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 Corporate Governance Changes and Future Plans. . .151 GRI 102-1 GRI 102-5 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 IN THE AND VOLGA REGION REPUBLIC REGION

100 % 3.0 RUB bn by 53 % of Udmurt Republic’s in proceeds from the sale reduction in the average municipal grid assets within of assets duration of power outages single grid complex

by 11 % 1,5 X FOR THE REGIONS FOR THE COMPANY FOR CUSTOMERS increase in yearly tax shorter new connection revenue from the assets ​ waiting time Major transactions provide Each transaction is More reliable and funds for investment-driven one more step towards greater higher-quality power development, community operational efficiency and lower supply projects implementation costs and hereinafter - large tax revenues in the future

PROSPECTS The Company plans to consolidate municipal grid assets in Nizhny FOR 2020 Novgorod, Ivanovo, and Vladimir Regions.

Cooperation with IDGC of Centre Digitalization Asset consolidation

4 5 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

PROGRESS OF PHASE I OF THE "DIGITAL TRANSFORMATION DIGITIZING 2030" CONCEPT SCHEDULED

GRI 203-2 FOR COMPLETION IN 2021 POWER GRIDS Complete

In December 2018, the "Digital Transformation 2030" Concept was Expected effects by 2030 % approved in the course of the face-to-face meeting of the Board of Directors of PJSC Rosseti. The Concept involves a complete transformation of the power grid infrastructure of the affiliated companies by 2030 through the introduction of digital technologies and solutions. 2x reduction of the average 30 accident management time By late 2019, the Company completed 30 % of the five- 1,5x year Phase I of "Digital Transformation 2030": higher availability of the grid connection

by 30 % reduction Two Digital Grid Control Centres Airport SS, the first digital substation, of line losses, operating costs In progress commissioned installed at Udmurtenergo and costs of the acquisition and modernization of power The Company began installing its Big First digital city-wide supervisory control grid assets % Data-based energy monitoring and centre began operation in Izhevsk unaccounted consumption detection system First electricity storage units installed in a low-voltage distribution grid at by 50 % Start given to the digitalization training Vladimirenergo lower SADI / SAIFI program by signing 26 agreements with 70 industry-specific universities First Digital Electrician commissioned for pilot operation to meter electricity at The Company expanded its fleet Vladimirenergo and Nizhnovenergo and application of unmanned aerial vehicles for scheduled and emergency First digital health centre inaugurated at by 10 % inspections of 35-110 kV power lines Tulenergo increase in the life of assets ​

Cooperation with IDGC of Centre Asset consolidation

Digitalization

6 7 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

SUSTAINABLE GROWTH The Cost of Environmental ARTWORK IS THE GOAL Protection, RUB mn FACILITIES

In its activities, IDGC of Center and Volga Region is open for dialog The Company has a comprehensive program and cooperation with the public and all stakeholders. 40.4 in place to construct and launch power grid facilities in regional centers, the architectural design of which alludes to the history CONFIRMED 32.8 and regional identity of these areas. The Company COMPLIANCE is guided by the following WITH INTERNATIONAL 26.1 principles: STANDARDS Completed projects: ISO 9001:2015

Respect for the opinions and interests of all parties ISO 14001:2015 VLADIMIR has a pole that looks like a Sharing of information in a bogatyr (a Russian folk hero), as timely manner 2017 2018 2019 it is Vladimir that associates with ISO 50001:2011 the folk tales whose protagonists Regular interaction pay visits to Prince Vladimir

Open productive collaboration ISO 45001:2018

Cooperation with the Youth Mutual fulfillment of the assumed obligations place 8th 1,189 1,241 in the ranking of 150 largest 1,006 companies in Russia and Kazakhstan in terms of environmental and energy efficiency 70,000

52,000

40,000 COMMUNICATION CHANNELS FOR SERVICE USERS:

2017 2018 2019 KALUGA Call center hot line For Consumers Interactive services WhatsApp and Number of schoolchildren that has a rocket-shaped pole, as attended the Company’s electrical 32 8-800-5050-115; section of the Personal Office and Viber messengers it was here that Konstantin service centers injury prevention classes, pers. corporate website Internet Reception Tsiolkovsky lived and worked. Students trained at the Company as interns, pers.

8 9 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

KEY PERFORMANCE INDICATORS1 KEY PERFORMANCE INDICATORS GRI 102-7 OPERATIONAL INDICATORS Production Facilities

33.79 As the Company com- 2.3 39.0 34.5 pleted a number of signif- 30.08 30.36 30.78 icant investment projects, it now has more in substation 2.5 capacity and longer power COMPANY PROFILE 285.03 285.67 transmission lines. These 275.11 272.75 projects improved the per- formance of the grid com- 3.1 plex in general and enable the Company to deliver elec- tricity to new social and pro- 13.8 4.8 IDGC of Center and Volga Region duction facilities. CENTRE AND VOLGA REGION Core Objectives: 2017 2018 2019 2020 (planned) PTL length, thous. km IDGC of Center and Volga Region is Ensuring the reliability and security of the company’s Substation capacity, thous. MVA power grid complex and electricity delivery services

Improvement of service quality Breakdown EU2 Electrical Supply, mn kWh of net electricity A key supplier of power distribution and Less electricity was delivered supply grid connection services in Better operational and investment performance, due to changing Ivenergo’s by customer attributable to accelerated digitalization among other 54,745.2 common-pot model and some 54,004.4 categories, % Vladimir Region things 53,565.2 major industrial enterprises 7.9 % 7.8 % 53,031.4 in the regions of the Company’s 7.9 % presence now consuming less Ivanovo Region Improving investment appeal and market 50,374.5 7.2% capitalization 49,770.7 electricity. Kaluga Region 49,310.4 49,191.3 Sustainable reduction in elec- Innovation-driven growth and energy efficiency of tricity losses year over year Kirov Region assets is a product of the Company’s 2017 2018 2019 2020 Local grid operators Investment and Repair (planned) Nizhny Novgorod Region Increasing the availability and affordability of power Programs while also attributa- Industrial customers Release to grid ble to the energy conservation grid infrastructure People or similiar customers and energy efficiency improve- Ryazan Region Electricity supplied from the grid to ment projects. Non-industrial customers Human capital development, social responsibility, and customers and LGOs Agriculture Tula Region customer focus Electric power losses Public and municipal organizations, Mari El Republic Being in line with Russia’s economic needs and the sundry budget-funded customers global market requirements Transport Udmurt Republic Grid Connection Respect the rights and legitimate interests of the The Company received company’s shareholders 46,585 45,896 less grid connection 44,059 requests due to an eco- In general, the structure of net Environmental protection and strife for eco-friendly nomic recession. power supply from the Company’s A subsidiary of the largest Russian production 38,771 grids remains stable year on year, energy company Rosseti PJSC, managed 951 as major industrial customers continue by IDGC of Centre, PJSC since September Being consistently open by informing the 909 895 to dominate. 756 11, 2017 (“Rosseti Centre”). shareholders, the customers, the business partners, the public authorities, and the employees on the company’s performance

2017 2018 2019 2020 1. The projections are cited from the Business Plan approved by the Company's Board (planned) of Directors on December 31, 2019 (Minutes No. 393 dd. December 31, 2019); they Connected capacity, MW are not adjusted for risks that actually occurred after approving such Business Plan and before publishing this Integrated Report for 2019. Contracts performed, no. 10 11 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

FINANCIAL RESULTS SUSTAINABLE DEVELOPMENT INDICATORS

Employee Сare, RUB mn Investments, RUB bn

Revenue growth observed 25.8 in 2019 is mainly attributable 5,836.9 11,367.1 44.4 1 683.1 2020 (planned) 25.5 457.3 460.0 to higher electricity delivery 5,332.0 7,364.4 336.6 4 897.5 2019 415.3 420.8 prices and a change in the com- 4,229.0 6,143.9 713.1 1 144.2 2018 96.5 99.7 4,330.0 4,994.5 219.3 1 588.8 2017 91.0 94.2 mon-pot settlement procedure in Ivanovo Region. 2020 19.1 22.2 (planned) Net income and EBITDA 2019 dropped due to reserves, made 2018 to cover the lawsuits brought 91.2 90.7 95.8 91.8 2017 against the Company by energy 107.4 109.7 117.5 123.6 23.4 11.4 24.0 11.7 18.4 6.7 22.2 8.1 suppliers.

2017 2018 2019 2020 (planned) 2017 2018 2019 2020 (planned)

Revenue, EBITDA, Profit, EBITDA margin, Occupational Costs of employee training Voluntary RUB bn RUB bn RUB bn % safety costs and advanced training health insurance costs Grid connection Reconstruction, upgrade and EV/EBITDA ratio rose due The rising costs of occupational safety, employee training and health are attrib- retrofitting to a reduction in EBITDA utable on the one hand to the expansion that came in form of acquiring Izhevsk and an increase in debt burden, Power Grids and Votkinsk Municipal Power Grids; on the other hand, the Company Investments projects under the 1,831.2 5.04 electric power industry development 1,677.3 which in turn was due to a pro- is digitalizing its grid complex and has to provide additional training and retrain- active approach to carrying out ing programs for its employees. The Company also has Program to Reduce Risks programs 1,440.4 4.13 the investment program. of Injury to Personnel and Third Parties at Power Grid Facilities for 2019-2020 Other 1 245.6 in place, hence the justifiably rising occupational safety costs. 2.97 2.55 The rising P/E ratio points to the market’s appreciation Every year, the Company invests of the Company’s prospects. more and more in reconstruction, upgrade, and retrofitting of its grid assets to stay in line with the "Digital Transformation 2030" Concept. 2017 2018 2019 2020 2017 2018 2019 2020 (planned) (planned) Environmental Protection, RUB mn EV/EBITDA P/E However, as the environmental law was amended to no longer charge solid Procurements, RUB bn utility waste dumping fees, the environmental impact fees dropped. The Company also has the Program for IDGC of Center and Volga Region / SME Partnership in place; under this Program, Recent years’ trends 27.4 % of the total procurement for 2019 in the Company’s dividends (value-wise) was SME-exclusive. 36.4 4,535,749 4,591,985 are explained by the adoption of the newly revised Dividend 32.4 48.6 Policy Regulations. For 2018, 0.0118 0.0402 0.0407 0.0163 the Company paid the largest 25.6 0.0056 0.0084 dividends ever in its history. 0.0013 0.0028 0.0043 0.0031 21.6 In late 2019, the Company paid 1,839,668 28.3 29.1 dividends again, now for Q1-Q3 25.7 1,329,045 10.1 10.3 942,560 (nine months) of 2019. 478,966 634,489 19.0 18.9 141,000 315,554 349,363 4.9 4.2 15.4 2.0 1.6 1.3 1.3 6.1 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 (9 months) 2017 2018 2019 2020 (planned) 2017 2018 2019 2020 Declared dividends per 1 Declared dividends on all (planned) shares, thous. RUB share, RUB Environmental Adverse environmental impact Fuel and energy Total procurement investment fees savings Purchases from Small and Medium-Sized Enterprises 12 13 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

ADDRESS FROM THE Power Grids” JSC, and “Votkinsk Municipal Cooperation with Rosseti Centre Power Grids” MUE. We plan to acquire grid CHAIRPERSON assets in Nizhny Novgorod, Ivanovo, and Vladimir Regions, as well as in the Udmurt Republic. OF THE BOARD Asset consolidation Such consolidation is expected to curb power transmission price growth and facilitate OF DIRECTORS supervisory control over the distribution grids GRI 103-2 while also implementing a single regional technology policy including activities under Digitalization the “Digital Transformation 2030" Concept.

Another important aspect lies in establishing Dear Shareholders! a more productive cooperation with “Rosseti to be based on the net income per RAS, and Dear Investors! Centre” to consolidate best corporate govern- the other one to be based on the net income ance and operations management practices, per IFRS; the shareholders will be paid to coordinate grid maintenance in 20 adja- whichever is larger minus the total of interim In 2019, the Board cent regions, to merge procurement logistics, dividends paid for Q1, Q2 and Q3. of Directors and the management together emergency reserves, power backups, and with the Company’s staff, took all measures to enable on-the-go communications. While Strategic Approach to Sustainable Growth to ensure that “Rosseti Centre and Volga Region” this is a long-term effort, it has already born Management of sustainable growth of successfully and at the highest professional its first fruit, a statement supported by both “Rosseti Centre and Volga Region” is based level pursued its primary objective, which was Companies’ figures for 2018-2019. on an integrated system developed in accord- and is to provide reliable and high-quality ance with international standards ISO electricity delivery services to consumers Improving Corporate Governance 9001:2015, ISO 14001:2015, ISO 45001:2018, in Russia; we also succeeded to a great extent and Increasing Investment Appeal ISO 50001:2011, and involves a proactive in improving the Company’s operations, corporate In 2019, “Rosseti Centre and Volga interaction with a wide range of concerned governance and interaction with shareholders Region” had the Board of Directors and its parties. Besides routinely everyday coopera- and investors. Committees assess themselves for the first tion, the Company has decided to publish an time, coupled with an independent exter- Integrated Annual Report for 2019 per the GRI nal performance audit of the Internal Control Standards. and Risk Management System. It is on this basis and with due account of the 2018 inter- nal corporate governance audit that the Industry Trends and Strategic Priorities success of pilot digital projects throughout Company has taken large-scale steps to Implementing the “Digital Transformation Russia. improve its corporate governance practices 2030" Concept is the core trend that will guide and to bring them in line with the Corporate the development of Russia’s electric power We expect that the spread of digitalization Governance Code. In particular, the Articles of grids; the Concept implies a complete trans- throughout “Rosseti Centre and Volga Region” Association, the Dividend Policy Regulations, formation of the “Rosseti” Group’s entire will improve the manageability and perfor- the Board of Directors Regulations, the electricity grid infrastructure by 2030 by mance of the Company’s grid facilities by Management Board Regulations, and a num- adopting state-of-the-art digital technologies. 2022. Besides, digitalization is expected to ber of sundry internal documents have been curb tariff growth, improve the quality and revised and re-approved for the Company to In 2019, the Company completed twice as accessibility of power transmission and grid be guided by. many projects as had been planned under the connection services, and qualitative expan- Concept, including launching two digital Grid sion of consumer services. The revised Dividend Policy Regulations have Control Centres in the Mari El Republic and made the Company significantly more attrac- Tula Region, the first city-wide digital super- Another important trend in the current devel- tive for investors, as the revision effectively visory control centre in Izhevsk, the first two opment of the industry lies in the consoli- brought about a new dividend calculation digital substations (the “Airport” SS and the dation of independent grid assets under the procedure. Two values of dividends for the A.I. Kazakov “Miratorg” SS), and sundry projects. The “Rosseti” Group’s control. In 2019, we have reporting year are calculated now: one value Chairperson Company’s successful projects will serve as signed a number of contracts to consoli- of the Board role models for the next steps in digitaliz- date grid assets. “Rosseti Centre and Volga of Directors ing the industry; they imply reproducing the Region” acquired the grid assets of “Izhevsk IDGC of Center and Volga Region

14 15 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

ADDRESS Implementation of Investment The Company’s top experts taught the Digital EBITDA in 2019 and Maintenance Projects Transformation of the Power Grid Complex totaled OF THE DIRECTOR In 2019, “Rosseti Centre and Volga Region” course at 20 industry-specific universities, an completed a number of important investment event unmatched in scale and significance; the GRI 102-14 GRI 103-2 projects aimed at improving the performance of course covered the most relevant issues of dig- GRI 103-1 GRI 103-3 grid infrastructure; the Company also arranged ital transformation of the national grid infra- 18.4 GENERAL electricity delivery to new social and manufac- structure. Students got a once-in-a-lifetime RUB bn turing facilities. The Company commissioned chance to learn first-hand about how digital 1,620 MVA of transformer capacity and 6,769 tech works in the grid industry and where it is km of power transmission lines. going.

It also completed the construction of the In 2019, it was the fourth time that “Rosseti Urvantsevo 110/35/10-kV SS, a landmark pro- Centre and Volga Region” took part in the The Company ject of 2019. This project enabled more reliable All-Russian Energy Conservation Festival Dear Shareholders, Investors, electricity delivery in Kirov and adjacent sub- #Brightertogether, which sought to inform commissioned Partners and Colleagues, urbs; it effectively created a new power distri- people about the modern energy-saving tech- bution centre in Kirov while also providing 10 kV nologies and to help model an energy-efficient backup for the Kommunalnaya 110 kV SS, the lifestyle. 1,620 MVA Krasnogorskaya 110 kV SS, the South-Western of transformer Since 2017, “Rosseti Centre” has been 35 kV SS, and the Bytpribor 110 kV SS. In 2019, “Rosseti Centre and Volga Region” the Management Company of “Rosseti Centre started its comprehensive program to con- capacity and Volga Region”. This fact imposes a special Besides, the Company spent over 3.6 RUB bn struct and launch power grid facilities in responsibility, since one could evaluate the man- in 2019 under its large-scale repair program, regional centres, the architectural design of agement efficiency in “Rosseti Centre” judging which helped considerably improve the qual- which alludes to the history and regional iden- by the performance indicators of “Rosseti Centre ity of electricity delivery to the Company-served tity of these areas. Vladimir already has a 6,769 km and Volga Region”. In this Report, we did our best regions while also reducing the power shortage transmission tower designed to look like a to cover not only the successes of the reporting in main power substations. SAIDI dropped by bogatyr (a Russian folktale hero), while Kaluga of power year, but also the challenges the Company faced >12 %, SAIFI by >25 %. got a rocket-reminiscent tower. The Group has transmission lines and the strategic objectives it is up to now. plans to create a number of such artworks in Accomplishments in Sustainable Development Kirov and Nizhny Novgorod Regions in 2020. Traditionally, “Rosseti Centre and Volga Region” We hope that aside from being worthy modern focuses on the issues of sustainable growth sights, these structures will remind everyone and development, which include energy con- that industrial facilities can and should deco- servation, occupational safety, implementation rate the city. of social benefits, including medical care and non-state pension coverage for the employ- Expectations and Plans for 2020 ees, minimizing harmful impact on the environ- For 2020, “Rosseti Centre and Volga Region” ment, and many other things. plans to keep its elevated pace of digital transformation of its grids, which will involve “Rosseti Centre Analysis of production results for 2019 IFRS Analysis of 2019 Financial Results It consistently cooperates with stakehold- the construction of digital PDZs, the commis- In 2019, “Rosseti Centre and Volga Region” “Rosseti Centre and Volga Region’s” revenue ers, among which are regional environ- sioning of new Grid Control Centres and dig- and Volga remained a leader in the market of electric totaled 96.5 RUB mn in 2019, a 2.5 % increase mental organizations (for example, the ital substations, the expansion of the “Digital Region’s” power transmission and grid connection ser- YoY. This increase is mainly attributable to the Nizhny Novgorod Ecological Centre “Dront” Electrician” project, and using Big Data to revenue totaled vices in nine regions of Central Russia and rising electricity delivery prices and changes and Ivanovo Branch of the Russian Birds detected and calculate unaccounted electric- near Volga. The Company delivered a total of in the common-pot settlement procedure in Conservation Union), regional and local author- ity. All of this will further improve the qual- 46,961.1 mn kWh of electricity in 2019, a 0.9 % Ivanovo Region. ities, and various public associations. Doors ity and reliability of electricity delivery, help mn decrease YoY due to Ivenergo changing its com- Open Days and tours for schoolchildren expand the range of extra services to make 96.5 mon-pot model and major industrial electricity Despite some negative factors, the Company and students of universities and vocational the Company a better partner, and the cities in 2019 buyers reducing their electricity consump- remained financially stable and finished 2019 schools are regularly held at the branches or towns it serves brighter. tion, including “Russian Railways”, “Uralchem”, with a net income of 6.7 RUB bn, while EBITDA of the Company along with students’ meet- “Izhstal”, “Kalashnikov”, etc. totaled 18.4 RUB bn thanks to a continuous ings with the management and other experts. successful effort to improve the efficiency of In the course of such meeting the young peo- Considerable effort went into making the grid the Company’s business processes internally, ple are given the opportunity to visit the connection procedure faster and easier in 2019; indicated, among other things, by a 16 % higher power facilities. I.V. Makovskiy the average connection contract fulfilment grid maintenance productivity in 2019. Director General dropped to 60 days. of IDGC of Centre, the Management Company of IDGC of Center and Volga Region

16 17 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

Degree of cooperation between IDGC of Center and Volga Region Staff and concerned parties, points (Company's employees, trade union, Young Professionals Board, Veterans Administration) 3 KEY STAKEHOLDER 3 Industrial community Shareholders and investors 3

GROUPS 2 GRI 101 GRI 102-42 GRI 102-44 GRI 102-47 AND MAP OF MATERIAL TOPICS GRI 102-40 GRI 102-43 GRI 102-46

Scientific 1 organizations and 1 industry-specific Business partners universities (suppliers and contractors) IDGC of Center and Volga Region’s business imply constant cooperation 1 2 with a wide range of parties concerned (stakeholders). The Company’s sustainable

development in general and its commercial success in particular strongly depend 1 on the quality of this cooperation. Maintaining an open and constructive dialog allows Society for a creation of a favorable image of the Company in the business environment. (population in the regions 2 of Company’s operations, Responsible care and a proper consideration of the stakeholders’ interests when nature conservation and social organizations, mass media) making corporate decisions are imperative for effective business growth. 2 Consumers State (federal, regional and local authorities, specialist regulatory authorities and organizations)

STAKEHOLDER MAP To create an effective system of interactions, the main groups of stakeholders were identi- fied and a map of stakeholders was generated. External environment Regular Stakeholder Engagement The categorization criteria included com- mon interests and expectations of stakehold- Contact environment Stakeholder interests Stakeholder engagement format ers from IDGC of Center and Volga Region, the nature of their influence on the achievement of the Company's strategic goals, as well as the STAFF tools used by the Company for interaction. CENTRE AND VOLGA REGION (Company employees, trade union, Council of Young Professionals, Council of Veterans) • Adequate living standards and quality • Collective Bargaining Agreement In-house stakeholders As a factor in identifying a place of each of the selected groups on the stakeholder map, the • High level of social security • Councils of Veterans and Councils of Young Professionals • Opportunities for personal and professional growth • Trade unions degree of interdependence (mutual influence) • Occupational safety • Corporate communications of the Company and stakeholders based on • Promoting power engineering as a prestigious career • Succession pipeline both an intersection and conflict of interests • Personnel raining Shareholders Staff (Company employees, trade • Cultural and sports events and investors union, Young Professionals Board, was used. The degree of interdependence was Veterans administration) expertly rated on the scale of 1 to 3: • 3 points – in-house stakeholders (including shareholders, investors, and employees), whose well-being directly depends on the SHAREHOLDERS AND INVESTORS successful development of the Company; • Dynamic growth and business development • General Shareholders’ Meeting Consumers Business State • 2 points – contact audience, with which the • Performance efficiency • Annual and social reports, informational booklets partners (federal, regional and local Company cooperates on a regular basis, • Boosting capitalization and brochures (suppliers and authorities, specialist including consumers and partners, as well • Transparency of activities and management • Meetings with management contractors) regulatory authorities and • Press conferences, presentational events, forums organizations) as the government agencies, regulatory and supervisory authorities; • Federal and regional media • 1 point – indirect parties concerned, whose • Corporate website • Surveys of shareholders and investors interaction with the Company is indirect or limited, including public organizations, peo- ple outside of the Company’s circle of cus- tomers, media, educational institutions, BUSINESS PARTNERS Society Scientific (suppliers and contractors) (population in the regions of Company’s organizations and scientific and expert community. operation, nature conservation and industry-specific • Mutually beneficial and long-term cooperation • Carrying out procurement procedures public organizations, mass media) universities • Stable financial situation • Negotiations • Profit from cooperation • Commercial offers • Timely and accurate fulfillment of contractual obligations • Corporate website • Fair competition • Federal and regional media • Topical workshops and conferences

18 19 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

Stakeholder Engagement in Identifying Material Issues

Stakeholder interests Stakeholder engagement format When drafting this Integrated Annual Report GRI topic list was expanded by adding Russia- for 2019, the Company interacted with all the specific matters, in particular those concern- stakeholder groups additionally to survey them ing IDGC of Center and Volga Region. so as to find the material ­topics for the Report CONSUMERS as the GRI Standards call for. The standard • Reliable, uninterrupted and high-quality power supply • Customer service centres • High quality service • United information centre • Transparency and availability of information • Unified federal “hotline” about the Company’s activities • Polls, surveys • Fast and easy procedure of grid connection • Corporate website (On-line reception) TOPIC MATERIALITY MATRIX • Federal and regional media • Press conferences, topical workshops and forums Topic materiality for stakeholders

STATE (federal, regional and local authorities, sectoral regulatory authorities and organizations) 3.2 • Reliable and stable operation of the power system • Tariffs for regulated activities 3.7 1.1 Material topics HIGH 1.8 disclosed in most • Implementation of programs for integrated development • Coordination of the investment programs and reports >3 1.4 3.3 detail of the infrastructure systems on their execution 1.7 2.2 3.15 2.7 3.1 1.2 • Implementation of long-term projects designed to further • Working groups for the drafting of Electric Power Industry 2.4 1.3 2.1 3.4 the electric power industry Development Roadmaps 1.5 3.5 3.8 3.14 1.9 Material topics disclosed in • Satisfaction of mid- and long-term electric power • Agreements on cooperation on the issues of development 3.6 2.5 2.3 2.6 the Integrated Annual and capacity demand of the electric power industry of the regions 2.8 MEDIUM 3.9 Report • Attraction of additional investment to the regions • Reporting to the authorities and disclosing information 2–3 3.10 1.6 3.12 3.13 and creation of new jobs in accordance with the legislation of the Russian Federation • Tax liabilities • Working meetings and joint events with the representatives 3.11 of the regional authorities • Payment of taxes

LOW 0–1 SOCIETY (residents of the regions of Company’s operation outside of the circle of customers, nature conservation and public organizations, mass media) • Reliable, uninterrupted and high-quality power supply • Social programs in the regions of operation • Creation of jobs • Federal and regional media (press, television, radio) IMMATERIAL • Transparency of the Company’s activities • Press conferences, press-releases, promotional events, 0–1 Topic materiality for the business of • Social and economic development of the regions of presence topical workshops, forums, contests Rosseti Centre and Volga Region • Ecological safety, environmental protection • Management meetings with veterans, students, • Energy security schoolchildren, etc. IMMATERIAL LOW MEDIUM HIGH • Implementation of social programs • Corporate website 0–1 0–1 2–3 >3 • Charity • Measures to prevent electrical injuries • Transparency and regularity of information update about the Company’s activities As a result, the list of the most material issues included the following:

Economic performance (1.1.); Consolidation of power grid Informing the customers on SCIENTIFIC ORGANIZATIONS AND INDUSTRY-SPECIFIC UNIVERSITIES assets (1.4.); grid connection (3.1.); • Promotion of science and education • Innovative development programs Reliable and uninterrupted • Integration of advanced achievements of the sectoral • Joint R&D electricity supply (3.2.); Collaboration with IDGC of The Сompany’s investment in research into the distribution power grid • Scientific conferences, exhibitions Сentre (1.3.); human resources to reduce • Adoption of effective innovation technologies • Cooperation agreements with universities Reduced energy consumption turnover and recruit qualified • Demand for young and promising personnel • Research to practice conferences and more efficient energy use Emergency preparedness (3.3.); personnel (3.5.); from the Company • Joint competitions of graduation projects on the electric (2.2.); • Improvement and development of joint educational industry topics The Company’s impact on Training and advanced training programs • Students’ teams Digitalization of power grid biodiversity (2.4.); for employees (3.8.). assets (1.2.); Occupational health and safety (3.7.);

These are the topics of focus in this Integrated Annual Report.

20 21 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

Surveyed Stakeholders’ View of Topic Materiality

Surveyed stakeholders’ view of topic materiality Surveyed stakeholders’ view of topic materiality Did Did Highly Medium Low Immaterial not evaluate Highly Medium Low Immaterial not evaluate material materiality materiality (0-1) the topic material materiality materiality (0-1) the topic Topic (>3) (2-3) (1-2) for materiality Mean score Topic (>3) (2-3) (1-2) for materiality Mean score ECONOMIC TOPICS 3.5 The Company's investment 5 6 1 0 2 2.86 1.1. Economic performance 11 1 0 0 2 3.92 in human resources. Reduced turnover. Recruitment of qualified 1.2. Digitalization of power grid assets 5 6 1 0 2 3.33 personnel 1.3. Collaboration with IDGC of Centre 5 5 2 0 2 3.25 3.6 Employee engagement 2 6 4 0 2 2.43 in negotiations on working 1.4. Consolidation of power grid assets 5 7 0 0 2 3.42 conditions. Prompt notification 1.5. Employees’ salaries compared of employees on significant changes to minimum wage in the regions in the Company’s activities of operation 4 5 3 0 2 3.08 3.7 Occupational health and safety, 7 5 0 0 2 3.07 1.6. Services pro bono and investments industrial injuries; occupational in regional infrastructure 2 2 8 0 2 2.50 diseases; treaties with trade unions 1.7. Transparency of the Company’s 3.8 Employee training, learning 2 9 1 0 2 2.64 procurement. Choice of bona fide programs, advanced training, suppliers and cooperation with local performance and career suppliers 5 6 1 0 2 3.33 assessment 1.8. Corruption control 6 5 1 0 2 3.42 3.9 Equal opportunity and pay 2 4 6 0 2 2.29 for men and women. Breakdown 1.9. Combating attempts of management and personnel to hinder competition, enforcement by gender, age, and other diversity of antitrust laws 1 8 3 0 2 2.83 features; man-to-woman salary ENVIRONMENTAL TOPICS ratio for same jobs 2.1 Use of renewable and nonrenewable 3.10 Freedom of association 3 2 6 1 2 2.21 natural resources. Percentage and collective bargaining. of recycled materials in use 6 4 3 0 1 3.92 3.11 Respect of rights of indigenous 1 3 4 4 2 1.79 2.2 Reduced energy consumption and small peoples in the regions and more efficient energy use 7 5 1 0 1 3.33 of the Company’s operation 2.3 More efficient water use 4 3 6 0 1 3.25 3.12 Engagement with the locals 1 6 3 2 2 2.14 2.4 The Company’s impact 3.13 The Company’s and suppliers’ 4 1 6 1 2 2.29 on biodiversity 5 6 3 0 0 3.42 observance of human rights 2.5 Reducing greenhouse gas emissions 5 2 5 1 1 3.08 3.14 Information security, including 4 4 3 1 2 2.50 that of consumer data. Cases 2.6 Production waste treatment. Control of consumer data leakage over the amount of effluents 5 3 4 1 1 2.50 3.15 Adherence to law. Fines 7 3 2 0 2 2.93 2.7 Company’s compliance and nonfinancial sanctions imposed with environmental regulations 6 6 1 0 1 3.33 on the Company for violations of law 2.8 Supplier selection criteria and procedure to ensure compliance with the Company’s environmental standards. 2 6 5 0 1 3.42 SOCIAL TOPICS 3.1 Informing the customers on grid connection 5 6 1 0 2 2.86 3.2 Reliable and uninterrupted electricity supply 11 1 0 0 2 3.36 3.3 Emergency preparedness 9 2 0 0 3 3.00 3.4 Research and innovation 3 8 1 0 2 2.71

22 23 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

Transferring the powers of the sole executive body of IDGC of Center and Volga HISTORY OF THE COMPANY’S Region to IDGC of Centre.

DEVELOPMENT 99.7 IDGC Holding OJSC 96.5 was renamed OJSC 94.2 Rosseti. 91.0 Establishment of • IDGC Center and Volga Region reorganiza- The powers of the sole IDGC of Center tion complete, GDCs started to operate as executive body of IDGC and Volga Region, regional branches rather than joint-stock Holding OJSC were OJSC, as a subsid- companies. transferred to the iary of OAO RAO • Shares of IDGC of Center and Volga Region, Federal Grid Company 78.5 UES of Russia JSC, began traiding on OAO RTS and ZAO of Unified Energy 77.7 based on nine grid MICEX stock exchanges. System. distribution com- • IDGC Holding, OJSC acquired a controlling Consolidation panies (GDC). interest in IDGC of Center and Volga Region, 69.2 68.9 of grid assets OJSC, previously owned by OAO RAO UES of Russia. 64.4 59.9 Implementation of the “Digital 54.4 Transformation 2030” Concept

47.2

REVENUE, Innovative Grid Development Program RUB bn

31.7

26.2 24.0 23.4 22.1

18.4

EBITDA, 13.3 10.9 10.9 RUB bn 9.8 10.2 10.5 6.6 5.2 4.6 4.9

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 (planned)¹

Declared dividends on all 4,535,749 4,591,985 shares, thous. RUB 0.0402 0.0407 0.0163 0.0118 0.0056 0.0084 Declared dividends per 1 0.0013 0.0028 0.0043 0.0031 share, RUB 1 839 668 1,329,045 942,560 478,966 634,489 141,000 315,554 349,363 0 0 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 (months)

1. The projections are cited from the Business Plan approved by the Company's Board of Directors on December 31, 2019 (Minutes No. 393 dd. December 31, 2019); they are not adjusted for risks that actually occurred after approving such Business Plan and before publishing this Integrated Report for 2019. 24 25 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

MAIN EVENTS OF 2019

INTERACTION WITH THE STAKEHOLDERS AND SUSTAINABLE DEVELOPMENT

DIGITALIZATION ENSURING SAFETY AND AND INNOVATIVE CONSOLIDATION OF POWER RELIABILITY OF POWER DEVELOPMENT GRID ASSETS SUPPLY CORPORATE GOVERNANCE

May October - November An integrated management sys- January September January tem of IDGC of Center and Volga IDGC of Center and Volga Region’s For the first time ever, the Company Region, PJSC, underwent a com- Rosseti Centre and Volga Region City of Izhevsk saw the commis- Heads of Production Control and Board of Directors approved the had its Internal Audit System inde- pliance audit, confirming that the acquired the properties of Izhevsk sioning of the first digital city-wide Occupational Safety of all Rosseti results of the Company’s first- pendently evaluated by an external management processes and provi- Power Grids, including > 2,900 km supervisory control centre. The Centre / Rosseti Centre and Volga ever Board of Directors’ / BoD entity. KPMG's opinion dd November sion of services for electric power of 0.4 to 10 kV power lines: >2,200 facility has communication chan- Region branches had a general Committees’ self-assessment. 22, 2019 was that IDGC of Center transmission and distribution, as km of cable lines, 1,705 power nels and IT systems that enable meeting. They discussed the relia- The Board of Directors analyzed its and Volga Region's Internal Audit well as grid connection of con- transformers, 989 distribution real-time monitoring and con- bility of electricity delivery as well own needs in professional exper- System was generally in line with sumers comply with the require- centers and transformer substa- trol over the city’s entire grid com- as occupational safety matters, tise, experience and business skills, the International Standards for the ments of international standards tions. The standards of the Uniform plex. The supervisors there can analyzed the necessary changes considered whether the quantita- Professional Practice of Internal ISO 9001:2015, ISO 14001:2015, ISO Technology Policy of Rosseti monitor the condition, operation, in preparations to safe large-scale tive composition of the Board of Auditing, the Ethics Code of the 45001:2018, and ISO 50001:2011. now apply to these facilities. The and repair of all facilities, analyze repair and preventive maintenance Directors meets the Company’s Institute of Internal Auditors, and Company fulfilled all of its obliga- the electricity quality parameters, efforts, and considered the inno- needs and satisfies the interests of the Company's Internal Audit pol- Following the results of a corpo- tions, both financial and social, to and coordinate dispatched repair vations pertaining to environmen- the shareholders. The average score icy, the highest assessment per the rate governance assessment, the the employees. teams. Some of the operations are tal safety, in addition to employee was 4.55. terminology of the Internal Audit Russian Institute of Directors (RID), automatic. training and briefing issues. Standards. a non-profit partnership, con- firmed the rating of IDGC of Center July November June and Volga Region as NCGR 7+ April December "Advanced Corporate Governance Rosseti Centre and Volga Region Rosseti Centre and Volga Region The Annual General Shareholders’ Practice" on the scale of the acquired the properties of Votkinsk signed an agreement with ROTEC Power engineers of Rosseti Centre Meeting of IDGC of Center and An extraordinary General National Corporate Governance Municipal Power Grids, includ- to implement PRANA, a predic- and Volga Region and Rosseti Volga Region elected a new Board Shareholders’ Meeting of IDGC of Rating (NCGR®). ing > 547 km of 0.4 to 10 kV power tive analytics and remote mon- Centre took part in the All-Russian of Directors and a new Audit Center and Volga Region took place lines: >271 km of cable lines, 199 itoring system; this will enable Command and Staff Exercises in Commission; it also approved new by absentee voting. They approved distribution centres and trans- condition-based maintenance. As Handling Spring Flood and Wildfire versions the Articles of Association, the amount, deadlines, and method former substations. The standards a result, the production processes Emergencies. The event took place the Board of Directors Regulations, for the payout of dividends of nine of the Uniform Technology Policy of will be more transparent for all in all the 85 regions of Russia. the Management Board Regulations, months of 2019; they also set Rosseti now apply to these facilities. levels of management while also It involved units of the Unified the GSM Regulations, and the Board the deadline to list the dividend The Company fulfilled all of its obli- providing extra control over the State Emergency Prevention and of Directors Remuneration and recipients. gations, both financial and social, to maintenance costs as well as an Elimination System, a total of more Reimbursement Regulations. They the employees. independent insight into the qual- than 1,300 thousand people and also approved the Annual Report The resolution was to pay 1,839,668 ity of such maintenance. 280 thousand units of equipment. and the annual accounting (finan- RUB thous., or 0.0163239 RUB per cial) statements, and resolved to pay ordinary share in dividends. dividends of 0.040746 RUB per ordi- nary share.

​

26 27 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

INTERACTION WITH STAKEHOLDERS AND SUSTAINABLE DEVELOPMENT

INVESTMENT Moscow Exchange and the RCB Company of Rosseti Centre and SUPPLIERS COMMUNITY Media Group; it also won four prizes Volga Region, had a meeting with the of LACP Inspire 2019, an American leaders of primary trade unions of contest of public reports. both companies. They discussed the May March topical issues of social partnership and regulation of labor relations as Rosseti Centre (the Management Rosseti Centre and Volga Region’s well as the short-term plans of the Company of Rosseti Centre and and Rosseti Centre’s managers EMPLOYEES AND Companies’ HR and social policies. Volga Region) had a production held the Analyst Day for the inves- TRADE UNIONS meeting, the first to involve the tor community, during which they executives of both Companies’ con- discussed both companies’ results tractors. The participants dis- for 2018 and forecasts for 2019. July UNIVERSITIES cussed matters pertaining­ to the Among other things, they dis- Companies’ Investment Program. cussed pricing, investment pro- Specialists of Rosseti Centre and gram adjustments, loss reduction Volga Region partook in Forsage April and profitability boosting; they also 2019, the annual young profes- presented the plans to begin large- sionals forum organized by the Managers of Rosseti Centre (the SOCIETY scale investment projects under MAKO Association of Citizens and Management Company of Rosseti the "Digital Transformation 2030" Organizations to Promote Corporate Centre and Volga Region) had a video Concept of Rosseti. Training, supported by the Ministry conference with universities oper- March – October of Energy and by the Civic Chamber ating in the 20 regions where both of the Russian Federation. This year, companies are present. The parties For the fourth year in a row, Rosseti August the Forum mainly focused on Digital discussed cooperation prospects and Centre and Volga Region and Rosseti Transformation and Integrated agreed to use R&D outputs, techni- Centre supported the All-Russian Managers of Rosseti Centre and Leadership. cal solutions, and educational pro- Festival #Brightertogether held in Volga Region and Rosseti Centre jects within the ongoing "Digital the regions of the country. During met the minority shareholders of Transformation 2030" Concept. the festival, the energy sector repre- both Companies. The parties dis- April sentatives organize and hold events cussed the companies’ perfor- aimed at modeling an energy-effi- mance of the first half of 2019 as IDGC of Center and Volga Region, October - November cient lifestyle. well as short-term plans; focus PJSC, took part in the Russia Health was made on Rosseti Centre’s per- and Safety Week (RHSW), organized Rosseti Centre and Volga Region’s formance as the Sole Executive by the Russian Ministry of Labor and and Rosseti Centre’s specialists March Body of Rosseti Centre and Volga Social Protection and the ETALON arranged a pilot learning project for Region. In particular, they dis- Interregional Association for the students of industry-specific univer- Rosseti Centre and Volga Region and cussed the first fruit born by opti- Promotion of Safe Labor Conditions. sities: the Digital Transformation of Rosseti Centre employees took part mizing the management hierarchy. Trends and prospects for the devel- the Power Grid Complex, a course in Earth Hour1, the world’s largest opment of measures promoting they taught in 20 regions at the same environmental ­campaign, by switch- occupational safety, ensuring safe time. ing off the lights of the branch office November labor conditions and protecting the buildings while also paying greater health of employees were the main attention to the grid operations. Rosseti Centre and Volga Region’s topics of discussion. Annual Report for 2018 won a prize as the Best Annual Report of a Company Worth up to 40 bn. RUB November at the XXII Annual Competition of Annual Reports organized by the Igor Makovskiy, Director General of Rosseti Centre, the Management 1. Earth Hour is an international campaign, in which the World Wildlife Fund calls for lights to be switched off for an hour to show respect for the world’s future. This is when they switch off the illumination of the world’s most famous buildings and monuments.

28 29 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

BRANCHES GEOGRAPHY CORE BUSINESS lies in transmission (supply) and distribution of electricity as well as in grid connection services AND ORGANIZATIONAL EU2 EU3 EU4 Substation Power capacity (SS Area, thous. Population, transmission 35 and higher), GRI 102-2 GRI 102-6 sq. km mn people lines, km thous. MVA STRUCTURE GRI 102-4 GRI 102-45 VLADIMIRENERGO 29 1.36 24,663 3.60 1 Tula Kaluga Vladimir Ivanovo Kirov IVENERGO 21 0.99 16,401 2.60 Region Region Region Region Region 50.4 % 2

63 % 78 % 63 % 42 % 59 % KALUGAENERGO 30 1.00 32,643 3.44 89 % 98 % 84 % 85 % 94 % 3 KIROVENERGO 120 1.26 39,996 3.14 4

NIZHNOVENERGO 77 3.20 63,346 5.37 7 3 1 2 4 5

RYAZANENERGO 40 1.11 29,502 3.50 6 13 TULENERGO 26 1.47 34,439 4.26 7

MARIENERGO 23 0.68 12,874 1.11 8

UDMURTENERGO 42 1.51 31,167 3.76 9 SUBSIDIARIES

PRIMARY ACTIVITIES

• medical rehabilitation; 10 ENERGETIK HEALTH • physical, healthcare, and spa services RESORT, JSC 100 % • accommodation, catering, and services.

• supply (sale) of electric and heat energy at the specified tariffs in accordance with the dispatch schedules of electric and heating loads; 11 11 SVET, JSC 100 % • receipt (purchase) of electric power from the electric energy (power) 12 wholesale market; • receipt (purchase) of heat and electricity from their producers.

6 5

• design, installation and commissioning of metering stations for electricity, 12 MEK ENERGOEFFEKTIVNIYE hot and cold water supply, heat energy, gas, boiler plants and supporting TEKHNOLOGII, JSC 71 % 72 % 51 % processing equipment, and maintenance of facilities; 87 % 97 % • assessment and reduction of energy losses, optimization of payments 10 for consumed energy resources, implementation of turnkey energy Ryazan Nizhny Novgorod conservation projects Region Region 8 9

Share of the power transmission / net • transport services; 13 • warehouse services; supply market of the region, % 42 % 58 % ATKH, JSC 86 % 95 % 100 % • repair, service and maintenance of vehicles. Share of the grid connection market of the region, % The Republic The Udmurt 30 of Mari El Republic 31 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

Grid Breakdown 0.61 0.04 0.74 0.12 0.00 0.00 1.73 0.00 1.41 0.00 11.01 8.75 1.76 11.39 4.93 3.58 21.79 13.53 10.77 4.79 by Age, % 50.44 43.08 57.45 56.39 65.96 45.25 45.02 59.50 31.07 51.38 CORE ASSETS 37.95 48.13 40.04 32.10 29.11 51.18 31.47 26.96 56.75 43.83

IDGC of Center and Volga Region controls: EU4

1,556 285.03 thous. km 66,298 units of of electric distribution grids, units of 6-35/0.4 kV 35/110/220 kV including: transformer substations IDGC of Center and Volga Region, total Vladimirenergo Ivenergo Kalugaenergo Kirovenergo Marienergo Nizhnovenergo Ryazanenergo Tulenergo Udmurtenergo high-voltage supply Under 35 35 to 53 years 53 to 70 years >70 years centres with a total 272,974 km capacity of 0.4-220 kV overhead 809 power lines units of 6-10 kV 30.78 thous. MVA 12,058 km distribution points Analysis of Risks of Equipment Failure due 0.4-110 kV cable lines to Improper Conditions

The Company assesses the technical condition Equipment units in operation, pcs. of equipment on a regular basis and analyzes the significance of failure consequences. Thus, Failure-associated risks it is able to objectively identify whether regulated maintenance, repair, reconstruction, or retrofitting of grid facilities is necessary and should take priority.

Late 2019 analysis found that >97 % of the HIGH 8,440,156 936,989 374,379 139,502 1,134 The current level of depreciation of fixed A proper technical condition, as well as the equipment was in good operating condition. It assets (29.8 %) makes it possible to carry out technical characteristics of the electric grid is most important, however, that 98.6 % of the the primary activities of the Company success- facilities that are required by the operat- Company’s equipment, failure of which would fully and to the full extent, ensuring high reli- ing conditions, are ensured by the scheduled have extremely negative implications, is in ability and quality of electric power supply to maintenance, repair works, reconstruction and good condition. consumers. retrofitting and upgrading of the facilities. MEDIUM 150,349 20,775 6,480 125,515 1,831

Breakdown 8.01 12.22 0.97 1.91 2.81 0.38 12.81 20.06 5.02 6.09 23.72 19.75 17.29 12.31 29.19 14.61 29.82 30.04 15.15 29.87 of Substation 31.95 29.79 63.32 31.73 30.68 34.43 29.38 35.54 21.64 32.06 Equipment 36.32 38.24 18.42 54.05 37.32 47.17 28.00 14.36 58.19 31.99 LOW 68,393 8,965 2,043 1,967 80 by Age, %

% 9,232 2,388 358 3,878 472 98.6 MINOR of the Company’s equipment is intact IDGC of Center and Volga Region, total Vladimirenergo Ivenergo Kalugaenergo Kirovenergo Marienergo Nizhnovenergo Ryazanenergo Tulenergo Udmurtenergo Equipment condition under 25 25 to 37 years 37 to 50 years >50 years

VERY GOOD GOOD SATISFACTORY UNSATISFACTORY CRITICAL

32 33 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

BUSINESS FOR THE ELECTRIC FOR THE FOR THE FOR THE FOR THE POWER FOR THE SOCIETY POWER CONSUMERS SHAREHOLDERS STATE EMPLOYEES GENERATORS IN GENERAL Power transmission to consumers Dividends Taxes Wages Reduction of accidents Environmental protection MODEL 46,961.1 mn kWh 1,835.2 mn RUB 15.7 RUB bn 17,825.0 RUB mn by 10.3 % 32.4 RUB mn (for 9 months of 2019) Execution of grid connection contracts • Compliance with the Strategy Occupational safety Reduction of electric power losses Concern for safety and energy 44.1 thous. units Changes in capitalization 2019/2018 for Development of the Electric Grid and protection of the employees’ by 9.7 % efficiency VALUE FORMATION -9.77 % Complex of the Russian Federation health >50,000 children participating Average grid connection time • Cooperation with the executive 457.3 RUB mn Detection and stopping in electrical injury prevention FOR THE STAKEHOLDERS 60 days authorities of the constituent enti- of the unaccounted and non-contracted activities ties the Russian Federation in plan- Professional and advanced consumption ning and delivering regional programs training 35.9 mn kWh Compliance with the international CONTRIBUTION TO THE UN SUSTAINABLE for regional development 117.5 RUB mn standards DEVELOPMENT GOALS ISO 9001:2015 ISO 50001:2011 ISO 14001:2015 ISO 45001:2018

Risk exposure Risk occurrence probability

Willingness to take opportunity LIKELY 1. Tariff associated risks 60-90 % 2. Risk of power transmission 1. Digital transformation opportunities 18 4 5 HIGHLY curtailment 2. Increased amounts of delivered Digitalization: 3. Risks associated with grid con- electricity Strategic 7 2 • Introduction of intelligent nection services provided 3. Opportunities associated with grid 10 PRIORITY priorities KPI 8 11 14 power grid management LIKELY to the applicants connection services provided 30-60 % 3 6 DEVELOPMENT AREAS systems based on digital Reliability and quality Zero increase in the number of major accidents 4. Risk of non-payments to the applicants 17 technologies of services provided Achievement of the reliability level of services by consumers 4. Opportunities to improve the eco- 15 13 9 5 • Obtaining reliable end-to-end provided 5. Risks associated with politi- nomic situation in the country 16 1 12 6 Maximizing the benefits Consolidation of power grid data on consumption, operat- Operating Reduction of specific operating expenses (costs) cal and economic downturn and the region <30 % of cooperation with IDGC assets: ing modes of a network and its UNLIKELY and investment Reduction of specific investment outlay in the country and region 5. Geographic opportunities of regions Risk importance (potential losses) of Centre:​ • Create a single centre elements in real time efficiency Increase in the process utilization of power grid 6. Risks of conflictsand labor dis- (temperature, daylight hours, etc.) • Consolidation of the best of responsibility for high-qual- • Significant reduction equipment putes, imposition of the state 6. Exchange rate opportunities MINIMUM SUBSTANTIAL VERY HIGH up to 100 RUB mn 100-200 RUB mn > 200 RUB mn practices of corporate gov- ity, reliable, and affordable in the number of dispatch Compliance with the commissioning schedule of emergency in the regions 7. Interest rate opportunities ernance, operating and situa- electricity points and creation of unified Investment Consolidated net cash flow 7. Geographical risks (natural disas- 8. Reputational opportunities tional management of the two • Increase the Rosseti subsidiar- network control centres Opportunity seizure probability appeal Consolidated operating profit (EBITDA) ters, transport links cut-off, etc.) 9. Strategic opportunities companies ies’ share in the common-pot • Introduction of a unified out- 8. Risks of exchange rate changes 10. Opportunities of integration Consolidated net debt / EBITDA 10 • Coordinated grid mainte- revenue generated from elec- age control system for all volt- Compliance with the plan of measures to reduce 9. Risks of interest rates changes with IDGC of Centre 11 1 60-90 % nance in 20 regions located tricity delivery to customers age levels in all areas the accounts receivable 10. Risks of inflation effects 11. Opportunities of grid assets 8 3 13 HIGHLY LIKELY 9 in close proximity to each in regions • Transformation of the sys- Energy efficiency Rate of electric power loss 11. Legal risks consolidation 2 other • Improving branch performance tem of emergency response and support Effectiveness of innovation 12. Reputation risk 12. Operational and technological 15 4 12 7 • Combining procurement, in every region in the Russian and recovery operations of the innovation-driven 13. Strategy risk opportunities 6 emergency supplies, Federation management LIKELY development 14. Operational and technological risk 13. Investment opportunities 30-60 % and backup energy sources • Build an optimal grid infra- • Improvement of the grid con- 15. Investment risk Availability of the power 14. Climate change opportunities • Prompt exchange of informa- structure and adopt digital grid nection rate Compliance with the terms of grid connection 16. Climate risk grid infrastructure (linked to global warming) tion and development of uni- elements. • Laying the groundwork 5 17. Human risks 15. Human opportunities 14 form standards in all areas for new consumer services Development Improving labor efficiency 18. Anthropogenic risks <30 % of human capital assets Zero increase in the casualty toll UNLIKELY • Comprehensive moderniza- Significance of opportunity (potential gain) tion programs MINIMUM SUBSTANTIAL VERY HIGH up to 100 RUB mn 100-200 RUB mn > 200 RUB mn Assessment of trends in risks and opportunities

PRODUCTION INVESTMENT 1RESOURCES​ 2 ACTIVITY 3 FINANCIALS 4 APPEAL

Human Power transmission Profit receipt and distribution, RUB mn Average staff number, ppl 22,345​ Electric supply, mn kWh 53,565 94,329 80,408 EBITDA for 2019 amounts to Net supply, mn kWh 49,310 With occupational education, % 89​ 1,062 879 a 21.8 % Industrial Performed technological connections to the networks – 2 17,078 RUB mn decrease YoY High-voltage supply centres, pcs. 1,556​ Quantity, pcs. 44,059 952 435 5,150.0 1,839.7 Distribution electric grids, thous. km 285.03​ Total power, MW 895 Development Transformer substations, pcs. 68,298​ Cost of repairs of basic production facilities, RUB bn 3.6 Distribution points, pcs. 809​ Directions New power lines commissioned, thous. km 6.8 3,354.3 Installed capacity, thous. MVA 30.78​ Power transmission Intellectual New transformer capacity commissioned, thous. MVA 1.6 Dividends Grid connection for 9 months Intangible assets value, RUB mn 77.01​ Cost of the Innovative Development Program, RUB mn 880.7 Patents and certificates, pcs. 33​ Sales of electric power and capacity for 2019 Costs for innovation, RUB mn 59.11​ Additional Services Reputation • Ensuring a temporary limited access to the infrastructure facilities to install the applicants’ equipment Moody’s long-term corporate credit rating Ва1​ • Installation and replacement of metering instruments Rating of the Russian Institute of Directors NRKU 7+ Revenue, Net cost, • Maintenance of the applicants’ facilities Net profit Unapproppriated RUB mn RUB mn balance

34 35 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

Dynamics 102.2 91.8 95.1 85.4 80.6 77.5 79.1 80.1 81.0 89.7 95.1 102.9 of Electricity 100.5 92.1 97.8 84.7 80.0 76.6 79.5 79.5 78.8 88.4 94.3 103.4 Consumption INDUSTRY OVERVIEW in the UES of Russia AND COMPETITION in 2018-20192 2018 2019 01 02 03 04 05 06 07 08 09 10 11 12 ANALYSIS Generation and Consumption 43,819.2 208,694.1 103,059.0 112,787.2 265,628.1 110,222.2 236,286.9 Generation, 40,308.7 211,423.4 101,274.9 94,956.3 260,320.0 109,082.2 241,921.2 Consumption AN OVERVIEW UES Capacity in 2018-20191, MW in 2018-2019, 1 1,080,496.8 mn KWh 2019 OF THE INDUSTRY 243,243.2 246,342.5 1,059,286.5 WITH TRENDS AND FORECASTS Eastern UPS EU10 151,877.0 151,661.0 North-Western UPS 37,644.7 205,280.8 104,735.4 113,345.1 263,657.1 114,398.0 231,814.8 Generation, as of as of Central UPS 34,197.4 210,146.0 102,281.8 95,026.1 261,099.2 110,198.5 242,539.0 Consumption December 31, January 1, 2018 2020 Siberian UPS 1,070,875.9 CLIMATE IN THE INDUSTRY IN 2019 Ural UPS 2018 2018 2019 Southern UPS 1,055,488.0 Installed capacity By the end of 2019, the total Middle Volga UPS Power plant load at the peak power installed capacity of the power consumption of the year plants of the UES of Russia reached All the regional branches of IDGC of Center In 2019, the electric power generated by the and Volga Region scored well in this Ranking Ranking also revealed that it was already in 2017-2018 that most companies 1.27 % and led in their subgroups (companies 3 more than in 2018 power plants of the UES of Russia, includ- reduced their actual losses to below the approved normal values. This was 246,342.45 MW ing the power plants of industrial enterprises, from different regions were grouped mainly due to active adoption of smart electricity (power) metering systems. totaled 1,080,496.8 mn kWh, a 0.9 % increase by their output). The process is expected to gain traction in the years to come as that will be necessary in order to comply with Law No. 522-FZ4, which, in particular, YoY. requires a mechanism in place for the reduction of non-process electricity losses: An increase in the installed capacity In 2019, electricity consumption in the UES of was conditioned by the following Russia totaled 1,059,286.5 mn kWh, which is factors: 0.4 % higher than in 2018. from July 1 from January 1 Energy Efficiency of the Regional 2020 2022 The annual maximum power demand within Branches of IDGC of Center and Volga • commissioning of a new generating the UES of Russia was recorded on December Region5 delegation of commercial elec- mandatory adoption of equipment with capacity of 4, 2019 and was equal to 151.6 GW, which is tricity (power) metering duties smart electricity (power) 0.3 GW (0.2 %) higher than the annual maxi- from consumers to grid opera- metering systems tors and last-resort suppliers mum of 2018 The maximum load of the UES of Ryazanenergo 61.7 2,969.89 MW Russia power plants per one hour of maximum Tulenergo 53.9 power demand was 148.9 GW, which is 5.3 GW These measures are assumed to reduce electricity losses so that no losses (3.1 %) higher than in 2018. Kirovenergo 52.6 occur other than process-related losses. The Law also sets forth that grid operators may keep the extra profits attributable to such loss reduction for • increasing the installed capacity Ivenergo 50.5 of the generating equipment In late 2019, the Ministry of Energy published­ up to ten years and use them to pay for energy service contracts, purchase Kalugaenergo and install electricity meters, and create smart metering systems. due to its remarking – its annual Energy Efficiency Ranking of Grid 48.2 Operators. This year, the methodology behind Nizhnivenergo 46.6 the Ranking was tweaked to focus on what Vladimirenergo 46.2 244.09 MW companies did to reduce their in-grid losses. Emphasis was made on two indicators: actu- Udmurtenergo 44.8 al-vs-normal losses and year-over-year Generating equipment of the power dynamics of actual-vs-normal losses. The Marienergo 43.2 plants of the UES of Russia Ranking was also adjusted for the fact that grid operators could not keep high positive trends with a total capacity of in year-over-year loss reduction for objective reasons. 2. System Operator, Unified Energy System of Russia: Interim Overview, January to December 2018 and January to December 2013. 3. Order of the Ministry of Energy No. 887 of September 26, 2017 On the Approval of Normal Electricity Losses in Transmission 1,746.03 MW Through the Grids of Local Grid Operators. 4. was taken out of service Federal Law No. 522‑FZ of September 27, 2018 On Amendments to Certain Laws of the Russian Federation in Connection With the Development of Electricity (Power) Metering Systems. 5. Energy Efficiency Ranking of Grid Operators, Ministry of Energy, September 2019. 1. System Operator, Unified Energy System of Russia: Interim Results Overview, December 2018 and December 2019.​ 36 37 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

Industry Trends and Forecasts Industry-Wide Development up to 2024 Projections for until 2035-2040

Gain in Electric Power Generation and Consumption Pursuant to the Ministry of Economic As stated in the draft Energy Strategy of the The industry expects large-scale adoption of in the UES of Russia as % over the Previous Year Development’s Forecast of Socioeconomic Russian Federation for until 2035 published novel distributed generation, microgeneration, for 2018-2024 Development of the Russian Federation for Until on the Ministry of Energy’s official website, the controlled consumption, and virtual energy A key trend of global 2024, the generation of electricity will reach industry’s growth in the years to come will be resource aggregation technologies, which will energy sector devel- 1.5 0.9 0.7 1.0 0.9 1.0 1.1 1,163.1 bn kWh by 2024. Despite the fact that mainly driven by: effectively recreate the competitive retail mar- opment lies in the 0.6 0.4 1.1 1.0 0.9 1.2 0.4 thermal power plants will still provide the bulk of • greater demand for electricity in transport ket; the new market will be based on auto- advancement of total electricity output by that time, the Ministry industry and public utilities; mated local electricity trading platforms. On energy-­saving tech- of Economic Development projects that the con- • development of energy-intensive indus- the one hand, this will deter the electricity nologies, and Russia tribution of TPPs will drop to 63.4 % while that of trial facilities in Russia’s East as well as in price growth; on the other hand, it will require will not stay aside. nuclear power plants will rise to 19.5 % and that the border regions of neighboring states, additional investment in the market man- of hydropower plants will reach 16.6 %. mainly the EAEU member states, China, agement systems while also making return other Asia-Pacific countries. on investment in wholesale generation less Pursuant to the Unified Energy System predictable. Development Roadmap for 2018-2025 as The risk factors that may hinder the develop- approved by the Order of the Ministry of Energy ment of the industry include: In general, the most promising technologies Another trend that dated February 28, 2019, the demand for elec- • nonconformance of the actual electric- that will shape the electricity market for until is gaining ever more 1 Actual value Projection tricity in the UES of Russia is projected to reach ity consumption parameters to what was 2035 include: traction every year 2018 2019 2020 2021 2022 2023 2024 1,138.9 bn kWh by late 2024. Electricity con- stated when performing grid connection; • renewable energy and energy storage; lies in a gradual tran- sumption will mainly grow due to the rising • wholesale and retail electricity buyers’ fre- • hybrid cars and electric cars, including sition to renewable Increase in electricity generation2, demand in the Eastern UPS, as the Western and quent failure to pay fully and timely; hydrogen vehicles, self-driving and con- energy resources. Increase in electricity consumption3 Central Power Districts of the Republic of Sakha • an inadequate relations and pricing model nected transports; (Yakutia) will join the EUPS. in electricity and heat delivery coupled with • network technologies for the electric power lack of competition in wholesale and retail industry: active adaptive grids, distributed While the electric power production and con- electricity and capacity markets; generation, Internet of Energy, etc.; Annual Maximum Demand for Power, MW sumption strongly depend on the temperature • cross-subsidizing that hinders the central- • energy-efficient technologies for housing, factor, fluctuation of their growth rates within the ized electricity delivery and is still in place. commercial and administrative buildings: 151,877 151,661 161,329 163,447 165,156 166,605 168,106 range of 0.3-0.6 % per year is possible, depend- zero-energy buildings, smart homes, smart ing on the temperature deviations from the long- A key trend of global energy sector devel- cities; time average annual values. opment lies in the advancement of energy-­ • IT platforms for management of energy saving technologies, and Russia will not stay infrastructure and energy users on the cus- It is expected that by 2024 the installed capac- aside. This is mainly due to the fact that most tomers’ side, which can help minimize the ity of the power plants of the UES of Russia will countries no longer have room for further cost of consumed energy and are capable of reach 248,668.4 MW. The projected dynamics of organizational and managerial improvement involvement in the wholesale market. the installed capacity for the period through to to reduce energy intensity, while technological 2024 was created based on the existing plans for savings are hindered by lack of investment, commissioning of new generating equipment, as inadequate public policy for investment mobi- well as for taking out of service, upgrading and lization, and customers’ limited motivation to 4 Actual value³ Projection reconstructing the existing generating equip- improve their energy efficiency. ment of electric power plants. 2018 2019 2020 2021 2022 2023 2024 Another trend that is gaining ever more trac- tion every year lies in a gradual transition

1. to renewable energy resources. Electricity Ministry of Economic Development of Russia, Forecast is expected to cover 25 % of the total energy of the Socioeconomic Development of the Russian Federation for Until 2024. consumption in 2040, which is a 60 % 2. Ministry of Energy, Roadmap of UES Development increase from 2017 that served as the base- for 2015-2025. line when drafting the Energy Strategy of the 3. System Operator, United Energy System of Russia: Interim Russian Federation. At the same time, it is Results Overiew, December 2018 and December 2019.​ non-carbon primary resources used in elec- 4. Ministry of Energy of Russia, Roadmap of UES Development The maximum power tricity generation that will account for >40 % for 2018-2025. consumption in the UES of this increase. of Russia in 2024 is expected to be

168,106.0 MW

38 39 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

Scenario-based Analysis of the Dynamics of Electricity Consumption in the UES of Russia in 2035 • creating a common electricity market for • improving the transmission efficiency; the EAEU, where Russian companies will be • improving local grid operators’ operations able to compete; management and process control; • switching the supervisory control systems • transition to digital risk-oriented manage- RUB bn bn kWh to 100 % automated remote control over ment of production assets in grids; 220 kV grid facilities, and over 25 MW gen- • creating smart metering systems; eration facilities in the UES of Russia (over • upgrading low-performance (fuel oil- or coal- 180,000 1,400 110 kV grid facilities and over 5+ MW gen- fired) generation in isolated or hard-to-reach eration facilities for islanded local electric areas. power systems).

The industry’s key objective with respect to regional development lies in improving the effi- 160,000 1,300 ciency of the grid complex. This can be done by: • more accurate projection of electricity and power demand by using data on the implementation of investment projects in 140,000 1,200 Russian regions;

120,000 1,100

Trends in UES of Russia Reliability Indicators, 2018-20352

Actual value ¹ Scenario-specific projection2 2.3 100,000 1,000 8.7 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Pessimistic forecast Optimistic forecast GDP of the Russian Federation, Electricity consumption, GDP of the Russian Federation, Electricity consumption, RUB bn bn kWh RUB bn bn kWh 1.2

3.5 0.9 2.2 Russia’s GDP is projected to grow by an aver- Measures designed to attain these goals For the coming age of 2.3 % to 3.0 % per annum in 2019-2035; include: years, Russia’s elec- thus, electricity consumption is projected to • improving the planning system used by the Actual value Projection Actual value Projection tric power industry grow to 1,310.0-1,380.0 bn kWh by 2035. This electric power industry; 2018 2024 2035 2018 2024 2035 is mainly tasked to growth will be driven by the popularization of • optimizing the structure of generation facil- Average outage duration index SAIDI, h System average interruption frequency index SAIFI, no. improve the quality electric cars and by further electrification of ities in the light of their price-performance and reliability of elec- railways, among other things. ratio; tricity delivery to be • improving the price-performance ratio of on par with the best For the coming years, Russia’s electric power thermal power plants and grid facilities; Trend in UES of Russia Efficiency Indicator, 2018-2035 foreign counterparts. industry is mainly tasked to improve the qual- • adopting a demand management mecha- ity and reliability of electricity delivery to be on nism and creating a market of electricity 10.6 par with the best foreign counterparts. This storage systems; 9.8 will require increasing the installed capacity to • creating a mechanism to control and at least 254 GW by 2024, 251-264 GW by 2035. improve the customer service quality; The industry’s key objective with respect to • gradual phaseout of cross-subsidizing by 7.3 regional development lies in improving the effi- gradual transition to economically sound ciency of the grid complex. electricity pricing;

Actual value Projection

1. Rosstat.​ 2018 2024 2035 1. Energy Strategy of the Russian Federation for Until 2035 2. Energy Strategy of the Russian Federation for Until 2035. In-grid electricity loss, %

40 41 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

COMPARISON TO THE PEER COMPANIES IN TERMS INVESTMENT APPEAL FACTORS OF FINANCIAL AND INVESTMENT RESULTS

2018 2019

REGIONS OF ACTIVITY Return on invested capital EBITDA, RUB bn EV/EBITDA WITH EFFECTIVE DEMAND STABLE IFRS FINANCIALS (ROIC), % AND HIGH DIVIDEND YIELD The Company operates in the economically favorable regions where about 9 % of the country’s residents live. These are the regions with a stable volume IDGC of Center 15 37.7 5,623.5 MOESK IDGC of Siberia of gross regional product, which ensures a high demand for electric power Net income in 2019 6.7 RUB bn and Volga Region 20 39.4 6,524.1 year on year. 13 28.1 5,250.0 IDGC of Volga Lenenergo Kubanenergo EBITDA 18.4 RUB bn 14 29.6 5,715.3 IDGC of North-West 8 18.4 4,637.2 IDGC of Center Rosseti South Net assets 54.9 RUB bn -5 and Volga Region 24.0 4,868.1 (as of December 31, 2019) Lenenergo 7 17.3 3,597.3 IDGC of Centre IDGC of Urals FAVORABLE CLIMATIC -6 17.4 3,477.5 CONDITIONS Deb/EBITDA ratio 1.55 6 11.8 3,004.7 IDGC of Volga IDGC of Centre IDGC of Centre 7 11.8 3,062.5 A favorable climate in the area of the Company’s production activity causes only (as of December 31, 2019) 5 8.4 2,630.7 minor losses in the grids and increases their availability for maintenance, which IDGC of Urals Lenenergo The Company has revised and approved MOESK 1 8.5 3,024.5 reduces the amount of costs and has a positive effect on the Company’s profits. new Dividend Policy Regulations, which 4 7.4 3,102.9 IDGC of Siberia MOESK Rosseti South 12 8.3 3,011.1 now set forth calculating two values 3 7.1 2,927.2 of dividends for the reporting year: one Kubanenergo Kubanenergo IDGC of North-West 5 7.6 2,845.7 value to be based on the net income 2 7.1 1,680.9 per RAS, and the other one to be based IDGC of North-West IDGC of Volga IDGC of Siberia 7 7.2 1,780.1 on the net income per IFRS; the share- POTENTIAL FOR COMPANY’S 2 Rosseti 7.1 Rosseti Tyumen 1,870.0 holders will be paid whichever is larger IDGC of Urals 7 Northern Caucasus 5.1 1,566.8 DEVELOPMENT minus the total of interim dividends 1 6.1 IDGC of Center 1,831.2 paid for Q1–Q3. For three quarters Rosseti Tyumen Rosseti South Participation in the transformation of the power grid complex of Russia 4 6.1 and Volga Region 1,245.5 (nine months) of 2019, dividend recip- -48 0.5 -7,510.0 pursuant to the "Digital Transformation 2030" Concept approved in December Rosseti Rosseti Tyumen Rosseti ient were paid 1,839,668 RUB thous., -55 Northern Caucasus 0.5 748.7 Northern Caucasus 2018 by Rosseti PJSC. Over 2019, the Company completed the 5-year Phase or 0.0163239 per ordinary share. I of this Concept by 30 %.

Under the approved investment program1, the Company plans to commission fixed assets for a total 84,392 RUB mn exclusive of VAT over 2020-2024. The investment program provides for new construction and reconstruction EBITDA margin, % P/E Dividend yield1, % of 19,603 km of PTLs and commissioning transformers for a total capacity of 1,997 MVA.

36.0 65.7 15.4 Lenenergo IDGC of Siberia IDGC of Center IDGC of Center 38.0 22.8 and Volga Regionand Volga Region 13.5 24.6 16.8 12.4 MOESK Kubanenergo IDGC of Volga IDGC of Volga Compliance with the requirements 24.8 5.7 14.3 Rating assigned by the NP Russian Institute of Directors on the scale of the National Corporate of international standards was confirmed IDGC of Center 19.1 9.6 11.0 Rosseti Tyumen Rosseti South Rosseti South during compliance audits and Volga Region 25.5 1.5 7.7 Governance Rating (NCGR®): 18.6 5.4 1.8 IDGC of Siberia IDGC of Urals IDGC of Urals IDGC of Urals PROVEN CORPORATE ISO 9001:2015 14.5 26.7 12.1 NCGR 7+ 18.6 5.4 8.3 GOVERNANCE ISO 14001:2015 MOESK (Advanced Corporate Governance IDGC of Volga 18.5 Rosseti South MOESK4.6 QUALITY ISO 45001:2018 5.4 Practice) 18.4 5.1 7.6 ISO 50001:2011 IDGC of Centre Lenenergo Lenenergo 18.5 4.3 Lenenergo2.3 16.6 IDGC of Center 5.0 6.1 Rosseti South IDGC of Centre 16.5 and Volga Region 2.5 IDGC of Centre6.5 16.2 4.8 1.8 Ratings assigned by the international Rating assigned Kubanenergo MOESK IDGC of Urals IDGC of Urals 16.3 4.9 12.1 rating agency Moody’s: by Expert RA: 10.9 4.7 1.0 IDGC of North-West IDGC of North-West IDGC of Siberia 11.0 4.6 IDGC 1.6of Siberia Long-term credit rating Probability Credit rating 10.5 4.3 0.6 on the international scale of default rating Rosseti Tyumen IDGC of Centre Kubanenergo STABLE CREDIT 8.0 4.1 Kubanenergo1.5 8.3 RATINGS IDGC of Urals 4.3 ruAA IDGC of Volga 8.5 3.2 1. Based on dividends paid in 2018 Ва1 Ва1-PD “stable” outlook -16.6 for 2017 and in 2019 for 2018 “stable” outlook Rosseti Northern Caucasus 25.9

42 1. Order of the Ministry of Energy of Russia dated December 24, 2018 No. 28@. 43 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

MARKET POSITION GRI 102-6 EU3 In 2018-2020, the Company’s share in the total Share in the grid connection market RR of grid services exclusive of electricity in the Company-served regions in 2019, loss-related costs dropped by 1 % in Vladimir % Region, by 1 % in Nizhny Novgorod Region, WHOLESALE POWER MARKET by 1 % in Ryazan Region and by 3 % in the Republic of Mari-El. This reduction was due to the regional regulators registering a greater % RELATED POWER ELECTRIC POWER WHOLESALE PJSC FGC UES (compared to the previous year) loss of third- MARKET SYSTEMS PRODUCERS (TGC, IDGC of Center CONSUMERS WGC, ETC.) party revenues, which arose from connect- and Volga region ing reduced fare beneficiaries to grids, costs Sundry local grid operators of investment projects, and compensation of increasing operating expenses in proportion to 91 the increase in conventional units.

The Company’s RR for 2018-2020 rose in Tula Region (+7 %), Ivanovo Region (+4 %), and the Udmurt Republic (+11 %).

The Company’s major competitors in IDGC Share in the electricity delivery of Center and Volga Region’s areas of opera- market in the Company-served REGIONAL GRID tion include the following local grid operators 1 OPERATORS regions in 2019, % (LGO): • Udmurtenergoneft, LLC, Izhevsk; • Gorelektroset, MUE, Kirov; % • UPDZ Vladimir Region JSC, Vladimir; • Ryazan Municipal Distribution Power Grids, MUE; • Tula Municipal Power Grids JSC; GUARANTEEING SUPPLIERS RETAIL MARKET • Lukoil-Energoseti, LLC, Nizhny Novgorod AND RETAIL COMPANIES CONSUMERS • Russian Railways – in six regions of 76 presence. 1. The share is calculated based on the NGP of IDGC of Center and Volga Region and its RETAIL POWER MARKET subsidiaries and affiliates, and the total NGP of other regional grid operators, taken into account when approving the common pot tariffs for branches in 2019.

IDGC of Center and Volga Region operates in supplied to consumers is transmitted through the electric power industry on the territory of 9 the Company’s grids. The Company’s cus- constituent entities of the Russian Federation. tomers include oil, mechanical engineering, The Company is a natural monopoly that steelworks, woodworking, and chemistry com- serves a total area of 408 thous. sq. km and panies, railway operators, agricultural and 12.6 million people1. construction firms, public utilities, and social facilities. In all areas of the Company’s power In the serviced areas, IDGC of Center and transmission services, there are local grid Electricity consumed from the grids of IDGC of Center and Volga Volga Region holds a dominant position in the operators (LGO) that provide similar services Region by the 10 largest consumers in 2019 market of power transmission services and for the transfer of electric power. Most of these grid connection of consumers’ power receiv- organizations are state and municipal property. Russian Railways 1 3 4 6 7 8 9 6.0 2,974.8 ers. A significant part of the electric power Volkov Belkamneft 9 1,110.7 2.3 Ryazan Oil Refinery 7 1,047.4 2.1 Transneft 1 2 4 5 6 7 9 942.2 1.9 Consumption, mn kWh Uralchem 4 643.8 1.3 Share in total consumption, % HaloPolymer Kirovo-Chepetsk 4 622.2 1.3

Volga Paper Company 6 503.4 1.0 1. Vladimirenergo 6. Niznovenergo 1. 7. Ryazanenergo According to the order of the Russian Federal Tariff Service No. 236-e dd. June 27, 236 IDGC of Center and Volga Region Lukoil Nizhegorodnefteorgsintez 6 468.7 1.0 2. Ivenergo is included into the Register of Natural Monopoly Entities in the fuel and energy complex regulated and controlled 3. Kalugaenergo 8. Tulenergo by the government. Izhstal 9 397.6 0.8 4. Kirovenergo 9. Udmurtenergo Cargill 8 222.8 0.5 5. Marienero 44 45 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

The Company renders power transmission IDGC of Center and Volga Region’s major com- Dynamics of the Average Common Pot Tariff for Power Transmission Services in the Regions services to consumers, both organizations and petitors in grid connection services are the of the Company’s Activities, kop./kWh Most of the applica- the general public, in the wholesale and retail local grid operators that function in the major tions for grid con- markets, and cooperates with last resort sup- cities of the regions of presence. These can 239.5 235.7 237.3 226.2 231.6 230.1 232.0 227.0 nection come from pliers and distribution companies that sup- be for-profit companies varying in structure 209.6 206.8 214.7 natural persons and ply electric power to ultimate consumers. The or municipal enterprises that provide public 208.4 212.7 208.6 212.7 212.9 209.9 209.4 198.5 202.0 small and medium-­ Company cooperates with the following major utilities. 187.5 171.7 177.5 sized businesses. last-resort suppliers: 170.5 174.1 167.4 Their essential­ share • TNS Energo NN PJSC; The largest of them are the following: 158.2 consists of the appli- • TNS Energo Tula JSC; • UPDZ Vladimir Region JSC; 122.0127.5 cations for grid con- • TNS Energo Mari El PJSC; • Ivanovo Municipal Power Grid JSC; 121.2 nection with the • Kaluzhskaya Sbytovaya Kompaniya PJSC; • Interconnected Power Grids JSC; contracted capac- • Kirov branch of EnergosbyT Plus OJSC; • Gorelektroseti, ME, Obninsk; ity of up to 15 kW • Udmurt branch of EnergosbyT Plus OJSC; • Public power grids and heating networks, and from 15 kV to • Ryazanskaya Sbytovaya Kompaniya PJSC; UME, Maloyaroslavets; 150 kV, received from • Rusenergosbyt, LLC, in nine regions of • Gorelektroset JSC, Kirov; the reduced fare presence; • Communenergo OJSC; beneficiaries. • Rusenergoresurs, LLC, in seven regions of • Yoshkar-Ola HPP-1, MUE; IDGC of Center and Volga Region, total Vladimir Region Ivanovo Region Kaluga Region Kirov Region The Republic of Mari El Nizhny Novgorod Region Ryazan Region Tula Region The Udmurt Republic presence. • RGRES, MUE; • ROEK JSC; 2017 2018 2019 (as of January 1, 2019) • Udmurtia Power Grids, LLC.

Tariff regulation in 2019 mainly sought to In-house RR rose the most in Kalugaenergo In-house restrain the grid service price growth start- (+8.1 %), Ivenergo (+4.9 %), Ryazanenergo (+4.1 RR growth ing from July 1, 2019. The regulatory author- %), and Udmurtenergo (+3.6 %). The increase ities of 7 Russian regions set tariffs above in the in-house RR of branches is associ- in comparison TARIFF FORMATION EU2 those projected by the Ministry of Economic ated, in the first place, with a compensation of to 2018 Three branches of the Development with adjustment for the grid the accumulated RR evening-out, provision of Company (Ivenergo, The core activities of IDGC of Center and Volga Region (power transmission and grid connection operators’ investment programs. Since July 1, sources of investment programs funding, as Marienergo, and services) are regulated by the state. 2019, tariffs for sundry customers (single-rate well as compensation of lost income on actual 8.1 % Udmurtenergo) used tariffs) on average rose by: basis of activity. Kalugaenergo long-term RR (revenue • 4.0 % for Vladimir Region; requirement) indexa- • 9.9 % for Ivanovo Region; tion, while the remain- Tariffs for Power Transmission Services • 3.5 % for Kaluga Region; ing six branches • 5.5 % for Kirov Region; 4.9 % employed the regula- Tariff regulation of power transmission services is carried out on a long-term basis according to • 9.9 % for Ryazan Region; NGP Dynamics of the Branches IDGC Ivenergo tory asset base (RAB) the Federal Law No. 35-FZ On the Electric Power Industry. • 3.5 % for Tula Region; of Center and Volga Region method. • 11.8 % for the Udmurt Republic.

In 2019, the Ivanov branch changed the settle- ment model: the boiler above model replaced 42,723 47,647 47,647 12,491 12,503 12,706 4.1 % the older mixed model. The Ivenergo branch of 11,760 12,996 13,207 Ryazanenergo IDGC of Center and Volga Region was elected 19,733 21,415 24,224 the boiler owner. Following the decisions made 97,784 by the regional regulators, the following tar- 94,561 iff-balance parameters were effective for IDGC 86,707 1 2 3 4 5 6 7 8 9 3.6 % Modes 2022 of Center and Volga Region in 2019: Udmurtenergo of Regulation 2021 • the average common pot tariff for power Applied 2020 transmission services was 202.0 kopecks/ to the Company's 2019 kWh, which is 1.8 % higher than in 2018; • the approved common-pot RR totaled Branches 2018 97,783 RUB mn, an increase of 3,222 mn or 2017 3.4 % YoY; 2016 1. Vladimirenergo • the approved in-house RR (revenue require- 2015 2. Kalugaenergo ment) of the Company’s branches reached 2014 3. Kirovenergo 47,647 RUB mn, which equaled the 2018 2013 4. Nizhnovenergo level. 2012 5. Ryazanenergo 2011 6. Tulenergo 2010 7. Ivenergo 2017 2018 2019 2009 8. Marienergo In-house RR 9. Udmurtenergo Services of FGC UES A return on invested capital method (RAB), % Revenue requirement (RR) long-term indexation method Losses 46 Services of sundry local grid operators 47 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

Average Standardized Tariff Rates to Cover the LGO Costs in 2019 Tariffs for Grid Connection Services (min-to-max rates depend on voltage, material grade, type of equipment, and methods in use)

According to the current legislation of the Russian Federation on rendering power grid Range of rates by branches connection services, there are two types of tariffs approved: a regulatory period tariff and a tariff at the request of the grid operator. Rates Min Max Grid connection by the organizational measures, RUB/unit 5,872 31,321

A regulatory period tariff At the request of the grid operator Construction of overhead power lines, RUB/km 75,801 3,643,632

There are three options: There are two options: Construction of cable power lines, RUB/km 177,902 6,513,268

standardized payment for connecting ­electricity Construction of islanding points, RUB/unit 37,037 33,804,569 1 tariff rates 1 generation facilities and individual customers’ power receivers to local Construction of transformer substations, RUB/kW 2,104 71,665 distribution grids, where the maximum Construction of distribution transformer substations, RUB/kW 10,806 14,626 power is at least 8,900 kW and and the minimum voltage is 35 kV rates per unit 2 of maximum power payment for the grid connection in Providing Preferential Terms for Payment 2 accordance with an individual project for Grid Connection formula of payment 3 for grid connection According to the Federal Law No. 35-FZ dated In 2019, a number of benefits were provided December 30, 2015 On the Electric Power for grid connection of power receivers. A sin- Loss of revenue due to connecting reduced fare The applicant has a right to independently Industry, the approved standardized rates gle connection cost 550 RUB (inclusive of VAT) beneficiaries were compensated by the grid operator choose the type of payment rate, provided that and rates per unit of maximum power are provided that: by adjusting the transmission tariffs. Such loss of revenue the distance from the property boundaries the same for all local grid operators in the totaled 3,465.3 RUB mn for IDGC of Center and Volga to power supply network facilities with volt- regions, which belong to the area of responsi- maximum power, with regard to the Region. age level of up to 20 kV is less than 10 km, and bility of IDGC of Center and Volga Region. previous connections at this point, the maximum power of the connected power 1 should be less or equal to 15 kW receivers is less than 670 kW. The applicant For organizational measures, standardized chooses the payment rate at the stage of mak- rates and rates per unit of maximum capacity the third category of reliability (one ing of a grid connection contract. have been approved in RUB per 1 ­connection power supply source) at the voltage and RUB per 1 kW, respectively. With that 2 level up to 20 kV Breakdown of Revenue Loss Due to Connecting for a Reduced said, in Ryazanenergo branch, the rates per Fare in 2019, RUB mn unit of maximumz power are approved per the distance from the applicant’s ranges of maximum connected power. property boundaries to power supply 709.8 1,006.2 3 facilities of the required voltage class According to the investment measures, the should not exceed 300 m in cities and 1.7 Dynamics of the Average Rates approved tariff rates are differentiated follow- urban-type settlements, and is not ing the Methodological Guidelines1 for the 1,747.6 of Charge per Unit of Maximum more than 500 m in rural areas Power, RUB/kV voltage level, grade of material, type of equip- ment used and the technique of work. 3,025 Fully exempt from paying the investment costs of grid connection are the applicants, Organizational activities for 2,577 whose maximum power, with regard to the applicants below 2,449 previous connections, does not exceed 150 15 kW 2,221 kW. Investments for applicants from 15 to 150 kW In respect to legal entities or individual entre- Investments for Over 2017-2020, standardized rates have been preneurs, who apply for a grid connection applicants below rising by an average of 10 % thanks to the with the maximum connected capacity of over 15 kW existing structure of connectible capacity in 15 but less than or equal to 150 kW, an inter- Interest-free each regulatory timeframe; this structure was est-free installment plan is applied, with 95 % installments based on the actual triennial data of previous of the payment for grid connection to be paid years. within a period of up to 3 years.

2017 2018 2019 2020

1. Order of the FAS of Russia No. 1135/17 dated August 29, 2017.

48 49 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

IMPROVEMENT OF OPERATIONAL AND TECHNOLOGICAL MANAGEMENT

In 2019, the Company launched two digital grid control centres - in Mari El Republic 01 and in the Tula Region and the first city-wide digital supervisory control centre in Izhevsk. In total, in the regions under Company’s operation, 603 dispatching centres will be replaced by 29 grid control centres and 9 city-wide digital supervisory control centres in cities with a population of over one hundred thousand people. They will be equipped digital communication channels and the most modern information STRATEGY systems that will enable online monitoring of the power grid facilities, analysis of the qualitative parameters of electric power and coordination of field and repair RISKS teams work. OPPORTUNITIES See details on p. 61

52 Strategy

75 Risks

82 Opportunities

50 51 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

STRATEGIC PRIORITIES, TASKS AND THEIR STRATEGY IMPLEMENTATION

MISSION STRATEGIC PRIORITY

STATEMENT OF THE DIRECTOR GENERAL IDGC of Center and Volga Region’s mission Strategic development priorities of IDGC of Center and Volga is to reliably deliver high-quality electricity Region are based on the Strategy for the Power Grid Complex GRI 102-10 G4-DMA IGOR MAKOVSKIY GRI 102-14 (earlier EU6) to customers while following these principles: Development, approved by the decree of the Government • socially responsible and customer-oriented of the Russian Federation No. 511-p dated April 3, 2013: behavior; • ensuring the reliability and security of the Company’s power Dear Shareholders, Investors, • being in line with Russia’s economic needs grid complex, improving the quality of services provided; and Partners! in Izhevsk and installed the first units of energy and the global market requirements; • increasing operational and investment efficiency; When defining IDGC of Center and Volga storage in the low-voltage distribution grid • protecting the shareholders’ interests; • improving investment appeal and market capitalization; Region’s strategy, we seek better of Vladimirenergo. What kind of benefits does • environmental protection and strife for eco- • innovation-driven growth and energy efficiency of assets; reliability, safety, and efficiency the Company expect from these efforts? Faster friendly production. • increasing the availability and affordability of power grid and more accurate grid status reporting, of operating our grids in the first place. This infrastructure; electricity loss localization, transport and repair is why the Company has always focused on its • human capital assets development. investment and repair programs. 2019 was crew positioning data; faster and more cost- no exception. 2019 saw the commissioning effective repairs, and a generally more reliable of 6,769.2 km of grids and 1,620.2 MVA and controllable grid system. of transformer capacity; specific accident rate 2019 also saw a more proactive approach dropped by 7.8 %, SAIDI by 12.4 %, SAIFI by 25.3 to consolidating the grid assets where % compared to 2018. our branches operate. The Company acquired At the same time, we continued the assets of Izhevsk Power Grids and Votkinsk what began in 2017, i.e. the merger Municipal Power Grids including ~3,500 km of 0.4- of operations and contingency management 10 kV power transmission lines. Thus, we gained control over 100 % of the Udmurt Republic’s grids An important factor of the successful of grids in cooperation with IDGC of Centre. growth of the Company in accordance The Companies serve 20 adjacent regions, which for more efficient maintenance, easier upgrades The Operational Efficiency Improvement and Cost and quality assurance of electricity delivery with its strategic priorities is the system Reduction Program for 2019-2023 was approved boosts their efficiency. As at the end of 2019, of key performance indicators (KPI). Bonus the cost effects of the Company’s measures to customers in the region. by the Board of Directors of IDGC of Center awarding of all top managers of the Company1 exceeded 1,952.7 RUB mn, including manpower and Volga Region on March 22, 2019, Minutes No. on the quarterly and annual basis depends optimization, implementation of standard facility 354. The program is expected to cut the specific on the KPI established by the Board connection solutions, consolidated purchasing, operating expenses by at least 2-3 % every year. of Directors. In particular, the system sets and enhanced detection and prevention forth the following bonuses: of unaccounted electricity consumption. We • for the attainment of quarterly and yearly further plan to apply the mutual integration KPIs directly pertaining to the Company’s practices in other activities of both Companies. As part of the Program, the Company took steps to attain approved strategic priorities; Since late 2018, the “Digital Transformation the following in 2019: • extra bonuses for attaining the Rate 2030” Concept remains a core strategic priority for IDGC of Center and Volga Region. The Concept of Electric Power Loss in 0.4-20 kV Grids • more efficient equipment, building, and facility maintenance was developed by Rosseti and implies a complete KPI by the end of the reporting year; and repair management; transformation of the entire grid infrastructure • special bonuses for a high value of a priority • more efficient circulating capital management; across the Rosseti Group by digitalization. KPI by the end of the reporting year; • more efficient management of fixed assets; By late 2019, we completed 30 % of the five- • one-time bonuses for completion • more efficient procurement and supply chain management; year Phase I of the Concept, or approximately of particularly important tasks (jobs). • adoption of cutting-edge technology and innovation; twice as much as had been planned. In particular, • optimized incentives and remuneration; the Company inaugurated two digital Grid Control For each of the KPIs, a relative share • organizational and functional structure and manpower Centres in 2019 and installed the equipment in the amount of bonuses paid is identified. optimization; for the first digital substation, the Airport KPI targets and results of the Management • energy efficiency improvement. SS, at Udmurtenergo; we launched the first Company (IDGC of Center) to be approved digital city-wide supervisory control centre by the Company’s Board of Directors; for the Company’s top managers to be approved by the managing organization.

Director General of IDGC of Centre, the Management Company of IDGC of Center and Volga Region I.V. Makovskiy 1. Top Manager Incentives and Benefits Package Regulations at IDGC of Center and Volga Region as approved by the Board of Directors of IDGC of Center and Volga Region on June 8, 2016, Minutes No. 231.

52 53 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

Strategic Objectives, their Implementation in 2019 and Plans for 2020

No. Strategic objectives Achievements in 2019 Plans for 2020 No. Strategic objectives Achievements in 2019 Plans for 2020 1. ENSURING THE RELIABILITY AND QUALITY KPI over 2019: 1.10. Maintaining an integrated The second supervisory audit passed. Recertification audit passed. OF SERVICES PROVIDED • zero increase in major accidents ≤1.00; management system in accordance • reliability levels attained: KPI ≤ 1.00 and Ki < 1.00. with international standards ISO 9001, ISO 14001, ISO 50001, OHSAS 1.1. Optimization of face-to-face The Company opened 38 Customer Service Opening such new offices 18001 in all branches. customer service infrastructure. offices distributed across the grid coverage helped improve the face-to-face areas. customer service infrastructure. 2. INCREASING OPERATIONAL KPI over 2019: 1.2. Improving the quality of long- The Company did improve the quality of service Optimization of long-distance AND INVESTMENT EFFICIENCY • Reduction of specific operating expenses (costs) ≥2.0 %; distance customer service. for customers that filed their requests via customer service. • Reduction of specific investment outlays (≤1.00); the Svetlaya Strana Portal of Rosseti: Better service by the single • improving the utilization rate of the grid equipment capacity; • there is now strict control in place over how federal call center. • Compliance with the commissioning schedule (≥90 %). branches handle the complaints filed via 2.1. Regulation of works Control over the activities of branches in terms Development of a unified system the portal; on standardization of costs in capital of standardization of costs was carried out. of standardization of costs • all the defects and malfunctions complained construction. in the Company. about were addressed within one month The branches implemented of receiving each respective complaint; strict in-house control • the Company cooperated with regional over the standardization of costs. and municipal governments so that they published links to the portal on their official 2.2. Implementation of project Control over timely commissioning of facilities. Timely commissioning websites. management in capital construction. Updating the procedure of operational of facilities and updating acceptance of 35-110 kV and 0.4-20 kV of documents regulating 1.3. Optimizing the For Consumers The Company disclosed its service quality data Further disclosure follows completed construction projects. this process, if necessary. section of the Company’s corporate in accordance with Appendix 7 to the Uniform the Uniform Standards of Service website. Standards of Service Quality for Quality for Grid Operators. 2.3. Construction compliance monitoring Arranging construction supervision Ensuring compliance Grid Operators1. in accordance with the requirements in accordance with the requirements of the processes of regulatory authorities. of regulatory documents. Updating with the published documents 1.4. Standardization of customer The Company updated its document STO It also developed and updated of the following internal documents: and updating the documents, if service processes in the Company 01-040-2018 Processing Requests from IDGC the effective in-house regulatory, • Confirmation and acceptance of scope necessary. and improvement of quality of Center and Volga Region’s Customers. organizational, and directive and quality of construction and assembly of service. documents with respect works performed by construction contractors to organizing business processes at the grid facilities of IDGC of Centre pertaining to additional services. and IDGC of Center and Volga Region; 1.5. Compliance with indicators Service reliability indicators deviated The Company carried out • Arrangement of acceptance control of reliability of services rendered from the values approved for 2019 within measures to attain the approved of products for construction specified by the regional regulatory the tolerance limit. planned reliability indicators. and reconstruction of power grid facilities authorities. Reliability targets were reached. of IDGC of Centre and IDGC of Center and Volga Region. 1.6. Calculation of the Saidi and Saifi Compared with 2018, there was a 25 % In 2020, Saidi and Saifi values 138 people were registered indicators of the reliability level reduction in Saidi values and 13 % reduction are expected to be at the 2019 in the National Registry of Specialists in the field at year-end 2018. in Saifi values. level. of construction management. 1.7. Timely and quality repair works. The Company completed overhauls in timely The Company plans to overhaul The Company carried out independent and appropriate manner for a total 3,625 RUB for a total 3,842 RUB mn, which construction audit that covered at least mn, which covered: will cover: 70 % of newly constructed, reconstructed, • 37.4 thous. km of 0.4-220 kV transmission • 37.7 thous. km of 0.4-220 kV and retrofitted 35+ kV facilities. lines; PTL; 2.4. Certification for compliance All the branches were certified for compliance This was confirmed • 8,125 units of transformer substations; • 8,074 units of transformer with international management with ISO 9001:2015, ISO 14001:2015, ISO by recertification audit • 45 units of 35-110 kV power transformers; substations; standards. 45001:2018, ISO 50001:2011 in electricity for compliance with ISO • 5,238 units of switching equipment. • 39 units of 35-110 kV power delivery and transmission, as well as in grid 9001:2015, ISO 14001:2015, ISO transformers; connection services. 45001:2018, ISO 50001:2018. • 5,692 units of 6-110 kV switching equipment. 2.5. Reduction of operating expenses Roughly, a 6.2 % value was achieved (the Ensuring the achievement pursuant to the Russian Government final results are summed up by the Board of the target figures set 1.8. Carrying out a dedicated program The Company completed its projects to expand Clearing and expanding Decree No. 2303-П13 dated April of Directors). by the business plan. to clear and widen forest corridors forest corridors for 35-110 kV OPLs. the forest corridors in the total 16, 2015 on reduction of specific for the overhead lines. The cleared and expanded area totaled 18,333 area of 17,661 ha, including a 173 operating expenses by at least 2-3 % ha, including 302 ha for 6-10 kV OPLs. ha extension for the 6-10 kV per year. overhead lines. 1.9. Improving management efficiency, 90 regulatory documents were produced 50 effective regulatory optimization and standardization and updated. documents were updated. of business processes in all branches using an integrated management system.

1. Approved by Order of the Russian Ministry of Energy No. 217 dated April 6, 2015.

54 55 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

No. Strategic objectives Achievements in 2019 Plans for 2020 No. Strategic objectives Achievements in 2019 Plans for 2020 3. ENHANCING THE INVESTMENT APPEAL KPI over 2019: 3.4. Maintaining an impeccable credit Performance of obligations to pay the principal Unconditional fulfillment • Consolidated net cash flow ≥7,847.4 RUB mn; history. amount of debt, interest and other expenses of payment obligations • Consolidated operating profit (EBITDA) for Q1, HY and 9 months related to handling of borrowed resources under bonds and loan of the reporting year ≥0, for the year ≥3 %; in a timely manner and in full. agreements. • Consolidated net debt/EBITDA for Q1, Q2, Q3, Q4 ≤ 3.0; 4. IMPROVING ENERGY EFFICIENCY KPI over 2019: • Compliance with the plan of measures to reduce the accounts receivable AND SUPPORT OF THE INNOVATION-DRIVEN • rate of electric power loss ≤7.49 %; ≥100.0 %. DEVELOPMENT • effectiveness of innovation ≥90 %. 3.1. The achieved target indicators Net income of 5,150 RUB mn with the target Ensuring the achievement 4.1. Development and implementation Implementation of measures within Ensuring unconditional include: net income, EBITDA, of 7,007 RUB mn, EBITDA of 17 080 RUB mn of the target figures set of programs for energy conservation the Energy Conservation and Energy Efficiency fulfillment of targets profitability. with the target of 19,768 RUB mn, EBITDA by the business plan1. and increasing energy efficiency Improvement Program to the full extent. for the program of energy margin of 17.7 % with the target of 20.4 %. of branches in accordance Consumption of fuel and energy resources conservation and energy 3.2. Effective IR-program. Establishing IR-program for 2019 was carried out. Carrying out the IR-program with the requirements of regional for operational and economic needs reached efficiency improvement. and maintaining long-term Dividends on the Company’s shares accrued for 2020. regulatory authorities. 40,668 toe, which is lower than the target Updating of the programs relationships with shareholders and paid in 2018 (4,591,985 RUB thous.); Ensuring the Company’s of 3,295 toe; water consumption was equal of energy conservation and investors. dividends for 9 months of 2019 accrued information transparency to 162,8 thous. m3, which is lower than and energy efficiency (1,839,667.9 RUB thous.). with regard to the needs the target of 30.5 thous. m3. improvement in the branches. of the investment community. 4.2. Upgrade of electric power metering Annual plan fulfillment by 150 %: 26,507 Implementation of the Smart 3.3. Development of corporate Following the results of corporate governance The Company monitored its points. metering points were upgraded. Metering Development Program. governance system. assessment, the Russian Institute of Directors, corporate governance practices. 4.3. Ensuring innovation-driven Approval of the Innovative Development IDP STP delivered. Following the best acknowledged NP, upgraded the Company’s corporate Implementation of corporate development. Program for 2016-2020 and up to 20251 (”the Under its “Digital Transformation” practice of corporate governance. governance rating to NCGR 7+. procedures in accordance IDP”). Approval of the IDP Implementation Concept, the Company founded >1/3 of the Board of Directors were independent with the legislation of the Russian Report for 2018 and Short-Term IDP new single grid control centers, directors in line with the Corporate Governance Federation. Implementation Plan for 2019-2021 (“the IDP pilot digital 35-110 kV substations, Code. Updating of internal STP”)2. The approved planned IDP STP activities and digital PDZs. In the reporting year, the Company made sure documents in compliance were undertaken in full: the Company effectively The Company keeps its place contracts were made to insure the liability of its with the requirements of the legislation spent 880.7 RUB mn exclusive of VAT on the IDP of adopting advanced innova- Directors and officers. and recommendations while it had been budgeted at 809.9 RUB mn, tive technologies, equipment, The Board of Directors and its Committees of the Corporate Governance of which 812.2 RUB mn went into innovative and materials. conducted self-assessment. Code, control over their effective equipment, materials, and technology; 59.1 It carried on to deliver five R&D New versions of the following internal implementation. mn went into R&D; 9.4 mn went into HR contracts, acquire patents documents were produced and approved: Performance self-assessment development. The Company completed 8 R&D and certificates, and commercial- • Articles of Association; of the Board of Directors contracts, acquired a single utility model patent ize the R&D results. • General Shareholders’ Meeting Regulations; and Committees of the Board and two software patents. In Q1 2020, the Company per- • Board of Directors Regulations; of Directors. formed bidding and made con- • Management Board Regulations; tracts on two R&D projects. • Board of Directors Remuneration and Reimbursement Regulations; 5. INCREASING THE AVAILABILITY KPI over 2019: • Insider Information Regulations; AND AFFORDABILITY OF POWER GRID • grid connection deadline compliance ≤1.1. • Board of Directors Strategy Committee INFRASTRUCTURE Regulations; 5.1. Providing potential consumers Public meetings with consumers were Holding of public meetings • Management: Instatement of the newly with information to evaluate held to discuss access to the power grid with existing and potential elected Board of Directors and BoD key parameters and risks infrastructure in each region. consumers to discuss access Committee members. of business projects with regard to the power grid infrastructure, Effective operation of the Company’s to the opportunities for grid including applications filing management bodies was ensured. connection. for grid connection in electronic form. 5.2. Managing the procedures The Company adopted its new regulatory Maintaining the procedures of interaction with applicants document RG BP 6/01-06/2019 Grid Connection of interaction with applicants in the process of grid connection of Energy Users on the Customer Side, in the process of grid connection in accordance with the legislation Electricity Generation Facilities, and Grid in accordance with the legislation in force. Facilities Owned by Grid Operators or Sundry in force. Parties, to IDGC of Centre’s or IDGC of Center and Volga Region’s Grids. 5.3. Reduction of grid connection terms, Increase to 45 % in the share of contracts, Performance of the maximum class of consumers: up to 15 kW. under which the works were performed using number of works using own own resources. resources.

1. 1. Business plans of the Company are created in accordance with RAS. Approved by the Board of Directors on March 30, 2017, Minutes No. 262. 2. Resolution of the Board of Directors dated October 3, 2019, Minutes No. 376.

56 57 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

No. Strategic objectives Achievements in 2019 Plans for 2020 Long-term EBITDA 6. DEVELOPMENT OF HUMAN CAPITAL KPI over 2019: and Net Income ASSETS • Improving labor efficiency ≥2.00 %; Targets for up • zero increase in the casualties ≤0.0075. to 2024, RUB mn 28,147 6.1. Fulfillment The obligations under the Collective bargaining Complete fulfillment (per RAS) 26,618 of the Company’s obligations agreement are fulfilled to the full extent. of the Company’s obligations 24,927 under the Collective bargaining under the Collective bargaining 23,634 agreement with the employees agreement (2016-2018, extended for 2016-2018, extended for 2019. for 2019, 2020-21). 21,554 6.2. Compliance with the regulatory The Company was staffed at 98 %. Maintaining a stable staffing requirement on the Company’s level and preventing it from non- 17,080 staffing level: 90 %. complying with the standard. 6.3. Staff participation in training, 59 % of the average number of the Company’s Performance of the approved retraining, and advanced training staff received training. plans for staff training. programs at the planned level 10,856 (≥30 %) 10,002 8,942 9,373 8,028

5,150

2019 (actual) 2020 (planned) 2021 (planned) 2022 (planned) 2023 (planned) 2024 (planned)

EBITDA Net profit

IMPLEMENTATION The Concept is supposed to be implemented in accordance with the specifically developed OF THE “DIGITAL Target Model of digital transformation TRANSFORMATION of “Rosseti’s” power grid complex by 2030. The following are the main principles FINANCIAL TARGETS IDGC of Center and Volga Region expects 2030” CONCEPT of this Target Model: that its competitive advantages, dynamic • a complete transformation of the power ON CORE STRATEGIC development of the regions of operation, AND INNOVATIVE grid infrastructure of the entire “Rosseti” INDICATORS and adherence to the approved strategic DEVELOPMENT Group; priorities will drive a positive dynamic • occurrence of a 100 % of data within GRI 202-3 G4-DMA of the Company’s financial performance (earlier EU8) technological and corporate information indicators. systems; • communication of data to the unified The core indicators here are the net income “Digital Transformation grid control centers as was necessary BY 2024, IDGC OF CENTER AND VOLGA REGION PLANS TO: and EBITDA. The Company expects them and sufficient for process control to grow by an average of 17.5 % and 10.8 2030” and contingency management; • carry out its “Digital Transformation 2030” Concept % per annum, respectively. As a result, • interconnection of all information digital projects; the Company’s EBITDA shall be >1.5x 2019 In late 2018, “Rosseti” approved its novel flows based on cloud technologies; • take measures to annually reduce unit operating costs by at least 2 % YoY; values, and the net income shall more than “Digital Transformation 2030” Concept • platform-based solutions, development • attain a positive financial result for the entire planning double by 2025. to transform the existing business process of a unified digital environment period. logic for grid operators by 2030, backed and introduction of the cybersecurity by the adoption of digital technologies technologies. for rapid big data mining.

58 59 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

ESSENTIAL STEPS DESIGNED FOR THE IMPLEMENTATION OF THE “DIGITAL TRANSFORMATION 2030” CONCEPT Innovative Ongoing Projects Development Program TRANSITION TO DIGITAL SUBSTATIONS OF VARIOUS VOLTAGE CLASSES 35-110 (220) KV Creation of Unified control centers for 0.4-220 kV networks 1 The key document that supports the “Digital Benefits: Transformation 2030” Concept is the Innovative Since 2014, IDGC of Center and Volga Region has been working on studying the best • reducing capital outlays on modernization of network management Development Program for 2016-2020 practices of employing digital substation technologies and assessing a possibility of their use points as part of the implementation of the “Digital Transformation 2030” and up to 2025 as approved by the Board in construction or reconstruction of the Company’s facilities. Today, IDGC of Center and Volga technologies; of Directors on March 30, 2017, Minutes No. Region has seven ongoing digital substation projects, of which four are being implemented. • enhancing a fail-safe operation of the power system and a level 262; this is also the document that sets forth of automation of the electric power complex management; the Company’s Innovation and R&D Policy. • achieving a high level of data reliability on the state of the electric power complex The main goal of the innovation-driven IEC 61850 Digital Substation Projects near completion in 2019 development of IDGC of Center and Volga Establishment of wireless digital communication Scheduled Region is to make a transition to the electric for supervisory control services Project name Project status as of late 2019 completion 2 grid of a new technological setup, with brand Reconstruction of the Airport 35/6 kV Airport is a digital substation undergoing 1-year pilot testing The project was Benefits: new characteristics of reliability, efficiency, SS at Udmurtenergo completed in 2019 • improving communication reliability and quality; accessibility, manageability and focus • expanding the coverage over the entire territory of the regions of responsibility on customer. Reconstruction of the Vyezdnoye Project estimates drafted 2020 110/35/10 kV SS at Nizhnovenergo Construction of unified 35-110 kV digital substations in all This innovation-driven development mainly Construction of the University 110/10 The APCS and RPA estimates and process documentation obtained 2020 3 branches of the Company seeks: kV SS at Kalugaenergo • transition to digital substations of various Reconstruction of the Vozha 110/10 Preliminary survey completed, project documentation drafted 2021 Benefits: voltage classes 35-110 (220) kV; SS at Ryazanenergo in full. The estimates provide for implementing communication • reducing capital outlays and operating costs during the construction channels to connect all the smart SS devices; the communication and operation of power grid facilities • transition to digital active-adaptive networks with distributed intelligent system will use IEC 61850-8-1 (MMS, GOOSE) and IEC 61850-9-2 (SV streams) standards Installation of an automated navigation and dispatch system of automation and control; to manage the entire motor vehicle fleet of the Company • transition to comprehensive efficiency 4 of business processes and automation of control systems; Benefits: • application of new technology and materials • administrating continuous and effective control over the location of vehicles and the fuels and lubricants consumption; in electric power industry. • enhancing traffic safety Most of the innovation projects implemented Provision of electricians with mobile communication by the Company are integrated in nature, and information devices meanwhile covering several cutting-edge Over the long term, the introduction electric grids with their substations, as well 5 technologies or solutions related to different of digital substation technologies will reduce as consumers, both those who have their own Benefits: areas. the time and money spent on the design, generation sources capable of outputting • improving the quality of scheduled, unscheduled and emergency construction, commissioning and operation excess power into the grid, and those who do recovery works; In 2019, IDGC of Center and Volga Region of substation equipment, improve the reliability not. • reducing the risk of injuries among operational staff; spent 812.2 RUB mn exclusive of VAT on its and operation speed of relays and automation An active-adaptive electric grid implies • improving labor efficiency of personnel Innovative Development Program, which was devices, improve the metrological a flexible interaction of all its participants 9.3 % higher than had been planned1. characteristics of secondary devices based on modern technologies and a unified and systems. smart control system. Automation of the 6-10 kV distribution network In 2019, IDGC of Center and Volga Region 6 started the implementation of two project Benefits: TRANSITION TO DIGITAL ACTIVE- groups in this area: • reducing the time for finding a site of damage and determining its nature; ADAPTIVE GRIDS • creation of an active adaptive grid equipped • reducing the time for localization of the affected area; with a distributed smart automation • reducing the power supply recovery time; Active-adaptive electric grid is a self- and control system for the branch- • reducing operating expenses on operations management; regulating energy supply system, which specific PDZs (13 PDZs are currently • reducing the amount of the lost load provides energy consumption analysis at different phases of design, engineering, and ensures energy accumulation in case and installation works); of excess generation and its output into • creation of a smart digital system the grid in case of energy shortfall. It for automation and management of 110-35 Development of the automated consumption metering system 7 is capable of automatic readjustment kV power supply centers and the adjacent 1. Benefits: Pursuant to the Medium-Tern Implementation in emergency situations, maintaining sections of the 6-10 kV grid (38 projects at 8 • time-sensitive localization of areas of electric power losses Plan for 2019-2021 under the Company’s an uninterrupted power supply to consumers branches). and effective measures to reduce commercial electric power losses; Innovative Development Program as approved in optimal modes and reporting all by the Board of Directors on October 3, 2019, • enhancing the observability of the 0.4-10 kV network condition; the events in the grid to the adjacent systems. • reducing operating costs of developing the scope of services provided Minutes No. 376. Complementary actors in such a grid include and improving their consistency generation sources, main and residential

60 61 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

Projects of both groups are integrated TRANSITION TO AN INTEGRATED Process design solutions used with the Company’s branch-specific EFFICIENCY OF BUSINESS in these projects are the results of research Patents plans to created integrated SCADA, DMS, PROCESSES AND AUTOMATION and development performed at IDGC of Centre OMS, and GIS-based control, monitoring, OF CONTROL SYSTEMS and IDGC of Center and Volga Region. IDGC of Center and Volga Region has 8 patents and analysis systems; the projects involve: Their adoption allows for an improvement for invention, 18 patents for utility models, 6 • using smart switches and short- IDGC of Center and Volga Region implements of the reliability and security of power supply certificates of state registration of software circuit/ground-fault indicators, which, a complex innovation project to develop its facilities of distribution grids. and 1 certificate of state registration if placed optimally at the critical points assets management system (PAMS). The goal of a database. The Company signed 11 licensed of a 6-10 kV distribution grid, will improve of the project is to optimize the distribution and equivalent contracts. At year-end 2019, the SAIDI and reduce the labor costs of costs for the implementation of the repair IDGC of Center and Volga Region received and the consumption of fuels and lubricants program, minimizing the risks of electric Research a total of 1.79 RUB mn of licensed contract associated with scheduled switching equipment failures, which directly affects fees. and emergency handling; the SAIFI indicator. and Development, Pilot At year-end 2019, • creating state-of-the-art digital Designs In 2019, IDGC of Center and Volga Region IDGC of Center communication channels to integrate As part of this project, in 2019, the Company obtained three Titles of Protection regarding and Volga Region the controls of automated 6-10 kV carried out the following work: IDGC of Center and Volga Region’s R&D its R&D: received a total distribution grid sections in the OMS/DMS; program follows the four key areas of 1.79 RUB mn • creating an automated energy saving • implementation of integrated control, of the Company’s Innovative Development • certificate of state registration of software of licensed contract system to be integrated in the OMS/DMS; monitoring, and analysis systems based Program for 2016-2020 and up to 2025. No. 2019616279 dd. May 22, 2019 Software fees. • switching to multi-agent control systems on SCADA, DMS, OMS, and GIS to complete The following R&D projects were carried out for an IEC 61850 Compliant Centralized and a single management information the Single Control Center projects in 2019: Protection System; system capable of digital communication; for branches, 7 of which are currently • utility model patent No. 194011 dd. • expanding the use of smart meters under design and surveying; • Design of Equipment to Deploy PLC-Based November 25, 2019 Digital Protection to enable their integration in the single • arranging DMR-based wireless digital Communication Networks in 6 (10) kV Device for a Power Substation; control system for remote control communication systems for branches. and 35 kV Grids; • certificate of state registration of software telemetry; Kalugaenergo has drafted the estimates, • Research Into the Physics of the Functioning No. 2019664062 dd. October 30, 2019 Smart • expanding the use of energy storage. Tulenergo has installed 9 base stations, 2 of, and Prototyping, an Automated Electrical Equipment Defect Identification radio masts, and 6 workstations, in addition Commercial 6 (10) kV Electricity Meter System Based on Neural Network- to purchasing 197 portable (hand-carried With a Magnetic-Transistor Converter; Enhanced Thermal Imaging and Tests or vehicle-mounted) radio communication • Design and Implementation of a Digital of Transformer Oil. stations; Substation Based on a Distributed Two- • adopting a technology to create Level Protection System per IEC 61850; an Operations Management System (OMS) • Smart Electrical Equipment Defect for grids. Identification System Based on Neural Network-Enhanced Thermal Imaging and Tests of Transformer Oil; • Exploring the Growth Rate of Core Forest APPLICATION OF NEW TECHNOLOGY AND MATERIALS Species as Affected by Climatic Areas and Soil Conditions Where Existing OPLs The Company’s most important projects of 2019 in this area are: Run, to Schedule Region-Specifically the Clearing of Forest Corridors for OPLs Costs, and Make Guidelines on Such Clearing; Branch Project name Utility model patents RUB mn • Research of Induced Voltage USE OF NOVEL TECHNOLOGIES AND MATERIALS FOR OPL RECONSTRUCTION AND GRID CONNECTION in Disconnected Power Transmission Lines in Loading Modes, and Analysis of Short Vladimirenergo 10/0.4 kV pole-mounted transformer No. 133982, No. 146463 0.34 Circuits in Functioning Lines to Design substation (PMTS) with a 25 kVA transformer, an Induced Voltage Compensator; 2 units • Designing a Device to Aline Load in Three- Ryazanenergo 100 kVA PMTS, 1 unit; 63 kVA PMTS, 5 units No. 133982, No. 146463 1.71 Phase 0.4 kV Distribution Grids: a Pilot SVm-110-5 poles, 117 pcs. Project; SVm-110-5 poles, 117 pcs. No. 140055 • Software and Hardware Complex for Staff USE OF NOVEL TECHNOLOGIES AND MATERIALS TO RECONSTRUCT 110 KV OPLS Health Management at Tulenergo. Nizhnovenergo ASKu wires with a cross-sectional area No. 119514 24.69 of 185/24 mm2 (35.95 km), 150/24 mm2 (55.60 km) USE OF NOVEL TECHNOLOGIES AND MATERIALS FOR GRID CONNECTION Ivenergo PMTS, 2 units, PMTS, 1 unit No. 133982, No. 146463 0.48 Kirovenergo SVm-95 and SVm-110 poles, 110 pcs. No. 140055 1.40 Tulenergo SVm-95 poles, 320 pcs. No. 140055 4.12 PMTS, 5 units No. 133982, No. 146463 Udmurtenergo PMTS, 5 units No. 133982, No. 146463 1.83 SVm-95 poles, 77 pcs. No. 140055 62 Total 34.57 63 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

2 such proposals were adopted, 6 were What Was Done in 2019 Cost advantage, RUB mn Innovative Proposals under pilot testing, 4 were being peer- Implementation and development of services, including: 675.1 In 2019, employees reviewed, and 3 rejected. • reduced electricity loss; of IDGC of Center Efficiency of the Company’s production The innovation proposals of 2019 addressed • greater revenue from grid connection services thanks to using standardized solutions to connect and Volga Region’s activity is improved not only through the following: applicants’ grid facilities to grids branches filed 15 the introduction of new technology • relay protection and emergency control HR management and organizational design, including manpower optimization 998.3 innovation proposals. and equipment with the more advanced automatics; Use of corporate and computer-aided process management systems 2.0 characteristics of energy consumption, • information technology, communication reliability and durability, but also through systems; Optimization of rent and sale of non-core assets due to switching to a two-level management system 47.3 the consideration of innovative proposals • distribution grid operation; of the employees. • monitoring and diagnosis; Investment, including savings due to consolidated purchases 230.0 In 2019, employees of IDGC of Center • operation of substation equipment; and Volga Region’s branches filed 15 innovation • quality and metering control of electricity; proposals. By the end of the reporting year, • management system enhancement.

Proposal authors were paid 0.01 RUB mn in 2019.

EVENTS SCHEDULED FOR 2020 INTEGRATION OF IDGC OF CENTRE AND IDGC OF CENTER AND VOLGA REGION The results achieved prove effectiveness of the decision to jointly manage the two companies. The Company plans even more for 2020 to unify and optimize all the activities of IDGC of Centre and IDGC of Center and Volga Region. Among other things, we plan to carry out technological In the long run, it is expected that the joint and innovation-driven development projects, to implement the Digital Transformation of the Grid management of two power grid companies Complex Program, which will take the Company’s operating performance to a whole new Key activities of IDGC will simplify and catalyze the solution level while also optimizing its management structure, improving the reliability and availability of Center and Volga Region’s of tasks in various areas of their activities. of infrastructure. First of all, the plan is to reduce the time cooperation with IDGC of Centre of emergency recovery works, to improve generated a cost advantage of the intelligence exchange in emergency situations and to consolidate the centralized emergency stock and backup power sources. 1,952.7 Joining forces will allow IDGC of Centre and IDGC of Center and Volga Region to reduce CONSOLIDATION OF POWER GRID RUB mn in 2019 the operating costs and improve the quality GRI 413-1 of the power grid complex, increase financial ASSETS stability and investment appeal of both Since September 11, 2017 IDGC of Centre has been companies. the sole executive body (SEB) of IDGC of Center and Volga Consolidation will help: Region . This agreement was signed upon the resolutions • create a single center of responsibility of the Boards of Directors of both Companies to boost A key focus area for the “Rosseti Group”, including EVENTS HELD IN 2019 AND THEIR for high-quality, reliable, and affordable their operational and financial performance. IDGC of Center and Volga Region, lies in consolidating RESULTS electricity; the grid assets of Russia. Consolidation of grid assets • increase the “Rosseti” subsidiaries’ share The primary targets of the Project aimed at consolidating is an umbrella term that refers to the “Rosseti” Group’s Key activities of IDGC of Center and Volga in the common-pot revenue generated the operations and contingency management of the grid effort to gain control over grid assets (facilities or clusters Region’s cooperation with IDGC of Centre from electricity delivery to customers complex of IDGC of Centre and IDGC of Center and Volga of facilities, or shares in companies that use grid Region include: generated a cost advantage of 1,952.7 RUB mn in regions; facilities to provide electricity transmission services) that in 2019, a 28.9 % or 437.6 RUB mn increase • improve the performance indicators of each are not yet under its control. • arranging a unified excellence and control centre; YoY. region of the Russian Federation; • increasing manageability of operational processes; • build an optimal grid infrastructure • simplifying the procedures of cash flow planning and adopt digital grid elements. and coordination; • reducing operating expenses and capital outlays; The “Rosseti” Group’s development strategy • association and unification of business processes; for until 20301 implies transforming the Rosseti • adoption of optimal solutions and best management Group into a single operator of Russia’s grid practices. complex.

1. Resolution of the General Shareholders’ Meeting No. 11 dated June 5, 2017.

1. Approved by Rosseti’s Board of Directors, Minutes No. 388 of December 26, 2019. 64 65 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

This work began in 2019 in all the regions In 2019, IDGC Center and Volga Region At the same time, consolidation of grids The money surplus, gained by the budget of the Udmurt Republic where the Company operates, as was successfully made a number of contracts under IDGC of Center and Volga Region by consolidating the assets of Izhevsk Power Grids and Votkinsk supposed to be done pursuant to the approved to consolidate grid assets. The Company’s will also improve the quality and reliability Municipal Power Grids under IDGC of Center and Volga Region List of Grid Assets Consolidation Projects, largest consolidation projects concerned grid of electricity delivery to customers, especially is planned to spend on socially significant projects in the region. the investment program, and the operational facilities operated by Izhevsk Power Grids those of grid operators that have failed to meet In particular, the Big Overhaul Program started in 2019 in Izhevsk business plan of the Company. and Votkinsk Municipal Power Grids, both set criteria and are thus no longer subject and Votkinsk; the Program provided overhauls for 251 schools, 253 acquired and made part of Udmurtenergo. to tariff regulation. kindergartens, 217 healthcare facilities, 54 houses of culture, 6 social CONSOLIDATION OF POWER GRID Consolidated assets totaled 29,538 conventional facilities, 7 sports venues, 5 libraries, and 3 vet clinics. ASSETS IN 2017-2019 units. In 2019, Rosseti also acquired 70 % In case of grid assets that used to be municipal of shares in Tula Municipal Power Grids. property, consolidating them will help IDGC of Center and Volga Region contribute For 2020, IDGC Center and Volga Region plans substantially to regional and municipal to consolidate municipal grid assets in Nizhny budgets. Novgorod, Ivanovo, and Vladimir Regions. Substation Сapacity, MVA Consolidation of grid assets implies close 3.8 6.3 15.5 1.8 3.8 692.0 cooperation with concerned parties in three 465.2 461.1 534.3 major categories: 12.8 10.8 1,124.7 • major regional local grid operators, EU10 2, 366.5 cooperation with whom must seek to create INVESTMENT PROGRAM mutually acceptable terms and conditions of asset consolidation; • organizations no longer subject to tariff IDGC of Center and Volga Region follows regulation due to noncompliance with set the principles of publicity and openness; The investment program of IDGC of Center and Volga 483.5 482.0 criteria; as such, it timely informs all the stakeholders • regional government agencies, cooperation on completed investment projects, Region evolves in the context of regional development with whom must seek to put an end and cooperates with them on any decision- plans, technical condition of the electrical grids, to the uncontrolled operation of unowned making regarding starting any new projects. and available sources of funding. Besides, the program focuses on the development of mainline and distribution 2017 2018 2019 grid assets. When drafting its investment program, grids, and generating capacities, in addition to assessing the Company undertakes to: the cost effectiveness and feasibility of any measures. Purchase Such contracts and deals first help • analyze the grid facilities and assess Rent the Company boost its share in the regional the need to develop the grid infrastructure RR, improve its operational efficiency, cut to cover long-term and medium-term Permanent ownership and rights of use the asset maintenance costs, and optimize demand for electricity and capacity; Temporary ownership and rights of use the investment in the development of regional • list the targeted measures to be grid infrastructure, all thanks to coordinating included in the investment program so each and every effort under a single as to eliminate the bottlenecks in branch- Technology Policy. specific energy systems; • assess the relevance of the branch- Length of Power Lines, km employed roadmaps for prospective development of power grids; industries, which are drafted every • cooperate with federal executive bodies year for a five-year period as required 60.6 36.9 118.5 and local self-government agencies to draft by the Decree of the Russian Government 66.5 20.4 2,806.0 and adjust the prospective development No. 823 dated October 17, 2009; 1,658.5 1,610.0 2,553.6 133.2 86.2 3,526.9 roadmaps; • Regulations under the Decree of the Russian • cooperate with generating companies, FGC Government No. 977 dated December 1, 9,050.0 UES PJSC, and adjacent grid operators 2009 On Investment Programs of Electric to provide grid connection; Power Industry Actors; • coordinate new construction • integrated 35+ kV grid development and reconstruction of grid facilities, programs in Russian regions as drafted cooperate with FGC UES and SO UES JSC, for a five-year period as set forth 1,918.8 1,753.5 as well as with other electricity market in the Rosseti Order No. 4 dd. January 10, actors and regional executive bodies; 2019 On Improving the Planning of Grid • draft and harmonize external electricity Development. delivery circuitry for newly constructed 2017 2018 2019 and reconstructed facilities; • study the feasibility and cost-effectiveness Purchase of proposed measures and solutions. Rent Permanent ownership and rights of use Since 2010, the Company’s investment Temporary ownership and rights of use program development, arrangement, and completion reporting have been guided by: • prospective development schemes and programs for regional electric power

66 67 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

CAPITAL INVESTMENT FINANCING STRUCTURE, RUB MN, VAT INCLUDED Cost and Physical Parameters of the Company’s Investment Activities in 2017-2024

By Sources of Funding in 2019 By Lines of Investment 11,132.6 12,230.2 19,419.8 17,930.5 18,931.5 18,770.5 20,378.9 20,532.1 19,053.0 9,481.2 11,160.1 16,825.6 15,506.0 15,836.1 15,688.2 17,150.1 17,184.8 15,956.7 10,946.9 61% 9,378.9 10,183.6 15,476.0 14,282.4 16,660.2 16,253.8 17,754.6 16,736.0 16,987.2 2,890.2 16% 898.3 1,534.0 1,025.5 5,057.2 4,850.5 1,262.5 5% 54.9 118.7 55.5 47.0 107.5 3,195.1 219.3 713.1 342.5 336.6 44.4 18% 4,994.5 6,143.9 7,827.9 7,364.4 11,530.4 4,330 4,229.0 6,136.6 5,332.0 5,986.6

19,419.8 18,931.5 17,930.5

12,230.2 11,132.6 2017 2018 2019 (planned) 2019 (actual) 2020 (planned) 2021 (planned) 2022 (planned) 2023 (planned) 2024 (planned)

Funding, RUB mn Spent, RUB mn Fixed assets inclusive of VAT inclusive of VAT commissioned, RUB mn

2017 2018 2019 (planned) 2019 (actual) 2020 (planned) 6,816.7 6,769.2

Other investment projects Internal funds Sundry new construction of grid facilities 4,594.7 Funds raised Investment projects under the Electric Power Industry Development 4,430.1 Roadmaps Grid Connection Fess 3,625.8 3,716.3 3,809.9 Reconstruction, upgrade, and retrofiting 3,511.8 Other 3,052.4 Grid Connection

2017 2018 2019 2019 2020 2021 2022 2023 2024 The Investment Program of IDGC of Center (planned) (actual) (planned) (planned) (planned) (planned) (planned) and Volga Region for 2019 was approved Power lines commissioning, km by Order of the Ministry of Energy No. 34@ dd. December 26, 2019. Capital investment in 2019 totaled 15,506.0 RUB mn, financing totaled 17,930.5 RUB mn. In 2019, the Company 1,619.1 1,620.2 commissioned 6,769.2 km of grids and 1,620.2 MVA of transformer capacity, equivalent to a total of 14,282.4 RUB mn in fixed assets.

663.6 639.7 469.2 324.5 329.0 279.2 234.4

2017 2018 2019 2019 2020 2021 2022 2023 2024 (planned) (факт) (planned) (planned) (planned) (planned) (planned)

Transformer capacity commissioned, MVA

68 69 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

Investment Projects Carried Out in 2019 Cost parameters for 2019, RUB mn Branch and name Capital Fixed assets Cost parameters for 2019, RUB mn of the project Scale Benefits Financing investment commissioned Branch and name Capital Fixed assets Udmurtenergo branch: 12.6 MVA • More reliable electricity 74.8 63.0 63.7 of the project Scale Benefits Financing investment commissioned Retrofitting the Airport 35/6 of transformer delivery to Izhavia OJSC NEW CONSTRUCTION kV SS with two 4.0 MVA power capacity and to the customers transformers replaced with 2 in the village of Zavyalovo Kirovenergo: Construction 40, 48 MVA • More reliable electricity 288.3 228.0 386.4 6.3 MVA transformers, six and in the Zavyalovsky of 110/35/10 kV Urvantsevo of transformer delivery in Kirov 35 kV oil circuit breakers Municipality, Udmurt substation with incoming lines capacity and adjacent suburbs replaced with 35 kV reclosers Republic of 110 kV overhead lines (1 • Inaugurating a new power priority) (installation of a T1 distribution center in Kirov’s Vladimirenergo 40 MVA • More reliable 52.7 43.8 44.7 40 MVA transformer, 110 kV West End branch: Reconstruction of transformer electricity delivery outdoor switchgear, 10 kV • Load backups of the Kolchugino 110 kV capacity to customers in Kolchugino indoor switchgear) for post-emergency with a 40 MVA T-2 power and in the Kolchuginsky and under-repair operation transformer installed Municipality, Vladimir in the 10 kV grid (backup Region power provided by the 110 kV Kommunalnaya SS, 110 kV Krasnogorskaya SS, 35 kV South-Western SS, and 110 kV Bytpribor SS) Tulenergo: Construction 12.6 MVA • Electricity delivery 154.0 128.4 128.4 of a 35/10 kV SS with two 6.3 of transformer to the machinery MVA transformers capacity of Miratorg-Orel, LLC (a vegetable storage and processing company) Investment Projects Scheduled for Implementation in 2020 Tulenergo: Construction 6.623 km • connecting the equipment 63.8 53.3 53.3 of a single-chain 35kV OPL of Miratorg-Oryol LLC on reinforced-concrete to the grid Cost parameters for 2019, RUB poles from the Botvinyevo- mn Gorbachyovo 35 kV OPL (long) and a single-chain 35 kV OPL Branch and name Capital on reinforced-concrete poles of the project Scale Benefits Financing investment from the Popovka-Gorbachevo NEW CONSTRUCTION 35 kV OPL Kalugaenergo 12.6 MVA • Grid connection of power equipment 12.4 10.3 RECONSTRUCTION branch: Construction of transformer utilized by ProZemResurs LLC Nizhnovenergo: 40 MVA • More reliable electricity 70.8 59.6 160.2 of the Mikhali 110/10 capacity with a stated capacity of 4,980 kWh; Reconstruction. SS-110kV of transformer delivery to customers kV SS an individual connection layout linked Sotsgorod. Operating capacity in the Gorodetsky District, the equipment to the EcoTechnoPark department Central power Nizhny Novgorod Kaluga (a sorting facility) grids. Replacement of Т-1 Kalugaenergo: 35 km of power • Grid connection of power equipment 26.7 22.3 TRDN-31500/110/6 (power Construction lines utilized by ProZemResurs LLC transformer) with TRDN- of branched lines with a stated capacity of 4,980 kWh; 40000/110/6 (40 MVA) from the Yukhnov- an individual connection layout linked Ryazanenergo: 25.4 km of power • More reliable electricity 40.0 34.2 62.9 Kondrovo Severnaya 110 the equipment to the EcoTechnoPark Reconstruction of the Yelino- lines delivery to customers kV OPL to the Medyn 110 Kaluga (a sorting facility) Podvyazye 25 km 110 kV OPL • Industrial and agricultural kV SS and Ostrozhnoye (46 poles and 25 km of wires development of Ryazansky 110 kV SS, replaced; wires reinsulated and Zakharovsky and from the Kondrovo- throughout the OPL) Municipalities, Ryazan Cherkasovo 110 kV OPL Region to the Medyn 110 kV SS Ryazanenergo: 25 MVA • More reliable electricity 50.7 59.1 63.1 Reconstruction of the 110 of transformer delivery to customers kV Oka SS with T-1, T-2 2*16 capacity in the town of Rybnoye replaced with 2*25 and two and in the Rybnovsky OSG 10 kW cells installed Municipality, Ryazan Region Udmurtenergo branch: 63 MVA • More reliable electricity 14.4 10.9 70.9 Reconstruction of transformer delivery to customers of the Mashzavod 110/6 kV capacity and industrial facilities SS. T-2 power transformer in Izhevsk, Udmurt Republic replaced

70 71 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

for the electric power industry to operate Improving the reliability and quality G4-DMA (earlier EU6) Long-Term Investment MORE RELIABLE G4-DMA (earlier EU21) and connect new customers smoothly of electricity delivery to consumers is one Program and efficiently; AND HIGHER-QUALITY of the strategic growth priorities of IDGC • increase the anti-sabotage and anti- ELECTRICITY of Center and Volga Region. Besides, reliability The Company’s investment plans for until 2024 terrorism security of energy facilities; indicators are also the key criteria are made under the Long-Term Investment • develop the systems of communication, DELIVERY for evaluating the performance Program of IDGC of Center and Volga telemechanics and data transmission of the Company’s units and its management. Region for 2016-2024 as approved by Order to increase the manageability of grids of the Russian Ministry of Energy No. 34@ dd. and reduce the emergency response time. To reduce the accident rates, In 2019, the Company managed to significantly December 2, 2019. This Program is drawn the Company took the following reduce the accident rates by researching into up with due regard to the development Overall, the Company plans to allocate measures under its 2019 repair the causes of earlier accidents and taking plans of the regions, the technical condition a total of 97,666.0 RUB mn inclusive of VAT necessary repairs in time. of power grids, the significance of power to the Long-Term Investment Program program: supply facilities and guidance for revenues over 2020-2024. The capital investment during from power transmission and proceeds this period should total 81,815.9 RUB mn •6-110 kV OPL routes expanded by under grid connection contracts. The Program inclusive of VAT. Fixed assets commissioned is also brought in line with the goals in 2020-2024 are expected to total 84,391.8 Accident Rates and objectives of the Unified technical policy RUB mn exclusive of VAT. 302 ha of the distribution power grid; and is guided 10.80 by the current legislation. When completed, the Program will result in the construction and reconstruction •of non-insulated wiring replaced 8.99 916 8.20 The implementation of the Long-term of 19,603.5 km of power transmission lines with steel insulated wires 832 Investment Program will help: as well as in the commissioning of 1,996.8 MVA (SIP-3) along 6-10 kV OPLs 745 • maintain the operational availability in transformer capacity. of the equipment necessary for a reliable, uninterrupted and high-quality power 1,453 km supply to consumers; 2017 2018 2019 • take measures to reduce production costs, Accidents in the 110 kV grid, no. including by improving the equipment •insulators at 6-110 kV OPLs replaced Specific accident rates, accidents per performance, developing the systems 1,000 units of equipment for metering of consumed energy resources; 135,921 1,744 • upgrade the fixed assets; 1,294 • ensure safety of equipment and personnel; 1,134 • ensure sufficient grid capacity •of ground wire replaced 3,467 at 35-110 kV OPLs Investment Projects Scheduled for Implementation in 2023-2025 2,166 1,618 101 km EU28 EU29 Branch and name of the project Benefits IN 2023: 2017 2018 2019 SAIDI (System Average Interruption Duration Index), h Tulenergo: • More reliable electricity delivery •of wires replaced at 6-110 kV OPLs SAIFI (System Average Interruption Frequency Index), units Reconstructing the Zvezda-Begichevo 110 kV OPL with branching lines, to the Bogoroditsky Municipality, Tula Region. and the Volovo-Begichevo 110 kV OPL with double-circuit branching to a total line length of 29.44 km 880 km IN 2024:

Tulenergo: • Upgraded electricity delivery reliability 2.8 Reconstruction of the Shcheglovskaya 110/35/6 kV SS to replace 110 kV equipment; •poles replaced at 6-110 kV OPLs outdoor switchgears and mount rigid busbars, replace 110 kV oil circuit • opportunities to connect more customers in Tula 2.2 breakers (OCB) with 110 kV SF6 circuit breakers (SF6CB), and install 110 kV 24 1.8 disconnectors with motor-driven knives 8,925 16 Tulenergo: • Enabled transit of electricity from Tula Region 13 Construction of the 59-km Glebovo-Ushatovo 110 kV OPL within the scope to Kaluga Region of measures to improve the reliability of electricity delivery to customers • Measures for more reliable electricity delivery in the Suvorovsky Municipality to the customers in the Suvorovsky Municipality, Tula Region 2017 2018 2019 Number of sustainable 35-110 kV transformer outages, pcs IN 2025: Average power outage duration (for 6-110 kV feeders), h Tulenergo: • More reliable electricity delivery to the Leninsky Reconstruction of the Leninskaya-Myasnovo, Myasnovo-Ratovo, Municipality, Tula Region and Leninskaya-Ratovo double-circuit 110 kV OPL with a Tula-Myasnovo line branching to the Yuzhnaya 110/10/6 SS, replacing the poles, the wires, and the insulators to improve the capacity of the 26.85-km Myasnovo-Ratovo section

72 73 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

The Main Causes of Accidents 17 9 14 GRI 102-15 in 2019, % 8 29 RISKS 18 5

RISKS MAP

Risk occurrence probability Windfallen trees or branches Equipment obsolescence Repetitive adverse weather conditions Exposure to animals or birds HIGHLY LIKELY Thunderstorm 60-90 % 18 Acts of third parties 4 Other

8 7 10 LIKELY 2 30-60 % 11 14 Actual and Planned 8,166 8,125 8,074 38.5 37.4 37.7 Completion 3 of Specific 17 Repair Types 9 15 13 1 in 2018-2020 UNLIKELY 5 up to 30% 16 12 2018 2019 2020 (planned) 2018 2019 2020 (planned) Risk importance Transformer substations repaired, units 0.4-220 kV power lines repaired, thous. km 6 (potential losses)

MINIMUM SUBSTANTIAL VERY HIGH up to 100 RUB mn 100-200 RUB mn > 200 RUB mn 48 5,692 45 5,238 39 4,704 Assessment of trends in risks and opportunities

2018 2019 2020 (planned) 2018 2019 2020 (planned) CLASSIFICATION AND DESCRIPTION OF RISKS 35-110 kV power transformers repaired, units 6-110 kV switching equipment reapired, units AND THE COMPANY’S CONTINUOUS RISK MINIMIZATION EFFORT Actual Repair By Type of Assets By Nature of Work Activity Costs in 2017- Management 2019, Projected 63.8 118.7 98.9 334.8 1,311.2 1,429.6 1,311.7 1,306.8 INDUSTRIAL RISKS: Costs for 2020, 186.7 216.8 208.1 204.7 2,528.9 2,328.5 2,313.6 2,535.3 243.0 233.5 242.3 224.9 RUB mn 389.2 334.3 319.4 240.8 Risk Name Risk owners Measures aimed at minimization of risk consequences 1,714.1 1,769.0 1,738.0 1,602.3 622.9 453.8 274.6 490.0 1. Tariff associated risks 620.5 631.9 406.0 744.0 Government-implemented policy Deputy Director General Drafting and submission of proposals for the economic 3,840.1 3,758.1 3,842.1 3,840.1 3,758.1 3,625.2 3,842.1 of tariff regulation considers for Economics and Finance, justification of the Company’s expenses to the regulatory 3,625.2 the need for inflation control IDGC of Center (the authorities of the constituent entities of the Russian and makes provisions for adjustment Management Company Federation. of regulated tariffs for grid operators of IDGC of Center and Volga Continuous implementation of the program to save in 2017-2019 making them lower Region) the Company’s costs. than the actual inflation index while Fulfillment of commitments under investment programs prices on the wholesale market and energy efficiency programs. increase higher than anticipated. It Ensuring the achievement of the target reliability 2017 2018 2019 2020 (planned) 2017 2018 2019 2020 (planned) preconditions a risk that the regulatory and quality of the services rendered. authorities impose tariff options, which OHL 35-220 kW Buildings and SS 35-220 kW structures In-house could not guarantee collectability of economically sound proceeds. ETL 0.4-10 kW Motor vehicles Outsourced TS 6-10/0.4 kWh Other

74 75 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

Risk Name Risk owners Measures aimed at minimization of risk consequences

2. A risk of decline of power transmission services COUNTRY-WIDE AND REGIONAL RISKS: A risk is conditioned by a possible Deputy Director General Monthly monitoring of power consumption of the largest slowdown of electric power sales for Service Sales consumers in the regions. and an optimization of external power and Improvement, IDGC Conducting cycle inspections of electric power metering Risk description Risk owners Measures aimed at minimization of risk consequences supply schemes by heavy consumers. of Centre (the Management systems, check taking of readings. 5. Risks associated with political and economic environment in the country and region Company of IDGC of Center Preparation of electric power balances for substations and Volga Region) based on the technical electric power metering, The risks are conditioned This The Company has a program of measures in place identification of grid segments with excess normative by a decline in the economic is jointly managed to minimize the consequences of such risks, including: losses, performing surprise inspections to identify off- activity of the constituent entities by specialized • reduction of costs of operating activities; the-meter and non-contractual consumption. of the Russian Federation in the regions responsible units • optimization of contractor relationships; Conclusion of power transmission contracts of the Company’s operations, increase • optimization of contractual relations with consumers; with the prerequisite submission of planned electric of loan fund costs, which, in its turn, • management of accounts receivable; power consumption values as accounted in the business may result from unstable external • ensuring optimal tariff and balance decisions plan of the Company. conditions, international sanctions, in the regions of the Company’s operation. 3.Risks associated with rendering the grid connection services to applicants credit rating downgrade and escalation To ensure stability of settlements, monetary transactions of inflationary exposure. This may of IDGC Center and Volga Region are handled in high Risks arising from: Deputy Director General Clarification of obligations under the grid connection reduce the Company’s revenue and its reliability banks partially owned by the government; • probable shortage for Service Sales contracts and explanation of the Applicants’ risks shareholder value. to prevent the debt burden from rising, there are restrictions of funding for activities carried out and Improvement, IDGC in the event of failure to fulfill the obligations on the volume and interest rate of raised borrowed funds. under the grid connection contracts; of Centre (the Management under these contracts (punitive measures, extension To optimize the investment activities, the investment • customers’ noncompliance Company of IDGC of Center of time of grid connection). programs are developed with regard to the order of priority with the terms and conditions of grid and Volga Region) Complaint management in terms of reimbursement of implementation of investment projects, with the exception connection contracts; of expenses for grid connection by the Applicant. of projects that do not have funding. • underutilization of capacity accessed Monitoring the requests and analyzing the grid via grid connection. connection prospects (including the geography 6. Risks associated with possible conflicts and their aspects, imposition of the state of emergency and protests in the regions These factors may cause a decline of expansion) to predict the number of requests Risks are conditioned by probable acts This Enhancing engineering and physical protection of facilities by: in the Company’s revenues from grid and the expected scope of the grid operator’s delivery of unlawful interference into Company’s is jointly managed • carrying out anti-terrorist exercises and drills; connection. over the coming year. operation, including acts of terrorism by specialized • arranging internal access and site access control along Control of compliance with the specifications as well as those committed by global responsible units with physical security measures in place; and the terms of drafting the grid connection contracts. terrorist groups and nationalists • ensuring security equipment serviceability. Control over fulfillment of obligations under grid from certain countries. These acts could Carrying out preventive measures in cooperation connection contracts. have a negative effect on the Company’s with the Company’s personnel. Building of consumer trust in the company by offering operation. Improving cooperation with law enforcement and supervisory an easy and clear explanation about the process of grid authorities, intelligence agencies, regional and municipal connection (posting information on the Company’s regulatory and administrative authorities, including that official website, developing a method of informing under the existing Agreements with territorial authorities the applicants, monitoring the quality of work of the Federal Security Service, Ministry of Internal Affairs, of customer service centers). and EMERCOM of the Russian Federation. 4. Risks associated with non-payment for the provided power transmission services (incurring of disputable and indisputable Monitoring of the criminal and socio-economic situation overdue accounts receivable) by service consumers in the area of the Company’s responsibility A risk is conditioned by the lack Deputy Director General Provision of customers with bills for power transmission 7. Risks associated with geographic features of the country and region, including higher risk of natural calamities, and possible of available procedures that motivate for Service Sales services with information about punitive measures interruption of transport connection the consumers to pay for power and Improvement, IDGC for breach of payment obligations and deadlines The risks are conditioned by natural This The regions where the Company operates have a well- transmission services in due time, of Centre (the Management as stipulated by the effective legislation. and climatic emergencies (exposure is jointly managed developed transport infrastructure and are not subject as well as by macroeconomic Company of IDGC of Center Initiating an examination of non-payment issues to hurricanes, heavy downpours, floods, by specialized to risks associated with disruption of transportation due factors (decline of financial solvency and Volga Region) at the meetings of the regional collegiate bodies snowdrifts, ice formation, power supply responsible units to remoteness and/or inaccessibility. of consumers). chaired by the executive bodies of the constituent entity interruption due to fires, explosions The Company implements a set of measures to prepare of the Russian Federation. in residences and so on). As a result, the electric grid complex for the autumn and winter Execution of measures aimed at reduction of overdue electric power supply and transport period with each branch of the Company being validated debts for the rendered power transmission services connection in the region could be for preparedness for the autumn and winter period. and resolution of disputes as specified by the Standard interrupted. The branches of IDGC of Center and Volga Region have of Claim-Related Work of IDGC of Center and Volga a long-term experience of successful and prompt elimination Region. of natural disaster consequences affecting the power grid Ensuring 100 % coverage of the total amount of overdue equipment and infrastructure. receivables by taking measures for debt recovery.

76 77 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

FINANCIAL RISKS: REPUTATION RISK

Risk description Risk owners Measures aimed at minimization of risk consequences Risk description Risk owners Measures aimed at minimization of risk consequences 8. Exchange rate risks 12. Reputation risk Adverse effect of changing foreign Deputy Director This risk does not have significant influence on the financial This risk pertains to the Company’s Deputy Director The Company constantly updates the public about its activities exchange rates on the results General for Economics position of the Company since it settles with contractors losses resulting from losing General and the activities of its branches and has well-established of the Company’s financial and Finance, IDGC in rubles and has neither obligations in foreign currency customers (counterparties) for Organizational relations with the media. and business operations. of Centre (the nor obligations bound to foreign currency. to a negative image of: its financial Affairs, IDGC On its official website, the Company timely and fully published its Management Company stability, financial standing of Centre (the data and reports subject to mandatory disclosure. of IDGC of Center of the issuer, the quality of its Management The Company has established cooperation and business and Volga Region) products (works and services), Company of IDGC communications with the press representatives of the regional and the nature of its activities of Center and Volga and municipal authorities, departments of the EMERCOM, social 9. Risks associated with changes in interest rates in general. Region) organizations, and the leading editorial offices in the regions. Influence on potential escalation Deputy Director Involving the largest Russian banks capable of accommodating of Company’s expenses associated General for Economics with a sufficient amount of credit resources at relatively low with raising credit funds and Finance, IDGC rates in participation in auctions for fund raising. Should for financing the investment of Centre (the the situation in the financial markets degrade, working programs. Management Company with these banks allows the issuer: of IDGC of Center • • to smooth the surges of interest rates on borrowed and Volga Region) funds received; • • to reduce the likelihood of early repayments of loans, STRATEGY RISK: which may be the result of interest rate development. The terms of the existing line of credit agreements of the emitter provide for a proportional increase in the interest Risk description Risk owners Measures aimed at minimization of risk consequences rate on loans only due to an increase in the key rate of Bank 13. Strategy risk of Russia. A risk of the Company’s This To minimize this risk, the Company takes the following 10. Inflation risks failure to achieve strategic is jointly managed measures: Impact of the consumer price Deputy Director A factoring scheme of settlements with the Company’s debtors goals and objectives due by specialized • delimitation of powers of management bodies in terms index growth on interest costs, General for Economics has been adopted. to potential changes in internal responsible units of decision-making; cost level and profitability and Finance IDGC Interim measures where the Company provides bank and external business environment • control over implementation of these decisions; level and, as a consequence, of Centre (the guarantees as securing consensus are used in court of the Company. • development of business plans and control on the Company’s financial position Management Company proceedings. This allows for a seizure of the contractor’s over their implementation; and capability to fulfill obligations. of IDGC of Center accounts, which, in turn, stimulates a faster debt recovery. • monitoring of changes in the legislation of Russia and Volga Region) and the existing regulatory documents; • monitoring of resources (including financial, material and technical, and human resources) to achieve the strategic goals; • continuous provision of advanced training for staff.

RISKS ASSOCIATED WITH COMPANY’S ACTIVITIES: LEGAL RISKS: Risk description Risk owners Measures aimed at minimization of risk consequences Risk description Risk owners Measures aimed at minimization of risk consequences 14. Operational and technological risk 11. Legal risks Decrease of reliability of power First Deputy Grid renovation and completion of dedicated programs to improve Risks associated with changes Deputy Director Mitigation of legal consequences having a negative impact supply to consumers resulting Director General, reliability and technical condition of the grid. in the legislation, court practice General for Corporate on the Company’s activities. from such factors as natural Chief Engineer On-condition repair of the facilities based on the risks and disconnection covering the Company’s activities, and Legal Affairs Constant monitoring of changes in the legislation of the Russian or human-made emergencies, of IDGC of Centre data. ensuring that the Company’s and other IDGC of Centre Federation, including explanations and comments concerning its which cause operation interruption (the Management Identification of causes and preconditions of fires and combustion electric power industry actors’ (the Management application. of electrical grid equipment; a large Company of IDGC to develop appropriate organizational and technical measures to prevent interests are balanced. Company of IDGC Constant monitoring of changes in the application number of equipment with higher- of Center and Volga therm. of Center and Volga of the legislation of the Russian Federation in court practice. than-normal service life; non- Region) Taking measures to eliminate the causes of violations of fire safety Region) Preliminary due diligence of legal disputes. compliance with the regulatory requirements at the facilities. Legal review of transactions with contractors. and technical requirements Constant and periodic control over fire safety and operation of power as related to exceeding the specified plants, equipment, buildings and structures. permitted values of technological Staff management: training, professional development. parameters of electrical grid Community outreach, development of PR programs. equipment. Drafting and updating the regulations on technological interaction with adjacent electric power industry actors (APA).

78 79 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

Risk description Risk owners Measures aimed at minimization of risk consequences Risk description Risk owners Measures aimed at minimization of risk consequences 15. Investment risk 18. Anthropogenic risks Reduction of sources of funding Deputy Director Timely funding of the investment program facilities, compliance Epidemics that cause national This Due to its industrial specifics, the Company is less susceptible for the Company’s investment General with the time-frames of payment under the contracts signed or regional quarantines, limit is jointly managed to these risks than companies from most other industries. programs in the event of weakening for Investment with contractors. transport communications, by specialized The occurrence of such risks will restructure, not reduce the demand of its financial and economic and Capital Conducting claim-related works with contractors violating suspend production, etc. responsible units for the Company’s services: while industrial customers will use standing, and, as a result, Construction, contractual obligations. less electricity, households will use more. A full suspension a decrease in the proceeds IDGC of Centre Deadline management for procurement procedures and making of the Company’s activities is unlikely, as the Company is a vital (life- while the investment programs (the Management of contracts. sustaining) business that is barely affected by concentrating a lot are not executed. Company of IDGC Weekly monitoring of the construction process of persons in limited space. In case of prolonged risk, i.e. where Failure to comply with the scheduled of Center and Volga under the investment program. the quarantine lasts more than a quarter, technological connections dates of putting into operation Region) Control over the scope of commissioning facilities may show a significant downward trend. the facilities constructed under the annual investment program. under the investment programs due Control over the quality and timely execution of design and survey to contractors’ and suppliers’ failure works. to discharge their obligations or do Designer’s supervision. so in time.

RISKS THAT OCCURRED IN THE REPORTING PERIOD In 2019, two risks from the table above actually faced the Company. SUSTAINABILITY RISKS: AND THE COMPANY’S RESPONSE IDGC of Center and Volga Region took measures to minimize them in a timely TO THEM fashion, which helped mitigate Risk description Risk owners Measures aimed at minimization of risk consequences the damage and alleviate the impact 16. Climate risks GRI 201-2 of these risks on the Company’s Risks associated with global This The Company continuously takes measures to make its operations business. warming. On the one hand, is jointly managed more energy-efficient and to be ready to cover a greater demand global warming threatens by specialized for electricity and capacity regardless of season or weather. a gradual seasonal redistribution responsible units The Company is involved in implementing the Grid Complex of demand for electricity Environmental Policy, which seeks to consistently limit and capacity, as people will use the environmental burden associated with the fuel and energy electric heaters less during complex by reducing hazardous emissions and waste generation. fall and winter while using air The Company has adopted, efficiently uses, and undergoes regular conditioners more in spring recertification of, an ISO 14001:2015 environmental management Summary of what happened Summary of the Company’s response to the risks and summer. On the other systems. A risk of decline of power transmission services hand, these risks entail stricter customers’ and general public’s The “common-pot” net supply totaled 46,961 mn Making electricity transmission contracts for further periods that set forth that environmental requirements kWh in 2019, which was 442 mn or 0.9 % below planned electricity amounts be delivered in full. to the energy efficiency that set forth in the Business Plan.. Adjusting the business plan for 2020 in light of what has changed. and “cleanliness” of production facilities. Risks associated with non-payment for the provided power transmission services (incurring of disputable and indisputable overdue accounts receivable) by service consumers 17.Human risks

Errors and violations This The Company’s HR Policy is designed to only hire employees that Arrears for electricity transmission totaled All measures addressing the arrears covered 100 % of the electricity of the existing rules, instructions, is jointly managed are properly qualified and skilled while also being as motivated 18,632.4 RUB mn (exclusive of bad-debt transmission arrears, where: and guidelines, including by specialized as possible to work for the Company. There are adaptation programs reserves) as of December 31, 2019, a 1,074.1 • 12.8 % of 2,396.4 RUB mn is being tacked under bankruptcy procedures; safety regulations, on the part responsible units for young professionals in place. Each employee is involved RUB mn or 6.1 % increase YoY. • 67.3 % or 12,540 RUB mn is being recovered in a court of law; of the staff, which may have in the corporate system of continuous education and advanced • 3.5 % or 648.5 RUB mn is being restructured; various consequences. training. The Company provides advanced training for its personnel • 16.4 % or 3,047.5 RUB mn is being processed under complaint procedure. to work at newly commissioned facilities and to learn to use novel As of year-end 2019, 12,540 RUB mn of arrears is being collected in a court equipment; it also tests staff before they can be allowed to do specific of law in 521 cases. jobs. Integrated targeted or thematic inspections are undertaken Complain procedures recovered 564 RUB mn. to monitor and register violations of occupational health and safety 15.7 RUB mn of uncollectible debts written off. rules. 824.8 RUB mn collected in penalties for late payment for electricity transmission services in 2019.

80 81 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

Description Opportunity owners Opportunity impact maximization measures 2. Increased amounts of delivered electricity GRI 102-15 OPPORTUNITIES This opportunity stems Deputy Director General Monthly monitoring of power consumption of the largest from a potential increase for Service Sales consumers in the regions. in demand for electricity on part and Improvement, Conducting cycle inspections of electric power metering of the growing transport industry, IDGC of Centre (the systems, check taking of readings. OPPORTUNITY MAP public utilities, and manufacturing Management Company Preparation of electric power balances for substations based in the regions where IDGC of Center of IDGC of Center on the technical electric power metering, identification of grid Opportunity seizure probability and Volga Region operates, and Volga Region) segments with excess normative losses, performing surprise which is in line with the Ministry inspections to identify off-the-meter and non-contractual of Energy’s1 and Ministry of Economic consumption. Development’s2 forecasts Conclusion of power transmission contracts for the coming years. with the prerequisite submission of planned electric power 1 consumption values as accounted in the business plan 11 10 HIGHLY LIKELY 8 of the Company. 60-90 % 13 3. Opportunities associated with rendering the grid connection services to applicants 3 9 These opportunities stem from: Deputy Director General Faster and simplified preparations for grid connection. 2 • an increase in connection requests for Service Sales Greater service quality. 15 4 and contracts in the regions where and Improvement, More new options for requesting grid connection, including 12 the Company operates; IDGC of Centre (the use of advanced digital tech. LIKELY • applications and contracts for grid Management Company Monitoring the requests and analyzing the grid connection 30-60 % 6 7 connection specifying ever greater of IDGC of Center prospects (including the geography of expansion) to predict capacity. and Volga Region) the number of requests over the coming year. These factors may cause an increase Building of consumer trust in the company by offering an easy in the Company’s revenues from grid and clear explanation about the process of grid connection connection. (posting information on the Company’s official website, developing a method of informing the applicants, monitoring the quality of work of customer service centers). UNLIKELY up to 30% 5 14 Significance of opportunity (potential gain)

MINIMUM SUBSTANTIAL VERY HIGH up to 100 RUB mn 100-200 RUB mn > 200 RUB mn

Assessment of trends in risks and opportunities

COUNTRY-WIDE AND REGIONAL OPPORTUNITIES:

Description Opportunity owners Opportunity impact maximization measures CLASSIFICATION AND DESCRIPTION OF OPPORTUNITIES 4. Opportunities pertaining to the country’s and the regions’ economic situation

AND THE COMPANY’S CONTINUOUS OPPORTUNITY These opportunities stem This is jointly managed The Company operates in the economically favorable regions from the rising population by specialized where about 9 % of the country’s residents live. These MAXIMIZATION EFFORT and increasing economic activity responsible units regions have stable GRP figures that fuels a high demand in the regions where the Company for electricity. operates. To optimize the investment activities, the investment This may increase the Company’s programs are developed with regard to the order of priority INDUSTRIAL OPPORTUNITIES: revenue and its shareholder value. of implementation of investment projects, with the exception of projects that do not have funding.

Description Opportunity owners Opportunity impact maximization measures 5. Geographical opportunities 1. Digital transformation of the grid infrastructure to improve the Company’s performance and profitability These opportunities stem This is jointly managed The regions where the Company operates have high electricity from the temperate continental climate by specialized demand all year round due to their climate. The opportunity stems This is jointly managed Phase I projects (scheduled for completion by 2021) are being of Central Russia where winters responsible units However, as it seeks stable and reliable electricity delivery, from the December 2018 approval by specialized implemented faster than had been planned, as Phase I was are markedly frosty, summers are hot, the Company has a set of measures in place to prepare of the “Digital Transformation 2030” responsible units complete by 30 % by the end of 2019. and the daylight hours are short in fall the electric grid complex for the autumn and winter Concept, which sets forth a complete and winter. period with each branch of the Company being validated transformation (digitalization) for preparedness for the autumn and winter period. of the “Rosseti” Group’s grid infrastructure.

1. UES Development Roadmap for 2018–2015, Ministry of Energy 2. Forecast of Socioeconomic Development of the Russian Federation for Until 2024, Ministry of Economic Development 82 83 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

Description Opportunity owners Opportunity impact maximization measures

FINANCIAL OPPORTUNITIES: 10. Opportunities created by integration with IDGC of Center These This is jointly managed Since September 2017, 2017 IDGC of Centre has been the sole Description Opportunity owners Opportunity impact maximization measures are the opportunities that by specialized executive body (SEB) of IDGC of Center and Volga Region. stem from the adoption of best responsible units The Companies have the following measures in place: 6. Exchange rate opportunities production and corporate • finding each Company’s best corporate governance practices Positive effect of changing foreign Deputy Director This opportunity does not have significant influence governance practices coupled for the other Company to adopt; exchange rates on the results General for Economics on the financial position of the Company since it settles with joint management • comprehensive grid modernization programs for 20 regions of the Company’s financial and Finance, IDGC with contractors in RUB and has neither obligations in foreign of resource-intensive of both companies activities; and business operations. of Centre (the currency nor obligations bound to foreign currency. processes. • combining the operations and contingency management Management Company of the grid complexes of the two companies; of IDGC of Center • combining emergency stocks and backup energy sources; and Volga Region) • automation of data collection on the readings of metering instruments and staff performance; 7. Opportunities associated with changes in interest rates • transfer of authority for the approval of technical conditions The Company’s costs of taking loans Deputy Director Involving the largest Russian banks capable of accommodating and signing of grid connection contracts of over 150 kW to finance its investment projects General for Economics with a sufficient amount of credit resources at relatively low from the branches to the Executive Arm; may lower. and Finance, IDGC rates in participation in auctions for fund raising. • application of uniform customer service standards; of Centre (the • unification of the process of cost of work formation Management Company and introduction of a single directory of prices for material of IDGC of Center and technical resources using standard technical specifications. and Volga Region) 11. Opportunities of grid assets consolidation Opportunities for the adoption This is jointly managed Making contracts with the administrative bodies of the Company’s of the best managerial by specialized regions on cooperation in grid development; such contracts shall decisions and technical responsible units set forth that the regions’ municipal grid assets be transferred solutions where the Company to the Company for operations management and process control, operates, including better and upgraded. OPPORTUNITIES STEMMING FROM GOOD BUSINESS REPUTATION: utilization of grid assets under the digitalization projects by increasing and/ Description Opportunity owners Opportunity impact maximization measures or acquiring full control 8. Reputational opportunities over regional grid assets. These opportunities stem Deputy Director General The Company constantly updates the public about its activities from the Company’s consistent for Organizational and the activities of its branches and has well-established and timely performance of its duties Affairs, IDGC of Centre relations with the media. under contracts with customers (the Management On its official website, the Company timely and fully published and counterparties. Company of IDGC its data and reports subject to mandatory disclosure. This makes the Company of Center and Volga The Company has established cooperation and business a trustworthy partner that Region) communications with the press representatives of the regional the customers and counterparties and municipal authorities, departments of the EMERCOM, are always willing to cooperate with. social organizations, and the leading editorial offices in the regions.

OPPORTUNITIES ASSOCIATED WITH COMPANY’S ACTIVITIES:

Description Opportunity owners Opportunity impact maximization measures STRATEGIC OPPORTUNITIES: 12. Operational and technological opportunities More reliable electricity delivery First Deputy Director Grid renovation and completion of dedicated programs to improve Description Opportunity owners Opportunity impact maximization measures thanks to detailed research into General, Chief Engineer reliability and technical condition of the grid. 9. Strategic opportunities the causes of earlier accidents of IDGC of Centre (the On-condition repair of the facilities based on the risks coupled with timely repairs. Management Company and disconnection data. These opportunities stem This is jointly managed To maximize these opportunities, the Company has the following of IDGC of Center Identification of causes and preconditions of fires and combustion from the accomplishment by specialized measures in place: and Volga Region) to develop appropriate organizational and technical measures of the Company’s strategic goals responsible units • delimitation of powers of management bodies in terms to prevent therm. and objectives, which in turns of decision-making; Taking measures to eliminate the causes of violations of fire safety comes from timely and effective • control over implementation of these decisions; requirements at the facilities. managerial decisions • development of business plans and control Constant and periodic control over fire safety and operation and proper planning. over their implementation; of power plants, equipment, buildings and structures. • monitoring of changes in the legislation of Russia Staff management: training, professional development. and the existing regulatory documents; Community outreach, development of PR programs. • monitoring of resources (including financial, material Drafting and updating the regulations on technological interaction and technical, and human resources) to achieve the strategic with adjacent electric power industry actors (APA). goals; • continuous provision of advanced training for staff.

84 85 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

Description Opportunity owners Opportunity impact maximization measures 13. Investment opportunities Tariff revenues rising as investment Deputy Director Timely funding of the investment program facilities, compliance programs approach completion, General for Investment with the time-frames of payment under the contracts signed which will better then Company’s and Capital with contractors. financial and economic stance. Construction, IDGC Conducting claim-related works with contractors violating of Centre (the contractual obligations. Management Company Deadline management for procurement procedures and making of IDGC of Center of contracts and Volga Region) Weekly monitoring of the construction process under the investment program. Control over the scope of commissioning facilities under the annual investment program. Commissioning of program-invested facilities on or ahead of the schedule. Control over the quality and timely execution of design and survey works. Designer’s supervision. 14. Climate opportunities Additional long-term opportunities This is jointly managed The Company continuously takes measures to make its operations stem from global warming that by specialized more energy-efficient and to be ready to cover a greater demand will induce more active use of split responsible units for electricity and capacity regardless of season or weather. systems, thus boosting electricity consumption and the Company’s revenues in spring and summer. 15. Human opportunities These are opportunities derived This is jointly managed Every year, the Company’s employees make technical, from adopting employees’ by specialized organizational, or managerial proposals to improve key production innovation proposals. responsible units performance indicators and enable further adoption of cutting- edge technologies. These proposals are further implemented in all aspects of the Company’s activities, from operating substations, substation equipment, and distribution grids, to quality control and electricity metering, from occupational health and safety to grid connection services. This part of the employees’ work is an upward trend.

86 87 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

LAUNCH OF THE FIRST DIGITAL SUBSTATIONS

In 2019, the Company completed a launch of the first two digital substations - 02 the «Airport» SS and the «Miratorg» SS. The facilities are equiped with modern software, integrated with automatic supervisory control system. Using these technologies will enhance the observability of the operation processes, provide remote diagnosis and monitoring of the network condition and, consiquently, diminish process losses of electric energy in the grids and reduce opering costs. PERFORMANCE RESULTS See details on p. 61

90 Production Results Analysis

RAS Financial Results 94 Analysis

IFRS Financial Results 98 Analysis

Direct Economic Value Generated 102 and Distributed 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

of the customers served by the Company’s branch; Significant branch-specific changes in net “common-pot” • consolidation of grids in Udmurtenergo, supply in 2019 compared to 2018: PERFORMANCE as the branch acquired the grids of Izhevsk Power Grids on January 1, 2019, – Vladimirenergo: 6 mn kWh less delivered to people, and Votkinsk Municipal Power Grids on July 83 mn less to sundry customers including the Russian RESULTS 1, 2019. Railways; – Ivenergo: 600 mn kWh more delivered to people, Net supply totaled 49,310 mn kWh in 2019, 678 mn less to sundry customers due to changing 1 PRODUCTION RESULTS ANALYSIS which was 976.6 mn kWh or 1.9 % less than the branch’s common-pot model; the actual value for 2018. This change is due – Kirovenergo: a 110 mn reduction in the net common- to a 1,577 mn kWh or 8 % reduction in power pot supply due to the Halopolymer LLC leaving Power Transmission flow to the grids of lower-level grid operators the common pot on December 1, 2020, and Uralchem while natural persons and legal persons LLC cutting its consumption; The main line IDGC of Center and Volga Region’s business is power transmission services. consumed 1,117 mn kWh or 4 % more. – Nizhnovenergo: 115 mn kWh less delivered EU2 EU12 to people, 185 mn less to sundry customers including In general, the structure of net power supply PrimaEnergo LLC, Vodokanal NN OJSC, Sokol Aircraft Power 4,370.6 from the Company’s grids remains stable year Plant, NMZ, and the Russian Railways; 4,233.7 4,254.8 Transmission on year. 2019 was no exception: high voltage – Udmurtenergo: 10 mn kWh less delivered to people, power transmission prevailed (63.4 %), due 39 mn less to sundry customers including the Russian Services Data, 4,072.4 mn kWh 3,840.1 to a large share of heavy industrial consumers Railways, Izhstal, and Kalashnikov. 54,359.4 (34.5 %). 54,745.2 54,004.4 53,565.2 53,031.4 50,374.5 49,770.7 50,287.0 49,310.4 49,191.3 48,308,2 47,400,2 47,402.9 46,961.1 47,059.0

Structure of Net Power Supply from Grids

2017 2018 2019 (planned) 2019 (actual) 2020 (planned) By Class of Customers, % By Voltage Levels, % Released to the grid Delivered electricity (including deliveries 13.8 To reduce electric as a last-resort supplier) 4.8 19.1 Net supply of electricity within the balance power losses, 3.1 17.5 63.4 boundaries of the Company’s branches IDGC of Center 34.5 Electric power Losses 2.6 and Volga Region 2.3 is taking measures to identify and stop Loss of Electricity 4,370.6 4,233.7 4,254.8 In 2019, IDGC of Center and Volga Region 39.1 4,072.4 3,840.1 the non-contractual supplied 49,310.4 mn kWh to customers 12,160.6 11,967.5 and off-the-meter 11,777.1 and adjacent local grid operators within 10,947.1 consumption. the area of the Company’s balance 10,065.3 In 2019, the Company and operational responsibility; this was a 460.3 identified, prevented, mn kWh or 0.9 % reduction YoY. and added 2017 2018 2019 2019 2020 to its net supply (planned) (actual) (planned) In real terms, million kWh a total 29.8 mn KWh of unaccounted In monetary terms, RUB mn. (exclusive of VAT) electricity consumption plus In 2019, the Company transmitted 46,961.1 mn • a 916 mn kWh reduction in electricity a total 6.1 mn kWh kWh, which in comparable terms (considering delivered to sundry consumers while High voltage (110 kV) of uncontracted the power transmission services rendered delivering 477 mn kWh more to people; electricity when the Company functioned as the last- • a transition to the boiler-above model Medium voltage (10-35 kV) Local grid operators consumption, which resort supplier in Vladimir Region from July 1, in Ivenergo: electricity consumed Low voltage (0.4 kV) prevented a loss 2017 to March 31, 2018) was a 0.9 % or 439 mn by the customers of the boiler-below LGOs Industrial customers of 109.1 RUB mn kWh decrease YoY. were redistributed across the entire voltage People or similar customers exclusive of VAT. spectrum (boiler-above), while the people Non-industrial customers Such changes are mainly attributable to: who received electricity from the LGO Agriculture grids in 2018 joined the “people” category Public and municipal organizations, sundry budget-funded customers 1. The projections are cited from the Business Plan approved by the Company’s Board of Directors Transport on December 31, 2019 (Minutes No. 393 dd. December 31, 2019); they are not adjusted for risks that actually occurred after approving such Business Plan and before publishing this Integrated Annual Report for 2019. 90 91 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

Grid Connection According to the results of 2019, the average Natural persons requested the bulk of (increased by 103.1 %) and Manufacturing time for execution of grid connection contracts connections to IDGC of Center and Volga (95.4 %), while the most significant drops were IDGC of Center and Volga Region provides was 60 days or 2 days less than in 2018 (62 Region’s grids (428.9 MW or 48.0 %). in Electricity, Gas, and Water Supply (52.3 %) all-inclusive services of grid connection days). Compared to 2018, the most significant and Construction (49.2 %). of consumers and power producers to electric relative increase in connected capacity was power systems1. Customers can apply observed in Transport and Communications for, contract, and control the procedure of, a grid connection at any of the 32 Customer Service Offices or using the Personal Office CONNECTED CAPACITY STRUCTURE service available at the official website of IDGC of Center and Volga Region. See the Company’s official website for a pre-estimate of the grid By Class of Applicants, % By Industry, % connection fee using a special calculating tool. 6.1 51.0 6.2 6.8 6.0 FIGURES OF GRID CONNECTION SERVICES 14.5 27.8 1.9 5.1 Number of Applications Submitted Capacity, MW 1.2 24.7 48.0 and Contracts Signed, no 0.7

56,304 57,617 55,969 2,191.1 46,441 2,157.4 47,438 45,639 46,585 45,896 44,059 1,754.1

812.9 1,007.1 912.9 909.2 950.9 895.4

Up to 15 kW Natural persons > 15 kW, op to 150 kW Agriculture, forestry, and fishing 2017 2018 2019 2017 2018 2019 > 150 kW and < 670 kW Manufacturing industry Number of applications filed Requested capacity Number of contracts concluded Connected capacity 670 kW or more Electricity, gas and water supply Number of contracts performed Maximum capacity under contracts Construction

Commerce Transport and communications Health, education, social services The number of grid connections executed In 2019, contracts for grid connection required Other by the Company depends on the current state significantly more capacity than in 2018: and plans for the economic development although the total requested capacity rose of the regions of presence. In 2019, IDGC by 1.6 %, the maximum contracted capacity of Center and Volga Region received over 55 was 9.4 % lower, while the connected Additional Services • diagnosis and and testing of electrical thous. requests to connect users’ power capacity under the completed contracts equipment; receivers to its grids, which is 2.9 % fewer dropped by 5.8 %. This was due to lesser In addition to its core business of electricity • meter installation and replacement; than in 2018. The number of contracts demand for electricity on the part of major delivery and grid connections, IDGC of Center • execution of works, which are the cus- signed in 2019 decreased by 3.8 % compared industrial consumers, in turn attributable and Volga Region provides additional for-profit tomers’ responsibility, when carrying out with 2018, while the number of executed grid to the economic recession. services that are not subject to mandatory the procedure of grid connection; connection contracts decreased by 4.0 %. governmental regulation. As of late 2019, • energy audit and energy service; the Company’s additional services included: • design and construction of energy facilities. • arranging outdoor lighting systems; • maintenance and repair of electric power system and electrical equipment; • reconstruction of power supply facilities in the best interests of customers; 1. Pursuant to the Decree of the Russian Government No. 147-r dd. January 31, 2017 On the Target Models for Simplification • provision of technical capacities; of Business and Better Investment Attractiveness of Russia’s Regions.

92 93 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

In 2019, the Company significantly expanded the Company’s services more accessible At year-end 2019, the service revenue of IDGC explained by the fact that as of April 1, its network of customer service desks located and affordable while also improving the quality of Center and Volga Region reached 96,343.1 2018 the Company was no longer operating in the power districts. Thanks to its 2019 and expanding the range of such services. RUB mn, a 2.6 % (or 2,467.2 RUB mn) increase as a last resort electricity supplier effort, the Company’s revenue from additional These measures are expected to further boost YoY. The following are the main factors in Vladimir Region. services rose by 21.8 % from 781.8 RUB the Company’s revenue. of the change in revenue: mn to 951.9 RUB mn. The Company plans • a 5,476.4 RUB mn increase in revenue to further expand its additional services, from electricity delivery due to rising including the arrangement of outdoor lighting tariffs and changes in the “common-pot” systems, in 2020. We also plan to make settlement procedure in Ivanovo Region; • decrease in revenue from resale of electric power and capacity by 3,315.9 RUB mn,

RAS FINANCIAL RESULTS ANALYSIS Factors Affecting Revenue, mn RUB Key Financial and Economic Results, RAS 5,476.3 136.4 93,875.9 170.4 96,343.1 2019 2019 2020 Change 2019 -3,315.9 Figures (RUB mn) 2017 2018 (planned) (actual) (planned)1 (actual) / 2018, % Proceeds from sales of products (services) 90,843.7 93,875.9 96,873.0 96,343.1 99,489.4 2.6 % Net cost of products (services) 74,372.0 78,409.1 82,596.0 80,779.6 83,805.9 3.0 % Gross profit 16,471.7 15,466.8 14,276.0 15,563.5 15,683.5 0.6 % Administrative expenses 1,149.0 901.8 954.0 942.1 1,037.0 4.5 % Selling and marketing expenses 227.3 147.2 28.0 2.2 16.9 –98.5 % Sales profit (loss) 15,095.4 14,417.8 13,294.0 14,619.1 14,629.6 1.4 % Interest receivable 220.5 130.2 101.0 243.9 95.1 87.4 % Interest payable 2,168.9 1,513.3 2,326.0 1,814.9 2,166.6 19.9 % Income from affiliation with other companies 5.7 3.2 2.0 5.2 0.6 60.9 % Other income 8,224.5 4,658.6 2,201.0 4,311.2 1,549.9 –7.5 % Other expenses 7,112.4 4,705.8 3,865.0 10,099.7 3,565.2 115 % Revenue in 2018 Revenue from sales of electric power and capacity Revenue from other activities Revenue from power transmission Revenue from power grid connection services Profit (loss) before tax 14,264.9 12,990.9 9,407.0 7,264.8 10,543.5 –44.1 % Revenue in 2019 Profit tax and other payments 3,264.3 3,643.8 2,400.0 2,114.6 2,515.4 –42.0 % Net income (loss) 11,000.6 9,347.1 7,007.0 5,150.1 8,028.0 –44.9 % Factor Analysis of Net • a reduction in costs incurred EBITDA 23,400.5 21,832.4 19,768.0 17,079.6 21,554.4 –21.8 % by Udmurtenergo to purchase services EBITDA profitability 25.8% 23.3% 20.4% 20.7% –2.5 p.p. –10.9 p.p. Cost Change from local grid operators thanks Net debt 20,297.0 17,739.0 29,421.0 24,279.0 30,284.0 38.0 % to acquiring Izhevsk Power Grids Costs (including managerial and commercial on January 1, 2019, and Votkinsk Municipal Debt / EBITDA 1.0 1.1 1.5 1.6 1.4 39.1 % costs) totaled 81,724.0 RUB mn in 2019, Power Grids on July 1, 2019. a 2.9 % or 2,266.0 RUB mn increase YoY, Factor Analysis of Revenue Change mainly driven by: Change • a 6.8 % increase in the costs of local Figures (RUB mn) 2017 2018 2019 2019 / 2018 % distribution grid operators’ services, which Proceeds from sales of products (services), including: 90,843.7 93,875.9 96,343.1 2.6 % among other things was due to changes in the “common-pot” settlement procedure Power transmission2 83,680.3 88,852.6 94,329.0 6.2 % in Ivanovo Region; Power grid connection services 733.4 925.5 1,062.0 14.7 % • an 11.1 % increase in electricity loss compensation costs due to 10.5 % higher Sales of electric power and capacity 6,011.0 3,315.9 - -100 % prices and a 0.5 % increase in purchased Other activities 313.2 781.8 952.2 21.8 % electricity;

1. The projections are cited from the Business Plan approved by the Company’s Board of Directors on December 31, 2019 (Minutes No. 393 dd. December 31, 2019); they are not adjusted for risks that actually occurred after approving such Business Plan and before publishing this Integrated Annual Report for 2019. 2. Revenue from electricity delivery for 2017 and 2018 specified herein exclusive of revenues made as a last-resort supplier in Vladimir Region from July 1, 2017 till March 31, 2018 (per RAS). In comparable terms (inclusive of “inhouse turnover”), revenue totaled 86,111.1 RUB mn in 2018, 90,268.9 RUB mn in 2018.

94 95 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

Net Cost Change Factors (Including Management and Commercial Expenses), Assets, Capital, and Liabilities, mn RUB mn RUB

5,758.0 118,272.0 2,310.0 2,531.0 118,272.0 4,002.0 114,703.0 114,703.0 79,458.0 81,724.0 - 2,190.0 -1,273.0 -74.0 -1,618.0 -44.0 Assets over 2018 Non-current assets Current assets Assets over 2019 Liabilities over 2018 Capital and reserves Long-term liabilities Short-term liabilities Liabilities over 2019 Net cost of sales electric power and capacity Net cost of other activities Net cost in 2019 Net cost in 2018 Net cost of power transmission Net cost of power grid connection services

The total assets and liabilities of the Company settlements payable to LGOs and capital in 2019 increased by 3.1 % (or 3,569.0 RUB construction contractors; Factor Analysis of Changes in Assets, Capital mn). In the capital structure, non-current • a 692.0 RUB mn increase in received assets had the largest relative share: advance payments; and Liabilities at year-end 2019, their share was 75.9 • a 385.0 RUB mn increase in the floating tax %. The following are the main factors and duty debt; for the increase in the Company’s assets • a 275.0 RUB mn reduction in payments Figures (RUB mn, unless otherwise specified) 2017 2018 2019 Change 2019 / 2018, % in 2019: to suppliers for electricity purchased • increase in the aggregate value of fixed to compensate for losses. Assets 101,517.7 114,703.3 118,272.0 3.1 % assets by 4.8 % (or 3,821.0 RUB mn) due Non-current assets, including: 77,701.3 83,957.1 89,715.0 6.9 % to the commissioning of new fixed assets Short-term credits and loans for 2019 Fixed assets 74,097.8 79,565.0 83,386.0 4.8 % under the investment program; increased by 1,354.0 RUB mn as a result • an 11.3 % or 2,474.0 RUB mn increase of the conversion of a long-term debt Construction in progress 1,791.3 2,652.3 3,278.0 23.6 % in accounts receivable due to an increase into short-term debt in compliance Long-term financial investments 306.3 299.1 272.0 –9.1 % in the debt of TNS Energo Group, a last- with the remaining maturity period Other 1,505.9 1,440.7 2,780.0 93.0 % resort supplier; (reclassification). The amount of long-term • a reduction in the remaining balance credits and loans rose by 787.0 RUB mn due Current assets, including: 23,816.4 30,746.2 28,556.0 –7.1 % in the Company’s current bank account to the reclassification of debts on a loan. There Inventories 1,197.5 1,725.8 1,385.0 –19.7 % by 69.6 % (or 4,599.0 RUB mn). was a 10.1 % (or 4,841.0 RUB mn) increase Long-term accounts receivable 5,855.4 2,772.9 550.0 –80.2 % in the total debt on credits and loans due In the structure of the Company’s liabilities, to the attraction of credit resources to fund Short-term accounts receivable 12,544.3 19,176.9 23,874.0 24.5 % its own sources (capital and reserves) the Company’s investment program. Short-term investments 33.8 32.5 – –100.0 % had the largest relative share: at year- Cash 3,785.2 6,611.9 2,013.0 –69.6 % end 2019 their share was 55.5 %. In 2019, the amount of stockholder equity rose by 1.9 % Other 400.1 426.3 734.0 72.2 % (or 1,272.0 RUB mn) due to a reduction Capital and reserves 62,140.3 66,955.6 65,683.0 –1.9 % in the undistributed profit. Long-term liabilities 29,366.7 22,094.8 24,405.0 10.5 % Long-term credits and loans 24,082.0 16,683.5 17,471.0 4.7 % The Company’s accounts payable dropped by 15.3 % or 2,428.0 RUB mn. This was due Other 5,284.7 5,411.3 6,934.0 28.1 % to the following: Short-term liabilities 10,010.7 25,652.9 28,184.0 9.9 % • repayment of 4,540.0 RUB mn of arrears Short-term credits and loans – 7,667.2 9,021.0 17.7 % under agency contracts and letters-of- credit with other creditors; Loans Payable 7,906.4 15,925.2 13,497.0 –15.2 % • a 964 RUB mn increase in payables Other 2,104.3 2,060.6 5,666.0 175.0 % to suppliers and contractors, including

96 97 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

IFRS FINANCIAL RESULTS ANALYSIS GRI 102-7 In 2019, IDGC of Center and Volga Region’s • a decrease in revenue from the sales total revenue rose by 2.5 % or 2,321 RUB mn of electric power and capacity by 3,315.9 YoY and totaled 96,534 RUB mn, a change RUB mn, explained by the fact that Key Financial Results, IFRS mainly driven by: as of April 1, 2018 Vladimirenergo branch • an increase of 6.2 % or 5,476 RUB mn was no longer operating as a last-resort Change 2019 due to the rising electricity delivery electricity supplier in Vladimir Region. 2019 2019 2020 (actual) / Figures (RUB mn, unless otherwise specified) 2017 2018 (planned) (actual) (planned)1 2018, % tariffs and a change in the common-pot settlement procedure in Ivanovo Region; Revenue 91,002 94,213 97,199 96,534 99,726 2.5 % Operating expenses 75,551 79,322 85,923 87,270 86,817 11.4 % Operating results 16,989 17,090 12,488 10,680 13,606 -37.5 % Operating margin, % 16.6 18.1 12.85 11.1 13.6 -7.1 p.p. EBITDA 23,439 24,055 20,195 18,405 22,092 -23.5 % EBITDA margin, % 25.8 25.5 20.78 19.1 22.2 - 6.5 p.p. Factor Analysis of Operating Expenses Change

Profits 11,353 11,722 6,823 6,687 8,138 -43.0 % Figures (RUB mn, unless otherwise specified) 2017 2018 2019 Change 2019 / 2018, % Profit margin, % 12.5 12.4 7.02 6.9 8.2 - 5.5 p.p. Operating expenses, including: 75,551 78,323 87,270 11.4 % Earnings per share, RUB 0.1007 0.1040 0.06 0.0593 0.0722 -43.0 % Staff remuneration expenses 17,102 15,136 17,825 17.8 % Debt / EBITDA 1.03 1.12 1.46 1.55 1.455 39.1 % Depreciation 6,645 6,969 7,684 10.3 % Equity to total assets ratio 0.60 0.58 0.55 0.56 0.5 -4.9 % Electric power for technological loss compensation 9,504 10,955 12,170 11.1 % Current liquidity ratio 1.80 1.09 1.11 0.99 1.1 -8.8 % Electric power for sales 3,799 1,741 - -100.0 % Total receivables and payables ratio 2.10 1.32 2.04 1.58 1.1 19.7 % Purchased electric and heat power for own requirements 419 413 424 2.7 % Other material expenses 2,707 2,860 2,823 -1.3 % Factor Analysis of Revenue Change Electric power transmission services 30,992 33,337 34,996 5.0 % Repair and maintenance services 1,467 1,624 1,519 -6.5 % Other works and production services 184 346 250 -27.7 % Figures (RUB mn, unless otherwise specified) 2017 2018 2019 Change 2019 / 2018, % Taxes and fees, other than profit tax 998 1,498 1,703 13.7 % Revenue, including 91,002 94,213 96,534 2.5 % Rent 334 441 65 -85.3 % Power transmission 83,680 88,853 94,329 6.2 % Insurance 143 142 142 - Power grid connection services 734 926 1,062 14.7 % Other services of third-party organizations1 1,211 1,311 1,274 -2.8 % Other revenue 6,588 4,434 1,143 -74.2 % Reserves 1,059 219 4,048 1,748.4 % Settlement of debts for electricity delivery and purchase for the purpose of loss compensation -1,823 134 763 469.4 % Factors Affecting Revenue, mn RUB Other expenses 810 1197 1,584 32.3 %

5,476.3 136.4 94,213.0 96,534.0 Factors Causing Changes in Operational Expenses, mn RUB -3,291.0

387 87,270 1,215 1,659 205 3,829 629 78,323 2,689 715 11 0 -1,741 -37 -105 -96 -376 -37 Revenue in 2018 Revenue from power transmission Revenue from power grid connection services Revenue from other activities Revenue in 2019 Operating expenses in 2019 Operating expenses in 2018 Staff remuneration expenses Depreciation Electric power of technological loss compensation Electric power for sales Purchased electric and heat power own requirements Other material expenses Electric power transmission services Repair and maintenance services Other works and production services Taxes and fees other than profit tax Rent Insurance Other services of third-party organizations Reserves Settlement of debts arisen from loss compensation Other expenses 1. The projections are cited from the Business Plan approved by the Company’s Board of Directors on December 31, 2019 (Minutes No. 393 dd. December 31, 2019); they are not adjusted for risks that actually occurred after 1. approving such Business Plan and before publishing this Integrated Annual Report for 2019. Communication services, security, consulting, legal and audit services, software and maintenance costs, transportation 98 and other services. 99 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

In 2019, the operating expenses of IDGC To compensate for the negative dynamics of Center and Volga Region rose by 11.4 % in the Company’s operating expenses, Factor Analysis of Changes in Assets, or 8,947 RUB mn YoY and totaled 87,270 RUB IDGC of Center and Volga Region focused mn, a change mainly driven by: on improving its internal efficiency Capital and Liabilities • making reserves to cover the lawsuits and optimizing the operating costs. brought against the Company by energy In particular, the grid maintenance Change 2019 / 2018, suppliers, where the ruling was expected performance rose by 16 % (from 71.5 to 82.9 Figures (RUB mn, unless otherwise specified) 2017 2018 2019 % to be made within a year; conventional units of equipment per person) Assets 89,903 103,650 109,407 5.6 % • increasing costs of employee remuneration in 2019. Non-current assets 71,815 75,423 80,923 7.3 % to due changes in the Non-State Pension Scheme; Besides, testing the assets effectively Current assets 18,088 28,227 28,484 0.9 % • a reduction in the costs of electricity recovered an earlier recognized loss of 805.6 Equity 47,121 54,680 54,948 0.5 % purchased for resale, as the Company RUB mn attributable to the impairment of fixed Long-term liabilities 32,709 23,161 26,114 12.7 % ceased to operate as the last-resort assets, including 679.4 RUB mn in the fixed supplier in Vladimir Region; assets of Ivenergo, 126.2 RUB mn in those including long-term credits and loans 24,082 16,684 19,057 14.2 % • rising costs of electricity delivery services of Udmurtenergo. Short-term liabilities 10,073 25,808 28,345 9.8 % due to the indexation of tariffs charged including short-term credits and loans - 7,667 9,095 18.6 % by local grid operators as well as due to changes in the common-pot settlement procedure used in Ivanovo Region; • a 11.1 % increase in electricity loss compensation costs due to a 10.5 % Assets, Capital and Liabilities, mn RUB increase in the electricity prices and a 0.5 % increase in electricity purchased; 5,500 257 109,407 2,953 2,537 109,407 • increase in depreciation due 103,650 103,650 268 to the investment program implementation and the introduction of new fixed assets.

Factors of Change Note that the Company paid dividends for nine months of 2019 in January and February 2020, in Other Important a total of 1,835.2 RUB mn.

Financials An increase in net debt as well as in the debt / The Company’s profits for 2019 were 43.0 % EBITDA ratio was due to a larger loan portfolio or 5,034.9 RUB mn lower than in 2018 coupled with a reduction in the Company’s and totaled 6,686.6 RUB mn, a reduction cash flow in 2019. mainly attributable to making reserves to cover lawsuits filed by energy suppliers. The current liquidity ratio as of year-end 2019 compared to 2018 dropped due to an The decrease in net income, in turn, increase in short-term liabilities, a result determined a decrease in EBITDA to 18,404.9 of reclassifying the loan debt. RUB mn, which a 23.5 % (or 5,649.7 RUB Assets in 2018 Non-current assets Current assets Assets in 2019 Capital and liabilities in 2018 Equity Long-term liabilities Short-term liabilities Capital and liabilities in 2019 mn) reduction YoY; the EBITDA margin was therefore 19.1 %.

Over 2019, the total assets and liabilities An increase in loan and debt liabilities due of the Company increased by 5.6 % (or 5,757 to taking loans to finance the investment RUB mn). Non-current assets have the largest program and refinance the Company’s relative share in the asset profile. In 2019, outstanding loan. The Company obtained asset growth reached 7.3 % (or 5,500 RUB mn). all the funds without security. In total, These changes were mainly driven by: the Company borrowed 18,208 RUB mn in 2019 • an increase in the value of fixed assets and repaid 16,093 RUB mn; the weighted thanks to the investment program; average rate in the Company’s loan portfolio • an increase in accounts receivable due was 7.36 % per annum as at December 31, to an increase in the debt of TNS Energo 2019. Group, a last-resort supplier.

100 101 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

Effective interest rate Balance-sheet value Economic Value • payments to capital suppliers, i.e. dividends to all categories of shareholders as well December 31, December 31, December 31, December 31, Distributed as interest payable to creditors; Maturity 2018 2019 2018 2019 • payments to the state, i.e. all the Company’s Unsecured credits and loans 2020-2022 7.40-8.27 % 7.40-7.55 % 24,351 21,465 Following the GRI Standards methodology, taxes except deferred taxes; Unsecured bond loans 2020-2022 - 6.85 % - 5,015 the distributed economic value is calculated • investment in local communities, i.e. on the IFRS data basis and includes these donations to charities, NGOs, and research Rent liabilities 2020-2103 - 6.82-9.92 % - 1,672 components: institutions, costs of supporting public Total 24,351 28,152 • operating costs, i.e. payments made infrastructure, and direct funding of social to counterparties for materials, product programs, cultural and educational events. components, equipment and services, rent payments, royalties, commissions, payments to contract workers, etc.; • wages and sundry employee payments Credit Portfolio 36 Breakdown and benefits, i.e. wages, payments 44 by Banks, % 19 to the state on behalf of workers such as taxes and duties, as well as pension 1 and insurance payments, healthcare costs, severance packages, and sundry support for workers;

Figures, RUB mn 2017 2018 2019 Sberbank Operating costs 51,572.3 54,500.8 55,247.3 Gazprombank Wages and other employee payments and benefits 17,102.1 15,135.7 17,824.7 Bond loan Payments to capital suppliers 7,155.3 4,762.2 4,058.5 Otkritie Bank Payments to the state 3,246.5 3,726.6 2,964.2 Charity GRI 203-1 - 243.3 143.4 Distributed economic value 79,076.2 78,368.6 80,238.1

DIRECT ECONOMIC VALUE GENERATED Economic Value Retained GRI 201-1 AND DISTRIBUTED Following the GRI Standards methodology, the economic value retained is calculated as the difference between the direct economic value generated and the economic value distributed. Direct Economic Value • income from financial investments, i.e. funds generated as interest on financial Generated loans, share dividends, royalties, and direct income from the use of the Company’s Following the GRI Standards methodology, assets, e.g. by leasing; Figures, RUB mn 2017 2018 2019 the generated direct economic value • income from sales of assets, i.e. funds Direct economic value generated 91,226.2 94,345.1 96,826.1 is calculated on the IFRS data basis received by selling tangible and intangible Economic value distributed 79,076.2 78,368.6 80,238.1 and includes these components: assets. • net sales, i.e. gross sales minus returns, Economic value retained 12,150.0 15,976.5 16,588.0 discounts, and write-offs;

Figures, RUB mn 2017 2018 2019 Net sales 91,002.2 94,212.8 96,534.0 Income from financial investments 224.0 132.3 247.1 Income from asset sales - - 45.0 Generated direct economic value 91,226.2 94,345.1 96,826.1

102 103 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 – 111

INTEGRATED MANAGEMENT SYSTEM

Sustainable growth of IDGC of Center and Volga Region is ensured 03 by the Integrated Management System, which is based on four international standards: ISO 9001:2015, ISO 14001:2015, ISO 50001:2011, and ISO 45001:2018.

SUSTAINABLE See more on p. 107 DEVELOPMENT

Corporate Management System 107 for Sustainable Development

Everyday Interaction 108 with Stakeholders

Membership in associations 118 and organizations

120 Environmental Protection

Human Capital Management and Social 130 Responsibility

143 Procurements and Supplier Relations

Preventing Corruption and Conflicts 146 of Interest

104 105 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

CORPORATE MANAGEMENT SYSTEM SUSTAINABLE FOR SUSTAINABLE DEVELOPMENT DEVELOPMENT STRUCTURE OF INTEGRATED MANAGEMENT SYSTEM

Improving reliability, quality and security of energy supply and quality of grid connection services for consumers

GRI 103-1 Dear colleagues and partners! of our work, from reducing the in-grid losses GRI 103-2 to saving energy when lighting offices and routing GRI 103-3 corporate transports in such way as to consume as little fuel as possible; • environmental safety and minimal air, soil, or water ISO 9001:2015 pollution; Quality management Our Company is responsible for uninterrupted • preserving biodiversity in any project, system (QMS) delivery of electricity to industrial enterprises from restraining from clearing forest corridors during Ensuring environmental safety

and people in nine regions of Central Russia the breeding periods to outfitting the OPLs with bird of production activities and near Volga. This is why the Company’s protections; managers deem sustainable development • maintaining the status of a “preferred employer” as important as profitability and competitiveness. for people that are able and willing to be as useful ISO 45001:2018 ISO 14001:2015 In this regard, the Company follows ISO as possible, achievable by providing competitive Occupational health and Environmental 9001:2015, ISO 14001:2015, ISO 50001:2011, salaries, favorable conditions for professional safety management management system and ISO 45001:2018. The Company also growth and advancements, good social packages system (OHSMS) (EMS) recognizes the importance and relevance and corporate culture; of the UN Sustainable Development Goals, • involvement in the economic and social development striving to contribute to the attainment thereof. of the regions where the Company’s branches operate.

Following the business openness and transparency the total number of accidents at work ISO 50001:2011 Ensuring occupational safety and health

The Company’s key strategic priorities principles, the managers are in a continuous dialog protection of employees, including reducing Energy management system in sustainable development are: with all the stakeholders, which this Integrated Annual (EnMS) • reliable and safe electricity delivery, Report based on the GRI Standards we deem a part of. achievable by a variety of methods from using state-of-the-art technologies, including digitalization, to upgrade and repair our grids, to teaching people how to be safe near energy facilities; Improving energy efficiency of production activities • greater energy efficiency and optimal use of energy resources in all aspects

Sustainable development of IDGC of Center • a top manager responsible for each respec- and Volga Region is ensured by the Integrated tive management system; Management System, which is based on • the structural unit authorized to manage four international standards: ISO 9001:2015, the management systems; Deputy Director General, Chief Engineer ISO 14001:2015, ISO 50001:2011, and ISO • subdivisions of the Company involved in the A.V. Pilyugin 45001:2018. operation of management systems.

The following are the main members of the Integrated Management System, who, conse- quently, have the basic power to ensure sus- tainable growth of IDGC of Center and Volga Region:

• Board of Directors; • executive bodies, i.e. the Management Company IDGC of Centre and the Board;

106 107 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

A significant part of the KPIs used in evaluating internal control systems, customer affairs • efforts to quickly restore electricity delivery the work and calculating the remuneration of and other areas of the Company’s sustainable in case of disruptions; IDGC of Center and Volga Region has 66 Customer Service Offices, the top management, including the sole exec- growth. • the implementation of the “Digital of which: utive body of the Company (IDGC of Centre, Transformation 2030” Concept; PJSC, the Management Company), is related to Following the international standards, IDGC • energy efficiency improvement and electric- various aspects of sustainable growth. These of Center and Volga Region has adopted and ity loss reduction, in particular combating performance indicators include: been consistently improving its Integrated unaccounted and uncontracted electricity 9 57 • non-occurrence of major accidents; Management System since the establish- consumption. are based are based on production • achievement of the reliability level of ser- ment of the Company in 2007. The main doc- on the executive units and branch-specific vices provided; ument regulating its functionality is the Policy IDGC of Center and Volga Region’s website personnel grid districts • rate of electric power loss; concerning quality, occupational safety and timely publishes complete information sub- of the Company’s • effectiveness of innovation; health, and environmental protection. In addi- ject to mandatory disclosure pursuant to the branches • improving labor efficiency; tion to this document, the Company has multi- Company’s Information Policy Regulations • zero increase in the casualty toll. ple internal regulations that establish uniform and the Standards of Information Disclosure standards for the Company to manage and for Actors in Wholesale and Retail Electricity The scope and target values of KPIs, includ- organize business processes in all its branches Markets. Customers can freely choose any of the three communication ing the indicators of sustainable develop- using the tools of the Integrated Management channels: face-to-face, long-distance, or interactive, ment, are set annually by resolution of the System. depending on what they can or would like to use. Company’s Board of Directors. Reports on their achievement are reviewed at the level In terms of sustainable development, the Customer of the Committees of the Board of Directors: Integrated Management System mainly helps: by the Strategy and Development Committee, • improve reliability, quality and security of Communication Personnel and Remuneration Committee, energy supply and the quality of grid con- • personnel interacting with the customers Reliability Committee. nection services for consumers; IDGC of Center and Volga Region is a cus- must have a guaranteed high qualification • ensure occupational safety and health pro- tomer-oriented company; as such, it seeks to level; In December 2019, as part of the work tection of employees, including a reduction obtain and maintain a high level of their trust • the business processes of customer service on development and improvement of the in occupational accidents; by providing excellent services and meet- must be transparent and subject to continu- Integrated Management System, the Company • improve energy efficiency; ing their ongoing demands as soon as possi- ous improvement; underwent a compliance audit, successfully • ensure environmental safety. ble. The Company’s key tool in this regard is its • customers’ complaints must be objective. confirming compliance with the requirements Centralized Customer Service System. of the international standards by all of its branches with the certification scope “Process IDGC of Center and Volga Region follows these control and rendering of services: electric principles in cooperation with its customers: power transmission and distribution, grid con- • the customers should have enough infor- nection of consumers”. mation on the Company and its services to make informed and adequate decisions; Independent auditors from the Russian • the customers should be able to reach Register Certification Association carried out the Company in any area of its operation, a thorough examination of management and while face-to-face service at the Company’s production activities of IDGC of Center and offices must be comfortable; Volga Region, evaluated the system of pro- • the Company’s long-distance and inter- cesses, resource management, investment active services must be easy and quick to activity, personnel management, planning, access;

GRI 102-33 GRI 413-1 GRI 102-43 G4-DMA EVERYDAY COOPERATION GRI 203-1 (ранее EU23) WITH STAKEHOLDERS Face-to-face customer service offices, no.

by the principles of timeliness, truthfulness, Public Disclosure completeness, and availability when dissemi- 15 nating information. to Stakeholders 13 When interacting with the widest circles of 11 To have more open and transparent relations stakeholders, the key tool IDGC of Center and its customers, shareholders, investors, actors Volga Region uses is the publications on its in the securities market, government agen- website and in the media. Publications topics 7 cies, and sundry stakeholders, to bolster its are those the Company believes are relevant 5 5 4 business reputation and reduce the reputa- to most stakeholders. In 2019, the Company- 3 3 tional risks, IDGC of Center and Volga Region related publications in media addressed: takes proactive measures to inform all con- • Investment Program’s phases and their cerned parties on the key aspects of its activ- completion; Vladimirenergo Ivenergo Kalugaenergo Kirovenergo Marienergo Nizhnovenergo Ryazanenergo Tulenergo Udmurtenergo ities. The Company thereby follows Rosseti’s • progress in repairing the grid facilities in Uniform Communication Policy and is guided the Company-served areas;

108 109 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

Appeals, 1.57 8.40 0.02 16.88 73.13 Customer Satisfaction Research, conducted in 2019 Complaints, and Reports: Research type Breakdown and timing Target audience Sample size Results by Communication Survey in writing All customers 1,864 Average score was -4.72. Channels, % at the office These aspects scored the highest: Face-to-face at the office • Office-based agents’ politeness -4.79; By phone • Speed of office-based agents’ decision-making when solving In writing through the office your problem -4.74. Through interactive services Online surveying All customers 406 Average score was -3.15. These aspects scored the highest: Other • Competency of the servicing agent -3.31; • Completeness of provided information -3.19. Surveying by phone Small and medium- - Average score was -4.45. sized businesses

Customer communication channels How to use What customers get from it Face-to-face • contact one of the Customer Service • find more about grid connection, electricity delivery Offices. and metering, or additional services; Cooperation Cooperation • file a request or complaint; • get contact information or consultation; with Regional with Employees, Trade • apply for services. and Municipal Unions, and Sundry Long-distance • call the federal hotline (+7 800 5050 • get advice; 115), which operates 24/7; • quickly solve matters pertaining to disconnection or quality Government Agencies Labor Regulators • send a WhatsApp or Viber message. of electricity, grid connections, reporting of meter readings, provision of meters (including their installation or replacement), The Company signed regulatory agree- In 2019, IDGC of Center and Volga Region was or additional services. ments with the governors of some of the traditionally represented at the Russian Health regions where the Company operates: Kaluga, and Safety Week (RHSW). This international Interactive • learn more about the legal framework regulating the Company’s • go to the For Consumers section activities; Vladimir, Ryazan Regions and the Udmurt discussion and presentation platform covered of the corporate website – http://www. • find more about how to make a grid connection and electricity Republic; these agreements focus on the long- the latest trends and prospects of occupational mrsk-cp.ru/for_consumers/; delivery contract; term development of the regional grid com- health and safety. The event was organized by • use the Personal Office and Internet • file an application; plexes. Similar agreements were further made the Ministry of Labor and Social Protection in Reception services; • ask a question and get an answer by email, mail, or phone call, with Ivanovo and Kirov Regions. The agree- cooperation with ETALON, the Interregional • go to Svetlaya Strana, Rosseti’s shared whichever is most convenient; ments set forth coordination of the Company’s Association for Safe Labor. portal. • file a complaint. and regional administrations’ actions in the field of tariff and balance decision-making as In 2019, the Company’s top managers met the well as with respect to the consolidation of leaders of primary trade unions to discuss the municipally owned grid assets. most pressing issues of social partnership and labor relations as well as the the short-term Such cooperation will create sufficient sources priority plans under the Company’s HR and to carry out integrated grid upgrade programs Social Policy. In 2019, IDGC Complaints can be filed at the specialized either addresses the problem or sets all-Russian portal Svetlaya Strana: – and states a specific deadline to do so. using digital tech. These include grid reliability of Center and Volga and monitoring improvements by digitalization, Region surveyed its https://светлаястрана.рф/. Customers can upgrading and expanding the smart metering customers face-to- use the portal to report: In fact, each reported problem system, improving the operations management face or interactively • power outages; is double-checked: and process control system, and consolidation on a regular basis • voltage fluctuations; • by the reporting customer, of local grid assets. to get feedback • low voltage; as they can refute whatever and find whether • equipment defects. information they get in a response In 2019, IDGC of Center and Volga Region they were satisfied The website will be able to register if the problem has not been solved joined regional authorities in a strategic part- with the quality complaints on a greater range of issues properly or at all; nership to take multiple measures to com- of at-the-office in the future. • by Rosseti, as the Company mission energy facilities, supervisory control service and services double-checks all the most critical centers, and grid control centers, as well as to in general. All complaints are subject to centralized complaints. processing by the single Rosseti expand the outdoor lighting systems. Besides, Moderation Service. Each message the Company’s and branches’ officers took is handled within 8 business days of its part in regional staff meetings, where they dis- reception; in this time, the Company cussed energy delivery safety and sundry gov- ernment-arranged activities.

110 111 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

The Company’s specialists hosted quite a num- ber of educational events, both conventional Cooperation Cooperation Cooperation In Q3–Q4 2019, Tutorial on Electricity and novel, in 2019 to prevent electrical injuries the Company’s Loss Management: with the Professional with Universities with Local Communities and teach safe behavior, including: Opportunities specialists organized • energy facility tours for schoolchildren and and Challenges Power Engineering in the Regions a unique special IDGC of Center and Volga Region’s cooperation students of industry-specific educational of Digital course titled Digital with universities rests upon two pillars: institutions; Transformation Community of Presence and Socially Transformation • development of human resources and part- • electrical safety festivals for children’s was a major of the Power Grid In addition to consistent cooperation under nership in the field of education; Significant Projects country camps, jointly hosted by power event held jointly Complex for the students their daily organizational, production, and • advancing a system for the development engineers and members of student teams; by the Company of specialized managerial work, IDGC of Center and Volga and adoption of innovative products and • safety classes co-taught with local and universities; universities located Region’s specialists regularly share their technologies (R&D). EMERCOM and Ministry of Internal Affairs hosted by Tula State PREVENTION OF INJURIES AMONG in the regions knowledge, experience, and ideas with experts officers, some of which were based on the University on October POPULATION of the Company’s 24-25, 2019, from other companies in the industry. The IDGC of Center and Volga Region cooperates Fundamentals of Life Safety classes (Rus: presence. The course the event was attended Company’s management reports its position, with 67 vocational education institutions as Every year IDGC of Center and Volga Region ОБЖ, a common supplementary class was designed to inform by the Company’s capabilities, and areas of focus to other actors well as with 35 universities, 17 of which are executes a large-scale electric safety program in Russian schools—translator’s note) in students on the promising personnel. in the electricity market. This mainly happens flagship universities. The Company’s coopera- to reduce the risk of electrical injuries among Kaluga and Yoshkar-Ola; grid development at conferences, conventions, international and tion in education focuses on: the population. This effort includes, organ- • Energy Night at the Energy Museum of Kirov technologies used industrial forums. • career counselling for students; izational, technical, and awareness-raising Region, a part of the Night of Museums under the “Digital • students’ teams; measures. campaign; Transformation 2030” In 2019, a delegation of IDGC of Center and • arranging student internships; • regional parental meeting titled Safe Concept. Volga Region spearheaded by the Director • targeted training using available state- In 2019, the Company took the following organ- Summer that included an online conference General of IDGC of Centre (the Management funded student slots, where some students izational and technical measures to reduce the with power engineers from Ivanovo, etc. Company of IDGC of Center and Volga Region) are also paid grants by the Company; electrical injury rates: Igor Makovskiy took part in the interna- • updating the training curricula; • 50,588 additional warning signs and post- The Company cooperates on a regular basis tional forum Power Grids 2019. Mr. Makovskiy • teacher internships; ers placed at different locations including with the local EMERCOM and MIA offices, spoke at the Pilot Projects and Digital • conceptualizing BSc and MSc theses; coastlines and shores near OPLs to inform executive authorities responsible for education Transformation, a TeDX session, where he • involvement of technical supervisors in the people on electricity hazards; in regions, urban malls, professional and sci- talked about the Company’s and IDGC of learning process; • 108 OPLs with non-insulated wiring entific museums. In every region, the Company Center’s pilot projects of using BIG DATA to • participation in state examination and certi- removed from areas of sports venues, regularly hosts meetings, conferences, round- identify the pockets of electricity losses and fication commissions; schools, vocational schools and colleges, tables, and assemblies involving teachers, to ensure reliable and high-quality electricity • engaging students and teachers alike in the kindergartens, orphanages, playgrounds, driving instructors, parents, heads of transport delivery by means of energy storage systems. Company’s contests; and summer camps; companies, representatives of fishing com- • training the Company’s employees. • 2,008 lines branching towards residential munities and horticultural unions to discuss In 2019, the Company dispatched its dele- housings, as well as 0.4 to 10(15) kV lines electrical safety and prevention of electrical gation to partake in the plenary session of In August 2019, all of the Company’s branches in populated areas had their non-insulated injuries. the Russian Energy Week (REW), in the All- approved their Programs for Cooperation With wires replaced with insulated or steel-insu- Russian Assembly On the Preparations of Local Industry-Specific Institutions of Higher lated wiring; IDGC of Center and Volga Region takes part Electric Power Industry Actors to the Fall and and Vocational Education. Those Programs • as part of the ongoing electrical equipment in international, state, sectoral, regional and Winter of 2019-2020, as well as in some other provide for cooperation with Moscow Power maintenance effort, engineers checked major events of REW 2019. Engineering Institute (a National Research poles and sundry equipment for warn- University) and its branches, Vladimir State ing signs and posters, replacing missing or Besides, the REW 2019 delegation received an University n.a. Alexander and Nicolai Stoletovs, illegible ones; they also checked the condi- award on behalf of the Company, as the latter Ivanovo State Power Engineering University, tion of entrances, locks, and fencing. was ranked 3rd in the Safe Energy category of Obninsk Institute of Nuclear Energy (a branch the Russian National MediaTEK 2019 contest. of MEPhI), Vyatka State University, Mari State University, Nizhny Novgorod State Technical The Company’s specialists represented University n.a. R.E. Alekseyev, Ryazan State the Company at the entry session of the Radio Engineering University n.a. V.F. Utkin, International Youth Energy Forum of Rosseti Tula State University, Izhevsk State Academy and prove themselves worthy during the busi- of Agriculture, etc. The Programs provide for ness games and project presentations. As a cooperation in: result, an Udmurtenergo specialist was ranked • improving the universities’ facilities and among Top 10 specialists of the Rosseti Team. resources; • cooperation in technology; • research projects; • educational projects; • cooperation under the university-received grants.

112 113 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

and adults through all available channels bowls, pots, some necessary household goods, that created Russia’s first memorial to the (mass media, EMERCOM system screens, dis- animal feed, and medications for the shelter. WWII Eastern Front veterans that worked as In 2019, the Company’s events aimed at reducing the pediatric plays in commercial centers, educational power engineers; the monument rose in Tula, injury rates involved more than 50 thous. children and teenagers institutions, and public transport). About 8.5 Ivenergo’s and Kalugaenergo’s employees took a city of military glory. in the regions of presence. These events included safe electricity thous. units of written content were published part in Lights for the Big House, an interre- handling classes our power engineers have been hosting for more and posted on social media and in printed gional charity campaign. They donated funds In 2019, the Company’s branches made dona- than 12 years. In 2019 alone, our specialists organized some 1.5 media. The Company organized multi-regional to replace old bulbs with LEDs at Kozelsk tions to the local clubs of such sports as foot- thous. electrical safety lessons attended by some 40 thous. students Internet contests on electric safety rules, in Boarding School, Kaluga Region, as well as at ball of rugby that are gaining foothold in in Vladimir, Ivanovo, Kaluga, Kirov, Nizhny Novgorod, Ryazan, Tula which more than 2 thous. children and teen- Raduga, an Ivanovo-based orphanage for chil- Russia. The Company’s efforts in this direction Regions, Mari El Republic, and Udmurt Republic. agers took part. >44.5 thous. copies of printed dren with developmental delays. are designed to support regional programs Power engineers also held themed festivals, creative quizzes, media and souvenirs were given to fishermen, that seek to promote sports and healthy life- adventure games, and web-based contests to remind schoolchildren summer cottagers, truck drivers, and children Nizhnovenergo’s staff helped the Specialized styles in general. of the need to observe the rules of behavioral safety near power as part of IDGC of Center and Volga Region’s Pediatric Hospital for Rehabilitation of facilities and the necessity for caution when handling electrical extensive effort to prevent electrical injuries. Psychoneurologically-Affected Children in Udmurtenergo followed its tradition of sup- appliances. Dzerzhinsk. Funds they collected were spent to porting the Community Foundation in the purchase extra game sets for developing fine Udmurt Republic. In 2019, they donated to the SOCIALLY SIGNIFICANT motor skills, logical thinking, and emotional projects that sought to support and develop AND CHARITABLE PROJECTS interestedness of youngest patients. safe urban environment and better ecology.

Every year, IDGC of Center and Volga Region On the eve of the 74th Victory Day, IDGC of Center and Volga Region has for many implements various infrastructural, social and Ryazanenergo’s power engineers took part yet years been in cooperation its CSKA and spon- charity projects and assists in spiritual and another time in the 28th We Knee Before You, sored the country’s premier professional foot- social economic development of the areas, Veterans! TV and radio marathon to raise and ball club. That cooperation continued in 2019. where it operates. transfer funds to the Ryazan Regional Office of Elektropatrul is a VK.com public page created by the employees the Russian Charity Foundation of War, Labor, of IDGC of Center and Volga Region for children, parents, and teachers; IDGC of Center and Volga Region helps orphan- and Armed Forces Veterans, to help combat- it is dedicated to the matters of electrical safety. In 2019, the page was ages and boarding schools, charities, health ants, workers of the rear, soldiers’ widows, for- visited more than 131.9 thous. times and has 2 thous. subscribers care and education institutions, participates in mer prisoners of Nazi concentration camps, of various ages. The Company also posts video products on electric the restoration and repair of cultural monu- and illegally repressed persons. safety on its official YOUTUBE channel. These posts had a total of ~20 ments, provides targeted assistance to children thous. views in 2019. with serious illnesses, the disabled, elderly and The Company’s workers have many times pro- veterans. vided targeted help to their colleagues or former, now retired workers to resolve life In 2019, IDGC of Center and Volga Region as difficulties. well as its branches supported multiple foun- dations and non-profit organizations in the IDGC of Center and Volga Region joined other municipal programs and activities aimed at regions of presence, which further helped Rosseti subsidiaries to finance a major project ensuring industrial safety and preventing inju- implement a number of socially significant pro- ries among the population: World Day for jects in education, sports, and other important Safety and Health at Work, Children’s Day (in areas. terms of ensuring safety of electricity-gen- erating equipment for children), all-Russian Every year, on the Power Engineers’ Day, the meetings and exhibitions on occupational and Company runs its traditional campaign The industrial safety, regional and district compe- Brightest Christmas Tree. As part of this cam- titions on occupational safety, educational pro- paign, the Company’s representatives organ- grams on the issues of electric safety, themed ize New Year celebrations and buy presents drawing competitions and a number of other for orphans growing up in children’s homes in events. the regions of the Company’s presence using employee-raised funds. Beside some sweets, In 2019, the Company broadcast video and children get toys, books, sports gear, home audio promos on electric safety for children appliances, etc.

Ivenergo’s Youth Council initiated a charity campaign to raise funds for the May Day ani- mal shelter. The Company’s staff collected

114 115 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

Single Brand Opportunities

SINGLE BRAND As of early 2019, Russia’s power grid complex had no single identifying name that a broad audience would “ROSSETI” GROUP IS HARMONIZING ITS BRAND easily recognize and understand. Each company con- trolled by, or reporting to, “Rosseti” had but a por- ARCHITECTURE tion of the public’s trust to the Group; each had to earn reputation with its customers, shareholders, and counterparties in its own segment. However, the exist- In June 2019, the St. Petersburg International Economic Forum witnessed the presentation ence of 15 seemingly independent brands confused of the new Single Brand Style Standard for “Rosseti” and “Rosseti” Group companies, laymen and kept them ill-informed. “Rosseti’s” brand which had been approved by “Rosseti’s” Board of Directors on April 29, 2019. Since then, all was grossly undervalued as of early 2019. This in fact the subsidiaries of the mainline and distribution grid complex have switched to this new brand negatively affected the Company’s quotes in the pub- architecture in their corporate and marketing communications, and started using new names lic capital markets, bringing no additional benefits to comprising the “Rosseti” trademark coupled with regional or functional markers. the Group’s shareholders. A stronger corporate iden- tity opened up more opportunities for the holding to attract investors.

A single ideological platform for all subsidiaries to P.A. Livinsky make all the “Rosseti” Group’s companies easier to Director General, recognize will enable the Group to focus the stake- Chairperson of the Management Board holders and the general public’s attention anywhere OJSC “Rosseti” in the world on how the energy hold is doing under the aegis of a single reputable brand. Such large-scale “Rosseti” Group is an umbrella firm that unites 70 % rebranding promises greater investment attractive- of Russia’s distribution grids and 90 % of mainlines; it relies ness, capitalization, and loyalty of the Company in on a set of harmonized approaches to the management general. The transformations will bring the Company and development of the country’s national grid infrastruc- closer to the stakeholders, while the new holistic ture, thus being capable of continues expansion and quality brand will symbolize the uniform quality standards the improvement of its services. Operating under a new sin- “Rosseti” Group will comply with across Russia. gle brand will bring the “Rosseti” Group’s companies closer together and gain better brand recognition in the coun- Renaming the subsidiaries will not change their struc- try and in the industry alike. It will facilitate custom- ture or staffing. More than that, communication based er-company interaction. Transition to a single name is part on a single brand in junction with the Group’s initia- of the systemic process of large-scale transformations in all tives to popularize the energy sector will considerably of the Holding’s activities”. improve the public view of jobs in power engineer- ing to help attract promising newcomers. Thanks to adopting a single brand architecture, each employee can now feel belonging to a big team of 220 thous. people regardless of where they work — they will take part in solving the problems facing the entire holding. A strong, united team rallied to seek common goals THIS TRANSITION TO A SINGLE-BRAND will be capable of that much more. ARCHITECTURE WAS BI-PHASE:

Phase I After “Rosseti’s” Board of Directors approved the Single Brand Style Standard, all the subsidiaries of the mainline and distribu- tion grid complex undertook appropriate corporate procedures. Further replacement of branded elements to be done after depreciation to avoid increasing the existing budgets and to stay within the approved business plans.

Phase II Since late December 2019, the subsidiaries of the distribution grid complex within the “Rosseti” Group began renaming them- selves legally to be in line with the new brand architecture.

116 117 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

MEMBERSHIP IN ASSOCIATIONS AND ORGANIZATIONS GRI 102-13 Name of the organization Date of joining Core activities 12. Ryazan Chamber Dec 28, 2009 • Assistance to organizations and entrepreneurs in Ryazan Region of Commerce and Industry • Representation and protection of Ryazan-based entrepreneurs business Name of the organization Date of joining Core activities (Ryazan CCI) interests, including abroad • Promoting the advancement in any business activity contextualized 1. All-Russian Industrial Oct 10, 2008 • Cooperation, representation, and protection of employers’ interests for the economic interests of Russia, Ryazan Region, national economy sectors, Association of Employers in the industry in their relations with public authorities, local governments, organizations, and entrepreneurs in the Electric Power trade unions and their associations, sundry employee organizations, and sundry Industry “Energy Employers associations 13. The National CIRED Jun 19, 2012 • Creation, maintenance, and advancement of knowledge exchange Association of Russia” (ERA Committee. Power with the International Committee of Russia Association) Distribution Grids, a non- • Reporting cutting-edge research data on: profit partnership (National – distribution grid design, 2. Research and Technology Nov 20, 2008 • Discussion of the most pressing issues pertaining to the operation of the UES CIRED Committee NPP) – distribution grid construction, Council of the United and its components – distribution grid operation, Energy System, a nonprofit • Expert evaluation of various projects and works – distribution grid packaging partnership (RTC UES NPP) • Analysis, concepts, and strategies of UES development • Advanced tech and technology, priority research, R&D programs 14. Non-Profit Partnership Dec 24, 2012 • Participation in rule-making for the wholesale and retail electricity markets, • Technical regulation and standardization “Market Council collection and analysis of proposals on amendments to such rules • Publishing in the electric power industry on the Organization • Monitoring the compliance with rules and regulations in the wholesale electricity of an Effective System market 3. Kirov Union Dec 11, 2008 • Coordination and harmonization of the Association members’ position for Wholesale and Retail • Drafting and approval of document forms for wholesale of electricity, capacity, of Industrialists on regulating social and labor relations as well as the related economic relations Electricity and Capacity or sundry goods traded in the wholesale market and Entrepreneurs (Regional • Protecting the Association’s position in its relations with trade unions Trading” Association (NPP • Design of the procedure for keeping a register of the wholesale electricity market Association of Employers), and their associations, public authorities, and local governments Market Council Association) actors, and keeping such a register; deciding on whether to grant or revoke KUIE (RAE) the status of an electricity market actor 4. Chamber of Commerce Dec 16, 2008 • Assistance to Russian firms and entrepreneurs • Monitoring the pricing in the wholesale and retail electricity markets and Industry of the Russian • Representation and protection of the Chamber members’ interests domestically • Analysis of the functional outcomes of the wholesale electricity (capacity) market; Federation (CCI of Russia, and internationally on any business matter disclosure of data as required by the law of the Russian Federation CCI RF) 15. EnergoProfAudit Jan 14, 2015 • Development and adoption of codes of conduct 5. Vyatka Chamber Dec 16, 2008 • Representation and protection of the Chamber members’ interests, as well Association of Energy • Development and maintenance of quality control systems for professional of Commerce and Industry as assisting them domestically and internationally on any business matter Audit Professionals, a self- self-regulation (Vyatka CCI) regulatory organization • Promotion of better professional training for the members (EnergoProfAudit Audit SRO) • Representation of the members’ interests before authorities 6. Association of Employers Dec 16, 2008 • Coordinating the organization’s members and their activities in social and labor • Protection of the members’ rights and legitimate interests and Manufacturers relations, as well as in the pertaining economic relations of Vladimir Region, • Representation and protection of rights and legitimate interests of the member 16. Nonprofit Partnership Jun 30, 2017 • Consolidation, representation, and protection of professional interests a regional association firms of Local Grid Operators of the Association’s members before authorities of any level, infrastructural of employers (AEM VO RAE) Association (NP LGO and public organizations as well as nonprofits Association) 7. Nizhny Novgorod Chamber Jun 23, 2009 • Assistance to Russian firms and entrepreneurs, including farms of Commerce and Industry • Representation and protection of Russian companies’ and entrepreneurs’ 17. Self-Regulatory Regional Jul 10, 2017 • Securing the implementation of the development strategy for Russia’s (NN CCI) business rights and interests, including abroad Industrial Association construction industry; construction product quality and competitiveness • Arrangement of cooperation between business entities “Nizhny Novgorod enhancement • Arrangement of private-public partnerships where the public parties Association of Construction • Promoting free enterprise and cooperation in construction, creation of production are governmental agencies and social partners Workers”, an association links, and cooperation of organizations and companies in construction industry (Nizhny Novgorod in Russia 8. Nizhny Novgorod Oct 23, 2009 • Coordinating the members and their activities in social and labor relations, Association of Construction • Promoting a better construction market infrastructure for Russia as well Association of Industrialists as well as in the pertaining economic relations Workers, NNACW) as protecting the construction market from unscrupulous actors and Entrepreneurs, • Representation of the legitimate interests of the member firms a regional association 18. Self-Regulatory Sep 20, 2019 • Securing the implementation of the development strategy for Russia’s of employers (NNAIE RAE) Association of Construction construction surveying industry; engineering and construction product quality Surveyors (SRACS) and competitiveness enhancement 9. Tula Chamber Oct 29, 2009 • Assistance to Russian firms and entrepreneurs • Promoting free enterprise and cooperation in construction surveying, of Commerce and Industry • Protection of Russian companies’ and entrepreneurs’ business rights creation of production links, and cooperation of organizations and companies (TCCI, Tula CCI) and interests, including abroad in this industry in Russia • Arrangement of cooperation between business entities • Promoting a better construction surveying market infrastructure for Russia • Arrangement of private-public partnerships where the public parties as well as protecting the market from unscrupulous actors are governmental agencies and social partners 10. Union of Investor Dec 24, 2009 • Research in the fields of knowledge that are of professional interest Relations Professionals, for the Partnership’s members a non-profit partnership • Adoption of progressive methods for the organization of investment processes (UIRP NP) • Informational, methodological, and analytical support for the Partnership’s members • Legal rights protection and representation of interests for the members 11. ENERGOPROEKT Dec 25, 2009 • Drafting and approval of the Partnership’s regulations binding upon all its Association of Energy members Facility Designers (the • Design and adoption of comprehensive measures to improve the quality ENERGOPROEKT of architectural and construction design (i.e. the design of capital construction Association) sites) as well as that of other design-related activities of the Partnership’s members

118 119 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

ENVIRONMENTAL PROTECTION1 reduce the soil contamination risks and fire Structure of Costs of the Environmental Protection, hazard; RUB thous. • use of insulated busbars only at SS to fully prevent bird and animal deaths. 3,610.6 5,814.9 5,616.3 9,983.0 GRI 103-1 2,033.2 1,631.2 1,344.0 1,215.9 GRI 103-2 Environmental Policy 2019, the Company carried out internal super- 956.0 1,392.8 2,352.4 1,030.5 GRI 103-3 visory audits and had its environmental man- In 2019, the Company followed its 13,156.5 13,620.4 17,501.7 17,159.6 IDGC of Center and Volga Region considers agement system recertified. Environmental Safety Program for 2019-2023 4,963.1 8,812.7 10,624.7 13,251.3 3,451.0 3,175.1 4,291.8 5,971.0 environmental protection an integral part of when planning and funding the environmental its daily operation, fully recognizing the need For its environmental management sys- measures1. 48,611.3 to maintain the environmental balance and tem to perform well, the Company has devel- 41,730.9 In 2019, IDGC ensure environmentally sustainable social oped and adopted the following environmental Environmental costs rose 23.0 % YoY in 2019. of Center and Volga and economic development of the Company. standards: This was due to the rising prices of waste 34,447.0 Region ranked 8th IDGC of Center and Volga Region’s Quality, • RK BP18/30-01/2019 IDGC of Centre removal and dumping, as regional solid util- out of Russia’s 28,170.4 Occupational Health and Safety, Environmental and IDGC of Center and Volga Region ity waste disposal operators emerged in 2019, and Kazakhstan’s Protection, and Energy Management Policy Environmental Safety Guidelines; as well as due to the rising water discharge Top 150 companies focuses on the optimal utilization and pres- • STO 01-018-2019 Environmental prices. in Interfax ERA’s ervation of natural resources, reducing the Management. Environmental environmental impact, and lowering the envi- However, as the environmental law was and Energy Efficiency ronmental risks. IDGC of Center and Volga Region actively adopts amended to no longer charge solid utility Rankings. innovative solutions and deploys cutting-edge waste disposal fees, the environmental impact In 2017, IDGC of Center and Volga Region technologies for more reliable and safer elec- fees dropped in 2019 compared to 2018. 2017 2018 2019 2020 joined the Grid Complex Environmental Policy, tricity delivery, less prone-to-accident grid (planned) which seeks to consistently limit the environ- operation, and lesser environmental impact. In 2019, 155 environmental specialists Biodiversity protection (purchase of bird protection devices) mental burden associated with the fuel and The following was done in 2019: employed by the Company were dispatched to Environmental impact fees energy complex by reducing hazardous emis- • use of insulated wire only at 0.4 to 10 kV take industry-specific professional training, Employee training and retraining in environmental impact minimization sions (discharge) and waste generation. OPLs to fully prevent OPL-related bird retraining, and advanced training programs. deaths while clearing less of forest areas; Environmental (land) protection from production consumption waste The Company has implemented and now suc- • oil circuit breakers replaced with vacuum Protection and rational use of water resources cessfully uses an environmental management and SF6 circuit breakers to use less oil, Air protection system in accordance with the requirements of the international standard ISO 14001:2015. In

Breakdown of Fees for Negative Environmental Impact, RUB thous. GRI 307-1

2,029.7 1,627.3 1,627.3 1,339.8 1,339.8 3.5 3.9 3.9 4.2 4.2 2,033.2

1,631.2 1,631.2

1,344.0 1,344.0

2017 2018 2019 2019 2020 (planned) (actual) (planned) Air emissions Waste dumping fees 1. The projections are cited from the Business Plan approved by the Company’s Board of Directors on December 31, 2019 (Minutes No. 393 dd. December 31, 2019); they are not adjusted for risks that actually occurred after approving such Business Plan and before publishing this Integrated Annual Report for 2019. 1. Approved on March 6, 2019 by order No. 85_TsA.

120 121 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

municipal sewage systems, as well as monitoring 174.2 165.5 164.3 Water Sources, GRI 305-1 GRI 305-5 12.5 11.6 8.1 3 AIR PROTECTION ACTIVITIES IN 2019: Air protection the quality of groundwater produced. thous. m • instrumental monitoring of air emissions from stationary 186.8 The Company regularly conducts an in-pro- 177.1 sources (measurements did not detect any emissions 172.4 GRI 303-1 GRI 303-2 cess analytical monitoring of compliance with IDGC of Center and Volga Region never dis- in excesses of the standards); • instrumental monitoring of the gas purification unit standards for emissions of pollutants and an charged wastewater into water reservoirs, as all instrumental verification of the efficiency of such water was transported to other companies (GPU) performance that are used to clean the effluents GRI 306-1 of woodworking machinery (measurements prove gas-cleaning plants with the assistance of the for treatment. the GPUs to be in line with their specifications); accredited laboratories. For all production • registering the emission sources and calculating the total sites of the Company with stationary emission emission of pollutants into the air (standard acceptable sources (boiler houses, mechanical work- emission levels calculated for 26 facilities). shops, welding stations, forging shop areas, etc.), maximum permissible emissions (MPE) projects have been developed and the appro- priate permits have been obtained. 2017 2018 2019

The Company focuses on preventing the neg- Groundwater sources ative environmental impact of its logistics by Municipal and sundry water supply doing the following: systems • when planning the activities, the logistics of trips is worked out and optimal routes are used; WATER SPENT TO COVER THE HOUSEKEEPING NEEDS OF ADMINISTRATIVE • road vehicles are regularly checked for BUILDINGS AND PRODUCTION FACILITIES compliance with technical standards for atmospheric emissions; In Real Terms, thous. m³ Emissions of Harmful Substances into Atmosphere, t • transport and other mobile vehicles are banned from use if the pollutant load in 3.3 3.5 4.2 3.4 2.6 179.5 168.4 189.2 159.5 153.0 109.9 109.9 their emissions exceeds the established 109.4 109.4 109.4 technical standards. 193.3 182.8 171.9 162.9 155.6 Protection and Rational Use of Water Resources

The household and production needs of the Company are provided by the municipalGRI and 301-1 other water supply systems as well as 11 2017 2018 2019 2019 2020 (planned) (actual) (planned) underground sources (wells) that are on the 2017 2018 2019 (planned) 2019 (actual) 2020 (planned) books of the Company. All available wells are licensed for the right to use subsurface min- Hot water supply eral resources. Cold water supply

WATER CONSERVATION AND MANAGEMENT ACTIVITIES IDGC of Center and Volga Region’s water con- IN 2019: sumption totaled 172.4 thous. cubic meters In Monetary Terms, RUB mn. (Exclusive of VAT) • monitoring the quality of extracted groundwater in 2019, a 2.7 % decrease YoY, of which 8.1 involving accredited laboratories (measurements 0.2 0.2 0.2 0.3 0.3 thous. cubic meters was groundwater, a 30.2 % 7.9 7.4 9.4 7.4 9.1 showed that water from the wells was in line decrease YoY or 4.7 % of the total water intake. with sanitation standards); • contracting the washing of the Company’s cars; The Company’s environmental services regularly 9.6 9.4 • laboratory testing of the wastewater discharged into carried out instrumental verification of the pol- 8.1 urban sewerage systems for contamination. lutant load in wastewater discharged into urban 7.6 7.7

2017 2018 2019 (planned) 2019 (actual) 2020 (planned)

Hot water supply Cold water supply 122 123 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

Over 2019, IDGC of Center and Volga Region Protection of Land from Industrial Waste did not record any spillage of substances ACTIVITIES TAKEN TO PROTECT SOILS and Hazardous Substances harmful to the environment. However, the FROM PRODUCTION WASTE AND HAZARDOUS Company continuously takes measures to pre- SUBSTANCES IN 2019: vent and address the consequences of such • 50 waste collection sites set up, 146 containers and 5 Waste Generation, 3,691.9 3,450.0 3,450.0 5,540.0 5,540.0 events. demercurization kits purchased to enable waste sorting thous. t 3,838.9 3,384.2 3,384.2 3,913.6 3,913.6 75.5 134.7 134.7 136.8 136.7 GRI 306-2 at production sites; • monitoring of waste generation and transport GRI 306-2 For example, IDGC of Center and Volga Region 9,590.4 9,590.4 at branches and within the Company in general; made provisions for a rapid collecting data on • production and consumption waste sent to specialized petroleum products spills and introduced an 7,606.5 companies for further processing, disposal, 6,968.8 6,968.8 environmentally safe neutralizing agent for and landfilling. petroleum products to prevent soil contamina- tion. In 2019, the Company purchased 1.2 t of absorbents and ecological neutralizers suita- ble for the elimination of oil product spills.

Besides, in 2019 the Company continued to replace oil-based units with vacuum and SF6 2017 2018 2019 (planned) 2019 (actual) 2020 (planned) ones, which reduces the risks of soil contami- Birds often use the power line poles to rest nation and contributes to fire safety. and track their prey. BPDs are the most effec- Class I,II and III tive option for preventing electrocution in Class IV birds. BPDs are made from polymer dielec- tric materials to insulate the current-carrying Class V parts, make it difficult for birds to land on trav- erses or make nests on the poles. Under its Environmental Safety Program, the Company’s IDGC of Center and Volga Region generated a To minimize the negative environmental branches purchased and mounted 8,583 bird total of 9,590.4 tons of waste, a 37.6 % increase impact of waste, the Company takes the fol- Biodiversity Protection protection devices on their OPLs in 2019, which YoY attributable to generating more hazard lowing measures: made some 500 km of OPLs safer for birds Class V waste consisting mainly of sent-to-dis- • a hazard class is established for all waste, Wildlife protection from industrial impactGRI 304-2 is a while also reducing the risks of bird-related posal ferrous metals and aluminum debris, determining the directions to its handling; focal point of the Company’s Environmental power outages. The Company plans to pur- which itself came from written-off grid assets • the Company’s industrial sites are equipped Safety Program. chase and mount 4,200 BPDs every year over and vehicles as well as from wires replaced with places for temporary accumulation of 2020-2023. with steel-insulated wires. waste in compliance with sanitary and envi- The areas of the Company’s operation include ronmental requirements; national parks (Meshera, Ugra, Mariy Chodra, IDGC of Center and Volga Region emphasizes Monitoring showed that most of IDGC of Center • the executive officers are appointed to han- Nechkinsky), federal partial reserves and the replenishment of forest resources in the and Volga Region’s waste was Class V (57.8 %) dle hazardous waste; wildlife sanctuaries (Nurgush, Klyazminsky, areas of its operation. As part of the large- or Class IV (40.8 %). Only 1.4 % was hazard • almost all waste (over 99 %) is transferred Muromsky, Tarusa, etc.), as well as specially scale environmental campaigns, the employ- Class I, II, or III waste. to specialized third-party organizations, protected natural areas of local significance. ees of the Company’s branches took an active which have the appropriate licenses, for part in activities aimed at restoring the natu- Transfer 4,344.7 4,522.0 4,748.7 its subsequent use, neutralization and dis- To preserve biodiversity, the Company con- ral balance, including tree planting, urban and 2,891.1 2,878.3 4,837.5 of Waste posal in accordance with the concluded ducts all works in these territories in full com- rural improvement and greening, improvement 9,586.2 agreements. pliance with the established requirements, of the areas around production departments for Dumping which imply the following: and the power distribution zone. or Disposal, • deciding against clearing overhead line 7,235.8 7,400.3 thous. tons routings using herbicides; • deciding against clearing power trans- mission line rights-of-way during mating season; • equipping overhead lines with bird protec- tion devices (BPD).

2017 2018 2019

Trasferred for disposal or neutralization Transferred for dumping

124 125 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

Under its Energy Conservation and Energy GRI 302-4 GRI 302-5 Energy Conservation • Regulations on the drafting of Energy Efficiency Improvement Program, IDGC of Conservation and Energy Efficiency Center and Volga Region took the following key and Energy Efficiency Improvement Programs for “Rosseti’s” steps in 2019: Improvement Subsidiaries2; • replacing incandescent and fluorescent • IDGC of Center and Volga Region’s Energy bulbs with LEDs in the Company’s lighting Energy conservation and energy efficiency Conservation and Energy Efficiency systems; improvement efforts of IDGC of Center and Improvement Program for Until 20223. • replacing outdated and worn-out electric Volga Region followed these regulations in boilers with advanced, automatically regu- 2019: lated ones; • Federal Law of Russia No. 261-FZ On • sealing and thermal insulation of buildings. IDGC of Center Energy Conservation and Energy Efficiency and Volga Region Improvement as well as on Amending By the end of 2019, the Company achieved the Certain Laws of the Russian Federation1; following results with respect to energy con- facilities’ equippment servation and efficiency: with LEDs as of year-end • as a result of the measures taken to reduce 2019 the electricity consumption related to IDGC OF CENTER AND VOLGA REGION’S ENERGY CONSERVATION AND ENERGY housekeeping needs, such consumption EFFICIENCY IMPROVEMENT PROGRAM FOR UNTIL 2022 dropped by 2.92 mn kWh or 9.87 RUB mn, which exceeded the planned figures by 2.41 . mn kWh and 8.73 RUB mn, respectively, an ROSSETI CENTER AND VOLGA REGION’S ENERGY CONSERVATION AND ENERGY excess attributable to the unplanned wide- EFFICIENCY IMPROVEMENT PROGRAM FOR UNTIL 2022 scale adoption of LEDs; • heat consumption was reduced by 11.2 Gcal % and 22.5 RUB thous., which exceeded the planned reduction figures by 9.6 Gcal and 21 61 RUB thous., an excess attributable to addi- cf. planned 50 % tional unplanned activities covered by the available funding sources; DEDICATED ACTIVITIES RELATED ACTIVITIES MAINTAINING ACTIVITIES • natural gas consumption was reduced by 23.6 thous. cubic meters and 216.5 RUB Activities that reduce the consump- • have a positive energy efficiency; • annual; thous., which exceeded the planned figures tion of energy and / or water by at • do not meet the criteria to be re- • maintain the existing electricity by 22.5 thous. m3 and 210 RUB thous., an least 15 % of the corresponding ferred to as dedicated activities loss level; excess attributable to additional unplanned total annual consumption • do not affect the Company’s electricity balance activities covered by the available funding sources; Activities that reduce transmis- sion- and distribution-related electricity losses Activities that involve disabling the Activities that reduce the produc- transformers at substations where tion- and housekeeping-related the load fluctuates seasonally consumption of energy and / or water and pay off by 80 % over 5 GRI 301-1 years Activities that reduce production- and housekeeping-related energy Activities that involve disabling consumption at facilities, feature transformers at substations that Electricity Consumption by the Company’s In 2019, positive energy efficiency, but do have two or more transformers Substations not meet the criteria to be referred when the loads are low 2.5 to as dedicated activities 2.4 Activities that reduce transmis- sion- and distribution-related 2.2 58 electricity losses and pay off with 2.0 2.0 employees 10 years of IDGC of Center and Volga

99.1 Region had advanced training 91.7 95.6 87.8 83.2 ECONOMIC PARAMETERS OF ACTIVITIES UNDERTAKEN IN 2019 in the matters of energy conservation and energy COSTS: EFFECTS: EFFECTS: efficiency improvement, 639 RUB mn 6,016.4 TOE 18.1 mn kWh funded by the Repair Program of whom 37 were trained 45.5 RUB mn in value 44.8 RUB mn 2017 2018 2019 2019 2020 (planned) (actual) (план) to perform internal audit In real terms, million kWh of the energy management

1. system. Passed by the State Duma on November 11, 2009; approved by the Federation Council on November 18, 2009. Rate of electric power loss, % 2. Approved by the Board of Directors of Rosseti on April 29, 2014, Minutes No. 156. 3. Approved by the Board of Directors of IDGC of Center and Volga Region on August 10, 2018, Minutes No. 328.

126 127 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

MOTOR FUEL CONSUMED BY VEHICLES AND SPECIALIZED EQUIPMENT • motor fuel consumption dropped by 239.8 • electricity losses were reduced by 32.5 mn TOE or 321.5 thous. liters compared to the KWh or 80 RUB mn, which was in line with planned figures, mainly due to continuous the plan and attained by taking the sched- In Real Terms, thous. TOE monitoring of transport routes and impos- uled measures under the repair program. 7.2 (5,840 thous. l) 8.0 (6,476.6 thous. l) 7.4 (6,052.3 thous. l.) 8.5 (6,966.3 thous. l) 7.8 (6,406.1 thous. l) ing fuel consumption limits; 11.1(9,838.2 thous. l) 11.2 (9,883.7 thous. l) 10.9 (9,987.9 thous. l.) 9.6 (8,752.4 thous. l) 10.1 (9,263.2 thous. l)

18.3 19.2 18.3 18.1 17.9 16,360.3 thous. l 15,678.4 thous. l 16,040.2 thous. l 15 718.7 thous. l 15,669.3 thous. l

GRI 302-1 ENERGY SPENT TO COVER THE HOUSEKEEPING NEEDS OF ADMINISTRATIVE BUILDINGS AND PRODUCTION FACILITIES

2017 2018 2019 (planned) 2019 (actual) 2020 (planned) In Real Terms, thous. TOE

3.8 (3,291.4 thous. m3) 3.5 (3,046.4 thous. m3) 3.5 (3,052.2 thous. m3) 3.1 (2,661.2 thous. m3) 3.4 (2,926.9 thous. m3) Gasoline 5.6 (37,389.4 Gcal) 5.8 (39,145.9 Gcal) 6.3 (42,565.5 Gcal) 5.8 (39,268.5 Gcal) 6.0 (40,555.4 Gcal) Other 34.6 (100.5 million kWh) 33.8 (98.1 million kWh) 34.1 (99.0 million kWh) 31.8 (92.2 million kWh) 33.2 (96.4 million kWh)

In Monetary Terms, RUB mn. (Exclusive of VAT) 44.0 43.1 44.0 42.6 40.7 166.7 209.6 184.9 254.5 227.8 297.3 309.0 294.9 315.0 323.6

569.5 551.4 518.6 464,0 479.8

2017 2018 2019 (planned) 2019 (actual) 2020 (planned)

Electricity 2017 2018 2019 (planned) 2019 (actual) 2020 (planned) Heat (buildings' heating) Natural gas (including LNG) Gasoline In Monetary Terms, RUB mn. (Exclusive of VAT) Other

16.6 17.7 19.8 18.3 19.5 Use of Energy Saving Lighting 66.8 66.8 87.1 75.3 83.4 331.1 310.7 353.5 325.2 352.6 75.0 61.0 50.0 460.4 455.5 32.8 35.0 414.5 418.7 97,168 395.2 79,675

62,595 64,779

43,614 44,742 44,817 35,099 22,408 16,163

2017 2018 2019 (planned) 2019 (actual) 2020 (planned) 2017 2018 2019 (planned) 2019 (actual) 2020 (planned) Energy-saving bulbs (non-LED), pcs. Electricity LED bulbs, pcs. Heat (buildings' heating) LED-equipped facilities of the Company, % Natural gas (including LNG)

128 129 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

HUMAN CAPITAL MANAGEMENT AND SOCIAL Average Staff Number: Breakdown by Gender and Regions in 2017-2019, persons RESPONSIBILITY 2017 2018 2019 Branch Women Men Women Men Women Men Vladimirenergo 701 1,711 619 1,690 506 1,644 GRI 103-1 GRI 103-2 Ivenergo 213 1,232 220 1,239 214 1,216 HR and Social Policy GRI 103-3 Kalugaenergo 673 1,904 665 1,913 639 1,872 KEY ELEMENTS OF HR AND SOCIAL POLICY The HR and Social Policy of IDGC of Center and Kirovenergo 389 2,187 383 2,196 373 2,179 OF THE COMPANY Volga Region is aimed at forming a cohesive team of employees, whose professional com- Marienergo 159 776 154 775 152 759 petence, responsibility, mutual respect and Nizhnovenergo 937 4,269 921 4,309 858 4,296 honesty underlie the commercial success and Ryazanenergo 503 1,797 498 1,795 491 1,773 Corporate culture sustainable growth of the Company. Therefore, IDGC of Center and Volga Region seeks to cre- Tulenergo 677 1,908 669 1,909 649 1,855 ate favorable working conditions, along with an Udmurtenergo 287 1,884 296 1,867 399 2,274 atmosphere of trust and cooperation. Safety and work Executive Arm 136 127 103 94 103 93 culture Total 4,675 17,795 4,528 17,787 4,384 17,961 The Company’s HR and Social Policy is devel- oped according to the requirements of the Social benefits Russian Federation legislation, the Sectoral and guarantees Tariff Agreement for the Electric Power Industry, the collective bargaining agreement Assignment between the employees and the Employer, of Staff Staff motivation 11.2 12.0 0.9 9.6 IDGC of Center and Volga Region, PJSC, as well 6.4 to Branches, % as the international standards ISO 9001:2015, 11.4 ISO 14001:2015, ISO 45001:2018, and ISO 11.2 Vladimirenergo Staff training 50001:2011. and development Ivenergo Kalugaenergo Kirovenergo Staffing Marienergo Nizhnovenergo Staff Number Ryazanenergo Organization design and Structure Tulenergo Udmurtenergo GRI 102-7 GRI 102-8 Executive Arm IDGC of Center and Volga Region’s staff num- ber averaged 22,345 persons in 2019, a 0.13 % reduction YoY due to some new jobs remaining 10.1 23.1 4.1 vacant as well as due to greater productivity IDGC of Center and Volga Region relies on negotiations resulting from optimized business processes. to resolve disputes with its employees on invoking the labor law or any other legal acts that regulate labor, in-house regulations, or employment contracts. Besides, every employee, whether incumbent Over the past three years, the staffing level of was 43 years. Over 2017-2019, the percentage or former, may complain about the Company’s action the Company has been stable, maintained at of workers aged 25-50 rose by 0.6 p.p., that of or inaction that they deem unfair. The Company shall Staff Number and active turnover the min. level of 97 % (97.7 % as of year-end older-than-50 pre-retirement workers rose by submit an official response to the complaint within 30 1.1 2019). Staff turnover was 1.1 % in 2019. The 1.5 p.p., while the percentage of working per- 0.9 days of receiving it. In 2019, IDGC of Center and Volga 0.6 Company seeks to reduce its turnover. In more sons of retirement age dropped by 2.1 pp. The Region received 16 such complaints from incumbent specific terms, the system of psychophysiolog- Company had 3.4 % of employees aged below and former employees and managed to settle all ical examinations is being improved to be used 25 as of late 2019, no change over 2017-2019. 22,470 the disputed matters. 22,315 22,345 in the process of recruitment to identify which candidates suit the best in terms of qualifica- 89 % of the Company’s employees have voca- tions and professional competence and are tional education and training, and over the past most eager to work for the Company. There three years this figure has increased by 2 p.p. are adaptation programs for young profession- als in place. 2017 2018 2019 Average staff number, ppl. In 2019, the average age of the Company’s Active turnover, % employees remained at the level of 2018 and

130 131 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

DISTRIBUTION OF PERSONNEL TURNOVER BREAKDOWN OF PERSONNEL HIRED IN 2019

By Region, % By Age, % By Region, % By Age, %

12.9 13.0 14.9 5.4 15.4 32.1 16.7 38.7 6.5 2.8 4.9 10.9 3.9 31.9 14.6

Vladimir Region Vladimir Region Ivanovo Region Ivanovo Region Kaluga Region Kaluga Region Kirov Region Kirov Region Under 25 Under 25 Mariy El Republic Mariy El Republic 25-50 25-50 Nizhniy Novgorod Region Nizhniy Novgorod Region Aged 50 to retirement age Aged 50 to retirement age Ryazan Region Ryazan Region Working retirees Working retirees Tula Region Tula Region 32.1 16.7 32.1 16.7 Udmurt Republic Udmurt Republic

12.9 13.0 14.9 5.4 15.4 38.7 6.5 2.8 4.9 12.1 39.1 53.3 10.2 16.2 3.8 8.2 14.6 7.4 6.7 15.0 3.4

Vladimir Region Under 25 Vladimir Region Under 25 Ivanovo Region 25-50 Ivanovo Region 25-50 Kaluga Region Aged 50 to retirement age Kaluga Region Aged 50 to retirement age Kirov Region Working retirees Kirov Region Working retirees Mariy El Republic Mariy El Republic Nizhniy Novgorod Region Nizhniy Novgorod Region Ryazan Region Ryazan Region Tula Region Tula Region 12.1 39.1 12.1 39.1 Udmurt Republic Udmurt Republic

10.2 16.2 3.8 8.2 By Employee Category, % By Gender, % 7.4 6.7 15.0 3.4 By Employee Category, % By Gender, %

68.5 10.9 20.6 28.2 71.8 78.1 6.7 15.2 20.2 79.8

Managers Men Managers Men Professional staff Women Professional staff Women Workers Workers

68.5 10.9 20.6 28.2 71.8 68.5 10.9 20.6 28.2 71.8

Managers Men Managers Men Professional staff Women Professional staff Women Workers Workers

132 133 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

Development GRI 404-2 Selection, Recruitment pool was sufficient to cover 83 % of manage- In 2019, the Company held an academic competition, ment jobs as of the end of 2019. Annually IDGC of Center and Professional the All-Russian “Rosseti” Olympiad for 9- and 10-Graders. Each employee of the Company receives ongo- The academic competition included testing the participants’ and Volga Region ing training. The adoption of state-of-the-art participates in the All- Development of Staff theoretical knowledge in physics, mathematics, PERSONNEL MOBILITY AND JOB technologies, as part of digitization of elec- Russian Thesis Contest and computer science, as well as the ability to apply GRI 404-3 G4-DMA (earlier EU14) ROTATION PROGRAM tric grids as well, increase the requirements for BScs and MScs this knowledge when solving the applied problems to the skill level of operational and administra- in Electricity and Electric of the electric power industry. This academic competition IDGC of Center and Volga Region has a stand- Personnel mobility and job rotation program tive staff of the Company. The Company organ- Power Engineering. helps power grid companies find talented students ardized procedure for search, recruitment, is aimed at supplying qualified personnel to izes a proactive training of staff to work at the In 2019, the Company with technical creativity and innovative thinking, who selection, and approval of candidates for those areas with staffing issues. As part of this newly commissioned facilities and master new appointed 8 experts are planning to be professionally engaged in the power vacant positions. Finding a candidate is a two- program, the Company participates in build- technology, and aims to integrate scientific from its staff to judge industry, and involve them in the development of advanced step effort: in-house and external recruitment. ing of a single corporate database of vacancies work into the educational and production pro- the contestants in topics infrastructure and technological projects relevant The Company prioritizes in-house recruit- and candidates’ resumes within the power grid cess. The main areas of training include the they specialized in. to the power grid complex of Russia. Prize winners ment i.e. filling vacant positions with the exist- complex. following1: then took part in the “Rosseti” Energy Project Session ing human resources, to which end it relies • professional training (retraining) of at Russian Children’s Centre Orlyonok, in the All-Russian on talent pools, rotation, and mobility within blue-collar employees to obtain a field-ori- Contest of Innovative Projects and Designs for the Electric the Company or the “Rosseti” Group. This not RECRUITMENT OF YOUNG ented profession, a secondary (sideline) Power Industry Energoproryv 2019, as well as in the All- only allows for a timely filling of vacant posi- PROFESSIONALS vocational profession; Russian ProeKTOriA Forum. tions with qualified personnel, but also gives • advanced training of staff of basic vocational employees some additional opportunities to IDGC of Center and Volga Region actively professions; gain new experience, supporting their interest recruits young professionals educated in rel- • advanced training of managers and and motivation. evant fields through cooperation with univer- Company’s experts; sities and vocational schools located in the • training and certification of personnel for regions of its branches’ operation. In 2019, the right to perform a certain type of work. TALENT POOL 1,241 students (mainly in power engineer- ing) undertook an internship in the Company. 59 % (13,166 employees) took time off to par- Breakdown of Trained Labor Force andTraining Costs, % The Talent Pool helps timely hire a skilled During the summer work season, 240 students ticipate training in 2019, a 3 p.p. (632 persons) worker that will be ready to work effectively were enlisted in the Company’s student teams, more than in 2018. 92 % or 12,086 persons of and professionally as a high-tier officer. Pooled and 203 students received training as part of those were production staff. 91.8 0.1 8.1 candidates are trained to boost their profes- targeted training (those who had good aca- sional and managerial skills as well as to demic performance received grants from the Most of them (60 % or 7,891 employees) motivate them more. In 2019, 90.9 % of vacant Company). underwent training at the corporate train- management jobs in the Executive Arm as well ing centers, a 5 pp increase YoY. The corporate as at the branches (1,423 jobs out of 1,566) Open Doors Days and tours for schoolchildren training centers offer the following advantages: were given to in-house candidates, with 25.7 % and students of universities and vocational • creation of uniform standards and methods Administrative staff (403 jobs) being given to persons from the tal- schools are regularly held at the branches of of education; ent pools. the Company along with students’ meetings • development of the educational principles Production staff with the management and other experts. In that comply with the Company’s strategic Support staff The effectiveness of a talent pool directly the course of such meeting the young people plans; depends on the conditions created for the pro- are given the opportunity to visit the electricity • rapid response and adjustment of the learn- fessional growth of succession pool mem- generation facilities and meet the experienced ing process to better meet the managerial bers and their preparedness to work in new specialists of the power industry to help them and production demands of the Company; conditions. The Company has approved tar- decide which career to pick in the future. • use of the Company’s training facilities; get positions for each succession pool mem- • cost reduction; ber, developed individual professional growth To recruit young professionals, IDGC of Center • personnel qualifications comply with the 0.9 0.9 plans, identified mentors from the most com- and Volga Region’s officers regularly take part Company’s needs to the greatest possible petent employees, whose main task is to assist in job fairs and are involved in hiring the grad- extent; 0.8 succession pool members in mastering the uates of industry-specific educational institu- • training effectiveness assessment available. 57 56 59 target positions. tions in the regions where it operates. The company also places its employees for 32 31 35 The executive talent pool is bi-level: Level 1 is training in industry-specific universities and the Company (candidates for the positions of vocational, such as the following: Deputy Directors General, Deputy Directors Training and Staff • National Research University Moscow of branches responsible for specific activities, Power Engineering Institute and its 2017 2018 2019 and Heads of Subdivisions in the Executive branches; Stake of employees granted off-the-job training, % Arm); Level 2 is its branches (candidates for the positions of Heads of Divisions at man- Stake of employees trained at corporate training centers, % agement offices, production departments, and Training costs to payroll ratio PDZs, as well as for the positions of Heads and Chief Engineers of production depart- ments and PDZs). In 2019, the executive talent 1. pool included 3,028 of the most high-potential Regulated by the HR and Social Policy of IDGC of Center and Volga Region, the Procedures for HR Management, the Provisions on Staff employees of the Company. Thus, the talent Training and Development of IDGC of Center and Volga Region, and the requirements of the HR Management Rules for the Electric Power Industry of the Russian Federation. 134 135 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

• State Educational Institution of Higher In 2019, to improve the professional skills of maintenance Professional Education Ivanovo State Power Employee Payroll, RUB mn personnel, popularize best practices, and promote University named after V.I. Lenin; Remuneration the prestige of vocational professions, four experts and five • Skopin Electrotechnical College; professionals represented IDGC of Center and Volga Region • Standardization, Metrology and Certification and Engagement Academy and its branches; 13,395.1 at the Young Professionals WorldSkills Open Corporate 12,984.5 Championship of Professional Skills, where they competed in: • Petersburg Power Engineering Institute of A uniform and transparent remuneration sys- 12,569.3 Professional Development and its branches. tem for all occupational groups enables IDGC • Operation of cable power transmission lines; of Center and Volga Region to recruit and • Maintenance and repair of relay protection and automation retain experienced staff members while also equipment; motivating them to perform the best they can. • Smart electricity metering system. Remuneration of the Company’s employees is composed of the tariff component (tariff rates / basic salaries) and a variable compo- nent (additional payments as a percentage of In 2019, IDGC of Center and Volga Region’s the tariff rate / basic salary). For all employees of the production departments and divisions of employees took part in Leaders of Russia the executive office ensuring operation of the 2017 2018 2019 and Leaders of Power Engineering, all-Russian production departments of the branches, there manager contests. The latter had is a single wage rate scale. For the adminis- trative staff of the branches and the executive respect to specifying the grid connection office employees, the basic salary ranges are conditions; applied. • bonuses as per results of the Accident-Free 176 participants representing the Company, and Safe Department of IDGC of Center and of whom 39 reached the finals and 7 were among The current wage system provides for the Volga Region’s Power Grids Contest. winners. following: • imposition of tariff rates / basic salaries The Company has a policy to keep its employ- based on the qualifications, professional ees social security level high, which includes aptitude and experience of the employee; their wages. The average wage at the Company GRI 404-1 AVERAGE TIME OF EMPLOYEE TRAINING PER TRAINED EMPLOYEE, HOURS • tenure pay; is higher than the regional average wherever • additional payments and bonuses depend- it operates; the Company keeps it that way to By Employee Category ing on the functions performed, volume of recruit high-skilled professionals in the com- work performed and working conditions; petitive labor market. 100 • current bonuses (according to the results 93 91 of work over a month, quarter, year) for the results of production and business 59 64 52 53 activities; 45 50 • one-time bonuses for performance of par- ticularly important tasks; • additional bonuses payable when a branch completes the fall and winter season suc- 2017 2018 2019 cessfully, awarded for proper arrangement of coordination and decision-making with Operational staff Professionals and officers Average Wage to Minimum Wage Ratio at Branches GRI 202-1 Managers 6.28 6.39 5.90 5.61 5.65 5.81 5.78 5.66 5.32 4.86 4.71 4.59 4.70 By Gender 4.52 4.31 4.29 4.39 4.42 4.39 4.29 4.30 4.03 4.26 4.12 4.24 4.11 95 3.95 78 75 69 73 74

2017 2018 2019

2017 2018 2019 Vladimirenergo Kirovenergo Ryazanenergo Ivenergo Marienergo Tulenergo Men Kalugaenergo Nizhnovenergo Udmurtenetgo Women

136 137 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

Average salary ratio: Company’s branch vs its region GRI 102-38 COLLECTIVE BARGAINING GRI 102-41 The Accident and Disease Insurance Program AGREEMENT has a round-the-clock (24 hours a day) coverage. Managers Professionals and officers Operational staff The Collective Bargaining Agreement Branches 2017 2018 2019 2017 2018 2019 2017 2018 2019 drafted in accordance with the Sectoral Tariff Agreement of the Electric Power Industry in NON-STATE PENSION SCHEMES Vladimirenergo 2.65 2.51 2.41 1.58 1.50 1.54 1.35 1.27 1.27 Russia is they key document that defines the (NPS) Ivenergo 3.03 2.95 2.66 1.96 1.84 1.81 1.48 1.43 1.36 benefits package for the Company’s employ- Kalugaenergo 2.11 2.00 1.86 1.28 1.18 1.18 1.04 0.99 0.94 ees. The Agreement sets forth a standard list As part of the NPS Program, the Company reg- of additional benefits, guarantees, and com- ularly transfers pension contributions to non- Kirovenergo 3.23 2.99 2.85 1.92 1.80 1.75 1.44 1.38 1.31 pensations available to the Company’s employ- state pension funds it has NPS agreements Marienergo 2.72 2.62 2.59 1.57 1.52 1.48 1.10 1.10 1.04 ees in addition to what is required by the with, and those employees that qualify for age- Nizhnovenergo 2.44 2.38 2.23 1.68 1.62 1.56 1.35 1.34 1.26 Russian law as well as by the Sectoral Tariff based pensions can count on receiving such Agreement of the Electric Power Industry in non-state pensions in addition to public wel- Ryazanenergo 2.49 2.36 2.21 1.52 1.44 1.41 1.28 1.23 1.21 Russia, including: fare. The NPS Program includes: Tulenergo 2.45 2.40 2.21 1.44 1.37 1.32 1.16 1.13 1.07 • voluntary health insurance (VHI); • the Corporate Plan, under which the Udmurtenergo 2.62 2.47 2.40 1.61 1.50 1.49 1.09 1.06 1.01 • insurance against accidents and diseases; Company fully finances additional non-state • provision of additional paid leave for fam- pension coverage of its employees at its ily reasons; own expense; 1 Social Assistance for Employees • support for socially vulnerable families; • the Parity Plan, which implies that the • financial assistance to employees during employee and the Company jointly, in cer- SOCIAL PAYMENTS the annual paid leave; tain proportions and according to certain The average wage keeps rising thanks to the • financial assistance to employees on such rules, contribute to the employee’s pension Total, RUB mn biannual indexation by the actual consumer occasions as marriage, birth or adoption of fund; price index value in Russia. a child, as well as the child’s birthday (from • the Co-Financing Program, which means 61.1 1 to 3 years inclusive); that the employee, the Company, and the The average salary within the Company rose by • financial assistance in organizing funerals state all contribute to the employee’s future 3 % YoY in 2019 due to the indexation of wages of the employees and their close relatives; pension under Federal Law No. 56-FZ dd. 44.6 and raising the rates payable to employees in • financial assistance to employees for anni- April 30, 2008. 39.1 38.7 essential jobs on the basis of their professional versary celebrations; traits. • payment of benefits to employees who retire due to disability; HOUSING POLICY IDGC of Center and Volga Region has a sys- • payment of benefits to children of employ- tem of key performance indicators (KPI) for ees who died in the workplace; IDGC of Center and Volga RegionGRI 201-3 helps the personnel assessment that is bound to the • providing conditions for recreation and employees to improve their housing. The Company’s strategic goals. Individual KPIs are health improvement of employees; Company has Housing Policy Regulations in 2017 2018 2019 2020 determined for every subdivision and every • providing children of employees with vouch- place to recruit high-skilled specialists and (planned) official. Decisions on awarding the employees ers to summer camps or leisure-and-health young talents. In 2019, 138 employees of the Per employee, RUB thous. with bonuses are made with regard to compli- institutions, as well as New Year’s gifts; Company received reimbursements for their ance with these indicators. KPIs of production • non-state pension schemes for employees. rent, 39 employees received compensation for personnel and specialists are tied to the com- a part of the costs of mortgage loan interest. 2.7 pletion of current tasks, while bonus awards for the top and middle managers are based INSURANCE COVERAGE on the attainment of medium- and long-term ORGANIZATION OF RECREATION 2.0 objectives. Under its Insurance Coverage Regulations AND PROMOTION OF HEALTH 1.8 and the Insurance Coverage Program, the 1.7 OF EMPLOYEES’ CHILDREN The most distinguished employees are pre- Company provides voluntary health insurance sented with national, industry and corpo- (VHI) as well as accident and disease insurance Vouchers for children of the employees to chil- rate awards. In 2019, 83 employees of IDGC to all its employees. dren’s camps and leisure-and-health institu- of Center and Volga Region were awarded tions are partially funded by the Company as by the Ministry of Energy, 137 gained corpo- The VHI Program provides the whole spectrum well as by the local self-governments. In 2019, rate awards from “Rosseti”, and 2,690 per- of health services: outpatient care (including at over 600 children of employees used such sons received industrial awards of inhouse home), private ambulance, inpatient and den- vouchers. 2017 2018 2019 2020 awards of IDGC of Center and Volga Region/its tal care at specialized regional hospitals. VHI (planned) branches. gives an option to choose any healthcare facil- ity covered by the insurance to better suit the employee’s condition and location; it also pro-

1. vides for faster examination, which improves The projections are cited from the Business Plan approved by the Company’s Board of Directors the quality of treatment, thus boosting fur- on December 31, 2019 (Minutes No. 393 dd. December 31, 2019); they are not adjusted for risks ther productivity. Beside basic healthcare, the that actually occurred after approving such Business Plan and before publishing this Integrated Annual Report for 2019. VHI Program provides for yearly vaccination against influenza and tick-borne encephalitis.

138 139 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

HEALTH, FITNESS AND SPORTS WORK WITH VETERANS company’s energy facilities. The Company also Industrial has Occupational Safety Violation Response In Spring 2019, IDGC of Center and Volga Region seeks to In 2019, the Coordination Veterans’ Council of Regulations in place, which state that only In 2019, Tulenergo shortly before promote health, fitness and popular sports. the Company continued its work. The Council and Occupational employees complying with the rules of occu- inaugurated the first- the Victory Day, ever medical facility Health Days, spartakiads and tourist rallies for supervises the activities of nine Veterans’ Safety GRI 403-1 pational safety could receive the wage bonus the employees branch employees take place in the regions Councils of the Company’s branches, which in full. created by the Staff of IDGC of Center of presence. Besides, the Company pays unite 5,421 working and 5,142 retired veterans One of the important performance indicators Health Management and Volga Region for its employees’ swimming pool and gym of the electric power industry, including 192 and a factor of sustainable growth for IDGC The requirements for compliance with safety System, a digital in all regions memberships. veterans of the WWII Eastern Front, homefront of Center and Volga Region lies in sustained rules are imposed not only on the person- project. The facility of the Company’s workers, prisoners of concentration camps occupational safety for the Company’s staff and nel of the Company, but also on the employ- relies on advanced operation worked Branch teams represent the Company in and residents of besieged Leningrad. Each of for the residents of the regions where it oper- ees of contracting organizations working software to remotely hard to complete regional inter-industry competitions with the veterans has worked in the electric power ates. To this end, the Company has its special at the Company’s energy facilities. These check employees’ Svet Pamyaty, honor. In 2019, IDGC of Center and Volga industry for over 20 years. Program for Prevention and Reduction of Risks requirements are mandatory and are stipu- health. This software a historical memorial Region’s teams participated in “Rosseti’s” of Injury to Personnel and Third Parties at Grid lated in the contracts signed with contracting enables every project. To preserve ski racing, volleyball, futsal, ice hockey, In 2019, non-state pensions were paid to 5,048 Facilities for 2019-2020 in place. The Program organizations. employee to monitor the memory table tennis, running, swimming, and chess persons, while 214 WWII Eastern Front vet- is based on audits and their related remarks, their medical test of participants tournaments. erans received monetary support when they suggestions from occupational health and Monitoring and accounting of the viola- results online, and events needed it the most. The Company continued safety officers, and injury overviews. The key tions of occupational safety and workplace and the managers of war, each branch its effort to compile an electronic almanac of actions under the Program are: hygiene is carried out as part of the compre- to monitor the health of the Company YOUTH POLICY archival documents, photographs, and recol- • equipping staff and workplaces with new, hensive, targeted and thematic inspections, of their subordinates collects data lections of EF and power engineering veter- modern protection devices and gear; as well as during such activities as, for exam- on a daily basis. for commemorative In 2010, IDGC of Center and Volga Region ans. The Company’s website keeps its Zhyvaya • accident prevention activities; ple, Occupational Safety Day, Fire Safety Day, museum established its Council of Young Professionals Ystoriya online museum of the electric power • implementation of sanitary measures to Operational Worker Day, Day With the Crew, exhibitions, sections to bring together promising young special- industry up-to-date and running. prevent occupational diseases; etc. G4-DMA (earlier EU 16) of photographs ists that have a proactive attitude, are willing • implementation of measures for a general and memories to grow professionally, build a career, and take improvement of working conditions. IDGC of Center and Volga Region established of participants part in the Company’s public life. The Council Occupational Safety Committees that consist of combat are created mainly seeks: The Company’s occupational health and safety of managers and trade union representatives; on the websites, • professional and social adaptation of young activities mainly seek to keep employees alive they meet to review different subdivisions’ meetings of the veterans employees to working in a collective; and healthy. At the same time, the Company occupational safety performance, analyze pro- dedicated to the Great • to promote professional growth; seeks to improve the working conditions, have posals on how to improve labor conditions and Victory are held. Every • to boost young people’s creative and as little as possible physically taxing jobs, and prevent injuries, and devise extra steps with year, the Company’s research initiative; promote healthy lifestyles. respect to occupational safety. employees • to encourage young people’s active partic- take active part ipation in the Company’s and its branches’ All employees of IDGC of Center and Volga IDGC of Center and Volga Region has 19,355 in the improvement jobs that are subject to regular check for work- of memorials productive and cultural life. Region have full medical checkups before and and monuments during their employment. Production staff’s ing conditions. In 2019, such checks identified to soldiers, who Members of the Council are involved in sports health is monitored every day or every shift by 320 jobs (or 2 % of the Company’s total job ros- died during and recreational activities, hiking, corporate their immediate superiors as well as by the ter) that were categorized as Class 3.1 or 3.2 1 the Second World events, subbotniks; they help organize festivi- medical officers employed by the Company’s (i.e. hazardous jobs) ; the Company planned War, participate ties for children from the Company-patronized branches. Besides, people in core professions and took 50 measures to improve the labor in solemn orphanages, etc. of the industry undergo psychophysiological condition. Compared to 2018, 3 % less hazard- processions testing every year to check their blood pres- ous jobs (Class 3.1 and 3.2) were found in 2019. with the veterans In 2019, the Council took part in the First All- sure, heart rate variability, visual and motor and lay wreaths Russian Intercorporate Walking Contest The reactions, distribution of attention, etc. People In 2019, IDGC of Center and Volga Region had on monuments Walking Man (Rus: Человек идущий), the at risk are subject to repeated tests. In case no cases of occupational injuries or diseases. to fallen soldiers. World Tree Planting Day, the International the checkups return contraindications to work, Less employees had harmful or hazardous Sport Forum Russia-Sports Power, the the employee is granted time off to undergo working conditions; productivity improved in International Youth Energy Forum, the Forsage individual testing or may be transferred to a general, as did the social and legal protection 2019 International Forum for Young Power lighter-duty job upon consent. If necessary and available to employees. Engineers and Industrialists, the Youth Day so recommended by the healthcare provider, of the Russian Energy Week, as well as in an employee can be provided in-depth exami- To prevent exposure to harmful or hazard- Leaders of Russia and Leaders of Power nation, outpatient, inpatient, or spa treatment. ous factors as well as to boost productiv- Engineering. ity, the Company equips workers with all the In its effort to keep each branch compli- ant with occupational safety standards, the Company follows local regulatory documents that comprise rules of conduct of works, per- sonal protective equipment selection and use procedures, contractor selection procedures, and guidelines for contractors working at the

1. 98 % of the Company’ s jobs were recognized as Class 1 or 2 jobs (optimal or acceptable, respectively); no Class 3.3, 3.4, or 4 jobs were found. 140 141 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

necessary protections as required by the cur- for 3.2 % of the total costs of occupational Structure of Costs for Occupational Specific Costs of Occupational Safety rent regulations: special clothing and foot- safety measures and 3.4 % of the total costs of Safety and Labor Protection, RUB mn per Employee, RUB thous. Personal protective wear, protective equipment, tools, and tooling providing employees with personal protective equipment to work safely. equipment. is chosen not only for protection (e.g. In particular, in 2019 the Company purchased The Company’s occupational health and safety 14.6 13.8 5.7 against electric fall protections of a fundamentally refreshed costs totaled 457.3 RUB mn in 2019, a 8.7 % 18.0 23.0 14.0 4.1 3.8 4.1 current) but also 60.1 55.8 72.1 design as well as special kits to protect OPL increase YoY. The Company plans to spend 14.4 15.0 16.3 for convenience. 323.4 335.8 365.5 servicemen from induced voltage, as well as over 460 RUB mn in 2020. Specific occupa- For instance, using 457.3 instrumentation to measure it. 15.5 RUB mn tional health costs totaled 20.4 RUB thous. per 415.3 420.8 20.4 induced voltage 18.8 was spent for these purposes, which accounts 18.5 sensors helps not only measure the induced voltage before GRI 403-2 doing any work, Industrial Injury Casualties, pers. but also prepare 2 1 2 0 0 0 the workplace faster 1 0 0 1 1 0 and easier. 1 0 1 0 0 0 4 2017 2018 2019 2017 2018 2019 3 Provision of PPE Provision of PPE Sanitation and hygiene Sundry occupational health and safety costs Accident prevention activities Improvement of labor conditions 1 1 1

0

2014 2015 2016 2017 2018 2019

Mild PROCUREMENT AND SUPPLIER RELATIONS Severe 1 Fatal IDGC of Center and Volga Region’s procurement is governed by Rosseti’s Uniform Procurement Standard .

employee in 2019, a 8.5 % increase YoY. The SUPPLY CHAIN GRI 102-9 specific costs of personal protective equipment totaled 16.3 RUB thous. per employee in 2019, a 8.6 % increase YoY. 42.4 ACTIVITIES PROCUREMENT PROCEDURES 25.2 25.7

Reconstruction, retrofitting and Framework agreements upgrading 49.1 % 56.5 % 10,315 Open tenders and auctions Energy repair (repair) 39.8 % production, maintenance 14.9 % Open requests for proposals 3.2 %

New construction Sole supplier 13.0 % 3.2 % 3,826 3,431 Price comparison IT procurements 2.2 % 2.5 % Seller-organized procedures 1.6 % 2017 2018 2019 Other procurement Procurement made, no Open requests for quotation 13.1 % 0.9 % Total procurement inclusive of VAT, RUB bn.

1. Rosseti’s Uniform Procurement Standard (the Procurement Regulations) was approved by Rosseti’s Board of Directors (Minutes No. 343 dd. December 25, 2018) as an inhouse regulation by joining it (Order No. 39-TsA dd. January 31, 2019), drafted in compliance with the Federal Law No. 39-FZ dd. July 31, 2019 On Purchasing Goods, Works and Services by Certain Types of Legal Entities. 142 143 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

Competitive IDGC of Center and Volga Region’s procurement efforts follow these principles: Following these principles, IDGC of Center and Volga Region uses the procurement methods below:

procurement Principle Description Procurement methods accounted for (in descending priority order) Terms and conditions Procurement transparency • as required by the current legislation; • sufficient for potential counterparties to decide whether Competition • priority method; to engage in procurement • choosing any other method must be allowed by Rosseti’s Uniform Procurement Standard 96.8 % Equality, fairness, non- • competitive selection; Auction • a competitive market exists for the procured products; of the total discrimination, no unreasonable • equal competitive opportunities for all bidders; • the procurement initiator has drawn a specification that sets forth the requirements in detail procurement competition restrictions • non-discrimination and no unreasonable competition for the bidders involved restrictions for the bidders involved; Request for proposal • the initial (maximum) contract price is within 15 RUB mn inclusive of VAT; value-wise, • reasonable requirements to potential bidders, procured goods, • the winner must be selected by at least two criteria set forth in the procurement with 3.2 % works, and services documentation being procured Targeted and cost-effective • commercial proposals must be selected on a basis of price Request for quotation • a competitive market exists for the procured products; spending of funds and non-price criteria; • the procurement initiator has drawn a specification that sets forth the requirements from a sole • the cost-effectiveness and sundry efficiency criteria must be in detail; supplier. set forth in advance • the initial (maximum) contract price is within 7 RUB mn inclusive of VAT; No unmeasurable requirements • no restrictions on admission to bidding; • contract price is the only winning criterion to bidders • no unmeasurable requirements to bidders Competitive pre-selection • the Customer is unable to define the scope and/or timing of delivery of works, goods, Transparency and controllability • planning; or services as of the time of bidding; of all bidding phases • accounting; • competitive pre-selection is subject to no limits on the initial (maximum) contract price; • monitoring; • prices are requested on the basis of competitive pre-selection • control; Price comparison • procurement of simple goods; • audit • the initial (maximum) price of purchase is within 500 RUB thous. inclusive of VAT; Only professional and competence • officers’ personal responsibility for any procurement procedure Procurement from a sole supplier • procurement of one-of-a-kind goods, works, or services from a sole supplier (contractor); employees of the Company to be and any decisions made with respect to procurement; (contractor) • procurement from a sole supplier (contractor) to prevent or address the consequences involved in procurement • impeccable compliance with all the procurement regulations of, an emergency Compliance with law • compliance with procurement-regulating laws; Procurement by participation • the seller must ensure fair competition for procurers • compliance with anti-corruption law in the seller-organized procedures

Below are the key challenges facing the In an effort to optimize its procurement activ- In 2019, e-commerce trading covered 93.3 % In 2019, IDGC of Center and Volga Region Company’s procurement departments: ities, IDGC of Center and Volga Region prefers of the total procurement in terms of value, or carried out • timely and complete satisfaction of the the following tools: 23,913.87 RUB mn inclusive of VAT. Company’s needs in products with the ade- • e-commerce platforms; quate price, quality, reliability and energy • procurement planning; analyses efficiency; • purchases from small and medium-sized 3,898 • efficient use of funds; enterprises. Purchases from Small of bidders, where it had • regularly increasing the possibility of legal entities and individuals to participate in the and Medium-Sized Company’s procurement procedures and Enterprises GRI 204-1 124 attracting new participants; Use of E-Commerce • contributing to the development of fair To fulfill the Decree of the Russian Government negative opinions competition; Platforms No. 867-r dated May 29, 2013 On Approval of and rejected • ensuring maximum openness and transpar- the Action Plan (Roadmap) Expanding Access ency of procurement; To publish information about orders, IDGC of Small and Medium-Sized Enterprises to the • prevention of corruption and other improper of Center and Volga Region uses a special- Procurements of Infrastructural Monopolies 75 bidders actions during procurement. ized official website of the Russian Federation and Companies Partially Owned by the (www.zakupki.gov.ru), Rosseti’s e-commerce Government, the Company has the Program platforms (www.etp.rosseti.ru) its B2B-Center for IDGC of Center and Volga Region / SME In cooperation with IDGC of Center and Volga (www.b2b-center.ru),as well as the official Partnership in place. Region’s Security Service and the Department websites of the Company (www.mrsk-cp.ru) of Anti-Corruption Compliance Procedures, and its branches. In 2019, 80.0 % of all procurement was made from small and medium-sized enterprises. it identified 9 cases of affiliated bidders. SME-exclusive procurement accounted for 27.4 % of the total procurement.

144 145 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

The measures taken allowed the Company by the Company passed these verification Statistics of the Company-received Reports of Corruption Procurement to obtain an economic advantage based on procedures. in 2019, pcs. the results of procurement procedures worth Improvement 851.0 RUB mn with VAT or 3.2 % of the target IDGC of Center and Volga Region independently declared value of competitive purchases. implements measures to prevent and counter- During 2019, the following measures were act corruption and also takes an active part in 127 taken to improve the organization and carrying collective anti-corruption initiatives. In particu- out procurement: lar, the Company cooperates on these issues • quarterly assessment of procurement with the Chamber of Commerce and Industry effectiveness; of the Russian Federation and all-Russian • training the employees of branch-based public organizations such as the Russian Union procurement offices as well as those of the of Industrialists and Entrepreneurs, Delovaya Executive Arm to organize and carry out Rossia, OPORA RUSSIA and others. 52 procurements; • informing small and medium-sized enter- prises about the Company’s procurement activities. 1 8

Identification Submitted via the Submitted by the Submitted by mail Submitted otherwise feedback section of the hotline and Clearing corporate website of Conflicts of Interests The conflicts of interest are managed by the Company’s Commission on Corporate of interest not only from newly employed, Ethics Compliance and Conflict of Interest but also from already employed special- Resolution, formed following the Rosseti Order ists. In 2019 alone, it checked 5,347 such PREVENTING CORRUPTION AND CONFLICTS No. 35 dd. March 4, 2015 On Measures to declarations; GRI 102-16 GRI 102-17 GRI 205-3 Prevent Corruption: Preventing and Resolving • the Commission for Corporate Ethics OF INTEREST Conflicts of Interests at Rosseti. Compliance and Conflict of Interest Resolution, IDGC of Center and Volga In 2019, to prevent conflicts of interest, the Region held 3 meetings, identified and Anti-Corruption Policy appointment. Any such corruption reports from Company took the following measures: resolved 43 preconflict and 6 conflict employees, counterparties, or sundry natural • candidates applying for vacant positions in situations. The department responsible for the prevention persons or legal entities are registered in the the Company filled out the declarations of of, and combating corruption at IDGC of Center Complaint Log of the Anti-Corruption Policy conflict of interest; and Volga Region follows the Anti-Corruption Implementation Division of the Department of • candidate-declared information validated to Policy of Rosseti and IDGC of Center and Volga Anti-Corruption Compliance Procedures. Over make statements whether this or that can- Region as approved by the Board of Directors 2019, the Company had 188 reported cases of didate was suitable for a vacant office; of IDGC of Center and Volga Region on corruption. • the Company annually collects, analyzes, February 28, 2017 (Minutes No. 258 of March and evaluates the declarations of conflict 2, 2017). Each report was carefully considered. One reported case of corruption was confirmed, In 2019, this department did the following: and appropriate measures were taken. • drafting the in-house regulations under Article 13.3 of the Federal Law No. 273- When carrying out procurement procedures, FZ dd. December 25, 2008 On Combating the Company follows the requirements of the Corruption; uniform Anti-Corruption Standard to check • review and verification of information on the procurements for possible corruption. It possible facts of corruption and other cor- involves an assessment of the degree of trust- ruptive practices in the Company. worthiness and integrity of contractors, excep- tion of possible conflicts of interest, affiliation In the event of a possible corruptive prac- or other abusive practices associated with tice, the Company’s employees, contractors positions held in the Company. Over 2019, and other natural persons and legal entities 123,670 expenditure and revenue agreements can report the case through the Company’s and 12,586 additional agreements concluded website, a hot line, mail or during a personal

1. Pursuant to the Corruption Report Reception, Review, and Resolution Procedure as approved by the Order No. 389-TsA dd. November 17, 2017.

146 147 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

IMPROVING THE QUALITY OF CORPORATE GOVERNANCE 04 In 2019, the following was done at IDGC of Center and Volga Region: • the number of independent directors on the Board of Directors has been increased; • an external independent evaluation of the effectiveness of internal systems risk control and management has been conducted; • self-assessment of the performance of the Board of Directors and Committees under the Board of Directors was carried out; • a contract of liability insurance of members of the Board of Directors was CORPORATE concluded. GOVERNANCE See more on p. 152

Memorandum of the Controlling 150 Shareholder

Corporate Governance 151 Principles

Corporate Governance Changes 151 and Future Plans

Assessment of Corporate Governance 153 Compliance with the Principles of the Corporate Governance Code (CGC)

Corporate Governance 155 Structure

Corporate Risk Management 190 System

Rewards 194 and Motivation

Shareholder Value 200 Formation 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

PRINCIPLES OF CORPORATE CORPORATE GOVERNANCE

The Corporate Governance System of IDGC of bodies to the Board of Directors; GOVERNANCE Center and Volga Region is based on the legal • effective operation of the Internal Control requirements valid for Russia, the Moscow and Risk Management System; Exchange listing rules, and the guidelines of • timely and full disclosure of corporate the Corporate Governance Code. information; MEMORANDUM OF THE CONTROLLING • transparent and fair reward system; The corporate governance principles of IDGC • social responsibility and stakeholder SHAREHOLDER of Center and Volga Region include: engagement. • equal and fair treatment of shareholders; • commitment of the Board of Directors; “Rosseti” is a public holding company with a state share • control and accountability of the executive in the share capital of 88.04 %, created in accordance with the Decree of the President of the Russian Federation of November 22, 2012 No. 1567 in order to improve the efficiency and development of the electricity grid complex of the Russian Federation, as well as coordinate the management of this complex through subsidiaries and dependent societies. CHANGES IN CORPORATE GOVERNANCE AND FUTURE PLANS PJSC “Rosseti” owns controlling interest in 14 • development of new service categories (non-tariff distribution grid operators1 (Kubanenergo PJSC, Lenenergo PJSC, MOESK PSJC, IDGC of Volga and consumer services) by virtue of digital trans- PJSC, IDGC of North-West PJSC, IDGC of Northern formation to keep the Company stable in the light Caucasus PJSC, IDGC of Siberia PJSC, IDGC of the industry’s changes. IDGC of Center and Volga Region was assigned of Urals PJSC, IDGC of Centre PJSC, IDGC of Center Internal Audit the corporate governance rating NCGR 7+ and Volga Region PJSC, IDGC of South PJSC, “Rosseti” manages the Group’s companies standing for Advanced Corporate Governance TDC PJSC, Rosseti Tyumen JSC, Yantarenergo in accordance with the uniform corporate standards of Corporate Practice on the National Corporate Governance JSC) and one mainline grid operator (FGC UES). designed to assure the efficiency and quality Rating scale (NCGR®). Alienation of these assets is not considered. of business processes, minimize all kinds Governance Efficiency of corporate risks, as well as keep them open “Rosseti” has the following strategic development and transparent. In the corporate year 2018/2019, IDGC of Center NCGR is an indicator of the corporate gov- priorities for its subsidiaries: and Volga Region audited its corporate govern- ernance quality, which makes it possible to • reliable, high-quality, and affordable electricity ance efficiency. The results of the audit were compare the development level of corporate delivery in the new digital environment; reviewed and approved by the Audit Committee governance and the risks related to it in differ- • further efficiency improvement for the core elec- (Minutes No. 3/124 dated August 28, 2019) and ent companies. It reflects the opinion of inde- tricity delivery business; the Board of Directors (Minutes No. 376 dated pendent experts about the development level • promotion of legislative initiatives to enhance the October 4, 2019). Following on from its results, of corporate governance in the company and industry; the Company implemented a set of measures compliance with international and Russian best • balancing the interests of the state, customers, to improve the corporate governance as well practices. shareholders, and investors; as the Internal Control and Risk Management PJSC “Rosseti” System. The Russian Institute of Directors’ audit con- firms that the Company complies with the cor- porate governance requirements of the Russian law and follows the bulk of guidelines under the Independent Russian Corporate Governance Code. The risks of loss of owners associated with the corporate Assessment governance quality are evaluated as quite low. of Corporate Governance Quality

In December 2019, following the inspection of

1. the corporate governance system carried out These subsidiaries use the following brands: Rosseti Kuban for Kubanenergo, Rosseti Lenenergo for Lenenergo, Rosseti jointly by the Russian Institute of Directors, NP, Moscow Region for MOESK, Rosseti Volga for IDGC of Volga, Rosseti Northwest for IDGC of North-West, Rosseti North Caucasus for IDGC of Northern Caucasus, Rosseti Siberia for IDGC of Siberia, Rosseti Urals for IDGC of Urals, Rosseti Centre for IDGC of Centre, Rosseti Centre and Volga Region for IDGC of Center and Volga Region, Rosseti South for IDGC of South, Rosseti Tomsk for TDC, Rosseti Yantar for Yantarenergo, Rosseti FGC UES for FGC UES.

150 151 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

Changes in Corporate Governance ASSESSMENT OF CORPORATE GOVERNANCE of the Company in 2019 COMPLIANCE WITH THE PRINCIPLES OF THE CORPORATE GOVERNANCE CODE To improve its corporate governance, IDGC of 13 dd. June 16, 2019); Center and Volga Region did the following in • General Shareholders’ Meeting Regulations (CGC) 2019: (AGSM Minutes No. 13 dd. June 16, 2019); • the number of independent directors in • Board of Directors Regulations (AGSM the Board of Directors rose to 4 and thus Minutes No. 13 dd. June 16, 2019); exceeded 1/3 of the Board; • Management Board Regulations (AGSM Methodology of Assessment • first-ever independent external perfor- Minutes No. 13 dd. June 16, 2019); mance audit of the Internal Control and Risk • Board of Directors Remuneration and In 2014, the Bank of Russia approved principles. The assessment was carried Management System; Reimbursement Regulations (AGSM and recommended to use the Corporate out by the Company independently • self-assessment of performance for the Minutes No. 13 dd. June 16, 2019); Governance Code (CGC). This document based on a comparison with the CGC Board of Directors and its Committees, • Insider Information Regulations (Board of is recommended for joint-stock companies recommendations, provisions of the existing the results of which were approved by the Directors’ Minutes No. 367 dd. June 14, whose securities are allowed for on-exchange internal documents and the Company’s Board of Directors on May 31, 2019, Minutes 2019); trading. corporate governance practices. Comments No. 365; • Board of Directors’ Strategy Committee are provided regarding those CGC principles, • short-term incentives removed from the Regulations (Board of Directors’ Minutes This Report contains the Company’s which, in the opinion of the Company, are being Board of Directors’ remuneration schemes; No. 377 dd. October 8, 2019); assessment of the current corporate not observed or partially observed. • Liability Insurance Contracts made for the • Audit Commission Remuneration and governance level for compliance with the CGC Board of Directors’ members. Reimbursement Regulations (AGSM Minutes No. 12 dd. June 4, 2019); To bring corporate governance in line with the • Information Policy Regulations (Board Assessment Results current legislation, the requirements of the of Directors’ Minutes No. 311 dd. April 2, Moscow Exchange, and the guidelines of the 2018); Compliance with the Principles of CGC According as at the End of 2019, pcs. Corporate Governance Code (CGC) in 2018- • Dividend Policy Regulations (Board of 2019, the Company drafted and approved the Directors’ Minutes No. 300 dd. February following revised in-house documents regulat- 5, 2018 amended by virtue of the Board of I ing the activities of the management and con- Directors’ Minutes No. 325 dd. August 2, trol bodies: 2018).

• Articles of Association (AGSM Minutes No. VII II 27

12

In 2019, the number of CGC principles observed by the Company significantly 1 10 2 increased.

6 III Plans to Improve Corporate VI 8 Compliance with the CGC Principles GRI 102-28 Governance Quality in 2017-2019, % 63 In 2020, IDGC of Center and Volga Region will bring better corporate governance as rec- 58 plans to further improve the corporate gov- ommended by the Corporate Governance Code 50 ernance level by analyzing the best practices approved by the Bank of Russia. in general while also relying on the Board of V IV Directors and Committees’ self-assessment IDGC of Center and Volga Region follows the for 2019-2020. principles of completion, truthfulness, and I. Shareholders' rights and the equality of shareholders in the comparability of disclosed information, as well exercise of their rights 22 The Company further plans to amend its as the best practices of corporate governance; II. Board of Directors of the Company 14 internal documents, including the Articles thus, it seeks to disclose more complete and 11 III. Corporate Secretary of the Company 7 7 of Association, the General Shareholders’ objective information. In particular, it plans to IV. System of remuneration of the members of the Board of 5 Meeting Regulations, the Board of Directors continue to yearly disclose its results of the Directors, executive bodies and other key managers of the Company Regulations, the Management Board reporting year in Integrated Annual Reports. V. Risk management and internal control system 2017 2018 2019 Regulations, and the Board of Directors’ VI. Company's information disclosure and information policy VII. Major corporate actions Committees Regulations. These amendments Observed Non-compliance Partially observed

152 153 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

Status of compliance with the criteria CORPORATE GOVERNANCE Number Year-end 2018 Year-end 2019 of the principles STRUCTURE GRI 102-18 recommended Full Non- Partial Full Non- Partial Subsection by the Code compliance compliance compliance compliance compliance compliance

1. SHAREHOLDERS’ RIGHTS AND EQUALITY OF SHAREHOLDERS IN THE EXERCISE OF THEIR RIGHTS

1.1. 6 6 – – 6 – – MANAGEMENT CONTROL AND AUDITING 1.2. 4 3 – 1 3 – 1 FUNCTIONS FUNCTIONS 1.3. 2 2 – – 2 – – 1.4. 1 1 – – 1 – – AUDIT 2. BOARD OF DIRECTORS OF THE COMPANY GENERAL COMMISSION SHAREHOLDERS’ 2.1. 7 7 – – 7 – – MEETING AUDITOR 2.2. 2 2 – – 2 – – 2.3. 4 4 – – 4 – – 2.4. 4 2 2 – 3 1 – 2.5. 3 2 – 1 2 – 1 2.6. 4 2 – 2 4 – - MANAGEMENT 2.7. 4 2 – 2 3 – 1 COMPANY – IDGC OF BOARD OF DIRECTORS MANAGEMENT BOARD CENTRE, PJSC 2.8. 6 2 2 2 2 2 2 2.9. 2 – 1 1 – 1 1

3. CORPORATE SECRETARY OF THE COMPANY 3.1. 2 2 – – 2 – – WORKFLOW MANAGEMENT OF THE COMMITTEES OF THE BOARD OF 4. SYSTEM OF REMUNERATION OF THE MEMBERS OF BOARD OF DIRECTORS, EXECUTIVE BODIES, BOARD OF DIRECTORS DIRECTORS AND OTHER KEY MANAGERS OF THE COMPANY 4.1. 4 4 – – 4 – – 4.2. 3 3 – – 3 – – STRATEGY AND DEVELOPMENT CORPORATE COMMITTEE 4.3. 3 1 1 1 1 1 1 SECRETARY 5. RISK MANAGEMENT AND INTERNAL CONTROL SYSTEM 5.1. 4 4 – – 4 – – PERSONNEL AND REMUNERATION 5.2. 2 2 – – 2 – – COMMITTEE 6. COMPANY’S INFORMATION DISCLOSURE AND INFORMATION POLICY 6.1. 2 1 – 1 4 – –

6.2. 3 3 – – 2 – – RELIABILITY COMMITTEE 6.3. 2 2 – – 4 – –

7. MAJOR CORPORATE ACTIONS 7.1. 3 – 1 2 – – 3 GRID CONNECTION COMMITTEE 7.2. 2 1 – 1 1 – 1 Total 79 58 7 14 63 5 11

AUDIT COMMITTEE

154 155 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

GENERAL SHAREHOLDERS’ MEETING Agenda of the General GRI 102-28 Shareholders’ Meeting In 2019, the first-ever self-assessment of performance • revised Articles of Association of the of the Board of Directors and Committees of the Board in 2020 of Directors was carried out according to the Methodology The General Shareholders’ Meeting is the Company’s Company, Board of Directors Regulations, for Assessing the Board of Directors and Committees supreme management body. The scope of its powers include General Shareholders’ Meeting Regulations, 1. Approval of the Annual Report, the annual of the Board of Directors’ Performance approved by the Board the issues of reorganizing and liquidating the Company, Management Board Regulations, Board of accounting (financial) statements of the of Directors on November 30, 2018 (Minutes No. 338). amending the Articles of Association and changing the size Directors Remuneration and Reimbursement Company for 2019. Regulations were approved; 2. Distribution of the Company’s profit (includ- of the authorized capital, issuing and delisting of securities, For this assessment, the Board of Directors analyzed its own determining the composition and remuneration of the Board • the Company has been approved to join the ing payment (declaration) of dividends) and Self-Regulatory Association of Construction losses according to the year-end results of needs in professional expertise, experience, and business of Directors and the Audit Commission along with the other skills; they also discussed whether the number of Directors fundamental issues of the Company’s operation. Surveyors (SRACS). 2019. 3. Election of members to the Board of was in line with the Company’s needs as the shareholders’ interests. The Company has approved the revised General Directors of the Company. 1 4. Election of members to the Audit Shareholders’ Meeting Regulations that detailed The results of the assessment, the average score for which Commission of the Company. the procedure for preparing and holding general meetings was 4.55, were reviewed at the meeting of the Personnel 5. Approval of the Company’s auditor. of shareholders. Two General Shareholders’ Meetings were Report and Remuneration Committee and also approved by the Board 6. Amending the Company’s Articles of held in 2019. of Directors on May 31, 2019 (Minutes No. 365). on the Extraordinary Association, which requires filing an appli- General Shareholders’ cation with the Ministry of Justice of the Russian Federation to request permit to Meeting use a word derived from the official names Russia and the Russian Federation in the An extraordinary General Shareholders’ Company’s new brand name. Meeting took place on December 31, 2019 by 7. Approval of the revised Board of Directors Report on the General absentee voting. The following resolutions Regulations of IDGC of Center and Volga were made: Region. Materials Shareholders’ Meeting • pay dividends on the Company’s ordi- and resolutions nary shares for Q1 Q3 2019 for a total of of the General Meetings The General Shareholders’ Meeting took place 1,839,668 RUB thous. (0.0163239 RUB per of Shareholders on June 14, 2019 in presentia. The following one ordinary share); are available resolutions were made: • set the deadline for listing the dividend on the Company’s BOARD OF DIRECTORS • the Company’s Annual Report and the recipients as 14th day of the Extraordinary official website. annual accounting (financial) statements of Meeting’s resolution to pay dividends. GRI 102-22 In 2019, IDGC of Center and Volga the Company for 2018 were approved; IDGC of Center and Volga Region’s Board of Region’s Board of Directors held • the proposed distribution of profit (losses) of Directors exercises general management of the Company for 2018 was approved; the Company in accordance with the legisla- • the decision was made to pay dividends tion of the Russian Federation, the Company’s 48 meetings equal to 4,591,985 RUB thous. on the Articles of Association, and the internal docu- (3 of them were held in person Company’s ordinary shares based on the ments except matters referable to the General results of 2018 (0.040746 RUB per ordinary Shareholders’ Meeting. and in absentia) share); • June 25, 2019 was set as the deadline for The resolutions of the Board of Directors are making the list of dividend recipients; passed by majority voting of the Board mem- 193 issues • members of the Board of Directors and the bers present at the meeting except otherwise were discussed. Audit Commission of the Company were allowed by Russian Law and the Company’s elected; Articles of Association. The quorum for hold- • Ernst & Young was approved as the ing a meeting is at least a half of the elected Company’s auditor; members of the Company’s Board of Directors. Meetings of the Board of Directors are held regularly, at least once every six weeks.

1. Revised General Shareholders’ Meeting Regulations (approved by Resolution of the Annual General Shareholders’ Meeting dd. June 14, 2019, Minutes No. 13).

156 157 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

Report on the Work of the Board of Directors in 2019 Breakdown of Issues Considered by the Board of Directors in 2019, %

4 21 21 17

6 Alexander Ivanovich Kazakov

Review of reports of executive bodies Chairperson of the Board of Directors, IDGC of Center and Volga Region; Financial and economic issues Chairperson of the Board of Directors, IDGC of Centre, professional director. General shareholders' meeting Holds no shares in IDGC of Center and Volga Region or its subsidiaries. preparation Issues related to SDCs Internal audit, internal control and risk management Related party transactions Board of Directors Committee activity Dear Colleagues! 2. The Company’s effort to keep the estab- Other lished level of service quality and reliabil- The Board of Directors prioritizes specific ity pursuant to regulations: made priority by activities of IDGC of Center and Volga Region the Board of Directors on August 30, 2011, that will determine the Company’s distribu- Minutes No. 84. tion of resources and effort. In 2019, those priorities included innovation-driven develop- In 2019, IDGC of Center and Volga Region’s ment (in particular the implementation of the Board of Directors considered the following “Digital Transformation 2030” Concept), relia- matters in this respect: bility and quality of services, as well as further • attainment of the service reliability and improvement of the Internal Control and Risk quality indicators established by the regula- 8 8 15 Management System: tory bodies of the Russian Federation over the reporting year of 2018 (Minutes No. 360 1. Drafting the Innovative Development dd. April 25, 2019); Program (made priority by the Board of • proposals on the planned service reliabil- Directors on February 28, 2011, Minutes No. ity and quality targets for Udmurtenergo No. of Board of Directors’ meetings in 2019 70). for 2020-2024 (Minutes No. 361 dd. May 6, 2019); In 2019, IDGC of Center and Volga Region’s • sole executive body’s Company-wide data Board of Directors approved the following doc- on the reliability of services subject to tariff 7 7 uments on this: regulation on the basis of long-term activity • Regulations on Drafting and Implementation regulations, collected for 6 months of 2019 6 of IDGC of Center and Volga Region’s (Minutes No. 380 dd. November 1, 2019); Innovative Development Program, revised • sole executive body’s Report on the 5 5 (Minutes No. 351 dd. March 5, 2019); Completion of the Board of Directors’ 4 • Report on the Implementation of IDGC Assignment (Minutes No. 84 dd. August of Center and Volga Region’s Innovative 30, 2011) to Submit Refined Proposals on 3 3 3 Development Program for 2016-2020 and the Planned Service Reliability and Quality up to 2025 in 2018 (Minutes No. 376 dd. Targets for Udmurtenergo for 2020-2024 2 2 October 3, 2019); (Minutes No. 389 dd. December 24, 2019). • Medium-term Implementation Plan of IDGC 1 of Center and Volga Region’s Innovative The Board of Directors’ consistent supervision Development Program for 2019-2021, of such matters enables making timely and 01.19 02.19 03.19 04.19 05.19 06.19 07.19 08.19 09.19 10.19 11.19 12.19 including the Research and Development feasible decisions to keep the required service Plan (Minutes No. 376 dd. October 3, 2019). quality and reliability level in the light of the rapidly changing external and internal circum- The approved documents are crucial for the stances, under which the Company operates. corporate innovation management system to Given that this is a priority, updating the Board function coherently. First of all, they laid the of Directors regularly helps them make bal- foundations for further implementation of an anced and effective decisions on the matters effective mechanism for innovation cycles that within their purview. create favorable conditions for the invention and mastering of key innovations, develop- ment and adoption of targeted innovative solu- tions for grids, and management of intellectual property.

158 159 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

3. Improvement of the Internal Control To improve the internal audit function, the Composition of the Board of Directors and Risk Management System, and Board of Directors approved the following in Enhancement of Internal Audit (made prior- 2019: STRUCTURE OF THE CURRENT BOARD OF DIRECTORS, PPL ity by the Board of Directors on August 27, • Revised Internal Audit Policy of the 2014, Minutes No. 164). Company (Minutes No. 385 dd. December 2, 2019); BYBy STATUSStatus BYBy AGE Age In 2019, the Board of Directors reviewed the • a format for independent external assess- following documents as part of the effort ment of the Company’s internal audit to improve the Internal Control and Risk (Minutes No. 370 dd. August 1, 2019); 4 1 5 6 1 4 Management system: • a methodology for calculating and assess- • sole executive body’s Report on the ing the accomplishment of functional key Management of the Company’s Key performance indicators of the internal audit Operational Risks in 2018 (Minutes unit’s executive and employees at IDGC of No. 360 dd. April 25, 2019); Center and Volga Region (Minutes No. 383 • Internal Audit Report on the Efficiency dd. November 20, 2019); Evaluation of the Internal Control and Risk • Budget and Plan for IDGC of Center and Management System in 2018 (Minutes No. Volga Region’s Internal Audit Department 360 dd. April 25, 2019); for 2020 (Minutes No. 389 dd. December 24, • results of an independent external effi- 2019). ciency evaluation of IDGC of Center and Volga Region’s Internal Control and Risk To be ready for the the new trends and chal- Management System (Minutes No. 370 dd. lenges, whether external or internal, the August 1, 2019). Company continuously improves its corporate Internal Audit System as well as the Internal Below are the primary documents approved in Control and Risk Management System. It reg- 2019 regarding the ICRMS improvement: ularly updates the lists of targets and activities • IDGC of Center and Volga Region’s Register pertaining to internal audit, internal control, Non-executive directors 31-40 of Key Operational Risks, revised (Minutes and risk management. All these processes call Independent directors 41-50 No. 380 dd. November 1, 2019); for the Board of Directors’ involvement, and Professional directors >60 • Plan of Measures to Develop and Keep 2019 was no exception. Efficient the Internal Control System of IDGC of Center and Volga Region (Minutes No. 380 dd. November 1, 2019); • Company’s Risk Management System By Gender By Duration of Service on the Board BY GENDER BY DURATION OF SERVICE ON THE BOARD OF DIRECTORS OF ROSSETI CENTER AND VOLGA REGION Development and Enhancement Plan of Directors of IDGC of Center and Volga Region (Minutes No. 393 dd. December 31, 2019). 1 10 5 6 To improve the internal audit function, the Board of Directors discussed the following issues in 2019: • the Internal Audit Department’s reports on progress made in 2018 and the results Маковский Игорь Владимирович Морозов Андрей Владимирович of internal audit, including the self-as- sessment of internal audit quality in 2018 and the Progress Report on the Internal Audit Development and Improvement Plan (Minutes No. 360 dd. April 25, 2019); • internal audit data on the identification and sale of non-core assets in 2018 (Minutes No. 360 dd. April 25, 2019); • the Company’s Internal Audit Report on the Corporate Governance Efficiency Assessment for the Corporate Year 2018- 2019 (Minutes No. 376 dd. October 4, 2019). Men Up to 1 year Women 1 year to 7 years

160 161 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

The current Board of Directors elected by Resolution of the General Shareholders Meeting dd. June 14, 2019 Main Competencies of the Members of the Current Board of Directors (Minutes No. 13) includes the following people1:

Main competencies Members of the Board Finance Legal Corporate of Directors Period of service on the Board of Directors Strategy and audit issues governance Alexander Ivanovich Less than two years (elected for the first time + + – – Kazakov on June 1, 2018) Dmitry Alekseyevich Less than one year (elected for the first time on: + – – – Bobkov June 14, 2019) Denis Lvovich Less than five years (elected and re-elected five Guriyanov times: June 16, 2015; June 9, 2016; June 5, 2017; + – + + June 1, 2018; and June 14, 2019) Vitaly Yurievich Less than one year (elected for the first time on June + + + + Zarkhin 14, 2019) Yury Kazbekovich Less than three years (elected and re-elected thrice: + + – – Zafesov August 22, 2012; June 1, 2018; June 14, 2019) Alexander Ivanovich Dmitry Alekseyevich Anastasia Igorevna Less than one year (elected for the first time on June + + + + Kazakov GRI 102-23 Bobkov Krupenina 14, 2019) Igor Vladimirovich Less than one year (elected for the first time on June Chairperson of the Board of Directors, IDGC Director of the Information Policy and Public Relations + + + + Makovskiy 14, 2019) of Center and Volga Region; Chairperson of the Board Department, Rosseti. of Directors, IDGC of Centre, professional director. Andrey Vladimirovich Less than two years (elected two times: June 1, 2018 Holds no shares of IDGC of Center and Volga Region or its – + + + Morozov and June 14, 2019) Holds no shares of IDGC of Center and Volga Region or its subsidiaries. subsidiaries. Egor Vyacheslavovich Less than one year (elected for the first time on June + + – – Prokhorov 14, 2019) Elected member of IDGC of Center and Volga Region’s Board First elected to the Board of Directors of IDGC of Center Andrey Olegovich Less than one year (elected for the first time on June + + – – of Directors twice on: June 1, 2018, and June 14, 2019. and Volga Region on June 14, 2019. Romankov 14, 2019) Alexander Viktorovich Less than six years (elected and re-elected six Born in 1948 Born in 1982 Shevchuk times: June 26, 2014; June 16, 2015; June 9, 2016; + + + + June 5, 2017; June 1, 2018; and June 14, 2019). He graduated from the Ordzhonikidze Moscow Institute Graduated from Lomonosov Moscow State University of Engineering and Economics as an Engineer Economist as a Philologist, Teacher of Spanish and Foreign Literature in 1971; was named a Doctor of Economics in 1993. in 2004. Was granted a PhD in Economics at the Institute of Social and Political Studies, Russian Academy of Sciences GRI 102-25 Over the past five years, he has served as: Chairperson in 2008. During 2019, the Company had two line- Association; of the Board of Directors, IDGC of Center and Volga Region ups of the Board of Directors. The Board • Vladimir Leonidovich Pelymsky, Deputy (June 2018 – present); Chairperson of the Board of Directors, Over the past five years, he served as: member of the Board of Directors elected by the Annual General Chief Engineer of “Rosseti”; IDGC of Centre (May 2018 – present); Chairperson of the Board of Directors, IDGC of Center and Volga Region (June 2019 – Shareholders’ Meeting1 on June 1, 2018 that • Larisa Anatolyevna Romanovskaya, Chief of Directors; Far-East Energy Management Company present); member of the Board of Directors, IDGC of Urals was in office from June 1, 2018 to June 13, Advisor of “Rosseti”; (December 2011 – July 2019). (May 2019 – present), member of the Board of Directors, IDGC of Northern Caucasus (June 2019 – present), Director 2019, comprised2: • Roman Alekseyevich Filkin, Director, the IDGC of Center and Volga Region has no information of the Public and Media Relations Department, then Director • Alexander Ivanovich Kazakov (Chairperson electric power industry, mechanical engi- about acquisition or alienation of the Company’s shares made of the Information Policy and Public Relations Department, of the Company’s Board of Directors), neering at the Representative office of by the person in 2019. Rosseti (April 2013 – present). Chairman of the Board of Directors, Far- Prosperity Capital Management (Russia), East Energy Management Company JSC Ltd; Not a member of any Committee of the Board of Directors IDGC of Center and Volga Region has no information (DVEUK), professional director; • Vladimir Sergeyevich Chistyakov, First at IDGC of Center and Volga Region. about acquisition or alienation of the Company’s shares made • Denis Lvovich Guryanov, Director of the Deputy Director General of JSC Investment by the person in 2019. Corporate Governance and Shareholder/ Holding “E-Union”; Not an independent director. Investor Relations Department, “Rosseti”; • Alexander Viktorovich Shevchuk, Executive Not a member of any Committee of the Board of Directors at IDGC of Center and Volga Region. • Vitaly Anatolyevich Domnich, Chief of Director of the Professional Investors the Strategic Projects Office, Strategic Association. Not an independent director. Development Department of “Rosseti”; • Oleg Yurievich Isayev, Director General of IDGC of Centre; • Yury Kazbekovich Zafesov, Director of the Procurement Department of “Rosseti”; • Andrey Vladimirovich Morozov, Legal Director of the Professional Investors

1. Minutes of the Annual General Shareholders’ Meeting No. 12 dd. June 4, 2018. 2. Details about the members of the Board of Directors of IDGC of Center and Volga Region in office from June 1, 2018 to June 13, 2019 are contained in the Company’s 2018 Annual Report published on the Company’s official website, https://www. mrsk-cp.ru/stockholder_investor/disclosure_reporting_info/godovye-otchety/. 1. The positions are indicated as of the time of election.

162 163 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

Denis Lvovich Vitaly Yurievich Yury Kazbekovich Anastasia Igorevna Guriyanov Zarkhin Zafesov Krupenina Director of the Corporate Governance and Shareholder/ An independent director. Director of the Procurement Department, Rosseti Director for Strategy and Investment, 5Plus LLC Investor Relations Department, Rosseti. An independent director. Holds no shares of IDGC of Center and Volga Region or its Holds no shares of IDGC of Center and Volga Region or its Holds no shares of IDGC of Center and Volga Region or its subsidiaries. subsidiaries. Holds no shares of IDGC of Center and Volga Region or its subsidiaries. subsidiaries.

Elected member of IDGC of Center and Volga Region’s Board First elected to the Board of Directors of IDGC of Center Elected member of IDGC of Center and Volga Region’s Board First elected to the Board of Directors of IDGC of Center of Directors thrice on: August 22, 2012; June 1, 2018; June 14, and Volga Region on June 14, 2019. of Directors five times on: June 16, 2015; June 9, 2016; June 5, and Volga Region on June 14, 2019. 2019. 2017; June 1, 2018; and June 14, 2019. Born in 1985 Born in 1976 Born in 1975 Born in 1977 She graduated from Tver State University majoring in Finance He graduated from Higher School of Economics as Bachelor In 1999 graduated from Lomonosov Moscow State University and Credit as an Economist in 1999. He graduated from Peoples’ Friendship University of Russia, of Economics in 1998, then as Master of Management in 2000. majoring in Management. In 1997 graduated from Moscow Master of Laws. In 2013, he completed the basic Management State University of Food Production as an Industrial Over the past five years, she has served as: member Pool Training Program at Lomonosov Moscow State University. Over the past five years, he served as: member of the Board Engineer. In 2006, received an academic degree of Candidate of the Board of Directors, IDGC of Center and Volga Region of Directors, IDGC of Center and Volga Region (June 2019 – of Economic Sciences at the Russian Presidential (June 2019 – present); Director for Strategy and Investment, Over the past five years, he has served as: Director present); member of the Board of Directors, Enel Russia Academy of Public Administration. In 2019, he was trained 5Plus LLC (June 2018 – present); Head of the Securities Office of the Corporate Governance Department, Director (June 2019 – present); member of the Board of Directors, under the PwC MBA Program in General Management. and Category I Economist of the Department of Dealerships, of the Corporate Governance and Shareholder/Investor IDGC of Centre (May 2019 – present), member of the Board Securities Office of GUTA-BANK JSC (June 2012 – February Relations Department (April 2013 – present); member of Directors, IDGC of South (May 2019 – present); member Over the past five years, he has served as: member 2018). of the Board of Directors, UES Engineering Center Real Estate of the Board of Directors, KTK PJSC (June 2018 – November of the Board of Directors of IDGC of Center and Volga Region PJSC (June 2018 – present); member of the Board of Directors, 2019); Managing Director of Gazprombank JSC (May 2011 – (June 2018 – present); member of the Board of Directors IDGC of Center and Volga Region has no information IDGC of Northern Caucasus (June 2017 – present); member March 2018). of IDGC of Urals (May 2018 – present); member of the Board about acquisition or alienation of the Company’s shares made of the Board of Directors, IDGC of Center and Volga Region of Directors of Tyumenenergo (June 2017 – present); member by the person in 2019. (June 2015 – present); member of the Board of Directors, IDGC of Center and Volga Region has no information of the Board of Directors of Lenenergo (June 2014 – June FTC PJSC (November 2014 – present); member of the Board about acquisition or alienation of the Company’s shares made 2016); Director of the Procurement Department and Director She has been a member of: the Audit Committee since July of Directors, IDGC of Siberia (June 2014 – June 2016), member by the person in 2019. of the Procurement Activities Department, Rosseti (May 2013 24, 2019, the Reliability Committee since September 5, 2019, of the Board of Directors, Sevkavkazenergo JSC (June 2014 – – present); Director General of ESSK UES JSC (October 2009 and the Strategy Committee since October 7, 2019. present), member of the Board of Directors of VOLS-VL – present); member of the Board of Directors of ESSK UES He has been a member of the Grid Connection Committee (January 2010 – present). Administration JSC (March 2014 – present). since September 5, 2019, and a member of the Strategy An independent director. Committee since October 7, 2019. IDGC of Center and Volga Region has no information IDGC of Center and Volga Region has no information about acquisition or alienation of the Company’s shares made about acquisition or alienation of the Company’s shares made An independent director. Pursuant to the Moscow Exchange by the person in 2019. by the person in 2019. Listing Rules, he was recognized an independent director by the Board of Directors on July 24, 2019 (Minutes No. 369). He’s been a member of the Audit Committee since July A member of the Audit Committee of the Board of Directors, 20, 2018; a member of the Personnel and Remuneration IDGC of Center and Volga Region since June 29, 2018. Committee since September 5, 2019 (chaired the latter until June 28, 2019) Not an independent director.

Not an independent director.

164 165 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

Igor Vladimirovich Andrey Vladimirovich Egor Vyacheslavovich Alexander Viktorovich Makovskiy Morozov Prokhorov Shevchuk Director General of IDGC of Centre Legal Director of the Professional Investors Association Deputy Director General for Finance, Rosseti Executive director of the Professional Investors An independent director. Association Holds no shares of IDGC of Center and Volga Region or its Holds no shares of IDGC of Center and Volga Region or its subsidiaries. Holds no shares of IDGC of Center and Volga Region or its subsidiaries. subsidiaries. An independent director. Holds no shares of IDGC of Center and Volga Region or its First elected to the Board of Directors of IDGC of Center Elected member of IDGC of Center and Volga Region’s Board subsidiaries. and Volga Region on June 14, 2019. of Directors twice on: June 1, 2018, and June 14, 2019. First elected to the Board of Directors of IDGC of Center and Volga Region on June 14, 2019. Elected member of IDGC of Center and Volga Region’s Board Born in 1972 Born in 1978 of Directors six times on: June 26, 2014; June 16, 2015; June 9, Born in 1982 2016; June 5, 2017; June 1, 2018; and June 14, 2019. In 1993, he graduated from the Alma-Ata Higher Front-Line In 2000, he graduated from the Russian Academy of Law Command College named after F.E. Dzerzhinsky majoring of the Russian Ministry of Justice majoring in Law. In 2016, He graduated from St. Petersburg State University majoring Born in 1983 in Command, Tactics with a degree in Border Force Officer; he was awarded a Master of Law, LLM, by Harvard Law School. in Mathematical Methods in Economics as an Economist in 2000, graduated from Kaliningrad State University and Mathematician. He is a Ph.D. in Economics. In 2005, graduated from the Finance Academy with a degree in Law, qualified as a lawyer. In 2004, he was Over the past five years, he has served as: member under the Government of the Russian Federation majoring retrained under the Public and Municipal Administration of the Board of Directors, IDGC of North-West (June 2019 – Over the past five years, he has served as: Acting Deputy Finance and Credit. program. present); member of the Board of Directors, IDGC of Center Director General for Strategy, Deputy Director General and Volga Region (June 2018 – present); member of the Board for Finance, Rosseti (December 2013 – present); member Over the past five years, he has served as: member Over the past five years, has has served as: Chairperson of Directors, IDGC of South (June 2018 – present); Legal of the Board of Directors, IDGC of Center and Volga Region of the Board of Directors, Detsky Mir PJSC (May 2018 – of the Board of Directors, YarESK JSC (June 2019 – present); Director of the Professional Investors Association (September (June 2019 – present); member of the Board of Directors, present); member of the Board of Directors, TGK-1 PJSC member of the Board of Directors, IDGC of Center and Volga 2017 – present); Head of the Legal Department, Moscow Office DVEUK (September 2017 – June 2019); Member of the Board (June 2017 – December 2017); member of the Board Region (June 2019 – present); member of the Board of NCH Advisors, Inc. (September 2003 – August 2015). of Directors, IDGC of Volga (May 2017 – June 2018); member of Directors, IDGC of Urals (June 2016 – present); member of Directors, IDGC of Centre (May 2019 – present); Director of the Board of Directors, Yantarenergo (June 2017 – June of the Board of Directors, IDGC of North-West (June 2016 – General of IDGC of Centre (September 2018 – present); IDGC of Center and Volga Region has no information 2018); member and Chairperson of the Board of Directors, June 2019); member of the Board of Directors, IDGC Chairperson of the Management Board, IDGC of Centre about acquisition or alienation of the Company’s shares made FGC UES (June 2016 – June 2019); member and Chairperson of Centre (June 2015 – present), member of the Board (September 2018 – present); Chairperson of the Management by the person in 2019. of the Board of Directors, UES Engineering Center Real Estate of Directors, OGK-2 PJSC (June 2015 – June 2019); member Board, IDGC of Center and Volga Region (September 2018 – (June 2016 – June 2018); member of the Board of Directors, of the Board of Directors, IDGC of Center and Volga Region present); member and Chairperson of the Board of Directors, TDC (November 2015 – June 2016); member of the Board He has been a member of: the Strategy Committee since (June 2014 – present); Executive Director of the Professional Kaliningrad Generating Company JSC (February 2013 – of Directors, FTC (November 2014 – June 2016); member October 7, 2019; the Reliability Committee since September 5, Investors Association (March 2014 – present); member present); member and Chairperson of the Board of Directors, and Chairperson of the Board of Directors, Lenenergo (March 2019; and the Grid Connection Committee since September 5, of the Board of Directors, MOSTOTREST PJSC (June 2012 – Yantarenergoservis (February 2013 — present); member 2014 – February 2018); member of the Board of Directors, 2019. June 2016); member of the Board of Directors, IDGC of South and Chairperson of the Board of Directors, Yantarenergosbyt IDGC of Siberia (June 2014 – June 2017); member of the Board (February 2013 – present); Acting Director General (June 2011 – June 2017). An independent director. Pursuant to the Moscow Exchange of Directors, Rosseti Volga (June 2013 – June 2015). and Director General, Yantarenergo (August 2012 – September Listing Rules, he was recognized an independent director IDGC of Center and Volga Region has no information 2018); Chairperson of the Management Board, Yantarenergo IDGC of Center and Volga Region has no information by the Board of Directors on July 24, 2019 (Minutes No. 369). about acquisition or alienation of the Company’s shares made (August 2012 – September 2018); member and Chairperson about acquisition or alienation of the Company’s shares made by the person in 2019. of the Board of Directors, Yantarenergo (June 2012 – present). by the person in 2019. A member of the Personnel and Remuneration Committee IDGC of Center and Volga Region has no information He has chaired the Strategy Committee since October 7, 2019, of the Board of Directors, IDGC of Center and Volga Region about acquisition or alienation of the Company’s shares made the Personnel and Remuneration Committee since September since September 5, 2019, Chairperson of the Audit Committee by the person in 2019. 5, 2019, and the Audit Committee since July 24, 2019. of the Board of Directors, IDGC of Center and Volga Region since July 24, 2019, and member of the Strategy Not a member of any Committee of the Board of Directors Not an independent director. at IDGC of Center and Volga Region. and Development Committee of the Board of Directors, IDGC of Center and Volga Region since October 7, 2019. Not an independent director. An independent director. Pursuant to the Moscow Exchange Listing Rules, he was recognized an independent director by the Board of Directors on July 24, 2019 (Minutes No. 369). 166 167 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

ATTENDANCE AT THE MEETINGS OF THE BOARD OF DIRECTORS

Participation of Members in the Meetings of the Board of Directors between January 1 and June 14, 2019

22 22 22 22 22 22 22 22 22 22 22 22 22 22 22 22 22 22 22 22 22 22 22 22 22 22 21 21 21 21 21 21 21 Alexander Ivanovich Kazakov Denis Lvovich Guriyanov Vitaly Anatolyevich Domnich Oleg Yuryevich Isaev Yury Kazbekovich Zafesov Andrey Vladimirovich Morozov Vladimir Leonidovich Pelymsky Larisa Anatolyevna Romanovskaya Vladimir Sergeyevich Chistyakov Roman Alekseyevich Filkin Alexander Viktorovich Shevchuk Andrey Olegovich CONFLICT OF INTEREST Romankov In 2019, no member of the Board of Directors Deputy Chief Engineer of Rosseti of IDGC of Center and Volga Region: Holds no shares of IDGC of Center and Volga Region or its • had family ties with the officials of manage- subsidiaries. ment bodies and (or) financial and business officers of the Company; • was held administratively liable for finan- cial improprieties, offense regarding tax and Participation of Members in the Meetings of the Board of Directors between June 15 and December 31, First elected to the Board of Directors of IDGC of Center fees or security market, or had any criminal 2019 and Volga Region on June 14, 2019. record for economic crimes and (or) crimes against the state; 26 26 26 26 26 26 26 26 26 26 26 26 26 26 26 26 26 26 26 26 25 25 25 Born in 1971 • held any positions in the management 24 24 24 24 24 24 24 bodies of any for-profit organization that He graduated from the Moscow Aviation Institute (Technical would be initiated an insolvency proceed- University) majoring in Engineering, Energy and Energy Physics Plants for Spacecraft in 1994; then from the Management ing against, or have to defend itself in court Academy of the Russian Ministry of Internal Affairs majoring of law under a proceedings case under the in Municipal and Public Administration in 2005. law of Russia during the Director’s office as 12 12 12 such; Over the past five years, he has served as: Director • had a conflict of interest with the executive of the Technology Policy Department, Deputy Chief Engineer bodies of the Company. of Rosseti (March 2020 – present); Director of Department, the Ministry of Digital Development, Communications Alexander Ivanovich Kazakov Dmitry Alekseyevich Bobkov Denis Lvovich Guriyanov Vitaly Yurievich Zarkhin Yury Kazbekovich Zafesov Anastasia Igorevna Krupenina Igor Vladimirovich Makovskiy Andrey Vladimirovich Morozov Egor Vyacheslavovich Prokhorov Andrey Olegovich Romankov Alexander Viktorovich Shevchuk and Mass Media of the Russian Federation (October 2019 – March 2020); member of the Board of Directors, IDGC of Center and Volga Region (June 2019 – October 2019); Total number of meetings the member could attend Director of the Technology Policy Department, Deputy Chief Number of meetings the member actually attended Engineer of Rosseti (February 2019 – October 2019); Advisor Number of meetings the member attended by absentee voting to the Director General of UNECO (September 2018 – February 2019); Deputy Director of Department, the Ministry of Digital Development, Communications and Mass Media of the Russian Federation (September 2016 – September 2018), Head of Department, FMS of Russia (March 2005 – September 2016). The average percentage of attendance IDGC of Center and Volga Region has no information of the meeting by the Board of Directors’ about acquisition or alienation of the Company’s shares made members was 97 %. Of the 48 meetings by the person in 2019. of the Company’s Board of Directors, 34 meeting were held with 100 % attendance A member of the Strategy Committee since October 7, of the Board’s members. 2019, he did not serve as a member of the Company’s Board of Directors or its Committees from October 25, 2019 to March 24, 2020 due to being hired as a public official. TRAINING OF THE MEMBERS OF THE BOARD OF DIRECTORS Not an independent director. In 2019, there was no training of the Members of the Board of Directors organized at the Company’s expense.

168 169 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

COMMITTEES OF THE BOARD OF DIRECTORS Participation of the Committee Members in the Meetings of the Strategy Committee in 2019

Number of the Meetings Held by the Board of Directors’ • business planning; January 1 to June 14, 2019 Between June 15 and December 31, 2019 Committees in 2019 • Dividend Policy; 8 8 8 8 8 8 8 8 8 8 • risk management; 14 14 14 14 14 14 15 11 14 9 12 • assessing the Company’s and its subsidiar- 7 7 3 1 3 5 ies’ performance; 11 11 6 6 6 6 • sundry objectives and areas as set forth in 10 the Corporate Governance Code1.

22 The current lineup2 of the Strategy Committee was approved by the Board of Directors on 17 October 7, 2019, Minutes No. 377: 2 2 2 15 14 In presentia • Egor Vyacheslavovich Prokhorov 12 (Chairperson of the Committee, non-exec- In absentia utive director), Deputy Director General for Andrey Vladimirovich Morozov Roman Alekseyevich Filkin Alexander Viktorovich Shevchuk Finance, Rosseti PJSC; Vitaly Yurievich Zarkhin Anastasia Igorevna Krupenina Andrey Vladimirovich Morozov Egor Vyacheslavovich Prokhorov Andrey Olegovich Romankov Alexander Viktorovich Shevchuk • Aleksey Igorevich Pavlov (non-execu- Total number of meetings the member could attend tive director), Director of the Strategy Number of meetings the member actually attended Strategy Committee Personnel and Remuneration Committee Reliability Committee Audit Committee Grid Connection Committee Department, Rosseti PJSC; Number of meetings the member attended by absentee voting • Irina Aleksandrovna Shagina (non-execu- tive director), Director of the Tariff Policy The Board of Directors of IDGC of Center and Department, Rosseti; Volga Region has five committees: Strategy • Olga Vladimirovna Tikhomirova (non-ex- The Strategy Committee, Audit Committee, Personnel ecutive director), Director of the Treasury and Development and Remuneration Committee, Reliability Department, Rosseti; Committee Committee, and Grid Connection Committee. • Alexander Viktorovich Pilyugin (executive REPORT ON THE WORK OF THE Since the Company’s Investment Program and was renamed These Committees are advisory bodies that director), First Deputy Director General, STRATEGY COMMITTEE IN 2019 innovative development are within the Strategy the Strategy preliminarily consider the most important Chief Engineer of IDGC of Centre; Committee’s purview, many of the Committee- Committee issues of the Company’s activities and draw • Dmitry Dmitriyevich Mikheyev (non-execu- discussed issues of 2019 were related to it, by the Board recommendations to the Board of Directors. tive director), Director of the Service Sales Dear Colleagues! including drawing recommendations for the of Directors on October Their main goal is to ensure that the Board of Department, Rosseti; Board of Directors on the approval of, and 7, 2019, Minutes No. Directors performs its functions effectively in • Andrey Olegovich Romankov3 (non-exec- Most of what the Strategy Committee dis- amendments to, the Investment Program for 377. compliance with the principles stipulated in utive director), Director of the Technical cussed in 2019 had to do with monitoring the up to 2024 as well as monitoring its progress. the Corporate Governance Code. Policy Department, Deputy Chief Engineer progress of the Company’s programs and pro- of Rosseti; jects. Those were first of all the Company’s Some of the matters had to do with the • Vitaly Yurievich Zarkhin (independent investment projects on the priority list. Company’s stakes in other companies. Those director); included alienating the Company’s shares in • Anastasia Igorevna Krupenina (independ- Financial planning was the Committee’s Berendeevskoye JSC as well as the acquisition Strategy Committee ent director), Director for Strategy and another important area of focus in 2019, of Votkinsk Municipal Power Grids. Investment, 5Plus LLC; namely issues related to drafting and approval Pursuant to the Strategy Committee • Andrey Vladimirovich Morozov (independ- of the Business Plan as well as monitoring the Over the reporting year, the Strategy Regulations approved by the Company’s Board ent director), Legal Director, Professional Egor related progress. Beside the Business Plan, Committee analyzed these important docu- In 2019, the Strategy of Directors on October 7, 2019 (Minutes No. Investors Association; Vyacheslavovich the Committee also discussed the Company’s ments: Loss Reduction Program of IDGC of Committee held 377). The Strategy Committee’s core task is to • Alexander Viktorovich Shevchuk (inde- Prokhorov planned long-term performance indicators for Center and Volga Region for 2019-2023, the 22 meetings draw and submit recommendations or opin- pendent director), Executive Director, up to 2023. Medium-Term Implementation Plan under the

and discussed 56 ions to the Company’s Board of Directors on Professional Investors Association. Innovative Development Program of IDGC of Chairperson issues. the Board’s activities within the Committee’s The Strategy Committee is a key actor of Center and Volga Region for 2019-2021, the of the Finance purview: Committee, non- the Corporate Risk Management System. Program for Digital Transformation of IDGC of • strategic development and its priorities; executive director Consequently, many of the matters discussed Center and IDGC of Center and Volga Region • innovative development; Deputy Director during the reporting yer pertained to that sys- for 2019-2030, IDGC of Center and Volga • organization of business processes; General for Finance, tem, independent audit, and the Company’s Region’s Business Plan for 2020, as well as Rosseti1 effort to improve it. projections for 2021-2024.

1. Recommended for use by the Bank of Russia’s Letter No. 06-52/2463 dd. April 10, 2014 On the Corporate Governance Code. 2. The positions are indicated as of the time of election. 3. Mr. Romankov did not serve as a member of the Company’s Board of Directors or its Committees from October 25, 2019 to March 24, 2020 due to being hired as a public official. 1. The positions are indicated as of the time of election.

170 171 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

Personnel and Remuneration Committee Egor Vyacheslavovich Prokhorov

Chairperson of the Personnel and Remuneration Committee, non-executive director 1 In accordance with the Personnel and Participation of the Committee Members in the Meetings Deputy Director General for Finance, Rosseti Remuneration Committee Regulations of the Personnel and Remuneration Committee in 2019 approved by the Company’s Board of Directors on 25 July 2014 (Minutes No. 163), the January 1 to June 14, 2019 Committee is mainly tasked to draw and sub- REPORT ON THE WORK OF THE was made on evaluating the candidates for the mit to the Board of Directors recommenda- Board of Directors and its committees, includ- 9 9 9 9 9 9 9 PERSONNEL AND REMUNERATION tions on: COMMITTEE IN 2019 ing analysis of their independence. • determining the amount of remunera- tion paid to the members of the Company’s 7 7 Dear Colleagues! In 2019, members of the Personnel and Board of Directors; Remuneration Committee followed their tra- • principles and criteria for determining the The most pressing issues discussed by the dition of submitting recommendations to the amount of remuneration paid to the mem- Personnel and Remuneration Committee in Board of Directors on the approval of KPI bers of the Board of Directors, members of 2019 include the Board of Directors’ and its accomplishment. the collective executive body and the per- Committees’ self-assessment as well as revis- son serving as the sole executive body of ing the Board of Directors Remuneration and Each of the discussed issues was cru- the Company (including the Management Reimbursement Regulations. cial for improving the Company’s HR Policy Company or the manager), as well as deter- and recruiting and motivating best-qualified Denis Lvovich Guriyanov Larisa Anatolyevna Romanovskaya Alexander Viktorovich Shevchuk mining the essential terms of contracts with Due to the Committee’s specific purview, most specialists. them; of the matters it discussed were related to the • criteria for selecting candidates to the approval of candidates for positions of various Company’s Board of Directors, members of From June 15 until December 31, 2019 levels in the Company’s Executive Arm. Focus the collective executive body and a person to serve as the sole executive body of the 5 5 5 5 5 5 Company, as well as a preliminary assess- ment of these candidates; 4 4 4 • regular assessment of performance of the person serving as the sole executive body (the Management Company, manager) and Reliability Committee reduction of risks of injury to the Company’s members of the collective executive body personnel and third parties at the of the Company, and preparation of pro- Pursuant to the Reliability Committee Company’s power units, as well as control posals for the Board of Directors on their Regulations as approved by the Board of over their implementation; reappointment. Directors on July 20, 2017 (Minutes No. 276), • monitoring and evaluation of the Company’s the Reliability Committee’s core task is to draw engineering teams in terms of ensuring The current lineup1 of the Personnel and and submit recommendations to the Board of reliability of electric grids and industrial

Remuneration Committee of the Board of Denis Lvovich Guriyanov Egor Vyacheslavovich Prokhorov Alexander Viktorovich Shevchuk Directors on the following: safety; Directors, IDGC of Center and Volga Region, • analysis of production programs, plans • analysis of the internal technical control was approved by the Company’s Board of Total number of meetings the member could attend for retrofitting and upgrading, reconstruc- system of the Company; Directors on September 5, 2019 (Minutes No. tion, new construction and repair of power • examination of the occupational safety Number of meetings the member actually attended 328): supply facilities, analysis of their develop- management system of the Company; • Egor Vyacheslavovich Prokhorov Number of meetings the member attended by absentee voting ment and execution from the point of view • analysis of the Environmental Policy (Chairperson of the Committee, non-ex- of meeting the requirements for operational Implementation Program; ecutive director), Acting Deputy Director reliability and technical condition of elec- • examination of fire and industrial safety General for Strategy, Rosseti; tric grids; systems. • Denis Lvovich Guryanov (non-execu- • assessing the completeness and suffi- tive director), Director of the Corporate ciency of measures according to the results The current lineup3 of the Reliability Governance Department, Rosseti; of accident investigation per the Electric Committee of the Board of Directors, IDGC of • Alexander Viktorovich Shevchuk (inde- Power Industry Accident Investigation Center and Volga Region was approved by the pendent director), Executive Director of the Rules2, as well as control over their Company’s Board of Directors on September 5, Professional Investors Association. implementation; 2019 (Minutes No. 373): In 2019, the Personnel and Remuneration • analysis of the quality of investigations • Vasily Vladimirovich Rozhkov (Chairperson Committee held 14 meetings, in the course into the causes of technological violations of the Committee), Head of Office, Director of which 25 issues were considered. (accidents); of the Production Department, Rosseti; • inspection of the Company’s emergency • Sergey Vladimirovich Shpilevoy, Head of response work (preparedness, organization the Analytical Management, Situation and and conduct of emergency response and Analytical Center of Rosseti; restoration work at power supply facilities); • Alexander Viktorovich Pilyugin, First Deputy • analysis of programs for prevention and Director General, Chief Engineer of IDGC of

1. The positions are indicated as of the time of election.

1. The positions are indicated as of the time of election. 2. Approved by the Decree of the Russian Government No. 846 dd. October 28, 2009. 172 3. The positions are indicated as of the time of election. 173 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

of Center, PJSC; • Andrey Vladimirovich Morozov, Legal • Artyom Gennadyevich Alyoshin, Acting Director of the Professional Investors Grid Connection Committee Deputy Director General for Economics and Association. Finance, IDGC of Center; • Anastasia Igorevna Krupenina, Director for Pursuant to the Grid Connection Committee Center and Volga Region, was approved by the Strategy and Investment, 5Plus LLC; Regulations as approved by the Company’s Company’s Board of Directors on September 5, Board of Directors on July 20, 2017 (Minutes 2019 (Minutes No. 373): No. 276), the Grid Connection Committee • Aleksandr Yurievich Korneyev (Chairperson Participation of the Committee Members in the Meetings is mainly tasked to draw and submit to the of the Committee), Deputy Director of the of the Reliability Committee in 2019 Board of Directors recommendations on the Service Sales Department, Rosseti; following: • Vladimir Aleksandrovich Davydkin, Head of From June 15 until December 31, 2019 • improvement of the legal framework of the the Grid Connection Office, Service Sales antitrust law and ensuring equal-opportu- Department of Rosseti; nity access to the grid connection services; • Alisa Aleksandrovna Manaka, Head of the 4 4 4 4 4 4 • improvement of the Company’s internal Entrepreneur Support Project Development rules and standards for ensuring equal-op- Office, MOESK; portunity access to the services of connect- • Vitaly Yurievich Zarkhin, member of the ing customers to power grids; Board of Directors, IDGC of Center and Total number of meetings the member could attend • principles and criteria for assessing the Volga Region; Company’s performance efficiency regard- • Andrey Vladimirovich Morozov, Legal Number of meetings the member actually attended In 2019, the Reliability Committee held ing connecting customers to power grids; Director of the Professional Investors 15 meetings, in the course of which 44 • assessment of the Company’s performance Association. Number of meetings the member attended by absentee voting issues were considered. All the Reliability efficiency regarding connecting customers Committee-drawn recommendations were to power grids; taken into consideration by the Board • analysis of the current situation in the of Directors when making their resolutions. Company regarding connecting customers Anastasia Igorevna Krupenina Andrey Vladimirovich Morozov to power grids.

The current lineup1 of the Grid Connection Committee of the Board of Directors, IDGC of

Vasily Vladimirovich Rozhkov Participation of the Committee Members in the Meetings of the Grid Connection In 2019, Chairperson of the Reliability Committee Committee in 2019 the Grid Connection Head of Office, Director of the Production Department, Rosseti Committee held January 1 to June 14, 2019 From June 15 until December 31, 2019 12 meetings and discussed 26 issues. All 7 7 7 the Grid Connection REPORT ON THE WORK OF THE another strategic issue in 2019: prelimi- Committee-drawn RELIABILITY COMMITTEE IN 2019 nary approval of merging the grid districts of recommendations Vladimirenergo. 5 5 5 5 were taken into consideration Dear Colleagues! The Reliability Committee’s essential purview 4 4 by the Board lies in monitoring the progress of Investment of Directors when Much information analyzed by the Reliability and Repair Programs; in this regard, the making Committee is related to regular condition mon- Committee members discussed reports on their resolutions. itoring of the fixed assets at the Company’s the Repair Program, the Grid Bottlenecks energy facilities, as well as to monitoring Elimination Program, as well as the Report on the progress of the Reliability Improvement the Quality of Accident Cause Investigation and Programs. In 2019, the Committee discussed Adequacy of Investigation-Based Measures. Vladimir Sergeyevich Chistyakov Vitaly Yurievich Zarkhin Andrey Vladimirovich Morozov this on a quarterly basis. Total number of meetings the member could attend Number of meetings the member actually attended The Reliability Committee also discussed mat- ters of passing through special periods, i.e. Number of meetings the member attended by absentee voting reports on the Company’s preparations, pre- paredness for, and outcomes of, the fall and 1. winter season 2019-2020/flooding season The positions are indicated as of the time of election. of 2019. Besides, the Committee discussed

174 175 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

PARTICIPATION OF THE COMMITTEE MEMBERS Audit Committee IN THE MEETINGS OF THE AUDIT COMMITTEE IN 2019 Aleksandr Yurievich Korneyev Pursuant to the Audit Committee Regulations Chairperson of the Grid Connection Committee as approved by the Board of Directors on Director of the Grid Connection and Infrastructure Development March 14, 2016 (Minutes No. 216), approved January 1 to June 14, 2019 Department, Rosseti with amendments by the Board of Directors on October 31, 2016 (Minutes No. 246), the Committee is mainly tasked to draw and 10 10 10 10 10 10 10 10 submit recommendations to the Board of Total number of 10 10 10 109 10 10 10 109 meetings the Directors on the following: Total number of 8 9 8 9 member could REPORT ON THE WORK OF grid complex development in the Company- • consideration of the accounting (financial) attendmeetings the 8 8 member could THE GRID CONNECTION served region; analysis of grid connection of statements of the Company and supervision Numberattend of meetings COMMITTEE IN 2019 small and medium-sized enterprises in 2018; over the process of its preparation; the member actually attendedNumber of meetings analysis of progress in making grid connec- • supervision over the systems of risk man- the member actually Dear Colleagues! tion more available; Report on the Company’s agement, internal control and corporate Numberattended of meetings the member Involvement in Drafting the Regional Electric governance; attendedNumber by of absentee meetings The Committee’s specific objectives mean that Power Industry Development Roadmap for • supervision over the performance of an votingthe member attended by absentee some of the matters have to be discussed reg- 2019; results of marketing studies of the con- external audit and selection of an auditor; voting ularly. Thus, we quarterly evaluate the attain- cluded grid connection contracts that involve • arrangement and ensuring independence ment of two KPIs (Grid Connection Deadline investment; and the Report on the Reduction in and objectivity of the internal audit function; Denis Lvovich Guriyanov Vitaly Anatolyevich Domnich Yury Kazbekovich Zafesov Andrey Vladimirovich Morozov Denis Lvovich Guriyanov Vitaly Anatolyevich Domnich Yury Kazbekovich Zafesov Andrey Vladimirovich Morozov Compliance and Improving the Utilization Rate Effective Contracts with Breached Deadlines. • performance management of the system of the Grid Equipment Capacity) and draw rec- of counteracting unethical practices on the Denis Lvovich Guriyanov Vitaly Anatolyevich Domnich Yury Kazbekovich Zafesov Andrey Vladimirovich Morozov ommendations for the Board of Directors per- The Committee’s effort, above all, enabled the part of the Company’s employees and third Between June 15 and December 31, 2019 taining to the current situation with respect Company to take further steps to openness parties. to grid connections. Besides, the Committee and non-discriminatory access to grid connec- 1 regularly discusses the Company’s compli- tion for all consumers. The current lineup of the Audit Committee 7 7 7 7 7 7 7 7 7 7 7 ance with the Russian law on grid connec- of the Board of Directors, IDGC of Center and tion, as well as the conformance of its services Besides, the Committee had its purview Volga Region was approved by the Company’s 7 7 7 7 7 7 7 7 7 7 7 to the requirements set forth by the regional and objectives expanded in 2019 by virtue of Board of Directors on July 24, 2019 (Minutes regulators. amended Regulations to improve non-tariff No. 369): and additional customer services as well as to • Alexander Viktorovich Shevchuk In 2019, the Committee also focused on plan- enhance sundry activities. (Chairperson of the Committee, independ- 3 3 3 3 ning corrective actions to address the short- ent director), Executive Director of the 3 3 3 3 comings identified by the Ministry of Energy’s Professional Investors Association; field inspections of Rosseti’s subsidiaries; • Denis Lvovich Guriyanov (non-execu- quarterly progress monitoring of such actions tive director), Director of the Corporate Denis Lvovich Guriyanov Yury Kazbekovich Zafesov Anastasia Igorevna Krupenina Egor Vyacheslavovich Prokhorov Alexander Viktorovich Shevchuk was also paid attention to. Governance and Shareholder/Investor Denis Lvovich Guriyanov Yury Kazbekovich Zafesov Anastasia Igorevna Krupenina Egor Vyacheslavovich Prokhorov Alexander Viktorovich Shevchuk Relations Department, Rosseti; In 2019, the Grid Connection Committee dis- • Yury Kazbekovich Zafesov (non-execu- Denis Lvovich Guriyanov Yury Kazbekovich Zafesov Anastasia Igorevna Krupenina Egor Vyacheslavovich Prokhorov Alexander Viktorovich Shevchuk cussed a number of important documents, tive director), Director of the Procurement including: analysis of the Company’s grid Department, Rosseti; development plans and communications • Egor Vyacheslavovich Prokhorov (non-exec- with executive authorities on the prospects of utive director), Deputy Director General for Finance, Rosseti; • Anastasia Igorevna Krupenina (independ- ent director), Director for Strategy and In 2019, the Audit Committee held 17 meetings and discussed Investment, 5Plus LLC. 47 matters.

1. The positions are indicated as of the time of election.

176 177 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

MANAGEMENT BOARD

The Management Board is a collective exec- shareholders; utive body intended to directly manage the • preparing proposals concerning the Company’s Alexander Viktorovich Shevchuk Company, guided by the resolutions of the development strategy; General Shareholders’ Meeting and the Board • implementing the Company’s Financial and Chairperson of the Audit Committee of Directors. The Management Board oper- Economic Policy, developing decisions on the Independent Director ates in accordance with the legislation of the major issues related to the Company’s cur- Executive director of the Professional Investors Association Russian Federation, the Articles of Association, rent economic operations and coordinating the the Management Board Regulations, and the operation of the Company’s units; Corporate Governance Code of the Company. • increasing the efficiency of the internal control and risk monitoring systems; The key objectives of the Management Board • ensuring a high level of income from the REPORT ON THE WORK OF THE significance they cited, to further prove their are as follows: Company’s assets and the maximum profit AUDIT COMMITTEE IN 2019 independence in view of the earlier non-au- • ensuring respect for the rights and from the Company’s operations. dit services, and to inform the Committee legitimate interests of the Company’s Dear Colleagues! members on how labor-intensive this Audit Contract was compared to earlier periods; In 2019, the Audit Committee actively dis- 4. Analysis of the Company’s expenditure cussed and made recommendations for the dynamics for non-standard transactions, Report on the Work of the Management Board Board of Directors on the following: including those with related parties. The Committee members did not note any sig- in 2019 1. Independent performance assessment of nificant changes from the available data; the Internal Audit System, which proved our 5. Performance assessment of the Internal Breakdown of Meetings Held Breakdown of Issues Considered internal audit function to be efficient and Control, Risk Management, and Corporate by the Management Board in 2019 by the Management Board in 2019, % advanced; Governance System. The Committee mem- In 2019, 2. Internal Audit System-related reports and bers studied the reports of the Audit 41 2 18 28 21 development plans, including an independ- Commission for 2018 and in due order 2 the Management Board held ent evaluation by an external advisor. The resolved to additionally evaluate the effi- 4 43 meetings Committee is satisfied with the specialized ciency of the approved Plan to Address and discussed 108 unit’s work and keeps track of the efforts to Audit Commission-Identified Shortcomings. 12 issues. improve the system and maximizing its util- ity for the Company; The Committee sought to have as many meet- 3. Cooperation with an external auditor to ings as possible in presentia and/or by con- draw the Auditor’s opinion on the RAS ference calls. All interested members of the 15 accounting statements and the IFRS finan- Board of Directors were regularly invited to cial statements. The Committee has taken attend the Committee, while some meet- note of the Auditor’s significant remarks ings with external auditors were held in the that were not addressed by the Company, absence of managers. and made sure in its communications with the auditors that the latter did not have significant remarks on the reserves, the impairment of fixed assets (within the IFRS reporting), the recognition and appreciation of revenues. On a side note, the Committee Held in presentia Management of educational institutions asked the auditors to justify the level of Held in absentia (by absentee voting) Recommendations for the Board of Directors Financial and economic activities Effective risk management Subsidiary management Transactions above 1% of the book value of assets Other

Below are the main issues preliminarily considered by the Management Board and submitted to the Board of Directors in 2019: • priorities and strategy of the Company; • approval of (adjusted) target values of key performance indicators (KPI) of the Company, and reports on their attainment; • recommendations on the size of share dividends and the payment procedures; • approval of candidacies for independent assessors; • making a decision on the Company’s affiliation with other organizations; • preliminary approval of transactions involving a transfer of the Company’s property without compensation. 178 179 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

Management Board Lineup

In 2019, Konstantin Aleksandrovich Mikhailik1 and Inna Vitalyevna Gromova2 had their powers of Management Board members terminated.

As of December 31, 2019, the current Management Board of IDGC of Center and Volga Region3 comprised:

Vitaly Olegovich Akulichev Vyacheslav Aleksandrovich Gorev First Deputy Director General, Director for Development Deputy Director General, Director of Nizhnovenergo, of IDGC of Centre (the Management Company of IDGC IDGC of Center and Volga Region of Center and Volga Region) Holds no shares of IDGC of Center and Volga Region or its Holds no shares of IDGC of Center and Volga Region or its subsidiaries. subsidiaries.

Igor Vladimirovich Makovskiy Alexander Viktorovich Pilyugin Born in 1987 Born in 1977 Chairperson of the Management Board, Director Deputy Chairperson of the Management Board, First In 2010 graduated from the Federal State Educational Graduated from Vyatka State Technical University General of IDGC of Centre Deputy Director General, Chief Engineer of IDGC Institution of Higher Professional Education Kaliningrad State as an Electric Power System and Grid Engineer in 1999, Vyatka of Centre (the Management Company of IDGC of Center Holds no shares of IDGC of Center and Volga Region or its Technical University majoring in Power Plants as an Engineer. State University with a degree in Management in 2007; had subsidiaries. and Volga Region) advanced training at the Industrial Center of Competence Holds no shares of IDGC of Center and Volga Region or its Over the past five years, he has served as: First Deputy in Construction and Power Engineering in Industrial subsidiaries. Director General, Director for Development of IDGC and Civil Engineering. Construction Company Management. of Centre (September 2019 – present); member of the Board Construction in 2016. Born in 1972 Born in 1968 of Directors, MEK Energoeffektivniye Tekhnologii JSC (June 2019 – present); Member of the Board of Directors, Svet Over the past five years, he has served as: Deputy Director In 1993, he graduated from the Alma-Ata Higher Front-Line In 1992 graduated from Kursk Polytechnic Institute majoring JSC (June 2019 – present); member of the Management General, Director of Nizhnovenergo, IDGC of Center and Volga Command College named after F.E. Dzerzhinsky majoring in Electrical Engineering and from the State Educational Board, IDGC of Centre (March 2019 – present); member Region (May 2019 – present); Deputy Director General in Command, Tactics with a degree in Border Force Officer; Institution of Higher Professional Education Kursk State of the Management Board, IDGC of Center and Volga Region for Capital Construction, IDGC of Centre (September 2017 in 2000, graduated from Kaliningrad State University Technical University as a Manager. (March 2019 – present); Acting First Deputy Director General, – April 2019); member of the Management Board of IDGC with a degree in Law, qualified as a lawyer. In 2004, he was Director for Development, and Acting First Deputy Director of and Volga Region (October 2016 – present); Advisor retrained under the Public and Municipal Administration Over the past five years, he has served as: member General (part-time), Advisor to the First Deputy Director to the Director General, IDGC of Centre (2017 – September program. of the Board of Directors, ATKh JSC (June 2019 – present); General, IDGC of Centre (October 2019 – September 2019); 2017), Head of the Capital Construction Department, Deputy member of the Management Board, IDGC of Center and Volga Chief Specialist and Director of the Strategic Development Chief Engineer for Reconstruction and Repair, Deputy Director Over the past five years, has has served as: Chairperson Region (November 2016 – present); Advisor at IDGC of Centre Directorate, Yantarenergo (April 2019 – October 2018); General for Investment, IDGC of Center and Volga Region (2007 of the Board of Directors, YarESK JSC (June 2019 – present); and Volga Region (November 2016 – October 2017); First Informer and Supervisor of the Operations Management – November 2017), member of the Board of Directors of Svet, member of the Board of Directors, IDGC of Center and Volga Deputy Director General, Chief Engineer of IDGC of Centre and Process Control Department, Supervisory Control Service CJSC (June 2015 – June 2017). Region (June 2019 – present); member of the Board (November 2014 – present); member of the Management of Yantarenergo (Municipal Tidal Power Plants) (April 2013 – of Directors, IDGC of Centre (May 2019 – present); Director Board, IDGC of Centre (February 2014 – present). April 2015). IDGC of Center and Volga Region has no information General of IDGC of Centre (September 2018 – present); about acquisition or alienation of the Company’s shares made Chairperson of the Management Board, IDGC of Centre IDGC of Center and Volga Region has no information IDGC of Center and Volga Region has no information by the person in 2019. (September 2018 – present); Chairperson of the Management about acquisition or alienation of the Company’s shares made about acquisition or alienation of the Company’s shares made Board, IDGC of Center and Volga Region (September 2018 – by the person in 2019. by the person in 2019. present); member and Chairperson of the Board of Directors, Kaliningrad Generating Company JSC (February 2013 – present); member and Chairperson of the Board of Directors, Yantarenergoservis (February 2013 — present); member and Chairperson of the Board of Directors, Yantarenergosbyt (February 2013 – present); Acting Director General and Director General, Yantarenergo (August 2012 – September

2018); Chairperson of the Management Board, Yantarenergo 1. (August 2012 – September 2018); member and Chairperson Resolution of the Board of Directors dd. March 5, 2019, of the Board of Directors, Yantarenergo (June 2012 – present). Minutes No. 351. 2. Resolution of the Board of Directors dd. July 24, 2019, Minutes No. 369. IDGC of Center and Volga Region has no information 3. Was elected by resolutions of the Company’s Board about acquisition or alienation of the Company’s shares made of Directors dd. October 14, 2016, Minutes No. 243, by the person in 2019. December, 2016, Minutes No. 249, July 10, 2017, Minutes 1 No. 275, March 5, 2019, Minutes No. 351, and July 24, 2019, Minutes No. 369.

180 181 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

THE SOLE EXECUTIVE BODY – THE MANAGEMENT COMPANY Participation of Members in the Meetings of the Management Board in 2019 The Sole Executive Body is responsible for The Sole Executive Body completed all assign- managing IDGC of Center and Volga Region’s ments of the the Company’s Board of Directors Igor Vladimirovich Makovskiy day-to-day operations unless referred to the for 2019. 43 General Shareholders’ Meeting, the Board of 39 Directors, or the Management Board of the The powers of the Sole Executive Body of IDGC 37 Company. of Center and Volga Region were delegated to Alexander Viktorovich Pilyugin the Management Company, IDGC of Centre as 43 43 The Sole Executive Body presents the reports resolved by the General Shareholders’ Meeting 41 on fulfillment of resolutions of the Board of on June 5, 2017. Vitaly Olegovich Akulichev Directors and other reports for the consider- 37 ation of the Board of Directors in compliance 37 with the current legislation, the operations Vladislava Vladimorovna Rezakova 35 plan of the Board of Directors and the internal Deputy Director General for Service Sales Vyacheslav Aleksandrovich Gorev documents of the Company. and Improvement, IDGC Centre (the Management 43 Company of IDGC of Center and Volga Region 43 41 Management Company Details Holds no shares of IDGC of Center and Volga Region or its Vladislava Vladimorovna Rezakova Complete trade name Public Joint-Stock Company “Interregional Distribution Grid subsidiaries. 17 Company of Centre” 17 Abbreviated company name IDGC of Centre, PJSC 16 Born in 1973 Inna Vitalievna Gromova Grounds for the delegation of powers Agreement No. 7700/00313/17 dated September 11, 2017 26 on the delegation of powers of the Sole Executive Body of IDGC of Center and Volga Region to IDGC of Centre Graduated from Orenburg State Technical University majoring 24 in Industrial Electronics as an Electronics Engineer. 23 Address Russia, Moscow Konstantin Aleksandrovich Mikhaylik INN 6901067107 Over the past five years, she has served as: member 6 of the Board of Directors, Votkinsk Municipal Power Grids 0 OGRN 1046900099498 (November 2019 – present); member of the Management 0 Phone: +7(495) 747-9292 Board, IDGC of Centre (July 2019 – present); member of the Management Board, IDGC of Center and Volga Region Email [email protected] (July 2019 – present); Deputy Director General for Service Total number of meetings the Management Board Information on license to carry out activities No such license Sales and Development, and Advisor to the Director General, member could attend on the management of investment funds, mutual investment IDGC of Centre (April 2019 – present); Director General funds and private pension funds and Acting Director General, Yantarenergosbyt (April 2016 – Number of meeting the member actually attended April 2019); Head of the Service Sales and Electricity Metering Number of meetings the memeber attended by Department, Yantarenergo (October 2014 – April 2016). absentee voting

IDGC of Center and Volga Region has no information about acquisition or alienation of the Company’s shares made CORPORATE SECRETARY by the person in 2019.

The Corporate Secretary of IDGC of Center The core functions of the Corporate Secretary and Volga Region acts upon the Articles of are the following: Association and the Corporate Secretary • prepare the Company to host the General Regulations as approved by the Board of Shareholders’ Meeting as required by The average percentage Directors on September 26, 2016 (Minutes No. the current law of Russia, the Articles of of attendance 242). Association, and other internal documents of the meetings by members of the Company; The corporate secretary is functionally sub- • facilitating the work of the Board of of the Management Board was ordinate to the Board of Directors of the Directors and Committees of the Board of Company. The corporate secretary’s main task Directors of the Company; is to ensure that the governing bodies and offi- • assisting the members of the Board of 87% cials of the Company comply with procedural Directors and Committees of the Board requirements, which guarantee the exercise of Directors of the Company in exercise of of rights and legal interests of the Company’s their functions; shareholders. • arranging the interaction between the Company (represented by the Board of Directors and the Director General) and its shareholders; storage of the Company’s documents.

182 183 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

descriptions and the managerial instruc- the Board of Directors and top management The Company’s Corporate Secretary is Center and Volga Region’s Corporate Secretary tions by the subordinates; on how efficiently the Company asses and obliged to submit their progress report to the was preliminarily reviewed by the Personnel • the second line of defense is at the level of manages its risks, and how effectively the Personnel and Remuneration Committee and and Remuneration Committee of the Board control units: they ensure the implementa- internal control is carried out on the first and to the Board of Directors of the Company every of Directors on March 21, 2019 (minutes No. tion of and compliance with the Company’s second lines of defense. year no later than 30 calendar days before the 15/122) and approved by the Board of Directors Policies regarding internal control, risk Annual General Shareholders’ Meeting. The on May 31, 2019 (minutes No. 365). management, environmental protection, recommended form of the report is annexed to compliance with safety regulations, quality the Regulations. In 2019, the Report of IDGC of assurance, etc.; • the third line of defense is at the level of the Internal Audit Department: using a risk- Yulia Stanislavovna Guseva Born in 1975 based approach, it examines and reports to Graduated from Nizhny Novgorod Commercial Institute majoring Corporate Secretary of IDGC of Center in Law. In 2014, she received occupational retraining at the Higher School and Volga Region (elected by the Company’s of Economics, National Research University under the Presidential Program Board of Directors on June 19, 2017 (Minutes for Training Managers for National Economy Enterprises in Russia (the No. 273)), Head of the Corporate Relations Innovation Management program). Division under the Corporate Governance Over the past five years has served as: Head of the Corporate Relations STRUCTURE OF THE INTERNAL CONTROL SYSTEM and Shareholder Relations Department. Division, Corporate Governance and Shareholder Relations Department Holds no shares of IDGC of Center and Volga of IDGC of Center and Volga Region (2007 – present), member of the Board 1st line of defense Region or its subsidiaries. of Directors of ATKh JSC (June 2017 – June 2018), member of the Board of Directors of Energetik Health Resort (June 2017 – June 2018), member Management Company – IDGC of the Board of Directors of MEK Energoeffektivniye Tekhnologii (June 2018 – Board of Directors Management Board June 2019). of Centre, PJSC IDGC of Center and Volga Region has no information about acquisition or alienation of the Company’s shares made by the person in 2019. Board of Directors’ Audit Not related to any members of the governing bodies and shareholders Heads of Subdivisions and Departments Committee of the Company. Has no criminal record, did not commit administrative offense in the field of business, finance, taxes and fees or security market. Other Committees of the Board Collegiate Bodies (Commissions, Working Groups) of Directors

2nd line of defense 3rd line of defense For 2019, the Corporate Secretary was paid 618,749 RUB • compliance with applicable laws and local before tax. regulations in the Company’s commercial Middle Offices: activities and financial accounting; • Internal Control and Risk Management Department • reliability and timelines of accounting • Legal Department Internal Audit Department (financial) and other reports. • Department of Anti-Corruption Policy Implementation • Security Department INTERNAL CONTROL • Corporate Governance and Shareholder Relations Department • Administrative Office GRI 102-56 SYSTEM Structure • Occupational Safety Department • Department of Industrial Monitoring and Reliability of the Internal Control • Quality Management Department System • Technical Supervision Centre Audit Commission IDGC Center and Volga Region’s Internal Control System is an integral part of the The Internal Control System of IDGC of Center Company’s General Management System and and Volga Region is designed to provide con- is regulated by: trol procedures that consistently cover the • the Company’s Internal Control Policy entire spectrum of the Company’s activities. and remuneration of an executive. In 2019, the as approved by the Board of Directors on The Internal Control System of IDGC of Center Internal Audit Internal Audit Department included 11 people. March 11, 2016 (Minutes No. 216); and Volga Region is based on the “three lines • the Company’s revised Internal Audit Policy of defense” model, which means the inter- Department The operations of the Internal Audit as approved by the Board of Directors on nal control in the Company is administered at Department of IDGC of Center and Volga November 29, 2019 (Minutes No. 385). three levels: The Internal Audit Department is the unit Region are regulated by the following • The first line of defense is at the level responsible for the implementation of the documents: IDGC of Center and Volga Region’s Internal of management bodies (the Sole and internal audit function in the Company. It • the Company’s Internal Audit Policy and the Control System is designed to reasonably war- Collective Executive Bodies) and heads of is immediately subordinate to the Board of Code of Ethics for Internal Auditors (revised) rant the attainment of the following targets; the Company’s units and subdivisions: they Directors, which monitors and organizes the approved by the Board of Directors on • operational efficiency and strong perfor- are responsible for achievement of results, operation of this unit, including the approval of March 29, 2019 (Minutes No. 385); mance of the Company including achieve- and control the compliance with the job performance plans and reports on their imple- • Internal Audit Department Regulations ment of financial and operating results, mentation, adoption of budgets, and approval approved by the Board of Directors on protection of the Company’s assets; of decisions on the appointment, dismissal,

184 185 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

The current Audit Commission was elected by Resolution of the Annual General Shareholders’ Meeting dd. June August 24, 2016, Minutes No. 238; regulated by the Company’s Articles of 14, 2019, Minutes No. 131: • Program on Assurance and Improvement Association and the revised IDGC of Center and of Internal Audit Quality approved by the Volga Region’s Audit Commission Regulations Sergey Vladimirovich Born in 1979 Company’s Board of Directors on December as approved by the resolution of the General First elected a member of the Audit Commission on June 14, 2019. 29, 2016, Minutes No. 252; Shareholders’ Meeting dd. June 6, 2017 Kiryukhin • in-house standards of internal audit and (Minutes No. 11). Over the past five years has served as: Chairperson of the Audit Commission, IDGC of Center and Volga Region (2019 – present); Chief Advisor, Director standards of practical application, devel- Chairperson of the Audit Commission, Acting Deputy Director General, Head of the Organizational Support Department (part-time in-house), and Acting Deputy oped according to the International The key objectives of the Audit Commission of of the Executive Arm, Rosseti Director General, Head of the Executive Arm, Rosseti (2018 – present); Deputy Professional Standards of Internal Audit. the IDGC of Center and Volga Region are the Head of the Department of Control and Analysis, Head of the Administration following: Holds no shares of IDGC of Center Department of the Federal Environmental, Industrial and Nuclear Supervision The Internal Audit Department receives feed- • control of the financial and business opera- and Volga Region or its subsidiaries. Service of Russia (Rostekhnadzor) (2017-2018); Advisor to the Director General back from the Audit Committee of the Board tions of the Company; of Research Institute of Labor, Ministry of Labor of the Russian Federation (2017); Deputy Head of the Internal Affairs Office under Directorate General for Interagency of Directors in various forms, including ques- • independent assessment of reliability of the Cooperation and Internal Affairs, Head of the Internal Investigation Division, Head tionnaires filled out by its members. The sat- data contained in the Company’s Annual of the Second Investigation Division under the First Investigation Office within isfaction rate of the Audit Committee with Report and the annual accounting (financial) the Directorate General for Investigation, Deputy Head of the Internal Affairs Office performance of the Internal Audit Department statements. under the Directorate General for Interagency Cooperation and Internal Affairs, Head is calculated as a ratio of the weighted average of the Internal Investigation Unit of the Russia’s Investigation Committee (2012-2016). score on the questionnaire forms of the vot- In 2019, the Commission held 4 meetings in ing members to their total number. Following presentia and discussed 10 matters. The Audit Marina Alekseyevna Born in 1961 the results of 2019, the Audit Committee of Commission audited the Company’s finan- Elected to IDGC of Center and Volga Region’s Audit Commission seven times: June the Board of Directors assessed the perfor- cial and business operations for 2018 as Lelekova 18, 2013; June 26, 2014; June 16, 2015; June 9, 2016; June 5, 2017; June 1, 2018; mance of the Internal Audit Department as scheduled. and June 14, 2019. Director of the Control and Audit “adequate”. Department, Rosseti. Over the past five years has served as: member of the Audit Commission, IDGC During 2019, IDGC of Center and Volga of Center and Volga Region (2013 – present); Chairperson of the Audit Commission, Region’s Audit Commission had two lineups. Holds no shares of IDGC of Center IDGC of Center and Volga Region (2013 – 2019), Director of the Control and Audit Between June 2, 2018 and June 14, 2019, the and Volga Region or its subsidiaries. Department, Director of the Monitoring Department and Director of the Control Commission included the following members and Audit Department, Rosseti (2013 – present). In 2019, KPMG carried out an independent external elected by Resolution of the Annual General Born in 1984 Shareholders’ Meeting dd. June 4, 2018, Artem Nikolaevich Kirillov evaluation of IDGC of Center and Volga Region’s Elected to IDGC of Center and Volga Region’s Audit Commission three times on: June Minutes No. 121: corporate Internal Audit System. This produced Deputy Head of the Audit Office, 26, 2014, June 1, 2018 and June 14, 2019 • Marina Alekseyevna Lelekova (Chairperson an opinion that the Company’s Internal Audit System was Control and Audit Department, of the Audit Commission), Head of the Over the past five years has served as: member of the Audit Commission, IDGC “generally compliant” with the International Standards Rosseti. Control and Audit Department, Rosseti; of Center and Volga Region (2018 – present); member of the Audit Commission, IDGC for the Professional Practice of Internal Auditing, of Center and Volga Region (2014 – 2015); Head of the Investment Audit Division the Ethics Code, and the Internal Audit Policy. KPMG also • Svetlana Anatolievna Kim, Head of the Audit Holds no shares of IDGC of Center of the Audit and Internal Audit Office under the Control and Audit Department, Deputy drew recommendations on how to improve the Company’s Office, Control and Audit Department of and Volga Region or its subsidiaries. Head of the Audit Office, Control Department, Deputy Head of the Audit Office, Control internal audit practices. Rosseti; and Audit Department of Rosseti (2013 – present). • Elena Aleksandrovna Kabizskina, Deputy Head of the Audit Office, Control and Audit Elena Stanislavovna Born in 1972 Department of Rosseti; Erandina Elected member of IDGC of Center and Volga Region’s Audit Commission thrice on: • Oksana Alekseyevna Medvedeva, Chief June 9, 2016, June 5, 2017, and June 14, 2019 Expert of the Audit Office, Control and Audit Chief Expert of the Control and Expert Over the past five years has served as: member of the Audit Commission, IDGC Audit Commission Department of Rosseti; Office, Control and Audit Department, of Center and Volga Region (2019 – present); member of the Audit Commission, IDGC • Artem Nikolaevich Kirillov, Deputy Head Rosseti. of Center and Volga Region (2016 – 2018); Chief Expert of the Control and Expert The Audit Commission is a permanent inter- of the Audit Office, Control and Audit Office, Control and Audit Department of Rosseti (2016 – present); Chief Specialist of the Internal Audit Service, Elektrosetservis ENES JSC (2013 – 2015). nal control body regularly monitoring the Department of Rosseti. Holds no shares of IDGC of Center Company’s financial and business activities, and Volga Region or its subsidiaries. its separate divisions, officials of the manage- Born in 1965 ment bodies and subdivisions of the executive Sergey Vladimirovich office for compliance with the legislation of the Malyshev Elected member of IDGC of Center and Volga Region’s Audit Commission twice on: June 26, 2014 and June 14, 2019 Russian Federation, the Articles of Association and internal documents of the Company. The Chief Expert of the Audit Office, Over the past five years has served as: member of the Audit Commission, IDGC Audit Commission acts in the interests of the Control and Audit Department, Rosseti of Center and Volga Region (2019 – present); member of the Audit Commission, IDGC of Center and Volga Region (2015 – 2016); Chief Expert of the Audit Office, Control Company’s shareholders and reports only to and Audit Department of Rosseti (2013 – present). the General Shareholders’ Meeting. Holds no shares of IDGC of Center and Volga Region or its subsidiaries. The Audit Commission’s activities are

1. The positions are indicated as of the time of election.

186 1. The positions are indicated as of the time of election. 187 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

For 2020, the Company plans to improve its EXTERNAL AUDIT Evaluation Internal Control System by doing the following: • keeping specialists appropriately trained and Improvement and continuous acquisition of new skills; The external auditor carries out an independ- Center and Volga Region’s Board of Directors of the Internal Control • integration of the Quality Management ent audit of the Company’s RAS accounting nominates an auditor for consideration and System, Internal Control System, and Risk records and financial (accounting) statements approval at the General Shareholders’ Meeting. System Management System in a single General as well as of its IFRS consolidated statements Management System; to draw up an opinion about their reliability and Resolution of the Annual General The Company regularly makes internal and • being the current risk evaluation procedure whether the accounting procedures comply Shareholders’ Meeting of IDGC of Center and external evaluations of efficiency of the current in line with the requirements of the updated with the legislation of the Russian Federation. Volga Region dd. June 14, 2019 (Minutes No. Internal Control System. In 2019, the Internal Risk Management System; 13) appointed Ernst & Young the Company’s Audit Department carried out internal evalua- • integration of the existing Anti-Corruption The Central Procurement Committee of auditor to audit the financial (accounting) tion.1 According to its results, the maturity level and Antitrust Compliance Systems in the Rosseti selects the external auditor, and the statements for 2019. Ernst & Young was also of the Company’s Internal Control System was General Internal Control System and the Audit Committee of the Board of Directors at selected to audit the consolidated financial “optimal” at the year-end 2018 and 2019 alike. Risk Management System; IDGC of Center and Volga Region assesses statements of IDGC of Center and Volga Region • automation of control procedures in the its qualifications, quality of work, compliance for 2018. A consortium of contractors compris- context of the “Digital Transformation 2030” with the requirements for independence to ing Ernst&Young Assessment and Advisory Concept; conclude on the auditor’s candidacy. IDGC of Services LLC and RSM RUS LLC carried out • optimization and automation of report- an independent external assessment of the ing and communications between IDGC of Internal Control System and concluded that Center and Volga Region and Rosseti. its was efficient as of March 31, 2019.2 In light of these recommendations, the Company has Auditor’s details approved3 and implements its Internal Control Maintenance and Improvement Plan. The fol- Complete trade name Ernst&Young Limited Liability Company lowing milestone measures were taken under Abbreviated company name Ernst&Young LLC this Plan in 2019 to improve the Internal Address 115035 Russia, Moscow, 77 Sadovnicheskaya Naberezhnaya, bld. 1 Control System: Main state registration number 1027739707203 • business process control matrices updated4; • Risk Management System Improvement INN/KPP 7709383532/770501001 Action Plan approved5; OGRN 1027739707203 • Antitrust Policy approved6; Phone, fax +7 (495) 755 97 00, +7 (495) 755 9701 • heads of subdivisions performed a self-as- sessment of efficiency of the control pro- Email [email protected] www.ey.com cedures and the Internal Control System of the business processes under their Membership in a self-regulatory organization Self-Regulatory Organization of Auditors Association “Sodruzhestvo” supervision. (RUA SRO) 119192, Russia, Moscow, 21 Michurinsky Prospekt, bld. 4. Registration entry number in the register of audotirs and audit organizations RUA SPO 12006020327.

IDGC of Center and Volga Region and Ernst & (involvement in the promotion of goods and Young entered into the Audit Services Contract services, joint enterprises, etc.), contracts No. ECU-2019-00172 of August 21, 2019 to for non-audit services, or family ties with the

1. audit the RAS and IFRS reports for a total Ernst&Young officers. The Auditor does not The Internal Auditor’s Report on the Performance Assessment of the Internal Control System of 6.09 RUB mn inclusive of VAT. Under this provide any non-audit services to the Company. for 2019 has been discussed by the Board of Directors, Minutes No. 407 dd. April 24, 2020, preliminarily discussed by the Board of Directors’ Audit Committee, Minutes No. 10/131 dd. Contract, Ernst & Young was paid 3.7 RUB mn March 23, 2020. inclusive of VAT in 2019. 2. The Board of Directors discussed the results of the external independent assessment of the Internal Control System on July 31, 2019, Minutes No. 370. The Auditor is not affiliated with the Company’s 3. Approved by the Board of Directors on October 31, 2019, Minutes No. 380. employees or managers. Neither the Company 4. Orders of Rosseti Centre No. 212-TsA dd. May 28, 2019; No. 255-TsA dd. June 27, 2019; and No. nor its employees have any business relations 626-TsA dd. December 31, 2019. 5. Approved by the Board of Directors on December 31, 2019, Minutes No. 393. 6. Rosseti Centre Order No. 508-TsA dd. November 11, 2019.

188 189 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

Parties of the Risk Management System CORPORATE RISK Main functions MANAGEMENT SYSTEM Parties of the Risk Pursuant to the Company’s Risk Management Management Process Policy Pursuant to other internal documents IDGC of Center and Volga Region has a Risk • Instructions for Use and Filling of the Board of Directors • approval of internal documents, which define Pursuant to the Company’s revised Articles Management System (RMS) in place. The pur- Operational Risk Data Sheet (Order No. 448 of the Company the organization and functioning of the RMS; of Association dated June 14, 2019 (Minutes No. 13 pose of the RMS is to ensure sustainable con- dd. August 14, 2015); GRI 102-29 • approval of the Risk Management Policy; of the Annual General Shareholders’ Meeting): tinuous operation and development of the • Guidelines on Using the Operational Risk • annual review of reports from the executive • defining the principles of, and approaches Company through timely identification, assess- Evaluation Methodology, the Probability bodies concerning the organization, to, the arrangement of Internal Audit, the Risk ment, and efficient management of risks that Scale Limits, the Risk Consequence and performance and effectiveness Management and Internal Control Systems, including threaten to hamper the efficient business or Significance Scales (Order No. 448 dd. of the RMS, assessment of the RMS functioning the approval of the Company’s internal documents damage the reputation of the Company, the August 14, 2015); and production of recommendations for its that set forth its Risk Management, Internal Control, improvement; and Internal Audit Policies; health of its employees, the environment, or • Instructions on Planning and • annual review of a report from the internal audit • risk evaluation as well as setting such risk levels that property interests of its shareholders and Implementation of Risk Management unit on the RMS efficiency; may be deemed acceptable for the Company; investors. Measures at IDGC of Center and Volga • consideration of the results of external • arrangement of annual or more frequent analysis Region (Order No. 705 dd. December 17, independent evaluation of the RMS efficiency and assessment of the Risk Management and Internal To develop the RMS, the Company has the fol- 2015); in case of its execution. Control Systems, which shall draw, among other lowing documents in place: • Functional Risk Evaluation Guidelines things, upon the regular reporting from the Company’s • Risk Management Policy (approved by (Order No. 38-TsA dd. January 31, 2019); executive bodies, Internal Audit, and external auditors. the Board of Directors on March 21, 2016, • IDGC of Center and Volga Region Risk Minutes No. 217); Appetite Determination Procedure (Order Strategy Committee • monitoring the efficiency of risk management Pursuant to the Board of Directors’ Strategy Committee • Rosseti Group Operational Risk Evaluation No. 38-TsA dd. January 31, 2019). procedures; Regulations dd. October 7, 2019 (Minutes No. 377): Methodology (Order No. 448 dd. August 14, • performance assessment of risk management • risk evaluation as well as setting such risk levels that 2015); measures and RMS improvements; may be deemed acceptable for the Company; • preliminary consideration of reports • annual review of the arrangement, operation, from the executive bodies concerning and performance of the Company’s risk management the organization and performance of the RMS systems. prior to their presentation to the Board STRUCTURE OF THE RISK MANAGEMENT SYSTEM of Directors; • analysis of proposals for the RMS improvement, including the identification of risks and adjustment of risk parameters; Board of Directors • preliminary review of the Company’s internal Audit Commission documents defining the organization and functioning of the RMS along with the Risk Management Policy Board of Directors’ Strategy Executive bodies and subsequent amendments thereto prior Committee to their approval by the Board of Directors; • preliminary consideration and preparation of a statement on the text of the RMS- Board of Directors’ Audit Management Board concerning section of the Company’s Annual Committee Report prior to its approval by the Board of Directors. Management Company – IDGC Sundry committees of the of Centre, PJSC Board of Directors Audit Committee • preliminary review of the results of the RMS In accordance with the Company’s Board of Directors’ of the Board of Directors efficiency evaluation and examination Audit Committee Regulations dated March 14, 2016 of the Company of compliance with the provisions (Minutes No. 216) as amended and supplemented of the Policy based on the internal on November 2, 2016 (Minutes No. 246): auditor’s report on the stated issues prior • at least once a year, preliminary review of the report Internal Audit Division Risk owners to their submission to the Board of Directors. from the Internal Audit on the efficiency of the internal control system, RMS and corporate governance, Deputy Directors General of the as well as preliminary review of reports based Internal Audit Department on the external independent assessment Management Company (IDGC of of the efficiency of the internal control system, RMS Centre) and corporate governance; • drafting of proposals for improving the RMS, internal control, and corporate governance practices. Audit Commission • review of reports before submitting to the Board In accordance with the Articles of Association of the Company of Directors; of the Company: Risk management divisions • drafting of proposals and recommendations • verification and analysis of the financial position for improving the RMS based on the results of the Company, financial solvency, performance of the audit. of the internal control system and the RMS, liquidity Internal Control and Risk Management Performers of risk management of assets, debt-equity ratio, correctness and timeliness of accrual and payment of bond interests, and yield Department actions on other securities

190 191 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

Performance Assessment of the Corporate Risk Main functions Management System GRI 102-30 Parties of the Risk Pursuant to the Company’s Risk Management Management Process Policy Pursuant to other internal documents The Internal Audit Department of IDGC of 23, 2020). The Company’s Risk Management Executive bodies • ensuring that an efficient RMS is in place In accordance with the Articles of Association (the Company’s and remains functional by applying common of the Company: Center and Volga Region assesses the per- System had an “optimal” maturity level as of Management Board approaches and standards developed • efficient risk management as part of the Company’s formance of the Company’s existing Risk year-end 2018 and 2019 alike. and the Management and approved for the Rosseti Group; day-to-day operations; approval of risk management Management System on a yearly basis. This Company, IDGC • responsibility for the compliance budgets within the limits approved by resolution keeps the system efficient and in line with the In 2019, the Company’s Risk Management of Center) with resolutions of the Board of Directors of the Company’s Board of Directors; continuously changing requirements and the System also underwent an independent exter- on the organization and operation of the RMS. • Resolution of cross-functional (multiple-division) risk Company’s internal and external operating nal assessment and was deemed “moderately management objectives. conditions. efficient” as of March 31, 2019. The results of Risk owners • timely risk identification and evaluation; Pursuant to Regulations On the Distribution such independent external assessment were • selection of a risk response methods; of Responsibility and Authority Between the Deputy The Internal Audit Department’s Report on the discussed by the Board of Directors on July 31, • timely development and organization of risk Directors General, Managers Subordinate to the Director Performance Assessment of the Corporate 2019 (Minutes No. 370), preliminarily discussed management activities; General, and Deputy Directors General – Directors by the Board of Directors’ Strategy Committee • regular risk monitoring; of the Branches of IDGC of Centre (Order No. 287-TsA dd. Risk Management System for 2019 has been • provision of timely informing of the Company’s July 9, 2019): discussed by the Board of Directors (Minutes on May 31, 2019 (Minutes No. 24/223). executive bodies on the results of risk • ensuring regular monitoring of status of risks No. 407 dd. April 24, 2020), preliminar- management work; of the supervised processes; ily discussed by the Board of Directors’ Audit • enabling resolution cooperation with the Risk • ensuring timely update of risks of the supervised Committee (Minutes No. 10/131 dd. March Management Division to draft documents processes; and reports on risk management. • ensuring a quarterly analysis and rating of factors contributing to the realization of risks of the supervised processes; • arranging the development and adoption of measures for risk management of the supervised processes. Performers of risk • timely identification and/or minimization - management actions of risks in accordance with job descriptions Improving the Corporate Risk Management and regulating documents; • implementation of measures aimed at risk System management timely and in full. Risk Management • general coordination of risk management The main functions are enshrined in the Internal Control Pursuant to resolution of the Company’s • adopting information support practices for Division – Internal processes, including the coordination of all and Risk Management Office Regulations. Board of Directors dd. December 31, 2019 the risk management processes; Control and Risk the RMS participants; (Minutes 393), IDGC of Center and Volga • adopting a risk appetite determination Management Office • introduction of methodology documents into Region has approved and implements its Risk methodology aligned with the development the Company that would ensure the process Management System Improvement Action strategy, defining the key risk indicators; of risk management and the RMS operation; Plan. In 2019, under this Plan, the Company: • updating the Risk Register in the context of • organization of RMS training of the Company’s employees; • updated its Registers of Operational Risks; the Company’s Development Strategy and • timely aggregation of information on all • elaborated measures to adopt and business targets under the same Strategy; identified risks and drafting of proposals update a new Risk Identification, • adapting a new methodology for risk iden- for updating the risk register; Evaluation, Registration, and Management tification, evaluation, registration, and • securing that the risk management process Methodology. management; in the Company and the entities it controls • updating the regulations on the self-as- are monitored per the established procedures; For 2020, the Company plans to further sessment of the risk management system • timely and full provision of all stakeholders (including the Company’s executive bodies) improve its corporate Risk Management performance. with information on the main trends, risks, System by: challenges and threats in the Company’s • attaching greater significance to risk activities. management issues and raising the risk Internal Audit • internal independent assessment of the RMS The main functions are enshrined in the Internal Audit awareness; Division – Internal efficiency and provision of recommendations Department Regulations. • arranging systematic training in risk man- Audit Department to the risk management unit aimed at improving agement for the key decision makers as the RMS efficiency and performance; well as for other officers involved in risk • informing the Company’s executive bodies management; and the Board of Directors (the authorized committee of the Board of Directors) on the RMS status.

192 193 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

STRUCTURE AND FORMATION OF REMUNERATION PAID IN 2019 REMUNERATION AND MOTIVATION GRI 102-35 TO THE MEMBERS OF THE BOARD OF DIRECTORS

Individual remuneration for the year Remuneration for the Members of the Board (pursuant to the revised Board of Directors Remuneration and Reimbursement Regulations of of Directors IDGC of Center and Volga Region dd. August 29, 2016, Minutes No. 239) Number of meetings The total number of meetings of • it sets forth the remuneration for the Board attended by a mem- the Board of Directors between of Directors be paid on a quarterly basis; The total remuneration paid to the members ber of the Board of the Annual General Meetings of • no additional remuneration for increased of the Board of Directors in 2019 was 14,848,250.82 RUB Directors in the period shareholders (AGMS) capitalization; before deduction of personal income tax. In 2019, between the AGMS 38,198 RUB was paid to the members of the Company’s • partaking in the meetings of the Board of Board of Directors in reimbursement. The Company’s Directors’ Committees and in the General internal documents provide for no non-financial Shareholders’ Meetings to be reimbursed; Not more than B remuneration. Over 2019, wages, bonuses • remuneration to be paid at the expense of S = Bbase* n / m + Increments base and commission fees were not paid to the members profits from unregulated activities. (900,000 RUB) + 30 % of the Board of Directors who were not the Company’s to the Chairperson employees. Remuneration is not paid to the following people: Basic part of the remuneration. Calculated + 20 % • members of the Board of Directors, in based on the RAS revenue for the fiscal year. to the Chairman of a Board respect of which the federal law prescribes Committee a restriction or prohibition on receipt of any + 10 % The General Shareholders’ Meeting resolves payments from commercial organizations; 8,500,654.66 to the members of a Board to remunerate and (or) reimburse the mem- • members of the Board of Directors who are Committee bers of IDGC of Center and Volga Region’s also members of the Collective Executive + 0,0175 % of the increase Not more than 5 % of Board of Directors. Such remuneration fol- Body of the Company. RAS net income lows the criteria set forth in the Board of in the market capitalization (according to the Directors Remuneration and Reimbursement (for the period from the election of a member of the Board of Directors until the results of the fiscal Regulations of IDGC of Center and Volga election of a new Board) year) Region. In 2019, the Company’s General Shareholders’ Meeting approved the revised Regulations (Minutes No. 13 dd. June 14, Quarterly individual remuneration 2019). The new revision is different from its (pursuant to the revised Board of Directors Remuneration and Reimbursement Regulations of predecessor: IDGC Center and Volga Region dd. July 14, 2019, Minutes No. 13) • it applies only to the members of the Board of Directors elected by virtue of the AGSM Number of meetings Total number of BoD 14,848,250.82 Resolution dd. June 14, 2019 (Minutes No. attended by a member meetings over the 13) as well as by resolutions of subsequent of the Board of Directors reporting quarter General Shareholders’ Meetings1; during the reporting quarter

1. Not more than ¼ Members of the Board of Directors elected by the AGSM Resolution per Minutes No. 12 dd. S = (Bbase/ 4)*n / m + Increments June 1, 2019 received their remuneration pursuant to the Board of Directors Remuneration Bbase and Reimbursement Regulations approved by the Board of Directors on August 29, 2016 (Minutes + 30 % (675,000 RUB) No. 239 dd. August 31, 2016) as a lump sum for the entire period from being elected a member to the Chairperson of the Board of Directors to the election of a new Board. 6,347,596.15 Basic part of the remuneration. Calculated + 20 % based on the RAS revenue for the fiscal year. to the Chairman of a Board Committee + 10 % to the members of a Board Committee

194 195 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

Remuneration of Members of Committees Personal remuneration paid to members of the Company’s Board of Directors in 2019, RUB (without deduction of personal income tax) of the Board of Directors Board Board of Directors remuneration of Directors Remuneration Remunerations to members of Committees of of the members of the Board of Directors’ and Reimbursement Regulations, and Reimbursement the Company’s Board of Directors are paid in Committees is the minimum monthly tar- 2016 rev. Regulations, 2019 rev. cash for each meeting within 30 days after it iff rate of a first-grade worker (MMTR) with For participation was held. Remuneration is calculable per the regard to the indexation, established by the in the meetings For the Company’s Board of Directors’ Committee Remuneration industry tariff agreement in the power industry of the Board increasing and Reimbursement Regulations as approved of the Russian Federation as of the date of the Members of the Board of Directors of Directors capitalization Q2 2019 Q3 2019 Total by the Company’s Board of Directors on August Committee meeting. Alexander Ivanovich Kazakov 900,000.00 - 56,250.00 675,000.00 1,631,250.00 29, 2016, Minutes No. 239. Denis Lvovich Guriyanov 900,000.00 - 56,250.00 623,076.92 1,579,326.92 A basis for calculating the remunerations Alexander Viktorovich Shevchuk 900,000.00 - 60,576.92 675,000.00 1,635,576.92 Yury Kazbekovich Zafesov 761,538.46 - 47,596.15 571,153.85 1,380,288.46 Andrey Vladimirovich Morozov 830,769.23 - 51,923.08 623,076.92 1,505,769.23 Remuneration for Participation in the Work of Committees of the Board of Directors Roman Alekseyevich Filkin 761,538.46 - - - 761,538.46 For each in-person meeting, For each meeting in absentia, Vladimir Sergeyevich Chistyakov 745,335.52 - - - 745,335.52 in which the member participated in which the member participated Oleg Yuryevich Isaev 486,088.38 - - - 486,088.38 For the members of the Board of Directors’ Committees 2*MMTR 1*MMTR Vitaly Anatolyevich Domnich 761,538.46 - - - 761,538.46 For the Secretaries of the Board of Directors’ Committees 3*MMTR 1.5*MMTR Vladimir Leonidovich Pelymsky 692,307.69 - - - 692,307.69 For the Chairpersons of the Board of Directors’ 1*MMTR 0.5*MMTR Committees Larisa Anatolyevna Romanovskaya 761,538.46 - - - 761,538.46 Igor Vladimirovich Makovskiy1 - - - - - The remuneration is neither accrued nor of payment to the members of the Board of Dmitry Alekseyevich Bobkov - - - 519,230.77 519,230.77 paid to the members of the Company’s Board Directors and are approved by the General Vitaly Yurievich Zarkhin - - - 571,153.85 571,153.85 of Directors, in respect of which the fed- Shareholders’ Meeting. Anastasia Igorevna Krupenina - - - 623,076.92 623,076.92 eral law prescribes a restriction or prohibi- tion on receipt of any payments from for-profit A member of the Committee of the Board Egor Vyacheslavovich Prokhorov - - - 675,000.00 675,000.00 organizations. of Directors may, in whole or in part, refuse Andrey Olegovich Romankov - - - 519,230.77 519,230.77 to receive a remuneration by sending an Total 8,500,654.66 0,00 272,596.15 6,075,000.00 14,848,250.82 If the Chairperson or members of the appropriate application to the Management Committees of the Company’s Board of Company, IDGC of Center. In 2019, none of the Directors are also members of the Board members of the Committees of the Board of of Directors, the remunerations are paid in Directors refused their remuneration. accordance with the terms and conditions

Remuneration Paid to the Members of the Board of Directors Remuneration Paid to the Members of the Board of Directors’ in 2017-2019 (Before Tax) Committees in 2019, RUB before tax

8,693 7,985 8,501 15,823 23,629 6,348 In addition to remuneration, the Company reimburses 1,554,617 the Board of Directors Committees’ members their costs of attending 31,614 Audit Committee the Committee meetings Strategy Committee (transport, accommodation, daily 24,516 allowances, etc.) in the manner Personal and Remuneration Committee and amount approved by the General For participation in the meetings Shareholders’ Meeting. In 2019, of the Board of Directors (quarter) 699,464 Reliability Committee 14,849 none was reimbursed for partaking For an increase in the market Grid Connection Committee in the Committee meetings. 1. capitalization of the Company No remuneration accrued 406,067 and paid to Mr. Makovskiy pursuant to Cl. 2 For participation in the meetings of the revised Board of Directors Remuneration of the Board of Directors (year) and Reimbursement Regulations. 0 0 2017 2018 2019

196 197 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

Remuneration of the Members of the Management Board Remuneration for the Management

All members of the Management Board are Quarterly and annual bonuses for the Company (IDGC of Centre) top managers of IDGC of Center and Volga Company’s top managers, including the mem- Region and work on the basis of employment bers of the Management Board, depend on the IDGC of Center and Volga Region pays remu- VARIABLE REMUNERATION contracts with the Company. Remuneration degree of KPI accomplishment, which KPIs are neration to the Management Company, IDGC of COMPONENT of the members of the Management Board is defined by the Board of Directors, related to Centre, for acting as the Sole Executive Body. regulated by the Top Manager Incentives and the Company’s strategy, measurable, incentiv- The remuneration consists of two parts: a fixed Variable remuneration component is paid Benefits Package Regulations as approved ize the employees to achieve, and represent an component and a variable component. to the Management Company based on the by the Board of Directors on June 8, 2016, objective evaluation of their performance. results of evaluation of its performance as the Minutes No. 231. Following this Regulation, Sole Executive Body. the members of the Company’s Management FIXED REMUNERATION Board are granted a market premium worth 15 COMPONENT The variable remuneration component is paid % of the fixed official salary for exercising their Amount and Structure of Remuneration and Reimbursement for each reporting year and is calculated on powers. Paid to the Members of the Management Board, RUB thous. Fixed remuneration component is paid to the the basis of the KPIs, the list of which, along before tax Management Company monthly for the exer- with the approval procedure and calculation, is A dismissal of a member of the Management cise of the powers of the Sole Executive Body. specified in the annex to the contract with the Board from a full-time position in the Company 2017 2018 2019 Management Company. For a 100 % attain- is not a reason for termination of his or her Remuneration for involvement 2,176.6 - - Its size is determined within the expense ment of all KPIs, the variable remuneration powers as a member of the Management with a governance body budget and is calculated following the component equals 3 % of the net income of Board and termination of the relevant employ- Methodology for establishing the fixed remu- IDGC of Center and Volga Region per RAS. Wage 23,364.6 - - ment contract. neration component for exercising the pow- Bonuses 35,494.7 59,688.5 - ers of the Sole Executive Body, which is an Commissions - - - annex to the contract concluded with the Other types of remuneration 1,268.5 - - Management Company. In 2019, the fixed com- ponent of the Management Company’s remu- Total 62,304.4 59,688.5 - neration was 11,170,668.53 RUB per month including 1,861,778.9 RUB in VAT. The fixed component of the Management Company’s remuneration totaled 133,546 RUB thous. in Remuneration of Top Executives 2019.

The list of top managers or top executives Electric Power Loss in 0.4-20 kV Grids KPI of the Company comprises Deputy Directors by the end of the year; General (branch directors). Incentives, ben- • special bonuses for a high value of priority efits, and reimbursement for top managers KPI by the end of the corporate year; are regulated by the Top Manager Incentives • one-time bonuses for completion of par- and Benefits Package Regulations1. These ticularly important tasks (jobs). Regulations set forth the procedure for approval and adjustment of salaries, types of Deputy Directors’ General (branch directors’) Remuneration for the Audit Commission bonuses, bonus calculation and payment pro- KPIs are calculated and evaluated on a per- cedures, bonus terms and conditions, benefits, branch basis. At the same time, the KPI tar- and compensations (including the termina- gets and their accomplishment are subject to tion of employment compensation), procedure IDGC of Center’s approval. According to the revised Audit Commission Remuneration Paid to the Members of the Audit Commission for housing conditions improvement or hous- Remuneration Regulations of IDGC of Center in 2017-2019, RUB mn before tax ing provision. Remuneration Paid to Key Executives in 2019 and Volga Region as approved by Resolution of the Annual General Shareholders’ Meeting The Regulations set forth the following bonus dd. June 4, 2018, Minutes No. 12, remunera- RUB thous. 0.8 0.78 0.06 types: tion is payable to a member of the Company’s 0.79 • bonuses for the accomplishment of KPIs Wage 17,635 Audit Commission on the basis of perfor- (on quarterly and yearly bases); mance over the business year and depends on 0.84 Bonuses 34,572 0.8 0.78 • extra bonuses for attaining the Rate of his or her participation in the work of the Audit Other types of remuneration 13,032 Commission. Total 65,239 Remuneration Reimbursement for accommodation and travel

2017 2018 2019 1. Approved by the Board of Directors on June 8, 2016, Minutes No. 231.

198 199 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

SHAREHOLDER VALUE GENERATION COMPANY’S BONDS The authorized capital stock of Rosseti is 200,903,014,525 RUB On December 3, 2019, IDGC of Center and is split into 200,903,014,525 shares with a par value and Volga Region placed exchange bonds (ID of 1 RUB, including 198,827,865,141 ordinary shares Share Capital The number of authorized shares is 2,182,957 4B02-02-12665-E dd. May 23, 2013). The total and 2,075,149,384 preferred shares. At the same time, units of registered ordinary shares with a par nominal value of this issue was 5 RUB bn, the majority of Rosseti shares are publicly owned. value of 10 kopecks each. These shares with the rate of Coupons 1 to 6 being 6.85 % COMPANY’S SHARES were formed as the difference between per annum, and a coupon period of 182 days. authorized (112,600,000,000 units) and placed The bond circulation term is 10 years; the issue As of December 31, 2018, the authorized (112,597,817,043 units) shares in the course provides for offer in 3 years after the initial capital of IDGC of Center and Volga Region of the Company’s reorganization in 2008 placement. The nominal value of the exchange was 11,269,781,704.3 RUB split into through merger with 9 grid distribution bonds is 1,000 RUB. 112,697,817,043 ordinary shares with a par companies (GDC). No additionally issued value of 10 kopecks each. The Company did shares were placed in 2019. In 2019, the following unplaced bonds REGISTRAR OF THE COMPANY not place any preferred shares. of the IDGC of Center and Volga Region were on the List of securities admitted to trading The Company’s register of security holders in MICEX Stock Exchange CJSC: has been maintained and stored by VTB • exchange bonds series BO-03 Registrar, which has been successfully with the nominal value of 5 RUB bn rendering the registrar services for over 20 and the maturity of 10 years (identification years. Issues of IDGC of Center and Volga Region’s Shares number of the issue 4B02-03-12665-E dated Issue registration State registration Number of shares May 23, 2013); Issue date number of the issue in the issue, units Par value, RUB • exchange bonds series BO-04 with the CROSS-HOLDING AND PRIMARY nominal value of 5 RUB bn and the maturity BENEFICIARY First issue Aug. 20, 2007 1–01–12665-Е 100,000,000 0.1 of 10 years (identification number of the Additional share issue 001 Feb. 21, 2008 1–01–12665-Е‑001D 9,933,178,038 0.1 issue 4B02-04-12665-E dated May 23, 2013). The Company holds shares in Rosseti due Additional share issue 002 Feb. 21, 2008 1–01–12665-Е‑002D 5,238,075,351 0.1 to the legal succession of the shares of RAO On October 10, 2016, MICEX Stock Exchange UES of Russia OJSC from Kirovenergo OJSC Additional share issue 003 Feb. 21, 2008 1–01–12665-Е‑003D 10,154,553,057 0.1 assigned an identification number by its merger with IDGC of Center and Volga Additional share issue 004 Feb. 21, 2008 1–01–12665-Е‑004D 8,579,998,539 0.1 to the Program of Exchange Bonds series Region OJSC. During the reorganization Additional share issue 005 Feb. 21, 2008 1–01–12665-Е‑005D 4,095,509,962 0.1 001Р. Exchange bonds of the Company of RAO UES of Russia OJSC the shareholders with the total nominal value up to 25 RUB in the latter were given shares in a number Additional share issue 006 Feb. 21, 2008 1–01–12665-Е‑006D 31,184,103,348 0.1 bn and the maturity of up to 30 years of power industry companies, including Additional share issue 007 Feb. 21, 2008 1–01–12665-Е‑007D 13,343,991,837 0.1 will be floated under the Program. the IDGC Holding OJSC (currently Rosseti). Additional share issue 008 Feb. 21, 2008 1–01–12665-Е‑008D 7,567,715,086 0.1 The program has indefinite duration. Additional share issue 009 Feb. 21, 2008 1–01–12665-Е‑009D 9,990,288,421 0.1 Additional share issue 010 Feb. 21, 2008 1–01–12665-Е‑010D 665,242,563 0.1 Additional share issue 011 Feb. 21, 2008 1–01–12665-Е‑011D 2,574,822,120 0.1 Additional share issue 012 Feb. 21, 2008 1–01–12665-Е‑012D 327,892,112 0.1 Additional share issue 013 Feb. 21, 2008 1–01–12665-Е‑013D 7,749,197,134 0.1 Additional share issue 014 Feb. 21, 2008 1–01–12665-Е‑014D 1,193,249,475 0.1 Cross-holding of IDGC of Center and Volga Region as of December 31, 2019 Combining first and additional Number Nominal issues (Jul. 1, 2008) Aug. 20, 2007 1–01–12665-Е 112,697,817,043 0.1 of ordinary value per Nominal value % of the authorized The total number of outstanding shares 112,697,817,043 0.1 Shareholding shares, units share, RUB of the deposit, RUB capital Shares in IDGC of Center and Volga Region held by Rosseti 56,799,338,107 0.1 5,679,933,810.7 50.4 Shares in Rosseti held by IDGC of Center and Volga Region 2,080,389 1.0 2,080,389.0 0.001

200 201 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

The number of Publicly Owned Shares in Rosseti as of March 30, 2019 Information About Shareholders (Excluding Data on Customers of Nominee Shareholders) Number of shares, units % of the authorized Shareholding Ordinary Preferential capital As of December 31, 2018 As of December 31, 2019 Federal Agency for State Property Share Share Management 176,729,514,113 145,523,224 88.04 Number of the authorized Number of the authorized Shareholder type of holders capital, % of holders capital, % Physical entities 18,907 3.309 18,833 3.292 (including non-residents) 27 0.008 26 0.008 Legal entities 150 0.279 148 0.2256

Thus, the Russian Federation is the primary (including non-residents) 13 0.07 13 0.051 As of December 31, 2019, the Shareholder beneficiary of IDGC of Center and Volga Nominee shareholders 6 96.408 6 96.447 Register of IDGC of Center and Volga Region Region. Trustees 1 <0.001 1 <0.001 comprised No special right reserved for the Russian Unidentified persons accounts 1 0.004 1 0.004 Federation, its region, or municipalities Total 19,065 100 18,989 100 in managing IDGC of Center and Volga Region 18,989 entities (“the golden share”). IDGC of Center and Volga Region is not aware disproportionate to their shareholdings of any shareholdings exceeding 5 % except in the Company, including pursuant those disclosed by the Company. The Company to shareholder agreements. is not aware of any shareholders that may acquire or have acquired a degree of control

SHAREHOLDER EQUITY STRUCTURE

Equity Concentration as of December 6, 2019 1 Major Shareholders of the Company Holding of the Company’s Equity (5 % Share and More) as of December by Entities Entitled to Participate Number of shares Number Share in the total Share in the equity 31, 2019, % in the General Shareholders’ Meeting on the account of accounts number of accounts, % capital, % as of December 6, 2019, % 1 to 1,000 2,921 7.80 <0.01 1,001 – 10,000 8,087 21.59 0.04 50.40 6.26 50.40 10,001 – 100,000 12,401 33.11 0.52

100,001 – 1,000,000 11,471 30.63 3.41 46.02 <0.01 16.50 1,000,001 to 10,000,000 2,262 6.04 5.30 3.58 26.84 10,000,001 to 100,000,000 276 0.74 6.56 100,000,001 to 1,000,000,000 34 0.09 9.66 1,000,000,001 to 10,000,000,000 2 <0.01 7.61 10,000,000,001 to 56,799,338,107 2 <0.01 66.90 Total 37,456 100 100

Shareholders’ rights are enshrined of Association. The Company guarantees in the Law of Russia as well as in IDGC a proper observance of rights. of Center and Volga Region’s Articles

Rossetti, owner Rosseti NRD JSC, NPO, nominal shareholder NEW RUSSIAN GENERATION Other Energyo Solutions Russia (Cyprus) Limited State-owned shared Other 1. The date of compilation of the list of entities entitled to participation in the General Shareholders Meeting.

202 203 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

of Center and Volga Region have been traded on the leading Russian stock market, Stock Market the Moscow Exchange, under registration number 1-01-12665-Е, with the ticker MRKP. 30 1 2 3 4 5 6 7 8 9 10 11 As of December 31, 2019, the Company’s shares STATUS OF THE COMPANY’S 25 are listed in the Second Tier quotation list. SHARES 20

Since 2008, after consolidation of the primary 15 issue and 14 additional issues of the Company’s 10 shares, the ordinary shares of IDGC 5 0 History of the Company’s Shares Presence in the Quotation Lists of the Moscow Exchange -5 -10 Date of quotation -15 Admission to the non-listed securities April 7, 2008 -20 Admission to Quotation List B September 23, 2008 -25 31.12.2018 28.02.2019 30.04.2019 30.06.2019 31.08.2019 31.10.2019 31.12.2019 Admission to Quotation List A2 May 18, 2011 Shares of IDGC of Moscow Stock Electric Utlities Admission to Quotation List A1 February 27, 2012 Center and Volga Region Exchange index index Admission to Quotation List A2 April 8, 2014 Admission to Quotation List of the First (Top) tier June 9, 2014 Admission to Quotation List of the Second tier January 31, 2017 The following events influenced the trends 10. Publication of consolidated financial IFRS of trade of the Company’s share: statements of the Company for 9 months 1. Publication of accounting (financial) RAS of 2019. Inclusion of the Company’s Shares into the Basis for Calculation of the Stock Indexes results of the Company for 2018. 11. The Russian Institute of Directors (RID), 2. Publication of accounting (financial) IFRS a non-profit partnership, confirmed Weight of the Company’s securities results of the Company for 2018. IDGC of Center and Volga Region’s Index Stock exchange tickets in index as of December 31, 2019, % 3. Approval of the Company’s Business Plan rating of NCGR 7+ (Advanced Corporate Medium and small capitalization-weighted index for 2019; Governance Practice) on the scale of the Moscow Exchange MCXSM 1.11 4. Publication of accounting (financial) RAS of the National Corporate Governance results of the Company for Q1 2019. Rating (NCGR®). Medium and small capitalization-weighted index 5. Publication of consolidated financial IFRS of the Moscow Exchange, USD RTSSM 1.11 statements of the Company for three Electric Utilities Index of the Moscow Exchange MOEXEU 2.52 months of 2019. TRADED VALUE AND A NUMBER Electric Utilities Index of the Moscow Exchange, USD RTSEU 2.52 6. Holding the Annual General Shareholders’ OF TRANSACTIONS WITH THE Meeting of IDGC of Center and Volga COMPANY’S SHARES IN 2017-2019 The Moscow Exchange Broad Market Index MOEXBMI 0.05 Region with the announcement of voting The Moscow Exchange Broad Market Index, USD RTSBMI 0.05 results and made resolutions, including The value of trading in shares of IDGC MOEX Regulated Companies Index RCI 2.31 those pertaining to the payment of Center and Volga Region on the Moscow of dividends for 2018. Exchange (basic mode T+) at year-end 7. Publication of accounting (financial) RAS 2019 was 36,214.66 MN units, 19,301.1 results of the Company for H1 2019. increase YoY. In 2019, 341,110 transactions 8. Publication of consolidated financial IFRS with the Company’s shares were made, Changes in Share Price, Capitalization and Indexes of the Moscow Exchange GRI 102-7 statements of the Company for 6 months an increase of 206,094 YoY. of 2019. Change 2019 / 9. Publication of accounting (financial) RAS 2017 2018 2019 2018, % results of the Company for 9 months Share price (minimum), year end, RUB 0.2964 0.2641 0.1980 -25.03 of 2019. Share price (maximum), year end, RUB 0.3021 0.2662 0.2015 -24.31

Share price (at close), year end, RUB 0.3015 0.2650 0.2390 -9.81 Share price (weighed average), year end, RUB 0.2989 0.2651 0.2392 -9.77 Capitalization (at weighted average price), year end, RUB mn 33,685.38 29,876.19 26,957.32 -9.77 Moscow Exchange index (at close), year end 2,109.74 2,369.33 3,045.87 28.55 Electric Utilities Index (at close), year-end 1,816.30 1,608.85 2,010.99 25.00 Regulated Company Index (at close), year end 1,142.84 1,161.42 1,501.42 29.27

204 205 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

Trading of Stocks of IDGC of Center and Volga on the Moscow Exchange in 2019, mn pcs. Policy in compliance with the Decree Dividend Policy of the Government of the Russian Federation No. 1094-r dd. May 29, 2017 and mainly applied 5,434.37 5,332.17 The Dividend Policy of IDGC of Center to the dividend calculation procedure. 4,994.41 and Volga Region is designed to maximize the observance of the shareholders’ According to the revised Dividend Policy 4,427.49 rights, enable increase in capitalization Regulations of IDGC of Center and Volga and investment attractiveness, as well Region, two dividend amounts are calculated 3,313.74 as balancing the distribution of net income based on the results of the reporting year: between dividend payouts and the Company’s one per RAS net income and one per IFRS 2,574.92 development. The Company has a clear net income. In fact, shareholders are paid 2,359.28 algorithm for the shareholders for determining the largest amount of the two reduced 2,036.67 1,901.73 1,566.75 the amount of dividends; it also provides by the amounts of interim dividends previously 1,338.22 the shareholders with a convenient payment paid for the results of three, six and nine 934.91 procedure. months of the reporting year.

On February 2, 2018 IDGC of Center and Volga Region’s Board of Directors approved January February March April May June July August September October November December the revised Dividend Policy Regulations, see Minutes No. 3001. The changes were aimed at bringing the Company’s Dividend Spread Dynamics and a Number of Transactions on IDGC of Center and Volga Region Shares at the Moscow Exchange in 2019

0.22 2,276 2,233 Dividend Payout History 0.20 2,130 2,020 Amount Reporting of dividend Dividend 0.15 period for which Date of decision Dividends Dividend payout per Dividends Share yield 0.14 dividends were on the dividend accrued, RUB share in net one share, paid, RUB of the paid out at the year- 1,267 0.13 accrued and paid payout thous. income, % RUB thous. dividends2, % end3, % 1,207 1,165 0.12 1,061 0.11 946 2010 Jun 14, 2011 141,000 10.1 0.0012511337 139,226.14 98.74 0.4 0.10 0.10 853 2011 June 22, 2012 315,554 7.5 0.0028 312,475.43 99.02 1.9 694 0.11 0.08 565 0.07 2012 Jun 18, 2013 478,966 25.0 0.00425 473,179.30 98.79 2.5 2013 Jun 26, 2014 634,489 25.0 0.00563 626,199.15 98.69 8.3 2014 Jun 16, 2015 349,363 25.4 0.0031 345,404.93 98.87 3.2 January February March April May June July August September October November December 2015 Jun 9, 2016 942,560 100.0 0.008363605 933,391.26 99.03 13.3 Average number of transactions, no. Average spread at the close of trading, % 2016 Jun 5, 2017 1,329,045 42.9 0.011793 1,316,275.48 99.04 8.0 2017 Jun 1, 2018 4,535,749 41.2 0.040247 4,501,154.23 99.24 13.5 2018 Jun 11, 2019 4,591,985 49.1 0.040746 4,556,653.36 99.23 15.4 9 months 2019 Dec 31, 2019 1,839,668 35.7 0.0163239 1,825,432.27 99.23 6.8

Key Analysts’ Recommendations on IDGC of Center and Volga Region’s Shares as of Year-end 2019 According to the Moscow Exchange Index Company Target, RUB Recommendation Recommendation date Committee, Zerich IC 0.24 (+dividend) Buy November 26, 2019 as of December 31, Renaissance Capital 0.20 Hold December 2, 2019 2019, the free-float ratio of IDGC of Center FINAM 0.225 Hold December 9, 2019 and Volga Region was 27 %. 1. Amendments were made by the Board of Directors on August 2, 2018, Minutes Nu. 325. 2. As of December 31, 2019, the deviation from 100 % payment of the accrued dividends is due to the fact that some shareholders included in the system for maintaining the register of shareholders have no or unreliable information about bank and postal details for transferring the income. 3. The value is calculated as (the ratio of dividends per one share to the weighted average price of one share at year-end) * 100 %.

206 207 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

Unappropriated Balance, RUB thous. • June 26, 2019: the managers PRELIMINARY CALENDAR An extraordinary General Shareholders’ of the Management Company (IDGC OF EVENTS FOR SHAREHOLDERS 1,772,092 6,464,832 4,755,083 3,354,345 Meeting of IDGC of Center and Volga of Center) had a meeting with securities AND INVESTORS FOR 2020 1,329,045 4,535,749 4,591,985 1,839,668 Region took place on December 31, 20191 specialists and experts specializing and resolved to pay interim dividends in electric power industry investment. • January 9, 2020: approval of the Company’s for Q1–Q3 2019, which was 1,839,668 RUB The meeting took place as part of the 23rd Business Plan for 2020; thous. or 0.0163239 RUB per ordinary Annual Russian Investors’ Conference • February 1-29, 2020: financial results share. The Meeting set the deadline of Renaissance Capital. The attendees of 2019 (RAS); 111,000,581 for listing the dividend recipients as 14th day discussed the financial and operational • March 1-31, 2020: financial results of 2019 9,347,068 of the Extraordinary Meeting’s resolution outcomes of IDGC of Center and IDGC (IFRS) ; to pay dividends. of Center and Volga Region’s cooperation • March 1-31, 2020: Analyst Day, dedicated 5,194,013 Dividends transferred to the Federal Budget in 2018 and Q1 2019. They also presented to the release of IFRS reporting for 2020; 3,101,137 in 2019 totaled 182,608.05 RUB. As of year- the projected business plans of both • April 1-30, 2020: financial results for Q1 end 2019, the Company had no arrears Companies regarding the net supply 2020 (RAS); in dividends payable to the Federal Budget. of electricity, revenues, and financial results • April 1-30, 2020: Annual Exchange Forum 2016 2017 2018 2019 (AGSM 2017) (AGSM 2018) (AGSM 2019) (AGSM 2019) for the current year; (plenary and panel sessions); • August 2019: Director General • May 1-31, 2020: financial results for Q1 2020 Business development of the Management Company (IDGC (IFRS); Dividends of Center) Igor Makovsky and the managers • May 1 – June 30, 2020: meetings of both companies met representatives with minority shareholders before of minority shareholders to discuss the Annual General Shareholders’ Meeting; the results of the first half of 2019 as well • May 1 – June 20, 2020: AGSM for 2019; Dividends as short-term plans; • June 1 – 30, 2020: 24th Annual Russian 100.0 • September 3 and December 3, 2019: Investor Conference of Renaissance Capital the Company had phone conferences IC; with investors and streamed its • July 1 – 30, 2020: financial results presentation over the Internet on the results for the first half of 2020 (RAS); of publishing the Consolidated IFRS • July 1 – 30, 2020: Day of Energy Companies 0.0402 0.0407 Statements for six and nine months of 2019; (a group meeting), organized by ATON IC; • information subject to mandatory • August 1 – 31, 2020: financial results disclosure per Russian law, IR releases, for the first half of 2020 (IFRS); 49.1 information bulletins, and presentations • August 1 – September 30, 2020: audio 42.9 41.2 posted on the Company’s official website webcast on the release of IFRS statements for H1 2020; 25.0 25.0 25.4 The Company proceeded with its practice • October 1 – 31, 2020: financial results 0.0163 of prompt submission of the current for Q1–Q3 2020 (RAS); 10.1 information about the Company’s financial • November 1 – 30, 2020: financial results 7.5 0.0118 and business activities at the request for Q–Q3 2020 (IFRS); 0.0084 0.0056 of shareholders, analysts of investment • November 1 – 30, 2020: audio webcast 0.0043 0.0028 0.0031 companies and other stakeholders. on the release of IFRS statements for Q1– 0.0013 Q3 2020; • November 1 – 30, 2020: Russia Calling! 2012 2016 2010 2011 2013 2014 2015 2017 2018 9 months 2019 Annual Investment Forum organized by VTB Declared dividends per 1 share, RUB Dividend share in net profit, % Capital; • December 1 – 31, 2020: a panel meeting with shareholder representatives and independent directors. Shareholder IDGC of Center and Volga Region has a specialized IR unit in place, the Shareholder and Investor Relations and Investor Relations Division of the Corporate Governance and Shareholder IDGC of Center and Volga Region Relations Department. The Company’s is continuously engaged in activities website lists contact details of the Division’s to promote capitalization, liquidity specialists. and corporate transparency and protects the rights and legitimate interests of its Below are the major projects carried shareholders and investors. When disclosing out by IDGC of Center and Volga region information to shareholders and investors, for shareholders and investors in 2019: the Company follows the principles • March 27, 2019: Analyst Day of timeliness, completeness and availability. for the representatives of the investment community, dedicated to the Company’s performance in 2018 and forecasts for 2019;

1. Minutes No. 14 dd January 9, 2020. 208 209 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

REGISTRAR’S DETAILS

ANNEXES REGISTRAR Name VTB Registrator JSC Address 127015, Moscow, 23 Pravdy ul. Corporate Code of Conduct Compliance Report Postal address 127137, Moscow, P.O.Box 54 Phone +7 (495) 787–44–83 Web http://www.vtbreg.ru/ GRI Standards Content Index E-mail [email protected]

GRI 102-55 Permission to Operate Federal Financial Markets Service’s Register Keeping Permit No. 045-13970- 000001 dd. February 21, 2008 (indefinite) Director General Konstantin Sergeyevich Petrov Details of Major Transactions and Related-party Transactions Vladimir branch of VTB Registrator JSC Actual / postal address: 600005 Vladimir, 45 Traktornaya ul. Phone: +7 (910) 775-53-75, +7 (980) 755-72-21 Kaluga branch of VTB Registrator JSC Actual / postal address: 248002 Kaluga, 23 Saltykova-Shchedrina ul., Room 3 Company’s RAS Statements for 2019 and the Auditor’s Opinion Phone: +7 (4842) 56-31-90, +7 (495) 787-44-83 add. 400, 401 Nizhny Novgorod Branch of VTB Registrator JSC Actual / postal address: 603000 Nizhny Novgorod, 30 3rd Yamskaya ul. Phone: +7 (831) 430-11-33, +7 (831) 430-13-21, +7 (831) 430-14-30

Company’s IFRS Financial Statements for 2019 and the Auditor’s Opinion

Report on Public Hearings

GRI 102-56 CONTACT DETAILS GRI 102-3 GRI 102-53

CONTACTS Public Joint-Stock Company Interregional Distribution Grid Company of Center Name and Volga Region Actual and mailing address: 603950 Russia, Nizhny Novgorod, 33 Rozhdestvenskaya ul. E-mail [email protected] Web www.mrsk-cp.ru AUDITOR INFORMATION Phone (reception) / fax (reception) +7 (831) 431-83-59

AUDITOR IR DIVISION Name Ernst&Young Limited Liability Company Head Natalya Gennadyevna Kiselyova Address 115035 Russia, Moscow, 77 Sadovnicheskaya Naberezhnaya, bld. 1 E-mail [email protected]; [email protected] Phone / fax +7 (495) 755-9700 / +7 (495) 755-9701 Phone +7 (831) 431–74–46 E-mail [email protected] DISCLOSURE SRO memberships Sodruzhestvo Association, a self-regulatory organization of auditors (SAA SRO) Head Alina Zoriktuyevna Rassmagina 119192 Russia, Moscow, 21 Michurinsky Prospekt, Bld. 4 E-mail Rassmagina.AZ@mrsk‑1.ru SAA SRO’s Registration Number in the Register of Auditors and Auditing Organizations 12006020327 Phone +7 (495) 747–92–92 PRESS CENTER Head Anzhelika Vladimorovna Shcherbakova E-mail [email protected] Phone +7 (831) 431–74–00 Contact Center +7 (800) 50–50–115 Internet Reception for Customers https://utp.mrsk-cp.ru/Pages/default.aspx

210 211