More annual reports from Federal Grid Company Of Unified Energy:
2019 ReportPeers and competitors of Federal Grid Company Of Unified Energy:
Superior Pluswww.fsk-ees.ru 20 15 Annual Report Annual Report 2015 Federal Grid Company is a Russian energy company that provides electricity transmission services through the Unified National Electric Grid. In this type of business, the Company is a natural monopoly. The bulk of our revenue is generated through tariffs for electricity transmission that are approved by the Federal Anti-Monopoly Service. Our major consumers are regional distribution companies, sales companies and large industrial enterprises. CHANGE OF COMPANY NAME On June 26 2015, the Annual General Meeting of Federal Grid Company resolved to approve a revised version of the Articles of Association, according to which Open Joint-Stock Company ‘Federal Grid Company of Unified Energy System’ has been renamed into Public Joint-Stock Company ‘Federal Grid Company of Unified Energy System’. In the text of this Annual Report, Public Joint-Stock Company ‘Federal Grid Company of Unified Energy System’ is also referred to as: PJSC FGC UES, JSC FGC UES (former name until 07 July 2015), Federal Grid Company, Federal Grid, the Company. The Annual Report has been preliminary approved by the Board of Directors of Federal Grid Company, Minutes No. 322 dated 27 May 2016 The Annual Report was approved by the Annual General Meeting of Shareholders on 29 June 2016 (Minutes No. 17 dated 04 July 2016) Chairman of the Management Board A. Murov OUR MISSION About the concept of the Annual Report To ensure reliable operation and development of UNEG that will be adequate to economic growth, and demonstrate high economic efficiency and cost minimisation Core businesses Managing the Unified National Electric Grid (UNEG) Providing the electricity transmission and technological connection services to Wholesale Electricity and Capacity Market participants Investing activities in the area of UNEG development While implementing its strategic priority – providing reliable, quality and secure energy supply for customers, Federal Grid Company is taking proactive efforts to improve openness and transparency of its business, implementing the most effective management tools, maintaining a constant dialogue with all stakeholders. While providing electricity transmission via backbone grids in 77 regions of Russia, we are involved in addressing the most important issues of social and economic development of our country. Therefore, along with objectives to deliver capitalisation growth and an increase in dividend payout to shareholders, we do our best to enhance our contribution to the regional economy development, encourage growth of domestic manufacturing of electrical equipment, create new and maintain existing jobs, support educational programmes and be actively engaged in environmental protection. This approach allows us to follow the trajectory of sustainable development and build the future today – for Federal Grid, for the economy, and for society as a whole. The core topics of our 2015 Annual Report are the implementation of the ‘road map’ for introducing key provisions of the new Russian Corporate Governance Code in the Federal Grid’s practice and the delivery of the Long-Tern Development Programme. The implementation of the Code provisions is aimed at increasing the openness of our Company for all stakeholders and widening the coverage of its activities. Lighting up the present Building the future Key achievements of the year by 22% ↓ The accident rate at the Federal Grid’s facilities was reduced by 51.5% ↓ Undersupply of electricity to consumers was reduced ↓ to 75% The share of domestic products in Federal Grid’s purchases of main electrical equipment increased ↓ by almost 3.5 times Net profit for 2015 increased most important events of the year The Ministry of Energy of The Russian Federation approved the Federal Grid’s Investment Programme for the period of 2016–2020 in the amount of RUB471.1 billion The Board of Directors approved a revised Corporate Governance Code of Federal Grid Company Revenue, RuB mln 168,941 173,266 155,352 Adjusted eBItDA, RuB mln. net profit (loss), RuB mln 96,297 99,603 103,667 17,870 for shareholders and investors RUB1,284* million of dividends for 2014 million 33 % of economic value added * including dividends for 1Q 2014 525.8 of electricity supplied to customers billion kWh 1.1 thousand km 7.58 thousand MVA of transmission lines commissioned of transformer capacity commissioned for consumers 2.6% 4.1% 5,137 2013 247.9% 2014 2015 for suppliers and contractors RUB142.6 allocated for procurement of equipment, work and services billion 2013 2014 2015 2013 2014 2015 –25,898 length of electricity transmission lines, thousand km number of substations, units transformer capacity of substations, including leased substations, MVA 135.1 138.8 139.1 924 931 919 332,009 332,133 334,501 0.22% 0.75% 0.71% 2013 2014 2015 2013 2014 2015 2013 2014 2015 Tabulated details on financial and non-financial highlights for 2010–2015 are available in section ADDITIONAL INFORMATION of the Annual Report investment highlights of federal grid c ompany • Federal Grid Company is a monopoly operator for • Federal Grid is a unique infrastructure company that managing and developing the Unified National Electric Grid provides reliable and uninterrupted electricity transmission through backbone electric grids in the Russian Federation electricity transmitted via the Company’s grids • More than a half of all energy consumption in Russia is of • A customer-oriented approach that ensures high standards of customer services and stakeholder engagement in order to maintain sustainability of the long-term development for employees 23,899 More than 15,000 workplaces created** employees trained during the year ** Сorresponds to average headcount as at the end of 2015. for the state and society as a whole million RUB 248 of environmental costs and investments RUB 23.5 billion of tax payments • Continuous investments in modernisation and expansion of the electric energy infrastructure based on advanced innovative technologies • Federal Grid is included in a list of systemically important organisations of strategic importance to Russia • Federal Grid is a public company whose securities are traded on Russian and foreign stock markets, including the Moscow Stock Exchange and the London Stock Exchange 8 statement from the Chairman of the Board of Directors 10 Interview with the Chairman of the Management Board CORPORATE GOVERNANCE REPORT gOvernance system cOntrOl system DisclOsure ADDITIONAL INFORMATION 142 Corporate governance structure 144 Board of Directors 164 Management Board 173 Corporate secretary 175 Audit Commission and Auditor 177 Internal control 180 Internal audit 182 Risk factors 200 security 202 Anti-corruption activities 205 Information policy 209 Investor relations 212 Key Performance Indicators 214 Disclaimer 215 Contacts 216 Glossary Our operating results are disclosed in the context of value creation for all stakeholders through consistent implementation of our mission and strategy based on the efficient use of various types of capital APPENDICES In electronic format and on our website at http://www.fsk-ees.ru/eng/ Contents ABOUT FEDERAL GRID COMPANY GOVERNANCE AND DEVELOPMENT 14 Key events of the year 18 Geography 20 structure 22 Business model 26 strategic management 37 Corporate governance 42 Risk management 47 Financial management PERFORMANCE – CAPITAL MANAGEMENT Productive capital Operating perfO rmance Financial capital management’s DiscussiOn anD analysis 50 electricity transmission 52 technological connection 55 Improving reliability 60 Development of communication networks and It systems 64 Procurement 70 Investing activities 79 energy saving and energy efficiency 82 overall review 89 Cash flow 90 Financial position 93 tariff Regulation 99 Borrowed Capital 99 Debt portfolio 101 Credit ratings 102 Share Capital 102 share capital structure 104 trading in securities 108 Dividend policy Intellectual capital innOvative DevelOpment Human capital sOcial respOnsibility Natural capital 110 Innovative development programme 113 smart grid 114 R&D 117 HR policy 124 social policy 130 Health and safety envirO nmental prOtectiOn 134 environmental impact management system Forward Movement towards the Future 8 DEAR Sh AREhOLDERS, Federal Grid Company demonstrates consistent improvement of its financial and operating performance for the third year in succession: accident rate is declining; investment programme has been implemented on time; the Company becomes more efficient and, as a result, more sustainable in financial terms. I would like to say that several targets of the Development Strategy for the Russian Electric Grid Complex were met ahead of schedule, particularly in terms of cost-cutting. Much progress has been achieved in the development of the Unified National Electric Grid. The capacity delivery from the third power generating unit of Rostov Nuclear Power Plant to Kuban power system was completed, and capacity was delivered from four hydropower plants in Chelyabinsk, Sverdlovsk and Vologda oblasts and Krasnoyarsk Krai. Federal Grid Company’s main customers include the largest mining and manufacturing corporations. The Company contributes to the building of power supply infrastructure for Vankor field in Yamal-Nenets Autonomous Okrug, the Caspian Pipeline System, Long-Term Development Programme of Federal Grid Company is aimed at maintaining and developing the Unified National Electric Grid – a backbone electric grid infrastructure for ensuring economic growth in Russia and uninterrupted energy supply for consumers throughout the country StAtEMENt FROM tHE CHAIRMAN oF ThE BoARD oF DIRECToRS Vostochny Spaceport, electricity supply to Baikal-Amur and Transsiberian railways, and in many other projects that we can call unique without exaggeration. the commissioning of power transit via Kurgan- Vityaz-Voskhod that connects UES Siberia and UES Ural deserves particular attention. It was built on instructions from the Russian Government in order to strengthen the integrity of the national energy system. Given the volatile market situation and the current trends and challenges, Federal Grid Company benefited from the Long-Term Development Programme that had been drafted in a timely way and approved by the Government of the Russian Federation in 2014. The programme helped to identify possible impacts of macroeconomic changes on the Company’s operations in advance, and to adjust the key operational vectors. I would particularly like to highlight the results that we achieved in the first year of our import substitution programme: the share of procurements from domestic producers increased by almost twofold and reached 75%. The Company assesses localisation of production of its key suppliers by using its own methodology. As for corporate governance, Federal Grid Company made major revisions of its Articles of Association, Corporate Governance Code and key internal documents that regulate governance bodies. This revision was made in accordance with recommendations outlined in the Russian Corporate Governance Code and Listing Rules of the Moscow Stock Exchange. The position of Corporate Secretary was established to ensure effective engagement of all stakeholders. Annual performance evaluation of the Board of Directors is made by an external Understanding the importance of improving corporate governance in order to make the Company more effective and attractive for investors, we make sure that the best standards are implemented at all levels of management in the Company. Corporate governance in Federal Grid Company is based on the principles of transparency, accountability, fairness and responsibility independent consultant. The new tools should improve performance and strengthen customer and investor confidence in the Company. 9 Close co-operation of the Board members and the Company’s management helped to create a truly synergetic effect. By coordinating our perspectives and combining diverse skills and expertise we managed to improve the results for shareholders, the State, counterparties and the Company itself. I strongly believe that a balance between ensuring the reliable operation of UNEG, economic and management efficiency will help Federal Grid Company to demonstrate positive momentum and remain a significant infrastructure company in the national economy. Vyacheslav Kravchenko Chairman of the Board of Directors Meet Expectations of Customers, Shareholders and Employees we achieved one of the best net profit figures in the industry. Net profit under RAS increased by 3.5 times and reached RUB17.9 billion. Net profit under IFRS reversed the negative trend and amounted to RUB44 billion. The operating costs were reduced by 40% relative to the 2012 reference year. Labour productivity increased by 21.5%. The Company paid dividend for the first time in three years in 2015, and we intend to increase the dividend yield further. the main vector in our work was and is the improvement of operational excellence (i.e. reliability, quality of repairs) and financial efficiency. – In 2015, Federal Grid Company made a transition to payment for actual capacity by the customers. How did it affect the Company and its customers – Customers that are connected directly to the Company’s grids were able to reduce the costs substantially after the transition was made to payment for actual capacity. of course, cash flows from electricity transmission have reduced. But the Company’s total revenues increased because we received the fee for technological connection. our direct customers now have the best terms and conditions in the industry, given that the indexation of the Company’s tariff for electricity transmission is several times lower than the inflation rate. – What are the outcomes of the first year of the Company’s Long-Term Development Programme? – The Long-Term Development Programme for Federal Grid Company was the first among similar programmes for natural monopolies which the Government of the Russian Federation approved. The Company has been developing in accordance with the underlying principles of the Programme and has achieved tangible results. In particular, the cost reduction targets were more ambitious than those set in the Development Strategy for the Russian Electric Grid Complex. As I said, we manage to maintain outstripping development. 10 Andrey Murov, Chairman of the Management Board of PJSC Federal Grid Company, answers questions about the Company’s main outcomes in 2015 and prospects for the future – What are Federal Grid Company’s main results in 2015? – In 2015, Federal Grid Company provided the best results over the past four years for its customers, shareholders and employees.. In the first place, we managed to achieve an even higher level of reliability. The number of accidents at our facilities was reduced by 17.3% in 2015. The corporate investment programme has been implemented in full and on time. The Company commissioned 7,585 MVA of capacity and more than 1,100 kilometres of electricity transmission lines. the target of reducing unit investment costs relative to the 2012 level was met ahead of schedule. technological connection of customers amounted to 8.2 GW. Revenues from technological connection increased by twofold and reached RUB12.4 billion. The Programme enables us to use new approaches to the organisation of work, think globally, and improve communication processes. INtERVIEw wItH tHE CHAIRMAN oF ThE MANAGEMENT BoARD – Have any major amendments been made to the Company’s investment programme over the past few years? What are its priorities today? – the investment programme should reflect the actual needs of the economy. Of course, changes in the macroeconomic environment in late 2014 did require amendments to investment plans. The amount of funds for the programme was reduced, particularly because the construction of some facilities was postponed. the investment programme for 2015 amounts to RUB85.9 billion. Its key priorities are to maintain UNEG reliability, provide uninterrupted power supply to customers, and ensure high quality and accessibility of services for electricity transmission and technological connection. We also pay close attention to synchronisation of the development programmes with the generating facilities and distribution grids. By 2020, we will have to implement major projects of national significance, such as energy supply to Baikal-Amur and Trans-Siberian railways, ESPo and Power of Siberia pipelines, connection of industrial and social facilities in Siberia and the Russian Far East, and strengthening of ties between UES North-West and Centre. – How does innovative development in Federal Grid Company progress? – Implementation of state-of-the-art technologies and methods of operational organisation is a guarantee of high reliability and payoff of the electric grid infrastructure. We focus on cooperation with industrial enterprises, development institutions, research think-tanks, institutions of higher education, foundations, small and medium-sized businesses. Joint tests of new technical solutions are conducted at our facilities and testing grounds. In 2015, with participation of Federal Grid Company, 30 patents were received for inventions and useful models, and 22 corporate standards were drawn up. Federal Grid Company is proactively co-operating with CIGRE, the most reputed international industry association. This helps to take into account the global technological trends better, and promote Russian producers on the world innovations market. – What does placing Federal Grid Company on a sustainable development trajectory mean for the company? – We try to find a balance between reliability, economic and environmental effectiveness and sustainable development objectives in our operations: increase energy efficiency and industrial safety; minimise impact on the environment; build responsible hR management practices; and factor in the interests of stakeholders. Since 2008, Federal Grid Company has published annual reports on social responsibility and corporate sustainability prepared in accordance with international standards for non-financial statement disclosure. – Federal Grid Company has been implementing advanced and effective tools of corporate governance. What relevance do these tools have for the Company’s development? – Implementation of best corporate governance practices is a factor of the Company’s investment attractiveness and capitalisation growth. we develop a productive dialogue between governance bodies and use the KPI system in the Company. of course, the overall effectiveness of our work does depend on proper management arrangements. – What will be the Company’s most important objectives in 2016? – the key value is to meet the high expectations of our customers, shareholders and employees. This means that we should always leave the comfort zone and move forward. Our customers should receive high-quality services on competitive terms. Federal Grid Company must implement its investment programme on time, in particular, projects of national importance. At the same time it is important to maintain financial viability, improve efficiency further, and increase dividend yield for our shareholders. Federal Grid Company’s entire team focuses on the highest possible results, and I would earnestly like to thank our team. of course, our cooperative trust- based relations with our customers, shareholders and partners help us very much. I am sure we will be able to maintain leadership in the industry if we move ahead in line with this policy. Andrey Murov Chairman of the Management Board 11 1 tHE PRESENt ABOUT FEDERAL GRID COMPANY wholesale electricity and capacity market l y t i c i r t c e e f o e s a h c r u P o t y t i c a p a c d n a s e s s o l e t a s n e p m o c EGIS M A N T A R T S T N E M E G A Government authorities S F F I R A T F I N A N C I A L M A N A y t i c a p a c d n a y t i c i r t c e e f o y p p u s l l G E M E N T i s e c v r e s r o f t n e m y a P s f f i r a t o t g n d r o c c a i services Generation facilities COR P O R A T ConStRuC tIon AnD ReConStRuC tIon eleCtRICItY tRAnSMISSIon teCHnolo GICAl ConneCtIon E G O V E R N A N C E payment for services according to tariffs T N E M E G A A N K M R I S Major electricity consumers i s e c v r e s i s e c v r e s payment for services according to tariffs Federal Grid Company is a unique infrastructure company that provides reliable and uninterrupted electricity transmission through backbone electric grids in the Russian Federation KEY EVENtS OF tHE YEAR Development Strategy Investment Programme Corporate Governance Sustainable Development January February March April May June 2015 EVENtS The first stage of technical re-equipment of 220 kV Soviet-Sosniskaya substation was completed as part of the facility supplying electricity to oil companies in the North of the Tomsk region. the international credit agency Standard &Poor’s lowered the credit rating of Federal Grid Company to ‘BB+’ following its downgrade of the Russian Federation sovereign credit rating. 14 Following the downgrade of the Russian Federation sovereign rating, the Federal Grid’s credit ratings according to the scales of two international credit agencies was subsequently lowered one notch to the sovereign level: to ‘BBB-‘ (Fitch Ratings) and ‘Ba1’ (Moody’s). the Consumer Council discussed with the major consumers the main provisions of the Long-term Development Programme of Federal Grid Company for the period of 2015–2019 approved by the Government of the Russian Federation. Federal Grid Company joined the Anti-Corruption Charter of the Russian Business and was included in the Consolidated Register of the parties to the Charter. Federal Grid connected one of the isolated energy regions of Yamalo-Nenets Autonomous Okrug and several energy supply facilities of the Vankor Field to UNEG. the Company completed the construction and reconstruction of more than 20 km of sections of 110–500 kV transmission lines for power delivery to Novovoronezh NPP-2. the Company completed the preparation of UNEG to flood season of 2015. A 330 kV Zelenchuk hPP- Cherkessk in Karachai- Cherkess Republic was energised – an energy facility of 56.3 km in length that provides power delivery of the Zelenchuk hPP to the energy system of the North Caucasus Federal District to support the economic development of the region. the Annual General Meeting of Shareholders of Federal Grid Company resolved to approve the revised Articles of Association and several internal documents and to pay dividends for 2014 in the amount of RUB0.0006647883 per share for the total amount of RUB847.383 million. 15 July August September october november December 2015 EVENtS 415 km of fiber-optic network were commissioned in the area between the cities of Surgut and Noyabrsk – the final section of telecommunication networks tyumen – Surgut – Nizhnevartovsk – Noyabrsk with total length over 2 thousand km, covering more than 50 of electric grid facilities in Western Siberia. Implementation was completed of the environmental management system in accordance with the requirements of the international standard ISO 14001:2004 in all branches of Federal Grid Company, which has been carried out in stages since 2011: in the year, the system was implemented in Siberia, Western-Siberia, Ural and Volga branches. the Ministry of Energy of the Russian Federation and the Russian National Committee of the International Council on Large Electric Systems (CIGRE) out for the strengthening of positions of national sectoral research abroad: the head of Federal Grid, Andrey Murov, became a President of the Russian National Committee of CIGRE. the Company completed the total reconstruction of 330 kV Belgorod – Lebedi overhead transmission line passing through the territory of Belgorod oblast and providing electricity supply to, among others, one of the largest local industrial enterprises – Lebedinsky GoK. 16 A 500 kV Kurgan-Vityaz- Voskhod transit line was commissioned connecting the IPS of Siberia and Ural through the Russian territory and thus strengthening the energy security of Russia. The Company’s name JSC FGC UES was changed into PJSC FGC UES – Public Joint Stock Company “Federal Grid Company of Unified Energy System”. A new 220 kV Blagoveschensk – Varvarovka transmission line in Amur oblast was put into operation thus improving reliability of electricity supply to Blagoveschensk and its region. Preparation of main energy facilities to winter maximum loads of 2015–2016 was completed. A new 330 kV Parnas substation was commissioned in Saint Petersburg providing electricity supply to the industrial area Parnas. Federal Grid acquired a share in the capital of a newly set up Analytical Credit Rating Agency among the other founders – 27 Russian companies that are the leaders in banking, insurance, metallurgical and other industries. The Federal Grid’s Project on energy saving aimed at improving energy efficiency of substations and reducing losses for own needs was recognised as one of the best at the International Forum ENES 2015 and awarded a Diploma of the Russian Ministry of Energy. the Russian Ministry of Energy approved adjustments of the Federal Grid’s Investment Programme for 2015 and an Investment Programme for 2016–2020. The Federal Grid’s environmental management system was certified for the compliance with the requirements of the international standard ISO 14001:2004: an independent audit was conducted during three months in the Executive office and four branches – MES Ural, MES Siberia, MES Western-Siberia and MES Volga. 17 EVENTS AFTER ThE REPoRTING DATE January February A meeting was held with the representatives of designers and manufacturers of electrical equipment the Company completed the construction of approaches of 220 kV transmission lines from Volgodonsk-2 distribution substation of Chuvash Republic concerning development prospects of industrial and innovative potential of the region for the implementation of the import substitution programme. and Kotelnikovo to Rostov NPP, as well as reconstruction of the existing 220 kV transmission lines to Gorodskaya-2 substation and Volgodonsk-2 distribution substation. March the power transmission capacity was increased to 220 kV Proton substation delivering to the FSBI State Scientific Centre of the Institute of High Energy Physics in Protvino (Moscow oblast) to provide additional 8 MW for the reconstruction of U-70 proton accelerator, ranked among the ten largest accelerators in the world. Federal Grid took part again in a worldwide event Earth Hour, in which lighting was turned off at a number of the Company’s facilities and administrative buildings throughout the country. The participation in the event did not affect the reliability of electricity supply to customers and security of the Federal Grid’s facilities. Country-Wide Reliability our Company operates in 77 Russian regions covering an area of more than 15.1 million sq. km. The territory in which the Company’s facilities are located is divided into zones of responsibility for corporate branches – backbone electric grids (MES), and their local enterprises (PMES). 18 MeS noRtH-WeSt PMES Bryanskoye Vyborgskoye Karelskoye Leningradskoye Novgorodskoye Severnoye MeS CentRe PMES Valdaiskoye Verkhne-Donskoye Volga-Donskoye Volga-Okskoye Vologodskoye Moskovskoye Priokskoye Chernozemnoye 309 PTLs 14,400 km 102 SSs 39,983 MVA 243 PTLs 16,660 km 106 SSs. 41,906 MVA 466 PTLs 29,052 km 197 SSs 96,658 MVA 187 PtLs 12 km 88 SSs 32,256 MVA 346 PTLs 12,212 km 144 SSs 27,243 MVA 198 PTLs 13,572 km 84 SSs 36,820 MVA 332 PTLs 23,897 km MeS SoutH PMES Kaspiiskoye Kubanskoye Rostovskoye Stavropolskoye Sochinskoye MeS VolGA PMES Nizhne-Volzhskoye Sredne-Volzhskoye Samarskoye Nizhegorodskoye MeS uRAl PMES Permskoye Sverdlovskoye Yuzhno-Uralskoye Orenburgskoye MeS WeSteRn SIBeRIA PMES Vostochnoye Tsentralnoye Yuzhnoye Yamal-Nenetskoye UNIFIED NATIONAL ELECTRIC GRID* Power transmission lines (PTL) 2,281 units with voltage up to 1,150 kV 139.1 thousand km Substations (SS) 931units with voltage up to 1,150 kV 334,501 MVA * PTLs and SSs the ownership rights to which have been duly registered for Federal Grid Company and other owners, including facilities with 0.4–110 kV voltage but excluding PTLs and SSs with 10 kW voltage and lower that operate on the territory of Krasnodar Krai under long- term lease agreements.. Underpopulated territories with no large customers – such as Chukotka, Kamchatka, Magadan oblast, Sakhalin, Nenets Autonomous okrug and Altai Republic – are not integrated into UNEG because they do not have economic conditions necessary for laying electricity transmission lines and establishing large substations. 120 SSs 44,915 MVA MeS eASt PMES Amurskoye Primorskoye Khabarovskoye MeS SIBeRIA PMES Zabaikalskoye Zapadno-Sibirskoye Krasnoyarskoye Kuzbasskoye Omskoye Tomskoye Khakasskoye GEOGRAPHY MANAGEMENT OF CROSS-BORDER ELECTRICITY TRANSMISSION LINES Federal Grid Company facilitates the transit of the Russian electricity through electric grids of 11foreign states and collects and processes information about electricity transmission 138 along cross-border electricity transmission lines 19 51regional branches 41 Backbone Electric Grid Enterprises (PMES) 8 1 1 Backbone Electric Grids (MES) Special Purpose Production Centre “Bely Rast” technical Supervision Centre 200 PtLs 16,763 km 90 SSs 14,720 MVA Federal Grid Company has 51 regional branches including 8 Backbone Electric Grids (MES), 41 Backbone Electric Grid Enterprises (PMES), Technical Supervision Centre and Special Purpose Production Centre “Bely Rast” Federal Grid Company participates in 26 business entities that operate in different industries, including those that support electric grid facilities Further details about the Company’s branches are available on the corporate website www.fsk-ees.ru in the section About the Company /Branches Further details on Federal Grid’s subsidiaries and associates are available in Appendix 7 to the Annual Report ExECUTIVE OFFICE OF FEDERAL GRID COMPANY Branches MES Centre MES North-west MES Volga MES South MES Ural MES western Siberia MES Siberia MES East 20 PMES Valdaiskoye Verkhne- Donskoye Volga-Okskoye Vologodskoye Moskovskoye Nizhegorodskoye Priokskoye PMES Bryanskoye Vyborgskoye Karelskoye Leningradskoye Novgorodskoye Severnoye PMES Nizhne- Volzhskoye Sredne- Volzhskoye Samarskoye PMES Kaspiiskoye Kubanskoye Rostovskoye Stavropolskoye Sochinskoye PMES Permskoye Sverdlovskoye Yuzhno- Uralskoye orenburgskoye PMES tsentralnoye Yuzhnoye Vostochnoye Yamal- Nenetskoye PMES Zabaikalskoye Zapadno- Sibirskoye Krasnoyarskoye Kuzbasskoye Omskoye tomskoye Khakasskoye PMES Amurskoye Primorskoye Khabarovskoye Special Purpose Production Centre “Bely Rast” Managing subsidiaries and associates technical Supervision Centre Subsidiaries, associates and other entities in which Federal Grid Company participates* 100%-owned subsidiaries 75–99%-owned subsidiaries 50–74%-owned subsidiaries JSC Agency for Forecasting Balances in Electricity Sector IT Energy Service, LLC 77.999% 77.999% JSC Mobile Gas-Turbin Power Plants JSC Nurenergo 76,999% JSC tomsk trunk Grids 52,025% JSC IPS SakRusenergo 50% JSC Moscow Communications Centre for Power Industry Associates and other entities with less than 50% owned by Federal Grid Company JSC R&D Centre of FGC JSC Kuban Trunk Grids 48,999% FGC – Asset Management, LLC 0,01% JSC Centre for Engineering and Construction Management of EUS CJSC North-western Energy Company 49% JSC Analytical Credit Rating Agency 3,7% JSC Chitatekhenergo JSC Energotekhnocomplect 48,99% Dalenergosetprojekt, LLC 0,005% JSC Specialized Electric Grid Service Company of UNEG JSC Power Institute named after Krzhizhanovsky 38,239% PJSC Centreenergoholding 0,0007% JSC Energostroysnabkomplekt PJSC INTER RAo 14,075% JSC Non-Governmental Pension Fund of Electric Energy Industry 0,001% Index Energetiki – FGC UES, LLC JSC testing Ground of Ivanovo HPP 0,826% CJSC taigaEnergoStroy 0,00001% Core subsidiaries and associates JSC EnergoRynok 8,5% * names of entities are as of 31 December 2015 Managing subsidiaries and associates Key forms of federal grid company’s engagement with subsidiaries and associates • Federal Grid Company’s Board of Directors reviews issues pertaining to the Company representatives’ position on draft decisions on issues included in the agendas of GMS and meetings of the boards of directors (Supervisory boards) of subsidiaries and associates • Federal Grid Company contributes to the drafting of proposals and decision-making by the management bodies of its subsidiaries and associates through the Company’s representatives at General Meetings of Shareholders / Participants and in the boards of directors (Supervisory boards) of subsidiaries and associates • Federal Grid Company’s Management Board reviews issues of engagement with subsidiaries and associates in accordance with its remit StRUCtURE federal grid company’s internal documents that regulate management of its subsidiaries and associates • Regulations on managing subsidiaries and associates and other entities in which Federal Grid Company participates • Standard for drawing up summary instructions to representatives of Federal Grid Company on issues included in the agendas of General Meetings of Shareholders / Participants and meetings of the boards of directors (supervisory boards) of subsidiaries and associates • Methodology for KPI calculation and target achievement evaluation in Subsidiaries and Associates of Federal Grid Company • Procedure for engagement of Executive office units of Federal Grid Company with subsidiaries and associates with respect to information gathering and data verification for KPI calculation and performance evaluation • Federal Grid Company’s order on Approval of Standards and Template Regulations on Managing Subsidiaries and Associates, and other internal documents 21 International Operations Federal Grid Company facilitates the transit of the Russian electricity through electric grids of foreign states being a technical contactor under commercial contracts of importers and exporters on the wECM and, pursuant to the contracts with PJSC Inter RAO, provides services on electricity transmission throughout Russia and right up to its borders via electric grid facilities that are integrated into UNEG and legally owned or possessed by the Company. 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 Georgia, Kazakhstan, the Baltic countries and the Republic of Belarus. The Company also signed an Inter-system Agreement with Finland. It also signed agreements on technical support of parallel operations with Ukraine, the Republic of Belarus, Azerbaijan and Mongolia. Federal Grid Company collects and processes information about electricity transmission via 138 cross-border electricity transmission lines (CBETL) finland Belarus estonia ukraine lithuania latvia georgia azerbaijan Kazakhstan mongolia china Being an organisation that manages cross-border electricity transmission lines, Federal Grid Company coordinates commercial contracts for the import/ export of electricity and provides their engineering support, 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. Federal Grid Company exchanges commercial metering data with the electricity systems of 11 foreign countries. It signed Agreements on Metering Electricity Transmission via CBETL with foreign electric power companies in order to measure the volume of electricity transmitted via each cross-border lines. Federal Grid Company continuously updates and improves relations with the foreign electric power systems in order to harmonise laws and regulations on the electric power industry, and synchronise electricity and capacity markets. BUSINESS MODEL The business model of Federal Grid Company is aimed at ensuring sustainable development of the Company in the long term and creating values for all stakeholders through consistent implementation of our mission RESOURCES (figures are given as of 31 December 2014) Financial capital Page 82 Productive capital Page 50 Intellectual capital Page 110 Human capital Page 117 Natural capital Page 134 1 2 • Equity • Debt • UNEG electric grid facilities • Patents, Licenses, software • R&D • Employees’ experience, skills and expertise 3 • Water and energy recourses RUB854.5 billion of equity RUB257.8 billion of debt portfolio 138.8 thousand km of transmission lines 924 substations RUB3.3 billion of intangible assets RUB0.4 billion for R&D financing 94 % of employees with higher or secondary vocational education 24.5 thousand of employees 1.16 million m3 of water consumption 968.7 million kWh of electricity for substation needs Wholesale electricity and capacity market Government authorities 7 Generation facilities y t i c a p a c d n a y t i c i r t c e e f o y p p u S l l MISSION OF FEDERAL GRID COMPANY STRATEGIC GOALS AND OBJECTIVES VALUE CREATION FOR STAKEHOLDERS To ensure reliable operation and development of UNEG that will be adequate to economic growth, and demonstrate high economic efficiency and cost minimisation • Increase return on equity • Reduce operating and investment costs • Maintain financial sustainability Purchase of electricity and capacity to compensate of losses ATEGIC M A N R T S T N E E M G A CORP O R A T E G CONSTRUCTION AND RECONSTRUCTION 4 O V E R N A N services C E ELECTRICITY TRANSMISSION 5 Payment for services according to tariffs s f f i r a t i s e c v r e s F I N Payment for services according to tariffs A N C I A L Payment for services according to tariffs TECHNOLOGICAL CONNECTION 6 Payment for services according to tariffs M A N A G E M E N T K M R I S T N A N AGEME Major electricity consumers Grid companies, factories, Russian Railways, other consumers services • Develop UNEG infrastructure • Ensure reliability and quality of electricity supply to customers • Consolidate all facilities of UNEG electric grids • Ensure quality customer service • Develop research and innovation capacity • Develop and implement new technologies • Substitute imports in order to support innovative development of the Russian energy sector • Develop and train personnel • Provide social support • Establish a talent pool for a ‘smart energy’ sector • Engage with higher education institutions (figures are given for 2015 ) RUB847 million RUB30.6 billion of dividends for 2014 of interest on debt obligations % 33 economic value added (EVA) RUB23.5 billion of tax payments 1,115 km of transmission lines commissioned 7.58 thousand MW of transformer capacity commissioned RUB484 allocated for R&D Programme million new 30 intellectual property items registered 23,899 jobs More then 15,000 employees were trained during the year • Ensure environmentalisation and improve energy efficiency of the electric grid operations • Reduce air emissions of hazardous substances • Reduce water consumption RUB248 million % 10,4 of environmental costs and investments Reduction in water consumption 11,7 % Waste reduction Shareholders and investors Government authorities People in the regions where we operate Consumers Suppliers and contractors Consumers Scientific community Educatiion institutions Employees People in the regions where we operate 1 2 Key risks Lack/higher costs of borrowings Risk mitigants Searching for low cost long-term financing Key risks Decline in Return on Capital Risk mitigants Innovations and asset structure planning 3 4 Key risks Pollution of environment Risk mitigants Implementing environment protection measures Key risks Cost and Schedule Overruns Risk mitigants Competitive contract awards, monitoring construction schedules 5 6 Key risks Interruptions (failures) in electric grid 7 Key risks Regulatory risk (unbalanced tariffs) Risk mitigants Improving grid reliability Key risks Excess capacity /lack of capacity Risk mitigants Forecasting grid loads Risk mitigants Drafting economically justified tariff proposals Federal Grid manages the Unified National Electric Grid, ensures electricity transmission through backbone lines and provides services for technological connection to electric grids CoRe BuSIneSS pRoCeSSeS ELECTRICITY TRANSMISSION Services of electricity transmission via UNEG are monopoly operations regulated by the State TEChNOLOGICAL CONNECTION A service package to connect power receivers of consumers, as well as generating and transmission facilities to Federal Grid’s electric grids CONSTRUCTION AND RECONSTRUCTION Implementation of projects on constructing new and reconstructing the existing facilities of electric grid infrastructure to improve the reliability of UNEG AuXIlIARY pRoCeSSeS Maintenance and Repairs A package of operations to maintain operational capability and good condition of equipment Procurement A set of measures aimed at meeting the Company’s needs in goods and services Energy Saving and Energy Efficiency Measures to reduce the volume of consumed energy resources while retaining their beneficial effect hR Policy A system of employee engagement that aims at creating conditions for effective development and use of human resources Industrial Safety Prevention of accidents at UNEG facilities and readiness to localise and liquidate the fallout of accidents Social Responsibility Meeting of voluntary commitments toward stakeholders in order to ensure the Company’s sustainable development Environment Minimisation of negative environmental impact when providing electricity transmission services 2 wholesale electricity and capacity market l d n a y t i c i r t c e e f o e s a h c r u P n o i t a s n e p m o c r o f y t i c a p a c s e s s o l f o AtEGIC R t S M A N y t i c a p a c d n a y t i c i r t c e e f o y p p u S l l s f f i r a t Government authorities F I N A N C I A L M A N A G E M E N t t n e m y a P i s e c v r e s r o f i g n d r o c c a s f f i r a t o t services Generation facilities t N E E M G A CORP O R A t E ConStRuC tIon AnD ReConStRuC tIon eleCtRICItY tRAnSMISSIon teCHnolo GICAl ConneCtIon G O V E R N A N C E Payment for services according to tariffs t N A N AGEME M K R I S i s e c v r e s Major electricity consumers i s e c v r e s Payment for services according to tariffs tHE FUtURE GOVERNANCE AND DEVELOPMENT The governance system of Federal Grid Company ensures consistent implementation of the Long-Term Development Programme aimed at maintaining and developing the Unified National Electric Grid – backbone electric grid infrastructure of the Russian economy. Long-term Development Strategy Market Overview Macroeconomic environment the social and economic conditions in Russia in the reporting year were the main factor that constrained the increase of electricity consumption and, as a result, the volume services provided by Federal Grid Company. Industrial output in Russia dropped by 3.4% for the full year 2015 (in 2014, Russia reported growth by 1.7%). output in the energy-intensive sectors, such as metallurgy and manufacture of machines and equipment, declined by 6.5 and 11.1%, respectively1. According to the System Operator of UES2, electricity consumption across the unified energy system (UES) of Russia reduced by 0.55% year-on-year in 2015, to 1,008.3 billion kWh. Export to the neighbouring countries increased by 25% but it accounts for a small share in electricity consumption in UES of Russia (less than 2%). The average annual growth of electricity consumption in UES of Russia is estimated at 100.81% in 2016–2022. Moderate GDP growth rates in Russia in the coming years and electricity consumption developments are important factors that affect the volumes of electricity consumption and electricity transmission services. Electricity consumption in the manufacture of the most energy-intensive goods has been declining over the past years due to modernisation of production technologies and implementation of energy saving programmes. A steady increase of electricity consumption was reported only in the oil industry. 1,008.3 billion kwh Electricity consumption in UES of Russia in 2015 26 ▶ electricity Consumption in ueS of Russia in 2015 and Forecast for 2016–2022, billion kWh StRAtEGIC MANAGEMENt these factors mitigate the effect of changes in the geography of demand for electricity and distribution of loads. They also help to use the available spare capacity in the grid, and postpone expensive enhancement projects. Industry Market Federal Grid Company transmits electricity via backbone grids and provides technological connection to the grid. Electricity transmission via backbone grids is a natural monopoly. Besides PJSC Federal Grid Company of the United Energy System, certain transmission services and technological connection to the Unified National Electric Grid (UNEG) are provided by JSC Grid Company (Republic of Tatarstan), JSC Bashkir Grid Company (Republic of Bashkortostan), JSC Regional Electric Grids (REG) (Novosibirsk oblast) and JSC Irkutsk Electric Grid Company (Irkutsk oblast) (within grids that they own). the Russian market of electricity transmission services is affected primarily by macroeconomic factors that characterise the overall economic situation in the country. The volume of services in the backbone electric grid depends on the capacity which is sold to the customers of electricity transmission services, and on the capacity of power receivers connected to the grid. In 2015, the paid capacity amounted to 87.9 GW, down by 3 GW relative to the previous year. This change is caused not so much by the lower consumption as by the transition to the principle of measuring services at their average arithmetic capacity when these services are sold to direct customers. optimisation of consumption modes by the customers and their possible use of distributed sources of generation also constrain the increase of the volume of Federal Grid Company’s services. Changes in Electricity Consumption Per Unit of Certain types of Goods Manufactured in 2014 Relative to 1995 Oil extraction, including 137% Synthetic rubbers 90% Oil processing 83% Finished steel 80% Electric steel 71% Coal 48% Source: Rosstat, “Russian Statistical Yearbook, 2015” 27 1,008.3 1,015.7 1,032.8 1,041.0 1,048.8 1,056.4 1,062.0 1,067.1 Forecast according to the draft Scheme and Development Programme for UES of Russia for 2016– 2022 (with regard of integration of Crimea, Sevastopol, and western and central regions of the Republic of Sakha (Yakutia) starting in 2017). ▶ Capacity paid For by Customers of transmission Services provided by Federal Grid Company, GW ▶ technological Connection Services in physical terms*, MW 90.9 90.5 91.4 90.9 87.9 8,185 6,058 5,537 4,569 3,793 2015 2016 2017 2018 2019 2020 2021 2022 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 * maximum capacity under contracts for technological connection 1 Source: Ministry of Economic Development of the Russian Federation, “The Outcomes of the Social and Economic Development of the Russian Federation in 2015.” Moscow, February 2016. 2 Source: System Operator of the Unified Energy System, “Report about Operations of UES of Russia in 2015.” 28 The volume of technological connection (of customers and generation facilities) in physical terms did not change substantially over the past few years. These changes largely depend on the demand for capacity which is required for the customers’ and electricity producers’ investment projects. The substantial increase of service in physical terms in 2015 was driven by the completion of several large projects of technological connection at the generating stations of State Nuclear Corporation RoSAToM. Based on the estimated electricity consumption and electricity exports and imports, and with regard of factors behind the lower electricity consumption growth rates (energy saving in the first place), the Company does not anticipate any significant increase in the volume of services paid for by the customers. The volume of services will increase in the coming years because UES of Russia will be expanded within the IPS South and IPS East (integration of the western and central energy regions of the Republic of Sakha (Yakutia). Depreciation of the national currency and growing inflation rates increase the uncertainty of investment expectations and might delay implementation of investment projects run by electricity consumers and producers. New projects of technological connection will be smaller as a result. Development Strategy Federal Grid Company’s mission is to ensure reliable operation and development of UNEG that will be adequate to economic growth, and demonstrate high economic efficiency and cost minimisation. our strategy should ensure steady commitment to this mission, respond to technological and economic challenges and promote the solution of problems that are caused by the current situation in the backbone electric grids and the capacity which is available for meeting the demand. Challenges Given the overall economic situation in the coming years, we anticipate the continued restrictive policy of tariff regulation and the transition to the setting of tariffs based on the “inflation minus” principle. one of the main incentives in the Company’s operations in this environment is the reduction of operating and investment costs. however, this reduction should not adversely affect reliability and entail higher costs in the future. while pursuing its cost reduction policy, the Company should carefully select investment projects for upgrade and development of its electrical grid network. the stagnating volume of services and restrictive tariff policy, even on the back of cost reduction, results in risks of restraining earnings increase for shareholders. Innovative development of Federal Grid Company should focus on the selection of the most relevant projects with the best prospects. The priority areas are identified in the Innovative Development Programme for PJSC FGC UES for 2016–2020. They include the design of substations with a high level of automated management of technological processes (“digital substation”), digital design, energy efficiency, and reliability and asset management. the grid remains underutilised in comparison to foreign peers. The utilisation ratio is the result of structural changes in electricity consumption and reflects principles of UNEG Planning that have been established over decades, and methods that ensure reliability. long-term Development programme The Company’s strategy is outlined in the Long-Term Development Programme of Federal Grid Company which is approved by the Board of Directors (Minutes No. 243 dated 19 December 2014). The Programme is coordinated with the relevant federal executive authorities and supported by the Expert Council at the Government of the Russian Federation. the Long-term Programme is consistent with the targets and provisions of the Development Strategy for the Russian Electric Grid Complex, as approved by Resolution No. 511-r of the Government of the Russian Federation, dated 3 April 2013, and Methodological Guidelines on the Drafting of Long-Term Development Programmes approved by the RF Ministry of Economic Development in 20141. 1 Methodological Guidelines on the Drafting of Long-Term Programmes for the Development of Strategic Open Joint-Stock Companies and Federal Sate Unitary Enterprises and Open Joint-Stock Companies in Which the Total Share of the Russian Federation in the Authorised Capital Exceeds Fifty Percent. StRAtEGIC MANAGEMENt In 2015, the Company drew up an updated Long-Term Development Programme which factors in a weaker operating environment in the coming years due to external factors and changes of macroeconomic parameters in late 2014 and early 2015. The new Long-Term Programme includes adjusted goals, objectives and implementation actions. The long-term goals and objectives were adjusted in such a way that they would meet the electrical grid users’ needs and shareholder expectations to the utmost possible extent, and would be feasible and achievable. The updated Long- Term Development Programme has a stronger focus on cost saving. This is reflected in the initiatives to reduce operating costs (they are more ambitious than those envisioned by the Government directives), and in a more cautious approach to the planning of electric grid development and earnings metrics. Guided by the Strategy of the Electric Grid Complex Development of the Russian Federation, Federal Grid Company focuses on the following strategic goals in its operations until 2030: • To ensure service reliability and quality • To maintain financial sustainability and independence and ensure an increase in the Company value • to develop UNEG with regard of technical and economic optimisation of the backbone grids • To meet customers’ demand for the Company’s services with regard of their region-specific features of demand and higher effectiveness of capacity utilisation • To consolidate, under Federal Grid Company’s management, all electric grid facilities that are part of UNEG and are consistent with the criteria for including the facilities in UNEG. ▶ Strategic objectives of Federal Grid Company in 2015–2019 1 2 3 4 5 6 7 8 9 Maintain a high level of reliability Reduce investment costs by 30% against the 2012 baseline by 2017 Implement investment projects of national significance on schedule Ensure compliance with the principles of technical and economic expediency when decisions are taken about the scheme of the backbone grid development Integrate an economic model of technical connection based on a balance of interests and equitable risk-sharing between the applicant and the Company Reduce operating costs by 41% against our 2012 baseline by 2017 * while maintaining reliability and avoiding an increase of costs in the future periods Optimise the utilisation of existing capacities Develop a programme of phased consolidation of electric grid facilities that are part of UNEG and meet its eligibility criteria Maintain the Company’s credit rating at the level of the sovereign credit rating on the Russian Federation, ensure earnings growth and an increase in the Company value * The objective was attained by Federal Grid ahead of schedule – in 2015, we achieved reduction in unit operating costs by 40% against 2012 29 StRAtEGIC MANAGEMENt Actions that are part of the Long-Term Development Programme are targeted at implementation of strategic goals and objectives. The base case scenario underlying Federal Grid Company’s financial model is based on the meeting of key performance indicators including a 30% reduction in operating and investment costs against 2012 already by 2017. These targets are more ambitious than those set in the Development Strategy for the Russian Electric Grid Complex. Yet, the Company aims to achieve these higher targets because it needs to complete a long-term investment programme and maintain a sustainable financial position. implementation audit of the long-term development programme An audit was initiated by Federal Grid Company and held in 2015 in order to monitor implementation of measures and achievement of targets that are set in the Long-Term Development Programme (its findings are included in the audit report dated 31 July 2015). An independent auditor compared the targeted and achieved KPIs in 2014, and analysed the reasons of deviations that were identified during the audit. Based on this review, the auditor concluded that actual KPIs were higher than the targeted ones because several measures had been taken to improve the Company’s effectiveness. Besides an external audit, Federal Grid Company performs internal monitoring of measures included in the Long-Term Development Programme. 31 what are the main outcomes in the first year of implementation of federal grid company’s long-term development programme? Semyon Danilov temporary Acting Director for Strategic Development and Head of Strategic Development Department 30 “the drafting and implementation of the Long-term Development Programme resulted in a new level of planning in Federal Grid Company. It also produced a new set of well-thought-out strategic goals in taking management decisions and communicating them within the Company and to external stakeholders. Since 2015, all key processes (such as investment planning, business planning and regulation of operational areas) are consistent with the strategic goals that are outlined in the Long-term Development Programme. Key performance indicators are now also consistent with the strategic goals outlined in the Long-term Development Programme. They were met and exceeded in 2014, as was proven by the Programme implementation audit that was held for the first time in 2015. As for the efficiency of actions with deadlines in 2015, I can say that the Company has fully implemented its import substitution initiatives, both in organisational terms and in the development and use of domestically manufactured products / technologies. Plans to reduce operating and investment costs and increase labour productivity have been overachieved. Electricity losses were reduced in 2015 by almost 49.4 million Kwh due to measures that were part of the programme for reducing electricity losses. The Company considerably reduced duration of transmission interruptions. It drew up many rules and regulations, and organised communication for addressing important issues, such as improvement of schemes for financing of the fee for technological connection, optimisation of load on the energy grid, and financing of projects of national significance. I would like to note that experience of operating in accordance with a long-term programme document is in itself a key outcome in the first year of implementation of the Long-Term Development Programme. We were able to assess the viability of our forecasts and feasibility of goals. While updating our Programme, we received feedback from a broad range of experts within the Company, in the ministries and in the Open Government, and we intend to use all new information for improvement of our long-term planning.” Strategic goal KPI ** 2015, plan 2015, actual 2015 RESULtS Implementation of strategy in 2015 (measures completed and achievements) ПЛАНЫ-2016 Реализация стратегии в 2016 году (планируемые мероприятия и показатели) RISKS** List of risks that affect implementation of strategy StRAtEGIC MANAGEMENt Reliability and quality of services to customers Reliability measure: no increase in the number of major accidents Preventing increase in the number of persons injured in accidents Achieving reliability level of services Zero increase Zero increase • The number of major accidents over the reporting period went down from 22 to 17 • Injury rate at the Company’s facilities lowered by 22% relative to 2014 • Undersupply of electricity to customers reduced by 51.5% Zero increase Zero increase relative to 2014 • the Company has completed all planned repair and maintenance at UNEG facilities 1 0.3 • Enhance the role of diagnostic using contemporary tools and methods for assessment of the actual state of equipment and for taking timely actions to prevent failures and avoid weaker reliability of Federal Grid Company’s facilities • Conduct repairs in a timely way and take targeted actions via upgrade / replacement of the most damageable equipment units risK management The Long-Term Development Programme analysed risks that might affect implementation of Federal Grid Company’s strategy, and outlined measures to minimise these risks Maintenance of financial stability and independence Return on invested capital (RoIC) 1.06% (actual figure must be at least 0.9 of the target) 1.95% (actual figure amounted to1.8 of the target) Financial sustainability measure: financial leverage total shareholder return (TSR) 0.43 28% No more than 1.5 or the value as per the business plan Higher than the average value for the past three years before the reporting year by the amount established by the Board of Directors Reduction of oPEX By at least 14.2% Labour productivity At least17% 24.2% 21.5% 32 • The costs of maintenance and repair conducted by external contractors was reduced by 25.6% as part of the efficiency enhancement programme • the Company achieved a reduction of operating expenditure (oPEX) by 40.1% compared to the 2012 level, which was above the target set by the Strategy of the Electric Grid Complex Development of the Russian Federation • The Company made changes in the structure and staffing tables of structural units within the Executive Directorate and the Company’s branches. As a result of these changes, the average headcount was reduced by 4.1% and labour productivity increased by 9.9% relative to 2014 • Continue cost optimisation initiatives • Implement the Procedure of operational Efficiency and Cost Reduction • Strengthen claims and bad debt recovery efforts to collect fees for the technological connection of electricity generation facilities • Seek to strengthen the customers’ payment discipline and liability for non-payment • Manage the efficiency of the Company’s units and employees by raising the level of labour productivity • operational and technological risks: violations of service conditions and system-wide interruptions in the performance of electric grids • Lower rates of replacement of fixed assets due to financial constraints • Financial risks related to the impact of the following factors: CBR’s monetary policy, exchange rate fluctuations, changes of interest rates and inflationary pressures • Risks related to tariff regulation 33 Development of UNEG with regard of technical and economic optimisation of backbone grids Compliance with the facilities commissioning schedule At least 95% 115.5% • Capacity commissioning plans were met by 99%, and for commissioning of transmission lines by 100% • The Company reviewed its unfinished construction and postponed or cancelled the commissioning of 35 facilities (reduction by RUB 83.6 billion) • the Company approved targeted programmes “Renovation of Fixed Assets,” “Facilities Providing Reliable Energy Supply for 2018 FIFA World Cup” and “Actions to Ensure Reliable operation of UES of Russia Separately from the Energy Systems of BRELL Countries” Reduction of investment costs At least 15% 18.3% Meeting of customers’ demand for services Meeting deadlines for technological connection Not more than 1.1 1.0236 • the Company signed 210 contracts for technological connection • The total connected capacity increased by 47.8% to 8.2 GW • the Council of Customers of Federal Grid Company was established in order to improve customer relations and the transparency of the Company’s operations • The Company conducts public discussions of its most important draft documents, such as the Long-term Development Programme and investment programme • • Improve the business process of planning and control of investment projects Improve methods for assessment of investment projects and the procedure of drawing up investment programmes • Write economic rationale for investment projects that are financed from the National Wealth Fund and federal budget • Update internal documents when methodological guidelines for technological and pricing audits of investment programmes are approved • Distorted priorities of the technical policy and investment planning • Suboptimal allocation of financial resources • Restricted opportunities for equity or debt financing of capital-intensive investment projects. • Develop schemes for the financing of fees for technological connection that would cover the Company’s connection costs, on the one hand, and take the customers’ interest into account, on the other hand • Support the work of the Customer Council • Improve the system for monitoring of service reliability and quality indicators Distorted priorities of the technical policy and investment planning • Suboptimal allocation of financial resources • Restricted opportunities for equity or debt financing of capital-intensive investment projects. * The Board of Directors annually approves Methodology for Calculation and Evaluation of Key Performance Indicators for Federal Grid’s Senior Management. The complete list of KPIs is available in CORPORATE GOVERNANCE REPORT / Governance System (p.142). ** Detailed information about the key risk factors and risk management actions is available in CORPORATE GOVERNANCE REPORT / Control System / Risk Factors (p.182). 34 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. owing to its specific role in the energy sector, economy and social development, Federal Grid Company expands and complements the traditional concept of sustainability in its operations. strategic priorities of federal grid’s sustainaBle development • To build mechanisms and practices for the synchronisation of stakeholder plans that envisage the development and expansion of UNEG • To achieve import substitution for the purposes of innovative development of the national energy sector and higher energy safety of the Russian Federation • to form a talent pool 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 assess the economic expediency of implementing innovations and new technologies • To integrate Corporate Social Responsibility (CSR) strategy in the internal business processes As a monopoly operator of UNEG, the Company ensures electricity transmission via backbone electric grids and is responsible for providing a reliable power supply for consumers across the Russian Federation. The Company’s responsibility for the efficient administration 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 services 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 responsibility and sustainable development is to continuously seek the balance between public and economic interests in Federal Grid’s work. Federal Grid Company, as one of the largest electric power 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 began implementing a Long-Term Development Programme aimed, among other things, at the renovation, modernisation and innovative development of UNEG. The success of this programme largely depends on constructive cooperation between the Company and a broad range of stakeholders. These include suppliers, contractors, project and R&D think tanks, and distribution electric grid companies, IDGCs, customers, generators, infrastructure regulators, labour unions, government authorities, public and environmental organisations and the expert community. Regular, open communication with stakeholders plays an important role, as it allows us to better understand their expectations and to use a target- oriented approach for shaping the corporate social responsibility agenda. The communication channels we use for the dialogue include congress and exhibition arrangements, multilateral discussions, raising awareness through mass media. Потребители Акционеры и инвесторы StRAtEGIC MANAGEMENt social responsiBility and corporate sustainaBility report of federal grid company Сотрудники Our social reports are prepared in accordance with international standards for non-financial statement disclosure: GRI Guidelines, the GRI energy protocol, AA 1000 SES standard. Поставщики и подрядчики As part of preparing 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. Federal Grid Company’s social responsibility and corporate sustainability reports are available in the About the Company / Corporate Social Responsibility section of our website www.fsk-ees.ru Население регионов присутствия ▶ Stakeholder engagement Научное сообщество Stakeholders Understanding of Social Responsibility Progress in 2015 the State and general public • Ensuring the reliable and uninterrupted • Meeting obligations under the investment power supply programme 35 • Implementation of priority public • Meetings with the heads of regions sector projects Государство и(cid:5)общество в(cid:5)целом • Transparency and efficiency of operations, meeting with the needs of the economy • Signing several cooperation agreements with the regional authorities (Krasnodar krai, Republic of Tatarstan) • Implementing import substitution programme Customers • openness and flexibility in consumer • Creating and arranging meetings of the Consumer relations Council • Support of Russian machine • Signing cooperation agreements (with RZD) Потребители Средства массовой Потребители информации manufacturing industry in order to implement import substitution processes Shareholders and investors • Transparency of business processes • Holding General Meeting of Shareholders • Growth in shareholder value Акционеры и инвесторы Потребители Акционеры и инвесторы Сотрудники Акционеры и инвесторы Сотрудники • Arranging meetings of Federal Grid Company’s senior executives with analysts from investment banks and funds, and rating agencies • Holding consultation meetings with minority shareholders – individuals • Participation in investment activities, such as forums, conferences and meetings with investors Employees • Creating decent working conditions • taking measures for attracting and retaining young specialists • Implementing a Corporate Housing Programme • Sports and fitness events • Doors open Days for employees’ children • Conducting professional skills competitions and ensuring professional training, including within the “Knowledge Days” • Providing opportunities for professional and personal growth Поставщики и подрядчики Сотрудники Поставщики и подрядчики Поставщики Население и подрядчики регионов присутствия Население регионов присутствия Население регионов Научное присутствия сообщество Научное сообщество Научное сообщество Потребители Потребители Потребители Потребители Акционеры и инвесторы Акционеры Акционеры Акционеры и инвесторы и инвесторы и инвесторы Сотрудники Stakeholders Understanding of Social Responsibility Сотрудники Сотрудники Сотрудники Progress in 2015 Suppliers and Contractors Поставщики и подрядчики environment • Creating transparent competitive • Using a market-based pricing model Поставщики Поставщики Поставщики и подрядчики и подрядчики и подрядчики Local Communities and Environmental team Население регионов присутствия • Reducing negative impact on the environment Население Население Население регионов регионов регионов присутствия присутствия присутствия Science and Education • Promoting industry-specific science Научное сообщество and education • Personnel training and ensuring generational continuity Научное Научное Научное сообщество сообщество сообщество • Applying innovative technologies that • Signing agreements with Russian and foreign manufacturers • Supporting domestic suppliers in access to foreign markets • Implementing environmental safety policy • Cooperation with the World Wildlife Fund (WWF) on conservation of oriental storks and prevention of bird death on power lines • Participation in Earth Day • Cooperating with scientific organisations and placing orders for R&D • R&D and technical partnership with SIGRE Russian National Committee • organising guest lectures and on-the-job training 36 reduce environmental impact for students Государство и(cid:5)общество в(cid:5)целом • Organising students construction teams • Participating in events for young people, such as forums, conferences and seminars • Cooperating with the Russian Geographic Society (celebrations of the 70th anniversary of victory in the Great Patriotic War)1 • Cooperating with the Russian Chess Federation Mass Media • Transparency of business processes • holding media events (briefings, press-points, and • Ensuring information accessibility of the Company’s activities Средства массовой информации others) • Distributing press releases on a timely basis • Handling requests from mass media StRAtEGIC MANAGEMENt CORPORAtE GOVERNANCE Compliance with Best Standards Corporate Governance Rating 2015, target 7+ 2015, actual 7+ 2016, target 7++ Corporate Governance Principles Federal Grid Company builds its corporate governance system in strict compliance with all relevant legislation and follows the Moscow Exchange listing rules and recommendations of the Russian Corporate Governance Code. When developing all elements of the system, adjusting them in response to new requirements and challenges of the external environment, we are constantly guided by the key principles of corporate governance set out in the Federal Grid’s Corporate Governance Code. TRANSPARENCY Ensuring timely and accurate disclosure of all material information on the Company, and free access to the information for all stakeholders 37 ACCOUNTABILITY The Board of Directors is accountable to all shareholders, and the Company executive bodies are accountable to the General Meeting of Shareholders and the Board of Directors FAIRNESS Creating conditions for protecting shareholder rights and legitimate interests and treating all shareholders equally RESPOPNSIBILITY Recognising the legal rights of all stakeholders for the purpose of the Company growth and financial stability Board of directors’ statement of compliance with corporate governance principles Federal Grid Company has always paid significant attention to improving its corporate governance system. It is crucial for us that the corporate standards we implement eventually contribute to the delivery of our strategic objectives, to strengthening confidence in the Company and improving its investment attractiveness, so we strive to meet the highest standards in this area. For Federal Grid Company, the reporting year was marked by a number of significant events including those related to the implementation of the ‘road map’ on introducing key provisions of the Corporate Governance Code into the Company’s practice. This work included an extensive revision of the Company’s Articles of Association and key internal documents, as well as the implementation of new elements in the Federal Grid’s corporate governance practice, in particular the position of a Corporate Secretary. 38 Following the results of the work performed, Federal Grid Company conducted a self-assessment of the Company’s corporate governance quality, as well as a review for its compliance with principles and recommendations of the Russian Corporate Governance Code. Based on the results of the self-assessment and analysis of the Federal Grid’s corporate governance system and practice the Board of Directors of Federal Grid Company has every reason to declare high quality of corporate governance of the Company and its compliance with most of recommendations of the Russian Corporate Governance Code. Vyacheslav Kravchenko Chairman of the Board of Directors of Federal Grid Company Assessment of Federal Grid Corporate Governance Quality In 2015, the Federal Grid’s corporate governance system has undergone some significant changes resulting from the implementation of key recommendations of the Russian Corporate Governance Code1. Following the implementation of the corporate governance development plans, the Company has conducted a self-assessment in accordance with the Corporate Governance Self-Assessment Methodology for State-Owned Companies (approved by the order of Rosimuschestvo No. 306 dated 22 August 2014). the corporate governance quality assessment have been conducted, among other things, with respect to compliance with the principles and recommendations set out in the Russian Corporate Governance Code. ▶ Results of 2015 Self-Assessment of Corporate Governance Quality in Federal Grid Company Component Shareholder rights Board of Directors Executive Management Transparency and Disclosure Risk Management, Internal Control and Internal Audit Corporate Social Responsibility and Business Ethics 1 2 3 4 5 6 weighting in the overall score Number of questions Actual score Degree of compliance 14% 37% 7% 25% 11% 6% 22 56 5 15 16 6 66 150 30 113 59 29 447 88% 74% 79% 84% 94% 94% 82% OVERALL SCORE 100% 120 CORPORAtE GOVERNANCE what new developments were implemented during the first year of the implementation of the ‘road map’ for improving the corporate governance system of federal grid company? Maria tikhonova Deputy Chairperson, member of the Management Board of Federal Grid Company “The Federal Grid’s Corporate Governance Code was among the first documents we updated under the ‘road map’ thus confirming the Company’s intention to develop corporate relations in accordance with the principles of the Russian Corporate Governance Code. Almost all key internal documents of our Company were revised in line with recommendations of the Code. In addition, we committed to conduct an annual performance evaluation of the Board and its committees facilitated by an external consultant. Such evaluation was already performed at the beginning of 2016. Based on the results achieved, the consultant developed recommendations that will serve as clear guidelines for our further work. one of the most significant structural changes aimed at the developing corporate governance was the establishment of a separate internal audit function that reports administratively to the Chairman of the Management Board and functionally – to the Board of Directors. A separate structural unit for internal control and risk management was also established. In the reporting year, we generally implemented all activities scheduled by the ‘road map’ for that period. This allows us to steadily move forward and open new opportunities.” 39 Following the Methodology’s approaches, six components have been assessed, all carrying a certain weight within the overall evaluation. of the Bank of Russia on reporting compliance with the Corporate Governance Code principles and recommendations1. When conducting the assessment, a number of key assumptions were taken into account, including non-applicability of certain provisions of the Corporate Governance Code due to the absence in the structure of the Federal Grid Group, under the latest consolidated financial statements, of the controlled legal entities meeting the materiality criteria defined by the Code. In addition, the Company has reviewed its corporate governance practices’ compliance with the principles and recommendations of the Russian Corporate Governance Code based on the Recommendations Being a company whose Global Depository Receipts are traded on the London Stock Exchange, Federal Grid Company strives to achieve high international standards in corporate governance, including the compliance with the UK Corporate Governance Code. Full Report on Federal Grid’s compliance with the Corporate Governance Code principles and recommendations, as well as the Report on compliance with main principles of the UK Corporate Governance Code are available in the Appendix 3 to the annual report 1 Approved by the Board of Directors of the Bank of Russia on 21 March 2014 and recommended for application by the Letter of the Bank of Russia “On the Corporate Governance Code” No. 06-52/2463 dated 10 April 2014 1 Letter of the Bank of Russia No. IN-06-52/8 dated 17 February 2016 40 Key elements of the Corporate Governance System (Model) of Federal Grid Company Mechanisms to ensure and protect shareholder rights • The company takes significant measures to ensure that all shareholders have equal opportunities to exercise their rights and legitimate interests, and to reduce the risk of violation of such rights and interests. This includes implementing best practices into the process of preparing and holding the General Meeting of Shareholders, increasing transparency of the dividend policy, improving mechanisms for ensuring safety and efficiency of the Company’s assets, creating facilities that eliminate any abusive actions of the Company’s major shareholder to minority shareholders. Governance and control structure • The Company has established the governing and control bodies that interact effectively, their responsibilities are clearly separated and work is strictly regulated by the Federal Grid’s internal documents. The Company’s Board of Directors is balanced enough in terms of qualifications and experience of its members, as well as consideration of interests of all shareholders. Fulfilling its key role of strategic leadership, the Board is responsible for the effective oversight of the executive bodies’ activities. A highly professional management team of Federal Grid is responsible for day-to- day management of the Company and the delivery of its strategic goals and objectives. Risk management and internal control • The Company’s effective system of risk management and internal control established in accordance with best standards plays an important role in the achievement of the Company’s goals. An internal audit function has been established to ensure regular independent review of this system’s effectiveness and reliability. Corporate Secretary Disclosure • To ensure effective engagement between shareholders, the Board of Directors and executive management of the Company, a position of independent Corporate Secretary has been established in Federal Grid. • The Company ensures timely and regular disclosure of full, relevant and accurate information about itself, its operations and securities to enable shareholders and other stakeholders to take informed decisions concerning Federal Grid and its securities. Corporate culture and ethics • In its activities and relationships with all stakeholders, Federal Grid Company follows high ethical standards and values set out in the Code of Corporate Ethics. The Company has an effective system of monitoring compliance with the provisions of the Code. For further details of the key elements of the Federal Grid’s corporate governance system, see the Company’s Articles of Association and internal documents available on our website www.fsk-ees.ru in section Investors/Corporate Governance /Corporate documents Full details on the Federal Grid’s corporate governance system are available in section CORPORATE GOVERNANCE REPORT of this annual report Improving the Corporate Governance System in 2015 In order to implement the Russian Corporate Governance Code recommendations, the Company developed and the Board of Directors approved (Minutes No. 255 dated 16 March 2015) an Action Plan (‘road map’) covered all aspects of the Federal Grid’s corporate governance system and practice. All commitments made within the ‘road map’ have been fully met by the Company. • In June 2015, the Annual general Meeting of Shareholders approved an updated version of the Articles of Associations, updated versions of the Regulations on the General Meeting of Shareholders, Board of Directors, Management Board, Audit Commission, the Regulations on Remunerations and Compensations to Members of the Board of Directors and on Remunerations and Compensations to Members of the Audit Commission • Following the update of the above documents, the Board also approved new Regulations on the Board committees and on remunerations to committee members • A position of Corporate Secretary was established, and the Board approved Regulations on the Corporate Secretary • The Federal Grid’s Information policy was updated, including with regard to new requirements of the Bank of Russia to securities issuers CORPORAtE GOVERNANCE When implementing measures envisaged by the ‘road map’, the Company continued to review and update the other internal documents as required by the recommendations of the Russian Corporate Governance Code, including the Regulations on the Investment Committee, Risk Management System, Internal Audit. Gorporate Governance Rating The results of the Company’s efforts to improve its corporate governance system were positively assessed by experts of the Russian Institute of Directors – an external independent consultant of Federal Grid Company that has been monitoring the corporate governance practice of the Company since 2012 and assigns a National Corporate Governance Rating (NCGR). new corporate governance code of federal grid company In 2015, the Board of Directors approved a new version of the Federal Grid’s Corporate Governance Code. A revised document has a better structure within which the Company has declared the main corporate governance principles, defined key participants of its corporate governance system, their roles, working environment and terms of engagement. taking into account the recommendations of the Russian Corporate Governance Code, the Code of Federal Grid Company has covered an extended range of issues concerning the rights of shareholders, specified principles of Board structure and composition, independence criteria of Board members, set out the basic provisions relating to the Corporate Secretary and to the ensuring of transparency of the Company’s activities. In August 2015, Federal Grid Company’s National Corporate Governance Rating was confirmed at a level 7+ “Well-Developed Corporate Governance Practice” Among the major achievements of Federal Grid Company experts noted the following: • Improving the balance of the Board of Directors by increasing the number of independent directors • Establishing the position of Corporate Secretary • Expanding the role of the Board of Directors with regard to monitoring and reviewing the effectiveness of the Company’s internal audit function After the Annual General Meeting 2016, the Federal Grid’s corporate governance practice will be re- evaluated under the updated NCGR methodology. Plans for 2016 • Assessing corporate governance systems of Federal Grid subsidiaries using the Guidelines for self-assessment of corporate governance quality in state-owned companies • Drafting, where appropriate, standard internal documents on corporate governance issues for the needs of subsidiaries • Developing/updating and approving organisational and administrative documents on safeguarding insider information • Improving organisational and administrative documents that regulate disclosure, and adjusting them in line with the recent changes in the Russian legislation 41 Integrated Risk Management what were the areas of the company’s focus in risK management in the reporting year? 42 Dmitry Shishkin Internal Control Director, member of the Management Board of Federal Grid Company “In 2015, we have continued to improve our internal control and risk management system, including with regard to the recommendations of the Russian Corporate Governance Code and requirements of the Moscow Exchange Listing Rules. The Federal Grid’s Board has approved a new document – the Regulations on the Risk Management System that covered both the latest regulatory changes and best practice recommendations. Pursuant to the instructions of the Board of Directors, the Company has taken serious measures to improve the quality of risk reporting, in particular by providing information within the report on the occurrence of the relevant risks in the reporting period, as well as to improve risk assessment tools, including the development of a map and matrix of key operational risks. Overall, in 2015 we have prepared a proper procedural and organisational framework for further improvement of the risk management system of Federal Grid Company.” Principles of and approaches to risk management Our risk management system is an element of the internal control and risk management system, which includes a set of mechanisms and tools providing procedural measures and structure for developing, implementing, monitoring, reviewing and continuously improving risk management processes of Federal Grid Company. Further details on our system of internal control and risk management are available in section CORPORATE GOVERNANCE REPORT /Control system risK management standards The Federal Grid’s risk management system has been established based on the generally accepted conceptual frameworks for risk management developed by the Committee of Sponsoring Organisations of the treadway Commission – COSO ERM “Enterprise Risk Management – Integrated Framework”. The Federal Grid’s Regulations on Risk Management has been developed with due account of the best Russian and international standards, including: • Guidelines for drafting regulations on risk management system approved by the Government of the Russian Federation • Russian Corporate Governance Code • Listing Rules of the Moscow Stock Exchange • International Standards ISo73:2009, 31000:2010 and 31010:2011 in the area of risk management • Risk management standards of the Federation of European Risk Management Associations (FERMA) RISK MANAGEMENt In accordance with the recommendations of the Russian Corporate Governance Code, in 2015 the Board of Directors has approved the Regulations on Risk Management System (Minutes No. 291 dated 19 November 2015). the risk management system is aimed at reducing uncertainties the Company face in delivering its objectives set at all levels of management, including in the Long-Term Development Programme and documents of tactical and operational planning (business plans, budgets). Improving Risk Management Annually the Company develops and implements a set of measures aimed at improving the risk management system. In 2015, the following measures were taken: • In order to execute the decision of the Board of Directors, key operational risks have been allocated to owners, factor analysis and assessment of key operational risks were conducted with further connection of such risks to control procedures, and key operational risk map and matrix were developed; the key operational risk management system was integrated in the Company’s system of business planning • In order to ensure unified approaches to risk management planning and to processes related to risk classification, assessment and reporting, the Company has started to develop a Procedure for operational risk assessment based on international standards and best practices in risk management 43 Key principles of risK management system • Continuity and integrity • Goal orientation • Quality of information • Involvement and leadership • Integration into management • Cross-functional networking • Balance between risks and earnings • Reasonable assurance and efficiency • Reducing uncertainties • Adaptability • Consistency and responsibility • Continuous improvement 44 ▶ Authorities and Responsibilities of Key participants of the Risk Management System Board of Directors • Determines principles of and approaches to the risk management system • Approves approaches to setting a preferred risk, its values and frequency of their revision • Considers at least annually matters of the organisation, operation and effectiveness of the risk management system Audit Committee • Monitors the effectiveness and reliability of the risk management system, including a review of the effectiveness of risk management procedures • Considers matter on the operation of the risk management system prior to their consideration by the Board of Directors Chairman of the Management Board Management Board • Ensures the establishment and maintaining the operation of sound risk management system • Are responsible for the implementation of decisions of the Board of Directors regarding the risk management system and report to the Board on the operation of the risk management system • Distribute powers, duties and responsibilities for certain risk management procedures among their subordinate heads of the Company’s structural units Internal Control and Risk Management Department • Provides overall coordination of the risk management processes • Develops guidance materials in support of the risk management process • Organise training of employees on risk management issues • Reviews the Federal Grid’s risk portfolio and makes proposals regarding its risk response strategies and re-allocation of resources to manage the relevant risks • Makes consolidated reports on risks • Monitors the risk management processes performed by the Company’s units and controlled legal entities • Informs the Board of Directors and the Company’s executive bodies on the effectiveness of the risk management processes Internal Audit Department • Regularly reviews the reliability and effectiveness of the risk management system, including: • Checks whether all elements of the risk management system are sufficient and well- developed for efficient risk management • Checks whether risks are fully identified and correctly assessed by the Company’s management at all levels of its management • Reviews the effectiveness of control procedures and other risk management measures • Analyses information on any risks that have materialised Risk Owners Management, structural units, working bodies • Develop, record, implement, monitor and improve the risk management system, including the identification and assessment of risks, development and application of risk response measures • Report on the risk management system operation to the Management Board and its Chairman through the Internal Control and Risk Management Department • Carry out risk management measures in coordination with risk owners and within the functional areas of the Company’s activities they oversee Executors of risk management measures Management, structural units, working bodies, employees RISK MANAGEMENt Monitoring (V) Risk Management Methods and Stages Information sharing and consulting (IV) Event Identification (environment factors) (I) Risk Assessment (II) Risk Identification (II-1) Risk Analysis (II-2) Risk Evaluation (II-3) Risk Treatment (response) (III) Risk response methods • Risk avoidance • Acceptance of or increase in risk to implement favourable opportunities • Risk reduction or transfer 45 The Long-Term Development Programme of Federal Grid Company has been developed with consideration of key risks Federal Grid’s risks rating based on their relevance Risks related to the state regulation of tariffs Risks related to technological connection Investment risk Operationaland technological risk Risk of implementation of the Import Substitution Programme Strategy risk Risks related to an increase of overdue and bad accounts receivable Environmental risks Risks related to the political and economic situation in the country and region Moderate Significant Risk of business reputation loss Critical Risks related to the geographical characteristics of the country or region Legal risks Financial risk Further details on key risks and risk management actions are available in section CORPORATE GOVERNANCE REPORT / Control system of the Annual Report RISK MANAGEMENt FINANCIAL MANAGEMENt Board focus on risK management system during the year • A Register of key risks of Federal Grid Company has been approved, the Chairman of the Management Board was instructed to ensure that an annual report on key operational risks of Federal Grid Company is submitted for consideration and approval of the Board of Directors (with prior consideration by the Audit Committee) (Minutes No. 248 dated 29 January 2015) • A Report on key risks for 2014 was considered. Following the consideration of the Report, the Board of Directors has made decisions aimed at improving the effectiveness of the Company’s risk management system (Minutes No. 270 dated 01 June 2015) 46 • In accordance with the recommendations of the Corporate Governance Code, the Regulations on Risk Management System have been approved (Minutes 291 dated 19 November 2015) Reviewing the effectiveness of risk management and the role of internal audit function the ongoing assessment of the effectiveness of the risk management system (self-assessment) is conducted by risk owners within the functional areas of the Company’s activities they oversee. Coordination, monitoring and methodological support of the ongoing evaluation is carried out by the Internal Control and Risk Management Departmnet. Independent internal review of the effectiveness and reliability of the risk management system is regularly conducted by the Internal Audit Department. For further details on the improvement of the Federal Grid’s internal audit function, please, see the section CORPORATE GOVERNANCE REPORT / Control system (page.175). Plans for 2016 • to improve the Regulations on Risk Management System: to develop and approve the Procedure for operational risk assessment based on the international standards and best practices in the area of risk management • to implement a system of monitoring, reporting and evaluating the quality of key risk management on a regular basis • to improve the system of motivation of senior managers, senior officers of the Executive office and branches of Federal Grid Company taking into account the requirements to ensure the acceptable risk levels • to produce reports on key operational risks Ensuring Financial Stability The main objective of financial management is to ensure financial stability and economic efficiency of Federal Grid Company and meet obligations to contractors, shareholders and investors in a timely manner. For Management’s Discussion and Analysis for 2015 please refer to the section FINANCIAL CAPITAL Financial Management Business Processes “Single Treasury” implements the functions of a single treasury at the level of Federal Grid’s executive office and provides more efficient use of intra-group liquidity, including the following: • Liquidity management: limiting the list of service banks (ToP 10) and deposit instruments • Payments: setting up payment approval process and payment arrangements, implementing financial control “Budgeting and budget performance reporting” defines the processes for business planning and budgeting, budget and business plan adjustments and monitoring of their performance, approval of business planning standards for subsidiaries. The Company’s budget system has the following planning levels (horizons): • Intra-group cash flow management: optimising liquidity management and treasury operations within the Group • It-system – a set of software used for the automation of Single treasury functions 47 “Raising external finance” establishes the Company’s borrowing policy with a view to minimise insolvency risks and preserve the financial stability. The Company’s borrowing policy is focused on maintaining high financial stability and the status of a reliable borrower, placing a priority on the following conditions for attracting external funding: • The use of long-term debt instruments • Maintaining a prudent level of debt burden and prudent debt management • Search for new sources of finance In order to enhance the internal efficiency of financial activities and planning, starting from 2016, business plans are developed not only for Federal Grid Company and separately for its subsidiaries but for Federal Grid Group on the whole based both on RAS and IFRS (consolidated parameters of Federal Grid Company and its controlled subsidiaries). • Long-term planning (a five-year planning horizon) – corresponds to the periods of Federal Grid’s investment planning and tariff approval with the planning step of one year in the form of a financial plan for Federal Grid’s investment programme and business plan. • Short-term planning – current planning in the form of the Company’s budget with the planning horizon of one year and the planning step of one quarter. The budget enables the management to use targets set at the stage of long-term planning as benchmarks for day-to-day operations. main stages of federal grid’s financial management • Financial planning • Budget performance monitoring • Selection of banking institutions for cash management services • Selection of debt instruments • Financial risk management • Liquidity management • AR and AP management • IT system to automate financial management processes 3 PRODUCTIVE CAPITAL FINANCIAL CAPITAL INTELLECTUAL CAPITAL hUMAN CAPITAL NATURAL CAPITAL t N E E M G A CORP O R A t E ConStRuC tIon AnD ReConStRuC tIon eleCtRICItY tRAnSMISSIon teCHnolo GICAl ConneCtIon M A N AtEGIC R t S F I N A N C I A L M A N A G E M E N t 1,115 km transmission lines commissioned RUB1,284 mln dividends paid for 2014 G O V E R N A N C E RUB 995.3 bn total assets of the Group t N A N AGEME M K R I S 30 new intellectual property items registered 23.9 thousand workplaces created RUB 248 mln spent and invested for environment protection CREAtION PERFORMANCE – CAPITAL MANAGEMENT Our activities are aimed at ensuring sustainable development in the long term and creating values for all stakeholders Electricity transmission ▶ Federal Grid’s Largest Customers in Terms of Revenue from Electricity transmission Services, 2015 ELECtRICItY tRANSMISSION VALUE CREAtION UNINTERRUPTED ELECTRICITY SUPPLY 473 Total number of customers of electricity transmission services provided by Federal Grid Company 525.8 Billion kwh Supply of electricity to customers in 2015 For customers 50 Number of counterparties under agreements for electricity transmission services Electricity losses in UNEG, % target 2015 470 4.27 Extent of electricity transmission constraints, % 0.0026 actual 2015 473 target 2016 510 4.47* 0.0002 4.13** 0.0025 * The increased electricity losses were caused by changes in UNEG operational mode in 2015. ** In accordance with Order No. 1024 dated 25 December 2015 issued by the Russian Ministry of Energy. the core activity of Federal Grid Company is the electricity transmission through the Unified National Electric Grid (‘UNEG’). This business accounts for 92% of the Company’s revenue. In accordance with Russian laws, Federal Grid Company’s services of electricity transmission via UNEG are monopoly operations regulated by the State. The cost of electricity transmission services is based on tariffs that are set by the Russian Federal Anti-Monopoly Service (FAS) and includes: • the cost of electricity transmission for the maintenance of electric grid facilities that are part of UNEG • The cost of electricity losses in UNEG allowed by the relevant technological standards in the constituent entities of the Russian Federation. Information about export and import of electricity under contracts between Federal Grid Company and INTER RAO is available in Annex 1 2.06 2.32 3.07 10.63 3.11 3.15 4.07 4.24 9.50 JSC Tyumenenergo PJSC IDGC Centre PJSC MOESK JSC IDGC Ural – Sverdlovenergo PJSC Lenenergo 9.77 JSC IDGC Ural – Chelyabenergo JSC Far East Distribution Grid Company PJSC Kubanenergo JSC RUSAL Krasnoyarsk PJSC IDGC South – Rostovenergo Reducing Electricity Losses Actual electricity losses in the Company’s grids in 2015 amounted to 23,478 million kWh. The relative level of 2015 losses was 4.47% of electricity supplied by the grid. As compared to 2014, it increased by 0.34%, or 2,217 million kWh as electricity supply increased by 2.04%. The increase of electricity losses was caused by changes in the operational mode of UNEG in 2015, as well as changes in the load of power stations, redistribution of customers’ load and the commissioning of new equipment in the Company’s grids 51 ▶ Actual electricity losses 2011 2012 2013 2014 2015 million kwh 22,553 21,946 22,262 21,261 23,478 % 4.43 4.24 4.28 4.13 4.47 Change 2015/2014 2,217 0.34 p.p. the measures to reduce electricity losses for the reporting period 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; • Construction, reconstruction and development of electric grids, and commissioning of energy-saving equipment As a result of implementing the above measures, electricity losses were reduced in 2015 by 49.4 million kWh. In 2014–2015, the Federal Grid Scientific and Technical Centre (with participation of JSC Scientific and Technical Centre of UES) conducted a “Study of the Possibility for Reducing Technical Losses during Electricity transmission via UNEG and the Capacity for Reducing Such Losses.” The document includes the findings of a study of thresholds for process losses of electricity in UNEG for the medium term, with regard of an impact that will be made by actions targeted at the reduction of electricity losses during the transmission, and plans for the development of electric grids. Operating perfOrmanceproductive capital Customer-Oriented Approach in Developing high-Quality Services VALUE CREAtION oPENNESS AND FLEXIBILITY IN CUStOMER RELAtIONS Gw 2.7 Increase of connected capacity of customers and generation facilities against the previous year For customers For the State 52 technological connection is a service package which the Company offers to connect electricity consumers’ power receivers, electricity producing facilities and grid facilities to Federal Grid Company’s electric grids. conditions, sign a contract, obtain a permit from the federal power supervision authority for the commissioning of the applicant’s facilities, and issue a connection report. we provide a full package of technological connection to electric grids: we accept an application for technological connection, develop technical client-oriented approach Federal Grid Company focuses its efforts on increasing the transparency and accessibility of the technological connection to the grids. The Company is implementing an action plan “Increasing the Accessibility of the Power Infrastructure” approved by the Russian Government, which provides for reduced timelines and stages of technological connection. Federal Grid Company’s customers have interactive access to the Technological Connection Portal at www.fsk-ees.ru (section About the Company / Customers / Technological Connection Services), which provides full and up-to-date information about technological connection to customers. we provide technological connection services to new and existing customers if the latter need to change the operating parameters of their power facilities. The Company enters into direct contracts with customers in all constituent entities of the Russian Federation where grid facilities of Federal Grid locate subject to the restrictions set by the Federal Law No. 35 and Technological Connection Rules. In 2015, Federal Grid Company signed 210 agreements for technological connection with customers and distribution grid companies and generation companies. The total maximum capacity for technological connection of consumers and distribution grid companies was 2.8 GW, and 5.4 GW for electricity production facilities. See changes in technological connection KPIs in Appendix 1 to Annual Report tECHNOLOGICAL CONNECtION minimisation of the cost of capital and earning of guaranteed but not excessive profits. As a result, this model makes it possible to pay dividends to shareholders. the main principle of such tariff regulation is the recovery by the Company of all its reasonable costs related to the development and servicing of electric grids, including reasonable return on invested capital from the fee for technological connection or via including these costs in the tariff for electricity transmission. What is the strategic initiative to establish attractive terms and conditions of technological connection? Alexey Molsky Deputy Chairman of Federal Grid Company’s Managing Board What is the economic model of technological connection which is implemented as part of the Long- Term Development Programme and based on a balance of interests and fair sharing of risks between applicants and the backbone grid company? “this model of tariff regulation provides for the mitigation of financial risks for such regulated entities as Federal Grid Company, as well as “We have been progressively optimising technical terms and capital costs. This will eventually help to reduce the customers’ costs related to technological connection. Moreover, Federal Grid Company has large financial resources that help it to implement major technological connection projects in most Russian regions. Finally, we offer an attractive tariff which is one of the lowest tariffs for electricity transmission services.” 53 ▶ Connection of Customers and electricity Generating Facilities, MW 3,907 2,259 1,657 2,912 1,401 2,392 1,769 3,768 5,419 2,766 2011 2012 2013 2014 2015 Electricity generating facilities Customers and grid companies Operating perfOrmanceproductive capital tECHNOLOGICAL CONNECtION IMPROVING RELIABILITY ▶ Federal Grid Company’s Major Technological Connection Projects in 2015 Customer JSC E.oN Russia PJSC OGK-2 Facility Capacity, Mw Berezovskaya hydro Power Station, Unit3 Cherepovets hydro Power Station, Unit 4 JSC INtER RAO – Elektrogeneratsia Yuzhnouralskaya Hydro Power Station-2, Unit 1 JSC Fortum PJSC MOESK Chelyabinsk heat and Power Plant-3, Unit 3 tC 110 kV MSU SS to 500 kV Ochakovo SS JSC GAZPRoMNEFT – Moscow Refinery 220 kV GPP-3 SS to 500 kV Chagino SS Federal State-Run Enterprise “Aerospace Industry Research & testing Centre” Vostochny Spaceport, Stage 1 LLC Yandex DC CJSC Vankorneft PJSC IDGC Ural JS tyumenenergo 110 kV Yandex SS 110 kV NPS-1 SS tC 110 kV Ustinovo SS to 220 kV Khimkomplex SS TP 110 kV Geolog SS to 220 kV Barsovo SS 54 800 420 400 220 83.17 67 60 56 20 19.65 18 Improving Reliability as a Strategic Priority VALUE CREAtION RELIABLE ELECTRICITY SUPPLY % 22 In 2015 accident rate at Federal Grid Company’s facilities decreased as compared to the previous year % 51.5 Undersupply of electricity to the Company’s customers decreased in 2015 as compared to the previous year For customers 55 Number of major accidents Extent of electricity transmission constraints, % 2015, target No more than 37 No more than 0.0026 2015, actual 17 0.0002 2016, target No more than 25 No more than 0.0025 Ensuring reliable electricity supply to our consumers is one of our priorities. Maintaining a high level of reliable power supply to customers is established as a strategic goal by the Long-Term Programme for the Development of Federal Grid Company, and an action plan is implemented annually in order to achieve this goal. The Company has been increasing the reliability of its grids by installing new equipment and improving its personnel’s skills and professionalism. In 2015 accident rate at Federal Grid’s facilities decreased compared to the previous year by 22% Operating perfOrmance productive capital in 2015, the numBer of accidents at the company’s facilities decreased By 17.3% as compared to the previous year. what actions help the company to improve the reliaBility of electricity supply to customers every year? 56 Vladimir Dikoy Deputy Chairman of the Management Board, Chief engineer, Member of Federal Grid Company’s Management Board “The continuous improvement of reliability is the result of our comprehensive approach to this strategic objective. First, repairs at UNEG facilities are organised and planned in accordance with all the established regulatory and technical requirements that are effective in Federal Grid Company, and with due regard of the actual technical condition of equipment, local conditions and track record of operation. Second, the Company carries out pinpoint upgrade of facilities and modernisation of equipment by installing units that have better technical characteristics and ensure higher reliability, including units in the schemes of capacity delivery from generation facilities. Third, the Company is able to respond promptly and professionally to any possible emergencies and liquidate the aftermath of accidents if they occur. The Company’s specialists conduct a mandatory review of causes and develop actions to prevent such disturbances in the future. Fourth Federal Grid Company has a holistic system for the preparation of facilities for operation during “special periods,” i.e. during thunderstorms, fires, river floods, and in the autumn/winter period. It enters into cooperative agreements with contractors, RosHydroMet, Ministry of Emergency Situations and grid distribution companies to collaborate and conduct repair and recovery work. Fifth, the Company has been steadily developing the competencies of repairs and diagnostics employees by arranging training for them by the leading training centres and producers of equipment, as well as by the Company’s Personnel Training Centres.” In 2015, we continued to take regular efforts to reduce the accident rate. The accident rate has been declining over the past five years. 22% compared to 2014, while the volume of services (number of electrical equipment items) continues to increase (by 6% in 2015). The quality of our operations is supported by the annual decrease of the accident rate over the past three years by 18% on average. In the reporting year, accident rate at Federal Grid Company’s facilities decreased by Undersupply is an important characteristic of sustainable electricity supply to our customers. In 2015, it decreased by more than twofold as compared to the previous year. IMPROVING RELIABILITY ▶ total Accidents at Federal Grid Company’s Facilities ▶ Accident Rate at Federal Grid Company’s Facilities (number of accidents per 1,000 units in operation) ▶ undersupply of electricity by Federal Grid Company, MWh 2,871 2,596 2,286 2.65 2.42 1,954 1,616 3,565 3,090 2,768 1,725 2.08 1.72 2,042 1.35 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 Fixed Assets Renovation Programme the Fixed Assets Renovation Programme is aimed at ensuring the reliable and efficient functioning of the electric grid complex via re-equipment. the renovation programme was included in the Company’s Investment Programme for 2015–2020 approved by the orders of the Russian Ministry of Energy No. 979 and 980 dated 18.12.2015. federal grid company’s technical policy Implementation of the Unified Technical Policy approved by the Board of Directors of Federal Grid Company in 2013 helps us improve the electric grid complex’s efficiency, reduce its operational cost, strengthen the system-wide reliability of UNEG and meet the increasing demand for electricity. 57 the draft of the Renovation Programme for 2015– 2020 stipulates commissioning of facilities with a total capacity of 11,452 MVA, reconstruction of 331.5 kilometres of transmission lines, and financing of RUB 118.2 billion. For 2016, the Renovation Programme envisages commissioning of 2,033 MVA of capacity for the total amount of RUB 16.7 billion. In 2015, Federal Grid Company fully implemented all planned measures scheduled for maintenance and repairs at its power facilities: Repairs Programme the Repairs Programme aims to provide technical maintenance and repairs at Federal Grid Company’s power facilities in order to ensure that equipment of substations and high-voltage lines is in good working conditions, that there are no accidents during the autumn/winter period and to ensure reliable operation of UNEG as a whole. • we repaired 215 phases of transformer equipment, 19 phases of reactors, 14,448 phases of disconnectors, 2,191 on-/off switches, and about 10,270 supports for high-voltage transmission lines • We cleared 43,400 hectares of high-voltage electricity transmission line paths • We replaced 125,917 insulators at high-voltage lines Operating perfOrmanceproductive capital Operational Process Control Operational process control in the Company is aimed at ensuring the reliable operation of the UNEG facilities and adhering to the operating modes that are set by the System operator’s control centres. our objective is to comply with the quality and safety requirements when we operate the UNEG facilities. Operational process control in Federal Grid Company addresses the following main issues: • to ensure proper quality and safety in the operations of UNEG facilities • To ensure effective work of the unified system for training of operational personnel • to make schedules for accident-caused restrictions on electricity consumption and impose accident- caused restrictions for teams of the System operator’s dispatch centres • To connect grid facilities and customers’ energy receivers to automatic emergency response systems Situational management is closely linked to the operational process control framework and addresses the following tasks: • Controls operational environment and implementation of actions related to response and mobilisation of staff and resources in cases of contingency and emergency • To minimise the number of process disturbances related to operating employee errors • Controls the organisation, timelines and process of emergency recovery work at UNEG facilities 58 • To contribute to the drafting and implementation of the UNEG development programmes in co-operation with the System operator’s dispatch centres • Promptly analyses dangerous natural phenomena to see whether there are risks to interrupt reliable operation of UNEG facilities • to plan and implement measures that ensure repairs, commissioning, modernisation and renovation of UNEG facilities • To liquidate process disturbances in UNEG • Organises information sharing with the situation centres of subsidiaries and affiliates of Rosseti, regional offices of the fuel and energy companies, Ministry of Emergency Situations, RosHydroMet, RZD, telecommunications companies and others ▶ number of process Disturbances Caused by employee errors ▶ Rate of process Disturbances Caused by operating employee errors ▶ outage Schedule Implementation Rate 57 40 12 9 19 18 16 4 4 5 3 3 0 0 . 6 2 0 0 . 2 1 0 0 . 8 0 0 0 . 6 1 0 0 . 4 1 0 0 . 3 0 0 0 . 3 0 0 0 . 5 3 1 0 0 . 8 3 0 0 0 . . 5 8 9 . 5 8 9 . 6 8 9 . 8 8 9 . 0 9 9 . 0 5 9 . 0 5 9 . 0 5 9 . 0 5 9 . 0 5 9 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 All categories Operating Employees Target Actual Target Actual IMPROVING RELIABILITY • Provides methodological guidance; organises and oversees Federal Grid Company’s duty teams • Forecasts evolution of natural, technology-related and anthropogenic situations that might disrupt the reliable operation of electric grid facilities Operation during Special Periods weather and climatic conditions make a strong impact on Federal Grid Company’s operations. therefore, we prepare electric grid equipment and facilities in advance for operation under low temperatures and peak loads occurring 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 operation. No major disturbances in UNEG operations were reported in 2015. The power system facilities operated as usual, including operations during river floods, thunderstorms and fires. The total number of process disturbances decreased markedly in the autumn/winter period of 2014–2015 as compared to the previous years, both at substations and electricity transmission lines. The number of accidents caused by errors or wrong actions of employees has also decreased. In 2015, river floods in most Russian regions were moderate. The situation was rather tense only in three regions, i.e. in the Far East, Western Siberia and South. There were no interruptions in electricity transmission due to actions that had been taken in advance, work of the river floods commissions, and regular inspections of places where power facilities could be flooded. Besides, the Company employees prevented major interruptions in the operations of the power supply facilities during forest fires that began in the spring in the Siberian Federal District. During the emergency situation in this period the Company closely co- operated with the regional governments, Ministry of Emergency Situations, hydro-meteorological services and power companies of the regional distribution grid system. Efforts had been taken in advance in order to reduce the likelihood of PtL disconnections because of brush-wood fires; dry wood had been removed in a timely way; and fire break ploughing had been made. on 12 November 2015, the Commission of the Russian Ministry of Energy issued a certificate confirming the Company’s readiness for operation during the 2015–2016 autumn/winter period. ensuring reliaBle operations of the electricity grid facilities during interruptions of power supply to the customers and other contingency situations • Federal Grid Company operates on a permanent basis 49 duty stations, whose main objective is to ensure reliable operation of the Company’s facilities during any emergency or other contingency situations and in cases where there is a threat of disruption of the course or efficient organisation of emergency and recovery work at such facilities • Branch representatives take part in the work of duty stations set up in the Russian regions to ensure safe electricity supply • our Company entered into 129 agreements on co-operation with contractors, which are involved, whenever necessary, in emergency and recovery efforts at the grid facilities. It also entered into 64 agreements with RoshydroMet and 85 agreements with the Russian Ministry of Emergency Situations • A sufficient emergency reserve has been created including a pool of large units • The Company has 349 back-up sources of power with total capacity of 100.6 MV which is uses in repair and recovery work. 59 Operating perfOrmanceproductive capital Effective Application of Information technology Reliability of UNEG, building a smart grid and effective management of the Company’s business are based on the use of advanced and modern information and communications technology. our Company has been building the Energy System’s Unified Process Communications Network (ESUPCN), which focuses on the digitalisation of the network and on making it smart. 60 nikolay pozdnyakov Deputy Chairman of the Management Board, Member of Federal Grid Company’s Management Board How do information technologies promote the achievement of strategic objectives that are outlined in Federal Grid Company’s Long-Term Development Programme? “Implementation of automated management projects provides for centralisation and automation of business processes in finance management, development of the corporate investment programme and investment budget, and storage and processing of financial documents. These solutions help to lower the risks of inappropriate use of funds and financial risks in settlements with counterparties, increase the transparency of accounting and reduce accounting-related labour costs. In the management of the Company’s investment programme, automated It systems help to improve the quality and accuracy of decisions when projects are selected. They also ensure more transparent calculations of financing required for investment projects, and efficient control over their implementation. Installation of modern equipment and new generation communication technologies at the electric grid facilities provides for better management of the Company’s operations and processes, and improves reliability of power supply to customers.” Are there any examples to demonstrate successful import substitution in the IT area: does Federal Grid Company employ any domestic IT systems and IT solutions? “We began gradually substituting some foreign- made software platforms for their Russian analogues – this work is part of our Import Substitution Programme. We harmonise the accounting systems in our subsidiaries on the basis of 1C software solutions, transfer Federal Grid Company’s geoinformation system to a Russian-made platform, and install an Enterprise Asset Management designed by Russian producers. In 2015, the Company installed a system of corporate identification and electronic digital signature. only Russian software is used in this system. we proactively use Russian equipment for the development of our telecommunication networks. For example, almost 80% of hF communication systems are produced in Russia. Domestically- made PABXs are also widely used.” DEVELoPMENT oF CoMMUNICATIoN NETWoRK AND IT SYSTEMS In order to improve operations and process management, the Company digitalises communication channels of the automated dispatch control system (ADCS) and automated process control system (APCS) at the level “object – Dispatch Centre.” In 2015, digitalisation level in the Company was about 75%. Comprehensive development of the Unified Process Communications Network helped to reduce the Company’s operating costs substantially. In 2015, the costs of process and corporate communications per one power facility of Federal Grid Company decreased by 16.5%. while implementing its It strategy in accordance with the Programme for Import Substitution of Equipment, technologies, Materials and Systems for 2015–2019, Federal Grid Company prefers to use Russian-made equipment and software at all levels of process management. ▶ Digitalisation of Federal Grid Company’s electric Grid Facilities ▶ unit Costs per one power Facility, RuB mln ▶ Share of Russian-Made Communications equipment, % 63.5 69.3 74.6 3.03 2.53 78.7 47.2 36.0 61 2013 2014 2015 2014 2015 FOCN Telephone HF communications Structure of the Uniform Communications Network in the Electric Power Industry and Technologies Employed in This Network Fibre-optic communications network (FoCN) total Length of FOCN, thousand kilometres In 2015 This is the basic communications network for the energy system. It is based on the use of a fibre-optic cable which is suspended on overhead electricity transmission lines. Federal Grid Company co-operates with telecom operators on the basis of long-term reciprocal lease. 48.9 54.0 57.7* 2013 2014 2015 * Net of rent (9,100 kilometres) Federal Grid Company completed construction of 3,664 kilometres of FoCN at the following facilities: Kostroma – Kirov (MES Ural), Bolchary – Kartopia (MES Western Siberia), Kyzylskaya – Chadan (MES Siberia), Konakovo hydro Power Station – Kalininskaya – Novaya – Kalininskaya Nuclear Power Station (MES Centre), Rostov Nuclear Power Station – Tikhoretskaya (MES South). Cable lines constructed by the Company itself account for the largest share of FoCN (59%), while the rest are either rented (14%) or have the right of passage (27%). Operating perfOrmanceproductive capital DEVELoPMENT oF CoMMUNICATIoN NETWoRK AND IT SYSTEMS Development of Corporate Information Management System the development of corporate information management system (CIMS) is regulated by Federal Grid Company’s IT strategy for 2014–2020, which was approved by the Management Board in 2014. The following most important CIMS projects were completed in 2015: a corporate information management system ensures comprehensive automation of the Company’s main business processes; improves manageability of Federal Grid via centralisation and systematisation of all available information and providing prompt access to it; and helps to reduce costs via more efficient spending of funds • the automated company-wide treasury system improved effectiveness and optimisation of the financial function in Federal Grid Company and its subsidiaries, and strengthened financial control • An automated system for managing the supply of personal protection means to employees. This helps to optimise planning, recording and supply of such means • the automated system for posting information about procurement and a list of procurement- based contracts on the corporate website. This system helped to reduce labour costs related to compliance with the federal law requirements about posting information on the official website of government procurement In 2016, the Company will continue developing CIMS and intends to install the following systems: • An automated system for managing the Company’s investment budget. This results in higher quality and effectiveness of budgeting • A subsystem for electronic digital signature of documents in order to ensure legally relevant electronic centralised approval of requests for payment and making payments in the Company • An automated system for the management of electronic archive services in order to improve effectiveness and quality of operations as part of business processes that are based on primary documents, by providing centralised access to the electronic repository of documents 63 high-frequency (hF) communications via electricity transmission lines Commissioning of HF Communications Systems at UNEG Substations this process communications network uses phase wires and cables of overhead transmission lines to carry signals. 436 393 367 2013 2014 2015 telephone communications network Commissioning of telephone Switching Systems at UNEG Substations 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 Operator and other electricity market participants. 62 113 83 50 2013 2014 2015 In 2015 Federal Grid Company upgraded some HF communications system facilities and decommissioned some other equipment because FoCNs were operationalised. In the reporting year, Federal Grid Company installed 393 half-sets of hF communications. The Company’s facilities now have 11,442 such half-sets. In 2015 Federal Grid installed 50 PABXs at the electric grid facilities of its branches, as well as systems for recording operational personnel communication, DECT wireless communications systems and loudspeaker and radio searching communications systems. Automated Process Control System The automated process control system (APCS) is a Company-wide 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. It also embraces tools and subsystems of the automated control systems that exist and develop on their own (such as APCS, IATS, ADCS, RPA, EFMS), thus providing the necessary interface for interaction with the management control systems of the System operator and distribution grid companies. In 2015, as part of the project “Development of the Automated Process Control System (APCS),” the Company completed a pilot project of an integrated APCS for MES North-West. This APCS ensures automated integration of all information-sharing and process systems on the basis of one network- wide model. As a result, employees of the process units in this branch receive updated information about the condition of UNEG facilities. They also have the tools for analysis and identification of contingency situations, remote management of the automated process control system allows both operational 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 equipment, and access to the database of UNEG regulations and reference information. In the reporting year, the Company continued the development of the automated systems for dispatch and process management in the grid management centres of Amur, Khabarovsk and Primorie PMES. the Company and JSC System Operator of UES ran joint projects in 2015 to develop remote management of equipment at several substations of MES North- west, Centre, South and East from Federal grid Company’s grid management centres and the System operator’s dispatch centres. Operating perfOrmanceproductive capital 64 Procurement transparency and Competitiveness MUTUALLY BENEFICIAL CooPERATIoN CREATIoN oF TRANSPARENT AND CoMPETITIVE ENVIRoNMENT SUPPoRT To DoMESTIC PoWER PLANT INDUSTRY AND IMPoRT SUBSTITUTIoN VALUE CREAtION RUB137 total purchases made by Federal Grid on the competitive basis in 2015 billion to suppliers and contractors to the State In all regions where the Company operates, it performs procurement aimed at purchasing the necessary equipment and services on the competitive market within its corporate investment programme, and at fulfilling its annual repairs and target programmes 88.4% In 2015, the Company made competitive purchases totalling RUB137 billion or 96% of total purchases. The economic benefit of such procurement reached RUB 2.7 billion. Share of purchases made via open tenders in total Federal Grid’s pur- chases in 2015 principles Key oBjectives OPENNESS optimise the procurement management system on the basis of best practices COMPEtItIVENESS Reduce Company’s expenses by cutting the cost of procured goods, works and services and minimising intermediary services JUStIFICAtION Provide goods, works and services of high quality at minimum cost and on time PROCUREMENt Grid’s procurement plan for 2016 was agreed with the Federal Corporation for Development of Small and Medium-Sized Enterprises. Moreover, our Company has set up an advisory body to improve the procurement efficiency, including the procurement from small and medium-sized enterprises. over the reporting year, we signed more than 6,300 contracts with small and medium-sized business entities for more than RUB33 billion that makes up more than 23% of all completed procurement procedures”. What is the role of local suppliers and contractors in Federal Grid’s regional procurement? “In each region where we operate, the share of local suppliers and contractors in regional procurement reaches 80%. To perform highly specific works, it is possible to contract companies that perform such work all over the Russian Federation. When constructing and commissioning energy facilities, we create new jobs and involve local residents or personnel of allied industries”. 65 pavel Barkalov procurement Director of Federal Grid Company How does procurement optimisation contribute to the fulfilment of the strategic objectives of reducing costs (specific operating and investment costs)? “In 2015, procurement savings reached RUB 2.7 billion or about 2% of all purchases made”. What are the main focuses for implementing the ‘ Road map’ for improving the access of small and medium- sized businesses to Federal Grid’s procurements? “we have a list of goods, works and services specified by the RF Government to be purchased from small and medium-sized businesses. Federal ▶ Federal Grid’s Regulated purchases in 2015 by type Open tender Open request for quote Open request for proposal Sole source Ordinary purchase tOtAL Value of purchases under procurement procedures, RUB billion Number of procurement procedures, ea. Share in total purchases,% 126.1 0.6 8.6 5.6 1.7 142.6 511 535 2,101 563 12,851 16,561 88.4% 0.4% 6.0% 4.0% 1.2% 100% Operating perfOrmanceproductive capital to facilitate engagement with suppliers, procurement procedures are conducted with the use of an electronic trading facility at www.Tzselektra.ru accessible to a large number of service providers. the Company holds annual meetings with its major suppliers to improve cooperation. An updated procurement plan (procurement to be announced, currently conducted and already completed) is published every month on the web-site www.fsk-ees.ru in section to Suppliers with the link to the trading platform to obtain details immediately. Federal Grid’s subsidiary JSK UES Energostroisnabkomplekt (ESSK) handles the preparation of tender documentation and bid evaluation. A winner is selected by the Tender Board, which is a collegial body. The Consolidated Planning and Procurement Department performs methodological and operational control of procurement. The Management Board Chairman reviews procurement reports on a regular basis. The Board of Directors is empowered to approve the Regulations on the Procedure for Regulated Procurement of Goods, Works and Services. this is a fundamental document governing the Federal Grid’s procurement and ensuring that goods, works and services are procured on a unified methodological basis with the use of up-to-date forms of competitive procurement primarily through tenders. 66 Main procured goods, works and services in RuB billion (% of total purchases) work package, including design and as-built documentation, construction and installation RUB101.2 billion (71.0%) Equipment and materials RUB13.6 billion (9.5%) Design RUB8.7 billion (6.1%) Repair and maintenance RUB6.5 billion (4.6%) Procurement Chain Construction and upgrade Electricity transmission CONSUMERS Repairs technological connections Electricity transmission and technological connection services PROCUREMENt Procurement from local suppliers As purchases are made in the regions, where Federal Grid has its branches, a lot of local suppliers and contractors participate in procurement procedures. Up to 80% Share of local vendors and contractors participating in Federal Grid’s regional purchases ▶ Federal Grid’s procurement Structure in 2015 by Region total value of regional purchases, RUB billion Number of regional purchases Share in total purchases, % Siberia Centre East South Volga Urals North-west Western Siberia tOtAL 9.8 22.0 12.5 9.4 5.6 7.3 52.4 23.6 142.6 3,185 3,223 1,712 1,625 1,816 1,842 1,795 1,363 16,561 6.9% 15.4% 8.8% 6.6% 3.9% 5.1% 36.8% 16.5% 100% 67 Cooperation with Small and Medium-Sized Businesses Federal Grid’s total purchases from small and medium-sized enterprises in 2015 Pursuant to the RF Government Resolution No. 867-r dated 29 May 2013, our Company has approved the Partnership Programme between Federal Grid Company and small and medium-sized enterprises (SME) and keeps a register of SMEs that joined the Programme. Federal Grid has also set up an advisory body to ensure the procurement efficiency, including the procurement from small and medium-sized enterprises. The above body includes representatives of the Department for Contractual System 6,302 contracts RUB33billion for the total amount of Quantity and value of contracts signed with small and medium- sized enterprises based on procurement procedures from January 1 to December 31, 2015 Contracts signed with small and medium-sized enterprises based on tenders or other procurement procedures specified by the Procurement Regulations, where small and medium-sized enterprises are participants of procurement process* Number of contracts, ea. Contract value, RUB billion, VAT inclusive Share in total contracts, % 6,302 652 33 1.3 23.1% 5.4% * Data are given for the period of July 1, 2015 – December 31, 2015 in accordance with RF Government Resolution No. 1352 dated 11 December 2014 (revision № 1169 as of 29 October 2015). Operating perfOrmanceproductive capital PROCUREMENt ▶ Growth of the share of Russian-made products in Federal Grid’s purchases (as regards main electrical equipment, which is included in the Import Substitution program) +30.5% 55.5% 83% +27.5% 25% 75% 17% 44.5% 2013 2014 2015 Imported equipment Russian-made equipment ▶ Average level of manufacture localisation of main electrical equipment used by Federal Grid 81% 79% 70% 68% 68% 65% 61% 57% t n e r r u C s r e m r o f s n a r t , s r o t c a e r t n u h S d e l l o r t n o c s r o t c a e r t n u h s s e x o b n o i t c n u J e g a t l o V s r e m r o f s n a r t t i u c r i C s r e k a e r b s e h c t i w S - o t u A s r e m r o f s n a r t s r a e g h c t i w s d e t a u s n l i 6 F S components capable of providing the quality in line with international standards. In this respect, a list of components and materials of foreign manufacture used by Federal Grid’s major contractors has been prepared. • to support the development of domestic manufacturers, Federal Grid provides assistance to enterprises that applied to the Industry Development Fund for a special-purpose low- interest loan for production growth. 69 • the launch of Russian electrical products to international markets is actively supported. Federal Grid maintains the cooperation with electrical grids of China, India, Vietnam and Belgium to exchange the experience of electrical equipment operation, in such a way increasing their awareness of Russian- made products. Federal Grid Company has drafted and approved in 2014 a Methodology for assessing localisation of electrical products manufacturing, which allows to obtain a quantitative criterion for treating manufacturers as domestic ones. • on 2 December 2015, Federal Gird Company together with the expert panel of the State Duma Energy Sector Committee “Import Substitution in the Fuel and Energy Sector” conducted the round table titled “Import Substation: Boundaries of Energy Security” as a part of the business programme of the exhibition “Russia’s Electrical Grids-2015”. According to the results of the round table, recommendations were made with respect to the implementation of the import substitution policy and promotion of domestic electrical industry and submitted to the Energy Committee of the State Duma, as well as to other interested departments and organisations. 68 Development of the RF Ministry of Economic Development, Skolkovo Fund, Association of Energy Constructing Enterprises, Compliance Assessment and Monitoring Directorate of JSC Federal Corporation for Development of Small and Medium- Sized Enterprises, JSC UK RUSCoMPoZIT, and Innovations Committee of the National Association of Procurement Institutions. the 2016 Procurement Plan was agreed with the Federal Corporation for Development of Small and Medium-Sized Enterprises. Import Substitution as a Strategic Priority Reducing the dependence on imported equipment is a key priority of the development of the Russian electricity industry. our Company, as one of the largest Russia’s consumers of high and extra-high voltage equipment, is interested in the development of the national electrical engineering industry and creation of internal competitive markets of such equipment. Given the need to lower the risks of dependence on imported equipment, Federal Grid has resolved that import substitution would be one of the strategic priorities of its long-term development programme. to encourage these processes and overcome the dependence on imports, we drafted and approved in 2014 the Programme for Import Substitution of Equipment, technologies, Materials and Systems for 2015–2019, which strategic priority is to reduce the share of imported electrical equipment procured by Federal Grid to 5% by 2030. criteria for assessing the import suBstitution programme efficiency • Increased share of domestically manufactured electrical equipment in purchases • Increase in localisation of electrical equipment manufacturing within the Russian Federation • Growth of innovative products and technologies developed jointly by Federal Grid and domestic manufacturers and launched into production 75% Share of domestically manufactured products in main electrical equipment procured by Federal Grid in 2015 The main objective of the Import Substitution Programme is to develop an efficient and effective cooperation with manufacturers of electrical equipment for the purpose of increasing the quality and reliability of electricity supply to consumers, assuring the state energy security and implementing the tasks of Federal Grid’s innovative development, energy saving and improving energy efficiency. Main Priorities and Results of the Import Substitution Programme in 2015 • the following nine groups of main electrical equipment were included into Federal Grid’s Import Substitution Programme as priorities: 1) 110–750 kV transformers and autotransformers; 2) 110–750 kV shunt reactors 3) 110–500 kV controlled shunt reactors 4) 110–750 kV switches 5) 110–750 kV circuit breakers/ 6) 110–500 kV current transformers 7) 110–500 kV voltage transformers 8) 110–500 kV SF6 insulated switchgears 9)110–330 kV power cable with cross-linked polyethylene coating the share of Russian-made products procured for these groups of equipment reached 75% in 2015. • In 2015, the implementation of long-term contracts with leading manufacturers of electrical equipment providing for production localisation in the Russian Federation continued. 2,092 МVА/ МVАr of transformer equipment was purchased from such manufacturers. • to increase the localisation of electrical equipment manufacture, Federal Grid promotes the cooperation of foreign firms with Russian manufacturers of units, materials and Operating perfOrmanceproductive capital Investments in the Electric Grid Infrastructure Development ELECTRIC PoWER INFRASTRUCTURE FoR DEVELoPING tHE ECONOMY VALUE CREAtION 70 44.3 thousand MVA of new transformer capacity planned for commissioning under the 2016–2020 investment programme 11.8 thousand km total length of electricity transmission lines planned for construction under the 2016–2020 investment programme to the State and society as a whole Total commissioning, RUB bn Capacity commissioned, MVA Electricity transmission lines commissioned, km * Set out by the investment programme for 2016–2020 2015 target 86.17 7,623 1,101 2015 actual 99.48 7,585 2016 target* 112.63 10,209 1,115 1,242.56 The key objectives of Federal Grid’s investments are to modernise and enhance the reliability of the unified energy system to ensure uninterrupted electricity supply to consumers. As part of its investment activities, the Company is currently implementing projects on construction of new facilities of the electric grid infrastructure and upgrade of existing ones. how can the current economic environment in the country influence the implementation of the investment programme? INVEStING ACtIVItIES Dmitry parishkura Investment Director, Federal Grid Company “the approved investment programme for 2016–2020 has been developed with due consideration of the current economic environment, the need to maintain the Company’s financial stability at the existing level under high volatility of financial and currency markets, much more expensive borrowings and payment discipline deterioration. As compared to the earlier approved investment programme for 2015–2019, there are some changes in funding of certain facilities to develop the electric grid infrastructure in Eastern Siberia and Far East, addressing also the expansion of the Baikal-Amur Mainline (BAM) and the Trans-Siberian railway, as well as changes in the required financing of the connection of electricity receivers of the Skolkovo Innovation Centre”. 71 ▶ Investment trends, RuB billion ▶ Federal Grid’s Capacity Commissioning trends ▶ Capital Investment Structure in 2015 (by financing), RuB billion 184.7 179.9 149.7 18.5 17.83 9% 23% 90.9 85.9 10.79 9.52 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2.96 3.64 3.69 3.12 2.32 0.66 68% Transformer capacity, thousand MVA Electricity transmission lines, thousand km 19.42 Upgrade and reconstruction 58.72 New construction 7.74 Other Operating perfOrmanceproductive capital Key oBjectives of federal grid’s long-term investment programme: • Maintain the reliable operation of the Unified Energy System to assure uninterrupted electricity supply to consumers • Assure electricity supply to the facilities of national importance • Ensure the high quality of electricity transmission and consumer connection services and access thereto • Improve the efficiency of backbone electric grids through cost reduction and energy efficiency programmes • Synchronise the development of generation facilities and distribution grids 72 • Establish an efficient system of management of Federal Grid’s operations with the view to improve the observability of grid facilities • Ensure uninterrupted electricity supply in the conditions of separate functioning of the Unified Energy System of Russia and the Integrated Power System of Ukraine Long-Term Investment Programme Federal Grid’s investment programme for 2016–20201 was developed in the conditions of current economic situation characterised by much more expensive borrowings, less accessible financial markets, inflation escalation, currency rate increase and consumer non-payments. total planned investments in 2016–2020 reach RUB471.1 billion to be spent on commissioning of 44.3 thousand MVA of capacity and 11.8 thousand km of transmission lines as Company’s fixed assets. the 2016–2020 investment programme is supposed to be financed with the use of Federal Grid’s own funds, bonds, loans and federal budget resources. The programme provides even distribution of investment costs over the 5-year period that enables the Company to maintain a balanced structure of its sources of funding. overall, the 2016–2020 programme has been optimised to address the completion of electric grid facilities that construction was started before, on the one hand, and to be able to finance new investment projects under current economic conditions, on the other. ▶ Structure of Federal Grid’s Capital Investments, RuB billion 99.00 5.34 31.49 98.10 9.71 91.50 27.03 62.17 61.36 3.54 23.1 64.86 89.70 7.27 92.82 37.04 20.29 30.95 45.39 41.58 2016, target 2017, target 2018, target 2019, target 2020, target Other Upgrade and reconstruction New construction 1 Approved by the Resolution of the RF Ministry of Energy No. 980 dated 18 December 2015. INVEStING ACtIVItIES ▶ Federal Grid’s Capital Investments by project in 2016–2020, RuB billion 10% 2% 21% 24% 7% 9% 6% 21% 102,4 BAM and TransSib 33,3 42,4 98,1 27,4 BRELL Backbone grid development Renovation Supply of generated electricity 112,7 Technological connections 8,6 Projects of national significance 46,2 Other Managing capital construction quality Specialists that performed construction supervision at Federal Grid’s facilities in 2015 As regards management and control of the quality of capital construction, Federal Grid issued Resolution No. 428 dated 29 November 2015 “on approval of the Regulation for interaction of Federal Grid’s branch ‘Technical Supervision Centre’ and structural units of its Executive office, branches and subsidiaries in the course of technical supervision”. the Construction Supervision and Industrial Safety Department of the Engineering and Construction Supervision Centre of the UES of Russia and certain units of its branches organise and perform the construction supervision at constructed and reconstructed facilities. There was no independent third-party’s construction supervision at Federal Grid’s facilities in 2015. Total number of employees Employees with higher education Employees with the following length of service in the electric enegry sector: above 5 years 3–5 years below 3 years 132 127 89 24 19 73 In pursuance of the Development Strategy of the electric grid complex of the Russian Federation approved by the RF Government resolution No. 511-r dated 03 April 2013 and with regard to meeting the target for 30% reduction in unit investment costs against a 2012 baseline by 2017, Federal Grid Company implemented a set of measures aimed at reducing investment costs and then contractually engaged an independent advisor, PricewaterhouseCoopers Advisory Services LLC, to assess the effectiveness of the above measures. Within the framework of the contract No. MoS-ADV-PI-204/16 dated 13 January 2016, an assessment was made of the unit costs reduction under the Federal Grid’s investment projects launched in 2015 in terms of the compliance with the above mentioned Development Strategy of the electric grid complex. According to the consultant’s report: • Average actual unit investment costs per1 km of transmission lines reduced by 25.6% in 2015 • Average actual unit investment costs per 1 MVA of transformer capacity reduced by 35.6% in 2015 Operating perfOrmanceproductive capital INVEStING ACtIVItIES the action plan for this electric grid construction and reconstruction project covers 11 facilities for the total value of RUB21.95 billion. It is planned to commission 972MVA of transformer capacity and 612.76 km of transmission lines. programme to contain the fallout from the accident at the Sayano- Shushenskaya Hpp Federal Grid’s investment programme provides for construction of the 668 MVA substation ‘Voskhod’ and 40.97 km of overhead lines, which commissioning is scheduled for 2016. On the whole, our Company has commissioned 501 MVA of transformer capacity and 632 km of transmission lines under the Sayano-Shushenskaya hPP Restoration Programme. the commissioning of the 500kV transit line will assure energy security, greatly enhance the integrity of the UES of Russia and concurrently reduce the transmission of electric power and capacity via the Republic of Kazakhstan and respective Federal Grid’s expenditure on KEGoG transit services. Actions to implement power transit via the Kurgan – Ishim – Voskhod connection enabled to increase the reliability of electricity supply to consumers of the omsk grid and the south of Tyumen oblast and increase flows between the IPS of Siberia and the IPS of Ural up to the maximum allowable level. 75 Amount of financing, RUB mln 2014 54,219 89 54,130 – – – 2015 46,088 2,831 42,729 – 528 – 36,638 39,801 – – 35,784 39,801 – 854 – – – – – – – – 2013 86,794 – 68,506 7,217 10,401 670 62,902 – 60,000 – 2,902 – – – 149,696 90,857 85,889 ▶ Structure of 2013–2015 investment programme financing sources Sources of financing 1 1.1 1.2 1.3 1.4 1.5 2 2.1 2.2 2.3 2.4 2.5 2.6 2.7 Own funds Profit allocated to investments Depreciation VAt refund Other own funds technological connection fee Borrowings Credits Bond loans Loans of organisations Government funding Funds of external investors Lease financing other borrowings tOtAL 74 Key Investment Projects Federal Grid’s investment programme covers the construction and reconstruction of energy infrastructure for projects of national significance, oil transportation projects and development programmes for Russia’s regions. We fully realise the importance of such projects and endeavour to construct and upgrade grid facilities on schedule and to the highest standards. Development of electric grids in Yakutia the construction of the 220 kV Neryungrinskaya HPP – Nizhny Kuranakh – tommot-Maya OHL and the substations in Tommot and Maya is still in progress. In 2011–2015, 709.6 km of transmission lines were commissioned. It is planned to commission in subsequent years. The full cost of construction amounts to RUB19.3 billion. The project completion (final commissioning of 158 MVA of transformer capacity and 45.5 km of transmission lines) is scheduled for 2016. To ensure parallel operation of the IPS of Siberia and the IPS of the East it is planned to construct the Amur transformer complex at the Khani substation. Development of energy infrastructure for oil transportation (eSpo – I, II) The project provides for construction and upgrade of the Federal Grid’s electric grid infrastructure in Siberian and Far-Eastern Federal Districts. The project objective is to meet the electricity demand of facilities of Expansion Phase I and II of the Eastern Siberia-Pacific ocean pipeline. Operating perfOrmanceproductive capital Compensatory measures for separate operation of the unified energy System of Russia and the Integrated power System of ukraine oblast). The work is on track and the commissioning of these facilities is scheduled for 4th quarter 2016. Improvement of the access to the Krasnodar Krai electric grid infrastructure one of the most important objectives at the level of regional infrastructure is to provide the technological connection for consumers in Krasnodar, including a large-scale housing construction project. on 24 February 2015, the Krasnodar Krai Administration and Federal Grid signed a Cooperation Agreement for 2015–2020, which serves as the basis for construction of the Eastern Promzona substation in Krasnodar. The commissioning of 560 MVA of capacity is scheduled for 2017. The cost of this investment project amounts to RUB2.4 billion. 76 To ensure reliable power supply to the north-western part of the Rostov grid, Federal Grid’s investment programme provides for installation of a 125 MVA autotransformer at the Pogorelovo substation and construction of a 95.3 electricity transmission line between the cities of Shakhty and Donetsk (Rostov to provide the technological connection to applicants it is planned to construct a 220kV Novo-Labinskaya sub-station with 220kV ohL approach lines with the total cost of construction of RUB1,150.51 million. the commissioning of 250 MVA of capacity is scheduled for 2018. Guaranteed supply of generated electricity the long-term investment programme provides for construction of electricity supply and distribution facilities for currently commissioned NPPs, hPPs and ChPs. Now power distribution and delivery facilities are being constructed for Novovoronezhskaya NPP-2, Leningradskaya NPP-2, Rostovskaya NPP, Nizhnebureyskaya hPP, Zelenchukskaya PSPP, Volzhskaya’hPP, huadian – Teninskaya ChP, and Zagorskaya PSPP. To supply electricity generated by power plants, it is planned to commission 953.63 km of transmission lines and 1,127 MVA of transformer capacity in 2016–2020. Development of the electric grid infrastructure in the area of BAM and TransSib Pursuant to RF President’s Instructions No. Pr-955 dated 29 April 2014 and No. Pr-1488 dated 24 June 2014, Federal Grid’s investment programme for 2016–202 provides for implementation of the macro-project nearby BAM and TransSib. INVEStING ACtIVItIES It is necessary to invest in aggregate RUB128.33 billion into construction and reconstruction of 21 UNEG facilities in order to meet the prospective BAM and Transsib demand. the technical upgrade and reconstruction, as well as construction of new facilities will increase the transformer capacity by 4,124 MVA and the length of electricity transmission lines by 4,215.34 km. 77 Operating perfOrmanceproductive capital INVEStING ACtIVItIES ENERGY SAVING AND ENERGY EFFICIENCY ensuring reliable operation of the unified energy System of Russia separately from the energy systems of the Baltic States (BRell macroproject) To ensure reliable operation of the UES of Russia upon separation from with the power grids of the Baltic States, the investment programme contains a set of measures designed to compensate the consequences of transmission capacity reduction in connections of the IPS of Centre and the IPS of the Northwest as parts of the UES of Russia and changes in operating modes of the BRELL energy ring, including the reconstruction of the Talashkino substation, upgrade of existing emergency control systems at the Leningradskaya, Chudovo and Pskov substations, construction of the Novosokolniki – talashkino, Leningradskaya – Belozerskaya, Pskov – Luzhskaya overhead lines and 330 kV ohL approach lines to the Kingisepskaya substation. “power of Siberia” gas transportation system The Power of Siberia, which is currently constructed by Gazprom, will become a unified gas transportation system for gas production centres in the Republic of Saha (Yakutia) (Chyandinskoye oil and gas condensate field) and Irkutsk oblast (Kovyktinskoye field) that will transport gas from the above gas production fields via Khabarovsk to Vladivostok, and to China as well. It is planned to supply 61 billion m3 of gas annually, including the export to China of 38 billion m3 per annum and also to the Amur gas processing and gas-derived chemicals integrated plants. Nowadays, Federal Grid is involved in the review of design documentation on the out-of-phase scope for external electricity supply of the Amur gas 78 processing and gas-derived chemicals integrated plants (projected demand –245 MW and 320 MW, respectively) developed by the design institute “ENERGOSEtPROEKt” upon request of GEKh Engineering. The table with basic parameters of key investment projects is available in Appendix 1 to the Annual Report Adjustment of the 2016–2020 Investment Programme Following the implementation of Federal Grid’s investment programme in 2015, and in accordance with the Rules for approval of investment programmes for electric power entities where the state is a shareholder and for grid companies” approved by the Resolution of the Russian Government No. 977 dated 1 December 2009, a draft adjustment of the Federal Grid’s investment programme for 2016–2020 was developed. ▶ Major draft adjustments of the 2016–2020 investment programme Total funding, RUB million Capacity to be commissioned, thousand MVA Transmission lines to be commissioned, thousand km 2016 target 99,000 9.4 1.4 2017 target 2018 target 98,100 107,655 9.7 1.3 10.8 3.3 2019 target 91,012 8.1 2.5 2020 target Итого 94,301 490,068 6.9 3.4 44.9 11.9 Contribution to Improving Energy Efficiency of Economy taking into account new requirements of the Order of the FTS of Russia No. 525-e dated 26 March 2015 and the Order of the Russian Ministry of Energy No. 398 dated 30 June 2014, the Management Board resolved to approve a revised version of the Federal Grid’s Energy Saving and Energy Efficiency Programme for 2015–2019 (Minutes No. 1326/2 dated 04 August 2015). • Fitting the buildings, structures, and installations that are owned by Federal Grid with metering devices for water, natural gas, thermal energy, and electrical energy • Reducing the electrical and thermal energy consumption in buildings, structures, and installations owned by Federal Grid In 2015, measures targeted at better energy saving and energy efficiency were implemented in the following key areas: • Reducing the consumption of fuel and lubricants used by Federal Grid to provide the electricity transmission services through UNEG • Reducing the process energy consumption during electricity transmission through UNEG oBjectives of the energy saving and energy efficiency programme • to ensure saving and rational use of the fuel and energy resources and reduce consumption of electricity for corporate needs during electricity transmission via UNEG grids by improving energy efficiency of the Company’s facilities and equipment • to put in place a system of electric power management and certification of operations based on requirements of ISo 50001:2011 “Energy management systems – Requirements with guidance for use” • To improve energy efficiency of the Company’s electrical grid facilities and equipment • Developing and improving Federal Grid’s regulations and internal documents related to energy saving and higher energy efficiency Our Company focuses on employee in-service training in energy saving and believes that such training plays an important role. To prepare and ensure an appropriate level of competence, in 2015 the Company arranged training in MES training сentres for the following categories of employees: • operating employees of substations and administrative and technical staff on a topic: “Classification of electric grids by purpose. Management of electric grid operating modes. Energy saving, energy efficiency and energy management” • Specialists who are responsible for the implementation of the Energy Saving Programme and energy management. Topic: “Energy saving technologies and energy management in the energy industry” 6,393 tonnes of equivalent fuel RUB 60.3 mln, net of VAt operational benefit of measures to reduce energy/fuel consumption Economic benefit of measures to reduce energy/fuel consumption 79 Operating perfOrmance productive capital ENERGY SAVING AND ENERGY EFFICIENCY ▶ use of energy Resources in Federal Grid Company in 2015 Volume Planned operational benefit of measures to reduce energy/ fuel consumption Actual operational benefit of measures to reduce energy/ fuel consumption Financial benefit of measures to reduce energy/ fuel consumption RUB thousand, excluding VAt Operational electricity consumption in UNEG, incl..: Electricity consumption for substations’ own needs Electricity consumption in buildings 23 478.1 mln kwh 922.7 mln kwh 32.3 mln kwh thermal energy consumption in buildings 41.9 thousand Gcal Gasoline consumption Diesel consumption 6 990.3 thousand litres 6 404.0 thousand litres 47.3 mln kwh 5.4 mln kwh 0.7 mln kwh 1.02 thousand Gcal 25.00 thousand litres 26.00 thousand litres 49.4 mln kwh 5.4 mln kwh 0.7 mln kwh 1.06 thousand Gcal 26.92 thousand litres 29.75 thousand litres 54,795.1 5,882.6 2 525.4 1,251.21 816.5 915.6 • Installing reflecting screens behind heating devices • Optimising travel routes using satellite navigation for continuous monitoring • Appointing responsible parties • Optimising the heating systems operations the key measures aimed at reducing consumption of fuel and lubricants: • Daily checks of tire pressure in vehicles • Adjusting fuel consumption norms • thorough monitoring of vehicle use • Purchasing diagnostic tools for vehicle injection engines • Optimising travel routes, staff training, and priority for loads with the lowest unit fuel consumption. In 2015, the companywide effect of measures aimed at reducing consumption of resources for Federal Grid’s own needs amounted to 312.1 tonnes of fuel equivalent (742.99 thousand kWh, 1.06 Gcal, 56.400 litres of fuel and lubricants) to the total amount of RUR5.509 million. For details about the Federal Grid’s pilot projects on energy saving and energy efficiency, see Appendix 1 to the Annual Report 81 federal grid’s energy management system consistent with the international standard iso 50001:2011 the corporate energy management system of Federal Grid Company has been certified for conformity with the international standard ISo 50001:2011 within the Executive office and two branches (MES Volga and Samarskoe PMES). Over the period from April to May 2015, an external audit of this system was successfully conducted for conformity with the standard with respect to the provision of electricity transmission services via UNEG. No inconsistencies were identified based on the audit findings, including in activities on reducing losses. The auditors issued a recommendation on the extension of the previously issued certificate of conformity. Strengths of the Federal Grid’s energy management system: • A detailed and manageable Energy Saving Programme • A well-designed system for monitoring of the implementation of targeted measures included in the Energy Saving Programme • high responsibility and competence of employees involved in the development and implementation of the energy management system • Promotion of information about advantages and methods of energy saving in the Company’s offices 80 • Specialists: training was arranged as part of the “Day of Knowledge”; topic: “Energy saving, energy efficiency and energy management” • training within the preparation for the youth day of Forum “Energy Efficiency and Energy Saving. Development of the Economy”, held by the RF Ministry of Energy Federal Grid is taking the following actions in order to reduce technological consumption (losses) of electricity in UNEG: • Replacing wooden windows with energy efficient equivalents • Replacing incandescent light bulbs in buildings with energy saving equivalents (including LED strip lamps) • Installing lighting control systems (installing of motion sensors) • Replacing old doors (mostly wooden ones) with new energy efficient ones • Optimisation of the circuit and mode parameters in operation and control of the electric grids • Modernising ventilation and air conditioning systems • Reduction of electricity consumption for the own needs of substations • Construction, reconstruction, and development of electric grids, as well as commissioning of energy saving equipment In 2015, the companywide operational benefit of measures aimed at reducing electricity losses was a saving of 49.437 million kWh, which is equivalent to 6,080.9 tonnes of fuel equivalent; the financial benefit amounted to RUR54.8 million. the key measures aimed at the reduction of electric and thermal energy consumption in buildings, structures and installations: • Improving heat insulation of building walls advanced projects on improving energy efficiency In November 2015, within the youth day at the Forum “Energy Efficiency and Energy Saving. Development of the Economy” our team “Grids No.1” presented its project aimed at energy efficiency of substations and reducing losses for own needs. The project that involved the transformer heat extraction and utilisation was declared the best in section “heat and Electric Power Industry and Young Leaders” and awarded the Diploma of the RF Ministry of Energy. Operating perfOrmanceproductive capital Improving Financial Performance through Enhanced Efficiency This report outlines Federal Grid’s financial position and operating results as of 31 December 2015 and should be reviewed together with the Company’s financial statements for 2015, including the explanatory notes thereto, issued in accordance with the Russian Accounting Standards (RAS). Federal Grid’s RAS-based financial statements for 2015 are available in Appendix 11 to the Annual Report 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 forward- looking statements can be identified by the use of conditional or forward-looking terminology such as “imply”, “anticipate”, “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 82 Forward-looking statements This report contains forward-looking statements regarding those contained in the forward-looking statements, including but not limited to: (а) environmental and financial risks; the financial position and results of operations of Federal (b) change in demand for the Company’s products; (c) change Grid Company and its consolidated entities. All statements in currency exchange rates; (d) risks associated with failure other than statements of historical fact are forward-looking to find appropriate property and assets for acquisition and statements. Forward-looking statements are statements to succeed in negotiations and complete such transactions; of future expectations based on the management’s current (e) reserve evaluation; (f) loss of market share and industry views and assumptions that are subject to risks and competition; (g) economical and financial market conditions uncertainties that could cause actual results and events in various countries and regions; (h) political risks, delay or to differ materially from those expressed in or implied by acceleration of project implementation, cost estimation; and these forward-looking statements. (i) change in trade conditions. 2015 target 2015 actual 2016 target Adjusted EBITDA, RUB million 91,612 103,667 Change against 2015 Efficiency of cost management programme (against 2012 level) (%) –24.6 –40 Reduction in unit operating expenses (costs) (compared to the prior year) (%) –14.2 –24 –41 –5 OVERALL REVIEw 83 managed to reduce the headcount by 4% and considerably the cost of materials and services – by 8.8%. Moreover, in 2015 Federal Grid reduced management expenses (less depreciation and property tax) by 1.3% thanks to the reduction of administrative and management staff by 9% among other things. Do you think Federal Grid has sufficient funds to finance its development plans for 2016? We have sufficient funds. The Company’s investment programme is well-balanced as regards its sources of financing, including both tariff revenue and loans. It is planned to obtain external financing of up to RUB10–15 billion for the 2016 investment programme, which amounts to RUB99 billion. Given the stable financial position of Federal Grid Company, various instruments of debt financing, including loans of the largest Russian banks under signed facility agreements and issue of bonds for direct public offering, are available for the Company. Moreover, we will continue our attempts to receive funds from the National Welfare Fund and other government sources. Decisions whether to use external financing will be taken in the light of minimisation of such financing costs and Company’s financial stability. How can the country’s economic environment affect Federal Grid’s performance in 2016? There is no doubt that the growth of USD exchange rate and high inflation may impact Federal Grid’s financial performance. For this purpose, we are optimising our investment programme and implementing action plans to maintain liquidity and cut costs. I believe that such actions will help us to mitigate the negative impact of external factors. Maria pichugina Deputy Chairperson of the Management Board, member of the Management Board of Federal Grid Company What are the factors that contributed to the Company’s best financial performance this reporting year over the last four years? there are two key factors – increased revenue from technological connections and cost cutting measures. Both of them are continuation of actions launched by the Company’s management in 2014. Do financial indicators achieved in 2015 demonstrate actual improvement of Federal Grid’s operating efficiency? It is absolutely true. In the environment when the tariff increment is lower than the inflation rate for two consecutive years, the Company is demonstrating the growth of earnings. Such results could not be achieved without efficiency improvements. one of our priorities is cost cutting. Unit operational costs were reduced by 40% versus 2012, which is 2.5-fold above the target set in the strategy for the electric grid complex (15%). Irrespective of the large-scale investment programme currently being implemented and an increase in equipment to be maintained, we ManageMent’s Discussion anD analysis Financial capital ▶ Key Financial performance Indicators, RuB million ▶ Revenue Structure, RuB million OVERALL REVIEw 2011 2012 2013 2014 2015 Change 2015/2014 Change 2015/2014, % Revenue, including: 138,137 138,836 155,352 168,941 173,266 Electricity transmission services Other operations Full cost, including * Electricity transmission services Other operations Management expenses Sales profit Other income** Other expenses*** 134,875 136,581 152,710 159,881 158,986 3,262 2,255 2,642 9,060 14,280 85,390 108,213 124,783 132,459 134,938 84,417 107,202 123,526 130,965 133,535 973 7,510 1,011 8,297 1,257 8,165 1,494 7,800 1,403 7,851 45,237 22,326 22,404 28,682 30,477 175,671 113,556 61,125 22,546, 31,853 209,463 150,152 101,201 36,890 34,446 Profit (loss) before tax 11,444 –14,270 –17,672 14,338 27,884 Deferred tax assets 46 –55 1,776 –816 –294 4,326 –895 5,220 2,480 ,2,570 –91 50 1,796 9,307 –2,444 13,546 523 Deferred tax liabilities –5,545 –8,736 –9,977 –8,367 –9,530 –1,164 84 Current profit tax Other similar mandatory payments –8,389 –1,471 –3 –0.3 – –5 Profit tax adjustment for previous periods –21 – –20 – –18 – –70 –120 – Net profit (loss) –2,468 –24,532 –25,898 5,137 17,870 Adjusted EBITDA**** 84,683 82,847 96,297 99,603 103,667 – –102 – 12,733 4,064 * Including retrospective changes in indicators ** Other income includes income from participation in other entities and interest receivable. *** Other expenses include interest payable. **** Not including accruals and recovered provisions for bad debt, revaluation of assets and revenue from technological connections. 2.56 –0.56 57.62 1.87 1.96 –6.09 0.65 6.26 41.28 –6.62 94.48 64.01 –13.91 – –558.42 – 247.89 4.1 Federal Grid’s performance in 2015 demonstrates the improvement of its operating efficiency attributable to the growth of its earning and cost optimisation under tariff increase constrains. ▶ Revenue, Full Cost and net profit, RuB million 138,137 138,836 85,390 108,213 155,352 124,783 168,941 173,266 132,459 134,938 Revenue Cost Net Profit (loss) 2011 2012 2013 2014 2015 Change 2015/2014 Change 2015/2014, % Revenue, including 138,137 138,836 155,352 168,941 173,266 4,325 Revenue from electricity transmission services Revenue from technological connection services Revenue from other operations 134,875 136,581 152,710 159,881 158,986 –895 2,127 1,077 986 7,002 12,397 5,395 1,135 1,178 1,656 2,058 1,883 –175 2.6 –0.6 77.1 –8.5 Revenue Federal Grid’s revenue in 2015 increased by 2.6% versus 2014, including the increment of RUB5.396 million from technological connection services due to completed connection of power plants and the regulator’s introduction of a technological connection fee that compensates the investment component of services rendered. the revenue from electricity transmission services fell by RUB895 million, including because in 2015 direct consumers started paying for power transmission services based on actual capacity (previously payments were based on committed capacity). Full cost Main factors that contributed to the full cost change in 2015 as compared with 2014 are as follows: • Electric power/capacity cost increase by RUB2,523 million (21. 4%) mainly (RUB2,473 million) due to changes in the grid operating modes • Property tax increase by RUB1,848 million (34.2%) that is explained by the phased elimination of property tax relief for transmission lines from January 1, 2013 in accordance with Federal Law “On Amendment of RF tax Code Section II” No. 202-FZ dated 29 November 2012 85 ▶ Structure of actual revenue for maintaining the Company’s grids in 2015 12 2 8 Sobsidiaries and associates of PJSC ROSSETI Other territorial grid organisations Guarantee suppliers Other energy sales companies and consumers 2011 –2,468 2012 2013 2014 2015 –24,532 –25,898 5,137 17,870 78 ДЗО ПАО «Россети» Прочие территориальные сетевые организации Гарантирующие поставки Прочие энергосбытовые компании и потребители ManageMent’s Discussion anD analysis Financial capital ▶ Cost of Services, RuB million ▶ Management expenses, RuB million OVERALL REVIEw 2011 2012 2013 2014 2015 Change 2015/2014 Change 2015/2014, % Fixed asset depreciation 39,784 58,993 69,669 76,332 75,383 Electric power and capacity 12,183 11,662 12,285 11,809 14,332 Labour and social charges 15,836 18,103 20,244 20,698 20,574 Property tax 761 1,098 3,464 5,403 7,251 –949 2,523 –125 1,848 Repair and maintenance 5,291 5,446 5,464 3,940 2,933 –1,007 Raw and other materials 2,424 2,702 3,147 2,879 2,878 Property insurance 848 894 975, 1,032 797 Rent Security 1,092 1,190 1,223 1,402 1,356 1,527 1,693 1,862 1,671 1,463 Power transmission 1,329 1,741 1,728 1,995 2,740 Other expenses 4,315 4,691 4,722 5,298 5,231 –1 –235 –46 –208 745 –67 TOTAL, full cost 85,390 108,213 124,783 132,459 134,938 2,479 –1.2 21.4 –0.6 34.2 –25.6 0.0 –22.8 –3.3 –12.5 37.3 –1.2 1.9 86 • RUB1,007 million (25.6%) reduction in the scope and cost of repair and maintenance performed by contractors under the Company’s operating efficiency improvement programme • Increase of power transit costs by RUB745 million (37. 3%) due to the RUB devaluation (power transit is performed via grids abroad) and respective adjustment of the transit tariff • Reduction of depreciation costs by RUB949 million due to revision of useful life for fixed assets • Reduction in labour costs and mandatory social charges, property insurance, rent and security costs as a part of the Company’s cost optimisation and operating efficiency improvement programme Management expenses Main factors that contributed to the change in management expenses in 2015 as compared with 2014 are the following: • Increase in depreciation charges mostly due to registration of intangible assets • Growth of labour costs including insurance payments due to the increase in marginal base subject to a higher tax rate (30%) from RUB624 thousand to RUB711 thousand as well as introduction of mandatory medical insurance charges on total payments (previously there were no charges on payments in excess of the set base) • Reduction of other management expenses mostly related to the upkeep of property (lease, insurance, security, other) Depreciation of tangible and intangible assets 2011 2012 2013 2014 2015 994 1,248 1,175 1,668 1,832 Labour and insurance payments 2,451 2,555 2,685 2,470 2,559 Other expenses 4,065 4,494 4,305 3,662 3,460 TOTAL, management expenses 7,510 8,297 8,165 7,800 7,851 Management expenses without property tax and depreciation 6,485 6,861 6,819 6,081 5,999 2015 share, % Change 2015/2014, % 23.3 32.6 44.1 100 76.4 9.83 3.60 –5.49 0.6 –1.3 Irrespective of high inflation rate in 2015 (15.5%), management expenses remain at the level of 2014 (variance is only 0.6%). Without property tax and depreciation charges there is a trend of management expenses reduction by 1.3% in 2015versus 2014. Cost management programme to increase the efficiency of Federal Grid’s operations and optimise production and management costs and their structure, the Company developed a comprehensive Programme for Improving Efficiency of operations approved as a part of the Federal Grid Business Plan for 2015–2019. According to the 2015 performance results, the Company fulfilled the operating efficiency improvement targets set for 2015: • oPEX reduced by 40.1% as compared with 2012 (the aggregate oPEX reduction effect as a part of the Cost Management Programme reached RUB14,100 million) • oPEX reduction against 2012 was more prominent than envisaged in the Strategy of the RF Electric Grid Complex Development pursuant to RF Government Directive No. 511-р dated 03.04.2013 • The Company’s earned net profit reached RUB17,870 billion. For the purpose of RF Government Directive No. 2303p-P13 dated 16 April 2015 to reduce oPEX by 2–3% annually, the Board of Directors of Federal Grid approved the Methodology for Calculation and Evaluation of Key Performance Indicators for Federal Grid’s Senior Management and set the oPEX reduction KPI for 2015 at no less than 14.2% as compared to 2014. In 2015, Expenses included into the basis of the Cost Management Programme (in 2012 prices), RUB million 2012 (basis) 2013 2014 2015 37,534 36,708 32,343 26,854 Number of equipment to be maintained, c.u.‘000* 1,139.5 1,227.4 1,254.8 1,361.2 C.u. increment vs 2012 (including the oPEX elasticity coefficient based on the number of assets, К = 0.75) Adjusted fixed costs per 1 c.u. (in 2012 prices), RUB‘000 / c.u. Unit Opex reduction vs 2012, % Adjusted fixed costs (covering the c.u./consumer price index increase), RUB million – 1.058 1.076 1.146 32.9 – 29.9 –9.2 37,534 34,700 25.8 19.7 –21.7 30,062 –40.1 23,434 * Corresponds to parameters approved by the Board of Directors for the 2015–2019 Business Plan based on old standards. 87 ManageMent’s Discussion anD analysis Financial capital OPEx (administered), RUB million, including: Labour costs, RUB million other oPEX (administered), RUB million Adjusted OPEx, RUB million BENEFIT ESTIMATION Consumer price index (plan) Consumer price index (actuals) Conventional units, c.u. 000’ (*) Unit oPEX in the reporting year prices, RUB ‘000 / c.u. Adjusted unit oPEX, RUB ‘000 / c.u. OPEx reduction benefit * The c.u. estimate is based on new standards for electricity and gas. OVERALL REVIEw 2015 37,426 18,237 19,188 33,773 1.067 1.155 1,296.4 28.9 26.1 –24% 2014 42,135 18,564 23,571 39,086 – 1.078 1,224.3 34.4 – – 88 the Company managed to reduce oPEX by 24% as against 2014. The Company was able to reach the above results thanks to the following: • Reduction in the cost of purchases • Reduction in costs under long-term agreements (supply of transformer oil, protective clothing, inputs; maintenance services for compressors; clean-up of transmission line right-of-way; ESS maintenance and repair) • Reduction in the value of security contracts • Reduction in the value of It services contracts (signing of amendments to reduce the cost but preserve the same scope of services) • Headcount optimisation other income and expenses Other income in 2015 increased by RUB9,307 million versus 2014. Main factors thereto: booking of gains from the revaluation of JSC INTER RAo stock (the loss from stock revaluation was booked in 2014) and fixed assets, and increase in earnings in the form of interest from placement of free funds at deposits. other expenses fell by RUB2,444 million irrespective of the growth of interest payable and provisions for bad debt and investment impairment because the number of promissory notes purchase/repayment transactions reduced and the loss from PJSC INtER RAO stock revaluation was booked in 2014. eBItDA Adjusted earnings before interest, profit tax, depreciation and amortisation (EBITDA) increased by RUB4,064 million (4.1%) as compared with the same period of 2014 and reached RUB103,667 million. net profit (loss) In 2015, Federal Grid earned net profit of RUB17,870 million CASH FLOw Cash Flow ▶ net Cash Flows, RuB million Net cash flows 2011 6,004 2012 281 Net cash flows from operations 99,194 100,494 2013 –3,196 86,688 2014 2015 22,149 –17,503 101,013 99,090 Net cash flows from investments –163,742 –173,183 –163,485 –53,849 –132,629 Net cash flows from financial operations 70,552 72,970 73,601 –25,015 16,037 Net cash flows from operations in 2015 were as follows: • Cash inflows from power transmission services via UNEG amounting to RUB160,139 million • Refund under bank guarantees of RUВ3,901 million under contracts for construction, technical upgrade and refurbishment of Federal Grid’s facilities because of contractors’ failure to perform or properly perform their contractual obligations • Cash inflows from property lease in the amount of RUB972 million • Payments to vendors for materials and supplies, work, services, and labour of RUB49,602million • Profit tax refund payments of RUB1,165 million • Property tax payments of RUB6,802 million • Interest payments of RUB6,645 million Net cash flows from investments in the reporting year included the following: • Gains from placement of temporarily free funds at bank deposits in the amount of RUB2,339 million. • Investment-related payments of RUB129,687 million • Loan/interest-related losses in the amount of RUB7,312 million Net cash flows from financial operations of RUB16,037 million included the buy-out of Federal Grid’s infrastructure bonds (37th and 38th series) in the amount of RUB39,995 million and debt repayment of RUB23,210 million. 89 ManageMent’s Discussion anD analysisFinancial capital Stable Financial Position ▶ Assets and liabilities, RuB million 31.12.2011 31.12.2012 31.12.2013 31.12.2014 31.12.2015 Total assets 1,037,493 1,122,995 1,214,291 1 231,217 1 268,301 Non-current assets 919,501 1,011,667 1,092,629 1 117,921 1 124,338 Current assets Total liabilities Shareholders’ equity Long-term liabilities Short-term liabilities 117,992 111,328 121,662 113,296 143,963 1,037,493 1,122,995 1,214,291 1 231,217 1 268,301 853,079 138,054 46,360 849,125 209,361 64,509 842,975 282,429 88,887 854,490 267,435 109,292 885,386 294,159 88,756 90 The dynamics of balance sheet items demonstrates that both assets and liabilities of Federal Grid are increasing from year to year. In liabilities, the shareholders’ equity forms the largest share – 69.8%. The share of short-term and long-term liabilities amounts to 30.2%. As of 31.12.2015, Federal Grid’s total assets in 2015 were higher as compared with 2014 by RUB37,084 million (or by 3%) due to the following, inter alia: • Increase in the value of current assets by RUB30,667 million (27.1%) as a result of the growth of investments and receivables that was offset by reduction in the Company’s settlement account balances • Increase in the value of non-current assets by RUB6,417 (0.6%) due to investments into construction as a part of the investment programme and reduction of construction-in-progress and advance payments for the purchase of non-current assets Federal Grid’s equity increased by RUB30,896 million (3.6%) in the reporting period due to booking of the 2015 financial results and non-current asset revaluation and implemented decision No. 16 of the annual Shareholders’ Meeting dated 30.06.2015 on allocation of 2014 earnings. In 2015, Federal Grid placed RUB40billion in revenue- yielding bonds at acceptable terms – consumer price index + 1% with the tenor of 35 years and the offer in 30 years. The said funds will be used for investment programme funding. Moreover, the debt of RUB23,210 million was repaid. At the same time, when exercising put options of 2015, Federal Grid has reduced its debt load by RUB23,210 million at its own expense. Over the year, the structure of assets did not change significantly. The shares of current and non-recurrent assets were 89% and 11%, respectively, as of 31.12.2015. Therefore, Federal Grid’s total borrowings (without accrued interest) increased by RUB16,889 million to RUB274,660 million by the end of 2015. FINANCIAL POSItION ▶ Asset Structure trends, RuB million 1,037,493 1,122,995 1,214,291 1,231,217 1,268,301 2011 2012 2013 2014 2015 Fixed assets Advance payments for non-current assets Current assets Work-in-progress Long-term investments Other assets 91 ▶ net Asset Value, RuB million 2011 2012 2013 2014 2015 Nominal net asset value* 853,354 849,400 842,975 855,251 886,127 Net asset value including contributions to the authorised capital** 855,573 852,647 846,731 855,251 886,127 * Estimate based on the annual accounting statements with retrospective adjustments. ** In 2012 and 2013, the authorised capital of Federal Grid was increased through the issue of additional shares. Consequently, current payables on Shareholders’ contributions to the authorised capital were booked in accounts payable (other short-term liabilities). Upon registration of the placement of additional shares with Russia’s FFMS this debt will be converted to the authorised capital of Federal Grid Company. The estimate of net asset value includes the payables on authorised capital contributions into the authorised capital in the amount of RUB2,219.2 million in 2011, RUB3,247.3 million in 2012 and RUB3,755.6 million in 2013. ▶ Accounts Receivable, RuB million Accounts receivable, including: Receivables with the maturity over 12 months from the reporting date Buyers and customers other receivables Receivables with the maturity within 12 months from the reporting date Buyers and customers Advance payments other receivables 31.12.2013 31.12.2014 31.12.2015 53,842 1,710 5 1,705 52,132 22,061 1,933 28,138 60,163 1,111 5 1,106 59,052 37,501 1,559 19,992 69,491 9,504 8,655 849 59,987 39,753 766 19,468 ManageMent’s Discussion anD analysis Financial capital FINANCIAL POSItION tARIFF REGULAtION ▶ Accounts payable, RuB million Accounts payable, including: Suppliers and contractors Wages/salaries Payables to state non-budget funds taxes and levies Advance payments Dividends due to Shareholders other payables ▶ Key Financial Indicators, % 31.12.2013 31.12.2014 31.12.2015 58,051 41,424 205 55 961 8,498 13 6,895 77,551 67,206 221 84 1,326 6,085 9 2,620 54,748 42,280 18 310 4,063 6,130 8 1,939 92 Return on equity (RoE) Return on net assets 2011 2012 2013 2014 2015 4.09 3.95 1.57 1.58 1.97 1.99 1.63 1.62 2.34 2.30 Claim-related work In 2015, as a result of claim-related work on collecting overdue receivables for services on electricity transmission, Federal Grid Company received favourable judgements within 65 trials for the total amount of RUB10,882.802 million. In the reporting year, there were no court cases under which claims were denied. The share of claims satisfied in favour of Federal Grid was 100%. In 2015, in accordance with judgements given, writs for execution for the amount of RUB7,535.746 million were issued, RUB5,022.163 million of which were repaid. For 2014, favourable judgments were made in respect of claims for the amount of RUB7,339.541 million (12 cases). In 2014, there were no court cases that denied recovery. Writs for execution in the previous year were received in the amount of RUB5,952.213 million, of which RUB5,174.445 million were repaid. tariff Regulation Tariff policy Federal Grid’s core business of electricity transmission via UNEG and technological connection services is performed based on tariffs subject to regulation by the federal government and approval by the Federal Tariff Service (FTS) of Russia. Pursuant to Decree of the RF President “On Some Issues of Government Control in the Area of Anti-Monopoly and tariff Regulation” No. 373 dated 21July 2015, the Federal Tariff Service was liquidated and the functions of government regulation of tariffs for services rendered by Federal Grid Company were transferred to the Federal Anti- Monopoly Service (FAS) of Russia Federal Grid’s services of electricity transmission over electric distribution grids (hereinafter “EDG facilities) are regulated at the regional level by executive authorities of the RF constituent entities. The list of main regulatory acts governing tariff setting for electricity transmission via UNEG is available in the Appendix to the Annual Report Tariffs for electricity transmission via UNEG Since 2010, within measures to improve the electricity industry’s investment attractiveness, tariffs for Federal Grid’s services of electricity transmission via UNEG have been set based on the return on invested capital (“RAB regulation”). to set tariffs for each year of the period under regulation, the gross revenue requirement is calculated by summing up the payback period, rate of return and total expenses required for provision of power transmission services via UNEG. To prevent any sharp increases in tariff rates, the RAB-based methodology provides a smoothing mechanism that redistributes the required gross revenue over the whole long-term period under regulation. 93 ▶ Key long-term parameters subject to regulation as set by the FtS of Russia for the second long-term regulation period of 2015–2019 Rate of return on investments, % Base oPEX, RUB billion oPEX efficiency index, % 2015 10 35,023,035 – 2016 2017 2018 2019 10 – 3.0 10 – 3.0 10 – 3.0 10 – 3.0 Net working capital, RUB billion 11,417.538 11,919.910 12,432.466 12,967.062 13,524.645 Payback period, years Electricity losses in electricity transmission grids, % 35 4.27 35 4.27 35 4.27 35 4.27 35 4.27 ManageMent’s Discussion anD analysisFinancial capital The FTS Resolution No. 297-e/3 dated 09 January 2014 approved tariffs for electricity transmission over UNEG for the second long-term period under regulation of 2015–2019. In 2015, the set tariffs were revised as follows: • Pursuant to RF Government Resolution No. 458 dated 11 May 2015, the FTS of Russia by its Resolution No. 187-e/1 dated 29 July 2015 made amendments according to which the fee for standard losses is calculated, since 01 July 2015, by a respective formula. The said resolution will help to mitigate the risk of Federal Grid’s revenue shortfall due to the increase in actual electricity/ capacity prices on the wholesale market against the prices that the regulator used as the basis for setting the fee for UNEG standard process losses. • Pursuant to clause 37 of the Basic Pricing Principles for Electricity Sector Prices/Tariffs Subject to Regulation approved by RF Government Resolution No. 1178 dated 29 January 2011, the FAS order No. 1346/15 dated 29 January 2015 amended the FTS Resolution No. 297-e/3 dated 09 January 2014 and approved revised tariffs for Federal Grid’s services of electricity transmission via UNEG for 2016–2019. ▶ tariffs for Federal Grid’s services of electricity transmission over uneG effective from 01.01.2011 to 30.06.2015, RUB/MW*month 94 116,782.52 111,083.35 123,328.44 134,964.06 134,589.17 +11% +9.4% –0.3% –4.9% 46,029.88 43,783.55 48,540.01 53,119.60 52,923.13 Others For RF constituent entities of the North Caucasus Federal District 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– 30.06.2015 ▶ tariffs for Federal Grid’s services of electricity transmission via uneG, adjusted and set by the FAS order No. 1346/15 dated 29.12.2015 for 2016–2019, RUB/MW*month 134,589.17 144,686.52 155,541.58 166,457.39 176,778.41 187,689.91 +6.2% Others +7.5% 52,923.13 56,868.70 +7.5% +7.0% +6.2% 61,137.82 65,428.44 69,485.26 73,777.72 For RF constituent entities of the North Caucasus Federal District tARIFF REGULAtION ▶ trend analysis of average rate to maintain grid facilities of Federal Grid Company for 2011–2016, RUB/MW*month Average rate to maintain girid facilities 2011 2012 2013 2014 2015 2016 115,246.25 115,498.38 127,263.94 132,690.23 137,415.66 147,731.01 Change, % +32.8 0.2 10.2 4.3 3.6 7.5 Regulation of reliability and quality of services tariff regulation focusing on the maintenance of the rate of return based on certain long-term parameters implies that Federal Grid will assure the reliability and quality of rendered services as provided by the FTS of Russia. Resolution of the RF Ministry of Energy No. 718 dated 14 october 2013 approved the new Methodical Guidelines for calculating reliability and quality level of goods supplied and services rendered for the UNEG administration company and the regional grid organisations. the list contains parameters of electricity transmission reliability, which primarily characterises power system disturbances and their consequences for consumers, and quality of services provided to consumers, which mostly defines the promptness of implementation of technological connection commitments. The FTS Resolution No. 254-e/1 dated 26 october 2010 approved the Methodical Guidelines for calculation and use of a reduction/multiplying factor maintaining the tariffs of entities that perform activities subject to regulation at the level assuring the reliability and quality of goods supplied and services rendered. In accordance with the above Methodic Guidelines, a reduction/multiplying factor of maximum 3% of the gross revenue requirement will be applied to Federal Grid’s revenue. Tariffs for electricity transmission via distribution grid facilities Federal Grid’s services of electricity transmission over distribution grids are rendered with the use of grid facilities constructed under the Federal Grid’s investment programme, including the facilities constructed for the XXII Winter olympic Games and XI Winter Paralympic Games held in 2014 in Sochi by the state corporation Olimpstroy handed over to Federal Grid for free use pursuant to respective resolutions of the Russian Government. Resolution No. 82/2014-e of the Department of Prices and tariffs of the Krasnodar Krai Regional Energy Commission (REC) dated 26 January 2014 and Resolution No.65/7 of the Primorsky Krai Tariff Department dated 26 January 2014 for the first time approved the tariffs for Federal Grid’s electricity ▶ planned reliability and quality of Federal Grid’s services as set by the FtS for 2015–2019 Reliability of services Quality of services 2015 2016 2017 2018 2019 0.03602 0.03548 0.03495 0.03443 0.03391 1.23908 1.22049 1.20219 1.18415 1.16639 95 01.01.2015– 30.06.2015 01.07.2015– 30.06.2016 01.07.2016– 30.06.2017 01.07.2017– 30.06.2018 01.07.2018– 30.06.2019 01.07.2019– 31.12.2019 1 By order of the Government of the Russian Federation dated 02.12.2013 No. 2243-r, the electric grid facilities of the state treasury constructed by SC Olympstroy were hand over to Federal Grid Company for the free use ManageMent’s Discussion anD analysis Financial capital ▶ Average rate R1 per capacity unit, RUB/kW ▶ Standard tariff Rates for technological Connection set for 2013–2016 tARIFF REGULAtION transmission via grid facilities owned by the Company: Federal Grid’s gross revenue requirement for distribution grid facilities is set at RUB1,780.5 million for Krasnodar Krai and RUB33.2 million for Primorsky Krai in 2015. Since 2016, tariffs for distribution electric grids of Federal Grid are set as long-term tariffs : the Regional Energy Commission – Department for Prices and Tariffs issued an order No. ½-16-e dated 13 January 2016 “on Amending Certain orders of the Regional Energy Commission – Department for Prices and tariffs” that has set the following parameters for the period 2016–2018: Gross revenue requirement, RUB thousand 2016 2017 2018 1,851,627 1,924,095 1,989,322 Change rate, % 4.0 3.9 3.4 96 Tariffs for technological connection to UNEG In accordance with paragraph 6 of the Guidelines on the calculation of fees for technological connection, approved by the order of the FTS of Russia No. 209- e/1 dated 11 September 2012 (further – Methodical instructions), the legislation includes a procedure for setting a fee for technological connection to UNEG facilities in two ways: • Approval by the FTS of Russia of the individual fee for a particular Applicant, if measures of capital nature are required that will be included in a fee for technological connection in accordance with the applicable law • Approval by the FTS of Russia of a fee as a formula based on standard tariff rate R1, which is applied by Federal Grid independently to calculate fee, in case measures of capital nature for technological connection of an Applicant are not required 28.61 27.56 27.56 +3.8% 25.16 −12.05% 2013 2014 2015 2016 A standard tariff rate R1 for Federal Grid Company for 2015 was approved by the Resolution of the FAS of Russia No. 2387-e dated 23 December 2014 in the amount of RUB28.61 per kW (ex VAT), for 2016 – by the FAS Resolution No. 1377/15 dated 21 December 2015 in the amount of RUB25.16 per kW with a breakdown by events. the Guidelines do not provide for differentiation of a standard rate C1 for 1 kw of connected capacity by a voltage level, connected capacity range, categorisation of power supply of Applicants, territories of the Russian Federation, except for consumers that connect less than 150 kW. In this case the rate R1 does not include the cost of Rostechnadzor inspections. The rate for such category of consumers is set at RUB24.64 per 1 kW for 2016. Standard tariff rate C1 is set at a single level for consumers in all constituent units of the Russian Federation. In accordance with amendments made to the Federal Law “on Electric Energy Industry” No. 35-FZ dated 26 March 2003 by the Federal Law No. 308-FZ dated 06 November 2013, starting from 6 December 2013, fee for technological connection of generation facilities to UNEG includes investment costs for development of the existing grid infrastructure to assure the delivery of generation capacity (irrespective of the type of generation – hPP, NPP or ChPP) in addition to the costs of new construction of “last mile” grid facilities. ▶ Trend analysis of average unit rate for capacity, RUB/kW Standard tariff rate R1 Change, % 2011 Not set – 2012 Not set – 2013 27.56 – 2014 27.56 2015 28.61 2016 25.16 – 3.8 –12.05 type of standard tariff rate 2013 2014 2015 2016 Rate to cover the costs for technological connection by activities, in line item 16 (except line sub-items “b” and “c”) – R1 27.56 27.56 28.61 25.16 including: • arranging technical conditions for the Applicant by the grid company (hereinafter, “TC”), RUB/kW • verification by the grid company of the Applicant’s compliance with TC, RUB/kW • participating in the evaluation (examination) by an official from the federal state energy supervision authority of the Devices connected, RUB/kW • the grid company actually connecting the facilities of the Applicant to the electric grids and turning the switchgear into “on” position, RUB/kW Rate to cover the costs of the grid company to build the overhead power lines – R2, RUB/km 22.08 19.34 4.92 4.38 0.58 0.52 27.56 27.56 1.03 0.92 97 Rate to cover the costs of the grid company to build the electric cable lines – R3, RUB/km not set not set not set not set Rate to cover the costs of the grid company to build the substations – R4, RUB/kW In 2015, the fee for technological connection under individual designs was set for 11 consumers and totaled RUB22.3 billion (ex VAT). The applicants with the largest fee are as follows: • JSC Rosenergoatom Concern, Rostov NPP, Unit No. 3 – RUB7.6 billion • JSC Rosenergoatom Concern, Beloyarskaya NPP- 2 – RUB 7.3 billion • JSC DRSK – RUB4.6 billion • JSC Fortum, Chelyabinskaya hPP – RUB1.1 billion ▶ Approved aggregated fee for technological connection in 2010–2015, RuB billion 34.48 22.38 6.15 1.25 1.39 1.43 2010 2011 2012 2013 2014 2015 ManageMent’s Discussion anD analysis Financial capital tARIFF REGULAtION DEBT PORtFOLIO ▶ execution of technological connection contracts in 2015 by method of calculating technological connection fee Number of acts under technological connection contracts, pcs % Amount under acts on technological connection, RUB , including VAT total Under individual design Under standard tariff rate R1 249 100 26 10.4 223 89.6 14,628,191,276 14,466,060,236.26 162,131,039.74 % 100 98.89 1.11 ▶ execution of technological connection contracts in 2015 by connection type Based on the amount of grid connection acts, RUB Based on the number of grid connection acts, pcs. 98 1.11% 10.4% 98.89% Under individual project Under standard tariff rate R1 89.6% Under individual project Under standard tariff rate R1 Debt Portfolio VALUE CREAtION PAYMENT oF INTEREST oN DEBT RUB30.6 billion interests on debt paid by the Company in 2015* * In accordance with the IFRS statements For investors At year-end 2015, Federal Grid Company’s debt portfolio amounted to RUB274.56 billion, increasing by RUB16.89 billion, or 6.5% compared to the previous year. The Company meets its obligations on servicing its debt portfolio and debt repayment in full and on time, including in 2015: • In April, the Company exercised a put offer under Bo-01 series (the outstanding amount is RUB10 billion), and bought 98% of the placed bonds from investors • In May, the Company placed bonds series 37 and 38, to the total amount of RUB40 billion with a coupon rate set at the level of “Consumer Price Index + 1%” and an offer after 30 years • In September, the Company exercised a put offer under 10 series (the outstanding amount is RUB10 billion), and bought 99.7% of the placed bonds from investors 99 ▶ Changes in Federal Grid Company’s debt portfolio, RuB billion 282.4 17.5 100.0 257.8 17.5 274.6 17.5 100.0 140.0 177.5 17.5 105.0 105.0 160.0 164.9 140.3 117.1 2011 2012 2013 2014 2015 Eurobonds Infrastructure bonds Bonds issues ManageMent’s Discussion anD analysisFinancial capital DEBT PORtFOLIO CREDIT RAtINGS • In october, the Company repaid exchange- traded bonds of Bo-01 series because they were due, and exercised a put offer under 07 series (the outstanding amount is RUB5 billion); it bought 65% of the placed bonds from investors For further details on outstanding bond issues of Federal Grid Company, please see Appendix 1 to the Annual Report In order to finance its investment programme in 2016–2010 and refinance its outstanding debt, the Company intends to continue using all available debt instruments, such as bonds, Eurobonds and bank loans. The amounts of debt and any particular instruments will depend on the corporate business plan for 2016–2020 and the market environment. In 2016, the Company will have to exercise put offers for the total amount of RUB 25 billion under bonds of 12 and 25 series. outstanding bonds in Russia and foreign stock exchanges Revolving and non-revolving credit facilities with major Russian banks, with maturities of 3–11 years MICEX (bonds) Irish Stock Exchange (Eurobonds) Sberbank of Russia, Gazprombank, ALFA-BANK, Bank FC otkrytie Promsvyazbank, AB Rossiya, Bank St. Petersburg 100 Credit Ratings In January and February 2015, Federal Grid Company’s credit ratings assigned by all global rating agencies (Standard & Poor’s, Moody’s and Fitch Ratings) were downgraded one notch due to geopolitical risks that had been elevated since 2014, slower economic activity and, as a result, the downgrade of the sovereign credit rating on the Russian Federation. Despite that, financial position of our Company remains strong and stable, which is confirmed by an assessment of its stand-alone credit profile, i.e. without factoring in government support. At year-end 2015, the Company’s credit ratings were equalised with the sovereign rating. They were in the investment category under Fitch Ratings’ scale and in the least speculative category under Standard & Poor’s and Moody’s scales. This means that Federal Grid Company’s fundamental metrics are consistent with the level that is required for the full and timely performance of all financial obligations. Information on the Federal Grid’s credit ratings for 2012–2015 is included in Appendix 1 to the Annual Report ▶ Federal Grid’s credit ratings as at 31.12.2015 Standard&Poor’s Moody’s Fitch Ratings Global scale ВВ+/Negative Ва1/Stable National scale ruAA+ Aa1.ru ВВВ-/Negative AAA(rus) 101 ManageMent’s Discussion anD analysis Financial capital | Borrowed capital SHARE CAPItAL StRUCtURE 32% Medium-Term Investors of free-float Long-Term Investors the share of foreign institutional inves- tors, including major funds, whose assets Short-Term Investors under management exceed USD1 billion: Kopernik Global All-Cap Fund, Vanguard International Equity Index Fund, Market- Vectors ETF Trust Russia ETF, BlackRock funds is 103 Share Capital Structure ▶ Foreign Investor Breakdown by Investment Horizons 7.9 26.6 65.5 Medium-Term Investors Long-Term Investors Short-Term Investors As of 31 December 2015, the charter capital of Federal Grid Company amounted to RUB637,332,661,531 and 50 kop and was divided into 1,274,665,323,063 ordinary registered non-documentary shares with a nominal value of RUB0.50 each. No preferred shared were placed as of the above date. In accordance with the Company’s Articles of Association, the number of authorised shares is 72,140,500,768 ordinary registered shares with a nominal value of RUB0.50 each and a total nominal value of RUB36,070,250,384. Authorised ordinary shares offer the same rights as outstanding ordinary shares. In 2015, there were no issues of additional shares of Federal Grid Company. Information on the Company’s share capital history can be found on our corporate website, www.fsk-ees.ru, Section Investors / Share Information / Share Capital History For further details on each of the Company’s securities issues, please see Appendix 1 to the Annual Reportу Share Capital Structure There were no significant changes in the share capital structure of Federal Grid Company during the reporting year: the Company still has more than 400,000 shareholders (including 43 nominees and 3 trustees). The PJSC Rosseti, which owns 80.13% of the share capital, is the Company’s majority shareholder. The Russian Federation, represented by the Federal Agency for State Property Management (Rosimushchestvo), owns 0.59% of the authorised capital. In June 2013, PJSC Rosseti and Rosimushchestvo signed a shareholders’ agreement regarding the managing and voting in Federal Grid Company. The parties have signed the agreement with respect to all, present and future, voting shares in Federal Grid Company. In order to improve interactions with shareholders, the Company performs an annual analysis of the shareholder register, which identifies the key groups of holders of ordinary shares and depository receipts. the main minority shareholders of the Company are institutional investors and holding structures, with retail investors accounting for 3.23%. ▶ Share Capital Structure of Federal Grid Company as of 31 December 2015 102 80.13 PJSC Rosseti 1.34 1.08 1.67 Kopernik Global All-Cap Fund Index of Energy FGC UES, LLC* Bank VTB (PJSC) 15.78 Others** ПАО «Россети» * Share Capital Structure of Federal Grid Company as of 31 December 2015 ** Federal Grid Company management is not aware of any shareholders that hold more than 5% of the outstanding shares, other than those specified above. Kopernik Global All-Cap Fund ООО «Индекс энергетики ФСК ЕЭС» * БАНК ВТБ (ПАО) Прочие** ManageMent’s Discussion anD analysis Financial capital | share capital Value Creation for Shareholders VALUE CREAtION INCREASE IN SHARE PRICE % 33 Economic Value Added (EVA) of Federal Grid Company in 2015 % 28 total Shareholder Return (TSR) level at the end of 2015 For shareholders and investors 104 Total Shareholder Return (TSR) 2015 target 2015 actual 2016 target higher than the average value for the past three years before the reporting year (-46.35%) 28% higher than the value of change of the MoEX RCI (Regulated Companies Index) by a positive value set by the Board of Directors Stock Market Shares of Federal Grid Company are traded on the “Level 1» quotation list of CJSC MICEX Stock Exchange, which is a member of PJSC Moscow Exchange Group, and are included in the list of securities traded at PJSC St.Petersburg Exchange. the Company shares are included in the index calculation base of key Russian and foreign indices. ▶ Information on Federal Grid Shares Share category Nominal value MICEX Ticker SPBEX Ticker LSE ticker ISIN Bloomberg Code Ordinary registered non-documentary RUB0.50 FEES FEES FEES RU000A0JPNN9 FEES RX 18.2% Federal Grid’s free-float as of the end of 2015 ▶ Stock Indices and Federal Grid Shares in 2015, % 75 65 55 45 35 25 15 5 –5 . 4 1 2 1 0 3 . . 5 1 1 0 0 3 . . 5 1 2 0 7 2 . . 5 1 3 0 1 3 . . 5 1 4 0 0 3 . . 5 1 5 0 9 2 . . 5 1 6 0 0 3 . TRADING IN SECURItIES ▶ ВInclusion of Federal Grid Shares in Key Stock Indices (weight in indices, %, as of 31 December 2015) MICEX Index MICEX BMI RtSI MICEX PWR The RTX Energy (Vienna Stock Exchange) 0.19 0.19 0.19 12.25 12.48 30.0 26.1 18.4 105 . 5 1 7 0 1 3 . . 5 1 8 0 1 3 . . 5 1 9 0 0 3 . . 5 1 0 1 0 3 . . 5 1 1 1 0 3 . . 5 1 2 1 0 3 . MICEX MICEX PWR FGC 2015 Share Performance In 2015, the MICEX PWR sector index performance was broadly consistent with the MICEX Index performance. In the reporting year, shares of Federal Grid Company outperformed the market and the MICEX PWR sector index. Since the beginning of the year, the Company’s share price has increased by 30% (from RUB0,047 in the beginning of the year to RUB0,057 at the end of the year) against an increase by 26% and 18% demonstrated by the MICEX Index and MICEX PWR respectively. a discussion of anti-crisis plan of the Government of the Russian Federation, including measures to support electric grid companies. Further growth of Federal Grid stock prices slowed down due to an adverse impact of several factors, including the following: • Slowdown in Russia’s economic growth and inflation rate, affecting the attractiveness of internal market-oriented companies • Problems with mid-term forecasts for tariff regulation in the industry Federal Grid share price increase in January-February was driven mainly by expectations of a reduction of the Company’s investment program, as well as • Switch to settlements with consumers based on actual capacity ManageMent’s Discussion anD analysis Financial capital | share capital ▶ Key parameters of Federal Grid Share trading Volume units RUB 2011 2012 2013* 2014 2015 476,111,513,800 619,919,120,000 989,348,930,000 1,068,425,610,000 448,624,060,000 159,370,754,044 147,513,331,183 116,812,022,883 65,320,385,916 28,939,553,091 Number of deals units 2,043,606 2,698,318 3,235,854 2,390,457 1,683,326 Low High Period end Number of shares RUB RUB RUB mln, shares Capitalisation at year end RUB, mln 0.21111 0.1513 0.07508 0.02900 0.481 0.3768 0.226 0.0939 0.2811 0.20104 0.09016 0.04569 0.0440 0.0804 0.0594 1,255,948 1,260,387 1,267,141 1,274,665 1,274,665 351,163.1 253,904.89 114,600.23 56,110.77 74,861.09 * T+2 trade results are calculated from 2 September 2013 – date of Moscow Exchange’s switch to this trading mode as a basic one. 106 Source: Moscow Exchange website, / moex.com For further information of share trading, please refer to website www.fsk-ees.ru, Section Investors / Share Information / Interactive Stock Chart Global Depository Receipt Programme Rule 144A. In 2011, the Company completed a technical listing of depository receipts on the Main Market of the London Stock Exchange (LSE), which began trading Federal Grid Company GDRs on 28 March. From 1 July 2013, the Programme’s depository bank is the Bank of New York Mellon (BNY Mellon). on 30 June 2008, Federal Grid Company launched a global depository receipt (GDR) programme, which was not listed under Regulation S and As of 31 December 2015, the GDR programme represented 0.48% of the Company’s share capital. ▶ GDR programme Highlights Ratio International Code Regulation S Rule 144A 1 GDR: 500 shares 1 GDR: 500 shares ISIN: US3133542015 CommonCode: 036273577 ISIN: US3133541025 CommonCode: 0362733372 Price per GDR as of 31 December 2015 ISIN: US3133542015 Number of GDRs as of 31 December 2015 CommonCode: 036273577 – 46,034 ▶ GDR programme Volume GDR Programme volume RegS and 144A, million receipts TRADING IN SECURItIES Programme volume as a percentage of share capital, % 10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 0.342% 0.342% 0.313% 0.069% 0.044% 0.045% 0.045% 0.045% 0.045% 0.045% 0.045% 0.048% 31.01.15 28.02.15 31.03.15 30.04.15 31.05.15 30.06.15 31.07.15 31.08.15 30.09.15 30.10.15 30.11.15 31.12.15 Reg S 144A Programme volume as a percentage of share capital, % (right scale) 0.4 0.3 0.2 0.1 0.0 ▶ GDR price and trading Volume, lSe DR trading volume, receipts Price, USD 107 250,000 200,000 150,000 100,000 50,000 0 0.9 0.8 0.7 0.6 0.5 0.4 0.3 . 5 1 1 0 2 0 . . 5 1 2 0 2 0 . . 5 1 3 0 2 0 . . 5 1 4 0 1 0 . . 5 1 5 0 1 0 . . 5 1 6 0 1 0 . . 5 1 7 0 1 0 . . 5 1 8 0 3 0 . . 5 1 9 0 1 0 . . 5 1 0 1 1 0 . . 5 1 1 1 2 0 . . 5 1 2 1 1 0 . . 5 1 2 1 1 3 . DR trading volume, receipts DR price on LSE, USD Adjusted DR price at the end of trading on MICEX For further details on trading in the Company’s depository receipts, please refer to our website www.fsk-ees.ru, Section Investors / Share Information / Global Depository Receipts Updates about the GDR Programme are also available on the LSE website at www.londonstockexchange. com, under Federal Grid Company’s ticker: FEES ManageMent’s Discussion anD analysis Financial capital | share capital Maintaining dividend income ▶ Federal Grid Dividend History DIVIDEND POLICY 2011 (for 2010) 2012–2014 (for 2011 – 2013) 2014 (for the 1st quarter of 2014) 2015 (for 2014) total amount of dividends declared, RUB mln Dividend per share, RUB. Share of net profit allocated for dividends, % Date of declaration Date of actual payment 2,577.7 0.21 4.44 29.06.2011 29.08.2011 No dividends were declared for 2011, 2012 and 2013 436.8 847.4 0.034 0.0006647883 36 25* 27.06.2014 26.06.2015 25.07.2014** 20.08.2014*** 30.07.2015** 20.08.2015*** * Taking into account dividends paid for the 1st quarter of 2014 ** To nominees and trustees *** To other persons registered in the Shareholder Register of Federal Grid Company 2015 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 determined under the Company’s accounting statements. Resolution on 2015 dividend payment will be made by the Annual General Meeting of Shareholders that will be held in 2016. 109 when shaping our dividend policy, we are guided not only by strict observance of legal requirements, but also the need to ensure an optimum balance between shareholders’ interests, the Company’s business needs, and the need to enhance its investment attractiveness and capitalisation. For the purpose of increasing shareholder value, the Company is constantly working over issues on improving financial transparency, including with respect to dividend payments. Currently Federal Grid is on target to synchronise calculation of a dividend base taking into account the RAS requirements and in accordance with IFRS. All the dividend policy principles, mechanisms for determining the size of dividends, procedure, period and form of dividend payment are set in the Regulations on Dividend Policy of Federal Grid Company approved by the Board of Directors in 2010. Board of Directors. The recommended dividend pay-out amount is determined by the Board of Directors on the basis of the Company’s financial results and with due account for the Federal Law “on Joint Stock Companies’ No. 208-FZ dated 26 December 1995 and the RF Government Resolution No. 705-r dated 18 April 2016. The table below shoes the profit distribution and dividend payment in accordance with the resolutions of the Annual General Meetings of Shareholders: • 2011 AGM (for 2010) – Minutes No. 11 dated 4 July 2011 • 2012 AGM (for 2011) – Minutes No. 12 dated 2 July 2012 • 2013 AGM (for 2012) – Minutes No.13 dated 2 July 2013 The full text of the Regulations on Dividend Policy is available on the corporate website www.fsk-ees.ru, Section Shareholders and Investors • 2014 AGM (for 2013) – Minutes No. 15 dated 30 June 2014 the General Meeting of Shareholders resolves on dividend payment based on recommendations of the • 2015 AGM (for 2014) – Minutes No. 16 dated 30 June 2015 108 ▶ 2011–2015 net profit Distribution, RuB thousand for 2010 (2011 AGM) for 2011 (2012 AGM) for 2012 (2013 AGM) for 2013 (2014 AGM) for the 1st quarter of 2014 ( 2014 AGM) for 2014 (2015 AGM) 58,088,388 –2,468,359 –24,501,917 –25,897,521 1,210,472 4,699,940 Retained net profit (loss) for the reporting period: Reserve Fund 2,904,419 For development 18,578,192 Dividends Covering losses from prior years 2,577,664 34,028,113 – – – – – – – – – – – – – – 256,837 – 436,803 847,383 – 3,595,720 ManageMent’s Discussion anD analysis Financial capital | share capital 110 Innovative Technologies for Better Reliability CoNTRIBUTIoN To DEVELoPMENT oF INDUSTRY-SPECIFIC SCIENCE AND EDUCATIoN VALUE CREAtION RUB484 mln amount of R&D financing in 2015 30 new intellectual properties registered by Federal Grid in the reporting year For educational institutions and scientific community Federal Grid Company’s innovative development is aimed at enhancing the reliability, quality and economy of the supply of electricity to consumers by upgrading the electric grids of the Russian Unified Energy System with the use of innovative technology to turn them into an intellectual core of the technology infrastructure of the national electric energy sector. Key areas of the innovative development programme Key Areas of the Innovative Development programme Development of new technologies • Development of the concept of a smart energy system • Development, testing and commercialisation of new technologies • Development of new energy market services • Energy efficiency improvement programme • 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 businesses • Interaction with venture capital businesses and the Skolkovo Institute of Science and technology • Integrated pilot projects to create a smart grid • Development, modernisation, and improvement of the energy efficiency of UNEG • Building of a production base for modernisation of UNEG Innovative Business processes • Improvement of business processes and introduction of new management methods • Development of a system of innovation activities INNoVATIVE DEVELoPMENT PROGRAMME what are the social and economic impacts of projects implemented within the federal grid’s innovative development programme? pavel Korsunov Deputy Chairman of the Management Board of Federal Grid Company “The Programme’s implementation is aimed mainly at achieving the strategic goals of our Company through introducing new types of equipment, supporting new processes, as well as improving the existing and creating new, including high tech, services. the main social and economic impact of its implementation is achieved through the industry’s commitment to search for and create advanced teсhnical solutions in the field of electricity transmission and distribution, which is accompanied by the creation of new industries and jobs and the increase in tax revenue. Based on the results of the analysis of international experience in innovative activity and the industry particularities, we focus on the creation of an extensive partnership infrastructure, built on the model of «open innovation» and focused on engagement with development institutions, research institutes, higher education institutions, small and medium-sized businesses, foundations, and foreign partners.» 111 In order to achieve the goals and objectives of our innovation policy, our Company has developed and now implements a comprehensive Innovative Development Programme for the years 2013–2017 with an outlook through 2020 (Minutes of the Management Board No. 1167/2 dated 26 April 2013). Our innovative development programme will improve the efficiency of utilisation of Russian’s energy potential, facilitate the development of new technologies, contribute to further development of the national industry, reduce the percentage of imported equipment, and create favourable conditions for procuring the maximum benefits for the national economy. As part of its Innovative Development Programme, we are is carrying out works aimed at fulfilling UNEG modernisation and development tasks, creating conceptual, technology and production fundamentals and favourable conditions for building a smart grid, and improving Federal Grid’s business processes and organisational mechanisms to achieve the goals and objectives of innovative development. InnovatIve Development Intellectual capital INNoVATIVE DEVELoPMENT PROGRAMME SMARt GRID SMARt GRID 2015 Results of the Innovative Development Programme Our focus on activities to introduce and test innovative technical solutions, developed together with partners of innovative infrastructure, at UNEG facilities became a key outcome of our efforts to implement the Innovative Development Programme in the reporting year. When updating the Innovative Development Program, we placed an emphasis on the practical importance of the Company’s projects, as well as the increase in transparency and involvement of development institutions, higher education institutions, research institutes, small and medium- sized businesses. Given the completion of the main scope of construction and installation works as part of the ongoing innovative projects and reduction of Federal Grid’s Investment Programme due to the change of the growth scenario for electricity transmission tariffs, only RUB3,962.27 million were spent to implement the Innovative Development Programme instead of the planned RUB9,717.44 million. Nevertheless, thanks to an increase in the efficiency of our innovative activities, we were able to fulfil most of the key performance indicators of that Programme in the reporting year Information on the meeting Key Performance Indicators of the Innovative Development Programme in 2015 is available in Appendix 1 to the Annual Report Electric Energy System of the Future In the future, our efforts to implement the Innovative Development Programme are expected to result in the creation of an electric energy system with a smart grid differing from the existing grid by the following innovative elements: • Current grid status monitoring system • Automated real-time systems to keep the operation of the energy system within the limits set as part of a uniform analysis and decision-making system • Automated electricity transmission systems • Active grid elements with variable parameters The smart (active-adaptive) grid and the principles of management of the energy system will be built on the priority of systemic factors and conditions – reliability and economy of the system as a whole. Smart Grid Diagram PoWER GENERATIoN AND ALTERNATIVE ENERGY SOURCES CONSUMERS 112 ▶ 2015 Innovation Costs as Broken down by Investment programme Items, RuB million 113 12% 88% 3,478.08 Integrated pilot projects to creating an active-adaptive grid with the use of innovative technologies and energy efficiency 484.19 R&D Programe SMART GRID INDUSTRIAL INStALLAtIONS ENERGY tRANSMISSION AND SToRAGE (hIGh-PoWER BATTERIES) new principles and technologies underlying the smart energy system with active-adaptive grid • the smart grid is rich with active components that • Necessary actuators and mechanisms for real- allow changing its topological parameters • Sufficient number of sensors to measure current mode parameters for monitoring the grid condition in various operation modes of the energy system • Data collection and processing system and controls for grid active components and consumer electric installations time measurement of grid topological parameters and interaction with adjacent power assets • tools for automatically assess the current conditions and preparing grid operation forecasts • High-performance control system and fast data exchange InnovatIve Development Intellectual capital Research and Development Activities An R&D Programme of Federal Grid Company for the years 2015–2017 (approved by the order No. 133 dated 19 March 2015) is one of the instruments for implementing the Innovative Development Programme. The R&D Programme has been designed to ensure stable, long-term funding of our efforts to develop state-of-the-art technologies, equipment and devices and is aimed at enhancing the reliability, quality and economy of consumer power supply by upgrading the Russian UES grids and turning them into a smart (active-adaptive) core of the future power technological infrastructure. The R&D works aimed at creating a smart energy system with an active-adaptive grid involve the development and implementation of new principles of managing technical aids, grid element management systems and management systems of electric grid complexes in stationary and post- emergency modes, reliable, long-life electrical equipment and automation systems based on new scientific developments, technologies and principles of the UES operation. 114 Benefits of 20-Kv-d/c hts caBle line developed By federal grid target suBprogrammes under the r&d programme • Reducing electricity losses in the cable • Digital substation • Implementing short-circuit current limitation • New materials and designs • obviating the need to use compensatory devices for electricity transmission • Improving cyclic load capability and controllability of transmission • Process Management • Operation and monitoring • Digital design • Combining grids with different frequency standards for parallel operation • Power conversion and transmission R&D R&D ▶ Key Results of the R&D programme Implementation in 2015 High temperature Superconductive (hTS) cable lines transition Joints and terminations for XLPE cables for 110, 220 and 330 KV Metrological Control and Supervision at digital substations • work was completed to create a 20-kV, 2,500-D/C hTS cable line having a length of up to 2,500 m • Design documentation was prepared and prototypes were manufactured • Design documentation was prepared and the hTS cable manufactured as follows: four construction units of cable having a length of 350–450 m; transition joints and terminations; valve converters; relay protection and automation control systems; cryogenic equipment • Acceptance and qualification tests were conducted at an assembled 110 and 220 kV cable system to check cable fitting’s conformity to GOSt and company standard • Operational life testing was conducted of prototypes of high voltage cable fitting for voltages from 110 kV to 330 kV • A set of regulations and specifications was prepared regulating operations of metrological control and supervision at digital substations • technical requirements and specifications were developed for a prototype hardware and software platform for metrological control over measuring channels of digital substations Automatic water-mist fire extinguishing system for 220-kV, 125–250 MVA transformers 2Physical condition monitoring and damage location system for 220–750-kV ohL • A system was developed • The testing results confirmed the efficiency compared to traditional water fire extinguishing systems: a significant decrease in water consumption ( by 3–7 times) and a serious reduction of extinction time (up to 4) • A model project was developed, the system was installed and now is under pilot operation at 220 kV tula SS (MES Centre) • working design documentation and software were developed • Prototypes were manufactured • Bench tests were conducted • the system is under pilot operation at ohLs of MES Siberia (at 3 facilities) and MES South (at 2 facilities) 115 InnovatIve Development Intellectual capital R&D SoCIAL RESPoNSIBILIT Human capital HR POLICY In accordance with our Investment Programme, in 2015 RUB484.19 mln were allocated to implement our R&D Programme that is 0.28% of Federal Grid’s revenue. The reduction of the R&D funding volume compared to the 2010–2013 period was caused by some adjustments we made to our Investment Programme in line with a change of the electricity transmission tariff growth scenario. Creating an intellectual portfolio and intangible assets of Federal Grid Company As part of our efforts to implement our R&D Programme, Federal Grid Company had 30 intellectual properties registered with Rospatent in 2015, including: ▶ R&D Funding, RuB billion 2.9 1.9 1.7 1 116 2010 2011 2012 2013 2014 2015 0.42 0.48 Long-Term Plans Given the limited funding in the years ahead, we intend to concentrate on improving the quality and efficiency of planning and implementation of our R&D Programme and focus our efforts on the most advanced and critical areas of our innovative activities. we also plan to further actualise our “open innovation” tools for working with our partners in innovative development in the following areas: • Development and popularisation of Federal Grid’s public documents and Internet resources concerning innovative development, oriented to our partners and counterparties and setting out goals and objectives, key requirements and technologies, and other important information related to modernisation of UNEG, building of a smart grid and other areas of our innovative development 8 15 1 6 invention patents utility model patents design patent computer software certificates • Further development of innovative competencies centres established with participation or support from Federal Grid Company on the premises of university labs, chairs, departments and small innovative “subsidiaries” and based on innovation contests • Development of public-private partnership mechanisms • Development of instruments to manage knowledge, competencies and the Company’s operating system to maximally use internal reserves for innovative development Creating Conditions for the Development of Human Capital WoRKPLACES AND oPPoRTUNITIES FoR PRoFESSIoNAL DEVELoPMENT VALUE CREAtION 23,899 workplaces created in 2015* over 15,000 employees engaged in various forms of training in 2015 * Corresponds to average headcount as at the end of 2015 For employees 117 Federal Grid Company’s hR Policy is a comprehensive system of relationships with employees. It is aimed at ensuring the achievement of the Company’s strategic goals, development and maintenance of the technical condition of electric grids and substations, enhancement of reliable functioning of UNEG facilities, and implementation of the corporate investment programme. The aim of our hR policy is to maintain a balance between economic and social effectiveness in using the human resources; provide highly qualified staff members to the Company’s departments; establish the necessary conditions for efficient development and employment of human resources; and meet our employees’ needs, expectations and interests. we take the utmost efforts to create the conditions for the best use of talents and strengthening our corporate culture, effective motivation and professional development of employees. headcount and Personnel Structure A priority in the Company’s personnel management policy in 2015 was performance management at the unit and employee level by raising labour productivity (this was also part of implementation of directives Nos. 2454p-P13 dated 23.04.2014, 7389p-P13 dated 31.10.2014 and 2303p-P13 dated 16.04.2015 issued by the Government of the Russian Federation). This priority envisions the following approaches: • optimise the Company’s organisational and functional structure, reduce the number of management levels, expand the span of control, and reduce the administrative and managerial staff • Optimise schemes for service maintenance of energy facilities with regard of the Company’s priorities in improving reliability, safety and effectiveness of the grid system and, consequently, reduce the process staff InnovatIve Development Intellectual capital what values does the company create for its employees as a Key staKeholder group? natalia ozhegina Deputy Chairperson of the Management Board of Federal Grid Company “A professional experienced team is Federal Grid Company’s main capital. This is why the Company opens up new opportunities for all people who do their job conscientiously and want to grow and develop in a team of employees who hold the same views. bonuses and allowances, such as voluntary medical insurance, accident insurance, non-governmental pension plan, and financial aid programmes. It runs a corporate housing programme and a programme of compensating the rental costs of housing for young specialists. 118 the key priorities of our HR policy are to ensure a decent level of wages, establish a system of social support for the employees, raise the level of satisfaction with working conditions and living standards, and make the Company’s social package more competitive. The Company offers additional An important value which the Company creates for its employees is an opportunity for professional development and career growth. We implement various training and professional development programmes, including via corporate licensed training centres, and develop our talent pool.” The following actions were completed in 2015: • Project “Audit and optimisation of Federal Grid Company’s organisational and Functional Structure” The employee turnover rate was 8.6%. The staffing level in the Company remains high at 97.2% as of year-end 2015, which is 0.5 percentage points above the 2014 level. • Centralisation of functions by management levels ▶ Average employee Headcount in Federal Grid Company • Reduction in operational service costs • Optimisation of administrative and managerial staff size In the reporting year, staff optimisation actions resulted in higher labour productivity in physical terms (c. u. /man) by 12.6% relative to 2014. At the end of 2015, the headcount of Federal Grid Company was 23,358 employees, a 4.1% decrease on 2014. 25,123 24,460 24,362 23,332 +4.8% +2.7% 23,358 -3% -4.1% 2011 2012 2013 2014 2015 HR POLICY One of the priority areas is to renew and maintain the number and quality of employees in order to ensure reliable operations and development of Federal Grid Company. the Company sets high standards for employee education and qualification. Its employees have a sufficiently high qualification level: more than 94% of employees have professional education. This measure is on the upward trend because it increased by 2 percentage points over the past three years. The average age of the Company’s employees is 40.9 years (as compared to 39.3 years in 2014). Most employees (59%) are under 40; this is the most active age in economic and social terms. Thus, the Company has achieved an optimal balance of young, enthusiastic employees and experienced, highly qualified staff members who ensure the continuity of generations and the transfer of professional knowledge and skills. Material incentives A compensation system in Federal Grid Company takes into account the position categories, performance results of the Company branches and structural divisions, specifics of regional labour markets and individual contribution of each employee. Executive performance is assessed against key performance indicators (KPIs) that are approved by the Board of Directors. Salary differentiation is based on the level of complexity and responsibility in a given job position, the employee’s qualification and his/her impact on the Company’s fundamentals. Remuneration to employees is based on the time and bonuses. The basic wage (wage rate) is consistent with the staffing table and a list of basic wages. Wage rates (basic wages) to workers are based on the minimum monthly wage rate of a grade 1 employee, which is established by the Tariff Agreement for the Electricity Industry of the Russian Federation. In 2015, the Company revised the frequency of indexation of basic wages and took a decision about semi-annual indexation of wages (wage rates) in accordance with the provisions of the Electricity Industry Tariff Agreement for 2013–2015 which was extended for 2016–2018 (the Company used to index wages quarterly in the previous years). Succession Pool Federal Grid Company pays much attention to the talent development. It conducts educational programmes that open up professional growth opportunities for the young people and attracts talents to the Company. In 2015, the Company hired 1,185 young specialists under 30, including 213 graduates of higher and secondary educational institutions. Employees from MES branches were trained under the federal programme «training and Retraining of Management Pool.” Young specialists from the Federal Grid Company’s succession pool took 119 ▶ 2015 employee Headcount by Branch 8 4 15 9 11 22 11 9 11 Executive Directorate MES Center MES North-West MES Volga MES South MES Ural MES Siberia MES Western Siberia MES East Social ReSponSibilityHuman capital 120 part in the Round Table for Young Professionals which PJSC Rosseti organised at the St. Petersburg International Economic Forum. Educational programmes “Director of Substation” and “Director of a Backbone Electric Grid Enterprise” were developed and conducted at the Personnel training Centres for employees included in Federal Grid Company’s succession pool. Personnel Training and Development Federal Grid Company implements a policy which is aimed at raising the professional level of its employees and talent development. In 2015, 15,093 employees (64% of total headcount) were involved in various types of training, retraining and professional development. Improvement of employees’ technical competencies remains a priority task for the Company. In the reporting year, 9,084 employees improved their skills in 9 licensed Personnel Training Centres of ▶ Employee Average Wage/Salary, RUB 58,032 53,078 62,042 64,091 66,573 +6.9% +9.3% +3.3% +3.7% 2011 2012 2013 2014 2015 Federal Grid Company. Educational programmes for operating personnel in Federal Grid Company’s training centres focus on the training of practical skills. These centres have training simulators, laboratories with relay protection and emergency automatic equipment, and electric grid training areas equipped with advanced technical training aids and prototype equipment. The simulation ▶ Appointments of succession pool members to superior positions in 2015 Number of members in 2015, persons Number of members appointed to superior positions, persons (share of the total) target positions Other positions Sufficiency of succession pool for managerial positions 311 54 (17%) 56 (18%) 90% 83 2 (2.4%) 4 (4.8%) 202% type of succession pool Tactical succession pool for the production and technical facilities of Federal Grid – MES This succession pool was formed in five key areas of the Company’s activities for the positions of heads and deputy heads of structural units in a branch (in charge for organisation, operations, maintenance and repairs of electric equipment and electric grid devices, such as relay protection and automation; running of substation equipment; It and process systems; operational and process management; and electricity transmission line) Succession pool for the position of PMES’ Director this succession pool was formed in order to enhance the talent capacity, identify the most valuable employees having the best capacity for their further development, and to minimise HR risks related to PMES directors’ natural retirement and level of professional competencies development of young professionals Federal Grid Company’s participation in the International Forum of Young Power Engineers «Forsazh-2015” was acknowledged by the Russian Ministry of Education and Science for the maintenance of high educational standards in capacity development of young engineers. classes allow us to organise realistic drills and emergency response exercises. Control Centre (MGCC) and Grid Control Centres at MES and PMES. Since the opening of training centres in 2011, the Company had 1,127 training sessions in 2011–2015. the Company is continuously upgrading its computerised training simulators to make them consistent with changes in substation schemes. the Personnel training Centres are the main platform where professional skill competitions are held. In 2015, the Company held 28 such competitions. HR POLICY ▶ employees trained in 2015 by categories 40 18 42 Professional employees Workers Management 121 At the request of the Ministry of Labour and Social Protection, Federal Grid Company’s training centre in the Moscow oblast hosted the federal-level stage of “The Best Professional,” a Russian national competition of professional skills, in the nomination for “The Best Electrical Lineman (high-voltage lines) award. ▶ Share of Employees Trained in 2015, and training costs/salary budget ratio, % 100 90 80 70 60 50 40 30 20 10 0 Executive Office MES Volga MES East MES Western Siberia MES North-West MES Siberia MES Ural MES Centre MES South Share of employees trained, %е Including at the Company’s training centres, % Training costs/salary budget ratio, % 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 Social ReSponSibilityHuman capital 122 Federal Grid Company’s Personnel Training Centre received the “Chrystal Pyramid” award in 2015 in the category “Corporate University” for a special contribution in human capital management. The award gives its winners the image of a leader and reputation of a reliable employer. In accordance with the objectives that had been set by the Council for Professional Qualifications in the Electricity Sector at the Russian Ministry of Energy, Federal Grid Company actively participated in the development and adaptation of industry professional standards for the electric grid complex. In 2015, Federal Grid Company continued to co-operate with institutions of higher education in all regions where the Company operates. The co-operation programmes covered professional retraining and skills development of the operating personnel, involved specialists from the industry- specific higher-education institutions in R&D, and organised on-the-job practice and training for the would-be power engineers at the Company’s facilities. the Company employees took part in the retraining and skills development programmes that were run by institutions of higher education, including the industry-wide targeted programme “Skills Development of Engineers and Technicians.” As part of its co-operation with the youth panel of CIGRE Russian National Committee, Federal Grid Company actively participated in actions that helped to promote the development of the Company and the entire electricity sector, such as the forum “Electricity Industry through the Eyes of the Young People,” International Academic Competition in the Electricity Industry held at Ivanovo Power Engineering University, conference “Dispatch Control and Management in the Electricity Sector” held for young people at Kazan State Power Engineering University, and 2015 ENES International Forum. A team of Federal Grid Company’s young specialists made a project on power transformer heat extraction and utilisation for subsequent use in heating of substation buildings and structures. It was recognised as the best project in the panel “heat and Electric Power Engineering and Young Leaders” at the 2015 ENES International Forum and was awarded a diploma by the Ministry of Energy. The Company’s specialists became members of a new youth association – the Russian National Union of Young Engineers of Commodities and Power Complexes. Awards Policy In order to raise motivation for effective performance and provide moral and financial awards for high results the Company has been successfully implementing a programme of giving state awards, awards by the Government and Ministry of Energy of the Russian Federation, Russian National Association of Electricity Sector Employers (RaEL), PJSC Rosseti and corporate awards to its employees. According to this programme, 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 efficiency and management competencies, or achieve great results in the operation, construction and re-construction of electric grid facilities, or in the development and implementation of new equipment and technologies, or implemented advanced forms of labour organisation, or demonstrated professionalism in the prevention or liquidation of accidents, restoration of power facilities, or have the authority and respect in their teams, promote corporate values and perform in accordance with these values. The teams of Federal Grid Company’s branches that have ensured reliable operation of equipment, achieved the best performance indicators, and demonstrated good results in the mastering and introduction of new equipment and technologies are awarded the title “Best Branch of Federal Grid Company – MES” and “Best Enterprise of Federal Grid Company – PMES.” HR POLICY 123 the Best in 2015 In the reporting year, 1,576 employees of Federal Grid Company, its subsidiaries and contractors received awards, including: 221 employees received awards from the Ministry of Energy of the Russian Federation for their services to the electricity sector; one employee received an award “honourable Worker of the Fuel and Energy Complex” and 11 employees received the title “honourable Power Engineer” the CIS Electric Power Council who were awarded the title “Veteran of Electricity Sector” for their long and fruitful service for their major contribution in the development of integration processes in the CIS power sectors 7 employees were awarded the title «Distinguished Power Engineer of CIS” 6 employees were given the honorary Certificate of 85 employees received awards from RaEl Association, including 9 employees 95 employees who made major contributions to the development 122 employees were awarded a commemorative sign 1 040 employees received corporate awards for their contribution to the development and services to Federal Grid Company, including: of the electric grid complex received corporate awards from PJSC Rosseti “95th Anniversary of GoELRo Plan” of Federal Grid Company” 2 titles “Honorary worker 9 signs “For Contribution to the Development of Federal Grid Company” (Grade 1) for high level of production efficiency and competencies for high level of production efficiency and competencies 79 signs “For Professional Excellence” 16 signs “For Professional Excellence” 23 titles “Veteran of Federal Grid Company” for merits to the Company 9 employees’ portraits were put on the Recognition Board and long and fruitful work in the electric grid complex of Federal Grid Company. MES western Siberia Omsk PMES was awarded the title “Best Branch of Federal Grid Company – MES” in 2015 was awarded the title “Best Enterprise of Federal Grid Company – PMES” in 2015 Social ReSponSibilityHuman capital Socially Responsible Approach SoCIAL SECURITY AND GUARANTEES VALUE CREAtION 124 million RUB377 Spent for voluntary medical insurance in 2015 million RUB327 Allocated for non-government pensions in 2015 million RUB146 Spent for the implementation of housing programmes in 2015 SOCIAL POLICY to attract high quality specialists and the youth, whose activities involve moving to another place, the Company reimburses their housing rental costs (this programme is included in the corporate benefits package). In 2015, the Company provided assistance in housing rent to 398 employees including 230 young specialists. In addition, Federal Grid Company provides corporate assistance according to its commitments under the programme for improving employees’ housing conditions. In 2015, corporate assistance in the form of interest-free loans and compensations was rendered to 686 employees, including 315 young specialists. For employees E F F I CIENCY s s e n effectiv e respo n sib ili t d e v e l o p m e n t I N N O V A T I O N e mplO y e s e profession a l i s m y t s tru Y T I L BI RELIA federal grid company’s ring of values is a symbol of achievement of strategic goals (external ring) through corporate values (internal ring), of which the Company’s personnel is the key value 125 Social Programmes for Employees A benefits package in Federal Grid Company is a tool for employee motivation and social security and includes voluntary medical insurance, accident insurance, non-governmental pension, financial assistance to employees in need (connected with marriages, childbirths, etc), and wage/salary advance. the Company has a Corporate Housing Programme. To provide qualified personnel for key power facilities that are in remote areas or under construction, a corporate housing stock of Federal Grid Company has been created. In 2015, 34 company-owned apartments were commissioned and provided for rent to the Company employees in Novy Urengoy and Pyt-Yakh. Employees of MES Western Siberia branch electric facilities located in remote areas will live in these apartments, including employees who will work under rotation system. Corporate housing stock apartments 481residential 11in Russian regions Corporate Values Development of Corporate Culture Federal Grid Company is a unique infrastructure company that embraces generation and consumption units in Russia in one national system. Well- coordinated teamwork of thousands of the Company’s employees largely depends on whether they have the same understanding of ethical and professional guiding principles that have been formed in the Company. this is why we have a Code of Corporate Ethics which is based on the best global practices of corporate governance and is aimed at raising the level of corporate culture among all employees. The Company’s Code of Corporate Ethics is available on our website www.fsk-ees.ru, in the section About Us/Corporate Governance/Corporate Documents. Federal Grid Company maintains the traditions of strengthening corporate culture and developing respect and interest in the profession of a power engineer. Corporate events In 2015, most corporate events in Federal Grid Company focused on the 70th anniversary of victory in the Great Patriotic War. In accordance with a programme designed by the Russian Ministry of Energy, a delegation of Federal Grid Company’s executives and veterans took part in the ceremonies that included the laying of wreaths to the Tomb of the Unknown Soldier and a monument to Marshal Zhukov; war veterans’ meeting with A. V. Novak, Minister of Energy; and a concert for veterans and employees of the power sector companies. Besides, we organised a special Social ReSponSibilityHuman capital event on the eve of Victory Day for long-service employees of Federal Grid Company and the electric grid complex. Festive events were held on the eve of Victory Day in all branches of Federal Grid Company. War veterans, home front workers, city residents of Leningrad who survived the blockade and worked in backbone grid enterprises received greetings from Andrey Murov, Chairman of the Management Board, and valuable gifts from the Company. War veterans met with the labour teams, photography exhibitions about the work of the electricity sector during the war were held, and an action “St. George Ribbon” was run. In 2015, the Company continued to organise trainings in sports that are popular among its employees, and offered them partial reimbursement of gym membership (annual contracts). The Company’s volleyball and indoor soccer teams participated in competitions that were held between the companies of the fuel and energy complex with support from the Ministry of Energy. In November 2015, Federal Grid Company, together with JSC R&D Centre of FGC UES, held the Fifth Open Chess tournament in memory of Mikhail Botvinnik, a great chess player and outstanding electrical engineer. 126 In March and April 2015, the Company held a competition of children’s drawings “The Energy of Victory” dedicated to the 70th anniversary of victory in the Great Patriotic War. over 450 children of Federal Grid Company’s employees participated. The best drawings were sent to the Russian national contest and exhibition that were organised by the Russian Ministry of Energy. Sports Involvement of employees in sport and physical activities, as well as promotion of a healthy lifestyle that helps them to strengthen their health and raise labour productivity is a priority in Federal Grid Company’s corporate life. SOCIAL POLICY 127 Non-Governmental Pension Programme In order to increase motivation, retain highly qualified employees and ensure high living standards for them after they reach the retirement age, non-governmental pension programme for the Company employees was approved in 2004 and is now successfully implemented. Its key principles are: • A uniform approach to the organisation of non- governmental pensions in Federal Grid Company • Differentiated size of a non-governmental pension • Incentives to employees for their service to Federal Grid Company and the electricity industry for long and conscientious work Insurance Medical Insurance In accordance with its social policy, Federal Grid Company has a corporate system of voluntary medical insurance of employees (VMI). It guarantees timely and high-quality additional medical and other services, and their scope and terms are over and above the services provided under the mandatory medical insurance programme. Insurance coverage is based on the VMI programme which meets the Company’s high standards and includes the following sub-programmes for all categories of employees: outpatient Care,” “Dental Care,” “Emergency and Planned Hospital Admission,” “office Doctor” (on-the-job medical services), “Vaccination,” “Disease Prevention Services” (including mandatory medical examinations and extended preventive medical checks at the health centres), “Medical Insurance during Foreign Travel,” “Diagnosis and Treatment in the Leading Research Institutions.” RUB 327 million was allocated for the non-governmental pension fund in 2015 property Insurance this type of insurance is aimed at the recovery of losses that the Company might incur as a result of loss or damage of its assets in case of an unexpected event. Property is insured against all risks, including fire, natural disasters, dangerous weather events, third parties’ wrongdoings, terrorist acts, and direct actions. In 2015, the Company took actions to cut property insurance costs while maintaining the same scope of insurance. The effective insurance rate is 0.0354%. liability Insurance The Company also insures liability of members of its Board of Directors, members of the Management Board, Chairman and deputy chairpersons of the Management Board, and Chief Accountant. Its insurance policy covers losses caused by damage to third parties or Federal Grid Company as a result of unintended / erroneous actions or omissions by the insured persons when they perform their functional duties. Youth Policy engagement with educational Institutions In 2015, the Company continued to develop mutually beneficial relationships with industry- specific higher-education institutions and specialised secondary schools. the voluntary medical insurance programme contains an extended list of medical services including expensive high-technology medical care, a broad list of medical specialists, and medical care in the best Russian medical and prevention centres. the main area of co-operation with educational institutions is still the organising practical and pre-degree training for students. over the course of 2015, about 770 students developed practical skills at the Company’s facilities. Temporary jobs with time wage were created for 200 of them. Social ReSponSibilityHuman capital In April and May 2015, a traditional annual Day of Federal Grid Company was organised in all branches and the Executive office, involving more than 1,500 students from 40 higher education institutions and 8 specialised secondary schools. In the reporting year, 32 power engineering students received additional theoretical and practical knowledge in the «School of Young Engineer» organised at the premises of the Personnel training Centre “Bely Rast” of MES Centre. In total, about 3,600 students, tutors and the Company’s employees took part in events that Federal Grid Company arranged in order to develop co-operation with educational institutions in 2015. Charity Federal Grid Company has been traditionally providing charity support (to individuals and organisations) in the following areas: • Support of educational, scientific and cultural activities, and public awareness campaigns • Support of physical culture and sport activities (except professional sport) • Social support and protection of citizens including the improvement of financial situation of low-income people, social rehabilitation of the unemployed, the disabled and other persons who are unable to implement their rights and lawful interests on their own due to their physical or intellectual specific features or any other circumstances 128 A special focus in this event was on the in-depth communication of specialists and heads of the Company’s units and branches with students. Most events were held in the form of students’ meetings with the Company’s specialists at the electric grid facilities. the Company organises annual guided tours to its facilities for students of higher-education institutions and specialised secondary schools, thus making the teaching processes more effective. More than 1,000 students took part in such tours in 2015. SOCIAL POLICY CO-OPERAtION Federal Grid Company co-operates with several Russian educational institutions: • Protection and adequate maintenance of buildings, facilities and territories of historic, religious, cultural or environmental importance • Social rehabilitation of orphaned children and children without parental care, neglected children and children in difficult life circumstances • Support of activities in the field of health care, healthy lifestyle promotion, improvement of moral and psychological condition of citizens • Assistance for those who have suffered from natural disasters, environmental or industrial disasters or other catastrophes, as well as social, ethnic or religious conflicts, victims of repression, refugees and forced migrants • Support of individuals who need surgery to protect their life and health (including for prevention of disability and long-lasting rehabilitation), and those who need treatment of serious disease. In 2015, the Company allocated RUB 50.9 million for charitable aid to individuals and legal entities.1 129 106 higher education institutions cooperative agreements are signed with 49 of them 30 specialised secondary schools cooperative agreements are signed with 13 of them In 2015, the Day of Federal Grid Company as an annual professional orientation event had an audience more than 1,500 students 1 Further details about charitable and sponsorship support by Federal Grid Company’s subsidiaries and associates are available in Appendix 7 to the Annual Report Social ReSponSibilityHuman capital Creating Safe working Conditions SAFE AND CoMFoRTABLE WoRKING CoNDITIoNS VALUE CREAtION For employees 130 Accident rate (including fatal or group accidents due to failure to perform or inadequate performance of job duties), per 1,000 persons 2015 target less than 0.02 2015, actual 0.018 2016, target less than 0.018 Labour Protection Our health and safety measures are aimed at elimination of workplace injuries and occupational diseases, promotion of safe conduct and development of accident-prevention skills among employees, as well as at improvement of working conditions. In 2015, we continued work to reduce the number of injuries. our efforts were based on the findings of an assessment of employee injure risks, and on objectives that had been outlined by the Company’s Labour Protection Committee and regulations / guidelines. By the end of the reporting year, the number of injured employees in the Company’s branches increased from 3 to 5. The largest share of injuries was related to the driving of vehicles. At the same time electric injuries were on the downward trend: only one person was injured in each of 2014 and 2015 as opposed to 6 persons in 2013. human factor plays an important role in all injuries (neglect of safety requirements by operators; knowledgeable violation; personal carelessness; employee’s inability to assess risks; employees are sure that they will not be disciplined for violations by their supervisors). HEALtH AND SAFETY to improve occupational safety, we take precautions to safeguard our employees before conducting any kind of repair work, assess risks to employee safety and develop corrective actions, and conduct regular safety checks on work carried out by our repair teams. Details of additional health and safety measures taken in 2015 are available in Appendix 1 to the Annual Report The Company pays much attention to employees’ working conditions. A comprehensive programme has been developed and implemented to improve working conditions at the facilities of MES branches. Its aim was to provide the necessary sanitary and living services, thus creating healthy and comfortable working conditions that would mitigate risks to employee health. federal grid company conducted a special assessment of worKing conditions (sawc) to monitor worKing conditions at the worKplaces • In 2015, SAWC covered 8,965 workplaces in 34 PMES branches, 4 MES Branches and in the Executive office with the total staff of 11,087 employees • SAWC costs amounted to RUB11.87 million (80.6% were covered from the budgets of MES and PMES, and 19.4% were reimbursed from the Social Insurance Fund of the Russian Federation) • Based on SAWC findings, the number of workplaces with hazardous working conditions reduced by 1.8 times and amounted to 0.97% of all workplaces covered by SAWC in 2015 131 Monitoring of Employee health Since 2002, no cases of occupational diseases have been registered in Federal Grid Company. the following medical examinations are conducted in Federal Grid Company in order to monitor employee health: • Preventive and regular medical checks (screenings) conducted in accordance with order No. 302n issued by the Ministry of health Care of the Russian Federation, dated 12.04.2011, and with regard of order No. 390 issued by the Ministry of Energy of the Russian Federation, dated 31.08.2011 • Pre-shift and pre- and post-trip medical checks (screenings) conducted in accordance with order No 835n issued by the Ministry of health Care of the Russian Federation ▶ Classes of Working Conditions Before and After SAWC in 2015 8,879 4,837 2,013 81 884 5 142 1,089 Class 2 Class 3.1 Class 3.2 Class 3.3 Newly created workplaces Breakdown of classes of working conditions at workplaces to be assessed (before assessment) Breakdown of classes of working conditions at workplaces assessed (after assessment) • Psychiatric checks in accordance with Law No. 3185-1 of the Russian Federation, dated 02.07.1992, and Resolution No. 695 of the Government of the Russian Federation, dated 23.09.2002 Social ReSponSibilityHuman capital • Regular checks (at least once every five years) at the professional pathology prevention centres and other medical institutions that are authorised to conduct preventive and regular checks for professional suitability and relationship between a disease and profession Industrial Safety hazardous industrial facilities are operated by Federal Grid Company in compliance with the requirements set by Federal Law No. 116-FZ, dated 21.07.1997, “on Industrial Safety of hazardous Industrial Facilities” and other relevant rules and regulations. Federal Grid Company operates 270 hazardous industrial facilities (hIFs) of III and IV hazard classes. Given that legislative requirements to industrial safety management systems are established for I and II hazard classes only, safe operation of Federal Grid Company’s hazardous industrial facilities, prevention of accidents and post-accident recovery are carried out via industrial control. ▶ Fires at Federal Grid Company’s Facilities 12 1 1 2 3 3 2010 2011 2012 2013 2014 2015 In 2015, the Company implemented the following major industrial safety projects: • We identified, registered / removed from register and re-registered facilities, and assigned the hazard class in the State Register of Hazardous Industrial Facilities • Federal Grid Company, together with the Federal Service for Environmental, technological and Nuclear Supervision and Ministry of Emergency Situations, proposed amendments to Article 10 of Federal Law No. 116-FZ, dated 21.07.1997, 132 HEALtH AND SAFETY The number of fires caused by process disturbances at the Company’s facilities did not increase over the past five years because additional measures had been taken to prepare for the danger period. Besides, the Company implemented a corporate programme aimed at raising the fire safety level and improving the quality of fire safety at UNEG facilities in 2011–2017. Fire Safety Days are held regularly in all units of MES branches and in the Company’s subsidiaries. Based on their results, the Company draws up and implements measures to eliminate the identified irregularities and violations. A branch of MES Western Siberia won the 2015 annual inspection for the best fire protection system at the facilities. 133 “On Industrial Safety of Hazardous Industrial Facilities.” These amendments require operating organisations to enter into service contracts with the professional emergency response entities or teams with regard of the hazard class of hazardous industrial facilities, its category, and accident severity at the given facility • we drew up safety passports for hazardous industrial facilities and had them approved by the regional offices of the Ministry of Emergency Situations No accidents and incidents were registered at the Company’s hIFs in 2005–2015. We meet all industrial safety requirements in accordance with the procedure established by the legislation. Fire Safety In order to comply with the fire safety requirements, the Company operates its facilities in accordance with the federal fire safety laws, Russian fire prevention rules, and internal regulations (such as Directive of PJSC Rosseti No. 6r dated 15.01.15) that set corporate standards in this field. Three process disturbances (fires) occurred at the Company’s facilities in 2015. No fires due to violation of fire safety rules (including those identified by the supervisory authorities) occurred at Federal Grid Company in all these cases. Regular fire drills and trainings are held as part of the fire safety training programme for the Company employees, including trainings together with the firefighting units of the Ministry of Emergency Situations. Besides, in 2015 the Company held personnel evacuation trainings in the buildings of its Executive office and branches. It drew up post-training actions to eliminate irregularities and violations in the work of the fire protection systems in the buildings. Social ReSponSibilityHuman capital Environmental Safety ENVIRoNMENTAL SAFETY AND ENVIRoNMENTAL MANAGEMENt VALUE CREAtION RUB248 million were spent and invested by Federal Grid Company in environmental protection in 2015 For people in the regions where we operate 134 Environmental costs, RUB million 2015 target 2015 actual 155.2 248.3 2016 target 242.9 A key priority in the Company’s Long-Term Development Programme for 2015–2019 is to ensure a more effective load of the grid with regard of requirements set in the Development Strategy for the Russian Electric Grid Complex. environmentally effective technologies, strengthen environmental control at the industrial facilities, involve employees in environmental protection, and ensure environmental safety and rational use of natural and energy resources. the Company takes systemic efforts to ensure environmental safety in order to consistently reduce the environmental impact of its electric grid facilities. The aim of these efforts is to comply with the environmental law requirements, introduce the consistent implementation of environmental protection measures helps to minimise the Company’s environmental risks and maintain favourable environmental conditions in the regions where the Company has presence. leadership in environmental protection Federal Grid Company won the 2015 Russian national competition “Leader of Environmental Protection Activities in Russia.” It gained recognition for proactive activities in environmental protection, efficient environmental management that is instrumental for sustainable development of the national economy, boosting of people’s health and improvement of environmental safety in the country Environmental Policy Environmental Policy and Implementation Programme are the fundamental documents for planning and implementation of environmental protection actions, environmental education, monitoring, internal environmental audit and industrial environmental control in order to ensure environmental safety and rational use of natural resources at the Company’s facilities. The goal of Federal Grid Company’s Environmental Policy is to minimise the adverse impact on environment during electricity transmission and distribution. In order to achieve this goal, ENVIRONMENtAL IMPACt MANAGEMENt SYStEM in what area does federal grid company intend to improve its environmental management system in the near future? “the International Standards Organisation developed a new version of its international standard ISO 14001:2015 “Environmental Management Systems” and published it in 2015. The new standard changes the approach to the environmental management system and sets new requirements, including requirements to management of risks related to the environmental impact. Federal Grid Company as a company that has an established environmental management system the Company drew up an Environmental Policy Implementation Programme for 2015–2019. the programme was drawn up in accordance with a decision of the Board of Directors and approved by the Chairman of the Management Board. Besides having environmental and economic effects, implementation of this programme is aimed at raising the social relevance of the Company. Environmental Policy Implementation Programme sets the targets that further detail the environmental policy commitments. This is done in order to achieve a phased reduction of the adverse impact on environment with regard of the Company’s technical and financial capacity. nikolay Shvets Deputy Chairman of the Management Board of Federal Grid Company will face a three-year period of transition to the new version ISo 14001:2015. The key priorities in our plans for 2016–2018 will be to build a hierarchy in environmental management, involve employees in environmental protection actions, ensure environmental safety and rational use of natural and energy resources, achieve better understanding of our role and responsibility for the protection of environment in our operations.” 135 Improving Environmental Control and Reporting A Procedure for Internal Environmental Audit in MES and PMES Branches was approved in 2015 in order to optimise the procedures of environmental control and reporting, improve the quality of inspections and As part of co-operation with the world wildlife Fund for Nature (WWF Russia), the Company took part in the worldwide Earth hour by turning off power for one hour at 762 facilities on the last Saturday of March 2015 12.3 Mwh were saved during this action EnvironmEntal ProtEction natural capital Key Environmental Protection Areas target • Ensure environmental safety in compliance with the requirements set in the Russian laws on environmental protection • to comply with the requirements set in the Russian laws on environmental protection and minimise an adverse impact on the environment • Improve guidelines for, and technical regulation of, • To contribute to the refinement of guidelines and environmental protection technical regulation • Improve environmental protection management system • to ensure effective functioning of the environmental management system • Build Federal Grid Company’s reputation as an environmentally • An environmental component in Federal Grid oriented and socially responsible company Company’s image • Innovative development in environmental safety and • To reduce the adverse impact on the environment by environmental management implementing innovative solutions eliminate any possible environmental risks. The Rules establish a uniform approach to an internal audit of the environmental management system and industrial environmental control at the production facilities. In 2015, the Company inspected 372 facilities, or 39.8% of the total number of operation facilities. 136 Developing Environmental Safety Standards In 2015, the Company drafted standards “Environmental Safety of Electric Grid Facilities: Requirements to Maintenance and Repair” and “Environmental Safety of Electric Grid Facilities: Requirements to Design, Construction, Reconstruction and Liquidation.” protecting Biodiversity Federal Grid Company, world wildlife Fund for Nature (WWF Russia) and the Russian Bird Conservation Union monitored the effectiveness of actions implemented by a branch of MES East to prevent death of oriental storks on power lines. In 2015, the Company installed 10,739 bird protection and bird deterring devices at high voltage lines 500/220/110 kV in the branches of MES East, MES Siberia, MES Centre, MES South and MES North-West. The total costs of these devices amounted to RUB13.26 million. The efficiency of these actions is proven by the fact that only a few cases of bird deaths on the Company’s power lines were reported in the past three years. development of environmental management system • In 2015, the Company installed the environmental management system in four branches of MES Siberia, MES Ural, MES Volga and MES Western Siberia • Measures were implemented to include all branches in the Company-wide system of environmental protection management • Education was organised for employees of all branches to ensure their competence and awareness: 412 employees took a course in “ISo 14001:2004 Requirements,” and 56 employees took a course in “Internal Audit of the Environmental Management System” • The Company received a certificate of compliance with the requirements of the international standard ISo 14001:2004 for its environmental management system ENVIRONMENtAL IMPACt MANAGEMENt SYStEM Environmental Performance in 2015 Environmental activities at Federal Grid Company’s subsidiaries are carried out in accordance with Environmental Action Plans that are approved annually. Water consumption has been on the downside trend since 2012 due to reduced losses as a result of measures aimed at the timely maintenance and repair of the water supply systems in MES and PMES branches. Wastewater discharges have been decreasing every year as a result of these measures. The reduction of waste volumes in 2014–2015 was related to the reduced volume of repair and maintenance at industrial facilities of MES South, MES North-West and MES Western Siberia. mitigating adverse environmental impacts By using advanced engineering solutions 137 • In the reporting year, higher-suspension supports were installed for 220 kV high-voltage transmission lines Kaluga-Sputnik (MES Centre). the environmental effect includes the reduced volumes of de-forestation, lower costs of clearing electricity transmission line paths, prompt installation without employing heavy vehicles; compliance with the requirements to electric and magnetic fields, radio interferences and acoustic noises. • R&D focused on fire protection of transformers by using the water sprinkling technology. the Company developed an innovative system for extinguishing fires at oil transformers and installed it at SS 220 kV Tula (MES Centre). Its environmental effect includes a substantial reduction of water consumption (by 8 to 10 times), reduced fire extinguishing time, and prevention of possible oil spillage at the substation 10.4% ↓ water consumption in 2015 decreased by 9.3% ↓ wastewater discharge in 2015 decreased by 11.7% ↓ the volume of waste disposed in landfills decreased by The blueprint standards were sent for review to the structural units of Federal Company’s Executive office, JSC R&D Centre of FGC UES, Technical Supervision Centre, leading Russian R&D think tanks, design institutes and non-governmental environmental protection organisations. ▶ Water Consumption and Wastewater Discharge, thousand cubic meters 1,743 1,844 1,390 1,317 1,283 1,262 1,160 1,090 1,040 992 2011 2012 2013 2014 2015 Water consumption Wastewater discharge EnvironmEntal ProtEction natural capital ▶ Gross air pollutant emissions, tonnes ▶ Federal Grid Company’s Current environmental protection Costs, RuB million ENVIRONMENtAL IMPACt MANAGEMENt SYStEM The volume of waste disposed in landfills also decreased, which indicates the reduction of adverse environmental impacts. In 2015, the Company transferred 5,160 trichlorodiphenyl-containing condensers weighing 272.5 tonnes to licensed organisations for detoxification / deployment. The cost of this work (net of investment costs) amounted to RUB8,812.82 thousand (net of VAT). Gross air pollutant emission slightly increases every year owing to the extended inventory of sources of emissions and setting parameters for new stationery sources. In 2015, 113 new draft standards for maximum permissible emissions were developed for Federal Grid Company’s branches. 221 184 163 115 90 2011 2012 2013 2014 2015 138 The above-limit payments for negative environment impact increased slightly in 2015 due to the need to pay for wastewater disposal onto local terrain at a rate which is 25 times about the standard rate because there is no procedure for issuing permits for such disposals (MES East, MES Ural, MES South and MES North-West). Gross air pollutant emission slightly increases every year owing to the extended inventory of sources of emissions and setting parameters for new stationery sources. In 2015, 113 new draft standards for maximum permissible emissions were developed for Federal Grid Company’s branches. ▶ Federal Grid Company’s payments for Adverse environmental Impacts, RuB million 6.62 7.12 7.54 2.89 4.23 4.07 2.55 6.82 6.52 2.77 2.55 4.77 4.27 2.58 3.94 2011 2012 2013 2014 2015 Within limit values Above limit values 152.40 13.68 6.01 12.75 54.67 65.29 98.82 1.55 4.23 11.33 37.20 44.51 139 47.47 60.33 3.83 1.56 20.30 21.78 73.06 2.98 3.19 4.76 20.55 41.58 3.92 4.26 16.51 35.64 2011 2012 2013 2014 2015 For protection of land resources (including industrial and consumer waste treatment) For protection of water bodies For air protection For EMS implementation Other costs environmental protection: main tasKs for 2016 • to approve the Procedure for Managing trichlorodiphenyl-Containing Equipment and set uniform Company-wide requirements for all stages of using trichlorodiphenyl-containing equipment • To organise the transition of the Company’s environmental management system to the new version of ISo 14001:2015 • to approve corporate environmental safety standards for all stages of lifecycle of electric grid facilities • To confirm the consistency of the Company’s environmental management system with the requirements of ISo 14001:2004 (pass the supervisory audit successfully) • To implement measures toward bird safety of electric grid facilities and prevention of facility outages caused by birds’ activity (in co-operation with ornithologists) EnvironmEntal ProtEction natural capital 4 OPENNESS CORPORATE GOVERNANCE REPORT Corporate Governance Principles of Federal Grid Company Accountability The Board of Directors is accountable to all shareholders, and the Company executive bodies are accountable to the General Meeting of Shareholders and the Board of Directors Transparency Timely and accurate disclosure of all material information on the Company, and ensuring free access to the information for all stakeholders Responsibility Recognising the legal rights of all stakeholders for the purpose of the Company growth and financial stability Fairness Creating conditions for protecting shareholder rights and legitimate interests and treating all shareholders equally Professionalism and openness in governance provide a sound basis for the successful delivery of strategy, increasing the investment attractiveness and market capitalisation of our Company. GOVERNANCE SYStEM CORPORAtE GOVERNANCE StRUCtURE Effective Implementation of Corporate Governance Principles Corporate Governance Scheme Minority shareholders 19.28% of voting shares election opinions GeneRAl MeetInG oF SHAReHolDeRS Rosimuschestvo 0.59% of voting shares Shareholder Agreement* PJSC Russian grids 80.13% of voting shares election opinions External Independent Auditor 142 Audit Commission n o i t c e e l d n a s t r o p e r s n o i t a d n e m m o c e r election reports and recommendations Board Committees • Audit • HR and Remuneration • Strategy • Investment opinions o t g n i t u b i r t n o c e v i t c e f f e e h t k r o w t n e m t n o p p a i Corporate Secretary i s n o n p o i BOARD OF DIRECTORS approval of the Head f o s r e b m e m f o n o i t c e E l d r a o B t n e m e g a n a M e h t f o e r e h t i t h g s r e v o d n a s t r o p e r reports e h t f o n o i t c e e l f o n a m r i a h C d r a o B t n e m e g a n a M e h t i s n o n p o i candidate approval and signing of agreement ChAIRMAN OF Th E MANAGEMENT BOARD i s n o n p o i hEAD Internal Audit Department Internal Control and Risk Management Department Management Board appointment reports and recommendations * As at 31 December 2015, the Russian Federation represented by the Federal Agency of State Property Management (Rosimuschestvo) owned 0.59% of shares of Federal Grid Company. In this context, an agreement has been signed between the Company’s major shareholder PJSC ROSSETI and Rosimuschestvo regarding the managing and voting in Federal Grid Company. The above agreement regulates shareholder relationships with regard to the implementation of their rights with respect to Federal Grid Company for the purposes set out by the Decree of the RF President No.1567 dated 22 November 2012. The Company’s interaction with the State as a shareholder has a specific procedural character determined by the regulatory acts of the President and the Government of the Russian Federation. In particular, the State representatives in the Company’s governing bodies are committed to vote on certain matters as instructed by the Government. i s n o n p o i Striving to meet the highest standards of corporate governance, our Company is governed by the principles set out in the Federal Grid’s Corporate Governance Code, as well as the Russian Corporate Governance Code, gradually integrates new requirements and recommendations into its practices and constantly improves mechanisms for the implementation of the above principles. Further details on the Company’s compliance with the principles and recommendations of the Russian Corporate Governance Code, as well as on measures to improve the Federal Grid’s corporate governance practices are available in section GOVERNANCE AND DEVELOPMENT/CORPORATE GOVERNANCE of the Annual Report Meeting of Shareholders of Federal Grid Company, a new version of which was approved by the resolution of the Annual General Meeting on 26 June 2015. In accordance with the recommendations of the Russian Corporate Governance Code, the above Regulations have considerably extended the list of additional materials that Federal Grid is committed to provide to its shareholders when preparing to a general meeting to enable them to make well-founded decisions. Such materials include, among other things, positions of the Board of Directors regarding all items on the meeting agenda, extended information about the candidates to the governing and control bodies, tables comparing amendments to be made to the Company’s Articles of Association and internal documents with the existing versions. General Meeting of Shareholders The General Meeting of Shareholders (GMS) is the supreme governing body of Federal Grid Company whose competence is set out by the Federal Law “on Joint Stock Companies” and the Company’s Articles of Association and includes, among other things, such serious matters as approval of annual reports and annual financial statements, election of an external auditor, election of members of the Board of Directors and the Audit Commission and termination of their powers, payment of dividends. All materials are disclosed on the Company’s website, in English and Russian languages, not later than 30 days prior to the date of the general meeting of shareholders that allows the latter to have full and timely access to the above materials. The Federal Grid’s Regulations on the General Meeting of Shareholders provide clear procedures for holding the GMS, including an opportunity for shareholders to ask questions on the agenda items. Shareholders may put questions directly to members of the governing and control bodies, the Chief Accountant and the Company’s Auditors, who are in all cases invited to attend the meeting. All matters related to the convening, preparing and holding a general meeting of shareholders of the Company are governed by the Regulations on the Procedure for Preparing and Holding the General Votes are counted and voting results are summed up by the Counting commission whose functions are performed by the independent Registrar. The voting results are announced at the meeting. annual general meeting of shareholders the 2015 Annual General Meeting of Shareholders of Federal Grid Company was held on 26 June 2015. In accordance with the AGM agenda, shareholders resolved on the following: • To approve the Company’s annual report and annual financial statements, including the Profit and Loss Account for 2014 • To pay dividends on common shares for 2014 • To pay remuneration to the members of the Board of Directors • To elect members of the Board of Directors and the Audit Commission • to approve the external auditor for 2015 • To approve a new version of the Federal Grid’s Articles of Association • to approve new versions of the Regulations the Procedure for Preparing and Holding the General Meeting of Shareholders, the Regulations on the Board of Directors, the Regulations on the Management Board, the Regulations on the Audit Commission and the Regulations on Payment of Remuneration to Members of the Audit Commission, as well as the Regulations on Payment of Remuneration to Members of the Board of Directors Minutes of the 2015 AGM are available on our website www.fsk-ees.ru in section Shareholders and Investors / Information for Shareholders / Shareholders Meeting 143 GOVERNANCE SYStEM Strategic Leadership Role of the Board of Directors The Board of Directors is responsible for strategic management of the Company and plays a key role in the Federal Grid’s corporate governance system. • Business planning • Procurement • Approval of material transactions The main functions of the Board of Directors are as follows: • Monitoring of executive performance against key performance indicators • To shape the Company’s strategy and monitor its implementation • Managing subsidiaries and associates on key issues and areas of focus • to ensure the exercise and protection of rights and legal interests of Federal Grid’s shareholders; to protect the Company’s assets • Internal control, risk management and internal audit Board Composition 144 • To ensure establishing and maintaining sound internal control and risk management system • To monitor activities of the executive bodies, to undertake regular performance evaluation of senior managers and to establish and maintain effective incentive schemes and development programmes for them • to ensure timely disclosure of full and fair information on the Company’s operation • To establish a system for managing subsidiaries and associates • To monitor the Company’s corporate governance practice The Board of Directors’ full responsibilities are set out in the Federal Grid’s Articles of Association and include issues specified by the Federal Law “on Joint Stock Companies”, as well as a wide range of additional issues, including in the following areas: • Finance and investment In accordance with Clause 16.1 of Article 16 of the Federal Grid’s Articles of Association, the Board shall include 11 members. This number of Board members best fits scope of the Company’s business and ensures compliance with the following principles when composing the Board: • Ensuring a balance within the Board, including with respect to skills, experience, knowledge and business qualities of its members • Election of independent directors to the Board in the amount not less than one-fifth of the membership of the Board of Directors, but at least three • Members of the Management Board may not constitute more than 25% of the Board composition The company also strives to ensure that the Board of Directors includes representatives of minority shareholders to maintain the balance within the Board in the best interests of all existing shareholders of the Company. BoARD oF DIRECToRS Membership of the Board of Directors1 members elected by the General Meeting of Shareholders on 26 June 2015 (positions are as of 31 December 2015) VYACHESLAV KRAVCHENKO Non-executive Director Chairman of the Board of Directors2 Chairman of the Investment Committee3 MAXIM BYSTRoV Non-executive Director Deputy Chairman of the Board of Directors2 Chairman of the Strategy Committee3 145 Board member since 2012 Born in 1967 In 1995, graduated from Lomonosov Moscow State University with a degree in Jurisprudence Experience: 2006–2008 – Director of the Department of Structural and Investment Policy in Industry and Energy of the Ministry of Industry of the Russian Federation 2008–2010 – General Director of RN Energo LLC 2010–2012 – General Director of JSC United Energy Service Company 2012–2013 – 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 since 2013 – Deputy Minister of Energy of the Russian Federation External appointments: Member of the Board of Directors of JSC System operator of Unified Energy System, PJSC Moscow United Electric Grid Company, PJSC RusHydro, PJSC IDGC of Siberia, state representative in the Supervisory Board of Non-Profit Partnership Market Council Board member since 2014 Born in 1964 In 1986, graduated from Moscow Civil Engineering Institute named after V.V.Kuibyshev with a degree in Hydraulic Engineering of River Installations of hydroelectric Power Plants; in 1998 – from the Russian Academy for Foreign trade with a degree in world Economy Experience: 2009–2010 – Deputy Director of the Department of Industry and Infrastructure of the RF Government 2010–2013 – Deputy Plenipotentiary Representative of the Russian President in North Caucasian Federal District since 2013 – Chairman of the Management Board of JSC trade System Administrator of the wholesale Energy Market since 2013 – acting Chairman of the Management Board, since May 2014 – Chairman of the Management Board of Non-profit Partnership Market Council External appointments: Chairman of the Board of Directors of Management Company of Mineralnye Vody Airport LLC, member of the Board of Directors of JSC Northern Caucasus Resorts, PJSC RusHydro, JSC System Operator of Unified Energy System 1 Independence criteria are defined in accordance with recommendations of the Russian Corporate Governance Code and the Listing Rules of the Moscow Exchange. 1 Here and elsewhere, personal information about members of the Federal Grid’s governing and control bodies is disclosed with their consent. 2 Decision of the Board of Directors dated 21 July 2015 (Minutes No. 279 dated 24 July 2015). 3 Decision of the Board of Directors dated 20 August 2015 (Minutes No. 280 dated 24 August 2015). GOVERNANCE SYStEM BoARD oF DIRECToRS OLEG BUDARGIN Non-executive Director PAVEL GRACHEV Independent Director Member of the Audit Committee and HR and Remuneration Committee1 ANDREY DEMIN Non-executive Director Member of the Strategy Committee1 BoRIS KOVALCHUK Non-executive Director Board member since 2010 Born in 1960 In 1982, graduated with from Norilsk Industrial Institute with a honours degree in Industrial and Civil Engineering; PhD in Economics First elected to the Board in 2013, reelected in 2015 Born in 1973 Graduated from St Petersburg State University and University of Trieste (Italy) with a Degree in Jurisprudence 146 Experience: 2007–2009 – Assistant to the Plenipotentiary Representative of the Russian President in Siberian Federal District 2009–2013 – Chairman of the Federal Grid Company’s Management Board since 2013 – General Director of PJSC RoSSETI since 2012 – member of the Presidential Commission for Strategic Development of Fuel and Energy Sector and Environmental Security External appointments: Chairman of the Board of Directors of PJSC Moscow United Electric Grid Company and PJSC Federal test Centre, member of the Board of Directors of PJSC RoSSETI, Chairman of the Supervisory Board of Non-Profit Partnership Association of Solar Energy Enterprises, JSC Russian Regional Development Bank, and the North-Caucasus Federal University, member of the Board of Trustees and the Academic Council of the National Research University «Moscow Power Engineering Institute» , member of the Russian Committee, Vice-Chairman, Senior Advisor for regional development of the world Energy Council, Vice-Chairman for Ecology of the Interregional Public organisation “Association of Polar Explorers”, member of the Board of Trustees of Primorsk opera and Ballet Theatre and the Mariinsky Theatre Experience: 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. 1998–2006 – head of the Russian office of the law firm Pavia e Ansaldo (Italy) 2006–2011 – Legal Department head, Managing Director of the investment company Nafta Moscow 2011– 2013 – head of the representative office of Alpina Capital, LL 01.2013–09.2013 – General Director of JSC Far East and Baikal Region Development Fund Since 2014 – Senior Executive Director of Polyus Gold International, President of JSC Polyus, General Director of JSC Polyus Gold External appointments: Member of the Board of Directors of Polyus Gold International and PJSC Polyus Gold Board member since 2014 Born in 1974 In 1996, graduated from Zaporozhye State University with a degree in Applied Mathematics; in 1999, graduated from Zaporozhian Institute of Economics and Information technologies with a degree in Finance Experience: 2007–2010 – Deputy Chairman of the Management Board, member of the Management Board of Federal Grid Company 2010–2012 – Adviser to the General Director on strategic development of Mezhregionsbyt LLC 2012–2013 – Advisor to the Chairman of the Management Board of Federal Grid Company Since 2013 – member of the Management Board of PJSC Rosseti 2013–2015 – First Deputy General Director for Economic Affairs and Finance of PJSC Rosseti External appointments: Member of the Board of Directors of PJSC Moscow United Electric Grid Company Board member since 2012 Born in 1977 In 1999, graduated from St Petersburg University with a degree in Jurisprudence; in 2010, graduated from the Institute of Advanced training for Executives and Experts of Fuel and Energy Sector, and the non-profit partnership Corporate Educational and Research Centre of UES Experience: 2006–2009 – head of the Department of National Priority Projects of the Russian Government, Assistant to the First Deputy Prime Minister of the Russian Federation since 2009 – Deputy Director General for Development of State Nuclear Corporation RoSAToM 2009–2010 – Acting Chairman of the Management Board of JSC INTER RAo since 2010 – Chairman of the Management Board of PJSC INtER RAO External appointments: Chairman of the Board of Directors of Inter RAo- WorleyParsons, LLC, CJSC Kambaratinskaya hydro Power Plant-1, member of the Board of Directors of PJSC INTER RAo, RIG RESEARCh PTE Ltd, member of the Supervisory Board of JSC Russian Regional Development Bank, member of the Management Board of the Russian Union of Manufacturers and Entrepreneurs 147 1 Decision of the Board of Directors dated 21 July 2015 (Minutes No. 279 dated 24 July 2015). 1 Decision of the Board of Directors dated 20 August 2015 (Minutes No. 280 dated 24 August 2015). GOVERNANCE SYStEM BoARD oF DIRECToRS MIKHAIL KOLESNIKOV Independent Director (at the time of election) Member of the Audit Committee and HR and Remuneration Committee1 SERGEY MIRONOSEtSKY Independent Director Chairman of the Audit Committee and HR and Remuneration Committee1, member of the Investment Committee2 ANDREY MUROV Executive Director SERGEY SHMAtKO Non-executive Director 148 Board member since 2015 Born in 1960 In 1982, graduated from Novosibirsk Electrotechnical Institute with an honours degree in Electrical Engineering, in 1993 graduated from the All-Union Foreign trade Academy with a degree in International Economic Relations, and from the MBA higher School of Paris Chamber of Commerce and Industry with a degree in Business Management Experience: Since 2009 – General Director of oldam LLc Since 2009 – Vice-President for Fuel and Energy Complex of the All-Russian Public organisation of SME OPORA ROSSII External appointments: Member of the Board of Directors of JSC Yantarenergo Board member since 2014 Born in 1965 In 1989, graduated from Novosibirsk State University with a degree in Economic Cybernetics Experience: 2005–2011 – Deputy General Director, member of the Management Board of JSC Siberian Coal Energy Company (SUEK) 2009–2013 – General Director, member of the Management Board of Management Company Siberian Generating Company, LLC (since 07.09.2011 – Siberian Generating Company, LLC) External appointments: Member of the Board of Directors of Siberian Generation Company, LLC Board member since 2013 Born in 1970 In 1993, graduated from St Petersburg State University with a degree in Jurisprudence; in 1998, took a special retraining course in Financial Management at the Inter-disciplinary Institute of Advanced Training and Retraining for Executives. In 2009, graduated from the State University of Civil Aviation with a degree in Freight Regulation and Air Transport Management. PhD in Economics Experience: 2007–2012 – General Director of JSC Pulkovo Airport 2012–2013 – 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 RoSSETI) since 2013 – Chairman of the Management Board of Federal Grid Company External appointments: Member of the Board of Directors of PJSC RoSSETI, PJSC Inter RAo, JSC System operator of Unified Energy System, Chairman of Non-Profit Partnership “Russian National Committee of CIGRE” Board member since 2008 Born in 1966 In 1992, graduated from the Faculty of Political Economy of the Ural State University; in 1992, studied Economy at Marburg University in the FRG. In 2004, completed Advanced Academic Courses in Defence and Security of the Russian Federation of the Military Academy of the General Staff of Armed Forces of the Russian Federation. PhD in Technical Sciences Experience: from 06.2008 to 05.2012 – Minister of Energy of the Russian Federation since 2012 – member of the Presidential Commission for Strategic Development of the Fuel and Energy Sector and Environmental Security of the Russian Federation since 2013 – Special Representative of the President of the Russian Federation on International Cooperation in the Electric Power Industry of the Executive office of the RF President External appointments: Member of the Board of Directors of PJSC Rosseti, Memberof the Supervisory Board of Non-Profit Partnership Scientific and Technological Council of Unified Energy System 149 1 Decision of the Board of Directors dated 21 July 2015 (Minutes No. 279 dated 24 July 2015). 2 Decision of the Board of Directors dated 20 August 2015 (Minutes No. 280 dated 24 August 2015). GOVERNANCE SYStEM BoARD oF DIRECToRS Board member since 2013 Born in 1951 In 1973, graduated from Novocherkassk Polytechnic Institute. PhD in Technical Sciences In 2007, passed a postgraduate training programme in the North- Caucasus State technical Universty Experience: From 2009 to 2015 – First Deputy of General Director of JSC System operator of Unified Energy System since 2015 – Chairman of the Management Board – General Director of PJSC RusHydro External appointments: Memberof the Supervisory Board of Non-Profit Partnership Scientific and Technological Council of Unified Energy System NIKOLAY SHULGINOV Non-executive Director Member of the Strategy Committee1 150 As at 31 December 2015, no member of the Federal Grid’s Board of Directors hold ordinary shares of Federal Grid Company, except Oleg Budargin whose share in the Company’s ordinary stock was 0.0006403563%. In 2015, there were no dealings in the Company’s shares by the Board members. ▶ Membership of the Board of Directors acting from 27 June 2014 to 26 June 2015 (positions are as of the election date) 1. oleg Budargin Board Chairman, Non-executive Director General Director of JSC RoSSETI 2. Vyacheslav Kravchenko Deputy Chairman, Deputy Minister of Energy of the Russian Federation 3. Maxim Bystrov Non-executive Director Non-executive Director 4. Andrey Demin Non-executive Director Chairman of the Management Board of Non-profit Partnership Market Council First Deputy General Director for Economic Affairs and Finance, member of the Management Board of JSC RoSSETI 5. Boris Kovalchuk Non-executive Director Chairman of the Management Board of JSC INTER RAo 6. Sergey Mironosetsky Non-executive Director Member of the Board of Directors of Siberian Generating Company, LLC 7. Andrey Murov Executive Director Chairman of the Management Board of Federal Grid Company 8. Georgy Nosadze Non-executive Director 9. Denis Fedorov Non-executive Director 10. Sergey Shmatko Non-executive Director Assistant of the Expert Directorate of the Executive office of the RF President General Director of JSC Centerenergoholding General Director of GazpromEnergoholding LLC, Special Representative of the President of the Russian Federation on International Cooperation in the Electric Power Industry of the Executive office of the RF President 11. Nikolay Shulginov Non-executive Director First Deputy Chairman of the Management Board of JSC SO UES 1 Decision of the Board of Directors dated 20 August 2015 (Minutes No. 280 dated 24 August 2015). ▶ Competencies and industry-specific experience of Federal Grid Board Members Board member V. Kravchenko M. Bystrov o. Budargin P. Grachev A. Demin B. Kovalchuk M. Kolesnikov S. Mironosetsky A. Murov S. Shmatko N. Shulginov tenure (number of years) Years within the energy industry Key competencies Strategy Finance and Audit Energy Industry Legal matters Corporate Governance 3 1 5 2 2 3 1 1,5 1,5 2 2 22 13 6 2 17 9 1 16 3 9 40 √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ Board of Directors’ Performance Report on the Company’s Business Priorities In the reporting year, the Board of Directors of Federal Grid Company regularly considered matters related to the maintenance and development of UNEG infrastructure, improvement of the Company management and its long-term development. To improve the Federal Grid’s corporate governance system, the Board of Directors approved (Minutes No. 255 dated 16 March 2015) an Action Plan (‘road map’) on implementing key provisions of the new Russian Corporate Governance Code. All commitments made within the ‘road map’ were fully met. For further details on the results of the ‘road map’ implementation, please, see section GOVERNANCE AND DEVELOPMENT / CORPORATE GOVERNANCE of the Annual Report In 2015, special attention was given by the Board to issues related to the Company’s joining the Anti-Corruption Charter of the Russian Business the result of which was the approval of new version of the Federal Grid’s Anti-corruption policy. Within the Board’s role and responsibilities, drafts of the Federal Grid’s investment programme for 2016–2020 were considered, as well as its adjustments for 2015–2019. to reduce uncertainty with respect to the achievement of the Company’s objectives and to ensure an independent review of the effectiveness of the internal control system and corporate governance practice, the Regulations on Risk Management System and Regulations on Internal Audit were approved in 2015. 151 GOVERNANCE SYStEM BoARD oF DIRECToRS role of the Board in implementing the company’s strategy ▶ Structure of issues considered by the Board of Directors in 2015 When implementing its key responsibilities – to develop the Company’s strategy and monitor its implementation – the Board considered in 2015 a number of issues related to the improvement of the Company management’s efficiency, and maintaining its financial stability, including: • the results of the comparative analysis of key performance indicators of the UNEG management organisation with indicators of major foreign electric grid companies • Cost estimation of construction projects of the Federal Grid’s investment programme for 2015–2019 • Business analysis of Federal Grid Company and high priority measures to ensure its financial stability in 2015 In accordance with the directives of the RF Government (No. 2303p-P13 dated 16 April 2015 and No. 2007p-P13 dated 16 April 2015) , the Board considered and instructed the Management Board on the following issues: • on reducing operating expenses (costs) by at least 2–3% • on submitting reports on implementing long-term development programmes and achieving the KPI targets The Board of Directors also considered a Report on implementing the Federal Grid’s Long-Term Development Programme, including the results of the independent audit of its implementation (Minutes No. 295 dated 01 December 2015). 152 For more details on the Company performance within its business priorities see section PERFORMANCE of the annual report 59 meetings were held by the Board of Directors in 2015, of which 10 in the form of joint presence 751 Issues were considered 63 Instructions were given to the man- agement 49 Business Planning 21% 1% 3% 8% 7% 2 8 18 15 36 Corporate Social Responsibility and Sustainable Development Investment Policy Updating of internal documents Implementation of the "road map" for improving the corporate governance Defining position of the Federal Grid’s representatives in the governing bodies of subsidiaries and affiliates 16% 102 Other matters reserved for the Board 44% ▶ Attendance of Board members at Board meetings and Committee meetings during 2015 Board of Directors Investment Committee Strategy Committee HR and Remuneration Committee Audit Committee 153 Board members during the year 2015 o. Budargin M. Bystrov A. Demin B. Kovalchuk V. Kravchenko. S. Mironosetsky A. Murov S. Shmatko N. Shulginov 43*/59 57/59 73% 97% 59/59 100% 45/59 55/59 52/59 51*/59 51/59 56/59 76% 94% 88% 86% 86% 95% Board members until 26 June 2015 G. Nozadze 30/31 98% D. Fedorov 29/31 96% Board members since 26 June 2015 P. Grachev 28/28 100% M. Kolesnikov 28/28 100% – – – – 61% 80% – – 86% – 86% – – – 100% 67% – – – – – 78% – – – – – – – – – 100% – – – – – 100% 100% – – 80% – 100% – – – – 100% 100% 100% * Meetings were not taken into account, where only related-party transactions were considered, as the Board member is a related party and does not participate in voting. GOVERNANCE SYStEM BoARD oF DIRECToRS new Board memBer induction policy Directors’ Liability Insurance the Company is committed to provide all opportunities for Board members to receive all information they need to perform their duties, especially for newly-elected Board members. For this purpose, presentations with the Management Board are held, among other things. In the reporting year, such a meeting was held on 29 September 2015. During the meeting, the Board members were provided with information on the Federal Grid’s strategy, corporate governance system, internal control and risk management system, the division of responsibilities between the executive bodies and other material information about the Company. In 2015, the Company maintained Directors’ liability insurance based on the AGM resolution of 27 June 2014. The Company concluded the D&o liability insurance contract aimed at reducing risk of adverse effect from actions/decisions made by the Company directors and officers. the insurer was determined through open competitive procurement, and terms and conditions of the insurance contract, including the volume of insurance cover, was in line with the best practices in this area. 154 Dealing with Conflicts of Interest of Board Members the Company has developed and implements a comprehensive system for dealing with conflicts of interest of Board members that provides reasonable assurance that any conflict will be resolved at an early stage and the Federal Grid’s interests will not be infringed. The Company’s internal documents define a ‘conflict of interest’ of a Board member and set forth his/her obligations: • To declare his/her affiliation • To report a conflict of interest or likelihood of conflict and its cause, including interests in transactions • to refrain from actions that will or may lead to a conflict between his/her interests and the Company’s interests • To refrain from voting on matters in which he/she has a conflict of interest • To report on his/her holding of the Company securities and transactions therewith Board Performance Evaluation In accordance with the ‘road map’ on implementing key provisions of the Russian Corporate Governance Code, as well as amendments made into the Company’s internal documents in 2015, Federal Grid has planned an annual evaluation of the Board performance with the assistance of independent consultants. At the beginning of 2016, an independent organisation JSC VTB Registrar, engaged through competitive procurement procedures, conducted the Board performance evaluation for 2015. It included evaluation of the Board performance and that of its committees and individual directors. The evaluation was conducted by questioning members of the Board and its committees, members of the Federal Grid’s Management Board, as well as interviewing some Board members, Committee members and the Corporate Secretary. In addition, experts performed a review of the internal and administrative documents of Federal Grid Company that regulate relevant issues. Experts developed recommendations on further improving work of the Board of Directors, including identification of the Board and committee priorities for the year, holding an offsite meeting of the Board (within the facilities of Federal Grid Group), as well as other recommendations. 4.7 scores out of 5 5 scores out of 5 quantitative evaluation of the Board as a governing body Quantitative evaluation of the Board Chairman 87% Board meeting attendance coefficient 86% in-person meeting attendance coefficient According to the matters reserved for the HR and Remuneration Committee, results of the evaluation are submitted for consideration to the Board of Directors with the preliminary consideration by the Committee. Results of the evaluation for 2015 were considered at the Board meeting on 20 April 2016 (Minutes No. 26 dated 20 April 2016). Board Committees In order to improve performance of the Federal Grid’s Board of Directors and to provide in-depth consideration of matters within its competence, special-purpose advisory bodies within the Board of Directors – Board Committees have been established and are working actively. the key role of each Committee is to provide preliminary consideration of the most important matters which are reserved for the Board, and to develop recommendations, which the Board follows when making decisions on relevant matters. when expert advice is necessary on issues requiring specialised knowledge, the Committees are entitled to involve outside experts within the limits of Committee budgets approved by the Board. Federal Grid’s Board of Directors has four permanent committees: for Audit, hR and Remuneration, Strategy, and Investment. The work of each Committee is regulated by the corresponding Regulations approved by the Board of Directors that include, among other things, the procedure for creation, composition, working arrangements, rights and obligations of Committee members. In 2015, the Board of Directors approved new versions of the Regulations for each Committee updating them in accordance with the recommendations of the Russian Corporate Governance Code. 155 GOVERNANCE SYStEM BoARD oF DIRECToRS Audit Committee Report Role and Responsibilities The role of the Audit Committee is to assist the Board of Directors in providing oversight of the Company’s financial and business operations. The Committee: • Monitors the completeness, accuracy, and reliability of the Company’s accounting (financial) statements • Monitors the robustness and effectiveness of the risk management and internal control system and the corporate governance system, including the review of their effectiveness and drafting proposals on their improvement • Ensures the independence and objectivity of the Company’s internal audit function • Reviews the external auditor’s independence, objectivity and absence of conflict of interest, evaluates candidates for the Company’s external auditors and makes recommendations to the Board of Directors regarding the appointment of external auditors and their fees, reviews audit quality and quality of the auditor’s opinion • Reviews the efficiency of a system of reporting on potential fraud and other irregularities on the part of any of the Company’s employees and third parties, as well as other violations in the Company The Committee’s activities are governed by the Regulations on Audit Committee of the Board of Directors of Federal Grid Company, a revised version of which was approved by the Board of Directors on 16 November 2015 (Minutes No. 291 dated 19 November 2015). Activities in 2015 The Committee held 10 meetings (8 in absentia and 2 in person). In accordance with the work plan approved (Minutes No. 35 dated 08 April 2015), the Committee considered, among others, the following issues: Subject Matters considered and decisions (recommendations) made Accounting (financial) statements • Review of the Federal Grid’s RAS financial statements for 2014 and recommendations to the Board of Directors with respect to the preliminary approval thereof (Minutes No. 37 dated 15 May 2015) • Review of results of the external auditor’s analysis of the Company’s accounting policies (Minutes No.37 dated 15 May 2015) • Recommendations to the Board of Directors with respect to the preliminary approval of the Company’s Annual Report 2014 (Minutes No. 37 dated 15 May 2015) • Review of the Federal Grid’s IFRS financial statements for 2014 and the auditor’s report thereon (Minutes No. 38 dated 03 June 2015) Risk Management, Internal Control and Corporate Governance • Regular review of reports of the Internal Control and Risk Management Department (Minutes No. 35 dated 08 April 2015 and No. 38 dated 03 June 2015) 156 ▶ Membership Elected by the Board of Directors on 27 August 2014 (Minutes No. 226 dated 29 August 2014) Elected by the Board of Directors on 21 July 2015 (Minutes No. 279 dated 24 July 2015) External Audit 1. Sergey Mironosetsky, Chairman, Non-executive Director* 2. Denis Fedorov, Non-executive Director 3. Boris Kovalchuk, Non-executive Director 1. Sergey Mironosetsky, Chairman, Independent Director * 2. Pavel Grachev, Independent Director 3. Mikhael Kolesnikov, Non-executive director* * Has expertise in preparing, analysing, evaluating, and auditing accounting (financial) statements. • Review of the Report on key risks for 2014 and the Auditor’s Report on the Federal Grid’s Internal Control System Effectiveness for 2014 and recommendations to the Board of Directors with respect to the approval thereof (Minutes No. 35 dated 08 April 2015) • Review of the Regulations on the Federal Grid’s Risk Management System and the Report on key operational risks for 1h 2015 (Minutes No. 42 dated 20 october 2015) • Recommendations to the Board of Directors and the General Meeting of Shareholders with respect to candidates for RAS and IFRS auditor for 2015 (Minutes No. 37 dated 15 May 2015) • Assessment of the external auditor’s performance (Minutes No. 37 dated 15 May 2015) • Recommendations to the Board of Directors regarding the external auditor’s fee (Minutes No. 39 dated 25 June 2015) 157 Internal Audit • Approval of the internal audit work plan for 2015 (Minutes No. 35 dated 08 April 2015) • Review of the Regulations on Internal Audit of Federal Grid Company and recommendations to the Board with respect to the approval thereof (Minutes No. 40 dated 21 September 2015) • Regular review of reports of the Internal Audit Department (Minutes No. 40 dated 21 September 2015 and No. 43 dated 02 December 2015) • Approval of a Programme for assessing and improving quality of the internal audit function (Minutes No. 40 dated 21 September 2015) • Approval of the Federal Grid’s Internal Audit Guidelines (Minutes No. 43 dated 02 December 2015) • Recommendations to the Board of Directors with respect to the approval of the 2016 work plan and budget for the Internal Audit Department (Minutes No. 43 dated 01 December 2015 and No. 44 dated 14 December 2015) • Review of a Standard for assessing the effectiveness of the Federal Grid’s internal control and risk management system (Minutes No. 44 dated 14 December 2015) • Review of the report on orginising a system for monitoring and control of financial stability of Federal Grid’s counterparties followed by appropriate instructions to the Company’s management (Minutes No. 43 dated 02 December 2015) • Recommendations to the Board of Directors with respect to the approval of the Business Plan Progress Reports for 2014 and 1Q 2015 (Minutes No. 36 dated 16 April 2015 and No. 38 dated 03 June 2015) Dealing with fraud and other irregularities on the part of the Federal Grid employees and third parties Other matters GOVERNANCE SYStEM BoARD oF DIRECToRS hR and Remuneration Committee Report Role and Responsibilities • Approving terms and conditions of agreements concluded with the Chairman and members of the Management Board, determining their remuneration and compensation the role of the HR and Remuneration Committee is to assist the Board of Directors in establishing efficient and transparent remuneration practices and developing hR and succession policies. • Appointing a Corporate Secretary of Federal Grid, determining his/her additional remuneration, preliminary evaluation of his/her performance for the year The key responsibilities of the hR and Remuneration Committee include preliminary consideration, review and making recommendations to the Federal Grid’s Board of Director on the following matters: • Annual evaluation of the Board performance and that of its committees and individual directors • Approving an organisational structure of the Company’s Executive office and candidates for senior executive positions • Reviewing the Company’s remuneration policies for the Board of Directors and executive bodies, including the approval of KPI target values The Committee’s activities are governed by the Regulations on HR and Remuneration Committee of the Board of Directors of Federal Grid Company, a revised version of which was approved by the Board of Directors on 30 September 2015 (Minutes No. 285 dated 02 october 2015). 158 ▶ Membership Elected by the Board of Directors on 27 August 2014 (Minutes No. 226 dated 29 August 2014) Elected by the Board of Directors on 21 July 2015 (Minutes No. 279 dated 24 July 2015) 1. Sergey Mironosetsky, Chairman, Non-executive Director 1. Sergey Mironosetsky, Chairman, Independent Director 2. Maxim Bystrov, Non-executive Director 2. Pavel Grachev, Independent Director 3. Denis Fedorov, Non-executive Director 3. Mikhael Kolesnikov, Non-executive Director Activities in 2015 The Committee held 4 meeting (3 in absentia and 1 in person), and considered, among others, the following matters: • Review of the organisational structure of the Federal Grid’s Executive office and recommendations to the Board of Directors with respect to its approval (Minutes No. 22 dated 21 September 2015) • Review of KPIs for senior management progress reports for 2Q and 3Q 2015 and recommendations to the Board of Directors with respect to the approval thereof (Minutes No. 23 dated 16 November 2015 and No. 24 dated 30 November 2015 ) • Recommendations to the Board of Directors with respect to the approval of the Methodology for Calculation and Evaluation of Key Performance Indicators for Federal Grid’s Senior Management (Minutes No. 24 dated 30 November 2015) • Recommendations to the Board of Directors with respect to the inclusion of target values for oPEX Reduction Indicator into the list of key performance indicators for the Company’s management that must be considered when making compensation decisions and personnel decisions, as well as of aligning the remuneration payable to the Company’s management to the achievement of ‘oPEX Reduction’ Indicator targets (Minutes No. 25dated 18 December 2015) Strategy Committee Report Role and Responsibilities the role of the Strategy Committee is to assist the Board of Directors in improving the Company’s performance efficiency in the long term. The Strategy Committee is responsible for preliminary consideration, review and making recommendations to the Federal Grid’s Board of Director on the following matters: • the Company long-term performance evaluation • Approving the Federal Grid’s long-term development programme, amendments thereto and reviewing its progress reports • Setting out strategic objectives, monitoring the delivery of the Company’s strategy, adjusting the exiting development strategy • Determining the Company’s business priorities • Drafting recommendations on the Company’s dividend policy • Approving the Company’s business plan (adjusted business plan) The Committee’s activities are governed by the Regulations on Strategy Committee of the Board of Directors of Federal Grid Company, a revised version of which was approved by the Board of Directors on 20 August 2015 (Minutes No. 280 dated 24 August 2015). ▶ Membership Elected by the Board of Directors on 27 August 2014 (Minutes No. 226 dated 29 August 2014) Elected by the Board of Directors on 20 August 2015 (Minutes No. 280 dated 24 August 2015) 159 1. Andrey Demin, Chairman, Non-Executive Director 1. Maxim Bystrov, Chairman, Non-executive Director 2. Georgy Nozadze, Non-Executive Director 2. Andrey Demin, Non-executive Director 3. Nikolay Shulginov, Non-Executive Director 3. Nikolay Shulginov, Non-executive Director 4. Stanislav Ananiev, First Deputy Chairman of the 4. Alexander Borisov, General Director of SIP-energo, LLC Management Board of JSC ATS 5. Sergey Zhuravlev, Vice-President for government 5. oleg Isaev, General Director of JSC IDGC of Centre relations of JSC Polus 6. Andrey Kazachenkov, First Deputy Chairman of the 6. Evgeny Miroshnichnko, Director of Strategic Management Board of JSC FGC UES 7. Sergey Lebedev, Director of Strategic Development Department of JSC RoSSETI 8. Valentin Mezhevitch, Deputy General Director for Strategic Communications of JSC ROSSEtI 9. Evgeny Miroshnichnko, Director of Strategic Development of the Strategy and Investment Block of JSC INtER RAO UES 10. Alexey Molskiy, Deputy Chairman of the Management Board of JSC FGC UES 11. Evgueny olkhovitch, Deputy Director of the Department of State Regulation of tariffs, Infrastructure Reforms and Energy Efficiency of the RF Ministry of Economic Development and Trade 12. Alexander Rogov, head of the Energy Sector Development Department at the Energy Sector and Energy Marketing Development Division of JSC Gazprom 13. Petr Sinyutin, General Director of JSC MoESK 14. Pavel Snikkars, Director of the Department of the Electric Energy Industry Development of the Russian Ministry of Energy 15. Pavel Shpilevoy, Director for Strategic Development of JSC FGC UES Development of the Strategy and Investment Block of PJSC INtER RAO 7. Evgueny olkhovitch, Deputy Director of the Department of State Regulation of tariffs, Infrastructure Reforms and Energy Efficiency of the RF Ministry of Economic Development and Trade 8. Maxim Rusakov, member of the Managemen Board, head of the Department for Competitive Pricing of Non-profit Partnership “Market Council” 9. Pavel Snikkars, Director of the Department of the Electric Energy Industry Development of the Russian Ministry of Energy 10. Andrey Kharin, Deputy Director of the Department for Corporate Governance, Pricing Environment and Auditing in Fuel and Energy Industries of the Russian Ministry of Energy 11. Pavel Shpilevoy, Director for Strategic Development – head of the Strategic Development Department of PJSC FGC UES GOVERNANCE SYStEM BoARD oF DIRECToRS 160 Activities in 2015 The Committee held 8 meetings (5 in person and 3 in absentia) and considered, among others, the following matters: • Review of the Business Plan Progress Report for 1h 2015 and recommendations to the Board of Directors with respect to its approval (Minutes No. 22 dated 24 September 2015) • Approval of adjustments to the Federal Grid’s Long- Term Development Programme for 2015–2019 and Prospects through 2030, and of a revised version of the above Programme (Minutes от 06.11.205 No. 24) • Review of the Regulations on Quality Control System and recommendations to the Board of Directors with respect to its approval (Minutes No. 26 dated 13 November 2015) • Review of the Federal Grid’s Business Plan for 2017–2020 and recommendations to the Board of Directors with respect to the approval thereof (Minutes No. 25dated 09 November 2015 and No. 27 dated 26 November 2015) • Review of the Procedures for improving the investment and operating efficiency and reducing costs (Minutes No. 25 dated 09 November 2015 and No. 27 dated 26 November 2015) • Review of the Report on the results of comparative analysis of key performance indicators of the UNEG management organisation with such of major foreign electric grid companies and recommendations to the Board of Directors with respect to the approval thereof (Minutes No. 27 dated 26 November 2015) • Recommendations to the Board of Directors with respect to amending the Federal Grid’s Business Planning Standards (Minutes No. 29 dated 18 December 2015) Investment Committee Report Roles and Responsibilities the role of the Investment Committee is to assist the Board of Directors in improving and developing the Company’s investment policy. The key responsibilities of the Investment Committee include preliminary consideration, review and making recommendations to the Federal Grid’s Board of Director on the following matters: • Approving the Federal Grid’s investment programme, including its adjustments, and reviewing its progress reports • Reviewing internal documents related to investing activities, including standards for technological and price audit of investment projects • Reviewing progress of certain investment projects of the Company • Approving the Federal Grid’s innovative development programme, including R&D programme, and reviewing progress reports on its implementation • Determining the Company’s procurement policy • Reviewing schemes and development programmes of the UES of Russia • Considering issues related to the technological connection to electric grids The Committee’s activities are governed by the Regulations on Investment Committee of the Board of Directors of Federal Grid Company, a revised version of which was approved by the Board of Directors on 20 August 2015 (Minutes No. 280 dated 24 August 2015). ▶ Membership Elected by the Board of Directors on 27 August 2014 (Minutes No. 226 dated 29 August 2014)* Elected by the Board of Directors on 20 August 2015 (Minutes No. 280 dated 24 August 2015) 1. Nikolay Shulginov, Chairman, Non-Executive Director 1. Vyacheslav Kravchenko, Committee Chairman, Board Chairman 2. Sergey Mironosetsky, Independent Director 3. Svetlana Balaeva, Deputy General Director for Investments of PJSC ROSSEtI 4. Alexander Vikhansky, Director for Natural Monopolies Relations of JSC Polus 5. Valery Goncharov, First Deputy Chairman, member of the Management Board of PJSC FGC UES 6. Alexander Ilienko, member of the Management Board, Director for UES Development of JSC So UES 7. Vasily Кisilev, Chairman of the Consumer Council of the Government Commission for Electricity Industry 8. Ilnar Mirsiyapov, member of the Management Board, Head of the Strategy and Investment Unit of PJSC INtER RAO 9. Evgueny olkhovitch, Deputy Director of the Department of State Regulation of tariffs, Infrastructure Reforms and Energy Efficiency of the RF Ministry of Economic Development and Trade 10. Ivan Selivakhin, Financial Director of Non-Profit Partnership «Market Council 11. Pavel Snikkars, Director of the Department of the Electric Energy Industry Development of the Russian Ministry of Energy 12. Victor Yavorsky, General Director of Tori- Audit, LLC 161 2. Sergey Mironosetsky, Non-Executive Director 3. Denis Fedorov, Non-Executive Director 4. Svetlana Balaeva, Deputy General Director for Investments of JSC ROSSEtI 5. Dan Belenkiy, First Deputy General Director for Investment Activity of JSC ROSSEtI 6. Vladimir Vashkevitch, Deputy General Director for Grid Development and Services of the Federal Grid branch MES North-west 7. Valery Goncharov, Deputy Chairman, member of the Management Board of JSC FGC UES 8. Konstantin Zavizenov, Deputy Director of the Department of the Electric Energy Industry Development of the Russian Ministry of Energy 9. Michael Kolesnikov, member of the Presidium of the Management Board of oPoRA RoSSII 10. Vitaliy Korolev, head of Electric Energy Industry Supervision Department of the Federal Antimonopoly Service of Russia 11. Viktor Lebedev, Assistant to the Deputy Chairman of the Government of the RF Arkadiy Dvorkovitch 12. Khasan Likhov, Deputy General Director for special projects of JSC RoSSETI 13. Leonid Mazo, member of the Management Board of JSC FGC UES 14. Ilnar Mirsiyapov, member of the Management Board, Head of the Strategy and Investment Unit of JSC INtER RAO UES 15. Evgueny olkhovitch, Deputy Director of the Department of State Regulation of tariffs, Infrastructure Reforms and Energy Efficiency of the RF Ministry of Economic Development and Trade 16. Alexander Rogov, head of the Energy Sector Development Department at the Energy Sector and Energy Marketing Development Division of JSC Gazprom 17. Ivan Selivakhin, Adviser to the Chairman of the Management Board of Non-Profit Partnership «Market Council» * On 12 January 2014, the Board of Directors decided to terminate the Investment Committee member Viktor Lebedev and to reduce the number of Committee members to 16 persons (Minutes No. 240 dated 15 January 2014). In January 2015, Leonid Mazo resigned, and the Committee membership reduced to 15 persons. GOVERNANCE SYStEM BoARD oF DIRECToRS Activities in 2015 The Committee held 9 meetings (6 in person and 3 in absentia), and considered, among others, the following matters: • Review of the Report on the results of on-site audits of the RF Ministry of Energy of the progress of the Federal Grid’s investment projects and recommendations to the Board of Directors with respect of its approval (Minutes No. 43 dated 18 February 2015), and review of management reports on implementing the corrective action plan (Minutes No. 47 dated 22 April 2015) • Review of draft adjustments to the Federal Grid’s investment programme for 2015–2019 (Minutes No. 44 dated 03 March 2015), and a draft investment programme for 2016–2020 (Minutes No. 45 dated 17 March 2015) 162 • Review of the results of estimation of the planned construction cost for projects within the Federal Grid’s investment programme for 2015–2019 (Minutes No. 44 dated 03 March 2015) • Review of the annual report on the technological and price audit of the Federal Grid’s investment projects performed in 2014 and recommendations to the Board of Directors with respect to its approval (Minutes No. 49 dated 28 September 2015) • Review of the Procedure for approving a Federal Grid’s investment programme and recommendations to the Board of Directors with respect to the approval thereof (Minutes No. 51 dated 18 December 2015) • Review of the 2014 annual progress report of the Federal Grid’s Innovative Development Programme for 2013–2017 and Prospects through 2020, and recommendations to the Board of Directors with respect to the approval thereof (Minutes No. 51 dated 18 December 2015) Remuneration of the Board of Directors and its Committees The Federal Grid Directors’ remuneration system has been designed to ensure the Company’s effective governance, meet its long-term interests, attract and retain highly competent professionals. Directors’ remuneration and compensation principles and arrangements are set by the Regulations on Remuneration and Compensation Payable to Members of the Board of Directors of Federal Grid Company, as approved by the Annual General Meeting of Shareholders on 26 June 2015 (Minutes No. 16 dated 30 June 2015). In accordance with the above Regulations, remuneration is paid to Board members out of the Company’s net profit based on their performance for the corporate year and subject to the relevant resolution of the General Meeting of Shareholders. The amount of remuneration to each Board member depends on the following factors: • his/her involvement in the activities of the Board including the number of Board meetings he/she attended • Total number of Board meeting held during the corporate year • The Company’s revenue for the fiscal year, which determines the basic part of remuneration 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%. The total remuneration for each Board member, given all premiums, cannot exceed RUB900 thousand. the Regulations provide for compensation of actual expenses of Board members, including travel expenses incurred in travelling to the place of the Board or Committee meeting and back, accommodation costs and expense not related to the meeting attendance but related to the Company’s activities. the 2016 General Meeting of Shareholders on 29 June 2016 will resolve on remuneration to the members of the Board of Directors for 2015. Remuneration paid in 2015 During the reporting year, the Company did not provide any loans (credits) to the Board members. The remuneration to the Board members for 2014 was paid in accordance with the Regulations on Remuneration Payable to Members of the Board of Directors approved by the resolution of the Annual General Meeting on 29 June 2012 (Minutes No, 16 dated 30 June 2015). when calculating the remuneration, the same factors and increases were considered that are provided by the effective Regulations. No compensation of expenses was provided. ▶ Remuneration to the Board members paid in 2015, RuB* oleg Budargin Maxim Bystrov Andrey Demin Boris Kovalchuk Vyacheslav Kravchenko** Sergey Mironosetsky Andrey Murov*** Georgy Nozadze Denis Fedorov Sergey Shmatko Nikolay Shulginov total 834,545.45 641,958.04 692,307.69 636,923.08 0 834,545.45 0 667,132.87 815,664.34 616,783.22 800,559.44 6,540,419.58 * No other remuneration, including compensation of expenses, was paid. ** Remuneration is not paid due to the fact that the Board member is a public servant. *** Remuneration is not paid due to the fact that the Board member is also the Chairman of the Company’s Management Board. Board Committees In the reporting year, the Board of Directors approved (Minutes No. 280 dated 24 August 2015) the Regulations on Remuneration and Compensation Payable to Members of Committees of the Board of Directors of Federal Grid Company that cover matters of paying remuneration to members of the Board committees who are not members of the Board of Directors or persons with whom the Company has concluded an employment agreement, as well as persons with respect to whom there are no legislative restrictions for or prohibition on receiving any payments from commercial organisations. on a quarterly basis, the above committee members shall be paid remuneration for each meeting attended. The amount of remuneration is equal to three minimum monthly wage rates for a first category worker set by the sectoral tariff agreement of the FR electric energy complex at the date of the meeting. Remuneration to the Committee Chairman is increased by 50%. The total amount of remuneration paid to members of the Board committees in 2015 was RUB 997.1 thousand. 163 GOVERNANCE SYStEM MANAGEMENt BoARD high Standards of Doing Business Membership of the Management Board as of 31 December 2015 The Management Board and the Chairman of the Management Board – collective and sole executive bodies – are responsible for the day-to-day operations of the Company, ensure efficient implementation of the Company’s objectives and the delivery of its strategy. Key matters reserved for the Management Board • Developing and submitting for the Board’s consideration the Company’s business priorities and long-term plans for their implementation • Preparing reports on the implementation of resolutions of the General Meeting of Shareholders and the Board of Directors of Federal Grid Company • Exercising of powers of General Meeting of Shareholders of wholly-owned subsidiaries of the Company • Submitting for the Board’s consideration business and financial performance reports of the Company’s subsidiaries and associates • Addressing other issues of managing the day-to-day operations of Federal Grid Company in accordance with its Articles of Association, resolutions of the General Meeting of Shareholders and the Board of Directors Key matters reserved for the Chairman of the Management Board • All matters of managing the day-to-day operations of the Company, except of those reserved for the General Meeting of Shareholders and the Board of Directors Changes to the membership of the Management Board in 2015 On 25 August 2015, the Board of Directors decided to terminate the authorities of the Management Board member Andrey Kazachenkov (Minutes No. 281 dated 28 August 2015). A new member was elected instead of him – Maria Pichugina. ANDREY MUROV Chairman of the Management Board, member of the Federal Grid’s Board of Directors VALERY GONCHAROV First Deputy Chairman of the Management Board Member of the Investment Committee of the BoD1 164 Management Board member since 2012 Management Board member since 2013 Areas of Responsibility: Areas of Responsibility: 165 Interaction between the Board of Directors and Executive Bodies In accordance with the Company’s Articles of Association and internal documents, the Chairman and members of the Management Board regularly report to the Board on their performance, including: • On the implementation of the Long-term Development Programme and Investment Programme • on the implementation of the Company’s business plan and achievement of the KPI targets • on the establishment and operation of the internal control and risk management system • On the implementation of resolutions of the General Meeting of Shareholders and the Board of Directors enables us to prevent possible conflict situations and minimise an adverse effect for the Company’s interests. A ‘conflict of interest’ of Company employees, including the executives, is defined by the Company’s internal documents, and the following obligations of the latter are provided: • To declare his/her affiliation • To report a conflict of interest or likelihood of conflict and its cause, including interests in transactions • to refrain from actions that will or may lead to a conflict between his/her interests and the Company’s interests • to refrain from discussing and voting on matters in which he/she has a conflict of interest Dealing with Conflicts of Interest of Executives • To report on his/her holding of the Company securities and transactions therewith the Company has developed and now implements a comprehensive system for dealing with conflicts of interest of members of the executive bodies that All external appointments of the Management Board members are subject to the consent of the Company’s Board of Directors. • Managing the day-to-day operations of the Company, organising the work of the Management Board Born in 1970 In 1993, graduated from St Petersburg State University with a degree in Jurisprudence; in 1998, took a special retraining course in Financial Management at the Inter-disciplinary Institute of Advanced training and Retraining for Executives. In 2009, graduated from the State University of Civil Aviation with a degree in Freight Regulation and Air Transport Management. PhD in Economics Experience: 2007–2012 – General Director of JSC Pulkovo Airport 2012–2013 – Deputy General Director, Acting General Director, Executive Director, member of the Management Board of JSC holding of Inter-regional Distribution Grid Companies (since 04.04. 2013 – JSC RoSSETI) since 2013 – Chairman of the Management Board of Federal Grid Company External appointments: Member of the Board of Directors of PJSC RoSSETI, PJSC Inter RAO, JSC SO UES, Chairman of Non- Profit Partnership “Russian National Committee of International Council on Large Electric Systems (RNC CIGRE) Holds no shares in the Company • Development and customer relations • Information technology and special projects • Environment and developing equipment manufacturing techniques • Innovations and R&D management • Investment planning, design and procurement • Strategic development Born in 1963 In 1987, graduated from Leningrad Shipbuilding Institute. PhD in Economics. Experience: 2006–2012 – Deputy Director for Economics and Finance of JSC Roszheldorproject 2012–2013 – Deputy Chairman of the Management Board of Federal Grid Company, Deputy Executive Director for Investments of JSC holding of Inter- regional Distribution Grid Companies since 2013 – First Deputy Chairman of the Management Board of Federal Grid Company Holds no shares in the Company 1 Decision of the Board of Directors dated 20 August 2015 (Minutes No. 280 dated 24 August 2015). GOVERNANCE SYStEM MANAGEMENt BoARD ALEXANDER VASILIEV Deputy Chairman of the Management Board VLADIMIR DIKoY Deputy Chairman of the Management Board – Chief Engineer ALEXANDER ZARAGATSKY Deputy Chairman of the Management Board MARIA PICHUGINA Deputy Chairperson of the Management Board Management Board member since 2014 Management Board member since 2013 Management Board member since 2014 Management Board member since 2015 166 Areas of Responsibility: • Security issues Areas of Responsibility: • Maintenance and Repairs Born in 1958 In 1982, graduated from Leningrad Mechanical Institute with a degree in Mechanical Engineering; in 2003, graduated from St Petersburg State University of Economics and Finance with a degree in Economics; in 2007, graduated from St Petersburg Institute of Foreign Economic Relations, Economics and Law with a degree in Jurisprudence Experience: 2003–2010 – head of Moscow Region Department of the RF State Committee for Control over Drug and Psychotropic Trafficking 2010–2011 – Deputy Director, Director of Security Department of JSC MMC Norilsk Nickel 2011–2014 – Deputy head of the Federal Customs Service since 2014 – Deputy Chairman of the Management Board of Federal Grid Company Holds no shares in the Company Born in 1954 In 1981, graduated from Moscow Power Engineering Institute with a degree in Electric Power Supply of Industrial Enterprises, Cities and Agriculture. PhD in Technical Sciences. Experience: 2008–2009 – Deputy Director General for Production of JSC Glavsetservice of UNEG 2010–2013 – Deputy Chief Engineer of Federal Grid Company since 2013 – Deputy Chairman of the Management Board – Chief Engineer of Federal Grid Company External appointments: Chairman of the Board of Directors of JSC Mobile Gas Turbine Electric Power Plants and JSC Dalenergosetproekt, member of the Board of Directors of JSC Elektrosetservis of UNEG and JSC tomsk trunk Grids Share in the Company’s ordinary stock: 0.0000219% Areas of Responsibility: Areas of Responsibility: • Legal, property and general administrative matters Born in 1976 In 2001, graduated from St Petersburg Law Institute of the General Prosecutor office with a degree in Jurisprudence; in 2002, graduated from St Petersburg Institute for Management and Economics with a degree in State and Municipal Management. PhD in Economics Experience: 2007–2013 – Chief of Staff of the Chairman of St Petersburg Legislative Assembly since 2013 – Deputy Chairman of the Management Board of Federal Grid Company External appointments: член Советов директоров ОАО «НТЦ ФСК ЕЭС» и ОАО «ЭССК ЕЭС» Holds no shares in the Company • Economy, finance and subsidiaries Maintenance and Repairs Born in 1980 In 2003, graduated from the State University – higher School of Economics with a degree in Finance and Credit 167 Experience: 2008–2012 – held senior positions in commercial companies 2013 – Deputy Director of the Department for Development of Electric Energy Industry of the Russian Ministry of Energy since the end of 2013 – Director for Economy and Finance of Federal Grid Company External appointments: member of the Board of Directors of JSC R&D Centre of FGC UES, Index Energetiki- FGC UES LLC, JSC Nurenergo, member of the Supervisory Board of JSC IPS SakRusenergo Holds no shares in the Company GOVERNANCE SYStEM MANAGEMENt BoARD NIKOLAY PoZDNYAKoV Deputy Chairman of the Management Board MARIA tIKHONOVA Deputy Chairperson of the Management Board DMITRY SHISHKIN Internal Control Director Born in 1967. In 1992, graduated from the higher School of the KGB of the USSR named after Dzerzhinsky with a degree in Jurisprudence Management Board member since 2014 Management Board member since 2013 Management Board member since 2013 168 Areas of Responsibility: Areas of Responsibility: • Information technology and special projects • Corporate governance Born in 1979 Graduated from Moscow State University with a degree in Physics and Higher School of Economics with a degree in Economics Experience: 2009–2013 – head of Investment Project Monitoring, Head of Investment Planning and Reporting Department of Federal Grid Company 2013–2014 – Deputy General Director for Investments of JSC ROSSEtI since 2014 – Deputy Chairman of the Management Board of Federal Grid Company External appointments: General Director of JSC Centre for Engineering and Construction Management of UES, member of the Board of Directors of JSC Energotekhcomplect Share in the Company’s ordinary stock: 0.0000938% Born in 1980 Graduated from Volga-Vyatka Academy of Public Service with a degree in Public and Municipal Administration, Higher School of Economics with MBA Finance. PhD in Economics. Experience: 2008–2012 – head of Corporate Management and Economic Analysis Unit of the Department, Director of the Department for Economic Regulation and Property Relations in the Fuel and Energy Complex of the Russian Ministry of Energy since 2013 – Deputy Chairman of the Management Board of Federal Grid Company Holds no shares in the Company Experience: 2009–2012 – Deputy Director for Security of Gazprom EP International Services B.V., Moscow 2013 – Security Director of JSC Moscow Unified Electric Grid Company since 2013 – Internal Control Director of Federal Grid Company External appointments: member of the Board of Directors of JSC Energostroysnabkomplekt and JSC Centre for Engineering and Construction Management of UES, Chairman of the Audit Commission of JSC Moscow Communication Centre of Energy Systems, member of the Audit Commission of JSC R&D Centre of FGC UES, JSC Mobile Gas Turbine Electric Power Plants, PJSC Inter RAO Holds no shares in the Company 169 Areas of Responsibility: • Internal Control and Risk Management • Operational controlling and compliance procedures In 2015, there were no dealings in the Company’s shares by the members of the Management Board Activities of the Management Board in 2015 As part of its work in the reporting year, the Management Board continued to implement the approved Programme of activities (‘roadmap’) to ensure financial sustainability and improve the economic efficiency of the Company for 2014– 2015. other matters, which received particular focus during the year, were the following: • Adjustments to a General scheme for building and developing the Energy System’s Unified Process Communications of Federal Grid Company aimed at determining the main directions for the development of telecommunication infrastructure necessary for the operation of dispatch and process control and corporate governance of the Company • Approval of a Concept for disposal of subsidiaries and other entities in which 78 meetings 788 matters considered, including 647 recommendations to the Board of Directors GOVERNANCE SYStEM MANAGEMENt BoARD Federal Grid participates that provides for spinning off the strategic assets and financial responsibility centres and determines the primary areas for development of key subsidiaries The major changes to the 2015 Methodology compared with the same methodology for the prior year were as follows: • Review of projects of the Federal Grid’s investment programme for 2016–2020, as well as draft adjustments to the investment programme for 2015 • Monitoring of the implementation of the technical maintenance and repair programme, as well as the programme for managing the Company’s non-core assets • Making decisions on charitable assistance and consideration of matters of social assistance to Federal Grid’s employees Remuneration of the Management Board In accordance with the Regulations on terms and Conditions of Employment Agreements and Determination of Remuneration and Compensation for Senior Managers of Federal Grid Company approved by the Board of Directors on 17 June 2010, remuneration for senior managers is determined by their employment agreements. Remuneration includes a fixed component (salary) and a variable component (bonuses). Bonuses are tied to key performance indicators (KPIs) of senior managers. In 2015, the Company applied a system of quarterly and annual bonuses based on the Methodology for Calculation and Evaluation of Key Performance Indicators for Federal Grid’s Senior Management approved by the Board of Directors (Minutes No. 243 dated 22 December 2015). 1. An indicator Cost Reduction for the Acquisition of Goods (Work, Services) was excluded from the list of KPIs due to its expiration (in accordance with the assignment of the RF President No. Pr-846 dated 02 April 2011, the above indicator was measured over three three years – from 2012 through 2014 2. An indicator Total Shareholder Return (TSR) has been changed from indicative to target (included in the senior management bonus plan) 3. Target values of some indicators were updated in accordance with the Company’s business plan: Reduction in operating Expenses (Costs), Reduction in Investment Costs, Electricity Losses In case any of the KPIs is not met, then the bonuses of all members of the Management Board, including the Chairman, are decreased by a certain percent depending on the indicator significance level. The most significant quarterly KPIs are No increase in major accidents (40% weighting) and Preventing Increase in the Number of Injured in Accidents (40% weighting). The most significant annual KPIs, with a 15% weighting each, are RoIC, Achieving Reliability Level of Services, and Meeting Deadlines for Technological Connection. All KPIs that are applied to motivate senior managers are included in the Federal Grid’s Long-Term Development Programme approved by the Board of Directors (Minutes No. 243 dated 22 December 2014). 170 2014 Actual values 2015 target values Actual values 2016 target values KPI Evaluation (met/ not met) 0* no increase no increase met no increase no increase no increase no increase met no increase Strategic objective KPI Reliability of energy supply to customers Effective management Development of UNEG infrastructure and implementation of projects of national significance Maintenance of financial stability No increase in major accidents Preventing Increase in the Number of Injured in Accidents Achieving reliability level of services Reduction in operating expenses (costs) 1** 1** 0.3 21.7% ≥ 14.2% 24.2% Reduction in investment costs 17.03% at least 15% Electricity losses 4.13% not higher than 4.27% workforce productivity – at least 17% 18.3% 4.09% 21.5% Meeting schedules for commissioning 106.2% not higher than 95% 115.5% RoIC (Return on Invested Capital) Financial leverage ratio TSR (Total Shareholder Return) 1.86 0.44 –50.5% 1.8 0.43 28.0% not higher than 0.9 not higher than 1.5*** higher than the average value for the past three years before the reporting year by the amount set out by the Board of Directors (–46,3%) met met met met met met met met met ≤ 1 ≥ 10.5% ≥ 23% ≤ 4.13% ≥ 3.9 RUB thousand/ man hour ≥ 95% ≥ 0.9 – > than the value of change in the MoEX RCI (Regulated Companies Index) by a positive value set by the Board of Directors 171 Effective engagement with customers Meeting deadlines for technological connection 0.72 not higher than 1.1 1.0236 met ≤ 1.1 * In 2014, the KPI ‘Reliability Indicator: No Major Accidents’ was effective according to the Methodology for Calculating and Evaluating Key Performance Indicators of Federal Grid’s Senior Management’ approved by the Board of Directors (Minutes No. 217 dated 17 April 2014). ** The actual value of the service reliability indicator is not higher than the plan value set by FTS. *** Or not higher than the value set in the business plan. GOVERNANCE SYStEM MANAGEMENt BoARD CORPORAtE SECREtARY ▶ Remuneration of members of the Management Board in 2015, RuB thousand All members including the Chairman* Remuneration for contributions to the Management Board’s operations Salary Bonuses Commission Benefits Reimbursement of expenses Other types of remuneration total 0 110,601 194,291 0 0 0 28,770 333,662 * Including remuneration paid to all members of the Management Board in 2015 taking into account changes in the membership of the Management Board. 172 ▶ Remuneration of the Chairman of the Management Board in 2015, RuB thousand Chairman of the Management Board Remuneration for contributions to the Management Board’s operations Salary Bonuses Commission Benefits Reimbursement of expenses Other types of remuneration total 0 29,143 51,693 0 0 0 18 80,854 During the reporting year, the Company did not provide any loans (credits) to members of the Management Board. Effective Corporate Interactions As part of the implementation of ‘road map’ on introducing key provisions of the Russian Corporate Governance Code into the Federal Grid’s corporate governance system, a position of Corporate Secretary was established in the Company in the reporting year. The Corporate Secretary’s key responsibilities are to ensure effective shareholder engagement, to coordinate the Company’s efforts aimed at protecting shareholder rights and legitimate interests, to implement the corporate disclosure policy, and to support the effective work of the Board of Directors. The Corporate Secretary is functionally subordinate and reports to the Board of Directors that ensures his/her sufficient independence from the Company’s management. The Corporate Secretary’s activities are subject to the provisions of the Regulations on Corporate Secretary of Federal Grid Company approved by the Board of Directors on 21 July 2015 (Minutes No. 279 dated 27 July 2015). Corporate Secretary of Federal Grid Company natalia shumaKher Appointed by the Board of Directors on 21 July 2015 (Minutes No. 279 dated 24 July 2015) Born in 1984 in the city of Frunze of the Kirgiz SSR. Graduated from Orel State University with a degree in Jurisprudence. Experience: since 2009 – Senior Specialist of the office for exercising ownership rights of the property department of PJSC IDGC of Centre. holds no shares in Federal Grid and its subsidiaries and associates, has no family ties with members of the governing and/or control bodies of Federal Grid Company. Key responsibilities • Participates in the procedures related to the General Meeting of Shareholders, including in respect of monitoring over their implementation • organises the Company’s engagement with shareholders, prepares replies to their requests and inquires • Provides support to the effective operation of the Board and its Committees, coordinates activities to ensure the exchange of information between the Board and its Committees • Participates, within her remit, in the procedures for safekeeping of the Company’s corporate documents, and in the implementation of the disclosure policy • Participates in the process of improving the Company’s corporate governance system and practices • Ensures, within her remit, the Company’s interactions with regulatory authorities, trade organisers, the registrar, and other professional security market players 173 GOVERNANCE SYStEM CORPORAtE SECREtARY AUDIT CoMMISSIoN AND AUDIToR how does the company perform an assessment of the federal grid’s corporate governance quality and its compliance with the principles set out in the russian corporate governance code? natalia Shumakher Corporate Secretary of Federal Grid Company 174 “there are two types of the corporate governance quality assessment: internal and external. that today enables us to declare a high quality of the Federal Grid’s corporate governance. In the reporting year, we conducted an internal assessment using a Methodology of Rosimuschestvo for Corporate Governance Self-Assessment in State- owned Companies. The above Methodology includes, among other things, the assessment of compliance with the principles and recommendations of the Russian Corporate Governance Code. According to the results of the self-assessment, we have achieved very good results – our level of compliance was 82% As regards external assessment, there we are talking about an audit of the Company’s corporate governance and assignment of National Corporate Governance Rating. Such rating has been assigned to Federal Grid since 2012 by an independent consultant – the Russian Institute of Directors. In 2015, the Company’ rating was confirmed at a level of 7+, which indicates of our well-developed corporate governance practices.” Audit Commission and Auditor Audit Commission The Audit Commission is a permanent body, which is elected annually by the General Meeting of Shareholders and is responsible for exercising control over the Company’s financial and business operations, its governing bodies and structural units. In its operations, the Audit Commission is governed by the Federal Grid’s Articles of Association and the Regulations on the Audit Commission a revised version of which was approved by the Annual General Meeting of Shareholders on 26 June 2015 (Minutes No. 16 dated 30 June 2015). the main functions of the Audit Commission are as follows: • To confirm the reliability of data contained in the Company’s annual report, accounting balance sheet, and profit and loss statement • To analyse the Company’s financial position, discover ways for improving thereof, and develop recommendations to the governing bodies • To organise and perform audits (revisions) of the Company’s financial and business operations ▶ Members of the Audit Commission1 elected by the Annual General Meeting of Shareholders on 26 June 2015 175 Name Nikolay Varlamov Marat Izmailov Marina Lelekova Denis Kant Mandal Year of birth 1974 1983 1961 1987 Education Position Higher Higher Higher Higher Deputy Director – Chief of Staff of PJSC RoSSETI head of Division of Department of the Russian Ministry of Energy head of the Control Department of PJSC RoSSETI Deputy head of Department of the Federal Agency for State Property Management (Rosimuschestvo) Roman Litviniov 1982 Higher Deputy head of Division of PJSC Gazprom acting from 27 June 2014 to 26 June 2015 Name Nikolay Varlamov Anna Drokova Year of birth 1974 1985 Higher Higher Education Position Marina Lelekova 1961 Higher Vladimir Skobarev Alan Khadziev 1952 1981 Higher Higher Deputy General Director for Control and Audit of JSC RoSSETI 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 head of the Control and Internal Audit Department of JSC ROSSEtI Director General of MooRE STEPhENS RUS, Ltd Director on Internal Audits of JSC Far East Energy Management Company 1 Positions of the Audit Commission members are stated at the time of election. None of the Audit Commission members (current or former) holds shares of Federal Grid Company and holds positions in its governing bodies. CONtROL SYStEM AUDIT CoMMISSIoN AND AUDIToR INtERNAL CONtROL Remuneration of the Audit Commission members the amount of and the procedure for paying remuneration and compensation to members of the Audit Commission of Federal Grid Company are established by the Regulations on Remuneration and Compensation Payable to Members of Audit Commission of Federal Grid Company, a new version of which was approved by the General Meeting of Shareholders on 26 June 2015. On 26 June 2015, the General Meeting of Shareholders approved RSM RUS, LLC to conduct an independent audit of the Company’s accounting statements prepared under RAS, and the consolidated financial statements prepared under IFRS. RSM RUS, LLC is a full member of the leading international auditing and consulting organisation RSM International and a member of the self-regulatory organisation of auditors, Non-Profit Partnership Auditor Association Sodruzhestvo. The total remuneration paid to the members of the Federal Grid’s Audit Commission in 2015 amounted to RUB573.5 thousand. Auditor 176 Federal Grid Company annually engages an external auditor to perform an independent and unbiased assessment of quality of its RAS and IFRS financial statements. Auditor Selection process In accordance with the resolution of the Federal Grid’s Board of Directors (Minutes No. 245 dated 31 December 2014), a centralised procurement of services on performing a statutory audit of the Federal Grid’s statements for 2015–2017 was conducted by PJSC RoSSETI. A candidate for the position of the Company’s auditor was proposed based on the results of the open single stage tender for performing a statutory audit of statements of subsidiaries and associates of PJSC RoSSETI for 2015–2017, conducted by PJSC ROSSEtI under the Federal Law “On Contract System of Federal and Municipal Procurement of Goods, Works and Services” No. 44-FZ dated 05 April 2013. Auditor Remuneration the amount of remuneration of the Auditor RSM RUS, LLC paid for the audit of the Company’s financial statements under RAS and IFRS for 2014 was RUB25,000 thousand including VAT. The Company’s Board of Directors determined (Minutes No. 280 dated 24 August 2015) the amount of the Federal Grid’s Auditor’s remuneration for the audit of the Company’s acсounts for 2015 of RUB24,682,983 and 68 kopeks, including VAT. During the reporting period, the external auditor did not provide any non-audit services to the Company. Review of the external Auditor’s effectiveness At the meeting held in May 2015, the Audit Committee considered a matter on the assessment of the External Auditor’s performance with regard to the audit of the Company’s statements for 2014. Upon consideration of the matter, the Committee concluded that the services of RSM RUS, LLC were provided strictly in accordance with the terms and conditions of the contract and in compliance with the requirements of legislation of the Russian Federation. Systemic Control at all Levels of Governance Internal Control and Risk Management System • Compliance with applicable legislation and internal regulations of the Company the internal control and risk management system of Federal Grid Company is an important component of the Company’s governance system. It includes a set of procedures, methods and tools aimed at obtaining reasonable assurance that the Company achieves its objectives in the following areas • Identification and mitigation of risks in key areas of activities • Prevention of fraud and other irregularities on the part of the Company’s employees and third parties with respect to its assets • Effectiveness and efficiency of activity arrangements • Accuracy, completeness and timeliness of all types of the Company reporting Information on the Federal Grid’s risk management system is available in section GOVERNANCE AND DEVELOPMENT/ Risk Management 177 Improving internal control and risk management system in 2015 with regard to recommendations of the Russian Corporate Governance Code to improve the effectiveness of internal control and risk management system, a separate structural unit has been set up in Federal Grid Company – Internal Control and Risk Management Department to perform a regular assessment of the effectiveness and reliability of the internal control and risk management system, a separate structural unit has been set up in the Company – Internal Audit Department, and its independence has been ensured through separate lines of functional and administrative reporting to the Board of Directors and the Chairman of the Management Board respectively The responsibilities of the Audit Committee have been extended in order to improve the Board performance with respect to oversight of the Company’s financial and business operations: a list of matters to be considered by the Committee has been considerably expanded in the area of financial reporting, internal audit. Internal control and risk management we strive to ensure the implementation of internal controls in each stage of the process of managing the Company in accordance with the COSO internal control integrated framework, while maintaining the neutrality and transparency of the procedures and methods for all activities Key principles of internal control system • Consistency • timeliness • Uniformity of approaches • Continuity • Division of responsibilities and powers • Documentation of procedures and results • Practicability • Interaction between all ICS participants • Consideration of changes in external environment CONtROL SYStEM INtERNAL CONtROL highlights of 2015 Plans for 2016 • the internal auditor assessed the effectiveness of the internal control system with further identification of system weaknesses and risks. The Board of Directors considered the results of the assessment at the meeting on 29 May 2015 (Minutes No. 270 dated 01 June 2015) and instructed the executive bodies to ensure the implementation of recommendations contained in the Report on the effectiveness of the Internal Control System of Federal Grid Company • In order to improve the internal control and risk management system, pursuant to the instructions of the Board of Directors (Minutes No. 270 dated 01 June 2015), a Programme (‘road map’) for enhancing the quality of the internal control system of Federal Grid for 2015–2017 has been developed and approved (Executive order No. 16 dated 20 January 2016. • Updating the Regulations on Internal Control System • Improving internal control over functional areas of the Company’s operations: Procurement, Project Management and Capital Construction • Updating control matrixes for business processes of accounting, tax accounting and preparing accounting (financial) statements • Drafting proposals on key performance indicators aimed at measuring the implementation of internal control procedures and reducing the Federal Grid’s key risks to an acceptable level, to be further included in the system of KPIs for the Company’s senior management 179 Internal Control Internal control as an integral part of the internal control and risk management system of Federal Grid Company is aimed at ensuring long-term financial sustainability and effective performance of the Company. The Company’s internal control is subject to the provisions of the Regulations on Internal Control System of Federal Grid Company approved by the Board of Directors (Minutes No. 170 dated 02 August 2012). The above Regulations set out objectives, tasks and principles of the Internal Control System (ICS) and its components. The full text of the Regulations on Internal Control System is available on the corporate website www.fsk-ees.ru in section Shareholders and Investors / Corporate Governance / Constituent and Internal Documents ▶ Authorities and Responsibilities of the participants of the Internal Control System High Level – Strategic Management Audit Commission Board of Directors 178 Audit Committee • Confirms the reliability of data contained in the Company’s annual report, accounting balance sheet, and profit and loss statement; performs audits of the Company’s financial and business operations • Ensures the creation, monitoring of performance and setting the overall strategy of the ICS, initiates audits of the Company’s operations, reviews results of internal control, performs regular review of the ICS’s effectiveness and ensures constant improvement of the internal control procedures • Carries out reviews of the Company’s Internal Control System, makes recommendations to the Board of Directors on its further improvement; plans the internal audit schedule and considers audit results; performs the Company’s financial statement analysis and the analysis of the external audit results; assesses candidates for the position of the Company’s auditor, makes recommendations to the Board of Directors regarding the appointment of external auditors, the conduct of annual independent audit and external auditors’ fees Chairman of the Management Board • Provides organisational support and scheduling of internal controls, makes decisions based on the outcomes of the controls; makes proposals to the Board of Directors regarding the improvement of internal control procedures Mid-Level – implementing, maintaining and monitoring the effectiveness of ICS Internal Audit Department • Conduct regular independent assessment of the effectiveness and reliability of the ICS Department for Operational Controlling Compliance Procedures • Implements the Federal Grid’s Anti-Corruption Policy, measures aimed at managing risks related to financial security of counterparties’ obligations, ensures monitoring of compliance with the requirements of the RF legislation and Federal Grid’s internal documents with respect to procurement procedures Internal Control and Risk Management Department • Provides overall coordination of internal control and risk management processes in the Company, operational control over the implementation of policies in the area of internal control and risk management, as well as preparation of summary reports on internal control and risk management systems Other units that perform control functions • The Executive office performs strategic, guidance and control functions subject to the Company’s hR Management Policy • Pursuant to the order No. 353 dated 01 September 2015 “on the Division of Responsibilities between officers of the Federal Grid’s Executive office”, members of the Management Board and Deputy Chairmen of the Management Board perform activity-specific control functions with respect to the Federal Grid branches, subsidiaries and associates Basic Level – implementing control procedures and monitoring their effectiveness Owners of Control Procedures • organise and implement control procedures within business processes in accordance with job descriptions and provisions of the Company’s regulatory and administrative documents CONtROL SYStEM Internal Audit A key objective of Internal Audit is to perform regular independent assessment of the reliability and effectiveness of the internal control and risk management system and corporate governance practices. main tasKs of internal audit • Assisting the executive bodies and employees of the Company in developing and monitoring compliance with procedures and measures aimed at improving the risk management and internal control system, and corporate governance 180 • Coordinating activities with the Company’s external auditors and persons providing advisory services in the area of risk management, internal controls, and corporate governance • Conducting internal audits of controlled entities pursuant to the established procedures • Preparing and submitting to the Board of Directors and the executive bodies reports on the results of internal audits • Checking whether members of the Company’s executive bodies and its employees comply with the statutory provisions and internal policies of the Company on insider information and anti-corruption, as well as with the requirements of the Company’s Code of ethics Improving Internal Audit In 2015, the Company worked hard to develop the internal audit function and bring it in line with the advanced standards in this area, including: • International Standards for the Professional Practice of Internal Auditing • COSO Internal Control – Integrated Framework • Russian Corporate Governance Code • Listing Rules of MICEX Stock Exchange • Methodological recommendations for organising internal audit in joint stock companies with participation of the Russian Federation (order of Rosimuschestvo No. 249 dated 04 July 2014) By order of the Chairman of the Federal Grid’s Management Board No. 246 dated 15 June 2015, the Internal Control and Risk Management Department was restructured as to transfer internal audit function to the Internal Audit Department, which reports functionally to the Board of Directors and administratively to the Chairman of the Management Board. As at 31 December 2015, the number of employees performing the internal audit function amounted to 16 people. The Director for Internal Audit – head of the Internal Audit Department is part of the Company’s management team. on 16 November 2015, the Board of Directors approved the Regulations on Internal Audit of Federal Grid Company (Minutes No. 291 dated 19 November 2015), which cover all issues related to the internal audit function in the Company. A Standard for assessing the effectiveness of the Federal Grid’s internal control and risk management system was developed in the Company, reviewed by the Audit Committee and recommended for the approval by the Board of Directors (Minutes No. 44 dated 14 December 2015). In the reporting year, the Company developed and the Audit Committee approved the Programme for assessing and improving the internal audit quality (Minutes No.40 dated 21 September 2015) and the Federal Grid’s Internal Audit Guidelines (Minutes No.43 dated 02 December 2015). The above Programme provides for periodic internal and external evaluations of the Internal Audit Department performance. Internal evaluation is conducted by internal auditors of the Company through self-evaluation at least once a year and external evaluation is conducted by external independent consultants at least once in five years. INtERNAL AUDIT what progress has Been made By the company in the reporting year in the field of internal audit? Izumrud Alimuradova Director for Internal Audit – Head of Internal Audit Department “In 2015, the Federal Grid’s internal audit function has been considerably developed. The Board of Directors approved a core document – the Regulations on Internal Audit that cover all key issues in this area. The Audit Committee approved a number of documents aimed at improving the internal audit effectiveness, including a Programme for assessing and improving the quality of the internal audit function. Internal auditors assessed the effectiveness of the Federal Grid’s internal control system for 2014 and prepared a report thereof that included a series of recommendations on certain components of the internal control system. During the implementation of the above recommendations, at the end of the year, the Company has developed a Standard for assessing the effectiveness of the internal control and risk management,system reviewed by the Audit Committee and recommended for approval by the Board of Directors”. 181 the Board’s role in ensuring the internal audit effectiveness By the resolution of the Annual Meeting of Shareholders dated 26 June 2015 (Minutes No.16 dated 30 June 2015) the Federal Grid’s Articles of Association has reserved the following matters have been reserved for the Board of Directors in the area of internal audit: • Approval of an internal audit policy • Approval of a work plan and budget of the Internal Audit Department • Approval of a candidate for the position of the Internal Audit Department head and termination of his/her powers • Determination of remuneration arrangements for the Internal Audit Department head, as well as consideration of significant limitations that might adversely affect the performance of the internal audit function CONtROL SYStEM Effective Risk Management Federal Grid Company develops measures that would make any identified risk consistent with the “preferred risk,” i.e. the maximum permissible risk which the Company seeks or is ready to maintain. The response depends on risk relevance, impact on the likelihood and effect of a given risk, costs of risk materialisation, and risk benefits. After deciding on response measures, the Company’s executives assess the residual risk that must not go beyond the “preferred risk” level. See details about the risk management system in Federal Grid Company in section GOVERNANCE AND DEVELOPMENT / Risk Management LEVEL OF RISK RELEVANCE RISK RELEVANCE TREND IN tHE REPORtING YEAR Critical Higher relevance Significant Lower relevance Moderate Relevance unchanged 182 Risk (Risk Disclosing Unit) Risk assessment and changes in the risk relevance 2014/2015 INDUSTRY RISKS 1. tariff regulation risks (Department of Economic Planning and Tariff Setting) 2014 2015 Risk Description/Factors Factors that affected risk assessment Risk Management Actions Risk Materialisation • The amount of investable funds in the tariff was reduced relative to the tariff sources of funds for the Company’s Investment Programme that has been taken into account when tariffs for electricity transmission were approved. The reduction was caused by an increased cost of debt • Actual revenues from electricity transmission services were lower due to a changed order of payment for services; this change had not been taken into account when tariffs were set • the costs of electricity transmission services via foreign energy systems increased due to changes of foreign currency rate • The amount of investable funds in the tariff was reduced relative to the tariff sources of funds for the Company’s Investment Programme that has been taken into account when tariffs for electricity transmission were approved. The reduction was caused by an increased cost of debt • Actual revenues from electricity transmission services were lower due to a changed order of payment for services; this change had not been taken into account when tariffs were set • the costs of electricity transmission services via foreign energy systems increased due to changes of foreign currency rates • the actual average tariff on electricity transmission deviated from the one that was included in the business plan • Draft proposed changes to the corporate Investment Programme and the structure of sources of financing and changes in the structure of tariff decision in terms of tariff sources of financing for the corporate Investment Programme. • Draft and submit proposed amendments to laws and regulations on tariff setting and on defining the declared capacity that is used in setting the tariffs, as well as the volumes of electricity transmission to customers, and other changes. • Draft proposals to include lost revenues (caused by a reduced volume of services and increased costs of electricity transmission services via foreign energy systems) in the gross revenues. These proposals will be submitted to the Federal Tariff Service. • Implement actions targeted at improving the efficiency of the Company’s operations and investments, consistent implementation of the approved parameters of RAB regulation and at drawing up well-balanced and economically justified proposals about how to adjust and set these parameters. • Improve the quality of budget planning and develop a system of budget control through improving the corporate Budget Code and integrating the risk management processes in the system of medium-term and long-term business planning. • The cost of debt increased because interest payments increased by RUB 7,091 million (or 30.2%) due to an increase of the consumer price index • Payments for services of other (foreign) distribution grid companies increased by RUB642 million (or 30.6%) • According to an approved tariff & balance profile, payments should be made for the declared capacity. In practice, direct customers pay for actual capacity which means that the required gross revenues declined by RUB484 million (or 0.3%) RISK FACtORS 183 CONtROL SYStEM Risk (Risk Disclosing Unit) Risk assessment and changes in the risk relevance 2014/2015 2. Risks related to technological connection (Technological Development Department) 2014 2015 Risks related to the untimely meeting of contractual obligations under contracts for technological connection, including deviation of the actual quality level of the technological connection services from the level established during tariff regulation. The quality level is measured as per Section 3 of Executive order No. 718 dated 14 october 2013, issued by the Ministry of Energy, as the aggregate impact by the quality parameters of reviewing applications for technological connection; execution of contract for technological connection, compliance with the antimonopoly legislation and the quality of customer services. 184 3. Risks related to an increase of overdue and bad accounts receivable (Treasury and Corporate Finance Department) 2014 2015 Deviation of overdue accounts receivable for electricity transmission services from the amount established in the business plan. Risk Description/Factors Factors that affected risk assessment Risk Management Actions Risk Materialisation – – – – The Company approved the Programme for Improving the Efficiency of technological Connection to Electric Grids of Federal Grid Company and Increasing Transformer Capacity Utilisation. It includes actions targeted at initiation of amendments to the Russian laws (law-making) and organisational actions. Institutional actions of the Programme are targeted at improving the efficiency of Federal Grid Company’s operations when the Company provides technological connection services if tariff sources of financing are insufficient, including: • Drafting and implementation of template documents in order to unify the document flow in the process of technological connection of customers • Actions to increase capacity utilisation by identifying and decommissioning inefficient capacities • Setting of schedules for completion of procedures by the Company’s structural units and implementation of actions to improve control over scheduled deadlines at all stages of business process, from registration of an application for technological connection to full performance of contractual obligations Law-making activities in the context of these risks include the drafting of proposed amendments to laws and regulations that govern relations of the parties in the process of technological connection (including those that regulate the fundamentals of pricing when individual tariffs for technological connection are set) and responsibility of grid organisations and counterparties for complying with the material terms and conditions of contracts for technological connection. These proposals were communicated to the regulators (the Federal Anti-Monopoly Service and Ministry of Energy). Federal Grid Company monitors and updates information about transformer capacity which is free for technological connection of customers and generation facilities. This monitoring is done across all feeding centres, and information is available at the corporate website. The Company approved the Receivables and Payables Management Procedure. It establishes the procedures of taking decisions about accounts receivable by contract managers. Besides, the Budget Committee has been established and is operating. Its goals are to make cash management in the Company more efficient, manage risks related to overdue accounts receivable and payable, and improve cash turnover. The Committee responsibilities include but are not limited to the following: • Review of aggregate reports about the status of accounts payable and receivable and explanatory notes of contract managers • Taking decisions about ways of recovering accounts receivable that have been overdue for more than three months and accounts receivable that were submitted for the Committee’s decision by contract managers • Taking decisions to write off bad debt • Selective assessment of the performance of employees who manage accounts payable and receivable • Taking decisions on proposals about disciplinary measures against delinquents to be brought for approval by the Chairman of the Management Board in cases when the procedure of handling overdue accounts payable and receivable is breached RISK FACtORS 185 CONtROL SYStEM Risk (Risk Disclosing Unit) Risk assessment and changes in the risk relevance 2014/2015 4. Environmental risks (Environmental Policy Department) 2014 2015 2014 2015 186 Risk Description/Factors Factors that affected risk assessment Risk Management Actions Risk Materialisation Risks related to noncompliance with the Russian laws on environmental protection. In accordance with a decision taken by the Board of Directors (Minutes No. 166 dated 3 July 2012), since 2011 the Company gradually introduced and certified an environmental management system in its branches. In 2015, the environmental management system was put in place and certified in the branches of MES Siberia, Western Siberia, Ural and Volga. Besides, we obtained a unified company-wide certificate for Federal Grid Company. As per Executive order No. 362 dated 11 September 2015, the Company drew up a Procedure of Working with Trichlorodiphenyl-Containing Equipment. Trichlorodiphenyl-containing equipment (total weight: 262.04 tons) was handed over for salvage / placement from several PMES. – RISK FACtORS Risks related to the failure to implement assignment of the President of the Russian Federation, dated 6 June 2010 (subclause “l” of Clause 1 in the List of Assignments No. Pr-1640 and Directive No. 1710p-P13 of the Government of the Russian Federation, dated 30 April 2012 “on the need to ensure that joint-stock companies with government capital take a decision on implementation of voluntary mechanisms of environmental responsibility” (hereinafter “Assignments” and “Directives”) and decisions taken by the Company’s Board about the procedure of implementation and obtaining the certificates for compliance with the international standard ISo 14001:2004 for the Company’s environmental management system (Minutes No. 230 of the Board meeting, dated 3 october 2014). the Company implements its environmental-saving initiatives in accordance with the Policy of Innovative Development, Energy Saving and Improvement of Energy Efficiency adopted by PJSC Rosseti (Minutes No. 222 of the Board meeting dated 30 June 2014) and Environmental Policy of Federal Grid Company (Minutes No. 230 of the Board meeting dated 03.10.2014). The Company implements the decision of its Board of Directors to put in place the system of environmental management as a voluntary mechanism of environmental responsibility, and obtain a certificate of compliance with the international standard ISo 14001:2004. The Company completed a set of actions that would help to embrace all its branches in one environmental protection framework in accordance with the international standards. An independent audit of the Company’s environmental management system was completed. 187 2014 2015 Reputation risks the Company follows clearly formulated principles of corporate social responsibility, given its impact on the national economy, environment and the society. Particular attention is paid to implementation of charitable, social and environmental programmes most of which are long-term ones. Risk Description/Factors Factors that affected risk assessment Risk Management Actions Risk Materialisation Political risk factors in 2015 were minor for the Company because political stability was maintained. The most significant economic risk factors were related to the deterioration of macroeconomic fundamentals (GDP, inflation, unemployment and others). Lower oil prices, depreciation of the Ruble exchange rates to the main foreign currencies and economic sanctions against the Russian Federation resulted in the higher relevance of the overall economic risk. Risks related to the political and economic situation in the country fall in the group of risks that the Company cannot manage or influence. Market situation deteriorated due to other factors; electricity consumption declined, followed by the lower demand for the Company’s services. RISK FACtORS CONtROL SYStEM Risk (Risk Disclosing Unit) Risk assessment and changes in the risk relevance 2014/2015 CoUNTRY AND REGIoNAL RISKS 5. Risks related to the political and economic situation in the country and region (Strategic Development Department) Political factors 2014 2015 Economic factors 2014 2015 188 189 6. Risks related to the geographical characteristics of the country or region, including an increased risk of natural disasters and possible discontinuation of transport services (Strategic Development Department) 2014 2015 Federal Grid Company manages a unified national electricity grid on the larger territory of the Russian Federation. It has a distributed network of structural units, and its assets are located on the whole territory of the Russian Federation. Therefore, risk factors for the Company are weather, climatic, seismic and other nature conditions. the Company takes these factors into account when it plans and constructs grid facilities, takes decisions about protection tools, location of repair facilities, distance of facilities from the repairs units, and possible impact of natural phenomena on these facilities. Federal Grid Company operates in compliance with the Unified Technical Policy of the Electric Grid Complex that was approved by the Board of Directors of JSC Rosseti (Minutes No. 138 dated 23 october 2013). The aim of the Unified technical Policy 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 industrial and environmental safety based on innovative principles that provide non-discriminatory access to electric grids for all market participants. This includes: • An increased number of off-road vehicles and use of air drones in the process of operating the overhead lines and arranging post-accident inspections • Higher readiness for repair and recovery works Equipment outages and technological disruptions caused by weather, climatic, seismic and other nature conditions did not exceed the estimated levels. CONtROL SYStEM Risk (Risk Disclosing Unit) Risk assessment and changes in the risk relevance 2014/2015 FINANCIAL RISK 7. Financial risk (Treasury and Corporate Finance Department) 2014 2015 190 RISK FACtORS Risk Description/Factors Factors that affected risk assessment Risk Management Actions Risk Materialisation – This risk is related to possible losses and/or the Company’s inability to meet its obligations in full due to the following factors: • CBR’s monetary policy • Exchange rate fluctuations • Changes of interest rates • Inflationary pressures • The Company’s restricted access to equity or debt financing The risk materialised in terms of higher interest rates that affected the average cost of debt for the Company The Company is implementing an Action Programme (“road map”) to ensure financial sustainability and enhanced economic efficiency of Federal Grid Company in 2014–2015, including a package of anti-crisis actions approved by the Management Board (Minutes No. 1263 dated 10 october 2014). The goals of this Programme are to achieve the best balance between objectives of the Company’s investment growth, the level of its shareholder value and profitability; ensure financial sustainability; and conduct efficient and high-performance business operations. the Company developed and implemented actions that are included in the programmes and have an impact on the outcomes of the Company’s operations. These include: • Investment Efficiency Programme which envisages a reduction of investment costs • Programme for Substitution of Imported Equipment, Technologies, Materials and Systems for 2015–2019. 191 • Maintenance and Repair Costs Efficiency Programme • Payroll Efficiency Programme • Programme for Improving Efficiency of Technological Connection to Federal Grid’s Electric Grids and Increasing Utilisation Ratio of Transformer Capacities. The Company also implements other actions to minimise the financial effect of the abovementioned factors: • It continuously monitors and manages risks related to changes of the regulatory framework (this is done by departments of finance and economy); • It takes actions to improve management of the Company’s working capital and ensure profit from cash flow, including via stronger financial discipline of counterparties. The Company also implements its policy which envisions gradual reduction of advances paid to contractors; • Federal Grid Company handles claims and bad debt recovery, and manages accounts receivable in order to reduce overdue accounts receivable or prevent their accumulation by counterparties; • the Company drafts proposals for the federal executive authorities on how to change the process of calculation of fines for untimely fulfilment of contractual obligations; • The Company conducts negotiations with entities that provide cross-border electricity transmission services (Kazakhstan, Belarus, the Baltic countries). The aim of these negotiations is to achieve an agreement not to increase the cost of transit due to exchange rate changes and synchronise the parameters of tariff indexation between the countries; • The Board of Directors established a foreign currency limit on FX transactions in order to control operations in foreign currency; • The Company takes actions to obtain various forms of government support (allocations from the National Wealth Fund, budget allocations via federal targeted programmes, loans and guarantees via investment projects support programmes implemented on the basis of project financing and others). CONtROL SYStEM Risk (Risk Disclosing Unit) Risk assessment and changes in the risk relevance 2014/2015 8. Legal risks (Rules and Regulations Directorate, Legal Department) 2014 2015 192 2014 2015 9. Risk of loss of business reputation (External Communications and GR Department) 2014 2015 Risk Description/Factors Factors that affected risk assessment Risk Management Actions Risk Materialisation the factor that affected the changed assessment of the risk related to the liability of customers for the untimely payment for services was the passage of Federal Law No. 307-FZ dated 3 November 2015 “On Amending Several Laws of the Russian Federation in the Context of Strengthening of Payment Discipline of Users of Energy Resources.” – these are risks related to changes in legislation and to regulation of Federal Grid’s operational areas, including but not limited to: • Relations with other owners of UNEG facilities; • Calculation of the justified value of maximum capacity for technological connection of applicants; • The procedure for defining the declared capacity to be used for setting of the electricity transmission tariffs and calculation of service costs; • technological connection to the Company’s facilities having voltage below 110 kW; • Coordination of electricity market participants’ programmes for development of the electric power industry in the longer term; • Customers’ liability for the untimely payment for services; • Relations with the third parties in technological connection. Risks related to public law and pertaining to: • Changes of court practices on issues related to the Company’s operations • Balance of interests with other entities operating in the electric power industry Risk related to lower efficiency in communication with stakeholders and lower level of the Company’s transparency. Information effect if other risks materialise. The Company continuously contributes to the drafting of rules and regulations at the federal level, takes part in the work of inter-ministry panels on the regulation of the electric power industry, and co-operates with the relevant committees of the Federal Assembly of the Russian Federation. The following actions were taken in the reporting year as part of this work: • Federal Grid Company drafted proposed amendments to the Federal Law “on Electric Power Industry” (about relations with other owners of UNEG) and submitted them to the Russian Ministry of Energy. • Federal Grid Company drafted proposed amendments to the rules and regulations on the establishment of a procedure for the calculation of declared capacity including for regional grid organisations that purchase services from Federal Grid Company • Federal Grid Company and the Ministry of Energy drafted and promoted proposed amendments to laws and regulations. These amendments will provide for exceptional cases of technological connection of the customers’ power receivers to electric grid facilities having voltage below 110 kV • Federal Grid Company drafted proposed amendments to laws and regulations and submitted them to the Ministry of Energy. The proposals pertain to the procedure whereby a grid organisation settles relations with the third parties in technological connection. • Federal Grid Company co-operated with the Ministry of Energy, Federal Anti- Monopoly Service and the State Duma Committee for Energy in order to include the Company’s proposals in the bill No. 348213-6 “on Amending Several Laws of the Russian Federation in the Context of Strengthening of Payment Discipline of Users of Energy Resources.” the Company monitors the key trends in court practices pertaining to its main operational areas. In the reporting period, there were no changes in the court practices on issues related to Federal Grid Company’s core business that could have a significant adverse effect on its performance and on the outcomes of court trials in which the Company is a party. The Company’s information policy is targeted at the efficient disclosure of mandatory and additional information that helps to raise information openness and transparency of relations between the Company and its shareholders, creditors, prospective investors, professional participants of the securities market, government bodies, the media and other stakeholders. The Board of Directors (Minutes No, 280 dated 24 August 2015) approved a new version of the corporate Information Policy which takes into account the requirements of the Russian Corporate Governance Code. The Company’s internal rules and regulations on information exchange help to mitigate the cost of these risks if they materialise. – _ RISK FACtORS 193 CONtROL SYStEM Risk (Risk Disclosing Unit) Risk assessment and changes in the risk relevance 2014/2015 10. Strategy risk (Strategic Development Department) 2014 2015 11. Execution risk related to the Import Substitution Programme (Department for the Development of technologies for the Manufacturing of Electrical Equipment) 2014 2015 194 Risk Description/Factors Factors that affected risk assessment Risk Management Actions Risk Materialisation RISK FACtORS Strategy risk factors are related to losses that the Company might incur because of mistakes in taking decisions about the strategy of its operations and development. – Execution risks related to the Import Substitution Programme became more relevant in 2015 because external environment further deteriorated, additional sanctions were imposed on the Russian Federation by some countries, and Russia imposed countersanctions. • Limited or impossible procurement of electrical products (caused by legislative restrictions or ban on import to Russia either by foreign countries or by the Russian Federation); refusal of foreign producers to co-operate with the Russian companies; domestic producers do not have the required technology, equipment and competencies for manufacturing electrical products that would meet the present-day requirements) • Increased prices on electrical products due to adverse external factors (Ruble depreciation against the main currencies; foreign producers’ discriminatory policy toward Russian customers; absence of Russian analogues of foreign equipment; or strong dependence of their manufacturing processes on imported equipment, inputs and spare parts) – In Q4 2015, due to Russian sanctions against turkey, Russia strengthened the customs control procedures for turkish goods including spare parts for the manufacture of electrical equipment. This increases the risk of delayed delivery of electrical equipment with these spare parts to the Company’s facilities. 195 The goals of the Company’s strategic development are outlined in its Long-Term Development Programme for 2015–2019, which was approved by the Board of Directors (Minutes No. 243 dated 22 December 2014). The Programme has been coordinated with the Ministry of Energy and Ministry of Economic Development, and approved by the Expert Council at the Government of the Russian Federation. Advantageous development area for the electric energy industry as an industry of production infrastructure and electricity transmission via backbone electric grids are identified with participation and control of the government bodies. Federal Grid Company and the System Operator draw up an annual Scheme and Development Programme for UES of Russia. The Scheme and Programme identifies, for seven years, the key development areas for the backbone grid in accordance with the projected volumes and location of generating sources and load units. The Scheme and Programme are approved by the Ministry of Energy. The Company drew up and approved (Directive No. 820r dated 29 December 2014) execution risk management actions related to the Programme for Import Substitution of Equipment, Technologies, Materials and Systems for 2015–2019. These actions include: • Establishment of priorities for implementation of the Company’s investment projects • Changes in the bids documentation and standard delivery contracts in order to use fixed prices for the calculation of prices for electrical products, and include clauses about mandatory hedging of currency risks in the delivery period • Adjustments in the Company’s technical policy and main technical and project decisions in order to increase the number and range of domestically- manufactured electrical products at the Company’s facilities; • transition to the centralised procurement of the main groups of import- substituted electrical products • Long-term delivery contracts with the Russian producers and those foreign companies that localise production in the Russian Federation • Centralisation of procurement of the main electrical equipment and an increased share of Russian-made electrical equipment procured for the Company, in compliance with the applicable legislation • Encouragement of innovative development of domestic producers of electrical equipment • Communication with the federal, regional and municipal authorities in order to ensure support of domestic producers of electrical equipment CONtROL SYStEM Risk (Risk Disclosing Unit) Risk assessment and changes in the risk relevance 2014/2015 12. Operational and technological risk (operational and Technological Management Department) 2014 2015 196 Risk Description/Factors Factors that affected risk assessment Risk Management Actions Risk Materialisation – this risk is related to high physical wear and obsolescence of electricity grid assets, violations of service conditions and operational regimes of electric grid equipment, damages of equipment, wrong performance of relay protection of automatic controls and automatic emergency response system, the use of inefficient and obsolete technologies and failure to implement the repairs programme in full. System-wide interruptions in performance and failures to supply electricity to customers, either due do equipment failures or to natural disasters could eventually cause significant economic and reputational losses for the Company. Besides, they could affect the volume of losses in its electric grids. – Federal Grid Company operates in accordance with the regulation on the Unified Technical Policy in the Electric Grid Complex. The aim of its implementation is to enhance the electric grid complex’s reliability and efficiency in the short and medium term with an appropriate industrial and environmental safety based on innovative principles of development. Implementation of the corporate Investment Programme 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 exchanges • 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 sources, vehicles and special-purpose machinery for post-accident repairs • Implement an action plan to prevent an increase of accident rate at high-voltage lines and substations. Moreover, the Company implements the following actions toward mitigation of operational and technological risks: • Maintains the existing number of repair employees that provide maintenance and repair of substations and high-voltage lines • Signs contracts for the servicing of substation equipment with the producers of electrical equipment • Educates, oversees and certifies employees who operate process equipment • Conducts emergency response drills and onsite inspections in the Company’s branches • Implements the Property Insurance Coverage Programme • Oversees operational and technological risks via technical oversight and maintaining the quality of construction control which is exercised by the Technical Supervision Centre as Federal Grid’s branch • Maintains primary equipment at UNEG substations and high voltage lines, as well as auxiliary equipment at UNEG substations, in a working order in accordance with the regulatory requirements for maintenance and repair • operations of permanent duty teams in the Company’s branches. These teams are to conduct emergency and recovery work at the grid facilities. Besides, the Company establishes emergency reserve of equipment in order to ensure reliable operations of UNEG facilities in cases of disruptions in the electric grids due either to equipment failures or the aftermath of natural disasters or other emergency situations. RISK FACtORS 197 CONtROL SYStEM Risk (Risk Disclosing Unit) Risk assessment and changes in the risk relevance 2014/2015 13. Investment risk (Investment Planning and Reports Department) 2014 2015 198 Risk Description/Factors Factors that affected risk assessment Risk Management Actions Risk Materialisation – Failure to meet the parameters of the Investment Programme which is approved by the Ministry of Energy and taken into account in tariff decisions results in a decline of gross revenues when tariffs are adjusted for the upcoming period of regulation (in accordance with the RAB-based regulation methodology). Rules of Approval of Investment Programmes of Electricity Sector Facilities with State Participation, and Grid organisations” (included in Resolution No. 247 of the Government of the Russian Federation (dated 29 March 2014) became effective. These Rules may expose the Company to risks because facilities that are not included in the regional plans may be excluded from this Investment Programme. the Company has developed and is implementing the following programmes in order to mitigate the abovementioned risk factors: • Investment Efficiency Programme (reduction of investment costs) • Programme for Substitution of Imported Equipment, Technologies, Materials and Systems for 2015–2019 • Programme for Improving the Efficiency of Technological Connection to Federal Grid’s Electric Grids and Increasing Transformer Capacity Utilisation. Besides, the Company implements measures toward fulfilment of an Action Plan (“road map”) to establish and develop 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). the Company implements an anti-corruption policy in order to avoid exposures to fraud in procurement during implementation of the Investment Programme; actions are taken to assess the good faith and reliability of counterparties. – RISK FACtORS 199 SECURItY • Protection of information assets of Federal Grid Company, ensuring smooth operation of corporate systems, server and network resources Managing Integrated Security In 2015, along with measures aimed at protecting energy facilities against terrorism, providing them with security equipment and optimal physical security, measures were implemented to maintain an integrated automated security management system. In this regard, work was performed under the direction and supervision of the Security Unit on arranging tendering procedures for maintenance and technical support of the integrated automated security management system within the limits of financing in MES South, MES East, MES Centre and MES North-West. 201 CONtROL SYStEM Ensuring Security In 2015, the Board of Directors resolved to adopt an Integrated Security Policy of Federal Grid Company (Minutes No. 269 dated 29 June 2015). The Policy sets goals, objectives and principles of the following areas of Federal Grid’s activities: • Scheduled plans for organisational and technical measures were approved for preparing integrated security systems of MES North-west, MES Volga, MES Ural, MES South and MES Centre for 2018 FIFA World Cup and 2017 FIFA Confederations Cup. • Protecting against terrorism and crime • Economic security • Information security • Managing integrated security 200 In the reporting year, the main efforts of the Security Unit of Federal Grid Company were aimed at implementing an Integrated Security of Federal Grid, instructions of the Russian Ministry of Energy and PJSC Rosseti. Protecting against Terrorism and Crime The main objective in this area is to improve a management system of security units and enhance the efficiency of anti-terrorist security of UNEG facilities. In this regard, documents were developed regularly for the discussion of challenging issues of secure operation of electric grid facilities at the meetings of the Security Council of Russia, National Anti- terrorism Committee, meetings of the working group of the Russian Ministry of Energy. In 2015, the Security Unit performed a considerable amount of work to ensure protection of energy facilities against terrorism and crime, including categorisation of facilities and interaction with law enforcement agencies. • Methodological support and joint security inspections of energy facilities of MES branches – North-west, Centre, South, Volga and East • optimisation and reduction by 10% of expenses for facilities’ protection Economic Security the main efforts of the Security Unit together with security units of MES branches and subsidiaries were focused on early identification and prevention (localisation) of threats and risks that could cause the most serious financial and image damage to the Company. • A series of audits were conducted to identify overpricing for goods, works and services supplied to the Company • to ensure control of tender procedures and contract work, 511 checks of legal entities and individuals were made before signing contracts, 258 document sets related to the above procedures were reviewed • the Security Unit actively implemented measures to protect the Company’s interests with respect to debt recovery under the enforcement proceedings: in 2015, 69 writs of execution were received to recover the debt for the total amount of RUB15.728 billion from 28 companies; as a result of the work performed, the Company received RUB 9.6 billion. Information Security the work on ensuring information security was performed in accordance with the approved Integrated Security Plan, instructions and orders of the Federal Grid leadership and the Russian Ministry of Energy in the following two areas: • Protection of information and process management systems at facilities of the electric grid complex – cybersecurity of automated process control systems (APCS) CONtROL SYStEM ANtI-CORRUPtION ACtIVItIES Comprehensive Implementation of Anti-Corruption Policy Fighting corruption is among the priority tasks of the Long-term Development Programme of Federal Grid Company. Principles and Tasks of Anti-Corruption Policy of Federal Grid Company During 2015, the Company has continued to improve its anti-corruption activities, taking into account recent changes in anti-corruption legislation, and the most important event of the beginning of the year – Federal Grid’s joining the Anti-Corruption Charter of the Russian Business and its inclusion in the Consolidated register of parties to the Charter (Certificate No. 2041 dated 13 March 2015). the anti-corruption policy is an element of the internal control and risk management system of Federal Grid Company and provides a set of measures to establish rules, procedures, organisational structure and corporate culture aimed at preventing corruption and reducing reputational risks and risks of imposing penalties and sanctions to the Company for bribery of officials. 202 In the reporting year, we developed a new version of the Anti-corruption Policy of Federal Grid Company, which was later approved by the Board of Directors (Minutes No. 280 dated 24 August 2015). the principles and tasks set out in our Anti-Corruption policy are in line with the best Russian and international anti-corruption standards. ▶ Improvement of the anti-corruption management system Department of Operational Control and Compliance Internal Control Director Board of Directors over the implementation of measures for In order to enhance the efficiency of control preventing and combating corruption, the Audit Committee of the Board of Directors has been included in the anti-corruption management structure Central Commission for Compliance with Ethical Standards and Conflict of Interest Resolution Commission of branches, subsidiaries and associates for Compliance with Ethical Standards and Conflict of Interest Resolution Audit Committee Chairman of the Management Board General Directors of branches, subsidiaries and associates Persons in charge for implementing anti-corruption measures in branches, subsidiaries and associates main principles main tasKs • Full compliance of Anti-Corruption Policy with applicable legislation and generally accepted rules • Zero tolerance towards corruption in all its forms and manifestations that includes an absolute prohibition for managers and employees to participate in corrupt practices • Strict observance of rights and legitimate interests of employees, partners and counterparties when implementing anti-corruption measures • A «tone at the top» set by senior managers and directors when creating a culture of zero tolerance towards corruption and building an anti-corruption system • Employee involvement in the design and implementation of anti-corruption standards and procedures • Proportionality of anti-corruption procedures and corruption risks • Liability for corruption of all employees irrespective of their position, length of service or other conditions • to ensure compliance with the requirements of Article 13.3 of the Federal Law «on Anti- Corruption» and other laws and regulations in the anti-corruption area • to perform compliance control, including anti- corruption compliance control • To establish an effective legal mechanism to prevent and fight corruption • To establish an effective mechanism for implementing measures to prevent and fight corruption • to prevent corrupt practices and to ensure liability for corruption offences • To build awareness and uniform understanding among employees, shareholders, members of the governing and control bodies, partners and counterparties of the Company’s position of zero tolerance towards corruption in all its forms and manifestations • Continuous control over, and regular monitoring of, the effectiveness of anti-corruption standards and procedures • To minimise the risk of the Company’s involvement in corrupt activities Focus Areas of the Anti-Corruption Policy Implementation in 2015 Regulatory framework development to improve our anti-corruption regulatory framework, we have introduced the following changes therein in the reporting year: • The Regulations “on exchanging business gifts and on reporting by employees of the Executive office on all gifts received in connection with their official position or performance of official duties, on handing over and evaluation of gifts, their disposal (repurchase) and entering proceeds to an account” were approved by the Administrative order of Federal Grid Company No. 347 dated 26 August 2015 • Similar regulations were approved in branches and subsidiaries of Federal Grid • Working committees of the Company’s Executive office and branches were created to decide on the necessity to dispose or otherwise use business gifts to support the Federal Grid’s activities • the Administrative Order of Federal Grid Company “on Approval of Regulations on Conflicts of Interest Resolution” No. 207 dated 25 April 2014 was amended in accordance with the Federal Law No. 285-FZ dated 05 october 2015 employee training and development Employees of the Department of operational Control and Compliance (DoC&C) refresh and update their professional knowledge and skills regularly. Due to the high level of professionalism, the Department leadership team is included in the Anti-Corruption Expert Council on the Chamber of Commerce and Industry of the Russian Federation. 203 CONtROL SYStEM ANtI-CORRUPtION ACtIVItIES INFORMAtION POLICY 204 In 2015, the DoC&C employees received training on various topics, including: Evaluation of the effectiveness of the Anti-Corruption policy – annual employee survey results • Meeting the requirements of the Russian and international legislation with regard to anti-corruption in organisations • Meeting the requirements and practical application of the Russian procurement legislation • Internal audit and anti-fraud activities • Creating a system of compliance control and corruption risk management In addition, a number of training videoconferences were conducted for the staff of the Executive office and branches devoted to anti-corruption activities and transparency of the Company’s business. Anti-corruption control and corruption risk management In order to exercise a risk-based approach to the implementation of the Anti-Corruption Policy in Federal Grid Company, a Corruption risk map and Matrix of corruption risks and anti-corruption control procedures were developed in accordance with the procedures and techniques of Federal Grid’s internal control and risk management system. to minimise corruption risks, a series of anti- corruption control procedures were conducted in 2015, including: • Submission of a monthly report on the contracts made, including the chain of ownership of counterparties, to the Russian Ministry of Energy, the Federal Financial Monitoring Service (Rosfinmonitoring) and the Federal Tax Service of Russia • Anti-corruption review of documents under 13,846 transactions, including procurement procedures, followed by specific actions aimed at preventing and/or compensating losses and missed profit under these transactions • Review of documents submitted to receive charitable assistance, as well as monitoring of the 3% 7% in the Executive office increase in the number of employees who assess the Anti-Corruption policy as effective compared to 2014 2% 7% in the Executive office increase in the number of employees who are ready to report corruption 9% increase in the awareness of where to refer in case an employee becomes aware of possible corruption acts use of funds allocated to 55 organisations in the amount of more than RUB48 mln • Anti-corruption review of 6,325 organisational and administrative documents and their drafts in the Company’s Executive office and branches • Declaration of conflicts of interest by the Company’s management team with the follow up check of more than 5 thousand declarations, as well as the work on detecting conflicts of interest, settlement of pre-conflict situations and resolution of conflicts of interest in the Company • Monitoring transactions for conflicts of interest, timely receipt of information about changes in the chain of ownership of counterparties, as well as the inclusion of an anti-corruption clause and other mandatory conditions in contracts • Monitoring of the Company’s requests for payment under bank guarantees due to the failure of its counterparties to perform their contracts obligations. In 2015, 293 requests were submitted for the total amount of RUB22.5 billion transparency for all stakeholders Declaration of commitment to transparency principles disclosure principles of federal grid company Information policy of Federal Grid Company is aimed at ensuring the Company’s effective interaction with shareholders, investors and other stakeholders, achieving the full realisation of their rights to receive relevant and reliable information required for taking informed investment and management decisions. Federal Grid avoids a formalistic approach to disclosure and goes beyond strict compliance with applicable legislative requirements. The Company strives to provide stakeholders with all material facts and events related to its activities as soon as practicable using various disclosure forms and channels, primarily electronic. when providing information, the Company maintains a reasonable balance between its own and stakeholder interests, including restrictions on access to insider information and trade secrets. New Regulations on Information Policy In 2015, in accordance with the Action Plan (‘road map’) on implementing key provisions of the Russian Corporate Governance Code, we developed a new version of the Regulations on Information Policy of Federal Grid Company that was approved by the Board of Directors (Minutes No. 280 dated 24 August 2015). In compliance with the Code recommendations, the Regulations set a list of additional information, which the Company undertakes to disclose beyond that which is statutorily required. It includes, among other • Regularity • Consistency • timeliness • Availability, reliability, completeness and comparability of disclosures things, information on the corporate governance system, work of the governing bodies, capital structure, financial activities and financial position of Federal Grid. The Chairman of the Company’s Management Board is responsible for the completeness and accuracy of the information disclosed, ensures procedures for the preparation, approval, control of content and time frames of disclosures, appropriate document storage system, functionality and safety of information resources. The Board of Directors is responsible for monitoring compliance with the Company’s information policy. The full text of the Regulations on Information Policy of PJSC FGC UES is available on our website www.fsk-ees.ru, section Company / corporate_governance / corporate_documents / Details on the Company’s compliance with the information policy are available in paragraphs 6.2 and 6.3 of the Report on the Company’s compliance with principles and recommendations of the Corporate Governance Code in Appendix 3 to the Annual Report 205 DISCLoSURE INFORMAtION POLICY what does transparency mean to federal grid company in the context of the long-term development programme? 206 “First of all, transparency is the norm for such a large public infrastructure company as Federal Grid. Of course, we strive to ensure that our operations are transparent and predictable for the State, our customers, shareholders, suppliers, contractors and other stakeholders. this fully applies to priorities of the Long-term Development Programme and its implementation. Particularly as our Company is progressing. Today, our Company provides uninterrupted electricity supply, high quality services and competitive conditions for the industry, military industrial Dmitry Klokov Director of external Communications – Head of external Communications and Government Relations Department complex and other consumers who connect directly to UNEG. Since it has become our long-term priority, we deliver relevant information to all stakeholders. Moreover, measures were implemented by the Federal Grid’s management that enabled us to strengthen the Company’s financial position and achieve the best, for the last four years, results for shareholders and investors. It is important to demonstrate what steps we had taken and explain how Federal Grid plans to maintain its positions in the future.” Disclosure Channels Federal Grid Company uses various disclosure channels, primarily electronic, which ensure free, easy, indiscriminate and free-of-charge access to information for all stakeholders. We regularly update our corporate website www.fsk-ees.ru which sections contain both mandatory and voluntary disclosures on all areas of the Company’s business, information for shareholders and investors, customers, suppliers, and employees, the latest news and press-releases, financial statements, annual reports and reports on sustainable development. We ensure that the structure of our website and its interactive tools facilitate quick and easy search of necessary information. In addition to publishing significant information on its website, the Company discloses information on the website of Interfax agency, on the home pages of the Moscow Exchange, London Stock Exchange, and in the print edition of Rossiyskaya Gazeta, as well as disseminating price-sensitive information through the RNS portal. the Company pays a special attention to such important tools for communication with its shareholders, investors and other stakeholders as annual and social reports. We strive to constantly improve the quality of our corporate reports, combining a clear structure and logic with the brevity and depth of statements. recognition – expert community evaluation of 2014 annual report of federal grid c ompany • Best Annual Report of a Company with Capitalisation from 30 to 200 billion roubles XVII Annual Report Competition organised by the Expert RA rating agency • Best Annual Report in the Electric Energy Sector • Best Annual Report of the Industry (infrastructure) • Best Presentation of Company Strategy and Investment Attractiveness in an Annual Report • Best E-Annual Report (III position in the nomination) XVIII Annual Report Competition orginised by the Moscow Exchange and RCB Media Group • Best Annual Report in Non-Financial Sector XII Open Annual Report Competition organised by the Administration of Krasnodar Krai 207 Public Relations Federal Grid Company closely engages with stakeholders on a regular basis, including government authorities, public organisations and Mass Media. To implement the Company’s policy in this area, a Department of External Communications and Government Relations has been created and operates actively in various areas, including engaging with Mass Media and stakeholders, arranging specific events and projects aimed at promoting activities of the backbone grid complex. PR projects of Federal grid Company are implemented within the framework of the Unified Information Policy of PJSC Rosseti. Communications with Mass Media and Public Organisations During 2015, the Company actively engaged with Mass Media. In January, the Chairman of the Federal Grid’s Management Board, Andrey Murov, gave an interview to the newspaper Vedomosti, where he spoke about the Company’s activities in a changing macro-economic environment and main directions for the future development. As part of the Company’s participation in 2015 St. Petersburg International Economic Forum, the Chairman of the Federal Grid’s Management Board gave interviews to the tV channel Russia 24 and the radio stations Kommersant FM and Business FM. Andrei Murov told about areas for the development of the Federal Grid’s infrastructure in the regions, the Company’s investment programme implementation tools, as well as on the results of the Company’s operations and measures aimed at maintaining high level of reliability and development of the electric grid complex of the Russian Federation. In September 2015, the head of Federal Grid Company, Andrey Murov, was elected a Chairman of the Russian National Committee of the International Council on Large Electric Systems (RNC CIGRE), a leading international organisation in the field of electric energy industry. And in November in Paris, he met with the President of CIGRE Klaus Froehlich, at which the parties discussed the extension of participation of the Russian members in the work of CIGRE and prospects of research in the field of global electric energy industry. DISCLoSURE INFORMAtION POLICY INVEStOR RELAtIONS participation in forums and conferences 2015 St. Petersburg International Economic Forum • Participation of the Federal Grid’s delegation in the Forum and holding a number of meetings with the Russian and foreign partners • The Chairman of the Management Board, Andrey Murov, spoke at the Panel Session “The Russian Regions’ Growth Formula: Freedom to Experiment” about the Company’s activities aimed at creating favourable conditions for clients and for the development of the economy the First Eastern Economic Forum in Vladivostok • The Chairman of the Federal Grid’s Management Board, Andrey Murov, presented a vision of the region development prospects, the role of electricity infrastructure in implementing key macroprojects and promoting the industrial capacity growth International Investment Forum Sochi-2015 • Participation of the Federal Grid’s delegation in the Forum and discussion of issues of infrastructure support of social and economic development of southern regions of Russia 208 International Forum ENES 2015 • Signing of a Co-operation Agreement with the administration of Krasnodar Krai • The Chairman of the Federal Grid’s Management Board took part in the meeting of ministers of BRICS and spoke on the development of the electricity industry in Russia, manufacturing of electrical products, the implementation by the member countries of joint projects in the electric grid complex Effective investor communication channel Federal Grid Company is a public company, one of the top blue chips of the Russian energy sector. our IR team maintains strong relationships with the investment community. The key objectives of the IR Team are to raise awareness of the investment community and to provide effective interaction therewith in order to enhance investor confidence and increase demand for the Company’s shares. we consider an active dialogue with the investment community to be important also for getting feedback from this audience, to understand how certain decisions may impact the investors’ assessment of the Company. IR Events In June 2015, as part of preparations for the Annual General Meeting of Shareholders, Federal Grid Company’s management held a meeting with a number of analysts from investment banks and brokerage companies covering the Russian electric energy sector. Following the meeting, the participants agreed to maintain an active dialogue enabling investors to receive all information on the Company’s activities and the Company to get feedback from the industry experts. In 2015, Federal Grid’s management held a series of one-on-one meetings with investors and analysts from investment banks in line with the Company’s «Meetings in such format have become a tradition and enable the Company’s management to get a direct feedback from the market experts, thus improving the quality and efficiency of management decisions» Andrey Murov the Chairman of the Management Board of Federal Grid Company policy on improving investment attractiveness among the financial market participants. During the reporting year, the Company’s IFRS financial results for 2014 were presented by the head of the financial unit through the conference call. Following the publication of Federal Grid Company’s IFRS results for the first half of 2015, the Company’s management held a meeting with representatives of major investment banks and investment companies, thereby facilitating direct dialogue and providing participants with the opportunity to discuss their questions directly with top management of the Company. In December 2015, the Chairman of the Management Board of Federal Grid Company, Andrey Murov, together with the Company’s key unit heads, held a business breakfast with the analysts and investment community representatives to discuss the Company’s performance in 2015, as well as mid-term plans. There was a third meeting held in such format. Further information on the IR events can be found in section Shareholders and Investors / IR releases of our website, www.fsk-ees.ru The list of investment analysts monitoring the Company’s performance is available in section Shareholders and Investors / Analysts Coverage of our website, www.fsk-ees.ru 209 Additional information KEY PERFOMANCE INDICATORS DISCLAIMER CONTACTS GLOSSARY DISCLoSURE q&a session some of the typical questions received from investors and answers thereto What is the impact of the Russian rouble exchange rate volatility and a rise in interest rates on the Federal Grid’s financial performance? the current economic situation in Russia is characterised by stable high volatility in foreign currency exchange rates. Besides, there are restrictions of access to foreign financial markets. All this, of course, has an impact on the operations of our Company, however this is not significant, and the financial position of Federal Grid is stable. The main impact of changes in exchange rates led to increased costs for services on electricity transit through foreign energy systems, which involve settlements in foreign currency, as well as increased cost of purchased imported equipment. What are the forecasts for the Federal Grid’s operating costs in 2016? In accordance with the Directive of the RF Government No. 2303p-P13 dated 16 April 2015, our Company strives to reduce operating costs by at least 2–3% annually. The Federal Grid’s Board of Directors approved the Methodology for Calculation and Evaluation of Key Performance Indicators for the Federal Grid’s Senior Management, including a target value for the reduction of unit operating expenses (costs) in 2015 by at least 14.2% compared to 2014. As of the end of the reporting year, we have managed to achieve reduction in specific operating costs by 24% While implementing the task set by the Government of the Russian Federation, and in accordance with our business plan, by the end of 2016, we intend to reduce unit operating costs by at least 41% compared to 2012, and by 2020 – by 51.9%. 210 ▶ 2016 Investor Calendar Date 25 February 17 March on or before 30 April on or before 30 May 29June on or before 29 July on or before 29 August on or before 28 october on or before 29 November Event/Location 2015 Annual Results (RAS) FY 2015 Financial Results (IFRS) Q1 2016 Financial Results (RAS) Q1 2015 Financial Results (IFRS) Annual General Meeting of Shareholders h1 2016 Financial Results (RAS) h1 2016 Financial Results (IFRS) Q3 2016Financial Results (RAS) Q3 2015 Financial Results (IFRS) December Annual meeting of the Company’s Management with the investment community/ Moscow Investor Calendar is available and updated regularly on our website www.fsk-ees.ru in section Investor / Investor Calendar ir team contacts phone: 8 (800) 200-18-81 fax: +7 (495) 710-96-41 egor toropov phone: 8 (800) 200-18-81, доб. 2275 e-mail: toropov-ev@fsk-ees.ru Alexey Novikov phone: 8 (800) 200-18-81, доб. 2143 e-mail: novikov-as@fsk-ees.ru ADDITIoNAL INFORMAtION Key Perfomance Indicators KEY PERFOMANCE INDICAToRS 2011 2012 2013 2014 2015 Change 2015/2014 2016, plan 2011 2012 2013 2014 2015 Change 2015/2014 2016, plan Financial Indicators Revenue Cost RUB mln 138,137 138,836 155,352 168,941 173,266 2.6% 205,795 RUB mln 85,390 108,213 124,783 132,459 134,938 1.9% 142,515 Adjusted EBITDA RUB mln 84,683 82,809 96,296 99,603 103,667 4.1% 102,851 Profit (loss) before tax RUB mln 11,444 –14,270 –17,672 14,338 27,884 94.5% 48,344 Net profit (loss) RUB mln –2,468 –24,532 –25,898 5,137 17,870 247.9% 32,750 Adjusted net profit (loss)* RUB mln 33,687 13,383 16,758 13,831 20,345 47.1% 40,653 Adjusted net profit per share RUB 0.0268 0.0106 0.0132 0.0109 0.0160 47.1% 0.0319 Credit portfolio RUB mln 105.0 177.5 282.4 257.8 274.6 6.5% 262.5 Unit incident rate Number of process disturbances caused by human errors Actual implementation of the investment programme Average level of customer satisfaction with technological connection services Accident frequency rate per 1,000 persons Tax payments to budgets of all levels units units 2.53 56 2.24 37 1.90 1.57 1.23 –21.7% 20 18 16 –11.1% RUB bn 184.7 179.9 149.7 90.9 85.9 –5.5% 99.0 points 9.3 8.9 9.3 8.6 9.07 0.47 point 0.025 0.028 0.032 0.008 0.018 125% RUB mln 15,741 9,980 13,082 20,156 26,171.6 29.8% 28,799 Market Capitalisation RUB mln 351,163.1 253,904.89 114,600.23 56,110.77 74,861.09 33.4% – Environmental costs RUB mln 155 142.5 206.7 225.8 248.3 10% 212 213 Financial benefit of measures implemented within the Energy Saving and Energy Efficiency Programme RUB mln 148.1 208.5 114.5 113.6 60.3 –46.9% 64.7 % % % total Shareholder Return, tSR Return on equity Return on net assets Financial leverage Non-Financial Indicators –23.4 –32.2 –56.4 –50.5 28 78.5 pp 4.09 3.95 0.22 1.57 1.58 0.32 1.97 1.99 0.44 1.63 1.62 0.44 2.34 2.30 0.43 931 139.1 0.71 pp 0.68 pp –2.3% 0.8% 0.2% Number of substations** units 854 891 919 924 Length of electricity transmission lines*** thousand km 124.6 131.6 135.1 138.8 transformer capacity of substations including leased substations MVA 322,533 334,797 332,009 332,133 334,501 0.7% Declared capacity Mw 90,937 90,492 91,398 90,887 87,920 –3.3% Electricity supply to customers Electricity losses within UNEG mln kwh 509,287 517,131 519,983 515,250 525,769 2.04% 525,244 mln kwh 22,553 21,946 22,262 21,261 23,478 10.4% 21,667 * Including leased facilities, open switchgears and cells at substations of other owners. ** Including leased transmission lines. *** Excluding accrual/reversal of provisions. 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, statements 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. “assume”, “may”, “could be”, “will be”, “continue” or similar words and expressions 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 forward-looking statements do not materialise. In view of the above risks, uncertainties and assumptions, the Company cautions that its actual results may differ materially from those expressed or implied in such forward-looking statements. the Annual Report contains certain forward-looking statements regarding business operations, economic and financial indicators of the Company, its business plans, projects and expectations. The Annual Report may also contain estimates of price changes, production and consumption volumes, 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”, 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-looking statements. Such forward-looking statements represent, 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. 214 DISCLAIMER CONtACtS Contacts pJSC FGC ueS Public Joint Stock Company Federal Grid Company of Unified Energy System Actual and postal address: 5A Academica Chelomeya str., Moscow 117630, Russia Call centre: 8 800 200 1881 For calls from neighbouring countries and beyond: +7 (495) 710 9333 Fax: +7 495 710 9655 E-mail: info@fsk-ees.ru Website: http://fsk-ees.ru/ For shareholders: 8 800 200 1881 Fax: +7 (495) 710 9641 Company Auditor (RAS) RSM RUS Limited Liability Company (RSM RUS LLC) Address: 4 Pudovkina str., Moscow 19285, Russia Phone: +7 495 363 2848 Fax: +7 495 981 4121 E-mail: mail@top-audit.ru INN: 7722020834 oGRN: 1027700257540 SRo Membership: Full name: self-regulatory organisation Non-for-Profit Partnership «Audit Association «Sodruzhestvo” Address: 21/4 Michurinsky prospect, Moscow 119192, Russia 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 statements. According to this requirement, KPMG CJSC was appointed as Auditor for Federal Grid Company’s IFRS consolidated financial statements for 2014 (as adopted by the EU). Company Auditor (IFRS) Closed Joint-Stock Company KPMG (CJSC KPMG) Legal address: office 3035, 18/1 olympic prospect, Moscow 119192, Russia Postal Address: Tower Complex Block, 10 Presnenskaya Naberezhnaya, Moscow 123317, Russia Phone: +7 495 937 4477 Fax: +7 495 937 4499 E-mail: moscow@kpmg.ru INN: 7702019950 oGRN: 1027700125628 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 Joint-Stock Company “Registrar Society StAtUS” (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 Non-Banking Credit organisation Closed Joint-Stock Company National Settlement Depository (CJSC NSD) Address: building 12, Spartakovskaya str., 105066 Phone: +7 495 234 9960 E-mail: sales@nsd.ru License number: 177-12042-000100 Issue date: 19.02.2009 Validity period: non-expiry Issuing authority: FFMS of Russia 215 ADDITIoNAL INFORMAtION Glossary Abbreviations 216 ADCS APCS BRELL CBETL CBR CHP CIMS CIS DECT EBITDA EMS ESS ESUPCN FFMS FOCN FtS GCC GDR Automated Dispatch Control System Automated Process Control System Belarus, Russia, Estonia, Latvia and Lithuania Cross-Border Electricity Transmission Line Central Bank of Russia Combined heat and Power Corporate Information Management System the Commonwealth of Independent States Digital European Cordless Telecommunications Earnings before Interest, Taxation, Depreciation & Amortisation Environmental Management System JSC Elektrosetservis Energy System’s Unified Process Communications Network Federal Financial Market Service Fibre-optic Communications Network Federal tariff Service Grid Control Centre Global Depository Receipt GLONASS Global Navigation Satellite System GDP GMS GRI GRES HPP HIFs HR HVL IAtS IFRS IDGC ICS IPS It Gross Domestic Product General Meeting of Shareholders Global Reporting Initiative State District Power Plant Hydro Power Plant Hazardous Industrial Facilities Human Recourses High Voltage Line Information Acquisition and transmission System International Financial Reporting Standards Inter-regional Distribution Grid Company Internal Control System Integrated Power System Information technology GLOSSARY 217 JSC KPI LED LLC MES MGCC MICEX MPEI NGPP NPP OHL OHtL oPEX RAS PABX PMES PSPP PtL R&D RAB RPA RUIE SS tPP UES UNEG VAt VMI wECM wwF XLPE Joint Stock Company Key Performance Indicator Light Emitted Diode Limited Liability Company Backbone Electric Grid Main Grid Control Centre Moscow Interbank Currency Exchange Moscow Power Engineering Institute Non-Governmental Pension Program Nuclear Power Plant Overhead Line Overhead transmission Line Operating Expenditures Russian Accounting Standards Private Automated Branch Exchange Backbone Electric Grid Enterprise Pumped Storage Power Plant Power transmission Line Research and Development Regulatory Asset Base Relay Protection and Automation Russian Union of Industrialists and Entrepreneurs Substation thermal Power Plant Unified Energy System Unified National Electric Grid Value Added tax Voluntary Medical Insurance wholesale Electricity and Capacity Market world wildlife Fund Cable with cross-linked polyethylene insulation ADDITIoNAL INFORMAtION Units of measure bn Gcal Gw km kv kw kwh l mln MVA MVAr Mw p.p. RUB billion gigacalorie gigawatt kilometer kilovolt kilowatt Kilowatt-hour litre million megavolt-ampere megavolt-ampere reactive megawatt Percentage point Russian rouble 218 GLOSSARY APPENDICES Appendices the following Appendices to the Annual Report are included in the set of document to be provided to shareholders as part of materials for the Federal Grid’s Annual Meeting of Shareholders, and are available on the Company’s website www.fsk-ees.ru for all stakeholders. • Appendix 1. Additional Information by Section of the Annual Report • Appendix 2. Audit Commission’s Report • Appendix 3. Report on Compliance with the Russian Corporate Governance Code and Report on Compliance with Main Principles of the UK Corporate Governance Code • Appendix 4. Information on Major Transactions and on Transactions made by Federal Grid Company in 2015, which are recognised under the RF laws as related party transactions, and are subject to approval by the Company’s authorised governing bodies • Appendix 5. Information on material Transactions made by Federal Grid Company and entities controlled thereby • Appendix 6. Information on the Actual Performance of Assignments of the President and the Government of the Russian Federation • Appendix 7. Information about participation of Federal Grid Company in subsidiaries, associates, and other entities in 2015 • Appendix 8. Information about the Structure of the Property Portfolio of Federal Grid Company • Appendix 9. Information about Land Plots of Federal Grid Company • Appendix 10. Information on Disposal of Non-Core Assets of Federal Grid Company in 2015 • Appendix 11. RAS Annual Financial Statements for 2015 219 • Appendix 12. Management Report 2015 • Appendix 13. IFRS Consolidated Financial Statements for 2015 Appendices to the Annual Report 2015 APPEndiCES to thE AnnuAl REPoR t APPEndiCES The following Appendices to the Annual Report are included in the set of document to be provided to shareholders as part of materials for the Federal Grid’s Annual Meeting of Shareholders, and are available on the Company’s website www.fsk-ees.ru for all stakeholders. APPENDICES 3 Appendix 1. Additional information by Section of the Annual Report 14 Appendix 2. Audit Commission’s Report 2 19 Appendix 3. Report on Compliance with the Russian Corporate Governance Code and Report on Compliance with main Principles of the uK Corporate Governance Code 57 Appendix 4. information on major transactions and on transactions made by federal Grid Company in 2015, which are recognised under the Rf laws as related party transactions, and are subject to approval by the Company’s authorised governing bodies 198 Appendix 5. information on material transactions made by federal Grid Company and entities controlled thereby 202 Appendix 6. information on the Actual Performance of Assignments of the President and the Government of the Russian federation 211 Appendix 7. information about participation of federal Grid Company in subsidiaries, associates, and other entities in 2015 215 Appendix 8. information about the Structure of the Property Portfolio of federal Grid Company 218 Appendix 9. information about land Plots of federal Grid Company 220 Appendix 10. information on disposal of non-Core Assets of federal Grid Company in 2015 224 Appendix 11. RAS Annual financial Statements for 2015 246 Appendix 12. management Report 2015 278 Appendix 13. ifRS Consolidated financial Statements for 2015 AdditionAl infoRm Ation Appendix 1. Additional information by Section of the Annual Report PRODUCTIVE CAPITAL | Operating Performance | Electricity Transmission ▶ Electricity Export and Import under Contracts of PJSC INTER RAO in 2011-2015 Actual export of electricity, million kWh № Country 1 2 3 4 5 6 7 8 9 10 11 Azerbaijan Belarus Georgia South ossetia Kazakhstan China latvia lithuania mongolia ukraine finland totAl: 2011 44.242 2012 55.770 2013 57.422 2014 53.054 2015 54.848 3,173.191 3,698.125 3,596.726 1,425.023 2,815.240 447.554 132.250 517.049 130.211 460.547 133.787 627.271 139.918 511.001 145.563 2,208.442 2,284.458 1,668.318 1,643.673 1,541.999 1,238.485 2,630.173 3,495.300 3,375.632 3,299.350 3 0.000 0.000 0.000 0.000 0.000 5,543.127 4,780.170 3,567.969 3,215.539 2,994.516 263.428 22.357 392.750 81.795 413.595 38.609 390.332 177.993 284.450 2,461.972 9,635.536 3,793.845 4,107.179 2,995.008 3,383.435 22,708.611 18,364.346 17,539.452 14,043.443 17,492.374 Actual import of Electricity, million kWh № Country 1 2 3 4 5 6 7 8 9 10 11 Azerbaijan Belarus Georgia South ossetia Kazakhstan China latvia lithuania mongolia ukraine finland totAl: 2011 391.551 0.000 588.576 0.000 2012 240.757 3.731 369.438 0.000 2013 128.607 1.935 370.608 0.000 2014 134.169 0.260 160.078 0.000 2,366.991 1,973.181 3,930.689 3,084.440 0.000 0.000 0.000 21.424 55.763 0.000 0.000 0.000 0.000 21.006 0.093 0.000 0.000 0.000 99.253 23.291 6.400 2.758 0.000 0.000 43.161 30.368 0.000 0.234 2015 108.365 0.058 169.575 0.000 989.666 0.000 0.000 114.561 54.178 3.756 23.400 3,424.305 2,608.206 4,563.541 3,452.710 1,463.559 APPEndiCES to thE AnnuAl REPoR t AdditionAl infoRm Ation PRODUCTIVE CAPITAL | Operating Performance | Technological Connection ▶ Key Indicators for Technological Connection Applications submitted Applications accepted technical terms and conditions approved technical terms and conditions approved / reviewed by the Executive Office Changes in the technical terms and conditions, ap- proved Contracts signed 4 Contracts completed (not including acts under phased technological connection) 2013 912 2014 559 2015 531 17,030.70 14,705.00 13,211.93 398 311 305 9,253.31 9,252.69 8,610.86 497 260 270 16,005.60 7,787.66 5,089.00 175 81 75 12,145.00 4,901.89 2,421.90 462 642 382 224 373 206 15,054.40 4,796.27 4,608.86 298 273 245 3,793.00 5,536.95 8,185.00 pcs mW pcs mW pcs mW pcs mW pcs pcs mW pcs mW PRODUCTIVE CAPITAL | Operating Performance | Investing activities ▶ Basic parameters of key investment projects Project implementation timeframe Commis- sioned in 2015 design capacity financing in 2016-2020, RuB billion development of electric grid infrastructure in the area of BAm and transSib Ensuring reliable operation of the Unified Energy System of Russia separately from the energy sys- tems of the Baltic States (BREll macroproject) Guaranteed supply of generated electricity Compensatory measures for separate operation of the Unified Energy System of Russia and the integrated Power System of ukraine improvement of the access to the Krasnodar Krai electric grid infrastructure Start Completion 2014 2024 2015 2020 0 0 2009 2015 2019 699.67 km 2017 2015 2018 0 0 4,124 МVA 4 215 km 1,334 МVAr 900 МVA 872.5 km 799.4 МVAr 125 МVA 865.4 km 125 МVA 95.3 km 810 МVA 16 km 102.37 33.25 27.54 1.08 2.47 Project implementation timeframe Commis- sioned in 2015 design capacity financing in 2016-2020, RuB billion development of the grid complex in the Republic of Saha (Yakutia) development of the energy infra- structure for oil transportation (ESPo – i, ii) measures to contain the fallout from the accident at the Sayano- Shushenskaya hPP Start Completion 2009 2024 2012 2019 2010 2016 0 0 0 794 МVA 1 062 km 200 МVAr 200 МW 972 МVA 684,76 km 200 МVAr 668 МVA Controlled shunt reactor (180+60) МVAr Controlled shunt reactor (180+60) mVAr 382,97 km 13.88 21.95 1.90 PRODUCTIVE CAPITAL | Operating Performance | Energy Saving and Energy Efficiency ▶ Federal Grid’s Pilot Projects on Energy Saving and Energy Efficiency heat recovery Pilot project of At 1 heat recovery (Phase A) at 500/220/10 kV nizhe- gorodskaya substation (mES Volga) for heating the substation control desk: the Company used a heat pump that made it possible to increase the saving of thermal resources for heating and reduce the consumption of electricity for heating of buildings and air cooling of transformers. • Expected energy saving: 648,000 kWh / year • Expected cash effect of energy saving: 1,166.78 RuB thousand optimising operation of the transformer cooling systems Cooling control boxes At-1 with frequency regulation were replaced at 500/220/10 kV nizhegorodskaya substation (mES Volga). the replace- ment helped to increase the service life of the autotransformer, increase the efficiency of using the cooling system, and register, store and auto- matically transmit information about the cooling system parameters in the automatic management system. • Calculated energy saving: 16,000 kWh / year using plasma lamps for lighting of the open switchgear Twenty-four external floodlights at 500/220/10 kV Nizhegorodskaya substation (mES Volga) were replaced with plasma lights that have high quality of light flux, energy efficiency and long service life, and are environmentally friendly. • Annual consumption of electricity used for lighting was reduced by 60,700 kWh / year using “light tubes” for lighting of office buildings This technology for lighting of office buildings by outdoor sunlight was used when the administrative building of mES Volga in Samara was refur- bished; 14 “light tubes” were installed on the roof of a six-floor building. • Calculated energy saving: 2,999.5 kWh / year 5 APPEndiCES to thE AnnuAl REPoR t AdditionAl infoRm Ation introduction of an automated heating station Automated control of water consumption was put in place when the heating system in the administrative building of mES Volga in Sa- mara was refurbished. this technology helps to reduce excess energy consumption for heating and hot water supply, extend the life service and reduce the time between repairs of heat networks and boiler room equipment, keep record of heat consumption and make surplus heat for periods of the lowest temperatures. • thermal energy saving: 230 Gcal • Expected cash effect of thermal energy saving: 437.04 RuB thousand improving energy efficiency of the lighting installations Work was completed on raising energy efficiency of lighting installa- tions in the administrative building of the upper don PmES: the existing lamps and lighting fixtures were replaced with energy efficient LED light bulbs and automated management of internal lighting in the building was installed. • Electricity saving: at least 19,300 kWh / year • operational costs reduced by at least 430,500 RuB/year INTELLECTUAL CAPITAL | Innovative Development | Innovative Development Programme 6 ▶ Meeting Key Performance Indicators of Federal Grid’s Innovative Development Programme in 2015 2014 actual 2015 target 2015 actual Assessment of whether or not the KPi 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, % 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 Share of undersupply of electricity to consum- ers in the total volume of electricity transmit- ted 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 fGC’s own expense relative to the revenue (from electric- ity transmission through unEG), % Share of funds secured from external sources in the total financing, % 2.5 44.5 4.13 14.56 0 3 40 4.46 14 700 4 met 75 met 4.47 not met 13.52 met 0 not met 0.0002 0.0024 0.0002 met 56 9 0.25 0 20 2 1.1 – 30 met 4 met 0.29 not met 0 not met Share of expenditures on R&d performed by universities relative to the total R&d expendi- ture, % 2014 actual 2015 target 2015 actual Assessment of whether or not the KPi has been met 6,7 1,0 2,94 met HUMAN CAPITAL | Social Responsibility | Health and Safety Additional health and safety initiatives implemented by federal Grid Company in 2015: • A behavior-based safety programme was implemented aimed at changing attitude of employees to conscious observance of safety practices, which resulted in improving employee safety behaviour in terms of work performance without violations of Safety Regulations • mobile video recorders are used aimed at recording the most dangerous actions of employees working on electrical installations • the structure has been changed of labour Protection days aimed at improving the efficiency and prevention of violations similar to those committed in accidents • Road traffic Safety months were organised • Efficient 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, taking account of up-to-date requirements • Work was continued on ensuring effective operation of stress-release rooms for operating employees of substations • A review competition was conducted for the best organisation of work in the area of health and safety among the Company’s mES and PmES branches: mES East and Primorskoe PmES were recognised to be the best for 2015 • A scheduled assessment of working conditions was performed at 5,935 workplaces 7 FINANCIAL CAPITAL | Management’s Discussion and Analysis | Tariff Regulation ▶ The following is a list of basic legislative acts regulating the tariffs for electricity transmission over UNEG: • federal law “on electric energy” no. 35-fl dated march 26, 2003 • Rf Government Resolution “on pricing in regulated areas (tariffs) in the electric energy sector” no. 1178 dated december 29, 2011 • Rf Government Resolution “on ratification of the Rules for the Wholesale Electric Energy and Power market and amendment of certain acts of the Rf Government related to organising the functioning of the wholesale market for electric energy and power” no. 1172 dated december 27, 2010 • Rf Government Resolution “on defining the applicable indicators of reliability and quality of goods and services provided in establishing long- term tariffs” no. 1220 dated december 31, 2009 • Rf Government Resolution «on ratification of the Rules for non-discriminatory access to electricity transmission services and provision thereof, the Rules for non-discriminatory access to services APPEndiCES to thE AnnuAl REPoR t AdditionAl infoRm Ation on operational dispatch management in electric power industry and provision thereof, the Rules for non-discriminatory access to services of wholesale market administrator and provision thereof, the Rules for technological connection of power receivers of electricity consumers, power generating facilities, and electric grid facilities owned by grid organisations and other entities, to electric grids» no. 861 dated 27 december 2004 • Rf Government Resolution «on investment programmes of subjects of electricity industry» No. 977dated 01 December 2009 • ftS (federal tariff Service) of Russia decree “on ratification of the guidelines for calculation of tariffs for electricity transmission through the unified national (All-Russia) Electric Grid” no. 56-e/1 dated march 21, 2006 • ftS of Russia decree “on ratification of the Guidelines on tariff regulation using the method of return on invested capital” no. 228-e dated march 30, 2012 • ftS of Russia decree «on ratification of the Procedure for preparing consolidated balance forecast for electricity (capacity) generation and sales within the unified Energy System of Russia by constituent units of the Russian federation» no. 53- e/1 dated 12 April 2012 8 FINANCIAL CAPITAL | Borrowed Capital | Debt Portfolio ▶ Information on outstanding bonds issued by PJSC FGC UES Series type of securities 6 7 8 9 Non-convertible interest-bearing certificated bearer bonds with mandatory centralised custody and the option of early redemption at the request of the bondholders or at the discretion of the issuer Registration number 4-06-65018-d dated 05.11.2009 4-07-65018-d dated 05.11.2009 4-08-65018-d dated 05.11.2009 4-09-65018-d dated 05.11.2009 issuance volume, RuB 10 billion 5 billion 10 billion 5 billion face value, RuB 1,000 term issue date Rate date of tender/ma- turity 10 years 28.09.2010 8.25% 1,000 10 years 1,000 10 years 1,000 10 years 29.10.2010 28.09.2010 29.10.2010 7.5% 8.25% 7.99% - / 15.09.2020 - / 16.10.2020 - / 15.09.2020 24.10.2017 / 16.10.2020 Exchange miCEX miCEX miCEX miCEX Quotation list Second level Second level Second level Second level lombard list of the Bank of Russia obligations are included obligations are included obligations are included obligations are included Volume outstanding as of December 31, 2015, RuB 7.535 billion 1.76 billion 7.315 billion 5 billion Series type of securities 10 11 12 13 Non-convertible interest-bearing certificated bearer bonds with mandatory centralised custody and the option of early redemption at the request of the bondholders or at the discretion of the issuer Registration number 4-10-65018-d dated 05.11.2009 4-11-65018-d dated 05.11.2009 4-12-65018-d dated 07.06.2011 4-13-65018-d dated 07.06.2011 issuance volume, RuB 10 billion 10 billion 10 billion 10 billion face value, RuB 1,000 term issue date Rate 10 years 28.09.2010 7.75% 1,000 10 years 1,000 7 years 1,000 10 years 29.10.2010 27.04.2012 05.07.2011 7.99% 8.1% 8.5% date of tender/ma- turity - / 15.09.2020 24.10.2017 / 16.10.2020 28.04.2016 / 19.04.2019 - / 22.06.2021 Exchange miCEX miCEX miCEX miCEX Quotation list Second level Second level Second level Second level lombard list of the Bank of Russia obligations are included obligations are included obligations are included obligations are included Volume outstanding as of December 31, 2015, RuB Series type of securities 0.0029 billion 10 billion 10 billion 10 billion 9 15 18 19 21 Non-convertible interest-bearing certificated bearer bonds with mandatory centralised custody and the option of early redemption at the request of the bondholders or at the discretion of the issuer Registration number 4-15-65018-d dated 07.06.2011 4-18-65018-d dated 07.06.2011 4-19-65018-d dated 07.06.2011 4-21-65018-d dated 21.06.2012 issuance volume, RuB 10 billion 15 billion 20 billion 10 billion face value, RuB 1,000 term issue date Rate 12 years 27.10.2011 8.75% 1,000 12 years 1,000 12 years 1,000 15 years 12.12.2011 21.07.2011 24.10.2012 8.5% 7.95% 8.75% date of tender/ma- turity 26.10.2018 / 12.10.2023 07.06.2019 / 27.11.2023 18.07.2018 / 06.07.2023 26.04.2017 / 06.10.2027 Exchange miCEX miCEX miCEX miCEX Quotation list Second level Second level Second level Second level lombard list of the Bank of Russia obligations are included obligations are included obligations are included obligations are included Volume outstanding as of December 31, 2015, RuB 0.312 billion 0.11 billion 20 billion 10 billion APPEndiCES to thE AnnuAl REPoR t AdditionAl infoRm Ation Series type of securities 29 30 34 37 38 Non-convertible interest-bearing certificated bearer bonds with mandatory centralised custody and the option of early redemption at the request of the bondholders or at the discretion of the issuer Registration number 4-29-65018-d dated 21.06.2012 4-30-65018-d dated 14.11.2013 4-34-65018-d dated 14.11.2013 4-37-65018-d dated 14.11.2013 4-38-65018-d dated 14.11.2013 issuance volume, RuB 20 billion 10 billion 15 billion 20 billion 20 billion face value, RuB 1,000 term 35 years 1,000 35 years 1,000 35 years 1,000 35 years 1,000 35 years issue date 21.10.2013 13.12.2013 13.12.2013 06.05.2015 06.05.2015 Rate 1st coupon – 7.1%, coupons 2-132 calculated based on a for- mula: Кi = (CPI – 100%) + 1% 1st coupon – 7.1%, coupons 2-132 calculated based on a for- mula: Кi = (CPI – 100%) + 1% 1st coupon – 7.1%, coupons 2-132 calculated based on a for- mula: Кi = (CPI – 100%) + 1% 1st coupon – 7.1%, coupons 2-132 calculated based on a for- mula: Кi = (CPI – 100%) + 1% 1st coupon – 7.1%, coupons 2-132 calculated based on a for- mula: Кi = (CPI – 100%) + 1% date of tender/ma- turity 17.09.2046 / 07.09.2048 08.11.2046 / 30.10.2048 07.11.2047 / 30.10.2048 05.04.2045 / 23.03.2050 05.04.2045 / 23.03.2050 Exchange miCEX miCEX miCEX miCEX miCEX unlisted securities register Volume outstanding as of december 31, 2015, RuB third level third level third level third level third level 20 billion 10 billion 14 billion 20 billion 20 billion 11 Series type of securities Non-convertible interest-bearing certificated bearer bonds with mandatory centralised custody and the option of early redemption at the request of the bondholders or at the discretion of the issuer 22 24 25 Registration number 4-22-65018-d dated 21.06.2012 issuance volume, RuB 10 billion face value, RuB 1,000 term issue date Rate 15 years 08.08.2012 4-24-65018-d dated 21.06.2012 4-25-65018-d dated 21.06.2012 10 billion 15 billion 1,000 15 years 1,000 15 years 25.01.2013 02.10.2012 1-2 coupons at 9%, coupons 2-20 calculated based on a formula: Кi=(CPI – 100%) + 2.5% 8% 8,6% date of tender/ma- turity 03.08.2022 / 21.07.2027 24.01.2020 / 07.01.2028 04.10.2016 / 14.09.2027 Exchange miCEX miCEX miCEX Quotation list Second level Second level Second level 10 lombard list of the Bank of Russia Volume outstanding as of December 31, 2015, RuB obligations are included obligations are included obligations are included 10 billion 10 billion 15 billion ▶ Information on the outstanding infrastructure bonds issued by PJSC FGC UES Series type of securities 23 26 27 28 Non-convertible interest-bearing certificated bearer bonds with mandatory centralised custody and the option of early redemption at the request of the bondholders or at the discretion of the issuer Registration number 4-23-65018-d dated 21.06.2012 4-26-65018-d dated 21.06.2012 4-27-65018-d dated 21.06.2012 4-28-65018-d dated 21.06.2012 issuance volume, RuB 10 billion 15 billion 15 billion 20 billion face value, RuB 1,000 term issue date Rate 35 years 10.06.2013 1,000 35 years 1,000 35 years 1,000 35 years 13.08.2013 13.08.2013 10.06.2013 1st coupon – 8.4%, coupons 2-140 calculated based on a formula: Кi = (CPI – 100%) + 1% 1st coupon – 7.5%, coupons 2-136 calculated based on a formula: Кi = (CPI – 100%) + 1% 1st coupon – 7.5%, coupons 2-136 calculated based on a formula: Кi = (CPI – 100%) + 1% 1st coupon – 8.4%, coupons 2-140 calculated based on a formula: Кi = (CPI – 100%) + 1% date of tender/ma- turity - / 27.04.2048 09.07.2047 / 30.06.2048 09.07.2047 / 30.06.2048 - / 27.04.2048 Exchange miCEX miCEX miCEX miCEX unlisted securities register Volume outstanding as of december 31, 2015, RuB third level third level third level third level 10 billion 15 billion 11 billion 20 billion APPEndiCES to thE AnnuAl REPoR t AdditionAl infoRm Ation FINANCIAL CAPITAL | Borrowed Capital | Credit Ratings ▶ Information on Credit Ratings of Federal Grid for the period 2012-2015 23 November / Moody’s 25 October / Fitch Ratings 30 December / Standard & Poor’s 26 February / Moody’s 2012 2013 2014 2015 federal Grid’s rating on the international scale downgraded from Baa2 to Baa3 (outlook: Stable) due to changes in the ownership structure relating to contribution to the share capi- tal of a newly created company, JSC Rosseti, of the state-held share in Federal Grid; assessment of Federal Grid’s financial position did not change. On the national scale the Company’s rating was confirmed at the level of Aaa.ru. long-term default rating of federal Grid was established at the level of BBB (outlook: Stable), on the national scale, at the level of AAA(rus). 17 October / Standard & Poor’s long-term credit rating of federal Grid on the international scale has been confirmed at BBB (outlook: Stable), on the national scale, at the level of ruAAA. Assessment of federal Grid’s credit by both agencies is based on similar factors. long-term default BBB ratings are two notches higher than federal Grid’s stand-alone credit taking into account moderately strong connections with the Company’s indirect shareholder, the Russian federation (BBB / outlook: Stable) via JSC Rosseti. Assessment of federal Grid’s stand-alone credit at the level of BB+ as a positive fac- tor takes into account the Company’s position as the owner and monopoly operator of the national electricity transmis- sion grid and its high level of profitability and liquidity. At the same time, the rating agencies point to the following factors as negatives: instability of the regulatory environment and financial risks that may relate to the implementation of a large-scale investment programme. 12 upon completion of the review period initiated by the rating agency due to deterioration in the macroeconomic and finan- cial climate in Russia, federal Grid Company’s credit rating was affirmed at Ba1 (outlook: Negative). 4 February / Standard & Poor’s following the change of the sovereign rating of the Russian Federation, Federal Grid was downgraded to BВ+ (outlook: negative). 20 January / Moody’s federal Grid’s credit rating downgraded from Baa3 (outlook: negative) to Ba1 (under review for downgrade) due to the change of the sovereign rating of the Russian federation. 13 January / Fitch Ratings due to the review of the sovereign rating of the Russian federation, long-term federal Grid default ratings in foreign and national currencies have been decreased from ВВВ to ВВВ- (outlook: Negative). 13 federal Grid’s ratings have been put under review for down- grade following the downgrade of the Russian federation, which is due to a rapid decline in the country’s flexibility in terms of its lending and monetary policy and with the impact of the weakening of the economy on the financial system. 23 December / Moody’s federal Grid’s ratings have been placed for review for down- grade due to similar actions in respect of Russia’s sovereign rating. 21 October / Moody’s long-term federal Grid’s rating under the global scale was confirmed at Baa3: by credit quality the company belongs to the investment category, which attests to the stability of its key areas of operations and high financial stability as macro- economic factors and market environment deteriorate. 1 July / Moody’s Rating agency Moody’s confirmed Federal Grid’s rating, Baa3 on the global scale and Aaa.ru on the national scale. 28 April / Standard & Poor’s federal Grid’s long-term rating in foreign currency has been decreased by one notch from ВВВ to BBB- (outlook: Nega- tive) due to the decrease of the sovereign rating of the Rus- sian federation in foreign currency from BBB to BBB- (out- look: Negative), in the national currency, from ВВВ+ to BBB. 3 April / Moody’s Placed ratings of federal Grid under review for downgrade due to the potential downgrade of the sovereign. 1 July 2014 the Company’s credit rating on the global scale was confirmed at the previous level of Baa3 (so called investment category) with a negative outlook. 27 March / Standard &Poor’s 26 March / Fitch Ratings outlook for federal Grid was changed from stable to nega- tive, at the same time the Company’s long-term ratings in foreign an national currencies – BBB – were confirmed. APPEndiCES to thE AnnuAl REPoR t Audit CommiSSion’ S REPoR t Appendix 2. OPINION OF THE AUDIT CommiSSion I. INTRODUCTION ▶ Composition of audit commission Audit Commission of fGC uES, PJSC Approved by the Audit Commission of PJSC fGC uES (Minutes No. 5/2016 dated May 12, 2016) 14 oPinion of thE Audit CommiSSion of Public Joint-Stock Company “federal Grid Company of unified Energy System” may 12, 2016 Prepared on: [date] moscow Prepared in: [place] the Audit Commission was elected by resolution of the General meeting of Shareholders Resolution of the annual General meeting of Shareholders of PJSC fGC uES dated June 26, 2015 (minutes no. 16 dated June 30, 2015) the Chairman and Secretary of the Audit Commission were elected by resolution of the Audit Commission minutes of the Audit Commission of fGC uES, PJSC No. 1/2015 dated July 17, 2015 Chairman of the Audit Commission denis Rishievich Kant mandal Secretary of the Audit Commission marina Alekseyevna lelekova members of the Audit Commission nikolai nikolayevich Varlamov, marat Viktorovich izmailov, Roman Vladimirovich litvinov Audit period: in accordance with the federal Law “On Joint-Stock Companies,” the Articles of Association of PJSC fGC uES (hereinafter the “Company”) and the Regulations on the Audit Commission of the Company, reliability of data contained in the Company’s annual report and accounting (financial) statements for 2015 was assessed by the Audit Commission of the Company during a period from April 20, 2016, to may 6, 2016. The following documents were used for the audit purposes: 15 • federal law no. 208-fZ of december 26, 1995, “on Joint-Stock Companies”; • federal law no. 402-fZ of december 6, 2011, “on Accounting”; Grounds for audit : resolution of the Audit Commission of the Company dated April 19, 2016 (minutes No. 4/2016 dated April 19, 2016). • Regulations on Accounting and Reporting in the Russian federation, approved by decree of the ministry of finance of the Russian federation No. 34n dated July 29, 1998; Audit purpose: independent assessment of reliability of data contained in the Company’s Annual Report and accounting (financial) statements for 2015 (hereinafter the “Statements”). Reliability in all material aspects means the degree of accuracy of data contained in the Statements, which allows shareholders to draw right conclusions about the Company’s business performance, financial standing and property status and to adopt informed decisions based on such conclusions. Audited period: from January 1, 2015, to december 31, 2015. Audited documents: annual accounting (financial) statements, annual report, ledgers, primary accounting documents and other documentation on the Company’s financial and business activities. • Accounting regulations (standards); • decree of the ministry of finance of the Russian Federation No. 66n dated July 2, 2010, “On Forms of Corporate Accounting Statements”; • Regulations for information disclosure by the issuers of issue-Grade Securities, approved by the Bank of Russia on december 30, 2014 (no. 454-P). • information letter from the Bank of Russia No. IN-06-52/8 dated February 17, 2016, “On Disclosure in the Annual Report of a Public Joint-Stock Company of the Report on Compliance with the Principles and Recommendations of the Corporate Governance Code”; • other legislative acts and the Company’s internal regulatory and administrative documents. APPEndiCES to thE AnnuAl REPoR t ▶ Company details full name Public Joint-Stock Company “Federal Grid Company of Unified Energy System’ Place of business (registered office) 5A Akademika Chelomeya St., moscow, Russian federation, 117630 Postal address 5A Akademika Chelomeya St., moscow, Russian federation, 117630 State registration (Principal State Registration number) 1024701893336 of August 20, 2002 INN (Taxpayer Identification Number) 4716016979 Sole executive body (in the reporting period and events after the reporting date) Andrei Yevgenievich murov, Chairman of the management Board, pursuant to resolution of the Extraordinary General meeting of Shareholders dated November 11, 2013 (Minutes No. 14 dated November 11, 2013) director of the Accounting and Reporting de- partment (Chief Accountant) Andrei Pavlovich Peskov pursuant to Decree No. 690/1R dated August 18, 2011 ▶ Independent auditor details Entity’s full name RSm RuS limited liability Company 16 Resolution of the annual general meeting of shareholders approving the candidate for inde- pendent auditor Resolution of the annual General meeting of Shareholders of PJSC fGC UES dated June 26, 2015 (Minutes No. 16 dated June 30, 2015). Resolution of the Board of directors on determi- nation of the auditor’s fee amount for 2015 Minutes of the Board of Directors’ meeting No. 280 dated August 24, 2015 independent Auditing Services Agreement Agreement no. 15a084 dated August 26, 2015 independent Auditor’s Report (document number, date, title) independent Auditor’s Report on Accounting Statements for 2015 No. RSM-1268 dated February 24, 2016 the audit was performed on a sample basis and included a testing-based study of the evidence proving the meaning and disclosure in the Statements of information about the Company’s financial and economic activities, the assessment of accounting principles and methods, the rules of preparation of accounting (financial) statements, the determination of significant estimates. in the course of the audit, we identified materiality level (aggregate acceptable error rate with respect to reported indicators). By materiality we mean the ability of the information disclosed in the statements to influence decision making by the users of such statements. We use the acceptable error rate as a criterion with regard to the confirmation of reliability of the Company’s Statements. When conducting the audit, we reviewed the Company’s compliance with the laws of the Russian federation and the Company’s by-laws. We also randomly reconciliated the indicators specified in the Annual Report and accounting (financial) statements for 2015, checked completeness of the information disclosed in the Company’s Annual Report as to compliance with the requirements of the Bank of Russia for information disclosure by the issuers of issue-grade securities. the audit also entailed an analysis of the Company’s internal controls, the materials prepared based on findings from the audits conducted by the internal audit function, the external auditor, external control and supervisory bodies. When conducting the audit, the Audit Commission of PJSC fGC uES relied, inter alia, on the report made by RSm RuS llC, the Company’s independent auditor, No. RSM-1268 dated february 24, 2016. Audit CommiSSion’ S REPoR t II. ANALYTICAL PART the result of the Company’s activity in the fiscal year is the net profit of RuB 17,870.137 million, which is higher than the plan by RuB 10,686.127 million. Accounts payable as of december 31, 2015, went down by 29% year-on-year to RuB 54,748.132 million. net asset value as of december 31, 2015, is RuB 886,127.082 million whereas the Company’s authorized capital is RuB 637,332.662. Book value of the Company’s assets as of december 31, 2015, is RuB 1,268,301.446 million, an increase of 3% versus december 31, 2014. non-current assets account for 87% of total assets on the Balance Sheet and amounted to RuB 1,124,338.485 million as of december 31, 2015, an increase of 0.6% versus the value of non-current assets as of december 31, 2014. the total amount of accounts receivable as of december 31, 2015, (Balance Sheet line 1230) increased by 16% against december 31, 2014 to RUB 69,491.215 million. in the fiscal year, the totality of accounting methods employed by the Company that constitute its Accounting Policy, approved by decree of the Company No. 613 dated December 30, 2014, “On the Approval of Accounting Policy of PJSC fGC uES for 2015,” were in compliance with the accounting laws of the Russian federation and the federal standards. the Statements are prepared in compliance with the legislative and regulatory acts of the Russian federation and the Company’s by-laws in all material respects. the Annual Report of PJSC fGC uES submitted for consideration by the Annual General meeting of Shareholders, contains the information provided for in the Regulations for information disclosure by issuers of issue-Grade Securities no. 454-P, approved by the Bank of Russia on december 30, 2014. 17 ▶ The Company’s statements, as confirmed by its Audit Commission, were composed of: type of Reporting form item no. date of signing by the executives number of pages in the document 1. 2. 3. 4. 5. 6. 7. Balance Sheet as of december 31, 2015 february 24, 2016 2 pages 2015 Profit and Loss Statement february 24, 2016 2 pages 2015 Statement of Changes in Equity february 24, 2016 2 pages 2015 Cash flow Statement february 24, 2016 2 pages Notes to the Balance Sheet and Profit and Loss State- ment for 2015 february 24, 2016 12 pages Appendices to the 2015 Annual Accounting Statements of PJSC fGC uES february 24, 2016 73 pages 2015 Annual Report of PJSC fGC uES (minutes of the Company’s Management Board No. 1384 dated April 26, 2016) management Board meet- ing date: April 22, 2016 238 pages As of the dates of audit and issue of this opinion, the Annual Report was neither approved by the resolution of the General meeting of Shareholders nor preliminary reviewed by the Company’s Board of directors. APPEndiCES to thE AnnuAl REPoR t REPoR t on ComPli AnCE With thE CoRPoRA tE GoVERnAnCE CodE III. CONCLUSION While conducting the audit, our attention was not drawn to any facts that would give us reasons to believe that the 2015 accounting (financial) statements of the Company do not fairly present, in all material respects, the financial standing of the Company as of december 31, 2015, its financial and economic performance for the period from January 1, 2015, up to and including december 31, 2015, in conformity with the requirements of laws of the Russian federation with regard to the preparation of the above-mentioned statements. As part of the work performed, the Audit Commission did not discover any material misstatement of the data contained in the 2015 Annual Report of PJSC fGC uES, either. this opinion of the Audit Commission of PJSC fGC uES should be examined together with the accounting (financial) statements, notes to the balance sheet and the profit and loss statement for 2015, written appendices in the text and table form, which are an integral part of the 2015 Annual Report of PJSC fGC uES Chairman of the Audit Commission of PJSC fGC uES /signature/ D. R. Kant Mandal 18 members of the Audit Commission of PJSC fGC uES /signature/ N. N. Varlamov /signature/ M. V. Izmailov /signature/ М. A. Lelekova /signature/ R. V. Litvinova Appendix 3. Report on Compliance with the Russian Corporate Governance Code and Report on Compliance with main Principles of the uK Corporate Governance Code REPORT ON FEDERAL GRID COMPANY’S COMPLIANCE with principles and recommendations of the Corporate Governance Code approved by the Board of Directors of the Bank of Russia on 21 March 2014 and recommended for application by the Bank of Russia (Letter No. 06- 52/2463 dated 10 April 2014) Report date: 30.03.2016 19 this Report has been considered by the Board of directors of federal Grid Company as part of the preliminary consideration of the Company’s Annual Report (Minutes № 322 dated 27 may 2016). this Report shall be considered as an Annex to the 2015 Annual Report of federal Grid Company containing the Corporate Governance section that includes the following information: the Board of directors confirms that the material presented in this Report contains complete and accurate information on the Company’s compliance with the principles and recommendations of the Corporate Governance Code during the reporting period from 01 January 2015 to 30 march 2016. • Statement of the federal Grid’s Board of directors on compliance with the principles set out in the Corporate Governance Code • Brief description of the most significant aspects of the Company’s corporate governance model and practices • description of the methodology the Company has applied to assess compliance with the corporate governance principles APPEndiCES to thE AnnuAl REPoR t REPoR t on ComPli AnCE With thE CoRPoRA tE GoVERnAnCE CodE Corporate Governance Principle Corporate Governance Principle Compliance Criteria Compliance Status Explanations of deviation from Corporate Governance Principles Compliance Criteria Comments 1.1 1.1.1 the company shall ensure equal and fair treatment of all shareholders exercising their right to participate in the governance of the company. the company should create the most favourable conditions for its shareholders to enable them to participate in the general meeting and develop informed positions on issues on its agenda, as well as to provide them with the op- portunity to coordinate their actions and express opinions on issues discussed. 1. The сompany’s internal document approved by the general meeting of shareholders and regulating the procedures for hold- ing the general meeting is publicly available. 2. the company provides an accessible way to communicate with the community, such as a hotline, special email or internet forum that enables share- holders to express their opinions and put questions regarding the agenda when preparing for the general meeting. the above actions were taken by the company before each general meeting held in the reporting period. 1.1.2 Procedures for notification of the general meet- ing and provision of materials for it should enable shareholders to get properly prepared for participation therein. 20 1.1.3 during the preparation for and holding of the general meeting, shareholders should be able to receive in a freely and timely manner information about the meeting and materials thereto, put questions to members of the company’s executive bodies and board of directors, and to communicate with each other. 1.1.4 There should be no unjustified difficulties preventing shareholders from exercising their right to request for a general meeting to be con- vened, nominate candidates to the company’s governing bodies, and to place proposals on its agenda. 1.1.5 Each shareholder should be able to freely ex- ercise his right to vote in a straightforward and most convenient way. 1. the notice of the upcoming general meeting was placed (published) on the corporate website at least 30 days before the meeting. 2. The Notice of the general meeting specified the exact loca- tion of the meeting and documents required for admission to the premises. 3. Shareholders were provided access to the information about who had proposed items on the agenda and nominated candi- dates to the board of directors and the audit commission of the company. 1. in the reporting period, shareholders were enabled to put questions to members of the company’s executive bodies and board of directors before and during the annual general meet- ing. 2. Position of the board of directors (including any dissenting opinions recorded in the minutes) on each agenda item of the general meetings held within the reporting period was included in the materials for the general meeting of shareholders. 3. the company provided shareholders, entitled thereto, with ac- cess to the list of persons entitled to participate in the general meeting, starting from the date of its receipt by the company, in all cases of holding general meetings in the reporting period. 1. in the reporting period, shareholders were entitled to propose new items to be included on the agenda of the annual general meeting at least 60 days after the end of the respective calen- dar year. 2. in the reporting period, the company did not refuse to accept proposals for the agenda or candidates to the company’s bodies due to misprints or other insignificant defects in a shareholder’s proposal. 1. the company’s internal document (internal policy) includes provisions whereby any participant of the general meeting may, until the end of the general meeting, request a copy of the ballot filled by that participant to be certified by the company’s count- ing board. Compliant Compliant Partially compliant Compliant Compliant 21 in 2015, when holding the Annual General meeting of Share- holders, no separate position of the Board of directors on each agenda item of the general meeting was formed. At the same time, minutes of the Board’s meetings that contained the Board’s position on certain agenda items were submitted to shareholders as part of the materials for the meeting. the Company’s obligation to include the Board’s position on each item of the General meeting’s agenda has been set out in the new version of the Regulations on the General meeting of Shareholders of federal Grid Company, and will be met when preparing the General meeting in 2016. APPEndiCES to thE AnnuAl REPoR t REPoR t on ComPli AnCE With thE CoRPoRA tE GoVERnAnCE CodE Corporate Governance Principle Corporate Governance Principle Compliance Criteria Compliance Status Explanations of deviation from Corporate Governance Principles Compliance Criteria Comments 1.1.6 Procedures for holding a general meeting set by the company should provide equal opportunity to all persons present at the general meeting to express their opinions and ask questions that might be of interest to them. 1. in the reporting period, when general meetings of sharehold- ers were held in the form of a meeting (joint presence of shareholders), sufficient time was provided for reports on agenda items and for further discussion thereof. 2. Candidates to the company’s governing and control bodies were available to answer shareholders’ questions at the meet- ing where they were put to the vote. 3. When making decisions related to the preparation and hold- ing of the general meeting of shareholders, the board of direc- tors considered a matter on the use of telecommunications to provide shareholders with remote access to attend the general meetings held in the reporting period. 22 1.2 1.2.1 1.2.2 1.2.3 1.2.4 Shareholders should have equal and fair opportunity to participate in the company's profits by means of receiving dividends the company should develop and put in place a transparent and clear mechanism for deter- mining the amount of dividends and payment thereof. 1. the company’s dividend policy has been developed, approved by the board of directors and disclosed. 2. if the company’s dividend policy uses criteria from the Company’s financial accounts to determine the amount of dividends, the dividend policy shall employ the consolidated financial accounts. the company should not make a decision on the dividend payment if such decision, without formally violating limits set by law, is eco- nomically unjustified and might lead to false assumptions about the company’s activity. 1. The company’s dividend policy clearly indicates the finan- cial/economic circumstances under which the Company should not pay dividends. the company should not allow deterioration of dividend rights of its existing shareholders. 1. in the reporting period, the company did not take any actions leading to the deterioration of dividend rights of the existing shareholders. the company should strive to rule out any ways through which its shareholders can obtain any profit or gain at the company’s expense other than dividends and liquidation value. 1. To eliminate other methods for shareholders to obtain profit (income) at the company’s expense, other than dividends and liquidation value, the company’s internal documents establish controls that ensure the timely identification and procedure for the approval of transactions with persons affili- ated (related) with substantial shareholders (persons entitled to dispose of the votes attached to voting shares), where the law does not formally recognise such transactions as related-party transactions. Partially compliant Partially compliant Compliant Compliant non-compliant in the reporting period, the Board of directors did not consid- er the matter on the use of telecommunications to provide shareholders with remote access to the general meetings. due to changes in the Rf legislation, when holding the 2016 Annual General meeting of Shareholders, there will be a remote attendance option provided for shareholders with nominee-registered holdings that means they will be able to submit, through the national Settlement depository (nSd), their electronic voting instructions to the Registrar. in future, as part of the reform of corporate actions at the nSd, an electronic voting platform will be established that enables all holders of securities to participate remotely in general meet- ings of shareholders Given the implementation of the recommendation with the participation of recording organisations at the securities market, no separate decision of the Board of directors is planned to be made. the recommended amount of dividends is determined by the Board of directors according to the dividend policy, ap- proved by the Board of directors on 16 January 2010, on the basis of RAS financial performance. federal Grid Company is a state-owned company (more than 80.7% of its share capital is indirectly owned by the State). A decision on dividend payment is made on the basis of directives issued by the Rf Government with due account of the Rf Government Resolution no. 774-r dated 29 may 2006 "on Building Positions of a Shareholder – Russian federa- tion in Joint Stock Companies whose Shares are in the federal ownership". therefore, the Company’s internal documents will be amended if the relevant amendments are introduced to the Russian legislation with respect to the necessity to calculate dividends based on consolidated financial performance. the Company’s internal documents do not provide for controls that ensure the timely identification and procedure for the approval of transactions with persons affiliated (related) with substantial shareholders (persons entitled to dispose of the votes attached to voting shares), where the law does not formally recognise such transactions as related-party transactions. the Company’s substantial shareholders are PJSC Ros- seti that holds 80.13% of voting shares, and the Russian federation represented by Rosimuschestvo based on the agreement made with PJSC Rosseti. the Russian federation has no affiliated persons. Transactions between Federal Grid Company and Rosseti’s affiliated persons are related-party transactions. At the same time, to the extent permitted by the Russian legislation, the Company’s internal documents specify the procedure for the identification and approval of related-party transactions. the Company does not currently plan to make any additional amendments to its internal documents in respect of the introducing additional control measures and procedures for the approval of transactions mentioned in this paragraph. 23 APPEndiCES to thE AnnuAl REPoR t REPoR t on ComPli AnCE With thE CoRPoRA tE GoVERnAnCE CodE Corporate Governance Principle Corporate Governance Principle Compliance Criteria Compliance Status Explanations of deviation from Corporate Governance Principles Compliance Criteria Comments 1.3 1.3.1 the corporate governance system and practices shall guarantee equal conditions for all shareholders owning shares of the same category (type), including minority shareholders and foreign shareholders, as well as their equal treatment by the company. the company should create conditions that would enable its governing bodies and control- ling persons to treat each shareholder fairly, in particular, which would eliminate the possibility of any abuse of minority shareholders by major shareholders. 1. during the reporting period, the procedures for managing potential conflicts of interest among existing shareholders were efficient, and the board of directors paid due attention to conflicts among shareholders, if there were any. 1.3.2 the company should not take any actions that will or might result in artificial redistribution of corporate control. 1. the company does not have ’quasi-treasury’ shares or they were used in the voting during the reporting period. 24 1.4 1.4.1 2.1 2.1.1 2.1.2 The shareholders should be provided with reliable and efficient means of recording their rights in shares as well as with the opportunity to freely dispose of such shares in a non-onerous manner. the shareholders should be provided with reliable and efficient means of recording their rights in shares as well as with the opportunity to freely dispose of such shares in a non-oner- ous manner. 1. the registrar’s quality and reliability in maintaining the shareholder register meet the Company’s and its shareholders’ needs. the board of directors provides strategic governance of the company, determines main principles of and ap- proaches to the organisation of the company’s risk management and internal control system, supervises the company’s executive bodies, and performs other key functions. the board of directors should be responsible for making decisions to appoint and remove members of executive bodies, including in connection with their failure to discharge their duties properly. the board of directors should also ensure that the company’s executive bodies act in accordance with an approved develop- ment strategy and the company’s businesses. 1. the board of directors has the powers set out in the Articles of Association to appoint and remove members of the executive bodies, as well as determine terms and conditions of contracts to be entered with them. 2. the board of directors has considered a report (reports) of the CEo and members of the collective executive board on the implementation of the company’s strategy. the board of directors should establish basic long-term targets of the company’s activity, evaluate and approve its key performance indi- cators and principal business goals, as well as evaluate and approve its strategy and business plans in respect of its core businesses. 1.during the reporting period, the board of directors considered matters related to the progress review and updating of the company’s strategy, the approval of its financial and business plan (budget), and the review of criteria and performance indica- tors (including intermediate) of the company’s strategy and business plan. Compliant non-compliant Compliant Partially compliant Compliant in the reporting period, ‘quasi-treasury’ shares of federal Grid Company were involved in the voting at the Annual General meeting Agenda of the General meeting of Shareholders annually includes items on the approval of related-party transactions, including those of the insurance contracts. the company’s major shareholder shall not vote on the above issue because it is recognised to be a related party. in accordance with the legislation of the Russian federation, the decision on this issue shall be taken by majority of votes of all shareholders not interested in the transaction. Given the ownership structure of federal Grid Company (the high concentration of share capital with a dispersed minority stake), there is a high risk of non-decision by the General meeting of Shareholders on key issues, including those stipulated by the Rf legislation (insurance, issues related to the additional issue of shares, etc.). thus, there remains a need for the Company to vote by ‘quasi-treasury’ shares at the General meetings of Sharehold- ers. however, trying to comply with the best corporate gover- nance practices, the Company plans, when preparing to the Annual General meeting, that the Board of directors will con- sider the relevant matter and make a conceptual decision on the use of ‘quasi-treasury’ shares in the voting at the AGm. According to the Company’s Articles of Association, the Board of directors shall appoint members of the federal Grid’s management Board, and the General meeting of Shareholders shall appoint the Chairman of the manage- ment Board. the Company does not plan to amend its Articles of Asso- ciation with respect to delegation of the authority to appoint the management Board’s Chairman to the Board of directors because of the high risk of financial and economic implica- tions for the Company resulting from the possible demand for redemption of minority stakes. 25 APPEndiCES to thE AnnuAl REPoR t REPoR t on ComPli AnCE With thE CoRPoRA tE GoVERnAnCE CodE Corporate Governance Principle Corporate Governance Principle Compliance Criteria Compliance Status Explanations of deviation from Corporate Governance Principles Compliance Criteria Comments 2.1.3 2.1.4 2.1.5 2.1.6 2.1.7 the board of directors should determine prin- ciples of and approaches to the organisation of the company’s risk management and internal control system. the board of directors should determine the company’s policy on remuneration due to and/ or reimbursement of expenses incurred by its board members, members of its executive bod- ies and other key managers. the board of directors should play a key role in prevention, detection and resolution of internal conflicts between the company’s bodies, shareholders and employees. the board of directors should play a key role in ensuring that the company is transparent, discloses information in full and in a timely manner, and provides its shareholders with easy access to its documents. the board of directors should monitor the com- pany’s corporate governance practices and play a key role in its material corporate events. 1. the board of directors has determined principles of and approaches to the organisation of the company’s risk manage- ment and internal control system. 2. in the reporting period, the board of directors reviewed the company’s internal control and risk management system. 1. the company has developed and implemented the policy(- ies) approved by the board of directors on the remuneration due to and reimbursement of expenses incurred by the board mem- bers, members of its executive bodies and other key managers. 2. during the reporting period, the board of directors considered matters related to the above policy(-ies). 1. the board of directors plays a key role in prevention, detec- tion and resolution of internal conflicts. 2. the company has established a system for identifying trans- actions involving conflicts of interest and a system of measures aimed at resolving such conflicts. 1. the board of directors has approved the regulations on the information policy. 2. the company has determined persons responsible for imple- menting the information policy. 1. during the reporting period, the board of directors considered matters on the company’s corporate governance practices. 26 2.2 the board of directors should be accountable to the company’s shareholders. 2.2.1 information about the board of directors’ work should be disclosed and provided to the share- holders. 1. the company’s annual report for the reporting period includes information on the attendance at meetings of the board of directors and its committees. 2. the annual report contains information on the main findings of the Board of Directors’ performance evaluation for the reporting period. 2.2.2 the chairman of the board of directors must be available to communicate with the company’s shareholders. 1. the company has a transparent procedure that enables shareholders to submit their questions and positions thereon to the chairman of the board of directors. Compliant Compliant Compliant Compliant Partially compliant Compliant Compliant 27 during the reporting period, the Board of directors did not consider separately a matter on the Company’s corporate governance practices. however, the corporate governance practices were consid- ered by the Board within the approval of a Plan of Actions (‘road map’) on implementing the key provisions of the Russian Corporate Governance Code and approval of the Company’s Corporate Governance Code. in the second quarter of 2016, a matter will be placed for consideration of the hR and Remuneration Committee and the Board of directors on the results of the Board perfor- mance evaluation and self-assessment of the federal Grid’s corporate governance quality. APPEndiCES to thE AnnuAl REPoR t REPoR t on ComPli AnCE With thE CoRPoRA tE GoVERnAnCE CodE Corporate Governance Principle Corporate Governance Principle Compliance Criteria Compliance Status Explanations of deviation from Corporate Governance Principles Compliance Criteria Comments 2.3 2.3.1 The board of directors should be an efficient and professional governing body of the company capable of making objective and independent judgments and taking decisions in the best interests of the company and its sharehold- ers. only persons with impeccable business and personal reputation should be elected to the board of directors; such persons should also have knowledge, skills, and experience required to make decisions that fall within the role and responsibilities of the board of directors and to perform its functions efficiently. 1. the procedure for the board of directors’ performance evalu- ation adopted in the company includes, among other things, evaluation of professional skills and expertise of the board members. 2. in the reporting period, the board of directors (or its nomina- tion committee) evaluated candidates to the board of directors in terms of their experience, knowledge, busi- ness reputation, absence of conflicts of interest, etc. 28 2.3.2 Board members should be elected pursuant to a transparent procedure enabling shareholders to obtain information about the respective can- didates that is sufficient to get an idea of the candidates’ personal and professional qualities. 1. in all cases when a general meeting of shareholders was held during the reporting period, the agenda of which included the election of the board of directors, the company provided shareholders with biographical data of all candidates to the board of directors, results of the evaluation of such candidates per- formed by the board of directors (nomination committee), as well as information on the candidates’ compliance with the independence criteria according to the recommendations in paragraphs 102 to 107 of the Code, and the candidates’ written consent to be elected to the board of directors. 2.3.3 2.3.4 the composition of the board of directors should be balanced, in particular, in terms of qualifications, expertise, knowledge and business qualities of its members. the board of directors should enjoy the confidence of shareholders. the number of members of the company’s board of directors must enable the board to or- ganise its activities in the most efficient way, in particular, to create board committees, as well as to enable the company’s substantial minority shareholders to elect a candidate to the board of directors for whom they would vote. 1. As part of the board performance evaluation carried out in the reporting period, the board of directors reviewed its own needs in professional expertise, experience and business skills. 1. As part of the board performance evaluation carried out in the reporting period, the board of directors considered whether the size of the board was appropriate in terms of the company’s needs and shareholder interests. in the reporting period, the Board of directors or the hR and Remuneration Committee performed no evaluation of candi- dates to the Board of directors. Given the ownership structure of federal Grid Company, the issue of electing the Board of directors and shaping the po- sition of the major shareholder in respect of the nominated candidates is regulated by the procedure set out by the deci- sions of the Government of the Russian federation. the Commission for selecting independent directors at the Rosimuschestvo conducts evaluation of candidates’ experi- ence, knowledge, business reputation, absence of conflicts of interest, etc., at the stage of selecting candidates. taking into account the above procedure for nominating candidates to the Board of directors, the Company does not plan to place a separate matter on candidates’ evaluation for consideration of the Board of directors or the hR and Remuneration Committee. in the reporting period, when preparing the General meeting of Shareholders, no information was provided to share- holders on the results of the board candidates’ evaluation performed by the Board of directors or the hR and Remuner- ation Committee, as well as on the candidates' compliance with the independence criteria recommended by paragraphs 1-2 – 107 of the Code. Given the ownership structure of federal Grid Company, the issue of electing the Board of directors and shaping the po- sition of the major shareholder in respect of the nominated candidates is regulated by the procedure set out by the deci- sions of the Government of the Russian federation. Evaluation of candidates against their compliance with the independence criteria (provided for in the listing Rules) is conducted at the stage of selecting candidates by the Commission for selecting independent directors at the Rosimuschestvo with the confirmation of compliance by the moscow Stock Exchange. necessary information on each candidate (biographical data, availability of written consent) was submitted to shareholders as part of the materials for the Annual General meeting of Shareholders. When preparing the 2016 Annual General meeting, the Com- pany plans, in addition to the above information on the Board candidates, to provide shareholders with the information on their compliance with the independence criteria specified by the moscow Exchange listing Rules. Partially compliant Partially compliant Compliant Compliant 29 Evaluation of the Board performance in 2015 was conducted in the 1st quarter of 2016. Evaluation of the Board performance in 2015 was conducted in the 1st quarter of 2016. APPEndiCES to thE AnnuAl REPoR t REPoR t on ComPli AnCE With thE CoRPoRA tE GoVERnAnCE CodE Corporate Governance Principle Corporate Governance Principle Compliance Criteria Compliance Status Explanations of deviation from Corporate Governance Principles Compliance Criteria Comments 2.4 The board of directors should include a sufficient number of independent directors. 2.4.1 2.4.2 An independent director should mean any indi- vidual who has required professional skills and expertise and is sufficiently able to have his/her own position and make objective and fair judg- ments, free from the influence of the company’s executive bodies, certain groups of sharehold- ers or other stakeholders. it should be noted that, under normal conditions, a candidate (or an elected director) should not be deemed independent, if he/she is associated with the company, any of its substantial shareholders, material trading partners or competitors, or the government. it is recommended to evaluate whether candi- dates nominated to the board of directors meet independence criteria as well as to review, on a regular basis, whether independent board members meet the independence criteria. When carrying out such evaluation, substance should take precedence over form. 1. during the reporting period, all independent members of the board of directors met the independence criteria specified in recommendations 102 to 107 of the Code or were recognised as such by the decision of the board of directors. 1. in the reporting period, the board of directors (or the nomina- tion committee) evaluated the independence of each candidate to the board of directors and submitted the relevant opinion to shareholders. 2. in the reporting period, the board of directors (or the nomina- tion committee) reviewed, at least once, the independence of the existing board members, indicated by the company in the annual report as independent directors. 3. the company has developed procedures that determine ac- tions to be taken by a member of the board of directors if he/ she loses his/her independence, including the obligation to notify the board of directors thereof in a timely manner. 30 Partially compliant Partially compliant According to the orders of the Rf Government, the Annual General meetings of Shareholders in 2014 and 2015 respec- tively elected the Board of directors with 1 and 3 directors who met the independence criteria. Because of the 2014 annual campaign, in the first half of 2015 there arose a reason in respect of the elected indepen- dent director to change his status. in the second half of 2015, following the 2015 annual campaign, one of three independent directors elected to the Board of directors lost his status also. in the event of such a situation in the future, the Company plans that it will be a matter of the Board to decide whether a certain Board member is independent or not. in the reporting period, at the Annual General meeting of Shareholders the Board of directors did not provide shareholders with an opinion on the independence of each nominated candidate. however, the opinion of the Board of directors regarding the board candidates was given at the meeting of the Board of directors, which included the consideration of the proposals of shareholders on nomination of candidates to the Com- pany’s governing and control bodies. When preparing the 2016 Annual General meeting, the Com- pany plans, in addition to the above information on the Board candidates, to provide shareholders with the information on their compliance with the independence criteria specified by the moscow Exchange listing Rules. Recommendations under item 2 were actu- ally observed within the consideration of matters on forming composition of the Board commit- tees, because of the Company’s obligation, in respect of some of them, to include members/to appoint a chairman from among the independent members of the Board of directors. 31 2.4.3 At least one third of the board of directors shall be independent directors. 1. At least one third of the board of directors shall be indepen- dent directors. Partially compliant 2.4.4 independent directors should play a key role in the prevention of internal conflicts in the company and in material corporate actions taken by the latter. 1. independent directors (who do not have any conflicts of interest) perform a preliminary evaluation of material corporate actions related to a potential conflict of interest, and the findings of such evaluation are submitted to the board of directors. non-compliant in the reporting period, the number of independent directors in the Company’s Board was less than one third. it was due to the following. According to the orders of the Rf Government, the Annual General meetings of Shareholders in 2014 and 2015 respectively elected the Board of directors with 1 and 3 directors who met the independence criteria. Because of the 2014 annual campaign, in the first half of 2015 there arose a reason in respect of the elected indepen- dent director to change his status. in the second half of 2015, following the 2015 annual campaign, one of three independent directors elected to the Board of directors also lost his status. Independent directors (who do not have any conflicts of interest) do not perform a preliminary evaluation of material corporate actions related to a potential conflict of interest. the Company’s Articles of Association, approved in 2015, do not define a concept of material corporate actions. However, based on the definition of this concept in the Corporate Governance Code, it should be noted that the Company’ Articles of Association provide for relevant responsibilities of the governing bodies on matters related, according to the Code, to material corporate actions. it should also be noted that in the reporting period the Company made two transactions out of the list of material corporate actions specified in the Code that were not related to a potential conflict of interest. issues related to material transactions are regulated in accordance with the Russian legislation and the Company’s internal documents. the Company does not plan to amend its internal docu- ments specifying the procedure for approval of materials on issues to be included in agenda of a scheduled meeting of the Board of directors. APPEndiCES to thE AnnuAl REPoR t REPoR t on ComPli AnCE With thE CoRPoRA tE GoVERnAnCE CodE Corporate Governance Principle Corporate Governance Principle Compliance Criteria Compliance Status Explanations of deviation from Corporate Governance Principles Compliance Criteria Comments 32 2.5 2.5.1 2.5.2 2.5.3 2.6 2.6.1 2.6.2 2.6.3 the chairman of the board of directors should contribute to the most effective implementation of functions im- posed on the board. the chairman of the board of directors shall be an independent director; or a senior indepen- dent director shall be appointed among the company’s independent directors to coordinate work of the independent directors and to liaise with the chairman of the board. 1. the chairman of the board of directors is an independent director; or a senior independent director has been appointed among the company’s independent directors. 2. the role, rights and duties of the chairman of the board of directors (and, if applicable, the senior independent director) are properly specified in the company’s internal documents. the board chairman should ensure that board meetings are held in a constructive atmosphere and that all items on the meeting agenda are discussed freely. the chairman should also monitor execution of decisions made by the board of directors. the chairman of the board of directors must take all measures as may be required to provide the board members in a timely manner with in- formation required to make decisions on issues on the agenda. 1. the performance of the board chairman was evaluated as part of the board perfor- mance evaluation in the reporting period. 1. the duty of the chairman of the board of directors to ensure all board members are provided with relevant information on meeting addenda in a timely man- ner is set out in the Company’s internal documents. Board members must act reasonably and in good faith in the best interests of the company and its shareholders, being sufficiently informed, with due care and diligence. Board members should make decisions consid- ering all available information, in the absence of a conflict of interest, treating shareholders of the company equally, and assuming normal business risks. 1. the company's internal documents establish that a member of the board of directors is obliged to inform the board of direc- tors if he/she has a conflict of interest with respect to any item on the agenda for a meeting of the board of directors or a board committee, prior to the discussion of the respective agenda item. 2. the company's internal documents provide that a member of the board of directors should refrain from voting on any item where he/she has a conflict of interest. 3. the company has established a procedure that enables the board of directors to obtain professional advice on matters fall- ing within its remit, at the company’s expense. Rights and duties of board members should be clearly defined and set out in the company’s internal documents. 1. the company has adopted and disclosed an internal docu- ment that clearly defines the right and duties of members of the board of directors. Board members should have sufficient time to discharge their duties. 1. individual attendance of board and committee meetings, as well as the time devoted to the preparation for meetings was taken into account in the course of board performance evalua- tion in the reporting period. 2. According to the company’s internal documents, members of the board of directors are obliged to notify the board of direc- tors of their intention to join governing bodies of other companies (except for the company’s affiliates and dependent companies) and of such actual appointments. Partially compliant Chairman of the Board of directors is not an independent director. in accordance with subparagraph "d" of paragraph 1 of the list of instructions of the President of the Russian federation no. Pr-846 dated 02 April 2011, as well as the Rf Govern- ment order no. iSh-P13-26pr dated 08 April 2011, profes- sional attorneys shall be elected as chairmen of the boards of directors of companies with state participation. in the reporting period, the Company did not practice the appointment of a senior independent director. it is not planned to appoint a senior independent director in 2016. Compliant Compliant Compliant Compliant Compliant 33 APPEndiCES to thE AnnuAl REPoR t REPoR t on ComPli AnCE With thE CoRPoRA tE GoVERnAnCE CodE Corporate Governance Principle Corporate Governance Principle Compliance Criteria Compliance Status Explanations of deviation from Corporate Governance Principles Compliance Criteria Comments 2.6.4 2.7 2.7.1 2.7.2 2.7.3 All board members should have equal opportu- nity to access the company’s documents and information. newly elected board members should be provided with sufficient information about the company and work of its board of directors as soon as practicable. 1. According to the company’s internal documents, members of the board of directors are entitled to access documents and to make requests relating to the company and its affiliates, and the company’s executive bodies are obliged to provide the relevant information and documents. 2. the company has a formalised induction programme for newly elected members of the board of directors. meetings of the board of directors, preparation for them, and participation of board members therein should en- sure the effective performance of the board. it is recommended that meetings of the board of directors be held as needed, with due ac- count of the Company’s scope of activities and its current objectives. the company’s internal documents should establish a procedure for preparing and holding meetings of the board of directors, enabling the board members to prepare for the meetings properly. the form of a meeting of the board of direc- tors should be determined with due account of importance of issues on the agenda. most important issues should be decided at meet- ings held in person. 1. the board of directors held at least six meetings in the report- ing period. 1. the company has adopted an internal document that governs the procedure for preparing and holding board meetings and specifies, among other things, that a notice of the meeting should normally be made at least five days prior to the meeting. 1. The сompany’s Articles of Association or internal document provide that the most important issues (according to the list in Recommendation 168 of the Code) should be considered at board meetings held in person. 34 Compliant Compliant Compliant non-compliant 35 the Company’s Articles of Association and internal docu- ments do not determine what issues should be considered at Board meetings held in person. According to the recommendations of the Corporate Gov- ernance Code, issues to be considered at meetings held in person include the following: issues relating to holding an Annual General meeting of Shareholders; issues to be resolved in accordance with the directives of the Rf Government; approval of the Company’s material transactions; consideration of material aspects of business of any legal entities controlled by the Company; issues relating the Company’s business (including business plans); other issues, including the results of the Board performance evaluation, consideration of a risk management policy, etc. thus, a number of issues that, according to the Code, require face-to-face consideration by the Board of directors involve tight deadlines for consideration what does not allow to ensure holding a Board meeting in person within the time specified by law due to a possible lack of quorum. the Company does not plan to amend its Articles of Asso- ciation and/or internal documents to specify what issues are to be considered at meetings held in person. At the same time, the Board’s work plan determines prior- ity issues to be considered at the meeting held in person, including the approval of the business plan (consolidated business plan that includes key performance indicators of subsidiaries and associates) and the Company’s investment programme, the long-term development Programme. APPEndiCES to thE AnnuAl REPoR t REPoR t on ComPli AnCE With thE CoRPoRA tE GoVERnAnCE CodE Corporate Governance Principle Corporate Governance Principle Compliance Criteria Compliance Status Explanations of deviation from Corporate Governance Principles Compliance Criteria Comments 2.7.4 decisions on the most important issues relating to the company’s business should be made at a meeting of the board of directors by a qualified majority vote or by a majority vote of all elected board members. 1. the company’s Articles of Association provides that deco- sions on the most critical issues outlined in Recommendation 170 of the Code shall be made at a meeting of the board of directors by a qualified majority of at least three quarters of votes or by a majority of votes of all elected members of the board of directors. non-compliant 36 2.8 2.8.1 2.8.2 the board of directors should establish committees for preliminary consideration of the most important issues of the company’s business. for the purpose of preliminary consideration of any matters relating to oversight of the Com- pany’s business, it is recommended to establish an audit committee composed of independent directors. for the purpose of preliminary consideration of matters relating to the development of efficient and transparent remuneration practices, it is recommended to establish a remuneration committee composed of independent directors and chaired by an independent director who should not be the board chairman. 1. the board of directors established an audit committee com- posed of independent directors only. 2. the company’s internal documents determine the objectives for the audit committee, including those set out by Recommendation172 of the Code. 3. At least one audit committee member, who is an independent director, has an experience and knowledge in preparing, analys- ing, evaluating, and auditing accounting (financial) statements. 4. the audit committee meetings were held at least quarterly during the reporting period. 1. the board of directors established a remuneration committee composed entirely of independent directors. 2. the remuneration committee is chaired by an independent director who is not the chairman of the board of directors. 3. the company’s internal documents determine the objectives for the remuneration committee, including those set out by Recommendation180 of the Code. Compliant Partially compliant the Company’s Articles of Association contain no provi- sions according to which decisions on issues are taken by the Board of Directors by a qualified majority, not less than three-quarters of votes or a majority of votes of all elected members of the Board of directors. Paragraph 18.8 of the Company’s Articles of Association specifies the list of issues to be decided by a two-thirds majority of votes of the Board members participating in the meeting. in particular, these issues include matters provided for in item 4 and item 8 of recommendation 170 of the Code: approval of the Company’s material transactions and consid- eration of material issues relating to activities of any legal entities controlled by the Company. in addition, in accordance with the Articles of Association, decisions are made by a two-thirds majority of votes of the Board members participating in the meeting on the Com- pany participation in other organisations and credit policy setting. the Company does not currently plan to make relevant amendments to its Articles of Association. in the reporting period, the hR and Remuneration Committee was composed not only of independent directors. it was due to the following. According to the orders of the Rf Government, the Annual General meetings of Shareholders in 2014 and 2015 respec- tively elected the Board of directors with 1 and 3 directors who met the independence criteria. Because of the 2014 annual campaign, in the first half of 2015 there arose a reason in respect of the elected indepen- dent director to change his status. in the second half of 2015, following the 2015 annual campaign, one of three independent directors elected to the Board of directors also lost his status. 37 APPEndiCES to thE AnnuAl REPoR t REPoR t on ComPli AnCE With thE CoRPoRA tE GoVERnAnCE CodE Corporate Governance Principle Corporate Governance Principle Compliance Criteria Compliance Status Explanations of deviation from Corporate Governance Principles Compliance Criteria Comments 2.8.3 for the purpose of preliminary consideration of matters relating to hR planning (succes- sion planning), professional composition and fficiency of the board of directors, it is recom- mended to establish a nomination committee (nominating committee, hR committee) with the majority of its members being independent directors. 1. the board of directors established a nomination committee (or its objectives, set out in Recommendation 186 of the Code, are delivered by another committee), and the majority of its members are independent directors. 2. the company’s internal documents determine the objectives for the nomination committee (or another committee with the relevant functions), including those set out by Recommenda- tion186 of the Code. 38 2.8.4 taking account of the company’s scope of activities and a risk level, the board of direc- tors has ascertained that the composition of its committees meets the objectives of the Company. Additional committees either were established, or were not considered necessary (a strategy committee, a corporate gover- nance committee, an ethics committee, a risk management committee, a budget committee, a committee on health, safety and environment, etc.). 2.8.5 the composition of the committees should be determined in such a way that it would allow a comprehensive discussion of issues being con- sidered on a preliminary basis with due account of the variety of opinions. 1. i the reporting period, the company’s board of directors reviewed the conformity of the membership in its committees to the objectives assigned to the board and to the company’s business goals. Additional committees were either established or were not recognised as necessary. 1. Committees of the board of directors are headed by indepen- dent directors. 2. the company’s internal documents (policies) contain provi- sions whereby individuals not included on the audit committee, the nomination committee and the remuneration committee may attend meetings of these committees only upon the invitation of the chairman of the respective committee. Partially compliant Compliant Partially compliant the Company has the hR and Remuneration Committee. Among the list of matters specified in Recommendation 186, matters reserved for the above Committee do not include the following: : interaction with shareholders in the context of selecting candidates to be nominated to the board of directors. Analysis of professional qualifications and independence of all candidates nominated to the board of directors, based on all information available to the nomination committee; draft- ing and communicating recommendations to shareholders in respect of their voting on the election of candidates to the board of directors. description of individual characteristics of directors and the chairman of the board of directors, including time they should spend on issues related to the company's activities, both at and outside the board meetings, in the course of planned and unplanned work. developing training and professional development pro- gramme for board members taking into account their indi- vidual needs, as well as monitoring of practical implementa- tion of the programme. Analysis of current and anticipated needs of the company in terms of professional qualifications of members of its executive bodies. At the same time, matters under item 5 are covered within the Committee responsibilities regarding the appointment of members of the executive bodies, as well as consideration of the Company’s organisational structure and amendments thereto. The Company does not plan to add the matters specified in items 1-4 to the Committee’ remit. the hR and Remuneration Committee and the Audit Com- mittee are headed by the independent director Sergey n. mironosetsky. At the same time, the Strategy Committee and the invest- ment Committee are headed by the Board members who are not independent directors – maxim S. Bystrov and Vyacheslav m. Kravchenko. the Company’s internal documents do not contain an obliga- tion to elect independent directors as the chairmen of the Strategy and investment Committees. According to the Regulations on the above Committees, taking into account certain resolutions of the Rf Govern- ment, these Committees are composed mainly of individuals who are not members of the Board of directors and provide an independent and thorough discussion of issues and the development of preliminary recommendations to the Board of directors. 39 in the reporting period, the Board of directors reviewed the conformity of its Committees’ com- position to their objec- tives when considering matters on the commit- tees’ membership, as well as the approval of the regulations on the committees. the Reli- ability Committee was terminated in 2015. APPEndiCES to thE AnnuAl REPoR t REPoR t on ComPli AnCE With thE CoRPoRA tE GoVERnAnCE CodE Corporate Governance Principle Corporate Governance Principle Compliance Criteria Compliance Status Explanations of deviation from Corporate Governance Principles Compliance Criteria Comments 2.8.6 the chairmen of the committees should inform the board of directors and its chairman of the work of their committees on a regular basis. 1. during the reporting period, the chairmen of the committees reported on the committees’ work to the board of directors on a regular basis. Partially compliant Reports of the committee chairmen were not included as separate items on the agenda of the Board meetings. however, the reports were submitted to the Board of direc- tors as part of the Company’s annual report. in addition, given that all committee chairmen are members of the Board of directors, information on the committees’ work is regu- larly submitted by their chairmen at the Board meetings held in person when considering matters on which the relevant committee has developed recommendations. the relevant provisions on the necessity to submit reports on the committees’ work to the Board of directors have been included in new versions of the Regulations on the commit- tees, approved in 2015. 40 2.9 2.9.1 2.9.2 3.1 3.1.1 3.1.2 the board of directors should ensure evaluation of its own performance, and that of its committees and individual directors. the board of directors’ performance evaluation should be aimed at determining how efficiently the board of directors, its com- mittees and board members work and whether their work meets the company’s needs, as well as at making their work more active and identifying areas for improvement. 1. the self-evaluation or external evaluation of the board performance conducted in the reporting period included the performance evaluation of the committees, individual directors and the board as a whole. 2. the results of the self-evaluation or external evaluation of the board performance, conducted in the reporting period, were considered at the board meeting held in presence. Performance evaluation of the board of direc- tors, its committees and board members should be conducted on a regular basis, at least once a year. to conduct an independent performance evaluation, it is recommended to involve an outside party (consultant) on a regular basis, at least once every three years. 1. for an independent evaluation of the board of directors’ performance, an external company (consultant) was engaged by the company at least once in three recent reporting periods. The company’s corporate secretary shall be responsible for efficient shareholder engagement, coordination of the company’s actions aimed at protecting the shareholder rights and interests, and support of efficient work of the board of directors. the corporate secretary should have knowl- edge, experience, and qualifications sufficient for the discharge of his/her responsibilities, as well as an impeccable reputation and should enjoy the trust of shareholders. 1. the company adopted and disclosed an internal document – the Regulations on the Corporate Secretary. 2. the company’s website and annual report provide back- ground information on the corporate secretary with the same level of detail as for members of the board of directors and the executive leadership of the company. the corporate secretary should be independent enough of the company’s executive bodies and be vested with powers and resources required to carry out his/her tasks. 1. the board of directors approves the appointment, dismissal and additional remuneration of the corporate secretary. Partially compliant during the reporting period, the Board of directors did not review the results of the Board performance evaluation conducted in the reporting period, including the performance evaluation of the committees, individual directors and the board as a whole. Evaluation of the Board performance in 2015 was conducted in the 1st quarter of 2016. the results of the evaluation are included in the annual report and are planned to be consid- ered by the Board of directors in the second quarter of 2016. 41 Compliant Compliant Compliant APPEndiCES to thE AnnuAl REPoR t REPoR t on ComPli AnCE With thE CoRPoRA tE GoVERnAnCE CodE Corporate Governance Principle Corporate Governance Principle Compliance Criteria Compliance Status Explanations of deviation from Corporate Governance Principles Compliance Criteria Comments 42 4.1 4.1.1 4.1.2 4.1.3 4.1.4 4.2 4.2.1 The level of remuneration paid by the company should be sufficient to attract, motivate, and retain individuals having required skills and qualifications. Remuneration to board members, members of the executive bodies, and other key managers of the company should be paid in accordance with a remuneration policy approved by the company. it is recommended that the level of remunera- tion paid by the company to its board members, executive bodies, and other key man- agers should be sufficient to motivate them to work efficiently and enable the company to at- tract and retain competent and qualified profes- sionals. the company should avoid setting the level of remuneration any higher than necessary, as well as an excessively large gap between the level of remuneration of any of the above individuals and that of the company’s employees. the company’s remuneration policy should be developed by its remuneration committee and approved by the board of directors. With the assistance of its remuneration commit- tee, the board of directors should monitor the implementation of and compliance with the remuneration policy by the company and review and amend the same, if necessary. the company’s remuneration policy should provide for transparent mechanisms to be used to determine the amount of remunera- tion due to members of the board of directors, the executive bodies, and other key managers of the company, as well as to regulate all types of payments, benefits, and privileges provided to any of the above individuals. the company is recommended to develop a policy on reimbursement of expenses, which would contain a list of reimbursable expenses and specify service levels provided to members of the board of directors, the executive bodies, and other key managers of the company. Such policy can be a part of the company’s remuneration policy. 1. the company has adopted internal remuneration policy(-ies) for members of the board of directors, executive bodies and other key managers that clearly define the approaches to the remuneration of the above individuals. 1. in the reporting period, the remuneration committee reviewed the remuneration policy(-ies) and the practice of its/their imple- mentation and, if necessary, submitted the relevant recommen- dations to the board of directors. 1. the company’s remuneration policy(-ies) provide(s) for transparent mechanisms to be used to determine the amount of remuneration due to members of the board of directors, the ex- ecutive bodies, and other key managers of the company, as well as regulate(s) all types of payments, benefits, and privileges provided to the above individuals. 1. the company’s remuneration policy(-ies) or other internal documents establish(-es) the rules on the reimbursement of expenses to members of the board of directors, executive bodies and other key managers of the company. The remuneration system of board members should ensure aligning of the directors’ financial interests with the long-term financial interests of shareholders. A fixed annual fee shall be a preferred form of monetary remuneration of the board members. it is not advisable to pay a fee for participation in certain meetings of the board of directors or its committees. it is not advisable to use any form of short-term incentives or additional financial incentives in respect of board members. 1. fixed annual remuneration was the only monetary form of remuneration for members of the board of directors for their work within the board during the reporting period. Compliant Compliant Compliant Compliant Compliant the term ‘other key man- agers of the Company’ is not applied according to the Action Plan ("road- map") on introducing the Corporate Governance Code provisions in the Company's practice approved by the Board of directors on 12 march 2015 (minutes no. 255). the term ‘other key man- agers of the Company’ is not applied according to the Action Plan ("road- map") on introducing the Corporate Governance Code provisions in the Company's practice approved by the Board of directors on 12 march 2015 (minutes no. 255). the term ‘other key man- agers of the Company’ is not applied according to the Action Plan ("road- map") on introducing the Corporate Governance Code provisions in the Company's practice approved by the Board of directors on 12 march 2015 (minutes no. 255). 43 APPEndiCES to thE AnnuAl REPoR t REPoR t on ComPli AnCE With thE CoRPoRA tE GoVERnAnCE CodE Corporate Governance Principle Corporate Governance Principle Compliance Criteria Compliance Status Explanations of deviation from Corporate Governance Principles Compliance Criteria Comments 4.2.2 4.2.3 4.3 4.3.1 long-term ownership of shares of the com- pany contributes most to aligning the financial interests of board members with the long-term interests of the company’s shareholders. however, it is not recommended to make the right to dispose shares dependent on the company’s achievement of certain performance results; nor should board members take part in the company’s option plans. it is not recommended to provide for any ad- ditional allowance or compensation in the event of early dismissal of board members in connection with a change in control over the company or other circumstances. 1. if the company’s internal document(s) - remuneration policy(- ies) provide(s) for granting shares to members of the board of directors, clear rules for holding shares by members of the board of directors, aimed at encouraging long-term ownership of such shares, should be available and disclosed. 1. The Company does not have any additional benefits or com- pensation in case of the early termination of members of the board of directors in connection with a change in control over the company or other circumstances. the system of remuneration due to members of the executive bodies and other key managers of the company should provide that their remuneration is dependent on the company’s performance results and their personal contributions to the achievement thereof. Remuneration due to members of the executive bodies and other key managers of the company should be set in such a way as to ensure a reasonable and justified ratio between its fixed portion and its variable portion that is depen- dent on the company’s performance results and employees’ personal (individual) contribution to the achievement thereof. 1. during the reporting period, the annual performance indica- tors approved by the board of directors were used to determine the amount of variable remuneration of members of executive bodies and other key managers of the company. 2. during the most recent evaluation of the remuneration system for members of the executive bodies and other key managers, the board of directors (the remuneration committee) made sure the Company applied an efficient ratio of the fixed portion of remuneration to the variable portion. 3. the company has a procedure for repaying bonuses unlaw- fully obtained by members of the executive bodies and other key managers. 44 Compliant this criterion is not applicable because the Company’s remuneration policy does not provide for granting the Company shares to members of the Board of directors. Compliant Compliant 45 the remuneration system for members of the Com- pany’s executive bodies is based on the achieve- ment of the approved target values of key performance indicators (KPis). the Board of directors reviews the results of target achievement, and payment of remuneration according to the results achieved is possible only upon the decision made by the Board of directors to approve the relevant report. thus, the possibility to get remuneration unlaw- fully is eliminated. in addition, the results of the Company’s KPi achievement are reviewed by an inde- pendent auditor, who evaluates the achieve- ment of indicators of the Company’s long-term development programme and submits all findings to the Board of directors, thus mitigating the risk of manipulating the report data or other irregulari- ties. 4.3.2 Companies whose shares are admitted to trad- ing at organised markets are recommended to put in place a long-term incentive programme for members of the company’s executive bodies and other key managers in- volving the company's shares (options or other derivative financial instruments the underlying assets for which are the company’s shares). 1. the company has put in place a long-term incentive pro- gramme for members of the company’s executive bodies and other key managers involving the company’s shares (financial instruments based on the company’s shares). 2. the long-term incentive programme for members of the company’s executive bodies and other key managers implies that the right to sell shares and other financial instruments used under such programme will not arise earlier than three years from their provision. the said right should be made conditional on the achievement of certain targets by the company. non-compliant the Company does not have a long-term incentive pro- gramme for members of the its executive bodies and other key managers involving the Company’s shares (financial instruments based on the company’s shares). APPEndiCES to thE AnnuAl REPoR t REPoR t on ComPli AnCE With thE CoRPoRA tE GoVERnAnCE CodE Corporate Governance Principle Corporate Governance Principle Compliance Criteria Compliance Status Explanations of deviation from Corporate Governance Principles Compliance Criteria Comments 46 4.3.3 5.1 5.1.1 5.1.2 5.1.3 5.1.4 5.2 5.2.1 5.2.2 the amount of compensation (a so-called "golden parachute") payable by the company in the event of early termination of a member of an executive body or other key manager at the initiative of the company, provided that there have been no unfair practices on the part of such person, should not exceed two times the fixed portion of his/her annual remuneration. 1. the amount of compensation (golden parachute") paid by the company in the event of early termination of a member of an executive body or other key manager at the initiative of the com- pany, provided that there have been no unfair practices on the part of such person, did not exceed two times the fixed portion of his/her annual remuneration in the reporting period. the company should have a sound risk management and internal control system aimed at providing reasonable assurance that the company’s goals will be achieved. the board of directors should determine prin- ciples of and approaches to the establishment of the company’s risk management and internal control system. 1. functions of various governing bodies and business units at the company in the risk management and internal control sys- tem are clearly defined in the company’s internal documents/ relevant policy approved by the board of directors. the company’s executive bodies should create and maintain an efficient risk management and internal control system in the company. 1. the company’s executive bodies ensured the distribution of functions and powers related to risk management and internal control among managers (heads) of business units and divi- sions accountable thereto. Compliant Compliant Compliant 1. the company has approved an anti-corruption policy. Compliant the company’s risk management and internal control system should enable one to obtain an objective, fair and clear view of the current posi- tion and prospects of the company, integrity and transparency of its accounts and reports, and reasonableness and acceptability of risks taken by the company. the board of directors is recommended to take sufficient measures to ensure that the existing risk management and internal control system of the company is consistent with the principles of and approaches to its creation as set forth by the board of directors and that it operates efficiently. 2. the company has organised an affordable method of informing the board of directors or its audit committee of any violations of legislation, internal procedures and the ethics code of the company. 1. in the reporting year, the board of directors or the audit committee evaluated the ef- ficiency of the company’s risk management and internal control system. Information on the key findings of such evaluation is included in the company’s annual report. for regular independent review of reliability and effectiveness of the risk management and internal control system and corporate governance practices, the company should arrange for internal audits. it is recommended that internal audits be car- ried out by a separate structural unit (inter- nal audit department) to be created by the company or through engaging an independent outside party . to ensure the independence of the internal audit department, it should have separate lines of functional and administrative reporting. functionally, the internal audit depart- ment should report to the board of directors. When carrying out an internal audit, it is recom- mended to review effectiveness of the internal control system and the risk management system, as well as to review corporate governance and apply generally accepted stan- dards of internal auditing. 1. to perform internal audits, the company has established a separate structural unit that performs internal audit func- tions and reports functionally to the board of directors, or has engaged an independent external organisation subject to the same reporting principle. 1. in the reporting period, as part of an internal audit, the effectiveness of the internal control and risk management system was reviewed. 2. the company applies the generally accepted approaches to internal control and risk management. Compliant Compliant Compliant 47 APPEndiCES to thE AnnuAl REPoR t REPoR t on ComPli AnCE With thE CoRPoRA tE GoVERnAnCE CodE Corporate Governance Principle Corporate Governance Principle Compliance Criteria Compliance Status Explanations of deviation from Corporate Governance Principles Compliance Criteria Comments 6.1 the company and its activities should be transparent for its shareholders, investors and other stakeholders. 48 6.2 6.2.1 6.1.1 the Company should develop and implement an information policy enabling the Company to efficiently exchange information with its share- holders, investors and other stakeholders . 6.1.2 the company should disclose information on its corporate governance system and practices, including detailed information on compliance with the principles and recommendations of the Code. 1. the company has approved an information policy developed in compliance with the Corporate Governance Code recommen- dations. 2. the board of directors (or one of its committees) considered matters related to the company’s compliance with its information policy at least once in the reporting period. 1. the company discloses information on its corporate gover- nance system and the general corporate governance principles applied thereby, including on its corporate website. 2. the company discloses information on the composition of its executive bodies and the board of directors, the independence of board members and their membership in com- mittees of the board of directors (as defined in the Code). 3. if there is a person who controls the company, the company discloses a memorandum from the controlling person concerning that per- son’s plans for corporate governance at the company. the company should disclose, on a timely basis, full, updated and reliable information about itself so as to enable its shareholders and investors to make informed decisions. the company should disclose information in ac- cordance with the principles of regularity, con- sistency and timeliness, as well as accessibility, reliability, completeness and comparability of data disclosed. 1. the company’s information policy determines the approaches to, and criteria for, determin- ing information that could have a significant influence on the company’s value and its securities, and the procedures that ensure the timely disclo- sure of such information. 2. if the company’s securities are traded in foreign markets, equivalent material information was disclosed in the Russian federation and in such markets simultaneously in the reporting period. 3. if foreign investors hold a material share in the company’s capital, the company disclosed information in Russian and in a commonly used foreign language in the reporting period. 6.2.2 the company is advised against using a formalistic approach to information disclosure; it should disclose material information on its activities, even if disclosure of such information is not required by law. 1. in the reporting period, the company disclosed annual and interim IFRS financial statements. the company’s annual report for the reporting period includes the annual ifRS financial statements with the auditor’s opinion. 6.2.3 the company’s annual report, being one of the most important tool for communication with shareholders and other stakeholders, should contain information enabling one to evaluate the company’s performance for the year. 2. the company discloses complete information on the com- pany’s capital structure, according to Recommendation 290 of the Code, in the annual report and on the company’s website. 1. the company’s annual report contains the company’s operat- ing and financial highlights. 2. the company’s annual report contains information on envi- ronmental and social aspects of the company’s business. the Company has no information on the avail- ability of its majority shareholder’s memoran- dum concerning its plans for corporate governance in federal Grid Company. As soon as the Company has such a document available, the latter will be disclosed in accor- dance with the Corporate Governance Code recom- mendations. 49 the Company’s securities (Global depositary Receipts) are traded on the london Stock Exchange. the disclosure of material information in the Russian federation and abroad is not equivalent. the Company provides disclosures in accordance with the requirements of the financial Services Authority of the uK. The FSA did not set a specific list of price sensitive informa- tion, and each issuer decides whether certain information is price sensitive. the Company considers most corporate announcements disclosed in accordance with the legislation of the Rus- sian federation to be not material to holders of depositary Receipts. thus, the Company considers the amount of information disclosed in accordance with the requirements of the uK legislation to be sufficient and does not plan to extend it. Compliant Compliant Partially compliant Compliant Compliant APPEndiCES to thE AnnuAl REPoR t REPoR t on ComPli AnCE With thE CoRPoRA tE GoVERnAnCE CodE Corporate Governance Principle Corporate Governance Principle Compliance Criteria Compliance Status Explanations of deviation from Corporate Governance Principles Compliance Criteria Comments 6.3 6.3.1 the company should provide information and documents requested by its shareholders in accordance with the principle of equal and easy access. the exercise by the shareholders of their right to access the company’s documents and information should not be unreasonably burdensome. 1. the company’s information policy specifies an easy procedure for providing access to shareholders to information, including information on the legal entities controlled by the company, upon the request of a shareholder. 50 6.3.2 When providing information to its sharehold- ers, the company should maintain a reasonable balance between the interests of individual shareholders and its own interests related to the fact that the company is interested in keeping confidentiality of sensitive business information that might have a material impact on its com- petitiveness. 1. in the reporting period, the company did not deny shareholders’ requests for information, or such denials were justified. 2. In cases specified in the company’s information policy, shareholders are informed of the confidential nature of information and undertake to keep it confidential. 7.1 7.1.1 Any actions which have or may have a material effect on the company’s share capital structure and its financial position and, accordingly, on the position of its shareholders (‘material corporate actions’) should be taken on fair terms and conditions ensuring that the rights and interests of shareholders as well as other stakeholders are observed. material corporate actions shall be deemed to include reorganisation of the company, acquisi- tion of 30 or more percent of its voting shares (takeover), entering by the company into any material transactions, increasing or decreas- ing its share capital, listing and delisting of its shares, as well as other actions which might result in significant changes in rights of its shareholders or violation of their interests. it is recommended to include in the company’s Articles of Association a list of (criteria for identifying) transactions or other actions fall- ing within the category of material corporate actions and provide therein that decisions on any such actions should fall within the matters reserved for the company’s board of directors. 1. the company’s Articles of Association specify a list of actions and other efforts that constitute material corporate actions, and their determination criteria. decision-making on material corporate actions falls within the remit of the board of directors. Where the taking of these corporate actions is directly referred by law to the remit of the general meeting of sharehold- ers, the board of directors makes the relevant recommenda- tions to shareholders. 2. the company’s Articles of Association classify as material corporate actions, at least, reorganisation of the company, ac- quisition of 30 or more percent of its voting shares (takeover), entering into material transactions, increase or decrease of its share capital, listing and delisting of the company’s shares. 7.1.2 the board of directors should play a key role in making decisions or developing recommenda- tions relating to significant corporate actions; for that purpose, it should rely on opinions of the company’s independent directors. 1. the company has a procedure whereby independent directors declare their position on material corporate actions prior their approval. Partially compliant Currently, the information policy of the Company does not provide declarative obligations of the Company regarding provision of information on legal entities controlled by the Company upon request of shareholders. At the same time, information on legal entities controlled by the Company (their businesses, contacts, composition of the governing and control bodies, annual financial indicators) is disclosed on the website of the Company and in the Company's annual report. information on material transactions of legal entities con- trolled by the Company are also disclosed in the Company's annual report. Currently, federal Grid does not have controlled entities that are material for its business. the Company does not currently plan to amend its informa- tion policy in this regard. if a relevant request is made, information will be submitted in accordance with the legislation of the Russian federation and internal documents of the Company. Compliant 51 Partially compliant the Company’s Articles of Association, approved in 2015, do not define a concept of material corporate actions. however, in accordance with the applicable legislation and the Company’s Articles of Association, decision making on matters that relate to material corporate actions specified in Recommendation 303 of the Code is reserved for the Board of directors of General meeting of Shareholders. When submitting for the shareholders ' meeting of any matters, including material corporate actions, the Board of directors provides shareholders with appropriate recommendations. Partially compliant the Company does not have a formal procedure whereby independent directors declare their positions on material corporate actions prior to their approval. however, the independent members of the Board of direc- tors have an opportunity to state their position as part of the preliminary consideration of issues on the agenda of the specialised committees, composed of independent direc- tors, as well as when considering issues by the Board of directors through special opinion or expression in writing. APPEndiCES to thE AnnuAl REPoR t REPoR t on ComPli AnCE With thE CoRPoRA tE GoVERnAnCE CodE Corporate Governance Principle Corporate Governance Principle Compliance Criteria Compliance Status Explanations of deviation from Corporate Governance Principles Compliance Criteria Comments 7.1.3 7.2 7.2.1 7.2.2 52 When taking any significant corporate actions which would affect rights or legitimate interests of the company’s shareholders, equal terms and conditions should be ensured for all of share- holders; if statutory mechanisms designed to protect the shareholder rights prove to be insuf- ficient for that purpose, additional measures should be taken with a view to protecting the rights and legitimate interests of the company’s shareholders. in such instances, the company should not only seek to comply with the formal requirements of law but should also be guided by the principles of corporate governance set out in the Code. 1. the company’s Articles of Association, taking into account the particular features of its business, established lower minimum criteria for classifying the company’s transactions as significant corporate actions than stipulated by law. 2. during the reporting period, all significant corporate actions were approved before their implementation. The company should have in place such a procedure for taking any significant corporate actions that would enable its shareholders to receive full information about such actions in time and influence them, and that would also guarantee that the shareholder rights are observed and duly protected in the course of taking such actions. When disclosing information about significant corporate actions, it is recommended to give explanations concerning reasons for, conditions and consequences of such actions. 1. in the reporting period, the company disclosed information on the company’s significant corporate actions in a timely man- ner and in detail, including the reasons and timeframe for taking of such actions. Rules and procedures in relation to significant corporate actions taken by the company should be set out in its internal documents. 1. the company’s internal documents provide for the procedure for engaging an independent appraiser when determining the value of property to be acquired or disposed of under a major transaction or a related-party transaction. 2. the company’s internal documents provide for the procedure for engaging an independent appraiser for determining a price of the company’s shares, repurchased or redeemed. 3. the company’s internal documents contain an expanded list of grounds on which members of the company’s board of direc- tors, as well as other persons referred to in the legislation, are deemed to be interested in the company’s transactions. Compliant Compliant Partially compliant 53 the Company’s internal documents do not provide for an extended list of grounds on which members of the Board of directors, as well as other persons referred to in the legisla- tion, are deemed to be interested in the company’s transac- tions. Given the special aspects of activities of the holding struc- ture PJSC Rosseti, which includes federal Grid Company, transactions with legal entities controlled by federal Grid are related-party transactions. Annually, the Company brings for consideration of the Board of directors about 400 of such transactions. the expansion of grounds on which members of the Board of directors and other persons referred to in the legislation are deemed to be interested in the Company’s transac- tions could hinder the activities of the Company due to the increase in the number of transactions that require approval. in addition, there are no such grounds in the Company’s practice. the Company does not plan to expand the list of grounds on which members of the Board of directors and other persons referred to in the legislation are deemed to be interested in the Company’s transactions. APPEndiCES to thE AnnuAl REPoR t REPoR t on ComPli AnCE With thE CoRPoRA tE GoVERnAnCE CodE Report of Federal Grid Company On Compliance with the main principles of the UK Corporate Governance Code Report date: 30.03.2016 federal Grid Company, being a public company whose securities (Global depositary Receipts) are traded on the main market of the london Stock Exchange, applies the main principles of the uK Corporate Governance Code. Corporate Governance Principle Compliance Status Explanations Corporate Governance Principle B.2. Appointments to the Board there should be a formal, rigorous and transparent procedure for the appointment of new directors to the board. Compliance Status Partially compliant 54 Section А leadership А.1. the Role of the Board A.2. division of Respon- sibilities А.3. the Chairman А.4. non-Executive directors Every company should be headed by an effective board which is collectively re- sponsible for the long-term success of the company. there should be a clear division of responsi- bilities at the head of the company between the running of the board and the executive responsibility for the running of the com- pany’s business. no one individual should have unfettered powers of decision. the chairman is responsible for leadership of the board and ensuring its effectiveness on all aspects of its role. As part of their role as members of a unitary board, non-executive directors should constructively challenge and help develop proposals on strategy. Section B Effectiveness B.1. the Composition of the Board the board and its committees should have the appropriate balance of skills, experi- ence, independence and knowledge of the company to enable them to discharge their respective duties and responsibilities ef- fectively. Compliant Compliant Compliant Compliant Compliant B.3. Commitment B.4. development All directors should be able to allocate suffi- cient time to the company to discharge their responsibilities effectively. Compliant All directors should receive induction on join- ing the board and should regularly update and refresh their skills and knowledge. Compliant B5. information and Support the board should be supplied in a timely manner with information in a form and of a quality appropriate to enable it to discharge its duties. Compliant B.6. Evaluation the board should undertake a formal and rigorous annual evaluation of its own performance and that of its committees and individual directors. Compliant B.7. Re-election All directors should be submitted for re-elec- tion at regular intervals, subject to continued satisfactory performance. Compliant Section C Accountability C.1. financial and Busi- ness Reporting C.2. Risk manage- ment and internal Control the board should present a fair, balanced and understandable assessment of the company’s position and prospects. the board is responsible for determining the nature and extent of the significant risks it is willing to take in achieving its strategic objectives. the board should maintain sound risk management and internal control systems. Compliant Compliant Explanations there is no nominations commit- tee in the Company. At the same time, federal Grid complies with the requirements of the Russian legisla- tion to the procedure for nominating board candidates. federal Grid Company is included in a special list approved by the Rf Government decree no. 91-r dated 23 January 2003, and board candidates are agreed by the Com- mission for selecting independent directors at the Rosimuschestvo with participation of the interested federal executive bodies and profes- sional associations, as well as the Rf Government and the Administra- tion of the Rf President. the Commission for select- ing independent directors at the Rosimuschestvo evaluates whether board candidates meet the indepen- dence criteria. At the stage of selecting candidates, their compliance with the independence criteria is confirmed by the Moscow Stock Exchange with the subsequent submission of results to the Rosi- muschestvo. 55 APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS Corporate Governance Principle C.3. Audit Committee and Auditors the board should establish formal and trans- parent arrangements for considering how they should apply the corporate reporting and risk management and internal control principles and for maintaining an appropri- ate relationship with the company’s auditors. Explanations Compliance Status Compliant Section d d.1. the level and Components of Remuneration d.2. Procedure Section E E.1. dialogue with Shareholders E.2. Constructive use of General meet- ings Remuneration Executive directors’ remuneration should be designed to promote the long-term success of the company. Performance-related ele- ments should be transparent, stretching and rigorously applied. there should be a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual directors. no director should be involved in deciding his or her own remuneration. Relations with shareholders there should be a dialogue with sharehold- ers based on the mutual understanding of objectives. the board as a whole has responsibility for ensuring that a satisfactory dialogue with shareholders takes place. Compliant Compliant Compliant the board should use general meetings to communicate with investors and to encour- age their participation. Compliant 56 Appendix 4. information on major transactions and on transactions made by federal Grid Company in 2015, 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 major transactions made by PJSC FGC UES in 2015 in 2015, the Company did not enter into any transactions recognised by the federal law on Joint Stock Companies as major transactions, as well as other transactions to which major transaction approval procedure applies pursuant to the federal Grid’s Articles of Association. 57 APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS ▶ Information on transactions made by PJSC FGC UES in 2015 that are recognised as related party transactions under the Russian laws, and are subject to approval by the Company’s authorised governing bodies no. transaction description transaction parties transaction subject* transaction price** JSC fGC uES and JSC “Elec- trosetservice unEG” Amendments to the terms and conditions of the rental agreement no. 22-07/12 dated 19.04.2012 Rental rate is RuB 916,275.85 per month, including VAt (18%) 58 1. 2. 3. 4. 5. Supplementary agreement no. 1 of 05.02.2014 to the rental agreement no. 22- 07/12 of 19.04.2012 Contractor agreement for the performance of construction and installation works, com- missioning works and supply of materials and equipment under the title: “Program of replacing of 110-750 kV voltage transformers at the facilities of JSC fGC uES (330 kV South-West SS)” Supplementary agreement no. 1 to the land sublease agreement no. 51-13 of 01.01.2013 JSC fGC uES and JSC “Elec- trosetservice unEG” Pursuant to the agreement, the Contractor (JSC “Electrosetservice unEG”) undertakes to perform: - construction and installation works, - commissioning works, - supply of materials and equipment, and deliver the work to the Customer (JSC fGC uES), and the Customer undertakes to accept the work and pay the agreed price according to the procedure specified by the agreement JSC fGC uES and JSC idGC of urals Amendments to the terms and conditions of the land sublease agreement no. 51-13 of 01.01.2013 Agreement for performing design and survey work for the installation of active balancing filters at 220 kV Skovorodino SS JSC fGC uES and JSC R&d Centre of fGC uES JSC fGC uES and JSC “Elec- trosetservice unEG” Contractor agreement for construction and installation, commissioning works and supply of materials and equip- ment under the title: “Program of replacing of hVl 330-750 kV at 330 kV Pskov SS” under the agreement, the Contractor (JSC R&d Centre of fGC uES) undertakes to perform work on: - the engineering survey; - the development of design documentation; - the development of procurement documentation, and the Customer (JSC fGC uES) undertakes to accept the resulst of works and pay the agreed price according to the procedure specified by the agreement under the agreement, the Contractor (JSC “Electro- setservice unEG”) undertakes to perform: - construction and installation works, - commissioning works, - supply of materials and equipment, and deliver the results to the Customer (JSC fGC uES), and the Customer undertakes to accept the result of works and pay the agreed price in the manner prescribed by the agreement Governing body that resolved to approve the transaction (minutes' date and number) the Company’s Board of directors (minutes no. 247 of 26.01.2015) Person(s) interested in the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company’s management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Work price according to the agreement shall not exceed RuB 3,422,000.00, includ- ing VAt (18%) the Company’s Board of directors (minutes no. 247 of 26.01.2015) the amount of lease payment under the land sublease agreement no. 51-13 of 01.01.2013, subject to supplementary agreement no. 1 with a protocol of differ- ences for the period from 01.01.2013 to 01.09.2015 is RuB 1,432,320.60, including VAt (18%) the Company’s Board of directors (minutes no. 247 of 26.01.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti 59 Work price according to the agreement shall not exceed RuB 18,098,000.01, includ- ing VAt (18%) the Company’s Board of directors (minutes no. 247 of 26.01.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti Work price according to the agreement shall not exceed RuB 21,123,477.00, includ- ing VAt (18%) the Company’s Board of directors (minutes no. 247 of 26.01.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC “Rosseti”; member of the Company’s management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction 6. Real property lease contract JSC idGC of Centre and Privolzhie and JSC fGC uES the lessor (JSC idGC of Centre and Privolzhie) transfers and the lessee (JSC fGC uES) accepts the property for temporary possession and use for a rental fee Rental payment is RuB 45,174.38 per month, including VAt (18%), and the rental rate for the use and possession of 1 sq.m. of the property is RuB 500.27 per month, including VAt (18%) the Company’s Board of directors (minutes no. 247 of 26.01.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti 7. Supplementary agreement no. 5 to the agency agree- ment no. A/72 of 21.10.2005 JSC fGC uES and JSC ESSK uES Amendments to the essential terms and conditions of the agency agreement no. A/72 of 21.10.2005 Agency fee is calculated in accordance with the table set forth in the supplementary agreement the Company’s Board of directors (minutes no. 247 of 26.01.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti, members of the Company’s management Board: A.A. Zagaratsky, d.l. Shishkin, m.n. Pichugina, who are members of the Board of directors of a party to the transac- tion APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** Governing body that resolved to approve the transaction (minutes' date and number) Person(s) interested in the transaction 60 8. 9. 10. 11. 12. 13. 14. 15. Supplementary agreement no. 5 to the agency agree- ment no. A/73 of 21.10.2005 JSC fGC uES and JSC ESSK uES Amendments to the essential terms and conditions of the agency agreement no. A/73 of 21.10.2005 Agency fee is calculated in accordance with the table set forth in the supplementary agreement the Company’s Board of directors (minutes no. 247 of 26.01.2015) Supplementary agreement no. 5 to the agency agree- ment no. A/74 of 21.10.2005 JSC fGC uES and JSC ESSK uES Amendments to the essential terms and conditions of the agency agreement no. A/74 of 21.10.2005 Agency fee is calculated in accordance with the table set forth in the supplementary agreement the Company’s Board of directors (minutes no. 247 of 26.01.2015) Supplementary agreement no. 5 to the agency agree- ment no. A/75 of 21.10.2005 JSC fGC uES and JSC ESSK uES Amendments to the essential terms and conditions of the agency agreement no. A/75 of 21.10.2005 Agency fee is calculated in accordance with the table set forth in the supplementary agreement the Company’s Board of directors (minutes no. 247 of 26.01.2015) Supplementary agreement no. 6 to the agency agree- ment no. A/76 of 21.10.2005 JSC fGC uES and JSC ESSK uES Amendments to the essential terms and conditions of the agency agreement no. A/76 of 21.10.2005 Agency fee is calculated in accordance with the table set forth in the supplementary agreement the Company’s Board of directors (minutes no. 247 of 26.01.2015) Supplementary agreement no. 5 to the agency agree- ment no. A/77 of 21.10.2005 JSC fGC uES and JSC ESSK uES Amendments to the essential terms and conditions of the agency agreement no. A/77 of 21.10.2005 Agency fee is calculated in accordance with the table set forth in the supplementary agreement the Company’s Board of directors (minutes no. 247 of 26.01.2015) Supplementary agreement no. 7 to the agency agree- ment no. A/78 of 21.10.2005 JSC fGC uES and JSC ESSK uES Amendments to the essential terms and conditions of the agency agreement no. A/78 of 21.10.2005 Agency fee is calculated in accordance with the table set forth in the supplementary agreement the Company’s Board of directors (minutes no. 247 of 26.01.2015) Supplementary agreement no. 7 to the agency agree- ment no. A/79 of 21.10.2005 JSC fGC uES and JSC ESSK uES Amendments to the essential terms and conditions of the agency agreement no. A/79 of 21.10.2005 Agency fee is calculated in accordance with the table set forth in the supplementary agreement the Company’s Board of directors (minutes no. 247 of 26.01.2015) Supplementary agreement no. 4 to the agency agreement no. 3332 of f 10.10.2005 JSC fGC uES and JSC ESSK uES Amendments to the essential terms and condi- tions of the agency agreement No. № 3332 of 10.10.2005 16. lease agreement JSC fGC uES and JSC “Elec- trosetservice unEG” the lessor (JSC fGC uES) leases and the lessee (JSC Electrosetservice unEG) takes movable prop- erty into temporary possession and use (lease) for a rental fee Agent's remuneration (JSC ESSK uES) is 0.19% of the amount of the proposal made by the winner of the tender or other regu- lated non-competitive procedure the Company’s Board of directors (minutes no. 247 of 26.01.2015) Rental payment is RuB 432,454.21, includ- ing VAt (18%) the Company’s Board of directors (minutes no. 248 of 29.01.2015) 61 Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti, members of the Company’s management Board: A.A. Zagaratsky, d.l. Shishkin, m.n. Pichugina, who are members of the Board of directors of a party to the transac- tion Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti, members of the Company’s management Board: A.A. Zagaratsky, d.l. Shishkin, m.n. Pichugina, who are members of the Board of directors of a party to the transac- tion Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti, members of the Company’s management Board: A.A. Zagaratsky, d.l. Shishkin, m.n. Pichugina, who are members of the Board of directors of a party to the transac- tion Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti, members of the Company’s management Board: A.A. Zagaratsky, d.l. Shishkin, m.n. Pichugina, who are members of the Board of directors of a party to the transac- tion Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti, members of the Company’s management Board: A.A. Zagaratsky, d.l. Shishkin, m.n. Pichugina, who are members of the Board of directors of a party to the transac- tion Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti, members of the Company’s management Board: A.A. Zagaratsky, d.l. Shishkin, m.n. Pichugina, who are members of the Board of directors of a party to the transac- tion Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti, members of the Company’s management Board: A.A. Zagaratsky, d.l. Shishkin, m.n. Pichugina, who are members of the Board of directors of a party to the transac- tion Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti, members of the Company’s management Board: A.A. Zagaratsky, d.l. Shishkin, m.n. Pichugina, who are members of the Board of directors of a party to the transac- tion Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company’s management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction APPEndiCES to thE AnnuAl REPoR t no. transaction description transaction parties transaction subject* transaction price** 17. Real property lease contract JSC fGC uES and JSC moESK the lessor (JSC fGC uES) agrees to provide the lessee (JSC moESK) with real property under the transfer and acceptance certificate for temporary possession and use for a fee, and the lessee agrees to pay rent and return the object to the lessor after agreement expiration in good working condition (considering natural wear and tear) the Contractor (JSC “Electrosetservice unEG”) undertakes to perform emergency and recovery work to replace t-5 transformer at 220 kV RPP-1 SS of the federal Grid’s branch – Vologda PmES, and the Customer (JSC fGC uES) undertakes to accept and pay the completed work in the manner prescribed by the agreement the Contractor (JSC “Electrosetservice unEG”) un- dertakes to perform emergency and recovery work for autotransformer type AdCt-167000/500/220 (at-2 f. C) replacement at 500 kV Cherepovetskaya SS of the federal Grid’s branch – Vologda PmES, and the Customer (JSC fGC uES) undertakes to accept and pay for the completed work in the man- ner prescribed by the agreement Agreement for emergency and recovery work to replace t-5 transformer at 220 kV RPP-1 SS of the federal Grid’s branch – Vologda PmES JSC fGC uES and JSC “Elec- trosetservice unEG” JSC fGC uES and JSC “Elec- trosetservice unEG” Agreement for emergency and recovery work to replace autotransformer type AdCt- 167000/500/220 (at-2 f. C) at 500 kV Cherepovetskaya SS of the federal Grid’s branch – Vologda PmES Supplementary agreement no. 5 to the real property lease contract no. 05.42.592.10 of 03.09.2010 Work contract for the creation of an automated measuring and information system for electricity fiscal metering at cross-border transmission lines JSC fGC uES and JSC idGC of Siberia Amendments to the essential terms and condi- tions of the agreement to the real property lease contract no. 05.42.592.10 of 03.09.2010 JSC fGC uES and it Energy Service, llC the Customer (JSC fGC uES) assigns and pays for, and the Contractor (it Energy Service, llC) undertakes to perform works on the creation of an automated measuring and information system for electricity fiscal metering at cross-border transmis- sion lines 62 18. 19. 20. 21. 22. 23. 24. Governing body that resolved to approve the transaction (minutes' date and number) the Company’s Board of directors (minutes no. 248 of 29.01.2015) Rental payment is RuB 565,128.00 per month, including VAt (18%). the amount of the rental payment for 11 months is RuB 6,216,408.00, including VAt (18 %) Work price according to the agreement shall not exceed RuB 16,656,202.23, includ- ing VAt (18%) the Company’s Board of directors (minutes no. 248 of 29.01.2015) infoRm Ation on mAJoR tRAnSAC tionS Person(s) interested in the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti, Chairman of the Company’s Board of directors o.m. Budargin, who is a member of the Board of directors of a party to the transaction, members of the Company’s Board of directors: V.m. Kravchenko and A.A. demin, who are members of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company’s management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Work price according to the agreement shall not exceed RuB 11,783,380.00, includ- ing VAt (18%) the Company’s Board of directors (minutes no. 248 of 29.01.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company’s management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Rental payment is RuB 211,760.41 per month, including VAt (18%), the amount of the rental payment for 13 months (the rent- al period during the term of the supplemen- tal agreement no. 5) is RuB 2,752,885.33, including VAt (18 %) Work price according to the agreement is RuB 5,843,080.34, including VAt (18%) the Company’s Board of directors (minutes no. 248 of 29.01.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti, member of the Company’s Board of directors S.n. mironosetsky, who is a member of the Board of directors of a party to the transaction the Company’s Board of directors (minutes no. 248 of 29.01.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti 63 Agreement on party replace- ment in the agreement no. 01-hV of 03.07.2012 JSC fGC uES, JSC “mega- fon”, JSC “VimpelCom”, A- telecom, llC and JSC “muS Energetiki” Changing the parties and other essential terms and conditions of the agreement no. 01-hV of 03.07.2012 Agreement on party replace- ment in the agreement no. 02-hV of 03.07.2012 JSC fGC uES, JSC “mega- fon”, JSC “VimpelCom”, A- telecom, llC and JSC “muS Energetiki” Changing the parties and other essential terms and conditions of the agreement no. 02-hV of 03.07.2012 Agreement on party replace- ment in the agreement no. 03-hV of 03.07.2012 JSC fGC uES, JSC “mega- fon”, JSC “VimpelCom”, A- telecom, llC and JSC “muS Energetiki” Changing the parties and other essential terms and conditions of the agreement no. 03-hV of 03.07.2012 Price (monetary valuation) of obligations assumed by JSC muS Energetiki under the agreement on party replacement in the agreement no. 01-hV of 03.07.2012, is RuB 1,226,230.17, including VAt (18%) Price (monetary valuation) of obligations taken by JSC muS Energetiki under the agreement on party replacement in the agreement no. 02-hV of 03.07.2012, is RuB 1,246,029.28, including VAt (18%) Price (monetary valuation) of obligations taken by JSC "muS Energetiki" under the agreement on party replacement in the agreement no. 03-hV of 03.07.2012, is RuB 20,691.60, including VAt (18%) the Company’s Board of directors (minutes no. 248 of 29.01.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti the Company’s Board of directors (minutes no. 248 of 29.01.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti the Company’s Board of directors (minutes no. 248 of 29.01.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** 64 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. Agreement on party replace- ment in the agreement no. 04-hV of 03.07.2012 JSC fGC uES, JSC “mega- fon”, JSC “VimpelCom”, A- telecom, llC and JSC “muS Energetiki” Changing the parties and other essential terms and conditions of the agreement no. 04-hV of 03.07.2012 Agreement on party replace- ment in the agreement no. 05-hV of 03.07.2012 JSC fGC uES, JSC “mega- fon”, JSC “VimpelCom”, A- telecom, llC and JSC “muS Energetiki” Changing the parties and other essential terms and conditions of the agreement no. 05-hV of 03.07.2012 Agreement on party replace- ment in the agreement no. 06-hV of 03.07.2012 JSC fGC uES, JSC “mega- fon”, JSC “VimpelCom”, A- telecom, llC and JSC “muS Energetiki” Changing the parties and other essential terms and conditions of the agreement no. 06-hV of 03.07.2012 Agreement on party replace- ment in the agreement no. 07-hV of 03.07.2012 JSC fGC uES, JSC “mega- fon”, JSC “VimpelCom”, A- telecom, llC and JSC “muS Energetiki” Changing the parties and other essential terms and conditions of the agreement no. 07-hV of 03.07.2012 Agreement on party replace- ment in the agreement no. 08-hV of 03.07.2012 JSC fGC uES, JSC “mega- fon”, JSC “VimpelCom”, A- telecom, llC and JSC “muS Energetiki” Changing the parties and other essential terms and conditions of the agreement no. 08-hV of 03.07.2012 Agreement on party replace- ment in the agreement no. 09-hV of 03.07.2012 JSC fGC uES, JSC “mega- fon”, JSC “VimpelCom”, A- telecom, llC and JSC “muS Energetiki” Changing the parties and other essential terms and conditions of the agreement no. 09-hV of 03.07.2012 Agreement on party replace- ment in the agreement no. 10-hV of 03.07.2012 JSC fGC uES, JSC “mega- fon”, JSC “VimpelCom”, A- telecom, llC and JSC “muS Energetiki” Changing the parties and other essential terms and conditions of the agreement no. 10-hV of 03.07.2012 Agreement on party replace- ment in the agreement no. 11-hV of 20.12.2012 JSC fGC uES, JSC “mega- fon”, JSC “VimpelCom”, A- telecom, llC and JSC “muS Energetiki” Changing the parties and other essential terms and conditions of the agreement no. 11-hV of 20.12.2012 Agreement on party replace- ment in the agreement no. 12-hV of 20.12.2012 JSC fGC uES, JSC “mega- fon”, JSC “VimpelCom”, A- telecom, llC and JSC “muS Energetiki” Changing the parties and other essential terms and conditions of the agreement no. 12-hV of 20.12.2012 Agreement on party replace- ment in the agreement no. 13-hV of 20.12.2012 JSC fGC uES, JSC “mega- fon”, JSC “VimpelCom”, A- telecom, llC and JSC “muS Energetiki” Changing the parties and other essential terms and conditions of the agreement no. 13-hV of 20.12.2012 Price (monetary valuation) of obligations taken by JSC "muS Energetiki" under the agreement on party replacement in the agreement no. 04-hV of 03.07.2012, is RuB 6,677,383.40, including VAt (18%) Price (monetary valuation) of obligations taken by JSC "muS Energetiki" under the agreement on party replacement in the agreement no. 05-hV of 03.07.2012, is RuB 6,855,709.35, including VAt (18%) Price (monetary valuation) of obligations taken by JSC "muS Energetiki" under the agreement on party replacement in the agreement no. 06-hV of 03.07.2012, is RuB 1,412,454.62, including VAt (18%) Price (monetary valuation) of obligations taken by JSC "muS Energetiki" under the agreement on party replacement in the agreement no. 07-hV of 03.07.2012, is RuB 1,778,162.91, including VAt (18%) Price (monetary valuation) of obligations taken by JSC "muS Energetiki" under the agreement on party replacement in the agreement no. 08-hV of 03.07.2012, is RuB 1,592,384.70, including VAt (18%) Price (monetary valuation) of obligations taken by JSC "muS Energetiki" under the agreement on party replacement in the agreement no. 09-hV of 03.07.2012, is RuB 1,113,260.10, including VAt (18%) Price (monetary valuation) of obligations taken by JSC "muS Energetiki" under the agreement on party replacement in the agreement no. 10-hV of 03.07.2012, is RuB 1,237,385.55, including VAt (18%) Price (monetary valuation) of obligations taken by JSC "muS Energetiki" under the agreement on party replacement in the agreement no. 11-hV of 20.12.2012, is RuB 135,587.56, including VAt (18%) Price (monetary valuation) of obligations taken by JSC "muS Energetiki" under the agreement on party replacement in the agreement no. 12-hV of 20.12.2012, is RuB 561,045.51, including VAt (18%) Price (monetary valuation) of obligations taken by JSC "muS Energetiki" under the agreement on party replacement in the agreement no. 13-hV of 20.12.2012, is RuB 428,661.51, including VAt (18%) Governing body that resolved to approve the transaction (minutes' date and number) the Company’s Board of directors (minutes no. 248 of 29.01.2015) Person(s) interested in the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti the Company’s Board of directors (minutes no. 248 of 29.01.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti the Company’s Board of directors (minutes no. 248 of 29.01.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti the Company’s Board of directors (minutes no. 248 of 29.01.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti the Company’s Board of directors (minutes no. 248 of 29.01.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti 65 the Company’s Board of directors (minutes no. 248 of 29.01.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti the Company’s Board of directors (minutes no. 248 of 29.01.2015) Shareholder who holds more than 20% of shares of JSC fGC uES – JSC Rosseti the Company’s Board of directors (minutes no. 248 of 29.01.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti the Company’s Board of directors (minutes no. 248 of 29.01.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti the Company’s Board of directors (minutes no. 248 of 29.01.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti Supplementary agreement no. 1 to the agreement no. 293925 of 06.08.2013 JSC fGC uES and JSC “Elec- trosetservice unEG” Amendments to the essential terms and conditions of the agreement no. no. 293925 of 06.08.2013 Work price set out in the supplementary agreement no. 1 to the agreement no. 293925 of 06.08.2013 shall not exceed RuB 86,044,695.30, including VAt (18%) the Company’s Board of directors (minutes no. 248 of 29.01.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company’s management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** 36. Supplementary agreement no. 1 of 29.05.2014 to the agreement no. 01/09V of 01.01.2009 37. Service agreement JSC fGC uES and JSC “muS Energetiki” Amendments to the essential terms and conditions of the agreement no. 01/09V of 01.01.2009 JSC fGC uES and JSC idGC of Siberia the Contractor (JSC idGC of Siberia) provides to the Customer (JSC fGC uES) the service for providing space with a total area of 0.36 sq.m. at the address: transbaikalian Edge, Khilok, lazo str., 73 in the Base building to accommodate the equip- ment, and the Customer shall pay for the provided service 38. 39. Supplementary agreement no. 4 to the agreement no. 82/2010 of 31.08.2010 for the provision of optical fiber Supplementary agreement no. 2 to the premises lease agreement no. 11-8368 of 16.08.2011 JSC fGC uES and JSC idGC of Volga Amendments to the essential terms and conditions of the agreement no. 82/2010 of 31.08.2010 for the provision of optical fiber JSC fGC uES and JSC “lenenergo” Amendments to the essential terms and conditions of the premises lease agreement no. 11-8368 of 16.08.2011 66 40. Agreement between JSC fGC uES and JSC inter RAo JSC fGC uES and JSC inter RAo the parties acknowledge the right of succession to property, rights and obligations of JSC RAo uES of Russia 41. Agreement on the transfer and protection of information constituting a trade secret JSC fGC uES, JSC iGdS of Siberia, JSC tRK and JSC “CiuS uES” Protection of information constituting a commer- cial secret 42. data exchange agreement JSC fGC uES, JSC iGdS of Siberia, JSC tRK and JSC “CiuS uES” Arranging data exchange between the parties to the agreement JSC fGC uES and JSC “Elec- trosetservice unEG” 43. Contractor agreement for the construction and installation works on replacement of inputs 110 kV (3 units) 220 kV (3 units) at AT-2 220 kV Lodey- noye pole SS for the needs of the federal Grid’s branch – Vyborg PmES the Contractor (JSC “Electrosetservice unEG”) undertakes to perform work on technical re- equipment (construction and installation works on replacement of inputs 110 kV (3 units) 220 kV (3 units)), and deliver the result to the Customer (JSC fGC uES) , and the Customer undertakes to accept and pay for the completed work in the manner prescribed by the agreement due to the fact that the agreement on the transfer and protection of information con- stituting a trade secret does not provide for monetary liabilities and is not related to the transfer of property (property rights), the agreement price shall not be determined due to the fact that the agreement on data exchange does not provide for liabilities of monetary nature, and is not related to the transfer of property (property rights), the agreement price shall not be determined the Company’s Board of directors (minutes no. 249 of 06.02.2015) the Company’s Board of directors (minutes no. 249 of 06.02.2015) Work price according to the agreement shall not exceed RuB 2,697,479.00, includ- ing VAt (18%) the Company’s Board of directors (minutes no. 249 of 06.02.2015) Service price according to the supplemen- tary agreement no. 4 to the agreement no. 82/2010 of 31.08.2010 is RuB 31,801.00 per month, including VAt (18%) the Company’s Board of directors (minutes no. 248 of 29.01.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti the Company’s Board of directors (minutes no. 249 of 06.02.2015) Shareholder who holds more than 20% of shares of JSC fGC uES – JSC Rosseti 67 Work price set out in the supplementary agreement no. 1 of 29.05.2014 to the agreement no. 01/09V of 01.01.2009 is RuB 138,766.87, including VAt (18%) Service price according to the agreement consists of: - service price in the amount of RuB 2,725.80, including VAt (18%), determined from calculation of cost of services per 1 month – RuB 247.80, including VAt (18%) ; - expenses of JSC idGC of Siberia for utili- ties and operational services in accordance with the invoice sent Rental payment determined by the supple- mentary agreement no. 2 of the premises lease agreement no. 11-8368 of 16.08.2011 is RuB 331,567.02 per quarter, including VAt (18%). Rental payment of the premises for the period from 01.01.2014 to 12.04.2015 (lease period during the validity term of the supplementary agreement no. 2) is RuB 1,702,044.03 including VAt (18%) due to the fact that the agreement between JSC fGC uES and JSC inter RAo does not and cannot entail monetary obligations for the parties, the price of the agreement, that is an interested party transaction, shall not be determined Governing body that resolved to approve the transaction (minutes' date and number) the Company’s Board of directors (minutes no. 248 of 29.01.2015) the Company’s Board of directors (minutes no. 248 of 29.01.2015) Person(s) interested in the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti, member of the Company’s Board of directors S.n. mironosetsky, who is a member of the Board of directors of a party to the transaction the Company’s Board of directors (minutes no. 249 of 06.02.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's Board of directors and the Chairman of the management Board A.E. murov, who is a member of the Board of direc- tors of a party to the transaction, members of the Company's Board of directors: d.V. fyodorov, B.Yu. Kovalchuk, V.m. Kravchenko, who are mem- bers of the Board of directors of a party to the transaction, Chairman of the Company’s Board of directors o.m. Budargin, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti, member of the Company’s Board of directors S.n. mironosetsky, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti, member of the Company’s Board of directors S.n. mironosetsky, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company’s management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** Governing body that resolved to approve the transaction (minutes' date and number) Person(s) interested in the transaction 68 44. 45. 46. 47. 48. 49. 50. JSC fGC uES and JSC “Elec- trosetservice unEG” JSC fGC uES and JSC “Elec- trosetservice unEG” JSC fGC uES and JSC “Elec- trosetservice unEG” JSC fGC uES and JSC R&d Centre of fGC uES JSC fGC uES and JSC R&d Centre of fGC uES JSC fGC uES and JSC “Elec- trosetservice unEG” JSC fGC uES and JSC iGdS of Centre Contractor agreement for re- placing high voltage bushings of 330 kV okulovsky SS, 330 kV South-West SS of the fed- eral Grid’s branch – novgorod PmES Contractor agreement for re- placing high voltage bushing 330 kV At-1 f.A at South- Western SS Agreement for the develop- ment of design and procure- ment documentation under the title: "220 kV Kosmos SS. Replacement of 220 kV circuit breakers (3 pcs.)" Agreement no. 3380 of 24.09.2013 for the develop- ment of design and working documentation under the title: "the security system of 220 kV Centurion SS" under the electric energy facilities protection program of JSC fGC uES Agreement for the develop- ment of design and techni- cal part of the procurement documentation under the title: "1150 kV itatskaya SS. Replac- ing in 1150 kV switches by Sf6 switches" Agreement for the develop- ment of design and procure- ment documentation under the title: "220 kV Chesnok SS reconstruction (replacement of oil circuit breakers 220 kV) Service agreement on main- tenance of 10 kV electricity supply networks of olympic facilities during the XXii olympic winter games and Xi Paralympic winter games of 2014 in Sochi the Contractor (JSC “Electrosetservice unEG”) un- dertakes to perform work on reconstruction of the facility in accordance with the terms of Reference of the Customer (JSC fGC uES), and deliver the re- sult to the Customer, and the Customer undertakes to accept the results and pay for the completed work as set forth by the agreement the Contractor (JSC “Electrosetservice unEG”) un- dertakes to perform work on replacing high voltage bushing 330 kV At-1 f.A on South-Western SS and deliver the result to the Customer (JSC fGC uES), and the Customer undertakes to accept and pay the completed work as set forth by the agreement the Contractor (JSC “Electrosetservice unEG”) undertakes to perform work on the development of design and tender documentation and approval thereof with the Customer, and the Customer (JSC fGC uES) undertakes to accept the results of work and pay for them according to the procedure speci- fied by the agreement the Contractor (JSC R&d Centre of fGC uES) undertakes to perform work on: - the development and approval of project and working documentation in accordance with the requirements of technical standards; - the expert assessment of project documentation; - the development and approval of procurement documentation, and the Customer (JSC fGC uES) undertakes to accept a result of work and pay for it according to the procedure specified by the agreement the Contractor (JSC R&d Centre of fGC uES) undertakes to perform: - the engineering survey; - the development of design and estimate docu- mentation and testing to obtain a positive expert opinion; - the development of the technical content of the procurement documents, and the Customer (JSC fGC uES) undertakes to accept the results of work and pay for them as set forth by the agreement the Contractor (JSC “Electrosetservice unEG”) undertakes to perform work on the development of design and tender documentation and its approval with the Customer, and the Customer (JSC fGC uES) undertakes to accept a result of work and pay for it as set forth by the agreement in order to ensure the reliable and safe operation of 10 kV electricitysupply networks of olympic facilities during the XXii olympic winter games and Xi Paralympic winter games of 2014 in Sochi in the area of operational responsibility of the federal Grid’s branch – Sochi PmES, the Customer (JSC fGC uES) assigns, and the Contractor (JSC idGC of Centre) undertakes to provide maintenance of the facilities subject to the terms of Reference Work price according to the agreement shall not exceed RuB 2,000,000.00, includ- ing VAt (18%) the Company’s Board of directors (minutes no. 249 of 06.02.2015) Work price according to the agreement shall not exceed RuB 646,347.30, including VAt (18%) the Company’s Board of directors (minutes no. 249 of 06.02.2015) Work price according to the agreement shall not exceed RuB 1,137,400.80, includ- ing VAt (18%) the Company’s Board of directors (minutes no. 249 of 06.02.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company’s management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company’s management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company’s management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Work price according to the agreement shall not exceed RuB 2,608,903.21, includ- ing VAt (18%) the Company’s Board of directors (minutes no. 249 of 06.02.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti 69 Work price according to the agreement shall not exceed RuB 3,078,000.00, includ- ing VAt (18%) the Company’s Board of directors (minutes no. 249 of 06.02.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti Work price according to the agreement shall not exceed RuB 1,155,100.80, includ- ing VAt (18%) the Company’s Board of directors (minutes no. 249 of 06.02.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company’s management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Service price according to the agreement shall not exceed RuB 4,752,517.84, includ- ing VAt (18%) the Company’s Board of directors (minutes no. 249 of 06.02.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** Governing body that resolved to approve the transaction (minutes' date and number) Person(s) interested in the transaction 70 51. 52. 53. 54. 55. 56. Service agreement on main- tenance of 10 kV electricity supply networks of olympic facilities during the XXii olympic winter games and Xi Paralympic winter games of 2014 in Sochi Service agreement on main- tenance of 10 kV electricity supply networks of olympic facilities during the XXii olympic winter games and Xi Paralympic winter games of 2014 in Sochi Service agreement on main- tenance of 10 kV electricity supply networks of olympic facilities during the XXii olympic winter games and Xi Paralympic winter games of 2014 in Sochi Supplementary agreement no. 1 to the real property lease contract no. 3.3-25/14/16 of 26.09.2014 Agreement for emergency and recovery works on replace- ment of the damaged 500 kV high-voltage bushing of phase "A" R-500 at 500 kV lipetsk SS of the federal Grid’s branch –upper don PmES Agreement for preparing project and working documen- tation, performing construc- tion, installation and commis- sioning works under the title: "Icing and fluctuations control at the facilities of the federal Grid’s branch – mES of Centre JSC fGC uES and JSC moESK JSC fGC uES and JSC “lenenergo” JSC fGC uE, JSC iGdS of Centre and Volga region in order to ensure the reliable and safe operation of 10 kV electricity supply networks of olympic facilities during the XXii olympic winter games and Xi Paralympic winter games of 2014 in Sochi in the area of operational responsibility of the federal Grid’s branch – "Sochi PmES", the Customer (JSC fGC uES) assigns, and the Contractor (JSC moESK) undertakes to provide maintenance of the facilities subject to the terms of Reference in order to ensure the reliable and safe operation of 10 kV electricity supply networks of olympic facilities during the XXii olympic winter games and Xi Paralympic winter games of 2014 in Sochi in the area of operational responsibility of the federal Grid’s branch – "Sochi PmES", the Customer (JSC fGC uES) assigns, and the Contractor (JSC “lenen- ergo”) undertakes to provide maintenance of the facilities subject to the terms of Reference in order to ensure the reliable and safe operation of 10 kV electricity supply networks of olympic facilities during the XXii olympic winter games and Xi Paralympic winter games of 2014 in Sochi in the area of operational responsibility of the federal Grid’s branch – "Sochi PmES", the Customer (JSC fGC uES) assigns, and the Contractor (JSC "iGdS of Centre and Volga region") undertakes to provide maintenance of the facilities in accordance with the terms of Reference JSC fGC uES and JSC “Elec- trosetservice unEG” Amendments to the essential terms and condi- tions of the real property lease contract no. 3.3- 25/14/16 of 26.09.2014 JSC fGC uES and JSC Elec- trosetservice unEG” JSC fGC uES and JSC “Elec- trosetservice unEG” Pursuant to the agreement, the Contractor (JSC “Electrosetservice unEG”) undertakes to perform emergency and repair work to replace a damaged high-voltage 500 kV bushing of phase "A" R-500 at 500 kV lipetsk SS of the federal Grid’s branch – upper don PmES in accordance with the damage statement of the Customer (JSC fGC uES), and the Customer undertakes to accept the results of work and pay for them the Contractor (JSC “Electrosetservice unEG”) un- dertakes to complete work and deliver the results to the Customer (JSC fGC uES), and the Customer undertakes to accept and pay for the completed work in the manner stipulated by the agreement the subject of the agreement is the recovery to the owner (JSC idGC of Centre and Privolzhie) of costs for the owner's activities in connection with the actions of the Company (JSC fGC uES) for the construction (reconstruction and techni- cal re-equipment) of electric grid facilities of the Company that involve reconstruction (transfer, reconstruction and technical re-equipment, change of configuration) of OHL of the Owner 57. Cost recovery agreement JSC fGC uES and JSC idGC of Centre and Privolzhie Service price according to the agreement shall not exceed RuB 6,955,316.29, includ- ing VAt (18%) the Company’s Board of directors (minutes no. 249 of 06.02.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti, Chairman of the Company’s Board of directors o.m. Budargin, who is a member of the Board of directors of a party to the transaction, members of the Company’s Board of directors d: A.m. Kravchenko and A.A. demin, who are members of the Board of directors of a party to the transaction Service price according to the agreement shall not exceed RuB 3,034,586.73, includ- ing VAt (18%) the Company’s Board of directors (minutes no. 249 of 06.02.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti Service price according to the agreement shall not exceed RuB 7,380,230.41, includ- ing VAt (18%) the Company’s Board of directors (minutes no. 249 of 06.02.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti 71 Rental payment defined in the supplemen- tary agreement no. 1 of the real prop- erty lease contract no. 3.3-25/14/16 of 26.09.2014 is RuB 988,381.79 per month, including VAt (18%) the Company’s Board of directors (minutes no. 250 of 13.02.2015) Work price according to the agreement shall not exceed RuB 891,270.02, including VAt (18%) the Company’s Board of directors (minutes no. 250 of 13.02.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company’s management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company’s management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Work price according to the agreement shall not exceed RuB 71,207,410.00, includ- ing VAt (18%) the Company’s Board of directors (minutes no. 250 of 13.02.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company’s management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction the amount of compensation under the agreement is RuB 83,093,350.00, VAt- exempt the Company’s Board of directors (minutes no. 250 of 13.02.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** 72 58. 59. 60. 61. 62. 63. 64. 65. 66. 67. Supplementary agreement no. 4 to the agreement no. 399 of 01.12.2008 for com- munication services Supplementary agreement no. 2 to the real property lease contract no. 173/12 of 14.12.2012 Supplementary agreement no. 1 of 11.03.2014 to the agreement no. 318/664 of 30.12.2013 for the provision of services of operation con- trol of SCS and communica- tion systems Supplementary agreement no. 6 to the agreement no. 80327 of 01.04.2008 on SCS equipment placement Supplementary agreement no. 11 to the agreement no. 9 of 01.09.2010 for mainte- nance of digital Communica- tion Systems (dCS) Supplementary agreement no. 4 to the agreement no. 117 of 01.07.2010 for the provision of services of main- tenance of ESuCCn Supplementary agreement no. 3 to the agreement no. 887 of 14.03.2007 on main- tenance and repair of a set of equipment and fiber optic communication lines Supplementary agreement no. 13 to the agreement no. 923 of 01.03.2006 for the provision of services for providing communication channels Supplementary agreement no. 14 to the agreement no. 923 of 01.03.2006 for the provision of services for providing communication channels Agreement for drafting design and procurement documenta- tion under the title: "220 kV mirage SS. Replacement of 220 kV voltage transformer (7 phases)" JSC fGC uES and JSC “muS Energetiki” Amendments to the essential terms and conditions of the agreement no. 399 of 01.12.2008 for com- munication services JSC fGC uES and JSC “muS Energetiki” Changing the validity period of the real property lease contract no. 173/12 of 14.12.2012 JSC fGC uES and JSC “muS Energetiki” Amendments to the essential terms and conditions of the agreement no. 318/664 of 30.12.2013 for the provision of services of operation control of SCS and communication systems JSC fGC uES and JSC iGdS of Volga Amendments to the essential terms and conditions of the agreement no. 80327 of 01.04.2008 on SCS equipment placement JSC fGC uES and JSC “muS Energetiki” Amendments to the essential terms and conditions of the agreement no. 9 of 01.09.2010 for mainte- nance of digital Communication Systems (dCS) JSC fGC uES and JSC “muS Energetiki” Amendments to the essential terms and conditions of the agreement no. 117 of 01.07.2010 for the provision of services of maintenance of ESuCCn Governing body that resolved to approve the transaction (minutes' date and number) the Company’s Board of directors (minutes no. 250 of 13.02.2015) Person(s) interested in the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti the Company’s Board of directors (minutes no. 250 of 13.02.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti the Company’s Board of directors (minutes no. 250 of 13.02.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti Service price according to the supplemen- tary agreement no. 4 to the agreement no. 399 of 01.12.2008 is RuB 87,738.53 per month, including VAt (18%) Rental payment set out in the supplemen- tary agreement no. 2 of the real property lease contract no. 173/12 of 14.12.2012 is RuB 6,474.88 per month, including VAt (18%) Service price defined in the supplementary agreement no. 1 of 11.03.2014 to the agreement no. 318/664 of 30.12.2013 shall not exceed RuB 11,560,585.88, including VAt (18%), based on the size of the monthly payment RuB 963,382.16, including VAt (18 %) Service price according to the supplemen- tary agreement no. 6 to the agreement no. 80327 of 01.04.2008 is RuB 34,738.52 per month, including VAt (18%) the Company’s Board of directors (minutes no. 250 of 13.02.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti Service price according to the supplemen- tary agreement no. 11 to the agreement no. 9 of 01.09.2010 shall not exceed RuB 9,753,423.57 per month, including VAt (18%) Service price according to the agree- ment for the period from 01.01.2010 to 30.06.2015 shall not exceed RuB 207,524,677.60, including VAt (18%) the Company’s Board of directors (minutes no. 250 of 13.02.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti 73 the Company’s Board of directors (minutes no. 250 of 13.02.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti JSC fGC uES and JSC “muS Energetiki” Amendments to the essential terms and condi- tions of the agreement no. 887 of 14.03.2007 on maintenance and repair of a set of equipment and fiber optic communication lines Work price according to the supplementary agreement no. 3 to the agreement no. 887 of 14.03.2007 is RuB 900,046.80 per month, including VAt (18%) the Company’s Board of directors (minutes no. 250 of 13.02.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti JSC fGC uES and JSC “muS Energetiki” Amendments to the essential terms and conditions of the agreement no. 923 of 01.03.2006 for the provision of services for providing communication channels JSC fGC uES and JSC “muS Energetiki” Amendments to the essential terms and conditions of the agreement no. 923 of 01.03.2006 for the provision of services for providing communication channels JSC fGC uES and JSC “Elec- trosetservice unEG” the Contractor (JSC “Electrosetservice unEG”) in consultation with the Customer (JSC fGC uES) undertakes to complete a set of work on drafting design and procurement documentation, and the Customer undertakes to accept the results of work and pay them as set forth by the agreement Service price according to the supplemen- tary agreement no. 13 to the agreement no. 923 of 01.03.2006 is RuB 1,056,834.59 per month, including VAt (18%), in accordance with the Specification of services the Company’s Board of directors (minutes no. 250 of 13.02.2015) Service price according to the supplemen- tary agreement no. 14 to the agreement no. 923 of 01.03.2006 is RuB 905,858.23 per month, including VAt (18%), in accordance with the specification of services the Company’s Board of directors (minutes no. 250 of 13.02.2015) Work price according to the agreement shall not exceed RuB 442,500.00, including VAt (18%) the Company’s Board of directors (minutes no. 250 of 13.02.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company’s management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** Governing body that resolved to approve the transaction (minutes' date and number) Person(s) interested in the transaction 74 68. 69. Agreement for drafting design and procurement documenta- tion under the title: "500 kV irtysh SS. Replacement of voltage transformers demian- skoe tn-500" Agreement for drafting design and procurement documenta- tion under the title: "220 kV Knyazhevo SS. Reconstruction of the system of own needs" JSC fGC uES and JSC “Elec- trosetservice unEG” JSC fGC uES and JSC R&d Centre of fGC uES 70. Real property lease contract JSC fGC uES and JSC “tyumenenergo” 71. 72. 73. Agreement for performing design and research work, drafting working documenta- tion, construction, installation and commissioning work with equipment supply for the re- placement of 220 kV voltage transformer (6 phases) at 220 kV dzhamku SS Agreement for performing design and research work, drafting working documenta- tion, construction, installation and commissioning with equipment supply for the re- placement of 110 kV voltage transformer (7 sets) at 500 kV Komsomolskaya SS Agreement for performing design and research work, construction, installation and commissioning under the title: “Replacement of Autotrans- former-2 at 220 kV oka SS” JSC fGC uES and JSC “Elec- trosetservice unEG” JSC fGC uES and JSC “Elec- trosetservice unEG” JSC fGC uES and JSC “Elec- trosetservice unEG” the Contractor (JSC “Electrosetservice unEG”) undertakes to perform work on drafting design and procurement documentation and its approving with the Customer (JSC fGC uES), and the Customer undertakes to accept the result of work and pay for it according to the procedure specified by the agreement the Contractor (JSC R&d Centre of fGC uES) undertakes to perform work on drafting design and procurement documentation and its approving with the Customer (JSC fGC uES), and the Customer undertakes to accept the result of works and pay for it for it according to the procedure specified by the agreement the lessor (JSC “tyumenenergo”) undertakes to provide to the lessee (JSC fGC uES) real property under the transfer and acceptance certificate for temporary possession and use for a fee, and the lessee undertakes to pay rent and return the prop- erty to the lessor after the agreement expiration in good working condition (considering natural wear and tear) the Contractor (JSC “Electrosetservice unEG”) undertakes to perform work on drafting design and working documentation; providing supervision and reconstruction and a complete set of materials, equipment, spare parts for the equipment in accor- dance with the design and working documentation, and deliver the result to the Customer (JSC fGC uES), and the Customer undertakes to accept the result of work and pay the stipulated price as set forth in the agreement the Contractor (JSC “Electrosetservice unEG”) undertakes to perform work on drafting design and working documentation; providing supervision and reconstruction and a complete set of materials, equipment, spare parts for the equipment in accor- dance with the design and working documentation, and deliver the result to the Customer (JSC fGC uES), and the Customer undertakes to accept the result of work and pay the stipulated price as set forth in the agreement the Contractor (JSC “Electrosetservice unEG”) undertakes to perform work and deliver the result to the Customer (JSC fGC uES), and the Customer undertakes to accept the results of work and pay the stipulated price as set forth in the agreement Work price according to the agreement shall not exceed RuB 254,880.00, including VAt (18%) the Company’s Board of directors (minutes no. 250 of 13.02.2015) Work price according to the agreement shall not exceed RuB 1,062,790.00, includ- ing VAt (18%) the Company’s Board of directors (minutes no. 250 of 13.02.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company’s management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti, member of the Company’s management Board A.A. Zagaratsky, who is a member of the Board of directors of a party to the transaction Rental payment is RuB 128,351.55 per month, including VAt (18%). Rental payment for the period from 01.12.2014 to 31.10.2015 is not more than RuB 1,411,867.05, including VAt (18%) the Company’s Board of directors (minutes no. 250 of 13.02.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti, member of the Company’s Board of directors A.A. demin, who is a member of the Board of directors of a party to the transaction Work price according to the agreement shall not exceed RuB 11,421,216.00, includ- ing VAt (18%) the Company’s Board of directors (minutes no. 250 of 13.02.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company’s management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction 75 Work price according to the agreement shall not exceed RuB 11,026,384.00, includ- ing VAt (18%) the Company’s Board of directors (minutes no. 250 of 13.02.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company’s management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Work price according to the agreement shall not exceed RuB 21,044,151.00, includ- ing VAt (18%) the Company’s Board of directors (minutes no. 250 of 13.02.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company’s management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** Governing body that resolved to approve the transaction (minutes' date and number) Person(s) interested in the transaction 74. 75. Agreement for performing design and research work, drafting working documenta- tion, construction, installation and commissioning with equipment supply for the re- placement of 35 kV oil circuit breakers at 220 kV levober- ezhnaya SS Agreement for performing design and research work, drafting working documenta- tion, construction, installation and commissioning with equipment supply for the re- placement of 220 kV oil circuit breakers (1t, 2t) at 220 kV Eterkan SS JSC fGC uES and JSC “Elec- trosetservice unEG” the Contractor (JSC “Electrosetservice unEG”) undertakes to perform work and deliver the result to the Customer (JSC fGC uES), and the Customer undertakes to accept the result of work and pay the stipulated price as set forth in the agreement Work price according to the agreement shall not exceed RuB 13,000,033.89, includ- ing VAt (18%) the Company’s Board of directors (minutes no. 250 of 13.02.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company’s management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction JSC fGC uES and JSC “Elec- trosetservice unEG” the Contractor (JSC “Electrosetservice unEG”) undertakes to perform work and deliver the result to the Customer (JSC fGC uES), and the Customer undertakes to accept the result of work and pay the stipulated price as set forth in the agreement Work price according to the agreement shall not exceed RuB 25,138,307.68, includ- ing VAt (18%) the Company’s Board of directors (minutes no. 250 of 13.02.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company’s management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction 76. Cost recovery agreement JSC fGC uES and JSC idGC of Volga 76 Compensation to the owner (JSC fGC uES) of costs for the implementation of measures for the reconstruction of the owner‘s facility (220 kV irGRES – Risaevo ohl, 220 kV irGRES – novo- troitsk ohl, 220 kV irGRES – orskaya-1 ohl, 220 kV irGRES – orskaya-2 ohl), which is necessary for the construction of the Company’s facility (110 kV orskaya ChP-1 ohl– mSdS-4) the Contractor (JSC “Electrosetservice unEG”) undertakes to perform work and deliver the result to the Customer (JSC fGC uES), and the Customer undertakes to accept the result of work and pay the stipulated price as set forth in the agreement JSC fGC uES and JSC “Elec- trosetservice unEG” JSC fGC uES and JSC “muS Energetiki” Amendments to the terms and conditions of the agreement no. 481 of 31.10.2002 JSC fGC uES and JSC “Chi- taenergo” the Contractor (JSC "Chitatechenergo") under- takes to provide services for maintenance of data transmission systems and means of dispatch and process control at 220 kV makkaveyevo SS at the address: transbaikalian Edge, Karymskiy Region, 8 km from the village of darasun (near the federal highway m58) (including emergency), and the Cus- tomer undertakes to pay for the services rendered JSC fGC uES and JSC “Yan- tarenergo” the debt repayment of the debtor (JSC “Yantaren- ergo”) to the Creditor (JSC fGC uES) 77. 78. 79. 80. Contractor agreement for performing construction and installation, commissioning and supply of materials and equipment under the title: “Programme for replacing 330-750kV air circuit breakers at 330 kV South-West SS Changes no. 4 to the supple- mentary agreement no. 13 of 01.09.2009 to the agreement no. 481 of 31.10.2002 Agreement for providing services for maintenance of data transmission systems and means of dispatch and process control at 220 kV makaveyevo SS Agreement on repayment of debt incurred under the agree- ment for electricity transmis- sion services via unEG no. 544/P of 25.01.2012 81. Agreement for software registration JSC fGC uES and it Energy Service, llC the Contractor (it Energy Service, llC) under- takes to provide services for state registration of computer programs/databases, copyright holder of which is JSC fGC uES, and the Customer (JSC fGC uES) undertakes to pay for services rendered Compensation amount according to the agreement is RuB 6,832,405.70, including VAt (18%) the Company’s Board of directors (minutes no. 250 of 13.02.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti 77 Work price according to the agreement shall not exceed RuB 51,124,054.00, includ- ing VAt (18%) the Company’s Board of directors (minutes no. 250 of 13.02.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company’s management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Service price (service code: C4 service description: keeping a telephone direc- tory) determined by amendment no. 4 to the supplementary agreement no. 13 of 01.09.2009 to the agreement no. 481 of 31.10.2002 is RuB 123,310.00 per month, including VAt (18%) the Company’s Board of directors (minutes no. 251 of 16.02.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti Service price according to the agreement shall not exceed RuB 719,210.04, including VAt (18%) the Company’s Board of directors (minutes no. 251 of 16.02.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti the debt subject to settlement under the agreement on repayment of debt incurred under the agreement is RuB 1,761,360,927.47, including VAt (18 %) the Company’s Board of directors (minutes no. 251 of 16.02.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti Service price according to the agreement is RuB 392,000.00, including VAt (18%) the Company’s Board of directors (minutes no. 251 of 16.02.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** 78 82. Supplementary agreement no. 3 to the agreement no. 527 of 20.05.2009 JSC fGC uES and JSC “muS Energetiki” Amendments to the essential terms and conditions of the agreement no. 527 of 20.05.2009 83. Compensation agreement JSC fGC uES and JSC iGdS of north Caucasus Compensation to the owner (JSC iGdS of north Caucasus) of expenses for measures taken in the interests of and in connection with the activities of the Company (JSC fGC uES) on the construction of Company's facility "330 kV nalchik-Vladika- vkaz-2 ohl" 84. 85. 86. 87. 88. 89. 90. 91. Supplementary agreement no. 1 to the agreement no. 222 of 01.07.2011 for moni- toring Satellite Communica- tions network (CCC) Agreement no. m8/29/05-14 of 28.03.2014 on capital and medium repair of transform- ers and circuit breakers at the facilities of the federal Grid’s branch– "South PmES" Agreement on termination the agreement no. 9 of 01.09.2010 for maintenance of digital Communication Systems (dCS) JSC fGC uES and JSC “muS Energetiki” Amendments to the essential terms and conditions of the agreement no. 222 of 01.07.2011 for moni- toring Satellite Communications network (CCC) JSC fGC uES and JSC “Elec- trosetservice unEG” the Contractor (JSC “Electrosetservice unEG”) undertakes to perform capital and medium repair of transformers and circuit breakers at the facili- ties of the federal Grid’s branch- South PmES in accordance with the toR of the Customer (JSC fGC uES), and the Customer undertakes to accept the result of work and pay for it JSC fGC uES and JSC “muS Energetiki” termination of the agreement no. 9 of 01.09.2010 for maintenance of digital Communication Sys- tems (dCS) Agreement for rendering services on equipment place- ment JSC fGC uES and JSC “lenenergo” the Contractor (JSC fGC uES) provides to the Customer (JSC "lenenergo") services on plac- ing processing equipment in buildings of non- residential properties of grid industrial technologi- cal systems - Contractor's substations, and the Customer undertakes to pay for services rendered in the manner stipulated by the agreement Supplementary agreement no. 2 of 28.03.2014 to the tri- partite agreement no. 55/13 of 15.05.2013 for electrical equipment service mainte- nance Supplementary agreement no. 3 of 30.07.2013 to the agreement no. 04/13 of 11.03.2013 for repair, mainte- nance and diagnostic inspec- tion of electric grid facilities Agreement on termination of the agreement no. 326- 05/136m of 01.10.2002 Agreement no. 2014/09 of 17.09.2014 for the supply of materials and equipment, construction, installation and commissioning works under the title: "Reconstruction of busbar protection at 220 kV Kirillovskaya SS " JSC fGC uES, JSC “Electro- setservice unEG” and JSC “Electrozavod” Amendments to the essential terms and conditions of the tripartite agreement no. 55/13 of 5.05.2013 for electrical equipment service maintenance JSC fGC uES and JSC “Elec- trosetservice unEG” Amendments to the essential terms and conditions of the agreement no. 04/13 of 11.03.2013 for repair, maintenance and diagnostic inspection of electric grid facilities JSC fGC uES and JSC “muS Energetiki” termination of the agreement no. 326-05/136m of 01.10.2002 JSC fGC uES and JSC “Elec- trosetservice unEG” the Contractor (JSC “Electrosetservice unEG”) undertakes to perform work and deliver the result to the Customer (JSC fGC uES), and the Customer undertakes to accept the result of work and pay the stipulated price as set forth in the agreement Governing body that resolved to approve the transaction (minutes' date and number) the Company’s Board of directors (minutes no. 251 of 16.02.2015) Person(s) interested in the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti Service price according to the supplemen- tary agreement no. 3 to the agreement no. 527 of 20.05.2009 is RuB 3,749,735.30 per month, including VAt (18%) Compensation amount according to the agreement is RuB 49,520,163.20, including VAt (18%) the Company’s Board of directors (minutes no. 251 of 16.02.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti Service price according to the supplemen- tary agreement no. 1 to the agreement no. 222 of 01.07.2011 is RuB 172,398.71 per month, including VAt (18%) the Company’s Board of directors (minutes no. 251 of 16.02.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti Work price according to the agreement is RuB 8,952,290.84, including VAt (18%) the Company’s Board of directors (minutes no. 251 of 16.02.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company’s management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction the Company’s Board of directors (minutes no. 251 of 16.02.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti 79 Services price under the agreement is RuB 1,082,588.00, including VAt (18%) per month, RuB 3,247,764.00, including VAt (18%) per quarter the Company’s Board of directors (minutes no. 253 of 02.03.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti Service price according to the supplemen- tary agreement no. 2 to the agreement no. 55/13 of 15.05.2013 shall not exceed RuB 55,834,936.41, including VAt (18%) the Company’s Board of directors (minutes no. 253 of 02.03.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company’s management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Service price according to the supplemen- tary agreement no. 3 of 30.07.2013 to the agreement no. 04/13 of 11.03.2013 shall not exceed RuB 1,499,633,390.96, including VAt (18%) the Company’s Board of directors (minutes no. 253 of 02.03.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company’s management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction the Company’s Board of directors (minutes no. 253 of 02.03.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti Work price according to the agreement shall not exceed RuB 3,142,776.60, includ- ing VAt (18%) the Company’s Board of directors (minutes no. 253 of 02.03.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company’s management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** 92. Real property lease contract JSC fGC uES and JSC “tyumenenergo” the lessor (JSC “tyumenenergo”) undertakes to provide to the lessee (JSC fGC uES) real property under the transfer and acceptance certificate for temporary possession and use for a fee, and the lessee undertakes to pay rent and return the prop- erty to the lessor after the agreement expiration in good working condition (considering natural wear and tear) the Contractor (JSC “Electrosetservice unEG”) undertakes to perform works and deliver the result to the Customer (JSC fGC uES), and the Customer undertakes to accept the result of works and pay the stipulated price as set forth in the agreement JSC fGC uES and JSC “Elec- trosetservice unEG” 93. 94. Agreement for drafting design and procurement documen- tation under the title: "220 kV Pravohettinskaya SS. Replacement of 220 kV circuit breakers (2pc)" Supplementary agreement no. 2 to the non-residential premises lease agreement no. 07-6/559(2010)KS of 16.08.2010 JSC fGC uES and JSC idGC of Centre Amendments to the essential terms and conditions of the non-residential premises lease agreement no. 07-6 / 559 (2010) KS of 16.08.2010 80 95. Supplementary agreement no. 3 to the agreement no. 50-10/511m of 01.10.2010 JSC fGC uES and JSC "moESK" Amendments to the essential terms and condi- tions of the the agreement no. 50-10/511m of 01.10.2010 Supplementary agreement no. 4 of 19.09.2013 to the agreement no. 04/13 of 11.03.2013 for electric grid facilities repair, maintenance and diagnostic inspection Agreement no. 294701 of 01.07.2013 for the provi- sion of services of operative control of SCS and communi- cation systems of mES north- West as amended by the additional agreement no. 3 Supplementary agreement no. 6 to the agreement on the use of standards of organisa- tions, dated 23.05.2011 JSC fGC uES and JSC “Elec- trosetservice unEG” Amendments to the essential terms and condi- tions of the agreement no. 04/13 of 11.03.2013 for electric grid facilities repair, maintenance and diagnostic inspection JSC fGC uES and JSC “muS Energetiki” the Customer (JSC fGC uES) requests, and the Contractor (JSC “muS Energetiki”) undertakes to provide the Customer with a comprehensive ser- vice for the organisation of work of control center and monitoring the telecommunications network of mES north-West JSC fGC uES and JSC So uES Amendments to the list of Standards of organisa- tions of JSC fGC uES and JSC So uES, being an appendix to the agreement 96. 97. 98. 99. Rental payment is RuB 21,952.40 per month, including VAt (18%). Rental payment for the period from 02.09.2014 to 02.08.2015 is RuB 241,476.40, including VAt (18%) Governing body that resolved to approve the transaction (minutes' date and number) the Company’s Board of directors (minutes no. 253 of 02.03.2015) Person(s) interested in the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company’s management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Work price according to the agreement shall not exceed RuB 758,267.20, including VAt (18%) the Company’s Board of directors (minutes no. 253 of 02.03.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company’s management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Rental payment according to the supple- mentary agreement no. 2 to the non- residential premises lease agreement no. 07-6/559(2010)KS of 16.08.2010 is RuB 137,809.59 per month, including VAt (18%). the amount of rental payment for 11 months is RuB 1,515,905.49, including VAt (18 %) the Company’s Board of directors (minutes no. 253 of 02.03.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti Rental payment according to the supple- mentary agreement no. 3 to the agreement no. 50-10/511m of 01.10.2010 is RuB 38,472.72 per month, including VAt (18%) the Company’s Board of directors (minutes no. 253 of 02.03.2015) Service price according to the supplemen- tary agreement no. 4 of 19.09.2013 to the agreement no. 04/13 of 11.03.2013 is not more RuB 1,499,633,390.96, including VAt (18%) the Company’s Board of directors (minutes no. 253 of 02.03.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti, Chairman of the Company’s Board of directors o.m. Budargin, who is a member of the Board of directors of a party to the transaction, members of the Company’s Board of directors d: A.m. Kravchenko and A.A. demin, who are members of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company’s management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Service price according to the agreement no. 294701 of 01.07.2013 shall not exceed RuB 29,661,895.98, including VAt (18%) the Company’s Board of directors (minutes no. 253 of 02.03.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti 81 not provided (the agreement does not and cannot implicate monetary obligations and is not related to property / property rights transfer) the Company’s Board of directors (minutes no. 255 of 16.03.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti, members of the Company's the Board of direc- tors: V.m. Kravchenko, who is a member of the Board of directors of a party to the transaction , and n.G. Shulginov, who is a member of the man- agement Board of a party to the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti, members of the Company's the Board of direc- tors: V.m. Kravchenko, who is a member of the Board of directors of a party to the transaction , and n.G. Shulginov, who is a member of the man- agement Board of a party to the transaction Supplementary agreement no. 7 to the agreement on the use of standards of organisa- tions, dated 23.05.2011 JSC fGC uES and JSC So uES Amendments to the list of Standards of organisa- tions of JSC fGC uES and JSC So uES, being an appendix to the agreement not provided (the agreement does not and cannot implicate monetary obligations and is not related to property / property rights transfer) the Company’s Board of directors (minutes no. 255 of 16.03.2015) APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** 82 100. Agreement for providing com- munication channels JSC fGC uES and JSC “muS Energetiki” 101. Agreement for termination of the agreement no. Ao-2- 10/539m of 01.11.2010 JSC fGC uES and JSC "moESK" 103. Real property lease contract JSC fGC uES JSC “CiuS uES” 104. Agreement for drafting design and procurement documenta- tion JSC fGC uES and JSC R&d Centre of fGC uES 105. 106. 107. Agreement for diagnosing underground anchors of stay-guys for intermediate supports at ohl 500 kV Agreement for drafting design and procurement documenta- tion under the title: "220 kV nadym SS. Reconstruction of switchgear 220 kV and 110 kV" JSC fGC uES and JSC “Elec- trosetservice unEG” JSC fGC uES and JSC “Elec- trosetservice unEG” JSC fGC uES and JSC “muS Energetiki” Supplementary agreement no. 1 to the agreement no. 377/1 of 15.02.2013 for information and telecommuni- cation support of the Situation Analysis Centre of JSC fGC uES and support of meetings of the headquarters of the electric grid complex the Contractor (JSC “muS Energetiki”) provides the Customer (JSC fGC uES) with communication services in accordance with the terms and condi- tions of the agreement termination of the agreement the lessor (JSC fGC uES) undertakes to provide to the lessee (JSC “CiuS uES”) real property under the transfer and acceptance certificate for tempo- rary possession and use for a fee (non-residential premises with a total area of 41.3 sq. m.) the Contractor (JSC R&d Centre of fGC uES) undertakes to perform a set of works on: - engineering survey; - drafting design documentation under the title: "Construction of 750 kV leningradskaya – Belozer- skaya ohl "; - drafting procurement documentation the Contractor (JSC “Electrosetservice unEG”) shall perform diagnostics of underground anchors for intermediate towers stay-guys at 500 kV ohl” according to the toR of the Customer (JSC fGC uES) the Contractor (JSC "Elektrosetservice unEG") undertakes to perform works on: - pre-project survey; - engineering survey (if necessary); - development of materials of basic technical solu- tions and their approval with the Customer (JSC fGC uES); - drafting of project documentation and its ap- proval with the Customer; - drafting of procurement documentation and its approval with the Customer Amendments to the agreement for information and telecommunication support of the Situation Analysis Centre of JSC fGC uES and support of meetings of the headquarters of the electric grid complex Service price shall not exceed RuB 2,460,596.00, including VAt (18%) Governing body that resolved to approve the transaction (minutes' date and number) the Company’s Board of directors (minutes no. 256 of 30.03.2015) Person(s) interested in the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti not provided (the termination agreement does not and cannot implicate monetary obligations) the Company’s Board of directors (minutes no. 256 of 30.03.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti Rental payment is RuB 53,990.94 per month, including VAt (18%) the Company’s Board of directors (minutes no. 256 of 30.03.2015) Work price shall not exceed RuB 353,415,000.00, including VAt (18%) the Company’s Board of directors (minutes no. 257 of 03.04.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board n.i. Pozdnyakov, who is a member of the Board of directors and a General director of a party to the transaction; member of the Company’s manage- ment Board d.l. Shishkin, who is a member of the Board of dircetors of a party to the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti Work price is RuB 697,380.00, including VAt (18%) the Company’s Board of directors (minutes no. 259 of 13.04.2015) Work price shall not exceed RuB 3,276,957.60, including VAt (18%) the Company’s Board of directors (minutes no. 259 of 13.04.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction 83 Service price for the period from 01.01.2014 to 08.01.2016 is RuB 593,587.20, including VAt (18%) the Company’s Board of directors (minutes no. 259 of 13.04.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti 108. Supplementary agreement no. 1 to the agreement dated 25.02.2014 on the use of national standards JSC fGC uES and JSC So uES Amendments to the list of national standards specified in the annex to the agreement not provided (the agreement does not and cannot implicate monetary obligations and is not related to property / property rights transfer) the Company’s Board of directors (minutes no. 259 of 13.04.2015) 109. Real property lease contract JSC fGC uES and JSC “muS Energetiki” the lessor (JSC fGC uES) undertakes to provide to the lessee (JSC “muS Energetiki”) real property (non-residential premises) under the transfer and acceptance certificate for temporary possession and use for a fee Rental payment is RuB 31,963.31 per month, including VAt (18%) the Company’s Board of directors (minutes no. 259 of 13.04.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti, members of the Company's the Board of direc- tors: V.m. Kravchenko, who is a member of the Board of directors of a party to the transaction , and n.G. Shulginov, who is a member of the man- agement Board of a party to the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** 110. Real property lease contract JSC fGC uES and JSC “muS Energetiki” 111. Real property lease contract JSC fGC uES and JSC “muS Energetiki” 112. Real property lease contract JSC fGC uES and JSC “muS Energetiki” 113. Agreement for the lease of optical fibres JSC fGC uES and JSC “muS Energetiki” 84 114. Real property lease contract JSC fGC uES and JSC “tyumenenergo” JSC fGC uES and JSC “dESP” 115. Agreement for drafting procurement documentation under the title: "Construction and installation, commission- ing works with equipment supply for construction of 220 kV neryungrinskaya SdPP – nizhniy Kuranakh – tom- mot – maya ohl with 220 kV tommot SS and 220 kV maya SS, the second phase of construction of 22- kV tommot SS and extension of 220 kV nizhny Kuranakh SS (excluding construction of 220 kV ohl, 220 kV maya SS and fiber-optic communica- tion lines)" the lessor (JSC fGC uES) undertakes to provide to the lessee (JSC “muS Energetiki”) real property (building) under the transfer and acceptance cer- tificate for temporary possession and use for a fee the lessor (JSC fGC uES) undertakes to provide to the lessee (JSC “muS Energetiki”) real property (part of premises with an area of 8 sq. m.) under the transfer and acceptance certificate for tempo- rary possession and use for a fee the lessor (JSC fGC uES) undertakes to provide to the lessee (JSC “muS Energetiki”) real property (non-residential premises with a total area of 12 sq. m.) under the transfer and acceptance certifi- cate for temporary possession and use for a fee the lessor (JSC fGC uES) undertakes to provide to the Lessee (JSC “MUS Energetiki”) optical fibers for temporary possession and use for a period of lease the lessor (JSC "tyumenenergo") undertakes to provide to the lessee (JSC fGC uES) real property (non-residual premises) under the transfer and ac- ceptance certificate for temporary possession and use for a fee in accordance with the assignment of the Cus- tomer (JSC fGC uES), the Contractor (JSC “dESP”) will develop procurement documentation within terms and to the extent specified by the agreement and approved terms of reference for the develop- ment of procurement documentation 116. Agreement for creating ener- gy-efficient SCB (substation control building) 500/220/10 kV nizhny novgorod SS JSC fGC uES and JSC R&d Centre of fGC uES 117. Real property lease contract JSC fGC uES and JSC “Elec- trosetservice unEG” the Contractor (JSC R&d Centre of fGC uES) undertakes to carry out work on: - drafting design and working documentation; - supervision; - reconstruction - provision of materials, equipment, spare parts the lessor (JSC fGC uES) undertakes to provide to the lessee (JSC “Electrosetservice unEG”) real property under the transfer and acceptance certifi- cate for temporary possession and use for a fee Rental payment is RuB 137,426.46 per month, including VAt (18%) Governing body that resolved to approve the transaction (minutes' date and number) the Company’s Board of directors (minutes no. 259 of 13.04.2015) Person(s) interested in the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti Rental payment is RuB 7,305.90 per month, including VAt (18%) the Company’s Board of directors (minutes no. 259 of 13.04.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti Rental payment is RuB 10,958.85 per month, including VAt (18%) the Company’s Board of directors (minutes no. 259 of 13.04.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti Rental payment is RuB 19,893.35 per month, including VAt (18%) Rental payment is RuB 128,351.55 per month, including VAt (18%) the Company’s Board of directors (minutes no. 259 of 13.04.2015) the Company’s Board of directors (minutes no. 259 of 13.04.2015) Work price shall not exceed RuB 461,685.62, including VAt (18%) the Company’s Board of directors (minutes no. 261 of 27.04.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's Board of directors A.A. demin, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction 85 Work price shall not exceed RuB 10,856,000.00, including VAt (18%) the Company’s Board of directors (minutes no. 261 of 27.04.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti 118. Agreement for the installa- tion of bird guards at 220 kV Amurskaya – Belogorsk/t ohl with branch lines to Belogorsk SS, Svobodnens- kaya SS JSC fGC uES and JSC “Elec- trosetservice unEG” the Contractor (JSC “Electrosetservice unEG”) undertakes to perform works on the installation of bird guards Work price is RuB 1,806,109.40, including VAt (18%) the Company’s Board of directors (minutes no. 261 of 27.04.2015) Rental payment is RuB 142,800.00 per month, including VAt (18%) the Company’s Board of directors (minutes no. 261 of 27.04.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** 119. 120. 121. Agreement for the installa- tion of bird guards at 220 kV novokievka –fevralskaya ohl with branch lines to uland- ochka SS Agreement for the installa- tion of bird guards at 220 kV Amurskaya – Koroli/t ohl with branch lines to Belogorsk SS Agreement for the installation of bird guards at 500 kV oJl of Bureyskaya hPP JSC fGC uES and JSC “Elec- trosetservice unEG” the Contractor (JSC “Electrosetservice unEG”) will work on the installation of bird guards undertakes to perform works on the installation of bird guards Work price is RuB 3,484,200.89, including VAt (18%) JSC fGC uES and JSC “Elec- trosetservice unEG” the Contractor (JSC “Electrosetservice unEG undertakes to perform works on the installation of bird guards Work price is RuB 2,172,484.90, including VAt (18%) the Company’s Board of directors (minutes no. 261 of 27.04.2015) JSC fGC uES and JSC “Elec- trosetservice unEG” the Contractor (JSC “Electrosetservice unEG undertakes to perform works on the installation of bird guards Work price is RuB 3,253,672.88, including VAt (18%) the Company’s Board of directors (minutes no. 261 of 27.04.2015) 122. lease agreement JSC fGC uES and JSC “muS Energetiki” the lessor (JSC fGC uES) undertakes to provide the lessee (JSC “muS Energetiki”) with property under the transfer and acceptance certificate for temporary possession and use for a fee 86 123. 124. 125. Supplementary agreement no. 4 to the agreement no. 02/13 of 15.02.2013 JSC fGC uES and JSC “Elec- trosetservice unEG” Amendments to the agreement Agreement for software upgrading JSC fGC uES and it Energy Service, llC the Contractor (it Energy Service, llC) undertakes to perform works on improving the automated sys- tem of planning and budgeting of JSC fGC uES Supplementary agreement no. 3 to the non-residential premises lease agreement no. 93-2012 of 01.06.2012 JSC fGC uES JSC «CiuS uES» Amendments to the agreement 126. Agreement for the lease of buildings and constructions JSC fGC uES and JSC “Elec- trosetservice unEG” JSC fGC uES and JSC R&d Centre of fGC uES 127. Agreement for development of design and technical part of tender documentation according to the lightning- proof raising program "500 kV Sayano-Shushenskaya hPP – novokuznetskaya no. 2 aerial cable line. the replacement of ground wearer with more resistant to sticking of wet snow with the installation of icing monitoring systems" the lessor (JSC fGC uES) undertakes to provide the lessee (JSC “Electrosetservice unEG”) build- ings and constructions for temporary compen- sated possession and use (lease) the Contractor (JSC R&d Centre of fGC uES) will perform works on: - engineering survey; - registration of land legal relations; - development of design documentation and the examination by obtaining a positive expert opinion; - drafting the technical part of procurement docu- mentation Rental payment is RuB 121,650.08 per month, including VAt (18%) the Company’s Board of directors (minutes no. 261 of 27.04.2015) Work price according to the supplemen- tary agreement shall not exceed RuB 951,263,438.08, including VAt (18%) the Company’s Board of directors (minutes no. 261 of 27.04.2015) Work price is RuB 493,997.40, including VAt (18%) the Company’s Board of directors (minutes no. 261 of 27.04.2015) Rental payment according to the supple- mentary agreement is RuB 251,920.96 per month, including VAt (18%) the Company’s Board of directors (minutes no. 261 of 27.04.2015) Rental payment according to the agreement is RuB 122,561.57 per month, including VAt (18%) the Company’s Board of directors (minutes no. 261 of 27.04.2015) Work price shall not exceed RuB 4,521,600.00, including VAt (18%) the Company’s Board of directors (minutes no. 262 of 27.04.2015) Governing body that resolved to approve the transaction (minutes' date and number) the Company’s Board of directors (minutes no. 261 of 27.04.2015) Person(s) interested in the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board n.i. Pozdnyakov, who is a member of the Board of directors and a General director of a party to the transaction; member of the Company’s manage- ment Board d.l. Shishkin, who is a member of the Board of dircetors of a party to the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti 87 APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** JSC fGC uES and JSC R&d Centre of fGC uES the Contractor (JSC R&d Centre of fGC uES) will perform works on: - engineering survey; - registration of land legal relations; - development of design documentation and the examination by obtaining a positive expert opinion; - drafting the technical part of procurement docu- mentation Work price is not more RuB 3,346,000.00, including VAt (18%) Governing body that resolved to approve the transaction (minutes' date and number) the Company’s Board of directors (minutes no. 262 of 27.04.2015) Person(s) interested in the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti Agreement for development of design and technical part of tender documentation according to the lightning- proof raising program "500 kV Sayano-Shushenskaya hPP – novokuznetskaya no. 1 aerial cable line. the replacement of ground wearer with more resistant to sticking of wet snow with the installation of icing monitoring systems" Agreement for the project development under the invest- ment program of expansion of ohl sites unEG of JSC fGC uES branches – mES under the title: "Expansion of ohl routes in the tomsk PmES service area" JSC fGC uES and JSC “Elec- trosetservice unEG” Agreement no. 3377 of 24.09.2013 for development of design and working docu- mentation under the title: "the security management system of 220 kV Cometa SS" under the power facilities protection program of JSC fGC uES Agreement for development of design and procurement documentation under the title: "Reconstruction of 500 kV Pyt-Yakh – nelym ohl" JSC fGC uES and JSC R&d Centre of fGC uES JSC fGC uES and JSC R&d Centre of fGC uES 88 128. 129. 130. 131. 132. 133. the Contractor (“Electrosetservice unEG”) will perform comprehensive works on: - engineering survey; - development, coordination of project documenta- tion; - obtaining a positive expert opinion on design documentation; - development and coordination in the established procedure of forest development plans (if neces- sary); - development of procurement documentation; - development and approval of working documen- tation; - arrangement of approvals and permits the Contractor (JSC R&d Centre of fGC uES) un- dertakes to perform comprehensive works on: - development and approval of project and working documentation in accordance with the require- ments of technical standards; - expert assessment of project documentation; - development and approval of procurement docu- mentation the contractor (JSC R&d Centre of fGC uES) undertakes to perform works on: - development and approval of engineering sur- veys; - development and approval of project documenta- tion; - development and approval of procurement docu- mentation; - support of expert assessment (if required) of project documentation Work price is not more RuB 3,018,900.00, including VAt (18%) the Company’s Board of directors (minutes no. 262 of 27.04.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Work price shall not exceed RuB 2,461,839.31, including VAt (18%) the Company’s Board of directors (minutes no. 262 of 27.04.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti 89 Work price shall not exceed RuB 1,302,450.00, including VAt (18%) the Company’s Board of directors (minutes no. 262 of 27.04.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti Supplementary agreement no. 1 to the agreement no. 291 of 31.07.2013 for design, equipment supply, construction and installation, commissioning of automatic diagnostics systems of GiS for the needs of the federal Grid’s branch- mES East Agreement no. ntC-0813 of 19.08.2013 for drafting design specification and estimates under the title "Reconstruction of 220 kV mikhaylovskaya SS. Replace- ment of AT 2х125 MVA with 2x250 mVA transformer and 110 kV capacitor banks" JSC fGC uES and JSC “Elec- trosetservice unEG” Amendments to the work schedule and cost of work Work price according to the supplemen- tary agreement shall not exceed RuB 19,566,330.14, including VAt (18%) the Company’s Board of directors (minutes no. 262 of 27.04.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction JSC fGC uES and JSC R&d Centre of fGC uES the Contractor (JSC R&d Centre of fGC uES) undertakes to perform works on development of design specifications and estimates, namely work on: - engineering survey; - drafting design documentation; - state expertise of project documentation; - drafting procurement documentation Work price shall not exceed RuB 10,394,000.00, including VAt (18%) the Company’s Board of directors (minutes no. 262 of 27.04.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** JSC fGC uES and JSC R&d Centre of fGC uES Amendments to the agreement Price is not determined due to the fact that the supplementary agreement does not change work price specified by the agree- ment Governing body that resolved to approve the transaction (minutes' date and number) the Company’s Board of directors (minutes no. 262 of 27.04.2015) Person(s) interested in the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti 134. 135. 136. Supplementary agreement no. 3 to the agreement no. R-85-5/11 of 26.07.2011 for development of working docu- mentation, construction and installation, commissioning, equipment supply under the title: "Creation of the intercon- nection at 220 kV between uES of Siberia and uES of East on the basis of the Zabai- kalskaya converter system on mogocha SS 220 kV" Supplementary agreement no. 5 to the agreement no. 06/13 of 18.02.2013 on re- pairs, equipment diagnostics and targeted programmes for SS and ohl of mES Western Siberia Supplementary agreement no. 6 to the agreement no. 06/13 of 18.02.2013 on re- pairs, equipment diagnostics and targeted programmes for SS and ohl of mES Western Siberia 90 JSC fGC uES and JSC “Elec- trosetservice unEG” Amendments to the annexes to the agreement JSC fGC uES and JSC “Elec- trosetservice unEG” Amendments to the annexes to the agreement Work price is not determined due to the fact that the supplementary agreement does not set forth additional works on the agreement the Company’s Board of directors (minutes no. 262 of 27.04.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Price is not determined due to the fact that the supplementary agreement does not change work price provided in the agree- ment the Company’s Board of directors (minutes no. 262 of 27.04.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction 91 137. Real property lease contract JSC fGC uES and JSC “tuy- menenergo” the lessor (JSC "tyumenenergo") undertakes to provide to the lessee (JSC fGC uES) real property under the transfer and acceptance certificate for temporary possession and use for a fee 138. Voluntary medical insurance agreement JSC fGC uES JSC “SoGAZ” Voluntary medical insurance services to employ- ees of JSC fGC uES 139. 140. 141. Agreement for the provision of services of operational control of dCS and communi- cation systems for the needs of the federal Grid’s branch– mES South Agreement for the provision of services of operation con- trol of dCS and communica- tion systems of Sochi PmES Agreement for the provision of services on technical maintenance of security and fire alarm system on 220 kV makkaveevo SS JSC fGC uES and JSC “muS Energetiki” the Contractor (JSC “muS Energetiki”) undertakes to provide the service operational control of dCS and communication systems JSC fGC uES and JSC “muS Energetiki” the Contractor (JSC “muS Energetiki”) undertakes to provides complete services of operation control of dCS and communication systems of Sochi PmES JSC fGC uES and JSC “Chi- taenergo” the Contractor (JSC “Chitaenergo”) undertakes to provide services for maintenance of security and fire alarm system on 220 kV Makkaveyevo SS Rental payment is RuB 192,708.75 per month, including VAt (18%) the Company’s Board of directors (minutes no. 262 of 27.04.2015) total service price (insurance premium amount) on the transaction for the whole period of transaction validity shall not be equal or exceed 2% of book value of assets of JSC fGC uES based on its account state- ments on the latest date before entering into the agreement Service price shall not exceed RuB 11,444,982.12, including VAt (18%) Service price shall not exceed RuB 11,137,700.00, including VAt (18%) Service price shall not exceed RuB 162,202.80, including VAt (18%) the Company’s Board of directors (minutes no. 262 of 27.04.2015) the Company’s Board of directors (minutes no. 264 of 30.04.2015) the Company’s Board of directors (minutes no. 264 of 30.04.2015) the Company’s Board of directors (minutes no. 264 of 30.04.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's Board of directors A.A. demin, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; members of the Company’s management Board: A.E. murov, V.A. Goncharov, A.V. Kazachenkov, A.V. Vasiliev, V.P. dikoy, A.A. Zagaratsky, n.i. Pozdnyakov, m.G. Tikhonova, D.L. Shishkin – beneficiaries in the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** 142. 143. Agreement for the provision of services for maintenance of uninterrupted power supply system and one time service for refueling backup diesel power plant of Situational analytical center of JSC fGC uES Supplementary agreement no. 1 to the agreement no. 24/1 of 26.03.2014 on replacement of reinforced concrete supports JSC fGC uES and it Energy Service, llC the Contractor (it Energy Service. llC) undertakes to provide services for maintenance of uninterrupt- ed power supply system and one time service for refueling backup diesel power plant of Situational analytical center of JSC fGC uES JSC fGC uES and JSC “Elec- trosetservice unEG” Amendments to the agreement in terms of work deadlines 144. Agreement for communica- tion services JSC fGC uES and JSC “muS Energetiki” 92 145. Agreement for the provision of services of operative con- trol of SCS and communica- tion systems of mES JSC fGC uES and JSC “muS Energetiki” 146. Agency agreement JSC fGC uES and JSC “muS Energetiki” the Contractor (JSC “muS Energetiki”) undertakes to provide services to the Customer (JSC fGC uES) for access (connection) to the communication channels the Contractor (JSC “muS Energetiki”) undertakes to provide the Customer (JSC fGC uES) the ser- vices of operative control of SCS and communica- tion systems of mES in accordance with the terms of reference on the instructions of and for the account of the Principal (JSC fGC uES) Agent (JSC “muS Energetiki”) on its own behalf concludes contracts for the provision of local, intercity and international telephone communication services 147. 148. 149. 150. Supplementary agreement no. 4 to the agreement no. 22 of 08.04.2008 on SCS equip- ment placement Supplementary agreement no. 5 to the agreement no. 80326 of 01.04.2008 on SCS equipment placement Agreement for operation and maintenance of dispatch control system for 2015 Supplementary agreement no. 1 to the agreement no. 409 of 01.04.2014 for operation and maintenance of dtCn equipment of ESuPCn of JSC fGC uES JSC fGC uES and "SC idGC of Volga Amendments to the agreement JSC fGC uES and JSC idGC of Volga Amendments to the agreement JSC fGC uES and JSC “muS Energetiki” the Contractor (JSC “muS Energetiki”) undertakes to perform works on maintenance of dispatch control system of electric grid facilities JSC fGC uES and JSC “muS Energetiki” Amendments to the annexes to the agreement 151. Supply agreement no. 738/14 of 04.08.2014 JSC fGC uES and JSC "tRK" 152. Real property lease contract JSC fGC uES and JSC “muS Energetiki” the Supplier (JSC "tRK") undertakes to transfer to the Buyer (JSC fGC uES) an insulator Pntu- 20/8000 the lessor (JSC fGC uES) undertakes to provide to the lessee (JSC “muS Energetiki”) real property (non-residential premises with a total area of 13 sq.m.) under the transfer and acceptance certifi- cate for temporary possession and use for a fee Service price shall not exceed RuB 357,130.00, including VAt (18%) Governing body that resolved to approve the transaction (minutes' date and number) the Company’s Board of directors (minutes no. 264 of 30.04.2015) Person(s) interested in the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti Work price is not determined due to the fact that the supplementary agreement does not change work price specified in the agreement the Company’s Board of directors (minutes no. 264 of 30.04.2015) Service price for the period from 01.07.2014 to 30.11.2014 is RuB 490,617.36, including VAt (18%) the Company’s Board of directors (minutes no. 264 of 30.04.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti Service price shall not exceed RuB 78,770,924.40, including VAt (18%) the Company’s Board of directors (minutes no. 264 of 30.04.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti the Company’s Board of directors (minutes no. 264 of 30.04.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti 93 the price of the agency agreement consists of: - cost of services (agency fee) in the amount of 5.26%, including VAt (18%), the amounts of the contracts concluded by JSC "muS Energetiki" with third parties; - expenses of JSC "muS Energetiki" in the amount of services provided by suppliers. the limit of funds under the agreement shall not exceed RuB 7,527,624.00 Service price according to the supplemen- tary agreement is RuB 40,528.27, including VAt (18%) the Company’s Board of directors (minutes no. 264 of 30.04.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti Service price according to the supplemen- tary agreement is RuB 46,318.02, including VAt (18%) the Company’s Board of directors (minutes no. 264 of 30.04.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti Work price according to the agreement shall not exceed RuB 9,210,000.00, includ- ing VAt (18%) the Company’s Board of directors (minutes no. 264 of 30.04.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti Service price according to the supple- mentary agreement is RuB 11,182,823.52, including VAt (18%) the Company’s Board of directors (minutes no. 264 of 30.04.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti the property price under the supply agree- ment is RuB 117,454.04, including VAt (18%) the Company’s Board of directors (minutes no. 264 of 30.04.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti Rental payment is RuB 2,030.84 per month, including VAt (18%) the Company’s Board of directors (minutes no. 265 of 14.05.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** Governing body that resolved to approve the transaction (minutes' date and number) Person(s) interested in the transaction 94 153. 154. 155. 156. 157. 158. 159. 160. 161. Supplementary agreement no. 1 to the agreement no. 427 of 11.06.2013 for the pro- vision of services for all-day organisation and provision of video conferencing and intercom Supplementary agreement no. 1 to the agreement no. 671 of 26.10.2009 for the provision of services for maintenance of equipment of ESuCCn (3rd stage) Supplementary agreement no. 6 to the agreement no. 05/13 of 05.03.2013 for repair, maintenance and di- agnostic tests of electric grid facilities Supplementary agreement no. 7 to the agreement no. 05/13 of 05.03.2013 for repair, maintenance and diagnostic test of electric grid facilities Supplementary agreement no. 7 to the agreement no. 04/13 of 11.03.2013 for repair, maintenance and diagnostic test of electric grid facilities Agreement for repair and maintenance of electric grid facilities Supplementary agreement no. 6 to the agreement no. 533 of 01.11.2008 on mainte- nance and repair of communi- cation lines Agreement for termina- tion of contract no. 533 of 01.11.2008 for maintenance and repair of communication lines Supplementary agreement no. 16 to the agreement no. ts/01 of 01.04.2008 for performing owner/developer functions JSC fGC uES and JSC “muS Energetiki” Amendments to the agreement, including services price Service price according to the supple- mentary agreement shall not exceed RuB 46,114,640.88, including VAt (18%) the Company’s Board of directors (minutes no. 265 of 14.05.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti JSC fGC uES and JSC “muS Energetiki” Amendments to the agreement total service price for the period from 01.01.2010 to 31.12.2014 is RuB 43,480,020.31, including VAt (18%) the Company’s Board of directors (minutes no. 265 of 14.05.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti JSC fGC uES and JSC “Elec- trosetservice unEG” Amendments to the agreement JSC fGC uES and JSC “Elec- trosetservice unEG” Amendments to the agreement JSC fGC uES and JSC “Elec- trosetservice unEG” Amendments to the agreement JSC fGC uES and JSC “Chi- taenergo” the Contractor (JSC “Chitaenergo”) will perform works for repair and maintenance of electric grid facilities JSC fGC uES and JSC “muS Energetiki” Amendments to the agreement JSC fGC uES and JSC “muS Energetiki” termination of the contract JSC fGC uES JSC “CiuS uES” Amendments to the agreement Work price is not determined due to the fact that the supplementary agreement does not change work price specified by the agreement the Company’s Board of directors (minutes no. 265 of 14.05.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Work price according to the supplemen- tary agreement shall not exceed RuB 967,045.61, including VAt (18%) the Company’s Board of directors (minutes no. 265 of 14.05.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction 95 Work price is not determined due to the fact that the supplementary agreement does not change work price specified by the agreement the Company’s Board of directors (minutes no. 265 of 14.05.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Work price shall not exceed RuB 1,229,101.94, including VAt (18%) the Company’s Board of directors (minutes no. 265 of 14.05.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti Service price according to the supple- mentary agreement shall not exceed RuB 80,846.66, including VAt (18%) the Company’s Board of directors (minutes no. 265 of 14.05.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti the price of the services/works under the agreement is not determined due to the fact that the agreement does not and cannot entail additional monetary obligations the Company’s Board of directors (minutes no. 265 of 14.05.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti Service price according to the supple- mentary agreement for the period from 01.01.2015 to 31.03.2015 shall not exceed RuB 575,250,000.00, including VAt (18%) the Company’s Board of directors (minutes no. 265 of 14.05.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board n.i. Pozdnyakov, who is a member of the Board of directors and a General director of a party to the transaction; member of the Company’s manage- ment Board d.l. Shishkin, who is a member of the Board of dircetors of a party to the transaction APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** JSC fGC uES and JSC “Elec- trosetservice unEG” Amendments to the agreement Work price is not determined due to the fact that the supplementary agreement does not provide for any additional works under the agreement Governing body that resolved to approve the transaction (minutes' date and number) the Company’s Board of directors (minutes no. 266 of 15.05.2015) Person(s) interested in the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction JSC fGC uES and JSC “Elec- trosetservice unEG” Amendments to the agreement Work price is not determined due to the fact that the supplementary agreement does not provide for any additional works under the agreement the Company’s Board of directors (minutes no. 266 of 15.05.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction JSC fGC uES and JSC “Elec- trosetservice unEG” Amendments to the agreement JSC fGC uES and JSC “Elec- trosetservice unEG” Amendments to the agreement JSC fGC uES and JSC “Elec- trosetservice unEG” Amendments to the agreement JSC fGC uES and JSC “Elec- trosetservice unEG” Amendments to the agreement Work price is not determined due to the fact that the supplementary agreement does not provide for any additional works under the agreement the Company’s Board of directors (minutes no. 266 of 15.05.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction 97 Work price is not determined due to the fact that the supplementary agreement does not provide for any additional works under the agreement the Company’s Board of directors (minutes no. 266 of 15.05.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Work price is not determined due to the fact that the supplementary agreement does not provide for any additional works under the agreement the Company’s Board of directors (minutes no. 266 of 15.05.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Work price is not determined due to the fact that the supplementary agreement does not provide for any additional works under the agreement the Company’s Board of directors (minutes no. 266 of 15.05.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction 96 162. 163. 164. 165. 166. 167. Supplementary agreement no. 1 to the agreement no. 212 of 09.10.2012 for execu- tion of works under the title: “Reconstruction of 330 kV Baksan SS (replacement of 330 kV air circuit breakers) for the needs of the federal Grid’s branch- mES South” Supplementary agreement no. 1 to the agreement no. 210 of 08.10.2012 for execu- tion of works under the title: “Reconstruction of 33- kV Cherkessk SS (replacement of 330 kV air circuit breakers replacement) for the needs of the federal Grid’s branch- mES South” Supplementary agreement no. 1 to the agreement no. 209 of 05.10.2012 for execu- tion of works under the title: “Reconstruction of 330 kv Stavropol SS (330 kV air cir- cuit breakers replacement) for the needs of the federal Grid’s branch– "mES of South” Supplementary agreement no. 1 to the agreement no. 208 of 08.10.2012 for execu- tion of works under the title: “Reconstruction of 330 kV Pri- kumsk SS (330 kV air circuit breakers replacement) Supplementary agreement no. 1 to the agreement no. 211 of 05.10.2012 for execu- tion of works under the title: “Reconstruction of 330 kV nalchik SS (330 kV air circuit breakers replacement) for the needs of the federal Grid’s branch– "mES of South” Supplementary agreement no. 1 to the agreement no. 193 of 25.09.2012 for execu- tion of works under the title: “Reconstruction of Chirurt SS 330/110/10 kV. Installation of rectifier device for ice melting (arranging ice melting on wires and cables of outgoing ohl 330 kV)” APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** JSC fGC uES and JSC “Elec- trosetservice unEG” Amendments to the agreement Work price is not determined due to the fact that the supplementary agreement does not provide for any additional works under the agreement Governing body that resolved to approve the transaction (minutes' date and number) the Company’s Board of directors (minutes no. 266 of 15.05.2015) Person(s) interested in the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction 98 168. 169. 170. 171. 172. 173. 174. 175. Supplementary agreement no. 1 to the agreement no. 213 of 08.10.2012 for execu- tion of works under the title: “Reconstruction of 330 kV Vladikavkaz-500 SS (330 kV air circuit breakers replace- ment) for the needs of the federal Grid’s branch- mES of South” Supplementary agreement no. 1 to the agreement no. 207 of 08.10.2012 for execu- tion of works under the title: “Reconstruction of 330 kV mozdok SS (330 kV air circuit breakers replacement) for the needs of the federal Grid’s branch– "mES of South” Agreement on repair of PASSmo-145 on 330 kV Bologoe SS Agreement for diagnostic inspection of power trans- former of 220 kV Energy SS of the federal Grid’s branch– "mES of East" Supplementary agreement no. 6 to the agreement no. 0817/10-V of 01.01.2011 for maintenance and repair of ground wire in the area from support no. 1 KS-33, ud-32 220 kV ohl – to support no. 252 Bd-75 220 kV ohl Supplementary agreement no. 2 to the premises sub- lease agreement no. Sap/ ESS/1 of 01.06.2008 Agreement for design and survey work under the title: "Reconstruction of 500 kV ulyanovskaya-Yuzhnaya ohl for replacement of support no. 821 to transfer it to a safe distance from the ravine" Agreement no. 98-St/14 of 28.11.2014 for execution of works under the title: "Re- construction of mogocha SS 220/110/35/10 kV. installa- tion of low-resistance devices into the neutrals of t3, t4, t5 and t6 transformers" JSC fGC uES and JSC “Elec- trosetservice unEG” Amendments to the agreement Work price is not determined due to the fact that the supplementary agreement does not provide for any additional works under the agreement the Company’s Board of directors (minutes no. 266 of 15.05.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction JSC fGC uES and JSC “Elec- trosetservice unEG” the Contractor (JSC “Electrosetservice unEG”) will perform repairs to PASSmo-145 at 330 kV Bologoe SS in accordance with the toR and defects state- ments of the Customer (JSC "uES fGC") JSC fGC uES and JSC “Elec- trosetservice unEG” the Contractor (JSC “Electrosetservice unEG”) will perform the works on diagnostic test of power transformer of 220 kV Energy SS of the federal Grid’s branch– "mES of East" in accordance with the toR of the Customer (JSC fGC uES) JSC fGC uES and JSC “Chi- taenergo” Amendments to the agreement JSC fGC uES and JSC “Elec- trosetservice unEG” Amendments to the agreement JSC fGC uES and JSC R&d Centre of fGC uES JSC fGC uES and JSC R&d Centre of fGC uES the Contractor (JSC R&d Centre of fGC uES) undertakes to perform works on: - engineering survey; - development of design documentation; - obtaining a positive expert opinion regarding the results of engineering survey and project documen- tation; - drafting working documentation (including local budgets) the Contractor (JSC R&d Centre of fGC uES) will perform works on: - development of design and working documenta- tion; - expertise of project documentation; - design supervision; - reconstruction as well as providing a complete set of materials, equipment, spare parts to the equipment in accor- dance with design and working documentation Work price shall not exceed RuB 1,155,636.54, including VAt (18%) the Company’s Board of directors (minutes no. 266 of 15.05.2015) Work price is RuB 396,092.61, including VAt (18%) the Company’s Board of directors (minutes no. 266 of 15.05.2015) Works price determined by the supplemen- tal agreement for 2015 is RuB 5,648,000.00, including VAt (18 %) the Company’s Board of directors (minutes no. 266 of 15.05.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; 99 Rental payment determined by the supple- mental agreement is RuB 3,526,953.18, including VAt (18 %) the Company’s Board of directors (minutes no. 266 of 15.05.2015) Work price under the agreement shall not exceed RuB 4,614,136.01, including VAt (18%) the Company’s Board of directors (minutes no. 269 of 29.05.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti Work price under the agreement shall not exceed RuB 67,923,200.76, including VAt (18%) the Company’s Board of directors (minutes no. 269 of 29.05.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** Governing body that resolved to approve the transaction (minutes' date and number) Person(s) interested in the transaction JSC fGC uES and JSC “Elec- trosetservice unEG” the Contractor (JSC “Electrosetservice unEG”) will perform works to replace high-voltage bushings of power autotransformers and shunt reactors Work price under the agreement shall not exceed RuB 7,372,393.77, including VAt (18%) the Company’s Board of directors (minutes no. 269 of 29.05.2015) Work price under the agreement shall not exceed RuB 19,206,000.00, including VAt (18%) the Company’s Board of directors (minutes no. 269 of 29.05.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction 100 176. 177. 178. 179. 180. 181. 182. Agreement no. 62-Suid of 25.11.2014 for modernisation of power autotransformers, shunt reactors and oil circuit breakers for the needs of the federal Grid’s branch– "mES of Volga" Agreement for development of design and working docu- mentation, supply of material and technical resources and equipment, construction and installation and commis- sioning works under the title: "Reconstruction of urengoi – Pangody (nadym) ohl 220 kV and the Kirillovskaya - Kholmogory ohl 500 kV (installation /replacement of ground wire)" for the needs of JSC "uES fGC" branch – "mES of Western Siberia" Supplementary agreement no. 3 to the agreement no. 262584 of 01.04.2013 Supplementary agreement no. 3 to the agreement no. 284791 of 01.06.2013 Supplementary agreement no. 3 to the agreement no. 262622 of 01.04.2013 Agreement concernin the termination of the greement no. 3907 of 15.05.2012 under the title: "Construction of two single circuit Arkhara – PS-29 ohl 220 kV with SS 220 kV SS-29" Supplementary agreement no. 1 to the agreement no. 8 of 18.01.2012 to work under the title: "Reconstruction of 330 kV Baksan SS. Replace- memnt of rectifier device for ice melting and setting ice load control points at Baksan – nalchik ohl 330-30 for ice melting at wires and cables)" JSC fGC uES and JSC “Elec- trosetservice unEG” the Contractor (JSC “Electrosetservice unEG”) will perform works on: - engineering survey; - development of design and working documenta- tion; - implementation of supervision; - reconstruction to the extent provided design and working documentation under the title: "Recon- struction of urengoi – Pangody (nadym) ohl 220 kV and the 500 kV Kirillovskaya - Kholmogory ohl 500 kV (installation/replacement of ground wire)"; - as well as providing a complete set of materials, equipment, spare parts for equipment in accor- dance with project and working documentation JSC fGC uES and JSC “muS Energetiki” the Contractor (JSC “muS Energetiki”) shall render comprehensive services on operation and mainte- nance of data transmission central network (dtSn) of the Energy System’s Unified Process Communi- cations network (ESuPCn) of JSC fGC uES JSC fGC uES and JSC “muS Energetiki” Amendments to the agreement JSC fGC uES and JSC “muS Energetiki” Amendments to the agreement JSC fGC uES and JSC “dESP” termination of the agreement no. 3907 of 15.05.2012 from the date of signing the agreement JSC fGC uES and JSC “Elec- trosetservice unEG” Amendments to the agreement Service price under the agreement shall not exceed RuB 1,313,040,640.00, including VAt (18%) the Company’s Board of directors (minutes no. 269 of 29.05.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti 101 Work price shall not exceed RuB 27,868,825.65, including VAt (18%) Work price shall not exceed RuB 51,080,365.27, including VAt (18%) due to the fact that the agreement to termi- nate the agreement no. 3907 of 15.05.2012 does not and cannot entail additional mon- etary obligations, the price of services/work under the agreement is not determined the Company’s Board of directors (minutes no. 269 of 29.05.2015) the Company’s Board of directors (minutes no. 269 of 29.05.2015) the Company’s Board of directors (minutes no. 269 of 29.05.2015) Work price is not determined due to the fact that the supplementary agreement does not set forth additional works on the agreement the Company’s Board of directors (minutes no. 269 of 29.05.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction 183. Agreement for works (with the protocol of disagreements) JSC fGC uES and JSC oGK-2 the Customer (JSC fGC uES) requests, and the Contractor ( JSC oGK-2) undertakes to perform the following activities: online maintenance of cell no. 6 oRu-330 kV (Pskovskaya GRES – Starorusskaya ohl 330 kV) installed in oRu-330 kV of JSC oGK-2 branch - Pskovskaya GRES and cell no. 14 (R-110) installed in oRu-330 kV of JSC oGK-2 branch - Pskovskaya GRES Work price under the agreement for works (with the protocol of disagreements) is RuB 309.79, including VAt (18%) the Company’s Board of directors (minutes no. 269 of 29.05.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti, member of the Company's Board of directors d.V. fyodorov, who is a member of the Board of directors of a party to the transaction APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** 184. 185. 186. Supplementary agreement no. 2 to the agreement no. 51/13 of 14.06.2013 for electrical equipment service maintenance JSC fGC uES, JSC “Electro- setservice unEG” and JSC “Electrozavod” Amendments to the agreement Agreement for services of project management and SAP competence center JSC fGC uES and it Energy Service, llC According to the agreed party application, the Contractor (it Energy Service, llC) undertakes to provide services of project management and SAP competence center JSC fGC uES and JSC “Elec- trosetservice unEG” Amendments to the agreement Supplementary agreement no. 4 to the agreement no. 03/13 of 15.02.2013 for repair and diagnostic scanning of electric grid facilities (for tar- get programs, financed under the main activity) 187. Agreement JSC fGC uES and JSC “uESK” the organiser (JSC fGC uES) undertakes to provide services to the Participant (JSC "uESK") concerning the access to the electronic document management system within corporate information system of digital signatures certification centre of JSC fGC uES Amendments to the agreement Supplementary agreement no. 1 to the agreement no. 22/60 of 01.07.2013 JSC fGC uES and JSC “tyumenenergo” Supplementary agreement no. 1 to the agreement no. 7700/00295/14 of 22.08.2014 JSC fGC uES and JSC iGdS of Centre Amendments to the agreement 102 188. 189. 190. Supplementary agreement no. 1 to the agreement no. 6 of 17.09.2012 JSC fGC uES and JSC "ESSK uES" Amendments to the agreement 191. 192. Agreement for management and monitoring of telecom- munication network of mES of Volga Agreement for design and survey works on reconstruc- tion of Relay Protection and Emergency Automation and organisation of communica- tion channels at Arkhara SS 220 kV and related SS JSC fGC uES and JSC “muS Energetiki” the Contractor (JSC "muS Energetiki") provides the Customer (JSC fGC uES) with comprehensive service for management and monitoring of tele- communication network of mES of Volga JSC fGC uES and JSC R&d Centre of fGC uES the contractor (JSC R&d Centre of fGC uES) undertakes to carry out work on: - engineering survey; - development of design documentation; - development of procurement documentation Work price under the supplementary agreement no. 2 to the agreement no. 51/13 of 14.06.2013 shall not exceed RuB 108,038,267.15, including VAt (18%) Governing body that resolved to approve the transaction (minutes' date and number) the Company’s Board of directors (minutes no. 269 of 29.05.2015) Person(s) interested in the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Service price under the agreement shall not exceed RuB 178,584.81, including VAt (18%) the Company’s Board of directors (minutes no. 269 of 29.05.2015) Work price under the supplementary agreement no. 4 to the agreement no. 03/13 of 15.02.2013 shall not exceed RuB 975,798,200.21, including VAt (18%) the Company’s Board of directors (minutes no. 270 of 01.06.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Service price under the agreement shall not exceed RuB 20,408.36, including VAt (18%) the Company’s Board of directors (minutes no. 270 of 01.06.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti Service price under the supplementary agreement no. 1 to the agreement no. 22/60 of 01.07.2013 shall not exceed RuB 500,000.00, including VAt (18%) due to the fact that supplementary agreement no. 1 to the agreement no. 7700/00295/14 of 22.08.2014 does not change the total service price under the agreement no. 7700/00295/14 of 22.08.2014, the service price is not deter- mined Service price determined by a supplemen- tary agreement no. 1 to the agreement no. 6 of 17.09.2012 shall not exceed RuB 10,205.00, including VAt (18%). total ser- vice price for the whole period of agreement no. 6 of 17.09.2012, in view of its prolonga- tion shall not be equal or exceed 2% of the book value of the assets of JSC fGC uES according to its accounting statements at the last reporting date Service price under the agreement shall not exceed RuB 14,670,003.04, including VAt (18%), while the final price will be deter- mined after conducting pre-contractual negotiations the Company’s Board of directors (minutes no. 270 of 01.06.2015) the Company’s Board of directors (minutes no. 270 of 01.06.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti, member of the Company’s Board of directors A.A. demin, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti the Company’s Board of directors (minutes no. 270 of 01.06.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti, member of the Company’s management Board d.l. Shishkin, who is a member of the Board of dircetors of a party to the transaction the Company’s Board of directors (minutes no. 270 of 01.06.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti Work price under the agreement shall not exceed RuB 9,918,962.00, including VAt (18%) the Company’s Board of directors (minutes no. 270 of 01.06.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti 103 APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** 193. Real property lease contract JSC fGC uES and JSC “tyumenenergo” 194. Supplementary agreement no. 2 to the Real property lease contract no. 3.3-25/14/16 of 26.09.2014 JSC fGC uES and JSC “Elec- trosetservice unEG” 195. Agreement for the mainte- nance of the computing and information infrastructure of the executive office of JSC fGC uES JSC fGC uES and it Energy Service, llC 104 the lessor (JSC “tyumenenergo”) undertakes to provide the lessee (JSC fGC uES) real property under the transfer and acceptance certificate for temporary possession and use for a fee the lessee (JSC "Electrosetservice unEG") undertakes to return on 31.03.2016, while the lessor (JSC fGC uES) undertakes to accept non- residential premises: no. 7,8,9 area of 35,2 sq.m., located on the ground floor of the administrative building (inv. no. 0720-2-11-17057) at the address: Khanty-mansi Autonomous okrug, Surgut, Bazo- vaya str.,16; no 34,35,39 area of 28,7 sq.m., located on the 2nd floor of the building of administrative- household (inv. no. 0720-2-11-17033) at the address: Khanty-mansi Autonomous okrug, Surgut, Bazovaya str.,16 the Contractor (it Energy Service, llC) undertakes to provide services for the maintenance of the computing and information infrastructure of the executive office of JSC FGC UES 196. Agreement for development of design and technical part of the procurement documentation under the title: "Reconstruction of 500 kV tavricheskaya SS and 220 kV moskovka SS (emergency control system modernisa- tion) (for tP of energy receiv- ing devices of JSC idGC of Siberia, Semirechenskaya SS 110 kV)" 197. on approval of an interested- party transaction 198. Supplementary agreement no. 1 to the agreement no. 8 of 12.11.2012 JSC fGC uES and JSC R&d Centre of fGC uES under the agreement the Contractor (JSC R&d Centre of fGC uES) undertakes to perform works to the Customer (JSC fGC uES) on: - engineering surveys (pre-survey); - development of design documentation and the examination to obtain a positive expert opinion; - development of the technical part of the procure- ment documentation in accordance with para. 15.7 of the Regulation "on infor- mation disclosure by issuers of securities", approved by the Bank of Russia no. 454-P dated 30/12/2014, informa- tion about the terms and conditions of the transaction, as well as persons who are parties to it, and the benefi- ciaries are not disclosed. JSC fGC uES and JSC R&d Centre of fGC uES Amendments to the agreement Governing body that resolved to approve the transaction (minutes' date and number) the Company’s Board of directors (minutes no. 270 of 01.06.2015) the Company’s Board of directors (minutes no. 272 of 08.06.2015) Person(s) interested in the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti, member of the Company’s Board of directors A.A. demin, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction the Company’s Board of directors (minutes no. 272 of 08.06.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti 105 Rental payment is RuB 19,774.13, including VAt (18%) Rental payment set by the supplemen- tary agreement no.2 is RuB 910,177.51, including VAt (18%). total rental payment for the whole period of agreement no. 3.3-25/14/16 of 26.09.2014 shall not be equal or exceed 2% of the book value of the assets of JSC fGC uES according to its accounting statements at the last reporting date Service price under the agreement for the maintenance of the computing and informa- tion infrastructure of the executive office of JSC fGC uES between JSC fGC uES and it Energy Service, llC, that is an interested- party transaction, shall not exceed RuB 49,484,031.60, including VAt (18%) shall not exceed RuB 7,548,411.60. total service price for the whole period of agreement considering its prolongation shall not be equal or exceed 2% of the book value of the assets of JSC fGC uES according to ts accounting statements at the last reporting date Work price under the agreement shall not exceed RuB 698,800.00, including VAt (18%) the Company’s Board of directors (minutes no. 272 of 08.06.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti the Company’s Board of directors (minutes no. 272 of 08.06.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti Service price under the supplementary agreement no. 1 to the agreement no. 8 of 12.11.2012 shall not exceed RuB 99,000.00, including VAt (18%). total service price for the whole period of agreement, in view of its prolongation shall not be equal or exceed 2% of the book value of the assets of JSC fGC uES according to its accounting statements at the last reporting date the Company’s Board of directors (minutes no. 273 of 19.06.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** 106 199. Agreement for emergency and repair work JSC fGC uES and JSC “Elec- trosetservice unEG” 200. Agreement for the provision of services of operational control of dCS and communi- cation systems JSC fGC uES and JSC “muS Energetiki” the Contractor (JSC "Elektrosetservice unEG") undertakes to perform emergency repair work on the replacement input 110 kV of circuit breaker MKP-110 MV 110 L-120 of 330 kV Mozdok SS in the amount of the consolidated estimation in accordance with the work schedule partly of the Customer’s (JSC fGC uES) materials the Contractor (JSC “muS Energetiki”) undertakes to provide to the Customer (JSC fGC uES) services of operational control of dCS and communication systems of Kuban PmES, consisting of compre- hensive services of operational control over the dispatch control system (hereinafter – dCS) and communication systems of PmES 201. 202. 203. 204. Supplementary agreement no. 4 to the agreement no. 08/13 of 15.02.2013 for repair, maintenance and diag- nostic inspection of electric grid facilities Supplementary agreement no. 7 to the agreement 06/13 of 18.02.2013 on repairs, troubleshooting of equipment and targeted programmes for the SS and ohl of mES of Western Siberia Agreement for development of design and technical part of the procurement documen- tation under the title: "500 kV tomskaya SS. Replacing auxil- iary transformers, auxiliary boards, oil circuit breakers of 10 kV switchgear in the vacuum, diesel-generator installation, reconstruction of AlC" Agreement no. 3379 of 24.09.2013 for develop- ment of design and working documentation under the title: "the security management system of 220 kV Pimskaya SS” under the electric grid facilities protection program of JSC fGC uES JSC fGC uES and JSC “Elec- trosetservice unEG” Amendments to the agreement JSC fGC uES and JSC “Elec- trosetservice unEG” the conclusion of the supplementary agreement to the agreement no. 06/13 of 18.02.2013 JSC fGC uES and JSC R&d Centre of fGC uES the Contractor (JSC "R&d Centre of fGC uES") undertakes to carry out work on: - engineering survey; - development of design documentation and state expertise to obtain a positive conclusion; - developing the technical content of the procure- ment documents JSC fGC uES and JSC R&d Centre of fGC uES the Contractor (JSC R&d Centre of fGC uES) undertakes to perform works on: - development, coordination of project and working documentation in accordance with the require- ments of normative-technical documents; - expertise of project documentation; - development and approval of procurement docu- mentation Governing body that resolved to approve the transaction (minutes' date and number) the Company’s Board of directors (minutes no. 273 of 19.06.2015) Person(s) interested in the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction the Company’s Board of directors (minutes no. 273 of 19.06.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti Work price under the agreement is RuB 445,608.00, including VAt (18%) Service price under the agreement is RuB 277,587.92 per month, including VAt (18%). total service price under the agreement for the period from 01.01.2015 to 31.12.2015 shall not exceed RuB 3,331,055.04, including VAt (18%) not exceeding RuB 508,127.04. total service price for the whole period of agreement shall not be equal or exceed 2% of a book value of the assets of JSC fGC uES according to its accounting statements at the last reporting date Work price under the supplementary agree- ment shall not exceed RuB 607,187,515.51, including VAt (18%) the Company’s Board of directors (minutes no. 273 of 19.06.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction 107 due to the fact that the supplementary agreement no. 7 to the agreement no. 06/13 of 18.02.2013 does not change work price under the agreement no. 06/13 of 18.02.2013, the work price is not deter- mined the Company’s Board of directors (minutes no. 273 of 19.06.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Work price under the agreement shall not exceed then RuB 1,531,800.00, includ- ing VAt (18%) shall not exceed then RuB 233,664.41 the Company’s Board of directors (minutes no. 273 of 19.06.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti Work price under the agreement shall not exceed then RuB 2,050,583.59, includ- ing VAt (18%) shall not exceed then RuB 312,800.89 the Company’s Board of directors (minutes no. 273 of 19.06.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** Governing body that resolved to approve the transaction (minutes' date and number) Person(s) interested in the transaction 205. 206. Agreement no. 319 / id of 17.09.2013 for drafting design documentation, technical documentation and tender documentation for the project: "improving the lighting-surge proofness under id."Kolskaya nPP - monchegorsk" ohl 330 kV l 397, "Kolskaya nPP - monchegorsk" ohl 330 kV l 398 (ohl without ground wire peaks), "Suojarvi - läskelä" ohl 220 kV l 224 Supplementary agreement no. 1 to the agreement no. 206 of 08.10.2012 to perform work for the project: “Recon- struction of 330 kV Kropotkin SS (replacement of air circuit breakers 330 kV) for the needs of the federal Grid’s branch– "mES of South” JSC fGC uES and JSC R&d Centre of fGC uES the Contractor (JSC "R&d Centre of fGC uES") undertakes to carry out work on: - engineering survey; - drafting design documentation; - drafting working documentation (including local budgets); - drafting procurement documentation Work price under the agreement shall not exceed then RuB 16,936,639.90, including VAt (18%) the Company’s Board of directors (minutes no. 273 of 19.06.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti JSC fGC uES and JSC “Elec- trosetservice unEG” Amendments to the agreement due to the fact that supplementary agree- ment no. 1 to the agreement no. 206 of 08.10.2012 does not change work price un- der the agreement no. 206 of 08.10.2012, the work price is not determined the Company’s Board of directors (minutes no. 273 of 19.06.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction 108 207. Real property lease contract JSC fGC uES JSC “CiuS uES” 208. Real property lease contract JSC fGC uES JSC “CiuS uES” the lessor (JSC fGC uES) undertakes to provide the lessee (JSC "CiuS uES") with non-residential premises with a total area of 356,5 sq. m located on the 4th floor in a building located to the ad- dress: Sverdlovsk region, Ekaterinburg, tolmacheva str., 5, under the transfer and acceptance certifi- cate for temporary possession and use for a fee the lessor (JSC fGC uES) undertakes to provide the lessee (JSC "CiuS uES") with non-residential premises with an area of 11.2 sqm., stipulated in appendix 16 to this protocol, in administrative and production building (inv. no. 0402-2-11-29426), located on the territory of the RPB Saratov (Sara- tov, Sokolovaya Gora, 40), cadastral (conditional) no. 63-01/48-163-26) , under the transfer and acceptance certificate for temporary possession and use for a fee 209. Supplementary agreement no. 3 to the real estate sub-lease agreement no. A/ CiuS/1 of 17.12.2012 JSC fGC uES JSC “CiuS uES” Amendments to the agreement Rental payment under the Real property lease contract is RuB 327,604.64, includ- ing VAt (18%) per month and includes the reimbursement of utility and maintenance costs. Rental payment for the period from 01.02.2015 to 31.12.2015 is RuB 3,603,651.04 including VAt (18 %). the total rent for the entire term of the Real property lease contract, taking into account its prolongation, shall not be or exceed 2 percent of book value of assets of JSC fGC uES according to its accounting statements at the last reporting date Rental payment under the Real property lease contract is RuB 5,341.21, including VAt (18%). Rental payment for the period from 01.03.2015 to 31.01.2016 is RuB 58,753.31, including VAt (18%) . the total amount of rent for the entire term of the Real property lease contract of lease of immovable property taking into account its prolongation should not be or exceed 2 percent of book value of assets of JSC fGC uES according to its accounting statements at the last reporting date due to the fact that the supplementary agreement no. 3 to the real estate sub- lease agreement of 17.12.2012 does not change the total amount of the rental pay- ment under the agreement of 17.12.2012 no. A/CiuS/1, the price is not determined the Company’s Board of directors (minutes no. 273 of 19.06.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board n.i. Pozdnyakov, who is a member of the Board of directors and a General director of a party to the transaction; member of the Company’s manage- ment Board d.l. Shishkin, who is a member of the Board of dircetors of a party to the transaction 109 the Company’s Board of directors (minutes no. 273 of 19.06.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board n.i. Pozdnyakov, who is a member of the Board of directors and a General director of a party to the transaction; member of the Company’s manage- ment Board d.l. Shishkin, who is a member of the Board of dircetors of a party to the transaction the Company’s Board of directors (minutes no. 273 of 19.06.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board n.i. Pozdnyakov, who is a member of the Board of directors and a General director of a party to the transaction; member of the Company’s manage- ment Board d.l. Shishkin, who is a member of the Board of dircetors of a party to the transaction APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** Governing body that resolved to approve the transaction (minutes' date and number) the Company’s Board of directors (minutes no. 273 of 19.06.2015) Person(s) interested in the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti due to the fact that the termination agree- ment no. di-73/107/30-49 of 30.12.2005 cannot entail additional monetary obliga- tions, the price of services/work under the agreement is not determined 210. Agreement for termination of the agreement on using electric grid facilities no. di- 73/107/30-49 of 30.12.2005 . JSC fGC uES and JSC “Ku- ban trunk Grids” 1.to terminate the agreement of a date prior to the date of approval by order of the federal tariff service (hereinafter - ftS of Russia) of the tariff for services on electric energy transmission through the unified national (all-Russian) electric network, rendered using the objects of the owner (JSC "Kuban trunk Grids") 2. JSC fGC uES undertakes to reimburse the owner of the facilities leased under the agreement by signing the act of acceptance-transfer of the property to a date prior to the date of approval by the order of fSt of Russia of tariffs for services on electricity transmission via unEG, provided by the owner 110 211. 212. 213. 214. Supplementary agreement no. 3 to the agreement no. 01/13 of 15.02.2013 JSC fGC uES and JSC “Elec- trosetservice unEG” Amendments to the agreement Agreement for maintenance of foCl Chelyabinsk- Khabarovsk (Bearing 252 hani-Khabarovsk) JSC fGC uES and JSC “muS Energetiki” the Customer (JSC "muS Energetiki") assigns and the Contractor (JSC fGC uES) assumes the obliga- tions for maintenance of communication lines of the Customer JSC fGC uES and JSC “Elec- trosetservice unEG” Amendments to para 2.1.1 of the agreement shall be revised JSC fGC uES and JSC “Elec- trosetservice unEG” the Contractor (JSC "Electrosetservice unEG") undertakes to perform works on the reconstruction of the object and deliver the result to the Customer (JSC fGC uES) Supplementary agreement no. 3 to the agreement no. 10/13 of 28.12.2012 on per- forming emergency recovery works Agreement no. 81-2014/1 of 06.06.2014 for construction, installation and commis- sioning works under the title: "modernisation of power auto- transformers, shunt reactors and oil circuit breakers" on the objects of the federal Grid’s branch– "mES of Centre" 215. Agreement for providing the use of pairs of metal strands of the cable (direct wire) JSC fGC uES and JSC iGdS of Centre the Contractor (JSC fGC uES) shall provide to the Customer (JSC "iGdS of Centre") a pair of metal cable conductors (direct wire), beneficially owned by the Contractor, for temporary compensated use Work price under the supplementary agreement no. 3 to the agreement no. 01/13 of 15.02.2013 shall not exceed RuB 2,213,170,716.06, including VAt (18%) the Company’s Board of directors (minutes no. 273 of 19.06.2015) Work price of the agreement on main- tenance service of foCl Chelyabinsk- Khabarovsk (Bearing 252 hani-Khabarovsk), is RuB 303,182.03, including VAt (18 %) in the month, but not more than RuB 6,670,004.66, including VAt (18%) for the period from 01.03.2015 to 31.12.2016. the total price of the agreement shall not be or exceed 2 percent of book value of assets of JSC fGC uES according to its accounting statements at the last reporting date due to the fact that supplementary agree- ment no. 3 to the agreement no. 10/13 of 28.12.2012 does not change work price un- der the agreement no. 10/13 of 28.12.2012, the work price is not determined the Company’s Board of directors (minutes no. 273 of 19.06.2015) the Company’s Board of directors (minutes no. 273 of 19.06.2015) Work price under the agreement no. 81- 2014/1 of 06.06.2014 shall not exceed RuB 19,057,000.00, including VAt (18%) the Company’s Board of directors (minutes no. 274 of 25.06.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti 111 Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction the Company’s Board of directors (minutes no. 274 of 25.06.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti Service price under the agreement is RuB 358,055.66, including VAt (18%) per month. the total price under the agreement for the period from 01.01.2015 to 31.12.2015 is RuB 4,296,667.92, including VAt (18%). the total fees for the entire term of the agree- ment, taking into account its prolongation, shall not be or exceed 2 percent of book value of assets of JSC fGC uES according to its accounting statements at the last reporting date APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** 216. Agreement for the provision of property JSC fGC uES and JSC iGdS of Centre 217. Agreement for the provision of services for providing com- munication channels JSC fGC uES and JSC “muS Energetiki” JSC fGC uES and JSC “Elec- trosetservice unEG” JSC fGC uES and JSC “Elec- trosetservice unEG” JSC fGC uES and JSC “Elec- trosetservice unEG” 112 218. 219. 220. 221. Agreement for the adjustment of working documentation, construction, installation and commissioning works for pro- gram for improving lighting- surge proofnesson ohl 220 kV "Raichihinsk tPP – Yadrin- t” with a branch line to the SS "tarmanchukan-t” Agreement for adjustment of working documentation, construction, installation and commissioning works for pro- gram for improving lighting- surge proofness at ohl 220 kV “urgal – Eterkan” (l-8280) Agreement for adjustment of working documentation, construction, installation and commissioning works for pro- gram for improving lighting- surge proofness at ohl 220 kV “urgal – Suluk” (l-279) Agreement for supply of ma- terial and technical resources and equipment, execution of construction, installation and commissioning (substitute 1V-500 demjanskaya) under the title: "Program of replace- ment of VV 330-750 kV" for the needs of JSC "uES fGC" branch – "mES of Western Siberia" the Contractor (JSC iGdS of Centre) under- takes to provide to the Customer (JSC fGC uES) property beneficially owned by the Contractor (record number of registration in the Unified state register of rights to immovable property and transactions therewith: no. 32-32-12/003/2008- 410 of 09.06.2008., no. 32-32-05/001/2008-353 of 28.05.2008, no. 32-32-02/006/2008-833 of 11.06.2008, no. 32-32-05/007/2008-781 of 07.06.2008) the Contractor (JSC "muS Energetiki") provides to the Customer (JSC fGC uES) communication services for the provision of digital communication channels the Contractor (JSC "Electrosetservice unEG") undertakes to perform: - adjustment of the working documentation; - organisation of field supervision; - reconstruction - and to provide a complete set of materials, equip- ment, spare parts for equipment in accordance with the design and working documentation, and deliver the result to the Customer (JSC fGC uES) the Contractor (JSC "Electrosetservice unEG") undertakes to perform: - adjustment of the working documentation; - organisation of field supervision; - reconstruction - and to provide a complete set of materials, equip- ment, spare parts for equipment in accordance with the design and working documentation, and deliver the result to the Customer (JSC fGC uES) the Contractor (JSC "Electrosetservice unEG") undertakes to perform: - adjustment of the working documentation; - organisation of field supervision; - reconstruction - and to provide a complete set of materials, equip- ment, spare parts for equipment in accordance with the design and working documentation, and deliver the result to the Customer (JSC fGC uES) Governing body that resolved to approve the transaction (minutes' date and number) the Company’s Board of directors (minutes no. 275 of 26.06.2015) Person(s) interested in the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti the Company’s Board of directors (minutes no. 275 of 26.06.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti the price of services on providing property for the use is RuB 6,095.46, including VAt (18%) per month, while the price of services on providing the use of property for the pe- riod from 01.01.2013 to 31.12.2014 is RuB 146,291.04, including VAt (18%) the price of services under the agreement is RuB 15,692.82, including VAt (18%) per month for the provision of a single digital communication channel capacity 128 KB/s, the total price of the services under the agreement for the period from 23.01.2014 to 30.06.2014 is RuB 2,353,923.00 includ- ing VAt (18%) Work price under the agreement shall not exceed RuB 20,068,653.45, including VAt (18%) the Company’s Board of directors (minutes no. 275 of 26.06.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction 113 Work price under the agreement shall not exceed RuB 23,493,480.81, including VAt (18%) the Company’s Board of directors (minutes no. 275 of 26.06.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Work price under the agreement shall not exceed RuB 20,323,745.20, including VAt (18%) the Company’s Board of directors (minutes no. 275 of 26.06.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction JSC fGC uES and JSC “Elec- trosetservice unEG” the Contractor (JSC "Electrosetservice unEG") undertakes to perform works on reconstruction of the facility of the Customer(JSC fGC uES) Work price under the agreement shall not exceed RuB 6,079,442.60, including VAt (18%) the Company’s Board of directors (minutes no. 275 of 26.06.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** Governing body that resolved to approve the transaction (minutes' date and number) Person(s) interested in the transaction 222. 223. Agency agreement under the title: "Rostovskaya nPP – tikhoretskaya no. 2 ohl 500 kV with extension of 500 kV tikhoretsk SS " JSC fGC uES and JSC “Ku- banenergo” JSC fGC uES and JSC “Elec- trosetservice unEG” Agreement for develop- ment of design and tender documentation under the title: "lugovaya SS 500 kV. Re- placement of 35 kV vacuum circuit breaker with Sf6 circuit breaker" 224. Agreement on performing emergency recovery work JSC fGC uES and JSC “Elec- trosetservice unEG” 114 225. land sublease agreement JSC fGC uES and JSC idGC of Volga the Principal (JSC "Kubanenergo") entrusts, and the Agent (JSC fGC uES) is engaged in the manner and on the conditions stipulated in the agreement, in its own name but for the Principal’s account or on behalf and at the Principal’s expense legal and other actions on the reconstruction of Principal’s objects, within the construction of the facility of Agent the Contractor (JSC "Electrosetservice unEG") un- dertakes to perform set of works for the Customer (JSC fGC uES) on: - development of project documentation and its approval with the Customer; - development of tender documentation and its approval with the Customer the Contractor (JSC "Electrosetservice unEG") undertakes to perform emergency repair work to replace the high-voltage bushing of phase "C" At-302 Prokhladnaya-2 SS 330 kV out of materials of the Customer (JSC fGC uES) and the Customer undertakes to accept and pay for work performed in accordance with the terms of the agreement and implementation schedule With the written consent of the lessor, the Subles- sor (JSC fGC uES) undertakes to provide, and the Sub-lessee (JSC idGC of Volga) takes to rent 1 (one) part of the land plot (hereinafter – land) with an area of 48 sq.m, from land plot with cadastral number 56:21:1808003:0002, with a total area of 54,007.94 sq.m, located at the address: found rela- tive to the landmark "Kargalinsky" SS 220 kV 226. Supplementary agreement no. 6 to the real property lease contract no. 05.42.592.10 of 03.09.2010 JSC fGC uES and JSC idGC of Siberia Amendments to the agreement 227. Supplementary agreement no. 15 to the agreement no. 923 of 01.03.2006 for the provision of services for providing communication channels JSC fGC uES and JSC “muS Energetiki” Amendments to the agreement for the provision of services for providing communication channels the price of the agency agreement is RuB 30,234,280.00, including VAt (18%), includ- ing the cost of agency fees in the amount of RuB 118,000.00, including VAt (18 %) the Company’s Board of directors (minutes no. 275 of 26.06.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti Work price under the agreement shall not exceed RuB 360,490.00, including VAt (18%) the Company’s Board of directors (minutes no. 275 of 26.06.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction the Company’s Board of directors (minutes no. 275 of 26.06.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction the Company’s Board of directors (minutes no. 275 of 26.06.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti 115 the Company’s Board of directors (minutes no. 275 of 26.06.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti the Company’s Board of directors (minutes no. 275 of 26.06.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti Work price of the agreement to perform emergency and recovery operations between JSC "uES fGC" and JSC "Elek- trosetservice unEG", that is an interested- party transaction, in the amount of RuB 1,058,912.00, including VAt (18%) in the amount of RuB 161,528.95 Rental payment is RuB 1.70, including VAt (18%) per year. the total rental payment under the sublease agreement of the land plot for the period from 01.07.2014 to 09.06.2057 is RuB 83.30, including VAt (18%) Rental payment determined by the supple- mentary agreement, is RuB 211,760.40, including VAt (18%) per month. the total rent for the period from 01.07.2010 till 31.12.2015 is RuB 20,450,806.30, including VAt (18%).the total rent for the entire term of the Real property lease contract no. 05.42.592.10 of 03.09.2010, taking into account its pro- longation, shall not be or exceed 2 percent of book value of assets of JSC fGC uES according to its accounting statements at the last reporting date Service price is determined by supplemen- tary agreement, is RuB 129,907.21, includ- ing VAt (18 %) per month. the total cost of services under the agreement no. 923 of 01.03.2006 for the provision of services for providing communication channels for the period from 01.03.2006 till 29.02.2016 is RuB 168,715,418.90, including VAt (18%). total service price for the entire term of the agreement no. 923 of 01.03.2006 for the provision services for providing com- munication channels, taking into account its prolongation, shall not be or exceed 2 percent of book value of assets of JSC fGC uES according to its accounting statements at the last reporting date APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** Governing body that resolved to approve the transaction (minutes' date and number) Person(s) interested in the transaction 228. Agreement on performing emergency recovery work JSC fGC uES and JSC “Elec- trosetservice unEG” 229. Agreement that is an interest- ed-party transaction JSC fGC uES and JSC idGC of urals the Contractor (JSC "Electrosetservice unEG") undertakes to perform emergency repair work on replacement of reinforced concrete portals at the t-15 SS 220 kV from materials of the Customer (JSC fGC uES) and the Customer undertakes to accept and pay the completed work the organiser (JSC fGC uES) undertakes to provide to the Principal (JSC idGC of urals) ser- vices for the creation and issuance of electronic signature keys and key certificates for verification of electronic signatures, organised and carried out in accordance with the agreement, the order on the digital signature use in JSC "uES fGC" and the organisation of cryptographic protection of information in the electronic document manage- ment system of certification authority of JSC FGC uES, approved by the order of JSC fGC uES of 27.12.2011 no. 800 Amendments to the agreement for development of design and working documentation under the title: "Amulet SS 220 kV with magistralnaya – Amulet ohl 220 kV" for the needs of JSC "uES fGC" branch – "mES of Western Siberia" Work price under the agreement on per- forming emergency recovery works is RuB 4,218,860.00, including VAt (18%) the Company’s Board of directors (minutes no. 275 of 26.06.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Service price under the agreement shall not exceed RuB 103,000.00, including VAt (18%) the Company’s Board of directors (minutes no. 275 of 26.06.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti Work price determined by supplemen- tary agreement, shall not exceed RuB 98,379,548.86, including VAt (18%) the Company’s Board of directors (minutes no. 275 of 26.06.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction 117 JSC fGC uES and JSC “dESP” 116 230. 231. 232. 233. Supplementary agreement no. 3 to the agreement no. 3881 of 20.10.2011 for development of design and working documentation under thetitle: "Amulet SS 220 kV with magistralnaya – Amulet ohl 220 kV" for the needs of JSC "uES fGC" branch – "mES of Western Siberia" Supplementary agree- ment no. 1 to the Real property lease contract no. 306742-13/407/30- 2045 of 29.10.2013 Supplementary agreement no. 1 to the agreement of 06.02.2013 no. 08-2013 for supply of equipment, construction and installation, commissioning works under the title: "Expansion of 220 kV Sasovo SS. technological connection of power installa- tions of llC Yandex Supplemenrary agreement no. 1 to the agreement no. 293929 of 06.08.2013 to perform design, construction and installation, commission- ing works, equipment supply, systems of automatic diag- nostics of GiS for the needs of the federal Grid’s branch– "mES of north-West" JSC fGC uES and JSC “Ku- banenergo” Amendments to the agreement JSC fGC uES and JSC “Elec- trosetservice unEG” Amendments to the agreement for supply of equip- ment, construction and installation, commissioning works under the title: "Expansion of Sasovo SS 220 kV. technological connection of power installa- tions of Yandex llC Rental payment determined by the supple- mentary agreement is RuB 180,000.00, in- cluding VAt (18%) per month. the total rent- al payment under the Real property lease contract no. 306742-13/407/30-2045 of 29.10.2013 for the period from 01.01.2013 to 28.10.2014 is RuB 5,235,000.00, includ- ing VAt (18%) due to the fact that the supplementary agreement does not provide for the per- formance of additional work under the agreement of 06.02.2013 no. 08-2013 price of work is not determined the Company’s Board of directors (minutes no. 275 of 26.06.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti the Company’s Board of directors (minutes no. 275 of 26.06.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction JSC fGC uES and JSC “Elec- trosetservice unEG” Amendments to the agreement no. 293929 of 06.08.2013 to perform design, construction and installation, commissioning works, equipment supply, systems of automatic diagnostics of GiS for the needs of the federal Grid’s branch– "mES of north-West" Works price, as determinedin the supple- mentary agreement shall not exceed RuB 93,329,580.79, including VAt (18 %) the Company’s Board of directors (minutes no. 275 of 26.06.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction 234. Agreement for the repair of equipment at the facilities of the federal Grid’s branch– Southern PmES JSC fGC uES and JSC “Elec- trosetservice unEG” the Contractor (JSC "Electrosetservice unEG") un- dertakes to perform works on repair of equipment at the facilities of the federal Grid’s branch– South- ern PmES of the Customer (JSC fGC uES) Work price under the agreement is RuB 6,579,541.99, including VAt (18%) the Company’s Board of directors (minutes no. 276 of 26.06.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** 235. Share purchase agreement JSC fGC uES and JSC Rushydro 236. Claim assignment agreement JSC fGC uES and JSC Rushydro the Seller (JSC fGC uES) undertakes to transfer to the Buyer (JSC Rushydro) ordinary registered non-documentary shares of JSC "GVC Energetiki" in amount of 16,280 shares with a par value of RuB 10 each, state registration number of issue 73-1-5123 that is 50,0031% of the share capital of JSC "mCC Energetiki", and the Buyer undertakes to accept the shares and pay the Seller their price in the manner and on the terms stipulated in the agreement the Assignor (JSC "uES fGC") concedes the right of claim to "GVC Energetiki". the Assignor concedes the right of claim to the extent and under the conditions that existed at the date of transfer of such rights, as well as rights to ensure fulfill- ment of the obligations and other rights associated with this requirement, including the right to unpaid interest the price of the property alienated - ordi- nary registered uncertified shares of JSC "GVC Energetiki" under the share purchase agreement between JSC fGC uES and JSC "Rushydro", that is an interested-party trans- action, is RuB 568 million, VAt exempt Governing body that resolved to approve the transaction (minutes' date and number) the Company’s Board of directors (minutes no. 278 of 29.06.2015) Person(s) interested in the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; members of the Company’s Board of directors m.S. Bystrov and V.m. Kravchenko who are mem- bers of the Board of directors of a party to the transaction Price (monetary valuation) of the assigned rights (monetary claims) under the claim assignment agreement shall not exceed RuB 97,979,060.38, VAt exempt the Company’s Board of directors (minutes no. 278 of 29.06.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; members of the Company’s Board of directors m.S. Bystrov and V.m. Kravchenko who are mem- bers of the Board of directors of a party to the transaction 118 237. Supplementary agreement no. 1 to the agreement of 21.06.2013 no. 10/12 for research, developmental and technological works ("Creat- ing phase A VtSP Kl of alter- nating current of 200 m at a voltage of 20 kV with a current of 1500 A and install into pilot operation on selected object") PJSC fGC uES and JSC "Enin" Amendments to the agreement no. 10/12 of 21.06.2013 due to the fact that the supplementary agreement does not change work price un- der the agreement no. 10/12 of 21.06.2013, the work price is not determined the Company’s Board of directors (minutes no. 279 of 24.07.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti 119 238. Agreements, that are inter-related interested-party transactions PJSC fGC uES and JSC R&d Centre of fGC uES the Company’s Board of directors (minutes no. 279 of 24.07.2015) APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** 239. loan agreement PJSC fGC uES and JSC R&d Centre of fGC uES the lender (PJSC fGC uES) provides the Borrower (JSC "R&d Centre of fGC uES") with a loan for a total amount not exceeding RuB 300 million, and the Borrower undertakes to repay the received funds and accrued interest thereon pursuant to the procedure established by the agreement 120 240. Pledge agreement PJSC fGC uES and JSC R&d Centre of fGC uES 241. Agreement for replacing ta- lashkino VV ohl-110 kV no. 124 SS 330 kV (emergency repair work) PJSC fGC uES and JSC “Electrosetservice unEG" the real estate owned by the Pledger (JSC R&d Centre of fGC uES) on the property right: building of the administrative office of destination, number of floors 10, total area 11,253.6 sqm, located at the address: moscow, Kashirskoe shosse, 22, korp. 3, cadastral (or conditional) No. 26401, certificate of state registration series 77-Ao no. 796839, date of issue: 22.07.2013; the entry of registration in the Unified state register of rights to immovable property and transactions with it no. 77-77- 04/001/2007-290 of 02.02.2007 The Сontractor (JSC "Electrosetservice UNEG") undertakes to perform design and research, construction and installation, commissioning works on replacement of talashkino VV ohl-110 kV no. 124 SS 330 kV related to the elimination of equipment damage, emergency work, with the aim of preventing human exposure to a hazardous production factor that can lead to injury or another sudden sharp deterioration in health as well as work on elimination of malfunctions and damages, threatening a disruption of the normal operation of equipment, installations, devices Governing body that resolved to approve the transaction (minutes' date and number) the Company’s Board of directors (minutes no. 279 of 24.07.2015) Person(s) interested in the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti, member of the Company’s management Board A.A. Zagaratsky, who is a member of the Board of directors of a party to the transaction 121 the Company’s Board of directors (minutes no. 279 of 24.07.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti, member of the Company’s management Board A.A. Zagaratsky, who is a member of the Board of directors of a party to the transaction the price (monetary valuation) of the property disposed (acquired) under the agreement is determined by: - the amount of funds available for a loan, not exceeding RuB 300 million; - the amount of interests, as determined by the interest rate, set on the basis of Mo- sPrime's rate for a period of 3 months plus 2.4% per annum; the interest rate on the loan is determined on the basis of mosPrime's rate for a period of 3 months, published on the official website of the Central Bank of the Russian federation, 2 working days prior to the date of the Borrower Application. during the term of each loan, interest rate is reviewed, calculated and recorded for each subse- quent period that is 3 months, in order to determine the interest rate for the next period the mosPrime's rate applies for a period of 3 months, published on the official website of the Central Bank of the Russian federation, 2 working days before the date of interest rate revision; - obligations of JSC R&D Centre of FGC UES to pay PJSC FGC UES the delay accrued on the overdue amount at the rate of 0.1% of the unpaid/untimely paid amount for each day of delay. The price of the loan agreement between PJSC fGC uES and JSC R&d Centre of fGC uES should not be or exceed 2 percent of book value of assets of PJSC fGC uES ac- cording to its accounting statements at the last reporting date Price (monetary valuation) of property transferred under the agreement in an amount equal to the market value of the pledged immovable property (building of administrative-office premises, total area 11253,6 sqm, located at the address: mos- cow, Kashirskoe shosse, 22, korp. 3) is RuB 578,913,000.00, including VAt. Work price under the agreement shall not exceed RuB 890,000.00, including VAt (18%) the Company’s Board of directors (minutes no. 280 of 24.08.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** Work price under the agreement, that is an interested-party transaction, shall not exceed RuB 69,341,275.12, including VAt (18%) shall not exceed RuB 10,577,482.74 Governing body that resolved to approve the transaction (minutes' date and number) the Company’s Board of directors (minutes no. 280 of 24.08.2015) Person(s) interested in the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction PJSC fGC uES and JSC “Electrosetservice unEG" PJSC fGC uES and JSC “Electrosetservice unEG" the Contractor (JSC "Electrosetservice unEG") undertakes to perform a set of works for the Cus- tomer (PJSC fGC uES) on: - registration of rights to land plots for design and survey works (if necessary); - engineering survey; - registration of rights to land plots for the recon- struction of the object; - development of design and working documenta- tion; - for the implementation of supervision; - reconstruction; and to provide a complete set of materials, equip- ment, spare parts the Contractor (JSC "Electrosetservice unEG") undertakes to perform a set of works for the Cus- tomer (PJSC fGC uES) on: - engineering survey; - development of design and working documenta- tion; - for the implementation of supervision; - reconstruction to the extent provided design and working documentation; - and to provide a complete set of materials, equip- ment, spare parts PJSC fGC uES and JSC “Electrosetservice unEG" Amendments to the agreement no. 200 of 04.10.2012 122 242. 243. 244. 245. Agreement for development of design and exploration works, working documenta- tion, construction and instal- lation, commissioning works with equipment supply for replacement of 33 concrete poles with metal on Start- Parus ohl-220 kV Agreement for development of design and working docu- mentation, supply of material and technical resources and equipment, construction and installation and commis- sioning works under the title: "Replacement of the defective ground wire on the section of supports no. 187-221 in the amount of 27 km of 500 kV Kirillovskaya -Kholmogor- skaya ohl" Supplementary agreement no. 2 to the agreement no. 200 of 04.10.2012 for execu- tion of works under the title: "Reconstruction of "500 kV Shakhty" SS and SS 220 / 110 / 10 kV "Sh 30". installation of rectifier devices of ice melting with the reconstruction of a scheme for ice melting at outgoing ohl-220 kV" Supplementary agreement no. 2 to the agreement no. 201 of 04.10.2012 for execu- tion of works under the title: "Reconstruction of SS "t-15" 220 / 110 / 35 / 10kV. installa- tion of rectifier devices of ice melting (arranging ice melting on wires and cables for outgo- ing ohl-220 kV)" Work price under the agreement, that is an interested-party transaction, shall not exceed RuB 10,969,916.28, including VAt (18%) shall not exceed RuB 1,673,377.06 the Company’s Board of directors (minutes no. 280 of 24.08.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction 123 Work price is not determined due to the fact that the supplementary agreement does not provide additional works under the agreement the Company’s Board of directors (minutes no. 280 of 24.08.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction PJSC fGC uES and JSC “Electrosetservice unEG" Amendments to the agreement no. 201 of 04.10.2012 in accordance with annex no. 12 Work price is not determined due to the fact that the supplementary agreement does not provide additional works under the agreement the Company’s Board of directors (minutes no. 280 of 24.08.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction 246. Agreement for the provision of services of operational control of SCS and communi- cation systems of CCE JSC fGC uES and JSC “muS Energetiki” the Contractor (JSC "muS Energetiki") undertakes to provide the Customer (JSC fGC uES) a range of services of operational control of SCS and communication system of CCE and the personnel training center of Sochi PmES, the list of which is determined by the agreement Service price under the agreement shall not exceed RuB 3,723,503.21, including VAt (18%). total price of services (works) for the entire term of the agreement taking into account its prolongation, shall not be or ex- ceed 2 percent of the book value of assets of PJSC fGC uES according to its account- ing statements at the last reporting date the Company’s Board of directors (minutes no. 280 of 24.08.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS Governing body that resolved to approve the transaction (minutes' date and number) the Company’s Board of directors (minutes no. 280 of 24.08.2015) Person(s) interested in the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti the Company’s Board of directors (minutes no. 281 of 28.08.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti 125 no. transaction description transaction parties transaction subject* transaction price** 247. Agreement for operations support and maintenance of equipment PJSC fGC uES and PJSC “lenenergo” the Contractor (PJSC fGC uES) undertakes to carry out operations support and maintenance of equipment owned by the Customer (PJSC "lenen- ergo") by its own efforts and expenses 248. Guarantee agreement PJSC fGC uES and llC “BESK” 124 the Guarantor (PJSC fGC uES) is liable to the Creditor (llC "BESK") for the execution by the debtor (JSC "CiuS uES") the following obligations of the debtor under the relevant contract to be concluded in the future between the debtor and the Creditor: - obligations of the debtor under the (re)payment to the Creditor of funds received by the debtor of the Creditor under the agreement as an advance payment(s). This guarantee ensures the fulfill- ment of the abovementioned obligations of the debtor arising by virtue of the agreement (on the grounds provided for by the agreement) and / or by operation of law (or judicial decisions), including in connection with the agreement termination, its recognition as invalid (null and void); - the obligations of the debtor to pay the Creditor the penalty (fines), established by the agreement for late performance of the debtor's obligations on return (payment) to the Creditor of funds received by the debtor of the Creditor under the agreement as an advance payment(s); - the obligations of the debtor to pay the Credi- tor the interest that accrues on the amount of funds paid by the Creditor to the debtor under the agreement as an advance payment(s), and shall be returned by the debtor in the cases and on the grounds provided for by the agreement the price of the service under the agree- ment shall not exceed RuB 417,266.37, in- cluding VAt (18%). the price of the service per month is: - RuB 34,772.20, including VAt (18%) for the period from 01.01.2014 to 30.11.2014; - RuB 34,772.17, including VAt (18%) for the period from 01.12.2014 to 31.12.2014 the price of the property which may be disposed / acquired under the guarantee agreement is determined as the aggregate of the following obligations provided JSC "CIUS UES" (the beneficiary) under the rel- evant contract agreement to be concluded in the future between JSC "CiuS uES" and llC "BESK": - obligations of JSC "CiuS uES" on the return / payment of llC "BESK" funds received by JSC "CiuS uES" of llC "BESK" under the agreement as an advance payment(s) in the amount of up to 30% of the agreement price, but not more than RuB 2,131,500,000.00, including VAt (18%); - obligations of JSC "CiuS uES" for the payment of LLC "BESK" of penalties (fines) established by the contract agreement for delay in performance of JSC "CiuS uES" duties refundable (payable) llC "BESK" funds received by JSC "CiuS uES" of llC "BASK" under the agreement as an advance payment(s); - obligations of JSC "CiuS uES" for the payment of llC "BESK" of interest charged on the amount of funds paid to llC "BESK" of JSC "CiuS uES" under the contract agreement as an advance payment(s), and returnable JSC "CiuS uES" in the cases and on the grounds provided for by the contract or by law; as well as the obligations of PJSC fGC uES for the payment of llC "BESK" penalty accrued on overdue amount specified in the written request of llC "BESK" sent in the manner and time stipulated in the guaran- tee agreement, for each day of delay from calculation of the key rate of the Bank of Russia (or the refinancing rate of the Bank of Russia, in the absence of the key rate) acting on the corresponding day of delay; - obligations of the llC "BESK" payment of PJSC fGC uES penalty of 0.001% of the amount specified in the written request of llC "BESK", in case of failure of llC "BESK" to PJSC FGC UES documents confirming the claim of llC "BEEK" to JSC "CiuS uES", and default of llC "BESK" obligations for the transmission of PJSC fGC uES of the rights providing this requirement. the total price of the property which may be alienated / acquired by the guarantee agree- ment must be equal to or exceed 2 percent of book value of assets of PJSC fGC uES according to its accounting statements at the last reporting date APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** 126 249 Agreement for establishing fGC - Asset management, llC PJSC fGC uES and “index energetiki fGC uES”, llC Establishing fGC –Asset management, llC", under the conditions specified in the agreement 250. Contracting agreement PJSC fGC uES and JSC “Electrosetservice unEG" 251. 252. 253. 254. 255. Agreement for development of design and exploration works, working documen- tation, construction and installation, commissioning works and supply of material and technical resources and equipment Agreement for executing works under the title: “Emer- gency repair work to replace the At-5 at 220 kV Alyuminie- vaya SS” Agreement to carry out emer- gency repair works to replace a damaged high-voltage bushings of the At-2 at 220 kV Bobrov SS of the federal Grid’s branch– "Verkhne-don- skoye PmES" Supplementary agreement no. 1 to agreement no. 046- 13 / EdmS of 29.10.2013 for supply of material and techni- cal resources and equipment, construction and installation and commissioning works Supplementary agreement no. 2 to agreement no. 045- 13 / EdmS of 29.10.2013 for supply of material and techni- cal resources and equipment, construction and installation and commissioning works PJSC fGC uES and JSC “Electrosetservice unEG" PJSC fGC uES and JSC “Electrosetservice unEG" PJSC fGC uES and JSC “Electrosetservice unEG" PJSC fGC uES and JSC “Electrosetservice unEG" PJSC fGC uES and JSC “Electrosetservice unEG" Contract agreement for the supply of material and technical resources and equipment, construction and installation and commissioning works under the title: "Expansion of Kirillovskaya oRu 110 kV SS 220 kV on two linear cells" between JSC fGC uES (the Customer) and JSC "Electrosetservice unEG" (the Contractor) development of design and exploration works, working documentation, construction and installa- tion, commissioning works and supply of material and technical resources and equipment under the title: "the installation of the second autotrans- former with capacity of 125 mVA at Pogorelovo SS 220 kV with the Ru 220 kV and 110 kV" between JSC fGC uES (the Customer) and JSC "Electroset- service unEG" (the Contractor) Executing works under the title: "Emergency repair work to replace the At-5 at 220 kV Alyuminievaya SS" between JSC fGC uES (the Customer) and JSC "Electrosetservice unEG" (the Contractor) JSC "Electrosetservice unEG" (the Contractor) undertakes to perform emergency repair work to replace a damaged high-voltage bushings of the At-2 at 220 kV Bobrov SS of JSC fGC uES branch – "Verkhne-donskoye PmES" in accordance with the damage statement of PJSC fGC uES (the Customer) Amendments to the agreement no. 046-13 / EdmS of 29.10.2013 for supply of material and technical resources and equipment, construction and instal- lation and commissioning works under the title: "Program of replacement of current transformers (Ct) 110-750 kV at JSC fGC uES for the needs of of the federal Grid’s branch- Eastern PmES" between PJSC fGC uES (the Customer) and JSC "Electrosetservice unEG" (the Contractor) Amendments to the agreement no. 045-13 / EdmS of 29.10.2013 for supply of material and technical resources and equipment, construction and instal- lation and commissioning works under the title: "Program of replacement of current transformers (Ct) 110-750 kV at JSC fGC uES for the needs of of the federal Grid’s branch– "Yamalo-nenetskoe PmES" between PJSC fGC uES (the Customer) and JSC "Electrosetservice unEG" (the Contractor) Governing body that resolved to approve the transaction (minutes' date and number) the Company’s Board of directors (minutes no. 282 of 28.08.2015) Price (monetary valuation) of property transferred as a contribution to the autho- rised capital created through the establish- ment of "fGC – asset management”, llC is RuB 80,206.32 , not subject to VAt Work price under the agreement shall not exceed RuB 64,497,600.32, including VAt (18%) the Company’s Board of directors (minutes no. 283 of 17.09.2015) Work price under the agreement shall not exceed RuB 343,332,800.00, including VAt (18%) the Company’s Board of directors (minutes no. 283 of 17.09.2015) Person(s) interested in the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Work price under the agreement shall not exceed RuB 21,578,446.72, including VAt (18%) the Company’s Board of directors (minutes no. 283 of 17.09.2015) Work price under the agreement shall not exceed RuB 1,621,958.72, including VAt (18%) the Company’s Board of directors (minutes no. 283 of 17.09.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction 127 Work price is not determined due to the fact that the supplementary agreement does not change work price specified by the agreement the Company’s Board of directors (minutes no. 283 of 17.09.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Price is not determined due to the fact that the supplementary agreement does not change work price specified by the agree- ment the Company’s Board of directors (minutes no. 283 of 17.09.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** 256. Supplementary agreement no. 3 to rental agreement no. 22-07/14 of 24.04.2012 PJSC fGC uES and JSC “Electrosetservice unEG" Amendments to the rental agreement no. 22-07/14 of 24.04.2012 between PJSC fGC uES (the lessor) and JSC "Electrosetservice unEG" (the lessee) 257. Agreement for replacing RPn At-1 on Vyborgskaya SS 400 kV (emergency repair work) PJSC fGC uES and JSC “Electrosetservice unEG" 128 258. Supplementary agreement no. 4 to the agreement no. 3896 of 16.03.2012 for de- veloping design and working documentation PJSC fGC uES and JSC “dESP” 259. Agreement to perform design and survey work PJSC fGC uES and JSC “dESP” 260. Agreement for the completion of the work package PJSC fGC uES and JSC R&d Centre of fGC uES JSC "Electrosetservice unEG" (the Contractor) undertakes to perform on the objects of PJSC fGC uES (the Customer) emergency repair works (construction and erection, commissioning, development of working documentation, equip- ment supply) to replace RPn At-1 on Vyborgskaya SS 400/330kV associated with the elimination of equipment damage, emergency work, performed with the aim of preventing human exposure to a hazardous production factor that can lead to injury or another sudden sharp deterioration in health as well as work on elimination of faults and damages, threatening a disruption of the normal operation of equipment, structures, devices, and the Customer undertakes to accept and pay the completed work Amendments to the agreement of 16.03.2012 no. 3896 for developing design and working docu- mentation under the title: "Construction of 500 kV Svyatogor SS with ohl approaches 500 kV and 220 kV" for the needs of the federal Grid’s branch- mES of Western Siberia between PJSC fGC uES (the Customer) and JSC "dESP" (the Contractor) JSC "dESP" (the Contractor) undertakes to perform a complex of works on: development of design documentation; obtaining a positive expert opinion regarding the estimated portion of project docu- mentation; development of procurement documen- tation for the project "Replacement of tn-1-110 and tn-2-110 Barysh SS 220 kV", and PJSC fGC uES (the Customer) undertakes to accept result of works and pay for them JSC R&d Centre of fGC uES (the Contractor) undertakes to perform a complex of works under the title: "Elaboration of a unified system of heat- ing cabinets drives and electrical circuit breakers, disconnectors, separators, RPn autotransformers oRu 220-750 kV" at the SSs of the federal Grid’s branch– mES of Volga and to deliver the result of the work of PJSC fGC uES (the Customer) and the Customer undertakes to accept result of works and pay the stipulated price Governing body that resolved to approve the transaction (minutes' date and number) the Company’s Board of directors (minutes no. 283 of 17.09.2015) Person(s) interested in the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Rents determined by the supplementary agreement, is RuB 177,608.38, including VAt (18%). Rental payment under the rental agreement no. 22-07/14 of 24.04.2012 for the period from 01.04.2012 to 24.12.2015 is RuB 10,055,491.85, including VAt (18%). the total rent for the entire term of the agreement no. 22-07/14 of 24.04.2012 tak- ing into account its prolongation, shall not be or exceed 2 (two) percent of the book value of assets of PJSC fGC uES accord- ing to its accounting statements at the last reporting date Work price under the agreement shall not exceed RuB 21,118,994.02, including VAt (18%) the Company’s Board of directors (minutes no. 283 of 17.09.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction 129 Work price determined by the supplemen- tary agreement, shall not exceed RuB 93,243,904.06, including VAt (18%) the Company’s Board of directors (minutes no. 283 of 17.09.2015) Work price under the agreement shall not exceed RuB 581,350.00, including VAt (18%) the Company’s Board of directors (minutes no. 283 of 17.09.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Work price under the agreement shall not exceed RuB 12,154,000.00, including VAt (18%) the Company’s Board of directors (minutes no. 285 of 02.10.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti, member of the Company’s management Board A.A. Zagaratsky, who is a member of the Board of directors of a party to the transaction 261. Supplementary agreement no. 2 to the agreement of 25.02.2014 on the use of national standards PJSC fGC uES and JSC "So uES" Amendments to the agreement of 25.02.2014 on the use of national standards between PJSC fGC uES and JSC "So uES" the price is not determined due to the fact that the supplementary agreement does not and cannot entail liabilities of monetary nature, and not related to the transfer of property (property rights) the Company’s Board of directors (minutes no. 286 of 29.10.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti, member of the Company's Board of directors and the Chairman of the management Board A.E. murov, mem- bers of the Company's Board of directors V.m. Kravchenko, m.S. Bystrov, who are members of the Board of directors of a party to the transaction APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** Governing body that resolved to approve the transaction (minutes' date and number) Person(s) interested in the transaction 262. Agreement for the completion of the work package PJSC fGC uES and JSC R&d Centre of fGC uES 263. Agreement for the provision of testing services for trans- former oil PJSC fGC uES and JSC “Electrosetservice unEG" 264. Agreement for the completion of the work package PJSC fGC uES and JSC “Electrosetservice unEG" 130 265. Agency agreement no. 370384 of 22.06.2015 JSC fGC uES and JSC “muS Energetiki” 266. Agreement of compensated use of the road PJSC fGC uES and JSC "tyumenenergo" JSC R&d Centre of fGC uES (the Contractor) un- dertakes to perform a complex of works under the title: "Coanda ohl 220 kV - Chara (KC-49), taksimo ohl 110 kV - tyagovaya (tt-72). Reconstruction of ohl (support no. 233 - no. 238)", and to deliver the result of the work of PJSC fGC uES (the Customer) and the Customer undertakes to accept result of works and pay the stipulated price JSC "Electrosetservice unEG" (the Contractor) undertakes to provide a range of services for transformer oil test equipment of PJSC fGC uES (the Customer): chemical and chromatographic analysis of transformer oil, in accordance with the schedule of services in 2015, and the Customer undertakes to accept the result of the rendered services and pay for it JSC "Electrosetservice unEG" (the Contractor) un- dertakes to perform a complex of works under the title: "Emergency repair work to replace reliance on Gumrak ohl 220 kV – Krasnoarmeyskaya with branches at the Volgograd ChP 3" and deliver the result of the work of PJSC fGC uES (the Customer) and the Customer undertakes to accept result of works and pay the stipulated price JSC fGC uES (the Principal) assigns and JSC "muS Energetiki" (the Agent) assumes the obliga- tion of its own name but for the account and in the interests of the Principal to perform legal and practical actions: - search of organisations (users) to enter contracts of communication services, except for transac- tions for the provision of telephone communication services, rent of equipment, communications and spaces of the Principal, rendering services related to the use of equipment, communication and spaces of the Principal; - representation of interests of the Principal in all matters arising out of contracts, the conclusion of additional agreements to contracts; - ensuring the full workflow on contracts and the timely provision of the principal primary docu- ments; - monitoring the performance by the users of their obligations under the contracts; - maintenance of claims work under contract disputes PJSC fGC uES (the owner) provides to the use of approach road (designation: construc- tion of transport, length of 253m., inv. no. 71:119:002:000003910:9015, lit. 15, address: Khanty-mansiysk Autonomous okrug-ugra, nizh- nevartovsk district, " Progress SS 220 kV", inv. no. 0720-2-12-55013) and JSC tyumenenergo (the user) uses it for its intended purpose in accor- dance with paragraph 1.5 of the Rules of the road adopted by the Council of ministers – the Govern- ment of the Russian federation, by the resolution of 23.10.1993 no. 1090 Work price under the agreement shall not exceed RuB 36,967,020.00, including VAt (18%) the Company’s Board of directors (minutes no. 286 of 29.10.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti, members of the Company’s management Board: A.A. Zagaratsky, m.n. Pichugina, who are members of the Board of directors of a party to the transaction Service price under the agreement is RuB 403,822.59, including VAt (18%) the Company’s Board of directors (minutes no. 286 of 29.10.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Work price under the agreement shall not exceed RuB 3,196,631.50, including VAt (18%) the Company’s Board of directors (minutes no. 286 of 29.10.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction 131 Service price (agency fees) under the agency agreement shall not exceed RuB 490,000.00, including VAt (18%) the Company’s Board of directors (minutes no. 286 of 29.10.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti the Company’s Board of directors (minutes no. 286 of 29.10.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti the amount of fees under the agree- ment is RuB 845.05, including VAt (18 %) per month. the total payment under the agreement for the period 01.06.2015 by 30.04.2016 is RuB 9,295.55, including VAt (18%). the total fees for the entire term of the agreement of compensated use of the road, taking into account its prolongation, shall not be or exceed 2 (two) percent of the book value of assets of PJSC fGC uES ac- cording to its accounting statements at the last reporting date APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** Governing body that resolved to approve the transaction (minutes' date and number) Person(s) interested in the transaction 267. 268. Supplementary agreement no. 1 to the agreement no. 123-2014 of 19.12.2014 on design, working documenta- tion, construction and installa- tion, commissioning Agreement on rendering services on laying fiber optic communication lines in the server no. 0.3 dPC "China- town" PJSC fGC uES and JSC “Electrosetservice unEG" PJSC fGC uES and it Energy Service, llC 269. Approval of inter-related interested-party transactions PJSC fGC uES and JSC “Kuban trunk Grids” 132 Amendments to the agreement no. 123-2014 of 19.12.2014 on design, working documentation, construction and installation, commissioning un- der the title: "Limitation of icing and fluctuations at the facilities of the federal Grid’s branch– mES of Center” between JSC fGC uES (the Customer) and JSC "Electrosetservice unEG" (the Contractor) it Energy Service, llC (the Contractor) undertakes to provide services on laying fiber optic communi- cation lines between the server racks in no. 0.3 of dPC "Chinatown", located at: moscow, Kitaygorod- skiy Pr., d. 7, p. 5, 0.3 server, ground floor, hall No. 2, in accordance with the terms of reference, and PJSC fGC uES (the Customer) undertakes to ac- cept and pay for services rendered Approval of inter-related interested-party transac- tions: 1. to determine that the amount of compensation according to the agreement about compensation under the title "Rostovskaya nPP – tikhoretskaya no. 2 ohl 500 kV with extension of tikhoretsk SS 500 kV", shall not exceed RuB 6,704,866.20, including VAt (18%) in the amount of not more RuB 1,022,776.20. 2. to approve the agreement on compensation of expenses under the title "Rostovskaya nPP – tikhoretskaya no. 2 ohl 500 kV with extension of tikhoretsk SS 500 kV" between JSC fGC uES (the Company) and JSC "Kuban trunk Grids" (the owner). 3. to determine the price of the agency agreement under the title " Rostovskaya nPP – tikhoretskaya no. 2 ohl 500 kV with extension of tikhoretsk SS 500 kV" between JSC fGC uES, JSC "Kuban trunk Grids", in the amount of not more RuB 6,704,866.20, including VAt (18%) in the amount of not more RuB 1,022,776.20, including the cost of agency fees in the amount of RuB 118,000.00, including VAt (18 %) in the amount of RuB 18,000.00. 4. to approve an agency agreement under the title "Rostovskaya nPP – tikhoretskaya no. 2 ohl 500 kV with extension of tikhoretsk SS 500 kV" between JSC fGC uES (the Agent) and JSC "Kuban trunk Grids" (the Principal). Works price is not determined due to the fact that the agreement does not change the price of the agreement the Company’s Board of directors (minutes no. 286 of 29.10.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Service price under the agreement is RuB 498,000.00, including VAt (18%) the Company’s Board of directors (minutes no. 286 of 29.10.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti Work price shall not exceed RuB 64,497,600.32, including VAt (18%) the Company’s Board of directors (minutes no. 287 of 02.11.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti 133 270. Supplementary agreement no. 3 to the agreement no. 42/2009-08 of 24.12.2009 PJSC fGC uES and it Energy Service, llC Provision for maintenance services and technical support between the JSC fGC uES (the Customer) and it Energy Service, llC (the Contractor) the Company’s Board of directors (minutes no. 287 of 02.11.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti Service price determined by supplemen- tary agreement, since 01.01.2014 is RuB 1,162,300.00, including VAt (18%) per month, is RuB 13,947,600.00, including VAt (18%) at 12 months, and under the agree- ment for the period from 07.12.2009 to 31.12.2014 is RuB 75,022,705.37, including VAt (18%). total price of services for the entire term of the agreement, taking into account its pro- longation, shall not be or exceed 2 percent of the book value of assets of PJSC fGC uES according to its accounting statements at the last reporting date. APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** Governing body that resolved to approve the transaction (minutes' date and number) Person(s) interested in the transaction 271. Supplementary agreement no. 1 to the agreement no. 291of 31.07.2013 PJSC fGC uES and JSC “Electrosetservice unEG" 272. Contracting agreement PJSC fGC uES and JSC “Electrosetservice unEG" 273. Agreement no. 025-14/EdmS of 01.09.2014 for construc- tion and installation and com- missioning works JSC fGC uES and JSC “Elec- trosetservice unEG" 134 274. 275. Agreement no. 381059 of 30.06.2015 to perform works on technical inspection of ohl of unEG JSC fGC uES and JSC “Elec- trosetservice unEG" Real property lease contract (with protocol of disagree- ments) PJSC fGC uES and PJSC Rushydro 276. Agreement no. 73-Suid of 01.12.2014 to perform design and survey work JSC fGC uES and JSC “dESP” 277. Agreement no. 024-14/Suid of 11.09.2014 for perform- ing work including supply of materials, technical resources and equipment, construction, installation and commission- ing JSC "fGC uES and JSC "tyumenenergo" 278. Agreement no. 84-Suid of 25.12.2014 to perform design and survey work JSC fGC uES and JSC “dESP” design work, equipment supply, construction and installation, commissioning works of automated di- agnostics systems GiS for the needs of the federal Grid’s branch– mES of East between PJSC fGC uES (the Client) and JSC "Electrosetservice unEG" (the Contractor) Construction and installation with supply of materi- als for the project: "liman ohl 220 kV (Astrakhan SS – SS lyman). measures to protect wires of the upper phase of site no. 280-420 of approximation to the posts supports" between JSC fGC uES and JSC "Electrosetservice unEG" Construction and installation and commissioning of the modernisation programme of the power transformers, shunt reactors and oil circuit break- ers, replacement of hV inputs 500 kV on trachu- kovskaya SS 500 kV and ilkovskaya SS 500 kV for the needs of the federal Grid’s branch– "mES of Western Siberia" between JSC fGC uES and JSC "Electrosetservice unEG" Execution of works on technical inspection of overhead power lines of unEG for the needs of Kuzbass PmES, between JSC fGC uES (the Customer) and JSC "Electrosetservice unEG" (the Contractor) PJSC Rushydro (the lessor) undertakes to transfer the PJSC fGC uES (the lessee) for temporary use of part of waterworks for placing and maintenance of supports of overhead power lines with a voltage of 220 kV and 500 kV Execution of design and survey works for the project: "Reconstruction reserve spaces nos. 6, 8 indoor switchgear 10 kV orlovskaya SS 220 kV with the installation of vacuum circuit breakers and current transformers for technological connection of llC "n. B.A." between JSC fGC uES (the Cus- tomer) and JSC "dESP" (the Contractor) Execution of work including supply of materials, technical resources and equipment, construction, installation and commissioning for the project: "Reconstruction of oRu Pyt-Yakh 110 kV SS 500 kV (Agreement on implementation of technologi- cal connection of 07.10.2009 no. 283/tP-m8)" between JSC fGC uES (the Customer) and JSC "tyumenenergo" (the Contractor) Execution of design and survey works for the project: "Reconstruction of nizhegorodskaya SS 500 kV, Kudma SS 220 kV and the construction of transmission line "Kudma - GPP5" 220 kV and transmission line "nizhegorodskaya GPP5" 220 kV for technological connection of power receiving devices of llC "luKoil - nizhegorodnefteorgsin- tez" (GPP-5), the application of 13.11.2013 no. iA/3tP/705, between JSC fGC uES (the Customer) and JSC "dESP" (the Contractor) Work price determined by supplemen- tary agreement, shall not exceed RuB 19,413,297.13, including VAt (18%) the Company’s Board of directors (minutes no. 287 of 02.11.2015) Work price of the agreement shall not exceed RuB 9,700,000.00, including VAt (18%) the Company’s Board of directors (minutes no. 287 of 02.11.2015) Work price of the agreement shall not exceed RuB 1,100,838.17, including VAt (18%) the Company’s Board of directors (minutes no. 287 of 02.11.2015) Work price of the agreement is RuB 479,080.00, including VAt (18%) the Company’s Board of directors (minutes no. 287 of 02.11.2015) the Company’s Board of directors (minutes no. 287 of 02.11.2015) Rental value under the Real property lease contract (with protocol of disagreements) between PJSC fGC uES and JSC "Rushy- dro", that is an interested-party transaction is RuB 149,630.48, including VAt (18%) is RuB 22,824.99 per month, but not more RuB 1,645,935.28, including VAt (18%) shall not exceed RuB 251,074.89 for the period from 01.05.2014 to 31.03.2015 Work price of the agreement shall not ex- ceed RuB 475,000.00, including VAt (18%) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction members of the Company's Board of directors V.m. Kravchenko, m.S. Bystrov, who are mem- bers of the Board of directors of a party to the transaction; member of the Board of directors and the Chairman of the management Board n.G. Shulginov, who is a General director of a party to the transaction 135 the Company’s Board of directors (minutes no. 287 of 02.11.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Work price of the agreement shall not exceed RuB 5,634,714.41, including VAt (18%) the Company’s Board of directors (minutes no. 287 of 02.11.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti Work price of the agreement shall not exceed RuB 17,331,010.00, including VAt (18%) the Company’s Board of directors (minutes no. 287 of 02.11.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction APPEndiCES to thE AnnuAl REPoR t no. transaction description transaction parties transaction subject* transaction price** Supplementary agreement no. 17 to the agreement no. ts/01 of 01.04.2008 for performing Customer-Builder functions PJSC fGC uES JSC “CiuS uES” the Customer-Builder functions between PJSC fGC uES (the Company) and JSC "CiuS uES" (Customer-Builder) Service price determined by supplementary agreement, for the period from 01.04.2015 to 31.12.2015 shall not exceed RuB 1,224,250,000.00, including VAt (18%) 279 280. 281. 282. 136 Supplementary agreement no. 16 to the agreement no. 923 of 01.03.2006 Agreement on termination of the agreement for rendering services on placement of technological equipment no. 10 / 11 of 02.12.2011 Supplementary agree- ment no. 1 to the property lease agreement no. B-1 of 24.01.2014 PJSC fGC uES and JSC “muS Energetiki” the provision of services on provision of commu- nication channels between JSC fGC uES (the Cus- tomer) and JSC "muS Energetiki" (the Contractor) PJSC fGC uES and PJSC idGC of north-West termination of the agreement between PJSC fGC uES (the Contractor) and PJSC "idGC of north- West" (the Customer) PJSC fGC uES and PJSC Rosseti Amendments to the property lease agreement no. B-1 of 24.01.2014 between PJSC fGC uES (the lessor) and PJSC Rosseti (the lessee) Governing body that resolved to approve the transaction (minutes' date and number) the Company’s Board of directors (minutes no. 287 of 02.11.2015) infoRm Ation on mAJoR tRAnSAC tionS Person(s) interested in the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board n.i. Pozdnyakov, who is a member of the Board of directors and a General director of a party to the transaction; member of the Company’s management Board d.l. Shishkin, who is a member of the Board of dircetors of a party to the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti the price of services determined by the supplementary agreement, is RuB 22,777.78, including VAt (18 %) the Company’s Board of directors (minutes no. 288 of 16.11.2015) not determined (the termination agreement does not entail and cannot entail any ad- ditional monetary obligations) the Company’s Board of directors (minutes no. 288 of 16.11.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti the Company’s Board of directors (minutes no. 288 of 16.11.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti 137 the Company’s Board of directors (minutes no. 288 of 16.11.2015) Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti the Company’s Board of directors (minutes no. 288 of 16.11.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti the amount of rent determined by the supplementary agreement for the period from 09.07.2014 to 30.09.2014 shall not exceed RuB 26,154,040.19, including VAt (18%) per month. the amount of rent from 01.10.2014 under the propert lease agreement of 24.01.2014 no. B-1 shall not exceed RuB 26,579,313.46, including VAt (18%) per month. the total rent value for the validity period of the property lease agreement of 24.01.2014 no. B-1, taking into account its prolonga- tion, shall not be or exceed 2 (two) percent of the book value of assets of PJSC fGC uES according to its accounting statements at the last reporting date Service price determined by the supple- mentary agreement, shall not exceed RuB 40,960,458.64, including VAt 18% for the period from 01.03.2013 till 29.02.2016. total price of services for the validity period of the agreement of 11.06.2013 no. 427, taking into account its prolongation, shall not be or exceed 2 percent of the book value of assets of PJSC fGC uES accord- ing to its accounting statements at the last reporting date Service price under the agreement is RuB 7,080.96, including VAt (18%) per month. Service price under the agreement for the period from 01.10.2014 on 31.07.2015 is RuB 70,809.60, including VAt (18 %). total price of services for the entire term of the agreement no. 3-2011/18.2400.2687.11 of 29.12.2011, taking into account its prolongation, shall not be or exceed 2 (two) percent of the book value of assets of PJSC fGC uES according to its accounting state- ments at the last reporting date. 283. Supplementary agreement no. 2 to the agreement of 11.06.2013 no. 427 for the provision of services for all-day organisa- tion and provision of video conferencing and intercom PJSC fGC uES and JSC “muS Energetiki” the conclusion of supplementary agreement no. 2 to the agreement of 11.06.2013 no. 427 for the provision of services for all-day or- ganisation and provision of video conferencing and intercom between PJSC fGC uES (the Customer) and JSC "muS Energetiki" (the Contractor) 284. Agreement of compensated use of immovable property PJSC fGC uES and PJSC idGC of Siberia the conclusion of the agreement of compensated use of immovable property under the title of con- struction "foCl "Chelyabinsk–novosibirsk–tay- shet-Vladivostok" on a new period of substantial conditions of the agreement of compensated use of immovable property on the title of construction "foCl "Chelyabinsk–novosibirsk–tayshet-Vladivo- stok" no. 3-2011/18.2400.2687.11 of 29.12.2011 between PJSC fGC uES (the user) and PJSC idGC of Siberia (the owner) 285. Supplementary agreement no. 2 to the agreement of 30.06.2011 no. 59/2011-02 PJSC fGC uES and it Energy Service, llC Supplementary agreement no. 2 to the agreement of 30.06.2011 no. 59/2011-02 between PJSC fGC uES (the Customer) and it Energy Service, llC (the Contractor) Service price determined by the supple- mentary agreement shall not exceed RuB 53,470,647.96, including VAt (18%) the Company’s Board of directors (minutes no. 288 of 16.11.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** 286. Agreement on operational maintenance of energy equip- ment PJSC fGC uES and PJSC "lenenergo" Agreement for operational maintenance of energy equipment between PJSC fGC uES (the Contrac- tor) and PJSC "lenenergo" (the Customer) 287. Supplementary agreement no. 2 to the premises lease agreement PJSC fGC uES and PJSC idGC of north-West Supplementary agreement no. 2 to the premises lease agreement of 25.10.2010 no. 1-mES be- tween PJSC idGC of north-West (the lessor) and JSC fGC uES (the lessee) 138 288. Supplementary agreement no. 2 to the agreement of 27.12.2012 no. 42/2012-02 PJSC fGC uES and it Energy Service, llC 289. Supplementary agreement no. 23 to the agreement of 31.10.2002 no. 481 PJSC fGC uES and JSC “muS Energetiki” Supplementary agreement no. 2 to the agreement of 27.12.2012 no. 42/2012-02 for the provision of telecommunications services and hardware main- tenance of the lAn infrastructure of PJSC fGC uES between PJSC fGC uES (the Customer) and it Energy Service, llC (the Contractor) Supplementary agreement no. 23 to the agree- ment of 31.10.2002 no. 481 on the provision of communication services between PJSC fGC uES (the Subscriber) and JSC "muS Energetiki" (the operator) 290. R&d agreement PJSC fGC uES and JSC R&d Centre of fGC uES R&d "System testing of the StAtCom at mogocha SS, scientific and technical support of the com- missioning and operation of equipment StAtCom at mogocha SS" between PJSC fGC uES (the Customer) and JSC "R&d Centre of fGC uES" (the Contractor) Governing body that resolved to approve the transaction (minutes' date and number) the Company’s Board of directors (minutes no. 288 of 16.11.2015) Person(s) interested in the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti the Company’s Board of directors (minutes no. 288 of 16.11.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti the price of services under the agreement is RuB 284,655.71, including VAt 18% per year. total price of services for the entire term of the agreement on operational operational maintenance of energy equipment, taking into account its prolongation, shall not be or exceed 2 percent of the book value of assets of PJSC fGC uES according to its accounting statements at the last reporting date. Rents determined by the supplementary agreement, is RuB 6,128.92, including VAt (18 %) per month. the amount of the lease payment for 11 months is RuB 67,418.12, including VAt (18 %). the total rent for the entire term of the premises lease agreement of 25.10.2010 no. 1-mES with regard to its prolongation should not be or exceed 2 percent of the book value of assets of PJSC fGC uES ac- cording to its accounting statements at the last reporting date. 139 the price of services is not determined due to the fact that the agreement does not change the price of services under the agreement the Company’s Board of directors (minutes no. 288 of 16.11.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti the price of services determined by the supplementary agreement, shall not exceed RuB 665,979.21, including VAt (18%) per month. total price of services under the agree- ment of 31.10.2002 no. 481 for the period from 01.01.2006 till 31.10.2015 is RuB 280,966,534.15, including VAt (18%). total price of services for the entire term of the agreement 31.10.2002 no. 481, taking into account its prolongation, shall not be or exceed 2 percent of the book value of assets of PJSC fGC uES according to its accounting statements at the last reporting date. Work price of the agreement is RuB 16,630,000.00, including VAt (18%) the Company’s Board of directors (minutes no. 288 of 16.11.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti the Company’s Board of directors (minutes no. 288 of 16.11.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti, members of the Company’s management Board: A.A. Zagaratsky, m.n. Pichugina, who are members of the Board of directors of a party to the transaction APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** 291. Supplementary agreement no. 4 to the real property lease contract of 01.06.2012 no. 93-2012 PJSC fGC uES and JSC “CiuS uES” Amendments to the real property lease contract of 01.06.2012 no. 93-2012 between PJSC fGC uES (the lessor) and JSC "CiuS uES" (the lessee) 292. 293. 140 Agreement on termination of the agreement for lease of copper cables connection of 01.10.2010 no. 50-10/511m PJSC fGC uES and PJSC "moESK" termination of the lease agreement of 01.10.2010 no. 50-10/511m between PJSC fGC uES (the les- sor) and PJSC "moESK" (the lessee) Supplementary agreement no. 2 to the real property lease contract of 02.09.2013 no. 1 PJSC fGC uES and JSC «CiuS uES» Amendments to the real property lease contract of 02.09.2013 no. 1 between PJSC fGC uES (the lessor) and JSC "CiuS uES" (the lessee) 294. lease agreement PJSC fGC uES and JSC uES "Sakrusenergo" lease of "Centralnaya" ohl 500 kV - Enguri hPP (Kavkasioni) on the territory of the Russian federa- tion between JSC uES "Sakrusenergo" (the lessor) and PJSC fGC uES (the lessee) 295. Service agreement PJSC fGC uES and JSC idGC of urals 296. Agreement of 24.09.2013 no. 3378 on development of design and working documen- tation JSC fGC uES and JSC R&d Centre of fGC uES Compensated provision of services by JSC idGC of Urals (the Contractor) to provide firmly places for placement of communication equipment of PJSC fGC uES (the Customer) in non-residential premises no. 43 in accordance with the scheme on the ground floor of non-residential building (ad- ministrative), located at the address: Chelyabinsk, Revolution square, 5 Execution of works on development of design and working documentation for the project: "Safety sys- tem of mirnaya SS 220 kV" under the program to ensure protection of electric grid facilities of JSC fGC uES, between JSC fGC uES (the Customer) and JSC "R&d Centre fGC uES" (the Contractor) Governing body that resolved to approve the transaction (minutes' date and number) the Company’s Board of directors (minutes no. 288 of 16.11.2015) Person(s) interested in the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board n.i. Pozdnyakov, who is a member of the Board of directors and a General director of a party to the transaction; member of the Company’s management Board d.l. Shishkin, who is a member of the Board of dircetors of a party to the transaction the Company’s Board of directors (minutes no. 288 of 16.11.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti the Company’s Board of directors (minutes no. 288 of 16.11.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board n.i. Pozdnyakov, who is a member of the Board of directors and a General director of a party to the transaction; member of the Company’s manage- ment Board d.l. Shishkin, who is a member of the Board of dircetors of a party to the transaction 141 the Company’s Board of directors (minutes no. 288 of 16.11.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti, member of the Company’s management Board m.n. Pichugina, who is a member of the Board of directors of a party to the transaction the Company’s Board of directors (minutes no. 288 of 16.11.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti Rent value determined by the supplementa- ry agreement, is RuB 103,043.51, including VAt (18 %) per month. Rental payment under the real prop- erty lease contract of 01.06.2012 no. 93-2012 for the period from 01.06.2012 till 31.01.2016 is RuB 8,807,908.57, including VAt (18 %). the total rent value for the entire term of the agreement taking into account its prolongation, shall not be or exceed 2 (two) percent of the book value of assets of PJSC fGC uES according to its accounting state- ments at the last reporting date. Agreement on termination of the real property lease contract does not and can- not entail additional monetary obligations, the price of the services/work under the agreement Rent value determined by the supplemen- tary agreement, is RuB 64,784.47, including VAt (18 %). the total rent value under the agreement for the period from 06.03.2013 till 02.06.2016 is RuB 4,251,204.84, including VAt (18%). the total rent for the entire term of the rental agreement taking into account its prolongation should not be or exceed 2 percent of the book value of assets of PJSC fGC uES according to its accounting state- ments at the last reporting date. Rental value under the agreement is RuB 1,791,162.01 per month, including VAt (18%) and the tax on the income of renting of immovable property used on the territory of the Russian federation (20 %), in the amount of RuB 303,586.78. the total rental payment under the agree- ment for 11 months is RuB 19,702,782.11, including VAt (18%) and the tax on the income of leasing immovable property used on the territory of the Russian federation (20 %), in the amount of RuB 3,339,454.58. the total rent value for the entire term of the agreement taking into account its pro- longation, shall not be or exceed 2 percent of the book value of assets of PJSC fGC uES according to its accounting statements at the last reporting date. the price of services under the agreement is RuB 39,120.00, including VAt (18%) per month. the price of services under the agree- ment for the period from 01.01.2015 to 30.11.2015 is RuB 430,320.00, including VAt (18%) Work price under the agreement shall not exceed RuB 2,792,239.31, including VAt (18%) the Company’s Board of directors (minutes no. 288 of 16.11.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti, members of the Company’s management Board: A.A. Zagaratsky, m.n. Pichugina, who are members of the Board of directors of a party to the transaction APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** Governing body that resolved to approve the transaction (minutes' date and number) Person(s) interested in the transaction 297. 298. Agreement of 23.12.2013 no. 3383 on development of design and working documen- tation JSC fGC uES and JSC R&d Centre of fGC uES Agreement of 23.12.2013 no. 3384 on development of design and working documen- tation JSC fGC uES and JSC R&d Centre of fGC uES Execution of works on development of design and working documentation for the project: "Safety system of orbita SS 220 kV" under the program to ensure protection of electric grid facilities of JSC fGC uES between JSC fGC uES (the Customer) and JSC "R&d Centre fGC uES" (the Contractor) Execution of works on development of design and working documentation for the project: "Safety sys- tem of Knyazhevo SS 220 kV" under the program to ensure protection of electric grid facilities of JSC fGC uES between JSC fGC uES (the Customer) and JSC "R&d Centre fGC uES" (the Contractor) 299. Accident and illness insur- ance contract PJSC fGC uES and JSC “SoGAZ” Accident and illness insurance 142 300. 301. 302. Supplementary agreement no. 1 to the compensation agreement of 31.10.2013 no. 237 PJSC fGC uES and JSC "Kuban trunk Grids" Amendments to supplementary agreement no. 1 to the compensation agreement of 31.10.2013 no. 237 between PJSC fGC uES (the Company) and JSC "Kuban trunk Grids" (the owner) Supplementary agreement no. 1 to the agency agree- ment of 31.10.2013 no. 238 PJSC fGC uES and JSC "Kuban trunk Grids" Amendments to the agency agreement of 31.10.2013 no. 238 between PJSC fGC uES (the Agent) and JSC "Kuban trunk Grids" (the Principal) Agreement for the completion of the work package PJSC fGC uES and JSC “Electrosetservice unEG" 303. Agreement for the completion of the work package PJSC fGC uES and JSC “Electrosetservice unEG" 304. Contracting agreement for construction and installation, commissioning works with equipment supply PJSC fGC uES and JSC “Electrosetservice unEG" 305. Supplementary agreement no. 1 to the agreement of 31.07.2013 no. 290 PJSC fGC uES and JSC “Electrosetservice unEG” Execution of complex of works on the project: "disassembly / reassembly of isolating suspen- sion wires (insulators) on the facility BnPP-Kras- noarmeyskaya-2 Samarskaya PmES ohl 500 kV" between PJSC fGC uES (the Customer) and JSC "Electrosetservice unEG" (the Contractor) Execution of complex of works on the project: "disassembly / reassembly of isolating suspension wires (insulators) on the facility BnPP-Krasno- armeyskaya-2 nizhne-Volzhskaya PmES ohl 500 kV" between PJSC fGC uES (the Customer) and JSC "Electrosetservice unEG" (the Contractor) Contract for performance of construction and installation, commissioning works with equipment supply for the project: "Astahovskaya SS 220 KV (Reconstruction with replacement of equipment, including od, SC)" for the needs of the federal Grid’s branch- Volgo-donskoye PmES" between PJSC fGC uES (the Customer) and JSC "Electro- setservice unEG" (the Contractor) Changes to the agreement of 31.07.2013 no. 290 to perform design works, equipment supply, construction, commissioning, automated diagnos- tics systems CR for the needs of the federal Grid’s branch– mES of East between PJSC fGC uES (the Customer) and JSC "Electrosetservice unEG" (the Contractor) Work price under the agreement shall not exceed RuB 1,845,600.00, including VAt (18%) the Company’s Board of directors (minutes no. 288 of 16.11.2015) Work price under the agreement shall not exceed RuB 1,910,200.00, including VAt (18%) the Company’s Board of directors (minutes no. 288 of 16.11.2015) the price of services (the insurance premium) under the agreement is RuB 1,040,899.54 (VAt exempt) the Company’s Board of directors (minutes no. 288 of 16.11.2015) the amount of compensation deter- mined by additional agreement is RuB 998,951,928.81, including VAt (18%) the Company’s Board of directors (minutes no. 289 of 16.11.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti, members of the Company’s management Board: A.A. Zagaratsky, m.n. Pichugina, who are members of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti, members of the Company’s management Board: A.A. Zagaratsky, m.n. Pichugina, who are members of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti; member of the Company's Board of directors and the manage- ment Board Chairman A.E. murov, members of the Company’s management Board: V.A. Goncharov, A.V. Vasiliev, V.P. dikoy, A.A. Zagaratsky, m.n. Pichugina, n.i. Pozdnyakov, m.G. tikhonova, d.l. Shishkin – beneficiaries in the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti Price of work determined by supplementary agreement, is RuB 996,119,928.81, includ- ing VAt (18%) the Company’s Board of directors (minutes no. 289 of 16.11.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti Work price under the agreement shall not exceed RuB 45,510,020.00, including VAt (18%) the Company’s Board of directors (minutes no. 289 of 16.11.2015) Work price under the agreement shall not exceed RuB 66,987,410.00, including VAt (18%) the Company’s Board of directors (minutes no. 289 of 16.11.2015) Work price of the agreement shall not exceed RuB 87,413,762.00, including VAt (18%) the Company’s Board of directors (minutes no. 289 of 16.11.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Price of work determined by supplemen- tary agreement, shall not exceed RuB 9,181,724.22, including VAt (18%) the Company’s Board of directors (minutes no. 289 of 16.11.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction 143 APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** 144 306. Agreement of 17.12.2014 no. 74-Suid to perform design and survey work JSC fGC uES and JSC “dESP” PJSC fGC uES and JSC R&d Centre of fGC uES PJSC fGC uES and JSC R&d Centre of fGC uES PJSC fGC uES and JSC R&d Centre of fGC uES PJSC fGC uES and JSC R&d Centre of fGC uES 307. 308. 309. 310. Agreement for performance of works (adjustment of proj- ect documentation, working documentation, construction and assembly works, equip- ment, registration of rights on land plots) for the project: "Re- construction of makhachka- la–330 SS 330/110/10 kV " (replacing the rectifier devices for ice melting)" Agreement on performance of works (design documenta- tion, working documentation, construction and assemble works, equipment, registration of land rights) for the project: "Reconstruction of the t–15 SS 220/110/35/10 kV (instal- lation of rectifier devices for ice melting, arranging ice melting on wires and cables for outgoing ohl 220 kV)" Agreement for performance of works (design documenta- tion, working documentation, construction and assemble works, equipment, registration of land rights) for the project: "Reconstruction of "Zimovniki" SS 220/110/10 kV (installa- tion of rectifier devices for ice melting, arranging ice melting on the exhaust ohl 220 kV)" Agreement for performance of works (design documenta- tion, working documentation, construction and assemble works, equipment, registration of land rights) for the project: "Reconstruction of the Volgo- donsk RP 220 kV (installation of rectifier devices of ice melt- ing, arranging ice melting on wires and cables for outgoing ohl 220 kV)" Execution of design and survey works for the project: "Reconstruction of Prosvet SS 220 kV with the installation of the backup cell no. 17 indoor switchgear 6 kV vacuum circuit breaker and current transformers for tP llC "Velesstroy", con- nection agreement of 03.09.2013, no. 158/tP-m6" between JSC fGC uES (the Customer) and JSC "dESP" (the Contractor) the performance by the Contractor (JSC "R&d Centre of fGC uES") of a complex of works on: - registration of rights to land plots for design and survey works (if necessary); - engineering survey; - registration of rights to land plots for the recon- struction of the object; - adjusting the project documentation and the design documentation; - examination of project documentation; - design supervision; - reconstruction the performance by the Contractor (JSC "R&d Centre of fGC uES") of a complex of works on: - registration of rights to land plots for design and survey works (if necessary); - engineering survey; - registration of rights to land plots for the recon- struction of the object; - adjusting the project documentation and the design documentation; - the examination of project documentation; - design supervision; - reconstruction the performance by the Contractor (JSC "R&d Centre of fGC uES") of a complex of works on: - registration of rights to land plots for design and survey works (if necessary); - engineering survey; - registration of rights to land plots for the recon- struction of the object; - adjusting the project documentation and the design documentation; - examination of project documentation; - design supervision; - reconstruction the performance by the Contractor (JSC "R&d Centre of fGC uES") of a complex of works on: - registration of rights to land plots for design and survey works (if necessary); - engineering survey; - registration of rights to land plots for the recon- struction of the object; - adjusting the project documentation and the design documentation; - the examination of project documentation; - design supervision; - reconstruction Work price of the agreement shall not ex- ceed RuB 215,452.00, including VAt (18%) Governing body that resolved to approve the transaction (minutes' date and number) the Company’s Board of directors (minutes no. 289 of 16.11.2015) Person(s) interested in the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Work price is determined in the amount of not more than RuB 65,487,510.00, including VAt (18%) the Company’s Board of directors (minutes no. 291 of 19.11.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti, members of the Company’s management Board: A.A. Zagaratsky, m.n. Pichugina, who are members of the Board of directors of a party to the transaction Work price is determined in the amount of not more than RuB 39,409,610.00, including VAt (18%) the Company’s Board of directors (minutes no. 291 of 19.11.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti, members of the Company’s management Board: A.A. Zagaratsky, m.n. Pichugina, who are members of the Board of directors of a party to the transaction 145 Work price is determined in the amount of not more than RuB 24,840,530.00, including VAt (18%) the Company’s Board of directors (minutes no. 291 of 19.11.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti, members of the Company’s management Board: A.A. Zagaratsky, m.n. Pichugina, who are members of the Board of directors of a party to the transaction Work price is determined in the amount of not more than RuB 42,878,360.00, including VAt (18%) the Company’s Board of directors (minutes no. 291 of 19.11.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti, members of the Company’s management Board: A.A. Zagaratsky, m.n. Pichugina, who are members of the Board of directors of a party to the transaction APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** Governing body that resolved to approve the transaction (minutes' date and number) Person(s) interested in the transaction 146 311. 312. 313. 314. 315. 316. 317. 318. 319. Agreement for performance of works (design documenta- tion, working documentation, construction and assemble works, equipment, registration of land rights) for the project: "Reconstruction of the B–10 SS 220/110/10 kV (installa- tion of rectifier devices of ice melting, arranging ice melting on wires and cables for outgo- ing ohl 220 kV)" Agreement for performance of works on development of software module for determin- ing hourly deviations of the amount of electricity Agreement on termination of the lease agreement of 01.08.2010 no. 1836- 10/345m of means of dis- patch and process control Supplementary agreement no. 6 to the agreement of 31.01.2010 no. 58-10/436m of lease of means of dispatch and process control Supplementary agreement no. 1 to the agreement of 27.04.2011 no. 99-2011 for the execution of complex of works on the project: "Replacement of air circuit breakers 330 – 750 kV" Supplementary agreement no. 4 (with the protocol of disagreements) to the lease agreement of 27.09.2011 no. 44.1900.587.11 Supplementary agreement no. 1 to the agreement of 16.10.2012 no. 164-2012 for the development of design and working documentation, construction and installation works on the integrated pro- gram for improving lighting- surge proofness of ohl Agreement on debt repayment arising from the agreement of services rendering in transfer of electricity via unEG of 25.01.2012 no. 544/P Supplementary agreement no. 2 to the agreement of 15.05.2013 no. 58/13 for electrical equipment service maintenance PJSC fGC uES and JSC R&d Centre of fGC uES PJSC fGC uES and it Energy Service, llC the performance by the Contractor (JSC "R&d Centre of fGC uES") of a complex of works on: - registration of rights to land plots for design and survey works (if necessary); - engineering survey; - registration of rights to land plots for the recon- struction of the object; - adjusting the project documentation and the design documentation; - the examination of project documentation; - design supervision; - reconstruction the Contractor (it Energy Service, llC) work on de- veloping a software module for determining hourly deviations of volumes of electricity for automated measuring and information system for electricity fiscal metering (hereinafter - the Work). the scope of Work agreed upon by the Parties in the specification to the agreement PJSC fGC uES and PJSC "moESK" termination of the lease agreement of means of dispatch and process control of 01.08.2010 no. 1836-10/345m from 01.04.2015 PJSC fGC uES and PJSC "moESK" Amendments to the agreement PJSC fGC uES and JSC “Electrosetservice unEG” Amendments to the agreement Work price is determined in the amount of not more than RuB 62,940,150.00, including VAt (18%) the Company’s Board of directors (minutes no. 291 of 19.11.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti, members of the Company’s management Board: A.A. Zagaratsky, m.n. Pichugina, who are members of the Board of directors of a party to the transaction Work price is determined in the amount of RuB 479,622.89, including VAt (18%) the Company’s Board of directors (minutes no. 291 of 19.11.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti the price of services is not determined (the termination agreement does not and cannot entail any additional obligations related to money) the Company’s Board of directors (minutes no. 293 of 27.11.2015) Rent value determined by the supplemen- tary agreement, is RuB 12,955.00 including VAt (18%), per month the Company’s Board of directors (minutes no. 293 of 27.11.2015) Works price is not determined due to the fact that the agreement does not change the price of the agreement the Company’s Board of directors (minutes no. 293 of 27.11.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti, members of the Company’s Board of directors: o.m. Budargin,V.m. Kravchenko and A.A. demin, who are members of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti, members of the Company’s Board of directors: o.m. Budargin,V.m. Kravchenko and A.A. demin, who are members of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction 147 PJSC fGC uES and PJSC idGC of Siberia Prolongation of lease term and the term of the agreement Rental value, following the conclusion of the supplementary agreement, is RuB 45,329.48, including VAt (18%), per month the Company’s Board of directors (minutes no. 293 of 27.11.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; PJSC fGC uES and JSC “Electrosetservice unEG” Amendments to the agreement in terms of work schedule, procurement and funding Works price is not determined due to the fact that the agreement does not change the price of the agreement the Company’s Board of directors (minutes no. 293 of 27.11.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction PJSC fGC uES and JSC “Yantarenergo” Settlement of debt repayment conditions the size of the debt, subject to settlement under the agreement, amounts to RuB 1,761,360,927.47., including VAt (18%) the Company’s Board of directors (minutes no. 293 of 27.11.2015) PJSC fGC uES, JSC “Electro- setservice unEG”, and JSC “Electrozavod” Amendments to the agreement Price of work determined by supplemen- tary agreement, amounts to no more RuB 17,650,368.07, including VAt (18%) the Company’s Board of directors (minutes no. 293 of 27.11.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti, member of the Company’s Board of directors m.A. Kolesnikov, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** Governing body that resolved to approve the transaction (minutes' date and number) Person(s) interested in the transaction 320. 321. 322. Supplementary agreement no. 2 to the agreement of 15.05.2013 no. 57/13 for electrical equipment service maintenance Supplementary agreement no. 2 to the agreement of 15.05.2013 no. 52/13 for electrical equipment service maintenance Supplementary agreement no. 3 to the agreement of 01.05.2013 no. 53/13 for electrical equipment service maintenance PJSC fGC uES, JSC “Electro- setservice unEG”, and JSC “Electrozavod” Amendments to the agreement PJSC fGC uES, JSC “Electro- setservice unEG”, and JSC “Electrozavod” Amendments to the agreement PJSC fGC uES, JSC “Electro- setservice unEG”, and JSC “Electrozavod” Amendments to the agreement 323. Compensation agreement PJSC fGC uES and JSC "tyumenenergo" Compensation of expenses incurred by the owner (PJSC fGC uES ) in connection with the actions of the Customer (JSC "tyumenenergo") on the con- struction of the Customer's facility that involve the need for reconstruction of the owner's object Price of work determined by supplemen- tary agreement, amounts to no more RuB 42,616,358.49, including VAt (18%) the Company’s Board of directors (minutes no. 293 of 27.11.2015) Works price is not determined due to the fact that the agreement does not change the price of the agreement the Company’s Board of directors (minutes no. 293 of 27.11.2015) Price of work determined by supplemen- tary agreement, amounts to no more RuB 32,388,106.64, including VAt (18%) the Company’s Board of directors (minutes no. 293 of 27.11.2015) the preliminary amount of compen- sation under the agreement is RuB 441,685,612.50, including VAt (18%) the Company’s Board of directors (minutes no. 293 of 27.11.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; 148 324. 325. Supplementary agreement no. 4 to the agreement of 10.11.2012 no. 195/12 to perform work on service maintenance of equipment and systems preventing ex- plosions and fires in oil-filled transformer equipment of Proteсtor Transformer (TR) brand Supplementary agreement no. 1 to the agreement of 06.06.2014 no. 81-2014/1 for execution of works on construction and installation, commissioning works for the project: "modernisation of power autotransformers, shunt reactors and oil circuit breakers" PJSC fGC uES and JSC “Electrosetservice unEG Amendments to the agreement Works price is not determined due to the fact that the supplementary agreement does not change the price of the agreement the Company’s Board of directors (minutes no. 293 of 27.11.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction 149 PJSC fGC uES and JSC “Electrosetservice unEG" Amendments to the agreement in terms of the work schedule, services and supplies Works price is not determined due to the fact that the supplementary agreement does not change the price of the agreement the Company’s Board of directors (minutes no. 293 of 27.11.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction 326. Agreement of compensated provision of services PJSC fGC uES and JSC “Electrosetservice unEG” the Contractor (PJSC fGC uES) undertakes to provide to the Customer (JSC "Electrosetservice unEG") parking spaces to accommodate vehicles of the Customer 327. Contracting agreement of 18.06.2014 no. 029-14/Suid for the supply of material and technical resources and equipment, construction and installation and commission- ing works for the project: "Replacement of voltage transformers” JSC fGC uES and JSC “Elec- trosetservice unEG” the Contractor (JSC "Electrosetservice unEG") un- dertakes to perform a complex of works, including obtaining of permissive documentation for con- struction (if necessary); construction and installa- tion works the price of services under the agreement is RuB 6,310.38, including VAt (18%) per month the Company’s Board of directors (minutes no. 293 of 27.11.2015) Work price shall not exceed RuB 10,439,522.52, including VAt (18%) the Company’s Board of directors (minutes no. 293 of 27.11.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** Governing body that resolved to approve the transaction (minutes' date and number) Person(s) interested in the transaction 150 328. 329. 330. 331. 332. 333. Contracting agreement for execution of construction and commissioning works with equipment supply for the project: "modernisation of Balashovskaya SS 500 kV. Re- placement of At-1" under the replacement program of At Сontracting agreement for performance of design and exploration works, working documentation, construction- assembly, commissioning for modernisation of autotrans- formers, shunt reactors and oil circuit breakers at SS of mES of East Contracting agreement for construction and installation and commissioning works under the program of improv- ing reliability of the main equipment of SS an ohl of PJSC fGC uES Contracting agreement for performance of design and exploration works, working documentation, construction and installation , commission- ing works on ohl recon- struction by replacement of porcelain isolation of mES of East Agreement for drafting work- ing documentation, peforming construction and installa- tion, commissioning works with equipment delivery at liteinaya SS 220 kV for the project: "technical re-equip- ment of liteinaya SS 220 kV, Satarovskaya SS 220 kV. Installation of rectifier devices to system PG" Contracting agreement for construction and installation and commissioning works under the program of improve- ment of reliability of the main equipment of PJSC fGC uES SS and ohl during the modernisation of autotrans- formers, shunt reactors and oil circuit breakers PJSC fGC uES and JSC “Electrosetservice unEG” the Contractor (JSC "Electrosetservice unEG") un- dertakes to perform a complex of works, including dismantling of the existing equipment (autotrans- former At-1, arresters 10 kV At-1); the construction of building structures under the equipment supply of the necessary structures and materials PJSC fGC uES and JSC “Electrosetservice unEG” the Contractor (JSC "Electrosetservice unEG") un- dertakes to perform a complex of works , including the development of project and working documen- tation; supervision; renovation Work price is determined in the amount of not exceeding RuB 25,926,494.66, including VAt (18%) the Company’s Board of directors (minutes no. 293 of 27.11.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Work price is determined in the amount of not exceeding RuB 14,955,837.73, including VAt (18%) the Company’s Board of directors (minutes no. 293 of 27.11.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction PJSC fGC uES and JSC “Electrosetservice unEG” the Contractor (JSC "Electrosetservice unEG") undertakes to peform a set of works on recon- struction Work price is determined in the amount of not exceeding RuB 9,746,028.01, including VAt (18%) the Company’s Board of directors (minutes no. 293 of 27.11.2015) PJSC fGC uES and JSC “Electrosetservice unEG” the Contractor (JSC "Electrosetservice unEG") undertakes to perform a complex of works on: - development of design and working documenta- tion; - design supervision; - reconstruction Work price is determined in the amount of not exceeding RuB 17,213,120.00, including VAt (18%) the Company’s Board of directors (minutes no. 293 of 27.11.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction 151 PJSC fGC uES and JSC “Electrosetservice unEG” the Contractor (JSC "Electrosetservice unEG") undertakes to perform a complex of works on: - development of working documentation; - organisation of field supervision; - technical re-equipment of the object. Work price is determined in the amount of not exceeding RuB 54,110,056.45, including VAt (18%) the Company’s Board of directors (minutes no. 293 of 27.11.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction PJSC fGC uES and JSC “Electrosetservice unEG” the Contractor (JSC "Electrosetservice unEG") undertakes to perform construction, installation and commissioning works Work price is determined in the amount not exceeding RuB 0.82, including VAt (18%) the Company’s Board of directors (minutes no. 293 of 27.11.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction 334. Gift agreement PJSC fGC uES and fSBEi hE "nRu "mPEi" transfer by the donator (PJSC fGC uES ) free of charge into the ownership of the donee (fSBEi hE "nRu "mPEi") of laboratory equipment for use in generally useful purposes within the system of higher, secondary and primary professional educa- tion Price of property transferred as a gift is RuB 5,560,593.22, VAt exempt the Company’s Board of directors (minutes no. 293 of 27.11.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** Governing body that resolved to approve the transaction (minutes' date and number) Person(s) interested in the transaction 335. 336. 337. 338. 339. Contracting agreement for the construction and installation and commissioning works for the program of increase of re- liability of the main equipment of PJSC fGC uES SS and ohl Contracting agreement for construction and installation and commissioning works under the program of improve- ment of reliability of the main equipment of PJSC fGC uES SS and ohl regarding re- placement and reinforcement of ohl supports Contracting agreement for construction and installation and commissioning works under the program of improve- ment of reliability of the main equipment of PJSC fGC uES SS and ohl in the reconstruc- tion of ohl by replacement of porcelain insulation Contracting agreement for construction and installation and commissioning works under the program of improve- ment of reliability of the main equipment of PJSC fGC uES SS and ohl Agreement for performance of design and exploration works, working documenta- tion, construction, commis- sioning for the replacement and reinforcement of ohl supports 152 PJSC fGC uES and JSC “Electrosetservice unEG” the Contractor (JSC "Electrosetservice unEG") undertakes to perform a complex of works on reconstruction Work price is determined in the amount of not exceeding RuB 81,058,890.00, including VAt (18%) the Company’s Board of directors (minutes no. 294 of 27.11.2015) PJSC fGC uES and JSC “Electrosetservice unEG” the Contractor (JSC "Electrosetservice unEG") undertakes to perform of construction, installation and commissioning works Work price is determined in the amount of not exceeding RuB 14,392,625.99, including VAt (18%) the Company’s Board of directors (minutes no. 294 of 27.11.2015) PJSC fGC uES and JSC “Electrosetservice unEG” the Contractor (JSC "Electrosetservice unEG") undertakes to perform construction, installation and commissioning works Work price is determined in the amount of not exceeding RuB 16,263,008.46, including VAt (18%) the Company’s Board of directors (minutes no. 294 of 27.11.2015) PJSC fGC uES and JSC “Electrosetservice unEG” the Contractor (JSC "Electrosetservice unEG") undertakes to perform construction, installation and commissioning works Work price is determined in the amount of not more than RuB 47,602,990.54, including VAt (18%) the Company’s Board of directors (minutes no. 294 of 27.11.2015) PJSC fGC uES and JSC “Electrosetservice unEG” Work price is determined in the amount of not more than RuB 5,268,017.96, including VAt (18%) the Company’s Board of directors (minutes no. 294 of 27.11.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction 153 340. Agreement to perform emer- gency recovery work PJSC fGC uES and JSC “Electrosetservice unEG” Work price is determined in the amount of RuB 2,219,004.69, including VAt (18%) the Company’s Board of directors (minutes no. 294 of 27.11.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction the Contractor (JSC "Electrosetservice unEG") undertakes to perform a work package: - registration of rights to land plots for design and survey works (if necessary); - engineering survey; - registration of rights to land plots for the recon- struction of the object; - development of design and working documenta- tion; - for the implementation of supervision; - reconstruction the Contractor (JSC "Electrosetservice unEG") undertakes to perform emergency recovery work on replacement of the 500 kV breaker at "Shakhty" SS 500 kV of materials of the Customer (PJSC fGC uES) APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** Governing body that resolved to approve the transaction (minutes' date and number) Person(s) interested in the transaction PJSC fGC uES and JSC «CiuS uES» the Contractor (JSC "CiuS uES") undertakes to perform work-in-progress on the development of working documentation, construction and instal- lation works, commissioning works and supply of material and technical resources and equipment of the 1st phase of construction for the project: "Construction of 500 kV Beloberezhskaya SS with approaches novobryanskaya –Eletskaya ohl 500 kV, Beloberezhskaya – Cementnaya ohl 220 kV, Beloberezhskaya –mashzavod ohl 220 kV and Beloberezhskaya – Bryanskaya ohl 220 kV" 341. Agreement for performance of work-in-progress on the development of working documentation, construction and installation , commission- ing and supply of material and technical resources and equipment of the 1st phase of construction for the project: "Construction of 500 kV Beloberezhskaya SS with approaches novobryanskaya –Eletskaya ohl 500 kV, Belo- berezhskaya – Cementnaya ohl 220 kV, Beloberezhskaya –mashzavod ohl 220 kV and Beloberezhskaya – Bryans- kaya ohl 220 kV" 154 342. lease agreement of electric grid facilities PJSC fGC uES and PJSC iGdS of Centre the lessor (PJSC idGC of Centre) transfers, and the lessee (PJSC fGC uES) accepts, for payment for temporary possession and use, electric grid facilities beneficially owned by the Lessor 343. Agreement for the termination of the real property lease con- tract of 18.06.2013 no. 3135 PJSC fGC uES and JSC «CiuS uES» the parties on the basis of voluntary expression terminate the real property lease contract from 18.06.2013 no. 3135. the last day of validity of the agreement is considered 31.05.2015 344. Supplementary agreement no. 1 to the real property lease contract of 10.07.2015 no. 372671 PJSC fGC uES and JSC «CiuS uES» Amendments to the real property lease contract of 10.07.2015 no. 372671 345. Agreement for operational service of power equipment PJSC fGC uES and PJSC “lenenergo” the Contractor (PJSC fGC uES) undertakes to provide operational service of power equipment owned by the Customer (PJSC “lenenergo”) on its own 346 Agreement for the provision of communication services PJSC fGC uES and JSC “muS Energetiki” the Contractor (JSC “muS Energetiki”) provides the Customer (PJSC fGC uES) with communica- tion services in accordance with the terms of the agreement Work price is determined in the amount of not more than RuB 3,297,566,756.73, including VAt (18%) the Company’s Board of directors (minutes no. 294 of 27.11.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board n.i. Pozdnyakov, who is a member of the Board of directors and a General director of a party to the transaction; member of the Company’s management Board d.l. Shishkin, who is a member of the Board of dircetors of a party to the transaction 155 the Company’s Board of directors (minutes no. 296 of 07.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti the Company’s Board of directors (minutes no. 296 of 07.12.2015) the Company’s Board of directors (minutes no. 296 of 07.12.2015) the Company’s Board of directors (minutes no. 296 of 07.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board n.i. Pozdnyakov, who is a member of the Board of directors and a General director of a party to the transaction; member of the Company’s management Board d.l. Shishkin, who is a member of the Board of dircetors of a party to the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board n.i. Pozdnyakov, who is a member of the Board of directors and a General director of a party to the transaction; member of the Company’s management Board d.l. Shishkin, who is a member of the Board of dircetors of a party to the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti the Company’s Board of directors (minutes no. 296 of 07.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti Rental payment under the lease agreement of electric grid facilities in a month is RuB 11,607.24 including VAt (18%). the total lease payment under the lease agreement of electric grid facilities for 11 months is RuB 127,679.64, including VAt (18%) due to the fact that the agreement on ter- mination real property lease contract does not and cannot entail additional monetary obligations, the price of services / work under the agreement is not determined Rent value determined by the supplementa- ry agreement is RuB 270,630.37, including VAt (18%) per month. the total rent value under the lease con- tractt for the period from 01.02.2015 to 31.12.2015 is RuB 3,204,831.15, including VAt (18%) Service price under the agreement on operational service of power equipment will be RuB 170,790.30, including VAt (18%) per year. total price of services for the entire term of the agreement taking into account its prolongation, shall not be or exceed 2 (two) percent of the book value of assets of PJSC fGC uES according to its accounting state- ments at the last reporting date. the price of services under the agreement per month consists of: - prices for a service connection by provid- ing access to 8 channels at RuB 81,769.56, including VAt (18%); - prices for a service connection by providing access to 6 channels at RuB 61,327.17, including VAt (18%).total price of services under the agreement on provi- sion of communication services for the period 01.05.2015 to 30.04.2016 is RuB 776,810.82, including VAt (18%). APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** 347 Supplementary agreement no. 3 to the premise lease agreement no. 18/3 of 25.10.2010 PJSC fGC uES and PJSC idGC of north-West Amendments to the premise lease agreement of 25.10.2010 no. 18/3 348. Agreement for the provision of services on repair, mainte- nance and diagnostic inspec- tion of electric grid facilities PJSC fGC uES and JSC “muS Energetiki” the Contractor (JSC "muS Energetiki") undertakes to provide the complex of services on maintenance and repair of communications equipment, and the Customer (PJSC fGC uES) undertakes to pay for services rendered. 156 349. Agreement for the provision of services for equipment placement PJSC fGC uES and JSC "tyumenenergo" the owner (PJSC fGC uES) provides the user (JSC "tyumenenergo") services for placement of the user's equipment at "Kartopia" SS 220/110/10 kV in accordance with the scheme of allocation of equipment PJSC fGC uES and PJSC Rushydro Subject and other essential conditions are estab- lished by the agreement Governing body that resolved to approve the transaction (minutes' date and number) the Company’s Board of directors (minutes no. 296 of 07.12.2015) Person(s) interested in the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti the Company’s Board of directors (minutes no. 296 of 07.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti the Company’s Board of directors (minutes no. 296 of 07.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti 157 the Company’s Board of directors (minutes no. 296 of 07.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; members of the Company's Board of directors: m.S. Bystrov, V.m. Kravchenko, n.G. Shulginov, who are members of the Board of directors of a party to the transaction Rent value determined by the supplemen- tary agreement is RuB 24,135.72, including VAt (18 %) per month. the total rental payment under the agree- ment for 11 months is RuB 265,492.92, including VAt (18 %).the total rent for the entire term of the premise lease taking into account its prolongation, shall not be or ex- ceed 2 percent of the book value of assets of PJSC fGC uES according to its account- ing statements at the last reporting date. Service price under the agreement shall not exceed RuB 16,700,000.00, including VAt (18%) total price of services for the entire term of the agreement taking into account its pro- longation should not be or exceed 2 percent of the book value of assets of PJSC fGC uES according to its accounting statements at the last reporting date. the price of services under the agreement for the provision of services for equipment placement is RuB 12,074.48, including VAt (18 %). total price under the agreement for render- ing services on equipment placement for a period of 12 months is RuB 144,893.76, including VAt (18%). total price of services for the entire term of the agreement taking into account its prolongation, shall not be or exceed 2 (two) percent of the book value of assets of PJSC fGC uES according to its accounting statements at the last reporting date. due to the fact that the agreement on the transfer and protection of information con- stituting a commercial secret does not and cannot entail for the parties the liabilities of monetary nature, and not related to the transfer of property (property rights), agree- ment price is not determined . 350. 351. 352. 353. Agreement on the transfer and protection of information constituting a commercial secret Supplementary agreement no. 4 to the agreement no. 07/13 of 13.03.2013 for maintenance and diagnostic inspection of electric grid facilities Supplementary agreement no. 2 to the agreement of 09.10.2012 no. 212 for execu- tion of works for the project: “Reconstruction of Baksan SS 330 kV” (replacement of air circuit breakers 330 kV) for the needs of the federal Grid’s branch– "mES of South" Supplementary agreement no. 8 to the agreement 06/13 of 18.02.2013 on repairs, troubleshooting of equipment and targeted programmes for the SS and ohl of mES of Western Siberia PJSC fGC uES and JSC “Electrosetservice unEG” Amendments to the agreement of 13.03.2013 no. 07/13 for maintenance and diagnostic inspection of electric grid facilities Work price under the supplementary agree- ment shall not exceed RuB 224,374,883.95, including VAt (18%) the Company’s Board of directors (minutes no. 296 of 07.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction PJSC fGC uES and JSC “Electrosetservice unEG” Amendments to the agreement of 09.10.2012 no. 212 due to the fact that the supplementary agreement does not change the price of the agreement of 09.10.2012 no. 212, price is not determined the Company’s Board of directors (minutes no. 296 of 07.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction PJSC fGC uES and JSC “Electrosetservice unEG” Amendments to the agreement no. 06/13 of 18.02.2013 on repairs, troubleshooting of equip- ment and targeted programmes for the SS and ohl of mES of Western Siberia due to the fact that the supplementary agreement does not change the price of the agreement of 18.02.2013 no. 06/13, price of work is not determined . the Company’s Board of directors (minutes no. 296 of 07.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** PJSC fGC uES and JSC “Electrosetservice unEG” 354. Agreement for execution of working documentation, construction and installa- tion, commissioning works with equipment supply for the project: "Reconstruction of relay protection and PA at metallurgicheskaya SS 750 kV, Yuzhnaya SS 330 kV, Zheleznogorskaya SS 330 kV, Kurskaya SS 330 kV (the power output of the Kursk nPP)" 355. Agreement on repair and maintenance of electric grid facilities PJSC fGC uES and JSC “Chitatechenergo” 356 Agreement for the provision of transport services PJSC fGC uES and JSC “Electrosetservice unEG” 158 under the agreement, the Contractor (JSC "Elec- trosetservice unEG") undertakes to perform a complex of works on: - development of working documentation; - organisation of field supervision; - reconstruction of the object, - and to provide a complete set of materials, equip- ment, spare parts for equipment in accordance with the documentation, and deliver the result to the Customer (PJSC fGC uES) the Contractor (JSC "Chitatechenergo") under- takes to perform repair and maintenance of electric grid facilities (hereinafter - works) in accordance with the technical specifications and the Customer (JSC fGC uES) undertakes to accept result of work and pay for it the Contractor (PJSC fGC uES) undertakes to provide, on request of the Customer (JSC "Electro- setservice unEG"), the institutional and technical capacity of the services to the Customer vehicle for payment for temporary use and implementation by the provider of vehicles and their operation for transportation support of the Customer’s activities Agreement for the provision of services on placement of communication equipment RuS in Chita for the needs of trans-Baikal PmES PJSC fGC uES and JSC “Chitatechenergo” the Customer (PJSC fGC uES) requests, and the Contractor (JSC "Chitatechenergo") undertakes to provide services on placement of equipment of a Single digital network of electric Power in its production premises located at the address: trans- baikalian Edge, Chita, Profsoyuznaya str., 23, with a total area 115.2 sqm Agreement for the provision of services for operational maintenance of cells Sobo- linaya-1 and Sobolinaya-2 110 kV at 220 kV Kartopia SS PJSC fGC uES and JSC "tyumenenergo" the Contractor (PJSC fGC uES) undertakes to provide services on operation and maintenance of Customer-owned (JSC tyumenenergo) linear high-voltage equipment of cells Sobolinaya-1 and Sobolinaya-2110 kV, located on the territory of 220 kV Kartopia SS 357. 358. 359. Work price of the agreement will not exceed RuB 107,436,265.20, including VAt (18%) Governing body that resolved to approve the transaction (minutes' date and number) the Company’s Board of directors (minutes no. 296 of 07.12.2015) Person(s) interested in the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Work price of the agreement will not exceed RuB 7,015,217.82, including VAt (18%) the Company’s Board of directors (minutes no. 296 of 07.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti the Company’s Board of directors (minutes no. 296 of 07.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction 159 the Company’s Board of directors (minutes no. 296 of 07.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti the Company’s Board of directors (minutes no. 296 of 07.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti Service price under the agreement will not exceed RuB 500,000.00, including VAt (18%). total price of services for the entire term of the agreement for the provision of transport services taking into account its prolongation should not be equal to or greater than 2 (two) percent of the book value of assets of PJSC fGC uES accord- ing to its accounting statements at the last reporting date. the price of services under the agreement is RuB 79,000.00, including VAt (18%) per month. total price of services for the period from 01.01.2015 to 31.12.2015 under the agreement for the provision of services on placement of communications equipment RuS in Chita for the needs of trans-Baikal PmES is RuB 948,000.00, including VAt (18%) the price of services under the agreement is RuB 53,709.21, including VAt (18 %) per month. the total price under the agreement is RuB 483,382.89, including VAt (18%). total price for the provision of services for the entire term of the agreement taking into account its prolongation, shall not be or exceed 2 (two) percent of the book value of assets of PJSC fGC uES according to its accounting statements at the last reporting date. PJSC fGC uES and JSC “Kuban trunk Grids” Amendments to paragraph 1 of the supplementary agreement no. 17 to the agency agreement of 29.05.2006 no. 69 Works price, as determined in the supple- mentary agreement shall not exceed RuB 80,770,000.00, including VAt (18%) the Company’s Board of directors (minutes no. 296 of 07.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti Supplementary agreement no. 17 to the Agency agree- ment of 29.05.2006, no. 69 on the implementation of the investment program of JSC "Kuban trunk Grids" on reconstruction and technical re-equipment of electric grid facilities APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** 360. 361. Agreement on performance of works on maintenance and repair of communication equipment PJSC fGC uES and JSC “muS Energetiki” PJSC fGC uES and it Energy Service, llC Agreement on performance of works on modernisation of automated measuring and information system for electricity fiscal metering with respect to formation of the normative-reference informa- tion of points of supply 362. Agreement for the recovery work PJSC fGC uES and PJSC idGC of the South the Contractor (JSC "muS Energetiki") undertakes to perform works on maintenance and repair of communications equipment for the needs of the federal Grid’s branch- Vyborg PmES in accordance with the technical task of the Customer (PJSC fGC uES), and the Customer undertakes to accept result of work and pay for it the Customer (PJSC fGC uES) charges and pays for, and the Contractor (it Energy Service, llC) undertakes to perform works on modernisation of automated measuring and information system for electricity fiscal metering with respect to formation of the normative-reference information of points of supply According to the Customer (PJSC idGC of the South) the Contractor (PJSC fGC uES) undertakes to perform emergency recovery work on liquidation of consequences of natural disaster at facilities of PJSC idGC of the South branch - "Astrakhanenergo" using Customer's materials 160 363. Supplementary agreement no. 1 to the real property lease contract of 28.01.2015 no. 15/154m PJSC fGC uES and PJSC "moESK" Amendments to the real property lease contract of 28.01.2015 no. 15/154 364. Agreement PJSC fGC uES and PJSC "moESK" PJSC fGC uES and JSC R&d Centre of fGC uES 365. Agreement on performance of works (adjustment of project documentation, working documentation, construc- tion and commissioning, the equipment, registration of land rights) for the project: "Reconstruction of "Shakhty" SS 500 kV and SS 220/110/10 kV Sh 30 (installation of recti- fier devices of ice melting with the reconstruction of scheme of ice melting for melting ice on outgoing ohl 220 kV)" for the needs of PJSC fGC uES branch - mES of South the Contractor (PJSC "moESK") takes responsi- bilities for the technical operation of the network facilities owned by the Customer (PJSC fGC uES), located at: moscow, Akademika Chelomeya str., 5A, in accordance with the Rules of technical operation of consumer electrical installations, ap- proved by order of ministry of energy of 13.01.2003 no. 6, and instructions for the operation of the power facility, including, but not limited to: - operational work - inspection, - implementation of installation of power facilities, - testing to ensure the power supply of the object the Contractor (JSC "R&d Centre of fGC uES") undertakes to perform a complex of works on: - registration of rights to land plots for design and survey works (if necessary); - engineering survey; - registration of rights to land plots for the recon- struction of the object; - adjusting the project documentation and the design documentation; - the examination of project documentation; - design supervision; - reconstruction as well as providing a complete set of materials, equipment, spare parts for equipment in accor- dance with the design and working documentation, and deliver the result to the Customer (PJSC fGC uES) Works price of the agreement is RuB 16,872,04700, including VAt (18%) Governing body that resolved to approve the transaction (minutes' date and number) the Company’s Board of directors (minutes no. 296 of 07.12.2015) Person(s) interested in the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti Works price of the agreement is RuB 489,333.75, including VAt (18%) the Company’s Board of directors (minutes no. 296 of 07.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti Works price under the agreement on recovery works between PJSC fGC uES and PJSC "idGC of the South", that is an interest- ed-party transaction, is RuB 26,748.75, including VAt (18 %) in the amount of RuB 4,080.32 due to the fact that the supplementary agreement to the real property lease con- tract of 28.01.2015 no. 15/154 does not change the amount of the rental payment under the real property lease contract of 28.01.2015 no. 15/154m, rental value is not determined Service price under the agreement is RuB 79,842.04, including VAt (18%) per year. total price of services for the entire term of the agreement, taking into account its prolongation, shall not be or exceed 2 percent of the book value of assets of PJSC fGC uES according to the accounting state- ments at the last reporting date. the Company’s Board of directors (minutes no. 296 of 07.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti the Company’s Board of directors (minutes no. 296 of 07.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti, members of the Company’s Board of directors: o.m. Budargin, V.m. Kravchenko and A.A. demin, who are members of the Board of directors of a party to the transaction 161 the Company’s Board of directors (minutes no. 296 of 07.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti, members of the Company’s Board of directors: o.m. Budargin, V.m. Kravchenko and A.A. demin, who are members of the Board of directors of a party to the transaction Works price shall not exceed RuB 50,330,640.00, including VAt (18%) the Company’s Board of directors (minutes no. 296 of 07.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti, members of the Company’s management Board: A.A. Zagaratsky, m.n. Pichugina, who are members of the Board of directors of a party to the transaction APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** 366. Agreement for the provision of services PJSC fGC uES and JSC “muS Energetiki” Service price under the agreement shall not exceed RuB 31,464.25, including VAt (18 %) Governing body that resolved to approve the transaction (minutes' date and number) the Company’s Board of directors (minutes no. 296 of 07.12.2015) Person(s) interested in the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti Works price under the agreement shall not exceed RuB 43,355,084.54, including VAt (18%) the Company’s Board of directors (minutes no. 298 of 11.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction the Contractor (PJSC fGC uES) undertakes to provide the Customer (JSC "muS Energetiki") with educational services for the organisation and con- duct of training on professional development on "Teaching skills in first aid to persons injured". the program and other conditions of educational services, as well as a list of Customer employees sent for training to the Contractor are determined by the Parties in the program. the Contractor (JSC "Electrosetservice unEG") undertakes to perform a complex of works on complex technical upgrading of the object, and deliver the result to the Customer (JSC fGC uES), and the Customer undertakes to accept result of works and pay the stipulated price as set forth in the agreement JSC fGC uES and JSC “Elec- trosetservice unEG” 367. 368. Contracting agreement no. 050-13/Suid of 31.10.2013 for the supply of material and technical resources and equipment, construction and installation and commis- sioning of the replacement program tt 110-750 kV at JSC fGC uES for the needs of the federal Grid’s branch- Southern PmES Supplementary agreement no. 1 to the agreement of 18.02.2013 no. 34-2013 on construction and installation, commissioning works for the program of replacement of tt 110-750 kV at JSC fGC uES 162 PJSC fGC uES and JSC “Electrosetservice unEG” Amendments to the agreement of 18.02.2013 no. 34-2013 in terms of cost and work schedule due to the fact that the agreement does not change the price of the agreement of 18.02.2013 no. 34-2013, price of work is not determined the Company’s Board of directors (minutes no. 298 of 11.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction 163 369. Real property lease contract PJSC fGC uES and JSC “Electrosetservice unEG” PJSC fGC uES and JSC “Electrosetservice unEG” 370. Agreement for the execution of working documentation, construction and installation, commissioning works with equipment supply for the project: "Reconstruction of northern SS 220 kV to set the third At 220/110/10 kV with a capacity of 200 mVA, the expansion of the Ru 110 kV of northern SS 220 kV with the construction of two new cells for the implementation of tP JSC "tula regional corporation of development" for the needs of the federal Grid’s branch- Priokskoye PmES" the lessor (PJSC fGC uES) undertakes to provide to the lessee (JSC "Electrosetservice unEG") real property under the transfer and acceptance certificate for temporary possession and use for a fee, and the lessee undertakes to pay rent and to return the facilities to the lessor upon the agree- ment expiration in good working condition (subject to normal wear and tear) According to the agreement, the Contractor (JSC "Electrosetservice unEG") undertakes to comply with the Customer (JSC fGC uES) a complex of works on: - registration of rights to land plots for the recon- struction of the object (if necessary); - development of working documentation; - for the implementation of supervision; - reconstruction; as well as providing a complete set of materials, equipment, spare parts for equipment in accor- dance with the design and working documentation. Rent under the Real property lease contract is RuB 150,985.74, including VAt (18%) per month, the total amount of rent for the entire term of the agreement shall not be or exceed 2 (two) percent of the book value of assets of PJSC fGC uES according to its accounting statements at the last reporting date. the Company’s Board of directors (minutes no. 298 of 11.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Work price of the agreement shall not exceed RuB 44,397,350.00, including VAt (18%) the Company’s Board of directors (minutes no. 298 of 11.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** Governing body that resolved to approve the transaction (minutes' date and number) Person(s) interested in the transaction PJSC fGC uES and JSC “Electrosetservice unEG” 371. Contracting agreement for construction and installation, commissioning works with equipment supply for the project: "Kotelnikovo SS 220 kV. Replacing the At-4" under the program of replacing the At for the needs of PJSC fGC uES branch - Volgo – dons- koye PmES" PJSC fGC uES and JSC “Electrosetservice unEG” 164 372. 373. Contracting agreement for development of working docu- mentation, supply of materi- als, execution of construction installation and commission- ing works under the program of increase of reliability of the main equipment of PJSC fGC uES SS and ohl (the program of modernisation of autotransformers, shunt reac- tors and oil circuit breakers, program of replacement and reinforcement of ohl sup- ports, the construction ohl by replacement of porcelain insulation) for the needs of PJSC fGC uES branch – "mES of urals" Contracting agreement for construction and installation and commissioning works under the program of increase of reliability of the main equipment of PJSC fGC uES SS and ohl for the needs of PJSC fGC uES branch - mES of South in 2015 under the title "Programme for the re- placement and reinforcement of ohl supports" the Contractor (JSC "Electrosetservice unEG") undertakes to perform to the Customer (PJSC fGC uES) works on: - dismantling of existing equipment (autotrans- former At-4, foundations and construction of the oil catch tank of At-4, arresters 110 kV of At-4, arresters 10 kV of At-4); – the construction of building structures under equipment with delivery of designs and materials; – supply of oPn-110 kV and oPn-10 kV, coupling, armature contact and insulators; – installation and commissioning of primary equip- ment; – the construction of the oil channels to the exist- ing well; – installation and commissioning of secondary equipment (relay protectionand automatics, control current circuits and SChCn); – the supply of secondary equipment and materi- als; – integration into the existing automated measur- ing and information system for electricity fiscal metering; – installation of the grounding system; – training of operating personnel of the Customer; - services in chief-installation of At-4 and the sec- ondary switching (relay protection and automaics); – commissioning, site acceptance tests and com- missioning of all systems listed objects; – provision of warranty after commissioning of the equipment in the framework of technical re-equip- ment, replacement of the autotransformer At-4. According to the agreement, the Contractor (JSC "Electrosetservice unEG") undertakes to perform for the Customer (PJSC fGC uES) a complex of works on reconstruction of the objects: - on the programme of modernisation of autotrans- formers, shunt reactors and oil circuit breakers: construction and installation works; commissioning. - on the programme of replacement and reinforce- ment of ohl supports: development of working documentation; delivery of materials; construction and installation work. - on the programme of reconstruction by replacing the porcelain insulation: development of working documentation; construction and installation work. Work price of the agreement shall not exceed RuB 21,445,095.62, including VAt (18%) the Company’s Board of directors (minutes no. 298 of 11.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction 165 Works price under the agreement shall not exceed RuB 48,942,000.00, including VAt (18%) the Company’s Board of directors (minutes no. 298 of 11.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction PJSC fGC uES and JSC “Electrosetservice unEG” According to the agreemet, the Contractor (JSC "Electrosetservice unEG") undertakes to comply with the Customer (PJSC fGC uES) a complex of works on reconstruction and to provide a complete set of materials in accordance with project and working documentation Works price under the agreement shall not exceed RuB 43,543,072.06, including VAt (18%) the Company’s Board of directors (minutes no. 298 of 11.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** Governing body that resolved to approve the transaction (minutes' date and number) Person(s) interested in the transaction 374. 375. Agreement for the replace- ment of linear portals and traverse of the northern SS 220 kV, Kirovskaya, neftepro- vod, Vladimirovka of PJSC fGC uES branch – "Volgo- donskoye PmES" Agreement for the construc- tion and installation work with supply of materials for the project: "Replacement of ohl support on Volgo-okskaya PmES" PJSC fGC uES and JSC “Electrosetservice unEG” PJSC fGC uES and JSC “Electrosetservice unEG” under the agreement, the Contractor (JSC "Elec- trosetservice unEG") undertakes to perform works on replacement of linear portals and traverse of the northern SS 220 kV, Kirovskaya, nefteprovod, Vladimirovka of PJSC fGC uES branch – "Volgo- donskoye PmES" in accordance with the technical tasks of the Customer (PJSC fGC uES) the Contractor (JSC "Electrosetservice unEG") undertakes to perform a complex of works in ac- cordance with design and estimate documentation provided by the Customer (PJSC fGC uES) for the supply of materials, execution of construction and installation works for the project: "Replacement of ohl support on Volgo-okskaya PmES": • OHL 220 kV Kostromskaya GRES-Vichuga II chain of support: no. 33, no. 133; • OHL 220 kV Kostromskaya GRES-Ivanovo II chain of support: no. 175; • OHL 220 kV Kostromskaya GRES-Kostroma – 2 supports: no. 7, no. 31, no. 62, no. 63, no. 79; • OHL 220 kV Vladimirskaya - Steklovolokno - II chain of support: no. 32, no. 33. Work price of the agreement shall not exceed RuB 6,019,200.00, including VAt (18%) the Company’s Board of directors (minutes no. 298 of 11.12.2015) Works price under the agreement shall not exceed RuB 25,263,000.00, including VAt (18%) the Company’s Board of directors (minutes no. 298 of 11.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction 166 376. 377. 378. 379. Supplementary agreement no. 2 to the agreement of 08.10.2012 no. 206 to perform work for the project: "Reconstruction of Kropotkin SS 330 kV (replacement of air circuit breakers 330 kV) for the needs of the federal Grid’s branch– "mES of South" Supplementary agreement no. 2 to the agreement of 05.10.2012 no. 211 to perform work for the project: "Reconstruction of nalchik SS 330 kV (replacement of air circuit breakers 330 kV) for the needs of the federal Grid’s branch- mES of South Supplementary agreement no. 2 to the agreement of 08.10.2012 no. 207 to perform work for the project: "Reconstruction of mozdok SS 330 kV (replacement of air circuit breakers 330 kV) for the needs of the federal Grid’s branch– "mES of South" Supplementary agreement no. 2 to the agreement of 08.10.2012 no. 213 to perform work for the project: "Reconstruction of Vladika- vkaz-500 SS 330 kV (replace- ment of air circuit breakers 330 kV) for the needs of the federal Grid’s branch– "mES of South" PJSC fGC uES and JSC “Electrosetservice unEG” Amendments to the agreement of 08.10.2012 no. 206 due to the fact that the supplementary agreement does not change the price of the agreement of 08.10.2012 no. 206, price of work is not determined. the Company’s Board of directors (minutes no. 298 of 11.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction 167 PJSC fGC uES and JSC “Electrosetservice unEG” Amendments to the agreement of 05.10.2012 no. 211 due to the fact that the supplementary agreement does not change the price of the agreement of 05.10.2012 no. 211, price of work is not determined. the Company’s Board of directors (minutes no. 298 of 11.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction PJSC fGC uES and JSC “Electrosetservice unEG” Amendments to the agreement of 08.10.2012 no. 207 due to the fact that the supplementary agreement does not change the price of the agreement of 08.10.2012 no. 207, price of work is not determined. the Company’s Board of directors (minutes no. 298 of 11.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction PJSC fGC uES and JSC “Electrosetservice unEG” Amendments to the agreement of 08.10.2012 no. 213 due to the fact that the supplementary agreement does not change the price of the agreement of 08.10.2012 no. 213, price of work is not determined. the Company’s Board of directors (minutes no. 298 of 11.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** Governing body that resolved to approve the transaction (minutes' date and number) Person(s) interested in the transaction PJSC fGC uES and JSC “Electrosetservice unEG” Amendments to the agreement of 08.10.2012 no. 208 due to the fact that the supplementary agreement does not change the price of the agreement of 08.10.2012 no. 208, price of work is not determined. the Company’s Board of directors (minutes no. 298 of 11.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction 380. 381. 382. Supplementary agreement no. 2 to the agreement of 08.10.2012 no. 208 to perform work for the project: "Reconstruction of Prikumsk SS 330 kV (replacement of air circuit breakers 330 kV) for the needs of the federal Grid’s branch- mES of South Agreement for the replace- ment of suspended porcelain insulation on glass (linear valve) on oRu SS 220 kV; 500 kV for the needs of PJSC fGC uES branch – "nizhegorods- koe PmES" Agreement for the develop- ment of project and working documentation, construction and installation and commis- sioning works and supply of material and technical resources and equipment for the project "ohl 220 kV dorogobuzhskaya ChPP – talashkino, ohl 220 kV talashkino Smolensk–1, ohl 220 kV novobryanskaya – naitopovichi 2 chain" 168 PJSC fGC uES and JSC “Electrosetservice unEG” PJSC fGC uES and JSC “Electrosetservice unEG” 383. Agreement on performance of works on repair of electric grid facilities PJSC fGC uES and JSC “Electrosetservice unEG” PJSC fGC uES and JSC “Electrosetservice unEG” 384. Supplementary agreement no. 1 to the agreement of 31.10.2013 no. 050-13/Suid for the supply of material and technical resources and equipment, construction and installation and commission- ing works of the replacement program tt 110-750 kV at JSC fGC uES for the needs of the federal Grid’s branch– "Southern PmES" the Contractor (JSC "Electrosetservice unEG") undertakes to perform works on replacement of suspended porcelain insulation on glass (linear valve) on oRu SS 220 kV; 500 kV of PJSC fGC uES branch – "nizhegorodskoe PmES" in accordance with the technical task of the Customer (PJSC fGC uES) under the agreement, the Contractor (JSC "Electro- setservice unEG") undertakes to perform a com- plex of works to the Customer (PJSC fGC uES) on: - registration of rights to land plots for design and survey works (if necessary); - engineering survey; - registration of rights to land plots for the recon- struction (if necessary); - development of design and working documenta- tion; - reconstruction; - providing a complete set of materials, equipment, spare parts for equipment in accordance with the design and working documentation, and deliver the result to the Customer. under the agreement, the Contractor (JSC "Elec- trosetservice unEG") undertakes to perform works on replacement of cable braces in the amount of 100 pieces for 25 poles of ohl 220 kV: Arzamas – Bobylskaia and Bobylskaia – Kudima of PJSC fGC uES branch - nizhegorodskoe PmES in accordance with the technical task of the Customer (PJSC fGC uES) Amendments to the agreement of 31.10.2013 no. 050-13/Suid for the supply of material and technical resources and equipment, construction and installation and commissioning works of the replacement program tt 110-750 kV at JSC fGC uES for the needs of the federal Grid’s branch– "Southern PmES" 385. Supplementary agreement no. 3 to the rental agreement of 19.04.2012 no. 22-07/12 PJSC fGC uES and JSC “Electrosetservice unEG” Amendments to the rental agreement of 19.04.2012 no. 22-07/12 Work price of the agreement is RuB 2,130,716.56, including VAt (18%) the Company’s Board of directors (minutes no. 298 of 11.12.2015) Works price of the agreement shall not exceed RuB 13,204,703.00, including VAt (18%) the Company’s Board of directors (minutes no. 298 of 11.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction 169 Work price of the agreement is RuB 3,139,463.16, including VAt (18%) the Company’s Board of directors (minutes no. 298 of 11.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction due to the fact that the supplementary agreement does not change the price of works under the agreement of 31.10.2013 no. 050-13/Suid for the supply of mate- rial and technical resources and equip- ment, construction and installation and commissioning works of the replacement program tt 110-750 kV at JSC fGC uES for the needs of the federal Grid’s branch– "Southern PmES", the price of work is not determined . Rents are determined by the supplementary agreement is RuB 851,350.93, including VAt (18%) per month, the total amount of the rent for the entire term of the agreement of 19.04.2012 no. 22-07/12 should not be or exceed 2 percent of book value of assets of PJSC fGC uES according to its account- ing statements at the last reporting date. the Company’s Board of directors (minutes no. 298 of 11.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction the Company’s Board of directors (minutes no. 298 of 11.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** Governing body that resolved to approve the transaction (minutes' date and number) Person(s) interested in the transaction 386. Supplementary agreement no. 1 to the agreement of 10.12.2013 no. 201-2013 for the supply of equipment, construction and installation, commissioning works on the programme of replacement ohl 330-750 kV on the ob- jects of PJSC fGC uES branch – "mES of Center" phase i PJSC fGC uES and JSC “Electrosetservice unEG” Amendments to the agreement of 10.12.2013 no. 201-2013 in terms of cost and work schedule due to the fact that the supplementary agreement does not change the price of the agreement of 10.12.2013 no. 201-2013, the price of work is not determined . the Company’s Board of directors (minutes no. 298 of 11.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction 387. Agreement for the repair of video surveillance and fire alarm systems at the facilities of the Amur PmES PJSC “fGC uES” and JSC “Electrosetservice unEG” 170 388. 389. Supplementary agreement no. 3 to the agreement of 15.05.2013 no. 56/13 for execution of works on mainte- nance of electrical equipment Agreement for emergency repair works to replace a damaged high-voltage bush- ing of 220 kV f. from At-5 at Yamskaya SS 220 kV of PJSC fGC uES branch – Priokskoye PmES PJSC “fGC uES”, JSC “Elec- trosetservice unEG”, and JSC “Electrozavod” PJSC “fGC uES” and JSC “Electrosetservice unEG” 390. Agreement on compensation of expenses PJSC fGC uES and JSC "tyumenenergo" 391. Agreement on compensation of expenses PJSC fGC uES, JSC "tyum- enenergo" and JSC “YuRESK” 392. Agreement on compensation of expenses PJSC fGC uES and JSC idGC of urals According to the agreement, the Customer (JSC "Electrosetservice unEG") reports, and the Contrac- tor (PJSC fGC uES) undertakes the execution of the following works: the repair and replacement of video surveillance systems, access control, fire detection and alarm system in a fire at the facilities of the Amur PmES: 500 kV Amurskaya SS; Zeisky mu northern RES; novobureisky mu Eastern RES Amendments to the agreement of 15.05.2013 no. 56/13 the Contractor (JSC "Electrosetservice unEG") undertakes to comply with the Customer (PJSC fGC uES) emergency repair work to replace a dam- aged high-voltage bushing of 220 kV f. from At-5 at Yamskaya SS 220 kV of PJSC fGC uES branch – Priokskoye PmES PJSC fGC uES (the Company) compensates expenses to JSC "tyumenenergo" (the owner) for the implementation of activities for the recon- struction of owner's objects because of the need of Company's construction, according to project estimate documentation under the title: "ohl 220 kV nyaganskaya GRES – Kartopia" PJSC fGC uES (the Company) compensates expenses to JSC "tyumenenergo" (the owner no. 1) on the implementation of measures for the reconstruction of the object of common ownership "ohl-110 kV Vandmtor-Sergino 1,2 with a branch line of ohl 110 kV on SS "Zarechnaya" in connec- tion with necessity of formation of the object ohl 220 kV "nyaganskaya GRES – Kartopia". PJSC fGC uES (the Company) compensates for JSC idGC of urals (the owner) the costs of imple- menting the owner-focused events and in connec- tion with the Company's actions for construction of a Company's facility, which entails the necessity of reorganisation of the owner's object: SS 110/10 kV "Atymia", ohl-110 kV SS of Atimia – SS of Kartopia-2, letter 3, which is part of the electric grid complex of the SS 110/10kV "Atymia" belonging to the owner of the right of ownership Work price of the agreement is RuB 1,275,519.97, including VAt (18%) the Company’s Board of directors (minutes no. 298 of 11.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction due to the fact that the supplementary agreement does not change the price of the agreement of 15.05.2013 no. 56/13, price of work is not determined. the Company’s Board of directors (minutes no. 298 of 11.12.2015) Work price of the agreement shall not exceed RuB 1,044,461.46, including VAt (18 %) the Company’s Board of directors (minutes no. 298 of 11.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction 171 the amount of compensation under the agreement is RuB 116,746,222.44, including VAt (18%) the Company’s Board of directors (minutes no. 299 of 15.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti the amount of compensation under the agreement is RuB 55,365,227.22, including VAt (18%) the Company’s Board of directors (minutes no. 299 of 15.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti the amount of compensation under the agreement is RuB 13,183,130.20, including VAt (18%) the Company’s Board of directors (minutes no. 299 of 15.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** 393. Agreement on compensation of expenses PJSC fGC uES and PJSC idGC of Centre and Privolzhie 394. Real property lease contract PJSC fGC uES and PJSC idGC of Siberia 172 395. Agreement for operational support and technical mainte- nance of equipment PJSC fGC uES and PJSC "lenenergo" 396. Agreement of compensated provision of services PJSC fGC uES and PJSC idGC of north-West 397. Approval of related-party transactions PJSC fGC uES and PJSC idGC of South PJSC fGC uES (the Company) compensates to the PJSC idGC of Centre and Privolzhie (the owner) the costs of implementing the owner's activities in the interests and in connection with the Company's actions for construction (reconstruction, techni- cal re-equipment) of the electric grid facility under the title: "Complex technical re-equipment and reconstruction of 220 kV Vichuga SS", located in the ivanovo region, Vichuga, 2nd Kirovskaya street, 39 (hereinafter – objects), which involves the need of reconstruction (technical re-equipment, change of configuration) of the Owner's facilities. due to the compensation receivable of the Com- pany the Owner provides fulfillment (completion) of works on reconstruction of the owner's facili- ties, the installation of communication equipment at opposite ends of the SS 110 kV Zavolzhsk and SS 110 kV novlyanskaya, and also performs other activities related to the reconstruction of the owner's facilities. PJSC fGC uES (the lessor) undertakes to provide the PJSC idGC of Siberia (the lessee) real property, namely, premises no. 1 and no. 2 for staff accom- modation, garage space no. 3 for the placement of vehicles with the right to use the land plot with cadastral number 75:25:180104:0220 to accom- modate emergency and maintenance inventories, under the transfer and acceptance certificate for temporary possession and use for a fee, and the lessee undertakes to pay rent and to return the ob- ject to the lessor on termination of the agreement in good condition. PJSC fGC uES (the Contractor) undertakes to carry out operational support and technical maintenance of power equipment, owned by the PJSC "lenener- go" (the Customer) at its own efforts and expenses in accordance with the terms of reference. on the instructions of PJSC fGC uES (the Cus- tomer), PJSC idGC of north-West (the Contractor) undertakes to provide the following services: to co- ordinate the production of works in security zones of ohl 35-110 kV and SS, to allow the Customer's employees to work in security zones of transmis- sion lines and substation, as well as to provide technical supervision of works at the objects. Compensation to PJSC idGC of South (the owner) costs for the exercise by the owner of activities in the interests and in connection with the actions of PJSC fGC uES (the Company) for construction of a facility of the Company that involve the need of Reconstruction of objects of the owner under title: "ohl 500 kV Rostovskaya nPP – tikhoretskaya no. 2 with extension of SS 500 kV tikhoretsk". Agency agreement under the title: "ohl 500 kV Rostovskaya nPP – tikhoretskaya no. 2 with extension of SS 500 kV tikhoretsk" between PJSC fGC uES (the Agent) and PJSC idGC of the South (Principal). Governing body that resolved to approve the transaction (minutes' date and number) the Company’s Board of directors (minutes no. 299 of 15.12.2015) Person(s) interested in the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti the Company’s Board of directors (minutes no. 299 of 15.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti 173 the Company’s Board of directors (minutes no. 299 of 15.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti the estimated amount of compensation under the agreement for compensation is RuB 62,823,471.64, including VAt (18%). The final amount of compensation agreed by the Parties in the supplementary agree- ment and includes all the owner's costs associated with the execution of the com- pensation agreements. Rental value under the agreement is RuB 47,451.21, including VAt (18%) per month. the total rental payment under the agree- ment for 11 months is RuB 521,963.31, including VAt (18%). the total rental payment under the real property lease contract for the entire term of the agreement, taking into account its prolongation, shall not be or exceed 2 (two) percent of the book value of assets of PJSC fGC uES according to its accounting state- ments at the last reporting date. the price of services under the agreement shall not exceed RuB 251,215.79, including VAt (18%), according to the local estimate shall not exceed RuB 38,321.05. With the price of services under the agreement per month is: - RuB 20,934.65, including VAt (18%) for the period from 01.01.2014 to 30.11.2014; - RuB 20,934.00, including VAt (18%) for the period from 01.12.2014 to 31.12.2014. the price of services under the agreement shall not exceed RuB 236,000.00, including VAt (18%) the Company’s Board of directors (minutes no. 299 of 15.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti the amount of compensation according to the agreement about compensation is RuB 18,852,780.00, including VAt (18%) the Company’s Board of directors (minutes no. 299 of 15.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti the price of the agency agreement is RuB 18,852,780.00, including VAt (18%), includ- ing the cost of agency fees in the amount of RuB 118,000.00, including VAt (18 %) APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS Governing body that resolved to approve the transaction (minutes' date and number) the Company’s Board of directors (minutes no. 299 of 15.12.2015) Person(s) interested in the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti 175 no. transaction description transaction parties transaction subject* transaction price** 398. Real property lease contract PJSC fGC uES and JSC “muS Energetiki” PJSC fGC uES (the lessor) undertakes to transfer to JSC "muS Energetiki" (the lessee) real property under the transfer and acceptance certificate for temporary possession and use for a fee. 174 the amount of the lease payment per month under the agreement consists of a fixed part and a variable part: - the value of the fixed part of the rent for the lease of non-residential premises with a total area of 1,498.82 sqm, located on 3rd floor in a building (non-residential premises in block B, space 20,072.90 sqm, Belove- zhskaya str., 4, inv. no. 0100-1-11-00008), is RuB 1,951,068.95, including VAt (18%); - the value of the fixed part of the rent for the lease of non-residential premises with a total area of 159.93 sqm, intended for general use and located on the 3rd floor in a building (non-residential premises in block B, space 20,072.90 sqm, Belovezhskaya str., 4, inv. no. 0100-1-11-00008), is RuB 104,093.37, including VAt (18%); - the value of the fixed part of the rent for the lease of parking spaces in the amount of 8 units with numbers: 1-8, located on the 1st floor in a building (non-residential premises in block B, space 20,072.90 sqm, Belovezhskaya str., 4, inv. no. 0100-1-11- 00008) is RuB 99,299.36, including VAt (18%) - the value of the fixed portion of the rent for parking spaces in the amount of 20 units with numbers: 316-335, located on the pla- nar structure (open guest parking, Belove- zhskaya str., 4, inv. no. 0100-1-12-00415), is RuB 137,210.40, including VAt (18%). the variable part of the rent are: - utilities (heat, water, sewerage, purification of water), and electricity; - cleaning of these facilities, including solid waste removal, deratization, disinfection and disinsection; - communication services; - maintenance of engineering systems of these objects and external networks; - maintenance of fire safety systems of specified objects; - ensuring protection and access control; - lighting rentals (facade and street lighting with consumables); - service of public transportation; - wash the outside glass and ventilated facade. the magnitude of the variable part of the rent for non-residential premises with a total area 1,498.82 sqm. located on the 3rd floor in a building (non-residential premises in block B, space 20,072.90 sqm, Belove- zhskaya str., 4, inv. no. 0100-1-11-00008) and parking spaces in the amount of 8 units with numbers: 1-8, located on the 1st floor in a building (non-residential premises in block B, space 20,072.90 sqm, Belovezhs- kaya str., 4, inv. no. 0100-1-11-00008) is cal- culated in proportion to the area transferred for temporary possession and use of the lessee's object. APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** Governing body that resolved to approve the transaction (minutes' date and number) Person(s) interested in the transaction 176 399. Agreement for the provision of complex services PJSC fGC uES and JSC “muS Energetiki” 400. Contracting agreement PJSC fGC uES and JSC “Electrosetservice unEG” 401. Agreement on compensation of expenses PJSC fGC uES and PJSC “Kubanenergo” 402. 403. Agreement of 20.05.2014 no. 806/14 on the provision of services on placement of communication equipment JSC fGC uES and JSC idGC of Volga Agreement on performance of works on repair of fiber optic cable in lightning protection cable PJSC fGC uES and JSC “Chitatechenergo” 404. R&d agreement PJSC fGC uES, JSC "Enin", JSC “R&d Centre of fGC uES” Providing comprehensive technical support ser- vices and maintenance of facilities of KASuB of north-West in 2015 between PJSC fGC uES (the Customer) and JSC "muS Energetiki" Contract for performance of design and explora- tion works, working documentation, construction and installation, commissioning works with equip- ment supply for reconstruction of ZRu 6 kV SS 220kV londoko for tP JSC "teploozersky cement plant" between PJSC fGC uES (the Customer) and JSC "Electrosetservice unEG" (the Contractor). the agreement on compensation of expenses under title: "ohl 500 kV Rostovskaya nPP – tikhoretskaya no. 2 with extension of SS 500 kV tikhoretsk" between PJSC fGC uES (the Company) and PJSC “Kubanenergo” (the owner) JSC idGC of Volga (the Contractor) shall provide PJSC fGC uES (the Customer) service on place- ment of communications equipment and other property of the Customer in the premises belong- ing to the Contractor JSC "Chitatechenergo" (the Contractor) undertakes to produce on a plot of ohl-35 kV tK-302 sup. no. 27 – sup. no. A2 – ohl-110 kV Rt-104 sup. no. 34 repair of fiber optic cable in lightning protection cable PJSC fGC uES (the Customer) assigns and JSC "Enin", JSC R&d Centre of fGC uES" (the Contrac- tor) undertakes to perform research, developmen- tal and technological works on the topic: "Study and development of a prototype of compact devices for distributed series compensation for transmission lines 220 kV with the selection and justification of the pilot implementation". the magnitude of the variable part of the rent for non-residential premises with a total area 159.93 sqm, intended for general use and located on the 3rd floor in a build- ing (non-residential premises in block B, space 20,072.90 sqm, Belovezhskaya str., 4, inv. no. 0100-1-11-00008) is calculated with a factor of 0.5. the magnitude of the variable part of the rent for parking spaces in the amount of 20 units with numbers: 316-335, located on the planar structure (open guest parking, Belovezhskaya str., 4, inv. no. 0100-1-12- 00415), calculated in proportion to the amount transferred to the use lessee park- ing spaces. the magnitude of the variable part of the rent in respect of connection services is cal- culated upon the lessee rendered services. the total amount of rent for the entire term of the property lease agreement, taking into account its prolongation, shall not be or exceed 2 (two) percent of the book value of assets of PJSC fGC uES according to its accounting statements at the last reporting date. the price of services under the agreement shall not exceed RuB 3,200,000.00, includ- ing VAt (18%) the Company’s Board of directors (minutes no. 299 of 15.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti Work price of the agreement shall not exceed RuB 5,295,607.43, including VAt (18%) the Company’s Board of directors (minutes no. 299 of 15.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction the amount of compensation under the agreement is RuB 30,477,150.00, including VAt (18%) the Company’s Board of directors (minutes no. 299 of 15.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti the price of services under the agreement per month is RuB 38,320.61, including VAt (18%) the price of services under the agree- ment for the period from 01.01.2014 to 31.12.2014 is RuB 459,847.32, including VAt (18%) Work price of the agreement is RuB 374,741.62, including VAt (18%) the Company’s Board of directors (minutes no. 299 of 15.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti the Company’s Board of directors (minutes no. 299 of 15.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti Works price of the agreement is RuB 29,900,000.00, including VAt 18% the Company’s Board of directors (minutes no. 299 of 15.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti, members of the Company’s management Board: A.A. Zagaratsky, m.n. Pichugina, who are members of the Board of directors of a party to the transaction 177 APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** 405 Agreement to perform design and survey work PJSC fGC uES and JSC “dESP” Works price of the agreement shall not ex- ceed RuB 404,468.00, including VAt (18%) Governing body that resolved to approve the transaction (minutes' date and number) the Company’s Board of directors (minutes no. 300 of 21.12.2015) Person(s) interested in the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction 178 406. 407. 408. 409. 410. 411. 412. Agreement for the provision of services to support the cor- porate information manage- ment system PJSC fGC uES and llC “it Energy Service” Supplementary agreement of 21.03.2014 no. 3 to the agree- ment of 16.03.2012 no. 3896 JSC fGC uES and JSC “dESP” Agreement on performance of works on development of project, working and procure- ment documentation PJSC fGC uES and JSC R&d Centre of fGC uES Execution of design and survey works for the project: "Reconstruction of reserve cells ZRu 6 kV of SS 220kV “Kremenki” with the installation of vacuum circuit breakers, current transformers for the implementation of the tP llC "novoulyanovsk- cogeneration", the application of 12.09.2013 m6/ ZtP/302" between PJSC fGC uES (the Customer) and JSC "dESP" (the Contractor). it Energy Service, llC (the Contractor) undertakes to provide a set of services to support and / or technical support of the corporate management information system (Additional modules) of PJSC fGC uES (the Customer). Amendments to the agreement of 16.03.2012 no. 3896 for the development of design and working documentation for the project: "Construction of SS 500 kV “Svyatogor” with entries of ohl 500 kV and 220 kV" of the federal Grid’s branch– "mES of Western Siberia" between JSC fGC uES (the Customer) and JSC "dESP" (the Contractor). Execution of works on developing design, technical and procurement documentation: "750 kV lenin- gradskaya nPP-2 – leningradskaya ohl, 750 kV leningradskaya nPP - leningradskaya nPP -2 ohl, access ohl 750 kV leningradskaya nPP - lenin- gradskaya on oRu 750 kV of leningradskaya nPP- 2" between PJSC fGC uES (the Customer) and JSC R&d Centre of fGC uES (the Contractor). Statement for offseting coun- ter claims between PJSC fGC uES and JSC "Kuban trunk Grids" Agreement of 01.10.2014 no. ChB-0239-2014 for the provi- sion of services on placement of equipment PJSC fGC uES and JSC "Kuban trunk Grids" Counter claims to be offset JSC fGC uES and JSC Rushydro JSC Rushydro (the Contractor) undertakes to provide services to JSC fGC uES (the Customer) on placement of the equipment owned by the Cus- tomer at the production facility of Rushydro branch - Cheboksarskaya hPP. Agreement for performing design and exploration works, drafting working documenta- tion PJSC fGC uES and JSC R&d Centre of fGC uES Supplementary agreement no. 1 (with the protocol of dis- agreements) to the agreement of 22.12.2014 no. 1104/14- 340027 PJSC fGC uES and JSC “Yantarenergo” Execution of design and exploration works, work- ing documentation under the project: "Construction of approaches of 220 kV Klyuchevaya - Sivaki ohl in Ru 220 kV of SS 220 kV nPS-23 (for tP of energy receiving devices of llC "dalnefteprovod") (tC Application no. m3/ZtP/338 of 21.07.2014)" between PJSC fGC uES (the Customer) and JSC R&d Centre of fGC uES (the Contractor). Supplementary agreement no. 1 (with the protocol of disagreements) to the agreement of 22.12.2014 no. 1104/14-340027 for repair and maintenance of electric grid facilities between PJSC fGC uES (the Customer) and JSC "Yantarenergo" (the Contrac- tor). the price of services under the agreement shall not exceed RuB 22,570,473.60, includ- ing VAt (18%) the Company’s Board of directors (minutes no. 300 of 21.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti Works price is not determined due to the fact that the supplementary agreement does not change the price of the agreement the Company’s Board of directors (minutes no. 300 of 21.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Works price of the agreement shall not exceed RuB 319,115,000.00, including VAt (18%) the Company’s Board of directors (minutes no. 300 of 21.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti, members of the Company’s management Board: A.A. Zagaratsky, m.n. Pichugina, who are members of the Board of directors of a party to the transaction 179 Amount of counter claims to be offset is RuB 996,001,928.80, including VAt (18%) the price of services under the agreement is RuB 35,400.00, including VAt (18%) per quarter. the price of services under the agree- ment for the period from 01.10.2014 till 31.12.2015 is RuB 177,000.00, including VAt (18 %) the Company’s Board of directors (minutes no. 300 of 21.12.2015) the Company’s Board of directors (minutes no. 300 of 21.12.2015) Works price of the agreement shall not exceed RuB 13,137,304.00, including VAt (18%) the Company’s Board of directors (minutes no. 300 of 21.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti members of the Company's Board of directors V.m. Kravchenko, m.S. Bystrov, who are mem- bers of the Board of directors of a party to the transaction; member of the Board of directors and the Chairman of the management Board n.G. Shulginov, who is a General director of a party to the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti, members of the Company’s management Board: A.A. Zagaratsky, m.n. Pichugina, who are members of the Board of directors of a party to the transaction Price of work determined by the supple- mentary agreement, shall not exceed RuB 1,249,143.28, including VAt (18%) the Company’s Board of directors (minutes no. 300 of 21.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** 413. Agreement on termination of the Real property lease contract PJSC fGC uES and JSC “CiuS uES” 414 license agreement PJSC fGC uES and JSC R&d Centre of fGC uES PJSC fGC uES (the lessor) and JSC "CiuS uES" (the lessee) agreed to terminate the real prop- erty lease contract of 14.10.2014 no. 4055 since 01.06.2015, the object of which is a part of non- residential premises with a total area of 10.6 sqm, 2 floor of 5-storey administrative building (cadas- tral (conditional) number 59-59-20/068/2006-453), located at the address: the Perm Edge, Perm, Visherskaya str., 34. PJSC fGC uES (the licenser) undertakes to entitle JSC R&d Centre of fGC uES (the licensee), on the basis of a simple (nonexclusive) license, to use the know-how on the territory of the Russian federation and the CiS countries, provided that the licensee pays remuneration to the licensor. 180 415. Agreement for performance of works on adjustment of design documentation PJSC fGC uES and JSC R&d Centre of fGC uES 416. Agreement to perform design and exploration works, work- ing documentation PJSC fGC uES and JSC R&d Centre of fGC uES 417. Supplementary agreement no. 2 to the agreement of 05.10.2012 no. 209 PJSC fGC uES and JSC “Electrosetservice unEG” 418. Agreement on performance of works on adjustment of design documentation PJSC fGC uES and JSC R&d Centre of fGC uES Execution of works on tupdating design documen- tation for the project: "p by id (Reconstruction of ohl-330-18 Stavropol – Blagodarnaya (suspension surge arrester) for the needs of the federal Grid’s branch– "mES of South" between PJSC fGC uES (the Customer) and JSC R&d Centre of fGC uES (the Contractor). Execution of design and exploration works, drafting working documentation for the project: "Construc- tion of approaches of 220 kV Khabarovskaya -Birobidzhan no. 1 ohlwith a branch line to SS ikura/t in Ru 220 kV SS 220 kV nPS-32" (for tP of energy receiving devices of llC "dalnefteprovod") (tC Application no. m3/ZtP/340 of 21.07.2014)" between PJSC fGC uES (the Customer) and JSC R&d Centre of fGC uES (the Contractor). Supplementary agreement no. 2 to the agreement of 05.10.2012 no. 209 to perform work for the project: "Reconstruction of 330 kV Stavropol SS (replacement of air circuit breakers 330 kV) for the needs of the federal Grid’s branch– "mES of South" between PJSC fGC uES (the Customer) and JSC "Electrosetservice unEG" (the Contractor). Execution of works on tupdating design docu- mentation for the project: "improving lightning- surge proofness by id (Reconstruction of 330 kV Budennovsk-Kizlyar-Chiryurt ohl (suspension surge arrester) for the needs of the federal Grid’s branch- mES of South" between PJSC fGC uES (the Customer) and JSC R&d Centre of fGC uES (the Contractor). Agreement on termination of the real property lease contract does not and can- not entail additional monetary obligations, the price of the services / work under the agreement. the price of services (remuneration) under the license agreement consists of the amount of: - fixed payments in the amount of RUB 200,000.00 for each set of technical documentation under the agreement (not subject to VAt); - current transfers (royalties) in the amount of 80% of sales volume for subcontracts not subject to VAt. total price of services (remuneration) under a license agreement for the entire term of the license agreement, taking into account its prolongation, shall not be equal or ex- ceed 2 percent of the book value of assets of PJSC fGC uES according to its account- ing statements at the last reporting date. Works price of the agreement shall not ex- ceed RuB 918,950.00, including VAt (18%) Governing body that resolved to approve the transaction (minutes' date and number) the Company’s Board of directors (minutes no. 300 of 21.12.2015) Person(s) interested in the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board n.i. Pozdnyakov, who is a member of the Board of directors and a General director of a party to the transaction; member of the Company’s management Board d.l. Shishkin, who is a member of the Board of directors of a party to the transaction the Company’s Board of directors (minutes no. 300 of 21.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti, members of the Company’s management Board: A.A. Zagaratsky, m.n. Pichugina, who are members of the Board of directors of a party to the transaction the Company’s Board of directors (minutes no. 300 of 21.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti, members of the Company’s management Board: A.A. Zagaratsky, m.n. Pichugina, who are members of the Board of directors of a party to the transaction 181 Work price of the agreement shall not exceed RuB 14,875,491.01, including VAt (18 %) the Company’s Board of directors (minutes no. 300 of 21.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti, members of the Company’s management Board: A.A. Zagaratsky, m.n. Pichugina, who are members of the Board of directors of a party to the transaction Works price is not determined due to the fact that the agreement does not change the price of the agreement the Company’s Board of directors (minutes no. 300 of 21.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Works price of the agreement shall not exceed RuB 4,030,770.00, including VAt (18%) the Company’s Board of directors (minutes no. 300 of 21.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti, members of the Company’s management Board: A.A. Zagaratsky, m.n. Pichugina, who are members of the Board of directors of a party to the transaction APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** 419. Agreement for repair and maintenance of electric grid facilities PJSC fGC uES and JSC “Yantarenergo” Agreement for repair and maintenance of electric grid facilities (with the protocol of disagreements) between PJSC fGC uES (the Customer) and JSC "Yantarenergo" (the Contractor). 420. Agreement to perform design and exploration works, work- ing documentation PJSC fGC uES and JSC R&d Centre of fGC uES 421. Agreement on performance of works on development of working documentation PJSC fGC uES and JSC R&d Centre of fGC uES 182 422. 423. 424. Agreement for termination of the agreement of 19.09.2013 no. KS-0913 for drafting design documentation and estimates PJSC fGC uES and JSC R&d Centre of fGC uES Supplementary agree- ment no. 1 to the agree- ment on compensation of 18.12.2012 no. 0211-92-K/12 (7600/12024/12) Agreement for the develop- ment of basic technical solu- tions, design, technical and procurement documentation PJSC fGC uES and PJSC iGdS of Centre PJSC fGC uES and JSC R&d Centre of fGC uES 425. Agreement of 23.03.2014 no. 29-3/117-GSiRPiR JSC fGC uES and JSC R&d Centre of fGC uES 426. Real property lease contract PJSC fGC uES and JSC “CiuS uES” Execution of design and exploration works, work- ing documentation on the object: "Construction of visits ohl 220 kV Amurskaya -Koroli/t with a branch line to SS Belogorsk in Ru 220 kV SS 220 kV nPS-26 (for tP of energy receiving devices of llC "dalnefteprovod") (tC Application no. m3/ ZtP/339 of 21.07.2014)" between PJSC fGC uES (the Customer) and JSC R&d Centre of fGC uES (the Contractor). Execution of works on development of working documentation for the project: " 750 kV leningrad- skaya – Belozerskaya ohl" for the needs of PJSC fGC uES branch - mES north-West between PJSC fGC uES (the Customer) and JSC R&d Centre of fGC uES (the Contractor). Agreement on agreement termination of 19.09.2013 no. KS-0913 for the development of design documentation and estimates for the proj- ect: "Complex reconstruction of 220 kV Kamskaya hPP – Soboli and Sl 220 kV Kamskaya hPP – Vladimirskaya 1 ohl" between PJSC fGC uES (the Customer) and JSC R&d Centre of fGC uES (the Contractor). Supplementary agreement no. 1 to the agreement on compensation of 18.12.2012 no. 02-11-92-K/12 (7600/12024/12) determines the amount of com- pensation between PJSC fGC uES (the "Company") and PJSC idGC of Centre (the owner). Execution of works on the development of basic technical solutions, design, technical and procure- ment documentation for the project: "Construction of 220 kV mezhdurechenskaya – Stepnaya ohl with the reconstruction of buildings and construc- tions of substations and the installation SKRm" between PJSC fGC uES (the Customer) and JSC R&d Centre of fGC uES (the Contractor). Execution of works on development of design documentation for the project: "Reconstruction of ohl 220 kV urengoi-Pangody (nadym), ohl 220 kV Pangody-nadym. installation of supports on new foundations" between JSC fGC uES (the Customer) and JSC R&d Centre of fGC uES (the Contractor). the lessor (PJSC fGC uES) undertakes to transfer to the lessee (JSC "CiuS uES") real property under the transfer and acceptance certificate for tempo- rary possession and use for a fee. Governing body that resolved to approve the transaction (minutes' date and number) the Company’s Board of directors (minutes no. 300 of 21.12.2015) Person(s) interested in the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti Price of works and services under the agreement for the period from 01.01.2015 to 31.12.2015 shall not exceed RuB 7,534,406.20, including VAt (18%). total price of works and services under the agreement for the entire term of the agree- ment shall not be or exceed 2 percent of the book value of assets of PJSC fGC uES according to its accounting statements at the last reporting date. Works price of the agreement shall not exceed RuB 11,066,898.00, including VAt (18%) the Company’s Board of directors (minutes no. 300 of 21.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti, members of the Company’s management Board: A.A. Zagaratsky, m.n. Pichugina, who are members of the Board of directors of a party to the transaction Works price of the agreement shall not exceed RuB 593,970,000.00, including VAt (18%) the Company’s Board of directors (minutes no. 300 of 21.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti, members of the Company’s management Board: A.A. Zagaratsky, m.n. Pichugina, who are members of the Board of directors of a party to the transaction 183 Price of the agreement to terminate the agreement of 19.09.2013 no. KS-0913 for the development of design documentation and estimates is RuB 687,553.35, including VAt (18 %) the Company’s Board of directors (minutes no. 300 of 21.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti, members of the Company’s management Board: A.A. Zagaratsky, m.n. Pichugina, who are members of the Board of directors of a party to the transaction the amount of compensation determined by supplementary agreement no. 1 to the agreement on compensation of 18.12.2012 no. 02-11-92-K/12 (7600/12024/12) is RuB 20,796,060.73, including VAt (18%) the Company’s Board of directors (minutes no. 300 of 21.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti Works price of the agreement shall not exceed RuB 227,033,940.00, including VAt (18%) the Company’s Board of directors (minutes no. 300 of 21.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti, members of the Company’s management Board: A.A. Zagaratsky, m.n. Pichugina, who are members of the Board of directors of a party to the transaction Works price of the agreement shall not exceed RuB 3,682,800.00, including VAt (18%) the Company’s Board of directors (minutes no. 300 of 21.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti, members of the Company’s management Board: A.A. Zagaratsky, m.n. Pichugina, who are members of the Board of directors of a party to the transaction Rental value per month consists of fixed and variable parts: - the fixed part of the rent is RUB 1,416,402.70, including VAt (18%); - the variable part of the rent is calculated in accordance with the terms of the agree- ment the Company’s Board of directors (minutes no. 301 of 28.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board n.i. Pozdnyakov, who is a member of the Board of directors and a General director of a party to the transaction; member of the Company’s management Board d.l. Shishkin, who is a member of the Board of directors of a party to the transaction APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** 427. Real property lease contract PJSC fGC uES and JSC “CiuS uES” 428. Real property lease contract PJSC fGC uES and JSC “CiuS uES” 429. Real property lease contract PJSC fGC uES and JSC “CiuS uES” 184 430. Supplementary agreement no. 3 to the agreement of 22.03.2013 no. 479/267607 for the provision of services for maintenance and repair of communication systems PJSC fGC uES and JSC “muS Energetiki” 431. Agency agreement on per- forming customer/developer functions PJSC fGC uES and JSC "tomsk trunk Grids" 432. Agreement for the provision of services for technical support of the automated investment projects manage- ment system of PJSC fGC uES based on the "oracle Primavera" software PJSC fGC uES and it Energy Service, llC 433. Compensation agreement PJSC fGC uES and JSC "tyumenenergo" 434 Real property lease contract PJSC fGC uES and JSC “muS Energetiki” the lessor (PJSC fGC uES) undertakes to provide to the lessee (JSC "CiuS uES") real property under the transfer and acceptance certificate for tempo- rary possession and use for a fee, and the lessee undertakes to pay the rent and to return the object to the lessor upon the termination of the agree- ment in good working condition (subject to normal wear and tear). the lessor (PJSC fGC uES) undertakes to provide to the lessee (JSC "CiuS uES") real property under the transfer and acceptance certificate for tempo- rary possession and use for a fee, and the lessee undertakes to pay the rent and to return the object to the lessor upon the termination of the agree- ment in good working condition (subject to normal wear and tear). the lessor (PJSC fGC uES) undertakes to provide to the lessee (JSC "CiuS uES") real property under the transfer and acceptance certificate for tempo- rary possession and use for a fee, and the lessee undertakes to pay the rent and to return the object to the lessor upon the termination of the agree- ment in good working condition (subject to normal wear and tear). Amendments to the terms and conditions of the agreement of 22.03.2013 no. 479/267607 for the provision of services for maintenance and repair of communication systems Agent (PJSC fGC uES) undertakes on the instruc- tions of the Principal (JSC "tomsk trunk Grids") of its own name but at the expense of the Principal, to perform functions of Customer/developer, associ- ated with modernisation, reconstruction, technical re-equipment of electric grid facilities beneficially owned by the Principal relating to the unEG, and the Principal shall pay the Agent compensation for performing the Principal's instructions and reim- burse costs incurred by the Agent when performing the Principal's instructions. the Contractor (it Energy Service, llC) undertakes to provide a range of services on technical support of automated investment projects management system of the Customer (JSC fGC uES) on the basis of the software "oracle Primavera" (APCS), and the Customer undertakes to pay for services rendered. Compensation of expenses incurred by the owner (PJSC fGC uES) for activities in the interests of and in connection with the actions of the Customer (JSC "tyumenenergo") on the construction of the Customer's facility the lessor (PJSC fGC uES) undertakes to provide to the lessee (JSC “muS Energetiki”) real property under the transfer and acceptance certificate for temporary possession and use for a fee, and the lessee undertakes to pay the rent and to return the property to the lessor upon the termination of the agreement in good working condition (subject to normal wear and tear). Rental value is RuB 90,183.85, including VAt (18%) per month Governing body that resolved to approve the transaction (minutes' date and number) the Company’s Board of directors (minutes no. 301 of 28.12.2015) Rental value under the real property lease contract is RuB 3,310.87, including VAt (18%) per month the Company’s Board of directors (minutes no. 301 of 28.12.2015) Rental value under the real property lease contract is RuB 14,490.00, including VAt (18%) per month the Company’s Board of directors (minutes no. 301 of 28.12.2015) the price of services, determined by the supplementary agreement no. 3 to the agreement of 22.03.2013 no. 479/267607 shall not exceed RuB 200,242,191.53, including VAt (18%) the Company’s Board of directors (minutes no. 301 of 28.12.2015) Person(s) interested in the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board n.i. Pozdnyakov, who is a member of the Board of directors and a General director of a party to the transaction; member of the Company’s management Board d.l. Shishkin, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board n.i. Pozdnyakov, who is a member of the Board of directors and a General director of a party to the transaction; member of the Company’s management Board d.l. Shishkin, who is a member of the Board of dircetors of a party to the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board n.i. Pozdnyakov, who is a member of the Board of directors and a General director of a party to the transaction; member of the Company’s management Board d.l. Shishkin, who is a member of the Board of dircetors of a party to the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti 185 the total price of the agency agreement on performing functions of customer/de- veloper for the entire term of the contract shall not be or exceed 2 (two) percent of the book value of assets of PJSC fGC uES according to its accounting statements at the last reporting date. the Company’s Board of directors (minutes no. 301 of 28.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction the price of services under the agreement shall not exceed RuB 1,563,264.00, includ- ing VAt (18%) the Company’s Board of directors (minutes no. 301 of 28.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti" the preliminary amount of compensation under the compensation agreement is RuB 9,288,373.28, including VAt (18%) the Company’s Board of directors (minutes no. 301 of 28.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti Rental value under the real property lease contract is RuB 9,699.44, including VAt (18%) per month the Company’s Board of directors (minutes no. 301 of 28.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** Governing body that resolved to approve the transaction (minutes' date and number) Person(s) interested in the transaction 435. Contracting agreement for drafting working documenta- tion, supply of material and technical resources and equipment, construction and installation and commission- ing works for the project: "220 kV orbit SS. Replacement of VChZ-110 kV, tt-110 kV, tt-220 kV" for the needs of PJSC fGC uES branch - mES of Western Siberia PJSC fGC uES and JSC “Electrosetservice unEG” the Contractor (JSC "Electrosetservice unEG") undertakes to perform a complex of works on reconstruction of 220 kV orbit SS and deliver the result to the Customer (PJSC fGC uES), and the Customer undertakes to accept the results of works and pay the stipulated price as set forth in the agreement 436. Rental agreement of movable property PJSC fGC uES and JSC “dESP” 437. Real property lease contract PJSC fGC uES and PJSC idGC of Siberia 186 PJSC fGC uES and it Energy Service, llC PJSC fGC uES and JSC R&d Centre of fGC uES 438. 439. Agreement on performance of works on re-engineering of automated measuring and information system for electric power fiscal metering with respect to maintaining the reference of the historic- ity of normative-reference information Agreement of 19.06.2013 no. 0214-0-72-01-PiR / 13 to per- form design and survey work (without documentation) for the project: "Construction of 220 kV obninsk –Sozvezdie 1,2 ohl" for the needs of the federal Grid’s branch– "mES of Center" 440. Real property lease contract PJSC fGC uES and PJSC idGC of Siberia the lessor (JSC "dESP") undertakes to provide to the lessee (PJSC fGC uES) movable property under the transfer and acceptance certificate for temporary possession and use for a fee, and the lessee undertakes to pay rent and return the property to the lessor at the end of the agreement in condition not worse than the original. the lessor (PJSC fGC uES) undertakes to provide to the lessee (PJSC idGC of Siberia) real prop- erty under the act of acceptance and transfer for temporary possession and use for a fee, and the lessee undertakes to pay rent and to return the property to the lessor upon the termination of the agreement in good working conditions (subject to normal wear and tear). the Customer (PJSC fGC uES) charges and pays, and the Contractor (it Energy Service, llC) as- sumes the obligation to perform re-engineering of automated measuring and information system for electric power fiscal metering in terms of maintain- ing the reference of the historicity of normative- reference information the Contractor (JSC R&d Centre of fGC uES) undertakes to perform a complex of works on engineering surveys; developing project documen- tation; developing procurement documentation, and the Customer (PJSC fGC uES) undertakes to accept result of works and pay them as set forth in the agreement the lessor (PJSC idGC of Siberia) undertakes to provide the lessee (PJSC fGC uES) real property for temporary possession and use, and the lessee undertakes to accept the property and pay rent in the amount and on the terms established by the agreement Works price of the agreement shall not exceed RuB 45,418,200.00, including VAt (18%) the Company’s Board of directors (minutes no. 301 of 28.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Rental value under the agreement is RuB 25,064.83, including VAt (18%) per month the Company’s Board of directors (minutes no. 301 of 28.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Rental value under the agreement is RuB 18,610.11, including VAt (18%) per month the Company’s Board of directors (minutes no. 301 of 28.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti 187 Works price of the agreement is RuB 47,775,840.00, including VAt (18%) the Company’s Board of directors (minutes no. 301 of 28.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti Work price of the agreement shall not exceed RuB 33,016,000.00, including VAt (18%) the Company’s Board of directors (minutes no. 301 of 28.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti, members of the Company’s management Board: A.A. Zagaratsky, m.n. Pichugina, who are members of the Board of directors of a party to the transaction Rent value under the agreement is RuB 25,757.78, including VAt (18%) per month the Company’s Board of directors (minutes no. 301 of 28.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti 441. Supplementary agreement no. 1 to the agreement of 04.10.2012 no. 198 on the execution of works for the project: "Reconstruction of 330/110/10kV "makhachkala 330 SS" (replacing the rectifier devices of ice melting)" PJSC fGC uES and JSC “Electrosetservice unEG” Amendments to the terms and conditions of the agreement of 04.10.2012 no. 198 Price of works is not determined the Company’s Board of directors (minutes no. 301 of 28.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** Governing body that resolved to approve the transaction (minutes' date and number) Person(s) interested in the transaction 188 442. 443. 444. 445. 446. 447. Agreement on performance of works on developing design, technical and procurement documentation for the project: "Reconstruction of 500 kV Peresvet – ilkovskaya ohl. improving lightning-surge proofness " for the needs of the federal Grid’s branch– "mES of Western Siberia" Supplementary agreement no. 5 to the agreement of 01.04.2008 no. 80326 Supplementary agreement no. 9 to the agreement of 18.02.2013 no. 06/13 on execution of works on repair and diagnostics of equipment and targeted programmes for the SS and ohl of mES of Western Siberia Contracting agreement for performance of emergency recovery works on replace- ment of high voltage bushings at the 220 kV "K", magdagachi SS, 500 kV Vladivostok SS, Chuguyevka, Khekhtsir -2 Agreement for performance of works (working documen- tation, construction and com- missioning works, delivery of materials) for the project: "improving of lightning-surge proofness by id" (Reconstruc- tion of ohl-330-30 Baksan- nalchik (installation of ground wires) for the needs of the federal Grid’s branch– "mES of South" Supplementary agreement no. 2 to the agreement of 08.10.2012 no. 202 for execution of works for the project: "Reconstruction of 220/110/10kV Zimovniki SS. Installation of rectifier devices of ice melting (arranging ice melting on wires and cables for outgoing ohl 220 kV) PJSC fGC uES and JSC R&d Centre of fGC uES the Contractor (JSC R&d Centre of fGC uES) un- dertakes to perform complex operations, and the Customer (PJSC fGC uES) undertakes to accept result of works and pay them as set forth in the agreement Works price of the agreement shall not exceed RuB 1,146,450.00, including VAt (18%) the Company’s Board of directors (minutes no. 301 of 28.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti, members of the Company’s management Board: A.A. Zagaratsky, m.n. Pichugina, who are members of the Board of directors of a party to the transaction PJSC fGC uES and PJSC idGC of Volga Amendments to the terms and conditions of the agreement of 01.04.2008 no. 80326 the price of services, determined by the supplementary agreement no. 5 to the agreement of 01.04.2008 no. 80326 is RuB 46,318.02, including VAt (18%) per month the Company’s Board of directors (minutes no. 301 of 28.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti PJSC fGC uES and JSC “Electrosetservice unEG” Amendments to the terms and conditions of the agreement of 18.02.2013 no. 06/13 the price is not determined the Company’s Board of directors (minutes no. 301 of 28.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction PJSC fGC uES and JSC “Electrosetservice unEG” PJSC fGC uES and JSC “Electrosetservice unEG” the Contractor (JSC "Electrosetservice unEG") undertakes to perform a set of works on: - drafting design and working documentation; - design supervision; - reconstruction and to provide a complete set of materials, equip- ment, spare parts for equipment in accordance with the design and working documentation, and deliver the result to the Customer (PJSC fGC uES), and the Customer undertakes to accept a result of works and pay the stipulated price as set forth in the agreement the Contractor (JSC "Electrosetservice unEG") undertakes to perform a complex of works on: - registration of rights to land plots for the recon- struction of the object; - development of working documentation; - organisation of field supervision; - reconstruction; - and to provide a complete set of materials, equip- ment, spare parts for equipment in accordance with the design and working documentation, and deliver the result to the Customer (PJSC fGC uES), and the Customer undertakes to accept result of works and pay the stipulated price as set forth in the agreement PJSC fGC uES and JSC “Electrosetservice unEG” Amendments to the terms and conditions of the agreement of 08.10.2012 no. 202 Works price of the agreement shall not exceed RuB 6,749,949.36, including VAt (18%) the Company’s Board of directors (minutes no. 301 of 28.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction 189 Works price of the agreement shall not exceed RuB 6,727,325.58, including VAt (18%) the Company’s Board of directors (minutes no. 301 of 28.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction the price determined by the supplementary agreement no. 2, shall not exceed RuB 133,277,401.38, including VAt (18%) the Company’s Board of directors (minutes no. 301 of 28.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS 448. 449. 450. 451. 452 190 no. transaction description transaction parties transaction subject* transaction price** Agreement on transfer of rights and obligations under the agreement of 22.08.2012 no. 3923 PJSC fGC uES, JSC "dESP" and JSC R&d Centre of fGC uES The definition of the transfer of rights and obliga- tions of the parties to the agreement Agreement on transfer of rights and obligations under the agreement of 17.02.2012 no. 3891 PJSC fGC uES, JSC "dESP" and JSC R&d Centre of fGC uES determination of the transfer of rights and obliga- tions of the parties to the agreement Agreement on transfer of rights and obligations under the agreement of 14.10.2011 no. 3879 PJSC fGC uES, JSC "dESP" and JSC R&d Centre of fGC uES determination of the transfer of rights and obliga- tions of the parties to the agreement Price (monetary valuation) of the assigned rights and obligations under the agreement on transfer of rights and obligations under the agreement of 22.08.2012 no. 3923 shall not exceed RuB 108,206,000.00, including VAt (18%) Price (monetary valuation) of the assigned rights and obligations under the agreement on transfer of rights and obligations under the agreement of 17.02.2012 no. 3891 shall not exceed RuB 49,265,000.00, including VAt (18%) Price (monetary valuation) of the assigned rights and obligations under the agreement on transfer of rights and obligations under the agreement of 14.10.2011 no. 3879 shall not exceed RuB 51,802,000.00, including VAt (18%) Governing body that resolved to approve the transaction (minutes' date and number) the Company’s Board of directors (minutes no. 302 of 28.12.2015) Person(s) interested in the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti, members of the Company’s management Board: V.P. dikoy, A.A. Zagaratsky, m.n. Pichugina, who are members of the Board of directors of a party to the transaction the Company’s Board of directors (minutes no. 302 of 28.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti, members of the Company’s management Board: V.P. dikoy, A.A. Zagaratsky, m.n. Pichugina, who are members of the Board of directors of a party to the transaction the Company’s Board of directors (minutes no. 302 of 28.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti, members of the Company’s management Board: V.P. dikoy, A.A. Zagaratsky, m.n. Pichugina, who are members of the Board of directors of a party to the transaction PJSC fGC uES and JSC “dESP” Amendments to the terms and conditionsof thea- greement of 05.04.2011 no. 3853 Works price, as determinedin the supple- mentary agreement no. 3 to agreement of 05.04.2011 no. 3853, shall not exceed RuB 31,176,302.68, including VAt (18%) the Company’s Board of directors (minutes no. 302 of 28.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction 191 PJSC fGC uES and JSC “dESP” Amendments to the terms and conditions of the agreement no. 3852 of 31.03.2011 Works price determined by the supplemen- tary agreement no. 3 to the agreement no. 3852 of 31.03.2011, shall not exceed RuB 28,031,442.80, including VAt (18%) the Company’s Board of directors (minutes no. 302 of 28.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Supplementary agreement no. 3 to the agreement of 05.04.2011 no. 3853 on performance of works on drafting design and work- ing documentation for the project: "Construction of 220 kV dunaevskaya SS with ap- proaches of 220 kV Surguts- kaya GRES-1-imilor ohl of PJSC fGC uES branch – "mES of Western Siberia" Supplementary agreement no. 3 to the agreement no. 3852 of 31.03.2011 on performance of works on drafting design and work- ing documentation for the project: "Construction of 220 kV novobystrinskaya SS with approaches to 220 kV Som- kinskaya – Peresvet ohl of PJSC fGC uES branch – "mES of Western Siberia" 453. Agreement on performance of works on maintenance of SCS PJSC fGC uES and PJSC idGC of Centre and Privolzhie 454. Supplementary agreement no. 5 to the non-residential premises lease agreement of 01.06.2012 no. 93-2012 PJSC fGC uES and JSC «CiuS uES» the Contractor (PJSC idGC of Centre and Privol- zhie) assumes the obligations for maintenance of equipment of dispatching and technological man- agement of 220 kV Electron SS, 220 kV liteinaya SS owned by the Customer (PJSC fGC uES) Amendments to the agreement of lease of non-residential premises no. 93-2012 dated 01.06.2012 Work price of the agreement is RuB 280,368.00, including VAt (18%) the Company’s Board of directors (minutes no. 303 of 28.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti Rent value determined by the supplementa- ry agreement is RuB 148,872.24, including VAt (18 %) per month. Rent value for the period from 01.06.2012 till 31.01.2016 is RuB 8,991,223.49, includ- ing VAt (18 %) the Company’s Board of directors (minutes no. 303 of 28.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board n.i. Pozdnyakov, who is a member of the Board of directors and a General director of a party to the transaction; member of the Company’s management Board d.l. Shishkin, who is a member of the Board of directors of a party to the transaction APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** 455. Protocol on determination of shares in common shared ownership PJSC fGC uES and JSC "Kuban trunk Grids" determination of shares in common shared owner- ship 456. Agreement for performance of works on maintenance of SCS PJSC fGC uES and PJSC idGC of Centre and Privolzhie 192 457. Agreement for performance of works on technical mainte- nance of equipment PJSC fGC uES and PJSC idGC of Centre and Privolzhie the Contractor (PJSC idGC of Centre and Privol- zhie) assumes responsibilities for maintenance of equipment of supervisory control system, installed at the 220 kV leninskaya SS, 220 kV Yasnopolyan- skaya SS, 220 kV Shipovo SS, 220 kV Begichevo SS, 220 kV lyutorichi SS, 220 kV Severnaya SS, 220 kV Zvezda SS, belongs to the Customer (PJSC fGC uES) the Contractor (PJSC idGC of Centre and Privol- zhie) assumes responsibilities for maintenance of equipment of supervisory control system of Ryazanskoe RmES of PJSC fGC uES branch – Prio- kskoye PmES belonging to the Customer (PJSC fGC uES) PJSC fGC uES and PJSC idGC of Volga Amendments to the agreement of 08.04.2008 no. 22 the size of the shares in common shared ownership for the facility 220 kV Shepsi- dagomys ohl under the protocol determi- nation of shares in common ownership is: - the share of PJSC fGC uES is RuB 1,983,668,000.00, which is equivalent to 87.3%; - the share of JSC "Kuban trunk Grids" is RuB 287,661,000.00, which is equivalent to 12.7%. the total transaction value is RuB 2,271,329,000.00 without VAt. Works price of the agreement shall not ex- ceed RuB 497,232.00, including VAt (18%) Governing body that resolved to approve the transaction (minutes' date and number) the Company’s Board of directors (minutes no. 303 of 28.12.2015) Person(s) interested in the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti the Company’s Board of directors (minutes no. 303 of 28.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti Works price of the agreement is RuB 279,206.88, including VAt (18%) the Company’s Board of directors (minutes no. 303 of 28.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti 193 the price of services determined by the supplementary agreement is RuB 40,528.27, including VAt (18%) per month. the price of services under the agree- ment of 08.04.2008 no. 22 for the period from 01.04.2008 to 31.12.2016 is RuB 4,989,219.24, including VAt (18%) the Company’s Board of directors (minutes no. 303 of 28.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti 458. 459. 460. Supplementary agreement no. 4 to the agreement of 08.04.2008 no. 22 Supplementary agreement no. 3 to the agreement of 08.07.2013 no. 26/13 on execution of works on mainte- nance of electrical equipment AVV (long-term) Contracting agreement for performance of emergency recovery works on replace- ment of high voltage bushings at the 220 kV Volna SS PJSC fGC uES and JSC “Electrosetservice unEG” Amendments to the agreement of 08.07.2013 no. 26/13 on execution of works on maintenance of electrical equipment AVV (long-term) Works price determined by the supple- mentary agreement shall not exceed RuB 62,760,175.61, including VAt (18%) the Company’s Board of directors (minutes no. 303 of 28.12.2015) PJSC fGC uES and JSC “Electrosetservice unEG” the Contractor (JSC “Electrosetservice unEG”) shall perform to the Customer (PJSC fGC uES) a complex of works on: - development of design and working documenta- tion; - design supervision; - reconstruction; - and to provide a complete set of materials, equip- ment, spare parts for equipment. the price of works under the agreement shall not exceed RuB 972,938.84, including VAt (18%) the Company’s Board of directors (minutes no. 303 of 28.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction 461. Supplementary agreement no. 1 to the real property lease contract of 01.02.2015 no. 7016/14-0294 PJSC fGC uES and PJSC idGC of Centre and Privolzhie Amendments to the real property lease contract of 01.02.2015 no. 7016/14-0294 the Company’s Board of directors (minutes no. 303 of 28.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti Rent determined by the supplementary agreement is RuB 36,169.52, including VAt (18%) per month. Rental value per month does not include the compensation of municipal, operational and administrative expenses of PJSC idGC of Centre and Priv- olzhie in the maintenance of property. the total rental payment under the real property lease contract of 01.02.2015 no. 7016/14- 0294 for the period from 01.02.2014 to 31.12.2015 is RuB 948,962.14, including VAt (18%) APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** 462. loan agreement PJSC fGC uES and JSC “muS Energetiki” the lender (PJSC fGC uES) undertakes to provide a cash loan to the Borrower (JSC “muS Energetiki”) with the debt limit (lump-sum total amount of issued and outstanding loans) not exceeding RuB 127,533,000.00, and the Borrower undertakes to repay to the lender the amount of borrowed funds, as well as accrued interest. 463. loan agreement PJSC fGC uES and JSC “Electrosetservice unEG” the lender (PJSC fGC uES) undertakes to provide a cash loan to the Borrower (JSC “Electrosetser- vice unEG”) with the debt limit (lump-sum total amount of issued and outstanding loans) not exceeding RuB 258,477,000.00, and the Borrower undertakes to repay to the lender the amount of borrowed funds, as well as accrued interest. 194 the price of the loan agreement consists of: - the amount of funds available for the loan with a debt limit (lump-sum total amount of issued and outstanding loans) shall not exceed RuB 127,533,000.00; - the amount of interest determined at the interest rate on each loan equal to a floating rate, determined on the basis of mosPrime's rate for a period of 3 months plus 2.5% per annum. the interest rate on the loan is determined on the basis of mosPrime's rate for a period of 3 months, published on the official website of the Central Bank of the Russian federation, 2 (two) working days prior to the date of issuance of the loan. the price of the agreement for provision consists of: - the amount of funds available for the loan with a debt limit (lump-sum total amount of issued and outstanding loans) shall not exceed RuB 258,477,000.00; - the amount of interest determined at the interest rate on each loan is equal to a floating rate, determined on the basis of mosPrime's rate for a period of 3 months plus 2.5% per annum. the interest rate on the loan is determined on the basis of mosPrime's rate for a period of 3 months, published on the official website of the Central Bank of the Russian federation, 2 working days prior to the date of issuance of the loan according to Borrower's applica- tion. during the term of each loan the inter- est rate is reviewed and calculated for each subsequent period of 3 months, in order to determine the interest rate for the next period the mosPrime's rate applies for a period of 3 months, published on the official website of the Central Bank of the Russian federation 2 working days before the start date of each period; - obligations of JSC “Electrosetservice unEG” payment of PJSC fGC uES in the amount of the penalty is charged on the outstanding amount of the loan, in the amount of 0.1% of the unpaid / untimely paid amount for each day of delay. Governing body that resolved to approve the transaction (minutes' date and number) the Company’s Board of directors (minutes no. 304 of 30.12.2015) Person(s) interested in the transaction Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti the Company’s Board of directors (minutes no. 304 of 30.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction 195 APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAJoR tRAnSAC tionS no. transaction description transaction parties transaction subject* transaction price** 464. loan agreement PJSC fGC uES and JSC "ESSK uES" the lender (PJSC fGC uES) undertakes to provide a cash loan to the Borrower (JSC “ESSK uES”) with the debt limit (lump-sum total amount of issued and outstanding loans) not exceeding RuB 14,137,000.00, and the Borrower undertakes to repay to the lender the amount of borrowed funds, as well as accrued interest. 196 465. loan agreement PJSC fGC uES and JSC "mobile GtES" the lender (PJSC fGC uES) undertakes to provide a cash loan to the Borrower (JSC “mobile GtES”) with the debt limit (lump-sum total amount of issued and outstanding loans) not exceeding RuB 1,271,000,000.00, and the Borrower undertakes to repay to the lender the amount of borrowed funds, as well as accrued interest. the price of the agreement for provision consists of: - amount of funds available for the loan with a debt limit (lump-sum total amount of issued and outstanding loans) shall not exceed RuB 14,137,000.00; - the amount of interest determined at the interest rate on each loan equal to a floating rate, determined on the basis of mosPrime's rate for a period of 3 months plus 2.5% per annum. the interest rate on the loan is determined on the basis of mosPrime's rate for a period of 3 months, published on the official website of the Central Bank of the Russian federation, 2 working days prior to the date of issuance of the loan according to Borrower's applica- tion. during the term of each loan the inter- est rate is reviewed and calculated for each subsequent period of 3 months, in order to determine the interest rate for the next period the mosPrime's rate applies for a period of 3 months, published on the official website of the Central Bank of the Russian federation 2 working days before the start date of each period; - obligations of JSC "ESSK uES" payment of PJSC fGC uES in the amount of the penalty is charged on the outstanding amount of the loan, in the amount of 0.1% of the unpaid / untimely paid amount for each day of delay. the price of the agreement for provision consists of: - amount of funds available for the loan with a debt limit (lump-sum total amount of issued and outstanding loans) shall not exceed RuB 1,271,000,000.00; - the amount of interest determined at the interest rate on each loan equal to a floating rate, determined on the basis of mosPrime's rate for a period of 3 months plus 2.5% per annum. the interest rate on the loan is determined on the basis of mosPrime's rate for a period of 3 months, published on the official website of the Central Bank of the Russian federation, 2 working days prior to the date of issuance of the loan according to Borrower's application. during the term of each loan the interest rate is reviewed and calculated for each subsequent period of 3 months, in order to determine the inter- est rate for the next period the mosPrime's rate applies for a period of 3 months, pub- lished on the official website of the Central Bank of the Russian federation 2 working days before the start date of each period; - obligations of JSC "mobile GtES" payment of PJSC fGC uES in the amount of the pen- alty is charged on the outstanding amount of the loan, in the amount of 0.1% of the unpaid / untimely paid amount for each day of delay. Governing body that resolved to approve the transaction (minutes' date and number) the Company’s Board of directors (minutes no. 304 of 30.12.2015) Person(s) interested in the transaction Shareholder who holds more than 20% of shares of JSC fGC uES - JSC Rosseti, member of the Company’s management Board d.l. Shishkin, who is a member of the Board of directors of a party to the transaction 197 the Company’s Board of directors (minutes no. 304 of 30.12.2015) Shareholder who holds more than 20% of shares of PJSC fGC uES - PJSC Rosseti; member of the Company's management Board V.P. dikoy, who is a member of the Board of directors of a party to the transaction APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAtERi Al tRAnSAC tionS Appendix 5. material transactions entered into by PJSC fGC uES and legal entities controlled thereby in 2015 in accordance with the recommendations of the Corporate Governance Code approved by the Board of directors of the Bank of Russia on 21 march 2014, federal Grid Company qualifies the following transactions as material: 1. Sale of shares (interests) in any legal entities controlled by PJSC fGC uES which is material to the latter, where, as a result of such transaction, PJSC fGC uES would lose control over such legal entities 2.3. transactions (including several related transactions) involving disposal or potential disposal of property constituting fixed assets, intangible assets and construction in progress intended for producing, transmitting, dispatching and distributing electricity and heat, with a book or market value exceeding RuB150 million 2.4. major transactions entered into by subsidiaries and associates of PSC fGC uES 2. transactions with property of PJSC fGC uES or any legal entities controlled thereby (including related transactions, if any, entered into by JSC fGC uES and one and/or more legal entities controlled thereby) whose value exceeds a threshold amount specified in the Company’s Articles of Association or which is material to the Company’s business operations: 2.5. transactions of subsidiaries and associates (including several related transactions) involving disposal or potential disposal of property constituting fixed assets, intangible assets, and construction in progress intended for producing, transmitting, dispatching and distributing electricity and heat, with a book or market value exceeding RuB15 million 2.1. transactions involving the Company’s non-current assets in the amount exceeding 10 percent of the book value of said assets as of the date of making a decision on entering into said transaction 2.2. transactions (including several related transactions) involving disposal or potential disposal of property constituting fixed assets, intangible assets and construction in progress intended for producing, transmitting, dispatching and distributing electricity and heat, with a book value exceeding RuB75 million 2.6. transactions of subsidiaries and associates (including several related transactions) involving disposal or potential disposal of property constituting fixed assets, intangible assets, and construction in progress not intended for producing, transmitting, dispatching and distributing electricity and heat, with a book or market value exceeding RuB30 million 3. Establishment of a legal entity controlled by PJSC fGC uES and being material to the Company’s operations. 198 ▶ Transactions (including several related transactions) involving disposal or potential disposal of property constituting fixed assets, intangible assets and construction in progress intended for producing, transmitting, dispatching and distributing electricity and heat, with a book value exceeding RUB75 million transaction description transaction parties transaction subject transaction price Supplementary agreement no. 1 to the sale and purchase agree- ment of power grid assets no. nn/1017-2007 dated 10.10.2007 JSC fGC uES and JSC mmC norilsk nickel the Seller (JSC fGu uES) undertakes to transfer and the Buyer (JSC "mmC "no- rilsk nickel") undertakes to accept movable and im- movable assets beneficially owned by the Seller the price of movable and immovable assets, as defined in the supplemen- tary agreement no. 1 to the sale and purchase agreement of power grid assets no. nn/1017-2007 dated 10.10.2007, is RuB1.45 billion, including VAt (18%) Governing body that resolved to approve the transaction (minutes' date and number) the Company’s Board of directors (minutes no. 272 of 08.06.2015) ▶ Transactions (including several related transactions) involving disposal or potential disposal of property constituting fixed assets, intangible assets and construction in progress intended for producing, transmitting, dispatching and distributing electricity and heat, with a book or market value exceeding RUB150 million 199 transaction description transaction parties transaction subject transaction price PJSC fGu uES and the Winner / sole participant of the English auction (Buyer) the Seller (JSC fGu uES) undertakes to transfer and the Buyer undertakes to accept and pay the Seller for the land plot pursuant to the agreement. transaction that in- volves the disposal of property constituting fixed assets, intangible assets and construc- tion in progress intended for producing, transmitting, dispatch- ing and distributing electricity and heat, with the book or mar- ket value exceeding RuB150 million the price of land plot disposed in the transac- tion is determined by the price offered by the win- ner of the English auction (VAt free). if the English auction is declared void, the price of land plot is determined by the parties in the amount equal to the starting lot price – RuB 1,446,057,000.00 (VAt free). Governing body that resolved to approve the transaction (minutes' date and number) the Company’s Board of directors (minutes no. 297 of 07.12.2015) APPEndiCES to thE AnnuAl REPoR t infoRm Ation on mAtERi Al tRAnSAC tionS 4. loan agreement PJSC fGC uES and JSC R&d Centre of fGC uES 200 the price (monetary valuation) of the property disposed (acquired) under the agree- ment is determined by: - the amount of funds available for a loan, not exceeding RuB 300 million; - the amount of interests, as determined by the interest rate, set on the basis of mosPrime's rate for a period of 3 months plus 2.4% per annum; - obligations of JSC R&D Centre of FGC UES to pay PJSC FGC UES the delay accrued on the overdue amount at the rate of 0.1% of the unpaid/untimely paid amount for each day of delay. the Company’s Board of directors (minutes no. 279 of 24.07.2015) ; the Board of directors JSC R&d Centre of fGC uES (minutes no. 11/nts of 24.07.2015) 201 ▶ Major transactions of subsidiaries and associates of PJSC FGC UES no. transaction description transaction parties transaction subject transaction price 1. 2. 3. Supplementary agreement no. 5 to the agreement no. i-11-21/10 of 13.09.2010 for performing re- search, development and process works JSC fGu uES and JSC R&d Centre of fGC uES Amendments to the conditions of the agreement no. i-11-21/10 of 13.09.2010 for performing research, development and process works Work price according to the supplementary agreement no. 5 to the agreement No. I-11-21/10 of 13.09.2010 is not defined Supplementary agreement no. 16 to the agreement no. ts/01 of 01.04.2008 for performing owner/devel- oper functions JSC fGu uES JSC CiuS uES Amendments to the terms and conditions of the agreement no. ts/01 of 01.04.2008 for perform- ing owner/developer functions Service price according to the supplementary agreement for the period from 01.01.2015 to 31.03.2015 shall not exceed RuB 575,250,000.00, including VAt (18%) Agreement no. 409 of 01.04.2014 for operation and maintenance of dtCn equipment of ESuPCn of JSC fGC uES JSC fGC uES and JSC “muS Ener- getiki” Service price according to the agreement shall not exceed RuB 1,313,040,640.00, including VAt (18%) the Contractor (JSC “muS Energetiki”) shall render comprehensive services on operation and maintenance of equipment of data transmission central network (dtSn) of the Energy System Unified Process Communications Network (ES- uPCn) of JSC fGC uES, and the Customer (JSC fGC uES) shall pay for these services the lender (PJSC fGC uES) provides a loan to the Borrower (JSC «R&d Centre of fGC uES»), and the Borrower undertakes to repay the received funds and accrued interest thereon pursuant to the procedure established by the agreement. 5. Pledge agreement 6. loan agreement PJSC fGC uES and JSC R&d Centre of fGC uES Pledging to the Pledgee (PJSC fGC uES) of immovable assets beneficially owned by the Pledger (JSC R&d Centre of fGC uES). the price (monetary valuation) of property transferred under the agreement is equal to the market value of the immovable assets pledged in the amount of RuB 578,913,000.00, including VAt. JSC R&d Centre of fGC uES and JSC dESP the lender (JSC «R&d Centre of fGC uES») pro- vides a loan to the Borrower (JSC dESP), and the Borrower undertakes to repay the received funds and accrued interests thereon pursuant to the procedure established by the agreement. the price (monetary valuation) of the property disposed (acquired) under the agree- ment is determined by: - the amount of funds available for a loan, not exceeding RuB 300 million; - the amount of interests, as determined by the interest rate, set on the basis of mosPrime's rate for a period of 3 months plus 2.5% per annum; - obligations of JSC dESP to pay JSC R&d Centre of fGC the delay accrued on the overdue amount at the rate of 0.05% of the unpaid/untimely paid amount for each day of delay. the price (monetary valuation) of property transferred under the agreement is RuB 302,476,305.00, including VAt (18%) 7. Pledge agreement JSC R&d Centre of fGC uES and JSC dESP Pledging to the Pledgee (JSC R&d Centre of fGC UES) of immovable assets beneficially owned by the Pledger (JSC dESP) 8. 9. Supplementary agreement no. 17 to the agreement no. ts/01 dated 01.04.2008 for performing owner/ developer functions JSC fGC uES JSC CiuS uES Amendments to the terms and conditions of the agreement no. ts/01 of 01.04.2008 for perform- ing owner/developer functions Service price according to the supplementary agreement for the period from 01.04.2015 to 31.12.2015 shall not exceed RuB 1,224,250,000.00, including VAt (18%) JSC fGC uES JSC CiuS uES Agreement for the performance of work-in-progress on the development of working documentation, construction and installation works, commissioning works and supply of materials and equipment of the 1st phase of construction under the title: “Construc- tion of 500 kV Beloberezhsky SS with approaches 500 kV novobryanskaya – Elets ohl, 220 kV Beloberezhsky – Cement ohl, 220 kV Beloberezhsky – mashzavod ohl and 220 kV Beloberezhsky – Bry- ansk ohl for the needs of PJSC fGC uES’s branch – mES north-West” Pursuant to the agreement, the Contractor (JSC CiuS uES) undertakes to perform works of the 1st phase of construction under the title: “Construction of 500 kV Beloberezhsky SS with approaches 500 kV novobryanskaya – Elets ohl, 220 kV Beloberezhsky – Cement ohl, 220 kV Beloberezhsky – mashzavod ohl and 220 kV Beloberezhsky – Bryansk ohl for the needs of PJSC fGC uES’s branch – mES north-West” Work price according to the agreement shall not exceed RuB 3,297,566,756 and 73 kopeks, including VAt (18%) Governing body that resolved to approve the transaction (minutes' date and number) the Company’s Board of directors (minutes no. 261 of 07.04.2015) the Board of directors of JSC R&d Centre of fGC uES (minutes no. 4/nts of 29.04.2015) the Company’s Board of directors (minutes no. 265 of 14.05.2015); EGSm of JSC CiuS – management Board of JSC FGU UES (minutes No. 1298 of 27.03.2015) the Company’s Board of directors (minutes no. 269 of 29.05.2015); GmS of JSC “muS Energetiki” – the management Board of JSC fGC uES (minutes no. 1292 of 20.02.2015) the Company’s Board of directors (minutes no. 279 of 24.07.2015) ; the Board of directors of JSC R&d Centre of fGC uES (minutes no. 11/nts of 24.07.2015) the Company’s Board of directors (minutes no. 279 of 24.07.2015) ; the Board of directors JSC «R&d Centre of fGC uES» (minutes no. 11/nts of 24.07.2015) the Company’s Board of directors (minutes no. 279 of 24.07.2015) ; the Board of directors JSC R&d Centre of fGC uES (minutes no. 11/nts of 24.07.2015) the Company’s Board of directors (minutes no. 287 of 02.11.2015); EGSm of JSC CiuS – the management Board of JSC fGC uES (minutes no. 1324 of 30.07.2015) the Company’s Board of directors (minutes no. 294 of 27.11.2015); EGSm of JSC CiuS – the management Board of JSC FGC UES (minutes No. 1332 of 14.09.2015) APPEndiCES to thE AnnuAl REPoR t infoRm Ation on thE ACtuAl PERfoRm AnCE of ASSiGnmEnt S of Rf PRESidEnt And thE Rf GoVERnmE nt Appendix 6. information about the Actual Performance of Assignments of the President and the Government of the Russian federation by federal Grid Company in 2015 no Assignment Registration data Brief summary of the document received measures taken by the company to fulfill the assignment Result of the completed assignment 1. Government of the Russian federation no. iSh-P13--5859 dated 31 July.2014 on implementing the provisions of the Corporate Governance Code 202 2. Government of the Russian federation no. iSh-P13--1419 dated 5 march 2015 on step-by-step substitution of foreign products (works, services) pro- cured with equivalent, by technical parameters and consumer properties, Russian products (works, services) 203 on 12 march 2015, the Board of directors of federal Grid Company, acting in line with the directive of the Government of the Russian federation no 496p-P13 dated 30 January 2015, resolved to approve the Action Plan (‘roadmap’) on implementing the provisions of the Corporate Governance Code. the roadmap stipulated for drafting and adopting new versions of the following documents: the Articles of Association of federal Grid Com- pany, the Regulations on Procedure for Preparing and holding the General Shareholders meeting, the Corporate Governance Code, the Regulations on information Policy of federal Grid Company, Regulations on Board of direc- tors (Rules and Procedures of the Board of directors), Regulations on the Audit Committee, the hR and Remuneration Committee, and the Strategy Committee. As recommended by the Corporate Governance Code, the roadmap also provided for the drafting and adopting of the Regulations on Corporate Secretary, and also for the adjustment of the Policy on Remuneration for members of the Board of directors of federal Grid Company and, if neces- sary, of the Regulations on labour Contracts terms and Conditions and determination of Amounts of Remunerations and Compensations for top managers of federal Grid Company. the federal Grid’s activity on import substitution is pursued in line with the Programme for the Substitution of Equipment, technologies, materials, and Systems for the period 2015 - 2019, as approved by the order no 455 dated 10 october 2014. As pursuant to the directive no 1346p-P13 dated 05 march 2015, binding representatives of the interests of the Russian federation at meetings of boards of directors of open joint-stock companies, where the Russian federation participating share in the charter capital is more than 50% in total, the long-term development Program of PJSC fGC uES, as approved by the Board decision no 243 dated 22 december 2014, provides for mea- sures on the step-by-step substitution of purchases s of foreign products (works, services) with those of Russian products (works, services) of equivalent technical parameters and consumer properties. measures planned for 2015 have been completed in full. the details of their implementation are given in an additional chart below. in addition, the following measures were undertaken in 2015 as part of the implementation of the import Substitution Program of PJSC fGC uES: 1. in order to support efforts aimed at increasing the level of localisation of production, measures were undertaken to stimulate cooperation between manufacturers of electrical products and such Russian manufacturers of pieces of equipment, materials and component parts, as capable to guar- antee their quality compliance with world standards. the list was compiled of component parts and materials of foreign origin that are used by main contractors of PJSC fGC uES. Assistance has been provided to the firms that submitted their applica- tions to the fund of industry development, with respect to the securing of purpose low-interest loans for the development of production facilities. the Annual General meeting of Shareholders held on 26 June 2015 resolved (minutes no 16) to approve the amended Articles of Association, Regulations on Procedure for Preparing and hold- ing the General meeting of Shareholders, Regulations on the Board of directors, Regulations on the management Board, Regulations on the Audit Commission, Regulations on Remunerations and Compensations due to members of the Board of directors, and Regulations on Payment of Remunerations and Compensations due to members of Audit Commission. Also, since the start of the corporate year of 2015-2016, with respect to the update of the aforesaid documents, the Board of directors resolved to approve the Regulations on hR and Remuner- ation Committee, Regulations on Strategy Committee, Regulation on Audit Committee, Regulation on Corporate Secretary, Corporate Governance Code, as amended, Regulation on Payment of Remu- nerations due to members of Committees of Board of directors, Regulation on information Policy, and several other documents not specified in the roadmap but subject to updating with respect to the Corporate Governance Code (including the Regulations on investment Committee, Regulations on Risk management System, Regulations on internal Audit, and others). As of december 2015, the roadmap approved by the Board of directors was implemented in full by PJSC fGC uES. 1. As of the end of 2015, the share of purchases of Russian prod- ucts with the breakdown on the groups of electrical equipment encompassed by the import Substitution Programme amounted to 75%. 2. in 2015, the implementation continued of the long-term con- tracts with electrical equipment manufacturers stipulating for localisation of production of the equipment in the territory of the Russian federation. As per the long-term contract signed with Power machines toshi- ba high-Voltage transformers, llC, the Company purchased 1,457 mVA in transformer capacities in 2014, and 650 mVA in 2015. the localisation level of the production averages at 55 %, above the requirements set forth in the long-term agreement. 3. Recommendations were proposed on amendments to be made to the Regulations on Procurement and standard procurement documentation of the Company, with respect to including of production localisation levels to the criteria for the assessment of bids submitted by suppliers of electrical products purchased by PJSC fGC uES. 4. Proposals were drafted and submitted on how to improve the current legal regulation in the field of import substitution and spe- cifically, the Federal Law “On Industrial Policy in the Russian Fed- eration” no 488-fZ dated 31 december 2014, and the federal law “on Procurement of Products, Works, Services by Certain types of legal Persons” no 223-fZ dated 18 July 2011, Rf Government Regulation no 719 dated 17 July 2015 “on Criteria for Classifying Products as industrial Products having no Analogues Produced in the Russian federation”. APPEndiCES to thE AnnuAl REPoR t infoRm Ation on thE ACtuAl PERfoRm AnCE of ASSiGnmEnt S of Rf PRESidEnt And thE Rf GoVERnmE nt no Assignment Registration data Brief summary of the document received measures taken by the company to fulfill the assignment Result of the completed assignment 3. President of the Russian federation noPr-2821 dated 05 december 2014 on introducing a system of bonuses for senior managers based on key performance indicators, as part of necessary cuts of operating costs (expenses) by at least 2-3% annually in implementation of the assignments of the President of the Russian federation noPr-2821 of 05 december 2014, and also of the directive of the Russian Government no 2303p-P13 of 16 April 2015, the Board of directors instructed (minutes no 274 dated 25June 2015) the Chairman of the management Board of the Company to submit for consideration of the Board of directors: - matter on including the target values for ‘oPEX reduction’ indicator into the list of key performance indicators of the Company’s management that must be considered when making decisions about compensation and per- sonnel decisions, as well as of the aligning of the amount of remuneration to be paid to the Company’s management to the achievement of the ‘oPEX reduction’ indicator; - matters on the amending of provisions of the labour agreement (contract) with the Company’s CEo with respect to the incorporation of the obligation to achieve such target levels of the ‘OPEX reduction’ Indicator, as specified in the Company’s long-term development Programme, thereto. 204 4. President of the Russian federation no Pr-3013 dated 27 decem- ber 2014 on developing and approving and approving a package of internal documents, governing the Company’s activities; on the mandatory reporting on progress in the implementation of long-term development programmes, and on the achievement of the approved targets in respect of key performance indicators in implementation of the instruction no 3013 Paragraph 3 to the extent of the reporting on the implementation of long-term development pro- grammes, the Board of directors instructed the Chairman of the manage- ment Board (minutes no 267 of 25 may 2015) as to ensure provision, along with other materials mandatory for the preparation and holding of annual general meetings of shareholders, of reports on the implementation of the federal Grid’s development programme and on the achievement of the ap- proved key performance indicators in due time, in conformity with the fed- eral law no 208-fZ dated 26 december 1995 “on Joint-Stock Companies” the Board of directors of PJSC fGC uES considered the following matter of: “the inclusion of the target values for oPEX Reduction indicator into the list of key performance indicators of the Company’s man- agement that must be considered when making decisions about compensation and personnel decisions, as well as of the aligning of the amount of remuneration to be paid to the Company’s management with the achievement of ‘oPEX Reduction’ indicator targets” (minutes no 307 dated 01 february 2016). therefore, it was resolved to make amendments to the methodol- ogy for Calculation and Evaluation of Key Performance indicators for federal Grid’s Senior management, as approved by the deci- sion of the Board of directors dated 19 december 2014 (minutes no 243 of 22 december 2014), aimed at replacing the existing KPi “Reduction in unit operating expenses” with the KPi “Reduction in unit operating expenses (costs)”, and also at setting the target value for the KPi “Reduction in unit operating expenses (costs)” as that of at least 14,2 % as of the end of 2015, against the level of 2014. Also, the indicator of the reduction in operating expenses (costs) is currently incorporated in the draft methodology for calculation and evaluation of implementation of key performance indicators for senior managers of PJSC fGC uES for 2016, while the target value of the indicator is currently set at the level no less than 2 % from the actual 2015 figure. As per Section 4 Paragraph 4.1 of the Regulations on terms and conditions of labour contracts and determinations of amounts of remunerations and compensations for senior managers of JSC fGC uES, as approved by the decision of the Board of directors (minutes no 105 dated 17 June 2010), “the system of material incentives for the Company’s senior managers aligns the amount of remuneration to the achievement of key performance indica- tors (hereinafter, KPi), as established by the Company’s Board of directors , including those established as part of the long-term development Programme”. thus, upon the incorporation of the ‘oPEX reduction’ indicator in the list of key performance indicators for the Company’s managers, the ratio of this KPi achievement is automatically accounted for in the system of remuneration of the Chairman of the Company’s management Board, i.e. there is no need for any additional amendment to the labour contract signed with of the Chairman of the Company’s management Board. the report on the implementation of the federal Grid’s long-term development Programme for 2015 was drafted to be presented, along with other records, to the Annual General meeting of Share- holders in 2016. Starting from 2016, reports on the achievement of the approved key performance indicators will be submitted, along with the other materials required for the preparation and holding of annual general meetings of shareholders,within timeframes in conformity with the federal law no 208-fZ dated 26 december 1995 “on Joint-Stock Companies. Currently, efforts are underway to prepare reports on the achievement of key performance indicators of federal grid Company in 2015, to be further submitted along with the other materials, for consideration at the AGm in 2016. 205 APPEndiCES to thE AnnuAl REPoR t infoRm Ation on thE ACtuAl PERfoRm AnCE of ASSiGnmEnt S of Rf PRESidEnt And thE Rf GoVERnmE nt no Assignment Registration data Brief summary of the document received measures taken by the company to fulfill the assignment Result of the completed assignment 5. President of the Russian federation no Pr-1032 dated 07 may 2014 on ensuring a creation of single treasuries at parent organisations, sub- sidiaries, and associates 6. President of the Russian federation no 596 dated 07 may 2012 on selling the non-core assets 206 7. President of the Russian federation no 6362p dated 24 october 2013 on expanding the access for small and medium enterprises to the procurement of infrastructure monopolies and state-owned companies. Pursuant to paragraphs 7, 8, 9, 10, 12, 17, 18, 19, 20, 24, 25, 26, 27, 28, 30, and 31 of the action plan (“roadmap”) “Expanding the access for small and medium enterprises to the procurement of infrastructure monopo- lies and state-owned companies”, approved by the decree of the Govern- ment of the Russian federation no. 867-r dated may 29, 2013 in the course of performance of the directive, the existing system of financial flow management at the Company, together with its subsidiaries and associates, was analysed and the respective report was compiled to contain a description of main areas for further improvements and enhance- ment of efficiency in the operation of a Single Treasury based at PJSC FGC uES, which was further submitted to the ministry of finance of the Russian federation. following the analysis done, as per the directive, a target structure of the Single treasury at PJSC fGC uES Group was developed, along with a plan/ schedule of actions to create the target structure of the Single treasury based at PJSC fGC uES. the Single treasury based at the Company currently operates within the Group. over the course of 2015, the Company undertook measures as follows: inventory auditing and the optimisation of the structure of transac- tion accounts of the Executive Office and branches of PJSC FGC uES treasury functional was centralised at the level of PJSC fGC uES A set of activities was developed and is currently implemented aimed at improving the Group’s information structure (introduction of electronic storage for documents, electronic digital signatures, etc.) Based on the developed model of centralisation and automa- tion of the treasury functional, headcount of financial services at branches (mES, PmES) was optimised the audit and update of the existing organisational and executive documentation was completed, in line with the target Single trea- sury structure. Several internal documents that were new to the Group, were developed, specifically, the Regulations on the Single treasury and the internal financing Procedures the economic impact from the operation of the Single treasury amounted to approx. RuB570 million and the report on economic impact has been submitted to the federal financial monitoring Service (Rosfinmonitoring) and the Russian Ministry of Finance. the Company has a noncore Assets management Programme, which sets the criteria for classifying any real estate and interests (shares) in subsidiaries, associates and other business entities in which PJSC fGC uES participates as non-core assets. the document also outlines the procedure and form of keeping the record of non-core assets, approaches to the calculation of their value, and the key provisions of divesting the noncore assets. information on the disposal of non-core assets in 2015 is disclosed in Section Appendices / information on disposal of non-Core Assets of federal Grid Company in 2015 of the Annual Report. information on disposal of non-core assets is quarterly published on the interdepartmental Portal on State Property management (Rosimushchestvo), information as at the end of 2015 has been disclosed in full. 207 1. the Board of directors of federal Grid Company (par. 6 of the minutes no. 279 dated April 24, 2015) adopted a number of resolutions regarding expanding the access for small and medium enterprises to the procure- ment performed by federal Grid on a competitive basis. 2. Actions are taken to review applications of small and medium enter- prises for inclusion in the partnership programme between federal Grid Company and small and medium enterprises. A list of small and medium enterprises is being drafted so that the Company would contract them when Resolution of the Government of the Russian federation no. 1352 dated 11 december 2014 “on the participation of small and medium enter- prises in the procurement of goods, works and services by certain types of legal entities” becomes effective. 3. Proposals were prepared aimed to amend federal Grid Company’s Procurement Regulations before Resolution of the Government of the Rus- sian federation no. 1352 dated 11 december 2014 “on the participation of small and medium enterprises in the procurement of goods, works and ser- vices by certain types of legal entities” becomes effective – 1 July 2015. 4. the Company made a list of Goods, Works and Services to Be Procured from Small and medium Enterprises. 5. federal Grid Company issued decree no. 191 dated 15 April 2014 “on establishment and development of organisational and technical condi- tions for the introduction of innovative and high-technology products at the electrical grid facilities of JSC fGC uES including those manufactured by small and medium enterprises.” 6. the Company adopted key performance indicators for management (share of procurement with SmEs in 2015) 1. members appointed to the Advisory Body, including delegates from public organisations, as approved by the order of JSC fGC uES no 93 of 25 february 2014 “on the establishment of the Advisory Body on issues of ensuring efficiency of procurement conducted by JSC fGC uES for small and medium enterprises”. 2. federal Grid’s decree no. 92 dated 25 february 2014 was en- acted entitled “Ratification of a partnership programme between federal Grid Company and small and medium enterprises”, which was developed based on the guidelines provided in the letter from the ministry of Economic development (no. 26231-EE/d28i dated 28 november 2013). 3. the share of electronic procurements is more than 90% of the total competitive procedures, which exceeds the targets set by the Roadmap. 4. labour productivity indicator is included in the “methodology for Calculation and Evaluation of Key Performance indicators set for Senior managers of JSC fGC uES” approved by the Board of directors (minutes no. 243 dated 19 december 2014) in order to implement par. 31 of the Action Plan (Roadmap). 5. to implement pp 17, 24, 25, amendments were made to the Regulations on Procurement of Products, Works and Services used by the Company (as amended on 24 July 2015, no 272). 6. to implement para 30, the Company issued the order no 177 of 22 April 2015 “on the approval of the methodology of calculation and evaluation of key performance indicators for senior manag- ers of the Executive Office and divisions of branch offices of the Company (mES, Centre for technical Supervision) for 2015”. APPEndiCES to thE AnnuAl REPoR t infoRm Ation on thE ACtuAl PERfoRm AnCE of ASSiGnmEnt S of Rf PRESidEnt And thE Rf GoVERnmE nt no Assignment Registration data Brief summary of the document received measures taken by the company to fulfill the assignment Result of the completed assignment 8. President of the Russian federation no Pr-3086 dated 27 decem- ber 2013 on the drafting and approval of a long-term development programme for the Company, auditing implementation of the long-term development programme and on the approval of a standard for such audit on 19 december 2014, the Board of directors of JSC fGC uES (minutes no. 243 dated 22 december 2014) approved a “long-term development Programme of JSC fGC uES” for 2015-2019 and a forecast until 2030. 9. Government of the Russian federation no iSh-P8-6196 dated 15 August 2014 on including the key parameters of manpower needs (including those for engineering and technical specialists) in the Company’s long-term development programme 208 10. President of the Russian federation no PR-1474 dated 05 July 2013 on key performance indicators to be adopted by joint-stock companies Section “manpower needs” was included in federal Grid’s long-term development Programme. Given the main initiatives of the long-term development Programme, the corporate hR policy is particularly focused on the growth of labour produc- tivity while maintaining the requirements to reliability of operations of the electrical grid complex. Corporate hR policy is based on the optimal use of manpower in the Company’s interests and continuous professional development of its employees. the methodology for calculation and evaluation of key performance indicators set for federal Grid’s senior managers for 2014 is based on the methodological guidelines about using key performance indicators by the government-owned corporations, government-owned companies and government-owned unitary enterprises as well as business entities in which the total share of the Russian federation in the charter capital exceeds 50%. 11. Government of the Russian federation no 1250-r dated 09 July 2014 on raising labour productivity as per par. 6 of Section 2 of the Action Plan aimed at raising labour productivity, and the creation and modernisation of highly productive jobs, as approved by the directive the Board of directors (minutes no. 242 dated 19 december 2014) re- quired the Chairman of the management Board to make sure that appropri- ate steps are taken to raise labour productivity in the Company. the Board of directors of JSC fGC uES (minutes no. 245 dated 31 december 2014) approved a standard for an annual independent audit of the programme performance. The audit findings, in the form of proposals for the appropriate adjustment of the pro- gramme, should be sent to the ministry of Energy no later than 10 July of the year following the reporting year. in 2015, the audit of the long-term development Programme performance in 2014 was carried out. the respective proposals on the programme’s adjustment were submitted to the Russian ministry of Energy. for further details on the federal Grid’s long-term development Programme, see section GoVERnAnCE And dEVEloPmEnt / Strategic management of the Annual Report On 19 December 2014, the Board of Directors (Minutes No. 243 dated 22 December 2014) approved the “Long-Term Development Programme of JSC FGC UES for 2015-2019 with a forecast until 2030.” See the annual report for further detail about the Long-Term Development Programme of JSC FGC UES: For further details on the Federal Grid’s Long-Term Development Programme, see section GOVERNANCE AND DEVELOPMENT / Strategic management of the Annual Report For further details of the Company’s HR Policy, see Section HU- MAN CAPITAL / HR Policy of the Annual Report 209 The Board of Directors approved methodologies for calculation and evaluation of key performance indicators of the Company’s senior managers for 2014 (Minutes No. 217 dated 15 April 2014) and 2015 (Minutes No. 243 dated 22 December 2014). For further details See section CORPORATE GOVERNANCE RE- PORT / Governance System / Management Board of the Annual Report the measures to be taken in order to increase labour productivity have been specified in the Federal Grid’s Long-term Development Programme. PJSC fGC uES also approved programs for long-term improvement of efficiency. Their targets are to reduce operational and investment costs (the “40 / 40” project). one of the key areas of the “40 / 40 project” is the labour Productivity improvement Programme. the methodology for Calculation and Evaluation of KPis for Senior managers of JSC fGC uES for 2015, which was approved by the Board of directors (minutes no. 243 dated 19 december 2014) includes a labour productivity indicator. the indicator was also added to the draft methodology of for calculation and evaluation of key performance indicators for the Company’s senior managers for 2016. APPEndiCES to thE AnnuAl REPoR t infoRm Ation ABout PARtiCiPA tion of fEdERAl GRid ComPAn Y in SuBSidiARiES And ASSoCi AtES ▶ Information about the Implementation of Measures of the Long-Term Development Programme in Terms of Import Substitution no measure information about the implementation of measure 1. 2. 3. 4. 5. 6. 7. Identification of risks associated with the imple- mentation of the Program of import substitution of equipment, technologi es, materials and systems in JSC "fGC uES" for the period 2015-2019, and setting measures to manage thereof implemented the list of risks associated with the implementation of the Pro- gram of import substitution of equipment, technologies, materi- als and systems in JSC fGC uES for the period 2015-2019, and measures to manage thereof has been approved by the order “on Approval of measures to manage Risks Associated with the implementation of import Substitution Programme” no. 820r dated 29 december 2014 Approval of Rules and Procedures for implementing the Program of import substitution of equipment, technologies, materials and systems in JSC "fGC uES" for the period 2015-2019 implemented Rules and Procedures for implementing the Program of import substitution of equipment, technologies, materials and systems in JSC fGC uES for the period 2015-2019 have been approved by the order no. 97 dated 02 march 2015 testing and approval of a methodology for assess- ing localisation of electrical products manufactur- ing development and approval of Rules and Proce- dures for implementing long-term contracts for delivery of electrical equipment implemented the methodology for assessing localisation of electrical prod- ucts manufacturing in the territory of the Russian federation has been developed and approved by the order no. 445 dated 06 october 2014 implemented Rules and Procedures for implementing long-term contracts for delivery of electrical equipment have been approved as part of the Rules and Procedures for implementing the Program of import substitution of equipment, technologies, materials and systems in JSC fGC uES for the period 2015-2019 approved by the order no. 97 dated 02 march 2015 development of criteria for determination of consistency of localised and domestic manufac- turing facilities with today’s level of technological development implemented Criteria for determination of consistency of localised and do- mestic manufacturing facilities with today’s level of technologi- cal development have been approved by the order of PJSC fGC uES no. 722r dated 10 december 2015 Analysis of opportunities of import substitution when procuring main equipment broken down by branches – mES implemented the Company has issued and order no. 86 dated 20 october 2015 “on centralised procurement of main electrical equipment for federal Grid’s facilities and a system for updating needs of PJSC fGC uES for main electrical equipment”, in accordance to which the Company quarterly reports on its needs for electrical equipment development and introduction of innovative prod- ucts and technologies within joint projects of PJSC fGC uES and domestic manufacturers implemented The Company has received 5 certifications on introducing in- novative products and technologies from electrical equipment manufacturers 210 Appendix 7. information about participation of federal Grid Company in subsidiaries, associates, and other entities in 2015 ▶ Information about participation of Federal Grid Company in subsidiaries, associates, and other entities Abbreviated corporate name of the entity* Region of operation Core business Share of PJSC fGC uES in the authorised capital of the company as of 31.12.2015 financial performance for 2015 Revenue, RuB thousand net profit, RuB thousand Charitable contributions and sponsorship in 2015, RuB thousand 211 Core companies 1 JSC muS Energetiki moscow Saint Petersburg Samara Yekaterinburg Chita ulan-ude Communication services 100% 1,519,170 23,948 JSC R&d Centre of fGC uES moscow novosibirsk R&d 100% 1,829,920 7,322 2 3 JSC CiuS EES 4 JSC ESSK EES * names of companies are as of 31.12.2015 100% 8,538,326 -366,409 100% 169,025 28,620 functions as an owner/developer in the field of capital construc- tion, recon- struction, and re-equipment of electric grid facilities Acts as a pro- curement agent moscow Saint Petersburg Samara Pyatigorsk Yekaterinburg Krasnoyarsk Khabarovsk Surgut moscow Saint Petersburg Yekaterinburg Krasnoyarsk Samara Khabarovsk Surgut Zheleznovodsk 0 0 0 0 APPEndiCES to thE AnnuAl REPoR t infoRm Ation ABout PARtiCiPA tion of fEdERAl GRid ComPAn Y in SuBSidiARiES And ASSoCi AtES Abbreviated corporate name of the entity* Region of operation Core business Share of PJSC fGC uES in the authorised capital of the company as of 31.12.2015 financial performance for 2015 Revenue, RuB thousand net profit, RuB thousand Charitable contributions and sponsorship in 2015, RuB thousand Abbreviated corporate name of the entity* Region of operation Core business Share of PJSC fGC uES in the authorised capital of the company as of 31.12.2015 financial performance for 2015 Revenue, RuB thousand net profit, RuB thousand Charitable contributions and sponsorship in 2015, RuB thousand 5 JSC Elektrosetservis unEG maintenance and repairs of electric grid facilities moscow moscow oblast Ryazan oblast novgorod oblast novosibirsk ulyanovsk oblast Pyatigorsk Yekaterinburg Khabarovsk Surgut 100% 2,296,990 -648,764 212 6 7 8 index Energetiki – fGC uES llC moscow Securities trans- actions 100% 12,817 2,135,194 JSC tomsk trunk Grids tomsk tomsk oblast Electricity transmission and distribution services 52.025% 191,119 19,700 JSC iPS SuakRusen- ergo (former JSC iPS GruzRosenergo) Georgia in Rf: Karachay- Cherkessia Krasnodar Krai Electricity trans- mission services 50% 495,661 (2) 46,449 (2) 0 0 0 0 0 48.999% 124,864 -190,088 14.0749% 45,953,526 3,721,453 (1) 9 JSC Kuban trunk Grids Krasnodar Krasnodar Krai 10 JSC inter RAo moscow Branches: ivanovo oblast Representative Offices: Ecuador, Belgium 11. CJSC taygaEnergo- Stroy Krasnoyarsk Electricity transmission and distribution services Electric power and heat genera- tion Electricity trans- mission ser- vices, functions as an owner/ developer 13 fGC – Asset manage- ment. llC moscow Sale of securi- ties 0.010% (4) (4) (1) Non-core companies 14 JSC mobile Gas-turbin Power Plant moscow moscow oblast Krasnodar Krai tuva Republic Electric power generation 100% 4,439,273 591,282 15 JSC APBE moscow 16 JSC Chitatechenergo Chita ulan-ude Support of power plant operations Communica- tion services; design and maintenance of communication lines 100% 1,356 -29,090 100% 119 275 828 17 JSC nurenergo Chechen Republic Sales of electric- 76.9996% 1,664,171 -4,815,646 18 CJSC Severovostoken- ergo moscow ity Generation and sale of thermal and electric energy 49% 0 -14 19 JSC Energotechcom- plekt moscow leasing out property 48.999% 4,152 -4 213 0 0 0 0 0 0 0 0 1 share (1) (1) (1) 20 it Energy Service llC moscow information technology services 79.999% 734,738 982 21 JSC Enin moscow R&d 38.24% 159,442 4,360 12 JSC Analytical Credit Rating Agency moscow Rating activity 3.7% (1) (1) (1) 22 CJSC Energorynok moscow Printing and pub- lishing services 8.50% (1) (1) (1) APPEndiCES to thE AnnuAl REPoR t infoRm Ation ABout thE StRu CtuRE of thE PRoPER tY PoRtfolio Abbreviated corporate name of the entity* Region of operation Core business Share of PJSC fGC uES in the authorised capital of the company as of 31.12.2015 financial performance for 2015 Revenue, RuB thousand net profit, RuB thousand Charitable contributions and sponsorship in 2015, RuB thousand Appendix 8. information about the Structure of the Property Portfolio of Federal Grid Company ▶ Information about the Structure of the Property Portfolio of Federal Grid Company in 2015 23 JSC Stend ivanovo oblast 214 24 JSC dESP far East Siberia 25 JSC tsentrenergohold- ing moscow 26 PJSC nPf Electroen- ergetiki moscow installation and commission- ing services for Gtd-110 gas turbine engines and modifica- tions thereof; Electric power generation and sales integrated design in the energy sector trust property management and agency services non-government pension benefits, mandatory pen- sion insurance 0.83% (1) (1) (1) name 0.0048% (1 share) (3) 65,831 -301,291 0.0007% (1) (1) 0 (1) 1. Assets related to electric grid facili- ties, including: 1.1. ohl 220 kV and higher Quantity: for ohl and cable networks, the length of the track (km); for SS and other Assets, the number (pcs) Book (carrying) value as of 01.01.2015, RuB thousand Gain from 01.01.2014 through 31.12.2014, RuB thousand loss from 01.01.2015 through 31.12.2015, RuB thousand Accumulated amortisation from 01.01.2015 through 31.12.2015, RuB thousand Book (carrying) value as of 31.12.2015, RuB thousand - 740,194,384 110,230,549 2 119 858 68,323,166 779,981,909 13,3271.349 330,896,784 33,257,829 426 613 27,732,045 335,995,955 215 0.0011% (1) (1) (1) 1.3. ohl 35 kV 65.465 128.555 1.692 502 12.414 117.331 1.2. ohl 110 kV 976.19 1,827,996 1,246,487 21 575 175.572 2,877,336 1.4. ohl 10 kV and lower 221.855 327.512 16.223 1 613 18.412 323.710 1.5. 220 kV and higher 793 351,210,081 68,762,742 966 956 37,125,506 381,880,361 1.6. SS 110 kV 1.7. SS 35 kV 1.8. 1.9. SS 10 kV and lower Cable networks (all voltage classes) and cable lines 41 7 59 7,193,353 231.757 441 446 632.314 6,351,350 629 34.862 7 70.271 593.592 1,233,016 46.124 256 324 56.230 966.586 396.21 27,913,886 3,194,044 1 676 1,032,317 30,073,937 1.10. other Assets de- 943.052 18,834,193 3,438,789 3 146 1,468,085 20,801,751 signed to provide electrical connec- tions, aerial cable lines Non-core Assets listed in the Reg- ister of Non-core Assets Other Assets (I.3 = I.4 – I.2 – I.1), including: 2. 3. 75 10,156,642 348.480 1 695 197 444.924 8,365,001 103 38,510,069 4,655,515 659 726 7,227,783 35,278,075 (1) as of 23.03.2016 no financial statements and/or information about charitable contributions and sponsorship were submitted (2) at the exchange rate of the National Bank of Georgia as at December 31 2015: RUB100 = 3.2724 Lari (3) the remaining shares are owned by JSC R&D Centre of FGC UES fully-owned by PJSC FGC UES (4) statements for2015 were not submitted, as 2016 will be the first reporting year subject to para 3 of Article 15 of the Federal Law No. 402-FZ “On accounting” APPEndiCES to thE AnnuAl REPoR t name 3.1. land plots under ownership 4. 5. Fixed Assets' (line of the balance sheet) Leased Assets related to electric grid facilities, including: 5.1. ohl 220 kV and higher 216 5.2. ohl 110 kV 5.3. ohl 35 kV 5.4. 5.5. ohl 10 kV and lower SS 220 kV and higher 5.6. SS 110 kV 5.7. SS 35 kV 5.8. 5.9. SS 10 kV and lower Cable networks (all voltage classes) 5.10. other leased As- sets designed to provide electrical connections 6. Other leased As- sets, including: Quantity: for ohl and cable networks, the length of the track (km); for SS and other Assets, the number (pcs) Book (carrying) value as of 01.01.2015, RuB thousand Gain from 01.01.2014 through 31.12.2014, RuB thousand loss from 01.01.2015 through 31.12.2015, RuB thousand Accumulated amortisation from 01.01.2015 through 31.12.2015, RuB thousand Book (carrying) value as of 31.12.2015, RuB thousand 350 1,631,794 67.178 1,698,972 788,861,095 115,234,544 4 474 781 75,995,873 823,624,985 - - 10,094,312 607.391 1 280 740 3092.876 1,214,169 89.71 - 0.074 - - - 31 914.660 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 18.582 17,777,017 4,102,542 1 885 092 6.1. land plots 15.217 16,716,468 1,539,131 1 839 575 7. Assets used under lease agreements related to electric grid facilities, including: 7.1. ohl 220 kV and higher 7.2. ohl 110 kV 7.3. ohl 35 kV - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 9,420,963 1,214,169 - - - 914.660 - - - - - 19,994,467 16,416,024 - - - - infoRm Ation ABout thE StRu CtuRE of thE PRoPER tY PoRtfolio name Quantity: for ohl and cable networks, the length of the track (km); for SS and other Assets, the number (pcs) Book (carrying) value as of 01.01.2015, RuB thousand Gain from 01.01.2014 through 31.12.2014, RuB thousand loss from 01.01.2015 through 31.12.2015, RuB thousand Accumulated amortisation from 01.01.2015 through 31.12.2015, RuB thousand Book (carrying) value as of 31.12.2015, RuB thousand 7.4. 7.5. ohl 10 kV and lower SS 220 kV and higher 7.6. SS 110 kV 7.8. SS 35 kV 7.9. SS 10 kV and lower 7.10. Cable networks (all voltage classes) 8. 9. 10. Other Assets used under lease agree- ments designed to provide electric connections Other Assets used under lease agree- ments Total for leased assets, including those under lease agreements (I.10= I.5 + I.6 + I.7 + I.8 +I.9) 11. TOTAL (I.11 = I.4 + I.10) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 217 27,871,329 4,709,933 3,165,832 0 29,415,430 816,732,424 119,944,477 7,640,613 75,995,873 853,040,415 APPEndiCES to thE AnnuAl REPoR t infoRm Ation ABout lAnd PlotS Appendix 9. information about land Plots of federal Grid Company ▶ Information about Land Plots of PJSC FGC UES no. types of land plots the total number and area of land plots including: bought out as at the reporting date leased (subleased) as at the reporting date 218 1 2 3 4 5 6 7 quantity ha quantity Land plots where facilities of substations are located 1,228 5,572 including: - - for SS 220 kV and higher 1,106 5,543 for SS 110 kV for SS 35 kV and lower Land plots for OHL 220 kV and higher Land plots for OHL 110 kV and lower including: for ohl 110 kV for ohl 35 kV for ohl 0,4 / 6 / 10 kV Land plots where facilities of power plans are located Land plots where facili- ties of boiler stations are located Land plots where heating grid facilities are located Land plots where other facilities are located 56 66 28 1 461 - 118 250 92 9 - - 129 - 28 71 23 11 - - 273 227 176 - 165 9 2 3 - - 3 - - - - 37 338 ha 861 - 854 7 0 13 0 - - 0 - - - - quantity ha 954 4,519 - 901 47 6 - 4,498 21 1 386 - 113 176 90 7 - - 127 - 26 68 22 11 - - 30 224 192 right of permanent (perpetual) use as at the reporting date right was not determined at the reporting date recorded in the State Cadastre as at the reporting date rights registered as at the reporting date State Cadastral Records Protective zones quantity ha quantity 20 - 20 - - 109 - 109 - - 78 - 20 - 58 ha 82 - 82 - 0 quantity ha quantity ha quantity km 1,073 4,750 943 4,301 299 556 - - - - - - 1,009 4,721 885 4,276 219 552 56 8 28 1 52 6 24 1 20 60 4 1 219 2 - - 2 - - - - 4 0 - - 0 - - - - 1 70 - 1 67 - 2 - - 8 1 - 0 1 - - - - 4 450 129 377 149 136 1,259 - 103 248 90 9 - - - 26 69 22 11 - - - 98 182 90 7 - - - 48 68 22 11 - - 246 198 215 177 - 62 39 31 6 - - - - 662 275 317 4 - - - TOTAL: 17,927 13,680 564 15,998 12,300 624 537 959 274 13,588 8,930 12,333 7,233 4,245 90,630 18,676 8,788 193 15,470 8,064 598 427 2,407 284 14,610 5,575 11,978 4,231 3,959 114,079 APPEndiCES to thE AnnuAl REPoR t Appendix 10. information on disposal of non-Core Assets of federal Grid Company in 2015 Non-core assets management programme the main goals and objectives that federal Grid Company set out in the field of non-core assets management are the performance of assignments of the President and the Government of the Russian federation, separation, insulation and disposal of rights relating to non-core assets, as well as income generation associated with such disposal. real estate and stakes (shares) of subsidiaries and associates in which federal Grid Company participates and that relate to non-core assets. the Programme sets criteria for classifying real estate and stakes (shares) of subsidiaries, associates and other business entities in which the Company participates as non-core assets, the procedure for maintaining the register of non-core assets, valuation policy and main principles for non-core assets disposal. 220 the federal Grid’s non-Core Assets management Programme approved by the Board of directors (minutes no. 178 dated 16 november 2012) determines the Company’s focus areas in managing * The Board of Directors of Federal Grid Company approved (Minutes No. 311 dated 14 March 2016) a revised version of the Non-Core Assets Management Programme ▶ Information on disposal of non-core assets of PJSC FGC UES in 2015 no name Asset identification number (if applicable) Asset book value, RuB thousand Balance sheet line, where the asset was reflected on the reporting date preceding the date of disposal Accounting entries (including itemisation) that reflect income and expenditure from disposal of asset infoRm Ation on diSPoSAl of non-CoRE ASSE tS Actual disposal proceeds, RuB thousand difference between actual disposal proceeds and asset book value, RuB thousand Cause for the difference between actual disposal proceeds and asset book value 1 2 3 4 5 non-residential premises at a basement of residential build- ing (Pyatigorsk city, moskovskaya street, 96) flat, Balakovo town, Saratov oblast Construction in progress of 220/35/10 kV Gorodskaya SS, usinsk town, with 220 kV and 35 kV approach lines (land plot area of 28000 sq.m) 0500-1-11-35001 1132 9110021101; 9120031110 481.85 4.809 4,327.15 0100-1-13-00493 1132 9110021101; 9120031110 1,709.37 1.770 60.63 _ _ Р0300-1-0004 1172 9110021201; 9120031211 221 10,368.44 1.416 -8,952.44 the actual dis- posal proceeds are lower than the book value. the construc- tion in prog- ress was not depreciated. the disposal value that is below the residual is justified by economic profit- ability compared to the write-off or saving the uncomplete construction facility. facilities of the Executive Office of Khakass PmES 0706-2-11-18905 0706-2-11-18906 0706-2-12-18908 0706-2-12-18907 1132 9120034102 22,787.7 1132 9120031110 16,537.93 500 kV lipetskaya SS 0210-1-12-40620 0210-2-12-79385 0210-2-12-79387 0210-1-12-41370 0210-1-12-40617 0210-1-11-40439 0210-1-12-40614 0210-1-12-40603 0210-1-11-40604 0210-1-12-40606 0 0 -22,787.7 Charge-free transfer to mu- nicipal owner- ship -16,537.93 Charge-free transfer to mu- nicipal owner- ship APPEndiCES to thE AnnuAl REPoR t infoRm Ation on diSPoSAl of non-CoRE ASSE tS no name Asset identification number (if applicable) Balance sheet line, where the asset was reflected on the reporting date preceding the date of disposal Accounting entries (including itemisation) that reflect income and expenditure from disposal of asset Asset book value, RuB thousand Actual disposal proceeds, RuB thousand difference between actual disposal proceeds and asset book value, RuB thousand Cause for the difference between actual disposal proceeds and asset book value no name Asset identification number (if applicable) 6 7 8 JSC Voronezh utility Company (100%) "JSC ural Energy manage ment Company (33.33%)" JSC Power in- dustry head data Processing Cen- tre (50.0031%) _ _ _ 222 1150 9120032412 0 0 0 the company was liquidated (date of entry in the uSRlE: 03.08.2015) 9 utility 220 kV opornaya SS 1150 9120032412 50 19,976.6 19,926.6 "the company was liquidated on 06.05.2015 liquidation quote was RuB19,976.60 thousand " Balance sheet line, where the asset was reflected on the reporting date preceding the date of disposal Accounting entries (including itemisation) that reflect income and expenditure from disposal of asset Asset book value, RuB thousand Actual disposal proceeds, RuB thousand difference between actual disposal proceeds and asset book value, RuB thousand Cause for the difference between actual disposal proceeds and asset book value 1132 9110021101; 9120031110 1,271,442.35 1,450,000 178,557.65 _ 223 0703-1-12-03582 0703-1-12-03581 0703-1-12-03576 0703-1-12-03570 0703-1-12-03580 0703-1-12-03579 0703-1-12-03578 0703-1-11-02910 0703-1-12-03556 0703-1-11-03484 0703-1-12-03573 0703-1-11-03068 0703-1-11-03550 0703-1-11-02404 0703-1-12-03589 0703-1-12-03584 0703-1-12-03586 0703-1-12-03588 0703-1-12-03587 0703-1-12-03585 Repair and main- tenance Station, Snezhnegorsk settlement 0703-1-11-05826 0703-1-11-05827 0703-1-12-05828 0703-1-12-03718 0703-1-11-05825 1150 9110021411; 9120031413 163 665,979.06 665,816.06 the shares were sold in favor of PJSC Rus- hydro at a price determined by an independent appraiser, in the amount of RuB568,000.00 thousand. PJSC Rushydro paid the debt owed by JSC Power industry head data Process- ing Centre to PJSC fGC uES in the amount of RuB97,979.06 thousand APPEndiCES to thE AnnuAl REPoR t RAS AnnuAl finAnCi Al StAtEmEnt S Appendix 11. RAS Annual financial Statements for 2015 Audit report on financial statements for 2015 To the shareholders of PJSC Federal Grid Company: Audited entity: 224 Public Joint Stock Company "Federal Grid Company of Unified Energy System" (abbreviated name PJSC "FGC UES"). Location: Russia, 117630, Moscow, ul. Akademika Chelomeya 5a; Main state registration number - 1024701893336. Auditor: Limited Liability Company "RSM RUS". Location: 119285, Moscow, Pudovkin street # 4; Phone: (495) 363-28-48; fax: (495) 981-41-21; Main state registration number - 1027700257540; Limited Liability Company "RSM RUS" is a member of the self-regulating organization (SRO) of auditors Non-Profit Partnership "Audit Association of membership number 6938, ORNZ 1 1306030308), location: 119192, Moscow, Michurinsky prospect #21,. Bldg. 4. the Commonwealth" (certificate of We have audited the accompanying financial statements of PJSC "FGC UES", which include the balance sheet as at 31 December 2015, the profit and loss statement, changes in equity and cash flow statement for 2015, as well as the notes to the annual financial statements. The responsibility of the audited entity's accounting statements The management of PJSC "FGC UES" is responsible for the preparation and fair presentation of these financial statements in accordance with Russian regulations regarding the preparation of financial statements and internal controls necessary to prepare financial statements that are free from material misstatement, whether due to fraud or error. Auditor's responsibility Our responsibility is to express an opinion on the reliability of the financial accounting on the basis of our audit. We have conducted our audit in accordance with federal auditing standards. Those standards require that we comply with relevant ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The audit involved performing audit procedures to obtain audit evidence supporting the values in the accounting and the information disclosure that it contains. The choice of audit procedures is the subject of our judgments, which is based on assessment of the risk of material misstatements, whether due to fraud or error. In assessing this risk, we considered the system of internal control, providing making and reliability of the financial statements in order to select appropriate audit procedures, but not for the purpose of expressing an opinion on the effectiveness of the internal control system. The audit also included assessing appropriateness of accounting policies used and the reasonableness of estimates made by the management of the audited entity as well as evaluating the overall financial statements. We believe that the audit evidence obtained during the audit provides a reasonable basis for expressing an opinion on financial statements. Opinion It is our opinion that these financial statements present fairly, in all material respects, the financial position of PJSC "FGC UES" as of December 31, 2015, the results of its financial and economic activities and cash flows for 2015 in accordance with Russian Accounting Standards. Chairman of the Board Auditor qualification certificate number 05-000015 issued on the basis of a decision self-regulatory organization of auditors "Russian Collegium of Auditors" Non-Profit Partnership November 15, 2011, protocol number 24 for an indefinite period. ORNZ in the register of auditors and auditing organizations - 29605011647 Head of Audit Auditor qualification certificate number 05-000030 issued on the basis of a decision self-regulatory organization of auditors non- profit Partnership "Russian Collegium of Auditors" November 30, 2011, protocol number 25 for an indefinite period. ORNZ in the register of auditors and auditing organizations - 21005008593. N.A. Dantser N.N. Usanova 225 APPEndiCES to thE AnnuAl REPoR t RAS AnnuAl finAnCi Al StAtEmEnt S BALANCE SHEET 20 15 December 31 as of city/town of Company Public Joint-Stock Company “Federal Grid Company of Unified Energy System” Tax identification code Activity Form of corporate entity’s incorporation/ form of ownership power transmission Annex to Order of the Russian Ministry of Finance No. 66n dated July 2, 2010 (as revised by Order of the Russian Ministry of Finance No. 124n dated October 5, 2011) CODES 0710001 12 2015 31 OKUD Form No. 1 Date (year, month, day) as per OKPO 56947007 INN as per OKVED 4716016979 40.12 public joint-stock company/mixed Russian assets with a federal share as per OKOPF/OKFS 47 41 Unit: Location (address) RUB thousand as per OKEI 384 5A Akademika Chelomeya Street, Moscow, Russia, 117630 Notes ASSET 1 I. NON-CURRENT ASSETS S.1 of Notes* S.3.2 of Annexes** Intangible assets S.1 of Notes* S.3.6 of Annexes** Research and development results S.2 of Notes* S.3.3 of Annexes** Fixed assets, including: land plots and natural resources buildings, machines and equipment, structures other fixed assets 226 S.3 of Notes* S.3.7 of Annexes** S.2 of Notes* S.3.4 of Annexes** S.5.1 of Notes* S.3.9 of Annexes** Income-bearing investments in tangible assets Financial investments Deferred tax assets Other fixed assets, including: equipment for installation investments in fixed assets advance on fixed assets S.3.11 of Annexes** other fixed assets TOTAL for Section I II. CURRENT ASSETS S.4 of Notes* S.3.10 of Annexes** Inventory, including: raw materials, materials and other similar assets finished goods and goods for sale WIP on core services to third parties Value added tax on purchased assets S.5 of Notes* S.3.9 of Annexes** Accounts receivable, including: Accounts receivable (payments are expected over more than 12 months upon the balance sheet date), including: customers and consumers advance payments made other debtors Accounts receivable (payments are expected within 12 months from the balance sheet date), including: customers and consumers amounts owed by members (founders) as share capital payments advance payments made other debtors S.3 of Notes* S.3.8 of Annexes** Financial investments (except cash equivalents) S.3.19 of Annexes** S.3.11 of Annexes** Cash and cash equivalents Other current assets TOTAL for Section II BALANCE Approval date Mailing (acceptance) date Indicator code 2 As of December 31, 2015 3 As of December 31, 2014 4 As of December 31, 2013 5 1110 1120 1130 1131 1132 1133 1140 1150 1160 1170 1171 1172 1173 1174 1100 1210 1211 1212 1213 1220 1230 1231 1232 1233 1234 1235 1236 1237 1238 1239 1240 1250 1260 1200 1600 3 494 151 3 265 522 1 258 891 243 651 324 255 293 213 823 624 985 1 698 972 817 957 414 3 968 599 - 32 339 155 - 264 636 543 33 850 277 209 738 793 20 854 723 788 861 095 1 631 794 782 636 932 4 592 369 - 25 764 856 - 299 704 867 33 218 459 226 376 514 39 761 614 715 008 677 1 547 211 708 271 656 5 189 810 - 30 405 661 - 345 662 295 35 196 369 252 700 001 56 921 125 192 750 1 124 338 485 348 280 1 117 920 595 844 800 1 092 628 737 12 632 339 12 632 325 14 - 881 583 9 635 100 9 635 083 17 - 1 146 693 8 802 454 8 581 729 29 986 190 739 1 548 763 69 491 215 60 162 888 53 842 100 9 503 739 8 654 597 - 849 142 59 987 476 39 753 400 - 766 050 19 468 026 38 893 489 21 977 333 87 002 143 962 961 1 268 301 446 1 110 748 4 877 - 1 105 871 1 709 965 4 851 - 1 705 114 59 052 140 52 132 135 37 501 050 22 061 069 - 1 559 543 19 991 547 2 762 466 39 480 358 108 866 113 296 371 1 231 216 966 - 1 932 565 28 138 501 39 997 563 17 331 698 139 778 121 662 356 1 214 291 093 S.3.1 of Annexes** S.3.1 of Annexes** LIABILITY 1 III. CAPITAL and RESERVES Share capital (contributed capital, authorized fund, contributions of partners) Shares repurchased Revaluation of non-current assets Additional capital (without revaluation) Reserve capital Undistributed profit (uncovered loss), including: Uncovered loss of past years Undistributed profit of past years Undistributed profit of the reporting year Uncovered loss of the reporting year TOTAL for Section III IV. LONG-TERM LIABILITIES S.3.12 of Annexes** Borrowed assets Deferred tax liabilities Estimated liabilities Other liabilities TOTAL for Section IV V. SHORT-TERM LIABILITIES Borrowed assets S.5.3 of Notes* S.3.13 of Annexes** Accounts payable, including: suppliers and contractors amounts owed to the company staff amounts owed to state non-budgetary funds taxes and fees payable advances received other creditors payables to members (founders) S.7 of Notes* Deferred income Estimated liabilities Other liabilities TOTAL for Section V * - Explanatory Notes to the Balance Sheet and Statement of Financial Performance for 2015. ** - Annexes to the annual 2015 Financial Statements. BALANCE Indicator code 2 As of December 31, 2015 3 As of December 31, 2014 4 As of December 31, 2013 4 1310 1320 1340 1350 1360 1370 1371 1372 1373 1374 1300 1410 1420 1430 1450 1400 1510 1520 1521 1522 1523 1524 1525 1526 1527 1530 1540 1550 1500 1700 637 332 662 - 246 420 309 31 867 163 13 295 300 637 332 662 - 235 563 921 31 867 163 13 038 463 ( ( 43 529 255 61 399 392 ) ) ( ( 63 312 639 ) 63 312 639 ) ( ( - 17 870 137 - 885 386 179 249 660 368 44 035 756 - 462 788 294 158 912 31 361 933 54 748 132 42 279 852 18 486 310 101 4 062 955 6 129 644 1 939 360 7 734 740 903 1 905 387 - - - - 854 489 570 232 771 196 34 211 465 - 453 029 267 435 690 29 544 812 77 550 930 67 205 391 221 038 84 162 1 326 189 6 085 001 2 619 738 9 411 760 936 1 435 028 - 633 570 508 - 233 001 961 31 867 163 13 038 463 68 502 921 68 502 921 ) ) - - - 842 975 174 257 349 473 25 028 416 - 51 434 282 429 323 29 488 107 58 051 033 41 424 439 204 732 54 719 961 610 8 497 875 6 895 025 12 633 - 1 347 456 - 88 756 355 1 268 301 446 109 291 706 1 231 216 966 88 886 596 1 214 291 093 Chief Executive (signature) A.E. Murov (print full name) Chief Accountant (signature) A.P. Noskov (print full name) “ 24 “ February 20 16 227 APPEndiCES to thE AnnuAl REPoR t RAS AnnuAl finAnCi Al StAtEmEnt S Notes Indicator name FOR REFERENCE Form 0710002 p. 2 As of December 2015 As of December 2014 S.3.3 of Annexes** Result of the fixed assets revaluation, not included in the net income (loss) for the period 13 866 221 3 052 302 Result of the other transactions, not included in the net income (loss) for the period Total profit or loss for the period S.3.16 of Annexes** Basic earning (loss) per share Diluted earning (loss) per share * - Explanatory Notes to the Balance Sheet and Statement of Financial Performance for 2015. ** - Annexes to the annual 2015 Financial Statements. 17 870 137 5 136 743 0,01402 0,00404 Chief Executive (signature) A.E. Murov (print full name) Chief Accountant A.P. Noskov (signature) “ 24 “ February 2016 229 228 STATEMENT OF FINANCIAL PERFORMANCE for 2015 city/town of Annex to Order of the Russian Ministry of Finance No. 66n dated July 2, 2010 (as revised by Order of the Russian Ministry of Finance No. 124n dated October 5, 2011) OKUD Form No.2 Date (year, month, day) CODES 0710002 12 31 2015 Company Tax identification code Activity Public Joint-Stock Company “Federal Grid Company of Unified Energy System” power transmission as per OKPO 56947007 INN as per OKVED 4716016979 40.12 Form of corporate entity’s incorporation/ form of ownership public joint-stock company/mixed Russian assets with a federal share as per OKOPF/OKFS 47 41 Unit: Notes RUB thousand as per OKEI 384 Indicator Description 1 General income and expenses Code 2 For the reporting period For the same period of the last year 3 4 Net proceeds from sale of goods, products and services (net of VAT, excise duties and other similar mandatory payments), including: 2110 173 266 394 168 940 833 services for electric power transmission other activity S.6 of Notes* Production cost of goods, products and services sold, including: S.6 of Notes* S.3.15 of Annexes** S.3.15 of Annexes** S.3.5 of Annexes** S.3.5 of Annexes** S.3.5 of Annexes** services for electric power transmission other activity Gross earnings (2110 + 2120) Commercial expenses Management expenses Profit (loss) from sales (2100 + 2210 + 2220) Participation capital Interest receivable Interest payable Miscellaneous income Miscellaneous expenses Profit (loss) before tax (2200 +2310 + 2320 + 2330 + 2340 + 2350) Current income tax, including: constant tax liabilities Deferred tax liabilities changes Deferred tax assets changes Other, including: Other similar mandatory payments Income tax adjustment for the previous periods Net income (loss) for the reporting period 2111 2112 2120 2121 2122 2100 2210 2220 2200 2310 2320 2330 2340 2350 2300 2410 2411 2430 2450 2460 2461 2462 2400 158 986 316 14 280 078 134 938 305 133 534 773 1 403 532 38 328 089 - 7 850 741 30 477 348 100 849 8 211 453 8 464 150 23 540 512 25 981 751 27 884 261 69 822 4 317 261 9 530 440 293 851 120 011 120 011 - ) ) ) ) ) ) ) ) ) ) ) ) ( ( ( ( ( ( ( ( ( ( ( ( 159 881 063 9 059 770 132 458 801 130 965 160 1 493 641 36 482 032 - 7 800 367 28 681 665 294 682 5 995 148 5 543 701 16 256 265 31 345 836 14 338 223 - 6 315 404 8 366 583 816 466 18 431 18 227 204 ) ) ) ) ) ) ) ) ) ) ) ) ( ( ( ( ( ( ( ( ( ( ( ( 17 870 137 5 136 743 APPEndiCES to thE AnnuAl REPoR t RAS AnnuAl finAnCi Al StAtEmEnt S 230 Statement of changes in equity for 20 15 Public Joint-Stock Company “Federal Grid Company of Unified Energy System” Company Tax identification code Economic activity Form of legal entity’s incorporation / form of ownership power transmission Annex No. 2 to Order of the Russian Ministry of Finance No. 66n dated July 2, 2010 (as revised by Order of the Russian Ministry of Finance No. 124n dated October 5, 2011) OKUD Form Date (day, month, year) 31 Codes 0710003 12 2015 as per OKPO 56947007 INN 4716016979 as per OKVED 40.12 public joint-stock company/mixed Russian assets with a federal share Unit of measure: thousand RUR (million RUR) as per OKOPF/OKFS 47 41 as per OKEI 384 Indicator name Code Charter capital Capital value as of December 31, 20 13 1 3100 633 570 508 For 20 14 2 Increase in capital value - total: 3210 3 762 154 including: net profit property revaluation income relating directly to the increase in capital value additional issue of shares increase of share denomination reorganization of legal entity other 3211 3212 3213 3214 3215 3216 3217 х х х 3 762 154 - - - 1. Changes in equity Treasury shares repurchased from shareholders - Additional capital Reserve capital Undistributed profits (uncovered loss) Total 264 869 124 13 038 463 ( 68 502 921 ) 842 975 174 х х х - - - - - 3 052 302 х 3 052 302 - - - - - х х х х х - - - 5 136 743 11 951 199 5 136 743 - 5 136 743 3 052 302 х - - - - 3 762 154 х - - - Form 0710023 p. 2 Indicator name Code Charter capital Treasury shares repurchased from shareholders Additional capital Reserve capital Undistributed profits (uncovered loss) Total Reduction of capital value - total: including: loss property revaluation expenses relating directly to the reduction of capital value decrease of share denomination reduction of shares quantity reorganization of legal entity dividends Changes in the additional capital Changes in the reserve capital Capital value as of December 31, 20 14 2 For 20 15 3 Increase in capital value - total: including: net profit property revaluation income relating directly to the increase in capital value additional issue of shares increase of share denomination reorganization of legal entity Reduction of capital value - total: including: loss property revaluation expenses relating directly to the reduction of capital value decrease of share denomination reduction of shares quantity reorganization of legal entity dividends other Changes in the additional capital Changes in the reserve capital Capital value as of December 31, 20 15 3 3220 3221 3222 3223 3224 3225 3226 3227 3230 3240 3200 3310 3311 3312 3313 3314 3315 3316 3320 3321 3322 3323 3324 3325 3326 3327 3328 3330 3340 3300 - - - х х х х х х 637 332 662 0 х х х х х х х х х - - - 637 332 662 - - - - - - - - - - - - - - - - - - - - х х х х х х х х х х х х х х х х - - - - - - ( х 490 342 х ) - ( 436 803 ) ( 436 803 ) х х х х х х - - - - - - ) ( - - - 436 803 490 342 - - - - - - - 436 803 х х 267 431 084 13 038 463 ( 63 312 639 ) 854 489 570 13 866 221 - 17 870 137 31 736 358 х 13 866 221 - - - - - - - - - - - х х х х х х х х х х х х х - - - - 17 870 137 х - - - - 17 870 137 13 866 221 0 х - - ( 839 749 ) ( 839 749 ) - - - - - - - - - - ) ( - - - 839 749 ) - ( 839 749 ( 3 009 833 х ) - 256 837 278 287 472 13 295 300 3 009 833 256 837 43 529 255 ( ( ) ) х х 885 386 179 2. Corrections due to changes in the accounting policy and errors elimination Form 0710023 p. 3 Indicator name Equity - total before corrections correction due to: changes in the accounting policy errors elimination after corrections including: retained earnings (uncovered loss): before corrections correction due to: changes in the accounting policy errors elimination after corrections other capital items subject to corrections: (per items) before corrections correction due to: changes in the accounting policy errors elimination after corrections Indicator name Net assets As of December 31, Code 20 13 1 Changes in equity for 20 14 2 due to net profit (loss) due to other factors As of December 31, 20 14 2 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 231 3. Net assets As of December 31, 20 15 3 As of December 31, 2 20 14 As of December 31, 13 20 1 3400 3410 3420 3500 3401 3411 3421 3501 3402 3412 3422 3502 Code 3600 886 127 082 855 250 506 842 975 174 Chief Executive (signature) A.E. Murov (print full name) Chief Accountant (signature) A.P. Noskov (print full name) “ 24 “ February 20 16 Notes 1. The year preceding the previous year is indicated. 2. The previous year is indicated. 3. The reporting year is indicated. APPEndiCES to thE AnnuAl REPoR t RAS AnnuAl finAnCi Al StAtEmEnt S 1 Cash flows from financial transactions Receipts - total, including: obtaining of credits and loans monetary contributions of owners (members) from issue of shares, participatory interest increase from issue of bonds, promissory notes and other debt securities other receipts Payments - total, including: to owners (members) due to repurchase of shares (participatory interest) of their organization or their cessation of membership for payment of dividends and other distribution payments profit to owners (members) due to the payment of promissory notes and other debt securities, repayment of credits and loans other payments Cash flow balance from financial operations Cash flow balance for the reporting period Cash and cash equivalents balance as of the beginning of the reporting year 2 3 4310 4311 4312 4313 4314 4319 4320 4321 40 094 200 99 200 - - 39 995 000 - ( 24 057 411 ) - 4322 ( 847 383 ) ( 23 210 028 ) - 16 036 789 4323 4329 4300 4400 4 21 - 21 - - - 25 015 080 - 436 803 24 578 277 - 25 015 059 ) ) ) ) ( ( ( ( ( 17 503 024 ) 22 148 734 4450 39 480 333 17 331 599 Cash and cash equivalents balance as of the end of the reporting year 4500 21 977 309 39 480 333 Influence of foreign currency change versus RUR 4490 233 Chief Executive (signature) A.E. Murov (print full name) Chief Accountant (signature) A.P. Noskov (print full name) “ 24 “ February 20 16 CASH FLOW STATEMENT For 2015 Annex to Order of the Russian Ministry of Finance No. 66n dated July 2, 2010 (as revised by Order of the Russian Ministry of Finance No. 124n dated October 5, 2011) OKUD Form Codes 0710004 Date (day, month, year) 31 12 2015 Public Joint-Stock Company “Federal Grid Company of Unified Energy System” Company Tax identification code Activity Form of legal entity’s incorporation / form of ownership power transmission as per OKPO INN as per OKVED public joint-stock company/mixed Russian assets with a federal share as per OKOPF/OKFS 232 Unit of measure: thousand RUR Indicator name 1 Cash flows from current transactions Receipts - total including: from sale of products, goods, work and services lease payments, license fees, royalties, commission charges and other similar payments from resale of financial investments other receipts Payments - total, including: to suppliers (contractors) for raw materials, materials, work and services remuneration of labor debenture interest corporate tax other payments Balance of cash flows from current transactions Cash flows from investment transactions Receipts - total, including: from sale of fixed assets (except financial investments) from sale of other companies’ shares (participatory interest) from repayment of granted loans, from sale of debt securities (claims for cash against third parties) dividends, interest on debt financial investments and other similar income from participatory interest in other companies budget subsidy other receipts Payments - total, including: payments associated with the acquisition, establishment, upgrading, reconstruction and preparation for the use of fixed assets from purchase of other companies’ shares (participatory interest) from purchase of debt securities (claims for cash against third parties), granting loans to third parties 4223 ( 43 416 320 ) debenture interest included in the investment asset value from budget subsidy other payments Balance of cash flows from investment transactions 4224 4228 4229 4200 ( 23 926 874 ) - 1 550 132 629 331 ( ( ) ) 56947007 4716016979 40.12 47 41 384 For 2014 4 as per OKEI For 2015 3 Code 2 4110 173 692 115 170 786 303 4111 160 139 058 156 512 674 4112 4113 4119 4120 4121 4122 4123 4124 4129 4100 4210 4211 4212 972 286 - 12 580 771 ( 74 602 597 ) ( 33 403 893 ) ( 16 197 793 ) ( 6 645 116 ) 1 164 771 ( 19 520 566 ) 99 089 518 973 585 - 13 300 044 69 773 141 ) 31 692 812 ) 16 341 345 ) ) 5 485 996 510 624 16 763 612 ) 101 013 162 ( ( ( ( ( 10 357 241 1 337 320 568 000 43 053 184 32 499 - 4213 5 988 017 39 346 547 4214 4218 4219 4220 4221 4222 ( 2 463 904 - - 142 986 572 ) ( 75 449 636 ) ) 192 192 ( 2 778 546 895 592 - 96 902 553 77 197 748 - 2 110 500 16 834 527 758 976 802 53 849 369 ) ) ) ) ) ) ) ( ( ( ( ( ( ( APPEndiCES to thE AnnuAl REPoR t RAS AnnuAl finAnCi Al StAtEmEnt S d o i r e p f o d n e e h t f o s A ) 7 4 6 6 3 9 7 ( ) 7 7 1 4 1 7 6 ( 4 1 8 9 7 0 3 4 1 1 9 9 6 9 7 9 9 3 1 d e t a l u m u c c A n o i t a i c e r p e d t n e r r u c / l a i t i n I e u l a v t e k r a m ) 5 6 4 8 8 ( 0 7 2 6 1 3 ) 6 4 2 ( ) 6 4 2 ( ) 9 6 5 1 6 ( ) 4 3 7 6 2 2 6 ( ) 9 9 2 6 4 3 5 ( ) 2 0 2 1 2 6 1 ( ) 3 6 0 6 0 3 1 ( 6 4 2 6 4 2 6 7 2 4 5 2 9 4 5 5 8 4 8 1 1 4 0 2 1 7 3 3 7 8 2 6 6 6 7 4 0 6 2 2 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - n o i t a u l a v e R n o i t a i c e r p e D 2 1 e u l a v t e k r a m 1 1 0 1 t n e r r u c / l a i t i n I s s o l t n e m r i a p m I 234 ) D & R ( s k r o w l a c i g o l o n h c e t d n a , l a t n e m i r e p x e d n a n g i s e d , t n e m p o l e v e d d n a h c r a e s e r r o f s e s n e p x e d n a s t e s s a e l b i g n a t n I . 1 d o i r e p e h t r o f s e g n a h C n w a r d h t i W s t e s s a e l b i g n a t n i n i s e g n a h c d n a y t i l i b a l i a v A . 1 . 1 r a e y f o g n i n n i g e b e h t f o s A r o t a c i d n I e h t f o r e d r O o t x e n n A f o y r t s i n i M n a i s s u R d e s i v e r s a ( 0 1 0 2 , 2 y l u J n a i s s u R e h t f o r e d r O y b . o N e c n a n i F f o y r t s i n i M d e t a d n 6 6 . o N e c n a n i F , 5 r e b o t c O d e t a d n 4 2 1 ) 1 1 0 2 S E D O C 5 О О О 1 7 О 1 3 \ 2 1 \ 5 1 0 2 5 . o N m r o F D U K O ] y a d , h t n o m , r a e y [ e t a D 9 7 9 6 1 0 6 1 7 4 N N I 7 0 0 7 4 9 6 5 O P K O r e p s a 2 1 . 0 4 D E V K O r e p s a 1 4 \ 7 4 4 8 3 I E K O r e p s a / S F K O F P O K O r e p s a T E E H S E C N A L A B E H T O T S E T O N Y R O T A N A L P X E T N E M E T A T S S S O L D N A T I F O R P D N A 5 1 0 2 r o F d e i f i n U f o y n a p m o C d i r G l a r e d e F “ y n a p m o C k c o t S - t n i o J c i l b u P ” m e t s y S y g r e n E n o i s s i m s n a r t r e w o p e r a h s l a r e d e f a h t i w s t e s s a n a i s s u R d e x i m / y n a p m o c k c o t s - t n i o j c i l b u p d n a s u o h t B U R d e t a l u m u c c A n o i t a i c e r p e d ) 0 7 4 2 2 2 1 ( ) 0 9 1 4 1 5 3 ( 9 ) 6 9 8 6 2 ( ) 2 0 8 6 2 ( ) 5 3 4 0 8 8 ( ) 2 1 9 8 7 2 3 ( ) 1 1 ( ) 9 3 1 5 1 3 ( ) 5 6 4 8 0 2 ( - - - - - - - - - - d e t a l u m u c c A n o i t a i c e r p e d 8 - ) 1 3 1 6 ( 7 t n e r r u c / l a i t i n I e u l a v t e k r a m 9 9 0 1 5 4 1 2 5 9 6 2 5 5 6 d e v i e c e R ) 7 7 1 4 1 7 6 ( ) 7 8 9 9 9 1 3 ( 5 9 9 6 9 7 9 9 8 7 8 8 5 4 4 4 d e t a l u m u c c A n o i t a i c e r p e d t n e r r u c / l a i t i n I e u l a v t e k r a m d o i r e P 3 5 1 0 2 r o F 4 1 0 2 r o F - - ) 1 3 1 6 ( - - - - 4 9 9 1 6 ) 9 6 5 1 6 ( 6 7 2 4 5 2 5 1 0 2 r o F - - 6 3 8 8 0 1 8 3 1 5 6 3 1 7 0 5 4 1 2 4 ) 6 4 2 ( ) 5 3 2 ( ) 7 6 7 4 3 ( ) 9 9 2 6 4 3 5 ( ) 7 8 3 7 6 0 2 ( 6 4 2 6 4 2 0 4 4 5 4 1 1 1 4 0 2 1 7 5 3 0 2 1 9 2 7 6 9 3 2 9 0 6 3 0 2 1 ) 3 6 0 6 0 3 1 ( ) 8 9 5 7 9 0 1 ( 6 6 7 4 0 6 7 5 1 1 0 4 2 1 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F e d o C 2 0 0 1 5 0 1 1 5 1 0 1 5 1 1 1 5 2 0 1 5 2 1 1 5 3 0 1 5 3 1 1 5 4 0 1 5 4 1 1 5 l a i r t s u d n i , n o i t n e v n i r o f r e d l o h t n e t a p y b l e d o m l u f e s u , e p y t o t o r p r e t u p m o c r o f t h g i r f o r o s s e s s o p y b s e s a b a t a d , s m a r g o r p e c i v r e s d n a k r a m e d a r t r o f r e n w o y b n i g i r o s d o o g f o n o i t a l l e p p a , k r a m m e t I 1 l a t o t - s t e s s a e l b i g n a t n I : g n i d u l c n i - 3 1 0 2 , 1 3 5 - - 4 1 0 2 , 1 3 4 5 1 0 2 3 r e b m e c e D f o s A r e b m e c e D f o s A , 1 3 r e b m e c e D f o s A e d o C 2 0 2 1 5 e m a n r o t a c i d n I 1 f l e s t i y n a p m o c e h t y b d e t a e r c s t e s s a e l b i g n a t n i f o t s o c n o i t i s i u q c A . 2 . 1 r e h t O l a t o T d o i r e p f o d n e e h t f o s A ) 0 2 3 0 6 1 ( ) 6 1 7 9 7 ( 1 1 t s o c f o t r a p s a d e s n e p x e d e r r u c n i ) 4 3 0 3 2 ( ) 2 7 8 9 ( ) 7 3 3 3 3 ( ) 5 3 3 7 1 ( ) 8 9 3 5 3 ( ) 7 0 4 8 1 ( ) 2 4 3 5 2 ( ) 8 7 1 3 1 ( ) 9 0 2 3 4 ( ) 4 2 9 0 2 ( t n e r r u c / l a i t i n i e u l a v t e k r a m t s o c f o t r a p s a d e s n e p x e d e r r u c n i 1 7 9 3 0 4 1 7 9 3 0 4 0 1 1 1 8 5 6 1 1 8 5 6 7 0 0 0 8 7 0 0 0 8 5 5 9 4 8 5 5 9 4 8 9 1 8 0 6 9 1 8 0 6 9 7 3 2 1 1 9 7 3 2 1 1 ) 4 0 6 0 8 ( ) 6 7 7 4 7 ( 9 ) 2 6 1 3 1 ( ) 2 7 8 9 ( ) 2 0 0 6 1 ( ) 2 0 0 6 1 ( ) 1 9 9 6 1 ( ) 1 9 9 6 1 ( ) 4 6 1 2 1 ( ) 4 6 1 2 1 ( ) 5 8 2 2 2 ( ) 7 4 7 9 1 ( - - - - - - - - - - - - - - - - - - - - - - - - n w a r d h t i W d o i r e p e h t r o f s e g n a h C t s o c f o t r a p s a d e s n e p x e d e r r u c n i 8 t n e r r u c / l a i t i n i e u l a v t e k r a m 7 s t l u s e r D & R n i s e g n a h c d n a y t i l i b a l i a v A . 4 . 1 r a e y f o g n i n n i g e b e h t f o s A d e v i e c e R t s o c f o t r a p s a d e s n e p x e d e r r u c n i t n e r r u c / l a i t i n i e u l a v t e k r a m - 8 1 8 5 0 1 6 1 1 8 5 6 - - - - - - 7 0 0 0 4 ) 6 1 7 9 7 ( ) 0 4 9 4 ( 5 - ) 2 7 8 9 ( ) 5 3 3 7 1 ( ) 3 3 3 1 ( ) 7 0 4 8 1 ( ) 6 1 4 1 ( ) 8 7 1 3 1 ( ) 4 1 0 1 ( ) 4 2 9 0 2 ( ) 7 7 1 1 ( 1 7 9 3 0 4 3 5 1 8 9 2 4 1 1 8 5 6 - 7 0 0 0 8 7 0 0 0 8 5 5 9 4 8 5 5 9 4 8 9 1 8 0 6 9 1 8 0 6 9 7 3 2 1 1 2 7 3 2 7 235 d o i r e P e d o C e m a n r o t a c i d n I 3 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 2 0 4 1 5 0 5 1 5 1 4 1 5 1 5 1 5 2 4 1 5 2 5 1 5 3 4 1 5 3 5 1 5 4 4 1 5 4 5 1 5 5 4 1 5 5 5 1 5 S E U f o l e d o m n o i t a m r o f n i l a r e n e g e h t f o n o i t a e r C s d r a d n a t s C E I n o d e s a b l t n e m p o e v e d t p e c n o c S A A e h t r o f m a r g o r p n o i t a z i n r e d o m a i s s u R f o G E N U 0 3 0 2 l l i t e v i t c e p s r e p h t i w , 0 2 0 2 l l i t d o i r e p 1 l a t o t - D & R : g n i d u l c n i S E U C G F C S J l f o t n e m p o e v e d e v i t a v o n n i f o m a r g o r P 0 2 0 2 l l i t r e h t O s t e s s a e l b i g n a t n i d e m e e d e r y l l a t o T . 3 . 1 3 1 0 2 , 1 3 5 4 1 0 2 , 1 3 4 5 1 0 2 3 6 6 4 3 5 3 2 0 4 7 0 9 0 4 5 1 7 2 1 6 5 r e b m e c e D f o s A r e b m e c e D f o s A , 1 3 r e b m e c e D f o s A 6 6 4 3 5 3 2 0 4 7 0 9 0 4 5 1 7 2 1 6 5 e d o C 2 0 3 1 5 1 3 1 5 e m a n r o t a c i d n I 1 g n i d u l c n i r e h t O l a t o T APPEndiCES to thE AnnuAl REPoR t RAS AnnuAl finAnCi Al StAtEmEnt S 1.5. Unfinished R&D and unfinished transactions on intangible assets acquisition Indicator name Code Period As of the beginning of year expenses for the period Changes for the period expenses withdrawn as non- effective accounted as intangible assets or R&D* As of the end of period Expenses for unfinished R&D - total 1 including: Development of technical requirements, design, manufacturing and testing of high-temperature superconductor of direct-current cable, including converters Setting-up a smart network within UPS East (Vostok) Development and manufacture of the production prototype for 500 kV HV line of Sayano- Shushenskaya HPP Other Unfinished operations on intangible assets acquisition - total including: Creation of the integrated hardware/software and technological solution “GCM” 2 5160 5170 5161 5171 5162 5172 5163 5173 5164 5174 5180 5190 5181 5191 Formation of ACS Treasury Change in computation of time АMIS EPFA Creation of OSNBS of electrical grid facilities 5182 5192 5183 5193 5184 5194 5185 5195 5186 5196 5188 5198 * 5160 and 5170 lines reflect reclassification to fixed assets Special automatic information and measurement system of Federal Grid Company UACS Modernisation 1st extension Other 3 For 2015 For 2014 For 2015 For 2014 For 2015 For 2014 For 2015 For 2014 For 2015 For 2014 For 2015 For 2014 For 2015 For 2014 For 2015 For 2014 For 2015 For 2014 For 2015 For 2014 For 2015 For 2014 For 2015 For 2014 For 2015 For 2014 4 4 389 233 5 797 989 864 177 658 267 214 075 163 869 155 268 54 218 3 155 713 4 921 635 1 669 231 5 448 450 188 454 67 985 60 001 - 55 475 - - - - - 64 727 16 847 1 300 574 5 363 618 5 254 466 672 012 54 999 211 905 30 900 61 588 22 350 101 050 146 217 297 469 652 540 493 706 83 470 120 469 60 001 55 475 135 209 - 169 392 - 69 263 47 880 195 206 209 881 6 - (148 212) - - - - - - (148 212) (10 853) 7 (83 095) (1 932 556) (7 551) (5 995) (8 239) (11 382) (5 491) - (61 814) (1 915 179) (1 369 983) 8 4 560 604 4 389 233 911 625 864 177 236 736 214 075 172 127 155 268 3 240 116 3 155 713 940 935 (78 308) (4 194 617) 1 669 231 - - - - - - - - - - (10 853) (78 308) (56 276) 215 648 - - - - - - - (1 313 707) (4 194 617) 188 454 60 001 60 001 55 475 55 475 135 209 - 169 392 - 133 990 64 727 171 220 1 300 574 236 d o i r e p f o d n e e h t f o s A n o i t a u l a v e r d o i r e p e h t r o f s e g n a h C n w a r d h t i w s t c e j b o d e t a l u m u c c a n o i t a i c e r p e d 4 1 t s o c l a i t i n i 3 1 d e t a l u m u c c a n o i t a i c e r p e d 2 1 t s o c l a i t i n i 1 1 d e t a l u m u c c a n o i t a i c e r p e d 0 1 d e t a l u m u c c a n o i t a i c e r p e d 9 t s o c l a i t i n i 8 ) 7 9 3 9 0 3 3 6 6 ( 2 8 3 4 3 9 6 8 4 1 ) 8 6 5 1 6 0 4 1 ( 3 0 6 8 8 1 8 2 ) 3 7 8 5 9 9 5 7 ( 8 9 3 1 9 6 8 ) 0 2 8 3 2 2 1 1 ( ) 3 9 1 6 4 8 1 8 5 ( 8 8 2 7 0 7 0 7 3 1 ) 0 1 1 7 8 1 ( 5 6 4 6 1 9 ) 0 4 3 3 0 7 6 7 ( 7 6 9 7 6 1 2 ) 6 1 7 5 4 7 3 ( ) 0 3 4 5 8 5 9 1 ( ) 1 8 6 5 4 7 6 1 ( ) 0 8 3 3 9 4 1 1 4 ( ) 8 0 6 5 5 3 4 7 3 ( ) 8 0 1 7 0 5 4 2 2 ( ) 6 0 1 7 7 1 4 8 1 ( ) 9 4 6 1 6 2 5 ( ) 3 6 6 4 5 3 4 ( ) 1 9 1 3 8 0 2 ( ) 4 2 4 7 7 8 1 ( ) 4 4 4 1 6 3 ( ) 1 1 7 5 3 3 ( - - - ) 5 9 1 7 1 ( 5 0 1 3 3 8 3 8 7 8 7 6 3 2 6 7 3 4 1 4 9 2 2 9 8 1 5 7 3 4 8 8 3 8 4 8 0 6 1 4 7 9 4 9 8 7 4 3 8 2 4 4 8 3 1 7 7 8 0 3 6 2 6 8 4 8 0 8 3 9 6 4 8 3 6 7 7 7 2 2 9 4 9 2 3 5 1 9 6 3 3 5 2 7 9 8 9 6 4 9 7 1 3 6 7 0 9 3 4 3 1 1 - ) 8 8 9 9 3 6 ( ) 0 1 2 4 2 2 ( 3 3 3 3 3 7 ) 4 2 5 4 1 9 6 ( ) 4 1 2 6 9 6 ( ) 1 0 9 5 0 5 6 ( - - ) 1 ( ) 4 1 ( ) 8 1 ( ) 1 4 1 1 ( - - - - 8 0 2 0 8 5 0 9 7 5 8 9 1 ) 2 3 1 5 8 0 2 ( 6 6 7 4 7 7 2 1 6 8 4 2 2 4 3 1 1 2 0 1 2 4 2 - - 1 4 1 7 6 3 7 4 5 5 - - - - ) 0 1 3 7 6 8 2 ( ) 2 4 4 8 6 6 2 ( ) 1 3 8 5 8 6 5 3 ( ) 0 0 5 4 6 0 8 3 ( ) 9 8 6 9 2 1 6 3 ( ) 2 1 4 1 9 5 4 3 ( ) 6 1 5 7 0 0 1 ( ) 7 2 9 1 0 1 1 ( ) 5 0 1 6 5 2 ( ) 4 4 5 5 3 2 ( ) 7 2 2 2 3 ( ) 5 1 5 1 4 ( - - - ) 5 9 1 7 1 ( 9 9 7 4 6 5 7 3 1 7 6 7 9 4 5 3 4 6 7 0 5 6 4 5 6 0 5 8 8 3 2 1 8 3 0 1 5 1 7 8 6 6 0 1 4 7 4 1 0 1 9 1 1 2 5 4 9 0 3 5 5 3 6 2 2 7 7 2 - - - - ) 4 8 2 6 4 1 ( ) 4 2 5 8 4 9 1 ( ) 6 1 5 8 9 2 6 ( ) 2 7 2 6 9 6 ( ) 6 8 0 6 9 7 2 ( ) 7 2 0 4 2 7 2 ( ) 4 3 2 7 1 1 ( ) 0 0 0 3 1 1 ( ) 7 4 1 5 5 ( ) 6 5 8 1 6 ( ) 3 1 3 8 ( ) 7 7 2 4 ( - - - - ) 1 6 1 7 9 ( ) 9 6 9 1 7 ( 7 ) 6 2 8 3 ( ) 0 2 7 3 ( ) 3 9 4 2 ( ) 1 5 0 5 ( ) 8 1 9 2 8 ( ) 2 6 1 3 ( ) 7 5 1 6 ( ) 7 6 7 1 ( ) 4 1 9 0 1 ( ) 3 4 6 0 3 ( ) 9 7 4 8 1 ( - - - - d e t a l u m u c c a n o i t a i c e r p e d d e v i e c e r t s o c l a i t i n i 6 d e t a l u m u c c a n o i t a i c e r p e d 5 t s o c l a i t i n i 4 1 1 3 2 6 2 9 9 ) 3 9 1 6 4 8 1 8 5 ( 8 8 2 7 0 7 0 7 3 1 1 2 1 6 7 4 1 5 1 ) 1 4 7 1 5 0 7 0 5 ( 8 1 4 0 6 0 2 2 2 1 r a e y f o g n i n n i g e b e h t f o s A 2 5 0 9 5 5 8 7 1 9 3 2 7 7 2 4 1 4 7 9 6 4 9 9 0 4 4 5 8 9 5 9 8 4 5 9 3 4 6 8 1 5 4 7 4 4 2 4 7 1 3 1 4 4 8 6 9 2 1 7 3 9 2 2 6 3 8 9 7 4 4 2 0 2 5 9 3 6 8 8 7 1 7 6 3 8 5 4 8 7 0 9 3 4 3 - ) 1 8 6 5 4 7 6 1 ( ) 8 0 1 4 1 9 3 1 ( ) 8 0 6 5 5 3 4 7 3 ( ) 7 8 8 4 5 4 7 3 3 ( ) 6 0 1 7 7 1 4 8 1 ( ) 9 9 6 6 9 3 0 5 1 ( ) 3 6 6 4 5 3 4 ( ) 6 9 2 3 4 3 3 ( ) 4 2 4 7 7 8 1 ( ) 0 3 3 4 6 6 1 ( ) 1 1 7 5 3 3 ( ) 1 2 4 8 7 2 ( - - - - 7 8 7 6 3 2 6 7 5 8 6 3 6 5 8 6 1 5 7 3 4 8 8 3 8 6 5 0 1 8 0 3 4 7 9 8 7 4 3 8 2 4 4 9 0 6 2 9 3 8 9 3 0 3 6 2 6 8 6 8 7 8 7 6 6 4 8 3 6 7 5 6 8 5 4 3 7 7 2 2 1 9 6 3 3 5 6 0 2 1 5 4 4 9 7 1 3 6 1 1 2 7 4 5 1 1 - - s t e s s a d e x i F . 2 s t e s s a d e x i f n i s e g n a h c d n a y t i l i b a l i a v A . 1 . 2 237 d o i r e P e d o C e m a n r o t a c i d n I 3 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 2 0 0 2 5 0 1 2 5 1 0 2 5 1 1 2 5 2 0 2 5 2 1 2 5 3 0 2 5 3 1 2 5 4 0 2 5 4 1 2 5 5 0 2 5 5 1 2 5 6 0 2 5 6 1 2 5 7 0 2 5 7 1 2 5 0 2 2 5 0 3 2 5 1 s t n e m t s e v n i g n i r a e b - e m o c n i g n i d u l c x e ( s t e s s a d e x i F l a t o t - ) s t e s s a e l b i g n a t n i : g n i d u l c n i s g n i d l i u B s m s i n a h c e m r e f s n a r t d n a s n o i t c u r t s n o C t n e m p i u q e d n a y r e n i h c a M s e l c i h e v t r o p s n a r T k c o t s d l o h e s u o h d n a n o i t c u d o r P s t e s s a d e x i f f o s e p y t r e h t O s e t i s s e c r u o s e r l a r u t a n d n a s t o l p d n a L t n e m e e r g a g n i s a e l r e d n u d e n i a t b o s t e s s a d e x i F APPEndiCES to thE AnnuAl REPoR t RAS AnnuAl finAnCi Al StAtEmEnt S 2.2. Incomplete capital investments Changes for the period Indicator name Code Period As of the beginning of year expenses for the period withdrawn accounted as fixed assets or the value is increased As of the end of period 1 Construction in progress and incomplete operations on purchase, modernization etc. of fixed assets - total including: new construction modernization and reconstruction acquisition of fixed asset items R&D objects creation of intangible assets DEW non-completed equipment for installation 2 5250 5240 5251 5241 5252 5242 5253 5243 5254 5244 5255 5245 5256 5246 5257 5247 3 4 5 6 7 8 For 2015 259 594 973 96 869 758 (13 858 969) (99 016 692) 243 589 070 For 2014 287 896 370 144 292 523 (21 341 344) (151 252 576) 259 594 973 For 2015 For 2014 For 2015 For 2014 For 2015 For 2014 For 2015 For 2014 For 2015 For 2014 For 2015 For 2014 For 2015 For 2014 111 656 622 137 603 074 105 015 235 99 200 621 419 526 905 200 4 389 233 5 797 989 1 669 231 5 448 450 3 226 667 3 744 667 33 218 459 35 196 369 48 601 776 89 638 853 33 333 423 38 749 089 1 846 937 3 084 453 254 466 672 012 652 540 493 706 1 868 651 637 443 10 311 965 11 016 967 (1 052 638) (1 020 957) (873 538) (167 958) (3 999) (133 063) (81 116) (1 596 121) (1 380 836) (4 272 925) (786 695) (1 155 443) (9 680 147) (12 994 877) (65 950 539) (114 564 348) (30 943 836) (32 766 517) (2 120 338) (3 437 064) (1 979) (484 647) - - - - - - 93 255 221 111 656 622 106 531 284 105 015 235 142 126 419 526 4 560 604 4 389 233 940 935 1 669 231 4 308 623 3 226 667 33 850 277 33 218 459 93 255 221 2.4. Other use of fixed assets Indicator name 1 Rented fixed assets on the balance sheet Rented fixed assets out of the balance sheet Leased fixed assets on the balance sheet Leased fixed assets out of the balance sheet Real assets accepted into operation and actually used, being in the process of state registration Isolated fixed assets Other use of fixed assets (pledge, etc.) Code 2 5280 5281 5282 5283 5284 5285 5286 As of December 31, 2015 3 As of December 31, 2014 4 As of December 31, 2013 5 10 313 874 5 818 381 5 980 387 - - - - - 30 925 398 29 613 882 22 037 467 189 135 531 183 302 369 155 135 099 87 768 - 91 045 - 252 796 - 238 2.3. Change in the cost of fixed assets as a consequence of further construction, further equipment, reconstruction and partial liquidation 239 Indicator name Increase in the cost of fixed assets as a consequence of further construction, further equipment, reconstruction - total including: Buildings Constructions and transfer mechanisms Machinery and equipment Transport vehicles Production and household stock Other Decrease in the cost of fixed assets as a consequence of partial liquidation - total: including: Buildings Constructions and transfer mechanisms Machinery and equipment Transport vehicles Production and household stock 5260 5261 5262 5263 5264 5265 5266 5270 5271 5272 5273 5274 5275 For 2015 1 For 2014 2 28 660 928 27 599 059 652 208 24 887 730 3 116 146 675 233 3 936 1 705 819 22 808 366 3 083 988 116 686 84 (26 582) (71 839) (300) (26 055) (227) - - (149) (59 939) (11 641) (110) - APPEndiCES to thE AnnuAl REPoR t d o i r e p f o d n e e h t f o s A d e t a l u m u c c a n o i t c e r r o c t s o c l a i t i n i t e k r a m t n e r r u c t n e m r i a p m i ( e u l a v ) s s o l - - - - - - - - ) 0 4 4 9 5 8 1 7 ( ) 3 3 1 8 4 8 6 7 ( 3 1 ) 6 0 6 2 6 5 2 6 ( ) 8 5 9 0 0 4 8 6 ( ) 4 3 8 6 9 2 9 ( ) 5 7 1 7 4 4 8 ( ) 1 2 8 0 7 8 2 1 ( ) 1 2 8 0 7 8 2 1 ( - - - - ) 0 0 3 1 0 5 ( ) 0 0 3 1 0 5 ( ) 1 2 5 9 6 3 2 1 ( ) 1 2 5 9 6 3 2 1 ( - - - - 2 1 5 9 5 8 9 1 4 0 1 9 8 9 2 1 6 2 0 1 9 7 2 8 2 7 8 7 5 5 9 6 1 6 8 7 2 1 5 1 7 1 4 2 4 1 9 1 9 9 3 2 - - 1 5 9 4 0 8 8 9 2 1 - - - 9 6 1 3 0 1 3 4 6 7 1 5 7 8 2 3 3 6 5 1 - - - - 1 2 5 9 6 3 2 1 1 2 5 9 6 3 2 1 6 2 2 8 6 2 6 4 0 5 5 2 9 3 0 2 3 6 1 1 0 3 - 0 2 7 8 3 4 2 0 1 3 9 6 8 8 9 4 ) 5 0 9 7 3 6 4 ( 1 1 2 5 3 8 3 8 5 ) 6 3 0 7 6 4 4 ( ) 9 5 6 9 4 8 ( ) 9 6 8 0 7 1 ( - - - - - - - - - - - - - - 9 9 1 8 8 2 ) 1 6 2 0 3 7 4 8 ( ) 4 5 9 8 1 7 9 8 ( 5 0 9 2 6 9 5 5 1 6 7 2 6 4 2 8 1 1 3 9 6 8 8 9 4 ) 6 0 7 9 4 3 4 ( 1 5 0 6 1 6 5 8 1 9 3 9 2 1 9 9 1 8 8 2 1 6 2 8 6 - - - - - - - - - - 1 5 0 6 1 6 4 2 9 0 7 8 2 1 f o l a u r c c a t s e r e t n i g n i d u l c n i ( f o t n e m t s u j d a o t e u l a v l a i t i n i ) e n o l a n i m o n 0 1 - - - - - - - - - - - - - - - - - - - 1 5 0 6 1 6 5 8 1 9 3 9 2 1 240 s t n e m t s e v n i l a i c n a n i f n i s e g n a h c d n a y t i l i b a l i a v A . 1 . 3 s t n e m t s e v n i l a i c n a n i F . 3 ) d i a p e r ( n w a r d h t i W d o i r e p e h t r o f s e g n a h C d e v i e c e R r a e y f o g n i n n i g e b e h t f o s A d e t a l u m u c c a n o i t c e r r o c t s o c l a i t i n i d e t a l u m u c c a n o i t c e r r o c t s o c l a i t i n i d e t a l u m u c c a n o i t c e r r o c t s o c l a i t i n i d o i r e P e d o C e m a n r o t a c i d n I - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 9 ) 0 0 9 2 ( ) 4 5 8 6 2 7 1 ( 8 - - ) 2 8 5 ( ) 0 0 0 1 ( - - - ) 9 6 1 3 ( - ) 0 0 9 1 ( ) 3 0 1 3 2 7 1 ( ) 0 7 7 7 8 9 5 ( ) 5 4 2 3 0 7 9 3 ( - - - - - - ) 8 3 2 ( ) 7 0 5 5 0 7 1 ( ) 0 7 7 7 8 9 5 ( ) 0 0 5 7 9 9 7 3 ( - - ) 4 2 6 4 1 7 7 ( ) 5 4 1 6 0 7 9 3 ( - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 7 - 0 6 4 2 1 3 3 6 - 4 2 3 1 1 1 0 8 1 0 8 1 - - - 6 5 9 0 2 0 3 - - - - - - - - - - - - - 5 ) 3 3 1 8 4 8 6 7 ( ) 8 2 2 0 1 2 2 7 ( ) 8 5 9 0 0 4 8 6 ( ) 2 2 9 3 3 9 3 6 ( ) 5 7 1 7 4 4 8 ( ) 6 0 3 6 7 2 8 ( 4 9 8 9 2 1 6 2 0 1 9 8 8 5 1 6 2 0 1 5 5 9 6 1 6 8 7 5 5 9 6 1 6 8 7 4 1 9 1 9 9 3 2 4 1 9 2 9 9 3 2 - - 1 5 9 1 5 8 2 - - 9 6 1 3 9 6 1 3 8 8 6 1 1 1 2 3 9 7 8 1 1 2 4 ) 1 2 8 0 7 8 2 1 ( ) 0 2 0 9 5 1 3 1 ( 7 8 2 3 3 6 5 1 3 8 5 6 5 1 3 5 - - - - - - - - 3 2 5 1 8 8 6 1 1 1 2 0 5 9 0 0 0 2 1 0 2 3 6 1 1 0 3 - - - - - - - - ) 0 0 3 1 0 5 ( ) 0 0 3 1 0 5 ( ) 1 2 5 9 6 3 2 1 ( ) 0 2 7 7 5 6 2 1 ( 8 8 6 1 1 1 2 3 5 2 1 3 4 5 4 ) 4 5 9 8 1 7 9 8 ( ) 8 4 2 9 6 3 5 8 ( - - - - 1 2 5 9 6 3 2 1 7 6 7 6 0 0 4 1 6 4 0 5 5 2 6 9 5 3 4 1 3 1 - 0 0 5 7 9 9 7 3 0 2 7 0 2 7 8 8 6 7 2 6 4 2 8 1 1 2 7 4 2 7 7 5 5 1 3 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 2 1 0 3 5 1 2 3 5 2 0 3 5 2 2 3 5 3 0 3 5 3 2 3 5 4 0 3 5 4 2 3 5 5 0 3 5 5 2 3 5 6 0 3 5 6 2 3 5 7 0 3 5 7 2 3 5 8 0 3 5 8 2 3 5 9 0 3 5 9 2 3 5 0 1 3 5 0 3 3 5 1 1 3 5 1 3 3 5 2 1 3 5 2 3 3 5 3 1 3 5 3 3 3 5 4 1 3 5 4 3 3 5 0 0 3 5 0 2 3 5 d n a s e i r a i d i s b u s f o s l a t i p a c r e t r a h c o t n i t n e m t s e v n I s e t a i l i f f a r e h t o f o s l a t i p a c r e t r a h c o t n i t n e m t s e v n I s e i n a p m o c ) s e t o n y r o s s i m o r p ( s e i t i r u c e S 1 l a t o t - m r e t - g n o L : g n i d u l c n i d n a s e i r a i d i s b u s f o s l a t i p a c r e t r a h c o t n i t n e m t s e v n I s e t a i l i f f a r e h t o f o s l a t i p a c r e t r a h c o t n i t n e m t s e v n I s e i n a p m o c ) s e t o n y r o s s i m o r p ( s e i t i r u c e S l a t o t - s t n e m t s e v n i l a i c n a n i F d e d n e t x e s n a o L s t i s o p e D r e h t O d e d n e t x e s n a o L s t i s o p e D r e h t O l a t o t - m r e t - t r o h S : g n i d u l c n i 3 1 0 2 , 1 3 5 4 1 0 2 , 1 3 4 5 1 0 2 3 r e b m e c e D f o s A r e b m e c e D f o s A , 1 3 r e b m e c e D f o s A e d o C 2 e m a n r o t a c i d n I 1 - - - - - - - - - 0 0 2 3 5 5 0 2 3 5 9 0 2 3 5 s e i t r a p d r i h t o t d e r r e f s n a r t s t n e m t s e v n i l a i c n a n i F s t n e m t s e v n i l a i c n a n i f f o e s u r e h t O l a t o t - ) e l a s t p e c x e ( l a t o t - e g d e l p s a d e v i e c e r s t n e m t s e v n i l a i c n a n i F e d o c e n i l t e e h s e c n a l a b ” s t n e m t s e v n I l a i c n a n i F m r e T - t r o h S “ n i h t i w l l a f t o n s e o d s t i s o p e d n o t s e r e t n i * RAS AnnuAl finAnCi Al StAtEmEnt S 241 y r o t n e v n I . 4 s e i r o t n e v n i n i s e g n a h c d n a y t i l i b a l i a v A . 1 . 4 d o i r e p f o d n e e h t f o s A n o i t c u d e r t s o c t n u o m a e v r e s e r t s o c n o i t c u d o r p - - - - - - - - 2 1 4 1 7 1 - - 1 1 0 0 1 5 3 6 9 9 3 3 2 3 6 2 1 5 2 3 2 3 6 2 1 3 8 0 5 3 6 9 - - - - - - - - - - - - - - - - s p u o r g r i e h t e u l a v y r o t n e v n i m o r f s s o l n e e w t e b r e v o n r u t n i n o i t a r o i r e t e d ) s e p y t ( 0 1 9 d o i r e p e h t r o f s e g n a h C ) d i a p e r ( n w a r d h t i W r o f n o i s i v o r p n i n o i t a r o i r e t e d t s o c n o i t c u d o r p d n a s e u n e v e r s e r u t i d n e p x e - - - - - - - - e u l a v 8 ) 7 5 6 6 9 1 4 ( ) 2 6 4 9 9 3 5 ( ) 0 9 5 5 9 1 4 ( ) 1 2 4 7 9 9 4 ( - ) 7 6 0 1 ( ) 5 3 7 1 3 ( ) 6 0 3 0 7 3 ( 7 6 9 8 3 9 1 8 0 1 2 3 2 2 3 8 2 9 1 5 7 7 0 5 0 7 6 7 6 6 - 4 6 0 6 6 7 1 1 7 6 5 9 7 1 r a e y f o g n i n n i g e b e h t f o s A - - - - - - - - n o i t c u d e r t s o c t n u o m a e v r e s e r 5 t s o c n o i t c u d o r p d o i r e P e d o C e m a n r o t a c i d n I 0 0 1 5 3 6 4 5 4 2 0 8 3 8 0 5 3 6 9 2 7 1 8 5 9 8 9 8 4 - 7 1 6 8 9 9 2 9 3 7 0 9 1 3 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 2 0 0 4 5 0 2 4 5 1 0 4 5 1 2 4 5 2 0 4 5 2 2 4 5 3 0 4 5 3 2 4 5 s e l b a u l a v r e h t o d n a s l a i r e t a m , s l a i r e t a m w a R s e i t r a p d r i h t o t s e c i v r e s e r o c n o P I W e l a s r o f s d o o g d n a s d o o g d e h s i n i f 1 l a t o t - s e i r o t n e v n I y r o t n e v n i d e g d e l P . 2 . 4 - - - - - - 3 1 0 2 , 1 3 5 4 1 0 2 , 1 3 4 5 1 0 2 3 r e b m e c e D f o s A r e b m e c e D f o s A , 1 3 r e b m e c e D f o s A e d o C 2 0 4 4 5 5 4 4 5 e m a n r o t a c i d n I 1 - e t a d g n i t r o p e r e h t f o s a d i a p t o n y r o t n e v n I l a t o t - s t c a r t n o c y b y r o t n e v n i d e g d e l P l a t o t APPEndiCES to thE AnnuAl REPoR t RAS AnnuAl finAnCi Al StAtEmEnt S 242 d o i r e p f o d n e e h t f o s A - g n o l m o r f r e f s n a r t e h t t a f f o g n i t i r w y r e v o c e r e c n a w o l l a s l a s o p s i d f f o - g n i t i r w d o i r e p e h t r o f s e g n a h C d e v i e c e r d n a s e n i f , t s e r e t n i s s e n i s u b f o t l u s e r a s a r a e y f o g n i n n i g e b e h t f o s A n o i s i v o r p t b e d d a b s m r e t t c a r t n o c y b m r e t - t r o h s o t m r e t f o e s n e p x e t n e m y a p e r e u d s l a u r c c a r e h t o n o i t c a s n a r t ( s e i t i v i t c a n o i s i v o r p t b e d d a b s m r e t t c a r t n o c y b d o i r e P e d o C s e l b a y a p d n a s e l b a v i e c e R . 5 e l b a v i e c e r s t n u o c c a n i s e g n a h c d n a y t i l i b a l i a v A . 1 . 5 - - ) 8 8 ( ) 8 8 ( ) 8 8 ( ) 5 5 8 0 5 ( 4 1 - ) 7 6 7 0 5 ( ) 1 7 3 0 0 9 8 5 ( ) 3 7 2 1 6 8 4 5 ( ) 1 1 2 6 2 9 0 1 ( ) 6 0 5 6 8 1 7 ( - - ) 5 0 1 0 8 9 ) 3 6 9 0 8 9 1 ( 1 ( ) 5 5 0 4 9 9 5 4 ( ) 4 0 8 3 9 6 5 4 ( ) 3 4 2 8 1 4 ) 8 3 5 7 4 8 5 ( 1 ( ) 9 6 4 9 6 3 4 6 ( ) 9 9 8 8 0 7 6 5 ( 8 8 8 8 4 9 5 4 5 5 6 3 8 0 1 1 9 1 3 1 7 7 8 4 7 9 5 4 5 6 8 9 0 9 9 9 8 1 7 8 5 0 1 1 7 4 8 7 8 8 8 1 1 3 1 4 3 1 9 3 1 1 - - 1 1 6 9 7 6 0 5 6 5 5 7 8 6 4 4 5 5 1 6 4 7 6 0 5 0 4 5 2 3 1 8 0 2 6 4 5 6 1 5 3 5 8 6 5 6 6 6 9 2 7 2 6 2 2 5 1 9 0 6 1 4 7 0 4 5 1 7 4 5 1 1 0 4 3 3 6 6 5 1 - - - - ) 4 1 6 4 2 2 ( t b e d 2 1 ) 7 5 3 9 1 ( - - ) 7 5 2 5 0 2 ( ) 6 5 0 6 6 1 8 ( ) 6 5 0 6 6 1 8 ( - - - - - - - - - ) 0 7 6 0 9 3 8 ( - - - - - - - - - - 0 2 7 2 5 0 2 9 2 7 7 7 7 0 3 6 4 3 2 0 7 5 8 7 4 1 4 1 9 2 2 8 4 9 8 7 9 6 8 9 1 1 1 3 1 2 2 3 8 1 9 3 6 3 3 1 5 0 8 s d n u f n o i s i v o r p 1 1 ) 7 6 7 0 5 ( 3 0 9 3 7 1 0 1 - - - - ) 7 6 7 0 5 ( 3 0 9 3 7 1 ) 6 5 9 9 9 4 ( ) 8 1 8 1 9 0 4 ( ) 2 8 7 2 4 7 3 ( 3 6 2 6 3 1 4 - - ) 6 5 5 ( ) 3 1 2 4 ( ) 0 8 4 8 4 3 ( ) 6 0 0 2 3 6 4 ( ) 3 0 9 1 8 5 ) 3 3 2 5 9 6 ) 8 8 4 4 2 7 ) 6 8 2 1 2 0 3 ( 1 ( 7 ( 2 ( - - - - - - - - 9 ) 1 2 8 3 2 ( ) 5 4 5 8 2 ( - - - ) 7 1 ( ) 1 6 1 ( ) 4 0 8 3 2 ( ) 4 8 3 8 2 ( - - ) 1 2 8 3 2 ( ) 5 4 5 8 2 ( ) 6 6 3 2 5 ( ) 6 9 4 5 2 9 ( 8 ) 5 1 ( ) 7 0 6 ( ) 5 3 6 4 ( ) 3 3 2 3 ( ) 8 9 4 4 4 ( ) 4 7 8 4 2 9 ( ) 1 9 6 4 8 5 6 1 6 ( ) 3 5 6 8 3 0 6 1 5 ( ) 9 4 4 8 5 9 7 9 1 ( ) 0 2 5 4 3 5 3 9 1 ( - - ) 3 3 8 3 2 3 2 7 ( ) 9 5 6 0 4 5 3 7 ( ) 9 0 4 2 0 3 6 4 3 ( ) 4 7 4 3 6 9 8 4 2 ( ) 8 0 9 7 0 4 1 0 3 ( ) 0 8 5 2 0 1 2 4 2 ( ) 5 6 9 4 4 0 8 1 9 ( ) 9 2 7 6 6 0 9 5 7 ( - - - - - - - - 7 1 6 1 6 1 2 6 5 9 7 0 7 1 1 - - - - - 1 6 1 6 1 2 6 5 9 7 0 7 1 1 - - 1 6 1 6 1 2 6 5 9 7 0 7 1 1 6 7 3 2 5 1 8 3 7 0 2 7 8 5 7 5 3 1 7 8 ) t b e d 6 5 1 3 3 6 5 3 6 4 8 2 5 2 8 2 7 1 5 1 1 6 5 5 8 5 8 2 6 3 0 2 9 7 7 1 2 5 7 3 6 9 1 1 2 1 2 8 3 2 8 3 8 4 0 2 - - 3 1 9 0 3 5 1 7 1 1 0 2 7 1 3 7 1 1 0 5 3 9 4 4 3 4 5 9 8 6 7 3 4 2 0 2 9 2 8 0 6 8 2 2 0 3 8 3 6 6 2 2 9 1 2 9 8 3 3 2 9 1 8 8 9 6 5 8 4 7 - - ) 8 8 ( ) 8 8 ( - ) 8 8 ( ) 1 9 9 3 7 1 ( 5 ) 3 0 9 3 7 1 ( ) 3 7 2 1 6 8 4 5 ( ) 7 3 2 4 3 1 5 5 ( ) 6 0 5 6 8 1 7 ( ) 5 1 1 5 2 0 2 1 ( - - ) 3 6 9 0 8 9 ) 5 3 5 7 7 9 1 ( 1 ( ) 4 0 8 3 9 6 5 4 ( ) 7 8 5 1 3 1 1 4 ( ) 8 1 5 4 8 1 ( ) 8 3 5 7 4 8 1 ( ) 9 9 8 8 0 7 6 5 ( ) 6 4 7 2 9 4 5 5 ( 8 8 8 8 7 7 8 1 5 8 4 4 6 3 8 0 1 1 6 5 9 3 8 8 1 1 4 1 7 8 5 0 1 7 1 0 9 7 8 1 1 3 1 4 3 1 9 3 1 1 2 7 3 6 6 2 7 0 1 - - 6 5 5 7 8 6 4 4 4 8 1 6 8 0 4 3 6 0 5 0 4 5 0 0 1 0 1 9 3 3 1 5 3 5 8 6 5 6 8 8 0 0 7 2 9 6 2 5 1 9 0 6 1 4 3 4 6 5 0 1 7 5 1 0 4 3 3 6 6 5 1 1 7 9 5 5 2 6 6 1 3 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F s s e l ( e u l a v e c n a l a b s s e l ( e u l a v e c n a l a b s s e l ( e u l a v e c n a l a b 3 1 0 2 , 1 3 r e b m e c e D f o s A 4 1 0 2 , 1 3 r e b m e c e D f o s A 5 1 0 2 , 1 3 r e b m e c e D f o s A l u f t b u o d r o f n o i s i v o r p s m r e t t c a r t n o c y b l u f t b u o d r o f n o i s i v o r p s m r e t t c a r t n o c y b l u f t b u o d r o f n o i s i v o r p s m r e t t c a r t n o c y b ) s t b e d 6 ) s t b e d 5 4 ) s t b e d 3 7 4 6 5 6 1 5 7 5 7 7 5 4 7 1 4 8 5 4 7 0 6 1 0 6 5 7 2 4 6 2 9 5 9 6 7 4 8 1 6 2 0 7 5 8 7 3 e l b a v i e c e r s t n u o c c a e u d r e v O . 2 . 5 4 1 6 7 2 6 2 9 2 7 2 5 6 4 1 4 7 9 9 8 8 2 1 0 8 4 6 7 0 0 2 8 9 0 5 9 0 7 1 9 0 3 1 2 0 8 2 - - 9 2 8 1 8 4 6 0 8 - - 5 3 3 2 7 9 5 6 1 3 1 - - 9 4 8 1 4 6 7 3 3 0 3 3 3 0 8 3 5 2 1 5 5 2 2 7 2 0 1 6 4 8 1 3 8 4 1 2 3 0 5 1 6 8 1 8 3 1 4 0 1 0 0 8 6 2 1 0 5 5 1 2 5 5 2 0 5 5 2 2 5 5 3 0 5 5 3 2 5 5 4 0 5 5 4 2 5 5 0 1 5 5 0 3 5 5 1 1 5 5 1 3 5 5 2 1 5 5 2 3 5 5 3 1 5 5 3 3 5 5 4 1 5 5 4 3 5 5 5 1 5 5 5 3 5 5 0 0 5 5 0 2 5 5 e d o C 2 0 4 5 5 1 4 5 5 2 4 5 5 3 4 5 5 4 4 5 5 e m a n r o t a c i d n I 1 - e l b a v i e c e r s t n u o c c a m r e t - g n o L s r e m u s n o c d n a s r e m o t s u c e d a m s t n e m y a p e c n a v d a s r o t b e d r e h t o : g n i d u l c n i l a t o t l a t o t - e l b a v i e c e r s t n u o c c a m r e t - t r o h S s r e m u s n o c d n a s r e m o t s u c : g n i d u l c n i l a t i p a c e r a h s s a ) s r e d n u o f ( s r e b m e m y b d e w o s t n u o m a e d a m s t n e m y a p e c n a v d a s t n e m y a p s r o t b e d r e h t o e c n a l a b ( s t e s s a t n e r r u c - n o n r e d n u s t n e m y a p e c n a v d A ) 3 7 1 1 e n i l l a t o T e c n a l a b ( s t e s s a t n e r r u c - n o n r e d n u s t n e m y a p e c n a v d A ) 3 7 1 1 e n i l e m a n r o t a c i d n I 1 s r e m u s n o c d n a s r e m o t s u C e d a m s t n e m y a p e c n a v d A s r o t b e d r e h t O : g n i d u l c n i l a t o T 8 8 7 2 6 4 9 2 0 3 5 4 2 3 1 8 4 7 4 5 0 3 9 0 5 5 7 7 0 1 4 7 9 5 8 2 2 4 1 9 3 5 0 2 7 6 6 8 4 8 1 8 3 0 1 2 2 1 9 3 0 1 3 2 6 1 4 8 5 5 9 2 6 0 9 8 1 6 2 3 9 9 6 3 4 1 1 0 0 5 8 0 0 6 3 9 3 9 8 3 7 9 1 6 4 3 7 1 1 4 7 9 4 1 6 6 1 2 0 2 9 0 1 2 9 5 9 3 0 0 5 5 8 7 - ) 2 9 9 6 1 ( - ) 7 7 1 0 2 ( ) 2 2 1 6 ( t b e d 9 - - - - - - - - - - - - ) 5 5 0 4 1 ( - ) 9 6 1 7 3 ( - - ) 8 9 6 3 1 ( ) 2 2 7 5 4 ( ) 8 0 4 3 1 ( ) 2 3 1 2 4 ( - - ) 0 9 2 ( - - - - - ) 2 7 6 ( ) 8 1 9 2 ( ) 8 9 6 3 1 ( ) 2 2 7 5 4 ( 8 ) 5 3 3 ) 6 5 6 6 ( 5 ( 7 ) 4 9 1 3 7 3 0 9 5 ( ) 2 1 8 7 4 1 0 1 6 ( ) 0 8 3 2 5 1 3 2 2 ( ) 0 1 1 2 7 2 4 8 1 ( ) 0 0 2 2 1 6 5 2 ( ) 1 8 2 5 6 8 9 1 ( ) 0 8 6 8 5 8 4 ( ) 5 5 4 8 1 7 4 ( ) 2 3 1 3 5 4 6 ( ) 3 1 3 1 3 7 1 7 ( ) 7 0 8 8 9 8 3 3 2 ( ) 0 2 2 1 1 5 6 3 2 ( ) 4 4 1 1 3 4 0 3 ( ) 0 2 5 7 8 8 7 5 1 ( ) 0 7 6 8 8 6 ( ) 4 9 0 0 4 4 ( ) 9 2 5 9 7 3 0 9 5 ( ) 8 6 4 3 5 1 0 1 6 ( - 0 0 9 9 6 2 5 2 3 5 2 6 2 4 3 2 1 - - 1 2 0 7 8 4 2 1 1 - 6 5 7 2 6 2 6 9 1 4 2 - 0 0 9 9 6 2 5 2 3 5 2 6 8 0 3 3 1 5 2 7 0 4 9 1 0 1 5 3 7 6 5 1 3 5 3 2 6 9 2 6 9 2 3 6 4 2 8 9 1 1 7 0 5 9 0 0 1 2 8 4 6 9 0 4 5 2 7 8 5 1 8 8 9 1 9 0 9 4 8 0 5 8 9 8 7 4 7 4 0 9 6 0 1 8 6 1 3 8 6 5 4 4 7 5 0 5 7 5 9 3 3 2 8 1 0 9 9 0 4 3 2 4 0 8 8 0 5 9 2 5 9 3 2 5 5 3 5 1 3 9 9 6 8 6 2 7 8 6 3 4 5 0 1 4 8 3 7 6 5 2 8 7 0 3 0 0 3 6 ) t b e d 5 d o i r e p f o d n e e h t f o s A m r e t - t r o h s o t m r e t f f o - g n i t i r w t n e m y a p e r e u d s l a u r c c a r e h t o n o i t c a s n a r t ( s e i t i v i t c a - g n o l m o r f r e f s n a r t s l a s o p s i d d o i r e p e h t r o f s e g n a h C d e v i e c e r d n a s e n i f , t s e r e t n i s s e n i s u b f o t l u s e r a s a 4 3 4 1 5 9 2 0 3 5 4 0 3 9 0 5 5 7 7 3 3 0 1 5 0 8 5 1 9 3 5 0 2 7 6 9 3 4 4 2 4 1 4 8 3 0 1 2 2 2 3 7 4 0 2 2 6 1 4 8 9 1 7 4 5 9 8 1 6 2 3 1 0 1 6 1 6 9 1 0 0 5 8 0 5 7 8 7 9 4 8 3 7 9 1 6 5 2 0 5 9 8 6 8 2 6 1 1 4 9 3 3 6 2 1 9 5 9 3 0 0 8 7 7 6 4 2 0 1 8 5 r a e y 4 f o g n i n n i g e b e h t f o s A d o i r e P 3 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F e l b a y a p s t n u o c c a n i s e g n a h c d n a y t i l i b a l i a v A . 3 . 5 e d o C 2 1 5 5 5 1 7 5 5 0 6 5 5 0 8 5 5 1 6 5 5 1 8 5 5 2 6 5 5 2 8 5 5 3 6 5 5 3 8 5 5 4 6 5 5 4 8 5 5 5 6 5 5 5 8 5 5 6 6 5 5 6 8 5 5 7 6 5 5 7 8 5 5 0 5 5 5 0 7 5 5 - - 0 4 1 1 0 4 1 1 0 8 6 9 5 - 8 2 9 4 2 2 5 7 4 3 3 1 0 2 5 4 1 0 2 4 9 5 2 8 7 7 - 2 5 7 4 3 7 0 5 3 4 7 5 1 0 2 3 , 1 3 r e b m e c e D f o s A , 1 3 r e b m e c e D f o s A , 1 3 r e b m e c e D f o s A e d o C 2 0 9 5 5 1 9 5 5 2 9 5 5 3 9 5 5 e l b a y a p s t n u o c c a e u d r e v O . 4 . 5 e m a n r o t a c i d n I 1 l a t o t - e l b a y a p s t n u o c c a m r e t - g n o L l a t o t - e l b a y a p s t n u o c c a m r e t - t r o h S s r o t c a r t n o c d n a s r e i l p p u s : g n i d u l c n i f f a t s y n a p m o c e h t o t d e w o s t n u o m A s d n u f t e g d u b - n o n e t a t s o t d e w o s t n u o m A ) s r e d n u o f ( s r e b m e m o t s e l b a y a P l a t o T s e l b a y a p s e e f d n a s e x a T d e v i e c e r s e c n a v d A s r o t i d e r c r e h t O e m a n r o t a c i d n I 1 s r o t c a r t n o c d n a s r e i l p p u S d e v i e c e r s e c n a v d A s r o t i d e r c r e h t O : g n i d u l c n i l a t o T 243 APPEndiCES to thE AnnuAl REPoR t RAS AnnuAl finAnCi Al StAtEmEnt S d o i r e p f o d n e e h t f o s A d e r o t s e R 6 0 5 1 5 7 7 8 3 5 0 9 1 7 - 9 1 6 2 6 7 6 0 5 1 5 7 9 9 8 6 7 8 2 2 5 3 8 6 9 6 8 5 6 2 ) 5 5 3 1 2 ( 6 - - - - ) 5 5 3 1 2 ( ) 7 5 9 4 2 ( ) 4 2 8 9 4 9 ) 6 7 5 0 5 0 2 ( 2 ( ) 8 4 7 7 8 2 ) 6 7 5 0 5 0 2 ( 2 ( ) 6 7 0 2 6 6 ( ) 1 4 0 9 3 6 ( e s U 5 - 8 3 5 1 4 4 3 2 9 1 1 1 - 1 6 8 8 9 2 3 2 9 1 1 1 8 0 8 6 7 8 3 2 2 0 9 6 9 6 8 5 6 2 4 3 2 2 2 d e u r c c A 9 5 1 0 9 6 8 2 0 5 3 4 1 r a e y 3 - - 6 0 5 1 5 7 9 5 1 0 9 6 2 2 5 3 8 6 7 9 2 7 5 6 f o g n i n n i g e b e h t f o s A 5 1 0 2 r o F 4 1 0 2 r o F 0 0 7 5 2 d o i r e P e d o C 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 5 1 0 2 r o F 4 1 0 2 r o F 1 0 7 5 2 0 7 5 3 0 7 5 244 - - - 5 5 5 9 8 5 1 2 8 8 6 6 0 1 9 1 0 8 4 1 6 0 4 6 9 0 0 0 0 8 7 9 4 3 1 0 5 7 1 8 6 1 9 5 2 0 4 1 4 1 0 2 r o F 4 - - - 2 2 7 9 2 9 3 2 5 8 4 2 7 8 8 1 1 0 7 9 5 2 4 9 8 6 6 1 2 7 7 9 4 4 0 1 5 8 1 6 4 0 9 8 7 2 4 1 5 1 0 2 r o F 3 8 6 1 9 5 2 0 4 1 6 4 0 9 8 7 2 4 1 s e i t i l i b a i l t n e g n i t n o c r o f s n o i s i v o r P . 7 e d o C 2 0 1 6 5 0 2 6 5 0 3 6 5 0 4 6 5 0 5 6 5 0 6 6 5 0 7 6 5 0 8 6 5 0 0 6 5 s t s o c n o i t c u d o r P . 6 ) ] - [ h t w o r g ( . c t e , s d o o g d e h s i n i f , s s e r g o r p n i k r o w ) ] + [ s s o l ( . c t e , s d o o g d e h s i n i f , s s e r g o r p n i k r o w : ) ] + [ s s o l , ] - [ h t w o r g ( e c n a l a b n i e g n a h C s e i t i v i t c a n o m m o c r o f s t s o c l a t o T e m a n r o t a c i d n I 1 s e s n e p x e t i f e n e b e g n i r F s e s n e p x e l a i r e t a M s t s o c r o b a L y r o g e t a c t s o c y b l a t o T s e s n e p x e r e h t O n o i t a i c e r p e D r o t a c i d n I m e t I 1 s t n e m y a p d o i r e p r o i r p n o s e i t i l i b a i l d e t a m i t s E d n u f n o i s n e p e t a t s - n o n n o y t i l i b a i l d e t a m i t s E n o i t a c a v d e z i l i t u n u n o s e i t i l i b a i l d e t a m i t s E s e i t i l i b a i l t n e g n i t n o C : g n i d u l c n i 9 6 3 1 4 1 3 1 4 3 4 1 3 6 9 0 7 1 3 6 9 0 7 1 9 5 0 9 0 2 1 1 1 9 1 1 7 3 5 1 7 1 7 3 5 1 7 1 9 5 1 9 9 7 5 5 1 2 7 9 0 7 6 3 1 9 0 7 6 3 1 1 9 5 6 0 9 6 9 9 4 1 1 3 1 7 6 9 0 7 3 6 0 0 5 3 7 3 1 9 1 7 9 9 1 3 9 5 4 7 6 5 2 4 4 8 8 0 5 3 1 0 2 5 4 1 0 2 4 5 1 0 2 3 , 1 3 r e b m e c e D f o s A , 1 3 r e b m e c e D f o s A , 1 3 r e b m e c e D f o s A e d o C 2 0 0 8 5 1 0 8 5 2 0 8 5 3 0 8 5 0 1 8 5 1 1 8 5 s e i t i l i b a i L g n i r u c e S . 8 e m a n r o t a c i d n I 1 l a t o t - s n o i t a g i l b o n w o r e d n u d e u s s I : g n i d u l c n i y t e r u S t c a r t n o c e g d e l p y t r e p o r P s e e t n a r a u g g n i k n a B r e h t O l a t o t - d e v i e c e R : g n i d u l c n i 2 9 5 5 9 8 2 9 5 5 9 8 - - 4 1 0 2 r o F 4 5 1 0 2 r o F 3 e d o C 2 0 0 9 5 1 0 9 5 d i a t n e m n r e v o G . 9 e m a n r o t a c i d n I 1 l a t o t – d o i r e p g n i t r o p e r e h t n i d e v i e c e r s d n u f t e g d u B s t e s s a t n e r r u c - n o n o t n i s t n e m t s e v n i : g n i d u l c n i v o k s o N . . P A _ _ _ _ _ _ _ _ _ _ _ _ _ _ t n a t n u o c c A f e i h C ] e m a n t n i r p [ ] e r u t a n g i s [ 245 ] e m a n t n i r p [ ] e r u t a n g i s [ v o r u M . . E A _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ e v i t u c e x E f e i h C 6 1 0 2 , 4 2 y r a u r b e F APPEndiCES to thE AnnuAl REPoR t mAnAGEmEnt REPoR t 2015 Appendix 12. management Report 2015 CONTENTS 1. ABout thE ComPAnY 2. CoRPoRAtE GoVERnAnCE 3. ShARE CAPitAl 4. mARKEt REViEW 5. CoRPoRAtE StRAtEGY, ChAllEnGES And SolutionS 6. oPERAtinG ACtiVitiES 7. dEVEloPmEnt outlooK foR thE ComPAnY 8. motiVAtion foR toP-mAnAGEmEnt 9. finAnCiAl RESultS 10. diSClAimER 11. RESPonSiBilitY StAtEmEnt 264 264 265 258 269 273 276 279 281 293 293 246 247 Public Joint Stock Company “federal Grid Company of unified Energy System” ANNUAL FINANCIAL REPORT FOR 2015 In accordance with the UK Disclosure and Transparency Rules April 2016 moscow APPEndiCES to thE AnnuAl REPoR t mAnAGEmEnt REPoR t 2015 248 1. ABOUT THE COMPANY 2. CORPORATE GOVERNANCE federal Grid Company (fGC) was founded in 2002 during the reform of the Russian power industry. the Company’s key activities are: • Electricity transmission through backbone electric grids; • technological connection services. We are included in the list of strategically important companies for Russia’s industrial development. As a result of our 13-year work, we have become one of Russia’s largest power sector companies by market capitalisation, and also one of the leading “blue chips” on the Russian stock market.. more than 23,400 individuals employed by our Company ensure the sustainable and efficient operation of more than 139.1 thousand kilometres of electricity transmission lines and 931 substations in the territory of more than 15,1 mln sq km comprised of 77 regions of Russia. As of 31 december 2015, fGC has 51 regional branches, including: • 8 branches – main Power transmission lines (mES); • 41 branches – main Power transmission line Companies (PmES); • 1 branch – Special Production Plant Bely Rast; • 1 branch – Center for technical Supervision. Details on the Company’s structure and history are available on our website in the “About Us / About Company” section. With a focus on long-term goals, we ensure the transparency of our activities, environmental protection, workplace safety and social protection of our employees, and we observe corporate governance principles. in 2015 fGC’s Board of directors adopted a new edition of Corporate Governance Code, developed in conformity with the recommendations stated in the Russian Code of Corporate Governance, which, in its turn, had been adopted by the Bank of Russia’s Board of directors. the Code revision allowed implementing a more clear structure, under which we declared key principles of corporate governance, defined our corporate governance system’s key officers, their functions, operational conditions and interaction rules. the Company’s supreme governing body is the General meeting of Shareholders. the Board of directors, elected by the General meeting of Shareholders, determines the Company’s development strategy and also supervises the activities of the management Board. the management Board is entrusted with operational management of the Company. the Chairman of the management Board is the sole executive governing body. the Board of directors’ primary activity is maintaining and ensuring further development of the unEG together with the Company’s sustainability, and also upgrading Company’s governance efficiency. Committees are formed under the Board of directors to increase the effectiveness and quality of the Board of the directors’ work. Regular committees include: Audit Committee, hR and Remuneration Committee, Strategy Committee and investment Committee. to protect the interests of our shareholders, we have effective external and internal control systems in place. the external control system is represented by the independent auditor, and internal control and risk management are undertaken by the internal Audit Commission, standalone division for internal audit and internal Control and Risk management department. in order to adopt the recommendations stated in the Russian Code of Corporate Governance, we developed a corresponding plan of actions (a “road map”) with respect to all the key aspects of our corporate governance system and practice (adopted by the Board of directors, protocol nr. 255 of 16.03.2015). the obligations undertaken by the Company under the “road map” were fulfilled in full: • in June 2015 the General meeting of Shareholders adopted the following corporate governance documents: revised Charter, Provision on preparing and holding of the General meeting of Shareholders, Provision on the Board of directors, the management Board, the internal Audit Commission, Provision on Payment of Remuneration and Compensation to the members of the Board of directors, and to the members of the internal Audit Commission; in accordance with the approaches stipulated by the methodology we assessed six corporate governance components, each of which had its weight in the total score’s structure: • Shareholders’ rights; • Board of directors; • operational management; • transparency and disclosure; • Risk management, internal control and internal audit; • Corporate social responsibility and business ethics. total self-score of compliance with the principles and recommendations stated in the Russian Code of Corporate Governance amounted to 82%. • Considering the revised documents mentioned above, the Board of directors also adopted new Provisions on Committees and remuneration to their members; With our GdRs traded on london Stock Exchange, we are striving to reach the highest international corporate governance standards, including those stated in the uK Corporate Governance Code. 249 • A new position of Corporate Secretary was implemented, and the corresponding Provision was adopted by the Board of directors. Corporate Secretary is considered as a key element of ensuring effective interaction among all the corporate governance officers. • Public Communications Policy was adjusted to comply with the new requirements by the Bank of Russia to securities issuers. We also revised certain internal provisions, including Provision on investment Committee, Provision on Risk management System, Provision on internal Audit. Adopting the recommendations stated in the Russian Code of Corporate Governance, in 2015 we carried out self-scoring in accordance with the methodology for corporate governance self-scoring for companies partially owned by the state (adopted by the order nr. 306 of 22.08.2014 issued by the federal Agency for State Property management). Details on the Company’s corporate governance are available on our website www.fsk-ees.ru in the “About Us / Corporate Governance” section. 3. SHARE CAPITAL As of 31 december 2015, the share capital of federal Grid Company amounted to 637,332,661,531 roubles and 50 kopecks divided into 1,274,665,323,063 ordinary shares with a nominal value of 50 kopecks each. in accordance with the Charter the number of authorised shares amounted to 72,140,500,768 ordinary shares with a nominal value of 50 kopecks each and a total nominal value of 36,070,250,384 roubles. Authorised ordinary shares have the same rights as outstanding ordinary shares. in 2015 no additional share issues were carried out and no preferred shares were issued. APPEndiCES to thE AnnuAl REPoR t mAnAGEmEnt REPoR t 2015 during the reported period there were no significant changes in the structure of our share capital. Currently we have over 400,000 shareholders. As of 31 december 2015 PJSC “Russian Grids” was the Company’s main shareholder, owning 80.13% of the Company’s shares. the Russian federation, represented by the federal Agency for State Property management, owned 0.59% of the Company’s shares. Since June 2013 a shareholders agreement, signed by PJSC “Russian Grids” and the federal Agency for State Property management, regarding managing and voting of fGC’s shares has been in place. the agreement covers all the shares owned by the parties as of June 2013 and any fGC voting shares purchased by the parties in the future. As of 31 december 2015, free-float constituted 18.2% of fGC’s total share capital. Key minority shareholders included institutional investors and holdings; retail investors constituted 3.23%. Approximately 32% of our free-float shares are owned by foreign institutional investors, including some of the largest funds with total assets un- der management exceeding 1 billion US dollars (Kopernik Global All-Cap Fund, Vanguard Inter- national Equity Index Fund, MarketVectors ETF Trust Russia ETF, BlackRock funds). Long-term investors constituted 65.5%, mid-term investors — 26.6%, and short-term inves- tors — 7.9% of total foreign investments into the Company. Details on the Company’s share capital structure and dynamics are available on our website www.fsk-ees.ru in the “Investors / Share Information” section. Market quotations for the Company’s shares in 2015 the dynamics of the industry indicator micexPWR generally correlated with that of miCEX. Shares of the Company performed significantly better than the market in general and the industry indicator micexPWR, outpacing them. Since the beginning of the year quotations for the Company’s shares increased by 30% (from 4.7 kopeeks at the beginning of the year to 5,7 kopeeks at the end) with micexPWR and miCEX growing by 26% and 18% accordingly. The growth of FGC shares’ market quotations in January — February 2016 was primarily due to the expectations of the Company’s investment programme reduction and also discussions of an- ti-crisis plan by the Government of Russian Fed- eration, including electric grid companies support measures. ▶ FGC’s share capital structure as of 31.12.2015 250 80.13 PJSC Rosseti 1.34 1.08 1.67 Kopernik Global All-Cap Fund Index of Energy FGC UES, LLC* Bank VTB (PJSC) 15.78 Others** ПАО «Россети» * since 2016 LLC “FGC — Asset Management”. ** The management are not aware of investors owning more than 5% of the Company’s share capital other than those indicated in the diagram above. Kopernik Global All-Cap Fund ООО «Индекс энергетики ФСК ЕЭС» * БАНК ВТБ (ПАО) Прочие** ▶ Stock Indices and Federal Grid shares in 2015, % 75 65 55 45 35 25 15 5 –5 . 4 1 2 1 0 3 . . 5 1 2 0 7 2 . . 5 1 3 0 1 3 . . 5 1 4 0 0 3 . . 5 1 5 0 9 2 . . 5 1 6 0 0 3 . . 5 1 7 0 1 3 . . 5 1 8 0 1 3 . . 5 1 9 0 0 3 . 30.0 26.1 18.4 . 5 1 0 1 0 3 . . 5 1 1 1 0 3 . . 5 1 2 1 0 3 . . 5 1 1 0 0 3 . MICEX MICEX PWR FGC 251 During the rest of the year the growth rate de- creased due to a number of negative factors with the following among the key ones: • Russia’s economic growth slowdown and inflation rate increase, affecting capital-raising potential of domestic market oriented companies; • mid-term tariff regulation forecasting difficulties; • transition to a new client accounts settlement basis — in accordance with actual capacity provided. In 2105 the Company’s capitalization increased by 33.4% and amounted to 74,861.09 million rou- bles. Details on the market quotations for the Company’s shares are available on our website www.fsk-ees.ru in the “Investors / Share Information / Interactive Stock Chart” section. Depositary receipts programme on 30 June 2008, federal Grid Company launched a depository Receipts Programme, not subject to listing procedures (Regulation S and Rule 144A). Since 1 July 2013, the Bank of new York mellon (BnY mellon) has been the depository bank for the programme. in 2011, the Company performed a technical listing of depository receipts (GdRs) on the main market of the london Stock Exchange, where trading of federal Grid Company’s GdRs was launched on 28 march 2011. In the year 2015 the depository receipts pro- gramme decreased and amounted to 1.23 million GDRs, or 0.048% of the Company’s share capital. Details on the Company’s depositary receipts programme are available on our website www. fsk-ees.ru in the “Investors / Share Information / GDR programme” section. Current information on the GDR programme can also be accessed at the official website of the London Stock Exchange at www.londonstockexchange.com, under Federal Grid Company’s ticker symbol — FEES. 252 APPEndiCES to thE AnnuAl REPoR t Key features Proportion Code Regulation S 1 GdR: 500 shares Rule 144A 1 GdR: 500 shares iSin: uS3133542015 CommonCode: 036273577 iSin: uS3133541025 CommonCode: 0362733372 Price per 1 GdR as of 31.12.2015 0,361 uS dollars Amount of GdR’s issued as of 31.12.2015 1,183,441 - 46,034 Dividend policy our dividend policy is based on the approach of balancing the interests of our shareholders and the Company’s development needs taking into account the necessity to increase the Company’s capital-raising potential and capitalization. A resolution on payment of dividends is adopted by the General Meeting of Shareholder subject to a recommendation made by the Board of Di- rectors. Recommended dividends volume is as- sessed by the Board of Directors basing on the Company’s financial results and with due regard to the Russia’s government order № 774-р of 29.05.2006. According to the order at least 25% of the net profit for the reporting period (exclud- ing income from revaluation of financial assets) of partially state-owned companies could be spent on dividend disbursement, if not specified other- wise by governmental acts. In accordance with Russian legislation, the Char- ter of Federal Grid Company, and the Dividend policy, the source for dividend payments is the Company’s net profit, which is determined on the basis of the Company’s annual statutory ac- counts. At the moment we are working on a new methodology for dividend basis calculation that could harmonize IAS and RAS approaches. According to Federal Grid Company’s 2015 statu- tory financial statements, the Company’s net profit for the reporting year amounted to RUB 17,870 million. Taking into account the net profit for the period the Company’s management will recom- mend the General Meeting of Shareholders to adopt a resolution to pay dividends for 2015. A resolution on the payment of dividends for 2015 will be adopted by the Company’s Annual General Meeting of Shareholders in June 2016. Details on the Company’s dividend policy are available on our website in the “Investors / Share Information / Dividends” section. 4. MARKET REVIEW As of the end of 2015 with Russia’s industrial out- put decreasing by 3.4% (growth of 1.7% in 2014), output of certain industries such as metallurgy and machinery and equipment production, featur- ing high electric consumption, reduced by 6.5% and 11.1% accordingly1. According to the data provided by the System op- erator of UES2, the energy consumption volume in Russia’s UES decreased by 0.55% against the previous year and amounted to 1,008.3 billion kWh. The electricity export in 2015 increased by 25% but still constituted an insignificant share in the consumption structure of UES (less than 2%). An average annual growth rate of electricity con- sumption in UES is expected to be 100.81% in 2016—2022. With modernization of production technologies and energy saving programmes put into force, specific energy consumption kept on decreas- ing with regards to the majority of power-hungry products during the previous years. A sustained growth of specific energy consumption remained only in oil drilling industry. mAnAGEmEnt REPoR t 2015 The mentioned factors adjust the effect from changes in demand’s geographical structure and distribution of loads. They also allow using the current power capacity reserves of the Grid and delaying expensive capacity increase projects. Organization and control over electricity supply network constitute a separate sector of power industry. Being a key element of infrastructure of Russian electricity market, our company is a natu- ral monopolist in the sector, and thus doing busi- ness under government regulation. The volume and physical characteristics of the services rendered by FGC are highly dependent on overall economic environment due to infra- structural nature of power industry in general and power grid in particular. The volume of services provided in backbone electric grids is assessed as power capacity provided to electricity transmission services cli- ▶ Power capacity paid by electricity transmission services clients of FGC, GW 90.9 90.5 91.4 90.9 87.9 2011 2012 2013 2014 2015 ▶ Physical volume of technological connection services provided, MW ents and capacity of power receivers, being con- nected to the grids. In 2015 paid power capac- ity amounted to 87.9 GW, having decreased by 3 GW in comparison with the previous year. The mentioned dynamics resulted from application of a new arithmetic average based calculation meth- od for direct customers provided services rather than a reduction in power consumption. A significant growth of technological connection services’ physical volume (consumers and power generating companies) in 2015 was mainly due to completion of a number of large-scale techno- logical connection projects with regards to power generating stations owned by “Rosenergoatom”. With the current dynamics of electricity export and import, and also global power saving trend, we do not expect a significant growth of the electric grid services within the next few years. The services’ volume growth is expected to be subject to expan- sion of UES of East and UES of South National currency exchange rate negative fluctua- tions just increase the uncertainty of investment expectations and might cause a delay in carrying out new investment projects by both energy con- sumers and producers, hence, resulting in lower technological connection services’ volume. 5. CORPORATE STRATEGY, CHALLENGES AND SOLUTIONS our mission is to ensure reliable functioning and development of the unEG in correlation with economic dynamics, achieving higher economic efficiency with lowest possible expenses. our strategic goals for the period till 2030 are: • Ensuring reliability and quality of our services; 8,185 • Retaining financial soundness and self-sufficiency; 253 6,058 5,537 4,569 3,793 • developing the unEG with due regard to economic and technical optimization of backbone grids; • meeting customers’ demand on fGC’s services with due regard to regional features, structure of the demand, and higher capacity load efficiency; • Consolidating under fGC’s governance all the objects constituting the unEG. 1 Source: Ministry of Economic Development of Russian Federation, “On the results of social-economic development of Russian Federation in 2015”, Moscow, February 2016. 2 Source: System operator of UES, “Report on Russia’s UES functioning in 2015”. 2011 2012 2013 2014 2015 APPEndiCES to thE AnnuAl REPoR t mAnAGEmEnt REPoR t 2015 254 Long-term development programme in december 2014 the Board of directors adopted1 the Long-term development programme for 2015—2019 with the prospect till 2030, previously approved by the government of Russia. in 2015 we revised the long-term development programme, considering more severe business environment, caused by certain external factors and the macroeconomic indicators dynamics reported at the end of 2014 — beginning of 2015. The goals and objectives as well as measures to reach target indicators were revised and clarified. the revised programme has become more focused on cost saving: • more ambitious operational cost saving objectives than those stipulated by the corresponding governmental acts; • more conservative approach applied to the unEG development plans and proceeds indicators. • in 2014 the independent auditor matched target and actual values of key efficiency indicators and analyzed the reasons for revealed discrepancies (the results are provided in the auditor’s report of 31.07.2015). the auditor states that for the reporting period the actual values surpassed the target ones due to the implementation of a number of efficiency upgrade measures. • the key results of the long-term development programme in 2015 were as follows: • undertaking in full a set of import substitution measures, as set forth by the corresponding plans; • Surpassing target indicators of specific operational and investment expenses as well as labour productivity; • Saving almost 49.4 million kWh as a result of implementing a set of measures directed at lowering losses of electricity during unEG transmission; • implementing the long-term investment programme under the conditions of tariff restrictions and 30% reduction of specific investment expenses by 2017 compared with those of 2012; • Adhering to the prearranged timeline when carrying out investment projects of state importance; • Adhering to the principles of economic and technical feasibility when making decisions with regards to backbone grid development scheme; • implementing economic model of technological connection based on a balance of interests and fair risks distribution between submitter (client) and the Company; • minimum 30% reduction of specific operational costs by 2017 compared with those of 2012 maintaining the same high level of reliability and quality of power supply; • optimization of the current power capacity load; • developing a step-by-step programme to consolidate all the objects constituting the unEG; • maintaining the Company’s credit rating at the level of Russian federation’s sovereign credit rating. Risk management system Risk management system, being an element of comprehensive internal control system, is a set of mechanisms and tools ensuring availability of corresponding organizational structure and measures to develop, adopt, monitor, revise and constantly improve risk management processes within fGC. in accordance with the recommendations set forth by the Russian Code of Corporate Governance in 2015 the Board of directors adopted Provision on Risk management System (protocol nr. 291 of 19.11.2015). the Provision was developed on the basis of headmost Russian and international standards, including: • Reducing the duration of electricity transmission cutoffs by 46%. The strategic goals for the period 2015—2019 are: • methodology instructions on preparing a risk management provision, approved by the Government of Russian federation; • maintaining high reliability of the unEG; • the Russian Code of Corporate Governance; 3 Protocol Nr.243 of 19.12.2014 • moscow Stock Exchange listing Rules; • international standards iSo:2009, 31000:2010 and 31010:2011 with regards to risk management; • Risk management Standard by federation of European Risk management Associations. developed a set of measures allowing the Company to mitigate to some extent the revealed risks. the key risks can be divided into three groups by the parameter of magnitude: critical, significant, moderate. none of the revealed risks is assessed as critical. taking into account the recent economic and political trends in the course of further upgrading the existing risk management system, we updated the risk map so that it could reflect all the challenges of business environment the Company experienced in the reporting period and will face in the near future. We also the following table provides brief characteristics of the significant risks with growing magnitude. in comparison with the risk assessment results of the previous year, the amount of such significant risks with growing magnitude has fallen to 3. however, the tariffs regulation and macroeconomic environment risks have increased their influence. Risk description mitigation measures Risk occurrence Tariffs regulation risks lower investment component of the tariff. Reduction of electricity transmission services actual revenue. increase of costs with regards to electricity transmission via foreign energy systems. deviation of actual average tariff from the one stipulated by the business plan. Changes in the investment programme and its financing structure. Proposing changes to regulatory acts with regards to: tariff setting and determination of indicators used to set tariffs. Efficiency increase of operating and invest- ment activities and consecutive implementa- tion of RAB regulation principles. Quality upgrade of budget planning and supervision over implementation. An increase in borrowing costs — interests payable increased by RuB 7,091 million (+30.2%). An increase in fees to foreign grid companies by RuB 642 million (+30.6%). the approved tariffs stipulate for a contracted capacity basis in settlement of clients ac- counts. Actually settlement of direct consum- ers’ accounts is being made on an actual capacity consumption basis — gross revenue requirement decreased by RuB 484 million (–0.3%). 255 Economic environment risks in country and region Worse basic macroeconomic indicators of the country’s economy: GDP, inflation rate, unemployment, etc. Crisis response (anti-crisis) programme and other expenses reduction programmes with regards to separate activities (investment in the first place) were adopted. the long-term development programme for 2015 — 2019 stipulates for overall efficiency increase: 30% and at least 30% reduction of specific investment and operational costs correspondingly by 2017 compared with 2012; power supply reliability increase. With crude oil prices dwindling, rouble negative exchange rate dynamics, economic sanctions against Russia, the magnitude of the risk has increased. macroeconomic environment has worsen, power consumption and, hence, the demand on the Company’s services have dropped. APPEndiCES to thE AnnuAl REPoR t mAnAGEmEnt REPoR t 2015 Risk description mitigation measures Risk occurrence Risks regarding import substitution programme implementation the risks might affect maintaining the required level of quality of services and reli- ability of the unEG objects functioning: Restrictions or even prohibition of purchasing electric machinery (mutual economic sanc- tions, absence of required technology or lack of equipment and competence regarding do- mestic manufacturers of electric machinery). Price surge with regards to electric machinery due to negative economic environment (weaker rouble, discriminating sales policy applied by foreign manufacturers to Russian customers). in 2015 the magnitude of the risks increased following the worsening of Russian foreign relations — implementation by a number of countries additional economic sanctions and counter sanctions. in 4th quarter of 2015 due to the Russian sanctions against turkey, custom clearance procedures, applied to products made in turkey and including components for electric machinery, were strengthened. that leads to higher risks of supply deadlines breach with regards to the electric machinery conceived of such components, that are supposed to be supplied to the objects of the Company. the Company developed and adopted (order nr. 820p of 29.12.2014) a set of measures to manage the risks regarding the implementa- tion of import equipment, technologies, mate- rials and systems substitution programme for 2015 — 2019. the measures are: • Setting priorities on specific projects from the investment programme; • Amending standard purchase contracts and tendering documentations to fix prices on electric machinery and to hedge exchange risks; • • increasing the range of electric machinery of domestic manufacturing which could be used for the needs of fGS’s objects; increasing the share of domestically manufactured electric machinery in the structure of purchases with due regard to the current legislation; • Centralizing purchasing process for key groups of electric machinery, being supplied under the import substitution programme; • long-term contracting with domestic manufacturers and foreign producers allocating their manufacturing facilities in Russia; • Stimulating innovative development of Russian electric machinery manufacturers, including technology transfers and innovations into manufacturing processes; interacting with federal, regional and local authorities to provide domestic manufactur- ers with any possible preferences. 256 6. OPERATING ACTIVITIES • PJSC “Lenenergo” — 4.07%. Electricity transmission services federal Grid Company’s principal activity is the transmission of electricity via the Russian unified national Electric Grid (the “unEG”). Payments for this type of service are the main source of revenue for the Company. According to Russian legislation, electricity transmission services via the unEG are monopolistic activities and are regulated by the Russian Government. the price for electricity transmission services is determined by tariffs set by the Russian federal tariff Service, and since 01.07.2015 by the Russian federal Anti-monopoly Service, including: • the price for electricity transmission services provided to maintain operation of the power assets constituting the unEG; • normative technological losses of electricity during unEG transmission for the respective subject of the Russian federation. for 2015, the volume of electricity transmission services provided by the Company increased by 2.04% and amounted to 525,8 billion kWh and RuB 157,8 billion according to our audited ifRS financial statements. the number of customers during the reporting period increased to 473 organizations. this increase was mainly due to the new customers of technological connection services and reduction in the amount of “last mile”4 companies, which led to fCG concluding direct contracts with its customers. As of 31 december 2015 our key5 consumers of electricity transmission services consisted of the following: • JSC “Tyumenenergo” — 10.63%; • PJSC “IDGC of Centre” — 9.77%; • PJSC “MOESK” — 9.50%; • JSC “IDGC of Urals”-“Sverdlovenergo” — 4.24%; • JSC “IDGC of Urals”-“Chelyabenergo” — 3.15%; • JSC “DRSK” — 3.11%; • PJSC “Kubanenergo” — 3.07%; • JSC “RUSAL Krasnoyarsk” — 2.32%; • PJSC “IDGC of South”-“Rostovenergo” — 2.06% Details on electricity transmission services provided by the Company are available on our website in the “Operations / Energy transmission” section. Technological connection services technological connections are a complex service that provides for the actual connection of electricity receiving devices (power units) to the electric grid system. We provide technological connection services to new consumers as well as to existing customers that need to increase power consumption. our primary goal is to synchronize industrial development in different regions of Russia with the current capacity of backbone electric grids. Answering the needs of our customers we pay much attention to transparency and availability of technological connection process, that results in less stages of the process and, hence, shorter timeline. in 2015, we concluded 2066 agreements to provide technological connection services (226 agreements concluded in 2014). the main reason for the decrease of the concluded agreements number was legal restriction preventing from taking orders with voltage class less than 110 kV. Economic situation in Russia was another reason. the total volume of maximum capacity with regards to technological connection services rendered increased by 46% and amounted to: • 2.8 GW under the agreements with consumers and distribution grid companies; • 5.4 GW under the agreements with power generating objects. 4 «Last mile» is a form of cross-subsidisation under which large industrial consumers connected directly to backbone grids of Federal Grid Company pay for electricity transmission services under distribution grid tariffs of IDGCs, which have leased part of grid facilities of the Company («last mile»). 5 Such customers’ shares in the revenue (IFRS) exceeded 2%. 6 Number of contracts with direct private customers, distribution grid companies and power generating objects. 257 APPEndiCES to thE AnnuAl REPoR t mAnAGEmEnt REPoR t 2015 Largest technological connection projects for 20157 Customer JSC “E.on Russia” PJSC “WGC-2” object Capacity, mW Berezovskaya state district power plant, unit nr.3 Cherepovetskaya state district power plant, unit nr.4 JSC “Inter RAO — Electrogeneracia” uzhnouralskaya state district power plant-2, unit nr.1 JSC “Fortum” PJSC “moESK” Chelyabinskaya tPP-3, unit nr.3 transformer substation 110 kV mGu added to sub- station 500 kV ochakovo JSC “GAZPROMNEFT — Moscow Oil Refinery” Substation 220 kV GPP-3 added to substation 500 kV Chagino federal treasury Enterprise R&d Centre Vostochny spaceport, 1 stage llC «Yandex dC» JSC “Vancorneft” PJSC “IDGC of Urals” JSC “Tyumenenergo” Substation 110 kV Yandexс Substation 110 kV nPS-1 transformer substation 110 kV ustinovo Geolog added to substation 220 kV Khimkompleksс transformer substation 110 kV Geolog added to substation 220 kV Barsovo 258 800 420 400 220 83,17 67 60 56 20 19,65 18 Details on electricity transmission services provided by the Company are available on our website in the “Operations / Technological connection” section. Upgrading the quality of services With the variety of climate zones in Russia, we take very seriously our mission of providing sustainable power supply. We do our best to ensure the provision of electricity to our customers on a reliable basis, adhering to all the necessary technical specifications. one of the key goals of the long-term development programme is maintaining high reliability of the infrastructure and further reduction of energy undersupply. upgrading reliability and maintaining efficient functioning of the unEG are directed by the funds renewal programme, which is a part of the investment programme for 2015 — 2020, approved by the Ministry of Energy’s orders nr. 979 and 980 of 18.12.2015. are scheduled by the programme. for 2016 the programme provides for capacity commissioning of 2,033 mVA with the budget of RuB 16.7 billion. Carrying out activities stipulated by the Company’s repairs programme guarantees reliability of the unEG. the programme is based on the results of regular diagnostics of technical condition of equipment taking into account local environment, normative documents by manufacturers and our rich experience in the industry. Scheduled for 2015 repairs, maintenance and diagnostics with regards to the unEG equipment were performed in full: • Repaired 215 transformers’ branches; 19 reactors’ branches, 14,448 disconnectors, 2,191 switches and around 10,270 transmission tower footings; • Cleared 43,4 thousand ha of electricity transmission lines; the renewal programme’s budget reaches RuB 118.2 billion. During 2015 — 2020 commissioning of 11,452 mVA and 331.5 km of transmission lines • Replaced 125,917 insulators on high-voltage transmission lines. the measures taken as a part of our Energy efficiency programme in 2015 were focused on the following points: • optimization of circuit and regime parameters; • lower electric energy consumption of the substations owned by fGC; • upgrading electric grids and energy saving equipment commissioning. Apart from the decrease of actual electricity losses (49.4 million kWh) the technological effect of the programme also includes lower electric (0.7 million kWh) and heat (1.06 thousand gigacalories) energy consumption in buildings. Additionally the implementation of the programme resulted in lower consumption of gasoline and diesel fuel. in 2015, total economic effect reached RuB 60.3 million of which RuB 54.8 million was made due to the reduction of electricity losses. 259 the reliability and efficiency of our grids is upgraded with every year as new equipment is commissioned, timely diagnostics and repairs carried out and staff development is conducted: • undersupply of energy to our customers dropped by one half in 2015 and continues tends to be on a low level. in 2015 the undersupply amounted to 1,725 MWh against 3,565 MWh in 2014.; • despite constant increases in assets subject to maintenance, in 2015 the accident rate at our power assets dropped by 22% and total amount of accidents decreased by 17.3%; • Actual losses of electricity in our grids continues to decrease. in 2015, losses were 23.5 billion kWh, which amounted to 4.47% of total electricity supply. the 2.2 billion kWh increase in actual electricity losses in comparison with 2014 was due to the run regime change of the unEG, corresponding load regime change of power stations, rescheduling power capacity loads of consumers, and new equipment commissioning. • As a result of implementation of our Energy efficiency programme, the total effect of energy saving in 2015 amounted to 49.4 million kWh. Key production indicators number of substations8 total transmission grid length including rented lines, thou- sand km Electricity transmitted from the unEG, mWh 525 769 515 250 Actual electricity losses, mWh transformer capacity including rented substations, GVA declared capacity, mW 23 478 334.5 87 920 21 261 332.1 90 887 2014 Change 2015/2014 2015 931 139.1 924 138.8 + 0.8% + 0.2% + 2.04% + 10.4% + 0.7% –3.3% 7 The table demonstrates the projects with capacity exceeding 100 MW each.. 8 Including rented sites as well as switchgears and units at substations of other owners. APPEndiCES to thE AnnuAl REPoR t mAnAGEmEnt REPoR t 2015 7. DEVELOPMENT OUTLOOK FOR THE COMPANY INVESTMENTS our Company’s investments are primarily aimed at modernisation and reliability upgrades to the unified national Electric Grid in order to ensure an uninterrupted supply of electricity to our consumers. under the investment activities we carry out complex projects with the purpose of building new electric grid infrastructure units and reconstruction of the existing ones. The priority goals for the Company’s Investment programme include: • maintaining reliability of the unEG functioning to ensure uninterrupted electricity supply to our customers; • Providing electricity supply to objects of high State importance; • Providing quality and availability of energy transmission and technological connection services; • improvement of the efficiency of backbone electric grids by implementing power efficiency programmes; • Synchronization of the Company’s development programme with those of power generating objects and distribution grid companies; • development of an efficient system to control and monitor all the objects constituting the unEG; • Providing reliable power supply with separate functioning of unified Energy Systems of Russia and ukraine; The Company’s 2016 — 2020 Investment programm9 was prepared under the current economic environment featuring significant increase in borrowing costs, financial markets’ limitedness, inflation rate increase, exchange rate fluctuations and customers’ bad debts. With the actual financing being 84% of the plans, during the reporting period fGC reached almost all target indicators stipulated by the Programme (commissioning of power capacity — 99% of the target value, transmission lines — 101%). 68% of investments for the year were spent on the construction of new capacities, 23% on reconstruction and modernization, and the remaining 9% on other investment projects for further development of the business and the industry in general. the overall size of the investment programme financing for 2016—2020 will amount to RUB 471.1 billion roubles. Within the framework of implementing the investment programme, the Company plans to put into operation 44.3 thousand mVA of transformer capacity and more than 11.8 thousand km of electricity transmission lines. the investment programme will be financed from the following sources: Company’s own funds, bond issues, loans originated by third parties and federal budget funds. Another key feature of the investment programme will be the equal distribution of investment expenses within the next 5 years, which will allow our Company to save its balanced structure of financing sources. 260 the key investment projects for the upcoming years are the following: • Energy infrastructure development in the following regions: − the Republic of Sakha (Yakutia); − BAm and transsib (around the mentioned railway mainlines). Adjustments to the Investment programme As a result of investment programme implementation in 2015 and according to the Russian federation Government Decree № 977 of 1 December 2009 (edition of 16 february 2015), fGC developed draft changes into the investment programme for 2016 — 2020. • Energy infrastructure development for oil transportation system “Eastern Siberia — the Pacific ocean”; Details on the Company’s Investment programme are available on our website in the “Operations / Investments” section. • damage recovery programme at the Sayano- Shushenskaya hydroelectric power station; • mitigating separate functioning of unified Energy Systems of Russia and ukraine; • increasing accessibility (connection) of the Krasnodar territory’s electric grids; • Ensuring power output of power units; • Ensuring reliable Russia’s uES functioning being separated from the grid systems of the Baltics (BREll macroproject); • Electricity supply to the natural gas transportation system “Power of Siberia”. INNOVATION the management Board and Strategy Committee under the Board of directors approved the innovative development and modernisation policy aimed at creation of an intelligent innovation-based electric grid, including: • Automate energy consumption management systems; • Active grid units with altering technical characteristics; • monitoring system of current grid status; • Automate real-time systems designed to maintain operation of the grid within the limits set, functioning as a part of an integrated system of analysis and decision-making. to achieve the goals of our innovation policy we adopted the innovative development programme for 2013 — 2017 with the prospect till 2020. The key tasks of the programme include: 261 Key indicators of our Company’s Investment programme for 2015 Key features of the adjusted Investment programme for 2016 — 2020 indicator Actual 2015 Status, % financing, billion roubles (VAt inclusive) Application of funds, billion roubles (VAt inclusive) Transfer of works-in-progress into fixed assets, billion roubles Commissioning (under voltage) mVA km 9 Adopted by the Russian Ministry of Energy’s order Nr. 980 of 18.12.2015. 85.9 61.4 99.5 2,318 663 84 98 115 105 104 indicator 2016 2017 2018 2019 2020 total financing, million roubles. 99 000.0 98,100.0 107,655.0 91,012.0 94,301.0 490,068.0 Capacity commissioning, thousand mVA transmission lines commissioning, thou- sand km 9.4 1.4 9.7 1.3 10.8 3.3 8.1 2.5 6.9 3.4 44.9 11.9 APPEndiCES to thE AnnuAl REPoR t mAnAGEmEnt REPoR t 2015 New technologies and innovative products development: Innovative business processes: • Concept developing for the intelligent energy system on the basis of self-adaptive electric grid; • developing, testing and commercialization of new technologies; • developing new services on electricity markets; • Energy efficiency upgrade programme; • Environmental compatibility upgrade programme; • Cooperation with universities and scientific organizations; • Partnership programmes with innovative small and medium enterprises; 262 • Cooperation with ventures and Skolkovo institute of Science and technology. New technologies application: • Comprehensive pilot projects on establishing self- adaptive intelligent electric grid; • further development, modernization and energy efficiency upgrades application to the unEG; • Building up manufacturing facilities for comprehensive for further modernization of the unEG. • upgrading the current business processes and new governance methods implementation; • developing the innovative activities system. fGC’s innovative development programme provides for upgrading use efficiency for Russia’s energy potential. the programme also contributes to further development of industrial sector of Russia’s economy, decrease of imported equipment share and establishes conditions for Russian economy gaining maximum benefits. the key system result of the Programme implementation in 2015 was keeping the focus on innovation implementation and further development of related activities. that was subject to the significant results achieved under various R&d programmes and projects, and also the objective necessity of innovative decisions approbation and application on the unEG objects. the targeted values of the effectiveness indicators mentioned above were reached despite a notable drop in the programme’s financing in 2015 — actual RuB 3,962.27 million instead of planned RuB 9,717.44 million. The innovative activities efficiency increase ensured the target values for effectiveness indicators of the programme being reached. the following table sets forth some of the key effectiveness indicators of the programme for 2015: indicator Ratio of actual losses of electricity to total electric energy supply, % Ratio of the personnel to 100 km of the transmission lines, units. Amount of patents and registration certificates received during the reporting period Amount of technologies developed and implemented as a result of R&d works Ratio of R&d carried out by universities (expenses) to total R&d expenses, % Plan 4.46 14 20 2 1.0 Actual 4.47 13,52 30 4 2.94 Status undone done done done done the innovative development programme provides for carrying out the R&D Programme for 2015 — 2017 (adopted by the order nr. 133 of 19.03.2015). 8. MOTIVATION FOR TOP-MANAGEMENT the R&d Programme is designed to ensure sustained and long-term financing for new technologies and equipment, to improve reliability, quality and energy efficiency of electricity supply to customers via upgrading the unEG, and turning it into an intelligent (self-adative) core for power industry technological infrastructure. in 2015, in accordance with the innovative development Programme, R&d financing amounted to RuB 484.19 million which is 0.28% of the revenue for the period. The decrease in financing against 2010 — 2013 period was due to the adjustments made to the investment Programme resulted from changes in tariff policy. in 2015 R&d programme’s key result was development of design documentation, standard designs and prototypes in various lines: • high-temperature superconducting lWC; • Splice and terminal boxes for cables with insulation mad of ClP; • metrological control and monitoring at digital substation; • Automatic fire suppression system equipped with finely-divided spay gears for 220 kV transformers of 125 — 250 MVA capacity; • technical monitoring and fault location system for 220 — 750 kV lines. to adapt to financing restrictions, we are upgrading planning and implementation of the R&d Programme and focusing our efforts on most progressive and crucial segments of innovation activity; in accordance with Provision on Employment Agreements and Payment of Remuneration and Compensation to top management, adopted by the Board of directors on 17.06.2010, remuneration to the top management is stipulated by employment agreements. the remuneration is comprised of fixed (position salary) and variable (bonuses) parts. Amount of bonuses is subject to reaching predefined KPis. in 2015 motivation system for the top management provided for quarterly and yearly accrued bonuses in accordance with the methodology for Calculation and Assessment of KPis for fGC’s top management adopted by the Board of directors (protocol nr. 243 of 22.12.2014). Subject to failing to reach a KPi, the management Borad’s bonuses get reduced by a certain percent according to the KPi’s weight. the most crucial quarterly KPis are: “Reliability: absence of major accidents” (40%) and “Preventing casualties increase” (40%). the most crucial yearly KPis (15% each) are: “Return on invested capital”, “Achieving required reliability level” and “meeting deadlines of technological connection”. All the KPis applied for motivating the top management were introduced into the long-term development programme adopted by the Board of directors (protocol nr. 243 of 22.12.2014). for 2015 the remuneration paid to the management Board (including the Chairman) was as follows: • Salary — RUB 110,601 thousand; • Bonuses — RUB 194,291 thousand; • Other kinds of remuneration and compensation — RuB 28,770 thousand. We are also intending to further develop “open innovation” mechanisms to work with our partners in the field of innovative development. in comparison with 2014 target KPis for 2015 were higher. the actual KPis reached in 2015 and targets for 2016 are set forth in the table below: Details on the Company’s Investment programme are available on our website in the “About Us / Innovation” section. 263 APPEndiCES APPEndiCES to thE AnnuAl REPoR t to thE AnnuAl REPoR t Strategic goal KPi 2015 2016 target KPi Actual KPi Status target KPi Power supply reli- ability Reliability: absence of major accidents no increase no increase done no increase Preventing casualties increase no increase no increase done no increase Achieving required reli- ability level 1* Company gover- nance efficiency Lower specific opera- tional expenses ≥ 14.2% Lower specific invest- ment expenses Actual electricity losses ≥ 15% ≤.,27% Workforce productivity ≥ 17% 0.3 24.2% 18.3% 4.09% 21.5% done done done done done ≤ 1 ≥ 10,5% ≥23% < 4.13% ≥ 3.9 thousand roubles /man hour 264 264 developing the unEG and carrying out projects of state importance meeting commission- ing deadlines ≥ 95% 115.5% done ≥ 95% Maintaining finan- cial soundness Return on invested capital ≥ 0.9 financial leverage ratio ≤ 1.5** 1.8 0.43 done done ≥ 0.9 - total shareholders return > an average for the previous 3 years for an amount stated by the Bod (-46,3%) 28,0% done > moEX RCi hanges (Regulated Com- panies index) for a positive amount stated by the Bod Efficient customer relations meeting technological connection deadlines ≤ 1.1 1.0236 done ≤ 1.1 * Actual services reliability indicator is not higher than the target approved by the Federal Tariff Service. ** Or whichever is less than the amount stated in a business plan. 9. FINANCIAL RESULTS this report contains selected financial information, which has been derived from the consolidated financial statements of PJSC “fGC uES” (the “Company”) and its subsidiaries (the “Group”) as at and for the year ended 31 December 2015, prepared in accordance with international financial Reporting Standards (ifRS) and its interpretations as adopted by the European union. the selected financial and operating data below should be read in conjunction with the Group’s consolidated financial statements prepared in accordance with ifRS. Consolidated Income Statement (IFRS) (in millions of roubles) Revenues other operating income operating expenses impairment and revaluation loss on property, plant and equipment, net Operating profit / (loss) finance income finance costs impairment of available-for-sale investments Share of (loss) / profit of associates and joint ventures Profit / (loss) before income tax Income tax (expense) / benefit Profit / (loss) for the period mAnAGEmEnt REPoR t 2015 mAnAGEmEnt REPoR t 2015 Summary of results For the year ended 31 December 2015 and 2014, the Group’s revenue amounted to RUR 187,041 million and RUR 175,968 million, respectively. For the year ended 31 December 2015 the Group’s profit for the period amounted to RUR 44,098 million compared to loss in the amount of RUR 20,601million for the year ended 31 December 2014. 265 265 Year ended 31 december 2015 Year ended 31 december 2014 187,041 4,001 (130,963) (2,850) 57,229 8,701 (9,635) - (8) 56,287 (12,189) 44,098 175,968 5,618 (126,137) (70,775) (15,326) 5,070 (6,249) (6,027) 19 (22,513) 1,912 (20,601) APPEndiCES to thE AnnuAl REPoR t Consolidated Statement of Financial Position (IFRS) (in millions of roubles) ASSETS Non-current assets Property, plant and equipment intangible assets investments in associates and joint ventures Available-for-sale investments deferred income tax assets long-term accounts receivable other non-current assets Total non-current assets Current assets Cash and cash equivalents Bank deposits 266 Accounts receivable and prepayments income tax prepayments inventories other current assets Total current assets TOTAL ASSETS EQUITY AND LIABILITIES Equity Share capital: ordinary shares treasury shares Share premium Reserves Accumulated deficit Equity attributable to shareholders of fGC uES non-controlling interest Total equity Non-current liabilities deferred income tax liabilities non-current debt deferred income Retirement benefit obligations Total non-current liabilities 31 december 2015 31 december 2014 821,114 795,029 7,752 1,691 22,271 260 15,180 1,799 8,285 2,109 14,384 437 2,933 1,177 870,067 824,354 28,176 30,269 50,043 432 16,063 278 125,261 995,328 637,333 (4,719) 10,501 229,578 (252,980) 619,713 (75) 619,638 14,589 250,076 1,105 7,357 273,127 42,068 185 55,912 1,516 10,446 694 110,821 935,175 637,333 (4,719) 10,501 226,382 (297,237) 572,260 971 573,231 1,954 233,291 1,130 6,456 242,831 (in millions of roubles) Current liabilities Accounts payable to shareholders of fGC uES Current debt and current portion of non-current debt Accounts payable and accrued charges income tax payable Total current liabilities Total liabilities TOTAL EQUITY AND LIABILITIES mAnAGEmEnt REPoR t 2015 31 december 2015 31 december 2014 6 31,466 71,036 55 102,563 375,690 995,328 8 29,686 89,316 103 119,113 361,944 935,175 Consolidated Statement of Cash Flows (IFRS) (in millions of roubles) CASH FLOWS FROM OPERATING ACTIVITIES: Year ended 31 december 2015 Year ended 31 december 2014 267 Profit / (loss) before income tax 56,287 (22,513) Adjustments to reconcile profit / (loss) before income tax to net cash provided by operations depreciation of property, plant and equipment loss / (gain) on disposal of property, plant and equipment Amortisation of intangible assets impairment and revaluation loss on property, plant and equipment, net impairment of available-for-sale investments Share of result of associates Accrual of allowance for doubtful debtors Share-based compensation finance income finance costs other non-cash operating income Operating cash flows before working capital changes and income tax paid Working capital changes: increase in accounts receivable and prepayments increase in inventories decrease / (increase) in other non-current assets increase / (decrease) in accounts payable and accrued charges Decrease in retirement benefit obligations income tax received Net cash generated by operating activities 39,447 3,699 1,481 2,850 - 8 7,063 - (8,701) 9,635 (74) 111,695 (12,824) (5,607) 387 6,299 (2,833) 906 98,023 43,365 (429) 3,773 70,775 6,027 (19) 2,887 6 (5,070) 6,249 (78) 104,973 (7,946) (2,430) (69) (1,185) (330) - 93,013 APPEndiCES to thE AnnuAl REPoR t (in millions of roubles) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment Proceeds from disposal of property, plant and equipment Purchase of intangible assets Redemption of promissory notes loans given investment in bank deposits Redemption of bank deposits dividends received Purchase of subsidiary Sale of subsidiary interest received 268 Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from non-current borrowings Repayment of current and non-current borrowings Repayment of lease dividends paid interest paid Government grants received Net cash used in financing activities Net (decrease) / increase in cash and cash equivalents Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period Year ended 31 december 2015 Year ended 31 december 2014 (75,604) (76,899) 1,980 (948) 667 (1,000) (30,422) 337 21 (293) 568 7,452 (97,242) 40,099 (23,210) (150) (840) (30,572) - (14,673) (13,892) 42,068 28,176 3,525 (830) 2,923 - (688) 39,573 1 - - 4,336 (28,059) 1 (24,582) (150) (436) (22,279) 2,933 (44,513) 20,441 21,627 42,068 Non-IFRS Financial Information (in millions of roubles, except for margins and ratios in %) EBitdA(1) EBitdA margin (2) Adjusted EBitdA(3) Adjusted EBitdA margin (2) Adjusted operating profit (4) Adjusted operating profit margin (2) Adjusted profit for the period (5) Return on assets (6) Return on equity (7) mAnAGEmEnt REPoR t 2015 Year ended 31 December 2015 Year ended 31 December 2014 98,149 52.5% 109,700 58.6% 60,079 32.1% 46,378 4.8% 7.8% 25,804 14.7% 107,676 61.2% 55,449 31.5% 40,841 4.4% 7.3% (1) EBITDA represents profit / (loss) for the period before income tax, finance income and costs, depreciation and amortisation; (2) Margins are calculated as EBITDA, adjusted EBITDA and adjusted operating profit divided by the total revenue for the period; (3) Adjusted EBITDA is calculated as EBITDA adjusted to exclude impairment of property, plant and equipment, revaluation loss on property, plant and equipment, impairment of available-for-sale investments and to include finance income; (4) Adjusted operating profit is calculated as operating profit / (loss) adjusted for impairment of property, plant and equipment and 269 revaluation of on property, plant and equipment; (5) Adjusted profit for the period is calculated as profit / (loss) for the period adjusted for impairment of property, plant and equipment, revaluation loss on property, plant and equipment, impairment of available-for-sale investments, including respective deferred income tax; (6) Return on assets is calculated as adjusted profit for the period divided by the average total assets for the period; (7) Return on equity is calculated as adjusted profit for the period divided by the average total equity for the respective period. the indicators presented above are not financial performance measures that are required by, or presented in accordance with ifRS. Accordingly, they should not be considered as alternatives to profit for the period as a measure of operating performance or to cash flows from operating activities as a liquidity measure. the Group’s calculation of these ratios may be different from calculations used by other companies and therefore comparability may be limited. the Group believes that EBitdA and Adjusted EBitdA provide useful information to investors, because they are indicators of the strength and performance of its ongoing business operations and indicators of its ability to fund discretionary spending, such as: capital expenditures, the acquisition of subsidiaries and other investments and its ability to incur and service debt. While depreciation and amortisation are considered operating costs under ifRS, these expenses primarily represent non-cash current period allocations of costs associated with long-lived assets that have been acquired or constructed in prior periods. APPEndiCES to thE AnnuAl REPoR t mAnAGEmEnt REPoR t 2015 Adjusted profit for the period Adjusted profit for the period is used to calculate the return on assets and the return on equity indicators. Profit / (loss) for the period was adjusted for impairment of property, plant and equipment, revaluation loss on property, plant and equipment, impairment of available-for-sale investments, including respective deferred income tax. the following table sets forth a reconciliation of adjusted profit for the period to profit for the periods indicated. (in millions of roubles) Profit / (loss) for the period Adjustments to profit / (loss) for the period: impairment of PPE Revaluation of PPE impairment of available-for-sale investments deferred income tax on adjustments Adjusted profit for the period 270 Year ended 31 december 2015 44,098 2,850 - - (570) 46,378 Year ended 31 december 2014 (20,601) 62 70,713 6,027 (15,360) 40,841 EBITDA and Adjusted EBITDA the following table represents adjusted profit / (loss) and EBitdA for the periods indicated. (in millions of roubles) Profit / (loss) for the period Add back: Income tax expense / (benefit) finance income finance costs depreciation and amortisation EBITDA Adjustments to EBITDA: impairment of PPE Revaluation of PPE impairment of available-for-sale investments Add back: finance income Adjusted EBITDA Year ended 31 december 2015 Year ended 31 december 2014 44,098 (20,601) 12,189 (8,701) 9,635 40,928 98,149 2,850 - - 8,701 109,700 (1,912) (5,070) 6,249 47,138 25,804 62 70,713 6,027 5,070 107,676 Liquidity ratios and other measures (in millions of roubles, except ratios) Current liquidity ratio (1) Cash liquidity ratio (2) total equity/total assets ratio net debt (3) 31 december 2015 31 december 2014 1.22 0.57 0.62 0.93 0.36 0.61 222,903 220,099 (1) Current liquidity ratio is calculated as total current assets divided by total current liabilities; (2) The cash liquidity ratio is calculated as a sum of cash and cash equivalents, short-term bank deposits and short-term promissory notes divided by total current liabilities; (3) Net debt represents non-current and current debt reduced by cash and cash equivalents, short-term bank deposits and short- term promissory notes. Revenue the Group’s revenue is derived primarily from the provision of electricity transmission services. Changes in this type of revenue are primarily dependent on changes in tariffs set by the fAS and volumes of electricity transmitted during the period. the Group also earns revenue from the sale of electricity generated and sold to third parties by the Group’s subsidiaries, services of technological connection of electricity producers to power grids and services rendered under transmission facilities construction contracts. the Group’s revenue increased by RuR 11,073 million, or 6.3%, from RuR 175,968 million for the year ended 31 december 2014 to RuR 187,041 million for the year ended 31 december 2015. the table below sets out the Group’s revenue for the periods indicated. 271 (in millions of roubles except for percentages) Year ended 31 december 2015 Percentage of total revenue Year ended 31 december 2014 Percentage of total revenue transmission fee Connection services Construction services Electricity sales other revenues total revenues 157,821 12,425 7,014 6,442 3,339 187,041 84.4% 6.6% 3.7% 3.4% 1.9% 100% 159,743 7,028 - 5,591 3,606 175,968 90.8% 4.0% - 3.2% 2.0% 100% Percentage change between the year ended 31 december 2015 and 2014 (1.2)% 76.8% 100% 15.2% (7.4)% 6.3% Transmission fee the Group’s revenue from electricity transmission services decreased by RUR 1,922 million, or 1.2%, from RUR 159,743 million for the year ended 31 December 2014 to RUR 157,821 million for the year ended 31 December 2015. In spite of tariffs increase by 3.6%, the revenue decreased due to lower capacity level in 2015 (as a result of transfer of direct consumers from claimed capacity basis of payment to actual). APPEndiCES to thE AnnuAl REPoR t mAnAGEmEnt REPoR t 2015 Connection services the Group’s revenue from connection services increased by RUR 5,397 million, or 76.8%, from RUR 7,028 million for the year ended 31 December 2014 to RUR 12,425 million for the year ended 31 December 2015. The increase related to completion of connection services and recognition of revenue from these services. the most significant customer for connection services was JSC «Concern Rosenergoatom» (the amount of revenue was RUR 7,673 million). Construction services in 2015 the Group started to render services for the construction of transmission facilities on the territory of Russian federation. As a result the revenue in the amount of RUR 7,014 million was recognised. Electricity sales the Group’s revenue from electricity sales increased by RUR 851 million, or 15.2%, from RUR 5,591 million for the year ended 31 december 2014 to RuR 6,442 million for the year ended 31 December 2015 as a result of both tariffs growth and increase in volumes of electricity sold by OJSC «MGES», which was partially offset by decrease in revenue of oJSC «nurenergo» caused by loss of the status of the electricity supplier in may 2015. Other revenues the Group’s other revenues decreased by RuR 267 million, or 7.4%, from RUR 3,606 million for the year ended 31 December 2014 to RUR 3,339 million for the year ended 31 December 2015. Other revenues include rental income, grids repair and maintenance services, communication services, design works and research and development services. Other operating income other operating income primarily includes income from non-core activities. the Group’s other operating income decreased by RuR 1,617 million, or 28.8%, from RuR 5,618 million for the year ended 31 December 2014 to RuR 4,001 million for the year ended 31 december 2015. decrease was mainly caused by the fact that government grants in the amount of RuR 1,803 million were received in 2014 year. No government grants were received in 2015. Operating expenses the table below sets out the Group’s operating expenses for the periods indicated. 272 (in millions of roubles except for percentages) depreciation of property, plant and equipment Employee benefit expenses and payroll taxes Purchased electricity for produc- tion needs taxes other than income tax Accrual of allowance for doubtful debtors Subcontract works Electricity transit other expenses Year ended 31 december 2015 Percentage of total operating expenses Year ended 31 december 2014 Percentage of total operating expenses Percentage change between the year ended 31 december 2015 and 2014 39,447 30.12% 43,365 34.38% (9.03%) 25,218 19.26% 26,606 21.09% (5.22%) 15,192 11.60% 14,047 11.14% 7,847 7,063 6,337 4,019 5.99% 5.39% 4.84% 3.06% 7,149 2,887 1,691 3,599 5.67% 2.29% 1.34% 2.85% 25,840 19.74% 26,793 21.24% 8.15% 9.76% 144.65% 274.75% 11.67% (3.56%) 3.83% total operating expenses 130,963 100% 126,137 100% Depreciation of property, plant and equipment the Group’s depreciation expenses decreased by RUR 3,918 million, or 9.03%, from RUR 43,365 million for the year ended 31 december 2014 to RuR 39,447 million for the year ended 31 December 2015, mainly due to the fact that as part of revaluation of property, plant and equipment, that was carried out as at 31 December 2014 the Group reassessed the useful lives of certain assets included in Power transmission grids group, which resulted in increase of period of depreciation of such assets and decrease in depreciation charge compared to prior periods. Employee benefit expenses and payroll taxes the Group’s employee benefits expenses and payroll taxes decreased by RuR 1,388 million, or 5.22%, from RuR 26,606 million for the year ended 31 december 2014 to RUR 25,218 million for the year ended 31 december 2015. this was caused by the decrease in average number of employees in 2015 year. Purchased electricity for production needs the Group’s expenses for purchased electricity increased by RUR 1,145 million, or 8.15%, from RUR 14,047 million for the year ended 31 December 2014 to RUR 15,192 million for the year ended 31 December 2015. The increase was mainly due to increase in volume of electricity and power purchased in 2015, which was partially compensated by decrease of oJSC «nurenergo» purchases caused by the loss of the status of the electricity supplier in may 2015. Taxes other than income tax the Group’s taxes other than income tax and property tax increased by RuR 698 million, or 9.76%, from RUR 7,149 million for the year ended 31 December 2014 to RuR 7,847 million for the year ended 31 December 2015 mainly due to the increase in property tax expenses caused by the gradual abolition of tax benefit for power transmission grids. Accrual of allowance for doubtful debtors After a detailed analysis of accounts receivable as at 31 december 2015 and based on the recent legal practice the Group recognized allowance for doubtful debts for overdue accounts receivable and for certain balances with customers where the Group had disputes related to certain terms of transmission services. the Group recognized a net accrual of the allowance for doubtful debtors in the amount of RuR 7,063 million for the year ended 31 december 2015. For the year ended 31 December 2014, the Group recognized a net accrual of the allowance in the amount of RUR 2,887 million. Subcontract works the Group’s expenses for subcontract works increased by RuR 4,646 million, or 274.75%, from RUR 1,691 million for the year ended 31 December 2014 to RuR 6,337 million for the year ended 31 December 2015 due to the fact that the Group started rendering the services of transmission facilities construction. Electricity transit the Group’s electricity transit expenses increased by RUR 420 million, or 11.67%, from RUR 3,599 million for the year ended 31 december 2014 to RuR 4,019 million for the year ended 31 December 2015 which was caused both by increase of exchange rate of Kazakh tenge to rouble and the increased volumes of electricity transmitted through Kazakhstan. Other expenses the Group’s other expenses decreased by RuR 953 million, or 3.56%, from RuR 26,793 million for the year ended 31 December 2014 to RUR 25,840 million for the year ended 31 December 2015. Other expenses are mainly represented by loss / (gain) on disposal of property, plant and equipment, expenses for materials for repair and construction and other materials, expenses for business trips and transportation, repairs and maintenance of equipment and security services. Finance income finance income primarily includes interest income from investments in bank deposits and promissory notes. Finance income increased by RUR 3,631 million, or 71.62%, from RUR 5,070 million for the year ended 31 december 2014 to RuR 8,701 million for the year ended 31 December 2015. The increase was in line with the growth of weighted average balances of deposits and relates to placement of available cash balances to deposit accounts aimed at gaining interest income. Finance costs Finance costs increased by RUR 3,386 million, or 54.18%, from RuR 6,249 million for the year ended 31 December 2014 to RUR 9,635 million the year ended 31 December 2015. The increase was primarily attributable to issue of certified non-convertible bonds in total amount of RUR 40,000 million and the increase of weighted average interest rate, applied to bonds with variable rates tied to Consumer Price index. the average interest rate applied increased by 3.99 percentage points from 8.10% in 2014 year to 12.09% in 2015 year. 273 APPEndiCES to thE AnnuAl REPoR t mAnAGEmEnt REPoR t 2015 Impairment of available-for-sale investments the impairment loss in 2014 year was caused by decrease in market rates of financial investments, represented by quoted securities. in 2015 year market rates increased, which was reflected in other comprehensive income. Profit / (loss) before income tax the Group recognised profit before income tax in the amount of RUR 56,287 million for the year ended 31 december 2015 and loss before income tax in the amount of RUR 22,513 million for the year ended 31 december 2014. Income tax (expense) / benefit the Group recognised income tax expense in the amount of RUR 12,189 million for the year ended 31 december 2015 and income tax benefit in the amount of RUR 1,912 million for the year ended 31 December 2014. the effective tax rate increased from 8.5% to 22.1%. Profit / (loss) for the period As a result of the above-mentioned factors, the Group recognised profit in the amount of RUR 44,098 million for the year ended 31 december 2015 and loss in the amount of RUR 20,601 million for the year ended 31 December 2014. Capital resources the electricity transmission business is capital- intensive and many of the Group’s facilities are aged and require regular maintenance and upgrades. Expenditures to maintain, expand and increase the efficiency and size of the transmission grid are, accordingly, an important priority and have a significant effect on the Group’s cash flows and future operating results. the table below sets out total additions to property, plant and equipment and repair and maintenance expenditures for the periods indicated. (in millions of roubles) total addition to property, plant and equipment Repairs and maintenance expenditure Year ended 31 december 2015 75,072 2,171 Year ended 31 december 2014 111,994 2,768 274 Liquidity the Group’s primary sources of liquidity are cash generated via operating activities, debt and equity financing. future requirements for the Group’s business needs, including those to fund additional capital expenditures in accordance with its business strategy, are expected to be financed by a combination of cash flows generated by the Group’s operating activities, as well as external financing sources and funds from the Russian Government. the table below summarizes the Group’s cash flows for the periods indicated. (in millions of roubles) net cash generated by operating activities net cash used in investing activities Net cash used in financing activities net (decrease) / increase in cash and cash equivalents Cash and cash equivalents at the end of the period Year ended 31 december 2015 Year ended 31 December 2014 98,023 (97,242) (14,673) (13,892) 28,176 93,013 (28,059) (44,513) 20,441 42,068 Net cash generated by operating activities net cash generated by the Group’s operating activities increased by RuR 5,010 million, or 5.4%, from RUR 93,013 million for the year ended 31 December 2014 to RUR 98,023 million for the year ended 31 december 2015. this was due to the revenue increase as described above. Net cash used in investing activities net cash used in the Group’s investing activities increased by RUR 69,183 million, or 247%, from RUR 28,059 million for the year ended 31 December 2014 to RUR 97,243 million for the year ended 31 december 2015. this increase was mainly caused by redemption of bank deposits in 2014 year and placement of bank deposits in 2015 year. Net cash used in financing activities net cash used in the Group’s financing activities in the year ended 31 December 2015 and 31 December 2014 amounted to RUR 14,673 million and 44,513 million accordingly. the decrease of cash outflows in financing activities in 2015 year was mainly related to the issue of bond series 37 and 38 in total amount of RuR 40,000 million. it was compensated by the increase in interest expenses on bonds with floating rates tied to consumer price index. Debt As at 31 december 2015, the Group’s total debt amounted to RUR 281,522 million as compared to RuR 262,977 million as at 31 december 2014. the following table sets out the Group’s current debt and non-current debt for the periods indicated. (in millions of roubles) 31 december 2015 31 december 2014 total current debt and current portion of non-current debt total non-current debt total debt net debt 31,446 250,076 281,522 222,903 29,686 233,291 262,977 220,099 275 APPEndiCES to thE AnnuAl REPoR t mAnAGEmEnt REPoR t 2015 10. DISCLAIMER 11. RESPONSIBILITY STATEMENT this Annual financial Report has been prepared for shareholders of Joint Stock Company «federal Grid Company of unified Energy System» (the Company) as a body and for no other persons. the Company, its directors, employees, agents or advisers do not accept responsibility for any other person to whom this document is shown or into whose hands it may reach and any such responsibility or liability is expressly disclaimed against. By their very nature, statements concerning risks and uncertainties that the Company faces in this Annual financial Report involve uncertainty since future events and circumstances can cause results and developments to differ materially from those that are anticipated. the forward-looking statements contained in this Annual financial Report reflect knowledge and information that were available at the date of preparing this Report and the Company undertakes no obligation to update these forward- looking statements. further, nothing in this Report should be construed as a profit forecast. i hereby confirm that to the best of my knowledge: (a) the consolidated financial statements, prepared in accordance with international financial Reporting Standards, and their interpretations adopted in the European union, give a true and fair value of the assets, liabilities, financial position and profit or loss of federal Grid Company uES Group, and the undertakings included in the consolidation taken as a whole (the «Group»); and (b) the management report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that are faced. 277 maria Pichugina, deputy Chairman of the management Board, member of the management Board April 29, 2016 the key reasons for the increase of the Group’s debt relates to a placement of two new bond series 37 and 38 in the amount of RuR 40,000 million. the effect was partially compensated by bond’s redemption in the amount of RuR 23,210 million. thus, as of 31 december of 2015 the fGC’s principal debt increased by RuR 16.89 billion, or 6.5%, and amounted to RuR 274.66 billion. the Company meets their liabilities timely and in full. ▶ FGC’s debt portfolio dynamics, in billions of roubles 282.4 17.5 100.0 257.8 17.5 274.6 17.5 100.0 140.0 177.5 17.5 105.0 276 105.0 160.0 164.9 140.3 117.1 2011 2012 2013 2014 2015 Eurobonds Infrastructure bonds Bonds issues the debt structure is represented by long-term financial instruments featuring a comfortable repayment schedule. the debt is 100% unsecured and nominated in Russian roubles. there is no exchange risk with regards to the debt. and consequently lower sovereign credit rating of Russian federation. despite that the Company’s financial stability was at a high level which is proved by domestic ratings with regards to independent credit standing excluding government support factor. Credit ratings In January — February 2015 the Company’s credit ratings got lowered by one grade on the rating scales of Standard&Poor’s, Moody’s и Fitch Ratings. Such dynamics was due to the rising since the early 2014 geopolitical risks, lower economic activity, At the end of 2015 our credit ratings (national scale): on Fitch Ratings’s scale — “Prime”, on Standard&Poor’s and Moody’s scales — “High Grade”. that proves key fGC’s activity indicators to be in conformity with the levels required to repay obligations timely and in full. FGC’s credit ratings as of 31.12.2015 Standard & Poor’s moody’s Fitch Ratings international scale National scale ВВ+ / “Negative” Ва1/ “Stable” ВВВ-/ “Negative” ruAA+ Aa1.ru AAA(rus) APPEndiCES to thE AnnuAl REPoR t ifRS ConSolid AtEd finAnCi Al StAtEmEnt S Appendix 13. ifRS Consolidated financial Statements for 2015 PJSC “FGC UES” CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS AS ADOPTED BY THE EU 278 FOR THE YEAR ENDED 31 DECEMBER 2015 AND AUDITORS’ REPORT CONTENTS Auditors’ Report Consolidated Statement of Financial Position ......................................................................................................................5 Consolidated Statement of Profit or Loss and Other Comprehensive Income ...................................................................6 Consolidated Statement of Cash Flows .................................................................................................................................7 Consolidated Statement of Changes in Equity .....................................................................................................................8 Notes to the Consolidated Financial Statements Note 1. PJSC “FGC UES” and its operations........................................................................................................ 10 Note 2. Basis of preparation .................................................................................................................................. 10 Note 3. Summary of significant accounting policies ............................................................................................. 13 Note 4. Principal subsidiaries ................................................................................................................................ 19 Note 5. Balances and transactions with related parties.......................................................................................... 19 Note 6. Property, plant and equipment .................................................................................................................. 21 Note 7. Intangible assets........................................................................................................................................ 24 Note 8. Investments in associates and joint ventures............................................................................................. 24 Note 9. Available-for-sale investments ................................................................................................................. 25 Note 10. Long-term receivables and other non-current and other current assets................................................... 25 Note 11. Cash and cash equivalents ...................................................................................................................... 26 Note 12. Bank deposits.......................................................................................................................................... 26 Note 13. Accounts receivable and prepayments.................................................................................................... 27 Note 14. Inventories .............................................................................................................................................. 28 Note 15. Equity...................................................................................................................................................... 28 Note 16. Income tax .............................................................................................................................................. 30 Note 17. Non-current debt..................................................................................................................................... 32 Note 18. Retirement benefit obligations................................................................................................................ 33 Note 19. Current debt and current portion of non-current debt ............................................................................. 35 Note 20. Accounts payable and accrued charges................................................................................................... 35 Note 21. Revenues and other operating income .................................................................................................... 35 Note 22. Operating expenses ................................................................................................................................. 36 Note 23. Finance income....................................................................................................................................... 36 Note 24. Finance costs........................................................................................................................................... 37 Note 25. Earnings / (loss) per ordinary share for profit / (loss) attributable to shareholders of FGC UES ........... 37 Note 26. Contingencies, commitments and operating risks................................................................................... 37 Note 27. Financial instruments and financial risks................................................................................................ 38 Note 28. Capital risk management ........................................................................................................................ 41 Note 29. Segment information .............................................................................................................................. 42 279 APPEndiCES to thE AnnuAl REPoR t ifRS ConSolid AtEd finAnCi Al StAtEmEnt S 280 281 APPEndiCES to thE AnnuAl REPoR t ifRS ConSolid AtEd finAnCi Al StAtEmEnt S 282 PJSC “FGC UES” Consolidated Statement of Profit or Loss and Other Comprehensive Income (in millions of Russian Rouble unless otherwise stated) Notes Year ended 31 December 2015 Year ended 31 December 2014 Revenues Other operating income Operating expenses Impairment and revaluation loss on property, plant and equipment, net Operating profit / (loss) Finance income Finance costs Impairment of available-for-sale investments Share of (loss) / profit of associates and joint ventures Profit / (loss) before income tax Income tax (expense) / benefit Profit / (loss) for the period Other comprehensive income / (loss) Items that will not be reclassified subsequently to profit or loss Change in revaluation reserve for property, plant and equipment Remeasurements of retirement benefit obligations Income tax relating to items that will not be reclassified Total items that will not be reclassified to profit or loss Items that are or may be reclassified subsequently to profit or loss Change in fair value of available-for-sale investments Impairment of available-for-sale investments recycled to profit or loss Foreign currency translation difference Income tax relating to items that may be reclassified Total items that are or may be reclassified to profit or loss Other comprehensive income for the period, net of income tax Total comprehensive income for the period Profit / (loss) attributable to: Shareholders of FGC UES Non-controlling interest Total comprehensive income / (loss) attributable to: Shareholders of FGC UES Non-controlling interest Profit / (loss) per ordinary share for loss attributable to shareholders of FGC UES – basic and diluted (in Russian Rouble) 21 21 22 6 23 24 9 8 16 6 18 16 9 9 8 16 25 25 187,041 4,001 (130,963) (2,850) 57,229 8,701 (9,635) - (8) 56,287 (12,189) 44,098 117 (3,005) 570 (2,318) 7,776 - (152) (1,556) 6,068 3,750 47,848 44,768 (670) 48,499 (651) 0.036 175,968 5,618 (126,137) (70,775) (15,326) 5,070 (6,249) (6,027) 19 (22,513) 1,912 (20,601) 50,562 1,699 (10,253) 42,008 (6,488) 6,027 650 6 195 42,203 21,602 (21,581) 980 19,686 1,916 (0.017) The accompanying notes are an integral part of these Consolidated Financial Statements 6 283 APPEndiCES to thE AnnuAl REPoR t ifRS ConSolid AtEd finAnCi Al StAtEmEnt S 22 22 22 6 9 8 22 22 23 24 284 PJSC “FGC UES” Consolidated Statement of Cash Flows (in millions of Russian Rouble unless otherwise stated) CASH FLOWS FROM OPERATING ACTIVITIES: Profit / (loss) before income tax Adjustments to reconcile profit / (loss) before income tax to net cash provided by operations Depreciation of property, plant and equipment Loss / (gain) on disposal of property, plant and equipment Amortisation of intangible assets Impairment and revaluation loss of property, plant and equipment, net Impairment of available-for-sale investments Share of result of associates Accrual of allowance for doubtful debtors Share-based compensation Finance income Finance costs Other non-cash operating income Operating cash flows before working capital changes and income tax paid Working capital changes: Increase in accounts receivable and prepayments Increase in inventories Decrease / (increase) in other non-current assets Increase / (decrease) in accounts payable and accrued charges Decrease in retirement benefit obligations Income tax received Net cash generated by operating activities CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment Proceeds from disposal of property, plant and equipment Purchase of intangible assets Redemption of promissory notes Investment in bank deposits Redemption of bank deposits Dividends received Purchase of subsidiary Loans given Sale of subsidiary Interest received Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from non-current borrowings Repayment of current and non-current borrowings Repayment of lease Dividends paid Interest paid Government grants received Net cash used in financing activities Net (decrease) / increase in cash and cash equivalents Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period 11 11 Notes Year ended 31 December 2015 Year ended 31 December 2014 56,287 (22,513) 39,447 3,699 1,481 2,850 - 8 7,063 - (8,701) 9,635 (74) 111,695 (12,824) (5,607) 387 6,299 (2,833) 906 98,023 (75,604) 1,980 (948) 667 (30,422) 337 21 (293) (1,000) 568 7,452 (97,242) 40,099 (23,210) (150) (840) (30,572) - (14,673) (13,892) 42,068 28,176 43,365 (429) 3,773 70,775 6,027 (19) 2,887 6 (5,070) 6,249 (78) 104,973 (7,946) (2,430) (69) (1,185) (330) - 93,013 (76,899) 3,525 (830) 2,923 (688) 39,573 1 - - - 4,336 (28,059) 1 (24,582) (150) (436) (22,279) 2,933 (44,513) 20,441 21,627 42,068 7 The accompanying notes on are an integral part of these Consolidated Financial Statements 4 9 1 2 2 , 6 ) 3 1 4 , 2 ( ) 2 5 1 ( 0 5 7 , 3 8 4 8 , 7 4 ) 3 3 8 ( ) 3 3 8 ( ) 6 5 1 ( ) 2 5 4 ( ) 8 0 6 ( 8 3 6 , 9 1 6 - - - 9 1 9 1 ) 1 5 6 ( ) 1 ( ) 1 ( 8 5 ) 2 5 4 ( ) 4 9 3 ( ) 5 7 ( 8 5 7 1 2 2 , 6 ) 3 1 4 , 2 ( ) 2 5 1 ( 1 3 7 , 3 9 9 4 , 8 4 ) 2 3 8 ( ) 2 3 8 ( - ) 4 1 2 ( ) 4 1 2 ( - - - - 8 6 7 , 4 4 ) 2 3 8 ( ) 2 3 8 ( 5 3 5 1 2 3 ) 4 1 2 ( - 5 7 1 2 2 , 6 ) 3 1 4 , 2 ( ) 2 5 1 ( 1 3 7 , 3 1 3 7 , 3 - - - ) 5 3 5 ( ) 5 3 5 ( - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 3 1 7 , 9 1 6 ) 0 8 9 , 2 5 2 ( , 8 7 5 9 2 2 ) 9 1 7 , 4 ( 1 0 5 0 1 , , 3 3 3 7 3 6 285 8 9 0 , 4 4 ) 0 7 6 ( 8 6 7 , 4 4 8 6 7 , 4 4 l a t o T y t i u q e - n o N t s e r e t n i g n i l l o r t n o c - u m u c c A l a t o T t i c i f e d d e t a l s e v r e s e R s e r a h s y r u s a e r T e r a h S m u i m e r p S E U C G F f o s r e d l o h e r a h s o t e l b a t u b i r t t A 1 3 2 , 3 7 5 1 7 9 0 6 2 , 2 7 5 ) 7 3 2 , 7 9 2 ( , 2 8 3 6 2 2 ) 9 1 7 , 4 ( 1 0 5 0 1 , e r a h S l a t i p a c , 3 3 3 7 3 6 s e t o N 5 1 5 1 , 9 8 1 , 5 1 5 1 , 8 x a t e m o c n i d e t a l e r f o t e n , ) s s o l ( / e m o c n i e v i s n e h e r p m o c r e h t O t n e m p i u q e d n a t n a l p , y t r e p o r p r o f e v r e s e r n o i t a u l a v e r n i e g n a h C s t n e m t s e v n i e l a s - r o f - e l b a l i a v a f o e u l a v r i a f n i e g n a h C s n o i t a g i l b o t i f e n e b t n e m e r i t e r f o s t n e m e r u s a e m e R e c n e r e f f i d n o i t a l s n a r t y c n e r r u c n g i e r o F e m o c n i e v i s n e h e r p m o c r e h t o l a t o T n i y l t c e r i d d e d r o c e r S E U C G F f o s r e d l o h e r a h s h t i w s n o i t c a s n a r T d o i r e p e h t r o f e m o c n i e v i s n e h e r p m o c l a t o T S E U C G F f o s r e d l o h e r a h s h t i w s n o i t c a s n a r t l a t o T d e r a l c e d s d n e d i v i D y t i u q e y r a i d i s b u s f o n o i t i s i u q c A p i h s r e n w o n i s e g n a h C y r a i d i s b u s f o l a s o p s i D p i h s r e n w o n i s e g n a h c l a t o T 5 1 0 2 r e b m e c e D 1 3 t a s A ) d e t a t s e s i w r e h t o s s e l n u e l b u o R n a i s s u R f o s n o i l l i m n i ( y t i u q E n i s e g n a h C f o t n e m e t a t S d e t a d i l o s n o C ” S E U C G F “ C S J P d o i r e p e h t r o f e m o c n i e v i s n e h e r p m o c l a t o T 5 1 0 2 y r a u n a J 1 t a s A d o i r e p e h t r o f t i f o r P APPEndiCES to thE AnnuAl REPoR t ifRS ConSolid AtEd finAnCi Al StAtEmEnt S l a t o T y t i u q e 7 9 2 , 8 4 5 ) 1 0 6 , 0 2 ( 0 5 4 , 0 4 ) 6 7 2 , 5 ( 1 2 8 , 4 8 5 5 , 1 0 5 6 3 0 2 , 2 4 2 0 6 , 1 2 2 6 7 , 3 6 ) 6 3 4 ( 2 3 3 , 3 1 3 2 , 3 7 5 9 286 ) 2 4 9 ( 9 3 2 , 9 4 5 ) 4 2 0 , 5 7 2 ( , 6 1 9 4 8 1 ) 5 2 7 , 4 ( 1 0 5 0 1 , , 1 7 5 3 3 6 - n o N t s e r e t n i g n i l l o r t n o c S E U C G F f o s r e d l o h e r a h s o t e l b a t u b i r t t A - u m u c c A l a t o T t i c i f e d d e t a l s e v r e s e R s e r a h s y r u s a e r T e r a h S m u i m e r p l a t i p a c e r a h S s e t o N 0 8 9 6 3 9 - - - 6 3 9 6 1 9 , 1 - - ) 3 ( ) 3 ( 1 7 9 ) 1 8 5 , 1 2 ( ) 1 8 5 , 1 2 ( - 4 1 5 , 9 3 ) 6 7 2 , 5 ( 1 2 8 , 4 8 5 5 , 1 0 5 6 7 6 2 , 1 4 6 8 6 , 9 1 2 6 7 , 3 6 ) 3 3 4 ( 5 3 3 , 3 - - - - ) 9 9 1 ( ) 9 9 1 ( ) 0 8 7 , 1 2 ( - - ) 3 3 4 ( ) 3 3 4 ( 3 1 7 9 3 , ) 6 7 2 , 5 ( 1 2 8 , 4 8 5 5 , 1 0 5 6 6 6 4 1 4 , 6 6 4 1 4 , - - - - - - - - - - - - - 6 - 6 - - - - - - - - - - - - - - - - - - - - - - 2 6 7 , 3 2 6 7 , 3 5 1 S E U C G F f o s r e d l o h e r a h s h t i w s n o i t c a s n a r t l a t o T n o i t a s n e p m o c d e s a b - e r a h S l a t i p a c e r a h s f o e u s s I d e r a l c e d s d n e d i v i D y t i u q e 5 1 5 1 , 9 5 1 , 9 8 1 , 5 1 5 1 , 8 s s o l r o t i f o r p o t d e l c y c e r s t n e m t s e v n i e l a s - r o f - e l b a l i a v a f o t n e m r i a p m I x a t e m o c n i d e t a l e r f o t e n , ) s s o l ( / e m o c n i e v i s n e h e r p m o c r e h t O t n e m p i u q e d n a t n a l p , y t r e p o r p r o f e v r e s e r n o i t a u l a v e r n i e g n a h C s t n e m t s e v n i e l a s - r o f - e l b a l i a v a f o e u l a v r i a f n i e g n a h C s n o i t a g i l b o t i f e n e b t n e m e r i t e r f o s t n e m e r u s a e m e R e c n e r e f f i d n o i t a l s n a r t y c n e r r u c n g i e r o F e m o c n i e v i s n e h e r p m o c r e h t o l a t o T n i y l t c e r i d d e d r o c e r S E U C G F f o s r e d l o h e r a h s h t i w s n o i t c a s n a r T d o i r e p e h t r o f e m o c n i e v i s n e h e r p m o c l a t o T 0 6 2 , 2 7 5 ) 7 3 2 , 7 9 2 ( , 2 8 3 6 2 2 ) 9 1 7 , 4 ( 1 0 5 0 1 , , 3 3 3 7 3 6 4 1 0 2 r e b m e c e D 1 3 t a s A ) d e t a t s e s i w r e h t o s s e l n u e l b u o R n a i s s u R f o s n o i l l i m n i ( y t i u q E n i s e g n a h C f o t n e m e t a t S d e t a d i l o s n o C ” S E U C G F “ C S J P d o i r e p e h t r o f e m o c n i e v i s n e h e r p m o c l a t o T 4 1 0 2 y r a u n a J 1 t a s A d o i r e p e h t r o f s s o L PJSC “FGC UES” Notes to the Consolidated Financial Statements (in millions of Russian Rouble unless otherwise stated) Note 1. PJSC “FGC UES” and its operations Public Joint-Stock Company “Federal Grid Company of Unified Energy System” (“FGC UES” or the “Company”) was established in June 2002 for the purpose of operating and managing the electricity transmission grid infrastructure of the Russian Unified National Electric Grid (the “UNEG”). FGC UES and its subsidiaries (the “Group”) act as the natural monopoly operator for the UNEG. The Group’s principal operating activities consist of providing electricity transmission services, providing connection to the electricity grid, maintaining the electricity grid system, technical supervision of grid facilities and investment activities in the development of the UNEG. The majority of the Group’s revenues are generated via tariffs for electricity transmission, which are approved by the Russian Federal Antimonopoly Service (the “FAS” – legal successor of the Federal Tariff Service, abolished on 21 July 2015) based on the Regulatory Asset Base (“RAB”) regulation. FGC UES's main customers are distribution grid companies (“IDGCs”), certain large commercial end customers and retail electricity supply companies. On 14 June 2013 the Government of the Russian Federation (the “RF”) transferred its stake in FGC UES to PJSC “Russian Grids” (former OJSC “IDGC Holding”), the holding company of an electricity distribution group, controlled by the Government of the RF. As at 31 December 2015, FGC UES was 80.13% owned and controlled by PJSC “Russian Grids”. The remaining shares are traded on Moscow Interbank Currency Exchange and as Global Depository Receipts on the London Stock Exchange. The registered office of the Company is located at 5A Akademika Chelomeya Street, Moscow 117630, Russian Federation. Relationships with the state. The Government of the RF is the ultimate controlling party of FGC UES. The Government directly affects the Group's operations via regulation over tariff by the FAS and its investment program is subject to approval by both the FAS and the Ministry of Energy. Ultimately the Government supports the Group due to its strategic position in the Russian Federation. The Government's economic, social and other policies could have a material impact on the Group’s operations. Business environment. The Group’s operations are primarily located in the Russian Federation. Consequently, the Group is exposed to the economic and financial markets of the Russian Federation which display characteristics of an emerging market. The legal, tax and regulatory frameworks continue development, but are subject to varying interpretations and frequent changes which together with other legal and fiscal impediments contribute to the challenges faced by entities operating in the Russian Federation. (Note 26). The conflict in Ukraine and related events has increased the perceived risks of doing business in the Russian Federation. The imposition of economic sanctions on Russian individuals and legal entities by the European Union, the United States of America, Japan, Canada, Australia and others, as well as retaliatory sanctions imposed by the Russian government, has resulted in increased economic uncertainty including more volatile equity markets, a depreciation of the Russian Ruble, a reduction in both local and foreign direct investment inflows and a significant tightening in the availability of credit. In particular, some Russian entities may be experiencing difficulties in accessing international equity and debt markets and may become increasingly dependent on Russian state banks to finance their operations. The longer term effects of recently implemented sanctions, as well as the threat of additional future sanctions, are difficult to determine. The consolidated financial statements (“Consolidated Financial Statements”) reflect management’s assessment of the impact of the Russian business environment on the operations and the financial position of the Group. The future business environment may differ from management’s assessment. Note 2. Basis of preparation Statement of compliance. These Consolidated Financial Statements have been prepared in accordance with, and comply with, International Financial Reporting Standards (“IFRS”) and its interpretations as adopted by the European Union (the “EU”). Each enterprise of the Group individually maintains its own books of accounts and prepares its statutory financial statements in accordance with the Regulations on Accounting and Reporting of the RF (“RAR”). The accompanying Consolidated Financial Statements are based on the statutory records and adjusted and reclassified for the purpose of fair presentation in accordance with IFRS. Functional and presentation currency. The Russian Rouble (“RR”) is functional currency for FGC UES and the currency in which these Consolidated Financial Statements are presented. All financial information presented in RR have been rounded to the nearest million, unless otherwise stated. New accounting developments not yet adopted. A number of new Standards, amendments to Standards and Interpretations are not yet effective as at 31 December 2015, and have not been applied in preparing these consolidated financial statements. Of these pronouncements, potentially the following will have an impact on the Group’s operations. The Group plans to adopt these pronouncements when they become effective. 10 287 APPEndiCES to thE AnnuAl REPoR t ifRS ConSolid AtEd finAnCi Al StAtEmEnt S 288 PJSC “FGC UES” Notes to the Consolidated Financial Statements (in millions of Russian Rouble unless otherwise stated) Note 2. Basis of preparation (continued) New or amended standard Summary of the requirements IFRS 9 Financial Instruments IFRS 15 Revenue from Contracts with Customers IFRS 16 Leases IFRS 9, published in July 2014, replaces the existing guidance in IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 includes revised guidance on the classification and measurement of financial instruments, including a new expected credit loss model for calculating impairment on financial assets, and the new general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financial instruments from IAS 39. IFRS 9 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted. IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces existing revenue recognition guidance, including IAS 18 Revenue, IAS 11 Construction Contracts and IFRIC 13 Customer Loyalty Programmes. The core principle of the new standard is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard results in enhanced disclosures about revenue, provides guidance for transactions that were not previously addressed comprehensively and improves guidance for multiple-element arrangements. IFRS 15 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted. IFRS 16 replaces the existing lease accounting guidance in IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a lease, SIC-15 Operating Leases – Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. It eliminates the current dual accounting model for lessees, which distinguishes between on-balance sheet finance leases and off-balance sheet operating leases. Instead, there is a single, on-balance sheet accounting model that is similar to current finance lease accounting. Lessor accounting remains similar to current practice – i.e. lessors continue to classify leases as finance and operating leases. IFRS 16 is effective for annual reporting periods beginning on or after 1 January 2019, early adoption is permitted if IFRS 15 Revenue from Contracts with Customers is also adopted Possible impact on consolidated financial statements The Group is assessing the potential impact on its consolidated financial statements resulting from the application of IFRS 9. The Group is assessing the potential impact on its consolidated financial statements resulting from the application of IFRS 15. The Group is assessing the potential impact on its consolidated financial statements resulting from the application of IFRS 16 The following new or amended standards are not expected to have a significant impact of the Group’s consolidated financial statements. • IFRS 14 Regulatory Deferral Accounts. • Accounting for Acquisitions of Interests in Joint Operations (Amendments to IFRS 11). • Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to IAS 16 and IAS 38). • Equity Method in Separate Financial Statements (Amendments to IAS 27). PJSC “FGC UES” Notes to the Consolidated Financial Statements (in millions of Russian Rouble unless otherwise stated) Note 2. Basis of preparation (continued) • Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28). • Annual Improvements to IFRSs 2012–2014 Cycle – various standards. • Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28). • Disclosure Initiative (Amendments to IAS 1). Critical accounting estimates and assumptions Management makes a number of estimates and assumptions that are continually evaluated and may differ from the related actual results. The estimates and assumptions that have the most significant effect on the amounts recognised in these Consolidated Financial Statements and estimates that can cause a significant adjustment to the carrying amount of assets and liabilities within the next financial year include: Carrying value of property, plant and equipment (Note 6). The Group uses the revaluation model for property, plant and equipment. The last external valuation was performed as at 31 December 2014. As at 31 December 2015 there have been no significant changes in the income projections for the Group. Based on depreciated replacement cost projections management concluded that the fair value of Property, plant and equipment does not differ materially from its carrying amount. No valuation has been performed. Carrying value of investment in PJSC “INTER RAO UES” (Note 9). As at 31 December 2015 the Group owns 18.57% of the voting shares of PJSC “INTER RAO UES” (“INTER RAO”). Management has assessed the level of influence that the Group has on INTER RAO, taking into account its limitation to obtain any additional financial information which may be an indicator of such influence, and determined that it does not have significant influence. Consequently, this investment is classified as available-for-sale investment. Decline in the fair value of available-for-sale equity investments (Note 9). The Group determines that available- for-sale equity investments are impaired when there has been a significant or prolonged decline in the fair value below its cost. The determination of what is significant or prolonged requires judgement. In making this judgement, the Group evaluates, among other factors, the volatility in share price and trend in share price movements during the period of analysis. Tax contingencies. Russian tax legislation is subject to varying interpretations and changes, which can occur frequently. Where the Group management believes it is probable that their interpretation of the relevant legislation and the Group’s tax positions cannot be sustained, an appropriate amount is accrued in the consolidated financial statements. The possible tax claims in respect of certain open tax positions of the Group companies are disclosed in Note 26. Measurement of fair values. When measuring the fair value of an asset or a liability, the Group uses market observable data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows. • • • Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). If the inputs used to measure the fair value of an asset or a liability might be categorised in different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred. Further information about the assumptions made in measuring fair values is included in the following notes: • Note 6 – Property, plant and equipment; • Note 10 – Long-term receivables and other non-current and other current assets; • Note 17 – Non-current debt; • Note 27 – Financial instruments and financial risk. 289 11 12 APPEndiCES to thE AnnuAl REPoR t ifRS ConSolid AtEd finAnCi Al StAtEmEnt S 290 PJSC “FGC UES” Notes to the Consolidated Financial Statements (in millions of Russian Rouble unless otherwise stated) Note 3. Summary of significant accounting policies The accounting policies set out below have been applied consistently to all periods presented in these Financial Statements, and have been applied consistently by Group entities. Certain comparative amounts have been reclassified to conform with the current year’s presentation. Principles of consolidation. Subsidiaries are entities (including special purpose entities) controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the Group. Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance. Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated. Purchases of subsidiaries from parties under common control. Purchases of subsidiaries from parties under common control are accounted for using the predecessor values method. Under this method the consolidated financial statements of the combined entity are presented as if the businesses had been combined prospectively from the date on which business combination between entities under common control occurred. The assets and liabilities of the subsidiary transferred under common control are at the predecessor entity’s carrying amounts. The predecessor entity is considered to be the highest reporting entity in which the subsidiary’s IFRS financial information was consolidated. Related goodwill inherent in the predecessor entity’s original acquisitions is also recorded in the consolidated financial statements. Any consideration for the acquisition is accounted for in the consolidated financial statements as an adjustment to retained earnings within equity. Associates and joint ventures. Associates and joint ventures are entities over which the Company has significant influence (directly or indirectly), but not control, generally accompanying a shareholding of between 20 and 50 percent of the voting rights. Investments in associates and joint ventures are accounted for using the equity method of accounting and are initially recognised at cost. The carrying amount of associates and joint ventures includes goodwill identified on acquisition and is reduced by accumulated impairment losses, if any. The Group discontinues the use of the equity method of accounting from the date when it ceases to have significant influence in the associate. The Group’s share of the post-acquisition profits or losses of associates and joint ventures is recorded in profit or loss, and its share of other comprehensive income of associates and joint ventures is recognised in the Group’s other comprehensive income. When the Group’s share of losses in an associate and joint ventures equals or exceeds its interest in the associate and joint ventures, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associates and joint ventures. Unrealised gains on transactions between the Group and its associates and joint ventures are eliminated to the extent of the Group’s interest in the associates and joint ventures; unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates and joint ventures have been changed where necessary to ensure consistency with the policies adopted by the Group. Classification of financial assets. The Group holds financial assets of the following measurement categories: loans and receivables and available-for-sale financial assets. Loans and receivables are unquoted non-derivative financial assets with fixed or determinable payments other than those that the Group intends to sell in the near term. All other financial assets are included in the available-for-sale category, which includes investment securities which the Group intends to hold for an indefinite period of time and which may be sold in response to needs for liquidity or changes in interest rates, exchange rates or equity prices. Classification of financial liabilities. The Group classifies non-derivative financial liabilities into the other financial liabilities category. These financial liabilities are carried at amortised cost using the effective interest method. Other financial liabilities comprise loans and borrowings, bank overdrafts, and trade and other payables. PJSC “FGC UES” Notes to the Consolidated Financial Statements (in millions of Russian Rouble unless otherwise stated) Note 3. Summary of significant accounting policies (continued) Initial recognition of financial instruments. The Group’s financial instruments are initially recorded at fair value plus transaction costs. Fair value at initial recognition is best evidenced by the transaction price. A gain or loss on initial recognition is only recorded if there is a difference between fair value and transaction price which can be evidenced by other observable current market transactions in the same instrument or by a valuation technique whose inputs include only data from observable markets. Derecognition of financial assets. The Group derecognises financial assets when (a) the assets are redeemed or the rights to cash flows from the assets otherwise expired or (b) the Group has transferred the rights to the cash flows from the financial assets or entered into a qualifying pass-through arrangement while (i) also transferring substantially all the risks and rewards of ownership of the assets or (ii) neither transferring nor retaining substantially all risks and rewards of ownership but not retaining control. Control is retained if the counterparty does not have the practical ability to sell the asset in its entirety to an unrelated third party without needing to impose additional restrictions on the sale. Available-for-sale investments. The Group classifies investments as available-for-sale at the time of purchase. Available-for-sale investments are carried at fair value. Dividends on available-for-sale equity instruments are recognised in profit or loss when the Group’s right to receive payment is established and it is probable that the dividends will be collected. All other elements of changes in the fair value are recognised in other comprehensive income until the investment is derecognised or impaired at which time the cumulative gain or loss is reclassified from other comprehensive income to profit or loss for the period. Impairment losses are recognised in profit or loss when incurred as a result of one or more events (“loss events”) that occurred after the initial recognition of available-for-sale investments. Any change in fair value of equity instruments is initially accumulated in other comprehensive income. A significant or prolonged decline in the fair value of an equity security below its cost is an indicator that it is impaired. If asset is considered to be impaired at the reporting date, the cumulative impairment loss (measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that asset previously recognised in profit or loss) is removed from other comprehensive income and recognised in profit or loss. Impairment losses on equity instruments are not reversed through profit or loss. Foreign currency. Monetary assets and liabilities, which are held by the Group entities and denominated in foreign currencies at the end of the reporting period, are translated into Russian Roubles at the official exchange rates prevailing at that date. Foreign currency transactions are accounted for at the exchange rates prevailing at the date of the transaction. Gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. As at 31 December 2015, the official rate of exchange as determined by the Central Bank of the Russian Federation, between the Russian Rouble and the US Dollar was RR 72.88:US Dollar 1.00 (31 December 2014: RR 56.26:US Dollar 1.00); between the Russian Rouble and Euro: RR 79.70:Euro 1.00 (31 December 2014: RR 68.34:Euro 1.00). Property, plant and equipment. Property, plant and equipment are stated at revalued amounts less any subsequent accumulated depreciation and any subsequent accumulated impairment losses, where required. Property, plant and equipment are subject to revaluation on a regular basis to ensure that the carrying amount does not differ materially from that which is determined using the fair value at the end of the reporting period. The frequency of revaluation depends upon the movements in the fair values of the assets being revalued. Increases in the carrying amount arising on revaluation of property, plant and equipment are credited to other comprehensive income and increase the revaluation reserve in equity; the increase is recognised in current period profits to the extent that it reverses previously recognised impairment loss of the same assets. Decreases that offset previous increases of the same asset are recognised in other comprehensive income and decrease the previously recognised revaluation reserve in equity; all other decreases are recognised in profit or loss for the period. Any accumulated depreciation at the date of revaluation is eliminated against the gross amount of the assets, and the net amount is restated to the revalued amount of the asset. The revaluation reserve in respect of an item of property, plant and equipment is transferred directly to retained earnings when the item is derecognised (on the retirement or disposal of the asset). Renewals and improvements are capitalised and the assets replaced are retired. The cost of minor repair and maintenance are expensed as incurred. Gains and losses arising from the retirement of property, plant and equipment are included in profit or loss as incurred. 291 13 14 APPEndiCES to thE AnnuAl REPoR t ifRS ConSolid AtEd finAnCi Al StAtEmEnt S 292 PJSC “FGC UES” Notes to the Consolidated Financial Statements (in millions of Russian Rouble unless otherwise stated) Note 3. Summary of significant accounting policies (continued) Depreciation on property, plant and equipment is calculated on a straight-line basis over the estimated useful life of the asset when it is available for use. The useful lives are reviewed at each financial year end and, if expectations differ from previous estimates, the changes are recognised prospectively. The useful lives, in years, of assets by type of facility are as follows: Buildings Electric power transmission grids Substations Other Useful lives 50-80 20-50 15-30 5-50 At each reporting date the management assesses whether there is any indication of impairment of property, plant and equipment. If any such indication exists, the management estimates the recoverable amount, which is determined as the higher of an asset’s fair value less costs to sell and its value in use. The carrying amount is reduced to the recoverable amount and the impairment loss is recognised as current period loss to the extent it exceeds the previous revaluation surplus in equity on the same asset. An impairment loss recognised for an asset in prior years is reversed if there has been a change in the estimates used to determine the asset’s value in use or fair value less costs to sell. Intangible assets. All of the Group’s intangible assets have definite useful lives and primarily include capitalised computer software and licences. Acquired computer software and licences are capitalised on the basis of the costs incurred to acquire and bring them to use. Costs that are directly associated with the production of identifiable and unique software products controlled by the Group, and that will probably generate economic benefits, are recognised as intangible assets. After initial recognition, intangible assets are carried at cost less accumulated amortisation and any accumulated impairment losses. Amortisation of intangible assets is calculated on a straight-line basis over the useful lives. At each reporting date the management assesses whether there is any indication of impairment of intangible assets. If impaired, the carrying amount of intangible assets is written down to the higher of value in use and fair value less cost to sell. Research costs are recognised as an expense as incurred. Costs incurred on development projects are recognised as intangible assets only when the Group can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete and the ability to measure reliably the expenditure incurred during the development. Other development expenditures are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. The carrying value of development costs is reviewed for impairment annually. Cash and cash equivalents. Cash comprises cash in hand and cash deposited on demand at banks. Cash equivalents comprise short-term highly liquid investments that are readily convertible into cash and have a maturity of three months or less from the date of origination and are subject to insignificant changes in value. Cash and cash equivalents are carried at amortised cost using the effective interest method. Bank deposits. Bank deposits comprise cash deposited at banks with a maturity date of more than three months from the acquisition date. Bank deposits are carried at amortised cost using the effective interest method. Promissory notes. Promissory notes are financial assets with fixed or determinable cash flows recognised initially at fair value and subsequently carried at amortised cost using the effective interest method. Trade and other receivables. Trade and other receivables are recorded inclusive of value added tax (VAT). Trade and other receivables are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method. Impairment of financial assets carried at amortised cost. Impairment losses are recognised in profit or loss when incurred as a result of one or more events (“loss events”) that occurred after the initial recognition of the financial asset and which have an impact on the amount or timing of the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. The primary factors that the Group considers in determining whether a financial asset is impaired are its overdue status and realisability of related collateral, if any. PJSC “FGC UES” Notes to the Consolidated Financial Statements (in millions of Russian Rouble unless otherwise stated) Note 3. Summary of significant accounting policies (continued) If the terms of an impaired financial asset held at amortised cost are renegotiated or otherwise modified because of financial difficulties of the counterparty, impairment is measured using the original effective interest rate before the modification of terms. Impairment losses are always recognised through an allowance account to write down the asset’s carrying amount to the present value of expected cash flows (which exclude future credit losses that have not been incurred) discounted at the original effective interest rate of the asset. The calculation of the present value of the estimated future cash flows of a collateralised financial asset reflects the cash flows that may result from foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is probable. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the previously recognised impairment loss is reversed by adjusting the allowance account in profit or loss. Uncollectible assets are written off against the related impairment loss provision after all the necessary procedures to recover the asset have been completed and the amount of the loss has been determined. Subsequent recoveries of amounts previously written off are credited to impairment loss account in profit or loss. Prepayments. Prepayments are carried at cost less provision for impairment. A prepayment is classified as non- current when the goods or services relating to the prepayment are expected to be obtained after one year, or when the prepayment relates to an asset which will itself be classified as non-current upon initial recognition. If there is an indication that the assets, goods or services relating to a prepayment will not be received, the carrying value of the prepayment is written down accordingly and a corresponding impairment loss is recognised in profit or loss. Inventories. Inventories mostly include repair materials and spare parts for transmission assets. Inventories are valued at the lower of cost and net realisable value. Cost of inventory is determined on the weighted average basis. Net realisable value is the estimated selling price in the ordinary course of business, less selling expenses. Value added tax. Output value added tax related to sales is payable to tax authorities on the earlier of (a) collection of receivables from customers or (b) delivery of goods or services to customers. Input VAT is generally recoverable against output VAT upon receipt of the VAT invoice. The tax authorities permit the settlement of VAT on a net basis. VAT related to sales and purchases is recognised in the consolidated statement of financial position on a net basis and disclosed as an asset or liability. Where provision has been made for impairment of receivables, impairment loss is recorded for the gross amount of the debtor, including VAT. Income taxes. Income taxes have been provided for in these Consolidated Financial Statements in accordance with Russian legislation enacted or substantively enacted by the end of the reporting period. The income tax charge comprises current tax and deferred tax and is recognised in the profit or loss unless it relates to transactions that are recognised, in the same or a different period, in other comprehensive income. Current tax is the amount expected to be paid to or recovered from the taxation authorities in respect of taxable profits/losses for the current and prior periods. Taxes other than on income are recorded as operating expenses. Deferred income tax is provided using the balance sheet liability method for tax loss carry forwards and temporary differences arising between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. In accordance with the initial recognition exemption, deferred taxes are not recorded for temporary differences on initial recognition of an asset or a liability in a transaction other than a business combination if the transaction, when initially recorded, affects neither accounting nor taxable profit. Deferred tax balances are measured at tax rates enacted or substantively enacted at the end of the reporting period which are expected to apply to the period when the temporary differences will reverse or the tax loss carry forwards will be utilised. Deferred tax assets and liabilities are netted only within the individual companies of the Group. Deferred tax assets for deductible temporary differences and tax loss carry forwards are recorded only to the extent that it is probable that future taxable profit will be available against which the deductions can be utilised. Deferred income tax is provided on post-acquisition retained earnings and other post acquisition movements in reserves of subsidiaries, except where the Group controls the subsidiary’s dividend policy and it is probable that the difference will not reverse through dividends or otherwise in the foreseeable future. 293 15 16 APPEndiCES to thE AnnuAl REPoR t ifRS ConSolid AtEd finAnCi Al StAtEmEnt S 294 PJSC “FGC UES” Notes to the Consolidated Financial Statements (in millions of Russian Rouble unless otherwise stated) Note 3. Summary of significant accounting policies (continued) The Group's uncertain tax positions are reassessed by management at each end of the reporting period. Liabilities are recorded for income tax positions that are determined by management as more likely than not to result in additional taxes being levied if the positions were to be challenged by the tax authorities. The assessment is based on the interpretation of tax laws that have been enacted or substantively enacted by the end of the reporting period and any known court or other rulings on such issues. Liabilities for penalties, interest and taxes other than on income are recognised based on management’s best estimate of the expenditure required to settle the obligations at the end of the reporting period. Trade accounts payable and accrued charges. Trade accounts payable are stated inclusive of value added tax. Trade payables are accrued when the counterparty performed its obligations under the contract. Accounts payable are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method. Advances received. Advances received are primarily a deferred income for the future connection services and are stated at nominal amount. Debt. Debt is recognised initially at its fair value plus transaction costs that are directly attributable to its issue. Fair value is determined using the prevailing market rates of interest for similar instruments, if significantly different from the transaction price. In subsequent periods, debt is stated at amortised cost using the effective interest method; any difference between the fair value of the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss as an interest expense over the period of the debt obligation. Borrowing costs are expensed in the period in which they are incurred if not related to purchase or construction of qualifying assets. Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial time to get ready for intended use or sale (qualifying assets) are capitalised as part of the costs of those assets. The commencement date for capitalisation is when the Group (a) incurs expenditures for the qualifying asset; (b) incurs borrowing costs; and (c) undertakes activities that are necessary to prepare the asset for its intended use or sale. Capitalisation of borrowing costs continues up to the date when the assets are substantially ready for their use or sale. The Group capitalises borrowing costs that could have been avoided if it had not made capital expenditure on qualifying assets. Borrowing costs capitalised are calculated at the Group’s average funding cost (the weighted average interest cost is applied to the expenditures on the qualifying assets), except to the extent that funds are borrowed specifically for the purpose of obtaining a qualifying asset. Where this occurs, actual borrowing costs incurred less any investment income on the temporary investment of those borrowings are capitalised. Pension and post-employment benefits. In the normal course of business the Group makes mandatory social security contributions to the Pension Fund of the RF on behalf of its employees. These contributions are expensed when incurred and included in employee benefit expenses and payroll taxes in profit or loss. In addition, the Group maintains a number of post-employment and other long-term benefit plans which are defined benefit in nature. These plans include life pension, lump sum upon retirement, financial support after retirement, jubilee and death benefits and cover majority of the Group’s employees. Under the pension plan amount of pension benefits that an employee will receive after retirement dependents on his date of birth, number of years of service, position, salary and presence of awards. The Group settles its liability to provide life pension through a non-state pension fund. However, the assets held in the non-state pension fund do not meet definition of plan assets in accordance with IAS 19(2011). These assets are accounted for as other non-current assets. Other benefits, apart from life pension payable via the non-state pension fund, are provided when they are due directly by the Group. The liability recognised in the consolidated statement of financial position in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets, together with adjustments for unrecognised past-service costs. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of government bonds that have terms to maturity approximating the terms of the related pension liabilities. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. Past-service costs are recognised immediately in income. PJSC “FGC UES” Notes to the Consolidated Financial Statements (in millions of Russian Rouble unless otherwise stated) Note 3. Summary of significant accounting policies (continued) Operating leases. Where the Group is a lessee in a lease which does not transfer substantially all the risk and rewards incidental to ownership from the lessor to the Group, the total lease payments, including those on expected termination, are charged to profit or loss on a straight-line basis over the period of the lease. Finance lease liabilities. Where the Group is a lessee in a lease which transferred substantially all the risks and rewards incidental to ownership to the Group, the assets leased are capitalised in property, plant and equipment at the commencement of the lease at the lower of the fair value of the leased asset and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of future finance charges, are included in debts. The interest cost is charged to profit or loss over the lease period using the effective interest method. The assets acquired under finance leases are depreciated over their useful life or the shorter lease term if the Group is not reasonably certain that it will obtain ownership by the end of the lease term. Treasury shares. Treasury shares are stated at weighted average cost. Any gains or losses arising on the disposal of treasury shares are recorded directly in shareholders’ equity. Dividends. Dividends are recognised as a liability and deducted from equity at the end of the reporting period only if they are declared (approved by shareholders) before or on the end of the reporting period. Dividends are disclosed when they are declared after the end of the reporting period, but before the consolidated financial statements are authorised for issue. Non-controlling interest. Non-controlling interest represents minority’s proportionate share of the equity and comprehensive income of the Group’s subsidiaries. This has been calculated based upon the non-controlling interests’ ownership percentage of these subsidiaries. Specific rights on liquidation for preference shareholders of subsidiaries are included in the calculation of non-controlling interests. The Group uses the ‘economic entity’ approach to the recognition of non-controlling interest. Any gains or losses resulting from the purchases and sales of the non-controlling interests are recognised in the consolidated statement of changes in equity. Revenue recognition. Revenue amounts are presented exclusive of value added tax. Revenue from rendering the electricity transmission services is recognised in the period when the services are provided. Revenue from sales of electricity is recognised on the delivery of electricity. Revenue from connection services represents a non-refundable fee for connecting the customer to the electricity grid network and is recognised when the customer is connected to the grid network. Revenue is measured at the fair value of the consideration received or receivable. Revenue from construction services are recognised in the accounting period in which the services are rendered, by reference to stage of completion of the specific transaction assessed on the basis of the actual service provided as a proportion of the total services to be provided. Government grants. Government grants are recognised initially as deferred income at fair value when there is reasonable assurance that they will be received and that the Group will comply with the conditions associated with the grant and are then recognised in profit or loss as other income on a systematic basis over the useful life of the asset. Grants that compensate the Group for expenses incurred are recognised in profit or loss as other income on a systematic basis in the same periods in which the expenses are recognised. Share capital. Ordinary shares with discretionary dividends are classified as equity upon completion of share issue and registration of the issue in the Federal Financial Markets Service. Any excess of the fair value of consideration received over the par value of shares issued is recorded as share premium in equity. Earnings per share. Earnings per share are determined by dividing the profit or loss attributable to owners of the Company by the weighted average number of participating shares outstanding during the reporting period. 295 17 18 APPEndiCES to thE AnnuAl REPoR t ifRS ConSolid AtEd finAnCi Al StAtEmEnt S 296 PJSC “FGC UES” Notes to the Consolidated Financial Statements (in millions of Russian Rouble unless otherwise stated) Note 4. Principal subsidiaries All subsidiaries are incorporated and operate in the Russian Federation. The principal subsidiaries as at 31 December 2015 and 31 December 2014 are presented below: Name Transmission companies: OJSC “The Kuban trunk grids” OJSC “The Tomsk trunk grids” Other companies OJSC “Nurenergo” OJSC “Mobile gas-turbine electricity plants” OJSC “Research and development centre of FGC UES” OJSC “Dalenergosetproject” OJSC “Specialised electricity transmission service company of the UNEG” JSC “Engineering and construction management centre of Unified Energy System” LLC “Index energetiki – FGC UES” 31 December 2015 31 December 2014 Ownership, % Voting, % Ownership, % Voting, % 49.0 52.0 77.0 100.0 100.0 100.0 100.0 100.0 100.0 49.0 59.9 77.0 100.0 100.0 100.0 100.0 100.0 100.0 49.0 52.0 77.0 100.0 100.0 100.0 49.0 59.9 77.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Transmission companies. OJSC “The Kuban trunk grids” and OJSC “The Tomsk trunk grids” own the UNEG assets which are maintained and operated by the Company. The Group holds 49% of the voting rights in OJSC “Kuban trunk grids”, a fully consolidated subsidiary. The Group controls this entity as it has the power to govern the financial and operating policies of this subsidiary on the basis of a significant shareholding combined with other factors which allow the Group to exercise control, most importantly: FGC UES has appointed the majority or of the members of the Board of Directors, FGC UES is the dominant owner and FGC UES has in substance full control of all aspects of the entity’s assets and operations. OJSC “Nurenergo” performs electricity distribution and sale activity in the Republic of Chechnya. Due to the difficult operating environment in the Republic of Chechnya, OJSC “Nurenergo” has negative net assets. In 2015 the company lost the status of the electricity supplier and stopped performing electricity distribution and sale activities. OJSC “Mobile gas-turbine electricity plants”. The primary activity of the company is generating and sale of electricity provided by mobile gas-turbine electricity plants used in power deficient points of the power system or in peak periods as temporary source of additional capacity. OJSC “Research and development centre of FGC UES” is a research and development project institution in the sphere of electric power. OJSC “Dalenergosetproject” is a grid engineering company. OJSC “Specialised electricity transmission service company of the UNEG”. The main activities of this company are technical inspection, maintenance and regular and emergency repairs of power grids and other electric power facilities of the UNEG. JSC “Engineering and construction management centre of Unified Energy System”. The main activity of this company is functioning as a customer-developer in capital construction projects associated with the reconstruction and technical modernisation of electricity supply facilities and infrastructure. LLC “Index energetiki – FGC UES” (“Index Energetiki”) owns minority shares in PJSC “INTER RAO UES” and PJSC “Russian Grids” (former OJSC “IDGC Holding”). Note 5. Balances and transactions with related parties Government-related entities. In the normal course of business the Group enters into transactions with government-related entities – entities, controlled, jointly controlled or significantly influenced by the Government of the RF. Large portion of the Group's primary activity – transmission services are rendered to government-related entities at the regulated tariffs. The Group borrows funds from government-related banks at the prevailing market rates. Taxes are accrued and settled in accordance with Russian tax legislation. 19 PJSC “FGC UES” Notes to the Consolidated Financial Statements (in millions of Russian Rouble unless otherwise stated) Note 5. Balances and transactions with related parties (continued) During the years ended 31 December 2015 and 31 December 2014 the Group had the following significant transactions with government-related entities: Transmission revenue Electricity sales Connection services Purchased electricity for production needs Year ended 31 December 2015 143,239 3,066 12,046 (7,971) Year ended 31 December 2014 136,232 2,758 1,616 (7,375) Significant balances with government-related entities are presented below: Cash and cash equivalents Bank deposits Long-term accounts receivable Other non-current assets Other current assets Trade receivables 31 December 2015 15,454 16,269 14,229 21 16 31 December 2014 41,474 130 2,627 38 47 (net of allowance for doubtful debtors of RR 7,656 million as at 31 December 2015 and RR 3,236 million as at 31 December 2014) Other receivables (net of allowance for doubtful debtors of RR 1,235 million as at 31 December 2015 and RR 919 million as at 31 December 2014) Available-for-sale investments Advances to construction companies and suppliers of property, plant and equipment (included in construction in progress) Accounts payable to the shareholders of FGC UES Non-current debt Current debt Accounts payable and accrued charges 29,237 2,009 22,271 912 (6) (416) (104) (22,537) 31,778 1,870 14,384 1,119 (8) (519) (141) (21,220) As at 31 December 2015 and 2014 the Group had long-term undrawn committed financing facilities with government-related banks of RR 105,000 million with the interest rates not exceeding 14% and the maturity dates from 2018 to 2026. There were no short-term undrawn committed financing facilities with government-related banks as at 31 December 2015 and 2014. Tax balances and charges are disclosed in Notes 16, 20 and 22. Tax transactions are disclosed in the Consolidated Statement of Comprehensive Income. Directors’ compensation. Compensation is paid to the members of the Management Board for their services in full time management position. The compensation is made up of a contractual salary, non-cash benefits, and a performance bonus depending on results for the period according to Russian statutory financial statements. Also, additional medical coverage is provided to the members of Management Board and their close family members. Fees, compensation or allowances to the members of the Board of Directors for their services in that capacity and for attending Board meetings are paid depending on results for the year. Fees, compensation or allowances, are not paid to the members of the Board of Directors who are government employees. Total remuneration in the form of salary, bonuses and non-cash benefits (social security contributions are not included) provided to the members of the Management Board for the year ended 31 December 2015 and 31 December 2014 was as follows: Short-term compensation, including salary and bonuses Termination benefits Post-employment benefits and other long-term benefits Share-based compensation Total Year ended 31 December 2015 323 23 10 - Year ended 31 December 2014 250 16 12 1 356 279 The amount of the short-term compensation to members of the Management Board represents remuneration accrued during the respective period. No remuneration was provided to the members of the Board of Directors for the years ended 31 December 2015 and 31 December 2014. 20 297 APPEndiCES to thE AnnuAl REPoR t ifRS ConSolid AtEd finAnCi Al StAtEmEnt S PJSC “FGC UES” Notes to the Consolidated Financial Statements (in millions of Russian Rouble unless otherwise stated) Note 6. Property, plant and equipment Buildings Power trans- mission grids Substations Construction in progress Other Total Appraisal value or cost Balance as at 1 January 2015 Acquisition of subsidiaries Additions Transfers Disposals Balance as at 31 December 2015 Including PPE under finance lease 20,145 232 503 1,864 (1,924) 20,820 - Accumulated depreciation and impairment 372,659 - 41 21,772 (1,710) 392,762 - - (15,389) - 39 (15,350) - 222,250 - 122 35,652 (1,495) 256,529 - - (17,541) - 206 (17,335) - 147,765 - 73,523 (63,762) (1,822) 32,210 17 883 4,474 (407) 155,704 37,177 - 1,432 795,029 249 75,072 - (7,358) 862,992 1,432 - - (2,850) - - (6,132) - 145 - (39,447) (2,850) 419 (2,850) (5,987) (41,878) - (72) (72) - (385) - 29 (356) - 20,145 372,659 222,250 147,765 32,210 795,029 20,464 377,412 239,194 152,854 31,190 821,114 Buildings Power trans- mission grids Substations Construction in progress Other Total 20,912 258 3,795 (46) 495,652 433 86,613 (113) 341,136 297 49,018 (1,129) (4,425) (195,619) (187,890) 1,034 3,074 (1,524) (2,933) 20,145 - 14,934 78,719 (59,499) (48,461) 372,659 - 25,379 25,054 (2,032) (27,583) 222,250 - 306,514 108,800 (147,102) (1,745) (84,636) 17,578 408 - 43,829 2,206 7,676 (1,401) (27,852 ) 4,922 6,744 (382) 1,208,043 111,994 - (4,434) (500,422) 63,847 113,999 (63,437) (52,052) (3,532) (134,561) 147,765 32,210 795,029 - 1,432 1,432 298 Balance as at 1 January 2015 Depreciation charge Impairment loss Disposals Balance as at 31 December 2015 Including PPE under finance lease Net book value as at 1 January 2015 Net book value as at 31 December 2015 Appraisal value or cost Balance as at 1 January 2014 Additions Transfers Disposals Elimination of accumulated depreciation and impairment Reversal of impairment provision Revaluation increase Decrease in revaluation reserve Revaluation loss Balance as at 31 December 2014 Including PPE under finance lease Accumulated depreciation and impairment Balance as at 1 January 2014 Depreciation charge Transfers Impairment loss Disposals Elimination of accumulated depreciation and impairment (3,423) (335) (673) - 6 (157,012) (20,354) (18,286) (5) 38 (158,450) (17,902) (12,166) - 628 (117,237) - 32,653 (52) - (22,211 ) (4,774) (1,528) (5) 666 (458,333) (43,365) - (62) 1,338 4,425 195,619 187,890 84,636 27,852 500,422 Balance as at 31 December 2014 Including PPE under finance lease - - - - - - - - - - - - Net book value as at 1 January 2014 17,489 338,640 182,686 189,277 21,618 749,710 Net book value as at 31 December 2014 20,145 372,659 222,250 147,765 32,210 795,029 21 PJSC “FGC UES” Notes to the Consolidated Financial Statements (in millions of Russian Rouble unless otherwise stated) Note 6. Property, plant and equipment (continued) Borrowing costs of RR 23,927 million for the year ended 31 December 2015 were capitalised within additions (for the year ended 31 December 2014: RR 16,835 million). A capitalisation rate of 10.96% was used for the year ended 31 December 2015 (for the year ended 31 December 2014: 6.27%) to determine the amount of borrowing costs eligible for capitalisation, representing the weighted average of the borrowing costs applicable to the borrowings of the Group that were outstanding during the periods. Construction in progress is represented by the carrying amount of property, plant and equipment that has not yet been put into operation and advances to construction companies and suppliers of property, plant and equipment. As at 31 December 2015 such advances amounted to RR 11,646 million, net of impairment of RR 4,308 million (as at 31 December 2014: RR 13,773 million, net of impairment of RR 13,604 million). Other property, plant and equipment include motor vehicles, computer equipment, office fixtures and other equipment. Land plots are classified together with items of property, plant and equipment located on them. Revaluation. In 2014, management commissioned an independent appraiser for revaluation of property, plant and equipment as at 31 December 2014. The fair value of property, plant and equipment was determined to be RR 795,029 million, which has been categorised as a Level 3 fair value based on the inputs to the valuation techniques used (see Note 2). The majority of the Group’s property, plant and equipment is specialised in nature and is rarely sold on the open market other than as part of a continuing business. The market for similar property, plant and equipment is not active in the Russian Federation and does not provide a sufficient number of sales of comparable property, plant and equipment for using a market-based approach for determining fair value. Consequently the fair value of property, plant and equipment was primarily determined using depreciated replacement cost. This method considers the cost to reproduce or replace the property, plant and equipment, adjusted for physical, functional or economical depreciation, and obsolescence. Depreciated replacement cost was estimated based on internal sources and analysis of the Russian and international markets for similar property, plant and equipment. Various market data were collected from published information, catalogues, statistical data etc., and industry experts and suppliers of property, plant and equipment were contacted both in the Russian Federation and abroad. In addition to the determination of the depreciated replacement cost, cash flow testing was conducted for each cash generating unit. The Group’s Transmission segment (Note 29) was considered as a single cash generating unit. This resulted in depreciated replacement cost values being decreased by RR 791,263 million in arriving at the above value. The following key assumptions were used in performing the cash flow testing of Transmission segment: • Forecast period is determined as 16 years – from 2015 to 2030. • A nominal after-tax discount rate of 12.6% in 2015, 11.32% in 2016 and 10.03% in 2017-2030 was determined based on the weighted average cost of capital. • Revenue projections are based on following assumptions: - - - - - Approved Regulatory Asset Base tariff calculation for 2015-2019; Key parameters for tariff-setting (rates of return for “old” and “new” capital (10%); normal useful live for calculation of return of capital (35 years); Net Working Capital to revenue ratio (7.9%); level of economy on controllable costs (3%) in 2020-2030 were based on 2019 data; Decrease of the volume of “old” capital employed under RAB methodology –down to nil; Fixed volume of contracted capacity from 2016 onwards; Revenue included fees from technological connection services. • The amount of expenditure for the period from 2014 through 2030 required for the maintenance of the current property, plant and equipment is assumed to be equal to the amount of such expenditure determined as allowable for the purpose of tariff regulation. • Terminal value was determined based on Gordon growth model with terminal growth rate of 2.76% (in line with long-term consumer price index forecast published by Ministry of Economic Development) If the discount rate would be 0.5% higher, the recoverable amount of property, plant and equipment included in Transmission segment would be 5.4% lower. 22 299 APPEndiCES to thE AnnuAl REPoR t ifRS ConSolid AtEd finAnCi Al StAtEmEnt S PJSC “FGC UES” Notes to the Consolidated Financial Statements (in millions of Russian Rouble unless otherwise stated) Note 6. Property, plant and equipment (continued) Revaluation results. Accumulated depreciation and impairment at 31 December 2014 are eliminated against the gross carrying amount of the property, plant and equipment and the net amount of PPE is restated to the revalued amount. The results of revaluation of PPE as well as elimination are shown in the table above. As part of revaluation of property, plant and equipment the Group reassessed the useful lives of certain assets included in Power transmission grids group, which resulted in increase of average useful life of assets included in this group from 19 to 24 years. Historical cost. For each class of property, plant and equipment stated at revalued amount in these Consolidated Financial Statements, the carrying amount that would have been recognised had the assets been carried under the historical cost basis is as follows: Net book value as at 31 December 2015 Net book value as at 31 December 2014 Net book value as at 31 December 2013 Power transmission grids Buildings Substations Construction in progress Other Total 20,824 294,689 280,836 205,598 29,688 831,635 18,713 274,793 247,829 223,140 26,553 791,028 15,597 222,834 238,904 247,851 25,832 751,018 Leased property, plant and equipment. Included in property, plant and equipment are certain items under finance leases. As at 31 December 2015 the net book value of leased property, plant and equipment was RR 1,360 million (as at 31 December 2014: RR 1,432 million). The leased equipment is pledged as security for the lease obligations. Operating leases. The Group leases a number of land areas owned by local governments under operating lease. The expected lease payments due are determined based on the lease agreements and are payable as follows: Under one year Between one and five years Over five years Total 31 December 2015 31 December 2014 559 1,041 7,357 8,957 780 1,997 14,729 17,506 The above lease agreements are usually signed for a period of 1 to 49 years and may be extended for a longer period. The lease payments are subject to review on a regular basis to reflect market rent prices. As at 31 December 2015 the carrying value of property, plant and equipment leased out under operating lease was RR 8,071 million (as at 31 December 2014: RR 8,232 million). 300 23 PJSC “FGC UES” Notes to the Consolidated Financial Statements (in millions of Russian Rouble unless otherwise stated) Note 7. Intangible assets Corporate information management system (SAP R/3) Other intangible assets Cost as at 1 January 2014 Accumulated amortisation Carrying value as at 1 January 2014 Additions Transfers Disposals – cost Amortisation charge Carrying value as at 31 December 2014 Cost as at 31 December 2014 Accumulated amortisation Carrying value as at 31 December 2014 Cost as at 1 January 2015 Accumulated amortisation Carrying value as at 1 January 2015 Additions Transfers Disposals – cost Amortisation charge Carrying value as at 31 December 2015 Cost as at 31 December 2015 Accumulated amortisation Carrying value as at 31 December 2015 5,468 (1,579) 3,889 298 91 (345) (2,038) 1,895 5,512 (3,617) 1,895 5,512 (3,617) 1,895 564 368 (11) (568) 2,248 6,433 (4,185) 2,248 10,382 (3,043) 7,339 998 (91) (121) (1,735) 6,390 11,168 (4,778) 6,390 11,168 (4,778) 6,390 399 (368) (4) (913) 5,504 11,195 (5,691) Total 15,850 (4,622) 11,228 1,296 - (466) (3,773) 8,285 16,680 (8,395) 8,285 16,680 (8,395) 8,285 963 - (15) (1,481) 7,752 17,628 (9,876) 301 5,504 7,752 The Corporate information management system (SAP R/3) consists of several modules (parts) and related licences. As at 31 December 2015 only certain modules (parts) were placed in operation and are subject to amortisation. These modules are amortised during 5 years, on a straight-line basis. SAP R/3 includes development costs of RR 676 million as at 31 December 2015 (as at 31 December 2014: RR 930 million). Other intangible assets include capitalised development costs that meet the definition of an intangible asset of RR 265 million as at 31 December 2015 (as at 31 December 2014: RR 739 million). Note 8. Investments in associates and joint ventures The movements in the carrying value of investments in associates and joint ventures are as follows: Carrying value as at 1 January Share of result of associates and joint ventures Acquisition of subsidiary Translation difference Carrying value as at 31 December Year ended 31 December 2015 Year ended 31 December 2014 2,109 (8) (258) (152) 1,691 1,440 19 - 650 2,109 The carrying value of investments in associates and joint ventures is as follows: JSC UES “SakRusEnergo” Other associates Total investments in associates 31 December 2015 31 December 2014 1,586 105 1,691 1,724 385 2,109 24 APPEndiCES to thE AnnuAl REPoR t ifRS ConSolid AtEd finAnCi Al StAtEmEnt S 302 PJSC “FGC UES” Notes to the Consolidated Financial Statements (in millions of Russian Rouble unless otherwise stated) Note 9. Available-for-sale investments PJSC “INTER RAO UES” PJSC “Russian Grids” Other Total PJSC “INTER RAO UES” PJSC “Russian Grids” Total 1 January 2015 Additions Change in fair value 31 December 2015 13,759 625 - 14,384 - - 111 111 7,721 55 - 7,776 21,480 680 111 22,271 1 January 2014 Change in fair value Impairment charge 31 December 2014 19,379 1,063 20,442 - (31) (31) (5,620) (407) (6,027) 13,759 625 14,384 For the year ended 31 December 2015 the increase in the fair value of these available-for-sale investments in the total amount of RR 7,776 million was recognised in other comprehensive income (for the year ended 31 December 2014: RR 6,027 million decrease was recognised in other comprehensive income and reclassified to profit or loss). Valuation of PJSC “INTER RAO UES” and PJSC “Russian Grids” is made on a recurring basis using quoted market prices (Level 1 inputs) at the end of each reporting period. Note 10. Long-term receivables and other non-current and other current assets 31 December 2015 31 December 2014 Long-term trade receivables (net of allowance for doubtful debtors of RR 118 million as at 31 December 2015 and RR 505 million as at 31 December 2014) Loans given Long-term promissory notes Total financial assets VAT recoverable Other non-current assets Total other non-current assets 15,180 1,030 204 16,414 7 558 16,979 2,933 - 354 3,287 23 800 4,110 Long-term trade receivables mainly relate to the new contracts of technological connection services provided that imply deferred inflow of cash and cash equivalents and to restructured receivable balances for transmission services that are expected to be settled within the period exceeding 12 months from the period end. Long-term receivables relating to the new contracts of technological connection are paid in equal parts quarterly with an interest accrued on the actual outstanding balances at the rate of Russian Federation Central Bank key interest rate per annum. Other current assets include short-term promissory notes in the total amount of RR 194 million as at 31 December 2015 (31 December 2014: RR 625 million). Included in short-term promissory notes are promissory notes of LLC “ENERGO-finance” which are fully impaired. The amount of impairment provision was RR 12,022 million as at 31 December 2015 and 31 December 2014. All promissory notes are denominated in Russian Rouble. Fair value of promissory notes approximates their carrying value. PJSC “FGC UES” Notes to the Consolidated Financial Statements (in millions of Russian Rouble unless otherwise stated) Note 11. Cash and cash equivalents Cash at bank and in hand Cash equivalents Total cash and cash equivalents Cash at bank and in hand PJSC “RNCB” JSC “Alfa-Bank” PJSC “Sberbank” JSC “Gazprombank” JSC “Bank “ROSSIYA” Cash in hand Other banks Total cash at bank and in hand Rating A BB+ Ва1 BB+ AA++ Rating agency Expert RA Fitch Ratings Moody’s Fitch Ratings Expert RA Cash equivalents include short-term investments in certificates of deposit: Bank deposits Interest rate Rating Rating agency 11,00-11,15% 10,75-11,50% 10,40-11,00% 4,00-10,20% 10,85-11,00% BB+ BB+ BB+ Ва1 AA++ Standard & Poor's Fitch Ratings Fitch Ratings Moody’s Expert RA PJSC “VTB” JSC “Alfa-Bank” JSC “Gazprombank” PJSC “Sberbank” JSC "Bank “ROSSIYA” Total certificates of deposit Note 12. Bank deposits PJSC “VTB” JSC “Alfa-Bank” Interest rate Rating Rating agency 10,50-11,01% 10,75-11,05% BB+ BB+ Standard & Poor’s Fitch Ratings JSC "Bank “ROSSIYA” 10,85-11,00% AA++ Expert RA JSC “Gazprombank” PJSC “Sberbank” Total bank deposits 10,60-11,20% 17,03-18,31% BB+ Ва1 Fitch Ratings Moody’s The carrying amount of bank deposits approximates their fair value. 31 December 2015 7,518 20,658 28,176 31 December 2014 11,336 30,732 42,068 31 December 2015 31 December 2014 4,180 1,767 733 469 167 16 186 7,518 - 461 9,880 893 1 17 84 11,336 31 December 2015 31 December 2014 6,599 6,364 5,818 1,770 88 20,639 - - 19,516 11,185 - 30,701 31 December 2015 31 December 2014 13,116 7,700 6,300 3,060 93 30,269 - - 25 30 130 185 There were no bank deposits denominated in foreign currency as at 31 December 2015 and 31 December 2014. 303 25 26 APPEndiCES to thE AnnuAl REPoR t ifRS ConSolid AtEd finAnCi Al StAtEmEnt S PJSC “FGC UES” Notes to the Consolidated Financial Statements (in millions of Russian Rouble unless otherwise stated) Note 13. Accounts receivable and prepayments Trade receivables (net of allowance for doubtful debtors of RR 14,232 million as at 31 December 2015 and RR 8,397 million as at 31 December 2014) Other receivables (net of allowance for doubtful debtors of RR 2,107 million as at 31 December 2015 and RR 1,466 million as at 31 December 2014) Total financial assets VAT recoverable Advances to suppliers (net of allowance for doubtful debtors of RR 2,002 million as at 31 December 2015 and RR 1,981 million as at 31 December 2014) Tax prepayments Total accounts receivable and prepayments 31 December 2015 31 December 2014 37,904 38,240 3,751 41,655 2,676 5,635 77 50,043 8,046 46,286 7,578 1,946 102 55,912 Trade and other receivables are not interest-bearing and are largely due in 30 to 90 days. Given the short period of the trade and other receivables repayment, the fair value of such receivables approximates their book value. Tax prepayments will be settled against future tax liabilities. Management has determined the provision for doubtful debtors based on specific customer identification, customer payment trends, subsequent receipts and settlements and analyses of expected future cash flows. The effects of discounting are reflected in the doubtful debtor allowance and expense. Management believes that the Group entities will be able to realise the net receivable amount through direct collections and other non-cash settlements, and that therefore the recorded value of receivables approximates their fair value. The movement of the provision for doubtful debtors is shown below: 304 Year ended 31 December 2015 As at 1 January Provision accrual Provision reversal Debt written-off Amortisation of discount Acquisition of subsidiaries Disposal of subsidiary Reclassifications As at 31 December Year ended 31 December 2014 As at 1 January Provision accrual Provision reversal Debt written-off Amortisation of discount Transfer from other financial assets Reclassifications As at 31 December Long-term trade receivables 505 85 - - (472) Short-term trade receivables 8,397 8,137 (1,960) (239) (84) Other short-term receivables 1,466 971 (188) (146) 5 Advances to suppliers 1,981 22 (4) (1) - - - - - (30) 11 118 14,232 10 - (11) 2,107 2,002 18,459 Long-term trade receivables 905 - - - (317) Short-term trade receivables 5,689 3,306 (491) (17) (178) Other short-term receivables 789 190 (123) (33) - Advances to suppliers 1,979 4 - (3) - - (83) 505 - 88 8,397 649 (6) 1,466 Total 12,349 9,215 (2,152) (386) (551) 14 (30) - Total 9,362 3,500 (614) (53) (495) 649 - 4 - - - 1 PJSC “FGC UES” Notes to the Consolidated Financial Statements (in millions of Russian Rouble unless otherwise stated) Note 13. Accounts receivable and prepayments (continued) As at 31 December 2015 the overdue accounts receivable for which the provision had not been recorded amounted to RR 18,846 million (as at 31 December 2014: RR 26,544 million). The ageing of trade and other receivables that were not impaired at the reporting date was as follows: Neither past due nor impaired Past due: Less than 3 months 3 to 6 months 6 to 12 months 1 year to 3 years 3 years to 5 years More than 5 years Total Note 14. Inventories Spare parts Repair materials Other inventories Total inventories 31 December 2015 22,809 31 December 2014 19,742 7,919 3,572 5,487 1,868 - - 41,655 11,279 7,439 6,007 1,819 - - 46,286 31 December 2015 3,298 3,073 9,692 16,063 31 December 2014 2,796 2,641 5,009 10,446 The cost of inventories is shown net of an obsolescence provision for RR 47 million as at 31 December 2015 (as at 31 December 2014: RR 57 million). As at 31 December 2015 and 31 December 2014 the Group had no inventories pledged as security under loan and other agreements. Note 15. Equity Share capital Ordinary shares Number of shares issued and fully paid 31 December 2015 1,274,665,323,063 31 December 2014 1,274,665,323,063 Share capital 31 December 2015 31 December 2014 637,333 637,333 As at 31 December 2015 the authorised share capital comprised 1,346,805,824 thousand ordinary shares with a nominal value of RR 0.5 per share. Treasury shares. As at 31 December 2015 the Group held through a subsidiary 13,727,165 thousand ordinary shares in treasury at the total cost of RR 4,719 million (as at 31 December 2014: RR 4,719 million). Reserves. Reserves included Revaluation reserve for property, plant and equipment and available-for-sale investments, foreign currency translation reserve and remeasurement reserve for retirement benefit obligations. The Foreign currency translation reserve relates to the exchange differences arising on translation of net assets of a foreign associate. 305 1,981 12,349 27 28 APPEndiCES to thE AnnuAl REPoR t ifRS ConSolid AtEd finAnCi Al StAtEmEnt S 306 PJSC “FGC UES” Notes to the Consolidated Financial Statements (in millions of Russian Rouble unless otherwise stated) Note 15. Equity (continued) Reserves comprised the following: Revaluation reserve (net of tax) for: - property, plant and equipment (Note 6) - available-for-sale investments (Note 9) Remeasurement reserve for retirement benefit obligations (Note 18) Foreign currency translation reserve Total reserves Reserves for the year ended 31 December 2015 (net of tax): Revaluation reserve for: property, plant and equipment (Note 6) available- for-sale investments (Note 9) As at 1 January 2015 Change in revaluation reserve for property, plant and equipment Change in fair value of available-for-sale investments Remeasurements of retirement benefit obligations Foreign currency translation difference 225,563 (460) - - - - - 6,221 - - As at 31 December 2015 225,103 6,221 Reserves for the year ended 31 December 2014 (net of tax): 31 December 2015 31 December 2014 225,103 6,221 (2,320) 574 229,578 Remeasure- ment reserve for retirement benefit obligations (Note 18) 93 - - (2,413) - (2,320) Foreign currency translation reserve (Note 8) 726 - - - (152) 574 225,563 - 93 726 226,382 Total reserves 226,382 (460) 6,221 (2,413) (152) 229,578 Revaluation reserve for: property, plant and equipment (Note 6) available- for-sale investments (Note 9) Remeasure- ment reserve for retirement benefit obligations (Note 18) Foreign currency translation reserve (Note 8) Total reserves As at 1 January 2014 Change in revaluation reserve for property, plant and equipment Change in fair value of available-for-sale investments Accumulated loss on available-for-sale investments recycled to profit or loss Remeasurements of retirement benefit obligations Foreign currency translation difference 185,850 39,713 - - - - As at 31 December 2014 225,563 455 - (5,276) 4,821 - - - (1,465) 76 184,916 - - - 1,558 - 93 - - - - 650 726 39,713 (5,276) 4,821 1,558 650 226,382 Dividends. The annual statutory accounts of the parent company, FGC UES, form the basis for the annual profit distribution and other appropriations. The specific Russian legislation identifies the basis of distribution as the net profit. For the year ended 31 December 2015, the net profit of FGC UES, as reported in the published statutory financial statements, was RR 17,870 million (net profit for the year ended 31 December 2014: RR 5,137 million). The Annual General Meeting in June 2015 approved the decision to declare dividends for the year 2014 in the total amount of RR 847 million (RR 0.00067 per ordinary share). 29 PJSC “FGC UES” Notes to the Consolidated Financial Statements (in millions of Russian Rouble unless otherwise stated) Note 16. Income tax Income tax expense comprises the following: Current income tax charge Deferred income tax (charge) / credit Total income tax (expense) / benefit Year ended 31 December 2015 (146) (12,043) (12,189) Year ended 31 December 2014 (168) 2,080 1,912 During the years ended 31 December 2015 and 31 December 2014 most entities of the Group were subject to tax rate of 20 percent on taxable profit. In accordance with Russian tax legislation, tax losses in different Group companies may not be offset against taxable profits of other Group companies. Accordingly, tax may be accrued even where there is a net consolidated tax loss. Profit / (loss) before income tax for financial reporting purposes is reconciled to income tax expenses as follows: Profit / (loss) before income tax Theoretical income tax (charge) / credit at the statutory tax rate of 20 percent Tax effect of items which are not deductible for taxation purposes Movement in unrecognised deferred tax assets Total income tax (expense) / benefit Year ended 31 December 2015 56,287 Year ended 31 December 2014 (22,513) (11,257) (1,151) 219 (12,189) 4,503 (2,298) (293) 1,912 Deferred income tax. Differences between IFRS and Russian statutory taxation regulations give rise to certain temporary differences between the carrying value of certain assets and liabilities for financial reporting purposes and for income tax purposes. Deferred income tax assets and liabilities were measured at 20 percent as at 31 December 2015 and 31 December 2014, the rates expected to be applicable when the asset or liability will reverse. Deferred income tax assets and liabilities for the year ended 31 December 2015: 31 December 2015 ) Recognised in profit or loss Movements for the year Recognised in other compre- hensive income Disposal of subsidiary 1 January 2015 Deferred income tax liabilities Property, plant and equipment Investments in associates Available-for-sale investments Other Total deferred income tax liabilities Deferred income tax assets Property, plant and equipment Long-term promissory notes Available-for-sale investments Accounts receivable and prepayments Intangible assets Retirement benefit obligation Current and non-current debt Accounts payable and accruals Other Tax losses Unrecognised deferred tax assets Total deferred income tax assets Deferred income tax liabilities, net 18,457 21 2,518 390 21,386 (1,413) (4,090) (2,000) (2,181) (386) (573) (104) (961) (470) (1,586) 6,707 (7,057) 14,329 12,887 (56) 22 (663) 12,190 (46) 12 - (664) 33 508 19 (395) 114 491 (219) (147) 12,043 23 - 1,171 - 1,194 - - 385 - - (593) - - - - - (208) 986 (267) - - (27) (294) 72 - - - - - - - 5 - - 77 (217) 5,814 77 1,325 1,080 8,296 (1,439) (4,102) (2,385) (1,517) (419) (488) (123) (566) (589) (2,077) 6,926 (6,779) 1,517 30 307 APPEndiCES to thE AnnuAl REPoR t ifRS ConSolid AtEd finAnCi Al StAtEmEnt S 308 PJSC “FGC UES” Notes to the Consolidated Financial Statements (in millions of Russian Rouble unless otherwise stated) Note 16. Income tax (continued) Deferred income tax assets and liabilities for the year ended 31 December 2014: Movements for the year 31 December 2014 () Recognised in profit or loss Recognised in other compre- hensive income 1 January 2014 Deferred income tax liabilities Property, plant and equipment Investments in associates Available-for-sale investments Other Total deferred income tax liabilities Deferred income tax assets Property, plant and equipment Long-term promissory notes Available-for-sale investments Accounts receivable and prepayments Intangible assets Retirement benefit obligation Current and non-current debt Accounts payable and accruals Other Tax losses Unrecognised deferred tax assets Total deferred income tax assets Deferred income tax liabilities / (assets), net 5,814 77 1,325 1,080 8,296 (1,439) (4,102) (2,385) (1,517) (419) (488) (123) (566) (589) (2,077) 6,926 (6,779) 1,517 (6,032) 2 (845) 713 (6,162) 3,366 (291) (360) (132) 149 (4) 17 (30) (25) 1,099 293 4,082 (2,080) 10,112 - (6) - 10,106 - - - - - 141 - - - - - 141 10,247 1,734 75 2,176 367 4,352 (4,805) (3,811) (2,025) (1,385) (568) (625) (140) (536) (564) (3,176) 6,633 (11,002) (6,650) Unrecognised deferred tax assets in the amount of RR 6,707 million as at 31 December 2015 (as at 31 December 2014: RR 6,926 million) include deferred income tax assets on tax losses carried forward and deferred income tax assets on temporary differences arising in respect of loss-making subsidiaries. These deferred tax assets are not recognised because it is not probable that sufficient taxable profits will be available against which the deferred tax assets can be utilised. Tax losses carried forward in respect of which deferred tax assets were not recognised are presented by companies in the table below: OJSC “Mobile gas-turbine electricity plants” OJSC “Nurenergo” Others Total tax losses carried forward 31 December 2015 2,314 4,635 583 7,532 31 December 2014 3,292 3,690 357 7,339 The tax losses expire in 10 years after their origination. The Group’s unrecognised tax losses expire mostly with term over 5 years (in 2022-2026) – RR 3,274 million, RR 4,362 million expire with terms from 2 to 5 years (during 2017-2021) and 296 expire during the year 2016. PJSC “FGC UES” Notes to the Consolidated Financial Statements (in millions of Russian Rouble unless otherwise stated) Note 17. Non-current debt Effective interest rate Due 31 December 2015 31 December 2014 Certified interest-bearing non-convertible bearer bonds: with fixed rates with floating rates 7.5-8.75% CPI+1-2.5% 2016-2028 2022-2050 Stock Exchange authorised certified interest- bearing non-convertible bearer bonds Loan participation notes (LPNs) Finance lease liabilities Total debt Less: current portion of non-current bonds and LPNs Less: current portion of finance lease liabilities Total non-current debt 8.10% 8.45% 9.50% 2015 2019 2018 109,493 153,586 - 17,943 520 281,542 (31,362) (104) 250,076 122,836 111,383 10,155 17,943 614 262,931 (29,545) (95) 233,291 All debt instruments are denominated in Russian Rouble. Reconciliation between carrying and fair values of financial liabilities is presented below. Non-convertible bearer bonds with fixed rates and loan participation notes Non-convertible bearer bonds with variable rates Total debt classified into fair value hierarchy level 1 Level 1 1 31 December 2015 31 December 2014 Fair value Carrying value Fair value Carrying value 117,161 127,337 129,377 150,933 10,281 10,722 9,746 10,415 127,442 138,059 139,123 161,348 Other non-current debt with floating rates classified into fair value hierarchy level 3 represent non-quoted non- convertible bearer bonds with floating rate lined to inflation with a premium of 1-2.5%, which is a unique instrument with specific market. Hence, the management believes carrying amount of these instruments approximates its fair value. As at 31 December 2015 the Group had long-term undrawn committed financing facilities of RR 152,500 million (as at 31 December 2014: RR 157,500 million) which could be used for the general purposes of the Group. Finance lease. Minimum lease payments under finance leases and their present values are as follows: Minimum lease payments as at 31 December 2015 Less future finance charges Present value of minimum lease payments as at 31 December 2015 Minimum lease payments as at 31 December 2014 Less future finance charges Present value of minimum lease payments as at 31 December 2014 Due in 1 year Due between 1 and 5 years Due after 5 years 150 (46) 104 150 (55) 95 457 (41) 416 607 (88) 519 - - - - - - Total 607 (87) 520 757 (143) 614 Leased assets with carrying amount disclosed in Note 6 are effectively pledged for finance lease liabilities as the rights to the leased asset revert to the lessor in the event of default. 309 31 32 APPEndiCES to thE AnnuAl REPoR t ifRS ConSolid AtEd finAnCi Al StAtEmEnt S 310 PJSC “FGC UES” Notes to the Consolidated Financial Statements (in millions of Russian Rouble unless otherwise stated) Note 18. Retirement benefit obligations The Group’s post-employment benefits policy includes the employee pension scheme and other various post- employment, retirement and jubilee payments. The post-employment and retirement benefit system is a defined benefit program as part of which every participating employee receives benefits calculated in accordance with certain formula or rules. The program’s core element is the corporate pension scheme implemented by the Group in cooperation with the Non-State Pension Fund of Electric Power Industry. The Group also pays various other long-term post-employment benefits, including lump sum benefits in case of death of employees or former employees receiving pensions, lump sum benefits upon retirement and in connection with jubilees. Additionally, financial aid in the form of defined benefits is provided to former employees who have state, industry or corporate awards. Such financial aid is provided both to employees entitled and not entitled to non-state pensions. The most recent actuarial valuation was performed as at 31 December 2015. The tables below provide information about benefit obligations and actuarial assumptions as at 31 December 2015 and 31 December 2014. The amounts recognised in the Consolidated Statement of Financial Position are determined as follows: Present value of defined benefit obligation Present value of other long-term employee benefit obligation Total net defined benefit liability Year ended 31 December 2015 7,021 336 7,357 Year ended 31 December 2014 6,234 222 6,456 The movement in the net defined benefit obligation over the year is as follows: Year ended 31 December 2015 Year ended 31 December 2014 Defined benefit obligations at 1 January Included in profit or loss Current service cost Past service cost Interest expense Remeasurements of defined benefit liability Remeasurements: Loss from change in demographic assumptions Loss / (gain) from change in financial assumptions Experience losses / (gain) Benefits paid by the plan Defined benefit obligations at 31 December Amounts recognized in profit or loss: 6,456 433 (2,634) 728 (1,473) - 1,802 1,324 3,126 (752) 7,357 7,912 466 (347) 573 692 316 (1,350) (693) (1,727) (421) 6,456 Year ended 31 December 2015 Year ended 31 December 2014 Service cost Remeasurements of other long-term employee benefit obligations Interest expense Total (2,201) 120 728 (1,353) 120 (29) 573 664 33 PJSC “FGC UES” Notes to the Consolidated Financial Statements (in millions of Russian Rouble unless otherwise stated) Note 18. Retirement benefit obligations (continued) Amounts recognized in other comprehensive income: Loss from change in demographic assumptions Loss / (gain) from change in financial assumptions Experience losses / (gains) Total Year ended 31 December 2015 Year ended 31 December 2014 - 1,749 1,256 3,005 308 (1,316) (691) (1,699) The movement of remeasurements in other comprehensive income are as follows: At 1 January Movement of remeasurements At 31 December The significant actuarial assumptions are as follows: Financial actuarial assumptions: Discount rate (nominal) Future financial support benefit increases Future salary increases (nominal) Year ended 31 December 2015 23 3,005 3,028 Year ended 31 December 2014 1,722 (1,699) 23 Year ended 31 December 2015 9.50% 6.00% 6.00% Year ended 31 December 2014 13.00% 7.00% 7.00% Financial assumptions are based on market expectations, at the end of the reporting period, for the period over which the obligations are to be settled. The average period over which the Group obligations are to be settled is 12.02 years. Demographic actuarial assumptions: Expected retirement age Male Female Employee turnover Mortality table Year ended 31 December 2015 Year ended 31 December 2014 60 55 5.1% 1998_adjusted 60 56 5.1% 1998_adjusted The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions is as follows: Discount rate Future salary increases (nominal) Future pension increases (nominal) Employee turnover Mortality level Change in assumption Increase / decrease by 0.5% Increase / decrease by 0.5% Increase / decrease by 0.5% Increase / decrease by 10% Increase / decrease by 10% Impact on defined benefit liability Decrease/ Increase by Increase / decrease by Increase / decrease by Decrease/ Increase by Decrease/ Increase by 4.34% 2.48% 2.00% 2.26% 0.94% The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the pension liability recognised within the consolidated statement of financial position. 34 311 APPEndiCES to thE AnnuAl REPoR t ifRS ConSolid AtEd finAnCi Al StAtEmEnt S 312 PJSC “FGC UES” Notes to the Consolidated Financial Statements (in millions of Russian Rouble unless otherwise stated) Note 19. Current debt and current portion of non-current debt Third party non-bank loans Current portion of non-current borrowings (Note 17) Effective interest rate 17.0% Total current debt and current portion of non-current debt 31 December 2015 31 December 2014 - 31,466 31,466 46 29,640 29,686 As at 31 December 2015 and 2014 the Group had no short-term undrawn committed financing facilities. Note 20. Accounts payable and accrued charges 31 December 2015 31 December 2014 Accounts payable to construction companies and suppliers of property, plant and equipment Trade payables Accrued liabilities Other creditors Total financial liabilities Advances received Accounts payable to employees Taxes other than on income payable Other provisions for liabilities and charges Total accounts payable and accrued charges Movement in provision for legal claims: Carrying amount at 1 January 2015 Additional amounts charged to profit or loss Unused amounts reversed Carrying amount at 31 December 2015 Note 21. Revenues and other operating income Transmission fee Connection services Construction services Electricity sales Rental income Grids repair and maintenance services Communication services Design works Research and development services Total revenue 58,002 17,942 64 1,769 77,777 7,060 2,154 1,825 500 89,316 29,140 21,949 201 1,451 52,741 12,936 2,242 2,169 948 71,036 500 878 (430) 948 Year ended 31 December 2015 Year ended 31 December 2014 157,821 12,425 7,014 6,442 1,117 700 545 508 469 187,041 159,743 7,028 - 5,591 1,168 954 880 276 328 175,968 Other operating income primarily includes income from non-core activities. Penalties and fines Insurance compensation Government grants Other income Total other operating income Year ended 31 December 2015 Year ended 31 December 2014 2,860 284 - 857 4,001 2,453 231 1,803 1,131 5,618 35 PJSC “FGC UES” Notes to the Consolidated Financial Statements (in millions of Russian Rouble unless otherwise stated) Note 22. Operating expenses Depreciation of property, plant and equipment Employee benefit expenses and payroll taxes Purchased electricity for production needs Property tax Accrual of allowance for doubtful debtors Subcontract works Electricity transit Loss / (gain) on disposal of property, plant and equipment Other materials Materials for repair and construction Business trips and transportation expenses Repairs and maintenance of equipment Security services Amortisation of intangible assets Rent Information system maintenance Consulting, legal and auditing services Insurance Utilities and maintenance of buildings Communication service Taxes, other than on income and property Movement in provision for legal claims Research and development Disposal of intangible assets Other expenses Year ended 31 December 2015 Year ended 31 December 2014 39,447 25,218 15,192 7,408 7,063 6,337 4,019 3,699 3,452 2,898 2,182 2,171 1,568 1,481 1,474 1,206 1,093 845 754 609 439 434 135 - 1,839 43,365 26,606 14,047 5,587 2,886 1,691 3,599 (429) 3,639 2,289 2,026 2,768 1,764 3,773 1,612 1,116 938 1,071 711 726 1,562 155 417 455 3,763 Total 130,963 126,137 In 2015 based on the recent legal practice the Group recognized allowance for doubtful debts for certain balances with customers where the Group had disputes related to certain terms of transmission services in the amount of RR 3,934 million (In 2014: RR 113 million). This expense was included in amount of allowance for doubtful debtors. Employee benefit expenses and payroll taxes include the following: Wages and salaries Social security contributions to the Pension Fund Social security contributions to other state non-budgetary funds Pension costs – defined benefit plans (Note 18) Share-based compensation Total employee benefit expenses and payroll taxes Note 23. Finance income Interest income Foreign currency exchange differences Dividends Other finance income Total finance income Year ended 31 December 2015 Year ended 31 December 2014 21,411 3,754 2,134 (2,081) - 25,218 21,447 3,849 1,213 91 6 26,606 Year ended 31 December 2015 Year ended 31 December 2014 8,255 392 21 33 8,701 4,988 65 1 16 5,070 36 313 APPEndiCES to thE AnnuAl REPoR t ifRS ConSolid AtEd finAnCi Al StAtEmEnt S 314 PJSC “FGC UES” Notes to the Consolidated Financial Statements (in millions of Russian Rouble unless otherwise stated) Note 24. Finance costs Interest expense Net interest on defined benefit liability Foreign currency exchange differences Other finance costs Total finance costs Less capitalised interest expenses on borrowings related to qualifying assets (Note 6) Total finance costs recognised in profit or loss Year ended 31 December 2015 Year ended 31 December 2014 32,455 728 379 - 33,562 (23,927) 9,635 22,442 573 67 2 23,084 (16,835) 6,249 Note 25. Earnings / (loss) per ordinary share for profit / (loss) attributable to shareholders of FGC UES Weighted average number of ordinary shares (millions of shares) Profit / (loss) attributable to shareholders of FGC UES (millions of RR) Weighted average earnings / (loss) per share – basic and diluted (in RR) Year ended 31 December 2015 Year ended 31 December 2014 1,260,938 1,260,938 44,768 0.036 (21,581) (0.017) The Group has no dilutive potential ordinary shares; therefore, the diluted earnings per share equal the basic earnings per share. Note 26. Contingencies, commitments and operating risks Political environment. The operations and earnings of the Group continue, from time to time and in varying degrees, to be affected by the political, legislative, fiscal and regulatory developments, including those related to environmental protection, in Russian Federation. Insurance. The Group held limited insurance policies in relation to its assets, operations, public liability or other insurable risks. Accordingly, the Group is exposed to those risks for which it does not have insurance. Legal proceedings. In the normal course of business the Group entities may be a party to certain legal proceedings. In the opinion of management, currently there are no existing legal proceedings or claims outstanding or final dispositions which will have a material adverse effect on the financial position of the Group. As at 31 December 2015 the Group's subsidiary, OJSC ”Nurenergo” was engaged in a number of litigations involving claims amounting in total to RR 14,731 million (as at 31 December 2014: RR 12,363 million), for collection of amounts payable for electricity purchased by OJSC ”Nurenergo”. The amount is recorded within accounts payable. No additional provision has been made as the Group's management believes that these claims are unlikely to result in any further liabilities. During 2012-2015 OJSC “Nurenergo” was involved in a number of litigations aiming to commence a bankruptcy procedure in respect of subsidiary. In July 2015 the Commercial Court of the Republic of Chechnya re-established the observation procedure in respect of the OJSC “Nurenergo”. In accordance with Russian legislation on bankruptcy, all the above-mentioned litigations were suspended. Tax contingency. Russian tax and customs legislation is subject to varying interpretation when being applied to the transactions and activities of the Group. Consequently, tax positions taken by management and the formal documentation supporting the tax positions may be successfully challenged by the relevant regional and federal authorities. Russian tax administration is gradually strengthening, including the fact that there is a higher risk of review of tax transactions without a clear business purpose or with tax incompliant counterparties. Fiscal periods remain open to review by the authorities in respect of taxes for three calendar years preceding the year of decision to perform tax review. Under certain circumstances reviews may cover longer periods. Transfer pricing legislation enacted in the Russian Federation starting from 1 January 2012 provides for major modifications making local transfer pricing rules closer to OECD guidelines, but creating additional uncertainty in practical application of tax legislation in certain circumstances. Currently there is lack of practice of applying the transfer pricing rules by the tax authorities and courts, however, it is anticipated that transfer pricing arrangements will be subject to very close scrutiny potentially having effect on these consolidated financial statements. 37 PJSC “FGC UES” Notes to the Consolidated Financial Statements (in millions of Russian Rouble unless otherwise stated) Note 26. Contingencies, commitments and operating risks (continued) As at 31 December 2015 management believes that its interpretation of the relevant legislation is appropriate and the Group’s tax, currency and customs positions will be sustained. Environmental matters. The enforcement of environmental regulation in the Russian Federation is evolving and the enforcement posture of government authorities is continually being reconsidered. Group entities periodically evaluate their obligations under environmental regulations. Potential liabilities might arise as a result of changes in legislation and regulation or civil litigation. The impact of these potential changes cannot be estimated, but could be material. In the current enforcement climate under existing legislation, management believes that there are no significant liabilities for environmental damage, other than any amounts which have been accrued in these Consolidated Financial Statements. Capital commitments related to construction of property, plant and equipment. Future capital expenditures for which contracts have been signed amount to RR 232,219 million as at 31 December 2015 (as at 31 December 2014: RR 233,101 million) including VAT. These amounts include accounts payable to construction companies and suppliers of property, plant and equipment in the amount of RR 29,140 million as at 31 December 2015 (as at 31 December 2014: RR 58,002 million) (Note 20). Note 27. Financial instruments and financial risks Financial risk factors. The Group’s ordinary financial and business activities expose it to a variety of financial risks, including but not limited to the following: market risk (foreign exchange risk, interest rate risks related to changes in the fair value of the interest rate and the cash flow interest rate, and price risk), credit risk, and liquidity risk. Such risks give rise to the fluctuations of profit, reserves and equity and cash flows from one period to another. The Group’s financial management policy aims to minimise or eliminate possible negative consequences of the risks for the financial results of the Group. The Group could use derivative financial instruments from time to time for such purposes as part of its risk management strategy. 315 Financial instruments by categories: 31 December 2015 Financial assets Available-for-sale investments (Note 9) Long-term promissory notes (Note 10) Long-term receivables and other non- current assets (Note 10) Cash and cash equivalents (Note 11) Bank deposits (Note 12) Short-term promissory notes (Note 10) Loans given Accounts receivable (Note 13) Total financial assets Financial liabilities Non-current debt (Note 17) Accounts payable to the shareholders of FGC UES Current debt and current portion of non-current debt (Note 19) Accounts payable and accrued charges (Note 20) Total financial liabilities Loans and receivables Investments available for sale Other financial liabilities - 204 15,180 28,176 30,269 194 1,114 41,655 116,792 - - - - - 22,271 - - - - - - - 22,271 - - - - - Total 22,271 204 15,180 28,176 30,269 194 1,114 41,655 139,063 - - - - - - - - - 250,076 250,076 6 6 31,466 31,466 52,741 334,289 52,741 334,289 38 APPEndiCES to thE AnnuAl REPoR t ifRS ConSolid AtEd finAnCi Al StAtEmEnt S PJSC “FGC UES” Notes to the Consolidated Financial Statements (in millions of Russian Rouble unless otherwise stated) Note 27. Financial instruments and financial risks (continued) 31 December 2014 Financial assets Available-for-sale investments (Note 9) Long-term promissory notes (Note 10) Other non-current assets (Note 10) Cash and cash equivalents (Note 11) Bank deposits (Note 12) Short-term promissory notes (Note 10) Loans given Accounts receivable (Note 13) Total financial assets Financial liabilities Non-current debt (Note 17) Accounts payable to the shareholders of FGC UES Current debt and current portion of non-current debt (Note 19) Accounts payable and accrued charges (Note 20) Total financial liabilities (а) Market risk 316 Loans and receivables Investments available-for- sale Other financial liabilities - 354 2,933 42,068 185 625 69 46,286 92,520 - - - - - 14,384 - - - - - - - 14,384 - - - - - Total 14,384 354 2,933 42,068 185 625 69 46,286 106,904 - - - - - - - - - 233,291 233,291 8 8 29,686 29,686 77,777 340,762 77,777 340,762 (i) Foreign exchange risk. The Group operates within the Russian Federation. The major part of the Group’s purchases is denominated in Russian Roubles. Therefore, the Group’s exposure to foreign exchange risk is insignificant. (ii) Interest rate risk. The Group’s operating profits and cash flows from operating activity are not largely dependent on the changes in market interest rates. Changes in interest rates impact primarily loans and borrowings by changing either their fair value (fixed rate debt) or their future cash flows (variable rate debt). Management does not have a formal policy of determining how much of the Group’s exposure should be to fixed or variable rates. However, at the time of raising new loans or borrowings management uses its judgment to decide whether it believes that a fixed or variable rate would be more favourable to the Group over the expected period until maturity. The Group does not account for any fixed-rate borrowings as fair value through profit or loss or as available-for- sale. Therefore a change in interest rates at the reporting date would not have an effect in profit or loss or in equity. There is no significant impact on the Group’s profit or loss or equity from the change in interest rates for variable rate borrowings as most of the Group’s interest on borrowings is being capitalised in property, plant and equipment. The increase of inflation by 1% would result in additional cash outflow of RR 1,362 million. (iii) Price risk. Equity price risk arises from available-for-sale investments. Management of the Group monitors its investment portfolio based on market indices. Material investments within the portfolio are managed on an individual basis and all buy and sell decisions are taken by the management of the Group. The primary goal of the Group’s investment strategy is to maximise investment returns in order to meet partially the Group’s investment program needs. Transactions in equity products are monitored and authorised by the Group’s corporate finance department. The total amount of investments available-for-sale exposed to the market risk equals RR 22,160 million. As at 31 December 2015, if equity prices at that date had been 10% higher (lower), with all other variables held constant, the Group’s other comprehensive income would increase (decrease) by RR 2,216 million. PJSC “FGC UES” Notes to the Consolidated Financial Statements (in millions of Russian Rouble unless otherwise stated) Note 27. Financial instruments and financial risks (continued) (b) Credit risk. The amounts exposed to credit risk are as follows: 31 December 2015 Not overdue, not impaired Not overdue, but impaired: - gross amount - less impairment provision Overdue, but not impaired Overdue and impaired: - gross amount - less impairment provision Total amount 31 December 2014 Not overdue, not impaired Not overdue, but impaired: - gross amount - less impairment provision Overdue, but not impaired Overdue and impaired: - gross amount - less impairment provision Total amount Long-term promisso- ry notes (Note 10) 204 - - - - - 204 Long-term promisso- ry notes (Note 10) 354 - - - - - 354 Other non-cur- rent assets (Note 10) 15,180 - 33 (33) - - 85 (85) 15,180 Other non-cur- rent assets (Note 10) 2,933 - 505 (505) - - - - 2,933 Cash and cash equi- valents (Note 11) 28,176 - - - - - - - 28,176 Cash and cash equi- valents (Note 11) 42,068 - - - - - - - 42,068 Bank deposits (Note 12 ) 30,269 - - - - - - - 30,269 Short-term promissory notes (Note 10) 194 - - - - - 12,022 (12,022) 194 Loans given 1,114 - - - - - - - 1,114 Bank deposits (Note 12 ) Short-term promissory notes (Note 10) Loans given 185 - - - - - - - 185 625 - - - - - 12,022 (12,022) 625 63 - - - 5 - - - 68 Accounts receivable (Note 13) 22,809 - 2,719 (2,719) 18,846 - 13,620 (13,620) 41,655 Accounts receivable (Note 13) 19,742 - 1,706 (1,706) 26,544 - 8,157 (8,157) 46,286 As at 31 December 2015 the amount of financial assets, which were exposed to credit risk, was RR 116,792 million (as at 31 December 2014: RR 92,520 million). Although collection of receivables could be influenced by economic factors, management of the Group believes that there is no significant risk of loss to the Group beyond the provision for impairment of receivables already recorded. The Group’s trade debtors are quite homogenous as regards their credit quality and concentration of credit risk. They are primarily comprised of large, reputable customers, most of which are controlled by, or related to the Government of the RF. Historical data, including payment histories during the recent credit crisis, would suggest that the risk of default from such customers is very low. Credit risk is managed at the Group level. In most cases the Group does not calculate their customers’ credit status but rates their creditworthiness on the basis of the financial position, prior experience and other factors. The cash has been deposited in the financial institutions with no more than minimal exposure to the default risk at the time of account opening. Although some of the banks and companies have no international credit rating, management believes that they are reliable counterparties with a stable position on the Russian market. (c) Liquidity risk. Liquidity risk is managed at the Group level and includes maintaining the appropriate volume of monetary funds, conservative approach to excess liquidity management, and access to financial resources by securing credit facilities and limiting the concentrations of cash in banks. The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the end of the reporting period to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances, as the impact of discounting is not significant. 317 39 40 APPEndiCES to thE AnnuAl REPoR t ifRS ConSolid AtEd finAnCi Al StAtEmEnt S 318 PJSC “FGC UES” Notes to the Consolidated Financial Statements (in millions of Russian Rouble unless otherwise stated) Note 27. Financial instruments and financial risks (continued) As at 31 December 2015 Non-current and current debt and interest payable (Notes 17, 19) Accounts payable to the shareholders of FGC UES (Note 15) Accounts payable and accrued charges (Note 20) Total as at 31 December 2015 As at 31 December 2014 Non-current and current debt and interest payable (Notes 17, 19) Accounts payable to the shareholders of FGC UES (Note 15) Accounts payable and accrued charges (Note 20) Total as at 31 December 2014 Less than 1 year 1 to 2 years 2 to 5 years Over 5 years Total 55,652 42,873 102,855 351,941 553,321 6 52,741 108,399 - - 42,873 - - 102,855 - - 351,941 6 52,741 606,068 59,586 40,949 97,357 250,322 448,214 8 77,777 137,371 - - 40,949 - - 97,357 - - 250,322 8 77,777 525,999 (d) Fair value. Management believes that the fair value of financial assets and liabilities carried at amortised cost is not significantly different from their carrying amounts, except for non-current and current debt (Notes 17 and 19). The carrying value of trade payables and trade receivables less provision for doubtful debtors is assumed to approximate their fair value due to their short-term nature. The financial instruments of the Group carried at fair value represent available-for-sale investments (Note 9). The fair value of the available-for-sale investments is determined by the quoted prices (Level 1 inputs) in active markets for identical financial assets. There are no significant unobservable inputs used in measuring fair values of financial assets and liabilities. Note 28. Capital risk management The Group’s management of the capital of its entities aims to comply with the capital requirements established by the legislation of the Russian Federation for joint stock companies, in particular: • • • share capital cannot be lower than RR 100 thousand; in case the share capital of an entity is greater than statutory net assets of the entity, such entity must reduce its share capital to the value not exceeding its statutory net assets; in case the minimum allowed share capital exceeds the entity’s statutory net assets, such entity is subject for liquidation. As at 31 December 2015 several companies of the Group namely OJSC “Nurenergo”, OJSC “Mobile gas-turbine electricity plants”, OJSC “The Kuban trunk grids”, OJSC “Specialised electricity transmission service company of the UNEG”, PJSC “Engineering and construction management centre of Unified Energy System”, OJSC “Dalenergosetproject”, were not in compliance with all requirements mentioned above. Management of the Group is currently implementing measures to ensure compliance with all legislation requirements within a short period. Management considers that a breach of above mentioned requirements will not have material effect on the Group’s consolidated financial statements. The Group’s capital management objectives are to ensure that its operations be continued at a profit for the shareholders and with benefits for other stakeholders, and to maintain the optimal capital structure with a view to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group can adjust the dividends paid to the shareholders or their contributions to the authorised capital by issuing new shares or by selling assets to reduce debts. The Group monitors capital ratios, including the gearing ratio, calculated on the basis of figures of financial statements prepared under the Russian Accounting Regulations. The Group should ensure that its gearing ratio, being the total debt divided by the total equity, does not exceed 0.50. As at 31 December 2015 the Company’s gearing ratio calculated under Russian Accounting Regulations was 0.32 (as at 31 December 2014: 0.31). PJSC “FGC UES” Notes to the Consolidated Financial Statements (in millions of Russian Rouble unless otherwise stated) Note 29. Segment information The Group operates within one operating segment. The Group’s single primary activity is provision of electricity transmission services within the Russian Federation which is represented as Transmission segment. The Board of Directors of the Company has been determined as chief operating decision maker (the “CODM”) of the Group which generally analyses information relating to Transmission segment. The Board of Directors does not evaluate financial information of other components of the Group to allocate resources or assess performance and does not determine these components as segments. The key indicator of the transmission segment performance is return on equity ratio (ROE). It is calculated based on the statutory financial statements prepared according to Russian Accounting Regulations (RAR) as net profit divided by net assets. Accordingly, the measure of transmission segment profit or loss analysed by the CODM is net profit of segment based on the statutory financial statements prepared according to RAR. The other information provided to the CODM is also based on statutory financial statements prepared according to RAR. Revenue from external customers Intercompany revenue Total revenue Depreciation and amortisation * Interest income Interest expenses Current income tax Profit for the year Capital expenditure Total reportable segment assets Total reportable segment liabilities Transmission segment – based on statutory financial statements prepared according to RAR Year ended 31 December 2015 173,003 362 Year ended 31 December 2014 168,748 237 173,365 77,744 8,334 8,517 81 19,186 75,597 168,985 80,669 6,305 5,595 82 3,198 128,721 31 December 2015 31 December 2014 1,287,303 433,413 1,248 887 427,207 * Depreciation charge under RAR is based on useful lives determined by statutory regulations. Total revenue from segment (RAR) Reclassification between revenue and other income Non-segmental revenue Elimination of intercompany revenue Other adjustments Year ended 31 December 2015 173,365 (1,625) 15,679 (362) (16) Year ended 31 December 2014 168,985 (469) 7,689 (237) - Total revenue (IFRS) 187,041 175,968 319 41 42 APPEndiCES to thE AnnuAl REPoR t ifRS ConSolid AtEd finAnCi Al StAtEmEnt S PJSC “FGC UES” Notes to the Consolidated Financial Statements (in millions of Russian Rouble unless otherwise stated) Note 29. Segment information (continued) Profit for the year (RAR) Property, plant and equipment Adjustment to the carrying value of property, plant and equipment Impairment of property, plant and equipment, net Financial instruments Reversal of re-measurement of available-for-sale investments Impairment of available-for-sale investments Discounting of promissory notes Consolidation Reversal of impairment of investments in subsidiaries Adjustments to intercompany promissory notes Reversal of re-measurement of treasury shares Other Adjustment to provision for legal claims Adjustment to allowance for doubtful debtors Accrual of retirement benefit obligations Write-off of research and development to expenses Share of result of associates Share-based compensation Deferred tax adjustment Other adjustments Non-segmental other operating loss Profit / (loss) for the year (IFRS) Year ended 31 December 2015 Year ended 31 December 2014 19,186 35,510 (1,183) (7,750) - 78 851 (2,137) (202) (449) 2,760 1,796 70 (8) - (2,021) (1,788) (615) 44,098 3,198 38,511 (68,211) 6,324 (6,027) 125 171 2,427 637 - (5,345) (280) 243 19 (6) 11,311 1,951 (5,649) (20,601) 31 December 2015 31 December 2014 Total reportable segment liabilities (RAR) Netting of VAT recoverable and payable Netting of advances and payables Recognition of finance lease liabilities Accrual of retirement benefit obligations Deferred tax liabilities adjustment Accrual / (reversal) of payables recognised in another accounting period Non-segmental liabilities Elimination of intercompany balances Total liabilities (IFRS) 433,413 (3,703) (5,934) 519 7,034 (29,384) 1,091 39,126 (66,472) 375,690 427,207 (1,805) (2,860) 614 6,132 (32,332) (28) 23,395 (58,379) 361,944 320 PJSC “FGC UES” Notes to the Consolidated Financial Statements (in millions of Russian Rouble unless otherwise stated) Note 29. Segment information (continued) Total reportable segment assets (RAR) Property, plant and equipment Adjustment to the carrying value of property, plant and equipment Impairment and revaluation of property, plant and equipment, net Recognition of property, plant and equipment under finance lease Financial instruments Adjustment to cost of investments in associates Adjustment to cost of available-for-sale investments Discounting of promissory notes Consolidation Reversal of impairment of investments in subsidiaries Reversal of impairment of promissory notes Reversal of re-measurement of treasury shares Unrealised profit adjustment Elimination of investments in subsidiaries Elimination of intercompany balances Other Write-off of research and development to expenses Adjustment to allowance for doubtful debtors Deferred tax assets adjustment Netting of VAT recoverable and payable Netting of advances and payables Other adjustments Non-segmental assets Total assets (IFRS) 31 December 2015 31 December 2014 1,287,303 1,248,887 197,355 (466,452) 576 979 12,377 (350) 9,298 33,880 (806) (426) (23,847) (66,472) (2,182) 8,011 (11,851) (3,703) (5,934) (1,355) 28,927 995,328 175,993 (465,268) 647 1,137 13,477 (428) 8,447 36,017 (604) (840) (23,406) (58,379) (2,252) 5,250 (12,793) (1,805) (2,860) (496) 14,452 935,175 The main differences between financial information prepared in accordance with IFRS and the financial information reported to the chief operating decision-maker related to profit or loss, and assets and liabilities results from the differences in the accounting methods under IFRS and RAR. Financial information on segments reported to the CODM under RAR does not reflect the adjustments made in accordance with IFRS. Non-segmental revenue, non-segmental other operating loss, non-segmental assets and non-segmental liabilities represent corresponding revenue, loss (profit), assets and liabilities of components (subsidiaries) that are not determined as segments by the CODM. Information on revenue for separate services and products of the Group is presented in Note 21. The Group performs most of its activities in the Russian Federation and does not have any significant revenue from foreign customers or any non-current assets located in foreign countries. The major customers of the Group are government-related entities. The amounts of revenue from such entities are disclosed in Note 5. The Group has no other major customers with turnover over 10 percent of the Group revenue. 321 43 44
Continue reading text version or see original annual report in PDF format above