Together Towards Effectiveness
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CENTRE AND VOLGA REGION TOGETHER TOWARDS EFFECTIVENESS Integrated annual report 2019 Cooperation with Rosseti Centre Asset consolidation Digitalization IDGC OF CENTER AND VOLGA REGION CONTENTS DISCLAIMER ABOUT THE REPORT ABOUT THE COMPANY . 1 Corporate Governance Principles .................151 GRI 102-1 GRI 102-5 Corporate Governance Changes and Future Plans. .151 GRI 101 GRI 102-50 GRI 103-1 Key Performance Indicators .......................10 GRI 102-48 GRI 102-52 GRI 103-2 Assessment of Corporate Governance Comliance The Integrated Annual Report contains information on Company Profile .................................10 GRI 102-49 GRI 102-54 GRI 103-3 with the Principles of the Corporate Governance the bottom-line performance in 2019, as well as forecast- Key Performance Indicators .......................11 Code (CGC) .....................................153 ing data, statements of intent, opinions or current expecta- Address from the Chairperson of the Board of Directors ..14 Corporate Governance Structure ..................155 tions of IDGC of Center and Volga Region PJSC (hereinafter The Integrated Annual Report of IDGC of Center Address of the Director General ....................16 referred to as IDGC of Center and Volga Region, Rosseti Corporate Risk Management System ...............190 Centre and Volga Region, the Company), regarding its oper- and Volga Region for 2019 (hereinafter “the Key Stakeholder Groups and Map of Material Topics ...18 Rewards and Motivation ..........................194 ating results, financial position, liquidity, growth pros- Annual Report”) represents the operating Stakeholder Map .................................18 pects, strategies, and development of the industry where and financial results, and covers certain aspects Shareholder Value Formation .....................200 the Company operates. By their nature, such forward-look- History of the Company's Development ..............24 ing statements involve risks and uncertainties because they of the Company’s corporate governance activities. Main Events of 2019 ..............................26 relate to events and depend on circumstances that may or may not occur in the future. The projections are cited Geography and Organizational Structure .............30 ANNEXES . 210 from the Business Plan approved by the Company’s Board Core Assets .....................................32 of Directors on December 31, 2019 (Minutes No. 393 dd. The Annual Report discloses data on the Company’s Business Model ..................................34 December 31, 2019); they are not adjusted for risks that activities in sustainable development, collected actually occurred after approving such Business Plan and and reported per the GRI Standards and including Industry Overview and Competition Analysis ..........36 before publishing this Integrated Annual Report for 2019. a specialized appendix for electricity companies; Words such as “intends”, “seeks”, “expects”, “estimates”, the scope of disclosure is at the Core level. “plans”, “believes”, “anticipates”, “may”, “should”, “will”, The Annual Report also specifies the UN targets STRATEGY . RISKS . “will continue” and other similar words usually indicate a forecasting nature of a statement and may suggest that the Company adheres to. OPPORTUNITIES . 50 there is a risk the specified events and actions may fail to happen depending on various factors. Strategy ........................................52 The Company cautions that forward-looking statements This year saw a significant change in the Company’s Risks ...........................................75 are not guarantees of future performance. The Company’s transition to integrated reporting, hence annual Opportunities ....................................82 actual operating results, financial position, liquidity, and development of the industry, in which it operates, may sig- rather than biennial reporting on sustainable nificantly differ from those contained in the forward-look- development has been adopted. ing statements set forth in the Integrated Annual Report. PERFORMANCE Furthermore, even if the above indicators are consist- ent with the forward-looking statements contained in the RESULTS . 88 Integrated Annual Report, those results or developments The Annual Report was prepared based may not be indicative of the similar results or developments on the effective data available to the Company Production Results Analysis .......................90 in the future. RAS Financial Results Analysis .....................94 at the time of its drafting. Financial and economic The Company makes no warranties or representations, indicators contained in the Annual Report comply IFRS Financial Results Analysis ....................98 whether express or implied, and bears no liability for any Direct Economic Value Generated and Distributed. .102 losses incurred by individuals or entities for any reason, with the IFRS, unless otherwise specified. Some whether directly or indirectly, as a result of using the for- sections of the Annual Report contain figures ward-looking statements contained in the Integrated Annual for the previous periods, as well as projections, Report. These individuals and entities should not rely SUSTAINABLE solely on the forward-looking statements contained in the forecasts, or plans of the Company regarding future Integrated Annual Report, since they do not represent the periods to demonstrate the dynamics of significant DEVELOPMENT . 104 only possible case scenario. processes. Corporate Management System for Sustainable Save as otherwise provided by the legislation, the Company undertakes no obligation to update or confirm its expec- Development ...................................107 tations and estimates, or publish updated and revised for- Everyday Interaction with Stakeholders .............108 ward-looking statements contained in the Integrated Annual The scope of information disclosed in the Annual Membership in Associations and Organizations ......118 Report as a result of future events or acquisition of new Report, with the exception of financial results information. Environmental Protection ........................120 under the IFRS, does not cover subsidiaries and affiliates of IDGC of Center and Volga Human Capital Management and Social Responsibility. 130 Region, as they do not have a significant impact Procurement and Supplier Relations ...............143 on either the Company’s performance indicators, Preventing Corruption and Conflicts of Interest ......146 or on the results of its activities aimed at sustainable growth. Compared to the 2018 Annual Report, the scope of the disclosed information CORPORATE GOVERNANCE 148 remains unchanged. Memorandum of the Controlling Shareholder .......150 The Annual Report was prepared in accordance with all official documents regulating the disclosure of information in annual reports of joint stock companies, including the requirements of the Central Bank of the Russian Federation and the Moscow Exchange, as well as the recommendations of the Corporate Governance Code. About Сompany Strategy. Performance Sustainable Corporate Appendix Integrated annual report Together towards Risks. Opportunities Results Development Governance 2019 effectiveness 1 – 49 50 – 87 88 – 103 104 – 147 148 – 209 210 – 211 RESULTS AND BENEFITS EFFICIENCY IMPROVEMENT THROUGH OF COOPERATION THE JOINT WORK WITH IDGC OF CENTRE IN 2019, RUB mn. Since September 2017, IDGC of Centre has been the sole executive body (SEB) of IDGC of Center and Volga Region 998.3 Within a short time, the following HR management and organizational design, has been achieved: including manpower optimization Comprehensive grid modernization Application of uniform customer service programs for 20 regions of both standards companies' activities Unification of the process of cost of work Combining the operations and formation and introduction of a single contingency management of the grid directory of prices for material and technical complexes of the two companies resources using standard technical 675.1 specifications Combining emergency stocks and 230.0 Implementation and development of backup energy sources Transfering affiliates from three-level to two- services, including electricity loss level managemnent structure and executive Investment, including savings due to reduction, grid connection services Complex implementation of branch staff optimization through centralised consolidated purchases innovative technologies and management revenue increase thanks to using automation of data collection on the standardized solutions to connect reading of metering instruments and Consolidation of best corporate governance applicants' facilities to grids and road transport monitoring practices additional sevices development Single standards for approval of technical conditions and grid connection contract offers 47.3 Assets management Cooperation with IDGC of Centre Asset consolidation Digitalization 2 3 About Сompany Strategy. Performance Sustainable Corporate Appendix Integrated annual report Together towards Risks. Opportunities Results Development Governance 2019 effectiveness 1 – 49 50 – 87 88 – 103 104 – 147 148 – 209 210 – 211 CONSOLIDATION GRI 413-1 OPERATIONAL AND PROCESS MANAGEMENT OF GRID ASSETS OF POWER GRID ASSETS OF IZHEVSK POWER GRIDS AND VOTKINSK MUNICIPAL POWER GRIDS Actual and expected effects: Consolidation of municipal grid assets in the regions of IDGC of Center and Volga Region operation: FOR IDGC OF CENTER FOR UDMURT FOR THE CUSTOMERS