APPROVED
at the PJSC Rosseti Annual General Shareholders Meeting on 30th of June 2016 (minutes as of 5th of July 2016)
2015 Annual Report
PJSC ROSSETI, Director-General O.M. Budargin
Annual Report || 2015
RELIABLE NETWORKS — SECURE FUTURE ROSSETI:
THE WORLD’S LARGEST ELECTRIC GRID COMPANY IN TERMS OF THE NUMBER OF CUSTOMERS AND THE LENGTH OF NETWORKS;
ONE OF THE MOST SIGNIFICANT INFRASTRUCTURE COMPANIES IN RUSSIA;
THE COUNTRY’S LARGEST EMPLOYER.
ROSSETI: FORWARD-LOOKING STATEMENTS:
For its customers ROSSETI striving >> This Annual Report contains, inter alia, >> Forward-looking statements are generally to provide services of high qual- information concerning the Company’s identified by words such as “intend,” ity: a reliable electricity supply and future production and business operations “strive,” “project,” “expect,” “estimate,” timely and transparent electricity based on projections and estimates of the “plan,” “believe,” “assume,” “may,” “can,” network connection at affordable Company’s management relying upon the “should,” “will,” “continue,” and other prices; current situation; similar or related words and expressions;
For the regions and local govern- >> This Annual Report can also contain >> The Company shall not be liable for ment authorities ROSSETI working forward-looking statements regarding any losses that may be incurred by any to satisfy the economy’s demand changes in prices of products/services, individuals or corporate entities relying for transmission and distribution output and consumption, costs, estimated upon forward-looking statements. In each capacity, acting as a reliable part- expenditures, development prospects, particular case, such forward-looking ner in planning and carrying out and other similar factors and predictions statements are only one of the numerous regional development programs, with respect to the development of the scenarios and shall not be regarded as the and being a bona fide taxpayer and industry and markets and to the start and most likely; employer; end dates of specific projects related to the Company’s business; >> Except where otherwise specifically For its staff, an efficiently organized provided for in law, the Company shall not ROSSETI that has a transparent >> By virtue of their particularities, forward- be obligated to publish any updates on or and comprehensible corporate gov- looking statements involve inherent risk changes in forward-looking statements ernance system and offers opportu- and uncertainty of a general and specific based on new information or subsequent nities for personnel to realize their nature, and there is a risk that estimates, events. full potential; predictions, projections, or other forward- looking statements may not materialize; For the investor community, an ef- fective instrument for investment, ensuring the payback, reliability, return, and liquidity of invested capital. PJSC “ROSSETI” ANNUAL REPORT || 2015
Contents
1 2 3 4
COMPANY STRATEGY CORPORATE GOVERNANCE CORPORATE SOCIAL OVERVIEW REVIEW AND SECURITIES RESPONSIBILITY
Report on the Report 6 Company Profile 18 Corporate Governance System 84 Human Resource Management and Personnel Policy 150 Message from the Chairman of the Board of Directors 10 Business Position of the Company. Governance Structure 93 Development Strategy 25 Stakeholder Relations 155 Message from the Director General of ROSSETI 13 Management Bodies 96 Operating Overview 34 Occupational Safety 168 Control Bodies 128 Operating Results 35 Charity and Social Programs 169 Internal Control and Risk Management Systems 130 Investment and Innovation 53 Implementation of Environmental Programs 170 Information Policy 140 Review of Financial Results 66 The Company for Shareholders and Investors: Securities; Dividend Policy 143
ADDITIONAL INFORMATION
Changes in Key Performance Indicators 173 Contact Information 174 Additional Information for Shareholders 177 Disclaimer 178 Glossary of Terms and Abbreviations 179
2 PJSC “ROSSETI” www.rosseti.ru 3 COMPANY OVERVIEW 1
2.3 MILLION KILOMETERS (+10,000 kilometers) LENGTH OF POWER LINES 490 THOUSAND UNITS (+10,000 units) NUMBER OF SUBSTATIONS DELIVERING ENERGY AND EXPANDING
We distribute electricity in 78 Russian regions and contribute to economic and social development in the regions of our operations and in the country as a whole
1. COMPANY OVERVIEW PJSC “ROSSETI” Report on the Report ANNUAL REPORT || 2015 1 Report on the Report Corporate Highlights of ROSSETI in the Reporting Period Operating Indicators of the ROSSETI Group
2013 2014 2015 COMPANY OVERVIEW
LENGTH OF POWER LINES, MILLION KILOMETERS
2.26 2.29 2.30 20.01 19.05 20.10 Cooperation agreement with OPORA RUSSIA Agreement with the Russian Direct Investment The International electric power industry forum is signed to create the favorable conditions for Fund on the Smart Grid Construction joint project «RUGRIDS-ELECTRO” is organized by ROSSETI
developing and supporting small and medium- is signed REVIEW STRATEGY sized businesses in Russia 30.10 NUMBER OF SUBSTATIONS, THOUSAND UNITS 08.06 | 22.06 22.01 Uniform Procurement Standard of ROSSETI is BO-04 exchange-traded bonds totaling 10 billion approved by the Board of Directors Strategic cooperation agreement with Belenergo rubles are placed | BO-01 exchange-traded bonds 473 480 490 is signed totaling 5 billion rubles are placed
TRANSFORMER CAPACITY, GVA CORPORATE GOVERNANCE CORPORATE AND SECURITIES 743 751 761 10.03 30.06 02.11
Action Plan to Introduce the Corporate Annual General Meeting of Shareholders of the Cooperation agreement with WorldSkills Russia Governance Code into ROSSETI is approved by Company is held is signed the Board of Directors NUMBER OF EMPLOYEES*, THOUSAND PEOPLE 29.09 03.11 31.03
All-Russian Forum “Accessible Networks: Projects, Shares placement of Additional Issue started SOCIAL CORPORATE RESPONSIBILITY Consolidated investment program for 2015 and Experience, Current Issues” is organized by aimed at recapitalization of LENENERGO and the for 2016–2020 is reviewed ROSSETI in Saint Petersburg construction of key electrical grid facilities in time for the 2018 FIFA World Cup 222 218 216 08.05 06.10
JV agreement with State Grid Corporation Increase in the share capital of ROSSETI is *Total staff on the payroll of SDCs engaged of China is signed approved by Extraordinary General Meeting in the ROSSETI Group’s core business. of Shareholders 16.10
Forum of regional small businesses of the member countries of the Shanghai Cooperation Organisation and BRICS with the partnership ADDITIONAL INFORMATION of ROSSETI
6 PJSC “ROSSETI” www.rosseti.ru 7 1. COMPANY OVERVIEW PJSC “ROSSETI” Report on the Report ANNUAL REPORT || 2015 1
Growth Strategy
RELIABILITY MODERNIZATION EFFICIENCY ACCESSIBILITY 13.11 28.12 After the Reporting Period COMPANY OVERVIEW
Strategic cooperation agreement with Fingrid Oyj ooperation agreement with the Federal 03.02 – 25% 211.2 49.7% 40% is signed Corporation for the Development of Small and Medium Business is signed 16.11 Addendum to the Memorandum with the Agency SPECIFIC ACCIDENT RATE BILLION RUBLES TOTAL PURCHASES REDUCTION IN THE TIME for Housing Mortgage Lending under the Housing (INCLUSIVE OF VAT) FROM SMALL AND MEDIUM- REQUIRED TO OBTAIN for Russian Families program is signed Restated versions of the Risk Management FINANCING SIZED BUSINESSES AN ELECTRICITY CONNECTION, Policy, the Internal Audit Policy, the Internal 24.02 Control Policy, the Regulations for the Quality – 4% FROM CONTRACT Management System, and the Regulations for the TO CERTIFICATE Procedure for Formulating and Implementing the Regulations for the Procedure for Establishing Innovative Development Program are approved and Using the Sponsorship and Charity Fund and AVERAGE DURATION OF POWER 213.3 13% FOR REQUESTS FROM REVIEW STRATEGY by the Board of Directors the Information Policy is approved by the Board OUTAGES RELATED TO PROCESS of Directors SMALL AND MEDIUM- FAILURES BILLION RUBLES 27.11 SHARE OF PURCHASES SIZED BUSINESSES FOR 31.03 COMMISSIONED CAPITAL FROM SMALL AND MEDIUM- FACILITIES RATED 15–150 KW Series BO-05 bonds totaling 10 billion rubles are ASSETS SIZED BUSINESSES placed Revaluation of financial investments (shares) AS COMPARED WITH 2013 at current market value as of March 31, 2016 is AFTER PROCUREMENT 08.12 reassessed, resulting in an increase of 36.5 billion PROCEDURES THAT MAY APPLY rubles in the value of shares ONLY TO SMBS Series BO-06 bonds totaling 6 billion rubles are 13,869 placed 23.12 МVА COMMISSIONED CAPACITY
< 5% GOVERNANCE CORPORATE AND SECURITIES 32 billion rubles in federal loan bonds, received 22.12.2015 from the Government, are used by SHARE OF IMPORTED ROSSETI as payment for shares in LENENERGO 24,850 PRODUCTS IN SDCS’ PURCHASES
KILOMETERS COMMISSIONED CAPACITY 49 CORPORATE SOCIAL CORPORATE RESPONSIBILITY LEGALLY PROTECTED DOCUMENTS AT 9 SUBSIDIARIES 54
R&D SUBJECTS AT 11 SUBSIDIARIES ADDITIONAL INFORMATION
8 PJSC “ROSSETI” www.rosseti.ru 9 1. COMPANY OVERVIEW PJSC “ROSSETI” Message from the Chairman of the Board of Directors ANNUAL REPORT || 2015 1
Specifically, measures were taken to opti- Company’s subsidiaries, the Board Message from the Chairman mize the organizational structure and cut of Directors approved the risk man- general and administrative expenses. agement, internal audit, and internal control policies of ROSSETI, along with of the Board of Directors Throughout 2015, the Board of Directors 81.6 the schedules of improving the operat- monitored the financial and economic ing and investment efficiency of the situation in the ROSSETI Group’s enti- BILLION RUBLES Company and reducing its expenses. All ties, which made it possible to increase this became important steps toward IFRS CONSOLIDATED NET PROFIT the responsibility of both the manag- optimizing the management structure, OF THE ROSSETI GROUP ers of subsidiaries and the Company’s
increasing the operating efficiency, COMPANY OVERVIEW management. and reducing costs of ROSSETI and its Novak In 2015, ROSSETI switched over to the subsidiaries. Uniform Procurement Standard approved Alexander Unification also extended to the key area >> Constructing and rehabilitating electric by the Board of Directors and developed of ROSSETI’s activities, namely secur- power facilities under the Program by the Company with the involvement of Preparations for the 2018 FIFA World ing a safe, reliable, and uninterrupted of the Federal Antimonopoly Service and Cup in Russia; Chairman of the Board of Directors power supply. The Company’s Board the Ministry of Energy. As the coordina- of Directors approved the uniform rules >> Providing a power supply for the tor of the Group’s procurement policy, for subsidiaries of ROSSETI for accident Baikal-Amur Mainline and the Trans- ROSSETI introduces the provisions of the prevention and management at electric Siberian Railroad. Uniform Procurement Standard into the grid facilities. Last year, ROSSETI received 1.47 billion operations of all its subsidiaries, which REVIEW STRATEGY unifies procurement and enhances its ROSSETI continued in 2015 to work rubles of federal budget funds to finance transparency. to improve the accessibility of electric work on the preparation of power supply grid services. Efforts made by ROSSETI’s facilities for the 2018 FIFA World Cup. Back to financial performance. There subsidiaries — MOESK and LENENERGO These funds were channeled to ROSSETI’s was an almost threefold decrease — in this area were appreciated by the subsidiaries — Yantarenergo, LENENERGO, in ROSSETI’s net loss in accordance World Bank. Russia ranked 29th in the and IDGC of Volga — for the implementa- with RAS in 2015 compared with 2014: “Getting Electricity” ranking of Doing tion of measures to build and rehabilitate from 52.3 to 18.2 billion rubles. I would Business in 2016, climbing as high electric power facilities involved in the like to note that the net loss for 2015 as 114 positions on the previous year. holding of the 2018 FIFA World Cup. is entirely due to the negative revalua- tion of the Company’s financial invest- Work continues in the current year In addition, as part of government support Dear Shareholders! GOVERNANCE CORPORATE AND SECURITIES ments (the value of shares in ROSSETI’s on reducing the connection time and cost measures and pursuant to decisions of the President and the Government of the I would like to present to you the Annual subsidiaries), which totaled 21.8 billion for networks of the ROSSETI Group’s Russian Federation in 2015, federal loan Report of ROSSETI for 2015. rubles. At the same time, the Group’s entities. Best practices in this area will consolidated net profit in accordance extend to all subsidiaries of ROSSETI. bonds with a par value of 32 billion rubles Despite the difficult macroeconomic with IFRS reached 81.6 billion rubles were used as the Russian Federation’s environment, the ROSSETI Group con- contribution to the share capital against a loss of 24.3 billion rubles It is deserving of special note that tinued to grow steadily last year. The of ROSSETI. The proceeds from the sale in the previous year. ROSSETI continues to participate Company’s staff ensured stable grid of these federal loan bonds were directed in the implementation of major operation and a reliable power supply, At the end of 2015, ROSSETI had an toward measures for the financial recovery national infrastructure projects: achieving positive results for basic opera- upward change in the value of its shares of LENENERGO, a subsidiary of ROSSETI. tional indicators. (+8.5%) compared with the beginning >> Completing the integration of the of the year (the share price on MICEX Crimea energy system into the Russia’s In addition, as part of government sup- SOCIAL CORPORATE RESPONSIBILITY Their high professionalism enabled rose to 0.462 rubles per share). United Power System; port measures and pursuant to decisions employees of ROSSETI’s electric grid sub- of the President and the Government >> Securing a reliable and uninterrupted sidiaries to reduce the number of process This is an important indicator because, of the Russian Federation in 2015, federal failures by 22% in 2015 compared with after several years of downward power supply for the Kaliningrad Region and the Northwest Integrated Power loan bonds with a par value of 32 bil- 2014. changes, the share price began to go up. System; lion rubles were used as the Russian In the reporting year, the Company’s Carrying out instructions of the Russian Federation’s contribution to the share >> Providing a power supply for the President and as part of implementing capital of ROSSETI. The proceeds from Board of Directors and management paid Power of Siberia gas transportation the sale of these federal loan bonds were much attention to increasing the trans- unified and synchronized approaches system; parency and efficiency of its operations. in the operational areas of the directed toward measures for the financial ADDITIONAL INFORMATION
10 PJSC “ROSSETI” www.rosseti.ru 11 1. COMPANY OVERVIEW PJSC “ROSSETI” Message from the Chairman of the Board of Directors ANNUAL REPORT || 2015 1
recovery of LENENERGO, a subsidiary progress in carrying out integration of the Company will allow the achieve- of ROSSETI. and cooperation projects. For instance, ment of the goals of the Strategy for Message we have signed and already started Development of the Electric Grid Sector To ensure compliance with to perform a joint venture agreement and will increase the utilization efficiency from the General Director new legislation and introduce with State Grid Corporation of China. and accessibility of the grid infrastruc- best corporate practices are Traditionally, great attention is given ture, ultimately ensuring further capital to cooperation with foreign equipment gains for the benefit of the shareholders one of the most important manufacturers, including the localization of ROSSETI. areas of the activities of the of production in Russia, and dialog with
Company’s Board of Directors Asian financial institutions. COMPANY OVERVIEW Assessing ROSSETI’s prospects Budargin for growth, the Company’s Board In 2015, considerable work was done of Directors and management are aware on introducing the provisions of the Oleg that the difficult macroeconomic situa- Corporate Governance Code recom- Sincerely, tion will continue to be a challenge to the mended by the Bank of Russia into Chairman of the Board of Directors ROSSETI Group in 2016. The projected Chairman of the Management Board ROSSETI and its subsidiaries. Alexander Novak high market volatility and other external General Director The Board of Directors approved the influences compel us to focus on the Company’s constitutive and internal search for internal sources to improve documents governing the disclosure efficiency. STRATEGY REVIEW STRATEGY procedures, risk management, internal The Board of Directors plans to consider audit, and the activities of the advisory and introduce a new list of quarterly and deliberative committees of the Board and annual KPIs for management, tak- of Directors. Several documents were ing into account the proposals of the aligned with the Listing Rules of the Russian Ministry of Energy, taking into stock exchange. We can say as early consideration the increasing importance as now that the conditions have been of financial and economic indicators, created for maintaining the Company’s and focusing on the enhancement of the securities in the stock exchange’s Company’s financial performance and quotation lists and attracting potential efficiency.
investors. Dear Shareholders! GOVERNANCE CORPORATE AND SECURITIES In the short term, ROSSETI’s Board There are plans to continue in 2016 of Directors and management will ROSSETI’s priorities in 2015 were to work to improve the corporate gover- work toward import substitution, cost to improve the operational indicators nance system reduction, stricter payment discipline, of electric grid subsidiaries through ROSSETI’s cooperation with federal exec- enhanced efficiency and energy conser- control and centralized management, utive authorities in improving the regula- vation, innovation, and improvements make the Company more attrac- tory and legal framework governing the to the Company’s personnel policy. tive to investors by increasing return investment activities of the ROSSETI ROSSETI, of course, will focus its efforts on invested capital and optimizing costs, Group’s entities, network connection on securing a safe, reliable, and high- and continue to adhere to the principles services, and mechanisms for enhancing quality power supply. of corporate social responsibility. We suc-
payment discipline deserves to be appre- ceeded in achieving positive results in all SOCIAL CORPORATE RESPONSIBILITY ciated and will be continued. I hope that constructive coopera- of these areas. tion among the government, minor- Speaking of the Company’s international ity shareholders, and management The fulfillment of the provisions activities, it is worth noting significant of the Uniform Technical Policy by all of ROSSETI’s subsidiaries, strict com- pliance with technical regulations, the timely and high-quality implementation of the repair and capital investment programs, the continuous upgrading of employee skills, and practical training ADDITIONAL INFORMATION
12 PJSC “ROSSETI” www.rosseti.ru 13 1. COMPANY OVERVIEW PJSC “ROSSETI” Message from the General Director ANNUAL REPORT || 2015 1
allowed us to take another step toward Bank’s Doing Business rankings. Owing The rehabilitation of existing facilities and electricity supply services for existing and building the architecture of tomorrow’s to efforts made by ROSSETI’s subsidiar- the construction of new ones used mod- new housing developments. th electric grid sector with maximal energy ies, namely MOESK and LENENERGO, ern technology and equipment making it ROSSETI will continue in 2016 to imple- efficiency and minimal electricity losses Russia rose from the 143rd to 29th posi- possible to additionally reduce harmful 1,436.8 ment the approved long-term develop- 29 in transmission and distribution grids. tion in the “Getting Electricity” ranking environmental impacts. ment strategy with the aim of improving of Doing Business in 2016. Total electricity transportation increased MILLION KWH ROSSETI believes that an important the efficiency of production processes, IN THE “GETTING ELECTRICITY” by 0.73% in 2015 compared with the Extremely important SAVED ELECTRICITY LOSSES IN 2015 element of society relations is to take providing investors with higher return RANKING OF DOING BUSINESS previous reporting period to 720.5 bil- preventive measures to reduce the risk on invested capital and making the IN 2016 lion kWh. At the same time, on a basis elements in the chain of electrical injuries that may affect Company and subsidiaries more attrac-
comparable with 2012, electricity losses of process measures aimed outsiders. In order to achieve the high- tive to them, and strengthening its social COMPANY OVERVIEW in 2015 totaled 9.22%, which is 0.14 pp at improving power supply was 81.6 billion rubles compared with est result, the Company approved the role. a consolidated loss of 24.3 billion in the or 1.5% lower than in 2014 on a basis quality and reliability are the Uniform Program of Electrical Injury comparable with 2012 (9.36%). previous year. Prevention in 2015, and all subsidiaries complete and high-quality started its implementation. A package of measures carried out As the government’s strategically impor- in 2015 to optimize electricity losses implementation of ROSSETI tant asset securing a reliable electricity In 2015, the ROSSETI Group continued saved 1,436.8 million KWh. SDCs’ repair programs supply in 78 regions, ROSSETI strictly work on the outstripping development adheres to the principles of corporate of the electric grid infrastructure to cre- To minimize financial losses associated Sincerely, social responsibility in its day-to-day ate the conditions for improving the with network process failures, we worked Chairman of the Management Board We carried out all of our plans in 2015. activities. socioeconomic situation in the regions General Director to reduce accident rates at ROSSETI’s For instance, the Company repaired This applies to both the Company’s sta- of its operations. Oleg Budargin REVIEW STRATEGY electric grid facilities. almost 155 thousand kilometers ble development and improved efficiency of power lines and more than 2,300 sub- Providing additional capacity, ROSSETI For instance, the specific accident rate as mentioned above and to the provision stations of different voltage classes and subsidiaries not only created vacan- was decreased by the ROSSETI Group of care for personnel and the environ- (35 kV and above) and cleared almost cies for their facilities but also stimulated by 25%, while the average duration ment, along with involvement in solving 133,000 hectares of power line path- job creation in outside organizations, of power outages caused by process social problems in the regions where the ways in the reporting period. along with performing high-quality failures was reduced to 2.91 hours. Company has a presence. Work on improving operational indicators Moreover, Moscow and Saint Petersburg To realize the full potential of ROSSETI’s and efficiency allowed us even in the diffi- received the highest reliability of sup- and subsidiaries’ employees, the cult macroeconomic environment in 2015 ply index from the World Bank in 2015 Company engaged leading Russian and (Russia was ranked among the top 19 to achieve higher key financial indica-
foreign experts to hold training sessions GOVERNANCE CORPORATE AND SECURITIES tors, which proves ROSSETI’s stable countries out of 189 with respect to this and organized practical training, including development. indicator). with the participation of allied organiza- This resulted from comprehensive efforts A significant factor that had an adverse tions and executive authorities, in 2015. made by technical and operational impact on ROSSETI’s financial perfor- We maintained contact and continued personnel. mance was the issue of receivables. to share experience with foreign part- However, our extensive measures ners, including under joint integration In 2015, ROSSETI paid close attention to introduce changes into legislation projects. to improving access to electric grid ser- affecting delinquent payers and establish vices and enhancing the terms of net- The Company invested substantially regional commissions under the heads work connection. in human resource development. of regional administrations to deal with ROSSETI built up a system of interac- Specifically, subsidiaries signed 393,271 the collection of debts to electric grid SOCIAL CORPORATE RESPONSIBILITY tion with 130 energy-related universi- network connection certificates in the companies stabilized the debt growth ties in the country. More than 1,500 reporting period, totaling 19,705 MW. situation and kept it down almost at the students were provided with summer The number of completed network con- level of 2014. externships at the Company’s facilities. nection contracts in the reporting period Despite this and the difficult macro- Students. Over 400 best graduates grew by 14% against 2014. The rise economic situation, ROSSETI increased of energy-related universities were hired in capacity (MW) also reached 14%. revenues by 3.6% in 2015 to 787.9 by ROSSETI’s subsidiaries. Russia made an impressive breakthrough billion rubles on 2014. In accordance Considerable attention was paid to the in grid infrastructure accessibility in the with International Financial Reporting environmental safety of power facilities. ranking, which measures the World Standards, the consolidated net profit ADDITIONAL INFORMATION
14 PJSC “ROSSETI” www.rosseti.ru 15 STRATEGY REVIEW 2
720.5 MILLION KWH (+0.8%) ELECTRICITY DISTRIBUTION –25% THE SPECIFIC ACCIDENT RATE WAS DECREASED BRINGING ENERGY CLOSER TO YOU, WORKING RELIABLY AND EFFICIENTLY
Our strategic priorities: reliability, modernization, efficiency, accessibility 2. STRATEGY REVIEW PJSC “ROSSETI” Company Profile ANNUAL REPORT || 2015 2 Company Profile 4.04.13
ROSSETI WAS ESTABLISHED ON APRIL 4, 2013 Development History 1 COMPANY OVERVIEW
L EAD ING SE I RI NF P RU ER S T T N R E U C C I T G U ROSSETI IS INCLUDED ON E R ROSSETI GROUP IS T E A THE LIST OF STRATEGIC R C ONE OF THE WORLD’S T O REVIEW STRATEGY S M LARGEST ELECTRIC ENTERPRISES AND P A ORGANIZATIONS N UTILITIES Y
R THE OPERATOR O
G T O C T OF RUSSIAN 87.81% E V N S E E R D ELECTRIC GRIDS G I STAKE IN THE SHARE N A R M ’S G E T CAPITAL OF ROSSETI C GOVERNANCE CORPORATE AND SECURITIES N N I T E R - T IS FEDERALLY OWNED L M C I N E N R L K E E ED OV E C E G TH O TH G MP IN A AG NY AN IN M
1 In order to align the Company’s Articles of Association with the Civil Code of the Russian Federation, the shareholders approved the Public Joint Stock Company ROSSETI grids was to create a single center Company’s new corporate name on June 30, 2015, renaming ROSSETI’s legal form a public joint-stock was established pursuant to the of responsibility to the shareholders, company. Decree of the President of the coordinate work on improving the Russian Federation of November economic efficiency of investing SOCIAL CORPORATE RESPONSIBILITY 22, 2012. Pursuant to the Decree activities, develop uniform quality the Strategy for Development standards and indicators, and of the Electric Grid Sector of the enhance the operating efficiency Russian Federation was approved of electric grid companies. by Ordinance of the Government 1 Decree of the President of the Russian Federation of the Russian Federation No. 511- No. 1567 of November 22, 2012, “On Joint Stock r of April 3, 2013. The goal of the Company ROSSETI”. structural transformations aimed at the consolidation of electricity transmission and distribution ADDITIONAL INFORMATION
18 PJSC “ROSSETI” www.rosseti.ru 19 2. STRATEGY REVIEW PJSC “ROSSETI” Company Profile ANNUAL REPORT || 2015 2
Geographic Presence
Regions of Operations FGG UES INTERREGIONAL GRID COMPANIES DISTRIBUTION GRID COMPANIES COMPANIES REGIONAL RETAIL REAL PROPERTY HOLDERS R&D AND DESIGN COMPANIES SERVICE AND CONSTRUCTION COMPANIES FGG UES INTERREGIONAL GRID COMPANIES DISTRIBUTION GRID COMPANIES COMPANIES REGIONAL RETAIL REAL PROPERTY HOLDERS R&D AND DESIGN COMPANIES SERVICE AND CONSTRUCTION COMPANIES COMPANY OVERVIEW 1 Altai Territory 44 Republic of Dagestan 2 Amur Region 45 Republic of Ingushetia 3 Arkhangelsk Region 46 Republic of Kabardino-Balkaria 4 Astrakhan Region 47 Republic of Kalmykia 5 Belgorod Region 48 Karachay-Cherkess Republic 6 Bryansk Region 49 Republic of Karelia 7 Vladimir Region 50 Komi Republic 8 Volgograd Region 51 Republic of Marij El 9 Vologda Region 10 Voronezh Region 52 Republic of Mordovia 11 Jewish Autonomous Region 53 Republic of Sakha STRATEGY REVIEW STRATEGY 12 Trans-Baikal Territory 54 Republic of North Ossetia-Alania 13 Ivanovo Region 55 Republic of Tatarstan 14 Irkutsk Region 56 Republic of Tuva 15 Kaliningrad Region 57 Udmurtian Republic 16 Kaluga Region 58 Republic of Khakassia 17 Kemerovo Region 59 Rostov Region 18 Kirov Region 60 Ryazan Region 19 Kostroma Region 61 Samara Region 20 Krasnodar Territory 62 Saratov Region 21 Krasnoyarsk Territory 22 Kurgan Region 63 Sverdlovsk Region CORPORATE GOVERNANCE CORPORATE AND SECURITIES 23 Kursk Region 64 Smolensk Region 24 Leningrad Region 65 Stavropol Territory 25 Saint Petersburg 66 Tambov Region 26 Lipetsk Region 67 Tver Region 27 Moscow Region 68 Tomsk Region 28 Moscow 69 Tula Region 29 Murmansk Region 70 Tyumen Region 30 Nizhni Novgorod Region 71 Ulyanovsk Region 31 Novgorod Region 72 Khabarovsk Territory 32 Novosibirsk Region 78 4 8 73 Khanty-Mansijsk Autonomous District 33 Omsk Region CORPORATE SOCIAL CORPORATE RESPONSIBILITY REGIONAL BRANCHES, DISTRIBUTION GRID DISTRIBUTION GRID 34 Orenburg Region 74 Chelyabinsk Region 75 Chechen Republic PART OF FGC UES COMPANIES COMPANIES 35 Oryol Region 36 Penza Region 76 Chuvashi Republic 37 Perm Territory 77 Yamalo-Nenets Autonomous District 38 Primorie Territory 78 Yaroslavl Region 39 Pskov Region 11 8 41 40 Republic of Adygeya 41 Republic of Altai INTERREGIONAL GRID REGIONAL ELECTRICITY TRANSMISSION GRID 42 Republic of Bashkortostan COMPANIES RETAIL COMPANIES ENTITIES (PMES’S) 43 Republic of Buryatia ADDITIONAL INFORMATION
20 PJSC “ROSSETI” www.rosseti.ru 21 2. STRATEGY REVIEW PJSC “ROSSETI” Company Profile ANNUAL REPORT || 2015 2
Business Model of the ROSSETI Group
GOVERNMENT REGIONAL ENERGY SUPPLIERS OF LAST NUCLEAR POWER REGULATION, MINISTRY OF ENERGY COMMISSIONS RESORT (ENERGY PLANTS RETAILERS) MINISTRY OF ECONOMIC DEVELOPMENT FEDERAL SERVICE SUPERVISION, FOR ENVIRONMENTAL, FEDERAL ANTIMONOPOLY SERVICE TECHNOLOGICAL AND STANDARDIZATION FEDERAL AGENCY AND NUCLEAR SUPERVISION COMPANY OVERVIEW FOR STATE PROPERTY MANAGEMENT MARKET COUNCIL
THERMAL POWER PLANTS
TERRITORIAL GRID ORGANIZATIONS OUTSIDE THE ROSSETI GROUP STRATEGY REVIEW STRATEGY
HYDRAULIC POWER PLANTS TION
RENEWABLE
ENERGY SOURCES GOVERNANCE CORPORATE AND SECURITIES
DIRECT CUSTOMER POWER GENERA
TRANSMISSION ENERGY CONSUMPTION
SMALL AND DISTRIBUTION GENERATION CORPORATE SOCIAL CORPORATE RESPONSIBILITY
SYSTEM DISPATCHING, OPERATOR FOREIGN ENERGY FOREIGN ENERGY SYSTEMS SYSTEMS MARKET BALANCING, TRADING SYSTEM AND SETTLEMENTS ADMINISTRATOR
FINANCIAL SETTLING CENTER ADDITIONAL INFORMATION
22 PJSC “ROSSETI” www.rosseti.ru 23 2. STRATEGY REVIEW PJSC “ROSSETI” Company Profile ANNUAL REPORT || 2015 2 Group Structure1 Business Position of the Company. Development Strategy
THE ROSSETI GROUP OPERATES IN THE ELECTRICITY GOAL ROSSETI TRANSMISSION AND DISTRIBUTION SEGMENT OF THE ELECTRIC COMPANY OVERVIEW GRID SECTOR TRANSMISSION INTERREGIONAL DISTRIBUTION RETAIL R&D CONSTRUCTION, GRID COMPANY DISTRIBUTION GRID GRID COMPANIES COMPANIES SDCs PROCUREMENT, AND Energy Sector in 2015 Position of the ROSSETI Securing the reliable, high- COMPANIES SERVICE ORGANIZATIONS Group in the Energy Sector Economic and regulatory risks; quality, and affordable FGC UES MOESK Yantarenergo Karachaevo-Cherkesskenergo REC IDGC, Power Grid Optical Networks The Strategy for Development of the energy supply for customers | 80.13% | 50.90% | 100% | 100% VNIPIENERGOPROM, Engineering, Engineering Center Decreased electricity consump- SKB VTI | 100% UES Real Estate | 100% Electric Grid Sector of the Russian tion; on a long-term basis Federation defines ROSSETI as the sec- IDGC of Center TDC Kalmenergosbyt ENIN NWEMC | 49%, Lower growth rate of energy tor’s largest group and mainstay. The and Volga Region | 85.77% | 100% | 31.34% Grozenergo | 49%
vast majority of the ROSSETI Group’s REVIEW STRATEGY | 50.40% prices; subsidiaries operate as natural monopo- Substantially increased receiv- lies and are subject to government Tyumenenergo Chechenenergo Tyvaenergosbyt Urals Power Engineering IT Energy Service ables; | 100% | 72.66% | 100% Company, SevZap NTC, VPEC | 19.99% regulation. | 25% + 1 share High borrowing rates in the debt In the regions of their operations, the >50% financing market; ROSSETI Group’s subsidiaries account IDGC of Urals Kubanenergo Kabbalkenergo ZES for about 70% and 90% of companies | 51.52% | 92.24% | 65.27% | 9.51% Sanctions and currency risks; engaged in distribution and transmis- REDUCTION IN THE NUMBER OF sion respectively. ROSSETI implements TERRITORIAL GRID ORGANIZATIONS Curtailed capex programs. BY 50% BY 2017 (COMPARED IDGC of Centre Dagestan Energy Supply Company measures to consolidate territorial grid | 50.23% | 51% organizations1. WITH 2012) AND BY 50% BY 2030 CORPORATE GOVERNANCE CORPORATE AND SECURITIES 1 The stakes are specified as of December 31, 2015; 1 (COMPARED WITH 2017). 2 The stakes do not include the placed shares of the As of the end of 2015, a total of about 5.93*% current securities issue. 2,700 territorial grid organizations operated in the LENENERGO2 Sevkavkazenergo Russian Federation | 64,.49% | 49%
IDGC of Siberia Ingushenergo Challenges to ROSSETI | 55.59% | 49% CHALLENGE SOLUTION and Solutions Decreased electricity consumption > Reduced electricity losses > Decreased electricity underdelivery IDGC of North-West NURENERGO In 2015, energy companies ensured | 55.38% | 23% Increased receivables > More effective debt collection
the reliable and uninterrupted opera- SOCIAL CORPORATE RESPONSIBILITY > Reduced overdue receivables tion of the Russian energy system while taking extensive measures to carry out Larger share of network connection > Optimized engineering solutions IDGC of Volga2 services on preferential terms > Lower specific capex | 67.63% a policy on the improvement of govern- ment-linked companies’ efficiency. Curtailed capex program with > Lower specific opex reliability to be maintained at a high > Lower specific capex level IDGC of Northern Caucasus | 92.00% High interest rates in debt capital > Optimized borrowing portfolio markets
Sanctions and currency risks > Reduced share of imported products, accounting for less IDGC of South than 5% of electric grid subsidiaries’ purchases | 51.66% ADDITIONAL INFORMATION
24 PJSC “ROSSETI” www.rosseti.ru 25 2. STRATEGY REVIEW PJSC “ROSSETI” Business Position of the Company. Development Strategy ANNUAL REPORT || 2015 2
THE ELECTRIC GRID SECTOR Development Strategy SERVICED BY THE ROSSETI GROUP IS UNIQUE IN THE >15% WORLD OPERATING EXPENSES MISSION OF ROSSETI COMPANY OVERVIEW To be the leader in developing the management system of the electric grid sector and secure a reliable and high-quality electric >30% power supply satisfying the growing demand of the Russian economy and social sector at service prices affordable for REDUCTION IN SPECIFIC customers INVESTMENT COSTS
The Strategy for Development of the AS A SINGLE MANAGEMENT Electric Grid Sector of the Russian COMPANY, ROSSETI COORDINATES STRATEGY REVIEW STRATEGY Federation 1 provides for the formation Competitive Advantages Prospects Main Development >> Tariff policy; of a single electric grid management 2.3 of the ROSSETI Group for Development Areas of ROSSETI company based on ROSSETI. >> Technical policy; >> Investment planning; A priority in the current macroeconomic MILLION KILOMETERS ROSSETU’S FUNCTIONS UNIQUENESS situation is to unconditionally secure FINDING THE RIGHT BALANCE >> Transparency of financial and economic LENGTH OF THE ROSSETI GROUP’S >> Strategic functions; activities; The ROSSETI Group is unique in terms a reliable and uninterrupted power supply With limited investment resources and POWER LINES of its serviced area, operating in special for all categories of customers and main- curtailed capex programs, the main task >> Controlling functions; >> Anti-corruption policy. climatic conditions. tain the accessibility of infrastructure. is to find the right balance between the >> Coordinating functions; The principal goal of the electric grid sec- need to retain the level of reliability and tor is to secure the reliable, high-quality, the fulfillment of obligations related >> Accomplishment of the industry’s
LENGTH GOVERNANCE CORPORATE AND SECURITIES to network connection and development. institutional goals; and affordable energy supply for Russian The Company together with its customers on a long-term basis by >> Participation in the consolidation subsidiaries owns and operates CONDITIONS FOR building a network infrastructure that is REDUCING LOSSES AND of territorial grid organizations. 2.3 million kilometers of electricity maximally efficient and conforms to inter- transmission and distribution lines on the THE ELECTRIC GRID IMPROVING DISCIPLINE national standards, with electricity territory of the biggest state in the world. SECTOR’S GROWTH Our priorities include the tasks of bringing transmission and distribution tariffs that down commercial losses and improving will make electricity expenses acceptable UNIFORMITY payment discipline. to the Russian economy and enable the Accessibility of tariff and industry to be attractive to investors The Uniform Technical Policy enables the borrowing resource through adequate return on capital. Group to unify its production processes IMPORT SUBSTITUTION 1 Approved by Ordinance of the Government of the and ensure efficient equipment operation. An important task is to reduce the SOCIAL CORPORATE RESPONSIBILITY Improvement of operating Russian Federation No. 511-r of April 3, 2013. dependence of the Russian fuel and EXPERIENCE and investment efficiency energy sector on imported equipment, technical devices, and component parts. Due to many years of experience and the available workforce capacity, ROSSETI is able to ensure the effective fulfillment of its tasks. ADDITIONAL INFORMATION
26 PJSC “ROSSETI” www.rosseti.ru 27 2. STRATEGY REVIEW PJSC “ROSSETI” Business Position of the Company. Development Strategy ANNUAL REPORT || 2015 2
FACTORS IN THE COMPANY APPEAL FOR INVESTORS
THE INDUSTRY’S MAINSTAY, INCLUDED ON THE LIST OF STRATEGIC ENTERPRISES COMPANY OVERVIEW
A LARGE TAXPAYER INVESTING A PRESENCE IN MOST RUSSIAN IN HUMAN RESOURCE REGIONS DEVELOPMENT AND CORPORATE SOCIAL RESPONSIBILITY
INCREASINGLY WIDE IN-HOUSE 90% OF TRANSMISSION GRIDS INFRASTRUCTURE; NETWORK AND 70% OF DISTRIBUTION
CONNECTIONS PROVIDED FOR GRIDS UNDER MANAGEMENT REVIEW STRATEGY NEW CUSTOMERS; INTERNATIONAL TIES ON THE RISE COMPLIANCE WITH ADVANCED STANDARDS OF CORPORATE TRANSPARENCY, INCREASINGLY GOVERNANCE, ADHERENCE ACTIVE DIALOG WITH ALL TO THE PRINCIPLES OF Principal goals of ROSSETI STAKEHOLDERS SUSTAINABLE DEVELOPMENT
SECURING THE RELIABLE OPTIMIZING INVESTMENT MAINTAINING INTEGRATED AN INNOVATIVE COMPANY A PUBLIC COMPANY TRADED ON
AND HIGH-QUALITY PROVISION ACTIVITIES SECURITY AT THE NECESSARY DEVELOPING IMPORT THE MOSCOW STOCK EXCHANGE GOVERNANCE CORPORATE AND SECURITIES SUBSTITUTION AND THE LONDON STOCK OF SERVICES Reduce specific expenses by an LEVEL, TAKING ACCOUNT EXCHANGE Ensure that SDCs attain the reli- average of 30% compared with OF TERRORISM THREATS AND ability and quality indicators 2012 (in rubles per physical unit: THE RISK OF ECONOMIC DAMAGE kilometers, MVA) Carry out the Action Plan “En- ROSSETI makes use of comprehensive hancing the Affordability of the business planning. The key indicators ENHANCING ENERGY Power Infrastructure” of the approved business plans in the CONSERVATION AND ENERGY medium term are linked to the objectives EFFICIENCY of ensuring the achievement of the tar- IMPROVING THE OPERATING gets and to the key operational risks. EFFICIENCY Reduce electricity losses by 11% SOCIAL CORPORATE RESPONSIBILITY compared with 2012 by 2017. ROSSETI takes an active part in the Reduce operating expenses by preparation of proposals for draft regula- 15% (adjusted for inflation) com- tions to implement the Strategy for pared with 2012 Development. ADDITIONAL INFORMATION
28 PJSC “ROSSETI” www.rosseti.ru 29 2. STRATEGY REVIEW PJSC “ROSSETI” Business Position of the Company. Development Strategy ANNUAL REPORT || 2015 2
Long-Term Development LTDP Goals IMPROVING SERVICE QUALITY ENHANCING THE OPERATING The key measures of the Long- ACTION PLAN TO Program of ROSSETI AND INCREASING CUSTOMER EFFICIENCY OF ELECTRIC Term Development Program were IMPLEMENT THE LONG-TERM and Objectives implemented in 2015 under the SATISFACTION GRIDS relevant programs affecting the DEVELOPMENT PROGRAM OF ROSSETI’s Long-Term Development following key functional areas: ROSSETI1 Program (LTDP) is an internal policy SECURING A RELIABLE document covering the period from AND UNINTERRUPTED POWER >> Reduce the number of network >> Operating activities; >> Consolidated Investment Program; connection stages from 10 to 6 by 2015 2015 to 2019 and containing the lists SUPPLY AND ENSURING >> Investment activities; >> Innovative Development Program; of mechanisms and measures to ensure and to 5 by 2018; >> Energy efficiency; >> Action plan to improve the operating the achievement of ROSSETI’s strategic ENERGY SECURITY > Ensure the territorial accessibility and 19.12.2014 > efficiency and ensure the financial goals. convenient conditions of face-to-face >> Import substitution; COMPANY OVERVIEW soundness of the ROSSETI Group in the customer service; The approved LTDP of ROSSETI meets >> Reduce the number and duration >> Innovative development; current macroeconomic conditions; The Board of Directors approved the Long- the Russian Government’s require- of accidents; >> Develop and ensure the accessibility Term Development Program of ROSSETI for >> Environmental security; >> Electricity Loss Reduction Program 2015–2019 of remote and electronic (online) ments relating to workforce productivity >> Decrease electricity underdelivery of ROSSETI SDCs for 2015–2020; growth, labor resource availability, import customer service. >> Institutional transformations; to customers; >> Development plans for production 26.12.2014 substitution, the enhancement of the >> Anti-corrupt practices; > Manage the condition of electric grid MAINTAINING THE asset management systems of ROSSETI Company’s transparency and efficiency, > assets; >> Internal control, risk management, and SDCs for 2015–2017; and an annual reduction of at least ACCESSIBILITY OF The Board of Directors approved the Standard internal audit. for Auditing the Implementation of the Long- >> Optimize repair programs in order >> Injury risk mitigation programs 2–3% in operating expenses. INFRASTRUCTURE AND Term Development Program of ROSSETI to lower equipment failure probability; for personnel of ROSSETI SDCs and 1 KEEPING A BALANCE Approved by the Board of Directors of ROSSETI CREATING THE CONDITIONS outsiders at electric grid facilities for in December 2014. The LTDP is formulated >> Reduce the time of remedying process 27.04.2015 REVIEW STRATEGY BETWEEN THE INTERESTS 2014–2017; in accordance with Instructions of the President failures (accidents) and increase the FOR ECONOMIC GROWTH of the Russian Federation No. Pr-3086 of December OF DIFFERENT KEY 27, 2013, and the Recommended Guidelines for mobility of repair crews; >> Road Map “Enhancing the Affordability The Board of Directors resolved to ensure Developing the Long-Term Development Programs STAKEHOLDERS of the Power Infrastructure”. of Strategic Open Joint-Stock Companies and >> Ensure compliance with the reliability >> Improve the accessibility of electricity that, on an annual basis, starting from 2016, Federal State Unitary Enterprises and Open Joint- and safety requirements applicable infrastructure as related to network More detailed information can be found the audit of implementing the Long-Term Stock Companies in Which the Russian Federation Development Program of ROSSETI would be to commissioned capital facilities; connection; in the corresponding sections of the Holds an Aggregate of More than 50% of Shares >> Corporate governance and conducted issued by the Ministry of Economic Development Annual Report. >> Develop the certification system for >> Implement strategic infrastructure shareholder/investor relations; of the Russian Federation. equipment, materials, and systems projects, governmental target-oriented >> Dividend policy; The implementation of the planned 30.11.2015 as the incoming inspection of technical programs, and international grid measures resulted in attaining the target characteristics of equipment used by construction projects; >> Financial stability; values of the Company’s key performance SDCs’ facilities; The Board of Directors reviewed and took note >> Study the issues related to improving >> Improvements to the tariff policy. indicators. of the report on the implementation of the GOVERNANCE CORPORATE AND SECURITIES >> Develop the technical supervision and the long-term planning of electric power It is possible to evaluate how the Long-Term Development Program of ROSSETI control system of ROSSETI. facilities’ sites, including forecasting for the 1st half of 2015 Company has attained the target values network connection and optimizing facilities’ utilization rates. specified in the LTDP after the LTDP audit 2016 for 2015 and after the submission of the audit results (audit report) scheduled for June 2016. Audit of the Long-Term Development Program of ROSSETI for 2015
1 Pursuant to paragraphs 32, 33, and 34 of Instructions of the President of the Russian Federation No. Pr-3086
of December 27, 2013. SOCIAL CORPORATE RESPONSIBILITY ADDITIONAL INFORMATION
30 PJSC “ROSSETI” www.rosseti.ru 31 2. STRATEGY REVIEW PJSC “ROSSETI” Business Position of the Company. Development Strategy ANNUAL REPORT || 2015 2
Attainment LONG-TERM GOALS INDICATORS TARGET VALUE IN 2015 ACHIEVED RESULTS
of key performance indicators Reducing electricity losses Electricity losses ≤ 9.56% Electricity losses were not higher than the target value.
The accomplishment of ROSSETI’s priority instructions issued by the Government Government of the Russian Federation, In 2015, the average duration of power outages at all of ROSSETI SDCs’ branches was not greater than the goals of development is evaluated by the of the Russian Federation. and adding the evaluation of the Securing a reliable and Achieved reliability ≤ 1 values prescribed by governmental regulators in charge Company’s system of key performance Company’s and SDCs’ liquidity as a com- uninterrupted power supply of services The KPI system and calculation technique of tariff regulation. Thus, the reliability of services was indicators (KPIs). ponent of the quarterly financial sound- achieved in all of the regions of ROSSETI’s operations. were adjusted by the Board of Directors ness indicator (starting from the 4th quar- The Company’s KPI system is aligned of ROSSETI in 2015, reclassifying the The implementation of the consolidated investment
ter of 2015). COMPANY OVERVIEW with the priorities defined by the total shareholder return and workforce Improving investment Reduction of specific program of ROSSETI SDCs engaged in electricity ≤ 1 Strategy for Development of the Electric productivity indicators as control indica- In accordance with the above-men- efficiency investment costs distribution resulted in achieving the required reduction of specific investment costs in 2015. Grid Sector of the Russian Federation, tors (taken into account in the motiva- tioned decision adopted by the Board the goals of the Company’s Long-Term tion system), clarifying the procedure for of Directors of the Company, the follow- Improving investment Compliance with Compliance with commissioning schedules was achieved ≥ 90% Development Program, and specific calculating the reduction of operating ing key performance indicators and their efficiency commissioning schedules in full. expenses pursuant to the Directive of the target values were prescribed in 2015: Measures to ensure the accessibility of the ROSSETI Group’s grid infrastructure resulted in a 25% reduction Improving service quality Compliance with network in the time required to obtain an electricity connection, and increasing customer ≤ 1.1 QUARTERLY INDICATORS connection deadlines from contract to certificate, for network connection satisfaction requests for facilities rated below 150 kW as compared Operational KPIs Financial KPIs Investment KPIs with 2013. STRATEGY REVIEW STRATEGY
LONG-TERM GOALS INDICATORS TARGET VALUE IN 2015 ACHIEVED RESULTS Ensuring high personnel efficiency and their Workforce productivity ≥ 1,490 rubles/man-hour Workforce productivity was higher than the target value. workforce productivity indicator Securing a reliable and No growth of large No growth Reduced number of large accidents. growth uninterrupted power supply accidents
Improving power supply No growth of casualties No growth All necessary measures taken in 2015 resulted safety in a reduction in occupational injuries compared with 2014. The target values of all key performance with respect to reducing specific operat- The number of casualties from among SDCs’ personnel indicators were attained in 2015; the ing expenses by at least 15% against decreased substantially. attained target values accounted for 2012 by 2017, reducing specific invest- at least 100% of the plan. The val- ment costs by at least 30%, and reduc- Ensuring financial soundness Financial soundness and > soundness ≥ 0.85; The Management Board of ROSSETI formulated and 100% liquidity indicator > liquidity ≥ 0.85 approved the action plan to improve the operating ues attained in the reporting year are ing electricity losses by 11% against GOVERNANCE CORPORATE AND SECURITIES efficiency and ensure the financial soundness of the not compared with prior periods due 2012. ATTAINMENT OF TARGET VALUES ROSSETI Group in the current macroeconomic conditions. to changes in the approaches to setting The implementation of the plan is a priority established The Company’s system of key perfor- most target values and calculating most for ROSSETI. mance indicators is interlinked with the actual values in 2015. variable component of management’s The KPI values for 2016 and there- remuneration: each indicator is assigned 1 Approved by Ordinance of the Government of the Russian Federation No. 511-r.; after are set forth in the Long-Term a specific weight in the bonus pool, and ANNUAL INDICATORS 2 Minutes of the Meeting No. 217 of December 25, Development Program of ROSSETI, quarterly and annual bonuses are paid if 2015; including the values required to achieve the corresponding KPIs are attained. 3 No. 2303p-P13 of April 16, 2015. LONG-TERM GOALS INDICATORS TARGET VALUE IN 2015 ACHIEVED RESULTS the targets set by the Strategy for
Development of the Electric Grid Sector SOCIAL CORPORATE RESPONSIBILITY > the average value of the Enhancing investor Total shareholder return Further information about the results can be found in the indicator for the three previous of the Russian Federation (Ordinance attraction (TSR) Section “Information on the Company’s Securities”. years of the Government of the Russian Federation No. 511-r of April 3, 2013) Enhancing investor Return on invested capital Return on invested capital was higher than the target ≥ 0.9 attraction (ROIC) value.
In 2015, pursuant to Directive No. 2303p-P13 of April 16, 2015, “Annual Reduction of at Least 2–3 Percent Reducing operating Reduction of specific ≥ 10% in Operating Expenses (Costs),” the ROSSETI Group expenses operating expenses achieved a reduction of over 10% in specific operating expenses with the target value of 2–3%. ADDITIONAL INFORMATION
32 PJSC “ROSSETI” www.rosseti.ru 33 2. STRATEGY REVIEW PJSC “ROSSETI” Operating Overview ANNUAL REPORT || 2015 2 Operating Overview Operating Results
The key goal of ROSSETI’s operating A very important and large-scale area Electricity Transmission Increased electricity losses were activities is to secure a reliable and high- of work is to modernize the electric grid and Distribution caused by changes in the operation quality electricity supply by subsidiar- infrastructure, including management mode of Russia’s United Power System ies’ implementing the provisions of the and metering systems for electricity in 2015. On a basis comparable with ROSSETI SDCs are engaged in electric- +5.2 Uniform Technical Policy, complying with consumed by customers, and increase 2012, electricity losses in 2015 totaled ity transmission and distribution in the
technical regulations, and carrying out our customer focus. To this end, the 9.22%, which is 0.14 pp lower than COMPANY OVERVIEW regions of their operations and are BILLION KWH repair and capital investment programs Company carries out various projects, in 2014 on a basis comparable with 2012 responsible for a reliable and uninter- in a timely manner. including the introduction of Smart (9.36%). ELECTRICITY TRANSMISSION AND rupted power supply and for compli- Grid technology in the regions of its DISTRIBUTION (+0.73%) ance with international standards The table detailing changes in revenues UNDER THE LONG- operations, the installation of up-to-date of reliability. from electricity distribution services is equipment and smart electricity meters, TERM DEVELOPMENT contained in Section 6.1 of the Appendix R&D in the field of electric power, and the PROGRAM, ROSSETI WILL to the Annual Report. opening of modern convenient customer CONTINUE TO INCREASE service centers along with the develop- 1 THE AFFORDABILITY OF ment of online services. Operating Results of ROSSETI SDCs in 2015 ELECTRICITY DISTRIBUTION ROSSETI will continue in the current year
DELIVERY TO NETWORKS, ELECTRICITY LOSSES, ELECTRICITY LOSSES, REVIEW STRATEGY to work to create the architecture of an MILLION KWH MILLION KWH % SERVICES, SIMPLIFY SDCS actively adaptive grid, reduce the number NETWORK CONNECTION 2014 2015 2014 2015 2014 2015 Roman and duration of process failures, and PROCEDURES, AND CUT decrease electricity underdelivery to cus- IDGC of Centre 64,175.5 62,556.3 5,949.2 5,850.3 9.27 9.35 Berdnikov CONNECTION COSTS tomers. There is still much to do, includ- IDGC of Center and Volga Region 55,004.0 53,583.8 5,076.9 4,862.4 9.23 9.07 ing carrying out subsidiaries’ production IDGC of Volga 54,931.5 52,907.5 3,638.4 3,543.4 6.62 6.70 Member of the Management Board programs and implementing targeted IDGC of North-West 39,715.0 39,475.4 2,547.1 2,520.1 6.41 6.38 First Deputy Director General Overall, ROSSETI’s grid subsidiaries measures such as maintaining employee ROSSETI IDGC of Siberia 74,766.2 70,846.4 5,668.8 5,145.4 7.58 7.26 distributed 720.5 billion kWh of electric- qualifications at the appropriate level TDC 6,050.2 5,645.6 511.9 467.7 8.46 8.28 ity in the reporting period, or 0.73% and reducing occupational and, espe- more than in 2014. The ROSSETI Group’s IDGC of Urals 79,770.1 76,152.5 6,240.6 6,011.2 7.82 7.89 cially, child injury rates. GOVERNANCE CORPORATE AND SECURITIES specific accident rate was down by 25%, IDGC of South 29,525.8 28,776.0 2,745.3 2,828.8 9.30 9.83 electricity underdelivery decreased by IDGC of Northern Caucasus 18,058.7 18,484.7 3,572.8 4,036.4 19.78 21.84 33%, and the average duration of power Truly yours, First Deputy Director General Chechenenergo 2,533.3 2,592.4 944.8 1,045.2 37.29 40.32 outages due to process failures was Roman Berdnikov reduced by 4%. Kubanenergo 21,572.7 22,032.6 2,852.7 2,835.7 13.22 12.87 MOESK 88,764.9 87,618.4 7,784.6 7,491.2 8.77 8.55 These data suggest that our package LENENERGO 34,208.4 34,346.7 3,791.5 4,193.0 11.08 12.21 of measures to improve electricity supply reliability produces the expected results. Tyumenenergo 73,403.2 71,552.7 1,868.2 1,818.1 2.55 2.54 Yantarenergo 4,198.4 4,154.4 776.0 776.3 18.48 18.44 The increased affordability of services TOTAL FOR DISTRIBUTION GRIDS 646,678.0 630,725.5 53,968.9 53,415.1 8.35 8.47
provided by the ROSSETI Group is evi- SOCIAL CORPORATE RESPONSIBILITY denced by the following data: 393,271 FGC UES2 536,510.6 549,247.1 21,261.1 23,478.1 4.13 4.47 network connection certificates were TOTAL for ROSSETI SDCs3 790,534.6 797,419.7 75,230.0 76,893.2 9.52 9.64 signed, totaling 19,705 MW. The num- TOTAL for ROSSETI SDCs4 790,534.6 795,444.6 75,230.0 74,918.1 9.52 9.42 ber of completed network connection contracts in 2015 grew by 14% against 2014. The rise in capacity (MW) also 1 ROSSETI’s total result takes account of ROSSETI 3 The calculation of ROSSETI’s total result takes account of the electricity flow balance between electricity networks reached 14%. These figures show an SDCs’ subsidiaries and dependent companies engaged of the electricity flow balance between electricity networks of FGC UES and electricity networks of ROSSETI’s in electricity distribution; of FGC UES and electricity networks of ROSSETI’s subsidiaries and dependent companies engaged increase in customer confidence. 2 The calculation of FGC UES’s electricity losses is subsidiaries and dependent companies engaged in distribution and excludes electricity losses caused by the based on electricity delivery from FGC UES’s networks in distribution; special operation mode of Russia’s United Power System to customers’ electricity networks; 4 The calculation of ROSSETI’s total result takes account in 2015. ADDITIONAL INFORMATION
34 PJSC “ROSSETI” www.rosseti.ru 35 2. STRATEGY REVIEW PJSC “ROSSETI” Operating Results ANNUAL REPORT || 2015 2
Network Connection MEASURES TO ENSURE THE ACCESSIBILITY OF THE ROSSETI GROUP’S GRID INFRASTRUCTURE RESULTED IN A 25% 9.22% Network Connection Chain REDUCTION IN THE TIME REQUIRED TO OBTAIN AN ELECTRICITY 40% CONNECTION, FROM CONTRACT TO CERTIFICATE, FOR NETWORK ELECTRICITY LOSSES Network connection is one of the main Power-receiving equipment is connected CONNECTION REQUESTS FOR FACILITIES RATED BELOW 150 KW REDUCTION IN THE TIME REQUIRED regulated services provided by the using temporary or permanent electricity (0.14 PP LOWER) AS COMPARED WITH 2013. TO OBTAIN AN ELECTRICITY ROSSETI Group. supply schemes. THE TIME OF OBTAINING AN ELECTRICITY CONNECTION, FROM CONNECTION Network connection is the actual CONTRACT TO CERTIFICATE, FOR SMALL AND MEDIUM-SIZED connection of power-receiving equip- COMPANY OVERVIEW FACTORS CONTRIBUTING BUSINESSES’ NETWORK CONNECTION REQUESTS FOR FACILITIES TO A DECREASE IN ELECTRICITY ment of electricity consumers, power generation facilities, and electric grid RATED 15–150 KW WAS DECREASED BY 40% AS COMPARED WITH DISTRIBUTED BY CERTAIN facilities owned by grid organizations 2013. SUBSIDIARIES and other persons to networks of grid organizations. Industrial customers require less electricity; The federal antimonopoly service super- Reducing the time required >> The time necessary for a grid vises statutory compliance and oversees to obtain an electricity connection organization to prepare for providing Large customers optimize their NETWORK CONNECTION SERVICES the activities of electric grid companies for power-receiving equipment a network connection (for maximum expenses associated with elec- in relation to network connection ser- of requesting entities capacity of 15–150 kW) was reduced tricity distribution services; vices. Legislation establishes require- to 90 days with the prescribed time Decreasing the number of elec- of 120–180 days; REVIEW STRATEGY ments governing the network connection tricity connection stages for Customers begin to use a higher procedure, and any grid organizations >> The list of ROSSETI SDCs’ performance THE PREVIOUSLY THE PREVIOUSLY POWER-RECEIVING power-receiving equipment of re- voltage; indicators with respect to the CONNECTED CAPACITY CONNECTED CAPACITY EQUIPMENT IS PUT INTO that are in breach of such regulations are questing entities OF POWER-RECEIVING REMAINS THE SAME, BUT OPERATION FOR THE FIRST subject to penalties: fixed penalties under implementation of measures under Customers switch over from EQUIPMENT IS INCREASED THE EXTERNAL ELECTRICITY TIME the Road Map from 2014 to 2017 was article 9.21 of the code of administrative Cutting electricity connection distribution networks to the Uni- SUPPLY SCHEME IS CHANGED expanded: fied National (All-Russian) Electric offences of the Russian Federation. costs ›› the synchronization of SDCs’ capex Grid; To improve the reliability and quality programs and Russian regions’ grid of services provided by grid companies, Electricity generators lease out development schemes by facility; the Federal Antimonopoly Service of the their equipment; THE ELECTRICITY SUPPLY THE CONNECTION POINT THE PRODUCTION Network Connection RELIABILITY CATEGORY IS IS CHANGED OPERATION TYPE IS Russian Federation applies economic Achievements of ROSSETI ›› the share of network connection CHANGED CHANGED contracts without capital GOVERNANCE CORPORATE AND SECURITIES Customers build in-house genera- incentives by annually adjusting minimum SDCs in 2015 expenditures; tion facilities. regulated revenue in the calculation of electricity distribution tariffs. ›› the share of contracts with delayed MAIN IMPLEMENTED completion. Network Connection After request submission: MEASURES 1 In accordance with the Strategy for Development Stages Enhancing the Affordability of the Electric Grid Sector of the Russian Federation approved by Ordinance of the Government of the Entering into Network Connection Actual network connection pro- of the Power Infrastructure >> The time of preparing and sending Russian Federation No. 511-r of April 3, 2013; Submitting Network Contract vided by the grid organization for draft network connection contracts was 2 Approved by Ordinance of the Government of the the requesting entity’s facilities The ROSSETI Group’s highest priority for reduced to 10 days with the prescribed Russian Federation No. 1144-r of June 30, 2012; Connection Request time of 15 days for facilities rated 3 Pursuant to Directive of the Government of the Completing network connection network connection1 is to achieve the below 150 kW and to 20 days with the Russian Federation No. 746p-P13 of December 12, procedures and obtaining permits Actual receipt (delivery) of voltage 2013, and as resolved by the Board of Directors targets of the Action Plan (Road Map) SOCIAL CORPORATE RESPONSIBILITY and capacity by turning on the prescribed time of 30 days for facilities of ROSSETI on December 27, 2013 (Minutes The request is accepted for processing “Enhancing the Affordability of the Power Obtaining the authorization switching device (the switching rated 150–670 kW; of the Meeting No. 142 of December 30, 2013), on the date when the requesting entity Infrastructure”2 (hereinafter, the “Road the implementation of the Action Plan (Road to operate the requesting entity’s device is in ON position) Map ‘Enhancing the Affordability of the >> The required number of a requesting Map) “Enhancing the Affordability of the Power provides all information and documents facilities Infrastructure” approved by Ordinance of the 3 entity’s visits (for maximum capacity specified in the Network Connection Power Infrastructure’”): Government of the Russian Federation No. 1144-r Receiving Network Connection of below 150 kW) was decreased to 3, Rules of June 30, 2012, is a priority for the Company’s Certificate while this number is 4 in common activities. practice; ADDITIONAL INFORMATION
36 PJSC “ROSSETI” www.rosseti.ru 37 2. STRATEGY REVIEW PJSC “ROSSETI” Operating Results ANNUAL REPORT || 2015 2
% Doing Business Rankings 100 Changes in Network Connection 478,693 pcs. 59,241 MW 80 Provided for Customers and 393,271 pcs. 19,705 MW Targets in the “Getting Electricity” Generation Facilities (2015 vs. 60 369,039 pcs. 17,192 MW Ranking of Doing Business ТОР 20 2014) 40 TARGET UNIT 2012 2015 2018 F OSSETI’S TARGET IS TO ACHIEVE THE received requests 20 Position in the “Getting Electricity” ranking – 183 60 20 INCLUSION OF RUSSIA IN THE TOP 20 +14% +14% +14% signed contracts 10 Number of procedures Pcs. 10 4 3 COUNTRIES ACCORDING TO THE DOING COMPANY OVERVIEW completed contracts Time Days 281 135 90 BUSINESS RANKINGS BY 2018 5
Cost (% of income per capita) % 1,852 321 20 0 –4% –2% –5 The legal regulations issued in accordance with the Road Map “Enhancing the Affordability of the Power Infrastructure” in 2015 are listed in the –10 Appendix 6.1. to the Annual Report. –16% –20 2014 2015 2014 2015 2014 2015
ROSSETI approved the action >> Use in-house resources to provide Cooperate with Russian regional REVIEW STRATEGY plan to attain the key electricity network connection for electrical executive authorities in the plan- connection indicators necessary installations rated 15–150 kW ning of requesting entities’ sites Changes in Network Connection for 488,324 1 for electrical installations rated 478,301 478,693 to reach the target position in the As resolved by the Board of Directors of the 2013–2015, pcs. “Getting Electricity” ranking of the Company on December 19, 2014; Minutes of the 15–150 kW Meeting No. 174 of December 22, 2014. Doing Business rankings in 20151: Carry out measures to optimize >> Enter into agreements with Russian procurement procedures under received requests 393,271 383,342 383,125 regional executive authorities for the Measures for the Doing network connection contracts signed contracts 369,039 allocation of land for the construction Business Rankings in 20162 using outsourced services and in- 346,062 of electric grid facilities under a simplified house resources completed contracts network connection procedure Inform requesting entities of the GOVERNANCE CORPORATE AND SECURITIES 2 In accordance with ROSSETI’s action plan >> Enter into an agreement with the existing network connection pro- to attain the benchmarks of the Road Map 261,710 Federal Service for Environmental, cedure and reforms in the electric “Enhancing the Affordability of the Power Technological and Nuclear Supervision grid sector Infrastructure” for 2016. of the Russian Federation for the simplification of the procedure for issuing Develop online functionalities and permits to electric grid facilities built services for the Personal Login 2013 2014 2015 in the course of network connection Page on the customer service website (портал-тп.рф) and ROS- >> Enter into agreements with energy SETI SDCs’ websites Changes in Network Connection for retail companies in Russian regions for 59,241 the implementation by grid companies 2013–2015, MW 54,634 52,022 of the procedure for verifying electricity SOCIAL CORPORATE RESPONSIBILITY meters and issuing electricity supply contracts to requesting entities received requests 30,622 signed contracts 19,566 20,468 19,705 completed contracts 17,246 17,192
2013 2014 2015 ADDITIONAL INFORMATION
38 PJSC “ROSSETI” www.rosseti.ru 39 2. STRATEGY REVIEW PJSC “ROSSETI” Operating Results ANNUAL REPORT || 2015 2
Network Connection Provided for Customers in 2015 Major Network Connection Projects
NUMBER OF NETWORK SIGNED NETWORK SIGNED NETWORK FGC UES network connection for Units 1 and 2, Nizhnyaya Tura TPP 2 по 230 MW T Plus SUBSIDIARY/DEPENDENT CONNECTION REQUESTS CONNECTION CONTRACTS CONNECTION CERTIFICATES COMPANY NAME IDGC OF NORTHERN CAUCASUS network connection for Gotsatlinskaya HPP 100 MW RusHydro PCS. MW PCS. MW PCS. MW FGC UES network connection for Unit 1, Chelyabinsk TPP 225 MW Fortum IDGC of Centre 60,534 2,798 49,566 1,166 63,299 1,125 LENENERGO 31,618 3,583 18,650 641 18,817 380 MOESK 102,025 8,646 68,695 2,903 77,355 3,107 1 In accordance with Ordinance of the Government of the Russian Federation No. 1334-r of August 11, 2010, “On the IDGC of Volga 18,497 1,329 15,981 965 17,408 583
Approval of the List of Generation Facilities Used for the COMPANY OVERVIEW Yantarenergo 6,315 389 4,833 110 4,222 91 Supply IDGC of South 18,971 1,569 15,696 467 14,874 424 Kubanenergo 36,080 2,098 29,449 651 31,032 673 IDGC of Northern Caucasus 9,491 398 7,918 244 7,040 171 Average Network Connection Fee 9,487 Tyumenenergo 5,942 988 5,258 562 5,430 540 for Distribution Grids for 2009– 8,033 IDGC of Siberia 40,826 2,186 30,941 794 27,787 637 1 2015, rubles/kW 6,973 TDC 3,451 145 3,035 68 3,309 62 IDGC of North-West 27,640 1,374 22,787 557 24,255 508 1 The average network connection fee rate (rubles/kW) is 4,931 IDGC of Urals 36,122 1,813 30,190 851 34,424 800 calculated by dividing network connection revenues for the period by connected capacity for the same period. IDGC of Center and Volga Region 60,595 2,618 51,088 1,289 48,408 1,065 REVIEW STRATEGY Other 20,027 1,493 14,703 488 15,335 445 2,926 2,606 TOTAL for distribution grids 478,134 31,426 368,790 11,755 392,995 10,611 2,007 FGC UES 397 11,376 195 3,009 220 2,766 TOTAL for ROSSETI SDCs 478,531 42,802 368,985 14,764 393,215 13,377
2009 2010 2011 2012 2013 2014 2015 Network Connection Provided for Generation Facilities in 2015 Detailed information about network connection fees is contained in Section 6.1 of the Appendix NUMBER OF NETWORK SIGNED NETWORK SIGNED NETWORK to the Annual Report. SUBSIDIARY/DEPENDENT CONNECTION REQUESTS CONNECTION CONTRACTS CONNECTION CERTIFICATES
Detailed information about changes in revenues GOVERNANCE CORPORATE AND SECURITIES COMPANY NAME PCS. MW PCS. MW PCS. MW from network connection services is contained in Section 1 of the Appendix to the Annual IDGC of Centre 8 653 4 271 3 12 Report. LENENERGO 8 39 1 101 0 0 MOESK 6 155 0 0 0 0 Best Practices and Pilot Projects for Network Connection IDGC of Volga 13 227 7 85 5 89 Yantarenergo 4 1,060 0 0 0 0 IDGC of South 15 349 4 67 2 13 IDGC OF SIBERIA MOESK Kubanenergo 4 67 4 67 1 17 IDGC of Northern Caucasus 12 47 4 8 0 0 The Creation of the Back Office project “3 Steps, 2 Visits” program. The num- unnecessary for a requesting entity Tyumenenergo 2 35 2 35 3 268 was put into test operation. The imple- ber of stages was reduced from 5 to 2; to visit the company’s office in person. SOCIAL CORPORATE RESPONSIBILITY IDGC of Siberia 11 131 1 20 5 111 mentation of the project will reduce the time of preparing draft contracts In 2015, MOESK received 29,000 elec- TDC 0 0 0 0 1 4 unjustified measures related to network for facilities rated below 150 kW was tronic network connection requests construction and rehabilitation, optimize decreased from 9 to 7 days. IDGC of North-West 6 353 2 25 4 26 (or about 30% of the total num- the number of employees by spread- IDGC of Urals 12 177 7 87 5 280 The year 2015 saw the launch of the ber of received network connection ing the workload, and prevent abuse IDGC of Center and Volga Region 6 18 2 11 2 90 “0 Visits” program: all network connec- requests). of authority. Other 5 1,005 1 1 0 0 tion stages are through the Personal TOTAL for distribution grids 112 4,313 39 777 31 909 Login Page on the Internet, using FGC UES 50 12,127 15 1,652 25 5,419 a digital signature and payment by TOTAL for ROSSETI SDCs 162 16,439 54 2,429 56 6,328 bank card, which will make it completely ADDITIONAL INFORMATION
40 PJSC “ROSSETI” www.rosseti.ru 41 2. STRATEGY REVIEW PJSC “ROSSETI” Operating Results ANNUAL REPORT || 2015 2
Consolidation Principal Goals of the Under the consolidation programs, the ROSSETI Group of Electric Grid Assets Consolidation of Electric Grid purchased 1,156 MVA of transformer capacity and Assets 2,813 kilometers of power lines in 2015; at the end of 2015, 44,705 STRATEGY FOR DEVELOPMENT TARGETS OF THE STRATEGY 14,882 MVA of transformer capacity and 44,705 kilometers OF THE ELECTRIC GRID FOR DEVELOPMENT OF THE Create a single center of respon- sibility for securing a reliable, of power lines were held under lease KILOMETERS — POWER LINES HELD SECTOR ELECTRIC GRID SECTOR high-quality, and affordable elec- UNDER LEASE IN 2015 tricity supply
Increase the share of ROSSETI’s COMPANY OVERVIEW TASK STAGE 1 (2014–2017) subsidiaries in pool-based rev- Reducing the fragmentation of territorial About half of the existing TGOs will leave enues from electricity distribution services provided for regional Electric Grid Facilities Purchased grid organizations and stiffening control the market due to their failure to qualify 3,204 over them as a territorial grid organization and customers in 2013–2015, MVA, kilometers 2,778 2,813 because of excluding one-customer grids’ (for the respective period) Reduce TGOs’ receivables for expenses from the pool tariff RISK OF IMPAIRED RELIABILITY electricity distribution services OF THE ELECTRIC GRID SECTOR 1,446 STAGE 2 (2017–2030 Build up an optimal electric grid Transformer capacity 1,156 >> If TGOs are numerous, this increases 918 infrastructure risks affecting the electric grid sector’s The number of TGOs will decrease Power lines operation; to around 800 by 2030 under the STRATEGY REVIEW STRATEGY >> The principle of uniformity influence of economic incentives and due OBJECTIVES of engineering solutions is violated; to bringing benchmarking tools into use 2013 2014 2015 operating expenses and investment and to stiffening quality and reliability Reduce the fragmentation costs overlap; requirements in tariff regulation of TGOs and stiffen control over them >> Small TGOs do not have sufficient Electric Grid Facilities Held Under resources to independently remedy Cut overlapping investment costs accidents and emergency situations. Lease in 2013–2015, MVA, 44,705 kilometers (at the end of the 38,459 Improve the operating efficiency 34,475 of the electric grid sector and respective period) reach a new level of manageabil-
NUMBER OF TERRITORIAL GRID ORGANIZATIONS ity GOVERNANCE CORPORATE AND SECURITIES 14,882 Transformer capacity 11,905 13,431 Secure a high-quality and reliable power supply and ensure energy Power lines 3,000 security in the regions 2,700 2013 2014 2015 1,500 Work on consolidating electric grid assets 800 at the level of ROSSETI’s subsidiaries is ROSSETI SDCs cooperate with autho- An example of positive experience done under the programs to consolidate rized executive agencies of constitu- of cooperation in this area is the joint electric grid assets approved by their ent entities of the Russian Federation, work done by LENENERGO and the 2012 2015 2017 2030 boards of directors. local government authorities, and TGOs Government of Saint Petersburg. in preparing road maps for consolidating SOCIAL CORPORATE RESPONSIBILITY electric grid assets and taking inven- tory of ownerless electric grid facilities. ADDITIONAL INFORMATION
42 PJSC “ROSSETI” www.rosseti.ru 43 2. STRATEGY REVIEW PJSC “ROSSETI” Operating Results ANNUAL REPORT || 2015 2
Implementation of Road Maps for Consolidating Electric Grid Growth of Automation Assets in Russian Regions 58% in 2015 51%
CONSTITUENT ENTITY START DATE 45% OF THE RUSSIAN FEDERATION OF IMPLEMENTATION 41% automation of production processes, 40% availability of telecommunications 38% Ingushetia August 28, 2014 IT infrastructure supportability Dagestan August 19, 2014 automation of business and North Ossetia August 28, 2014
production processes COMPANY OVERVIEW Kabardino-Balkaria August 1, 2014
Karachay-Cherkessia July 25, 2014
Vladimir Region April 2, 2014
Karelia June 18, 2015 2014 2015 Komi December 9, 2015
IT Achievements in 2015 USE OF DOMESTICALLY MADE MAIN AREAS OF AUTOMATION UNDER THE ITT STRATEGY SOFTWARE AND AUTOMATION REVIEW STRATEGY The Company implements the TOOLS IN THE ELECTRIC GRID Strategy for Development SECTOR of ROSSETI and Its Subsidiaries IMPROVED NETWORK OBSERVABILITY ACCESSIBLE SERVICES AND CONTROLLABILITY FOR CUSTOMERS and Dependent Companies Use 1C software products for in Information Technology, Auto- the automation of the ROSSETI The Common Treasury was set up, whose The Network Connection Portal Group’s business processes; mation and Telecommunications software and hardware platform enables (портал-тп.рф) was modernized, all participating companies to conduct providing a friendlier user interface and, Until 2016 (ITT Strategy) and the payment transactions on a real time basis consequently, considerably increasing the Switch workstations over to do- ITT Strategies of all ROSSETI number of visitors mestically made equivalent ap- plication software on a phased GOVERNANCE CORPORATE AND SECURITIES SDCs. basis; In order to increase the transparency The ROSSETI Group’s principle method Give preference to the use of do- of implementing the ITT Strategy, the for IT cost reduction is the use mestically devised solutions for Company uses an evaluation system of resources of its wholly owned sub- telecommunications, telemetry, +5% for the achieved results in terms of the sidiary, Power Grid Optical Networks and automated process control scope of functions that can be auto- Engineering, for the operation of informa- systems and switch over to long- mated. The calculation of the scope tion systems and equipment. OVERALL GROWTH OF AUTOMATION term planning and close coopera- of such functions is transparent and uni- tion with domestic manufacturers form for all participants in the process. of such equipment. GOAL FOR 2016
ROSSETI initiated centralized bidding SOCIAL CORPORATE RESPONSIBILITY procedures ensuring cost reduction due TO UPDATE THE ITT STRATEGY WITH A PLANNING HORIZON to economies of scale: for instance, the UNTIL 2020 centralized purchase of software in 2015 reduced its purchase price by a half.
ADDITIONAL INFORMATION
44 PJSC “ROSSETI” www.rosseti.ru 45 2. STRATEGY REVIEW PJSC “ROSSETI” Operating Results ANNUAL REPORT || 2015 2 Operating Activities –4% 35.8 –25% –22%
AVERAGE DURATION OF POWER BILLION RUBLES SPECIFIC ACCIDENT RATE REDUCTION IN PROCESS FAILURES OUTAGES RELATED TO PROCESS LARGE-SCALE REPAIR PROGRAM IN NETWORKS RATED 6 KV AND ABOVE FAILURES COMPANY OVERVIEW PRINCIPAL SCENARIO THE TIMELY Reducing Accident Rates CONDITIONS OF THE 2015 IMPLEMENTATION OF THE REPAIR PROGRAM In 2015, ROSSETI SDCs recorded and REPAIR PROGRAM IS KEY investigated 95,849 process failures The scope of the repair program TO SUCCESS IN THE (accidents) in networks rated 6 kV and in physical terms is not less than ACCIDENT-FREE OPERATION above (22% down from 2014), includ- in the previous year and is not ing 13,662 process failures in networks lower than the scope approved by OF FACILITIES DURING THE rated 110 kV and above (16% down). the regulator in tariff and balanc- ing decisions HEAT DEFICIT PERIOD STRATEGY REVIEW STRATEGY The scope in physical terms and financial resources are so planned as to cover at least 90% and 10% of the repair program in the 1st–3rd quarters and the 4th quar- ter respectively Main Results of Securing THE CRITERION FOR ASSESSING Repair Program a Reliable and Uninterrupted THE LEVEL OF RELIABILITY IS THE The measures affecting the acci- dent-free operation of facilities Power Supply DURATION OF POWER OUTAGES. The goal of the repair program is to secure a reliable and high-quality elec- in the 2015/16 heat deficit period are so planned as to be complet- The equivalent criterion for electric grid tricity supply and ensure the accident- In 2015, branches of electricity distribu- ed before October 1, 2016 GOVERNANCE CORPORATE AND SECURITIES companies is the average outage dura- free operation of facilities in the heat tion grid companies did not exceed the tion indicator determined by regional deficit period. prescribed target values of the indicator energy commissions. approved by the relevant regional energy With curtailed capex programs, special commissions, adjusted for the tolerance attention was given in 2015 to main- Specific Accident Rate factor. Many SDCs attained the indicator taining the reliability and quality levels 2015 6.4 with substantial improvements. prescribed by the regulator. (number of process failures / 1,000 conditional units AS PART OF PREPARATIONS of equipment) 2014 8.5 FOR THE 2015/16 HEAT DESCRIPTION 2014 2015
DEFICIT PERIOD, ROSSETI SOCIAL CORPORATE RESPONSIBILITY Repaired power lines, kilometers 172,875 154,409 SDCs COMPLETED A LARGE- 2013 Comprehensive repairs to substations rated 35 kV and above 2,363 2,321 10.17 SCALE REPAIR CAMPAIGN Major repairs to transformers and autotransformers 4,906 5,373 TOTALING 35.8 BILLION Major repairs to switching devices, units 73,524 71,968 RUBLES Cleared power line pathways, hectares 140,593 132,971 ADDITIONAL INFORMATION
46 PJSC “ROSSETI” www.rosseti.ru 47 2. STRATEGY REVIEW PJSC “ROSSETI” Operating Results ANNUAL REPORT || 2015 2
Average Outage Duration 2015 2.91 Indicator Related to Process –15% –24% –20% Failures (hours)
2014 3.03 REDUCTION IN THE NUMBER REDUCTION IN THE NUMBER REDUCTION IN THE NUMBER OF PROCESS FAILURES CAUSED OF PROCESS FAILURES CAUSED BY OF PROCESS FAILURES RESULTING BY WORN-OUT INSULATION ADVERSE ATMOSPHERIC PHENOMENA IN POWER OUTAGES 2013 3.8 COMPANY OVERVIEW
THE ROSSETI GROUP’S Reducing Electricity EFFECTIVE PRODUCTION Underdelivery The system of recording electric grid Main Causes of Accidents facilities’ process failures in ROSSETI OPERATIONS IN 2015 REDUCED –23% SDCs is governed by the following PROCESS FAILURES (ACCIDENTS) The duration of power outages is the worn-out (damaged) insulation principal parameter that can be influ- documents: 20% 3% CAUSED BY WORN-OUT enced by an electric grid company. REDUCTION IN THE TOTAL DURATION Rules for investigating into Physical damage, including damage, INSULATION AND ADVERSE 7% caused by outsiders OF POWER OUTAGES the causes of accidents in the ATMOSPHERIC PHENOMENA
2% REVIEW STRATEGY electricity industry whereby all 1% Atmospheric (lightning) overvoltage process failures in any network (LIGHTNING) BY 15% AND 24% damage caused by icing and wind loads, of 6 kv or above are classified 14% RESPECTIVELY acts of nature as accidents; altered properties of materials Guidelines for calculating the level of reliability and quality of sup- 11% trees falling onto overhead line wires Average Duration of Process KUBANENERGO 4.57 plied goods and rendered services 8% 34% obstruction caused by birds/animals for the organization managing Failures Related to Power IDGC OF NORTH-WEST 4.38 the unified national (all-russian) damaged customer equipment Outages in 2015, hours IDGC OF NORTHERN CAUCASUS 4.17 electric grid and territorial grid other defective operations LENENERGO 3.76 organizations. IDGC OF CENTER AND VOLGA REGION
3.61 GOVERNANCE CORPORATE AND SECURITIES IDGC OF URALS 2.76 IDGC OF SOUTH 2.72 To evaluate the electric grid sector’s per- To reduce accident rates, the Work continued in the reporting period IDGC OF VOLGA 2.71 formance with respect to accident rates Company continued in 2015 to work on sectionalizing long feeders with the TYUMENENERGO 2.34 and electricity supply reliability, ROSSETI under the target-oriented multiyear installation of reclosers and on replac- YANTARENERGO 2.25 uses Avariynost, a software system for programs to: ing circuit breakers with modern devices. IDGC OF CENTRE Measures were developed and car- 2.17 recording process failures (accidents), >> widen narrow clearings; which enables the Company to consoli- ried out to prevent consistent failures IDGC OF SIBERIA 1.95 date and analyze information on power >> replace oil circuit breakers rated of overhead lines, and target-oriented TDC 1.71 outages. 6–110 kV (with an expired standard programs to improve reliability were MOESK 1.41 operating life) with modern vacuum FGC UES adjusted. 1.34 SOCIAL CORPORATE RESPONSIBILITY circuit breakers and SF6-insulated circuit ROSSETI 2.91 breakers; >> replace surge arresters rated 6–110 kV with overvoltage suppressors, etc. ADDITIONAL INFORMATION
48 PJSC “ROSSETI” www.rosseti.ru 49 2. STRATEGY REVIEW PJSC “ROSSETI” Operating Results ANNUAL REPORT || 2015 2
Energy Conservation Energy Resource Consumption for Business Purposes in Electricity Distribution Grids in 2015 and Energy Efficiency Enhancement UNIT OF 196.32 TARGET VALUE/INDICATOR 2015 (PLAN) 2015 (ACTUAL) MEASUREMENT The ROSSETI Group’s energy conserva- IN 2015, THE COMPANY tion and energy efficiency enhancement FORMULATED THE MILLION RUBLES Resource consumption for business purposes, including by resource type million rubles 6,661.42 5,407.83 measures are aimed at the efficient use million rubles 3,001.07 2,792.87 CONSOLIDATED PROGRAM OF ECONOMIC EFFECT OF TARGET- Electricity of fuel and energy and at the reduction million kWh 1,033.60 981.40 ENERGY CONSERVATION AND ORIENTED MEASURES TAKEN million rubles 629.97 575.51 of the process consumption of electricity Heat TO REDUCE ENERGY RESOURCE thousand Gcal 407,711.62 362,035.56
transported in networks. ROSSETI SDCs ENERGY EFFICIENCY COMPANY OVERVIEW thousand cbm 169.27 128.88 formulated and carry out 16 energy con- CONSUMPTION Hot water supply ENHANCEMENT OF ROSSETI FOR million rubles 16.9 13.63 servation and energy efficiency enhance- 2015–2019 thousand cbm 3,009.79 2,186.48 Cold water supply ment programs. million rubles 90.41 74.93 thousand tonnes 158.9 160.35 Other (gasoline, kerosene, diesel fuel, etc.) of fuel equivalent 3,839.33 3,888.10 million rubles thousand cbm 10,568.11 9,303.52 Targets of the ROSSETI PRODUCTION SUBPROGRAM Natural gas Energy Conservation OF ENERGY CONSERVATION million rubles 51.83 44.9 Program 5,791.62 program of organizational and Energy Resource Consumption for Business Purposes in Electricity Transmission Grids in 2015 STRATEGY REVIEW STRATEGY Reduce electricity losses production measures to reduce MILLION RUBLES electricity losses EXPENSES ASSOCIATED WITH THE Reduce specific electricity con- 2015 (PLAN) UNIT OF UNDER THE ENERGY 2015 program to reduce energy con- PURCHASE OF FUEL AND ENERGY TARGET VALUE/INDICATOR sumption for business purposes MEASUREMENT CONSERVATION (ACTUAL) sumption for production and busi- FOR PRODUCTION AND BUSINESS PROGRAM ness purposes Provide modern electricity meters PURPOSES IN ELECTRICITY for the retail market RESOURCE CONSUMPTION FOR BUSINESS PURPOSES, INCLUDING BY RESOURCE TYPE program to renew electric grid DISTRIBUTION GRIDS ELECTRICITY IN BUILDINGS, STRUCTURES, AND FACILITIES equipment Electricity consumption in buildings, structures, and facilities thousand kWh 32.61 32.32
long-term development program Reduction of electricity consumption in buildings, structures, and facilities thousand kWh 0.696 0.743 for electricity metering systems CORPORATE GOVERNANCE CORPORATE AND SECURITIES in the retail market Savings related to energy purchase expenses and resulting from reduced electricity thousand rubles 2,462.99 2,525.42 consumption (exclusive of VAT)
HEAT IN BUILDINGS, STRUCTURES, AND FACILITIES
Heat consumption in buildings, structures, and facilities thousand Gcal 42.44 41.9
Reduction of heat consumption in buildings, structures, and facilities thousand Gcal 1.02 1.06
Savings related to energy purchase expenses and resulting from reduced heat consumption thousand rubles 975.38 1251.21
GASOLINE
Gasoline consumption thousand liters 7,958 6,990.26
Reduction of gasoline consumption thousand liters 25.0 26.92 CORPORATE SOCIAL CORPORATE RESPONSIBILITY Savings related to gasoline purchase expenses thousand rubles 757.74 816.54 (exclusive of VAT)
DIESEL FUEL
Gasoline consumption thousand liters 7,958 6,990.26
Reduction of gasoline consumption thousand liters 25.0 26.92
Savings related to gasoline purchase expenses thousand rubles 757.74 816.54 (exclusive of VAT)
Further information about ROSSETI SDCs’ energy resource consumption for business purposes in the reporting year
is contained in Section 6.17 of the Appendix to the Annual ADDITIONAL INFORMATION Report.
50 PJSC “ROSSETI” www.rosseti.ru 51 2. STRATEGY REVIEW PJSC “ROSSETI” Operating Results ANNUAL REPORT || 2015 2
The following solutions contributed Reducing Electricity to meeting the targets of the Program Investment and Innovation of Energy Conservation and Energy Losses Efficiency Enhancement: 1,436.8 LED lighting ROSSETI continued in 2015 to carry out ROSSETI WILL CONTINUE Electricity Loss Reduction MILLION KWH capital investment projects of paramount IN 2016 TO WORK TOWARD Improved thermal insulation SAVINGS ARISING FROM MEASURES importance for securing a reliable, high- specifications of buildings, namely Measures quality, and affordable electricity supply. DEVELOPING ELECTRIC GRIDS TO OPTIMIZE ELECTRICITY LOSSES the use of windows and fenc- In the reporting period, 13,869 MVA IN THE REGIONS OF ITS ing structures with high thermal ROSSETI Group carries out a package of capacity and 24,850 kilometers OPERATIONS AND IMPROVING COMPANY OVERVIEW resistance of measures to optimize (reduce) electric- of power lines were put into operation. ity losses. THEIR RELIABILITY AND The value of commissioned capital assets Use of heat pumps and solar ACCESSIBILITY BY MEANS collectors and the installation totaled 213 billion rubles. Financing for IN 2015, SAVINGS TOTALED of automatic heating and lighting the consolidated investment program OF THE NEW CONSTRUCTION, 1,436.8 MILLION KWH DUE TO: +17.6% control systems for substations totaled 211 billion rubles, inclusive REHABILITATION, TECHNICAL Organizational measures, of VAT. UPGRADING, AND Use of GPS systems on motor 1,125.0 million kWh; SAVINGS ARISING FROM MEASURES vehicles Priority projects include those of national TO REDUCE ELECTRICITY LOSSES CONSOLIDATION OF ELECTRIC Technical measures, 86.5 million significance such as work on energy kWh; (IN PHYSICAL TERMS) IN 2015 WERE security for the Kaliningrad Region and GRID ASSETS
HIGHER THAN PLANNED the Northwest Integrated Power System REVIEW STRATEGY Measures to improve electricity and preparations for the 2018 FIFA More detailed information about metering, 225.3 million kWh. World Cup. ROSSETI’s achievements in investment 36,900 reports on noncontractual con- Svetlana As part of implementing the Strategy for in 2015 can be found below in this sumption of electricity totaling 305.4 mil- Balaeva Development of the Electric Grid Sector section. lion kWh were issued and paid in the of the Russian Federation, we carried reporting period, which made it possible >179 out measures to optimize the value Deputy Director General for Investment of the consolidated investment program. Very truly yours, to avoid expenses of 1,508.1 million ROSSETI The effect of applying the Technique for Svetlana Balaeva rubles, exclusive of VAT. THOUSAND ELECTRICITY METERS Deputy Director General for Investment the Reduction of Investment Costs is WERE MODERNIZED IN 2015 (WITH Detailed information about electricity loss expected to be 16.9 billion rubles, exclu- CORPORATE GOVERNANCE CORPORATE AND SECURITIES reduction measures is contained in the EXPENSES OF 1.9 BILLION RUBLES) sive of VAT, for commissioned distribution Appendix 6.1 to the Annual Report. facilities in 2015. >120
THOUSAND ELECTRICITY METERS WITH ORGANIZED REMOTE DATA CORPORATE SOCIAL CORPORATE RESPONSIBILITY COLLECTION ADDITIONAL INFORMATION
52 PJSC “ROSSETI” www.rosseti.ru 53 2. STRATEGY REVIEW PJSC “ROSSETI” Investment and Innovation ANNUAL REPORT || 2015 2
Investment and Innovation Key Indicators of the Consolidated Investment Program in 2015
ROSSETI carries out projects 211.2 213.3 FINANCING, COMMISSIONED CAPITAL COMMISSIONED COMMISSIONED of national significance: SDC MILLION RUBLES ASSETS, MILLION RUBLES CAPITAL ASSETS, CAPITAL ASSETS, (INCLUSIVE OF VAT) (EXCLUSIVE OF VAT) MVA KILOMETERS energy security for the Kalinin- BILLION RUBLES INCLUSIVE OF VAT BILLION RUBLES grad Region and the Northwest FINANCING COMMISSIONED CAPITAL ASSETS IDGC of Siberia 6,196 5,689 364 1,623 Integrated Power System TDC 636 695 47 180 preparations for the 2018 FIFA Tyumenenergo 10,733 19,748 645 1,606 COMPANY OVERVIEW World Cup Areas and Breakdown of Financing Under the Consolidated IDGC of Urals 7,043 6,488 384 2,072 The principal goal of the electric grid sec- Investment Program, million rubles (inclusive of VAT) IDGC of Volga 3,213 2,998 258 805 tor is to secure the reliable, high-quality, IDGC of South 2,017 1,470 101 385 AREAS OF FINANCING1 2014 2015* and affordable energy supply for custom- Kubanenergo 9,956 8,580 382 1,039 ers on a long-term basis. Investment Network connection 81,887 87,797 42% efficiency is a necessary step toward IDGC of Northern Caucasus 1,793 2,805 144 370 achieving the principal goal. Technical upgrading and rehabilitation 70,525 59,546 29% Chechenenergo 213 160 15 50 New construction 58,612 44,740 22% IDGC of Center and Volga Region 5,904 5,487 353 2,484 Under its capex programs, the Other 29,113 13,677 7% IDGC of North-West 4,811 4,067 243 1,098
ROSSETI Group invests in: REVIEW STRATEGY Total 240,137 205,760 100% LENENERGO 13,145 3,685 211 452 >> new construction; Yantarenergo 1,223 752 52 190 >> rehabilitation, extension, and *For comparability purposes with respect to reports technical upgrading of production and for prior years, information does not include ROSSETI’s IDGC of Centre 15,184 12,758 1,228 4,785 subsidiary SDCs: Yargorelektroset, Svet, Tsarskoye Selo nonproduction facilities; MOESK 36,295 34,458 1,593 6,206 Energy Company, Kurortenergo, Saint Petersburg Power >> acquisition of buildings, structures, Grid, and Petrodvorets Electric Company. Tyvaenergo 79 106 38 38 equipment, land, and facilities intended ENCE 1,432 1,467 113 199 for the use of natural resources; Principal Financing Sources for the Consolidated Investment Program, % FGC UES 85,888 99,481 7,585 1,115 >> acquisition and creation of intangible assets and other capital investment Total for ROSSETI SDCs 205,760 210,895 13,756 24,700
expenses; GOVERNANCE CORPORATE AND SECURITIES 23.3% Tariff-based revenues Tsarskoye Selo Energy Company 180 185 7 19 >> purchase of shares in electric grid Borrowed funds Kurortenergo 127 65 4 5 companies. Connection fees and other sources Svet 7 5 0 0 In the reporting period, the greater part Saint Petersburg Power Grid 4,784 2,007 90 105 of investment was directed to network connection for customers and generation Petrodvorets Electric Company 321 128 12 21 facilities (42%), technical upgrading and 48.2% Total for ROSSETI SDCs including 211,178 213,286 13,869 24,850 rehabilitation (29%), and new construc- subsidiary SDCs tion (22%). The financing sources for the capital CORPORATE SOCIAL CORPORATE RESPONSIBILITY investment program were tariff-based 28.5% Changes in Financing for revenues, borrowed funds, and connec- 2015* 205,760 tion fees. 2013–2015, million rubles 2014 240,137 1 In the reporting period, ROSSETI did not make (inclusive of VAT) investments with estimated ROI of more than 10% per year. 2013 313,449
*For comparability purposes with respect to reports for prior years, information does not include ROSSETI’s subsidiary SDCs: Yargorelektroset, Svet, Tsarskoye Selo Energy Company, Kurortenergo, Saint Petersburg Power Grid, and Petrodvorets Electric Company. ADDITIONAL INFORMATION
54 PJSC “ROSSETI” www.rosseti.ru 55 2. STRATEGY REVIEW PJSC “ROSSETI” Investment and Innovation ANNUAL REPORT || 2015 2
Changes in Commissioned Capacity Under the Consolidated Investment Program for 2013–2015 (MVA) 13,869 МVА
2013 2014 20151 2015/2014% 2015/2014% SDCS KILOME- KILOME- KILOME- МVА МVА МVА МVА KILOMETERS 24,850 КМ TERS TERS TERS
IDGC of Siberia 522 1,486 865 2,197 364 1,623 –58 –26 COMMISSIONED CAPACITY
TDC 82 221 25 91 47 180 88 98 COMPANY OVERVIEW
Tyumenenergo 649 90 131 258 645 1,606 392 522
IDGC of Urals 644 1,854 426 2,060 384 2,072 –10 1
IDGC of Volga 779 1,823 435 1,153 258 805 –41 –30
IDGC of South 299 972 111 410 101 385 –9 –6
Kubanenergo 257 357 500 1,567 382 1,039 –24 –34
IDGC of Northern Caucasus 277 621 160 520 144 370 –10 –29
Chechenenergo 37 386 203 245 15 50 –93 –80
IDGC of Center and Volga Region 694 2,952 364 2,833 353 2,484 –3 –12 REVIEW STRATEGY
IDGC of North–West 357 2,366 400 1,636 243 1,098 –39 –33 Reduction of the Value Capital Investment Projects of IDGC of Northern Caucasus. The pro- LENENERGO 907 1,846 1,450 2,490 211 452 –85 –82 of Capital Investment Financed from the Federal gram of high priority measures to renew Yantarenergo 74 118 83 149 52 190 –37 28 cable lines of 6–110 kV is aimed Projects Budget. Planned Completion at improving the operating reliability IDGC of Centre 1,362 5,689 1,107 5,110 1,228 4,785 11 –6 Dates of the city cable network and securing an MOESK 4,453 6,195 3,440 8,614 1,593 6,206 –54 –28 As part of implementing the Strategy for uninterrupted electricity supply for Saint Development of the Electric Grid Sector Tyvaenergo 7 42 10 40 38 38 280 –5 The ROSSETI Group is involved in most Petersburg and Kronshtadt. of the Russian Federation as related construction projects of national signifi- ENCE 154 133 198 324 113 199 –43 –39 In 2015, ROSSETI reported to the to reducing specific investment costs by cance. One of such projects implemented FGC UES 10,793 3,690 9,522 3,121 7,585 1,115 –21 –64 30% compared with 2012, based on the Ministry of Energy on the completion
by the Company is preparations for the GOVERNANCE CORPORATE AND SECURITIES of all cable lines rated 110 kV (9 proj- results of ROSSETI SDCs’ consolidated 2018 FIFA World Cup in Russia. It is Total for ROSSETI SDCs* 22,346 30,843 19,430 32,819 13,756 24,700 –29 –25 ect titles) in 2014 with a total length investment program for distribution grids planned that the tournament will take of 74 kilometers. for 2015, the actual effect of apply- place at 12 stadiums in 11 cities, six ing the Technique for the Reduction 1 For comparability purposes with respect to reports of which (Volgograd, Samara, Saransk, With the aim of reducing commercial for prior years, information does not include ROSSETI’s of Investment Costs is 16.9 billion rubles, Rostov-on-Don, Saint Petersburg, and electricity losses in networks of IDGC subsidiary SDCs: Yargorelektroset, Svet, Tsarskoye Selo exclusive of VAT, for capital assets com- Energy Company, Kurortenergo, Saint Petersburg Power Kaliningrad) are in the area of respon- of Northern Caucasus in the Republic Grid, and Petrodvorets Electric Company. missioned in 2015. sibility of four ROSSETI SDCs (IDGC of Dagestan, the Republic of Ingushetia, of Volga, IDGC of South, LENENERGO, and the Chechen Republic, the Company and Yantarenergo). The construction launched the comprehensive program and rehabilitation of the power supply of measures to reduce above-standard
infrastructure in these cities are included electricity losses in 2011 with plans SOCIAL CORPORATE RESPONSIBILITY in the federally funded program of prepa- to automate 636,216 electricity meters. rations for the 2018 FIFA World Cup. Two other key construction projects are the comprehensive program to renew cable lines of 6–110 kV in Saint Petersburg and the program to reduce commercial electricity losses in networks ADDITIONAL INFORMATION
56 PJSC “ROSSETI” www.rosseti.ru 57 2. STRATEGY REVIEW PJSC “ROSSETI” Investment and Innovation ANNUAL REPORT || 2015 2
The data collection and recording system Priority Projects Planned Long-Range Activities to develop Yantarenergo’s electric grid was put into commercial operation in the to Be Implemented in 2016– facilities until 2020 was formulated. The Republic of Ingushetia in 2015. amount of financing for 2016–2020 is 2020 The high physical depreciation of equip- 16.9 more than 20 billion rubles. The program In seven of 12 electric grid districts in the ment with an expired standard operating received approval from the Government Chechen Republic, construction and life, the need to ensure electricity supply of the Kaliningrad Region; work is installation work was completed. It is BILLION RUBLES, OF VAT In the period from. It is planned reliability for existing customers and underway on receiving approval from planned that the comprehensive program ACTUAL EFFECT OF APPLYING THE to implement 572 capital investment provide network connection for new com- the Ministry of Energy of the Russian in the Republic of Dagestan will be com- TECHNIQUE FOR THE REDUCTION projects from 2016 to 2020, meeting mercial and social facilities, the reduc- tion of tariff-based revenues, and the Federation. pleted in 2016. OF INVESTMENT COSTS the criteria for qualifying as priority projects, including 253 capex projects insufficiency of internal sources make it COMPANY OVERVIEW for transmission grids (FGC UES) and necessary to decide on using federal bud- 1 Approved by Resolution of the Government of the 319 capex projects for distribution get funds for the development of electric Russian Federation No. 309 of April 15, 2014; Information on Spent Federal Budget Funds grids, of which the most significant grids. 2 Approved by Ordinance of the Governor of the Kaliningrad Region No. 242-r of April 30. are the following: Jointly with IDGC of Northern Caucasus, SPENT FEDERAL BUDGET FUNDS BALANCE >> Facilities for supplying capacity from ROSSETI developed comprehensive RECEIVED COMPLETION OF FEDERAL EXPECTED PROGRAM FEDERAL BUDGET Leningrad NPP-2; programs for the development of elec- DATES BUDGET SAVINGS FUNDS TOTAL 2014 2015 % FUNDS >> Facilities for supplying capacity tric grids located in the North Caucasus to Novovoronezh NPP-2; Federal District. The amount of financing Program of Preparations for the 2014–2017 1,473 614 – 614 42% 859 – for 2017–2021 is 49,854.3 million rubles. 2018 FIFA World Cup in Russia >> Facility for supplying capacity
The comprehensive programs received REVIEW STRATEGY to Rostov NPP; Program to Renew Cable Lines 2011–2014 5,000 4,503 651.2 158.1 90% 497 488 approval from all constituent entities of 6–110 kV in Saint Petersburg >> Measures to ensure the reliable of the district. Work is underway on the Comprehensive Program 2011–2016 4,950 3,953 298.6 113.5 80% 997 – operation of Russia’s United Power integration of the comprehensive pro- of Measures to Reduce Above- System with the separation from the grams into Government Program of the standard Electricity Losses Baltic energy systems; Russian Federation “Development of the TOTAL 11,423 9,070 949.8 885.6 79% 2,353 488 >> Facilities securing a reliable electricity North Caucasian Federal District” for the supply for the 2018 FIFA World Cup; period until 2025.1 >> Facilities for providing network Similar work is underway on the mod- connection for large industrial ernization of electricity networks in the Material Events customers; th Kaliningrad Region. Based on the previ- in the 4 Quarter of 2015: GOVERNANCE CORPORATE AND SECURITIES >> Creation of the 20 kV smart electricity ously developed comprehensive program network for the Skolkovo Innovation to develop electricity networks in the Resolution of the Government All funds received from the Center. Kaliningrad Region for 2016–20202 and of the Russian Federation No. Federal Budget for 2015 the long-term development scheme 1076 of October 8, 2015, “On (1,472.8 million rubles) were used the Allocation of Public Funding as payment for placed shares Detailed information about priority proj- and program for the Kaliningrad Region to Public Joint Stock Company in ROSSETI SDCs, specifically ects under the capital investment project electric power sector for 2016–2020 and ROSSETI under Capital Construc- 825.7 million rubles for Yantar- is contained in the Appendix 6.1 to the with due consideration to the current tion Projects […] in Order to Cre- energo, 580.3 million rubles for Annual Report projects for preparations for the 2018 ate the Power Supply Infrastruc- LENENERGO, and 66.8 million FIFA World Cup and measures for new ture for the 2018 FIFA World Cup rubles for IDGC of Volga. construction in relation to supplying in Russia” was issued;
capacity from new generation facilities SOCIAL CORPORATE RESPONSIBILITY More detailed information is contained in the Kaliningrad Region, the program On December 18, 2015, the in Section 6.1 of the Appendix to the Ministry of Energy of the Russian Annual Report. Federation, the Federal Agency for State Property Management of the Russian Federation, and ROSSETI signed a tripartite public funding agreement; ADDITIONAL INFORMATION
58 PJSC “ROSSETI” www.rosseti.ru 59 2. STRATEGY REVIEW PJSC “ROSSETI” Investment and Innovation ANNUAL REPORT || 2015 2 11.9 5
BILLION RUBLES MODE-3 EV CHARGING STATIONS INNOVATIVE DEVELOPMENT EXPENSES INSTALLED IN 2015 IN 2015 COMPANY OVERVIEW STRATEGY REVIEW STRATEGY Innovative In order to achieve this goal, work is done in the following An important result of accomplishing Innovative Development Expenses areas under the Innovative Development Program: the key goals of the Innovative (thousand rubles, inclusive of VAT) Development Development Program is the practical Program use of solutions and technologies, 1 Ensuring the development and introduction of advanced technology and creating the namely focused and comprehensive SDCs 2015 conditions for carrying out innovation projects projects, with their subsequent The goal of the ROSSETI Group’s IDGC of Centre 167,846.4 2 Automating the operation of electric grid facilities commercialization. Innovative Development Program is IDGC of Center and Volga Region 785,820.0 to switch over to a technologically new 3 Implementing pilot projects and solutions >> Pursuant to Instructions of the IDGC of North-West 490,950.0 electric grid with qualitatively new char- President of the Russian Federation No. Building up an efficient management system for innovative development and Pr-3013 of December 9, 2014, the Board GOVERNANCE CORPORATE AND SECURITIES acteristics of reliability, efficiency, afford- 4 IDGC of Urals 726,250.0 streamlining the business process management system of Directors approved the Regulations ability, manageability and customer- for the Procedure for Formulating IDGC of Volga 78,389.0 orientedness in the ROSSETI Group Developing and introducing new energy efficiency technology and making use 5 of modern engineering solutions aimed at energy efficiency enhancement and Implementing the Innovative IDGC of Siberia 1,140,500.0 as a whole. Development Program on November 16, TDC 154,675.3 2015. 6 Developing and improving electricity metering systems IDGC of South 37,131.5 >> The Innovative Development Program Employing up-to-date quality control methods for the management system 7 of ROSSETI is subject to approval by the Kubanenergo 954,919.1 Board of Directors in the 2nd quarter 8 Carrying out the Research and Development (R&D) Program IDGC of Northern Caucasus 169,440.0 of 2016. 9 Minimizing the adverse impact of electric grids on the environment and public health MOESK 470,790.0 CORPORATE SOCIAL CORPORATE RESPONSIBILITY Improving the system of mutually beneficial collaboration with innovative small and LENENERGO 649,620.0 medium-sized businesses and carrying out projects and R&D activities aimed at the 10 Tyumenenergo 853,883.9 development of innovative technologies, products, and services Yantarenergo 31,045.0 Creating the conditions for the development of employees’ competencies in innovation, research, and engineering by improving personnel training programs TOTAL FOR DISTRIBUTION GRIDS 6,711,260.20 11 and providing the Company’s employees with targeted training, advanced training, retraining, and pre-evaluation training FGC UES 5,189,780.,00
Total for ROSSETI SDCs 11,901,040.20 ADDITIONAL INFORMATION
60 PJSC “ROSSETI” www.rosseti.ru 61 2. STRATEGY REVIEW PJSC “ROSSETI” Investment and Innovation ANNUAL REPORT || 2015 2
Major projects under the Innovation program 49
LEGALLY PROTECTED DOCUMENTS AT 9 SUBSIDIARIES NATIONAL PROJECTS COMPANY OVERVIEW Pursuant to Ordinance of the Government of the Russian Federation No. 1217-r of July 3, 54 2014, “On the Approval of the Action Plan (Road Map) ‘Introducing Innovative Technologies and Modern R&D SUBJECTS Materials into the Fuel and Energy AT 11 SUBSIDIARIES Industry Sectors’ for the Period Until 2018,” two national projects were included in the draft of the Innovative
Development Program of ROSSETI for REVIEW STRATEGY 2016–2020: EV Charging Station R&D Goal of R&D: 1. Develop and bring into use an Infrastructure automated protection and control A significant part of the Innovative system for a new generation Switch over to a technologically new electric grid with Development Program is research and of electrical substations (iSAS); Since 2012, ROSSETI has been involved qualitatively new characteristics of reliability, efficiency, in the nationwide program to develop development (R&D). 2. New construction technologies the electric vehicle charging station The formulation of the R&D Program affordability, manageability and customer-orientedness and for overhead power lines using infrastructure. takes account of the challenges faced ensure sustained innovative development towers made of composites. In the reporting year, ROSSETI installed by the electric grid sector and takes into five Mode-3 EV charging stations. consideration the promising innovative
The material prepared by ROSSETI with GOVERNANCE CORPORATE AND SECURITIES areas of R&D. respect to the national projects were approved by the working group on the IN 2015, ON THE INITIATIVE The R&D Program contains measures selection of national projects under OF ROSSETI: to develop breakthrough technologies Russian Minister of Energy A.V. Novak. >> the transport tax on electric vehicles aimed at creating fundamentally new was abolished; products, techniques, and methods and covers practical areas of improving exist- >> the Russian Government issued the ing technologies. resolution allowing to install charging infrastructure at filling stations. CORPORATE SOCIAL CORPORATE RESPONSIBILITY ADDITIONAL INFORMATION
62 PJSC “ROSSETI” www.rosseti.ru 63 2. STRATEGY REVIEW PJSC “ROSSETI” Investment and Innovation ANNUAL REPORT || 2015 2 The main R&D deliverables in 2015 are as follows: 12
R&D PRODUCTS BROUGHT INTO USE AT ELECTRIC GRID FACILITIES COMPANY OVERVIEW STRATEGY REVIEW STRATEGY quick-installed metal tower for OL bridge-type centralized relay pro- protection with improved sensitiv- fire protection for substation As part of improving the system of intro- Financing 35-110 kV for accident recovery tection for standard substations ity and selectivity for the connec- transformers using water mist ducing innovative solutions, including work (IDGC of Siberia) (Tyumenenergo) tion of grounding devices in elec- (FGC UES) deliverables under the R&D Program, The actual amount of financing for the tricity networks rated 6–35 kV ROSSETI formed the Innovation R&D Program, was 727.6 million rubles. (IDGC of Volga) Commission for electric grid facilities, composed of employees from the parent company and subsidiaries. Prospects In 2015, the test operation of 11 R&D products was successfully completed, As a long-range development direction of the R&D management system, the while 12 were brought into use at elec- GOVERNANCE CORPORATE AND SECURITIES tric grid facilities. ROSSETI Group is considering setting up the centralized Foundation for Research, Detailed information about the implementation of the R&D Program is contained in the Annual Development, and Innovation Support Report on the Implementation of the R&D (R&D Foundation) and the Center for Program of the ROSSETI Group in 2015 posted on ROSSETI’s corporate website in the Section Technology Monitoring and Transfer. “Investment and Innovation” — “R&D Program” The R&D Foundation is expected to give added impetus to the development
R&D PROGRAM of R&D due to the possibility of carry- ing out long-term projects with con- firmed financial support from the R&D
Foundation, the possibility of spread- SOCIAL CORPORATE RESPONSIBILITY ing R&D deliverables among all SDCs, and the co-financing of major projects jointly with industry and government software and hardware system completion of the creation TOR 300 ADZ 514 adaptive pro- foundations. for online status diagnostics of a high-temperature supercon- tection terminal for power lines of constructional parts of OL ducting (HTSC) DC cable line rated rated 110–220 kV (Tyumenenergo) 35–220 kV (Tyumenenergo) 20 kV and 2,500 A with a length of up to 2,500 meters (FGC UES) ADDITIONAL INFORMATION
64 PJSC “ROSSETI” www.rosseti.ru 65 2. STRATEGY REVIEW PJSC “ROSSETI” Financial Results ANNUAL REPORT || 2015 2 Financial Results
At the end of 2015, the weighted aver- ROSSETI, together with its subsidiary In the reporting year, the ROSSETI As a result, the Group’s EBITDA reached age value of the loan portfolio of the IDGC of Centre, completed the first Group’s entities worked to ensure finan- 248.9 billion rubles, which is 88.8% companies included in the Common large-scale project in the Russian elec- cial and economic stability and improve higher than in 2014. And the implementa- Treasury was 10.3% per annum, while tric grid sector in 2015 by entering the relevant indicators. Despite a dif- tion of measures to improve the Group’s the average lending rate for nonfinan- into a concession agreement between ficult year in the Russian economy, the operating efficiency brought the EBITDA cial organizations was 13% per annum IDGC of Centre and the Tambov Region ROSSETI Group achieved high results margin to a record 32.5%. COMPANY OVERVIEW according to the Bank of Russia. Administration in relation to electricity by the end of 2015 owing to a well- The IFRS consolidated net profit reached transmission and distribution facilities. balanced policy to increase operating Centralized financing did not lead to an 81.6 billion rubles compared with the The project was awarded the national efficiency and cut costs. increase in the debt burden on the consolidated net loss of 24.3 billion prize ROSINFRA-2015, Russia’s only ROSSETI Group but made it possible Timely tariff indexation and the imple- rubles in the previous year. award instituted by PPP Development to greatly bring down debt service costs. mentation of the government’s initia- Center, in the category “Best PPP Project Our priorities for 2016 will continue As part of centralized financing, funds tives to regulate the industry allowed in Energy”. to include controlling counterparties’ were provided to IDGC of Centre, IDGC us to increase revenues from electricity payment discipline and maintaining the of Urals, Kubanenergo, IDGC of South, We hope that the year 2016 will be no transmission and distribution to 650.4 stable financial condition of our key sub- IDGC of North-West, and Yantarenergo. less successful for ROSSETI and we will billion rubles. Combined with an increase sidiaries, which is a prerequisite for the The economic effect of centralized bor- make every effort to achieve this result!! in other revenues, this offset decreased successful achievement of the ROSSETI
rowings within the Common Treasury revenues from electricity sales due to the REVIEW STRATEGY Group’s goals. exceeded 2.3 billion rubles. termination of certain subsidiaries’ sup- Very truly yours, plier of last resort functions. As a result, More detailed information about our eco- On June 8, 2015, ROSSETI placed the Deputy Director General for Finance total revenues for the period grew nomic and financial achievements in 2015 Yegor debut issue of Series BO-04 exchange- Yegor Prokhorov Oksana to 766.8 billion rubles. can be found below in this section. Prokhorov traded bonds totaling 10 billion rubles. Shatokhina ROSSETI raised 6 billion rubles in bonds We were able to reduce (Series BO-06) from Vnesheconombank Very truly yours, Deputy General Director for Finance Deputy Director General for Economic Affairs operating expenses by Deputy Director General for Economic Affairs on December 8, 2015, callable after Oksana Shatokhina 30 years, with a coupon rate of 10.29%. 14.1% compared with ROSSETI’s financial activities evolved ROSSETI offered the lowest coupon rate 2014, largely because of the among all Russian corporate borrow- in 2015 as expected and reached a quali- implementation of the GOVERNANCE CORPORATE AND SECURITIES ers in 2015, while the borrowing term is tatively new level, capitalizing invested program to improve operating efforts and the results of prior years. 30 years. The Group set up the Common Treasury As regards international cooperation, efficiency and reduce costs to centralize its cash flow management. ROSSETI continued consistent work in the ROSSETI Group’s This made it possible to increase the in the capital markets of the Asia-Pacific entities transparency of the Group’s financial region, especially on the possible place- flows due to effective control of large ment of its Eurobonds on major Asian payments made by ROSSETI subsidiaries, exchanges and building up dialog with build an effective system for monitoring local financial institutions and inves- the implementation of the cash flow bud- tors. get, create a centralized infrastructure CORPORATE SOCIAL CORPORATE RESPONSIBILITY to raise funding, and introduce mecha- Additionally, we carried out large- nisms for intragroup financing. scale measures to consolidate Saint Petersburg’s electric grids; for instance, The centralization and coordination Saint Petersburg Power Grid, the city’s of measures to raise funding at the level third largest electric utility behind of the parent company, ROSSETI, within LENENERGO and Petrodvorets Electric the Common Treasury allowed us to keep Company, joined the ROSSETI Group. the borrowing costs of the distribu- tion companies included in the Common Work continued on selling noncore Treasury at a level substantially below assets, which has been one of our priori- the market average. In addition, the debt ties since 2010.
burden was reduced. ADDITIONAL INFORMATION
66 PJSC “ROSSETI” www.rosseti.ru 67 2. STRATEGY REVIEW PJSC “ROSSETI” Financial Results ANNUAL REPORT || 2015 2
Tariff Policy Priorities Main Changes in the Characteristics of Tariff The distribution of costs in the electric- Tariffs of Electricity Regulatory Framework for Regulation ity distribution tariff in 2015 was marked Distribution Services The goals of the tariff policy are to pro- by an increase in costs incurred by other ENSURE LONG-TERM AND Tariff Regulation in 2015 territorial grid organizations and by a rise vide operating and investing activities ROSSETI SDCs are subject to long- in costs associated with compensation with financing sources and achieve TRANSPARENT TARIFF term tariff regulation methods: return THE WEIGHTED AVERAGE POOL 28.02.2015 for electricity losses. attractive return on invested capital. REGULATION on invested capital method (RAB) and TARIFF OF ELECTRICITY long-term minimum regulated revenue Criteria were approved in relation DISTRIBUTION SERVICES IN THE indexation method. Each regulation IMPROVE TARIFF REGULATION to qualifying owners of electric grid facili- EXISTING AGREEMENT SYSTEM method is selected by the regula- TRANSPARENCY ties as territorial grid organizations4. tor upon agreement with the Federal WAS 1.25 RUBLES PER KWH COMPANY OVERVIEW 11.05.2015 Antimonopoly Service of the Russian IN 2015, OR 7% HIGHER THAN Federation1. IN 2014 PRINCIPLES OF THE ROSSETI TARIFF POLICY The procedure was changed in relation 1 Resolution of the Government of the Russian to determining the volume of capacity Federation No. 1178 of December 29, 2011 UNIFORM METHODOLOGY purchased in the wholesale market for households and the equivalent cat- egories of customers and in relation >> tariff setting is based on the current guidelines, regulations, and standards governing to determining the volume of capacity Distribution of Long-Term Tariff 2015 31% the activities of SDCs purchased by the management organiza- Regulation Methods in 2011– 69% tion of the Unified National (All-Russian) 2015 2014 32%
ECONOMICALLY FEASIBLE TARIFFS REVIEW STRATEGY Electric Grid (UNEG)5. 68%
>> minimum regulated revenue from electricity distribution services and network The Pricing Fundamentals in the Area Long-term indexation 2013 32% connection services provides SDCs with the necessary resources for regulated activities of Regulated Prices (Tariffs) in the 68% RAB regulation Electric Power Industry were amended. 2012 32% LONG-TERM PLANNING Cost-plus pricing 68% 07.07.2015 2011 12% >> production costs and profits from electricity distribution services and network The Pricing Fundamentals in the Area 85% connection services are calculated in the long term, taking into account possible 3% of Regulated Prices (Tariffs) in the adjustments to minimum regulated revenue Electric Power Industry were amended6.
TRANSPARENCY 30.12.2015 GOVERNANCE CORPORATE AND SECURITIES
>> the transparency and accessibility of information on tariff regulation and ways Article 23.2 of the Federal Law “On the 7 Distribution of Costs in the +4% 673 to improve it provides customers with all necessary information Electric Power Industry” was amended . 637 +2% 648 Electricity Distribution Pool Tariff, +8% 584 +2% 593 97 billion rubles +16% 96 –1% 95 +2% 1 4 The Federal Tariff Service of the Russian Decree of the President of the Russian Federation Resolution of the Government of the Russian 502 93 –8% 86 +12% No. 373 of July 21, 2015.; 125 Federation ceased to exist in July 2015, Federation No. 184 of February 28, 2015; +20% 119 +4% 123 +2% 2 Resolution of the Government of the Russian Federation 5 Resolution of the Government of the Russian 116 +3% 78 111 +4% and its functions were transferred No. 941 of September 4, 2015.; Federation No. 458 of May 11, 2015; Loses +21% 1 –1% 138 to the Federal Antimonopoly Service . 3 Ordinance of the Government of the Russian Federation 6 Resolution of the Government of the Russian 92 141 –1% 140 Territorial grid organizations 133 +6% On September 4, 2015, approval was No. 1785-r of September 11, 2015. Federation of No. 1079 October 9, 2015; +26% 128 +4% 7 SOCIAL CORPORATE RESPONSIBILITY given to the rules whereby the Federal Federal Law No. 450-FZ of December 30, 2015. UNEG 102 313 281 +3% 290 +8% Antimonopoly Service decides on tariff Minimum regulated revenue for +9% 251 +3% 258 +9% 230 setting and tariff ceilings, and a collegial maintenance of electric grid facilities body was established for such deci- sions2. Several days later, the members of the collegial body of the Federal Antimonopoly Service were appointed3. 2010 2011 2012 2013 2014 2015 ADDITIONAL INFORMATION
68 PJSC “ROSSETI” www.rosseti.ru 69 81,6 МЛРД РУБ.
2. STRATEGY REVIEW PJSC “ROSSETI” Financial Results ANNUAL REPORT || 2015 2
Review of Financial Results Weighted Average Pool Tariff of Electricity Distribution Services 125 117 This review of financial results is No. 458 of May 11, 2015, and Resolution 81.6 in 2008–2015, kopecks/kWh 106 based on the ROSSETI Group’s of the Government of the Russian 97 96 audited consolidated financial results Federation No. 184 of February 28, 2015, 86 BILLION RUBLES for the year ended December 31, “On Deeming the Owners of Electric 68 2015 in accordance with IFRS. The Grid Facilities to Be Territorial Grid NET PROFIT 55 consolidated results include the Organizations” and from other revenue financial performance of subsidiaries increased by 12.9 billion rubles, largely
expenses, mainly due to measures COMPANY OVERVIEW and dependent companies. because of the performance of services implemented under the Program under construction project contracts for to Improve the Operating Efficiency electric grid facilities and under capital of the ROSSETI Group, partial reversal Consolidated Key construction contracts. 2008 2009 2010 2011 2012 2013 2014 2015 of impairment losses in relation to fixed Financial Indicators Consolidated EBITDA totaled 248.9 assets with tariff and balancing deci- billion rubles in 2015, or 117.1 billion sions taken into consideration, and The ROSSETI Group’s consolidated rubles higher than in the previous year. a decrease in depreciation deductions. revenue rose by 0.9% to 766.8 billion The EBITDA margin reached 32.5%, Tariff Rates of Electricity rubles in 2015 compared with its revenue which is a change of 15.1 percentage earned in 2014 (759.6 billion rubles). points compared with 2014. Distribution Services Related 144,687 STRATEGY REVIEW STRATEGY to Maintenance of Electric Grid 134,964 The rise in revenue resulted from The consolidated net profit was Facilities, UNEG, 2009–2015, 116,783 increased income from electricity distribu- 81.6 billion rubles in 2015 compared 134,589 rubles/MWm 123,328 tion due to the indexation of electricity with a loss of 24.3 billion rubles in the 111,083 distribution tariffs from July 1, 2015, and previous year. The increase in this indica- due to the effects of Resolution of the 87,869 tor in the reporting period is primarily Government of the Russian Federation due to a 14.1% decrease in operating 58,159 Financial and Economic Performance Indicators of the ROSSETI Group, million rubles
2009 2010 01.01.2011 – 01.04.2011 – 01.07.2012 – 01.07.2013 – 01.01.2015 – 01.07.2015 – INDICATOR 2014 2015 % VS. 2014 GOVERNANCE CORPORATE AND SECURITIES 31.03.2011 30.06.2011 30.06.2013 31.12.2014 31.06.2015 31.12.2015 Revenue 759,608 766,812 0.9
Operating expenses (759,805) (652,538) (14.1) On July 1, 2015, tariff indexation of 7.5% was applied to electricity distribu- EBITDA 131,834 248,942 88.8 Adjusted EBITDA tion services related to maintenance 249,029 273,080 9.7 of UNEG electric grid facilities (tariff rates EBITDA margin1 17.4% 32.5% 15.1 pp changed by 7.2% compared with the end of 2014). Adjusted EBITDA margin 32.8% 35.6% 2.8 pp Profit/(loss) for the period (24,257) 81,602 –
1 2 Order of the Federal Tariff Service of the Russian Adjusted net profit for the period 69,499 100,912 45.2 SOCIAL CORPORATE RESPONSIBILITY Federation No. 297-e/3 of December 9, 2014. Adjusted net profit margin 9.1% 13.2% 4.1 pp
Net cash flow from operating activities 160,676 156,688 (2.5)
1 Adjusted EBITDA is calculated as EBITDA (earnings 2 Adjusted net profit is calculated as net profit for the before interest, tax, depreciation, and amortization for period excluding losses from impairment of fixed assets, the reporting period) excluding losses from impairment impairment of investments, impairment of accounts of fixed assets, impairments of financial investments and receivable and deferred income tax expense related impairment of accounts receivable.; to them. ADDITIONAL INFORMATION
70 PJSC “ROSSETI” www.rosseti.ru 71 2. STRATEGY REVIEW PJSC “ROSSETI” Financial Results ANNUAL REPORT || 2015 2
Revenue Revenue from electricity distribution rose Operating Expenses by 4.9% on 2014 to 650.4 billion rubles, Employee benefits increased by 7.8 largely due to the indexation of electric- The ROSSETI Group’s revenue is deter- Operating expenses went down by billion rubles, or 5.0% compared with ity distribution tariffs from July 1, 2015, +4.9% –14.1% mined by changes in electricity con- 14.1% in 2015 compared with 2014 2014, which is considerably lower than due to the effects of Resolution of the sumption and electricity transmission to 652.5 billion rubles. The decrease the inflation rate. The increase was due Government of the Russian Federation and distribution tariffs. In addition, the NCREASE IN ELECTRICITY in operating expenses in 2015 was to the indexation of production personnel DECREASE IN OPERATING No. 458 of May 11, 2015, and Resolution change in revenue in 2015 was affected DISTRIBUTION REVENUE primarily caused by measures imple- pay as required under the Sectoral Wage EXPENSES IN 2015 of the Government of the Russian by a decrease in revenue from electricity mented under the Program to Improve Rate Agreement. Depreciation deduc- Federation No. 184 of February 28, 2015, sales due to the supplier of last resort the Operating Efficiency of the ROSSETI tions went down by 25.4 billion rubles, in connection with the supplier of last
“On Deeming the Owners of Electric COMPANY OVERVIEW functions transferred by certain sub- Group, the absence of significant impair- or 20.2% compared with 2014, largely Grid Facilities to Be Territorial Grid Revenue by Reportable resort functions transferred by certain sidiaries of ROSSETI to winning bidders ment of fixed assets, partial reversal because of upward revision of the use- Organizations,” and due to the changed Segment subsidiaries of ROSSETI, which, among of the supplier of last resort bidding of impairment losses with tariff and ful life of certain assets included in the system of pool-based mutual payments. other things, offset higher expenses procedures as determined by the Russian balancing decisions taken into consid- Power Lines group. The Group has identified 14 reportable related to electricity purchases for com- Ministry of Energy. Consolidated revenue The rise of 12.9 billion rubles in other eration, and a decrease in depreciation segments. which are the Group’s strate- The decrease of 5.0 billion rubles, or pensation for losses due to the increased in 2015 increased by 0.9% on 2014 revenue was mainly due to higher rev- deductions. gic business units. The strategic business 3.0% compared with 2014, in tan- cost of electricity purchases for compen- to 766.8 billion rubles. enue from the performance of services units provide electricity transmission gible costs was due to lower purchase sation for losses. under construction project contracts for The Group’s revenue from electricity and and distribution and network connection expenses related to electricity for sale electric grid facilities. capacity sales decreased by 35.4% com- services in 78 constituent entities of the pared with 2014 to 55.9 billion rubles. Russian Federation.
The decrease was due the supplier Operating Expenses by Cost Item, million rubles REVIEW STRATEGY of last resort functions transferred by The following companies account certain subsidiaries of ROSSETI to win- for a significant share in the Group’s INDICATOR 2014 2015 % VS. 2014 ning bidders of the supplier of last resort consolidated revenue: bidding procedures as determined by the Employee benefits 155,155 162,911 5.0 Russian Ministry of Energy. >> MOESK, 17.3% Depreciation and amortization 125,910 100,529 (20.2) >> IDGC of Centre, 10.5% Impairment/(reversal of impairment) of fixed assets 81,690 (5,090) - >> IDGC of Center and Volga Region, 9.0% Tangible costs (including electricity) 167,607 162,558 (3.0)
Production work and services 144,384 141,668 (1.9) Revenue by Segment, million rubles Impairment of receivables 18,872 28,778 52.4 CORPORATE GOVERNANCE CORPORATE AND SECURITIES
Taxes and levies except profit tax 14,738 17,637 19.7 INDICATOR 2014 2015 % VS. 2014 Reserves 12,043 3,902 (67.6) Electricity transmission and distribution 620,022 650,376 4.9 Other 39,406 39,645 0.6 Network connection services 36,473 34,165 (6.3) TOTAL 759,805 652,538 (14.1) Electricity resale 86,516 55,913 (35.4)
Other revenue 12,484 25,354 103.1
Government subsidies 4,113 1,004 (75.6)
TOTAL 759,608 766,812 0.9 CORPORATE SOCIAL CORPORATE RESPONSIBILITY ADDITIONAL INFORMATION
72 PJSC “ROSSETI” www.rosseti.ru 73 2. STRATEGY REVIEW PJSC “ROSSETI” Financial Results ANNUAL REPORT || 2015 2
EBITDA under the Program to Improve the Assets Long-term receivables went up by 9.6 bil- Operating Efficiency of the ROSSETI lion rubles in 2015 due to activated A reduction in operating expenses and Group and the reversal of impairment The book value of the ROSSETI Group’s network connection services provided losses in relation to fixed assets with 32.5% to generation facilities with payment +8.1% a rise in consolidated revenue allowed assets as at December 31, 2015, stood the Group to improve EBITDA by 88.8% tariff and balancing decisions taken into at 2,145.8 billion rubles, or 8.1% higher in long-term installments. consideration. compared with 2014 to 248.9 bil- EBITDA MARGIN than in 2014. The structure of non-current assets THE BOOK VALUE OF THE ROSSETI lion rubles. The principal factors in the The EBITDA margin rose from 17.4% Non-current assets increased by 6.8% changed insignificantly in 2015. GROUP’S ASSETS INCREASE growth were measures implemented in 2014 to 32.5% in the reporting period. to 1,811.2 billion rubles. Changes Current assets increased by 16.4% in increased non-current assets were to 334.6 billion rubles in 2015. Changes COMPANY OVERVIEW caused by a rise in the value of fixed in the value of current assets were EBITDA Analysis, million rubles assets due to the commissioning of capi- caused by increased inventories due tal assets under the capital investment to certain subsidiaries’ switching over INDICATOR 2014 2015 % VS. 2014 program. to using in-house resources for repair Profit/(loss) for the period (24,257) 81,602 – The value of other long-term investments operations, a rise in other investments and financial assets because of cash Depreciation and amortization 125,910 100,529 (20.2) and financial assets increased by 9.0 billion rubles, largely due to an increase placed on deposit in banks, increased Interest paid under financial obligations with amortized cost 23,804 34,607 45.4 in the value of financial assets because trade and other receivables due to a rise Interest paid under finance lease obligations 169 94 (44.4) of a rise in the fair value of Inter RAO in prepayment under construction con- tracts, and increased cash due to the Expense tax income 6,208 32,110 417.2 shares.
proceeds from federal loan bonds sold by REVIEW STRATEGY EBITDA 131,834 248,942 88.8 LENENERGO. Adjusted EBITDA 249,029 273,080 9.7
EBITDA margin 17.4% 32.5% 15.1 pp Structure of Non-Current Assets, million rubles Adjusted EBITDA margin 32.8% 35.6% 2.8 pp
INDICATOR 2014 2015 % VS. 2014
Fixed assets 1,643,586 1,734,044 5.5
Cash Flows Intangible assets 14,300 18,532 29.6
Investments in associates and joint ventures 1,627 1,489 (8.5)
Free cash flow decreased by 6,145 million rubles on 2014, largely due GOVERNANCE CORPORATE AND SECURITIES to the decrease in cash flows from operating activities at the result Nin-current receivables 6,971 16,572 137.7 of increase of unpaid percent for loans. Other investments and financial assets 22,952 31,928 39.1
Deferred tax assets 7,117 8,579 20.5
TOTAL NON-CURRENT ASSETS 1,696,553 1,811,144 6.8 Cash Flows, million rubles
INDICATOR 2014 2015 % VS. 2014 Structure of Current Assets, million rubles Net cash flows from operating activities before working capital changes, tax, and 235,593 242,840 3.1 interest
INDICATOR 2014 2015 % VS. 2014 SOCIAL CORPORATE RESPONSIBILITY Net cash flows from operating activities 160,676 156,688 (2.5) Inventories 26,630 33,921 27.4 Net cash flows from investing activities (166,290) (174,519) 4.9 Other investments and financial assets 17,908 36,777 105.4 Net cash flows from financing activities 26,273 32,345 23.1 Current income tax prepayments 4,636 4,201 (9.4) Free cash flow 20,659 14,514 (29.7) Trade and other receivables 155,776 162,624 4.4
Cash and cash equivalents 82,576 97,090 17.6
TOTAL CURRENT ASSETS 287,526 334,613 16.4 ADDITIONAL INFORMATION
74 PJSC “ROSSETI” www.rosseti.ru 75 2. STRATEGY REVIEW PJSC “ROSSETI” Financial Results ANNUAL REPORT || 2015 2
Equity and Liabilities payables accounting for 67.0% of total Structure of Current Liabilities, million rubles current liabilities. The Group’s equity increased by Non-current liabilities in the reporting +12.5% INDICATOR 2014 2015 % VS. 2014 130.1 million rubles in 2015, or 12.5% period rose by 14.0 billion rubles, or Loans and borrowings (short-term) 93,227 118,832 27.5 on 2014, to 1,168.9 billion rubles. 2.5%, and reached 577.2 billion rubles THE GROUP’S EQUITY INCREASE Trade and other payables (short-term) 268,469 267,972 (0.2) The key factor contributing to changes at the end of 2015. The Group’s long- in the Group’s equity was the decision term loans and borrowings decreased Provisions 18,871 11,421 (39.5) to increase the share capital of ROSSETI by 20.0 billion rubles, or 4.1%. Changes Current tax liabilities 1,547 1,495 (3.4) by placing additional uncertificated regis- in long-term loans and borrowings
TOTAL CURRENT LIABILITIES 382,114 399,720 4.6 COMPANY OVERVIEW tered ordinary shares, resulting in estab- were due to long-term loans reclassi- lishing a reserve for issue of shares fied as short-term loans with respect in the amount of 33.5 billion rubles. to repayment dates, which was substan- tially offset by the issue of long-term In addition, retained earnings went up bonds. Financial Stability and Loan Portfolio by 64.6 billion rubles in 2015, or 16.8% on 2014, due to the ROSSETI Group’s The rise of 17.6 billion rubles, or 4.6%, As of December 31, 2015, the Company’s consolidated net debt –1.8% profit earned in 2015. in current liabilities in 2015 was substan- decreased by 1.8% on 2014 to 87.2 billion rubles. The decrease in net tially due to short-term loans and bor- debt was due to a 17.6% increase in cash and cash equivalents. CONSOLIDATED NET DEBT DECREASE The structure of liabilities changed insig- rowings increased by reclassifying some nificantly in 2015, with loans and bor- long-term loans as short-term loans with rowings representing a substantial share respect to repayment dates. REVIEW STRATEGY in non-current liabilities (80.6%) and Analysis of Gross Debt
INDICATOR 2014 2015 % VS. 2014 Structure of Equity, million rubles Long-term debt 485,409 465,439 (4.1)%
Short-term debt 93,227 118,832 27.5% INDICATOR 2014 2015 % VS. 2014 Gross debt 578,636 584,271 1.0% Share capital 163,154 163,154 0.0 Long-term debt, % 84% 80% (4 pp) Share premium 212,978 212,978 0.0 Cash and cash equivalents 82,576 97,090 17.6% Treasury shares (2,725) (2,713) (0.4) Net debt 496,060 487,181 (1.8) GOVERNANCE CORPORATE AND SECURITIES Reserve for issue of shares 0 33,473 –
Other reserves (3,981) (2,100) (47.2)
Retained earnings (uncovered loss) 383,554 448,120 16.8 Key Financial Ratios Total equity attributable to equity holders of the Company 752,980 852,912 13.3
Non-controlling interest 285,824 315,983 10.6 INDICATOR 2013 2014 2015 TOTAL EQUITY 1,038,804 1,168,895 12.5 Adjusted EBITDA margin 30.8% 32.8%
Operating expenses/revenue 120.7% 100.0% 85.1%
Net Debt / Adjusted EBITDA 2.1 2.0 1.8 SOCIAL CORPORATE RESPONSIBILITY Structure of Non-Current Liabilities, million rubles Debt/ Adjusted EBITDA 2.4 2.3 2.1
INDICATOR 2014 2015 % VS. 2014 Current ratio 0.93 0.75 0.84 Financial leverage 0.83 0.91 0.84 Loans and borrowings 485,409 465,439 (4.1) Long-term loans/gross debt 89% 84% 80% Trade and other payables 17,851 22,075 23.7
Employee benefits 25,512 29,473 15.5
Deferred tax liabilities 34,389 60,155 74.9
TOTAL NON-CURRENT LIABILITIES 563,161 577,142 2.5 ADDITIONAL INFORMATION
76 PJSC “ROSSETI” www.rosseti.ru 77 2. STRATEGY REVIEW PJSC “ROSSETI” Financial Results ANNUAL REPORT || 2015 2
Credit Ratings ROSSETI’s international credit rating major companies, including downgrad- Program for Disposing ROSSETI’s Noncore Assets THE REGISTER OF NONCORE from Standard & Poor’s corresponds ing ROSSETI’s credit rating to Ba2 and of Noncore Assets ASSETS CONTAINS 13 NONCORE to the sovereign rating FGC UES’s credit rating to Ba1. The The Company is active in cooperating Capital assets and construction- ASSETS, SIX OF WHICH ARE credit ratings of LENENERGO, MOESK, with leading international rating agen- After Standard & Poor’s downgraded the The disposal of the Company’s noncore in-progress facilities intended for IDGC of Volga, IDGC of Urals, and IDGC use other than the generation, SUBJECT TO RETAINED cies: Moody’s, Standard & Poor’s, and Russian Federation’s rating to BB+, the assets is governed by the Strategy for of Center and Volga Region remained transmission, dispatching, and OWNERSHIP (AS ASSETS Fitch Ratings. In accordance with the credit ratings of ROSSETI and FGC UES, Disposing of Noncore Assets of ROSSETI distribution of electricity and methodologies of the international at Ba2 in 2015. s1 SUPPORTING THE COMPANY’S and MOESK and IDGC of Centre, were and Subsidiarie and Dependent heat; rating agencies, ROSSETI and its SDCs also downgraded to BB+ and BB- respec- Fitch downgraded by one notch the credit Companies of ROSSETI and the Register CORE ACTIVITIES) AND SEVEN OF qualify as government-linked compa- tively in early 2015. rating of FGC UES to BBB-, while MOESK’s (Sale Program) of Noncore Assets Shares, issue-grade securities WHICH ARE SUBJECT TO SALE nies. Consequently, the credit ratings rating remained at BB+. of ROSSETI2. convertible into shares, and COMPANY OVERVIEW of the Group’s entities are closely tied No rating action was associated shareholdings in organizations The plans to sell such assets involve to the sovereign rating of the Russian with the ROSSETI Group’s own Receiving credit ratings from that are not engaged in the gen- making disposal decisions by the end Federation. creditworthiness in 2015, which international credit rating agencies eration, transmission, dispatch- of 2016 and selling them by the end ing, distribution, and retailing Against a background of instable foreign evidences the Group’s stable financial enables the Company and its of 2017. of electricity and heat. policy, sanctions against some Russian condition subsidiaries to be increasingly Noncore assets were not sold in 2015. attractive to investors and pursue an entities and individuals, and the dete- During 2015, Moody’s downgraded the In the reporting period ROSSETI effective borrowing policy in public 3 riorating economic situation, the inter- Russian Federation’s sovereign rating METHODS FOR DISPOSING decided to sell an ownership interest capital markets. national rating agencies in 2015 revised twice: first, to Baa3; second, to Ba1. OF NONCORE ASSETS in the office building located at: Nizhni the sovereign rating for the Russian Novgorod, bulvar Mira, 14, and entered The Russian Federation’s sovereign rating >> Sale of assets on a priority basis (in
Federation and the credit ratings for relation to assets for which the period into agreements to appraise shares REVIEW STRATEGY downgraded by Moody’s resulted in down- Russia’s largest companies, including the of sale is determined); in Urals Power Engineering Company, ROSSETI Group’s entities. grading the credit ratings of Russian Volga Power Engineering Center, and >> Retained ownership of assets for the ZARUBEZHENERGOSTROY. purpose of their future designated use. 1 Approved by the Board of Directors on June 22, Disposing of noncore assets aims ROSSETI Group Credit Ratings as of December 31, 2015 2010; Minutes of the Meeting No. 37; to reduce expenses associated with the 2 A restated version was approved by the Board maintenance and management of non- of Directors on October 30, 2015; Minutes of the Meeting No. 206; CURRENT CREDIT RATING core assets, earn proceeds from the sale COMPANY INITIAL ASSIGNMENT DATE 3 As approved b3y the Board of Directors MOODY’S S&P FITCH of such assets, and receive high-quality on December 25, 2015; Minutes of the Meeting (exclusive) services supporting the core No. 217. ROSSETI Ba2 ВВ+ _ July 2010/March 2014
activities. GOVERNANCE CORPORATE AND SECURITIES February June October Information about the sale of noncore FGC UES Ва1 ВВ+ ВВВ- 2006 2004 2013 assets in 2015 is contained in Section 6.14 of the Appendix to the Annual October January August MOESK Ва2 ВВ- BB+ 2007 2012 2013 Report.
IDGC of Centre _ ВВ- _ November 2009
IDGC of Volga Ва2 _ _ October 2012
IDGC of Center and Volga Region Ва2 _ _ October 2012
IDGC of Urals Ва2 _ _ October 2012
LENENERGO Ва2 _ _ November 2009 CORPORATE SOCIAL CORPORATE RESPONSIBILITY ADDITIONAL INFORMATION
78 PJSC “ROSSETI” www.rosseti.ru 79 2. STRATEGY REVIEW PJSC “ROSSETI” Financial Results ANNUAL REPORT || 2015 2
Operating Efficiency and Cost Reduction Reduction of Operating Expenses: Results Achieved in 2013–2015
of the ROSSETI Group YEAR REGULATORY FRAMEWORK IN ABSOLUTE IN RELATIVE TERMS, % TERMS, BILLION RUBLES Measures to Reduce action plans to improve the operating Targets of the Strategy for Operating Expenses and efficiency and financial and economic con- Development of the Electric Grid Sector 2013 Instructions of the Ministry of Energy of the Russian Federation 19.5 13.3 (vs. 2010) dition, approved by their boards of direc- of the Russian Federation: 2014 Strategy for Development of the Electric Grid Sector of the Russian Federation 23.1 13.5 Their Implementation Results tors, and reports on their implementation >> reduction of operating expenses Instructions of the Prime Minister of the Russian Federation, Directive of the Government are reviewed on a quarterly basis. by 15% by 2017, adjusted for In recent years, the electric grid section 2014 of the Russian Federation regarding the reduction of general and administrative 9.5 17.5 inflation, compared with 2012, per unit expenses by at least 15% of their actual value in 2013 COMPANY OVERVIEW has been substantially affected by accu- Pursuant to Directive of the Government of maintained electrical equipment; mulated systemic problems: an increased of the Russian Federation No. 3984p- 2015 Strategy for Development of the Electric Grid Sector of the Russian Federation 43.1 25.3 (vs. 2012) P13 of June 24, 2015, the Company >> reduction of specific investing burden of cross-subsidies, reduced Directive of the Government of the Russian Federation “On the Annual Reduction 2015 26 12.1 (with the target of 2–3%) electricity consumption, a rise in network developed the Schedule of Improving expenses by 30% compared with 2012 of at Least 2–3 Percent in Operating Expenses (Costs)” connection on preferential terms without the Operating Efficiency and Reducing (in rubles per physical unit: kilometers, MVA); full reimbursement for expenses, and Expenses of ROSSETI, approved by the a growth in the volume of maintained Board of Directors. The document is >> reduction of electricity losses by 11% connected reserve capacity that is not fundamental to improving operating by 2017 compared with 2012. Pursuant to Directive of the Government of the Russian efficiency and reducing costs in ROSSETI paid for by customers. Federation No. 2303p-P13 of April 16, 2015, “On the Annual SDCs and their subsidiaries and regu- The main areas of measures In recent years, the electric grid section lates the procedure for formulating and Reduction of at Least 2–3 Percent in Operating Expenses to improve operating efficiency and REVIEW STRATEGY has been substantially affected by accu- carrying out the Program to Improve reduce costs are as follows: (Costs),” the ROSSETI Group reduced per-unit operating mulated systemic problems: an increased the Operating Efficiency and Reduce >> raise workforce productivity (optimize burden of cross-subsidies, reduced Expenses of the ROSSETI Group. expenses by 12.1%, or 26 billion rubles, in 2015 compared electricity consumption, a rise in network the organizational and functional connection on preferential terms without ROSSETI SDCs and their subsidiaries structures of management, reduce with 2014, while the target was 2–3%. full reimbursement for expenses, and developed the schedules of improving the number of administrative and managerial employees, and curb the a growth in the volume of maintained the operating efficiency and reducing growth of pay for administrative and connected reserve capacity that is not expenses, approved by their boards of directors, whereby they will formulate managerial employees by not applying paid for by customers. wage indexation and by linking pay the programs to improve the operat- to managers’ performance); TARGETS FOR 2016: ROSSETI’s management formulated ing efficiency and reduce expenses for >> update standards of costs based GOVERNANCE CORPORATE AND SECURITIES and approved the action plan 2016–2020. on the commissioning of new equipment, to improve the operating efficiency Measures to increase operating effi- update technical charts of production and ensure the financial soundness ciency aim to achieve the key targets processes, improve the efficiency of the ROSSETI Group in the of the Strategy for Development of the of procurement procedures, and cut 15% 3% current macroeconomic conditions, Electric Grid Sector of the Russian general and administrative expenses); subsequently approved by the Federation approved by Ordinance of the >> enhance energy efficiency (modernize REDUCE PER-UNIT OPERATING REDUCE PER-UNIT OPERATING Strategy Committee of the Board Government of the Russian Federation electricity billing metering systems, EXPENSES BY AT LEAST 15%, EXPENSES BY 3% PURSUANT of Directors of ROSSETI. The No. 511–r of April 3, 2013, and Directive decrease noncontractual and unbilled ADJUSTED FOR INFLATION, COM- TO DIRECTIVE OF THE GOVERNMENT implementation of the plan in the of the Government of the Russian electricity consumption, ensure the current macroeconomic conditions is Federation No. 2303p-P13 of April conservation and efficient use of fuel PARED WITH 2012 PURSUANT TO THE OF THE RUSSIAN FEDERATION NO.
a priority for ROSSETI. 16, 2015, “On the Annual Reduction and energy based on the commissioning STRATEGY FOR DEVELOPMENT OF THE 2303P-P13 OF APRIL 16, 2015, SOCIAL CORPORATE RESPONSIBILITY of innovative equipment); In accordance with the approved action of at Least 2–3 Percent in Operating ELECTRIC GRID SECTOR OF THE “ON THE ANNUAL REDUCTION Expenses (Costs)”. plan to improve the operating efficiency >> improve financial stability (manage RUSSIAN FEDERATION APPROVED BY OF AT LEAST 2–3 PERCENT and ensure the financial soundness the loan portfolio and increase ORDINANCE OF THE GOVERNMENT IN OPERATING EXPENSES (COSTS)” the effectiveness of receivables of the ROSSETI Group, ROSSETI SDCs OF THE RUSSIAN FEDERATION NO. and their subsidiaries formulated the management). 511–R OF APRIL 3, 2013 ADDITIONAL INFORMATION
80 PJSC “ROSSETI” www.rosseti.ru 81 CORPORATE GOVERNANCE AND SHARE CAPITAL 3
43 MEETINGS OF THE BOARD OF DIRECTORS DEALING WITH 194 ISSUES 4 BOND LOANS TOTALING 31 BILLION RUBLES CONTROLLING AND MANAGING RISKS TO GAIN WIDER APPEAL AMONG INVESTORS
Our goal is to respect the interests of all shareholders. Our benchmark is global best practices in corporate governance. 3. CORPORATE GOVERNANCE AND SECURITIES PJSC “ROSSETI” Corporate Governance System ANNUAL REPORT || 2015 3 Corporate Governance System Principles of Governance
ROSSETI is a unique public holding EXTENSIVE WORK WAS DONE ROSSETI views governance as an integral The Company strives to build a corporate company with a corporate governance IN 2015 ON IMPROVING and inseparable part of the sustainability governance system in accordance with system as an essential component, which strategy and as a means of improving the laws of the Russian Federation, best includes the management of fifteen major CORPORATE GOVERNANCE. the efficiency of its operations, build- practices in governance, and the Listing electric grid companies, thirteen of which WE FORMULATED THE ROAD ing up its reputation, and making the Rules of the Moscow Exchange.
are traded in the securities market. MAP TO INTRODUCE THE Company more attractive to investors COMPANY OVERVIEW The corporate governance structure CORPORATE GOVERNANCE of ROSSETI and its subsidiaries includes CODE RECOMMENDED the general meetings of shareholders, Key Principles of the Corporate Governance Code1 boards of directors, and executive and BY THE BANK OF RUSSIA. controlling bodies. Their activities, rights, THE DOCUMENT CONFORMS In its letter of April 2014, the Bank and obligations are governed by the TO NOT ONLY RUSSIAN LAWS of Russia recommended that joint-stock requirements of corporate legislation, ACCOUNTABILITY TRANSPARENCY companies whose securities are admit- the securities market, and the system BUT ALSO GLOBAL BEST ted to regulated trading joint-stock of internal documents: articles of associ- PRACTICES IN GOVERNANCE companies whose securities are admitted ation, regulations, schedules and policies. to regulated trading apply the Corporate REVIEW STRATEGY This system should meet all legal FAIRNESS RESPONSIBILITY Governance Code (hereinafter, the “Code”). requirements, adapt in a timely man- Pursuant to the new code, amend- The Russian Government approved the list Yuri ner to changes in legislation, ensure ments were made in 2015 to the articles of 13 joint-stock companies for the high- managerial unity, and make it possible Goncharov of association and internal documents priority implementation of the principles to reach the goals set for ROSSETI in the of the Company and its subsidiaries, the and standards contained in the Code. President’s Decree on the establish- Deputy Director General for Corporate competence of the Board of Directors ROSSETI is included in the list. Governance, ROSSETI ment of ROSSETI and the Strategy for was expanded, including with respect Development of the Electric Grid Sector to audit, the Corporate Secretary was and must comply with best practices elected, and a preparatory process in corporate governance. Basic principles of corporate governance according to the Code was carried out for future improve- CORPORATE GOVERNANCE CORPORATE GOVERNANCE CORPORATE AND SECURITIES AND SECURITIES Conforming to high governance stan- ments associated primarily with the dards should contribute to making strategy and system of remuneration. I. SHAREHOLDER RIGHTS AND >> Equitable treatment of all shareholder groups in managing the Company and receiving ROSSETI and its subsidiaries more Further measures to improve corporate THE EQUITABLE TREATMENT dividends. OF SHAREHOLDERS IN THE EXERCISE attractive to investors and boosting governance in the ROSSETI Group will OF THEIR RIGHTS the liquidity of their shares. continue in 2016, which should undoubt- edly contribute to higher investor appeal II. BOARD OF DIRECTORS >> Strategic management of the company. Therefore, one of the priorities for shares in the Company and its OF THE COMPANY >> Accountability to shareholders. of ROSSETI’s long-term development subsidiaries. >> Sufficient number of independent directors. program is the continuous improvement >> Bona fide and reasonable activities for the benefit of the Company, with the Chairman’s pow- of corporate governance. Very truly yours, ers effectively exercised. Yuri Goncharov >> Committees established by the Board of Directors. CORPORATE SOCIAL CORPORATE RESPONSIBILITY First Deputy Director General >> Performance evaluation in relation to the Board of Directors, its committees, and members Deputy Director General for Corporate of the Board of Directors.
III. CORPORATE SECRETARY >> Protection of the rights and interests of shareholders, support for the efficient work of the OF THE COMPANY Board of Directors.
1 Approved by the Company’s Board of Directors on November 29, 2012. ADDITIONAL INFORMATION
84 PJSC “ROSSETI” www.rosseti.ru 85 3. CORPORATE GOVERNANCE AND SECURITIES PJSC “ROSSETI” Corporate Governance System ANNUAL REPORT || 2015 3
IV. SYSTEM OF REMUNERATION >> Sufficient level of remuneration for competent and qualified persons. Remuneration paid Development of Corporate Governance FOR MEMBERS OF THE BOARD in accordance with the Company’s policy on remuneration. OF DIRECTORS, EXECUTIVE BODIES, >> Interrelation between the financial interests of members of the Board of Directors in the AND OTHER KEY EXECUTIVES OF THE COMPANY system of remuneration and shareholders’ long-term financial interests. >> Dependence of remuneration for executive bodies and other key executives upon the com- As ROSSETI works to accomplish IN MARCH 2015, The Company’s Board of Directors pany’s performance results and upon their personal contribution to achieving such results. the objectives of the Long-Term THE COMPANY’S BOARD resolved on August 5, 2015, to elect the Development Program, the Company Corporate Secretary of the Company. V. RISK MANAGEMENT AND INTERNAL >> Effective risk management and internal control systems designed to provide reasonable carries out measures to improve cor- OF DIRECTORS APPROVED CONTROL SYSTEMS assurance that the Company achieves their goals. porate governance and implement the THE ACTION PLAN (ROAD MAP) >> Internal audit in order to systematically independently evaluate the reliability and efficiency provisions of the Corporate Governance TO INTRODUCE THE CORPORATE COMPANY OVERVIEW of the risk management and internal control system and corporate governance practices. Code recommended by the Bank of Russia and other legal regulations. GOVERNANCE CODE INTO VI. DISCLOSURE OF INFORMATION >> Transparency. THE ACTIVITIES OF ROSSETI ABOUT THE COMPANY; THE >> Equal and unhindered access to information and documents as requested by shareholders. INFORMATION POLICY OF THE COMPANY
VII. SIGNIFICANT CORPORATE ACTIONS >> Protection of the rights and interests of shareholders and other stakeholders in any actions that significantly affect the capital structure and financial condition of the Company. IN ACCORDANCE WITH THE “ROAD MAP” IN REPORTING PERIOD: >> Complete information received by shareholders on significant corporate actions in a timely manner. Shareholders’ ability to influence the conduct of significant corporate actions and pro- ANNUAL GENERAL MEETING OF SHAREHOLDERS BOARD OF DIRECTORS tection of shareholders’ rights in the course of conducting such actions. STRATEGY REVIEW STRATEGY APPROVED IN RESTATED VERSIONS: APPROVED IN RESTATED VERSIONS: > The Articles of Association of ROSSETI > The Regulations for the Audit Committee of the Board of Directors of ROSSETI; > The Regulations for the General; Meeting > The Risk Management Policy of ROSSETI of Shareholders; > The Internal Control Policy of ROSSETI > The Regulations for the Board of Directors. > The Internal Audit Policy of ROSSETI Statement from the Company’s Board of Directors on Compliance with SUBMITTED FOR THE CONSIDERATION OF THE BOARD OF DIRECTORS: the Principles and Recommendations of the Corporate Governance Code > Regulations for the Corporate Secretary of ROSSETI; > Restated version of the Regulations for Disclosing Material Information of PJSC ROSSETI Under Shareholder Laws and Securities Market Laws (Information Policy)1 As a strategic company, ROSSETI the provisions of the Code; the Action The Board of Directors strives to follow the best standards Plan (Road Map) was developed and SCHEDULED FOR APPROVAL IN 2016: 2 > Regulations for the Nomination and Remuneration Committee of the Board of Directors
of corporate governance, integrating approved by the Board of Directors GOVERNANCE CORPORATE GOVERNANCE CORPORATE AND SECURITIES AND SECURITIES hereby states that the Com- of ROSSETI; the recommendations of the Corporate to introduce the key provisions of the pany is committed to con- > Regulations for the Strategy Committee of the Board of Directors of ROSSETI. stantly improving corporate Governance Code and global best Code into the Company’s activities, cov- practices into the governance system ering all principal aspects of ROSSETI’s governance practices and in a phased manner. corporate governance system. determined to continue its standards of the Corporate Governance In June 2015, the annual general meetings In accordance with Instructions of the In the reporting period, the Company Development of Corporate work on introducing the key Code into the activities of subsidiaries of shareholders of 12 SDCs (Interregional Government of the Russian Federation1, carried out extensive measures Governance in subsidiaries and dependent companies. and Regional Distribution Grid Companies)2 principles and recommen- ROSSETI is on the list of major govern- to implement the Road Map. and dependent companies approved restated versions of the articles dations of the Corporate ment-linked companies for the high- In 2015, the articles of association and Further information with regard of association and internal documents Governance Code into the priority implementation of the principles internal documents of the Company’s to the implantation of the prin- With due consideration to the tasks governing the activities of their manage- Company’s activities and standards of the Code. SDCs were developed and submitted ciples and recommendations of the assigned to ROSSETI as the management ment bodies (regulations for the general SOCIAL CORPORATE RESPONSIBILITY for approval by the annual general In order for the recommendations Corporate Governance Code can be company of the electric grid sector, the meeting of shareholders and regulations meetings of shareholders of ROSSETI of the Code to be implemented by the found in Section 6.15 of the Appendix Company took measures in the report- for the board of directors). SDCs. Company, ROSSETI analyzed whether to the Annual Report. ing year to introduce the principles and existing standards and practices of cor- porate governance were consistent with 1 Approved by the Company’s Board of Directors on February 24, 2016; Minutes of the Meeting No. 221; 2 Restated versions of the articles of association and internal documents were approved by the following electric 1 No. ISh–P13–5859 of July 31, 2014; grid SDCs of ROSSETI (Interregional and Regional Distribution Grid Companies): IDGC of Siberia, TDC, IDGC 2 On March 10, 2015, (Minutes of the Meeting No. of Volga, IDGC of South, Kubanenergo, IDGC of Northern Caucasus, IDGC of Center and Volga Region, IDGC 179). of Centre, MOESK, IDGC of North-West, LENENERGO, and FGC UES. ADDITIONAL INFORMATION
86 PJSC “ROSSETI” www.rosseti.ru 87 3. CORPORATE GOVERNANCE AND SECURITIES PJSC “ROSSETI” Corporate Governance System ANNUAL REPORT || 2015 3
Transactions of the Company Governance self-assessment will allow ROSSETI to form an opinion on the current status of the key processes The Company’s activities are in strict compliance with the Russian statutory requirements applicable to major transactions and related party transactions. The Articles of Association and internal documents of the Company cover the following material transac- in corporate governance for tions that require approval from management bodies: further improvement in this area MAJOR TRANSACTIONS Decisions are adopted unanimously by all members of the Board of Directors, disregarding the votes by retired members of the Board of Directors COMPANY OVERVIEW
RELATED PARTY TRANSACTIONS Decisions are adopted by a majority votes of independent directors that are not related parties to such transactions
TRANSACTIONS INVOLVING THE COMPANY’S Decisions are adopted by a majority of two-thirds of votes of the members of the Board NONCURRENT ASSETS constituting from ten (10) percent of Directors present at a meeting to twenty-five (25) percent of the book value of such assets
TRANSACTIONS IN CONNECTION WITH THE DISPOSAL Depending on the designated purpose of such property (generation, transmission, OF THE PROPERTY that constitutes fixed assets, dispatching, and distribution of electricity and heat, or other uses), decisions may be intangible assets, and construction-in-progress adopted by a majority of two-thirds or by a majority of votes of the members of the Board of Directors present at a meeting STRATEGY REVIEW STRATEGY
TRANSACTIONS RELATED TO THE OBTAINING AND Depending on whether the terms and conditions of transactions meet the requirements Interrelation between the Governance Self-Assessment Performance Evaluation GRANTING OF LOANS, ADVANCES, GUARANTEES, of the Regulations for Credit Policy of ROSSETI approved by the Board of Directors and PLEDGES AND SURETYSHIP in accordance with the depending on the creditworthiness group determined by the Company as provided for Company’s Strategic Goals of the Board of Directors procedure defined by the Сompany’s Board of Directors in the Regulations, decisions may be approved by the Director General or adopted by the and Priorities and the Goals The Company plans to perform self- Management Board by a majority of votes of the members of the Management Board assessment in 2016 in relation to the The Company has plans to conduct inde- present at a meeting or the Board of Directors by a majority of two-thirds of votes of the and Objectives of Corporate members of the Board of Directors present at a meeting quality of corporate governance in accor- pendent performance evaluation of the Governance dance with the technique approved Board of Directors in 2016. TRANSACTIONS REQUIRING DECISIONS ON STAKES Decisions are adopted by a majority of two-thirds of votes of the members of the Board by Order of Federal Agency for State HELD BY THE COMPANY IN OTHER ORGANIZATIONS, of Directors present at a meeting and only if so required by directives of the Russian As part of implementing the Strategy Property Management of the Russian For this purpose, it is planned to engage and on the acquisition, disposal, and encumbrance of their Government1 and the Long-Term Development Federation No. 306 of August 22, 2014, an expert company that employs an shares and stakes and change in the ownership interest
in the said organizations GOVERNANCE CORPORATE GOVERNANCE CORPORATE AND SECURITIES AND SECURITIES Program, the Company deals with the “On the Approval of the Technique for evaluation technique based on advanced following priorities: Self-Assessment in Relation to the international technology and using both subjective and objective assessments, an Improve the Company’s and SDCs’ Quality of Corporate Governance analysis of internal documents, compre- 1 corporate governance system and in Government-Linked Companies.” The documents listed below govern The measures taken to verify As specified in Resolution of the Government hensive diagnostics for the work of the of the Russian Federation No. 738 of December 3, implement the provisions of the the procedure for conducting compliance with the requirements Board of Directors and its committees 2004. Corporate Governance Code; THE FOLLOWING COMPONENTS OF transactions and organizing the reveal that in 2015: and for the individual work of members CORPORATE GOVERNANCE WILL BE interaction of ROSSETI’s divisions: >> ROSSETI did not enter into transac- Ensure compliance with new of the Board of Directors, and quality EVALUATED: tions qualifying as major transactions legislation and implement best evaluation for the performance by mem- >> Regulations for Contract Management under the Federal Law “On Joint-Stock corporate practices into the >> Shareholder rights; bers of the Board of Directors of their of PJSC ROSSETI; Companies.” Company and SDCs, taking ac- >> Board of Directors; functions in terms of compliance with >> Schedule of Planning Actions and count of the necessity to preserve the recommendations of the Corporate Preparing and Agreeing Materials for >> ROSSETI approved 10 transactions SOCIAL CORPORATE RESPONSIBILITY >> Executive management; SDCs’ manageability; Governance Code. Meetings of the Management Board qualifying as related party transactions >> Transparency and disclosure; of PJSC ROSSETI; under the Federal Law “On Joint-Stock Create the conditions for the ad- The result of evaluation will be Companies” (for more detailed informa- >> Schedule of Planning Actions and mission of the Company’s securi- >> Risk management, internal control, a report containing recommendations tion, see Appendix 6.13). ties (shares and bonds) to the and internal audit; to improve the performance of the Board Preparing and Agreeing Materials for Meetings of the Board of Directors and >> The Board of Directors of ROSSETI highest quotation lists in order >> Corporate social responsibility, busi- of Directors, its committees, and corpo- Committees of the Board of Directors approved 1 transaction in connec- to increase liquidity. ness ethics, and compliance. rate governance in general. of PJSC ROSSETI. tion with the disposal of the property ADDITIONAL INFORMATION
88 PJSC “ROSSETI” www.rosseti.ru 89 3. CORPORATE GOVERNANCE AND SECURITIES PJSC “ROSSETI” Corporate Governance System ANNUAL REPORT || 2015 3
that constitutes the Company’s fixed ›› Yantarenergo: using fed- CONTROL OF SPECIFIC TRANSACTIONS CONDUCTED assets, namely an ownership interest eral budget funds of at most in the office building located in Nizhni 2,423,463,300 rubles2 WITHIN THE ROSSETI GROUP Novgorod. ›› LENENERGO: using federal >> The Board of Directors of ROSSETI loan bonds (Issues 29006RMFS, approved 2 transactions related to the 29007RMFS, 29008RMFS, Define the position of ROSSETI’s representatives on specific agenda items of meetings granting of loans to Yantarenergo and 29009RMFS, and 29010RMFS) and BOARD OF DIRECTORS of the management bodies of ROSSETI SDCs and subsidiaries and dependent companies LENENERGO1 to finance their operations. federal budget funds of at most AND MANAGEMENT BOARD of ROSSETI SDCs 811,861,910 rubles2 OF ROSSETI >> The Board of Directors of ROSSETI
approved the acquisition of additional ›› IDGC of Siberia: purchasing COMPANY OVERVIEW shares in the following SDCs as part 5,071,030,570 additional prefer- of their additional share issues: ence shares in the total amount of 507,103,057 rubles3 ›› IDGC of Volga: using federal budget > Decide on specific agenda items as instructed by the Board of Directors or the Management 2 funds of at most 1,359,670,000 rubles BOARD OF DIRECTORS Board of ROSSETI; AND MANAGEMENT BOARD > The boards of directors of ROSSETI SDCs define the position of ROSSETI SDCs’ representatives OF ROSSETI on specific agenda items of meetings of the management bodies of subsidiaries and dependent companies of ROSSETI SDCs as instructed by the Board of Directors or the Management Board Transactions completed by ROSSETI in 2015 of ROSSETI THE COMPANY APPLIES
Decide on specific agenda items as instructed by the boards of directors of ROSSETI SDCs REVIEW STRATEGY 5 10 Related party transactions A STANDARD OF DEFINING SHAREHOLDERS AND BOARDS THE POSITION OF ROSSETI OF DIRECTORS OF SUBSIDIARIES Transactions in connection with the AND DEPENDENT COMPANIES disposal of property that constitutes ON TRANSACTIONS OF ROSSETI SDCS ROSSETI’s fixed assets PLANNED BY ROSSETI SDCS Transactions related to the granting of loans to ROSSETI’s SDCs IN RELATION TO PROPERTY AND PROPERTY RIGHTS Transactions requiring decisions ROSSETI’s management bodies consid- Most transactions involved the acqui- This also included considering and 2 on stakes held by the Company in other ered and approved more than 50 trans- sition, disposal, or possible disposal approving several transactions in relation organizations, and on the acquisition, actions of SDCs and subsidiaries and of the property that constitutes to shares and stakes in subsidiaries and disposal and encumbrance of their shares dependent companies of ROSSETI SDCs fixed assets, intangible assets, and dependent companies of ROSSETI SDCs 1 and stakes and change in the ownership GOVERNANCE CORPORATE GOVERNANCE CORPORATE AND SECURITIES AND SECURITIES interest in the said organizations in 2015. construction-in-progress. and a number of major transactions planned by ROSSETI SDCs.
Independent Directors In order for the Company to control transactions of the ROSSETI Group’s 1 The transaction associated with the loan granted to LENENERGO in accordance with the Federal entities, the Board of Directors and the Management Board define Law “On Joint-Stock Companies” was approved the Company’s position on the following issues: by the Board of Directors of ROSSETI as a related In the reporting year, the criteria for determining the independent members of the Board of Directors were set by the applicable party transaction; laws and the following legal regulations: 2 Received by ROSSETI in accordance with >> major transactions entered into >> transactions in relation to the Resolution of the Government of the Russian Federation No. 1076 of October 8, 2015; by SDCs; acquisition, disposal, or possible dis- > FEDERAL LAW “ON JOINT-STOCK COMPANIES” The independence provisions and criteria contain recommendations to introduce best SOCIAL CORPORATE RESPONSIBILITY 3 posal of the property that constitutes Received by ROSSETI in accordance with Federal practices into joint-stock companies’ activities. >> transactions in relation to shares and Law No. 357-FZ of December 13, 2010, “On the fixed assets, intangible assets, and stakes in subsidiaries and dependent Federal Budget for 2011 and the Planning Period construction-in-progress. of 2012 and 2013.” > CORPORATE GOVERNANCE CODE RECOMMENDED The independence provisions and criteria contain recommendations to introduce best companies of SDCs; BY THE BANK OF RUSSIA practices into joint-stock companies’ activities.
> ORDER OF THE FEDERAL FINANCIAL MARKETS The Listing Rules are based on the criteria recommended by the Corporate Governance SERVICE OF THE RUSSIAN FEDERATION NO. 13–62/ Code and define the mandatory scope of compliance with the recommendations of the Code PZ-N OF JULY 30, 2013, “ON THE PROCEDURE FOR for joint-stock companies whose securities are admitted to regulated trading and included ADMITTING SECURITIES TO REGULATED TRADING” on the Level 1 and Level 2 Quotation Lists. > LISTING RULES OF THE MICEX STOCK EXCHANGE ADDITIONAL INFORMATION
90 PJSC “ROSSETI” www.rosseti.ru 91 3. CORPORATE GOVERNANCE AND SECURITIES PJSC “ROSSETI” Corporate Governance System ANNUAL REPORT || 2015 3
According to the Corporate Governance executive bodies, certain groups of share- >> is not affiliated with a significant coun- Code, it is recommended that an inde- holders, or other stakeholders. terparty or competitor of the company; Governance Structure pendent director shall be deemed to be >> is not affiliated with the government a person who has sufficient professional- An independent director shall be (the Russian Federation, a constituent ism, experience, and independence to form deemed to be a person who entity of the Russian Federation). his or her own position, is able to make >> is not affiliated with the company; GENERAL MEETING OF SHAREHOLDERS objective, and honest judgements inde- pendent of the influence of the company’s >> is not affiliated with a significant shareholder of the company;
INTERNAL AUDIT COMMISSION BOARD OF DIRECTORS COMPANY OVERVIEW Information on independent directors for the 1st half of 2015
NAME OF THE MEMBER OF THE COMPANY’S BOARD OF DIRECTORS AS PER THE CRITERIA AS PER THE CRITERIA OF THE LISTING RULES OF THE CODE 2 COMMITTEES OF THE BOARD EXECUTIVE BODIES EXTERNAL INDEPENDENT AUDITOR OF DIRECTORS1 ALEXANDER SERGEYEVICH KALININ, independent director + +
ALEXEI ALEKSANDROVICH MAKAROV, independent director + + STRATEGY COMMITTEE CHAIRMAN OF THE MANAGEMENT BOARD — DIRECTOR GENERAL SERGEI NIKOLAEVICH MIRONOSETSKY, independent director + +
INVESTMENT, TECHNICAL POLICY, REVIEW STRATEGY RELIABILITY, ENERGY EFFICIENCY, MANAGEMENT BOARD AND INNOVATION COMMITTEE Information on independent directors for the 2nd half of 2015 NOMINATION AND REMUNERATION NAME OF THE MEMBER OF THE COMPANY’S BOARD OF DIRECTORS AS PER THE CRITERIA AS PER THE CRITERIA COMMITTEE OF THE LISTING RULES OF THE CODE
VASILY MIKHAILOVICH BELOV, independent director + + AUDIT COMMITTEE ALEXEI ALEKSANDROVICH MAKAROV, independent director + + CORPORATE GOVERNANCE CORPORATE GOVERNANCE CORPORATE AND SECURITIES AND SECURITIES DENIS STANISLAVOVICH MOROZOV, independent director + + 1 Based on the decision adopted by the Board of Directors on August 5, 2015 (Minutes of the Meeting No. 198); 2 As resolved by the Annual General Meeting of Shareholders on June 30, 2015, the Company’s Auditor The Company carried out the the selection of independent direc- It is planned to approve a restated for 2015 is RSM RUS LTD. following measures as part of forming tors, representatives of the Russian version of the Regulations for the the Company’s Board of Directors Federation, and independent experts for Nomination and Remuneration to ensure that the Board of Directors election to the management and control Committee of the Board of Directors includes members who meet bodies of joint-stock companies; of ROSSETI in 2016 to make the the independence criteria defined >> the Company had questionnaires com- Committee responsible for evaluating
by the Code and the Listing Rules: pleted by nominees for the Company’s the independence of nominees for the SOCIAL CORPORATE RESPONSIBILITY Board of Directors to determine their Company’s Board of Directors. >> the Company prepared and submitted independent status in the format to the Federal Agency for State Property approved by the MICEX Stock Exchange; The Company’s Board of Directors Management and the Ministry of Energy did not resolve in the reporting its proposals for the list of nominees, >> independent directors were regis- period to recognize any members tered in the Interdepartmental Portal including independent directors, for elec- of the Board of Directors of ROSSETI tion to the Board of Directors of ROSSETI of the Federal Agency for State Property as independent. at the Annual General Meeting in 2016; Management for their nomination as members of the Company’s Board >> in November 2015, the Company’s of Directors. authorized representative took part in a meeting of the commission for ADDITIONAL INFORMATION
92 PJSC “ROSSETI” www.rosseti.ru 93 3. CORPORATE GOVERNANCE AND SECURITIES PJSC “ROSSETI” Структура корпоративного управления ANNUAL REPORT || 2015 3
Principal Competences of Each of the Management and Control Bodies
MANAGEMENT COMPETENCE DOCUMENTS FREQUENCY OF MEETINGS FORM MANAGEMENT COMPETENCE DOCUMENTS FREQUENCY OF MEETINGS FORM BODIES OF THE BODIES OF THE MEETING MEETING
General Meeting > election of members of the Board of Directors and the > Russian laws The Annual General Meeting In-person Nomination > defining selection criteria for nominees for the > Russian laws > in accordance with the schedule In-person of Shareholders1 Internal Audit Commission of the Company; > Articles of Shareholders of the Company shall meeting and Management Board and the Director General of the > Articles of meetings; meeting > approval of annual reports and annual financial statements of Association be held not earlier than two Voting Remuneration Company; of Association > in accordance with the notice Voting of the Company; > Regulations months and not later than six months in absentia Committee > defining the terms and conditions of employment contracts > Regulations received from the Secretary of the in absentia
> distribution of profits and losses of the Company based for the General after the end of the financial with members of the Management Board, and the Director for the Board Board of Directors; COMPANY OVERVIEW on the results of the financial year; Meeting year. General of the Company; of Directors > at the discretion of the Chairman > payment (declaration) of dividends based on the results of Shareholders The Extraordinary General Meeting > preparing recommendations for remuneration for members > Regulations for of the Committee, as resolved by the of the financial year; of Shareholders shall of management and control bodies; the Nomination Board of Directors, as resolved by the > approval of the Company’s Auditor be convened by the Board > formulating recommendations for the formation of the and Remuneration Committee; amendments and supplements to the Articles of Association; of Directors. personnel reserve of the Company and SDCs. Committee > at the request of the Chairman > or approval of a restated version of the Articles of the Board of Directors, at the of Association; request of a member of the > approval of internal documents governing the activities Committee, at the request of the of the Company’s bodies; Internal Audit Commission, and at the > increase/decrease in the Company’s authorized capital; request of the Director General. > reorganization/liquidation of the Company. Investment, > formulating recommendations for the Company’s Board > Russian laws > in accordance with the schedule In-person Board General management of the Company’s activities except for > Russian laws > in accordance with the schedule In-person Technical Policy, of Directors with respect to the implementation of the > Articles of meetings; meeting
2 REVIEW STRATEGY of Directors any issues that, in accordance with the Federal Law “On > Articles of meetings; meeting Reliability, investment and technical policies, reliability assurance, of Association > in accordance with the notice Voting Joint-Stock Companies” and the Articles of Association of Association > at the discretion of the Chairman; Voting Energy Efficiency, energy efficiency, and innovative development of the > Regulations received from the Secretary of the in absentia of the Company, fall within the competence of the General > Regulations > at the written request of any in absentia and Innovation Company; for the Board Board of Directors; Meeting of Shareholders for the Board member of the Board of Directors; Committee > monitoring the implementation of the consolidated of Directors > at the discretion of the Chairman of Directors > the Internal Audit Commission, investment program, the Annual Comprehensive > Regulations for of the Committee, as resolved by the the Director General, Procurement Program with respect to large investees, the Investment, Board of Directors, as resolved by the or the Auditor. the Innovative Development Program, the Energy Technical Policy, Committee; Conservation and Energy Efficiency Enhancement Program, Reliability, > at the request of a member of the COMMITTEES OF THE BOARD OF DIRECTORS and the Regulations for the Uniform Technical Policy. Energy Efficiency, Committee. and Innovation Committee Audit Committee Consideration of issues related to: > Russian laws > in accordance with the schedule In-person > supervision over the reliability of the Company’s > Articles of meetings; meeting EXECUTIVE BODIES accounting (financial) statements; of Association > at the discretion of the Chairman Voting
> control over the reliability and effectiveness of the internal > Regulations of the Committee, as resolved by the in absentia GOVERNANCE CORPORATE GOVERNANCE CORPORATE AND SECURITIES AND SECURITIES control, risk management, and corporate governance for the Board Board of Directors, Director General The Company’s day-to-day activities are managed by the > Russian laws > in accordance with the action plan In-person systems; of Directors at the request of the Internal Audit Management Company’s sole executive body (Director General) and > Articles and as and when necessary, but meeting > supervision over ensuring compliance with legal > Regulations Commission, at the discretion Board the Company’s collegial executive body (Management of Association at least once a month Voting requirements and informing executive bodies about for the Audit of a member of the Committee, at the Board). The executive bodies are accountable to the Board > Regulations for in absentia nonconformities; Committee request of the Director General, of Directors of the Company and the General Meeting the Management > the coordination of interaction between the external and at the request of the external auditor. of Shareholders. The executive bodies of the Company Board internal auditors. organize the implementation of decisions adopted by the General Meeting of Shareholders and the Board of Directors Strategy > preparing recommendations for the Board of Directors > Russian laws > in accordance with the schedule In-person of the Company. All issues related to the Company’s Committee for the implementation of the Company’s priority lines > Articles of meetings; meeting day-to-day activities except for the issues falling within the competence of the General Meeting of Shareholders and the of development; of Association > in accordance with the notice Voting Board of Directors. > monitoring the implementation of the priority lines > Regulations received from the Secretary of the in absentia of development; for the Board Board of Directors;
> analyzing proposals and developing recommendations for of Directors > at the discretion of the Chairman SOCIAL CORPORATE RESPONSIBILITY the Board of Directors for the preparation of standards for > Regulations for of the Committee, as resolved by the 1 formulating development plans for subsidiaries. the Strategy Board of Directors, as resolved The issues falling within the competence of the General Meeting of Shareholders may not be delegated to executive by the Committee, at the discretion bodies of the Company. The issues falling within the competence of the General Meeting of Shareholders may not be delegated to the Board of Directors, except where otherwise provided for in the Federal Law “On Joint-Stock of a member of the Committee. Companies.” 2 The issues falling within the competence of the Board of Directors of the Company may not be delegated to executive bodies of the Company. ADDITIONAL INFORMATION
94 PJSC “ROSSETI” www.rosseti.ru 95 3. CORPORATE GOVERNANCE AND SECURITIES PJSC “ROSSETI” Management Bodies ANNUAL REPORT || 2015 3 Management Bodies General Meeting of Shareholders Board of Directors
The highest management body of the The procedure for convening and hold- On June 30, 2015, the The Board of Directors acts in accor- for the Board of Directors of the REGULATIONS FOR Company is the General Meeting ing the General Meeting of Shareholders dance with the laws of the Russian Company approved by the decision THE BOARD OF DIRECTORS Annual General Meeting OF ROSSETI of Shareholders. The Company should of ROSSETI is governed by the Articles of Shareholders discussed Federation, the Articles of Association, adopted by the Annual General Meeting
hold the Annual General Meeting of Association and Regulations for the Corporate Governance Code, and of Shareholders on June 30, 2015. COMPANY OVERVIEW of Shareholders every year, not earlier the General Meeting of Shareholders the Company’s performance the restated version of the Regulations than five months and not later than six approved by the Annual General Meeting results for 2014. months after the end of the financial year. of Shareholders on June 30, 2015. THE PRINCIPAL OBJECTIVES AND TASKS OF THE ACTIVITIES OF THE BOARD OF DIRECTORS PRINCIPLE DECISIONS: NOT TO PAY DIVIDENDS AND APPROVE THE LIABILITY
NOT TO PAY REMUNERATION INSURANCE CONTRACT FOR Define the Company’s Ensure the exercise and Ensure that the development strategy TO MEMBERS OF THE BOARD DIRECTORS AND OFFICERS, protection of the rights information about the aiming to enhance its Evaluate the performance and lawful interests Company disclosed
market capitalization Create efficient internal of the Company’s REVIEW STRATEGY OF DIRECTORS OTHER THAN WHICH IS A RELATED PARTY of the Company’s to shareholders and and appeal to investors, control mechanisms executive bodies shareholders and other stakeholders is THOSE WHO HOLD PUBLIC TRANSACTION, AND THE achieve the maximum on a regular basis contribute to resolving complete, reliable, and profit, and increase the corporate conflicts unbiased OFFICE FOR SERVING ON COMPANY’S MEMBERSHIP Company’s assets THE BOARD OF DIRECTORS IN THE RUSSIAN NATIONAL BASED ON PERFORMANCE COMMITTEE OF THE COUNCIL RESULTS IN 2014 DUE TO THE ON LARGE ELECTRIC SYSTEMS PRINCIPLES OF THE BOARD OF DIRECTORS RECEIVED LOSS; (CIGRE). Ensure that shareholders’ Achieve a balance of interests
rights are observed with re- of different shareholder groups GOVERNANCE CORPORATE GOVERNANCE CORPORATE AND SECURITIES AND SECURITIES Make decisions based Due to the planned issue of additional On August 24 and September 3, 2015, spect to participating in the and ensure that the Board ARTICLES OF ASSOCIATION on reliable information about ordinary shares in excess of 25% the Board of Directors decided to con- OF ROSSETI management of the Company of Directors makes as unbiased the Company’s activities of ROSSETI’s outstanding shares, vene the Extraordinary General Meeting and receiving dividends and in- decisions as possible to the the Board of Directors resolved on July of Shareholders on October 6, 2015, and formation about the Company benefit of all shareholders 6, 2015, to convene the Extraordinary include on its agenda the issue related General Meeting of Shareholders to an increase in the authorized capital REGULATIONS FOR on August 17, 2015. of ROSSETI. THE GENERAL MEETING OF SHAREHOLDERS Since a quorum was not present, The Extraordinary General Meeting OF ROSSETI Work Planning of Directors of the Company. In order not present at the meeting are taken the Extraordinary General Meeting of Shareholders of ROSSETI resolved for the Board of Directors to best deal with the issues submitted for into account, provided that such opin-
of Shareholders of ROSSETI was on October 6, 2015, to increase the consideration by the Company’s Board ions are received prior to tabulating the SOCIAL CORPORATE RESPONSIBILITY declared to be aborted on August 17, Company’s authorized capital by means of Directors, the Committees of the voting results with respect to the item DETAILED INFORMATION On an annual basis the Board of Directors Company’s Board of Directors formulate on the agenda. This mechanism makes it 2015. of the placement of additional uncertifi- ABOUT THE GENERAL approves the Action Plan for the Board cated registered ordinary shares MEETINGS OF SHAREHOLDERS recommendations within their compe- possible to take into consideration the OF ROSSETI IN 2015 of Directors for the planned corporate tence and provide opinions on issues. dissenting opinions of all members of the year. Meetings of the Board of Directors Company’s Board of Directors. are held in accordance with the approved For the purposes of determining whether Action Plan for the Board of Directors the meeting has a quorum and tabu- For the purpose of proper control over and as and when necessary, but lating the voting results with respect the implementation of instructions issued at least once every six weeks. To make to any item on the agenda of the meet- by the Board of Directors, the Company’s urgent decisions, the Chairman of the ing of the Company’s Board of Directors, Board of Directors considers information Board of Directors may decide to hold written opinions of the members of the on the implementation of its decisions ADDITIONAL INFORMATION an unscheduled meeting of the Board Company’s Board of Directors who are on a quarterly basis.
96 PJSC “ROSSETI” www.rosseti.ru 97 3. CORPORATE GOVERNANCE AND SECURITIES PJSC “ROSSETI” Management Bodies ANNUAL REPORT || 2015 3
Procedure for Electing 1. Sergey Ivanovich 4. Oleg Mikhailovich 6. Andrey Yurievich 9. Alexei Aleksandrovich 12. Andrey Yevgenyevich Members of the Board Shmatko Budargin Ivanov Makarov Murov of Directors Member of Presidential Commission for General Director, ROSSETI Deputy Minister of Finance INDEPENDENT DIRECTOR Chairman of the Management Board, Strategic Development of the Fuel and of the Russian Federation «FGC UES» The Board of Directors consists Academician, Russian Academy of Sciences Energy Sector and Environmental Security of 15 members elected by the General YEAR OF BIRTH: 1960 of the Russian Federation Meeting of Shareholders at the sugges- YEAR OF BIRTH: 1975 YEAR OF BIRTH: 1970 Education: higher education, YEAR OF BIRTH: 1937 tion of shareholders holding an aggre- Candidate of Science (Economics) Education: higher education Education: higher education, Education: higher education, gate of 2% of voting shares. Members YEAR OF BIRTH: 1966 Doctor of Science (Economics)
Shares held in the Company Shares held in the Company Doctor of Science (Economics) COMPANY OVERVIEW of the Company’s Board of Directors Education: higher education, and the Company’s SDCs: and the Company’s SDCs: N/A Shares held in the Company Shares held in the Company are elected by the General Meeting Candidate of Science (Engineering) and the Company’s SDCs: N/A >>0.00064% of share capital of FGC UES and the Company’s SDCs: N/A of Shareholders by cumulative vote for Shares held in the Company (0.00064% of ordinary shares). a term until the next Annual General and the Company’s SDCs: N/A Meeting of Shareholders. The General 7. Alexander Sergeyevich Kalinin 10. Sergei Nikolaevich 13. Seppo Juha Meeting of Shareholders may decide 5. Anatoly Fyodorovich Mironosetsky Remes on early termination of their powers only 2. Boris Ilyich Dyakov with regard to all members of the Board INDEPENDENT DIRECTOR Ayuyev Director General, Kiuru of Directors. First Vice President for Energy INDEPENDENT DIRECTOR President, NP STC UPS and Infrastructure, OPORA RUSSIA All- If any Annual General Meeting Chairman of the Management Board, Member of the Board of Directors,
Russian Public Organization of Small and YEAR OF BIRTH: 1955 REVIEW STRATEGY of Shareholders is not held within «SO UPS», JSC Siberian Generation Company 1936–2015 Medium Business the period specified in the Articles Education: higher education, Ph.D. in Economics Education: higher education, Associate Member of Association, the powers of the Shares held in the Company YEAR OF BIRTH: 1957 of the Russian Academy of Sciences, Professor, YEAR OF BIRTH: 1965 YEAR OF BIRTH: 1966 and the Company’s SDCs: N/A Company’s Board of Directors termi- Doctor of Science (Engineering) Education: higher education Education: higher education nate except for the powers to prepare, Education: higher education, Shares held in the Company Shares held in the Company Engineering Economics Shares held in the Company convene, and hold the Annual General and the Company’s SDCs: and the Company’s SDCs: and the Company’s SDCs: N/A Meeting of Shareholders. Shares held in the Company 14. Pavel Olegovich >>0.0031% of share capital of ROSSETI (0.00314% >>0.005501% of share capital of ROSSETI and the Company’s SDCs: N/A of ordinary shares) Shatsky Only an individual may be a member (0.005572% of ordinary shares) and of the Board of Directors. The members >>0.004537% of share capital of FGC UES >>> 0.007115% of share capital of «FGC UES», 11. Denis Stanislavovich (0.004537% of ordinary shares) of the Company’s Management Board (0.007115% of ordinary shares). First Deputy Director General, >>0.001091% of share capital of IDGC of Northern Morozov may not constitute more than one-fourth 8. Vyacheslav Mikhailovich Gazprom Energoholding GOVERNANCE CORPORATE GOVERNANCE CORPORATE AND SECURITIES AND SECURITIES Caucasus (0.001091% of ordinary shares) of the members of the Company’s Board Kravchenko of Directors. Persons elected to the >>0.00172% of share capital of IDGC of North-West Representative of the Russian Federation 3. Oleg Gennadyevich (0.00172% of ordinary shares) on the Board of Directors of the European YEAR OF BIRTH: 1972 Board of Directors may be reelected for Deputy Minister of Energy Barkin >>0.012852% of share capital of IDGC of Siberia Bank for Reconstruction and Development Education: higher education any number of successive terms. (0.012852% of ordinary shares) of the Russian Federation Shares held in the Company Deputy Chairman of the Board, Association >>0.025509% of share capital of IDGC of South and the Company’s SDCs: (0.025509% of ordinary shares) YEAR OF BIRTH: 1973 «NP Market Council» YEAR OF BIRTH: 1967 >>0.008024% of share capital of IDGC of Urals Education: higher education, >>Shares held in the Company and the Company’s Members of the Board (0.008024% of ordinary shares) Education: higher education Candidate of Science (Economics) SDCs: 0.000007% of share capital of ROSSETI (0.000001% of ordinary shares) of Directors YEAR OF BIRTH: 1975 >>0.005796% of share capital of MOESK Shares held in the Company Shares held in the Company (0.005796% of ordinary shares) and the Company’s SDCs: N/A Education: higher education and the Company’s SDCs: N/A
>>0.023% of share capital of LENENERGO (0.024% SOCIAL CORPORATE RESPONSIBILITY THE MEMBERS ELECTED Shares held in the Company of ordinary shares) 15. Andrey Nikolayevich and the Company’s SDCs: N/A BY THE ANNUAL GENERAL >>0.001917% of share capital of IDGC of Center and Shishkin Volga Region (0.001917% of ordinary shares) MEETING OF SHAREHOLDERS >>0.020182% of share capital of Dagestan Energy Vice President for Energy, Industrial Safety, OF THE COMPANY ON JUNE Supply Company (0.020182% of ordinary shares) Occupational Safety and Environmental >>0.04404% of share capital of NWEMC (0.05159% 30, 2014, SERVED UNTIL JUNE of ordinary shares) Affairs, Rosneft 30, 20151 1 As of the time of election. YEAR OF BIRTH: 1959 Education: higher education, Candidate of Science (Economics) ADDITIONAL INFORMATION Shares held in the Company and the Company’s SDCs: N/A
98 PJSC “ROSSETI” www.rosseti.ru 99 3. CORPORATE GOVERNANCE AND SECURITIES PJSC “ROSSETI” Management Bodies ANNUAL REPORT || 2015 3
1. Alexander Valentinonvich 2. Stanislav Olegovich 3. Boris Ilyich Novak Ashirov Ayuyev
Chairman of the Board of Directors Member of the Board of Directors, Member of the Board of Directors, Member of the Strategy Committee, Member of the Investment, ON JUNE 30, 2015, THE ANNUAL Member of the Audit Committee, Technical Policy, Reliability, YEAR OF BIRTH: 1971 Member of the Nomination and Energy Efficiency, and Innovation GENERAL MEETING OF SHAREHOLDERS Remuneration Committee Committee OF THE COMPANY ELECTED THE FOLLOWING MEMBERS OF THE BOARD YEAR OF BIRTH: 1973 YEAR OF BIRTH: 1957 OF DIRECTORS OF ROSSETI: COMPANY OVERVIEW
Indicators: Russian Federation Group of shareholders ROSSETI, namely Gazprom Energoholding jointly Russian Federation with Gazprom Finance B.V 28.06.2013 28.06.2013 28.06.2013 Nationality Minister of Energy of the Russian Federation Chairman of the Management Board, SO UPS Director General, Mezhregionenergosbyt Nominating shareholder (group of shareholders) EDUCATION: HIGHER EDUCATION EDUCATION: HIGHER EDUCATION >>1993 — Norilsk Industrial Institute, majoring in Economics and Management EDUCATION: HIGHER EDUCATION, CANDIDATE OF SCIENCE (ECONOMICS) >>1979: Ural Polytechnic Institute, majoring in Power Plants Date of the first election in Metallurgic Engineering >>1996: Sergo Ordzhonikidze State Academy of Management, majoring in Management; postgraduate studies at the State University of Management. POSITIONS HELD OVER THE PAST 5 YEARS: to the Board of Directors of ROSSETI >>2009 — Lomonosov Moscow State University, majoring in Management >>2004 — present: Chairman of the Management Board, SO UPS
POSITIONS HELD OVER THE PAST 5 YEARS: REVIEW STRATEGY Position as of the time of election POSITIONS HELD OVER THE PAST 5 YEARS: >> 2008 — present: Director General, Mezhregionenergosbyt MEMBERSHIP IN MANAGEMENT BODIES OF OTHER CORPORATE ENTITIES: >>2008–2012 — Deputy Minister of Finance of the Russian Federation As of the time of nomination >>2008 — present: Deputy Director General for Strategic Development (part-time), >>2004 — Member of the Board of Directors, SO UPS >>2012 — present: Minister of Energy of the Russian Federation Tyumen Power Sales Company >>2004–2013 — Member of the Board of Directors, FGC UES In accordance with the Listing Rules of the MICEX Stock MEMBERSHIP IN MANAGEMENT BODIES OF OTHER CORPORATE ENTITIES: MEMBERSHIP IN MANAGEMENT BODIES OF OTHER CORPORATE ENTITIES: Exchange >>2005–2011 — Member of the Board of Directors, Energy Forecasting Agency >>2010–2012 — Member of the Board of Directors, Rosspirtprom >>2013 — present: Member of the Board of Directors, Tyumen Power Sales >>2008–2013 — Member of the Board of Directors, TSA and Financial Settling In accordance with the provisions of the Corporate >>2010–2012 — Member of the Board of Directors, United Aircraft Corporation Company Center Governance Code recommended by the Bank of Russia >>2011–2013 — Member of the Supervisory Board, >>2013–2014 — Member of the Board of Directors, Siburenergomanagement >>2009–2010 — Member of the Supervisory Board, GruzRosenergo State Company Russian Highways INDEPENDENCE: >>2009–2015 — Chairman, Russian National Committee of the Council on Large >>2012 present: Member of the Supervisory Board, ROSATOM Electric Systems (CIGRE) not independent, nonexecutive director >>2015 — present: Member of the Board of Directors, Rosneft >>2012–2015 — Member of the Board of Directors, RusHydro >>2015 — present: Member of the Board of Directors, GAZPROM not independent >>2015 — present: Member of the Presidium, Russian National Committee of the Council on Large Electric Systems (CIGRE) GOVERNANCE CORPORATE GOVERNANCE CORPORATE AND SECURITIES AND SECURITIES >>2015 — present: Member of the Board of Directors, Transneft Order of Honor, not independent letters of honor from the President and Government of the Russian Federation INDEPENDENCE: Shares held in the Company and the Company’s SDCs,%: none Honorary citizen of Norilsk from 2013. representative of the Russian Federation No transactions to acquire or transfer shares INDEPENDENCE: not independent representative of the Russian Federation not independent not independent Shares held in the Company and the Company’s SDCs,%: not independent >>00.005501% of share capital of ROSSETI (0,005572% of ordinary shares). Shares held in the Company and the Company’s SDCs,%: none >>0.007115% of share capital of FGC UES (0.007115% of ordinary shares) No transactions to acquire or transfer shares No transactions to acquire or transfer shares CORPORATE SOCIAL CORPORATE RESPONSIBILITY ADDITIONAL INFORMATION
100 PJSC “ROSSETI” www.rosseti.ru 101 3. CORPORATE GOVERNANCE AND SECURITIES PJSC “ROSSETI” Management Bodies ANNUAL REPORT || 2015 3
4. Oleg Gennadyevich 5. Vasily Mikhailovich 6. Oleg Mikhailovich 7. Anatoly Fyodorovich Barkin Belov Budargin Dyakov1
Member of the Board of Directors, Member of the Board of Directors, Member of the Board of Directors, Member of the Board of Directors Chairman of the Investment, INDEPENDENT DIRECTOR executive director Technical Policy, Reliability, Chairman of the Audit Committee, 1936–2015 Energy Efficiency, and Innovation Member of the Strategy Committee, YEAR OF BIRTH: 1960 Committee Member of the Investment, Member of the Strategy Committee Technical Policy, Reliability, Energy Efficiency, and Innovation YEAR OF BIRTH: 1975 Committee, Member of the
Nomination and Remuneration COMPANY OVERVIEW Committee
YEAR OF BIRTH: 1981 Russian Federation Russian Federation Russian Federation Russian Federation 30.06.2014 30.06.2015 28.06.2013 30.06.2014 Deputy Chairman of the Board, NP Market Council Senior Vice-President for Innovations, Non-Profit Organization the Fund Director General, ROSSETI President and Chairman of the Scientific and Technical Board, Scientific for Development of the Center for Elaboration and Commercialization and Technical Council of Unified Energy System — EDUCATION: HIGHER EDUCATION, MASTER’S DEGREE EDUCATION: HIGHER EDUCATION, CANDIDATE OF SCIENCE (ECONOMICS) of New Technologies >>1998: Moscow Power Engineering Institute (Technical University), majoring >>1982: Norilsk Industrial Institute, majoring in Industrial and Civil Construction EDUCATION: HIGHER EDUCATION, ASSOCIATE MEMBER OF THE RUSSIAN in Applied Mechanics EDUCATION: HIGHER EDUCATION, MBA ACADEMY OF SCIENCES, PROFESSOR, DOCTOR OF SCIENCE (ENGINEERING) POSITIONS HELD OVER THE PAST 5 YEARS: >>1999: Moscow Power Engineering Institute, majoring in Financial Management >>2003 — Faculty of Computational Mathematics and Cybernetics, Lomonosov Major: Mining Electromechanics. Moscow State University >>2009–2013 — Chairman of the Management Board, FGC UES POSITIONS HELD OVER THE PAST 5 YEARS: POSITIONS HELD OVER THE PAST 5 YEARS: REVIEW STRATEGY POSITIONS HELD OVER THE PAST 5 YEARS: >>2012–present: Chairman of the Management Board, ROSSETI >>2008–2012: Member of the Board and Deputy Chairman of the Board for Market >>1998–2015: Chairman, Russian National Committee of the World Energy Council >2013–present: Director General, ROSSETI Development, NP Market Council >>2010–2011 — Project Office Director, Interdepartmental Analytical Center > >>2008–2015: President, Scientific and Technical Council of Unified Energy System >>2012–2014: Member of the Board and Deputy Chairman of the Board, NP Market >>2011–2013 — Executive Director of the Energy-Efficient Technology Cluster, Non- MEMBERSHIP IN MANAGEMENT BODIES OF OTHER CORPORATE ENTITIES: Non-profit Partnership Council Profit Organization the Fund for Development of the Center for Elaboration and Commercialization of New Technologies >>2010–2011: Member of the Board of Directors, Energy Forecasting Agency >>2008–2015: Advisor to the Chairman of the Management Board, FGC UES >>2014 — present: Member of the Board, Deputy Chairman of the Board, NP Market >>2010–present: Member of the Board of Directors, FGC UES Council >>2013 — present: Senior Vice-President for Innovations, Non-Profit Organization MEMBERSHIP IN MANAGEMENT BODIES OF OTHER CORPORATE ENTITIES: the Fund for Development of the Center for Elaboration and Commercialization >>2011–present: Member of the Supervisory Board, Russian Regional Development INDEPENDENCE: of New Technologies Bank >>2009–2015: Honorary Chairman, Chairman of the Technical Committee, Russian National Committee of the Council on Large Electric Systems (CIGRE) INDEPENDENCE: >>2011–2015: Member of the Board of Directors, Inter RAO nonexecutive director (nominated as independent) >>2014–2015: Member of the Public Council of the Ministry of Energy >>2011–present: Chairman of the Supervisory Board, Association of Solar Energy of the Russian Federation not independent independent director Enterprises Nonprofit Partnership not independent independent director >>2012–2013: Chairman of the Board of Directors, Kubanenergo INDEPENDENCE: CORPORATE GOVERNANCE CORPORATE GOVERNANCE CORPORATE AND SECURITIES AND SECURITIES Shares held in the Company and the Company’s SDCs,%: none independent director >>2012–present: Chairman of the Board of Directors, MOESK representative of the Russian Federation >>2012–2013: Chairman of the Board of Directors, IDGC of Siberia No transactions to acquire or transfer shares Shares held in the Company and the Company’s SDCs,%: none not independent >>2012 — present: Member of the Supervisory Board, North-Caucasus Federal No transactions to acquire or transfer shares University not independent >>2012 — present: Member of the Board of Trustees, member of the Scientific Shares held in the Company and the Company’s SDCs,%: Council, Moscow Power Engineering Institute (National Research University) >>0.0031% of share capital of ROSSETI (0.00314% of ordinary shares) >>2012 — present: Member of the Board and Vice President for Environmental Issues, Association of Polar Explorers >>0.004537% of share capital of FGC UES (0.004537% of ordinary shares) >>2013 — present: Vice Chair, Responsibility for Regional Development, World >>0.001091% of share capital of IDGC of Northern Caucasus (0.001091% Energy Council (WEC) of ordinary shares) >>2013 — present: Member of the Board of Trustees, Mariinsky Theatre and >>0.00172% of share capital of IDGC of North-West (0.00172% of ordinary shares) Primorsky Opera and Ballet Theater >>0.012852% of share capital of IDGC of Siberia (0.012852% of ordinary shares) >>2014 — present: Member of the Board of Trustees, Primorsky Opera and Ballet CORPORATE SOCIAL CORPORATE RESPONSIBILITY Theater >>0.025509% of share capital of IDGC of South (0.025509% of ordinary shares) >>0.008024% of share capital of IDGC of Urals (0.008024% of ordinary shares) >>2014 — present: Chairman of the Board of Directors, FTC >>0.009994% of share capital of MOESK (0.009994% of ordinary shares), including >>2012 — present: Member of the Presidential Commission for Strategic 2,044,722 shares purchased in the 3rd quarter of 2015 Development of the Fuel and Energy Sector and Environmental Security of the Russian Federation. >>0.023% of share capital of LENENERGO (0.024% of ordinary shares) INDEPENDENCE: >>0.001917% of share capital of IDGC of Center and Volga Region (0.001917% of ordinary shares) representative of the Russian Federation, Executive director >>0.020182% of share capital of Dagestan Energy Supply Company (0.020182% not independent of ordinary shares) >>0.04404% of share capital of NWEMC (0.05159% of ordinary shares) not independent
Shares held in the Company and the Company’s SDCs,%: 1 Member of the Board of Directors of ROSSETI A. F. Dyakov died on August 12, 2015. >>0.00064% of share capital of FGC UES (0.00064% of ordinary shares) ADDITIONAL INFORMATION No transactions to acquire or transfer shares
102 PJSC “ROSSETI” www.rosseti.ru 103 3. CORPORATE GOVERNANCE AND SECURITIES PJSC “ROSSETI” Management Bodies ANNUAL REPORT || 2015 3
8. Andrey Yurievich 9. Alexander Sergeyevich 10. Alexei Aleksandrovich 11. Denis Stanislavovich Ivanov Kalinin Makarov Morozov
Member of the Board Member of the Board, Member of the Board — Member of the Board — Chairman of the Nomination and INDEPENDENT DIRECTOR INDEPENDENT DIRECTOR Remuneration Committee, YEAR OF BIRTH: 1975 Member of the Nomination and Member of the Strategy Committee, Remuneration Committee, YEAR OF BIRTH: 1973 Member of the Audit Committee Member of the Audit Committee
YEAR OF BIRTH: 1966 YEAR OF BIRTH: 1937 COMPANY OVERVIEW
Russian Federation Russian Federation Russian Federation Russian Federation 30.06.2014 30.06.2014 30.06.2014 28.06.2013 Deputy Minister of Finance of the Russian Federation President, OPORA RUSSIA All-Russian Public Organization of Small Member of the Presidium, Russian Academy of Sciences Representative of the Russian Federation on the Board of Directors and Medium Business of the European Bank for Reconstruction and Development EDUCATION: HIGHER EDUCATION EDUCATION: HIGHER EDUCATION,
>> 1997–1997: Krasnoyarsk State University, majoring in Law EDUCATION: HIGHER EDUCATION ACADEMICIAN, RUSSIAN ACADEMY OF SCIENCES EDUCATION: HIGHER EDUCATION, CANDIDATE OF SCIENCE (ECONOMICS) POSITIONS HELD OVER THE PAST 5 YEARS: >>1989: Chelyabinsk Polytechnic Institute, majoring in Robotics >>1959: Kalinin Leningrad Polytechnic Institute, majoring in Energy Economics and >>1993: Lomonosov Moscow State University, majoring in Political Economics Organization >> > 2008–2011: Deputy Director of the Department for Budgetary Policy in Economic Sectors, >>1991: postgraduate studies at the Engineering Economics Department of the >>1996: Lomonosov Moscow State University, majoring in Law Ministry of Finance of the Russian Federation Chelyabinsk Polytechnic Institute POSITIONS HELD OVER THE PAST 5 YEARS: >>2000: Swiss Banking School; postgraduate school of the Moscow State Institute REVIEW STRATEGY >> 2011–2012: Director of the Department for Budgetary Policy in Innovation, Civil Industry, >>1998: Ural Academy of Public Civil Service, majoring in Law >>1985–2013: Director, Energy Research Institute of the Russian Academy of International Relations (University) of the Ministry of Foreign Affairs of the Energy, Communications and Public-Private Partnership, Ministry of Finance of the Russian of Sciences Russian Federation (MGIMO), majoring in International Economic Relations Federation POSITIONS HELD OVER THE PAST 5 YEARS: >> 2012–present: Deputy Minister of Finance of the Russian Federation >>2013 — present: Chief Research Associate, Energy Research Institute of the >>Harvard Business School under the Advanced Management Program; Columbia >>2002–2014: Director, Granitny Bereg Russian Academy of Sciences University’s School of International and Public Affairs as a Master of Public MEMBERSHIP IN MANAGEMENT BODIES OF OTHER CORPORATE ENTITIES: Administration under the Program in Economic Policy Management >>2012–2014: First Vice President for Energy and Infrastructure, OPORA RUSSIA >>2013 — present: Member of the Presidium, Advisor to the Russian Academy >> 2012–present: Member of the Executive Board, Internet Initiatives Development Fund of the All-Russian Public Organization of Small and Medium Business of Sciences POSITIONS HELD OVER THE PAST 5 YEARS: Agency for Strategic Initiatives >>2014 — present: President, OPORA RUSSIA All-Russian Public Organization >>2010–2010: President and CEO, Uralkali >> 2012–present: Chairman of the Finance and Investment Committee of the Board of Trustees, of Small and Medium Business MEMBERSHIP IN MANAGEMENT BODIES OF OTHER CORPORATE ENTITIES: Skolkovo Institute of Science and Technology >>2014 — present: Member of the Board of Directors, FTC >>2011 — present: Executive Director for the Russian Federation, Belarus and >> 2012–present: Member of the Working Group on Consideration of Materials for the >>2014–2015: Director (part-time), Granitny Bereg Tajikistan, European Bank for Reconstruction and Development (EBRD) Supervisory Board, member of the Nomination and Remuneration Committee the Supervisory INDEPENDENCE: Board, member of the Working Group of the Contest for Bonuses for Contributions MEMBERSHIP IN MANAGEMENT BODIES OF OTHER CORPORATE ENTITIES: MEMBERSHIP IN MANAGEMENT BODIES OF OTHER CORPORATE ENTITIES: to Russian Socioeconomic Development (Development Bonuses), State Corporation Bank for Development and Foreign Economic Affairs (Vnesheconombank) >>2014 — present: Member of the Board of Directors, SO UP independent director >>2009–2010: Member of the Board of Directors, United Grain Company >> 2012 — present: Member of the Board of Directors, Special Economic Zones >>2015 — present: Member of the Board of Directors, Russian Small and Medium independent director >>2010–2010: Member of the Board of Directors, Belarusian Potash Company GOVERNANCE CORPORATE GOVERNANCE CORPORATE AND SECURITIES AND SECURITIES >> 2012 — present: Member of the Board of Directors, Innopolis Business Corporation >>2011–2014: Member of the Board of Directors, Russian Agency for Export Credit >> 2013 — present: Member of the Board of Directors, Innopolis Special Economic Zone independent director INDEPENDENCE: and Investment Insurance >> 2013 — present: Member of the Supervisory Board, State Company Russian Highways Shares held in the Company and the Company’s SDCs,%: none >>2012–2015: Member of the Supervisory Board, ALROSA >> 2013–2014: Member of the Board of Directors, North Caucasus Development Corporation independent director No transactions to acquire or transfer shares >>2013 — present: Member of the Board of Directors, RusHydro >> 2013–2014, 2015–present: Member of the Board of Directors, Northern Caucasus Resorts not independent 1 >> 2013 — present: Member of the Skolkovo Foundation Board, Non-Profit Organization the Fund >>2014 — present: Member of the Supervisory Board, Russian Agricultural Bank for Development of the Center for Elaboration and Commercialization of New Technologies not independent 1 INDEPENDENCE: >> 2013 — present: Member of the Board of Directors, United Aircraft Corporation Shares held in the Company and the Company’s SDCs,%: none >> 2014 — present: Member of the Supervisory Board, Chairman of the Strategy Committee, independent director member of the Audit Committee, Russian Agricultural Bank No transactions to acquire or transfer shares >> 2014 — present: Member of the Board of Directors, Russian Railways independent director >> 2014–2015–Member of the Board of Directors, ROSNEFTEGAZ 1 independent director >> 2014 — present: Member of the Board of Directors, URALVAGONZAVOD Due to the acquisition of LENENERGO shares performed by the Company on December 22, 2015 pursuant to the Ordinance of the Government of the SOCIAL CORPORATE RESPONSIBILITY >> 2014 — present: Member of the Supervisory Board, Monotowns Development Fund Shares held in the Company and the Company’s SDCs,%: none Russian Federation No. 21770r of October 10, 2015, A.S. Kalinin ceased to meet >> 2015 — present: Member of the Board of Directors, Russian Export Center independence criteria. No transactions to acquire or transfer shares >> 2015 — present: Member of the Board of Directors, Chairman of the Budget and Reporting Committee, GLONASS >> 2015 — present: Member of the Board of Directors, RUSNANO INDEPENDENCE: representative of the Russian Federation not independent not independent Shares held in the Company and the Company’s SDCs,%: none No transactions to acquire or transfer shares ADDITIONAL INFORMATION
104 PJSC “ROSSETI” www.rosseti.ru 105 3. CORPORATE GOVERNANCE AND SECURITIES PJSC “ROSSETI” Management Bodies ANNUAL REPORT || 2015 3
12. Andrey Yevgenyevich 13. Oleg Romanovich 14. Andrey Nikolayevich 15. Sergey Ivanovich Murov Fyodorov Shishkin Shmatko
Member of the Board Member of the Board, Member of the Board Member of the Board Member of the Strategy Committee, Member of the Nomination and YEAR OF BIRTH: 1970 Remuneration Committee YEAR OF BIRTH: 1959 YEAR OF BIRTH: 1966
YEAR OF BIRTH: 1968 COMPANY OVERVIEW
Russian Federation Russian Federation Group of shareholders PJSC ROSSETI, namely Gazprom Energoholding Russian Federation jointly with Gazprom Finance B.V. 28.06.2013 30.06.2015 28.06.2013 28.06.2013 Chairman of the Management Board, FGC UES Member of the Supervisory Board, ALROSA Special Representative of the President of the Russian Federation Vice President for Energy and Localization, Rosneft on International Cooperation in the Electric Power Industry EDUCATION: HIGHER EDUCATION, DOCTOR OF SCIENCE (ECONOMICS) EDUCATION: HIGHER EDUCATION >>1993: Faculty of Law, Saint Petersburg State University >>1992 — Lomonosov Moscow State University, majoring in Mathematics and EDUCATION: HIGHER EDUCATION EDUCATION: HIGHER EDUCATION, CANDIDATE OF SCIENCE (ENGINEERING) Applied Mathematics >>1985: Moscow Institute of Petrochemistry and Gas, majoring in Industrial >>1990: Faculty of Political Economics, Ural State University >>1998: professional retraining in Financial Management from the Interbranch Thermal Power Engineering Institute of Advanced Training and Retraining of Executive Personnel POSITIONS HELD OVER THE PAST 5 YEARS: >>1992: Faculty of Economics, University of Marburg, Germany >>2000: Finance Academy under the Government of the Russian Federation >>2009: State University of Civil Aviation >>2009–2012: Head of the Government and Government-Linked Company Relations >>2004: Higher Academic Courses of the Military Academy of the General Staff REVIEW STRATEGY Division, VTB Capital >>2002: Moscow International Higher Business School MIRBIS (Institute) of the Russian Armed Forces, majoring in Defense and Security Protection of the POSITIONS HELD OVER THE PAST 5 YEARS: Russian Federation >>2012–2014: Advisor to the Head, Federal Agency for State Property Management >>2007–2012: Director General, Pulkovo Airport POSITIONS HELD OVER THE PAST 5 YEARS: of the Russian Federation POSITIONS HELD OVER THE PAST 5 YEARS: >>2010–2012: Deputy Minister of Energy of the Russian Federation >>2012–2012: Deputy Director General, IDGC Holding (from April 4, 2013, JSC >>2013 — present: Member of the Supervisory Board, ALROSA >>2008–2012: Minister of Energy of the Russian Federation ROSSETI; from July 17, 2015, PJSC ROSSETI) >>2012 — present: Vice President for Energy and Industrial, Occupational and Environmental Safety (until August 17, 2014), Vice President for Energy and >>2012 — present: Member of the Presidential Commission for Strategic >>July 2012–July 2012: Acting Director General, IDGC Holding (from April 4, 2013, MEMBERSHIP IN MANAGEMENT BODIES OF OTHER CORPORATE ENTITIES: Localization (from August 18, 2014), Rosneft Development of the Fuel and Energy Sector and Environmental Security of the JSC ROSSETI; from July 17, 2015, PJSC ROSSETI) >>2014 — present: Member of the Board of Directors, Vnukovo International Airport Russian Federation >>2015 — present: Director General, RN-Aktiv >>2012–2013: First Deputy Chairman of the Management Board, FGC UES >>2013–present: Member of the Board of Directors, Russian Investment Fund >>2013 — present: Special Representative of the President of the Russian of Information-Communication Technologies >>2012–2013: Executive Director, IDGC Holding (from April 4, 2013, JSC ROSSETI; MEMBERSHIP IN MANAGEMENT BODIES OF OTHER CORPORATE ENTITIES: Federation on International Cooperation in the Electric Power Industry from July 17, 2015, PJSC ROSSETI) INDEPENDENCE: >>2006 — present: Member of the Board of Directors, Tyumen Power Sales Company MEMBERSHIP IN MANAGEMENT BODIES OF OTHER CORPORATE ENTITIES: >>2012–2013: Member of the Management Board, FGC UES representative of the Russian Federation >>2012–2015–Member of the Board of Directors, Rusenergo Fund >>2008–2011: Chairman of the Board of Directors, IDGC Holding (from April 4, >>2012–2013: Member of the Management Board, ROSSETI 2013, JSC ROSSETI; from July 17, 2015, PJSC ROSSETI) >>2013 — present: Member of the Board of Directors, United Shipbuilding GOVERNANCE CORPORATE GOVERNANCE CORPORATE AND SECURITIES AND SECURITIES not independent >>2014–present: Chairman of the Management Board, FGC UES Corporation >>2008–2011: Chairman of the Board of Directors, RusHydro not independent MEMBERSHIP IN MANAGEMENT BODIES OF OTHER CORPORATE ENTITIES: >>2013 — present: Member of the Supervisory Board, NP Market Council >>2008–2011: Chairman of the Board of Directors, FGC UES >>2014–2015: Member of the Board of Directors, Okha CHPP >>2012–2012: Member of the Board of Directors, IDGC of Urals Shares held in the Company and the Company’s SDCs,%: none >>2008–2011: Member of the Board of Directors, Inter RAO >>2014 — present: Member of the Board of Directors, RusHydro >>2012–2013: Chairman of the Board of Directors, IDGC of Volga No transactions to acquire or transfer shares >>2008–2010: Member of the Board of Directors, ROSNEFTEGAZ >>2014 — present: Member of the Board of Directors, Chairman of the Board >>2012–2013: Chairman of the Board of Directors, IDGC of Centre >>2008–2011: Chairman of the Board of Directors, Transneft of Directors, RIG Research Pte. Ltd. >>2012–2013–Member of the Board of Directors, Kubanenergo >>2008–2011: Chairman of the Board of Directors, Zarubezhneft >>2014 — present: Member of the Board of Directors, National Petroleum >>2012–2013: Chairman of the Board of Directors, LENENERGO Consortium >>2009–2011: Chairman of the Board of Directors, SO UP >>2012–2013–Member of the Board of Directors, MOESK >>2014 — present: Member of the Board of Directors, United Research and >>2009–2011–Member of the Board of Directors, Gazprom Development Centre >>2012–2014: Chairman of the Board of Directors, IDGC of North-West >>2009–2012–Member of the Supervisory Board, ROSATOM >>2015 — present: Member of the Board of Directors, Far Eastern Shipbuilding and >>2013 — present: Member of the Board of Directors FGC UES Ship Repair Center >>2013–present: Member of the Board of Directors, FGC UES CORPORATE SOCIAL CORPORATE RESPONSIBILITY >>2014 — present: Member of the Board of Directors, Inter RAO >>2013 — present: Member of the Supervisory Board, Scientific and Technical INDEPENDENCE: Council of Unified Energy System Non-profit Partnership >>2015 — present: Member of the Board of Directors, SO UP dependent, nonexecutive director >>2013–2014: Member of the Board of Directors, Transneft >>2015 — present: Chairman, Russian National Committee of the Council on Large Electric Systems (CIGRE) not independent INDEPENDENCE: INDEPENDENCE: not independent representative of the Russian Federation representative of the Russian Federation Shares held in the Company and the Company’s SDCs,%: none not independent not independent No transactions to acquire or transfer shares not independent not independent Shares held in the Company and the Company’s SDCs,%: none Shares held in the Company and the Company’s SDCs,%: none No transactions to acquire or transfer shares
No transactions to acquire or transfer shares ADDITIONAL INFORMATION
106 PJSC “ROSSETI” www.rosseti.ru 107 Management Bodies
3. CORPORATE GOVERNANCE AND SECURITIES PJSC “ROSSETI” Management Bodies ANNUAL REPORT || 2015 3
Competencies and Sectoral Experience Performance Report of the Board of Directors of the Board of Directors PARTICIPATION OF THE MEMBERS OF THE BOARD OF DIRECTORS IN THE WORK OF THE BOARD OF DIRECTORS AND COMMITTEES IN 2015 MEMBERS OF THE LENGTH LENGTH KEY COMPETENCIES BOARD OF DIRECTORS OF SERVICE OF SERVICE ON THE BOARD IN THE STRATEGY FINANCE LAW CORPORATE ACADEMIC OF DIRECTORS INDUSTRY MEMBERS OF THE BOARD INDEPENDENT BOARD OF STRATEGY INVESTMENT NOMINATION AND AUDIT AND AUDIT GOVERNANCE DEGREE OF DIRECTORS IN 2015 MEMBER OF DIRECTORS COMMITTEE COMMITTEE REMUNERATION COMMITTEE THE BOARD OF COMMITTEE ALEXANDER 1 year 3 years V V V DIRECTORS VALENTINOVICH NOVAK 2 A. V. Novak 23/23 COMPANY OVERVIEW STANISLAV OLEGOVICH 2 years More than 10 V V V Candidate of Science ASHIROV years (Economics) S. O. Ashirov2 23/23 14/14 3/3 3/3 B. I. Ayuyev 43/43 17/17 BORIS ILYICH 3 years More than 35 V V AYUYEV years O. G. Barkin + 39/43 19/25 13/17 V. M. Belov2 + 22/23 7/14 4/6 2/3 3/3 OLEG GENNADYEVICH 2 years More than 15 V V V Master’s Degree BARKIN years O. M. Budargin 42/43
VASILY MIKHAILOVICH 1 year More than 5 V V V MBA A. F. Dyakov 19/24 5/11 BELOV years A. Yu. Ivanov 12/43 4/11 OLEG MIKHAILOVICH 3 years More than 5 V V V Candidate of Science A. S. Kalinin +3 35/43 18/25 5/5 11/11
BUDARGIN years (Economics) 1 V. M. Kravchenko 17/20 11/11 REVIEW STRATEGY ANDREY YURIEVICH 2 years 2 years V V V V A. A. Makarov + 40/43 5/5 11/11 IVANOV S. N. Mironosetsky1 12/20 11/25 2/8 0/2 5/8 ALEXANDER SERGEYEVICH 2 years 3 years V V V D. S. Morozov + 39/43 KALININ A. Ye. Murov 40/43 ALEXEI ALEKSANDROVICH 2 years More than 45 V V V Doctor of Science 1 MAKAROV years (Economics) S. Remes 14/20 7/11 O. R. Fyodorov2 23/23 11/14 2/3 DENIS STANISLAVOVICH 3 years 3 years V V V V Candidate of Science MOROZOV (Economics) P. O. Shatsky1 5/20
ANDREY YEVGENYEVICH 3 years 3 years V V V V Doctor of Science A. N. Shishkin 36/43 10/11 MUROV (Economics) S. I. Shmatko 38/43 CORPORATE GOVERNANCE CORPORATE GOVERNANCE CORPORATE AND SECURITIES AND SECURITIES OLEG ROMANOVICH 1 year 1 year V V V FYODOROV
ANDREY NIKOLAYEVICH 3 years 10 years V V V ISSUES CONSIDERED BY MEETINGS OF THE BOARD OF DIRECTORS SHISHKIN 1 The members of the Board of Directors serving SERGEY IVANOVICH 3 years 10 years V V V V Candidate of Science PERIOD, YEAR IN PERSON IN ABSENTIA TOTAL on the Board of Directors during the year only SHMATKO (Engineering), until the Annual General Meeting of Shareholders Professor 2013 52 141 193 on June 30, 2015; 2 The members of the Board of Directors serving on the Board of Directors during the year only 2014 48 138 186 after the Annual General Meeting of Shareholders on June 30, 2015; ministrative sanctions against the and/or one of the bankruptcy Conflict of interest 2015 43 151 194 3 Due to the acquisition of LENENERGO shares individual for the violations of law procedures provided for by the performed by the Company on December 22, 2015 SOCIAL CORPORATE RESPONSIBILITY in the area of finance, taxes and pursuant to the Ordinance of the Government IN THE REPORTING PERIOD, NONE insolvency (bankruptcy) laws dues, securities market or crimi- of the Russian Federation was of the Russian Federation No. 21770r of October OF THE MEMBERS OF THE BOARD OF 10, 2015, A.S. Kalinin ceased to meet independence nal sanctions (criminal record) for introduced; MEETINGS HELD BY THE BOARD OF DIRECTORS criteria. DIRECTORS OF ROSSETI: crimes in the field of economics or was a relative of any persons offences against the state; had any conflict of interest with PERIOD, YEAR IN PERSON IN ABSENTIA TOTAL that were members of the man- the Company’s executive bodies. was subject to any information agement bodies and/or bodies 2013 8 30 38 controlling ROSSETI’s financial concerning the positions in the management bodies of business and economic activities; 2014 8 25 33 entities when bankruptcy pro- was subject to any information ceedings were initiated against 2015 8 35 43 concerning the imposition of ad- the above-mentioned entities ADDITIONAL INFORMATION
108 PJSC “ROSSETI” www.rosseti.ru 109 3. CORPORATE GOVERNANCE AND SECURITIES PJSC “ROSSETI” Management Bodies ANNUAL REPORT || 2015 3
Principal Issues Considered by the >> Proposals for the Extraordinary >> Approval of the Schedule of Improving Committees of the Board Remuneration for Members On top of the remuneration, the Board of Directors of ROSSETI: General Meeting of Shareholders of the the Operating Efficiency and Reducing following premiums apply: Company concerning the issue “Increase Expenses of PJSC ROSSETI; of Directors of ROSSETI of the Board of Directors > Review of the consolidated investment > 30% payable to the Chairman of the > in the authorized capital of the Company > program of PJSC ROSSETI for 2014 and >> Approval of the Regulations Board of Directors of the Company; by means of the placement of additional ROSSETI takes out liability insurance for The amounts and payment procedure for 2015–2019; for the Quality Management System; shares”; directors and officers (including mem- of remuneration and compensation >> 20% payable to the Chairman >> Approval of the Action Plan (Road >> Implementation of the Smart Grid bers of the Board of Directors, mem- for members of the Board of Directors of a specialized committee of the Board >> Approval of the Uniform Procurement Map) to Introduce the Corporate Construction investment project; of Directors of the Company; Standard of PJSC ROSSETI (Procurement bers of the Management Board, and of ROSSETI are defined by Regulations Governance Code; Regulations); >> Approval of the PJSC ROSSETI Budget independent directors) to indemnify the for Remuneration and Compensation >> 10% payable to a member of a special- >> Annual analysis of the results of set- for 2016. Company’s shareholders, creditors, and for Members of the Board of Directors ized committee of the Board of Directors
>> Approval of a restated version of the COMPANY OVERVIEW ting up the Common Treasury of the other persons for their damage (losses) of PJSC ROSSETI. of the Company. Risk Management Policy of PJSC Company and its subsidiaries and depen- caused by the mistakes and unintentional ROSSETI; No remuneration shall be accrued or acts (omission to act) on the part of such No premium for holding office as chair- dent companies; paid to the Chairman or members of the >> Approval of a restated version of the directors and officers while they perform man and/or a member of a specialized >> Annual reduction of at least 2–3 per- Board of Directors of the Company who Internal Audit Policy of PJSC ROSSETI; their managerial activities. The liability committee is paid if the committee of the cent in operating expenses (costs); are persons falling within the purview insurance contract provides directors and Board of Directors holds less than three >> Approval of a restated version of the of such restriction or ban on the receipt >> Progress in preparations for the 2018 officers with coverage consistent with meetings in the corporate year. No remu- Internal Control Policy of PJSC ROSSETI; of any payments from business entities FIFA World Cup in the Russian Federation; international insurance standards as to neration is paid to any member of the as imposed by federal law. insured risks and indemnity limits. Board of Directors of the Company if Remuneration shall be paid from net such member fails to participate in more On June 30, 2014, the Annual General Subjects of the Issues Considered by the Board of Directors (%) income to members of the Board than 50% of the meetings held (from the
Meeting of Shareholders of ROSSETI REVIEW STRATEGY of Directors of the Company for their election of such member until the termi- approved the liability insurance con- work for the period from their election nation of such member’s powers). tract for directors and officers, which is Strategic planning and development to the Board of Directors of the Company 29% 4% a related party transaction. Any member of the Board of Directors until the election of new members of the Finance, investment, and R&D of the Company may decline to receive 9% THE INSURANCE PREMIUM Board of Directors of the Company. the remuneration provided for in these 6% Budget and monitoring of SDCs’ financial and economic condition Remuneration shall be paid to members Regulations, in full or in part, by notice UNDER THE INSURANCE of the Board of Directors of the Company 7% Procurement (including the Annual Comprehensive Procurement Program, contracts) thereof to the sole executive body CONTRACT FOR THE PERIOD as a lump sum in Russian rubles. (Director General) of the Company. 2% Key performance indicators FROM DECEMBER 25, 2014, Each member of the Board of Directors 10% Approval of internal documents TO DECEMBER 24, 2015, of the Company is paid remuneration Audit, control, and risks IS 4.3 MILLION RUBLES, in the amount calculated by the formula No remuneration was GOVERNANCE CORPORATE GOVERNANCE CORPORATE AND SECURITIES AND SECURITIES specified in the Regulations, taking Administration of SDCs with respect to key issues of their operations accrued or paid to the 28% 5% WHILE THE TOTAL INSURED account of the total number of meetings members of the Board Other AMOUNT (AGGREGATE LIMIT of the Board of Directors of the Company of directors in 2015 due OF LIABILITY) IS 100 MILLION in the previous corporate year and taking account of the number of meet- to the lack of net profit US DOLLARS. ings in which such member of the Board INDIVIDUAL EVALUATION enterprises» an individual assessment The evaluation shows the efficiency of Directors takes part. OF THE BOARD OF DIRECTORS of the members of the Board of Directors of the work of the Board of Directors, The remuneration base amount is based for 2014–2015 corporate year was and promotes the revitalization of the on the revenues calculated in accordance As part of development of corporate performed. work of the Board of Directors and iden- with Russian Accounting Standards and SOCIAL CORPORATE RESPONSIBILITY governance, strengthen the role of mem- tifies areas of activities to be improved. The evaluation was conducted by com- received by the Company in the financial bers of the Board of Directors in joint- pleting interactive questionnaires in the year. stock companies with state participation, personal accounts of joint stock compa- included in the special list approved nies for inter-Agency portal the Agency. by the decree of the Government of the REGULATIONS FOR The aim of this work was to determine the REMUNERATION AND Russian Federation1, in accordance with contribution of each member of the Board COMPENSATION FOR the decree of the Government of the MEMBERS OF THE BOARD of Directors, elected as representative Russian Federation2 «On improving the OF DIRECTORS of the interests of the Russian Federation, OF ROSSETI procedure for managing open joint stock in the activities of the Company subject companies whose shares are in Federal to its development strategy. 1 As of January 23, 2003 No. 91–r; 2
ownership and Federal state unitary As of 31.12.2010 № 1214. ADDITIONAL INFORMATION
110 PJSC “ROSSETI” www.rosseti.ru 111 3. CORPORATE GOVERNANCE AND SECURITIES PJSC “ROSSETI” Management Bodies ANNUAL REPORT || 2015 3
Committees NO. NAME POSITION AS OF THE TIME OF ELECTION of the Board of Directors of ROSSETI 10. VIKTOR VIKTOROVICH MAMIN Director of the of the Department for Corporate Governance, Price Conditions and Auditing in Fuel and Energy Industry Branches, Ministry of Energy of the Russian Federation In order to perform its functions in the Strategy Committee2 tation of ROSSETI’s and its SDCs’ 11. SERGEI NIKOLAEVICH Member of the Board of Directors, FGC UES, member of the Board of Directors, Siberian Generation most effective manner and preliminar- principal lines of development; MIRONOSETSKY Company ily consider the most important issues The Strategy Committee analyzes and 12. NATALIA VIKTOROVNA Chairperson of the Management Board, Noncommercial Partnership Guaranteeing Suppliers and Power falling within its competence, the Board Monitor the implementation NEVMERZHITSKAYA Suppliers prepares for the Board of Directors of ROSSETI’s and its SDCs’ prin- of Directors set up its Committees1. 13. VASILY VLADISLAVOVICH NIKONOV Director of the Energy Department, Rosneft recommendations and proposals regard- cipal lines of development ap- The members, competence, and work- ing the Company’s strategic development proved by the Board of Directors 14. YEVGENY ALEKSANDROVICH Deputy Director of the Department for State Regulation of Tariffs, Infrastructural Reforms and Energy COMPANY OVERVIEW OLKHOVICH Efficiency, Ministry of Economic Development of the Russian Federation ing procedure of the Committees of the and the standardization of planning the of the Company; Board of Directors of the Company are development of SDCs. 15. NIKOLAY DMITRYEVICH ROGALEV Rector, Moscow Power Engineering Institute (National Research University) determined by the Board of Directors and Analyze proposals and develop 16. PAVEL NIKOLAYEVICH SNIKKARS Director of the Electric Power Industry Development Department, Ministry of Energy of the Russian set forth in the Committee Regulations ОTHE PRINCIPAL OBJECTIVES recommendations for the Board Federation of Directors of the Company for approved by the Board of Directors 17. OLEG ROMANOVICH FYODOROV Member of the Board of Directors, ROSSETI, member of the Supervisory Board, ALROSA OF THE COMMITTEE ARE the preparation of standards in accordance with the applicable laws. AS FOLLOWS for formulating development 18. ALEXANDER VIKTOROVICH Executive Director, Investor Protection Association SHEVCHUK Decisions made by the Committee are plans for the Group’s SDCs and recommendatory. Analyze proposals and prepare for reviewing specific plans 19. PAVEL VIKTOROVICH SHPILEVOY Director for Strategic Development and Head of the Strategic Development Department, FGC UES recommendations for the Board (as needed). 20. NIKOLAY GRIGORYEVICH SHULGINOV First Deputy Chairman of the Management Board, SO UPS of Directors of the Company for the preparation, amendment, REVIEW STRATEGY supplementation, and implemen- In 2015, the Committee’s current mem- THE COMMITTEE CONSIDERED >>Approval of the Uniform Procurement bers adopted decisions on 32 issues docu- THE FOLLOWING PRINCIPAL Standard of PJSC ROSSETI mented in 14 meeting minutes, including (Procurement Regulations); MEMBERS OF THE STRATEGY COMMITTEE ISSUES RELATED TO THE 16 issues considered at five in-person >>Review of the Schedule of Improving The current members of the Committee were appointed by the decision adopted by the Board of Directors on August 5, meetings and nine meeting minutes con- COMPANY’S ACTIVITIES the Operating Efficiency and Reducing 2015 (Minutes of the Meeting No. 198)3: taining decisions on 16 issues that were >>Financial and economic condition Expenses of PJSC ROSSETI. addressed at absentee meetings with of subsidiaries and dependent compa- Further information can be found NO. NAME POSITION AS OF THE TIME OF ELECTION voting by ballot. nies of PJSC ROSSETI and high prior- in Section 6.15 of the Appendix 1. VYACHESLAV MIKHAILOVICH Chairman of the Committee, member of the Board of Directors, ROSSETI, It is deserving of note that, for several ity objectives of ensuring the financial to the Annual Report.
KRAVCHENKO Deputy Minister of Energy of the Russian Federation stability of subsidiaries and dependent GOVERNANCE CORPORATE GOVERNANCE CORPORATE AND SECURITIES AND SECURITIES issues, instructions were given with companies of PJSC ROSSETI in 2015; 2. STANISLAV OLEGOVICH ASHIROV Member of the Board of Directors, ROSSETI, Director General, Mezhregionenergosbyt respect to their refinement with sub- 3. OLEG GENNADYEVICH BARKIN Member of the Board of Directors, ROSSETI, Deputy Chairman of the Board, NP Market Council sequent submission for consideration >>Organization of the ROSSETI Group’s work on ensuring payments for electric- 4. VASILY MIKHAILOVICH BELOV Member of the Board of Directors, ROSSETI, Senior Vice-President for Innovations, Non-Profit by the Board of Directors of ROSSETI and (INDEPENDENT DIRECTOR) Organization the Fund for Development of the Center for Elaboration and Commercialization of New deferred to a later date. ity distribution services; Technologies 5. ROMAN NIKOLAEVICH BERDNIKOV Member of the Management Board and First Deputy Director General for Technical Policy, ROSSETI 6. ALEXANDER MIKHAILOVICH BORISOV Member of the Presidium, OPORA RUSSIA Types of Issues Considered by the Strategy Committee (%) 72 7. ANDREY ALEKSANDROVICH DYOMIN Member of the Management Board, ROSSETI 8. ALEXANDER SERGEYEVICH KALININ Member of the Board of Directors, ROSSETI, and President, OPORA RUSSIA All-Russian Public ISSUES
4 SOCIAL CORPORATE RESPONSIBILITY (INDEPENDENT DIRECTOR) Organization of Small and Medium Business 19% 81% Prior consideration before a meeting WERE CONSIDERED BY THE STRATEGY of the Board of Directors 9. VASILY NIKOLAYEVICH KISELYOV Chairman of the Council of Customers of the Government Commission on the Development of the Electric COMMITTEE IN 2015, DOCUMENTED Power Industry Consideration by the Committee only, IN 25 MEETING MINUTES, without submission for consideration 1 Before August 05, 2015 6 Committees of the Board of Directors were set up in the Company, including Valuation by the Board of Directors INCLUDING 48 ISSUES CONSIDERED Committee, Society, Customer, and Government Relations and Information Policy Committee; AT 11 IN-PERSON MEETINGS AND 2 Acts in accordance with the Committee Regulations approved by the Board of Directors of ROSSETI on October 21, 2013 (Minutes of the Meeting No. 137 as amended by the decisions adopted by the Board of Directors of ROSSETI 14 MEETING MINUTES CONTAINING on September 17, 2014 (Minutes of the Meeting No. 165), October 6, 2014 (Minutes of the Meeting No. 166), November 25, 2014 (Minutes of the Meeting No. 171), and August 5, 2015 (Minutes of the Meeting No. 198); DECISIONS ON 24 ISSUES ADDRESSED 3 The Committee’s members served before August 5, 2015 are specified in Section 6.1 of the Appendix to the Annual AT ABSENTEE MEETINGS WITH VOTING Report; BY BALLOT 4 Due to the acquisition of LENENERGO shares performed by the Company on December 22, 2015 pursuant to the
Ordinance of the Government of the Russian Federation No. 21770r of October 10, 2015, A.S. Kalinin ceased ADDITIONAL INFORMATION to meet independence criteria.
112 PJSC “ROSSETI” www.rosseti.ru 113 3. CORPORATE GOVERNANCE AND SECURITIES PJSC “ROSSETI” Management Bodies ANNUAL REPORT || 2015 3
Subjects of the Issues Considered by the Strategy Committee (%) ABSENTEE MEETINGS IN-PERSON MEETINGS
NO. NAME OF THE NUMBER OF ATTEN NUMBER OF NUMBER OF MEETINGS ATTENDANCE PARTICI Strategic planning and development COMMITTEE’S MEETINGS DANCE MEETINGS ATTENDED BY THE RATE, % PATION RATE 22% 7% MEMBER ATTENDED RATE, % ATTENDED COMMITTEE’S MEMBER % BY THE BY THE BY BALLOT Finance, investment, and R&D COMMITTEE’S COMMITTEE’S 12% MEMBER MEMBER IN Budget and monitoring of SDCs’ financial and economic condition PERSON Noncore and retail assets 17. O. R. Fyodorov 6 67 5 0 100 100 14% Legal aspects 18. A. V. Shevchuk 9 100 3 2 60 100 COMPANY OVERVIEW Review of internal documents 22% 19. P. V. Shpilevoy 8 89 3 2 60 100 9% Administration of SDCs with respect to key issues of their operations 20. N. G. Shulginov 9 100 0 5 0 100 9% 5% Others
Audit Committee1 THE PRINCIPAL OBJECTIVES Ensure the independence and OF THE COMMITTEE ARE objectivity of the internal audit function; INFORMATION ON THE MEETINGS ATTENDED BY THE MEMBERS OF THE STRATEGY COMMITTEE The goal of the Audit Committee AS FOLLOWS is to assist the Board of Directors
Supervise external audit and the REVIEW STRATEGY Supervise the preparation of the in effectively performing its functions selection of the external auditor; ABSENTEE MEETINGS IN-PERSON MEETINGS with respect to the preliminary consid- Company’s accounting (financial) statements; eration of issues related to control over Control the operating effective- NO. NAME OF THE NUMBER OF ATTEN NUMBER OF NUMBER OF MEETINGS ATTENDANCE PARTICI the Company’s financial and economic ness of the system of combating COMMITTEE’S MEETINGS DANCE MEETINGS ATTENDED BY THE RATE, % PATION RATE Control the operating reliability MEMBER ATTENDED RATE, % ATTENDED COMMITTEE’S MEMBER % activities. misconduct on the part of the and effectiveness of the internal BY THE BY THE BY BALLOT Company’s employees and third COMMITTEE’S COMMITTEE’S control, risk management, and parties. MEMBER MEMBER IN corporate governance systems; PERSON
1. V. M. Kravchenko 9 100 5 0 100 100 MEMBERS OF THE AUDIT COMMITTEE 2. S. O. Ashirov 9 100 5 0 100 100 CORPORATE GOVERNANCE CORPORATE GOVERNANCE CORPORATE AND SECURITIES AND SECURITIES The current members of the Committee were appointed by the decision adopted by the Board of Directors on August 5, 3. O. G. Barkin 4 44 2 2 40 80 2015 (Minutes of the Meeting No. 198)2:
4. V. M. Belov 5 56 1 1 20 40 NO. NAME POSITION AS OF THE TIME OF ELECTION
5. R. N. Berdnikov 9 100 5 0 100 100 1. VASILY MIKHAILOVICH BELOV Chairman of the Committee, member of the Board of Directors, ROSSETI, Senior Vice-President for (INDEPENDENT DIRECTOR) Innovations, Non-Profit Organization the Fund for Development of the Center for Elaboration and 6. A. M. Borisov 8 89 1 3 20 80 Commercialization of New Technologies
7. A. A. Dyomin 8 89 5 0 100 100 2. STANISLAV OLEGOVICH ASHIROV Member of the Board of Directors, ROSSETI, Director General, Mezhregionenergosbyt 3. ALEXANDER SERGEYEVICH KALININ Member of the Board of Directors, ROSSETI, President, OPORA RUSSIA All-Russian Public Organization 8. A. S. Kalinin 7 78 1 2 20 60 (INDEPENDENT DIRECTOR)3 of Small and Medium Business
9. V. N. Kiselyov 9 100 5 0 100 100 4. ALEXEI ALEKSANDROVICH MAKAROV Member of the Board of Directors, ROSSETI, Academician, Russian Academy of Sciences SOCIAL CORPORATE RESPONSIBILITY (INDEPENDENT DIRECTOR) 10. V. V. Mamin 6 67 3 2 60 100
11. S. N. Mironosetsky 3 33 3 1 60 80 1 Acts in accordance with the Committee Regulations approved by the Board of Directors of ROSSETI on December 25, 2015 (Minutes of the Meeting No. 217) (the previous version was approved on October 21, 2013 (Minutes of the 12. N. V. Nevmerzhitskaya 9 100 3 2 60 100 Meeting No. 137)). In accordance with the Road Map, in order to align the Regulations for the Audit Committee with the recommendations contained in the Corporate Governance Code and the requirements set forth in the 13. V. V. Nikonov 5 56 2 0 40 40 Listing Rules, the Board of Directors of ROSSETI resolved on December 25, 2015, (Minutes of the Meeting No. 217) to approve a restated version of the Regulations for the Audit Committee of the Board of Directors of ROSSETI; 14. Ye. A. Olkhovich 8 89 2 3 40 100 2 The Committee’s members served before August 5, 2015 are specified in Section 6.1 of the Appendix to the Annual Report; 15. N. D. Rogalev 7 78 4 1 80 100 3 Due to the acquisition of LENENERGO shares performed by the Company on December 22, 2015 pursuant to the Ordinance of the Government of the Russian Federation No. 21770r of October 10, 2015, A.S. Kalinin ceased to meet 16. P. N. Snikkars 9 100 4 1 80 100 independence criteria. ADDITIONAL INFORMATION
114 PJSC “ROSSETI” www.rosseti.ru 115 3. CORPORATE GOVERNANCE AND SECURITIES PJSC “ROSSETI” Management Bodies ANNUAL REPORT || 2015 3
In 2015, the Committee’s current mem- THE COMMITTEE CONSIDERED >> Preliminary review of a restated ver- INFORMATION ON THE MEETINGS ATTENDED BY THE MEMBERS OF THE AUDIT COMMITTEE bers adopted decisions on 10 issues THE FOLLOWING PRINCIPAL sion of the Risk Management Policy documented in three meeting minutes, of PJSC ROSSETI; ISSUES RELATED TO THE ABSENTEE MEETINGS IN-PERSON MEETINGS including eight issues considered at two >> Preliminary review of a restated COMPANY’S ACTIVITIES NO. NAME OF THE NUMBER OF ATTEN NUMBER NUMBER OF MEETINGS ATTENDANCE PARTICI in-person meetings and one meeting version of the Internal Control Policy COMMITTEE’S MEETINGS DANCE OF MEETINGS ATTENDED BY THE RATE, % PATION RATE minutes containing decisions on two of PJSC ROSSETI; MEMBER ATTENDED BY THE RATE, % ATTENDED BY THE COMMITTEE’S MEMBER % >> Preliminary review of a restated ver- COMMITTEE’S COMMITTEE’S BY BALLOT issues that were addressed at absentee sion of the Internal Audit Policy of PJSC >> Review of the annual action plan MEMBER MEMBER IN meetings with voting by ballot. ROSSETI; of the Directorate for Internal Audit PERSON of PJSC ROSSETI for 2016. 1. S. O. Ashirov 1 (out of 1) 100 1 (out of 2) 1 (out of 2) 50 100
2. V. M. Belov 1 (out of 1) 100 2 (out of 2) 0 (out of 2) 100 100 COMPANY OVERVIEW 3. A. S. Kalinin 5 (out of 5) 100 4 (out of 6) 2 (out of 6) 67 100 4. A. A. Makarov 5 (out of 5) 100 1 (out of 6) 5 (out of 6) 17 100 5. S. N. Mironosetsky 3 (out of 4) 75 0 (out of 4) 2 (out of 4) 0 50 Types of Issues Considered by the Audit Committee (%) 28 Nomination and of the Board of Directors, mem- members of the Management ISSUES Remuneration Committee1 bers of the Management Board, Board and prepare proposals 46% 54% Prior consideration before a meeting of the WERE CONSIDERED BY THE AUDIT and the Director General of the to the Board of Directors of the Board of Directors Company; Company as to whether they can COMMITTEE IN 2015, DOCUMENTED Consideration by the Committee only, THE PRINCIPAL OBJECTIVES OF be reappointed;
IN 11 MEETING MINUTES, INCLUDING REVIEW STRATEGY without submission for consideration THE COMMITTEE ARE AS FOLLOWS Develop principles and criteria by the Board of Directors 19 ISSUES CONSIDERED AT SIX of remuneration for members Develop principles and criteria IN-PERSON MEETINGS AND FIVE Define selection criteria for nomi- of the Board of Directors, mem- related to remuneration for the bers of the Management Board, Chairman and members of the MEETING MINUTES CONTAINING nees for the Board of Directors, the Management Board, and the the Director General of the Com- Internal Audit Commission of the DECISIONS ON NINE ISSUES Director General of the Company pany, the management organiza- Company; ADDRESSED AT ABSENTEE MEETINGS and preliminarily evaluate such tion, or the manager; WITH VOTING BY BALLOT nominees; Formulate recommendations for Regularly evaluate the activities the formation of the personnel re- Develop proposals to define of the Director General of the serve of the Company and SDCs. material terms and conditions Company (the management of contracts with members organization or the manager) and CORPORATE GOVERNANCE CORPORATE GOVERNANCE CORPORATE AND SECURITIES AND SECURITIES Subjects of the Issues Considered by the Audit Committee (%) Further information can be found MEMBERS OF THE NOMINATION AND REMUNERATION COMMITTEE in Section 6.15 of the Appendix to the The current members of the Committee were appointed by the decision adopted by the Board of Directors on August 5, 25% 25% Accounting (financial) statements Annual Report. 2015 (Minutes of the Meeting No. 198)2: Operating reliability and effectiveness of the internal control, risk management, NO. NAME POSITION AS OF THE TIME OF ELECTION and corporate governance systems 1. ALEXANDER SERGEYEVICH KALININ Chairman of the Committee, member of the Board of Directors, ROSSETI, First Vice President, OPORA Internal audit functions (INDEPENDENT DIRECTOR)3 RUSSIA All-Russian Public Organization of Small and Medium Business
4% 2. STANISLAV OLEGOVICH ASHIROV Member of the Board of Directors, ROSSETI, Director General, Mezhregionenergosbyt External audit and the selection of the SOCIAL CORPORATE RESPONSIBILITY 10% external auditor 3. VASILY MIKHAILOVICH BELOV Member of the Board of Directors, ROSSETI, Senior Vice-President for Innovations, Non-Profit Organization 4% System of combating misconduct on the (INDEPENDENT DIRECTOR) the Fund for Development of the Center for Elaboration and Commercialization of New Technologies part of employees and third parties 4. ALEXEI ALEKSANDROVICH MAKAROV Member of the Board of Directors, ROSSETI, Academician, Russian Academy of Sciences (INDEPENDENT DIRECTOR) 32% Other 5. OLEG ROMANOVICH FYODOROV Member of the Board of Directors, ROSSETI, member of the Supervisory Board, ALROSA
1 Acts in accordance with the Committee Regulations approved by the Board of Directors of ROSSETI on October 21, 2013 (Minutes of the Meeting No. 137). In accordance with the Road Map, in order to align the Regulations for the Nomination and Remuneration Committee with the recommendations contained in the Corporate Governance Code and the requirements set forth in the Listing Rules, the Company formulated and received prior approval from the Moscow Exchange for a restated version of the Regulations for the Nomination and Remuneration Committee of the Board of Directors of ROSSETI, scheduled for approval in 2016; 2 The Committee’s members served before August 5, 2015 are specified in Section 6.1 of the Appendix to the Annual Report; 3 Due to the acquisition of LENENERGO shares performed by the Company on December 22, 2015 pursuant to the Ordinance of the Government of the Russian Federation No. 21770r ADDITIONAL INFORMATION of October 10, 2015, A.S. Kalinin ceased to meet independence criteria.
116 PJSC “ROSSETI” www.rosseti.ru 117 3. CORPORATE GOVERNANCE AND SECURITIES PJSC “ROSSETI” Management Bodies ANNUAL REPORT || 2015 3
n 2015, the Committee’s current mem- THE COMMITTEE CONSIDERED >> Organizational structure of PJSC Investment, Technical Policy, of the investment and techni- the Regulations for the bers adopted decisions on nine issues THE FOLLOWING PRINCIPAL ROSSETI’s executive arm. cal policies, reliability assurance, Uniform Technical Policy Reliability, Energy Efficiency, energy efficiency, and innovative of ROSSETI in the Distribu- documented in three meeting minutes, Further information can be found ISSUES RELATED TO THE and Innovation Committee development of the Company; tion Grid Sector. including four issues considered at one in Section 6.15 of the Appendix in-person meeting and two meeting min- COMPANY’S ACTIVITIES of the Company’s Board to the Annual Report. Monitor the implementation of: Analyze proposals and formulate utes containing decisions on five issues 1 >> Approval of the Technique for Calcu of Directors recommendations for the Com- that were addressed at absentee meet- lating and Evaluating the KPI of the the consolidated investment pany’s Board of Directors with ings with voting by ballot. Director General of the Company for 2015; The goal of the Committee is to assist the program of the Company; respect to the preparation of and Board of Directors of the Company in per- amendments to internal corporate
forming its functions related to ensuring the Annual Comprehen- documents (standards, codes, COMPANY OVERVIEW INFORMATION ON THE MEETINGS ATTENDED BY THE MEMBERS the implementation of the Company’s sive Procurement Program regulations, procedures, forms) OF THE NOMINATION AND REMUNERATION COMMITTEE investment and technical policies, reli- of the Company’s SDCs with in relation to the investment and ability assurance, energy efficiency, and respect to large investees; technical activities, reliability assur- innovative development of the Company. ance, energy efficiency, and innova- ABSENTEE MEETINGS IN-PERSON MEETINGS the Consolidated Innova- tive development of the Company; tive Development Program NO. NAME OF THE NUMBER OF ATTEN NUMBER NUMBER OF MEETINGS ATTENDANCE PARTICI THE PRINCIPAL OBJECTIVES of the Company; Analyze applicable regulatory COMMITTEE’S MEETINGS DANCE OF MEETINGS ATTENDED BY THE RATE, % PATION RATE MEMBER ATTENDED BY THE RATE, % ATTENDED BY THE COMMITTEE’S MEMBER % OF THE COMMITTEE ARE documents and formulate recom- the Consolidated Energy COMMITTEE’S COMMITTEE’S BY BALLOT AS FOLLOWS mendations for the Company’s MEMBER MEMBER IN Conservation and Energy Board of Directors with respect PERSON Analyze proposals and formulate Efficiency Enhancement to the implementation of the 1. A. S. Kalinin 2 (out of 2) 100 1 (out of 1) 0 (out of 1) 100 100 recommendations for the Com- Program of the Company; investment and technical poli- REVIEW STRATEGY pany’s Board of Directors with cies, reliability assurance, energy 2. S. O. Ashirov 2 (out of 2) 100 1 (out of 1) 0 (out of 1) 100 100 respect to the implementation efficiency, and innovative develop- 3. V. M. Belov 1 (out of 2) 50 0 (out of 1) 1 (out of 1) 0 100 ment of the Company.
4. A. A. Makarov 2 (out of 2) 100 1 (out of 1) 0 (out of 1) 100 100 MEMBERS OF THE INVESTMENT, TECHNICAL POLICY, 5. O. R. Fyodorov 1 (out of 2) 50 0 (out of 1) 1 (out of 1) 0 100 RELIABILITY, ENERGY EFFICIENCY, AND INNOVATION COMMITTEE
The current members of the Committee were appointed by the decision adopted by the Board of Directors on August 5, 2015 (Minutes of the Meeting No. 198)2:
Subjects of the Issues Considered by the Nomination NO. NAME POSITION AS OF THE TIME OF ELECTION GOVERNANCE CORPORATE GOVERNANCE CORPORATE AND SECURITIES AND SECURITIES and Remuneration Committee in 2015 12 1. BORIS ILYICH AYUYEV Chairman of the Committee, member of the Board of Directors, ROSSETI, Chairman of the Management Board, SO UPS ISSUES 2. OLEG GENNADYEVICH BARKIN Member of the Board of Directors, ROSSETI, Deputy Chairman of the Board, NP Market Council 1 2 Organizational matters related to the WERE CONSIDERED BY THE 3. VASILY MIKHAILOVICH BELOV Member of the Board of Directors, ROSSETI, Senior Vice-President for Innovations, Non-Profit Organization Committee’s work (INDEPENDENT DIRECTOR) the Fund for Development of the Center for Elaboration and Commercialization of New Technologies 1 NOMINATION AND REMUNERATION KPI reports 4. ROMAN NIKOLAEVICH BERDNIKOV Member of the Management Board and First Deputy Director General for Technical Policy, ROSSETI COMMITTEE IN 2015, DOCUMENTED IN 5. YURI YEFIMOVICH DOLIN Deputy Director General for Capital Construction, Gazprom Energoholding Incentives for senior managers FIVE MEETING MINUTES, INCLUDING 1 6. VASILY NIKOLAYEVICH Chairman of the Council of Customers of the Government Commission on the Development of the Electric Implementation of instructions issued FOUR ISSUES CONSIDERED AT ONE KISELYOV Power Industry by the Board of Directors IN-PERSON MEETING AND FOUR 7. MIKHAIL ALEKSANDROVICH Member of the Presidium and Head of the Electric Power Committee, OPORA RUSSIA All-Russian Public SOCIAL CORPORATE RESPONSIBILITY Organizational structure MEETING MINUTES CONTAINING KOLESNIKOV Organization of Small and Medium Business 2 8. VIKTOR VASILYEVICH KUDRYAVY Advisor to President on Energy and Gas Supply and Long-Term Development, EUROCEMENT Group Reports of the Committee DECISIONS ON EIGHT ISSUES ADDRESSED AT ABSENTEE MEETINGS 9. ALEKSEY VALERYEVICH MOLSKY Deputy Chairman of the Management Board, FGC UES 2 WITH VOTING BY BALLOT 10. YURI VLADIMIROVICH OSOKIN Member of the Presidium, OPORA RUSSIA 11. PAVEL NIKOLAYEVICH SNIKKARS Director of the Electric Power Industry Development Department, Ministry of Energy of the Russian Federation 12. ALEXANDER VIKTOROVICH SHEVCHUK Executive Director, Investor Protection Association
1 The Investment Committee of the Board of Directors of ROSSETI was established pursuant to the decision adopted by the Board of Directors of ROSSETI on October 22, 2010 (Minutes of the Meeting No. 46). As resolved by the Board of Directors of ROSSETI on February 17, 2012 (Minutes of the Meeting No. 75), the Investment, Technical Policy, Reliability,
Energy Efficiency, and Innovation Committee of the Board of Directors of ROSSETI was established; ADDITIONAL INFORMATION 2 The Committee’s members served before August 5, 2015 are specified in Section 6.1 of the Appendix to the Annual Report.
118 PJSC “ROSSETI” www.rosseti.ru 119 3. CORPORATE GOVERNANCE AND SECURITIES PJSC “ROSSETI” Management Bodies ANNUAL REPORT || 2015 3
INFORMATION ON THE MEETINGS ATTENDED BY THE MEMBERS OF THE COMMITTEE Corporate Secretary of ROSSETI
ABSENTEE MEETINGS IN-PERSON MEETINGS
NO. NAME OF THE NUMBER OF ATTEN NUMBER NUMBER OF MEETINGS ATTENDANCE PARTICI The Corporate Secretary is accountable participate in providing organiza- participate in the organization COMMITTEE’S MEETINGS DANCE OF MEETINGS ATTENDED BY THE RATE, % PATION and answerable to the Company’s Board tional support for the committees of the Company’s interaction with MEMBER ATTENDED BY THE RATE, % ATTENDED BY THE COMMITTEE’S MEMBER RATE % of the Board of Directors; regulatory authorities, securities COMMITTEE’S COMMITTEE’S BY BALLOT of Directors, which approves the perfor- MEMBER MEMBER IN mance report of the Corporate Secretary trading institutors, the registrar, PERSON and evaluates the Corporate Secretary’s provide organizational support and other professional securities for monitoring the implementa- market participants within the
performance. COMPANY OVERVIEW 1. BORIS ILYICH AYUYEV 3 (out of 3) 100 1 (out of 3) 2 (out of 3) 33 100 tion of decisions adopted by the powers assigned to the Corporate 2. OLEG GENNADYEVICH 2 (out of 3) 67 2 (out of 3) 1 (out of 3) 67 100 The Corporate Secretary acts in close General Meeting of Shareholders Secretary; BARKIN contact and cooperation with all divisions and the Board of Directors and recommendations provided by the decide on other issues as in- 3. VASILY MIKHAILOVICH 2 (out of 3) 67 1 (out of 3) 1 (out of 3) 33 67 of the Company. BELOV committees of the Board of Direc- structed by the Board of Directors tors for executive bodies; of the Company within his or her THE CORPORATE SECRETARY 4. ROMAN NIKOLAEVICH 3 (out of 3) 100 1 (out of 3) 2 (out of 3) 100 competence. BERDNIKOV PERFORMS THE FOLLOWING participate in the implementa- 5. YURI YEFIMOVICH DOLIN 3 (out of 3) 100 1 (out of 3) 2 (out of 3) 33 100 FUNCTIONS tion of the Company’s policy The Corporate Secretary’s activities are on the disclosure of information 6. VASILY NIKOLAYEVICH 3 (out of 3) 100 2 (out of 3) 1 (out of 3) 67 100 governed by the Articles of Association provide organizational support for KISELYOV and ensure compliance with legal and internal documents of ROSSETI. the work of the Company’s Board requirements and the Company’s STRATEGY REVIEW STRATEGY 7. MIKHAIL 3 (out of 3) 100 1 (out of 3) 1 (out of 3) 33 67 of Directors; internal documents with respect ALEKSANDROVICH to the disclosure of information; KOLESNIKOV NATALIA NIKOLAYEVNA participate in preparing reference 8. VIKTOR VASILYEVICH 3 (out of 3) 100 3 (out of 3) 0 (out of 3) 100 100 information and advising members participate in implementing the BARANYUK WAS ELECTED KUDRYAVY of the Company’s Board of Direc- procedures prescribed by law and CORPORATE SECRETARY 9. ALEKSEY VALERYEVICH 1 (out of 3) 33 2 (out of 3) 1 (out of 3) 67 100 tors and executive bodies and the the Company’s internal docu- MOLSKY Company’s shareholders on cor- ments to ensure the protection OF ROSSETI IN NOVEMBER porate law and governance; 10. YURI VLADIMIROVICH 2 (out of 3) 67 1 (out of 3) 2 (out of 3) 33 100 of the rights and legitimate inter- 2015 OSOKIN ests of shareholders and in moni- participate in the organization toring their implementation; 11. PAVEL NIKOLAYEVICH 3 (out of 3) 100 2 (out of 3) 1 (out of 3) 67 100 of monitoring compliance with the SNIKKARS
requirements of corporate laws, participate in improving the GOVERNANCE CORPORATE GOVERNANCE CORPORATE AND SECURITIES AND SECURITIES 12. ALEXANDER 2 (out of 3) 67 3 (out of 3) 0 (out of 3) 100 100 the Company’s Articles of Associa- system and practices of the VIKTOROVICH SHEVCHUK tion and internal documents and Company’s corporate governance, monitor the protection of share- prepare proposals within his or holders’ rights and interests while her competence, and organize the Company’s management bod- the implementation of decisions In the period specified above, the Enhancement Program of PJSC ROSSETI ies make decisions; adopted by the Board of Directors Committee’s members listed above held for 2015–2019; with respect to the development six (6) meetings, including three (3) >> Approval of the Regulations for inform the Board of Directors of corporate governance practices in absentia and three (3) in person. the Procedure for Formulating 17 of any identified noncompliance in the Company; and Implementing the Innovative with the provisions of the Compa- ny’s internal documents if com- KEY ISSUES CONSIDERED Development Program of PJSC ROSSETI. participate in the organization MEETINGS pliance therewith relates to the of the Company’s interaction with SOCIAL CORPORATE RESPONSIBILITY BY THE COMMITTEE Further information can be found WERE HELD BY THE COMMITTEE Corporate Secretary’s functions; shareholders; in Section 6.15 of the Appendix to the >> Approval of a restated version of the IN 2015, INCLUDING THREE IN-PERSON Annual Report. participate in the organization Investment Policy of PJSC ROSSETI; MEETINGS of preparing and holding the >> Approval of the Unified Energy General Meeting of Shareholders; Conservation and Energy Efficiency ADDITIONAL INFORMATION
120 PJSC “ROSSETI” www.rosseti.ru 121 3. CORPORATE GOVERNANCE AND SECURITIES PJSC “ROSSETI” Management Bodies ANNUAL REPORT || 2015 3
Executive bodies
Sole Executive Body Collegial Executive Body BUDARGIN Exercise the powers of general Define the position of the Com- The Director General of the Company is Oleg Mikhailovich The Management Board of ROSSETI acts meetings of shareholders (mem- pany (the Company’s representa- in charge of the Company’s day-to-day Director General, in accordance with the Regulations for bers) of the Company’s wholly- tives), including the instructions activities pursuant to decisions adopted Chairman of the Management Board, the Management Board approved by the owned SDCs; to vote or not to vote on any by the General Meeting of Shareholders ROSSETI Annual General Meeting of Shareholders issues on the agendas of general COMPANY OVERVIEW and the Board of Directors of the of ROSSETI on June 30, 2015. Nominate persons as chair- BORN on November 16, 1960. meetings of shareholders and Company within their competence. men of boards of directors, sole meetings of boards of directors EDUCATION: Oleg Budargin graduated The Management Board of the executive bodies, and the Com- of SDCs1 The competence of the Director with honors from the Norilsk Industrial Company is a collegial executive pany’s representatives on boards General of the Company includes all Institute, majoring in Industrial and Civil body of the Company, acts to the of directors and in internal audit Resolve other issues related matters related to the management Construction. benefit of the Company’s sharehold- commissions of organizations to the Company’s activities pursu- of the Company’s day-to-day activities, He started his career in 1984 as a fore- ers, follows decisions of the General of any legal form of ownership ant to decisions adopted by the except for any issues falling within the man of the Construction Directorate Meeting of Shareholders and the in which the Company partici- General Meeting of Shareholders competence of the General Meeting of the Shaft Sinking Division of Norilsk Board of Directors of the Company, pates (except where the functions or the Board of Directors, and of Shareholders, the Board of Directors, Mining-and-Metallurgical Integrated and acts in accordance with the laws of general meetings of sharehold- other issues submitted by the ers of SDCs are performed by the Company’s Director General for its or the Management Board of the Works; later, he was appointed as the of the Russian Federation, the Articles REVIEW STRATEGY Company. Deputy Head of the Production of Association of the Company, other Company’s Management Board review. Department of Norilskstroy; and in 1995, internal documents of the Company, and except where (with respect Budargin he took up his position as Deputy and the Regulations. to nominating persons as chair- The number of the members of the men of boards of directors and Director General of Norilsk Mining-and- Management Board is determined by the Oleg Mikhailovich On june 14, 2013, the Board sole executive bodies of SDCs) Metallurgical Integrated Works. decision adopted by the Company’s of directors of ROSSETI COMPETENCE the size of any stake (interest) He was the Head of the Norilsk Board of Directors at the suggestion resolved to appoint Oleg OF THE MANAGEMENT BOARD held by the Company in SDCs Director General, Municipality from 2000 and the of the Company’s Director General. Chairman of the Management Board, ROSSETI Mikhailovich Budargin as the or the number of votes of any Governor of the Taimyr (Dolgano-Nenets) Develop the priority areas of the nonprofit organizations to which The Director General of the Company Director General of ROSSETI Autonomous District from 2003. Company’s activities and long- the Company is entitled does not submits any nomination for a member term implementation plans and From 2009, he is the Chairman of the allow the Company to influence of the Management Board for review
submit them for approval by the GOVERNANCE CORPORATE GOVERNANCE CORPORATE AND SECURITIES AND SECURITIES Management Board of FGC UES. the decisions adopted by SDCs’ or by the Board of Directors, except for Board of Directors; In June 2013, he was appointed as the nonprofit organizations’ man- his/her own nomination. The members Director General of ROSSETI. agement bodies on the election of the Management Board, including the Prepare a report on the Com- of chairmen of boards of directors He is a member of the Presidential Director General, are elected and their pany’s financial and economic and sole executive bodies of SDCs Commission for Strategic Development powers are terminated earlier by the activities and on the organization, and nonprofit organizations from of the Fuel and Energy Sector and functioning, and effectiveness among the persons nominated Board of Directors of the Company. Environmental Security of the Russian of the Company’s risk manage- by the Company); Federation. ment and internal control system; REGULATIONS FOR THE MANAGEMENT BOARD OF PJSK ROSSETI He is Vice Chair, Responsibility for 1 Unless, pursuant to the Procedure for Interaction Regional Development, of the World of ROSSETI with the Economic Entities Whose
Shares (Stakes) Are Owned by ROSSETI, the SOCIAL CORPORATE RESPONSIBILITY Energy Council (WEC). Company’s Board of Directors shall decide on such issues. OLEG BUDARGIN HAS GOVERNMENTAL AND SECTORAL AWARDS. ADDITIONAL INFORMATION
122 PJSC “ROSSETI” www.rosseti.ru 123 3. CORPORATE GOVERNANCE AND SECURITIES PJSC “ROSSETI” Management Bodies ANNUAL REPORT || 2015 3
Members of the Management Board
1. Oleg Mikhailovich 2. Roman Nikolaevich 3. Nikolay Nikolayevich 4. Andrey Aleksandrovich
Budargin Berdnikov Varlamov Dyomin COMPANY OVERVIEW
Chairman of the Management Member of the Management Board, Member of the Management Member of the Management Board, Director General, ROSSETI First Deputy Director General, Board, Deputy General Director — ROSSETI Chief of Staff, ROSSETI YEAR OF BIRTH: 1974 YEAR OF BIRTH: 1960 YEAR OF BIRTH: 1973 YEAR OF BIRTH: 1974
EDUCATION: HIGHER EDUCATION, CANDIDATE OF SCIENCE (ECONOMICS) EDUCATION: HIGHER EDUCATION EDUCATION: HIGHER EDUCATION, MASTER OF ECONOMICS EDUCATION: HIGHER EDUCATION >>1982 — Norilsk Industrial Institute, majoring in Industrial and Civil Construction. >>1998 — Moscow Power Engineering Institute (Technical University), majoring >>1996 — Institute of Asian and African Studies, Lomonosov Moscow State >>1996 — Zaporozhye State University, majoring in Applied Mathematics in Power Plants University POSITIONS HELD OVER THE PAST 5 YEARS: >>1999 — Zaporozhye Institute of Economics and Information Technologies, POSITIONS HELD OVER THE PAST 5 YEARS: >>2000 — Finance Academy under the Government of the Russian Federation, majoring in Finance
>>2009 — 2013 — Chairman of the Management Board, FGC UES majoring in Economics REVIEW STRATEGY >>2009–2013 — Member of the Management Board, FGC UES POSITIONS HELD OVER THE PAST 5 YEARS: >>2012 — present — Chairman of the Management Board, ROSSETI POSITIONS HELD OVER THE PAST 5 YEARS: >>2010–2012 — Deputy Chairman of the Management Board, FGC UES >>2009–2010 — Member of the Management Board, FGC UES >>2013 — present — Director General, ROSSETI >>2008–2011 — Secretary of State and Deputy Head, Federal Service for Financial >>2012–2013 — First Deputy Chairman of the Management Board FGC UES Monitoring >>2010–2012 — Advisor to the Director General, Mezhregionsbyt MEMBERSHIP IN MANAGEMENT BODIES OF OTHER CORPORATE ENTITIES: >>07.2012–10.2012 — First Deputy Executive Director, IDGC Holding (from April 4, >>2011–2013 — Deputy Chairman of the Management Board, FGC UES >>2012–2013 — Advisor to the Chairman of the Management Board, FGC UES >>2010 — 2011 — Member of the Board of Directors, Energy Forecasting Agency 2013, JSC ROSSETI; from July 17, 2015, PJSC ROSSETI) >>2012–2013 — Member of the Management Board, FGC UES >>2013–2015 — First Deputy Director General for Economic Affairs and Finance, >>2010 — present — Member of the Board of Directors, FGC UES >>2012 — present — Member of the Management Board, ROSSETI ROSSETI >>2013–2015 — Deputy General Director of the Internal Audit and Control, ROSSETI >>2011 — present — Member of the Supervisory Board, Russian Regional >>2013–2015 — First Deputy Director General for Technical Policy, ROSSETI >>2013 — present — Member of the Management Board, ROSSETI Development Bank >>2015 — present — Deputy Director General and Head of the Administrative Office, >>2015 — present — First Deputy Director General, ROSSETI ROSSETI MEMBERSHIP IN MANAGEMENT BODIES OF OTHER CORPORATE ENTITIES: >>2011–2015 — Member of the Board of Directors, Inter RAO >>2015 — present — Acting Director General and Chairman of the >>2013–2015 — Member of the Board of Directors, Tyumenenergo >>2011 — present — Chairman of the Supervisory Board, Association of Solar MEMBERSHIP IN MANAGEMENT BODIES OF OTHER CORPORATE ENTITIES: Energy Enterprises Nonprofit Partnership MEMBERSHIP IN MANAGEMENT BODIES OF OTHER CORPORATE ENTITIES: >>2013–2015 — Member of the Board of Directors, IDGC of Northern Caucasus >>2013 — 2014 — Chairman of the Board of Directors, TDC
>>2012–2013 — Chairman of the Board of Directors, Kubanenergo >>2010–2014 — Member of the Supervisory Board, GruzRosenergo >>2013 — present — Member of the Board of Directors, IDGC of Center and Volga >>2013–2015 — Member of the Board of Directors, FEEMC GOVERNANCE CORPORATE GOVERNANCE CORPORATE AND SECURITIES AND SECURITIES >>2012 — present — Chairman of the Board of Directors, MOESK >>2010–2012 — Member of the Board of Directors, ENIN Region >>2014 — present — Member of the Board of Directors, MOESK >>2012–2013 — Chairman of the Board of Directors, IDGC of Siberia >>2011–2014 — Member of the Supervisory Board, NP Market Council Shares held in the Company and the Company’s SDCs,%: none >>2014 — present — Member of the Board of Directors, FGC UES >>2012 — present — Member of the Supervisory Board, North-Caucasus Federal >>2012–2014 — Member of the Board of Directors, EnergoRynok Shares held in the Company and the Company’s SDCs,%: none University >>2012–2013 — Member of the Board of Directors, Tyumenenergo >>2012 — present — Member of the Board of Trustees, member of the Scientific Council, Moscow Power Engineering Institute (National Research University) >>2012–2013 — Member of the Board of Directors, IDGC of Urals >>2012 — present — Member of the Board and Vice President for Environmental >>2012–2013 — Member of the Board of Directors, IDGC of Northern Caucasus Issues, Association of Polar Explorers >>2013–2014 — Member of the Board of Directors, IDGC of Siberia >>2013 — present — Member of the Board of Directors, ROSSETI >>2013 — present — Member of the Presidium, Russian National Committee of the >>2013 — present — Vice Chair, Responsibility for Regional Development, World Council on Large Electric Systems (CIGRE) Energy Council (WEC) >>2013 — present — Member of the Supervisory Board, Noncommercial Partnership >>2013 — present — Member of the Board of Trustees, Mariinsky Theatre and of Territorial Power Grid Organizations SOCIAL CORPORATE RESPONSIBILITY Primorsky Opera and Ballet Theater >>2013 — present — Chairman of the Supervisory Board, Scientific and Technical >>2014 — present — Member of the Board of Trustees, Primorsky Opera and Ballet Council of Unified Energy System Non-profit Partnership Theater >>2014 — present — Member of the Supervisory Board, Engineering Center UES >>2014 — present — Chairman of the Board of Directors, FTC Real Estate >>2012 — present — Member of the Presidential Commission for Strategic >>2014 — present — Member of the Board of Directors, FTC Development of the Fuel and Energy Sector and Environmental Security of the Russian Federation Shares held in the Company and the Company’s SDCs,%: 0.000000195% of share capital of (0.000000195% of ordinary shares) Shares held in the Company and the Company’s SDCs,%: FGC UES 0.00064% of share capital of (0.00064% of ordinary shares) FGC UES ADDITIONAL INFORMATION
124 PJSC “ROSSETI” www.rosseti.ru 125 3. CORPORATE GOVERNANCE AND SECURITIES PJSC “ROSSETI” Management Bodies ANNUAL REPORT || 2015 3
5. Valentin Yefimovich STATISTICS ON THE MEETINGS HELD BY THE MANAGEMENT BOARD OF THE COMPANY IN 2013–2015 Mezhevich
2013 2014 2015 Member of the Management Board, Chief Advisor, PJSC ROSSETI Number of meetings in the period, including: 42 85 133
YEAR OF BIRTH: 1947 in person 8 14 24
in absentia 34 71 109
Number of issues considered, including: 134 197 368 COMPANY OVERVIEW
in person 21 40 58
EDUCATION: HIGHER EDUCATION, CANDIDATE OF SCIENCE (ENGINEERING) in absentia 113 157 310 >>1970 — Irkutsk Polytechnic Institute, majoring in Thermal Power Plant >>1991 — Leningrad Polytechnic Institute, Candidate of Science (Engineering) POSITIONS HELD OVER THE PAST 5 YEARS: >>2001–2013 —Member of the Federation Council, First Deputy Chairman of the System and Criteria REMUNERATION PAID TO MEMBERS OF THE MANAGEMENT BOARD IN 2015 Committee on Economic Policy, Federation Council of the Federal Assembly of the (MILLION RUBLES) Russian Federation of Remuneration for >>2013–2014 — Deputy Director General for Strategic Communications, ROSSETI Members of the Management >>2013 — present — Member of the Management Board, ROSSETI Board TYPE OF REMUNERATION AMOUNT OF REMUNERATION REVIEW STRATEGY >>2014 — present Chief Advisor, ROSSETI Remuneration for participation in the work of the 6.38 MEMBERSHIP IN MANAGEMENT BODIES OF OTHER CORPORATE ENTITIES: The pay system for ROSSETI’s senior management body/financial and economic control >>2008–2014 — Deputy Chairman of the Supervisory Board, NP Market Council managers is governed by the Regulations body >>2014–2015 — Member of the Board of Directors, IDGC of Northern Caucasus for Financial Incentives for Senior Salary 119.24 >>2014–2015 — Member of the Board of Directors, IDGC of Siberia Managers approved by the Board >>2014–2015 — Member of the Board of Directors, Kubanenergo of Directors of the Company and includes Bonuses 181.67 >>2015 — present — Member of the Board of Directors, IDGC of Volga the fixed and variable parts of pay. Commission fees 0 >>2015 — present — Member of the Board of Directors, Tyumenenergo
Shares held in the Company and the Company’s SDCs,%: none Benefits 0 CORPORATE GOVERNANCE CORPORATE GOVERNANCE CORPORATE AND SECURITIES AND SECURITIES
Other remuneration 5.13
CHANGES IN THE COMPOSITION INFORMATION ON MEETINGS TOTAL 312.42 OF THE MANAGEMENT BOARD OF THE MANAGEMENT BOARD
As resolved by the Board of Directors on August 5, 2015 From January 2015 to August 2015, the Management Board (Minutes of the Meeting No. 198), the powers of Dan of the Company held 72 meetings, including 12 in person. Mikhailovich Belenky as a member of the Management Board In 2015, the current members the Management Board held The variable part of remuneration for this category of managers of ROSSETI were terminated, and Nikolay Nikolayevich Varlamov, 61 meetings, including 11 in absentia. is paid on the basis of performance evaluation for a quarter Deputy Director General and Head of the Administrative Office
and year and depends on attained key performance indicators, SOCIAL CORPORATE RESPONSIBILITY of ROSSETI, was elected to the Management Board of ROSSETI. the composition, calculation technique, and target values of which are approved by the Board of Directors of ROSSETI according to the goals of the Strategy for Development of the Electric Grid Sector of the Russian Federation and the Long- Term Development Program of the Company. ADDITIONAL INFORMATION
126 PJSC “ROSSETI” www.rosseti.ru 127 3. CORPORATE GOVERNANCE AND SECURITIES PJSC “ROSSETI” Control Bodies ANNUAL REPORT || 2015 3 Control Bodies Internal Audit Commission REMUNERATION PAID TO MEMBERS OF THE INTERNAL AUDIT COMMISSION IN 2015 (RUB) The Internal Audit Commission is a standing elected body responsible for internal control within the Company, acts to the benefit of the Company’s shareholders and NAME AMOUNT is accountable to the General Meeting of Shareholders of the Company. Alan Fyodorovich Khadziev 477,900 COMPANY OVERVIEW Astkhik Artashesovna Bashindzhagyan 318,600 PRINCIPAL OBJECTIVES Vladimir Yulianovich Skobarev 318,600
Vladimir Vasilyevich Khvorov 318,600 Conduct audits of the financial and economic activities;
1 TOTAL 1,433,700
Make an independent assessment of reliability of information contained in the Company’s annual report and annual accounting statements; 2 INTERNAL AUDIT >> the Board of Directors of the Company4 COMMISSIONS OF SDCS resolved to recommend RSM RUS as the Auditor for the mandatory Ensure supervision of the compliance of the Company’s financial and economic transactions with the laws of the Russian Federation and auditor; annual statements for 2015 REVIEW STRATEGY the Articles of Association of the Company; 3 The internal audit commissions of the >> the Annual General Meeting (IFRS and RAS) — RSM RUS ROSSETI Group’s entities act in accor- of Shareholders of ROSSETI approved Inform about any noncompliance of the Company’s financial and economic activities with the accounting and financial reporting procedure dance with the Federal Law “On Joint- on June 30, 2015, RSM RUS as the 4 prescribed by legal regulations of the Russian Federation and with legal regulations of the Russian Federation; Stock Companies,” the articles of asso- Company’s auditor. ciation of SDCs, and the regulations for 1 Minutes of the Meeting No. 223 of March 21, RSM RUS is a member of RSM the internal audit commissions of SDCs 2014; Make proposals/recommendations for the improvement of efficiency of the Company’s assets management, improvement of the risk International and ranks among Russia’s 2 Minutes of the Meeting No. 176 of February 16, in compliance with the Model Regulations 5 management and internal control system; largest accounting firms. RSM RUS is 2015; for the Internal Audit Commission 3 also a member of a self-regulatory orga- Minutes of the Meeting of the Bidding Commission approved for ROSSETI’s subsidiar- No. 0473000000515000001 of April 17, 2015; nization of auditors, Auditor Association Implement control over the remedying of faults and carrying out of the recommendations set forth in the reports based on the results 4 Minutes of the Meeting No. 189 of May 27, 2015; ies and dependent companies by the 5 of previous audits (inspections). Sodruzhestvo Non-profit Partnership . 5 GOVERNANCE CORPORATE GOVERNANCE CORPORATE AND SECURITIES AND SECURITIES 6 Management Board of the Company1. Resolution of the Management Board of Auditor Association Sodruzhestvo of September 25, 2013; RSM RUS’s fee for the mandatory Certificate of Membership No. 6938. EXTERNAL AUDITOR annual audit of the statements of the Company for 2015 (IFRS and RAS) is The external auditor was selected five million (5,000,000) rubles, inclusive MEMBERS OF THE INTERNAL AUDIT COMMISSION in accordance with the following of VAT. procedure: The following members were elected by the Annual General Meeting of Shareholders on June 30, 2015: RSM RUS has not provided the >> the bidding documents for auditor Company with any services other than 1 NAME POSITION selection were approved by the Board audit services. of Directors of the Company2; Andrey Nikolayevich Kharin (Chairman) Deputy Director, Department for Corporate Governance, Price Conditions and Auditing in Fuel and Energy The mandatory annual audit of the CORPORATE SOCIAL CORPORATE RESPONSIBILITY Industry Branches, Ministry of Energy of the Russian Federation >> based on the results of a public bid- statements for 2014 (IFRS and RAS) ding procedure for the right to enter into was conducted by Ernst & Young LLC. Polina Sergeyevna Tsodikova Advisor, Internal Control Division, Federal Agency for State Property Management of the Russian the agreement to conduct a mandatory Federation Ernst & Young LLC was paid a fee annual audit of the statements of the of seven million, eighty thousand Vladimir Vasilyevich Khvorov Lead Expert of the Division, Ministry of Economic Development of the Russian Federation Company for 2015–2017 (IFRS and RAS), RSM RUS was selected as the preferred (7,080,000) rubles, inclusive of VAT. bidder3; Andrey Ivanovich Yudin Head of the Auditing Unit, Ministry of Energy of the Russian Federation
Igor Vladimirovich Shmakov Head of the Directorate for Internal Audit, ROSSETI
1 The positions specified are as of the time ADDITIONAL INFORMATION of election.
128 PJSC “ROSSETI” www.rosseti.ru 129 3. CORPORATE GOVERNANCE AND SECURITIES PJSC “ROSSETI” Internal Control and Risk Management Systems ANNUAL REPORT || 2015 3
IN 2015, THE COMPANY Internal Control UPDATED THE INTERNAL CONTROL POLICY OF ROSSETI and Risk Management Systems AND THE MODEL INTERNAL CONTROL POLICY FOR ROSSETI Organizing reliable internal control and SDCS IN ORDER TO BRING THEM building up a sound system of risk man- INTO LINE WITH OTHER agement is one of the most important conditions for ensuring the stable and INTERNAL DOCUMENTS COMPANY OVERVIEW efficient operation of the Company and FORMULATED PURSUANT protecting the interests of its sharehold- TO INSTRUCTIONS OF THE ers and investors. PRESIDENT OF THE RUSSIAN FEDERATION1, DIRECTIVES OF THE GOVERNMENT OF THE RUSSIAN FEDERATION2 AND THE ROSSETI GROUP SET UP AND DEVELOPS THE INTERNAL ENSURE COMPLIANCE WITH THE CONTROL SYSTEM TO ACHIEVE THE FOLLOWING GOALS: PROVISIONS OF THE CORPORATE
GOVERNANCE CODE REVIEW STRATEGY RECOMMENDED BY THE BANK Ensure compliance with the OF RUSSIA3 Ensure efficiency and applicable legal requirements Ensure the reliability and productivity of organizing and local regulatory timeliness of accounting the Company’s and its SDCs’ documents, including (financial) and other activities; safeguard assets in economic events and reporting Internal Control System business accounting
In order to prevent abuses and miscon- In accordance with the COSO internal control — integrated duct, the ROSSETI Group requires that GOVERNANCE CORPORATE GOVERNANCE CORPORATE AND SECURITIES AND SECURITIES framework, the ROSSETI Group builds the control environment, counterparties unconditionally disclose operates the risk assessment system, carries out control proce- their entire owner chain and launched an online whistleblower reporting dures applied continuously to all processes (areas of activities) channel via its corporate website and THE IMPROVEMENT OF INTERNAL CONTROL SYSTEM at all management levels, and monitors internal control a whistleblower hotline for allegations of corruption. The Company also formu- IS REALIZED ON ALL LEVELS AND CONTROL DIRECTIONS: lated and updated standard documents The internal control system is part of the The effectiveness of the internal relating to personnel recruitment, evalua- general management system and covers control system relies on the tion, rotation, promotion, and motivation. PREVENTIVE (PROACTIVE) ROUTINE FOLLOW-UP all areas of the Group’s activities. interrelationship of the following Further information is contained SOCIAL CORPORATE RESPONSIBILITY constituent management processes: CONTROL CONTROL CONTROL in Section 6.1 of the Appendix to the Building effective internal control system, Implementation of embedded in business Internal audit, the auditing control >> Organization of effective internal con- Annual Report. including: verifying the adequacy of control processes internal control procedures, of reliability of reporting, safeguarding trol over business processes; procedures to prevent or reduce the impact aimed at achieving the goals of business of assets, compliance monitoring, external >> Risk management; of risks and achieve the objectives of business processes audit, self-assessment processes, development and implementation >> Internal audit and independent of control procedures 1 No. Pr–2013 of December 27, 2014; evaluation; 2 No. 3984p–P13 of June 24, 2015; >> Auditorial control. 3 No. 06–52/2463 of April 10, 2014. ADDITIONAL INFORMATION
130 PJSC “ROSSETI” www.rosseti.ru 131 3. CORPORATE GOVERNANCE AND SECURITIES PJSC “ROSSETI” Internal Control and Risk Management Systems ANNUAL REPORT || 2015 3
Internal control system participants; The roles of participants in the internal control system their authority and responsibilities PARTICIPANT THE COMPETENCE PRINCIPAL INTERNAL IN THE DOCUMENTS SPECIFYING INTERNAL THE FUNCTIONS CONTROL SHAREHOLDERS SYSTEM SUBORDINATE Internal Audit > Exercise control of financial and economic activities; Articles of Association, SUBORDINATE Commission > Prepare proposals/recommendations to improve the internal control system; Internal Control Policy, > Make an independent assessment of the reliability of information contained in the annual report and Regulations for the Internal
annual accounting statements. Audit Commission COMPANY OVERVIEW
Board > Approve internal documents defining the organization and the development and improvement strategy Articles of Association, of Directors of the internal control system; Internal Control Policy > Approve the Internal Control Policy containing the principles of and approaches to the organization of the INTERNAL AUDIT INFORMING BOARD OF DIRECTORS internal control system; > Control the activities of executive bodies in the principal (high-priority) areas; COMMISSION (COMMITTEES) > Review the results of the evaluation of internal control system effectiveness on an annual basis.
Audit > Carry out a preliminary review of internal documents defining the organization and the development Internal Control Policy, APPROVING POLICY Committee and improvement strategy of the internal control system, the Internal Control Policy, and subsequent Regulations for the Audit AND INTERNAL DOCUMENTS of the Board amendments thereto; Committee INSPECT THE INTERNAL CONTROL SYSTEM REPORTS of Directors > Carry out a preliminary review of the results of the evaluation of internal control system effectiveness PROPOSALS FOR THE INTERNAL CONTROL based on the internal auditor’s report on internal control system effectiveness and based on reports on the SYSTEM IMPROVEMENT findings of external independent evaluation and prepare proposals and recommendations to improve the INFORMING internal control system; REVIEW STRATEGY RECOMMENDATIONS FOR > Oversee the reliability and effectiveness of the internal control system as related to supervising the RECOMMENDATIONS FOR THE INTERNAL THE INTERNAL CONTROL reliability of accounting (financial) statements, selecting the external auditor and conducting the external CONTROL SYSTEM IMPROVEMENT EXECUTIVE SYSTEM IMPROVEMENT audit, and ensuring compliance with regulatory and legal requirements and as related to analyzing and assessing the implementation of the Internal Control Policy. BODIES Other Oversee the attainment of prescribed financial and operational indicators, compliance with the applicable Internal Control Policy, committees laws, compliance with the rules and procedures set forth in local regulatory documents, and the reliability committee regulations of the Board and timeliness of reporting within their competence specified by the Board of Directors of Directors SUBORDINATE Executive Ensure the effective internal control system is created and kept in working order, including: Articles of Association, APPROVING LOCAL REGULATORY SUGGESTIONS FOR bodies > defining the areas and plans of developing and improving the internal control system; Internal Control Policy DOCUMENTS ENSURING THE INTERNAL CONTROL > approving regulatory and methodological documents relating to the organization and functioning of the THE FUNCTIONING OF THE INTERNAL SYSTEM IMPROVEMENT internal control system within their competence; GOVERNANCE CORPORATE GOVERNANCE CORPORATE AND SECURITIES AND SECURITIES CONTROL SYSTEM > ensuring the implementation of action plans; > preparing and submitting for consideration by the Board of Directors reports on financial and economic INTERNAL CONTROL INTERNAL AUDIT activities and on the organization, functioning, and effectiveness of the risk management and internal DIVISIONS DIVISION DIVISION control systems. Divisions > Implement the principles of the internal control system; Internal Control Policy, > Organize and regulate the building of effective processes (areas of activities), including using identified division regulations risks to develop and implement new control procedures or change existing control procedures; > Carry out control procedures; > Perform self-assessment in relation to supervised processes (areas of activities) and initiate the METHODOLOGY improvement of control procedures; INTERACTION BETWEEN > Correct discovered deficiencies in control procedures and processes (areas of activities). THE COMPANY AND Internal > Develop basic and methodological documents and ensure their implementation in relation to building up Internal Control Policy, ITS SDCS UNDER SOCIAL CORPORATE RESPONSIBILITY control and improving the internal control system; regulations for the internal SDCS SHAREHOLDERS division > Assist management in building the control environment and formulate recommendations for the control division REGULATION description of control procedures and their introduction into processes (areas of activities) and for the assignment of responsibilities to officers; > Coordinate measures to maintain and monitor the intended state of the internal control system; > Prepare information on the state of the internal control system for stakeholders.
Internal audit > Prepare recommendations based on the internal audit results to improve control procedures, specific Internal Control Policy, division components (elements) of internal control and the internal control system; Internal Audit Policy, > Make the internal evaluation of internal control system effectiveness and provide recommendations regulations for the internal to improve the efficiency and effectiveness of the internal control system. audit division ADDITIONAL INFORMATION
132 PJSC “ROSSETI” www.rosseti.ru 133 3. CORPORATE GOVERNANCE AND SECURITIES PJSC “ROSSETI” Internal Control and Risk Management Systems ANNUAL REPORT || 2015 3
Report on the Evaluation found to be partially in conformity with TO EVALUATE THE STATE OBJECTIVES OF THE RISK MANAGEMENT SYSTEM of Internal Control System the Moderate level (in accordance with (MATURITY LEVEL) the criteria established by the Strategy2). Effectiveness The Board of Directors reviewed the OF THE INTERNAL CONTROL 3 results of the evaluation . SYSTEM IN ACCORDANCE Keep an optimal Develop a Risk- Improve the Decision- Improve the Decision- Identify and Manage The internal independent evaluation balance between the oriented Corporate making process for Risk making process for Risk the totality of risks The internal auditor’s report on the WITH THE COSO CONCEPT, Preferred risk and the of internal control system culture response response in Economic activities effectiveness is made by: effectiveness evaluation of the internal THE COMPANY USES THE Development strategy control and risk management system >> the internal audit division on an annual and corporate governance of ROSSETI CRITERIA ESTABLISHED basis; 4 and ROSSETI SDCs for 2015 was sub- BY THE STRATEGY : SIX COMPANY OVERVIEW >> the external independent consultants mitted for consideration by the Board DEVELOPMENT (MATURITY) Key Roles and The basic principles of the >> Ensure that processes are dynamic, at least once every three years, depend- iterative (recurrent), and prompt of Directors of ROSSETI upon preliminary LEVELS OF THE RISK Responsibilities of the Risk risk management system are ing on changes in the organizational review by the Audit Committee of the (immediate response to changes in the activities and on the general level of the Company’s Board of Directors (Minutes MANAGEMENT AND INTERNAL Management System as follows situation); internal control system’s development, of the Meeting No. 69 of May 24, 2016). CONTROL SYSTEM FROM >> Ensure the adaptiveness of the sys- reliability, and effectiveness. Board of directors >> Protect the Company’s values and cre- tem, enabling risk management to be The external independent evaluation “ZERO” TO “HIGH” ation the conditions for the Company’s The Articles of Association of the improved at the same time as improv- of the ROSSETI Group’s internal control Board of directors authorized development; Company and SDCs were amended ing other management processes in the system in 2014 and 2015 was not made committee of the board of direc- >> Integrate the risk management process Company; in 2015 to make the Board of Directors Detailed information about the measures tors into the Company’s overall management responsible for the annual review of the On June 2, 2015, the Board of Directors carried out in 2015 to improve the inter- >> Cause all participants to be respon- system. Risk management is part of the REVIEW STRATEGY evaluation of internal control system of ROSSETI reviewed the report on the nal control and risk management system Internal audit commission sible for risk management; effectiveness1. performance results for the schedule obligations of management and is incor- can be found in the Appendix to the >> Optimize the structure of the system, (road map) for implementing the Strategy Executive bodies: Management porated into all organizational processes The Directorate for Internal Audit Annual Report. ensuring that decision making related for Developing and Improving the board director general and into project and change manage- of ROSSETI evaluated the effectiveness ment processes, including the Company’s to risk response is based on the compre- Internal Control System of ROSSETI and of ROSSETI’s and SDCs’ internal control strategic development planning; hensive consideration of factors; Subsidiaries and Dependent Companies Risk owners and risk management system for 2014. of ROSSETI for 2014; the similar report >> Ensure the unity of risk management >> Ensure the unity of the methodologi- As noted by the Audit Committee of the Officers responsible for risk man- for 2015 is submitted for review by the and decision making; cal framework for all of the Company’s Board of Directors of ROSSETI, there agement measures divisions, using unified approaches and Board of Directors of ROSSETI in May >> Ensure that processes are systematic, were improvements in the develop- standards developed and approved for 2016. structured, and timely; ment (maturity) level of internal control Risk management division the ROSSETI Group.
>> Ensure the continuity of information GOVERNANCE CORPORATE GOVERNANCE CORPORATE AND SECURITIES AND SECURITIES in 2014, and the current maturity was The direct implementation of risk man- Internal audit division flows and the availability and complete- agement procedures and the organiza- ness information; tion of the effective control environment >> Ensure the adaptability of the system of supervised processes (areas of activi- Risk Management and its continuous development with due ties) are entrusted to process owners, consideration to the necessity of meeting namely the managers of the Company’s the new challenges arising from changes units and divisions1. The Company period- Pursuant to instructions of the Russian Grid Sector of the Russian Federation 1 In accordance with the Corporate Government in the internal and external conditions Code, recommended by the Bank of Russia; ically evaluates the current status of the President and Government and the and the Long-Term Development Program of the Company’s operations; 2 Minutes of the Meeting of the Audit Committee risk management system: self-assess- recommended guidelines issued by the and the Articles of Association of the No. 60 of June 5, 2015; >> Ensure the transparency of activi- ment; internal independent evaluation; Federal Agency for State Property Company and increasing the Company’s 3 Minutes of the Meeting of the Board of Directors ties and protect the interests external independent evaluation. Management, a restated version of the enterprise value while keeping a balance No. 193 of June 25, 2015; of stakeholders; SOCIAL CORPORATE RESPONSIBILITY 4 Strategy for Developing and Improving the Internal Risk Management Policy of ROSSETI was between the interests of all stakeholders. Control System of ROSSETI and Subsidiaries and 1 approved in 2015 Dependent Companies of ROSSETI, approved In accordance with the approved Risk Risk management measures apply to the by the decision of the Board of Directors on the Management Policy, job descriptions, and ROSSETI’s risk management measures level of ROSSETI and SDCs. Management’s initiative (Minutes of the Meeting applicable regulatory documents. are aimed at ensuring that the Company No. 143 of February 10, 2014). achieves the goals set out in the Strategy for Development of the Electric ADDITIONAL INFORMATION
134 PJSC “ROSSETI” www.rosseti.ru 135 3. CORPORATE GOVERNANCE AND SECURITIES PJSC “ROSSETI” Internal Control and Risk Management Systems ANNUAL REPORT || 2015 3
Key Stages of the Risk Management Process Levels of Significance of risks
MODERATE SIGNIFICANT CRITICAL GOAL RISK SETTING IDENTIFICATION Main Risks of the ROSSETI Group in 2015
RISKS DESCRIPTION RISK MITIGATION MEASURES
RISK RISK TREATMENT Financial Risks COMPANY OVERVIEW ASSESSMENT (RESPONSE) These risks are involved in a possible rise in the Measures are taken to maximize its operating and investment Company’s costs or a possible decrease in its efficiency, to enhance import substitution. This allowed to reduce Risks associated with revenues in the event of growth of the Russian the impact of these risks on the Company’s performance. exchange rate changes ruble foreign exchange rates, including due to the The ROSSETI Group’s risk management OPERATIONAL RISKS >> risks associated with the issuer’s purchase of foreign-made equipment, its repayment measures are carried out in accor- activities; and maintenance. >> Risks of the operational management dance with the Technique for Evaluating These risks are involved in a possible rise in SDCs’ SDCs took measures to minimize the loan portfolio, including of ROSSETI SDCs, having a significant >> other risks. Operational Risks1, which makes it pos- Risks associated with costs if they need to borrow to finance capital by means of optimizing their operating expenses and capital impact on the attainment of the business interest rate changes investment programs. investment programs and by means of using their own funds sible to ensure the unity of approaches plan targets, i.e. on the achievement to partially repay debts. to their structuring, including their clas- of the goals of SDCs’ operations; Risk Management Matrix sification, risk assessment, and reporting These risks are associated with the effect of a rise Regulations for operating efficiency increase and cost cutting REVIEW STRATEGY in the consumer price index on SDCs’ interest are developed by SDCs of ROSSETI and adopted by the Boards >> Business process risks inherent in the Risks associated with the on performance results. costs, profitability, and, consequently, the financial of Directors. basic and other business processes Timely risk identification and assess- effects of inflation ment, management method selection, condition of the Company and SDCs and their ability In order to improve the effectiveness of ROSSETI SDCs engaged in electricity to perform obligations. of measures at all risk management distribution. the timely development and organization of risk management measures, and the Risks associated with the These risks are associated with the possible liability Measures are taken to maintain financial stability of SDCs. stages, the ROSSETI Group introduced possible liability of the of the Company for third-party debts. the technique for preparing compre- MACROECONOMIC regular monitoring and timely com- issuer for third-party debts, munication of risk management results including the issuer’s hensive risk planning and management AND OTHER RISKS measures, the system of risk manage- to the Company’s executive bodies are Industry-Specific Risks ment2 system evaluation using a unified, Risks affecting the ROSSETI Group’s entrusted to risk owners. This risk is associated with a reduction in industrial The monitoring of electricity and capacity demand is organized systematic, and consistent approach, general operating process and the Risk associated with production and the optimization of customers’ and measures to enhance the reliability of the predicted volume and the procedure and criteria for Company’s share value as defined 1 the decreased volume GOVERNANCE CORPORATE GOVERNANCE CORPORATE AND SECURITIES AND SECURITIES Approved by Ordinance of ROSSETI No. 381r expenses related to electricity distribution. of electricity distribution services for pricing and business planning 3 of electricity distribution evaluation . by the Regulations for the Disclosure of July 30, 2015; purposes are carried out. services of Information by Issuers of Issue- 2 In accordance with Ordinance of ROSSETI No. Measures are taken to reduce electricity losses. Grade Securities approved by the Bank 555r of November 30, 2015; 3 This risk arises from imperfect operation 4 In accordance with Ordinance of ROSSETI No. Risk Management Map of Russia : 624r of December 31, 2015; Risk associated with mechanisms of the retail electricity market and ROSSETI carries out measures under the Program for Improving 4 No. 454–P of December 30, 2014. failure to pay for provided from the unavailability of effective mechanisms for the Efficiency of Measures to Reduce Receivables for Electricity >> industry-specific risks; electricity distribution encouraging customers to make timely payments for Distribution Services. STRATEGIC RISKS >> country and regional risks; services electricity distribution services and also results from Claims work. macroeconomic factors. >> Risks affecting the achievement >> financial risks; of the goals set out in the Strategy for These risks are associated with restrictions Documents are made available to regulatory authorities in a timely >> legal risks; imposed by tariff regulators on the tariff growth manner. Development of the Electric Grid Sector rate of electricity distribution services and with If necessary, applications for the pre-trial resolution
of the Russian Federation and the Long- >> reputational risks; Tariff regulation risks a possibility that grid companies’ expenses are only of disagreements with regional regulatory authorities are submitted SOCIAL CORPORATE RESPONSIBILITY Term Development Program of ROSSETI; partially recognized for the formation of minimum to the federal executive authority in charge of governmental tariff >> strategic risks; regulated revenue. regulation. >> Risks of the most significant business Claims work. planning processes. Simplified procedure of deprivation certain retail Measures are taken to cooperate with federal and regional companies of the supplier of last governmental authorities, the mass media, infrastructural resort (SOLR) status according to the Order issued organizations of the wholesale electricity market, law enforcement Risks associated with taking by the Government of the Russian Federation agencies, and organizations deprived of the supplier of last resort on and subsequently causes additional risks of failure in performance its status in the performance of the SOLR functions and the settlement transferring the supplier obligations for reliable electric power transmission of debts. Initiatives are promoted to streamline the procedure of last resort status by these TGC. for changing the SOLR, enhance ROSSETI SDCs’ competencies in collecting bad debts and participating effectively in bankruptcy procedures against debtors, etc. ADDITIONAL INFORMATION
136 PJSC “ROSSETI” www.rosseti.ru 137 3. CORPORATE GOVERNANCE AND SECURITIES PJSC “ROSSETI” Internal Control and Risk Management Systems ANNUAL REPORT || 2015 3
The independence of internal audit is >> A system was created for the continu- RISKS DESCRIPTION RISK MITIGATION MEASURES THE UNITS RESPONSIBLE achieved by separating its subordination: ous quality monitoring of internal audit activities and for periodic internal (at FOR INTERNAL CONTROL Risks Associated with the Issuer’s Activities internal audit is functionally subordinate to the Board of Directors and admin- least once a year) and external (at least AND INTERNAL AUDIT Risk associated with failure These risks are associated with changes of the tariff The forecast of hydrometeorological situation is being monitored. istratively subordinate to the Director every five years) quality evaluations CONDUCTED 521 to achieve the reliability growth rate of electricity distribution Measures are being taken to reduce recovery time of power supply, of ROSSETI’s and subsidiaries’ internal General. level set in tariff regulation services in subsequent period. including an emergency reserve. audit; INSPECTIONS IN 2015, for electricity distribution services Key events in 2015: >> Report of the Internal Audit Directorate INCLUDING 130 INTERNAL PJSC ROSSETI on the implementation These risks are associated with changes Preliminary legal review of planned corporate procedures, conducted AUDITS OF SDCS (INTERNAL >> Subject to the recommendations to legislation and judicial practice relating to the transactions, and other aspects of financial and economic activities of the work plan for 2015, including on Company’s activities and with changes to the provided for by the applicable laws and/or Articles of Association of the Corporate Governance Code, the the results through audits reviewed and AUDITS COVERED COMPANY OVERVIEW balance between the interests of the Company and of the Company. Updating of local regulatory documents with Company’s Articles of Association were Legal risks approved at meeting of Audit Committee 102 ENTITIES OF THE ROSSETI other electricity sector entities. respect to claim-related work. amended to define the competence of the Board of Directors (Minutes Participation in governmental authorities’ regulatory and legislative of the Board of Directors in the area GROUP) activities and constantly monitors changes to legislation and judicial 03.03.2016 № 65); of internal audit; practice. >> As part of the evaluation of the inter- >> The Board of Directors approved nal control system in the course of the a restated version of the Internal Audit audit of the accounting (financial) state- Follow-up Control Policy ROSSETI, taking into account the MAIN AREAS OF IMPROVING RISK the impact of risks on the accomplish- on these issues as part the corporate ments of ROSSETI in accordance with provisions of the Corporate Governance of Corrective Measures MANAGEMENT MEASURES IN 2016: ment of the principal goal (mission) administration of such processes. Russian Accounting Standards for 2015, Code, the Listing Rules of the stock of the electric grid sector; the external auditor evaluated the effi- 3,261 corrective measures were pre- >> Provide practical regulations and meth- exchange, the guidelines and recom- ciency and effectiveness of the internal
>> Ensure the further development of reg- REVIEW STRATEGY odological support for the Company’s mendations of the Federal Agency for audit division’s activities. The external scribed for the ROSSETI Group’s entities ulations governing the procedure for the and ROSSETI SDCs’ risk management State Property Management of the auditor made similar evaluations while in 2015 as a result of internal inspec- interaction of the Company’s divisions process; Russian Federation, and the International preparing opinions about the reliability tions, including internal audits. Out of the in risk management, including method- Professional Practices Framework (IPPF) >> Improve the interaction between the of the accounting (financial) statements 2,405 corrective measures to be imple- ological documents on risk assessment, released by The Institute of Internal Company and SDCs in the planning and of SDCs for 2015. mented in the reporting year, 2,138 were and in the preparation of proposals Auditors (IIA); completed. implementation of measures to reduce In 2015, the Directorate for Internal >> Basic regulatory documents were Audit coordinated SDCs’ measures formulated and approved in relation to introduce regulatory documents to internal audit (Code of Ethics for on internal audit and conducted end-to- Internal Audit Internal Auditors of the ROSSETI Group, Regulations for the Internal Audit end focused audits at electric grid SDCs (the number of focused audits increased Division, Model Internal Audit Policy for GOVERNANCE CORPORATE GOVERNANCE CORPORATE AND SECURITIES AND SECURITIES SDCs, and model manuals, methodolo- by 12.5% compared with 2014). The goal of internal audit is to assist the The Company’s internal audit functions Basic Principles gies, and programs for internal audits); Board of Directors and executive bodies are performed by the Directorate for of Internal Audit in increasing the Company’s management Internal Audit. efficiency and improving the Company’s financial and economic activities, includ- ing by taking a systematic and consistent INDEPENDENCE approach to the analysis and evaluation of the risk management, internal con- trol, and corporate governance systems INTEGRITY as instruments for reasonable assur- CORPORATE SOCIAL CORPORATE RESPONSIBILITY ance regarding the achievement of the Company’s goals. OBJECTIVITY
CONFIDENTIALITY
COMPETENCY ADDITIONAL INFORMATION
138 PJSC “ROSSETI” www.rosseti.ru 139 3. CORPORATE GOVERNANCE AND SECURITIES PJSC “ROSSETI” Information Policy ANNUAL REPORT || 2015 3
Information Policy In order for the Сompany to have a good business reputation and a positive image in Russia and abroad, the schedule of implementing Approaches to Disclosure the uniform communications policy of the ROSSETI Group was approved in 2015
Corporate Website Corporate Newspaper Social Actions 34.5 1.3 71.5 COMPANY OVERVIEW The main channel of communication with To provide internal communica- Much attention is paid to social actions. THOUSAND MILLION THOUSAND the external audience is the corporate tions among many thousands of the Extensive media coverage was given PUBLICATIONS ABOUT THE COMPANY SITE VISITORS USERS OF THE INTERNAL CORPORATE website in English and Russian. The Company’s employees, ROSSETI pub- to the patriotic event marking the 70th IN THE NATIONWIDE MEDIA PORTAL Company’s website is an online resource lishes the Rossiyskie Seti corporate anniversary of Victory Day with voluntary updated on a daily basis and equipped newspaper. The main purpose of the cleanup campaigns in all of the regions with tools for obtaining feedback from publication is to inform personnel about of the ROSSETI Group’s operations, media outlets and the general public. the implementation of the Company’s including Moscow. 1 The Information Policy of the Company strategy and about industry events, On its corporate website, the Company In 2015, the successful implementation is aimed at ensuring the maximal exercise increase employee loyalty, and develop The information policy publishes complete information about its of ROSSETI’s uniform communications of the rights of shareholders and their intracompany communication channels. representatives, potential investors, and of ROSSETI meets the Information is the main activities, including statements of mate- policy related to the management of the REVIEW STRATEGY other stakeholders to obtain information highest Russian and resource for investment rial facts, issue-related and internal docu- electric grid sector received an award ments, and other information subject in the first contest among media out- in order to make informed investment International standards decisions Internal Corporate Portal decisions, improving corporate gover- to mandatory disclosure. lets, energy companies’ media relations of disclosure services, and regional administrations, nance, and increasing the value of the The Media page at www.rosseti.ru/ Another important instrument of internal MediaTEK, organized with the support Company’s assets. press/news/ publishes news and communications is ROSSETI’s internal of the Russian Ministry of Energy. information messages, management corporate portal. Access to the portal is statements, interviews with senior granted to all employees of the Company BASED ON THE PERFORMANCE managers, and photographs and videos Principles of the Company’s Disclosure System and the executive arms of its SDCs. The RESULTS IN 2015, THE MEDIA about the Company’s activities and number of portal users exceeded 71,500
1 Regulations for Disclosing Material Information contains the archive of the corporate in 2015. RELATIONS SERVICE OF THE GOVERNANCE CORPORATE GOVERNANCE CORPORATE AND SECURITIES AND SECURITIES of ROSSETI Under Shareholder Laws and Securities newspaper. COMPANY WAS RECOGNIZED AVAILABILITY COMPLETENESS Market Laws THE CORPORATE PORTAL IS The number of site visitors is regularly AS THE BEST IN THE ELECTRICI- PART OF A COMMON INFOR- on the increase: for instance, the pre- TY INDUSTRY IN THE KONTEKST vious year saw an increase of 30% MATION SPACE AND IS DE- CONTEST ORGANIZED BY THE on 2014 to more than 1.3 million. SIGNED TO OPTIMIZE DAY-TO- TIMELINESS ACCURACY RUSSIAN MINISTRY OF ENERGY DAY OPERATIONS AND RAISE Nationwide Media EMPLOYEES’ AWARENESS
Receiving the regular media coverage Future Plans Channels of Disclosure dissemination (corporate pages on social SOCIAL CORPORATE RESPONSIBILITY networks, electronic and telephone of the ROSSETI Group’s activities is also The Company plans to continue The Company realizes the importance communication, and personal meetings). a key instrument of the communica- to improve its standards of disclosure of different sources of information The Company avoids discrimination in dis- tions policy. Leading nationwide media in accordance with amendments to the disclosed to investors. In this connec- closure and provides access to informa- outlets (Kommersant, Vedomosti, RBC, Corporate Governance Code and the tion, in addition to the mandatory and tion for the general public. TASS, RIA Novosti, VGTRK, etc.) pub- restated version of the Regulations for CORPORATE WEBSITE formal channels of disclosure (Interfax lished more than 34,500 news items, the Disclosure of Information by Issuers newswire, LSE Regulatory News Service including interviews with top manag- OF THE COMPANY of Issue-Grade Securities, effective from (RNS), corporate website, and media ers and videos about the Company’s March 14, 2016 (both documents were WWW.ROSSETI.RU releases), the Company makes exten- operations. approved by the Bank of Russia). sive use of alternative methods for ADDITIONAL INFORMATION
140 PJSC “ROSSETI” www.rosseti.ru 141 3. CORPORATE GOVERNANCE AND SECURITIES PJSC “ROSSETI” Information Policy ANNUAL REPORT || 2015 3 Insider Information Security The Company for Shareholders and Investors: Securities; Dividend Policy Regulations for Insider The regulations unambiguously define COMPLIANCE CONTROL RELATED Information1 the terms “insider” and “insider informa- TO INSIDER INFORMATION: tion,” specify the procedure for providing Information on Securities >> Maintaining the insider list; access to insider information, and lay ROSSETI is a publicly traded company down the rules for keeping it confidential >> Sending the Company’s insider list whose shares are listed on Russian to the securities trading institutor upon The registered share capital of ROSSETI On November 3, 2015, the Company
and checking whether legal requirements FURTHER INFORMATION CAN COMPANY OVERVIEW and international stock exchanges. request; are fulfilled. is 163,154,002,694 rubles and con- began the placement of 42,796,991,468 BE FOUND ON THE CORPORATE The Company gives special attention WEBSITE >> Notifying insiders of the inclusion sists of 163,154,002,694 shares, each additional ordinary shares The Company maintains and updates the to insider information security. The on or exclusion from the insider list; with a par value of 1 ruble, including Company uses the world’s best practices insider list applying to the persons sub- 161,078,853,310 ordinary shares and >> Recording notices of the inclusion in this area to provide all stock market ject to the special procedure for transac- 2,075,149,384 preference shares. participants with equal conditions, work- tions involving the Company’s financial on or exclusion from the insider list and of insider transactions involving the ing to combat insider information misuse. instruments, along with the list of insider Company’s securities; information. QUANTITY OF FEDERALLY OWNED SHARES IN ROSSETI THE COMPANY’S BOARD >> Monitoring compliance with the rules OF DIRECTORS APPROVED THE REGULATIONS FOR INSIDER for conducting transactions involving insider-related financial instruments INFORMATION: SHAREHOLDER QUANTITY OF SHARES PERCENTAGE OF SHARES, % PERCENTAGE OF SHARE CAPITAL, THE REGULATIONS FOR of the Company and its SDCs according REVIEW STRATEGY >> Establish the rules for making the INSIDER INFORMATION OF to information on (notices of) insider ORDINARY PREFE ORDINARY SHARES PREFE BEFORE SHARES Company’s insider list; transactions. SHARES RENCE RENCE EMISSION PLACED AFTER ROSSETI, COMPLYING WITH SHARES SHARES ADDITIONAL >> Define the Company’s list of insider THE LAWS OF THE RUSSIAN The Company provides information secu- BEFORE THE ACTUALLY PLACED AS OF EMISSION, AS information; rity in accordance with the laws of the ISSUE DECEMBER 31, 2015, OF 31.12.2015 INCLUDING ADDITIONALLY FEDERATION AND ENGLISH >> Establish the rules for spreading Russian Federation. ISSUED SHARES LAW insider information; Federal Agency 172,510,447,163 145,523,224 86.32 88.67 7.01 85.31 87.81 >> Establish the rules for conducting for State Property transactions involving insider-related Code of Corporate Ethics Management financial instruments of the Company
and its SDCs; Additionally, the Company approved the GOVERNANCE CORPORATE GOVERNANCE CORPORATE AND SECURITIES AND SECURITIES THE REGULATIONS Code of Corporate Ethics, governing the FOR INSIDER INFORMATION >> Define insider information confidential- OF ROSSETI ity agreements and addenda to employ- corporate accountability and behavior SHAREHOLDERS WITH A SHARE OF MORE THAN 2% AS OF DECEMBER 31, 2015 ment contracts with the Company’s ethics of the Company’s employees quali- employees qualifying as insiders. fying as insiders. The Company decided in the reporting year to analyze the NAME SHAREHOLDER TYPE* PERCENTAGE OF SHARE CAPITAL, % completeness, adequacy, and relevance Federal Agency for State Property Management O 85.31 of the current Code and formulate the Corporate Code of Ethics and Business National Settlement Depository NS 9.53 Conduct of ROSSETI. Depository and Corporate Technologies NS 3.78 CORPORATE SOCIAL CORPORATE RESPONSIBILITY
1 http://www.rosseti.ru/investors/info/insider/ TOTAL 98.62 doc/polojenie_ob_insaide_ot_26.08.2014.pdf.
*“NS” means a nominee shareholder; “O” means an owner ADDITIONAL INFORMATION
142 PJSC “ROSSETI” www.rosseti.ru 143 3. CORPORATE GOVERNANCE AND SECURITIES PJSC “ROSSETI” The Company for Shareholders and Investors ANNUAL REPORT || 2015 3
SHAREHOLDING STRUCTURE (SHAREHOLDERS WITH A SHARE OF MORE THAN 1%) AS OF SEPTEMBER 4, 2015 STOCK MARKET INDICES INCLUDING THE COMPANY’S SHARES AT THE END OF 2015
PERCENTAGE, % INDEX WEIGHT, % INDEX CURRENCY SHAREHOLDERS MICEX Index 0.13 OS RUB OF ORDINARY SHARES OF SHARE CAPITAL 7.96 OS RUB The Russian Federation represented by the Federal Agency 86.32 85.31 MICEX Power Index for State Property Management 0.88 PS RUB
Gazprom Finance B.V. 1.59 1.57 MICEX SMID Index 1.36 OS RUB
Gazprom Energoholding 1.22 1.20 Second-Tier Index 0.81 PS USD COMPANY OVERVIEW
VTB Bank 1.30 1.28 RTS Index 0.13 OS USD
Neft-Aktiv 0.99 0.97 0.12 OS RUB Moscow Exchange Broad Market Index Other 8.58 9.67 0.01 PS RUB
TOTAL 100.00 100.00 THE COMPANY’S SHARES ARE Stock Market Quotes for the SHAREHOLDERS BY COUNTRY AS OF SEPTEMBER 4, 2015 ALSO INCLUDED IN GLOBAL Company’s Shares in 2015 PROVIDERS’ INDICES SUCH FURTHER INFORMATION ABOUT
Despite negative macroeconomic fac- REVIEW STRATEGY AS THE S&P GLOBAL BMI USD THE COMPANY’S SHARES CAN tors, including the economic slowdown, BE FOUND ON THE CORPORATE INDEX, THE FTSE GLOBAL lower electricity consumption, the weaker WEBSITE CORE INFRASTRUCTURE 50/50 ruble, and inflation, ROSSETI’s ordinary INDEX, AND THE FTSE EASTERN and preference shares showed increases of 8.5% and 5.8% respectively in 2015 0.10% EUROPE ALL CAP INDEX. NORWAY RUSSIAN FEDERATION after decreases in prior periods. DENMARK 0.03% 1 SWEDEN 95.21% EUROPE ALL CAP INDEX ESTONIA GREAT BRITAIN LATVIA 0.26% LITHUANIA LUXEMBURG 1.58%
0.12% IRELAND NETHERLANDS GOVERNANCE CORPORATE GOVERNANCE CORPORATE AND SECURITIES AND SECURITIES 0.05% AUSTRIA FRANCE Changes in ROSSETI Share 60% USA 0.07% 1.02% 0.01% Prices (Ordinary and 50% SWITZERLAND СYPRUS Preference Shares) and the 1.14% MICEX PWR Index in 2015 (%) 0.28% 40% 0.01% 0.02% GERMANY UAE CAYMAN BRITAIN 0.01% 0.07% 30% ISLANDS VIRGIN ISLANDS Ordinary shares 20% Preference shares 10%
MICEX PWR Index SOCIAL CORPORATE RESPONSIBILITY 0%
–10%
–20% Percentage of Share Capital, % Residents of the Russian Federation –30% hold 95% of shares, while the remain- OTHER (29 COUNTRIES) — 0.02% january february march april may june july august september october november december ing 5% of shares are distributed among corporate entities and individuals from
43 countries. 1 According to Bloomberg. ADDITIONAL INFORMATION
144 PJSC “ROSSETI” www.rosseti.ru 145 3. CORPORATE GOVERNANCE AND SECURITIES PJSC “ROSSETI” The Company for Shareholders and Investors ANNUAL REPORT || 2015 3
Depositary Receipts Bonds Financial Calendar
ROSSETI’s global deposi- ROSSETI raised a total of 31 billion rubles ROSSETI PLACED 4 BOND DISCLOSURE GENERAL MEETINGS tary receipts began trad- in bonds in 2015, including 6 billion rubles ISSUES IN 2015, TOTALING OF FINANCIAL RESULTS OF SHAREHOLDERS ROSSETI makes itself more ing on the London Stock invested by Vnesheconombank. The pro- attractive to investors Exchange’s Main Market ceeds from the placement of exchange- 31 BILLION RUBLES 2014 RAS financial results — Annual — on December 8, 2011, and traded bonds in 2015 were used March 30, 2015 June 30, 2015 by enhancing transparency were admitted to trading to replace SDCs’ expensive current loans and increasing the liquidity 2014 IFRS financial results — Extraordinary — as interbank repos on the MICEX Stock as part of intragroup financing. of its securities FURTHER INFORMATION April 24, 2015 October 6, 2015. Exchange on May 28, 2014. COMPANY OVERVIEW ROSSETI SDCs raised a total of 83 bil- ABOUT THE COMPANY’S BONDS CAN BE FOUND 1Q2015 RAS financial results — ROSSETI works to gain entry into new Since the depositary receipts that repre- lion rubles in bonds in 2015, including ON THE CORPORATE April 28, 2015 capital markets in the Asian region. sent ownership of ROSSETI’s shares are 31 billion rubles coming from intragroup WEBSITE This means that it is necessary for the traded in the Standard Listing segment financing and 40 billion rubles invested 1H2015 RAS financial results — Company to operate in a new regulatory of the London Stock Exchange’s Main by Vnesheconombank. July 27, 2015 environment and adapt to a new corpo- Market, the Company should comply with The ROSSETI Group’s principal investors 1H2015 IFRS financial results — rate and communication culture. the requirements for depositary receipts in 2015 were management companies, August 28, 2015 under the Listing Rules and the Disclosure pension funds, and large banks. and Transparency Rules. 9M2015 RAS financial results — October 26, 2015 STRATEGY REVIEW STRATEGY Shareholder/Investor Relations Dividend Policy and History
One of ROSSETI’s most important Investor Events Special attention is given to changes The Annual General Meetings of Share As of January 1, 2016, there were no priorities is to provide stakeholders in legislation in relation to the protection holders in 2014 and 2015 resolved overdue dividends payable to the Federal Since the inception of the with information reflecting not only the of shareholder rights. At meetings held to pay no dividends for 2013 and 2014. Budget. 1ST QUARTER OF 2015 Company, SDCs have current state of the Company but also its by the Share Issuers Committee of the The Annual General Meeting Due to the absence of the Company’s prospects. MICEX Stock Exchange in 2015, the generally shown an upward >> 6th annual seminar for shareholder/ of Shareholders scheduled for June 2016 net profit for 2014, the net profit was investor relations departments Company took part in lively discussions change in dividend payment In its shareholder/investor relations, will decide whether dividends will be paid not distributed, and the reserve and of Russian electric grid companies/ about the Bank of Russia’s Report on the and a trend toward an GOVERNANCE CORPORATE GOVERNANCE CORPORATE AND SECURITIES AND SECURITIES ROSSETI acts in accordance with the for 2015 subject to the Regulations for other funds were not established by the ROSSETI/Moscow Improvement of Corporate Governance annually approved plan of IR events and Dividend Policy of ROSSETI1. Company. increase in aggregate by Public Joint-Stock Companies. efforts to raise the liquidity of securities dividend payouts 2ND QUARTER OF 2015 The rights and interests of the issued by the Company and SDCs1. Company’s shareholders and inves- >> Management Report prepared under tors before the financial market regu ROSSETI SDCs English law and submitted to the London Stock Exchange lators were represented by ROSSETI’s Deputy Director General for Corporate DIVIDEND HISTORY OF SDCS FOR 2013–2015. >> Investor conference/Raiffeisen Bank/ Governance Yuri Goncharov, a member (THOUSAND RUBLES) 8.48% Zürs of the Committee. IN 2014 IN 2015 1 The Regulations for Dividend Policy were TH FOR 2013 FOR 2014 SOCIAL CORPORATE RESPONSIBILITY 4 QUARTER OF 2015 approved by the Board of Directors of ROSSETI TOTAL SHAREHOLDER RETURN (TSR) 1 DETAILED INFORMATION (Minutes of the Meeting No. 169 of November ABOUT THE LIST OF EVENTS >> 7th annual investment forum/VTB Dividends payable 3,064,127 3,336,502 21, 2014) in accordance with Ordinance of the SCHEDULED FOR 2016 CAN BE by SDCs to the Company Government of the Russian Federation No. 774–r Capital/Moscow FOUND ON THE COMPANY’S of May 29, 2006. WEBSITE >> Investor conference/Moscow Exchange, Shanghai Stock Exchange, Gazprombank/Shanghai, China >> Power Industry Day/BCS/Moscow >> Meeting with Singapore Exchange management/Singapore ADDITIONAL INFORMATION
146 PJSC “ROSSETI” www.rosseti.ru 147 CORPORATE SOCIAL RESPONSIBILITY 4
+5.5% GROWTH LABOUR PRODUCTIVITY –31.3% DURING THE YEAR OCCUPATIONAL INJURIES DECREASED BY ALMOST A THIRD TAKING CARE OF PERSONNEL AND THE ENVIRONMENT
We value people who work with us, striving to provide safe working conditions and social protection. We take all possible measures to protect the Environment. 4. CORPORATE SOCIAL RESPONSIBILITY PJSC “ROSSETI” Human Resource Management and Personnel Policy ANNUAL REPORT || 2015 4 Human Resource Management and Personnel Policy Personnel and Social Policy Commitment to Sustainable Development
A basic element of the personnel and ROSSETI traditionally pays special The ROSSETI Group pursues the Per THE ROSSETI GROUP — social policy is the human resource devel- attention to the implementation sonnel and Social Policy approved THE COUNTRY’S LARGEST opment system built on the principles of youth programs and projects aim- by the Board of Directors in 2014 and of continuity, practicability, and feasibility. ing to satisfy tomorrow’s staffing aimed at employing personnel sufficient EMPLOYER needs of the Company. to achieve the current and long-range COMPANY OVERVIEW We employ a variety of training methods: goals contained in the Strategy for corporate education programs, webinars, In collaborating with leading universi- Development of the Electric Grid Sector knowledge days, and target-oriented ties in all regions where the Company of the Russian Federation and the Long- projects aimed at enabling employees has a presence, we focus on providing Term Development Program of ROSSETI. to realize their potential in research and training for engineers and technicians: innovation. in 2015, ROSSETI signed a memoran- dum of cooperation with the Consortium To ensure that the professional com- of Higher Education Institutions of Power petencies of the electric grid sector’s Engineering chaired by the Moscow KEY GOALS OF THE PERSONNEL workforce conform to international Power Engineering Institute (National standards, ROSSETI has taken an active AND SOCIAL POLICY Research University). With the aim REVIEW STRATEGY part in WorldSkills events 2015. The of ensuring practice-oriented training, 2nd National Competition of Cross- we carry out target-oriented training Plan personnel requirements Industry Blue-Collar Occupations of High- programs for bachelor’s and master’s Technology Industries based on the by obtaining reliable Provide the group degrees, hold contests among quali- Ensure high personnel Nikolay Varlamov WorldSkills methodology included the information about the current in a timely manner with fication graduation papers to attract efficiency and workforce Deputy Director General — Head of the presentation “Maintenance and Repair and forecasted quantitative required personnel having young talent to the Group’s companies, productivity growth Administrative Office of Relay Protection Devices” related and qualitative workforce necessary qualifications and organize the work of student labor to the electric grid sector’s professional One of ROSSETI’s key assets is a highly brigades requirements competencies. professional team. In 2015, the St. Petersburg International Personnel reserves were established The Company’s employees are engaged Economic Forum included the 4th Annual GOVERNANCE CORPORATE AND SECURITIES at all management levels, from electric in managing electric grid facilities Youth Energy Forum attended by foreign grid districts to the electric grid sec- in 76 Russian regions, are involved in the partners and organized on the initiative tor as a whole. In meeting electric grid KEY INDICATORS OF PERSONNEL POLICY improvement of the regulatory and legal of ROSSETI. The participants were young companies’ staffing needs, preference is framework in the energy industry, build professionals of leading European and IMPLEMENTATION given to current employees: internal can- up and expand international cooperation Asian electric grid companies. The event didates accounted for more than 50% with leading equipment manufacturers discussed prospects for growth and of appointments to managerial positions and electric utilities around the world. cross-border integration in the energy in 2015. sector and dealt with the IN THE DIFFICULT We actively develop the internal por- 216 42 53% MACROECONOMIC tal where employees are able not only Very truly yours, ENVIRONMENT IN 2015, to find information about the latest NikolayVarlamv THOUSAND EMPLOYEES YEARS SHARE OF EMPLOYEES ATTENDING SOCIAL CORPORATE SOCIAL CORPORATE RESPONSIBILITY RESPONSIBILITY developments in the Company and the Deputy Director General — Head of the Administrative Office NUMBER OF EMPLOYEES RESPONSIBLE AVERAGE AGE OF THE ROSSETI TRAINING EVENTS ROSSETI PAID CONSIDERABLE industry or the necessary documents but ATTENTION TO PERSONNEL also to share their personal experiences FOR THE MAINTENANCE AND GROUP’S EMPLOYEES RETENTION AND HUMAN in the forum. OPERABILITY OF THE COUNTRY’S ELECTRIC GRID ASSETS RESOURCE DEVELOPMENT To inform employees of the most sig- WITHIN THE COMPANY nificant events and unite staff members in order to reach common goals, we AND ITS SUBSIDIARIES continued to publish the Rossiyskie Seti corporate newspaper. ADDITIONAL INFORMATION
150 PJSC “ROSSETI” www.rosseti.ru 151 4. CORPORATE SOCIAL RESPONSIBILITY PJSC “ROSSETI” Human Resource Management and Personnel Policy ANNUAL REPORT || 2015 4
Production personnel accounted for 87% of trainees; training was mainly Personnel of the ROSSETI Group by Occupational Category provided for production personnel at corporate training centers (60% of off-the-job training in 2015) 16.0% Executives Specialists Staff on the Payroll of the TDC 1,541 Workers ROSSETI Group in 2015 YANTARENERGO 1,950 (people 1) LENENERGO 6,003
years COMPANY OVERVIEW TYUMENENERGO 7,448 35 KUBANENERGO 8 ,326 ONE-THIRD OF THE WORKFORCE IDGC OF NORTHERN CAUCASUS 13,480 IS YOUNG PROFESSIONALS AGED IDGC OF SOUTH 14,801 52.1% 31.9% UNDER 35 IDGC OF NORTH-WEST 14,813
IDGC OF URALS 15,058 MOESK 15,797 0.8% 15.1% Administrative and Managerial IDGC OF SIBERIA 20,451 Production
IDGC OF VOLGA 21,338
Auxiliary REVIEW STRATEGY IDGC OF CENTER AND VOLGA REGION 22 ,270
FGC UES 23,358
IDGC OF CENTRE 29,428
84.1% 1 Including SDCs and subsidiary SDCs engaged in the grid business under management THE PURSUED PERSONNEL POLICY AND HIGH STANDARDS OF SOCIAL RESPONSIBILITY ENABLE THE COMPANY TO STABLY
RETAIN A HIGHLY QUALIFIED TEAM GOVERNANCE CORPORATE AND SECURITIES
Personnel of the ROSSETI Group by Age
under 35 8% 33% The uniform youth policy 35 to 45 and targeted measures 97% to 4.9% 45 to retirement age aimed at attracting employed retirees young professionals and STAFFING LEVEL AVERAGE PERSONNEL TURNOVER promoting their professional CORPORATE SOCIAL CORPORATE SOCIAL CORPORATE RESPONSIBILITY RESPONSIBILITY DECREASED IN 2015 (2014 — 6%) development allow the company to maintain the average age of the group’s 34% 25% employees at 42 ADDITIONAL INFORMATION
152 PJSC “ROSSETI” www.rosseti.ru 153 4. CORPORATE SOCIAL RESPONSIBILITY PJSC “ROSSETI” Human Resource Management and Personnel Policy ANNUAL REPORT || 2015 4
Measures to enable employees to fulfill their potential and continuous person- Stakeholder Relations nel training make it possible to maintain a high educational level of employees. Keeping a balance between the inter- Key stakeholder groups monitoring of media publications, per- ests of different key stakeholders is one of the Company: sonal meetings). Personnel of the ROSSETI Group by Educational Level of the principal objectives of the Long- 300 Customers This enables the Company to be aware Term Development Program of ROSSETI. of the opinions, interests, and desires MORE THAN 300 EMPLOYEES Employees of all stakeholders and identify the areas 42.1% higher education Principles of Stakeholder Relations: that need special attention. COMPANY OVERVIEW OF THE ROSSETI GROUP HAVE Shareholders and investors (see >> comply with legal requirements; ACADEMIC DEGREES OF DOCTORS basic/general secondary education the section “For Shareholders OR CANDIDATES OF SCIENCE undergraduate/secondary, elementary >> fulfill additional obligations assumed and Investors” for more detailed professional education by the Company; information) >> take into account the interests and Contractors expectations of stakeholders; 71.5 >> ensure transparency; Business community >> assess effectiveness and improve The Company has established certain THOUSAND PEOPLE activities on a constant basis. 39.9% 18.0% practices and channels of communica- VISITED THE CORPORATE WEBSITE tion with each stakeholder, including FROM MARCH TO DECEMBER 2015 REVIEW STRATEGY feedback methods (hotline, website,
THE EMPLOYEE Organizational Structure Dialog with Personnel COMPENSATION SYSTEM INCLUDES A FIXED PART The organizational structure of ROSSETI The organizational structures of subsid- includes the executive arm and the iaries are built on linear functional lines, Internal Communications The electronic version of the publication INTERNAL CORPORATE PORTAL (SALARIES, EXTRA PAYMENTS, Technical Supervision Center, a branch with functional verticals maintained from is posted on ROSSETI’s corporate web- The internal corporate portal is an AND PERKS) AND A established in 2013 for independent the management company to the produc- The main internal communications site and on the internal corporate portal.
technical supervision over electric grid tion units of subsidiaries. information system designed to: GOVERNANCE CORPORATE AND SECURITIES VARIABLE PART (BONUSES). of ROSSETI are as follows: The principal goal of the newspaper facilities. EMPLOYEES RECEIVE is to inform the electric grid sector’s organize teamwork on projects >> Rossiyskie Seti corporate newspaper; and tasks; employees of the priority areas of opera- BONUSES FOR ATTAINING KEY >> internal corporate portal (for communi- tions of the Company and its SDCs. PERFORMANCE INDICATORS cation both within ROSSETI and between improve the efficiency of corpo- Employee ROSSETI and SDCs). rate communications; AND FOR OBTAINING AN The publication creates a common infor- Benefits mation space between the Company’s optimize day-to-day professional EFFECT OF ACHIEVING HIGH- ROSSIYSKIE SETI management and staff and also allows activities; PRIORITY GOALS CORPORATE NEWSPAPER each employee to identify himself or her- The ROSSETI Group’s employee com- The ROSSETI Group’s entities regularly self as an integral part of the united pensation system is built on the uniform increase pay for production personnel enhance the awareness of the The Rossiyskie Seti newspaper is one professional community in the electric Company’s and SDCs’ awareness. principles taking account of regional in accordance with the agreements with of Russia’s largest corporate indus- grid industry. SOCIAL CORPORATE SOCIAL CORPORATE RESPONSIBILITY RESPONSIBILITY particularities and ensures competi- labor unions. try publications. The newspaper is an Access to the internal corporate portal is tive income for comparable positions Additional instruments of employee official media outlet published from 2013 granted to employees of ROSSETI’s and in the regions. The basic provisions THE ELECTRONIC VERSION motivation are to recognize employees’ on a monthly basis. Its circulation is THE ROSSIYSKIE SETI SDCs’ executive arms. The portal was of the employee compensation system achievements (corporate awards) and more than 40,000 distributed in all of the CORPORATE NEWSPAPER put into test operation in 2014 and into are specified in the Sectoral Wage Rate hold professional contests. regions where ROSSETI and SDCs oper- regular operation in 2015. Agreement in the Electric Power Industry ate, including electric grid districts and and the collective bargaining agreements production units. The portal was put into test opera- of electric grid companies. tion in 2014 and into regular operation in 2015. ADDITIONAL INFORMATION
154 PJSC “ROSSETI” www.rosseti.ru 155 4. CORPORATE SOCIAL RESPONSIBILITY PJSC “ROSSETI” Stakeholder Relations ANNUAL REPORT || 2015 4
Dialog with Customers
facilities on the map and obtain informa- ROSSETI’s Portal SERVICES ON THE PORTAL: Principles of the Policy on Society, tion about their location and technical Customer feedback Customer Care of Electric Grid Services Customer, and Government Relations: Transparency of operations characteristics, including the utilization To raise the ROSSETI Group’s customer for customers rates of electrical installations service quality, the portal is equipped with ROSSETI approved the Model Customer >> High-quality and affordable services online inquiry forms enabling customers Service Quality Standards for SDCs, provided by the ROSSETI Group in accor- Accessibility of services for customers: which are the main mechanism for imple- dance with Russian laws;
to send inquiries about services or make COMPANY OVERVIEW complaints about customer service quality. menting the Policy on Society, Customer, >> Customers’ sufficient awareness of the and Government Relations. Company and the ROSSETI Group’s In order to monitor the quality and acces- services; sibility of network connection, the portal The Policy defines the principal goals is equipped with an online questionnaire of customer relations: applying a cus- >> Territorial accessibility and convenient to conduct customer surveys on a regu- tomer-oriented approach to grid organi- conditions of the ROSSETI Group’s face- lar basis. The redesigned version of the zations’ operations and raising customer to-face customer service; portal with enhanced functionalities has confidence. >> Accessibility and promptness of remote already been put into test operation, and The basic objective of the Policy is and online customer service; Extensive work was done in 2015 the beginning of its regular operation is to achieve customer loyalty by providing >> Qualified customer service; to upgrade and redesign the portal >> Calculator for network connection prices scheduled for the 1st half of 2016. affordable services, offering high-quality of electric grid services (Портал-ТП.рф) >> Transparent business processes of cus- REVIEW STRATEGY (to calculate estimated network connection customer service, and ensuring cus- Corporate websites of SDCs and their tomer service and unbiased processing as part of implementing ROSSETI’s cus- prices at the approved fee rates with the >> The functionality of personal login pages branches are well equipped for online tomer satisfaction in the short and long of customer complaints. tomer-oriented policy. The work involved assumptions related to the scope of a grid was expanded in accordance with the customer service. The main tools of online term. changing the concept of the portal and organization’s connection activities); Uniform Quality Standards of Electricity ROSSETI gives much attention to increas- customer service are online inquiry forms expanding the functionality as related >> Scientific calculator for network connec- Distribution and Metering; ing the accessibility of network connec- to ROSSETI SDCs’ services in accordance and personal login pages. tion prices (to calculate network connec- >> For ease of navigation, all services are tion and providing convenient conditions with the Uniform Customer Service tion prices at the approved fee rates for cataloged by activity type, and each service for customers. To this end, customer ser- 1 Quality Standards for Grid Organizations . the current year, taking account of a grid is furnished with a data sheet and visual vice offices are upgraded and fitted with The redesigned portal makes it possible organization’s activities provided for in the reference describing the service perfor- modern equipment such as electronic to monitor grid organizations’ operations, Specifications); mance procedure; queue management systems, payment including network connection, both on the >> The refined functionality will decrease terminals, and self-service information GOVERNANCE CORPORATE AND SECURITIES part of authorized agencies and on the 1 the number of visits to a grid organiza- 1.8 20% kiosks . part of customers. tion, reduce the time of considering and processing requests, and ensure high MILLION PEOPLE OR 20% MORE THAN IN 2014 MAIN AREAS customer service quality in all of the 1 NUMBER OF VISITORS TO THE ROSSETI The ROSSETI Group audited face-to-face customer OF REDESIGNING THE PORTAL: regions where the ROSSETI Group service for compliance with the Uniform Customer operates. GROUP’S CUSTOMER SERVICE OFFICES Service Quality Standards for Grid Organizations approved by Order of the Ministry of Energy of the Сreated uniform showcase for Russian Federation No. 186 of April 15, 2014; and information disclosed by ROS- measures are taken to cause customer service SETI SDCs (enabling regulators offices to meet the approved requirements. to monitor and analyze grid orga- ПОРТАЛ ТП nizations’ operations); >> To assess the capacity available for net- SOCIAL CORPORATE SOCIAL CORPORATE RESPONSIBILITY RESPONSIBILITY Expanded functionality of person- work connection, it is planned to launch 97 al login pages (enabling request- on the portal the uniform map of utiliza- ing entities to monitor compliance tion for main substations rated 35 kV THOUSAND ONLINE INQUIRIES by grid organizations with the and above for all of the regions of the prescribed deadlines for providing ROSSETI Group’s operations in the 1st half IN 2015, OR MORE THAN TWICE regulated services). of 2016. The convenient interface of the AS MANY AS IN THE PREVIOUS YEAR service will make it possible to find power
1 Ministry of Energy directive 15.04.2014 №1 86 ADDITIONAL INFORMATION
156 PJSC “ROSSETI” www.rosseti.ru 157 4. CORPORATE SOCIAL RESPONSIBILITY PJSC “ROSSETI” Stakeholder Relations ANNUAL REPORT || 2015 4
Customer service offices were set up and information about other local electric 941 CUSTOMER SERVICE Subjects of Inquiries from Customers opened after upgrading in Omsk, Troitsk, utilities. OFFICES (119 CUSTOMER Argoyash, Ust-Labinsk, Kaliningrad, The increase was largely due to the Guryevsk, and Stavropol in 2015. SERVICE CENTERS higher territorial accessibility and qual- 59% Network connection Visitors to customer service centers can ity of face-to-face services provided for AND 822 CUSTOMER submit requests for services, obtain households. SERVICE POINTS) OPERATED Electricity distribution reference information and consultations AT THE END OF 2015 Power outages regarding network connection, electricity Maintenance of electric grid facilities distribution, and electricity billing meter-
ing. Customers can also make a claim 7% Electricity billing metering COMPANY OVERVIEW (complaint) and become familiar with 9% Ancillary services 4% 2% Other (service quality, contact information, etc.) 1200 2000 1% 18% Changes in the Opening 1,829 of Customer Service Offices 1800 and the Number of Face-to- 1000 1,527 941 Face Inquiries in 2012–2015 1,331 1600 (pcs.) 800 986 1200
734 REVIEW STRATEGY Customer service offices, pcs. 1000 Changes in Inquiries in 2013– 5000 300 600 Face-to-face inquiries, 2015 (thousand pcs.) 4,259 4,286 800 thousand pcs. 4500 3,763 250 400 600 4000 Total inquiries, 254 204 thousand pcs. 3500 400 200 200 Quality complaints, 3000 200 thousand pcs. 185 2500 150 0 0 2000
2013 2014 2015 GOVERNANCE CORPORATE AND SECURITIES 100 1500
1000 Remote customer service primarily uses Following current trends, the ROSSETI 50 500 Via all channels call center hotlines and numbers of the Group pays considerable attention of communication with operational dispatching units of SDCs. The to expanding the use of its uniform portal 0 0 principal goals of a call center is to receive for electric grid services and electronic 2013 2014 2015 customers, the ROSSETI and handle customers’ incoming calls customer service on SDCs’ websites. Group received 4.3 million about all issues related to SDCs’ activities inquiries in 2015, or 14% and provide a customer with necessary
more than in 2014 information. SDCs created hotlines to miti- THE NUMBER OF NETWORK CONNECTION REQUESTS RECEIVED SOCIAL CORPORATE SOCIAL CORPORATE RESPONSIBILITY RESPONSIBILITY gate the consequences of process failures OVER THE INTERNET IN 2015 WAS 40,000, WITH MOSCOW and promptly provide households with information on the duration of accident AND THE MOSCOW REGION ACCOUNTING FOR MORE THAN recovery work, especially during the heat 70% OF REQUESTS deficit period.
ADDITIONAL INFORMATION
158 PJSC “ROSSETI” www.rosseti.ru 159 4. CORPORATE SOCIAL RESPONSIBILITY PJSC “ROSSETI” Stakeholder Relations ANNUAL REPORT || 2015 4
At the same time, the Company works Dialog with Contractors to reduce the share of sole source pur- chases. Compared with 2009, this indica- tor is down from 31.4% to 3.1% of the Information on all planned and cur- Procurement actual volume of purchases. rent procurement procedures is man- In 2015, the ROSSETI Group completed ROSSETI procurement procedures are datorily posted on the official website HIGHEST AWARD, “GUARANTEED TRANSPARENCY,” 31,500 procurement procedures, totaling 49.7% in accordance with the requirements set of the Uniform Information System, the IN THE NATIONAL PROCUREMENT TRANSPARENCY RATING 302 billion rubles, exclusive of VAT, while forth in Russian laws and the Uniform Company’s website, and the Company’s the total economic effect was 8.3%, OF CONTRACTING PUBLIC ENTITIES Procurement Standard (Procurement electronic trading floor.
TOTAL SHARE OF PURCHASES COMPANY OVERVIEW or 32.2 billion rubles, inclusive of VAT. FROM SMALL AND MEDIUM-SIZED Regulations) implemented in 2015. To provide potential suppliers with more BUSINESSES opportunities for participation in procure- In its procurement management ment procedures, the Company system- system, ROSSETI adheres to the atically works to increase the proportion 4.3 following principles: of purchases through electronic trading Reduction of Sole Source 4,5 floors. In the reporting year, the share Purchases in 2013–2015 >>transparency; 4,0 of competitive purchases through elec- (%) 3.7 >>equality; tronic trading floors remained at 98%. 3,5 3.1 13% >>fairness; 3,0 >>nondiscrimination; AFTER PROCUREMENT PROCEDURES UNIFORM PROCUREMENT REVIEW STRATEGY >>proper and cost-effective use STANDARD ROSSETI.RU 2,5 THAT MAY APPLY ONLY TO SMALL AND of funds. MEDIUM-SIZED BUSINESSES 2,0
1,5
1,0
0,5
0 2013 2014 2015 CORPORATE GOVERNANCE CORPORATE AND SECURITIES Regulated Procurement Procedure Breakdown Regulated Procurement Procedure Breakdown by Purchasing Method by Purchasing Method
66% Public competitive bidding 24% 38% New construction and expansion of electric grid facilities Public requests for quotations 32.2 Rehabilitation and technical upgrading Public requests for proposals of electric grid facilities BILLION RUBLES Public competitive negotiations Power equipment repair, general repair,
3% OR 8.3% THE TOTAL ECONOMIC SOCIAL CORPORATE SOCIAL CORPORATE RESPONSIBILITY RESPONSIBILITY Public auctions 2% and maintenance operations 2% EFFECT WITH SAVINGS ARISING FROM IT purchases Sole source purchases PROCUREMENT PLANNING REACHED 1% 12% Other purchases (financial services, leases, insurance, security guard services, etc.) 26% 2% 24% ADDITIONAL INFORMATION
160 PJSC “ROSSETI” www.rosseti.ru 161 4. CORPORATE SOCIAL RESPONSIBILITY PJSC “ROSSETI” Stakeholder Relations ANNUAL REPORT || 2015 4
The Company continued its work The Company approved the action plan on entering into long-term (three-year) to popularize the program of partner- contracts and framework agreements ship between ROSSETI and small and with manufacturers of basic electrical medium-sized businesses, and more than 15 194 5% equipment. As at the end of 2015, the 500 suppliers joined the program in the ROSSETI Group had about 11,000 sup- reporting year. BILLION RUBLES BILLION RUBLES COMPREHENSIVE IMPORT pliers of electric grid equipment and In 2015, the Company attained the indica- SUBSTITUTION MEASURES ALLOWED contractors in all Russian regions. OR 13% IS THE SHARE OF PURCHASES WHEN IMPLEMENTED, THE IMPORT tor of the share of purchases from small FROM SMALL AND MEDIUM-SIZED SUBSTITUTION POLICY WILL ENABLE SDCS TO SUBSTANTIALLY REDUCE THE The Company continued in 2015 its work and medium-sized businesses as pre- SHARE OF IMPORTED PRODUCTS IN
BUSINESSES AFTER PROCUREMENT ROSSETI TO PLACE ORDERS WITH COMPANY OVERVIEW started in 2014 to provide small and scribed by Resolution of the Government THEIR PURCHASES, WHICH ACCOUNTED medium-sized businesses with increased of the Russian Federation No. 1352 PROCEDURES THAT MAY APPLY ONLY TO DOMESTIC MANUFACTURERES WITHIN access to purchases. of December 11, 2014. SMALL AND MEDIUM-SIZED BUSINESSES 5 YEARS FOR LESS THAN 5% IN 2015
In 2015, ROSSETI developed 12 stan- Anti-Corruption Policy THE COMPANY BUILDS RELA- Share of Purchases from Small ROSSETI GROUP, AVERAGE SHARE OF PUR- dards for electrical products in order CHASES FROM SMALL TIONSHIPS WITH PARTNERS, and Medium-Sized Businesses 50 AND MEDIUM-SIZED to eliminate excessive equipment require- (%) BUSINESSES FOR ments making it necessary to purchase ROSSETI WAS INCLUDED COUNTERPARTIES, AND THIRD 50% 2015 AS PRESCRIBED
BY THE RESOLU- imported products. ON THE REGISTER OF PARTIES ON THE ANTI-COR- REVIEW STRATEGY 40 TION OF THE RUSSIAN Additionally, ROSSETI implement mea- RELIABLE PARTNERS OF THE RUPTION PRINCIPLES AND Total share of purchases GOVERNMENT sures to unify technical requirements for from small and medium-sized CHAMBER OF COMMERCE AND STANDARDS, AND CARRIES equipment as part of centralizing equip- businesses after procurement 30 INDUSTRY OF THE RUSSIAN OUT AWARENESS-RAISING procedures that may apply 24% ment purchases for SDCs at the man- only to small and medium-sized agement company’s level. For instance, FEDERATION IN 2015 ACTIVITIES IN THIS AREA businesses 19% 20 procurement procedures were conducted Total share of purchases in the reporting year to select the 13% A priority for the ROSSETI Group’s activi- from small and medium- agent for the centralized supply of sup- 9% sized businesses, inclusive 10 ply transformers rated 35–220 kV for ties is systematic work on avoiding and INFORMATION ON MEASURES 5% of subcontracts ROSSETI SDCs. combating corruption as specified in the TAKEN BY ROSSETI TO AVOID Strategy for Development of the Electric AND COMBAT CORRUPTION IS GOVERNANCE CORPORATE AND SECURITIES POSTED ON THE COMPANY’S 0 ROSSETI continued extensive work Grid Sector of the Russian Federation. In WEBSITE AT 2013 2014 2015 2015 in 2015 to set up the Federal Testing accordance with the Strategy, ROSSETI Center in Saint Petersburg, which will should coordinate anti-corruption mea- make it possible to conduct a full range 1 sures of all grid organizations . 1 Changes in legislation and the electric grid of tests on electrical equipment inside sector’s organizational structure are reflected Import Substitution Work was organized on minimizing Russia. This will have a positive impact ROSSETI’s absolute priority in this area is in ROSSETI’s and ROSSETI SDCs’ Anti-Corruption Policy defining electric grid companies’ unified the use of imported equipment and on the Russian electrical industry’s tech- to cooperate with governmental authori- ties in order to improve the legal regula- approach to implementing Article 13.3 of Federal To pursue the government policy materials in the course of preparing nological independence from foreign test- Law No. 273–FZ of December 25, 2008, tion of anti-corruption activities. “On Combating Corruption. on import substitution in the electric design solutions and terms of reference, ing laboratories and will form a uniform grid sector of the Russian Federation, and changes were made to design and nationwide system of comprehensive ROSSETI formulated and carries out estimate documents under construction, equipment testing. SOCIAL CORPORATE SOCIAL CORPORATE RESPONSIBILITY RESPONSIBILITY rehabilitation, and repair projects for the Action Plan to Reduce Dependence With a view to developing the localiza- electric grid facilities. on Imported Products. The Company tion of the production of high-technol- took additional measures in the report- An area of the import substitution policy ogy equipment and component parts ing year to evaluate the electric grid was the design standardization of equip- in Russia, ROSSETI entered into several sector’s potential for import substitu- ment used in the electric grid sector. agreements with global leaders in the tion and mapped out the principal areas manufacture of electrical equipment: of activities. General Electric on June 19, 2015; China XD Group on June 18, 2015; ABB on June 3, 2015. ADDITIONAL INFORMATION
162 PJSC “ROSSETI” www.rosseti.ru 163 4. CORPORATE SOCIAL RESPONSIBILITY PJSC “ROSSETI” Stakeholder Relations ANNUAL REPORT || 2015 4
The Company applies: anti-corruption Executives of the Company’s execu- The Company worked in 2015 to avoid During the Forum, the EnergyNet was Developing Intersystem obligations of purchasing participants, tive arm and SDCs’ senior managers corruption, provide legal education for signed by 11 parties, namely ROSSETI, links and Implementing the electric grid sector’s employees, the Agency for Strategic Initiatives, anti-corruption clause, uniform mecha- are caused to declare their income, integration projects nism for processing information on the expense, and property obligations, and form the basis for their law-abiding Russian Venture Company, the Center owner chain of purchasing participants extending these practices to their close conduct. Measures were taken to enable for Strategic Research Foundation, and counterparties of ROSSETI and relatives. This work involves collecting, whistleblowers to report possible corrup- the Russian Technology Agency, the ROSSETI SDCs. The company created analyzing, and processing informa- tion via the corporate website, a hotline, Russian Energy, the Skolkovo Foundation, the automated analysis and collection tion and submitting it to controlling electronic mail, Russian Post, personal Tavrida Electric, QIWI, Bright Capital, and system for information on beneficiaries authorities. meetings, and otherwise. T-System.
ROSSETI signed cooperation agree- COMPANY OVERVIEW ments with SAP, Grid Company, 1C, RUGRIDS-ELECTRO Elektrosetizolyatsiya, and Panasonic CIS. Dialog with the Business Community INTERNATIONAL ELECTRIC POWER FORUM ROSSETI attaches great importance The discussion was attended by the >> Cooperation agreement between From October 20 to 23, 2015, to maintaining an ongoing dialog with Russian Minister of Energy, the Minister ROSSETI and the National Union RUSSIA–KOREA Expocentre hosted the annual Rugrids- the business community both in Russia for the Development of the Russian Far of Vegetable Producers; Electro International Electric Power At a meeting of the Russia–Korea and abroad. East, ROSSETI’s Director General, the >> Cooperation agreement between Forum organized by ROSSETI. Committee on Cooperation in Energy Bulgarian Minister of Energy, and Enel’s ROSSETI and the Tomsk Region and Natural Resources in 2016, ROSSETI Main conferences Chief Executive Officer and General Administration; The main components of the Forum and Korea Electric Power Corporation REVIEW STRATEGY were an exhibition, an extensive busi- and Exhibitions attended >> Memorandum of cooperation between (Kepco) signed two strategic cooperation At the 2015 Forum, ROSSETI held the ROSSETI Group and the Consortium ness program, a podium of innovative agreements. by ROSSETI in 2015 several meetings and entered into of Higher Education Institutions of Power solutions, a business contact exchange, ROSSETI and Inter RAO, on the Russian mutually beneficial cooperation Engineering; a youth policy area, and an electric car INNOPROM 2015 agreements with Russian and foreign area. The program of the Forum covered side, and Kepco, on the Korean side, >> Agreement between ROSSETI and the topical issues of the industry facing geo- INTERNATIONAL INDUSTRIAL agreed to jointly explore the possibili- companies: Republic of Tatarstan Administration; economic challenges and creating new EXHIBITION ties of using high voltage transmission >> Cooperation agreement >> Agreement between ROSSETI and the models of international partnerships. The lines to connect the Russian and Korean between ROSSETI and E.ON Russia IDGC of Urals, a subsidiary of ROSSETI, Republic of Karelia; discussion involved the heads of minis- energy systems for the exportation (Yantarenergo); was an exhibitor displaying state-of- >> Agreement between ROSSETI and tries and departments, legislators, and of electricity from the Russian Federation
the-art innovative inventions and tech- GOVERNANCE CORPORATE AND SECURITIES >> Cooperation agreement between Mezhregionsoyuzenergo. the chief executives of corporations and to the Republic of Korea. ROSSETI and General Electric; nologies for a reliable and high-quality energy companies. The business program The project to develop the interstate electricity supply. >> Cooperation agreement between of the Forum covered key macroeconomic energy links between Korea and Russia ROSSETI and the Ministry of North trends such as the launch of priority can increase the volume of electricity Caucasus Affairs of the Russian development areas, the improvement THE KEY EVENT OF ROSSETI’S exported from Russia by 3–5 GW. ST. PETERSBURG INTERNATIONAL Federation; of mechanisms for special economic PARTICIPATION IN THE The Russia–Korea energy bridge is part ECONOMIC FORUM >> Cooperation agreement between regimes, import substitution, the inten- of the Asian super ring project to cre- ROSSETI and China XD Group sification of interaction between small EXHIBITION WAS A STRATEGIC ate links between the energy systems At the St. Petersburg International Corporation; and medium-sized businesses and large COOPERATION AGREEMENT of Russia, Mongolia, China, North Korea, Economic Forum, ROSSETI organized corporations, along with factors that >> Cooperation agreement between SIGNED WITH ABB South Korea, and Japan. The implemen- a roundtable discussion on “Energy encourage the innovative development
ROSSETI and the Chamber of Commerce SOCIAL CORPORATE SOCIAL CORPORATE RESPONSIBILITY RESPONSIBILITY Integration of Europe, Russia, and Asia — tation of the project to create the Asian and Industry of the Russian Federation; of the industry: energy efficiency and super ring may mean reaching a totally Endless Possibilities,” bringing together resource conservation, the promotion >> Cooperation agreement between new level of interstate energy integration global energy leaders to discuss the main of electric vehicles, and the development ROSSETI and Renault Russia; in Northeast Asia. The potential volume aspects and issues of energy system of charging infrastructure. integration. of intersystem flows in the Asian super ring may exceed 15 GW. ADDITIONAL INFORMATION
164 PJSC “ROSSETI” www.rosseti.ru 165 4. CORPORATE SOCIAL RESPONSIBILITY PJSC “ROSSETI” Stakeholder Relations ANNUAL REPORT || 2015 4
The subject matter of the memorandum Membership in Interstate BRELL COMMITTEE INTERSTATE COUNCIL FOR is to implement Yantarenergo’s wind associations ON ENERGY SYSTEMS STANDARDIZATION, METROLOGY power projects in the Kaliningrad Region AND CERTIFICATION OF 15 by replacing the existing generation As part of simultaneous cooperation capacity (5.1 MW) of the wind power ADVISORY COMMITTEE with the energy systems of the countries THE COMMONWEALTH OF plant and investigating the possibility ON ENERGY OF THE BOARD of the BRELL (Belarus, Russia, Estonia, INDEPENDENCE STATES GW of additionally increasing the capacity OF THE EURASIAN ECONOMIC Latvia, and Lithuania) Energy Ring, THE POTENTIAL VOLUME OF of wind turbines to about 45 MW. ROSSETI continued work on formulat- Cooperation with the Interstate Council COMMISSION INTERSYSTEM FLOWS IN THE ASIAN ing and agreeing upon the new regula- for Standardization, Metrology and tions for planning interstate electricity Certification of the Commonwealth SUPER RING MAY EXCEED 15 GW RUSSIA–BELARUS In 2015, the Supreme Eurasian Economic COMPANY OVERVIEW of Independence States is part of the Council approved the Concept of Forming flows with due consideration to trading The reporting year witnessed the suc- activities of the Subcommittee on Electric RUSSIA–CHINA the Common Electricity Market of the in the Baltic countries’ markets in order cessful implementation of the action to secure electricity supply reliability for Grids (Transmission and Distribution), ROSSETI and Kepco also signed a bilat- Eurasian Economic Union, which At a meeting between Russian President plan to perform the strategic coopera- Russian customers. resources for which are provided eral memorandum of cooperation was formulated with the participa- Vladimir Putin and President of the tion agreement between ROSSETI and by ROSSETI. in sharing experience in the introduction tion of ROSSETI. In accordance with People’s Republic of China Xi Jinping Belenergo to develop both countries’ of innovative equipment and turnkey the approved Concept, the Advisory WORLD ENERGY COUNCIL in Moscow on May 8, 2015, the JV agree- electric grid sectors, provide personnel design solutions and of best practices Committee on Energy prepared the draft ment to implement electric grid projects training, share experience in operating In 2015, ROSSETI’s senior executives in the operation of electric grid facili- of the Program of Forming the Common was signed. electric grid facilities, apply new tech- Energy Market of the Eurasian Economic took part in several events organized ties to improve and raise the efficiency, nology, and develop smart grids and by the World Energy Council (WEC), for reliability, and safety of the Russian and Union with the involvement of ROSSETI.
the approval of the joint action plan for instance, the Strategic Forum on the REVIEW STRATEGY Korean electric grid infrastructures. 2016. Energy Industry in Seoul, Republic DURING A VISIT OF RUSSIAN EXECUTIVE COMMITTEE OF of Korea. The event focused on discuss- PRESIDENT VLADIMIR PUTIN THE ELECTRIC POWER COUNCIL RUSSIA–IRAN ing energy security and strengthening TO BEIJING ON SEPTEMBER 3, OF THE COMMONWEALTH OF cooperation among Eurasian countries 2015, THE MEMORANDUM ON During a visit of Russian Minister INDEPENDENT STATES to create an integrated energy grid, THE JOINT IMPLEMENTATION of Energy Alexander Novak in December which would ensure the stable supply 2015, ROSSETI met with Tavanir. During In the reporting year, ROSSETI took of energy for countries in the region and OF THE PROJECT FOR THE the meeting, they discussed the pos- an active part in the Commission for would be a major step forward in build- CONSTRUCTION OF 500 sibility of mutually beneficial cooperation Operational and Technical Coordination ing up multilateral cooperation. between the companies and the pos- of Joint Operation of Energy Systems KV TRANSIT IN THE TOMSK In April 2015, the Republic of Armenia
sibility of joint research on the connec- in the CIS and Baltic Countries and work- GOVERNANCE CORPORATE AND SECURITIES REGION WAS SIGNED tion of the Russian and Iranian energy ing groups of the Executive Committee established its National Committee of the systems through the energy systems of the CIS Electric Power Council (CIS World Energy Council, which resulted RUSSIA–FINLAND of Georgia, Azerbaijan, and Armenia. EPC). The CIS EPC was established from successful measures to expand And the parties agreed to build up in accordance with the Agreement for Eurasian countries’ membership On November 13, 2015, ROSSETI and cooperation in considering options of the ROSSETI takes an active part in set- the Coordination of Interstate Relations in the WEC. Fingrid Oyj signed a strategic coopera- Russia–China energy routes and their ting up the Coordinating Council and in the CIS Electric Power Industries. The tion agreement. technical and economic parameters. drafting the agreement to conduct most important area of its activities is a feasibility study for the construction The agreement focuses on expand- At the Rugrids-Electro 2015 exhibition to create the common legal framework of the North–South energy corridor ing possibilities for mutually ensuring on October 20, 2015, Yantarenergo of the CIS member states for the electric (Russia–Georgia–Armenia–Iran). energy security, conducting joint research and China Electric Power Equipment power industry and take joint measures
on the modeling of energy systems, and and Technology signed a memorandum to secure a stable and reliable electricity SOCIAL CORPORATE SOCIAL CORPORATE RESPONSIBILITY RESPONSIBILITY continuing to coordinate the energy of understanding and cooperation for supply for the member states. system development plans for Russia’s the joint implementation of wind power Northwestern and Central Federal projects in the Kaliningrad Region. Districts and Finland. ADDITIONAL INFORMATION
166 PJSC “ROSSETI” www.rosseti.ru 167 4. CORPORATE SOCIAL RESPONSIBILITY PJSC “ROSSETI” Occupational Safety ANNUAL REPORT || 2015 4 Occupational Safety Charity and Social Programs
ensuring that occupational safety require- Number of Occupationally The ROSSETI gives much attention Shaping a favorable social en- ments are fulfilled, and preventing occu- Injured Persons to charity and sponsorship activities. vironment and settle pressing The Company gives social issues; pational injuries and diseases for employ- The Company supports the initiatives preference to the projects ees of ROSSETI and ROSSETI SDCs. of charitable foundations and nonprofit 10% In the reporting period, the Company organizations. Providing support for sports and with clearly defined In order to increase the safety achieved a substantial reduction in inju- a healthy lifestyle; objectives and measurable IN ACCORDANCE WITH THE LONG-TERM of elevated jobs at ROSSETI SDCs’ ries caused to SDCs’ personnel by the COMPANY OVERVIEW Main areas of charity and social results DEVELOPMENT PROGRAM OF ROSSETI, facilities, the Company drew up the main injury factors: electric shocks Preserving and increasing the in- programs tellectual potential and providing OCCUPATIONAL INJURY RISKS WILL BE Recommended Guidelines for Complying (from 21 in 2014 to 19 in 2015), falling with the Occupational Safety Rules for from a height (from 15 to 5), and traffic Promoting Russia’s cultural support for initiatives in science, REDUCED BEFORE 2019 Performing Elevated Jobs and Reducing accidents (form 19 to 9). Additionally, and spiritual heritage: projects education, and instruction; Injuries Caused by Falling from a Height ROSSETI managed to almost halve in culture and the arts; programs Providing target-oriented social in Operating Electrical Installations. SDCs the number of outsiders injured by the to create, protect, and restore support for people in difficult situ- prepared and caused to be approved Company’s electrical installations historic and architectural monu- To attain these indicators, the Company ations, including veterans. by their boards of directors the sched- in 2015, from 124 to 66. ments; developed measures and issued regula- ules for eliminating injury-risk equipment, tions and orders in 2015. The detailed list of implemented occu- places, and mechanisms and eliminating pational safety measures is contained CHARITABLE ACTIVITIES OF ROSSETI AND SDCS IN 2015 REVIEW STRATEGY In 2015, the Occupational Safety injury risks for 2014–2016. in Section 6.1 of the Appendix to the Commission was established to prepare All necessary measures resulted in reduc- Annual Report. coordinated recommendatory decisions CONTRIBUTION, ing the occupational injury rate in 2015 AREA with respect to improving the occu- MILLION RUBLES compared with 2014. pational safety management system, Culture 92.86
Healthcare 5.75
3 Education and science 835.39 EXTERNAL MECHANICAL IMPACTS Types of Accidents 2 Affecting SDCs’ Personnel Physical culture and popular sport 155.53 ELECTRIC SHOCKS 21 19 GOVERNANCE CORPORATE AND SECURITIES (injured persons) Low-income, disabled, and other people unable to independently exercise 38.47 TRAFFIC ACCIDENTS 19 their rights and legitimate interests 9
from January 1 FALLING ON AN EVEN SURFACE 4 Environmental and animal protection 5.52 to December 31, 2014 4 Restoration of buildings, facilities, and areas of historic, spiritual, and 254.17 FALLING OF OBJECTS 3 from January 1 0 cultural importance to December 31, 2015 FALLING FROM A HEIGHT 7 2 Other socially important areas 62.00
FALLING FROM A POWER LINE TOWER 3 1 TOTAL 1,449.69
INSECT AND ANIMAL BITES 1 0 CORPORATE SOCIAL CORPORATE SOCIAL CORPORATE RESPONSIBILITY RESPONSIBILITY PEDESTRIAN ACCIDENTS 1 1 SPONSORSHIP OF ROSSETI AND SDCS IN 20151 DROWNING 0 4
5 CONTRIBUTION, FALLING WITH A POWER LINE TOWER AREA 2 MILLION RUBLES PHYSICAL OVERLOADS AND OVERVOLTAGES 0 1 Regional socioeconomic development 2.95 1 Exclusive of the advertising services agreement with PFC CSKA. IMPACTS OF SMOKE, FIRE, AND FLAME 0 1 ADDITIONAL INFORMATION
168 PJSC “ROSSETI” www.rosseti.ru 169 4. CORPORATE SOCIAL RESPONSIBILITY PJSC “ROSSETI” Implementation of Environmental Programs ANNUAL REPORT || 2015 4 Implementation of Environmental Programs
Environmental Safety Measures to Reduce Toxic Vehicle Exhaust Emissions in 2015: The activities of ROSSETI and its SDCs >> Regulation of fuel equipment and inter- 432.8 do not involve a significant impact on the nal combustion engine carburetors in the environment; however, the Company course of the maintenance and repair MILLION RUBLES takes all possible environmental protec- of motor vehicles; COMPANY OVERVIEW tion measures. IN THE REPORTING YEAR, >> Regulation of fuel equipment and inter- nal combustion engine carburetors in the ENVIRONMENTAL PROTECTION In the reporting period, the Company developed 274 draft standards for maxi- course of the maintenance and repair EXPENSES of motor vehicles; mum permissible air pollutant emissions and took an inventory of air pollutants >> Re-equipment of motor vehicles and hazardous emissions. in order for them to run on LPG. The Company systematically takes measures to reduce air emissions. For 4 years, ROSSETI SDCs reduced air con- Measures taken by ROSSETI SDCs of which were not found to ex- Drafting of standards for waste taminant emissions by 4.9%. ROSSETI’s to minimize an adverse environmental ceed the prescribed standards. formation and waste disposal; REVIEW STRATEGY gross air contaminant emissions were impact Additionally, instrumental verifica- 1,463.2 tonnes in 2015. tion of the efficiency of dust and Certification of waste of I–IV haz- Installation of bird protection gas cleaners; ard classes; equipment on overhead power lines and outdoor switchgear Laboratory quality control of po- Training provided for persons ad- EXPENSES ASSOCIATED WITH ENVIRONMENTAL PROTECTION IN 2015 devices of substations; table water; mitted to the treatment of waste of I–IV hazard classes. Work on arranging places for Recording of underground water EXPENSES, EXPENSE TYPE the accumulation of production intake; THOUSAND RUBLES waste; Installation of meters for potable
water protection and conservation expenses 155,645.006 GOVERNANCE CORPORATE AND SECURITIES Analytical production control water intake; of pollutant emissions from air protection expenses 61,765.914 stationary sources, the results land protection from production waste and consumption 215,324.702
land rehabilitation expenses 50,000 Breakdown of Environmental Payments by Adverse Impact in 2015 (thousand rubles) TOTAL 432,785.622 The adverse impact on the environ- ment is subject to payment1; in the 39,653.1 9,180.5 payment for emissions to water bodies reporting year, payment for contamina- and water collection areas, thousand
THE COMPANY CARRIES OUT SOCIAL CORPORATE SOCIAL CORPORATE RESPONSIBILITY RESPONSIBILITY rubles tion not exceeding the standards was ALL APPROPRIATE MEASURES 34,873 thousand rubles and for con- IN ACCORDANCE WITH THE payment for air emissions, thousand tamination exceeding the standards was rubles 15,515 thousand rubles. APPLICABLE ENVIRONMENTAL payment for waste disposal, thousand LAWS OF THE RUSSIAN rubles FEDERATION
1,554.9 1 In accordance with Article 16 of Federal Law No. 7–FZ of January 10, 2002, “On Environmental
Protection”. ADDITIONAL INFORMATION
170 PJSC “ROSSETI” www.rosseti.ru 171 PJSC “ROSSETI” ANNUAL REPORT || 2015 5
Changes in Key Performance Indicators 5 INDICATOR 2013 2014 2015
Operating Activities COMPANY OVERVIEW
Electricity distribution, million kWh 705,959.1 715,304.6 720,526.5
Network connection, MW 19,566 17,246 19,705
Repaired power lines, kilometers 160,896 172,875 154,409
Cleared power line pathways, thousand hectares 131.8 140.6 133.0
Specific accident rate, process failures/1,000 conditional units of equipment 10.17 8.5 6.4
Average duration of power outages 3.80 3.03 2.91 REVIEW STRATEGY
Investing Activities
Commissioned capacity, MVA 22,346 19,430 13,7311
Commissioned power lines, kilometers 30,843 32,819 24,7001
ADDITIONAL Capital financing, million rubles (including VAT) 313,449, 240,137 205,7601
INFORMATION Financial and Economic Activities
Revenues, million rubles 755,806 759,608 766,812 CORPORATE GOVERNANCE CORPORATE AND SECURITIES
Operating expenses, million rubles (912,566) (759,805) (652,538)
EBITDA, million rubles (58,574) 131,834 248,942
Net profit/(loss), million rubles (159,389) (24,257) 81,602
Net debt, million rubles 488,120 496,060 487,181 CORPORATE SOCIAL CORPORATE RESPONSIBILITY
1 For comparability purposes with respect to reports for prior years, information does not include ROSSETI’s subsidiary SDCs: Yargorelektroset, Svet, Tsarskoye Selo Energy Company, Kurortenergo,
Saint Petersburg Power Grid, and Petrodvorets ADDITIONAL ADDITIONAL INFORMATION INFORMATION Electric Company.
www.rosseti.ru 173 5. ADDITIONAL INFORMATION PJSC “ROSSETI” Contact Information ANNUAL REPORT || 2015 5
Contact Information
FULL CORPORATE NAME: PUBLIC JOINT ADDRESS: One Wall Street, New York, 5. VLADIKAVKAZ OFFICE TEL./FAX: +7 (843) 200-11-72 18. NIZHNI NOVGOROD OFFICE E-MAIL: [email protected] STOCK COMPANY ROSSETI New York 10286, USA ADDRESS: Russia, 362003, Republic E-MAIL: [email protected] ADDRESS: Russia, 603155, Nizhni DIRECTOR: Olga Borisovna Askarova SHORT CORPORATE NAME: PJSC ROSSETI TEL.: +1 212 815 5984 of North Ossetia-Alania, Vladikavkaz, DIRECTOR: Arslan Faridovich Shigalov Novgorod, ul. Bolshaya Pecherskaya, 32 REGISTERED ADDRESS AND PLACE OF www.bankofny.com ul. Karla Marksa, 25 TEL./FAX: +7 (831) 220-53-65 25. YUZHNO-SAKHALINSK OFFICE BUSINESS: Russia, 121353, Moscow, TEL./FAX: +7 (8672) 25-23-56 12. KALUGA OFFICE E-MAIL: [email protected] ADDRESS: Russia, 693020, Sakhalin Belovezhskaya, 4 ADDRESS: REGISTRAR E-MAIL: [email protected] Russia, 248002, Kaluga, DIRECTOR: Natalia Nikolayevna Petrova Region, Yuzhno-Sakhalinsk, COMPANY OVERVIEW TAXPAYER IDENTIFICATION DIRECTOR: Amiran Aleksandrovich Gagiev ul. Saltykova-Shchedrina, 23 ul. Kryukova, 57 NUMBER (INN)/PRINCIPAL STATE FULL CORPORATE NAME: STATUS TEL./FAX: +7 (4842) 56-43-07, 56-43-06, 19. OMSK OFFICE TEL./FAX: +7 (4242) 50-08-07 REGISTRATION COMPANY JOINT-STOCK REGISTRATION NUMBER (OGRN): 6. VOLOGDA OFFICE 56-31-90 ADDRESS: Russia, 644043, Omsk, E-MAIL: [email protected] COMPANY 7728662669/1087760000019 ADDRESS: Russia, 160000, Vologda, E-MAIL: [email protected] ul. Kemerovskaya, 10 DIRECTOR: Tatiana Vladimirovna SHORT CORPORATE NAME: AO STATUS UNIFORM STATE REGISTER OF JURIDICAL ul. Dobrolyubova, 26 DIRECTOR: Boris Ivanovich Poltoratsky TEL./FAX: +7 (3812) 25-05-50, 24-45-11 Pavelyevna ADDRESS: Russia, 109544, Moscow, PERSONS: Series 77 No. 011168002 of TEL.: +7 (8172) 54-87-46 E-MAIL: [email protected] ul. Novorogozhskaya, 32/1 July 1, 2008 E-MAIL: [email protected] 13. KOSTROMA OFFICE DIRECTOR: Valentina Petrovna Mikhailova 26. PENZA OFFICE TEL.: +7 (495) 974-83-50 RUSSIAN CLASSIFICATION DIRECTOR: Yelena Mikhailovna ADDRESS: Russia, 156000, Kostroma, ADDRESS: Russia, 440052, Penza, FAX: +7 (495) 678-71-10 OF ENTERPRISES AND ORGANIZATIONS Kupriyanova ul. Pyatnitskaya, 49 20. ORENBURG OFFICE ul. Chkalova, 52, korp. 1 www.rostatus.ru (OKPO): 94129941 TEL./FAX: +7 (4942) 31-64-04 ADDRESS: Russia, 460021, Orenburg, TEL./FAX: +7 (8412) 23-10-15, 23-10-14
TEL./FAX: +7 (495) 995 -53-33, 7. VORONEZH OFFICE E-MAIL: [email protected] ul. 60 let Oktyabrya, 30A E-MAIL: [email protected] REVIEW STRATEGY 664-81-33 REGISTRAR OFFICES ADDRESS: Russia, 394036, Voronezh, DIRECTOR: Mikhail Aleksandrovich TEL./FAX: +7 (3532) 70-26-64 DIRECTOR: Dmitry Vitalyevich Makurin (9 a.m. to 6 p.m. Moscow time) 1. ALEKSEYEVKA OFFICE ul. Feoktistova, 4 Ipatov E-MAIL: [email protected] E-MAIL: [email protected] ADDRESS:Russia, 309850, Belgorod TEL./FAX: +7 (4732) 53-13-54, 64-44-47, DIRECTOR: Tatiana Anatolyevna Yatsuk 27. PERM OFFICE www.rosseti.ru Region, Alekseyevka, ul. Frunze, 2A, 64-44-49 14. KRASNODAR OFFICE ADDRESS: Russia, 614990, Perm, k. 13–14 E-MAIL: [email protected] ADDRESS: Russia, 350000, 21. ORYOL OFFICE ul. Lenina,50 DEPARTMENT TEL./FAX: +7 (47234) 3-25-18 DIRECTOR: Dmitry Ivanovich Potapov Krasnodar, ul. im. Ordzhonikidze, 46/ ADDRESS: Russia, 302028, Oryol, TEL.: +7 (342) 201-71-73 ul. Krasnoarmeyskaya, 32, lit. B ul. Saltykova-Shchedrina, 32 E-MAIL: [email protected] FOR CORPORATE GOVERNANCE E-MAIL: [email protected] DIRECTOR: Galina Dmitryevna 8. YEKATERINBURG OFFICE TEL./FAX: +7 (861) 274-88-85, 274-88-86 TEL./FAX: +7 (4862) 48-36-47 DIRECTOR: Roman Georgyevich Gabitov AND SHAREHOLDER Kuznetsova ADDRESS: Russia, 620026, Sverdlovsk E-MAIL: [email protected] E-MAIL: [email protected] AND INVESTOR RELATIONS: Region, Yekaterinburg, ul. Kuybysheva, DIRECTOR: Ilona Andreyevna Kalmykova DIRECTOR: Yelena Gennadyevna 28. VOLGA OFFICE
44D Fenicheva ADDRESS: Russia, 410065, GOVERNANCE CORPORATE AND SECURITIES Toll-free shareholder hotline: 2. ARKHANGELSK OFFICE TEL./FAX: +7 (343) 287-18-39, 169-21-50 15. MAGNITOGORSK OFFICE Saratov Region, Saratov, 9 a.m. to 6 p.m. Moscow time, Mon. ADDRESS: Russia, 163000, Arkhangelsk, E-MAIL: [email protected] ADDRESS: Russia, 455044, Chelyabinsk 22. SEVERODVINSK OFFICE 2-y Kransoarmeysky tupik, 1A through Fri. ul. Rozy Lyuksemburg, 5, korp. 1 DIRECTOR: Pavel Anatolyevich Ivanov Region, Magnitogorsk, ul. Zavenyagina, 9 ADDRESS: Russia, 164500, TEL./FAX: +7 (8452) 459-000, ext. 65-14 TEL.: +7 (495) 974-87-40 TEL.: +7 (8182) 63-32-60 TEL./FAX: +7 (3519) 25-60-22, 25-60-23 Arkhangelsk Region, Severodvinsk, E-MAIL: [email protected] E-MAIL: [email protected] E-MAIL: [email protected] DIRECTOR: Irina Ruslanovna Detkova 9. IZHEVSK OFFICE E-MAIL: [email protected] ul. Karla Marksa, 21 DIRECTOR: Yelena Nikolayevna Avdeyeva ADDRESS: Russia, 426011, DIRECTOR: Sergey Sergeyevich Yasko TEL./FAX: +7 (8184) 52-96-00 AUDITOR 3. BASHKORTOSTAN OFFICE Udmurtian Republic, Izhevsk, ul. 10 let E-MAIL: [email protected] 29. RYBINSK OFFICE FULL CORPORATE NAME: RSM RUS ADDRESS: Russia, 450001, Republic Oktyabrya, 53 16. NABEREZHNYE CHELNY OFFICE DIRECTOR: Yelena Mikhailovna ADDRESS: Russia, 152903, LIMITED LIABILITY COMPANY of Bashkortostan, Ufa, ul. Sobinova, 27 TEL./FAX: +7 (3412) 90-13-30 ADDRESS: Russia, 423834, Republic Kupriyanova Yaroslavl Region, Rybinsk, SHORT CORPORATE NAME: RSM RUS (ul. Kirovogradskaya, 36/2) E-MAIL: [email protected] of Tatarstan, Naberezhnye Chelny, pros- prospekt Lenina, 148 CORPORATE SOCIAL CORPORATE RESPONSIBILITY ADDRESS: Russia, 119285, Moscow, TEL.: +7 (347) 216-37-44 DIRECTOR: Lyudmila Grigoryevna Volkova pekt Kh. Tufana, 6 23. SOCHI OFFICE TEL./FAX: +7 (4855) 29-66-00, 29-64-27 ul. Pudovkina, 4 E-MAIL: [email protected] TEL./FAX: +7 (8552) 35-80-89 ADDRESS: Russia, 354341, Krasnodar E-MAIL: [email protected] TEL.: +7 (495) 363-2848 DIRECTOR: Yulia Vladimirovna Reznikova 10. IRKUTSK OFFICE E-MAIL: [email protected] Territory, Sochi, ul. Karla Marksa, 14 DIRECTOR: Tatiana Nikolayevna Filippova FAX: +7 (495) 981-4121 ADDRESS: Russia, 664003, Irkutsk DIRECTOR: Arslan Faridovich Shigalov TEL./FAX: +7 (8622) 40-55-10 E-MAIL: [email protected] 4. VLADIVOSTOK OFFICE Region, Irkutsk, ul. Dzerzhinskogo, 7 E-MAIL: [email protected] 30. RYAZAN OFFICE www.rsmrus.ru ADDRESS: Russia, 690001, Vladivostok, TEL.: +7 (3952) 20-09-83 17. NAKHODKA OFFICE DIRECTOR: Nadezhda Konstantinovna ADDRESS: Russia, 390000, ul. Pogranichnaya, 6 E-MAIL: [email protected] ADDRESS: Russia, 692904, Primorie Popova Ryazan, pl. Sobornaya, 52 DIRECTOR: Anna Valeryevna Khlebnikova Territory, Nakhodka, ul. Portovaya, 3a DEPOSITARY BANK TEL.: +7 (4232) 22-45-18 TEL.: +7 (4912) 99-49-77, 28-44-76 E-MAIL: [email protected] TEL.: +7 (4236) 62-25-32 24. CHITA OFFICE E-MAIL: [email protected]; FULL CORPORATE NAME: THE BANK DIRECTOR: Alexander Mikhailovich 11. KAZAN OFFICE E-MAIL: [email protected] ADDRESS: Russia, 672000, Trans-Baikal [email protected] OF NEW YORK MELLON ADDRESS: Russia, 420043, Republic DIRECTOR: Svetlana Anatolyevna Territory, Chita, ul. Petrovskaya, 35 DIRECTOR: Larisa Konstantinovna
Miroshnichenko ADDITIONAL ADDITIONAL INFORMATION INFORMATION SHORT CORPORATE NAME: BNY MELLON of Tatarstan, Kazan, ul. Vishnevskogo, 26 Prits TEL./FAX: +7 (3022) 26-38-71 Romashova
174 PJSC “ROSSETI” www.rosseti.ru 175 5. ADDITIONAL INFORMATION PJSC “ROSSETI” Contact Information ANNUAL REPORT || 2015 5
Additional Information for Shareholders
31. SAMARA OFFICE 35. TOLYATTI OFFICE 39. KHABAROVSK OFFICE Dividend Payment Procedure the payment of dividends, by providing the Dividend Taxation ADDRESS: Russia, 443100, ADDRESS: Russia, 445051, ADDRESS: Russia, 680000, Company’s registrar with the registered Samara, ul. Molodogvardeyskaya/ Samara Region, Tolyatti Khabarovsk Territory, Khabarovsk, Dividends are paid to the sharehold- person’s questionnaire accompanied by the The size of declared dividends shall Yarmarochnaya, 167/3 ul. Frunze, 14B ul. Zaparina, 82 ers of PJSC ROSSETI in accordance with relevant instructions. include any taxes payable by sharehold- TEL./FAX: +7 (846) 332-41-77, 332-82-29 TEL./FAX: +7 (8482) 27-01-61, 27-01-62, TEL./FAX: +7 (4212) 32-56-54 the procedure set forth in the laws of The persons that are entitled to dividends ers in accordance with the laws of the
E-MAIL: [email protected] 27-01-60 E-MAIL: [email protected] COMPANY OVERVIEW the Russian Federation, the Company’s and whose rights to shares are recorded Russian Federation. DIRECTOR: Vladimir Vladimirovich E-MAIL: [email protected] DIRECTOR: Oleg Anatolyevich Yaryshev Articles of Association, and the Company’s with any nominee shareholder shall Obukhov DIRECTOR: Olga Stanislavovna In accordance with the procedure pro- Regulations for Dividend Policy approved receive dividends in cash in accordance Tarasova vided for in the tax law of the Russian by the Board of Directors on November 18, with the procedure provided for in the 32. SAINT PETERSBURG OFFICE Federation, the tax agent shall withhold 2014. securities laws of the Russian Federation. ADDRESS: Russia, 197046, Saint 36. TOMSK OFFICE tax amounts from dividends accrued Petersburg, ul. Chapayeva, 9, lit. A ADDRESS: Russia, 634021, Tomsk, Payment of dividends shall be made in Any person failing to receive dividends for shareholders and pay such amount TEL./FAX: +7 (812) 702-43-03, 498-12-04 prospekt Frunze, 132 cash unless otherwise provided for in a because the correct and necessary address to the budget. decision adopted by the General Meeting E-MAIL: [email protected] TEL./FAX: +7 (3822) 44-26-23 or bank details are not available to the The tax agent for the persons registered of Shareholders of the Company. DIRECTOR: Valery Eduardovich Albertovich E-MAIL: [email protected] Company or the registrar or due to any on the register shall be the Company. DIRECTOR: Natalia Mikhailovna Yartseva Any dividend payment period in the case other delay on the part of the creditor shall In the case of any persons whose shares 33. SARATOV OFFICE of nominee shareholders and asset manag- have the right to submit a request to pay are held by nominee shareholders or REVIEW STRATEGY ADDRESS: Russia, 410031, 37. ULYANOVSK OFFICE ers that are professional securities market such dividends (unclaimed dividends) within asset managers that are professional Saratov, ul. Moskovskaya, 35 ADDRESS: Russia, 432063, participants shall not exceed 10 business three years after the decision to pay such securities market participants, the tax TEL./FAX: +7 (8452) 23-39-91, 23-74-82, Ulyanovsk Region, Ulyanovsk, days or, in the case of any other persons dividends. No interest shall be charged on agent shall be nominee shareholders 27-43-73 ul. Mira, 17A registered on the shareholder register, unclaimed dividends. or asset managers that are professional TEL./FAX: +7 (8422) 42-30-55, 96-87-53 E-MAIL: [email protected] 25 business days after the date on which If any deadline for requests to pay securities market participants respec- E-MAIL: [email protected] DIRECTOR: Dmitry Aleksandrovich the persons entitled to dividends are deter- unclaimed dividends is missed, such dead- tively under the relevant agreements. Dubovitsky DIRECTOR: Yelena Aleksandrovna Belova mined. Any decision on dividend payment line may not be reset unless any person If any shareholder is entitled to tax may specify a shorter dividend payment entitled to dividends fails to submit such benefits, such a shareholder shall have 34. SYZRAN OFFICE 38. UFA OFFICE period. request on account of violence or threats the right to submit to the tax agent the ADDRESS: Russia, 446010, ADDRESS: Russia, 450030, Republic of
Payment of dividends in cash shall be made documents in support of the availability GOVERNANCE CORPORATE AND SECURITIES Samara Region, Syzran, ul. Bashkortostan, Ufa, Upon the expiration of such period, the by bank transfer by the Company or, on of such benefits. Gidroturbinnaya, 13 Industrialnoye shosse, 119 declared dividends that have not been its instructions, by the registrar keeping TEL.: +7 (8464) 37-12-52, 37-24-18 TEL./FAX: +7 (347) 238-32-77, 238-18-81 claimed by any shareholder shall be the Company’s shareholder register or by E-MAIL: [email protected] E-MAIL: [email protected] restored as part of the Company’s undis- a credit institution. DIRECTOR: Irina Fanilovna Onushkina DIRECTOR: Vladimir Petrovich Yatsko tributed profit, and the obligation to pay Payment of dividends in cash to any such dividends shall terminate. individuals whose rights to shares are The Company shall be deemed to have recorded in the Company’s shareholder performed its obligation to pay dividends register shall be made by bank transfer as of the date when money is accepted into their accounts or, if so requested by by a federal postal organization for such such persons, by postal order and, in the postal order or as of the date when money SOCIAL CORPORATE RESPONSIBILITY case of any other persons whose rights is received by the credit institution that to shares are recorded in the Company’s maintains the bank account of the person shareholder register, by bank transfer into entitled to such dividends. their accounts. The Company shall not be liable for any Any owner of shares may at any time make losses caused to the shareholder due to alterations to the registered person’s sending any dividends to the shareholder, questionnaire, changing the method for using the details specified in the list of the receiving money income from shares, or the persons entitled to dividends. banking details or postal address used for ADDITIONAL ADDITIONAL INFORMATION INFORMATION
176 PJSC “ROSSETI” www.rosseti.ru 177 5. ADDITIONAL INFORMATION PJSC “ROSSETI” Disclaimer ANNUAL REPORT || 2015 5
Disclaimer Glossary of Terms and Abbreviations
This Annual Report is prepared using the start and end dates of specific proj- described in the forward-looking ROSSETI KPI RAS information available to PJSC ROSSETI ects related to the Company’s business. statements. Public Joint Stock Company ROSSETI Key performance indicators Russian Accounting Standards (“Company”) and its subsidiaries and (PJSC ROSSETI) or the Company Forward-looking statements are gener- The Company shall not be liable for any PL RGC dependent companies at the time of the ally identified by words such as “intend,” losses that may be incurred by any indi- ROSSETI GROUP Power line Regional grid company preparation hereof. “strive,” “project,” “expect,” “estimate,” viduals or corporate entities relying upon ROSSETI and SDCs MVA RDIF COMPANY OVERVIEW This Annual Report contains, inter alia, “plan,” “believe,” “assume,” “may,” “can,” forward-looking statements. In each NPP Megavolt-ampere Russian Direct Investment Fund information concerning the Company’s “should,” “will,” “continue,” and other particular case, such forward-looking Nuclear power plant future production and business opera- similar or related words and expressions. statements are only one of the numer- MW REC tions based on projections and estimates ous scenarios and shall not be regarded AHML Megawatt Regional Energy Commission By virtue of their particularities, forward- of the Company’s management relying as the most likely. Agency for Housing Mortgage Lending MOESK ICS looking statements involve inherent risk upon the current situation. FOCL Moscow United Electric Grid Company Internal control system and uncertainty of a general and specific Except where otherwise specifically Fiber-optic communication line Due to various objective factors, the nature, and there is a risk that esti- provided for in law, the Company shall IDGC MM actual performance results may differ mates, predictions, projections, or other not be obligated to publish any updates ВО Interregional Distribution Grid Company Mass media from such projections and estimates. forward-looking statements may not on or changes in forward-looking state- Subsidiary subsidiaries SMB SO UPS materialize. ments based on new information or sub- This Annual Report contains certain GVA Small and medium-sized businesses System Operator of the United Power
sequent events. REVIEW STRATEGY forward-looking statements regarding In view of the foregoing risks, uncertain- Gigawatt-ampere IFRS System the Company’s business operations, ties, and assumptions, the Company GW International Financial Reporting NC economic indicators, financial condi- warns that the actual results may Gigawatt Standards Network connection tion, plans, projections, and expected materially differ from what is expressed, GDR ETG TGO results. This Annual Report can also whether directly or indirectly, in the for- Global depositary receipt Electricity transmission grids Territorial grid organization contain forward-looking statements ward-looking statements and valid only regarding changes in prices of products/ at the time of the preparation of this ACPP MRR FES services, output and consumption, costs, Annual Report. Annual comprehensive procurement Minimum regulated revenue Fuel and energy sector estimated expenditures, development program The Company makes no representa- NS CHPP prospects, and other similar factors and tions or warranties with respect to the AGM Nominee shareholder Combined heat and power plant predictions with respect to the develop- achievement of the operating results Annual General Meeting of Shareholders GOVERNANCE CORPORATE AND SECURITIES ment of the industry and markets and to VAT AC TPP Value added tax Authorized capital Thermal power plant R&D FAS SGCC Research and development Federal Antimonopoly Service of the State Grid Corporation of China RDC Russian Federation SDCS Research and development center FTS Subsidiaries and dependent companies HDP Federal Tariff Service of the Russian LTDP Heat deficit period Federation Long-Term Development Program OVS CSC
UNEG Overvoltage suppressor Customer service center SOCIAL CORPORATE RESPONSIBILITY Unified National (All-Russian) Electric Grid IPS ETF UPS Integrated Power System Electronic trading floor United Power System of Russia DEI EBITDA ITT Design engineering institute Earnings before interest, tax, deprecia- tion and amortization Information technology and SS telecommunications Substation IR KV Investor/shareholder relations RP department Kilovolt Relay protection ADDITIONAL ADDITIONAL INFORMATION INFORMATION
178 PJSC “ROSSETI” www.rosseti.ru 179 5. ADDITIONAL INFORMATION PJSC “ROSSETI” Glossary of Terms and Abbreviations ANNUAL REPORT || 2015 5
Notes
RAB POOL TARIFF Regulatory Asset Base, a system of long- Uniform tariff applied to electricity term tariff regulation aiming to encour- distribution services and set within age investment in the construction and a constituent entity of the Russian modernization of grid infrastructure and Federation for the purposes of settle-
stimulate grid organizations to imple- ments between customers and territorial COMPANY OVERVIEW ment cost efficiency measures grid organizations MICEX PWR MICEX Power Index. The Sector Indices are market capitalization weighted indices calculated based on prices of the most liquid shares of Russian issuers operating in the relevant economic sec- tors, admitted to trading on the Moscow Exchange, and included in the Broad Market Index calculation base STRATEGY REVIEW STRATEGY CORPORATE GOVERNANCE CORPORATE AND SECURITIES CORPORATE SOCIAL CORPORATE RESPONSIBILITY ADDITIONAL ADDITIONAL INFORMATION INFORMATION
180 PJSC “ROSSETI” www.rosseti.ru 181 5. ADDITIONAL INFORMATION PJSC “ROSSETI” Contact Information ANNUAL REPORT || 2015 5
Notes Notes COMPANY OVERVIEW STRATEGY REVIEW STRATEGY CORPORATE GOVERNANCE CORPORATE AND SECURITIES CORPORATE SOCIAL CORPORATE RESPONSIBILITY ADDITIONAL ADDITIONAL INFORMATION INFORMATION
182 PJSC “ROSSETI” www.rosseti.ru 183 5. ADDITIONAL INFORMATION Contact Information
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