Jsc Lenenergo Reliability Efficiency Availability

RELIABILITY EFFICIENCY AVAILABILITY

JSC LENENERGO Annual Report PRESENTATION EDITION 2013 2. About the Company Annual Report 2013 JSC Lenenergo

JSC Lenenergo TO OUR SHAREHOLDERS Annual Report 2013 1.1. Address of Chairperson of the Board of Directors 2 of JSC Lenenergo E.V. Prokhorov Online Annual Report 1.2. Address of the Director General 4 of JSC Lenenergo A.V. Sorochinskiy of JSC Lenenergo 1 http://ar2013.lenenergo.ru/en/

APPENDICES

8.1. Reference information ABOUT THE COMPANY STRATEGY PERFORMANCE INDICATORS 208 2.1. General information of the Company 8 3.1. The Company’s position in the industry 22 4.1. Q&A 62 8.2. Basic principles of accounting policies 210

2.2. Corporate structure of the Company 12 3.2. Mission and strategy of the Company 32 4.2. Operating results 74 8.3. RAS accounting reporting of Lenenergo for 2013 213 2.3. Geographic reach of the Company 13 3.3. Business model and competitive environment 38 4.3. Financial results 104 8.4. Dynamics of key indicators of IFRS financial statements 288 2.4. Brief history of Lenenergo 14 3.4. Investment activity 42 4.4. Technical re-equipment, development and innovations 138 of Lenenergo for 2009-2013

2.5. Milestones of the reporting period 16 3.5. Risk management 54 8.5. Observance of the Corporate Codes of Conduct 289

8.6. The list of related party transactions for 2013 301 2 3 4 88.7. Data on electricity transmission tariffs in 2013-2014 302 8.8. Data on grid connection tariffs in 2013-2014 305

8.9. Data on the structure of property complex 323 and its changes in 2013

8.10. Data on land plots 326

8.11. Dynamics of the capital investments structure in 2011-2013 328

8.12. Organization structure of the Company 330

CORPORATE GOVERNANCE SECURITIES SUSTAINABLE DEVELOPMENT 8.13. Information about issued instructions in 2013 332

5.1. Corporate governance principles 152 6.1. Shares. Capitalization 180 7.1. HR policy 194 8.14. Client service centers in St. Petersburg 332 and Leningrad Region 5.2. Management bodies 154 6.2. Profit distribution and dividend policy 189 7.2. Labor protection 199

5.3. Supervisory bodies 168 6.3. Bonds 191 7.3. Social policy and charity 200 8.15. Glossary 333 5.4. Subsidiaries and dependent companies 175 6.4. Interaction with shareholders and investment community 191 7.4. Environmental policy 203 7.5. Sustainable performance in the field of procurements 204 5 6 77.6. External communication 206

DISCLAIMER CONTACTS TO OUR SHAREHOLDERS CONTENTS STRATEGY 1. To our Shareholders Annual Report 2013 JSC Lenenergo

1.1. ADDRESS OF CHAIRPERSON OF THE BOARD OF DIRECTORS OF JSC LENENERGO E.V. PROKHOROV Dear Shareholders!

JSC Lenenergo is one of the largest distribution grid companies in the Northwest of Russia. Two main objectives of the Company are reliable and high-quality power supply of consumers of St. Petersburg and the Leningrad Region and prompt non-discriminatory technological connection to networks. The Company’s priorities are attraction of large-scale investments into construction and reconstruction of power grid facilities to provide both reliable power supply and advanced development of the energy sector in relation to economic growth.

Last year JSC Lenenergo proceeded with active development and transformation aimed primarily at improving efficiency, cardinal renovation of production facilities, development of customer services and increase of its business reputation. I believe that results of 2013 indicate that the Company is on the right track, and all the decisions were justified.

I would like to note that today JSC Lenenergo not only successfully parsed with the cargo of serious system problems which have been accumulated up to 2010, but also implements global innovation projects in the sphere of improving the reliability of power supply, and development of the system of technological connection to networks. Thus many initiatives of the Company were supported at the Federal level.

Over the past year the staff of JSC Lenenergo repeatedly received awards from regional and Federal authorities. in 2013 work of power engineers was marked off by the governors of St. Petersburg and the Leningrad Region, Ministry of the Power Industry and management of JSC Rosseti.

In the reporting year the Company continued its movement in the framework of the set of priority objectives. The efforts of the personnel of JSC Lenenergo ensured uninterrupted supply of electricity to consumers, increasing the capacity and reconstruction of electric networks of St. Petersburg and the Leningrad Region. Comprehensive work aimed at improvement of financial and business indicators, increase of investment appeal and transparency of activity of the Company was carried out. a significant Two main objectives of the Company attention of the Company was paid to the issues of innovation development are reliable and high-quality power and energy efficiency as well as reliability and quality of services. supply of consumers of St. Petersburg Priority direction of activity is work on increasing the availability of grid infrastructure. The initiatives implemented by Lenenergo in the past are used and the Leningrad Region and prompt today by other regional grid companies. Last year the Company continued its non-discriminatory technological work on improvement of business processes of technological connection. connection to networks. At the end of 2013 Lenenergo reached a new level of rendering of services in connection to networks having launched the project «8-800» in the Leningrad Region which is a technological connection without visits to the grid company. This is an unprecedented step in simplifying access to energy resources.

CONTENTS ABOUT THE COMPANY 1. To our Shareholders Annual Report 2013 JSC Lenenergo

An important role in realization of the interests of shareholders, including The Company together with its principal shareholders will actively proceed the strategic issues faced by the Company in 2013 was carried out with seeking ways to attract non-tariff sources of financing. Improving by the Board of Directors, which defines the priority areas of development the efficiency of financial and business performance of the enterprise will and sets the Company’s guidelines for the long term. in 2013 interests be carried out including due to more rational use of resources. The issues of shareholders in the Board of Directors were represented by officials of managing the Company’s business reputation, improving its social of such companies as JSC Rosseti and JSC FGC UES, and representatives responsibility, transparency and integrated communications will be of the Ministry of Power Industry of the Russian Federation, Government deduced in a special priority. of St. Petersburg. On behalf of the Board of Directors of JSC Lenenergo I express sincere In 2013 the Board of Directors of JSC Lenenergo regularly considered gratitude to the members of the Board of Directors and the management strategic and production and business issues of the Company’s for coordinated and effective work aimed at comprehensive protection activity. Special attention was paid to approval and control over of interests of the Company. I give the words of special appreciation implementation of key documents for the Company, such as to the administrations of St. Petersburg and the Leningrad Region for the business plan, including the investment program. Reports constructive cooperation and systematic approach to development of grid of the Director General on the basic directions of activity infrastructure in the interests of high-quality and reliable power supply of the Company were considered regularly. of consumers. I sincerely thank all employees of the Company which professional and productive work contributes to stability and reliability In 2013 36 meetings of the Company’s Board of Directors were held, of the electricity grid infrastructure of JSC Lenenergo. of them in absentia – 32, in correspondence – 4; 241 issues were considered at these meetings.

Priority directions of the Company’s activity on the near-term outlook are ensuring of reliability and quality of rendered services pursuant to regulatory legal acts, further reduction of the average duration of technological violations liquidation, implementation of programs to expand the slopes of overhead power lines. The Company has to pay considerable attention to such issues as increase in the market share of JSC Lenenergo in the region at the expense of decrease in RGR of third- party network companies and consolidation of grid assets, decrease in volumes of non-contractual electricity consumption by registration of contractual relations of the consumer under contracts of technological connection and power supply.

In its relations with shareholders the Company, as before, is committed to adhere to the fundamental principles of corporate governance – accountability, justice, transparency and responsibility. I feel confident that in the long term professionalism of employees and support of shareholders of JSC Lenenergo will continue successfully to ensure reliable electricity supply to consumers in St. Petersburg and the Leningrad Region, modernization of electric grid facilities, increase of investment appeal and transparency on the basis of the growth of income and improvement of corporate governance.

In order to ensure break-even activity and maximize profit of the Company development and implementation of measures focused on cutting and growth of income is of particular relevance for JSC Lenenergo.

CONTENTS ABOUT THE COMPANY 1. To our Shareholders Annual Report 2013 JSC Lenenergo

1.2. ADDRESS OF THE DIRECTOR GENERAL OF JSC LENENERGO A.V. SOROCHINSKIY Dear Shareholders!

The past year can be considered with good reason successful for JSC Lenenergo. It is the year when very serious further steps on reliability strengthening were taken. From year to year we increase the volumes of financing of the repair program for which in 2013 RUB 963 mln were allocated. As in previous periods the Company has developed the program of supplementary technical measures in excess of the repair program which financing made another RUB 509 mln for ensuring reliable power supply of consumers. I would like to note that we have increased total financing of the repair program and the program of supplementary measures in 2013 compared to 2012 by 20%, and as compared with 2010 funding was increased almost twice.

In 2013 JSC Lenenergo was the first company of Rosseti holding which established a new division, Situational Analysis Center (SAC), which task is to organize both the work on prevention of emergency situations, and effective interaction, attraction and arrangement of necessary forces for operative elimination of technological violations.

I believe that today the Company is ready to the most effective work in case of emergency situations that was especially vividly reflected in mass hurricanes in the Leningrad Region in November and the first half of December. JSC Lenenergo obviously turned out to be more efficient and operative in comparison with our neighbors, including foreign countries – Finland and Estonia.

Another indicator is reduction of cable lines in St. Petersburg requiring renovation. Three years ago we had 2,100 damaged lines and, as a result, serious problems with reliability in the city. by the end of 2012 due to competent organizational decisions we managed to reduce the number of damaged lines to 1,300, and for 2013 we set the objective to reduce this indicator to 600, but yet in November we executed even more than we planned for 2014.

Implementation of the program of technical re-equipment and management We are leaders in many areas solutions have enabled us to reduce the average time for elimination of technological violations in St. Petersburg for the last two years from 50.4 of activity. Still it is necessary minutes in 2010 to 45.6 minutes in 2012. by the end of 2013 this indicator was for us to hold these positions and already 43.2 minutes. All of this suggests that the work we have done in recent years within the program to enhance reliability, maintenance and investment to constantly improve. Today we programs were absolutely reasonable and proper steps. are mobilizing all our efforts for Last year the Company made considerable progress from the viewpoint of capital very serious, complicated, but construction: today we are building power facilities cheaper than in the Central regions, we exceed the investment program both on distribution networks and interesting tasks, implementation large objects. The total volume of development of capital investments in 2013 of which is resolved into one goal – amounted to RUB 18.7 bn, input of new capacity – 907 MVA. JSC Lenenergo should become one Within implementation of the investment program in 2013 Lenenergo reconstructed six substations of 110 kV in St. Petersburg, put in operation a new of the most efficient power grid modern distribution complex of 10 kV as a part of the substation Rzhevskaya. companies. Two substations of 35 kV and four substations of 110 kV were reconstructed in the Leningrad Region. Modernization of these energy sources significantly improved the reliability of power supply of consumers, enabled to connect new subscribers, and reduced the rate of depreciation of fixed assets.

CONTENTS ABOUT THE COMPANY 1. To our Shareholders Annual Report 2013 JSC Lenenergo

In 2013 the project of development of network 35 kV in the Petrogradsky At the end of last year JSC Lenenergo reached an essentially new standard district, one of the largest projects in the modern history of the Company, was of connection to electric networks– we have launched the project on technological launched. The solution we have worked out on development of the distributive connection in the Leningrad region without visits to the grid organization. network is unique for the downtown of St. Petersburg. Such scheme of power supply is applied for the first time in the conditions of a megalopolis. The project Now residents of the region should only call by phone and leave an application. will allow not only to ensure the enforcement of existing commitments All other stages, from development of specifications to supply of voltage and on technological connection in the amount of 40.8 MW, but to create additional opening personal accounts in the sales company, Lenenergo will execute without reserve for connection of applicants in the amount of 38 MW. I am pleased calls of the client. Such a simple procedure of technological connection to power to note that the project developed by Lenenergo has become a winner of two grid was introduced for the first time in Russia. We plan to expand this practice competitions in the category «Best innovative project» of the regional contest to St. Petersburg as well. «Made in St. Petersburg» and the Federal contest «Made in Russia». With a view of improving customer focus in 2013 JSC Lenenergo created Last year pursuant to the approved plans JSC Lenenergo proceeded with the Council of consumers of services of the grid company. It is a collegial body implementation of one of the most important for the energy system composed of the heads of the network company and representatives of the main of St. Petersburg program– Renovation of cable lines 6-110 kV. Such a large and groups of consumers. The Council’s function is formation of expert opinions technically complex project of comprehensive upgrade of the cable network on activities, proposals on improving the regulatory framework, and introduction is being implemented in Russia for the first time. in 2014 we will complete the first of initiatives of JSC Lenenergo and JSC Rosseti into public associations and stage of the program. 22 cable lines of 6-110 kV with the length of nearly 110 km associations of the business community. will be reconstructed. This will significantly improve the condition of the municipal power supply system, and will enable to provide uninterrupted supply of electricity Today JSC Lenenergo continues to be an active participant of the national to consumers and to connect new load needed for the region’s development. project of the Agency for strategic initiatives to increase access to the energy infrastructure of Russia. ASI chose our Company as a partner in the development Implementation of global programs which will improve the manageability of mechanisms of the project at the national level, since in some areas of the network also proceeds. The first of them is telemechanization the development of Lenenergo comes with a faster pace relative to the road map of substations. Lenenergo creates a system of online transmission of all of this project. processes which occur in the network. This is an unprecedented project – we will be the country’s first grid company which has equipped all power sources 35- Last year was quite difficult but also successful for the company. JSC Lenenergo 110 kV with telemechanics systems. Another large-scale project is modernization has become more strong, smart and stable. We are leaders in many areas and optimization of the system of operative-technological management of activity. Still it is necessary for us to hold these positions and to constantly of networks which main goal is to construct a transparent and clear structure improve. Today we are mobilizing all our efforts for very serious, complicated, but of management of the power supply system, and to reduce time for elimination interesting tasks, implementation of which is resolved into one goal – Lenenergo of technological violations. should become one of the most efficient power grid companies.

Net income of JSC Lenenergo in 2013 amounted to RUB 425 mln, and the volume of productive supply of electric power to the grid totaled 29,613 mln kWh. in 2013, the international rating agency Moody’s Investors Service affirmed credit rating of JSC Lenenergo at Ba2 and national rating at Aa2.ru. The Company received a high rating in terms of efficiency. The rating outlook is stable as Moody’s believes that JSC Lenenergo has sound and prudent plans to develop and adjust its business in close interaction with its shareholders taking into account the availability of funding, tariff evolution and the wider economic environment.

In 2013 as in previous years, the Company management gave particular attention to the issues of optimization of business processes in the field of technological connection. Much of what we have done in 2011-2012 is used today by most of the country’s grid companies. Therefore, we do not stop and continue to improve the processes of technological connection, perform activities on the road map to improve energy infrastructure. We understand today where our bottlenecks are: best of all and more qualitatively to construct and optimize the processes of technological connection of both individuals, and small and medium business.

CONTENTS ABOUT THE COMPANY 2. About the Company Annual Report 2013 JSC Lenenergo

RELIABILITY EFFICIENCY AVAILABILITY

Activities of JSC Lenenergo are aimed at ensuring The Company has been reducing its operating and The priorities of JSC Lenenergo are increasing reliable and uninterrupted supply of consumers with investment costs while maintaining a high level the availability of grid infrastructure, development high quality and green electricity of operational efficiency of a client-focused approach, ensuring maximum About transparency and efficiency at rendering services the Company2

JSC Lenenergo is one of the largest distribution grid companies of Russia. JSC Lenenergo renders services in electric power transmission and technological connection in St. Petersburg and Leningrad Region. In 2013 productive supply of electric power amounted to 29,613 mln kWh, connected capacity reached 771 MW, and revenue totaled RUB 39.9 bn

6 6

TO OUR SHAREHOLDERS CONTENTS STRATEGY 2. About the Company Annual Report 2013 JSC Lenenergo

2.1. GENERAL INFORMATION OF THE COMPANY

LENENERGO, OPEN JOINT STOCK COMPANY OF THE POWER INDUSTRY AND ELECTRIFICATION IS ONE OF THE LARGEST DISTRIBUTION GRID COMPANIES OF RUSSIA, OPERATING NETWORKS 0.4–110 KV

JSC LENENERGO RENDERS SERVICES ON TRANSMISSION AND DISTRIBUTION OF ELECTRIC POWER, CONNECTION OF NEW CONSUMERS TO NETWORKS, AND OTHER SERVICES RELATED TO ELECTRICITY SUPPLY.

Market share in electric power trans- Natural monopoly - tariffs Average staff number mission and distribution on the Company’s services are set by the regulatory authorities 65.7% 6,181 people

ASSETS

Overhead transmis- Cable lines Substations Transformer Installed capacity sion lines 0.4–110 kV, 0.4–110 kV 35–110 kV substations 6–35 kV on circuits 23,059 MVA 40,408 km 21,156 km 379 pcs. 15,531 pcs. +5% +0.9% +3.7% +0.5% +3.4%

Shareholders of JSC Lenenergo (over 1% of ordinary shares Dividends Credit considering disclosure of nominal holders) paid in 2011–2013, RUB mln ratings 25% 53.4% JSC Russian Grids 10% 10% Ba2 % of net proﬁt stable outlook 26.6% St. Petersburg represented by CSPM Moody’s 7.2% JSC IDGC of Ural Aa2.ru ENERGYO SOLUTIONS RUSSIA 381 stable outlook 3.4% (CYPRUS) LIMITED 309 Moody’s Interfax Rating Agenсy 2.2% RUSENERGO FUND LIMITED 142 (rating on national scale) 2.1% Citigroup Global Markets Limited for 2010 for 2011 for 2012

5.1% Other Shares and Capitalization 1For the closing date 13% of the shareholders register 23.12.2013 Listing 3,742 RUB mln free ﬂoat on JSC Moscow Exchange MCap as of (calculated under methodology of JSC Moscow Exchange) (MICEX SE) LSNG LSNGP 31.12.2013

TO OUR SHAREHOLDERS CONTENTS STRATEGY 2. About the Company Annual Report 2013 JSC Lenenergo

Online Annual Report of JSC Lenenergo http://ar2013.lenenergo.ru/en/

OPERATIONAL INDICATORS See more information about operating performance on page 74

Productive supply, mln kWh Electric power losses, % Connected capacity, MW1

1.3% 0.3 p.p. 47.4%

30,007 29,095 28,975 29,613 10.3 10.7 10.6 10.4 10.1 771 Productive27,672 supply, mln kWh 645 1 Electric power losses, % Connected capacity, MW 523 353 321 1.3% 0.3 p.p. 47.4% 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 1Considering generation facilities.

30,007 29,095 28,975 29,613 10.3 10.7 10.6 10.4 10.1 771 Maintaining27,672 stable productive supply while reducing energy losses 645 523 353 321 EBITDA, RUB mln Revenue,2009 RUB2010 mln 2011 2012 2013 and2009 EBITDA2010 margin,2011 % 2012 2013 Net2009 proﬁt,2010 RUB mln2011 2012 2013

10.0% 31% 29% 28% FINANCIAL INDICATORS 27%See more information about financial15.9% performance on page 104 23% EBITDA, RUB mln 39,902 3,258 3,535 34,201 36,958 36,273 Revenue, RUB mln and EBITDA10,022 margin, % 9,733 11,279 Net proﬁt, RUB mln 26,088 8,522 59.2% 8,154 1,367 10.0% 31% 1,042 29% 27% 28% 425 2009 2010 2011 2012 2013 2009 2010 2011 2012 201315.9% 2009 2010 2011 2012 2013 23%

39,902 3,258 3,535 34,201 36,958 36,273 26,088 10,022 9,733 11,279 8,154 8,522 59.2% 1,367 1,042 425 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013

Data are given under RAS. See dynamics of key IFRS indicators in Appendix 8.4 on page 288

Revenue growth and high operating margins

INVESTMENT PROGRAM See more information about the investment program on page 42

Capex, RUB mln w/o VAT Input of transformer capacity, MVA Input of power lines, km

25.8% 16.8%

52.5% 1,846 18,729 1,911 1,713 15,813 15,061 14,891 1,507 1,581 10,334 832 932 996 907 669

2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013

Large-scale modernization of infrastructure aimed at increasing its accessibility and reliability

TO OUR SHAREHOLDERS CONTENTS STRATEGY 2. About the Company Annual Report 2013 JSC Lenenergo

Key performance indicators

Key operational and financial indicators

Change, 2013/2102, % Indicator Unit 20111 20121 2013 (unless otherwise noted)

Productive supply of electric power Mln kWh 28,975 30,007 29,613 –1.3

Electric power losses % 10.6 10.4 10.1 –0.26 p.p.

Connected capacity MW 321 523 771 47.4

Sales revenue, including: RUB mln 36,958 36,273 39,902 10.0

from electric power transmission services RUB mln 28,475 28,816 33,207 15.2

from grid connection services RUB mln 8,311 7,282 6,515 –10.5

from other industrial activity RUB mln 172 175 180 2.7

Prime cost RUB mln 31,758 32,830 36,429 11.0

Gross profit RUB mln 5,201 3,443 3,473 0.9

Earnings before tax RUB mln 2,311 1,962 1,444 –26.4

Net profit RUB mln 1,367 1,042 425 –59.2

For reference: –

ROE 2 % 2.5 1.6 0.6 –1.0 p.p.

EBITDA 3 RUB mln 8,522 9,733 11,279 15.9

EBITDA margin % 23.1 26.9 28.3 1.4 p.p.

Ratio of equity to debt – 1.1 1.4 1.1

Net debt 4 RUB mln 20,197 22,360 23,722 6.1

Net debt /EBITDA – 2.4 2.3 2.1 –

Investment program (development) RUB mln 15,061 14,891 18,729 25.8

Market Cap RUB mln 11,139 7,759 3,742 –52%

P/E 5 – 7.2 6.8 7.0 –

1Indicators for 2011–2012 – according to the annual accounting reporting for 2013 taking into account retrospective data reflection. 2ROE (return on equity) is calculated according to a technique recommended by Department of corporate finance of JSC Rosseti by preparation of the annual report for 2013: (Net profit/Equity) x 100% = [line 2400 f.2 / ((line 1300 f.1 report + line 1300 f.1 bas.) / 2)) x 100%. 3EBITDA is calculated according to a technique applied at formation of the business plan for 2013: EBITDA = Net profit + Profit tax + Depreciation + Interest payable – Interest receivable. 4Net debt is calculated as a sum of long-term and short-term debt (lines 1410 and 1510 of the balance sheet), including debt on interest, net of cash and short-term financial investments. 5Calculated on a formula: average cost of one ordinary share as of the end of the reporting year / Earnings per share.

TO OUR SHAREHOLDERS CONTENTS STRATEGY 2. About the Company Annual Report 2013 JSC Lenenergo

Characteristics of assets

Indicator Unit 2011 2012 2013

Installed capacity (MVA) MVA 21,427.4 21,952.2 23,059.0

Overhead transmission lines 0.4–110 kV, on ROW km 36,586.8 36,858.7 37,213.8

OTL 110 kV km 4,611.4 4,611.4 4,611.5

OTL 35 kV km 3,018.7 3,026.8 3,026.8

OTL 6–10 kV km 17,194.5 17,356.8 17,487.3

OTL 0.4 kV km 11,762.2 11,863.7 12,088.3

Overhead transmission lines 0.4–110 kV, on circuits km 39,782.6 40,052.8 40,407.7

OTL 110 kV km 7,132.1 7,132.1 7,132.5

OTL 35 kV km 3,673.8 3,677.7 3,675.7

OTL 6–10 kV km 17,211.0 17,375.9 17,506.8

OTL 0.4 kV km 11,765.7 11,867.1 12,092.8

Cable lines 0.4–110 kV km 19,554.2 20,400.2 21,156.0

OTL 110 kV km 161.8 167.7 217.0

OTL 35 kV km 369.2 375.6 352.5

OTL 6–10 kV km 13,085.7 13,869.7 14,501.8

OTL 0.4 kV km 5,937.5 5,987.2 6,084.8

Substations 35–110 kV pieces 373 377 379

Substations 35–110 kV MVA 13,741.6 13,968.9 14,569.8

Substations 35 kV pieces/MVA 167/2,173.6 170/2,253.6 169/2,301.7

Substations 110 kV pieces/MVA 206/11,568.0 207/11,715.3 210/12,268.1

Transformer substations 6–35 kV pieces 14,770 15,025 15,531

Transformer substations 6–35 kV MVA 7,685.8 7,983.3 8,489.2

TO OUR SHAREHOLDERS CONTENTS STRATEGY 2. About the Company Annual Report 2013 JSC Lenenergo

2.2. CORPORATE STRUCTURE OF THE COMPANY

JSC LENENERGO

BRANCHES SUBSIDIARIES

1. Vyborg Electric Networks 1. СJSC Tsarskoselskaya Energy Company ––Electric power transmission on distribution grids; ––Technological connection of power installations; km MVA 6,316 1,271 503 people –– Maintenance of outdoor lighting.

2. Gatchina Electric Networks

1,363 km 1,813 MVA 635 people 2. CJSC Kurortenergo 3. Kingisepp Electric Networks ––Transmission of electricity and capacity ––Technological connection to grids.

5,390 km 614 MVA 568 people

4. St. Petersburg High-Voltage Electric Networks 3. СJSC Lenenergospetsremont ––Exercising powers of the sole executive body of economic entities; ––Entrusted management of property; 2,336 km 11,432 MVA 965 people ––Electric power transmission.

5. New Ladoga Electric Networks

5,949 km 845 MVA 562 people 4. JSC Energy Service Company Lenenergo ––Ensuring operation of electrical networks; 6. Suburban Electric Networks ––Production of electrical distribution and control equipment; ––Assembly, repair and maintenance of electrical distribution and control equipment. 3,812 km 600 MVA 535 people

7. Tikhvin Electric Networks

3,775 km 409 MVA 312 people 5. JSC Energouchet ––Production, implementation and maintenance of metering devices 8. Cable Network of energy resources; ––Assembly, repair and maintenance of devices and tools for metering, 17,171 km 5,307 MVA 1,546 people control, testing, navigation, location and other purposes; ––Commissioning works.

9. Directorate of objects under construction

Length of overhead Staff number transmission lines

Total transformer capacity of power Length of cable lines sources

TO OUR SHAREHOLDERS CONTENTS STRATEGY 2. About the Company Annual Report 2013 JSC Lenenergo

2.3. GEOGRAPHIC REACH OF THE COMPANY

Finland

Svetogorsk Kuznechnoye Republic of Karelia

Priozersk Podporozhye

Vyborg Lodeynoye Pole 1 Lake Ladoga

Baltic Sea Sestroretsk Novaya Ladoga 2 5 Vsevolzhsk

St. Petersburg Volkhov Sosnovy Bor 3|4|5 8 Kirovsk

Pushkin 1 4|6 Tikhvin 7 Pikalevo Gatchina 2 Boksitogorsk Ivangorod Volosovo Tosno Kirishi Kingisepp Estonia 3

Slantsy

Novgorod Region

Luga JSC Lenenergo serves the territory of St. Petersburg and the Leningrad Region

Area of St. Petersburg Pskov Region 1.4 thousand sq.km Russia Area of the Leningrad Region 85.9 thousand sq.km

Population of the region 6.9 mln people

Production branches (electric power transmission) Subsidiaries and dependent companies 4.8% Of the total country’s population

TO OUR SHAREHOLDERS CONTENTS STRATEGY 2. About the Company Annual Report 2013 JSC Lenenergo

2.4. BRIEF HISTORY OF LENENERGO

1886 1917 1926 1932 1933 1941–1945

On 16 July 1886, Emperor On 16 (29) December 1917, Company On 19 December 1926, Volkhov After several transformations and change On 19 December 1933, a solemn launch The war and the blockade of Leningrad Alexander III approved the charter of 1886 was nationalized. hydroelectric plant, the country’s first and of names in 1932 the Company was of Nizhne-Svirskaya hydroelectric plant, is a separate page in the annals of Electric Lighting Company. the most powerful hydroelectric plant was renamed to Lenenergo. the world’s first power plant constructed of the St. Petersburg power industry and commissioned. on floating soil, Devonian clays, took place. Lenenergo. More than 1500 engineers died This day is considered Energy of the hydroelectric plant was defending the besieged city or supporting the beginning of the electrical transmitted to Leningrad on substation the work of the energy system. age and the foundation date Chesmenskaya through power line 220 kV of JSC Lenenergo. in length of 240 km, for the first time constructed in our country.

1942 1949 1964 1965 1992 2000

In the winter of 1942, the employees During the great Patriotic war Lenenergo 28 regional power operational Since 1965 formation of main electric In 1992 Lenenergo, Open Joint Stock From 2000 to 2005 5 new substations of Lenenergo paved four threads of cable suffered significant damage: two-thirds departments of agriculture Selenergo were grid of 330 kV was launched. Substations Company of the Power Industry of 110 kV were constructed 10 kV in besieged Leningrad. This cable of the power grid were lost. liquidated, and eight enterprises of electric Vostochnaya, Chudovo and Yuzhnaya with and Electrification was established as in the Petersburg energy system, and more in length more than 100 km was later But in 1949, thanks to the selfless networks Lenenergo were established 330 kV lines were commissioned. a result of privatization. than 120 km of thermal networks and called a «life cable» – due to this unique work of power engineers capacity on their base. tens of thousands of kilometers of electric technical solution power blockade was and electricity output reached networks were reconstructed. broken and Leningrad survived. the pre-war level.

2005 2008 2010 2011 2012

JSC Lenenergo was reorganized St. Petersburg acquired a blocking stake Within creation of the uniform electric Since 01.01.2011 JSC Lenenergo The Agency for strategic initiatives selected by separating into the following in the Company’s authorized capital. grid company JSC Lenenergo acquired switched to a new system of long- JSC Lenenergo to be its partner in the companies: JSC Petersburg Generating CJSC TSEC (96.95% from the authorized term tariff regulation of RAB implementation of the roadmap of the Company, JSC Northwest Power capital) and CJSC Kurortenergo (98.13% (Regulatory Asset Base – adjustable project «Increase of energy infrastructure Management Company, JSC Petersburg from the authorized capital). base of the invested capital) availability». In the framework of this Power Trade Company, and JSC Petersburg which is aimed at attraction project mechanisms of modernization Transmission Networks. of investments into expansion and of the system of technological connection, modernization of infrastructure. designed for implementation at the national level have been worked out on the basis of JSC Lenenergo.

14 15

TO OUR SHAREHOLDERS CONTENTS STRATEGY 2. About the Company Annual Report 2013 JSC Lenenergo

2.5. MILESTONES OF THE REPORTING PERIOD

2013

FEBRUARY APRIL MAY JUNE JULY The state awards were handed over JSC Lenenergo completed construction JSC Lenenergo resumed the tradition of student JSC Lenenergo put into operation a dispatch Shareholders of JSC Lenenergo at the annual Specialists of JSC Lenenergo set to employees of JSC Lenenergo by decrees of external power supply of the new terminal construction brigades. Solemn opening control point of power grids of the United meeting held on June 20, 2013 decided to direct on the Primorskoye highway in St. Petersburg of the President of the Russian Federation of Pulkovo-1 airport in St. Petersburg. of the first shift of student construction dispatching service (UDS) of the East most of its profit for 2012 on development a unique anchor multifaceted pole Vladimir Putin: Alexander Kurilkin, Director brigade of JSC Lenenergo was held on April in branch New Ladoga Electric Networks. of the power grid complex. of transmission lines, which was a unique of JSC Lenenergo branch Suburban Electric 24, 2013 in the territory of substation # 145 Work of the unique automated control complex experience not only for the region’s power Networks, was awarded the order “For merits “Nevsky DSK”. Students were congratulated of power grids on Wednesday May 8, 2013 was system, but for the entire electric power towards Fatherland” II degree. An honorary by heads of the company, representatives estimated by the governor of the Leningrad industry of the Northwest of Russia. title “Honored power engineer of the Russian JSC Lenenergo completed a large-scale of St. Petersburg state agrarian university. Region Alexander Drozdenko. Federation” was awarded to Valentin Nikolayev, replacement of insulators on overhead dispatcher of the Priozersk district of electric transmission lines (OTL) along the main networks of JSC Lenenergo. highways of St. Petersburg, such as KAD and ZSD. In two months power engineers installed On July 25 after the large-scale modernization more than 36 thousand units of the new JSC Lenenergo commissioned substation equipment – it is the amount of the five-year 110/10-6 kV # 185 “Pushkin- Yuzhnaya” program of insulators replacement. in St. Petersburg. MARCH The agency of strategic initiatives (ASI) on the meeting of the working group on increase of access to power infrastructure praised the work of JSC Lenenergo on creation of an effective training course for technological The power supply system of St. Petersburg connection to electric networks which is based successfully sustained load of the St. Petersburg on an interactive platform on the Internet and International Economic Forum held JSC Lenenergo launched the project “single JSC Lenenergo won the competition specially developed workbook. in the Northern capital on June 20-22, 2013. window” in the implementation of technological of the Leningrad federation of trade unions: connection to electric networks in the center for the collective agreement of the company was work with clients and connection at Ligovsky recognized as the best in St. Petersburg and Ave, 61. the Leningrad Region. JSC Lenenergo introduced a simplified The first labor group of pupils was opened procedure of confirmation of capacity up in JSC Lenenergo. 20 pupils of St. Petersburg to 3 kW for all businessmen – owners or lessees were employed in summer vacations from July AUGUST On April 17, 2012 JSC Lenenergo fully placed its of built-in premises, including those in charge 1 to August 15, 2013 in JSC Lenenergo branch JSC Lenenergo Board of Directors first issue of exchange bonds of series BO-01 of non-contractual electricity consumption. Suburban Electric Networks. at the meeting held on August 22, 2013 in the amount of RUB 3 bn. The first coupon considered the report on production activities rate of securities during the auction on MICEX of the Company for 2010-2012 and 1H 2013. Stock Exchange was set at the level of 8.25% per annum.

Specialists of JSC Lenenergo developed an Internet portal for kids dedicated to electrical safety. Thematic sections of the website contain the rules of safe handling of electricity and energy saving, visual aids, scripts, video and photo. Portal opening “Safe electricity” was dated for the International Child Protection Day.

16 17

TO OUR SHAREHOLDERS CONTENTS STRATEGY 2. About the Company Annual Report 2013 JSC Lenenergo

2013 2014

SEPTEMBER OCTOBER JANUARY FEBRUARY Director General of JSC Rosseti Oleg JSC Lenenergo completed construction and Council of consumers of services, an advisory Alexander Drozdenko, Governor of the Leningrad JSC Lenenergo began application of equipment JSC Lenenergo implemented an automated Budargin on September 2, 2013 launched commissioning of substation 110/10 kV collegial body representing the interests of all Region, on December 6, 2013 familiarized with for the use of networks of base stations system of procurements management which a unique software-technological complex # 335 “Kudrovo” in the Vsevolzhsk district groups of consumers, public associations a course of works on clearing of the glade GLONASS/GPS. The technology based was the first complex portal solution in Russian on the corporate chair of JSC Lenenergo of the Leningrad Region, one of the largest and business community was established of power lines 35 kV “Gorkovskaya-3,4”, from on modern software, will enable to increase power industry on management of competitive “Energy saving and increase of power efficiency” power sources constructed by the company over in JSC Lenenergo. which powered traction substation “Kannelyarvi” accuracy and speed up the process of adding procedures. Development of IT professionals in St. Petersburg state agrarian university. the last few years. providing movement of trains on the high- information about power grid facilities within of the grid company was appreciated speed railway St. Petersburg – Helsinki. In 2013 the unified database. by professional community and became the winner JSC Lenenergo cleared 3,096 hectares of glades of contest “Project of the year” of the largest on 2,576 overhead lines 6-110 kV and expanded community of IT Directors Global CIO. 1647.7 hectares of glades. It more than in 2011 and 2012 put together. Specialists of JSC Lenenergo took up duty on the power grid facilities of Sochi. In the period of preparation and holding of the Olympic and Paralympic games Petersburg power engineers assisted to ensure reliable electricity supply of the capital of sport competitions.

JSC Lenenergo prepared the schemes Alexander Novak, Minister of the Power JSC Lenenergo received the award “Best regional of external power supply of sites of the summit Industry of the Russian Federation, on October employer” by results of the rating “Index of leadership” of G-20, museums, transport hubs, and about 11, 2013 visited the network control center held by the group RDV-media. The company received 20 hotels of St. Petersburg for extra loadings. and the situational and analytical center high awards for development and implementation The international rating agency Moody’s of JSC Lenenergo. of projects in the field of HR management. Investors Service affirmed credit rating On 6 December, 2013 JSC Lenenergo opened of JSC Lenenergo at Ba2 and national rating substation 110/35/10 kV # 158 “Pobeda” at Aa2.ru with stable outlook. in the Vyborg district of the Leningrad Region JSC Lenenergo became the winner of competition after a large-scale reconstruction. “Made in Petersburg”. Two projects of the company, on construction of a distribution network 35 kV in the Petrogradsky district, and protection JSC Lenenergo was the first among power of power equipment, became winners in the special grid companies of the country to start nomination of competition «Best innovative the skilled use of a monitoring system project». of overhead lines isolation MetrySense-4000. The unique equipment enables technical specialists of the company to monitor remotely the condition of OTL and remove isolation of the required areas of power lines.

NOVEMBER DECEMBER The annual report of JSC Lenenergo for 2012 JSC Lenenergo launched construction got the first place among companies with of an educational complex of training facilities capitalization up to RUB 10 bn at the XVI annual for professional development and retraining competition of annual reports held by the group of specialists of the company, and for carrying On 20 December, 2013 JSC Lenenergo opened “Moscow exchange” (MICEX-RTS). out professional competitions. The object with a new substation 110/35/10 kV # 216 “Severnaya a total area of 4 hectares will be equipped with Dolina” in the Vyborg district of St. Petersburg. the most modern power equipment.

18 19

TO OUR SHAREHOLDERS CONTENTS STRATEGY 3. Strategy Annual Report 2013 JSC Lenenergo

RELIABILITY EFFICIENCY AVAILABILITY

JSC Lenenergo has been successfully performing its Among the key elements of JSC Lenenergo strategy JSC Lenenergo has been working on simplification repair program, reducing the number of damaged is effective implementation of the large-scale of the technological connection procedure: a new client cable lines and the average time of failuresfailures investment program aimed at renovation of power grid center was opend, the Council of consumers of services elimination assets and business development was established, procedures of applications submission and tracking progress were simplified, and the project “8-800” providing the opportunity of technological connection without any visit to the network company Strategy3 was launched

Strategy of JSC Lenenergo is aimed at ensuring reliable, high- quality and available energy supply of consumers; formation and development of grid infrastructure; maintaining a high level of efficiency; development of scientific and innovation potential; improving the Company’s investment appeal.

20 20

ABOUT THE COMPANY CONTENTS PERFORMANCE INDICATORS 3. Strategy Annual Report 2013 JSC Lenenergo

3.1. THE COMPANY’S POSITION IN THE INDUSTRY

In the 2000th, as a result of the reform of the electric power industry networks, and System Operator – for management of the power supply several independent joint stock companies were established on the basis system. Regional AO-energo were divided by types of business activities of RAO UES of Russia, a uniform structure carrying out generation, on generating, sales and grid companies. The structural reform enabled transmission, and sale of electric power and capacity. There was created to pass to the creation of high-grade market relations in the power industry. Federal Grid Company for electric power transmission on high voltage

Structure of the power grid branch of the Russian Federation

TRADE GENERATION TRANSMISSION AND DISTRIBUTION Sales of electric Electricity and heat generation High-voltage and low-voltage electric networks power to consumers

Nuclear Hydroelectric JSC Russian Grids Power Plants Power Stations

JSC Rosenergoa- JSC RusHydro1 – tom Concern1 – generation of elec- JSC FGC UES Interregional generation tric power (capaci- distribution grid companies of electric power ty) on hydroelectric Backbone high-voltage (IDGC/MRSK) (capacity) at nucle- power stations networks (from 220 W) ar stations which includes JSC Lenenergo

Transmission of electric power Distribution grid End users: on UNEG networks companies (DGC/RSK) Thermal Power Plants industrial Transmission of electric consumers and power on territorial distribution population OGK1 – networks TGK1 – thermal genera- territorial generation companies tion companies of the wholesale market

Third-party grid organizations Generation of the retail market

JSC RAO UES of East All power grid companies of the Far East

1Backbone generators of electric power

Today, the Uniform Energy System of Russia (UES of Russia) consists of seven The grid complex of UES of Russia accounts for more than 10,700 power lines incorporated power systems: East, Siberia, Ural, Middle Volga, South, Center 110–1,150 kV. In the European part of Russia there was formed a developed and Northwest which, in turn, include 69 regional power supply systems. network of 500–750 kV, and in the Asian part – of 500–1,150 kV. High-voltage All power supply systems are connected by intersystem high-voltage power power lines of 220 kV and above make the main backbone network and are lines 220–500 kV and above, and work in a synchronous mode. The power grid maintained by intersystem electric networks. The total length of power lines of all complex of UES of Russia comprises about 700 power stations over 5 MW. voltage classes across the Russian Federation amounts to 2,647.8 thousand km.

ABOUT THE COMPANY CONTENTS PERFORMANCE INDICATORS 3. Strategy Annual Report 2013 JSC Lenenergo

Basic branch infrastructure organizations Main indicators of the power grid branch of Russia

JSC System Operator of the Unified Energy System individually At the end of 2013 general installed capacity of power plants of UES exercises the centralized operative and dispatching control of the Unified of Russia was at the level of 226, 470.2 MW which is 1.5% higher Energy System of Russia. than at the end of 2012. 71 power lines 220 kV and above were commissioned in 2013. Input of new capacity at power plants of UES NP Council for Organizing Efficient System of Trading of Russia in 2013 totaled 3,783.4 MW. A year earlier this indicator at Wholesale and Retail Electricity and Capacity Market was 64.1% more. In 2014, according to plans of the Ministry of Power (Market Council) organizes functioning and control of the wholesale Industry, commissioning of generating capacities in Russia should reach and retail markets of electric power. 9,115 MW. Thus, this indicator625 362 should261 grow up in comparison with 2013 in 2.4 times.4 762 Inter RAO UES group, the diversified power holding operating generating and sales assets in Russia, and in the countries of Europe and Electric power generation by power plants of UES of10 Russia 460 in 2013 the CIS. The Company is a single Russian operator of export and import totaled 1,023.5 bn kWh, which is 0.8% less than in 2012. Overall electricity of electric power. consumption across Russia in 2013 decreased in comparison with 2012 by 0.6% to 1,009.8 bn kWh.30 Reduction 513 of consumption occurred for the first Russian Grids, Open Joint Stock Company (JSC Rosseti) time for the last four years. Thus on consumption volume the result of 2013 6 150 is the operator of power networks in Russia and one of the largest grid conceded only to record results of 2012, but exceeded results of other years. companies in the world. The company operates 2.2 million km of power lines, 473 thousand transformer substations with a capacity of more than 748 GW. Increased values of air temperature in February7 892 and December 2013 and the decline of electricity consumption by industrial enterprises had the most Property complex of JSC Rosseti includes 43 subsidiaries and dependent significant effect on the dynamics of electricity consumption in 2013. companies, including 14 interregional companies and the federal grid company. The controlling shareholder is the state represented by the Federal Agency for state property management of the Russian Federation.

JSC Rosseti is the major shareholder of JSC Lenenergo.

In 2013, according to the Ministry of Power Industry, In 2013 input of new transformer capacity Russia generated 4.7% of global electric power and was on the power plants of UES of Russia was the fifth in the world after China, USA, Japan and India. 3,738.4 MW Electric power generation, bn kWh

1,18 8.0 1,200 1, 032.3 Electricity generation by the power plants 1,000 of UES of Russia in 2013 1 023.5 1,023.5 bn kWh 800 582.0 600

400 2000 2012 2013 2020

ABOUT THE COMPANY CONTENTS PERFORMANCE INDICATORS

105

100 99.13 94.33 97.04 95

90 87.62 85 88.24 87.36

80 82.45 76.89 73.97 74.56 75 76.44 70 71.76

65 Jan Feb Mar Apr May JunJul Aug Sept Oct Nov Dec

Bn kWh Thousand MW 1,400 162 157. 4 1,300 157

1,200 152

1,10 0 150.0 149.2 147 147.8 147. 0 1, 000 142 989.0 1,000.1 1, 016.5 1,009.8 900 942.8 137 800 132

700 127

600 122

500 117 2009 2010 2011 2012 2013

74 745 61 730 61 367 57 357 48 184 39 902

2013 2014 2015 2016 2017 2018 625 362261 4 762

10 460

30 513

6 150

7 892

625 362261 4 762

10 460

30 513

6 150

7 892

1,18 8.0 1,200 1, 032.3 1,000 1 023.5 3. Strategy 625 362261 625 362261 800 Annual Report 2013 JSC Lenenergo 4 762 4 762 582.0 600 10 460 10 460

400 2000 30 513 302012 5132013 2020

6 150 6 150

Structure of installed capacity of power plants Structure of electric power generation by types of power stations of UES of Russia, % 7 892 7 892 of UES of Russia, %

105

100 99.13 94.33 97.04 1,18 8.0 95 1,200 90 87.62 1, 032.3 85 88.24 30.9% Thermal power87.36 plants 1,000 1 023.5 60.8% Heat stations Heat stations 80 82.45 28.6%76.89 Hydroelectric 74.56 Hydroelectric 17.1% 73.97 20.6% 800 Power stations 75 Power stations 76.44 16.8% Nuclear power plants 70 71.76 11.2% Nuclear power plants 582.0 600 Electric power 65 8.7% STU, PSU 5.3% stations of industrial Jan Feb Mar Apr May JunJul Aug Sept Oct Nov Dec enterprises

400 2000 2012 2013 2020

Volumes of electricity consumption and maximum of capacity Dynamics of power consumption in Russia in 2013, consumption in 2009–2013, Thousand MW by months, Bn kWh

Bn kWh Thousand MW 1,400 162 105 157. 4 1,300 157 100 1,18 8.0 1,18 8.0 99.13 1,200 1,200 94.33 97.04 1,200 152 95 1,10 0 150.0 149.2 1, 032.3 1, 032.3 147 147.8 147. 0 90 87.62 1,000 1,000 1, 000 142 88.24 989.0 1,000.11 023.5 1, 0116.5 023.51,009.8 85 87.36 900 942.8 137 80 82.45 76.89 800 800 800 132 74.56 75 73.97 700582.0 582.0 127 76.44 600 600 600 122 70 71.76

500 117 65 Jan Feb Mar Apr May JunJul Aug Sept Oct Nov Dec 400 2009 400 2010 2011 2012 2013 2000 2000 2012 2013 2012 20202013 2020 Electricity consumption Maximum capacity consumption

Demand for electric power steadily grows in long-term prospect.74 745 The highest growth rates in electricity demand in the UES of Russia On forecasts of the Ministry of Power Industry,61 till 2019730 demand for electric are forecasted in 2014–2017 due to the expected expansion and 105 105 61 367 power will continue to grow57 357 and by 2019 it may reach 1,150 bn kWh Bnreconstruction kWh of existing facilities and commissioning of new Thousandcapacity MW 1,400 162 100at99. the13 average10 annual0 99.13 growth rate for the period of 1.79%. at the large enterprises of manufacturing industries.157. 4 48 184 97.04 97.04 94.33 94.33 1,300 157 9539 902 95 1,200 152 90 90 87.62 87.62 88.24 88.24 1,10 0 150.0 149.2 147 85Northwest85 integrated power system 87.36 87.36 147.8 147. 0 1, 000 142 80 8082.45 82.45 76.89 76.89 1,000.1 1, 016.5 1,009.8 The integrated power system of the Northwest is located in the territory The structure of the989.0 Northwest power supply system comprises eight 74.56 74.56 900 942.8 137 75 75 73.97 73.97 of ten subjects of the Russian76.44 Federation76.44 of the Northwest federal district: regional800 power systems: Arkhangelsk, Kaliningrad, Karelian, Kola 132 2013 2014 2015 2016 2017 2018 70St. Petersburg, 70Murmansk Region,71.7 Kaliningrad6 Region,71.76 Leningrad Region, (Murmansk),700 Leningrad (uniting St. Petersburg and the Leningrad Region),127 Novgorod Region, Pskov Region and Arkhangelsk Region, Republic of Karelia, Novgorod, Pskov and the Komi Republic. 65 65 600 122 JanRepublicFeb of Komi,Mar Jan andApr NenetsFeb May Mar autonomousJunJApr ul May region.Aug JunJSept ul Oct Aug Nov Sept Dec Oct Nov Dec 500 117 2009 2010 2011 2012 2013

Bn kWh ABOUT BnTHE kWh COMPANY Thousand MWCONTENTSThousand MW PERFORMANCE74 INDICATORS 745 1,400 1,400 162 162 61 730 157. 4 157. 4 61 367 1,300 1,300 157 157 57 357 1,200 1,200 152 152 48 184 1,10 0 150.0 1,101049.2150.0 149.2 147 39 902147 147.8 147.8 147. 0 147. 0 1, 000 1, 000 142 142 989.0 1,000.1989.0 11,,000.1016.5 1,009.1,8016.5 1,009.8 900 942.8 900 942.8 137 137 800 800 132 132

700 700 127 127

600 600 122 2013122 2014 2015 2016 2017 2018 500 500 117 117 2009 20102009 20112010 20122011 20132012 2013

74 745 74 745 61 730 61 730 61 367 61 367 57 357 57 357 48 184 48 184 39 902 39 902

2013 20142013 20152014 20162015 20172016 20182017 2018 3. Strategy Annual Report 2013 JSC Lenenergo

As at January 01, 2014 power grid complex is formed by 127 power Electricity generation by the power plants (including 104 power stations 5 MW and above) with total installed plants of UES of North-West in 2013 capacity of 23,386 thousand MW, 1,095 electric substations 110–750 kV 101.1 bn kWh with total installed capacity of 85,992.3 MVA and 1,395 transmission lines 110–750 kV with the total length of 43,828.3 km on electric circuit. Electricity consumption on the territory of UES of North-West in 2013 Electric power generation by power plants of OES of the Northwest in 2013 totaled 101.1 bn kW h that is by 3.7% less than in 2012. Electricity consumption 90.3 bn kWh in the territory of OES of the Northwest in 2013 was 90.3 bn kWh that is by 2.3% less than in 2012. Electricity consumption in St. Petersburg and the Leningrad Region in 2013 43.2 bn kWh

Regions of activity of JSC Lenenergo

JSC Lenenergo is one of the largest distribution grid companies of Russia, The situation in national and regional economy considerably affects serving a capacious market – the territory of St. Petersburg and JSC Lenenergo development, therefore the Company on a constant basis the Leningrad Region. conducts monitoring of economic development of the region.

The main indicators of economy development of the regions of service of the Company 20131

Indicator St. Petersburg Leningrad Region

Consumer price index

December 2013, in % by December, 2012 106.7 106.0

For reference: December 2012, in % by December, 2011 106.1 106.5

Performance of the consolidated budget

Income (January–December 2013), RUB mln 408,752 94,403

Expenses (January–December 2013), RUB mln 393,401 99,638

Surplus (January–December 2013), RUB mln 15,351 – 5,235

Public debt of the subject, RUB mln

As of: 01.01.2014 18,663.4 5,866.9

For reference: as of 01.01.2013 21,285.7 10,210.3

Commissioning of residential buildings

2013, total area, thousand sq. m 2,583.50 1,292.7

2013, in % to the corresponding period of the previous year 100.3 112.5

Industrial production index

2013 to 2012, in % 98.8 95.7

For reference: 2012 to 2011, in % 104.3 104.2

1It is filled according to the Territorial body of the Federal service of state statistics across St. Petersburg and the Leningrad Region (Petrostat), Committee of finance of St. Petersburg, the Official website of Administrations of the Leningrad Region (http://lenobl.ru/finance) and St. Petersburg (http://www.gov.spb.ru), data of the Ministry of regional development (http://www.minregion.ru), the Ministry of economic development of the Russian Federation (http://www.economy.gov.ru) including on the basis of data of the operative statistical reporting at the moment of report preparation. The methodology of definition of the majority of indicators is given on Petrostat’s official website http://petrostat.gks.ru.

ABOUT THE COMPANY CONTENTS PERFORMANCE INDICATORS 3. Strategy Annual Report 2013 JSC Lenenergo

Indicator St. Petersburg Leningrad Region

Balance financial result (profit minus loss) by types of business activity

Total (January–December, 2013), RUB bn 423.5 87.3

in % to the similar period of 2012 114.1 100.5

Dynamics of the real monetary income, in % to the corresponding period of previous year

January–December, 2013 109.5 100.1

For reference: January–December, 2012 103.0 108.0

Ratio of the average per capita income and living wage

Q4 20131, % 449.9 327.3

Foreign trade turnover (goods)

Foreign trade turnover, January–December, 2013, USD mln 54,054 18,326

In % by January–December, 2012 95.5 86.8

Including export 19,129 13,398

In % by January–December, 2012 92.6 83.9

Including import 34,925 4,928

In % by January–December, 2012 97.1 96.0

Investments into fixed capital

Total January–December 2013, RUB bn 366.9 235.5

January–December, 2013, in % to the corresponding period of the previous year 100.3 69.5

Demographic indicators

Population2, thousand people, 2013, total 5,131.9 1,763.9

Natural increase in 2013 per 1,000 people, in % to 2012 8.0 times 98

Change in births per 1,000 people, 2013 in % by 2012 102 100

Change in deaths per 1,000 people, 2013 in % by 2012 96 99

Number of unemployed, thousand people 20.2 5.1

Level of registered unemployment, % of economically active population 0.3 0.4

For reference: 2012 0.4 0.5

1The ratio of the average per capita income and a living wage across St. Petersburg is reflected for Q3 2013 and Q3 2012, respectively. 2Population of regions – by preliminary estimates as of 01.01.2014.

ABOUT THE COMPANY CONTENTS PERFORMANCE INDICATORS 3. Strategy Annual Report 2013 JSC Lenenergo

St. Petersburg Leningrad Region The largest enterprises and organizations of the Northwest federal Leningrad Region is among the regions ensuring stable growth district are located in St. Petersburg such as aircraft construction of budget income, industrial production, and positive dynamics enterprises, power engineering plants, etc., which produce and develop of investments. According to the Ministry of Regional Development, aircraft engines, devices and special equipment, power engineering the Leningrad Region takes one of leading places on investment equipment, and a number of other large enterprises. Among strengths appeal in the Russian Federation and on the integrated indicator of the economy of St. Petersburg are diversified structure, high level of development of the region as well. of development of financial and banking infrastructure, availability of modern trade networks and capacious consumer market, and Simultaneously with the work on attraction of large investors the region a high level of competitiveness of several industries. The city is among implemented a set of measures to support entrepreneurship, development the largest transport and transit hubs in Europe. However, significant of small and medium business. Investment development of the region long-term needs of St. Petersburg in infrastructure financing, high serves as a stimulus for development of the construction industry. concentration of the economy and a relatively low level of welfare have In 2013, 1.3 mln sq. meters of residential housing was commissioned a negative impact on economic development of the city. which exceeds the planned figures, while the number of construction sites for the year increased 1.6 times. Besides, large objects of mechanical Among the main priorities of the Government of St. Petersburg in 2013 engineering and metallurgy, a large number of agro-industrial enterprises remained support of social and economic stability and sustainability and major chemical facilities are located in the Leningrad Region. of economic development; economic growth; further modernization of economics (including increase of the investment activity of enterprises). A number of indicators of the regional economy development improved The region proceeded with development and implementation of target in 2013: CPI decreased to the level of 2012 by 0.5 p.p., and the indicator programs, work on creation of conditions and preconditions for the most reached 106.0% which is lower than the national values of the indicator effective management of budgetary funds pursuant to priorities for 2013 (106.5%). Positive dynamics of real incomes of the population of the state policy is carried out on a permanent basis. was noted. The region proceeds with implementation of major projects and target programs providing concentration of financial resources Dynamics of the number of regional macroeconomic indicators are on priority directions of social and economic development. positive. Positive trends in dynamics of real incomes of population, improvement of demographic indicators, growth of the net financial In 2013 a drop of indexes of industrial production, a growth of CPI result of enterprises and organizations, investments in fixed capital in St. Petersburg, reduction in the net financial result of enterprises and were noted. In 2013 the volume of public debt of the subject decreased, investments in the fixed capital of the Leningrad Region, as well as other commissioning of residential houses increased. negative factors of economic development of the subjects had a negative influence on the activity of JSC Lenenergo which reflects national trends. At the same time, consumer price index across St. Petersburg in 2013 made 106.7% that exceeds all-Russian CPI by results of 2013 (only by 0.2 p.p.), and the level of the previous year (by 0.6 p.p.). In 2013 the index of industrial production also decreased.

However, despite a number of negative aspects of economic development of St. Petersburg and the Leningrad Region, their prospect as a whole can be regarded as quite favourable that can positively affect the Company’s activities.

ABOUT THE COMPANY CONTENTS PERFORMANCE INDICATORS 3. Strategy Annual Report 2013 JSC Lenenergo

Peers When analysing the position of JSC Lenenergo in the market indicators Along with JSC Lenenergo regional distribution grid of peer group companies – regional distribution grid companies companies comprise1: which were formed by results of RAO UES reform and are operating – JSC MOESK; today in various regions of the Russian Federation as subsidiaries – JSC IDGC of Centre; of JSC Rosseti, are considered. The companies do not compete directly as they serve different geographical segments of the market. Regional – JSC IDGC of Centre and Volga; distribution grid companies operate in similar market conditions within – JSC IDGC of Ural; the general tariff policy, and, respectively, all basic market and country – JSC IDGC of Siberia; economic factors equally influence the activity of market players. – JSC IDGC of Volga; At the same time situation and prospects of development of each – JSC IDGC of Northwest; company are closely associated with peculiarities of the economic – JSC IDGC of South; situation in the regions of activity. – JSC IDGC of North Caucasus.

1listed companies, whose shares are traded on JSC Moscow Stock Exchange.

In 2013 revenues of distribution grid companies under IFRS increased account that the demands for electric power in Russia vary considerably while dynamics of EBITDA was multidirectional. The financial position between regions and settlements. However, comparison of the companies of distribution grid companies in the reporting period and in the medium- enables to get an overview of the development of the power grid complex as term prospect is complicated by the decision on a zero indexation of tariffs a whole and the place of a certain company in the distribution grid complex for rendering of services to industrial consumers, and overall slowing of the power industry of Russia. of economic growth and development of a number of industrial sectors. On this background the grid companies take measures for reduction of the volumes of investment programs, other costs and operational JSC Lenenergo is the second among its Russian peers efficiency enhancement. on the book value of assets under RAS and IFRS, the third on EBITDA under RAS and IFRS, on Net profit is the fourth In 2013 some distribution grid companies – JSC IDGC of Siberia, JSC IDGC under RAS and the second under IFRS, the seventh on Market of Northwest, JSC IDGC of Centre, JSC IDGC of Centre and Volga and capitalization, the eighth on revenue under RAS and IFRS. JSC IDGC of Volga became guaranteeing suppliers of electric power Discrepancy of high book value of assets to the level in the territory of the Bryansk Region, the Orel Region, the Kursk Region, of capitalization testifies to significant underestimation the Tver Region, the Murmansk Region, the Smolensk Region, the Omsk of the Company and, accordingly, to the potential of growth Region, the Novgorod Region, the Ivanovo Region, the Tula Region, the Penza of share prices under favorable development of the power Region and the Republic of Buryatia. Thus, in addition to rendering of services and financial markets. The comparative analysis also shows in electric power transmission, these companies began to carry out electric that JSC Lenenergo demonstrates some of the best industry’s power purchase in the wholesale market and its sale in the retail market. profitability indicators for 2013. The Company is ranked second on EBITDA margin. Accordingly, direct comparison of performance indicators of the regional distribution grid companies it not always correct. It is necessary to take into

ABOUT THE COMPANY CONTENTS PERFORMANCE INDICATORS 3. Strategy Annual Report 2013 JSC Lenenergo

Comparison of JSC Lenenergo with its peers on financial statements under RAS in 2013

Book value of assets, RUB bn Revenue, RUB bn

MOESK 299.7 MOESK 124.7

Lenenergo 148.5 IDGC of Center 92.9 IDGC 105.0 IDGC of Center of Center and Volga 77.7 IDGC of Center and Volga 89.3 IDGC of Siberia 63.2

IDGC of Volga 65.3 IDGC of Ural 57.4

IDGC of Siberia 57.6 IDGC of Volga 49.2

IDGC of Ural 56.6 IDGC of Northwest 42.1 IDGC of Northwest 55.2 Lenenergo 39.9

IDGC of South 46.7 IDGC of South 27.4 IDGC IDGC of North 32.7 of North 12.5 Caucasus Caucasus

EBITDA, RUB bn, Net profit, RUB bn, EBITDA margin, % Net profit margin, %

MOESK 36.3 / 29.1 MOESK 11.7 / 9.3

IDGC IDGC of Center of Center 11.4 / 12.3 and Volga 2.54 / 3.3 IDGC Lenenergo 11.3 / 28.3 of North 0.54 / 4.3 Caucasus IDGC of Center and Volga 10.9 / 14.0 Lenenergo 0.42 / 1.1

IDGC of Volga 6.0 / 12.2 IDGC of Ural 0.35 / 0.6

IDGC IDGC of Siberia 5.8 / 9.2 of Northwest 0.30 / 0.7

IDGC of Ural / 9.4 IDGC 0.29 / 0.3 5.4 of Center IDGC of Northwest 5.2 / 12.4 IDGC of Volga 0.05 / 0.1

IDGC of South 5 / 18.2 IDGC of South 0.03 / 0.1

IDGC IDGC of North 2.1 / 16.8 of Siberia –1.13 / –1.8 Caucasus

Source: data of financial statements of the companies in accordance with Russian Accounting Standards. EBITDA is calculated by the formula: Net profit + Profit tax + Interest payable – Interest receivable + Depreciation of fixed assets and intangible assets.

ABOUT THE COMPANY CONTENTS PERFORMANCE INDICATORS 3. Strategy Annual Report 2013 JSC Lenenergo

Comparison of JSC Lenenergo with its peers on financial statements prepared under IFRS in 2013

Book value of assets, RUB bn Revenue, RUB bn

MOESK 286.3 MOESK 129.1

Lenenergo IDGC 120.8 of Center 93.3 IDGC 96.0 IDGC of Center 77.6 of Center and Volga IDGC of Center and Volga 76.9 IDGC of Ural 65.5

IDGC of Ural 70.6 IDGC of Siberia 63.7

IDGC of Siberia 55.0 IDGC of Volga 49.2 IDGC 51.5 IDGC of Northwest 44.6

IDGC of Volga 50.4 Lenenergo 37.3

IDGC of South 39.1 IDGC of South 27.3 IDGC IDGC of North 27.0 of North 13.7 Caucasus Caucasus

EBITDA, RUB bn, EBITDA margin, % Net profit, RUB bn

MOESK 44.4 / 34.4 MOESK 19.5 IDGC of Center 11.3 / 12.1 Lenenergo 3.3

Lenenergo 10.4 / 27.8 IDGC of Center and Volga 1.8 IDGC of Center and Volga 9.7 / 12.5 IDGC of Volga 1.5 IDGC IDGC of Volga 6.5 / 13.3 of Northwest 0.4 IDGC IDGC of Ural 5.7 / 8.6 of Center 0.3

IDGC 5.3 / 11.9 IDGC of South of Northwest 0.2 IDGC of South 5.1 / 18.6 IDGC of Siberia –1.1

IDGC of Siberia 4.2 / 6.6 IDGC of Ural –1.1 IDGC IDGC of North –0.5 / –3.5 of North –2.1 Caucasus Caucasus

Source: data of financial statements of the companies in accordance with IFRS. EBITDA is calculated by the formula: Earnings before tax + Depreciation of fixed assets and intangible assets + Financial expenses – Financial income.

ABOUT THE COMPANY CONTENTS PERFORMANCE INDICATORS 3. Strategy Annual Report 2013 JSC Lenenergo

High potential of operational efficiency Position of a natural monopoly on the stably increase owing to implementation Approved dividend policy developing market of St. Petersburg and of the programs of cutting costs, increases and positive dividend history. Leningrad region. of power efficiency, and innovative development.

Diversified base of customers, including large- Strong team of skilled managers at the head scale industry, small and medium business, of the Company, qualified, experienced and population. trained staff. FACTORS OF INVESTMENT APPEAL OF JSC LENENERGO Individual approach of regulatory authorities Effective implementation of the large-scale to establishment of long-term parameters investment program directed on renovation of tariff regulation with the aim of creating of power grid assets and possibility of business sources for implementation of the investment development. program.

Strong reputation of a diligent borrower Support of significant investment projects confirmed with a long-term credit rating Status of a strategic enterprise. from the state, including by participation of Moody’s at Ba2 on the international scale. in their financing.

Market capitalization on MICEX SE as of 30.12.2013, RUB bn

MOESK 70.8

IDGC of Center 9.3 IDGC of Center 7.6 and Volga

IDGC of Siberia 6.6

IDGC of Ural 5.6 in this section, the following sources were used:

IDGC of Volga 4.1 1. The program of development of the Unified Energy System of Russia for 2013–2019, approved by the Order of the Ministry of Power Industry # 309 of 19.06.2013. Lenenergo 3.7 2. Report on the functioning of the UES of Russia in 2013 of JSC SO UES. IDGC 3. Analytical Bulletin “Electric power industry: trends and forecasts. Issue # 13. Outcomes of 2013”. Group of Northwest 2.7 “RIA Rating”, Moscow, 2014 IDGC 4. “The main indicators. The results of the work of the power grid complex in 2012”. Ministry of Power of North 2.4 Industry of Russia. Caucasus 5. Data of the branch of JSC SO UES – ODM of the North-West, territorial body of the Federal Service IDGC of South 1.6 of State Statistics of St. Petersburg and the Leningrad Region (Petrostat), Finance Committee of St. Petersburg, official web-site of the administrations of the Leningrad Region (http://lenobl.ru/ finance) and St. Petersburg (http://www.gov.spb.ru), data of the Ministry of Regional Development (http://www.minregion.ru), the Ministry of Economic Development of the Russian Federation (http://www. economy.gov.ru), data of the Ministry of Power Industry (http://www.minenergo.gov.ru/), data of operative statistical reporting at the time of preparation of the report.

ABOUT THE COMPANY CONTENTS PERFORMANCE INDICATORS 3. Strategy Annual Report 2013 JSC Lenenergo

3.2. MISSION AND STRATEGY OF THE COMPANY

MISSION OF JSC LENENERGO – ENSURING RELIABLE AND UNINTERRUPTED SUPPLY OF CONSUMERS WITH HIGH-QUALITY AND GREEN ELECTRIC POWER AND SATISFACTION OF THE INCREASING DEMAND FOR ELECTRIC ENERGY AND CAPACITY.

THE DIRECTIONS OF BRANCH DEVELOPMENT ARE DEFINED BY THE DEVELOPMENT STRATEGY OF THE POWER GRID COMPLEX OF THE RUSSIAN FEDERATION APPROVED BY THE RESOLUTION OF THE GOVERNMENT OF THE RUSSIAN FEDERATION # 511-R OF 04.03.2013.

Pursuant to the strategy the main objective (mission) of activity of the power grid complex is long-term ensuring of reliable, high-quality Strategic tasks of the power grid complex of the Russian and available power supply of consumers of the Russian Federation. Federation are: The branch strategy is focused on organization of network infrastructure – competitive tariffs for electric power for industry development; most effective and corresponding to the international standards. Thus tariffs for electric power transmission should provide acceptable level – ROE attractive for investors ROE; of expenses for electric power for the Russian economy and investment – maintenance of high level of organizational, operational and appeal of the branch through adequate return on equity. investment efficiency;

– ensuring reliability of power supply of consumers; The number of key task of state policy in the field of power grid economy includes creation of economic methods of stimulation of network – ensuring quality of service of consumers; organizations efficiency, providing conditions for stabilization of tariffs, – development of scientific and innovative potential of the power and attraction of new capital into the power grid complex in the volume grid complex, including for stimulation of the development sufficient for modernization and reconstruction of electric networks for of related industries; ensuring power supply reliability. – infrastructure development for maintenance of the growth of economy of Russia. To achieve its strategic goals the Company applies the instruments of HR, financial, corporate, investment and production policies.

ensuring reliable, high-quality and available maintenance of high level of organizational, power supply of consumers operational and investment efficiency STRATEGIC PRIORITIES OF JSC LENENERGO correspond to the development strategy of the power grid complex formation and development of the power grid of the Russian Federation development of scientific and innovative capacity infrastructure meeting needs of the region of the Company, contribution to innovative of presence branch development of the power industry

increase of investment appeal of the Company, promotion of the image, improvement of interaction with all stakeholders

ABOUT THE COMPANY CONTENTS PERFORMANCE INDICATORS 3. Strategy Annual Report 2013 JSC Lenenergo

Implementation of the program on simplification Road map of the procedure of technological connection “Increase of power infrastructure availability” to power supply networks of JSC Lenenergo In 2012 the Government of the Russian Federation set a task In compliance with the governmental road map in 2012–2013 in the field of improvement of conditions for business activity: JSC Lenenergo implemented a series of measures for to provide essential reduction of the terms of passing procedures simplification of technological connection procedures, in the areas of state regulation (including connection to networks) development of internal, correspondence and interactive of the subjects of entrepreneurial activity and the cost of these services. Among priority directions of work in the field procedures, including the implementation of the road maps for of simplification of technological connection are: improvement of the investment climate in Russia.

ԔԔ regulation of business processes associated with technological Within the Resolution # 1144-R of 30.06.2012 the plan connection; of measures “Increase of availability of power infrastructure” (further – the road map) which contains ԔԔ creation of electronic archive on technological connection; the actions urged to facilitate the conditions of connection of users to power infrastructure in Russia and is approved ԔԔ opening of the new client center with a qualitatively new level and provides: of service; – improvement of the rules of technological connection to power networks and creation of conditions of reduction of the terms and ԔԔ improvement of mechanisms for submitting applications for stages of technological connection; technological connection via Internet; – improvement of a legal mechanism of redistribution of free capacity; ԔԔ creation of the geo information system (GIS) simplifying technological connection of new facilities; – decrease in tariffs for technological connection; – introduction of uniform standards of information disclosure ԔԔ creation and improvement of the modern automated control system on technological connection; of technological connection, introduction of electronic project – increase of efficiency of the use of existing resources of network management systems; organizations.

ԔԔ opening of the uniform contact center, including for addresses By results of the executed actions in 2013 Russia managed on technological connection; to rise considerably in the international rating “Doing Business” on availability of power infrastructure: Russia moved ԔԔ creation of the council of consumers of JSC Lenenergo for discussion from the 188th on the 117th place. and solution of various questions associated with technological connection;

ԔԔ approval of internal regulatory legal acts, modification of internal Increase of 71 positions documents pursuant to requirements of the road map. 117 place

188 place

2012 2013

ABOUT THE COMPANY CONTENTS PERFORMANCE INDICATORS 3. Strategy Annual Report 2013 JSC Lenenergo

STRATEGY IN OPERATION

Ensuring reliable, high-quality and available power supply of consumers, ensuring non-discriminatory 1 access of consumers to networks

Development of scientific and innovative capacity of the Company, contribution to innovative branch 2 development of the power industry

Formation and development of the power grid infrastructure meeting needs of the region 3 of presence

Increase of investment appeal of the Company, promotion of the image, improvement of interaction 4 with all stakeholders

Maintenance of high level of operational, organizational and investment efficiency

34 5 ABOUT THE COMPANY CONTENTS PERFORMANCE INDICATORS 3. Strategy Annual Report 2013 JSC Lenenergo

Ensuring reliable, high-quality and available power supply of consumers, ensuring non-discriminatory access of consumers to networks

Tasks Development of sales of services: ԔԔ Productive supply of electric power (in comparable conditions ԔԔ Decrease in the indicator of specific breakdown rate. without “last mile” consumers) increased since 2010 by 4%, ԔԔ Reduction of average time of elimination of technological violations. the indicator of electric power losses was reduced by 0.85 p.p. ԔԔ Development and implementation of the repair program. ԔԔ The number of applications for technological connection 1ԔԔ Increase of serviceability of the equipment. in 2013 increased in comparison with 2010 almost twice: by 94%, ԔԔ Increase of availability of network infrastructure. to 28,444 pieces. ԔԔ Simplification of mechanisms of technological connection. ԔԔ The number of signed contracts on technological connection in 2013 ԔԔ Increase of grid efficiency and controllability. increased in comparison with 2010 by 62%, to 18,066 pieces, thus the number of executed contracts grew by 77%. Outcomes ԔԔ According to the governmental road map in 2012–2013 JSC Lenenergo implemented a series of measures for simplification Ensuring reliability: of procedures of technological connection ԔԔ Implementation of the repair program since 2010 grew by 95% ԔԔ In 2013 JSC Lenenergo launched the project «8-800» from RUB 770.6 mln to RUB 1,500.5 mln in 2013. in the Leningrad region providing technological connection without ԔԔ Cumulative financing of the repair program and the program any visit of the network company. of supplementary actions in 2013 in comparison with 2012 grew by 20%, and in comparison with 2010 financing was increased practically twice. Programs of the Company development were approved: ԔԔ Average time of elimination of technological violations ԔԔ Plans of execution by JSC Lenenergo of current, accumulated and in St. Petersburg was lowered from 50.4 minutes in 2010 delayed obligations on technological connection towards applicants to 43.2 minutes in 2013. of St. Petersburg and the Leningrad Region. ԔԔ The Company reduces the number of damaged cable lines. ԔԔ The plan of measures on bringing the system of client service In three years the Company managed to lower this indicator from in compliance with the standard requirements “The system 2,100 to 600 that increased essentially reliability of power supply of centralized customer service” in the new edition. in St. Petersburg. ԔԔ In 2013 JSC Lenenergo became the first company of the Rosseti holding in which the new division, the situational and analytical center for organization of effective interaction in emergency situations, was created.

Development of scientific and innovative capacity of the Company, contribution to innovative branch development of the power industry

Tasks

ԔԔ Introduction of new technologies, innovative products and services ԔԔ The total amount of financing of R&D in 2013 totaled RUB 40.2 mln. ԔԔ Implementation of R&D programs. ԔԔ In 2013 JSC Lenenergo implemented a series of priority programs in the field of R&D, including programs “Method of laser aero- Outcomes scanning of OTL 35–110 kV”, “Signaling device of relay protective 2 automation”, “Mode of resistive grounding of a neutral of the power ԔԔ In 2013 RUB 2,782.1 mln were directed on innovative activities transformer”, “Introduction of Smart Grid”. in the field of power efficiency increase, actions in the field of development of innovative technologies and R&D that is by 66% higher than in the previous year.

ABOUT THE COMPANY CONTENTS PERFORMANCE INDICATORS 3. Strategy Annual Report 2013 JSC Lenenergo

Formation and development of the power grid infrastructure meeting needs of the region of presence Tasks

ԔԔ Implementation of the investment program providing development ԔԔ From 2010 6,647 km of OTL, 4,746 MVA were commissioned of infrastructure. by the Company. ԔԔ Implementation of programs of renovation of equipment. ԔԔ The volume of capital investments during 2010–2013 totaled RUB 64 bn. ԔԔ Implementation of projects of networks development. ԔԔ The program of Renovation of CL 6–110 kV in St. Petersburg 3 regarding commissioning of objects in operation in 2013 Outcomes is executed in full. ԔԔ In 201 the project of development of network 35 kV ԔԔ The volume of capital investments in 2013 in comparison with in the Petrograd district that is one of the largest ever project 2010 increased by 18%, thus volumes of incomplete construction in the history of the Company was launched. decreased for 17%. ԔԔ Regulations on investment activity of JSC Lenenergo in the new ԔԔ The plan on input of OTL and transformer capacity during edition, and scenario conditions of formation of the investment 2010–2013 is exceeded on 2,059 km (827 MVA). program of JSC Lenenergo were approved.

Increase of investment appeal of the Company, promotion of the image, improvement of interaction with all stakeholders

Tasks

ԔԔ Implementation of the program of public loans. were paid. The total size of dividends paid for 2012 amounted ԔԔ Work with rating agencies. to 25% of the Company’s net profit calculated under RAS. ԔԔ Implementation of effective dividend policy. ԔԔ The Company pursues a policy of openness and transparency: ԔԔ Observance of principles of openness and transparency of business. ԔԔ in addition to mandatory information disclosure in accordance 4 with Russian legislation the Company regularly publishes additional Outcomes materials for shareholders, potential investors and all interested persons on its website. ԔԔ In 2013 the Company placed exchange bonds of a series BO-01 ԔԔ The Company conducts active work for ensuring transparency of its in the volume of RUB 3 bn with a maturity term of three years and activities, including in the field of procurements, investment activity, registered four issues of exchange bonds of series BO-02– BO-05 and technological connection in the total amount of RUB 20 bn with a maturity term of 10 ԔԔ The following internal documents were approved and years. Besides, there is the issue of a series 04 registered in 2012. operate in the Company: the Code of Corporate Governance The Company has proved itself as a good borrower always meeting of JSC Lenenergo in the new edition; the Code of Corporate its obligations in due time and in full. Conduct of JSC Lenenergo; Regulations on insider information ԔԔ In 2009 the rating agency Moody’s appropriated JSC Lenenergo of JSC Lenenergo in the new edition; Regulations on information with a long-term credit rating at Ba2 on the international scale. policy of JSC Lenenergo in the new edition. In 2013 and 2014 the rating was affirmed. ԔԔ The Company annually pays dividends on preferred shares. For the first time since 2005 in 2013 dividends on ordinary shares

ABOUT THE COMPANY CONTENTS PERFORMANCE INDICATORS 3. Strategy Annual Report 2013 JSC Lenenergo

Maintenance of high level of operational, organizational and investment efficiency Tasks ԔԔ Within introduction of the control system of production assets ԔԔ Decrease in operational expenses. in 2013 the basis for Enterprise resource planning creation ԔԔ Reduction of investment expenses. on the SAP platform on automation of management by processes ԔԔ Maintenance of a comfortable level of profitability of primary of maintenance and repair of equipment was put which will enable activity. to raise the urgency of data on actual state of equipment, increase 5 efficiency of use of the funds of repair programs, and the program Outcomes of modernization and reconstruction. ԔԔ Work on increase of grid controllability proceeds, including Decrease in operational expenses: the program of telemechanization of substations: JSC Lenenergo ԔԔ The effect from implementation of the program of costs creates the system of online translation of all processes in the grid. management regarding operational expenses in 2010–2013 ԔԔ The following internal documents directed on ensuring high amounted for RUB 2.1 bn. efficiency are approved and operate in the company: Regulations ԔԔ In 2013 decrease in the given operational expenses in comparison of JSC Lenenergo about uniform technical policy in the power grid with 2010 was 10.8%. complex; the Program of perspective development of the systems of accounting of electric power in the retail market of electric power Decrease in investment expenses: in JSC Lenenergo networks for the period till 2017; the Program ԔԔ Specific cost of construction in 2013 decreased (CK 110 kV (HV) – of energy saving and increase of power efficiency of JSC Lenenergo by 17% in relation to 2009, in 2010 of CL 110 kV was not entered; for 2013–2018; the Target Program of development CL 3–10 kV – by 14% in comparison with 2010; CL 0.4 kV by 35% of the automated system of technological management in relation to 2009). of JSC Lenenergo. ԔԔ The Company supports a high level of operational efficiency: EBITDA margin for 2013 constituted 28.3% (26.8% – in 2012, 23.1% – in 2011)

In its activity JSC Lenenergo aspires to satisfy interests of all stakeholders, including third-party grid organizations, staff, consumers, public authorities, and investment community.

Consumers Staff Creation of the system of authentic measurement Professional growth, including training and exchange of quality and reliability of power supply PRIORITIES of knowledge. Increased focus on fulfillment of key on the basis of international standards, increase OF JSC LENENERGO performance indicators. Effective assessment and of responsibility for achievement of target values promotion of the best employees on quality and reliability. Achievement of high AIMED AT THE INTERESTS load of commissioned capacities owing to better OF KEY STAKEHOLDERS demand planning, revision of criteria of closing of substations, introduction of stage-by-stage construction

Investment community Third-party grid organizations Public authorities

Preservation of the system of tariff regulation Ensuring the coordinated development of the power Satisfaction of requirements of the economy by a method of return on invested capital (RAB grid complex of the region. Implementation of St. Petersburg and the Leningrad Region in new regulation), increase of transparency of tariff-setting of the uniform technical policy of stage-by-stage technological connections to electric networks and investment programs construction

ABOUT THE COMPANY CONTENTS PERFORMANCE INDICATORS 3. Strategy Annual Report 2013 JSC Lenenergo

3.3. BUSINESS MODEL AND COMPETITIVE ENVIRONMENT

Level 1 Level 2 Level 3

End users Distribution grid company Backbone networks JSC Lenenergo Generation Third-party (FGC UES) 0.4-110 kV grids > 220 kV grids grid organizations 0.4-110 kV grids

34% electricity transmission fee Sales 66% companies electricity transmission fee

payment of losses in networks of JSC Lenenergo electricity fee

electricity transmission fee

purchase of electricity

Generation Backbone networks Distribution grid company Third-party grid organizations Sales companies End users JSC Lenenergo TGK-1, OGK-6, Branch of JSC FGC UES – Major TGOs in the region: Independent power sales NW GRES, LAES, etc. MEN of North-West Market share of the Company in SPb – JSC SPbES, companies in LR – JSC LOESK 69.5% 70.3% 65.7% Guaranteeing suppliers: JSC PSK, LLC RSK-Energo, LLC Rusenergosbyt, contracts with LLC Energy Holding third-party 51 grid organizations Direct consumers – participants 2011 2012 2013 of the wholesale and retail electricity markets

Consolidated revenue system electric power sales cash funds 34 companies

38 39

ABOUT THE COMPANY CONTENTS PERFORMANCE INDICATORS 3. Strategy Annual Report 2013 JSC Lenenergo

Competitive environment

JSC Lenenergo is the major grid company in the territory 34 sales companies, including four guaranteeing suppliers, operate of St. Petersburg and the Leningrad Region transmitting electric on the territory of St. Petersburg and the Leningrad Region. For execution power and capacity from generation companies to end users. of obligations on electric power transmission to consumers of the region JSC Lenenergo uses the services of third-party grid organizations. Services in electric power transmission are provided At present JSC Lenenergo has signed contracts on electric power to the guaranteeing suppliers, independent power trade companies transmission with 51 third-party grid organizations. and direct consumers –participants of the wholesale market of electric power. Electric power arrives in JSC Lenenergo network from JSC FGC UES branch of – MEN of the Northwest and generation companies.

Competitive environment Today there are three levels of grid companies in Russia which were created on technological and administrative-territorial signs:

Federal Grid Company which owns Regional distribution grid companies Territorial network organizations which networks of 220 kV and above. created upon reformation of AO-energo. primarily own networks of 0.4–10 kV. The company conducts its activity These companies own networks By results of the reforming processes in the territory of all Russian of 110–0.4 kV and render transmission part of such enterprises merged. Federation with branches in all regions services in the territory of the subject of the Russian Federation. of the Russian Federation in which they are located.

ABOUT THE COMPANY CONTENTS PERFORMANCE INDICATORS 3. Strategy Annual Report 2013 JSC Lenenergo

JSC Lenenergo is a regional distribution grid company, operating About 19 territorial network organizations in St. Petersburg and on the second level of the power system. JSC Lenenergo conducts its 31 organizations in the Leningrad Region conduct their activities activities in the territory of two subjects of the Russian Federation with in electric power transmission besides JSC Lenenergo. separate tariff regulation – St. Petersburg and the Leningrad Region. Tariffs for electric power transmission are set in the territory of each Along with JSC Lenenergo, activities for connection of consumers subject of the Russian Federation. in St. Petersburg and Leningrad Region are performed by JSC St. Petersburg Electrical Networks, MEN of Northwest – At present the competition between the grid companies of the region a branch of JSC FGC UES, JSC Leningrad Territorial Management is practically absent. The competition between grid companies is possible, Power Grid Company (JSC LOESK), and a number of third-party grid if some grid organization in the region owns networks of the same organizations which areas of responsibility are fixed by Resolutions voltage level, and consumers can select a provider of services. of the Governments of appropriate subjects of the Russian Federation.

Regional and territorial network organizations own networks of 0.4–10 kV. At regional level there is a competition between JSC Lenenergo and territorial network organizations.

Market share of the Company The share of electric power transmission of JSC Lenenergo Decrease in the share of JSC Lenenergo in the market of transmission in the total electricity consumption by own consumers of power trade services is caused by leaving of some consumers connected under companies conducting their activity in the territory of St. Petersburg “last mile”, formation of new territorial network organizations and the Leningrad Region, taking into account the consumers who on the basis of large enterprises (industrial sites), transferring their have been directly connected to power installations of generation own power network facilities in the use of the network organization companies, for the last three years amounted to: and thus reducing own costs of maintenance of power equipment.

Market share, %

69.5% 70.3% 65.7%

2011 2012 2013

ABOUT THE COMPANY CONTENTS PERFORMANCE INDICATORS 3. Strategy Annual Report 2013 JSC Lenenergo

3.4. INVESTMENT ACTIVITY

AT PRESENT JSC LENENERGO IS IMPLEMENTING AN AMBITIOUS AND LARGE-SCALE INVESTMENT PROGRAM WHICH ALLOWS SOLVING KEY STRATEGIC GOALS OF THE COMPANY.

Parameters of large-scale investment program

Formation of network infrastructure for Creation of technological infrastructure for Decrease in the level of wear of equipment and providing a growing demand for electric power functioning of the competitive market of electric infrastructure of the distributive power network from consumers power and capacity industry

Implementation of the Program of renovation Creation of free transformer capacity for of CL 6-110 kV, financed with attraction the purpose of ensuring optimum loading KEY OBJECTIVES of federal funds pursuant to agreements of the centers of a food of the power accepting OF THE INVESTMENT between JSC Lenenergo, the city equipment, providing an optimum operating of St. Petersburg and JSC Rosseti, and between mode of an electric network PROGRAM JSC Rosseti and Ministry for the Power Industry of Russia

Performance of obligations on technological connection, including towards a preferential category Introduction of innovative projects and power of consumers according to the Concept of execution of accumulated obligations on grid connection efficiency programs approved by the Company’s Board of Directors

The investment program of JSC Lenenergo was developed in the conditions of tariff regulation by a method of return on invested capital (RAB regulation) Total capital investments for 2014–2019 according to development plans of territories and technical condition of electric RUB bn w/o VAT networks taking into account the importance of power supply facilities, forecasts 157.3 on revenue from electric power transmission and proceeds under grid connection contracts. The decisions approved during development of the investment program correspond to the goals and objectives of the uniform technical policy in the distributive power network industry and to provisions of the current legislation. The volume of funding is planned for 2014–2019 in the sum of 188.8 RUB bn (with VAT)

ABOUT THE COMPANY CONTENTS PERFORMANCE INDICATORS 3. Strategy Annual Report 2013 JSC Lenenergo

The investment program of JSC Lenenergo for 2014-2019 was developed In April 2014 public hearings of the draft long-term investment upon instructions of the Ministry of the Power Industry of Russia (Minutes program were held at the Open Government of the Russian Federation. # 09-1183-pr of 30.12.2013) taking into account extension of the tariff The program was affirmed and recommended for approval. regulation period till 2019. Total CAPEX for 2014-2019 under the long-term program The draft of investment program of JSC Lenenergo was coordinated amounts to RUB 157,280 mln (with VAT), including by the regions: by the Commission on investments of JSC Rosseti on 17.12.2013 and is submitted for approval by the Ministry of the Power Industry of Russia. ԔԔ St. Petersburg – RUB 113,077 mln (with VAT);

Pursuant to the plan of measures (“Road map”) “Increase of power ԔԔ Leningrad Region – RUB 44,203 mln (with VAT). infrastructure availability”, the approved Resolution of the Government of the Russian Federation # 1459-R of 17.08.2013 providing introduction of the procedure of public hearings on drafts of investment programs of power network organizations, the draft of investment program for 2014–2019 received positive conclusions by results of the hearings of public expert advisory boards under Committees on tariffs of St. Petersburg and the Leningrad Region. Planned input of power lines The investment program was coordinated by executive in 2014–2019 bodies of subjects of the Russian Federation (requirements 14,540 km of the Resolution of the Government of the Russian Federation # 977 of 01.12.2009):

ԔԔ St. Petersburg – # 04-10-167/14-0-1 of 06.03.2014 signed by Vice governor of St. Petersburg M.P. Mokretsov; Planned input of transformer capacity in 2014–2019 ԔԔ Leningrad Region – # 7-10760/12-4-2 of 05.03.2014 signed by Governor of the Leningrad Region A.Y. Drozdenko. 13,525 MVA

Dynamics of key parameters of the long-term investment program

2014 2015 2016 2017 2018 2019

Capex, RUB mln (w/o VAT) 25,864 29,987 28,376 24,525 24,242 24,286

Financing, RUB mln (with VAT) 32,173 34,234 33,790 29,578 29,628 29,370

Input of fixed assets, RUB mln 28,903 30,107 30,430 26,060 25,679 25,623

Transformer capacity, MVA 1,992 2,508 2,781 2,758 1,729 1,757

Power lines, km 2,604 2,591 3,133 949 2,320 2,943

ABOUT THE COMPANY CONTENTS PERFORMANCE INDICATORS 3. Strategy Annual Report 2013 JSC Lenenergo

Dynamics of Capex by directions, RUB mln (w/o VAT)

Name 2014 2015 2016 2017 2018 2019

St. Petersburg 18,207 21,987 19,876 16,525 18,241 18,241

Retrofitting and renovation 8,147 9,876 11,701 13,189 12,988 15,642

New construction 9,960 12,089 8,174 3,336 5,253 2,599

Other 99 22 0 0 0 0

Leningrad Region 7,657 8,000 8,500 8,000 6,001 6,045

Retrofitting and renovation 4,437 5,476 5,871 5,765 4,202 4,734

New construction 3,181 2,524 2,629 2,235 1,799 1,311

Other 39 0 0 0 0 0

JSC Lenenergo, total 25,864 29,987 28,376 24,525 24,242 24,286

Retrofitting and renovation 12,584 15,353 17,572 18,954 17,190 20,375

New construction 13,141 14,612 10,804 5,571 7,052 3,911

Other 138 22 0 0 0 0

Dynamics of capacity input, MVA Dynamics of capacity input, km

2,781 2,758 3,133 2,508 2,943 763 936 2,604 2,591 2,002 1,992 595 1,645 1,757 2,320 1,729 1,796 1,798 1,949 757 1,912 2,018 1,822 416 1,319 581 1,260 1,341 1,235 1,148 1,298 1,130 1,002 808 793 690

2014 2015 2016 2017 2018 2019 2014 2015 2016 2017 2018 2019

St. Petersburg Leningrad Region St. Petersburg Leningrad Region

At implementation of the investment program of 2014–2019 Implementation of the investment program will influence capacity the increase in fixed assets will make RUB 166.8 bn, additional increase, drop in the breakdown rate, improvement of the quality transformer capacity in the volume of 7,573 MVA will be created, of reliability of the power supply system functioning and will provide the length of power lines will be increased by 6,358 km. technological connection of consumers to electric networks.

ABOUT THE COMPANY CONTENTS PERFORMANCE INDICATORS 3. Strategy Annual Report 2013 JSC Lenenergo

Dynamics of Capex by directions, RUB mln (w/o VAT)

1 The main direction of Capex for 2014–2019 is retrofitting and 29,987 28,376 1 renovation of network facilities (over 65% of the total amount 25,864 14,612 24,525 24,242 24,286 10,804 of investments), required due to a high share of wear of the capital 13,141 5,571 7,052 3,911 equipment. The share of investments into new construction in the long-term investment program makes 35% of the total 18,954 20,375 17,572 17,190 amount of investments. 15,353 12,584

2014 2015 2016 2017 2018 2019

Retrofitting New construction and renovation Technical modernization of network facilities accounts for more than 65% of total investments 1Including Other

Implementation of the investment program in 2013

In 2013 Capex totaled The investment program for 2013 was formed pursuant to requirements of the Resolution of the Government # 977 of 01.12.2009, coordinated 18.7 RUB bn by subjects of the Russian Federation and approved in the structure of the investment program for 2012-2017 by the Order of the Ministry of Power Industry of Russia # 240 of 05.05.2012.

Capex under the investment program for 2013 totaled RUB 18.7 bn. Commissioning of transformer capacity in 2013 In 2013 within investments 907 MVA of transformer capacity and 907 MVA 1,846 km of power lines were put in operation. The gain of capacity made 709 MVA and 1,159 km. and power lines 1,846 km

Dynamics of execution of the investment program

Capex Input of fixed assets Financing Capacity input Capacity gain Name RUB mln w/o VAT RUB mln RUB mln with VAT МVA km МVA km

2011

St. Petersburg 10,829 11,246 11,446 623 935 513 740

Leningrad Region 4,232 5,077 4,101 373 778 279 341

JSC Lenenergo, total 15,061 16,323 15,547 996 1,713 792 1,081

ABOUT THE COMPANY CONTENTS PERFORMANCE INDICATORS 3. Strategy Annual Report 2013 JSC Lenenergo

Capex Input of fixed assets Financing Capacity input Capacity gain Name RUB mln w/o VAT RUB mln RUB mln with VAT МVA km МVA km

2012

St. Petersburg 11,515 12,424 12,337 1,409 716 951 657

Leningrad Region 3,377 3,651 3,663 502 864 314 355

JSC Lenenergo, total 14,891 16,075 16,000 1,911 1,581 1,265 1,012

2013

St. Petersburg 13,158 14,355 13,940 603 764 529 620

Leningrad Region 5,570 4,299 5,405 304 1,082 181 539

JSC Lenenergo, total 18,729 18,653 19,345 907 1,846 709 1,159

Gain 2013/2012, %

St. Petersburg 14 16 13 – 57 7 – 44 – 6

Leningrad Region 65 18 48 – 39 25 – 42 52

JSC Lenenergo, total 26 16 21 – 53 – 17 – 44 15

Dynamics of Capex, RUB mln w/o VAT In relation to the level of 2012 for the reporting period the volume of Capex increased by 26%. It was caused by: + 25.8% ԔԔ works under contracts on technological connection under 18,729 obligations – this is one of the main directions of investment 15,061 14,891 5,570 activity of the Company which purpose is execution of accumulated St. Petersburg obligations on technological connection, including towards 4,232 3,377 13,158 a preferential category of consumers of St. Petersburg and 11,515 Leningrad Region the Leningrad Region pursuant to the concept of execution 10,829 of accumulated obligations on technological connection, approved by the Company’s Board of Directors.

ԔԔ execution of actions under the signed contract on technological 2011 2012 2013 connection on the individual tariff on a title “New DS-110 kV with CL-110 kV for connection of new substations 110 kV of “Kamennogorsk-tyagovaya”, “12 km”, “29h km”, “46” of FSUE Uniform Group of Customers of the Federal Agency of Railroad Transport.

ABOUT THE COMPANY CONTENTS PERFORMANCE INDICATORS 3. Strategy Annual Report 2013 JSC Lenenergo

Dynamics of capacity input, MVA Dynamics of capacity input, km

1,911 1,846 1,713 502 1,581 1,082 St. Petersburg St. Petersburg 778 864 996 1,409 907 Leningrad Region Leningrad Region 373 304 935 716 764 623 603

2011 2012 2013 2011 2012 2013

Decrease in the rates of input of transformer capacity in 2013 (–53%) ԔԔ In the Leningrad Region – substation # 484 (50 MVA), substation is connected with early input of equipment in 2012 that is reflected # 158 (80 MVA), substation # 98 (63 MVA – leasing). in the report on execution of the investment program for 2012, +51% to the plan (under the approved investment program the input In 2013 the growth of input of power lines made 17% that is also of facilities was planned in 2013): caused by works on construction and reconstruction of distributive grid 0.4–10 kV under contracts on technological connection ԔԔ In St. Petersburg – substation # 127 (126 MVA), substation # 33 of consumers on accumulated obligations, including of a preferential (32 MVA), substation # 93 (126 MVA), substation # 185 (160 MVA – category of applicants. leasing), substation # 369 (63 MVA – leasing), 161.4 MVA – property for payment of additional issue of JSC Lenenergo shares;

Actual implementation of the investment program in comparison with the plan

2011 2012 2013 Change, % Change, % Change, % Plan Fact Plan Fact Plan Fact

Capex, RUB mln w/o VAT 15,633 15,061 –4 14,100 14,891 6 13,039 18,729 44

Input of fixed assets, RUB mln 17,105 16,323 –5 16,023 16,075 0 13,934 18,653 34

Financing, RUB mln with VAT 19,463 15,547 –20 16,327 16,000 –2 15,954 19,345 21

Input of fixed assets

transformer capacity, MVA 744 996 34 1,267 1,911 51 1,051 907 –14

power lines, km 1,444 1,713 19 1,363 1,581 16 696 1,846 165

Decrease in the growth rates of input of transformer capacity in 2013 (–14%) is caused by early input of equipment in 2012 that is reflected in the report on execution of the investment program for 2012 (+51%). According to the approved investment program input of objects was planned in 2013.

ABOUT THE COMPANY CONTENTS PERFORMANCE INDICATORS 3. Strategy Annual Report 2013 JSC Lenenergo

Sources of financing of the investment program The main sources of Capex financing of JSC Lenenergo in 2013 are: amortization, additional issue of shares, or technological connection fees, debt funds, and VAT refund.

2011 2012 2013

RUB mln w/o VAT

Sources of investments (on financing), total 15,547 16,000 19,345

Own funding sources

Amortization 4,415 2,826 1,903

Net profit 377 0 0

Additional issue of shares 0 1,204 1,770

Other own sources (calculations by property, lost income) 1,916 1,386 1,319

VAT refund 2,251 2,119 2,533

Debt funding sources

Borrowings (credits and loans) 2,838 5,174 7,032

Technological connection fee – advance payments 3,751 3,290 4,788

Capex funding sources in 2013, RUB mln w/o VAT The share of own funds in financing of the investment program of 2013 1,319 36% Borrowings (credits and loans) 39% 1,770 7,032 25% Technological connection fee – advance payments 1,903 13% VAT refund 19,345 10% Amortization

2,533 9% Additional issue of shares

4,788 7% Other own sources (calculations by property, lost income)

ABOUT THE COMPANY CONTENTS PERFORMANCE INDICATORS 3. Strategy Annual Report 2013 JSC Lenenergo

Directions and structure of Capex

Structure of Capex, RUB mln w/o VAT

2011 2012 2013 Change, 2013/2012, %

St. Petersburg 10,829 11,515 13,158 14

Retrofitting and renovation 4,510 3,156 3,430 9

New construction 6,242 7,344 9,704 32

Other 77 1,015 25 – 98

Leningrad Region 4,232 3,377 5,570 65

Retrofitting and renovation 2,242 2,141 3,084 44

New construction 1,982 1,213 2,463 103

Other 8 23 23 1

JSC Lenenergo, total 15,061 14,891 18,729 26

Retrofitting and renovation 6,753 5,297 6,513 23

New construction 8,223 8,557 12,167 42

Other 85 1,037 48 – 95

Including under the programs

Technological connection 9,196 10,417 11,860 14

Renovation of basic equipment and auxiliaries 10,530 6,320 4,899 – 22

Energy saving and increase of power efficiency 13,631 3,523 6,873 95

Creation of systems of anti-emergency and regime automatic equipment 53 68 89 31

Creation of telemechanics and communication systems 170 580 532 – 8

Installation of devices for voltage regulation and compensation of circulating power 12

Application of innovative technologies and equipment 5,933 1,408 2,833 101

Actions for anti-terrorist security of facilities 61 55 125 129

Replenishment of emergency stock 22 79 42 – 47

In the structure of the investment program for 2013 34.8% of total amount of investments is the share of retrofitting and renovation. The growth of volumes of retrofitting and renovation by 2012 makes 23%. The annual gain of the volumes of new construction (in 2013 – 42%) is caused Negative dynamics of decrease in other directions of Capex by work with accumulated obligations under contracts on technological con- in 2013 is associated with property transfer from administration nection, including towards a preferential of St. Petersburg to the Company regarding electronetwork facilities category of citizens. in the amount of RUB 1.0 bn for payment of additional issue of JSC Lenenergo shares in 2012. Without the accepted property the dynamics and the share of this item of expenditures did not essentially change.

ABOUT THE COMPANY CONTENTS PERFORMANCE INDICATORS 3. Strategy Annual Report 2013 JSC Lenenergo

Decrease in the share of renovation of basic equipment and auxiliaries Dynamics of Capex by directions, RUB mln during the reporting period was caused by early input of equipment (including leasing equipment) in 2012. 18,729 15,061 14,891 12,167 Works on telemechanization and communication in 2013 were Retrofitting and renovation executed according to the planned parameters. 8,223 1,037 New construction Negative dynamics of decrease regarding replenishment of emergency 8,557 stock in 2013 concerning the level of 2012 was associated with Other 6,753 6,513 reduction of large-scale technological violations. 5,297

2011 2012 2013

In 2013 technological connection Structure of executed investment program in 2013, RUB mln w/o VAT had the greatest weight in the total amount of Capex (RUB 10.9 bn, 58% Technological connection 58%); this is one of the main 182 directions of investment activity 263 670 707 12% Programs of special importance of the Company which purpose 936 is execution of accumulated 1,292 8% Retrofitting and renovation obligations on technological connection. 7% Development of distributive networks 1,564 XX18, 7XXX29 5% New construction

4% Technological management 2,217 automation

10,898 1% Electricity metering and control devices

1% Security

3% Other programs and activities

Main directions of Capex in 2013

ԔԔ The program of special importance is the Program of renovation of CL 6–110 kV financed with attraction of federal funds, and it is also a priority task amounting to RUB 2.2 bn (12%). ԔԔ RUB 1.6 bn (8%) were directed on retrofitting and renovation of facilities 35–110 kV in 2013. ԔԔ New construction of facilities 35–110 kV totaled RUB 0.9 bn (5%). ԔԔ RUB 1.3 bn (7%) were directed on development of distributive networks 0.4–10 KV. ԔԔ The program of technological management automation was carried out according to ITT strategy of the Company and constituted RUB 0.7 bn (4%) in 2013. ԔԔ The cost of program of introduction of AIMSEM systems totaled RUB 0.3 bn (1%).

ABOUT THE COMPANY CONTENTS PERFORMANCE INDICATORS 3. Strategy Annual Report 2013 JSC Lenenergo

The most important and priority projects of the investment program put in operation in 2013

Cost of fixed Input of Planned terms Date of object assets put Structure of capital Project name Purpose of the project capacity, of construction commissioning in operation, equipment MVA/km RUB mln

Outdoor switchgear 110 kV: PASS MO-145 Increase of power supply reliability of consumers (12 pieces); of Krasnogvardeysky district of St. Petersburg. PASS MO(SBB) Commissioning of capital equipment of substation (13 pieces); and CL 110 kV (0.21 km) was carried out in 2012. RPAE cases; indoor Reconstruction In 2013 works on external networks of water supply switchgear 10 kV: of substation and sewerage, system of security and fire alarm, and (TLSh-10-5- UZ) 110 kV # 184 substation protection were complete. 2007–2012 Q4 2013 31 (15 pieces)

Increase of power supply reliability of consumers and elimination of electronetwork restrictions in Kirovskiy Reconstruction district of St. Petersburg. The transformer capacity TDTN 63000/110-U1 of substation of 63 MVA was put in operation in 2008. In 2013 input Q4 2013 power transformer (1 110 kV # 17 of substation protection (0.8 km) was carried out. 2006–2013 (partial input) 7 piece)

Reconstruction Technological connection of consumers of Kurortny of substation district of St. Petersburg. In 2012 input of two power 110 kV # 127 transformers was carried out. In 2013 CDDEI equipment U1 TRDN 63000/110 – increase of 35 kV, the system of relay protection and automatic power transformer (2 of transformer equipment of 35 kV, and substation control building Q4 2013 pieces), KRUN-35kv capacity were commissioned. 2007–2013 (partial input) 180 UHL1 (1 to - t)

Substation Technological connection of consumers of Kalininsky # 124A with CL district of St. Petersburg. In 2013 a new building Q4 2013 110 kV of substation was commissioned. 2007–2014 (partial input) 182

Renovation of 6–110 kV, including The target program on reconstruction of oil-filled CL 2013 2013 3,638 0/57

Reconstruction Decrease in the level of accident rate of grids. Ensuring of CL 6–110 kV: reliability of power supply of industrial facilities and CL 110 kV K-103, household enterprises of Vasilyevsky island and K-104 Petrograd part of St. Petersburg. 2010–2012 Q4 2013 643 0/8

Decrease in the level of accident rate of grids. Increase of power supply reliability of consumers of Central and Krasnogvardeysky Reconstruction districts of St. Petersburg. Input of CL 110 kV K-105, K-106 was of CL 6–110 kV; carried out in 2012. In 2013 the equipment of temperature CL 110 kV K-105, monitoring for the purpose of control over temperature Q4 2012, Q2 K-106 parameters of cable lines was commissioned. 2010–2011 2013 8

Reconstruction Increase in capacity of power lines with a view of CL 6–110 kV: of increase of power supply reliability of consumers CL 110 kV K-126, of Central district of St. Petersburg and creation K-127 of conditions for connection of additional loading. 2010–2012 Q4 2013 1,085 0/18

Decrease in the level of accident rate of grids. Increase Reconstruction of power supply reliability of industrial and household of CL 6–110 kV: enterprises, and social and significant subscribers CL 110 kV K-119, of Petrogradsky, Vyborgsky and Kalininsky districts K-120 of St. Petersburg 2013 Q4 2013 364 0/6

Reconstruction Decrease in the level of accident rate of grids. Increase of CL 6–110 kV: of power supply reliability of industrial and household CL 110 kV K-101, enterprises of Vyborgsky and Kalininsky districts K-102 of St. Petersburg 2013 Q4 2013 711 0/12

ABOUT THE COMPANY CONTENTS PERFORMANCE INDICATORS 3. Strategy Annual Report 2013 JSC Lenenergo

Cost of fixed Input of Planned terms Date of object assets put Structure of capital Project name Purpose of the project capacity, of construction commissioning in operation, equipment MVA/km RUB mln

Reconstruction of CL 6–110 kV: Decrease in the level of accident rate of grids. Ensuring CL 110 kV K-117, increase of power supply reliability of consumers K-118 of Vyborgsky and Kalininsky districts of St. Petersburg. 2013 Q4 2013 357 0/6

Increase of power supply reliability of industrial and Reconstruction household enterprises of Vyborgsky and Kalininsky of CL 6–110 kV: district of St. Petersburg, including consumers of 1 CL 110 kV K-140, category of power supply reliability and socially K-141 significant facilities. 2013 Q4 2013 469 0/8

The most important and priority projects of the investment program launched in 2013

Input Planned terms Structure of capital Project name Purpose of the project of capacity, of construction equipment MVA/km

Formation of the optimum scheme of power supply of Petrogradsky district 9 x CDTS 35/6/0.4 kV providing possibility of connection of applicants in the terms required under in capacity of 2 x 12,5 contracts on technological connection taking into account declared category MVA each; new substation Complex of reliability for the general capacity of 40.8 MW, and connection of future 110 kV with transformers development consumers on applications for the general capacity of 37.9 MW. Creation of a of capacity 2 x 63 of electric supplementary reserve of capacity and ensuring further development of grids MVA; reconstruction networks of Petrogradsky district. Ensuring power safety at simultaneous decrease of existing substation of Petrogradsky in specific expenses, increase of environmental safety of the historical 110 kV with installation district downtown of St. Petersburg. Replacement of CL sites and substations’ worn of transformers of St. Petersburg out equipment. 2013–2016 511/85 of capacity 2 x 80 MVA

The project is implemented within the target program “Renovation of CL 6–110 kV” on reconstruction of oil-filled CL. The reconstruction will provide increase of power supply reliability of consumers of Vasilyevsky Island and Kirovskiy district of St. Petersburg, increase in capacity, connection Reconstruction of additional loadings to substation of JSC Lenenergo, increase of reliability of CL 6–110 kV: of transits providing increase of stability of the power supply system CL 110 kV K-128, in emergency operation, reduction of the volume of abortively interruptible K-129 loadings. 2013–2014 0/7

The project is implemented within the target program “Renovation of CL 6–110 kV” on reconstruction of oil-filled CL. The reconstruction will provide increase of power supply reliability of consumers of Admiralteysky and Moskovskiy districts of St. Petersburg, increase in capacity, connection of additional loadings to substation of JSC Lenenergo, increase of reliability Reconstruction of transits providing increase of stability of the power supply system of CL 6–110 kV: CL in emergency operation, reduction of the volume of abortively interruptible 110 kV K-29, K-30 loadings. 2010–2013 0/2

ABOUT THE COMPANY CONTENTS PERFORMANCE INDICATORS 3. Strategy Annual Report 2013 JSC Lenenergo

The program of renovation of the cable network 6–110 kV in St. Petersburg financed by the federal budget

Cost of implementation, RUB mln between St. Petersburg, JSC Lenenergo and JSC Rosseti (approved by Minutes # 1, # 42-s of 21.08.2013), and supplementary agreements 2,217 on implementation of the renovation program between Ministry of Power Industry and JSC Rosseti under which the deadline of implementation of the program was prolonged till 2014.

By results of 2013 execution of the plan of Capex under the program 1,152 of renovation of CL 6-110 kV totaled 89%. The deviation from planned 1,008 indicators is connected with existence of savings of budget cost by results of trading and procurement procedures.

In 2013 within implementation of the program “Renovation of CL 6-110 kV” 169 input of CL 110 kV K-103, K-104; K-126, K-127; K-101, K-102, K-117, K-118; K-119, K-120; K-140, K-141 was carried out with the general length 2010 2011 2012 2013 of 57.1 km in the districts of St. Petersburg.

As a result of the renovation of CL 110 kV the capacity of power lines The program of priority actions on renovation of cable lines 6-110 kV increased that contributed to increase of power supply reliability financed with attraction of budgetary funds was developed with a view of consumers of Petrogradsky, Central, Vyborgsky, Kalininsky, and of increase of reliability of work of the cable network in St. Petersburg Vasileostrovsky districts, including consumers of 1 category of power and provision of uninterrupted power supply of city districts. supply reliability and socially significant facilities, and to creation of conditions for connection of additional loading. The share Initial term of implementation of the program according of equipment with above-level time-frame after implementation to the agreement between JSC Rosseti, Ministry of Power Industry of the projects made 0% at the indicator before implementation of the Russian Federation and St. Petersburg was planned for of the project of 100%. 2013. Subsequently there was signed a tripartite agreement

ABOUT THE COMPANY CONTENTS PERFORMANCE INDICATORS 3. Strategy Annual Report 2013 JSC Lenenergo

3.5. RISK MANAGEMENT

JSC LENENERGO HAS AN EFFECTIVE SYSTEM OF INTERNAL CONTROL AND RISK MANAGEMENT. THE MAIN BODIES RESPONSIBLE FOR DEVELOPMENT AND IMPLEMENTATION OF PROCEDURES, METHODS AND CONTROL MECHANISMS ARE THE BOARD OF DIRECTORS, AUDIT COMMISSION, AND EXECUTIVE MANAGEMENT BODIES.

The system of internal control and risk management ԔԔ prevention of illegal actions of employees of the Company and third of JSC Lenenergo is aimed at providing reasonable guarantees parties in respect of the Company assets; of achievement of the purposes in the following directions: ԔԔ reliability, completeness and timeliness of preparation of all types ԔԔ efficiency and productivity of activities; of reporting.

ԔԔ observance of requirements of the legislation, and requirements of local regulations of the Company;

Investment risk Strategic risks Risk of shareholder value – country and regional risks; – decrease in efficiency and depreciation of capital investments at implementation (corporate risk) – branch risks (risks associated with tariff of investment programs, programs of innovative – risks of corporate governance. regulation inflationary risks). development and research and development.

Financial risks Compliance-risk – inflationary risks; – risk of non-compliance by the Company KEY RISKS of the legislation and other legal acts, – currency risks; FOR THE COMPANY requirements of regulating and supervising – interest risk; authorities; – risk of liquidity. – tax risks.

Operational and technological risks –risks associated with reliability of power supply, ensuring safe operation of production facilities and power efficiency; –risks associated with procurement activity and logistics; –risks associated with property management.

ABOUT THE COMPANY CONTENTS PERFORMANCE INDICATORS 3. Strategy Annual Report 2013 JSC Lenenergo

The description of risks and activities on their minimization

Strategic risks

Country and regional risks Interest risk

Factors (sources) of risks Factors (sources) of risks ԔԔ The crisis phenomena in world economy: financial crisis, inflation, ԔԔ Unforeseen increase in interest rates in the financial market. capital depreciation, decrease in volumes of the financial market. ԔԔ Political and economic changes in Russia and worldwide. Consequences of risk for the Company ԔԔ Transition state of the Russian banking system. ԔԔ Unplanned increase in expenses on service of credits. ԔԔ Decrease in industrial outputs and electricity consumption. ԔԔ Need of modification of the credit policy.

Consequences of risk for the Company Risk management activities ԔԔ Negative influence on possibilities on attraction of extra capital. ԔԔ Continuous monitoring of the loan capital market and banks- ԔԔ Decrease in indicators of liquidity. contractors and, whenever possible, debt restructuring. ԔԔ Decrease in shareholder value of the Company. ԔԔ Continuous optimization of a loan portfolio taking into account ԔԔ Reduction of operational efficiency and revenue of the Company. the changed market indicators. ԔԔ Monitoring of the credit resources market for the purpose Risk management activities of identification of more favorable credit conditions. ԔԔ Monitoring of current economic situation of the world, state and ԔԔ Increase in the share of tools with the fixed rate at the level regional level. acceptable for the Company. Search of alternative sources ԔԔ Implementation of the complex of measures, directed of borrowings. on optimization of the share of loans in the general structure of capital. ԔԔ Attraction of long-term loans on fixed interest rates. Liquidity risk ԔԔ Increase of efficiency of operating and investment expenses. Factors (sources) of risks ԔԔ Cross subsidizing. Currency risks ԔԔ Low payment discipline in the retail market of electric power. ԔԔ Policy of tariffs growth control. Factors (sources) of risks ԔԔ Adverse changes in the exchange rate of foreign currencies Consequences of risk for the Company ԔԔ Decrease in liquidity and financial stability. Consequences of risk for the Company ԔԔ Shortfall of revenue due to reduced tariffs for the population ԔԔ Decrease in actual income as a result of currencies rate fluctuation. ԔԔ Difficulties in attraction of borrowings from banks and investors. ԔԔ Difficulties of observance of the terms of credit agreements Risk management activities ԔԔ From the moment of its reforming the Company is not engaged Risk management activities in foreign economic activity. Export transactions are absent. Income ԔԔ Monitoring of the capital structure of the Company. and expenses, assets and liabilities are nominated in rubles. ԔԔ Determination of optimum loan parameters. ԔԔ In case of negative influence of the change of exchange rates ԔԔ Optimization of the working capital structure. in the future management of the Company plans to analyze the risk ԔԔ Assessment of financial stability and solvency, including calculation and make relevant decisions in each case. of limits of a debt position. ԔԔ Operational planning and performance of budgets (budgeting procedure, the system of cash flow accounting). ԔԔ Control over receivables.

ABOUT THE COMPANY CONTENTS PERFORMANCE INDICATORS 3. Strategy Annual Report 2013 JSC Lenenergo

Branch risks (risks associated with tariff regulation) ԔԔ Emergence of challenged receivables for services in electric power transmission. Factors (sources) of risks ԔԔ Default of long-term parameters of RAB regulation. ԔԔ State regulation of tariffs for the Company’s services (services ԔԔ Default of obligations towards subscribers on technological in electric power transmission and service in technological connection. connection). ԔԔ Violation of the antitrust law regarding rendering of services ԔԔ Control of tariffs growth. on electric power transmission and services on technological ԔԔ Mechanism of cross subsidizing. connection. ԔԔ Transition to RAB regulation. ԔԔ Competition with TGOs for a share in the consolidated tariff. Risk management activities ԔԔ Discrepancy of tariffs and rates approved by regulators ԔԔ Ensuring the balanced planning taking into account approved tariff to requirements of the Company. and balance decisions. ԔԔ Disagreements between power grid and power sales companies ԔԔ Control of execution of the approved business plans. concerning the volumes of electricity consumption and capacity, ԔԔ Development of offers on legislation change. applied in tariffs calculations. ԔԔ Implementation of the program of cost management. ԔԔ Contest by the regulator of assessment results of initial base ԔԔ Justification of lost income at regulation for the subsequent periods. of invested capital. ԔԔ Submission of documents to the regulator confirming validity ԔԔ Redistribution of RGR by regulator within one long-term period. of expenses and volumes of electric power transmission. ԔԔ Decrease in demand for technological connection services and ԔԔ Appeal to regulators for establishment of an individual tariff for services in electric power transmission in comparison with technological connection. the planned volumes considered at acceptance of tariff and balance ԔԔ Participation in the solution of problems of cross-subsidies decisions. at the federal level. ԔԔ Default of obligations to consumers on technological connection ԔԔ Implementation of the program of perspective development owing to large volume of demands. of the systems of electric power metering. ԔԔ Change of tariffs for electric power transmission. ԔԔ Conclusion of agreements with the regulator on the volumes and sources of financing of investment activities within long-term Consequences of risk for the Company programs of development of the regions. ԔԔ Decrease in revenue caused by a drop in tariffs during the period ԔԔ Monitoring of applications, formation of look-ahead productive of tariff regulation. supply of electric power, demand for services in technological ԔԔ Decrease in revenue due to loss of potential consumers. connection for the next year. ԔԔ Failure to receive income differed as a result of implementation ԔԔ Inventory and updating of the databases used for calculations of the mechanism of smoothing. of the volumes of electricity transmitted. ԔԔ Decrease in tariff sources for investments. ԔԔ Analysis and systematization of the reasons for the dispute ԔԔ Decrease in liquidity and financial stability. on the volume of electricity transmitted. ԔԔ Losses associated with an incorrect forecast of the structure ԔԔ Contesting in court the volume of electricity transmitted. of electric power transmission on the level of voltage and ԔԔ Explanatory work of the process of rendering of services overestimated volumes of declared capacity against actual ones, on technological connection among consumers, including with public considered at acceptance of tariff and balance decisions. placement of information on rendering of services. ԔԔ By results of 2013 the Company received revenue below ԔԔ Placement of information on connection sources on the website. RGR accepted by the Committee at calculation of tariffs, due to application in calculations for electric power transmission for the actual capacity of tariffs (single- and double-rate), set by the tariff and balance decision which basis included single (joint-operations) tariffs calculated proceeding from the size of declared capacity which volumes are much higher than actual ones. The volume of lost income was RUB 3.7 bn. ԔԔ Accounting of expenses at a tariff-setting not in full. ԔԔ Overdue receivables growth.

ABOUT THE COMPANY CONTENTS PERFORMANCE INDICATORS 3. Strategy Annual Report 2013 JSC Lenenergo

Operational and technological risks

Risks associated with reliability of power supply, ensuring safe Risks associated with procurement activity and logistics operation of production facilities and power efficiency Factors (sources) of risks Factors (sources) of risks ԔԔ Rise in prices for raw materials. ԔԔ Emergency situations owing to natural disasters (hurricanes, storm and sleets, high waters, snow blockages, etc.). Consequences of risk for the Company ԔԔ Emergencies of technogenic character. ԔԔ Financial losses associated with excess of the actual expenses over ԔԔ Physical and obsolescence of power grid assets. the planned ones. ԔԔ Default of the program of repairs in necessary volume. ԔԔ Violation of service conditions and operational modes of power grid Risk management activities equipment. ԔԔ Monitoring of prices, planning of procurements. ԔԔ Implementation of scheduled purchases in compliance with Consequences of risk for the Company the existing order. ԔԔ Decrease in reputation in the region. ԔԔ Increase in the volumes of electric power losses. ԔԔ Increase in expenses for electric power purchase to compensate Risks associated with property management losses. ԔԔ Losses which are not covered by insurance compensations. Factors (sources) of risks ԔԔ Lack of title documents for real estate objects. Risk management activities ԔԔ Implementation of the program of energy saving and increase Consequences of risk for the Company of power efficiency. ԔԔ Disputing of the rights on power grid facilities by third parties. ԔԔ Introduction of the automated control system of production assets. ԔԔ Development and implementation of actions for preparation for Risk management activities passing of the autumn and winter period. ԔԔ Collection of documents confirming the right of ownership. ԔԔ Expansion and clearing of glades of OTL routes. ԔԔ Work with state authorities. ԔԔ Reconstruction (renovation) of power grid facilities. ԔԔ Recognition of property rights in court. ԔԔ Expansion of the park of reserve power supply, car- and special ԔԔ Registration of property rights. equipment for emergency recovery operations. ԔԔ Modernization of the switching equipment and telemechanization systems. ԔԔ Creation and improvement of formation of emergency stock. ԔԔ Implementation of the insurance program. ԔԔ Production control. ԔԔ Interaction with third-party power grid subjects. ԔԔ Improvement of systems of collecting and information transfer, analysis of technological violations, forecasting of their consequences. ԔԔ Organization of work of the networks control center. ԔԔ The growth of mobile emergency response teams and their quality of staffing. ԔԔ Programs to reduce risks of accidents in the power grid facilities. ԔԔ Training, control and assessment of personnel.

ABOUT THE COMPANY CONTENTS PERFORMANCE INDICATORS 3. Strategy Annual Report 2013 JSC Lenenergo

Investment risk

Decrease in efficiency and depreciation of capital investments Risk of joint-stock cost (corporate risk) at implementation of investment programs, programs of innovative development and research and development Factors (sources) of risks ԔԔ Control over tariffs growth for the electric power at the state level. Factors (sources) of risks ԔԔ Decision-making at the state level associated with merge, ԔԔ Non-compliance with parameters of RAB regulation. acquisition, privatization of network companies of the power grid ԔԔ Sale of socially significant objects for the region, economically complex. inefficient for the Company. ԔԔ Violations of planned terms of development of capital investments Consequences of risk for the Company and delay of commissioning of objects of investment programs. ԔԔ Decrease in capitalization of the Company. ԔԔ Growth of the volume of construction in progress due to exception ԔԔ Mistrust of investors. of the objects under construction from the investment program. ԔԔ Deterioration of image and reputation of the Company. ԔԔ Claims of minority shareholders. Consequences of risk for the Company ԔԔ Decrease in sources of financing of the investment program and Risk management activities required gross revenue of the Company in the subsequent periods. ԔԔ Implementation of the program of strategic development of the Company till 2015 with prospect till 2020. Risk management activities ԔԔ Performance of the normative legal acts issued by federal executive ԔԔ Formation and planning of the investment program directed authorities within implementation of the plan of measures (road on expansion and increase of availability of network infrastructure, map) “Increase of availability of power infrastructure”. modernization of power grid facilities, achievement of high ԔԔ Performance of the long-term RAB-parameters of regulation. load of commissioned capacities, coordination with the plans ԔԔ Implementation of the program of costs management. of territorial and regional development. ԔԔ Ensuring the balanced planning, formation of indicators ԔԔ Monitoring of implementation of investment programs, its of the business plan taking into account tariff and balance financing, analysis of reasons for deviation of the actual parameters decisions. of implementation of investment programs from the planned ones. ԔԔ Coordination of volumes and sources of financing of the investment ԔԔ Timely coordination of changes of the investment program with program with authorities taking into account programs executive authorities. of development of territories. ԔԔ Introduction of project management by investment activity. ԔԔ Ensuring observance of the balance of interests of shareholders, ԔԔ Automation of the investments control system. requirements and standards of the Code of corporate governance ԔԔ Decrease in specific cost of construction, introduction of the system of the Company. of comparative analysis of specific cost of construction and materials.

ABOUT THE COMPANY CONTENTS PERFORMANCE INDICATORS 3. Strategy Annual Report 2013 JSC Lenenergo

Compliance-risk

Tax risks

Factors (sources) of risks Consequences of risk for the Company ԔԔ Increase in rates or change of the order of taxes calculation. ԔԔ Penalties for nondisclosure of essential information, for violations of the antitrust legislation, tax legislation, lack of re-registration Consequences of risk for the Company of rights to perpetual rights of use of land plots, etc. ԔԔ Tax sanctions. ԔԔ Decrease in indicators of profitability and increase in tax load Risk management activities of the Company. ԔԔ Monitoring of changes in the legislation. ԔԔ Control of observance of requirements of the law of the Russian Risk management activities Federation of July 27, 2010 # 224-FZ “About counteraction to a misuse ԔԔ Attraction of external audit and adviser. of insider information and manipulation of the market” and Regulations ԔԔ Defense of interests in tax authorities and arbitration courts. on insider information of JSC Lenenergo. ԔԔ Timely disclosure of essential information on the official corporate website. ԔԔ Conducting declaration of the management team of the Company Risk of non-compliance by the Company of the legislation and (including their close relatives), members of the Management Board other legal acts, requirements of regulating and supervising with the purpose of preventing the conflict of interests. authorities ԔԔ Control over observance of the code of corporate conduct of JSC Lenenergo. Factors (sources) of risks ԔԔ Creation and organization of work of the Conflict Commission. ԔԔ Frequent changes of legislation, wide range of standard ԔԔ Implementation of actions for execution of orders requirements and restrictions in the conditions of state regulation of the Government of the Russian Federation in the field of fight of the branch. against corruption. ԔԔ Control over the Company’s activity from FAS, FST, FFMS, FTS ԔԔ Monitoring of changes in the legislation. of Russia, Audit Chamber, the Federal Service for Ecological, ԔԔ Development of actions for observance of requirements Technological and Nuclear Supervision, prosecutor’s office of the current legislation. ԔԔ Violations of the antitrust law in the field of technological ԔԔ Optimization of the business process of technological connection connection of power installations of consumers to electric networks as a whole, including the process of reception and processing of the Company. of applications of consumers. ԔԔ Manipulation by securities market and misuse of insider information ԔԔ Implementation of actions for renewal of the right of termless of the Company. using. ԔԔ Conflict of interests.

ABOUT THE COMPANY CONTENTS PERFORMANCE INDICATORS 4. Performance Indicators Annual Report 2013 JSC Lenenergo

RELIABILITY EFFICIENCY AVAILABILITY

The goal of a unified technical policy of JSC Lenenergo In 2013 the Board of Directors of JSC Lenenergo The number of executed contracts on technological approved in 2013 is to ensure increase of reliability approved the program of energy saving and connection in 2013 was up by 6% and amounted and efficiency of the power grid complex while energy efficiency for 2013–2018 among the tasks to 7,378 units. The number of potential Performance maintaining an adequate level of industrial and of which are introduction of the power management customers applying for connection to the grids environmental safety on the basis of innovative system, modernization and building of a new of JSC Lenenergo also increased. In its cooperation development principles. model of («smart») grid on the basis of innovative with customers the Company is committed technologies and equipment, introduction to the principles of availability and responsiveness of the systems of technological management and grid of the correspondence and interactive services, operation. qualified service, and transparency of business Indicators 4 processes of service.

Operating and financial results of JSC Lenenergo for 2013 testify to a stable market position of the Company. In 2013 33,945 mln kWh were released in Lenenergo networks from grids of FGC UES and electricity generating companies. Revenue increased by 10% to RUB 39.9 bn.

60 60

STRATEGY CONTENTS CORPORATE GOVERNANCE 4. Performance Indicators Annual Report 2013 JSC Lenenergo

4.1. Q&A

Deputy Director General For implementation of the program of liquidation of accumulated on economy and finance obligations towards the region’s consumers, including preferential categories of customers and reliability increase of the power grid complex of the regions of service in 2012–2013 JSC Lenenergo jointly with administrations of the regions developed the investment program for 2014–2019. Before approval of the investment program by regional Tatiana G. Sudakova regulators the level of a joint-operations tariff for electric power transmission in 2013–2014 was set just for the planned year based on the level of interests of consumers and the producer of electricity transmission services. A tariff projection for subsequent years was not restated.

How do you estimate results of the tariff campaign of 2012 (tariffs for Upon approval of the investment program for 2014–2019 by the Ministry 2013) and 2013 (tariffs for 2014)? of Power Industry of Russia applications will be submitted to the Federal Tariff Service to prolong extension of the long-term period of regulation — Results of tariff regulation in electric power transmission for 2013 and for JSC Lenenergo and formation of the tariff projection up to 2019 2014 can be estimated positively. Individual conditions on a growth level for creation of funding sources for the investment program and of the joint-operations tariff for electricity transmission which exceeded decrease in tariff load of electric power consumers. Annual growth level the national average level were set for JSC Lenenergo in the implementation of electricity transmission tariff provided by tariff projections for consumer of its significant investment programs. of the category “Other” would not exceed 12.5% in St. Petersburg, and 13.5% in the Leningrad Region. The basic indicator for estimation of results of the tariff regulation for JSC Lenenergo is a growth of own required gross revenue (excluding expenses on payment of losses in own networks, services on electric Why net loss on electric power transmission was generated? When power transmission in UNEG networks and third-party grid companies). does the Company plan to generate positive net income from By results of tariff regulation own required gross revenue of JSC Lenenergo electricity transmission services? in 2013 increased by 37.1% concerning tariff and balance decisions of 2012. The growth of 20.3% is expected in 2014. — The main reasons for net loss formation on electric power transmission on the both subjects of service of JSC Lenenergo are negative smoothing applied by a regional regulator in compliance with the methodology of RAB How can you characterize the forecasted long-term tariff projection regulation, lost income formed as a result of selection by consumers for JSC Lenenergo within the general policy of the Government of an applied tariff (single rate and double rate), excess of amortization over of the Russian Federation on reduction of growth rates for electricity the size of accrued return on invested capital due to the excess of the term tariffs? of return on capital (35 years) over the actual term of amortization of fixed assets (on average 25 years). — According to the forecasts of social and economic development of Russia for 2013, 2014–2016 developed by the Ministry of Economic According to the RAB regulation methodology, for leveling of the annual Development of Russia and approved during meetings of the Government growth level of electricity transmission tariffs a mechanism of adjustment of Russia, the growth level of a joint-operations tariff for electric power of required gross revenue (RGR) or smoothing is used. In 2011–2013 due transmission from July 1, 2013 should not exceed 10%, from July 1, 2014 – to some restrictions on the growth level of the joint-operations tariff set 0%, from July 1, 2015 – 4.5%, and from July 1, 2016 – 5%. forth by the Government of the Russian Federation, RGR of JSC Lenenergo was essentially underestimated, and negative smoothing which However, for the servicing regions of JSC Lenenergo, St. Petersburg and is compensated before the end of the first regulation period (2019) in full the Leningrad Region, this document provided a possibility of excess with a discounting factor was applied. of the set limits on the growth level of tariffs for creation of required sources of financing the large-scale investment programs.

STRATEGY CONTENTS CORPORATE GOVERNANCE STRATEGY 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Lost income upon the consumer’s selection of the type of applicable tariffs However, a decisive impact on the cash flow and generation of revenue are generated due to the accepted methodology for calculating tariff from technological connection has large applicants with the volume rates, which does not provide applying of different rates for settlements connected capacity of more than 8,900 kW. with consumers. Lost income is compensated by the regional regulator on the next year of the regulation period upon confirmation. Drop in payments for technological connection will entail replacement of one type of attracted source of investment projects financing (advances According to the approved business plan for 2014–2018, a positive financial on technological connection) on another – borrowings generated result on electric power transmission will be achieved in 2017–2018. in the tariff projections for electricity transmission.

How do you estimate forecasted dynamics of payments for How can you characterize the current financial state of the Company? technological connection services? How stable is this type of income? How was the Company’s income affected by decrease in rates — While working in difficult conditions of uncertainty on the financial for technological connection after exception from the tariff markets, and economic instability in the country, JSC Lenenergo annually of an investment component? generates net profit, successfully implements the large-scale investment program in both regions of its presence and retains its solvency. — In 2014–2019 JSC Lenenergo forecasts a gradual decrease in payments for technological connection. It is associated with implementation The current financial state of JSC Lenenergo can be estimated as stable. of the plan of liquidation of accumulated obligations towards consumers The level of debt does not exceed the established maximum allowable by 2017 and changes in legislation in the field of payment rates regulation values (Debt/EBITDA < 3), and execution of all maximum limits of the debt – decrease in the size of the investment component and exception position established pursuant to the Regulations on credit policy of profit tax from the structure of payment for technological connection. of the Company is ensured.

Pursuant to the legislation of the Russian Federation in the field of tariff Attraction by the Company of considerable volumes of credit resources regulation since 2011 expenses on construction of power grid facilities for implementation of its large-scale investment program, including have been included in the structure of payment for technological in the form of public loans, confirms the credibility of JSC Lenenergo connection – from existing power grid facilities to connected power on the part of the banking community. accepting devices (the investment component to cover expenses connected with development of existing infrastructure is considered Evidence of investment appeal of the Company is confirmation at tariff-setting for electricity transmission services), and since 2013 of the Company’s credit rating in February, 2014 by the international the payment for a specific applicant includes expenses only on those rating agency Moody’s at Ba2 on the international scale and Aa2.ru actions of “last mile” which are provided by specifications of the contract on the national scale with stable outlook. on technological connection. Therefore in 2013 proceeds under contracts without the actions of “last mile” dropped by RUB 1.1 bn in comparison with 2012. What are the main features of the long-term business plan of the Company? Besides, the planned stage-by-stage exception from payment of the investment component for applicants up to 150 kW since — The long-term business plan of JSC Lenenergo is characterized 01.07.2015 by 50% and since 01.07.2017 by 100% will also reduce money by a growth tendency both of the volumes of rendered services – by 2018 cash flow and the Company’s revenue roughly on RUB 1 bn (upon approval a growth of productive supply will constitute 6.6% to the level of 2013, and of economically reasonable payment rates for this group of applicants). received proceeds from activity on electric power transmission: increase in revenue in 2018 in 2.1 times to the level of 2013. The main reason for Despite the lack of essential growth rates in domestic economy revenue growth in 2014–2018 is compensation in the long-term tariff in previous years, stable demand for services on technological connections projection of reduction of required gross revenue (smoothing) in the first of applicants is observed in St. Petersburg and the Leningrad Region. years of the period of regulation used by the regulator.

STRATEGY CONTENTS CORPORATE GOVERNANCE 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Revenue form technological connection of applicants by our estimates connection, additional issue of securities, funds received from applicants will decrease in 2018 in comparison with 2013 almost in 1.5 times. at performance of obligations under technological connection contracts, Execution of accumulated obligations towards applicants will enable net profit, and funds of the federal budget. to lower the debt on advances received from applicants on technological connection to the level of 2013 in 3.3 times and improve financial The major share of the funding sources is borrowed funds (over performance, including the indicator of liquidity. 40% of the general financing of the investment program) which is caused by application of RAB regulation of tariffs for electric power The business plan of JSC Lenenergo for 2014–2018 provides financing transmission. Amortization is used as a source of financing in the volume of the investment program in the volume of RUB 159 bn (including corresponding to return invested capital accrued in a long-term tariff VAT) with attraction of debt funds for capital construction in the sum projection. No less significant source of financing is the payment of RUB 73 bn (45.9% of required sources for financing of investments). for technological connection of applicants (more than 10% from total amount of financing of the investment program). JSC Lenenergo plans to implement the program of performance increase, including cost management in 2014–2018, and to reduce controllable Net income from activities on electric power transmission is generated costs per one unit by 2018 in comparison with 2012 by 21%. only in the last year of a regulation period. It is caused by specifics of RAB regulation. Net income on electric power transmission is generated in JSC Lenenergo since 2017 and directed first of all on repayment What caused the growth of debt load? What debt level is acceptable of operational credits. It is expected that yet in 2019 it will be used for the Company? for financing of investments.

— Growth of debt load of JSC Lenenergo is caused by implementation The funds of shareholders received by results of placement of additional of the considerable investment program. issue of securities of JSC Lenenergo are a target source of financing of the renovation program of cable lines 6–110 kV. To execute obligations The methodology of RAB regulation of electricity transmission in St. Petersburg on creation of power grid infrastructure for holding tariffs determines long-term debt funds as the main funding source of FIFA World Cup in 2018 it is planned to receive a target source of the investment program. Means for financing of investment activity of financing from the federal budget of Russia. in a tariff projection are formed generally by attraction of debt funds and it return at the expense of charged income and return on invested capital pursuant to the established standards. Debt load is determined What are the Company’s plans concerning public loans? in the business plan of the Company for 2014–2018 at a level no more than 3 under condition of providing a ratio Debt/EBITDA. — For the beginning of 2014 there are corporate bonds of a series 04 in the total volume of RUB 3 bn and the life of 5 years (term of offer is 3 Besides, JSC Lenenergo constantly estimates compliance of the level years) and exchange bonds of a series BO-01 in the volume of 3 mln pcs current and forecasted debt to the restrictions set forth by the standard with total par value of RUB 3 bn. of a debt position management to subsidiaries of JSC Rosseti and the Regulations on credit policy of JSC Lenenergo – to the limits of debt According to the business plan of the Company for 2014–2018 within position, and if necessary implements corrective actions. the prospectus of securities registered in 2013 on exchange bonds, placement of two issues of bonds with the total par value of RUB 10 bn in 2014 and two issues of bonds with the total par value of RUB 10 bn At the expense of what sources the Company plans to finance its in 2015 is planned. large-scale investment program?

— Sources of financing of the investment program of JSC Lenenergo for 2014–2019 are debt funds, amortization, advances on technological

STRATEGY CONTENTS CORPORATE GOVERNANCE STRATEGY 4. Performance Indicators Annual Report 2013 JSC Lenenergo

What measures are taken in order to improve internal efficiency? What In April 2013 of JSC Lenenergo placed the first issue of exchange bonds are results of the program of reduction of operating costs? BO-01 of 3 mln pcs with a total par value of RUB 3 bn with a coupon rate of 8.25%. in June 2013 there was registered the securities prospectus — To increase internal operational efficiency the Program of efficiency on the four issues of exchange bonds of series BO-02, BO-03, BO-04 and management is being implemented in the Company. The effect from BO-05 with a total par value of RUB 20 bn. In 2013 loans with the highest implementation of the program regarding operating costs for 2013 totaled rates in the credit portfolio of the Company were refinanced, including RUB 952 mln, for 2014–2018 the effect is planned at a rate of RUB 3,466 mln. the credit of VEB in the amount of RUB 4.7 bn with a floating rate (a single loan with established financial covenants). The specified refinancing enabled The effect is planned to reach at the expense of the following actions held to reduce the average rate of the credit portfolio from 8.3% to 8.2%. by the Company: In February 2014 the Moody’s rating agency confirmed the credit rating ԔԔ optimization of the number of employees of the management office for 5%; of the Company at Ba2 with stable outlook, and retained the rating on a national scale at Aa2.Ru. For 2009–2014 the rating agency repeatedly ԔԔ reduction of the cost of procurements due to carrying out the regulated confirmed the Company’s rating, which was assigned in November 2009. procedures;

ԔԔ optimization of the production program: replacement of flat normal relay What are the plans for 2014? of voltage transformers, installation of reclosers for segmenting OTL 6–10 kV; — JSC Lenenergo submitted an application to the regional regulators ԔԔ decrease in general and other expenses: rent, cleaning, training, mobile of both subjects about extension of the first long-term period of regulation communication; till 2019 that will enable to create guaranteed sources for financing of the investment program of the Company at a minimum level of tariff ԔԔ implementation of the Program of energy saving and increase of power load for customers. efficiency, including decrease in electric power losses and reduction of consumption of electric power for business needs. JSC Lenenergo plans to proceed with further increase in economic efficiency and ensuring financial stability. JSC Lenenergo plans to get Implementation of the management efficiency program enables net income at a rate of RUB 2.8 bn that will exceed the level of 2013 to successfully realize the development strategy of the power grid in 6.5 times, and revenue will reach RUB 48.2 bn that is above the level complex of the Russian Federation in the Company in part of “decrease of last year by 20.8%. in operating costs by 15% by 2017 taking into account inflation level concerning 2012 per unit of service of the power technical equipment” approved by the Government of the Russian Federation. A special attention will be given to cutting costs; the Company will proceed with implementation of the program of efficiency management. It is planned What is in your opinion a key achievement of the Company for 2013? to optimize the credit portfolio, to expand public loans by means of placement of the registered exchange bonds (placement of two bond issues with a total — In 2013 the indicator of EBITDA characterizing a cash flow generated par value of RUB 10 bn) that will enable to diversify sources of financing and will by the Company before payment of taxes and interest grew, EBITDA positively influence the Company’s image in the business environment. margin increased as well.

Despite the growth of the Company’s credit portfolio, a ratio of Debt/ EBITDA for the end of 2013 constituted 2.96 and corresponds to the standard (3), and the Company managed to keep its financial independence at a rather high level: the share of own capital in balance currency as of 31.12.2013 was 51.4%.

STRATEGY CONTENTS CORPORATE GOVERNANCE 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Deputy Director General For the program activities aimed at technological connection of customers on investments a payback period of investments as a rule corresponds to the term of the facility construction, and for the activities aimed at improving reliability of power supply, make up depending on the specific structure of the investment project from 10 years up to the end of operation of the facility. Ilya G. Meshcheryakov

How is the efficiency of the Company’s investment activity assessed? What indicators are used? What caused the need for the Company to implement the large-scale investment program? — Efficiency of investment activity is defined according to an assessment of execution of key performance indicators (KPI) of the approved program. — Three main factors that determine the necessity of the investment program are: The major KPI of the Company’s investment activity is timely and complete implementation of planned indicators of the investment program ԔԔ high volume of accumulated contractual obligations on technological on development of capital investments, financing and commissioning connection towards subscribers, including the preferential category of capacities (transformer capacity, MVA, and power lines, km). which have been accumulated since 2002; Besides, decrease in specific cost indexes of construction and execution ԔԔ high rates of social and economic development of St. Petersburg and of network schedules of investment projects implementation is a strategic goal. the Leningrad Region, formation of the increased demand for power supply;

ԔԔ high depreciation level and the need to update the electric What is a depreciation level of the Company’s fixed assets? How does grid equipment to ensure reliable power supply of consumers execution of the investment program influence a decrease in the level in St. Petersburg and the Leningrad Region. of depreciation?

— The depreciation level of the Company’s fixed assets is 62.3%, including What are the key objectives of the program? What tasks should be across St. Petersburg – 62.0%, across the Leningrad Region – 65.0%. solved? Bye results of the long-term program 2014–2019 a decline across — Main objectives of the program are: the Company – 52.0%, including over St. Petersburg – 49.0%, and ԔԔ providing reliable and uninterrupted power supply of customers; across the Leningrad Region – 54.0% will be achieved. In absolute terms ԔԔ ensuring non-discriminatory access to electric networks of customers; this is equivalent to reduction of 10.3% for the entire Company and, ԔԔ ensuring sustainable economic growth in regions of presence. accordingly, 13.0% and 11.0% across the subjects.

Long-term program is aimed at achieving the following main objectives: ԔԔ decrease in the depreciation level of fixed assets; What is a dynamics of unit cost of construction of the facilities? ԔԔ reducing losses in electricity transmission; ԔԔ execution of accumulated obligations, transition to the execution — Since 2012 the Company has been conducting control over construction of technological connection contracts in the current conditions; cost on specific indicators. The specific indicator is considered upon ԔԔ opening of the closed power centers; commissioning in fixed assets and is deduced on a voltage class and types ԔԔ construction and reconstruction of the objects directed on power supply of works, namely per 1 km and per 1 MVA. Control over specific indicators of investment projects which support regions’ development. is conducted only regarding new construction and expansion.

In comparison with 2011 the specific indicator has decreased. What are the terms of return on investment? For 2012 the construction cost dropped by 12% on the average concerning 2011, taking into account inflation (in 2012, according to the Ministry — As the sources of financing of the program are formed on two types of economic development, the index deflator equaled to 1.075), and there of activity (electric power transmission and technological connections was a drop of 19.5%. of applicants), and payback periods of investments are formed in two directions.

STRATEGY CONTENTS CORPORATE GOVERNANCE STRATEGY 4. Performance Indicators Annual Report 2013 JSC Lenenergo

During determination of the budget cost of construction the Company On the initiative of JSC Lenenergo open hearings on the basis of the public applies “a technique – 10%” and “a technique – 30%” at application expert advisory boards under regional regulators, and open hearings with of which the smallest cost is selected and put up for procurement participation of the Ministry of Power Industry and the Advisory council procedures. The application of techniques also promotes to reduction of the Government of the Russian Federation were held. Positive feedback of construction cost. by results of the open hearings became the evidence of the quality and relevance of the activities of the investment program. By 2016 the peak of the cost reduction of construction is expected concerning 2012 according to the Strategy of development of the power grid complex of the Russian Federation approved by the Order What are the key and priority projects of 2014? of the Government of the Russian Federation # 511-R of 03.04.2013. — The basic direction of the investment program in 2014 is execution of obligations on technological connection, including towards What measures ensure the most effective work with contractors? a preferential category of consumers of St. Petersburg and the Leningrad Region, pursuant to the concept of execution of the accumulated — Requirements to contract organizations are toughened at carrying out obligations on technological connection approved by the Board competitive procedures on the right of the conclusion of frame contracts of Directors of the Company. regarding financial, material and staffing; the concept of a safe deposit, money brought in by a contract organization to ensure implementation The planned volume of input into fixed assets in this direction for 2014 of obligations, is entered; work on cancellation of contracts delayed is 821 MVA, 1,887 km, 24 thousand contracts. Financing of facilities will because of contract organizations is conducted. amount to RUB 12.1 bn that in 2–2.5 times more than during the previous periods. Besides the current meetings with contract organizations, regular (once per quarter) general meetings of contract organizations are held during which Besides, the following areas of work should be noted: the results of work for the last period, completeness of implementation of the declared plans, default reasons etc. Are considered. Permanent job In St. Petersburg: with city structures on simplification and acceleration of obtaining initial ԔԔ renovation of cable lines 6–110 kV (1st and 2nd stage) for permit documentation and carrying out coordination is conducted. increase of reliability of power supply of consumers and decrease in environmental risks from the use of oil-filled cable lines 35–110 kV;

What can be identified in your opinion as a key achievement ԔԔ complex development of electric networks of the Petrograd district of the Company for 2013? of St. Petersburg to ensure development of the grid, creation of reserve capacities on a forecasted demand taking into account perspective — A change of approach to formation of the investment program – focus investment projects of the city and increase of environmental safety on execution of contractual obligations on technological connection towards of the downtown of St. Petersburg; customers, including a preferential category of customers, which have been accumulated since 2002 and provision of reliable power supply of consumers. ԔԔ construction of cable lines 110 kV Krestovskaya – Vasileostrovskaya to secure the holding of FIFA World Cup in 2018. In 2013 by results of a system work on decrease in the accumulated obligations on technological connection parameters in this direction In the Leningrad Region: exceeded the level of 2012 in 1.3 times. ԔԔ a new distribution substation 110 kV with OTL 110 kV for connection of new substations 110 kV of Kamennogorsk-tyagovaya, 12 km, The plan on capitalization is ahead of schedule for 2013 in the whole investment 29 km, 46 km of FSUE Unified Group of Customer of the Federal program in 1.5 times, the plan of input of power lines is ahead of schedule Agency of Railway Transport for technological connection of facilities in 2.6 times, transformer capacity was commissioned in the full volume. of JSC Russian Railways, the largest project on technological connection being implemented in the Northwest region. Commissioning of 12.6 MVA There were commissioned 6 lines under to the program of Renovation of transformer capacity and 66 km of power lines is scheduled. of cable lines 6–110 kV for the total length of 57.2 km which was financed with attraction of federal funds. In 2013 the draft of the investment ԔԔ reconstruction of external power supply networks of the sea commercial program was published on the available information source with a view port Ust-Luga for development of ICC Ust-Luga and satisfying the needs of receiving feedback, drawing attention of business communities, in power supply of related infrastructure facilities. a wide range of public organizations and other interested persons to the investment program. 67

STRATEGY CONTENTS CORPORATE GOVERNANCE 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Deputy Director General markets also have JSC Tikhvin Ferroalloy Plant, and companies of oil for development industry – JSC Baltnefteprovod, JSC Lukoil. Owing to changes in production and sales of services volumes in the region the volumes of transportation by railway (JSC Russian Railways) and maritime transport (JSC Seaport) also change.

Based on the forecast of consumption at the expense of commissioning Andrey V. Zykov of new capacities under existing technological connection contracts, and a natural increase of loads a sustainable growth of consumption by consumers from JSC Lenenergo grid is forecasted. The forecasted What is the situation with power consumption in St. Petersburg growth of electricity consumption on the near-term outlook (RAB regulation and Leningrad Region? What is your forecast on the dynamics period till 2019) is about 2% per annum. It is expected that by 2019 of consumption in the region for the next years? the volume of consumption will increase up to 33,155.8 mln kWh per year.

— St. Petersburg and the Leningrad Region are the dynamically developing regions. For the last years demand for electric power has been What is your forecast on the dynamics of demand for electric power and constantly growing. technological connection to the grid of new customers?

— By results of technological connection activities in the area of operational Dynamics of electric power supply from JSC Lenenergo grid responsibility of JSC Lenenergo a steady growth of capacity declared for in comparable conditions (taking into account consumption over technological connection is noted: from 2009 up to 2013 the gain of capacity “last mile” objects) in 2008–2013, mn kWh was 555 MW. The number of annually accepted applications for the similar period increased more than twice, from 11,444 pieces to 23,728 pieces. +3.4% –0.3% +3.6% +0.6% –1.5% Changes in the federal legislation of 2009, setting a preferential cost 29,108 29,015 27,011 27,986 28,161 of technological connection of power accepting devices for applicants of the group up to 15 kW, promoted to considerable growth of applications of this category up to 2013.

As a result, in quantitative expression the share of applications up to 15 kW on the average during 2009–2013 amounts to 87% from the total number for the year that corresponds to only 8% of the total declared capacity. Thus, before changes in the normative base the share of the applications in this category accounted for about 50% of total annual number of applications and corresponded to less than 1% of the volume of declared

2009 2010 2011 2012 2013 capacity.

Besides the growth of a preferential category of contracts in the overall structure of applications a growth of the declared capacity in recent years Dynamics of electric power supply from the grid of JSC Lenenergo was provided by large objects of housing construction and production in 2008–2013 indicates uneven electricity consumption in different years. facilities (48% and 16% of the total declared capacity for 2013 respectively). This is not due to fluctuations in the demand for electricity consumption and new capacity but the uneven loading of existing production facilities, mainly In our opinion, in the long term the tendency of increasing demand from by large industrial enterprises. It is connected with the situation in the global applicants will retain which in general will be determined by realization currency and commodity markets. So, for example, the branch of JSC SUAL of industrial and business potential of the region on the background Volkhov Aluminum Plant was compelled to stop production in 2013 due of stabilization of the number of applications of preferential categories to a drop in the world prices for aluminum. Greater sensitivity to world of applicants.

STRATEGY CONTENTS CORPORATE GOVERNANCE STRATEGY 4. Performance Indicators Annual Report 2013 JSC Lenenergo

With the purpose of reducing the size of existing obligations How did the withdrawal of last mile consumers influence JSC Lenenergo annually increases the number of executed contracts the Company? on technological connection (from 6.3 thousand pieces in 2011 to 7.4 thousand pieces in 2013), thus increasing the share of execution — Since St. Petersburg and the Leningrad Region were not included of delayed obligations that increased from 58% in 2011 to 72% in 2013. in the list of regions on the territory of which the operation of last mile contracts prolongs, the volumes of these consumers which by results Nevertheless, as of 01.01.2014 the volume of accumulated obligations under of 2013 totaled 1.5 bn kWh (5% of total amount of rendered services technological connection contracts amounted to more than RUB 41.4 bn in electric power transmission) were excluded from the balance with VAT (revenue to closing), including RUB 19.6 bn with VAT with an expired of JSC Lenenergo from 2014. Exception of this volume of productive term of rendering services which have not been executed on mutual fault supply from JSC Lenenergo networks was considered at formation of JSC Lenenergo and the applicant. of the consolidated forecasted balance of electric power production and delivery for 2014. Hence, the withdrawal of last mile consumers will not To reduce the amount of accumulated obligations on connections of applicants lead to lost revenue from electric power transmission. in JSC Lenenergo the investment program for 2014–2019 was developed.

The draft of the investment program for 2014–2019 passed public hearings, What actions are held to cut losses in JSC Lenenergo networks? What received the approval of the Vice- Governor of St. Petersburg and the Governor indicator is acceptable for the Company? What is the effectiveness of the Leningrad Region, and a positive conclusion of the Public Advisory of these measures in terms of financial results? Council of the Committees on tariffs of St. Petersburg and the Leningrad Region. The draft considers long-term plans of perspective development — According to requirements of the current legislation of the Russian of the regions of service of the Company and provides a possibility Federation the Program of energy saving and increase of power efficiency of connection of applicants to the closed power grid centers. The draft has to 2019 was developed in JSC Lenenergo and approved by the Board been optimized from the viewpoint of implemented technical solutions. of Directors. By results of 2013 the effect of implementation of activities It will enable to connect all applicants of a preferential category till 2017. under the program accounted for 142.6 mln kWh, or RUB 752.2 mln. The target indicator of electric power losses in JSC Lenenergo networks taking into account implementation of activities under the program up Is the problem of receivables substantial for the Company? Who are to 2019 is 9.12% (the actual indicator of 2013 in comparable conditions major debtors of the Company? What measures are implemented taking into account the exception of last mile objects was 10.5%). to reduce receivables? Economic effect of implementation of the program at the expense of decrease in electric power losses and increase in the volumes of electric — The problem of receivables is essential for JSC Lenenergo. The major power transmission constitutes RUB 3.3 bn. consumers of services on electric power transmission and, respectively, the debtors of JSC Lenenergo are sales companies. For 2013 monthly average receivables constituted 15% of monthly average charge for How is the problem of accumulated and delayed obligations services on electric power transmission. on technological connection of applicants to networks solved? How did the problem occur? At present the legal framework of interaction of network organizations with contractors enables last to use the tools of payments delay and — JSC Lenenergo acting in conditions of the limited financing, thus does not provide network organizations with adequate counter a considerable growth of contracts signed with a preferential category mechanisms to prevent the growth of receivables. of applicants, legislation changes in the field of tariff regulation, and existence of electric power centers closed for connection, faced a problem Today JSC Lenenergo actions on ensuring timely reclamation of debt of accumulation of delayed contracts on technological connection in claiming order not always lead to its reduction since debtors when in recent years. repaying debt on “old” periods (on the basis of judgments come into force), accumulate debt on «new» periods.

STRATEGY CONTENTS CORPORATE GOVERNANCE 4. Performance Indicators Annual Report 2013 JSC Lenenergo

To reduce the current level of receivables the following control tools over receivables are applied in JSC Lenenergo: How to solve the problem of closed substations?

ԔԔ analytical database of accounting and control over receivables of sales — The lack of unified and actual Russian methods of calculation companies – consumers of services in electric power transmission, of reserve capacity on substations 35–110 kV creates conditions is created; for ambiguous treatment of the number of substations closed for ԔԔ disagreements are settled in the pretrial order; technological connections. In its turn this causes contradictions with ԔԔ claims and debt collection is conducted in the pretrial order; the system operator concerning technological connections of additional ԔԔ debt is restructuring; loads. Unmatched positions of grid companies and divisions of the system ԔԔ assignment of debt is executed; operator create unjustified barriers for connection of new consumers. ԔԔ JSC Lenenergo conducts work together with guaranteeing suppliers to solve problem of non-payments of end users at the regional level. In Q1 2014 44% of the total number of substations 35–110 kV of JSC Lenenergo were closed for technological connection (161 piece) at 105% excess of transformer capacity of substations in the mode (n-1). Describe the problem of preferential connections of consumers In case of existence of proper communications on a distributive network up to 15 KW. In what volume is lost income evolved? How of low voltage between different substations that enable operatively does the Company compensate lost profit? What are solutions to switch load from substation to another (flexible grid), reliability of power of the problem? supply of consumers will be provided even at emergency shutdown of a substation’s transformer and load of the nominal remained above — Since 2009 a rapid growth of the preferential category of applicants (but not more than 135%). These criteria of reference to closed substations with the term of works of 6 months has been observed. On this category are specified in Order # 727 of 29.12.2013, which approved methodical of applicants 40,838 pieces in quantitative expression and RUB 672 mln with instructions for definition of capacity reserve on substations of SDCs VAT in terms of money were accumulated as of 01.01.2014. The main reason of JSC Rosseti. for default of obligations in time is the lack of a source of financing of capital works necessary for performance of specifications on technological The problems arising at connection of customers in the districts connection of applicants. Execution of the total volume of accumulated of the distributive network on closed substations are: obligations on the preferential category of applicants of “RUB 550” requires ԔԔ long periods of reconstruction of substations 35–110 kV do not RUB 9,250 mln including VAT. Specific cost of connection of one preferential comply with normative terms of connection of applicants determined applicant constitutes RUB 277 thousand with VAT. by the Federal legislation, which creates preconditions for accumulate obligations; To compensate lost profit JSC Lenenergo is trying to consider these expenses in the distribution tariff, and as a result the volume ԔԔ to ensure timely connection of applicants it is necessary to burden of an investment component, which could be put in modernization technical specifications with more expensive works connected of depreciated assets, is reduced. with construction of the distributive network to open substations, creation of the schemes of unloading of closed substations (flexible Another reason of default in time it the fact that the accumulated volume grid), or construction of new substations under an individual tariff. of applications with an execution date of 6 months involves a large volume Alternative to the burden technical specifications is connection from of activities on reconstruction of existing networks and new construction, the existing closed substation after its opening according to activities thus in some cases complete replacement of networks of whole of the investment program (if provided); settlements is required that is impossible to execute for half a year. ԔԔ a permanent decline in reliability of power supply of consumers of closed Besides, in certain cases connection of applicants of the preferential substations due to the natural increase of load (with selection of declared category is complicated by the lack of declared load in a point capacity) and urgent connections of new consumers of a social group; of technological connection, misuse of a connection privilege, and untimely performance by an applicant of technological connection specifications. ԔԔ a constant growth in the number of closed substations in connection with To solve these problems JSC Lenenergo offers to provide a network the natural growth of loads and technological connection; organization a legislative opportunity to check the validity of required capacity, to simplify bureaucratic nature of procedures of coordination ԔԔ need of regular adjustment of the investment program to ensure opening and issue of construction licenses, and legislatively to limit the number of all substations (including those closed for the expired period) that of possible misuses of unreasonable technological connection. is impossible due to limited sources of financing of the investment program.

STRATEGY CONTENTS CORPORATE GOVERNANCE STRATEGY 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Among possible solutions of these problems JSC Lenenergo sees timely The complete elimination of non-contractual consumption consists and economically reasonable activities of the investment program in registration of the documents on technological connections directed on increase of reservation schemes of power supply of consumers on the object and conclusion on their basis of the contract on power from different substations to create a flexible distributive network, supply. With a view of reduction of non-contractual electricity consumption reconstruction of existing substations and construction of new ones. volumes in JSC Lenenergo a simplified order of paperwork on technological Solution of the declared problems will be also promoted by stage-by-stage connections of built-in premises and installation (acceptance) of metering construction with the use of mobile substations applied by JSC Lenenergo devices for registration of the contracts on power supply is organized. that enables to reduce the cost of initial construction. For the period from January 1, 2013 till March 31, 2014 3,173 contracts on power supply were signed with customers on which objects non- Is the Company facing the problem of non-use of declared capacity? contractual consumption was earlier revealed. For the end of Q1 2014 over How to solve this problem? 3,000 non-contractual objects are at the stage of execution of documents on technological connection which receiving will enable consumers to sign — Pursuant to requirements of the current legislation of Russia payment power supply contracts. for the reserve of non-used capacity by consumers is provided if the maximum capacity under the contract exceeds 670 kW. At present the procedure of tariffs calculation on payment of reserve capacity is not What measures for improving transparency of the technological approved by FTS of Russia, it approval is expected till the end of 2014. connections process are implemented in the Company? How is client The work on fixing parameters of maximum capacity of customers with policy lining up in the Company? the maximum capacity over 670 kW is conducted by JSC Lenenergo. Besides, the size of reserve capacity is specified in acts of rendered — Technological connection is a process including at least five different services on electric power transmission. types of activity with a huge flow of applications and a large quantity of non-standard objects and solutions. JSC Lenenergo solves today When applications for technological connection are accepted there are a complex task on business simplification in part of availability and no requirements to check the correctness of calculations of the load and transparency of technological connection procedures. demand of load requested by an applicant. As a result, actual loading reached by the consumer often makes 10–30% of initially declared capacity Implementation of this task is carried out in two directions: that leads to unreasonable switch of substations to the status of closed for ԔԔ approval of internal documents at JSC Rosseti and JSC Lenenergo. technological connections. The basic document is the standard “The system of centralized customer service” approved by the Board of Directors of the Company Example of such unreasonably closed substation is recently constructed (Minutes # 13 of 19.12.2011); substation 110 kV # 161 Toyota Plant with transformers 2×63 MVA and existing load of 21.03 MVA. At the volume of contractual obligations ԔԔ at the federal level the Resolution of the Government # 1144-R and demands for technological connection at a rate of 56.06 MVA, of 30.06.2012 approved the road map which will enable to reduce the substation is closed for technological connection pursuant the quantity of connections to three and time for passing all stages to the requirements of approved methods for definition of reserve capacity. of technological connection to receive access to power networks.

According to the plan of implementation of activities for standard How do you conduct work on revealing non-contractual electricity introduction “The system of centralized customer service” approved consumption? What is economic effect from measures on revealing by Minutes of the Board of Directors # 3 of 30.07.2012, taking into illegal connections? account adjustment of the terms of implementation (Minutes of the Board of Directors# 35 of 07.06.2013), in 2011–2013 actions for reengineering — Within works on revealing non-contractual electricity consumption of the technological connection process, development of internal and representatives of JSC Lenenergo perform a site survey, verify documents correspondence services, including interactive services were implemented. and, when the lack of documents on the object connected to electric networks is revealed, make out the act of non-metered (non-contractual) The main results are: consumption. Based on this act, the consumer is given an invoice for ԔԔ work on regulation of business processes, updating of job descriptions, payment of the cost of non-contractual electricity consumption pursuant creating document templates, regulations on the technological to requirements of the current legislation of the Russian Federation (by connection, standard forms of applications for technological connection cable sectioning). and contracts of technological connection;

STRATEGY CONTENTS CORPORATE GOVERNANCE 4. Performance Indicators Annual Report 2013 JSC Lenenergo

ԔԔ electronic database of documents on technological connection was which are focused on facilitating the conditions of connection of users created; to power infrastructure in Russia.

ԔԔ a new client center for work with customers and technological The goal in the field of improvement of conditions for conducting business connection was opened, terms of consideration of applications for activity is set, i.e. To provide essential reduction in the terms of passing technological connection and issue of contracts on technological procedures in the spheres of state regulation (including connections connections were reduced, the system of electronic turn was entered, to networks) to the subjects of entrepreneurial activity and the cost of these quality and comfort of service, quality of consultation, information procedures. Implementation of these actions of the road map was delegated support are improved; by the same Resolution # 1144-R of 30.06.2012 to executive federal authorities of the Russian Federation: Ministry of Power Industry, Ministry ԔԔ the section to Clients on the corporate website is under improvement, of Economic Development, Federal Service for Ecological, Technological and placement on the website in Internet of applications for receiving Nuclear Supervision, Federal Antimonopoly Service, Ministry of Regional (redistribution) of capacity was implemented, and possibility Development, Ministry of Industry and Trade and Federal Tariff Service. to get information on the course of execution of the application on technological connection on the Company’s website was worked out; Monitoring and control over implementation of the road map is carried out by Ministry of Economic Development of the Russian Federation with ԔԔ geo-information system (GIS) to track operational information about participation of interested federal government authorities, executive loading of substations, to define the nearest substation to the object authorities of subjects of the Russian Federation, public associations of connection, to receive advance information on preliminary possibility of entrepreneurs and independent non-profit organization Agency on connections to networks; of Strategic Initiatives on Promotion of New Projects (item 34 of the road map; Resolution of the Government of the Russian Federation # 1613-R ԔԔ modern automated control system of technological connections was of 06.09.2012). As of 31.12.2013 a number of normative legal acts created and is constantly improved, the electronic control system to support execution of the road map actions were published. of contractors is implemented;

ԔԔ a contact center, allowing directing addresses on any questions What is, in your opinion, the key achievement of the Company of Company’s activity on a single number 8-800-700-14-71 was created; regarding technological connection to networks in 2013? the project of submission of applications for technological connections by phone on the single number of JSC Lenenergo 8-800-700-14-71 — Key achievements of the Company regarding technological connection was introduced. Today it is possible to submit a general application for in 2013 are associated with implementation of complex of measures aimed technological connection and conclusion of the contract on power supply; at improvement of customer-focused services of the Company, namely:

ԔԔ the Council of consumers of JSC Lenenergo for solving problematic ԔԔ reduction of the average time of processing of applications, issues of technological connection was established; improvement of the system of registration of applications (including development of the system of electronic document flow), automation ԔԔ the task of decrease in the number of customers’ addresses of preparation of draft contracts on technological connection owing in the network organization, reduction of stages of the technological to introduction of the automated control system of the process connection procedure, terms of their passing and the cost of technological connection SharePoint; of technological connection for the group of applicants up to 150 kW is being solved. ԔԔ creation of conditions for submission of application for technological connection by phone (for the maximum capacity of power accepting devices to 15 kW), providing supplementary service in technological How do you perform actions for increase of power infrastructure connection on turnkey basis; availability? ԔԔ providing opportunities for consumers to get on the information resource — The Resolution of the Government of the Russian Federation # 754-R in the Internet data on the presence of the amount of free capacity for of 06.05.2012 approved the plan of preparation of legal acts directed technological connection on substations below 35 kV (updated quarterly); on increase of power infrastructure availability, containing 26 actions. The Resolution # 1144-R of 30.06.2012 approved the plan of measures ԔԔ automation of all sub-processes of technological connection; “Increase of availability of power infrastructure” (road map) which contains 33 actions (including all actions approved by the Resolution # 754-R) ԔԔ creation of the Council of customers of JSC Lenenergo.

STRATEGY CONTENTS CORPORATE GOVERNANCE STRATEGY 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Besides, positive dynamics of performance of the contracts devices into operation and conclusion of the contract on power supply on technological connection was provided in the reporting period. before completion of the technological connection procedure; By results of 2013 JSC Lenenergo has connected 7,381 applicants, exceeding the similar indicator of 2012 by 6%. The volume of connected ԔԔ reception, processing and delivery upon address of the applicant of all capacity of JSC Lenenergo (taking into account connections of generation documents which complete the technological connection procedure facilities) increased by 47% concerning 2012. Against insignificant along with voltage supply of the power installation (for preferential decrease in the number of accepted applications, the maximum gain applicants up to 15 kW); of capacity under accepted applications rather previous periods was provided in 2013. In the next period implementation of the complex of activities for improvement of the Company’s IT strategy will go on: In 2013 JSC Lenenergo signed contracts on technological connection with large ԔԔ ensuring visualization of indicators of the technological connection applicants, such as the Committee on transport infrastructure development process efficiency at the stages of processing of an application of St. Petersburg (the contract on technological connections of Krasnoselsko- (Manager Dashboard); Kalininskaya subway line and Frunzenskaya subway line in the total cost of RUB 3,490 mln with VAT), FSUE Central Research and Development Institute ԔԔ modernization of existing software for technological connection named after ac. Krylov (for the sum of RUB 576.9 mln with VAT). division, including system completion according to new regulations and legislation, preparation of the system for GIS introduction; Moreover, in 2013 JSC Lenenergo reduced the terms of preparation of draft contracts on technological connection across St. Petersburg ԔԔ automation of processes of formation, adjustment, execution, by 27%, across the Leningrad Region by 14%, and reached the indicator and forecasting of execution of the address investment program of quality of services rendered by JSC Lenenergo approved by executive of JSC Lenenergo across St. Petersburg; authorities (regulated by Order # 718 of 14.10.2013 of the Ministry of Power Industry of the Russian Federation). ԔԔ GIS introduction across the Leningrad Region, automation of formation of the address investment program of JSC Lenenergo across the Leningrad Region; What are key plans of JSC Lenenergo regarding technological connection to networks for 2014? ԔԔ development of the resource “Private Client Office” with information disclosure on the stages of processing of applications for technological — JSC Lenenergo when performing its activities in compliance with connection and possibility for tracking dates of applications’ the development strategy of JSC Rosseti aims to improve the efficiency performance on technological connection. of technological connections in the area of its own operational responsibility.

The Company not only solves operational objectives, but also is actively engaged in strategic planning in implementing significant projects of development of the system of technological connection in the long run. However, many of the Company’s initiatives have a potential for use at a national level already today.

In 2014 it is planned to implement the following activities aimed at accelerating procedures of technological connection to electric networks of JSC Lenenergo: ԔԔ improvement of the system of technological connections within the company (regulation and updating of business processes at implementation of technological connections, introduction of personal responsibility, reduction of the terms of procedures at all stages of technological connection);

ԔԔ regulation of procedures of interaction with JSC PSK and other power supplying organizations on implementation of possibilities of power supply, registration of input of metering devices and power accepting

STRATEGY CONTENTS CORPORATE GOVERNANCE 4. Performance Indicators Annual Report 2013 JSC Lenenergo

4.1. OPERATING RESULTS

Rendering of electricity transmission services

Dynamics of electric power supply to grid, supply from grid and losses

Comparable indicators Supply to grid, mln kWh Supply from grid, mln kWh

2011 2012 2013 2011 2012 2013

JSC Lenenergo 33,460 34,513 33,945 29,914 30,935 30,513

St. Petersburg 21,297 21,811 21,730 18,962 19,477 19,459

Leningrad Region 12,163 12,702 12,215 10,952 11,458 11,054

Comparable indicators Electric power losses, mln kWh Electric power losses, %

2011 2012 2013 2011 2012 2013

JSC Lenenergo 3,546 3,579 3,432 10.6 10.4 10.1

St. Petersburg 2,335 2,334 2,270 11.0 10.7 10.5

Leningrad Region 1,211 1,245 1,161 10.0 9.8 9.5

In 2013 33,945 mln kWh of electric power were supplied to JSC Lenenergo Electricity supply from grid in 2013 grid from networks of JSC FGC UES and producers of electric power. 30,513 mln kWh of electric power were transferred out of this volume 30,513 mln kWh to consumers and territorial network companies, thus electric power Electric power losses in 2013 losses totaled 3,432 mln kWh, or 10.1% of the electric power supplied to JSC Lenenergo grid. 10.1%

Key operational indicators of JSC Lenenergo for 2011–2013, mln kWh

–1.6% –1.4% 33,460 34,513 33,945 30,935 Electric power supply to grid 29,914 30,513 Electric power supply from grid

–4.1% Electric power losses

10.6% 10.4% 10.1% 3,546 3,579 3,432

2011 2012 2013

STRATEGY CONTENTS CORPORATE GOVERNANCE STRATEGY 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Dynamics of productive electricity supply, Dynamics of electricity consumption by consumers of “last mile” mln kWh contracts, mln kWh –1.3%

30,007 29,613 –18.0% 28,975 1,753 1,826 10,902 10,530 599 1,498 10,436 606 St. Petersburg 318 St. Petersburg

Leningrad Region Leningrad Region

18,539 19,104 19,083 1,147 1,228 1,180

2011 2012 2013 2011 2012 2013

In comparison with the indicators of 2012 the volume of productive Productive supply of electric power electricity supply decreased by 394 mln kWh, or 1.3%. The main drop to consumers in 2013 was noted in the Leningrad Region and was caused by a withdrawal of some consumers from the “last mile” contracts. In 2012 the volume 29,613 mln kWh of services in electric power transmission rendered to this category of consumers amounted to 329.3 mln kWh, including JSC Russian Railroads –197.5 mln kWh and JSC Pikalevsky Cement –131.8 mln kWh. Withdrawal of these consumers was considered at formation of the tariff and balance decision for 2013 and did not lead to any emergence of lost income for JSC Lenenergo.

Key operational indicators of JSC Lenenergo for 2011–2013 in comparable terms (excluding consumers of “last mile” contracts)

–0.7% –0.3% 31,707 32,687 32,447 28,161 29,108 29,015 Electric power supply to grid

Electric power supply from grid –4.1% Electric power losses 11.2% 11.0% 10.6% 3,546 3,579 3,432

2011 2012 2013

STRATEGY CONTENTS CORPORATE GOVERNANCE 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Breakdown of electricity consumption

Breakdown of supply from grid by categories of consumers, mln kWh

Category 2011 2012 2013 Change, 2013/12, %

Industrial consumers 8,827 8,981 7,892 – 12

Transport 607 711 625 – 12

Agriculture and food industry 378 378 362 – 4

Nonindustrial consumers 4,312 4,486 4,762 6

State (municipal) organizations and other budgetary 123 137 261 91 consumers

Population and the equated groups of consumers 5,551 6,131 6,150 0

TGOs 10,116 10,111 10,460 3

Total 29,914 30,935 30,513 – 1

In 2013 electricity consumption volumes Breakdown of productive supply by categories of end consumers in 2013, mln kWh by industrial consumers dropped that was caused by the following reasons: 625 362261 ԔԔ conclusion of direct contracts with JSC FGC UES 4,762 34.3% TGO by industrial consumers – 329.3 mln kWh; 10,460 25.9% Industrial consumers Population and the equated 20.2% ԔԔ redistribution of some consumers between groups of consumers

the groups “Industrial consumers”, 15.6% Nonindustrial consumers “Nonindustrial consumers” and “State 30,513 2.1% Transport (municipal) organizations and other budgetary 6,150 consumers”; 1.2% Agriculture and food industry 0.9% State (municipal) organizations and other budgetary consumers ԔԔ increase in the volume of consumers 7,892 connected to TGOs’ networks.

In the breakdown of electric power supply by groups of consumers the greatest specific weight makes supply from Lenenergo grid to TGOs’ networks – over JSC Lenenergo the indicator makes 33.3% from combined value of consumption, including 27.2% across St. Petersburg and In 2013 the share of industrial consumers 48.8% across the Leningrad Region. For the last five years the general tendency of increase in the productivel supply of electric power in the share of electric power supply to TGOs’ networks in connection with formation of new of JSC Lenenergo was TGOs – grid organizations submitting applications for their inclusion into the volume of joint 25.9% operations productive supply is observed. Generally new TGOs are formed on the basis of large enterprises (industrial sites) transferring their own power network facilities for use by TGOs.

STRATEGY CONTENTS CORPORATE GOVERNANCE STRATEGY 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Dynamics of productive electricity supply by voltage levels, mln kWh

2011 2012 2013 Change, 2013/12, %

HV 8,102 7,930 8,046 1

MV1 878 889 756 – 15

MV2 10,417 11,066 11,099 0

LV 9,578 10,121 9,712 – 4

Total 28,975 30,007 29,613 – 1

By results of 2013 a drop in consumption at a low Breakdown of productive supply by voltage levels in 2013, mln kWh voltage level is noted that is caused by reduced consumption by the group “Population and the equated groups of consumers”. 756

8,046 11,099 37% Medium voltage 2 29,613 33% Low voltage 27% High voltage

3% Medium voltage 1

9,712

Voltage level MV2 (6–10 kV) accounts for the largest share in the structure It should be noted that the greatest size of productive supply in the breakdown of productive of productive supply (37.5%) supply in the volume of 37.5% is the share of MV2 level (6–10 kV), low voltage level (32.8%) and high voltage level (27.2%). The breakdown of electric power supply by voltage levels is similar to the breakdown by groups of consumers, i.e. The main volume of services rendered to industrial consumers is rated on HV level, to nonindustrial consumers – on MV2 level, to population – on LV level. As in structure of network equipment of JSC Lenenergo an insignificant share is occupied by equipment 20–35 kV, the smallest volume of productive supply of 2.6% is the share of voltage level MV1.

STRATEGY CONTENTS CORPORATE GOVERNANCE 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Electric power consumption from Lenenergo networks by the largest consumers in 2013, mln kWh

Consumer Volume consumption, mln kWh Share in productive supply, %

Productive supply of electric power in 2013 29,613 100

St. Petersburg

JSC PC Baltika 40 0.1

JSC Admiralty Shipyards 28 0.1

JSC PC Energy, AO JSC Kirov Plant 33 0.1

JSC Svetlana 33 0.1

JSC Shipbuilding Plant Severnaya Verf 49 0.2

JSC Power Machines LMP 84 0.3

JSC Nevsky Zavod 30 0.1

Leningrad Region

LLC Cement 147 0.5

LLC PG Fosforit 122 0.4

CJSC Metakhim 138 0.5

CJSC Pikalevsky Cement 203 0.7

CJSC SZIPK 82 0.3

CJSC Tikhvin Ferroalloy Plant 342 1.2

JSC Saint Petersburg cardboard-printing plant 137 0.5

Total on the largest consumers 1,468 5.0

Power consumption data are specified in the table only on the largest industrial consumers of St. Petersburg and the Leningrad Region. Overall, the number of consumers with installed capacity over 670 kW on the two regions is more than 1,300.

STRATEGY CONTENTS CORPORATE GOVERNANCE STRATEGY 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Electric power losses

Dynamics of electric power losses, mln kWh

2011 2012 2013 Change, 2013/12

mln kWh % mln kWh % mln kWh % % p.p. St. Petersburg 2,335 11.0 2,334 10.7 2,270 10.5 –2.7 –0.2

Leningrad Region 1,211 10.0 1,245 9.8 1,161 9.5 –6.7 –0.3

JSC Lenenergo, total 3,546 10.6 3,578 10.4 3,432 10.1 –4.1 –0.3

Drop of losses in 2013 For 12 months 2013 losses in Lenenergo networks totaled 3,431.5 mln kWh, mln kWh 146 or 10.1% of supply to grid that is 146 mln kWh lower than the level of 2012 – 4% to 2012 in absolute expression (–0.26 p.p. to relative level of losses in 2012)

Dynamics of actual electric power losses in comparison with planned indicators in 2011–2013

By results of implementation of actions Indicator 2011 2012 2013 under the program of energy saving and increase of power efficiency Normative losses (electric power losses of JSC Lenenergo: decrease considered in the tariff and balance 3,573 3,698 3,471 in the electric power losses constituted decision), mln kWh 142.6 mln kWh under the planned size Normative losses (electric power losses of 141.9 mln kWh. considered in the tariff and balance 10.8 10.4 10.2 This allowed reducing electric power decision), % losses by 0.3 percentage points by results of 2013 concerning the level Losses according to the business plan, % 10.8 10.4 10.2 of losses in 2012. Losses, fact, % 10.6 10.4 10.1

Deviation fact/plan, p.p. –0.2 0.0 –0.1

STRATEGY CONTENTS CORPORATE GOVERNANCE 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Energy saving and increase of power efficiency

In 2013, the Board of Directors of JSC Lenenergo approved the Program modernization and building of the new model of («smart») grid on the basis of energy saving and increase of power efficiency for 2013–2018 of innovative technologies and equipment, introduction of the systems within which a complex of measures aimed at optimization (reduction) of technological management and network operation. Volume of financing of the level of losses is implemented. The main objectives of the program of the Program of energy saving and increase of power infrastructure are introduction of the power management system in JSC Lenenergo, is RUB 6,873 mln. The source is the investment program of JSC Lenenergo.

Decrease in electric power losses to 2018 from the level of 2012 pursuant to the program 17.5%

Program of energy saving and increase of power efficiency in 2013

Target programs Implementation

14.2 RUB mln Measures for decrease in energy resources on production and business facilities 21. 9 262.5 12 ,169.1 4 ,562.3 RUB mln thousand m3 Gcal thousand tons Electric power Cold and hot water Heat power of conditional fuel Other (diesel, kerosene, gasoline, etc.) 510.8 RUB mln organizational and technical measures 173. 9 mln kWh

Non-target programs Implementation

226.9 RUB mln Program of perspective development of electricity metering systems 113.1 mln kWh

14.5 RUB mln Program of modernization and reconstruction 8.7 mln kWh

STRATEGY CONTENTS CORPORATE GOVERNANCE STRATEGY 4. Performance Indicators Annual Report 2013 JSC Lenenergo

ACTIONS AIMED AT DECREASE OF NONTECHNICAL LOSSES

Installation and upgrade of metering stations Reveal of unmetered electricity Reveal of non-contractual electricity consumption consumption 16,103 pcs.

113 .1 mln kWh 19.6 mln KWh 147.6 mln KWh

Decrease in electric power Wire replacement by wires with larger consumption for own needs ACTIONS AIMED AT DECREASE cross-section on overloaded OTL of substations OF TECHNOLOGICAL LOSSES

3 .1 mln KWh 9.7 mln KWh

Shutdown of transformers Optimization of working voltage Replacement of derivation Replacement of overloaded on substations with seasonal loading in main substations of radial electric in apartment houses by SIW transformers networks 110 kV and 35 kV

0.3 mln KWh 0.03 mln KWh 0.02 mln KWh 0.1 mln KWh

Redistribution of loading of the main Installation and commissioning Shutdown in the modes of small Balancing of phases loadings network by switching of devices for reactive capacity loadings of transformers on substations in electric networks compensation in electric networks with two and more transformers

0.2 mln KWh 0.01 mln KWh 1. 6 mln KWh 0.4 mln KWh

STRATEGY CONTENTS CORPORATE GOVERNANCE 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Performance of target indicators under the energy saving program

Indicators 2011 2012 2013 Change in 2013 (plan/fact)

p.p. (unless Plan Fact Plan Fact Plan Fact % otherwise noted)

Decrease in electric power losses, % 0.5 – 1.0 – 2.2 – 2.17 – 1.54 – 2.51 – – 1.0

Decrease in consumption of energy – 14.0 195 190 206 178 206 192 – 7.0 resources for business needs, RUB mln RUB mln

Equipment by modern electricity metering 2 2 5 3 7 7 0 0 devices in the retail market, %

In 2013 due to implementation of the energy saving program losses In monetary terms the economy for the Company in 2013 was were lowered by 2.5% relatively the basic year of 2012. In 2012 and 2011 RUB 498.2 mln, having exceeded the economic effect of 2012 the drop was 2.2% and 1.0%, respectively. by RUB 256.5 mln, or 106%, and in 2011 – by RUB 398.4 mln, or 399%.

Implementation of key actions to reduce electric power losses in 2013, mn kWh

Annual effect of decrease in losses Actions at the expense of the performed actions, mln kWh

Measures, total 295.8

1. Organizational measures 167.2

Identification of unmetered consumption 19.6

Identification of non-contractual consumption 147.6

2. Technical measures 15.5

Shutdown in the modes of small loadings of transformers on substations with two and more transformers 1.6

Shutdown of transformers on substations with seasonal loading 0.3

Balancing of phases loadings in electric networks 0.4

Decrease in electric power consumption for own needs of substations 3.1

Installation and commissioning of devices for reactive capacity compensation in electric networks 0.0

Wire replacement by wires with larger cross-section on overloaded OTL 9.7

Replacement of overloaded transformers 0.1

Replacement of derivation in apartment houses by SIW 0.0

Optimization of working voltage in main substations of radial electric networks 110 kV and 35 kV 0.0

Redistribution of loading of the main network by switching 0.2

3. Measures to improve electric power metering 113.1

STRATEGY CONTENTS CORPORATE GOVERNANCE STRATEGY 4. Performance Indicators Annual Report 2013 JSC Lenenergo

By implementing a set of measures to optimize losses in 2013 15.5 mln kWh (RUB 27.5 mln) through technical measures, and the volume of savings totaled 295.8 mln kWh (RUB 752.3 mln), including 113.1 mln kWh (RUB 226.9 mln) through measures to improve electric 167.2 mln kWh (RUB 497.9 mln) through organizational measures, power metering.

Data on actual consumption by JSC Lenenergo of energy resources for production and business needs in 2013

2013 # Name Unit Plan Fact

energy resources delivered under take-off agreements (purchase 1 RUB mln 206.3 192.1 and sale), total

RUB mln 74.0 61.5 1.1 electric power Mln kWh 23.9 21.9

RUB mln 15.9 14.7 1.2 heat power Gcal 12,793.6 12,169.1

RUB mln 6.4 5.9 1.3 cold water supply thousand m³ 276.0 263.4

RUB mln 110.0 110.0

1.4 other (diesel fuel, kerosene, gasoline, etc.) thousand tons 4,526.3 4,526.3 of standard fuel

Identification of illegal electricity consumption

In 2013 22,491 acts of non-contractual consumption for 512.6 mln kWh to requirements of the current legislation of the Russian Federation were issued. Under the exposed acts of non-contractual electricity regarding collecting the cost of non-contractual consumption was consumption in 2013 payment in favor of JSC Lenenergo pursuant RUB 1,832 mln with VAT; charges totaled RUB 1,867 mln w/o VAT.

Identified unmetered consumption Non-contractual consumption 1Cost of services in electric power transmission is specified. 19.6 mln kWh 512.6 mln kWh 33 RUB mln w/o VAT1 1,867 RUB mln w/o VAT1

STRATEGY CONTENTS CORPORATE GOVERNANCE 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Tariffs. RAB regulation

Tariffs on electricity transmission services are established by regulators. by sales companies arrive in the higher territorial network organization JSC Lenenergo which pays off with subordinate territorial network Tariffs on electricity transmission services for 2013 were approved companies. within the levels coordinated by the Federal Tariff Service of the Russian Federation by a joint-operations method that is uniform in the territory Tariffs on transmission services across St. Petersburg are approved under of the whole subject of the Russian Federation. the scheme “mixed costs”. According to this scheme payments collected by sales companies arrive in the higher territorial network organization Since 2008, single «joint operations» tariffs have been approved for JSC Lenenergo which pays off with all subordinate territorial network the services in electric power transmission which are identical to all companies, except CJSC KirovTEK and JSC Oboronenergo. An individual consumers irrespective of the connection point to distributive networks double-rate tariff under a “cost minus” scheme was set for CJSC KirovTEK in the region (item 42 of the Rules of non-discriminatory access and JSC Oboronenergo (these companies pay JSC Lenenergo for electricity to services in electric power transmission and rendering of these services transmission services). # 861 of 27.12.2004), and individual tariffs on transmission services for calculations between grid companies. Since 01.01.2011 regulation in JSC Lenenergo has been carried under the method of return on invested capital (RAB) according to which Tariffs on transmission services across the Leningrad Region are approved the Committee on tariffs of St. Petersburg and the Committee on tariffs under a “cost plus” scheme. According to this scheme payments collected and price policy of the Leningrad Region had set long-term parameters of tariff regulation for JSC Lenenergo till 2017.

In response to the Resolution of the Government 2017 (Order of the Committee on tariffs of the Russian Federation # 1178 of St. Petersburg # 181-R of 13.07.2012, Order of 29.12.2011 (in the edition of the Resolution of the Committee on tariffs and price policy RAB (Regulatory Asset Base) is the system of the Government of the Russian Federation of the Leningrad Region # 88-p of 13.07.2012). of long-term tariff formation aimed at attraction of investments into # 663 of 30.06.2012) parameters of the long- These parameters were coordinated by FTS infrastructure expansion and modernization. term tariff regulation approved earlier of Russia (Orders # 471-e, # 472-e, # 473-e were reconsidered for JSC Lenenergo and and # 474-e of 12.07.2012) and have been the period of regulation was prolonged till applied since July 1, 2012.

Advantages of return on invested capital are as follows: Within the procedure of coordination By results of work the Resolution of a tariff projection during RAB reboot of the Government of the Russian ԔԔ provision of incentives to attract JSC Lenenergo carried out much work with Federation # 663 of 30.06.2012 investments; regional and federal executive authorities and scenario conditions of Ministry ԔԔ increase in capitalization of regulated on justification of the need of coordination of Economic Development of the Russian organizations; of individual long-term parameters Federation defined individual conditions of tariff regulation for JSC Lenenergo for on the level of a gain of joint operations ԔԔ improvement of the quality of strategic the purpose of creation of funding sources tariff for electric power transmission for planning of company activities; of the investment program that allow St. Petersburg and the Leningrad Region ԔԔ possibility to smooth tariff consequences performing accumulated obligations on grid in case they are caused by implementation of investment programs implementation connection and strengthening of reliability of investment projects. for consumers; of the power network complex of the region. ԔԔ creation of economic motivation on cutting costs, increase of reliability and quality of rendered services; ԔԔ lack of «item-by-item» control on expenses from regulatory authorities.

STRATEGY CONTENTS CORPORATE GOVERNANCE STRATEGY 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Key RAB parameters

Indicator St. Petersburg Leningrad Region JSC Lenenergo

Invested capital (residual) as of 01.01.2013, RUB mln 59,353 24,787 84,140

CAPEX considered at tariff regulation, 2011–2017, RUB mln 63,846 20,616 84,463

Rate of return on invested capital – old capital, %

2011 6 6 6

2012–2016 1 1 1

2017 11 11 11

Rate of return on invested capital – new capital, %

2011 12 12 12

2012 12 12 12

2013 and further 11 11 11

Term of return of invested capital, years 35 35 35

Revenue from electric power transmission activities

2011 2012 2013 Change, 2013F (fact) Change, Indicator Unit Approved / 2013 2013F / 2012F, % Fact Fact Fact by REC (approved), %

Leningrad Region

Revenue1 RUB mln 11,327 12,577 14,130 14,490 2.5 15.2

Productive electricity supply mln kWh 10,755 11,142 12,384 11,815 – 4.6 6.0

Average tariff kop./ kWh 105.3 112.9 114.1 122.6 7.5 8.6

St. Petersburg

Revenue1 RUB mln 17,907 16,954 22,852 19,545 – 14.5 15.3

Useful holiday of the electric mln kWh 18,539 19,104 19,463 19,083 – 2.0 – 0.1 power

Productive electricity supply kop./ kWh 96.6 88.7 117.4 102.4 – 12.8 15.4

JSC Lenenergo, total

Revenue1 RUB mln 29,234 29,531 36,982 34,034 – 8.0 15.3

Productive electricity supply mln kWh 29,294 30,246 31,848 30,897 – 3.0 2.2

Average tariff kop./ kWh 99.8 97.6 116.1 110/2 – 5.1 12.8

1W/o decrease on the size of load losses.

STRATEGY CONTENTS CORPORATE GOVERNANCE 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Dynamics of revenue of JSC Lenenergo from rendering of electricity transmission services in 2011–2013, RUB mln Actual revenue of JSC Lenenergo from activities in electric power transmission in 2013 +15.2% 34,034 34,034 RUB mln +15% to 2012 29,234 29,531 14,490 11,327 12,577 St. Petersburg Leningrad Region Structure of required gross revenue in 2011–2013, RUB mln

17,907 19,545 16,954 Indicator 2011 ▲ , % 2012 ▲ , % 2013 ▲ , %

St. Petersburg 2011 2012 2013 Revenue, total 17,907 19 16,954 –5 19,545 15

Own revenue of 7,136 34 5,856 –18 7,105 21 JSC Lenenergo Drop in the revenue from electric power transmission activities relatively approved revenue on both subjects of the Russian JSC FGC UES 3,282 18 4,145 26 4,617 11 Federation was RUB 2,947 mln that is caused by the following Other TGOs 3,445 29 3,363 –2 4,010 19 factors: Losses in Lenenergo 4,044 –6 3,589 –11 3,813 6 networks ԔԔ overestimate by the largest sales companies of St. Petersburg, JSC Petersburg Sales Company and LLC Energia holding, of the size Leningrad Region of declared capacity of consumers in regard to purchased capacity Revenue, total 11,327 24 12,577 11 14,490 15 in the wholesale and retail market, therefore inadequate single-rate and double-rate tariffs for services in electric power transmission Own revenue of 2,378 2 4,058 71 6,198 53 are formed. This, in turn, leads to decrease in actually received JSC Lenenergo revenue regarding the approved one; JSC FGC UES 2,404 13 1,974 –18 2,098 6

Other TGOs 4,524 62 4,666 3 3,764 –19 ԔԔ increase in revenue due to tariff revision for the group of consumers «Population» across the Leningrad Region Losses in Lenenergo 2,021 9 1,879 –7 2,430 29 (Order of LenRTC # 40-p of 15.03.2013) regarding the tariff networks considered in the joint operations model of the region pursuant JSC Lenenergo, total to the instruction of FTS of Russia; Revenue, total 29,234 21 29,531 1 34,034 15

ԔԔ non-uniform half-year distribution of declared capacity volumes Own revenue of 9,514 25 9,914 4 13,303 34 in agreements with sales companies; JSC Lenenergo

JSC FGC UES 5,686 16 6,119 8 6,715 10 ԔԔ different structure of productive electricity supply by voltage levels developed upon 2013 in comparison with the approved one. Other TGOs 7,969 46 8,029 1 7,774 –3 Losses in Lenenergo 6,065 –2 5,469 –10 6,243 14 networks

STRATEGY CONTENTS CORPORATE GOVERNANCE STRATEGY 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Dynamics of RGR structure on electric power transmission, RUB mln (%) Own required gross revenue on electric power transmission in 2013 +15.2%

34,034 13,303 RUB mln 29,234 29,531 6,243 own RGR +34% to 2012 6,065 5,469 JSC FGC UES 7,773 7,969 8,029 Other TGOs 6,715 5,686 6,119 Losses 13,303 9,514 9,914

2011 2012 2013

Revenue from rendering services in electric power transmission broken down by groups of consumers, RUB mln

Indicator 2011 2012 2013

St. Petersburg

Other consumers 7.0 10.3 20.4

Third-party grid organizations 111.2 147.7 108.9

Energy supplying organization 84.6 258.9 753.9

Guaranteeing supplier 17,263.5 16,106.1 18,152.3

Leningrad Region

Other consumers 22.8 1,262.6 350.1

Third-party grid organizations – – –

Energy supplying organization 1,065.6 1,103.8 2,129.7

Guaranteeing supplier 9,971.5 9,926.5 11,691.7

JSC Lenenergo

Other consumers 29.8 1,272.9 370.5

Third-party grid organizations 111.2 147.7 108.9

Energy supplying organization 1,150.2 1,362.7 2,883.6

Guaranteeing supplier 27,235.0 26,032.6 29,844.0

STRATEGY CONTENTS CORPORATE GOVERNANCE 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Cost of services in electric power transmission on networks for 2011–2013 The cost of services in electric power transmission in 2013 was respectively. The share of controllable costs in the cost of services RUB 35,903 mln and increased by RUB 3,559 mln, or 11.0%, in electric power transmission in 2013 was 17.6%, and uncontrollable in comparison with 2012. Controllable costs increased by RUB 826 mln, costs – 82.4%. or 15%, and uncontrollable costs – by RUB 2,733 mln, or 10.2%,

Cost of services in electric power transmission on networks, RUB mln

Indicators 2011 2012 2013 Change, 2013 / 2012, %

Controllable costs 5,223 5,502 6,329 15.0

Material inputs 414 464 497 7.2

Works and services of production character 940 1,121 1,367 21.9

Payroll fund 2,506 2,596 2,939 13.2

Other costs 1,362 1,321 1,525 15.4

Uncontrollable costs 25,233 26,842 29,575 10.2

Purchased energy on compensation of losses 5,357 4,754 5,415 13.9

Services in electric power transmission 7,969 8,029 7,774 – 3.2 by networks of grid organizations

JSC FGC UES fee 5,686 6,119 6,715 9.7

Amortization of fixed assets and intangible assets 5,095 6,270 8,254 31.6

Lease payments 288 803 123 – 84.6

Other costs 839 867 1,294 49.2

Total costs 30,456 32,344 35,903 11.0

Dynamics of controllable and uncontrollable costs on electric power transmission, RUB mln Growth of controllable costs in 2013 +11.0% 35,903 826 RUB mln 32,344 +15% to 2012 30,456 6,329 5,502 5,223 Uncontrollable costs

Controllable costs 29,575 25,233 26,842 Growth of uncontrollable costs in 2013 2,733 RUB mln +10% to 2012 2011 2012 2013

STRATEGY CONTENTS CORPORATE GOVERNANCE STRATEGY 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Key factors of changes of the cost of services on electric power transmission

Controllable costs increased by RUB 826 mln (15%) due to the gain of components:

ԔԔ Material inputs increased by RUB 34 mln, or 7.2%. The greatest influence ԔԔ Payroll fund increased by RUB 343 mln, or 13.2% due to indexation on their growth was rendered by increase in expenses on materials for repair of official salaries in connection with performance of obligations by economic way in connection with performance of additional repair actions of the employer under the collective agreement, increase in official during preparation for the autumn and winter period of 2013–14, on materials salaries by key professions, and motivation of the personnel involved for labor protection by results of approval of new norms of given-out in elimination of consequences of accidents on power lines; means of individual protection from 01.01.2013 and extension of the list of categories of employees equipped with means of individual protection; ԔԔ Other costs increased by RUB 204 mln, or 15.4%, due to acquisition of new software products and growth of expenses for information ԔԔ Works and services of production character were up by RUB 246 mln, service caused by increase in the quantity of facilities. or 21.9%. The greatest influence was rendered by increase in expenses on repair in connection with growth of expenses on ensuring reliable power supply of consumers for successful passing of the autumn and winter period of 2013–14.

Uncontrollable costs increased by RUB 2,733 mln (10.2%), thus:

ԔԔ Purchased energy on compensation of losses increased of fixed assets, made revaluation of power network equipment for by RUB 662 mln, or 13.9% due to increase in the non-regulated tariff the end of 2012, and cancellation of privilege on the power network of purchase of losses at the expense of growth of the actual price equipment tax pursuant to the Federal Law of 29.11.2012 # 202-FZ of ATC in 2013 in comparison with 2012 and at the expense of increase “About modification of the second part of the Tax code of the Russian in the sales extra charge across the Leningrad Region from 2H 2013; Federation”;

ԔԔ JSC FGC UES fee increased by RUB 596 mln, or 9.7% that is caused ԔԔ There was a decrease in electric power transmission services by increase in rates for networks maintenance and payment of losses by networks of third-party grid organizations by RUB 255 mln, or in ENEG networks in 2013; 3.2%. JSC Lenenergo as a consumer of services of third-party grid organizations selected a single-rate tariff for calculations of the cost ԔԔ Amortization of fixed assets and intangible assets increased of services for electric power transmission for the majority of grid by RUB 1,984 mln, or 31.6% due to increase in book value as a result organizations that at simultaneous decrease in supply to network of implementation of the investment program on input of fixed assets provided essential savings of expenses; and revaluation made as of 31.12.2012; ԔԔ Lease payments decreased by RUB 679 mln, or 84.6% that is caused ԔԔ Other costs increased by RUB 426 mln, or 49.2%, in connection by termination of the validity period under lease agreements. with growth of expenses on property tax caused by increase in cost

Cost of purchased energy for loss Cost of services of JSC FGC UES increased compensation increased in 2013 by in 2013 by 662 RUB mln 596 RUB mln +14% to 2012 +10% to 2012

STRATEGY CONTENTS CORPORATE GOVERNANCE 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Financial result from electricity transmission activities1

Results of financial and business activity on electricity transmission in 2011–2013, RUB mln

Change, Indicators 2011 2012 2013 2013/2012, %

Revenue from electric power transmission on networks 28,475 28,816 33,207 15.2

Cost of electric power transmission on networks 30,456 32,344 35,903 11.0

Gross profit on electric power transmission on networks – 1,981 – 3,529 – 2,696 – 23.6

Interest payable 1,167 1,788 2,217 24.0

Other expenses 1,081 830 887 6.8

Profit (loss) before tax from electric power transmission – 4,229 – 6,146 – 5,800 – 5.6 on networks

Profit tax attributed to transmission activity 383 427 646 51.5

Net profit (loss) from electric power transmission on networks – 4,611 – 6,573 – 6,446 – 1.9

Loss on transmission in 2013 As of the end of 2013 the Company’s activities on electric power In 2013 the sum of loss on electric power transmission decreased transmission are unprofitable. Since 2011 the Company has carried out concerning the level of previous fiscal year by RUB 127 mln. Decrease transition to regulation on the method of return on invested capital (RAB in loss on transmission is caused by revenue growth in a bigger volume regulation). Taking into account the incomplete account by the regulator than prime cost growth due to the growth of average tariff by 16.8% of necessary expenses (generally on federal factors: JSC FGC UES at decrease in transmission volumes by 394 mln kWh (1.3%). Thus fee, purchased electric power on compensation of losses), and due expenses from profit were up due to the growth of interest payable and to application of a smoothing mechanism since 2011, the loss for 2011 profit tax growth in a smaller volume than the growth of gross profit. on electric power transmission was higher that the loss put at regulation and totaled RUB 4,560 mln, and for 2012 the loss reached RUB 6,573 mln.

Dynamics of gross profit, profit before tax and net profit on electric power transmission, RUB mln

2011 2012 2013

Gross profit -1,981 -2,696 Profit (loss) before tax

-3,529 Net profit (loss) -4,229 -4,611 -5,800 -6,146 -6,573 -6,446

1Indicators for 2011-2012 are given according to the annual accounting reporting for 2013 taking into account retrospective data reflection.

STRATEGY CONTENTS CORPORATE GOVERNANCE STRATEGY 4. Performance Indicators Annual Report 2013 JSC Lenenergo

The reasons for loss formation from electricity transmission activities in 2013 Proceeding from the approved tariffs for 2013 losses from electricity In 2013 actual losses from electricity transmission activities in the amount of RUB 1,727 mln are formed transmission on networks were higher than those put at regulation by in the Company. 4,719 RUB mln

Financial result on the solution of regulators, RUB mln

Indicator Leningrad Region St. Petersburg JSC Lenenergo, total

Own funds for investments and expenses from profit 2,879 5,629 8,508

Expenses from profit (interest on credits, social payments, dividends, other expenses) 1,281 1,811 3,092

Amortization 2,005 4,621 6,626

Own funds for investments (item 1 – item 2 – item 3) – 407 – 803 – 1,210

Smoothing – 245 – 1,852 – 2,096

Dropping out 177 1,403 1,579

Total loss on transmission put by regulators – 475 – 1,252 – 1,727

Deviation of the actual indicators from the indicators considered at regulation

Decision deviation from the regulator, RUB mln Indicator name JSC Lenenergo, Leningrad Region St. Petersburg total Revenue 360 – 3,307 – 2,947

Controllable costs 326 292 618

Uncontrollable costs 94 – 1,060 – 965

Profit tax 248 232 480

Expenses from profit – 35 46 11

Amortization 1,186 442 1,628

Total loss gain – 1,459 – 3,260 – 4,719

STRATEGY CONTENTS CORPORATE GOVERNANCE 4. Performance Indicators Annual Report 2013 JSC Lenenergo

The reasons of deviations:

Decrease in sales revenue from the one considered by regulators Growth of profit tax was RUB 480 mln. was RUB 2,947 mln. The deviation on profit tax is connected with different calculating The main reasons are application by the Committee on tariffs of St. Petersburg procedures of profit tax. The regulator does not consider features of tax in tariff rates calculations of the overestimated volume of declared capacity, accounting. deviation of the actual structure of consumption by voltage levels from the structure considered by committees at formation of the balance of electric power and capacity, change of the actual productive electricity supply relatively supply considered by committees and its half-year redistribution in 2013. Across the Leningrad Region there was an increase in revenue from the one Growth of expenses from profit was RUB 11 mln. considered by the regulator in connection with change of tariffs for electric The greatest influence was rendered by formation of the reserve power transmission on the group of consumers «Population» regarding under conditional obligations on disagreements with third-party grid an exception of a preferential type of tariff for electric power transmission organizations. pursuant to the instruction of FTS of Russia.

Growth of controllable costs as compared to those considered Depreciation charges by regulators was RUB 618 mln. Depreciation charges upon 2013 were RUB 1,628 mln higher than The greatest influence was rendered by increase in repair expenses due amortization considered by the regulator since at formation of a tariff to the growth of expenses on ensuring reliable power supply of consumers projection revaluation of fixed assets for the end of 2012 carried out for successful passing of the autumn and winter period of 2013–14. Coordi- according to accounting policies of JSC Lenenergo was not considered, and nation on increase in the volume of repair work provided by regional bodies as a result of excess of the actual input of fixed assets over the planned of regulation of electricity transmission tariff under condition of providing ones are considered reached that was a consequence of implementation documents confirming the cost and the fact of performance of actions of a client-focused approach. is received. These expenses will be considered in the subsequent periods as dropping-out unrecorded expenses.

Decrease in uncontrollable costs totaled RUB 965 mln.

The main influence was rendered by decrease in electric power transmission services by networks of third-party grid organizations for the following reasons: selection of single-rate tariffs on many network companies, disagreements regarding application of actual or declared capacity in calculations. Thus there was an increase in expenses on property tax in connection with legislation change regarding privilege cancellation on property tax.

STRATEGY CONTENTS CORPORATE GOVERNANCE STRATEGY 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Rendering of grid connection services

Grid connection services are rendered to legal entities and individuals wishing to get an opportunity of power supply of newly constructed facilities for different purposes, and to consumers requiring increased power consumption on the facilities connected to JSC Lenenergo grid.

General scheme of the technological connection process

COORDINATION IN THE REGIONAL >5 MW DISPATCH OFFICE APPLICATION DEVELOPMENT RECEIPT OF SPECIFICATIONS < 5 MW CONTRACT SIGNING

Inclusion in the investment program THE SCHEDULE OF PAYMENTS ON CATEGORIES OF APPLICANTS (FROM THE DATE OF CONTRACT SIGNING)

Contracts of RUB 550 From 15 to 150 kW Over 150 kW

100% 15% 10% Contractor selection in 14 days in 15 days in 15 days 30% 30% in 60 days in 60 days

20% Work performance under specifications in 180 days

COMMISSIONING OF FACILITIES ACTUAL INSPECTION CERTIFICATE, (JSC Lenenergo) CONNECTION ACT OF PERFORMANCE OPERATIONS BY THE APPLICANT OF SPECIFICATIONS ACCEPTANCE OF APPLICANT’S FACILITIES (Rostekhnadzor1)

1Except for applicants up to 670 kW and individuals up to 15 kW.

ACT OF BALANCE AND RESPONSIBILITY THE SCHEDULE OF PAYMENTS DIFFERENTIATION ON CATEGORIES OF APPLICANTS (FROM THE DATE OF ACTS SIGNING):

From 15 to 150 kW Over 150 kW GRID CONNECTION CERTIFICATE, 45% 30% ACT OF RENDERED SERVICES in 15 days in 15 days

FINAL PAYMENT UNDER THE GRID OFF ON CONNECTION CONTRACT SUPPLY OF VOLTAGE AND CAPACITY 10% within 15 days Switching device Switching device after the date of factual switch on

STRATEGY CONTENTS CORPORATE GOVERNANCE 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Sales volumes By results of 2013 JSC Lenenergo provided connection under 7,378 contracts having exceeded a similar indicator of 2012 by 6%. The volume of connected capacity over JSC Lenenergo (taking into account connection of generation facilities) for the similar period increased by 47% concerning 2012. 7,378 technological connection contracts were executed in 2013

+6% to 2012 The main contribution to increase in the volume of executed obligations is provided by results of grid connection activities in the territory of St. Petersburg: increase in quantity concerning 2012 by 9%, in capacity – by 68%.

Dynamics of grid connection contracts performance in 2011–2013

2011 2012 2013 Change, 2013/2012, % pieces MW pieces MW pieces MW pieces MW JSC Lenenergo 6,302 321 6,949 523 7,3781 3711 6 – 29

St. Petersburg 2,328 169 2,037 338 2,224 207 9 – 39

Leningrad Region 3,974 151 4,912 185 5,154 165 5 – 11

1W/o connection of generation facilities under three grid connection contracts for the general capacity of 400 MW.

Dynamics of connected capacity2, MW, and quantity of closed contracts, pieces

523 In 2013 JSC Lenenergo provided 321 371 grid connection of the following generation facilities: +6.2% – 3 hydroelectric generators on blocks 1,2,4 of Svetogorsk hydroelectric power station, 6,949 7,378 Quantity 6,302 11 hydroelectric generators of Lesogorsk Capacity hydroelectric power station (21.75 MW); – 2 combined-cycle plants on Pervomayskaya heat station-14 in St. Petersburg (360 MW); – 3 hydroelectric generators on Lesogorsk hydroelectric power station-10

2011 2012 2013 in the Leningrad Region (18 MW).

Thus, total revenue under the executed 2 w/o connection of generation facilities contracts on grid connection of the specified generation facilities made less than 1% of the total consolidated Increase in the number of executed contracts on grid connection sales of JSC Lenenergo for 2013. concerning 2012 at simultaneous decrease in the connected capacity is caused by prevalence in the structure of executed contracts in 2013 of a preferential category of applicants with connected capacity up to 15 kW.

STRATEGY CONTENTS CORPORATE GOVERNANCE STRATEGY 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Breakdown of connected capacity

Dynamics of connected capacity broken down Breakdown of connected capacity by categories of applicants, MW across St. Petersburg in 2013, MW (%)

+47.4% 14 7 771 40 507 62 22 over 670 kW 89% over 670 kW 523 57 49 from 150 kW to 670 kW 7% from 150 kW to 670 kW 24 321 60 from 15 kW to 150 kW 568 3% from 15 kW to 150 kW 39 630 up to 15 kW 1% up to 15 kW 25 68 389 189

2011 2012 2013

The indicator of connected capacity has been growing since 2011. The main share in the structure of declared capacity across St. Petersburg Considerable prevalence of the group “Over 670 kW” is caused belongs to the category of applicants “Over 670 kW” – 89% from by connection of large generation facilities in the territory the general declared capacity (including connection of the generation of St. Petersburg and Leningrad Region. facilities of Pervomayskaya heat station-14 for 360 MW, and Glavstroy of St. Petersburg for 8.6 MW). The category “From 150 kW to 670 kW” being second-large makes 7% of the general capacity which corresponds to 40 MW.

Analysis of payment type selection for grid connection in JSC Lenenergo Breakdown of connected capacity across the Leningrad Region under the contracts executed in 2013, by regions of service, % in 2013, MW (%)

8 8 17 1 Rate for the unit of maximum capacity 125 61% over 670 kW 69 Individual project 54 27% up to 15 kW 95 91 Standardized tariff rates 204 8% from 150 kW to 670 kW

1 4% from 15 kW to 150 kW Preferential category of applicants 31 5 St. Petersburg Leningrad JSC Lenenergo, Region total

Distinctive feature of grid connection in the territory of the Leningrad Across the Leningrad Region the maximum share in structure Region is prevalence of applicants on the group “Up to 15 kW” making 27% of the total amount of connected capacity. of declared capacity also belongs to the category “Over 670 kW” which corresponds to 61% of the total amount of connected capacity.

STRATEGY CONTENTS CORPORATE GOVERNANCE 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Breakdown of connected capacity on primary branches of activity in 2013

Breakdown of connected capacity on branches in St. Petersburg, MW

The main contribution in the structure 37 64% Generation 7 of connected capacity of St. Petersburg 1010 22% Construction besides generation facilities is formed 17 360 Wholesale and retail trade; repair of vehicles, by applicants of construction branch (22% 3% household goods and articles of personal use in the general structure of connected Distribution of electricity, gas and 2% capacity), and facilities of wholesale and 127 568 water retail trade (3%). Processing productions, 2% Manufacturing distribution of electric power, gas, water and health care facilities in the sum form about 1% Health and social services 5% of connected capacity (27 MW). 6% Other

Breakdown of connected capacity on branches in the Leningrad Region, MW

A considerable share in the structure 1 8 7 of connected capacity on the territory 42% Construction 14 85 of the Leningrad Region is occupied 24% Individuals by the group “Individuals” (24% of total amount of connected 19% Generation capacity). 40 204 7% Manufacturing 3% Distribution of electricity, gas and water

1% Transport and communication

4% Other 49

STRATEGY CONTENTS CORPORATE GOVERNANCE STRATEGY 4. Performance Indicators Annual Report 2013 JSC Lenenergo

The volume of demand for grid connection In 12 months 2013 JSC Lenenergo received 28,444 demands for grid By results of work for the reporting period a slight decrease in the number connection from consumers on total capacity of 2,828 MW. Thus, of demands is noted that is caused by a slowdown of business activity according to JSC Rosseti requirements at formation of the volume in the region. of demands there are considered demands not only of the current period, but also of the previous periods on which contracts in the reporting period were signed. In 2013 JSC Lenenergo signed 18,066 contracts, including 4,663 pieces across St. Petersburg for the general capacity The main share of demands was accepted from applicants across of 337 MW and 13,403 pieces across the Leningrad Region for the general capacity of 518 MW. the Leningrad Region and it totaled 21,467 pieces on the general capacity of 1,307 MW.

Volume of demand for grid connection in St. Petersburg and the Leningrad Region

2011 2012 2013 Change, 2013/2012, % Indicator pieces MW pieces MW pieces MW pieces MW Demands on grid connection 1

JSC Lenenergo 19,870 2,306 29,832 2,934 28,444 2,828 – 5 – 4

St. Petersburg 4,453 1,454 7,341 1,682 6,977 1,521 – 5 – 10

Leningrad Region 15,417 853 22,491 1,252 21,467 1,307 – 5 4

Concluded contracts on grid connection

JSC Lenenergo 14,561 485 20,160 1,410 18,066 855 – 10 – 39

St. Petersburg 3,656 247 5,366 901 4,663 337 – 13 – 63

Leningrad Region 10,905 238 14,794 510 13,403 518 – 9 2

1 the volume of demands for the reporting period, and demands of the previous periods on which contracts in the reporting period are signed are specified

STRATEGY CONTENTS CORPORATE GOVERNANCE 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Breakdown of declared capacity Breakdown of declared capacity across St. Petersburg in 2013, MW across the Leningrad Region in 2103, MW

53 36 111 254 1,321 812

87% over 670 kW 62% over 670 kW 63 1,521 7% from 150 kW to 670 kW 1,307 14% from 150 kW to 670 kW 4% from 15 kW to 150 kW 5% from 15 kW to 150 kW

2% up to 15 kW 178 19% up to 15 kW

The structure of declared capacity of JSC Lenenergo in 2013 testifies Distinctive feature of structural breakdown of applicants in the territory to prevalence of a share of the group “Over 670 kW” in the total amount of the Leningrad Region is prevalence of applicants on the group “Up of capacity both in St. Petersburg and in the Leningrad Region. to 15 kW” (19% of the general declared capacity).

Dynamics of declared capacity Technological connection broken down by categories of applicants, MW of preferential categories of applicants

+13.8% 2,828 Among main challenges of JSC Lenenergo is ensuring 2,484 290 appropriate grid connection of applicants to power 116 277 289 network equipment. The number of potential consumers 1,856 115 over 670 kW submitting applications for connection to electric networks 294 176 from 150 kW to 670 kW of JSC Lenenergo has been steadily growing. 79 215 from 15 kW to 150 kW 2,133 1,798 up to 15 kW 1,386 In accordance with the basic provisions approved by the Resolution of the Government of the Russian Federation # 1178 “About pricing in the field of regulated prices”, the cost of grid connection of power accepting devices 2011 2012 2013 of applicants up to 15 kW is defined at the rate of 550 rubles per one connection. The specified changes in turn led to a repeated growth of the number of contracts signed with this group of applicants (a preferential category). Dynamics of declared capacity on categories of applicants in JSC Lenenergo testifies to steady growth of this indicator since 2011 The applicants which connection is carried out on the 3rd category (increase by 52% to the level of 2013) and is provided at the expense of reliability on one source of power supply taking into account earlier of increase in contribution of the group “Over 670 kW”. connected power accepting devices, at voltage level below 20 kV inclusive

STRATEGY CONTENTS CORPORATE GOVERNANCE STRATEGY 4. Performance Indicators Annual Report 2013 JSC Lenenergo

However rates of performance of obligations towards the applicants By results of 2013 connection of the applicants of preferential category are significantly behind the rate of conclusion of preferential category (550 rub per connection) in the volume of revenue of RUB 0.08 mln w/o VAT of new contracts. across St. Petersburg and RUB 2.27 mln w/o VAT across the Leningrad Region was made. The main reason for default of obligations in time is the lack of financing of capital works necessary for performance of specifications on grid and being at distance no more than 300 meters in cities and no more than connection of applicants. 500 meters in rural areas to the existing power network facilities of grid organizations treat a preferential category of applicants. The connected capacity amounted to: across St. Petersburg – 1.6 MW, across the Leningrad Region – 53.7 MW. Costs of work on connection Concerning gardening and country noncommercial associations of the preferential category of applicants totaled RUB 419.3 mln w/o VAT. the payment rate for grid connection of power accepting devices should Lost incomes across St. Petersburg for 2013 was RUB 34.1 mln w/o VAT not exceed 550 rubles increased by the number of members of these and across the Leningrad Region – RUB 512.6 mln w/o VAT. associations.

Performance of obligations under delayed contracts on grid connection Deficiency of the funding source of capital works necessary for performance of specifications on grid connection of applicants The plan of execution of current, accumulated and delayed leads to violation of terms to perform obligations. Emergence obligations towards applicants of St. Petersburg and and accumulation of obligations towards applicants occurs for the Leningrad Region has been developed to determine the following reasons: the necessary volume of expenses and rates of performance of JSC Lenenergo contracts under which there are defined: ԔԔ existence of power stations closed for grid connections; – the volume of expenses necessary for execution of accumulated obligations in the volume of RUB 40 bn, including RUB 11.5 bn ԔԔ deficiency of financing of the investment program of JSC Lenenergo with VAT for preferential categories of applicants; regarding grid connection; – physical parameters of constructed power network facilities till 2017 (more than 8,000 km of OTL 0.4–110 kV are constructed/ ԔԔ avalanche growth of the volume of contracts with a preferential reconstructed, about 1,700 TS/RS 0.4–10 kV with replacement category of applicants. of transformers are reconstructed, and more than 2,700 TS/RS 0.4–10 kV are constructed), etc. Following the results of 2013 As of 01.01.2014 the number of delayed obligations (without contracts JSC Lenenergo has already provided input of 820 facilities for the general capacity of 592.1 MVA and total length of lines with a property component) is 35,967 pieces with a total amount of 1,764.4 km on the voltage level 0.4–10 kV. of connected capacity of 1,080 MW that makes 80% of all accumulated obligations. It is necessary to take into consideration that 27% of total delayed obligations are not executed through the fault of the applicant.

STRATEGY CONTENTS CORPORATE GOVERNANCE 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Structure of connected capacity under grid connection contracts1

Indicator Unit 2011 Share, % 2012 Share, % 2013 Share, %

Connected capacity, including MW 321 100 523 100 371 100

under current contracts MW 130 41 227 43 164 44

under delayed contracts MW 190 59 296 57 207 56

1W/o connection of generation facilities.

Revenue from grid connection services

Revenue structure under grid connection contracts

Indicator Unit 2011 2012 20131 Change, 2013/2012, %

St. Petersburg

Revenue RUB mln w/o VAT 4,710 6,173 5,198 – 16

Connected capacity MW 169 338 207 – 39

Average rate under closed contracts RUB/kW 27.8 18.3 25.2 38

Leningrad Region

Revenue RUB mln w/o VAT 3,601 1,109 1,317 19

Connected capacity MW 151 185 165 – 11

Average rate under closed contracts RUB/kW 23.8 6.0 8.0 33

JSC Lenenergo

Revenue RUB mln w/o VAT 8,311 7,282 6,515 – 11

Connected capacity MW 321 523 371 – 29

Average rate under closed contracts RUB/kW 25.9 13.9 17.6 26

1W/o connection of generation facilities.

Average rate under closed technological Share of executed monetary contracts connection contracts in 2013 in the total structure of JSC Lenenergo The average rate under closed contracts revenue from technological connection is calculated as relation of revenue from RUB/kW services in 2013 17.6 grid connection (RUB thousand) to the size 70% of connected capacity (MW).

100

STRATEGY CONTENTS CORPORATE GOVERNANCE STRATEGY 4. Performance Indicators Annual Report 2013 JSC Lenenergo

The property form of contracts provides that the consumer of services Revenue of JSC Lenenergo from rendering grid connection independently satisfies specifications, and all property created services is made by contracts with payment of service at performance of these conditions, is transferred to JSC Lenenergo as of two types: a payment for grid connection. In connection with the entry into force – cash in full volume (“monetary contracts”) in 2010 of changes in the Rules of grid connection (# 759) under which all – contracts with a property component (“property contracts”). obligations to the borders of the applicant’s site are executed by a grid organization, conclusion of property contracts was stopped.

Decrease in the average rate in 2012 concerning 2011 was caused by existence in revenue of 2011 of large contracts with LLC Gazprominvestzapad concluded on the individual rate.

Breakdown of executed contracts by payment method, RUB mln w/o VAT

Indicator 2011 Share, % 2012 Share, % 2013 Share, %

Revenue from grid connection services 8,311 100 7,282 100 6,515 100

under monetary contracts 6,238 75 5,428 75 4,582 70

under property contracts 2,073 25 1,854 25 1,933 30

Dynamics of revenue generation broken down Breakdown of revenue by payment method, RUB mln w/o VAT by terms of performance of obligations, RUB mln w/o VAT

8,311 –10.5% 8,311 –10.5% 7,282 7,282 2,073 6,515 6,515 1,854 Under monetary 4,529 Under current 1,933 contracts contracts 4,195 3,243 Under property Under delayed contracts 6,238 5,428 contracts 4,582 3,781 3,087 3,272

2011 2012 2013 2011 2012 2013

Decrease in revenue by results of 2013 concerning 2012 is caused by postponement for 2014 of the terms of performance of a large contract due to the lack of granting by the applicant of working documentation.

101

STRATEGY CONTENTS CORPORATE GOVERNANCE 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Profit and loss from grid connection activities

Results of financial and business activity on grid connection for 2011–2013, RUB mln

Change, Indicators 2011, RUB mln1 2012, RUB mln1 2013, RUB mln 2013/2012, % Revenue from grid connection services 8,311 7,282 6,515 – 10.5%

Cost of grid connection services 1,226 400 437 9.2%

Gross profit on grid connection services 7,084 6,882 6,078 – 11.7%

Other income and expenses 105 – 23 34 –

Profit (loss) before tax from grid connection services 6,979 6,905 6,045 – 12.5%

Profit tax 561 411 312 – 24.1%

Net profit (loss) from grid connection services 6,418 6,494 5,733 – 11.7%

1Indicators for 2011–2012 are given according to the annual accounting reporting for 2013 taking into account retrospective data reflection.

By results of 2013 net profit from grid connection services totaled Decrease in net profit is caused by negative dynamics of revenue from grid connection in 2013 in comparison with 2012. 5,733 RUB mln

Introduction of customer service standards Among priorities of the Company’s development today is improvement The number of basic principles of the system of centralized of interaction with customers by implementing a client-focused approach service includes – sufficient knowledge of customers about the Company and services; aimed at ensuring maximum transparency and efficiency when rendering services. – territorial availability and comfortable conditions of internal service; – availability and efficiency of correspondence and interactive services; Customer focus has been introducing at the expense of creation and – qualified service; functioning of the system of centralized customer service. The standard – transparency of business processes of service and objectivity “System of centralized customer service” was approved by the decision of consideration of complaints submitted by customers. of the Board of Directors (item 6 of Minutes # 13 of 19.12.2011).

102

STRATEGY CONTENTS CORPORATE GOVERNANCE STRATEGY 4. Performance Indicators Annual Report 2013 JSC Lenenergo

In 2013 the following actions directed to enhance ԔԔ Geo-information system displaying information on power supplies the Company’s customer focus were implemented: on the map of St. Petersburg and the Leningrad Region has been functioning. ԔԔ Procedures on the business process regulation “Grid connection to electric networks” were carried out, sub-processes were described, ԔԔ Automation of all sub-processes of grid connection with a view and duty regulations were updated. of implementation of the system of continuous improvements was carried out. ԔԔ Average time of processing of applications was reduced, the system of applications registration was improved (including at the expense ԔԔ The additional office of Client service center across the Leningrad of development of the system of electronic documents flow), and Region «Tikhvin» was open in 2013. preparation of draft contracts on grid connection with introduction of an automated control system by the process of grid connection ԔԔ Council of consumers of JSC Lenenergo was established. (ACS) SharePoint was automated. Actual indicators of the quality of rendered services characterize ԔԔ Single telephone number of JSC Lenenergo allowing getting information primary activity of the Company (grid connection and electric power on all major activities when contacting the Company was created. transmission) and are calculated on the basis of calculation methods approved by Ministry of the Power Industry. In the basis of calculation ԔԔ Possibility of application for grid connection by phone was introduced of indicators of the quality of rendered services the total of applications (at the maximum capacity of power accepting devices up to 15 kW), and of consumers of services (demands and contracts on rendering the extra service providing possibility of implementation of “turnkey” of services, inquiries of reference information and so on) is used. Planned grid connection is being introduced. values of indicators of the quality of rendered services for the long-term period of regulation are approved by executive authorities of subjects ԔԔ Function of submitting an application for grid connection through of the Russian Federation. The planned indicators of rendered services a private office on the website of a grid organization on the internal portal established by regulators by results of 2013 are considered reached due on the Internet, allowing tracking main stages of the course of processing to implementation of the customer-focused approach. of the application for grid connection was introduced in a test mode.

Other activity

Other primary activity for JSC Lenenergo are ԔԔ services in shutdown and turn-up of consumers; Revenue from services on other activity, works and services of industrial character rendered RUB mln w/o VAT to legal entities and individuals under the contracts ԔԔ engineering services – design of engineering +2.9% concluded in interests of JSC Lenenergo subject networks and systems of power supply to timely and qualitative execution of works of voltage below 10 kV, electric lighting; 180 172 175 on primary activities. ԔԔ other services: installation, adjustment and Other types of activity are as follows: repair of power facilities, power equipment and ԔԔ repair and operational service of power power installations of consumers, metering installations of third-party consumers of electric of resistance of isolation and test of power power; installations and protective equipment, and other works.

2011 2012 2013

103

STRATEGY CONTENTS CORPORATE GOVERNANCE 4. Performance Indicators Annual Report 2013 JSC Lenenergo

4.3. FINANCIAL RESULTS

Dynamics of key financial and business indicators

Net Income, RUB mln, Net Income Margin, % Revenue, RUB mln EBITDA, RUB mln

39,902 36,958 36,273 +15.9% 3.7% 2.9% 1.1% 11,279 9,733 8,522 1,367 1,042 425

2011 2012 2013 2011 2012 2013 2011 2012 2013

Among the main trends of financial and business activity of JSC Lenenergo in 2013 were: – increase of sales volumes; – a slight gain of Income on Sales; Revenue for 2013 totaled – drop in Net Income. 39,902 RUB mln +10% to 2012

Balance sheet of the Company At preparation of the present section of the annual report balance sheets The balance sheet of the Company as of 31.12.2013 is characterized of the Company as of 31.12.2011, 31.12.2012 and 31.12.2013 (as a part by the following features: of the audited annual accounting reporting of JSC Lenenergo for 2013 taking into account a retrospective) were used. ԔԔ a high share of non-current assets – 85.9% of grand total; ԔԔ prevalence of accounts receivable in the structure of current assets– Grand total (i.e. sum of assets at the Company’s disposal) at the end 48.2% of current assets, 6.8% of grand total, and a considerable sum of 2013 made RUB 148,483 mln. In comparison with the balance sheet as of the most liquid assets (cash and short-term financial investments) of 31.12.2012 total property of the Company and sources of its formation that makes 46.2% of current assets and 6.5% of grand total increased by RUB 16,935 mln (12.9%). in aggregate, respectively; ԔԔ a considerable volume of borrowings (long-term and short-term credits and As JSC Lenenergo operates in the capital-intensive industry, the structure loans) – 22.5% of grand total, 46.3% of total liabilities of the Company; of liabilities under the Company’s balance sheet is characterized by a large ԔԔ prevalence of equity in the structure of assets formation sources volume of debt funds, and in structure of assets non-current assets prevail. (51.4% of grand total).

104

STRATEGY CONTENTS CORPORATE GOVERNANCE STRATEGY 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Changes,2013 / 2012 As As Share Share Line (Decree of 31.12.12, of 31.12.13, Indicator in grand in grand On specificweight # 66-N) actual actual Sum, RUB in grand total, % total, % total, % % result* result mln specificweight in grand total, %

Assets

I. NON-CURRENT ASSETS

Intangible assets 1110 146 0.1 105 0.1 – 41 – 28.0 0.0

R&D results 1120 67 0.1 83 0.1 16 23.6 0.0

Fixed assets 1150 115,075 87.5 124,823 84.1 9,748 8.5 – 3.4

including construction in progress 11,322 8.6 11,753 7.9 432 3.8 – 0.7

including advance payments on capital construction and acquisition of fixed 745 0.6 458 0.3 – 287 – 38.6 – 0.3 assets

Financial investments 1170 947 0.7 898 0.6 – 49 – 5.2 – 0.1

Deferred tax assets 1180 510 0.4 980 0.7 469 92.0 0.3

Other non-current assets 1190 777 0.6 707 0.5 – 70 – 9.0 – 0.1

Total for Section I 1100 117,523 89.3 127,596 85.9 10,073 8.6 – 3.4

II. CURRENT ASSETS

Supplies 1210 443 0.3 584 0.4 141 31.9 0.1

Value added tax under purchased valuables 1220 223 0.2% 495 0.3% 272 122.2 0.2

Accounts receivable, including: 1230 7,797 5.9 10,071 6.8 2,274 29.2 0.9

Long-term accounts receivable 1231 201 0.2 112 0.1 – 90 – 44.5 – 0.1

Short-term accounts receivable 1232 7,596 5.8 9,960 6.7 2,364 31.1 0.9

Financial investments (excluding cash 1240 2,266 1.7 6,284 4.2 4,018 177.3 2.5 equivalents)

Cash and cash equivalents 1250 3,163 2.4 3,370 2.3 208 6.6 – 0.1

Other current assets 1260 134 0.1 82 0.1 – 52 – 38.6 0.0

Total for Section II 1200 14,025 10.7 20,887 14.1 6,862 48.9 3.4

Balance sheet total 1600 131,548 100.0 148,483 100.0 16,935 12.9 0.0

105

STRATEGY CONTENTS CORPORATE GOVERNANCE 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Assets structure of the balance sheet Assets structure of the balance sheet Assets structure of the balance sheet in 2011, % in 2012, % in 2013, %

XX XXX XX XXX XX XXX

86.2% Non-current assets 89.3% Non-current assets 85.9% Non-current assets

13.8% Current assets 10.7% Current assets 14.1% Current assets

LIABILITIES

III. CAPITAL AND RESERVES

Authorized capital 1310 1,228 0.9 1,228 0.8 0 0.0 – 0.1

Revaluation of non-current assets 1340 51,520 39.2 51,433 34.6 – 87 – 0.2 – 4.5

Additional capital 1350 11,417 8.7 11,417 7.7 0 0.0 – 1.0

Reserve capital 1360 153 0.1 184 0.1 31 20.5 0.0

Retained profit (uncovered loss) 1370 11,907 9.1 12,078 8.1 172 1.4 – 0.9

Total for Section III 1300 76,225 57.9 76,341 51.4 116 0.2 – 6.5

IV. LONG-TERM LIABILITIES

Loans and credits 1410 24,645 18.7 29,406 19.8 4,761 19.3 1.1

Deferred tax liabilities 1420 1,989 1.5 2,569 1.7 579 29.1 0.2

Other liabilities 1450 1,586 1.2 572 0.4 – 1,013 – 63.9 – 0.8

Total for Section IV 1400 28,220 21.5 32,547 21.9 4,327 15.3 0.5

IV. SHORT-TERM LIABILITIES

Loans and credits 1510 3,144 2.4 3,970 2.7 826 26.3 0.3

Accounts payable 1520 22,898 17.4 34,615 23.3 11,717 51.2 5.9

Deferred income 1530 0 0.0 0 0.0 0 – 0.0

Estimated liabilities 1540 1,061 0.8 1,010 0.7 – 51 – 4.8 – 0.1

Total for Section V 1500 27,103 20.6 39,595 26.7 12,492 46.1 6.1

Balance sheet total 1700 131,548 100.0 148,483 100.0 16,935 12.9 0.0

106

STRATEGY CONTENTS CORPORATE GOVERNANCE STRATEGY 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Liabilities structure of the balance sheet Liabilities structure of the balance sheet Liabilities structure of the balance sheet in 2011, % in 2012, % in 2013, %

XX XXX XX XXX XX XXX

52.1% Capital and reserves 57.9% Capital and reserves 51.4% Capital and reserves

22.1% Long-term liabilities 21.5% Long-term liabilities 21.9% Long-term liabilities

25.8% Short-term liabilities 20.6% Short-term liabilities 26.7% Short-term liabilities

Non-current assets Current assets Non-current assets of the Company as of 31.12.2013 totaled For the end of 2013 current assets of the Company totaled RUB 20,887 mln, RUB 127,596 mln, or 85.9% of grand total. 84.1% of cumulative assets or 14.1% of grand total, and having increased by RUB 6,862 mln (or 48.9%) and 97.8% of non-current assets of the Company were assignable to fixed in comparison with 2012. assets (including construction in progress and advance payments on capital construction and acquisition of fixed assets) of RUB 124,823 mln. The major specific weight in the structure of current assets by results of 2013 was assignable to accounts receivable – 48.2% of their total amount The increase of non-current assets was caused by extension (RUB 10,071 mln). The most liquid assets – cash and short-term financial of the Company’s investment program, input and reconstruction of fixed investments (presented by bank deposits) – made in total RUB 9,655 mln, assets during its performance. or 46.2% of current assets.

In the structure of long-term financial investments of the Company Moreover, supplies, VAT under purchased valuables and other current assets –VAT (RUB 898 mln, 0.7% of non-current assets) the cost of stakes on sums of advances given out on capital construction and purchase of fixed in CJSC Lenenergospetsremont, CJSC Kurortenergo, CJSC Tsarskoselskaya assets, were reflected in the structure of current assets. Energy Company and a number of other issuers was considered. Decrease in their size by RUB 49.3 mln, or 5.2%, was connected with A growth of current assets by results of 2013 was caused by increase creation of reserve under devaluation of shares of JSC Northwest in the sum of the most liquid assets by RUB 4,226 mln, in 1.8 times, including Energy Management Company, CJSC Velma and CJSC Akvatron and sale the sums of short-term financial investments – by RUB 4,018 mln (in of JSC Ruskobank shares. 2.8 times), cash and cash equivalents – by RUB 208 mln, 6.6%. In particular, sources received as a result of additional issue of shares, cash of subscribers Other non-current assets in the sum of RUB 707 mln making 0.5% of total on technological connections for financing construction of facilities under assets were also recognized in the balance sheet as of 31.12.2013. In this the investment program, other own sources were considered in the structure balance sheet line a number of expenses relating to future reporting periods of the most liquid assets. (under insurance contracts, non-exclusive rights to use databases, license agreements, expenses on connection to grids of third-party organizations, etc.) was reflected.

107

STRATEGY CONTENTS CORPORATE GOVERNANCE 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Introducing amendments to the Federal Laws # 94-FZ of 21.07.2005 Cumulative value of accounts receivable for the end of fiscal year was “About placement of orders for delivering of goods, performing of works, RUB 10,071 mln that is RUB 2,274 mln (29.2%) higher than under rendering of services for state and municipal needs” and # 135-FZ the balance sheet as of 31.12.2012. of 26.07.2006 “About protection of competition” since 2012 provides for placing financial sources without carrying out competitive procedures and The sum of advances paid under capital construction which decreased for promotes to the growth of the sum of short-term financial investments the analyzed period by RUB 287 mln (w/o VAT) did not enter into Section II of the Company. Management of temporarily free funds of the Company “Current assets” under the line “Accounts Receivable” as of 31.12.2012 and is based on a principle of achievement of the maximum efficiency 31.12.2013, and constituted RUB 745 mln as of 01.01.2013 and RUB 458 mln of financial investments at optimization of a risk – profitability ratio. for the year end, respectively.

Concerning 2012 the size of value added tax under purchased valuables Advances paid as of 31.12.2013 totaled RUB 573 mln, or 5.7% of cumulative and supplies also increased by RUB 272 mln and RUB 141 mln, respectively. accounts receivable. The size of other current assets thus decreased.

Long-term and short-term accounts payable, RUB mln Long-term and short-term accounts receivable, RUB mln

+43.7% +29.2% 35,187 10,072 572 112 24,484 Short-term accounts payable 7,797 22,216 7,226 Short-term accounts receivable 1,586 201 1,492 1,005 Long-term accounts payable 34,615 9,960 Long-term accounts payable 22,898 7,596 20,724 6,221

2011 2012 2013 2011 2012 2013

Thus advances paid under contracts of leasing (RUB 33 mln, or 5.8% JSC Lenenergo grids (increase by RUB 1,752 mln); debt of buyers of total amount of advances) were recognized as a part of long-term and customers on technological connections services (increase accounts receivable. Advances paid to service providers for the sum by RUB 988 mln), under identified non-contractual electricity consumption of RUB 4 mln and to other debtors for the sum of RUB 536 mln (0.7% (increase by RUB 378 mln) and debt of other buyers and customers and 93.5% of total amount of advances paid) were recognized as a part (cumulative decrease of RUB 15 mln). of short-term advances in the volume of RUB 540 mln. About 58.6% of cumulative accounts receivable were assignable to other Accounts payable of suppliers and contractors totaled RUB 5,898 mln, or receivables in the sum of RUB 3,600 mln as of 31.12.2013. It includes: VAT 58.6% of cumulative accounts receivable: a growth in comparison with on advances received (RUB 2,454 mln), the sum of overpayments on taxes 31.12.2012 was RUB 3,103 mln. This debt includes: debt on the contracts and fees (RUB 379 mln), debtors on claims (RUB 289 mln), short-term debt signed on rendering of services on electric power transmission over on leasing at a rate of RUB 85 mln and other debt.

108

STRATEGY CONTENTS CORPORATE GOVERNANCE STRATEGY 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Capital and Reserves Own sources had the greatest specific weight among sources of assets By results of net profit distribution for 2012 the reserve capital formation of the Company – 51.4% of the balance sheet total, or RUB in the reporting year was increased by RUB 31 mln. The reserve capital 76,341 mln. The main share among them is occupied by the sum of JSC Lenenergo as of 31.12.2013 amounted to RUB 184 mln, or 15% of its of revaluation of non-current assets (67.4% of own sources). The additional authorized capital that corresponds to requirements of the Company’s capital represents 15.0%, the share of authorized capital is 1.6%, Charter. Sources of the created reserve fund were not used in reporting year. on retained profit (of past years and fiscal year) – 15.8% of the Section III “Capital and Reserves”. Concerning 2012 the sum of capital and reserves increased (by RUB 116 mln, or 0.2%) due to the growth of consolidated financial result. Equity capital for the end of 2013 was Authorized capital for 2013 did not change. Growth of the authorized and RUB mln additional capitals by results of the additional issue of ordinary shares 76,341 +0.2% to 2012 carried out by JSC Lenenergo is expected in 2014 after registration of the report on results of additional issue.

Liabilities Liabilities of JSC Lenenergo (Sections 4 and 5 of the balance Short-term liabilities (including income of future periods and estimated sheet net of deferred tax liabilities, income of future periods and liabilities) were the second important source of formation of the Company’s estimated liabilities) as of 31.12.2013 totaled RUB 68,564 mln, assets– 26.7% of the balance sheet total. including: The greatest specific weight among short-term liabilities was assignable ԔԔ long-term accounts payable – RUB 572 mln, or 0.8% of total liabilities to accounts payable – 87.4% of short-term liabilities and 23.3% of all funding of the Company; sources. In comparison with 31.12.2012 the sum of short-term accounts payable increased by RUB 11,717 mln, or 51.2%. ԔԔ long-term debt funds – RUB 29,406 mln (42.9%), including debt on the bond issue placed in 2012, and liabilities on par value on exchange As a part of short-term liabilities as of 31.12.2013 (2.7% of all bonds of a series BO-01 placed in Q2 2013 – totaling RUB 6,000 mln; sources of assets formation) there were recognized:

ԔԔ short-term liabilities (including debt on accrued but unpaid interest) – ԔԔ RUB 3,813 mln – the sum of debt on long-term credits transferred at a rate of RUB 3,970 mln (5.6%); according in the structure of short-term liabilities pursuant to accounting requirements as before their repayment there is less than 1 year; ԔԔ short-term accounts payable – RUB 34,615 mln (50.5%). ԔԔ accrued interest on long-term and short-term credits and loan in the sum The share of long-term liabilities (Section IV of the balance sheet) was 21.9% of RUB 157 mln. by results of 2013. Long-term liabilities were created by 90.3% at the expense of long-term credits and loans in total amount of RUB 29,406 mln. The gain of short-term liabilities relatively 31.12.2012 was RUB 826 mln (26.3%) and was caused by the growth of debt on credits and loans The gain of long-term liabilities of the Company in comparison with previous considered in the structure of short-term liabilities as of 31.12.2013. fiscal year (by RUB 4,327 mln, or 15.3%) was caused by the growth of debt on long-term credits and loans (on RUB 4,761 mln, or 19.3%).

109

STRATEGY CONTENTS CORPORATE GOVERNANCE 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Overall, the amount of debt (indebtedness on long-term and short-term Thus on 31.12.2013 concerning the beginning of reporting period the sum credits and loans, including debt on interest) concerning 2012 increased of short-term payables increased by RUB 11,717 mln, or 51.2%, and the sum by RUB 5,587 mln (20.1%). The Company carried out both attraction and of long-term payables decreased by RUB 1,013 mln, or 63.9%. repayment of credits and loans in the reporting year (see section “Credit Policy”).

The cumulative accounts payable (long-term and short-term) as of 31.12.2013 totaled RUB 35,187 mln, having increased by RUB 10,704 mln (43.7%) in comparison with 2012.

Dynamics and structure of accounts payable, RUB mln Dynamics and structure of accounts receivable, RUB mln

+43.7% +29.2%

35,188 10,071 5,373 7,797 24,483 14,245 Advances received 7,227 3,600 Accounts payable of suppliers 22,216 and contractors 1,293 Debt of suppliers and 690 573 Advances paid 7,981 contractors 4,628 6,013 4,542 15,570 Other accounts payable Other accounts receivable 15,513 15,209 374 5,898 1,402 2,795 1,283 2011 2012 2013 2011 2012 2013

Decrease in long-term accounts payable concerning the level of the year by RUB 2,347 mln and to grid companies by RUB 3,516 mln. The gain beginning occurred at the expense of decrease in long-term accounts of debt to construction organizations is caused by changes in the scheme payable on advances received on the contracts of technological of financing of investment projects: implementation of calculations upon connection to electric networks. As of 31.12.2013 long-term liabilities performance by contractors of their obligations in time not less than 90 on advances on technological connections made RUB 380 mln compared (ninety) calendar days from the date of executed works (services) or delivery to RUB 1,335 mln as of 31.12.2012, respectively. of goods. The change of the scheme of financing allowed minimizing risks in cases of unfair performance of works on construction (reconstruction) For the end of 2013 short-term accounts payable of the Company of the objects of power network complex by contract organizations. reached RUB 34,615 mln. The growth of short-term accounts payable by RUB 11,717 mln concerning the level of 2012 ԔԔ increase in other accounts payable by RUB 4,137 mln that is generally is generally associated with influence of the following factors: caused by recognition of debt on additional issue of ordinary shares (in the amount of RUB 3,000 mln) and growth of debt on providing applications ԔԔ growth of obligations under advances received by RUB 1,315 mln, for tender procedures by RUB 474 mln, and increase in accounts payable including short-term advances received on technological connection – on taxes and fees by RUB 282 mln (primarily on profit tax – by RUB 171 mln by RUB 1,308 mln, taking into account reclassification of debt; and property tax – by RUB 94 mln, as a result of tax privileges cancelation and increased tax charges in 2013). ԔԔ increase in debt to suppliers and contractors by RUB 6,265 mln, mainly in connection with debt growth to construction organizations

110

STRATEGY CONTENTS CORPORATE GOVERNANCE STRATEGY 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Ratio of accounts receivable and accounts payable1, RUB mln

In general, within the analysis 0.33 0.32 0.29 of the receivables and payables ratio, including in dynamics, specifics +43.7% of financial and business activity of JSC Lenenergo associated with 35,187 Accounts payable implementation of the investment program and payment of fees Accounts receivable on technological connection should be 24,484 22,216 considered. Ratio of accounts receivable +29.2% and accounts payable, RUB mln 10,071 7,226 7,797

2011 2012 2013

1Indicators for 2011–2012 are given according to the annual accounting reporting for 2013 taking into account retrospective data introduction.

Ratio of receivables and payables for The ratio of receivables and payables reflects the extent of crediting of buyers by the Company the end of 2013 was on the one hand and the level of the Company’s crediting by sellers on the other hand, and 0.29 it is considered normal at a level of 1.2–1.5. Within the conditions of a smaller growth rate of the sum of receivables concerning a growth rate of the Company’s payables the indicator reflecting their ratio dropped by results of 2013.

Indicators of the Company’s profit and loss statements

Generation of Net Income in 2013, RUB mln

39,902 36,429

3,473 – 2,028 Costs

1,444 1,019 Balance of other Income Tax and Income and Expenses Other relevant Payments 425

Revenue Income Income Net Income on sales before Taxes

111

STRATEGY CONTENTS CORPORATE GOVERNANCE 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Financial results

Financial performance by results of financial and business activity of JSC Lenenergo in 2011–2013, RUB mln

Indicators 2011 2012 2013 Change, 2013/2012, %

Revenue (net) 36,958 36,273 39,902 10.0 Costs of production and sales – 31,758 – 32,830 – 36,429 11.0 Profit (loss) on sales1 5,201 3,443 3,473 0.9 Income of participation in other organizations 0.4 0.8 0.7 – 16.1 Interest receivable 57 296 644 117.4 Interest payable – 1,167 – 1,788 – 2,217 24.0 Other income 750 1,924 3,529 83.4 Other expenses – 2,530 – 1,914 – 3,985 108.2 Profit (loss) before taxes 2,311 1,962 1,444 – 26.4 Current profit tax – 782 – 447 – 1,000 123.5 Change of deferred tax liabilities – 443 – 496 – 579 16.7 Change of deferred tax assets 288 – 25 470 – 1,949.9 Other – 7 49 90 83.2 Total profit tax and other payments – 944 – 920 – 1,019 10.8 Net profit (loss) of the reporting period 1,367 1,042 425 – 59.2

1The sum of profit (loss) on sales coincides with the size of gross profit (loss) in the absence of commercial and management expenses

Revenue

Revenue, RUB mln

Share Share Share Change, Revenue 2011 2012 2013 in revenue, % in revenue, % in revenue, % 2013/2012, %

Total revenue, including: 36,958 100.0 36,273 100.0 39,902 100.0 10.0 from electric power transmission 28,475 77.0 28,816 79.4 33,207 83.2 15.2 from technological connection 8,311 22.5 7,282 20.1 6,515 16.3 – 10.5 services from other services 172 0.5 175 0.5 180 0.5 2.7

Profit on sales in 2013 Profit before taxes in 2013 3,473 RUB mln 1,444 RUB mln +1% to 2012 –26% to 2012

112

STRATEGY CONTENTS CORPORATE GOVERNANCE STRATEGY 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Dynamics of sales revenue, RUB mln Revenue from electric power transmission services in 2013 +10.0% 33,207 RUB mln 39,902 +15% to 2012 36,958 36,273 180 172 175 6,515 Electric power transmission 8,311 7,282 Technological connections Revenue from technological connection 33,207 Other services 28,475 28,816 services in 2013 6,515 RUB mln –11% to 2012

2011 2012 2013

JSC Lenenergo revenue for 2013 totaled RUB 39,902 mln (growth of 10.0% Revenue growth on electric power transmission by results of 2013 to the level of 2012). concerning the fact of the similar period of 2012 was caused by growth of the average tariff by 16.8% at decrease in the volumes of electric power Revenue from basic types of activity – electric power transmission and transmission by 394 mln kWh (1.3%). services in technological connection – made 99.5% of consolidated revenues of the Company for the reporting year. Drop in revenue from rendering technological connection services by results of 2013 in comparison with the fact of 2012 was caused by postponement of the maturity date under a large contract for 2014 due to default on submission of working documentation by the applicant.

Performance of revenue plan in 2013, RUB mln

1 Revenue Plan Fact Fact/Plan, % The actual revenue of the Company turned Total revenue, including: 42,669 39,902 – 6.5 out to be lower than the forecasted indicator by RUB 2,767 mln. A drop in revenue from from electric power transmission 34,271 33,207 – 3.1 electric power transmission by RUB 1,064 mln, from technological connection services 8,239 6,515 – 20.9 or 3%, was caused by decrease in the volume of consumption by 617 mln kWh, or for 2%, from other services 159 180 13.1 and a slight reduction of the average tariff by 0.8%. Decrease in the actual revenue from technological connection services relative to the planned indicator was caused by postponement of the maturity date under 1Planned indicators are given according to the approved business plan of the Company for 2013–2017 (approved by the Board of Directors on 26.04.2013 (Minutes # 29 of 30.04.2013). a large contract for 2014.

113

STRATEGY CONTENTS CORPORATE GOVERNANCE 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Prime cost

Dynamics of expenses on production and sale of services by types of activity, RUB mln

Share Share Share 2011 in total 2012 in total 2013 in total amount, % amount, % amount, %

Prime cost, including: 31,758 100.0 32,830 100.0 36,429 100.0 rendering of services in electric power transmission 30,456 95.9 32,344 98.5 35,903 98.6 rendering of services in technological connection 1,226 3.9 400 1.2 437 1.2

other services 75 0.2 86 0.3 89 0.2

Structure and dynamics of costs by items of expenditure in 2011–2013, RUB mln

Share in total Share in total Share in total 2011 2012 2013 amount, % amount, % amount, %

Material costs 5,852 18.4 5,292 16.1 5,990 16.4 Works and services of production character 14,662 46.2 15,366 46.8 15,961 43.8 Payroll and social charges 3,424 10.8 3,525 10.7 3,981 10.9 Depreciation 5,102 16.1 6,278 19.1 8,261 22.7

Miscellaneous expenses 2,717 8.6 2,368 7.2 2,236 6.1

Total expenses 31,758 100.0 32,830 100.0 36,429 100.0

Cost Structure for 2011, RUB mln Cost Structure for 2012, RUB mln Cost Structure for 2013, RUB mln

2,717 2,368 2,236 14,622 3,424 15,366 3,981 15,961 3,525

XX3 1, 7 XXX 5 8 XX3 2, 8XXX 3 0 XX36,429 XXX

5,102 6,278 8,261

5,852 5,292 5,990

46% Work and services of production 47% Work and services of production 44% Work and services of production character character character

18% Material costs 16% Material costs 16% Material costs

16% Depreciation 19% Depreciation 23% Depreciation

11% Payroll and social charges 11% Payroll and social charges 11% Payroll and social charges

9% Miscellaneous expenses 7% Miscellaneous expenses 6% Miscellaneous expenses

114

STRATEGY CONTENTS CORPORATE GOVERNANCE STRATEGY 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Prime cost of sold goods, products, works, and services of JSC Lenenergo There was also an increase on the following items: in 2013 was RUB 36,429 mln (growth by RUB 3,599 mln, 11.0% to the level of 2012). ԔԔ material costs increased by RUB 699 mln (13.2%) in connection with growth of expenses for purchased electric power to compensate for By results of 2013 the most essential changes in the structure of costs losses due to an increase in the non-regulated tariff of losses purchase of production and sales of goods (services) occurred concerning a growth at the expense of growth of the actual ATS price in 2013 in comparison in the share of depreciation (by 3.6 items) at a simultaneous decrease with 2012 and at the expense of increase in the cost premium across in the specific weight of works and services of production character (by the Leningrad Region from 2H 2013. 3.0 items). ԔԔ works and services of production character were up by RUB 595 mln In absolute expression the most considerable gain (31.6%, or RUB 1,983 mln) (3.9%) at the expense of increased cost on JSC FGC UES services due was noted on the size of depreciation that is connected with increase in the book to an increase in the rates of networks maintenance and payment value by results of implementation of the investment program on input of fixed of losses in the UNEG networks in 2013. assets and revaluation of fixed assets carried out for the end of 2012. ԔԔ Payroll and social charges increased by UB 455 mln (12.9%) in connection with carrying out of indexation, increase in official salaries by key professions, and motivation of the personnel involved in elimination of consequences of black outs in the Company’s grid.

ԔԔ Thus miscellaneous expenses decreased by RUB 132 mln (5.6%). Prime cost of production and sales of services in 2013 The growth rate of controllable costs for the reporting period in comparison with 2012 exceeded the growth rate of non-controllable costs while RUB mln 36,429 in absolute expression controllable costs increased by RUB 935 mln, and +11% to 2012 non-controllable costs – by RUB 2,664 mln, respectively.

Costs of production and sales of goods (services) of the Company broken down by controllable and non-controllable costs, RUB mln

Indicator 2011 2012 2013 Change, 2013/2012, %

Controllable costs 5,488 5,857 6,792 16.0 Material costs 413 469 503 7.2 Works and services of production character 1,014 1,218 1,464 20.2

Labor compensation fund 2,693 2,790 3,154 13.1

Other costs 1,369 1,380 1,672 21.1 Non-controllable costs 26,270 26,973 29,637 9.9 Purchased energy on compensation of losses 5,357 4,754 5,415 13.9 Services in electric power transmission by networks of third- 7,969 8,029 7,774 – 3.2 party grid organizations JSC FGC UES fees 5,686 6,119 6,715 9.7 Depreciation of fixed assets and intangible assets 5,102 6,278 8,261 31.6 Leasing payments 1,187 803 123 – 84.6 Other costs 969 990 1,349 36.3 Total costs 31,758 32,830 36,429 11.0

115

STRATEGY CONTENTS CORPORATE GOVERNANCE 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Dynamics of controllable and non-controllable cost, RUB mln

In comparison with the previous reporting year specific weight of controllable and non-controllable costs in the prime cost structure 36,429 practically did not change. By results of 2013 controllable costs 31,758 32,830 6,792 represented 18.6% and non-controllable costs – 81.4% of total costs 5,488 5,857 Non-controllable costs of the Company for production and sales of goods (work, services).

Controllable costs Both in the previous year and by results of the reporting year the share 29,637 of labor compensation fund (46.4%) prevailed in structure of controllable 26,270 26,973 costs. The share of labor compensation fund in comparison with 2012 decreased (by 1.2%), the gain of a share of works and services of production character made 0.8%. The share of material costs in 2013 2011 2012 2013 decreased by 0.6%. Miscellaneous costs increased by 1%.

Dynamics of Controllable Costs Structure, % Dynamics of Non-controllable Costs Structure, %

3.7 3.7 4.6 4.5 3.0 0.4 Depreciation of fixed assets and intangible assets 24.9 23.6 24.6 18.3 20.4 17.6 Services in electric power Labor compensation 7.5 8.0 7.4 transmission by networks fund 22.7 22.7 of third-party grid organizations 21.6 18.5 20.8 21.6 Works and services of production character JSC FGC UES services fee Purchased energy 29.8 26.2 Material costs 30.3 on compensation of losses

49.1 47.6 46.4 Miscellaneous expenses Leasing payments 27.9 19.4 23.3 Miscellaneous costs

2011 2012 2013 2011 2012 2013

Overall growth of controllable costs by 16%, or RUB 935 mln in 2013 is caused The main specific weight in the structure of non-controllable costs by increase in works and services of production character, growth of labor is the share of depreciation (27.9%), and services in electric power compensation fund and miscellaneous costs. transmission by networks of third-party grid organizations, JSC FGC UES and purchased energy on compensation of losses. The most essential changes in the structure of non-controllable costs in comparison with 2012 occurred regarding a growth of specific weight of depreciation by 4.6 p.p. at a simultaneous decrease in the share of costs of services in electric power transmission by networks of third-party grid Gain of non-controllable costs in 2013 organizations by 3.5 p.p. and leasing payments by 2.6 p.p. 2,664 RUB mln +10% to 2012

116

STRATEGY CONTENTS CORPORATE GOVERNANCE STRATEGY 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Cost reduction program The program of cost management was developed and executed Implementation of the cost management program and actions held in JSC Lenenergo in 2013. by the Company on definition of the limits of operational budgets provided execution of the Resolution of the Government on decrease The effect from implementation of activities directed on optimization in reduced operating costs in 2013 by 10% to the level of 2010. of operational costs and generation of additional income constituted RUB 952.1 mln in 2013. Within the strategy of development of the power network complex of Russian Federation the Company is obliged to ensure achievement The effect form implementation of activities directed on optimization of the target indicator of decrease in operating expenses not less of costs in the field of technical re-equipment, retrofitting and new than 15% by 2017 taking into account inflation concerning the level construction totaled RUB 474.5 mln in 2013. of 2012 counting per unit of service of electro-technical equipment. The Company’s business plan for 2014–2018 was developed under the condition of ensuring advancing rate of achievement of the target indicators.

Execution of the Program of Cost Management in 2013, RUB mln The program includes a complex of organizational and technical actions directed on optimization of business 41 26 Implementation of the losses 34.9% decrease program operations of the Company, such as: 133 – actions on revenue increase; 33.2% Investment activity 498 optimization – logistics improvement by carrying out tender procedures; 17.8% Actions on revenue increase 254 – cost optimization of the production 1,427 program; 9.3% Logistics improvement by carrying out tender – implementation of the losses decrease procedures program; Cost optimization 2.9% of the production program – general business costs reduction;

474 General business costs – investment activity optimization. 1.9% reduction

Decrease in the cost of service per unit of electro-technical equipment in comparison with the level of 2012

Indicator 2014, plan 2015, plan 2016, plan 2017, plan 2018, plan Reduced fix costs (in the prices of 2012), RUB thousand 5,870,308 6,116,677 5,894,969 5,891,476 5,891,926 Quantity, c.u. 526,801 546,573 565,733 584,891 605,191 Reduced fixed costs per c.u., RUB thousand 11.14 11.19 10.42 10.07 9.74 Decrease in costs per c.u. In comparison with 2012, % – 9.4 – 9.0 – 15.3 – 18.1 – 20.8 Target indicator, % – 5.0 – 8.3 – 11.7 – 15.0 – 18.0

Decrease in operating costs reduced to the level of 2010

Indicator 2011 2012 2013

Decrease (–) / growth (+) of operating costs reduced to the level of 2010, RUB mln +176,5 – 347,3 – 449,9 Decrease in operating costs reduced to the level of 2010, % +4.2 – 8.3 – 10.8

117

STRATEGY CONTENTS CORPORATE GOVERNANCE 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Sales profit By results of 2013 sales profit reached RUB 3,473 mln. Its gain in comparison In general concerning 2012 there was a decrease in balance of other with the previous reporting year was caused by a higher increase in revenue income and expenses (without interest receivable and payable and income of the Company compared to its prime cost growth. The sum of expenses of participation in other organizations) by RUB 466 mln in the conditions per 1 rub of sold goods for 2013 compared to the previous reporting year of a smaller gain of the sum of other income in comparison with increase practically did not change and constituted 91 kopeks. in other expenses. Thus, the main influence on decrease in balance of other income and expenses was rendered by a growth of expenses on creation of reserves Other income and expenses on bad debts and other conditional obligations while increase in income Interest payments of JSC Lenenergo in 2013 increased by RUB 429 mln of identified non-contractual electricity consumption made a smaller volume. compared to 2012 and totaled RUB 2,217 mln in the reporting year. Interest payments for 2013 were calculated on credits and the loans attracted by the Company in 2010–2013. Growth of interest payments was caused Income before taxes and income tax by increase in the sum of a principal debt on which interest accrual was made Growth of income on sales in 2013 compared to 2012 was followed in the reporting period. by a significant increase in absolute expression, increase in negative The sum of interest payments in favor of JSC Lenenergo reached RUB 644 mln balance of other income and expenses (including interest and income from that was above the level of previous reporting period by RUB 348 of mln participation in other organizations). As a result income before taxes by results (in 2.2 times). The specified income is in dependence from the balance of cash of 2013 decreased by RUB 518 mln. placed on settlement accounts of the Company within a year and total cash Income tax and other similar obligatory payments following the results of 2012 placement on deposits. reached RUB 1,019 mln that was above the level of 2012 by RUB 99 mln. Income of participation in other organizations was insignificant and made less than RUB 1 mln.

EBITDA

Analysis of EBITDA dynamics, RUB mln

+15.9% +15.9% EBITDA of the Company identifying cash flow generated 11,279 by the Company before interest and taxes payments increased 11,279425 9,733 425 in 2011–2013. 9,733 1,019425 8,522 1,019 Depreciation 8,522 1,0421,042 1,5731,019 1,367 1,042920 1,573 1,367 920 1,573 By results of 2013 EBITDA totaled RUB 11,279 mln that was above the level 1,3671,367 920 Profit tax 944 1,492 8,261 of 2012 by RUB 1,546 mln (15.9%). The growth of indicator was primarily due 1,110944 1,492 8,261 1,110944 Balance of interest 1,110 6,278 to higher growth rate of revenue (+10.0%, RUB 3,629 mln) in comparison with 5,1021,110 6,278 payable and receivable prime cost growth net of depreciation (+6.0%, RUB 1,617 mln). 5,102 8,261 Net income 6,278 The balance of other income and expenses without interest payable 5,102 2011 2012 2013 and interest receivable decreased by RUB 466 mln (in 3.2 times), mainly 20112011 20122012 20132013 at the expense of reserve formation on bad debts and reserve on other

2011 2012 2013 conditional obligations that was not compensated by growth of positive balance of income and expenses on identified non-contractual electricity consumption.

118

STRATEGY CONTENTS CORPORATE GOVERNANCE STRATEGY 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Net income

Net income by types of activity, RUB mln Dynamics of net income generation, RUB mln

Balance Profit tax Income 1,367 1,042 425 Income of other and other Net Period before on Sales income and similar Income 1,121 Taxes 1,138 expenses payments From other services 1 2 3 4 = 2 + 3 5 6 = 4 + 5 6,418 6,494 5,733 From electric power transmission on networks 2011 5,201 – 2,890 2,311 – 944 1,367 From services on technological 2012 3,443 – 1,481 1,962 – 920 1,042 –4,611 connection –6,573 –6,446 2013 3,473 – 2,028 1,444 – 1,019 425 –440 Change, 0.9 37.0 – 26.4 10.8 – 59.2 2011 2012 2013 2013/2012, %

Implementation of the plan on net income in 2013, RUB mln

Indicators Plan Fact Deviation fact/plan, %

Net income, including: 801 425 – 46.9

from electric power transmission on networks – 7,116 – 6,446 – 9.4

from services on technological connection 7,427 5,733 – 22.8

from other services 490 1,138 132.4

DECREASE IN NET INCOME IN RELATION TO THE FORECAST CONSTITUTED RUB 376 MLN, OR 46.9%. PERFORMANCE RESULTS OF THE COMPANY WERE AFFECTED BY THE FOLLOWING FACTORS:

Net income in 2013 Decrease in revenue by RUB 2,767 mln at the expense of:

425 RUB mln ԔԔ decrease in revenue on electric power transmission by RUB 1,064 mln that was caused by decrease in the volume of consumption by 617 mln kWh, or 2% and insignificant reduction of the average tariff by 0.8%;

ԔԔ decrease in revenue from technological connection by RUB 1,724 mln was due to non-fulfillment of the large contract caused by the applicant’s failure to provide working documentation.

119

STRATEGY CONTENTS CORPORATE GOVERNANCE 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Decrease in prime cost by RUB 2,230 mln. The most significant Decrease in the negative balance of other income and expenses decrease was due to: by RUB 3 mln. Growth of other expenses by RUB 3,237 mln was compensated by the growth of other income by RUB 3,240 mln. ԔԔ decrease of costs on services of other distribution grid companies by RUB 1,290 mln in connection with existence of disagreements: The greatest increase in other income was due to: regarding application in calculations of actual or declared capacity due to the lack of documents confirming ownership rights for objects and ԔԔ receiving additional revenue from identified non-contractual electricity execution of technological connection due to selection of a tariff type consumption; (single-rate, double-rate); ԔԔ growth of interest receivable due to the growth of short-term financial ԔԔ decrease in depreciation by RUB 1,012.5 mln in connection with investments and remains on settlement accounts; decrease in the average rate of depreciation charges that is associated with the changes introduced in 2012 in accounting policies ԔԔ accounts payable write-off by results of inventory under the contracts of JSC Lenenergo due to increase in terms of useful life of fixed assets on technological connection; at significant improvement of characteristics of the objects after their modernization; ԔԔ growth of other actual income which were recognized after reset of earlier created reserves, income of compensatory contracts, insurance ԔԔ decrease in the cost of JSC FGC UES services by RUB 217,4 mln because payments and other. of the losses volume reduction in UNEG networks by 99.1 mln kWh at the expense of a drop in electric power output from UNEG networks; The greatest increase in other expenses was due to:

ԔԔ decrease in the cost of purchased electric power on compensation ԔԔ creation of a reserve on bad debts – bad debt on capital construction, of losses by RUB 117.2 mln due to reduction in the volume of losses on technological connection services, on other activity; by 111.4 mln kWh, or 3% caused by decline of electricity output in network by 754.4 mln kWh, or 2% at insignificant increase ԔԔ creation of a reserve on other conditional obligations – on disagreements in the non-regulated tariff of losses purchase by 1% due to increase regarding coordination of settlement schemes on application of the tariff in the actual ATS price; type and calculated capacity, on lawsuits concerning technological connection on the basis of decisions adopted by the court of appellate ԔԔ thus there was a growth of the cost of services of repair organizations jurisdiction and set not in favor of the Company, on other lawsuits; by RUB 529 mln in connection with rendering of supplementary repair services which were carried out during passing of the autumn and ԔԔ growth of interest payments in connection with excess of the size of credit winter period of 2012/13. portfolio within a year in comparison with the forecast and a larger volume of refinancing of credits with a view of decrease in interest rates; increases in expenses from identified non-contractual electricity consumption in connection with obtaining income in a higher volume than it was planned;

ԔԔ receivables write-off – debt on electric power transmission; write-off of losses, fines, penalties and legal costs.

Reduction in income tax by RUB 159 mln, or 14% due to the gross income drop.

120

STRATEGY CONTENTS CORPORATE GOVERNANCE STRATEGY 4. Performance Indicators Annual Report 2013 JSC Lenenergo

THE LOSS FROM ACTIVITIES ON ELECTRIC POWER TRANSMISSION Net income from activities on technological connection totaled FOR 2013 TOTALED RUB 6,446 MLN THAT WAS LESS THAN RUB 5,733 mln that is less than the forecasted net income by RUB 1,693 mln. THE FORECASTED LOSS BY RUB 670 MLN, OR 9%. DECREASE IN THE LOSS WAS AFFECTED BY THE FOLLOWING FACTORS: Reduction of net income was affected by a drop in revenue on technological connection by RUB 1,724 mln, or 21% that was caused by non-fulfilment of the large contract due to the applicant’s failure Decrease in prime cost by RUB 2,341 mln. Decrease in prime cost was caused to provide working documentation. The income tax carried on activity by a drop in the services of other distribution grid companies by RUB 1,290 mln, on technological connection, decreased by RUB 100 mln due to decline or 14% because of selection of the single-rate type of an individual tariff and of income before taxes. existing disagreements regarding application in calculations of actual or declared capacity; decrease in depreciation charges by RUB 1,020 mln in connection with Net income from other types of activity constituted RUB 1,138 mln that increase in the terms of useful life of fixed assets as well as setting of new terms exceeded the forecasted indicator by RUB 648 mln. The growth of net of useful lives at significant improvement of characteristics of objects after their income was influenced by increase in miscellaneous income to a greater modernization. extent than the growth of miscellaneous expenses. The major factors which affected the growth of net income were:

ԔԔ growth of the balance from identification of non-contractual electricity Decrease in revenue in a smaller volume than the drop in prime cost. consumption by RUB 931 mln; The revenue decreased by RUB 1,064 mln, or 3% that was caused by decrease in the volume of consumption by 617 mln kWh, or 2%, and ԔԔ growth of interest receivable by RUB 581 mln in connection with insignificant reduction of the average tariff by 0.8%. increase in short-term financial investments and remains on settlement accounts;

ԔԔ thus there was a growth of miscellaneous expenses: a reserve Growth of expenses from income by RUB 702 mln, or 29% by results on other conditional obligations at a rate of RUB 310 mln on lawsuits of the following factors: on the basis of judgments of the court of appellate jurisdiction which were approved not in favor of the Company was formed; the negative ԔԔ growth of interest payable by RUB 322 mln in connection with excess of the size balance on the won lawsuit for losses caused by a contract organization of credit portfolio within a year in comparison with the forecast and a higher at carrying out reconstruction of substation # 17 of RUB 273 mln was volume of refinancing of credits with a view of decrease in interest rates; recognized; growth of miscellaneous expenses by RUB 248 mln – write- off of construction in progress, losses of past years, fines and penalties. ԔԔ formation of a reserve on other conditional obligations at a size of RUB 390 mln on disagreements with third-party network organizations Income tax attributable to other activities was up by RUB 35 mln due regarding coordination of calculation schemes on application of the tariff type to the growth of income before taxes. and estimated capacity;

ԔԔ write-off of accounts receivable at a rate of RUB 169 mln on electric power transmission on the basis of court decisions;

ԔԔ recognition of income on earlier created reserves at a rate of RUB 113 mln as revenue of past periods on the basis of change of judgments of the court of appellate jurisdiction which were set in favor of the Company;

Reduction in income tax by RUB 94 mln in connection with decrease in fixed tax liabilities.

121

STRATEGY CONTENTS CORPORATE GOVERNANCE 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Net income secured by cash flow, RUB mln

Indicators 2011 2012 2013 Change, 2013/2012, % For information: formula

Net profit of the reporting period = (profit of past years revealed Net income secured 1,266 975 210 – 78.5% in the reporting period x 0.8 + write-off of accounts payable x 0.8 + by cash flow income on revaluation of financial investments)

Dynamics of net income secured by cash flow declined in 2011–2013 and coincided with the dynamics of net income for the corresponding Net income secured by cash flow in 2013 periods. 210 RUB mln In general, the size of income on sales in 2013 concerning the level of 2012 increased, while the sum of income (loss) before taxes and net profit both relatively 2011 and 2012, decreased in the reporting year.

Dynamics of income on sales, income before taxes and net income

Income on sales, RUB mln Income before taxes, RUB mln Net income, RUB mln

5,201 +0.9%

3,443 3,473 2,311 –35.9% 1,962 1,444 1,367 –145.2% 1,042 425

2011 2012 2013 2011 2012 2013 2011 2012 2013

Overall decrease in net profit in 2013 was primarily due to the growth of negative balance of miscellaneous income and expenses relative to previous reporting period despite increase in income on sales.

122

STRATEGY CONTENTS CORPORATE GOVERNANCE STRATEGY 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Financial Performance Analysis

Key Indicators Characterizing Financial Performance of the Company1

Change,

Indicator 2011 2012 2013 2013/2012, p.p. For information:formula (unless otherwise specified)

Indicators of financial stability

Order # 10-N of the Ministry of Finance Cost of net assets, RUB mln 56,144 76,225 76,341 0.2% of the Russian Federation

Level of delayed accounts payable, % 3.7 2.9 2.2 – 0.7 Overdue receivables/ (1400 + 1500 f. 1)

Equity-assets ratio (financial 0.5 0.6 0.5 – line 1300 f. 1/line 1700 f. 1 independence)

DEBT/EBITDA 3.1 2.9 3.0 – Line 1410 f. 1 + line 1510 f.1) / EBITDA

Security ratio of own current assets – 0.9 – 1.0 – 0.9 – (line 1200 f. 1– line 1231 f. 1– line 1500 f. 1) / line 1200 f. 1

Profitability Ratios

EBITDA margin, % 23.1 26.8 28.3 1.4 (EBITDA/Revenue (line 2110 f. 2)) x 100%

Net Income margin, % 3.7 2.9 1.1 – 1.9 (line 2400 f. 2/Revenue (line 2110 f. 2)) x 100%

Return on Total Assets (ROTA) (line 2300 f. 2/(line 1600 f. 1 + line 1600 f. 1 base / 2)) 2.4 1.6 1.0 – 0.6 on income before taxation, % x 100%

line 2400 f 2/((line 1300 f. 1 + line 1300 f. 1 / 2)) ROE (Return on Equity), % 2.5 1.6 0.6 – 1.0 *100%

Indicators of business activity

Assets turnover, times 0.3 0.3 0.3 – 2110 f. 2/1600 f. 1

Accounts receivable turnover, times 5.1 4.7 4.0 – 2110 f. 2/(1230-123204) f. 1

Accounts payable turnover, times 1.4 1.3 1.0 – 2120 f. 2/(1450 + 1520) f. 1

Current AR = line 1230 f. 1 / line 1230 f. 1 Ratio of receivables and payables growth Current AP = line 1520 f. 1 / page 1520 f. 1 1.0 1.0 0.9 – rates, times Current AR / Current AP = (line 1230 f. 1 / line 1230 f. 1) / (line 1520 f. 1 / line 1520 f. 1)

Ratio of cumulative receivables and 0.3 0.3 0.3 – line 1230 f. 1/line 1450 f. 1 + line 1520 f. 1) payables, times

Ratio of the most liquid receivables and line 123201. 1 + page 123206 f. 1) / 0.9 0.9 0.5 payables, times (page 1521. 1 + page 1528 f. 1)

Liquidity Ratios

Absolute liquidity ratio 0.2 0.2 0.2 – line 1240 f. 1 + line 1250 f. 1) / line 1500 f. 1

line 1260 f. 1 + line 1250 f. 1 + line 1240 f. 1 +line Quick liquidity ratio 0.5 0.5 0.5 – 1232 f. 1) / line 1500 f. 1

1Indicators given in the table were calculated according to a methodology of financial ratios calculation for annul reporting recommended by Department of Corporate Finance of JSC Rosseti.

123

STRATEGY CONTENTS CORPORATE GOVERNANCE 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Change,

Indicator 2011 2012 2013 2013/2012, p.p. For information:formula (unless otherwise specified)

Current liquidity ratio 0.5 0.5 0.5 – line 1200 f. 1/line 1500 f. 1

Market indicators

formula: (net profit for the reporting year - accrued EPS, RUB 1.38 0.98 0.34 – dividends on preferred shares)/number of outstanding ordinary shares

formula: average weighted price of one ordinary share P/E, times 7.14 6.75 7.04 – by the end of the reporting year/ earnings per share

1Indicators given in the table were calculated according to a methodology of financial ratios calculation for annul reporting recommended by Department of Corporate Finance of JSC Rosseti.

Assets liquidity degree, RUB mln

Formula Indicator Designation 2011 2012 2013 (line of the balance sheet)

Most liquid assets А1 1240 + 1250 6,796 5,429 9,655

Quick assets А2 1232 + 1260 6,391 7,730 10,042

Slow assets А3 1210 +1220 + 1231 1,657 866 1,190

Sticky assets А4 1100 92,883 117,523 127,596

Most accrued liabilities P1 1520–1527 20,724 22,898 34,615

Short-term liabilities P2 1510 + 1527 + 1550 6,193 3,144 3,970

Long-term liabilities P3 1400 + 1530 + 1540 24,666 29,281 33,557

Stable liabilities P4 1300 56,144 76,225 76,341

А1> =P1 А1 – P1 – 13,928 – 17,469 – 24,960

Conditions of absolutely liquid balance А2> =P2 А2 – P2 198 4,586 6,072 sheet А3> =P3 А3 – P3 – 23,009 – 28,414 – 32,367

А4

124

STRATEGY CONTENTS CORPORATE GOVERNANCE STRATEGY 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Dynamics of the ratio of net assets and total assets

Net assets, RUB bn Total assets, RUB bn Authorized capital, RUB bn

+12.9%

+0.2% 148.5 131.5 76.2 76.3 107.7 56.1 1.228 1.228 1.019

2011 2012 2013 2011 2012 2013 2011 2012 2013

Net assets of JSC Lenenergo by results of the reporting year increased due to the growth of consolidated financial result of the Company concerning the level of 2012. Essential excess (in 62.2 times) of net assets over the authorized capital completely meets requirements Net assets for the end of 2013 of regulations1 to the size of net assets of the organization and can 76.3 RUB bn be regarded as a major factor of stability of the Company’s financial +0.2% to 2012 condition at present and in the long-run.

1Article 35 of Law “About joint stock companies” of 26.12.1995 # 208-FZ (with the subsequent amendments and supplements).

Assessment of financial stability

Stability of the Company’s financial condition depends both on the optimal Since equity is a basis of the Company’s independence, a considerable structure of equity sources (ratio of own and borrowed funds) and share of own funds on balance of the Company testifies to its sufficient the optimal structure of the Company’s assets. financial independence. For the end of 2013 specific weight of equity constituted 51.4% of balance sheet total of JSC Lenenergo that was not below the traditionally recommended level (50%). The positive characteristic of the Company’s activity in 2013 was decrease in the level of delayed accounts payable due to reduction In general the ratio of financial independence, the ratio of equity and of its sum. Delayed accounts payable were attributable borrowed capital, and the ratio of total debt to EBITDA by results of 2013 to advances received under contracts on technological connection. were within the standard limits that is regarded positively. Deterioration Work on minimization of delayed liabilities is conducted of the indicators of financial stability concerning the level of 2012 was in the Company on a continuous basis. primarily caused by increased liabilities of JSC Lenenergo in the conditions of growth of accounts payable and its debt on credits and loans.

125

STRATEGY CONTENTS CORPORATE GOVERNANCE 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Indicators of profitability and business activity

EBITDA margin for 2013 Indicators of profitability of JSC Lenenergo in 2013 were positive as a result of profitable business activity 28.3% of the Company. +1.4 p.p. to 2012

EBITDA margin The indicator of return on equity (ROE)

EBITDA margin reflecting the size of EBITDA per each ruble of revenue The indicator of return on equity (ROE) is one of the key indicators received by the Company improved in 2013. The gain was 1.43 percentage characterizing efficiency of functioning of the Company, and reflects points in connection with advancing growth rate of EBITDA versus the size of profit received by its owners from each ruble invested the growth rate of revenue. In 2013 the ratio of EBITDA to revenue was in the Company. Its decrease in comparison with 2012 was also 28 kopeks per 1 rub. connected with decrease in net income of JSC Lenenergo.

Net income margin The indicator of return on total assets (ROTA)

Decrease of net income margin reflecting the size of net income The indicator of return on total assets (ROTA) shows that on each of the Company per 1 ruble of received revenue, is connected with ruble invested in assets, JSC Lenenergo received 1.0 kopeks of income multidirectional changes of the Company’s revenue (growth) and its net before taxation in 2013. Reduction of the indicator testifies to decrease income (decrease). in efficiency of assets use.

Insufficiently high level of profitability indicators is primarily due for purchasing of goods, works, services counting per unit to the operating tariff methodology – RAB regulation, application of production not less than by 10% within three years in real of smoothing, and lost income. Hence, transition of JSC Lenenergo expression in the prices of 2010; to RAB-regulation of tariffs in the long-term will act as the main – annual development and implementation of the program catalyst of considerable improvement of financial and economic on energy saving and increase of power efficiency; condition and growth of the Company’s capitalization. – execution of the Company’s obligations on technological Management of the Company introduces a competent policy connection of applicants; on a continuous basis aimed at achievement of positive results – formation of actual prices for rendering of other services; upon its operating activities and increase of investment appeal of JSC Lenenergo overall. – negotiation for the purpose of attraction of additional financing under profitable terms, credit portfolio optimization, including In modern conditions this policy assumes: measures on decrease of interest rates; – development and implementation of the program of costs –the program of innovative development for 2011–2016 optimization; was approved and is implemented in the Company to ensure – tender procedures directed on performance of the task modernization and technological development of the Company, of the President of the Russian Federation on decrease in expenses reliability of power supply and increase of economic efficiency.

126

STRATEGY CONTENTS CORPORATE GOVERNANCE STRATEGY 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Accounts receivable turnover

Accounts receivable turnover reflects the speed under which buyers In conditions of a higher growth of accounts payable concerning increase (debtors) pay off their obligations to the Company. By results of 2013 it of accounts receivable, the indicator reflecting the ratio of receivables constituted 4.0 times and as compared to the previous reporting year it and payables following the results of 2013 decreased by 0.03 p.p. decreased by 0.7 p.p. due to high growth rates of liabilities in comparison The indicator characterizing the ratio of most liquid receivables and with the revenue growth. The similar trend was observed with respect payables also decreased that was caused by a considerable gain to accounts payable turnover – decrease by 0.3 p.p. was caused by high of the most urgent accounts payable (short-term accounts payable growth rates of accounts payable concerning increase in operating costs. to suppliers and contractors and debt of other creditors – generally at the expense of debt growth to the construction organizations and Duration of turnover of accounts payable characterizes average duration network companies, reflection of debt on additional issue of ordinary of a delay of payments provided to the Company by suppliers. For 2013 shares). duration of turnover of accounts receivable is much lower than duration of accounts payable turnover that was a positive factor. In terms of higher growth rates of short-term accounts payable in comparison with growth rates of accounts receivable for 2013 At the same time the indicator of assets turnover in comparison with the value of ratio of growth rates of receivables and payables decreased. level of 2013 practically did not change and constituted 0.3 times in 2013. Thus the indicator of the ratio of growth rates of receivables and payables is close to 1 that testifies to an insignificant gap at the growth rates of short-term accounts payable and accounts receivable, and is positively regarded from the viewpoint of assessment of the Company’s financial condition.

Liquidity and solvency assessment

The balance sheet of JSC Lenenergo for the end of 2013 was not absolutely At the same time the main lowering influence on liquidity indicators liquid. Conditions of absolutely liquidity were observed only regarding of the Company was rendered by a large sum of debt on advances received excess of the size of quick assets over short-term liabilities. from applicants on contracts on technological connection. The major part of this debt is short-term (RUB 15,163 mln) – 43.8% of short-term accounts Since JSC Lenenergo is a company relating to the capital-intensive industry, payable of JSC Lenenergo and 97.6% of cumulative size of advances the structure of its balance liabilities is characterized by a large volume on technological connections as of 31.12.2013 was assignable to it. of debt funds, and non-current assets prevail in the structure of assets. Absolute financial stability (presence of own current assets) for capital- In most cases the fee for connection services to JSC Lenenergo networks intensive industries may not always be ensured. Hence, for companies are advances paid at conclusion of the contract on technological of the industry liquidity indicators are at the level below the traditionally connection and which are actually long-term sources of funds since recommended ones. they are linked to implementation by the Company of its long-term investment program. The specified liabilities do not demand security with The ratio of security with own current assets of JSC Lenenergo has current assets as they are sources for formation of non-current assets negative value since due to the industry specifics the Company has no own of the Company and are repaid when rendering services in technological current assets that is admissible and acceptable for the Company. Current connection. assets of JSC Lenenergo are not financed at the expense of long-term sources. At the same time concerning 2012 the indicator improved. Improvement of the Company’s liquidity indicators in the long-term can be reached by decrease in the sum of short-term liabilities on advances By results of 2013 optimum values of current and quick ratio were not received by the Company by result of fulfillment of its obligations towards reached, thus relative to the previous reporting year the ratios increased. applicants and increase in expected revenue from rendering of services The absolute liquidity index, which value as of 31.12.2013 increased in technological connection. also corresponds to the traditionally recommended indicator (> =0.15). The growth of liquidity indicators was caused by a higher growth rate By results of the reporting year advances received under technological of current assets, primarily at the expense of cash and short-term financial connection contracts increased by RUB 354 mln or 2.3%. investments, concerning the growth rate of short-term liabilities.

127

STRATEGY CONTENTS CORPORATE GOVERNANCE 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Credit policy

FOR THE PURPOSE OF FINANCING OF THE INVESTMENT PROGRAM AND DEBT REFINANCING THE COMPANY USES ALL AVAILABLE INSTRUMENTS OF ATTRACTION OF FINANCIAL SOURCES – BANK CREDITS AND BONDS (CORPORATE AND EXCHANGE). DECISIONS ON ATTRACTION OF ADDITIONAL FINANCIAL SOURCES ARE BASED ON THE PRINCIPLE OF PROVIDING A SMALLER COST OF FUNDING AT INCREASE IN THE TERM OF LOAN.

JSC Lenenergo activities in the field of attraction of credit resources is carried By results of calculation of compliance of JSC Lenenergo debt position defined out according to the approved decision of the Board of Directors and in the Regulations on credit policy with the limits of debt position a group the Regulations on credit policy of JSC Lenenergo (Minutes # 8 of 11.10.2013), of solvency (A, B or C) was defined that influences the management powers the limits of cost parameters of loans approved by the Board of Directors and to approve financial decisions in the field of crediting. The limits of borrowings the approved business plan of the Company. The system of limits on the size cost parameters are defined depending on the rate of refinancing, the term of credit capital was introduced in the Company to forecast the Company’s of credit and presence of mortgage for the date of attraction of credit solvency. There were established the powers of senior management resources. Formation of the Company’s credit portfolio is carried out taking to approve financial decisions in the field of crediting. into account performance of the indicator Debt/EBITDA not exceeding 3.

Formation of the Company’s credit portfolio is carried out taking into account performance of the indicator Debt/EBITDA not exceeding 3.

Key indicators of the Company’s debt policy

Change, Indicator 2011 2012 2013 For information:formula 2013/2012, %

Equity, RUB mln 56,144 76,225 76,341 0.2 line 1300 f. 1

Borrowed capital, RUB mln, including 51,583 55,323 72,142 30.4 line 1400 + line 1500 f. 1

loans and credits 26,993 27,789 33,376 20.1 line 1410 + line 1510 f. 1

accounts payable 22,216 24,484 35,187 43.7 line 1450 + line 1520 f. 1

Equity to Borrowings 1.1 1.4 1.1 – 1300/(1400 + 1500) f. 1

Debt/EBITDA 3.17 2.86 2.96 – (1410 + 1510) f. 1/EBITDA

Net debt, RUB mln 20,197 22,360 23,722 6.1 1410 + 1510–1240 – 1250 f. 1

Net debt/EBITDA 2.37 2.3 2.10 – (1410 + 1510–1240 – 1250 f. 1)/EBITDA

Interest payable, RUB mln 1,167 1,788 2,217 24.0 P&L line 2330

EBITDA/interest payable 7.3 5.4 5.1 – EBITDA/line 2330 OPU

For reference:

line 2400 f. 2 + line 2330 f. 2 + EBITDA, RUB mln 8,522 9,733 11,279 15.9 depreciation + profit tax f. 2– line 2320 f. 2

128

STRATEGY CONTENTS CORPORATE GOVERNANCE STRATEGY 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Debt, RUB mln, Debt/EBITDA Net Debt, RUB mln, Net Debt/EBITDA

3.17 2.86 2.96 2.37 2.30 +6.1% 2.10

33,376 +20.1%

26,993 27,789 Debt 23,722 Net Debt 22,360 Debt/EBITDA 20,197 Net Debt/EBITDA

2011 2012 2013 2011 2012 2013

In 2011–2013 a steady growth trend both of the Company’s debt (debt Following the results of 2013 Debt/EBITDA did not exceed 3, the growth on credits and loans), and the sums of net debt was observed. Credits of indicator 0.1 p.p. concerning the level of 2012 was connected with advancing growth rate of debt on credits and loans concerning and loans were involved for financing of operating and investment the growth rate of EBITDA. At the same time decrease in Net debt/ activities of the Company, including for financing of renovation of cable EBITDA in comparison with the beginning of fiscal year was caused lines in St. Petersburg and construction of a distributive network. by a smaller growth rate of net debt (at the expense of essential growth of the most liquid assets at the end of the reporting period (the sums of short-term financial investments and cash) concerning the growth rate of EBITDA.

Credit portfolio structure by terms of repayments, RUB mln Credit portfolio structure by types of attracted sources, RUB mln

+15.9% +15.9%

33,219 33,219 26,800 27,645 3,813 26,800 27,645 6,000 3,000 Over 3 years 3,000 6,000 6,000 Credits 15,425 9,593 1–3 years 10,375 Bonded loans 24,645 27,219 Less than 1 year 20,800 15,052 13,981 10,425

2011 2012 2013 2011 2012 2013

Dynamics of average interest rate on debt funds servicing, %

Indicator 2011 2012 2013 Change, 2013/2012, p.p.

The average borrowing rate on total funds 7.71 8.26 8.14 – 0.12 p.p. (taking into account bonded loans)

The average borrowing rate on bank credits 7.55 8.23 8.09 – 0.14 p.p.

Refinancing rate of the Central bank RF 8.00 8.25 8.25 0.00

129

STRATEGY CONTENTS CORPORATE GOVERNANCE 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Debt structure at the end of 2013, % Credit portfolio for the end of 2013 33,219 RUB mln 3 981 60% Sberbank

18% Bonded loans

XX XXX 12% Bank of Russia See more information about bonds of JSC Lenenergo in the section Securities 8 261 on page 180 9% VTB Bank

1% Svyaz Bank

Change of Credit Portfolio of the Company in 2013

Increase in the credit portfolio in 2013 was Credit Credit Involved Repaid Type of debt portfolio portfolio in 2013 in 2013 due to a growth of the sum of credit resources on 01.01.2013 on 31.12.2013 involved on financing of investment activity, Credits, RUB mln 27,645 18,843 13,269 33,219 thus the sum of the credit resources involved on operating activities decreased. Interest payments, RUB mln 144 2,619 2,606 157

Total 27,789 21,462 15,876 33,376

Dynamics of credit portfolio Dynamics of accrued in 2013 on the sum of principal debt, RUB mln and paid interest in 2013, RUB mln

18,843 13,269

2,619 2,606 33,219 27,645

144 157

Credit Portfolio Involved Repaid Credit Portfolio Balance Accrued Repaid Balance as of 01.01.2013 in 2013 in 2013 as of 31.12.2013 as of 01.01.2013 in 2013 in 2013 as of 31.12.2013

130

STRATEGY CONTENTS CORPORATE GOVERNANCE STRATEGY 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Credit rating

Agency Value Outlook Assignment Confirmed

Moody’s March 2011 Ba2 Stable November 2009 on international scale February 2012 Moody’s Interfax Rating Agency January 2013 Aa2.ru Stable November 2009 on a national scale February 2014

By results of refinancing of credits with high borrowing rates, lack In November, 2009 the Moody’s Investors Service agency of increase in the rates under the concluded credit agreements and assigned JSC Lenenergo with a credit rating at level Ba2, conclusions of new contracts under the rates that were lower than outlook – stable. At the same time Moody’s Interfax Rating the market average, the average borrowing rate on credits attracted Agency which major shareholder is Moody’s, assigned by the Company decreased. JSC Lenenergo with a rating on a national scale at level Aa2. ru. For 2009–2014 the rating agency annually confirmed The Company managed to successfully proceed with its public credit the assigned ratings. history, having placed exchange bonds registered in July, 2012 on April 17, 2013 in the volume of RUB 3,000 mln with the interest coupon rate The analysis carried out by the rating agency provides rather full complex of only 8.25% per annum. assessment of the Company’s financial and economic condition. In the future the Company intends to expand public loans by placement By results of the reporting year improvement of the indicators of liquidity of registered exchange bonds of 02–05 reissues that will allow and solvency of the Company took place, the financial independence diversifying its funding sources and will have a positive impact remains at a high level, growth of net assets was steady – its essential on the overall Company’s image in business environment. excess over authorized capital completely meets the requirements of regulations to the size of net assets of the Company and can be At the same time in comparison with 2012 a number of financial regarded as a major factor of stability of financial condition at present indicators declined. Hence, profitability indicators (except for EBITDA time and in the mid-term. The indicator of EBITDA characterizing a cash margin) decreased that was closely linked to negative dynamics of net flow generated by the Company before payment of taxes and interest profit. In the terms of growth of the Company’s liabilities a decrease increased, and EBITDA margin also improved. in the level of its financial independence takes is noted.

JSC Lenenergo on a continuous basis optimizes credit portfolio, the structure of its assets and obligations, including work with receivables and payables: optimization of its size was executed, and active work on arrears minimization that promoted to decrease in the level of delayed accounts payable was carried out in 2013.

High performance following the results of 2013 was provided by rational management of the Company’s liquidity as the result of optimization of the structure of placement of temporarily free cash from the viewpoint of profitability and risks reduction.

131

STRATEGY CONTENTS CORPORATE GOVERNANCE 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Forecast of financial results of the Company

THE FORECAST OF FINANCIAL RESULTS OF JSC LENENERGO IS GIVEN ACCORDING TO THE ADJUSTED BUSINESS PLAN OF THE COMPANY FOR 2014–2018 (APPROVED BY THE BOARD OF DIRECTORS OF JSC LENENERGO, MINUTES # 30 OF 16.04.2014 OF THE MEETINGS OF THE BOARD OF DIRECTORS OF JSC LENENERGO OF 11.04.2014).

Scenario conditions for formation of JSC Lenenergo business plan (pursuant ԔԔ Tariff models are formed taking into account extension of the first to the scenario conditions for subsidiaries and depended companies period of regulation till 2019 and in compliance with a forecast approved at the budgetary committee of JSC Rosseti on 27.06.2013, of social and economic development of the Russian Federation Minutes # 1, with subsequent alterations and supplements) are as follows: for 2014–2016 and consider implementation of large investment programs in St. Petersburg and the Leningrad Region that corresponds ԔԔ Volume of electricity consumption is planned taking into account to the forecast of social and economic development. operating contractual conditions with consumers, forecasted volumes of a gain in power consumption under the implemented contracts ԔԔ Revenue from electric power transmission is planned proceeding from on technological connection, and dynamics of power consumption the forecasted volumes of services in electric power transmission in the region. Cancellation of lease contracts of the power network taking into account the approved long-term parameters of tariff facilities entering into the uniform national (all-Russian) electric grid regulation net of the cost of loading losses. (“last mile”) is provided. ԔԔ Operating expenses for 2014–2018 considering inflation ԔԔ Losses of electric power are planned taking into account decrease decrease concerning the level of 2012 counting per unit of service in the size of losses both in absolute and relative expression of electronetwork equipment according to the strategy of development considering the levels of voltage, taking into account implementation of the network sector of the Russian Federation approved of the program of energy saving and increase of power efficiency. by the Resolution of the Government of the Russian Federation # 511-r of 03.04.2013. For 2014 controllable operating expenses ԔԔ Volume of technological connections is planned proceeding from (except for labor costs) were formed with a condition of non -excess the list of technological connection contracts under execution and of the level of expenses approved in the business plan for 2013 pursuant forecasts of the volumes of technological connections on subjects to the decision of the Board of Directors of JSC Rosseti (Minutes # 195- of the Russian Federation. pr/1 of 05.09.2013).

ԔԔ Expenses within the program of maintenance and repairs are planned for 2014 at the level of approved limits of expenses on maintenance and repair approved in the Company’s business plan for 2013. The volume of repair program for 2014–2018 is formed at the level of forecasted tariffs and balance decisions. When planning the volumes of borrowings the ratio of Debt/EBITDA should not exceed 3. ԔԔ The volume of investment program for 2014–2018 is formed taking into account execution of present obligations on technological connection of applicants, and increase of reliability and uninterrupted supply of consumers. Revenue for 2018 under the business plan 74.7 RUB bn +87% to 2013

132

STRATEGY CONTENTS CORPORATE GOVERNANCE STRATEGY 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Key forecasted financial indicators of JSC Lenenergo under the approved business plan of Company for 2014–2018, RUB mln

Changes 2015, 2016, 2017, 2018, 2018 /2013, % For reference: Indicator 2013, fact 2014, plan forecast forecast forecast forecast (if other is not formula specified)

Book value of assets 148,483 159,373 174,252 190,159 199,315 207,896 40.0 line 1600 f. 1

Equity 76,341 83,688 89,622 94,662 100,271 107,503 40.8 line 1300 of the balance sheet

Order # 10-N of the Ministry Net assets 76,341 82,195 88,130 93,169 98,778 106,011 38.9 of Finance of RF

Debt at the end of period 33,376 45,600 60,082 71,112 78,661 81,465 144.1 1410 + 1510

Net debt 23,722 43,904 59,440 70,258 78,010 80,830 240.7 1410 + 1510–1240 – 1250 (f. 1)

Revenue, including: 39,902 48,184 57,357 61,367 67,730 74,745 87.3 line 2110 P&L

from services in electric 33,207 39,834 44,498 51,832 60,123 70,059 111.0 – power transmission

from services in technological 6,515 8,183 12,683 9,352 7,415 4,485 – 31.2 – connection

from other services 180 168 177 184 192 200 11.2 –

COGS 36,429 41,370 43,882 47,252 51,198 54,960 50.9 line 2120 P&L

Income on sales 3,473 6,814 13,474 14,115 16,532 19,785 469.7 line 2200 (f. 2)

Income before taxes 1,444 4,454 8,454 8,282 9,833 12,256 748.6 line 2300 (f. 2)

Net income 425 2,763 5,960 5,834 7,067 8,999 2,018.1 line 2400 (f. 2)

line 2400 f. 2 + depreciation + EBITDA 11,279 16,862 24,827 26,945 30,833 35,399 213,9 income tax f. 2 + line 2330 f. 2 – line 2320 f. 2

(EBITDA/Revenue (line 2110 f. 2)) EBITDA margin 28.3% 35.0% 43.3% 43.9% 45.5% 47.4% 19.1 p.p. x 100%

(line1410 + 1510–0150 – Net Debt/EBITDA 2.1 2.6 2.4 2.6 2.5 2.3 – 1240–1250 f. 1)/EBITDA

Debt/EBITDA (relation (line 1410 f. 1 + line 1510 f. 1) / 3.0 2.7 2.4 2.6 2.6 2.3 – of Total Debt to EBITDA) EBITDA

[line 2400 f. 2/((line 1300 f. 1 + ROE (return on equity) 0.6% 3.5% 6.9% 6.3% 7.3% 8.6% 8.1 p.p. line 1300 f. 1) / 2)] x 100%

Return on Total Assets [line 2300 f. 2/((line 1600 f. 1 + (ROTA) on income before 1.0% 2.9% 5.1% 4.6% 5.1% 6.0% 5.0 p.p. line 1600 f. 1) / 2)] x 100% taxation

(line 1240 f. 1 + line 1250 f. 1) / Absolute liquidity 0.2 0.1 0.03 0.03 0.03 0.04 – line 1500 f. 1

133

STRATEGY CONTENTS CORPORATE GOVERNANCE 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Changes 2015, 2016, 2017, 2018, 2018 /2013, % For reference: Indicator 2013, fact 2014, plan forecast forecast forecast forecast (if other is not formula specified)

(line 1260 f. 1 + line 1250 f. 1 + Quick liquidity 0.5 0.5 0.5 0.5 0.5 0.7 – page 1240 f. 1 + line 1232 f. 1) / line 1500 f. 1

Current liquidity 0.5 0.6 0.5 0.5 0.6 0.7 – line 1200 f. 1/line 1500 f. 1

Equity-assets ratio 0.5 0.5 0.5 0.5 0.5 0.5 – line 1300 f. 1/line 1700 f. 1 (financial independence)

Current assets – receivables more than 12 months – Ratio of security with own short-term obligations) / – 0.9 – 0.8 – 1.0 – 0.9 – 0.7 – 0.3 – current assets current assets = (line 1200 f. 1–line 1231 f. 1– line 1500 f. 1) / line 1200 f. 1

Debt/Equity Ratio 1.1 1.1 1.1 1.0 1.0 1.1 – (1300) / (1700) (f. 1)

CAR = line 1230 f. 1 / Ratio of growth rates line 1230 f.1 CAP = line 1520 f. 1/ of receivables and 0.8 1.5 1.1 1.0 1.2 1.2 – line 1520 f. 1 CAR / CAP = payables (line 1230 f. 1 / line 1230 f. 1) / (line 1520 f. 1/ line 1520 f.1)

Ratio of total receivables 0.3 0.5 0.5 0.5 0.7 0.8 – 1230/(1520 + 1450) and payables

Ratio of most liquid (123201 f. 1 + line 123206 f. 1) / 0.5 1.0 0.8 0.8 0.9 1.1 – receivables and payables (line 1521 f. 1 + line 1528 f. 1)

(1410 + 1510) / Leverage 30.4% 35.3% 40.1% 42.9% 44.0% 43.1% 12.7 p.p. (1410 + 1510 + 1300) (f. 1)

Transition of JSC Lenenergo to RAB-regulation of tariffs is the main catalyst of considerable improvement of the Company’s financial and economic condition and growth of its capitalization.

JSC Lenenergo plans to considerably improve its financial condition to what the dynamics of the most of key performance indicators of the Company testifies.

134

STRATEGY CONTENTS CORPORATE GOVERNANCE STRATEGY 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Dynamics of key performance indicators pursuant to the long-term business plan

Revenue Income on Sales, RUB mln by main types of activity, RUB mln Income on Sales margin, %

74,745 26.5% 23.5% 23.0% 24.4% 67,730 4,485 61,367 14.1% 57,357 7,415 8.7% 9,352 19,785 48,184 12,683 39,902 16,532 8,183 13,474 14,115 6,515 70,059 60,123 51,832 44,498 6,814 33,207 39,196 3,473

2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018

Revenue from electric power transmission Income on Sales

Revenue from technological connections Income on Sales margin

Net Income, RUB mln Net Income margin, %

The revenue gain in 2018 in comparison with 2013 is expected at the level of 87.3% (in 1.9 times) that essentially advances the growth 10.4% 9.5% 10.4% 12.0% 5.7% rate of prime cost (50.9%). A significant growth of revenue from 1.1% services in electric power transmission for 2013–2018 (in 2.1 times) 8,999 is thus predicted at decrease in revenue from services in technological 7,067 connection (by 31.2%). 5,960 5,834 For 2013–2018 the share of services in technological connection 2,763 in revenue is supposed to decrease from 16.3% in 2013 to 6.0% in 2018. 425 It is due to the fact that RAB regulation ensures passing from unstable income of technological connection to a stable model under which most 2013 2014 2015 2016 2017 2018 of income is formed at the expense of electric power transmission.

Net Income

Net Income margin

135

STRATEGY CONTENTS CORPORATE GOVERNANCE 4. Performance Indicators Annual Report 2013 JSC Lenenergo

EBITDA, RUB mln, EBITDA margin, % Equity dynamics, RUB mln, ROE, %

47.4% 8.7% 45.5% 43.3% 43.9% 7.3% 6.9% 107,503 35,399 6.3% 35.0% 30,833 26,945 83,688 100,271 24,827 76,341 94,662 89,622 28.3% 16,862 11,279 3.5% 0.6%

2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018

EBITDA Equity

EBITDA margin ROE

In the next five years a gradual increase in EBITDA – in 3.1 times A considerable growth of net income (in 21.2 times) by 2018 is caused concerning 2013 is forecasted at a simultaneous growth of EBITDA by essential growth of the Company’s revenue from services in electric margin to 47.4% in 2018 that is characterized positively from power transmission. Equity of the Company also increases (+ 40.8%), the viewpoint of assessment of a the Company’s financial condition. and the indicator of return on equity (ROE) in 2018 reaches 8.66% that is 15.6 times above the level of 2013. Thus specific weight of net income in the structure of EBITDA for the end of 2018 increases to 25.4% (versus 3.8% for 2013) that is also a positive characteristic of the Company’s financial condition. EBITDA for 2018 under the business plan 35 RUB bn +214% to 2013

Equity and debt capital, RUB mln

1.1 1.1 1.1 1.0 1.0 1.1 107,503 94,662 100,271 100,393 89,622 99,044 Debt capital 76,341 83,688 95,498 75,685 84,630 72,142 Equity

Ratio of equity and debt capital

2013 2014 2015 2016 2017 2018

Throughout the considered period the ratio of equity and debt capital The ratio of equity and debt capital exceeds 1, and the ratio of financial (cumulative liabilities) of the Company and financial independence are independence is at the level of 0.5 and above. within the recommended limits.

136

STRATEGY CONTENTS CORPORATE GOVERNANCE STRATEGY 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Debt, RUB mln, Debt/EBITDA Net Assets, total Assets, authorized Capital, RUB mln

199,315 207,896 190,159 98,778 106,011 174,252 93,169 3.0 81,465 159,373 2,002 2,002 78,661 148,483 88,130 2,002 2.7 71,112 82,195 2,002 76,341 2,002 60,082 2.6 1,228 45,600 2.6 33,376 2.3 2.4

2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018

Debt Net Assets

Total Assets Debt/EBITDA Authorized Capital

The increase in the volumes of the Company’s credit portfolio Growth of the indicator of debt loading (leverage) up to 2017 in 2.4 times by 2018 in comparison with 2013 is caused is associated with considerable attraction of debt funds for the needs by the necessity of attraction of considerable credit resources of investment activity and advancing growth rate of the sum of credits for implementation of the large-scale investment program and loans concerning increase in equity. of the Company. RAB-regulation of electricity transmission tariffs defines long-term debt funds as the main funding source At the same time, for 2013–2018 the value of net assets remains within of the investment program. the recommended standard values at the level considerably exceeding the size of the Company’s authorized capital. Thus, decrease in the cumulative debt on operational credits and loans will start yet in 2014, and by 2018 the credit portfolio on operational credits and loans reduces to the level of 2013 more than in 15.4 times.

At the same time in the terms of increase in debt on the investment Overall it is expected that by 2018 the financial condition credits and loans indicators of Debt and Net Debt of the Company of JSC Lenenergo in comparison with 2013 considerably during the whole considered period increases. improves, including due to positive financial result from primary activities on electric power transmission (RUB 5,691 mln versus

the loss received by results of 2013 from services in electric Dynamics of EBITDA of the Company in 2013–2018 is characterized power transmission in the amount of RUB 6,446 mln). by a steady growth trend. As a result during the whole considered period the ratio of Debt/EBITDA does not exceed the level of 3.0 and by 2018 decreases by 22.2%, to the level of 2013, reaching the size of 2.3.

Ratio Debt/EBITDA for the end Net assets for the end of 2018 of 2018 under the business plan under the business plan 2.3 106 RUB bn +39% to 2013

137

STRATEGY CONTENTS CORPORATE GOVERNANCE 4. Performance Indicators Annual Report 2013 JSC Lenenergo

4.4. TECHNICAL RE-EQUIPMENT, DEVELOPMENT AND INNOVATIONS

THE MOST IMPORTANT CHALLENGE OF JSC LENENERGO IS CREATION OF NEW POWER NETWORK INFRASTRUCTURE ON THE BASIS OF INNOVATIVE DEVELOPMENT, UPGRADE AND IMPROVEMENT OF APPLIED TECHNOLOGIES. IN THE FIELD OF TECHNOLOGICAL DEVELOPMENT THE COMPANY ASPIRES TO ADOPT THE BEST RUSSIAN AND FOREIGN EXPERIENCE.

Technical policy

In 2013 the Board of Directors of JSC Lenenergo approved The goal of uniform technical policy in the power network complex the Regulations of JSC Rosseti about uniform technical policy consists in ensuring increase of reliability and efficiency of functioning in the power network complex (further – the Regulations) as of the power network complex in short-term and medium-term the internal document of the Company (Minutes # 19 of the meeting prospect at maintenance of the appropriate level of industrial and of the Board of Directors of JSC Lenenergo of 30.12.2013). All projects environmental safety on the basis of the innovative principles of JSC Lenenergo on new construction and reconstruction included of development providing non-discriminatory access to electric in the investment program of JSC Lenenergo are implemented with networks to all participants of the market. observance of the requirements of uniform technical policy.

Development of conditions for connection Increase of preparedness of electric networks Automation of processes and introduction of up-to-date software of the participants of wholesale and retail to transmission and distribution of electric power markets of electric power to electric networks for ensuring reliable supply of consumers with on the terms of non-discriminatory access electric energy

Ensuring vocational training of operational and Minimization of negative impact on environment repair staff

OBJECTIVES OF THE UNIFORM TECHNICAL POLICY

Cutting Capex and operational costs into Development of the system of diagnostics facilities due to optimization of technical of facilities and structure of the operative and solutions technological management of facilities

Increase of power efficiency of applied Development of information and Overcoming of aging trend of fixed assets technologies telecommunication infrastructure of electric networks

138

STRATEGY CONTENTS CORPORATE GOVERNANCE STRATEGY 4. Performance Indicators Annual Report 2013 JSC Lenenergo

A specialized scientific and technical council (STC) which considers the issues of research and development, trial operation of equipment and materials during its sessions operates in JSC Lenenergo. In 2013 five sessions of STC were carried out.

Topic

Trial operation of equipment, materials Research and development works (R&D) Questions of use of the equipment and technologies

Considered issues:

1) Results of completed R&D: 1) Results of trial operation of overstrain 1) Application of self-bearing insulated ԔԔ R&D work “Research of operation modes limiters 110 kV produced by LLC Tavrida and protected wires and cables of network equipment at various methods electric SPB in JSC Lenenergo branch – of 0.38–35 kV in the conditions of rural of a neutral grounding and development St. Petersburg high-voltage electric territories and city building in the territory of guidelines at the choice of the mode of a neutral networks. of the Leningrad Region. grounding in electric networks 6–35 kV”;

ԔԔ R&D work “Development and application of techniques for assessment of condition of the electronetwork equipment with application of modern tool methods and laser air-scanning for management of assets of JSC Lenenergo branch - Kingisepp electric networks”;

ԔԔ R&D work “Development of the signaling device 2) Application of non-insulated wire from 2) Use and experience of application of relay protection and automatic equipment for a heat-resistant aluminum-zirconium alloy of arc-suppressing reactors for ground power lines 6–110 kV”. of ASPT brand on CL 35–110 kV limited compensation of single-phase short on capacity. circuit currents (RDMR-485/10-U1 2) Development of R&D plan of JSC Lenenergo on substation # 166, etc.) for 2013–2017.

139

STRATEGY CONTENTS CORPORATE GOVERNANCE 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Integration of technical policy directions in practice

The technical policy is implemented in JSC Lenenergo on a number of key directions, including application of new technologies and equipment in various segments of activity.

Segments of activity

RPAE, DOCS, communication, Distributive networks 0.4–10 kV Distributive networks 35–110 kV telemechanics

Work directions

ԔԔ application of cables with insulation of sewed ԔԔ transition to vacuum and gas-insulated ԔԔ application of microprocessor protection; polyethylene; switches; ԔԔ automation of technological control; ԔԔ application of self-bearing insulation and ԔԔ application of GIS 110 kV (in the presence protected wires; of justification); ԔԔ introduction of SCADA-systems;

ԔԔ BCTS application; ԔԔ application of block and compact switchgears ԔԔ introduction of modern control offices with 35–110 kV; the automated systems of operative and ԔԔ application of hi-tech switching devices dispatching control of different levels of recloser type; ԔԔ application of small-sized gas- and air-insulated integrated switchgears of medium voltage; ԔԔ transition to vacuum switches; ԔԔ application of cables insulation of sewed ԔԔ application of small-sized gas-insulated polyethylene; integrated switchgears; ԔԔ application of multisided and heightened ԔԔ application of up-to-date devices of protection power transmission line poles; against pulse and storm overvoltage ԔԔ development and introduction of computed model of the grid 110 kV for optimization of electric power modes

In 2013 JSC Lenenergo proceeded with implementation of a series of projects within uniform technical policy, including the program of renovation of cable networks 6–110 kV and the program of renovation of cable network 6–110 kV in St. Petersburg, financed by federal budget funds. In 2013 the Company launched implementation of the investment project “Complex development of electric networks of Petrogradsky district of St. Petersburg”.

Investment program of JSC Lenenergo for 2013–2017

140

STRATEGY CONTENTS CORPORATE GOVERNANCE STRATEGY 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Trial operation of equipment, materials and technologies

JSC Lenenergo activity in the field of trial operation of equipment is regulated by the Regulations on introduction of new equipment and technologies in trial operation, approved by Order of JSC Lenenergo # 758 of 29.12.2012.

In 2013 trial operation of the following equipment was completed on JSC Lenenergo facilities:

OVERVOLTAGE LIMITERS (OL) OF SERIES OPN-PK-110/77-10-680-UHL1 APPOINTMENT OPN-RK-110 are intended for protection against switching and storm Produced by LLC Tavrida Electric SPB installed overvoltage of electric equipment of power networks 110 kV with on substation 110 kV # 103 substation 110 kV # 124, effectively grounded neutral. substation 110 kV # 193 RESULTS OF TRIAL OPERATION During the STC session of JSC Lenenergo results of trial operation of equipment were recognized positive.

RECLOSER 35 KV OF TYPE SMART PBA35 APPOINTMENT Recloser Smart35 is the first switching device in the voltage class 35 kV Produced by LLC Tavrida Electric SPB installed which is directly installed on poles of power transmission lines 35 kV. as partitioning point on CL 35 kV Gostilitskaya-1 in JSC Lenenergo branch Kingisepp Electric Networks RESULTS OF TRIAL OPERATION At NTS JSC Lenenergo meeting results skilled operation of the equipment are recognized as the positive.

REMOTELY-CONTROLLED DISCONNECTOR RMNSA WITH AN AUTOMATED DRIVE PA-N-1-UHL1 APPOINTMENT Among major advantages of disconnector RMNSA is possibility Produced by JSC SPA Pribor installed on CL 10 kV of its application for connection of switching devices (disconnectors, f. 39-05 in JSC Lenenergo branch Lodeynoye Pole reclosers, switches) under automated control systems for «smart» grids Electric Networks development.

RESULTS OF TRIAL OPERATION Results of trial operation should be considered at a STC session of JSC Lenenergo in Q2 2014.

141

STRATEGY CONTENTS CORPORATE GOVERNANCE 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Innovations and R&D

THE GOAL Innovative development program

In 2013 JSC Lenenergo proceeded with implementation of the innovative development program Elaboration and introduction of new technologies, for 2011-2016, approved by the Board of Directors in 2011 (Minutes of the Board of Directors innovative products and services corresponding # 2 of 29.07.2011) and adjusted in 2012 (Minutes # 8 of meeting of the Board of Directors to global scale that is urged to enhance economic and power efficiency of power supply. of JSC Lenenergo of 27.08.2012).

PROGRAM TASKS Dynamics of expenses for implementation of the innovative development program by key directions, RUB mln

formation of the corporate management system focused on development and introduction of new technologies, innovative products and services +66.0%

2,782 Innovative activities in the field of power decrease in wear of networks to the level of developed countries 26 efficiency increase 334 Activities in the field 1,596 1,676 1 498 of innovative technologies creation of the system of search and selection of fundamental innovative ideas 21 44 248 429 R&D 2,422 development and introduction of the mechanism of selection of priority subjects of R&D works 1,327 1,203

2011 2012 2013 creation of the mechanism of implementation of pilot projects of innovative technologies In 2013 RUB 2,782.1 mln were spent on innovative activities in the field of power efficiency increase and development of innovative providing necessary conditions for replication of innovations in scales of JSC Lenenergo and JSC Rosseti technologies and R&D that is 66% higher than the year before. The main volume of spent funds is the share of innovative activities in the field of power efficiency increase (RUB 2,421.9 mln in 2013). working off of the funding mechanism of innovations at the expense of own funds and attraction of interested foreign investors

ensuring integration of the Program with basic business processes in JSC Lenenergo

providing necessary level of personnel capacity of JSC Lenenergo Allocated for innovative activities in the field of energy efficiency improvement, measures in the field of development of innovative technologies and R&D in 2013 ensuring protection of intellectual property in JSC Lenenergo 2,782 RUB mln +66% providing the system of information support of innovative processes control in JSC Lenenergo

promotion of innovative projects in the field of energy saving, Of them on innovative activities power efficiency, economic efficiency and reliability of power supply in the field of energy efficiency in the distributive power network complex 2,422 RUB mln

optimization of operational expenses and cutting costs

142

STRATEGY CONTENTS CORPORATE GOVERNANCE STRATEGY 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Trial operation of innovative equipment In 2013 the Company proceeded with works in the field of trial operation of innovative equipment.

Power transformer 110 kV with dielectric low-combustible liquid MIDEL EXPECTED RESULT OF INTRODUCTION Decrease in the level of threat for environment and fire safety Produced by LLC ABB. increase in city conditions at operation of power transformers It is planned to installation at substation 110 kV # 369 110 kV, increase of power supply reliability of consumers. “Shipbuilding institute”.

Module PASS M0 N (GIS 110 kV) EXPECTED RESULT OF INTRODUCTION Reduction of the area for placement of equipment 110 kV, increase Produced by LLC ABB. of power supply reliability of consumers, decrease in the volume Planned installation site: substation 110 kV # 80 of engineering and construction works on installation of equipment “Ust-Slavyanka”. on substation 110 kV.

Microprocessor terminals of a series BEMP RU EXPECTED RESULT OF INTRODUCTION Increase of power supply reliability of consumers. Produced by CJSC ChEAZ (Cheboksary). Planned installation site: DTS 7935, DTS 1917 pf JSC Lenenergo branch Cable Network.

Integrated switchgear 10 kV Eltima in a block and modular building EXPECTED RESULT OF INTRODUCTION Increase of power supply reliability of consumers. Produced by CJSC Elektronmash. Planned installation site: substation 110 kV # 257 “Kronshtadskaya” of JSC Lenenergo branch Gatchina Electric Networks.

Gas-insulated switches of type VGP-110-40/3150U1 with a spring drive and gas-insulated transformers EXPECTED RESULT OF INTRODUCTION of current of type TGF-110III Increase of power supply reliability of consumers. Produced by JSC Electromechanical Plant. . Installation site: substation 110 kV # 484 “Ryabovo” of JSC Lenenergo branch Gatchina Electric Networks.

143

STRATEGY CONTENTS CORPORATE GOVERNANCE 4. Performance Indicators Annual Report 2013 JSC Lenenergo

R&D In 2013 JSC Lenenergo went on with implementation of projects in the field The priority attention was given to such directions as – system issues of electric networks development of research and development under the program of innovative development. The total amount of R&D financing for the reporting period totaled RUB – elaboration of secondary equipment of substations, including 40.2 mln (considering payment of accounts payable). the means of protection, control, automatic equipment, measurements and monitoring

Priority R&D programs

Method of laser air-scanning of CL 35–110 kV In Q3 2013 R&D work “Development and application of techniques The Company conducted survey of 118 overhead transmission lines for assessment of condition of the electronetwork equipment with 35–110 kV in the general extent of 1,942.6 km with application of this application of modern tool methods and laser air-scanning for technique. The database received by results of inspection will be management of assets of JSC Lenenergo branch - Kingisepp electric introduced in a control system of production assets of JSC Lenenergo. networks” within the program of innovative development was completed. The Company submitted an application in the federal executive authority on intellectual property on obtaining a patent for the database. Issue The method of laser air-scanning provides estimation of a technical of the patent is expected in Q1 2014. condition and receiving a 3D-model of overhead transmission lines 35– 110 kV that essentially reduces time of emergency recovery operations.

Signaling Device of Relay Protection and Automatic Equipment (SD RPAE)

In Q3 2013 &D work “Development of signaling device of relay protection and SD RPAE provides comparison of signals from the combined filter DZL automatic equipment (SD RPAE) for power lines 6–110 kV” was completed. (DFZ) and accepted on the communication line on a phase and signal SD RPAE developed within the project is intended for protection of air, cable formation on power outage, duplex transfer of two discrete signals, control and mixed air and cable power lines 6–110 kV in networks with effectively of serviceability of device and communication channel. The Company intends grounded or isolated (compensated) neutral. to put SD RPAE in operation on the facilities of substation # 88 – HES-15, substation # 40 – substation # 17, substation # 13 – substation # 14.

Mode of resistive neutral grounding of a power transformer

In Q3 2013 the standard “Guidelines at the choice of a mode of neutral grounding Within the project resistors with a size of active resistance 30 Om were installed in electric networks of 6–35 kV” developed within performance of R&D work on substation 110 kV # 75 “Lakhta” and substation 110 kV # 155 of “Piskarevka”. “Research of operation modes of network equipment at various methods Besides, current transformers, equipment of relay protection and telemechanics of a neutral grounding and development of guidelines at the choice of the mode were installed on all BCTSs. of a neutral grounding in electric networks 6–35 kV” (Order of JSC Lenenergo # 334 of 25.06.2013) was introduced in the Company. Introduction of the mode of resistive neutral grounding of grid will provide automatic shutdown of connection with single-phase short circuit on the ground, In 2013 distributive networks 10 kV of substation 110 kV # 75 “Lakhta” and lower the level of overvoltage and probability of damage of the electronetwork substation 110 kV # 155 of “Piskarevka” were completely transferred to resistive equipment, increase reliability of cables and other elements of grid, and prolong neutral grounding. term of their operation.

144

STRATEGY CONTENTS CORPORATE GOVERNANCE STRATEGY 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Introduction of Smart Grid Intellectual network (“smart” grid) is a qualitatively new condition of power In 2013 JSC Lenenergo held a series of projects on expansion of the use electric networks which assumes integration of electric networks, of smart active and adaptive grid, including introduction of the automated consumers and producers of electric power within the uniform automated information and measuring system of commercial electricity metering system. Smart Grid independently traces operating modes of all participants (AIMS CEM), implemented the target program on upgrade of the systems of the process of generation, transmission and consumption of electricity of telemechanics, installed reclosers in networks 6–10 kV, and performed real-time. Getting online feedback via a multidivisional system of sensors, a complex of works within the investment project “Complex development Smart Grid automatically responds to all changes occurring in the grid, of electric networks of Petrogradsky district of St. Petersburg”. making optimum decisions for accident prevention.

Information technologies

JSC Lenenergo development as a hi-tech and socially responsible grid Telecommunications company is closely linked to development of reliable and available In 2013 works on laying of the network of fiber-optical communication infrastructure of information technologies. The Company follows cables were completed and two basic rings of communication the strategy in the field of information technologies, automation and in St. Petersburg were launched: telecommunications for the period till 2016 (ITT-strategy) approved by the Board of Directors on 31.07.2012. ITT-strategy defines a mission, ԔԔ SGH ring with speed of 2.5 GGB for organization of telemetry channels, strategic objectives of development, strategic direct dispatching and technological circuit;

Actions for implementation of provisions ITT- strategy are formed annually ԔԔ MPLS ring with speed of 10.0 GGB for organization of corporate network and approved by decisions of the Board of Directors of JSC Lenenergo. for data transmission and work of various applications. Execution of actions on ITT-strategy also is supervised by the Company’s Board of Directors. Besides, a series of fiber-optical communication lines (transits) was installed. In 2014 it is planned to complete works on their connection In 2013 JSC Lenenergo introduced own infrastructure of the catalog to the basic ring of St. Petersburg, and to lay the fiber-optical of accounts and corporate mail service on the basis of Microsoft software. communication line to Vyborg. Further it is planned to expand the network In all branches of the Company reserve systems of all-corporate catalogs of fiber-optical cables and to increase the number of users of SDH and of accounts and e-mail were installed. The project on system development MPLS rings. of communication networks and the target program on development of the direction were developed.

THE MAIN OBJECTIVE OF THE TARGET MODEL The situational and analytical center equipped with the most up-to-date communication and information transmission systems which activity is focused on prevention of emergence and elimination of consequences of failures The main objective of the target model of ITT-infrastructure developed and other emergency situations was established within the ITT-strategy is ensuring requirements of target models of business applications and technological systems with the maximum economic efficiency. in the Company.

145

STRATEGY CONTENTS CORPORATE GOVERNANCE 4. Performance Indicators Annual Report 2013 JSC Lenenergo

In the field of development of telecommunications in 2013 ԔԔ completed construction of Eastern and Southern half-rings for the Company also: connection of regional transits to the basic ring;

ԔԔ organized digital communication channels and data transmission from ԔԔ purchased 15 automatic telephone stations with a view of construction 50 substations 110 kV of JSC Lenenergo in St. Petersburg; of own telecommunication network;

ԔԔ completed construction of fiber-optical communication lines with new ԔԔ upgraded mobile network of radio communication in branches Kingisepp points of access to the corporate network; Electrical Networks and Novaya Ladoga Electrical Networks;

ԔԔ completed construction of the basic ring of a multiservice network ԔԔ developed the program on upgrade of high-frequency communication of corporate communication; channels.

Corporate and technological business applications In 2013 projects on introduction and development of information systems and corporate business applications were implemented in JSC Lenenergo, and the following processes were automated:

Process Application Formation and control over execution of competitive procedures Information system AMS Procurements Information system Investpro as a part of uniform information system Investment projects control Alpha

Certification of power network equipment Part of control system of production assets on the basis of SAP software

Management of construction and investment development projects Oracle Primavera software

Accounting of technological violations Program complex Accidence

Maintaining electronic archive of documents on technological connection Customized application

Plans on expansion of IT application

In 2014 and during the subsequent periods JSC Lenenergo plans Among perspective projects in the field of IT there are: to proceed with implementation ITT-strategy, including further automation of the Company’s activity. ԔԔ creation of corporate GIS-system in which the processes of collecting and processing of information, integration of data of existing information systems, visualization of objects on a geospatial basis will be automated. The system will also provide automation of the processes of technical connection of consumers;

Pursuant to the principle of continuous upgrade ԔԔ introduction of a hardware-software complex Uniform Integration Wire for of available IT resources the Company updates its ensuring reliability and urgency of data of continuous business processes computers, office, telecommunication and processing of various structural divisions; equipment and information systems.

ԔԔ introduction of a uniform control system for maintenance and repair of power network equipment.

146

STRATEGY CONTENTS CORPORATE GOVERNANCE STRATEGY 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Provision of reliability and repair activity

Reliability

ENSURING RELIABLE POWER SUPPLY OF CONSUMERS IS AN ABSOLUTE STRATEGIC PRIORITY OF JSC LENENERGO. INDICATORS OF RELIABILITY ARE INCLUDED IN THE MAIN INDICATORS OF OVERALL BUSINESS PERFORMANCE OF THE COMPANY.

With a view of increase of power facilities reliability JSC Lenenergo implements the following target programs:

Target program Implementation of the program Effect from implementation of the program

2013 2008–2013 The program on replacement of oil-filled Application of inputs with firm insulation inputs by the inputs with firm insulation reduces the quantities of outputs of power of power transformers 110 kV 49 inputs 319 inputs transformers for repair. were replaced were replaced

2013 2008–2013 The medium-term program on installation Installation of reclosers increases network of reclosers on CL 6–10 kV reliability of CL 10 kV and reduces time for 50 235 malfunctions search. reclosers reclosers were commissioned were commissioned

2013 2008–2013 The program of renovation of network Application of self-bearing insulated wires 6–10 kV with replacement of non-insulated excludes outage of CL 6–10 kV at a contact wire by SIW 71 km 778 km of wires and falling of trees on them. The total length The total length of of SIW SIW on OTL 6-10 kV

2013 2013 The program of expansion of glades of CL Expansion of glades of CL reduces probability 35–110 kV in 2013–2015 of falling trees on CL and therefor reduces 1,752 ha 3,893 ha the number of technological violations with area of glades area of glades outage of consumers in adverse weather expansion expansion1 conditions.

1Within conservation zones.

147

STRATEGY CONTENTS CORPORATE GOVERNANCE 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Dynamics of technological violations (accidents)

Dynamics of technological violations (accidents):

Comparative indicators 2011 2012 2013 Change, 2013/2012, %

Accidents investigated by commissions 6 2 1 – 50% of Rostekhnadzor

Accidents investigated by commissions of JSC Lenenergo 7,204 6,973 6,884 – 1.3%

Curtailment of electric power, thousand kWh 2,155 1,834 1,824 – 0.5%

Economic damage, RUB mln 62.7 40.9 35.5 – 13.2%

Average duration of break in power supply of consumers, 5.32 5.28 4.36 – 17.4% hours

Average duration of termination of electric power 0.01905111 Pp 0.01904669 Pp 0.01836852 Pp – 3.6% transmission

Main causes of accidents in 2013, % Economic damage in 2013 decreased and totaled 45.4% Influence of the spontaneous phenomena 35.5 RUB mln Overlapping by birds and animals, 29.2% – 13% to 2012 previous mechanical damages, change of material properties (corrosion, wear)

Influence of extraneous persons and 7.6% organizations Average duration of break in electricity Construction imperfection, supply in 2013 decreased and totaled 2.3% assembly defect, etc. hours Default of equipment 4.36 1.0% maintenance in required volumes – 17% to 2012

0. 1% Staff errors

14 . 4% Other and non-identified causes

In 2011–2013 the number of technological violations and failures decreased that promoted reduction of the average duration of the break in power supply of consumers consistently. The policy of the Company in the field of increase of equipment reliability and carrying out repair work is directed on further improvement of indicators.

148

STRATEGY CONTENTS CORPORATE GOVERNANCE STRATEGY 4. Performance Indicators Annual Report 2013 JSC Lenenergo

Repair program Dynamics of costs on the repair program by methods of implementation, RUB mln Costs on the repair program in 2013 +22.9% 1 ,500 RUB mln 1,500 +23% to 2012 1,221 342 979 314 Contract method The repair program of JSC Lenenergo is formed annually proceeding 293 Economic way from long-term plans schedules of equipment repair, analysis 1,158 of equipment condition, and instructions of supervising authorities. 907 686 In 2013 under the repair program RUB 1,500.4 mln were spent, including RUB 342.3 mln on repair by economic way and RUB 1,158.1 mln on repair by contract method. In relation to 2012 and 2011 repair costs 2011 2012 2013 increased by 23% and 53%, respectively.

Dynamics of costs on the repair program by key directions, RUB mln

+41% 2011 571 –11% 2012 +21% 405 440 2013 394 +69% 278 330 287 229 190 220 156 +111% 130

16 18 38

OTL 110-0.4 kV CL 110-0.4 kV Equipment of substations Buildings and constructions Other facilities

Indicators of the repair program of 2013 In 2011–2013 funding volumes increased on all directions of the repair program, except for a slight decrease in repair costs of substations >100% equipment. Dynamics of repair costs is caused by performance of supplementary technical actions within preparation for the autumn and winter periods, including, in particular, replacement of overloaded Overfulfillment on some indicators was reached at the expense power transformers 35–110 kV, replacement of insulators on CL, repair of supplementary technical actions implemented under the program of switches 110–35 kV on substations, restoration of electromagnetic “About additional technical actions of 2013” (approved by Order blocking on substations 35–110 kV, replacement of current # 124 of the Director General of 13.03.2013). transformers on substations, and repair of buildings and constructions of substations.

149

STRATEGY CONTENTS CORPORATE GOVERNANCE 5. Corporate Governance Annual Report 2013 JSC Lenenergo

RELIABILITY EFFICIENCY AVAILABILITY

The Committee on reliability is established under Issues of increasing the efficiency of operating The Committee on technological connection the Board of Directors of JSC Lenenergo which aims activities are within the competence of the most to electric networks under the Board of Directors at ensuring comprehensive reliability of network of management and control bodies of JSC Lenenergo. of JSC Lenenergo works to ensure non-discriminatory Corporate equipment and facilities. The Committee carries Target values of key performance indicators (KPI) for access to the services of technological connection out expert examination of investment programs, the Director General and top-managers are approve to electric networks of the Company. The Committee analysis of repair plans performance, assesment in the Company on the annual basis develops recommendations for the Board of Directors of the adequacy of measures to eliminate violations on improvement of the internal standards in the field and activities of technical services of the Company of technological connection and evaluates Governance5 the effectiveness of the Company’s activity in this area

The main principles of corporate governance are accountability, justice, transparency and responsibility. The Company is constantly working to improve the efficiency of its corporate governance system in accordance with requirements of the legislation, and Russian and international standards.

150 150

PERFORMANCE INDICATORS CONTENTS SECURITIES 5. Corporate Governance Annual Report 2013 JSC Lenenergo

5.1. CORPORATE GOVERNANCE PRINCIPLES

CORPORATE GOVERNANCE IN JSC LENENERGO IS BASED ON EFFICIENT AND TRANSPARENT SYSTEM OF RELATIONS BETWEEN SHAREHOLDERS, COMPANY MANAGEMENT AND STAKEHOLDERS. JSC LENENERGO AS A PUBLIC COMPANY IS COMMITTED TO CONTINUOUSLY IMPROVING ITS CORPORATE GOVERNANCE SYSTEM PURSUANT TO CONVENTIONAL RUSSIAN AND INTERNATIONAL STANDARDS AND PRINCIPLES SET FORTH IN THE CORPORATE GOVERNANCE CODE.

ACCOUNTABILITY

The Company’s Charter and internal documents provide accountability of the Company’s Board of Directors to all shareholders in compliance with the current legislation, controllability of executive bodies to the Board of Directors and General Shareholder Meeting.

The Company’s Audit commission ensures control over financial and economic activities of the Company. The system of internal control and risk management implemented by Department of internal audit and risk management functions in JSC Lenenergo. The Company involves auditors for confirmation of compliance of the annual accounting reporting of JSC Lenenergo to the Russian accounting standards and International Financial Reporting Standard.

TRANSPARENCY RESPONSIBILITY

The Company ensures timely The Company recognizes the rights disclosure of reliable information on all BASIC PRINCIPLES of all stakeholders envisaged by current essential facts concerning its activity, legislation of the Russian Federation, including financial position, social and OF CORPORATE and strives towards cooperation with environmental indicators, performance GOVERNANCE such persons for the purposes of its results, structure of property and IN JSC LENENERGO development and assurance of financial management of JSC Lenenergo, and stability. provides a free access of all stakeholders to such information.

JUSTICE

The Company undertakes to protect the rights of shareholders and ensure equal treatment of all shareholders. The Board of Directors provides all shareholders with an opportunity of effective protection in case of violation of their rights.

Shareholders are entitled to participate in management by the joint stock company by decision-making on the most important issues of JSC Lenenergo activities at General Shareholder Meeting.

152

PERFORMANCE INDICATORS CONTENTS SECURITIES PERFORMANCE INDICATORS 5. Corporate Governance Annual Report 2013 JSC Lenenergo

Documents regulating the activity in the sphere of corporate governance in the Company:

ԔԔ Regulations on the procedure of preparation and holding of General of the Power Industry and Electrification in new edition (Minutes Shareholders Meeting in new edition (GSM Minutes # 1/2011 of the Board of Directors # 35 of 13.06.2013); of 21.06.2011); ԔԔ Regulations on the Committee on technological connection to grids ԔԔ Regulations on the procedure of convocation and holding meetings of the Board of Directors of Lenenergo, Open Joint Stock Company of the Board of Directors in new edition (GSM Minutes # 2/2012 of the Power Industry and Electrification (Minutes of the Board of 20.06.2012); of Directors # 8 of 10.02.2009);

ԔԔ Regulations on the procedure of convocation and holding meetings ԔԔ Code of corporate governance of JSC Lenenergo in new edition of the Management Board (GSM Minutes # 1 of 30.05.2008); (Minutes of the Board of Directors # 23 of 06.03.2013);

ԔԔ Regulations on the Audit Commission of JSC Lenenergo (GSM Minutes ԔԔ Corporate codes of conduct of JSC Lenenergo (Minutes of the Board # 1 of 23.05.2002); of Directors # 23 of 06.03.2013).

ԔԔ Regulations on payment of remuneration and compensation The documents regulating the procedure for disclosure and use to members of the Board of Directors (GSM Minutes # 1 of information in JSC Lenenergo: of 30.05.2008); ԔԔ Regulations on insider information of JSC Lenenergo in new edition ԔԔ Regulations on payment of remuneration and compensation (Minutes of the Board of Directors # 36 of 20.06.2013); to members of the Audit Commission (GSM Minutes # 1 of 30.05.2008); ԔԔ Regulations on information policy of JSC Lenenergo in new edition (Minutes of the Board of Directors # 7 of 19.09.2013). ԔԔ Regulations on the Committee on strategy and development of the Board of Directors of Lenenergo, Open Joint Stock Company In 2013 the Code of corporate governance, the corporate codes of the Power Industry and Electrification in new edition (Minutes of conduct, the Regulations on insider information and the Regulations of the Board of Directors # 4 of 09.09.2009); on information policy of JSC Lenenergo were approved in new edition.

ԔԔ Regulations on the Committee on reliability of the Board of Directors The Company interaction with subsidiaries and dependent companies of Lenenergo, Open Joint Stock Company of the Power Industry and is carried out on the basis of the approved procedure of interaction Electrification (Minutes of the Board of Directors # 13 of 28.02.2008) of JSC Lenenergo with business entities, shares (stakes) of which amended on 10.07.2009; are owned by JSC Lenenergo (Minutes of the Board of Directors # 12 of 24.03.2009). ԔԔ Regulations on the Committee on audit of the Board of Directors of Lenenergo, Open Joint Stock Company of the Power Industry and Electrification in new edition (Minutes of the Board of Directors # 8 of 27.08.2012);

ԔԔ Regulations on the Committee on personnel and remuneration of the Board of Directors of Lenenergo, Open Joint Stock Company

Along with the Charter of JSC Lenenergo all above-mentioned documents are placed on the corporate website at (http://www.lenenergo.ru/en/shareholders/corp/ustav/).

153

PERFORMANCE INDICATORS CONTENTS SECURITIES 5. Corporate Governance Annual Report 2013 JSC Lenenergo

5.2 MANAGEMENT BODIES

PURSUANT TO ITEM 9.1 OF ARTICLE 9 OF JSC LENENERGO CHARTER MANAGEMENT BODIES OF THE COMPANY ARE GENERAL SHAREHOLDER MEETING, BOARD OF DIRECTORS, MANAGEMENT BOARD (COLLEGIATE EXECUTIVE BODY), AND DIRECTOR GENERAL (SOLE EXECUTIVE BODY). ACTIVITIES OF THE CORPORATE GOVERNANCE BODIES ARE SUPERVISED BY AUDIT COMMISSION, COMMITTEE ON AUDIT, DEPARTMENT OF INTERNAL AUDIT AND RISK MANAGEMENT, AND EXTERNAL AUDITORS OF THE COMPANY.

GENERAL SHAREHOLDER MEETING

MANAGEMENT BODIES CONTROL BODIES

COMMITTEE ON TECHNOLOGICAL COMMITTEE ON AUDIT CONNECTION TO GRIDS

COMMITTEE ON RELIABILITY DEPARTMENT AUDITORS BOARD OF INTERNAL AUDIT OF THE OF DIRECTORS AUDIT AND RISK COMMISSION COMPANY MANAGEMENT COMMITTEE ON STRATEGY AND DEVELOPMENT

COMMITTEE ON PERSONNEL AND REMUNERATION

MANAGEMENT BOARD DIRECTOR GENERAL

154

PERFORMANCE INDICATORS CONTENTS SECURITIES PERFORMANCE INDICATORS 5. Corporate Governance Annual Report 2013 JSC Lenenergo

5.2 MANAGEMENT BODIES

General Shareholder Meeting General Shareholder Meeting is a supreme management body In accordance with the regulatory documents, each of JSC Lenenergo. The competence of the General Shareholder Meeting shareholder is entitled: is set forth by the Federal Law «About joint stock companies» # 208-FZ of 26.12.1995 and the Company Charter. ԔԔ to participate personally or through representatives in General Shareholder Meeting with a right to vote on all issues within its In 2013 the Annual general shareholder meeting of JSC Lenenergo competence; was held on June 20 (Minutes # 1/2013 of 21.06.2013). Proposals of shareholders on introducing of issues into the agenda of the Annual ԔԔ to introduce proposals to the agenda of the General meeting general shareholder meeting of the Company and on promotion in the order stipulated by the current legislation of the Russian of candidates for governing and control bodies of the Company Federation and the Charter; were considered by the Board of Directors in the terms established by the current legislation of the Russian Federation and the Company’s ԔԔ to receive information on the Company’s activity and get charter (decision of the Board of Directors of 06.03.2013, Minutes # 24 acquainted with documents according to article 91 of the Federal of 11.03.2013). Law “About joint stock companies”;

The following issues were considered at the Annual general shareholder ԔԔ to receive dividends declared by the Company; meeting of JSC Lenenergo on 20.06.2013: ԔԔ to primary acquisition of additional shares placed by an public ԔԔ about approval of the annual report, the annual accounting reporting offering and issue-grade securities converted into shares of the Company, and about profit and losses distribution (including in the quantity proportional to the number of shares of this about payment of dividends) of the Company by results of 2012; category (type) belonging to them;

ԔԔ about election of members of the Company’s Board of Directors; ԔԔ to receive a part of its property in case of liquidation of the Company; ԔԔ about election of members of the Company’s Audit Commission; ԔԔ to exercise other rights provided by the legislation of the Russian ԔԔ about approval of the Company’s auditor; Federation.

ԔԔ about increase in the Company’s authorized capital by placement Shareholder(s) owning at least 2% of voting shares of the Company of additional shares. is entitled to bring issues in the agenda of the Annual general shareholder meeting and to nominate candidates for the Board General shareholder meeting was held pursuant to requirements of Directors, Audit commission and the candidate for the position of the current legislation of the Russian Federation, provisions of a sole executive body of the Company. Introducing proposals of regulatory legal acts of FFMS of Russia with establish additional to the agenda of the Annual general shareholder meeting should requirements to the procedure of carrying out General Shareholder arrive in the Company not later than in 90 days after December 31 Meeting, by the Company’s charter and the Regulations on the procedure of previous year. of preparation and carrying out General Shareholder Meeting of JSC Lenenergo. Shareholders (shareholder) owning at least 10% of voting shares may require to convene an Extraordinary general shareholder meeting. The results of voting on all agenda issues of the meeting were announced at the meeting after summing up its results in accordance with the provisions of Article 62 of the Federal Law “About joint stock companies”.

155

PERFORMANCE INDICATORS CONTENTS SECURITIES 5. Corporate Governance Annual Report 2013 JSC Lenenergo

Board of Directors Members of the Board of Directors are guided by the following principles in their work: The Board of Directors performs general management of the Company and supervises execution of the decisions of the General Shareholders Meeting ԔԔ decision-making on the basis of reliable information about the Company’s of JSC Lenenergo pursuant to the legislation of the Russian Federation. activity; ԔԔ elimination of restrictions of the shareholders’ rights to participate in managing The main goals and tasks of the Board of Directors are as follows: the Company, receive dividends and information about the Company; ԔԔ definition of priorities and development strategy of the Company; ԔԔ achieving a balance of interests of various groups of shareholders and ԔԔ implementation and protection of the rights and legitimate interests acceptance by the Board of Directors of the most objective decisions of shareholders, and settlement of corporate conflicts; in the interests of all shareholders of the Company. ԔԔ ensuring completeness, reliability and objectivity of the information disclosure by the Company for shareholders and other stakeholders; The issues referred to the competence of the Board of Directors ԔԔ creation of effective internal control mechanisms; of the Company are determined by the Federal Law “About joint stock ԔԔ regular assessment of activity of the Company’s executive bodies and companies” of 26.12.1995 # 208-FZ and the Company’s Charter and may not management work. be delegated to the executive body of the Company.

Pursuant to item 16.1 of Art. 16 of the Charter of JSC Lenenergo, the Board of Directors is elected in the number of thirteen (13) members. Members of the Board of Directors are elected by cumulative voting.

In 2013 the Board of Directors of JSC Lenenergo conducted its activities in the following composition1:

1Place of work and positions are specified at the moment of election.

From 01.01.2013 up to 20.06.2013 From 20.06.2013 up to 31.12.2013

# Full name Work place # Full name Work place

Chairperson of the Board of Directors

1 Murov Andrey First Vice-Chairperson of the Management 1 Kazachenkov Member of the Management Board, First Evgenyevich Board of JSC FGC UES, Executive Director Andrey Vice-Chairperson of the Management Board of JSC Rosseti (previous name – JSC IDGC Valentinovich of JSC FGC UES Holding)

Vice-Chairperson of the Board of Directors

2 Kazachenkov Member of the Management Board, First 2 Lebedev Sergey Director for economic forecasting –Head Andrey Vice-Chairperson of the Management Board Yuryevich of Department of economic forecasting Valentinovich of JSC FGC UES of JSC FGC UES

Members of the Board of Directors

3 Ageev Valery Director General of JSC FGC UES branch MEN 3 Ageev Valery Director General of JSC FGC UES branch MEN Valentinovich of Northwest Valentinovich of Northwest

4 Boltenkov Ivan First Vice-Chairperson of the Committee 4 Akhrimenko First Deputy Head of Department of corporate Aleksandrovich on tariffs of St. Petersburg Dmitry Olegovich governance and interaction with shareholders of JSC Rosseti

5 Bondarchuk Vice-Chairperson of the Committee on tariffs 5 Boltenkov Ivan First Vice-Chairperson of the Committee Andrey and price policy of the Leningrad Region Aleksandrovich on tariffs of St. Petersburg Sergeyevich

6 Goncharov Valery Vice-Chairperson of the Management Board 6 Vasilyev Sergey Director of Department of power industry Anatolyevich of JSC FGC UES, Deputy Executive Director Vyacheslavovich development of the Ministry of Power Industry on investment activity of JSC Rosseti (previous of Russia name – JSC IDGC Holding)

156

PERFORMANCE INDICATORS CONTENTS SECURITIES PERFORMANCE INDICATORS 5. Corporate Governance Annual Report 2013 JSC Lenenergo

From 01.01.2013 up to 20.06.2013 From 20.06.2013 up to 31.12.2013

# Full name Work place # Full name Work place

7 Demidov Alexey Member of the Management Board, Deputy 7 Voronin Alexey Deputy Head of Department of tariff setting Vladimirovich Executive Director on economy and finance Yuryevich of JSC Rosseti of JSC Rosseti (previous name – JSC IDGC Holding)

8 Remes Seppo Juha Director General of LLC Kiuru 8 Komarov Valentin Head of Department of perspective development Mikhaylovich and technological connection of JSC Rosseti

9 Rozova Evgenia Vice-Chairperson of the Committee on power 9 Magadeev Ruslan head of the department of operative and Evgenyevna and engineering support of the Government Raisovich technological management of JSC Rosseti of St. Petersburg

10 Sizov Andrey Vice-Chairperson of the Committee on power 10 Rozova Evgenia Vice-Chairperson of the Committee on power Andreyevich and engineering support of the Government Evgenyevna and engineering support of St. Petersburg

11 Sorochinskiy Director General of JSC Lenenergo 11 Sinkin Dmitry First Vice-Chairperson of the Committee Andrey Borisovich on power and engineering support Valentinovich

12 Tikhonova Maria Independent director 12 Sorochinskiy Director General of JSC Lenenergo Gennadyevna Andrey Valentinovich

13 Fedorov Dmitry Director for investments of Infrastructure 13 Umanets Natalia Head of Department of legal support Sergeyevich Capital, Limited Liability Company Anatolyevna of JSC Rosseti

Representation of interests of shareholders in JSC Lenenergo Board of Directors

01.01.2013–20.06.2013, % 20.06.2013–31.12.2013, %

54% Rosseti 69% Rosseti Government of 23% XX XXX St. Petersburg XX XXX Government 23% 15% Minority shareholders of St. Petersburg Ministry of Power Industry Government of 8% 8% of Russia the Leningrad Region

By the decision of the Board of Directors of 17.07.2013 (Minutes # 1 of 18.07.2013): ԔԔ Smolnikov Andrey Sergeyevich, Head of Department of corporate ԔԔ Kazachenkov Andrey Valentinovich, Member of the Management Board, First governance and interaction with shareholders of JSC Lenenergo, was Vice-Chairperson of the Management Board of JSC FGC UES, was elected elected the Corporate Secretary of JSC Lenenergo. the Chairperson of the Board of Directors of JSC Lenenergo; ԔԔ Lebedev Sergey Yuryevich, Director of Department of strategic development The current members of the Board of Directors of JSC Lenenergo were of JSC Rosseti, was elected the Vice-Chairperson of the Board of Directors elected by the Annual general meeting of shareholders on 20.06.2013. of JSC Lenenergo.

157

PERFORMANCE INDICATORS CONTENTS SECURITIES 5. Corporate Governance Annual Report 2013 JSC Lenenergo

Structure of the Board of Directors

Kazachenkov Andrey Valentinovich Chairperson of the Board of Directors

Year of birth: 1980 Education: St. Petersburg State Engineering and Economic University, economist-manager, 2002; Business school of university of Wisconsin Madison, MVA, 2004.

2012 up to 17.03.2014: Member of the Board of Directors of JSC Lenenergo. 2012 up to now: Member of the Management Board, First Vice-Chairperson of the Management Board of JSC FGC UES. 2009–2012: Advisor of the Chairperson of the Management Board; Vice-Chairperson of the Management Board of JSC FGC UES. 2007–2009: Head of Department of corporate finance of JSC First Generation Company of Wholesale Electricity Marketing.

Lebedev Sergey Yuryevich Vice-Chairperson of the Board of Directors, Chairperson of the Committee on strategy and development, Chairperson of the Committee on audit

Year of birth: 1967 Education: Moscow State University named after M.V. Lomonosov, finance and credit, Master of economy, 1999.

2013 up to now: Member of the Board of Directors of JSC Lenenergo. 2013 up to now: Director of Department of strategic development of JSC Rosseti. 2003–2013: Director for economic forecasting –Head of Department of economic forecasting of JSC FGC UES.

1 2 3

5 6 7 8

9 10 11

158

PERFORMANCE INDICATORS CONTENTS SECURITIES PERFORMANCE INDICATORS 5. Corporate Governance Annual Report 2013 JSC Lenenergo

1. Ageev Valery Valentinovich 5. Voronin Alexey Yuryevich 9. Sinkin Dmitry Borisovich Member of the Board of Directors, member Member of the Board of Directors Member of the Board of Directors, member of the Committee on audit of the Committee on personnel and remuneration Year of birth: 1980 Year of birth: 1966 Education: State University of Management, Year of birth: 1976 Education: Northwest Correspondence Polytechnic management in power industry, manager, 2002. Education: St. Petersburg State University, Institute, industrial electronics, 1998. mathematician, 1998; St. Petersburg State University 2013 up to 17.03.2014: Member of the Board of Economy and Finance (FINEK), economist, 2004. 2012 up to 17.03.2014: Member of the Board of Directors of JSC Lenenergo. of Directors of JSC Lenenergo. 2008–2013: Deputy Head of Department of JSC IDGC 2013 up to 17.03.2014: Member of the Board 2006 up to now: Director General of JSC FGC UES Holding (new name – JSC Rosseti). of Directors of JSC Lenenergo. branch MEN of Northwest. 2013: Vice-Chairperson of the Committee on power and 6. Komarov Valentin Mikhaylovich engineering support of Administration of St. Petersburg. 2. Akhrimenko Dmitry Olegovich Member of the Board of Directors 2005–2013: First Deputy Director General of Member of the Board of Directors JSC MC Vodokanalstroy. Year of birth: 1973 Year of birth: 1977 Education: Moscow Power Institute, electrical 10. Sorochinskiy Andrey Valentinovich Education: Kiev National Economic University, engineer, 1996; Moscow University of Economy, Member of the Board of Directors, Chairperson jurisprudence, 1998; Russian Legal Academy Statistics and Informatics, manager, 1999. of the Management Board, Director General of the Russian Federation, law, 2000; Diplomatic academy of the Ministry of Foreign Affairs 2013 up to now: Member of the Board of Directors Year of birth: 1975 of the Russian Federation, international relations, 2002. of JSC Lenenergo. Education: St. Petersburg State University, economics 2013 up to now: Deputy Head of Department department, chair of macroeconomic and economic 2013 up to now: Head of project group on optimization of special projects organization of JSC Rosseti. theory, economist, 1997; Northwest academy of state of the ownership structure of the group JSC OMZ. 2008–2013: Deputy Chief of Department service, faculty of state and municipal management, 2013 up to 17.03.2014: Member of the Board of perspective development and technological 2007; PhD in Economics. of Directors of JSC Lenenergo. connection of JSC IDGC Holding (new name – 2008–2013: First Deputy Head of Department JSC Rosseti). 2011 up to now: Member of the Board of Directors of corporate governance and interaction with of JSC Lenenergo. shareholders of JSC Rosseti. 7. Magadeev Ruslan Raisovich 2010 up to now: Chairperson of the Management Member of the Board of Directors Board, Director General of JSC Lenenergo. 3. Boltenkov Ivan Aleksandrovich 2004–2010: Vice-Chairperson of the Committee Member of the Board of Directors, Chairperson Year of birth: 1977 on power and engineering support of the Government of the Committee on technological connection Education: Magnitogorsk State Technical University, of St. Petersburg. to electric networks, member of the Committee power supply of industrial enterprises, electrical on strategy and development engineer, 1999. 11. Umanets Natalia Anatolyevna Member of the Board of Directors, member Year of birth: 1978 2013 up to 17.03.2014: Member of the Board of the Committee on audit Education: St. Petersburg State Mining Institute of Directors of JSC Lenenergo. named after G.V. Plekhanov (Technical University), 2013–2014: Director of Department of development Year of birth: 1976 2000, PhD in Economics. of operative and technological management Education: Higher. of JSC Rosseti. 2012 up to 17.03.2014: Member of the Board 2011–2013: Head of Department of operative and 2013 up to 17.03.2014: Member of the Board of Directors of JSC Lenenergo. technological management of JSC IDGC Holding (new of Directors of JSC Lenenergo. 2009 up to now: First Vice-Chairperson name – JSC Rosseti). 2013 up to now: Deputy Director of JSC Rosseti of the Committee on tariffs of St. Petersburg. 2009–2011: Chief of service of perspective branch Center of Technical Supervision. 2007–2009: First Deputy Director General, Financial development, Head of division of Service of development 2009–2013: Head of Department of legal support director of LLC Northern Company. and technical re-equipment of JSC SO UES. of technical supervision of JSC Rosseti. 2006–2009: Head of Department of operative and technological management, Head of Department 4. Vasilyev Sergey Vyacheslavovich of operative and technological management of JSC IDGC Member of the Board of Directors of Centre.

Year of birth: 1975 8. Rozova Evgenia Evgenyevna Education: Moscow State University named after Member of the Board of Directors, member Lomonosov, law; State University – Higher School of the Committee on strategy and development, of Economics, financial management. member of the Committee on audit

2013 up to 17.03.2014: Member of the Board Year of birth: 1961 of Directors of JSC Lenenergo. Education: Leningrad Engineering and Economic 2012–2013: Director of Department of power industry Institute named after P. Tolyatti, economics and development of the Ministry of Power Industry organization of municipal economy, engineer- of the Russian Federation. economist, 1983. 2008–2012: Member of the Management Board, Director for legal affairs of JSC IDGC Holding (new 2012 up to now: Member of the Board of Directors name – JSC Rosseti). of JSC Lenenergo. 2005 up to now: Vice-Chairperson of the Committee on power and engineering support of Administration of St. Petersburg. .

159

PERFORMANCE INDICATORS CONTENTS SECURITIES 5. Corporate Governance Annual Report 2013 JSC Lenenergo

Information on members of the Board of Directors

Board of Directors Committee Committee Committee Committee on strategy on Committee on Personnel on reli- Remuneration, RUB Non- Participation and devel- technological on audit and Remu- Board member Independent ability executive in meetings opment connection neration

Current members of the Board of Directors of JSC Lenenergo as of 31.12.2013

Kazachenkov A.V. Х 36/36 1,041,834

Lebedev A.Y. Х Х 20/20 Х Х 332,192

Ageev V. V. Х Х 36/36 Х 840,146

Akhrimenko D. O. Х Х 20/20 633,287

Boltenkov I.A. Х Х 36/36 Х Х not paid

Vasilyev S. V. Х Х 15/20 not paid

Voronin A.Y. Х Х 19/20 355,920

Komarov V.M. Х Х 19/20 355,920

Magadeev R. R. Х Х 20/20 308,464

Rozova E.E. Х Х 24/36 Х Х not paid

Sinkin D.B. Х Х 1/20 Х not paid

Sorochinskiy A.V. 36/36 1,188,698

Umanets N. A. Х Х 20/20 Х 355,920

Members who left the Board of Directors on 20.06.2013

Remes S. J. Х 15/16 Х Х 669,789

Fedorov D. S. Х Х 16/16 Х Х Х 588,864

Sizov A.A. Х Х 0/16 Х Х not paid

Murov A.E. Х 16/16 761,932

Demidov A.V. Х 16/16 Х Х Х 876,504

Goncharov V.A. Х 16/16 Х Х 507,954

Tikhonova M. G. Х Х 8/16 Х 151,072

Bondarchuk A.S. Х Х 0/16 Х Х not paid

Other (extra fee of members of the Board of Directors of 2012 for net profit growth, paid in 2013) 1,417,978

Total 10,386,474

160

PERFORMANCE INDICATORS CONTENTS SECURITIES PERFORMANCE INDICATORS 5. Corporate Governance Annual Report 2013 JSC Lenenergo

Activity of the Company Board of Directors in 2013 was carried Number of meetings of the Board out according to the current legislation of the Russian Federation, of Directors held in 2013 the Company’s Charter and the Regulations on the procedure of convocation and holding meetings of the Board of Directors 36 of JSC Lenenergo (approved in the new edition by the decision of AGMS of 20.06.2012, Minutes # 2/2012 of 20.06.2012).

In 2013, 36 meetings of the Company’s Board of Directors were held, Number of considered issues of them 32 off-site meetings (by poll) and 4 combined on-site and off-site at the meetings of the Board of Directors meetings (joint presence with direction of questionnaires). The Company’s in 2013 Board of Directors considered more than 240 issues in 2013. 241

Statistics on meetings of the Board of Directors of JSC Lenenergo during 2009–2013 260 241

38 1 36 183 1 Off-site 4 On-site 146 178 25 Combined on-site and off-site 23 22 1 Number of considered issues 1 3 2 2 36 32

19 24 18

2009 2010 2011 2012 2013

161

PERFORMANCE INDICATORS CONTENTS SECURITIES 5. Corporate Governance Annual Report 2013 JSC Lenenergo

In 2013 the Board of Directors approved the following principal decisions:

PROGRAMS OF THE COMPANY DEVELOPMENT WERE APPROVED

ԔԔ Program of perspective development of electricity metering systems ԔԔ Plans of execution by JSC Lenenergo of current, accumulated and in the retail market of electric power in JSC Lenenergo networks for delayed obligations on technological connection towards applicants the period up to 2017; of St. Petersburg and the Leningrad region; ԔԔ Program of energy saving and increase of power efficiency ԔԔ Plan of measures on bringing the system of consumer services of JSC Lenenergo for 2013–2018; in accordance with the requirements of the standard «System ԔԔ Program of insurance protection of JSC Lenenergo for 2013–2014; of centralized customer service» in the new edition ԔԔ Program of non-state provision of pensions of JSC Lenenergo ԔԔ Plan of measures for 2013 on implementation of the Company’s employees; strategy in the field of information technologies, automation and ԔԔ Target program of development of the Automated system telecommunications for the period up to 2016. of technological management of JSC Lenenergo;

THE PROPOSAL ON INCREASE SCENARIO CONDITIONS OF THE AUTHORIZED CAPITAL OF THE INVESTMENT PROGRAM AND THE DECISION FORMATION ARE APPROVED ON BOND ISSUE

The Board of Directors has proposed Scenario conditions of formation to the Annual general shareholder of the investment program of JSC Lenenergo meeting to increase the authorized capital and the adjusted investment program of JSC Lenenergo by placement of additional PRINCIPAL DECISIONS of the Company for 2012–2017 were ordinary shares, and determined the offering OF THE BOARD OF DIRECTORS approved. The decision on carrying out public price of one additional ordinary registered technological and price audit of investment share. projects of JSC Lenenergo was made.

On 25.04.2013 the decision on issue of non- convertible interest documentary bearer Minutes of the meetings of the Board of Directors exchange bonds with mandatory centralized of JSC Lenenergo are available custody of series BO-02, BO-05 with the total on the corporate website at par value of RUB 20 bn was approved. (http://www.lenenergo.ru/en/ shareholders/corp/control/ sd/?part=1).

INTERNAL DOCUMENTS OF THE COMPANY WERE APPROVED

ԔԔ Code of corporate governance of JSC Lenenergo in the new edition; ԔԔ Regulations on procurements of goods, works, services for ԔԔ Code of corporate conduct of JSC Lenenergo; JSC Lenenergo in the new edition; ԔԔ Regulations on investment activity of the Company in the new edition; ԔԔ Regulations on information policy of JSC Lenenergo in the new edition; ԔԔ Regulations on the Committee on personnel and remuneration ԔԔ Regulations on credit policy of JSC Lenenergo in the new edition; of the Board of Directors of JSC Lenenergo in the new edition; ԔԔ Regulations on payment of remuneration and compensation ԔԔ Regulations on ensuring insurance protection of JSC Lenenergo for to the members of Committees of the Board of Directors 2013–2015. of JSC Lenenergo; ԔԔ Regulations on insider information of JSC Lenenergo in the new ԔԔ Regulations of JSC Lenenergo about uniform technical policy edition; in the power grid complex.

162

PERFORMANCE INDICATORS CONTENTS SECURITIES PERFORMANCE INDICATORS 5. Corporate Governance Annual Report 2013 JSC Lenenergo

Themes of the issues submitted for consideration by the Board of Directors of the Company, %

Issues of current activities Reliability and quality 28% 10% of the Company of rendered services Efficiency control of work 19% 8% HR issues XX XXX of executive bodies 13% Financial management 6% Related party transactions

Strategic development and 11% 5% Corporate governance of SDCs innovations

Data on remuneration and compensation paid The amount of remuneration, paid to the Chairperson (Vice- Chairperson) for to members of the Board of Directors and Committees each meeting at which he carries out functions of the Chairperson of the Board The amount of remuneration and compensation paid to members of Directors, increases by 50%. Extra fee for the indicator of net profit of the Board of Directors is defined pursuant to the Regulations on payment of the Company according to the annual accounting statements approved to members of the Board of Directors of remuneration and compensation, the General meeting of shareholders of the Company, and extra fee in case approved by the Annual general shareholder meeting in 2008 (Minutes # 1 of increase in the amount of market capitalization of the Company during work of 09.06.2008). In accordance with the Regulations, payment of remuneration of the Board of Directors is paid to the members of the Board of Directors. and compensation is carried out as follows: In addition, members of the Board of Directors are reimbursed for travel ԔԔ compensation in the amount of the sum equivalent to four minimum expenses to visit the facilities of JSC Lenenergo, meetings with shareholders monthly tariff rates of an employee of the first category set and investors, participation in the General meetings of shareholders by the industry tariff agreement in the power grid complex of Russia of the Company and performing other tasks related to the functions is paid to the member of the Board of Directors for participation of a member of the Board of Directors. in the meeting of the Board of Directors held in absentia (by filling a voting ballot); The total amount of remuneration and compensation paid to members of the Board of Directors in 2013 was RUB 10,386,474 including taxes. ԔԔ compensation in the amount of the sum equivalent to eight (8) minimum monthly tariff rates of an employee of the first category set In 2013 the Company’s Board of Directors did not make a decision on payment by the industry tariff agreement in the power grid complex of Russia of remuneration to the members of Committees of the Board of Directors. is paid to the member of the Board of Directors for participation in the meeting of the Board of Directors held in the form of joint In 2013 no transactions were made between the members of the Board presence. of Directors and Committees of the Board of Directors of JSC Lenenergo. Claims to the members of the Board of Directors and Committees were not presented by the Company.

163

PERFORMANCE INDICATORS CONTENTS SECURITIES 5. Corporate Governance Annual Report 2013 JSC Lenenergo

Committees of the Board of Directors

Committee Chairperson Main tasks Committee Structure Outcomes of the year

Meetings Committee on strategy and development S.Y. Lebedev ԔԔ development of recommendations to the Board of Directors Lebedev S. Y. Shulakov D. V. of the Committee in 2013 Total: 8 On-site: 3 Yashcheritsyna J. V. Petrovskiy P. V. The Committee is called upon to play a major Director of Department on determining strategic goals of the Company, development, The Committee prepared recommendations terminations of participation of JSC Lenenergo role in defining strategic goals of the Company, of strategic development implementation and adjustment of the business plan, including Balayeva S. A. Melnikova S. A. Gracheva I. A. Rozova E. E. to the Board of Directors for decision-making in JSC Ruskobank and JSC Energouchet; placements the investment program of the Company; estimation of efficiency of its activities in the long of JSC Rosseti Dyuzhinov A. L. Boltenkov I. A. concerning the approval of the business plan by JSC Lenenergo of exchange bonds. Moreover, term and make recommendations to the Board ԔԔ monitoring of the implementation of the approved business- Isaev V. I. Denisov I. V. (including the investment program) of the Company the Committee on a quarterly basis carried out of Directors on adjustment of the existing plan and investment program; Pankstyanov Y. N. Bashindzhagyan A. A. for 2013 and 2014; target values of key performance preliminary examination of the reports on results development strategy of the Company. Yantsevich P. Y. ԔԔ estimation of efficiency of the Company’s activity in the long indicators (KPI) of the Director General and top of implementation of the business plan (including term. managers of the Company for 2013 and 2014; the investment program) of the Company.

Meetings Committee on reliability A.M. Epifanov ԔԔ examination of investment programs and plans on repair Epifanov A. M. of the Committee in 2013 Total: 6 On-site: 2 Radko A. V. The Committee’s activities are aimed Director of Department of power facilities; The Committee on a quarterly basis considered equipment of JSC Lenenergo. In the reporting year, at ensuring comprehensive reliability of production assets Chernetsov V. V. ԔԔ analysis of execution of the programs and plans on repair Artemyev M. S. reports about supply of production with materials, the Committee also reviewed the proposals of network equipment and facilities. management of JSC Rosseti of power facilities from the viewpoint of compliance with Matyushin A. Y. equipment and machines, about JSC Lenenergo for the loading of power transformers the requirements of comprehensive reliability; Uskov V. E. work in the field of labor protection in 2012, of JSC Lenenergo on main substations 35-110 kV ԔԔ evaluation of completeness and sufficiency of measures about organization and performance of major in the mode N-1 over 105%, and proposals by results of accidents and major technological breakdowns, repairs of equipment of the Company’s power on the development of the system for operative and control of their execution; facilities, and about condition of the power grid and technological management of JSC Lenenergo. ԔԔ assessment of activity of the Company’s technical services.

Meetings Committee on audit S.Y. Lebedev ԔԔ control over the process and procedures of preparation Lebedev S. Y. of the Committee in 2013 Total: 9 On-site: 1 of financial (accounting) statements, review of financial Ageev V. V. The Committee on audit works over Director of Department The Committee on a quarterly basis considered results of legislation on control of insider information improvement of the quality of financial of strategic development (accounting) statements; Umanets N. A. Rozova E. E. of the consolidated accounting (financial) statements in the Company, and information about the state statements, information disclosure, internal of JSC Rosseti ԔԔ submission of recommendations to the Board of Directors of the Company prepared in accordance with RAS and of affairs on implementation of the documents control procedures and risk management on increase of efficiency of the systems of internal control IFRS, reports of Department of internal audit and risk aimed at the improvement and development in compliance with the best practices and risk management; management of the Company about performed work, of internal control, audit and risk management of corporate governance. ԔԔ selection of the independent auditor and assessment of his work. reports about the results of implementation of the Company. of measures for observance of the requirements

Meetings Committee on technological connection I.A. Boltenkov ԔԔ providing recommendations to the Board of Directors Boltenkov I. A. Melnikova S. A. of the Committee in 2013 Total: 4 On-site: 3 on improvement of internal regulations and standards Veshteyunas M. A. Uskov V. E. to electric networks First Vice-Chairperson In the reporting period the Committee developed Region on technological connection. Besides, of the Committee on tariffs of the Company to ensure non-discriminatory access Melnichenko E. I. Masaleva I. B. The Committee was established to ensure Zykov A. V. Miromanov S. I. recommendations for the Board of Directors the Committee on a quarterly basis reviewed reports to services on technological connection of consumers openness of activities and non-discriminatory of St. Petersburg Eresov S. A. for decision-making on approval of plans on technological connection to electric networks to electric networks, access to services on technological on execution by JSC Lenenergo of current, of JSC Lenenergo. connection of consumers to power grids ԔԔ assessment of efficiency of the Company’s activities on accumulate and deferred obligations towards of the Company. technological connection of consumers to electric networks. applicants of St. Petersburg and the Leningrad

Meetings Committee on personnel and Y.N. Mangarov ԔԔ providing recommendations to the Board of Directors Mangarov Y. N. of the Committee in 2013 Total: 15 on determining the essential terms of contracts and Chevkin D. A. remuneration Advisor to the Director In the reporting period the Committee developed of the Board of Directors of JSC Lenenergo. remuneration of the members of the Board of Directors Sinkin D. B. The goal of the Committee is to provide General of JSC Rosseti recommendations for the Board of Directors for The Committee also examined the candidatures of the Company, members of the collegial executive body recommendations about formation decision-making on approval of the organization for election to the Management Board of the Company, and the Director General of the Company; of the system of selection and motivation structure of the Company’s executive office, and appointment to positions of Deputies Director of employees to successfully perform ԔԔ definition of criteria for selection of candidates to members the Regulations on payment of remuneration and General and Directors of branches. the strategic plans of the Company. of the collegial executive body of the Company compensation to members of the Committees and for the position of the Director General of the Company, as well as preliminary assessment of candidates.

164 165

PERFORMANCE INDICATORS CONTENTS SECURITIES 5. Corporate Governance Annual Report 2013 JSC Lenenergo

Management Board

The management of current activity of JSC Lenenergo is carried out 14 meetings of the Management Board were held in reporting year. Within by the executive bodies of the Company – Management Board (collective its competence the Management Board performed functions of the General executive body) and Director General (sole executive body) which are meetings of shareholders of the subsidiaries 100% of the authorized capital accountable to the Board of Directors and the General meeting of shareholders of which are owned by JSC Lenenergo, on a quarterly basis pre-considered of the Company. the reports on financial and business activity of subsidiaries and dependent companies, and the reports on the course of execution of the project JSC Lenenergo Management Board is the collegiate executive body of Renovation of cable network 6–110 kV of JSC Lenenergo. of the Company exercising its powers since 11.07.2008. Competence of the Management Board is defined by the Federal Law “About joint stock Work of the Management Board is organized by the Chairperson companies”, Charter of the Company, Regulations on the procedure for convening of the Management Board –Director General of the Company. and holding meetings of the Management Board of JSC Lenenergo. According to item 12.3 of the Company Charter, members of the Management Board The Director General is elected by the Board of Directors pursuant to item are appointed by the Board of Directors on the basis of recommendations 21.4 of Art. 21 of the Charter. Andrey Valentinovich Sorochinskiy was elected of the Committee on personnel and remuneration. the Director General by the decision of the Board of Directors of 30.07.2010 (Minutes # 2 of 30.07.2010). In 2013 there were following changes in the structure of the Management Board of the Company: All issues of management of the Company’s current activities fall under ԔԔ early dismissal of a member of the Management Board Piskarev A.N. the competence of the Director General, except for the issues referred On 26.04.2013; to the competence of the General meeting, Board of Directors and ԔԔ the structure of the Management Board of 6 members was defined Management Board. on 30.10.2013; Melnichenko E.I., Deputy Director General on corporate governance of JSC Lenenergo, and Nikonov A.D., Deputy Director General on security of JSC Lenenergo, were elected members of the Management Board.

Data on remuneration and compensation paid Structure of the Management Board to members of the Management Board and Director General In accordance with the Regulations on the procedure for convening and Sorochinskiy Andrey holding meetings of the Management Board of JSC Lenenergo, employment Valentinovich Member of the Board contracts are concluded with elected members of the Management of Directors, Chairperson Board of the Company. The amount and procedure of remuneration and of the Management Board, compensation to members of the Management Board is determined Director General by the Board of Directors. Criteria of determination and the size of remuneration of the Director General are established by the employment contract and the Regulations on material incentives approved by the Board of Directors (Minutes # 1 of 25.07.2011). The bonus payment to the Director General of the Company is made by results of execution of the key Year of birth: 1975 Education: St. Petersburg State University, economics department, chair performance indicators determined by the Board of Directors of the Company of macroeconomic and economic theory, economist, 1997; Northwest for reporting periods (quarter and year). academy of state service, faculty of state and municipal management, 2007; PhD in Economics.

In 2013, the total amount of remuneration and compensation paid 2011 up to now: Member of the Board of Directors of JSC Lenenergo. to the members of the Management Board, including the Director General, 2010 up to now: Chairperson of the Management Board, Director was RUB 65,141,561 including taxes. General of JSC Lenenergo. 2004–2010: Vice-Chairperson of the Committee on power and engineering support of the Government of St. Petersburg. In 2013 no transactions were made between the members Share in the authorized capital of the Company: no. of the Management Board and JSC Lenenergo. Claims were not presented Positions in other organizations: Chairperson of the Board of Directors: CJSC Tsarskoselskaya Energy Company; CJSC Kurortenergo. to the members of the Management Board.

166

PERFORMANCE INDICATORS CONTENTS SECURITIES PERFORMANCE INDICATORS 5. Corporate Governance Annual Report 2013 JSC Lenenergo

Artemyev Maxim Sergeyevich Zykov Andrey Vladimirovich Melnichenko Evgeny Ivanovich Member of the Management Board, Deputy Member of the Management Board, Deputy Member of the Management Board, Deputy Director General on technical affairs – Chief Director General on development and sales Director General on corporate governance Engineer of services Year of birth: 1958 Year of birth: 1977 Year of birth: 1979 Education: Leningrad State University named Education: Ivanovo State Power University, chair Education: St. Petersburg State Engineering and after A.A. Zhdanov, jurisprudence, lawyer, 1981. of power grid systems and networks, electrical Economic University, 1998. engineer, 1999; National State University 2013 up to now: Deputy Director General of Physical culture, sports and health named 2011 up to now: Deputy Director General on corporate governance of JSC Lenenergo. after P.F. Lesgaft, chair of public relations, expert on development and sales of services 2008–2013: President of LLC Vsevolzhsk Industrial in public relations, 2010. of JSC Lenenergo. Corporation. 2010–2011: Director for technological connection 2011 up to now: Deputy Director General for St. Petersburg of JSC Lenenergo. on technical affairs – Chief Engineer 2007–2010: Vice-President of CJSC Baltros. of JSC Lenenergo. 2007–2010: Director General of LLC Slavenergo. 2010–2011: Deputy Director General on sales of services of JSC Lenenergo. 2008–2010: Director for technical development of JSC Lenenergo.

Meshcheryakov Ilya Georgiyevich Nikonov Alexander Dmitriyevich Member of the Management Board, Deputy Member of the Management Board, Deputy Director General on capital construction Director General on security

Year of birth: 1960 Year of birth: 1976 Education: Higher Political School of the Ministry Education: St. Petersburg State Architectural and of Internal Affairs of the USSR, officer with higher Construction University, manager, 2000 military-political education, 1984; St. Petersburg Economic School of Turku, Finland, 1999. Legal Institute, law, lawyer, 1996.

2011 up to now: Deputy Director General 2013 up to now: Deputy Director General on capital construction and investments on security of JSC Lenenergo. of JSC Lenenergo. 2008–2013: Deputy Director General of LLC 2010–2011: Deputy Director on capital Security Company Galax. construction of JSC Lenenergo branch Cable Network. 2009–2010: Head of division of projects support of LLC CEII-energo. 2006–2009: Head of division of engineering preparation of CJSC Energoproject.

167

PERFORMANCE INDICATORS CONTENTS SECURITIES 5. Corporate Governance Annual Report 2013 JSC Lenenergo

5.3. SUPERVISORY BODIES

PURSUANT TO ITEM 9.2 ART. 9 OF THE CHARTER OF JSC LENENERGO THE AUDIT COMMISSION IS A SUPERVISORY BODY OVER FINANCIAL AND BUSINESS ACTIVITIES OF THE COMPANY.

Audit Commission

Audit Commission of JSC Lenenergo is the permanent body of control Revisions (audit) of financial and business activities of JSC Lenenergo are independent of the officials of governing bodies and the executive office carried out by results of operations for the year (planned check) or at any of the Company. Powers of the Audit Commission are set forth by the Federal time upon decisions or demands of the bodies or persons possessing Law “About joint stock companies”, the Charter and the Regulations the right to initiate such revisions (audit). Revisions are possible following on the Audit Commission of JSC Lenenergo approved by the General meeting decisions of the Audit Commission, decisions of the General shareholders of shareholders of the Company on 23.05.2002 (Minutes # 1). meeting, or the Board of Directors, upon the request of a shareholder (shareholders) owning in aggregate not less than 10% of the Company’s In accordance with the Charter of the Company, the Audit Commission voting shares. is elected by the General shareholders meeting in the quantity of 5 members for a one-year term (before the date of the next Annual General By results of the revisions conclusions about financial and business Meeting). Members of the Audit Commission may not simultaneously be activities, annual accounting statements and reliability of the data members of the Board of Directors or hold other positions in the governing presented in the annual report were prepared. bodies of the Company.

In accordance with the Charter of the Company the competence In 2013 the Audit Commission of JSC Lenenergo held of the Audit Commission includes: revisions of: ԔԔ financial and business activities of JSC Lenenergo for 2012; ԔԔ confirmation of reliability of the data presented in the annual report, annual balance sheet, and the profit and loss statement ԔԔ organization of procurement activity of JSC Lenenergo for 1H 2013; of the Company; ԔԔ execution by JSC Lenenergo of the requirements of regulatory ԔԔ analysis of financial state of the Company, identification of reserves, legal acts approved by federal executive authorities in response improvement of the Company’s financial condition and development to the plan of measures of the road map Increase of Power of recommendations for the Company governing bodies; Infrastructure Availability;

ԔԔ organization and implementation of revisions (audit) of financial and ԔԔ financial and business activities of JSC Lenenergo for 9 months 2013. business activities of the Company.

168

PERFORMANCE INDICATORS CONTENTS SECURITIES PERFORMANCE INDICATORS 5. Corporate Governance Annual Report 2013 JSC Lenenergo

In 2013 the following compositions of the Audit Commission of the Company carried out their work1:

From 01.01.2013 up to 20.06.2013 From 20.06.2013 up to 31.12.2013

# Full name Position # Full name Position

1 Alimuradova 1 Head of division of standards and methodology Director for internal audit and risk management Adler Yury Izumrud of Department of corporate governance and of JSC Rosseti (previous name – JSC IDGC Holding) Veniaminovich Aligadzhiyevna interaction with shareholders of JSC Rosseti

2 2 Arkhipov Vladimir Head of Department of security of JSC Rosseti Kabizskina Elena Deputy Head of Department of control and audits Nikolayevich (previous name – JSC IDGC Holding) Aleksandrovna of JSC FGC UES

3 3 Danilov Maxim Head of Department of internal audit Kim Svetlana Head of control of investments of Department Nikolayevich of CJSC Integrated Energy Systems Anatolyevna of control and audits of JSC FGC UES

4 Head of division of the Committee on city 4 Kozelskiy Vladislav Kozelskiy Vladislav Head of Department of the Committee on city property management of the Government Vilorgovich Vilorgovich property management of St. Petersburg

Head of division of auditing revisions and 5 Kormushkina 5 expertise of Department of internal audit and risk Uskov Valery Head of division of the Committee on power and Lyudmila management of JSC Rosseti (previous name – Evgenyevich engineering support Dmitriyevna JSC IDGC Holding)

1Place of work and positions are specified at the moment of election.

169

PERFORMANCE INDICATORS CONTENTS SECURITIES 5. Corporate Governance Annual Report 2013 JSC Lenenergo

The current members of the Audit Commission

WERE ELECTED BY THE ANNUAL GENERAL MEETING OF SHAREHOLDERS ON 20.06.2013 (MINUTES # 1/2013 OF 21.06.2013).

Kim Svetlana Anatolyevna Chairperson of the Audit Commission

Year of birth: 1981 Education: Moscow State University of Railway Engineering, commerce, specialist of commerce, 2004.

2013–2014: Head of auditing activity and internal audit of Department of control and audits of JSC Rosseti. 2008–2013: Head of control of investments of Department of control and audits of JSC FGC UES. Share in the authorized capital of the Company: no

Adler Yury Veniaminovich Member of the Audit Commission

Year of birth: 1975 Education: Ural State Legal Academy, law, 2000.

2008 up to now: Head of division of standards and methodology of Department of corporate governance and interaction with shareholders of JSC Rosseti. Share in the authorized capital of the Company: no

Kabizskina Elena Aleksandrovna Member of the Audit Commission

Year of birth: 1964 Education: Far East Technical Institute of Fishing Industry, engineering economics department, engineer-economist.

2005 up to now: Head of Department of internal control and risk management of JSC FGC UES. Share in the authorized capital of the Company: no

Kozelskiy Vladislav Vilorgovich Member of the Audit Commission

Year of birth: 1976 Education: Engineering and Economic Academy, state and municipal management, 1998.

2004 up to now: Head of Department of the Committee on city property management of St. Petersburg. Share in the authorized capital of the Company: no

Uskov Valery Evgenyevich Member of the Audit Commission

Year of birth: 1979 Education: St. Petersburg State Agrarian University, electrification and automation of agriculture, electrical engineer.

2010 up to now: Head of division of the Committee on power and engineering support of the Government of St. Petersburg. 2006–2010: Engineer of 1 category of division of construction of power industry facilities of St. Petersburg state institution “Management of the customer on construction and major overhaul of facilities of the engineering-energy complex”. Share in the authorized capital of the Company: no

170

PERFORMANCE INDICATORS CONTENTS SECURITIES PERFORMANCE INDICATORS 5. Corporate Governance Annual Report 2013 JSC Lenenergo

Data on remuneration and compensation paid to members of the Audit Commission Payment of remuneration and compensation to members one week after the report on results of the revision. The size of the Audit Commission is carried out in a monetary form pursuant of remunerations paid to the Chairperson of the Audit Commission to the Regulations on payment of remuneration and compensation, is increased by 50%. Payment of remuneration and compensation approved by the Annual general shareholder meeting on 30.05.2008. to the specialists (experts) involved by the Audit Commission who The member of the Audit Commission is compensated for expenses are not members of the Audit Commission of the Company, is made associated with participation in the meeting of the Audit Commission on the basis of concluded contracts the provisions of which are and carrying out a revision under the norms of travel expenses approved by the Board of Directors of the Company. reimbursement in force at the time of the meeting or the revision. The total amount of remuneration and compensation paid Single compensation is paid to the member of the Audit Commission to the members of the Audit Commission of the Company, including of the Company for participation in revisions (audit) of financial involved experts, in 2013 was RUB 1,113,556 including taxes. and business activities in the amount equivalent to twenty three minimum monthly tariff rates of an employee of the first category In the reporting year no transactions were made between set by the industry tariff agreement in the power grid complex the members of the Audit Commission and the Company. Claims of the Russian Federation for the period of the revision including were not presented to the members of the Audit Commission indexation defined by the agreement. The payment is made within by the Company.

Internal control system

JSC Lenenergo organizes internal and external control of its activity. The Board of Directors, the Management Board, the Director General, The internal control bodies are the Committee on audit of the Board heads of structural divisions and all egoless of the Company also enter of directors, the Audit Commission and Department of internal audit the system of internal control. External control is carried out by auditors. and risk management.

The Company’s activities in the field of internal control ԔԔ The policy of internal control of JSC Lenenergo (Minutes are directly linked to risk management and regulated # 8 of 27.08.2012) defines basic principles of organization by the following legal acts: of the internal control system of JSC Lenenergo obligatory to observance and formation of a uniform approach ԔԔ The policy of risk management in JSC Lenenergo (Minutes to implementation of the internal control processes # 22 of 18.06.2010) defines basic principles of organization, in the Company; implementation and control of the risk management processes in JSC Lenenergo and provides for the priority actions to develop ԔԔ Methodical recommendations about risk management the risk management system; coordinated by the Committee on audit of the Board of Directors of JSC Lenenergo (Minutes # 17 of 20.04.2011).

171

PERFORMANCE INDICATORS CONTENTS SECURITIES 5. Corporate Governance Annual Report 2013 JSC Lenenergo

Improvement of the internal control and risk management system is carried out at all levels of the Company management in three key areas

Preventive control Current control Subsequent control

ԔԔ Development and optimization ԔԔ Implementation of control Internal audit is carried out by conducting: of processes (activities) with procedures by the processes ԔԔ revisions of structural divisions, processes, projects the formation of the minimum owners (heads of divisions) and and activities in the Company and SDCs; required control procedures, employees of the Company worked out taking into account within performance of their ԔԔ assessment of reliability and efficiency of functioning costs and effect of their basic functional duties; of the internal control system in the Company and implementation; SDCs; ԔԔ monitoring achievement ԔԔ formalization (regulation) of quantitative and qualitative ԔԔ participation in special (office) investigations of activity – processes indicators of the Company and on the facts of abuses (fraud), causing of a damage of the Company are described individual activities (monitoring to the Company and SDCs, inappropriate and in the internal documents; of efficiency of the current ineffective use of resource. participants, their powers processes). By results and responsibilities are fixed of the monitoring corrective External audit is performed by the external auditor documentary, milestones and actions are carried out. of the Company by the audit of the annual statements actions are identified; of the Company under RAS and assessment of the state of the Company’s internal control system. ԔԔ risk management activities – the Company performs Audits are carried out by the Audit Commission monitoring, identification of the Company by means of control over financial and and assessment of the risks, business activities of the Company for compliance with and insures development Russian Federation legislation, the Charter and internal and implementation of risk documents of the Company. management activities. Self-evaluation is carried out by the heads of structural units, or by the Company’s management, including assessment of effectiveness, efficiency and productivity of supervised processes and compliance with applicable legislation and internal documents of the Company.

172

PERFORMANCE INDICATORS CONTENTS SECURITIES PERFORMANCE INDICATORS 5. Corporate Governance Annual Report 2013 JSC Lenenergo

Department of internal audit and risk management

Department of internal audit and risk management of JSC Lenenergo The main tasks of department are: was created in 2008. The department submits directly to the Director ԔԔ evaluation of the effectiveness of the internal control system General and is functionally accountable to the Committee on audit of the Company, monitoring of compliance with internal control of the Board of Directors. Department of internal audit and risk procedures management operates on the basis of: ԔԔ monitoring the company’s compliance with requirements of current ԔԔ the policy of risk management of JSC Lenenergo approved legislation, internal regulations of the Company, and effective use and by the decision of the Board of Directors of 18.06.2010 (Minutes # 22 safekeeping of assets (property) of the Company; of 18.06.2010); ԔԔ organization and support functioning of the risk management process ԔԔ the policy of internal control of JSC Lenenergo approved by the decision of the Company, coordination of activity of subdivisions participating of the Board of Directors of 24.08.2012 (Minutes # 8 of 27.08.2012); in this process, evaluation of the effectiveness of the risk management ԔԔ methodical recommendations about risk management process of the Company, regular monitoring of risk management of JSC Lenenergo approved by the decision of the Board of Directors activities, and submission of recommendations to improve of 31.05.2011 (Minutes # 19 of 31.05.2011). the efficiency and productivity of risk management.

Auditors of the Company

CJSC KPMG For carrying out the audit of accounting and financial (accounting) The candidacy of the auditor CJSC KPMG was reviewed by the Committee statements of JSC Lenenergo for 2013, prepared in accordance with on audit of the Board of Directors of JSC Lenenergo on 26.04.2013 Russian accounting standards, Annual General Shareholders Meeting (Minutes # 33). Based on the recommendation of the Committee the Board of the Company approved CJSC KPMG (Minutes of AGMS # 1/2013 of Directors made the decision to nominate the candidacy of the auditor of 21.06.2013). CJSC KPMG for its approval at the Annual General meeting of shareholders (Minutes of the meeting of the Board of Directors # 31 of 06.05.2013).

LLC Ernst & Young JSC Ernst & Young performs audit of the annual statements and review The Company held open competitive negotiations to select the audit of interim (half-yearly) consolidated financial statements for 2013, prepared company, by results of which the auditor company LLC Ernst & Young in accordance with International financial reporting standards (IFRS). was elected. The Committee on audit of the Board of Directors approved the auditor candidacy of LLC Ernst & Young to perform After the necessary procurement procedures the auditor candidacy for the audit audit of the consolidated statements of JSC Lenenergo group for 2013 of consolidated financial statements in accordance with IFRS is assessed according to IFRS (Minutes of the Committee # 35 of 13.06.2013). and approved by the Committee on audit of the Board of Directors. Approval of the auditor candidacy by the General shareholder meeting is not required.

Fee of auditors Pursuant to item 22.8 of Art. 22 of the Charter, the amount of fee The amount of fee paid to LLC Ernst & Young is defined paid to the auditor is defined by the Board of Directors. According by the Committee on audit of the Board of Directors. According to the decision of the Board of Directors of 18.10.2013, the amount to the contract of auditor services, concluded between JSC Lenenergo of fee of the auditor CJSC KPMG was RUB 1,324,187, including VAT and LLC Ernst & Young, in 2013 compensation was RUB 8,098,860, (Minutes of the Board of Directors # 10 of 22.10.2013). including VAT (Minutes of the Committee # 35 of 13.06.2013).

173

PERFORMANCE INDICATORS CONTENTS SECURITIES 5. Corporate Governance Annual Report 2013 JSC Lenenergo

Protection of insider information

JSC Lenenergo as a public company whose shares are included With a view of further improvement of the internal control system in quotation lists of the Russian stock exchange pays special and protection of insider information in June 2013, the Company attention to insider information that can have a significant effect introduced the Regulations on insider information of JSC Lenenergo on the value of financial tools of the Company. JSC Lenenergo in the new edition, approved by the Board of Directors. In particular, is guided by the requirements of Federal Law # 224-FZ of July 27, the Regulations: 2010 «About counteracting improper use of insider information and market manipulation» (hereinafter - Federal Law # 224). The Company ԔԔ define the terms of «insider» and «insider information», takes measures on countering improper use of insider information ԔԔ define the list of insider information of the Company and in compliance with the best Russian and international practices the procedure of compilation of the list of insiders, in the field of prevention of insider trading. ԔԔ establish the procedure of access to insider information, the rules of protection of its confidentiality and control over compliance with Department of internal audit and risk management exercises control the requirements of Federal Law # 224 and normative legal acts over compliance with requirements of the Federal Law # 224 and approved thereof, laws and regulations approved thereof. A report on observance ԔԔ set the rules for implementation by insiders of transactions with of the requirements is quarterly submitted to the Board of Directors. insider financial tools, including restrictions on trade in securities within the so-called closed period.

The Company performs current and subsequent compliance control in the field of insider information protection:

Current compliance control Subsequent compliance control

ԔԔ Conducting the list of insiders. ԔԔ Analysis of dynamics of prices for financial tools of the Company on organized securities markets. ԔԔ Keeping records of notifications about inclusion of persons in the list of insiders or exclusion from this list, and about ԔԔ Analysis of news impact on the price dynamics transactions of insiders with the Company’s securities. of financial tools.

ԔԔ Control over observance of the rules of conducting ԔԔ Analysis of transactions with securities of the Company, transactions with insider financial tools of the Company declared in notifications directed to the Company by insiders. on the basis of information (notification) about conducting transactions by insiders.

174

PERFORMANCE INDICATORS CONTENTS SECURITIES PERFORMANCE INDICATORS 5. Corporate Governance Annual Report 2013 JSC Lenenergo

5.4. SUBSIDIARIES AND DEPENDENT COMPANIES

Subsidiaries

Lenenergospetsremont, Closed Joint Stock Company (CJSC LESR)

Legal and actual address 199178 St. Petersburg, Vasilyevsky Ostrov, 12 Line, 43, let. A

Authorized capital RUB 7,500,000

Stake of JSC Lenenergo in the authorized capital of the company, % 100

Service territory St. Petersburg

ԔԔ rendering of services in implementation of powers of the sole executive body of managing subjects; Principal activities ԔԔ rendering of services in trust management of property; ԔԔ rendering of services in electric power transmission.

Alexander Viktorovich Lurie Director General 1963 Election date – 21.10.2010

Power Service Company Lenenergo, Open Joint Stock Company (JSC Power Service Company Lenenergo)

Legal and actual address 196247 St. Petersburg, Constitution Sq, 1

Authorized capital RUB 1,000,000

Stake of JSC Lenenergo in the authorized capital of the company, % 100

Service territory St. Petersburg

ԔԔ activities for ensuring operability of electric networks; ԔԔ production of electric distributive and regulating equipment; Principal activities ԔԔ service on installation, repair and maintenance of electric distributive and regulating equipment.

Syunyaeva Diana Anatolyevna Director General 1989 Election date – 17.10.2013

Kurortenergo, Closed Joint Stock Company (CJSC Kurortenergo)

Legal and actual address 197706 St. Petersburg, Sestroretsk, Kommunarov St, 16

Authorized capital RUB 209,160

Stake of JSC Lenenergo in the authorized capital of the company, % 98.13

Service territory St. Petersburg

ԔԔ rendering of services in electric power transmission and other services which are inseparably linked with the process of electricity supply of consumers; Principal activities ԔԔ technological connection of power accepting devices (power installations and power grid facilities) of legal entities and individuals to electric networks.

Lurie Alexander Viktorovich Director General 1963 Election date – 30.03.2011

175

PERFORMANCE INDICATORS CONTENTS SECURITIES 5. Corporate Governance Annual Report 2013 JSC Lenenergo

Tsarskoselskaya Energy Company, Closed Joint Stock Company (CJSC TSEC)

Legal and actual address 196601 St. Petersburg, Pushkin, Glinka St, 5

Authorized capital RUB 13,152,000

Stake of JSC Lenenergo in the authorized capital of the company, % 96.95

Service territory St. Petersburg

ԔԔ rendering of services in electric power transmission on distributive networks; Principal activities ԔԔ rendering of services in technological connection of power installations; ԔԔ operational service of external lighting networks.

Tarnorutskaya Veronica Viktorovna Director General 1959 Election date – 2005

Dependent companies

Energouchet, Open Joint Stock Company (JSC Energouchet)

Legal and actual address 195197 St. Petersburg, Zhukov St, 19

Authorized capital RUB 10,000

Stake of JSC Lenenergo in the authorized capital of the company, % 40

Service territory St. Petersburg, Leningrad Region

ԔԔ production, installation and repair of energy resources gages; Principal activities ԔԔ development and introduction of energy saving technologies; ԔԔ certification of energy saving technologies.

Kornev Vladimir Gennadyevich Director General 1955 Election date – 15.07.2008

Information on stakes of the Company in other organizations

Stake Year of Name Type of activity Authorized capital, RUB in AC, % investment

JSC Northwest Power Management Trust management of property; consulting 897,363,008.00 12.51 2005 Company services

AOZT Akvatron Production and trade of fish products 3,000.00 1.33 1991

176

PERFORMANCE INDICATORS CONTENTS SECURITIES PERFORMANCE INDICATORS 5. Corporate Governance Annual Report 2013 JSC Lenenergo

In 2013 JSC Lenenergo had its participation terminated in the following organizations:

Date of termination Name Stake in AC, % Method of termination of participation of participation

Sale of securities in accordance with mandatory offer to acquire shares JSC Ruskobank 0.0208 18.04.2013 of JSC Ruskobank received by JSC Lenenergo

Write-off in connection with an exception of CJSC Velma from the uniform CJSC Velma 7.69 20.09.2013 state register of legal entities as invalid

Participation of JSC Lenenergo in non-profit organizations

The company is a member of the following non-profit organizations and partnerships:

Name Date of entering

Leningrad regional commercial and industrial chamber 03.09.2003

St. Petersburg commercial and industrial chamber 14.12.2006

All-Russian public organization “Delovaya Rossiya” 27.09.20 07

Non-profit partnership “Association of builders of St. Petersburg” 25.09.2008

Non-profit partnership “Scientific and technical council of the Uniform economic system of Russia” 01.12.2008

Regional association of employers “Union of industrialists and entrepreneurs of St. Petersburg” 24.12.2009

Non-profit partnership “Energostroy” 07.12.20 09

Non-profit partnership “Energoproject” 05.03.2010

Non-profit partnership “Union of power auditors and power service companies” 23.12.2010

Non-profit partnership “National committee SIRED. Electric distributive networks” 29.05.2012

Independent non-profit organization “Strategic partnership on economic and social development of the Northwest 2012 of the Russian Federation”

177

PERFORMANCE INDICATORS CONTENTS SECURITIES 6. Securities Annual Report 2013 JSC Lenenergo

RELIABILITY EFFICIENCY AVAILABILITY

Ensuring a high level of technological and economic Increase of performance efficiency contributes JSC Lenenergo seeks to organization of effective reliability is an essential factor in the growth to improved financial results and, consequently, interaction with all stakeholders in order to provide of investment appeal of JSC Lenenergo. The Company increases the flow of dividend payments. the maximum transparency of its activities. strives to implement comprehensive consideration The Company annually pays dividends on its preferred The Company maintains a constant dialogue with of the interests of shareholders in decision making shares. In 2013 for the first time since 2005 dividends representatives of the investment community and Securities6 and ensure a guaranteed return on invested capital were paid on ordinary shares pursues an active policy of information disclosure

Major shareholders of JSC Lenenergo are JSC Russian Grids and the Federal city of St. Petersburg represented by the Committee on State Property Management. Shares of JSC Lenenergo are traded on the Russian stock exchange CJSC MICEX Stock Exchange, a member of the group JSC Moscow Stock Exchange. Corporate bonds of a series 04 and exchange bonds of a series BO-01 of JSC Lenenergo are also traded on the market.

CORPORATE GOVERNANCE CONTENTS SUSTAINABLE DEVELOPMENT 6. Securities Annual Report 2013 JSC Lenenergo

6.1. SHARES. CAPITALIZATION

Shares. Capitalization

Share capital Authorized capital of JSC Lenenergo as of 31.12.2013 amounted The number of declared shares constitutes 1,790,960,366.0 pieces to RUB 1,228,325,624.08:1,135,061,313.08 ordinary shares and (ordinary shares with par value of 1 rub each). Declared ordinary shares 93,264,311 preferred shares (with par value of 1 rub each). have the same rights as the placed ordinary shares.

Share capital structure

Major holders of JSC Lenenergo shares (over 1%) on 31.12.2012

Stake Stake in ordinary Owners of securities in the authorized shares, % capital, % JSC Russian Grids 49.36 53.41

Subject of the Russian Federation – the city of federal value St. Petersburg represented by the Committee 24.56 26.57 on state property management

NPO CJSC National Settlement Depository (nominal holder) 11.62 8.86

JSC IDGC of Ural 8.46 7.15

JSC J. P. Morgan Bank International (nominal holder) 1.78 1.88

JSC ING BANK (Eurasia) (nominal holder) 1.42 0.98

Other 2.80 1.15

Total 100.00 100.00

Major holders of JSC Lenenergo shares (over 1%) on 31.12.2013

Stake Stake in ordinary Owners of securities in the authorized shares, % capital, % JSC Russian Grids 49.36 53.41

Subject of the Russian Federation – the city of federal value St. Petersburg represented by the Committee 24.56 26.57 on state property management

NPO CJSC National Settlement Depository (nominal holder) 15.04 11.99

JSC IDGC of Ural 8.46 7.15

Other 10.80 1.15

Total 100.00 100.00

Share Information on holders of shares Quantity of holders in the authorized capital, % Nominal holders of shares 2 64.39

Owners – legal entities 42 33.16

Owners – individuals 6,283 2.43

Shares in joint shared property 46 0.02

Total, quantity of persons in the register of shareholders 6,373 100.00

180

CORPORATE GOVERNANCE CONTENTS SUSTAINABLE DEVELOPMENT CORPORATE GOVERNANCE 6. Securities Annual Report 2013 JSC Lenenergo

Structure of shareholders – owners of over 1% of ordinary shares considering disclosure of nominal holders1 The largest shareholders of JSC Lenenergo

53.41% JSC Russian Grids

26.57% St. Petersburg represented by CSPM 7.15% JSC IDGC of Ural JSC Rosseti the largest Russian and worldwide energy company providing transmission 3.40% Energyo Solutions Russia (Cyprus) Limited and distribution of electric power (www.rosseti.ru) 2.24% Rusenergo Fund Limited

2.10% Citigroup Global Markets Limited CSPM 5.14% Other Committee on state property management, executive body of the Government of St. Petersburg (commim.spb.ru)

Structure of shareholders – owners of over 1% of the authorized capital considering disclosure of nominal holders1 JSC IDGC of Ural carries out electricity transmission by networks 0.4–110 kV and technological accession of consumers to power supply networks in the Ural region 49.36% JSC Russian Grids (www.mrsk-ural.ru) 24.56% St. Petersburg represented by CSPM 8.46% JSC IDGC of Ural Rusenergo fund (controlled by XENON Capital Partners) 4.25% Rusenergo Fund Limited the largest fund in Russia in the sphere of power industry which funds are 3.18% Energyo Solutions Russia invested in the shares of Russian power generating and grid companies (Cyprus) Limited on a long-term basis (www.xenoncp.com) 1.94% Citigroup Global Markets Limited 8.27% Other

Energyo Solutions Russia Cyprus Limited (EOS) 1For the last closing date of the shareholders register – 23.12.2013. subsidiary of EOS AB (Sweden) making investments into Russian power network assets (www.eos-russia.se) Free-float (calculated under design procedure of JSC Moscow Exchange)

Citigroup Global Markets Limited is a part of Citigroup Inc. Ordinary shares Preferred shares the largest global corporation, one of world leaders in the sphere of financial service (www.citiglobalmarkets.ru) 13% 76%

In 2013 the second stage of additional issue of ordinary shares was launched, Additional issue of ordinary shares was registered by the Financial Markets the main goal of which is receiving funds of the federal budget (by means Service of the Bank of Russia on September 10, 2013. State registration of participation in JSC Rosseti placement) for financing of the investment program number of the issue: 1-01-00073-A-003D. The offering price constituted of JSC Lenenergo, including renovation of cable network 6–110 kV of St. Petersburg. RUB 6.06 and was determined on the basis of the average value of prices of transactions with JSC Lenenergo ordinary shares at JSC MICEX Stock The decision on additional issue of securities in the form of registered Exchange trades during the period from 18.01.2013 to 19.04.2013. ordinary non-documentary shares with par value of 1 rub in the quantity of 926,876,304 pieces by public offering was approved by the decision In September, 2013 JSC Rosseti during implementation of the preemptive right of the Board of Directors of JSC Lenenergo on July 17, 2013 (Minutes # 1 acquired 495,049,505 ordinary shares for the sum of RUB 3,000,000,000.3. of July 18, 2013) on the basis of the decision on increase in the authorized The increase in authorized capital of JSC Lenenergo is expected in 2014 after capital by the placement of additional shares approved by the Annual general registration of the report on results of additional issue. meeting of shareholders of JSC Lenenergo on June 20, 2013 (Minutes # 1/2013 of June 21, 2013). The list of persons having the preemptive right of acquisition of the placed securities was made on 06.05.2013.

181

CORPORATE GOVERNANCE CONTENTS SUSTAINABLE DEVELOPMENT 6. Securities Annual Report 2013 JSC Lenenergo

Brief history of the Company’s issue activity

State registration number Quantity of shares, pieces First issue 72-1p-191 2,951,852 The issue of shares was carried out in connection with the Company’s privatization on the basis of the Decree of the President of the Russian Federation # 923 of 15.08.1992. The issue was registered by the financial committee of the city hall of St. Petersburg on 01.02.1993. During the issue there were placed: Ordinary shares 2,519,852 Preferred shares 432,000 Par value of each security of the issue: RUB 1,000 (non-denominated). State registration date of the report on results of the issue: 06.09.1999 Additional issue (1) 72-1-2367 894,411,156 The issue was registered by the committee of economy and finance of St. Petersburg on 29.11.1995. During the additional issue there were placed: Ordinary registered shares 763,515,156 Preferred shares of type A 130,896,000 Par value of each security of the issue: RUB 1,000 rub (non-denominated). State registration date of the report on results of the issue: 09.08.1999 Consolidation of issues The Resolution of the Federal Commission on Securities of Russia # 03-1269/R of June 27, 2003 carried out consolidation of the issues of issue-grade securities. Par value of each security of the issue: RUB 1. The size of authorized capital decreased by results of shares repayment pursuant to the decision of the General shareholder meeting on reorganization of 08.04.2005 (Report on repayment results of 01.08.2005). By results of shares repayment authorized capital consisted of: Ordinary registered shares 1-01-00073-A 691,854,144 Preferred shares of type A 2-01-00073-A 93,264,311 Additional issue (2)1 1-01-00073-A-001D 234,167,535.04 The issue was registered by the Federal Financial Markets Service (FFMS of Russia) on 25.10.2007. During the additional issue there were placed: Ordinary registered shares 234,167,535.0 Par value of each security of the issue: RUB 1. State registration date of the report on results of the issue: 12.12.2008. Upon expiration of 3 months from the state registration of the report on results of additional issue of ordinary registered shares JSC Lenenergo made a cancellation of the individual number of additional issue – 001D (SRN – 1-01-0073-A-001D) (notification message # 09-EK-03/6679 of 01.04.2009) Additional issue (3)2 1-01-00073-A-002D 209,039,634.04 The issue was registered by the Federal Financial Markets Service (FFMS of Russia) on 21.02.2012. During the additional issue there were placed: Ordinary registered shares 209,039,634.00

1Main goal of the additional issue of JSC Lenenergo in 2008 was creation in the territory of St. Petersburg of the joint grid company with increase in reliability both technological and economic, on the basis of technically indissoluble and interconnected network equipment. 2 Main goal of the additional issues of ordinary shares of JSC Lenenergo in 2012-2013 was financing of the program of renovation of cable lines 6–110 kV in St. Petersburg.

182

CORPORATE GOVERNANCE CONTENTS SUSTAINABLE DEVELOPMENT CORPORATE GOVERNANCE 6. Securities Annual Report 2013 JSC Lenenergo

State registration number Quantity of shares, pieces Par value of each security of the issue: RUB 1. State registration date of the report on results of the issue: 18.09.2012. Upon expiration of 3 months from the state registration of the report on results of additional release of ordinary registered shares JSC Lenenergo made a cancellation of the individual number of additional issue – 002D (SRN – 1-01-0073-A-001D) (notification message of FFMS of Russia # 13-EK-03/3554 of 07.02.2013)

Additional issue (4)2 1- 01-00073-A-003D 926,876,304

The issue was registered by the Financial Markets Service of the Bank of Russia on 10.09.2013. For the end of 2013 the issue was in a placement stage

2 Main goal of the additional issues of ordinary shares of JSC Lenenergo in 2012-2013 was financing of the program of renovation of cable lines 6–110 kV in St. Petersburg.

Shares Since July 16, 2003 JSC Lenenergo shares are traded at the Russian stock exchange CJSC MICEX Stock Exchange entering into the group of JSC Moscow Exchange. On December 27, 2007 ordinary and preferred shares were included in the quoted list B.

Main characteristics of JSC Lenenergo shares

Preferred registered non-documentary shares Type of shares Ordinary registered non-documentary shares of type A State registration number 1-01-00073-A 2-01-00073-A Volume of the issue 1,135,061,313.08 93,264,311 Par value RUB 1 RUB 1 Exchange MICEX STOCK EXCHANGE MICEX STOCK EXCHANGE Start date of trades 16.07.20 03 16.07.20 03 ISIN RU0009034490 RU0009092134 Ticker LSNG LSNGP Quoted list B B

Wide market (MICEX BMI) Wide market (MICEX BMI) Inclusion in exchange indexes Power industry (MICEX PWR) Power industry (MICEX PWR) Support echelon (MICEX SC) Support echelon (MICEX SC)

For the last year stock quotations of the companies entering into In 2013 JSC Lenenergo shares traded in the general downward trend JSC Rosseti group essentially decreased. Drop in the capitalization with other distribution grid companies and the branch index reflecting of distribution grid companies constituted on average from 40% to 70%. mistrust of investors to the sector due to the continued uncertainty The branch index MICEX PWR (MICEX power) lost 40% for the reporting of tariff regulation. period.

183

CORPORATE GOVERNANCE CONTENTS SUSTAINABLE DEVELOPMENT 6. Securities Annual Report 2013 JSC Lenenergo

Key indicators of JSC Lenenergo shares trade1

2011 2012 2013 Changes, 2013/2012, %

Ordinary shares

Minimum price, RUB 9.6 5.5 2.2 – 61

Maximum price, RUB 29.6 11.5 7.0 – 39

Price for the year end 10.0 6.6 2.3 – 65

Volume of trades, pieces 21,309,200.0 29,703,000.0 47,366,000.0 59

Volume of trades, RUB 375,007,537.0 221,671,745.0 183,900,139.0 – 17

Number of transactions, pieces 17,286,0 23,151.0 19,255.0 – 17

Actions exclusive

Minimum price, RUB 20.1 15.3 10.8 – 29

Maximum price, RUB 50.0 26.8 20.3 – 24

Price for the year end 22.0 17.6 11.4 – 35

Volume of trades, pieces 8,071,500.0 11,231,700.0 12,735,500.0 13

Volume of trades, RUB 267,706,640.0 211,066,571.0 157,571,099.0 – 25

Number of transactions, pieces 16,699.0 11,073.0 12,020.0 9

1Data on trades at MICEX Stock Exchange (http://www.micex.ru/).

Key multiples of ordinary shares of JSC Lenenergo

2011 2012 2013

Profit per share (EPS)2, RUB 1.38 0.98 0.34

P/E 3 7.14 6.75 7.04

2Calculated on the formula: (net profit for the reporting year calculated under RAS – the sum of accrued dividends on preferred shares for the reporting year) / number of ordinary outstanding shares. 3Calculated on the formula: average cost of one ordinary share for the end of the reporting year/profit per share.

Trade volumes Trade volumes P/E for the end of 2013 of ordinary shares in 2013 of preferred shares in 2013 7.04 184 RUB mln 158 RUB mln

184

CORPORATE GOVERNANCE CONTENTS SUSTAINABLE DEVELOPMENT CORPORATE GOVERNANCE 6. Securities Annual Report 2013 JSC Lenenergo

Key events which could affect the cost of shares according to the Company

Dynamics of cost and trade volumes of ordinary shares on MICEX Stock Exchange in 2013

Volume of securities, thousand pieces (ordinary shares) Ordinary shares, RUB thousand pieces RUB (ordinary shares) 8 2,500

7 2,000 6

5 1,500 4

3 1,000

2 500 1

0 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

31.01. 2013 16. 04. 2013 06. 05. 2013 02. 08. 2013 31. 10. 2013 28. 12. 2013

The Moody’s rating agency JSC Lenenergo released JSC Lenenergo released RAS JSC Lenenergo released RAS JSC Lenenergo released RAS On December 28 the Board confirmed a credit rating IFRS financial statements financial statements for financial statements for financial statements for of Directors of JSC Lenenergo of JSC Lenenergo at Ba2 for 2012 Q1 2013 6M 2013 9M 2013 approved the business plan (outlook stable) and for 2014. Preliminary results a national rating at Aa2.ru of 2013 and the plan for 2014 (outlook stable) were published.

28. 03. 2013 30. 04. 2013 20. 06. 2013 29. 08. 2013

JSC Lenenergo released On April 26, 2013 the Board On June 20, 2013 the Annual JSC Lenenergo released IFRS RAS financial statements of Directors of JSC Lenenergo general meeting of shareholders financial statements for six for 2012 approved the business of JSC Lenenergo was held. months ending June 30, 2013 plan of JSC Lenenergo for The decision on dividends 2013–2017 and the investment payment on ordinary and program for 2013–2018 preferred shares for 2012 was (Minutes # 29 of 30.04.2013) made.

thousand pieces RUB (preferred shares) 20 500 18 450 16 400 14 350 12 300 10 250 8 200 6 150 4 100 2 50 0 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Dynamics of cost and trade volumes of preferred shares on MICEX Stock Exchange in 2013

Volume of securities, thousand pieces (preferred shares) Preferred shares, RUB

185

CORPORATE GOVERNANCE CONTENTS SUSTAINABLE DEVELOPMENT 6. Securities Annual Report 2013 JSC Lenenergo

Dynamics of stock quotations of JSC Lenenergo in comparison with dynamics of MICEX and MICEX PWR in 2013

10%

–10%

–20%

–30%

–40%

–50%

–60%

–70%

–80% 08.01.13 08.02.13 08.03.13 08.04.13 08.05.13 08.06.13 08.07.13 08.08.13 08.09.13 08.10.13 08.11.13 08.12.13

Ordinary shares Preferred shares MICEX MICEX PWR

Dynamics of MICEX, MICEX PWR and JSC Lenenergo shares on MICEX Stock Exchange in 2013

31.12.2011 31.12.2012 31.12.2013 Change 2013/2012, % MICEX, p. 1,402.23 1,474.72 1,504.08 2

MICEX PWR, p. 2,053.02 1,707.42 1,032.39 – 40

Ordinary shares (LSNG)1, RUB 9.84 6.60 2.37 – 64

Preferred shares (LSNGP)1, RUB 21.74 17.63 11.26 – 36

1Weighted average stock value for the last trading day of the reporting year.

Capitalization

Dynamics of capitalization of JSC Lenenergo on MICEX Stock Exchange in 2011–20131, RUB mln JSC Lenenergo capitalization in 20131, RUB mln

11,139 8,462 7,913 7,538 6,570 7,759 6,501 6,309 6,511 6,189 –51.8% 4,800 4,343 3,656 3,742 3,742

2011 2012 2013 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

1Hereinafter calculation of capitalization is made on the average stock value on MICEX Stock Exchange (JSC Moscow Exchange) for the last trading day of the reporting period.

186

CORPORATE GOVERNANCE CONTENTS SUSTAINABLE DEVELOPMENT CORPORATE GOVERNANCE 6. Securities Annual Report 2013 JSC Lenenergo

Dynamics of capitalization of distribution grid companies on MICEX Stock Exchange in 20132

RUB bn % 126.7 120 114.6 80 61%

70.8 31% –17% 55 0 –4% –52% –56% –39% –62% –61% –70% –70% –55%

9.3 7.6 6.6 2.7 2.4 1.6 10 3.7 5.6 4.1 –80

Russian MOESK IDGC Lenenergo IDGC IDGC IDGC IDGC IDGC IDGC IDGC FGC UES Grids3 of Centre of Centre of Ural of Volga of Siberia of Northwest of North of South and Volga Caucasus3

2 Capitalization is calculated considering additional issue Capitalization, RUB bn of ordinary shares in 2013. 3Calculation of capitalization is made at the weighted average Change 2013/2012, % stock value on MICEX Stock Exchange for the period end.

Key macroeconomic indicators

Change Change Index 31.12.2012 31.12.2013 Index 31.12.2012 31.12.2013 2013/2012, % 2013/2012, % S&P 500, p. 1,402.4 1,848.4 32 MSCI World (MXWO Ind), p. 1,338.5 1,661.1 24

Dow Jones Industrial Average, p. 12,938.1 16,576.7 28 MSCI EM (MXEF Ind), p. 1,055.2 1,002.7 – 5

CAC 40, p. 3,620.3 4,296.0 19 MSCI Russia (MXRU IND), p. 807.5 786.9 – 3

DAX, p. 7,612.4 9,552.2 25 USD/RUR 30.6 32.7 7

UK FTSE 100, p. 5,925.4 6,749.1 14 EUR/RUR 40.3 45.0 12

Nikkei 225, p. 10,395.2 16,291.3 57 oil, Brent, USD 110.4 110.9 0.5

Hang Seng, p. 22,666.6 23,306.4 3

Key world indexes completed the year of 2013 with a growth. Indexes The most outstanding result among the developed countries markets of the majority of the developed countries demonstrated confident positive showed a Japanese index Nikkei 225, having increased by 57% for the year, dynamics while indexes of emerging markets showed a slight growth (Hang that is caused by positive feedback of the investment community to policy Seng +3%; MICEX +2%). By results of 2013 the index of the developed markets of “Abenomics”, formulated by Sindzo Abe, the prime minister of Japan, which MSCI World grew by 24%, and indicators of emerging markets (MSCI EM) means a whole range of measures on monetary, fiscal policy and the strategy and the Russian market (MSCI Russia) showed a decrease (–5% and –3% of economic growth. respectively) .

187

CORPORATE GOVERNANCE CONTENTS SUSTAINABLE DEVELOPMENT 6. Securities Annual Report 2013 JSC Lenenergo

For the American stock markets the year of 2013 became the best since 1997. Decrease in MSCI Russia following the results of 2013 was promoted At the end of 2013 S&P 500 showed growth over 30% in comparison with by the negative news background primarily connected with events round the similar period of last year, and Dow Jones Industrial Average grew by 28%. Ukraine, and stagnation signs in economics. The situation of geopolitical instability led to revision of IMF of the forecast on growth of the Russian For the European financial markets the year of 2013 became the best economics in 2014 from 1.3% to 0.2%. According to the Ministry of Finance since 2009 that was promoted by leveling of fears of investors concerning of the Russian Federation the average price for Urals oil brand, the main disintegration of euro zone and its turn from recession to restoration. Among export goods of the country, in 2013 made USD 107.9 per barrel, having the European indexes the German DAX which has grown by 25% to the level decreased by 2.4% from USD 110.5 fixed in 2012. of last year, and the French CAC 40 which has demonstrated growth by 19% became leaders of growth. The British FTSE 100 showed the best result for According to IMF, economic growth of the world economy in 2013 was the four-year period and grew by 14%. at the level of 3%. In the long-term experts of the organization forecast increase of world growth rates to 3.6% in 2014 and 3.9% in 2015. In particular, emerging markets and developed markets a gradual increase in growth rates of economics from 4.7% in 2013 to about 5% in 2014 and 5.3% in 2015 1 Analytical summary of the report of IMF «Prospect of development of world economy», 1 April 2014 http://www.imf.org/external/russian/pubs/ft/weo/2014/01/pdf/textr.pdf. is forecasted.

GDR program The Federal Financial Markets Service (FFMS) of Russia issued permission In Q4 2008 JSC Lenenergo opened four sponsored programs of depository to the circulation of ordinary and preferred shares of JSC Lenenergo receipts (GDR) on JSC Lenenergo shares with the right of circulation outside the Russia Federation on September 30, 2008. The circulation on the territories of the Central Europe and the USA. GDR issue was carried of 74,206,626 ordinary shares and 19,585,504 preferred shares out within programs by a rule 144А and by provision S. Global depository of the Company that constitutes 12.0% of total of the placed shares (at receipts on JSC Lenenergo shares are traded on the OTC securities market. the moment of permission delivery) was authorized abroad. GDR bank depositary of JSC Lenenergo is the Bank of New York Mellon.

Quantity of receipts, Security Program Opening date Factor pieces

Ordinary shares 144А 24.10.2008 1:10 0

Preferred shares 144А 28.10.2008 1:10 0

Ordinary shares RegS 24.10.2008 1:10 7,496

Preferred shares RegS 28.10.2008 1:10 0

188

CORPORATE GOVERNANCE CONTENTS SUSTAINABLE DEVELOPMENT CORPORATE GOVERNANCE 6. Securities Annual Report 2013 JSC Lenenergo

6.2. PROFIT DISTRIBUTION AND DIVIDEND POLICY

THE DIVIDEND POLICY OF JSC LENENERGO IS DIRECTED ON INCREASE OF THE COMPANY’S INVESTMENT APPEAL AND INCREASE IN ITS MARKET CAPITALIZATION. THE POLICY IS BASED ON THE BALANCE OF INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, ON RESPECT AND STRICT OBSERVANCE OF THE RIGHTS OF SHAREHOLDERS PROVIDED BY THE CURRENT LEGISLATION OF THE RUSSIAN FEDERATION, THE CHARTER AND INTERNAL DOCUMENTS OF THE COMPANY.

The dividend policy of the Company is defined by the Regulations ԔԔ compliance with the practice of accrual and payment of dividends on dividend policy approved by decision of the Board of Directors approved by the Company to the legislation of the Russian Federation of the Company on 31.08.2010 (Minutes # 4). and to the best standards of corporate behavior;

The Regulations define overall principles of JSC Lenenergo dividend ԔԔ optimum combination of interests of the Company and its shareholders; policy, terms of payment and the amount of dividend payments, sources of funds directed on dividends payment, a procedure for decision- ԔԔ the need to increase the Company’s investment appeal and its making on dividends payment, a procedure for drawing up of the list capitalization; of persons having the right to receive dividends, an order, terms and a form of dividends payment, disclosure of information on dividend policy, ԔԔ ensuring transparency (clearness) of the mechanism of determination responsibility of the Company for nonpayment of dividends. The Regulations of the size of dividends and their payment; on dividend policy of JSC Lenenergo and all alterations to it are available on the Company’s website on the Internet. ԔԔ dividends on ordinary shares are paid only in case of full payment of dividends on preferred shares according to the Company Charter (in Basic principles of JSC Lenenergo dividend policy: case of placement of the Company’s preferred shares).

ԔԔ calculation of dividends is based on the use of profit without influence The recommended sum of dividend payments is defined by the Board of reassessment of financial investments; of Directors on the basis of financial performance of the Company, thus the Board of Directors aspires to provide positive dynamics of the size ԔԔ the need to maintain a required level of the financial and technical of dividend payments to shareholders. condition of the Company (implementation of the investment program), providing prospects of the Company’s development;

Profit distribution in 2011–20131

for 2010 for 2011 for 2012 Growth Type of income (AGSM 2011) (AGSM 2012) (AGSM 2013) 2013/2012, % Retained profit, RUB thousand 3,805,591 1,417,420 1,234,328 – 12.9

Reserve fund, RUB thousand 0 0 31,356 –

Profit on development, RUB thousand 3,425,032 1,275,678 894,390 – 29.9

Dividends, RUB thousand 380,559 141,742 308,583 117.7

Other purposes, RUB thousand 0 0 0 –

1Information on profit distribution according to decisions of the Annual general shareholder meetings (AGSM) is provided in tables:

AGSM 2011 (for 2010) – AGSM Minutes # 1/2011 of 21.06.2011; AGSM 2012 (for 2011) – AGSM Minutes # 2/2012 of 20.06.2012; AGSM 2013 (for 2012) – AGSM Minutes # 1/2013 of 21.06.2013.

189

CORPORATE GOVERNANCE CONTENTS SUSTAINABLE DEVELOPMENT 6. Securities Annual Report 2013 JSC Lenenergo

Dividend history of the Company

Dividends for 2010 Dividends for 2011 Dividends for 2012 Type of income Growth 2013/2012, % (AGSM 2011) (AGSM 2012) (AGSM 2013) Per one ordinary share, RUB 0.00 0.00 0.16 –

Per one preferred share, RUB 4.08 1.52 1.32 – 12.9

Information on the sums of accrued dividends from 2010 to 2012

Dividends for 2010 Dividends for 2011 Dividends for 2012 Type of income Growth 2013/2012, % (AGSM 2011) (AGSM 2012) (AGSM 2013) Ordinary shares, RUB thousand 0.0 0.0 185,150.0 –

Preferred shares, RUB thousand 380,559.1 141,742.0 123,432.8 – 12.9

Information on the sums of paid dividends from 2010 to 2012

Dividends for 2010 Dividends for 2011 Dividends for 2012 Type of income Growth 2013/2012, % (AGSM 2011) (AGSM 2012) (AGSM 2013) Ordinary shares, RUB thousand 0.0 0.00 185,150.1 –

Preferred shares, RUB thousand 380,559.1 141,742.0 123,432.8 – 12.9

Indicators of dividend profitability of JSC Lenenergo shares

2010 2011 2012 2013

Ordinary shares 0.00 0.00 15.00 15.00 Payout ratio1, % Preferred shares 10.00 10.00 10.00 10.00

Ordinary shares 0.00 0.00 2.47 – Dividend Yield2, % Preferred shares 11.39 6.99 7.51 –

1Calculated on the formula: the sum of accrued dividends for the reporting year / net profit for the reporting year calculated on RAS. 2Calculated on the formula: dividend per one share for the reporting year / average cost of one share for the reporting year end.

Dividends paid in 2011–2013, RUB mln

The Company annually pays dividends on preferred 25% 10% 10% shares. For the first time since 2005 dividends on ordinary shares were paid in 2013. The general size of dividends for 2012 totaled 25% of net profit of the Company 381 +117.7% calculated according to RAS. Payout ratio for 2013 is given on the basis of recommendations of the Board 309 of Directors to the Annual general shareholder meeting. % from net profit The decision on payment of dividends for 2013 will be approved at the Annual General Shareholder Meeting in June, 2014. For the last years the Company shows high 142 dividend profitability – one of the best in the sector.

for 2010 for 2011 for 2012

190

CORPORATE GOVERNANCE CONTENTS SUSTAINABLE DEVELOPMENT CORPORATE GOVERNANCE 6. Securities Annual Report 2013 JSC Lenenergo

6.3. BONDS

Corporate bonds of a series 04 and exchange bonds of a series BO-01 Documentary bearer bonds of a series 04 (state registration number of JSC Lenenergo are traded on the market. Exchange documentary bearer 4-04-00073-A) were placed on CJSC MICEX Stock Exchange on April bonds of a series 01 (state registration number 4B02-01-00073-A) were 24, 2012 with inclusion in the quoted list B. The volume of placement placed on CJSC MICEX Stock Exchange on April 17, 2013 with inclusion constituted 3,000,000 pieces with par value of RUB 1,000. The organizers in the quoted list B. The volume of placement constituted 3,000,000 pieces of the exchange bonds issue were CJSC IC Troika Dialog and CJSC VTB with par value of RUB 1,000. The organizers of the exchange bonds issue Capital. Depositary of bonds is CJSC National Settlement Depository. were CJSC IC Troika Dialog and CJSC VTB Capital. Depositary of bonds Payment on the second coupon of a bonded loan was made on 23.04.2013, is CJSC National Settlement Depository. Payment on the first coupon of a and on the third coupon – on 22.10.2013. bonded loan was made on 16.10.2013.

Outstanding bonds

As of 31.12.2013 JSC Lenenergo Corporate bonds Exchange bonds Type of securities of a series 04 of a series BO-01 holds the Prospectus of securities on exchange bonds registered Registration number 4 04 00073-A 4B02-01-00073-A by CJSC MICEX Stock Exchange Volume of issue, RUB mln 3,000 3,000 of the series BO-02, BO-03, BO-04, Quantity, thousand pieces 3,000 3,000 BO-05 under registration numbers Par value, RUB 1,000 1,000 4B02-02-00073-A, 4B02-03-00073-A, 4B02-04-00073-A, 4B02-05-00073-A Maturity, years 5 3 of 07.06.2013 Rate, % 8.5 8.3 in total amount of RUB 20 bn (20 mln pcs. with State registration date of the issue 29.03.2012 20.07.2012 par value of RUB 1,000).

Placement date 24.04.2012 17.04.2013 Placement of bonds issues is planned Repayment/offer date 18.04.2017/21.04.2015 13.04.2016 in the volume of RUB 10 bn in 2014 Coupon yield per 1 bond, RUB 42.4 41.1 and in the volume of RUB 10 bn in 2015. Exchange MICEX MICEX Quoted list B B

6.4. INTERACTION WITH SHAREHOLDERS AND INVESTMENT COMMUNITY

The Company pursues active policy in the field of information disclosure: besides Effective interaction with shareholders and investment the obligatory disclosure which is carried out within the current legislation, community is included into the number of key priorities the Company on a constant basis publishes supplementary materials containing of JSC Lenenergo. essential information for shareholders and potential investors on its website. The Company aspires to provide the maximum transparency of its Hence, on a quarterly basis the Company publishes IR releases on operational activity, supporting continuous productive dialogue with representatives and financial performance of the Company for the reporting period (both under of investment community, market analysts of share and debt capital. RAS and IFRS). By results of a fiscal year and when necessary the Company A key task of the Company in the field of interaction with shareholders prepares IR presentations containing information on key results and long-term and investors is receiving a fair assessment of business and increase of its forecasts accompanied by essential comments. The Company also directs all investment appeal. publicized materials to the interested persons signed up for news.

The Company aspires to construct regular and effective dialogue with Efforts of the Company on maintaining open and transparent information investment community, paying much attention to communication with policy were highly appreciated by representatives of professional community: analysts and investors both of share and debt market. The Company annual reports of JSC Lenenergo twice (for 2011 and 2012) won the nomination endeavors to provide operatively information on inquiries of analysts, “The best disclosure of information in the annual report by companies with investors and minority shareholders. Management of the Company capitalization below RUB 10 bn” at annual competitions of annual reports is always open for carrying out individual meetings, conference calls, organized by JSC Moscow Exchange. participation in investment conferences.

191

CORPORATE GOVERNANCE CONTENTS SUSTAINABLE DEVELOPMENT 7. Sustainable Development Annual Report 2013 JSC Lenenergo

RELIABILITY EFFICIENCY AVAILABILITY

In its activity JSC Lenenergo is committed to be a reliable Among principal tasks of HR and social policy of PR policy of JSC Lenenergo is based on the principles partner for all stakeholders, including third-party grid JSC Lenenergo is an increase of production efficiency. of openness, availability, timeliness, and accuracy organizations, staff, consumers, public authorities and That goes to hire and retain qualified employees, of information. Interaction with public is aimed at Sustainable investment community. implement corporate training programs, create a business transparency increase and improvement of comprehensive system of motivation and development the Company’s reputation. Development7 of HR reserve.

In its activity JSC Lenenergo adheres to the principles of sustainable development, considering at decision making interests of all stakeholders, including third-party grid organizations, staff, consumers, public authorities and investment community. The Company strives to ensure responsible business practices in all areas, including HR and social policies and environmental protection.

SECURITIES CONTENTS APPENDICES 7. Sustainable Development Annual Report 2013 JSC Lenenergo

7.1. HR POLICY

HUMAN RESOURCES POLICY OF JSC LENENERGO IS DIRECTED ON MAINTENANCE AND DEVELOPMENT OF PERSONNEL POTENTIAL OF THE COMPANY TAKING INTO ACCOUNT THE PURPOSES AND PROBLEMS OF DEVELOPMENT OF THE DISTRIBUTIVE NETWORK COMPLEX, FEATURES OF REGIONS AND DYNAMICS OF SOCIAL AND ECONOMIC DEVELOPMENT OF THE COUNTRY.

Recruitment and retention of qualified human MAIN OBJECTIVES Improvement of social guarantees and privileges resources to solve current and perspective tasks system, permanent work with youth, support of the Company OF THE COMPANY’S HR POLICY of the institution of family and childhood

Development of corporate culture, intra Formation of the uniform system of preparation Improvement of motivation system and corporate communications system and common and development of staff, including formation development of social partnership system information space, maintenance of favorable of a personnel reserve moral and psychological climate

The staffing level for 2013 Average staff number of JSC Lenenergo 97% in 2013 6,181 people

Improvement of organizational Intra corporate communications and management structure and KEY ELEMENTS OF HR POLICY and corporate culture personnel planning development

Social Motivation Personnel training support and compensation and development

194

SECURITIES CONTENTS APPENDICES SECURITIES 7. Sustainable Development Annual Report 2013 JSC Lenenergo

Purposes and principles of HR policy are executed according to the program ԔԔ development of vocational training system, preparation and retraining of support and development of staff potential, approved by the decision of personnel in the direction of wide use of possibilities of training of the Company’s Board of Directors on 02.06.2010. Within the program centers of St. Petersburg and Leningrad Region; a schedule of execution of HR policy purposes for 5 years in the following main directions was developed: ԔԔ work strengthening with a personnel reserve;

ԔԔ definition of a special category of employees which retention has key ԔԔ development of the complex motivation system, development of a social value for the Company; partnership system in the Company;

ԔԔ development and introduction of actions for rejuvenation of staff, ԔԔ creation of a developed system of intra corporate communications and in particular, personnel of production divisions (workers and technical experts); common information space;

ԔԔ strengthening of cooperation with leading Russian educational ԔԔ strengthening of work on psychophysiological safety of labor activity institutions of higher, secondary and professional education, including of operation personnel. profile power educational institutions and chairs of higher education institutions of St. Petersburg and Leningrad Region in the direction of target preparation of junior specialists;

Data on the Company personnel

Average number of the Company’s personnel in 2013 totaled 6,181 people The staffing level remains stably high, and for the end of 2013 it was that is by 2.9% higher than in the previous year. The increase in the number 97%. The structure of employees by categories is caused by specifics of employees was caused by strengthening of the block of the Chief Engineer of activities of enterprises operating in the distributive network industry. and grid connections direction, and creation of additional operational teams. The main category of employees, 55% of the Company’s staff, is represented by workers.

Dynamics of employees, people Distribution of staff number by branches in 2013

Staff strength as od 31.12.2013 Branch name +2.9% people %

5,975 6,007 6,181 Total on the Company 6,417 100.0 17% 17% 18% Executive office 755 11.8 Production units 5,662 88.2 27% 27% 27% Workers Specialists and office workers

Managers 56% 56% 55%

2011 2012 2013

195

SECURITIES CONTENTS APPENDICES 7. Sustainable Development Annual Report 2013 JSC Lenenergo

The share of workers aged till 30 years increased from 18.9% in 2012 The share of employees with higher education in the total number to 19.3% in 2013, and the share of personnel aged till 35 years increased of personnel increased by 1.2% in comparison with the level of 2012, and from 30.0% in 2012 to 31.1% in 2013 that testifies to a tendency made 40.7%. In 2013 there was a trend on recruitment of young specialists on development of the hired young specialists in the Company. As a whole with higher education and professional retraining. At the same time decrease middle age of the working personnel in the Company remained at a former in the share of workers with secondary education is noted that in general level and made 44 years. testifies to a trend of increase in the educational level of the personnel.

Dynamics of age breakdown for 2011-2013, % Dynamics of educational level breakdown for 2011-2013, %

Age 2011 2012 2013 Education 2011 2012 2013

under 25 years old 7 7 6 Doctor’s degree / Ph.D. 0.4 0.2 0.2 Higher education in two 25-29 12 12 13 1.8 1.9 2.2 and more specialties 30-34 11 11 12 Specialized higher 37.5 39.6 40.7 35-39 9 9 10 Specialized secondary 21.2 21.5 21.1 40-44 10 9 10 Basic vocational 13.8 14.2 14.1 45-49 12 11 10 Secondary / junior secondary 25.3 22.6 21.7

50-54 16 15 15

55-59 years old for men 10 10 10

working pensioners 14 14 14

System of staff development Training and development of the Company’s staff is directed on potential of graduates of higher education institutions, correspondence courses disclosure and professional development of employees taking into account of workers at the expense of the Company. Construction of power perspective requirements of the companies, changes of environment and network and substation training grounds for carrying out competitions the level of development of the employee’s competences. on professional skill, anti-emergency trainings, and practical training within further vocational training comes to the end.

Among the main directions of preparation With a view of increase of professional skills of its staff in 2013 of the Company’s staff are: JSC Lenenergo carried out close cooperation in the field of professional – meeting requirements for compulsory education, personnel development and retraining of personnel with a wide range of leading certification; Russian higher education institutions. In 2013 767 employees – training under programs supporting introduction of new equipment, of JSC Lenenergo were trained within professional development programs, technologies and performing new types of activity; and 34 employees were trained on personnel retraining programs. Costs – professional development under programs developed for of professional development and professional retraining of personnel JSC Lenenergo staff taking into account specifics of operational in higher education institutions in 2013 totaled RUB 23,543 per one conditions of power network equipment. employee.

The profile chair of JSC Lenenergo “Energy saving and increase of power JSC Lenenergo has introduced a comprehensive approach to recruitment, efficiency of enterprises” proceeds with its active work on the basis upgrade of the level of professionalism and retention of experts within of St. Petersburg Agrarian University. In 2013 the Company increased which the Company intensifies interaction with profile institutions costs of training; the quantity of trained employees has increased. of higher and secondary education, implemented programs of involvement In 2013 highly skilled experts of the Company on the chair trained

196

SECURITIES CONTENTS APPENDICES SECURITIES 7. Sustainable Development Annual Report 2013 JSC Lenenergo

460 electrical engineers of operative mobile teams, 101 masters on service of overhead power transmission lines 0.4-6-10 kV, and 142 dispatchers of the Company’s distribution zones. Economic effect Economic effect of training on the specialized chair of JSC Lenenergo staff of training on the profile chair of JSC Lenenergo staff is RUB 8 mln. 8 RUB mln

Number of trained employees, people Costs of training, RUB mln Employees trained in 2013, %

+14.4% +22.2%

3,126 33 2,877 2,732 29 27

51% Workers 2011 2012 2013 2011 2012 2013 30% Managers

19% Specialists and office workers

Among main sources of staff recruitment in the Company are institutions 2013 a labor group of pupils primarily consisting of kids of the Company’s of higher and secondary professional education. Basic higher education employees was created for the first time. institutions for JSC Lenenergo are Ivanovo State Power University named after V.I. Lenin and St. Petersburg State Agrarian University. In November, 2013 within participation in the international exhibition In 2013 student’s construction crews composed of the students “Education and career” JSC Lenenergo was awarded a diploma of power engineering faculty of St. Petersburg State Agrarian University by the Minister of Education and Science of the Russian Federation were created in the Company for the first time. By results of work for work with youth, a big contribution to development of professional in construction crews 28 best students were included in an external education and educational activities. personnel reserve of the Company, and 5 students were employed by the Company’s branches for working and engineering positions. 33 students of Ivanovo State Power University named after V.I. Lenin in the summer of 2013 held work practice in the human resources deficit areas of JSC Lenenergo, and 12 graduates were hired by the Company. In 2013 136 instructors were allocated for 186 trainees and probationers.

The Company conducts work on maintenance and development of labor dynasties with a view of securing the Company with the employees sharing corporate values and possessing correct professional aims and adjusted for long-term work in the power network industry. In summer

197

SECURITIES CONTENTS APPENDICES 7. Sustainable Development Annual Report 2013 JSC Lenenergo

Formation of personnel reserve

JSC Lenenergo carries out formation and preparation of administrative personnel reserve, The personnel reserve is formed for three official levels according to administrative structure personnel reserve of young specialists and of the Company: external personnel reserve to identify, develop and promote high-potential employees.

Advance level Share of managerial positions provided by personnel reserve, % Deputy Director General; Deputy Director and Deputy Chief Engineer of branches 69

49 51

Intermediate level

Personnel reserve Heads to which heads occupying positions of basic level are directly subordinated (heads of structural divisions – chiefs of departments, divisions; area directors; chiefs and chief engineers of distribution zones) Executive Branch Distribution oﬃce management zones oﬃce

Basic level In 2013, to the top positions from among the youth personnel reserve Heads (of sites, services, departments) in which direct submission there are were appointed workers and experts 17 people

Insufficient provision with the personnel reserve in separate directions Within work on development of scientific and innovative activity of reservists is caused by discrepancy of the age qualification and educational level Youth and Innovative Center created on the basis of JSC Lenenergo chair from of employees. The Company conducts work on expansion and development young specialists of the Company and young scientists of St. Petersburg State of the personnel reserve on a constant basis. Agrarian University, held two conferences. Besides, in 2013 reservists became participants of the conference of young scientists “Energy of uniform grid”, Appointments to higher positions from among reservists the youth roundtable “Available networks” within the 17th economic forum, the innovative forum of young power engineering specialists “Forcing-2013”, Number of reservists appointed to higher the international educational forum «Seliger-2013», the second international Personnel reserve type positions, people To target positions Other forum on energy saving and power efficiency ENES-2013.

Administrative 6 0 personnel reserve

Youth personnel reserve 10 7

198

SECURITIES CONTENTS APPENDICES SECURITIES 7. Sustainable Development Annual Report 2013 JSC Lenenergo

7.2. LABOR PROTECTION

JSC LENENERGO ADMITS AN UNCONDITIONAL PRIORITY OF PRESERVATION OF LIFE AND HEALTH OF ITS EMPLOYEES OVER PERFORMANCE RESULTS. THE COMPANY MANAGEMENT ASSUMED OBLIGATIONS ON FULL COMPLIANCE WITH REQUIREMENTS OF THE LEGISLATION IN THE FIELD OF LABOR PROTECTION.

Structure of labor protection expenses in 2013, % Dynamics of labor protection expenses, RUB mln

+11.2%

109 Provision with means 98 62% of individual protection 88

16% Hygienic measures

109 Accidents 14% RUB mln prevention measures 8% Overall improvement of working conditions

2011 2012 2013

The Company undertakes warning measures for prevention of traumas, In 2013 the volume of expenses for labor protection increased by 11%, constantly works over improvement of system of management totaling RUB 109 mln. The Company proceeded with financing of provision of occupational safety and health according to requirements of its employees by means of individual protection, carrying out actions of the international standard OHSAS 18001. Programs of staff training for accident prevention, social and hygienic actions, and works on overall in the labor protection are implemented, certification of workplaces improvement of working conditions. is carried out in due time. The effective system of life and health In 2013 new norms of delivered means of individual protection were insurance of employees operates within the Company. approved, and the list of categories of workers provided by means of individual protection was expanded. In the reporting period there were no injured persons during accidents within the Company.

Number of persons injured during accidents, people

6 In 2013 JSC Lenenergo implemented the program of PR activities 1 aimed at prevention of visitors’ injures on the objects of power network facilities of Lenenergo. – JSC Lenenergo conducted dozens of lessons at schools and kid camps Total of St. Petersburg and the Leningrad Region. Fatal accidents – in 2013 website “Safe electricity” at www.portal-lenenergo.ru was created 5 under the program. In thematic sections of the website there are collected the rules of safe handling of electricity and electric energy saving, visual aids, 1 scenarios, video and photo. 0 – Brochures, animated films, audio materials for improvement of knowledge 2011 2012 2013 of electricity security among kids and adults were developed and widespread in educational institutions of St. Petersburg and the Leningrad Region.

199

SECURITIES CONTENTS APPENDICES 7. Sustainable Development Annual Report 2013 JSC Lenenergo

7.3. SOCIAL POLICY AND CHARITY

JSC LENENERGO IS A RESPONSIBLE EMPLOYER AND PAYS MUCH ATTENTION TO SOCIAL SUPPORT OF EMPLOYEES, MEMBERS OF THEIR FAMILIES AND UNEMPLOYED PENSIONERS. AMONG PRIORITIES OF THE COMPANY’S SOCIAL POLICY THERE ARE CREATION OF CONDITIONS FOR EFFECTIVE WORK OF EMPLOYEES, THEIR PROFESSIONAL GROWTH AND PROVISION OF POSSIBILITY FOR DECENT WAGES. SOCIAL POLICY OF JSC LENENERGO IS BASED ON THE IMPLEMENTATION OF THE COLLECTIVE AGREEMENT APPLICABLE TILL DECEMBER 31, 2015.

Objectives and tasks of the social policy

social security of employees protection of workers through the system of benefits and guarantees provided by the State and the Company

increase of production efficiency

provision and maintenance of social stability in the Company maintenance of the Company’s competitiveness OBJECTIVES TASKS

stimulation of employees to high-efficiency work creation of effective and safe workplaces promoting increase of their welfare

formation of favorable social and psychological recruitment and retention of skilled employees climate

200

SECURITIES CONTENTS APPENDICES SECURITIES 7. Sustainable Development Annual Report 2013 JSC Lenenergo

Directions of social policy and instruments of its implementation

Directions Tools

ԔԔ granting and payment of extra holidays ԔԔ surcharges and extra charges for the working conditions deviating the normal ԔԔ compensation to annual holiday, for long service. Compensation to the employees awarded branch and departmental awards ԔԔ single payment at the birth of a child and a monthly grant on the care of the child till 3 years ԔԔ financial support in case of marriage registration; Granting social benefits and compensations ԔԔ compensation of expenses for children’s preschool education to large families and families with a disabled child ԔԔ encouragement of workers to anniversaries ԔԔ encouragement to festive dates ԔԔ partial compensation of payment of the electric energy to all employees, pensioners and disabled employees of JSC Lenenergo ԔԔ other payments

ԔԔ voluntary medical insurance ԔԔ insurance upon accidents and diseases ԔԔ preliminary and periodic medical examinations ԔԔ fluorographic inspections Prevention of diseases and health protection ԔԔ vaccination against flu ԔԔ certification of workplaces ԔԔ equipment with special clothes and footwear and other means of individual protection ԔԔ training of workers to first-aid treatment in case of accidents

ԔԔ providing permits in sanatorium with partial or complete payment the Company. In 2013 127 compensations for permits acquired by employees on summer holiday were paid to employees Organization of health-improving rest for ԔԔ organization of rest of employees’ children in kids’ recreation camps of the Leningrad Region employees and their family members and Bulgaria. In the summer of 2012 in children’s recreation and sports centers 315 children had a rest

ԔԔ mentoring development: in the reporting year 129 employees were involved as instructors to supervise training of 183 trainees ԔԔ involvement of students of profile higher education institutions on training. In 2013 174 students Work with youth and veterans underwent practical training within the Company ԔԔ encouragement of activities of the council of young specialists: in 2013 council implemented more than 25 actions

201

SECURITIES CONTENTS APPENDICES 7. Sustainable Development Annual Report 2013 JSC Lenenergo

Directions Tools

NPP of employees of JSC Lenenergo is carried out through the Non-state pension fund of the power industry. In 2013 the following programs of NPO were implemented:

ԔԔ Supporting program according to which the Company at the expense of own means organizes NPP of its employees dismissed in connection with their retirement Non-state pension provision (NPP) ԔԔ Program of solidary financing of NPP by the Company and the employee under which the Company and the employee in common on a parity basis participate in formation of NPP of the employee ԔԔ Co-financing program directed on support of formation of pension accumulation within the Federal law # 56-FZ of 30.04.2008 “About additional insurance fees for the accumulative part of labor pension and state support of the formation of pension accumulation”

ԔԔ non-state pension provision ԔԔ financial support ԔԔ financial support on burial Support of unemployed pensioners – ԔԔ payments to anniversaries and festive dates: by the day of Blockade Removal veterans of the Company to the participants of the Great Patriotic War, to the Victory Day, and to the Day of Power Engineers ԔԔ compensation of payment for electricity

Charity JSC Lenenergo traditionally renders charitable and sponsor assistance In 2013 charitable help was rendered to public and religious organizations located in the territory of St. Petersburg in the amount of and the Leningrad Region. In 2013 charitable assistance rendered by JSC Lenenergo amounted to RUB 35.5 mln. 35.5 RUB mln

Organization Description of assistance RUB mln

Charity foundation for assisting citizens appeared in a difficult The help in payment of the electric power consumed life experience “Step towards” (for the charitable center 1.8 by the charitable center «White rose» “White Rose”)

Non-profit partnership Military Patriotic Club “Blue berets” Sponsor assistance in the club development and 4.0 of Aviation and Navy Support NGO of Russia – “Panda” creation of educational material resources

Assistance in payment of electric power consumed Voskresensky Novodevichy Convent 3.1 by a monastery and the Sacred and Vladimir School

Sponsor assistance in creation of a new scene Charity foundation “Valery Gergiev Fund” 25.0 of the Maryinsky Theater

State Enterprise “Fire and Salvage Center of Moscow” and St. Petersburg State Cultural Institution “Center Assistance in elimination of flood consequences of in 1.6 of International Humanitarian Relations” of the Committee the Far East Federal District on social policy of St. Petersburg

In 2013 JSC Lenenergo held a charitable action “Magic sent to five orphanages, boarding schools, shelters together on Christmas Eve”. From December 13 to December 30, 2013 with Miloserdiye fund. For each child care facility the New the staff of JSC Lenenergo collected New Year’s gifts for orphan Year’s festive program was organized with Father Frost’s children and children without parental support. The gifts were congratulation and participation of fairy tales heroes.

202

SECURITIES CONTENTS APPENDICES SECURITIES 7. Sustainable Development Annual Report 2013 JSC Lenenergo

7.4. ENVIRONMENTAL POLICY

JSC LENENERGO BEING SOCIALLY RESPONSIBLE ORGANIZATION ASPIRES TO MINIMIZATION OF NEGATIVE IMPACT ON ENVIRONMENT. THE COMPANY ACTIVITIES IN THE FIELD OF ENVIRONMENT ARE REGULATED BY THE RUSSIAN LEGISLATION AND INTERNAL REGULATIONS, THEREFORE JSC LENENERGO ASPIRES NOT ONLY TO OBSERVE THE ESTABLISHED REQUIREMENTS, BUT TO CORRESPOND TO THE ADVANCED INTERNATIONAL STANDARDS. THE ENVIRONMENTAL POLICY OF THE COMPANY WAS APPROVED IN 2010.

Objectives and tasks of the environmental policy

OBJECTIVES TASKS

Performance of all actions directed on ensuring of productive functioning of the environmental Ensuring productive functioning management system under international standard requirements ISO 14001:2004 of the environmental management system under international standard requirements ISO 14001:2004 Confirmation of compliance of the environmental management system under international standard requirements ISO 14001:2004

Ensuring waste disposal on the licensed ranges

Decrease in negative impact of the Company’s Ensuring fulfilled luminescent lamps treatment according to internal requirements of the Company production activities on environment

Ensuring observance by contract organizations of the requirements of JSC Lenenergo connected with ecological aspects of the Company

Increase of competence of the Company’s staff Implementation of the plan of preparation, retraining and professional development of JSC Lenenergo staff in the field of nature protection activities in the field of nature protection activities

Environmental protection costs, RUB mln Funding of environmental protection In 2013 JSC Lenenergo directed total programms in 2013 +19% of RUB 27.7 mln on environmental protection programs. 27.7 RUB mln 27.7 23.2 25.9 Within a year the Company held a series of nature protection actions, including development of nature protection documentation, control of compliance to the standards of Environmental Emissions Limit, noise level and quality of water, and implementated the program of removal and disposal of waste on the licensed ranges. 2011 2012 2013

203

SECURITIES CONTENTS APPENDICES 7. Sustainable Development Annual Report 2013 JSC Lenenergo

7.5. SUSTAINABLE PERFORMANCE IN THE FIELD OF PROCUREMENTS

THE POLICY OF JSC LENENERGO IN THE FIELD OF PROCUREMENTS IS BASED ON THE PRINCIPLES OF OPENNESS AND TRANSPARENCY. THE COMPANY ASPIRES TO INCREASE THE LEVEL OF EFFICIENCY AT COMPETITION OF PARTICIPANTS OF PROCUREMENT PROCEDURES, AND ACHIEVEMENT OF THE MAXIMUM ECONOMIC EFFECT.

Key goals of the Company in the field of procurements:

supplying the Company with quality facilities, achievement of economic effect in the field mechanics, materials and services for reasonable KEY GOALS of procurements prices

high level of organization in procurement high level of objectivity at carrying out actions procurement activities at competitive basis procedures within procurement procedures

Procurement activity of JSC Lenenergo is regulated by the relevant ACPP is formed on the basis of the programs defining the Company’s federal laws, resolutions of the government and internal documents production activities and is approved by the Board of Directors. and is implemented according to the annual comprehensive program ACPP is published on the official website (www.zakupki.gov.ru) and of procurements (ACPP). Organization and carrying out procurement on JSC Lenenergo website (www.lenenergo.ru) in the section «Procurement». procedures in the Company are included into the competence of Department The official website http://zakupki.gov.ru/223 is used as the basic information of logistics and material support consisting of Division of procurements resource at carrying out procurements. planning, Division of preparation and carrying out competitions, Division of logistics and marketing Division. During implementation of ACPP its adjustment is allowed by results of approval of electricity transmission tariffs in the bodies of state regulation, ACPP includes all procurements of production (goods, works and services) in connection with adjustments of parameters of the Company’s business which cost exceeds RUB 500,000 (VAT included). The form of ACPP plan, or if competitive procedures are required to be held in the current period is approved by the Regulations. The methods of procurements are due to the projects of the next year. determined by all sections of ACPP according to the Regulations and are held by various ways, including open competition, open auction, open request By results of procurement activity the Department of logistics and of offers, open inquiry of prices, open competitive negotiations, and purchase material support forms quarterly reports on which the Director General at the unique supplier. of the Company reports to JSC Russian Grids and, following the results

204

SECURITIES CONTENTS APPENDICES SECURITIES 7. Sustainable Development Annual Report 2013 JSC Lenenergo

of the year, to the Company’s Board of Directors. Quarterly reports of the Director General for 2013 are coordinated by the central procurement In 2013 the Company installed software “Automated system commission (CPC) of JSC Russian Grids for Q1 by Minutes # 18 of 06.06.2013, for procurements control” allowing operatively tracing for Q2 (6 months) by Minutes # 28 of 24.09.2013, for Q3 (9 months) submission of documents within procurement procedures by Minutes # 1 of 17.01.2014, and for Q4 (12 months) by Minutes # 7 by JSC Lenenergo branches. of 03.03.2014.

Introduction of e-commerce

In the reporting period 2,219 procurements with selection of the winner In 2013 JSC Lenenergo held 99% of procurement procedures in the total cost of RUB 38 bn with VAT included were held. in an electronic form with the use of virtual e-trading platforms

From them 2,077 procurements for the sum of RUB 37,145.5 mln with VAT www.b2b-mrsk.ru, www.etp.roseltorg.ru on the Internet. (99% of total procurements) were held with application of e-commerce. The official site http://zakupki.gov.ru/223 Economic effect by results of open competitive procurement procedures for is used as the basic information resource. 2013 totaled RUB 1,810.9 mln with VAT, or 5% of the planned declared cost of competitive procurements.

In 2013 the Company held 2,219 procurements with selection of a winner

for the total amount of 38 RUB bn with VAT

205

SECURITIES CONTENTS APPENDICES 7. Sustainable Development Annual Report 2013 JSC Lenenergo

7.6. EXTERNAL COMMUNICATIONS

PUBLIC COMMUNICATIONS PLAY A KEY ROLE IN INTRODUCING THE PRINCIPLES OF TRANSPARENCY AND OPENNESS OF JSC LENENERGO PROMOTING STRENGTHENING OF ITS REPUTATION, GROWTH OF THE IMAGE CAPITAL IN THE STRUCTURE OF MARKET VALUE AND INCREASING INVESTMENT APPEAL OF THE COMPANY. THE COMMUNICATION POLICY OF THE COMPANY IS BASED ON THE PRINCIPLES OF OPENNESS, AVAILABILITY, EFFICIENCY AND RELIABILITY OF INFORMATION.

The Department of public relations carries out work on such main directions as – public relations – interaction with mass media – congress and exhibition activities – nternational cooperation

The Department of public relations directly submits to the Director General of JSC Lenenergo and adheres to the uniform standards uniform standards on information disclosure in its work.

In 2013 the Company implemented seven target communication programs:

ԔԔ Management of Reliability – Stable Power Supply System; ԔԔ Technological Connection to Networks. Reboot; ԔԔ Power construction – New Energy of Regions; Interaction expansion with target audiences ԔԔ Transparent Company – Investments into the Future; ԔԔ Intellectual Technologies – Effective Business Processes; For interaction expansion with target audiences the corporate account ԔԔ Lenenergo – Traditions of Leadership; in the social network Instagram was created. ԔԔ Social Responsibility – Rules of Modern Business.

Promotion of the project of JSC Lenenergo “8-800” Council of consumers of services

The website section “Connection to networks without leaving home” In December, 2013 the Council of consumers of services for development was developed for promotion of the project of JSC Lenenergo “8-800” of offers on activity improvement in the field of technological connection on technological connection without visits to the client centers on the official was established in JSC Lenenergo. site.

Information work with small and medium business Continuous business contacts to the press centers of public authorities

In 2013 JSC Lenenergo paid special attention to information work with small Continuous business contacts to the press centers of public authorities and medium business regarding technological connection to networks. of St. Petersburg and the Leningrad Region were established and supported. In particular, collaboration with public organizations “Business Russia” and Information support of working meetings of the Company’s top-management “OPORA of Russia” concerning the termination of non-contractual electricity with heads of subjects of the Russian Federation in the area of responsibility consumption was organized. During a roundtable held in February, 2013 of the Company was carried out. In 2013 there was held opening of a number JSC Lenenergo and regional office of United Russia made the decision of large power facilities of JSC Lenenergo with participation of top officials on collaboration on the issue of connection of business to energy resources. of St. Petersburg and the Leningrad Region.

206

SECURITIES CONTENTS APPENDICES SECURITIES 7. Sustainable Development Annual Report 2013 JSC Lenenergo

Participation in exhibitions Sports promoting among the staff of the Company

In 2013 of JSC Lenenergo participated in seven largest international and In 2013 JSC Lenenergo increased the number of actions for sports All-Russia exhibitions and forums: promoting among the staff of the Company. Within the year JSC Lenenergo staff took active part in such actions, as ԔԔ St. Petersburg International Economic Forum; ԔԔ 20th international specialized exhibition and conference “Power and ԔԔ football tournaments “Cup of power engineers”, “Power Industry Cup”, electrical equipment – 2013”; “Football Weekend”; ԔԔ industrial HR forum of HRM Expo 2013; ԔԔ the All-Russia Winter sports contest of power engineers in Sochi; ԔԔ Moscow International Power Forum; ԔԔ Open chess tournament of power engineers of memory of M.M. ԔԔ forum and exhibition “Power industry of Russia in the XXI century”; Botvinnik; ԔԔ the 4th international exhibition and conference on safety and labor ԔԔ Regular trainings with participation of the trainer of JSC Lenenergo protection in the oil and energy complex SAPE 2013; team on mini-football were organized. ԔԔ 12th international exhibition of cables, wires and accessories CABEX. In 2013 JSC Lenenergo for the first time organized internal competitions During St. Petersburg International Economic Forum there was a press in the format of a sports contest among the teams of branches and approach with participation of the Director General of JSC Lenenergo executive office. Andrey Sorochinskiy on the topic “Increase of grid infrastructure availability”.

Events for Veterans and home front workers of the Great Patriotic War Veterans of the Great Patriotic War who worked for JSC Lenenergo and home Advance of business image of JSC Lenenergo in the international front workers are annually invited to the actions devoted to the Day of Blockade environment Removal, to the Victory Day, the Day of Break of the Power Blockade. In 2013 In March, 2013 the meeting of representatives of the technical block JSC Lenenergo held a commemorative event devoted to the 69th anniversary of JSC Lenenergo with Kim Son Su, the Director General of trading from the Day of Blockade Removal. Veterans-power engineers together with department of the Consulate General of the Republic of Korea the Company’s staff assigned wreaths and flowers on the Piskarevsky memorial in St. Petersburg, directed on development of business connections, advance cemetery. Participants of the action visited a concert at the Theatre of musical of business image of JSC Lenenergo in the international environment took comedy, devoted the Day of Blockade Removal. place. Within celebration of the Victory Day on May 9 within a city commemorative event laying of wreaths and flowers to the monument “Motherland” and Social policy a memorial plate to power engineers on the Piskarevsky cemetery took place. On the Day of Break of the Power Blockade of Leningrad on September Among the most important directions of intra corporate communications 23 veterans and the Company’s staff assigned wreaths to the memorial is social policy, including care of employees of the Company, members on “Nevsky patch” and at a diorama “Break of the Blockade of Leningrad”. of their families, and veterans of the Company.

In 2013 JSC Lenenergo held such activities as Corporate newspaper “Power Engineer of Petersburg” ԔԔ the competition “Company’s image” for the staff of JSC Lenenergo; ԔԔ the environmental action “Healthy environment – responsibility Department of public relations of JSC Lenenergo monthly issues of the enterprise”; the corporate newspaper “Power Engineer of Petersburg” which ԔԔ solemn opening and closing of changes of student’s construction group is distributed in all branches of the Company. In 2013 the newspaper “Power of JSC Lenenergo; Engineer of Petersburg” became the winner in the special nomination ԔԔ city bicycle race across night St. Petersburg; of the organizing committee of corporate media competition “Silver threads” ԔԔ Welcome days and excursions on power objects of JSC Lenenergo; and regional advisory council “Successful solutions of business tasks”. ԔԔ mass community work days; ԔԔ corporate holidays.

207

SECURITIES CONTENTS APPENDICES 8. Appendices Annual Report 2013 JSC Lenenergo

8.1. REFERENCE INFORMATION

Full name Lenenergo, Open Joint Stock Company of the Power Industry and Electrification

Abbreviated name JSC Lenenergo

Location 196247, St. Petersburg, Constitution Sq, 1

Taxpayer Identification Number (TIN) / Tax Registration Reason Code 7803002209/781001001 (TRRC)

Principal State Registration Number (PSRN) 1027809170300

Bank account details Settlement account # 40702810855000164957, correspondent account # 30101810500000000653 in the Northwest Bank JSC Sberbank of Russia St. Petersburg BIC 044030653

E-mail [email protected]

Web www.lenenergo.ru

Director General Andrey Valentinovich Sorochinskiy Reception: T. (812) 331-87-95; F. (812) 331-87-96

Chief Accountant Galina Vladimirovna Kuznetsova T. (812) 595-86-78; f. (812) 224-81-67

Corporate Secretary of the Company Andrey Sergeyevich Smolnikov T./F. (812) [email protected]

Shareholder and Investor Relations Division T. (812) 494-74-35; F. (812) 494-37-34 [email protected]

Head of Press Center Denis Vladimirovich Shereshevskiy T. (812) 494-39-12; F. (812) 494-35-44 [email protected]

Head of Department of Preparation and Holding Competitions Anatoly Alekseevich Mizgin-Somov T. (812) 494-35-24; F. (812) 595-33-48 [email protected]

Hot line T. (812) 595-86-62; F. (812) 494-31-71

208

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

General information about the Company Registrar

Full name Registrar R.O.S.T., Open Joint Stock Company

Abbreviated name JSC Registrar R.O.S.T.

Registration date 22 November 1993, Moscow registration chamber, # 447.993

License number License of the Federal Commission on Securities of the Russian Federation # 10-000-1-00264 of 03.12.2002

Location 107996, Moscow, Stromynka St, 18, build. 13 190013, St. Petersburg, Vvedenskiy Canal, 7, office 338

Contact information T./F. (812) 418-33-38 [email protected]

Before 14.12.2010 the shareholders register was held by JSC MCD (www.mcd.ru).

General information about the Company Auditor

Full name of the official auditor KPMG, Closed Joint Stock Company

Abbreviated name of the official auditor CJSC KPMG

Legal address 129110, Moscow, Olimpiysky Ave, 18/1, office 3035

Actual address 123317, Moscow, Presnenskaya Emb, 10, Complex “Tower on EMVAnkment”, block C

Phone number, fax T. (495) 937-44-77, F. (495) 937-44-99

Web www.kpmg.com

Entered into the Unified State Register of Legal Entities USRLE 1027739329375

E-mail [email protected]

209

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

8.2. BASIC PRINCIPLES OF ACCOUNTING POLICIES

General provisions Accounting policies as a set of principles, rules of the organization Organizational aspects of Accounting policies and technology of implementation of the methods for conducting accounting are developed for the purpose of formation of the most JSC Lenenergo structure as at 31.12.2012 includes the executive complete, objective and authentic reporting, and also financial and office and 9 branches. Allocation of branches is carried out management information, taking into account organizational and in connection with isolation of production, commercial and business branch features of JSC Lenenergo. processes.

Ways of maintaining accounting and tax accounts are applied Heads of branches are appointed by the Director General by JSC Lenenergo consistently, all new elements and aspects are of JSC Lenenergo and act under power of attorney. included in the Accounting policies as modification in the operating policies, approved in past years. At formation of the present The Chief Accountant of JSC Lenenergo is held responsible for amendments of the Accounting policies all amendments have been accounting policies formation, maintaining accounting and tax consistently applied since January 01, 2013. accounts, timely submission of full and authentic accounting and tax reporting, and financial statements under the International Financial JSC Lenenergo organizes, conducts accounting and prepares Reporting Standard (IFRS). accounting reporting according pursuant to the Federal law # 402- FZ of December 06, 2011 “About accounting”, relevant regulations Requirements of the Chief Accountant for documentary registration on accounting (RAS), the working book of accounts developed of business operations and submission of necessary documents on the basis of standard book of accounts of accounting of financial and data in accounting services are obligatory for all employees and business activity and the Instruction on its application, approved of the executive office and branches of JSC Lenenergo. by the Order of the Ministry of Finance of the Russian Federation # 94n of 31.10.2000 in the last operating edition. The Chief Accountant is subordinated to the Director General.

JSC Lenenergo applies the working book of accounts of accounting including synthetic and analytical accounts which is developed Account organization on the basis of standard book of accounts. Department of accounting and tax accounting and reporting Working book of accounts of accounting allows implementing of the executive office is directly subordinated to the Chief the scheme of registration and group of data on the facts Accountant, and Divisions of accounting and tax accounting of economic activity for formation of necessary forms and reporting of branches are operatively and methodologically of the reporting (financial, statistical, tax) and is intended for subordinated to the Chief Accountant. unification of accounting of JSC Lenenergo. Divisions of accounting and tax accounting and reporting JSC Lenenergo estimates and pays taxes centrally, according of branches headed by chief accountants, together with Department to the legislation of the Russian Federation on taxes and fees, of accounting and tax accounting and reporting of the executive the legislation of subjects of the Russian Federation on taxes and office comprise the accounting service of JSC Lenenergo which fees, regulatory legal acts of local governments on taxes and fees, basic functions are maintaining accounting and tax accounts, and taking into account the software used for maintaining the account formation of accounting and tax reporting. in JSC Lenenergo. The structure and subordination, separation of powers and Branches of JSC of Lenenergo make the intermediate reporting responsibilities, structure, distribution of accounting functions in an order established by accounting policies, bear responsibility for (including their centralization), and formation of the list of objects the account organization on the allocated property, and are guided of the account within the Company’s accounting service is carried by basic provisions of the Accounting policies of JSC Lenenergo. out at direct coordination with the Company’s Chief Accountant depending on production functions of branches and business Property (materials, fixed assets, etc.) are transferred from processes occurring in them. branch to branch according to the indication of the management as redistribution of property of the uniform legal entity Maintaining accounting under IFRS standards and preparation on the corresponding accounts of intra-economic calculations of international financial statements are carried out by the Division of working book of accounts. of preparation of IFRS statements of the executive office, which is a

210

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

part of Department of accounting and tax accounting and reporting. which is registered in the given flow rate.

Division of tax accounting and reporting of the executive office carries Copies of contracts, originals of acts and invoices according out control of tax payments, formation of taxable base and tax to liabilities are transferred in that accounting service which declarations, and consolidation of registers (forms) of tax accounting. is authorized on maintaining this expense.

Accounting and tax accounting of property (including, fixed assets), liabilities and business transactions is conducted in rubles and Technical aspects of accounting policies kopeks. The accounting reporting is made in thousand rubles. Documents that register business transactions with cash (over bank accounts, by cash documents, under contracts changing Property (materials, fixed assets, etc.) are transferred from financial liabilities of JSC Lenenergo) are signed by the Director branch to branch according to the indication of the management General of JSC Lenenergo and the Chief Accountant or by authorized as redistribution of property of the uniform legal entity persons. on the corresponding accounts of intra-economic calculations of working book of accounts. The right to sign primary registration documents is established by the Order on JSC Lenenergo. Besides, heads of divisions (chiefs Information on operational segments is admitted by JSC Lenenergo of managements, departments, services etc.) have the right as primary, on geographical segments – secondary. of the signature of documents according to their official and functional duties under the power of attorney issued by the Director General Objects, taxation on which is made proceeding from a place of their of the Company. location (real estate, vehicles etc.) are considered in tax accounting in the context of territorial accessory. For registration of financial and economic activities, needs of tax accounting and RAS 18/02 requirements on which standard The accounting reporting of JSC Lenenergo is formed forms of primary registration documents are not provided, forms by Department of accounting and tax accounting and of tax registers and documents on the basis of RAS, methodical reporting of the executive office on the basis of consolidated instructions and instructions on accounting and operating forms information on property, liabilities and results of business activity of primary registration documentation, taking into account of the Company. requirements of the power supply system and the separate branch features accepted and reflected in accounting policies are developed JSC Lenenergo submits the annual reporting according to addresses in JSC Lenenergo. and terms provided by the current legislation and releases its annual reporting no later than June 1 of the year following the reporting one. Depending on the nature of transaction, requirements of regulations and technology of processing of registration information additional Preparation of reporting on taxes and fees in relation to taxes and requisites can be brought in primary documents. fees paid centrally is carried out by Department of tax accounting and reporting of the executive office on the basis of data provided Due to use in the Company of the automated system of the account it by departments of accounting and tax accounting and reporting is possible to maintain unified and other used forms in electronic form, of branches, other services of JSC Lenenergo. with listing according to requirements of auditor and tax authorities. Disclosure (allocation in separate article) of reporting indicator Movement of primary documents in JSC Lenenergo (creation or is carried out provided that its size is essential. receiving from other enterprises, establishments or the organizations, movement between branches, acceptance to the account, processing, The indicator is considered essential if failure to disclose it may and transfer to archive) is regulated by the schedule of documents flow. influence business decisions of stakeholders made on the basis of reporting information. The level of severity is set at a rate of 5% Copies of the documents confirming an expense of financial funds, to a grand total of the appropriate section of accounting forms. forming for calculations with the various organizations according to JSC Lenenergo liabilities (including branches), are transferred An error in accounting and reporting pursuant to item 3 RAS in treasury of the executive office with the filled form “Payment 22/2010 is admitted essential if it alone or in aggregate with order” and the put-down stamp “accepted to the account” and other errors for the same reporting period distorts an indicator the signature of the responsible person of that accounting service of the reporting article for more than 10%.

211

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

Inventory of assets and liabilities for accounting and tax accounts ●● at change of materially responsible persons; is carried out pursuant to Methodical instructions on inventory of assets and financial liabilities approved by Order # 49 ●● at identification of plunder, abuse or damage to property; of the Ministry of Finance of the Russian Federation of 13.06.1995. ●● in case of natural disaster, fire or other emergency situations caused by extreme conditions; Carrying out inventory is obligatory: ●● in other cases set forth by the legislation of the Russian ●● before drawing up of the annual accounting reporting (except Federation. for the property which inventory was carried out not earlier than 1 November of fiscal year); Besides inventories provided with a view of drawing up of accounting reporting, JSC Lenenergo carries out inventories ●● of fixed assets and intangible assets – once a year as of 1 necessary for confirmation of the data of operative accounting and November; for other managerial purposes of the Company.

●● of inventory items – once a year as of 1 November; The schedule of inventories is approved by the Director General of JSC Lenenergo or by heads of branches authorized by him ●● of assets and liabilities accounted on off-balance accounts – on the branches entrusted to them. once a year as of 1 November; Inventory commissions which structure is approved by heads ●● of financial liabilities – once a year as of 1 January; of branches, and in the provided cases – by the Director General of JSC Lenenergo are established to carry out inventories. At large ●● of cash accounts – monthly as of the last working day of month; volume of work working inventory commissions are established to carry out simultaneous inventories. ●● at transfer of assets in rent, repayment, sale;

212

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

8.3. RAS ACCOUNTING REPORTING OF LENENERGO FOR 2013

Data on the Auditor

KPMG, Closed Joint Stock Company (St. Petersburg branch of KPMG, Closed Joint Stock Company – Name Northwest Regional Center)

Location 129110, Moscow, Olimpiysky Ave, 18/1, office 3035 St. Petersburg branch of KPMG, Closed Joint Stock Company - Northwest Regional Center: (legal address) 191119, St. Petersburg, Marat St, 69-71, let. A

123317, Moscow, Presnenskaya Emb, 10, block C, floor 31 Postal address St. Petersburg branch of KPMG, Closed Joint Stock Company - Northwest Regional Center: 191119, St. Petersburg, Marat St, 69-71, let. A

Registered by the Moscow registration chamber. Certificate # 011.585 of 25.05.1992 Brought in the Uniform state register of legal entities by interdistrict inspectorate of the Ministry of the Russian Federation for taxes and fees State registration # 39 for Moscow # 1027700125628. Certificate: series 77 # 005721432. St. Petersburg branch of KPMG, Closed Joint Stock Company is registered by the decision of the Registration chamber of St. Petersburg # 74620 of June 13, 1997

Member of the Auditor Chamber of Russia, Non-Profit partnership. Membership in the self-regulating organization of auditors Principal registration number of entry in the state register of auditors and auditor organizations: 10301000804

Data on the Audited Person

Name Lenenergo, Open Joint Stock Company

Location 196247, St. Petersburg, Constitution Sq, 1 (legal address)

Postal address 196247, St. Petersburg, Constitution Sq, 1

State registration Registered by the Registration chamber of a city administration of St. Petersburg. Certificate # 2084 of January 22, 1993. Brought in the Uniform state register of legal entities by Inspectorate of the Ministry of the Russian Federation for taxes and fees for the Central district of St. Petersburg under # 1027809170300 on July 22, 2002. Certificate: series 78 # 004009112.

213

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

Audit Report which is based on an assessment of risk of the essential distortions to Shareholders of Lenenergo, allowed owing to unfair actions or mistakes. In the course of an Open Joint Stock Company assessment of this risk we considered the internal control system providing drawing up and reliability of the accounting reporting, for We conducted audit of the accounting reporting of Lenenergo, Open the purpose of a choice of the corresponding auditor procedures, but Joint Stock Company (further – the Company) enclosed to this Audit not for the purpose of expression of opinion on efficiency of internal report for 2013. control.

The accounting reporting on 83 sheets consists of: Audit also included an assessment of appropriate character of applied accounting policies and validity of the estimated ԔԔ Balance Sheet as at 31 December 2013; indicators received by the Company management, and also ԔԔ Profit and Loss Statement for 2013; an assessment of submission of the accounting reporting as ԔԔ applications to Balance Sheet and Profit and Loss Statement, a whole. including: ‣‣ Statement of Changes in Equity for 2013; We believe that the auditor proofs received during the audit give ‣‣ Cash Flow Statement for 2013; the sufficient grounds for expression of opinion on reliability ‣‣ explanations to the accounting reporting for 2013. of the accounting reporting.

Responsibility of the Company for the accounting reporting Opinion

The Company’s management bears responsibility for drawing up and In our opinion, the accounting reporting of the Company enclosed reliability of the given accounting reporting according to the Russian to this Audit report reflects authentically in all essential relations rules of drawing up of the accounting reporting and for the system its financial position as at 31 December 2013, results of its of internal control necessary for drawing up of the accounting financial and business activity and cash flow for 2013 according reporting, not containing essential distortions owing to unfair to the Russian rules of drawing up of the accounting reporting. actions or mistakes. Other data Responsibility of the Auditor Audit of the accounting reporting for 2011 was carried out by other Our responsibility consists in expression of opinion on reliability auditor who in an audit report from 24 February 2012 expressed not of the accounting reporting in all essential relations on the basis modified opinion. of the audit carried out by us. We conducted audit according to federal standards of auditor activity. These standards demand Deputy Director on Audit of St. Petersburg L.S. Tverdokhlebov observance of applicable ethical standards, and also planning and Branch of KPMG - Northwest Regional Center, carrying out audit so that to receive sufficient confidence that Closed Joint Stock Company the accounting reporting does not contain essential distortions. (Power of attorney # 54/11 of October 28, 2011)

Audit included carrying out the auditor procedures directed on obtaining of auditor proofs, confirming numerical indicators in the accounting reporting and information disclosure in it. The choice of auditor procedures is a subject of our judgment 07 March 2014

214

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

Balance Sheet Codes as at 31 December 2013 Form under ARCMD 0710001

Date (day, month, year) 31 | 12 |2013

Company JSC Lenenergo under ARCBO 00107131

Taxpayer Identification Number TIN 7803002209

Type of business activity power industry ADCEA 40.10.2

under ARCFI/ARCFO 1 22 47|34 Business legal structure / Form of ownership private or foreign property joint stock company / joint under ARCM 384

Unit RUB thousand

Location (address) 196247 St. Petersburg, Constitution Sq, 1

As at As at As at Notes Indicator Line code 31 December 2013 31 December 2012 31 December 2011

ASSETS

I. NON-CURRENT ASSETS

Ap 5–7 Intangible assets 1110 105 301 146 240 201 791

Ap 7 including pending transactions to acquire intangible assets 1111 33 137 23 380 43 794

Ap 6–7 R&D results 1120 83 401 67 494 14 742

Ap 7 including expenses for R&D in progress 1121 − 54 578 14 349

Intangible exploratory assets 1130 − −

Tangible exploratory assets 1140 − −

Ap 8–13 Fixed assets 1150 124 823 286 115 075 239 90 550 662

land plots and environmental facilities 1151 79 465 76 985 67 554

buildings, machinery and equipment, constructions 1152 112 321 552 102 104 509 76 198 151

other types of fixed assets 1153 24 305 21 831 29 426

Ap 12 construction in progress 1154 11 753 400 11 321 706 12 787 626

advances made for capital construction and acquisition of fixed Ap 13 assets 1155 457 875 745 135 941 384

raw materials for use in the creation of fixed assets* 1156 186 689 805 073 526 521

Profitable investments in tangible assets 1160 − − −

property for leasing 1161 − − −

property on tenancy contract basis 1162 − − −

Ap 14–16 Financial investments 1170 897 795 947 113 947 105

investments in subsidiaries 1171 897 791 897 791 897 791

investments in affiliates 1172 4 4 4

investments in other companies 1173 − 49 318 49 310

215

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

As at As at As at Notes Indicator Line code 31 December 2013 31 December 2012 31 December 2011

loans granted to companies for more than 12 months period 1174 − − −

other long-term financial investments 1175 − − −

Ap 28 Deferred tax assets 1180 979 858 510 444 534 590

Other non-current assets 1190 706 526 776 552 634 207

TOTAL for section I 1100 127 596 167 117 523 082 92 883 097

II. CURRENT ASSETS

Ap 17–18 Supplies 1210 584 059 442 638 423 087

raw material, materials and other analogous values 1211 584 059 442 638 423 087

construction in progress costs 1212 − − −

finished products and goods for resale 1213 − − −

shipped goods 1214 − − −

other supplies and expenses 1215 − − −

Value added tax according to purchased valuables 1220 494 588 222 626 229 329

Ap 19–22 Accounts receivable 1230 10 071 190 7 796 952 7 226 404

Payments on which are expected more than 12 months after accounting date 1231 111 573 201 158 1 004 957

buyers and customers 123101 2 983 4 867 −

bills receivable 123102 − − −

advances made 123103 32 880 117 733 926 858

other accounts receivable 123104 75 710 78 558 78 099

Payments on which are expected within 12 months after accounting date 1232 9 959 617 7 595 794 6 221 447

buyers and customers 123201 5 894 969 2 790 090 1 282 791

bills receivable 123202 − − −

debts of subsidiaries and affiliates on dividends 123203 − − −

debts of participators (founders) according to contributions in the authorised capital 123204 − − −

advances made 123205 540 122 255 880 474 822

other accounts receivable 123206 3 524 526 4 549 824 4 463 834

Ap 14–16 Financial investments (excluding money equivalents) 1240 6 284 109 2 266 000 −

loans granted to organisations for less than 12 months period 1241 − − −

other short-term financial investments 1242 6 284 109 2 266 000

Cash and cash equivalents 1250 3 370 400 3 162 812 6 795 830

cashier’s desk 1251 106 111 119

216

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

As at As at As at Notes Indicator Line code 31 December 2013 31 December 2012 31 December 2011

settlement accounts 1252 3 369 454 3 161 480 6 794 509

foreign exchange accounts 1253 − − −

other monetary funds 1254 840 1 221 1 202

Other currents assets 1260 82 417 134 124 169 449

TOTAL for section II 1200 20 886 763 14 025 152 14 844 099

BALANCE 1600 148 482 930 131 548 234 107 727 196

LIABILITIES

III. CAPITAL AND RESERVES

Share capital (joint-stock capital, authorised capital, limited partner contributions) 1310 1 228 326 1 228 326 1 019 286

Own shares repurchased from shareholders 1320 − − −

Revaluation of non-current assets 1340 51 433 062 51 520 365 35 434 696

Additional capital (without revaluation) 1350 11 416 960 11 416 960 8 591 422

Reserve capital 1360 184 249 152 893 152 893

Retained profit (uncovered loss) 1370 12 078 295 11 906 679 10 945 528

of past years 1371 11 653 428 10 864 458 9 579 009

of the reporting period 1372 424 867 1 042 221 1 366 519

TOTAL for section III 1300 76 340 892 76 225 223 56 143 825

IV. LONG-TERM LIABILITIES − − −

Ap 25–26 Loans and credits 1410 29 406 037 24 644 586 20 800 000

bank credits subject to payment more than within 12 months after the reporting date 1411 23 406 037 21 644 586 20 800 000

loans subject to payment more than within 12 monthsafter the reporting date 1412 6 000 000 3 000 000 −

Ap 28 Deferred tax liabilities 1420 2 568 663 1 989 361 1 493 043

Ap 27 Estimated liabilities 1430 − − −

Ap 23–24 Other liabilities 1450 572 489 1 585 858 1 491 698

TOTAL for section IV 1400 32 547 189 28 219 805 23 784 741

V. SHORT-TERM LIABILITIES

Ap 25–26 Loans and credits 1510 3 970 003 3 144 374 6 193 141

bank credits subject to payment within 12 months after the reporting date 1511 3 868 188 3 095 474 34 871

loans subject to payment within 12 months after the reporting date 1512 101 815 48 900 6 158 270

Ap 23–24 Accounts payable 1520 34 614 993 22 897 723 20 724 273

suppliers and contractors 1521 14 206 328 7 941 330 5 971 497

217

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

As at As at As at Notes Indicator Line code 31 December 2013 31 December 2012 31 December 2011

bills payable 1522 − − −

debt to personnel relating to labour payment 1523 234 879 154 674 186 014

debt to governmental extra-budgetary funds 1524 75 606 85 956 61 502

taxes and levies payable 1525 642 283 360 535 62 565

advances received 1526 15 189 554 13 874 103 14 252 875

debts to participators (founders) according to income payment 1527 − − −

other accounts payable 1528 4 266 343 481 125 189 820

Deferred income 1530 − − −

Ap 27 Estimated liabilities 1540 1 009 853 1 061 109 881 216

Other liabilities 1550 − − −

TOTAL for section V 1500 39 594 849 27 103 206 27 798 630

BALANCE 1700 148 482 930 131 548 234 107 727 196

Director General A.V. Sorochinskiy

Chief Accountan G.V. Kuznetsova

07 March 2014

218

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

Profit and Loss Statement for 12 months 20 13 Codes Form under ARCMD 0710002

Date (day, month, year) 31 | 12 | 2013

Company JSC Lenenergo under ARCBO 00107131

Taxpayer Identification Number TIN 7803002209

Type of business activity power industry ADCEA 40.10.2

under ARCFI/ARCFO 1 22 47|34 Business legal structure / Form of ownership private or foreign property joint stock company / joint under ARCM 384

Unit RUB thousand

Notes Indicator Code For 2013 For 2012

1 2 3 4 5

Revenue 2110 39 902 018 36 272 948

including

revenue from electricity transmission 2111 33 206 992 28 815 858

revenue from grid connection 2112 6 515 077 7 281 854

revenue from functioning organisation and development of UES of Russia in terms of electric distribution grid 2113 − −

revenue from resale of electric energy and power 2114 − −

income from participation in other organisations 2115 − −

lease income 2116 − −

revenue from sale of other goods, products, works, services of industrial nature 2117 179 949 175 236

revenue from sale of other goods, products, works, services of nonindustrial nature 2118 − −

Ap 1 Cost of sales 2120 (36 429 276) (32 830 060)

including

electricity transmission 2121 (35 903 216) (32 344 382)

grid connection 2122 (436 615) (399 814)

functioning organisation and development of UES of Russia in terms of electric distribution grid 2123 − −

resale of electric energy and power 2124 − −

participation in other organisations 2125 − −

lease 2126 − −

other goods, products, works, services of industrial nature 2127 (89 445) (85 864)

other goods, products, works, services of non-industrial nature 2128 − −

Gross profit (loss) 2100 3 472 742 3 442 888

Commercial expenses 2210 − −

Management expenses 2220 − −

Profit (loss) from sales 2200 3 472 742 3 442 888

219

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

Notes Indicator Code For 2013 For 2012

1 2 3 4 5

Profit from participation in other organisations 2310 690 823

Interest receivable 2320 643 594 296 011

Interest payable 2330 (2 217 089) (1 787 795)

Ap 32 Other profit 2340 3 529 476 1 924 127

Ap 32 Other expenses 2350 (3 985 166) (1 913 685)

Profit (loss) before taxation 2300 1 444 247 1 962 369

Ap 3 Current profit tax 2410 (999 927) (447 440)

Ap 3 including constant tax liabilities (assets) 2421 820 351 499 849

Ap 3 Change in deferred tax liabilities 2430 (579 302) (496 318)

Ap 3 Change in deferred tax assets 2450 470 029 (25 408)

Ap 3 Other 2460 89 820 49 018

Net profit (loss) 2400 424 867 1 042 221

FOR REFERENCE

Result from the revaluation of fixed assets, not included in net income (loss) for the period 2510 − 16 174 460

Result from other transactions not included in net income (loss) for the period 2520 − −

Aggregate financial result of the period 2500 424 867 17 216 681

Ap 2 Basic earnings (loss) per share 2900 0,374 1,057

Ap 2 Diluted earnings (loss) per share 2910 − −

Director General A.V. Sorochinskiy

Chief Accountan G.V. Kuznetsova

07 March 2014

220

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

Statement of Changes in Equity for 2013 Codes Form under ARCMD 0710003

Date (day, month, year) 31 | 12 | 2013

Company JSC Lenenergo under ARCBO 00107131

Taxpayer Identification Number TIN 7803002209

Type of business activity power industry ADCEA 40.10.2 under ARCFI/ARCFO 1 22 47|34 Business legal structure / Form of ownership private or foreign property joint stock company / joint under ARCM 384

Unit RUB thousand

1. Capital flow

Own shares Authorised repurchased from Retained earnings Indicator Code capital shareholders Aditional capital Reserve capital (uncovered loss) Total

1 2 3 4 5 6 7 8

Capital stock for December 31st 2011 3100 1 019 286 − 44 026 118 152 893 10 945 528 56 143 825

For 2012 (2)

Capital increase - total 3210 209 040 − 19 009 037 − 1 051 260 20 269 337

including:

net profit 3211 х х х х 1 042 221 1 042 221

property revaluation 3212 х х 16 174 460 х − 16 174 460

income due directly to increase of the capital 3213 х х − х 9 039 9 039

additional share issue 3214 209 040 − 2 834 577 х х 3 043 617

increase in par value of shares 3215 − х х х − х

reorganisation of the legal person 3216 − − − − − −

Capital reduction - total 3220 − − (9 039) − (178 900) (187 939)

including:

loss 3221 х х х х − −

property revaluation 3222 х х − х − −

expenses dut directly to capital reduction 3223 х х (9 039) х (37 158) (46 197)

reduction of par value of shares 3224 − − х х − −

reduction of quantity of shares 3225 − − х х − −

reorganisation of the legal person 3226 − − − − − −

dividends 3227 х х х х (141 742) (141 742)

Additional capital change 3230 х х (88 791) х 88 791 х

Reserve capital change 3240 х х х − − х

221

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

Own shares Authorised repurchased from Retained earnings Indicator Code capital shareholders Aditional capital Reserve capital (uncovered loss) Total

1 2 3 4 5 6 7 8

Capital stock for 31 December 2012 3200 1 228 326 − 62 937 325 152 893 11 906 679 76 225 223

For 2013 (3)

Capital increase - total 3310 − − − − 424 867 424 867

including:

net profit 3311 х х х х 424 867 424 867

property revaluation 3312 х х − х − −

income due directly to increase of the capital 3313 х х − х − −

additional share issue 3314 − − − х х −

increase in par value of shares 3315 − х х х − х

reorganisation of the legal person 3316 − − − − − −

Capital reduction - in total 3320 − − − − (309 198) (309 198)

including:

loss 3321 х х х х − −

property revaluation 3322 х х − х − −

expenses dut directly to capital reduction 3323 х х − х (615) (615)

reduction of par value of shares 3324 − х х х − −

reduction of quantity of shares 3325 − − х х − −

reorganisation of the legal person 3326 − − − − − −

dividends 3327 х х х х (308 583) (308 583)

Additional capital change 3330 х х (87 303) х 87 303 х

Reserve capital change 3340 х х х 31 356 (31 356) х

Capital stock for 31 December 2013 3300 1 228 326 − 62 850 022 184 249 12 078 295 76 340 892

3.2. Adjustments in connection with change of accounting policy and correction of errors

Capital change for 2012

Indicator As at 31 at the expense at the expense Code December 2011 of net profit (loss) of other factors As at 31 December 2012

1 2 3 4 5 6

Capital - total

before adjustments 3400 56 143 825 4 059 866 16 213 639 76 417 330

adjustment in connection with:

accounting policy change 3410 − − − −

correction of errors 3420 − (192 107) − (192 107)

after adjustments 3500 56 143 825 3 867 759 16 213 639 76 225 223

222

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

Capital change for 2012

Indicator As at 31 at the expense at the expense Code December 2011 of net profit (loss) of other factors As at 31 December 2012

1 2 3 4 5 6

including:

retained earnings (uncovered loss):

before adjustments 3401 10 945 528 1 234 328 (81 070) 12 098 786

adjustment in connection with:

accounting policy change 3411 − − − −

correction of errors 3421 − (192 107) − (192 107)

after adjustments 3501 10 945 528 1 042 221 (81 070) 11 906 679

«Other articles of the capital, on which adjustments are performed:»

(under articles)

before adjustments 3402 45 198 297 2 825 538 16 294 709 64 318 544

Authorised capital 1 019 286 − 209 040 1 228 326

Own stocks repurchased from shareholders − − − −

Additional capital 44 026 118 2 825 538 16 085 669 62 937 325

Reserve capital 152 893 − − 152 893

adjustment in connection with:

accounting policy change 3412 − − − −

correction of errors 3422 − − − −

after adjustments 3502 45 198 297 2 825 538 16 294 709 64 318 544

3.3. Net assets

Indicator Code As at As at As at 31 December 2013 31 December 2012 31 December 2011

Net assets 3600 76 340 892 76 225 223 56 143 825

Director General A.V. Sorochinskiy

Chief Accountan G.V. Kuznetsova

07 March 2014

223

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

Cash Flow Statement for 12 months 2013 Codes Form under ARCMD 0710004

Date (day, month, year) 31 | 12 | 2013

Company JSC Lenenergo under ARCBO 00107131

Taxpayer Identification Number TIN 7803002209

Type of business activity power industry ADCEA 40.10.2 under ARCFI/ARCFO 1 22 47|34 Business legal structure / Form of ownership 384 private or foreign property joint stock company / joint under ARCM

Unit RUB thousand

Indicator Line code For 2013 For 2012

1 2 3 4

Cash flows from current transactions 4110 36 688 051 35 611 624

Receipts - total

including:

from sale of products, goods, works and services 4111 35 698 056 34 888 664

including from sale of products, the goods, works and services to the parent, affiliated and dependent companies 411101 1 025 −

rent payments, licence fees, royalty, commission fee and other similar payments 4112 42 084 23 885

including from rent payments, licence fees, royalty, commission fee and other similar payments from the parent, affiliated and dependent companies 411201 − 13 790

from resale of financial investments 4113 − −

including from resale of financial investments to the parent, affiliated and dependent companies 411301 − −

other receipts 4119 947 911 699 075

including other receipts from the parent, affiliated and dependent companies 411901 185 15

Payments - total 4120 (26 708 113) (29 286 842)

including:

to suppliers (contractors) for raw, materials, works, services 4121 (16 888 213) (20 995 480)

including to suppliers (contractors) for raw, materials, works, services of the parent, affiliated and dependent companies 412101 (4 985 906) (752 469)

in connection with payment for the labour of employees 4122 (4 666 081) (4 292 400)

debenture interests 4123 (2 226 244) (2 116 242)

including debenture interests to the parent, affiliated and dependent companies 412301 − −

profits tax of the organisations 4124 (740 765) (148 888)

other payments 4129 (2 186 810) (1 733 832)

including other payments to the parent, affiliated and dependent companies 412901 (514 906) (556 252)

Balance of cash flows from current transactions 4100 9 979 938 6 324 782

224

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

Indicator Line code For 2013 For 2012

1 2 3 4

Cash flows from investment transactions 4210 570 450 298 504

Receipts - total

including:

from sale of non-current assets (except financial investments) 4211 6 298 1 736

including from sale of non-current assets (except financial investments) to the parent, affiliated and dependent companies 421101 − −

from sale of stocks of other organisations (participation share) 4212 20 −

including from sale of stocks of other organisations (participation share) to the parent, affiliated and dependent companies 421201 − −

from return of the given loans, from sale of debt securities (the rights of the requirement of money funds to other persons) 4213 − −

including from return of the given loans, from sale of debt securities (the rights of the requirement of money funds to other persons) of the parent, affiliated and dependent companies 421301 − −

dividends, percent on debt financial investments and similar receipts from individual share in other organisations 4214 564 132 296 768

including dividends, percent on debt financial investments and similar receipts from individual share in other organisations from the parent, affiliated and dependent companies 421401 692 757

other receipts 4219 − −

including other receipts from the parent, affiliated and dependent companies 421901 − −

Payments - total 4220 (14 534 786) (10 133 713)

including:

in connection with acquisition, creation, modernisation, reconstruction and preparation for use of non-current assets 4221 (14 147 397) (9 854 032)

including payments to the parent, affiliated and dependent companies in connection with acquisition, creation, modernisation, reconstruction and preparation for use of non-current assets 422101 (5 949) (2 568)

in connection with share acquisition of other organisations (participation shares) 4222 − −

including payments to the parent, affiliated and dependent companies in connection with share acquisition of other organisations (participation shares) 422201 − −

in connection with acquisition of debt securities (the rights of the requirement of money funds to other persons), granting of loans to other persons 4223 (7 000) −

including payments to the parent, affiliated and dependent companies in connection with acquisition of debt securities (the rights of the requirement of money funds to other persons), granting of loans to other persons 422301 − −

debenture interests, included in cost of investment assets 4224 (380 389) (279 681)

including the debenture interests, included in cost of investment assets to the parent, affiliated and dependent companies 422401 − −

other payments 4229 − −

including other payments to the parent, affiliated and dependent companies 422901 (624) −

Balance of cash flows from investment transactions 4200 (13 964 336) (9 835 209)

225

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

Indicator Line code For 2013 For 2012

1 2 3 4 Cash flows from financial transactions 4310 21 843 167 14 780 755 Receipts - total including: receipt of credits and loans 4311 18 843 076 11 237 136 including reception of credits and loans from the parent, affiliated and dependent companies 431101 − − money deposits of proprietors (participants) 4312 − − including money deposits of proprietors (participants) of the parent, affiliated and dependent companies 431201 − − from a share issue, increase in shares of participation 4313 3 000 091 2 043 619 including from a share issue, increase in shares of participation of the parent, affiliated and dependent companies 431301 3 000 000 2 043 619 from bond issue, bills and other debt securities, etc. 4314 − − including from bond issue, bills and other debt securities, etc. Of the parent, affiliated and dependent companies 431401 − −

other receipts 4319 − 1 500 000 including other receipts from the parent, affiliated and dependent companies 431901 − − Payments - total 4320 (17 651 181) (14 903 346) including: to proprietors (participants) in connection with the repurchase of stocks from them (participation share) of the organisation or their secession as participants 4321 − − including to proprietors (participants) in connection with the repurchase of stocks from them (participation share) of the organisation or their secession as participants of the parent, affiliated and dependent companies 432101 − − on payment of dividends and other payments on profit distribution for benefit of proprietors (participants) 4322 (285 052) (141 742) including on payment of dividends and other payments on profit distribution for benefit of proprietors (participants) of the parent, affiliated and dependent companies 432201 − − in connection with repayment (redemption) of bills and other debt securities, return of credits and loans 4323 (13 268 500) (10 393 000) including in connection with repayment (redemption) of bills and other debt securities, return of credits and loans to the parent, affiliated and dependent companies 432301 − − other payments 4329 (4 097 629) (4 368 604) including other payments to the parent, affiliated and dependent companies 432901 − − Balance of cash flows from financial transactions 4300 4 191 986 (122 591) Balance of cash flows for the accounting period 4400 207 588 (3 633 018) Balance of cash and cash equivalents on the accounting period beginning 4450 3 162 812 6 795 830 Balance of cash and cash equivalents on the accounting period end 4500 3 370 400 3 162 812 Size of influence of rate changes of foreign exchange to rouble 4490 − −

Director General A.V. Sorochinskiy

Chief Accountan G.V. Kuznetsova

07 March 2014

226

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

Explanations to the Accounting Reporting of JSC Lenenergo for 2013

1. The Company’s Overview industry and electrification Lenenergo of an award of October Lenenergo, Open Joint-stock Company of the Power Industry and revolution and an award of Patriotic war of the I degree in the limits Electrification (further – the Company) was established pursuant defined in the Plan of privatization of the state enterprise of the power to Decrees of the President of the Russian Federation # 922 of 14 August industry and electrification Lenenergo, approved by the Chairperson 1992 “About peculiarities of the reorganization of state enterprises, of the Committee on City Property Management of the administration associations, organizations of the fuel and energy complex into joint of St. Petersburg on 22 December 1992. stock companies”, # 923 of 15 August 1992 “About organization of management of the power grid complex of the Russian Federation Legal address of the Company: 196247, St. Petersburg, Constitution in the conditions of privatization”, # 1334 of 5 November 1992 “About Sq, 1 realization in the electric power industry of the Decree of the President Postal address of the Company: 196247, St. Petersburg, Constitution of the Russian Federation # 922 of 14 August 1992 “About peculiarities Sq, 1 of the reorganization of state enterprises, associations, organizations TIN (RRC): 7803002209 (781001001) of the fuel and energy complex into joint stock companies”. PSRN: 1027809170300

The Company’s constituent document is the Charter. The Company’s State registration date: 22 January 1993, certificate # 2084. The body Charter in the new edition was approved at the Annual General Meeting which carried out the state registration: Registration Chamber of Shareholders of the Company on 20.06.2012 (Minutes # 2/2012). of the Administration of St. Petersburg. The Company was established without limitation of the period of activity. The Company is the assignee of the rights and obligations of the state enterprise – the Leningrad production association of the power The Company includes the following branches for the reporting date:

# Name Location

1 Vyborg power distribution networks 188800, Vyborg, Severny Val, 5

2 Gatchina power distribution networks 188300, Gatchina, Konstantinova St, 2

3 Cable network 197022, St. Petersburg, Akademika Pavlova St, 5, let. B

4 Kingisepp power distribution networks 188480, Kingisepp, K. Marks Ave, 64

5 Novaya Ladoga power distribution networks 187453, Novaya Ladoga, Sadovaya St, 25

6 Suburban power distribution networks 196608, St. Petersburg, Pushkin, Setevaya St, 25

7 Tikhvin power distribution networks 187500, Tikhvin, SS-143

8 St. Petersburg high-voltage networks 191127, St. Petersburg, Sinopskaya Emb, 60/62, let. A

9 Management of objects under construction 196247, St. Petersburg, Leninskiy Ave, 160

Nowadays JSC Lenenergo carries out its activities in the territory Average personnel number for the reporting year of 2013 totaled of two subjects of the Russian Federation: St. Petersburg and 6,181 people and for the previous reporting year of 2012 – 6,007 the Leningrad Region. people.

The main goal of the Company’s activity is to gain profit. The Company’s authorized capital is completely paid, and as The Company is entitled to carry out the following types of activity at 31.12.2013 it constitutes 1,228,325,624 and 8/100 pieces to gain profit: of shares: Ordinary registered uncertified shares, pcs 1,135,061,313.08

●● electric power transmission; : Preferred registered uncertified shares 93 264 311,00 ●● power networks operation activities; of type A, pcs ●● connection of additional capacity to consumers; ●● other types of activity not restricted by the legislation of the Russian Federation.

227

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

The holder of the Company’s register of shareholders As at 31.12.2013 JSC Russian Grids owns 53.41% from ordinary is JSC Registrar R.O.S.T. shares (49.36% from the Company’s authorized capital), and the Government of St. Petersburg owns 26.57% from ordinary Total number of shareholders of JSC Lenenergo is 6,373, from them: shares (24.56% from the Company’s authorized capital).

●● accounts of legal entities – 42; ●● accounts of joint ownership – 46; ●● accounts of nominal holders (including the account of the central depository NRD) – 2; ●● account of pawnbrokers – 1.

The largest shareholders of the Company are as follows:

Name % from ordinary shares % from authorized capital

JSC Russian Grids 53.41% 49.36%

St. Petersburg represented by CPMC 26.57% 24.56%

JSC IDGC of Ural 7.15% 8.46%

RUSENERGO FUND LIMITED 2.24% 4.25%

ENERGYO SOLUTIONS RUSSIA (CYPRUS) LIMITED 3.40% 3.18%

Citigroup Global Markets Limited 2.10% 1.94%

Other 5.13% 8.25%

Total 100.00% 100.00%

The shareholder structure of JSC Lenenergo is given taking into Other shareholders during implementation of the pre-emptive right account disclosure of nominal holders of shares for the last closing transferred to the Company RUB 91,282 rubles as of 31.12.2013 for date of the register of shareholders – 23.12.2013. acquisition of 15,063 pieces of additional shares.

On September 10, 2013 additional issue of ordinary shares The Company’s auditor is KPMG, Closed Joint Stock Company. of JSC Lenenergo in the quantity of 926,876,304 pieces was Legal address: Russia, 129110, Moscow, Olimpiysky Ave, 18/1, office 3035. registered. According to the Decision on additional issue the expiry TIN 7702019950, RRC 784043001. date of securities placement is the placement date of the last share of the additional issue, but not later than the day in which expires 1 CJSC KPMG is the member of SRO Non-Profit Partnership “Auditor year from the date of the state registration of the additional issue Chamber of Russia” (membership certificate # 255 of December 28 of securities. 2009). Professional risks of CJSC KPMG are insured in Ingosstrakh for over USD 5 mln pursuant to requirements for auditor activity and Shareholders of the issuer pursuant to Article 40 of the Federal Law services accompanying audit (including to legal services). “About Joint Stock Companies” have the pre-emptive right to acquire ordinary shares placed by an open subscription in the quantity The Company’s auditor was elected by the Annual General Meeting proportional to the number of the issuer’s ordinary shares belonging of Shareholders on 20.06.2013. to them. The period of validity the pre-emptive right (the term during which the Statement for acquisition of shares under the pre- Director General of JSC Lenenergo – emptive right, and the document on payment of acquired shares Sorochinskiy Andrey Valentinovich. should be received by the issuer), is two hundred forty (240) days from 23.09.2013 – the date of notification of shareholders. Chief Accountant of JSC Lenenergo – Kuznetsova Galina Vladimirovna. On September 26, 2013 JSC Rosseti during implementation of the pre-emptive right transferred 3 billion 30 kopeks (federal budget funds) for acquisition of 495,049,505 pieces of additional shares.

228

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

The Company has the following governing bodies:

The Company’s Board of Directors was elected by the decision of the Annual General Meeting of Shareholders on 20.06.2013 in 13 people. The composition of the Board of Directors consists:

# Full name of the candidate Position of the candidate (at the moment of promotion)

Chairperson of the Board of Directors of JSC Lenenergo. Member of the Management Board, First 1 Kazachenkov Andrey Valentinovich Deputy Chairperson of the Management Board of JSC FGC UES

Deputy Chairperson of the Board of Directors of JSC Lenenergo. Director of Strategic Development 2 Lebedev Sergey Yuryevich Department of JSC Rosseti

3 Sinkin Dmitry Borisovich Independent Director

Vice-chairperson the Committee on Power and Engineering Support of the Government of St. 4 Rozova Eugenia Evgenyevna Petersburg

5 Boltenkov Ivan Aleksandrovich First Vice-chairperson of the Committee on Tariffs of St. Petersburg

6 Ageev Valery Valentinovich Director General of the branch of JSC FGC UES- MES Northwest

7 Akhrimenko Dmitry Olegovich Head of Project Group on optimization of ownership structure of the group JSC OMZ

8 Vasilyev Sergey Vyacheslavovich Director of Department of Power Industry Development of the Ministry of Power Industry of Russia

9 Voronin Alexey Yuryevich Independent Director

10 Komarov Valentin Mikhailovich Deputy Head of Organization of Special Projects of JSC Rosseti

11 Magadeev Ruslan Raisovich Director of Department of Operative and Technological Management of JSC Rosseti

12 Sorochinskiy Andrey Valentinovich Director General of JSC Lenenergo

13 Umanets Natalya Anatolyevna Director of Technical Supervision Legal Support of JSC Rosseti

The composition of the Management Board consists:

# Full name Position in JSC Lenenergo

1 Sorochinskiy Andrey Valentinovich Director General of JSC Lenenergo, Chairperson of the Management Board

2 Artemyev Maxim Sergeyevich Deputy Director General on Technical Affairs – Chief Engineer

3 Zykov Andrey Vladimirovich Deputy Director General on Development and Implementation of Services

4 Meshcheryakov Ilya Georgiyevich Deputy Director General on Capital Construction

5 Melnichenko Evgeny Ivanovich Deputy Director General on Corporate Governance

6 Nikonov Aleksander Dmitriyevich Deputy Director General on Security

The composition of the Audit Commission of JSC Lenenergo was elected by the Annual General Meeting of Shareholders on 20.06.2013 in 5 people

# Full name Position of the candidate

Head of Division of Standards and Methodology of Department of Corporate Governance and 1 Adler Yury Veniaminovich Shareholder Relations of JSC Rosseti

2 Kim Svetlana Anatolyevna Head of Investments Control of Department of Control and Audits of JSC FGC UES

Head of Department of the Committee on City Property Management of the Government of St. 3 Kozelskiy Vladislav Vilorgovich Petersburg

Head of Division of the Committee on Power and Engineering Support of the Government of St. 4 Uskov Valery Evgenyevich Petersburg

5 Kabizskina Elena Aleksandrovna Deputy Head of Department of Control and Audits of JSC FGC UES

229

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

The Company has the following subsidiaries and dependent companies:

Name of SDC % of participation of JSC Lenenergo in the authorized capital of SDC CJSC Lenenergospetsremont 100.00 JSC Power Service Company Lenenergo 100.00 CJSC Kurortenergo 98.13 CJSC Tsarskoselskaya Energy Company 96.95 JSC Energouchet 40.00

2. Basis of Information Presentation 3. Disclosures to the Balance Sheet Indicators in the Reporting The present accounting (financial) reporting of JSC Lenenergo 3.1. Intangible Assets is prepared according to the legislation on accounting of the Russian Federation and the Company’s accounting policies approved by Order The accounting of intangible assets is made by the Company # 764 of 29.12.2012, on the basis of consolidated data on separate pursuant to the Accounting Regulations “Accounting of intangible balances of the Company’s branches. assets” of RAS 14/2007 approved by Order of the Ministry of Finance of the Russian Federation # 153n of 27.12.2007. The accounting (financial) reporting of the Company is made taking into account the samples of forms recommended for application Intangible assets purchased for a fee are estimated in the sum by Order of the Ministry of Finance of the Russian Federation # 66-n of the actual expenses on their acquisition without compensated taxes of 02.07.2010 “About the forms of accounting reporting” taking into (VAT). account the amendments brought by Order of the Ministry of Finance of the Russian Federation # 124-n of 05.10.2011. JSC Lenenergo establishes useful life by each type of depreciated intangible assets in their statement on the account proceeding from Responsibility for organization of accounting and submission the expected term of use of this item during which the Company can of the Company’s authentic accounting reporting, observance receive cost benefits, thus the term of useful life of an intangible of legislation at performance of business operations, and provision assets item is defined by a specially created commission. of obligatory audit are born by the Director General, Deputies Director General and Directors of the Company branches. Intangible assets are accepted to accounting at their actual (initial) cost defined as of the date of acceptance of the asset The Chief Accountant – Head of Department of accounting and to accounting. tax accounting and reporting of the Company is responsible for conducting accounting, preparation of the accounting reporting, Intangible assets are shown in the reporting at initial cost net formation of accounting policies, and provision of the full and authentic of accumulated depreciation. Depreciation of intangible assets accounting reporting to internal and external users. is charged by the linear way.

The accounting (financial) reporting of the Company for 2013 is made The structure of intangible assets on the beginning and for the end without derogations from principles and rules of accounting which can of the reporting period and their movement is given in Application take place in case when such rules do not allow reflecting authentically 5 to the balance sheet of the Company “Existence and movement a property status and financial result of the Company’s activities. of intangible assets”.

Each essential indicator is disclosed in the accounting (financial) For the end of the year the following assets are in the structure reporting of the Company. An indicator is considered essential if its of intangible assets: information databases and information non-disclosure in a separate line in the balance sheet and the profit and systems, electronic archive of the branch Cable network. loss statement can affect economic decisions of the interested users made on the basis of the reporting information. The intangible asset “Lenenergo website” is not written off from accounting after complete repayment of cost due to its use for The Company calculates and pays taxes centrally according gaining cost benefits and advertising purposes. to the legislation of the Russian Federation on taxes and fees, the legislation of subjects of the Russian Federation on taxes and fees, There was no retirement of assets from the structure of intangible regulatory legal acts of local governments on taxes and fees, taking assets in the reporting year. into account software used for accounting in JSC Lenenergo.

230

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

3.2. Research, Developmental and Technological Works (R&D) Depreciation of fixed assets acquired after 01.01.2002 is made under the norms calculated proceeding from the useful lives defined according The accounting of expenses on research, developmental to the Classification of fixed assets included in depreciation groups and technological works is made by the Company pursuant approved by Resolution of the Government of the Russian Federation # 1 to the Accounting Regulations “Accounting of expenses on research, of January 01, 2002. developmental and technological works” of RAS 17/02 approved by Order of the Ministry of Finance of the Russian Federation # 115n Fixed assets are reflected in the reporting at their initial or replacement of 19.11.2002. cost net of the sums of depreciation which has been accumulated for the whole term of operation. Write-off of expenses on each executed R&D work is made by the linear way on the basis of the term established proceeding Initial cost of fixed assets received on the contracts providing performance from the expected term of use of this item from the moment of liabilities (payment) by non-cash funds is recognized as the cost of values of the actual application of the received results, thus the useful which are transferred or subject to transfer from JSC Lenenergo. life of R&D item is defined by a specially created commission at the moment of recognition of results of work. Statement on balance of leasing property is carried out at the redemption cost defined in the contract. R&D structure on the beginning and for the end of the reporting period and its movement are given in the tables of explanations On the basis of RAS 15/2008 the cost of investment asset joins interest to the balance sheet of the Company in Application 6 “Existence payable to the creditor directly associated with acquisition, construction or and movement of R&D results” and in Application 7 “Incomplete manufacturing of the investment asset. and unexecuted R&D and incomplete operations on acquisition of intangible assets”. In the reporting year accrual of interest on loans and credits for RUB 401,732 thousand (in 2012 – RUB 279,681 thousand) was included In the reporting year two complete works that yielded positive in the structure of the investment asset of JSC Lenenergo. results “Laser air-scanning” and “Signaling of relay protection and automatics” for the total amount of RUB 76 mln with the useful life The valuation of property purchased for a fee is carried out by summarizing of 36 months each were entered in the structure of R&D. The term of actually made expenses on its purchase; property received is established by a specially created commission on inventory gratuitously at market cost for the posting date; property manufactured of R&D items and expenses on their creation on the basis of Order by the organization at the cost of its manufacturing. on commissioning of these works. The revaluation of homogeneous items of fixed assets is carried out 3.3. Fixed Assets in the order prescribed by the legislation on the basis of the relevant administrative document of the Company. 3.3.1. Fixed assets (except for construction in progress) Cost performance of fixed assets on groups are given in the table The accounting of fixed assets is made by the Company pursuant of Application 8 “Existence and movement of fixed assets” of Explanations to the Accounting Regulations “Accounting of fixed assets” of RAS to the balance sheet of the Company. 6/01 approved by Order of the Ministry of Finance of the Russian Federation # 26n of 30.03.2001, and the Methodical instructions 3.3.2. Construction in progress on accounting of fixed assets approved by Order of the Ministry of Finance of the Russian Federation # 91n of 13.10.2003. The accounting of construction in progress is made by the Company pursuant to the Regulations on accounting and reporting in the Russian The assets intended for carrying out of works, rendering of services, Federation approved by Order of the Ministry of Finance of the Russian or for administrative needs of JSC Lenenergo during the term Federation # 34n of 29.07.1998, and pursuant to the Regulations exceeding 12 months and over RUB 40,000 are referred to fixed on accounting of long-term investments (the letter of the Ministry assets. of Finance of Russia # 160 of 30.12.1993) in the part not contradicting further regulatory legal acts on accounting. Fixed assets are accepted to accounting at their initial cost. In 2013, fixed assets were commissioned in physical expression as follows: Depreciation of fixed assets commissioned before 01.01.2002 is calculated by the linear way under the norms approved ԔԔ 907 MVA of transformer capacity under the plan of 1,051 MVA; by Resolution of the Government of the USSR # 1072 of 22.10.1990. ԔԔ 1,846 km of transmission lines under the plan of 696 km.

231

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

Regarding the reliability program in 2013 reconstruction 3.4. Other Non-Current Assets of distribution networks 0.4-10 kV of the total length of 231 km with the input of transformer capacity of 36.4 MVA is executed. The following sums (in RUB thousand) are reflected in the line “Other non-current assets”: Cost performance of construction in progress movement is given in the table of Application 12 “Incomplete capital investments”.

Name 31.12.2013 31.12.2012 31.12.2011

Other non-current assets, total 623,572 647,114 527,909

Including:

Expenses of the Company to purchase capacity from grid organizations for 537,167 568,115 499,752 subsequent technological connection of the Company’s customers

Insurance 82,954 129,438 106,298

Total 706,526 776,552 634,207

3.5. Financial Investments

The accounting of financial investments is made by the Company Under debt securities on which current market value is not pursuant to to the Accounting Regulations “Accounting of financial determined, a difference between initial cost and par value during investments” of RAS 19/02 approved by Order of the Ministry their term of circulation is reflected in other income or expenses. of Finance of the Russian Federation # 126n of 10.12.2002. At retirement of an asset accepted to the account as a financial Accounting unit of financial investments in the form of shares investment on which current market value is not determined its and bonds is a consignment of (shares) bonds of one issuer. A unit value is defined as initial cost of each unit of account. of account of other investments is the concrete financial investment. Investments in the shares considered as a part of long-term Financial investments are accepted to the account in the sum financial investments are reflected in the reporting at initial cost as of the actual expenses on each unit of investments. their securities do not circulate in stock market.

Financial investments are subdivided into two groups: Financial investments considered on balance of the Company as at 31.12.2012 classified as long-term investments into subsidiaries, ԔԔ on which current market value is determined; dependent and other companies, taking into account the created ԔԔ on which current market value is not determined. reserve under depreciation total RUB 897,795 thousand.

Financial investments on which it is possible to determine current market value, are reflected in the accounting reporting for the end of fiscal year at their current market value by adjustment of their valuation for the previous reporting date. A difference between the valuation of such securities for the current reporting date and the previous valuation is reflected in other expenses and income.

232

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

Name Type of shares Quantity Share Book value as Year of Book value as in the authorized capital at 31.12.2011, RUB investment at 31.12.2012, RUB

ordinary 1 599 CJSC Kurortenergo 98.13% 517,140,000 2010 517,140,000 preferred 77

CJSC Tsarskoselskaya Energy ordinary 7 229 96.96% 372,312 640 2010 372,312,640 Company preferred 1 272

JSC Northwest Energy ordinary 74 180 864 12.51% 49,317,987 2005 - Management Company preferred 38 063 689

CJSC LESR ordinary 1,000 100% 7,337,778 1999 7,337,778

JSC Power Service Company ordinary 1,000,000 100% 1,000,000 2011 1,000,000 Lenenergo

CJSC Ruskobank ordinary 105,000 5.25% 105,000 - -

JSC Energouchet ordinary 4,000 40% 4,000 1993 4,000

AOZT Akvatron ordinary 2 1.33% 100 1991 -

CJSC Velma preferred 8 7.69% (data of 2002) 8 - -

Total: 947,217,513 897,794,418

As of 31.12.2012 a reserve under depreciation of financial from financial operations”, namely, on the line “Other receipts” (line investments concerning JSC Ruskobank shares in the amount of RUB 4139) in the amount of RUB 1,500,000 thousand and on the line “Other 105 thousand was created by the Company. payments” in the amount of RUB 3,766,000 thousand (line 4329).

The indicated shares of JSC Ruskobank were sold on 18.04.2013 In 2013 the cash flow connected with deposits was reflected according to the obligatory offer on acquisition of shares in the section “Cash flows from financial operations” in brief, of JSC Ruskobank arrived in the Company from LLC Ursa Capital on the line “Other payments” (line 4329) in the sum of RUB Projects on the basis of the decision of the Board of Directors 4,018,110 thousand, thus a total amount of receipts for 2013 of JSC Lenenergo of 08.04.2013 (Minutes # 27 of 10.04.2013) pursuant was RUB 8,202,729 thousand, and payments – RUB 12,220,839 to sub-item 21 of item 15.1 Art. 15 of the Charter of JSC Lenenergo. thousand.

As of 31.12.2012 a reserve under depreciation of financial investments 3.6. Inventories concerning JSC Northwest Energy Management Company shares in the amount of RUB 49,318 thousand was created by the Company. The accounting of inventories is made by the Company pursuant to the Accounting Regulations “Accounting of inventories” of RAS In the reporting year a write-off of shares of CJSC Velma in connection 05/01 approved by Order of the Ministry of Finance of the Russian with submission by the Federal Tax Service of the data on termination Federation # 44n of 09.06.2001, and the Methodical instructions of activities of the specified joint stock company into the Uniform State on accounting of inventories approved by Order of the Ministry Register of Legal Entities is carried out. of Finance of the Russian Federation # 119n of 28.12.2001.

As of 31.12.2012 in the balance sheet of the Company deposits Inventories are accepted to accounting on the actual cost of their on the bank deposit contracts in the amount of RUB 6,284,109 acquisition or manufacturing. At output of inventories to production thousand with a maturity date during 12 months are reflected or other retirement their valuation is made by the FIFO method in the structure of short-term financial investments. (First-In-First-Out).

Cost performance of the movement of financial investments are given The cost of tools, stock and household supplies is written off in the table of Application 14 “Existence and movement of financial on expenses in full when sending in operation. With a view investments”. of ensuring their safety a quantitative account is organized.

At preparation of the Cash Flow Statement the cash flow connected Cost performance of inventories is given in the table of Application with deposits was reflected in 2012 in details in the section “Cash flows 17 “Existence and movement of inventories”.

233

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

3.7. Receivables and Payables From the total amount of receivables:

3.7.1. Receivables ԔԔ long-term receivables – RUB 111,573 thousand (1.1% from total receivables); As of 31.12.2013 the Company’ receivables totaled RUB 10,071,190 ԔԔ short-term receivables – RUB 9,959,617 thousand (98.9% from thousand, that is by RUB 2,274,238 thousand (29.2%) higher than total receivables). for the year beginning when receivables totaled RUB 7,796,952 thousand.

Growth (+) Line code 31.12.2012 31.12.2013 Drop (-) Growth (+) % Indicator of the BS (RUB thousand) (RUB thousand) Share, % (RUB thousand) Drop (-) %

Cumulative receivables 1230 7,796,952 10,071,190 100.0% 2,274,238 29.2%

Receivables (over 12 months) including: 1231 201,158 111,573 1.1% -89,585 -44.5%

under leasing contracts 117,733 32,880 0.3% -84,853 -72.1%

under technological connection contracts 4,867 2,983 0.0% -1,884 -38.7%

other 78,558 75,710 0.8% -2,848 -3.6%

Receivables (up to 12 months) including: 1232 7,595,794 9,959,617 98.9% 2,363,823 31.1%

Buyers and customers, including: 123201 2,790,090 5,894,969 58.5% 3,104,879 111.3%

Power trading companies including: 1,398,606 3,151,084 31.3% 1,752,478 125.3%

third-party power trading companies 1,347,018 1,664,820 16.5% 317,802 23.6%

JSC PSK 51,588 1,486,264 14.8% 1,434,676 2,781.0%

Subscribers on grid connection 1,113,622 2,102,797 20.9% 989,175 88.8%

Other buyers and customers 277,862 641,089 6.4% 363,227 130.7%

Advances paid, including: 123205 255,880 540,122 5.4% 284,242 111.1%

to suppliers of materials 3,892 4,309 0.0% 417 10.7%

to repair organizations 10,872 125 0.0% -10,747 -98.9%

to service providers and other 241,116 535,688 5.3% 294,572 122.2%

Other debtors, including: 123206 4,549,824 3,524,526 35.0% -1,025,298 -22.5%

VAT from advances received 2,398,039 2,453,567 24.4% 55,528 2.3%

overpayment on taxes 425,633 379,176 3.8% -46,457 -10.9%

claims charges 1,383,147 288,826 2.9% -1,094,321 -79.1%

under contracts with NPF of power industry 132,439 139,750 1.4% 7,311 5.5%

under lease agreements 174,219 84,852 0.8% -89,367 -51.3%

litigation payments - 25,417 0.3% 25,417

For the 12 months of 2013 in comparison with the beginning of the period, The sum of advances paid on capital construction is reflected in the balance the general increase in receivables is observed. Cumulative growth sheet under the line 1155 and as of 31.12.2013 it was RUB 475,875 thousand of receivables (w/o advances paid on capital construction and acquisition (w/o VAT, net of the reserve for bad debts in the sum of RUB 107,156 of fixed assets) was RUB 2,274,238 thousand, thus long-term receivables thousand), and decreased for the reporting period by RUB 287,260 thousand. decreased by RUB 89,585 thousand (or by 44.5%), and short-term The sum of VAT from advances on capital construction in the amount of RUB receivables increased by RUB 2,363,823 thousand (or by 31.1%). 82,417 thousand is reflected on the line 1260 of the balance sheet “Other current assets”.

234

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

Advances paid, including VAT, in the amount of RUB 573,002 thousand are for the rendered services (for the end of the reporting period reflected in receivables on the lines 123103 and 123205 “Advances paid” receivables totaled RUB 72,199 thousand). This debt was of the balance sheet. restructured in 2014. ԔԔ increase in short-term receivables for services in technological Cumulative decrease in long-term receivables for the end of the reporting connection by RUB 989,175 thousand (89%). For the end period by RUB 89,585 thousand was primarily driven due to a drop in debt of the reporting period receivables under these services totaled RUB on contracts of financial rent (leasing) for the sum of RUB 84,853 thousand 2,102,797 thousand. (72.1%). ԔԔ This growth is connected with increase in the volumes of debt concerning which transfer of assets (equipment and buildings As a part of the Company’s long-term receivables a secured deposit under of substations) to the Company in payment of the corresponding the lease agreement of the building of JSC Lenenergo located on Constitution receivables is planned. As of 31.12.2013, the total value of receivables Square is considered, as the agreement is signed for the term of 10 years providing a property payment made RUB 1,406,217 thousand. in the amount of RUB 71,721 thousand. ԔԔ cumulative growth of debt of other buyers and customers for the sum of RUB 363,227 thousand (130.7%) that is connected with Increase in cumulative short-term receivables by RUB 2,274,238 thousand increase in receivables on the identified non-contractual electricity (29.2%) concerning the level of the year beginning is caused by impact consumption by RUB 377,816 thousand (213.7%). Due to the legislation of the following factors: changes calculations of the volume of non-contractual consumption is determined by cable cutting that increased both the cost of non- ԔԔ increase in debt for RUB 3,104,879 thousand (111.3%) under the line contractual consumption, and the number of refusals on its payment. “Buyers and customers” that was caused by: ԔԔ cumulative growth of debt on the line “Advances paid” (short-term) for ‣‣ Cumulative growth of debt of power trading companies for services the sum of RUB 284,242 thousand (111.1%) that is generally connected in electric power transmission by RUB 1,752,478 thousand (125.3%) with a growth of advances paid to service providers for the sum that was generally driven by: of RUB 294,572 thousand, at a simultaneous drop in advances paid ‣‣ non-payment by the largest guaranteeing supplier, to repair organizations by RUB 10,747 thousand. JSC Petersburg Sales Company, of its debt for December ԔԔ Under the line “Other debtors” there was a decrease in receivables 2013. For the end of 2013 receivables totaled RUB 1,434,676 for the sum of RUB 1,025,298 thousand (22.5%) that is generally thousand. Payment of this debt was made in full in 2014; connected with decrease in calculations for claims in the amount ‣‣ increase in receivables of JSC RKS-energo for the sum of RUB 1,094,321 thousand. of RUB 454,432 thousand caused by disagreements with the contractor that were settled at the end of December 2013 Specific weight of receivables as of 31.12.2013 in total assets and specification of the physical volumes of rendered services of the Company was 6.8% that is 2% higher than the value of this indicator (for the end of the reporting period receivables totaled RUB for the end of 2012 following the results of which it was 5.9%. 701,611 thousand); ‣‣ drop in receivables by RUB 382,262 thousand from LLC Energia Specific weight of receivables in the sum of current assets decreased Holding that is connected with change of borders of the zone in comparison with the beginning of the year by 3.3% and made 48.2% for of activity of the guaranteeing supplier, JSC Petersburg Sales the end of the reporting period (for the beginning of the reporting period it Company, and, respectively, transition of consumers from LLC was 55.6%). Energia Holding to JSC Petersburg Sales Company (for the end of the reporting period receivables of this contractor totaled RUB Bad debt is receivables of the organization which are not redeemed 93,246,thousand); in the terms established by the contract, and are not provided with ‣‣ increase in receivables in the sum of RUB 48,283 thousand the corresponding guarantees. The reserve for bad debts is created from CJSC KirovTEK (additional branch JSC Kirov Plant) that on the basis of results of the carried-out inventory of receivables is connected with disagreements on the applied tariff (for the end of the organization. The size of the reserve is determined separately on each of the reporting period receivables totaled RUB 62,594 thousand; bad debt depending on a financial status (solvency) of the debtor and ‣‣ growth of receivables of JSC Oboronenergosbyt which is connected an assessment of probability of repayment of the debt in full or in part. with a non-payment by the contractor of the rendered services due to payment delays from end users (for the end of the reporting The Company creates the reserve for bad debts in case if it is more period receivables totaled RUB 57,882 thousand); probable that there will be an outflow of economic resources, or a drop ‣‣ growth of receivables of JSC Second Generation Company of inflow of cost benefits for the Company as a result of non-payment of the Wholesale Electricity Market (OGK-2) for the sum of RUB of the corresponding debt. 35,219 thousand that is connected with the growth of transmission tariff in December 2013 (for the end of the reporting period The reserve for bad debts increased in 2013 by RUB 1,100,794 thousand receivables totaled RUB 136,225 thousand); and as of 31.12.2013 it was RUB 1,121,115 thousand (specific weight ‣‣ growth of receivables of LLC Vyborg Timber Industry Corporation of the reserve for bad debts is 10.1% from total amount of receivables). for the sum of RUB 41,498 thousand that is caused by an underpay In the reporting period at the expense of the reserve for bad debts the bad

235

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

debt for the total sum of RUB 23,396 thousand was written off, the reserve 3.7.2. Accounts payable for bad debts for the sum of RUB 7,236 thousand is restored, and bad debt for the sum of RUB 1,131,426 thousand is included in the reserve for bad As of 31.12.2013 long-term accounts payable of the Company totaled debts. Explanations on the essential sums included in RSD are presented RUB 572,489 thousand that is by RUB 1,013,369 thousand lower than for in section 4.1 Income of organization. the beginning of the year when long-term accounts payable totaled RUB 1,585,858 thousand. Receivables interpretation by types is given in the table of Application 19 “Existence and movement of receivables”. The decrease in long-term accounts payable concerning the level of the year beginning is generally associated with a drop of accounts payable on advances received under contracts of technological connection to electric networks.

Indicator 31.12.2012 31.12.2013 Growth (+), Drop (-)

Long-term accounts payable, including: 1,585,858 572,489 (1,013,369)

Debt on advances received under contracts of 1 335 150 380 432 (954 718)

technological connection 1,335,150 380,432 (954,718)

Rosenergoatom 66,000 66,000 -

LLC Caterpillar Tosno 40,001 38,201 (1,800)

JSC FGC UES 33,148 30,938 (2,210)

Bank Saint Petersburg 1,261 1,261 -

Other 110,298 55,657 (54,641)

In the structure of long-term liabilities it is reflected: ԔԔ restructured debt on the arbitration court of JSC FGC UES in the sum of RUB 30,938 thousand; ԔԔ debt on advances received for technological connection ԔԔ a secured deposit of Bank Saint Petersburg for the building rent to electric networks with a maturity date of liabilities of more services in the sum of RUB 1,261 thousand. than one operational cycle; ԔԔ debt on a bill given-out to Rosenergoatom for the purchased As of 31.12.2013 short-term accounts payable of the Company totaled electric power in the sum of RUB 66,000 thousand with RUB 34,614,993 thousand that is RUB 11,717,270 thousand higher a maturity date in 2020; than for the beginning of the year when accounts payable totaled ԔԔ debt to LLC Caterpillar Tosno in the amount of RUB 38,201 RUB 22,897,723 thousand. thousand for acquisition of fixed assets subject to uniform repayment by tranches per annum;

236

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

thousand RUB

Indicator 31.12.2012 31.12.2013 Growth (+), Drop (-)

Total short-term accounts payable: 22,897,723 34,614,993 11,717,270

Suppliers and contractors, including: 7,941,330 14,206,328 6,264,998

to construction organizations 4,346,530 6,693,461 2,346,931

to repair organizations 395,827 617,470 221,643

to other suppliers and contractors, including: 3,198,973 6,895,397 3,696,424

to grid companies 2,735,947 6,252,290 3,516,343

Payroll liabilities 154,674 234,879 80,205

Debt to off-budget funds 85,956 75,606 (10,350)

Debt on taxes and fees 360,535 642,283 281,748

Advances received, including: 13,874,103 15,189,554 1,315,451

advances on technological connection 13,854,193 15,163,109 1,308,916

Other creditors 481,125 4,266,343 3,785,218

Advances received, including the VAT, in the sum of RUB 15,189,554 in debt on profit tax in the sum of RUB 171,150 thousand and thousand are reflected in the structure of accounts payable on property tax in the sum of RUB 93,733 thousand; on the line 1526 “Advances received” of the balance sheet. ԔԔ increase in advances received by RUB 1,315,451 thousand, Simultaneously, the sum of VAT on advances received in the sum including advances received for technological connection – of RUB 2,453,567 thousand is reflected on the line 123206 “Other by RUB 1,308,916 thousand taking into account a debt receivables” of the balance sheet. reclassification from long-term debt in short-term liabilities. ԔԔ The cumulative increase of (long and short-term) advances The increase of cumulative short-term accounts payable concerning received for technological connection totaled RUB 354,198 the level of the year beginning by RUB 11,717,270 thousand thousand; is generally caused by influence of the following factors: ԔԔ The Company believes that advances received within contracts on technological connection which maturity date does not ԔԔ Increase in debt for the sum of RUB 6,274,998 thousand under exceed an operational cycle (which on this type of service makes item “To suppliers and contractors”, including: 24 months) should be classified as short-term ones. ‣‣ debt growth to network companies for electric power ԔԔ increase in debt of other creditors for the sum of RUB 3,785,218 transmission by RUB 3,516,343 thousand that is generally thousand, including due to the following factors: caused by debt to JSC FGC UES for the sum of RUB ‣‣ reflection of debt on additional issue of ordinary shares 2,905,082 thousand. This debt is connected with change in the amount of RUB 3,000,091 thousand (see Section 1 of the settlement scheme under the contract of rendering “General information” above); of services in electric power transmission on the main ‣‣ providing collateral in a monetary form by participants networks of JSC FGC UES regarding transfer of the payment of competitive procedures. term of cost of the rendered services in 2013 for the period till the end of 2014; Overdue accounts payable as of 31.12.2013 totaled RUB 1,620,695 ‣‣ increase in accounts payable towards construction thousand that makes 4.7% of cumulative accounts payable as organizations for the sum of RUB 2,346,931 thousand of the end of fiscal year. The Company on a continuous basis carries that is connected with the change of the financing scheme out work on minimization of overdue liabilities. Concerning the level of the investment projects which financing is carried out of the year beginning overdue accounts payable decreased by 0.15% upon performance by contractors of their obligations in time percentage points. not less than ninety (90) calendar days from the date of executed works (services), or goods delivery. Change Overdue accounts payable account for advances received under of the financing scheme allowed to minimize risks in cases contracts of technological connection. Violation of the term of unfair works on building (reconstruction) of power network of performance of obligations by the Company is connected with facilities by contract organizations; long terms of coordination of allowing documentation on building ԔԔ increase in debt on taxes and fees in total amount by RUB of power network facilities, and in certain cases – by unfair works 281,748 thousand, generally at the expense of increase on construction of power industry facilities by contract organizations

237

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

involved by the Company for implementation of actions for Additional expenses on loans and credits (cost of information and technological connection of subscribers. Besides, the delayed consulting services, etc.) are considered separately and reflected as obligations are caused by untimely execution by subscribers other expenses in the process of their emergence. of connection specifications. Accrued sums of interest are considered separately. Accounts payable interpretation by types is given in the table in Application 23 “Existence and movement of accounts payable”. Accounting of operations associated with the issue of bonds is conducted pursuant to requirements of RAS 15/01 “Accounting 3.8. Capital of credits and loans”.

Authorized capital of the Company makes RUB 1,228,326 thousand. Interest on received loans and credits directly relating to acquisition As at 31.12.2013 authorized capital of the Company is completely and (or) construction of the investment asset, join in the cost of this paid and consists of ordinary shares in the amount of 1,135,061,313 asset and are repaid by means of depreciation charge, except for and 8/100 pieces with par value of 1 ruble and preferred shares cases when charge of depreciation of the asset is not provided in the amount of 93,264,311 pieces with par value of 1 ruble. by accounting rules.

3.9. Credits and Loans Short-term liabilities – debt funds

The accounting of expenses on loans and credits is made In the structure of short-term liabilities – debt funds there are by the Company pursuant to the Accounting Regulations “Accounting reflected: of expenses on loans and credits” of RAS 15/2008 approved by Order of the Ministry of Finance of the Russian Federation # 107n ԔԔ debt on short-term credits in the volume of RUB 3,813,000 of 06.10.2008. thousand, transferred within a year from long-term into short- term; Accounts payable on received credits and loans are considered taking ԔԔ accrued coupon yields on the bonded loan of a series 04 into account interest payable for the end of the reporting period. in the sum of RUB 49,599 thousand; ԔԔ accrued coupon yields on the bonded loan of a series BO-01 Accrual of interest payable to payment to creditors is made monthly. in the sum of RUB 52,216 thousand; The accrued sums of interest are considered separately. ԔԔ accrued interest on long-term and short-term credits – RUB 54,748 thousand. The accrued coupon yield on bonds is reflected in the structure of other expenses in those reporting periods which these charges concern.

Bank Agreement number and date 31.12.2012 31.12.2013

JSC Sberbank of Russia 0162-1-111710 of 10.11.2010 2,684 1,227,691

JSC Bank VTB in St. Petersburg 81/10 of 28.07.2010 2,615 1,102,622

JSC Bank VTB in St. Petersburg 99/10 of 30.08.10 2,000 852,006

JSC Bank VTB in St. Petersburg 133/10 of 22.11.2010 1,068 501,071

JSC Bank VTB in St. Petersburg 134/10 of 22.11.2010 1,062 138,740

Bonded loan of a series BO-01 4В02-01-00073-А of 20.07.12 - 52,216

Bonded loan of a series 04 4 04 00073-А of 29.03.2012 48,900 49,599

JSC Sberbank of Russia 0162-104513-RKL of 27.09.13 - 12,142

238

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

Bank Agreement number and date 31.12.2012 31.12.2013 JSC Sberbank of Russia 0162-1-115913 of 17.09.13 - 11,756

JSC Sberbank of Russia 0162-104613-RKL of 27.09.13 - 3,111

JSC Sberbank of Russia 0162-1-108313 of 28.06.13 - 2,516

JSC Sberbank of Russia 0162-1-114911 of 27.09.2011 2,362 2,369

JSC Sberbank of Russia 0162-1-115011 of 27.09.2011 864 2,369

JSC Sberbank of Russia 0162-1-114811 of 27.09.2011 2,350 2,357

JSC Sberbank of Russia 0162-1-110811 of 04.07.2011 2,188 2,194

JSC Sberbank of Russia 0162-1-108213 of 28.06.13 - 1,248

JSC Sberbank of Russia 0162-1-108413 of 28.06.13 - 1,248

JSC Bank VTB in St. Petersburg 80/10 of 28.07.10 1,231 1,234

JSC Sberbank of Russia 0162-1-108010 of 29.09.10 1,189 1,192

JSC Sberbank of Russia 0162-1-114711 of 27.09.2011 1,181 1,184

JSC Sberbank of Russia 0162-1-107311 of 19.04.2011 1,135 1,138

JSC Sberbank of Russia 0162-1-105110 of 13.08.10 1,002,257 -

JSC Sberbank of Russia 0162-1-105810 of 30.08.10 1,002,257 -

JSC Sberbank of Russia 0162-1-105910 of 08.09.10 1,002,320 -

VnesheconoMVAnk 110100/1249 of 21.03.2012 60,223 -

JSC Sberbank of Russia 0162-1-107211 of 19.04.2011 2,107 -

JSC Sberbank of Russia 0162-1-110711 of 04.07.2011 2,170 -

JSC Sberbank of Russia 0162-1-102712 of 22.05.2012 2,211 -

Total 3,144,374 3,970,003

In the structure of short-term liabilities for the end of 2013 debt Transfer of long-term liabilities in short-term debt in Q3 2013. on the sum of a principal debt on credit agreements there are ԔԔ Agreement # 133/10 of 22.11.2010 about opening of the non- considered: renewable credit line in the volume on the sum of a principal debt – RUB 500,000 thousand with a maturity date on 22.11.2014. ԔԔ Agreement # 0162-1-111710 of 10.11.2010 about opening Transfer of long-term liabilities in short-term debt in Q4 2013. of the non-renewable credit line in the volume on the sum of a ԔԔ Agreement # 134/10 of 22.11.2010 about opening of the renewable principal debt – RUB 1,225,000 thousand with a maturity date credit line in the volume on the sum of a principal debt – RUB on 10.11.2014. Transfer of long-term liabilities in short-term debt 138,440 thousand with a maturity date on 22.11.2014. Transfer in Q4 2013. of long-term liabilities in short-term debt in Q4 2013. ԔԔ Agreement # 81/10 of 28.07.2010 about opening of the non- Existence of delay of execution of the liability regarding payment renewable credit line in the volume on the sum of a principal debt of the sum of a principal debt and/or fixed interest: no. – RUB 1,100,000 thousand with a maturity date on 28.07.2014. Transfer of long-term liabilities in short-term debt in Q3 2013. Long-term liabilities – debt funds ԔԔ Agreement # 99/10 of 30.08.2010 about opening of the non- renewable credit line in the volume on the sum of a principal In the structure of long-term debt liabilities for the end of 2013 debt – RUB 850,000 thousand with a maturity date on 29.08.2014. the following liabilities are considered:

Creditor Agreement number and date 31.12.2012 31.12.2013 JSC Sberbank of Russia 0162-104513-RKL of 27.09.13 - 5,000,000

JSC Sberbank of Russia 0162-1-115913 of 17.09.13 - 4,700,000

Bonded loan of a series 04 4 04 00073-А of 29.03.2012 3,000,000 3,000,000

239

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

Bonded loan of a series BO-01 4В02-01-00073-А of 20.07.12 - 3,000,000

JSC Sberbank of Russia 0162-104613-RKL of 27.09.13 - 1,281,037

JSC JSB Rossiya 2.1-1/045/2011 of 19.04.2011 1,025,000 1,025,000

JSC JSB Rossiya 2.1-1/046/2011 of 19.04.2011 1,000,000 1,000,000

JSC JSB Rossiya 2.1-1/048/2011 of 19.04.2011 1,000,000 1,000,000

JSC JSB Rossiya 2.1-1/047/2011 of 19.04.2011 1,000,000 1,000,000

JSC Sberbank of Russia 0162-1-110811 of 04.07.2011 1,000,000 1,000,000

JSC Sberbank of Russia 0162-1-114811 of 27.09.2011 1,000,000 1,000,000

JSC Sberbank of Russia 0162-1-114911 of 27.09.2011 1,000,000 1,000,000

JSC Sberbank of Russia 0162-1-115011 of 27.09.2011 7,000 1,000,000

JSC Sberbank of Russia 0162-1-108313 of 28.06.13 - 1,000,000

JSC Sberbank of Russia 0162-1-108213 of 28.06.13 - 500,000

JSC Sberbank of Russia 0162-1-108413 of 28.06.13 - 500,000

JSC Sberbank of Russia 0162-1-108010 of 29.09.10 500,000 500,000

JSC Sberbank of Russia 0162-1-107311 of 19.04.2011 500,000 500,000

JSC Sberbank of Russia 0162-1-114711 of 27.09.2011 500,000 500,000

Branch Meridian of JSC Bank VTB in St. Petersburg 80/10 of 28.07.10 500,000 500,000

JSC Svyaz-Bank 005/2010 of 30.07.2010 400,000 400,000

VnesheconoMVAnk 110100/1249 of 21.03.2012 4,019,644 -

JSC Sberbank of Russia 0162-1-111710 of 10.11.2010 1,225,000 -

Branch Meridian of JSC Bank VTB in St. Petersburg 81/10 of 28.07.2010 1,100,000 -

JSC Svyaz-Bank 006/2010 of 30.07.10 1,100,000 -

JSC Sberbank of Russia 0162-1-107211 of 19.04.2011 1,000,000 -

JSC Sberbank of Russia 0162-1-110711 of 04.07.2011 1,000,000 -

JSC Sberbank of Russia 0162-1-102712 of 22.05.2012 853,736 -

Branch Meridian of JSC Bank VTB in St. Petersburg 99/10 of 30.08.10 850,000 -

Branch Meridian of JSC Bank VTB in St. Petersburg 133/10 of 22.11.2010 500,000 -

JSC JSB Rossiya 02-1-2/1/067/2012 of 22.05.2012 364,206 -

Total 24,644,586 29,406,037 29 406 037

In the structure of long-term liabilities as of 31.12.2013 there are During 2013 on the bonded loan of a series 04: considered: ԔԔ the second coupon yield in the sum of RUB 78,240 thousand 1. Bonded loan (unconvertible interest-bearing documentary bearer was accrued and paid in the sum of RUB 127,140 thousand bonds of a series 04 with the obligatory centralized custody, issue on 23.04.2013; of 29.03.2012) for the sum of RUB 3,000,000 thousand. The number ԔԔ the third coupon yield in the sum of RUB 127,140 thousand was of bonds issued on this loan totaled 3,000,000 pieces with par value accrued and paid on 22.10.2013; of RUB 1,000 each. Start date of placement of issue of the bonds ԔԔ the fourth coupon yield was accrued in the sum of RUB 49,599 of a series is 24.04.2012. Date of repayment of bonds at par value thousand. on the issue is 18.04.2017. The issue volume at par value totaled RUB 3,000,000 thousand. Profitability of each bond is determined as 8.5% 2. Bonded loan (unconvertible interest-bearing documentary bearer per annum by each of ten coupons. The yield of each coupon of one bonds payable to bearer of a series BO-01, issue of 20.07.2012) bond makes 42.38 rubles, payment frequency – 182 days. in the amount of 3,000,000 pieces with par value of RUB 1,000 each for the sum of RUB 3,000,000 thousand.

240

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

Placement of the issue of bonds (series BO-01) was carried out ԔԔ reserve under estimated liabilities for the sums of future on 17.04.2013. Maturity date is 13.04.2016. The issue volume at par payments for holidays unused for the reporting date. value totaled RUB 3,000,000 thousand. Profitability of each bond The reserve size as of 31.12.2013 totaled RUB 115,811 thousand. is determined as 8.25% per annum by each of six coupons. The yield ԔԔ reserve under forthcoming expenses on compensation of each coupon of one bond makes 41.14 rubles, payment frequency – payment following the results of work for the reporting period. 182 days. The reserve size as of 31.12.2013 totaled RUB 127,874 thousand. ԔԔ reserves under judicial proceedings, incomplete for the reporting During 2013 on the bonded loan of a series BO-01: date, including: ‣‣ arbitration affairs decisions on which were not made ԔԔ the first coupon yield was accrued and paid in the sum of RUB by the court of the second instance in favor of JSC Lenenergo 123,420 thousand on 16.10.2013; and the probability of which favorable outcome in favor ԔԔ the second coupon yield was accrued in the sum of RUB 52,216 of the Company was estimated by the Company as low. thousand. The size of this type of liabilities as of 31.12.2013 was RUB 301,331 thousand on six lawsuits, from which the largest are: 3. Debt on the long-term bank credits on a principal debt in the sum ‣‣ LLC Interkros SP for the sum of RUB 214,109 thousand of RUB 23,406,037 thousand. under the contract on connection to electric networks; ‣‣ LLC Tres for the sum of RUB 62,780 thousand under During 2013 interest accrued on credits totaled RUB 2,155,242 the contract on capital construction services; thousand, and interest paid – RUB 2,195,643 thousand. ‣‣ LLC Evrika for the sum of RUB 10,935 thousand under the contract on connection to electric networks; Under all credit agreements the borrower has the right to receive ‣‣ Reserves under other estimated liabilities which include: credit resources by separate parts (tranches). ‣‣ reserve under a claim on disagreements with JSC United Energy Company for the sum of RUB 389,589 thousand; In 2013 expense on credits and loans include: ‣‣ reserve under the award for input of capacities and ԔԔ interest, including coupon yield on the bonded loans, accrued capital construction facilities. The reserve size as for using borrowings – RUB 2,585,857 thousand, interest paid – of 31.12.2013 totaled RUB 75,248 thousand. RUB 2,573,343 thousand, respectively; ԔԔ commission fee accrued for the unused rest of credit in 2013 The reserve size under other liabilities which have not been settled totaled RUB 64 thousand, commission paid – RUB 389 with contractors is referred to other expenses. thousand, respectively. ԔԔ commission fee for early repayment totaled RUB 32,900 Movement of reserves under estimated liabilities is given in the table thousand. of Application 27 “Estimated liabilities”.

As of 31.12.2013 the Company has available free credit limit for 3.11. Deferred Taxes the sum of RUB 6,180,523 thousand within open credit lines under the signed contracts. The accounting of deferred taxes is made by the Company pursuant to the Accounting Regulations “Accounting profit tax calculations” Existence of delay of execution of the liability regarding payment of RAS 18/02 approved by Order of the Ministry of Finance of the sum of a principal debt and/or fixed interest, term of delay, days: no of the Russian Federation # 114n of 19.11.2002.

3.10. Estimated Liabilities At drawing up of the accounting reporting the sums of deferred tax assets and deferred tax liabilities are reflected in the balance sheet The accounting of estimated liabilities is made by the Company in detail. pursuant to the Accounting Regulations “Estimated liabilities, conditional liabilities and conditional assets” of RAS 8/2010 approved The characteristic of deferred tax asset and deferred tax liabilities for by Order of the Ministry of Finance of the Russian Federation # 167n the reporting period is presented as follows (see also Application 28): of 13.12.2010.

Estimated liabilities reflected in the reporting are created on the basis of valuation of the Company’s liabilities with respect to employees and contractors and include the following elements:

241

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

31.12.2012 Accrued Redeemed 31.12.2013

Deferred tax asset

Fixed assets 305,701 106,541 10,199 402,043

Reserves of future periods 46,579 83,713 86,620 43,672

Expenses of future periods 13,265 58,329 42,357 29,237

Prime cost 5,534 748 - 6,282

Financial investments 7 - - 7

Reserves under other 139,358 363,118 3,858 498,618 estimated liabilities

TOTAL: 510,444 612,449 143,034 979,859

Deferred tax liability

Fixed assets 1,901,269 741,748 197,315 2,445,702

Non-current assets (interest payable related to objects 80,549 92,562 109,333 63,778 of capital investments)

Lawsuits - 53,260 5,986 47,274

Materials 6,958 10,324 7,349 9,933

Expenses of future periods 409 4,239 2,818 1,830

Other delayed expenses 176 34 142

Prime cost - 4 - 4

TOTAL: 1,989,361 902,137 322,835 2,568,663

3.12. Guarantees ԔԔ a secured deposit under the contract of communication with JSC Vympelcom for the sum of RUB 2,000. As at 31.12.2013 the most essential guarantees received and given out by the Company, are as follows: 3.13. State Support

Guarantees of liabilities and payments received Use by the Company of budgetary funds is given in the table of Application 30 “State support” and represents performance Total amount of RUB 868,436 thousand, including: of the contract on mobilization preparation and financing of precautionary measures for reduction of operational injuries and ԔԔ secured payments on provision of guarantees on application for occupational diseases. participation in competitive procedures in the amount of RUB 867,175 thousand; 4. Disclosures to Indicators of the Financial ԔԔ a secured deposit issued by JSC Bank Saint Petersburg under Results Statement the sub-rent contract of non-residential premises for the sum of RUB 1,261 thousand. 4.1. Income of Organization Guarantees of liabilities and payments given out The accounting of revenues and other income is made Total amount of RUB 138,026 thousand, including: by the Company pursuant to the Accounting Regulations “Income of organization” of RAS 9/99 approved by Order of the Ministry ԔԔ a secured deposit within the rent contract of the building with of Finance of the Russian Federation # 32n of 06.05.1999. JSC Petroestate for the sum of RUB 71,722 thousand; ԔԔ promissory note of JSC Lenenergo with par value of RUB 66,000 The list of receipts recognized as income from ordinary types thousand; of activity of the Company:

242

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

ԔԔ revenue from electric power transmission; Revenue from sales of production and goods, including proceeds associated ԔԔ revenue from technological connection; with performance of work, rendering of services is reflected according ԔԔ revenue from works and services of industrial character. to assumption of temporary definiteness of the facts of economic activity (upon shipment) and submission of payables. The accounting of revenue Revenue from performance of specific work, rendering of specific services, is made by the types of activity. and sale of specific goods is reflected in the accounting when completed if it is possible to define completeness of work, services, and goods. Sales revenue is reflected in the financial results statement net of the value added tax, discounts and similar obligatory payments. Income of the organization not associated with the sale of goods, performance of work, rendering of services, are not reflected as income from ordinary types Income for fiscal year is reflected in the financial results statement of activity and are subject to accounting in the structure of other income separately by ordinary types of activity and other income and expenses with pursuant to requirements of RAS 9/99. interpretations by types and sizes, and comparison to the previous year.

For the reporting year sales revenue totaled:

RUB thousand

Deviation

As of 31.12.2012 As of 31.12.2013 Sum %

Total revenue, including: 36,272,948 39,902,018 3,629,070 10.005

from electric power transmission 28,815,858 33,206,992 4,391,134 15.239

from technological connection 7,281,854 6,515,077 (766,777) (10.530)

from works and services of industrial character 175,236 179,949 4,713 2.690

The buyers sales revenue on which makes not less than 10% of total In the reporting year the Company considered in the structure revenue of the Company from sale to external buyers are as follows: of other income compensation of damage and the penalty related to it from one of the Company’s contractors who did 1. JSC Petersburg Sales Company. The total value of revenue not qualitatively perform works on substation reconstruction in 2013 from sale of services in electric power transmission for total amount of RUB 925,460 thousand. The final of JSC Petersburg Sales Company was RUB 20,673,140 thousand judgment on the damage compensation was accepted in favor (w/o VAT). In 2012 this size was RUB 19,166,929 thousand (w/o VAT). of the Company in 2013.

2. CJSC Energia Holding. The total value of revenue in 2013 from As a result of the valuation made by the Company with involvement sale of services in electric power transmission of CJSC Energia of external experts the conclusion was drawn that during Holding was RUB 4,494,279 thousand (w/o VAT). In 2012 this size reconstruction the contractor essentially broke construction was RUB 3,455,843 thousand (w/o VAT). norms, and derogations from the approved project took place. The object of incomplete construction which was the result Revenue from technological connection to the networks of works of the contractor, was recognized not suitable for further of JSC Lenenergo received as a result of implementation use (was recognized emergency). As a result the Company made of the contracts providing payment by non-cash funds was formed the decision on write-off of this object from the balance sheet for on 55 organizations and totaled RUB 1,776,557 thousand. the sum of RUB 148,622 thousand, and on write-off of residual cost of fixed assets connected with this object for the sum of RUB 7,145 In 2013 total amount of other income constituted RUB 3,529,476 thousand. These sums were reckoned by the Company versus other thousand and increased by RUB 1,605,349 thousand in comparison income in which structure compensation of the above mentioned with the previous year (RUB 1,924,127 thousand), or 83%. damage and the corresponding penalty was included. The growth is caused by increase in income of identified non- contractual electricity consumption and the Company’s work with Concerning the specified contractor in 2013 a bankruptcy procedure accounts payable that revealed in essential write-off of accounts was initiated, and in December, 2013 a supervision procedure was payable over 3 years (see Application 32). entered. In this regard the Company made the decision on inclusion of all sum of damage and penalty in the structure of the reserve for bad debts.

243

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

4.2. Expenses of Organization According to item 18 of RAS 10/99 “Expenses of organization” expenses are admitted in that reporting period in which they took The accounting of expenses is made by the Company pursuant place irrespective of the time of actual payment of cash funds and to the Accounting Regulations “Expenses of organization” of RAS other form of implementation. 10/99 approved by Order of the Ministry of Finance of the Russian Federation # 33n of 06.05.1999. Expenses for the reporting year are reflected in the profit and loss statement separately by ordinary types of activity, and According to item 17 of RAS 10/99 “Expenses of organization” miscellaneous income and expenses with interpretations by types expenses are subject to reflection in the accounting irrespective both and sizes, and comparison to the previous year. of intention to gain revenue, miscellaneous or other income, and the form of implementation of expenses (cash, natural and other).

In the reporting year cost of sales totaled: RUB thousand Deviation

As of 31.12.2012 As of 31.12.2013 Sum %

Total cost, including: 32,830,060 36,429,276 3,599,216 10.963

from electric power transportation 32,344,382 35,903,216 3,558,834 11.003

from technological connection 399,814 436,615 36,801 9.205

on works and services of industrial character 85,864 89,445 3,581 4.171

Prime cost broken down by items of expenses : RUB thousand

Items of expenses 2013 2012

Works and services of industrial character performed by third-party organizations 20,331,893 19,338,786

Depreciation 8,261,000 6,278,409

Labor costs 3,154,032 2,789,689

Repairs 1,460,398 1,169,674

Assignments on social needs 826,538 735,621

Material inputs 593,863 551,379

Miscellaneous expenses: 1,801,552 1,966,502

Taxes included in prime cost 500,373 134,789

Payment for rent 416,686 401,652

Insurance fees 140,160 157,532

Other expenses 347,208 748,092

Other services of third-party organizations 397,125 524,437

Total 36,429,276 32,830,060

General running costs of RUB 2,052,183 thousand are reflected 4.3. Accounting of Calculations for Profit Tax of Organizations in the structure of prime cost for 2013, and of RUB 1,783,932 thousand – for 2012. For the reporting year of 2013 accounting profit before taxes in the sum of RUB 1,444,247 thousand and tax profit in the sum of RUB 4,999,634 In 2013 total amount of miscellaneous expenses was RUB 3,985,166 thousand was received as a result of business activity. The current thousand and increased in comparison with the previous year (RUB profit tax for the fiscal year created under the influence of existing tax 1,913,685 thousand) by RUB 2,071,481 thousand, or 108%. differences was RUB 999,927 thousand. Conditional expense on profit tax totaled RUB 288,849 thousand.

244

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

In 2013 the Company made specification of its liabilities on tax payments With a view of performance of Resolution of the Government for previous years, from which reduction of earlier accrued profit tax for of the Russian Federation # 1178 of 29.12.2011 for state regulation the sum of RUB 90,316 thousand was the most essential one. of prices (tariffs) the Company provides separate account on subjects of the Russian Federation. According to accounting policies of JSC Lenenergo with a view of taxation JSC Lenenergo estimates and pays taxes and fees pursuant Information on geographical signs is disclosed in the table to the legislation of the Russian Federation on taxes and fees, of Application 34. the legislation of subjects of the Russian Federation on taxes and fees, and regulatory legal acts of local governments on taxes and fees. For purposes of information presentation on geographical signs the Company provides separate account on subjects of the Russian For tax purposes the Company admits sales revenue in part of accrual Federation in which territory it carries out regulated activity. of the value added tax and profit tax by the charge method, and The separate account is provided in the following directions: other taxes – according to the Tax Code of the Russian Federation, income, expenses, profit tax, net profit, and debt funds with the use the legislation of the Russian Federation and subjects of the Russian of interpretations of the data of primary accounting, technical Federation on taxes and fees. information, statistical data, and the Company’s business plan. Other assets and liabilities due to their insignificance are divided in proportion taking into account the developed proportions for assets and liabilities considered separately. 5. Other Disclosures 5.3. Adjustments Concerning Comparative Indicators 5.1. Inventory of Assets and Liabilities In 2012 after acceptance of works from one of the contractors In 2013 the Company carried out planned (annual) inventories of its the Company found essential derogations from the requirements assets and liabilities pursuant to Order # 608 of 28.10.2013: provided by technical documentation of installation and construction works. The damage as a result of inadequate execution of the turnkey By results of assets inventory: contract was estimated by the Company at a rate of RUB 175,162 thousand that made the sum comparable to the Company’s debt ԔԔ property unsuitable for operation and revealed at inventory for to the contractor for performed work for the valuation date. With a view the sum of RUB 8,189 thousand was written off. of settlement of damage the Parties agreed about offset of counter ԔԔ deficiency in payment revealed in the course of inventory for homogeneous requirements for the specified sum, and besides the sum of RUB 19,471 thousand was written off coordinated payment by the contractor of a penalty for inadequate ԔԔ revealed surpluses for the sum of RUB 1,004 thousand were put execution of its obligations to the Company in the amount of RUB on the account; 20,000 thousand. ԔԔ By results of inventory of liabilities and receivables: ԔԔ reserve for bad debts of RUB 1,121,115 thousand was created In 2012 the debt of the Company specified above, and debt on other ԔԔ accounts payable over 3 years in the amount of RUB 69,000 were contracts was conceded by the contractor in favor of a third party written off. (assignor). The agreement on debt settlement with this third party was not signed by the Company. In 2012 the Company reflected income 5.2. Information on Segments in the form of write-off of unpaid accounts payable under the turnkey contract and recognition of the penalty sum specified above for total Information on segments is disclosed by the Company pursuant amount of RUB 195,162 thousand. to the Accounting Regulations “Information on segments” of RAS 12/2010 approved by Order of the Ministry of Finance of the Russian In 2013, in connection with default by the Company of its obligations Federation # 143n of 08.11.2010. the assignor appealed to court as the new creditor about collecting debt. The court decided to collect from the Company the specified debt, Basis for allocation of the segments recognized reporting, are and debt on other contracts, conceded to the third party in the amount rendered services. of RUB 280 million.

Information on rendered services is disclosed in the Financial Results Due to the specified circumstances, the Company made the decision Statement, and in section 4.1 “Incomes of organization” above. to adjust comparative indicators in the reporting year in the accounting reporting concerning retained earnings in the sum of RUB 195,162 thousand, and to reflect adjustment of the value added tax in the sum

245

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

of RUB 3,055 thousand accrued on the penalty in the sum of RUB Information on affiliates of the Company pursuant to requirements 20,000 thousand specified above. The decision on adjustment was of normative documents of the Federal Service for Financial Markets approved in view of the fact that the Company incorrectly interpreted of Russia is disclosed and published in the Internet on the website and estimated information which is available for the date of signing at www.lenenergo.ru. of the accounting reporting for 2012. JSC Rosseti owns 49.36% of the Company’s share capital. 5.4. Information on Related Parties Conditions and terms of implementation (completion) of calculations for Information on related parties is disclosed by the Company pursuant operations are carried out according to the signed contracts, the form to the Accounting Regulations “Information on Related Parties” of RAS of calculations – non-cash. Calculations with organizations are carried 11/2008 approved by Order of the Ministry of Finance of the Russian out in rubles. Federation # 48n of 29.04.2008. The Company rendered services on technological connection to electric In the present explanations to the accounting reporting essential networks, property is provided in rent, and other industrial services information concerning related parties is disclosed. on equipment service are rendered to the following organizations:

Related parties 2012 2013

JSC Rosseti (IDGC Holding) - -

Affiliated companies 62,103 103,715

Other related parties 963,857 13

Sales revenue (w/o VAT) 1,025,960 103,728

The following organizations rendered transportation services, consulting services, services in electric power transmission and equipment maintenance to the Company, sold electric power at the level of losses in networks, and provided property in rent:

Related parties 2012 2013

JSC Rosseti (IDGC Holding) 74,784 88,382

Affiliated companies 767,188 1,099,256

Other related parties 6,138,546 7,147,949

Cost of goods, work, services (w/o VAT) 6,980,518 8,335,587

The debt of the Company on calculations with the organizations totaled:

Accounts receivable Accounts payable

Related parties As of 31.12.2012 As of 31.12.2013 As of 31.12.2012 As of 31.12.2013

JSC Rosseti (IDGC Holding) 3,242 33 - 3,004,813

Affiliated companies 34,401 50,550 156,020 192,750

Other related parties 556,190 187,745 1,108,579 4,138,520

Debt 593,833 238,328 1,264,599 7,336,083

In 2013 compensation to members of the Board of Directors and Audit commission according to the Company’s Charter totaled RUB 10,311 thousand.

246

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

5.5. Information on Energy Saving ԔԔ power for economic needs – RUB 76,815 thousand (w/o VAT), including: Within the reporting calendar year the Company suffered ‣‣ costs of electric power – RUB 62,142 thousand; the following costs for payment of the used energy resources: ‣‣ costs of heat power – RUB 14,673 thousand; ԔԔ power for own needs of substations – RUB 71,839 thousand w/o VAT. To acquire: According to operating techniques the expense of electric power ԔԔ water for economic needs – RUB 5,873 thousand (w/o VAT), for own needs of substations is included in the structure of losses. including: Costs of electric power acquisition for own needs of substations are ‣‣ costs of water removal – RUB 4,874 thousand; calculated proceeding from the volume of electricity consumption for ‣‣ costs of water consumption – RUB 999 thousand; own needs and a mid-annual tariff under the rate on payment of losses.

Costs of electricity for own needs for 2013 2013

Volume kWh 44 068 237 Total JSC Lenenergo Sum RUB 71 838 693

Volume kWh 22 847 521 St. Petersburg Sum RUB 33 247 281

Volume kWh 21 220 716 Leningrad Region Sum RUB 38 591 412

5.6. Events after the Reporting Date

On February 11, 2014 the Company’s Board of Directors approved termination of participation of the Company in JSC Energouchet by alienation of all shares belonging to the Company by means of sale at open auction. The initial sale price was determined at a level of the market cost defined by the independent appraiser at a rate of RUB 368,400. JSC Energouchet shares value in the balance sheet as of 31.12.2013 in the accounting of the Company totaled RUB 4,000.

Director General Sorochinskiy A.V.

Chief Accountant Kuznetsova G.V.

March 07, 2014

247

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

Application 1. Cost of sold goods, works, services in elements of costs

Indicator

Name Code For 2013 For 2012

1 2 3 4 Production costs 6510 36 429 276 32 830 060

including:

material costs 6511 593 863 551 379

labor costs 6512 3 154 032 2 789 689

deductions for social welfare 6513 826 538 735 621

amortization 6514 8 261 000 6 278 409

miscellaneous expenditures 6515 23 593 843 22 474 962

«For reference: change of stock and reserves growth [+], drop [–]):» 6520 − −

including:

work in progress 6521 − −

final goods 6522 − −

purchased goods 6523 − −

shipped goods 6524 − −

auxiliary raw 6525 − −

Total cost of goods sold 6500 36 429 276 32 830 060

including:

cost of sales 6530 36 429 276 32 830 060

third-paty management services 6540 − −

Commercial expenses 6550 − −

including:

material costs 6551 − −

labor costs 6552 − −

deductions for social welfare 6553 − −

amortization 6554 − −

miscellaneous expenditures 6555 − −

Administrative expenses 6560 − −

including:

material costs 6561 − −

labor costs 6562 − −

deductions for social welfare 6563 − −

amortization 6564 − −

miscellaneous expenditures 6565 − −

Director General A.V. Sorochinskiy Chief Accountan G.V. Kuznetsova

07 March 2014

248

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

Application 2. Earnings per share and diluted earnings per share

Indicator

Name Code For 2013 For 2012

1 2 3 4

Net profit (uncovered loss) of the reporting period 6610 424 867 1 042 221

Dividends on preferred shares3 6611 − −

Base profit (loss) of the reporting period 6612 424 867 1 042 221

Weighted average number of outstanding ordinary shares during the period 6613 1 135 061 985 992

Base profit (loss) per share 6620 0,374 1,057

Weighted average market value of one ordinary share 6621 4,718 6,603

«Possible increment in profit and weighted average number of outstanding shares» 6630 Х Х

As a result of convertation of preferred shares into ordinary shares 6631 Х Х

possible increment in profit 66311 − −

additional number of shares 66312 − −

As a result of convertation of bonds into ordinary shares 6632 Х Х

possible increment in profit 66321 − −

additional number of shares 66322 − −

As a result of execution of the contracts of purchase and sale of shares at the price of below 6633 market Х Х

contract price 66331 − −

possible increment in profit 66332 − −

additional number of shares 66333 − −

Diluted earnings per share 6640 0,0000 0,0000

adjusted base profit 6641 − −

adjusted weighted average number of outstanding shares 6642 − −

Director General Sorochinskiy A.V.

Chief Accountant Kuznetsova G.V.

March 07, 2014

249

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

Application 3. Profit taxation

Name Code For 2013 For 2012

1 2 3 4

Profit (loss) before taxation 6710 1 444 247 1 962 369

including assessed under the rate of: 20% 67101 1 444 247 1 962 369

other rates 67102 − −

non-taxable 67103 − −

Permanent differences 6711 4 101 756 2 691 350

For reference: permanent differences, corresponding with time differences 67111 − −

Change of time subtracted differences 6712 2 350 143 65 063

Change of time taxable differences 6713 (2 896 512) (2 481 590)

Tax base 6714 4 999 634 2 237 192

Expense (income) on the profits tax 6720 1 109 200 969 166

Conditional expense (income) on the profits tax 6721 288 849 392 474

Permanent tax obligation (assets) 6722 820 351 499 849

For reference: the change of the deferred taxes carried on profit and losses 67221 − −

Expense (income) on the deferred taxes 6723 (109 273) (521 726)

including: − −

Change of the deferred tax asset 67231 470 029 (25 408)

Change of the deferred tax obligation 67232 (579 302) (496 318)

Current profits tax 6724 (999 927) (447 440)

Specification of the sums of the profits tax for last tax periods 6725 91 724 49 087

Other fiscal charges and sanctions from profit 6730 (1 904) (69)

including under essential articles 6731 − −

Profit (loss) on ordinary activity 6740 424 867 1 042 221

Director General Sorochinskiy A.V.

Chief Accountant Kuznetsova G.V.

March 07, 2014

250

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

Application 4. Calculation of cost estimation of net assets of the joint stock company

Line code of the balance As at 31 December As at 31 December As at 31 December Indicator sheet 2013 (8) 2012 (7) 2011 (6)

I. Assets

Intangible assets 1110 105 301 146 240 201 791

Results of researches and developments 1120 83 401 67 494 14 742

Intangible exploratory assets 1130 − − −

Tangible exploratory assets 1140 − − −

Fixed assets 1150 124 823 286 115 075 239 90 550 662

Profitable investments in material assets 1160 − − −

Long-term and short-term financial investments 1170 + 1240 7 181 904 3 213 113 947 105

Other non-current assets 1180+1190 1 686 384 1 286 996 1 168 797

Supplies 1210 584 059 442 638 423 087

Value-added tax on the acquired values 1220 494 588 222 626 229 329

Accounts receivable 1230 10 071 190 7 796 952 7 226 404

Cash and cash equivalents 1250 3 370 400 3 162 812 6 795 830

Other current assets 1260 82 417 134 124 169 449

Total assets accepted to calculation (the sum of given points 1-13) 148 482 930 131 548 234 107 727 196

II. Liabilities

Long-term borrowings 1410 29 406 037 24 644 586 20 800 000

Deferred tax liabilities 1420 2 568 663 1 989 361 1 493 043

Estimated liabilities 1430+1540 1 009 853 1 061 109 881 216

Other long-term liabilities 1450 572 489 1 585 858 1 491 698

Short-term borrowings 1510 3 970 003 3 144 374 6 193 141

Accounts payable 1520 34 614 993 22 897 723 20 724 273

Other short-term liabilities 1550 − − −

Total liabilities accepted to calculation (the sum of given points 15-21) 72 142 038 55 323 011 51 583 371

Joint stock company net assets value (total assets accepted to calculation (line 14) minus total liabilities accepted to calculation (line 22)) 76 340 892 76 225 223 56 143 825

1Net of actual costs for the repurchase of own shares from shareholders. 2Including deferred tax assets. 3Net of debt of participants (founders) on contributions to the authorized capital. 4Including payables to participants on payment of income. Director General Sorochinskiy A.V. 5In data on the value of other long-term and short-term liabilities the sums of reserves formed in the prescribed manner in connection with contingent liabilities and termination of activitites are specified. 6The year preceding the previous one is indicated. 7The previous year is indicated. Chief Accountant Kuznetsova G.V. 8The reporting date of the reporting period is specified.

March 07, 2014

251

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

Application 5. Availability and movement of intangible assets

Indicator At the beginning of year Changes for the period Changes for the period At the period end

Revaluation

Initial / current Accumulated Losses from Initial / current Accumulated Losses from Accrued Losses from Initial / current Accumulated Initial / current Accumulated Losses from Name Code Period market value depreciation depreciation Residual value Accepted market value depreciation depreciation depreciation depreciation market value depreciation market value depreciation depreciation Residual value

5100 For 2013 (1) 293 548 (170 688) − 122 860 − − − − (50 696) − − − 293 548 (221 384) − 72 164 Intangible assets - total 5110 For 2012 (2) 265 948 (107 951) − 157 997 27 600 − − − (62 737) − − − 293 548 (170 688) − 122 860

Objects of intellectual property 5101 For 2013 (1) 61 198 (12 240) − 48 958 − − − − (12 240) − − − 61 198 (24 480) − 36 718 (exclusive rights to results of intellectual property) 5111 For 2012 (2) 61 198 − − 61 198 − − − − (12 240) − − − 61 198 (12 240) − 48 958

including:

at the patentee on inventions, 51011 For 2013 (1) − − − − − − − − − − − − − − − − industrial pattern, useful model 51111 For 2012 (2) − − − − − − − − − − − − − − − −

at the legal owner on computer 51012 For 2013 (1) 61 198 (12 240) − 48 958 − − − − (12 240) − − − 61 198 (24 480) − 36 718 software programs, databases 51112 For 2012 (2) 61 198 61 198 − − − − (12 240) − − − 61 198 (12 240) − 48 958

at the legal owner on topology 51013 For 2013 (1) − − − − − − − − − − − − − − − − of integrated microcircuits 51113 For 2012 (2) − − − − − − − − − − − − − − − −

51014 For 2013 (1) − − − − − − − − − − − − − − − − at the owner on a trade mark, a service mark, the name of a place of an origin of the goods 51114 For 2012 (2) − − − − − − − − − − − − − − − −

5102 For 2013 (1) − − − − − − − − − − − − − − − − Business reputation of the Company 5112 For 2012 (2) − − − − − − − − − − − − − − − −

5103 For 2013 (1) 232 350 (158 448) − 73 902 − − − − (38 456) − − − 232 350 (196 904) − 35 446 Other 5113 For 2012 (2) 204 750 (107 951) − 96 799 27 600 − − − (50 497) − − − 232 350 (158 448) − 73 902

252 253

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

Application 6. Availability and movement of R&D results

At the beginning of year Changes for the period At the period end

retired part of cost which part of cost part of cost has been part of cost which which written off which has been has been on expenses has been written off written off for written off Indicator Code Period initial cost on expenses accepted initial cost on expenses the period initial cost on expenses

5140 For 2013 (1) 15 758 (2 842) 76 373 − − (5 888) 92 131 (8 730) Total R&D 5150 For 2012 (2) 758 (365) 15 000 − − (2 477) 15 758 (2 842)

from them:

Expenses on R&D which 5141 For 2013 (1) 15 758 (2 842) 76 373 − − (5 888) 92 131 (8 730) results are used for production needs 5151 For 2012 (2) 758 (365) 15 000 − − (2 477) 15 758 (2 842)

5142 Patent-capable results For 2013 (1) − − − − − − − − of executed R&D 5152 For 2012 (2) − − − − − − − −

Expenses on R&D which 5143 For 2013 (1) − − − − − − − − are performed by third party organizations 5153 For 2012 (2) − − − − − − − −

Expenses on R&D which 5144 For 2013 (1) − − − − − − − − are performed by third party organizations 5154 For 2012 (2) − − − − − − − −

Application 7. Not finished and not properly executed R&D and not finished transactions on acquisition of intangible assets

Changes for the period

accepted written off costs as to accounting as At the beginning expenses for not given positive intangible assets Indicator Code Period of year the period result or R&D At the period end

5160 For 2013 (1) 54 578 21 795 − (76 373) − Total costs of not finished R&D 5170 For 2012 (2) 14 349 55 229 − (15 000) 54 578

including:

5161 For 2013 (1) 54 578 21 795 − (76 373) − Research works 5171 For 2012 (2) 14 349 55 229 − (15 000) 54 578

5162 For 2013 (1) − − − − − Developmental works 5172 For 2012 (2) − − − − −

5163 For 2013 (1) − − − − − Technological works 5173 For 2012 (2) − − − − −

5164 For 2013 (1) − − − − − Other 5174 For 2012 (2) − − − − −

5180 Total not finished transactions For 2013 (1) 23 380 9 757 − − 33 137 on acquisition of intangible assets 5190 For 2012 (2) 43 794 7 186 − (27 600) 23 380

including:

254

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

Changes for the period

accepted written off costs as to accounting as At the beginning expenses for not given positive intangible assets Indicator Code Period of year the period result or R&D At the period end

at the patentee on inventions, 5181 For 2013 (1) − − − − − the industrial pattern, useful model 5191 For 2012 (2) − − − − −

5182 at the legal owner on computer For 2013 (1) 17 448 9 757 − 27 205 software programs, databases 5192 For 2012 (2) 43 794 1 254 − (27 600) 17 448

5183 at the legal owner on topology For 2013 (1) − − − − − of integrated microcircuits 5193 For 2012 (2) − − − − −

at the owner on a trade mark, 5184 For 2013 (1) − − − − − a service mark, the name of a place of an origin of the goods 5194 For 2012 (2) − − − − −

5185 For 2013 (1) 5 932 − − − 5 932 Other 5195 For 2012 (2) − 5 932 − − 5 932

255

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

Application 8. Availability and movement of fixed assets

At the beginning of year Changes for the period At the period end

revaluation accumulated accumulated depreciation accumulated accumulated accumulated accumulated Indicator Code Period initial cost depreciation residual value accepted on accepted items initial cost depreciation depreciation initial cost depreciation initial cost depreciation residual value

Fixed assets (without profitable 5200 For 2013 233 411 138 (131 207 813) 102 203 325 18 582 173 − (314 252) 263 229 (8 309 153) − − 251 679 059 (139 253 737) 112 425 322 investments in tangible assets) - total 5210 For 2012 162 408 800 (86 113 669) 76 295 131 16 033 076 − (500 473) 489 237 (6 301 411) 55 469 735 (39 281 970) 233 411 138 (131 207 813) 102 203 325

including:

5201 For 2013 233 334 153 (131 207 813) 102 126 340 18 579 693 − (314 252) 263 229 (8 309 153) − − 251 599 594 (139 253 737) 112 345 857 Depreciable fixed assets - total: 5211 For 2012 162 341 246 (86 113 669) 76 227 577 16 023 645 − (500 473) 489 237 (6 301 411) 55 469 735 (39 281 970) 233 334 153 (131 207 813) 102 126 340

including:

52011 For 2013 20 316 081 (11 084 083) 9 231 998 601 321 − (90 007) 66 429 (356 097) − − 20 827 395 (11 373 751) 9 453 644 production buildings 52111 For 2012 19 392 596 (10 765 472) 8 627 124 946 607 − (19 890) 18 165 (338 835) (3 232) 2 059 20 316 081 (11 084 083) 9 231 998

52012 For 2013 3 870 427 (1 888 615) 1 981 812 207 047 − (17 873) 15 362 (134 029) − − 4 059 601 (2 007 282) 2 052 319 constructions, except power lines 52112 For 2012 2 837 264 (1 156 795) 1 680 469 230 209 − (12 262) 12 367 (106 789) 815 216 (637 398) 3 870 427 (1 888 615) 1 981 812

52013 For 2013 158 656 829 (97 065 720) 61 591 109 10 577 711 − (82 697) 75 943 (4 485 910) − − 169 151 843 (101 475 687) 67 676 156 power lines and devices to them 52113 For 2012 97 589 019 (55 706 608) 41 882 411 6 697 865 − (280 505) 276 391 (2 992 564) 54 650 450 (38 642 939) 158 656 829 (97 065 720) 61 591 109

machines and equipment for electric power 52014 For 2013 50 407 825 (21 108 235) 29 299 590 7 182 956 − (122 495) 104 373 (3 324 991) − − 57 468 286 (24 328 853) 33 139 433 generation, substations, equipment for electric power transformation 52114 For 2012 42 441 729 (18 433 582) 24 008 147 8 145 575 − (186 780) 181 562 (2 852 523) 7 301 (3 692) 50 407 825 (21 108 235) 29 299 590

52015 For 2013 82 420 (61 108) 21 312 10 658 − (1 122) 1 122 (8 070) − − 91 956 (68 056) 23 900 production and economic stock 52115 For 2012 80 126 (51 184) 28 942 3 049 − (755) 752 (10 676) − − 82 420 (61 108) 21 312

52016 For 2013 571 (52) 519 − − (58) − (56) − − 513 (108) 405 other 52116 For 2012 512 (28) 484 340 − (281) − (24) − − 571 (52) 519

Objects with unlimited useful life, not 5202 For 2013 76 985 − 76 985 2 480 − − − − − − 79 465 − 79 465 depreciable - total 5212 For 2012 67 554 − 67 554 9 431 − − − − − − 76 985 − 76 985

including:

52021 For 2013 76 985 − 76 985 2 480 − − − − − − 79 465 − 79 465 land lots 52121 For 2012 67 554 67 554 9 431 − − − − − − 76 985 − 76 985

52022 For 2013 − − − − − − − − − − − − − environmental facilities 52122 For 2012 − − − − − − − − − − − − −

Capital investments on radical improvement 5203 For 2013 − − − − − − − − − − − − − of the land lots 5213 For 2012 − − − − − − − − − − − − −

Accounted as a part of profitable 5220 For 2013 − − − − − − − − − − − − − investments in tangible assets - total 5230 For 2012 − − − − − − − − − − − − −

including:

5221 For 2013 − − − − − − − − − − − − − property for transfer to leasing 5231 For 2012 − − − − − − − − − − − − −

5222 For 2013 − − − − − − − − − − − − − property given under the lease contract 5232 For 2012 − − − − − − − − − − − − −

256 257

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

Application 9. Terms of useful life and depreciation methods

Indicator Code Determined average useful life (in months) Depreciation methods

Production buildings 7001 673 straight-line

Constructions, except power lines 7002 350 straight-line

Power lines and devices to them 7003 381 straight-line

Machines and equipment for electric power generation, 7004 197 straight-line substations, equipment for electric power transformation

Production and economic stock 7005 70 straight-line

Other 7006 54 straight-line

Application 10. Value change of fixed assets as a result of completion, additional equipment, reconstruction and partial liquidation

Indicator Code For 2013 For 2012

Value addition of items of fixed assets as a result of completion, additional equipment, reconstruction 5260 3 300 593 2 548 052 - total

including:

production buildings 5261 73 045 132 087

constructions, except power lines 5262 33 354 14 677

power lines and devices to them» 5263 2 367 780 1 669 012

machines and equipment for electric power generation, substations, equipment for electric power 5264 826 370 732 276 transformation

production and economic stock» 5265 44 −

other 5266 − −

Reduction of cost of items of fixed assets as a result of partial liquidation - total 5270 13 930 29 364

including:

production buildings 5271 7 145 −

constructions, except power lines 5272 − 293

power lines and devices to them» 5273 5 098 21 967

machines and equipment for electric power generation, substations, equipment for electric power 5274 1 687 7 104 transformation

production and economic stock» 5275 − −

other 5276 − −

Application 11. Other use of fixed assets

As at 31 December As at 31 December As at 31 December Indicator Code 2013 (1) 2012 (2) 2011 (3)

Fixed assets transferred in rent which are registered on the balance sheet 5280 2 409 201 1 501 948 1 252 272

Fixed assets transferred in rent which are registered off the balance sheet 5281 − − −

Fixed assets received in rent which are registered on the balance sheet 5282 − − −

258

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

As at 31 December As at 31 December As at 31 December Indicator Code 2013 (1) 2012 (2) 2011 (3)

Fixed assets received in rent which are registered off the balance sheet 5283 1 489 605 2 008 396 6 587 338

Items of immovable property accepted in transaction and actually used, in process of the state registration 5284 1 694 105 1 234 239 1 921 820

Fixed assets transferred for preservation 5285 189 560 − −

Other use of fixed assets (pledge, etc.) 5286 − − −

Application 12. Capital investments in progress

Changes for the period

accepted to accounting as At the beginning expenses for fixed assets or cost Indicator Code Period of year the period written off is increased At the period end Construction in progress and 5240 For 2013 (1) 11 321 706 19 319 462 (310 972) (18 576 796) 11 753 400 not complete transactions on acquisition, modernisation, etc. 5250 Of fixed assets - total For 2012 (2) 12 787 626 15 826 529 (12 784) (17 279 665) 11 321 706

including:

5241 For 2013 (1) 11 321 706 19 319 462 (310 972) (18 576 796) 11 753 400 of production use 5251 For 2012 (2) 12 787 626 15 826 529 (12 784) (17 279 665) 11 321 706

52411 For 2013 (1) 10 776 364 16 299 914 (291 956) (15 599 384) 11 184 938 construction in progress 52511 For 2012 (2) 12 177 485 10 708 773 (12 198) (12 097 696) 10 776 364

52412 For 2013 (1) 2 331 951 009 (6 979) (874 888) 71 473 acquisition of fixed assets 52512 For 2012 (2) 17 360 2 621 053 − (2 636 082) 2 331

52413 For 2013 (1) 503 963 761 741 (12 037) (795 670) 457 997 equipment for installation 52513 For 2012 (2) 553 788 1 197 998 (586) (1 247 237) 503 963

52414 For 2013 (1) 39 048 1 306 798 − (1 306 854) 38 992 other 52514 For 2112 (2) 38 993 1 298 705 − (1 298 650) 39 048

5242 For 2013 (1) − − − − − other of non-production use 5252 For 2012 (2) − − − − −

52421 For 2013 (1) − − − − − construction in progress 52521 For 2012 (2) − − − − −

52422 For 2013 (1) − − − − − acquisition of fixed assets 52522 For 2012 (2) − − − − −

52423 For 2013 (1) − − − − − equipment for installation 52523 For 2012 (2) − − − − −

52424 For 2013 (1) − − − − − other 52524 For 2012 (2) − − − − −

259

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

Application 13. Advances issued under capital construction and acquisition of fixed assets

At the beginning of year Changes for the period Changes for the period At the period end

acceptance acceptance retirement

as a result of business transactions (amount write-off for account accounted under reserve size of debt under of the previously write-off on financial accounted under reserve size Indicator Code Period contract provisions on doubtful debts the transaction) other charges reserve charge repayment accrued reserve result reserve restoration contract provisions on doubtful debts

5291 For 2013 (1) 745 135 − 1 457 025 − (107 663) (1 635 972) (507) (650) − 565 031 (107 156) Advances issued under capital construction 5292 For 2012 (2) 988 027 (46 643) 1 595 740 − − (1 791 696) (46 643) (293) − 745 135 −

including:

52911 For 2013 (1) 744 814 − 1 354 174 − (107 663) (1 533 282) (507) (650) − 564 549 (107 156) capital construction 52921 For 2012 (2) 979 610 (46 643) 1 554 120 − − (1 741 996) (46 643) (277) − 744 814 −

52912 For 2013 (1) 321 − 102 851 − − (102 690) − − − 482 − acquisition of fixed assets 52922 For 2012 (2) 8 417 − 41 620 − − (49 700) − (16) − 321 −

52913 For 2013 (1) − − − − − − − − − − − other 52923 For 2012 (2) − − − − − − − − − − −

Application 14. Availability and movement of financial investments

At the beginning of year Changes for the period Changes for the period At the period end

retired (repaid) interests accrual (including bringing mark-to-market value Indicator Code Period initial cost accumulated adjustment accepted initial cost accumulated adjustment the initial cost to nominal) (losses from depreciation) initial cost accumulated adjustment

5301 For 2013 (1) 947 218 (105) − (105) 105 − (49 318) 947 113 (49 318) Long-term financial investments - total 5311 For 2012 (2) 947 266 (161) − (48) 48 − 8 947 218 (105)

Contributions in authorised (share) 53021 For 2013 (1) 947 218 (105) − (105) 105 − (49 318) 947 113 (49 318) capital of other companies - total 53121 For 2012 (2) 947 266 (161) − (48) 48 − 8 947 218 (105)

including:

530211 For 2013 (1) 897 791 − − − − − − 897 791 − affiliated economic companies 531211 For 2012 (2) 897 791 − − − − − − 897 791 −

530212 For 2013 (1) 4 − − − − − − 4 − dependent economic companies 531212 For 2012 (2) 4 − − − − − − 4 −

530213 For 2013 (1) 49 423 (105) − (105) 105 − (49 318) 49 318 (49 318) other 531213 For 2012 (2) 49 471 (161) − (48) 48 − 8 49 423 (105)

53022 For 2013 (1) − − − − − − − − − State and municipal securities 53122 For 2012 (2) − − − − − − − − −

53023 For 2013 (1) − − − − − − − − − Securities of other organisations - total 53123 For 2012 (2) − − − − − − − − −

including:

260 261

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

At the beginning of year Changes for the period Changes for the period At the period end

530231 For 2013 (1) − − − − − − − − − debt securities (bonds, bills) 531231 For 2012 (2) − − − − − − − − −

53024 For 2013 (1) − − − − − − − − − Loans granted 53124 For 2012 (2) − − − − − − − − −

53025 For 2013 (1) − − − − − − − − − Deposits 53125 For 2012 (2) − − − − − − − − −

53026 For 2013 (1) − − − − − − − − − Other 53126 For 2012 (2) − − − − − − − − −

Long-term financial investments with 5302 For 2013 (1) − − − − − − − − − current market value - total 5312 For 2012 (2) − − − − − − − − −

Contributions in authorised (share) capital 53031 For 2013 (1) − − − − − − − − − of other companies - total 53131 For 2012 (2) − − − − − − − − −

including:

530311 For 2013 (1) − − − − − − − − − affiliated economic companies 531311 For 2012 (2) − − − − − − − − −

530312 For 2013 (1) − − − − − − − − − dependent economic companies 531312 For 2012 (2) − − − − − − − − −

530313 For 2013 (1) − − − − − − − − − other 531313 For 2012 (2) − − − − − − − − −

53032 For 2013 (1) − − − − − − − − − State and municipal securities 53132 For 2012 (2) − − − − − − − − −

53033 For 2013 (1) − − − − − − − − − Securities of other organisations - total 53133 For 2012 (2) − − − − − − − − −

including: −

530331 For 2013 (1) − − − − − − − − − debt securities (bonds, bills) 531331 For 2012 (2) − − − − − − − − −

53034 For 2013 (1) − − − − − − − − − Other 53134 For 2012 (2) − − − − − − − − −

Long-term financial investments 5303 For 2013 (1) 947 218 (105) − (105) 105 − (49 318) 947 113 (49 318) on which current market value is not determined - total 5313 For 2012 (2) 947 266 (161) − (48) 48 − 8 947 218 (105)

Short-term financial 5305 For 2013 (1) 2 266 000 − 12 220 838 (8 202 729) − − − 6 284 109 − investmants - total 5315 For 2012 (2) − − 2 266 000 − − − − 2 266 000 −

Contributions to authorised capital of other 53061 For 2013 (1) − − − − − − − − − companies - total 53161 For 2012 (2) − − − − − − − − −

53062 For 2013 (1) − − − − − − − − − State and municipal securities 53162 For 2012 (2) − − − − − − − − −

262 263

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

At the beginning of year Changes for the period Changes for the period At the period end

53063 For 2013 (1) − − − − − − − − − Securities of other organisations - total 53163 For 2012 (2) − − − − − − − − −

including: − − − − − −

530631 For 2013 (1) − − − − − debt securities (bonds, bills) 531631 For 2012 (2) − − − − − − − − −

53064 For 2013 (1) − − − − − − − − − Loans granted 53164 For 2012 (2) − − − − − − − − −

53065 For 2013 (1) 2 266 000 − 12 220 838 (8 202 729) − − − 6 284 109 − Deposits 53165 For 2012 (2) − − 2 266 000 − − − − 2 266 000 −

53066 For 2013 (1) − − − − − − − − − Other 53166 For 2012 (2) − − − − − − − − −

Short-term financial investments with 5306 For 2013 (1) 2 266 000 − 12 220 838 (8 202 729) − − − 6 284 109 − current market value - total 5316 For 2012 (2) − − 2 266 000 − − − − 2 266 000 −

Contributions in authorised (share) capital 53071 For 2013 (1) − − − − − − − − − of other companies - total 53171 For 2012 (2) − − − − − − − − −

53072 For 2013 (1) − − − − − − − − − State and municipal securities 53172 For 2012 (2) − − − − − − − − −

53073 For 2013 (1) − − − − − − − − − Securities of other organisations - total 53173 For 2012 (2) − − − − − − − − −

including:

530731 For 2013 (1) − − − − − − − − − debt securities (bonds, bills) 531731 For 2012 (2) − − − − − − − − −

53074 For 2013 (1) 2 266 000 − 12 220 838 (8 202 729) − − − 6 284 109 − Other 53174 For 2012 (2) − − 2 266 000 − − − − 2 266 000 −

Short-term financial investments 5307 For 2013 (1) − − − − − − − − − on which current market value is not determined - total 5317 For 2012 (2) − − − − − − − − −

5300 For 2013 (1) 3 213 218 (105) 12 220 838 (8 202 834) 105 − (49 318) 7 231 222 (49 318) Financial investments - total 5310 For 2012 (2) 947 266 (161) 2 266 000 (48) 48 − 8 3 213 218 (105)

264 265

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

Application 15. Adjustments of estimations of financial investments

Retirement At the at write-off At beginning of of financial the period Indicator Code year Increase Reduction investments end

Long-term financial investments 7100 (105) (49 318) − 105 (49 318)

Difference between the current market value of financial investments and 7110 − − − − − their previous estimation

including:

Contributions in authorised (share) capital of other companies - total 7111 − − − − −

including:

affiliated economic companies 71111 − − − − −

dependent economic companies 71112 − − − − −

other 71113 − − − − −

State and municipal securities 7112 − − − − −

Securities of other organisations - total 7113 − − − − −

including:

debt securities (Bonds, bills) 71131 − − − − −

Other 7114 − − − − −

Difference between the current value of debt securities and their initial cost 7120 − − − − −

including:

Securities of other organisations - total 7121 − − − − −

including:

debt securities (Bonds, bills) 71211 − − − − −

Other 7122 − − − − −

Reserve under depreciation of the financial investments, on which the market 7130 (105) (49 318) − 105 (49 318) value is not determined

including:

Contributions in authorised (share) capital of other companies - total 7131 (105) (49 318) − 105 (49 318)

including:

affiliated economic companies 71311 − − − − −

dependent economic companies 71312 − − − − −

other 71313 (105) (49 318) − 105 (49 318)

State and municipal securities 7132 − − − − −

Securities of other organisations - total 7133 − − − − −

including:

debt securities (Bonds, bills) 71331 − − − − −

Loans granted 7134 − − − − −

Deposits 7135 − − − − −

Other 7136 − − − − −

266

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

Retirement At the at write-off At beginning of of financial the period Indicator Code year Increase Reduction investments end

Short-term financial investments 7200 − − − − −

Difference between the current market value of financial investments and 7210 − − − − − their previous estimation, at which it was determined

including:

Contributions in authorised (share) capital of other companies - total 7211 − − − − −

including:

affiliated economic companies 72111 − − − − −

dependent economic companies 72112 − − − − −

other 72113 − − − − −

Securities of other organisations - total 7212 − − − − −

including:

debt securities (bonds, bills) 72121 − − − − −

Other 7213 − − − − −

Difference between the current value of debt securities and their initial cost 7220 − − − − −

including:

Securities of other organisations - total 7221 − − − − −

including:

debt securities (bonds, bills) 72211 − − − − −

Other 7222 − − − − −

Reserve under depreciation of the financial investments which do not have 7230 − − − − − the market value

including:

Contributions in authorised (share) capital of other companies - total 7231 − − − − −

including:

affiliated economic companies 72311 − − − − −

dependent economic companies 72312 − − − − −

other 72313 − − − − −

State and municipal securities 7232 − − − − −

Securities of other organisations - total 7233 − − − − −

including:

debt securities (Bonds, bills) 72331 − − − − −

Loans granted 7234 − − − − −

Deposits 7235 − − − − −

Other 7236 − − − − −

267

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

Application 16. Other use of financial investments

Indicator Code As at 31 As at 31 As at 31 December December December 2013 (1) 2012 (2) 2011 (3)

Financial investments in pledge - total 5320 − − −

including:

bonds 5321 − − −

bills 5322 − − −

stocks 5323 − − −

Financial investments transferred to third parties (except sale) - total 5325 − − −

including:

bonds 5326 − − −

bills 5327 − − −

stocks 5328 − − −

Other use of financial investments 5329 − − −

Application 17. Availability and movement of supplies

At the beginning of year Changes for the period At the period end

retired turnover reserve reserve losses of supplies reserve size under receipts size under from between size under decrease and decrease decrease their groups decrease Indicator Code Period cost value in value expenses cost value in value in value (types) cost value in value

5400 For 2013 (1) 442 638 − 691 021 (549 600) − − х 584 059 − Supplies - total 5420 For 2012 (2) 423 087 − 535 582 (516 031) − − х 442 638 −

5401 For 2013 (1) 442 638 − 691 021 (549 600) − − − 584 059 − raw and materials 5421 For 2012 (2) 423 087 − 535 582 (516 031) − − − 442 638 −

5402 For 2013 (1) − − − − − − − − − work in progress 5422 For 2012 (2) − − − − − − − − −

5403 For 2013 (1) − − − − − − − − − goods shipped 5423 For 2012 (2) − − − − − − − − −

finished products and 5404 For 2013 (1) − − − − − − − − − goods 5424 For 2012 (2) − − − − − − − − −

5405 For 2013 (1) − − − − − − − − − other stocks and costs 5425 For 2012 (2) − − − − − − − − −

268

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

Application 18. Supplies in pledge

Indicator Code As at 31 As at 31 As at 31 December December December 2013 (1) 2012 (2) 2011 (3)

Supplies not paid for on the reporting date - total 5440 520 341 378 617 1 022 726

including:

raw and materials 5441 520 341 378 617 1 022 726

work in progress 5442 − − −

goods shipped 5443 − − −

finished products and goods 54441 − − −

other stocks and costs 54442 − − −

Supplies in pledge under the agreement - total 5445 − − −

including:

raw and materials 5446 − − −

goods shipped 5447 − − −

finished products and goods 5448 − − −

other stocks and costs 5449 − − −

269

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

Application 19. Availability and movement of accounts receivable

At the beginning of year Changes for the period Changes for the period At the period end

acceptance acceptance

as a result of business w r i t e - o ff accounted transactions interests, for account transfer from long- under contract reserve size for (amount of debt under penalties and of the previously w r i t e - o ff term to short-term accounted under reserve size for Indicator Code Period provisions doubtful debts transactions) other charges due reserve accrual repayment accrued reserve on financial result reserve restoration debt contract provisions doubtful debts

5501 For 2013 (1) 201 158 − 731 949 − − (821 534) − − − − 111 573 − Long-term accounts receivable - total 5521 For 2012 (2) 1 004 957 − 843 123 − − (1 646 922) − − − − 201 158 −

including:

5502 For 2013 (1) 4 867 − 731 031 − − (732 915) − − − − 2 983 − Settlements with buyers and customers 5522 For 2012 (2) − − 271 075 − − (266 208) − − − − 4 867 −

including:

55021 For 2013 (1) − − − − − − − − − − − − for electric power transmission 55221 For 2012 (2) − − − − − − − − − − − −

55022 For 2013 (1) 4 867 − 731 031 − − (732 915) − − − − 2 983 − for grid connection 55222 For 2012 (2) − − 271 075 − − (266 208) − − − − 4 867 −

for the organisation of functioning and development 55023 For 2013 (1) − − − − − − − − − − − − of UES of Russia regarding the distribution electric grid complex 55223 For 2012 (2) − − − − − − − − − − − −

55024 For 2013 (1) − − − − − − − − − − − − for electric power and capacity resale 55224 For 2012 (2) − − − − − − − − − − − −

55025 For 2013 (1) − − − − − − − − − − − − for lease revenues 55225 For 2012 (2) − − − − − − − − − − − −

55026 For 2013 (1) − − − − − − − − − − − − for other 55226 For 2012 (2) − − − − − − − − − − − −

5503 For 2013 (1) 117 733 − 158 − − (85 011) − − − − 32 880 − Advances issued 5523 For 2012 (2) 926 858 − 570 136 − − (1 379 261) − − − − 117 733 −

5504 For 2013 (1) − − − − − − − − − − − − Bills receivable 5524 For 2012 (2) − − − − − − − − − − − −

5505 For 2013 (1) 78 558 − 760 − − (3 608) − − − − 75 710 − Other debt receivable 5525 For 2012 (2) 78 099 − 1 912 − − (1 453) − − − − 78 558 −

including: − − − − − − − −

55051 For 2013 (1) − − − − − − − − − − − − non-interest-bearing notes 55251 For 2012 (2) − − − − − − − − − − − −

55052 For 2013 (1) 78 558 − 760 − − (3 608) − − − − 75 710 − other 55252 For 2012 (2) 78 099 − 1 912 − − (1 453) − − − − 78 558 −

5506 For 2013 (1) − − − − − − − − − − − − From the total sum of long-term accounts receivable: 5526 For 2012 (2) − − − − − − − − − − − −

270 271

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

At the beginning of year Changes for the period Changes for the period At the period end

acceptance acceptance

55061 For 2013 (1) − − − − − − − − − − − − indebtedness of affiliated companies 55261 For 2012 (2) − − − − − − − − − − − −

55062 For 2013 (1) − − − − − − − − − − − − indebtedness of dependent companies 55262 For 2012 (2) − − − − − − − − − − − −

5510 For 2013 (1) 7 616 115 (20 321) 88 792 067 − (1 004 383) (85 369 937) (22 797) (61 160) 7 236 − 10 954 288 (994 671) Short-term accounts receivable - total 5530 For 2012 (2) 6 267 851 (46 404) 60 052 137 − (22 131) (58 629 980) (48 214) (25 679) − − 7 616 115 (20 321)

including:

5511 For 2013 (1) 2 809 635 (19 545) 48 772 141 − (46 441) (45 586 462) (22 021) (41 595) 7 236 − 5 931 698 (36 729) Settlements with buyers and customers 5531 For 2012 (2) 1 319 715 (36 924) 44 166 923 − (21 355) (42 631 346) (38 734) (6 923) − − 2 809 635 (19 545)

including:

55111 For 2013 (1) 1 347 705 − 39 235 374 − − (37 395 583) − (36 412) − − 3 151 084 − for electric power transmission 55311 For 2012 (2) 655 039 − 34 002 712 − − (33 310 046) − − − − 1 347 705 −

55112 For 2013 (1) 1 208 608 (17 966) 6 862 257 − (43 640) (5 913 661) (17 966) − 7 199 − 2 139 238 (36 441) for grid connection 55312 For 2012 (2) 601 136 (36 924) 8 327 499 − (17 966) (7 677 799) (36 924) (5 304) − − 1 208 608 (17 966)

for the organisation of functioning and development 55113 For 2013 (1) − − − − − − − − − − − − of UES of Russia regarding the distribution electric grid complex 55313 For 2012 (2) − − − − − − − − − − − −

55114 For 2013 (1) − − − − − − − − − − − − for electric power and capacity resale 55314 For 2012 (2) − − − − − − − − − − − −

55115 For 2013 (1) 55 741 (1 579) 145 089 − (132) (165 055) (1 579) − 37 − 34 196 (95) for lease revenues 55315 For 2012 (2) 35 904 − 111 535 − (3 389) (89 652) (1 810) (236) − − 55 741 (1 579)

55116 For 2013 (1) 197 581 − 2 529 421 − (2 669) (2 112 163) (2 476) (5 183) − − 607 180 (193) for other 55316 For 2012 (2) 27 636 − 1 725 177 − − (1 553 849) − (1 383) − − 197 581 −

5512 For 2013 (1) 256 656 (776) 10 816 191 − (596) (10 529 064) (776) (2 289) − − 540 718 (596) Advances issued 5532 For 2012 (2) 474 822 − 145 289 − (776) (354 033) − (9 422) − − 256 656 (776)

5513 For 2013 (1) − − − − − − − − − − − − Bills receivable 5533 For 2012 (2) − − − − − − − − − − − −

5514 − − − − − indebtedness of participants (founders) on instalments For 2013 (1) − − − − − − − in authorised capital 5534 For 2012 (2) − − − − − − − − − − − −

5515 − − − − − − − − − − − Indebtedness of affiliated and dependent companies For 2013 (1) − on dividends 5535 For 2012 (2) − − − − − − − − − − − −

5516 For 2013 (1) 4 549 824 − 29 203 735 − (957 346) (29 254 411) − (17 276) − − 4 481 872 (957 346) Other debt receivable 5536 For 2012 (2) 4 473 314 (9 480) 15 739 925 − − (15 644 601) (9 480) (9 334) − − 4 549 824 −

including:

272 273

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

At the beginning of year Changes for the period Changes for the period At the period end

acceptance acceptance

55161 For 2013 (1) − − − − − − − − − − − − non-interest-bearing notes 55361 For 2012 (2) − − − − − − − − − − − −

55162 For 2013 (1) 432 671 − 16 836 058 − − (16 885 045) − − − − 383 684 − overpayment under taxes and levies 55362 For 2012 (2) 864 138 − 1 285 216 − − (1 716 683) − − − − 432 671 −

55163 For 2013 (1) − − − − − − − − − − − − property sale 55363 For 2012 (2) − − − − − − − − − − − −

55164 For 2013 (1) 4 117 153 − 12 367 677 − (957 346) (12 369 366) − (17 276) − − 4 098 188 (957 346) other 55364 For 2012 (2) 3 609 176 (9 480) 14 454 709 − − (13 927 918) (9 480) (9 334) − − 4 117 153 −

5517 For 2013 (1) 42 441 − 106 299 − − (98 190) − − − − 50 550 − From the total sum of short-term accounts receivable: 5537 For 2012 (2) 37 500 − 73 134 − − (68 193) − − − − 42 441 −

55171 For 2013 (1) 42 441 − 106 299 − − (98 190) − − − − 50 550 − indebtedness of affiliated companies 55371 For 2012 (2) 37 500 − 73 134 − − (68 193) − − − − 42 441 −

55172 For 2013 (1) − − − − − − − − − − − − indebtedness of dependent companies 55372 For 2012 (2) − − − − − − − − − − − −

5500 For 2013 (1) 7 817 273 (20 321) 89 524 016 − (1 004 383) (86 191 471) (22 797) (61 160) 7 236 − 11 065 861 (994 671) Total 5520 For 2012 (2) 7 272 808 (46 404) 60 895 260 − (22 131) (60 276 902) (48 214) (25 679) − − 7 817 273 (20 321)

274 275

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

Application 20. Reserve on doubtful debts

Indicator Changes for the period At the beginning of Reserve Reserve At the period Name Code year creation w r i t e - o ff end

Settlements with buyers and customers 7310 19 545 46 441 (29 257) 36 729

including:

for electric power transmission 7311 − − − −

for grid connection 7312 17 966 43 640 (25 165) 36 441

for the organisation of functioning and development of UES of Russia regarding 7313 − − − − the distribution electric grid complex

for electric power and capacity resale 7314 − − − −

for lease revenues 7315 1 579 132 (1 616) 95

other 7316 − 2 669 (2 476) 193

Advances issued 7330 776 127 639 (1 375) 127 040

Other accounts receivable 7320 − 957 346 − 957 346

Total 7300 20 321 1 131 426 (30 632) 1 121 115

Application 21. Overdue accounts receivable

Indicator Code As at 31 December 2013 As at 31 December 2012 As at 31 December 2011

accounted book value accounted book value accounted book value under (minus under (minus under (minus contract a reserve contract a reserve contract a reserve provisions on doubtful provisions on doubtful provisions on doubtful debts) debts) debts)

Total 5540 755 056 755 056 809 940 789 620 591 974 553 966

including: 5541 755 056 755 056 809 940 789 620 591 974 553 966

Settlements with buyers and customers, including

for electric power transmission 55411 30 322 30 322 344 259 344 259 103 981 103 981

for grid connection 55412 724 734 724 734 463 326 445 361 486 909 449 985

for the organisation of functioning and development of UES of Russia regarding the distribution electric 55413 − − − − − − grid complex

for electric power and capacity resale 55414 − − − − − −

for lease revenues 55415 − − 1 579 − 654 −

other 55416 − − 776 − 430 −

Other accounts receivable 5542 − − − − − −

276

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

Application 22. Disagreements with trading companies

At the beginning of year Changes for the period At the period end

Charged for the period (turnover on debtors, RUB Paid for the period(turnover thousand) on creditors, RUB thousand)

Company Contractor Company Contractor Company Contractor Company Contractor Contractor data data data data data data data data

LLC Rusenergoresurs − − − 2 552 − − − 2 552

JSC SUAL − 322 139 − 7 778 − 4 234 − 325 683

LLC Dizazh M − 818 − 52 − − − 870

JSC PSC, electric power transmission − 36 412 − (36 412) − − − −

for reference: JSC PSC, purchase of losses − 105 738 105 738 105 738 105 738 − −

CJSC Energy trading company of Kirov − 33 186 − 16 676 − 19 709 − 30 153 plant

LLC Transenergoprom − − − 493 − − − −

JSC Oboronenergosbyt − − − 137 − − − −

LLC Rusenergosbyt − 96 600 − (96 600) − − − −

Application 23. Availability and movement of accounts payable

Changes for the period

acceptance

as a result of business accrued transactions interests, transfer from Balance (amount penalties w r i t e - o ff long-term Balance at the beginning of debt under and other repayment on financial to short-term at the period Indicator Code Period of year transactions) charges result debt end

Long-term accounts 5551 For 2013 (1) 1 585 858 808 650 − (724 500) − (1 097 519) 572 489 payable - total 5571 For 2012 (2) 1 491 698 1 450 459 − (250 333) − (1 105 966) 1 585 858

including:

accounts payable 5552 For 2013 (1) 33 148 − − (2 210) − − 30 938 of suppliers and contractors 5572 For 2012 (2) 1 383 978 1 575 − (246 439) − (1 105 966) 33 148

including:

55521 For 2013 (1) − − − − − − − construction 55721 For 2012 (2) − − − − − − −

55522 For 2013 (1) 33 148 − − (2 210) − − 30 938 other 55722 For 2012 (2) 1 383 978 1 575 − (246 439) − (1 105 966) 33 148

5553 For 2013 (1) 1 552 710 808 650 − (722 290) − (1 097 519) 541 551 Other accounts payable 5573 For 2012 (2) 107 720 1 448 884 − (3 894) − − 1 552 710

From the total sum 5554 For 2013 (1) − − − − − − − of long-term accounts payable 5574 For 2012 (2) − − − − − − −

55541 − − − − − − − indebtedness towards For 2013 (1) affiliated companies 55741 For 2012 (2) − − − − − − −

277

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

Changes for the period

acceptance

55542 − − − − − − − indebtedness towards For 2013 (1) dependent companies 55742 For 2012 (2) − − − − − − −

Short-term accounts 5560 For 2013 (1) 22 897 723 106 542 327 − (95 694 873) (227 703) 1 097 519 34 614 993 payable - total 5580 For 2012 (2) 20 724 273 76 414 823 − (75 269 976) (77 363) 1 105 966 22 897 723

including:

Settlements with 5561 For 2013 (1) 7 941 330 48 808 653 − (42 541 541) (2 114) − 14 206 328 suppliers and contractors 5581 For 2012 (2) 5 971 497 34 917 457 − (33 026 359) (8 604) 87 339 7 941 330

including:

55611 For 2013 (1) 4 346 511 19 490 562 − (17 143 299) (313) − 6 693 461 construction 55811 For 2012 (2) 3 502 783 6 388 789 − (5 545 061) − − 4 346 511

55612 For 2013 (1) 3 594 819 29 318 091 − (25 398 242) (1 801) − 7 512 867 other 55812 For 2012 (2) 2 468 714 28 528 668 − (27 481 298) (8 604) 87 339 3 594 819

5562 For 2013 (1) 13 874 103 25 412 718 − (24 970 434) (224 352) 1 097 519 15 189 554 Advances received 5582 For 2012 (2) 14 252 875 28 006 267 − (29 334 923) (68 743) 1 018 627 13 874 103

including:

55621 12 834 20 397 856 − (20 397 330) − − 13 360 for electric power For 2013 (1) transmission 55821 For 2012 (2) 218 804 23 135 091 − (23 341 061) − − 12 834

55622 For 2013 (1) 13 853 656 4 842 752 − (4 407 124) (223 696) 1 097 519 15 163 107 for grid connection 55822 For 2012 (2) 14 026 258 4 709 103 − (5 831 932) (68 400) 1 018 627 13 853 656

for the organisation 55623 For 2013 (1) 7 300 152 707 − (148 414) (653) − 10 940 of functioning and development of UES of Russia regarding 55823 For 2012 (2) 4 864 150 605 − (147 937) (232) − 7 300 the distribution electric grid complex

55624 − − − − − − − for electric power and For 2013 (1) capacity resale 55824 For 2012 (2) − − − − − − −

55625 − − − − − − − for participation For 2013 (1) in other organisations 55825 For 2012 (2) − − − − − − −

55626 For 2013 (1) 313 19 403 − (17 566) (3) − 2 147 for rent services 55826 For 2012 (2) 2 949 11 468 − (13 993) (111) − 313

55627 For 2013 (1) − − − − − − − for other 55826 For 2012 (2) − − − − − − −

Indebtedness 5563 For 2013 (1) − − − − − − − to participants (founders) on payment of incomes 5583 For 2012 (2) − − − − − − −

278

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

Changes for the period

acceptance

5564 For 2013 (1) − − − − − − − Bills payable 5584 For 2012 (2) − − − − − − −

5565 85 956 964 702 − (975 052) − − 75 606 Indebtedness before For 2013 (1) the state off-budget funds 5585 For 2012 (2) 61 502 849 869 − (825 415) − − 85 956

5566 360 535 15 242 137 − (14 960 389) − − 642 283 Settlements under taxes For 2013 (1) and levies 5586 For 2012 (2) 62 565 616 757 − (318 787) − − 360 535

5567 154 674 3 864 161 − (3 783 956) − − 234 879 Indebtedness before For 2013 (1) the company personnel 5587 For 2012 (2) 186 014 3 406 496 − (3 437 836) − − 154 674

5568 For 2013 (1) 481 125 12 249 956 − (8 463 501) (1 237) − 4 266 343 Other accounts payable 5588 For 2012 (2) 189 820 8 617 977 − (8 326 656) (16) − 481 125

From total sum 5569 For 2013 (1) 138 888 1 184 658 − (1 130 796) − − 192 750 of short-term accounts payable 5589 For 2012 (2) 142 289 921 573 − (924 974) − − 138 888

55691 138 888 1 184 658 − (1 130 796) − − 192 750 indebtedness towards For 2013 (1) affiliated companies 55891 For 2012 (2) 142 289 921 573 − (924 974) − − 138 888

55692 − − − − − − − indebtedness towards For 2013 (1) dependent companies 55892 For 2012 (2) − − − − − − −

5550 For 2013 (1) 24 483 581 107 350 977 − (96 419 373) (227 703) − 35 187 482 Total 5570 For 2012 (2) 22 215 971 77 865 282 − (75 520 309) (77 363) − 24 483 581

Application 24. Overdue accounts payable

Indicator Code As at 31 December As at 31 December As at 31 December 2013 2012 2011

Total 5590 1 620 695 1 623 185 1 890 285

including:

Settlements with suppliers and contractors 5591 − − −

including

construction 55911 − − −

other 55912 − − −

Indebtedness to participants (founders) on payment of incomes 5592 − − −

Indebtedness before the state off-budget funds 5593 − − −

Settlements under taxes and levies 5594 − − −

Indebtedness before the company personnel 5595 − − −

Other accounts payable 5596 1 620 695 1 623 185 1 890 285

279

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

Application 25. Credits and loans

Changes for the period

Transfer from As Short-term of the beginning Accrual Principal Interest Debt to Long- At the period Indicator Code Period of the year Entry of Interest Repayment Repayment term Debt end

7410 24 644 586 18 843 451 − (5 168 560) − (8 913 440) 29 406 037 Total long-term For 2013 (1) borrowings 7430 For 2012 (2) 20 800 000 11 237 586 − (4 393 000) − (3 000 000) 24 644 586

including:

7411 For 2013 (1) 21 644 586 15 843 451 − (5 168 560) − (8 913 440) 23 406 037 Credits 7431 For 2012 (2) 20 800 000 8 237 586 − (4 393 000) − (3 000 000) 21 644 586

7412 For 2013 (1) 3 000 000 3 000 000 − − − − 6 000 000 Loans 7432 For 2012 (2) − 3 000 000 − − − − 3 000 000

7420 3 144 374 − 2 618 821 (8 100 000) (2 606 632) 8 913 440 3 970 003 Total short-term For 2013 (1) borrowings 7440 For 2012 (2) 6 193 141 − 2 067 476 (6 000 000) (2 116 243) 3 000 000 3 144 374

including:

7421 For 2013 (1) 3 000 000 − − (8 100 000) − 8 913 440 3 813 440 Credits 7441 For 2012 (2) − − − − − 3 000 000 3 000 000

74211 For 2013 (1) 95 474 − 2 188 206 − (2 228 932) − 54 748 Interest on credits 74411 For 2012 (2) 34 871 − 1 801 996 − (1 741 393) − 95 474

7422 For 2013 (1) 48 900 − 430 615 − (377 700) − 101 815 Loans 7442 For 2012 (2) 6 158 270 − 265 480 (6 000 000) (374 850) − 48 900

Application 26. Expenses on credits and loans

Indicator

Name Code On long-term credits and loans On short-term credits and loans

Expenses on credits in total 7510 1 811 498 376 708

written off on other expenses 7511 1 512 412 319 071

included in cost of assets 7512 299 086 57 637

Expenses on loans in total 7520 430 615 −

written off on other expenses 7521 385 606 −

included in cost of assets 7522 45 009 −

From total expenses on loans and credits: 7530 2 275 077 376 708

accrued % 7531 2 242 113 376 708

other expenses 7532 32 964 −

280

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

Application 27. Estimated liabilities

Indicator

Balance at the beginning Written off as Name Code of year Recognised Redeemed the excessive sum Ending balance

Estimated liabilities - total 5700 1 061 109 1 316 648 (1 298 482) (69 422) 1 009 853

including:

Payment of forthcoming holidays 5701 132 554 351 058 (357 281) (10 520) 115 811

Annual bonus payment 5702 112 539 127 874 (68 278) (44 261) 127 874

For repair of fixed assets 5703 − − − − −

For works in connection with the seasonal 5704 − − − − − character of production

warranties and claims 5705 − − − − −

liquidating obligations 5706 − − − − −

judicial proceedings which have not been 5707 141 277 310 213 (135 518) (14 641) 301 331 settled on the reporting date

claims of taxing authorities by results of the tax checks, not settled 5708 − − − − − on the reporting date

other estimated liabilities 5709 674 739 527 503 (737 405) 464 837

From the total sum of contingent liabilities:

Created for account of expenses on usual 5710 418 566 − − − types of activity

Created for account of other expenses 5720 699 802 − − −

Included in assets cost 5730 183 870 − − −

Application 28. Deferred taxes

Deductible temporary Taxable temporary Deferred tax Name Code difference Deferred tax assets difference liabilities

Balance at the beginning of accounting year 7700 2 552 220 510 444 9 946 805 1 989 361

Income 7710 3 062 240 612 448 4 510 690 902 137

Expense 7720 (712 100) (142 420) (1 614 175) (322 835)

Result of change of the tax rates 7730 Х − Х −

Result of correction of errors of past years 7740 − − − −

Permanent differences in cost of assets and 7750 (3 075) (614) − − liabilities

Write-off which does not imply tax consequences 7760 − − − −

Balance on the accounting period end 7800 4 899 285 979 858 12 843 320 2 568 663

281

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

Application 29. Provisions

Indicator

Name Code As at 31 December 2013 As at 31 December 2012 As at 31 December 2011

Received - total 5800 868 436 393 896 179 638

including:

notes 5801 − − −

Property in pledge 5802 − − −

from which:

fixed assets 58021 − − −

securities and other financial investments 58022 − − −

other 58023 − − −

other received 5803 868 436 393 896 179 638

Issued under own liabilities – total 5810 138 026 137 724 148 103

including:

notes 5811 − − −

Collateral 5812 − − −

from which:

fixed assets 58121 − − −

securities and other financial investments 58122 − − −

other 58123 − − −

other issued 5813 138 026 137 724 148 103

Application 30. Government assistance

Indicator Code For 2013 (1) For 2012 (2)

Budgetary funds received - total 5900 850 850

including:

for current expenses 5901 − −

compensation for Chernobyl cleanup veterans 5902 − −

for accomplishment of tasks on mobilisation preparation 5903 850 850

for liquidation of the interterritorial cross subsidising 5904 − −

for investments in non-current assets 5905 − −

for other purposes 5906 − −

282

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

At the At the beginning Received Returned At the year beginning Received Returned At the year Indicator Code of year for the year for the year end of year for the year for the year end

Budget credits - total 5910 − 371 (371) − − 1 729 (1 729) −

including:

financing of precautionary measures on reducing of industrial injuries and 5911 − 371 (371) − − 1 729 (1 729) − occupational diseases

financing of profound medical checks of the employees at work with harmful and 5912 − − − − − − − − (or) dangerous production factors

other 5913 − − − − − − − −

Application 31. Government assistance on which the conditions of its granting are not satisfied

Indicator For 2013 For 2012

Name Code Subject to return Actually returned Subject to return Actually returned

Received budgetary funds on which the conditions of their 7910 − − − − granting are not satisfied

including

for current expenses 7911 − − − −

compensation for Chernobyl cleanup veterans 7912 − − − −

for accomplishment of tasks on mobilisation 7913 − − − − preparation

for liquidation of the interterritorial cross subsidising 7914 − − − −

other 7915 − − − −

Received budget credits on which the conditions of their 7920 − − − − granting are not satisfied

including

financing of precautionary measures on reducing 7921 − − − − of industrial injuries and occupational diseases

financing of profound medical checks of the employees at work with harmful and (or) dangerous production 7922 − − − − factors

other 7925 − − − −

283

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

Application 32. Miscellaneous income and expenses

Indicator

Name Code For 2013 For 2012

Total miscellaneous income 8000 3 529 476 1 924 127

including:

From disposal of fixed assets except for apartments 8001 8 940 5 913

From disposal of apartments 8002 2 340 5 384

From disposal of inventory 8003 30 426 20 606

From disposal of currency 8004 − −

From disposal of intangible assets 8005 − −

From sales of securities 8006 20 −

From disposal of other assets 8007 91 87

From joint activity 8008 − −

Profit of 2011 identified in the reporting period 8009 13 668 6 206

Profit of 2010 identified in the reporting period 8010 − −

Profit of 2009 identified in the reporting period 8011 − −

Profit before 01.01.2009 identified in the reporting period 8012 − −

Acknowledged fines, forfeitures and other financial penalties 8013 155 308 17 021

Accounts payable for which limitation period has expired (over 3 8014 255 149 77 362 years)

Exchange rate differences 8015 139 12

Property in surplus by results of inventory 8016 2 983 2 550

Donated assets except for fixed assets and intangible assets 8017 28 225

Income from donated fixed assets determined in the established 8018 16 677 16 445 order

Cost of tangible assets remaining from write-off of assets 8019 23 191 15 903 obsolete to restore and further use

Revaluation of financial investments at current market value 8020 − −

Income from decrease (write-off) of doubtful debt reserve 8021 7 237 85

Income from decrease (write-off) of reserve for estimated 8022 175 998 45 051 liabilities

Income from decrease (write-off) of reserve against decreases 8023 − − in the value of tangible assets

Income from claim assignment agreements 8024 − −

Income from identified non-contractual electricity consumption 8025 1 907 313 1 260 069

Insurance payments receivable 8026 58 059 1 235

Income from participation in the authorized capital of other 8027 − − organizations

Recovery of previously written off receivables 8028 − −

Discount on notes 8029 − −

Tariffs difference compensation (budget funding 8030 − −

284

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

Indicator

Name Code For 2013 For 2012

Income from decrease (write-off) of reserve against devaluation 8031 − − of financial investments

Full appreciation of fixed assets 8032 − 13 305

Other 8033 871 909 436 668

Total miscellaneous expenses 8100 (3 985 166) (1 913 685)

including:

On disposal of fixed assets except for apartments 8101 (869) (5 129)

On disposal of apartments 8102 (57) (238)

On disposal of inventory 8103 (28 054) (16 862)

On disposal of currency 8104 − −

On disposal of intangible assets 8105 − −

On sales of securities 8106 (105) −

On disposal of other assets 8107 (96) (53)

Other taxes 8108 (6 997) (2 569)

Expenses on bank services payment 8109 (7 555) (7 791)

Cost financial investments servicing 8110 (24 661) (18 456)

Reserve for doubtful debts 8111 (1 131 427) (22 131)

Reserve against devaluation of financial investments 8112 (49 318) −

Reserve against decreases in the value of tangible assets 8113 − −

Reserve for discontinued operations 8114 − −

Reserve for estimated liabilities 8115 (699 802) (247 015)

Disposal of incomeless assets 8116 (150 002) (28 656)

VAT on donated property 8117 − −

Loss of 2011 identified in the reporting period 8118 (114 704) (31 850)

Loss of 2010 identified in the reporting period 8119 (187) (1 484)

Loss of 2009 identified in the reporting period 8120 − (22)

Loss before 01.01.2009 identified in the reporting period 8121 − (77)

Acknowledged fines, forfeitures and other financial penalties 8122 (92 914) (33 484)

State duties on economic contracts 8123 (8 989) (4 612)

Revaluation of financial investments at current market value 8124 − −

Discount on notes 8125 − −

Expenses on claim assignment agreements 8126 − −

Non-refundable VAT 8127 (123 750) (55 428)

Expenses on identified non-contractual electricity consumption 8128 (456 866) (382 201)

Contributions to associations and foundations 8129 (3 180) (3 003)

285

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

Indicator

Name Code For 2013 For 2012

Accounts receivable for which limitation period has expired (over 8130 (193 632) (25 710) 3 years)

Exchange rate differences 8131 (196) (6)

Legal costs 8132 (15 856) (51 238)

Embezzlement and deficiencies 8133 (28 924) (135 708)

Costs of enforcement 8134 (75 134) (1 302)

Payment of cost of employees’ apartments 8135 (2 761) (3 200)

Other material (financial) assistance and other payments 8136 (223 436) (221 707) to employees

Material assistance to pensioners (including immediate 8137 (11 548) (11 295) compensation for utilities)

Expenses for sports activities 8138 (7 963) (6 011)

Expenses for cultural activities 8139 (28 421) (26 740)

Charitable contributions 8140 (35 406) (10 535)

Write-down of fixed assets 8141 − −

Other 8142 (462 356) (559 172)

Application 33. Reference on assets booked on off-balance-sheet accounts

Name Code As at 31 December 2013 As at 31 December 2012 As at 31 December 2011

Leased fixed assets 8200 1 489 605 2 008 396 6 587 338

including: on leasing 82001 603 470 1 239 796 5 511 244

Goods and materials accepted for custody 8201 79 605 30 287 30 287

Materials accepted for processing 8202 − − −

Goods accepted on commission 8203 − − −

Equipment accepted for assembly 8204 − − −

Indebtedness of insolvent debtors written off to losses 8205 989 807 1 030 257 426 566

Wear of land improvement facilities and other similar 8206 606 624 565 facilities

Strict reporting forms 8207 74 101 107

Federally owned property 8208 − − −

Intangible assets acquired in use 8209 − − −

Property transferred to share capital as payment for 8210 − − − purchased shares

286

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

Application 34. Reportable segment information

Leningrad Reporting Reporting Reporting 31.12. 2013 Code St. Petersburg Region Segment Segment Segment Other Segments Total

Revenue from external 8310 24 362 378 15 539 640 − − − − 39 902 018 customers

Sales revenue between 8320 − − − − − − − segments

Total revenue of segment 8300 24 362 378 15 539 640 − − − − 39 902 018

including: −

revenue from electricity 8301 19 035 480 14 171 512 − − − − 33 206 992 transmission

revenue from grid 8302 5 198 179 1 316 898 − − − − 6 515 077 connection

other revenue 8303 128 719 51 230 − − − − 179 949

Interest receivable 8330 328 240 315 354 − − − − 643 594

Interest payable 8340 1 352 834 864 255 − − − − 2 217 089

Profit tax expenses 8350 674 561 344 820 − − − − 1 019 381

Profit (loss) of segment 8360 1 020 161 (595 295) − − − − 424 866

Assets of segments 8370 95 174 108 55 083 749 − − − − 150 257 857

incl. non-current assets 8371 83 587 123 44 009 044 − − − − 127 596 167

Liabilities of segments 8380 37 098 296 36 818 669 − − − − 73 916 965

Depreciation of fixed assets and intangible 8390 5 067 547 3 193 453 − − − − 8 261 000 assets

287

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

8.4. DYNAMICS OF KEY INDICATORS OF IFRS FINANCIAL STATEMENTS OF LENENERGO FOR 2009-2013

Key performance indicators of JSC Lenenergo in dynamics for 5 years (RUB mln):

2009 2010 2011 2012 2013 Revenue 22,800 28,574 32,257 33,135 37,323

from electric power transmission 15,416 17,692 22,895 23,521 27,480

from technological connection 6,638 10,300 8,629 7,580 6,807

other 746 582 732 2,034 3,036

Operating expenses 18,489 21,441 31,503 -30,653 31,008

Net profit 2,587 4,750 -943 238 3,281

Net profit margin, % 11.4 16.6 -2.9 0.7 8.8

EBITDA 8,185 11,611 5,681 6,785 10,358

EBITDA margin, % 35.9 40.6 17.6 20.5 27.8%

Net debt 13,736 15,038 20,469 24,277 29,664

Net debt/EBITDA 1.68 1.30 3.60 3.58 2.86

Key indicators of the consolidated statements of financial position in dynamics for 5 years (RUB mln):

2008 2009 2010 2011 2012 2013 Long-term assets 73,023 78,962 87,010 84,958 88,157 102,100

Short-term assets 10,331 9,363 6,372 11,993 11,236 18,744

Assets 83,355 88,325 93,382 96,951 99,393 120,845

Long-term debt 12,946 10,074 14,125 21,028 20,637 29,402

Long-term liabilities 24,496 16,926 21,924 29,412 25,338 34,700

Short-term debt 436 6,611 1,566 6,549 7,153 3,982

Short-term liabilities 15,618 25,565 21,497 25,035 30,567 36,679

Liabilities 40,114 42,492 43,421 54,448 55,905 71,380

Capital 43,241 45,834 49,961 42,504 43,487 49,465

Key indicators of the consolidated profit and loss statement in dynamics for 5 years (RUB mln):

2008 2009 2010 2011 2012 2013 Revenue 17,914 22,800 28,574 32,257 33,135 37,323 Operating expenses -14,608 -18,489 -21,441 -31,503 -30,653 -31,008 Operating income 3,306 4,311 7,133 754 2,482 6,316 Financial income 2,292 78 774 61 302 667 Financial expenses -1,372 -2,084 -1,580 -1,660 -2,175 -2,682 Profit before taxes 3,048 2,132 6,257 -845 609 4,301 Expense on profit tax -1,210 455 -1,507 -99 -371 -1,020 Net income 1,838 2,587 4,750 -943 238 3,281

288

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

8.5. OBSERVANCE OF THE CORPORATE CODES OF CONDUCT

Data on observance by JSC Lenenergo of the Corporate Codes of Conduct (prepared pursuant to Order # 03-849/R of Federal Commission on Securities of the Russian Federation of 30.04.003 “About methodical recommendations on the structure and the form of representation of data on observance of the code of corporate conduct in annual reports of joint stock companies”)

# Provision of the code of corporate conduct Observed / Not Note observed

General shareholder meeting

1 Notice of shareholders on carrying out general Observed It is provided by sub-item 11.5 of Art. 11 of the charter of the Company. shareholder meeting not less than in 30 days The notice on carrying out general shareholder meeting is published prior to the date of its carrying out irrespective by the Company in the Izvestiya newspaper, and is also placed of the issues included in its agenda if a bigger on the Company web site on the Internet not later than 30 (thirty) days term is not set forth by legislation before date of its carrying out

2 Existence of possibility for shareholders to get Observed It is executed by the Company in practice according to item 4 of Art. 51 acquainted with the list of persons entitled of Federal Law “On joint stock companies” to participate in general shareholder meeting since the day of the message on carrying out general shareholder meeting and before closing of internal general shareholder meeting, and in case of correspondence general shareholder meeting – to an expiry date of reception of voting ballots

3 Existence of possibility for shareholders Observed Pursuant to item 11.7 of Art. 11 of the charter shareholders of JSC Lenenergo have to get acquainted with information (materials) possibility within 20 days, and in case of carrying out the general shareholder which is subject to granting by preparation meeting which agenda contains the issue of Company reorganization, within 30 for carrying out general shareholder meeting, days, before carrying out general meeting, to familiarize with materials to general by means of electronic communications, shareholder meeting in executive office of the Company and other places which including by means of the Internet addresses are specified in the notice on carrying out general shareholder meeting. 2008 2009 2010 2011 2012 2013 This information (materials) is available to the persons which are taking part Long-term assets 73,023 78,962 87,010 84,958 88,157 102,100 in general shareholder meeting, during its carrying out. Order of acquaintance of the persons having the right to participation in general Short-term assets 10,331 9,363 6,372 11,993 11,236 18,744 shareholder meeting, on information (materials) concerning the agenda of general Assets 83,355 88,325 93,382 96,951 99,393 120,845 shareholder meeting and the list of such information (materials) are determined by the decision of the Board of Directors of the Company. Long-term debt 12,946 10,074 14,125 21,028 20,637 29,402 Besides, according to item 4.1 of the Regulations on the procedure for preparation Long-term liabilities 24,496 16,926 21,924 29,412 25,338 34,700 and carrying out general shareholder meeting, information materials concerning the agenda of general shareholder meeting besides means of communication Short-term debt 436 6,611 1,566 6,549 7,153 3,982 to shareholders of the Company should be published on the Company site on the Internet no later than the expiration of the notification message Short-term liabilities 15,618 25,565 21,497 25,035 30,567 36,679 of shareholders about carrying out general shareholder meeting. The specified Liabilities 40,114 42,492 43,421 54,448 55,905 71,380 materials are recommended to be published also in English

Capital 43,241 45,834 49,961 42,504 43,487 49,465 4 Existence of possibility for the shareholder Observed Pursuant to sub-item 2 of item 6.2 of Art. 6 of the charter of the Company to bring an issue in the agenda of general shareholders have the right to make offers in the agenda of general shareholder meeting or to demand convocation shareholder meeting in an order provided by the legislation of the Russian of general shareholder meeting without Federation and the charter of the Company. According to item 13.1 of Art. granting an extract from the register 13 of the Charter of the Company the shareholders (shareholder) being 2008 2009 2010 2011 2012 2013 of shareholders if the accounting of its in aggregate owners of not less than 2% of voting shares of the Company, Revenue 17,914 22,800 28,574 32,257 33,135 37,323 rights to actions is carried out in system in time no later than 60 days after the termination of fiscal year have the right of maintaining the register of shareholders to bring issues in the agenda of annual general shareholder meeting and Operating expenses -14,608 -18,489 -21,441 -31,503 -30,653 -31,008 and in case its rights to shares are considered to nominate candidates for the Board of Directors and audit commission Operating income 3,306 4,311 7,133 754 2,482 6,316 on the custody account, there is enough extract of the Company, which number cannot exceed quantitative structure from the custody account for implementation of appropriate body Financial income 2,292 78 774 61 302 667 of the above-stated rights Financial expenses -1,372 -2,084 -1,580 -1,660 -2,175 -2,682 Profit before taxes 3,048 2,132 6,257 -845 609 4,301 Expense on profit tax -1,210 455 -1,507 -99 -371 -1,020 Net income 1,838 2,587 4,750 -943 238 3,281

289

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

# Provision of the code of corporate conduct Observed / Not Note observed

5 Existence in the Charter or internal documents Observed partially The charter and internal documents of the Company do not contain the specified of joint-stock company of the requirement provision, as the legislation of the Russian Federation does not establish on obligatory presence at general meeting the requirement to obligatory presence at general meeting of shareholders of shareholders of the Director General, of the specified persons. members of the Management Board, members According to subparagraph 5.2.2 of point 5.2 of the Code of corporate governance of the Board of Directors, members of audit of JSC Lenenergo the Company whenever possible provides presence at general commission and the auditor of joint-stock meeting of shareholders of members of the Board of Directors, executive bodies, company audit commission and the auditor of the Company and authorizes them to answer questions of shareholders. The charter and internal documents of the Company do not contain this provision, which requires mandatory presence at general shareholder meeting of such persons, however according to established practices, the Director General of the Company, Chairman of the Board of Directors and members of the Board of Directors are present at conducted general shareholder meetings

6 Obligatory presence of candidates Observed partially The legislation of the Russian Federation did not establish the requirement for consideration at general meeting about obligatory presence at general meeting of shareholders of shareholders of issues of election of board of the specified candidates. The special norm in the charter is not members, the director general, members provided. In practice, at consideration at general meeting of shareholders of the Management Board, members of audit of the issues related to election of members of the Board of Directors, commission, and also an issue of approval the Director General, members of the Management Board, audit of the auditor of joint-stock company commission, invitations to general shareholder meeting are dispatched to candidates. According to sub-item 48 of item 15.1 of Art. 15 of the charter of the Company definition of quantitative structure of the Management board, election of the Management board members and the early termination of their powers, including making decision on the early termination of the labor agreement with them is referred to competence of the Board of Directors of the Company

7 Existence in internal documents of joint- Observed The order of registration of the persons having the right to participation stock company of procedure of registration in general shareholder meeting, is defined by item 5.1 of Art. 5 of participants of general shareholder meeting of the regulations on the procedure for preparation and carrying out general meeting of shareholders of Lenenergo Open joint stock company of the power industry and electrification

Board of Directors

8 Existence in the charter of joint-stock company Observed Pursuant to sub-item 17 of item 15.1 of Art. 15 of the charter of power of the Board of Directors according of the Company the approval of the business plan (the adjusted business to the annual approval of the financial and plan) is carried to competence of the Board of Directors of the Company economic plan of joint stock company and the report on results of its performance

9 Existence of the procedure of risk management Observed • In the Company the following internal documents defining procedures approved by the Board of Directors in joint- of risk management are approved: policy of risk management stock company in JSC Lenenergo (Minutes # 22 of 18 June 2010); • methodical recommendations about JSC Lenenergo risk management (Minutes # 19 of 31May 2011); • Regulations on the control environment and risks of business processes of the Company “Commercial account and sales of services on electric power transmission”, “Management of procurements”, “Sales of services on grid connection”, “Operational activity” (Minutes # 19 of 31May 2011; Minutes # 1 of 25 July 2011)

10 Existence in the charter of joint-stock Observed Pursuant to sub-item 41 of item 15.1 of Art. 15 of the charter company of the right of the Board of Directors of the Company election of the Director General of the Company and to make the decision on suspension of powers the early termination of his powers, including making decision on the early of the Director General appointed by general termination of the labor agreement with him, is referred to competence shareholder meeting of the Board of Directors of the Company

290

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

# Provision of the code of corporate conduct Observed / Not Note observed

11 Existence in the charter of joint-stock Not observed These requirements are not specified by the Charter and internal documents company of the right of the Board of Directors of the Company to establish requirements to qualification and amount of remuneration of the Director General, members of the Management Board, heads of the main structural divisions of joint- stock company

12 Existence in the charter of joint-stock company Observed Pursuant to item 21.14 of Art. 21 of the charter of the Company of the right of the Board of Directors to approve conditions of the labor agreement with the Director General and members conditions of contracts with the Director of the Management Board, including regarding a term of office, are defined General and members of the Management by the Board of Directors or the person authorized by the Board of Directors Board on signing of the labor agreement

13 Existence in the charter or internal documents Not observed These requirements are not contained in the charter and internal of joint-stock company of the requirement that documents of the Company. In JSC Lenenergo conditions of the labor at approval of conditions of contracts with agreement on the Director General and the Management board members the Director General (managing organization, are determined by the person authorized by the Board of Directors the managing director) and members on signing of the labor agreement. As a rule, this person is the Chairman of the Management Board votes of members of the Board of Directors of the Board of Directors being the Director General and members of the Management Board, at counting of votes are not considered

14 Existence in the Board of Directors of joint- Observed The structure of the Board of Directors of the Company includes not less stock company of not less than three than 3 (three) independent directors independent directors who are meeting the requirements of the Code of corporate behavior

15 Absence in the Board of Directors of joint- Observed The specified persons are absent in the Board of Directors of the Company stock company of persons which were found guilty of commission of crimes in the sphere of economic activity or crimes against the government, interests of public service and service in local governments or to which administrative punishments for offenses in the field of business activity, or in the field of finance, taxes and fees, securities market were applied

16 Absence in the Board of Directors of joint-stock Not observed The member of operating structure of the Board of Directors Rozova E.E. company of the persons being the participant, is a member of the Board of Directors of JSC St. Petersburg Electrical the Director General (managing director), Networks and JSC Petrodvortsovaya Grid which are carrying out the activity the member of governing body or the employee on transmission and grid connection of applicants in the territory of St. of the legal entity competing to joint-stock Petersburg which is competing to JSC Lenenergo activities company

17 Existence in the charter of joint-stock company Observed Pursuant to item 16.2 of Art. 16 of the Company Charter elections of the requirement about election of the Board of the Board of Directors members are carried out by cumulative vote of Directors at cumulative vote

291

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

# Provision of the code of corporate conduct Observed / Not Note observed

18 Existence in internal documents of joint- Observed Pursuant to item 4.1.6. Art. 4.1. Of the Code of corporate governance members stock company of a duty of the members of the Board of Directors act honestly and with due care in interests of the Company of the Board of Directors to abstain from and all its shareholders. Each director aspires to take part in all meetings of the Board actions which will bring, or are potentially of Directors. capable to lead, to conflict emergence between Members of the Board of Directors realize the responsibility before shareholders and their interests and interests of joint-stock consider as the main goal diligent and competent fulfillment of duties on management company, and in case of such conflict – duties of the Company, providing maintenance and growth of cost of its shares, and also to disclose information on this conflict protection and possibility of realization by shareholders of their rights. Members to the Board of Directors of the Board of Directors aspire to carry on continuous dialogue with shareholders. Members of the Board of Directors provide formation and implementation of strategy of development of the Company. Members of the Board of Directors do not disclose and do not trade on confidential information on the Company. Members of the Board of Directors undertake to abstain from actions which can lead to conflict emergence between their interests and interests of the Company. In case of such conflict the member of the Board of Directors undertakes to report about it to other members of the Board, and also to refrain from vote on appropriate issues. Besides, according to item 3.5 of Art. 3 of the Regulations on the procedure for convocation and carrying out meetings of the Board of Directors of Lenenergo Open joint stock company of the power industry and electrification members of the Board of Directors at implementation of the rights and fulfillment of duties should act in interests of the Company, carry out the rights and fulfill duties concerning the Company diligently and reasonably

19 Existence in internal documents of joint-stock Observed Requirements to providing information on transactions of insiders contain company of a duty of board members in writing in Art. 4 of the Regulations on insider information of JSC Lenenergo. to notify the board of directors on intention Thus, information on all transactions of insiders with Company and SDC securities, to make transaction with securities of the joint- according to item 4.4 of the Regulations on insider information, are reveled and stock company, which board members they supervised by the special division of the Company which is carrying out control are, or its affiliated (dependent) companies and of insider information. Besides, according to item 4.1 of the Regulations insiders are also to disclose information on the transactions obliged to provide information on the transactions made for the reporting month made by them with such securities with securities of the Company and its SDC

20 Existence in internal documents of joint-stock Observed Pursuant to item 18.1 of Art. 18 of the Charter of JSC Lenenergo, item 5.1 company of the requirement on carrying out of Art. 5 of the Regulations on procedure of convocation and carrying out meetings of the board of directors not rare than meetings of the board of directors of JSC Lenenergo meeting of the board once in six weeks of directors are carried out as required, but not rare than once in six weeks

21 Carrying out meetings of the board of directors Observed For fiscal year 36 meetings of the board of directors of the Company are of joint-stock company within a year for which carried out the annual report of joint-stock company is made, with periodicity not rare than once in six weeks

22 Existence in internal documents of joint-stock Observed The order of carrying out meeting of the board of directors is defined company of an order of carrying out meetings by Art. 18 of the charter of the Company and the Regulations on procedure of the board of directors of convocation and carrying out meetings of the board of directors of JSC Lenenergo in the new edition

23 Existence in internal documents of joint-stock Observed Pursuant to sub-item "a" of sub-item 35 of item 15.1 of Art. 15 of the charter company of situation on need of approval of the Company preliminary approval of decisions on commission by the board of directors of transactions by the Company of the transactions, which subject is non-current assets of joint-stock company for the sum of 10 and of the Company at the rate above 10% of book value of non-current more percent of cost of assets of the Company, assets of the Company for the date of decision-making on commission except for the transactions made in the course of such transaction is referred to competence of the Board of Directors of ordinary economic activity of the Company

292

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

# Provision of the code of corporate conduct Observed / Not Note observed

24 Existence in internal documents of joint-stock Observed Pursuant to item 3.2. Art. 3 of the Regulations on procedure of convocation company of the right of board members and carrying out meetings of the board of directors of JSC Lenenergo on receiving from executive bodies and heads the board member can request in writing documents and information of the main structural divisions of joint- necessary for decision-making concerning competence of the board stock company of information necessary of directors both directly from the director general of the Company for implementation of the functions, and (other person which is carrying out functions of the sole executive body also responsibility for non-provision of such of the Company), and through the corporate secretary information

25 Existence of the Committee of the Board Observed Pursuant to the decision of the Board of Directors on 15.10.2007 (Minutes of Directors on strategic planning, or laying of the Board of Directors # 8 of 15.10.2007) the Committee on Strategy and the functions of this committee onto another Development was established committee (except the Committee on Audit and the Committee on Personnel and Remuneration)

26 Existence of the Committee of the Board Observed Pursuant to the decision of the Board of Directors (Minutes # 2 of Directors (Committee on Audit), which of 27.08.2008) the Committee on Audit of the Board of Directors recommends the Board of Directors of JSC Lenenergo was established. the Company’s auditor and interacts with The objective of the Committee is to develop and submit the auditor and the Audit Commission of recommendations (opinions) to the Board of Directors in the field of audit of the Company and reporting of the Company

27 Existence as a part of the Audit Committee Observed All members of the Committee on Audit of the Board of Directors of independent and non-executive directors of JSC Lenenergo are independent and non-executive directors. only

28 Implementation of the Audit Committee Observed The Chairperson of the Committee on Audit of the Board of Directors management by an independent director of JSC Lenenergo is an independent director

29 Existence in internal documents of a joint stock Observed It is provided by item 4.1 of Art. 4 of the Regulations on the Committee company of the right of access of all members on Audit of the Board of Directors of JSC Lenenergo of the Committee on Audit to any documents and information of joint-stock company under condition of nondisclosure of confidential information by them

30 Creation of the Committee of the Board Observed Pursuant to the decision of the Board of Directors (Minutes # 2 of Directors (Committee on Personnel and of 27.08.2008) the Committee on Personnel and Remuneration of the Board Remuneration), whose function is to determine of Directors of JSC Lenenergo was established the criteria for selection of candidates for members of the Board of Directors and to develop the Company’s policy on remuneration

31 Management of the Committee on Personnel Observed The Committee’s management is held by an independent director and Remuneration by an independent director

32 Absence in the Committee on Personnel and Observed There are no officials of the Company in the Committee on Personnel and Remuneration of officials of a joint-stock Remuneration of the Board of Directors JSC Lenenergo company

33 Creation of the committee of the board Not observed The committee is not established in the Company of directors on risks or assignment of functions of the specified committee on other committee (except the committee on audit and the personnel and remuneration committee)

293

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

# Provision of the code of corporate conduct Observed / Not Note observed

34 Creation of committee of the board of directors Not observed The committee is not established in the Company on settlement of the corporate conflicts or assignment of functions of the specified committee on other committee (except the committee on audit and the personnel and remuneration committee)

35 Absence as a part of the committee Not observed The committee is not established in the Company on settlement of the corporate conflicts of officials of a joint stock company

36 Implementation of the management Not observed The committee is not established in the Company by the committee on settlement of the corporate conflicts by the independent director

37 Existence of internal documents of a joint stock Observed • The Board of Directors of the Company approved the following company providing an order of formation and regulations: work of committees of the Board of Directors • Regulations on the Committee on Strategy and Development approved by the Board of Directors of the Board of Directors of JSC Lenenergo (Minutes # 4 of 09.09.2009); • Regulations on the Committee on Personnel and Remuneration of the Board of Directors of JSC Lenenergo (Minutes # 35 of 13.06.2013); • Regulations on the Committee on Audit of the Board of Directors of JSC Lenenergo (Minutes # 8 of 27.08.2012); • Regulations on the Committee on Reliability of the Board of Directors of JSC Lenenergo (Minutes # 13 of 28.02.2008 as amended by Minutes # 1 of 13.07.2009); • Regulations on the Committee on Technological Connection to Power Grids pf the Board of Directors of JSC Lenenergo (Minutes # 8 of 10.02.2009)

38 Existence in the charter of a joint-stock Not observed Requirements for the order of definition of quorum of the Board company of an order of definition of quorum of Directors, allowing providing obligatory participation of independent of the Board of Directors, allowing to provide directors in meetings of the Board of Directors of the Company are absent obligatory participation of independent in the Company’s charter. directors in meetings of the Board of Directors Pursuant to item 18.9 of Art. 18 of the charter of the Company and item 7.3 of Art. 7 of the Regulations on the order of convocation and carrying out meetings of the Board of Directors of JSC Lenenergo quorum for carrying out meeting of the Board of Directors shall make not less than a half from the number of elected members of the Board of Directors

Executive bodies

39 Existence of collegial executive body Observed Existence of collegial executive body - Management Board is provided (Management Board) of a joint stock company by item 9.1 of Art. 9, Art. 21 of the Company’s charter

40 Existence in the charter or internal documents Observed partially The charter and internal documents of the Company did not provide need of joint-stock company of provision on need of approval by the Management Board of transactions with real estate, of approval by the board of transactions with receiving by the Company of credits if specified transactions are not admitted real estate, receiving by joint-stock company major deals and their commission is not related to ordinary business activity of the credits if the specified transactions do of the Company. not belong to large deals and their commission Pursuant to sub-item 7, item 21.6 of Art. 21 of the charter decision-making does not belong to ordinary business activity on conclusion of transactions which subject is real estate, works and of joint-stock company the services which cost makes from 5% to 25% of book value of the Company’s assets defined for the date of decision-making on conclusion of transaction falls under the competence of the Management Board

1Previously the Regulations on credit policies of JSC Lenenergo (Minutes # 17 of 09.04.2007

294

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

# Provision of the code of corporate conduct Observed / Not Note observed

41 Existence in internal documents of a joint Observed Procedures of coordination of operations which are beyond the financial stock company of procedure of coordination and business plan of a joint stock company are provided by sub-item 17, of operations which are beyond the financial item 15.1 of Art. 15 of the charter of JSC Lenenergo, item 2.13 – 2.14 Art. and economic plan of joint-stock company 2 of the Standard on business planning of JSC Lenenergo, item 3.4.1 Art. 3 of the Regulations on credit policies of JSC Lenenergo (Minutes # 8 of 11.10.2013)1

42 Absence in the executive bodies of the persons Observed The specified persons in the executive bodies of the Company are absent being participants, directors general (managing directors), members of governing body or employees of legal entity competing to the joint stock company

43 Absence in the executive bodies of a joint Observed The specified persons in the executive bodies of the Company are absent stock company of persons which were found guilty of commission of crimes in the sphere of economic activity or crimes against the government, interests of public service and service in local governments or to which administrative punishments for offenses in the field of business activity, or in the field of finance, taxes and fees, securities market were applied. If functions of individual executive body are carried out by managing organization or the managing director, compliance of the director general and board members of managing organization, or the managing director, to the requirements shown to the director general and board members of a joint stock company

44 Existence in the charter or internal documents Not observed The charter and internal documents of the Company do not contain these of a joint stock company of a ban to managing requirements to a managing organization or to a management Company organization (managing director) to carry out similar functions in competing company, and also to be in any other property relations with a joint stock company, besides rendering of services of managing organization (managing director)

45 Existence in internal documents of a joint Observed It is provided by sub-item 4.2 item 4.2.7 Art. 4 of the Code of corporate stock company of an obligation of executive governance of JSC Lenenergo bodies to abstain from actions which will bring, or are potentially capable to lead, to conflict emergence between their interests and interests of joint-stock company, and in case of such conflict – duties to inform on it of the board of directors

46 Existence in the charter or internal documents Not observed The charter and internal documents of the Company did not provide this of a joint stock company of criteria of selection provision of managing organization (managing director)

295

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

# Provision of the code of corporate conduct Observed / Not Note observed

47 Submission to the executive bodies of a joint Observed partially The charter and internal documents of the Company do not contain stock company of monthly reports on its work the specified requirements to the executive bodies of the Company. to the Board of Directors However, reports of the Director General on execution of orders of the Board of Directors in the reporting quarter that contain information on the Company’s activity are submitted quarterly for consideration to the Board of Directors

48 Establishment in the contracts signed by a joint Observed Such provisions are contained in labor agreements with the Director General stock company with the Director General and members of the Management Board of the Company (managing organization, managing director) and members of the Management Board, of responsibility for violation of regulations on the use of confidential and office information

Secretary of the Company

49 Existence in a joint stock company Observed In the Company the corporate secretary is elected with a view of the special official (the secretary of appropriate observance in the Company of the order of preparation and of the Company) which task is ensuring carrying out general shareholder meeting, activity of the Board of Directors observance with bodies and officials of the joint of the Company. stock company of the procedural requirements The Regulations on the corporate secretary of the Board of Directors guaranteeing implementation of the rights (approved by the decision of the Board of Directors, Minutes # 22 and legitimate interests of the Company’s of 21.05.2007) operates within the Company. shareholders The issue on ensuring observance by bodies and officials of the joint stock company of the procedural requirements guaranteeing implementation of the rights and legitimate interests of the Company’s shareholders is carried out by Department of Corporate Governance and Shareholder Relations of the Company

50 Existence in the charter or internal documents Observed Item 20.1, item 20.5, Art. 20 of the charter of the Company, Art. 3 of a joint stock company of the order of the Regulations on the corporate secretary of the Board of Directors, Art. of appointment (election) of the secretary 4 of the Regulations on the order of convocation and carrying out meetings of the Company and responsibilities of the Board of Directors of the secretary of the Company

51 Existence in the charter of a joint stock Not observed The charter of the Company does not define any requirements for company of requirements for the candidacy the candidacy of the Corporate secretary of the secretary of the Company

Essential corporate actions

52 Existence in the charter or internal documents Observed Pursuant to the Company’s charter decision-making on approval of major of a joint stock company of the requirement transactions in cases provided by chapter X of the Federal Law “About on approval of a major transaction before its joint stock companies”, Art. 79 of the Federal Law “About joint stock commissioning companies” (item 10.2 Art. 10 of the charter of the Company) falls under the competence of governing bodies of the Company (General Shareholder Meeting and the Board of Directors)

53 Obligatory involvement of an independent Observed According to sub-item 37 item 15.1 Art. 15 of the charter the Company appraiser for assessment of market value establishes powers of the Board of Directors on approval of the candidacy of the property subject to a major transaction of an independent appraiser (appraisers) for definition of market value of shares, property and other assets of the Company in cases set forth by the Federal Law “About joint stock companies”, the Company’s charter, and separate decisions of the Board of Directors

296

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

# Provision of the code of corporate conduct Observed / Not Note observed

54 Existence in the charter of a joint stock Not observed This ban is absent in the charter of the Company. company of a ban on acceptance at acquisition of large blocks of shares of joint-stock company (takeover) of any actions directed on protection of interests of executive bodies (members of these bodies) and board members of the joint stock company, and also shareholders worsening situation in comparison with existing (in particular, a ban on acceptance by the board of directors before the termination of expected term of acquisition of actions of the decision on issue of additional shares, about issue of the securities converted in a share, or the securities providing the right of acquisition of shares of the company even if the right of adoption of such decision is provided to it by the charter)

55 Existence in the charter of a joint stock Not observed This requirement is absent in the charter of the Company. It is implemented company of the requirement about obligatory by the Company in practice pursuant to requirements of the Federal Law involvement of the independent appraiser for “About joint stock companies” an assessment of the current market stock value and possible changes of their market cost as a result of takeover

56 Absence in the charter of a joint stock company Observed This provision is absent in the charter of the Company of release of the purchaser from a duty to suggest shareholders to sell ordinary shares of the Company belonging to them (issue-grade securities converted into ordinary shares) at M&A

57 Existence in the charter or internal documents Not observed This requirement is absent in the charter of the Company. It is implemented of a joint stock company of the requirement by the Company in practice pursuant to requirements of the Federal Law on obligatory involvement of an independent “About joint stock companies” appraiser to determine the share conversion ratio at reorganization

Information disclosure

58 Existence of the internal document approved Observed The Board of Directors of the Company approved the Regulations by the Board of Directors defining rules on information policy of JSC Lenenergo (Minutes # 7 of 19.09.2013)2 and approaches of a joint stock company to disclosure of information (the Regulations on information policy)

59 Existence in internal documents of a joint stock Observed partially Disclosure of information is carried out according to requirements company of the requirement on disclosure of the current legislation of the Russian Federation and the Regulations of information on the purposes of placement on information policy of the Company of shares, on persons which are going to get placed shares, including the large block of shares, and also about, whether the top officials of joint-stock company will participate in acquisition of placed shares of the company

2Previously the Regulations on information policy of JSC Lenenergo (Minutes # 6 of 09.12.2008)

297

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

# Provision of the code of corporate conduct Observed / Not Note observed

60 Existence in internal documents of a joint stock Observed Provisions of the charter of the Company do not contain this list company of the list of information, documents of information. and materials which should be provided The list of information, documents and materials which should be provided to shareholders for the solution of the issues to shareholders for the solution of the issues submitted for general submitted for general shareholder meeting shareholder meeting is defined and approved by the Company board of directors. Specified information according to item 11.7 of the charter of the Company within 20 days, and in case of carrying out the general shareholder meeting which agenda contains an issue of Company reorganization – within 30 days before carrying out general shareholder meeting, should be available to the persons having the right to participation in general shareholder meeting, to acquaintance in executive body of the Company and other places which addresses are specified in the message on carrying out general shareholder meeting. Information (materials) concerning the agenda of general shareholder meeting no later than in 10 days prior to date of carrying out general shareholder meeting is placed on the Company web site on the Internet

61 Presence of the website of a joint stock Observed The address of the web site of the Company on the Internet: www. company on the Internet and regular disclosure lenenergo.ru. of information about the joint stock company Information on the Company is subject to placement on the Company on this website website on the Internet pursuant to item 11.5, item 11.7 Art. 11 of the charter of the Company, Art. 4 of the Regulations on information policy of JSC Lenenergo

62 Existence in internal documents of a joint stock Observed partially Pursuant to Art.5 of the Regulations on information policy of the Company company of the requirement on disclosure information on accessory to members of governing bodies and persons of information on transactions of joint-stock of shares of the company affiliated with them, and also its affiliated or company with the persons belonging according dependent economic companies, with the indication of quantity, category to the charter to the top officials of the joint of shares, and also information on transactions between the specified stock company, and also about transactions persons and the Company is revealed of joint-stock company with the organizations in which the top officials of joint-stock company directly or indirectly possess 20 and more percent of authorized capital of joint-stock company, or on which such persons can make otherwise essential impact

63 Existence in internal documents of a joint stock Observed Art. 5 of the Regulations on information policy of JSC Lenenergo company of the requirement on disclosure of information on all transactions which can influence the market value of shares of the joint stock company

64 Existence of the internal document approved Observed Regulations on the insider information approved by the decision by the Board of Directors on the use of the Board of Directors in the new edition (Minutes # 36 of 20.06.2013)3 of essential information on activity of a joint operate within the Company stock company, shares and other securities of the Company and transactions with them which is not public and which disclosure can make essential impact on market value of shares and other securities of the joint stock company

3Previously the Regulations on the insider information of JSC Lenenergo (Minutes # 15 of 30.12.2011)

298

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

# Provision of the code of corporate conduct Observed / Not Note observed

Control over financial and business activity

65 Existence of the procedures of internal control Observed The Company approved the internal control policy of JSC Lenenergo approved by the Board of Directors over financial by the decision of the Board of Directors (Minutes # 8 of 27 August 2012) and economic activity of a joint stock company

66 Existence of a special division in the joint stock Observed Department of internal audit and risk management is established company providing observance of internal control in the Company procedures (control and audit service)

67 Existence in internal documents of a joint stock Observed Pursuant to item 3.2.1 of Art. 3 of the Regulations on the Committee company of the requirement on definition on audit of the Board of Directors of JSC Lenenergo (Minutes # 8 of the structure and composition of control of 27.08.2012) the Committee on audit considers and coordinates and audit service of the joint stock company the organizational structure of the division which is carrying out functions by the Board of Directors of internal control/audit of the Company

68 Absence in the control and audit service Observed Such persons are absent in Department of internal audit and risk of the persons which were found guilty management of commission of crimes in the sphere of economic activity or crimes against the government, interests of public service and service in local governments or to which administrative punishments for offenses in the field of business activity or in the field of finance, taxes and fees, securities market were applied

69 Absence in the control and auditing service Observed Such persons are absent in Department of internal audit and risk of the persons which are a part of executive management bodies of joint-stock company, and also the persons being participants, the director general (managing director), members of governing bodies or employees of the legal entity competing to joint-stock company

70 Existence in internal documents of a joint stock Not observed These requirements are not specified in the charter and internal documents company of the term of submission to the control of the Company and audit service of documents and materials for assessment of the performed financial and business transaction, and responsibility of officials and employees of the joint stock company for their non- submission within the specified term

71 Existence in internal documents of a joint stock Not observed These requirements are not specified in the charter and internal documents company of the obligation of the control and audit of the Company service to report about the revealed violations to the Audit committee, and in case of its absence – to the Board of Directors of the joint stock company

72 Existence in the charter of a joint stock company Not observed This requirement is not specified in the charter of the Company of the requirement about preliminary estimate by the control and audit service of expediency of commissioning of transactions not specified by the financial and business plan of the joint stock company (non-standard transactions)

299

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

# Provision of the code of corporate conduct Observed / Not Note observed

73 Existence in internal documents of a joint Not observed This order is not specified in the charter and internal documents stock company of the order of coordination of the Company of non-standard transactions with the Board of Directors

74 Existence of the internal document approved Observed Regulations on audit commission of JSC Lenenergo (approved at annual by the Board of Directors defining the order general meeting of shareholders of JSC Lenenergo – Minutes # 1 of 23May of carrying out checks of financial and 2002) operate in the Company economic activity of a joint stock company by the audit commission

75 Implementation by the Audit committee Observed Item 3.1.1 of Art. 3 of the Regulations on the Committee on Audit of an assessment of an audit report before of the Board of Directors of JSC Lenenergo representation to its shareholders at general shareholder meeting

Dividends

76 Existence of an internal document approved Observed Regulations on dividend policy of JSC Lenenergo (approved by the decision by the Board of Directors by which of the Board of Directors of JSC Lenenergo – Minutes # 4 of 31 August the Board of Directors is guided at approval 2010) operate in the Company of recommendations about the size of dividends (the Regulations on dividend policy)

77 Existence in the Regulations on dividend policy Observed Pursuant to sub-item 5.7 of Art. 5 of the Regulations on dividend policy of the procedure for determining the minimum of JSC Lenenergo, the total amount paid as dividends on each preferred share of net profit of a joint stock company share shall be equal to 10% of net profit of the Company for the most recent directed for dividends, and conditions under fiscal year, determined in proportion to the number of sold preferred shares which dividends are not paid or partially of type A. Pursuant to sub-item 3.5 Art. 3 of the Regulations on dividend paid on preferred shares, and the dividends policy of JSC Lenenergo, the Company is not entitled to decide on (declare) sum on which is defined by the charter dividends payment on preferred shares of a certain type (in case of their of the Company placement), on which the amount of dividend is determined by the Company charter, if the decision on full payment of dividends is not approved (including on full payment of all accrued dividends on cumulative preferred shares) on all types of preferred shares that provide an advantage in priority to receiving dividends on preferred shares of this type (in case of placement of such shares)

78 Release of the data on dividend policy of a Observed Regulations on dividend policy of JSC Lenenergo operate in the Company. joint stock company and amendments The specified Regulations are published on the Company's website introduced to it in a periodical set forth on the Internet. by the charter of the joint stock company At the same time information about dividends paid by the Company, and for publication of messages on carrying out the procedure for their payment is released by the Company in its annual general shareholder meetings, and placement report, quarterly reports, and on the Company's website of the specified data on the website of the joint stock company on the Internet

300

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

8.6. THE LIST OF RELATED PARTY TRANSACTIONS FOR 2013

# Contractor Subject Amount of transaction, RUB Minutes of the Board Related party of Directors

1 JSC FGC UES Provision of services in placement 43,200 with VAT/month # 26 of 10.04.2013 JSC Rosseti of technology equipment on non-residential facilities owned by JSC FGC UES, without passing the facility in rent

2 JSC FGC UES Provision of services in placement 15,500 with VAT/month # 26 of 10.04.2013 JSC Rosseti of a telecommunication case with the communication equipment at substation

3 JSC FGC UES Implementation of technical supervision no more than 6,625,198with # 30 of 06.05.2013 JSC Rosseti on power network facilities relating VAT to territorial distributive networks of JSC Lenenergo in 2013

4 JSC IDGC of Centre Provision of access to the information # 35 of 13.06.2013 JSC Rosseti; resources containing data making a trade Kazachenkov A.V.; secret, and conditions of the information Tikhonova M.G. transfer making a trade secret

5 JSC Rosseti Implementation by JSC Rosseti # 1 of 18.07.2013 JSC Rosseti; of the actions on control of implementation Sorochinskiy A.V. by JSC Lenenergo of the program of renovation of cable network 6-110 kV in the city of St. Petersburg in 2011-2013 pursuant to the agreement, at the expense of funds brought in the authorized capital of JSC Rosseti from the federal budget

6 JSC FGC UES Provision of services in organization of access Cost of works is defined # 1 of 18.07.2013 JSC Rosseti to the system of electronic documents pursuant to the contract flow of corporate information system Supplement of the certifying center of digital signatures of JSC FGC UES

7 JSC FGC UES Lease of part of the land plot in the area 371,654 plus VAT 18% # 1 of 18.07.2013 JSC Rosseti of 49m145.7 sq. m located at: St. Petersburg, Polyustrovsky Ave, 46

8 JSC Kubanenergo Interaction and mutual aid at the prevention # 10 of 22.10.2013 JSC Rosseti; and elimination of accidents and emergency Magadeev R.R. situations on power network facilities, including caused by natural hazards

9 JSC Energy Lease of non-residential premises for office 1,196,342with VAT /month # 13 of 26.11.2013 Sorochinskiy A.V. Service Company placement in the total area of 751.4 sq. m Lenenergo in the building located at: St. Petersburg, Sinopskaya Emb, 60-62, let. A

10 JSC FGC UES Conclusion of supplementary agreements 496,523 with VAT /quarter; # 13 of 26.11.2013 JSC Rosseti to lease contracts of premises 444,202 with VAT /quarter

301

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

# Contractor Subject Amount of transaction, RUB Minutes of the Board Related party of Directors

11 JSC Rosseti Implementation of technical supervision 12,580,633 with VAT # 15 of 17.12.2013 JSC Rosseti; on power network facilities of JSC Lenenergo Sorochinskiy A.V. in 2014

12 CJSC Kurortenergo Interaction and mutual aid at the prevention # 18 of 27.12.2013 Sorochinskiy A.V.; and elimination of accidents and emergency Sinkin D.B. situations on power network facilities, including caused by natural hazards

13 CJSC TSEC Interaction and mutual aid at the prevention # 18 of 27.12.2013 Sorochinskiy A.V.; and elimination of accidents and emergency Sinkin D.B. situations on power network facilities, including caused by natural hazards

14 JSC Kubanenergo Work on technical and operative service and Cost of works is defined # 18 of 27.12.2013 JSC Rosseti; repair of facilities pursuant to the contract Magadeev R.R. Supplement

8.7. DATA ON ELECTRICITY TRANSMISSION TARIFFS IN 2013-2014

Electricity transmission tariffs approved for 2013

1.Over St. Petersburg: a) single (joint-operations) double-rate and single-rate tariffs with differentiation on voltage levels and allocation of tariffs for the group “population” (Order # 603-r of 26.12.2012): from 01.01.2013 to 30.06.2013

Rate for maintenance of electrical Rate for payment of electric power # Voltage level networks, RUB/MW per month losses in networks, RUB/MWh Single-rate tariff, RUB/MWh

1. Other consumers

HV (110 kV and above) 135,689.1 66.1 429.6

MV1 (35 kV) 270,737.8 122.5 997.3

MV2 (20-1 kV) 299,940.0 223.5 1,413.4

LV (0.4 kV) 309,431.2 379.6 1,570.1

2. Population 661.3

Population and other eligible categories 2.1. 1,017.9 of consumers, except as described in item 2.2

Population and other eligible categories of consumers living in urban settlements in houses 2.2. equipped in accordance with established procedure 273.8 with stationary electric ovens and (or) electrical heating installations

302

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

from 01.07.2013 to 31.12.2013

Rate for maintenance of electrical Rate for payment of electric power # Voltage level networks, RUB/MW per month losses in networks, RUB/MWh Single-rate tariff, RUB/MWh

1. Other consumers

HV (110 kV and above) 180,196.7 72.8 560.9

MV1 (35 kV) 343,024.7 134.8 1,302.5

MV2 (20-1 kV) 407,293.0 245.82 1,854.0

LV (0.4 kV) 451,554.8 417.5 2,047.0

2. Population

Population and other eligible categories 2.1. 1,154.7 of consumers, except as described in item 2.2

Population and other eligible categories of consumers living in urban settlements in houses 2.2. equipped in accordance with established procedure 301.0 with stationary electric ovens and (or) electrical heating installations

b) individual double-rate tariffs applied to calculations c) for CJSC KirovTEK an individual double-rate tariff by a principle of JSC Lenenergo with third-party grid organizations (for rendering “cost minus” (pays to JSC Lenenergo of services in electric power of services in electric power transmission on their networks) without transmission; (Order # 651-r of 28.12.2012) any differentiation on voltage levels (Order # 651-r of 28.12.2012)

from 01.01.2013 to 30.06.2013 Third-party grid organization Rate for maintenance of electrical networks, Rate for payment of technological Single-rate tariff, RUB/MWh RUB/MW per month consumption (losses) in networks, RUB/MWh

CJSC KirovTEK 125,619.4 171.2 443.2

from 01.07.2013 to 31.12.2013 Third-party grid organization Rate for maintenance of electrical networks, Rate for payment of technological Single-rate tariff, RUB/MWh RUB/MW per month consumption (losses) in networks, RUB/MWh

CJSC KirovTEK 228,179.3 223.3 726.9

2. Over the Leningrad Region:

a) single (joint-operations) double-rate tariffs with differentiation (Order # 212-p of 28.12.2012 as amended by Order # 189-p on voltage levels and allocation of tariffs for the group “population” of 29.11.2013):

from 01.01.2013 to 30.06.2013

Rate for maintenance of electrical Rate for payment of electric power # Voltage level networks, RUB/MW per month losses in networks, RUB/MWh Single-rate tariff, RUB/MWh

1. Other consumers

HV (110 kV and above) 679,354.0 96.6 780.8

MV1 (35 kV) 812,211.4 140.4 1,262.0

MV2 (20-1 kV) 575,077.7 302.7 1,328.7

LV (0.4 kV) 858,923.6 684.0 2,477.9

2. Population 1,003.9

303

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

from 01.07.2013 to 30.11.2013

Rate for maintenance of electrical Rate for payment of electric power # Voltage level networks, RUB/MW per month losses in networks, RUB/MWh Single-rate tariff, RUB/MWh

1. Other consumers

HV (110 kV and above) 900,144.0 106.3 926.8

MV1 (35 kV) 1,082,143.5 154.5 1,497.9

MV2 (20-1 kV) 839,580.0 333.0 1,577.0

LV (0.4 kV) 1,254,006.0 752.4 2,941.0

2. Population 1,099.6

from 01.12.2013 to 31.12.2013

Rate for maintenance of electrical Rate for payment of electric power # Voltage level networks, RUB/MW per month losses in networks, RUB/MWh Single-rate tariff, RUB/MWh

1. Other consumers

HV (110 kV and above) 947,076.7 106.7 1,014.5

MV1 (35 kV) 1,136,250.7 154.5 1,598.7

MV2 (20-1 kV) 889,954.8 333.0 1,645.8

LV (0.4 kV) 1,320,531.8 752.4 3,070.7

2. Population 1,099.6

b) individual double-rate tariffs applied to calculations of JSC Lenenergo with third-party grid organizations (for rendering of services in electric power transmission on their networks) without any differentiation on voltage levels

304

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

8.8. DATA ON GRID CONNECTION TARIFFS IN 2013-2014

St. Petersburg, 2013 (Resolution of the Committee on Tariffs of St. Petersburg # 620-r of 28.12.2012)

The cost of activities carried out at technological connection of a unit of the maximum capacity to electric networks of JSC Lenenergo in a territorial zone (district) of technological connection # 1 in the territory of St. Petersburg for 2013 at a voltage level of below 35 kV and capacity below 8,900 kW

# Name of activities Rates for payment calculation for each activity, RUB/kW

Voltage level

6-10 kV 1-0.4 kV

Maximum capacity of power accepting devices of applicants

over 50 kW below 150 kW Over 150 kW and Below 50 kW and up to 150 kW over 150 kW and inclusively up to 670 kW 670 kW and above inclusively inclusively up to 670 kW 670 kW and above

Preparation and issue by the network organization of specifications 1 to the applicant 481 481 481 481 481 481 481

Development by the network organization of design documentation on "the 2 last mile" construction X X X X X X X

Implementation by the network organization of activities related to "the last mile" 3 construction X X X X X X X

3.1 Construction of cable lines 13,961 13,961 13,038 9,458 15,816 15,807 14,888

Construction of complete transformer substations (CTS), distributive transformer substations (DTS) of voltage level up 3.2 to 35 kV X X X X 3,847 3,693 4,649

Verification by the network organization of specifications compliance 4 by the applicant 155 155 155 155 155 155 155

Participation of an official from the Federal Service for Ecological, Technological and Nuclear Supervision (Rostekhnadzor) in the survey of the applicant’s 5 connected devices X 62 62 X X 62 62

Actual connection and to ensuring work of devices 6 in electric networks 111 111 111 111 111 111 111

305

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

The cost of activities carried out at technological connection of a unit of the maximum capacity to electric networks of JSC Lenenergo in a territorial zone (district) of technological connection # 2 in the territory of St. Petersburg for 2013 at a voltage level of below 35 kV and capacity below 8,900 kW

# Name of activities Rates for payment calculation for each activity, RUB/kW

Voltage level

6-10 kV 1-0.4 kV

Maximum capacity of power accepting devices of applicants

over 50 kW below 150 kW Over 150 kW and Below 50 kW and up to 150 kW over 150 kW and inclusively up to 670 kW 670 kW and above inclusively inclusively up to 670 kW 670 kW and above

Preparation and issue by the network organization of specifications 1 to the applicant 481 481 481 481 481 481 481

Development by the network organization of design documentation on "the 2 last mile" construction X X X X X X X

Implementation by the network organization of activities related to "the last mile" 3 construction X X X X X X X

3.1 Construction of cable lines 12,807 12,807 11,956 8,635 14,518 14,509 13,661

Construction of complete transformer substations (CTS), distributive transformer substations (DTS) of voltage level up 3.2 to 35 kV X X X X 3,550 3,403 4,285

Verification by the network organization of specifications compliance 4 by the applicant 155 155 155 155 155 155 155

Participation of an official from the Federal Service for Ecological, Technological and Nuclear Supervision (Rostekhnadzor) in the survey of the applicant’s 5 connected devices X 62 62 X X 62 62

Actual connection and to ensuring work of devices 6 in electric networks 111 111 111 111 111 111 111

306

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

Standardized tariff rates for calculation of payment for technological connection in a territorial zone # 1 in the territory of St. Petersburg for 2013

Maximum capacity of power accepting devices Trademark/ Standard size # Standardized tariff rate Voltage level of applicants of the applied equipment Tariff rate

1 Standardized tariff rate to cover losses on technological below 150 kW X 747 connection of power accepting devices of consumers inclusively of electric power, power network facilities owned 6-10 kV over150 kW and up by network organizations and to other persons X 809 on the activities specified in item 16 of the methodical to 670 kW instructions (except for sub-items b and v) counting per 1 kW of maximum capacity, RUB/kW (С1) 670 kW and above X 809 below 50 kW inclusively X 747

over 50 kW and up X 747 to 150 kW inclusively 1-0.4 kV over 150 kW and up X 809 to 670 kW

670 kW and above X 809

2 Standardized tariff rate to cover losses of a network X SIW 3 1х35 270,029 organization on construction of overhead transmission lines on voltage levels, RUB/km (С2) X SIW 3 1х50 274,589 6-10 kV X SIW 3 1х70 285,598

X SIW 3 1х95 299,355

X SIW 3 1х120 310,298

X SIW 2 3x70+1x70 144,921

1-0.4 kV X SIW 2 3х95+1x95 176,846

X SIW 2 3х120+1x95 196,152

3 Standardized tariff rate to cover losses of a network X APvPg-10 3x70 102,160 organization on construction of cable lines on voltage levels, RUB/km (С3) X APvPg-10 3x95 105,580 X APvPg-10 3x120 110,782

X APvPg-10 3x240 127,904

X APvPg -10 3x300 142,788

X APvPg -10 3x400 133,817 6-10 kV X APvPg -10 3x500 155,023

X AAbl-10 3x70 559,512

X AAbl -10 3x95 621,570

X AAbl -10 3x120 662,593

X AAbl -10 3x150 713,557

X APvPu2g 3(1х240/70) 1,621,620

X APvBbShp 4х185 840,217

1-0.4 kV X APvBbShp 4х240 1,292,642

X ASB2l 3х150 1,127,336

307

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

Maximum capacity of power accepting devices Trademark/ Standard size # Standardized tariff rate Voltage level of applicants of the applied equipment Tariff rate

4 Standardized tariff rate to cover losses of a network 1-0.4/ X STP 1x16 5 934 organization on construction of complete transformer substations (CTS), distributive transformer substations 6-10 kV X STP 1х16 5,934 (DTS) of voltage level up to 35 kV, RUB/kW (С4) X STP 1х25 3,938

X STP 1х40 2,549

X STP 1х63 1,675

X STP 1х100 1,407

X STP 1х160 989

X KTP 1х63 stub types 2,812

X KTP 1х100 stub types 1,470

X KTP 1х160 stub types 1,174

X KTP 1х250 stub types 809

X KTP 1х400 stub types 1,124

X KTP 1х630 stub types 655

KTP 1х1000 stub X 487 types

X KTP 1х63 pass types 5,018

X KTP 1х100 pass types 3,233

X KTP 1х160 pass types 2,110

X KTP 1х250 pass types 1,464

X KTP 1х400 pass types 1,551

X KTP 1х630 pass types 1,083

KTP 1х1000 pass X 830 types

X 2KTP 2х63 3,671

X 2KTP 2х100 2,367

X 2KTP 2х160 1,548

X 2KTP 2х250 1,107

X 2KTP 2х400 589

X 2KTP 2х630 750

X 2KTP 2х1000 586

X BKTP 1х160 3,267

X BKTP 1х100 5,086

X BKTP 1х250 2,205

X BKTP 1X400 3,111

X BKTP 1X630 2,045

308

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

Maximum capacity of power accepting devices Trademark/ Standard size # Standardized tariff rate Voltage level of applicants of the applied equipment Tariff rate

X BKTP 1X1000 1,314

X BKTP 2X100 3,792

X BKTP 2X160 2,439

X BKTP 2X250 1,649

X BKTP 2х400 1,495

X BKTP 2х630 982

X BKTP 2х1000 742

X BKTP 2х1250 753

X BKTP 2х1600 602

X BKTP 2х1250 2,241

X RTP 4х1250 1,288

Standardized tariff rates for calculation of payment for technological connection in a territorial zone # 2 in the territory of St. Petersburg for 2013

Maximum capacity of power accepting devices Trademark/ Standard size # Standardized tariff rate Voltage level of applicants of the applied equipment Tariff rate

1 Standardized tariff rate to cover losses on technological below 150 kW X 747 connection of power accepting devices of consumers inclusively of electric power, power network facilities owned by network organizations and to other persons on the activities specified in item 16 of the methodical 6-10 kV over150 kW X 809 instructions (except for sub-items b and v) counting per and up to 670 kW 1 kW of maximum capacity, RUB/kW (С1) 670 kW and above X 809

below 50 kW X 747 inclusively

over 50 kW and up to 150 kW X 747 1-0.4 kV inclusively

over 150 kW X 809 and up to 670 kW

670 kW and above X 809

2 Standardized tariff rate to cover losses of a network X SIW 3 1x35 248,427 organization on construction of overhead transmission lines on voltage levels, RUB/km (С2) X SIW 3 1x50 252,622 6–10 kV X SIW 3 1x70 262,750

X SIW 3 1x95 275,407

X SIW 3 1x120 285,474

309

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

Maximum capacity of power accepting devices Trademark/ Standard size # Standardized tariff rate Voltage level of applicants of the applied equipment Tariff rate

X SIW 2 3x70+1x70 133,327

1–0,4 kV X SIW 2 3x95+1x95 162,698

X SIW 2 3x120+1x95 180,460

3 Standardized tariff rate to cover losses of a network X APvPg-10 3x70 93,987 organization on construction of cable lines on voltage levels, RUB/km (С3) X APvPg-10 3x95 97,134 X APvPg-10 3x120 101,919

X APvPg-10 3x240 117,672

X APvPg-10 3x300 131,365

X APvPg-10 3x400 123,112 6–10 kV X APvPg-10 3x500 142,621

X AAbl -10 3x70 514,751

X AAbl -10 3x95 571,844

X AAbl -10 3x120 609,586

X AAbl -10 3x150 656,472

X APvPu2g 3(1х240/70) 1,491,890

X APvBbShp 4х185 772,730

1–0,4 kV X APvBbShp 4х240 1,189,224

X ASB2l 3х150 1,037,149

4 Standardized tariff rate to cover losses of a network 1–0,4/ X STP 1х16 5,459 organization on construction of complete transformer 6–10 kV substations (CTS), distributive transformer substations X STP 1х25 3,623 (DTS) of voltage level up to 35 kV, RUB/kW (С4) X STP 1х40 2,345

X STP 1х63 1,541

X STP 1х100 1,294

X STP 1х160 910

X KTP 1х63 stub types 2,587

X KTP 1х100 stub types 1,352

X KTP 1х160 stub types 1,080

X KTP 1х250 stub types 744

X KTP 1х400 stub types 1,034

X KTP 1х630 stub types 603

X KTP 1х1000 stub types 448

X KTP 1х63 pass types 4,617

X KTP 1х100 pass types 2,974

X KTP 1х160 pass types 1,941

X KTP 1х250 pass types 1,347

X KTP 1х400 pass types 1,427

310

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

Maximum capacity of power accepting devices Trademark/ Standard size # Standardized tariff rate Voltage level of applicants of the applied equipment Tariff rate

X KTP 1х630 pass types 996

X KTP 1х1000 pass types 764

X 2KTP 2х63 3,377

X 2KTP 2х100 2,178

X 2KTP 2х160 1,424

X 2KTP 2х250 1,018

X 2KTP 2х400 542

X 2KTP 2х630 690

X 2KTP 2х1000 539

X BKTP 1х160 3,006

X BKTP 1х100 4,679

X BKTP 1х250 2,029

X BKTP 1X400 2,862

X BKTP 1X630 1,881

X BKTP 1X1000 1,209

X BKTP 2X100 3,489

X BKTP 2X160 2,244

X BKTP 2X250 1,517

X BKTP 2х400 1,375

X BKTP 2х630 903

X BKTP 2х1000 683

X BKTP 2х1250 693

X BKTP 2х1600 554

X BKTP 2х1250 2,062

X RTP 4х1250 1,185

St. Petersburg, 2014 (Resolution of the Committee on Tariffs of St. Petersburg # 630-r of 27.12.2013)

311

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

The cost of activities carried out at technological connection of a unit of the maximum capacity to electric networks of JSC Lenenergo in a territorial zone (district) of technological connection # 1 in the territory of St. Petersburg for 2014 at a voltage level of below 35 kV and capacity below 8,900 kW

# Activities Rates for payment calculation for each activity, RUB/kW

Voltage level

MV2 LV

Maximum capacity of power accepting devices of applicants

over 50 kW below 150 kW Over 150 kW and Below 50 kW and up to 150 kW over 150 kW and inclusively up to 670 kW 670 kW and above inclusively inclusively up to 670 kW 670 kW and above

Preparation and issue by the network organization of specifications 1 to the applicant 491 491 491 491 491 491 491

Development by the network organization of design documentation on "the last mile" 2 construction Х Х Х Х Х Х Х

Implementation by the network organization of activities related to "the 3 last mile" construction Х Х Х Х Х Х Х

3.1 Construction of cable lines 13,961 13,961 13,038 9,458 15,816 15,807 14,888

Construction of complete transformer substations (CTS), distributive transformer substations (DTS) ofvoltage level up 3.2 to 35 kV Х Х Х Х 3,847 3,693 4,649

Verification by the network organization of specifications 4 compliance by the applicant 158 158 158 158 158 158 158

Participation of an official from the Federal Service for Ecological, Technological and Nuclear Supervision (Rostekhnadzor) in the survey of the applicant’s 5 connected devices Х 63 63 Х Х 63 63

Actual connection and to ensuring work ofdevices 6 in electric networks 114 114 114 114 114 114 114

312

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

The cost of activities carried out at technological connection of a unit of the maximum capacity to electric networks of JSC Lenenergo in a territorial zone (district) of technological connection # 1 in the territory of St. Petersburg for 2014 at a voltage level of below 35 kV and capacity below 8,900 kW

# Activities Rates for payment calculation for each activity, RUB/kW

Voltage level

MV2 LV

Maximum capacity of power accepting devices of applicants

over 50 kW below 150 kW Over 150 kW and Below 50 kW and up to 150 kW over 150 kW and inclusively up to 670 kW 670 kW and above inclusively inclusively up to 670 kW 670 kW and above

Preparation and issue by the network organization of specifications 1 to the applicant 491 491 491 491 491 491 491

Development by the network organization of design documentation on "the last mile" 2 construction Х Х Х Х Х Х Х

Implementation by the network organization of activities related to "the 3 last mile" construction Х Х Х Х Х Х Х

3.1 Construction of cable lines 12,807 12,807 11,956 8,635 14,518 14,509 13,661

Construction of complete transformer substations (CTS), distributive transformer substations (DTS) ofvoltage level up 3.2 to 35 kV Х Х Х Х 3,550 3,403 4,285

Verification by the network organization of specifications 4 compliance by the applicant 158 158 158 158 158 158 158

Participation of an official from the Federal Service for Ecological, Technological and Nuclear Supervision (Rostekhnadzor) in the survey of the applicant’s 5 connected devices Х 63 63 Х Х 63 63

Actual connection and to ensuring work ofdevices 6 in electric networks 114 114 114 114 114 114 114

313

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

Standardized tariff rates for calculation of payment for technological connection in a territorial zone # 1 in the territory of St. Petersburg for 2014

# Maximum capacity of power accepting Trademark/Standard size Standardized tariff rate Voltage level devices of applicants of the applied equipment Tariff rate

1 Standardized tariff rate to cover losses on technological below 150 kW X 747 connection of power accepting devices of consumers inclusively of electric power, power network facilities owned X 763 by network organizations and to other persons on the activities specified in item 16 of the methodical 6–10 kV over150 kW X 826 instructions (except for sub-items b and v) counting per and up to 670 kW 1 kW of maximum capacity, RUB/kW (С1) 670 kW and above X 826

below 50 kW X 763 inclusively

over 50 kW and up to 150 kW X 763 1–0,4 kV inclusively

over 150 kW X 826 and up to 670 kW

670 kW and above X 826

X SIW 3 1х95 299,355

X SIW 3 1х120 310,298

X SIW 2 3х70+1x70 144,921

1–0,4 kV X SIW 2 3х95+1x95 176,846

X SIW 2 3х120+1x95 196,152

3 Standardized tariff rate to cover losses of a network ASB2l 3х120 one cable X 524,380 organization on construction of cable lines on voltage into the trench levels, RUB/km (С3) ASB2l 3х120 two cables X 839,008 into the trench

ASB2l 3х240 one cable X 813,815 into the trench

ASB2l 3х240two cables X 1,302,104 into the trench 6–10 kV APvPu2g 3(1х120/70) X one cable into 1,370,421 the trench

APvPu2g 3(1х120/70) X two cables into 2,192,674 the trench

APvPu2g 3(1х185/50) X one cable into 1,467,777 the trench

314

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

# Maximum capacity of power accepting Trademark/Standard size Standardized tariff rate Voltage level devices of applicants of the applied equipment Tariff rate

APvPu2g 3(1х185/50) X two cables into 2,348,443 the trench

APvPu2g 3(1х240/70) X one cable into 1,621,620 the trench

APvPu2g 3(1х240/70) X two cables into 2,594,592 the trench

APvBbShp 4х120 one X 726,470 cable into the trench

APvBbShp 4х120 two X 1,017,058 cables into the trench

APvBbShp 4х150 one X 748,705 cable into the trench

APvBbShp 4х150 two X 1,048,187 cables into the trench

APvBbShp 4х240 one X 1,292,642 cable into the trench

APvBbShp 4х240 two X 1,809,699 cables into the trench 1–0,4 kV ASB2l 4х120 one cable X 626,267 into the trench

ASB2l 4х120 two cables X 876,774 into the trench

ASB2l 4х150 one cable X 1,127,336 into the trench

ASB2l 4х150 two X 1,578,270 cables into the trench

ASB2l 4х240 one cable X 826,831 into the trench

ASB2l 4х240 two X 1,157,563 cables into the trench

4 Standardized tariff rate to cover losses of a network organization on construction of complete transformer X KTP 1х63 stub types 2,812 substations (CTS), distributive transformer substations (DTS) of voltage level up to 35 kV, RUB/kW (С4) 1–0,4/ X KTP 1х100 stub types 1,470 6–10 kV X KTP 1х160 stub types 1,174

X KTP 1х250 stub types 809

X KTP 1х400 stub types 1,124

X KTP 1х630 stub types 655

X KTP 1х1000 stub types 487

X KTP 1х63 pass types 5,018

X KTP 1х100 pass types 3,233

315

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

# Maximum capacity of power accepting Trademark/Standard size Standardized tariff rate Voltage level devices of applicants of the applied equipment Tariff rate

X KTP 1х160 pass types 2,110

X KTP 1х250 pass types 1,464

X KTP 1х400 pass types 1,551

X KTP 1х630 pass types 1,083

X KTP 1х1000 pass types 830

X 2KTP 2х63 3,671

X 2KTP 2х100 2,367

X 2KTP 2х160 1,548

X 2KTP 2х250 1,107

X 2KTP 2х400 589

X 2KTP 2х630 750

X 2KTP 2х1000 586

X BKTP 1х160 3,267

X BKTP 1х100 5,086

X BKTP 1х250 2,205

X BKTP 1X400 3,111

X BKTP 1X630 2,045

X BKTP 1X1000 1,314

X BKTP 2X100 3,792

X BKTP 2X160 2,439

X BKTP 2X250 1,649

X BKTP 2х400 1,495

X BKTP 2х630 982

X BKTP 2х1000 742

X BKTP 2х1250 753

X BKTP 2х1600 602

X BKTP 2х1250 2,241

X RTP 4х1250 1,288

316

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

Standardized tariff rates for calculation of payment for technological connection in a territorial zone # 2 in the territory of St. Petersburg for 2014

# Maximum capacity of power accepting Trademark/Standard size Standardized tariff rate Voltage level devices of applicants of the applied equipment Tariff rate

1 Standardized tariff rate to cover losses on technological below 150 kW X 763 connection of power accepting devices of consumers inclusively of electric power, power network facilities owned X 826 by network organizations and to other persons on the activities specified in item 16 of the methodical 6–10 kV over150 kW X 826 instructions (except for sub-items b and v) counting per and up to 670 kW 1 kW of maximum capacity, RUB/kW (С1) 670 kW and above X 826

below 50 kW X 763 inclusively

over 50 kW and up to 150 kW X 763 1–0,4 kV inclusively

over 150 kW X 826 and up to 670 kW

670 kW and above X 826

2 Standardized tariff rate to cover losses of a network X SIW 3 1х35 248,427 organization on construction of overhead transmission lines on voltage levels, RUB/km (С2) X SIW 3 1х50 252,622 6–10 kV X SIW 3 1х70 262,750

X SIW 3 1х95 275,407

X SIW 3 1х120 285,474

X SIW 2 3х70+1x70 133,327

1–0,4 kV X SIW 2 3х95+1x95 162,698

X SIW 2 3х120+1x95 180,460

3 Standardized tariff rate to cover losses of a network ASB2l 3х120 one cable X 482,410 organization on construction of cable lines on voltage into the trench levels, RUB/km (С3) ASB2l 3х120 two cables X 771,856 into the trench

ASB2l 3х240 one cable X 748,680 into the trench

ASB2l 3х240 two X 1,197,888 cables into the trench 6–10 kV APvPu2g 3(1х120/70) X one cable into 1,260,737 the trench

APvPu2g 3(1х120/70) X two cables into 2,017,179 the trench

APvPu2g 3(1х185/50) X one cable into 1,350,301 the trench

317

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

# Maximum capacity of power accepting Trademark/Standard size Standardized tariff rate Voltage level devices of applicants of the applied equipment Tariff rate

APvPu2g 3(1х185/50) X two cables into 2,160,482 the trench

APvPu2g 3(1х240/70) X one cable into 1,491,890 the trench

APvPu2g 3(1х240/70) X two cables into 2,387,024 the trench

APvBbShp 4х120 one X 668,326 cable into the trench

APvBbShp 4х120 two X 935,656 cables into the trench

APvBbShp 4х150 one X 688,781 cable into the trench

APvBbShp 4х150 two X 964,293 cables into the trench

APvBbShp 4х240 one X 1,189,224 cable into the trench

APvBbShp 4х240 two X 1,664,914 cables into the trench 1–0,4 kV ASB2l 4х120 one cable X 576,143 into the trench

ASB2l 4х120 two cables X 806,600 into the trench

ASB2l 4х150 one cable X 1,037,149 into the trench

ASB2l 4х150 two X 1,452,009 cables into the trench

ASB2l 4х240 one cable X 760,654 into the trench

ASB2l 4х240 two X 1,064,915 cables into the trench

4 Standardized tariff rate to cover losses of a network organization on construction of complete transformer X KTP 1х63 stub types 2,587 substations (CTS), distribution transformer substations (DTS) up to 35 kV, RUB/kW (C4) 1–0,4/ X KTP 1х100 stub types 1,352 6–10 kV X KTP 1х160 stub types 1,080

X KTP 1х250 stub types 744

X KTP 1х400 stub types 1,034

318

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

# Maximum capacity of power accepting Trademark/Standard size Standardized tariff rate Voltage level devices of applicants of the applied equipment Tariff rate

X KTP 1х630 stub types 603

X KTP 1х1000 stub types 448

X KTP 1х63 pass types 4,617

X KTP 1х100 pass types 2,974

X KTP 1х160 pass types 1,941

X KTP 1х250 pass types 1,347

X KTP 1х400 pass types 1,427

X KTP 1х630 pass types 996

KTP 1х1000 pass X 764 types

X 2KTP 2х63 3,377

X 2KTP 2х100 2,178

X 2KTP 2х160 1,424

X 2KTP 2х250 1,018

X 2KTP 2х400 542

X 2KTP 2х630 690

X 2KTP 2х1000 539

X BKTP 1х160 3,006

X BKTP 1х100 4,679

X BKTP 1х250 2,029

X BKTP 1X400 2,862

X BKTP 1X630 1,881

X BKTP 1X1000 1,209

X BKTP 2X100 3,489

X BKTP 2X160 2,244

X BKTP 2X250 1,517

X BKTP 2х400 1,375

X BKTP 2х630 903

X BKTP 2х1000 683

X BKTP 2х1250 693

X BKTP 2х1600 554

X BKTP 2х1250 2,062

X RTP 4х1250 1,185

Leningrad Region, 2013 (Resolution of the Committee on Tariffs and Price Policy of the Leningrad Region # 100-p of 18.06.2013)

319

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

The cost of activities carried out at technological connection of a unit of the maximum capacity to electric networks of JSC Lenenergo at a voltage level of below 35 kV and capacity below 8,900 kW on the territory of the Leningrad Region for 2013

# Activities Rates for payment calculation for each activity, RUB/kW

Voltage level

MV2 (6-10 kV) LV (1-0.4 kV)

Maximum capacity of power accepting devices of applicants

up to 150 kW above 150 kW up to 150 kW above 150 inclusively inclusively kW

1 Preparation and issue by the network organization of specifications to the applicant 257.0

2 Development by the network organization of design documentation on "the last mile" construction X X X X

3 Implementation by the network organization of activities related to "the last mile" construction X X X X

3.1. Construction of cable lines 10,330 10,875

3.2. Construction of complete transformer substations (CTS), distributive transformer substations (DTS) of voltage level up to 35 kV х X X

3.3. Verification by the network organization of specifications compliance by the applicant X X 3,756 3,630

4 Participation of an official from the Federal Service for Ecological, Technological and Nuclear Supervision (Rostekhnadzor) in the survey of the applicant’s connected devices 72.0

5 Actual connection and to ensuring work of devices in electric networks 48.0

6 Preparation and issue by the network organization of specifications to the applicant 113.0

Standardized tariff rates for calculation of payment for technological connection to electric networks of JSC Lenenergo

The list of standardized rates Unit Standardized tariff rate (w/o VAT)

С1 - Standardized tariff rate to cover losses on technological connection of power accepting devices of consumers of electric power, power network facilities owned by network organizations and to other persons on the activities specified in item RUB/kW in prices of 2013 16 of the methodical instructions (except for sub-items b and v) counting per 1 kW of maximum capacity

С1 RUB/kW 490.0

С2 - standardized tariff rate to cover losses on construction of overhead transmission RUB/km in FUR prices-2001 lines

SIW-3 1х95mm2 (joint suspension) RUB/km 458,165.0 С2-L2 (6 – 10 kV) SIW -3 1х95mm2 RUB/km 387,635.0

С2-L (1 -0.4 kV) SIW -2А 3х95+1х95+1х16mm 2 RUB/km 382,663.0

С3 - standardized tariff rate to cover losses on construction of cable lines RUB/km RUB/km

APvPg-10 3х(1х240/70) RUB/km 555,782.0 С3-L2 (6–10 kV) ASB-10 (3х240) RUB/km 443,609.0

320

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

The list of standardized rates Unit Standardized tariff rate (w/o VAT)

С4 - standardized tariff rate to cover losses on construction of substations RUB/kW in FUR prices-2001

С4-L2/LV MTP 1х100 kVA RUB/kW STP 1х25 kVA RUB/kW 1,157.0

KTP 1х250 kVA stub types RUB/kW 1,616.0

KTP 1х400 kVA stub types RUB/kW 803.0

KTP 1х630 kVA stub types RUB/kW 511.0

KTP 2х400 kVA stub types RUB/kW 380.0

KTP 2х630 kVA stub types RUB/kW 679.0

С4_MV2/LV BKTP 1х250 kVA RUB/kW 471.0

BKTP 1х400 kVA RUB/kW 2,644.0

BKTP 1х630 kVA RUB/kW 2,589.0

BKTP 2х630 kVA RUB/kW 1,865.0

BKTP 2х1000 kVA RUB/kW 1,122.0

BKTP 2х1250 kVA RUB/kW 1,177.0 Leningrad Region, 2014 (Resolution of the Committee on Tariffs and Price Policy of the Leningrad Region # 241-p of 27.12.2013)

The cost of activities carried out at technological connection of a unit of capacity to electric networks of JSC Lenenergo at a voltage level of below 35 kV and capacity below 8,900 kW on the territory of the Leningrad Region (zone 1) for 2014

# Activities Rates for payment calculation for each activity, RUB/kW

Voltage level

MV2 (6-10 kV) LV (1-0.4 kV)

Maximum capacity of power accepting devices of applicants

up to 150 kW above 150 kW up to 150 kW above 150 inclusively inclusively kW

1 Preparation and issue by the network organization of specifications to the applicant 271.0

2 Development by the network organization of design documentation on "the last mile" construction X X X X

3 Implementation by the network organization of activities related to "the last mile" construction X X X X

3.1. Construction of cable lines 10,929.0 11,506.0

3.2. Construction of complete transformer substations (CTS), distributive transformer substations (DTS) of voltage level up to 35 kV 3,421.0 4,751.0

3.3. Verification by the network organization of specifications compliance by the applicant X X 3,974.0 3,841.0

4 Participation of an official from the Federal Service for Ecological, Technological and Nuclear Supervision (Rostekhnadzor) in the survey of the applicant’s connected devices 77.0

5 Actual connection and to ensuring work of devices in electric networks 49.0

6 Preparation and issue by the network organization of specifications to the applicant 119.0

321

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

Standardized tariff rates for calculation of payment for technological connection to electric networks on the territory of the Leningrad region for 2014

The list of standardized rates Unit Standardized tariff rate (w/o VAT)

С1 - Standardized tariff rate to cover losses on technological connection of power accepting devices of consumers of electric power, power network facilities owned by network organizations and to other persons on the activities specified in item RUB/kW in prices of the regulation period 16 of the methodical instructions (except for sub-items b and v) counting per 1 kW of maximum capacity

С1 up to 150 kW inclusively RUB/kW 467.0

С1 above 150 kW RUB/kW 516.0

С2 - standardized tariff rate to cover losses on construction of overhead transmission RUB/km in FUR prices-2001 lines

SIW-3 1х95 mm2 (joint suspension) RUB/km 458,165.0

SIW -3 1х50 mm2 RUB/km 333,734.0

С2-MV2 (6–10 kV) SIW -3 1х70 mm2 RUB/km 360,561.0

SIW -3 1х95 mm2 RUB/km 387,635.0

SIW -3 1х120 mm2 RUB/km 408,978.0

С2-LV (1-0.4 kV) SIW -2А 3х95+1х95+1х16 mm2 RUB/km 382,663.0

SIW -2А 3х35+1х50 mm2 RUB/km 241,015.0

SIW -2А 3х50+1х70 mm2 RUB/km 241,646.0

SIW -2А 3х70+1х70 mm2 RUB/km 244,843.0

SIW -2А 3х70+1х95 mm2 RUB/km 246,255.0

С3 - standardized tariff rate to cover losses on construction of cable lines RUB/km in FUR prices-2001

APvPg -10 3х(1х240/50) RUB/km 524,783.0

ASB-10 (3х240) RUB/km 419,044.0 С3-MV2 (6–10 kV) APvPg-10 3(1х240/50) two cables RUB/km 1,040,984.0

ASB -10 (3х240) two cables RUB/km 787,931.0

ASB 4х185 RUB/km 377,953.0

С3-LV (1–0.4 kV) AAB2l-1 (3х185) two cables RUB/km 738,909.0

ASB 4х185 two cables RUB/km 692,635.0

С4 - standardized tariff rate to cover losses on construction of substations RUB/kW in FUR prices-2001

RUB/kW RUB/kW 711.0

RUB/kW RUB/kW 474.0

MTP 1х250 kVA RUB/kW 332.0

STP 1х25 kVA RUB/kW 1,830.0 С4-MV2/LV STP 1х40 kVA RUB/kW 1,483.0

STP 1х63 kVA RUB/kW 1,442.0

STP 1х100 kVA RUB/kW 1,407.0

STP 1х160 kVA RUB/kW 989.0

322

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

The list of standardized rates Unit Standardized tariff rate (w/o VAT)

KTP 1х63 kVA stub types RUB/kW 1,964.0

KTP 1х100 kVA stub types RUB/kW 1,271.0

KTP 1х160 kVA stub types RUB/kW 1,206.0

KTP 1х250 kVA stub types RUB/kW 653.0

KTP 1х400 kVA stub types RUB/kW 421.0

KTP 1х630 kVA stub types RUB/kW 299.0

KTP 2х400 kVA stub types RUB/kW 333.0

KTP 2х630 kVA stub types RUB/kW 226.0

BKTP 1х250 kVA RUB/kW 2,779.0

BKTP 1х400 kVA RUB/kW 1,742.0

BKTP 1х630 kVA RUB/kW 1,240.0

BKTP 2х250 kVA RUB/kW 2,263.0

BKTP 2х400 kVA RUB/kW 1,444.0

BKTP 2х630 kVA RUB/kW 990.0

BKTP 2х1000 kVA RUB/kW 854.0

BKTP 2х1250 kVA RUB/kW 760.0

BKTP 2х1600 kVA RUB/kW 602.0

8.9. DATA ON THE STRUCTURE OF PROPERTY COMPLEX AND ITS CHANGES IN 2013

# Name Physical quantities: on OTL, cable networks - Accrued length of chains Book (residual) Received from Disposals from depreciation Book (residual) (km); on substations, value as 01.01.2013 01.01.2013 from 01.01.2013 value as other assets - of 01.01.2013, RUB to 31.12.2013, RUB to 31.12.2013, RUB to 31.12.2013, RUB of 31.12.2013, RUB amount (pcs) thousand thousand thousand thousand thousand

Assets related to electricity 1. 99,477,184 21,441,409 4,219,651 7,508,484 109,190,457 facilities, including:

1.1. OTL 220 kV and above

1.2. OTL 110 kV 7,132.5 9,006,702 463,836 4,191 868,647 8,597,700

1.3. OTL 35 kV 3,675.5 3,169,996 96,669 1,018 280,962 2,984,686

1.4. OTL 10 kV and below 29,599.5 6,807,068 1,198,633 2,469 954,726 7,048,506

1.5. SS 220 kV and above

1.6. SS 110 kV 209 12,202,979 1,808,806 1,293,158 12,718,626

1.7. SS 35 kV 169 1,274,295 185,437 5,355 137,414 1,316,963

1.8. SS 10 kV and below 15,531 12,882,478 3,623,193 1,048,409 15,457,261

323

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

Cable networks (all voltage 1.9. 21,156 42,657,058 8,746,737 3,012 2,315,929 49,084,854 classes)

Other assets held for 1.10. maintenance of electrical 11,476,608 1,130,924 16,432 609,239 11,981,861 connections

Non-core assets brought 2. in the register of non-core 29 429 57 372 assets

Other assets (item 3 = 3. item 4 – item 2 – item 1), 2,725,712 1,327,938 18,489 800,669 3,234,493 including

3.1. Land plots in property 23 76,985 16,090 13,610 79,465

Fixed assets (line 120 4. 102,203,325 18,582,173 51,023 8,309,153 112,425,322 of the balance sheet)

depreciation is not charged Rented assets related for fixed assets 5. to power grid facilities, 985,194 0 304,659 680,535 accounted including: on off-balance account

5.1. OTL 220 kV and above

5.2. OTL 110 kV 222

5.3. OTL 35 kV 69 25,967 25,967

5.4. OTL 10 kV and below 316 24,011 24,011

5.5. SS 220 kV and above

5.6. SS 110 kV 12 1,697 1,697

5.7. SS 35 kV 6 77,802 77,802

5.8. SS 10 kV and below 1,206 691,582 304,659 386,923

Cable networks (all voltage 5.9. 1,918 159,894 159,894 classes)

Other assets held for 5.10. maintenance of electrical 4,241 4,241 connections

depreciation is not charged Other rented assets, for fixed assets 6. 10,075 400,888 79,315 25,063 455,140 including: accounted on off-balance account

324

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

10,075, including: 4,075 6.1. Land plots 12,343 19,254 710 30,887 (on area) 6,000 (under lines)

depreciation is not charged Assets used under lease for fixed assets 7. contracts related to power 622,314 63,283 331,667 353,930 accounted grid facilities, including: on off-balance account

7.1. OTL 220 kV and above

7.2. OTL 110 kV

7.3. OTL 35 kV

7.4. OTL 10 kV and below

7.5. SS 220 kV and above

7.6. SS 110 kV 544,512 63,283 331,667 276,128

7.8. SS 35 kV 77,802 77,802

7.9. SS 10 kV and below

Cable networks (all voltage 7.10. classes)

Other assets used under lease contracts held for 8. maintenance of electrical connections

Other assets used under 9. lease contracts

depreciation Total rented assets, is not charged including on leasing (item for fixed assets 10. 2,008,396 142,598 661,389 1,489,605 10 = item 5 + item 6 + item accounted 7 + item 8 + item 9) on off-balance account

TOTAL (item 11 = item 4 + 11. 104,211,721 18,724,771 712,412 8,309,153 113,914,927 item 10)

325

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

8.10. DATA ON LAND PLOTS

# Types of land plots Quantity and area of land plots From them: From them: State cadastral account Security zones

Repaid for the reporting date Leased (sub rented) for the reporting date Under the right of continuous Right is not defined for Put on cadastral account for Rights are registered for (termless) use for the reporting the reporting date the reporting date the reporting date date

Quantity Hectare Quantity Hectare Quantity Hectare Quantity Hectare Quantity Hectare Quantity Hectare Quantity Hectare Quantity km

Land plots for power 1 5,995 224.62 19 11.93 4,009 157.93 4 1.6 1,963 53.5 2,876 184.0 1,860 157.3 161 Х substations facilities

Including:

for SS 220 kV and above 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 х

for SS 110 kV 199 152.13 11 11.2 134 109.9 1 0.3 53 31.5 164 131.1 137 115.1 2 х

for SS 35 kV and below 5796 79.2 8 0.74 3,875 48.0 3 1.0 1,910 21.93 2,712 53.3 1,723 42.3 159 х

Land plots for OTL 2 220 kV and above

Land plots for OTL 3 33,707 8,624 km 3 0.02 6,000 10.7 0 0 27,674 0 15,631 31.6 6,003 10.7 598 7,788.2 110 kV and below

Including:

for OTL 110 kV 18,387 5,464 km 3 0.02 2,465 4.5 0 0 15,919 9,754 22.1 2,468 4.5 359 5,153.5

for OTL 35 kV 15,320 3,160 km 0 0 3,535 6.2 0 0 11,755 5,877 9.5 3,535 6.2 239 2,634.7

for OTL 0.4/6,10 kV

Land plots for power 4 х plants facilities

Land plots for boiler 5 х facilities

Land plots for heat 6 network facilities

Land plots for other 7 86 54,5 1 0,2 66 45,2 2 1 17 8,3 65 45,5 67 45,2 0 0 facilities

Total 39 788 23 12,2 10 075 213,8 6 2,3 29 654 61,7 18572 291,2 7930 213,2 759

326 327

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

8.11. DYNAMICS OF THE CAPITAL INVESTMENTS STRUCTURE IN 2011-2013

JSC Lenenergo 2011 2012 2013

Plan Fact Implemented %

Direction of investment activity – total: 15,061.1 14,891.4 13,038.9 18,728.9 144

Power grid facilities, including: 13,620.9 13,381.0 12,073.6 17,614.9 146

Retrofitting and renovation (R&R), including: 5,561.8 4,851.0 5,306.0 5,521.9 104

overhead lines, including: 920.4 1,057.3 703.26 1,683.06 239

OTL 110-220 kV (HV) 256.1 216.7 218.0 471.8 216

OTL 35 kV (MV1) - 133.4 - 70.4 -

OTL 1-20 kV (MV2) 196.9 196.0 129.7 228.6 176

OTL 0.4 kV (LV) 467.4 511.3 355.5 912.2 257

cable lines, including: 1,785.2 1,131.0 1,773.8 1,548.7 87

CL 110 kV (HV) - 50.4 - 142.1 -

CL 20-35 kV (MV1) - - 350.0 46.3 13

CL 3-10 kV (MV2) 1,785.0 1,073.6 1,405.1 1,359.7 97

CL 1 kV (LV) 0.2 7.0 18.8 0.5 3

substations, including: 2,685.8 2,078.6 2,448.0 1,580.7 65

Level of input voltage HV 2,311.2 1,708.5 1,603.1 1,158.9 72

Level of input voltage MV1 358.0 252.4 671.1 142.0 21

Level of input voltage MV2 16.6 117.7 173.8 279.9 161

Other power grid facilities (automation, communication) 170.4 584.0 380.9 709.3 186

New construction and expansion of operating facilities, 8,059.1 8,530.0 6,767.6 12,093.1 179 including:

overhead lines, including: 1,521.0 852.0 617.1 2,344.4 380%

OTL 110-220 kV (HV) 332.0 57.8 100.0 464.4 464%

OTL 35 kV (MV1) 229.7 - - - -

OTL 1-20 kV (MV2) 27.1 1.9 - 12.1 -

OTL 0.4 kV (LV) 932.2 792.3 517.1 1,867.9 361

328

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

JSC Lenenergo 2011 2012 2013

Plan Fact Implemented %

cable lines, including: 5,799.1 6,654.3 5,072.8 8,693.6 171

CL 110 kV (HV) 1,873.5 1,432.0 2,696.4 2,483.2 92

CL 20-35 kV (MV1) - - - - -

CL 3-10 kV (MV2) 3,925.6 5,222.3 2,376.4 6,210.5 261

CL 1 kV (LV) - - - - -

substations, including: 739.1 979.4 1,057.5 1,055.0 100

Level of input voltage HV 738.4 936.1 1,044.2 954.7 91

Level of input voltage MV1 0.6 0.7 - 5.8 -

Level of input voltage MV2 - 42.6 13.3 94.6 710

Other power grid facilities (automation, communication) - 44.3 20.1 - 0

Metering and controlling devices of electric power 109.4 69.6 498.9 262.9 53

R&R for construction of future periods 502.8 - - - -

Other production and business facilities 577.3 229.9 396.4 597.9 151

Equipment not included into estimates of construction 165.5 173.6 70.0 205.0 293

Non-industrial facilities - - - - -

Capital investments in intangible assets 70.7 7.2 - 9.8 -

Long-term financial investments - - - 0 -

Acquisition of fixed assets 14.5 1,016.5 - 16.7 -

R&D - 13.7 - 21.8 -

329

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

8.12. ORGANIZATIONAL STRUCTURE OF THE COMPANY

Director General

Deputy Director General for Chief Accountant, Head Deputy Director General Deputy Director General for Deputy Director General Deputy General Director for Deputy Director General economics and finance of Department of accounting for development and sales capital construction for technical affairs - Chief corporate governance for security and tax accounting and of services Engineer reporting

Director of economics Department Director on gird Director of investments Deputy Chief Engineer Department of corporate Department of security Department of legal of accounting and tax connection for operation and governance and support accounting and reporting maintenance shareholder relations Department of economics

Department on grid Department Department of repairs and Department of public Department of tariff Department of internal connection for of investments retrofitting and renovation relations setting audit and risk St. Petersburg Department of property management management and Department of estimate- Department of state Director of finance Department consolidation of power secrets protection contractual work and of maintenance grid assets Department Department on grid pricing of human resources Department of finance connection for management and Department of production the Leningrad Region Group of mobilization and organizational design Director of construction control and labor civil defense Treasury and development protection of distribution networks Department of customer 0.4-10 kV Department Corporate finance Service relations Management of information of metrology and quality technologies control of electric power Department of construction and Department reconstruction Deputy Chief Engineer Deputy Director General - chief of logistics and for operational of staff material support and technological Department of planning Department management - Head and engineering of transportation and of NMC metering of electric power Department of human Director of the branch resources management Directorate of objects Department NMC and organizational design of perspective under construction development Department of technical development Division of energy saving Administrative Department and power efficiency increase Quality management Representative office Service in Moscow

Director of the branch Director of the branch Director Director of the branch Director of the branch Director of the branch Director of the branch Director of the branch Director of the branch Vyborg Electrical Gatchina Electrical of the branch Kingisepp Electrical Luga Electrical Novaya Electrical Suburban Electrical Saint-Petersburg Tikhvin Electrical Networks Networks Cable Network Networks Networks Networks Networks High-Voltage Electrical Networks Networks

330 331

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

8.13. INFORMATION ABOUT ISSUED INSTRUCTIONS IN 2013

Instructions Prescribed actions in 2013 Performed actions in 2013 Not expired term

Issued by state supervisory authorities, including: 184 90 94

• Oversight Management of the Russian Ministry for Emergency Situations 95 20 75

• Federal Service for Ecological, Technological and Nuclear Supervision 89 70 19 (Rostekhnadzor)

• Russian Agency for Health and Consumer Rights (Rospotrebnadzor) - - -

8.14. CLIENT SERVICE CENTERS IN ST. PETERSBURG AND LENINGRAD REGION

# Contact information (telephone number Branch Working hours with a region code)

Mon – Thu.: 9.00 am – 5.00 pm Fri: 1 (812) 595-86-50 Servicing center for St. Petersburg 9.00 am – 4.00 pm

Servicing center for the Leningrad region – Mon – Thu.: 9.00 am – 5.00 pm Fri: 2 (812) 494-35-19 central office 9.00 am – 4.00 pm

Servicing center for the Leningrad region – (812) 458-36-93 Gatchina office

Servicing center for the Leningrad region – (81363) 30-107 Novaya Ladoga office

Servicing center for the Leningrad region – (812) 494-32-94 Suburban office

Servicing center for the Leningrad region – (81375) 20-376 Kingisepp office

Servicing center for the Leningrad region – (81378) 22-087 (81378) 93-422 Vyborg office

Servicing center for the Leningrad region – (81372) 24-880 (81372) 24-327 Luga office

Mon – Fri: 8.00 am - 10.00 pm, from 3 (812) 595-86-62, (812) 494-31-71 Hot line 01.09.2012 - 24h

(812) 385-14-85 (87), (812) 4 Client and grid connection center Mon – Fri: 9.00 am - 8.00 pm 244-43-30

332

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

8.15. GLOSSARY

Abbreviations

AC Authorized Capital

ACS TP Automatic Control System of Technological Processes

AIMS CEM Automated Information-Measuring System of Commercial Electricity Metering

AOPP Annual Overall Procurement Program

ARL Automatic Re-Launch

ATCS Automated Technological Control Systems

AWP Autumn and Winter Period

CJSC Closed Joint Stock Company

CJSC MICEX SE, MICEX Moscow Interbank Currency Exchange, Closed Joint Stock Company

CL Cable Line

Company Lenenergo, Open Joint Stock Company of the Power Industry and Electrification

CSC Client Service Center

CSS Commodity Stocks and Supplies

DGC Distribution Grid Company

DOCS Dispatcher Operation Control System

DTS Distribution Transformer Substation

DZ Distribution Zone

ECA Emergency Control Automatics

EN Electrical Networks

FA Fixed Assets

FFMS Federal Financial Markets Service

FGC JSC FGC UES

FL Federal Law

FST Field Service Team

FTS Federal Tariff Service of the Russian Federation

GEN Gatchina Electric Networks – a branch of JSC Lenenergo

GIS Geographic Information System

GISCG Gas-Insulated Switchgear and Control Gear

HES Heating Electrical Station

333

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

Abbreviations

HS Hydropower Station

IDGC Interregional Distribution Grid Company

IFRS International Financial Reporting Standard

IT Information Technologies

JSC Open Joint Stock Company

JSC FGC UES Federal Grid Company of Unified Energy System, Joint Stock Company

JSC SO UES System Operator of Unified Energy System of Russia, Joint Stock Company

KEN Kingisepp Electric Networks – a branch of JSC Lenenergo

LLC Limited Liability Company

LPEN Lodeynoye Pole Electric Networks – a branch of JSC Lenenergo

MEN Main Electrical Networks

MITI Modular Integrated Transformer Item

NCC Networks Control Center

NLEN Novaya Ladoga Electric Networks – a branch of JSC Lenenergo

OTL Overhead Transmission Line

R&D Research and Development

RAS Russian Accounting Standards

RDO Regional Dispatching Office

REC Regional Energy Commission

RPAE Relay Protection and Automatic Equipment

SCB Substation Control Building

SCG Switchgear and Control Gear

SDCs Subsidiaries and Dependent Companies

SEN Suburban Electric Networks – a branch of JSC Lenenergo

SG Switchgear

SO-CSM UES JSC System Operator – Central Supervising Management of Unified Energy System (JSC SO-CSM UES)

SPA Science and Production Association

SS Substation

SSIW Self-Supporting Insulated Wire

SW Switch

TEN Tikhvin Electric Networks – a branch of JSC Lenenergo

TI Transformer Item

TL Transmission Line

TRR Technical Re-equipment and Reconstruction

UNEG Unified National (All-Russian) Electric Grid

VAT Value Added Tax

VEN Vyborg Electric Networks – a branch of JSC Lenenergo

334

SUSTAINABLE DEVELOPMENT CONTENTS SUSTAINABLE DEVELOPMENT 8. Appendices Annual Report 2013 JSC Lenenergo

Abbreviations

Units of measure

Hz Hertz – frequency of electric current

Km Kilometer

kV Kilovolt – unit of voltage

KVA Kilovolt-ampere – unit of full power

kWh Kilowatt per hour – unit of generated electric power

MVA Megavolt-ampere – unit of transformer power

MVAr Megavolt-ampere reactive – unit of electrical reactive power

MW Megawatt – unit of electrical power capacity

p.p. Percentage point

Pcs Pieces

RUB thousand Thousand rubles

Terms

Final financial result revealed on the basis of accounting of all business operations of organizations. Represents the sum of profit (loss) from sale of goods (work, services), fixed assets, and other assets of the organization and Balanced financial result incomes from non-sales transactions minus the sum of expenses for these operations. Data on the balanced (profit minus loss) financial result is provided for a circle of large and medium-sized organizations at current prices, structure and methodology of the corresponding years, according to financial reporting

Capitalization Market cost of the Company, calculated by multiplying the price of shares and their total amount

Company Lenenergo, Open Joint Stock Company of the Power Industry and Electrification

Consumer price index Indicator characterizing the time variation of the overall level of prices and tariffs for goods and services and tariffs for goods and paid purchased by the population for non-productive consumption. It measures the relation of cost of the fixed kit services to population (CPI) of goods and services in the current period to its cost in the previous period

Open joint stock company established as a result of division of AO-Energo by types of activity on the basis Distribution grid company, DGC of power grid facilities not related to the Unified National (All-Russian) Electric Grid

Dividend Part of net profit of the Company, allocated between shareholders

(abbr. Earnings before Interest, Taxes, Depreciation and Amortization) – analytical indicator equal to the volume EBITDA of profit before deduction for expenses on interest, tax payments, and depreciation charges

Branch of economy of the Russian Federation, including a complex of economic relations arising in the course of production (including production in the mode of combined generation of electric and heat power), transmission of electric power, operatively-dispatching management in the electric power industry, sales and Electric power industry consumption of electric power with the use of production and other property objects (including those entering the Unified Energy System of Russia), belonging by right of ownership or other basis prescribed by Federal Laws to subjects of the electric power industry or other persons. The electric power industry is the basis of functioning of the economy and life-support

The electric part of the power supply system and receivers of electric power fed by this grid, united Electric power industry system by a generality of the process of production, transmission, distribution and consumption of electric power

Export of goods from the state customs territory abroad without the obligation to re-import. Export includes goods of domestic production, as well as re-exports of goods. The goods of domestic production include Export the goods of foreign production entered into the country and subjected to substantial processing, altering any qualitative or technical core characteristics of the goods. Re-exported goods include goods imported into the country and then exported abroad without any processing

Foreign trade turnover The sum of export and import

335

SUSTAINABLE DEVELOPMENT CONTENTS 8. Appendices Annual Report 2013 JSC Lenenergo

Abbreviations

Basic indicator of social and economic development of constituent entities of the Russian Federation characterizing the result of production of goods and services for a certain period. GDP is the sum of gross added Gross regional product (GRP) cost (GAC) produced by all units-residents of the regional economics plus the size of the amount of net taxes on products

Import of goods to the state customs territory from abroad with no obligation to re-export. Import comprises imported goods intended for consumption in the national economy, goods imported to the territory of the state Import according to the mode of re-export, and goods purchased for domestic organizations abroad, for consumption on the premises

Relative indicator characterizing the change of scale of production in the compared periods. Individual and composite indices of industrial production differ. Individual indices reflect changes in output of one product and are calculated as the relation of volumes of output of the given type of product in natural material expression in the periods compared. The composite index of industrial production characterizes cumulative changes Industrial production index of production of all types of goods. The index characterizes the change of cost created in the course of industrial production as a result of change only of physical volume of produced goods. To calculate the composite index of production of industrial output, individual indices by concrete types for industrial output are gradually aggregated into indices by economic activities and industrial production as a whole

Process defined by increase in the overall price level in the economy, or, which is equivalent - by a decrease Inflation in the purchasing power of money

Transaction that may significantly affect the Company activity. The list of such transactions is determined Material transaction by the Company independently

Salary of employees, incomes of the persons occupied by entrepreneurial activity, pensions, benefits, grants and Monetary incomes other social transfers, and incomes from property in the form of percent interest on contributions, securities, dividends and other incomes

The value determined by subtracting the sums of liabilities of a joint stock company accepted to calculation, Net assets from the sum of its assets accepted to calculation

Net debt is calculated as a sum of long-term and short-term debt net of cash and short-term investments (line Net debt 510 + line 610 – line 250 – line 260 of the balance sheet)

Productive supply Amount of electric power transmitted to end consumers, connected to networks of a distribution grid company

abbr. Regulated Asset Base (method of return on invested capital used for calculation of tariffs for electric power RAB transmission)

Devices intended for automatic switching-off of a damaged element from power supplies by means of switches Relay protection and for response to dangerous abnormal operating modes of elements of the power supply system

abbr. Return on equity – profit on equity (share) capital. The ratio of net income after payment of taxes and net ROE share capital

Useful result of activity satisfying certain needs, but not embodied in any material form. The main types Service of international services include: transport services, services of hotels and restaurants, mail and communication services, repair of machines, installation of equipment and other types of services not included in the list

Legal entities in which the Company has more than 20% of voting shares, either due to prevailing participation Subsidiaries and Dependent in share capital, or according to an agreement concluded, or otherwise enabled to make decisions accepted Companies by such legal entities

An electric installation composed of wires, cables, isolating elements and bearing structures, intended for Transmission line electric power transmission between two stations of the grid with a possible intermediate take-off

Unemployment rate Ratio of unemployed to economically active people, as a percentage

336

SUSTAINABLE DEVELOPMENT CONTENTS APPENDICES Annual Report 2013 JSC Lenenergo

Disclaimer

This annual report by JSC Lenenergo for 2013 (hereinafter the Annual Report) has been prepared using information available to the Company at the time of its drafting.

This Annual Report contains information on the Company’s performance in 2013 and estimations or current expectations of the authorized governing bodies of the Company which relate to future events and/ or actions, growth prospects of the core branch in which JSC Lenenergo operates, Company’s plans, probability of certain events and expected actions.

Investors shall not exclusively rely on estimations and projections made by the Company’s governing bodies, since they are not the only scenario, and actual performance of the Company may differ from estimated results for a variety of reasons.

Some statements given in this Annual Report are not historical facts, but forward-looking statements.

Such words as “plans”, “expects”, “estimates”, “considers”, “will make”, “will happen” and the like are forecasting statements, and carry the risk that the events and activities expressed or implied by these forward-looking statements might not come to pass.

The principal risks that are considered in the tactical and strategic planning of the Company’s activities and that may affect the business of JSC Lenenergo are: changes in the parameters of tariff regulation imposed by state authorities for the services rendered by the Company; actions of state authorities with respect to the Company; amendments to tax legislation; risks associated with legal actions against JSC Lenenergo, etc. The specified list of essential risks is not exhaustive.

Contacts

196247, St. Petersburg, Constitution Sq, 1 Tel.: +7 (812) 595 8613 Fax: +7 (812) 494 3254 E-mail: [email protected]

Telephone: 8-800-700-14-71

Hot Line of Lenenergo: +7 (812) 595-86-62 +7 (812) 494-31-71

APPENDICES CONTENTS