One of the creators of the management theory, Henri Fayol wrote, that manage- ment is an continuous process, consisting of forecast, planning, organization, man- agement, coordination and control. But how the reliable forecast can be made, that The annual report Volga TGC 2007 can become the grounds for the successful project implementation? How at least the pencil sketch of the picture of tomorrow can be drawn? And what is future? Futurologists still argue what is the extent of its predictability and alternativeness. Are we creating future or will the events going to happen inevitably become the real- ity having masqueraded as the consequences of inevitable chain of accidents? And what is more important when our knowledge of tomorrow is insufficient: analysis or intuition? Let the futurologists guess what is the future of power companies and what sources of energy will dominate: thermonuclear synthesis, nanotechnological solar ele- ments or upper-air wind. We already know the most important thing about the future: we are going to face competition and this is the major factor that will influ- ence Volga TGC operation in the nearest future. It is the increase of ability to com- pete that is the basic goal of today. Which means that each figure of the reporting statistics will reveal not only information of the past, but also a key to more success- ful future. Samara 2008 Addresses of Chairman of the Board and the General organizational structure. Gradual liberalization of elec- of investments and the primary contractor Volga TGC tricity and gas markets, the changing conditions of standard of customers servicing Director of the Company to shareholders municipal heat markets functioning assign the objectives - Regulation on corporate assistance and support of of management and business processes optimization for employees in dwelling improvement future operations efficiency increase. - Program of ecological policy implementation for 2007- Dear shareholders! In this connection the retail market directorate has 2009 been significantly modified. This Directorate is expected - Regulation on Volga TGC Audit Committee of the Summing up the results of 2007 it is necessary to mention that this period has not only to implement the new system of relationship Board of Directors embodied a number of the important stages of our company development. The between Volga TGC and the heat energy consumers, - Regulation on Volga TGC department of control and most important one is the completion of the target structure of Volga TGC for- but also to expand the company presence on the ther- internal audit. mation. Almost 3-years period of power systems of Samara, Saratov, Ulyanovsk mal markets of the cities it operates in and to increase One annual and six extraordinary shareholders’ meet- and Orenburg regions finished for our company on June 1 of the reporting year, efficiency of this activity. In order to achieve these goals ings were held in the reporting year. The extraordinary when the shareholders of Volga TGC could exercise their rights in possession of new branches – territorial heat supplies divisions – have meetings were convoked both on the initiative of the our company’s shares to full extent. That was prefaced by contribution of 100% been created in six towns. The divisions incorporate Board and the shareholders of the Company. The deci- shares of Orenburg TGC shares to the authorized capital of the Company in thermal grids and heat sales departments. sions were made on many issues of major importance: March 2007. Taking into consideration the strong interrelation Company reorganization in term of regional generation It is important to emphasize that the model of our company formation differed between fuel consumption mode of our stations and companies merger, dividends payment on the results of significantly from the basic reformation project and was associated with some strong competition on the power wholesale market the six months of 2007, election of new Board of Directors additional procedures for the shareholders. However, such approach already on decision was made to assign the issues of fuel supply and Auditing Committee, Company reorganization by the first step allowed to create a large operating company, that was able to start to the wholesale directorate. way of merger of “Volga TGC Holding” created as a production and operating activity on the wholesale and retail power market at Moreover, the Capital Construction Directorate has result of RAO UES of Russia reorganization in term of once. In this connection we would like to express our special gratitude to nearly been created in Volga TGC, that will be in charge of spin-off, increase of the authorized capital due to addi- 20 thousand of our shareholders who managed to evaluate the significant advan- the company’s investment programs implementation. tional shares distribution, approval of Agreement of tages of our project and trusted in it. The new Strategy Development Directorate will develop capacity providing to the electricity wholesale market Speaking of financial results of the reporting year we can acknowledge that all and realize the integrated strategy of Volga TGC devel- and Underwriting Agreement that are the related party efficiency indicators, determined by the shareholders, were met by the company opment. transactions, supplements and modifications introduction management. In particular, return on equity (ROE) amounted to 2.85%, com- One more important step in the company’s life was to the By-Laws. pared to the planned figure of 2.20%, and net profit exceeded the planned val- the preparation to additional shares issue that finished Speaking of Volga TGC development strategy for ues by 167 million rubles. It is necessary to mention that compared to the previ- in March 2008. The funds realized from the additional 2008 it is necessary to mention that within the frames ous year net profit of Volga TGC in the reporting year increased by 54.9% and issue distribution will be allocated for financing of Volga of terminating reorganization of RAO UES of Russia in President of the Board OJSC Volga TGC amounted to 682 million rubles in comparison with 440 million rubles in 2006. TGC investment programs. One of the most important 2008 the Company will have to perform a number of V.E. Avetisyan And it is important that this profit was gained not due to tariffs for heat and stages of this process in start of the company’s shares corporate procedures in introduction of the current electricity, but as a result of efficient company operation in the free market sec- trading at the local stock market. In the end of the owners of RAO UES in the shareholding structure of tor of electric power wholesale market. year Volga TGC securities were listed in quotation list Volga TGC. Speaking of the results of production activity, it is necessary to point out that the “B” of the leading local stock exchange floors – MICEX Activities aimed at enhanced reliability and quality of company managed to increase the reliability of power supply to the customers. The and RTC. power supply, increase of productive supply of thermal total quantity of technological breakdowns in the reporting year compared to 2006 The basic activities of the Board in 2007 were caused and electric power will remain the key points of Volga reduced by 7% - from 131 to 122 incidents. The quantity of technological breakdowns by the goals of the company in the reporting period. In TGC operation. due to the faults of personnel also reduced by 25% - from 28 to 21. total 31 Board meetings took place in the reporting Another strategic goal of Volga TGC is further inte- In 2007 the program of equipment technical upgrade and reconstruction was year, over 390 issues were considered concerning vari- gration of municipal thermal grid assets as well as cre- fulfilled completely. The total amount of about 2 708 million rubles was allocat- ous spheres of the company activity. ation of joint heat transportation companies with other ed for this purpose in the reporting year, including over 1 951 million rubles for Many decisions of the Board dealt with preparation owners of thermal grid property in the towns of the reconstruction and technical upgrade. of the key documents that specify the criteria of corpo- company presence. One of the most significant results of this activity is start of implementation of rate management, govern the production activity and These activities will allow to strengthen the leading posi- two Volga TGC priority investment projects for 2007-2012. The project social security of the employees. In particular, the fol- tion of our company on the thermal markets of the largest “Construction of 4th heating trunk from Togliatti TPP to Avtozavodsky district of lowing documents have been approved by the Board: cities of Volga basin and increase Volga TGC efficiency on Togliatti” is the core element of Togliatti generation center development. - Strategy of Volga TGC information technologies the wholesale electricity and power market. Realization of all actions, specified in the program will allow to overcome the development existing deficiency of thermal energy and secure future power loads in Togliatti - 5-year investment program of Volga TGC and President of the Board OJSC Volga TGC until 2015. Orenburg Heat Generation Company V.E. Avetisyan Construction of 8th heating trunk from Saratov TPP-5 will allow to connect - Regulation on Volga TGC information policy new urban districts to central heating. Furthermore, new heating trunk will allow - Regulation on Volga TGC insider information to connect the consumers of several old boiler houses that do not meet the cur- - Regulation on investment funds management General Director OJSC Volga TGC rent technical requirements to TPP. - Regulations on cash flow formation and approval and General Director OJSC Volga TGC V.V. Nikonov Another important event in the Company activity was the change of Volga TGC reports on their execution by the customers – parties V.V.