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international standards rational use of natural resources charity 2011 environment employee development efficiency SUSTAINABILITY AND motivation social programmes principles risk management performance staff training strategy OHS ENVIRONMENTAL
safety responsibility sustainability
anti-corruption RESPONSIBILITY corporate standards corporate investment management information transparency reliability corporate ethics corporate REPORT
energy efficiency JSC INTER RAO UES
regional development consistency commitment
benefits openness support SUSTAINABILITY AND ENVIRONMENTAL RESPONSIBILITY REPORT 2 0 AND ENVIRONMENTAL JSC INTER RAO UES SUSTAINABILITY
WWW.INTERRAO.RU
TABLE OF CONTENTS
MESSAGE FROM BORIS KOVALCHUK, CHAIRMAN OF THE MANAGEMENT BOARD 4. RELIABILITY, SECURITY AND EFFICIENCY______51 OF JSC INTER RAO UES______5 4.1. ENSURING RELIABLE AND SECURE ENERGY SUPPLIES ______51 4.2. OCCUPATIONAL HEALTH AND SAFETY______62 1. INTER RAO UES GROUP: KEY FACTS______7 4.3. ENSURING ASSET SECURITY______64 1.1. HISTORY______7 4.4. ENVIRONMENTAL PERFORMANCE______64 1.2. PROFILE______8 4.5. INNOVATIVE DEVELOPMENT______71 1.3. DEVELOPMENT STRATEGY______12 4.6. IMPROVING ENERGY EFFICIENCY______74 1.4. BUSINESS MANAGEMENT MODEL______13 4.7. INTERNATIONAL ENERGY ALLIANCES AND INITIATIVES______78 1.5. FINANCIAL PERFORMANCE______14 1.6. AWARDS______15 5. REGIONAL SOCIO-ECONOMIC DEVELOPMENT______81 5.1. PRINCIPLES AND APPROACHES______81 2. SUSTAINABILITY______17 5.2. RUSSIA______84 2.1. APPROACH TO SUSTAINABILITY______17 5.3. GEORGIA______85 2.2. STAKEHOLDER ENGAGEMENT______18 5.4. ARMENIA______86 2.3. CORPORATE GOVERNANCE______22 5.5. KAZAKHSTAN______87 2.4. RISK MANAGEMENT______27 2.5. PREVENTING CORRUPTION AND OTHER ILLEGITIMATE PRACTICES______28 6. ABOUT THIS REPORT______89 2.6. PROCUREMENT MANAGEMENT______29 CONCLUSION ON PUBLIC ASSURANCE OF THE REPORT______90 3. HUMAN RESOURCES______33 PUBLIC ASSURANCE OF THE REPORT BY INTERNAL STAKEHOLDERS______90 3.1. PRINCIPLES AND APPROACHES______33 PUBLIC ASSURANCE OF THE REPORT BY EXTERNAL STAKEHOLDERS______92 3.2. STAFF PROFILE______34 3.3. SOCIAL PROGRAMMES______39 GRI CONTENT INDEX______94 3.4. EMPLOYEE TRAINING AND DEVELOPMENT______47 3.5. REMUNERATION AND MOTIVATION______49 LIST OF ABBREVIATIONS______105
MESSAGE FROM BORIS KOVALCHUK, CHAIRMAN OF THE MANAGEMENT BOARD OF JSC INTER RAO UES 5
MESSAGE FROM BORIS KOVALCHUK, CHAIRMAN OF THE MANAGEMENT BOARD OF JSC INTER RAO UES
The INTER RAO UES Group made considerable progress in 2011 and Remuneration Committee, the Strategy and Investment The larger a company is, the greater its impact and influence towards its strategic goal of becoming a top ten global power Committee and the Audit Committee. In 2011, the Board in its regions of operation. We see this influence primarily company by installed capacity. We operated 25 thermal power of Directors approved our Declaration of Environmental lying in our considerable responsibility to society. INTER stations, 3 hydropower plants and one wind farm with a total Responsibility, which defines the Group’s main commitments, RAO UES Group companies are often some of the largest installed capacity of over 28 GW. Our operations generated 117 objectives and areas of activity with regard to the environment. electricity producers and suppliers and the largest employers billion kilowatt-hours of electricity and 20 million gigacalories of It covers the management of the environmental aspects and and taxpayers in the regions in which they are based. Every heat. The Group’s total staff count numbered more than 47,000. risks of operations, environmental protection, efficient use of citizen in communities located close to the Group’s operations All of this together makes INTER RAO UES one of Russia’s natural resources and safeguarding employee and public health is a customer of electricity supply services provided by our largest power companies. in the Group’s regions of operation. We continuously improve companies. This means that ensuring reliable and secure the quality of our work, following international best practices energy supplies, fair pricing and investing in developing regional We are proud of what we have achieved but always remember and trends in the field of corporate governance, corporate social infrastructure and energy efficient technologies are important that the larger the scale of our operations, the greater our responsibility, openness and transparency. areas in the Group’s strategic development and worthy of responsibility. To us, this responsibility means not just special attention. ensuring reliable and secure supplies to our customers but also The second strategic component of our sustainability practices guaranteeing safe working conditions and the wellbeing of our is a balanced approach towards human resource management. This is the INTER RAO UES Group’s first ever sustainability employees and their families. It also means contributing to the We understand that outstanding employee performance and environmental responsibility report. In compiling it, we development of local communities and supporting the regions depends directly on how we treat our people. It also depends strictly followed international non-financial reporting guidelines in which we operate. Being a responsible company means on incentives and intangible motivators, fostering a favourable developed by the Global Reporting Initiative (GRI). Within this caring for the environment and ensuring environmental safety corporate culture and ensuring comfortable and safe working report we detail our development approach and corporate for the community. This is why sustainability is an integral part conditions. We strive to be an employer of choice. Corporate responsibility philosophy, as well as the social, environmental, of the INTER RAO UES Group’s strategy. As we move forward, training and skills enhancement programmes are offered both occupational safety and personnel management projects we we have set ourselves three main goals: that our activities at Group level and within individual companies. Our corporate implemented in 2011. We strive to become one of the world’s should be economically profitable, environmentally responsible knowledge management system allows employees to complete largest energy companies. To us, this means not only becoming and socially oriented. both in-person and remote training and choose from dozens of the largest or the most efficient, but also setting an example for courses and workshops without interrupting their normal work others to follow and constantly adopting the highest corporate To successfully pursue these goals, we seek to effectively activities. We are developing integrated employee motivation responsibility standards. combine several components. systems to retain highly skilled specialists and expanding our cooperation with universities and attracting promising young The first is the corporate governance system the Group is specialists. Another important aspect of our HR policies is building in line with best international standards and practices. our corporate social programmes aimed at supporting young INTER RAO UES has adopted a Corporate Governance Code families and parents, as well as retired workers and pensioners. Chairman of the Management Board of JSC INTER RAO UES compliant with the requirements of Russian legislation and Boris Kovalchuk aligned with recognised Russian and international standards. The third priority component in our sustainability model is Furthermore, we have developed and approved a Corporate operational and occupational safety. To keep pace with the Ethics Code Code of Corporate Ethics reflects the most Group’s rapid development, we focused our efforts in 2011 on important principles and values of the JSC INTER RAO UES. developing and gradually introducing unified standards in the The compliance with principles and values is mandatory field of occupational health and safety, as well as industrial, fire for the Board of Directors, Executive Committee, Revision and environmental safety. We are now developing a Groupwide Commission, as well as all employees of the JSC INTER policy in this area, which we plan to approve and adopt in 2012. RAO UES regardless of their position. The company’s Board We have always placed a strong emphasis on industrial safety of Directors has three committees: the Human Resources and this remains our highest priority.
1. INTER RAO UES GROUP: KEY FACTS 7
PART INTER RAO UES GROUP: 1. KEY FACTS PAGE §§ SUBSECTION
07 1.1. HISTORY 08 1.2. PROFILE 12 1.3. DEVELOPMENT STRATEGY 13 1.4. BUSINESS MANAGEMENT MODEL 14 1.5. FINANCIAL PERFORMANCE 15 1.6. AWARDS
1.1. HISTORY
1997 CJSC INTER RAO UES is created as the electricity export and import subsidiary of RAO 2003 Rosenergoatom acquires a 40% stake in CJSC INTER RAO UES. The company UES of Russia. becomes the united export and import operator for two of Russia’s largest generating companies. 2001 The company launches international trade programmes for foreign-produced energy. The first major project involves supplying power generated at Ignalina NPP (Lithuania) CJSC INTER RAO UES starts acquiring foreign power assets. to Belarus and Russia’s Kaliningrad Region. 2005–2006 CJSC INTER RAO UES launches a major effort to consolidate Russian and The first subsidiaries of CJSC INTER RAO UES are created for operations on foreign foreign power assets. The company acquires stakes in JSC Ekibastuzskaya TPP-2 energy markets. (Kazakhstan), CJSC Moldavskaya TPP (Pridnestrovye), JSC Severo-Zapadnaya CHPP (Russia) and TGR Enerji (Turkey). Sangtuda HPP-1, a joint Russian-Tajik venture, is set 2002 CJSC INTER RAO UES begins exporting Russia-produced electricity. up with INTER RAO UES’ involvement. A CJSC INTER RAO UES subsidiary acquires a 100% stake in CJSC Power Grids of Armenia. The lease of a generating unit at Iriklinskaya TPP (JSC Orenburgenergo) signifies the start of the company’s generating operations. 8 1. INTER RAO UES GROUP: KEY FACTS JSC INTER RAO UES
SUSTAINABILITY AND ENVIRONMENTAL 2007 The strategic decision is taken as part of the large-scale 01 Business evolution RESPONSIBILITY REPORT reorganisation of JSC RAO UES of Russia to consolidate 2011 2005 2008 2011 a number of assets – JSC Severo-Zapadnaya CHPP, JSC Ivanovskiye CCPP, JSC Kaliningradskaya CHPP-2 and JSC Sochinskaya TPP – and merge CJSC INTER RAO Trading ✓✓ ✓✓ ✓✓ UES into JSC Sochinskaya TPP. Thermal power ✓ ✓✓ ✓✓ Engineering ✓ 2008 JSC Sochinskaya TPP changes its name to JSC INTER Hydropower RAO UES, with Sochinskaya TPP, Severo-Zapadnaya ✓ ✓ ✓✓ CHPP, JSC Ivanovskiye CCPP and Kaliningradskaya Nuclear energy ✓ ✓ ✓✓ CHPP-2 – former subsidiaries of JSC RAO UES of Distribution and sales ✓ ✓ ✓✓ Russia – becoming subsidiaries.. Other sectors ✓✓ ✓✓ ✓✓ 2009 Global asset consolidation begins. JSC INTER RAO UES – Foreign assets – Russian assets assumes control of JSC OGK-1. ✓ ✓
2010 JSC INTER RAO UES adopts a mid-term development strategy, setting the aim of becoming a top ten and heat, making an important step in strategic asset strategic significance for the development of Russia’s energy international energy company by 2020. consolidation. infrastructure and the country’s fuel and energy industry as a whole. The Group is responsible for energy security and As part of the diversification of operations, JSC stability in Russia and other countries in which it operates. INTER RAO UES actively grows its businesses in 1.2. PROFILE areas associated with core operations, focusing on Developing international cooperation is a strategic priority engineering and energy equipment manufacturing. The for INTER RAO UES. The Group already operates in almost 30 Group acquires Quartz Group, an engineering company, Today the INTER RAO UES Group (JSC INTER RAO UES and countries, is a member of the CIS Electric Power Council and and creates joint ventures with top global mechanical its subsidiaries and dependent companies, hereinafter the is involved in a number of intergovernmental commissions engineering alliances, including General Electric and Group) operates in 27 counties. At the end of 2011, the Group’s and international projects. The Group actively engages in WorleyParsons. headcount numbered more than 47,000 employees. The international partnerships, targeting both rapidly growing Group’s organisational structure includes the following lines of markets in the Middle East, Asia, Africa and Latin America, To further consolidate energy assets, JSC INTER RAO business: as well as developed European markets. One of the Group’s UES shareholders approve the private placement of priority objectives is to enter market segments where it has additional shares. ͗͗ Generation and sale of electricity and heat; clear competitive advantages or has prospects for mutually ͗͗ International energy trading; beneficial partnership. By RF Presidential Decree of September 30, 2010 ͗͗ Engineering; No. 1190, INTER RAO UES is included in the national ͗͗ Export of energy equipment; The Group controls and operates 25 thermal power plants, 3 list of strategic enterprises and strategic joint-stock ͗͗ Scientific research into energy efficiency; hydropower plants and one wind farm with a total installed companies. ͗͗ Application of innovative technologies. capacity of over 28 GW. These plants are located in Russia, the CIS and Europe. In 2011, the total output of the Group’s power 01 Geography of operations plants reached 117 billion kWh, placing the Group among the 2011 As a result of a May 2011 large-scale additional world’s power generation leaders. share placement, JSC INTER RAO UES assumes As a crucial component of Russia’s energy system, the ownership of some 40 companies operating in power Group plays an important role in implementation of the generation and the distribution and sale of electricity country’s Energy Strategy through 2030. The Group is of 1. INTER RAO UES GROUP: KEY FACTS 9
02 Installed capacity and power output 01 Geography of operations
Today the Group owns and operates the largest electricity sales network in Russia spanning the entire country. In 2011, the Group sold more than 143 billion kWh of electricity on the Russian retail market. The Group’s key foreign assets involved in power and heat generation and sale, power export and import and engineering are based in Georgia, Armenia,
Kazakhstan, Moldova, Lithuania and Finland. The overall EUROPE FAR CENTRAL EAST length of the Group’s overhead power lines is 34,130 km, ASIA while underground lines span 806 km. In 2012, the Group plans to continue expanding the geography of its operations LATIN AMERICA SOUTHEAST MIDDLE ASIA in Russia through the acquisition of JSC Bashkirenergo’s AFRICA EAST generating assets.
The Group is one of the leading players on the Russian power import and export market, supplying electricity to Finland, Belarus, Latvia, Lithuania, Ukraine, Georgia, Azerbaijan, South Ossetia, Kazakhstan, China and Mongolia. The main export destinations in 2011 were Finland, Lithuania and Belarus. The Group imported electricity from Azerbaijan, Georgia, Kazakhstan, Mongolia and Ukraine. Overall, in 2011 the Group exported 22.7 billion kWh of electricity and imported 3.4 billion kWh; it accounted for 97% of electricity Installed capacity and power output exports from Russia. 02
Fuel mix, Installed generating capacity Power output, million kWh The Group’s parent company is JSC INTER RAO UES. JSC coal/gas/liquid fuel (as of the end of 2011), MW INTER RAO UES stock is traded on the MICEX-RTS stock exchange and has been included in the MICEX, RTS, MICEX JSC INTER RAO UES 0.0/100.0/0.0 2,283 13,520 Power and MSCI Russia indices. The company’s Global JSC OGK-1 7.5/92.2/0.3 9,861 55,548 Depositary Receipts (GDRs) have been admitted to trading on the London Stock Exchange's International Order Book (IOB). JSC TGK-11 53.5/46.0/0.5 1,971 8,685 JSC OGK-3 43.8/55.1/1.1 8,357 23,952 Georgia division 0.0/100.0/0.0 827 2,046 Armenia division 0.0/100.0/0.0 1,518 628 Moldova division 2.4/97.3/0.3 2,520 4,255 Kazakhstan division 100.0/0.0/0.0 1,000 5,918 Vydmantai Wind Farm UAB (Lithuania) 0/0/0 30 71
1. INTER RAO UES GROUP: KEY FACTS 11
03 Organisational structure of Group companies included in this Report
JSC INTER RAO UES
GENERATION IN RUSSIA SALES IN RUSSIA TRADING IN RUSSIA AND EUROPE FOREIGN ASSETS
LLC INTER RAO – MANAGEMENT JSC UNITED ENERGY SALES RAO NORDIC OY CJSC MOLDAVSKAYA TPP OF ELECTRIC POWER PLANTS COMPANY UAB «INTER RAO LIETUVA» JSC EKIBASTUZSKAYA TPP-2 JSC INTER RAO – ELECTRIC JSC MOSENERGOSBYT POWER PLANTS JSC EASTERN ENERGY COMPANY JSC PETERSBURG SALES LLC MTKVARI ENERGY JSC OGK-1 COMPANY JSC TELASI JSC OGK-3 JSC SARATOVENERGO ENGINEERING IN RUSSIA JSC KHRAMI HPP-1 JSC TGK-11 JSC TAMBOV ENERGY SALES QUARTZ GROUP COMPANY JSC KHRAMI HPP-2 LLC INTERRAO- JSC ALTAIENERGOSBYT WORLEYPARSONS JSC HRAZDAN TPP
LLC INTER RAO – ORLOVSKY CJSC POWER GRIDS OF ARMENIA ENERGOSBYT
LLC RN-ENERGO
JSC INDUSTRIAL ENERGY 12 1. INTER RAO UES GROUP: KEY FACTS JSC INTER RAO UES
SUSTAINABILITY AND ENVIRONMENTAL 1.3. DEVELOPMENT STRATEGY RESPONSIBILITY REPORT 2011
MISSION CORPORATE PRINCIPLES AND VALUES MAIN PRIORITIES OF THE GROUP’S STRATEGIC INITIATIVES ͗͗ Safeguarding shareholder interests To promote sustainable economic development and improve ͗͗ Reliable, secure and efficient operation of assets the quality of life in all regions of operation by ensuring ͗͗ Profitability, efficiency and performance reliable energy supplies, meeting growing demand for ͗͗ Growth within Russia electricity and applying innovative energy efficiency and ͗͗ Innovative development and modernisation conservation technologies and solutions. ͗͗ International growth ͗͗ Energy efficiency and conservation ͗͗ Fuel mix diversification ͗͗ Optimal management of human resources The Group’s mission, which is based on sustainability, ͗͗ Retail business development defines why it exists. The Group’s activities aim to ensure ͗͗ Information transparency reliable and secure energy supplies, while at the same time ͗͗ Fuel business development reducing production costs and improving energy efficiency ͗͗ Moral integrity in line with objectives set by the Russian government and ͗͗ Development of engineering, technology transfer the international community. Development of the Group’s ͗͗ Social responsibility and manufacturing of new types of energy business is directly linked to development in the regions in equipment which it operates. ͗͗ Fair business practices ͗͗ Energy efficiency The Group’s activities are based on a set of fundamental principles and values that provide guidance for decision- making and allow the business to be run in accordance with In 2011, the Group embarked on the implementation of its A number of mid-term programmes were approved in 2011 the highest standards of business ethics. Development Strategy through 2015 with an outlook until to support implementation of the Development Strategy, 2020, which was approved by the Board of Directors at the including the Investment Programme, the Innovative end of December 2010. In the document, the Group set Development Programme, the Energy Efficiency and itself the ambitious goal of becoming a global energy leader Conservation Enhancement Programme and the R&D in terms of installed capacity and business size by 2020. Programme. Achieving this goal means creating a highly efficient energy holding that operates in all key competitive market segments. The Group has set itself the objective of becoming an equal partner for the world’s largest energy companies.
Implementation of this Strategy will allow the Group to become one of the ten top players on the international energy market by 2020. 1. INTER RAO UES GROUP: KEY FACTS 13
1.4. BUSINESS MANAGEMENT MODEL
The Group’s Organisational Development Policy defines management system improvement objectives. The Policy aims 04 Business model to form effective mechanisms to manage the organisational structure and operating methods of the Group’s companies, as well as to create information management mechanisms. RETAIL SALES EQUIPMENT The Group relies on a systematic approach to organisational MANUFACTURING development, which allows it to analyse organisational SALES TO LARGE structure, processes, techniques and other elements in terms FUEL PRODUCTION GENERATION CUSTOMERS of how they fit in with Group objectives. DESIGN AND CONSTRUCTION INTERNATIONAL The organisational development systems defined by the Policy TRADE include:
͗͗ An organisational management system (to create an organisational structure aligned with the Group’s objectives and processes); As the Group develops new areas, enters new market One of the key objectives of the integrated business model is ͗͗ A process management system (to improve the segments and continues to consolidate assets, it needs to build a diversified resource base so as to ensure reliable efficiency of Group operations, transparency and the to introduce an integrated approach to management of its supplies to power generating facilities of various types. The manageability of processes); business. Under the 2020 strategy, the Group aims to establish Group has already begun to enter the fuel production market. its presence in all segments of the value chain in the energy The Group plans to expand this business segment both ͗͗ A project management system (to improve the industry – from fuel production and supply through to the through the acquisition of resource assets and by creating joint manageability and transparency of project-based distribution and sale of electricity and heat to end customers. ventures with leading market players. activities). It is planned that this will logically create multiple synergies. Every stage of the value chain should contribute to increasing The Group plans to expand opportunities for energy sales. A process-based approach to management is one of the shareholder value. The Strategy envisages entering a market niche new to the key instruments in improving the quality of the Group’s Group – the sale of electricity and heat lo large customers. In management processes. The Group’s internal policies and Developing the engineering and manufacturing segments the retail segment, further expansion will include acquiring regulations, both existing and under development, incorporate is an important element in the Group’s integrated business existing retailers, expanding the range of services provided the main principles of this process-based approach, taking model. It will help reduce dependence on external suppliers and developing new offerings for customers. Implementation into account quality management system requirements and while creating the Group’s own technologies and integrated of these plans will allow the Group to become, by 2015, one of defining mechanisms for evaluating results. It is important to solutions for the design and construction of power plants. the largest players on the Russian energy sales market with a note that the general management approaches introduced at Ultimately, it will lead to a substantial reduction in the Group’s market share of at least 25%. Group level can be adapted to fit the objectives and operating costs. The Group sets up partnership relations with leading conditions of a specific company or division. Management foreign players in the sector so as to improve technological Originally created as an energy export/import market practices at the Group’s companies, including newly acquired expertise and implement innovative solution. operator, INTER RAO UES continues to pay serious attention ones, are analysed on a continuous basis, with best practices to developing its international operations. It is assumed that being identified and replicated across the Group. foreign assets should organically fit into the Group’s integrated 14 1. INTER RAO UES GROUP: KEY FACTS JSC INTER RAO UES
SUSTAINABILITY AND ENVIRONMENTAL business model. The Group will continue to construct its 1.5. FINANCIAL PERFORMANCE EXPERT 400 RESPONSIBILITY REPORT own generating facilities and form strategic alliances with 2011 the largest foreign energy companies. One example of such 2011 saw an improvement in the Group’s financial Russia’s Expert Media Holding held its 7th Annual Expert 400 an alliance is the agreement of intent signed between INTER performance. Revenue was RUB 536.2 billion, a 15.5% Big Business Forum on October 5, 2011. One of the events at RAO UES and the government of the Republic of Ecuador increase on 2010. Net profit was RUB 41.5 billion. Over the the forum was an award ceremony to recognise companies to implement a project to construct a series of hydropower reporting year, total assets grew 113.5%, reaching RUB 531.9 that had made a significant contribution to Russian economic plants. billion. development.
In order to further improve the effectiveness of management 02 Group financial performance in 2010–2011 (IFRS) Awards were bestowed on the country’s largest companies processes, the Group plans to reorganise its business who were included in the Expert 400 ranking in categories by consolidating assets into several divisions. The new 03 Aggregated balance sheet (IFRS) such as Russia’s Biggest Company, Dynamic Development, management structure will be based on grouping assets Successful Debut and Deal of the Year. similar in terms of their business or geography of operations 05 Direct economic value generated and distributed by into business divisions (generation, retail sales, procurement, the Group in 2010–2011 JSC INTER RAO UES was named the winner in the Fast engineering and export of equipment). This will help accelerate Market Capitalisation Growth category. Over the past year, decision-making processes, while at the same time reducing The Group’s robust financial performance in the reporting the Group has moved up in the ranking of Russia’s largest administrative and operating costs. year and rapid growth in capitalization, for which the Group companies by market capitalisation from 33rd to 21st, was recognised with an Expert 400 award, allowed it to becoming the third largest company in the Russian power progress towards the strategic goal of increasing shareholder sector. As of September 1, 2011, the Group’s capitalisation value and securing leading positions in the Russian energy was estimated at RUB 336.7 billion. industry.
In 2011, JSC INTER RAO UES shares were transferred from Quotation List B to Quotation List A Level 1 on the MICEX stock exchange (CJSC SE MICEX) and included in the MSCI Russia Large Cap Index. In the reporting year, Group shares were among the most liquid stocks of all thermal generating 05 Direct economic value generated and distributed by the Group in 2010–2011 companies and also one of the top three most liquid power industry stocks. 2010, RUB mln 2011, RUB mln In November 2011, JSC INTER RAO UES global depositary Retained economic value 13,587 47,660 receipts were admitted to trading on the London Stock Benefits not included in the gross payroll, social investments and charity 469 469 Exchange’s International Order Book (IOB) platform. In 2012, the Group plans to obtain credit ratings from international Taxes, duties and other payments to government 9,447 13,183 rating agencies *. The Group’s plans also include listing on Payments to providers of capital 6,478 4,051 international stock exchanges. Payroll expenses 21,079 28,221 Operating costs, except for payroll expenses, social investments and taxes and payments to government 415,450 527,650 * On March 15, 2012, the rating agency Fitch assigned JSC INTER RAO UES an international credit rating of BB+, outlook stable, and a national rating of AA (rus). 1. INTER RAO UES GROUP: KEY FACTS 15
1.6. AWARDS 02 Group financial performance in 2010–2011 (IFRS), RUB bn
Relevant awards received by Group companies in 2011: 600 RUB bn
500 536.2 548.5
400 464.4 JSC INTER RAO UES JSC TGK–11 438.3 300 ͗͗ 2011 Best Risk Management in Russia and the CIS ͗͗ First class diploma in the National Competition 200 competition: 1st place (winner’s certificate) in the for the Best Company in the Housing and Utilities 100 Best Specialised Risk Management Programme Sector 2011. 0 18.6 41.5 category. Operating Net profit Revenue expenses ͗͗ 3rd place in the Best Information Disclosure by ͗͗ Nominated as Best Press Office in the Power Companies with Capitalisation of Less than RUB 10 2010 2011 Industry 2011 in the ConTEKst competition for the Billion category in the Annual Report Competition press offices of companies in the fuel and energy held by the MICEX and RTS stock exchanges. sector organised by the Russian Energy Ministry. JSC Saratovenergo 03 Aggregated balance sheet (IFRS), RUB bn ͗͗ 3rd place in the Most Highly Socially Effective Generating Organisation category in the Highly ͗͗ Honourable distinction For Work without Accidents 600 RUB bn Socially Effective Organisation in the Power Industry and Injuries from the National Association of Power 500 539.1 2011 competition. Sector Employers for no accidents and fatalities and 400 for reducing the overall injury rate over the last three 390.7 ͗͗ 2nd place in the transparency rating of Russian years. 300 companies in the fuel and energy complex by the Oil 200 249.1
of Russia information and analytical portal. Kaliningradskaya TPP-2, a branch of JSC INTER RAO – 100 139.1 110.0 141.3 Electric Power Plants 0 18.6 41.5 JSC Ekibastuzskaya TPP-2 Total assets Equity Liabilities ͗͗ Certificate from the Ministry of Industrial Policy, ͗͗ Certificate of participation in the Paryz 2011 regional Entrepreneurship Development and Trade of the socially responsible business contest. Kaliningrad Region For Ensuring the Energy Security 2010 2011 of the Kaliningrad Region and Implementing ͗͗ 3rd place in the Best Section (Workplace) municipal Government Policy for the Development of contest associated with World Day for Safety and Combined Heat and Power Generation. Health at Work. ͗͗ Honourable distinction For Contribution to Socio- JSC Mosenergosbyt Economic Development in the Kaliningrad Region.
͗͗ 1st place in the Highly Socially Effective Organisation in the Power Industry 2011 competition.
2. SUSTAINABILITY 17
PART 2. SUSTAINABILITY PAGE §§ SUBSECTION
17 2.1. APPROACH TO SUSTAINABILITY 18 2.2. STAKEHOLDER ENGAGEMENT 22 2.3. CORPORATE GOVERNANCE 27 2.4. RISK MANAGEMENT 28 2.5. PREVENTING CORRUPTION AND OTHER ILLEGITIMATE PRACTICES 29 2.6. PROCUREMENT MANAGEMENT
2.1. APPROACH TO SUSTAINABILITY
The Group sees sustainability as a business management citizens, but also the energy security of the country. The Organisational unit heads are responsible for the concept that aims to satisfy the demands of all stakeholders Group’s approaches towards addressing these challenges implementation of business processes underpinning for the Group’s comprehensive sustainable economic, social provided the foundation for its development strategy through corporate social activities; they participate in the and environmental development by meeting the needs of 2020 and determined key areas of its activities based on the implementation of corporate social programmes and the the present without compromising the opportunities and principles of sustainability. introduction of the latest social responsibility principles. aspirations of future generations. The Group has designated functions and units in charge of the The HR department develops methodologies and introduces Today energy companies are charged with the important task management of various aspects of sustainability as part of state-of-the-art approaches in the field of corporate social of ensuring the sustainable development of the sector and the improvements to the corporate sustainability management responsibility and works to integrate the concept of social country as a whole. It is the growing demand for electricity, system. Areas of responsibility have also been defined. responsibility into the Group’s corporate governance the need to improve approaches to the management of system. It also oversees corporate social programmes energy assets and the call to introduce innovative energy The Group’s senior management sets objectives and and participates in their implementation, as well as being efficiency and conservation solutions that determine strategic defines the principles of engagement with internal and responsible for the consolidation, systematisation and areas for the Group’s activities and its important role in the external stakeholders, as well as participating in the actual analysis of corporate social programmes for the purpose of socio-economic development of the countries and regions engagement process. evaluating their effectiveness and preparing annual social in which it operates. Reliable and secure power supplies reports. determine not only the quality of life for a large portion of 18 2. SUSTAINABILITY JSC INTER RAO UES
SUSTAINABILITY AND ENVIRONMENTAL HR departments within the Group’s companies implement Prior to 2011, the Group’s stakeholder engagement activities stakeholders include shareholders and investors, business RESPONSIBILITY REPORT and support business processes underpinning corporate were based on the following corporate documents: partners and competitors, government and society. 2011 social activities and compile reports on the implementation of corporate social programmes. ͗͗ The Corporate Governance Code; 04 Group stakeholder map
Group employees participate in the implementation of all ͗͗ The Regulation on Risk Management; social programmes and provide feedback, which helps evaluate satisfaction levels. ͗͗ Collective agreements defining the key principles and areas of social partnership within the Group. GOVERNANCE AND CONTROL BODIES 2011 marked an important stage in the formation of the 2.2. STAKEHOLDER ENGAGEMENT Group’s system of stakeholder engagement standards. The High corporate governance standards, as well as effective and following fundamental corporate documents were developed constructive synergy between the Group’s governance and Building effective communications and long-term and adopted: control bodies, are an essential pre-requisite of its long-term relationships with stakeholders is an important element sustainable development. of non-financial risk management at the Group and an ͗͗ The Corporate Ethics Code, which defines key instrument in the implementation of strategic development engagement areas and principles, as well as a list of Engagement with the Group’s governance and control bodies goals. the Group’s stakeholders; takes place as part of activities carried out in accordance with their responsibilities in the best interests of the Group and its The Group’s stakeholders include the communities and ͗͗ The Information Policy, which defines key external shareholders. The Group’s governance and control bodies, individuals that form the system of expectations regarding and internal communication priorities, as well as well as their key responsibilities, are described in the the Group’s activities. They impact management decision- as principles governing the disclosure of Group Corporate Governance section of this Report. making within the Group and, in turn, are impacted by these activities; decisions. Engagement with this stakeholder group is based on the ͗͗ The Regulation on Information Policy; principles of information transparency and compliance So as to identify relevant stakeholders, the Group performed with existing legislation and local regulations, as well as a comprehensive review of existing engagement practices ͗͗ The Regulation on Dividend Policy; avoidance of any conflict between the interests of the Group based on a number of criteria, taking into consideration and the interests of members of the Board of Directors, the stakeholder interests and needs, the extent of their influence ͗͗ The Internal Control Policy; Management Board and the Internal Audit Commission. on achieving the Group’s strategic goals, as well as their proximity to the Group and dependence on its activities. The ͗͗ The Regulation on the Management of Non-Core The key means of engagement with the Group’s governance list of stakeholders produced as a result of this analysis has Assets; and control bodies is meetings during which comprehensive been codified in the Group’s Corporate Ethics Code and the information about the Group’s performance is provided and Corporate Knowledge Management System Glossary. ͗͗ The JSC INTER RAO UES Declaration of decisions are made about development priorities. Environmental Responsibility. The Group has been building an effective stakeholder engagement system based on standardised approaches Stakeholders are classified as internal and external based towards the identification of stakeholders and engagement on the extent of their influence over the Group’s activities principles and areas, as well as on a system of corporate and engagement methods. Internal stakeholders include standards and regulations and a transparent management the Group’s governance and control bodies, employees structure for such engagement. and primary trade union organisations, whereas external 2. SUSTAINABILITY 19
EMPLOYEES 04 Group stakeholder map
Employees are one of the Group’s key stakeholder categories.
Engagement with employees is carried out through social partnerships between the Group, its employees and their Joint programmes Preparation and representatives. These partnerships are regulated by with the authorities distribution of press and NGOs releases collective agreements with the Group’s companies.
Engagement with this stakeholder group is based on the principles of mutual responsibility, respect for the individual and a focus on results. It is aimed at the timely and effective SH AREHO achievement of objectives and on fostering constructive LDE relationships within the Group’s staff. Reputation audit, S RS analysis of the opinions OR A of journalists and IT N Press conferences The Group observes the legislative rights of employees and investment analysts T D and roundtables E T I about the Group P R N respects personal freedom and dignity. The Group prohibits ES AD V M YE E E any form of employment discrimination on political, religious, O O U S L N C I T ethnic or other similar grounds; all employees are given P O O M N R equal opportunities for effective career and professional E S S development. In turn, the Group expects employees to continuously improve professionally and develop their skills, INTER RAO UES viewing them as drivers and catalysts of the development of GROUP the Group and the energy sector as a whole. Y T B E G I U O S The Group uses a broad range of employee engagement S V IE C IN ER D O methods, including work group meetings, personal meetings Participation in N BO S forums, ES AN L D Press tours for with managers, employee feedback systems, corporate CE TRO journalists exhibitions and S AND CON AN media and a corporate intranet portal. Employees may summits PA T RT EN make an anonymous complaint to management through the NER NM intranet portal and the Internet or by email and telephone, S OVER which is an important instrument in developing responsible G labour practices. When acquiring new companies, additional protocols to collective agreements are signed with their union organisations and work group representatives; these Regular production Disclosure of significant documents ensure the continuity of collective agreements, of corporate publications and holding information on the as well as the preservation of traditional social guarantees, corporate events official corporate website benefits and labour conditions. 20 2. SUSTAINABILITY JSC INTER RAO UES
SUSTAINABILITY AND ENVIRONMENTAL SHAREHOLDERS AND INVESTORS ͗͗ Publication of materials disclosed in the process of In 2010–2011, INTER RAO UES specialists participated in RESPONSIBILITY REPORT public communication with investors and analysts the drafting of the following legal acts and provided expert 2011 INTER RAO UES ensures the unconditional observance of on the corporate website of INTER RAO UES; support during their passing through the legislative process: all shareholder and investor rights as defined by existing legislation and stemming from the Group’s commitments ͗͗ Web conferences and webcasts. ͗͗ Draft federal law No. 576274-5 On Amendments associated with the trading of its securities on stock to the Federal Law On Protection of Competition exchanges. Engagement with this stakeholder group is based GOVERNMENT and Certain Legal Acts of the Russian Federation on the principles of strict legal compliance, openness and (on the improvement of anti-monopoly regulation transparency. INTER RAO UES provides its shareholders Engagement with the government is the key instrument in and facilitating competition), signed by the Russian and investors with timely information necessary for their communicating INTER RAO UES’ position on energy sector President on December 6, 2011 (No. 401-FZ); professional activities and for making informed investment development objectives and priorities. INTER RAO UES and management decisions. maintains an ongoing dialogue with the state authorities, ͗͗ Draft federal law No. 497896-5 On Amendments providing all necessary information about its activities on to the Federal Law On the Electric Power Industry, INTER RAO UES recognises its considerable responsibility to a timely basis and actively contributing to the development signed by the Russian President on December 6, shareholders and strives to maintain a constructive dialogue of the relevant legal and regulatory framework through 2011 (No. 394-FZ); with them based on respect for their interests, rights and participation by its specialists in working groups, panels freedoms. INTER RAO UES adheres to the principle of equal and committees preparing or reviewing drafts of relevant ͗͗ Amendments to the Customs Code of the Customs treatment of all shareholders and ensuring the maximum regulations. Union, adopted on April 16, 2010 by a union possible level of transparency, regardless of the size of a protocol. shareholder’s equity holding. An important aspect of the Group’s engagement with Russian power market players is joint work within the framework of In order to facilitate the expansion of the Group’s international INTER RAO UES engages with stakeholders both by means the Market Council, a non-profit partnership. This work is presence and improve the efficiency of the management of of personal consultations as part of General Meetings aimed at ensuring the functioning of Russia’s wholesale and its foreign assets, INTER RAO UES specialists are involved of Shareholders and through correspondence, personal retail electricity markets, creating favourable conditions for in developing and implementing international initiatives meetings and responding to calls to the shareholders’ hotline. attracting investment in the sector and forming a common that take into account the strategic interests of the Russian Furthermore, for shareholder convenience, the INTER RAO position for wholesale and retail market participants with Federation. Among other activities, they may contribute to UES’ registrar, JSC Registrar R.O.S.T., also maintains a regard to proposed legislation and regulations. The main the preparation of sector and regional development plans in telephone hotline, which is toll-free for calls from the Russian objectives of the partnership include: ensuring the energy Russia and other countries, or participate in the development Federation. security of the Russian Federation, the unity of the economic of Russia’s Foreign Economic Strategy. INTER RAO UES space and freedom of economic activities and competition also actively participates in a number of intergovernmental The Group used the following key instruments to engage with on the wholesale and retail power markets; maintaining a commissions. its investors: balance between producers’ and customers’ interests; and meeting demand for reliable and secure power supplies. INTER RAO UES is a member of the Russian Union of ͗͗ Meetings, presentations and roundtables for Industrialists and Entrepreneurs. investors and analysts; As a member of the partnership’s Supervisory Board, INTER RAO UES participates in the preparation of legislative and ͗͗ Investor days; regulatory proposals and amendments to existing legal regulations. The Group also prepares expert opinions for ͗͗ Meetings with investors, including one-on-one the federal executive and legislative authorities, as well as meetings; regional bodies, so as to create conditions for the stable functioning of the electricity market. ͗͗ Conference calls to discuss accounting reports and financial results; 2. SUSTAINABILITY 21
SOCIETY COMPETITORS
Environmental protection, efficient use of natural resources The Group respects all players in its business sector and and regional socio-economic development, as well as adheres to the principles of open, honest and fair competition ensuring energy security and meeting growing demand for in accordance with the legal requirements of all jurisdictions electricity and heat, are among the Group’s top priorities. in which it operates.
The Group engages with the general public and local The Group deems any action or inaction that may potentially authorities in the countries and regions in which it operates lead to a violation of competition law, including abuse of in the context of the implementation of investment projects market power, to be unacceptable. and regional socio-economic projects and in the course of the day-to-day operations of Group companies. The Group’s The Group’s systematic approach towards stakeholder entities sign cooperation agreements with the governments engagement is based on ongoing assessment of respective of the Russian regions in which they operate as a foundation practices, which includes both ongoing analysis in the course for long-term partnership in the implementation of integrated of relevant activities and periodic reviews of engagement regional development programmes. All the Group’s regional results. The following key criteria are used for assessment: development programmes are prepared and implemented with the cultural specifics and traditions of the respective ͗͗ The absence of conflicts; regions taken into account. ͗͗ Considering stakeholder expectations in planning The Group’s key means of engagement with local community the Group’s activities; representatives and regional officials include personal meetings, conferences and disclosing information on the ͗͗ Achieving engagement goals and objectives and official website of INTER RAO UES. resolving issues;
More information about the Group’s engagement with society ͗͗ The Group’s image among stakeholders. is available in the Regional Socio-Economic Development section of this Report. The comprehensive assessment of stakeholder engagement practices helps identify engagement approaches and methods BUSINESS PARTNERS best tailored to each stakeholder group. In 2010–2011, the Group carried out numerous events with the involvement of The Group strives to base its dealings with business partners its stakeholders, including: on mutually beneficial long-term cooperation. ͗͗ 112 working group sessions; The Group engages with business partners as part of international cooperation in the field of energy efficiency ͗͗ 217 meetings; and energy conservation, within the framework of various projects and in the context of the provision of consulting and ͗͗ 38 workshops and conferences. audit services, among others. The Group provided timely responses to 195 stakeholder Engagement with this stakeholder group is based on the enquiries and communications and prepared and distributed principles of mutual benefit, good business conduct and legal over 450 pieces of information and analytical materials. compliance. 22 2. SUSTAINABILITY JSC INTER RAO UES
SUSTAINABILITY AND ENVIRONMENTAL 2.3. CORPORATE GOVERNANCE RESPONSIBILITY REPORT 2011
By corporate governance, INTER RAO UES means the A revised version of the Regulation on Insider Information Documents regulating relations in the area of corporate system of processes that ensures governance and control (minutes of the meeting of the Board of Directors dated governance at INTER RAO UES are available on the corporate of its activities in the best interests of its shareholders. September 1, 2011 No. 47) was adopted to ensure compliance website at www.interrao.ru/investors/uprav/docs/. The Group’s corporate governance system is designed to with Federal Law No. 224-FZ On Counteracting Illegitimate ensure highly effective interaction between the Board of Use of Insider Information and Market Manipulation and on The basic principles of corporate governance at INTER RAO Directors, management and shareholders in the management Amending Certain Legal Acts of the Russian Federation, UES are set forth by the company’s Corporate Governance decision-making process. INTER RAO UES recognises dated July 27, 2010. The law is aimed at ensuring fair pricing Code (minutes of the meeting of the Board of Directors dated the importance of corporate governance in ensuring the of financial instruments, investor equality and strengthening April 23, 2008 No. 1) and aimed at boosting internal and efficiency of operations, enhancing the company’s investment investors’ trust through the creation of a legal mechanism external stakeholder confidence. These principles provide a attractiveness and following the principles of sustainability. for the prevention, detection and suppression of abuses on foundation for the Group’s internal policies, standards and organised markets. In accordance with the Regulation, INTER processes. INTER RAO UES has been continuously developing and RAO UES has compiled a list of insider information and a list improving its corporate governance system, drawing on of company insiders. A special section on insider information international and Russian best practices in the field. INTER has been created on the corporate website (www.interrao. RAO UES is working towards standardising corporate ru/company/insiders/). It provides access to corporate governance systems across all Group companies and bringing documents regulating compliance with the respective legal them in compliance with Group practices. requirements.
The corporate governance system at INTER RAO UES is based The Regulation on Dividend Policy (minutes of the meeting of on the Corporate Governance Code and the Charter of INTER the Board of Directors dated May 3, 2011 No. 41) was adopted RAO UES, the current revision of which was approved by an to inform shareholders of INTER RAO UES about the principles Extraordinary General Meeting of Shareholders on February of distributing net profit and procedures for determining the 15, 2012 (minutes dated February 17, 2012 No. 10) and amount of dividends payable and dividend payment process registered on March 11, 2012. and to set forth the rules for the Board of Directors to follow when preparing recommendations for the General Meeting of In 2011, as part of improvements to the corporate governance Shareholders regarding the amount of dividends payable and system, a number of corporate documents were adopted or payment procedure. revised, including the Corporate Ethics Code, the Regulation on Insider Information, the Regulation on Dividend Policy and A new revision of the Regulation on the Human Resources the Regulation on the Human Resources and Remuneration and Remuneration Committee (minutes of the meeting of the Committee of the Board of Directors. Board of Directors dated August 5, 2011 No. 46) was approved to set forth the rules for appointment of Committee members The Code of Corporate Ethics (minutes of the meeting of and to define its authorities. According to the Regulation, only the Board of Directors dated October 21, 2011 No. 50) sets members of the Board of Directors who meet the criteria of forth the principles, norms and rules of corporate behaviour an independent director as defined by the Code of Corporate to which INTER RAO UES voluntarily commits to adhere. The Behaviour recommended by the Russian Federal Securities Code’s provisions are mandatory for members of the Board Commission (order dated July 18, 2003 No. 03-1169/r) may of Directors, the Management Board and the Internal Audit serve on the Committee. Commission of INTER RAO UES, as well as for all employees regardless of their position. 2. SUSTAINABILITY 23
CORPORATE GOVERNANCE PRINCIPLES INFORMATION DISCLOSURE TRANSPARENCY RANKING OF RUSSIAN FUEL AND ENERGY COMPLEX COMPANIES Accountability. The Code stipulates the accountability of the INTER RAO UES’ disclosure policy is guided by the Board of Directors of INTER RAO UES to all shareholders in requirements of the Russian federal laws On Joint-Stock INTER RAO UES pays considerable attention to enhancing accordance with existing legislation and provides guidance to Companies and On the Securities Markets, the Regulation transparency and continuously improving its corporate the Board in defining corporate strategy, guiding the executive on Disclosure by Equity Securities Issuers approved by order governance and disclosure systems. These efforts should bodies of INTER RAO UES and overseeing their activities. of the Federal Service for Financial Markets, other laws and contribute to an improvement in the Group’s investment regulations of the Russian Federation and the requirements of attractiveness and strengthen its positions on the Fairness. INTER RAO UES commits to safeguard shareholder the UK Financial Services Authority. international markets. The Group’s achievements in this rights and ensure equal treatment for all shareholders. The area have been acknowledged by independent experts; in Board of Directors provides opportunities for the effective In September 2011, the Board of Directors of INTER RAO UES December 2011, INTER RAO UES placed the top three in protection of all shareholders in case of an infringement of approved a revised version of the Regulation on Information information and analytic portal Oil of Russia’s transparency their rights. Policy. The document contains an updated list of information rating of Russian fuel and energy complex companies. to be disclosed, as well as provisions regarding the frequency Transparency. INTER RAO UES ensures timely disclosure and timeframes for disclosure. The main objective of the of reliable information about all material facts related Regulation is to ensure that the right of all stakeholders to to its activities, including its financial status, social and information necessary for their professional activities and economic performance, operating results and ownership for them to make informed investment and management and management structure, as well as free access for all decisions is observed. interested parties to that information.
Responsibility. INTER RAO UES recognises the rights of all stakeholders as defined by existing legislation and strives to collaborate with those stakeholders to ensure the development and financial stability of the Group.
2. SUSTAINABILITY 25
GOVERNANCE AND CONTROL BODIES 06 Group governance system and control bodies
According to the Charter, the governance bodies of INTER RAO UES are: HUMAN RESOURCES INTERNAL AUDIT GENERAL MEETING OF SHAREHOLDERS AND REMUNERATION COMMISSION ͗͗ General Meeting of Shareholders; COMMITTEE BOARD OF DIRECTORS ͗͗ Board of Directors; STRATEGY AND CHAIRMAN OF THE MANAGEMENT BOARD INVESTMENT COMMITTEE ͗͗ Management Board; MANAGEMENT BOARD
͗͗ Chief Executive Officer (Chairman of the Management Board). AUDIT COMMITTEE
The Internal Audit Commission oversees the Group’s financial and business activities.
General Meeting of Shareholders The General Meeting of Shareholders is the supreme the best interests of the Group and its shareholders. The activities and strategic development. In addition to approval governing body of INTER RAO UES. Federal Law No. 208-FZ high level of professionalism and skills of Board members of key corporate governance documents, in 2011 the Board On Joint-Stock Companies and the Charter of INTER RAO UES is ensured by their professional education and extensive of Directors addressed numerous agenda items related to define the authorities of the General Meeting of Shareholders. relevant working experience in the power industry, including sustainability. Among others, these included: Shareholder rights are regulated by the Group’s Corporate through public service. Governance Code. ͗͗ Determining priority areas of activity for INTER RAO The working procedures of the Board of Directors are defined UES, including approval of the corporate research The General Meeting of Shareholders is held at least once a by the Charter and the Regulation on the Procedure of and development (R&D) programme (minutes of the year as a physical meeting. In 2011, four general meetings Convening and Holding Meetings of the Board of Directors, meeting of the Board of Directors dated January 28, were held; three of them were extraordinary. approved by the General Meeting of Shareholders of INTER 2011 No. 38); RAO UES on June 24, 2011 (minutes dated June 28, 2011 To ensure observance of the shareholder right to have free No. 8). ͗͗ Approval of charity projects in various areas access to information, draft General Meeting resolutions and (biodiversity conservation, developing young other relevant materials are made available to shareholders The Board of Directors is a collective body comprised of specialists, supporting children and making at least 30 days prior to the meeting date. Alongside other 11 members, including nine independent directors. The donations to churches and monasteries). distribution means, they are published in a dedicated section independence of directors is determined based on the criteria on the corporate website at www.interrao.ru/investors/ defined by the Code of Corporate Behaviour recommended More details on the matters addressed by the Board of meetings/. by the Russian Federal Securities Commission and the Directors in 2011 and the decisions rendered by the Board Corporate Governance Code of INTER RAO UES. In 2011, are available on the corporate website of INTER RAO UES at Board of Directors the composition of the Board of Directors underwent some www.interrao.ru/investors/uprav/org/sovet/Minutes/2011/. INTER RAO UES views having a professional Board of changes. A list of Board members is provided in the 2011 Directors as an essential element of an effective corporate Annual Report of INTER RAO UES. A total of 21 Board The amount of remuneration and compensation paid to governance system. The Board of Directors affects the meeting were held in 2011, including one meeting held in Board members and the payment procedure are determined Group’s overall performance by providing strategic guidance person and 20 by absentee voting. Over the year, the Board in accordance with the Regulation on the Payment of to and supervision of the corporate executive bodies in addressed the most important aspects of the Group’s current Remuneration and Compensation to Members of the Board 26 2. SUSTAINABILITY JSC INTER RAO UES
SUSTAINABILITY of Directors of INTER RAO UES, which is available on the Strategy and Investment Committee. The functions of ensures effective management of the Company’s day-to-day AND ENVIRONMENTAL corporate website www.interrao.ru. the Strategy and Investment Committee include providing operations. Each of its members, including the Chairman, has RESPONSIBILITY REPORT recommendations for the Board of Directors in a number the experience, knowledge and expertise necessary for proper 2011 The total amount of remuneration paid to members of the of areas, including: priority areas, strategic goals and key performance of his or her duties. Board of Directors of INTER RAO UES in 2011 for their service principles of the Group’s strategic development; enhancing on the Board in 2010 was RUB 10,902,500. the Group’s investment attractiveness; and improving its In 2011, a total of 95 meetings of the Management Board were investment activities and making sound investment decisions. held, including 31 meetings held in person and 64 by absentee In 2011, criteria for determining the amount of Board voting. member remuneration were based on the Regulation on the Audit Committee. The objective of the Audit Committee is Payment of Remuneration and Compensation to Members to provide recommendations (opinions) in the field of audit In order to improve the effectiveness of corporate governance of the Board of Directors of INTER RAO UES (protocol of and internal control to the Board of Directors. It is through and management, INTER RAO UES has a motivation system the General Meeting of Shareholders dated June 25, 2009 the Committee that the Board of Directors participates in the providing incentives for top executives to contribute to the No. 3). Remuneration is paid to Board members for their oversight of the Group’s financial and economic activities. achievement of the Group’s strategic objectives. participation in meetings of the Board of Directors and its The key functions of the Audit Committee include, among committees. others, providing recommendations for the selection of an The system of incentives for members of the Management Board independent auditor and collaboration with the Internal Audit is defined by the Regulation on Incentives for the Chairman of The Board of Directors has three committees: Commission of INTER RAO UES and the independent auditor. the Management Board, Deputy Chairman and Members of the Management Board of INTER RAO UES, approved by the Board ͗͗ Human Resources and Remuneration Committee; The Committee comprises only independent non-executive of Directors on December 24, 2010 (minutes dated December Board members, which conforms to stock exchange listing 27, 2010 No. 35) and amended on June 21, 2011. ͗͗ Audit Committee; requirements for Quotation List A issuers. The Board of Directors approves the system of remuneration of ͗͗ Strategy and Investment Committee. Management Board the Chairman and members of the Management Board. Their The Management Board is a collective executive body of INTER remuneration consists of fixed and variable components, the Human Resources and Remuneration Committee. The RAO UES providing day-to-day management of the Group’s latter depending on achieving quarterly/annual key performance main objective of the Committee is to attract highly skilled operations. The Management Board reports to the General indicators (KPIs) and benchmarks linked to the personal professionals for executive positions at INTER RAO UES Meeting of Shareholders and the Board of Directors of INTER contribution of Management Board members to the long-term and provide incentives for their work. On August 3, 2011 RAO UES. Candidates for the Management Board are nominated development of INTER RAO UES in the best interests of its the Board of Directors approved a revised version of the by the Chairman of the Management Board and elected by the shareholders. Regulation on the Human Resources and Remuneration Board of Directors for a five-year period. The Management Committee. According to the document, the exclusive Board is responsible for the implementation of INTER RAO UES Based on the Group’s approved business plan, the Board of functions of the Committee include defining criteria for objectives, strategy and policy. Its activities are regulated by the Directors draws up the list of quarterly and annual KPIs and the selection of candidates for the Board of Directors, the Charter and the Regulation on the Management Board approved benchmarks, as well as KPI targets for the Management Management Board and the position of Chief Executive Officer by the Management Board of INTER RAO UES (minutes dated Board. Members of the Management Board receive bonuses of the head company, as well as pre-evaluation of those March 28, 2008 No. 1845pr/3). for meeting KPIs set for the respective quarter or year; bonus candidates. payment decisions are made by the Board of Directors. As of the end of 2011, the Management Board comprised 10 In 2011, for the first time, the Committee comprised only members. More details about its composition are available in In 2011, total remuneration (including compensation) paid to independent non-executive Board members, which conforms to the 2011 Annual Report of INTER RAO UES. Being comprised of members of the Management Board (including the Chairman) stock exchange listing requirements for Quotation List A issuers. competent and effective professionals, the Management Board amounted to RUB 353,200,877.54 (before tax). 2. SUSTAINABILITY 27
INTERNAL CONTROL SYSTEM 2.4. RISK MANAGEMENT ͗͗ Economic soundness and efficiency;
The Group’s internal control mechanisms aim to ensure a To INTER RAO UES, risk management is a systematic activity ͗͗ Access to information and communication high level of shareholder and investor confidence in INTER integrated into strategic and operational management at standards within the corporate risk management RAO UES’ governance and management bodies and protect all levels and encompassing all organisational units and system; shareholders’ investments and assets. employees performing their functions as part of any business processes. ͗͗ Prioritisation of activities in terms of associated The effectiveness of the internal control system and risks. compliance of financial and economic activities with relevant The Company has the Regulation on Risk Management, which requirements are overseen by the following dedicated internal defines the main objectives, principles and approaches in that The Group’s main approaches in the field of risk management control bodies: area, as well as an integrated corporate risk management include the following: concept. ͗͗ Audit Committee of the Board of Directors of INTER ͗͗ Compliance with applicable requirements and RAO UES; INTER RAO UES has created a dedicated department within its standards; Internal Audit, Control and Risk Management Unit responsible ͗͗ Internal Audit Commission of INTER RAO UES; for the functioning of the corporate risk management system ͗͗ Integrated risk management infrastructure, which and meeting key objectives in the field of risk management, includes organisational units and employees ͗͗ Internal Audit, Control and Risk Management Unit of which include: coordinating their activities, a common INTER RAO UES. methodology, a shared database of internal ͗͗ Supporting implementation of the Group’s strategy; documents, as well as business processes and The Internal Audit, Control and Risk Management Unit is a procedures; dedicated internal control body of INTER RAO UES operating on ͗͗ Ensuring timely adaptation to internal and external the basis of the Regulation on the Internal Audit, Control and Risk changes; ͗͗ Risk management as a continuous and iterative Management Unit approved by the Board of Directors (the most process comprising a part of the overall corporate recent revision – minutes of the Board meeting dated August 3, ͗͗ Ensuring the Group’s business functions effectively, governance and management architecture of INTER 2011 No. 46). sustainably and with prospects for growth and RAO UES; development. According to the Regulation, the responsibilities of the unit ͗͗ Fostering a corporate risk management culture. include: organising and coordinating processes to standardise In its risk management activities, INTER RAO UES relies on control procedures at INTER RAO UES; providing methodological the following principles: The Group’s risk management system focuses on the timely support for the introduction of such procedures; independently identification of all potential risk factors and sources. Distinct evaluating the compliance of business process participants ͗͗ Alignment with the strategy; features of the system include the development of risk maps with established control procedures; and assessing the overall and action plans for individual companies within the Group effectiveness of INTER RAO UES’ internal control system and ͗͗ Integration; tailored to the nature of their business, the broad application preparing recommendations for its improvement. of advanced modelling techniques and the use of innovative ͗͗ Defined responsibility; approaches developed within the Group. INTER RAO UES assesses risk not only in terms of potential economic ͗͗ Continuity; consequences, but also from the standpoint of management logic and associated decision-making. 28 2. SUSTAINABILITY JSC INTER RAO UES
SUSTAINABILITY AND ENVIRONMENTAL 2.5. PREVENTING CORRUPTION AND has to carry out an appropriate investigation or contact the The corporate websites of Group companies have sections RESPONSIBILITY REPORT OTHER ILLEGITIMATE PRACTICES respective organisational unit of INTER RAO UES. Disciplinary containing information on ways to counteract corruption and 2011 actions against a person who failed to comply with the contact information for anonymous reporting. Using these It is a Group priority to improve the transparency of INTER Corporate Ethics Code may be taken, if there are legal mechanisms, individuals can report on: RAO UES’ business both within Russia and abroad and to grounds to do so. protect the interests of shareholders, partners and employees ͗͗ Planned or actual incidents of corruption, fraud, or from threats associated with corruption. The Group makes systematic efforts to prevent corruption. In theft; 2011, it put in place a mechanism for stringent oversight of To ensure compliance with Federal Law dated December 25, Group company investment programmes and strengthened ͗͗ Failure to comply with established procurement 2008 No. 273-FZ On Counteracting Corruption, INTER RAO internal audit and control practices with regard to financial requirements; UES makes serious efforts in the following areas: and economic activities. Inspections and oversight of the planning and implementation of repair works, investment ͗͗ Abuse of position or power by managers; ͗͗ Preventing conflicts of interest; projects and general operations aim to identify practices that led to inefficient use of corporate resources in previous ͗͗ Other actions that may cause harm to the property ͗͗ Combatting corruption; periods. or business reputation of INTER RAO UES.
͗͗ Combatting violations of anti-monopoly legislation. A number of HR decisions have been made to increase the The Group pays particular attention to compliance with anti- personal responsibility of managers for implementation of monopoly legislation. It requests the necessary approvals The Corporate Ethics Code of INTER RAO UES defines the investment programmes, as well as the general financial and for transactions involving equity (shares) and the property of Group’s procedures for preventing potential risks and economic activities of Group companies. For example, since business organisations in accordance with the federal laws On conflicts of interest by fostering a corporate culture and November 2011, in response to requests from the Russian the Protection of Competition and On Foreign Investment in through stakeholder communications. Compliance with government to reinforce anti-corruption activities, the Group Economic Entities of Strategic Significance to National Defence the Code, which embodies the Group’s key corporate has been working on strengthening its internal processes and Security. When law requires, the Group also notifies the principles and values, is mandatory for members of the in the area of economic security. These processes include, Federal Antimonopoly Service of the closing of deals. The head Board of Directors, the Management Board, the Internal among others, regular background checks on candidates for company issues orders that any resolutions received from the Audit Commission and for all Group employees regardless management positions and screening potential contractors Federal Antimonopoly Service be complied with. of their position. According to the code, in case of an actual and suppliers. Furthermore, the Group has been reinforcing or potential conflict of interest, persons involved in it or operational oversight processes at its companies. The In 2011, Federal Law dated July 18, 2011 No. 227-FZ introduced aware of it are required to immediately notify the Group’s security services of Group companies carry out regular amendments to the Russian Tax Code, which entered into management. Individuals who have become aware of actual inspections and investigations to identify and prevent cases of force on January 1, 2012. These amendments established new or planned violations of legislation in association with the abuse of position. principles for determining the price of goods and services for Group’s business or who have grounds to believe so, are also the purpose of taxation and introduced additional provisions required to immediately notify the Group’s management. In order to ensure the completeness and reliability of regarding tax regulation of related party transactions. information, the Group prepared an action plan to prevent When an employee, a member of the Board of Directors, corruption in 2011 and ruled to create a standing anti- This has led to significant strengthening of state oversight Management Board or Internal Audit Commission has any corruption working group. Furthermore, there are plans over the pricing of transactions with affiliated companies. The questions concerning the application of the Code’s provisions to amend local Group company policies in areas such as amendments introduced a new type of tax audit carried out or has doubts about the correctness of a decision or action procurement, HR, contracting and corporate governance. by the Federal Tax Service to verify the completeness of tax taken, he or she may refer to the Security and Regime Unit payments associated with related party transactions. These for consultation. The manager who received such an enquiry amendments may result in serious additional risks for virtually 2. SUSTAINABILITY 29
any economic entity in the Russian Federation. Sanctions 2.6. PROCUREMENT MANAGEMENT Since January 1, 2012, procurement activities by the Group’s imposed by the tax authorities on the Group or members of its Russian entities are subject to a special regulatory regime management bodies may, in turn, adversely affect the Group’s The highest corporate body responsible for procurement established by Federal Law dated July 18, 2011 No. 223-FZ operations. management is the Board of Directors of INTER RAO UES. On the Procurement of Goods, Works and Services by Certain The Board’s functions include, among others, approving the Categories of Legal Persons. The main principles of the law A positive development for INTER RAO UES was the signing Regulation on the Procedure for Regulated Procurement of include: of Russia’s WTO Accession Protocol on December 16, 2011. Goods and Services, Annual Comprehensive Procurement After ratification of the protocol, when Russia becomes a WTO Programmes, members of the Central Procurement ͗͗ Ensuring the unity of the economic space; member, new customs duty rates on certain categories of Committee and the Regulation on the Central Procurement goods, including electricity, established by RF Government Committee. The Committee is the central procurement body ͗͗ Ensuring efficient use of funds; Resolution dated August 31, 2011 No. 724, will enter into force. that oversees procurement of goods and services across the Group and is responsible for day-to-day decision-making in ͗͗ Expanding opportunities for participation by legal this area. persons and individuals in the procurement process and facilitating such participation; On December 24, 2010, the Board of Directors designated improving the Group’s procurement practices as a priority ͗͗ Creating conditions for meeting, on time and in full, area (minutes dated December 27, 2010 No. 35). the demands of legal persons for goods, works and services with required pricing, quality and reliability Prior to January 1, 2012, the Group’s procurement activities parameters; were regulated by corporate standards based on existing legislation. For Russian companies in the Group, the key ͗͗ Facilitating the development of fair competition; elements of the respective legal framework include the Civil Code of the Russian Federation, Federal Law dated July 26, ͗͗ Ensuring the openness and transparency of the 2006 No. 135-FZ On the Protection of Competition, Federal procurement process; Law dated April 14, 1995 No. 41-FZ On State Regulation of Prices for Electricity and Heat in the Russian Federation ͗͗ Preventing corruption and other illegitimate and RF Government Resolution dated April 2, 2002 No. 226 practices. Fundamentals of Electricity and Heat Pricing in the Russian Federation, as well as certain provisions of Federal Law dated In 2011, a revised version of the Regulation on the Procedure for July 21, 2005 No. 94-FZ On the Placement of Orders to Supply Regulated Procurement of Goods and Services for the Needs of Goods, Carry Out Works and Render Services to Meet State INTER RAO UES was approved. The document regulates various and Municipal Needs (with regard to the regulation of natural aspects of the corporate procurement process, including the monopolies and by references from other acts). scope, sequence and timing of procurement procedures, as well as the key functions of participants. It also takes into account relevant legal requirements. Its adoption provided a regulatory basis for the Group’s transition from a decentralised to a centralised procurement system. 30 2. SUSTAINABILITY JSC INTER RAO UES
SUSTAINABILITY AND ENVIRONMENTAL The Group’s centralised procurement system is aimed at: In 2011, the Central Procurement Committees of the When conducting regulated procurement procedures, the RESPONSIBILITY REPORT Group’s companies delegated centralised procurement Group’s entities pay special attention to reliability and good 2011 ͗͗ Providing, on time and in full, goods, works and responsibilities to LLC INTER RAO UES FINANCE*, whose key business conduct by potential contractors and suppliers. To services necessary for the Group’s activities, while areas of activities include: optimise corporate centralised procurement management ensuring efficient use of funds; mechanisms, the Group introduced a procedure to accredit ͗͗ Developing unified corporate procurement goods and services providers. The main objectives of the ͗͗ Reducing the cost of goods, works and services standards for the entire Group, introducing these procedure include: procured while ensuring their compliance with standards and overseeing compliance; necessary conditions, delivery dates and quality ͗͗ Protecting against unethical suppliers and reducing requirements; ͗͗ Organising the preparation and revision of the the risks of failure to ensure timely delivery or the Group’s annual comprehensive procurement required quality of goods and services as a result ͗͗ Improving the reliability of the supply of goods and programmes and overseeing their implementation; of bidders with dubious experience or reputations provision of services; analysing the technical and economic feasibility of being selected through competitive procurement draft annual procurement programmes; procedures; ͗͗ Achieving synergy by consolidating and integrating procurement activities; ͗͗ Organising, managing and providing documentary ͗͗ Improving the timing and transparency of support for all stages of tender-based and regulated procurement activities; ͗͗ Implementing the principles of a unified technology non-tender procurement procedures in accordance policy with regard to the procurement of goods and with annual comprehensive procurement ͗͗ Facilitating the formation of a market of high-quality services for Group companies; programmes. suppliers and contractors able to meet the Group’s demands. ͗͗ Minimising procurement risks; To comply with the requirements of Directive of the Russian Prime Minister dated December 16, 2010 No. 6464p- More details on the supplier accreditation procedure are ͗͗ Reducing inefficient use of capital to maintain P13 regarding the transparency of procurement and the available on the Group’s website at www.interraofinans. reserves of goods and materials; transition to electronic procurement, INTER RAO UES uses ru/purchase/accreditation/. It is important to note that the services of its long-standing partner В2В Electronic accreditation or lack thereof does not affect a supplier’s ͗͗ Improving procurement timing and transparency; Trading Venue (http://B2B-interrao.ru). This platform eligibility to participate in tenders for providing goods or is used as an information portal for the Group’s entire services for the Group. ͗͗ Reducing transportation, logistics and storage costs; range of procurement activities and as a venue for certain procurement procedures. In order to ensure the transparency of procurement activities, ͗͗ Reducing the cost of processing orders/bids in in 2011 the Group started to deploy a corporate information procurement. In 2012, INTER RAO UES plans to start cooperating with the system based on the Oracle eBS platform – the Unified United Electronic Trade Venue (JSC UETV) and, beginning in Procurement Information System (UPIS). The main objective More details on key procurement goals and objectives and the middle of the third quarter of 2012, gradually transition all of the system will be to automate procurement activities responsible units are available on the websites www.interrao- of its procurement procedures to the two electronic trading in the interest of all the Group’s key companies and to zakupki.ru and www.interrao.ru/custom/. venues mentioned above. specifically support the following processes:
* Since June 15, 2012: LLC INTER RAO – Procurement Management Centre. 2. SUSTAINABILITY 31
͗͗ Development, modification, coordination and ͗͗ A comprehensive review with the involvement of approval of Annual Comprehensive Procurement various groups of experts and multi-factor applicant Programmes for the Group’s companies; ranking.
͗͗ Management of competitive procurement The Group defines eligibility criteria for procurement procedures; participants in terms of their legal capability, expertise and reputation, depending on the nature of specific products and ͗͗ Maintenance of an electronic procurement archive; services. The Security and Regime Unit thoroughly studies information about the activities of potential contractors and ͗͗ Generation of reports required in the course of suppliers. competitive procurement procedures. One aspect of application review is an analysis of information Operational testing of the system began at the Group in March about labour conflicts associated with violations of labour 2012. legislation by potential suppliers or contractors. Such information itself does not necessarily lead to the application Furthermore, a Procurement Quality Service has been created being rejected but serves as an indication that a more within the Group to improve procurement practices. The thorough analysis of other information about the applicant’s service reviews proposals and complaints from participants activities is required. According to the Group’s internal in the procurement process. Internal regulations on the estimates, violations of labour legislation had been identified Procurement Quality Service are currently being developed to at no more than 2% of all potential contractors and suppliers define in detail procedures aimed at improving the quality of in the reporting year. the procurement process and actions of the parties involved. The Procurement Commission reviews each application. In To reduce the risk of corporate fraud and prevent corruption, order to improve review quality, the Commission engages the Group’s procurement procedures incorporate the highly skilled specialists (experts) in specific areas, each of following elements: whom evaluates specific aspects of the application.
͗͗ An analysis of beneficiary information provided by applicants;
͗͗ An analysis of the terms of reference in order to identify artificial conditions substantially limiting opportunities for competition;
͗͗ An evaluation carried out by the corporate security service and other competent bodies of conformance with the qualification requirements;
3. HUMAN RESOURCES 33
PART 3. HUMAN RESOURCES PAGE §§ SUBSECTION
33 3.1. PRINCIPLES AND APPROACHES 34 3.2. STAFF PROFILE 39 3.3. SOCIAL PROGRAMMES 47 3.4. EMPLOYEE TRAINING AND DEVELOPMENT 49 3.5. REMUNERATION AND MOTIVATION
3.1. PRINCIPLES AND APPROACHES
Employees are one of the Group’s key assets. Achievement INTER RAO UES has developed and enacted its Human ͗͗ Developing the competencies and skills of Group of the Group’s strategic objectives depends directly on HR Resource Policy in line with the provisions of Russia’s Energy employees to support the Group’s leading position in approaches, incentives and intangible motivators, as well as Strategy through 2030 on the development and effective use the sector and achieve its strategic objectives; the formation of a favourable corporate culture. One of the of human potential in the energy sector. According to the key objectives for the Group’s organisational development is Policy, the main objectives in the field of HR management ͗͗ Maintaining a corporate culture aimed at fostering a improving work efficiency and safety. include: feeling of belonging among Group employees;
͗͗ Building a flexible and effective system to manage ͗͗ Fostering employee commitment to the Group’s the Group’s human resources and ensure that these values and ethos; resources are capitalized upon; ͗͗ Maintaining a positive image of the Group in the ͗͗ Hiring effective managers and highly skilled labour markets in the countries in which it operates. specialists able to ensure implementation of the Group’s strategy; Group representatives are actively involved in the Ministry of Energy’s Working Group for the Revision and Updating of ͗͗ Ensuring competitive employment conditions; Personnel Management Rules in the Power Sector. 34 3. HUMAN RESOURCES JSC INTER RAO UES
SUSTAINABILITY AND ENVIRONMENTAL 2ND NATIONAL HR CONFERENCE ON THE HR POTENTIAL 3.2. STAFF PROFILE 05 Staff breakdown by division in 2011 RESPONSIBILITY REPORT OF THE FUEL AND ENERGY COMPLEX AS THE 2011 FOUNDATION FOR IMPLEMENTATION OF RUSSIA’S As of December 31, 2011, the number of Group employees 4 5 6 ENERGY STRATEGY was 47,014. The Group is among the best performing in the sector in terms of staff turnover and age composition. The This conference, held in December 2011 and supported by employee turnover rate at Group companies is between 3% 3 the Russian Ministry of Energy, aimed to identify priority and 10%; at some operations it is as low as 3–4%. At the objectives and approaches towards improving and developing Group’s Russian generating assets, the average employee age human capital in Russia’s fuel and energy complex. is about 43, while the average age for the sector is 52. One Participants noted that human capital is the key factor in third of Group employees have a university degree. The Group the sector’s sustainable development and in improving the prefers to recruit employees from local communities: 87% of 1 competitiveness of the Russian economy. At the conference the Group’s total workforce is comprised of local residents, they also paid special attention to the development of while the percentage of local residents at management level innovation in the field of HR management. is 84%.
The Ministry of Energy acknowledged INTER RAO UES’ The Group also recognises the social significance of ensuring participation in the conference with an Honorary Certificate. equal access to employment for individuals with disabilities 2 and continuously works towards this objective. In 2012–2013, the Group plans to make a number of important amendments to its social policy in order to create conditions for recruiting 1. Generation______49% 4. Engineering______4% 2011 saw a rapid increase in the number of Group assets, individuals with disabilities. If changes to Russian legislation 2. Sales______24% 5. Other segments______1% as well as the development and growth of its organisational create a legal basis for working from home, then the Group 3. Grids______21% 6. Headquarters______1% structure and expansion of INTER RAO UES’ geography of will be able to create distance jobs for a number of positions operations. In terms of HR management, this rapid growth and recruit disabled individuals. period was characterised by the following features:
͗͗ Merging of different corporate cultures in the process of asset consolidation;
͗͗ Co-existence of different management systems and methods;
͗͗ The personal objectives and motivation of senior managers being affected by changes in their professional status and organisational role in the process of consolidation;
͗͗ Staff responses to structural and organisational changes resulting from the consolidation and an increased risk of social and labour conflict. 3. HUMAN RESOURCES 35
06 Staff breakdown by gender in 2010 08 Staff breakdown by age in 2010 10 Staff breakdown by category in 2010
3 1 1
2
3 1
2
2 1. Managers, senior executives ______15% 2. Specialists, administrative and technical staff______33% 1. Men______66% 2. Women______34% 1. Under 30_____ 17% 2. 30-55_____ 69% 3. Over 55______14% 3. Workers______52%
07 Staff breakdown by gender in 2011 09 Staff breakdown by age in 2011 11 Staff breakdown by category in 2011
3 1 1
2
3 1
2
2 1. Managers, senior executives ______15% 2. Specialists, administrative and technical staff______33% 1. Men______66% 2. Women______34% 1. Under 30_____17% 2. 30-55_____ 69% 3. Over 55______14% 3. Workers______52% 36 3. HUMAN RESOURCES JSC INTER RAO UES
SUSTAINABILITY AND ENVIRONMENTAL 12 Management breakdown by age in 2010 14 Management breakdown by gender in 2010 16 Breakdown of employees who left the Group in 2010 by gender RESPONSIBILITY REPORT 2011 1 3 1 2 1 2
2
1. Under 30_____ 5% 2. 30-55_____ 80% 3. Over 55______15% 1. Men______81% 4. Women______19% 1. Men______62% 2. Women______38%
13 Management breakdown by age in 2011 15 Management breakdown by gender in 2011 17 Breakdown of employees who left the Group in 2011 by gender
1 3 1 1 2 2
2
1. Under 30_____ 4% 2. 30-50_____ 81% 3. Over 55______15% 1. Men______78% 2. Women______22% 1. Men______64% 2. Women______36% 3. HUMAN RESOURCES 37
18 Breakdown of employees who left the Group in 2010 by age 20 Employees with 5 years or less to retirement by category, 2010 22 Employees with 10 years or less to retirement by category, 2010
1 1 1
3
3 3
2 2
2 1. Managers, senior executives ______12% 1. Managers, senior executives ______14% 2. Specialists, administrative and technical staff______38% 2. Specialists, administrative and technical staff______35% 1. Under 30_____ 23% 2. 30-55_____ 38% 3. Over 55______39% 3. Workers______50% 3. Workers______51%
19 Breakdown of employees who left the Group in 2011 by age 21 Employees with 5 years or less to retirement by category, 2011 23 Employees with 10 years or less to retirement by category, 2011
1 1 1
3
3 3
2 2
2 1. Managers, senior executives ______13% 1. Managers, senior executives ______14% 2. Specialists, administrative and technical staff______38% 2. Specialists, administrative and technical staff______34% 1. Under 30_____ 21% 2. 30-50______44% 3. Over 55______35% 3. Workers______49% 3. Workers______52% 38 3. HUMAN RESOURCES JSC INTER RAO UES
SUSTAINABILITY AND ENVIRONMENTAL Pension legislation in the countries in which the Group 07 Pension age in countries with Group operations RESPONSIBILITY REPORT operates varies significantly in terms of retirement age, which 2011 Pension age affects the relative size of the older age group of employees. Country Men Women The highest retirement age for both women and men across the Group’s countries of operation is 65 (Finland). The 55 – Armenia 63 63 65 age group comprises employees, including those at the Group’s foreign assets, below the retirement age for the Georgia 65 60 country in which they are employed. Kazakhstan 63 58 Lithuania 62,5 60 In 2011, substantial progress was made in the consolidation of HR policy and social programme data across the Group. Pridnestrovian Moldavian Republic 60 55 This allows individual companies to use methodologies and Russia 60 55 documents developed at Group level and integrate their Finland 65 65 systems into the corporate HR management reporting system.
SOCIAL PARTNERSHIP
Social partnership in the context of labour relations is In January 2010, Group companies signed collective FIRST SOCIAL REPORTING CONFERENCE regulated by labour legislation, according to which collective agreements for 2010–2012. The documents were based bargaining procedures should regulate relations between on the model collective agreement, which defined key In 2011, guided by best stakeholder engagement practices, parties, helping them not only structure those relations, but corporate social policy priorities, approaches to managing the Group held its first Social Reporting Conference. make them more transparent, predictable and responsible. employer/employee relations, the rights and responsibilities Participants in the event included representatives from The collective bargaining process results in the signing of a of managers and employees, as well as a standardised the management of power plants, HR department heads, collective agreement between the employer and employees. list of benefits, guarantees and obligations available to trade union leaders and representatives and active young employees. The agreements ensure a good balance between employees from the Group’s operations. At the beginning of the asset consolidation period, INTER employee interests and INTER RAO UES’ capabilities; RAO UES faced the difficult challenge of integrating the their implementation will support the Group’s continuous In the course of the conference, representatives of Group experience and practices of different Group companies into development. companies and union organisations presented reports on the framework of a common approach. To raise social and their activities. Areas for improvement were identified both labour relations to a new level, the Group had to come up with It is also important to note that employees facing problems for management and the unions. a new approach to the form and substance of agreements at regional level may refer directly to the Group’s HR between the parties in a social partnership. Department. This mechanism allows for labour conflicts to be addressed at Group level. Preparations for signing new collective agreements began in October 2009. Five management/labour collective bargaining In 2011, the Group’s social policy was aimed at developing commissions were set up. In the course of negotiations, corporate social activities as an integrated innovation-based INTER RAO UES proposed a draft model collective agreement. system essential to the Group’s long-term development The essence of the proposal was a transition from traditional and at actively involving union organisations in the collective agreements, which defined specific benefits, implementation of social programmes. At the end of guarantees and compensations in a fragmented manner, to 2011, 77% of Group employees were covered by collective best practices involving the development and implementation agreements. of an integrated social policy. 3. HUMAN RESOURCES 39
3.3. SOCIAL PROGRAMMES EMPLOYEE SAFETY PROGRAMME conditions and providing employees with personal protective equipment are available in the Occupational Health and Safety In implementing its social policy concept, the Group has High occupational health and safety (OHS) standards are a section of this Report. offered trade union organisations and company labour distinct feature of the world’s leading energy companies. In collectives 12 targeted social programmes aimed at ensuring turn, ensuring employee safety through the prevention of the safety of employees’ livelihoods and work, protecting occupational injuries, incidents and deterioration in health is one their health, improving their welfare and developing their of the top priorities of the Group’s social policy. A SAFE APPROACH professional careers. Many of these programmes encompass not only employees, but also their family members and non- INTER RAO UES’ employee safety corporate social programme In 2011, the OHS and Operational Oversight Service at working pensioners. The social programmes are defined by comprises the following components: Nizhnevartovskaya TPP implemented a number of initiatives collective agreements at Group companies. aimed at improving working conditions at the plant. Among ͗͗ A system of OHS measures; other measures, special glasses with corrective lenses for INTER RAO UES Group companies, as parties to social employees working at computers, earplug dispensers and partnerships, make commitments to support social ͗͗ Equipping workplaces and ensuring comfortable other types of personal protective equipment were procured. programmes, oversee employee compliance with workplace working conditions; Specific workplace conditions and employee preferences were safety procedures and practices and develop proposals taken into account when selecting models and materials for for enhancing working conditions, automating operations ͗͗ Providing meals for employees at the Group’s work clothing. Electro-gas welders working at the plant were and improving the workplace culture, as well as promoting production facilities; provided with new helmets to protect their eyes, face and sport and a healthy lifestyle and supporting recreation for head from bright light, sparks and molten metal. employees and their families. ͗͗ Compensating workplace hazards;
The Group’s social programmes have a clear focus and are ͗͗ Creating comfortable conditions for work-related tailored to the specific needs of employees. They encompass travel; EMPLOYEE HEALTH AND ACTIVITY PROGRAMME the interests of all categories of staff and take into account motivational factors affecting the performance of both ͗͗ Supporting the relocation of employees and To ensure the high level of performance and professional individual employees and the organisation as a whole. pensioners; longevity of its employees, the Group pays serious attention The amount of social benefits and payments for all staff to creating supportive conditions for maintaining the health categories is determined on the basis of standardised rules. ͗͗ Providing employees with corporate means of and labour activity of its staff and relieving the physical and Corporate social programmes incorporate experience from transportation; mental stress of their work. The Group also makes efforts reorganisation of the Group and seek to optimise approaches to prevent illness and reduce the incidence of illness among towards targeted investments in human capital and labour ͗͗ Accident insurance; employees. INTER RAO UES’ employee health and activity activities aimed at achieving the Group’s strategic objectives. programme includes the following components: ͗͗ Support in emergencies; Since 2010, the Group has reported quarterly on the results ͗͗ Additional holiday leave for employees with special of corporate social programmes. In addition to clearly ͗͗ Additional compensation in the event of an work schedules and conditions defined objectives, each programme has a set of quantitative occupational injury or fatality where the employer is and qualitative indicators that help monitor and evaluate to blame. ͗͗ Obligatory medical insurance programme implementation and effectiveness. In 2010–2011, total spending on the programme exceeded ͗͗ Voluntary medical insurance RUB 1.5 billion. More details about the Group’s activities in the field of occupational health and safety, including OHS ͗͗ Flexible work schedules for certain staff categories training, workplace certification with regard to working
3. HUMAN RESOURCES 41
͗͗ Group sports and fitness events; HEALTHY LIFESTYLE COLUMN Many Group companies support the formation of young leaders’ groups and participation by their specialists in ͗͗ Subsidised gym membership or paying to rent The Group works to promote a healthy lifestyle among youth forums. They also encourage creativity among their sports facilities for team sports; employees at its companies and their families. One young specialists in the field of science and technology by instrument used for this purpose is the Healthy Lifestyle involving them in project competitions and research and ͗͗ Medical rehabilitation programmes; Column, which appears on a regular basis in the corporate practical conferences. In 2012, there are plans to approve a editions Energy without Borders. The column, which provides Groupwide regulation on young leaders’ groups and organise ͗͗ One-off allowance associated with annual leave. practical information about ways to prevent illness and a conference for young leaders. improve health, is written in vivid clear language. The page Many Group companies implement a system of measures to containing it can be conveniently removed so that information In 2010–2011, the Group spent over RUB 7 million on the support their employees, and in some cases their families, can be shared with family and friends. programme. Over 750 students completed internships at in case of serious illnesses such as oncological conditions, Group companies. tuberculosis and diabetes. A typical example is the health programme at Gusinoozyorskaya TPP, which includes, among others, the following elements: YOUNG INTER RAO UES SPECIALIST PROGRAMME SELECTION OF STUDENTS FOR CORPORATE ͗͗ Prevention of tuberculosis and infectious diseases; The Group is interested in attracting young specialists, whose SCHOLARSHIPS professionalism and loyalty will become the main factor ͗͗ Check-ups, diagnosis, treatment and rehabilitation driving the Group’s development in the mid and long term. In 2010, TGK-11 launched a scholarship project for students under voluntary medical insurance schemes; at specialist universities in all three regions in which it The Young INTER RAO UES Specialist programme includes operates – the Omsk, Tomsk and Novosibirsk Regions. The ͗͗ Health resort treatment for employees; the following components: project, known as Future Employees of TGK-11, aims to provide support and incentives for talented students and, ͗͗ Health resort treatment/rehabilitation at the RF ͗͗ Adaptation of young specialists; ultimately, encourage them to seek employment with the Social Insurance Fund’s rehabilitation centres. Group. ͗͗ Mentoring of young employees by experienced In 2010–2011, overall expenditures on this programme were specialists; After a stringent screening process, the scholarship over RUB 1.5 billion. commission had to choose from 18 candidates. In the end, ͗͗ Targeted training programmes for young specialists eight winners were selected for the scholarship. Preference in external educational institutions for subsequent was given to students whose term and diploma papers were work at the Group; related to the thermal power industry.
͗͗ Work placements at Group companies for students at universities and vocational schools; PROFESSIONAL CAREER AT INTER RAO UES ͗͗ Participation by the Group in national projects and PROGRAMME cooperation with non-governmental organisations as part of social and non-governmental projects. The Group strives to maintain a high level of staff motivation and provide opportunities for its employees to grow and develop professionally. The Group’s HR policy aims to maintain the professional skills of staff and enhance employee capacity for the introduction of new technologies and 42 3. HUMAN RESOURCES JSC INTER RAO UES
SUSTAINABILITY AND ENVIRONMENTAL management methods so as to achieve the Group’s strategic CORPORATE TRAINING FOR THE ENERGY EFFICIENCY In 2010–2011, expenditures on the programme amounted to RESPONSIBILITY REPORT and operational objectives. CENTRE more than RUB 21 billion. In 2012, there are plans to adopt 2011 a Regulation on the Veterans’ Council at Group level and The Professional Career at INTER RAO UES programme On July 22–23, 2011, a corporate training session titled actually establish the Council. includes the following components: Strategy 2015 was held for employees of the INTER RAO UES Energy Efficiency Centre. The main objective of the event ͗͗ Adaptation of newly recruited and rotated was to improve the effectiveness of interaction between employees; employees through joint work on achieving the tasks set for A MEETING OF GENERATIONS them. ͗͗ Career guidance programmes involving the In October 2011, a meeting was held between young development of personalised career profiles; Almost 100 employees from the Energy Efficiency Centre specialists at Omskaya CHPP-4 with former plant employees took part in the event. The training session included two now members of the company’s Veterans’ Council. The ͗͗ Improving employee skills while ensuring components – a presentation about the Group Development participants spoke about the importance of preserving compliance with professional and sector standards; Strategy through 2015 and a team building exercise. For the traditions in the power sector and the need to see and recently formed Energy Efficiency Centre team, the training understand the social mission of the energy industry. The ͗͗ Short-term and long-term training under staff skill session was the first corporate event aimed at improving veterans who attended the meetings were at the core of the development programmes; internal communications. CHPP-4 team in the 1970s at the time of its construction and early days of operation, when it was the largest and most ͗͗ Supporting employees in learning foreign languages; advanced energy facility in Omsk.
͗͗ Strategic sessions for employees; INTER RAO UES GOLDEN FUND PROGRAMME Many of the meeting participants emphasised the critical role of mentorship in young specialists’ formative years. The ͗͗ Employee work placements with other companies in Preserving accumulated knowledge, experience, best participants agreed that such events should be held more their sector; practices and effective technological solutions is particularly frequently; they may be conducted as working meetings on important in such a high-tech industry as the power sector. the shop floor so as to also involve an analysis of specific ͗͗ Participation by the Group in national projects and This is why the Group is so serious in its efforts to build an situations arising during the course of operation of the plant. cooperation with non-governmental organisations effective knowledge management system to support, among within the framework of social and non- other processes, the transfer of professional experience governmental projects. between distinguished specialists and workers and their involvement in innovation processes. INTER RAO UES CANDIDATE POOL PROGRAMME In 2010–2011, the Group spent more than RUB 200 million on the programme. More details on the professional The INTER RAO UES Golden Fund Programme includes the Another priority area in the Group’s HR and social policy is development and training of Group employees are available in following components: the timely preparation of candidates for key positions and the Employee Training and Development and Remuneration skill sets at Group companies and reducing turnover in these and Motivation sections of this Report. ͗͗ Mentorship of members of the corporate candidate positions. pool by distinguished employees; The INTER RAO UES Candidate Pool programme includes the ͗͗ Involving distinguished employees as experts in following components: supporting the Group’s knowledge management system by sharing information; ͗͗ Formation of a candidate pool;
͗͗ Paying one-off bonuses to distinguished employees. ͗͗ Professional development and training of members of the candidate pool; 3. HUMAN RESOURCES 43
͗͗ Temporary service by those in the candidate pool in BEST INTER RAO UES EMPLOYEE PROGRAMME COMPETITION FOR INTEGRATED OPERATING PERSONNEL positions for which they are preparing in accordance CREWS with their personal development programmes. The Group organises various professional competitions and contests for its employees on a regular basis to improve the The 2nd Annual Corporate Competition for Integrated In 2010–2011, expenditures on the programme exceeded professional skills of its staff and facilitate the dissemination Operating Personnel Crews at Modular TPPs was held on May RUB 11 million. Active efforts are currently being made to of best practices and advanced work methods. Such events 22 – 27, 2011, in the town of Dobryanka in the Perm Territory. create a common candidate pool at Group level. Many young are an effective motivation tool, helping promote safe and Group specialists are involved in national candidate pool and efficient equipment operation standards and raising the In 2011, the event gained international status; in addition management training programmes. prestige of key skill sets and positions. to teams from the Group’s Russian power plants, the competition featured a team from CJSC Moldavskaya TPP and Activities carried out within the framework of the Best INTER representatives from Mtkvari Energy (Georgia), who visited RAO UES Employee programme include: the event as guests. A total of 11 teams competed in the MOSENERGOSBYT CANDIDATE POOL event; the overall number of participants was 92. ͗͗ Professional mastery competitions held at individual At Mosenergosbyt, the training of members of the company’s Group operations, e.g. Best in Profession, Best Shift, The steam turbine unit competition was won by a team from candidate pool is organised in two clusters. These are: Safe Work and Fire Safety; CJSC Nizhnevartovskaya TPP; while a team from Severo- Company Development Management, delivered at the Russian Zapadnaya CHPP walked away with the CCGT-based units Presidential Academy of National Economy and Public ͗͗ Annual corporate competitions for integrated award. Administration; and Power Industry Economics, delivered at operating personnel crews at the Group’s modular the UES Corporate Training and Research Centre. thermal plants;
The training programmes include subjects important ͗͗ Participation in the National Professional Mastery for today’s manager such as strategic management, Competition for Operating Personnel conducted financial analysis techniques in business development and under the auspices of the Russian Ministry of FIRE CREW COMPETITION marketing and business planning in the power sector. The Energy. programmes pay considerable attention to energy efficiency On June 30, a competition for voluntary fire crews at and conservation. Candidates on the programmes master In 2010–2011, expenditures on the programme amounted to Kostromskaya TPP was held at the plant’s training range situational leadership skills, techniques for taking and more than RUB 26 million. as part of the annual fire safety contest between the plant’s implementing management decisions and HR approaches. workshops and organisational units. The event helped test the readiness of volunteers and practice interaction both within The candidate training programmes involve the preparation the crews and with the regional unit of the State Fire Service. and presentation of a final project. Projects should involve individual and group work and incorporate an analysis of Crews from the plant’s electric workshop and chemical management problems, preparation of recommendations workshop completed the tasks in the fastest time and were for improvements at specific organisational units and named the winners. the development of an action plan for implementation of these recommendations. At the culmination of the course, candidates defend their projects at an event open not only to course instructors but also to company managers.
3. HUMAN RESOURCES 45
THE CHILDREN OF INTER RAO UES PROGRAMME YOUNG ARTISTS FOR THE ENERGY INDUSTRY INTER RAO UES EMPLOYEE WELFARE PROGRAMME
As part of its socially active position, the Group implements For more than a quarter of a century, the Palette Studio of The Group assumes responsibility for its employees and is a system of measures to provide additional support to the Arts has been teaching painting and drawing to the children ready to help them in difficult situations. When relocating families of its employees. In addition to creating a feeling of Energetik, a settlement built for employees of Iriklinskaya employees, the Group also provides comprehensive support of social security among employees, the programme aims TPP. For many years, the studio has held an annual children’s for them and their families to make the relocation as to instil a positive attitude towards the energy industry in arts competition to commemorate Energy Worker Day. comfortable as possible. employees’ children and foster their desire to complete specialist education and continue the family tradition of In 2011, some 50 young artists aged between 5 and 17 The INTER RAO UES Employee Welfare programme includes working in the energy sector. submitted their works for the competition. A total of 12 of the the following components: best works were selected in three age groups – 8 and under, The Children of INTER RAO UES programme includes the 10 and under and 14 and under – and one work was selected ͗͗ Financial assistance for employees or their following components: in the category 17 and under. Another 20 young artists were families in case of significant or critical life events given prizes of recognition. (conscription into the army, death of a close relative, ͗͗ Additional holiday leave for parents; illness or death of a family member, death of an employee or a person retired from the Group, theft ͗͗ Financial assistance; of personal property, robbery, fire, etc.); THE YOUNG FAMILY PROGRAMME ͗͗ Additional allowances for pregnant women and birth ͗͗ Additional holiday leave (in case of the death of a (adoption) allowances; The Group’s efforts to support young families are intended to close relative, when moving to another place of demonstrate its position towards family values and provide residence); ͗͗ Additional allowances for families with many additional assistance to Group employees entering into children, children with disabilities and orphans who marriage. ͗͗ Consideration of priority rights for certain employee lost parents as a result of an occupational accident; categories when deciding the holiday schedule; The Young Family programme includes the following ͗͗ Health improvement programmes for employees’ components for employees entering into marriage: ͗͗ Employment assistance for employees laid off as a children; result of downsizing or organisational restructuring; ͗͗ A financial allowance; ͗͗ Holiday gifts for employees’ children; ͗͗ Compensation of vacation travel expenses to ͗͗ Additional holiday leave. permanent place of residence for relocated ͗͗ Organising children’s festivals in the regions in employees and their families. which the Group operates. In 2010–2011, spending on the programme was more than RUB 5.7 million. In 2010–2011, the Group spent more than RUB 448 million on Many Group companies provide support to nursery schools. the programme. Additionally, as part of the Group’s Scholarship Programme, corporate scholarships are provided to employees’ children studying at university.
In 2010–2011, more than RUB 122 million was spent on the programme. 46 3. HUMAN RESOURCES JSC INTER RAO UES
SUSTAINABILITY AND ENVIRONMENTAL DECENT PENSIONS FOR INTER RAO UES EMPLOYEES COMMEMORATING VICTORY DAY UNITED ENERGY SALES COMPANY FOOTBALL FESTIVAL RESPONSIBILITY REPORT PROGRAMME 2011 Since 2003, it has been a tradition at CJSC Power Grids of At the end of 2011, JSC United Energy Sales Company The Group strives to ensure a decent standard of living for its Armenia to help veterans of the Second World War and visit (UESC) held its first mini-football tournament in the Kupol pensioners. Occupational pension programmes are aimed at them during Victory Day celebrations on May 9. Currently Sports Arena at the Cherkizovo Stadium. The tournament improving the social security of Group employees after their the company provides aid to seven war veterans who are was contested by six teams from energy sales companies retirement and are also an important motivation tool. also retired power industry workers, matching their state managed by UESC and a team from the Oryol branch of JSC pensions with an equal allowance. Unfortunately, the number INTER RAO UES. The Decent Pensions for INTER RAO UES Employees of veterans decreases each year; just a few years ago there programme includes the following components: were 14 such veterans. Every veteran of the Second World The tournament was won by a team from Mosenergosbyt, War living in Armenia – currently there are some three which beat Saratovenergo in a tightly fought struggle. Almost ͗͗ A one-off retirement allowance for those leaving the thousand of them – received 200 kWh of electricity free of all participants expressed a desire for the tournament to Group after reaching retirement age; charge as a gift from the company. become a corporate tradition, seeing it as an excellent way ͗͗ Financial aid for pensioners on special dates; to build a cohesive team and a good vehicle for informal ͗͗ An occupational pension programme; communication between representatives of companies ͗͗ A medical rehabilitation programme for non- managed by the United Energy Sales Company. working pensioners. INTER RAO UES CULTURE PROGRAMME
The Group currently employs more than 4,300 people who The Group views corporate culture as an essential element will reach retirement age within the next five years (9% of for the smooth functioning of its business, contributing, the Group’s total headcount) and more than 7,400 employees among other processes, to the development of its internal ENERGETIK TURNS 45 who will reach retirement age within the next ten years (16% information environment. Corporate events support the of total headcount). Many Group companies have their own development of ethical principles in the Group’s corporate On June 18, 2011, the settlement of Energetik, which was built corporate pension programmes. In 2010–2011, the Group culture, strengthen inter-personal and group relations within to accommodate employees of Iriklinskaya TPP, celebrated its spent more than RUB 239 million on the Decent Pensions for collectives and help build the Group’s image as an attractive 45th anniversary. INTER RAO UES Employees programme. employer, ultimately contributing to the effectiveness of its operations. The festival began with a sports tournament at the Yunost The integration of a number of major generating and sales Stadium. An outdoor inflatable bouncy castle was installed for assets in 2011 brought to the forefront the objective of The INTER RAO UES Culture programme includes the the youngest participants. In the settlement’s square, residents developing a Groupwide occupational pensions policy. A following components: could find an ethnic village that was literally built overnight. corresponding policy is to be developed in 2012–2013. Unlike Representatives from the five ethnic groups living in the previous Group company pension schemes that focused ͗͗ Team building activities for employees; Novoorsky district built their traditional yurts and huts, which primarily on social support for retired employees, the main served as small ethnic museums full of household items. At objective of the new system will be to motivate various age ͗͗ Corporate festivals; the door of each house, members of folk ensembles in ethnic groups of employees to actively build their pension savings clothing performing traditional songs and dances greeted through effective and productive work for the Group. The ͗͗ Cultural and educational entertainment events out of guests. Guests were also offered traditional meals. new pension programme is to be recommended to Group working time; companies, taking into consideration their financial status and In the evening, those who first built the settlement gathered regional specifics. ͗͗ One-off payments or corporate greetings on at the Sovremennik Cultural Centre with their children and holidays (Energy Worker Day, Defender of the grandchildren. The day of celebration continued with an Fatherland Day, International Women's Day, etc.). outdoor show in front of the cultural centre and a disco. Colourful fireworks brought the festival to an end. Orenburg In 2010–2011, the Group spent more than RUB 346 million on Region Governor Yuri Berg attended the festival. the programme. 3. HUMAN RESOURCES 47
3.4. EMPLOYEE TRAINING AND The Group maintains a system of ongoing staff training and operation of energy equipment and ensuring DEVELOPMENT skills enhancement, ensuring that the right conditions are in compliance with sector and corporate standards; place to systematically improve the professional knowledge and skills of its employees. When required by legislation and ͗͗ Short- and long-term training and skills The Group recognises the importance of continuously sector regulations, the Group provides mandatory training for enhancement programmes for specialists delivered improving the professional skills of employees and developing certain positions or for admission to certain jobs. The Group’s with the involvement of specialised training staff. Corporate training priorities and key training areas are Science and Technology Council analyses professional training organisations, development of the practice of work determined by the Group’s strategic goals and objectives in methods and best practices. placements; the field of innovation, investment, modernisation and energy efficiency. The main areas of activity in the field of employee training and ͗͗ Deployment and development of computerised development include: training systems, including distance learning In 2011, across the Group a total of more than 900,000 hours systems, video courses, simulators, computerised of training were given, which is 187,000 more than in the ͗͗ Training for mid-level and senior managers; tests, etc.; previous year. In 2011, more than 18,000 employees received corporate training, a 6% increase on 2010. ͗͗ Professional training for employees aimed at ͗͗ Development of the Group’s candidate pools. ensuring good knowledge of equipment and processes, building practical skills for proper In 2011, the Group implemented corporate personnel development programmes in the most relevant and strategically important areas, including: strategic 24 Employee training by category in 2010 25 Employee training by category in 2011 management; corporate energy efficiency and energy conservation programme implementation strategy; corporate risk management system introduction; cost management; 1 1 relevant aspects of ensuring the reliability, security and efficiency of power systems; significant changes in legislation (including the law on counteracting the illegitimate use of insider information and market manipulation); and managing social and labour relations during reorganisation.
3 3 Group employees receive professional training at specialist educational institutions, including the Ivanovo State Energy University, Moscow Energy Institute (Technical University), St. Petersburg State Polytechnic University, Urals State Technical University, Kazan State Energy University, Corporate Power University and St. Petersburg Energy Institute for Skills 2 Enhancement under the RF Ministry of Energy. 2 The Group actively uses distance learning for employee training: a number of courses are available on the corporate portal, including mandatory OHS and first aid courses and 1. Managers, senior executives ______24% 1. Managers, senior executives ______23% courses on using MS Office, as well as introductory courses 2. Specialists, administrative and technical staff______31% 2. Specialists, administrative and technical staff______29% on project management, finance, knowledge management 3. Workers______45% 3. Workers______48% and the basics of ISO standards. Employees also have access to a database of conferences, workshops and other training
3. HUMAN RESOURCES 49
events, which helps reach a significant portion of the Group’s In 2011, the average monthly salary across the Group was EMPLOYEE SATISFACTION SURVEY employees to provide training to enhance their skills. around RUB 36,100, while average salaries in individual business segments were as follows: A survey of employee satisfaction was carried out in In the future, there are plans to provide training for the generation segment as part of the Group’s ongoing operating staff and monitor how their skills conform to 08 Average monthly salaries in business segments engagement with employees. Among other aspects, current requirements through the United Corporate Training the survey sought to assess employee satisfaction with Centre, which will hold a state license for training. Highly In addition to remuneration, the Group uses intangible remuneration. According to the results of the survey, 65% skilled trainers will staff the centre, including instructors for motivators, which include, among others, corporate awards. respondents were completely satisfied with the size of their simulator-based training. In 2011, in line with traditional Energy Worker Day greetings, salaries. It was also found that lack of satisfaction with the the Group’s 1,300 best employees were given corporate remuneration level was typically associated with social awards for their professional mastery and outstanding infrastructure being underdeveloped in the regions in which performance. respondents live and work. 3.5. REMUNERATION AND MOTIVATION
As part of its strive to build a team of highly skilled professionals, the Group offers competitive employment conditions and uses both tangible and intangible motivators. Salaries paid by the Group consist of fixed and variable components. The fixed element is the base salary, which is indexed on a regular basis (quarterly or annually in accordance with existing provisions and collective agreements). The Group regularly monitors remuneration levels, including by analysing Corporate awards granted on Energy Worker Day in 2011 corporate business plans and labour markets in regions of 08 Average monthly salaries in business segments 09 operation. Salaries paid by Group companies are typically by award type, % much higher than average salaries in the respective regions. 1 Generation in Russia RUB 45,900 The variable element of compensation comprises a semi- 4 variable component and bonuses. The semi-variable component is a premium on the base salary established Engineering in Russia RUB 44,500 on an individual basis as an incentive for highly skilled employees to perform to their full potential. The size of the Sales in Russia RUB 49,600 premium is determined by management on the basis of general approaches set forth by the collective agreement 2 Trading in Russia and Europe RUB 169,400* 3 and depending on the employee’s experience and quality of work. Employees may also receive regular, quarterly, annual Foreign assets RUB 15,100 and one-off bonuses. Such bonuses are linked to meeting key performance indicators and benchmarks reflecting an employee’s contribution to achieving strategic objectives and 1. Board of Honour ______3% * The average salary in the trading segment is much higher partly because improving operating efficiency (e.g. no accidents caused by personal income tax for residents of Finland (which is relevant for RAO 2. Certificate of Merit______54% staff at energy facilities, no fatalities, obtaining a certificate of Nordic Oy) may be up to 39% depending on the income amount. Furthermore, municipal and property taxes paid on top of this may reach up to 70% of personal 3. Acknowledgement______24% readiness for the autumn/winter season within the established income tax; the tax rate for non-residents of Finland is about 35%. 4. Letter of appreciation from the Chairman of the Management Board timeframe, meeting established targets for fuel consumption of JSC INTER RAO UES______19% per unit of electricity produced and meeting obligations to pay for power transmission services).
4. RELIABILITY, SECURITY AND EFFICIENCY 51
PART RELIABILITY, SECURITY AND 4. EFFICIENCY PAGE §§ SUBSECTION
51 4.1. ENSURING RELIABLE AND SECURE ENERGY SUPPLIES 62 4.2. OCCUPATIONAL HEALTH AND SAFETY 63 4.3. ENSURING ASSET SECURITY 64 4.4. ENVIRONMENTAL PERFORMANCE 71 4.5. INNOVATIVE DEVELOPMENT 74 4.6. IMPROVING ENERGY EFFICIENCY 78 4.7. INTERNATIONAL ENERGY ALLIANCES AND INITIATIVES
4.1. ENSURING RELIABLE AND SECURE 26 JSC INTER RAO UES’ share in Russia’s total installed capacity, power generation and heat output, % ENERGY SUPPLIES 10% Russia’s Energy Strategy through 2030 states that the 10.2 10 strategic goal of state energy policy is to stably meet demand for high quality energy resources by developing a highly competitive energy market operating on the principles of fair 5% 6.2 6.8 trade. Group companies contribute directly to Russia’s energy security and ensure the guaranteed and reliable supply of 3.8 3.8 energy to the economies and households of the countries in 0 which they operate. Installed generating capacity Power generation Heat output at year end
2010 2011 52 4. RELIABILITY, SECURITY AND EFFICIENCY JSC INTER RAO UES
SUSTAINABILITY AND ENVIRONMENTAL Group companies strictly comply with requirements set development of documents for the sector at all levels of RESPONSIBILITY REPORT 10 Instruments and mechanisms for ensuring the reliability, out in legislation and technical regulations with regard to the decision-making hierarchy. In 2011, a representative security and safety of energy supplies 2011 ensuring the reliability and security of energy supplies. The from INTER RAO – Electric Power Plants was elected to Main areas in ensuring Group’s operating performance indicators – a part of its the partnership’s Supervisory Board – a standing collective the reliability, security Instruments and mechanisms corporate system of key performance indicators – include, governance body. The involvement of Group representatives and safety of energy among others, an annual reliability indicator and an indicator in various committees and working groups operating on the supplies reflecting accident-free operating time. basis of the partnership also helps ensure that the Group’s interests are considered. Commissioning generating capacities With its value chain combining generating, grid and retail Preventing capacity Strengthening links within the energy companies, the Group has at its disposal a broad range of At present, the Group is the fastest-growing energy company deficit in certain energy system mechanisms for managing the reliability and security of in Russia due to both the construction of new generating system zones supplies. The Group’s generating, grid and retail companies facilities and its active acquisition policy. According to its Creating a technological capacity reserve perform a number of functions to that end. development strategy, by 2015 the Group plans to increase its Upgrading equipment and increasing its installed power generation capacity to 40 GW. capacity 10 Instruments and mechanisms for ensuring the reliability, security and safety of energy supplies 11 Installed electricity capacity of the Group’s Reliable power supply schemes companies Ensuring fail-safe operation of equipment GENERATING ASSETS and stable fuel Proper operation by skilled staff In creating the Group’s Investment Programme, experts supplies The power plants managed by the company LLC INTER thoroughly analysed moderate and base scenarios for Diversifying fuel suppliers RAO – Management of Electric Power Plants (namely the projected energy consumption in the Russian Federation in production assets of JSC OGK-1, JSC OGK-3 and JSC INTER the period 2012–2020 with tentative estimates through 2030. Quality repair services RAO – Electric Power Plants) are of systemic importance to Despite the impact of the global economic crisis on all of the Russia’s United Energy System. All production branches are main factors and drivers of growth in power consumption, Regulating frequency and voltage members of the wholesale electricity and capacity market the basic technology trends and processes underpinning Prioritising reliability and, in accordance with existing legislation and regulations, projections made prior to the recession have retained their Monitoring highly loaded segments of when managing transmission lines sell power and capacity on the wholesale market. significance. According to the Russian Ministry of Economic operating regimes. Development’s current macroeconomic forecasts, domestic Measures to prevent Mobilising operating reserves accidents In seeking to build effective mechanisms for operating on power demand will be driven by growth in the natural the energy market, Group companies actively contribute to resources and manufacturing industries. Customer-side load management improving its regulatory framework. For example, OGK-1, OGK-3 and INTER RAO – Electric Power Plants are members 12 Projected domestic demand of the Market Council, a non-profit partnership (Market Council for Organising an Effective System of Wholesale and 13 Commissioning plan for power generating capacities RUB 42.9 billion. Capital spending planned for 2011–2015 is Retail Trading of Electricity and Capacity). The Partnership in 2011–2015 set to exceed RUB 268 billion. develops rules for the wholesale and retail energy markets, oversees compliance with them and regulates relations The Group’s Investment Programme focuses on between wholesale electricity and capacity market commissioning new capacities based on state-of-the-art participants. efficient technologies, ensuring the reliability and operability of existing equipment, improving its energy efficiency OGK-3 is a member of the Council of Energy Producers, a and reducing the environmental impact of operations. non-profit partnership, where it represents the consolidated In 2011, capital spending across the Group amounted to interests of generating companies and contributes to the 4. RELIABILITY, SECURITY AND EFFICIENCY 53
Commissioning plan for power generating capacities in 2011–2015 11 Installed electricity capacity of the Group’s companies 13 Project name Commissioned Commis- Sources of Purpose 2011, 2010, capacity *, MW sioning year financing Name Type MW MW JSC INTER RAO UES 325 Russian assets Improving stability Ivanovskiye CCPP: Modernisation of Unit No. 2 325 2012 Own resources of power supply JSC INTER RAO – Electric Power Plants Thermal 2,283 2,283 JSC OGK-1 1,680 JSC OGK-1 Thermal 9,861 9,861 Meeting growing demand Urengoyskaya TPP: Construction of CCGT-450 450 2012 Equity financing for electricity ** JSC OGK-3 Thermal 8,357 - Permskaya TPP: Construction of CCGT -410 410 2015 JSC TGK-11 Thermal 1,971 2,051 Nizhnevartovskaya TPP: Construction of Unit No. 3.1 410 2014 Debt capital, own resources Russian assets total 22,472 14,003 Nizhnevartovskaya TPP: Construction of Unit No. 3.2 410 2015 Foreign assets JST TGK-11 602 CJSC Armenian NPP* Nuclear 408 408 Omskaya CHPP-3: Modernisation of turbine PT-50-90 No. 9 60 (10) 2011 Omskaya CHPP-3: Modernisation of turbine PT-50-130 No. 12 60 (10) 2013 JSC Hrazdan TPP (Armenia) Thermal 1,110 - Omskaya CHPP-3: Construction of CCGT-90 90 2012 CJSC International Energy - 561 Corporation (Armenia) Tomskaya peak boiler plant: Installation of GTU-16 and a heat 16 2012 recovery water boiler Debt capital, Meeting growing demand LLC Mtkvari Energy (Georgia) Thermal 300 300 Omskaya CHPP-3: Modernisation of turbine PT-50-130 No. 13 60 (10) 2013 own resources for electricity **
JSC Khrami HPP-1 (Georgia) Hydropower 113 113 Omskaya CHPP-5: Modernisation of turbine PT-80-130 No. 1 98 (18) 2014 Omskaya CHPP-5: Modernisation of turbine PT-80-130 No. 1 98 (18) 2015 JSC Khrami HPP-2 (Georgia) Hydropower 114 114 Omskaya CHPP-3: Installation of a new turbine T-120 instead JSC Ekibastuzskaya TPP-2 of PT-50-130 No. 10 120 2016 (Kazakhstan) Thermal 1,000 1,000 JSC OGK-3 2,265 Vydmantai Wind Farm UAB (Lithuania) Wind 30 - Kharanorskaya TPP: Construction of Unit No. 3 225 2012 Cherepetskaya TPP: Construction of two 225 MW units CJSC Moldavskaya TPP (Moldova) Thermal 2,520 2,520 (Units No. 8 and 9) 450 2013-2014 Gusinoozyorskaya TPP Restoration and modernisation of Foreign assets total 5,895 5,316 Unit No. 4 210 2012 Equity financing, Group total 28,367 19,511 Yuzhnouralskaya TPP-2 Construction of Energy Complex 400 2013 debt capital, Meeting growing demand (Unit No. 1) own resources for electricity ** * Was managed by JSC INTER RAO UES until March 1, 2012. Dzhubginskaya TPP: Construction of CCGT units No. 1 and 2 180 2013 Yuzhnouralskaya TPP-2 Construction of Energy Complex (Unit No. 2) 400 2014 Yuzhnouralskaya TPP-2 Construction of Energy Complex (Unit No. 3) 400 2015 12 Projected domestic demand Foreign assets 500 Ekibastuzskaya TPP-2: Expansion and modernisation with Debt capital, Period Base scenario Moderate scenario installation of Unit No. 3 500 2014 own resources Solving regional energy deficit
2011–2015 2.3% 1.9% * Commissioned capacity (incl. as a result of retrofitting and modernisation) ** within the framework of capacity supply agreements 2016–2020 2.26% 2.0% 54 4. RELIABILITY, SECURITY AND EFFICIENCY JSC INTER RAO UES
SUSTAINABILITY AND ENVIRONMENTAL 27 Actual capital spending in 2011 ͗͗ Automating processes and operations, especially SALES AND GRID ASSETS RESPONSIBILITY REPORT labour-intensive ones (e.g. work in boiler plants, fuel 2011 handling, ash and slag removal), staff optimisation For a supplier of last resort, meeting power supply conditions Given the seasonal nature of energy consumption, the Group and boosting labour productivity. and reliability requirements is a material condition set down makes every possible effort to ensure reliable operation of its in power supply/sales contracts. Article 38 of Federal Law systems at maximum load. In accordance with the Regulation In 2011, the capacity factor across the Group was 51.1% or No. FZ-35 On the Electric Power Industry defines customer on Inspecting Power Companies’ Readiness for Operations 0.6% more than in the previous year. The Group’s leading power supply guarantees, including responsibilities for in the Autumn/Winter Period (approved by the Government generating assets in terms of this indicator were INTER suppliers of last resort. Commission on the Security of Power Supplies), the Group RAO – Electric Power Plants and Ekibastuzskaya TPP-2 carries out annual campaigns to prepare its facilities for the (Kazakhstan). In 2011, the management of JSC United Energy Sales autumn/winter period. The campaigns involve developing Company prepared a Concept for Development of the Retail and implementing action plans to prepare facilities for the 28 Capacity factor at Group generating companies, Business of JSC INTER RAO UES through 2015. The document autumn/winter and thunderstorm period, the season of 2010–2011 defines key development objectives for the Group’s sales increased fire risks and spring floods. Group companies assets in the retail segment of regional electricity markets received certificates confirming their readiness for the 29 Availability factor at Group power plants in 2011 and specific tasks to support these objectives. 2011–2012 autumn/winter period following a comprehensive assessment carried out by representatives from the Russian Ministry of Energy with the involvement of representatives from JSC System Operator of the United Energy System, the Ministry of Emergency Situations and Rostekhnadzor. 27 Actual capital spending in 2011, RUB thousand The reliability, security and quality of power supplies is 20,000,000 supported by a system of measures aimed at improving the Russian generation efficiency of existing equipment and maintaining operating 18,000,000 and economic performance indicators at the required level. 1,398,980 16,000,000 These measures include: 16,461,566
14,000,000 1,894,738 ͗͗ Modernising core generating equipment, optimising 12,000,000 the heat flow arrangement and realising existing 12,385,540 heat saving potential; 10,000,000
͗͗ Optimising generating equipment operating 8,000,000 regimes; 6,000,000
͗͗ Making efficient use of cogeneration; 4,000,000
2,000,000 1,245,883 2,451,264 ͗͗ Removing capacity constraints associated with the 1,462,031 774,578 734,059 performance of cooling systems, boiler capacity, 0 1,593,084 578,030 1,032,180 112,894 279,045 505,938 fuel and transmission line throughput; JSC INTER RAO UES JSC OGK-1 JSC OGK-3 JSC TGK-11 Russian Other Foreign Foreign sales Russian generation grid ͗͗ Realising energy saving potential at TPPs through companies assets companies reducing losses and energy consumption for the plants’ own needs; New construction and expansion Retrofitting and modernisation 4. RELIABILITY, SECURITY AND EFFICIENCY 55
The development strategy for the Group’s retail business 29 Availability factor at Group power plants in 2011 * focuses on the following strategic objectives: 28 Capacity factor at Group generating companies, 2010–2011
94.220% 1. Ensuring an increase in the capitalisation of INTER RAO Tomsk branch of TGK-11 INTER RAO – EPP 57 UES’ sales assets and assets created to support them by: 69 Omsk branch of TGK-11 90.119% ͗͗ Maintaining and strengthening leading positions OGK-1 (incl. Nizhnev. TPP) 61 in electricity sales markets through retaining and 64 Ivanovskiye CCPP 16.735% expanding the Group’s customer base and entering new regions; OGK-3 44 46 Sochinskaya TPP 87.485% ͗͗ Ensuring sustainable profits from electricity sales 50 TGK-11 through cost optimisation, synergy in managing a 48 Severo-Zapadnaya CHPP 91.135% network of similar retail companies and developing centralised energy sales services. Kazakhstan 62 (Ekibastuzskaya TPP-2) 68 Kaliningradskaya CHPP-2 93.060% 2. Ensuring high-quality power supply to customers by: PMD 21 Urengoyskaya TPP 97.080% (Moldavskaya TPP) 19 ͗͗ Improving the quality of customer service using the latest service methods and technologies; Armenia 5 Permskaya TPP 95.838% (Hrazdan TPP) 9 ͗͗ Developing a broad line of additional paid services, to include a full range of services associated with Georgia 11 Verkhnetagilskaya TPP 84.820% power supply, supporting efficient and effective (Mtkvari Energy) 25 energy use and ensuring better customer Georgia Iriklinskaya TPP 87.59% experience and service quality. 30 (Khrami HPP-1) 30 Kashirskaya TPP 99.700% Georgia 39 (Khrami HPP-2) 41 * Note: The chart presents data for power plants operated by JSC OGK-1, JSC TGK- 11 and JSC INTER RAO – Electric Power Plants. The Group plans to disclose data 2010 2011 for foreign generating assets and JSC OGK-3 power plants in the Sustainability and Environmental Responsibility Report for 2012.
Amendments to legislation enacted on October 1, 2011, allow INTER RAO UES’ retail business in Russia includes a customers to change their energy suppliers. This has made managing company, six electricity sales companies that are the quality of customer service and range of services the key suppliers of last resort, four unregulated sales companies competitive advantage for suppliers of last resort, which, and a number of service and agent companies. In 2011, the unlike unregulated sales companies, cannot compete on Group’s regional sales companies had a retail market share price. of up to 91%, depending on the region. 56 4. RELIABILITY, SECURITY AND EFFICIENCY JSC INTER RAO UES
SUSTAINABILITY AND ENVIRONMENTAL 14 Number of customers served, electricity sales PROTECTING STORKS AND PREVENTING POWER GRID in the context of long-term export agreements. The main trends RESPONSIBILITY REPORT and market share for the Group’s electricity sales FAILURES in the energy trading market include: 2011 companies that are suppliers of last resort in 2011 In Armenia, storks often build nests on electricity pylons. ͗͗ Formation of long-term contractual relations 15 Number of customers served by suppliers of last This may lead to short circuit failures, outbreaks of fire or to ensure favourable conditions for investment resort by category equipment failures, which, in turn, can cause accidental power projects in all economic sectors in accordance with outages or in some cases trigger electric shocks for people in development scenarios; 16 Areas served, sales and market shares for the the vicinity. It also poses a threat to the life and health of the ͗͗ Increased significance of the economic aspects of Group’s unregulated sales companies in 2011 birds themselves. In the stork nesting season, the number of the parallel operation of energy systems; incidents involving power outages may reach 60–70 per month. ͗͗ Changing rules for the functioning of national electricity markets: increasing share of markets Electricity sales companies managed by INTER RAO UES CJSC Power Grids of Armenia runs a programme to preserve with time-based pricing and the emergence of serve more than 10 million customers with the overall sales the national population of storks, which are included in balancing markets. volume amounting to 148.3 billion kWh. Total revenue for Armenia’s Red Book of rare and endangered species. In the companies is RUB 373.9 billion. Group companies hold concentrated nesting areas, special equipment is installed At the same time, the reliability, security and quality of power a combined share of the Russian retail electricity market of to prevent the death of storks and also to help decrease the supply remain the top priority in all trading operations. around 15%. incidence of outages. Long-term contracts are deemed an important mechanism The Group’s grid companies include JSC Telasi (Georgia) and in ensuring the reliability of energy supplies to international CJSC Power Grids of Armenia. Overall, JSC Telasi supplied 1,749 million kWh of electricity markets; they help make energy trading more predictable to customers, while CJSC Power Grids of Armenia supplied in the long term, ultimately leading to better business JSC Telasi strives to ensure reliable and high-quality power 5,097 million kWh. To reduce electricity losses, the grid performance. Compared to the spot market, long-term supplies to more than 456,000 customers in Tbilisi. In 2011, companies are continuing to implement administrative and contracts currently play a fairly important role by supporting the company’s sales to customers amounted to more than engineering measures, including those aimed at improving stability on the global markets and helping producers 1,749 million kWh. grid metering systems. effectively manage risks and undertake costly long-term investment projects, while at the same time guaranteeing In 2011, JSC Telasi registered 6,246 interruptions of supply, 17 Electricity losses in distribution and transmission in reliable supplies to customers. which was 126 less than in 2010. The total duration of 2010–2011 interruptions in 2011 was 17,399 hours, which represents In physical terms, the main destinations for the Group’s almost 20% less than in the previous year. electricity exports in 2011 were Finland (42%), Lithuania (24%) and Belarus (14%). This was a result of higher prices 30 Total duration of supply interruptions by JSC Telasi TRADING in these regional markets relative to Russia’s domestic in 2010–2011 market, the regional energy balance and the availability of Russia’s Energy Strategy through 2030 lists the guaranteed transmission infrastructure. The Group also supplies power to CJSC Power Grids of Armenia is the only national company fulfilment of obligations under international export contracts as Georgia, Kazakhstan, South Ossetia and Azerbaijan. The total involved in power distribution and sales in Armenia. It one of the principles of state energy policy. The Group’s trading amount of electricity exported in 2011 was 22,709 million accounts for 100% of electricity distribution and sales in activities are regulated by a Trading Policy approved in 2010 kWh, or 22% more than in 2010. the country, serving more than 940,000 customers. No and are based on the principle of mutual benefit. Each year, the interruptions of power supply to customers were registered in Group carries out numerous consultations with counterparties, 2011; total sales were more than 5 billion kWh. including those involved in the transit of electricity, in the process of preparing new annual contracts or revising prices, or 4. RELIABILITY, SECURITY AND EFFICIENCY 57
14 Number of customers served, electricity sales and market share for the Group’s electricity sales companies 15 Number of customers served by suppliers that are suppliers of last resort in 2011 of last resort by category Number of customers, thousand Company Region for which company is Sales, million Share of regional supplier of last resort House- Corpo- kWh market, % holds rates 1. Households 11,183,118
Moscow, JSC Mosenergosbyt Moscow Region 6,398 246 78,113 90.8 JSC Petersburg Energy Sales Company St. Petersburg, 2,005 34 29,168 66 Leningrad Region 2. Grid companies 180 JSC Saratovenergo Saratov Region 638 19 6,169 59 Altai Territory, JSC Altaienergosbyt Altai Republic 1,833 69 5,682 62.8 JSC Tambov Energy Sales Company Tambov Region 239 5 1,453 46.3 3. Corporate customers and other organisations 379,304 LLC INTER RAO – Orlovsky Energosbyt Oryol Region 71 6 - 31 Total 11,183 379 120,585 -
16 Areas served, sales and market shares for the Group’s unregulated sales companies in 2011
Share of Russian Company Areas served Sales, million kWh market, %
LLC RN-Energo Krasnodar Territory, Stavropol Territory, Udmurt Republic, Samara Region, Komi Republic, 18,328 1.77 Tyumen Region (incl. Khanty-Mansi AA – Yugra and Yamalo-Nenets AA), Tomsk Region, Irkutsk Region, Krasnoyarsk Territory, Sakhalin Region JSC Industrial Energy Cities of Nizhny Tagil, Volgograd, Stupino (Moscow Region), Berezniki (Perm Territory) 5,844 0.56
30 Total duration of supply interruptions by JSC Telasi 17 Electricity losses in distribution and transmission in 2010–2011 in 2010–2011
JSC Telasi CJSC Power Grids of Armenia 770 9,906 376 Electricity purchased, mln kWh 2,158 6,019 6,370 Transmission losses, mln kWh 41 133 10,838 10,575 Supply to grid, mln kWh 2,025 5,887 Losses in distribution networks, incl., mln kWh 276 762 41.5 Technical losses, mln kWh 251 703 2010 2011 Commercial losses, mln kWh 25 58 0.4 kV 6-10 kV 110-35 kV Supply to customers, mln kWh 1,749 5,097
4. RELIABILITY, SECURITY AND EFFICIENCY 59
31 Electricity exports in 2011 31 Electricity exports in 2011, mln kWh 32 Electricity imports in 2011, mln kWh
11 32 Electricity imports in 2011 10 5 1 2 9 The Group imported electricity to Russia mainly from 8 Kazakhstan; significant amounts of power were also imported 7 6 from Georgia and Azerbaijan. In 2011, imports totalled 3,424 5 3 4 million kWh compared to 2,923 million kWh in 2010. Group 1 companies purchased electricity for export and sold imported 4 power on the Russian wholesale electricity and capacity market – both in different price zones and in the so-called 3 “non-price zone” (Kaliningrad Region).
The Group supports the development of ties between energy markets in different countries and contributes to Russia’s 2 integration into the global energy market and the further strengthening of the country’s leading position in it through, 1. Finland______9,636 7. Georgia______448 1. Ukraine______56 4. Kazakhstan______2,367 among other means, expansion of the international presence 2. Belarus______3,173 8. South Ossetia______132 of Russian energy companies. The Group is involved through 3. Lithuania______5,543 9. Kazakhstan______2,208 2. Azerbaijan______392 5. Mongolia______21 working bodies and groups in Russia-EU Energy Dialogue, 4. Latvia______- 10. China______1,238 which aims to create a common pan-European energy space. 5. Ukraine______22 11. Mongolia______263 The aim of strategic energy partnership between Russia and 3. Georgia______589 6. Azerbaijan______44 the European Union is to make energy relations on the free market reliable, secure and predictable in the long term. A roadmap for Russia-EU energy cooperation until 2050 is currently being prepared. ͗͗ Providing a preliminary estimate for transmission ͗͗ Preparing documentation for a power supply CUSTOMER SERVICE services; contract and supporting the process; ͗͗ Consulting on the procedure for concluding a ͗͗ Preparing documentation for technical capacity All Group companies working directly with electricity and capacity power transmission contract and determining the connections and supporting the process; customers seek to increase loyalty, expand their client base and respective tariff; ͗͗ Preparing design documentation for indoor offer a broad range of services. Retail sector companies pay ͗͗ Consulting on the preparation of planned and actual electrical equipment; serious attention to ensuring access to electricity and providing electricity balances; ͗͗ Calculating technical power losses and obtaining technical support for their customers. The main programmes and ͗͗ Preparing one-line diagrams/flowcharts or obtaining consent from network organisations. initiatives in this area include the following, among others: consent from network organisations; ͗͗ Preparing documents for delineation of ownership In the increasingly competitive retail market environment, the ͗͗ Replacing customers’ meters with support from and operating responsibility for power supply Group plans to evaluate customer satisfaction on a regular the state (by including the cost of purchase and infrastructure components and obtaining consent basis. In 2011, a comprehensive analysis of customer service installation of the meters in regulated electricity from external organisations; evaluation practices was carried out at all retail companies. prices); ͗͗ Preparing documentation for obtaining a permit to The analysis included the following stages: ͗͗ Consulting on the procedure for increasing capacity; operate power generating or distribution equipment ͗͗ Consulting on the preparation of design and supporting the permit process; ͗͗ Examining specific experience and internal documentation for power supplies; regulations at each company; 60 4. RELIABILITY, SECURITY AND EFFICIENCY JSC INTER RAO UES
SUSTAINABILITY AND ENVIRONMENTAL ͗͗ Developing and approving evaluation indicators; As part of the Group’s drive to improve service quality, it of the heat does not comply with the required standards, the RESPONSIBILITY REPORT ͗͗ Identifying data collection instruments; pays serious attention to customer complaints and other company recalculate utility bills in accordance with existing 2011 ͗͗ Defining evaluation frequency for each indicator; communications. These are handled in accordance with the legislation. In 2011, a total of 31 cases of non-compliance with ͗͗ Preparing a list of internal documents needed to Regulation on the Procedure for Registering and Handling regulatory requirements were identified at the Group’s sales introduce the respective business process. Customer Complaints (Communications). In 2011, Group companies. For each case, an analysis was carried out and companies also developed additional channels for customer corrective measures were taken. communication, including customer feedback books kept CERTIFICATION OF COMPLIANCE WITH INFORMATION at offices, official websites, virtual reception rooms, social 18 Number of cases of non-compliance with regulatory SECURITY REQUIREMENTS networks, text messaging and mobile applications. Some requirements in 2011 companies make active use of call centres. For example, the JSC Petersburg Sales Company is the Group’s leader when Tambov Energy Sales Company, which launched its call centre The main responsibility of customers is to pay their energy it comes to information security. In June 2011, the company in 2010, received its 10,000th call in October 2011. bills on time. Group companies divide customers into three obtained certificates of compliance with information security groups: household customers (some 11 million households), requirements for two personal data management information Many Group companies implement comprehensive measures grid companies (compensation of losses) and other systems – BusinessProf and the Information System for specifically aimed at improving the quality of services customers. All customer groups are ensured equally reliable Managing Electricity Sales to Retail Customers. Furthermore, provided to households. For example, TGK-11 is continuously services as defined by the respective technical regulations. the availability and integrity of systems containing confidential expanding its network of points where retail customers can information is continuously monitored by Nagios software. To pay their heating bills. It is also developing an electronic In the Russian Federation, electricity tariffs for households are prevent the loss of data containing confidential information, it payment system and makes sure to keep customers established by the Federal Tariff Service and Regional Energy is backed up once a day. informed about changes in the legal framework for defining Commissions. Different rates are set for urban and rural heat prices and the payment procedure, as well as educating customers and for households using gas and electric stoves. customers about their rights and responsibilities as utility The rates for heat customers are not differentiated in terms of The Group has been continually improving the quality of its service users. the reliability of supply. For grid companies (compensation of customer service. For example, in July 2011, INTER RAO – losses) and other customers, six main approaches to pricing Orlovsky Energosbyt carried out a questionnaire-based In 2011, the Group developed an action programme to assess are used, which can be combined into three groups: customer satisfaction survey for the first time. The survey compliance with customer service standards. The programme results demonstrated a high level of satisfaction with the includes a comprehensive survey, the development of ͗͗ Single rate tariff (i.e. customers pay only for the quality of the company’s services: 86% of respondents gave compliance monitoring systems and an analysis of the electricity they use); the highest possible score, while 12% gave a medium score causes of non-compliance. In developing the programme, ͗͗ Single rate tariff with time-of-use pricing; and only 2% awarded the lowest one. sales company specialists identified 110 quality criteria for ͗͗ Twin rate tariff, which includes both a rate for 1 personal customer service and 60 for remote service, as megawatt-hour (1000 kWh) of electricity and a rate In 2011, Group companies designed new service quality well as criteria for on-site and VIP service. The programme for 1 megawatt (1000 kW) of capacity. enhancement programmes and improved those currently distinguishes between unconditional and conditional criteria in place. They also paid attention to customer loyalty and between universal and specific criteria for each customer Group companies carry out special campaigns to promote programmes. Mosenergosbyt, for example, plans to launch group. timely payments for electricity and capacity. For example, the MES-Bonus, its own customer loyalty programme. Omsk branch of TGK-11 has run a bonus campaign to reward MUTUAL SUPPLIER AND CONSUMER RESPONSIBILITY customers who pay their heating bills on time since 2010. Ensuring the security of customers’ personal data is an important priority for retail companies. No incidents of The Group seeks to establish effective relationships with Despite all the efforts made by Group companies to promote personal data leakage, theft or loss were registered at the its customers based on mutual responsibility. For the timely payment, in some cases temporary disconnection of Group’s sales companies in 2011. Organisational unit heads energy company, the responsibility lies in supplying heat non-paying customers remains the only effective measure. continuously monitor employee practices in working with and electricity of the proper quality as defined by existing As is evident from an analysis of time between disconnection confidential information. regulations and in the amount specified by supply contracts. and payment, most customers make overdue payments for When an insufficient amount of heat is supplied, or the quality electricity within two days of being disconnected. 4. RELIABILITY, SECURITY AND EFFICIENCY 61
33 Number of customers disconnected from electricity 18 Number of cases of non-compliance with regulatory 33 Number of customers disconnected from supplies for overdue payments in 2011 requirements in 2011 electricity supplies for overdue payments in 2011 Number of 34 Time between customer disconnection and payment Company cases of non- compliance LLC RN-Energo 55 LLC INTER RAO – JSC United Energy Sales Company 31 375 There are currently discussions between the government Orlovsky Energosbyt and energy companies around the possibility of introducing a Including JSC Tambov Energy Sales Company 737 “social quota” for power consumption and ending the practice JSC Mosenergosbyt 10 of subsidising household customers who earn enough to fully JSC Altaienergosbyt 743 JSC Petersburg Sales Company 4 pay for the power they consume. Currently small- and medium- JSC Saratovenergo 1,286 sized customers are able to pay less due to the so-called “last LLC Energiya-Holding 0 LLC Energiya-Holding 774 mile rule”, a form of cross-subsidization under which energy JSC Altaienergosbyt 14 prices for big companies include power distribution services JSC Petersburg JSC Saratovenergo 0 Sales Company 9,312 they do not actually use. The Ministry of Energy expects this cross-subsidization to be extended through 2016–2017 instead JSC Tambov Energy Sales Company 3 JSC Mosenergosbyt 18,996 of 2014, as was earlier planned. LLC INTER RAO – Orlovsky Energosbyt 0 0 10,000 20,000
When making decisions about disconnecting customers or limiting electricity or heat supplies due to overdue payments, 34 Time between customer disconnection and payment accidents and other situations, Group companies take care to identify customers whose supplies are of economic, LLC RN-Energo 45% 14% 13% 24% 4% environmental or social significance. Even if those customers LLC INTER RAO – Orlovsky Energosbyt 97% 3% have overdue bills, they are supplied within the established JSC Tambov Energy Sales Company emergency quota, or the limiting of supplies is not practiced 41% 41% 12% 2%4% at all (e.g. for nursery schools, hospitals, etc.). In order to JSC Altaienergosbyt 35% 26% 14% 22% 3% ensure timely payment of utility bills by government-funded JSC Saratovenergo 14% 22% 21% 43% institutions, the Group’s companies actively engage with LLC Energiya-Holding regional authorities responsible for dispensing government 69% 6% 7% 12% 6% funding. JSC Petersburg Sales Company 69% 6% 7% 12% 6% JSC Mosenergosbyt 99% 0 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Less than 48 hours 48 hours – 1 week 1 week – 1 month 1 month – 1 year More than 1 year 62 4. RELIABILITY, SECURITY AND EFFICIENCY JSC INTER RAO UES
SUSTAINABILITY AND ENVIRONMENTAL 4.2. OCCUPATIONAL HEALTH AND into collective agreements and comprehensive action plans MEASURES TO BRING WORKPLACE CONDITIONS IN RESPONSIBILITY REPORT SAFETY to improve workplace conditions and employee health. To COMPLIANCE WITH EXISTING STANDARDS AND RULES 2011 prevent accidents and ensure accident preparedness, all PRINCIPLES AND APPROACHES Group companies prepare and implement annual equipment ͗͗ Modernisation of equipment and tools; inspection schedules. Preventive maintenance, repair and Ensuring occupational healthy and safety for INTER RAO UES equipment overhaul programmes are drawn up based ͗͗ Measures to minimise injury risks associated with employees is a top priority in the Group’s social policy. on the results of inspections. All production unit facilities equipment and workplace conditions; and engineering services are inspected by commissions In accordance with Order of the RF Ministry of Fuel and Energy that comprise specialists and managers from the Group’s ͗͗ Acquisition of equipment and devices for safe work dated February 19, 2000 No. 49 On the Approval of Rules production branches. The results of inspections at all Group at height; for Personnel Management in Organisations in the Electric companies are available for comparison. Power Industry of the Russian Federation and Rostekhnadzor ͗͗ Measures to improve the lighting of areas, Order dated January 29, 2007 No. 37 On the Procedure for Over the reporting period, eight Group employees suffered workshops and workplaces; the Training and Certification of Employees at Organisations occupational injuries. There were no fatalities. Supervised by the Federal Service for Environmental, ͗͗ Dedicated OHS awareness and training rooms. Technological and Nuclear Supervision, the Group adheres to In order to prevent workplace injuries, all incidents are the following principles: investigated and measures to reduce the risk of injury are developed and implemented. ͗͗ Safeguarding the life, health, labour activity and In 2011, a total of 11,806 workplaces were certified across the professional longevity of employees; In 2011, OHS expenditures across the Group were Group, including workplaces re-certified due to improvements RUB 387,424,000. This is equivalent to RUB 19,005 per employee. in working conditions. ͗͗ Observing human rights. OHS expenditures increased 18.8% compared to 2010. Providing employees with special clothing and equipment Group companies have collective agreements that define on a timely basis for working in hazardous conditions is twelve targeted social programmes. These include the INTER an important factor in reducing occupational injury risks. RAO UES Employee Life and Work Safety programme and the WORKPLACE CERTIFICATION AND PROVIDING In 2011, Group companies spent a total of RUB 68,961,000 INTER RAO UES Employee Health and Activity programme. The EMPLOYEES WITH PERSONAL PROTECTIVE EQUIPMENT on purchasing protective clothing and footwear; electrical programmes aim to prevent occupational injuries, illnesses protective equipment; hand, head and hearing protection and incidents and encompass all Group employees, regardless Group companies carry out regular certification of working equipment; as well as equipment to prevent employees from of their position, and all Group companies from the moment conditions in line with current legislation. Pursuant to a falling from height. In 2011, 100% of eligible employees they are included in the Group. decision taken by INTER RAO UES’ Central Workplace received personal protective equipment. Certification Commission, a corporate document – the Occupational Health and Safety (OHS) is addressed in collective Methodology for Determining Compensation for Employees OHS EDUCATION AND TRAINING FOR EMPLOYEES agreements, which contain provisions regarding workplace Working in Hazardous and/or Dangerous Conditions at the safety. When collective agreements are prepared, employees, Group’s Facilities – was developed jointly with the Labour Highly skilled staff with the right management and technical through their representatives, are involved in discussions of Institute’s Training and Consultation Centre and approved in skills are essential to ensuring safe operation of production measures to improve safety in the workplace. 2010. systems and equipment and implementation of the Group’s Technology Policy. The Group pays particular attention to Each Group company has dedicated units responsible for Based on the results of workplace certification, Group employee awareness in the field of OHS. Various elements of occupational health and safety. OHS managers are involved in companies develop and implement action plans to improve occupational health and safety are regularly covered in the developing measures to improve workplace culture and reduce working conditions. The processes of certifying workplaces and Group’s corporate magazine – Energy without Borders. the amount of unskilled heavy labour and work in hazardous improving working conditions are implemented at all Group conditions. They also oversee the inclusion of such measures companies. 4. RELIABILITY, SECURITY AND EFFICIENCY 63
The main areas of OHS training at the Group include: FIRE AND MEDICAL RELAYS
͗͗ Simulator training and emergency response Group companies regularly carry out fire and medical exercises; relays. These are competitions intended to test and improve employees’ fire fighting and first aid skills. The relay includes ͗͗ Pre-exam training, testing knowledge of norms and the following components: specifications, video-based training in compliance with norms and specifications and in the system of ͗͗ Removing a victim (mannequin) from a high-voltage work assignments; wire (over 1,000 V); ͗͗ Evaluating the condition of and resuscitating the ͗͗ OHS and fire safety briefings, first aid training, etc. injured party; ͗͗ Demonstrating first aid skills in a given situation; Group companies have dedicated rooms for OHS training. All ͗͗ Using emergency fire fighting equipment to training rooms are equipped with advanced simulators, testing extinguish a fire in an electric motor; software, software for video-based training and computerised ͗͗ Evacuating staff through a smoke-filled tunnel using workstations for instructors and trainees. If a Group company self-rescuers; does not have the necessary simulators or training software, ͗͗ Deploying a hose from a fire truck and its employees receive distance training or are sent to a demonstrating an accurate aim by hitting a target training centre at another Group company with the necessary with the water. resources.
In 2011, the following activities were carried out within the framework of the Group’s OHS training system: OHS ENGAGEMENT WITH SUPPLIERS AND CONTRACTORS
͗͗ Pre-certification training on OHS, fire safety and With regard to suppliers and contractors, the Group makes industrial safety training for subsequent certification efforts to ensure that they comply with OHS regulations by state supervisory agencies; and standards when carrying out work at Group companies. Contractors are allowed to work at Group facilities only after ͗͗ Testing of OHS and industrial safety knowledge and demonstrating their OHS skills. Any contractor sending skills within the framework of the annual corporate its employees to the premises of any Group company is competition for integrated operating personnel responsible for their proper training, skills and knowledge, crews. as stipulated by the respective contract. In 2011, ten injuries involving contractors were recorded at the Group’s production facilities. There was one fatality, in an incident in which an employee of LLC Vostokenergomontazh, a contractor company, fell from a height of six meters while working at Gusinoozyorskaya TPP due to failure to use his personal protective equipment.
64 4. RELIABILITY, SECURITY AND EFFICIENCY JSC INTER RAO UES
SUSTAINABILITY AND ENVIRONMENTAL 4.3. ENSURING ASSET SECURITY In accordance with Federal Law dated July 21, 2011 No. 256- SECURE ENERGY FACILITIES ARE A TOP PRIORITY RESPONSIBILITY REPORT FZ On the Security of Fuel and Energy Complex Facilities, a 2011 Security of the Group’s assets is one of INTER RAO UES’ vulnerability analysis for all of the Group’s production facilities An organisational and methodological working meeting of priorities. The Group’s efforts to ensure the security of its has been carried out using the KS Security integrated information security specialists was held at INTER RAO UES on June 7–9, production facilities encompass four functional areas: and analytical system. The results of this analysis are used as the 2011. The event was attended by over 50 specialists from JSC basis for so called “security passports” for facilities in Russia’s INTER RAO UES, LLC INTER RAO – Management of Electric ͗͗ Ensuring the Group’s economic and internal security; fuel and energy complex. In 2012, security passports are to be Power Plants, JSC OGK-1, JSC OGK-3, JSC TGK-11, JSC United prepared for all the Group’s industrial facilities. Energy Sales Company, CJSC Nizhnevartovskaya TPP, CJSC ͗͗ Safeguarding the Group’s resources; Moldavskaya TPP, CJSC Power Grids of Armenia, JSC Telasi, Group companies have developed emergency prevention and LLC INTER RAO Finance, JSC Sangtuda HPP-1 and LLC UK ͗͗ Civil defence, emergency prevention and response; response plans, orders regarding employee training, training Quartz. schedules and methodological materials for heads of the ͗͗ Ensuring the security of information classified as respective groups. Practical training sessions for participants were arranged at state secret. Moscow energy facilities and organisations. Specialists were The Group regularly holds events aimed at improving the shown examples of how to achieve objectives related to the INTER RAO UES has a dedicated organisational unit – the security of assets and preparing staff for effective and physical security of facilities, as well as integrated security Security and Regime Unit – responsible for security in these coordinated response to emergencies. All such events comply equipment complexes and emergency prevention systems. The areas. with the Recommendations for Preparing and Conducting annual meeting is a logical continuation of the Group’s efforts Civil Defence, Emergency Response and Fire Safety Exercises to develop a comprehensive security system and it provided a In response to the adoption of Federal Law dated July 21, and Training at Facilities issued by the Russian Ministry of venue to productively share experience. 2011 No. 256-FZ On the Security of Fuel and Energy Complex Emergency Situations. Facilities and Federal Law dated July 21, 2011 No. 257-FZ On Amendments to Certain Legal Acts of the Russian Federation In 2011, INTER RAO UES carried out 76 emergency with regard to Ensuring the Security of Fuel and Energy preparedness exercises. A total of 142 employees received Complex Facilities, the Group created a working group to training at methodological and training centres for civil defence develop and implement a system of measures to ensure and other relevant training institutions. compliance with these laws. The working group comprises 4.4. ENVIRONMENTAL PERFORMANCE representatives from the Security and Regime Unit, the Legal Unit, the Organisational Development Department, the HR PRINCIPLES AND APPROACHES Department and the Financial and Economic Centre, as well 19 Emergency preparedness exercises in 2011 as the heads of security and regime departments at subsidiary INTER RAO UES addresses environmental objectives in and managed companies. It holds monthly meetings and Event type Number cooperation and dialogue with all stakeholders, including the develops proposals for improving the security of the Group’s government and municipal authorities, partner businesses production assets. One result of its activities in 2011 was the and non-governmental organisations. The level of the Group’s approval of a large-scale investment programme to modernise Command post exercises 18 environmental impact and associated risks is an indication of its engineering systems ensuring security of the Group’s facilities. responsibility to society and the degree of sustainability of its development. Special tactical exercises 26 Group companies carry out anti-terrorism drills and emergency response exercises in accordance with the Group’s Civil Defence The Group’s key environmental aspects and risks are mainly and Emergency Prevention and Response Policy. Companies Comprehensive exercises 6 associated with the generation segment of its business and also regularly participate in regional anti-terrorism exercises, particularly with thermal power plants powered by fossil fuels where the National Anti-Terrorism Committee of the Federal Training at facilities 26 (coal and natural gas). Fuel combustion emits hazardous Security Service often acknowledges their performance. 4. RELIABILITY, SECURITY AND EFFICIENCY 65
substances and greenhouse gases into the atmosphere and, in ͗͗ Developing the Group’s environmental management considering the environmental performance of fuels, the case of coal, creates large volumes of ash and slag waste. systems and continually improving their materials and equipment being purchased or used; performance by studying and implementing best In 2011, the Group developed the JSC INTER RAO UES environmental practices, among other approaches; ͗͗ Engaging the Group’s entire staff in environmental Declaration of Environmental Responsibility. The document activities, training employees in environmentally defines the Group’s strategic objectives in the field of ͗͗ Developing an industrial environmental monitoring safe work methods, improving environmental environmental protection and rational use of natural resources. system, developing, monitoring and considering awareness; These include: environmental performance indicators for operations and providing incentives for employees ͗͗ Promoting environmentally responsible behaviour ͗͗ Ensuring Group company operations comply with to improve environmental performance in terms of among the Group’s staff and contractors, as well as national, regional and local requirements in the these indicators; suppliers of fuel, equipment and materials; field of environmental protection, natural resource management and industrial safety; ͗͗ Implementing as a priority environmental protection ͗͗ Analysing and assessing environmental risks, measures to prevent the generation of hazardous planning and implementing measures to ͗͗ Gradually reducing the environmental impact of substances and waste and adverse environmental prevent accidents with adverse environmental the Group’s operations to a technically feasible impacts, as well as implementing other integrated consequences, ensuring accident preparedness and and economically viable minimum, adhering to environmentally and economically sound measures; compensating associated environmental damage; the principle that reducing pollution is a priority and working towards continuously improving the ͗͗ Considering environmental aspects in the design ͗͗ Initiating and supporting research projects aimed environment in regions in which the Group operates; and construction of new energy facilities, as well as at developing promising environmental and energy in the modernisation and overhaul of equipment, conservation technologies, improving the efficiency ͗͗ Gradually reducing economic costs associated with using the best available techniques in the power of the use of natural resources and materials, waste the environmental aspects of operations while industry and environmental impact management; recycling and reuse; taking into account the interests of shareholders and customers and seeking to address environmental ͗͗ Reducing water consumption by introducing, ͗͗ Ensuring the openness and accessibility of issues in economically sound ways; wherever feasible, processes with zero water the Group’s facilities, as well as the results consumption, water recycling and reuse systems, of its environmental activities and industrial ͗͗ Working towards an accord between INTER consumption metering systems, eliminating losses environmental monitoring, for any stakeholder RAO UES’ management and staff, shareholders, and improving the quality of operation and repairing group, considering stakeholder interests and views governmental and non-governmental organisations engineering systems; in planning and implementing the Group’s activities; and the general public on the environmental safety of the Group’s operations, as well as the level of its ͗͗ Promoting the recovery and reuse of all types of ͗͗ Adopting an active information policy with regard social responsibility and environmental performance. industrial waste, particularly coal ash and slag, to the Group’s environmental performance through providing coal-fired plants with equipment and disclosing environmental performance to Furthermore, the Declaration defines priority areas for activities to collect, process and handle waste and developing stakeholders; and approaches towards achieving these objectives. These partnerships and cooperation with the authorities, include: construction and road building companies, ͗͗ Supporting governmental and non-governmental agribusinesses and other parties interested in initiatives in the field of environmental protection ͗͗ Improving the energy efficiency of operations, expanding the economically viable reuse of waste; and sustainable development. energy and resource conservation and enhancing operating discipline; ͗͗ Removing, wherever possible, environmentally The main environmental performance requirements for new dangerous and hazardous substances and high- and existing equipment are set forth in the JSC INTER RAO ͗͗ Developing alternative energy on the basis of waste processes from the production cycle, UES Technology Policy, a mandatory document for all Group renewable energy sources; companies.
4. RELIABILITY, SECURITY AND EFFICIENCY 67
The Group is currently preparing a targeted environmental ͗͗ Installing a unit for selective non-catalytic reduction programme through 2030 to identify major environmental of nitrogen oxides at boiler unit No. 3 at Kashirskaya 35 Environmental spending in 2010–2011, RUB mln investment projects to be implemented in future. The main TPP (OGK-1). According to the results of preliminary objective of the programme will be to ensure compliance not tests, the efficiency of the unit is about 50% and only with existing environmental legislation, but also with future nitrogen oxide emissions should be some 400 tonnes 2,500 laws and regulations, which are being planned at the moment. lower per year; 2,000 690 This will help reduce the risk of future non-compliance and 1,179 1,500 prevent a dramatic growth in investment spending. In choosing ͗͗ Modernising water removal systems at 768 approaches towards addressing environmental issues, the Verkhnetagilskaya TPP (OGK-1), Cherepetskaya TPP 1,000 Group will take into account European practice in identifying and and Kostromskaya TPP (OGK-3); 88 500 697 735 using the best available techniques. 0 41.5 ͗͗ Reconstructing ash disposal sites at Kashirskaya To improve corporate environmental management processes, TPP (OGK-1), Cherepetskaya TPP (OGK-3) and 2010 2011 in 2012–2014 INTER RAO UES plans to develop and implement Omskaya CHPP-5 (TGK-11); an environmental management system based on the ISO Operating spending Spending on Investment 14001:2004 international standard at Group companies. It is ͗͗ Installing structures to protect fish at Iriklinskaya overhauling fixed spending expected that the Group’s environmental management system TPP and Verkhnetagilskaya TPP (OGK-1) and environmental assets will be a part of the operations management system, since Cherepetskaya TPP and Yuzhnouralskaya TPP the main environmental aspects and risks are associated with (OGK-3). operations. At present, TGK-11 and Ekibastuzskaya TPP-2 economic incentives for suppliers to comply with established (Kazakhstan) have environmental management systems In 2011, the total value of fines paid by Group companies for requirements for ash and sulphur content in coal. certified as compliant with the ISO 14001:2004 standard. non-compliance with environmental laws and regulations was RUB 5,805,000. Almost all of this total (RUB 5,688,000) The Group increased environmental spending from RUB 1,964 was paid by Kazakhstan-based Ekibastuzskaya TPP-2. The million in 2010 to RUB 2,193 million in 2011. lawsuit for this case initiated by environmental regulators against the plant reflected a change in environmental 35 Environmental spending in 2010–2011 enforcement approaches in the country. According to the plant’s water balance system, wastewater treated at the The most significant investment projects aimed at reducing plant’s own facilities was then used as make-up water for adverse environmental impacts include the following: the hydraulic ash removal system. In 2011, Kazakhstan’s environmental authorities re-classified that practice as “the ͗͗ Modernising fly ash collectors at two boilers at unsanctioned discharge of wastewater into a body of natural Yuzhnouralskaya TPP (OGK-3). As a result of the water”. The plant has now received a corresponding permit project, fly ash emissions were reduced by 3,600 from the authorities. tonnes per year and sulphur dioxide emissions by 800 tonnes per year; The environmental safety of the Group’s operations depends not only on its own staff, but also on the activities of partner ͗͗ Technically upgrading ash removal systems at two businesses, such as service providers and suppliers of boilers at Verkhnetagilskaya TPP (OGK-1), which raw materials and equipment. Therefore, in contracts with achieved a reduction in ash emissions of 700 tonnes suppliers and contractors, the Group includes, among other per year; provisions, requirements regarding the environmental compliance and performance of equipment, materials and fuel provided. Coal purchase contracts also include 68 4. RELIABILITY, SECURITY AND EFFICIENCY JSC INTER RAO UES
SUSTAINABILITY AND ENVIRONMENTAL COMBATTING GLOBAL CLIMATE CHANGE VYDMANTAI WIND FARM RESPONSIBILITY REPORT 36 Total greenhouse gas emissions in 2009–2011 mln tonnes CO e 2011 2 36 Total greenhouse gas emissions in 2009–2011 In July 2011, UAB IRL Wind, a subsidiary of UAB INTER RAO Lietuva, successfully completed its first investment project. 90 37 Specific greenhouse gas emissions per unit of The company acquired a wind farm of 15 Enercon E-70 wind 80 energy produced in 2009–2011 turbines with a total installed capacity of 30 MW in the village 70 77 60 of Vydmantai in the Kretinga district municipality of Lithuania. 50 54 INTER RAO UES recognises the significance of global climate In 2011, the park generated 70.6 GWh of electricity, replacing 40 47 change and the power industry’s considerable contribution energy generation from fossil fuels. The wind farm has 30 20 to this problem. In 2011, the Group’s total greenhouse gas been registered as a joint implementation project by the JI 10 emissions amounted to 77 million tonnes of CO2 equivalent. Supervisory Committee of the Secretariat of the Kyoto Protocol/ 0 This substantial increase in emissions compared to 2010 was a UNFCC. Emission Reduction Units are issued based on the 2009 2010 2011 result of the consolidation of JSC OGK-3 into the Group, which amount of energy generated. led to a significant increase in the share of coal in the Group’s overall fuel mix. At present, UAB IRL Wind operates only within Lithuania, but 37 Specific greenhouse gas emissions per unit the company’s plans for the near future include investments in of energy produced in 2009–2011, The Group pays serious attention to developing alternative (non- renewable energy outside the country: in other Baltic countries, tonnes CO2e/MWh fuel) energy and uses economic mechanisms set down in the Poland and Scandinavia. Kyoto Protocol to the United Nations Framework Convention on 0.530 Climate Change to generate additional revenue from the sale of 0.526 Emission Reduction Units. A wind farm project implemented in 0.520 Lithuania by UAB IRL Wind, a Group company, has been given AIR POLLUTION joint implementation project status. The Group not only plans 0.510 0.514 to expand its presence in the renewable energy sector but is 38 Specific air pollutant emissions in 2009–2011 0.508 also exploring opportunities to use carbon capture and storage 0.500 technology at thermal power plants in the future. 39 Total air pollutant emissions in 2009–2011 2009 2010 2011 The increase in the total and specific air pollutant emissions is a result of the consolidation of JSC OGK-3 into the Group, which lead to a significant increase in coal combustion. 38 Specific air pollutant emissions in 2009–2011 per unit of energy produced, g/kWh
3.50 3.00 3.21 2.50 2.95 2.00 2.56 1.50 1.00 0.50 0 2009 2010 2011 4. RELIABILITY, SECURITY AND EFFICIENCY 69
WATER USE 39 Total air pollutant emissions in 2009–2011, thousand tonnes
20 Total water withdrawal by source in 2009–2011
Withdrawal sources 2009 2010 2011 500 Surface water bodies, thousand m3 4,044,980 4,052,175 8,387,264 173.397 450 Underground sources, thousand m3 2,542 3,186 4,376
Received from other companies, thousand m3 54,600 30,647 31,441 400 Total, thousand m3 4,102,122 4,086,008 8,423,081
350
21 Water recycling and reuse, 2009–2011 300 161.289 Indicator 2009 2010 2011 102.574 250 106.020 Volume of water recycled, thousand m3 6,315,312 6,209,621 9,267,435
200 Volume of water reused, thousand m3 15,276 27,812 235,024
Percentage of water reused and recycled in total water 61 60 53 150 consumption 102.895 82.867 106.656 100 1,906 22 Water discharge in 2009–2011 50 52.277 63.943 770 697 Water discharge 2009 2010 2011 15.031 11.797 16.988 0 1.960 2.617 13.991 Total water discharge, thousand m3 3,855,353 3,842,559 8,122,795 2009 2010 2011 Discharge into soil, thousand m3 168 120 100
Water sent to external organisations, thousand m3 3,134 3,243 4,790
Discharge into surface water bodies, thousand m3 3,852,051 3,839,196 8,117,905 Sulphur dioxide Without treatment (Polluted) 6,257 6,334 8,981 Solid fuel ash Insufficiently treated (Quality standards not met) 4,831 4,559 6,750 Nitrogen dioxide (expressed as NO2) Carbon monoxide (СО) Not requiring treatment (Quality standards met) 3,838,286 3,824,956 8,099,107 Other pollutants Sufficiently treated (Quality standards met) 2,677 3,347 3,067 Percentage of water meeting quality standards without treatment in total water discharge, % 99.5 99.5 99.7 70 4. RELIABILITY, SECURITY AND EFFICIENCY JSC INTER RAO UES
SUSTAINABILITY AND ENVIRONMENTAL RESPONSIBILITY REPORT INTER RAO UES is a major water user. The Group’s water may accelerate eutrophication. The second is that aquatic STERLET IN THE KAMA RIVER BASIN 2011 consumption has increased substantially since 2009 as a organisms may be killed if they enter water intakes and other result of the acquisition of new generation assets and an engineering systems. To mitigate these impacts, power plants Permskaya TPP has been involved in fish breeding since 2003. increase in power output. Most of the water used by the install fish protection equipment at their water intakes and Each year specialists from the plant hatch and release young Group is withdrawn from surface water bodies and used to periodically carry out dredging and other works intended to sterlet, replenishing the fish stock in the Perm Territory. cool equipment used in the generation of electricity; then all make bodies of water more suitable and safe for fish. Over 9 years, they have released over 2.5 million fingerlings that water is returned to water bodies without any changes of sterlet – an endangered species of sturgeon included in in its chemical composition. For example, in 2011, the total the Russian Red Book of rare and endangered species – into volume of water withdrawn from all sources was 8,423 the Kama Basin. A commission that comprises specialists million m3. Of that amount, 8,099 million m3 or more than GRASS CARP IN THE VERKHNETAGILSKOYE RESERVOIR from the Mid-Volga Regional Fishery Department, the 96% was used for cooling and returned to water bodies. The Kamuralrybvod State Institute and the Perm Branch of the remaining water was used to make up for losses in industrial In 2004, Verkhnetagilskaya TPP started using biological weed State Lake and River Fisheries Research Institute oversees processes involving water recycling and in heating networks control methods to improve the environmental condition the release process. and to meet various staff needs. of the Verkhnetagilskoye Reservoir. By introducing grass carp into the reservoir, the specialists sought to reduce the Group companies meet more than 50% of their water area covered by aquatic weed and the biomass of the weed demand by using recycled and reused water. At certain and other aquatic organisms. A total of three thousand WASTE MANAGEMENT AND LAND RECLAMATION Group operations, recycled water accounts for more than fish were released into the reservoir, which, according to 99% of total water use. This indicator will continue to grow measurements made a year later, halved the area covered by 40 Total weight of waste generated in 2009–2011 as the Group’s operations commission new water recycling the weed and led to a sevenfold decrease in weed biomass. systems. The main source of waste at Group companies is the In 2009, the plant repeated the project on a larger scale, combustion of coal at thermal power plants, which leads Water used in cooling systems without changes to its releasing ten thousand carp into the reservoir. A study to the creation of ash and slag (non-combustible mineral chemical properties accounts for 99.7% of the Group’s total carried out in 2011 demonstrated that the biomass content components found in coal). Ash and slag waste accounts for water discharge. At the same time, polluted water discharged in the Verkhnetagilskoye Reservoir was at optimal level and some 99% of waste generation at Group companies. without treatment or treated to a substandard quality corresponded to first class water body cleanliness indicators. accounts for over half of the total water discharge associated 23 Waste generation and management in 2009–2011 with other process or utility purposes. In order to reduce the At the 2008 Environmental Safety competition organised by volume and improve the quality of water discharged, Group the Interregional Department of Rostekhnadzor for the Urals Typically ash and slag waste is disposed of at special disposal companies implement projects to modernise and construct Federal District, Verkhnetagilskaya TPP was recognised as sites. At the same time, coal ash and slag can be used as a treatment facilities for industrial wastewater and sewage, the best company in the district in terms of the application replacement for natural materials in the production of cement, as well as pumping stations used during floods to prevent of technologies for the protection and efficient use of water concrete and reinforced concrete elements in road construction the discharge of flood water. In 2011, such projects were resources. and other sectors. In 2010–2011, OGK-1 and TGK-11 were able implemented at Verkhnetagilskaya, Cherepetskaya and to substantially increase the amount of ash and slag waste used Kostromskaya TPPs. in the construction industry.
Another area of the Group’s environmental activities is In 2011, in partnership with the Federal Road Agency of the reducing adverse impacts on biological resources that Russian Ministry of Transport, the Group launched a research inhabit bodies of water, primarily fish. Typically such impacts and development project to prepare for the construction of a result from one of two processes. The first is that the higher plant for the production of low water content cements from temperature water in small or shallow bodies of water ash and slag. It is expected that the plant, to be located close to 4. RELIABILITY, SECURITY AND EFFICIENCY 71
40 Total weight of waste generated in 2009–2011, Waste generation and management in 2009–2011, tonnes thousand tonnes 23 2009 2010 2011 6,000 5,000 5,332 Total waste generation, incl., tonnes 3,504,176 3,836,082 5,331,998 4,000 3,836 Received from external organisation, tonnes 11 - 8 3,000 3,504 2,000 Re-used, tonnes 648 21,353 15,843 1,000 Decontaminated, tonnes 4,286 5,475 2,405 0 Sent to external organisations, tonnes 97,695 137,548 155,617 2009 2010 2011 Disposed of at the Group’s own facilities, tonnes 3,401,548 3,671,705 5,158,133
Gusinoozyorskaya TPP, will manufacture reinforced concrete ͗͗ Energy Strategy of the Russian Federation through ͗͗ Meeting, to the maximum extent possible, demand elements for road construction using waste ash from the plant. 2030; from retail customers for electricity and heat in a Ekibastuzskaya TPP-2 is implementing a project to design, competitive market environment; procure and install a unit for dry ash collection. INTER RAO ͗͗ General Scheme for the Siting of Electric Power UES plans to take further steps to increase waste recovery; Facilities through 2020 with an Outlook until 2030; ͗͗ Changing the fuel mix by developing renewable respective provisions have been included in the Group’s sources of energy; Innovative Development Programme. ͗͗ Requests made by the President of the Russian Federation following a meeting of the Presidential ͗͗ Boosting efficiency and environmental performance Commission for the Modernisation and to bring it in line with international best practice; Technological Development of the Economy held 4.5. INNOVATIVE DEVELOPMENT on January 31, 2011 (dated February 7, 2011 No. ͗͗ Meeting, to the maximum extent possible, demand Pr-307); from wholesale customers for electricity and heat in INNOVATIVE DEVELOPMENT PROGRAMME a competitive market environment; ͗͗ Resolution of the Government Commission for High Innovation plays a special role in JSC INTER RAO UES’ integrated Technology and Innovation (minutes No. 4 dated ͗͗ Meeting, to the maximum extent possible, customer business model. The Group’s Development Strategy defines August 3, 2010) and Methodological Guidelines demand for energy efficiency and conservation innovation as the development driver for both the company and for the Preparation of the Innovative Development solutions; the energy industry as a whole. In 2011, the Group’s Board of Programmes of Joint-Stock Companies with State Directors approved the Innovative Development Programme Participation, State Corporations and Federal ͗͗ Maximising the use of the company’s intellectual through 2015 with an outlook until 2020 (hereinafter referred to in Unitary Enterprises; capital. this section as the Programme). The Programme was developed in accordance with the following documents: ͗͗ Request of RF Deputy Minister of Energy Andrey When establishing and developing mutually beneficial Shishkin (letter dated February 17, 2011 No. ASh- partnership relations in the field of innovation, the Group 1299/02), among others. focus its efforts on public-private partnerships and developing technology platforms, international cooperation and access to According to the Programme, the Group’s key innovation advanced expertise, as well as collaboration with universities objectives include: and cooperation with small- and medium-sized businesses. 72 4. RELIABILITY, SECURITY AND EFFICIENCY JSC INTER RAO UES
SUSTAINABILITY AND ENVIRONMENTAL PUBLIC-PRIVATE PARTNERSHIPS AND TECHNOLOGY COLLABORATION WITH UNIVERSITIES In the future, the Group plans to expand cooperation with RESPONSIBILITY REPORT PLATFORMS small- and medium-sized businesses, using a broader range 2011 The Group’s collaboration with universities focuses of cooperation forms and methods. Public-private partnerships (PPP) are an important on scientific study and R&D activities for the creation instrument for creating and financing technology platforms, of competitive technologies and products and on joint The Group uses the partnership relations described above to which are gradually becoming an essential element in programmes to train specialists for the power industry. address its innovative development objectives, which can be Russia’s national innovation system, helping focus the grouped into three general areas: efforts of the government, business and science on the most More details about the Group’s collaboration with universities promising areas of innovative development. INTER RAO UES can be found in the section of this Report about the Young ͗͗ Developing and implementing process innovations; is actively involved in the Environmentally Sound and Highly INTER RAO UES Specialist Programme. Efficient Thermal Power Industry and Small-Scale Distributed ͗͗ Developing and implementing product and Generation technology platforms. The Group also plans to COOPERATION WITH SMALL- AND MEDIUM-SIZED marketing innovations; participate in other technology platforms. BUSINESSES ͗͗ Developing and implementing management The Centre for Innovative Energy Technology, created at the The key prerequisites of the Group’s engagement with innovations, including developing a corporate All-Russian Thermal Engineering Institute, will coordinate small- and medium-sized businesses are set forth in the innovation management system. the efforts of Russia’s largest energy companies and the procurement policy, which ensures equal access for all government in the field of R&D and the application of potential bidders to relevant information and the absence innovative technologies, playing an important role in the of criteria discriminating against small- and medium-sized 24 Innovative development objectives and activities implementation of PPP projects in the energy sector. businesses as suppliers and contractors.
INTERNATIONAL COOPERATION, SECTOR CLUSTERS AND The Group is currently implementing a number of projects Under JSC INTER RAO UES’ Investment Programme, the ACCESS TO ADVANCED EXPERTISE that involve small- and medium-sized businesses, including, Group’s spending on R&D in 2011-2013 will amount to some among others: RUB 5.77 billion (or 2.4% of total revenue). To promote The Group’s presence on a number of international markets innovation, the Group also initiated, in partnership with other creates favourable conditions for the development of ͗͗ Developing and implementing automated process organisations, the creation of the Energy without Borders innovation and technology transfer, a process through control systems and information systems (CJSC Research and Innovation Support Foundation. which foreign technologies and processes are acquired and Iteratsiya, LLC VEB-Centre and LLC Distributed subsequently adapted and localised in Russia. The Group Technologies); actively engages with a number of international technology leaders, including Alstom, Electricite de France (EDF), Fenice, ͗͗ Developing and manufacturing new types of General Electric and WorleyParsons. metering devices and other energy equipment (LLC Production and Technology Firm ConSys, CJSC The most promising approach to promoting the Group’s own Electroteks and CJSC Teplouchyot); innovative solutions on the international markets is through the provision of energy engineering services. At present, the ͗͗ Deploying specialised software complexes and geography of the Group’s engineering contracts includes system integration services (CJSC Stins Coman). Cuba, Venezuela, Nicaragua, Ecuador, Jordan, Israel and Turkey, among others. 4. RELIABILITY, SECURITY AND EFFICIENCY 73
24 Innovative development objectives and activities
Objectives Activities
Developing and implementing process innovations
͗͗ Improving the efficiency of existing equipment Improving the energy efficiency and economic and ͗͗ Using new technologies in the construction of new generating capacities and modernising existing ones environmental performance of the Group’s generating ͗͗ Adopting advanced technologies that incorporate international best practices and preparing standardised designs for industrial assets facilities ͗͗ Other measures in the field of technology
Developing and implementing product and marketing innovations
͗͗ New products and services in the retail market Attracting and retaining customers for the Group’s ͗͗ Innovative products and services on new commodity exchanges products and services ͗͗ Creating new lines of business based on technology transfer (engineering and energy equipment manufacturing) ͗͗ New products and services for the non-energy markets (manufacturing powerful LED lighting units and developing synthetic liquid fuels and coal chemicals)
Developing and implementing management innovations, including developing a corporate innovation management system
Improving the Group’s operating efficiency by introducing ͗͗ Developing a corporate innovation management system, including by creating a corporate innovation infrastructure and system international and Russian best management practices, for external innovation partnerships international standards and IT solutions ͗͗ Implementing integrated management systems ͗͗ Deploying state-of-the-art IT solutions 74 4. RELIABILITY, SECURITY AND EFFICIENCY JSC INTER RAO UES
SUSTAINABILITY AND ENVIRONMENTAL 4.6. IMPROVING ENERGY EFFICIENCY ͗͗ Developing a competitive energy equipment The Power Efficiency Centre’s key areas of activity include: RESPONSIBILITY REPORT manufacturing cluster. 2011 The Group works to ensure reliable energy production, the ͗͗ Implementing energy conservation and efficiency introduction of an integrated approach towards the use of improvement projects for different customer energy resources and the development of energy efficiency groups (companies in the energy sector, industrial and conservation technologies. The Group is guided by the ENERGY CONSERVATION AND EFFICIENCY STRATEGY enterprises, public institutions, the housing and principal of making the most efficient use of natural energy utilities sector and households); resources. Energy efficiency and conservation are among the A strategic session on the Group’s Energy Conservation and Group’s strategic priorities. Efficiency Strategy was held at the World Trade Centre in ͗͗ Developing innovative projects in the field of Moscow on June 1–3, 2011. The event focused on identifying renewable energy sources, small-scale distributed INTER RAO UES employs the following measures to improve the principles for building an effective energy efficiency generation and energy sector environmental the energy efficiency of its production facilities: management system and on developing proposals for performance; amendments to local energy conservation and efficiency ͗͗ Reducing energy resource procurement costs, regulations. ͗͗ Manufacturing energy saving products based on which is achieved, among other measures, through environmentally safe technologies; a reduction of peak loads; Participants in the strategic session included representatives from the RF Ministry of Education and Science, the RF ͗͗ Conducting research in the field of energy efficiency. ͗͗ Improving competiveness by reducing the fuel Ministry of Energy’s Russian Energy Agency, Gazprombank, cost component in the cost of electricity and heat the Federal Grid Company, the Guild of Energy Auditors In 2011, INTER RAO UES’ Power Efficiency Centre implemented produced; (a self-regulating organisation), Design Solutions and the over 10 large-scale projects for the deployment of smart lighting Kurchatov Institute (a national research centre), among systems based on efficient LED units and embarked on a number ͗͗ Reducing energy losses in transmission and others. of projects for the creation of smart metering systems. distribution within the Group’s production facilities; The Power Efficiency Centre actively partners with scientific ͗͗ Improving environmental performance by increasing A significant increase in energy production and sales by centres and research institutes, laboratories, research and design the share of “clean” energy sources offering an Group companies in 2009–2011 led to an increase in total fuel centres, universities, pilot plants and design bureaus for the alternative to fuel oil and coal, among other consumption. At the same time, the share of electricity used implementation of joint research, development, design and pilot measures. for the Group’s own needs decreased from 4.48% to 4.26%. projects. Overall generation efficiency at thermal power plants also The energy efficiency targets defined by the Group’s increased. Development Strategy through 2015 are centred around the 26 Research partners of the Power Efficiency Centre following objectives: 25 Fuel consumption by the Group in 2009–2011
͗͗ Achieving a 50% increase in the efficiency of fuel In 2010, the Group created a Power Efficiency Centre to combustion; build expertise in all aspects of energy conservation and efficiency and environmental performance in the power sector. ͗͗ Bringing the share of energy consumed for the The Centre has at its disposal the combined expertise and Group’s own needs to 3–4%; resources of its parent companies (JSC INTER RAO UES and Rosatom – Russia’s state nuclear corporation). It partners with ͗͗ Improving the environmental performance of international and Russian companies providing energy saving production assets; solutions and equipment and has access to the most advanced technologies and best international business practices in the ͗͗ Developing renewable energy technologies; field of energy conservation and efficiency. 4. RELIABILITY, SECURITY AND EFFICIENCY 75
25 Fuel consumption by the Group in 2009–2011
Fuel type 2009, thousand GJ 2010, thousand GJ 2011, thousand GJ
Fuel, total 951,993 1,080,389 1,149,672 Petroleum fuel, incl. 6,031 6,607 6,212 Fuel oil 6,030 6,605 6,199 Gas, incl. 679,404 761,498 825,421 Natural gas 573,000 653,293 705,414 Associated gas 106,404 108,205 120,007 Coal, incl. 266,558 312,283 318,039 Hard coal 139,573 117,036 115,172 Brown coal 126,985 195,248 202,866
26 Research partners of the Power Efficiency Centre
JSC Electric Power Industry Research and Technology Centre, ENERGOSETPROEKT Design and Research Institute for Energy Systems and Electrical Grids, Krzhizhanovsky Power Engineering Institute, ORGRES (a branch of JSC Engineering Centre), LETI St. Petersburg State Electrotechnical University, St. Petersburg State Polytechnic University, Energy industry, electric power industry Shukhov Belgorod State Technology University, High Voltage Direct Current Transmission Research Institute (JSC NIIPT), North-Western Power Engineering Centre (JSC SevZap NTC) and Moscow Power Engineering Institute (national research university)
All-Russian Institute of Thermal Technology (JSC VTI), Polzunov Research and Production Centre for the Study and Design of Energy Equipment, JSC SibVTI, JSC Southern Thermal power generation, power engineering, Power Engineering Centre, Urals Research Institute of Thermal Technology (UralVTI), CJSC KOMPOMASH-TEK, Skochinsky Institute of Mining, Institute of Combustible fuel Mineral Resources and Moscow Power Engineering Institute (national research university)
Nuclear energy Kurchatov Institute (national research centre) and MEPhI National Research Nuclear University
Institutes of the Russian Academy of Sciences Joint RAS Institute of High Temperatures, RAS Institute for the Safe Development of Nuclear Energy, RAS Institute of Energy Studies, RAS Institute for Electrophysics and (RAS) and other sector institutes and research Electric Power, Zhuk Hydroproject Institute, JSC NIIES Energy Structures Research Institute (RusHydro), Vedeneyev Institute of Hydropower Technology, centres JSC Lenhydroproject and Road Research Institute (RosdorNII)
4. RELIABILITY, SECURITY AND EFFICIENCY 77
One of the Group’s most important areas of activity in the ALTAIENERGOSBYT ENERGY CONSERVATION CENTRE field of energy efficiency is the replacement of obsolete and deteriorated power generation equipment with new units based In 2011, JSC Altaienergosbyt opened an Energy Conservation on advanced technology with efficiency levels comparable to Centre to promote energy conservation among the general international benchmarks. public and organisations in the region. The Centre serves as a venue for a broad range of activities, including awareness The Group also plans a system of measures to promote raising events for schoolchildren and the heads of state-funded customer-side efficiency, which includes: organisations and companies operating in Barnaul’s housing and utilities sector, exhibitions of energy saving equipment, ͗͗ Awareness raising and educational programmes in workshops and roundtables on energy efficiency and automated the field of energy efficiency; metering, as well as training for chief power engineers and other specialists responsible for electrical systems. ͗͗ Deploying infrastructure for electric vehicles in Moscow;
͗͗ Developing energy services targeted at municipal infrastructure and the housing sector, including the modernisation of lighting, metering and control SUPERWATT AND FRIENDS systems, developing and installing LED-based smart lighting systems, etc.; INTER RAO UES has been implementing an awareness raising campaign in St. Petersburg since 2010 to educate the general ͗͗ Developing energy services targeted at industrial public about energy conservation and promote a culture of enterprises and state-funded organisations, rational energy consumption. As part of the project, the Group including energy audits, modernising processes, produces a comic book called SuperWatt and Friends. The story installing metering systems and implementing follows the adventures of SuperWatt, who is relentless in his energy management systems. fight to stop electricity being wasted. The comic book is aimed at young schoolchildren and is distributed at schools in the city. An exclusive theatrical production for children featuring SuperWatt and his friends premiered in May 2011. Since then, the production has been performed regularly in St. Petersburg’s schools. 78 4. RELIABILITY, SECURITY AND EFFICIENCY JSC INTER RAO UES
SUSTAINABILITY AND ENVIRONMENTAL 4.7. INTERNATIONAL ENERGY ALLIANCES AND INITIATIVES RESPONSIBILITY REPORT 2011
The Group’s presence on different markets in many countries The Group will be able to increase the share of non-fossil provides unique opportunities for the development of its fuel generation in total power output, thereby achieving one activities in the field of innovation. On the one hand, this of its key strategic objectives, by diversifying its fuel mix and facilitates effective adoption of international best practices expanding its presence in the renewable and nuclear energy in the field of technology and the organisation of industrial segments of Russian and international markets. An important processes and management systems; while on the other, aspect of the Group’s activities in this area is collaboration it creates favourable conditions for broad international with major Russian state companies working in the field of marketing of innovative solutions created with the Group’s renewable and nuclear energy. involvement. 29 Energy cooperation with Russian and international Of particular importance is the aspect of international players cooperation related to access to new technology. In this regard, the key themes of the Group’s partnership with An important area of international cooperation is foreign companies include: collaboration with international think tanks and research centres, as well as participation in international scientific ͗͗ Manufacturing core generating equipment; and technology development projects. One example of such activities is the Group’s effective cooperation with the ͗͗ Renewable energy sources; International Energy Agency, which includes joint conferences and roundtables on energy efficiency, as well as information ͗͗ Engineering. exchange on development trends in the global energy industry and promising innovation projects in the sector. The Group has extensive experience of working with foreign partners in these areas. Some joint projects are already being To improve the effectiveness of international cooperation and implemented, while others are at the negotiations stage. gain direct access to global intellectual resources, the Group It is important to note that some international cooperation plans to be involved in setting up an Innovative Technology projects are implemented within the framework of a Russia- Centre outside Russia. EU initiative – Partnership for Modernisation – which includes energy-related components.
27 International cooperation agreements signed by JSC INTER RAO UES
28 Joint ventures in the field of energy efficiency
4. RELIABILITY, SECURITY AND EFFICIENCY 79
27 International cooperation agreements signed by JSC INTER RAO UES
Company (country) Current cooperation
Siemens (Germany) Memorandum of understanding (project to construct and operate medium- and small-scale cogeneration facilities)
EDF (France) Memorandum of understanding (energy efficiency, optimisation of operations and modernisation of production assets)
Enel (Italy) Memorandum of understanding (technology audit at the Group’s plants and joint projects in the field of wind power)
Alstom (France) Memorandum of understanding (manufacturing of small steam turbines)
Shenhua (China) Memorandum of understanding (building a coal-to-liquid plant in Russia)
28 Joint ventures in the field of energy efficiency
Company (country) Current cooperation
General Electric (United States) and GE Energy Europe (France) Joint venture with GE to manufacture state-of-the-art medium-capacity gas turbines (75 and 126 MW) in Russia
WorleyParsons (Australia) INTER RAO – WorleyParsons engineering and design joint venture
29 Energy cooperation with Russian and international players
Company Current cooperation
CJSC Atomstroyexport, JSC Energoatom Concern JSC Atomtekhenergo Construction of the Akkuyu NPP (Turkey)
JSC INTER RAO UES, JSC Atimenergoremont General Electric, Russian Technologies State Corporation Localisation of technologies, development and application of know-how to modernise energy infrastructure
JSC INTER RAO UES and TNK-BP Long-term contracts for gas supply to Nizhnevartovskaya TPP
JSC INTER RAO UES and the Ecuadorian Strategic Sectors Coordinating Ministry Agreement of intent for the construction of the Tortuga, Tigre and Llurimaguas hydropower plants on the Guayllabamba river
JSC INTER RAO UES and Eletrobras Memorandum of understanding on developing cooperation between the companies in the electric power industry
JSC INTER RAO UES, Siemens AG, Russian-German Energy Agency (RUDEA) and German Energy Memorandum of understanding on the construction of medium- and small-scale cogeneration units and their use in the Russian housing and utilities Agency (DENA) sector and industry
JSC INTER RAO UES and the Government of Israel Exploration of an oil shale field in the Negev desert
5. REGIONAL SOCIO-ECONOMIC DEVELOPMENT 81
PART REGIONAL SOCIO-ECONOMIC 5. DEVELOPMENT PAGE §§ SUBSECTION
81 5.1. PRINCIPLES AND APPROACHES 84 5.2. RUSSIA 85 5.3. GEORGIA 86 5.4. ARMENIA 87 5.5. KAZAKHSTAN
5.1. PRINCIPLES AND APPROACHES
By developing its business in line with international best Group companies, often vital to the economy of the practice, the Group strives to maintain its status as a socially communities in which they are based, have substantial responsible company. Since 2009, the Group has been influence on the development of their regions. Group developing and applying a systematic approach towards companies are some of the largest or even the only the management of social policy, standardised across the producers and suppliers of electricity and heat in the regions Group. The Group regularly evaluates the effectiveness of in which they are based and are critical to the functioning of corporate social programmes and builds partnerships with industrial operations, the housing and utilities sector and the government and municipal authorities, non-governmental social facilities. INTER RAO UES recognises its considerable organisations, local communities, trade unions and expert responsibility to society and understands that reliable and organisations. The Group’s social policy is aligned with secure energy supplies, fair pricing and investing in regional the overall Group development strategy and provides infrastructure and energy efficiency are important priorities for achieving long-term business development goals by in the Group’s strategic development. Engaging with regional contributing to socio-economic development in Russia and communities is an important element in the Group’s social other countries in which the Group operates. policy. 82 5. REGIONAL SOCIO-ECONOMIC DEVELOPMENT JSC INTER RAO UES
SUSTAINABILITY AND ENVIRONMENTAL 30 Population of communities located in the vicinity of ͗͗ Support for environmental organisations and RESPONSIBILITY REPORT the Group’s power plants protected areas. 41 Spending on sponsorship and charity in 2011 by area, RUB mln 2011
The Group’s high social and charity programme standards Many Group companies are among the largest employers apply to all its companies, including new assets. At the 4 5 6 in the regions in which they operate. The implementation of same time, Group companies have some discretion in their the Group’s investment projects to construct new generating decisions to finance social and charity programmes, which capacities will help substantially increase tax revenues for helps take into account established practices and the social 3 regional governments, create new jobs and generate demand and cultural specifics of the regions in which they are based. for energy equipment. Charity projects are often implemented in partnership with regional and local authorities in the regions and countries in Group companies provide vocational guidance to which Group companies operate. schoolchildren; power plant employees teach lessons 1 in schools and organise visits to plant museums. Group The main principles for selecting charity and sponsorship companies also finance university education for the children projects for financing by Group companies include: of employees in energy-related subjects, on the condition that the students commit to subsequent employment with ͗͗ Specific focus: Providing funds or other resources to the Group. Additionally, students at educational institutions an individual or a legal person for specific purposes located close to Group power plants are offered work with subsequent monitoring of their proper use. 2 placements. ͗͗ Effectiveness: Ability to achieve concrete results, Charity and sponsorship projects represent another including an impact on the company’s reputation 1. Sport______31,3% 5. Culture and arts______7,1% important aspect of INTER RAO UES’ social responsibility. and core activities (supporting corporate values, 2. Science and education__43,2% 6. Religion______2,6% Group companies regularly support non-governmental contributing to the implementation of the Group’s 3. Healthcare______0,3% 7. Environment______1% organisations, cultural, healthcare and educational strategy, etc.). 4. Vulnerable social groups__ 13,2% 8. Other______1,3% institutions, as well as providing targeted charity aid. The Group’s social investment priorities include: ͗͗ Objectivity: Evaluating programmes and projects in terms of their social significance and fit with ͗͗ Programmes to support vulnerable social groups, the Group’s objectives, priorities and charity and orphaned children, children with disabilities and sponsorship principles. low-income families; ͗͗ Efficiency: Ability to achieve given results using the ͗͗ Projects to support educational and healthcare least amount of funds. institutions and public and youth sports; In 2011, Group companies implemented over 250 charity ͗͗ Sponsorship of cultural projects and events and projects in Russia and abroad, on which they spent some financial support for historical and cultural heritage RUB 315 million. sites;
͗͗ Special programmes to support retired power industry workers and war veterans, including those who have been disabled; 5. REGIONAL SOCIO-ECONOMIC DEVELOPMENT 83
30 Population of communities located in the vicinity of the Group’s power plants
Power plant City or community Population of communities located in the plant’s vicinity
Khrami HPP-1 Khrami settlement 20 families
Khrami HPP-2 Khrami-2 settlement 20 families
Verkhnetagilskaya TPP, a branch of OGK-1 Verkhny Tagil municipal district 13,000
Gusinoozyorskaya TPP, a branch of OGK-3 Gusinoozyorsk 24,000
Nizhnevartovskaya TPP Izluchinsk municipal district Approximately 17,000
Ivanovskiye CCPP, a branch of INTER RAO – Electric Power Plants Komsomolsk 10,000
Iriklinskaya TPP, a branch of OGK-1 Energetik settlement 9,000
Kaliningradskaya CHPP-2, a branch of INTER RAO – Electric Power Plants Moskovsky district of Kaliningrad 85,000
Kashirskaya TPP, a branch of OGK-1 Kashira-2 21,000
Kostromskaya TPP, a branch of OGK-3 Volgorechensk 4,000
Mtkvari Energy Gardabani 12,000
Permskaya TPP, a branch of OGK-1 Dobryanka 36,000
Pechorskaya TPP, a branch of OGK-3 Pechora municipal district 57,700
Severo-Zapadnaya CHPP, a branch of INTER RAO – Electric Power Plants Lakhta-Olgino municipal district 4,000
Sochinskaya TPP, a branch of INTER RAO – Electric Power Plants Khostinsky district of Sochi 77,500
Tomsk branch of TGK-11 Tomsk 728,000
Omsk branch of TGK-11 Central administrative district of Omsk 267,000
Urengoyskaya TPP, a branch of OGK-1 Limbyayakha district of Novy Urengoy 3,500
Kharanorskaya TPP, a branch of OGK-3 Yasnogorsk settlement 8,000
Cherepetskaya TPP, a branch of OGK-3 Suvorov, Tula Region 24,000
Ekibastuzskaya TPP-2 Solnechny settlement 5,200
Yuzhnouralskaya TPP Yuzhnouralsk, Chelyabinsk Region 38,600 84 5. REGIONAL SOCIO-ECONOMIC DEVELOPMENT JSC INTER RAO UES
SUSTAINABILITY AND ENVIRONMENTAL 5.2. RUSSIA CONTRIBUTING TO DEVELOPMENT IN THE TULA REGION LIGHT AND HEAT FOR CHILDREN RESPONSIBILITY REPORT 2011 The Group’s generating and sales assets are based in many On October 10, 2008, JSC OGK-3 signed an agreement on Since 2007, the Kaliningradskaya CHPP-2 and the Kaliningrad Russian regions. In the retail segment, the share of the cooperation in the implementation of an investment project Museum of Amber have implemented an annual social respective regional markets held by Group companies varies with the government of the Tula Region. The agreement project called Light and Heat for Children. The central event between 24% and 91%. In this segment, the Group serves defines mutual obligations for the parties with regard to of the project is a festive theatrical show staged for children more than 326,000 corporate customers and more than supporting the investment project and allocating plots of land from low-income families, power plant employees and their 9,946,000 household customers. for construction, creating new jobs, increasing tax payments children. to the regional government and improving the environmental In 2011, the Group’s generating segment accounted for situation. A few months before the event, a children’s creative 10% of total power generation and 3.8% of heat supply to competition is held (including drawing and painting, crafts, customers in the Russian Federation. Some 2,000 temporary jobs will be created during the musical and literary competitions). The winning works are construction phase and over 400 permanent positions will be exhibited in the Museum of Amber. In 2011, more than 100 In a number of Russian regions, the Group’s generating and created for the operational phase. young artists, poets and writers took part in the competition. sales assets, as the largest energy producers and major taxpayers and employers, are de facto guarantors of socio- The day of the event is a real treat for the children. First they economic stability. A number of programmes to support Group company social and charity programmes are designed are taken on an educational and entertaining guided tour of regional socio-economic development are implemented and implemented on a long-term and systematic basis and the museum. Then they watch a festive theatrical show led by in partnership with the regional authorities on the basis of are aimed at improving the social environment and serving an energetic host that features characters from well-known cooperation agreements. the interests of employees and residents of the Group’s fairy tales. At the end of the festival, awards are given to the regions of operation. Group companies provide aid to retired winners of the creative contest, with power plant employees power industry workers and World War II veterans, as well as presenting gifts to the children. HELPING BUILD THE SOCHI OLYMPICS supporting non-governmental organisations and educational, healthcare and cultural institutions. In 2011, the budget for the event was RUB 95,000. The Group signed an agreement with the state corporation Olympstroy for construction of Dzhubginskaya TPP – an Almost all Group companies implement projects to support Olympic facility of federal significance. Furthermore, the educational institutions on an annual basis. The main areas Group has also signed an agreement with the Fuel and Energy of support include donating equipment and organising leisure SUPPORTING SPORTS GROUPS IN ENERGETIK Department of the Krasnodar Territory for cooperation in the activities for children. field of energy security. The Dolphin Sport Palace runs training groups in several Special attention is paid to programmes aimed at developing sports, including judo, volleyball, karate and swimming, for Construction of Dzhubginskaya TPP, which will run public and youth sports. An integral part of the Group’s social children of the employees of Iriklinskaya TPP and all residents until the end of 2013, will create some 1,000 local jobs. activities is organising regular sports competitions open to in the settlement of Energetik. The company sponsored the Commissioning, start-up and operation will create 142 residents of the communities in which the Group’s power purchase of training equipment and sports kits, which has permanent positions. plants are based. helped involve more children in sport.
The Group cares for the environment and implements The charity programme helps children living in the settlement numerous projects to raise awareness among a broad range spend their free time in a meaningful way, engaging them in of stakeholders of the need to protect the environment and a healthy lifestyle and allowing them to play sport at a decent natural riches of the regions in which it operates. level from a young age. 5. REGIONAL SOCIO-ECONOMIC DEVELOPMENT 85
THE POWER TO COMMUNICATE LEOPARD CONSERVATION 5.3. GEORGIA
The Power to Communicate is a charity programme In 2011, INTER RAO UES provided financial support to In Georgia, the Group’s key assets include the grid company implemented by JSC Petersburg Sales Company. There are the Eurasian Centre for Leopard Population Research, JSC Telasi and LLC Mtkvari Energy (a thermal power plant), as 9,000 visually impaired people registered in St. Petersburg. Preservation and Recovery, a non-profit organisation. This well as JSC Khrami HPP-1 and JSC Khrami HPP-2 (a cascade of The objective of the programme is to help children fully or project to preserve and restore the population of Amur hydropower plants). partially deprived of sight find ways to reach each other and leopards is also supported by the Russian Government. the world around them. Telasi, one of the largest grid companies in Georgia, is involved Almost twelve years of work by environmentalists, scientists in electric power distribution and sales and serves the national As part of the project, prior to the beginning of the academic and specialists from the Centre resulted in the creation of capital Tbilisi and its suburbs. In the household sector, the year, the company implements landscaping projects and the Land of the Leopard National Park. The new protected company supplies electricity to over 475,000 customers (more builds playgrounds at specialised nursery schools and area covers most of the remaining habitat of this critically than 10% of the country’s population*). schools for visually impaired children in St. Petersburg and endangered group of large cats. The national park will also the Leningrad Region. In 2012, there are plans to open a radio become home to ten Amur tigers that are essential to the Telasi is one of the largest taxpayers in Tbilisi. In 2011, its tax studio for visually impaired children, the first in the northwest restoration of the Changbaishan tiger population in China. payments to all levels of government and payments to extra- of Russia. budgetary funds totalled RUB 754,035,000**. Aside from this programme, another project is being In 2011, the company spent RUB 1.57 million on the project. implemented in Russia to re-introduce the Persian Mtkvari Energy, the most advanced thermal power plant in (Caucasian) leopard. Its historical habitat includes almost Georgia, accounts for 10% of national power generation. The all of the mountainous areas of the Caucasus, however, plant is located three kilometres from the town of Gardabani, the Persian leopard population in Russia was completely which has a population of 12,000. INTERRA INTERNATIONAL YOUTH INNOVATION FORUM destroyed as early as the second decade of 20th century. Khrami HPP-1 and Khrami HPP-2 form a hydropower cascade The Interra International Youth Innovation Forum, which is In 2011, the programme’s budget was RUB 3 million. on the Khrami river. The two companies account for 5% of all held in Novosibirsk, is one of the most attractive international power generation in Georgia. and interregional platforms in Russia for discussing innovative social and economic development ideas and The Group’s social and charity programmes in the country are experience. The forum includes a competition for innovation Furthermore, many Group company employees regularly mainly aimed at providing aid to vulnerable social groups and projects and ideas. The winning projects receive a grant participate in volunteer projects typically aimed at supporting are implemented in partnership with the regional authorities. for their implementation, while their creators are given the vulnerable social groups. opportunity to receive training at the Moscow Business As part of its social programme, Telasi subsidises electricity School. The forum provides a good venue for talented young bills for Tbilisi’s churches and cathedrals, a hotel-type people to exchange and implement ideas. In 2011, the event rehabilitation house for children with leukaemia and their family attracted a total of 40,000 participants with guests and members and the Catharsis Humanitarian Union (a nursing experts representing 34 countries and 83 regions of Russia. home for the elderly). For eight years, Telasi has supported the Digomi Children’s Home for children with hearing impairments. TGK-11 has traditionally been the forum’s general partner.
* According to the National Statistics Office of Georgia, as of January 1, 2012, the country’s population was 4,497,600. http://www.geostat.ge/index.php?action=page&p_id=152&lang=eng
** GEL 43,363,000 converted at the annual average exchange rate (GEL 1=RUB 17.3889). 86 5. REGIONAL SOCIO-ECONOMIC DEVELOPMENT JSC INTER RAO UES
SUSTAINABILITY AND ENVIRONMENTAL Jointly with the Lazarus Charity Foundation of the Patriarchate well as skills enhancement programmes for operating staff at Group companies based in Armenia pay special attention to RESPONSIBILITY REPORT of the Georgian Orthodox Church, Telasi implements a project JSC Telasi and other energy companies. supporting vulnerable social groups, cultural and healthcare 2011 to set up and equip workshops for teaching crafts to teenagers institutions and the church. from socially vulnerable families. Using funds provided by the The company also supports talented young people within company in January 2011, the Lazarus Foundation was able to the framework of annual arts competitions organised by the Each year CJSC Power Grids of Armenia provides funds to establish woodwork and sewing workshops. The company also Academy of Arts, thereby helping talented children receive cover the electricity debts of members of vulnerable social subsidises the purchase of materials necessary for running the a grant or take part in various master classes, concerts, groups. In 2011, the company spent some RUB 0.8 million workshops. Successful trainees are offered business courses exhibitions, literary evenings and competitions both in Georgia on this programme*. Aid was provided to more than 100 to help them start their own independent businesses in the and abroad. The Academy holds competitions in the field of individuals and the Prkutyun day care centre for children with future. In order to raise awareness of the problems this group literature, classical music, painting and Georgian song. In 2012, disabilities, which helps 60 children. of young people faces, the foundation regularly conducts sales 20 winners of competitions organised by the Academy of Arts exhibitions of their work and prepares television programmes. will receive grants from Telasi. The company also has a programme that involves full or This, in turn, boosts the young people’s motivation to master partial subsidisation of electricity bills for certain customers their chosen crafts. for a certain period of time or subsidised installation of meters. The programme covers World War II veterans, An important project in 2010–2011 was the establishment of a 5.4. ARMENIA individuals with disabilities, non-profit organisations and training centre at the Georgian Technical University within the many other customer categories. The annual cost of the framework of an agreement between JSC Telasi, the university In Armenia, the Group’s key assets include JSC Hrazdan programme is RUB 4.3 million**. and the Georgian Academy of Energy. The main objective Energy Company, which operates the Hrazdan TPP with its of the project is to increase interest among young people in installed capacity of 1,110 MW, and CJSC Power Grids of One of CJSC Power Grids of Armenia’s most important subjects related to the power industry and to train highly skilled Armenia. social projects in 2011 was the opening of a new medical specialists for subsequent employment at energy companies. ultra-diagnostic laboratory in Yerevan, equipped with cutting- Hrazdan TPP is the largest power plant in Armenia, edge systems and devices from the leading German and Another project implemented by Telasi within the framework of accounting for some 5–6% of total electric power generation Japanese manufacturers. The laboratory is able to perform the same agreement is a scholarship programme; the company in the country. On the Armenian domestic market, it is up to 100,000 tests per year. The laboratory is located on the pays for scholarships for five students in the university’s Energy classified as a balancing plant, which means that it only premises of the First Clinical Complex of the Yerevan State Department. The most gifted students are not only rewarded supplies power to Armenian customers in the event of a Medical University. CJSC Power Grids of Armenia invested a for their academic performance and active participation in deficit in the national energy system (typically during the total of RUB 4.3 million*** in the project. The new laboratory, scientific research but are also offered work placements autumn/winter period or when the nuclear power plant is which is able to perform precise tests for a range of genetic with the company. The best students are granted priority for temporarily stopped). At the same time, Hrazdan TPP is indicators, features a fully automated testing process. employment at the company upon graduation. The creation critical to national power exports. Some tests take as little as one minute, which is particularly of the new training centre will not only help energy students important when dealing with fast-decaying biological and specialists acquire theoretical knowledge of the sector CJSC Power Grids of Armenia is the only national company and innovation but will also allow them to master practical in Armenia involved in the distribution and sale of electricity. skills needed to operate state-of-the-art energy equipment. The company distributes and sells 100% of the electricity * AMD 10 million converted at the annual average exchange rate The training centre, which is the only one of its kind in the consumed in the country. Its customers include 940,000 (AMD 1,000=RUB 78.8062). South Caucasus, will support the practical training of Energy individuals (approximately 29% of the country’s population). ** AMD 55 million converted at the annual average exchange rate Department students at the Georgian Technical University, as The company is also a major employer of national scale with a (AMD 1,000=RUB 78.8062). headcount of more than 7,000. *** AMD 55 million converted at the annual average exchange rate (AMD 1,000=RUB 78.8062). 5. REGIONAL SOCIO-ECONOMIC DEVELOPMENT 87
materials. The laboratory can provide diagnostic services to JSC Ekibastuzskaya TPP-2 plays a critical role in the local some 300 people per day. economy, thereby actively contributing to socio-economic development in the region. The main priorities of its activities In 2011, the company also provided support to: the Russian in this area include charity, organising large-scale cultural Orthodox Church for the restoration of the Pokrovsky s events and sponsoring social projects. Church in Yerevan; Charents School No. №13 in Kapan (Syunik Region); the Foundation for Support of Socio- In 2011, the plant’s total spending on charity, social projects Economic Development of the Town of Jermuk for the and large-scale cultural events amounted to RUB 24.4 modernisation of the municipal street lighting system; the million****. municipal government of Etchmiadzin for the restoration of the house museum of Oganes Oganesyan, the founder of new Armenian poetry; the Give Life Foundation (which supports children with oncological and haematological illnesses); and vulnerable social groups.
5.5. KAZAKHSTAN
The Group’s key asset in Kazakhstan is JSC Ekibastuzskaya TPP-2 – a thermal power plant with an installed electric capacity of 1,000 MW. The plant’s two units today account for 12% of total power generation in the country. When construction of the third unit is complete, the plant will increase its installed capacity by 50%, further strengthening its position in the power market.
The foundation of the Group’s successful operations in the country is effective cooperation with the government. The country’s rapid socio-economic development and the attention paid to sustainability when implementing national strategic initiatives generally facilitates the gradual resolution of social problems. However, some regions of the country still face problems that impact the plant’s operations. Such problems include, among others, difficulties with attracting and retaining highly skilled specialists, as well as the insufficient level of specialist education and training. To address these issues, the Group makes efforts to ensure decent remuneration and standards of living for its **** KZT 121.7 million converted at the annual average exchange rate employees. (KZT 100 KZT=RUB 20.0357).
6. ABOUT THIS REPORT 89
PART 6. ABOUT THIS REPORT
This is the first Sustainability and Environmental sustainability and environmental performance compared with GRI APPLICATION LEVEL Responsibility Report (hereinafter the Report) JSC INTER previous reporting periods. RAO UES has prepared to disclose its economic, social This report has been prepared in accordance with the and environmental performance. The Report has been REPORT CONTENT requirements of GRI Application Level A (see GRI Content prepared taking into account the Global Reporting Initiative’s Index on page 94). Sustainability Reporting Guidelines version 3.0 (hereinafter This Report covers a broad range of topics related to the – the GRI Guidelines) and the Electric Utilities Sector Group’s sustainability performance. In determining Report CONTACT DETAILS Supplement to the Guidelines. content, the Group relied on the principles of materiality, stakeholder inclusiveness, sustainability and completeness as Open Joint-Stock Company INTER RAO UES REPORTING PERIOD defined by the GRI Guidelines. (JSC INTER RAO UES)
The reporting period is the calendar year 2011. The Group The following procedures were used to identify topics to be Address: Russian Federation, 119435, Moscow, intends to publish sustainability reports annually. covered by the Report: 27 Bolshaya Pirogovskaya Str., Bld. 3.
REPORT BOUNDARY ͗͗ Interviews with the heads of responsible Phone: +7 (495) 967-05-27 organisational units; The Report provides information on the Group companies Fax: +7 (495) 967-05-26 presented in Figure 3 of this Report. The Report boundary ͗͗ An analysis of the content of the non-financial includes all entities that have significant influence on the reports of similar companies; Website: www.interrao.ru Group’s sustainability performance. For certain indicators, the boundary was modified due to the negligible influence of ͗͗ An analysis of media materials and other publicly certain Group companies on those indicators. In such cases, available sources; this is explicitly stated in the Report. ͗͗ An analysis of internal policies and regulations. In the future, the Group plans to include in the reporting boundary its newly acquired assets, develop data collection To ensure the quality of this Report, the Group relied on the and consolidation processes at existing assets and present its principles of balance, comparability, accuracy, timeliness, clarity and reliability as defined by the GRI Guidelines. 90 6. ABOUT THIS REPORT JSC INTER RAO UES
SUSTAINABILITY AND ENVIRONMENTAL FEEDBACK CONCLUSION ON PUBLIC ASSURANCE OF THE REPORT RESPONSIBILITY REPORT 2011 Please contact the Group’s HR Department with PUBLIC ASSURANCE OF THE REPORT BY INTERNAL STAKEHOLDERS any questions regarding the 2011 Sustainability and Environmental Responsibility Report of JSC INTER RAO UES. Location of assurance: Pushkin, St. Petersburg 2. The Report covers all sustainability issues that are material Please contact the Group’s Public Relations Department with Date of assurance: August 16-17, 2012 to the Company. The Report contains sections on the key any questions regarding charity projects. areas of sustainability. Introductory provisions Phone: +7 (495) 967-05-27 We believe that these issues are described to an appropriate JSC INTER RAO UES (hereinafter the Group) invited us level of detail and at sufficient length. We are not aware of to assess its 2011 Sustainability and Environmental any other sustainability issues significant to stakeholders that Responsibility Report (hereinafter the Report) in terms of should be covered by the Report. the presentation of material sustainability issues and the incorporation of stakeholder expectations. 3. The Report presents information in a well-structured manner. For that purpose, we and our representatives were given the text of the Report for review and were provided an 4. The Report provides a balanced representation of the opportunity to participate in public hearings on the draft Group’s sustainability performance: it describes not only the Report, which were carried out within the framework of the Group’s achievements in different areas of sustainability, but INTER RAO UES Group’s 2nd Reporting Conference for Social also the key challenges faced by the Group and the problems and HR Policy. it encounters in the course of its operations.
The objectives of public assurance did not include verifying 5. The Report meets the expectations of the Group’s the reliability of information presented in the Report. We did stakeholders to an appropriate extent. not assess the management processes and data collection and analysis systems that underpinned preparation of the Resolution Report. Assurance of the application level of Sustainability Reporting Guidelines by the Global Reporting Initiative (the Based on the considerations presented above, our evaluation GRI Guidelines) is beyond the scope of this public assurance. of the 2011 Sustainability and Environmental Responsibility Report of JSC INTER RAO UES is positive and we confirm Findings that it has passed public assurance. We are unanimous in our positive evaluation of the Report in terms of the presentation Based on our review of the Report, as well as information of material issues and incorporation of stakeholder known to us and group discussions held in the process of expectations. public assurance, we state the following: All signatories have agreed upon the text of this conclusion. 1. The Company has presented detailed information on The Group commits itself to not make any modifications to its development values, strategic goals and guideposts. the text of the conclusion when publishing it. The Report describes to a sufficient extent the Group’s management systems with regard to the key areas of sustainability, as well as mechanisms for stakeholder engagement. 6. ABOUT THIS REPORT 91
31 Stakeholder representatives
From the Russian Generation Division
Head of the HR and Organisational Development Department, LLC INTER RAO – Management of Electric Konstantin Berezhnoy Power Plants
Sergey Kuznetsov Head of the HR Department, Kostromskaya TPP (a branch of JSC OGK-3)
Alexander Sidorov Chairman of the primary trade union organisation, Permskaya TPP (a branch of JSC OGK-1)
From the Russian Sales Division
Victor Lutskovich Deputy Director General for HR and Social Policy, JSC United Energy Sales Company
Oleg Prokofyev Chairman of the primary trade union organisation, JSC Saratovenergo
From Foreign Assets
Valery Pampukha Head of the HR Department, CJSC Moldavskaya TPP
Varlam Pantsulaya Head of the Public Relations Department, JSC Telasi
First Deputy Director for Economics and Finance – Head of the Economics and Planning Department, Arman Mnatsakanyan CJSC Power Grids of Armenia
Marika Chikovani HR Inspector, JSC Khrami HPP-1
From the Russian and European Trading Division
Andrey Popov Head of the Corporate Governance Department, RAO Nordic Oy 92 6. ABOUT THIS REPORT JSC INTER RAO UES
SUSTAINABILITY AND ENVIRONMENTAL CONCLUSION ON PUBLIC ASSURANCE OF THE REPORT RESPONSIBILITY REPORT 2011 PUBLIC ASSURANCE OF THE REPORT BY EXTERNAL STAKEHOLDERS
Location of assurance: Moscow Findings The Group demonstrates its commitment to systematic Date of assurance: August 23, 2012 stakeholder engagement through its strive towards dialogue Based on our review of the Report, as well as information on the aspects of its activities most relevant in terms of known to us and group discussions held in the process of sustainability. Introductory provisions public assurance, we state the following: Questions and recommendations JSC INTER RAO UES (hereinafter the Group) invited us 1. The Group has presented detailed information on its to assess its 2011 Sustainability and Environmental development values, strategic goals and guideposts, Throughout the course of the roundtable we asked a Responsibility Report (hereinafter the Report) in terms of demonstrating its commitment to the principles of number of questions and provided recommendations for the presentation of material sustainability issues and the sustainability and the strategic significance of its activities to the preparation of the Group’s future Sustainability and incorporation of stakeholder expectations. the functioning of energy systems in the countries in which Environmental Responsibility Reports. We recommend it operates. The Report describes to a sufficient extent the providing more information and/or data on the following For that purpose, we were given the text of the Report for Group’s management systems with regard to the key areas aspects of the Group’s activities: review and were provided an opportunity to participate in of sustainability, as well as mechanisms for stakeholder public hearings on the draft Report, which were carried out engagement. ͗͗ Programmes and measures aimed at improving within the framework of a roundtable titled Non-Financial energy efficiency; Report – an Instrument of Stakeholder Communication. In the 2. The Report covers all sustainability issues that are material course of the event, all participants had the full opportunity to to the Group. The Report contains sections on the key areas ͗͗ Cooperation with universities and vocational express their opinions. of sustainability. education institutions;
We express our personal objective opinion in the process We believe that these issues are described to an appropriate ͗͗ Building a responsible supply chain; of public assurance as experts in different aspects of level of detail and at sufficient length. We are not aware of sustainability and non-financial reporting. any other sustainability issues significant to stakeholders that ͗͗ Relations with minority shareholders and their should be covered by the Report. involvement in decision-making; The objectives of public assurance did not include verifying the reliability of information presented in the Report. We did 3. The Report presents information in a well-structured ͗͗ Consideration of sustainability issues in the not assess management processes and data collection and manner. corporate governance system; analysis systems that underpinned preparation of the Report. The Group’s management is responsible for statements made 4. The Report as a whole provides a balanced representation ͗͗ The activities of OHS commissions and in the Report. of the Group’s sustainability performance: it describes commissioners; not only the Group’s achievements in different areas of We note that in preparing the Report, the Group relied on the sustainability, but also the key challenges faced by the Group ͗͗ Pricing policy with regard to small- and medium- provisions of the Global Reporting Initiative’s Sustainability and the problems it encounters in the course of its operations. sized business customers; Reporting Guidelines version 3.0 (the GRI Guidelines). Nevertheless, assurance of the GRI application level is beyond 5. The Report meets the expectations of the Group’s ͗͗ Participation in the CIS Electric Power Council; the scope of this public assurance. stakeholders to an appropriate extent. ͗͗ Formation of a system that takes into account environmental risks; 6. ABOUT THIS REPORT 93
͗͗ Development of regulations in the field of Stakeholder representatives environmental protection. 32
We also recommend that when preparing reports in the Alexander Pekarnikov Desk Officer, Administrative and Legislative Drafting Work Department, RF Ministry of Energy future, the Group pay more attention to providing a balanced representation of information in terms of the coverage of Anna Petricheva Head, Office for the Regulation of Technical and Economic Indicators, Department for Operating problematic areas of activity and objectives for the future. Monitoring and Control in the Electric Power Sector, RF Ministry of Energy
The recommendations we offer do not diminish the merits Oleg Mikhailov Head, Strategic Communications Department, JSC FGC UES and quality of the Report. We hope that JSC INTER RAO UES Serafima Gorbatova Deputy Director, Disclosure Service, CJSC Interfax will continue to make focused efforts to develop its system of public non-financial reporting. Valery Vakhrushkin Chairman, All-Russian Electric Trade Union (a non-governmental association)
Resolution Sergey Gerasimov Utility Analyst, EBRD Moscow Resident Office
Based on the considerations presented above, our evaluation Ivan Rubinov Energy Sector Analyst, URALSIB Capital of the 2011 Sustainability and Environmental Responsibility Report of JSC INTER RAO UES is positive and we confirm Alexander Seleznev Utility Analyst, VTB Capital that it has passed public assurance. We are unanimous in our positive evaluation of the Report in terms of the presentation Anatoly Tumanovsky First Deputy General Director and Head of Research, JSC All-Russian Institute of Thermal Technology of material issues and incorporation of stakeholder Alexander Vasilevsky Deputy Director, Guild of Energy Auditors (a self-regulating organisation) expectations.
Head of the Steam and Gas Turbines Department, Director of the Training and Research Centre for All signatories have agreed upon the text of this conclusion. Andrey Vinogradov Simulators in the Energy Sector, Ivanovo State Energy University JSC INTER RAO UES commits itself to not make any modifications to the text of the conclusion when publishing it. Head of the Laboratory for the Environmental Aspects of the Energy Sector, JSC Krzhizhanovsky Energy Mikhail Saparov Institute
Head of the Laboratory for Assessment of Working Conditions, JSC Technologies of Labour Expert and Dmitry Gnatyuk Analytical Centre
Natalya Makedonskaya Commercial Director, MAKO Group
Head of the Committee for Communications in the Fuel and Energy Complex, Russian Public Relations Irina Yesipova Association
Andrey Reznichenko Journalist, RIA Novosti News Agency
Anastasia Shatskaya Journalist, Interfax News Agency 94 GRI CONTENT INDEX JSC INTER RAO UES
SUSTAINABILITY AND ENVIRONMENTAL GRI CONTENT INDEX RESPONSIBILITY REPORT 2011 Disclosure / indicator Status Location in report / comment
Statement from the most senior decision-maker of the organisation about the relevance of 1.1. Disclosed Message from Boris Kovalchuk, Chairman of the Management Board of JSC INTER RAO UES sustainability to the organisation and its strategy
2.2. Stakeholder Engagement 1.2. Description of key impacts, risks, and opportunities Disclosed 2.4. Risk Management
2.1. Name of the organisation Disclosed 1. INTER RAO UES Group: Key Facts
2.2. Primary brands, products, and/or services Disclosed 1. INTER RAO UES Group: Key Facts
2.3. Operational structure of the organisation Disclosed 1.2. Profile
2.4. Location of organisation’s headquarters Disclosed Russian Federation, 123610, Moscow, Krasnopresnenskaya Naberezhnaya 12, Entrance 7
Number of countries where the organisation operates, and names of countries with either major 2.5. Disclosed 1.2. Profile operations or that are specifically relevant to the sustainability issues covered in the report
2.6. Nature of ownership and legal form Disclosed 1. INTER RAO UES Group: Key Facts
1. INTER RAO UES Group: Key Facts 2.7. Markets served Disclosed 1.2. Profile
1. INTER RAO UES Group: Key Facts 2.8. Scale of the organisation Disclosed 1.2. Profile
1. INTER RAO UES Group: Key Facts 2.9. Significant changes during the reporting period regarding size, structure, or ownership Disclosed 1.1. History
2.10. Awards received in the reporting period Disclosed 1.6. Awards
3.1. Reporting period (e.g., fiscal/calendar year) for information provided. Disclosed 6. About This Report
6. About This Report 3.2. Date of most recent previous report (if any) Disclosed This is the Group’s first Sustainability and Environmental Responsibility Report.
3.3. Reporting cycle Disclosed 6. About This Report
3.4. Contact point for questions regarding the report or its contents Disclosed 6. About This Report
3.5. Process for defining report content Disclosed 6. About This Report GRI CONTENT INDEX 95
Disclosure / indicator Status Location in report / comment
1.1. History 3.6. Boundary of the report Disclosed 1.2. Profile 6. About This Report
3.7. Limitations on the scope or boundary of the report Disclosed 6. About This Report
Basis for reporting on joint ventures, subsidiaries, leased facilities, outsourced operations, and 3.8. other entities that can significantly affect comparability from period to period and/or between Disclosed 6. About This Report organisations
Data measurement techniques and the bases of calculations, including assumptions and 3.9. techniques underlying estimations applied to the compilation of the indicators and other Disclosed 6. About This Report information in the report
Explanation of the effect of any re-statements of information provided in earlier reports, and the 3.10. Disclosed This is the Group’s first Sustainability and Environmental Responsibility Report. reasons for such re-statement
Significant changes from previous reporting periods in the scope, boundary, or measurement 3.11. Disclosed This is the Group’s first Sustainability and Environmental Responsibility Report. methods applied in the report
3.12. Table identifying the location of the Standard Disclosures in the report Disclosed GRI Content Index
This Sustainability and Environmental Responsibility Report has not undergone external 3.13. Policy and current practice with regard to seeking external assurance for the report Disclosed assurance (audit).
Governance structure of the organisation, including committees under the highest governance 4.1. Disclosed 2.3. Corporate Governance body responsible for specific tasks, such as setting strategy or organisational oversight
The Chairman of the Board of Directors of JSC INTER RAO UES is not an executive officer of 4.2. Indicate whether the Chair of the highest governance body is also an executive officer Disclosed JSC INTER RAO UES.
For organisations that have a unitary board structure, state the number of members of the 4.3. Disclosed 2.3. Corporate Governance highest governance body that are independent and/or non-executive members
Mechanisms for shareholders and employees to provide recommendations or direction to the 2.2. Stakeholder Engagement 4.4. Disclosed highest governance body 2.3. Corporate Governance
Linkage between compensation for members of the highest governance body, senior managers, 4.5. and executives (including departure arrangements), and the organisation’s performance Disclosed 2.3. Corporate Governance (including social and environmental performance)
4.6. Processes in place for the highest governance body to ensure conflicts of interest are avoided Disclosed 2.5. Preventing Corruption and Other Illegitimate Practices
Processes for determining the qualifications and expertise of the members of the highest 4.7. governance body for guiding the organisation’s strategy on economic, environmental, and social Disclosed 2.3. Corporate Governance (sustainability) topics 96 GRI CONTENT INDEX JSC INTER RAO UES
SUSTAINABILITY AND ENVIRONMENTAL Disclosure / indicator Status Location in report / comment RESPONSIBILITY REPORT 2011
Internally developed statements of mission or values, codes of conduct, and principles relevant 1.3. Development Strategy 4.8. Disclosed to economic, environmental, and social performance and the status of their implementation 2. Sustainability
Procedures of the highest governance body for overseeing the organisation’s identification and 2.3. Corporate Governance management of economic, environmental, and social performance, including relevant risks and 4.9. Disclosed 2011 Annual Report of JSC INTER RAO UES opportunities, and adherence or compliance with internationally agreed standards, codes of conduct, and principles
Processes for evaluating the highest governance body’s own performance, particularly with 2.3. Corporate Governance 4.10. Disclosed respect to economic, environmental, and social performance The Board of Directors of JSC INTER RAO UES does not currently assess its own performance.
In its activities, the Group adheres to the precautionary principle. New technologies and Explanation of whether and how the precautionary approach or principle is addressed by the 4.11. Disclosed production facilities are put into operation only after receiving necessary permits confirming the organisation safety of their use.
2.2. Stakeholder Engagement Externally developed economic, environmental, and social charters, principles, or other initiatives 4.12. Disclosed 4.7. International Energy Alliances and Initiatives to which the organisation subscribes or endorses 6. About This Report
Memberships in associations (such as industry associations) and/or national/international 2.2. Stakeholder Engagement: Government 4.13. Disclosed advocacy organisations 4.7. International Energy Alliances and Initiatives
4.14. List of stakeholder groups engaged by the organisation Disclosed 2.2. Stakeholder Engagement
4.15. Basis for identification and selection of stakeholders with whom to engage Disclosed 2.2. Stakeholder Engagement
2.2. Stakeholder Engagement Approaches to stakeholder engagement, including frequency of engagement by type and by 4.16. Disclosed 3.3. Social Programmes stakeholder group 4.5. Innovative Development
Key topics and concerns that have been raised through stakeholder engagement, and how the 2.2. Stakeholder Engagement 4.17. Disclosed organisation has responded to those key topics and concerns, including through its reporting 3.5. Remuneration and Motivation GRI CONTENT INDEX 97
Disclosure / indicator Status Location in report / comment
Electric Utility Sector Supplement
Management approach Disclosed 4. Reliability, Security and Efficiency
EU1 Installed capacity, broken down by primary energy source and by regulatory regime Disclosed 4.1. Ensuring Reliable and Secure Energy Supplies
EU2 Net energy output broken down by primary energy source and by regulatory regime Disclosed 1.2. Profile
4.1. Ensuring Reliable and Secure Energy Supplies EU3 Number of residential, industrial, institutional and commercial customer accounts Disclosed The Group uses a different classification. In the Report, customer data is provided according to the following categories: household customers, grid companies and other corporate customers.
EU4 Length of above and underground transmission and distribution lines Disclosed 1.2. Profile
Allocation of CO2e emissions allowances or equivalent, broken down by carbon trading EU5 framework Disclosed The Group does not have facilities for which GHG emissions allowances are required.
EU6 Management approach to ensure short and long-term electricity availability and reliability Disclosed 4.1. Ensuring Reliable and Secure Energy Supplies
Demand-side management programmes including residential, commercial, institutional and EU7 Disclosed 4.1. Ensuring Reliable and Secure Energy Supplies industrial programmes
Research and development activity and expenditure aimed at providing reliable electricity and 4.1. Ensuring Reliable and Secure Energy Supplies EU8 Disclosed promoting sustainable development 4.5. Innovative Development
The Group does not carry out activities involving the use of nuclear fuel and does not have EU9 Provisions for decommissioning of nuclear power sites and nuclear waste disposal sites Not applicable nuclear waste disposal sites.
Planned capacity against projected electricity demand over the long term, broken down by energy EU10 Disclosed 4.1. Ensuring Reliable and Secure Energy Supplies source and regulatory regime
4.1. Ensuring Reliable and Secure Energy Supplies EU11 Average generation efficiency of thermal plants by energy source and by regulatory regime Disclosed The Group does not currently calculate the generation efficiency of thermal plants by energy source.
EU12 Transmission and distribution losses as a percentage of total energy Disclosed 4.1. Ensuring Reliable and Secure Energy Supplies
Biological diversity (impact on biodiversity, population decrease/loss of indigenous species; 4.1. Ensuring Reliable and Secure Energy Supplies EU13 Disclosed biodiversity of offset habitats compared to the biodiversity of the affected areas) 4.4. Environmental Performance
3.3. Social Programmes EU14 Programmes and processes to ensure the availability of a skilled workforce Disclosed 3.4. Employee Training and Development 3.5. Remuneration and Motivation 98 GRI CONTENT INDEX JSC INTER RAO UES
SUSTAINABILITY AND ENVIRONMENTAL Disclosure / indicator Status Location in report / comment RESPONSIBILITY REPORT 2011
Percentage of employees eligible to retire in the next 5 and 10 years broken down by job category EU15 Disclosed 3.2. Staff Profile and by region
Policies and requirements regarding health and safety of employees and employees of 3.3. Social Programmes EU16 Disclosed contractors and subcontractors 4.2. Occupational Health and Safety
Days worked by contractor and subcontractor employees involved in construction, operation & The indicator is not substantive as the share of contractors and subcontractors in the core EU17 Disclosed maintenance activities activities of Group companies is insignificant.
Percentage of contractor and subcontractor employees that have undergone relevant health and EU18 Disclosed 4.2. Occupational Health and Safety safety training
Stakeholder participation in the decision making process related to energy planning and 2.2. Stakeholder Engagement EU19 Disclosed infrastructure development 5. Regional Socio-Economic Development
EU20 Approach to managing the impacts of displacement Disclosed In the reporting period, the Group’s activities did not cause impacts related to displacement.
Contingency planning measures, disaster/ emergency management plan and training EU21 Disclosed 4.3. Ensuring Asset Security programmes, and recovery/restoration plans
Number of people physically or economically displaced and compensation, broken down by type EU22 Disclosed In the reporting period, the Group’s activities did not cause impacts related to displacement. of project
Programmes, including those in partnership with government, to improve or maintain access to EU23 Disclosed 4.1. Ensuring Reliable and Secure Energy Supplies electricity and customer support services
Practices to address language, cultural, low literacy and disability related barriers to accessing EU24 Disclosed At present, the Group does not have such programmes. and safely using electricity and customer support services
Number of injuries and fatalities to the public involving company assets, including legal No incidents of illness or injury to the public involving the Group’s assets were registered in the EU25 Disclosed judgments, settlements and pending legal cases of diseases reporting period.
EU26 Percentage of population unserved in licensed distribution or service areas Disclosed 4.1. Ensuring Reliable and Secure Energy Supplies
EU27 Number of residential disconnections for non-payment Disclosed 4.1. Ensuring Reliable and Secure Energy Supplies
EU28 Power outage frequency Disclosed 4.1. Ensuring Reliable and Secure Energy Supplies
EU29 Average power outage duration Disclosed 4.1. Ensuring Reliable and Secure Energy Supplies
EU30 Average plant availability factor by energy source and by regulatory regime Disclosed 4.1. Ensuring Reliable and Secure Energy Supplies
Economic Performance Indicator GRI CONTENT INDEX 99
Disclosure / indicator Status Location in report / comment
1.3. Development Strategy 2.3. Corporate Governance Management approach Disclosed 4.1. Ensuring Reliable and Secure Energy Supplies 4.6. Improving Energy Efficiency
Direct economic value generated and distributed, including revenues, operating costs, employee EC1 compensation, donations and other community investments, retained earnings, and payments to Disclosed 1.5. Financial Performance capital providers and governments
Financial implications and other risks and opportunities for the organisation’s activities due to EC2 Disclosed 4.4. Environmental Performance climate change
3.2. Staff Profile EC3 Coverage of the organisation’s defined benefit plan obligations Disclosed 3.3. Social Programmes
EC4 Significant financial assistance received from government Disclosed The Group did not receive financial assistance from the government.
3.5. Remuneration and Motivation The standard entry level wage at the Group’s Russian companies exceeds the minimum wage as Range of ratios of standard entry level wage compared to local minimum wage at significant defined by Federal Law dated June 19, 2000 No. 82-FZ (as amended on June 1, 2011). In Moldova EC5 Disclosed locations of operation and Armenia, the standard entry level wage also substantially exceeds the minimum wage. This indicator is not applicable to operations in Georgia, where there is no minimum wage established by law.
2.6. Procurement Management Policy, practices, and proportion of spending on locally-based suppliers at significant locations of Partially EC6 In selecting suppliers, Group companies use other qualitative criteria. operation disclosed The Group plans to disclose the proportion of local procurement starting from 2012.
Procedures for local hiring and proportion of senior management hired from the local community EC7 Disclosed 3.2. Staff Profile at locations of significant operation
Development and impact of infrastructure investments and services provided primarily for public EC8 Disclosed 5. Regional Socio-Economic Development benefit through commercial, in-kind, or pro bono engagement
Understanding and describing significant indirect economic impacts, including the extent of EC9 Disclosed 5. Regional Socio-Economic Development impacts
Environmental Performance Indicators
Management approach Disclosed 4.4. Environmental Performance
EN1 Materials used by weight or volume Not applicable Insubstantial. 100 GRI CONTENT INDEX JSC INTER RAO UES
SUSTAINABILITY AND ENVIRONMENTAL Disclosure / indicator Status Location in report / comment RESPONSIBILITY REPORT 2011
EN2 Percentage of materials used that are recycled input materials Not applicable Insubstantial.
EN3 Direct energy consumption by primary energy source Disclosed 4.6. Improving Energy Efficiency
The consumption of energy purchased externally by the Group’s operations is negligible EN4 Indirect energy consumption by primary energy source Disclosed compared to the consumption of primary energy sources (gas, petroleum products and coal).
EN5 Energy saved due to conservation and efficiency improvements Disclosed 4.6. Improving Energy Efficiency
Initiatives to provide energy-efficient or renewable energy based products and services, and EN6 Disclosed 4.6. Improving Energy Efficiency reductions in energy requirements as a result of these initiatives.
The Group has no such initiatives because the consumption of energy purchased externally by EN7 Initiatives to reduce indirect energy consumption and reductions achieved Disclosed the Group’s operations is negligible compared to the consumption of primary energy sources (gas, petroleum products and coal).
EN8 Total water withdrawal by source Disclosed 4.4. Environmental Performance
EN9 Water sources significantly affected by withdrawal of water. Disclosed 4.4. Environmental Performance
EN10 Percentage and total volume of water recycled and reused Disclosed 4.4. Environmental Performance
Location and size of land owned, leased, managed in, or adjacent to, protected areas and areas The Group does not have production facilities located in protected areas or areas of high EN11 Disclosed of high biodiversity value outside protected areas biodiversity value.
Description of significant impacts of activities, products, and services on biodiversity in protected The Group’s production facilities do not cause significant impacts on protected areas or areas of EN12 Disclosed areas and areas of high biodiversity value outside protected areas high biodiversity value.
4.1. Ensuring Reliable and Secure Energy Supplies EN13 Habitats protected or restored Disclosed 4.4. Environmental Performance
4.1. Ensuring Reliable and Secure Energy Supplies EN14 Strategies, current actions, and future plans for managing impacts on biodiversity Disclosed 4.4. Environmental Performance
Number of IUCN Red List species and national conservation list species with habitats in areas 4.1. Ensuring Reliable and Secure Energy Supplies EN15 Disclosed affected by operations, by level of extinction risk 4.4. Environmental Performance
EN16 Total direct and indirect greenhouse gas emissions by weight Disclosed 4.4. Environmental Performance
EN17 Other relevant indirect greenhouse gas emissions by weight Not applicable Insubstantial.
EN18 Initiatives to reduce greenhouse gas emissions and reductions achieved Disclosed 4.4. Environmental Performance
EN19 Emissions of ozone-depleting substances by weight Not applicable Insubstantial.
EN20 NOx, SOx, and other significant air emissions by type and weight Disclosed 4.4. Environmental Performance
EN21 Total water discharge by quality and destination Disclosed 4.4. Environmental Performance GRI CONTENT INDEX 101
Disclosure / indicator Status Location in report / comment
EN22 Total weight of waste by type and disposal method Disclosed 4.4. Environmental Performance
In 2011, one pipeline rupture involving a ground spill of fuel oil occurred at Verkhnetagilskaya EN23 Total number and volume of significant spills Disclosed TPP.
Weight of transported, imported, exported, or treated waste deemed hazardous under the terms The Group did not transport, import, export or treat waste deemed hazardous under the terms of EN24 of the Basel Convention Annex I, II, III, and VIII, and percentage of transported waste shipped Not applicable the Basel Convention. internationally
Identity, size, protected status, and biodiversity value of water bodies and related habitats EN25 Disclosed The Group’s production facilities do not have discharges or runoff to protected water bodies. significantly affected by the reporting organisation’s discharges of water and runoff
Initiatives to mitigate environmental impacts of products and services, and extent of impact EN26 Disclosed 4.4. Environmental Performance mitigation
EN27 Percentage of products sold and their packaging materials that are reclaimed by category Not applicable Insubstantial.
Monetary value of significant fines and total number of non-monetary sanctions for EN28 Disclosed 4.4. Environmental Performance noncompliance with environmental laws and regulations
Significant environmental impacts of transporting products and other goods EN29 Disclosed Insubstantial. and materials used for the organisation’s operations, and transporting members of the workforce
EN30 Total environmental protection expenditures and investments by type Disclosed 4.4. Environmental Performance
Labour Practices and Decent Work Performance Indicators
2.3. Corporate Governance Management approach Disclosed 3. Human Resources
LA1 Total workforce by employment type, employment contract, and region Disclosed 3.2. Staff Profile
LA2 Total number and rate of employee turnover by age group, gender, and region Disclosed 3.2. Staff Profile
Benefits provided to full-time employees that are not provided to temporary or part-time LA3 Disclosed 3.3. Social Programmes employees, by major operations
LA4 Percentage of employees covered by collective bargaining agreements Disclosed 3.2. Staff Profile
Minimum notice period(s) regarding operational changes, including whether it is specified in In line with existing Russian labour legislation, employees are notified of significant changes in LA5 Disclosed collective agreements working conditions at least two months in advance. 102 GRI CONTENT INDEX JSC INTER RAO UES
SUSTAINABILITY AND ENVIRONMENTAL Disclosure / indicator Status Location in report / comment RESPONSIBILITY REPORT 2011
Percentage of total workforce represented in formal joint management–worker health and safety 3.3. Social Programmes LA6 Disclosed committees that help monitor and advise on occupational health and safety programmes 4.2. Occupational Health and Safety
Rates of injury, occupational diseases, lost days, and absenteeism, and number of work-related Partially LA7 4.2. Occupational Health and Safety fatalities by region disclosed
Education, training, counselling, prevention, and risk-control programmes in place to assist LA8 Disclosed 3.3. Social Programmes workforce members, their families, or community members regarding serious diseases
LA9 Health and safety topics covered in formal agreements with trade unions Disclosed 3.3. Social Programmes
LA10 Average hours of training per year per employee by employee category Disclosed 3.2. Staff Profile
3. Human Resources Programmes for skills management and lifelong learning that support the continued 3.3. Social Programmes LA11 Disclosed employability of employees and assist them in managing career endings 3.4. Employee Training and Development 3.5. Remuneration and Motivation
LA12 Percentage of employees receiving regular performance and career development reviews Disclosed 3.4. Employee Training and Development
Composition of governance bodies and breakdown of employees per category according to LA13 Disclosed 3.2. Staff Profile gender, age group, minority group membership, and other indicators of diversity
The Group does not practice a gender-based approach to determining salary size. For all LA14 Ratio of basic salary of men to women by employee category Disclosed employee categories, there is no difference between basic salary for men and women.
Human rights performance indicators
2.2. Stakeholder Engagement 3.3. Social Programmes Management approach Disclosed 4.2. Occupational Health and Safety 4.3. Ensuring Asset Security 5. Regional Socio-Economic Development
Percentage and total number of significant investment agreements that include human rights The approach practiced by the Group does not provide for including human rights clauses into or HR1 Disclosed clauses or that have undergone human rights screening human rights screening of investment agreements.
Percentage of significant suppliers and contractors that have undergone screening on human Partially HR2 2.6. Procurement Management rights and actions taken disclosed GRI CONTENT INDEX 103
Disclosure / indicator Status Location in report / comment
At present, the Group’s information collection systems do not support disclosure of this indicator. Total hours of employee training on policies and procedures concerning aspects of human rights Not disclosed HR3 The Group plans to begin disclosing it starting from 2014. that are relevant to operations, including the percentage of employees trained
HR4 Total number of incidents of discrimination and actions taken Disclosed No such incidents were registered in the reporting period.
Operations identified in which the right to exercise freedom of association and collective There is no risk to the right to exercise freedom of association and collective bargaining at the HR5 Disclosed bargaining may be at significant risk, and actions taken to support these rights Group.
Operations identified as having significant risk for incidents of child labour, and measures taken HR6 Disclosed In accordance with existing Russian labour legislation, the Group does not use child labour. to contribute to the elimination of child labour
Operations identified as having significant risk for incidents of forced or compulsory labour, and In accordance with the existing Russian labour legislation, the Group does not use forced or HR7 Disclosed measures to contribute to the elimination of forced or compulsory labour compulsory labour.
Percentage of security personnel trained in the organisation’s policies or procedures concerning All security personnel receive training in the Group’s policies and procedures concerning relevant HR8 Disclosed aspects of human rights that are relevant to operations aspects of human rights.
HR9 Total number of incidents of violations involving rights of indigenous people and actions taken Disclosed No incidents of violations involving rights of indigenous people were registered in 2011.
Society Performance Indicators
2.2. Stakeholder Engagement 3.3. Social Programmes Management approach Disclosed 4.1. Ensuring Reliable and Secure Energy Supplies 5. Regional Socio-Economic Development
Nature, scope, and effectiveness of any programmes and practices that assess and manage the Partially 2.2. Stakeholder Engagement SO1 impacts of operations on communities, including entering, operating, and exiting disclosed 5. Regional Socio-Economic Development
All (100%) of the Group’s subsidiaries and dependent companies in which JSC INTER SO2 Percentage and total number of business units analysed for risks related to corruption Disclosed RAO UES owns more than a 50% interest were analysed for risks related to corruption.
2.5. Preventing Corruption and Other Illegitimate Practices The total number of employees trained in anti-corruption policies and procedures is 1,280, SO3 Percentage of employees trained in organisation’s anti-corruption policies and procedures Disclosed including four non-management employees. The percentage of managers who have received anti-corruption training is 100%. The percentage of non-management employees who have received anti-corruption training is 0.01%.
In the reporting period, no incidents of corruption were registered at Group companies. SO4 Actions taken in response to incidents of corruption Disclosed 104 GRI CONTENT INDEX JSC INTER RAO UES
SUSTAINABILITY AND ENVIRONMENTAL Disclosure / indicator Status Location in report / comment RESPONSIBILITY REPORT 2011
2.1. Approach to Sustainability 2.2. Stakeholder Engagement SO5 Public policy positions and participation in public policy development and lobbying Disclosed 3.4. Employee Training and Development 4.7. International Energy Alliances and Initiatives Total value of financial and in-kind contributions to political parties, politicians, and related In the reporting period, the Group did not make any financial or in-kind contributions to political SO6 Disclosed institutions by country parties, politicians and related institutions. In the reporting period, no legal actions for anticompetitive behaviour were taken against the Total number of legal actions for anticompetitive behaviour, anti-trust, and monopoly practices SO7 Disclosed Group. and their outcomes
Monetary value of significant fines and total number of non-monetary sanctions for In the reporting period, no fines or non-monetary sanctions for anticompetitive behaviour were SO8 Disclosed noncompliance with laws and regulations imposed on Group companies.
Product Responsibility Performance Indicators
Management approach Disclosed 4.1. Ensuring Reliable and Secure Energy Supplies Life cycle stages in which health and safety impacts of products and services are assessed for PR1 improvement, and percentage of significant products and services categories subject to such Disclosed 4.2. Occupational Health and Safety procedures Total number of incidents of non-compliance with regulations and voluntary codes concerning PR2 Disclosed 4.1. Ensuring Reliable and Secure Energy Supplies health and safety impacts of products and services during their life cycle, by type of outcomes No requirements regarding the provision of information or labelling apply to Group products and Type of product and service information required by procedures, and percentage of significant PR3 Disclosed services. products and services subject to such information requirements
Total number of incidents of non-compliance with regulations and voluntary codes concerning No incidents of non-compliance with regulations and voluntary codes concerning product and PR4 Disclosed product and service information and labelling, by type of outcomes service information and labelling were registered in the reporting period. Practices related to customer satisfaction, including results of surveys measuring customer PR5 Disclosed 4.1. Ensuring Reliable and Secure Energy Supplies satisfaction Programmes for adherence to laws, standards, and voluntary codes related to marketing 2.2. Stakeholder Engagement PR6 Disclosed communications, including advertising, promotion, and sponsorship 4.1. Ensuring Reliable and Secure Energy Supplies Total number of incidents of non-compliance with regulations and voluntary codes concerning No incidents of non-compliance with regulations and voluntary codes concerning product and PR7 marketing communications, including advertising, promotion, and sponsorship by type of Disclosed service information and labelling were registered in the reporting period. outcomes Total number of substantiated complaints regarding breaches of customer privacy and losses of No complaints regarding breaches of customer privacy and losses of customer data were PR8 Disclosed customer data registered in the reporting period. Monetary value of significant fines for noncompliance with laws and regulations concerning the PR9 Disclosed No significant fines covered by this indicator were imposed on the Group in the reporting period. provision and use of products and services LIST OF ABBREVIATIONS 105
LIST OF ABBREVIATIONS
AA autonomous area CCGT combined cycle gas turbine CCPP combined cycle power plant CHPP combined heat and power plant CIS Commonwealth of Independent States CJSC Closed Joint-Stock Company
CO2e CO2 equivalent ERU Emission Reduction Unit GHG greenhouse gases GTU gas turbine unit HR human resources JI joint implementation JSC Joint-Stock Company LLC Limited Liability Company NPP nuclear power plant OHS occupational health and safety RAS Russian Academy of Sciences R&D research and development RF Russian Federation Rostekhnadzor Federal Service for Environmental, Technological and Nuclear Supervision of the Russian Federation TPP thermal power plant UNFCC United Nations Framework Convention on Climate Change GJ gigajoule GW gigawatt GWh gigawatt-hour kV kilovolt kW kilowatt kWh kilowatt-hour MW megawatt MWh megawatt-hour V volt mln million bn billion Design and production: LLC MediaCode
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