The basis of design concept of the Annual Report of PJSC “MOESK” for 2015 was a significant event — the first anniversary of the Company. Ten years during which the Company grew, changed, increased the reliability and quality, doing everything for it’s services to became the ANNUAL REPORT 2015 most competitive and convenient for consumers. The results of this work, positively marked of Public Joint Stock Company by the business community, consumers and authorities, were achieved mainly thanks to the highly professional labor collective of the Company. MOSCOW UNITED ELECTRIC GRID COMPANY

Director General of PJSC MOESK P. A. Sinyutin

Head of Accounting — Director, Division of Financial and Fiscal Accounting and Reports, PJSC MOESK V. V. Vitinskiy ANNUAL 2 REPORT2015 3 CONTENTS

About the Company 4 1. About the Company 16 2. Results of Company 3. Sustainable Development 95 4. Corporate Governance 142 5. Annexes 195 Activities 31 About the Report 4 1.1. General information 16 3.1. Company Priorities 95 4.1. Corporate Governance 5.1. GRI Content Index 195 2.1.Operating Results 31 System 142 Key Performance 1.2. Structure 3.2. Stakeholder 5.2. Glossary of Main Terms Indicators 5 of Electric Grids Assets 17 2.1.1 .Transmission and Engagement 99 4.2. Management Bodies 148 and Abbreviations 201 Distribution of Electric Power 31 Address from 1.3. Business Model 18 3.2.1. Interaction 4.2.1. General Meeting 6. Disclaimer 204 the Chairman of the Board 2.1.2. Technological with Investors 99 of Shareholders 148 of Directors 5 1.4. Strategy 20 Connection 36 7. Contacts 205 3.2.2. Interaction with Authorities 4.2.2. Board of Directors 149 Interview of the Director 1.4.1. Market Position and 2.1.3. Non-Tariff Activities 41 and Public Organizations 99 General 6 Development Prospects 22 4.2.2.1. Information about the 2.2.Financial Results 44 3.2.3. Public Relations 100 Board of Directors Priority Key Events in the Reporting 1.4.2. Priority Fields of Activities Activities 155 Year and Events after the and Development Prospects of 2.2.1. Financial results 3.2.4. Interaction with Service Report Date 12 the Company 24 according to RAS 45 Consumers 102 4.2.3. The Board Committees 157

1.5. Key Performance 2.2.2. Financial Performance 3.3. Environmental Policy 106 4.2.4. Management Board 164 Indicators 28 according to IFRS 54 3.4. Energy Efficiency 4.2.5. Director General 166 1.6.Quality Management 2.3. Credit Policy 56 and Power Consumption 117 System 31 4.3. External, Internal Audit 2.4. Tariff Regulation 63 3.5. Health and Safety 122 and Control 168

2.5. Improvement 3.6.HR and Social Policy 127 4.3.1. Internal Control of Reliability 67 System 168 3.6.1.HR Policy 127 2.6. Investment Activities 70 4.3.2. Risk Management 3.6.2. Social Policy 136 System 172 2.7. Technologies and Innovations 78 4.3.3. Auditing Commission 185

2.8. Procurement Activities 88 4.4. Information for Shareholders 2.9. Property Management and Investors 187 and Consolidation 92 4.5. Anticorruption Policy and Corporate Ethics 192 ANNUAL 4 REPORT2015 5 ABOUT THE COMPANY KEY PERFORMANCE

PJSC Moscow United Electric personnel headcount over 15 thous. transformation power of over Grid Company (MOESK) is people and 4 subsidiaries. 49 thous. MVA; 36.1 thous. INDICATORS one of the largest electric grid distribution grid stations with the distribution company in the Russian MOESK forms a part of PJSC power rating of approximately market, carrying out services «Rosseti» assets portfolio and holds 25 thous. MVA, over 71 thous. km Revenues, RUB mln EBITDA (according to RAS), RUB mln EBITDA (according to IFRS), RUB mln on electric power transmission a leading position in terms of electric of overhead power lines 32.45 34.42 132,356 33.75 and technological connection of power supply reliability and quality and 76.9 thous. km of cable grids. 29.51 29.59 129,288 41,954 consumers to electric grids of the as well as volumes of technological 129,125 3.4 44,668 128,018 44,446 27.33 Company in Moscow and Moscow connections to power grids arranged In 2015, the revenue of MOESK was % 36,808 37,059 region. for the consumers. 129.3 bln rubles, EBITDA was 124,731 125,260 13.2 27.7 3.2 % 34,992 % 41.9 bln rubles. The Company shares % The Company structure includes MOESK maintains 610 HV power are traded on the Moscow Stock 10 branch offices with the total supply centers with the combined Exchange. 2013 2014 2015 2013 2014 2015 2013 2014 2015 according to RAS according to IFRS EBITDA margin, % Net profit, %

Net asset value, RUB mln Net profit (according to RAS), RUB mln Net profit (according to IFRS), RUB mln 9.33 15.08 ABOUT THE REPORT 190,988 183,787 7.15 9.54 178,489 169,233 11,641 6.55 19,473 6.31 The annual report 2015 is the first prepared according to the RAS and companies. The table with the 153,578 159,026 integrated report of the Company. Consolidated Reports based on complete list of aspects covered by 6.4 9,247 12,631 The report includes financial, IFRS for 2015. The full versions of the report and the pages presenting % 8,208 8,078 12.7 56.4 operating, and non-financial RAS and IFRS reports are available the corresponding indicators are 103.9 % % indicators, which provide a complex at PJSC MOESK web site included into Annex 5.1 — % overview of the Company activities, (www.moesk.ru). GRI Content References. The 2013 2014 2015 2013 2014 2015 2013 2014 2015 including in the field of sustainable previous report on the activities according to RAS according to IFRS Net profit margin, % Net profit margin, % development. This integrated report represents in the field of sustainable Company’s first report prepared development was issued in 2013 to The report presents the main following the principles and present the results achieved by the Market capitalization and volume Electrical power output Volume of connected from the grid activities of PJSC MOESK in methods of G4 Sustainability Company in 2012. of accrued dividends capacities, MW Moscow region in 2015, plans for Reporting Guidelines by Global 4,296 80,980.3 2,910 80,133.3 80,127.2 3,107 2,055 2016 and mid-term perspectives. Reporting Initiative (further referred Thus, this integrated report is a -1.05 2,646 70,771 64,780 The focus is also made on the to as GRI G4 Guidelines) with balanced and justified presentation % 17.4 36,579 1,531 % environmental and social aspects, inclusion of additional industry- of the significant economic, social, -43.5 which form an integral part of the specific indicators of non-financial and environmental aspects of % Company activities. reporting as recommended for activities, which determine the electric power sector companies sustainable development indicators 2013 2014 2015 2013 2014 2015 2013 2014 2015 The integrated report was (Electric Utilities Sector of PJSC MOESK. Market capitalization 1, RUB mln Electrical power output from the grid to prepared in compliance with Disclosures). The disclosure level consumers and to associated local grid operators the Russian law on reports of is Primary. The report scope is Volume of accrued dividends, RUB mln within the limits of balance and operational responsibility public joint stock companies. The limited to the executive bodies and financial information is based 10 branch offices of PJSC MOESK 1 Market capitalization — data of www.micex.ru (daily market capitalization as of the last trade session of the year), estimations of PJSC on the financial accounting data without subsidiaries and dependent MOESK, other indicators — data and estimations — PJSC MOESK. ANNUAL 6 REPORT2015 7

Despite the overall challenging situation in the Russian economy In 2016, the Company will continue imple- ADDRESS FROM in 2015, PJSC MOESK continued its active work to maintain the invest- mentation of projects for development of ment community’s interest in the THE CHAIRMAN Company and raise information its system of technological connections transparency through organization of conference calls and meetings to the grids along with its activities for OF THE BOARD with investors. modernization of PJSC MOESK assets to To facilitate its perception by improve the quality of its services. Special investors, for the first time in its OF DIRECTORS operation history the Company priority will be given to improvement of made a resolution to approve the PJSC MOESK Group Business Plan availability and transparency of informa- O. M. BUDARGIN based on RAS and IFRS principles for 2015 and forecast indicators tion on the Company activities, including for 2016-2019. in the course of Company investment For a number of years in a The year 2015 for the Company In 2015, in addition to provision of with these processes, the issue row, PJSC MOESK has been program implementation. was marked by difficult manage- reliable power supply to the con- of electric power transmission demonstrating its commitment ment decisions, on the one hand, sumers in Moscow region, PJSC losses was also addressed. In to compliance with the Corporate and by achievement of all the MOESK made a significant contri- 2015, these activities were marked Governance Code: shareholder nized by Expert RA rating agency MOESK considered 391 matters target indicators specified in the bution to improvement of techno- by the Board of Directors as a rights and necessary balance which assigned the A++.gq rating associated with the Company business plan, on the other hand. logical connection procedure and priority field. of interests. (“Exceptionally highlevel of gov- operation and held 25 meetings, Passing the 10th anniversary mark availability of grid infrastructure. ernance quality”) to the Company. including 4 physical meetings. of its operation and development, Understanding the necessity to Ensuring the financial stability of Thus, in 2015, PJSC MOESK fully PJSC MOESK demonstrated improve the quality of delivered the Company in 2015, the Board and timely paid dividends in the Additionally, over the year the I would like to express my sincere traditional level of stability and services, the Board of Directors of Directors approved the action amount of 2.1 bln rubles or 25% of Company approved the updated gratitude to the shareholders, flexibility against the background approved the PJSC MOESK Con- plan for increasing the operational the net profit according to the RAS internal documents on its invest- members of the Board of Directors of changing financial and eco- sumer Service Quality Standard. efficiency and improvement of based on the work results in the ment policy, integrated security and executives of the Company for nomic conditions. financial and economic condition previous period. To ensure adop- assurance and communication their great teamwork, high level The Company also developed as well as the Business Plan of tion of justified decisions by the policy. Adoption of the Uniform of cooperation and commitment, Due to the joint decision-making its non-tariff income sources, PJSC MOESK, which includes Board of Director, the representa- Procurement Standard was professional approach to devel- efforts of its executives, the Board including those associated with the investment program and tives of the Company shareholders another important resolution. opment of electric grid complex in of Directors and shareholders, provision of additional services to information on the key operational appointed new members of The target model of system for Moscow region. PJSC MOESK managed to deliver the clients. Moreover, considering risks for 2016 along with the committees in charge of reliability, operational and process manage- good year-end results. A signif- the scale of current technological forecast for 2017-2020. strategy and development, audit, ment of distribution grid complex O. M. Budargin, icant role in this process was connection activities, it is safe to personnel and remuneration, was analyzed. A number of Chairman of the Board played by the crisis management say that the Moscow region today A special effort was made to fulfill and technological connections internal structural transformations of Directors, PJSC MOESK activities and proactive measures is one of the areas which show activities associated with centrali- to electric grids. were implemented, including in aimed at reduction of the Com- continued dynamic development zation and automation of treasury the Company’s Moscow branches pany’s costs. Thus, the Board of both in the industrial sector, department functions in order The high level of organization/ and executive bodies. Directors made a resolution to including the small and medium to ensure implementation of the support of management bodies reduce the operating costs annu- businesses, and in the residential unified payment discipline across and their internal interaction with In total, over the reporting period, ally by at least 2-3%. housing construction sector. In line PJSC “Rosseti” group of companies. PJSC MOESK in 2015 is recog- the Board of Directors of PJSC ANNUAL 8 REPORT2015 9

Currently, this service is provided the applicants with up to 150 parency of tariffs index. It should to MOESK clients with the power kW capacity requirements) in be pointed out in this regard that INTERVIEW rating requirements up to 150 kW, the previous year was 89.4 days maximum points were awarded including the privileged category (excluding the applicant’s waiting to 18 out of 189 participating (up to 15 kW) with the contract time). The average timeframe for countries only. OF THE DIRECTOR value of 550 rubles. The work on connection to the grid according to expansion of service scope and the applications for technological — Which factor had the great- functionality of the Client Area connections, excluding the activ- est effect for improvement of GENERAL on the Company’s web site is ities of the power grid company the Company efficiency? continued. MOESK has sufficient (for the applicants with up to 150 in-house competences and is able kW capacity requirements), was — Throughout the reporting year, P. A. SINYUTIN to provide this service online via 29.6 days (excluding the appli- the Company managed to optimize the Internet. cant’s waiting time). its operating costs. According to the year-end results, the operating and Due to the interactive capabilities, The average timeframe for perfor- other costs paid out of profit as per the service delivery processes mance of contracts on technolog- the approved business plan for 2015 have become transparent and sim- ical connections for the applicants were reduced by 1.57 bln rubles. — What are the main ities being performed using the the planned value of 0.000484 ple for our clients.The Company with power capacity requirements achievements and results of Company’s own resources. (Order of Regional Energy Com- pays much attention to consumer from 150 kW to 670 kW was 166 Considerable changes were imple- the Company operation in the mittee of Moscow No. 90 dated awareness both in terms of legal days. The average performance mented in the Company structure: reporting year? Due to the timely implementation May 16, 2012). For the Moscow changes and in terms of innovative period for the contracts classified a new branch — Moscow HV of the repair program, the Com- region, this indicator in 2015 was services, programs, and informa- as Doing Business was 68 days. Grids — was established through — In the reporting year, the pany was fully prepared for the 0.004200 against the planned tion base updates. the merger of Central Electric Company celebrated its 10th anni- autumn and winter period. value of 0.073412 (Ordinance of — The significant achievements Networks branch and HV Cable versary and, despite the difficult Moscow Region Pricing and Tar- Using the information portal of the Company in the field of Networks branch. Due to this, economic situation, it successfully In the framework of investment iffing Committee No. 88-R dated dedicated to MOESK technological technological connection in the Company can more efficiently fulfilled the tasks set by the share- program, new transformation October 1, 2012). connections, the consumers 2015 were also confirmed by develop its main grids. holders and main stakeholders. capacities were launched in Mos- can sign up to get sms/email the World Bank rating Doing The business plan was fulfilled cow with the power rating of 897 The customer service quality notifications about the scheduled Business-2016. — How would you describe the in its entire scope. The net profit MVA (99% of the plan), in Moscow was also improved significantly. shutdown of power facilities in sustainable development pros- according to the 2015 year-end region with the power rating The functionality of electronic Moscow and Moscow Region, — Absolutely right. This rating pects of the Company for 2016 results was 9,247 mln rubles with of 695 MVA (110% of the plan). application submission was obtain expert opinions of other confirmed that the process of and the following years? the planned value being 9,224 mln New electric power lines with all implemented. All such applications users through the open Forum connection to the electric grids rubles; EBITDA was 41,954 mln voltage levels were commissioned are registered in the same manner on Electrical Connections (EC), in Russia was simplified con- — In terms of the cornerstone rubles with the planned indicator with the total line length of 6,206 as the official paper documents access the FAQ section, view the siderably. Our country made a strategic targets in the Company being 40,967 mln rubles. km (117% of the plan), including and processed within the estab- detailed video guidelines on how significant breakthrough in the development, we make a special 1,825 km in Moscow and 4,381 lished timeframe. to use the Client Area. category “Getting Electricity” by emphasis on maintaining the high The reliability of electric power km in Moscow region. being upgraded to rank 29, which level of economic efficiency and supply to consumers in the Mos- In 2015, over 30% of applications In January 2016, Internet acquiring is 24 points higher than in 2014. capitalization relative to the average cow region was improved signifi- The Company fully complied were received by the Company capabilities were implemented on The achievements of MOESK were industry level; achievement of relia- cantly. According to the year-end with the requirements of reg- in the electronic format. A new the public section of the EC portal recognized not only by the leaders bility level indicators as required by results, the total rate of incident ulatory authorities in terms of interactive option was introduced (utp.moesk.ru), i.e., payment of the country and energy sector the regulatory authorities; provision occurrence in the electric grids electric power supply reliability. in the framework of “Zero Visits” for electrical connections by but also by the representatives of of high quality service in the field of was reduced by 19% in 2015. The reliability factor estimated program development: online bankcards. small and medium enterprises as technological connections. according to the methods of connection in the full scope, well (according to the surveys of The Company fulfilled its repair Ministry of Energy department in arrangement of voltage supply to The average timeframe for the Work Bank experts). Moscow In view of these targets, consoli- and investment programs for Moscow (including New Moscow) the client facility without the need performance of contracts on received 8 of 8 possible points on dation of electric grid companies in 100%, with 47.6% of repair activ- in 2015 was 0.000245 against to physically visit our client offices. technological connections (for the reliability of supply and trans- Moscow region will be performed ANNUAL 10 REPORT2015 11

to ensure the economic advantages sq. m and the expected population processes. Thus, regarding the — The process of consumer ser- In order to improve the application nation-wide policy for energy-sav- for MOESK, which will eliminate the growth of 2 mln people. Therefore, investment activities, the action vice and loyalty enhancement can processing quality and response ing, improvement of energy and duplicating functions of dispatching according to our estimations, the plan provides for update of report be continuous. time, we recently adopted the environmental efficiency. control and enable transition to demand for power capacity will forms, establishment of unified concept of Integrated Contact the unified centralized operational increase from 1,800 MVA to 4,250 IT environment, which will be The Company developed a log- Center which will handle all the Additionally, activities aimed at and process management (OPM). MVA. Construction of 220 kV Kho- used to record and monitor the term action plan for improvement applications submitted to the consolidation of management of This process will contribute to the vanskaya station of PJSC MOESK information on investment project of client relationship. Thus, the Company (including complaints). the main and distribution electric improvement of electric power sup- is one of the promising investment implementation as well as overall Company plans to expand the In this regard, I am happy to say grids in the Russian Federation ply reliability; ensure better quality projects of the Company, which business process standardization scope of services available in the that in 2015 the number of com- which are being implemented in of grid development planning. The will be implemented in New activities. In terms of loss reduc- web-based Client Area due to plaints was reduced by 35%, which compliance with the Russian Fed- investment costs will be reduced Moscow in the near future. The tion measures, the Company’s deeper integration with the client speaks volumes. eration President Order No. 1567 due to centralization of investment installed transformation capacity key strategy will be transition area of PJSC “Mosenergosbyt”, dated November 21, 2012 On Open planning functions. As a result, the of the future power supply center from the activities, which have the use of digital signature for the final Special attention is paid to phone Joint Stock Company “Russian administrative and management will be 700 MVA. The station will accompanying effect in the form connection acceptance reports. service functionality because Grids” will also have a long-term costs will be lowered. Availability of supply electric power to the res- of loss reduction to the target over 60% of all applications are impact on the development of the technological connections will be idential buildings in Troitsky and activities, which are directly aimed MOESK analyzes the needs of all submitted over the phone. In 2016, electric grid complex in the Rus- provided for any location in Moscow Novomoskovsky Administrative at energy efficiency improvement. applicant categories. Soon, our the Company will implement sian Federation. Thus, the Russian and Moscow region. Districts and to the Administration The following indicators are clients will be able to directly edit an interactive voice response Federation Government issued and Business Center in Kommu- planned for 2020: electric power their profiles in the Client Area. system and automatic voice calls Ordinance No. 511-r dated April The high quality of electric power narka town of Novomoskovsky losses in Moscow — 7.34%; to consumers informing them in 3, 2013 to approve the Strategy supply is a basis for national Administrative District. electric power losses in Moscow Special functionality for sub- case of emergency and scheduled for Development of the Power economy and business develop- region — 6.83%. mission of multiple applications shutdown of electrical facilities. In Grid Complex in the Russian ment. Therefore, our key objective — Will the Company seek to from the system customers in the the framework of its efforts aimed Federation. for the current year is to ensure optimize its investment costs Additional services sales growth Moscow region was developed for at improvement of technological high reliability of electric power and electric power losses con- is expected due to development the category “professional prox- connection process efficiency, The Company has set ambitious supply to consumers. According sidering the existing economic of promising income-generat- ies”. In cooperation with Moscow the Company plans to reduce the goals for itself. I am confident that to the results of the year 2015, we situation? ing fields. By 2020, the share of authorities, the Company started a time period required for business successful achievement of these managed to reduce the average earnings from additional services new project to enable submission proposal preparation: to 3 days goals will further improve the power supply recovery time for the — Surely, optimization of in the overall revenue structure of electronic applications via the for electric power units rated quality and reliability of electric Company in general by 4 minutes, investment costs is an important is expected to reach 3%, with the Public Services Portal (pgu.mos. up to 150 kW; and to 5 days for power supply to consumers. i.e. from 65 to 61 minutes. Our long-term objective. A complex of planned sales profitability for addi- ru) for the sake of the client’s electric power units rated from goal for the year 2016 is to further activities will be implemented for tional services being 44%. convenience and in the framework 150 kW to 670 kW. The timeframe P. A. Sinyutin, decrease this period by 5 minutes. this purpose, including develop- of integration with external infor- for connection of all consumer Director General at By 2017, the Company plans to ment of prospective development The workforce productivity by 2020 mation systems. categories will not exceed the PJSC MOESK reduce the average time required scheme for the electric grid in shall be increased by 15% against regulatory period. to recover technological violations Moscow region. In the framework the indicator of the year 2014. Most importantly, the entire within the new Moscow bounda- of this strategic initiative, by the approach to the consumer rela- — What large-scale trends will ries to 50 minutes. year 2020, the Company plans to — We already discussed the tions is changing. Currently, the impact the prospective develop- reduce the capital costs by 30% improvement of technological Company is implementing a CRM ment of the Company? Another priority area for the Com- to the level of 2012 (in RUB per connection procedure. As we system, which will give us the pany is development of electric physical unit — km, MVA). know, at the current stage opportunity to manage the history — First of all, the long-term grid complex in New Moscow. The the Company processes are of applications made by every cli- planning should be performed new territories will be used by A project was launched to ensure already advanced, for example, ent. This is a completely new level with consideration of slower federal and municipal authorities, the transparency of Company the clients are now able to of work. With the personalized growth dynamics of electric world financial center buildings, activities in various functional submit their applications for approach we can better under- power demand from consumers R&D and innovations cluster, with fields. The Company plans to iden- electrical connection online. stand the consumer problems and in the region of presence. The the total scope of planned con- tify its resources and improve the Is there still some room for track the dynamics of consumer Company development will surely struction activities being 105 mln visibility of internal and external improvement here? interaction with the Company. be impacted by implementation of ANNUAL 12 REPORT2015 13

KEY EVENTS IN THE FEBRUARY 5, 2015 April MAY 5, 2015 MAY 25, 2015 JUNE 29, 2015 MOESK launched the APRIL 1, 2015 MOESK participated in the first Moscow City Council held the Oleg Budargin, Director General REPORTING YEAR “Presnya” cable tunnel for regional conference organized by the public hearings for the invest- of PJSC «Rosseti», was reelected MOESK celebrated its 10th 220kV overhead cable line Moscow Region Department of pub- ment program for the period to the position of Chairman of the AND EVENTS AFTER anniversary. “Matveevskaya — Presnya, lic organization of small and medium 2015-2020. MOESK Board of Directors. THE REPORT DATE chain 1, 2”. companies “OPORY Rossii”. APRIL 7, 2015 The unified call center Light Line MAY 29, 2015 July January MAY 6, 2015 of MOESK became the finalist MOESK joined the Anticorruption Exchange-traded bonds of MOESK JULY 9, 2015 of the 11th annual international Charter of Russian Business. JANUARY 23, 2015 with BO-07 series for the total award “Crystal Headset”. Revamp of 220 kV overhead amount of 7 bln rubles were placed MOESK launched a project for cable line (OCL) “Mat- implementation of intelligent on CJSC Stock Exchange MICEX APRIL 8, 2015 veevskaya — Presnya 1, 2” through open subscription. distribution grids. The pilot sites was completed in Moscow. The Board of Directors of MOESK were deployed across the 20 kV The project improved the approved the draft of revised electric grids in the 22nd region MAY 8, 2015 reliability of power supply and of Moscow Cable Networks FEBRUARY 16, 2015 investments program of the Com- MOESK won the golden medal the quality of electric power branch and 6-10 kV grids in The analytical system for pany for 2015 and 2016-2020. and award “For Preservation and feeding the consumers in Mozhaisky and Ruzsky Power support of management Restoration of Natural Environ- the entire western district of Grids Region of the Western decision-making process based APRIL 8, 2015 ment” in the contest “Top 100 Moscow, including Moscow branch of MOESK. on the SAP platform was given June Moody’s rating agency Russian Companies. Ecology and City district. the top award in the category confirmed the credit rating Environmental Management”. JUNE 11, 2015 “Innovations. Mobile Solutions” of MOESK at the Ba2 level. February at SAP Quality Awards 2014. MOESK signed an agreement with the Moscow Region APRIL 13, 2015 FEBRUARY 2, 2015 Government on cooperation in MOESK achievements were rec- the field of HR training. MOESK provided technological FEBRUARY 17, 2015 connection for “Matreshka” ognized by the high award of SAP business center (within MOESK launched the first CIS for the COMPASS project — pilot project proposed by SAP Excellence Award 2014 in JUNE 11, 2015 “Skolkovo” innovation center). MAY 15, 2015 the winners in the contest of the category SAP Mobility. The Board of Directors of innovative solutions “Energy MOESK completed revamp of MOESK approved target pro- Breakthrough —‚ 2014” which 110/35/10/6 kV “Kubinka” station. JULY 28, 2015 APRIL 29, 2015 grams for improvement of elec- was organized by Rosseti OJSC MOESK notified about success- tric power supply to consumers MOESK completed work on and its partner — a cluster of MAY 21, 2015 ful closing of book building of Novaya Moskva branch. technological connection of energy efficient technologies premises owned by Moscow owned by “Skolkovo” Fund. for exchange-traded bonds Public hearings on the MOESK investment program for Moscow Museum of Modern Art ahead with BO-07 series for the total JUNE 18, 2015 amount of 7 bln rubles. for the period 2015-2020 were of schedule. March held as part of the meeting or- MOESK signed a cooperation agreement with VTB bank and May ganized by the Municipal Services FEBRUARY 4, 2015 MARCH 16, 2015 and Housing Policy Committee of “Gazprombank”. The governance quality rating Sergey Sobyanin, Moscow Mayor, MAY 5, 2015 Moscow City Council. of MOESK was upgraded by opened the key 220 kV “Babush- MOESK signed the first contract JUNE 24, 2015 Expert RA rating agency to A++. kin” station owned by MOESK on technological connections MOESK held the annual General gq (“Exceptionally high level of following the revamp completion using digital signature and Meeting of Shareholders. governance quality”). in the northeast of Moscow. online payment. ANNUAL 14 REPORT2015 15

August October NOVEMBER 10, 2015 DECEMBER 3, 2015 DECEMBER 29, 2015 FEBRUARY 5, 2016

AUGUST 3, 2015 OCTOBER 2, 2015 MOESK provided additional A new service was launched in MOESK won the VII city MOESK completed construction power supply capacity to the Moscow for small and medium contest “Best Company for of 220 kV cable line “Avtoza- The portal for technological Fitch Ratings confirmed the Shalom Theater. businesses — courier delivery Working Mothers”. vodskaya-Yuzhnaya 4, 5” in the connections of MOESK clients rating of MOESK at the BB+ of documents on technological southern region of Moscow. was upgraded. level, Outlook Stable. connections. NOVEMBER 23, 2015 DECEMBER 2015 FEBRUARY 10, 2016 AUGUST 6, 2015 OCTOBER 26, 2015 The project on development Over 6 thous. schoolchildren DECEMBER 10, 2015 attended the open lessons MOESK successfully completed MOESK organized a technologi- MOESK successfully completed of charging infrastructure organized by MOESK as part repayment of bonded loan on cal connection for the buildings repayment of bonded loan on for electrical motor vehicles Representatives of the largest of its charitable project “Good bonds with BO-03 series for the of federal perinatal center. bonds with BO-02 series for the “MOESK-EV” was awarded global auto groups tested the Electricity for Children”. total value of 5 bln rubles. total value of 5 bln rubles. the 2nd prize in the Russian compatibility of their vehicles National Contest of Mass Media, with the network of charging Press Services and regional September stations in the Moscow area — FEBRUARY 17, 2016 OCTOBER 28, 2015 Administrations — “MediaTEK”. “MOESK-EV”. SEPTEMBER 8, 2015 January 2016 MOESK revamped 100 kV MOESK reforms in the MOESK launched a new form of “Fryazino” station in Fryazino technological connections NOVEMBER 25, 2015 JANUARY 12, 2016 DECEMBER 10, 2015 town. feedback — Forum for clients contributed to upgrading The activities on technological MOESK launched a new where the Company specialists Russia to the 3rd position in The Board of Directors made connection of CSKA sports field interactive service for its clients: provide online consultations. the World Bank rating Doing a resolution to establish the in Moscow were completed by free sms or e-mail notifications Business-2016. Russia made a Moscow HV Grids branch. The March 2016 MOESK for 90%. about scheduled electric power significant breakthrough in the branch was established through SEPTEMBER 9, 2015 shutdown. MARCH 3, 2016 category “Getting Electricity” the merger of existing Central MOESK organized a by being upgraded to rank Electric Networks branch and HV The Board of Directors of technological connection for 29. In terms of technological Cable Networks branch. JANUARY 13, 2016 MOESK reelected Sinyutin, Petr Alekseevich, the Company’s the largest Moscow Cathedral connection simplicity, over MOESK won the category Director General, for a new term Mosque. the year Russia dramatically “City Environment” in the contest DECEMBER 16, 2015 (3 years) till February 4, 2019 improved its ranking by 24 “National Environmental Award inclusive. points due to the new methods. MOESK organized a reliable named after V. I. Vernadsky”. SEPTEMBER 16, 2015 Moscow received 8 points on power supply for the new children’s hospital in Podolsk. MOESK reduced the timeframe the reliability of supply and MARCH 18, 2016 JANUARY 14, 2016 required for connection of transparency of tariffs index, December Moody’s Interfax Rating consumers with LV capacity (up which is the highest possible RAEX confirmed the MOESK DECEMBER 26, 2015 Agency, a subsidiary of to 150 kV) to 80 days. ranking awarded by the experts. DECEMBER 2, 2015 rating at the level A++.gq Moody’s Investors Service (“Exceptionally high level of MOESK and “OPORA Rossii” Andrey Vorobiev, Governor international rating agency, governance quality”). SEPTEMBER 18, 2015 introduced a new publishing of Moscow Region, opened the informed about revocation November Grids Management Center MOESK successfully completed project “How to Become a of all nation-scale ratings of MOESK branch in Noginsk. repayment of bonded loan on NOVEMBER 10, 2015 MOESK Supplier”. awarded to the Russian February 2016 issuers, including MOESK’s bonds with BO-01 series for the MOESK completed the project on long-term credit quality rating total value of 5 bln rubles. migration from the solution of a DECEMBER 2, 2015 FEBRUARY 3, 2016 according to the nation scale foreign developer to the Russian MOESK filed an application to Acquiring capabilities were of level Аa2.ru. The agency’s service management platform — SEPTEMBER 29, 2015 the Moscow Arbitration Court implemented on the MOESK resolution to revoke nation- Naumen Service Desk. The return portal for technological MOESK completed another for termination of power supply scale ratings will not affect the on MOESK investment into the connections, i.e., payment for revamp stage of 110/10/6 kV transmission agreement with ratings awarded according to project was 300% per the year. services by bankcards. “Koptevo” station. OJSC “Oboronenergosbyt”. the international scale. ANNUAL ABOUT 16 REPORT2015 THE COMPANY 17 ABOUT THE COMPANY 1.1. GENERAL INFORMATION

Public Joint-Stock Company The main types of Company Establishment of a New Moscow United Electric Grid activities are transmission and Branch — Moscow HV Grids Company (hereinafter referred to distribution of electric power, as PJSC MOESK or the Company) technological connections of con- • Operation of high voltage equip- was established through restruc- sumers to the power grids. ment rated for 35 kV and above in turing as a result of spin-off from Moscow in 2015 was performed JSC “Mosenergo” on April 1, 2005. The total amount of Company by the following two branches of The head office of the Company is capital as of December 31, 2015 PJSC MOESK: located in Moscow. was 332,749,590 thous. rubles with 57.4% being represented by • Central Electric Networks (over- As of December 31, 2015, the the equity capital (190,988,390 head lines and 35-220 kV station structure of PJSC MOESK includes thous. rubles) and 42.6% being equipment); 10 branches, the Company group represented by borrowed capital includes 4 subsidiaries. (141,761,200 thous. rubles). • HV Cable Networks (110-500 kV cable lines).

Serviced area Central electric Northern electric Networks Networks 10,000 km2 2 15.1 10,100 km thousand people Novaya Moskva The average personnel 1,500 km2 headcount

Western electric Networks 2 129.3 10,000 km Eastern bln rubles Southern electric Networks electric Networks 16,000 km2 Company revenues 7,800 km2 according to the RAS ANNUAL ABOUT 18 REPORT2015 THE COMPANY 19

Considering that this equipment 1. Establishment of a unified com- 3. Optimization of management 1.3. BUSINESS MODEL relates to a single process chain, petence center for HV grid assets structure; establishment of a new united branch management in Moscow; for servicing HV grids on the basis of 4. Reduction of operating costs. Process: Electric Power Transmission and Distribution the above two branches in Moscow 2. Improved reliability of power will deliver the following advantages: supply to consumers; PJSC MOESK provides electric power transmission services to guaranteed power suppliers, utility companies GENERATION 1.2. STRUCTURE OF ELECTRIC GRIDS ASSETS and direct consumers — members of wholesale and retail electric power MAIN GRIDS ≥ 220 KV Structure of Electric Grids Assets market under the contracts on elec- ASSOCIATED tric power transmission services. The ENERGY SYSTEMS Category 2013 2014 2015 2015/2014, % contract subject is performance of a Line classification by location: complex of organizational and tech- nical activities as required to supply payment for electric power overall length of overhead power transmission lines, km (total), including: electric power to end users of PJSC payment MOESK, which have their electrical for electric power by circuits 66,562.8 68,861.0 71,712.5 4.1 transmission installations connected directly to SALE services by routes 59,645.4 61,798.0 64,675.1 4.7 PJSC MOESK grids and to local grid GUARANTEED payment overall length of overhead powercabel lines, km (total) 72,692.6 73,447.4 76,931.2 4.7 operators (LGOs). POWER SUPPLIER, for electric power transmission POWER services Line classification by voltage (with breakdown to by circuits or by route): COMPANIES PJSC MOESK receives the electric HV transmission lines, km 17,015.9 17,008.8 16,369.9 -3.8 power from the power generating payment for electric Distribution lines, km 122,239.5 125,299.5 132,273.8 5.6 companies (power plants, block power 220-0.4 kV stations), associated energy losses Total number of HV feed centers, ea. 608 608 610 0,3 systems located in the nearby payment for electric power Installed power of HV feed centers, constituent entities of the Russian 47,291.0 48,416.3 49,572.2 2.4 MVA Federation, main electric grids — grids rated for 220 kV and above Total number of distribution grid substations, ea. 29,664 31,624 36,143 14.3 (PJSC Federal Grid Company of payment Installed power of distribution grid substations, Unified Energy System or PJSC FGC CONSUMER for electric power 22,092.6 22,957.3 24,963.9 8.7 transmission MVA of UES) and transmits this electric services power to the terminal points of end Similar data with breakdown to Moscow and Moscow region is presented in Annex 5.9. users or LGOs. Electric power flows LGO 35-0.4 kV The increase in the length of grid substations is associated consumers and consolidation In consideration of electric power Cash flows distribution grids, the number with fulfillment of obligations of electrical grid facilities. transmission services, PJSC and power rating of distribution for technological connection of MOESK performs settlements In the course of electric power Company grids and the volume with the power supply companies transmission certain power losses of energy transmitted from the (guaranteed power suppliers, direct occur in the electric grids due to the Company’s own grids to the grids consumers) and grid companies normal electric power transmission owned by LGOs. The electric power (LGOs, PJSC FGC of UES) according process; the volume of losses losses in the Company’s own grids 76,9 36,1 24,963.9 to the electric power transmission is measured as the difference are purchased by PJSC MOESK thous. km (total) thous. ea MVA tariffs established by the Moscow between the volume of energy from the guaranteed power sup- overall length of overhead Total number of Installed power Regional Energy Committee and received by the Company’s own grid plier under the electric power sale powercabel lines distribution grid of distribution grid Moscow Region Pricing and Tariff- and the volume of energy delivered agreement in order to compensate substations substations ing Committee. to the consumers connected to the for such losses. ANNUAL ABOUT 20 REPORT2015 THE COMPANY 21

Business Model of PJSC MIPC

Strategic Objectives Efficient Management of Key Value Proposition and Goals Business Processes for Key Stakeholders

Development process Reliable power supply to consumers Reliable power supply Strategic and business Investments Consumers planning and development Optimization of operating and investments Quality services costs for ensuring the required reliability level

Tax payments to the Main business processes government Higher company capitalization New grid facilities for Government Technological Electric power economic development and Better consumer service quality connection transmission society and efficiency of electrical connection process Creation of jobs

Development of non-regulated Resource management processes business types Increase of share price Shareholders and dividends and investors

Development of HR Production assets Personnel and improvement of labor efficiency Decent salaries Company personnel Ensuring high level of safety Materials Financial capital Professional development of electric grids complex and equipment ANNUAL ABOUT 22 REPORT2015 THE COMPANY 23

STRATEGY Strengths: Opportunities: Comparison of PJSC MOESK 1.4.1. Market Position and Development Prospects with Peer Companies • Well-developed grid infrastruc- • Increase of market share due to Based on Results of the ture with 0.4-220 kV rating in the fast development of grid infrastruc- Russian Federation region with ture and acquisition of territorial Reporting Year PJSC MOESK provides Market Overview Main Consumers the highest growth dynamics. grid companies of the second level. services on transmis- of Company Services Market capitalization sion of electric power In consideration of electric power • Dominant position in electric • Improvement of reliability and Revenues for 2015 according transmission services, PJSC 0,66% 1,10% power transmission market. economic efficiency of grids due to the RAS and technological con- MOESK performs settlements to implementation of smart grid nections of consumers with the power supply companies • Possibility to arrange electric technologies. 129,288.321 (guaranteed power suppliers, power supply with any level of to the electric grids in power companies, direct reliability. • Reduction of losses due to the Moscow area, which consumers) and grid companies 98,24% implementation of commercial includes two constituent (LGOs, PJSC FGC of UES) according • Developed structure of operative metering system. entities of the Russian to the electric power transmission and technological grid manage- tariffs established by the Moscow ment. • Generation of additional revenues Federation (Moscow Regional Energy Committee from non-regulated activities. and Moscow region) and Moscow Region Pricing and Electric power supply companies • Developed network of customer and concentrates a Tariffing Committee. Guarantee suppliers service centers for provision of • Improvement of operating Other consumers technological connections. efficiency due to implementation significant part of the of cost-cutting potential and national demographic increased labor output. 79,817.205 and economic potential of the country. 46.9 19 68,884.071 thous. km² mln people Serviced territory Serviced popultaion 60,535.362 headcount

47,860.392

43,726.661 42,744.387 Competitors and Competi- Power transmission Technological connections 39,622.649 36,579 tive Advantages 35,704.161 Among the largest companies Among the largest companies PJSC MOESK is one of the largest providing similar services in Moscow performing similar activities in 30,365.033 inter-regional distribution compa- are JSC United Energy Company (JSC Moscow are JSC United Energy nies in the Russian Federation and UEC) and JSC “Energokompleks”, in Company (JSC UEC) and JSC “Ener- the largest distribution company in Moscow region - JSC Moscow Region gokompleks”, in Moscow region — 16,774 the Moscow area. Power Grid Company (JSC “Mosoblen- JSC Moscow Region Power Grid 14,548.592 ergo”), OJSC “Oboronenergo”, CJSC Company (JSC “Mosoblenergo”), 8,232 8,253 “Elektrosetekspluatatsia”, Minicipal OJSC “Odintsovskaya Elektroset”, 5,888.948 7,066 4 ,608 Unitary Enterprise “Kolomenskaya OJSC “Oboronenergo”, CJSC “Elek- 2,625 3,790 3,455 940 1,544 1,917 Elektroset”, Municipal Enterprise of trosetekspluatatsia”. Schelkovsky district “Schelkovskie TDC (Tomsk IDGC IDGC IDGC “Lenenergo” IDGC IDGC IDGC of Centre IDGC IDGC “Kubanenergo” MOESK Elektroseti”, Minicipal Unitary Enter- Distribution of South of North of North-West of Volga of Siberia and Volga of Centre of Ural prise “Podolskaya Elektroset”. Company) Caucasus Region ANNUAL ABOUT 24 REPORT2015 THE COMPANY 25

1.4.2. Priority Fields of Activities and Development Prospects Commentary-interview of restore the power supply to consumers arranged within the time limits required of the Company the Director for Business was reduced from 220 minutes in 2011 by the law increased to 95%, which Processes Automation to 81 minutes in 2015 in Moscow region resulted in upgrading of Moscow posi- A. A. Areshkin and from 50 minutes in 2011 to 23 tion in the regional rating and Russian Strategic priorities of the Company minutes in 2015 in Moscow (within old Federation position in the international The main areas of development for the boundaries). This indicator is considered rating of the World Bank in the category next three years and strategic goals by the Company as the key indicator which “Getting Electricity” (in the framework Improvement Proactive grid of the Company are defined by the can be used to assess the achievement of of the survey “Doing Business”) to rank Program of Priority Goals for the Period goals in terms of improvement of electric 29 (which is 24 points higher compared of power supply development. through 20152. This document was power supply reliability. with the previous rating). implementation developed on the basis of the provisions set forth in the Russian Federation Ener- In order to considerably improve the client Due to implementation of activities of new technologies gy Strategy through 20303, development service level, the Company fulfilled the aimed at proactive grid development, strategies (including energy strategies) following key tasks: complex optimization the share of feed centers with reserve for the regions of Company presence4 and automation of the entire cycle of power capacity available for tech- with consideration of interests and technological connection to reduce the nological connection of consumers Improvement Growth of investment requirements of the key shareholders. connection timeframe and simplify the was increased (to 87% in Moscow, connection procedures for all client to 82% in Moscow region). of service quality. attractiveness In order to improve the reliability of categories, implementation of efficient availability electric power supply to consumers, the schemes for interaction with the power Speaking of the main tasks associated and capitalization Company fulfilled a complex of tasks, supply companies to enable the clients with improvement of HR professional of grid connections including: replacement of 1,425 km of to execute all the documents associated level and loyalty in 2015, I would like overhead lines with self-supporting with technological connection services at to mention the increase in the salary insulated conductors, arrangement one point, development and provision of levels and development of incentives Improved of remote control functionality for 45 additional services to the consumers. systems based on assessment of the stations rated for 35-220 kV and 15 dis- employee results, increase in the share professional level tribution points and transformer stations Following the implementation of the above of internal training to 70.5%, estab- and loyalty in 6-20 kV grid, clearing the overhead measures, the timeframe required for lishment of candidates’ pool for the line routes running through forests preparation of contracts on technological key positions in the Company, higher of personnel according to the regulatory parameters connections was reduced to 7.5 days in level of occupational safety and lower (3.5 ha for HV grids and 495 km for 2015, the share of technological connections occurrence of work-related injuries. distribution grids), organization of dispatch control point in Novaya Moskva Company Mission branch of PJSC MOESK, optimization of work performed by repair and mobile work teams due to implementation of Providing the electric power for the capital region of the Russian Federation, PJSC MOESK ensures the universal approach and utilization of maximum level of reliability and availability of distribution grid infrastructure due to the use of energy- modern equipment and tools. efficient technologies and innovations, and due to strict compliance with the global quality standards of service delivery and observance of the best corporate governance practices. In 2015, in order to provide mobile teams with additional transportation means, the Company purchased 80 transportation vehicles (20 Kamaz 2 Approved by the resolution of the Board of Directors dated May 29, 2013 (minutes No. 200 dated May 31, 2013). trucks, 56 GAZ-Sobol light commer- 3 Approved by Russian Federation Government Ordinance No. 1715-r dated November 13, 2009 On Russian Energy Strategy for cial vehicles, 4 Ford Transit vehicles). the Period through 2030. Due to fulfillment of the planned 4 Moscow Energy Strategy for the Period through 2025, Electric Power Sector Development Strategy for Moscow region for the Period through 2020, Prospective Development Scheme and Program for Electric Power Sector in Moscow region for the tasks, the average time required to Period through 2013-2017. ANNUAL ABOUT 26 REPORT2015 THE COMPANY 27

Dynamics of Achievement of Key Indicators in the Framework of the Company’s Priority In 2015, the Company developed the • Average time required for electric The Company plans to achieve the Tasks for 2013-2015 draft Strategic Development Plan power restoration — 50 minutes following indicators by 2020: for 2017 and for the Period through (Moscow within the new limits). Target indi- Dynamics of achievement of indicators 2020 based on the Strategy for Devel- • Level of electric power losses in cator value according to priority tasks opment of the Power Grid Complex • New supply growth — “+15%” Moscow — 7.34% for 2015 in in the Russian Federation5 and the Strategic objective Indicator description compliance Actual in Actual in Actual in results of Priority Tasks fulfillment. 3. Reduction of losses and • Level of electric power losses in with priority 2013 2014 2015 minimization of operating Moscow region — 6.83%. tasks 5 The Company defined the following and investment costs Improvement of electric Average time required for electric priority strategic goals for the next required to ensure the 4. Improved efficiency of power supply reliability power supply recovery, minutes five years: necessary level of relia- technological connection bility, safety, and service process Moscow (within old limits): 45 46 37 23 1. Maintain the high level of economic quality Moscow region: 150 122 70 81 efficiency and capitalization relative • Number of technological connec- New Moscow: 120 108 57 75 to the average industry level; • Reduction of specific incident tion procedures — 3 occurrence rate by 10% minimum Reliability indicator, hour/ 2. Achieve the reliability level indi- • Timeframe for preparing an offer: connection point: cators as required by the main • Reduction of spare parts stock 3 days for electric installations Moscow 0.000484 0.000410 0.000308 0.000245 stakeholders; by 15% rated up to 150 kW; 5 days for Moscow region 0.073412 0.022525 0.009414 0.004200 electric installations rated from 3. Ensure the high level of service • Reduction of post-emergency 150 kW to 670 kW Improvement of service quality. Share of contracts on technological in the field of technological recovery time Availability of technological connections which were performed in 99 83.39 89.73 95.35 connections. • Connection timeframe: 90 days connection due time, % • Increase in the share of repair and for electric installations rated up Average time required to prepare In order to achieve its strategic operation activities performed using to 150 kW; 180 days for electric an offer for the contract on goals, the Company sets the fol- the Company’s own resources installations rated from 150 kW technological connection (for 15 19.4 8.17 7.47 lowing strategic priorities: due to inclusion of field service to 670 kW. applicants with power supply rating personnel into the Mobile Work up to 150 kW), days 1. Consolidation of electric Team, possibility to divide the team 5. Development of non-reg- Number of physical visits to MOESK 2 grid companies in the Mos- into several groups with operating ulated business types offices in case of technological <3 3 3 maximum cow area in the manner personnel members in each group. connection which would be economi- In the framework of this priority Proactive grid development. Share of feed centers with cally beneficial for MOESK. • Allocation of up to 15% of the field, the Company plans to achieve Implementation of new reserve capacity for technological total work hours of mobile the following indicators by 2020: technologies connection of consumers,%: In the framework of this priority work teams for performance of Moscow 76 64 78 87 field, the Company plans to additional activities which are not • The share of revenues from increase the share of gross revenue connected with maintenance and additional services in the total Moscow region 72 66 79 82 requirements (GRR) in the regions repair tasks, e.g., for arrange- revenues — 3% Overall transmission power losses,% 8.55 9.16 8.77 8.55 of presence and increase the share ment of technological connec- Enhancement of investment in the net supply. tions using the Company’s own • Sales margin for additional ser- Specific operation costs, RUB thous. / attractiveness and 17.8 17.48 15.63 15.13 resources or for performance vices — 44%. 1 conventional unit capitalization 2. Development of electric of work on the customer’s side grid complex in New (additional services). 6. Improvement of labor Improvement of personnel’s Wok time loss due to work-related 4 3.79 1.23 0.47 professional level and loyalty injuries (LTIFR), hour Moscow territories efficiency and develop- • Reduction of the specific invest- ment of human resources In the framework of this priority ment costs by 30% by the year field, the Company plans to achieve 2020 relative to the level of 2012 (in The key activities for improvement 5 Approved by Ordinance of the Russian Federation Government No. 511-r dated April 3, 2013. the following indicators in в 2017: RUB per physical unit — km, MVA). of labor efficiency are: ANNUAL ABOUT 28 REPORT2015 THE COMPANY 29

• Rational organization of produc- • Reduction of administrative and protection system of the facilities; Key Performance Indicators tion personnel work due to opti- management personnel. installation of additional security mization of mobile team work. systems; Target values for 2015 Scope of indicators • Establishment of candidates’ pool Q1 Q2 Q3 Q4 • Enhancement of HR flexibility, for the mid-term and long-term • Minimized economic risks due personnel training for devel- perspectives of the Company with to support of activities for imple- Quarter-based indicators: opment of associated skills (at at least 3 candidates for each key mentation of large investment Absence of major emergency occurrence rate growth ≤ 0 ≤ 0 ≤ 0 ≤ 0 least 50% of team members hold position. projects and improvement of Prevention of growth in the number of injured permits for routine switching security system for the business ≤ 0.0551 ≤ 0.0551 ≤ 0.0551 ≤ 0.0551 operations, 100% of workers 7. Ensuring the high safety processes with the highest risk of persons in case of accidents performing certain tasks have level of electric power corruption; ≤ 1,5 ≤ 1,5 ≤ 1,5 associated work skills such as grid complex Financial stability indicator — leverage ratio ≤ 1.5 or or or sling operator, tower worker, die- • High information security due ≤ 0,8 ≤ 0,83 ≤ 0,76 sel generator set operator, etc.). • Higher level of anti-terrorist to protection of information and protection for the facilities and telecommunication infrastructure Year-based indicators: • Revision of technological charts personnel due to integration from the leaks of confidential ≥ average value for the companies included into the and work performance regula- of cutting-edge information information and personal data. base for calculation of MICEX PWR as of the end of the TSR (total shareholder return) tions. technologies into the physical reporting period or ≥ average value of indicator for the previous three years before the reporting year Return On Invested Capital (ROIC) ≥ 0.9 Reduction of specific operating costs ≥ 10% 1.5. KEY PERFORMANCE INDICATORS Level of power losses ≤ 8.55% Achievement of required reliability level of 1 Achievement of In 2015, the set of Company • clause 15.1, article 15 of the delivered services priority Company performance indicators was Company’s Articles of Associa- Reduction of specific investment costs ≥ 15% changed considerably in order to tion, Compliance with the commissioning schedule ≥95% development goals incorporate the priorities as defined by the Strategy for Development • resolution of the Company’s Compliance with the due dates for electrical is assessed based ≤ 1.1 of the Power Grid Complex Board of Directors dated April connection on the system of approved by Russian Federation 13, 2015 (minutes No. 256) on Labor efficiency indicator 4.429 thous. rubles/thous. man-hours Government Ordinance No. 511-r, agenda item No. 8 “Approval key performance correlate the indicators with the of methods for calculation and indicators (KPI) goals of the Long-Terms Company assessment of achievement of According to the results of the Strategy for Development of The system of key performance Development Program and fulfill key performance indicators for 2015, the target values of key the Power Grid Complex (Russian indicators used by the Company implemented by the certain orders given by the Russian Director General of OJSC Moscow performance indicators were Federation Government Ordinance determines the amount of Company. Federation Government. United Electric Grid Company. achieved, the degree of annual KPI No. 511-r), i.e., reduce the specific variable remuneration paid to the fulfillment is 90%, and degree of operating costs by at least 15% executives: each indicator bears a The system of key performance The following scope and values of quarterly KPI fulfillment is 100%. by the year 2017 relative to the certain specific relative value within indicators for the Company’s key performance indicators were level of 2012, reduce the specific the total remuneration amount; Director General was adopted adopted for 2015 (Table): The indicators for 2015 were set investment costs by at least 30% quarterly and annual bonuses are based on: with consideration of necessity to and cut the electric power losses by paid subject to achievement of achieve the target benchmarks of 11% relative to the level of 2012. corresponding KPIs. ANNUAL ABOUT 30 REPORT2015 THE COMPANY 31

1.6. QUALITY MANAGEMENT SYSTEM

One of the key objectives of the services. Development and improve- quality of delivered services, Company is to increase the avail- ment of the management system PJSC MOESK implemented and ability level of electric grids infra- in compliance with the international maintains its quality management structure and improve the quality of standards of ISO 9000 series if the system. he quality management electric power transmission services key tool for achievement of this goal. system was developed in compliance and technological connection In order to ensure the sustainable with the requirements of ISO 9001.

Development of Quality 2008 2009 2011 the quality management the quality management the scope of QMS Management system was certified system was updated to meet certification was expanded to for compliance with the the requirements the branch of PJSC MOESK System requirements of ISO 9001:2008 — Moscow Cable Grids of ISO 9001:2000

2012 2013 2014 2015 the scope of cetification was second supervisory audit adaptation of management certification of quality expanded to the regional in the framework of system operated by management system electric grid branches expanded certification scope «Energouchet» branch for compliance with of the Company to the requirements requirements of ISO 9001:2008 of ISO 9001:2008

In 2015, the quality management management system, including system of PJSC MOESK was certi- as related with preparation for fied by Bureau Veritas Certification successful completion of the first Holding SAS for compliance with supervisory audit of PJSC MOESK requirements of ISO 9001:2008 with quality management system for the the following scope of certification: following application field: Provision Provision of electric power trans- of electric power transmission and mission and distribution services distribution services and connection and connection to electrical grids of to electrical grids of PJSC MOESK PJSC MOESK. with application to the following Company branches: Currently, the quality management • Moscow Cable Networks system of PJSC MOESK covers all • Moscow HV Grids the executive bodies and branches • Southern Electric Networks of the Company. • Western Electric Networks • Eastern Electric Networks In 2016, the Company plans to • Northern Electric Networks perform activities aimed at devel- • “Energouchet” opment of PJSC MOESK quality • Novaya Moskva ANNUAL RESULTS OF COMPANY 32 REPORT2015 ACTIVITIES 33

Commentary-interview of the • relocation of production facilities from How will the demand for electric Deputy Director General for Moscow to other regions (including fur- power change over the next Transport and Electric Power niture factories, liquidation of industrial few years? Metering V. A. Kimerin zones which were previously located within Moscow boundaries); Considering that small and medium How would you describe the situa- businesses have already imple- tion with electric power consump- • change of migration policy in rela- mented their own Energy-Saving tion in the Moscow area? tion to the CIS countries (outflow Programs in accordance with Federal of immigrants); Law No. 261-FZ dated November The Moscow area is characterized by 23, 2009 On Energy-Saving and dynamic growth and development; • implementation of the Moscow Improvement of Energy Efficiency therefore, growth of electric power Government Program for small and on Amendment of Certain consumption is observed annually. retail businesses. Russian Federation Legal Acts and The output to the grid over the period considering the overall slow-down of economic stability from 2012 to The electric power consumption in of growth rates due to the economic 2014 was increasing steadily at the Moscow dropped by 2.41% against the crisis, the Company’s Business rate of 1.5%. In 2014, the growth previous year to 45.2 bln kW•h. Plan provides for the annual energy slowed down to 0.62%; and according consumption growth in 2016-2020 to the operation results of 2015, The electric power consumption in Moscow at the level of 0.26%. The losses are the volume of power output to the region in 2015 was 42.4 bln kW•h, which expected to decrease from 7.75% in grid dropped by 1.29% relative to matches the level of 2014. Better situation 2016 to 7.09% in 2020. The growth 2014. The lower power output to in the region is explained by the high growth of net supply in 2016 and further the grid (net power supply) was rates of electric power consumption by the in 2017-2020 will be achieved RESULTS OF caused by reduction in electric population due to intensive construction of due to considerable reduction of power consumption. new residential buildings and villa commu- electric power losses. nities in Moscow region. Lower consumption was observed COMPANY due to the following reasons: • slowdown of production rates;

• relocation of large companies to other regions (Constitutional ACTIVITIES Court of the Russian Federation, PJSC “Gazprom”);

• absence of demand for residential 2.1. OPERATING RESULTS housing (both renting and acquisi- tion). The earning power of rented 2.1.1. Transmission and Distribution of Electric Power apartments in Moscow is the low- est among other Russian cities with Over the year 2015, the volume indicators for 2014, the volume a million-plus population (4.6%), of electric power transmission of delivered power transmission according to RBC); to consumers was 70,533 mln services decreased by kW•h. Compared with the actual 1,351 mln kW•h or 1.9%. ANNUAL RESULTS OF COMPANY 34 REPORT2015 ACTIVITIES 35

Results and Forecast of Electric Power Balance Indicators

Category 2013 2014 2015 2016* 2015/2014, % Electric Power Losses Incorporated into Tariff and Balance Resolution and Business Plan

Electric power output to the grid, mln kW•h 88,215 88,765 87,618 88,160 -1.3 Actual/ Actual/Business Description Regulatory losses Business plan Actual regulatory Electric power output from the grid to plan consumers and associated LGOs within losses 80,133 80,980 80,127 81,328 -1.1 the limits of balance and operation mln kW•h 7,927 7,617 7,491 -5.50% -1.65% responsibility, mln kW•h % 8.93 8.55 8.55 -0.38 pp 0 pp Losses, % of output to the grid 9.16 8.77 8.55 7.75 -0.2 Losses, mln kW•h 8,082 7,785 7,491 6,832 -3.8 Similar data with breakdown to Moscow and Moscow region is presented in Annex 5.9 to the Annual Report. For reference: Volume of electric power transmission According to the operation results power consumption volumes due The actual losses of electric power to consumers (boiler net power supply 71,412 71,884 70 533 71,315 -1.9 of PJSC MOESK, the volume to the economic situation in the in the electrical grids of PJSC according to uniform tariffs), mln kW•h of electric power output to country, which affected Moscow MOESK were 7,491 mln kW•h or consumers and associated LGOs on a larger scale. Additionally, 8.55% of the output to the grid. * Business plan for 2016 was approved at the meeting of the Board of Directors on December 10, 2015 (minutes No. 271 within the limits of balance and abnormally warm weather in Compared with the same period in dated December 11, 2015). operation responsibility in 2015 Moscow region also contributed to 2014, decrease in the output to the Similar data with breakdown to Moscow and Moscow region is presented in Annex 5.9 to the Annual Report. was 80,127 mln kW•h, which is reduction of power consumption. grid by 1.29% resulted in decrease 853 mln kW•h or 1.05% lower The average annual ambient air in electric power losses by 193 mln than in 2014 (80,980 mln kW•h). temperature in 2015 was 0.85° kW•h or 0.22 pp. The volume of net supply by Structure of Power Structure of Power The decrease in the net supply higher than in 2014 (7.94° and PJSC MOESK according to Transmission Service Transmission Service Volumes was mainly caused by reduction of 7.09° respectively). uniform tariffs in 2015 relative Volumes with Breakdown with Breakdown to Voltage to 2014 decreased by 3.62% in Moscow and by 0.27% in Mos- to End Consumer Groups Levels, mln kW•h (total) cow region, which is explained 814 5,195 by economic stagnation, low 12,497 business activity and, as a result, 6,040 21,812 29,982 reduced volumes of power 1,085 consumption as well as abnor- mal temperature in December 70 533 2015. Considerable drop in the Net supply net supply according to the 22,461 uniform tariffs in Moscow is 26,969 associated with transfer of elec- 14,211 trical facilities owned by state unitary enterprise “Mossvet” Industrial consumers High voltage (110-500 kV) to JSC UEC under a leasing Non-industrial consumers Medium voltage-1 (35 kV) agreement. However, despite the Household and equivalent Medium voltage-2 (1-20 kV) considerable reduction of net consumer groups Low voltage (0.4 kV and below) supply to industrial consumers Governmental and municipal (by 4.2%) and non-industrial organizations and other consumers (by 3.8%), the overall budget-funded consumers growth dynamics of net supply Transport to consumers is positive for the Agricultural sector Company. ANNUAL RESULTS OF COMPANY 36 REPORT2015 ACTIVITIES 37

2.1.2. Technological Connection Commentary-interview of the clients using technological connection Due to the above work, the timeframe Deputy Director General for services. Today the clients can choose required for preparation of offers on the most convenient payment sched- technological connection contracts was In general, the dynamics of (starting from September 1, 2015 of individual residential housing Technological Connections and Service Development ule for the period of 3 years. reduced (from 7 days for the applicants applications for technological the applicants with power rating construction in Moscow region A. M. Pyatigor with the power rating up to 150 kW and to connections to MOESK grids cor- requirements from 15 to 150 kW and development of New Moscow I would like to make a special mention 15 days for the applicants with the power responds to the indicators of the may determine their payment territory; simplification of tech- In my opinion, the main achievement of of the Company achievements in the rating up to 670 kW), the applicants have previous year; slight growth (10% schedule at their convenience nological connection procedure PJSC MOESK in this field is implemen- client relations management. Currently, a greater level of control over the process relative to 2014) is explained by and select an individual option of for the applicants; dramatic tation of Zero Visits program. Due to this any prospective customer can easily of technological connections and the per- the increased number of applica- payment by installments up to 3 change in the internal business program, the clients no longer have to understand all the specific details of centage of applications for technological tions for the capacities up to 150 years). processes of the Company physically visit the offices of PJSC MOESK technological connection procedure. connections via the interactive services kW which was observed after the associated with technological to sign the paper documents related to There are several ways to obtain increased considerably (up to 50%). following reforms: reduction of Reduction of the total power rat- connections; active completion the offer on technological connection. necessary information: personal appli- technological connection prices ing in the contracts on technolog- of earlier contracts on techno- Clients with power rating up to 150 kW cation to the Company office by calling Speaking of plans for 2016 in terms by 50% for the applicants with ical connection by 22.2% over the logical connections (acceptance may sign the contracts with the digital the unified call center Light Line at of technological connections, the mid- power rating up to 150 kW from reporting year is explained by the of technological connections by signature and make payments under the 8(800) 700-40-70, asking questions on term and long-term strategy can be October 1 2015 (in compliance difficult situation in the national the clients). Additionally, Moscow contracts with the bankcard using the the Client Forum or reading information described generally as improvement of with RF Government Ordinance economy. Region Law No. 124/2014-OZ On Client Area on the web portal of PJSC available on the specialized portal service quality for the applicants: No. 1116 dated October 29, 2014 Characteristics of Cases where MOESK for technological connections. utp.moesk.ru. On Amendment of Pricing Basis The growth of fulfilled contracts No Permit is Required for Con- • Further reduction of time required for Regulated Prices (Tariffs) in ratio by 34.5% in 2015 relative to struction in Moscow Region dated Moreover, the Company completed an Moreover, each prospective customer for preparation of offers on Power Sector and introduction the year 2014 was observed in November 11, 2015 was amended important project in cooperation with with power requirements above technological connection and of individual payment schemes line with the higher growth rates in the reporting year. PJSC “Mosenergosbyt”. For example, 8,900 kW will be assigned a personal performance timeframe of contracts when submitting their applications to manager to provide consultations on on technological connections due MOESK, clients now can sign a contract technological connections. to optimization of internal business Results of Technological Connection Activities on technological connection and power processes of the Company; supply at the same time. The grid com- The Company also launched a program pany specialists also perform accept- of document delivery by courier service • Development of client service proce- Category 2013 2014 2015 2015/2014,% ance of metering instruments. I would for small and medium enterprises dures both for personal and interactive also like to point out that the clients can (with power rating from 15 to 150 kW) formats in order to enhance the Total number of submitted applications for technological in Moscow, which will be expanded to customer experience in the course of 91,610 92,735 102,031 10.0% personally submit their applications for connection, ea. technological connections to MOESK in Moscow region next year. technological connection procedure. any client service center as convenient Total power rating for submitted applications for for the client, regardless of the location 8,841 7,836 8,801 12.3% technological connection, MW of the facility for which the technological connection will be arranged. Total number of executed contracts on technological 70,877 67,479 68,695 1.8% connection, ea. Regarding the terms of payment for technological connection, the following Total power rating for executed contracts on technological measures were implemented in 2015: 4,454 3,729 2,903 -22.2% connection, MW • The price of technological connection was reduced by 50% for the con- Actual connections, ea. 34,859 57,499 77,355 34.5% sumers with power rating up to 150 kW starting from October 1, 2015. Actual connected power capacities, MW 1,531 2,523 3,107 23.1% • Additional installment payment schemes were introduced for the Similar data with breakdown to Moscow and Moscow region is presented in Annex 5.9 to the Annual Report. ANNUAL RESULTS OF COMPANY 38 REPORT2015 ACTIVITIES 39

Results of Technological Connection Activities (ea.)

8,841 8,801 102,031 91,610 92,735 7,836 77,355 12.3 70,877 67,479 68,695 % 10 57,499 4,454 % 3,729 34,5 3,107 1.8 34,859 % 2,903 2,523 % -22.2 1,531 % 23.1 % 2013 2014 2015 2013 2014 2015 2013 2014 2015 2013 2014 2015 2013 2014 2015 2013 2014 2015

Total number Total number Actual connections, ea. Total power rating Total power rating Actual connected power of submitted applications of executed contracts for submitted applications for executed contracts capacities, MW for technological on technological for technological on technological connection, ea. connection, ea. connection, MW connection, MW

Total number of submitted applications, ea. Total power rating for submitted applications, MW

1% 2% 1% 0% 3% 2% 12% 9% 6% 6% 28% 30% 8%

2013 2014 2015 2013 12% 2014 2015 9% 8% 87% 91% 93% 68% 47% 49% 16% 13% up to 15 kW, total above 15 kW and up to 150 kW above 150 kW and under 670 kW At least 670 kW up to 15 kW, total above 15 kW and up to 150 kW above 150 kW and under 670 kW At least 670 kW

Detailed Results of Technological Connection Activities Subjects of Applications Related with Technological Connections

Indicator 2013 2014 2015 2015/2014,% Category 2013 2014 2015 2015/2014, %

Actual connected capacities, MW (total), including: 1,531 2,523 3,107 23.1% Total number of submitted applications, ea. (total), including: 118,013 117,323 190,272 62.2% industrial 93 536 46 -91.4% for technological connection 91,610 92,735 102,031 10.0% agricultural 3 2 1 -50.0% for change of power user, for redistribution, for increase of power 3,177 10,182 12,017 18.0% utilities and social community 247 258 176 -31.8% rating, temporary technological connection individuals 391 656 850 29.6% others 23,226 14,406 76,224 429.1% others 797 1,070 2,034 90.1%

The sharp change of indicators agricultural sector due to the of technological connections for The increase in the number of individual residential housing The increase in the number of across various economic sectors difficult economic situation in individuals became higher. applications for technological construction in Moscow region applications for redistribution occurred following the downturn the country in the reporting year. connections was observed in line and development of New Mos- of power in the reporting year of industrial production and At the same time, the number with the higher growth rates of cow territory. is explained by availability of ANNUAL RESULTS OF COMPANY 40 REPORT2015 ACTIVITIES 41

information on the entities wish- After amendment of correspond- than “others” category, which 2.1.3. Non-Tariff Activities ing to redistribute their power ing law in November 2014, the also contributed to the growth capacities on the Technological applications for restoration of in the category “for change of Connections Portal and improve- earlier issued documents are power user, for redistribution, for ment of general information classified as applications for increase of power rating, tempo- Commentary-interview technical and regulatory requirements will center around construction, availability for the applicants. “change of power users” rather rary technological connection”. of the Deputy Director (“Electric Diagnosis”), etc. installation and maintenance General for Technological of street lighting networks Number of Contracts with Breakdown to Technological Connection Price Calculation Methods Connections and Service In 2015, the volume of revenues from (“Bright Light” service). Development A. M. Pyatigor additional services rose by 382 mln rubles, while the volume of net profit In fact, today the Company is ready Category 2013 2014 2015 2015/2014, % In addition to its main activities, i.e. increased by 125 mln rubles compared to provide the entire spectrum of Total number of contracts, ea., including: 70,877 67,479 68,695 1.80% technological connections to the with 2014. The key performance services, which may be requested grids and transmission of electric indicator defining the Company’s by the client in the course of individual project 30 31 23 -25.81% power, the Company provides efficiency in terms of additional services connection, and operation of standard tariff rates 436 942 857 -9.02% a broad spectrum of additional in 2016 will be the net profit, which electrical grid equipment. This will services: from maintenance of the Company plans to increase by generate an additional source of rate per unit of power 7,916 13,044 15,521 18.99% electric installations used by the 167.6 mln rubles against the same income for the Company, while reduced rate (550 rubles) 62,495 53,462 52,294 -2.18% consumers to renting of Company indicator in 2015. the customers will be able to facilities. Currently, the highest level enjoy the high quality services of demand is observed for such One of the priorities in terms of with the guarantee from the Redistribution of power: the enti- in the required feeding center zone the reduced rate and approved the services as “Turnkey Technological additional services delivery in 2016 big grid company. ties which have power-receiving on the technological connections limit for the average technological Connection”, “Energy Assistance” — equipment based on the owner- portal. connection costs (order No. 218 operation and maintenance of grid ship title or other legal grounds dated March 4, 2015 On Organi- facilities used by the consumers; and which arranged an associated In 2015, PJSC MOESK received 158 zation of Control over the Costs installation, replacement of technological connection before applications for redistribution of of Technological Connection for metering instruments; “Grids January 1, 2009, may reduce the maximum electric power to other Eligible Applicants at the Reduced outside Boarders”, including volume of maximum power rating entities in accordance with the Rate, order No. 1023 dated August relocation of electric grid facilities allocated earlier. Any entities information posted on the techno- 17, 2015 On Amendment of PJSC from the construction territory, etc. interested in redistribution of logical connections portal. MOESK Order No. 218 dated power capacitates may post and March 4, 2015). New package services are now read information on the techno- Over the reporting period, 52,294 available and can be ordered by logical connections portal of PJSC contracts with reduced prices were As a result, due to improved effi- the Company clients. For example, MOESK (utp.moesk.ru) regarding executed with the eligible consumers. ciency of construction in 2015, the installation of automated measuring the intentions of power-receiving volume of income decrease was and information system for electric equipment owners to redistribute In order to ensure control over 49.5% lower than in 2014 with the power fiscal metering (AIIS KUE) their capacities to other users the volumes of income decrease total number of executed contracts at the consumer sites (“Energy subject to compliance with the due to provision of technological with the consumers at the reduced Effect” service), preparation of Russian Federation law. connection services at reduced value being decreased by 2.3%. diagrams for consumer site based price for the eligible consumers in on individual power line supports The entities wishing to use these Moscow and Moscow region, the In 2016, the limits on provision of and single-line diagrams (“Energy redistributed capacities can also Company approved the procedure technological connection services Order”), survey of consumers’ find information on the volumes of for calculation of average costs for at reduced price for the eligible electrical installations in terms power capacities to be redistributed connection of eligible consumers at consumers will be further reduced. of their compliance with the ANNUAL RESULTS OF COMPANY 42 REPORT2015 ACTIVITIES 43

Development of Additional Services Revenue from Non-tariff Services: Results and Forecast, RUB mln

The web site of PJSC MOESK has a section dedicated to Category 2013 2014 2015 2015/2014, % Plan 2016 additional services where the consumer can find the news Additional services (total), including: 519.2 920.6 1,303.5 41.6% 2,228.3 Operation of electric grids owned by 205.1 236.6 257.2 8.7% 278.2 on additional services, up-to-date Price List and submit consumers (Energy Assistance) an application for an additional service online. In 2015, Installation activities, including relocation of grids 123.7 275.4 494.2 79.4% 836.7 the Company adopted regulations on delivery of additional (Grids outside Boundaries) services with detailed description of all the processes Organization and technical services 52.9 104.6 119.2 14.0% 128.0 and implemented an incentives scheme for the Company Turnkey technological connection 0.0 115.7 199.2 72.2% 236.6 employees involved in provision of additional services Outdoor lighting (Bright Light) 4.2 36.9 52.4 42.0% 220.0 Rent 72.7 101.4 114.8 13.2% 184.9 to the companies and individual clients. Equipment tests and diagnosis 15.3 17.9 18.8 5.0% 23.7 Others 45.3 32.1 47.7 48.6% 320.2

1. Turnkey Technological emergency repair of electrical of the construction period. site plans, locations of facilities, Land lots, administrative and Connection: equipment. Due to outsourcing Advantages of electrical grids design and other documentation. service buildings, power lines, of maintenance functions in relocation by PJSC MOESK for the transportation means. In the framework of its policy of connection with electric grids clients: 5. Outdoor Lighting 2,228.3 customer-oriented approach and and installations to PJSC MOESK, (Bright Light). 7. Equipment tests RUB mln simplification of technological the non-power companies • High level of design and and diagnosis: connection procedure, PJSC can significantly reduce their installation work and strict “Bright Light”: design, Additional services (total), MOESK launched and developed expenses on electric equipment compliance with all standards, construction, operation and repair Tests on protection devices and including (Plan 2016) the service “Turnkey Electrical maintenance and technical codes and rules in connection of outdoor lighting grids through electrical equipment; electrical Connection”, which includes personnel costs. This service with the electric grid relocation participation in construction of measurements and diagnosis performance of work on the will improve the efficiency from the client’s premises; new outdoor lighting facilities (identification of cable damage client side in compliance with the and reliability of electric grid (specifically, in New Moscow) and point and cabling tests, analysis 170% technical specification and using operation at the minimum cost for • Shorter time period required in RFPs on operation of outdoor of transformer oil, etc.). the resources of MOESK under the client. Moreover, it will ensure for work performance and lighting facilities, performance a separate contract. This service safe operation of the company’s high quality of service due of work in the framework of the 8. Others: is in high demand mostly by the electrical installations in full to utilization of high-tech Program for Refurbishment of individual clients. compliance with the current design methods and modern Communal Hallway and Street Services of PJSC MOESK safety rules. installation technologies; Lighting, execution of contracts training center, non-conventional 1,305.5 2. Operation of Consumers’ on arrangement of outdoor services, one-time, social/ RUB mln Electric Grids (Energy 3. Installation activities, • Cost reduction. lighting facilities at the existing household, and other services. Assistance): including relocation of grids power lines infrastructure of Additional services (total), (Grids outside Borders): 4. Organization and Technical PJSC MOESK. including (2015) «Energy Assistance”: operation Services: and technical management and “Grids outside Borders”: 6. Rent: maintenance of the consumer’s relocation of electrical grid Consultations on technical electric grids, including facilities of PJSC MOESK from the matters, review and approval of Renting the following property electric grids in buildings, client’s premises for the duration grid routing design, construction of PJSC MOESK: ANNUAL RESULTS OF COMPANY 44 REPORT2015 ACTIVITIES 45

2.2. FINANCIAL RESULTS 2.2.1. Financial results according to the RAS

Main Balance Sheet Figures The total amount of PJSC MOESK Commentary-interview of demonstrated by many users of electric strengthening its position in accounts receivable as of the start the First Deputy Director power transmission services and higher associated economy sectors, Assets, RUB mln Liabilities, RUB mln of the reporting year was 26,673 General for Financial & costs of borrowing is the Company’ identify cases of power mln rubles; as of December 31, ability to maintain its credit portfolio consumption without commercial Economic Activities and 2015, 27,219 mln rubles. The Corporate Governance at the level of January 1, 2015 without metering, consolidate its assets, 326,036 332,750 326,036 332,750 any increase. Thus, the Company including consolidation with no 2% increase occurred due to the A. V. Inozemtsev 299,675 35,647 299,675 managed to fulfill all of its obligations in consideration, develop additional 39,976 60,557 increase in the level of receivables 39 164 76,191 The year 2015 was marked by the connection with bonded loans and credit services. Considering that the 58,141 in the “Customers and clients” 10th anniversary of PJSC MOESK obligations in due time and manner in economic situation remains category by 25.5% and reduction the reporting period and maintained difficult, special attention will be 81,204 when the Company once again 66,058 of “advances paid” by 25.2% and managed to confirm its status of the level of borrowings as of December paid to replacement of imported 63,045 “other receivables”, by 2.9%. the largest grid company, which 31, 2015 at 73.4 bln rubles. products, increase in the share of not only delivers reliable and repair activities and technological 286,060 297,103 The amount of accounts receivable The Company continuously connections performed using the high-quality power supply but also 260,511 due by the Customers and client- maintains steady dynamics of its demonstrates steady position in the Company’s resources only. The 183,787 190,988 swas 15,631 mln rubles, which is financial results. ratings of the largest rating agencies, Company has gained sufficient 178,489 such as Fitch Ratings, Moody’s. level of competence over the 3,174 mln rubles (25.5%) higher than Compared with a similar period past few years to achieve these the level as of December 31, 2014. last year, even despite the In March 2015, Moody’s confirmed the goals. Additionally, the Company The increase is explained by the limitations on the tariff growth credit rating of PJSC MOESK at the will revise the scope of financing 2013 2014 2015 2013 2014 2015 higher level of current receivables against the backgrounds of Ba2 level; in December, Fitch Ratings allocated to the Company’s non-current current capital and long-term due for electric power transmission rising inflation rates and reduced confirmed the BB+ rank level. investment program in order assets assets reserves obligations in connection with revised payment power consumption, PJSC MOESK to preserve the current level of schemes under the contracts with In 2016, the Company will continue financial stability while maintaining short-term obligations managed to achieve the increase retail electricity companies. in EBITDA by 13.2% and increase in optimization of operation and the standards of electric power the net profit by 12.7%. investment costs, take actions supply reliability and implementing to increase the revenue base by the priority projects in the region. The accounts receivable on The Company was able to achieve advances paid was 7,436 mln such results due to successful rubles, which is 2,502 mln rubles implementation of the Program 27,219 15,631 lower than the level of receivables for Reduction of Costs and Electric RUB mln RUB mln as of December 31, 2014. The Power Losses. The specific Accounts Receivable Receivables in the “Advances paid” line in the balance operation costs were proactively sheet of PJSC MOESK reflects reduced by 5% against the level “Customers and clients category settlements for technological of 2014 in compliance with RF connections with the parties to the Government Decree No. 2303p- P13 dated April 16, 2015, which tariff regulation in the framework of requires annual reduction of the the Single Window. These accounts target indicator value by 2-3%. receivable were generated in the period from 2006 to 2010 as a result The scope of losses in 2015 was 7,436 4,152 of distribution of advance payments 8.55%, while the losses over the RUB mln RUB mln received from the service consum- same period last year were 8.77%. Advances paid Other receivables ers to the settlement accounts of other grid companies in accordance Another important achievement with the amounts (rates) of payment in the current market conditions for technological connections as with the poor payment discipline stipulated by the orders of Regional Energy Committee of Moscow. The ANNUAL RESULTS OF COMPANY 46 REPORT2015 ACTIVITIES 47

Company is performing work on amounts of non-justified enrich- with state unitary enterprise Accounts Receivable Due by the Members of the “Single Window” System settlement of accounts receivable ment, due to consumer-initiated “Moskollektor” to 100% of payables December with the technological connection termination of contracts on tech- (4,451 mln rubles) due to dismissal as of as of as of 31, 2015/ partners through pre-court set- nological connections which had of PJSC MOESK claims, including Category December December December December tlement procedure. The decrease been executed earlier in accordance refusal to refer the cassation appeal 31, 2013 31, 2014 31, 2015 in the level of receivables over with the “single window” principle. of PJSC MOESK to the Judicial Panel 31, 2014, % the reporting year was caused The major decrease in the accounts of the RF Supreme Court for review. Accounts receivable due by the members of the “Single by enforcement of certain court receivable on advances paid over As of the start of the reporting Window” system (without reserve for doubtful debts), RUB 21,598.5 21,320.7 8,715.7 -59.1% resolutions on PJSC MOESK claims the reporting period is connected period, the amount of reserve for mln, including: against its technological connection with additional accrual of reserve “Moskollektor” was 50% of payables JSC “Energokompleks” 12,480.0 12,346.8 - -100.0% partners initiated to recover the for doubtful debt under the contract (2,274.2 mln rubles). SUE “Moskollektor” 4,601.4 4,548.4 4,451.0 -2.1% Accounts Receivable and Payable JSC “UEC” 3,839.9 3,758.2 3,611.0 -3.9% Category 2013 2014 2015 2015/2014, % PJSC “Mosenergo” 677.2 667.3 653.7 -2.0% Receivables, RUB mln 25,014 26,673 27,219 2.0 Reserve for doubtful debts, RUB mln, including: 13,792.6 15,008.1 4,838.1 -67.8% Payables, RUB mln 55,463 59,610 59,599 0.0 JSC “Energokompleks” 12,480.0 12,346.8 - -100.0% Balance of receivables and payables, RUB mln -30,449 -32,937 -32,380 -1.7 SUE “Moskollektor” 925.5 2,274.2 4,451.0 95.7% JSC “UEC” 387.1 387.1 387.1 0.0% Structure of Accounts Receivable for Electric Power Transmission Services PJSC “Mosenergo” - - - - Receivables due by the members of the “Single Window” December as of as of as of system (with consideration of reserve for doubtful debts), 7,805.9 6,312.6 -38.6% 31, 2015/ 3,877.6 Indicator December December December RUB mln, including: December 31, 2013 31, 2014 31, 2015 31, 2014, % JSC “Energokompleks” - - - - Accounts receivable for electric power transmission, SUE “Moskollektor” 3,675.9 2,274.2 - -100.0% 9,234 10,514 13,436 27.8 including: JSC “UEC” 3,452.8 3,371.1 3,223.9 -4.4% Current 8,348 9,087 11,872 30.7 PJSC “Mosenergo” 677.2 667.3 653.7 -2.0% Overdue 887 1,109 1,564 41.0 For reference: disputed accounts receivable for electric Analysis of Accounts Payable Variation* 56 388 435 12.11 power transmission, RUB mln 19,437 36,566 1,400 2,196

2015 18,378 39,715 1,236 280

2014 15,457 39,756 23812

2013

Suppliers and contractors Advances received Taxes and levies Other payables

*The indicators are specified in accordance with the Company’s accounting report data for the reporting year. ANNUAL RESULTS OF COMPANY 48 REPORT2015 ACTIVITIES 49

Structure of Accounts Payable Revenue, RUB mln EBITDA, RUB mln Revenues from sales of products (services), December 129,288 as of as of as of 41,954 including 31, 2015/ 36,808 37,059 Indicator December December December 3.2 1,304 December 124,731 125,260 13.2 519 922 31, 2013 31, 2014 31, 2015 % % 31, 2014, %

Accounts payable, RUB mln, including: 55,463 59,610 59,599 -0.0

2013 2014 2015 2013 2014 2015 1. Current/overdue 3.6 6.5 2.8 -56.9 110,981 112,509 117,683 Cost of products (services), Net profit (loss), RUB mln Current 43,347 51,615 -14.7 44,016 RUB mln

Overdue 12,116 7,994 15,583 94.9 113,648 103,023 108,711 11,641 For reference: ratio of overdue accounts payable to total 4.5 9,247 13,231 11,830 10,302 8.2 5.4 10.2 88.9 % revenues, % 8,208 2013 2014 2015 12.7 % Technological connections 2. Long-term/short-term 0.13 0.16 0.18 12.5 Electric power transmission Long-term 6,536 8,227 9,284 12.8 2013 2014 2015 2013 2014 2015 Other activities

Short-term 48,927 51,383 50,315 -2.1 Key Financial and Economic Indicators, RUB mln

Indicator 2013 2014 2015 2015/2014, % The accounts payable in 2015 are was 36,566 mln rubles, which is The amount of payables in the lower than those in 2014 by 11 3,149 mln rubles (7.9%) lower form of taxes and levies is 1,400 Gross profit 21,708 16,549 -5.5 mln rubles; as of December 31, than the same indicator as of mln rubles, which is 164 mln 15,640 2015, the amount of accounts pay- December 31, 2014. This balance rubles (13.3%) higher than the Sales profit (loss) 21,708 16,549 15,640 -5.5 able was 59,599 mln rubles. The sheet item is 99% formed by same indicators as of December following changes were observed: advance payments received in the 31, 2014. These are current Interests receivable 378 550 933 69.6 framework of performance under payables, which accrued in line Interests payable 2,448 3,457 4,787 38.5 The payables in the “suppliers the contracts on technological with occurrence of the Company’s and contractors” category connections. The decrease in tax liabilities subject to payment Shareholding income 14 3 2 -33.3 increased by 1,059 mln rubles this indicator is observed due to in compliance with the due time- Other incomes 10,766 9,403 7,258 -22.8 because the amounts due to con- fulfillment of obligations in the frame. Other costs 14,794 11,148 -49.0 struction companies increased by reporting year in compliance with 5,686 1,824 mln rubles, amounts due the schedule of commissioning The amount of other accounts Pre-tax profit (loss) 15,624 11,899 13,361 12.3 to repair companies increased by and technological connections. payable as of the end of the Profit tax and other payments 3,983 3,691 4,114 11.5 94 mln rubles, and the amounts The availability of accounts reporting year specified in table due to other suppliers increased payable under contracts on 6 is 2,196 mln rubles, which by 725 mln rubles, while the technological connections in is a 1,916 mln rubles increase The amount of revenues from the from electric power transmission more details, see section 2.4. Tariff amounts due under the settle- the balance sheet is due to the relative to the beginning g of the sale of products (services) according being 117,683 mln rubles (5,174 mln Regulation). The volume of revenues ments with the electric power payment procedure and terms of year. The increased amount of to the year-end results in 2015 was rubles higher than the same indicator from technological connection ser- suppliers increased by 1,584 such contracts established by the payables occurred due to receipt 129,288 mln rubles, which is 4,028 in 2014). The growth was observed vices in 2015 was 10,302 mln rubles, mln rubles. The payables in the law for various consumer groups of contract performance securi- mln rubles (3.2%) higher than in due to the increase in the average which is 1,528 mln rubles lower “advances received” category (from 6 months to 2 years). ties in 2015. 2014, with the amount of revenues annual amount of uniform tariffs (for than the actual volume in 2014. The ANNUAL RESULTS OF COMPANY 50 REPORT2015 ACTIVITIES 51

reduction in the volume of revenues 2014. Higher costs are explained According to the year-end results, the The costs of electric power The cost of services provided by value for this cost item is increase in was caused by non-readiness of con- mostly by increased expenses on net profit of the Company in 2015 was procurement for compensation of distribution grid companies in 2015 the salary of industrial and production sumers and postponement of work compensation of losses, cost of 9,247 mln rubles, which is 1,038 mln losses in 2015 were 13,171 mln was 30,085 mln rubles (26.5% of personnel in line with the growth of completion to later dates. services provided by PJSC FGC rubles higher than in 2014. The growth rubles (11.6% of the total costs). the total costs). The costs decreased minimum monthly remuneration rate of UES, depreciation, and by the is mostly attributable to the reduction In absolute terms, the increase by 881 mln rubles compared with for workers of category 1. The cost amount was 113,648 mln increase of other costs, namely: of negative balance of other incomes relative to 2014 was 1,596 mln the previous year. The deviation is rubles, which is 4,937 mln rubles personnel costs, property taxes and and costs with consideration of inter- rubles and occurred due to explained by the reduced number of The value of other cost items in (4.5%) increase against the level of other operating costs. ests receivable and payable. increase in the tariff for compen- grid companies in 2015. 2015 was 7,452 mln rubles, which sation power procurement by in general is similar to the levels of 28 kopecks. Depreciation of property, plant and such costs in 2014. The Company Comparison of the actual revenues from electric power transmission services, Business equipment and intangible assets was able to maintain the same Plan values and values as per the Tariff and Balance Resolution (TBR) The cost of services provided by was higher than in 2014 (by 2 104 level for this cost item due to PJSC FGC of UES was 14,834 mln mln rubles) due to introduction implementation of activities aimed Indicator 2013 2014 2015 2015/2014, % rubles (13% of the total costs). of new PPE in the framework of at reduction of its operating costs. In absolute terms, the increase Investment Program in 2015. Regarding growth factors, the Revenues (without cost of load losses), RUB mln 110,980 112,509 117,683 4.6 relative to 2014 was 223 mln rubles increase in the amount of taxes and Cost of load losses, RUB mln. 3,101 3,181 3,173 -0.3 and occurred due to increase in the The amount of personnel costs in 2015 levies should be noted, including rower rating, growth of average was 16,795 mln rubles (14.8% of the the amount of property tax in con- Revenue (including load losses), RUB mln. 114,081 115,690 120,855 4.5 power tariff and average tariff for total costs), which is 9.2% higher than nection with the increased rate for Volume of delivered services, mln kW·h 71,412 71,884 70,533 -1.9 regulatory losses. in 2014. The main cause of higher the exempt property. Average tariff, kopecks/kW·h without VAT 159.8 160.9 171.4 6.5 EBITDA*

Conditionally non- Influenceable costs Costs in 2015 9,247 23,806 4,114 4,787 influenceable costs 41,954 7% 81,895 31,753 2% 12% 2015 78,855 29,856 3% 72,401 2,056 1% 30,622 1,592 8,208 21,702 3,691 3,457 23,806 1,087 13% 21,702 3,860 37,059 18,737 3,913 3,940 15% 1,590 2014 1,525 1,523 11,641 18,737 3,983 2,448 30,085 2015 28,298 30,966 36,808 2013 16,795 21% 26% 14,880 15,377 13,529 14,611 14,834 Net profit Depreciation Taxes Interest (net value) purchased electric power for loss 11,836 11,575 13,171 compensation * - equation for EBITDA calculation 2013 2014 2015 2013 2014 2015 services of PJSC FGC of UES services of distribution grid companie In 2015, EBITDA grew by 13.2% 1,038 mln rubles higher than rubles due to increase in the aver- Purchased electric power for loss Personnel costs (remuneration, secu- depreciation compensation rity fund contributions, contributions to 41,954 mln rubles. Reduction in 2014. This variation is age annual uniform tariffs; to non-governmental pension funds) personnel costs (remuneration, security of negative balance of other attributable to the following Services of PJSC FGC of UES fund contributions, contributions to Raw and other materials revenues and costs relative to 2014 factors: • Growth of revenues from other Services of distribution grid non-governmental pension funds) contributed to the increase of this activities by 382 mln rubles due companies Production services raw and other materials measure. Factors which influenced the to higher volumes of sales of Depreciation Taxes and levies production services increase in the net profit: additional services, including taxes and levies According to the results of 2015, due to development of promising Similar data with breakdown to Moscow and Moscow region is presented other costs the net profit of the Company was Growth of revenues from electrical services and other services with in Annex 5.9 to the Annual Report. 9,247 mln rubles, which is power transmission by 5,174 mln high demand level; ANNUAL RESULTS OF COMPANY 52 REPORT2015 ACTIVITIES 53

• Reduction of negative balance mln rubles due to non-readiness • Increase of influenceable costs associated with advances on Financial Stability The ratio of total debt to EBITDA of other revenues and costs by of consumers and postponement by 1,897 mln rubles due to higher future technological connections, Indicators in 2015 was within the regulated 2,371 mln rubles due to decline in of work completion to later dates; personnel costs, property tax, which more accurately reflects values; moreover, certain decline other costs and revenues; cost of other production services the Company’s financial condition. Stability of the company’s in this indicator value was • Increase of non-influenceable and other costs; financial situation depends observed over the reporting year, Factors which influenced the costs by 3,040 mln rubles mainly Ratios of Turnover and on the structure of the capital which is a positive trend. reduction of net profit: due to the increased costs of loss • Increase of property tax by 423 Efficiency sources (debt to equity ratio) and compensation, cost of services mln rubles due to the growth of the structure of the company’s The ratio of EBITDA to interests • Reduction of revenues from tech- provided by PJSC FGC of UES and taxable base. The growth of efficiency ratio assets. on debt liabilities regulates nological connections by 1,528 amortization; over the reporting period is the level of interest load attributable to the activities Since the equity forms the basis on the Company. Reduction performed by PJSC MOESK to for the company’s independence, of this indicator in 2015 is Indicators of Financial Performance and Operation Results control the accounts receivable the significant share of equity attributable to the higher cost and accounts payable and in the Company’s balance sheet of borrowing services in the Indicator 2013 2014 2015 2015/ 2014 characterizes the efficiency of demonstrates its sufficient financial market. The increase assets utilization in 2015. The financial independence. in the indicator does not exceed Absolute liquidity ratio 0.03 0.06 0.003 -0.0588 growth of the total accounts the regulatory value. receivable to total accounts The equity to total assets ratio Acid test ratio 0.43 0.41 0.48 0,07% payable ratio with the steady in 2015 was 0.57, which means In general, the indicator values Current liquidity ratio 0.54 0.44 0.52 0.08 share of accounts receivable in that 57% of the Company assets show financial stability of the the revenues demonstrates the are financed on account Company. Working capital to current assets ratio 0.17 -0.29 -0.05 0.23 financial stability of the Company. of equity. Turnover rate of accounts payable 1.90 1.89 1.91 0.02 Ratio of accounts receivable and accounts payable growth rates 0.59 1.07 1.02 -0.05 Ratio of total accounts receivable and accounts payable 0.45 0.45 0.46 0.01 Share of accounts receivable in the revenues 0.17 0.18 0.18 0.00 Equity to total assets 0.60 0.56 0.57 0.01 EBITDA/% 9.34 7.22 5.80 -1.42

Liquidity and Current own working) in capital-intensive In 2015, the optimum liquidity Solvency Indicators sectors of industry may not ratio values were not achieved. always be provided. For this The increase in the current PJSC MOESK operates in class of companies, the values liquidity indicators is associated the capital-intensive sector; of liquidity ratios are lower than with more considerable therefore, the structure conventional recommended level. reduction of the volume of short- of Company liabilities is The main factor, which causes term obligations compared with characterized by a large volume lower liquidity indicators of the reduction of working assets. of borrowed funds while the Company, is the high amount structure of assets mainly of accounts payable in the form Working capital to current assets includes non-current assets. of advances received from the ratio for the annual report was The absolute financial stability applicants for the contracts on calculated without consideration (availability of the Company’s technological connections. of short-term obligations ANNUAL RESULTS OF COMPANY 54 REPORT2015 ACTIVITIES 55

2.2.2. Financial Performance according to IFRS Indicator 2013 2014 2015 2015/2014, % Consolidated statement of financial position Key Financial and Economic Indicators according to IFRS, RUB mln Assets/liabilities, RUB mln 286,301 310,583 325,618 4.8 Indicator 2013 2014 2015 2015/2014, % Consolidated statement of cash flows Consolidated statement on total income Cash in operating activities, RUB mln 28,194 30,754 26,697 -13.2 Revenues from sale of products (services), including: 129,125 128,019 3.4 132,356 Cash in investment activities, RUB mln - 34,584 - 40,738 - 28,174 -30.8 Electric power transmission 110,981 112,509 117,683 4.6 Cash in financial activities, RUB mln -346 12,693 - 2,427 -119.1 Technological connections 14,503 11,893 10,521 -11.5 Cash and cash equivalents as of the end of period, RUB mln 1,596 4,305 401 -90.7 Other activities 3,641 3,617 4,152 14.8 Financial ratios Cost of products (services) - 106,760 - 119,827 - 111,486 -7.0 Net debt/EBITDA, % 1.28% 2.00% 1.65% (0.35) pp Conditionally non-influenceable costs - 71,581 - 77,745 - 78,859 1.4 Net debt/Equity, % 36.9% 44.0% 43.50% (0.5) pp. Purchased electric power for loss compensation -11,836 -11,575 - 13,171 13.8 Equity/Total assets, % 53.60% 51.20% 51.97% 0.77 pp Services of PJSC FGC of UES -13,529 -14,611 - 14,834 1.5 Services of distribution grid companies -28,298 -30,966 - 30,085 -2.8 For reference: The consolidated OJSC “Moskabelenergoremont” statements of PJSC MOESK include (MKER), OJSC Electotechnical Depreciation -17,918 - 20,593 - 20,770 0.9 the following subsidiaries: OJSC Equipment Repair Plant (RETO), Influenceable costs “Moskabelsetmontazh” (MKSM), OJSC “Energotsentr”. Personnel costs (remuneration, security fund contributions, - 16,620 - 16,362 - 17,888 9.3 contributions to non-governmental pension funds) Generated and Distributed Economic Value Raw and other materials - 2,062 - 1,846 - 2,254 22.1 Component 2013 2014 2015 2015/2014, % Taxes and levies - 1,177 - 1,799 - 2,142 19.1 Direct economic value generated Other costs - 15,320 - 22,075 - 10,343 -53.1 revenues 133,690 134,793 136,359 1.2 EBITDA, RUB mln*  44,446 34,992 44,668 27.7 Economic value distributed: -88 816 -101 225 -91 341 -9,8 Profit 26,528 14,399 23,898 66.0 operating costs, - 88,816 - 101,225 - 91,341 -9.8 Depreciation - 17,918 - 20,593 - 20,770 0.9 employee wages and benefits -5 932 -5 214 -3 259 -37,5 Taxes - 1,177 - 1,799 - 2,142 19.1 payments to capital providers; - 6,855 - 6,470 - 7,288 12.6 Interest, received and paid (net) -2,156 -2,994 - 4,258 42.2 payments to government (by countries); - 5,932 - 5,214 - 3,259 -37.5 Profit tax and other payments -4,898 -3,327 - 7,010 110.7 investments in local communities; - 147 - 442 - 114 -74.1 Net profit (loss) 19,473 8,078 12,631 56.4 Basic and diluted earnings per share, RUB 0.397 0.1646 0.2571 56.2 Economic value retained 15,320 5,080 16,468 224.2 ANNUAL RESULTS OF COMPANY 56 REPORT2015 ACTIVITIES 57

2.3. CREDIT POLICY

In 2015, the focus of the credit policy was mainly on fulfillment of obligations in relation to the contractual counterparties without In 2015, the Company exceeding the credit portfolio limit approved by the Business Plan. raised As of the end of the reporting period, the limits of the Company’s debt conformed to the provisions of the Regulations on Credit 27,479,700 Policy (approved by the resolution of the Board of Directors dated thous. rubles, including: November 7, 2013 (minutes No. 209 dated November 8, 2013), under facility agreements in the amount of 20,479,700 thous. and the Company credit capacity conformed to the top level “A”. rubles, including: • for debt refinancing — 14,826,926 thous. rubles; Structure of Borrowings, RUB mln • for financing of investments activities —5,652,774 thous. December December December December 31, 2015/ Source of debt rubles; 31, 2013 31, 2014 31, 2015 December 31, 2014, % under bonded loan in the amount Borrowed funds (total), including 57,527 73,407 73,414 0.01 of 7,000,000 thous. rubles for debt refinancing. Loans (total), including: 42,165 52,895 55,958 5.79

long-term 36,721 42,121 53,368 26.70

short-term 5,444 10,774 2,590 -75.96

Bond issues (total), including: 15 362 20 512 17 456 -14,90

15,362 20,512 17,456 -14.90 20,00

long-term 15,000 10,000 12,000 20.00 Over the year 2015, debt short-term 362 10,512 5,456 -48.10 service obligations in the Finance lease liabilities 23 72 49 -32.62 amount of 27,433,137 The structure of Company borrow- loan agreements is attributable to agreements. Reduction of short-term thous. rubles were ings mostly consists of long-term the repayment of principal amounts debt on securities in 2015 is attribut- fulfilled. accounts payable. Reduction of the in accordance with the repayment able to repayment of bonded loan on short-term accounts payable under schedules of the corresponding loan bonds with BO-01, BO-02 series. ANNUAL RESULTS OF COMPANY 58 REPORT2015 ACTIVITIES 59

Structure of Credit Portfolio with Breakdown to Reporting Dates Average Weighted Rate for Borrowed Funds Servicing, %

23.77 As of December 31, 2014 As of December 31, 2015

17 15.7 12.54 Average Average 11,95% 11.79 Amount Average Amount 11.5 11 Creditor Average weighted weighted 5.5 11% of raised weighted of raised weighted rate* validity validity 8.15 14 funds rate* funds % period* period* RUB mln % RUB mln 9.11 9.14 9.91 10,09% 10.32 years years 5.5

Loans 9.05 2.5 52,821 10.06 2.1 55,868 Average weighted rate of borrowing with Key rate of the Russian Federation MosPrime 3M Rate consideration of bills and bonded loan Central Bank (Bank of Russia) Bonded loans 9.30 1.4 20,000 11.17 1.5 17,000 Bonded Loans Bills ------Information on Issued Bonds * weighted according to liability amount Category 2015 Variation of Borrowing in 2015, RUB mln Series BO-01 BO-02 BO-03 BO-04 BO-07 27 480 27 433 Type of securities Certified, interest-bearing, non-convertible, exchange-traded bearer bonds 4B02-01- 4B02-02- 4B02-03- 4B02-04- 4B02-07- 7 196 7 236 Registration number 73 407 73 414 65116-D 65116-D 65116-D 65116-D 65116-D Scope of issue, RUB thous. 5,000,000 5,000,000 5,000,000 5,000,000 7,000,000 Quantity, mln ea. 5 5 5 5 7 Par value, RUB 1,000 1,000 1,000 1,000 1,000 Maturity, years 3 3 3 10 10 Date of state registration of issue 03.07.2012 03.07.2012 03.07.2012 09.07.2013 09.07.2013 Balance Raised Repaid Accrued Paid Balances as of interest interest as of Placement date 21.09.2012 29.10.2012 14.02.2013 25.09.2014 06.05.2015 December December 12.09.2024/ 23.04.2025/ 31, 2014 31, 2015 Maturity / offer date 18.09.2015 26.10.2015 10.02.2016 25.09.2017 04.05.2018 Coupon yield per 1 bond 43.88 43.88 42.38 54.85 65.82 Stock exchange CJSC MICEX Stock Exchange Quotation list First level Third level Scope of issue in circulation as of December 31, 2014 5,000,000 5,000,000 5,000,000 5,000,000 - as of December 31, 2015 - - 5,000,000 5,000,000 7,000,000 Existing bond debt - - - - - ANNUAL RESULTS OF COMPANY 60 REPORT2015 ACTIVITIES 61

In order to optimize its credit port- March 25, 2015, Moody’s confirmed October 2, 2015, Fitch Ratings folio, in May the Company placed On September 18 and October 26, the the Company’s credit ratings at the confirmed the Company’s credit Currently, PJSC exchange-traded bonds of BO-07 Company successfully paid up its bonded level of Аa2.ru according to the rating in the foreign currency at the MOESK has ratings series with the total par value of national scale and the level of Ba2 level of BB+ with stable outlook. 7,000 mln rubles on CJSC MICEX loans with three-years maturity period according to the international scale, assigned by the Stock Exchange. This issue provides negative outlook. December 7, According to the rating agencies, for an offer after 3 years after place- (BO-01 and BO-02 series respectively) 2015, the rating agency confirmed the dominant position of MOESK leading global rating ment start date and a call option after which were placed at the rate of 8.80% the credit ratings and upgraded the in the market due to its role of the agencies: Fitch Ratings 1 year based on the par value. The outlook to stable. This resolution main distribution grid company maturity period for bonds of BO-07 with the total par value of 10,000 was made following the change of in Moscow and Moscow region (BB+), Moody’s (Вa2), series is 10 years. Based on the the outlook for governmental bonds as well as the stability of cash results of book building completion, mln rubles and paid up the remaining in the Russian Federation to stable flows from the regulated power Standard and Poor’s the final coupon rate was set at coupons, i.e., the Company duly fulfilled on December 3. distribution business and favorable, (ВВ-) 13.20% per annum. mostly long-term, nature of its obligations in relation to the holders February 4, 2015 Standard & Poor’s borrowings have positive influence These finances were raised in the confirmed the Company’s credit on the ratings. framework of the Company’s Busi- of securities. rating in the foreign currency at the ness Plan for 2015. level of BB- with stable outlook. The Company also has exchange- on CJSC MICEX Stock Exchange traded bonds of BO-05, BO-06, with assignment of the following BO-08, BO-09, BO-10 series identification numbers: 4B02-05- Key Indicators and Ratios for the total par value of 65116-D, 4B02-06-65116-D, 4B02- 38,000 mln rubles, which are ready 08-65116-D, 4B02-09-65116-D December 2,632.8 as of as of as of for placement. The maturity term and 4B02-10-65116-D. 31, 2015/ RUB mln Category December December December of each borrowing is 10 years after December 31, 2013 31, 2014 31, 2015 The total amount of the placement start date. The Company plans to sell 31, 2014, % earnings paid on BO-01 the securities through open The issues were included into the subscription in the favorable and BO-02 series Debt, RUB mln. 57,527 73,407 73,414 0.01 list of securities allowed for trading market conditions. Debt/equity, х 0.3 0.4 0.4 -3.9

Debt/EBITDA, х 1.6 2.0 1.7 -12.5 Credit Ratings Net debt, RUB mln 56,046 69,226 73,214 5.8

Information of Assigned Credit Ratings Net debt/ EBITDA, х 1.5 1.9 1.7 -8.2

Rating according to international scale Rating according to national scale Date of Interests payable, RUB mln 2,448 3,457 4,787 38.5 Agency assignment / EBITDA/interests payable, х 14.9 10.6 8.8 -17.0 value forecast value update

Moody’s Ba2 stable Aa2.ru 07.12.2015 The total amount of Company which is traditionally considered not expect this ratio to exceed Standard and Poor’s BB- stable RuAA- 04.02.2015 debt in the reporting period was low for the power industry in 2. Usually, when calculating the 73,414 mln rubles. The Company general, and for the grids sector debt load, the bank and credit Fitch BB+ stable AA(rus) 02.10.2015 managed to maintain its debt to in particular. In the short-term agencies consider the 3-4 value EBITDA ratio (1.7) at the level, perspective, the Company does of this ratio as acceptable. ANNUAL RESULTS OF COMPANY 62 REPORT2015 ACTIVITIES 63

2.4. TARIFF REGULATION

General

PJSC MOESK operates on the types of activities: electric is performed by the Regional territory of two constituent power transmission services Energy Committee of Moscow entities of the RF Central and technological connection (REC of Moscow), Moscow Region Federal District: Moscow and of consumers to power grids. Pricing, and Tariffing Committee Moscow region. Tariff regulation Governmental regulation of (“Mosoblkomtsen”). is applicable to the following tariffs in the regions of presence

Revenue structure, RUB mln

693 519 922 1,304 341

106,994 100,280 110,981 112,509 117,683 Technological connection

Electric power transmission

Other activities 18,860 17,386 13,231 11,830 10,302 2011 2012 2013 2014 2015

Tariffs on Electric Power Transmission

The electric power transmission The basic level of operating tariffs for PJSC MOESK are (controlled) costs of PJSC MOESK determined using the return on in Moscow and Moscow region was investment method since 2011. revised.

Analysis of PJSC MOESK average Uniform Tariff Variation for Electric Power Transmission Services, with Breakdown to Operation Regions, kopecks/kW·h

Category 2011 2012 2013 2014 2015 Moscow 156.88 154.54 163.76 172.47 182.33 Moscow region 140.90 146.32 156.58 156.95 163.38 Total for PJSC MOESK 149,19 150,12 160,08 164,53 172,57 Growth, % 18.13% 0.63% 6.63% 2.78% 4.88% ANNUAL RESULTS OF COMPANY 64 REPORT2015 ACTIVITIES 65

The main causes of variation Structure Dynamics of RGR for Electric Power Transmission of tariffs for electric power Services by PJSC MOESK 125,727.61 transmission services and RUB mln Required gross revenue in Moscow and Moscow region in 2015 are as follows: 32,447 Required gross revenue 31,333 for Electric Power 29,550 • growth of tariffs for the services 31,523 Transmission Services 23,515 15,085 provided by PJSC FGC of UES 14,534 (the tariffs for PJSC FGC of UES 13,822 14,549 are set by Federal Antimonopoly 13,476 16,846 17,336 15,406 Service of Russia); 12,266 13,524

Dynamics of Required gross revenue for Electric Power Transmission Services, • increased costs of electric power loss compensation; with Breakdown to Regions of Operation, RUB mln 57,672 60,860 49,761 49,040 52,682 • growth of necessary gross Category 2011 2012 2013 2014 2015 2015/2014, % revenues for the local grid operators; Required gross revenue for 2011 2012 2013 2014 2015 108,099.09 99,554.96 111,459.65 120,384.56 125,727.61 4.44% uniform tariffs (total), including: • growth of necessary gross revenues for PJSC MOESK. Company’s RGR FGC Losses LGO Moscow 58,980.08 47,435.63 55,610.63 61,622.76 64,386.01 4.48%

Moscow region 49,119.01 52,119.33 55,849.02 58,761.80 61,341.60 4.39% Payment for Technological Connection Payments to PJSC FGC of UES 12,266.16 13,524.35 15,405.55 16,846.21 17,335.61 2.91%

Moscow 3,914.99 4,743.45 5,639.61 6,642.66 6,408.58 -3.52% Payment rates were established 2014 (as amended by Ordinance No. 186-R dated December for PJSC MOESK in 2015 in of Moscow Region Pricing and 30, 2014 On Establishment Moscow region 8,351.17 8,780.90 9,765.93 10,203.55 10,927.03 7.09% Moscow and Moscow region Tariffing Committee No. 06-Р of Payment Rates per Unit of for connection of electric power dated February 9, 2015) Maximum Power (RUB/kW) Payments to LGOs 31,523.32 23,514.58 29,550.49 31,332.56 32,446.99 3.56% equipment operated by the power consumers, electric grid facilities From October 1, 2015: The approved payment rates Moscow 14,955.00 6,861.15 11,335.17 13,425.00 13,875.57 3.36% owned by grid companies and per unit of maximum power Moscow region 16,568.32 16,653.43 18,215.32 17,907.56 18,571.42 3.71% other entities with the voltage • Ordinance of REC of Moscow and standardized tariff rates for level below 35 kV and maximum No. 199-tpe dated August 27, connection of electric power Costs of loss compensation 14,548.85 13,475.68 13,822.11 14,533.56 15,084.85 3.79% power rating below 8,900 kW in 2015 (as amended by Ordinance equipment operated by the power compliance with: of REC of Moscow No. 226-tpe consumers, electric grid facilities Moscow 7,091.61 6,305.70 6,703.06 6,938.02 7,353.30 5.99% dated September 18, 2015) owned by grid companies and • Ordinance of REC of Moscow other entities with the voltage Moscow region 7,457.23 7,169.97 7,119.05 7,595.54 7,731.55 1.79% No. 542-tpe dated December • Ordinance of Moscow Region level below 35 kV and maximum 25, 2014; Pricing and Tariffing Committee power rating below 8,900 kW to Required gross revenue 49 760,76 49 040,36 52 681,50 57 672,23 60 860,15 5,53% No. 112-R dated August the electric grids of PJSC MOESK of PJSC MOESK • Ordinance of Moscow Region 31, 2015 On Amendment of are specified in Annex 5.9. to the Moscow 33,018.47 29,525.33 31,932.79 34,617.08 36,748.55 6.16% Pricing and Tariffing Committee Ordinance of Moscow Region Annual Report. No. 186-R dated December 30, Pricing and Tariffing Committee Moscow region 16,742.29 19,515.03 20,748.71 23,055.15 24,111.61 4.58% ANNUAL RESULTS OF COMPANY 66 REPORT2015 ACTIVITIES 67

Average Price of 1 MW 2.5. IMPROVEMENT OF RELIABILITY

Category 2013 2014 2015 2015/2014, %

Average cost of 1 MW, RUB mln (without VAT) 8,6 5,8 3,3 - 43,1% Commentary-interview How did the current situation What are the main goals for up to 15 kW (total), including: 0.2 0.1 0.1 0 the First Deputy Director impact the progress of reliability 2016 in terms of reliability individuals up to 15 kW 0.0005 0.0005 0.0005 0 General — Engineering improvement programs? improvement? above 15 kW up to 150 kW 6.5 3.8 3.3 - 13.2 Director V. E. Ivanov In the current situation, the Company The main goals in this sphere are above 150 kW under 670 kW 10.5 5.8 5.3 - 8.6 Did the Company manage to has to be even more focused on 100% completion of repair program at least 670 kW 13.3 11.3 4.7 - 58.4 achieve its main objectives in efficient application of its financial with the budget of 5,187 mln rubles, terms of reliability improve- resources, cut its expenses on pro- reduction of incident occurrence rate ment in 2015? curement of materials and in connection with relay protection Analysis of Utilization spare parts. and automation equipment failure. Frequency (Selected by Ap- I can say with confidence that the plicants) for Various Methods Technical Department of the Com- In 2015, the economic situation The main activities of our Department of Payment for Technological pany successfully completed the forced us to optimize our costs. in 2016, as always, will focus on Connection in 2015, % tasks associated with achievement On the one hand, it creates certain ensuring reliable operation of The average cost of technological of specified reliability indicators. limitations for the companies oper- electrical grid facilities, improvement connection per 1 MW in 2015 We managed not only to reduce the ating in the electric grids sector, of energy efficiency, modernization 27 decreased by 43.1% to number of technological violations but on the other hand, it is an of grid assets, and qualification (16.5% decrease against 2014), but opportunity to optimize our internal improvement for operation personnel 76 87 we also succeeded in improvement business processes to achieve assigned to perform electrical equip- 3.3 of such important indicators as the maximum efficiency of operations. ment operation and repair tasks. 70 mln rubles average period of technological violations (6.5% decrease against 23 12 1 3 1 2014) and volume of non-supplied MOESK Moscow Moscow electric power (31% decrease region against 2014). Reduced tariff (550 rubles) Rate per unit of power What activities did you Standardized tariff rates perform to achieve these Individual project indicators?

In 2015, the contracts on technolog- Surely, such achievements ical connections at the reduced rate became possible due to 100% (550 rubles /connection) formed fulfillment of the repair program a major part in the structure of with 4,970 mln rubles budget, PJSC MOESK contracts. In terms of program for replacement of con- service regions, the largest share The decrease is attributable ventional wires with self-sup- of contracts with reduced payment to the decrease in the share porting insulated conductors, rate is observed in Moscow region of revenues on the contracts targeted tree-cutting program (87% of the total number of exe- executed before January in the locations where the trees cuted contracts); in Moscow, the 1, 2011 (cancellation of create risks for the line integrity. largest share of contracts (70%) is payment for the executed based on the rate per unit “high side”). of maximum power rating. ANNUAL RESULTS OF COMPANY 68 REPORT2015 ACTIVITIES 69

Dynamics of Reliability Indicators The budget of the repair program • using the Company’s own • engagement of contractors — completed in 2015 was 4,970 mln resources — 2,360 mln rubles 2,610 mln rubles (84.7% Category 2013 2014 2015 2015/ 2014, % rubles (93.3% of the actual costs (105.1% of the actual costs of the actual costs Number of technological violations (incidents) ea. 7,357 7,799 6,516 -16.5 in 2014) in 2014) in 2014)

Average frequency of electric power transmission loss 0.0065/ 0.0064/ - -1.5/ -47.4 (Psaifi ) in Moscow /Moscow region* ea. 0.4308 0.2264 Fulfillment of Repair Average duration of electric power transmission loss 0.0067/ 0.0065/ Program - -3.0/ -26.1 (Psaidi) hour in Moscow /Moscow region* 0.5369 0.3967 153.6 179.8 Average duration of technological violationin the grids 1.84 1.08 1.01 -6.5 2,367 2,400 Clearing the power line routes from forest rated for 0.4 kV and above hour 3,348 3,828 0.4-220 kV overhead power line, ha Number of technological non-compliances (incidents) / Repair 0.4-220 kV overhead power line, km 5.70 5.47 4.41 -19.4 1000 conventional units ea./1000 c.u. Repair of power transformers 302 Plan 368 Actual for 35- 220 kV overhead power line, ea. Number of technological non-compliances (incidents) / 5,70 5,47 4,41 -19,4 Repair of transformer stations (enclosed TS, 1000 conventional units, ea./1000 c.u. packaged TS, distribution station), ea. Repair 0.4-220 kV overhead power line, km Volume of non-supplied power mln kW·h 1.34 1.40 0.96 -31.4 3,118 3,179.5 Total economic damages RUB mln 148.7 423.7 329.5 -22.2 Due to increase in the scope of Costs of repair, Types of repair Information on the Main bility of their falling on the electric World Cup 2018 and information repair program relative to 2014 in RUB mln (total) program, RUB mln Reliability Improvement grids of, PJSC MOESK. transmission to the Situation connection with additional repair 5,333 5,325 Programs Implemented Analysis Center (SAC) of World work on 0.4-220 kV overhead 4,970 in 2015 Additionally, the Company com- Cup 2018 in Moscow and Moscow power line, repair of transformer -6.7 % pleted the program on installation region based on the SAC of PJSC stations (enclosed TS, packaged TS, 2,246 2,245 2,360 Over the year, the Company of automatic sectionalizing points in MOESK. distribution station), and 0.4-220 performed activities to bring the 6-10 kV distribution grids kV cable lines, the level of planned cleared strips in the forest in (181 units were installed) and per- In order to reduce the time period and actually completed volumes compliance with the regulatory formed technical inspection of: of repair and restoration activities for these work types in 2015 was 3,086 3,080 2,610 requirements on the total area of on 35-220 kV power lines, in 2015 lower than 2014 (the data is speci- 36.6 ha along the 35-220 kV over- • 116 stations rated for 35-220 kV; the Company installed 14 micro- fied in the table). head power lines and with the total • 268 overhead lines rated for processor-based fault locators (FL) 2013 2014 2015 2013 2014 2015 length 495 km along the 6-10 kV 35-220 kV; on the transmission lines. In order to ensure rational uti- Own resources overhead power lines. • 11 cable lines rated for 110 kV; lization of repair capacities by Contractors • 2,602 facilities along the distri- In 2015, PJSC MOESK continued the Company in general, certain The Company cleared 3,828 ha of bution grids; implementation of its Mobile Work additional work volumes were land along the 0.4-220 kV power Teams project. The Company estab- performed with engagement of lines from trees and bushes. The Company started activities for lished 553 mobile work teams with contractors: activities for improve- arrangement of process monitor- special vehicles and equipment ment of electrical grid equipment The Company cut 166,399 trees ing at PJSC MOESK electric power as required for repair and mainte- reliability during preparation for and creating hazard due to the possi- facilities to be used during the nance of distribution grids. duration of FWP 2015/16, repair of equipment at stations and distribu- * in compliance with item 8. of Guidelines on Calculation of Quality and Reliability Level of Goods Supplied and Services Delivered for tion stations, and performance of Organization Managing the Unified National (Russian) Electric Grid and Local Grid Operators approved by Order of Russian Ministry of certain activities in accordance with Energy No. 718 dated October 14, 2013, the calculation of indicative reliability level indicators for delivered services Psaidi and Psaifi the orders given by the supervisory shall be performed starting from 2014. authorities. ANNUAL RESULTS OF COMPANY 70 REPORT2015 ACTIVITIES 71

2.6. INVESTMENT ACTIVITIES Parameters of Investment Activities The Investment Program 2015 In total, the Investment Program program which were included was approved by Order of Russian 2015 covers 35 thous. facilities. into the fixed assets in 2015 is Ministry of Energy No. 952 dated Information on the priority facilities presented in the Annex to the Commentary-interview of of power supply for the Great will commission 1.1 thous. MVA of December 14, 2015. in the framework of the investment Annual Report. the Deputy Director General Sports Arena of “Luzhniki”; transformation capacities and over 3.8 for Capital Construction thous. km of transmission power lines. Projects O. V. Ivanov • CSKA football field; Implementation of capital Commissioning of fixed assets, Financing, RUB mln with VAT Priority projects for 2016: construction investment, RUB mln without VAT RUB mln without VAT What are the main achievements and • Power supply for the facilities included of 220/100/20/10 kV station results delivered by the Department into the special city development “Khovanskaya” for electric power 51,212 45,494 45,827 45,452 47,795 under your supervision? program, including revamp of Moscow supply to New Moscow facilities; 42,694 Cathedral Mosque, arrangement of power construction of the first circuit of 220 36,715 34,458 36,295 In 2015, the Investment Program supply for subway stations “Salarievo”, kV cable line “City-2 — Belorusskaya”; was completed in the full scope; the “Rumyantsevo”, and “Tekhnopark”. 35 kV station “Molchanovo”; 110/20 Company operated in accordance with kV station “Medvedevskaya”; revamp the approved schedules. I would also like to mention that PJSC of the first circuit in 110 kV cable line MOESK fulfilled its key task: preparation of “City — Mayakovskaya”, etc. Speaking about power facilities the office building located at 7-9 Vavilova commissioned in 2015, I would like St., Moscow for relocation. Additionally, the Company plans to 2013 2014 2015 2013 2014 2015 2013 2014 2015 to make a special mention of revamp actively participate in improvement of 220/110 kV station “Tsentralnaya”; What are the Company plans and of legal aspects: introduction of Construction in progress, RUB Commissioning of capacities / Commissioning of capacities / 110/10 kV station “Avtozavodskaya”; forecasts for 2016? amendments and supplements into mln without VAT lines, MVA lines, km 110/10 kV station “Lomonosovo” the Land Code, Urban Development and some other projects. In 2016, the focus will be made on Code, Forestry Code of the Russian 28,476 27,130 28,280 4,453 3,440 8,614 significant facilities, which are required Federation in terms of reduction 1,593 6,195 6,206 In addition to feed centers, the Company to ensure reliable power supply in of timeframe and simplification of also commissioned several HV cable the Moscow area and to the activities procedures for execution of legal lines: 220 kV circuit “Matveevskaya — associated with connection of consumers. documents on the land lots owned by Presnya” (4.9 km); 110 kV circuit the government or municipal authorities “Butyrki — Smarskaya” (5.76 km); 110 The amount of capital investments in the and approval of design documentation kV circuit “f.GES-1 — TETs-12” (7.17 framework of Investment Program 2016 for construction/revamp of power km); 110 kV circuit “Fili — Presnya” will be around 29.6 bln rubles. The Company facilities’ infrastructure in Moscow. (1.21 km); 110 kV circuit “Kosino- 2013 2014 2015 2013 2014 2015 2013 2014 2015 Vykhino” (2.85 km). The second circuit of 220 kV cable line “Avtozavodskaya — Yuzhnaya” (5.67 km) was constructed. In 2015, the Investment Program were made in Moscow due to of fixed assets commissioning The 110 kV overhead transmission became subject to sequestering as the geopolitical location of the decreased by 24% to 34,458 mln line “Radischeva-Klin Z and V” follows: capital area; a slight decline in the rubles. (22 km) was revamped. volumes of capital investments was In the framework of preparation for 1. The amount of planned capital observed in the region in absolute 3. The planned amount of financing the World Cup 2018, PJSC MOESK investments was reduced by 19% to terms. decreased by 21% to 39,683 mln completed activities in accordance 35,002 mln rubles. The actual scope rubles. The actual scope of plan with the approved schedules on the of plan fulfillment was 105%. Capital 2. The planned volume of fixed fulfillment was 91%. Relative following facilities: investments relative to 2014 were assets commissioning was to the year 2014, the volume of cut by 19% to 36,715 mln rubles. reduced by 27% to 32,980 mln financing decreased by 24% to • development of “Luzhniki” sports rubles. The actual scope of plan 36,295 mln rubles. The financing field territory and arrangement Similar to previous years, in 2015 fulfillment was 104%. Relative was performed within the limits over 50% of capital investments to the year 2014, the volume of available funds. The activities ANNUAL RESULTS OF COMPANY 72 REPORT2015 ACTIVITIES 73

were performed; accounts pay- to the year 2014, the volume of plan fulfillment was 117%. Rela- Structure of Capital Investments, RUB bln with VAT able were formed as of January commissioned transformation tive to the year 2014, the volume 2015/ 1, 2016. capacity decreased by 54% to of commissioned transmission Area of Investment Activities 2013 2014 2015 2014, % 1,593 MVA. lines decreased by 28% 4. The planned volume of transfor- to 6,206 km. The decrease in Total 42,694 47,795 36,295 -24.1% mation capacity commissioning 5. The planned volume of trans- the commissioned production decreased by 56% to 1,543 mission line commissioning capacities was observed due to Priority projects 9,101 10,958 4,479 -59.1% MVA. The actual scope of plan decreased by 34% reduction of capital investments R&R 7,436 6,239 3,053 -51.1% fulfillment was 103%. Relative to 5,307 km. The actual scope of into the fixed assets. New construction 1,664 4,719 1,426 -69.8% Programs of special importance 0 0 0 0.0% R&R for HV (TL, SS) 0 0 0 0.0% Areas and Structure of Capital Investments New construction for HV (TL, SS) 0 0 0 0.0%

The priority area of financing Dynamics of Financing with Areas of Financing Programs, including: 33,593 36,837 31,816 -13.6% through capital investments Breakdown to Areas through Capital HV facilities rated for 35-330 kV 9,203 9,504 4,509 -52.6% for the Company in 2015 was of Investment Activities, Investments in 2015, % R&R for HV (TL, SS) 9,108 9,489 4,498 -52.6% new construction (59% of the RUB mln total financing scope) aimed at New construction for HV (TL, SS) 95 15 11 -28.9% liquidation of existing deficit in 227 7 Technological connection facilities (total), including: 12,254 18,644 18,075 -3.0% terms of electric capacities and 624 connection of new consumers. Technological connection facilities rated above 670 kW 5,548 8,622 9,696 12.5% 25,306 2,441 34 16,469 Technological connection facilities rated from 150 to 670 kW 1,179 1,592 1,649 3.6% Technology upgrade and 21,421 Technological connection facilities rated from 15 to 150 kW 383 1,716 1,084 -36.8% revamp projects take 34% 2015 Technological connection facilities rated up to 15 kW 4,298 6,713 -15.9% of the total financing scope, 25 602 22,263 5,646 which is associated with the 12,433 Power generation 0 0 0 0.0% policy of tariff growth limitation 59 for natural monopolies and 2013 2014 2015 Distribution grids 6,785 5,430 3,982 -26.7% prospective development Technology upgrade and revamp 6 670 4 846 3 796 -21,7% schemes for the territories. Technology upgrade and revamp New construction 115 584 186 -68.1% New construction Automated process control (excluding AISKUE) 1,540 1,252 1,126 -10.1% Others Electric power metering and monitoring means (AISKUE) 760 531 324 -39.1% Safety programs 461 213 130 -39.1% In general, the scope of financing • ECs with power rating over for inclusion into the cost of Procurement of electric grid facilities, land lots, other 598 211 5 -97.6% in 2015 was reduced by 24% 150 kW (11% increase) — investment assets —2,308 mln facilities compared with 2014. The decrease due to the increased rubles; of financing was associated number of applications from Other programs and activities 26 14 2,436 >100.0% with targeted sequestering of new consumers, including • Others (buildings; equipment Others (buildings; equipment not included into construction 1,967 1,036 1,230 33.2% Investment Program. Financing representatives of small and not included into the cost estimates) was cut for all sections of the medium businesses. construction cost estimates) Technology upgrade and revamp 16 469 25 306 21 421 -15,4% Investment Program, except the (18.8% growth) — procurement following areas where the scope • Other programs and activities of equipment and vehicles for New construction 16,469 25,306 21,421 -15.4% of financing actually increased (increase over 100%): distribution mobile work teams in 2015; Others 624 226 2,441 >100.0% compared with 2014: of interest on borrowed funds emergency stock. ANNUAL RESULTS OF COMPANY 74 REPORT2015 ACTIVITIES 75

Long-Term Investment Program Main Physical Parameters of Investment Program 2016-2019

The long-term investment program The key objectives of PJSC MOESK technological connections to Transformation capacity, MVA Transmission lines, km Thus, implementation of approved of PJSC MOESK for 2015-2019 was investment program are as follows: overloaded feed centers; investment program provides for prepared in compliance with the • ensuring power output from the 3,783 commissioning of 12,618 MVA 3,880 2,857 2,453 2,963 Electric Power Sector Development • modernization of equipment as newly commissioned power 3,109 3,100 2,529 of transformation capacities and Strategy for Moscow for the Period required for sufficient, reliable, generating plants of PJSC commissioning of 12,056 km 2014-2019, Prospective Develop- uninterruptible power supply to “Mosenergo”; of transmission lines with ment Scheme and Program for consumers; • implementation of develop- 182,635 mln rubles financing Electric Power Sector in Moscow • commissioning of new capac- ment plans for Troitsky and over 2016-2019. region for the Period 2015-2019. ities to close the deficit of Novomoskovsky Administrative 2016 2017 2018 2019 2016 2017 2018 2019 loads and increase the volume Districts due to construction of The long-term investment program of reserve capacity in feed new feed centers (220 kV station Areas of Investment Program, RUB mln with VAT for 2015-2019 was approved by centers; “Khovanskaya”, 700 MVA); Order of Russian Ministry of Energy • implementation of program for • ensuring the full scope of tech- Areas of Investment Activities 2016 2017 2018 2019 2016-2019 No. 735 dated October 16, 2014. elimination of limitations on nological connections. Total 43,148 43,910 47,481 48,096 182,635 Main Cost Parameters of Investment Program 2016-2019 Technology upgrade and revamp 24,730 23,227 27,236 31,738 106,931 New construction 16,378 18,669 18,312 14,502 67,861 Capital investments, RUB mln Commissioning of fixed Financing, RUB bln without VAT assets, RUB mln without VAT with VAT Others 2,040 2,014 1,933 1,855 7,843 46,774 47,481 48,096 Priority projects 12,043 14,881 15,802 14,513 57,239 43,050 41,148 43,910 40,751 40,101 41,041 R&R 6,931 7,649 9,177 11,032 34,789 38,823 38,869 37,851 New construction 5,112 7,232 6,625 3,481 22,450 Programs 9,396 8,467 10,444 9,605 37,912 R&R for HV (TL, SS) 9,044 8,173 10,128 9,423 36,768 2016 2017 2018 2019 2016 2017 2018 2019 2016 2017 2018 2019 New construction for HV (TL, SS) 352 294 316 182 1,144 Technological connection facilities 10,247 10,556 10,687 10,428 41,919 Distribution grids 6,234 5,763 6,229 9,439 27,665 R&R 6,073 5,585 6,221 9,439 27,318 New construction 161 177 8 0 346 Automated process control (excluding AISKUE) 1,808 1,146 652 619 4,225 Electric power metering and monitoring means 506 409 675 411 2,001 (AISKUE) Safety programs 64 61 176 200 501 Procurement of electric grid facilities, land lots, other 0 0 0 0 0 facilities Other programs and activities 810 612 883 1,025 3,330 Payment of interest on borrowed funds 2,040 2,014 1,933 1,855 7,843

Data with breakdown to Moscow and Moscow region is presented in Annex 5.9. ANNUAL RESULTS OF COMPANY 76 REPORT2015 ACTIVITIES 77

Out of the total scope of capital Implementation of new construc- The total volume of the investments in accordance with tion and retrofit program will Company’s own funds used the approved investment program prevent the delay in connection to finance the investments for 2016-2019 (182,635 mln rubles with procurement and replacement (with consideration of with VAT), retrofit and revamp of of damaged power transformers. advances for technological existing electric power facilities will Due to prevention of overload, connections) is take 106,931 mln rubles (or 58.5%), the equipment service life will be new construction and expansion extended since the overload deteri- will take 67,861 mln rubles (or orates the insulation characteristic 37.2%), others (payment of interest of equipment and increases the risk 175,806 on borrowed funds) will take 7,843 of damage to expensive equipment. mln rubles or 96.3% mln rubles (or 4.3%). Implementation of the The main share of invest- program shall: ments in compliance with the Sources of Financing approved investment program • decrease the number of over- 2016-2019, RUB mln is allocated to finance: loaded power transformers, overhead and cable lines with 5,530 • Technology upgrade and revamp all voltage levels; 3% of HV facilities — 71,557 mln 35,325 107,874 19% 59% rubles with VAT or 39.2% of the • bring the breaking total scope of investments. characteristics of 6-110 kV circuit breakers in 6,829 4% Technology upgrade and compliance with the regulatory 414 2016-2019 revamp of HV facilities documentation requirements; 0% 26,663 • redistribute the load across 15% existing grids of PJSC MOESK; 71,557 • modernize the mln rubles with VAT or 39.2% operational funds; Revenues used for investment Depreciation • improve the reliability of power VAT refund Technological supply to consumers; connection facilities Other Company funds • increase the reliability of data on Raised funds (borrowing with interest) electric power transmission. Payment for technological connection 41,919 mln rubles with VAT or 23.0%

Distribution grids 27,665 mln rubles with VAT or 15.1% ANNUAL RESULTS OF COMPANY 78 REPORT2015 ACTIVITIES 79

2.7. TECHNOLOGIES AND INNOVATIONS Information Technology and Telecommunication

Results of Development of • Development of information • Development of service for Commentary-interview of Additionally, the Company: will improve the level of information Automated Process Control portal for technological waiting time calculation the Director for Automation certainty as required to make Systems (AEa.) in 2015: connections (Zero Visits and provision of audible of Business Processes • worked on creation of reference base decisions in the course of operating program) in order to eliminate information for subscribers in A. A. Areshkin regulating archive storage of docu- dispatch control, operation, repair, In order to improve observability the need for personal the queue; ments, which is an important step to- and development of electric grid and and controllability of 35-220 (physical) visits to the offices The main areas of IT system de- wards creation of electronic document to improve the efficiency and reduce kV grid, over the reporting year for the Applicants: • Development of service velopment in 2015 are related with archive with all archive documentation the timeframe of scheduled and the Company commissioned “Request — Response”. automation of business processes. of PJSC MOESK, emergency activities at electrical grid cutting-edge systems for data • Application submission; facilities due to optimum distribution collection and transfer at 26 • Implementation of uniform In order to improve the quality • implemented the system for automated of mobile work teams among work stations. Seven stations were • Submission of missing authentication functionality of customer care, the Company processing of internal user requests sites. This project will increase the equipped with Automated documents; for the web-based client performed the following activities in (ServiceDesk), reliability of electric power supply Process Control Systems (AEa.). area of PJSC MOESK and the framework of automation of its and labor efficiency. In 2015, the Company launched • Execution of contract on web-based client area of technological connection business • launched a project for implementation a target program to increase the technological connection and PJSC “Mosenergosbyt”, which process and service development: of a single corporate domain for The Company also plans to reliability of operational process technical specifications by enables quick transition centralization of IT computing systems complete automation of business control (OPC) for Novaya Moskva signing with digital signature; between them without • implemented the support system for used by all automated facilities into process for client application branch; implementation of other additional authentication; development of technical specifica- an IT infrastructure with uniform con- management and analysis of target programs is in progress: • Payment by bank card; tions which enables the Company trol functions. client relations efficiency (CRM), automation of OPC at Moscow • Subsystem for generation of specialists to design and select the implement a system for prompt Cable Grids (MCG) branch of • Submission of notification bar codes for documents on optimum technical solution for con- One of the key goals for 2016 is to notification about process-related PJSC MOESK, modernization and about fulfillment of technical technological connections, nection to PJSC MOESK grid, thus implement the project for replication of violations with indication of causes expansion of data collection and specifications. which enables the Company reducing the timeframe required for mobile team management system, which of their occurrence. transmission system for PJSC employees to uniquely identify technological connection, MOESK stations. • Modernization of Contact and quickly find the documents Center Light Line which and enables the consumers • developed its information portal Results of Business enabled delivery of services to use the bar code for online on technological connections Process Automation to consumers in automatic services; in order to eliminate the need in 2015 mode without direct interaction for personal (physical) visits to with the operator and reduced • Implementation of functionality the offices for the Applicants PJSC MOESK continuously timeframe for information for notification of consumers (Zero Visits program), improves its IT system. Thus, provision in response to client about scheduled power supply the following projects were applications: outage via SMS and E-mail; • performed activities on moderniza- implemented in 2015: tion of its contact center Light Line. • Automatic notification of • Automation of business • Implementation of system clients about readiness of process for consolidation of In the framework of automation of its for support of technical their documents from the electrical grid assets into the business process for electric power specifications preparation 1C software, including voice Automated Information System transmission and metering, the Com- process based on Tekla message with information on for Technological Connection pany implemented additional func- NIS platform which can the application number; Control (AIS TCC) and the tions of the hardware and software automatically calculate the Client Area of PJSC MOESK in complex for calculation of delivered options of technical solutions • Development of service order to formalize the transfer transmission services and generation for connections to electric “Notification about Technical of electric grid facilities to of electric power balances. grids in regions 12 and 21 of Specifications Fulfillment”; the balance sheet of PJSC MCG branch of PJSC MOESK; with the possibility to submit ANNUAL RESULTS OF COMPANY 80 REPORT2015 ACTIVITIES 81

applications both in the client introduction of additional personnel appraisal; R&D in 2015 service centers and via the functions of the hardware & web-based client area; software complex of AIS “KIS • Automation of integration Balance” based on the Omni- process between the Software • Implementation of digitization utilities platform to enable Complex for Incident Notification R&D Description process for applications and calculations for the volumes (SWCIN) and Software Complex System for monitoring and prediction of electric grid damage, including assessment of necessary resource complaints in the client area of of delivered transmission “Accident Occurrence Rate” mobilization under the impact of hazardous natural phenomena PJSC MOESK, where the client services and generation of as related with application for can quickly obtain consultation, electric power balances; emergency outage; Timeframe Actual cost of R&D implementation in 2015, RUB mln with VAT send a letter or complaint without the need for a physical • Creation of reference base • The SWCIN has functionality visit to the Company office; regulating archive storage for input of data on 0.4 of documents, survey and kV equipment, including 2014-2016 • Automation of workspace for collection of input data on the association with the consumer 12.35 12.35 compliance control employee paper documentation funds addresses, which will enable Financing Cost per acceptance certificates in charge of identification of within branches and Power delivery of notifications to the possible corruption attributes Grids Regions, development clients about emergency power based on the key corruption of typical reference outage in the future. Technical results, including the list • development of technical design for quences caused by hazardous natural indicators, including the documentation set for of equipment, technologies, mate- deployment of pilot part of weather phenomena. possibility to prepare uniform organization and performance Additionally, the following rials, and system developed in the monitoring system; reports on the completed of activities on documentation projects were launched in 2015: framework of R&D as of December • Reduced time of emergency response anticorruption checks; fund digitization; 31, 2015 • ongoing development of design and cost due to timely arrival of personnel to the • Transfer to electronic workflow estimation documentation for deploy- site of emergency occurrence. • Automation of business • Creation of client forum in the • study of global experience in the R&D ment of pilot part of monitoring system. process “Electric Power form of interactive consulting • Automation of technological subject; • Mobilization of main resources of one Consumption without Contract” platform dedicated to connection process R&D result implementation site specific branch (personnel, reserve in the Automated Information technological connections and • development of concept for weather equipment, special vehicles, etc.) System for Technological power supply; • Reliability improvement monitoring system design; The Company plans to implement a assigned to the territory of possible Connection Control (AIS TCC) system for monitoring and prediction of emergency without engagement of to formalize the accounting • Automation of business • HR management and • development of technical specifications occurrence time, nature, and duration resources from other branches. process for Reports on Electric process for 360 degrees remuneration calculation for weather monitoring subsystems; of hazardous natural phenomena which Power Consumption without damage the electric grid as required Contract until execution of • development of software for weather to assess necessary mobilization of contract on electric power monitoring subsystems, generation resources in case of hazardous natural consumption or limitation of of weather forecasts and warning phenomena impact across the entire electric power consumption; about hazardous weather conditions service area of PJSC MOESK, including to determine damage risks for power implementation of automatic weather sta- • Modernization of architecture, equipment and assess the resources tions for prompt collection of weather data implementation and required for emergency response. and forecast update within the system operation territory. • inspection of equipment installed at pilot site facilities of PJSC MOESK; R&D result implementation effect

• selection of installation points (25 • Decreased volumes of non-supplied installation points in Company electric power. branches) and types of weather monitoring equipment at PJSC MOESK • Reduced time and costs for rectifica- facilities; tion of emergency situation conse- ANNUAL RESULTS OF COMPANY 82 REPORT2015 ACTIVITIES 83

R&D Descriptio R&D Descriptio Development and implementation of intelligent distribution grid technologies for PJSC MOESK Study of electric power quality in 10/0.4 kV distribution grids, including development of guidelines, instructions, and technical activities to improve the quality of electric power supplied by PJSC MOESK

Timeframe Actual cost of R&D implementation in 2015, RUB mln with VAT 2014-2016 2014-2015 9.94 Technical results, including the list of Technical Metering of Electric Energy transformer stations (DTS), transformer Cost per acceptance certificates equipment, technologies, materials, and Power (IPMS), solutions for combi- stations (TS) which have effect on opera- and system developed in the framework nation of metering and remote control tion of the entire grid between the TSs, as Technical results, including the list of • implementation of corrective actions department, electric and cable grid regions, of R&D as of December 31, 2015 functionality; well as switching equipment, automated equipment, technologies, materials, which do not require additional costs; technological connections departments sectionalizing points, overhead lines and and system developed in the framework within PJSC MOESK branches. Electric power • study of global experience in imple- • main technical solutions for ATVR4 for cable lines in distribution grids rated for of R&D as of December 31, 2015 • development of guidelines for PJSC quality improvement activities, which do not mentation of intelligent grid projects; transformers in feed center and RPCM5 6-20/0.4 kV. MOESK personnel regarding the electric require any additional costs, were performed in TS9/DTS10; • survey of Southern Electric Grids power quality; at the pilot sites of Southern Electric Grids • survey of equipment in pilot zones (22nd R&D result implementation effect (SEG) branch, including preparation of branch of PJSC MOESK. region of Moscow Cable Grids branch • solutions for organization of commu- documentation; • implementation of corrective actions “Scherbinka” and Mozhaisky and Ruzsky nication channels for ASDPC13 and • Reduction of technology application which do not require additional costs; R&D result implementation effect Power Grids Region of the Western Elec- IPMS14; cost in the course of further deploy- • tests for identification of electric power tric grids branch) to be used for intelli- ment. quality indicators in (6—10) kV grids and • repeated measurements of electric power • Optimization of costs for revamp of facil- gent grid technology implementation. • information security solutions; voltage losses in 380 V grids, prepara- quality indicators after performance of ities due to performance of economically • Reduction load losses, non-supplied tion of electric power quality charts for corrective measures. feasible activities in the sufficient scope • development of main technical • IT assets of ASDPC and IPMS. electric power in emergency conditions. the surveyed grids. to ensure compliance of electric power concepts for implementation of smart • development of guidelines for PJSC quality with the regulatory documents. distribution grids rated for 6-20/0.4 kV • design documentation for implementa- • Optimization of grid operation condi- • identification of main causes for MOESK personnel regarding the electric and approval of such concepts by the tion of smart grids technology at pilot tions. violationwith the electric power quality power quality; • Increase in the share of technical activ- Science and Technology Board of PJSC sites of Mozhaisky and Ruzsky Power indicators at the surveyed pilot sites (7 ities performed using the resources of MOESK, including the following: Grids and 22nd region of Moscow Cable • Improved observability and controllabil- stations of SEG branch); • organization of seminars for PJSC PJSC MOESK only (selection of optimum Grids branch (Scherbinka) was pre- ity of the grid. MOESK personnel regarding the electric voltage regulation law, load compensa- • creation of SCADA6 /DMS7 /OMS8 pared and approved by the Science and • development of technical and power quality. tion in 380 V grids). systems; Technology Board of PJSC MOESK; • Monitoring of equipment condition. organizational corrective measures to improve the quality of electric R&D result implementation site • Improvement of electric power quality • identification of scope and composition • ongoing development of cost estimates power at pilot sites, identification of and transmission efficiency due to opti- of remote metering functionality and detailed design documentation for bottlenecks, electric grids which must The results shall be used by the electric mization of electric power consumption as required for SCADA/DMS/OMS implementation of smart distribution be revamped; power quality departments, distribution grid and losses. operation; grids in pilot zones. 6 Supervisory Control and Data • technical solutions for remote control R&D result implementation site Acquisition R&D Descriptio 7 Distribution management system over distribution grids of PJSC MOESK; Preparation of development schemes for 6-20 kV electric grids in Power Grids Regions (PGR) of PJSC MOESK in Moscow region 8 Outage Management System The technology will be implemented at 9 Automatic transformer voltage • methods and algorithms for optimum pilot sites of 22nd region of Moscow Cable regulation Timeframe Actual cost of R&D implementation in 2015, RUB mln with VAT selection of recloser quantities and Grids branch of PJSC MOESK “Scherbinka” 10 Reactive power compensation means 11 installation points; and at pilot sites of Mozhaisky and Ruzsky Transformer station 12 Distribution transformer station 2014-2015 Power Grids Region of the Western 13 Automated system of dispatch process • main technical solutions for creation Electric grids branch of PJSC MOESK. The control 33.14 150.98 of Intelligent System for Fiscal and technology will be applied for distribution 14 Intelligent power metering systems Financing Cost per acceptance certificates ANNUAL RESULTS OF COMPANY 84 REPORT2015 ACTIVITIES 85

Technical results, including the list of construction, expansion, and revamp of R&D result implementation site R&D Descriptio equipment, technologies, materials, distribution grids; Reactive power compensation in distribution grid and system developed in the framework 6-20 kV electric grids, 34 PGRs in Moscow of R&D as of December 31, 2015 • establishment of database to be region. used as a part of geoinformation Timeframe Actual cost of R&D implementation in 2015, RUB mln with VAT • analysis of the current condition of system; R&D result implementation effect electrical facilities and throughput capacity of electric grids rated for 6-20 • preparation of proposal for develop- • Improved quality of investment plan- 2014-2016 kV for 34 PGRs; ment of electric grids rated for 6-20 ning by PJSC MOESK. 15.8 15.8 kV with breakdown to each PGR for Financing Cost per acceptance certificates • development of single-line diagrams short-term (5-7 years) and long-term • Improved quality and reliability of for 34 PGRs rated for 6-20 kV in Mos- (10 years) perspective, including electric power supply to consumers in Technical results, including the list of The following activities are in progress: R&D result implementation effect cow region with consideration of new assessment of Moscow region equipment, technologies, materials, and system developed in the framework • development of design documentation • Reduction of electric power losses due of R&D as of December 31, 2015 on prototype of reactive power com- to optimization of reactive power flows. pensation device; R&D Descriptio • analysis of global experience in applica- • Reduction of PJSC MOESK costs in con- Development of typical digital station rated for 10, 20, 35 kV tion of RPC devices20 in distribution grids; • fabrication of RPC device control nection with design & survey activities system and laboratory tests; and construction & installation activities, Timeframe Actual cost of R&D implementation in 2015, RUB mln with VAT • development of control algorithm commissioning activities due to replica- for RPC and AVR (automatic voltage • -development of design and detailed tion of solutions in distribution grids. regulation) devices to minimize electric design documentation on RPC device 2014-2016 power losses minimization and main- control system with consideration of AVR • Decreased load on the power equipment 6.12 6.12 tain the allowable voltage levels in the utilization at the pilot site of PJSC MOESK. due to the lower value of reactive current. Financing Cost per acceptance certificates electric grid. R&D result • Improved possibilities for connection of Technical results, including the list of The following activities are in progress: • decreased time and costs for revamp of • selection of pilot sites for implementa- implementation site consumers to PJSC MOESK stations. equipment, technologies, materials, and facilities rated for 35 kV, ESG, DP and DTP tion of RPC devices. system developed in the framework of • development of typical design documenta- rated for 6-10, 20 kV. The Company plans to implement the con- • Higher efficiency of utilization of R&D as of December 31, 2015 tion for modular packaged digital station; • development of design documentation trol system and install at least 50 reactive equipment throughput capacity in the • possibility to perform revamp projects at on installation of RPC device control power compensation devices at the pilot electric grid for active power trans- • study of technologies in the field of digital • development of design documentation for sites with limited space; system with consideration of AVR sites of PJSC MOESK branch — Eastern mission due to optimization of reactive stations and development of technical modular packaged digital station at the utilization at the pilot site. Electric Grids. current flows. specifications for components of digital SS pilot site of Znamenskaya SS. • improved performance reliability of sta- rated for 10,20, 35 kV; tions, lower emergency occurrence rate. R&D result implementation site • development of technical specifications for the typical compact modular quick-mount The Company plans to fabricate a pro- digital station rated for 35 kV, SG15, DP16 and totype (components of DSS: ESGMB — DTS rated for 6-10, 20 kV; 35kV, ESGMB-6(10)kV, SSC A CDCCS MB) which will be operated at a PJSC MOESK • development of technical specification site. The pilot site shall be arranged at 35 for manufacturing of typical modules kV station Znamenskaya. 15 Switchgear (Transformer MB17, ESGMB-6(10-20)kV, 16 Distribution point 17 ESGMB-35kV18, SSC A CDCCS MB19) to be R&D result implementation effect Transformer module box 18 Enclosed switchgear module boxes installed at stations rated for 35 kV, SG, rated for 6(10-20) kV and 35 kV DS and DTP 6-10, 20 kV for two options of • decreased time and costs for design and 19 Station-service control, auxiliaries and station enclosure (concrete and sandwich) survey activities; control DC current system module box 20 Reactive power compensation ANNUAL RESULTS OF COMPANY 86 REPORT2015 ACTIVITIES 87

• System for monitoring and prediction • Development of typical digital station • Reactive power compensation in distri- R&D Descriptio of electric grid damage, including rated for 10, 20, 35 kV; bution grid. Automatic reclosing with transmission line condition monitoring (ARTLCM) assessment of necessary resource mobilization under the impact of haz- • Automatic reclosing with transmission Timeframe Actual cost of R&D implementation in 2015, RUB mln with VAT ardous natural phenomena; line condition monitoring; 2014-2016 13.04 List of Patents/Certificates • Utility model patent “Charger for elec- Additionally, the Company submitted an Cost per acceptance certificates Obtained in 2015 in Connection tric public transport (DC)”; application for utility model patent “Auto- with R&D Results matic recloser for overhead electric cable • Utility model patent “ Charger for elec- transmission line” to Rospatent (Russian Technical results, including the list • laboratory tests were performed on the lines operated by PJSC MOESK. Pilot imple- In 2015, PJSC MOESK obtained 4 title pro- tric public transport (AC)”; Agency for Patents and Trademarks). of equipment, technologies, materials, model and prototype of FL device. mentation of ARTLCM system is planned for tection documents (patents) on the results and system developed in the overhead cable lines in the following branches of its R&D activities: • Certificate of software registration framework of R&D as of December • model and prototype of AR device with of PJSC MOESK: Moscow HV Grids, Western “Settings calculation program for 31, 2015 line condition monitoring function were Electric Grids and Eastern Electric Grids. • Utility model patent “Automatic trans- automatic regulation of transfer volt- developed and fabricated; former voltage governor”; age in electric grids”. • optimum methods of FL21 and SCL22 R&D result implementation effect were selected for AR23 of power lines • experimental and performance tests with line condition monitoring function were performed on AR device with line • Reduced equipment repair costs Funds Allocated for R&D (Pulse wave method, Pulse location condition monitoring function. method; • Lower volumes of equipment damage; Category 2013 2014 2015 2015/2014, % R&D result implementation site (application of AR on the cable run with Revenues from electric power transmission, • model and prototype of FL device for 1-phase short circuit results in damage 38,580.2 33,656.4 35,787. 8 +6.33 RUB mln without VAT (total), including: AR with line condition monitoring were The Company plans to install the new device to adjacent phases and larger scopes of developed and fabricated; on all existing 110 – 220 kV transmission equipment damage). Funds allocated for R&D, RUB mln Financing 67.4 -65.93 47.7 197.8 Cost per acceptance certificates 208.2 5.26

PJSC MOESK plans to perform the fol- Moscow Cable Grids rated for 6(10) kV rural areas; lowing R&D activities in 2016–2017: to resistive earthing neutral operation mode; • Development of typical engineering • Development of guidelines on appli- solutions for segregation of technical cation of diagnosis tools for 6–220 kV • Development of typical design for and fiscal metering of electric power 35,787.8 67.4 208.2 equipment under operating voltage by support-mounted 110 kV junction unit in 6-20 kV switchgear cubicles with RUB mln RUB mln RUB mln partial discharge method; for connection of overhead line and bolted feeders which supply power to Revenues from electric Funds allocated for R&D Cost per acceptance cable line; several electric users; power transmission, certificates • Development of guidelines on selection without VAT (total) of neutral earthing mode in 6–35 kV • Development of technical solutions • Development and implementation of grids, including description of aspects and recommendations for transfer of intelligent distribution grid technolo- in connection with the transfer of existing 6–10 kV grid to 20 kV grid in gies;

21 Fault localization 22 Short-circuit localization 23 Automatic reclosing ANNUAL RESULTS OF COMPANY 88 REPORT2015 ACTIVITIES 89

2.8. PROCUREMENT ACTIVITIES

The Company holds the procurement procedures through Commentary-interview of the • increase in the share of procurement and Medium Companies, which • the share of equipment electric power supply to consumers, the electronic trading platform Deputy Director General for from small and medium jointed the Program. procurement from the the Procurement Department must www.b2b-energo.ru which Logistics and Procurement businesses in the total annual manufacturers and their ensure fulfillment of procurement enables involvement of a large M. L. Budyko procurement volume; Based on the results of procurement official representatives plan for repair activities for 100%. number of service suppliers procedures held in 2015, the increased to 78%. and therefore contributes to What are the main achievements • increase in the share of direct economic effect was 1,321 mln rubles To achieve the target rating of higher efficiency of procurement and results delivered by procurement by the customers from with VAT (or 2.2% of the planned and How do you manage your the Russian Federation in the activities. the Department under your small and medium businesses in the declared procurement costs). relations with the suppliers category “Connection to Power supervision? total annual procurement volume; considering that they are not Supply System” and expedite the The Company’s Moreover: at all willing to lower the procedure of consumers’ connection PJSC MOESK performs its • elimination of administrative, financial, equipment prices? to electric grids of PJSC MOESK, procurement activities procurement activities in and information barriers for the small • the share of procurement from the the priority goal of the Procurement are based on the compliance with Federal Law No. and medium businesses in the course single supplier was reduced to 1%, We organized negotiations with all Department shall be arrangement of principles of open 223-FZ dated July 18, 2011 On of their participation in procurement the main Russian manufacturers bidding procedures for selection of Procurement of Goods, Works, and supply of goods, works and • the share of electronic procurement and openly explained the key contractors as required to perform and transparent Services by Certain Types of Legal services for the customers. was increased to 99%. The volume principles of our operation: the contracts on technological procedures. Entities (further referred to as of procurement from small and connection within the shortest Law 223-FZ), which establishes Additionally, the Company approved medium businesses only over the 1. Development of competitive possible timeframe. general principles and main the PJSC MOESK Partnership Program period from July 1 to December environment Special attention is paid to requirements to procurement of for Small and Medium Companies. In 31, 2015 was 1,602 mln rubles PJSC MOESK has implemented general availability of information goods, works, and services. In the framework of this program, the without VAT or 8.7% of the total 2. Equal accessibility of bidding the import substitution program in on the procurement procedures, addition to reduction of expenses Company maintains the Register of Small procurement volume in H2 2015. procedures for all bidders order to minimize the Company’s which is fully supported by on procured equipment, works, dependence on imported equipment. mandatory publication of and services without prejudice 3. Lower prices without prejudice to Thus, according to the Department’s information on the requested to improvement of power supply the quality plans, the share of purchased goods, works, and services in reliability in the region, last year, imported equipment shall not exceed the uniform information system Director General of PJSC MOESK 4. Compliance with the requirement 5%, if the corresponding equipment of the Russian Federation on the assigned new tasks to the Logistics of MOESK technical policy currently has Russian analogs. Internet (www.zakupki.gov.ru). and Procurement Department. 5. Elimination of intermediaries In order to eliminate involvement Thus, improvement of accessibility from the supply chain of intermediary organizations in of the Company’s procurement the supply chain and thus reduce processes for the small and What are the Company plans and the costs of goods and materials, medium businesses became forecasts for 2016? the Logistics and Procurement another priority field for the Department shall ensure that the Logistics and Procurement In order to enable successful manufacturers and their direct Department in 2015. fulfillment of the Company’s representatives deliver least 75% of maintenance and repair program goods and materials. A number of activities were for 2016 and improvement of performed to achieve this objective: ANNUAL RESULTS OF COMPANY 90 REPORT2015 ACTIVITIES 91

Structure of Procurement, Structure of Procurement, with Breakdown to Types with Breakdown to Types of of Activities, ea Activities, RUB mln with VAT new construction technology upgrade and revamp repair of power equipment (repair) 278 and maintenance 4617 IT procurement 488 2,981 16,526 19,137 0 2 R&D consulting 4,587 57,875 appraisal services 775 0.07 Total 667 0 Total other procured items 1,073

7,553 12,919

Procurement Structure, Procurement Structure, with Breakdown with Breakdown to to Procurement Procurement Procedures, Procedures, ea RUB mln with VAT procurement from a soul supplier request for price quotation based on the results of open competitive negotiations 11 78 365 540 626 24 659 open bidding process/auction 13 405 open request for proposals 285 000 000 open competitive negotiations procurement through participation 4 587 57 875 in procedures organized by sellers Total Total of goods closed bidding process/request for proposals 3 587 18 906 open request for price quotation

Improvement of Procurement Activities in 2015

In view of the large volumes services as required to perform supplier. In particular, in case of procurement and in order the Company’s contracts on of consideration of non-planned to expedite the procurement technological connections procurement possibilities procedures and optimize between the executive bodies of from the single supplier, the the work of procurement PJSC MOESK and its branches. Central Bidding Committee of committees, the Company the Company made resolutions distributed the powers in terms In 2015, the Company continued to organize other competitive of organization of bidding work on reduction of the volume procedures in compliance with procedures for contracted of procurement from the single the Regulations on Procurement. ANNUAL RESULTS OF COMPANY 92 REPORT2015 ACTIVITIES 93

2.9. PROPERTY MANAGEMENT AND CONSOLIDATION

Assets of Naro-Fominsk The consolidated property includes Summarized Indicators of Commentary-interview of contract with local grid operator CJSC worth is 1,394 c.u.; it includes 7 Grid in New Moscow (lease) 14 (packaged) transformer sta- Consolidation in the Frame- the Deputy Director General “Oktyabrskaya Elektroset” (with annual distribution transformer stations tions with transformer capacity works of Agreements on for Corporate Governance NGR in 2016 equal to 107 mln rubles). and 28 transformer stations with the PJSC MOESK signed 2 lease agree- of 10.5 MVA, 14 km of electric Loss Compensation with no and Property A.S. Starostin The lease contract came into force on installed transformer power rating ments to realize the transaction: transmission lines and private Consideration January 1, 2016. PJSC MOESK operates 68.5 MVA; 10-0.4 kV overhead power with OJSC Naro-Fominsk Electric property — 122 packaged trans- In 2015, the Company achieved good the electric grid which supplies electric line with 183 km length. Grid Company and JSC “Mosoblen- former stations with transformer In 2015, the Company consolidated results in terms of consolidation. power to Oktyabrsky town, residential ergo” (sublease of municipal facil- capacity of 35.3 MVA, 213 km 3,810 c.u. of electric grid assets, The last three years were marked by building and commercial premises in The Company plans to execute a similar ities of Naro-Fominsk Grid located of electric transmission lines. including 831 km of transmission lines active work: the simplified electronic Ramensky district and Malakhovka transaction for another municipal district in in Troitsky and Novomoskovsky and transformers with installed power application submission system has town in Moscow region. The property’s in Moscow region in H1 2016. Administrative Districts). OJSC of 575 MVA in exchange for no consid- started to bring results. However, “NESK”’s operation in the capacity eration and on account of receivables the overall economic downturn of a LGO was terminated. for delivered maintenance services. caused reduction of construction volumes, decrease in the number of potential consolidation objects, i.e., Share of PJSC MOESK in RGR in Moscow new grids of real estate developers. The electric facilities of individuals (first of all, owners of countryside 40% 38% 39% houses and summerhouse communities) often do not meet the technical requirements and therefore cannot be accepted for 2013 2014 2015 registration on the balance. 60% 62% 61% In 2016, the Company will continue its efforts in the field of LGO grids consolidation. PJSC MOESK Other LGOs

In December 2015, the Company signed a long-term property lease Share of PJSC MOESK in RGR in Moscow region

Largest Consolidation Transactions in 2015 32% 29% 28%

Stock of shares owns 5 large feed centers in Following the transaction com- 2013 2014 2015 (25% + 1 share) Moscow region with various pletion, PJSC MOESK acquired of OJSC “Energotsentr” degree of readiness (installed complete control over the sub- 68% 71% 72% (acquisition) power — 909 MVA, net supply sidiary (the participation interest at optimum load — 3 bln kW•h, was increased to 100%). OJSC “Energotsentr” is a subsidi- value of grid property — The acquisition cost was PJSC MOESK Other LGOs ary of PJSC MOESK. The Company 4,582 c.u.). 120 mln rubles. ANNUAL SUSTAINABLE 94 REPORT2015 DEVELOPMENT 95

As a result, PJSC MOESK identified 5 key priority areas of its development which are traditionally associated with the sustainable development and at the same time specific of PJSC MOESK due to its role of electric grid company:

Stakeholder Sustainable economic Reduced negative effect Social and HR impact engagement development on the environment control (sections 3.2., 4.1. and 4.5.) (sections 2. and 4.4.) (section 3.3.) (sections 3.5. and 3.6.)

• ensuring financial • improved quality of • provision of good work SUSTAINABLE • development of dialog stability of the Company waste water and higher conditions and safety with the key groups of efficiency of effluent interested parties • fulfillment of financial treatment plants • implementation of obligations in relation to measures to reduce work- • customer-friendly interested parties • reduction of atmospheric related injuries DEVELOPMENT approach emissions • growth of investment • HR development • high level of Corporate attractiveness and • protection and rational Governance capitalization use of land resources • HR loyalty improvement

• compliance with • implementation of long- • protection of flora and • Implementation of social 3.1. COMPANY PRIORITIES the Ethics Code and term stable dividend policy fauna programs Anticorruption Policy According to PJSC MOESK, sustainable development means meeting the • investments into the electric power system of current demands without jeopardizing the ability of future generations Moscow area to fulfill their needs, which can be achieved subject to balanced consideration of the impact of economic, social and environmental consequences of the Company’s activities on the society at large, including authorities and business. • implementation • increased availability of • improved quality of Providing electric power since it provides vital conditions Sustainable Development for of energy-efficient electric power supply equipment maintenance transmission services in Moscow for its existence and sustainable 2012 along with the aspects technologies and repair and Moscow region, PJSC development. When preparing the which are generally considered • uninterruptible power MOESK contributes to support integrated report of PJSC MOESK important in the electric power Improvement of electric • reduction of electric supply of normal living conditions of for 2015 in compliance with GRI sector. Additionally, the Company power supply efficiency power losses in the the population and development G4 Guidelines, the Company took into consideration the and reliability course of transmission of all the economic sectors in identified the key aspects of analysis of the best practices (sections 2.5. and 3.4.) the Moscow area. Due to the sustainable development. The used by the Russian and foreign infrastructure-related basis of its basis was formed by the key electric grid companies in terms activities, PJSC MOESK has great aspects of the previous Report of non-financial aspects of responsibility towards the society, on Activities in the Field of the report. ANNUAL SUSTAINABLE 96 REPORT2015 DEVELOPMENT 97

A list of stakeholder groups engaged by the organization. in 2015

Group of Stakeholders

Non-commercial organizations and local Personnel Consumers Suppliers, contractors Shareholders, investors Authorities Mass media communities Educational institutions

Interests of the Stakeholders

Salary and social benefits Product price Procurement from local Operational efficiency Tax payments in due time and Uninterruptible and quality Environmental safety Refresher training and suppliers in full scope power supply qualification improvement for Cost control Minimization of negative Steady jobs Operational efficiency personnel Energy support for Operational efficiency consequences in case of Procurement budget Development prospects of PJSC Occupational health Safety and reliability implementation of plans production accidents Internship and employment MOESK Client-friendly approach Compliance with procurement for social and economic opportunities for graduates Creation of learning and Compliance with the law standards in the framework Compliance with the law development of territories Environmental impact development opportunities Support of industry-specific of all bidding processes Social programs Situation in the power market Development prospects of Opportunities for professional Participation in significant educational institutions and social projects PJSC MOESK Development and scientific research activities and career growth Corporate governance modernization Support of partner relations Strategy and KPIs of social infrastructure Support of cultural events

Forms of Engagement

HR policy and Environmental Questionnaires Organization of procurement Publication of reports as Disclosure of information and Press events: press tours, Partnership in non- “Doors Open” days Policy procedures using electronic required by the law reports as required by the law briefings, press conferences commercial organizations Cooperation with educational Interaction via front office trading platforms Personnel satisfaction surveys Presentations and conference Use of personal Press releases on the most Participation in work groups institutions in connection with and questionnaires Internet reception office Contractual relations calls organized by the Company communication significant subjects and key relevant education subjects Economic, environmental and of Director General executives for the investment events Intranet portal Meetings with manufacturers Participation in joint work social initiatives community Execution of monthly reports of electrical and other groups Interviews with the Company Personnel meetings with Publications in local mass based on the readings of electric equipment Press releases on material executives Deputy Director General for HR Meetings of PJSC MOESK media power meters subjects and key corporate Management Agreement on information executives with the Video and radio spots, events Execution of reports exchange representatives of authorities publications in mass media Internal meetings on electric power consumption General meetings of Organization of joint public Organization of cultural and without metering and contracts shareholders events sports events Instrumentation checks for Meetings of PJSC MOESK Activities of labor dispute electric power meters executives with representatives committee of shareholders, investment Meetings organized by communities representatives of Young Analyst’s days, including visits to Specialists’ Council the production facilities Meetings with trade union representatives ANNUAL SUSTAINABLE 98 REPORT2015 DEVELOPMENT 99

3.2. STAKEHOLDER ENGAGEMENT 3.2.2. Interaction with Authorities and Public Organizations 3.2.1. Interaction with Investors In addition to publication of informa- On December 17, 2015, PJSC One of the most significant events One of the main achievements of the Company’s Public Relations tion on the web site, in 2015 the Com- MOESK held the annual event for in terms of interaction with the pany organized 2 conference calls analysts of investment companies shareholders is organization of Division was establishment of partner relations between following the publication of reports and banks — the Analyst’s Day. general shareholder meetings. The in compliance with the RAS and IFRS The event was attended by repre- Annual General Meeting of PJSC the Company and authorities at the regional and municipal for 2014 and held 2 meetings with the sentatives of the following financial MOESK Shareholders dedicated levels, regional departments of national public organizations, industry analysts following the publi- structures: CJSC Leader, Rye, Man to the results of the year 2014 cation of report in compliance with the & Gor Securities, Raiffeisenbank, was held on June 24, 2015 and which contributed to creation of favorable environment RAS for H1 and 9 months of 2015. BKS Company, “Gazprombank” and attended by the holders of over Sberbank CIB. The analysts were 92% voting shares in the Company for the Company operation. The Company under- traditionally interested in achieve- (for more detailed information see ment of goals set for the year 2015, the section General Meeting of stands the importance Company development prospects, Shareholders). The complete infor- of interaction with and possibilities in terms of tariff mation on the resolutions of the The main forms of Com- V. Kravchenko to the client Opportunities, Trends, Per- policy, scope and implementation General Meetings of Shareholders pany activities in 2015 were service center Moskovsky spectives and organized in the shareholders and of investment program. Every year is available on the web site of as follows: (New Moscow); commission- the framework of conference investors; therefore, this form of communication with PJSC MOESK (www.moesk.ru). ing of 220/10/6 kV station and exhibition “Energy-Effi- industry analysts is becoming more • organization of personal “Babushkin” after large-scale cient Moscow Area”; speech much attention is paid and more popular. In this way, rep- communication with rep- revamp project which was delivered by PJSC MOESK to establishment of resentatives of financial structures resentatives of authorities, attended by Moscow Mayor Director General P. Sinyutin can obtain specific figures for their public organizations for S. Sobyanin; opening of new at the research-to-prac- direct dialog between methodological approach, while the establishment and develop- Grids Control Center in East- tice conference in Moscow the Company execu- Company, in its turn, can deliver ment of strong and mutually ern Electrical Grids branch region Council dedicated to accurate information on the results beneficial relations; of PJSC MOESK which was the Implementation of the tives and the invest- of its activities to the investment attended by Moscow region Uniform Tariff Policy in the ment community. community. • organization of public hear- Governor A. Vorobiev, etc.); Course of Connection of Small ings in Moscow City Council and Medium Businesses to and Moscow region Council • participation of PJSC MOESK Electric Grids, etc.). dedicated to the revised draft representatives in events investment program of PJSC organized by the authorities Over the years, the Company MOESK for 2015-2020; and controlling agencies organized over 20 major public (video conference in the events which contributed to for- • organization of inauguration Moscow region Government mation of favorable environment ceremonies (visits) for the House dedicated to the for PJSC MOESK operation. new facilities of PJSC MOESK Current Issues in the Field of attended by the representa- Connections to the Electric tives of RF Ministry of Energy, Grids in Moscow region; par- Moscow and Moscow region ticipation in the round table Governments (including visit dedicated to the Connections of Deputy Minister of Energy to Engineering Networks: ANNUAL SUSTAINABLE 100 REPORT2015 DEVELOPMENT 101

3.2.3. Public Relations Communication with Mass Media

MOESK performs its Public Relations activities in line with the provisions Commentary-interview of the investment program and procurement target audience. The Company will Director of Public Relations process implementation. The Company continue participating in congresses of the Uniform Information Policy of PJSC «Rosseti». Division L. Dusheina will focus not only on the published and exhibitions to demonstrate its media but on visual and informative best practices. In terms of social In 2016, the Company’s efforts will materials as well: infographics, communication, the Company’s Social Communications focus on ensuring the Company’s advertising modules, banners. These focus will be on maintaining efficient openness to authorities at various formats shall be used by PJSC MOESK and prompt feedback for the service levels and the general public in to deliver large volumes of information consumers, including via Internet connection with development and and explain complicated subjects to the communication and social networks. In September 2015, the Company implementation of PJSC MOESK launched its novelty project — investment program, which, in Client Forum dedicated to tech- our opinion, shall ensure mutual nological connections and electric understanding and sustainable MOESK-EV Project “Legal Kilowatt” power supply where the users development of the Company can ask questions online on any in the short-term perspective, In line with the growing interest in In the framework of this project, subjects of their interest, from according to Director for External this subject on behalf of the Moscow MOESK performed inspections to application processing status Communications — Director Government, the key objective of the identify cases of electric power and electric power quality to the of Public Relations Division Company in 2015 was to organize consumption without contract current amendment of law. MOESK Lyudmila Dusheina. efficient interaction and coordinate and metering, raise awareness of experts in various fields respond the initiatives proposed by the the population, which contributed to these questions on the forum, energy companies and authorities to achievement of the strategic with the maximum response time In 2016, we will focus our efforts in connection with the city program Company objective — reduction being 3 days. This tool considerably on improvement of information “Electric Vehicles”, while maintaining of electric power losses during increases the speed of interaction availability regarding the services MOESK’s status of the leading expert transmission. with the clients and provision of and offerings of PJSC MOESK in this field. Based on the achieved feedback. During the period from for consumers and on increase results, from 2015 the MOESK-EV September to December 2015, the in transparency in the course of network will be expanded due to Company posted 182 answers on installation of charging stations on over 100 subjects. The popularity municipal parking lots in Moscow. of the new service is demonstrated by the number of views: as of late To improve the transparency of entire spectrum of its activities, formats: from regular distribution December, the counter reached business processes and deliver the Company actively cooperates of press releases to organization Internet approximately 133 thous. views. maximum volume of information with the mass media companies of press events. to the target audience about the at all levels and in various Communication In 2015, the Company implemented additional modern tools for In 2015, the Company continues Main Subjects of Publications in the Reporting Year interaction with the client based development of its Internet on the Technological Connections Category 2013 2014 2015 2015/2014, % “Kind Electricity to communication channels. Portal, specifically: subscription Number of mentions of the Company in mass media, ea. Children” to notifications about scheduled 14,528 14,703 19,473 32.4 (total), including the following subjects: In 2015 over 6 thous. schoolchildren power outage, possibility to pay for participated in the charitable event technological connection services, Implementation of investment program 1,162 1,191 1,314 9.3 “Good Electricity to Children”. PJSC re-assignment (re-issue) of docu- Progress of repair campaign 1,888 1,882 1,984 5.4 MOESK specialists organized 125 open ments on technological connection, lessons dedicated to Electrical Safety payment for various additional Dealing with difficult seasonal phenomena 1,017 1,041 1,079 3.7 in the schools of Moscow region. services. Number of issued press releases, ea. 679 690 676 -2.0 ANNUAL SUSTAINABLE 102 REPORT2015 DEVELOPMENT 103

3.2.4. Interaction with Service Consumers 4. systems for receipt of departments in 2015 was to electronic applications. increase the share of electronic applications to 30% of the total The main forms of consumer services include personal services, One of the key objectives number of applications for tech- non-personal services via telephone communication, and interactive services assigned to the client service nological connection. via the Internet. Statistics on Consumer Applications

The Company’s activities organized Infrastructure of Non-per- Category 2013 2014 2015 2015/2014, % to improve the system of client ser- sonal Services via Tele- Average time spent per application, min. 25 23 20,6 -10.40% vicing are based on the following 31 phone Communication principles of interaction with the dedicated customer consumers: care offices In 2015 the Company continued Over the reporting year, the Number of applications via communication channels, ea. work on transfer of consumer number of complaints in specific 1. Ensuring quality and availability calls to the unified call center figures decreased by 35%, of services in compliance “Light Line”; the outsourcing which signifies considerable 66,123 4,398 with the effective Russian company is engaged only during improvement in the service level Personal applications Federation laws. night hours and in case of massive for consumers and potential 523,242 Non-personal applications via call power outage. clients in 2015, especially center 2. Provision of sufficient information 2 in terms of technological customer care offices on the Company and its services connections (the number Written applications via opened in Novaya Moskva Interactive Services 2015 administrative support department to the consumers. via the Internet of complaints decreased over 2-fold). Non-personal applications via Internet reception office /client area /online 3. Territorial accessibility and com- The Western Electric Grids The year 2015 was marked by 673,964 consultations/e-mail fortable conditions of personal launched a pilot project to locate active development of interactive client servicing. its customer service office in the services by PJSC MOESK. Number of Questions Received via Internet Reception Office multi-functional governmental 4. Highly available and prompt services center in Naro-Fominsk In 2015, the Company imple- Category 2013 2014 2015 2015/2014, % non-personal and electronic town. Following the assessment mented new capabilities for inter- Applications received by the Internet reception office, ea. (interactive) services. of work results for this office, active servicing of consumers: 8,838 9,657 8,569 -11.3% (total), including the following subjects the Company will consider its 5. High-quality services. possibilities in terms of further 1. documentation execution with technological connections 7,098 6,949 4,721 -32.1% cooperation with the multi-func- digital signature; power outage and interruption, voltage surge, maintenance 6. Transparent business processes tional centers, which will increase of electric grid facilities, electric power consumption without 641 844 1,469 74.1% in connection with consumer the number of client service points 2. expansion of electronic appli- contract / power meters, stealing of electrical grid facilities services and objective review of in Moscow region by over 3-fold cation types (consolidation of consumer complaints. (currently, there are 92 multi-func- electric grid assets, re-assign- financial and economic matters 98 118 102 -13.5% tional centers in Moscow region ment (re-issue) of documents, expression of gratitude 178 65 122 87.6% Infrastructure of Personal and 31 PJSC MOESK customer relocation of grids from the others 759 1,681 2,155 28.2% Services service centers in Moscow region). construction site);

PJSC MOESK runs 120 offices to 3. remote payments by bank Reduction of the total number (32.1% reduction in the number of without fiscal metering is explained provide consumer services. Unified cards — Internet acquiring of applications submitted to applications). by expansion of client-friendly call center for personal and non-personal the Internet reception office (by approach and direct communication “Light Line” applications; 11.3%) is attributable to the overall The increased number of applica- with the power consumers without improvement of service quality, tions regarding the quality/power involvement of guaranteed power 8 (800) 700-40-70 including technological connections outage and power consumption supplier — retail power companies. ANNUAL SUSTAINABLE 104 REPORT2015 DEVELOPMENT 105

Doing Business Rating: on all 10 indicators). Since 2014, the Thus, over the period from 2012 Company Results and Plans ranking of the Russian Federation was PJSC MOESK has done a colossal determined by aggregation of results for amount of work which resulted in Over the period 2013-2015, PJSC the two largest cities in the country — decreased number of procedures MOESK implemented and launched a Moscow (PJSC Moscow United Electric required for connection to the electric number of programs in furtherance Grid Company) and Saint Petersburg infrastructure: from 10 to 3. The of Russian Federation Government (PJSC “Lenenergo”). timeframe required for technological Decree No. 7464p-P13 dated connection of the applicant was December 12, 2013 on priority fields Russia made a significant breakthrough in reduced from 281 to 80 days (statistical of activities for PJSC Russian Grids 2015 in the category “Getting Electricity” data of MOESK). The cost of connection in connection with implementation of by being upgraded by 24 points based was reduced from 3,500 mln rubles to action plan (Road Map) Improvement on application of new methods and by 224 thous. rubles (16-fold decrease). of Energy Infrastructure Availability 114 points based on application of old approved by Russian Federation methods. Today, thanks to the efforts of In order to improve Russia’s position Government Ordinance No. 1144-r Moscow energy sector workers, Russia in the World Bank rating Doing dated June 30, 2012 in order to holds the 29th place in the category Business-2016 in the category ensure Russian Federation ranking “Getting Electricity”. Just four years ago, “Getting Electricity”, PJSC MOESK in top 20 of Doing Business rating our country’s ranking in the same category realized a number of reforms in the prepared by the Word Bank on the was as low as the last but one place, field of technological connections annual basis. i.e. rank 184 (according to the methods to the grids in 2015. In the course valid in the period). of such reforms, PJSC MOESK PJSC MOESK performed significant completely revised its approach to work to improve the entire system Considerable transformations which the customer care, which resulted of technological connection starting made achievement of such great results in considerable decrease in the from the moment of application possible have been performed by PJSC time period required to prepare submission to the actual power MOESK since 2012. In 2013, the Company and perform the contracts on supply to the connected facility. launched its program “5 steps in 3 visits”, technological connections and in 2014, “3 steps in 2 visits” and in 2015, allowed the consumers to enjoy the The Doing Business rating prepared the Company introduced online connection transparent and accessible service of by the World Bank on the annual possibilities (“Zero Visits” program). technological connection. basis was selected as a control indicator for assessment of road map implementation. The rating provides assessment for 189 countries based on 10 indicators of business regulation. The higher the country’s position in the rating, the more favorable its environment is in terms of small and medium business establishment and operation. The target benchmark indicating the success of road map implementation is inclusion of Russian Federation into Top 20 of this rating by 2018 (based ANNUAL SUSTAINABLE 106 REPORT2015 DEVELOPMENT 107

3.3. ENVIRONMENTAL POLICY

The environmental policy of PJSC • Prioritize implementation Commentary-interview of and Production. Prospects contest “National Environmental In furtherance of its cooperation MOESK1 established the following of new technologies which the First Deputy Director for Development of Economic Award named after V. I. Vernadsky”. with the ornithologists, PJSC strategic goals in the field of contribute to reduced level of soil General — Engineering Mechanisms for Environment According to the resolution of MOESK organized installation of environmental protection: contamination with oil products, Director for Environmental Protection” was held in Saint the judging panel, the award in bird protection devices (BPD) on modern waste handling methods Aspects of Company Petersburg with the support of the the category “City Environment” 6-10 kV overhead power lines in • Bring the level of negative and procedures; Operation V. E. Ivanov State Duma and the Federation in 2015 was given to PJSC order to ensure protection environmental effect of PJSC Council of the Federal Assembly MOESK. All awarded companies of birds in the course of MOESK business and other • Ensure rational use of natural What are the main results of the Russian Federation. In the are environmentally conscious power line operation, maintain activities below the acceptable resources; protect the delivered by the Department framework of the conference, companies which made the biodiversity and prevent environmental impact flora and fauna affected by under your supervision over the results of the contest “Top 100 environment protection one of the technological violationof the level defined by the current business and other activities reporting year? Russian Companies. Ecology and priority fields of their activities. overhead power lines. regulations; of PJSC MOESK. Environmental Management” In compliance with the approved were announced. PJSC MOESK Could you speak of the What are the main plans for the environmental policy, the Company won a medal and award “For partnership programs with next year? Environmental Impact of Company Activities fulfills the assumed obligations Preservation and Restoration other parties in the field of even with consideration of annual of Natural Environment”. These environment protection? 1. Instrumental monitoring over Water tightening of environmental law. In awards signify recognition of the the emissions of pollutants particular, the Company performed Company’s achievements in the field The Company has established by fixed and mobile sources The Company’s operations result identified by measuring the volume the following activities in this regard: of environmental protection and efficient cooperation with of atmospheric pollution, in formation of domestic waste of water in the circulating waters preservation of biodiversity. the Russian national public monitoring of noise level and water and surface effluents. The systems of vehicle wash units. • check of RF environmental law organization Russian Birds electromagnetic fields; water is supplied to the Company PJSC MOESK does not collect water compliance by the Company’s December 24, 2015, Moscow: the Conservation Union in order to facilities from the communal directly from the water bodies. The branches; environmental fund named after V. I. improve ornithological safety of 2. Environmental control over water supply system and by volume of waste water discharged • development and extension of Vernadsky announced the results of the PJSC MOESK facilities. compliance with the RF delivery of bottled water. Water to the centralized water disposal validity period of environmental environmental laws in the resources are utilized to meet the system is assumed as equal to the certification and permits; course of operation; daily living needs of the Company water consumption. The change • environmental monitoring; employees and for operation in the level of water consumption • ensuring compliance with 3. Obtaining the regulatory purposes, such as feeding the from the communal water supply wildlife protection requirements. documentation and permits; circulating water system used for systems is attributable to the vehicle washing, sprinkling and changes in the share of bottled How did the results of 4. Bird protection activities along washing the Company’s premises. water. environmental activities impact the power lines; The surface effluents are formed the openness of Company by atmospheric precipitation operation in the reporting year? 5. Improvement of qualification accumulated on the hard surfaces. Water Consumption, thous. m3 in the field of environmental 298 PJSC MOESK participates in protection. The total water consumption the environmental forums and volume in 2015 was 265 thous. m3. 281 conferences on the annual basis, The volume of circulating water 265 thus increasing the openness of the utilized by vehicle wash units with -5.7 % Company activities: closed circulating water system is 0.65 thous. m3. This indicator is • April 2015, the IX National Conference “Environment 24 Approved by PJSC MOESK Order No.1039 dated September 12, 2014. 2013 2014 2015 ANNUAL SUSTAINABLE 108 REPORT2015 DEVELOPMENT 109

Air Land

The main environmental impact The Company facilities also SF-6 gas emission, t The main environmental impact networks and operation activities Operation in terms of atmospheric air generate noise emissions due to in terms of land is created on the Company premises. 35,225.5 and Consumption Waste, t is created by emissions of operation of electrical equipment 32,158 by operation of oil-filled pollutants by motor vehicles — at stations (transformers, equipment (oil leaks are possible The biggest operation and 9.5 20,290 special-purpose vehicles (cranes, circuit breakers) which have % during operation of oil-filled consumption waste generators 19,761 towers, mobile laboratories, etc.) corresponding acoustic 16,930 transformers, circuit breakers, are the Company’s activities in the 18,728 -7.7 used for operation and repair characteristics depending on their etc. due to insufficient tightness) framework of repair and investment % activities, external party vehicles power rating. and handling of operation and programs as well as operation (garbage trucks, etc.), personal consumption waste generated of communal utilities at the cars used by the Company The Company widely uses SF-6 2013 2014 2015 during utilization of utility Company’s premises employees. equipment (current transformers, 2013 2014 2015 voltage transformers, dead- Emissions of Pollutants, t The running internal combustion tank circuit breakers, live-tank engines of motor vehicles circuit breakers, packaged SF-6 Volumes of Operation and Consumption Waste Generated in 2015, 3,25 3,15 generate emissions in the form switchgears, etc.). Application of with Breakdown to Hazard Classes 2,52 of solid particles (mainly carbon this equipment in the distribution Category 2013 2014 2015 2015/2014, % black), gaseous substances grids improves the reliability of (mainly carbon oxides, nitrogen power supply, personnel safety Operation and consumption waste, t (total), including: 19,761 20290 18727.9 -7.7 oxides, sulfur dioxide). Electric and reduces the operation costs. 43,18 41,7 hazard classes 1-3 291 412 235.0 - 43.0 welding operations (metal In the course of SF-6 equipment 38,41 cutting) result in emission of operation, SF-6 gas leaks may hazard class 4 4,674 5333 4906.2 -8.0 solid contaminating particles occur. The volume of gas in hazard class 5 14,796 14545 13586.7 -6.6 in the form of ferrous oxide CO2 equivalent is estimated by and manganese. Preparation of calculations. 2013 2014 2015 solder alloy for metal soldering Waste Volumes with Breakdown to Handling Method generates oxides of copper, zinc, Solid particle emissions tin, lead and stibium. Waste transfer to other companies Liquid and gas emissions Waste hazard class for utilization for neutralization for landfilling Gross emissions of contaminants into atmosphere, t hazard class I - 4.47 Indicator 2015 hazard class II 14.89 33.43 Gross emissions of contaminants into atmosphere, total including: 44.9 hazard class III 47.28 134.96 solid 3.2 hazard class IV 34.02 968.22 3,903.20 gaseous and liquid, including: 41.7 hazard class V 3,208.39 - 10,837.89

sulfur dioxide - SО2 0.2 carbon oxide - СО 27.4 Biodiversity

nitrogen oxide (recalculated to NO2) 1.8 PJSC MOESK branches operate 10 — 220 kV and transformer Moscow (natural historic parks hydrocarbon (without volatile organic components) 0.2 within environmentally sensitive stations with various power Bitsevsky Forest, “Kosinsky”, volatile organic components (VOC) 11.2 areas (ESA) of Moscow and ratings. “Izmailovsky”, “Tsaritsino”, persistent organic pollutants (POP) - Moscow region. The ESAs are “Kuzminki-Lyublino”, natural used for installation of HV The power grid facilities are reserve Setun river valley, hazardous air pollutants - transmission lines rated operated within 7 ESAs of national park Elk Island). ANNUAL SUSTAINABLE 110 REPORT2015 DEVELOPMENT 111

Most Significant Environmental Activities in 2015 Air protection Water protection

The following activities were received, the Company takes lower emissions of harmful The following activities were • preparation of well datasheet • recording the volumes of performed in 2015 to reduce the actions to temporarily (for substances, including heavy performed in 2015 to improve for the well in Troitsky PGR of pollutants in the disposed rain volumes of polluting emissions into the duration of UWC) reduce metals; the quality of waste water Novaya Moskva branch; water effluents; the atmosphere: emissions in accordance with and increase the efficiency of the UWC action plan; • checking the operational treatment plants: • removal of garbage and snow • the Company performed efficiency, including inspection from the Company premises; instrumental monitoring over • regular inspection of vehicles of technical condition of dust • periodic control over the emissions of polluting substances with carburetor engines for and gas removal units, cyclone pollutant substances in the into the atmosphere from fixed toxicity and inspection of diesel cleaning; surface effluents delivered to sources in compliance with the vehicles for smoking; the municipal lines of Moscow Main results charts of operation control over • preservation of dust and gas (for Moscow branches). compliance with regulations on the • implementation of GLONASS removal units (GDRU) due to low Over ten parameters which The results of laboratory maximum allowable emissions system for motor vehicles to utilization rate; determine the waste water analysis of the surface (MAE): 83 measurements for 20 minimize the mileage and thus quality are controlled annually rainwater samples collected pollutant substances. The analysis reduce emissions from the • developing the inventory of (including suspended particles, from the operation sites of confirmed that the emissions are mobile sources; sources of pollutant generation oil products, chlorides, NEG, SEG, EEG, WEG, NM within the allowable limits; and emissions, including sulphates, total ferrum, branches and samples • procurement of new special development of documentation copper, etc.). of surface water returned to • when an UWC (unfavorable vehicles and removal of outdated on maximum allowable the municipal lines weather conditions) warning is vehicles, which contributes to emissions (MAE); • periodic control over the in Moscow are within content of suspended particles and oil products in surface the allowable values rain water at 394 operation in accordance with the Main results sites of Company branches in regulated waste limits The results of measurements performed by a certified laboratory do not exceed the allowable limits in Moscow region. The recorded developed compliance with the regulations on the allowable emissions. parameters are within for the corresponding regulatory limits; branch sites.

• inspection of treatment plants used at vehicle water wash stations and rain water sewers;

• maintaining efficient operation of treatment facilities at vehicle wash stations (replacement of components, handover of waste generated during operation to specialized company, maintenance and repair of equipment and units); ANNUAL SUSTAINABLE 112 REPORT2015 DEVELOPMENT 113

The following activities were m, screen length — 35.4 m, houses from station No. 193 performed by the Company in total area — 177 m2); “Troiskaya” were performed. 2015 to control the noise impact PSh and PShO panels manu- The architectural and civil Land protection on the environment created by factured by LLC “OZMK” design documentation for the Company facilities: were used as an acoustic construction of acoustic The Company performed the • replacement of open-type hazard class) of operation material for screen screen for station No. 193 following activities in 2015 batteries with low- and consumption waste with • completion of work on fabrication. “Troiskaya” was prepared in order to ensure protection maintenance models; hazard class I — IV; operational control over and will be used for further and rational use of land resources: compliance with sanitary rules • the calculations of acoustic construction work. • organization of temporary • ensuring proper conditions and regulations in terms of impact on the residential • repair of oil headers, oil operation and consumption of storage and transportation environmental impact created collectors, cable lines; waste storage at operation of materials, operation and by noise and electromagnetic sites, including installation of consumption waste to prevent radiation at 162 stations oper- • gradual decommissioning of sheds, replacement of worn environment contamination; ated by PJSC MOESK branches oil-filled equipment (oil circuit containers for temporary in compliance with the devel- breakers) and its replacement accumulation of solid waste, • development and update of oped program. Main results with vacuum equipment; procurement of special orders and regulations on containers for temporary hazardous waste handling; • execution of a contract on per- The results of acoustic • replacement of porcelain accumulation of fluorescent formance of control and meas- impact measurement insulator stacks with polymeric bulbs and covers for • execution of certificates for urements of physical factors, conform to the approved insulator stacks which have such containers; 72 types of waste categorized which enabled the Company regulations as per a longer service life, smaller as hazard classes I-IV and to quickly respond to the com- SN 2.2.4/2.1.8.562-96 weight (approximately 10 • execution of contracts assignment of specific plaints from individuals. times lighter), low content of with specialized licensed environmental hazard class Noise at Workplaces, in transformer oil and which can be organizations for removal or to waste accumulated by • instrumental monitoring of air Residential, recycled rather than disposed of; dumping (depending on the PJSC MOESK branches; parameters and noise at the Public Buildings boundary of buffer zones (BZ) and in Residential around facilities operated by Construction SEG, NEG, WEG branches of Areas PJSC MOESK; no deviations from the allowable values were identified in the course of measurements.

• implementation of technical measures to reduce the level of noise generated by operating equipment at stations:

• replacement of transformers which do not comply with the requirements in terms of noise levels with less noisy or low- noise models;

• installation of acoustic screen on the transformer at station No. 95 “Bazarovo” (height — ANNUAL SUSTAINABLE 114 REPORT2015 DEVELOPMENT 115

• calculation and approval • record-keeping in connection Reforestation: Dmitrovsky) in the framework • Participation in the Russian of hazard (toxicity) class of with operation and consumption of environmental campaign “Our national project “Forest of waste based on the scope of waste handling at structural • over 2,000 nursery and young Forest. Plant your Tree”. The Victory”, which resulted in waste impact on the living divisions of PJSC MOESK in trees of various species were campaign was organized for the thousands of nursery pines environment and human compliance with Order of the planted by PJSC MOESK second time upon the initiative being planted in Moscow region health in accordance with SP Russian Ministry of Natural employees in various districts of of Moscow Region Governor. (Khimkinsky, Mytischinsky 2.1.7. 1386-03 Identification of Resources and Environment No. Moscow region (Tchekhovsky, The following tree species were districts). Hazard Class for Toxic Operation 721 dated September 1, 2011 Domodedovsky, Noginsky, planted: pine, maple, chestnut, and Consumption Waste for On Approval of Record-Keeping Kolomensky, Shatursky, oak, rowan, bird cherry, linden. 27 waste types; Procedure in Connection with Waste Handling.

Main results The performed activities will prevent land contamination with oil products, operation and consumption waste, which contributes to positive environmental situation at Company’s sites.

Main results The performed Biodiversity activities contribute to preservation protection of biodiversity.

The Company performed the pre-migration gathering of grey Preservation of environmentally following activities for protection cranes in Russia. The protected sensitive areas: of flora and fauna in 2015: area is a natural habitat for 227 bird types, many of which are • in compliance with Ordinance Bird protection along power included into the endangered- of Moscow Government transmission lines: species Red Book. The birds No. №262-PP dated April use the power line supports 9, 2002 On Activities for • PJSC MOESK cooperates with when flying from one spot to Implementation of Moscow the Birds Conservation Union another and when detecting Law On Environmentally in the framework of its efforts prey. The birds can cause Sensitive Areas in Moscow, for bird protection in power malfunctioning of 10 kV power the Company executed line areas; lines. conservation obligations agreements on preservation • Northern Electric Grids branch • Replacement of old wire with and utilization of ESAs of of PJSC MOESK installed 479 modern insulated wire of SIP- regional importance in bird protection devices on 2,3 type on 0.4-10 kV lines in Moscow: natural historic 6-10 kV overhead line near the framework of power supply park Tsaritsino — 114 the special protection natural quality improvement. In 2015, power transmission lines, area Grane Land. The Grane the Company replaced 1425 km 4 information boards were Land is the largest area of of wires. installed; ANNUAL SUSTAINABLE 116 REPORT2015 DEVELOPMENT 117

Environment Protection Costs • Environmental Protection ronmental Control (approved by performed and planned for all the Measures to be Implemented PJSC MOESK Order No. 601 dated comments and non-compli- Environment Protection Structure of Environment protection by Managers and Specialists of August 16, 2012) and the approved ances. Reports on rectification of Costs, RUB mln without VAT costs, RUB mln without VAT (total), % General Administrative Control schedule and typical program, the identified non-compliances were Systems — 9 people; Company performed 7 inspections received within the prescribed 113,32 101,47 7.5 to verify compliance with the timeframe. 93, 18 5.7 6.0 • Environmental Protection environmental requirements by 53.0 Pollution charges Measures to be Implemented Company branches. In the frame- In 2015, the audit of integrated 42.1 51.3 Protection of land resources in the Field of Hazardous Waste work of environmental control, environmental, occupational 16.3 Handling — 62 people; compliance with environmental health and safety management 13.6 12.7 Protection of air resources programs, environmental action system of PJSC MOESK was not 31.6 31.9 36.5 Protection and rational utilization • Environmental Audit — 2 plans, control schedules for emis- performed. of water resources people; sion source, waste accumulation 2013 2014 2015 2013 2014 2015 site was verified. The verification In 2015, no penalty sanctions Environmental Audit resulted in 153 comments. were imposed by the supervisory The increase in the cost of protec- allowable emissions (MAE) and, the Company employees received authorities in connection with tion and rational utilization of water consequently, the necessity to training in accordance with the fol- In compliance with the require- Corresponding corrective and environmental law compliance by is attributable to: obtain new permits. lowing programs: ments of the Regulations on Envi- preventive actions were timely PJSC MOESK.

• increased water supply and The cost of land resources protec- • List of Environmental Measures disposal tariffs; tion from operation and consump- in Design Documentation — 1 tion waste depends on the volumes person; • increased scopes of work on of repair and investment program 3.4. Energy Efficiency and Power Consumption repair of utilities, cleaning of implementation. • Expert Review of Design Docu- sewage lines and pumping out mentation — 1 person; the liquid waste from the oil Environmental Education PJSC MOESK Effect of implementation • due to technical measures — sumps. • Environmental Protection of the Action Plan for 14.6 mln kW•h (25.6 mln rubles); Improvement of executives’ and spe- Measures to be Implemented developed and Reduction of Electric The increase in the cost of atmos- cialists’ qualification in terms of envi- by Managers and Specialists implemented the Action Power Losses in the In 2015, the Company modernized pheric air protection is attributable ronment protection is an important of Environmental Services and Company’s Grids 8,977 thous. metering points with the to limitation of validity period condition for efficient implementation Environmental Control Sys- Plan for Reduction of total budget of 225.9 mln rubles out of documentation on maximum of environmental activities. In 2015, tems — 5 people; Electric Power Losses of the planned 13,765 thous. metering in the Company’s Grids points with planned budget of 413.5 mln rubles. Remote data collection in the framework 194.6 was organized for 8,977 thous. of its priority task, kW•h metering points out of the planned i.e., optimization 13,765 thous. metering points. (reduction) of electric The Plan for Reduction of Electric power losses. Power Losses in the framework of 674.0 the Program for Reduction of the mln rubles Company’s Electric Power Losses for 2015 was fulfilled for 126.6%: with the planned task being 153.7 • due to organizational mln kW•h, the actual effect of plan measures — 175.2 mln kW•h implementation was as high as (643.6 mln rubles); 194.6 mln kW•h. ANNUAL SUSTAINABLE 118 REPORT2015 DEVELOPMENT 119

• Prepared options of development documents on the energy energy efficiency improvement in Commentary-interview of the borderlines of balance attribution in New mentation of the Program will result (improvement) and organization management system of compliance with the Program: Deputy Director General for Moscow and Moscow region and to transfer in reduction of losses by the year 2020 structure of EnMS at the PJSC MOESK. Transport and Electric Power the metering devices on the inputs to the to 7.09% of the supply to the grid. To following management levels: • electric power losses during Metering V. A. Kimerin multi-apartment residential buildings in achieve the planned indicator for power Executive Bodies— Branches — Completion of work is scheduled transmission and distribution Moscow to fiscal metering. losses, the Company reviewed and PGR/HVPGD; for 2016. across electric grids; Our efforts for decreasing the power revised its Investment Program for 2016 losses have become more important According to the Company’s Business Plan — 2020, revised the plans according to • Prepared proposals for The following parameters were • consumption of energy considering the current economic for 2016, the power losses relative to 2015 the Repair Program towards significant development of new documents assumed as target indicators in resources for operation situation in the country. shall be decreased by 705 mln kW•h. For increase in the volumes of the Program and revision of existing the field of energy-saving and support activities; reference, from 2012 the average annual for Prospective Development of Electric Therefore, the Company’s Board of reduction of power losses in the Company Power Metering Systems. In this way, Planned and Actual Values of Target Indicators Directors and executives made a grids was 300 mln kW•h. Therefore, in the Company will be able to modernize resolution to drastically change the 2016 the power losses shall be reduced and expand its stock of meters and at Units 2013 2014 2015 2015 2015/ Indicator power loss reduction trend. additionally by 400 mln kW•h. This task the same time generate data on the of Measurement Actual Actual Plan Actual 2014 requires a fundamentally new approach to delivered power transmission services mln kW•h 8,082.0 7,784.6 7,846.7 7,491.2 0,98% In 2015, the electric power losses organization of work on reduction of elec- using its own resources. Electric power losses, including: decreased by 0.22 pp (from 8.77% to tric power losses in the Company grids. % of supply to the grid 9.16 8.77 8.55 8.55 0,97% 8.55% of the volume of supply to the In 2016, the Company for the first time consumption by station auxiliaries mln kW•h 247.0 244.0 243.75 224.2 0,92% grid) or by 192.94 mln kW•h relative In order to achieve the indicators set by the is able to define the regulatory values to the year 2014. Business Plan, the Company developed for losses with breakdown to each Resources consumption and approved the Program for Reduction of voltage level and assigned responsi- for business needs, with RUB mln 584.5 556.7 584.3 552.2 0,99% The main volumes of power supply loss Power Losses for 2016-2020, including both ble persons for compliance with such breakdown to resource types reduction were achieved due to imple- technical and organizational activities. Imple- indicators in each Company branch. t of ref.fuel 28,612.6 27,452.0 26,867.5 26,240.6 0,96% mentation of organizational measures. t of ref.fuel per m2 The Company performed active work fuel and energy, including: 0.061 0.057 0.055 0.053 0,93% on verification of meters to identify of premises cases of unauthorized consumption RUB mln 571.7 543.2 570.7 540.5 0,99% (stealing) of electric power. By the end mln kW•h 62.4 56.2 57.9 55.0 0,98% of 2015, approximately 2,500 reports on electric power power consumption without meters and RUB mln. 248.4 190.1 206.0 192.4 1,015 without contracts were executed for the Gcal 61,086.8 52,478.4 49,461.2 50,316.5 0,96% total volume of 522 thous. kW•h. thermal power RUB mln 79.4 72.4 73.1 71.3 0,98% The Company performed activities to thous. m3 271.1 194.9 156.7 163.7 0,84% organize electric power metering at the gas RUB mln 1.1 0.9 0.9 0.7 0,78% others (diesel fuel, kerosene, t of ref.fuel 16,025.4 12,988.9 12,666.5 12,258.7 0,94% Energy-Saving and Energy informed the personnel of of the Executive Bodies, pilot gasoline, etc.) RUB mln 391.8 279.8 290.8 276.1 0,99% Efficiency Improvement Activities pilot branches and PGR/ branches and PGR/HVPGD HVPGD, and “Energouchet” as well as “Energouchet” thous. m3 17.1 18.33 15.2 12.96 0,71% The Company implemented hot water supply branch of PJSC MOESK on the branch of PJSC MOESK in RUB mln 1.8 1.8 1.5 1.2 0,67% the following activities as of subject: Development of Energy the field of energy-saving December 31, 2015: Management System (EnMS) and energy efficiency thous. m3 489.0 314.6 345.7 269.0 0,86% cold water supply of PJSC MOESK; improvement and fulfillment RUB mln 15.4 11.7 12.0 10.5 0,90% • Selected pilot branches and PGR of EnMS function, including Fitting with modern electric power (Power Grids Regions)/ HVPGD • Performed diagnostic audit in terms of compliance with % 29.4 31.2 31.9 31.6 1,28% (HV Power Grids Districts), of activities and interaction ISO 50001:2011; meters in the retail market ANNUAL SUSTAINABLE 120 REPORT2015 DEVELOPMENT 121

Actual The effect of activities aimed at reduction of electric power Commentary-interview of region. Individual design solutions are reduced consumption of all fuel and consumption for operation the Director for Business also being deployed at the facilities energy resources for the business support was 293.5 thous. kW•h. Processes Automation of Eastern Electric Network branch needs of PJSC MOESK (electric 710.2 The effect of activities aimed of PJSC MOESK. power, thermal power, gas, motor mln rubles A. A. Areshkin at reduction of motor fuel was fuel, and water). Effect of implementation 570.5 t of ref.fuel. Additionally, In 2015, PJSC MOESK worked on Development of Energy Management of PJSC «MOESK» energy the effect of activities aimed improvement of the Company’s System (GOST R ISO 50001-2012) In 2015, PJSC MOESK participated savings and energy reduction of water consumption indicators in the field of energy in the IV International Forum on 293.5 efficiency program for for operation support needs was saving, including as related with In 2015, the Company continued Energy Efficiency and Energy Sector thous kW•h the period of 2015-2019 2.3 thous. m3. In total, the level reduction of fuel and energy development of the energy management Development ENES—2015 (and Plan of consumption for operation resources consumption for system with consideration of GOST R in the Second Russian National The effect of activities support needs in 2015 for all production and business operations. ISO 50001-2012 Energy Management Contest of Implemented Projects aimed at reduction types of resources was 26,240.6 Systems at all management levels: the in the Field of Energy-Saving, of electric power t of ref.fuel, which is lower than The following projects and activities Company prepared the main regulatory Energy Efficiency and Energy consumption for 517.4 the total consumption in 2014 should be mentioned as the most documents, developed interaction Sector Development ENES—2015) operation support mln rubles (27,452.0 t of ref.fuel) by 4.4%. significant in this aspect: mechanisms for the structural divisions which provided a key platform (the plan was fulfilled of executive bodies, branches, and PGR/ for discussion of important for 137.3%). Implementation of Project HVPGD, assigned responsibility for the current matters in connection “Energy Efficient Office” process in general and for certain key with energy-saving and energy aspects of operation. As a result, PJSC efficiency improvement. Technical Losses of Electric Power In the framework of this project, MOESK achieved the key indicators PJSC MOESK deployed Energy in the field of energy saving and Additionally, PJSC MOESK attended Efficient Offices on the basis of its improvement of energy efficiency. the XXXII conference and exhibition 2015 2015 Indicator Unit of Measurement client service centers using the “Moscow — Energy-Efficient Plan Actual new energy efficient technologies Following the implementation of energy City” and made a presentation and resources, including saving activities and improvement of on the subject “Energy-Saving % of supply to the grid 5.47% 5.302% installation of solar collector energy efficiency in 2015, the Company Management at PJSC MOESK”. Technical losses of electric power systems. Due to the application of thous. kW•h 4,830,673.17 4,645,682.98 these technologies, the Company considerably reduced consumption of energy resources for water heating in the water supply system and even arranged partial heating In 2016, the Company Regarding innovations in the The “Energy-Efficient Office” in the office buildings with the total plans to develop the energy-saving field, the Company project shall be expanded to area of 22 m2 (in one building). plans to launch a project for two other client service centers The vacuum (tubular) collector energy management installation of photovoltaic of Western Electric Networks used in the project can generate system further. In par- power system (PVPS) for branch of PJSC MOESK in Ruzsky heat even at negative temperatures ticular, the Company will additional power supply to the and Naro-Fominsky districts, (up to — 20° C). administrative building of PJSC Moscow region. prepare for certification MOESK. This system can reduce The pilot project was implemented in compliance with GOST power consumption from the in two client service offices of PJSC R ISO 50001-2012. feeding grid due to electric power MOESK — in Shakhovsky and generated by the PVPS itself. Volokolamsky districts of Moscow ANNUAL SUSTAINABLE 122 REPORT2015 DEVELOPMENT 123

3.5. HEALTH AND SAFETY Dynamics of Labor Safety Structure of Costs for Costs, RUB mln without VAT Occupational Health Activities in 2015 PJSC MOESK developed and MOESK Personnel and Third the Company’s Electric Grid 26 implemented the following target Parties at the Company’s Facilities . 400.7 7.79 action plans for decreasing the Electric Grid Facilities for 395.2 6.26 Provision of personal protection occurrence of work-related 2014-201725 . 3. Program for Reduction 11.6 % equipment to personnel injuries: of Injury Risk for Third 358.9 2. Program of Additional Parties within the Scope of Prevention of occupational diseases 1. Program for Reduction of Activities for Reduction of Responsibility of OJSC MOESK 23.40 62,55 Overall improvement of work Injury Occurrence of OJSC Injury Risk for Third Parties at for 2013-201527. conditions Accident prevention

2013 2014 2015

Work-Related Injuries

Category 2013 2014 2015 2015/2014, % Accident, ea. (total), including: 4 3 6 100.0% By types of accidents: road accident 0 1 1 0.0% electrical injury 3 0 1 100.0% falling on surfaces 0 0 2 - object falling 0 1 0 -100.0% others 1 1 2 100.0% By severity degree: death 0 0 0 0.0% Dynamics of Labour Safety Costs per One Employee severe and moderate consequences 4 3 6 100.0% Wok time loss due to work-related injuries (LTIFR28), r.u. 3.79 1.23 0.47 -0.76 r.u. Category 2013 2014 2015 2015/2014, %

Costs per one employee, RUB without VAT (total), including: 26,080 23,760 26,610 12.0% The increase in the number of surface and road accidents No occupational diseases of PJSC provision of personal protection equipment to personnel 14,830 14,270 16,640 16.6% accidents in 2015 is attributable through the fault of the third party. MOESK employees were identified. to registration of all injuries The main cause of falling was other labour safety activities 11,250 9,500 9,970 4.9% (including those which occurred negligence of the injured people through no fault of the Employer), moving on the territory outside including falling on the slippery PJSC MOESK control.

25 Approved by the Resolution of the Board of Directors dated June 24, 2014 (minutes No. 234). 28 LTIFR (Lost Time Injury Frequency Rate) is calculated as (number of work hours lost due to injuries*200,000) / total work time fund 26 Approved by Order of OJSC MOESK No. 1100 dated September 30, 2014. of all Company employees; measured in relative units — r.u. 27 Approved by Order of OJSC MOESK No. 669 dated July 5, 2013. ANNUAL SUSTAINABLE 124 REPORT2015 DEVELOPMENT 125

Activities for Prevention of Injuries of Third Parties in Moscow region: Prevention of third • from December 1, 2014 to March party injuries 1, 2015 PJSC MOESK launched a Prevention of child project for electric safety in the electrical injury public transport. A trolleybus with images demon- 37 4 227 strating electric safety rules was • With the support of the Moscow “Good Electricity to Children”. (posters, timetables, coloring press releases television publications dedicated driving in Podolsk for 3 months: Department of Education Notifications about free access books, etc.) can be downloaded spots to electric safety • audio on the radio station and Moscow Region Ministry to the materials on the web site from the Company’s web site “Podmoskovie”; of Education, the Company for organization of lessons were in the section “Good Electricity • Before commencement of the • Posters informing about exclu- arranged around 120 open made in the press releases and to Children” at www.moesk.ru/ summer season, a publication, sion zones of power lines were • billboards along motor roads. lessons dedicated to electric publication in the mass media press/spec_projects/dobroeel/; audio information and video hung in all Client Service Centers safety which were attended sources on a regular basis; were posted on the web sites of PJSC MOESK. A video was • The scope of audience reach by over 6 thous children and • With the support of the of municipal administrations prepared for broadcasting on the with consideration of subway teachers of Moscow region in • Letters on arrangement of Moscow and Moscow Region and in mass media to warn plasma TV panels, broadcasting passengers is approximately the framework of the charitable seminars for teachers were Government, the Company about the danger of fishing and was organized; 7 mln people; campaign “Good Electricity to sent to the Moscow Mayor and organized public service performance of unauthorized Children”. The campaign was Moscow Region Governor. The advertising in May and activities near the power lines; • PJSC MOESK field tested the • A video on exclusion zones approved by Moscow Mayor S. Company held 5 seminars which September 2015: broadcasting form of visual promotion was prepared in cooperation S. Sobyanin and Moscow Region were attended by approximately of video “Electric Safety of • 2,700 posters warning about the material distribution in the with OKSION (Russian National Governor A. Yu. Vorobiev; 120 teachers; Minors” on the TV channels danger of fishing near electric framework of public service Integrated Population Notification “360”, “Moscow 24”, “Doverie”, in power facilities and in exclusion advertising. Relevant documen- and Warning System). From • Souvenirs with the characters • Internet users can submit minibuses equipped with bus TV zones of power lines, violation with tation packages were prepared 2015, following the agreement of the popular cartoon Fiksiki an electronic application for sets “Marshrut TV” (87 lines in the boating rules near power lines and submitted to the Moscow with EMERCOM, the video is (posters, bookmarks, coloring participation in the seminar and Moscow) every hour; were prepared and distributed. The Department of Mass Media and broadcast once every hour on a books, etc.) warning about post a review after the seminar posters were hung on the infor- Advertising and to the Main regular basis: 115 addresses in importance of electric safety on the Company’s web site; • The structure of lesson mation stands of summer house Directorate for Information Moscow, including all airports, were produced and distributed organization was published in communities in Moscow area with Policy in Moscow region. Social train stations, 20 addresses in (during lessons) in schools and • All graphic materials to be the official magazine of Russian the support of the Center of State video and audio materials, Moscow, and in all Client Service kindergartens; used by teachers and parents EMERCOM “Health and Safety” in Inspectorate for Small Vessels in billboards, audio advertising Center of PJSC MOESK; for organization of lessons November 2015. Moscow region — in inspection were prepared in accordance • September 1 to 15 of 2015, a departments and offices, boat with the results of this work and • 4 raids were performed to campaign was organized for stations, recreation camps; presented to the general public identify non-compliances in the the employees of PJSC MOESK: in May and September 2015: exclusion zones near the power “Hang a poster — save a child’s • A series of posters (1,000 ea.) lines with media coverage life”. The employees distributed and leaflets (5,000 ea.) to inform in Moscow: by journalists; 1,000 posters with electric safety about exclusion zones of power • audio material on the radio rules in educational institutions lines, stickers (10,000 ea.) were “Govorit Moskva”, audio • Scheduled and non-scheduled of Moscow region; produced. The materials were advertising in subway cars; walk-downs and inspections hung on the supports and stations were performed for 0.4-10 • An educational video on electric (stickers), on the information • billboards along the motor kV overhead power lines and safety, safety promotion stands of summer house com- roads, on the arch above 6-10/0.4 kV transformer station, visuals, lesson structure, munities, garages (posters), dis- subway escalators; earthing devices and electrical handout materials for printing tributed among directors of motor installations of PJSC MOESK were posted on the web site transport companies in municipal • advertising in the Metro were checked. of PJSC MOESK in the section entities (posters and leaflets); newspaper. ANNUAL SUSTAINABLE 126 REPORT2015 DEVELOPMENT 127

3.6. HR AND SOCIAL POLICY Prevention of third party access 3.6.1. HR Policy to the electrical facilities

• Perimeter fencing around • The facilities of the Company’s branch facilities were revamped branches were equipped Commentary-interview The Company managed to achieve connection using the Company’s in accordance with the with video surveillance and of the Deputy Director considerable results in personnel own resources in the course approved plans; alarm systems. General for HR and motivation: the average remuneration of construction and revamp of Administrative Matters was maintained at the competitive electrical facilities. O. P. Chaus level in order to retain experienced and qualified specialists who In order to improve the One of the key objectives of the contribute to fulfillment of PJSC efficiency of HR management, Prevention of contractor’s Company in terms of HR policy MOESK tasks, i.e., high quality and the Company developed and personnel injuries implementation in 2015 was reliable power supply to consumers in implemented methods for improvement of transparency Moscow and Moscow region. 360 degrees appraisal of and efficiency of management management and candidates • The Company ensured com- of OJSC MOESK under Oper- On Approval of Typical Sub- system in the Company. To achieve In 2015, 15 process charts were to the management positions pliance with the “Regulations ation, Construction, Revamp, contracts on Equipment Repair this objective, the function of prepared as a standard for mobile competences (107 employees on Access of Contractors and Modernization” approved by and Maintenance; financial and fiscal accounting work teams in order to optimize were appraised in 2015). Subcontractors to Work on the Order of OJSC MOESK and reports was centralized; processes and implement uniform Power Lines, Stations and dated September 30, 2014 and • Photographic materials on Moscow HV Networks branch was typical labor costs for technological General Construction and Repair compliance with OJSC MOESK injuries at PJSC MOESK established through the merger Activities at OJSC MOESK Facil- Order No. 71 dated February 4, were included into induction of two Company branches — ities and on Access of Travelling 2013 On Amendment of Typical briefing program for con- Central Electric Networks and Personnel for Performance of Subcontracts and Order No. tractor employees. HV Cable Networks. Work on Electrical Installation 161 dated February 17, 2014 Additionally, in order to ensure availability of qualified personnel for management positions, the Occupational Safety Plans for 2016 Company continued its efforts on development and training 1. Special assessment of work 3. Arrangement of contest for best 5. Repair of premises and of candidates’ pool. It should conditions in compliance with organization of occupational installation of appliances be mentioned that in 2015 the Federal Law On Special safety activities between and furniture in sanitary and approximately 80% of nominations Assessment of Work Conditions. PJSC MOESK branches. staff rooms. to the management positions were made out of internal candidates, 2. Implementation of target 4. Creation of database with 6. Personnel training as a part including the employees from the programs for reduction of injury films on accidents and injury of internal and external Company’s candidates’ pool. occurrence rate among Company hazard situations. occupational safety training. employees and third parties. ANNUAL SUSTAINABLE 128 REPORT2015 DEVELOPMENT 129

Main Areas, Objectives, Main HR Management HR support: • psychophysiological check — • fulfillment of the main require- Dynamics of Average Company and Tasks of the Company’s Activities in 2015 4,075 people; ments in terms of production Personnel Headcount HR Policy • organization of professional personnel training due to imple- for 2013-2015 Improvement of management sys- skills contests for the personnel; • performance of corrective mentation of internal teaching pro- 15 160 15 104 The HR and social policy of PJSC tem transparency and efficiency: actions in the framework of the grams which were developed and 15 058 MOESK approved by the Board • horizontal and vertical rotation of program for reduction of risk of organized by the Training Center; of Directors of OJSC MOESK • centralization of financial and personnel: 377 employees, with erroneous actions by operating (minutes No. 249 dated December fiscal accounting unit; 12% — gemba management29 personnel due to psychophysi- • the license for performance 31, 2014) shall establish an (including top management of ological causes — 466 people of educational activities by the efficient HR management • approval of new organization the Company), 88% — rotation classified as the risk group; Training Center was renewed; a system which contributes to structure for the Company’s of employees from the candi- following the completion of permit for professional training improvement of work efficiency executive body and organization dates’ pool to the target and such actions 10% of examined was obtained; certification for and sharpening of the Company’s structures for the management associated jobs; people (45 people) were found delivery of occupational safety 2013 2014 2015 competitive edge. bodies in the Company branches; to have increased competence training services was obtained. • development and implementa- indicators which ensure work The objectives of the Company’s • establishment of Moscow HV tion of procedure for establish- safety; Improvement of workforce productivity: HR Policy implemented to achieve Grids branch through the merger ment of the candidates’ pool Distribution of Personnel the target benchmarks according of two Company branches — in the Company; composition • implementation of program for • 15 technological charts were devel- in 2015 to the Strategy for Electric Grids Central Electric Networks and of the candidates’ pool was operating personnel in the pension oped as a work standard for mobile 2,6 7,1 Complex Development in Russia HV Cable Networks; updated, external candidates’ age in order to ensure efficient work teams (plan until December 5.3 10,1 are as follows: pool was prepared for the sharing of experience by qualified 31, 2016 — development of 133 • implementation of program for candidates to the key positions personnel, timely replacement and technological charts); daily work • planning HR requirements — optimization of administrative — 85 positions, including grad- reduction of the average age of time records for the mobile work 11,6 ensure availability of accurate and management personnel uates of the higher education Company personnel; teams were prepared; 27,8 2015 information on the current (reducing the headcount of institutions preparing specialist and forecast headcount and administrative and management for the power sector; internal • implementation of youth move- • work time tracking, including 11,9 quality requirements to human personnel by 281 positions). candidates in the Company — ment “Tomorrow is me”; daily time records for technical 3,5 resources as required and 631 people, including 299 young unit employees; issue of recom- 8,0 12,1 sufficient for achievement of Improvement of personnel incen- (aged up to 35) specialists • development of plan for mendations on work efficiency the Company goals; tives scheme: (including 40% — tactic candi- increasing the education level of improvement and optimization of Executive bodies dates’ pool); managers and dispatchers; load on the personnel. Southern Electric Networks • timely fulfillment of the • average remuneration growth by Eastern Electric Networ Company’s HR requirements 4.4% in the Company in general; • automation and implementation Western Electric Networks with consideration of necessary adoption of uniform minimum of process for management Northern Electric Networks qualification level; monthly remuneration rate for competence assessment by 360 Central Electric Networks all categories of workers in the degrees method; HV Cable Networks • ensuring efficiency of branches; Moscow Cable Networks personnel work, improvement • assessment of management Energouchet of workforce productivity in the • development and implementation of competences of the candidates Novaya Moskva Company. revised structure of key performance to the Company’s management indicators and monetary incentives positions using the 360 degrees The decrease in the average for the employees of branches for a method (107 employees were personnel headcount in month, quarter, and year. appraised in 2015); 2013-2015 is attributable to optimization of administrative and management human resources 29 Gemba management: Resolution of issue, which occurs in the course of the Company’s business activities at a specific workplace. In the course of personnel rotation, an employee shall be assigned to a specific workplace in accordance with the gemba management with simultaneous engagement of principle, i.e., to the place where value is created, in order to resolve/understand the issue which occurs in the course of operation. additional operation personnel by the branches. ANNUAL SUSTAINABLE 130 REPORT2015 DEVELOPMENT 131

Staffing level Active staff turnover level Number of Hired and Personnel Structure with Personnel Structure with Dismissed Employeed of Breakdown to Employee Breakdown by Age PJSC MOESK in 2013-2015, Categories 7.2% 97% 96% 97% people 2,231 2,271 1,355 1,191 1,042 2,020 4.2% 1,910 1,865 3.9% 15,058 1,807 7,109 6,996 7,116 4,102 4,048 3,902 people 5,363 5,511 5,458 9,216 9,487 9,753 Average 2013 2014 2015 2013 2014 2015 headcount 3,134 3,068 2,905 933 849 782 2013 2014 2015 2013 2014 2015 2013 2014 2015 To maintain the high staffing level filling of positions, which require tutions and secondary specialized and reduce the level of active staff highly qualified personnel, and to education institutions. Carrier Hired Managers Aged up to 25 Aged 25-50 turnover in the Company, activities provide development opportunities planning for Company employees Dismissed Specialists and office personnel 50 — pension age aimed at qualified personnel reten- for the personnel, the Company is arranged. The main mechanisms Workers Working pensioners tion are performed on a regular cooperates and interacts with the for carrier planning are the candi- basis. In order to ensure timely specialized higher education insti- dates’ pool and personnel rotation.

Personnel Turnover with Breakdown to Age Groups, Gender, and Region

Number of Including Average dismissed Active personnel Branch headcount in employees for active turnover rate in Aged Aged 2015, people turnover calculation 2015,% Male Female up to 30+ in 2015, people 30

Executive bodies 1,066 93 8.7% 49 44 44 49 Energouchet 796 44 5.5% 25 19 9 35 Novaya Moskva 388 56 14.4% 41 15 13 43 Northern Electric Networks 1,823 59 3.2% 49 10 19 40 Moscow Cable Networks 4,186 98 2.3% 71 27 32 66 HV Cable Networks 523 12 2.3% 9 3 9 3 Analysis of personnel with (+4 pp). The share of working also reduced (by 1 pp). Thus, the breakdown to age groups relative pensioners in 2015 decreased by Company is achieving the optimum Southern Electric Networks 1,527 42 2.8% 28 14 5 37 to the year 2013 in the Company 2 pp in line with implementation combination of young employees in general shows gradual increase of the action plan for pension aged with high level of initiative and Central Electric Networks 1,209 67 5.5% 60 7 30 37 in the share of employees in the and pre-pension aged employee experienced employees who can Eastern Electric Network 1,742 61 3.5% 47 14 28 33 most economically and socially in the Company. The share of share their professional knowledge active age, i.e., from 25 to 50 years young specialists (aged up to 25) and skills. Western Electric Networks 1,798 47 2.6% 40 7 16 31 PJSC MOESK 15,058 579 3.9% 419 160 205 374 ANNUAL SUSTAINABLE 132 REPORT2015 DEVELOPMENT 133

Personnel Structure with Breakdown to Education Level Information on Personnel Training, Refreshment Training, and Qualification Improvement

Category 2013 2014 2015 2015/2014, % Category 2013 2014 2015 2015/2014, % Headcount, people (total), including: 15,606 15,575 15,479 -0.6% Number of trained employees, people (total), including: 10,900 10,062 10,667 6.0 Basic/secondary general education 3,816 3,331 3,132 -6.0% Initial vocation education 1,495 1,772 1,758 -0.8% managers 3,064 2,446 2,964 21.2 Secondary vocation education 3,211 3,068 2,945 -4.0% workers 5,467 5,380 5,569 3.5 Incomplete higher education 0 66 59 -10.6% specialists and office personnel 2,339 2,236 -4.6 Higher education 6,619 5,630 6,012 6.8% 2,134 Higher education with 2 or more degrees 436 1,659 1,523 -8.2% Number of trained employees, people (total), including: 10,900 10,062 10,667 157.0 Candidate of Science 28 47 48 2.1% number of employees trained at external training 8,569 8,278 6,083 73 Higher Doctorate 1 2 2 0.0% centers

number of employees trained at the Company’s 2,331 1,784 4,584 257 Personnel Education and Development own training centers

PJSC MOESK continued its and qualification improvement, implemented by the Training Center Training costs to payroll fund ratio,% 0.62 0.78 0.70 -0.08 pp activities on professional training, including training in external of PJSC MOESK, which organized refreshment training, and educational institutions for 6,083 training for 14,537 employees, with Total number of training hours, h 306,099 302,567 315,743 4.4 qualification improvement in 2015 employees or 40.4% of the total 4,584 people being trained directly in the framework of the Company personnel headcount. at the Training Center and 9,953 Average number of training hours per one employee, h 28.1 30.1 29.6 -1.7 HR Management Program. people being trained according Training Center to the typical and local internal In 2015, 20,620 employees training programs in the field and Remuneration System participated in professional A significant share of qualification at the training sites of the Training training, refreshment training, improvement programs was Center and Company branches. The Company’s remuneration The existing remuneration system Average Personnel system corresponds to the main also provides for the following Remuneration, RUB thous remuneration trends in the labor payments: market. The remuneration system 74.3 77.6 was developed in compliance with • additional compensation 68.7 the labor law and RF Electric Power payments in compliance with the 4.4 % Sector Remuneration Tariff Agreement work hours and conditions; (uniform remuneration rate, system of bonuses, benefits, and compensations) • incentives depending on the and based on the principles of equal personal work results of the payment for work with equal value employee. depending on the complexity, volumes, 2013 2014 2015 and quality of work. ANNUAL SUSTAINABLE 134 REPORT2015 DEVELOPMENT 135

The increase in the average classified as “worker” and of additional services with remuneration amount in 2015 by 4.4% “foreman, senior foreman” and the objective to expand is attributable to the following factors: by 4.8% for other employee the Company’s share categories; of the service market, • Indexation of remuneration: development of the Company’s — from December 1, 2015 — by engineering competences and — from July 1, 2014 — by 2.0% 3.7% for branch employees enhancement of client-friendly for branch employees classified classified as “worker” and approach; as “worker” and “foreman, “foreman, senior foreman”; senior foreman”; • Maintaining the average • Increase in the amount of remuneration level for the — from January 1, 2015 — by employee remuneration in employees with professions in 2.8% for branch employees connection with development high demand.

KPI System (prospects) which are associated 4. Internal prospects (How should (Employee’s KPIs) with the strategic aspects of the the internal Company processes Company business, including: be organized?); The Company’s KPI System is governed by the Regulations 1. Financial prospects (What 5. Personnel prospects (How on the Management System in financial results does the will the Company develop its Compliance with the Objectives of Company need to achieve personnel?). the Company. The Management to meet the shareholders’ System in Compliance with the expectations?); Assessment of KPI achievement is Objectives includes a number of performed on a quarterly basis. The key performance indicator charts 2. Prospects of consumer personnel incentive scheme directly (KPI charts) for various Company satisfaction (How should the depends on achievement of KPIs in management levels. The KPI Company be perceived by the the reporting period (quarter/year) chart includes four projections consumers?); set for the structural division.

Key Plans in HR • Gradually reduce the number • Assess and analyze the level of Management for 2016: of administrative and personnel satisfaction, develop management employees of the and implement the corrective For improvement of management Company due to optimization action plan to increase the system transparency and efficiency: of the management system, level of Company personnel improvement of organizational satisfaction. • Bring the organizational and structures and business functional structure of the processes of the Company; Company in compliance with the typical structure approved by • Prevent reduction of operational PJSC «Rosseti»; personnel headcount; ANNUAL SUSTAINABLE 136 REPORT2015 DEVELOPMENT 137

3.6.2. Social Policy PJSC MOESK has high level The objectives of the Company’s including graduates of educational of social responsibility and social policy are as follows: institutions specializing in power Commentary-interview of the in the modern information society, PJSC Bargaining Agreement, including implements special programs to maintain the competitive sector, reduce the average Deputy Director General for MOESK implemented the project “Personal Regulations on Non-Governmental increase the level of social security advantages of PJSC MOESK in personnel age, ensure sharing HR and Administrative Matters Area of Employee”. Pension Fund, Regulations on Corporate for its employees, create favorable the labor market, retain qualified of experience with younger O. P. Chaus Assistance and Corporate Support for conditions for well-balanced employees due to creation generation, provide social security In order to support and improve the Improvement of Living Conditions, development and corporate of additional social security for the Company’s veterans and What were the most significant events personnel health and prevent diseases, Social Security Program (private solidarity of employees. means, attract young specialists, maintain the occupational prestige. of the year? Did you manage to fulfill the Company developed and implemented health insurance, accident and disease all the tasks set for 2015? the project “Workplace Gymnastics” which insurance), organization of health-im- already covers 7,362 people. proving vocations for children, health All the objectives for 2015 in terms of resort treatment for employees and social policy were achieved. What is the main achievement of the year, disadvantaged groups, medical services Collective Agreement in your opinion? for non-working pensioners. We will The Company developed and approved also continue work on support of young the Collective Agreement for three years In my opinion, the main achievement in 2015 was employees and veterans. The Collective Agreement is the in electric grids market before • registration of marriage; (2015-2017). The terms of this agreement expansion of employee categories who receive main document which defines the retirement. correspond to the Electric Power Sector monthly meal allowance in the amount of 2 In 2016, we plan to organize and hold social and labor relations between • enrollment into the army; Remuneration Tariff Agreement (EPSRTA) thous. rubles from 2015, which became possible events dedicated to 75th anniversary of PJSC MOESK and the employees. In The Company’s social partners and in terms of many indicators even due to optimization of social package. The follow- commencement of the Great Patriotic War 2014, the new Collective Agreement are Moscow Region Committee • for single parents — on Sep- exceed the requirements of EPSRTA. ing categories are eligible for allowance: workers, and Battle for Moscow. of PJSC MOESK for 2015-2017 was of “Elektroprofsoyuz” and Mos- tember 1 (per each schoolchild); The achievements of PJSC MOESK were foremen and senior foremen of the Company. prepared and signed. The agree- cow City Committee of “Elektro- recognized with multiple awards at the We also plan to develop the project “Per- ment is applicable to all Company profsoyuz”. The share of trade • in case of employee’s death at annual Russian National Contest “Russian What are your plans for 2016? sonal Area of Employee”. employees. union members in the Company the workplace; Company with High Social Efficiency” in is 63% of the total number of the categories “For Development of Social Our key objective is to ensure social stability We will gear our forces towards increase in The agreement defines the employees. • in case of employee disability Partnership in Production Sector Com- of Company personnel, prevent social tension the number of employees practicing fitness structure of social compensations due to the injury through the panies”, “For Creation and Development and social or labor disputes in the Company. and sports on a regular basis, development and allowances for various In compliance with the Collective fault of the employer or due to of Jobs in Production Companies”, “Best of the projects “Workplace Gymnastics” target groups, sets forth social Agreement, financial aid is provided occupational disease; Company for Working Mothers”. We will continue strengthening our social part- and “PJSC MOESK Hockey Team”. compensations and payments for to the Company employees in the nership and cooperation with Moscow Region non-working pensioners, including following cases: • in connection with funeral of the The year 2015 was marked by many Committee of “Elektroprofsoyuz” and Moscow In the framework of its charitable program, those who were employed by Company employees or their significant events. In 2015, the Company City Committee of “Elektroprofsoyuz” to make PJSC MOESK will continue performance the Company’s predecessors • birth of child; relatives. fulfilled a key strategic task: PJSC MOESK sure the year 2016 is also marked by stability. of the Agreement signed in 2015 with the organized and held events to commemo- governmental institution in Sevastopol rate the 70th anniversary of Victory in the We will use our best efforts to fulfill the “Family Support Center” on provision of Great Patriotic War. Company obligations under the Collective assistance to the Sevastopol Orphanage.

Additionally, the Company organized Social insurance programs and held events to commemorate the 95th anniversary of GOELRO Plan (Soviet plan for national economic recovery and Private medical insurance for the ical, health improving and disease vanie”. The subject of insurance development). personnel in 2015 was arranged preventing help. was the property interests of the under the contract with OJSC insured employees associated with In order to create and maintain favorable “SOGAZ”. Due to the private med- All the Company employees harm to their lives and health due conditions for self-education, self-de- ical insurance programs, all the are insured against injuries and to accidents as well as diseases velopment and adaptation of employees insured Company employees are diseases under the centralized which were first diagnosed within entitled to timely and quality med- contract with OJSC “AlfaStrakho- the contract validity period. ANNUAL SUSTAINABLE 138 REPORT2015 DEVELOPMENT 139

Health resort treatment for employees, disadvantaged Cultural events group, and health-improving vocations for children

In 2015, the health resort treatment MOESK approved by Order No. 1148 MOESK — once every two years PJSC MOESK organizes various events attended by over 10,000 drawing contest organized by for employees, social group, and dated September 11, 2015. maximum. cultural activities to increase the Company employees. The key PJSC MOESK — participated health-improving vocations for level of corporate culture, social cultural events of 2015: a com- in the contest “Russian Grids: children were organized by the Free vouchers were granted to: • schoolchildren — for the period attractiveness of employment plex of events dedicated to the Drawings by Children”, which is Company in compliance with the of summer break but no longer by the Company, form a group 70th anniversary of Victory in the traditionally organized before Instructions on the Procedure for • employees — in accordance than 2 sessions in health-im- of committed team players, main- Great Patriotic War 1941-1945, the anniversary of PJSC Russian Procurement and Distribution of with the results of the mandatory proving camps for children; for tain the image of PJSC MOESK as 10th anniversary of the Company, Grids. In 2015, the contest theme Vouchers for Health-Improving of periodic medical examination; children with 1 parent only or a single family of power sector Youth Day, IV Games of Humor was the 70th anniversary of the the Employees’ Children, Employ- disabled children — for the workers, preserve and share Contest Club of PJSC MOESK Victory in the Great Patriotic War ees, Disadvantaged Groups of PJSC • non-working pensioners of PJSC entire period of summer break. traditions and build stronger employees, and creative contest 1941-1945. Special prizes in the corporate ties. for children “Inspiration”, VI PJSC category “A hero in every family” MOESK Youth Forum. were awarded to Ekaterina In accordance with the Program Panevina (Moscow Cable Net- Sports, fitness and health of Cultural Events, in 2015 PJSC Children of Company employ- works branch) and Irina Koroleva improvement events MOESK held approximately 200 ees — winners of the children (“RETO” plant).

Fitness and sports are an I place — Eastern Electric Net- Over 230 fitness and sports important aspect of a healthy work events were organized in 2015, lifestyle; therefore, promotion of including Olympics within Com- Youth regular sports activities among II place — Moscow Cable Net- pany branches, sports events for programs employees and their family mem- works families, health days, etc. The bers and creation of necessary events were attended by over 2,000 conditions for practicing sports is III place — Western Electric employees. Training process of the The program of social support for a key task in the social policy of Networks Company’s hockey team is organ- young employees — graduates PJSC MOESK. ized on a regular basis. with major in electric power In accordance with the results of disciplines has been in forced in the Every year, the Company organizes this sports event, PJSC MOESK Workplace gymnastics is organized in Company since 2013. The program corporate Olympics between the formed general corporate teams the Company from October 1, 2014. includes a signing bonus, relocation teams of Company branches, sub- which participated in external sports compensation, personal allowance, sidiaries and executive bodies. The competitions with other companies April 29, 2015, the Company organ- corporate support for improvement participating teams compete in the in the power sector. The Company’s ized a cross-country race “In the of living conditions. following sports: cross-country team won prizes in ping-pong Name of Victory!” dedicated to the skiing, shooting, tug of war, and mini football (2 and 3 places 70th anniversary of victory in the volleyball, track and field sports respectively) at the IV All-Russia Great Patriotic War. (cross-country, sprint, relay race), Olympics of Workers on Poklonnaya mini football, chess, swimming, Hill. The Company’s sports teams The young employees of the Com- ping-pong. also participated in tournaments pany competed with each other in for the RF Ministry of Energy Cup in the traditional paintball tournament In 2015, in accordance with the overall mini football and volleyball, chess “Profatack-2015” which was team score, the results of the Olympics tournament in the memory of M. M. organized Moscow City trade union in PJSC MOESK were as follows: Botvinnik (PJSC Russian Grids). “Elektroprofsoyuz”. ANNUAL SUSTAINABLE 140 REPORT2015 DEVELOPMENT 141

Improvement of living Support conditions of veterans

From 2012, the Company has compensation of monthly mortgage loans granted by the partner been guided by the Regulations payments, subsidies) and corporate banks or up to 10% discount from The employee database of PJSC residents of Leningrad during Veterans of PJSC MOESK have on Improvement of Employees’ assistance. the apartment price offered by MOESK includes records on 4,753 Blockade — 2. an extensive work experience Living Conditions which provides construction development com- pensioners, including 4,074 non- and knowledge in the power for corporate support (compen- The corporate assistance pro- pany CJSC SU-155. working pensioners, of whom: The Company adopted Regulations sector and make their important sation of apartment rent costs, vides for low-interest mortgage participants in the Great Patriotic on compensations and other social contribution to raising and teaching War — 33, participants in the labor payments to the Company veterans, young specialists, organization of front force during the GPW — participants in the GPW, labor mentorship, participate and events 157, underage prisoners of Nazi front force. Medical care for the in cooperation with the Youth Pension concentration camps — 10, pensioners is organized. Councils. support

From 2005, the Company has provide the source of NGPS financ- One of the principles of NGPS: Charitable been guided by the Regulations ing. The total amount of finances the amount of non-governmental and social programs on Non-Governmental Pension contributed to the NGPS shall be pension depends on the amounts Schemes to attract and retain calculated in accordance with the accumulated by the employee. employees, boost their loyalty and Regulations and approved by the The number of employees who PJSC MOESK provides a long-term framework volunteer initiative furniture, houseware, sports gear, social security. The regulations Board of Directors in the framework joined the “Parity Plan” program support for a number of important “Kind Heart”: by the International and school uniform. were approved by the Board of of the Company’s business plan. as of 2015 was 6,121 people; social initiatives such as support of Donor Day — aid for rehabilitation Directors (minutes No. 192 dated the planned annual amount of specialized schools, orphanages, of disabled child, for emergency In the framework of its long-term February 28, 2013). The actual expenses on NGPS Company contributions is 109 mln support of religious organizations, response activities following the obligations to provide support in 2015 amounted to 485.2 mln rubles. cultural and sports projects. fire in the Republic of Khakassia, for the orphanage in Sevastopol, The Non-Governmental Pension rubles, including 474.5 mln rubles aid for governmental institution the Company signed Cooperation Scheme was introduced to on account of cost (programs Additionally, in 2015 the Company In 2015, the Company organized in Sevastopol “Family Support Agreement No. 200006-15-30762 ensure decent level of life for “Manager” “Support”, “Profes- continued work on informing its and held 4 campaigns in the Center” for procurement of dated September 1, 2015. PJSC MOESK employees after sional”, “Parity Plan”), 10,7 mln employees (executives and all retirement, create conditions for rubles on account of profit (pro- branches) about mandatory pen- efficient resolution of HR issues gram “Veteran”). sion schemes. associated with attraction, reten- tion and motivation of personnel Personal Area for effective work. of Employee The Regulations on the NGPS provides for two main pension In 2015, the Company implemented the Company organized 62 meetings Statistics on utilization of “Personal schemes: Corporate (financing the project “Personal Area of with the employees in branch offices. Area of Employee” subsystem by on account of the Company) and Employee” based on its corporate Corresponding information and the employees over 12 months of Parity (joint financing with the intranet portal. advertising materials were produced 2015: 15,229 counts. Due to the Company employee). and distributed. For employees who organized events, the number of To promote the project and inform do not have computers at their work subsystem use counts rose from In accordance with the Regulations the employees about possibilities places, general access work stations 578 in January 2015 to 5,506 in on the NGPS for the Company and development prospects of this with information stands were December 2015. employees, the Company shall subsystem of the corporate portal, organized. ANNUAL CORPORATE 142 REPORT2015 GOVERNANCE 143

Commentary-interview of Another important focus of activities between representatives of the Deputy Director General in terms of corporate governance investors and top-level executives for Corporate Governance in 2015 was associated with the of the Company, organized CORPORATE and Property Management Company’s efforts to bring the corporate conference calls, attended A. S. Starostin governance system of PJSC MOESK investment conferences. in compliance with the new Corporate Year after year we have been Governance Code recommended by the The Company makes every effort demonstrating our commitment Bank of Russia and the new Listing to maintain the high level of GOVERNANCE to the best global practices in the Rules approved by CJSC MICEX Stock corporate governance recognized field of corporate governance, Exchange. This work will be continued and confirmed by the independent information openness and in 2016. rating agency CJSC Expert RA 4.1. CORPORATE GOVERNANCE SYSTEM transparency which form the which assigned the A++.gq cornerstone principles for It should be mentioned that the rating (“Exceptionally high level establishment of corporate Company practices interaction with the of governance quality”) to the relations by the Company. investment community in the form of Company. direct dialog. Over the reporting period, An important task, which invariably in the framework of communication determines the specific attributes with potential investments and analysts, of corporate governance in the we organized a number of meetings Company, is associated with the need to establish the efficient In compliance Accountability Transparency dialog between the shareholders in order to enable achievement of the with the Corporate The corporate governance system The Company shall ensure timely Company’s objectives in its main Governance Code30, is based on direct accountability of disclosure of accurate information operation areas and ensure reliable the Company’s Board of Directors about all significant facts regarding and accessible power supply in the the corporate to the shareholders in compliance its operation, including its financial Moscow area. governance in the with the effective law of the Russian position, social and environmental Federation and is used as the key indicators, operation results, The main platform for Company is based principle by the Board of Directors in structure of Company ownership establishment of this dialog in 2015 the course of strategy development and control as well as provide free was the Board of Directors and on the following and control over the activities of the access to this information to all Committees reporting to the Board principles Company’s executive bodies. interested parties. of Directors. Thus, the Company arranged meetings of the Board of Directors in the form of physical attendance at least once a quarter. Additionally, it should be mentioned that certain meetings were held at Responsibility the Company’s operation facilities, Fairness in particular, at the “Butovo” station The Company shall protect the The Company acknowledges its re- and in the administrative building rights of shareholders and ensure sponsibility to the Company share- of HV Cable Lines branch. The equal treatment of all shareholders. holders. The Board of Directors, members of the Board of Directors 30 The new revision is approved by the The Board of Directors shall make Management Board, and Director used this opportunity to observe resolution of the Board of Directors sure that all shareholders have the General shall bear responsibility to the work of power grids facilities. dated March 14, 2013, minutes opportunity of efficient protection if the Company for losses caused by No. 194 dated March 15, 2013. their rights are breached. their actions (omissions). ANNUAL CORPORATE 144 REPORT2015 GOVERNANCE 145

Structure of corporate management

Control and management bodies Conclusion (report)

Resolution Resolution Elects General Meeting Conclusion (report) Аuditing Commission of Shareholders (GMS) Resolution

Resolution

Direct resolutions Recommendations Establishment, election Elects Consulting bodies assigned to the Board Conclusion (report) of Directors

Reliability Recommendations, report 9 members Resolution Board of Directors (BD) Elects Committee Elects 13 people Resolution Strategy and Development 14 members Committee

Technological 11 members Report Recommendations, report Connections Committee

Audit Committee Management 8 members Board 10 members Director General Organizes activities Personnel and GMS for SCC Remuneration 5 members Resolution Committee

Recommendations Appoints Approves candidates Report

Consent to personal Branch Directors Subsidiaries data processing 10 Branches 4 Subsidiaries All members of the governing bodies consented to processing EEN, GN, NE, SE, CE, HVCN, MC, МKSМ (100%), МKER (100%), of their personal data at the stage “Energouchet”, Novaya Moskva, MHVG Factory “REТО” (100%), Energocentr (100%) of preparation of the Annual Report.

ANNUAL 146 REPORT2015

Assessment of Corporate Governance Level

Rating agency In 2015, the Company obtained the ISO 9001 quality man- agement certificate, which confirms the high organization level of business processes in the Company and has posi- tive effect on its rating, according to the leading analysts Level of the rating agency. Exceptionally high level of governance quality Assignment date January 13, 2016

Rating “А++.gq Exceptionally high level of governance quality

High level of compliance with the (Auditing Commission and Inter- • high level of corporate and social following criteria had positive nal Audit and Control); responsibility (the Company effect on maintaining the high implements a number of social level of Company rating: • high level of interaction and charitable projects; the Code between management bodies of Ethics was adopted); • high level of organization (the Company structure of executive bodies (the includes the Secretary of the • high efficiency level of Company Management Board was formed, Board of Directors, the Secre- operations and moderately its activities are regulated; tary’s duties are governed by high level of organization of the the Regulations on the Board Board of Directors’ activities. • remuneration of the Manage- of Directors Secretariat); ment Board members depends on the long-term results of the • high level of risk management; Company operation) • high level of organization of • high level of information trans- committees assigned to the parency (information on the Board of Directors (Audit Com- Company strategy, executives, mittee, Personnel and Remuner- and financial reports are availa- ation Committee, Technological ble on the web site). Connection Committee, Reliabil- ity Committee, and Strategy and • high level of organization of Development Committee); control over business activities ANNUAL CORPORATE 148 REPORT2015 GOVERNANCE 149

4.2. MANAGEMENT BODIES 4.2.2. Board of Directors 4.2.1. General Meeting of Shareholders Members of the Board of In the period up to 24 June 2015 the June 2015 new Board of Directors Directors Board of Directors was presented members were elected: The General Meeting of Shareholders is the supreme • approve the auditor; by following 13 members: According to clause 16.1 of O.M. Budargin, A.A. Gavrilenko, management body of the Company. • approve the Articles of Associa- the Articles of Association the O.M. Budargin, A.A. Gavrilenko, S.V. Grishchenko, A.A. Demin, tion, Regulations on the General Board of Directors consist of 13 S.V. Grischenko, A.A. Demin, A.A. Kokin, V.M. Kravchenko, The matters included into the scope of competence Meeting of Shareholders, Regu- members elected by the General A.A. Kokin, V.M. Kravchenko, S.Y. Lebedev, P.A. Livinsky, D.A. assigned to the General Meeting of Shareholders may lations on the Board of Directors, Meeting of Shareholders. In 2015 S.Y. Lebedev, P.A. Livinsky, O.V. Malkov, Y.N. Mangarov, S.A. Regulations on the Auditing there were two compositions of Shatokhina, J.N. Mangarov, S.A. Nikitin, A.V. Nuzhdov, P.A. Sinyutin. not be referred to the Board of Directors, Manage- Commission, Regulations on the Board of Directors. Nikitin, A.V. Nuzhdov, P.A. Sinyutin. ment Board, and Director General for resolution. the Management Board, Reg- Consent for disclosure of this ulations on Remuneration and By the Decision of the General information in the Annual Report The procedure for convening and Swissotel at: 52/7 Kosmodamian- Compensations for the Members Meeting of Shareholders of 24 was obtained. holding the General Meetings of skaya nab., Moscow. of the Company’s Board of Shareholders is defined by the RF Directors, Remuneration and law, the Company’s Articles of The following resolutions were Compensations for the Members Association, and the Regulations taken by the shareholders in of the Company’s Auditing Composition of the Board of Directors Acting from June 24, 2015 on the General Meeting of Share- accordance with the voting results: Commission; holders of PJSC MOESK. • approve the Annual Report, • approve transactions of interest. One General Meeting of Share- annual financial reports and holders was held in 2015 — aver- distribute profit (including divi- The information on the resolutions Job title as of nomination date Date of first election to the BD age annual meeting. dend payment) according to the made by the General Meeting of Chairman, of the Management 27.08.2012 Board at PJSC «Rosseti», Director results of the financial year 2014; Shareholders is disclosed on the Number of times the nominee The General Meeting of Company corporate web site of the Company General at PJSC «Rosseti» (Chairman, Board of Directors) was elected to the BD Shareholders was held in the form • elect new members to the in the section “Shareholders and 5 of joint attendance on June 24, Board of Directors and Auditing Investors”/“General Meetings of Information on education 2015 in the Conference Center of Commission; Shareholders”/ tab “Resolutions”. Norilsk Industrial Institute, Presence in Committee specialization: Industrial assigned to the BD and Civil Construction - Number of shares in Company / Budargin, Oleg SCC of the Company Mikhailovich 0/0 Birth year 1960

Detailed information on the members of the Board of Directors is presented in Annex 5.3. to the Annual Report. ANNUAL CORPORATE 150 REPORT2015 GOVERNANCE 151

Job title as of nomination date Date of first election to the BD Job title as of nomination date Date of first election to the BD Director General at Closed 28.02.2005 Deputy Minister of Energy of the 13.03.2014 Joint Stock Company Leader Russian Federation (Management of pension Number of times the nominee Number of times the nominee fund assets) was elected to the BD Information on education was elected to the BD 13 Lomonosov Moscow State 3 Information on education University, 1995, jurisprudence Lomonosov Moscow State Presence in Committee Presence in Committee University, specialization: assigned to the BD assigned to the BD Economical Cybernetics, Personnel and Remuneration - Committeee qualification Number of shares in Company / Gavrilenko, Anatoliy Economist — mathematician; Number of shares in Company / Kravchenko, Vyacheslav SCC of the Company Anatolievich Lomonosov Moscow State SCC of the Company Mikhailovich 0/0 University, specialization: 0/0 Birth year 1972 Jurisprudence , qualification: Lawyer Birth year 1967

Job title as of nomination date Date of first election to the BD Job title as of nomination date Date of first election to the BD Deputy Head of Division of Direct 05.06.2008 Head of Moscow Department of Fuel 26.06.2013 Investments at GPB (PJSC) and Energy Number of times the nominee Number of times the nominee

Information on education was elected to the BD Information on education was elected to the BD Moscow State Institute of 6 Lomonosov Moscow State 4 University, specialization: Economics International Relations University Presence in Committee of the MFA of Russia, 1994, Presence in Committee assigned to the BD assigned to the BD jurisprudence, international lawyer - with knowledge of foreign language Strategy and Development Com- mittee, Audit Committee, Personnel Number of shares in Company / Grischenko, Sergey and Remuneration Committee Livinsky, Pavel SCC of the Company 0/0 Valentinovich Number of shares in Company / Anatolievich SCC of the Company Birth year 1980 Birth year 1972 0/0

Job title as of nomination date Date of first election to the BD Job title as of nomination date Date of first election to the BD Deputy Director General — Head 26.06.2013 Member of the Management Board 13.03.2014 of Corporate Control Division Number of times the nominee at PJSC “Rosseti” at Closed Joint Stock Company Number of times the nominee Leader (Management of pension was elected to the BD was elected to the BD fund assets) 4 Information on education 3 Presence in Committee Zaporizhzhya National University Information on education assigned to the BD Zaporizhzhya Institute of Economics Presence in Committee Bauman Moscow State Technical Strategy and Development and Information Technologies assigned to the BD University, specialization: design Strategy and Development Com- and production of radio electronic Committee, Audit Committee mittee, Audit Committee Nikitin, Sergey equipment; Number of shares in Company / Demin, Andrey Number of shares in Company / Alexandrovich State University — Higher School SCC of the Company SCC of the Company of Economics, specialization: 0/0 Alexandrovich 1968 0/0 Birth year Finances and Credit. Birth year 1974 ANNUAL CORPORATE 152 REPORT2015 GOVERNANCE 153

Job title as of nomination date Date of first election to the BD Job title as of nomination date Date of first election to the BD Deputy Director General for 30.06.2010 Director General at PJSC MOESK 26.06.2013 Investments and Relations with Public Authorities at Closed Number of times the nominee Information on education Number of times the nominee Joint Stock Company Leader was elected to the BD Chelyabinsk Polytechnic Institute, was elected to the BD (Management of pension 9 specialization: Electric Engineer 4 fund assets) Russian Presidential Academy Presence in Committee of National Economy and Public Presence in Committee Information on education assigned to the BD Administration, specialization: Public assigned to the BD Saratov Military Academy affiliated Strategy and Development and Municipal Administration Strategy and Development to Internal Troops of the Ministry Committee, Audit Committee Committee Nuzhdov, Aleksey for Internal Affairs named after Number of shares in Company / Sinyutin, Petr Number of shares in Company / Victorovichh F. I. Dzerdzhinskiy SCC of the Company Alekseevich SCC of the Company 0/0 0/0 Birth year 1968 Birth year 1962

Job title as of nomination date Date of first election to the BD Job title as of nomination date Date of first election to the BD Director General at Limited Liability 26.06.2006 Advisor at PJSC «Rosseti» 24.06.2014 Company “Stroi Capital” Number of times the nominee Information on education Number of times the nominee Information on education was elected to the BD Plekhanov Russian University of was elected to the BD Voznesensky University of 5 Economics: Economical Cybernetics, 2 Economics and Finances economist — mathematician. (Saint Petersburg), Department Presence in Committee Presence in Committee of International Financial assigned to the BD assigned to the BD Relations, Economist Audit Committee Personnel and Remuneration Committee, Audit Committee Number of shares in Company / Kokin, Andrey SCC of the Company Mangarov, Yuriy Number of shares in Company / Anatolievich 0/0 Nikolaevich SCC of the Company 0/0 Birth year 1970 Birth year 1956

Job title as of nomination date Date of first election to the BD Job title as of nomination date Date of first election to the BD Director of the Division of Strategic 13.03.2014 Director of the Division of Electric 24.06.2015 Projects at PJSC «Rosseti» Power Balance and Metering Number of times the nominee at PJSC «Rosseti» Number of times the nominee Information on education was elected to the BD was elected to the BD Lomonosov Moscow State 3 Information on education 1 University, 2001, finances and credit, Ural State Technical University — Master of Economics Presence in Committee Yeltsin Polytechnic Institute Presence in Committee assigned to the BD assigned to the BD Strategy and Development Com- Audit Committee, Personnel mittee, Audit Committee, Personnel and Remuneration Committee and Remuneration Committee Lebedev, Sergey Malkov, Denis Number of shares in Company / Yurievich Number of shares in Company / Alexandrovich SCC of the Company SCC of the Company 0/0 Birth year 1967 0/0 Birth year 1974 ANNUAL CORPORATE 154 REPORT2015 GOVERNANCE 155

Approval of Transactions of Interest and Large Transactions

In 2015, the Company executed are recognized as transactions In 2015, the Company did not 2015 and to the decrease in Directors and provides for one- Education of Members 48 transactions which in of interest and which were execute large transactions which the number of members in the time payment of remuneration of the Board of Directors accordance with the Federal approved by the Board require prior approval of the Board of Directors who received based on the work results over Law On Joint-Stock Companies of Directors. Board of Directors. remuneration. The new revision the period from the date of the Education at the cost of the Com- of the Regulations amends candidate election to the Board pany was received by only one Average Rate of Attendance of the Board of Directors Meetings by the Members the procedure for payment of of Directors until election of member of the Board of Directors: of the Board of Directors remuneration for attendance to the new composition of the Director General of PJSC MOESK P. the members of the Board of Board of Directors. A. Sinyutin. More detailed informa- Category 2013 2014 2015 tion is presented in the section on the Director General. Total number of the Meetings of the Board of Directors, ea., including: 28 32 25 Remuneration Paid to the Members of the Board physical 3 2 4 of Directors (with Breakdown to Remuneration Types)

Average attendance rate, % 92.6 94.8 92 Category 2013 2014 2015

Remuneration, RUB, without PIT (total), including: 32,269,337 39,457,285 22,731,347 Secretary of the Board of Directors for attendance of meetings 10,081,824 15,288,336 7,868,022 Technical support (provision The Chairman of the Board of Company’s Board of Directors of information, documents, Directors ensures coordinated by the majority of votes cast Additional remuneration (total), including: 22,187,513 24,168,949 14,863,325 preparation of meetings, secretarial and prompt work of the Board by the members attending support) of the daily activities of of Directors members with the the BD meeting. for net profit indicator 22,187,513 24,168,949 14,863,325 the Board of Directors is provided Company shareholders and their by the Secretary of the Company’s representatives, with executive Currently, in compliance with for increase in the volume of market capitalization 0 0 0 Board of Directors (Secretariat of body of the Company, managers the corresponding resolution the Board of Directors) acting by and employees of the Company of the Board of Directors dated virtue of the Company’s Articles divisions in order to ensure efficient June 29, 2015 (Minutes No. 264 of Association, Regulations on the operation of the Board of Directors. dated June 29, 2015), Aleksey 4.2.2.1. Information about the Board of Directors Priority Activities Board of Directors, Regulations on Nikolaevich Svirin, Deputy Director the Secretary (Secretariat) of the According to clause 4.1. of the of the Division of Corporate Board of Directors, other internal Regulations on the Company’s Governance and Shareholder Cutting of trees which were falling (resolution of the Board of Directors of the Board of Directors dated May documents of the Company and in Board of Directors, the Secretary Relations, is elected to the position or might fall on the 6-220 kV over- dated September 23, 2011, minutes 30, 2012, minutes No. 170 dated compliance with the orders of the of the Board of Directors shall be of the Secretary of PJSC MOESK head power lines in Moscow and No. 147 dated September 26, 2011). June 1, 2012). Chairman of the Board of Directors. elected by the members of the Board of Directors. Moscow region (resolution of the Board of Directors dated February Implementation of construction Participation in creation of charging Remuneration Paid to the Members of the Board of Directors 28, 2011, minutes No. 128 dated management system for priority infrastructure for electric vehicles February 28, 2011). investment projects (resolution of in Moscow and Moscow region Remuneration to the members In 2015, the amount of paid decrease in the amount of the Board of Directors dated Novem- (resolution of the Board of Directors of the Board of Directors shall to the members of the Board remuneration is attributable Ensuring compliance of the ber 23, 2011, minutes No. 152 dated dated June 22, 2012, minutes No. be paid in compliance with the of Directors was 22,731,347 to approval of the new Company with required level of September 26, 2011) 174 dated June 25, 2012). Regulations on Remuneration rubles without Personal Regulations on Remuneration reliability and quality for the deliv- and Compensations for the Income Tax, which is 57.6% and Compensations for the ered services as established by the Implementation of Computer-Aided Settlement of accounts receivable Members of PJSC MOESK lower than the remuneration Members of PJSC MOESK executive authorities of the Russian Design (CAD) system for design of with members of the “Single Window” Board of Directors31. amount paid in 2014. The Board of Directors on June 24, Federation in charge of governmen- overhead power lines rated 35 kV system (resolution of the Board of tal tariff regulation in accordance and above in OJSC Moscow United Directors dated August 24, 2012, min- 31 Approved by the Resolution of the General Meeting of Shareholders dated June 24, 2015 (minutes No. 17 dated June 29, 2015). with the regulatory legal acts Electric Grid Company (resolution utes No. 180 dated August 27, 2012). ANNUAL CORPORATE 156 REPORT2015 GOVERNANCE 157

Implementation of production Consolidation of electric grid facil- Order No. 674 dated September 30, 4.2.3. The Board Committees assets management system in the ities located in Moscow and New 2014 in the first year of subsequent Company (resolution of the Board Moscow (resolution of the Board period in the framework of the of Directors dated November of Directors dated November long-term regulation (resolution of Committees assigned to the Board of Directors ensure efficient consideration 8, 2012, minutes No. 185 dated 19, 2014, minutes No. 245 dated the Board of Directors dated Sep- November 9, 2012). November 21, 2014). tember 10, 2015, minutes No. 267 of matters included into the scope of competence assigned to the Board of dated September 11, 2015). Directors and develop preliminary recommendations for the Board of Directors Verification of equipment, materi- Ensuring availability of power infra- and the executive body. The Committees include representatives of the main als, and systems at the Company’s structure and quality of connection Features of decision-making Company shareholders. facilities (resolution of the Board to the electric grids of OJSC MOESK by the Board of Directors of Directors dated September 12, (resolution of the Board of Directors in 2015, ea. 2014, minutes No. 241 dated Sep- dated February 24, 2015, minutes Information on the Committees assigned to the Board of Directors tember 15, 2014). No. 251 dated February 27, 2015) 11 1 Improvement of internal control and Implementation of activities for risk management system, devel- centralization and automation of Reliability opment of internal audit function PJSC MOESK treasury depart- Committee (resolution of the Board of Directors ment functions (resolution of the 392 dated October 6, 2014, minutes No. Board of Directors dated March Total 242 dated October 9, 2014) 23, 2015, minutes No. 253 dated March 26, 2015). Committee objective investigation of accidents in third parties; control Ensuring reliability of OJSC MOESK 380 compliance with the Rules for compliance with the on the territory of Novaya Reduction of electric power losses Ensure efficient work of the Investigation of Causes programs; Moskva (resolution of the Board in order to ensure achievement of Company’s Board of Directors of Accidents in the Electric a positive decision of Directors dated November regulated indicators by the Com- within the scope of its Power Sector (approved 6. perform control and 19, 2014, minutes No. 245 pany in compliance with the Rus- postponed to a later date competence. by Ordinance of Russian assessment of activities dated November 21, 2014). sian Federation Ministry of Energy no decisions Federation Government of the Company’s technical Committee task No. 846 dated October 28, services in terms of ensuring 2009), control compliance with the operation reliability of Develop and present the Rules; electric grids and operation recommendations (opinions) to safety; the Company’s Board of Directors 3. perform expert review of on the following subjects: the quality of technological 7. perform expert review of the violation(accident) Company’s internal technical 1. perform expert review of investigation; control; operation programs, plans for retrofit, revamp, new 4. perform expert review of the 8. perform expert review construction and repair Company’s activities in the of occupational health of electric grid facilities, field of emergency prevention management system in the analysis of their development (ensure availability, organize Company; and performance in terms of and perform emergency compliance with the complex restoration activities at electric 9. perform expert review reliability of functioning facilities); of environmental policy and technical condition implementation; of electric grids; 5. perform expert review of electrocution injury prevention 10. perform expert review of fire 2. assess the completeness and risk reduction for and industrial safety and sufficiency of activities on Company personnel and system. ANNUAL CORPORATE 158 REPORT2015 GOVERNANCE 159

Committee’s resolutions Suchkov, Vladimir Petrovich Regulations on the Reliability Technological Connections disclosed at the Company’s Ivanov, Vsevolod Evgenievich Committee Assigned to the Board website in the section “Share- Nikitin, Vyacheslav Borisovich of Directors of OJSC Moscow Committee holders and Investors / Corpo- Ardeev, Andrey Vladimirovich Region Grid Company Minutes rate governance / Committees Balabanov, Mikhail Ivanovich No. 268 dated October 2, 2015 Committee objective Company activities in the field Committee’s resolutions dis- under the Board of Directors / Neganov, Leonid Valerievich of technological connections of closed at the Company’s website Reliability Committee” Mikheev, Dmitry Dmitrievich Regulations on the Reliability Ensure open and non-discrimina- consumers; in the section “Shareholders Committee disclosed at the tory accessibility of technological and Investors / Corporate gov- Active Committee composition Title and details of the Regula- Company’s website in the sec- connection to the Company’s 4. assess the efficiency of Com- ernance / Committees under the (without indication of job titles) tions which form the basis for tion “Shareholders and Inves- electric grids for the consumers. pany activities in the field of Board of Directors / Committee Gvozdev, Dmitry Borisovich (Chair) the Committee functioning tors / Information disclosure / technological connections of on technological connections to Semenov, Roman Alekseevich Charter and Internal documents” Committee task consumers; electric networks”

Develop and present recommen- 5. analyze the current situation in Title and details of the Regula- dations (opinions) to the Com- the Company and prepare pro- tions which form the basis for 28.12.2005 Committee establishment date pany’s Board of Directors on the posals for the Board of Directors the Committee functioning following subjects: regarding technological connec- Number of members in the Committee 9 tions for consumers. Regulations on the Technological Date of the latest changes (election) in the composition of the Committee 28.06.2015 1. prepare proposals on improve- Connections Committee Assigned ment of legal base for antimo- Active Committee composition to the Board of Directors of Open Number of Committee meetings in the reporting year, ea. (total), including: 11 nopoly regulation and ensuring (without indication of job titles) Joint-Stock Company Moscow non-discriminatory access to United Electric Grid Company physical 2 technological connection ser- Korolev, Vitaly Gennadievich Minutes No. 206 dated Septem- vices for consumers; Pyatigor, Alexander Mikhailovich ber 2, 2013 Amount of remuneration paid to the Committee members in the reporting year, RUB 322,894 Yushin, Leonid Yurievich 2. prepare proposals on improve- Markov, Andrey Rudolfovich Regulations on the Technolog- ment of internal Company regu- Ardeev, Andrey Vladimirovich ical Connections Committee lations and standards to ensure Korolev, Yury Andreevich disclosed at the Company’s non-discriminatory access to Pleshivtsev, Vsevolod Georgievich website in the section “Share- technological connection ser- Panin, Alexander Alexandrovich holders and Investors / Infor- vices for consumers; Mikheev, Dmitry Dmitrievich mation disclosure / Charter and Masaleva, Irina Borisovna (Chair) Internal documents” 3. develop principles and criteria Lebedeva, Nadezhda Ivanovna to assess the efficiency of

Committee establishment date 10.02.2009

Number of members in the Committee 11

Date of the latest changes (election) in the composition of the Committee 28.06.2015

Number of Committee meetings in the reporting year, ea. (total), including: 9

Amount of remuneration paid to the Committee members in the reporting year, RUB 261,591 ANNUAL CORPORATE 160 REPORT2015 GOVERNANCE 161

Strategy and Development Audit Committee Committee

Committee objective 5. determine and improve the Committee’s resolutions dis- Committee objective to ensure that the Company’s exec- Demin, Andrey Alexandrovich Company’s business planning closed at the Company’s web- utive bodies fulfill their obligations to Lebedev, Sergey Yurievich Ensure efficient work of the Com- and budgeting policy; site in the section “Sharehold- Provide assistance to ensure effi- ensure the report accuracy, establish Malkov, Denis Alexandrovich pany’s Board of Directors within ers and Investors / Corporate cient performance of its functions by reliable systems of risk management, Mangarov, Yury Nikolaevich the scope of its competence. 6. control the implementation of governance / Committees under the Company’s Board of Directors in internal control, corporate governance, Grischenko, Sergey Valentinovich approved business plan and the Board of Directors / Strategy terms of preliminary review of the compliance with the law and internal Nikitin, Sergey Alexandrovich (Chair) Committee task budget of the Company; and Development Committee” matters associated with control over Company documents. Kokin, Andrey Anatolievich the Company’s business activities. Nuzhdov, Aleksey Victorovich Develop and present recom- 7. prepare recommendations on Title and details of the Regula- Many of the Committee’s functions mendations (opinions) to the the Company’s dividend policy; tions which form the basis for Committee task are described in the regulations using Committee’s resolutions disclosed Company’s Board of Directors on the Committee functioning the terms “supervision”, “control”, at the Company’s website in the the following subjects: 8. assess the efficiency of 1. Review the accounting (financial) “assessment”, “analysis”, “organi- section “Shareholders and Inves- Company activities Regulations on the Strategy reports of the Company and zation”, “development” in relation to tors / Corporate governance / 1. identify priority subjects , stra- and Development Committee supervise the process of its certain business functions. The Com- Committees under the Board of tegic goals and main principles Active Committee composition Assigned to the Board of Directors implementation; mittee’s obligation is not to perform Directors / Audit Committee” of the Company’s strategic (without indication of job titles) of OJSC Moscow Region Grid 2. supervise the systems of risk the functions in relation to which it development; Neganov, Leonid Valerievich Company Minutes No. 54 dated management, internal control and exercises the actions of “supervision”, Title and details of the Regula- Snikkars, Pavel Nikolaevich December 28, 2007 corporate governance; “control”, “assessment”, “analysis”, tions which form the basis for the 2. improve the investment Demin, Andrey Alexandrovich 3. supervise the external audit and “organization”, “development”, i.e., Committee functioning attractiveness of the Company, (Chair) Bobrov, Vitaly Pavlovich Regulations on the Strategy auditor selection process; the Committee does not participate improve investment activities Balaeva, Svetlana Alexandrovna and Development Committee 4. organize and ensure the inde- in their direct performance. When Regulations on the Audit Com- and make justified invest- Lebedev, Sergey Yurievich disclosed at the Compa- pendence and objectivity of exercising its supervisory functions, mittee Assigned to the Board of ment decisions; Chevkin, Dmitry Alexandrovich ny’s website in the section internal audit process; the Committee relies on the fair Directors of OJSC MOESK Minutes Yascheritsina, Yulia Vitalievna “Shareholders and Investors / 5. control the efficiency of system practices of the Company’s executive No. 263 dated June 24, 2015 3. revise the existing Company Sinyutin, Petr Alekseevich Information disclosure / Charter for prevention of unethical prac- bodies and employees delivering the development strategy; Inozemtsev, Alexander Valerievich and Internal documents” tices of the Company employees information to the Committee. In case Regulations on the Audit Grischenko, Sergey Valentinovich and third parties. of any doubts as to the information Committee disclosed at the 4. control the progress in con- Nikitin, Sergey Alexandrovich accuracy, the Committee must inform Company’s website in the section nection with implementation of Nuzhdov, Aleksey Victorovich The Committee’s role is not to guaran- the other members of the Company’s Shareholders and Investors / adopted programs, projects and Ardeev, Andrey Vladimirovich tee the accuracy of reports, efficiency Board of Directors. Information disclosure / Charter process of Company reforms; of systems of risk management, and Internal documents internal control, corporate governance, Active Committee composition compliance with the law, but rather (without indication of job titles)

Committee establishment date 26.09.2007 Committee establishment date 13.12.2006 Number of members in the Committee 14 Number of members in the Committee 8 Date of the latest changes (election) in the composition of the Committee 28.06.2015 Date of the latest changes (election) in the composition of the Committee 28.06.2015 Number of Committee meetings in the reporting year, ea. (total), including: 15 Number of Committee meetings in the reporting year, ea. (total), including: 16 physical 5 physical 5 Amount of remuneration paid to the Committee members in the reporting year, RUB 1,112,041 Amount of remuneration paid to the Committee members in the reporting year, RUB 1,105,527 ANNUAL CORPORATE 162 REPORT2015 GOVERNANCE 163

Personnel and Remuneration Committee

Committee objective 3. develop proposals on identifica- Malkov, Denis Alexandrovich tion of material contract terms Lebedev, Sergey Yurievich Ensure efficient work of the Com- with the members of the Board Grischenko, Sergey Valentinovich pany’s Board of Directors within of Directors, members of the col- Gavrilenko, Anatoly Anatolievich the scope of its competence and lective executive body and person develop necessary recommenda- performing the functions of the Committee’s resolutions dis- tions for the Board of Directors and Company’s sole executive body; closed at the Company’s website executive bodies of the Company. in the section “Shareholders 4. determine the criteria for selec- and Investors / Corporate gov- Committee task tion of candidates to the mem- ernance / Committees under the bers of the Board of Directors, Board of Directors / Personnel Develop and present recommen- members of the collective exec- and Remunerations Committee” dations (opinions) on the following utive body and to the position of subjects: the sole executive body of the Title and details of the Regula- Company, perform preliminary tions which form the basis for 1. prepare recommendations on the assessment of such candidates; the Committee functioning amount of remuneration to be paid to the members of the Board 5. regular assessment of the Regulations on the Personnel of Directors; person/entity performing the and Remuneration Committee of functions of the sole executive OJSC Moscow United Electric Grid 2. develop the principles and crite- body (management company, Company Minutes No. 238 dated ria for determining the amount manager) and members of the August 25, 2014 of remuneration to be paid collective executive body of the to the members of the Board Company and prepare proposals Regulations on the Personnel of Directors, members to the regarding their re-appointment and Remuneration Committee collective executive body and the for the board of directors. disclosed at the Company’s person performing the functions website in the section “Share- of the Company’s sole executive Active Committee composition holders and Investors / Infor- body, including a management (without indication of job titles) mation disclosure / Charter and company or manager; Mangarov, Yury Nikolaevich (Chair) Internal documents”

Committee establishment date 26.09.2007

Number of members in the Committee 5

Date of the latest changes (election) in the composition of the Committee 28.06.2015

Number of Committee meetings in the reporting year, ea. (total), including: 8

Amount of remuneration paid to the Committee members in the reporting year, RUB 165,844 ANNUAL CORPORATE 164 REPORT2015 GOVERNANCE 165

4.2.4. Management Board Personal Composition of the Management Board (data as of December 31, 2015) The Management Board is a collective management body of the Company. The Management Board acts by virtue of the Articles of Sinyutin, Budyko, Ivanov, Pyatigor, Filin, Association and the Regulations on Petr Alekseevich Mark Leonidovich Vsevolod Evgenievich the Management Board approved Alexander Mikhailovich Alexander Valentinovich by the General Meeting Company Director General Deputy Director General for Deputy Deputy Director General — Deputy Director General for First Deputy Director General for Shareholders (Minutes No. 17 dated Director General for Logistics and Engineering Director Technological Connections and Corporate protection and Corruption June 29, 2015) which establishes Procurement Service Development Control the timeframe and procedure for convocation and holding of its meetings as well as the resolution- making procedure. Remuneration Paid to the Members of the Management Board

Financial incentives for the members of the Management Board in 2015 were determined in compliance with the Regulations on the Financial Incentives and Social Package Inozemtsev, Ivanov, Kimerin, Starostin, Chegodaev, for the Top Managers32 and the Alexander Valerievich Victor Ivanovich Vladimir Anatolievich Aleksey Sergeevich Regulations on the Labor Remu- Anatoly Vasilievich neration System for Executive Body First Deputy Director General for Director, Western Electric Networks Deputy Director General Deputy Director General for Director, Central Electric Networks Employees33. In 2015, the amount of Financial & Economic Activities branch for Electric Power Transmission Corporate Governance branch remuneration paid to the members and Corporate Governance and Metering and Property of the Management Board was 313.8 mln rubles (with Personal Income Tax), which is 10.5% lower than the Average Rate of Attendance of the Management Board Meetings by the members amount paid in 2014. of the Management Board

32 Regulations on Financial Incentives and Social Package for the Top Managers. Approved by the resolution of the Board 2015/2014, Category 2013 2014 2015 of Directors dated December 30, 2013 (minutes No. 217 dated December 31, 2013) as amended on April 10, 2015 % (minutes No. 256 dated April 13, 2015). Total number of Management Board meetings, ea., including: 62 48 60 25.0 33 Regulations on Labor Remuneration for Executive Body Employees of OJSC Moscow United Electric Grid Company, Regulations on Financial Incentives (Bonuses) for Executive Body Employees of OJSC Moscow United Electric Grid Company, Guidelines for physical 34 21 40 90.5 Calculation of Bonuses for Employees in the Structural Divisions of OJSC MOESK Executive Body approved by OJSC MOESK Order Average attendance rate, % 75 62.5 76.54 14.04 pp No. 1206 dated November 5, 2014 (as amended by orders No 977 dated August 6, 2015, No. 1368 dated October 27, 2015.) ANNUAL CORPORATE 166 REPORT2015 GOVERNANCE 167

4.2.5. Director General

Training of Director General December 17, 2014 (Minutes No. List of Annual KPIs: 248 dated December 19, 2014) The Company pays much attention as amended (minutes of the BD • Total Shareholder Return (TSR); to improvement of qualification of meetings No. 256 dated April 13, its executives. Thus, in 2015, the 2015, No. 266 dated August 24, • Return On Invested Director General of PJSC MOESK P. 2015 and No. 273 dated December Capital (ROIC); A. Sinyutin completed qualification 28, 2015). improvement training on the • Reduction of specific following subjects: Bonus payments to the Director operating costs; General shall depend on • ensuring environmental achievement of the Company’s key • Level of power losses; management, performance indicators and results of fulfillment of the Company’s • Achievement of required • electric safety group V; KPIs for the reporting periods reliability level of delivered approved by the Company’s Board services; • fundamentals of industrial of Directors. safety. • Reduction of specific List of Quarterly KPIs: investment costs; Financial Incentives Sinyutin, Petr Alekseevich for Director General • Absence of major accident • Compliance with the rate growth; commissioning schedule; Financial incentives for the The Director General performs daily ment of the Company, excluding the General for 3 years (from July 4, Company’s Director General are • Prevention of growth in the • Compliance with the due dates management of the Company in matters within the scope of com- 2012, July 11, 2012 to February 5, organized in accordance with the number of injured people in case for electrical connection; compliance with the resolutions petence of the General Meeting of 2013 Sinyutin, P. A. was the acting Regulations on Financial Incentives of accidents; of the General Meeting of Sharehold- Shareholders, the Board of Directors Director General of the Company). of OJSC MOESK Director General • Labor efficiency improvement. ers, the Board of Directors and the and the Management Board. In accordance with the resolution of approved by the Resolution of OJSC • Financial stability indicator — Management Board adopted within the Board of Directors dated March MOESK Board of Directors dated leverage ratio. the scope of their competence. In accordance with the resolution 3, Sinyutin, Petr Alekseevich was of the Board of Directors dated re-elected to the position of the The scope of the Director General February 5, 2013, Sinyutin, Petr Company’s Director General for the competence includes all the matters Alekseevich was elected to the period from February 5, 2016 to associated with the daily manage- position of the Company’s Director February 4, 2019.

Period Company Position from to 2010 2012 OJSC “Mosenergosbyt” Managing Director — First Deputy Director General OJSC Moscow United Electric Grid Acting Director General, Chairman of the 2012 2013 Company Management Board present PJSC Moscow United Electric Grid Director General, Chairman of the Management 2013 date Company Board, member of the Board of Directors

P. A. Sinyutin has no interest in the issuer’s authorized capital/ordinary shares ANNUAL CORPORATE 168 REPORT2015 GOVERNANCE 169

4.3. EXTERNAL, INTERNAL AUDIT AND CONTROL Internal Control System

4.3.1. Internal Control System Auditing Commission Board of Directors The Company’s Internal Control • Efficiency and effectiveness of Company operation, Auditing commission, System (further referred to as the other committees ICS) is an element of the overall integrity of the Company assets; Executive bodies management system of the Company. The ICS covers all the • Compliance with legal requirements applicable to the fields of the Company activities, Company and local regulatory acts of the Company, Managers and employees control procedures are applied Control and Risk Unit continuously to all the Company including in connection with performance of business of structural divisions processes (fields of activities) at activities and financial accounting; all management levels in order to ensure reasonable guarantees for • Ensuring accurate and timely preparation Specialized control units (Division of Operation Control, Division achievement of objectives in the of accounting (financial) and other reports. of Economic Security and Corruption Control, Division following areas: of Anticorruption Compliance Procedures, Quality Management Internal Audit Unit and Operation Efficiency Unit, Division of Legal Support, etc.)

Improvement of ICS is performed at all the Company’s control levels in the following control areas: Function of ICS Elements

Auditing Commission • controls the activities of the prior to their review by the Board Company’s executive bodies in of Directors, prepares proposals preliminary (proactive) current follow-up • controls the Company’s business the main (priority) areas / recommendations on ICS control control control activities; based on the control improvement; results, the Committee prepares Audit Committee assigned to the proposals/recommendations for Board of Directors • preliminary review of the Creation of process Implementation of Internal audit, review ICS improvement; matters in connection with control environment, control procedures control of report • preliminary review of internal organization and results of including: verification integrated into the accuracy, integrity of • independent assessment of Company documents which internal audit prior to their of sufficiency of business processes for assets, compliance the accuracy of the Company’s define the organization and the review by the Board of Directors; control procedures for achievement of business control, external audit, annual report and the Company’s strategy for development and prevention or mitigation process objectives internal assessment annual financial reports improvement of the Company • supervision over reliability of risk realization ICS prior to approval of such and efficiency of ICS in consequences and Board of Directors documents by the Board of terms of review of the achievement of Directors; matters associated with the business process • determines principles of and supervision over the accuracy objectives, development approach to ICS organization • preliminary review of results of the Company’s accounting and implementation of as well as the strategy for of ICS efficiency assessment (financial) reports, selection control procedures development and improvement results based on the data in of external auditor and of the Company ICS; the internal auditor’s report on performance of external audit, the ICS efficiency and reports ensuring compliance with • controls and organizes the on the results of external regulatory legal requirements internal audit activities; independent ICS assessment and in terms of review of ANNUAL CORPORATE 170 REPORT2015 GOVERNANCE 171

the matters associated with functioning in compliance • perform internal audit of analysis and assessment with their professional duties the Company’s quality Commentary-interview the Company’s Internal Audit Department organizational independence and of Internal Control Policy and adopted regulatory management system; of the Audit Director already pilot-tested the application of objectivity in the course of internal implementation documents; E. A. Schegoleva approach and regulations included into audit performance and improve the • prepare recommendations the draft documents, in particular, in order quality of activities: Other committees assigned to • ensure timely notification of on improvement of control In 2015, the Internal Audit Department to receive feedback form the audited the Board of Directors their direct supervisors about procedures based on the took active part in the methodological Company divisions, which had positive • complete the methodological cases where performance of results of internal control activities of PJSC «Rosseti»: the impact on the quality and efficiency of the documents on the internal audit • supervision over fulfillment control procedures for some activities Company developed a range of local Department’s operation. procedures; of the established financial reason became impossible regulatory documents on organization and operational indicators, and/or the control procedure Control and Risk Department of internal audit activities (some The following activities are planned • implement the project for internal compliance with applicable design needs to be changed of these documents are already for 2016 in order to contribute to audit automation. law, rules and procedures in connection with changes • develop and ensure approved), such as Internal Audit implemented in compliance in internal and/or external implementation of the main Glossary, Guidelines on Performance with the local regulatory acts conditions of the Company and methodological documents of Internal Audit, Guidelines on and over the accuracy and functioning, including on ICS establishment and Monitoring over Fulfillment of timely preparation of Company development of proposals improvement; Anticorruption Action Plan, Guidelines reports (within the framework on implementation of control on Internal Audit Planning, etc. These of their competence as procedures in the corresponding • coordinate activities on support documents were developed based on defined by the Board of operation areas and submission and monitoring of the ICS the global professional practices in the Directors) of such proposals to the target status; field of internal audit and following the executives for review recommendations of Rosimushchestvo Director General, Management • prepare information (Federal Agency for State Property Board of the Company Specialized control on the status of ICS for Management) and the Bank of Russia Departments interested parties for joint-stock companies and holding • ensure establishment and daily structures with participation interest functioning of the Company’s ICS (Division of Operation Control, Internal Audit Department of the Russian Federation. Even before Division of Economic Security official approval of the documents, Heads of Departments and Corruption Control, Division • prepare recommendations in the course of its activities in 2015, and Structural Divisions of Anticorruption Compliance on improvement of control Procedures, Quality Management procedures, certain • organize effective control and Operation Efficiency components (elements) of Corrective Actions Results of Control Activities Performed environment for the supervised Department, Division of Legal internal control and ICS based by Internal Audit Department in 2015 processes (areas of operation), Support, etc.) on the results of internal 264 bear responsibility for efficiency audit activities; Audits 5 of operation objectives’ • perform internal control 2 4 1 Complex inspection of branches achievement in the framework activities and internal • perform independent internal 189 9 of supervised processes (areas investigation in the field assessment of ICS efficiency 160 Review of SCC of operation) and performance of of technical control, and issue recommendations Assessment of ICS and RM control procedures anticorruption control on improvement of ICS Participation in internal investigation of business processes, efficiency and effectiveness 63 / inspection Employees of the Company’s monitoring over the current Expert and analytical activities structural divisions who perform condition of compliance 42 according to the order of DG control procedures in compliance procedures, legality of Total number of prescribed corrective actions Monitoring over performance with their professional duties Company operations and of activities prevention of violationwith the Actions with expired completion date • perform control procedures effective RF law in the field of Completed actions in the framework of ICS the main Company activities; ANNUAL CORPORATE 172 REPORT2015 GOVERNANCE 173

4.3.2. Risk Management System Level of risk Description Risk mitigation activities significance and its dynamics relative to The Company implemented the The main participants in the risk Key Risk Factors 2014 and during 2015 Risk Management System (further management process are: referred to as the RMS) to ensure Level of Risk Significance Regulatory risk Risks associated with the • Design of power lines with consideration of sustainable and uninterruptible • Board of Directors; regional specifics of operation regional classification in terms of ice formation ; operation and development of the Critical Company due to timely identification, • Authorized committed • Expansion and timely clearing of territory along assessment and efficient reporting to the Board of Significant the power line route from trees; management of risks which threaten Directors; the efficient performance of the Moderate • Implementation of modern equipment for Company’s business activities and • Executive bodies (Management diagnosis of overhead line condition and location reputation, the employees’ health, Board, Director General); Insignificant of damage points; environment, and property interests • Replacement of overhead line wires with self- of the shareholders and investors. • Risk owners; Dynamics of risk significance supporting insulated conductors; relative to 2014 and during 2015 In order to develop the RMS in the • Rink Management (if any) is shown with arrows: ↑ • Creation of weather monitoring system, Company, the Board of Directors Department; (growth of risk significance), ↓ preparation of weather forecasts and warning approved the Risk Management (reduction of risk significance). about hazardous weather; Policy (Minutes No. 242 dated • Persons in charge of October 9, 2014). risk management action • Selective implementation of anti-icing and ice performance. melting system;

• Property insurance. Main Risks in the Company Operation Regional risks Risk associated with the • Interaction with the authorities in the field of resolutions of authorities in tariff regulation to provide supporting materials Level of risk Description Risk mitigation activities the field of tariff regulation: which justify the level of costs; significance and its introduction of electric power dynamics relative to transmission tariffs below • Development of proposals on revision of draft 2014 and during 2015 economically feasible level, regulatory documents prepared by authorities revision of established tariffs for revision of electric power transmission tariffs; Country risk Decrease in the Company • Cost-cutting activities; over the regulation period possibilities to access capital • Planning of the Company’s business activities and decrease in the demand • Optimization of investment program; with consideration of tariff and balance for the Company services due resolutions; to the negative impact of global • • Reasonable credit policy. financial market instability on the • Interaction with regulatory authorities and RF Russian economy. Ministry of Energy in connection with approval of the Company’s long-term investment program.

Risks associated with Regional risks • Implementation of cost management program deterioration of economic • Implementation of crisis management activities situation in the region and in case of risk realization destabilized political situation ANNUAL CORPORATE 174 REPORT2015 GOVERNANCE 175

Level of risk Description Risk mitigation activities Level of risk Description Risk mitigation activities significance and its significance and its dynamics relative to dynamics relative to 2014 and during 2015 2014 and during 2015

Risk of decrease in Risk associated with decrease • Monitoring of electric power consumption and Price risk Risk associated with possible • Implementation of PJSC MOESK program for demand for services in the volume of electric revision of sales plans with consideration of the variation of prices for raw energy-saving and energy efficiency improvement; power transmission services current demand for electric power; materials, services, equipment due to general decrease and other material and • Development and implementation of Program of • Interaction with regulatory authorities to in the volumes of power technical resources used by Organizational and technical Activities for Reduc- account for lost revenues in the electric power consumption and technological the Company in the course of tion and Prevention of Losses; transmission tariff in the following year; connections operation. • Fulfillment of Program for Energy-Saving and • Interaction with the regulatory authorities in Energy Efficiency Improvement; connection with incorporation of justified costs of power loss compensation into the Compa- • Implementation of activities in the framework ny’s NGR, including submission of documents of the project “3 steps in 2 visits” to simplify which confirm the actual costs in the previous the technological connection procedure and reporting periods; reduce the timeframe required for contract performance; • Interaction with regulatory authorities in connec- tion with establishment of balance indicators (net • Inclusion of subjects in accordance with the supply and power rating) for PJSC MOESK and Program for Lifting of Limitations into the LGO of level 2 for adoption of tariff and balance investment program and fulfillment of Programs. resolutions; Operational risk Risk associated with • Creation of weather monitoring system, • Creation of competive environment in the firled of technological violation preparation of weather forecasts and warning work and services procurement; (including grid breakdown) about hazardous weather; • Remote control functionality for 110-220 kV • Centralized procurement to cust costs due to the stations; procurement scale effect;

• Implementation of target program on • Elimination of cross procurement; replacement of 0.4-10 kV overhead line wires with self-supporting insulated conductors; • Optimization of costs of repair, operation and capital construction projects. • Expansion and time cleating of power lines routes from trees; • Transformation of quick-action teams and repair & operation teams into mobile work teams; • Repair activities based on the results of assessment of the current technical conditions of main production assets; • Operation control over the condition of electric grid equipment, building and structures within Company branches • Insurance of electric grid facilities. ANNUAL CORPORATE 176 REPORT2015 GOVERNANCE 177

Level of risk Description Risk mitigation activities Level of risk Description Risk mitigation activities significance and its significance and its dynamics relative to dynamics relative to 2014 and during 2015 2014 and during 2015

Interest rate risk Risk associated with increase • Business planning with consideration of possible Credit risk Risk associated with non- • Performance of raids to identify power consump- in the rate of interest on interest rate growth; performance by counterparties: tion without metering; borrowed funds due to financial

market instability • Raising of borrowed funds in the framework • non-payment by consumers • Installation of meters at the boundaries of power of long-term agreements on revolving credit (guaranteed suppliers and attribution with management companies in lines with considerable limit of borrowing and retail power companies) multi-apartment buildings. Transfer of installed established limitations on the maximum interest for power transmission metering devices to fiscal metering; depending on the refinancing rate established by services, the RF Central Bank; • Implementation of PJSC MOESK Action Plan for • electric power consumption collection of overdue receivables for power trans- • Selection of financial organizations for service without contract or fiscal mission services and settlement of disputes; delivery through open bidding procedures to metering, ensure borrowing on the most beneficial terms • Initiation of claims against the participants of for PJSC MOESK; • Non-repayment of amounts tariff regulation with consideration of the estab- transferred to the members lished judicial practice for recovery of payments • Inclusion of terms, which fix the floating interest of the “single window” PJSC MOESK by consumers due to termination rate in accordance with the key interest rate of system for technological of contract on technological connections which the RF Central Bank into the new contracts. connections in Moscow were executed earlier in the framework of the in the form of advance “Single Window” system; Currency risk Increase in the Company costs • Minimization of transactions in foreign currencies payments during the period due to currency exchange rate from 2006 to 2010. • Negotiations with participation of representatives fluctuations of the Moscow Government, controlling share- holder and members of the “Single Window” Inflation risk Increase in the Company costs • Planning with consideration of annual price system in order to develop reasonable solutions . due to higher inflation rate growth; Strategic risk Risk of Company losses due to • Implementation of the Company’s Program of

• Implementation of cost management program. the errors (omissions) made Priority Objectives; when taking resolutions which • Implementation of the conceptual part of the Com- determine the Company’s pany’s strategic plan with planning horizon through operation and development 2020; strategy (strategic management) • Adoption of management resolutions with consideration of the approved Business Plan, additional cost-cutting activities and with consideration of the documents which define the long-term plans for certain areas (e.g., Investment Program, Energy-saving and Energy Efficiency Improvement Program) ANNUAL CORPORATE 178 REPORT2015 GOVERNANCE 179

Level of risk Description Risk mitigation activities Level of risk Description Risk mitigation activities significance and its significance and its dynamics relative to dynamics relative to 2014 and during 2015 2014 and during 2015

Reputation risk Risk of losses, which may be • Information support in connection with the main Amendment of legal Risk of amendment of legal • Optimization of the process for legalization of incurred by the Company due Company operation areas (issue of press releases, practices practice in the aspects documents and Company operation support; to decrease in the number of publications in mass media, press tours, video associated with the Company clients (counterparties) due to spots, etc.); activities • Arrangement of mandatory due diligence for formation of negative image contracts and internal regulatory documents. • Preparation and presentation of comments for of the Company’s financial mass media; stability, financial position, quality of its products (work, • Organization of public events which contribute to services) or nature of its promotion of the strategic Company activities with Antimonopoly Risk of fines imposed by • Reduction of internal time period required for activities. participation of authorities and public organiza- regulation risk antimonopoly authorities in connection of consumers; tions (forums, round tables, etc.); connection with violation with the timeframe for preparation • Development of CRM system in compliance • Participation in professional and themed events of offers on technological with the approved regulations on technological to inform the target audience about the Company connection and contract connections; activities (congresses and exhibitions) performance timeframe as required by the law. • Submission of pleas for the court to invalidate • Preparation and issue of polygraphic and adver- the ordinances of antimonopoly authorities on tising materials on the main Company activities application of administrative fines as related (booklets, leaflets, client journal, etc.) with cancellation of penalty enforcement and • Creation of permanent positive information field reduction of fine amount to 100 thous. rubles and informing consumers about company ser- vices in the social networks; Level of Risk Significance • Regular information provision and updated on the web site of PJSC MOESK. Country risk Antimonopoly Regional risks Amendment of tax law Risk associated with • Performance of on-going work on improvement regulation risk amendment of tax system, tax of tax base calculation in strict compliance with rates, tax payment procedure the effective law of the Russian Federation Amendment of legal Regulatory risk practices • Planning of business activities with consideration of the effective tax law Risk of decrease in Amendment of tax law demand for services

Strategic risk Operational risk

Reputation risk Price risk

Interest rate risk Credit risk

Inflation risk Currency risk ANNUAL CORPORATE 180 REPORT2015 GOVERNANCE 181

Information on Possible regulated by dams of hydraulic to premises where the Company The risk of losses due to this Circumstances which structures, which reduces the property is located is low, hazard group is assessed as low. Commentary-interview • We implemented the system, Objectively Impact water level variation amplitude including unauthorized access of the Audit Director which allows us to identify the the Company’s during spring floods. with sabotage intentions. The risk Improvement of Risk E. A. Schegoleva risk impact on the Company’s Operation of terrorist attack is minimal for Management System operation results and engage The risk of losses due to flooding these facilities. The Control and Risk Department took manager at all Company levels or partial flooding is assessed In the framework of activities active part in the methodological activ- into this process. Risk of earthquake as low. The risk of losses due to a terrorist conducted by the work group ities of PJSC “Rosseti” in connection attack is insignificant. under the supervision of PJSC with development of new methods for In order to improve the Compa- The region of PJSC MOESK Terrorism «Rosseti», the risk management risk identification and assessment. ny’s risk management system property location is not classified Illegal actions of third parties system was integrated into the Due to that and also due to the interest further, the following activities are as seismic hazardous. The premises where the Company (stealing, robbery, assault Company’s business planning into implementation of new methods scheduled for 2016: property is located are surrounded with intend to rob, property process. Methods for risk demonstrated by the top level execu- The risk of losses due to with fencing. Entry to and exit damage due to willful acts or assessment were developed and tives, this year we managed to make a • Adapt the Policies of Internal earthquake is absent. from the station premises is negligence) approved with consideration of breakthrough in the RMS formation and Control and Risk Management in controlled due to utilization of their mutual impact and their improvement, specifically: accordance with the approach rec- Risk of flood access permit system. Shift No significant stealing or impact on achievement of the ommended by PJSC “Rosseti” and duty personnel and security misappropriation occurrences Company’s strategic objectives • All the risks associated with submit these documents to the A part of the Company’s electric personnel are always present were detected over the last 5 (order No. 1021 dated August 14, the Company business were Board of Directors for approval; transmission lines run across at the attended stations; video years at PJSC MOESK facilities, 2015). Additionally, the Company identified, systemized, described the beds of rivers in Moscow surveillance systems are installed; which is attributable to the high developed and implemented and assessed; the risk chart • Develop and approve methods region — areas of possible for unattended stations without perimeter security level and strict the Guidelines on Planning was developed; for assessment of the Compa- land flooding during spring continued presence of operating access control. All motor vehicles and Implementation of Risk ny’s internal control and risk flood season. Sharp elevations personnel, transfer points, cable entering or exiting the premises Management Activities, for form • Action plans were developed for management system. of water level are possible structures are equipped with of the Company’s facilities are of Action Plan (Company order all risks, control over their perfor- after snowy winters; however, security alarm. In our opinion, subjected to thorough inspection No. 1633 dated December mance and assessment of their the flow rate of most rivers is the risk of unauthorized access at checkpoints. 18, 2015). impact on the risks are ongoing;

In the framework of the RMS implemented by the Company, the Board of Directors approved the Register of Key Operation Risks (minutes No. 246 dated November 27, 2014). The key operation risks are the top-level risks which have direct effect on achievement of the Company’s strategic priorities. ANNUAL CORPORATE 182 REPORT2015 GOVERNANCE 183

Relationship between Strategic Priorities, Risks and KPI The table below presents information on assessment and actual values of key operation risks in 2015: The figure below shows the relationship between the key operation risks and strategic priorities of the Company.

Improvement Improvement of Proactive grid Growth of investment Improvement of Risk Unit of Company of personnel service quality development. Assessment parameter Risk value Actual value Deviation, % attractiveness electric power number measurement strategic professional level and availability of Implementation of and capitalization supply reliability priorities and loyalty electrical connection new technologies Volume of electric power QRA-001 mln kW·h 71,105.44 70,532.76 -0.81% transmission services Average electric power QRA-002 RUB/K kW·h 1,720.8 1,713.46 -0.43% Key risks transmission tariff Financial KPI: Number of performed QRA-008 — Deviation of debt/EBITDA QRA-003 ea. 55,000 77,355 40.65% from plan; QRA-009 — Deviation contracts on TC of NP from plan Volume of connected capacity mln kW 1,750 3,106.71 77.53% Revenues from TC services RUB mln 10,000 10,302.1 3.02% Purchased electric power QRA-004 RUB mln 13,637.30 13,170.9 -3.42% for power loss compensation Interest, other costs Operation safety Non-influenceable costs QRA-007 — Deviation QRA-015 — Injuries through QRA-005 minus costs of power loss RUB mln 71,782.46 68,724.39 -4.26% of overdue receivables the Company’s fault compensation QRA-006 Operation costs RUB mln 32,477.90 31,752.88 -2.23%

Operation costs Volume of overdue receivables QRA-004 — Deviation of power loss QRA-007 for electric power transmissi RUB mln 2,392.04 1,564.02 -34.62% compensation costs; Workforce productivity on services QRA-005 — Deviation of non- influenceable QRA-016 — Deviation of workforce costs from plan; productivity from the plan QRA-008 Debt/EBITDA - 2 1.75 -12.51% QRA-006 — Deviation of OPEX from plan QRA-009 Net profit RUB mln 8,269.18 9,246.55 11.82% QRA-010 Investment utilization (without VAT) RUB mln 32,916.13 36,715.42 11.54% Commissioning of fixed assets Revenues from technological connection RUB mln 31,014.75 34,458 11.10% services Main parameters (without VAT) QRA-003 — Deviation of revenues of investment program Financing of investment from EC from plan RUB mln 37,297.86 36,295.23 -2.69% QRA-010 — Non-compliance with IP development program (with VAT) parameters; Rate of decrease of specific QRA-011 — Deviation of specific QRA-011 % 14.35 15 4.57% investment costs investment costs Volume of power transmission services QRA-001 — Deviation of EP transmission QRA-012 Capacity load indicator % 24 30.13 25.54% volume from plan; Reliability indicator of electric QRA-012 — Insufficient load on capacities QRA-013 - 1 1 0.00% power transmission service (KPI) Service quality QRA-014 Quality indicator for TC service - 1.2 1.03 -14.17% QRA-013 — Non-achievement QRA-015 Number of work-related injuries ea. - 6 - EP transmission tariffs of reliability indicator; QRA-014 — Non-achievement RUB thous. / QRA-002 — Deviation of average EP QRA-016 Workforce efficiency 4.382 4.432 1.13% transmission tariff from plan of EC quality indicator persons h ANNUAL CORPORATE 184 REPORT2015 GOVERNANCE 185

4.3.3. Auditing Commission

The Auditing Commission Company, its independent to verify compliance with controls the Company’s divisions, officers of the Russian Federation law, business activities though management bodies and the Company’s Articles of regular inspections of the structural divisions of the Association and internal activities performed by the Company’s executive body documents of the Company.

The resolutions adopted by the of the annual General Meeting days when the functions of the Company’s Auditing Commission of Company Shareholders dated Auditing Commission member are disclosed at the Company’s June 24, 2015 (minutes No. 17 were performed, rate of personal website in the section “Corporate dated June 29, 2015). participation of the Auditing Com- Governance” mission member. Additionally, in In compliance with the new compliance with the new Reg- Payment of remuneration to approved Regulations, the remu- ulations, remuneration shall be the members of the Auditing neration amount due to a member paid to the Auditing Commission Commission is performed in of the Auditing Commission shall members based on the results of compliance with the Regulations be determined in accordance with work in the corporate year. on Remuneration and Compensa- the remuneration base estimated tion Payments to the Members of in accordance with the Company OJSC MOESK Auditing Commis- revenues as per the RAS for the sion approved by the resolution financial year, number of calendar ANNUAL CORPORATE 186 REPORT2015 GOVERNANCE 187

Composition of Auditing Commissionfrom June 24, 2015 4.4. INFORMATION FOR SHAREHOLDERS AND INVESTORS

Number of Number of The Company’s authorized of ordinary shares was In accordance with the Company’s shares in the Job title as Year of Date of first times the capital is equal to 24,353,545,787 performed in connection with Articles of Association, the Full name Company / of December 31, 2015 birth election to RC person was rubles and is divided into OJSC MOESK restructuring Company may issue 3,718,126 SCC of the elected to RC 48,707,091,574 ordinary shares through consolidation of OJSC additional ordinary shares with Company with 0.5 ruble par value each. In Moscow City Power 0.5 ruble par value each for the Head of Review 2008, additional emission Grid Company. total amount of 1,859,063 rubles. Department Kim, Svetlana within Control 1981 05.02.2014 3 0/0 Anatolievna and Review Division of PJSC “Rosseti” Information of Registered Issues of Shares

Head of Internal Shmakov, Igor Public registration number of issue 1-01-65116-D 1-01-65116-D-001D* Audit Division 1974 24.06.2015 1 0/0 Vladimirovich of PJSC “Rosseti” Date of public registration of issue 31.05.2005 30.06.2008 Number of issued shares, ea. 28 249 359 700 20 457 731 874 Deputy Head of Review Department Par value, RUB 0.5 0.5 Kirillov, Artem within Control 1984 05.02.2014 3 0/0 Distribution of shares of the Nikolaevich Conversion of ordinary registered and Review Division company established through shares of Consolidated Company of PJSC “Rosseti” Issue method demerger between shareholders into ordinary registered shares of of the company restructured the Main Company Lead Expert, Review through demerger Medvedeva, Department Oksana within Control 1978 24.06.2015 1 0/0 Registration date Alekseevna and Review Division 31.05.2005 31.07.2008 of PJSC “Rosseti” of report on issue results

Deputy Head of Department Zaytseva, Tatiana within Control 1969 24.06.2015 1 0/0 Victorovna and Review Division STRUCTURE 17.62 Open Joint-Stock Company of PJSC “Rosseti” OF SHAREHOLDING PJSC «Rosseti» Other shareholders as of May 18, 2015 (date when 9.77 Open Joint-Stock Remuneration Paid to the Auditing Commission Members the list of persons entitled 50.9 Company OEK-Finans to attend the annual General Management Company AGANA Meeting of Shareholders was 8.51 Category 2013 2014 2015 2015/2014, % Gazprombank (Joint-Stock Company) prepared) 5.05 CJSC Leader RUB without PIT 1,212,040 2,407,725 623,659 -74.1 8.15

* Individual code 001 D of public registration number 1-0165116-D-001D assigned to the additional issue of securities was cancelled on November 18, 2008 (Order of Federal Financial Markets Service No. 08-2788/pz-i). ANNUAL CORPORATE 188 REPORT2015 GOVERNANCE 189

Statistics on Shareholders. Stake in the equity capital, % 74,4 74,9 Dynamics of Market 69,4 Capitalization, RUB billion 64,8 0.04 0.51 69.54 3.47 holders — individuals 56,1 Last trading day of previous year NH — trustees Last trading day of reporting year 2015 NH — individuals holders — legal entities 35,6 holders — legal entities

26.44

16,8 Shares on the Stock Market 12,0 11,5 11,3 8,5 8,3 8,2 5,5 7,1 Category Reporting years 4,6 5,3 3,8 3,5 2,6 3,0 2,4 1,8 1,9 1,3 0,9 Stock exchange CJSC MICEX Stock Exchange PJSC Rosseti PJSC PJSC FGC PJSC IDGC OJSC IDGC PJSC PJSC PJSC IDGC PJSC IDGC of PJSC IDGC PJSC TDC (Tomsk Trading start date 03.02.2006 MOESK PJSC IDGC of Siberia of UES of Volga of Ural IDGC of Lenenergo of North Center and of Centre Kubanenergo Distribution North-West Caucasus Volga Region Company) Quotation list First level from 09.06.2014 (А1 from 19.02.2009) ISIN RU000A0ET7Y7 Dynamics of Prices and Traded Value for PJSC MOESK Stock RUB mln points Ticker MSRS 12 1,4

Bloomberg code MSRS RX Equity, MSRS RU Equity, MSRS RM Equity 10 1,2 1,0 8 0,8 MICEX Trading Results 6 Price of PJSC MOESK shares, RUB 0,6 4 Traded value, RUB Category 2013 2014 2015 2015/2014, % 0,4

2 0,2 Minimum share price per year*, RUB 1.0950 0.8650 0.7430 - 14.10% 0 0 Maximum share price per year*, RUB 1.7771 1.4548 1.2250 - 15.80% Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec

Closing prices on the last trading day of the year, RUB 1.389 1.250 0.750 - 40.00% Inclusion in Indexes Weight of shears in index, Average-weighted price as of the last trading session Index Index code Inclusion date 1.453 1.330 0.751 - 43.53% % 30.12.2015 of the year, RUB 2-tier stock index (in RUB) MICEXSC 16.09.2014 2.44 Number of transactions per year, ea. 59,872 42 772 - 53.26% 19,991 2-tier stock index (in USD) РТС-2 16.09.2014 2.44 Traded value per year: Broad market index (in RUB) MICEX BMI 30.12.2011 0.04 Broad market index (in USD) RUBMI 31.12.2011 0.04 RUB mln 6,447 8,793 250 - 97.16% MICEX power stock index (in RUB) MICEX PWR 03.07.2006 2.61 mln ea. 5,390 6,580 297 - 95.49% RTS energy stock index (in RUB) RTSeu 15.09.2006 2.61 ANNUAL CORPORATE 190 REPORT2015 GOVERNANCE 191

Dynamics of PJSC MOESK Stock Market value and Stock Indexes Information on Dividends (*Information on profit distribution in accordance with points RUB the resolutions of annual general meetings of shareholders (AGMS) 2 000 1,4 AGMS 2013 based AGMS 2014 based AGMS 2015 based 1 800 Category 1,2 on results of 2012 on results of 2013 on results of 2014 1 600 2 4 1 1,0 Volume of declared (accrued) dividends (total), 1 400 3 8 4,296 2,910 2,055 10 including: 1 200 5 6 9 12 0,8 7 1 000 11 13 volume of paid dividends (RUB mln) 4,296 2,910 2,055 0,6 800 Share of dividend payments in net profit,% 25 25 25 600 0,4 Dividend per share, RUB 0.088201 0.05975 MICEX index, points (left scale) 0.0422 400 Shares of PJSC MOESK (right scale) 1 0,2 Dividend yield, % 5.85 4.11 3.17 200 MICEX PWR index, points (left scale) For reference: 0 0 Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec Net profit 17,184 11,641 8,208 1. 04.02.15. — The rating agency recommended to the 11. 11.12.15. — Analyst’s Day: Market value 2 1.5084 1.4530 1.330 Expert RA (RAEX) upgraded annual General Meeting of the Company’s executives the management quality Shareholders to pay dividends presented their assessment ranking of MOESK to A++.gq on the ordinary shares in of operation in 2015 and Dividend Policy capitalization. The policy is based the Dividend Policy approved by (Exceptionally high level of the amount of 0.0422 ruble perspectives of further on the balance of Company the resolution of the Company’s governance quality). per share. development. The Company’s dividend policy interests and shareholder Board of Directors dated shall ensure the financial interest interests. September 2, 2010 (Minutes 2. 03.03.15. — Accounting report 7. 24.07.15. — Accounting report 12. 11.12.15. — PJSC MOESK of the shareholders, enhance the No. 114 dated September according to the RAS. The according to the RAS. The net consolidated 100% of the investment attractiveness of the The Company’s dividend policy is 3, 2010). net profit of OJSC MOESK for profit of PJSC MOESK for H1 authorized capital of its Company and increase its market governed by the Regulations on 2014 according to the RAS 2015 was 3.2 bln rubles. subsidiary OJSC “Energotsentr”. was 8.2 bln rubles. 8. 27.08.15. — Accounting report 13. 15.12.15. — the Board of 3. 06.04.15. — Accounting report according to the IFRS. The profit Directors of PJSC MOESK according to the IFRS. The of PJSC MOESK according to approved the Business Plan Group’s profit in 2014 was 8.1 the IFRS for H1 2015 grew by including the investment bln rubles, which is 58.52% 29.4% to 5.6 bln rubles. program and information on the lower than in 2013. key operation risks for 2016. 9. 10.09.15. — The Company’s 4. 08.04.15. — Moody’s Board of Directors reviewed confirmed the credit rating of the program for Company OJSC MOESK at the level Ba2. capitalization increase.

5. 06.05.15. - Accounting report 10. 30.10.15. — Accounting according to the RAS. The report according to the RAS. net profit of OJSC MOESK for The net profit of PJSC MOESK Q1 2015 was 2.4 bln rubles. for 9 months of 2015 was 7.7 bln rubles, EBITDA was 6. 22.05.15. — The Board of 28.4 bln rubles. 1 The dividend yield is calculated as ratio of dividend per share to market value of shares. Directors of OJSC MOESK 2 Market value as of the last trading session of the year according to moex.com ANNUAL CORPORATE 192 REPORT2015 GOVERNANCE 193

4.5. ANTICORRUPTION POLICY AND CORPORATE ETHICS

Commentary-interview of exposure and prevention of requirements of the PJSC MOESK the economic efficiency of the enforcement and judicial authorities the financial damages caused the First Deputy Director financial crimes. Anticorruption Policy, performed Company’s security and corruption to protect the legal interests of to PJSC MOESK by 44% General for Corporate necessary activities to prevent, control divisions. PJSC MOESK, coordinate the and the rate of prevention Protection and Corruption In 2015, the economic security divisions identify and rectify the economic activities of interested divisions of the financial damages to Control A. V. Filin of PJSC MOESK prevented damages losses of PJSC MOESK. Special In view of the above, the key within PJSC MOESK to reduce PJSC MOESK by 35%; in the amount of 508 mln 085.1 thous. attention in the year 2015 was paid objective of the PJSC MOESK the level of receivables with the In 2015, the Security Department of rubles (in 2014 — 284 mln 960 thous. to identification of unauthorized Security Department in the short- assistance of the governmental • Reduce the amount of overdue PJSC MOESK performed a complex rubles); recovered damages in the consumption of electric power, term perspective are as follows: authorities and special services; receivables for electric of activities and proactive measures amount of 245 mln 317.0 thous. rubles procurement activities, and power transmission services to prevent damages, corruption (in 2013 — 299 mln 293 thous. rubles). connection of consumers to the • Take actions in cooperation • Prevent unreasonable increase in by 850 mln rubles relative risks, protect PJSC MOESK 260 claims were submitted to the law electric grids of PJSC MOESK. with the law enforcement the price of procured materials, to the level recorded as of finances and assets. enforcement agencies (in 2014 — agencies and special services work and services relative to the December 31, 2015; 161 claims). Following the investigation, In line with its commitment to to decriminalize the electric market value by over 1.0% of the The key areas of focus for the the law enforcement agencies the high anticorruption standards, grids complex in the cost of PJSC MOESK investment • Recover payments for electric Security Department in the previous initiated 13 criminal cases, convicted PJSC MOESK supported the Moscow area; program and program of operational power consumption in the year were as follows: 2 persons; disciplinary sanctions initiative of the Russian Business activities for 2016; amount at least 500 mln rubles. were applied to 162 PJSC MOESK Community and joined the • Active cooperate with the federal • Support of the most costly employees, 18 employment agreements Anticorruption Charter of Russian executive authorities, law • Increase the rate of recovery of investment projects in accordance were terminated. Business in May 2015. with the PJSC MOESK capital construction and repair program; In my opinion, in 2015 PJSC MOESK In my opinion, the main objective successfully complied with the for 2016 is to further improve • Identification, prevention and Principles and Objectives • Identify and rectify the Information on this communica- rectification of financial damages of PJSC MOESK causes of corruption tion channel is posted on the web of PJSC MOESK in connection Anticorruption Policy (corruption prevention). site of PJSC MOESK. The Anticor- with its procurement activities ruption Hot Line operates 24/7. and technological connections of The key objective of PJSC Anticorruption Activities Information on corruption cases consumers; MOESK Anticorruption Policy is to in 2015 and their Results can also be submitted via the web establish a uniform approach to site of PJSC MOESK in the section • Implementation of algorithm compliance with article 13.3. of the “About Company / Anticorruption for identification of power Anticorruption Law: Policy / feedback”. consumption without contract and recovery of the costs of • Identify, prevent and stop corrup- A number of activities were electric power utilized by unfair tion and other crimes; performed in 2015 to recover consumers without contract; and prevent financial damages of • Minimize and/or liquidate the In 2015, PJSC MOESK PJSC MOESK. The planned indi- • Organization of interaction with consequences of corruption ensured steady functioning cator for 2015 was 80 mln rubles, the law enforcement authorities and other crimes, including of Anticorruption Hot Line: the actual indicator was 753 mln in connection with identification, as stipulated by article 19.28 402.1 thous. rubles, specifically: Administrative Offences Code of 8(499)951-06-49 the Russian Federation; ANNUAL ANNEXES 194 REPORT2015 195

• Prevented damages — Use of Insider Information and and Moscow Chamber of 508 mln 085.1 thous. rubles; Market Manipulation and on Commerce and Industry. Amendment of Certain Legal • Recovered damages — Acts of the Russian Federation. In order to ensure compliance 245 mln 317.0 thous. rubles. with the anticorruption law of the ANNEXES The following activities were Russian Federation, improve the The following activities performed to raise legal awareness anticorruption activities of PJSC were performed to identify and ensure lawful conduct of MOESK and fulfill Ordinance of 5.1. GRI CONTENT INDEX corruption risk: employees: PJSC “Rosseti” No. 413r dated August 21, 2015 On Compliance Disclosure Code Description Report Section • analysis of certain business • Consultations were provided for with the Anticorruption Law level processes of PJSC MOESK for the employees on the subjects of of the Russian Federation, Strategy and Analysis possible corruption risk; corruption prevention and lawful the Company approved the Statement of the most senior decision-maker of the conduct; Anticorruption Clause (order No. Foreword by Board organization about the relevance of sustainability to G4-1 Full of Directors Chairman • establishment of cross- 1182 dated September 22, 2016) the organization and the organization’s strategy for Interview of Director General functional work group to identify • An educational course entitled which shall be included into all addressing sustainability corruption indicators in the “Corruption Prevention and new contracts. G4-2 Description of significant impacts, risks and opportunities Full Risk Management System framework of the business Control” was prepared and processes “Technological organized for the top-level The Corporate Protection and Organization Profile Connection” and “Investment executives and employees of Corruption Control Department G4-3 Name of organization Full 1.1. General Activities”. PJSC MOESK. of PJSC MOESK coordinates G4-4 Major products and/or services and related brands Full 1.1. General the activities of PJSC MOESK The following activities were The following activities were Committee for Compliance with G4-5 Location of organization’s headquarters Full 1.1. General performed in connection with performed in the field of common Corporate Ethics Code Number of countries where the organization operates, and names of countries with either major operations or disclosure of information on initiatives for corruption control and and Settlement of Conflict of G4-6 Full 1.1. General the PJSC MOESK counterparty prevention: Interest. that are specifically relevant to the sustainability issues covered in the report owners (to the final beneficiary) and prevention of conflict of • Interaction with representatives G4-7 Nature of ownership and legal form Full 1.1. General interest: of Russian business G4-8 Markets served Full 1.1. General community in connection G4-9 Scale of the reporting organization Full 1.1. General • Improvement of procedure for with implementation of the disclosure of information on Anticorruption Charter of G4-10 Number of employees with breakdown by various categories Full 3.6.1. HR Policy the PJSC MOESK counterparty Russian Business approved Percentage of total employees covered G4-11 Full 3.6.2. Social Policy owners (to the final beneficiary); on September 21, 2012 by the by collective bargaining agreements RF Chamber of Commerce G4-12 Organization’s supply chain Full 1.3. Business Model • Activities for conflict of interest and Industry, Russian Union of G4-13 Significant changes during the reportingperiod Full 1.1. General resolution. Industrialists and Entrepreneurs, Russian Public Organization G4-14 Addressing of precautionary approach Full 3.3. Environmental Policy The following activities were “Business Russia” and Russian Externally-developed economic, environmental, and 3.6.2. Social Policy performed to prevent unauthorized Public Organization “OPORA G4-15 social charters, principles, or other initiatives to which the Full 4.5. Anticorruption Policy use of insider information and Rossii”; organization subscribes or which it endorses and Corporate Ethics market manipulation: 1.4.1. Market Position and G4-16 Participation in associations Full • Representative of PJSC Development Prospects • organization of insider MOESK present their expert information handling in opinions in the course of compliance with Federal Law anticorruption activities No. 224-FZ dated July 27, 2010 organized by the RF Chamber On Prevention of Unauthorized of Commerce and Industry ANNUAL ANNEXES 196 REPORT2015 197

Identified Material Aspects and Boundaries Governance List all entities included in the organization’s consolidated 2.2.2. Financial Governance structure of the organization, including G4-17 Full financial statements Performance according to IFRS committees of the highest governance body. Identify G4-34 Full 4.1. Corporate Governance System any committees responsible for decision-making on Process for defining the report content and the Aspect economic, environmental and social impacts. Boundaries. G4-18 Full 3.1. Company Priorities Ethics and Integrity Explanation as to how the organization has implemented the The organization’s values, principles, standards and Reporting Principles for Defining Report Content. 4.5. Anticorruption Policy and G4-56 norms of behavior such as codes of conduct and codes Full Corporate Ethics List all the material Aspects identified in the process for of ethics G4-19 Full 3.1. Company Priorities defining report content Category “Economic” For each material Aspect — report on the Aspect G4-20 Full 3.1. Company Priorities ­Boundary within the organization­­ ­­ Economic Performance 2.2.2. Financial Performance For each material Aspect — report on the Aspect Boundary The Aspects are not material G4-EC1 Direct economic value generated and distributed Full G4-21 Full according to IFRS outside the organization outside the organization Coverage of the organization’s defined benefit plan Effect of any restatements of information provided in No restatements G4-EC3 Full 3.6.2. Social Policy G4-22 Full obligations previous reports, and the reasons for such restatements. of information were made Significant changes from previous reporting periods in No changed were made in the Scope Indirect Economic Impact G4-23 Full the Scope and Aspect Boundaries and Aspect Boundaries Development and impact of infrastructure investments G4-EC7 Full 2.6. Investment Activities and services supported Stakeholder Engagement 3.2. Interactions with Category “Environmental” G4-24 List of stakeholder groups engaged by the organization Full Interested Parties Energy Basis for identification and selection of stakeholders with 3.2. Interactions with 3.4. Energy Efficiency G4-25 Full G4-EN3 Energy consumption within the organization Full whom to engage Interested Parties and Power Consumption Organization’s approach to stakeholder engagement, 3.2. Interactions 3.4. Energy Efficiency G4-26 including frequency of engagement by type and by Full G4-EN6 Reduction of energy consumption Full with Interested Parties and Power Consumption stakeholder group Reductions in energy requirements of products and 3.4. Energy Efficiency G4-EN7 Full Key topics and concerns that have been raised services and Power Consumption through stakeholder engagement, and how the 3.2. Interactions G4-27 Full organization has responded to those key topics and with Interested Parties Water concerns, including through its reporting G4-EN8 Total water withdrawal by source Full 3.3. Environmental Policy Overall G4-EN9 Water sources significantly affected by withdrawal of water Full 3.3. Environmental Policy G4-28 Reporting period for information provided. Full Report Overview Percentage and total volume of water recycled G4-EN10 Full 3.3. Environmental Policy G4-29 Date of most recent previous report Full Report Overview and reused G4-30 Reporting cycle Full Report Overview Biodiversity Contact point for questions regarding the report Operational sites owned, leased, managed in, or adjacent to, G4-31 Full Contacts or its contents G4-EN11 protected areas and areas of high biodiversity value outside Full 3.3. Environmental Policy protected areas Report Overview Report on the ‘in accordance’ option the organization Description of significant impacts of activities, products, has chosen. Report the GRI Content Index for the 5.1. GRI Content Index G4-EN12 and services on biodiversity in protected areas and areas Full 3.3. Environmental Policy G4-32 chosen option. Report on the reference to the External Full of high biodiversity value outside protected areas Assurance Report, if the report has been externally The report has not been assured. G4-EN13 Habitats protected or restored Full 3.3. Environmental Policy externally assured Total number of IUCN Red List species and national Report on the organization’s policy and current practice The report has not G4-33 Full G4-EN14 conservation list species with habitats in areas affected Full No data with regard to seeking external assurance for the report. been externally assured by operations, by level of extinction risk ANNUAL ANNEXES 198 REPORT2015 199

Emissions Labor/Management Relations G4-EN15 Direct greenhouse gas emissions Full 3.3. Environmental Policy Minimum notice periods regarding operational changes, G4-LA4 including whether these are specified in collective Full 3.6.1. HR Policy Accounting of energy indirect agreements G4-EN16 Energy indirect greenhouse gas emissions Full greenhouse gas emissions is not performed Occupational Health and Safety Accounting of other indirect Type of injury and rates of injury, occupational diseases, G4-EN17 Other indirect greenhouse gas emissions Full greenhouse gas emissions (motor G4- LA6 lost days, and absenteeism, and total number of work- Full 3.5. Occupational Health and Safety vehicle emissions) is not performed related fatalities, by region and by gender Greenhouse gas emissions intensity is Workers with high incidence or high risk of diseases G4-EN18 Greenhouse gas emissions intensity Full G4- LA7 Full 3.5. Occupational Health and Safety not calculated. related to their occupation G4-EN19 Reduction of greenhouse gas emissions Partial 3.3. Environmental Policy Health and safety topics covered in formal agreements with G4- LA8 Full 3.5. Occupational Health and Safety trade unions No emissions of ozone-depleting G4-EN20 Emissions of ozone-depleting substances (ODS) Full substances. Training and Education G4-EN21 NOx, SOx, and other significant air emissions Full 3.3. Environmental Policy Average hours of training per year per employee by G4- LA9 Full 3.6.1. HR Policy gender, and by employee category Effluents and Waste Programs for skills management and lifelong learning G4-EN22 Total water discharge by quality and destination Full 3.3. Environmental Policy G4- LA10 that support the continued employability of employees Full 3.6.2. Social Policy G4-EN23 Total weight of waste by type and disposal method Full 3.3. Environmental Policy and assist them in managing career endings No significant spills Percentage of employees receiving regular performance G4-EN24 Total number and volume of significant spills Full at PJSC MOESK facilities G4- LA11 and career development reviews, by gender and by Partial 3.6.1. HR Policy were recorded in 2015. employee category Weight of transported, imported, exported, or treated Category “Social” — Society PJSC MOESK does not perform waste deemed hazardous under the terms of the Basel G4-EN25 Full international shipments, including Anticorruption Convention (2) Annex I, II, III, and VIII, and percentage of import, export, or waste treatment. transported waste shipped internationally Total number and percentage of operations assessed 4.5. Anticorruption Policy G4- SO3 for risks related to corruption and the significant risks Partial and Corporate Ethics Weight of transported, imported, exported, or treated identified waste deemed hazardous under the terms of the Basel PJSC MOESK does not discharge G4-EN26 Full Convention (2) Annex I, II, III, and VIII, and percentage of waste water-to-water bodies. Communication and training on anti-corruption policies 4.5. Anticorruption Policy G4- SO4 Full transported waste shipped internationally and procedures and Corporate Ethics

Compliance 4.5. Anticorruption Policy G4- SO5 Confirmed incidents of corruption and actions taken Full Monetary value of significant fines and total number and Corporate Ethics G4-EN29 of non-monetary sanctions for non-compliance with Full 3.3. Environmental Policy environmental laws and regulations Public Policy No financial contributions or in-kind Overall Total value of political contributions by country and G4- SO6 Full contributions were made for political Total environmental protection expenditures and recipient/beneficiary G4-EN31 Full 3.3. Environmental Policy purposes investments by type Standard disclosures for the electricity sector Category “Social” — Labor Practices and Decent Work Category “Economic Employment Length of above and underground transmission and Total number and rates of new employee hires and G4 - EU4 Full 1.2. Structure of Electric Grids Assets G4-LA1 Full 3.6.1. HR Policy distribution lines by regulatory regime employee turnover by age group, gender and region Research and development activity and expenditure G4- DMA Benefits provided to full-time employees that are not aimed at providing reliable electricity and promoting Full 2.7. Technologies and Innovations (earlier EU8) G4- LA2 provided to temporary or part-time employees, by Full 3.6.2. Social Policy sustainable development significant locations of operation Transmission and distribution losses as a percentage 3.4. Energy Efficiency G4- EU12 Full of total energy and Power Consumption ANNUAL ANNEXES 200 REPORT2015 201

Category “Social” — Society 5.2. GLOSSARY OF MAIN TERMS AND ABBREVIATIONS Contingency planning measures, disaster/emergency G4- DMA management plan and training programs, and recovery/ Full 3.5. Occupational Health and Safety (earlier EU21) restoration plans List of Main Abbreviations and Acronyms used in the Annual Report Number of injuries and fatalities to the public involving G4- EU25 company assets including legal judgments, settlements Full 3.5. Occupational Health and Safety ERP (Enterprise and pending legal cases of diseases. company resource planning system combining all the company divisions and necessary Resource functions in one computer system which services all the needs of such divisions G4- EU28 Power outage frequency (SAIFI) Full 2.5. Reliability Improvement Planning) G4- EU29 Average power outage duration (SAIDI) Full 2.5. Reliability Improvement RAB (Regulatory method of tariff regulation based on return on invested capital Asset Base) SAP software by German company SAP AG Smart Grid smart grid technology AIIS KUE automated measuring and information system for electric power fiscal metering ACS BO automated control system for business operations OPL overhead power line FOL fiber optic lines EGMS extraordinary General Meeting of Shareholders AGMS annual General Meeting of Shareholders GRES state-owned regional power plant (historic term) SCC subsidiary and controlled companies price (tariff) for electric power transmission services used for settlements with service consumers (excluding grid companies) located in the corresponding constituent entity Uniform (boiler) of the RF and belonging to a group (category) which is subject to differentiation of tariffs tariff for electric energy (power) in accordance with the RF law, regardless of the electric grid company to which they are connected (unless otherwise stipulated by the RF Government resolution) In the broad sense: a group of individuals or legal entities capable of impacting the company activities or depending on the company activities. In the narrow sense: public authorities and local Interested party self-governing authorities, commercial companies, social and non-commercial organizations and (stakeholder) units (including informal) position of which in relation to the Company activities is publicly expressed and aimed at protection of socially significant and group interests. IT Information Technologies OCL overhead cable line CL cable line KPI Key Performance Indicators TPL Transmission power line IDGC Interregional Distribution Grid Company ANNUAL ANNEXES 202 REPORT2015 203

Russian Ministry M&R maintenance and repair Russian Federation Ministry of Energy of Energy TC technological connection MICEX Moscow Interbank Currency Exchange R&R retrofit and revamp Regional dispatch unit of energy system in Moscow and Moscow Region — branch of OJSC Moscow RDU LGO Local Grid Operator System Operator of the Unified Power System TS Technical Specifications IFRS International Financial Reporting Standards FEC Fuel and Energy Committee VAT Value Added Tax CHP Combined heat and power plant RDED Research, development and experimental design activities FAS of Russia Federal Antimonopoly Service of Russia R&D Research and development activities FCSM Federal Commission for Securities Market (since August 2004 — FSFM of Russia) WGC Wholesale generating company GFC of UES of FWP fall/winter period Federal Grid Company of Unified Energy System of Russia Russia fault current limiter FCL Federal Financial Markets Service (liquidated on September 1, 2013, the functions were FSFM pp percentage point assigned to the Financial Markets Service within the Bank of Russia) para paragraph FTS Federal Tariffing Service SS station rated for 35 kV and above CSC Client service center consumers of electric power which have their electrical installations connected to electric grids of electric grid company via the electric installations of generating Consumers company. Consumers pay for electric power transmission services in accordance with the established tariff rate for electric power maintenance. Units of Measurement DSA design and survey activities SHW software & hardware complex ha hectare kW•h kilowatt-hour RUB ruble RAS Russian Accounting Standards kV kilovolt km kilometer t ton

RTS Russian Trading System MW megawatt kop. kopeck ref.fuel reference fuel REC Regional Energy Committee GW gigawatt MW•h megawatt-hour c.u. reference unit PGR Power Grids Region kVA kilovolt-amperes mln million ea. pieces Sustainability Reporting Guidelines by Global Reporting Initiative which define the principles which determine the report content and ensure reporting data quality; standard Global Reporting MVA megavolt-ampere bln billion reporting elements which consist of effectiveness indicators in the field of economic, Initiative, GRI environmental, social impact of the organization, approach to impact management and other characteristics as well as recommendations on specific report technicalities. CAD Computer-Aided Design MM mass media SSIC self-supporting insulated conductors TGC Territorial Generating Company ANNUAL 204 REPORT2015 205 DISCLAIMER CONTACTS

The annual report of Public Joint- the statement and may assume Company does not guarantee Registered address (same as Inquiries on the letters: Office hours of executive bodies Stock Company Moscow United the risk that the specified event accuracy of information received physical address) +7 (499) 951-06-26, Monday to Thursday 8.30 to 17.30 Electric Grid Company (hereinafter will not happen. from third parties that may be 3, bld. 2, 2nd Paveletsky Passage, [email protected] Friday 8.30 to 16.40 referred to as PJSC MOESK, summarized or incomplete. Moscow, 115114 Lunch break 12.00 to 12.50 Company) for 2014 (hereinafter The Company informs the Fax referred to as the Annual Report) is readers that the forward-looking The Company does not give any “Light Line” Contact Center +7 (499) 954-06-50 Website prepared based on the information statements are not a guarantee express or implied guarantees 8 (800) 700-40-70, www.moesk.ru available to the Company at the of future performance. The actual and does not assume any liability [email protected] Securities Department time of preparation hereof. performance of the Company, its for any direct or indirect losses +7 (495) 662-40-70 (ext. 41-70), Central Customer Office financial position and liquidity, that may be incurred by physical Line for SMS-messages +7 (495) 363-40-70 (ext. 41-70) 7 Alexandra Solzhenitsyna The Annual Report contains as well as the development of persons or legal entities as a 8 (903) 767-25-76 Street, Moscow information about the Company’s the industry in which it operates result of use of the forward- IR Department performance in 2014 and may considerably differ from looking statements contained in Hotline +7 (495) 662-40-70 (ext. 41-72), Office hours forecasted data, statements of the forward-looking statements the Annual Report. Such persons +7 (499) 951-06-49 +7 (495) 363-40-70 (ext. 41-72), Monday to Saturday 09.00 to 20.00 intentions, opinions or current contained in the Annual Report. and entities shall not fully rely on [email protected] (no lunch break) expectations of the Company the forward-looking statements Reference information concerning its performance, Moreover, even if the performance contained in the Annual Report +7 (495) 662-40-70 / PR Department Addresses and office hours of financial position, liquidity, and events will match the as they do not represent the only +7 (495) 363-40-70 +7 (495) 662-40-70 (ext. 21-15), other customer service centers prospects of growth, strategy, forward-looking statements possible case scenario. +7 (495) 363-40-70 (ext. 21-15), are available onthe technological and development of the industry contained in the Annual Report, [email protected] connection web-portal in which the Company operates. such performance and events Unless otherwise provided by the utp.moesk.ru Such forward-looking statements shall not be considered as an laws of the Russian Federation, are inherently related to risks and indicator of similar results and the Company will not assume an uncertainty because they depend on events in the future. obligation to review or confirm events and circumstances that may expectations and estimates or or may not happen in the future. In addition to the official publish updates and amendments information about the Company’s to the forward-looking statements Words ”intends”, ”aims”, ”expects”, performance, the Annual Report contained in the Annual Report ”estimates”, ”plans”, ”considers”, contains information received from as a result of occurrence of ”assumes”, ”can”, ”shall”, ”will be”, third parties Such information certain events or obtaining ”will continue” also others similar is received from sources that of new information. words and phrases are usually are considered reliable by indicative of estimated nature of the Company. However, the ANNUAL 206 REPORT2015

Auditor

Full company name Phone TIN Limited Liability +7 (495) 363-28-48 7722020834 Company RSM RUS Fax PSRN Abbreviated company name +7 (495) 981-41-21 1027700257540 LLC RSM RUS Website Address www.rsmrus.ru 4, Pudovkin Str., Moscow, Russia 119285 E-mail [email protected]

Registrar

Full company name License Contact telephone number Joint-Stock Company No. 10-000-1-00304 dated (for shareholders) “Registrar “STATUS” 12. 03. 2004, perpetual, issued +7 (495) 974-83-47 by the Federal Financial Markets Abbreviated company name Service (Financial Markets Fax JSC STATUS Service of the Bank of Russia +7 (495) 678-71-10 from the end of 2014) Address Website 32-1 Novorogozhskaya Ul, TIN www.rostatus.ru Moscow, 109544 7707179242 E-mail PSRN [email protected] 1027700003924

Contact telephone number (general) +7 (495) 974-83-50