeting of Shareholders
The General Meeting of Shareholders (GMS) is the su-
preme governing body of Federal Grid Company. In ac-
cordance with the Federal Law “On Joint Stock Compa-
nies” and the Company’s Articles of Association, matters
within its competence include, among others, payment
of dividends, approval of annual reports and annual fi-
nancial statements, election of the external auditor, re-
organisation and liquidation of the Company, election of
members of the Board of Directors and the Audit Com-
mission, approval of large transactions and related par-
ty transactions and other important matters relating to
Company business.
When preparing and holding a GMS, the Company
follows recommendations of the Russian Code of
Corporate Conduct ensuring the smooth execution
of shareholder rights including the following:
• Shareholders holding at least 2% of the voting shares
are provided with an opportunity to exercise their rights
as stipulated by the Articles of Association and cur-
rent legislation, upon submitting a statement of their
securities account (if their right to shares is recorded
in a securities account) without submitting any other
documents as evidence of their rights.
• Notice on the GMS is sent (or handed over) to each
person included in the list of those authorised to partic-
ipate in the GMS at least 30 days prior to the meeting.
The notice is also to be published in the newspaper
Rossiyskaya Gazeta.
•
•
Information (materials) on the agenda of the GMS is
available on the Company’s website at least 20 days
prior to the meeting.
Functions of the Counting Board are performed by the
independent registrar of Federal Grid Company.
Annual General Meeting of Share-
holders
The 2013 Annual General Meeting of Shareholders (AGM) of
Federal Grid Company was held on 27 June 2013.
In accordance with the AGM agenda, the shareholders ap-
proved the Company’s annual report and annual financial
statements, elected the Board of Directors and approved
the external auditor for 2014. The shareholders decided
not to pay dividends on common shares for 2012, since
the Company incurred a loss in the accounting period. The
AGM also made a resolution to approve a related party
transaction involving Directors’ and Officers’ liability insur-
ance.
The Minutes of the 2013 AGM are available on
our website, www.fsk-ees.ru, section About
Us / Corporate Governance / Shareholders
Meetings.
Extraordinary General Meeting
of Shareholders
On 11 November 2013, an Extraordinary General Meeting
of Shareholders was held which made a resolution on the
early termination of powers of the Chairman of the Com-
pany’s Management Board and on the election of a new
Chairman, as well as on the election of the Audit Com-
mission.
The Minutes of the Extraordinary General
Meeting are available on our website, www.
fsk-ees.ru, About Us / Corporate Govern-
ance / Shareholders Meetings section.
Board of Directors
The Board of Directors is a Company’s governing body re-
sponsible for the strategic guidance in the name and on
behalf of all its shareholders. The Board also supervises the
executive bodies and ensures the effectiveness of internal
control and risk management systems.
The Board of Directors’ full responsibilities are set out in
the Articles of Association and are clearly differentiated
from those of the General Meeting of Shareholders and the
Company’s executive bodies. The Board’s meetings are
held on a regular basis, in accordance with the approved
work plan and when the need arises, but at least once
every six weeks.
The Board shall include 11 members. Federal Grid Compa-
ny’s Articles of Association provide for obligatory membership
of representatives of the Market Council, a non-profit partner-
ship uniting, on a membership basis, electric power industry
entities and large electric and thermal energy consumers.
128
129
CORPORATE GOVERNANCE / GOVERNANCE SYSTEM
The Company’s Board of Directors has a balanced
set of knowledge, experience and professional skills
required for its effective performance. The Company
also aims to maintain a balance on the Board with
respect to all shareholders’ interests. The Federal
Grid Company’s Board of Directors includes repre-
sentatives of minority shareholders and independent
directors
Composition of the Board of Directors
Elected by the General Meeting of Shareholders
on 27 June 2013 (as of 31 December 2013). Information about board members is disclosed with their consent.
Composition of the Board of Directors acting
from 29 June 2012 to 27 June 2013
Name
Status
Position (as of the election date)
1. Ernesto Ferlenghi
Non-executive director, Chairman of the
Board of Directors
Vice President of Eni S.p.A. (Italy), Head
of the Representative Office of Eni (the
CIS).
2. Boris Ayuev
Non-executive director
3. Oleg Budargin
Executive director
4. Boris Kovalchuk
Non-executive director
5. Vyacheslav Kravchenko
Independent director
Chairman of the Management Board of
JSC System Operator of Unified Energy
System
Chairman of Federal Grid Company’s
Management Board
Chairman of the Management Board
of JSC INTER RAO UES
Chairman of the Management Board of
Non-Profit Partnership Market Council
for the Organisation of an Efficient
System of Wholesale and Retail Trade
of Electric Energy and Power;
6. Andrey Malyshev
Non-executive director, Deputy
Chairman of the Board of Directors
President of JSC Group E4
7. Vladimir Rashevsky
Independent director
8. Elena Titova
Independent director
9. Denis Fedorov
Non-executive director
10. Rashid Sharipov
Independent director
11. Ilya Scherbovich
Independent director
General Director, Chairman of the
Management Board of JSC SUEK
Managing Director, First Deputy
Chairman of the Management Board of
Morgan Stanley Bank LLC
General Director of JSC
Centerenergoholding, General Director
of Gazpromenergoholding LLC
Deputy General Director of KFK-
Consult LLC
President, member of the Management
Board of United Capital Partners LLC
Oleg Budargin
Chairman of the Board of Directors
General Director of JSC Russian Grids
Federal Grid Board member since 2010
Georgy Boos
President of BOOS LIGHTING GROUP MC LLC
Federal Grid Board member since 2013
Born in 1960
Born in 1963
Education: Norilsk Industrial Institute
(degree in Industrial and Civil Engineering)
Education: Moscow Power Engineering Institute
in 1986
PhD in Technical Sciences.
From 2007 to 2009 – Assistant to the Plenipotentiary Repre-
sentative of the Russian President in Siberian Federal District.
From October 2009 to November 2013 – Chairman of Fed-
eral Grid Company’s Management Board.
Positions in governing bodies of other organisations:
member of the Supervisory Board of JSC Russian Regional
Development Bank; member of the Board of Directors of
JSC INTER RAO UES; Chairman of the Supervisory Board
of Non-Profit Partnership Association of Solar Energy En-
terprises; Chairman of the Board of Directors of JSC Mos-
cow United Electric Grid Company.
From December 2003 to September 2005 – Depu-
ty of the 4th State Duma of the Federal Assembly of the
Russian Federation, Deputy Chairman of the State Duma.
From September 2005 to September 2010 – Governor
of Kaliningrad Region.
Positions in governing bodies of other organisations:
member of the Board of Directors of JSC Russian Grids;
member of the Board of Directors of JSC Sheremetyevo
International Airport.
Share in the Company’s ordinary stock: 0.000644%.
Holds no shares in the Company.
130
131
CORPORATE GOVERNANCE / GOVERNANCE SYSTEM
Pavel Grachev
Independent Director
General Director of Polyus Gold
International Limited
Federal Grid Board member since 2013
Boris Kovalchuk
Vyacheslav Kravchenko
Andrey Murov
Independent Director
Chairman of the Management Board of JSC INTER RAO UES
Federal Grid Board member since 2012
Deputy Chairman of the Board of Directors
Deputy Minister of Energy of the Russian Federation
Federal Grid Board member since 2012
Chairman of the Management Board
of Federal Grid Company
Federal Grid Board member since 2013
Born in 1973
Born in 1977
Born in 1967
Born in 1970
Education: St Petersburg State University
(degree in Jurisprudence)
University of Trieste (Italy) (degree in Jurisprudence)
Education: St Petersburg University (degree in
Jurisprudence). Institute of Advanced Training for
Executives and Experts of Fuel and Energy Sector
Non-profit partnership Corporate Educational and
Research Centre of UES.
From 2002 to 2006 – Managing Partner of the Russian
branch of the law firm Pavia e Ansaldo. From 2006 to 2011 –
Legal Department Head, Managing Director of JSC Nafta
Moskva.
Positions in governing bodies of other organisations:
Chairman of the Board of Directors of Nafta Moskva (Cy-
prus) Ltd.
From 2006 to 2009 – Head of the Department of National
Priority Projects of the Russian Government, Assistant to
the First Deputy Prime Minister of the Russian Federation.
From April to November 2009 – Deputy Director General
for Development of State Nuclear Corporation ROSATOM.
From November 2009 to June 2010 – Acting Chairman of the
Management Board of JSC INTER RAO UES.
Positions in governing bodies of other organisations:
Board Chairman of OGK-1, JSC Mosenergosbyt, CJSC Kam-
baratinskaya Hydro Power Station-1, TGK-3; Board member
of JSC St Petersburg Sales Company, Irkutsk JSC of Energy
and Electrification, JSC Russian Regional Development Bank;
member of the Management Board of the RSPP.
Education: St Petersburg State University (degree in
Jurisprudence). Inter-disciplinary Institute of Advanced
Training and Retraining for Executives (a special
retraining course in Financial Management). State
University of Civil Aviation (degree in Freight Regulation
and Air Transport Management). PhD in Economics.
From 2007 to 2012 – General Director of JSC Pulkovo Airport.
From 2012 to November 2013 – Deputy General Director,
Acting General Director, Executive Director, member of the
Management Board of JSC Holding of the Inter-regional
Distribution Grid Companies (since 04.04. 2013 – JSC
Russian Grids).
Positions in governing bodies of other organisations: Chair-
man of the Board of Directors of JSC Inter-regional Distri-
bution Grid Company of the North-West; member of the
Board of Directors of JSC Russian Grids.
Education: Lomonosov Moscow State University
(degree in Jurisprudence).
From 2004 to 2006 – Deputy Director of the Department
of Structural and Investment Policy in Industry and Energy
of the Ministry of Industry of the Russian Federation. From
2006 to 2008 – Director of the Department of Structural
and Investment Policy in Industry and Energy of the
Ministry of Industry of the Russian Federation. From 2008
to 2010 – General Director of RN Energo LLC. From 2010
to 2012 – General Director of JSC United Energy Service
Company. From 2012 to September 2013 – Chairman of
the Management Board of Non-profit Partnership Market
Council and Chairman of the Management Board of JSC
Trade System Administrator of the Wholesale Energy Market.
Positions in governing bodies of other organisations: Board
member of JSC Financial Settlements Centre, JSC Trade
System Administrator of the Wholesale Energy Market, JSC
INTER RAO UES, JSC Russian Grids, JSC System Opera-
tor of Unified Energy System.
Holds no shares in the Company.
Holds no shares in the Company.
Holds no shares in the Company.
Holds no shares in the Company.
132
133
CORPORATE GOVERNANCE / GOVERNANCE SYSTEM
Sergey Serebryannikov
Denis Fedorov
Ernesto Ferlenghi
Sergey Shmatko
Independent Director
Department Head, Professor of Moscow Power
Engineering Institute
Federal Grid Board member since 2013
Independent Director
General Director of JSC Centerenergoholding
Federal Grid Board member since 2011
Head of the Representative Office of Eni (the CIS)
Federal Grid Board member since 2008;
Board Chairman from 2011 to 2013
Special Representative of the President of the Russian
Federation on International Cooperation in the Electric
Power Industry.
Federal Grid Board member from 2008–2010 and since 2013
Born in 1952
Born in 1978
Born in 1968
Born in 1966
Education: Electromechanical Faculty of Moscow Power
Engineering Institute (degree in Insulating and Cable En-
gineering). PhD in Technical Sciences.
Education: Bauman Moscow State Technical Universi-
ty (degree in Economics and Management). Moscow
Power Engineering Institute (degrees in Economics and
Industrial Heat Power Engineering (postgraduate stud-
ies)). PhD in Economics.
Education: University of Rome Tor Vergata (Faculty of
Mathematics Physics and Natural Science)
Education: Ural State University (Faculty of Political Econ-
omy). Marburg University in the FRG (Economy). Russian
Federation of the Military Academy of the General Staff of
Armed Forces of the Russian Federation (Advanced Aca-
demic Courses in Defence and Security). PhD in Technical
Sciences
From 2004 to 2005 – Pro-Rector for Research of Mos-
cow Power Engineering Institute (Technical University).
From 2005 to March 2013 – Rector of Moscow Power
Engineering Institute.
From 2003 to 2006 – Head of the Department of Invest-
ment Technologies and Technological Projects of EuroSi-
bEnergo-Engineering LLC and the Investment Department
of Corporation Gasenergoprom LLC. From February 2006
to April 2007 – Adviser to the General Director of Mezhre-
giongas LLC. From 2006 to 2008 – General Director of JSC
Mezhregionenergosbyt. From 2007 – Head of the Depart-
ment of Electric Power Sector Development and Marketing
in Power Generation of JSC Gazprom. From 2009 – Gen-
eral Director of GazpromEnergoholding LLC.
Positions in governing bodies of other organisations:
member of the Management Board of CJSC FortisEnergy;
Board Chairman of JSC Second Generating Company of
the Wholesale Electricity Market, JSC Tumen Energy Ser-
vice Company, Non-Profit Partnership Council of Power
Producers; Board member of JSC Mosenergo, JSC INTER
RAO UES, Heat Retail Company LLC, Non-Profit Partner-
ship Centre of Innovative and Energy Technologies.
From 2003 to 2004 – Regional Director of Eni for Kazakh-
stan, Regional Manager of Agip Caspian Sea and Agip
KCO in Astana, Kazakhstan. From 2005 – Vice President
of Eni S.p.A.
From June 2008 to May 2012 – Minister of Energy of the
Russian Federation. In June 2012, by presidential decree,
was appointed a member of the Presidential Commission
for Strategic Development of the Fuel and Energy Sector
and Environmental Security of the Russian Federation.
Positions in governing bodies of other organisations: Board
member of Eni Energy LLC and JSC Russian Grids. Honorary
Consul of the Republic of Italy in Russia.
Positions in governing bodies of other organisations:
Chairman of the Board of Directors of JSC Russian Grids;
Chairman of the Supervisory Board of Non-Profit Partner-
ship Scientific and Technological Council of Unified Energy
System; Board member of JSC AK Transneft
Holds no shares in the Company.
Holds no shares in the Company.
Holds no shares in the Company.
Holds no shares in the Company.
134
135
CORPORATE GOVERNANCE / GOVERNANCE SYSTEM
Nikolay Shulginov
First Deputy General Director of JSC SO UES
Federal Grid Board member since 2013
Born in 1951
Education: Novocherkassk Polytechnic Institute.
PhD in Technical Sciences.
From 2002 to 2004 – member of the Management Board,
Director on Technical Audit of JSC System Operator –
Central Dispatch Administration of Unified Energy System
(SO – CDA UES).
Positions in governing bodies of other organisations: mem-
ber of the Supervisory Board of Non-Profit Partnership Sci-
entific and Technological Council of Unified Energy System.
Share in the Company’s ordinary stock: 0.000809%
In 2013, the Board of Directors
held 25 meetings, of which two
were in the form of joint presence,
and considered 261 issues.
Board of Directors’ Performance
Report on the Company’s
Business Priorities
In 2013 the Board of Directors’ activities were focused on
creating favorable conditions for achieving the Compa-
ny’s strategic objectives and for further strengthening of
its electric power infrastructure.
Federal Grid’s achievements in the reporting year be-
came possible, to a large extent, because of the well
coordinated efforts of the Board of Directors and the
Company’s management aimed at overcoming impacts
of uncertainty on financial markets and slowdown in eco-
nomic growth on the Company and the whole industry.
One should note strong cooperation of the Board and
the Company’s executives on key issues of its business
operations, managing its share capital and subsidiaries
and associates.
In 2013, the Board of Directors held 25 meetings, of
which two were in the form of joint presence, and con-
sidered 261 issues.
During the reporting period, the Board of Directors
adopted the following documents:
•
Federal Grid Insurance Program for 2014
•
Federal Grid Regulations on the Credit Policy
(amended version)
• Calculation method and target values for a key per-
formance indicator (KPI) - Meeting Schedules of
Technological Connection - to be included in a KPI
structure for the Chairman of the Company’s Man-
agement Board and the Heads of branches involved
in technological connection
• Regulations of Russian Grids on Uniform Technical
Policy in Electric Grid Sector.
The Board made the following key decisions:
• Approval of a long-term electro-technical sup-
ply agreement with Siemens Transformers LLC,
which provides production to be localised in Rus-
sia and aims to support and develop production of
high-technology transformer equipment conforming
to up-to-date technical specifications
• Pre-approval of transactions which may entail liabil-
ities denominated in foreign currency
• Resolution on expediency of the Company’s partic-
ipation in venture funds via co-investing its property
rights for innovative technologies developed within
the framework of the Company’s R&D Programme
• Resolution on placement of non-convertible inter-
est-bearing certified bearer bonds with mandatory
centralised custody of Series 30-39
• Resolution on increase of the Company’s share cap-
ital by additional issue placement
• Approval of the Company’s business plan for 2014
and key targets for 2015-2018
• Setting Federal Grid’s procurement policy with re-
spect to facilitating access to procurement for
of small and medium-sized enterprises.
The structure of issues considered by the Board of Directors in 2013*
* This structure does not include 151 issues of related party transactions’ approval
For more details on the Company performance see Section Performance Overview of the Report (p. 34)
136
137
CORPORATE GOVERNANCE / GOVERNANCE SYSTEM
Committees of the Board of Directors
The committees of the Company’s Board of Directors are
established to hold preliminary discussions on the most im-
portant matters that fall within the Board’s competence and
in order to develop recommendations for the Board on these
matters. The Committees’ work shall enhance the efficiency
and effectiveness of the Board of Directors’ performance.
When appointing members to the committees the Board
of Directors is guided by the need to include individuals
with extensive experience and expertise in the relevant ar-
eas, and follows the stock market requirements imposed
on issuers whose securities are included in Quotation Lists
A and B.
Federal Grid’s Board of Directors has four committees: for
Audit, HR and Remuneration, Strategy, and Investment. Ac-
tivity of the committees is regulated by the respective Reg-
ulations approved by the Board of Directors.
HR AND REMUNERATION COMMITTEE
Key functions
AUDIT COMMITTEE
Key functions
•
Evaluation of candidates for the Company’s external auditors and drafting recommendations to the Board of
Directors regarding the appointment of external auditors, the conduct of annual independent audit and exter-
nal auditors’ fees
• Review of the Company’s financial statements and results of the external audit of the financial statements with
respect to their compliance with RF legislation, International Financial Reporting Standards, Russian Account-
ing Standards, other legal regulations
Evaluation of the Company’s internal control system
•
• Approval of internal audit plans in the Company
Membership
During the period from 11 September 2012 to 27 June 2013, the Committee comprised the following members:
• Development of principles and criteria for remuneration and material incentives of members of the Board of Di-
rectors, the Management Board and the Audit Commission
• Development of recommendations regarding the material terms and conditions of contracts with members
of the Board of Directors, the Chairman and members of the Management Board
• Development of criteria for selecting potential nominees to the Board of Directors, the Management Board and
preliminary evaluation of the said candidates
1. Rashid Sharipov, Chairman, Independent Director
2. Elena Titova, Independent Director
3. Denis Fedorov
4. Vladimir Rashevsky, Independent Director
5. Ilya Scherbovich, Independent Director
• Regular assessment of performance of the Chairman and members of the Management Board, and drafting
On 28 November 2013, the following members were appointed to the Committee by the Board of Directors:
recommendations to the Board of Directors regarding their possible reappointment
Membership
During the period from 11 September 2012 to 27 June 2013, the Committee comprised the following members:
1. Denis Fedorov, Chairman
2. Elena Titova, Independent Director
3. Ilya Scherbovich, Independent Director
1. Denis Fedorov, Chairman, Independent Director
2. Boris Kovalchuk, Independent Director
3. Sergey Serebryannikov, Independent Director
Activities in 2013
The Committee held five meetings and considered a number of important issues, including:
• Review of the external auditor’s report on Federal Grid Company Group interim consolidated IFRS financial
On 28 November 2013, the following members were appointed to the Committee by the Board of Directors:
statements for 6 months of 2012
1. Denis Fedorov, Chairman, Independent Director
2. Boris Kovalchuk, Independent Director
3. Sergey Serebryannikov, Independent Director
Activities in 2013
The Committee held two meetings, and the following issues were considered:
• Recommendations to the Board of Directors with respect to preliminary approval of the Company’s Annual
Report 2012 and its submission to the General Meeting of Shareholders
• Recommendations to the Board of Directors on issues of preparation and holding the 2013 Annual General
Meeting of Shareholders
• Review of the external auditor’s opinion on 2012 financial statements and recommendations regarding a can-
didate for external auditor
• Recommendations to the Board of Directors to approve the Directors’ and Officers’ liability insurance contract,
which was a related party transaction
• Review of the report on insiders’ dealings in the Company’s securities
• Recommendations to the Board of Directors to approve the Strategy of Federal Grid Company’s internal con-
• Approval of the Committee work plan for H1 2013
• Recommendations to the Board of Directors to approve the Report on the KPIs’ achievement in H2 2012
trol system development
• Recommendations to the Board of Directors regarding the external auditor’s fees for 2013
and 2012
138
139
CORPORATE GOVERNANCE / GOVERNANCE SYSTEM
STRATEGY COMMITTEE
Key functions
• Consideration of and making recommendations to the Board of Directors on the following issues:
• Measures and programmes for the development of the Unified Energy System (UES) of Russia, including devel-
oping the Unified National (all-Russian) Electric Grid (UNEG), including isolated energy systems
• Measures to carry out technological connections to the electric grids
• Processes related to the effective functioning of the wholesale electric energy market, the technological man-
agement of electric grids that are part of the UES of Russia
• Control over implementation of investment projects to develop electric grids and the UES of Russia
•
• Other issues related to the development of UNEG
Information disclosure by a subject of natural monopoly in the electric power industry
Membership
During the period from 11 September 2012 to 27 June 2013, the Committee comprised the following members
(positions are indicated as of the appointment date) :
1. Vyacheslav Kravchenko, Chairman of the Strategy Committee, Chairman of the Management Board of Non-Profit
Partnership Market Council
2. Andrey Malyshev, President, member of the Board of Directors of JSC GROUP E4
3. Evgeny Miroshnichnko, Director of Strategic Development of the Strategy and Investment Alliance of JSC INTER
RAO UES
4. Anatoly Dyakov, President of the Unified Energy Complex Corporation and the Non-Profit Partnership Scientific
and Technical Council of UES
5. Igor Kozhukhovsky, General Director of CJSC APBE
6. Roman Berdnikov, First Deputy Chairman of the Management Board of Federal Grid Company
7. Igor Khvalin, Deputy Chairman of the Management Board of JSC FGC UES
8. Vladimir Fortov, Member of the Presidium of the Russian Academy of Sciences (RAS)
9. Nikolay Shulginov, First Deputy Chairman of the Management Board of JSC SO UES
10. Alexey Sukhov, Deputy Chairman of the Management Board of JSC ATS
11. Alexander Rogov, Head of the Energy Sector Development Department at the Energy Sector and Energy Market-
ing Development Division of JSC Gazprom
12. Andrey Naryshkin, Deputy Chief of Staff of the Chairman of the Board of Directors of JSC FGC UES
On 31 January 2014, the Company’s Board of Directors appointed 17 new members of the Strategy Committee,
including three Board members (Vyacheslav Kravchenko – the Committee Chairman, Nikolay Shulginov and Ernesto
Ferlenghi), and 14 external experts.
Activities in 2013
The Committee held two meetings. The most important issue among those considered within the reporting period
was the Development Strategy of JSC Russian Grids which was discussed during the joint meeting of the Compa-
ny’s Strategy Committee and the Strategy Committee of Russian Grids’ Board of Directors. The recommendations
were made to improve the document with consideration of the Committee members’ opinions.
INVESTMENT COMMITTEE
Key functions
•
•
Expert evaluation of new investment projects and programmes, submitted for consideration of the Company’s
Board of Directors
Timely informing of the Company’s Board of Directors about risks in the area of investment activity, to which
the Company and its subsidiaries and associates are subjected
• Making recommendations to the Company’s Board of Directors on issues that fall under the competence of
the Committee
Membership
During the period from 11 September 2012 to 27 June 2013 the Committee comprised the following members (posi-
tions are indicated as of the appointment date) :
1. Andrey Malyshev, Chairman of the Investment Committee, member of the Board of Directors of JSC GROUP E4
2. Alexander Ilyenko, Director for Assets Management of JSC SO UES
3. Roman Berdnikov, First Deputy Chairman of the Management Board of JSC FGC UES
4. Andrey Murov, Deputy Chairman of the Management Board of JSC FGC UES, Chairman of the Management Board
of Non-Profit Partnership Market Council
5. Valery Goncharov, Deputy Chairman of Federal Grid Company’s Management Board
6. Vyacheslav Kravchenko, Chairman of the Management Board of Non-Profit Partnership Market Council
7. Ilnar Mirsiyapov, member of the Management Board, Head of Strategy and Investment Unit of JSC INTER RAO UES
8. Sergey Serebryannikov, Rector of Moscow Power Engineering Institute
9. Alexander Rogov, Head of the Energy Sector Development Department at the Energy Sector and Energy Marketing
Development Division of JSC Gazprom
10. Vladimir Fortov, Member of the Presidium of the RAS
11. Andrey Naryshkin, Deputy Chief of Staff of the Chairman of the Board of Directors of JSC FGC UES
12. Sergey Vasilyev, Director of the Department of Electric Power Industry Development of the Russian Ministry of Energy
On 31 January 2014, the Company’s Board of Directors appointed 17 new members of the Investment Committee, in-
cluding two Board members (Sergey Shmatko – the Committee Chairman, and Ernesto Ferlenghi), 2 Company officers
and 13 external experts.
Activities in 2013
The Committee held two meetings. The recommendations were made to the Board regarding approval of the
Company’s Investment Programme for 2013 and the draft Investment Programme for 2014–2018.
140
141
CORPORATE GOVERNANCE / GOVERNANCE SYSTEM
Attendance of Board members at Board meetings
and Committee meetings during 2013
Board member
The Board of
Directors
Investment Com-
mittee
Strategy Com-
mittee
HR and Remuner-
ation Committee
Audit Committee
Board members during the year 2013
Oleg Budargin
Boris Kovalchuk
Vyacheslav
Kravchenko
96%
72%
92%
50%
100%
Denis Fedorov
100%
100%
100%
100%
100%
100%
Ernesto Ferlenghi
96%
Board members until 27 June 2013
Boris Ayuev
Andrey Malyshev
Elena Titova
Vladimir Rashevsky
Rashid Sharipov
100%
100%
57%
71%
50%
Ilya Scherbovich
100%
Board members since 27 June 2013
Georgy Boos
Pavel Grachev
Andrey Murov
Sergey
Serebryannikov
55%
81%
100%
100%
Sergey Shmatko
100%
Nikolay Shulginov
100%
100%
100%
100%
75%
100%
100%
100%
Management Board
Composition of Management Board
The Management Board and the Chairman of the Man-
agement Board – collective and sole executive bodies –
are responsible for the day-to-day operations of the
Company and the implementation of the strategy estab-
lished by the Board of Directors and the shareholders.
The competence of the Chairman of the Management
Board includes all matters of day-to-day management
of the Company apart from those reserved to the General
Meeting of Shareholders, the Board of Directors and the
Management Board.
The Management Board’s competence covers the follow-
ing matters:
• Development of the Company’s business priorities
and the respective implementation plans
During 2013, substantial changes were made to the composi-
tion of the Management Board.
On 29 August 2013, the Board of Directors made a decision
to terminate the authorities of the First Deputy Chairman An-
drey Cherezov, who was a Chief Engineer, and appointed
Vladimir Dikoy to this position.
The authority of Oleg Budargin, the Chairman of the Compa-
ny’s Management Board, was terminated by a resolution of the
Extraordinary Meeting of Shareholders on 11 November 2013,
and Andrey Murov was appointed as the new Chairman.
On 28 November 2013, the authorities of the following Man-
agement Board members were terminated by the Board of Di-
rectors: Roman Berdnikov, Nikolay Varlamov, Yuriy Mangarov
and Sergey Sergeev.
• Reporting on execution of decisions made by the
General Meeting of Shareholders and the Board
of Directors
The following new members of the Management Board were
appointed: Valery Goncharov, Maria Tikhonova, Dmitry Shish-
kin and Leonid Mazo.
• Addressing other matters of the Company’s day-
to-day operations in accordance with the decisions
of the General Meeting of Shareholders and the
Board of Directors, as well as other matters referred
to the Management Board by the Chairman of the
Management Board
142
143
CORPORATE GOVERNANCE / GOVERNANCE SYSTEM
Composition of the Management Board as of 31.12.2013
Information about the Management Board members is disclosed with their consent.
Andrey Murov
Valery Goncharov
Andrey Kazachenkov
Vladimir Dikoy
Chairman of the Management Board
Member of the Management Board since 2012
First Deputy Chairman of the Management Board
Member of the Management Board since 2013
First Deputy Chairman of the Management Board
Member of the Management Board since 2010
Deputy Chairman of the Management Board –
Chief Engineer
Member of the Management Board since 2013
Born in 1970
Born in 1963
Born in 1980
Born in 1954
Education: St Petersburg State University (degree in
Jurisprudence). Inter-disciplinary Institute of Advanced
Training and Retraining for Executives (a special
retraining course in Financial Management). State
University of Civil Aviation (degree in Freight Regulation
and Air Transport Management). PhD in Economics.
From 2007 to 2012 – General Director of JSC Pulkovo
Airport. From 2012 to November 2013 – Deputy General
Director, Acting General Director, Executive Director,
member of the Management Board of JSC Holding of the
Inter-regional Distribution Grid Companies (since 04.04.
2013 – JSC Russian Grids).
Positions in governing bodies of other organisations:
Chairman of the Board of Directors of JSC Inter-regional
Distribution Grid Company of the North-West; member
of the Board of Directors of JSC Russian Grids.
Education: Leningrad Shipbuilding Institute in 1987.
PhD in Economics.
From 1998 to 2000 – Finance Director of State Enterprise Fuel
and Energy Complex of St Petersburg. From 2000 to 2001 –
General Director of CJSC Lenteplosnab. From 2001 to 2004
– Chairman of the Regional Energy Commission of the
Administration of St Petersburg. From October 2004 to June
2005 – Deputy Minister of Regional Development of Russia.
From 2005 to 2006 – Deputy Director for Economics and
Finance of TGK-1. From December 2006 – Deputy Director
for Economics and Finance of JSC Roszheldorproject. From
June 2012 – General Director of JSC Roszheldorproject.
In July 2012, was appointed Deputy Chairman of the
Management Board of JSC FGC UES. Since 13 November
2013 – First Deputy Chairman of the Management Board
of JSC FGC UES. Member of the Company’s Management
Board since 28 November 2013.
Education: St Petersburg State Engineering and
Economic University (degrees in Management and
Economics and Management in Engineering Industry).
MBA at the University of Wisconsin (Madison, USA)
Special programmes in Economics and Finance at The
IMD (Switzerland) and INSEAD (France) business schools
From 2004 – Adviser to Finance Director, Deputy Finance
Director of JSC Lenenergo. From 2005 – Head of Corporate
Finance Department of JSC OGK 1. From October 2009 –
Adviser to the Chairman of the Management Board of JSC
FGC UES. From November 2009 – Deputy Chairman of the
Management Board of JSC FGC UES. From May 2012 –
First Deputy Chairman of the Management Board of JSC
FGC UES.
Positions in governing bodies of other organisations:
Chairman of the Board of Directors of JSC Lenenergo,
Deputy Chairman of the Board of Directors of JSC Moscow
United Electric Grid Company.
Education: Moscow Power Engineering Institute (degree
in Electric Power Supply of Industrial Enterprises, Cities
and Agriculture). PhD in Technical Sciences.
From 1997 to 2002 – Chief Engineer, First Deputy Director
of territorial subdivision of JSC RAO UES of Russia –
Central Interconnected Electric Grids, Head of the Electric
Grids Department of JSC RAO UES of Russia. From 2002
to 2009 – Head of the Electric Grids Department, Head of
the Department of Regional Management of Federal Grid
Company, Deputy Director General for Production of JSC
Glavsetservice of UNEG. From 2009 to 2013 – Deputy Chief
Engineer of Federal Grid Company.
Positions in governing bodies of other organisations:
member of the Board of Directors of JSC Glavsetservice
of UNEG and JSC Tomsk Transmission System.
Holds no shares in the Company.
Holds no shares in the Company.
Share in the Company’s ordinary stock: 0.000552%.
Share in the Company’s ordinary stock: 0.0000220534%.
144
145
CORPORATE GOVERNANCE / GOVERNANCE SYSTEM
Maria Tikhonova
Leonid Mazo
Deputy Chairman of the Management Board
Member of the Management Board since 2013
Deputy Chairman of the Management Board
Member of the Management Board since 2013
Dmitry Shishkin
Internal Control Director
Member of the Management Board since 2013
Vladimir Shukshin
Member of the Management Board since 2012
Born in 1980
Born in 1977
Born in 1967
Born in 1959
Education: Volga-Vyatka Academy of Public Service
(degree in Public and Municipal Administration, Higher
School of Economics with MBA Finance). PhD in
Economics.
Education: Moscow State University, Russian Academy
of Public Service (a professional retraining course). PhD
in Economics.
Education: Higher School of the KGB of the USSR
named after Dzerzhinsky (degree in Jurisprudence)
Education: State Central Institute of Physical Culture,
FSB Academy of the Russian Federation. Russian
Academy of Public Service under the President of the
Russian Federation. Ph.D in Political Science.
From 2003 to 2005 – engineer of JSC Nizhnovenergo. From
2005 to 2008 – specialist, Deputy Head of Property Relations
Department of Fuel and Energy Complex of the Federal Energy
Agency. From 2008 to 2012 – held senior management
positions at the Ministry of Energy of the Russian Federation,
including the position of Department Head for Corporate
Management, Pricing, Control and Audit in the Fuel and
Energy Complex. From October 2013 – Deputy Chairman of
the Management Board of JSC FGC UES.
Positions in governing bodies of other organisations: member
of the Board of Directors of JSC Institute Energosetproekt,
member of the Audit Commission of JSC RusHydro.
From 2001 to 2008 – Chief of the Secretariat of the First
Deputy Chairman of the Government of Moscow Region.
From 2008 to 2009 – held senior positions in Expostroy,
Planstroyexpo and Energocentre. From 2009 to 2011 –
Deputy General Director for sales and service development of
JSC MOESK. In 2011 – Deputy General Director for Strategy
and Development of JSC Technopromexport From 2011 to
2012 – Deputy Executive Director for Development and Client
Relations, Deputy General Director of JSC IDGC Holding.
From 2012 to 2013 – General Director of Moscow Cable
Grids, a branch of JSC MOESK. From August 2013 – General
Director of JSC Centre for Engineering and Management
of Construction of the Unified Energy System.
From 1985 to 2009 – served in the Armed Forces of the
Russian Federation. From 2009 to 2012 – Deputy Director for
Security of Gazprom EP International Services B.V., Moscow.
From February to October 2013 – Security Director of JSC
Moscow Unified Electric Grid Company.
From 1998 to 2005 – Adviser to the Mayor of Moscow.
From 2005 to 2010 – Deputy Chief of Staff of the Mayor and
Moscow Government. From October 2010 to 2011 – Deputy
Mayor of Moscow in Moscow Government for coordination
and work with law enforcement agencies. From January to
June 2012 – Deputy General Director for Security of JSC IDGC
Holding. From June 2012 to May 3013 – Deputy Chairman of
the Management Board of JSC FGC UES. From April 2013
– Deputy General Director for Security of JSC Russian Grids.
Positions in governing bodies of other organisations: Chairman
of the Board of Directors of JSC IDGC of North Caucasus.
Holds no shares in the Company.
Holds no shares in the Company.
Holds no shares in the Company.
Holds no shares in the Company.
146
147
CORPORATE GOVERNANCE / GOVERNANCE SYSTEM
Activities of the Management
Board in 2013
In 2013, the Management Board held 83 meetings and
considered issues on Federal Grid Company’s business
priorities and perspective business plans, as well as other
issues related to the Company’s day-to-day operations in
accordance with the decisions of the General Meetings of
Shareholders and the Board of Directors.
Valery Sedunov
Member of the Management Board since 2012
Born in 1950
Ivanovo Power Engineering
Education:
Institute
(degree in Production Automation and Electric Power
Distribution).
From 2002 – First Deputy Director General – Chief Engineer,
General Director of the branch of Federal Grid Company –
MES Centre.
Share in the Company’s ordinary stock – 0.000027%
In the reporting year,
there were no dealings
in the Company’s securities
by the Chairman and members
of the Management Board.
Key Performance Indicators
The KPIs, their target values and calculation methods are sub-
ject to approval by the Company’s Board of Directors. The tar-
gets are set with consideration of aims and objectives stated in
the RF Electric Grid Complex Development Strategy.
KPI’s Target and Actual Values in 2013 , annual
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, not less
Efficient implementation of the Cost Management Programme (CMP), not less
EBITDA, RUB million, not less
No major accidents
2013 Target
2013 Actual
10%
10%
10.25%
13.8%
91.037
96.297
0
0
Electric energy losses in the grid used by Federal Grid Company to provide electrici-
ty transmission services, not less
4.48%
4.28%
Meeting schedules for commissioning power facilities and implementing plans for
financing and disbursing capital investments, not less
90%
99.6%
KPI’s Target and Actual Values in 2013, semi-annual
No fatal workplace injuries or group accident with
at least one person severely injured
Financial stability indicator, i.e. the financial leverage
ratio
Meeting schedules for financing and implementing
investment programmes on a cumulative total from
the beginning of the year, not less
2013 Target
2013 Actual
First half
of the year
Second half
of the year
First half
of the year
Second half
of the year
0
1.5
0
1.5
0
0
0.33
0.44
90%
90%
99.2%
99.57%
Average duration of energy transmission interrup-
tions, hours/connection points, ea
-
0.0475
-
0.0199
Remuneration of the governing bodies
Federal Grid’s Remuneration Policy is based on our under-
standing of an efficient motivation system to be one of the
main conditions for improving the performance of members of
the Board of Directors and the Company’s senior executives.
Board of Directors
The Director’s remuneration criteria are set by the Regula-
tions on Remuneration and Compensation by members of the
Board of Directors of Federal Grid Company, as approved by
the Annual General Meeting of Shareholders on 29 June 2012.
148
149
Details on remuneration, benefits
and compensation paid to members
of the Company’s Management Board,
including the chief executive officer
(CEO), in 2013 (RUB thousand)*
Control System
Internal Control and Risk Management
CORPORATE GOVERNANCE / GOVERNANCE SYSTEM
The amount of remuneration to each Board member for his/
her contribution to the operations of the Board of Directors
depends on the following factors:
•
total number of Board of Directors’ meetings held dur-
ing the previous corporate year;
number of meetings attended by the Board member;
and
the Company’s revenues for the respective fiscal year.
•
•
Remuneration for the Chairman of the Board of Directors
is increased by 30%. Increase is 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%.
Compensation for expenses of members of the Board of
Directors is not provided.
Remuneration for contributions to the
Management Board’s operations
Salary
Bonuses
Commission
Benefits
The total remuneration for each Board member, given all
premiums, cannot exceed RUB900,000.
Other types of remuneration
Since the Company incurred a loss for the 2012 fiscal year,
the 2013 GMS resolved to pay no remuneration to the
Board of Directors.
Committees of the Board of Directors
Payment of remuneration to members of the committees of
the Board of Directors is made based on the Regulations on
Remuneration of Members of the Committees of the Board
of Directors of Federal Grid Company, as approved by the
Board of Directors on 16 December 2010.
The above Regulations do not apply to committee mem-
bers who are members of the Board of Directors, or mem-
bers of the collective executive body and/or the sole execu-
tive body of the Company.
TOTAL
* Including remuneration paid to all members of the Man-
agement Board in 2013 taking into account changes in the
composition of the Management Board.
Details on remuneration, benefits and
compensation paid to the Company’s
chief executive officer (CEO), in 2013
(RUB thousand)*
Remuneration for contributions to the
Management Board’s operations
On a quarterly basis, committee members shall be paid re-
muneration for each meeting attended. The amount of re-
muneration is equal to three minimum monthly wage rates
for a first category worker. Remuneration to the Chairman
of the Committee is increased by 50%.
The total amount of remuneration paid to members of the
Board committees in 2013 was RUB342,600.
Salary
Bonuses
Commission
Benefits
Management Board
Payments to the Company’s senior executives are regulat-
ed by Federal Grid’s internal documents and depend on
achievement by him or her of individual key performance
indicators (KPIs).
Other types of remuneration
TOTAL
* Including remuneration paid to all persons who performed
functions of the Company’s Chief Executive Officer in 2013
0
84,409
157,901
0
0
262,845
505,155
0
19,884
29,498
0
0
19,889
69,271
Main principles of Internal Control and Risk Man-
agement System Operation
• Risk Management Policy;
• Procedure for Applying the Risk Management Policy.
The Federal Grid’s Internal Control System (ICS) is an inte-
grated part of the Company’s governance system admin-
istered by the authorised bodies and officers. Our Internal
Control System has been designed to ensure:
The above documents set tasks and objectives of the risk
management system, its processes (elements), including
the procedures for risk identification and assessment,
planning of risk management actions and risk reporting.
In accordance with the Risk Management Policy the major
objective of the risk management system is to reduce risks
to an acceptable level set by the Company’s Management
Board. Federal Grid’s Risk Management Policy is aimed
at improving the Company’s short and long-term perfor-
mance, as well as ensuring the sustainable and continu-
ous operation and development of the Company through
the timely identification, assessment and treatment of risks
that threaten its efficient economic operation and good
standing, the health of its employees, the environment and
the property interests of shareholders and investors.
•
•
•
•
implementation of the State policy regarding the Elec-
tric Power Industry;
security, effectiveness and efficiency of business ac-
tivity of the Company and its subsidiaries and asso-
ciates;
reliability of all types of reporting of the Company and
its subsidiaries and associates;
compliance with applicable Russian laws and internal
regulations of the Company.
To ensure the ICS’s effective operation and the achieve-
ment of the Company’s objectives, the Board of Directors
approved the Regulations on Internal Control System of
Federal Grid Company (minutes No. 170 dated 3 August
2012).
The above ICS Regulations set the objectives, tasks and
operating principles of the Internal Control System, as
well as the structural components of the internal control
framework including the risk management system. Ac-
cording to the Regulations, the risk management system
includes:
•
•
analysis of business processes aimed to identify
events that can negatively affect the achievement of
the Company’s goals;
risk assessment with regard to their significance and
probability;
•
planning of risk treatment actions.
In order to give effect to the provisions set by the ICS Reg-
ulations regarding the risk management system, the Com-
pany’s CEO has approved the following documents
150
151
CORPORATE GOVERNANCE / CONTROL SYSTEM
Participants in Federal Grid’s Internal Control System
Authorities and Responsibilities of the Participants
of the Risk Management System
Management Board
Considers and approves a Risk Matrix, Risk Summary and risk minimisation
actions
Risk Owners
members of the Management Board, Deputy
Chairmen of the Management Board and the
Heads of the Company’s structural units
Ensure efficient risk management including risk identification and assess-
ment, and provision in the budget and business-plans of the amounts
required for financing the risk management actions
Owners of Control Procedures
Staff of the Company’s structural units
Organise and implement control procedures within the business processes
Identify and assess risks, plan and implement on reducing risk probability
and/or risk implications
Internal Control and Risk Management
Department
Plans and performs internal audit of the risk management system
Analyses risk factors and operational and investment efficiency enhancement
potentials in the course of long-term planning of operating and investing
activities
Organises the risk management system and evaluation of its efficiency
Following the results of the control conducted by the Audit
Chamber of the Russian Federation at the Federal Grid’s
facilities aimed to evaluate the efficiency of handling public
funds when preparing for the 2014 Winter Olympics and
Paralympics in Sochi and developing the city of Sochi as
an alpine climatic resort, the Company issued a Decree
No 785 dated 26 December 2013 which provides for the
review of the regulations and administrative documents
of the Company and its subsidiaries that regulate the ex-
isting internal control system. The above document also
provides for drafting and submitting for the approval of
the Chairman of the Management Board the Programme
for improving the quality of the Company’s internal control
system. In 2014, measures are expected to be implement-
ed aimed at improving the Internal control and risk man-
agement system of Federal Grid Company.
152
153
CORPORATE GOVERNANCE / CONTROL SYSTEM
Key Risk Factors and Information
about Risk Management Actions
RISK DESCRIPTION
RISK IMPACT
RISK MITIGATION ACTIONS
Risk of employee injury at
the Company’s facilities,
resulting in damages to
health or death
The Company’s health and safety sys-
tem is effectively achieving objectives
whereby employees develop skills of
safe behaviour in the workplace and
dangerous situations are prevented,
thus minimising the risk of accident.
•
Take actions to raise the level of health and safety
at the Company’s facilities
• Develop and update internal rules and regulations
pertaining to health and safety and employee in-
jury prevention in the Company.
RISK DESCRIPTION
RISK IMPACT
RISK MITIGATION ACTIONS
Industrial safety (p. 117)
System-wide interruptions in perfor-
mance and failures to supply elec-
tricity to customers, either due do
equipment failures or to natural disas-
ters could eventually cause significant
economic and reputational losses for
the Company.
Besides, they could affect the volume
of losses in its electric grids.
Industrial risks
Operational and tech-
nological risks
Risks are related to high
physical wear and obso-
lescence of electricity grid
assets, violations of ser-
vice conditions and oper-
ational regimes of electric
grid equipment, damages
of equipment, wrong per-
formance of relay protec-
tion of automatic controls
and automatic emergency
response system, the use
of inefficient and obsolete
technologies and failure
to implement the repairs
programme in full.
Operational and tech-
nological risks are also
related to possible emer-
gency situations at the
grid facilities due to natural
disasters (hurricanes, rain
storms, icy rains, high river
water, river floods, snow
blocks, etc.)
•
Implementation of the corporate
Investment
Programme, which includes projects that aim to
achieve the following goals:
– Reduce the degree of wear of fixed assets
– Renovate electric grid facilities
–
Ensure delivery of capacity by power plants and
reliability of cross-regional electric power ex-
changes
– Upgrade switchgear equipment
– Upgrade and develop automated process control
systems
–
Improve grid manageability and observability
– Clear the routes for overhead transmission lines
–
–
•
(OHTLs)
Improve energy efficiency
Expand the pool of backup electric power sourc-
es, vehicles and special-purpose machinery for
post-accident repairs
Implement maintenance and repair plans and tar-
geted programmes for the replacement of obso-
lete OHTLs and equipment at substations
• Oversee implementation and update of Regula-
tion of JSC Russian Grids on the Unified Techni-
cal Policy in the Electric Grid Complex
•
Educate, oversee and certify employees who run
process equipment
• Conduct emergency response drills and onsite
inspections in the Company’s branches
• Operations of permanent duty teams in the re-
gions. These teams are to conduct emergency
and recovery work at the grid facilities. Establish
emergency reserve of equipment
•
Implement the Property Insurance Protection
Programme
• Operations of the Company’s branch, i.e. Technical
Supervision Centre, which was established to main-
tain current technical supervision over the condition
of the Company’s energy facilities and technical su-
pervision at facilities that are under upgrade, tech-
nical renovation and at newly constructed facilities.
Improving reliability (p. 41)
Investment activities (p. 57)
Environmental risks
The environment may
be adversely affected
by emergency situations
that are caused by the
physical wear of electric
grid infrastructure facilities
or the violation of their op-
erational conditions. The
Company’s equipment
contains trichlordiphenyl,
which may in some cases
pollute the environment
and cause injury to em-
ployees and the public.
The Company may be fined if it violates
Russian environmental law.
Government controlling authorities can
impose sanctions on the Company if it
violates the procedures of usage, stor-
age or disposal of trichlordiphenyl-con-
taining equipment.
The likelihood of these risks is as-
sessed as very low.
Industry risks
Risk related to govern-
ment tariff regulation
(changes in the tariff
decisions or parame-
ters of tariff regulation)
The Company derives its
main income from pay-
ments for electric power
transmission services via
UNEG. The size of these
payments is based on
tariffs that are approved
by the Federal Tariff
Service of Russia as rates
for maintenance of the
power grid facilities that
are integrated with UNEG,
and rates of rules-based
technological losses of
electric power in UNEG in
the Russian regions.
• Restrictions on the
growth of tariffs on
power transmission
via UNEG and revi
Factors that cause the risk of limitation
on sources of tariffs for the Company’s
operations and investments:
• According to the Social and Eco-
nomic Outlook for 2012–2014
that was approved by the Russian
Government, a decision was taken
to postpone indexation of prices
(tariffs) for goods (services) of nat-
ural monopolies, including electric
grid companies from 1 January to
1 July of the next calendar year in
order to curb the growth of prices
and tariffs on goods (services) of
natural monopolies in 2012–2014
• Based on the outcomes of the
2013 St Petersburg Economic Fo-
rum, the President of the Russian
Federation signed several orders
aimed at curbing the growth of
tariffs of natural monopolies for a
five-year period
• On 19 November 2013, the Rus-
sian Government approved an
Action Plan to cap the final cost of
goods and services provided
154
155
•
•
The Company’s Environmental Policy approved
by the Board of Directors is the tool of environ-
mental risk mitigation
The design of any new facility involves the drafting
of a special environmental section that takes into
account all requirements of Russian environmen-
tal protection laws
• All projects for construction and renovation of
power grid facilities undergo environmental due
diligence by the State authorities
•
The Company implements a targeted programme
of full decommissioning and detoxification of
trichlordiphenyl-containing equipment
• Work is in progress to gradually involve all Com-
pany branches in the existing system of envi-
ronmental management and subsequent issue
of certificates of consistency with international
standard ISO 14001:2004 “Environmental Man-
agement System”.
Environment (p. 120)
•
–
–
–
–
–
• Management of risks related to tariff regulation
implies a further implementation of actions that
aim for higher operational and investment efficien-
cy.
The Company approved a large-scale cost-cut-
ting programme with the following objectives:
To cut the costs of information services
To optimise the costs of facility maintenance, in-
cluding the costs of utilities
To reduce the costs of leasing office space
To reduce the costs of business travel
To reduce the costs of insurance in tender-based
contract awards
To reduce the costs of the operational programme
by using the Company’s own resources in the
performance of some works, lowering prices of
procured works and materials without reducing
their physical volumes and making some reduc-
tions in targeted repair programmes
In November 2013, the Company established the
Operating Efficiency Committee. This Commit-
tee is mandated to review, approve and oversee
programmes to improvement of operating and
investment efficiency
The Efficiency Committee approved several pro-
grammes to reduce operational costs and raise
the Company’s investment efficiency:
–
•
•
CORPORATE GOVERNANCE / CONTROL SYSTEM
RISK DESCRIPTION
RISK IMPACT
RISK MITIGATION ACTIONS
RISK DESCRIPTION
RISK IMPACT
RISK MITIGATION ACTIONS
•
sion of parameters of
ong-term regulation
by the FTS
The Company re-
ceives lower revenues
from power trans-
mission because the
payment procedure
is changed but these
changes have not
been taken into
account when tariffs
were set.
Risks of failing to meet
the parameters of the
investment programme
approved by the Minis-
try of Energy
Risks of failing to meet
the parameters of the
Company’s investment
programme may mate-
rialise if scheduled due
dates of project imple-
mentation are not met
or if projects that had
not been envisaged are
included in the invest-
ment programme or if
the actual costs of the
investment programme
facilities overrun their
budgeted costs. The
investment programme
parameters can also be
breached if the Company
fails to obtain the neces-
sary cash funds.
by infrastructure companies while
maintaining their financial sustain-
ability and investment attractiveness
• Rules of non-discriminatory ac-
cess to electric power transmis-
sion services and delivery of these
services, approved by Resolution
No. 861 of the Russian Govern-
ment (dated 27 December 2004),
stated that on 1 July 2014 there
will be transition to the payment
for the Company’s electric power
transmission services on the basis
of its actual consumption
• Amendments were made in 2013
to Resolution “On Pricing in Reg-
ulation of Prices (Tariffs) in the
Electricity Sector” No. 1178 of
the Russian Government (dated
29 December 2011), According
to these amendments, as of 1
July 2014, long-term tariffs on
the Company’s services will be
capped by tariffs that were effec-
tive on 30 June 2014, which ef-
fectively means that tariffs will be
frozen at their 2013 level.
The investment plan for the coming
five years includes draft adjustments
of Federal Grid Company’s investment
programme for 2014 and the invest-
ment programme for 2015-2019. Draft
investment programmes have been
sent to the Ministry of Energy. Reso-
lution No. 159 of the Government of
the Russian Federation (dated 27 Feb-
ruary 2013) “On Making Amendments
to the Rules of Approval of Investment
Programmes of Electricity Sector Facil-
ities with State Participation, and Grid
Organisations” became effective. This
Resolution may expose the Company
to risks because facilities that are not
included in the regional plans may be
excluded from this Investment Pro-
gramme.
Given that the Investment Programme
parameters are used when the Com-
pany’s tariffs for power transmission
are set, non-implementation of the In-
vestment Programme will result in the
downward adjustment of gross reve-
nues in the subsequent periods.
–
–
–
•
•
•
•
•
•
•
The 2014 Programme for the Optimisation of the
Power Transmission Costs
The 2014 Programme for the Optimisation of
Costs of Purchases for Compensation of Losses
The Programme for the Optimisation of IT Costs
In order to mitigate risks related to changes in the
procedure of calculating the volume of the Com-
pany’s power transmission services, the Compa-
ny sent letters to the Federal Tariff Service, the
Ministry of Economic Development and the Minis-
try of Energy asking them to consider postponing
transition to payments for actual consumption of
capacity
The Company draws high-quality rationale mate-
rials to back up application for tariff setting/revi-
sion.
Tariff regulation (p. 92)
Cost optimisation (p. 81)
The Company has initiated actions to implement
an action plan (“road map”) to establish and de-
velop mechanisms of public control over natural
monopolies (in which the power consumers will
take part), as approved by Directive No. 1689-
r of the Government of the Russian Federation
(dated 19 September 2013) “On the Approval of
the Concept of the Establishment and Develop-
ment of Mechanisms of Public Control over Natu-
ral Monopolies (With Participation of Customers)”
and Action Plan (“road map”). Oversee implemen-
tation of capital investment financing plan and
consistency with the work completion deadlines
The Company approved an anti-corruption policy
in order to avoid exposures to fraud during pro-
curement during the implementation of the Invest-
ment Programme; actions are taken to assess the
good faith and reliability of counterparties
In order to mitigate risks of breaching the param-
eters of the Investment Programme, the Compa-
ny’s Efficiency Committee approved the Invest-
ment Efficiency Programme, which envisages a
reduction of investment costs in 2014.
In order to mitigate the risk of having some facil-
ities excluded from the Investment Programme,
the Company makes sure that its officers take
part in the drafting and approval of the Scheme of
Territorial Planning of Energy Facilities in the Rus-
sian Federation by the Ministry of Energy
The risk of a shortage of funding sources for the
Investment Programme is minimised via borrow-
ings: in 2013, the Company signed agreements
about credit facilities and successfully placed in-
frastructure bonds.
Investment activities (p. 57)
Procurement (p. 52)
Debt portfolio (p. 95)
Financial risks
Risk of the counter-
parties’ default on
their obligations to the
Company
This risk is related to
untimely or incomplete
fulfilment by customers
and/or counterparties of
their obligations to pay the
Federal Grid Company for
its services or supply of
goods and/or services.
Currency risk
Currency risk is related to
uncertainty about fluc-
tuations of the currency
exchange rates and
affects the performance
of obligations with respect
to procured imported
equipment.
Liquidity risk
Liquidity risk is related to
possible losses that may
be caused by the Com-
pany’s inability to meet its
obligations in full.
Payments
transmis-
for electricity
sion services are the primary revenue
source for the Federal Grid Company.
According to Russian law, the Compa-
ny must sign contracts for electricity
transmission services with all custom-
ers that meet certain criteria. If a cus-
tomer fails to make timely payments
for electricity transmission services, the
Company is allowed to suspend the
delivery of these services to this cus-
tomer. However, the Company is not
allowed to terminate the contract with
a non-paying customer unilaterally.
If the Company faces non-payment
and delayed payments (in particular if
this situation continues for a long pe-
riod because the Company is unable
to discontinue services to non-paying
customers), this may have a substan-
tial adverse effect on the Company’s
financial standing and performance.
Deterioration of the business envi-
ronment for counterparties may also
affect the Company’s estimated cash
flows and assessment of impairment
of financial and non-financial assets,
as well as its ability to service bonds.
•
•
The Efficiency Committee approved the Pro-
gramme for Improving the Receivables Manage-
ment and Contractual Discipline/Claims Manage-
ment in 2014
The Company established the Receivables and
Payables Management Committee which has
been operating as a permanent body
• Analyse a given counterparty’s financial standing
at the procurement stage and subsequent moni-
toring at the stage where contractual obligations
are performed
• Contract supervising managers to monitor the
status of receivables
• Settle overdue accounts receivable (claims
management, court reclamation of debt, claims
offsetting, debt restructuring via court and in the
off-court manner)
Initiate amendments to existing legislation and
regulations in order to strengthen financial re-
sponsibility/liability of non-payers
•
Management’s Discussion and Analysis
(p. 74)
The Company receives its revenues
from the electricity transmission ser-
vices in roubles, and only a small
share of revenues is billed in foreign
currency.
•
•
The Company’s current loan payments
are also in roubles.
Therefore, its financial standing, liquid-
ity, sources of financing and perfor-
mance are not substantially exposed
to fluctuations of currency rates.
Economic risks related to exchange
rate appreciations and increased in-
flation are relevant to the Company to
the extent that they affect the costs of
imported equipment which is procured
under its Investment Programme.
Federal Grid has
investment-grade
credit ratings. It services loans and
credit in strict accordance with sched-
ules.
The Company controls its payments level and for-
eign currency obligations: the Board of Directors
sets a limit on foreign currency transactions
The Company implements an Import Substi-
tution Programme (equipment, materials and
technologies) at its facilities in 2011–2014. The
Programme targets the priority procurement of
high-tech equipment produced in Russia.
Management’s Discussion and Analysis
(p. 74)
Import substitution policy (p. 56)
•
•
•
The Company controls its debt level and credit
standing in compliance with its Regulations on
Credit Policy
The Company maintains a high level of undrawn
open loan facilities in the largest Russian and
foreign banks
The Company builds a diversified loan portfolio in
terms of instruments and maturities.
Financial position (p. 88)
Debt portfolio (p. 95)
156
157
CORPORATE GOVERNANCE / CONTROL SYSTEM
RISK DESCRIPTION
RISK IMPACT
RISK MITIGATION ACTIONS
Audit Commission
Interest rate risk
This risk is largely related
to changes of interest
rates on loans and bank
credit.
In order to finance its Investment Pro-
gramme for 2013–2017, the Company
made large borrowings, thus increas-
ing its exposure to interest rate risks.
Unfavourable changes in the capital
markets (such as a substantial in-
crease of interest rates) may result in
larger costs of debt service.
A large share of the Company’s floating
rate facilities includes clauses about re-
payment of these debt obligations be-
fore maturity if the coupon rate reaches
or exceeds 10% per annum. There-
fore, the risk that the floating interest
rate will increase is partially hedged,
and the Company perceives interest
risk as low.
•
•
The Company seeks to arrange most of its bor-
rowing at fixed rates
The Company controls its debt levels and cred-
it standing, including the process of planning its
investments
• Credit-standing criteria and targets are set in the
Company’s Regulations on Credit Policy, which is
approved by the Board of Directors
The Company services loans and credit in strict
compliance with schedules.
•
Financial position (p. 88)
Debt portfolio (p. 95)
•
The Audit Commission is a permanent body which is elected
annually by the General Meeting of Shareholders and is re-
sponsible for exercising control over the Company’s financial
and operational activities, its governing bodies and structural
units. The main tasks of the Audit Commission are as follows:
confirmation of the reliability of data contained in the
•
Company’s annual report, accounting balance sheet,
and profit and loss statement;
analysis of the Company’s financial position, identifi-
cation of ways for improving the financial position of
the Company, and developing recommendations to
the governing bodies;
organisation and performance of audits (revisions) of the
Company’s financial and operational activities, includ-
ing: review of financial, accounting, payment and set-
tlement, and other documents related to financial and
operational activities; control over the preservation and
use of the fixed assets; control over expenditures in ac-
cordance with the approved business plan and budget;
control over formation and use of reserve and other spe-
cial-purpose funds; audit of timeliness and correctness
of payment of dividends and bond interests.
•
Members of the Audit Commission elected
by the Extraordinary General Meeting
of Shareholders on 11 November 2013
Anna Drokova
Year of birth: 1985
Education: Higher School of Economics, Master’s degree
in Economics
Position: Deputy Head of Secretariat of the Chairman
of the Board of Directors of JSC Russian Grids
Vladimir Khvorov
Year of birth: 1947
Education: higher, Moscow Power Engineering Institute
Position: leading expert of the Department of the Ministry
of Economic Development of Russia
Anna Nesterova
Year of birth: 1982
Education: higher
Position: Deputy Director for Social Projects branch
of Non-Profit Autonomous Organisation Agency
for Strategic Initiatives
Members of the Audit Commission hold no shares
in Federal Grid Company.
Remuneration of the Audit
Commission members
Education: higher, State University of Management (Mas-
ter’s degree in Jurisprudence), Russian State University of
Trade and Economics
Position: Head of the Department of organisations of Fuel
and Energy Sector of the Department of Property Relations
and Privatisation of the Federal Agency of State Property
Management
On 30 June 2008, the General Meeting of Shareholders
approved the Regulations on Remuneration and Com-
pensation to Members of the Audit Commission of Federal
Grid Company. The above-mentioned Regulations do not
provide for mandatory payments to members of the Audit
Commission. In 2013, no remuneration was paid to the Au-
dit Commission members.
Leonid Neganov
Year of birth: 1972
Education: higher, Moscow Engineering Physics Institute,
Higher School of Economics (degree in Management)
Position: Minister of Energy of Moscow Region
Karim Samakhuzhin
Year of birth: 1988
158
159
CORPORATE GOVERNANCE / CONTROL SYSTEM
Auditor
As required by the laws of the Russian Federation, the Gen-
eral Meeting of Shareholders of Federal Grid Company ap-
points, on an annual basis, an auditor to perform a statutory
audit of the Company’s accounting statements.
Company by property interests, and are non-affiliated with
the Company and/or with its affiliates. The auditor’s pro-
fessional level and the cost of their services are the main
criteria for selecting an audit firm.
On 27 June 2013, the General Meeting of Shareholders ap-
proved RSM Top-Audit LLC (renamed RSM RUS LLC on 20
August 2013) as the Company’s auditor under the Russian
Accounting Standards (RAS) and the International Financial
Reporting Standards (IFRS). RSM RUS LLC is a full member
of the leading international auditing and consulting organi-
sation RSM International and a member of the self-regula-
tory organisation of auditors, Non-Profit Partnership Auditor
Association Sodruzhestvo.
Auditor Selection
In order to select an independent auditor, the Company
holds an open tender among organisations which have
a general audit licence and are not connected with the
Based on the tender results, the Audit Committee
of the Board of Directors makes a recommendation to the
Board to consider a winner as a candidate to be pro-
posed for an approval by the Annual General Meeting
of Shareholders.
Auditor Remuneration
The Board of Directors has set the maximum amount pay-
able to the external auditor for auditing the Company’s fi-
nancial statements under RAS and IFRS for 2013 at RUB25
million including VAT.
During the reporting period, the external auditor did not
provide any non-audit services to the Company.
Managing Subsidiaries and Associates
As of 31 December 2013, Federal Grid had 21 subsidiaries
and associates mostly operating in the energy industry, in-
cluding supporting electric grid facilities.
The following internal documents have been adopted to
regulate the Company’s relationship with its subsidiaries
and associates, as well as other entities in which Federal
Grid has an ownership interest:
• Procedure for Interaction with Subsidiaries and Associ-
ates of Federal Grid Company
• Regulations on Managing Subsidiaries and Associates
and other Entities in which Federal Grid Company has
an ownership interest
• Standard for Structural Units of Federal Grid Company
on Building Positions and Instructing Representatives
of the Company in General Meetings of Shareholders
and Boards of Directors of Subsidiaries and Associates
The Procedure for Interaction with Subsidiaries and Asso-
ciates of Federal Grid Company, approved by the Board of
Directors, serves as a basic document setting corporate
procedures through which the Company manages its sub-
sidiaries and associates.
The main forms of interaction between the Company and its
subsidiaries and associates are as follows:
• Consideration by the Board of Directors of issues re-
garding positions of the Company representatives
on draft resolutions on agenda items of General Meet-
ings of Shareholders and meetings of Boards of Direc-
tors of subsidiaries and associates
• Participation in drafting proposals and decision-mak-
ing by governing bodies of subsidiaries and associ-
ates through the Company representatives in Gener-
al Meetings of Shareholders and meetings of Boards
of Directors of subsidiaries and associates
• Procedure for KPI calculation and target achievement
evaluation in Subsidiaries and Associates of Federal
Grid Company
• Consideration by the Management Board of issues
within its competence that relate to interaction between
the Company and its subsidiaries and associates.
•
Federal Grid Company’s Order on Approval of Stand-
ards and Model Regulations on Managing Subsidiaries
and Associates, and other regulatory and administra-
tive documents of Federal Grid Company
For further details on Federal Grid’s partici-
pation in subsidiaries, associates and other
organisations see Appendix to the Report
on the memory stick attached.
160
161
CORPORATE GOVERNANCE / CONTROL SYSTEM
Anti-Corruption Activities
Implementation of the Company’s
Anti-Corruption Policy
ACTUAL
2012
ACTUAL
2013
The Anti-Corruption Policy’s tasks are as follows:
Economic effect of
anti-corruption measures
in procurement, RUB mln
116.9
450.0
• minimising the risk of involvement in corrupt practices
on the part of members of the Board of Directors, the
Chairman and members of the Management Board
and the Company’s employees, irrespective of their
position
•
preventing corrupt practices
A special-purpose structural unit – the Department of Op-
erational Control and Compliance – is responsible for the
organisational support that underpins the implementation
of the Anti-Corruption Policy.
In 2013, there were three main areas surrounding the imple-
mentation of the Anti-Corruption Policy.
We consider corruption to be one of the systemic threats to
the stability and national security, and fighting corruption is
among our priority tasks.
•
ensuring liability and compensation for harm caused
by corruption
The following anti-corruption measures were implemented
in 2013:
• monitoring the effectiveness of anti-corruption meas-
ures
•
The procedure for the declaration of conflicts of inter-
ests by the Company’s senior managers.
• Scheduled and unscheduled audits aimed at detect-
ing corrupt practices in the activities of the Company’s
subsidiaries and associates.
• Anti-corruption review of 2011 organisational and ad-
ministrative documents in the Company’s Executive
Office and branches.
• Anti-corruption review of transaction documents under
11,644 transactions, including procurement proce-
dures, followed by specific actions aimed at preventing
and/or compensating losses and missed profit.
The economic effect of anti-corruption measures in 2013
significantly exceeded figures reported in 2012 and amount-
ed to more than RUB450 million.
Enhancement of functions
performed within anti-corrup-
tion activities and compliance
procedures
Improvement of regulatory
framework
For the purpose of preventing possible corrupt practices, we started to monitor the financial
condition of our existing and potential counterparties. We also arranged monitoring of pro-
curement procedures within our investing activities.
In 2013, we continued to develop our internal anti-corruption regulatory framework and
adopted a number of organisational and administrative documents on certain anti-corrup-
tion procedures, including Regulations on handling conflict of interests and Procedures for
handling information on the chain of ownership (including beneficiaries) of procurement
participants (potential counterparties) and counterparties of Federal Grid.
Automation of activities
In 2013, we performed testing and commissioning of the computer-aided system Record-
ing of the Company Counterparties’ Beneficiaries, which has been created to collect and
analyse information on counterparties’ owners.
•
•
establishing legal mechanism preventing bribery of
those responsible for anti-corruption measures in the
Company
ensuring awareness and compliance with anti-corrup-
tion legislation and the requirements of the Anti-Cor-
ruption Policy by the Company employees.
Main Principles and Tasks of the
Anti-Corruption Policy
In 2012, the Board of Directors approved Federal Grid’s An-
ti-Corruption Policy, which aims to design and implement
measures for the prevention of corruption, eliminate its root
causes and conditions, and strengthen anti-corruption atti-
tudes among employees.
The implementation of our Anti-Corruption Policy is based
on principles which are in line with the best international
anti-corruption practices, including:
•
zero tolerance towards corruption in all its forms and
manifestations
• minimisation of the risk of business relations with coun-
terparties which may be involved in corrupt practices
•
•
•
•
the mission of top management – members of the gov-
erning bodies and senior managers - should form an
ethical standard for the non-acceptance of any forms
of corruption at all levels, making their own behaviour
an example to others
prohibition of granting privileges or immunities from li-
ability for corruption to certain groups of employees
prohibition of any impediments to access to informa-
tion about corrupt practices and anti-corruption meas-
ures
continuous monitoring of, and control over, Anti-Cor-
ruption Policy implementation.
162
163
CORPORATE GOVERNANCE / SHARE CAPITAL
Share capital
Share Capital Structure*
As of 31 December 2013, the charter capital of Feder-
al Grid Company amounted to RUB633,570,507,998
and was divided into 1,267,141,015,996 ordinary regis-
tered non-documentary shares with a nominal value of
RUB0.50 each.
In accordance with the Company’s Articles of Association,
the number of authorised shares was 79,664,807,835 or-
dinary registered shares with a nominal value of RUB0.50
each and a total nominal value of RUB39,832,403,917.5.
Authorised ordinary shares offer the same rights as out-
standing ordinary shares.
In November 2013, the Board of Directors adopted a res-
olution to increase Federal Grid Company’s share capital
by placing additional ordinary registered shares with a
total value of RUB4,715,699,886.5 through an open sub-
scription. On 21 November 2013, the additional issue
was registered by the FFMS of Russia under the state
registration number of 1-01-65018-D. The Company pro-
vided its shareholders with a pre-emptive right to acquire
shares of additional issue.
On 20 February 2014, the additional ordinary share issue
was completed with a price of RUB0.50 per share. Dur-
ing the additional issue, 7,524,307,067 shares (79.78% of
the total number of securities of the additional issue to
be placed) were placed. As a result of the placement, the
Company received funds in the amount of RUB3,762 billion.
The Russian Federation, which acquired shares to the
amount of RUB3,756 billion, was the main participant in
the additional issue. The remainder of the outstanding
shares, in the amount of RUB6 million, was acquired by
minority shareholders. The Company has allocated funds
received from the additional issue for constructing and
commissioning electricity transmission lines to improve
the reliability of power supply in the Republic of Sakha
and Buryatia, as well as facilities for the Winter Olympics
in Sochi.
Information on the Company’s share capital
history can be found on our corporate website,
www.fsk-ees.ru, in Investors / Share Infor-
mation / Share Capital History section.
For further details on each of the Company’s
securities issue, see Appendix to the Report
on the memory stick attached.
The Company has more than 400,000 shareholders.
The JSC Russian Grids, which owns 80.6% of the share
capital, is the Company’s majority shareholder. The Rus-
sian Federation, represented by the Federal Agency for
State Property Management (Rosimushchestvo), owns
0.00000000055% of the share capital.
On 17 June 2013, Russian Grids and Rosimushchestvo
signed a shareholders’ agreement regarding the holding
of shares, present or future, and voting in Federal Grid
Company.
To improve interactions with shareholders, Federal Grid
Company analysed its shareholder register and identified
the key groups of holders of ordinary shares and depos-
itory receipts. As of the end of 2013, the Company’s free
float was on average 19.4%. The main minority share-
holders of the Company are institutional investors and
holding structures, with retail investors accounting for
2.82%.
Share Capital Structure of Federal Grid*
* Information is disclosed with the consent of the respective shareholders.
15% of the Company’s free float includes foreign in-
stitutional investors, such as major funds focused pri-
marily on Russia, whose assets under management ex-
ceed USD1 billion: Vanguard Emerging Markets Stock
Index Fund (USD62 billion), East Capital Russian Fund
(USD1.2 billion), Market Vectors ETF Trust Russia ETF
(USD1 billion), and BlackRock funds.
Geographical Breakdown of Foreign Investors
As before, the largest share of foreign investments belongs
to American (43%) and Scandinavian (36%) shareholders.
Investor Breakdown by Investment Horizons
* Data as of 31 December 2013 (without taking into account data for shares of additional issue,
placement of which was completed in 2014).
The Company’s shareholders are predominantly long-
term investors, with low portfolio turnover, and holdings that
(on average) exceed two years.
164
165
CORPORATE GOVERNANCE / SHARE CAPITAL
Stock Market
Shares of Federal Grid Company are traded on the “B” quo-
tation list of the MICEX Russian Stock Exchange, which is a
member of JSC Moscow Exchange Group. The fundamen-
tal appeal of the Company’s stock is underpinned by its
inclusion in key Russian and foreign indices: MSCI Russia,
MSCI Emerging Markets, MICEX Index, RTS Index, Sector
Index (Micex PWR) and Vienna Stock Exchange Indices
(Russian Traded Index, the RTX Energy).
2013
TARGET
2014
TARGET
Return on initial
invested capital, %
7.8
10
Federal Grid’s Share Information
2013 Share Performance
Global equity markets closed mixed in 2013: the index
of developed countries MSCI World has increased by
24%, while the index of emerging MSCI EM declined
by 5%. The difference in absolute values of these indi-
cators has more than doubled, reaching its maximum
since 2001.
The Russian market grew – the MICEX index added 2%,
which is far below the growth rate of the MSCI World but yet
looks better than MSCI EM behaviour.
Share category
Nominal value
MICEX Ticker
LSE Ticker
ISIN
Ordinary registered
non-documentary
RUB0.50
FEES
FEES
RU000A0JPNN9
Bloomberg Code
FEES RX
Electricity Sector, Federal Grid Company’s shares
Electricity industry equities were major underperformers –
the Micex PWR sector index went down by 39.5%. The in-
dicator declined quicker than the market, largely because
of the tighter tariff policy followed by a decision about zero
indexation of tariffs in 2014.
In 2013, Federal Grid Company shares lost 55.2%, strong-
ly underperforming the Micex PWR sector index.
In February and March, shares were under pressure of spec-
ulations regarding the parameters of a stock valuation of
Federal Grid Company and Russian Grids for Russian Grids’
additional issue within the electric grid sector reorganisation.
Since April 2014, the Russian Government’s proposals to
tighten the tariff policy for natural monopolies (these pro-
posals were finalised in a decision to freeze tariffs in 2014)
have had an additional adverse material impact on Federal
Grid Company equities.
Another adverse effect on Federal Grid Company’s equi-
ties was the exclusion of Russian Grids’ shares from MSCI
Russia because equities related to the conversion ratios
were under pressure following the aggressive selling of
Russian Grids shares.
At year-end, Federal Grid Company shares recovered
somewhat, supported – among other factors – by a state-
ment from Russian Grids’ CEO that emphasised the read-
iness of the holding company and its subsidiaries to pay
25% of IFRS net profit as dividend.
Key Parameters of Federal Grid Company Share Trading
2011
2012
2013*
units
476,111,513,800
619,919,120,000
989,348,930,000
RUB
159,370,754,044
147,513,331,183
116,812,022,883
units
RUB
RUB
RUB
mln,
shares
2,043,606
2,698,318
3,235,854
0.21111
0.481
0.2811
0.1513
0.3768
0.20104
0.07508
0.226
0.09016
1,255,948
1,260,387
1,267,141
RUB, mln
351,163.1
253,904.89
114,600.23
Volume
Number of deals
Low
High
Period end
Number of shares
Capitalisation at year
end
* T+2 trade results are calculated from 2 September – date of Moscow Exchange’s switch to this trading mode as a basic
one. Source: Moscow Exchange website, moex.com
For further details of our shares’ trading, please refer to the section Investors / Share Information / Interactive
Stock Chart of our website, www.fsk-ees.ru
166
167
GDR Price and Trading Volume, LSE
CORPORATE GOVERNANCE / SHARE CAPITAL
Global Depository Receipt Programme
On 30 June 2008, Federal Grid Company launched a
global depository receipt (GDR) programme, which was
not listed under Regulation S and Rule 144A. From 1 June
2013, the Programme’s depository bank is the Bank of
New York Mellon (BNY Mellon).
In 2011, the Company completed a technical listing of de-
pository receipts on the Main Market of the London Stock
Exchange (LSE), which began trading Federal Grid Com-
pany GDRs on 28 March.
As of 31 December 2013, the GDR programme had
5.6 million receipts, representing 0.221% of the
Company’s share capital. The maximum number
of GDRs that the Company is allowed to issue is
287,269,492,431.
GDR Programme Highlights
Regulation S
Rule 144A
Ratio
1 GDR: 500 shares
1 GDR: 500 shares
International Code
ISIN: US3133542015
CommonCode: 036273577
ISIN: US3133541025
CommonCode: 0362733372
Price per GDR at year end
USD 1.35
Number of GDRs as of 31 December 2013
2,221,960
—
3,384,725
GDR Programme as a Percentage of the Company’s Share Capital
For further details on trading in the Company’s
depository receipts, please refer to our website
www.fsk-ees.ru, section Investors / Share
Information / Interactive Stock Chart.
Updates about the GDR programme are also
available on the LSE website at www.lon-
donstockexchange.com under Federal Grid
Company’s ticker: EEES.
168
169
CORPORATE GOVERNANCE / SHARE CAPITAL
Dividend Policy
Our dividend policy strikes a balance between shareholders’
interests and the Company’s business needs, including en-
hancing its investment attractiveness and capitalisation.
The full text of the Regulations on Dividend Pol-
icy is available at our website www.fsk-ees.ru,
Section Shareholders and Investors.
The Company’s Board of Directors approved the Regulations
on Dividend Policy of Federal Grid Company setting the divi-
dend policy principles, mechanisms for determining the size of
dividends, procedure, period and form of dividend payment.
In accordance with the Regulations, the minimum payout rate
is set at 10% of net profit under RAS.
The General Meeting of Shareholders may, by ordinary res-
olution, declare dividends in accordance with the respective
rights of the shareholders, but not exceeding the amount
recommended by the Board of Directors. The Board makes
its recommendations based on financial results, seeking to
balance the interests of the Company and its shareholders.
Payment of dividends for 2006—2012
2006
2007
2008
2009
2010
2011
2012
Dividend per share, kop.
0.16
0.08
Total accrued, RUB mln
587.9
380.0
Total paid, RUB mln
587.9
380.0
Paid to accrued dividend ratio, %
100
100
—
—
—
—
—
—
—
—
0.21
2,577.7
2,569.3*
99.67
—
—
—
—
—
—
—
—
* Dividends were paid in full to all shareholders registered in the Company’s shareholder register excluding the amount
of RUB 8,383,793.57 to those shareholders who had not timely informed about changes in their personal data or who
had submitted incorrect payment details.
No dividends were declared for 2008, 2009, 2011 and 2012.
2013 Dividends
In accordance with Clause 2 of Article 42 of the Federal Law
“On Joint Stock Companies” and Clause 7.5 of Article 7 of
Federal Grid Company’s Articles of Association, dividends
shall be paid out from the Company’s net income deter-
mined under the Company’s accounting statements.
According to Federal Grid Company’s 2013 accounting
statements, there was a loss of RUB25,898 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 ac-
crual and recovery of doubtful debt provisions.
In 2014, the Company’s Annual General Meeting
of Shareholders will make a resolution on the 2013 div-
idend payment. Shareholders have proposed to resolve
not to pay 2013 dividends on the Company’s ordinary
shares.
Information Policy
Our Information Policy is based on the following funda-
mental principles of information disclosure:
•
terms and conditions of regulated services
•
regularity and promptness
•
availability of information
•
completeness and reliability of disclosed information
• maintenance of a reasonable balance between the
openness of the Company and protection of its com-
mercial interests.
The Regulations on Information Policy of Federal Grid
Company approved by the Company’s Board provide the
main principles of information disclosure and establish
the list of information subject to disclosure as well as the
rules for information disclosure.
We believe that openness is one of the key elements for
improving the efficiency and sustainability of the Com-
pany’s activities, and for strengthening relations with its
stakeholders.
In addition to strict compliance with the requirements on
mandatory disclosures, we maintain an ongoing dialogue
with our stakeholders, assess their informational needs
and strive to meet them promptly.
In accordance with the Federal Law “On Natural Mo-
nopolies”, as well as with the Standards of Information
Disclosure by participants of the wholesale and retail
electricity and capacity markets, our Company, being a
natural monopoly entity and a participant of the Whole-
sale Electricity and Capacity Market (WECM), provides
free access to information about its activities, including
information on:
•
tariffs for services with regard to which State regu-
lation is applied
•
key indicators of financial and operational activities
•
the main consumer specifications of regulated ser-
vices
•
the technical accessibility of regulated services
•
registration and implementation of applications for
technological connections to the Company’s infra-
structure
•
•
technological, technical and other activities related
to technological connections to the Company’s in-
frastructure
investment programmes, their projects and imple-
mentation
• modes of purchase, cost and on the amount
of goods required for rendering regulated services.
Information disclosure channels
Federal Grid Company’s main disclosure channel is our
corporate website www.fsk-ees.ru, which is updated
regularly and provides information on material facts and
events, governance structure and the Company’s busi-
ness results. The website presents the Articles of Asso-
ciation and other internal documents, information of af-
filiated entities, securities, dividend payments, quarterly
and annual reports and sustainability reports, annual
and interim financial statements under RAS and IFRS,
materials for General Meetings of Shareholders as well
as resolutions adopted by the GMS and the Board of
Directors.
In addition to publishing significant information on its
website, the Company discloses information on the web-
site of Interfax agency, on the home page of the London
Stock Exchange and in the print edition of Rossiyskaya
Gazeta, as well as disseminating price-sensitive informa-
tion through the RNS portal.
We consider an annual report one of the most important
tools for the Company to communicate with its share-
holders, investors and other stakeholders. When prepar-
ing our annual reports we not only comply with legislative
requirements but also actively strive to provide our stake-
holders with additional information on various aspects of
the Company’s activities.
Our efforts in this area were recognised: in November
2013, the 2012 annual report of Federal Grid Company
became the winner of the Best Annual Report (non-fi-
nancial sector) at the 15th Annual Report Competition
held by the Expert Rating Agency. The interactive ver-
sion of the Company’s annual report won third place
170
171
CORPORATE GOVERNANCE / SHARE CAPITAL
at the 16th annual competition run by Rynok Tsenykh
Bumag magazine and the social network investor.ru
in partnership with Bank of Russia Financial Markets
Service.
Information policy in the area
of long-term development
Federal Grid Company manages UNEG. To ensure the
most efficient development of UNEG, the Company’s ac-
tivities must be coordinated with other governing bodies
of the Russian electric power industry.
The Company’s policy of
information openness
in the field of UNEG long-term development is based
on properly informing current and potential custom-
ers about the existing procedures of long-term devel-
opment and the possibilities for clients to participate
in these procedures.
The effectiveness of interaction and the fullness of in-
formation exchange with electric power entities are
ensured by virtue of the principles of transparency
at all stages of decision-making and the regular provi -
sion of all interested parties with up-to-date and reliable
data on actions expected in the area of UNEG devel-
opment
Investor Relations
Investor Calendar *
Date
March 11th
April 4th
May
Event
2013 Annual Results (RAS)
FY2013 Annual Financial Report (FSA), FY 2013 Financial
Results (IFRS)
Q1 2014 Financial Results (RAS)
Before June 30th
Annual General Shareholders Meeting
July
August
October
H1 2014 Financial Results (RAS)
H1 2014 Financial Results (IFRS)
Q3 2014 Financial Results (RAS)
* Dates may be subject to change.
Information
IR Release
Financial Statements
IR Release
Financial Statements
Presentation
IR Release
Financial Statements
IR Release
Financial Statements
Annual General Meeting
Presentation
IR Release
Financial Statements
IR Release
Financial Statements
Presentation
IR Release
Financial Statements
the long-term financing of interregional distribution grid
companies.
The active work of our IR staff was highly appreciated
by the investment community. Thus, in July 2013, Fed-
eral Grid Company became one of three companies
to be shortlisted for the awards “Best Investor Rela-
tions by a CEO, mid cap” and “Best Investor Relations
by a CFO, mid cap” by IR magazine (Russia & CIS).
Further information on our IR events can be
found in the section Shareholders and Investors
/ IR releases of our website, www.fsk-ees.ru
The list of investment analysts monitoring Fed-
eral Grid Company’s performance is available
in section Shareholders and Investors /
Analysts of our website, www.fsk-ees.ru
IR Team
Vladimir Baklanov
Head of Investor Relations
Tel: +7 (495) 710 9064
Email: baklanov-vv@fsk-ees.ru
Egor Toropov
Tel: +7 (495) 710 9333 ext. 2275
Email: toropov-ev@fsk-ees.ru
Federal Grid Company is a public company, one of the
top blue chips of the Russian energy sector. We strive to
maintain strong relationships with the investment com-
munity, paying a great deal of attention to communicat-
ing with analysts and investors, at investment forums,
conferences and in personal meetings.
The main task of our investor relations (IR) is to provide
our shareholders, current and potential investors, and
analysts with accurate and up-to-date information on the
Company’s affairs and its prospects.
We also consider it important to get feedback from this
community, which helps to set a development strategy in
line with the financial market participants’ perceptions.
Federal Grid representatives hold regular meetings with
minority shareholders and investors with a view to en-
hance their awareness of the Company’s activities, to
identify investment needs and to define optimal ways for
investing in Federal Grid’s securities.
In March 2013, within the policy of improving investment
attractiveness among retail stock market participants,
Federal Grid held a meeting in St Petersburg with minority
shareholders – individuals. The meeting was organised in
collaboration with staff members of the Company’s Cor-
porate Governance Department with the assistance of
the ALOR Stock Trading Institute. The participants were
given the Company’s performance results and discussed
prospects for investing in its securities.
In June 2013, a meeting with minority shareholders was
held during preparations for a General Meeting of Share-
holders.
In November 2013, the Chairman of the Management
Board of Federal Grid Company, Andrey Murov, held
a meeting with investors. At the meeting, Mr Murov told
investors about the Company’s 2014–2018 strategy for
development of the national backbone grid complex and
about areas of potential growth under the regulatory tariff
freeze.
In June 2013, Federal Grid’s representatives within the
delegation of Russian Grids’ companies took an active
part in the 17th St Petersburg International Economic
Forum. The First Deputy Chairman of the Company’s
Management Board, Andrey Kazachenkov, attended
a working session of Russian Grids’ delegation with the
EBRD President, Suma Chakrabarti. The participants
discussed issues regarding cooperation within agree-
ments made earlier on financing the Company’s invest-
ment programme and the potential for cooperation with
172
173
ADDITIONAL INFORMATION / DISCLAIMER
Additional Information
Disclaimer
This annual report (hereinafter – the Annual Report) was
prepared based on information available to Federal Grid
Company and its subsidiaries and associates at the time
this Report was compiled.
The Annual Report includes, among other things, state-
ments regarding the Company’s future operations based
on management’s current forecasts and assessments.
There are a number of objective factors that could cause
actual results to differ materially from the above forecasts
and assessments.
The Annual Report contains certain forward-looking state-
ments regarding business operations, economic and finan-
cial indicators of the Company, its business plans, projects
and expectations. The Annual Report may also contain es-
timates of price changes, production and consumption vol-
umes, costs, expenses, development prospects and other
similar factors, as well as forecasts on industry and market
development, beginning and end dates of certain projects
of the Company.
Such forward-looking statements can be identified by the
use of the terminology such as “intend”, “strive”, “project”,
“expect”, “estimate”, “plan”, “anticipate”, “assume”, “may”,
“could be”, “will be”, “continue” or similar words and expres-
sions or variation thereon.
By their nature, forward-looking statements involve risks and
uncertainties, both general and specific, that may cause the
relevant assumptions, forecasts, projections and other for-
ward-looking statements do not materialise. In view of the
above risks, uncertainties and assumptions, the Compa-
ny cautions that its actual results may differ materially from
those expressed or implied in such forward-looking state-
ments.
These statements are neither promises nor guarantees,
and the Company shall not be liable for any losses incurred
by legal entities and individuals who relied on forward-look-
ing statements. Such forward-looking statements repre-
sent, in each case, only one of many possible scenarios
and should not be viewed as the most likely scenario.
Except as required by applicable legislation, the Company
does not undertake any obligation to release publicly any
updates and revisions of such forward-looking statements
whether as a result of new information or future events.
Contacts
Joint Stock Company Federal Grid Company
of Unified Energy System (SC FGC UES)
Address: 5A Academica Chelomeya str.,
Moscow 117630, Russia
Call centre: 8 800 200 1881
For calls from neighbouring countries
and beyond:
Tel: +7 (495) 710 9333
Fax: +7 495 710 9655
E-mail: info@fsk-ees.ru
Website: http://fsk-ees.ru
IR Service:
Vladimir Baklanov
Head of Investor Relations
Tel: +7 (495) 710 9064
Email: baklanov-vv@fsk-ees.ru
Egor Toropov
Tel: +7 (495) 710 9333 ext. 2275
Email: toropov-ev@fsk-ees.ru
Company Auditor (RAS):
Full name: RSM RUS Limited Liability Company
Short name: RSM RUS LLC
Address: 4 Pudovkina str., Moscow 19285, Russia
INN: 7722020834
OGRN: 1027700257540
Phone: +7 495 363 2848
Fax: +7 495 981 4121
E-mail: mail@top-audit.ru
SRO Membership:
Full name: self-regulatory organisation Non-
for-Profit Partnership “Audit Association
“Sodruzhestvo”
Address: 21/4 Michurinsky prospect,
Moscow 119192, Russia
statements. According to this requirement, KPMG CJSC
was appointed as Auditor for Federal Grid Company’s
IFRS consolidated financial statements for 2013 (as
adopted by the EU).
Company Auditor (IFRS)
Full name: Closed Joint-Stock Company KPMG
Short name: CJSC KPMG
Legal address: office 3035, 18/1
Olympic prospect, Moscow 119192, Russia
Postal Address: Tower Complex Block,
10 Presnenskaya Naberezhnaya,
Moscow 123317, Russia
INN: 7702019950
OGRN: 1027700125628
Phone: +7 495 937 4477
Fax: +7 495 937 4499
E-mail: moscow@kpmg.ru
SRO Membership:
Full name: Non-for-Profit Partnership
“Audit Chamber of Russia”
Address: building 3, 3/9, 3rd Syromyatnichesky
pereulok, Moscow 105120, Russia
Company Registrar
Full name: Closed Joint-Stock Company
“Registrar Society STATUS”
Short name: CJSC STATUS
Address: building 1, 32 Novorogozhskaya str.,
Moscow 109544, Russia
Phone: +7 495 974 8350
Fax: +7 495 678 7110
E-mail: info@rostatus.ru|
License number: 10-000-1-00304
Issue date: 12.03.2004
Validity period: non-expiry
Issuing authority: FFMS of Russia
Depositary
Full name: Non-Banking Credit Organisation Closed
Joint-Stock Company National Settlement Depository
Short name: NSD
According to the terms of the dealer agreement
in respect to the bond issue programme entered
into by 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 IFRS consolidated financial
Address: building 8, 1/13 Sredny Kyslovsky
pereulok, Moscow
License number: 177-12042-000100
Issue date: 19.02.2009
Validity period: non-expiry
Issuing authority: FFMS of Russia
174
175
ADDITIONAL INFORMATION / GLOSSARY
Glossary
Abbreviations
APCS
ACPP
ALCS
BRELL
CDC
CEO
CFO
CHP
CIS
Automated Process Control System
Annual Comprehensive Procurement Programme
Automated Lighting Control System
Belarus, Russia, Estonia, Latvia and Lithuania
Contract for Delivery of Capacity
Chief Executive Officer
Chief Financial Officer
Combined Heat and Power
The Commonwealth of Independent States
CIS EPC
CIS Electric Power Council
COSO
The Committee of Sponsoring Organisations of the Treadway Commission
Commission for Operating and Engineering Coordination of Collective Operation of CIS and Baltics
Energy Systems
Central Tender Commission
COTC
CTC
DECT
DHS
DSS
EBITDA
EBRD
EMS
ESS
Dedicated Heating Station
Digital Substation
Earnings before Interest, Taxation, Depreciation & Amortisation )
European Bank for Reconstruction and Development
Environmental Management System
Energy Storage System
ESUPCN
Energy System’s Unified Process Communications Network
EurAsEC
Integration Committee of Eurasian Economic Community
FFMS
FOCN
GDR
GIS
Federal Financial Market Service
Fibre-Optic Communications Network
Global Depository Receipt
Gas-Insulated Switchgear
GLONASS
Global Navigation Satellite System
GMS
GRI
GRES
HPP
HIFs
HPB
HR
General Meeting of Shareholders
Global Reporting Initiative
State District Power Plant
Hydro Power Plant
Hazardous Industrial Facilities
high power batteries
Human Recourses
HSCSR
High-speed controlled shunt reactor
HTS
HVL
IES
ISIN
High temperature superconducting
High Voltage Line
Illuminating Engineering Society
International Securities Identification Number
ISGAN
International Smart Grid Action Network
IDR
IDGC
ICS
IPS
JSC
KPI
MES
Issuer Default Ratings
Inter-regional Distribution Grid Company
Internal Control System
Integrated Power System
Joint Stock Company
Key Performance Indicator
Backbone Electric Grid
Digital European Cordless Telecommunications
IFRS
International Financial Reporting Standards
176
177
ADDITIONAL INFORMATION / GLOSSARY
MPEI
NGPP
NPP
OECD
OHTL
OSIR
RAS
PABX
PMES
PTC
PTL
R&D
RAB
RPAS
RPD
RUIE
Moscow Power Engineering Institute
Non-Governmental Pension Program
Nuclear Power Plant
Organisation for Economic Cooperation and Development
Overhead Transmission Line
Outage Schedule Implementation Rate
Russian Accounting Standards
Private Automated Branch Exchange
Backbone Electric Grid Enterprise
Permanent Tender Commission
Power Transmission Line
Research and Development
Regulatory Asset Base
Relay Protection and Automation System
Rate of Process Disturbances
Russian Union of Industrialists and Entrepreneurs
Units of measure
bn
billion
kWh
Kilowatt-hour
Gcal
gigacalorie
GW
gigawatt
km
kv
kilometer
kilovolt
kW
kilowatt
l
litre
mln
million
MVA
megavolt-ampere
MW
megawatt
p.p.
Percentage point
Appendices, on the memory stick attached
•
audit Commission’s Report
•
Information on Compliance with the FCSM Code of Corporate Conduct
•
Information on Major Transactions and on Transactions made by Federal Grid Company in 2013, which are recognised
under the RF laws as related party transactions, and are subject to approval by the Company’s authorised governing
bodies
•
Information on the Actual Performance of Assignments of the President and the Government of the Russian Federation
SPS AAG
Smart Power System with an Active Adaptive Grid
•
Information about the Structure of the Property Portfolio of Federal Grid Company
SS
TPP
UES
UNEG
VoIP
WECM
Substation
Thermal Power Plant
Unified Energy System
Unified National Electric Grid
Voice over IP
Wholesale Electricity and Capacity Market
VRP ACS
Voltage and Reactive Power Automatic Control System
VSAT
WWF
Very Small Aperture Terminal
World Wildlife Fund
•
Information about Land Plots of Federal Grid Company
• RAS Annual Financial Statements
• Additional Information by Section of the Annual Report
Information materials,
on the memory stick attached
• management Report 2013
•
IFRS Consolidated Financial Statements
178
179
NOTES
180