EXCELLENT ENERGY! Annual Report 2012 EXCELLENT ENERGY! 001

EXCELLENT ENERGY! Annual report 2012 www.mrsk-volgi.ru EXCELLENT ENERGY! 001

Annual report based on the results of the fiscal year 2012

«Interregional Distribution Grid Company of Volga», Joint-Stock Company

Preliminary approve by resolution of the Board of Directors of IDGC of Volga, JSC 25.04.2013 (Minutes of 30.04.2013, №17)

General Chief Director Accountant V.A. Ryabikin I.A. Tamlenova IDGC OF VOLGA ANNUAL REPORT 2012

CONTENTS

INTRODUCTION 005 ADDRESS OF CHAIRMAN OF THE BOARD OF DIRECTORS 007 ADDRESS OF GENERAL DIRECTOR 009

01 COMPANY INFORMATION 012 Basic facts about the Company 012 Presence and Position in Industry 014 Key facts of 2012 and events occurred after the reporting date 018 Main results of the year 020

02 STRATEGY AND FUTURE DEVELOPMENT 022 03 SECURITIES 028 Authorized capital 028 Stock market 031 Dividend policy 034 04 CORPORATE GOVERNANCE 036 Structure and principles of corporate governance 036 Management and supervisory bodies 039 05 INTERNAL CONTROL AND RISK MANAGEMENT SYSTEM 062 Model of the internal control and risk management system 062 Main risk factors 063 06 FINANCIAL ACTIVITY 070 Basic financial and economic performance indicators 070 Analysis of financial condition and results of operations 071 Loan policy 073 Long-term financial investments 076 07 PRODUCTION ACTIVITY 080 Production potential 080 Power transmission and distribution 082 Technological grid connection 086 The Company’s use of power resources 091 08 TARIFF POLICY 092 09 INVESTMENT ACTIVITY 098 Parameters of investment activity 098 Trend and structure of capital investments 101 Long-term investment program 110 www.mrsk-volgi.ru EXCELLENT ENERGY! 002 | 003

10 INNOVATIVE DEVELOPMENT 114

11 HUMAN CAPITAL ASSETS AND SOCIAL RESPONSIBILITY 116 Human Resources Policy 116 Social policy 121 12 labour SAFETY AND ECOLOGICAL POLICY 124 Activity on labour safety 124 Ecological policy 125 13 referenCE AND CONTACT INFORMATION 128

Appendices 132 1 Information on participation in other companies and non-profitable organizations 132 2 Information on adherence to corporate code of conduct 136 3 Overview of interested party transactions approved by the board of directors 148 4 Financial (accounting) statements under RAS 164 5 Auditor’s report 164 6 Consolidated financial statements 170 7 Report of the Internal Audit Commission 212 IDGC OFOF VOLGAVOLGA AnnANNUALual REPORT report 2012 2012 COMPANYINTRODUCTION INFORMATION

Mordovenergo Orenburgenergo Penzaenergo Chuvashenergo the Republic of Mordovia the Orenburg region the Penza region the Chuvash Republic

IDGC of Volga, JSC

Samara Saratov Ulyanovsk Distribution Grids Distribution Grids Distribution Grids the Samara region the Saratov region the Ulyanovsk region www.mrsk-volgi.ru EXCELLENT ENERGY! 004 | 005

INTRODUCTION

“Interregional Distribution Grid Company of Volga”, Joint-Stock Company (hereinafter referred to as IDGC of Volga, JSC, the Company) was registered on June 29, 2007 in Saratov as a one hundred percent subsidiary of RAO UES of Russia, JSC according to the resolution passed by the sole founder of RAO UES of Russia, JSC (Order of the Management Board of RAO UES of Russia, JSC No. 191р dated June 22, 2007) to implement the resolution on participation in IDGC passed by the Board of Directors of RAO UES of Russia, JSC (Minutes of Meeting No. 250 dated April 27, 2007). According to IDGC’s structure approved by the resolution of the Board of Directors of RAO UES of Russia, JSC (Minutes of Meeting No. 250 dated April 27, 2007), IDGC of Volga, JSC encompassed the following distribution grid companies: Volzhskaya IDG, JSC; Mordovenergo, JSC; Penzaenergo, JSC; Orenburgenergo, JSC and Chuvashenergo, JSC. During the period from June 29, 2007 to March 31, 2008, IDGC of Volga, JSC ensured operation of the distribution grids encompassed by the Company according to IDGC’s structure. In order to form DGC’s target management model and improve the efficiency of management of the above companies, IDGC of Volga, JSC started to exercise functions of the sole executive body of these companies according to the resolution passed by the General Meeting of Shareholders of DGC on October 01, 2007. On December 25, 2007, the Management Board of RAO UES of Russia, JSC exercising functions of the extraordinary General Meeting of Shareholders of IDGC of Volga, JSC (Minutes of Meeting No. 1795пр/8 dated December 25, 2007) passed the resolution on Company’s restructuring through affiliation of Volzhskaya IDC, JSC; Mordovenergo, JSC; Orenburgenergo, JSC; Penzaenergo, JSC and Chuvashenergo, JSC. In January 2008, the extraordinary General Meetings of Shareholders of the above five distribution grid companies encompassed by IDGC of Volga, JSC passed the resolutions on restructuring through affiliation with the Company. On April 01, 2008 IDGC of Volga, JSC was finally restructured through affiliation of five distribution grid companies: Volzhskaya IDG, JSC; Mordovenergo, JSC; Orenburgenergo, JSC; Penzaenergo, JSC and Chuvashenergo, JSC. Since April 01, 2008, DGCs affiliated with IDGC of Volga, JSC have ceased operating as legal entities and started carrying out their activities as the following branches: Mordovenergo, Orenburgenergo, Penzaenergo, Samara Distribution Grids, Saratov Distribution Grids, Ulyanovsk Distribution Grids and Chuvashenergo. Since April 01, 2008 and till the present time, IDGC of Volga, JSC operates as a single operating company in 7 constituents of the Russian Federation: the Chuvash Republic, the Republic of Mordovia, the Orenburg region, the Penza region, the Saratov region, the Samara region and the Ulyanovsk region; the Company’s headquarters is located in Saratov. ADDRESS OF CHAIRMAN IDGC OFOF VOLGAVOLGA AnnANNUALual REPORT report 2012 2012 OFCOMPANY THE BOARD INFORMATION OF DIRECTORS

“In 2012, the Company paid dividends based on the 2011 results in the amount of 198.6 million rub. or 99.29% of total amount of declared dividends on the Company’s shares.”

ANDREY EVGENyeVICH MUROV, Chairman of the Board of Directors IDGC of Volga, JSC www.mrsk-volgi.ru EXCELLENT ENERGY! 006 | 007

ADDRESS OF CHAIRMAN OF THE BOARD OF DIRECTORS

Dear Shareholders And Investors,

In 2012, IDGC of Volga, JSC succeeded in achieving As a socially responsible, successful and efficiently its top-priority goal — reliable and smooth electric operating company, IDGC of Volga, JSC is engaged in power supplies and equal access to electric grids for charitable activities. The Company took part in various all consumers. Stable and dynamic development of the cultural, scientific, educational and sports projects under distribution electric grid infrastructure of the regions its Program of Charitable Activities for 2012 approved by serviced by the Company was rooted in the effective the Board of Directors. Charitable activity as one of the strategic management and high professional skills of the important segment of social communications contributes management team and personnel of IDGC of Volga, JSC. to formation of efficient relations between the business Despite of limited growth of power transmission and IDGC of Volga, JSC and the Company’s positive image. tariffs in 2012, the Company achieved a positive The Company’s achievements leave room for financial result (net profit) and high financial stability optimism. The next step is to improve the efficiency of and independence, fully implemented the repair and the Company’s operations and increase its income and investment programs, took special measures intended profit. Meanwhile, being aware of responsibility before to reduce power losses in distribution grids resulting in the Company’s shareholders, the management team is the economic effect to the amount of 342 million rub. committed to improving the corporate governance system In 2012, the Company paid dividends based on the and ensuring reliable protection of legitimate rights of 2011 results in the amount of 198.6 million rub. or 99.29% shareholders and investors, transparency of all activities, of total amount of declared dividends on the Company’s structures and management procedures. shares. The dividend policy, one of the main elements of On behalf of the Board of Directors, I would like the corporate governance, is a key sign of observance of to express our gratitude to the management team and rights of the Company’s shareholders. personnel of the Company for their efforts aimed to The financial and economic results achieved by improve the system of management of the main business the Company in 2012 and its development prospects processes and business reputation and to ensure a non- were evaluated by the international rating agencies. In stop growth and financial stability. I am sure that IDGC the reporting year, IDGC of Volga, JSC was assigned an of Volga, JSC will cope with all challenges and will make international credit rating Ba2 with the international rating a significant contribution to the development ofR ussian agency, Moody’s Investors Service, and a national credit power industry. rating Aa2.ru with Moody’s Interfax. The above credit ratings show that the key performance indicators of the Company match the level required for full and timely discharge of the Company’s financial obligations. During the reporting year, IDGC of Volga, JSC endeavored to improve its corporate governance system, boost liquidity of shares and attract interest to its shares from the investment professionals. The Company did its best to improve the quality of corporate governance and transparency of its activities and increase the involvement of the Board of Directors in making strategic decisions. The corporate governance system of IDGC of Volga, JSC complies with the international and domestic best practices. NonprofitP artnership “Russian Institute of Directors” raised the rating previously assigned to IDGC of Volga, Best regards, JSC up to NRKU 7+ “Advanced Practice of Corporate ANDREY EVGENyeVICH MUROV, Governance”, thus confirming high quality of the Chairman of the Board of Directors Company’s corporate governance. IDGC of Volga, JSC ADDRESS IDGC OOFF VVOLGAOLGA AnnANNUALual REPORT report 2012 2012 OFCOMPANY GENERAL INFORMATION DIRECTOR

“The work of power engineers of IDGC of Volga, JSC plays a major role in the development of infrastructure of the Middle Volga Region and the Orenburg region.”

VLADIMIR ANATOLyeVICH RYABIKIN, General Director, Chairman of the Management Board of IDGC of Volga, JSC www.mrsk-volgi.ru EXCELLENT ENERGY! 008 | 009

ADDRESS OF GENERAL DIRECTOR

Dear Shareholders, Investors, Clients And Partners,

In 2012, IDGC of Volga, JSC celebrated its fifth anniversary. Ulyanovsk region); reconstruction of 110/10 kV substation After five years of operation, the Company left behind the “Raduga” (the Chuvash Republic). stage of initial formation and goal setting. Due to hard and The production and financial results gained in 2012 intense efforts, the Company achieved positive financial formed a reliable platform for further development. and production results and gained leadership positions Next year, the management team of the Company in the market of power transmission and technological will pursue efforts to implement sweeping innovation connection to electric grids in the Saratov, Samara, projects of national importance, ensure reliable and Orenburg, Penza and Ulyanovsk regions, the Republic of effective operation of the electric grid facilities and Mordovia and the Chuvash Republic. development and expansion of company’s capitalization, IDGC of Volga, JSC immediately launched large-scale as well as to increase the number of investors. projects for reconstruction and upgrading of substations I express my gratitude to our shareholders, partners, and power transmission lines, new construction and clients and employees for their confidence and I highly elimination of power shortage in cities in the regions of appreciate our many year mutually beneficial cooperation the Company’s presence. The work of power engineers of and joint contribution to the development of Russian IDGC of Volga, JSC plays a major role in the development electric grid complex. of infrastructure of the Middle Volga Region and the Orenburg region. In 2012, the Company achieved a positive financial result with the net profit amounting to 1,162 million rub., and the rate of net assets growth per one share was equal to 102% of the 2011 rate. The Company endeavored to increase the energy efficiency and cut power losses.T he implementation of the Energy Savings and Increased Energy EfficiencyP rogram resulted in the economic effect in the amount of over 342 million rub. The projects for new construction and technical upgrading of the Company’s distribution electric grid complex involve cutting-edge technologies and developments. In 2012, the amount of 3.8 billion rub. was allocated for implementation of the Innovative Development Program (including 87.7 million rub. for R&D projects). The capital investments of the Company for the reporting year amounted to 9,246 million rub. exceeding the last year investments by 22.2%. In 2012, the Company put into operation 1,752.7 km of power transmission lines and introduced 780.15 MVA of transformer capacity. The major projects implemented by the Company encompass the construction of 110/10 kV substation “Erzya” (the Republic of Mordovia); construction of 110 kV power transmission line “Kiembay — Priisk-Kumak — Best regards, Svetly” (the Orenburg region); reconstruction of 110/10 kV VLADIMIR ANATOLyeVICH RYABIKIN, substation “Novaya” (the Penza region); construction of General Director, 110/35/10 kV substation “Khoper” (the Saratov region); Chairman of the Management Board reconstruction of 110/6 kV substation “Avtozapchast” (the of IDGC of Volga, JSC IDGC OFOF VOLGAVOLGA AnnANNUALual REPORT report 2012 2012 COMPANY INFORMATION

EXCELLENT FOR DEVELOPMENT STRATEGY!

01 02 03 01 www.mrsk-volgi.ru EXCELLENT ENERGY! 010 | 011 EXCEL- LENT FOR DEVELOPMENT STRATEGY! 50% REDUCTION OF EQUIPMENT DETERIORATION BY 2020 — LESS THAN 50%

7,680 mln. rub. investment expenditures scheduled for 2013

Ryabikin Vladimir Anatolyevich 805 mln. rub. General Director of IDGC Total economic impact of Volga, JSC as a result of cost control program implementation “Our employees are as targeted for 2013 for all areas of activity confident about their future as they realize how important their work is. Working as a team, 1,252 mln. rub. achieving common tar- amount of planned total ex- gets we create a sustain- penditures for innovations for 2013-2017 able company”. IDGC OF VOLGA ANNUAL REPORT 2012 COMPANY INFORMATION

COMPANY 01 INFORMATION

BASIC FACTS ABOUT THE COMPANY

IDGC of Volga, JSC

Core activities: Production facilities: ̤̤ delivery of power transmission ̤̤ 1,690 35-220 kV substations with services; 27,294.7 MVA capacity, ̤̤ dispatch and operation control; ̤̤ 44,793 6-10-35/0.4 kV ̤̤ technological connection of power transformer substations with receivers (power systems) of legal 7,393.44 MVA capacity; entities and natural persons to ̤̤ 0.4-220 kV power lines with the power girds overall mileage of 224,380.2 km

In accordance with the Order of the Federal Tariff Service of June 27, 2008 No. 237-э, IDGC of Volga, JSC was entered The Company holds a leadership position into the register of natural monopolies in in the market of electric grid services in the energy sector. the area of its presence — seven regions of the VOLGA FEDERAL DISTRICT OF THE RUSSIAN FEDERATION: THE REPUBLIC OF MORDOVIA, CHUVASH REPUBLIC AND SAMARA, SARATOV, ORENBURG, PENZA AND ULYANOVSK REGIONS with the total area of 403.5 th. km² and population exceeding 12.5 million persons. 01 www.mrsk-volgi.ru EXCELLENT ENERGY! 012 | 013

Structure of the Company

SUBSIDIARIES AND AFFILIATES Saratov Distribution grids ̤̤ Zavolzhskoye Production Department ̤̤ Pravoberezhnoye Production Department ̤̤ Privolzhskoye Production Department ̤̤ Prikhoperskoye Production Department ChAK, JSC ̤̤ Severnoye Production Department ̤̤ Severo-Vostochnoye Production Department Social sphere-M, JSC ̤̤ Tsentralnoye Production Department

Samara Distribution grids ̤̤ Samarskoye Production Department ̤̤ Zhigulevskoye Production Department ̤̤ Volzhskoye Production Department ̤̤ Chapaevskoye Production Department

Ulyanovsk Distribution grids ̤̤ Dimitrovgradskoye Production Department ̤̤ Baryshskoye Production Department ̤̤ Yuzhnoye Production Department

Chuvashenergo ̤̤ Severnoye Production Department IDGC OF VOLGA, JSC BRANCHES ̤̤ Yuzhnoye Production Department ̤̤ Alatyrskoye Production Department

MORDOVENERGO ̤̤ Saranskoye Production Department ̤̤ Komsomolskoye Production Department ̤̤ Kovylkinskoye Production Department ̤̤ Krasnoslobodskoye Production Department

Penzaenergo * ̤ Penzenskoye Production Department SUBSIDIARIES AND AFFILIATES ̤ ̤̤ Kuznetskoye Production Department ̤̤ Kamenskoye Production Department ̤̤ Serdobskoye Production Department ̤̤ Nizhnelomovskoye Production Department

Orenburgenergo Energoservice of Volga, JSC ̤̤ Production Department “Central Electric Grids” ̤̤ Production Department “Eastern Electric Grids” Solnechniy Sanatorium- ̤̤ Production Department “Eastern Electric Grids” Preventorium, JSC ̤̤ Production Department “Northern Electric Grids” ̤̤ Production Department “Orenburg City Electric Grids” ̤̤ Production Department “Orsk City Electric Grids” ̤̤ Production Department “Informenergosvyaz”

* Events occurred after the reporting date: as a result of assigning of the status of a guaranteeing supplier in the area of responsibility of Penzaenergo, a branch of IDGC of Volga, JSC, to the Company (by the resolution of the Supervisory Board of Nonprofit Partnership «Market Council» dated January 23, 2013, Order of RF Ministry of Energy No. 29 dated January 24, 2013 and Decree of the Government of Russia No. 1482 dated December 30, 2012), a new Production Department «Energosbyt» was formed in the structure of the above branch on February 01, 2013. IDGC OF VOLGA ANNUAL REPORT 2012 COMPANY INFORMATION

PRESENCE AND POSITION IN INDUSTRY

COVERAGE FOR TRANSFER MARKETE / ELECTRIC, %

Penzaenergo Saratov Distribution Grids Branch of IDGC of Volga, JSC area of the Penza region: Branch of IDGC of Volga, JSC area of the Saratov re- 43.4 th. km²; population: 1,386.19 th. residents gion: 101.2 th. km²; population: 2,521.89 th. residents

66 % 54 % 01 www.mrsk-volgi.ru EXCELLENT ENERGY! 014 | 015

Moscow

Affected area

Mordovenergo Chuvashenergo Branch of IDGC of Volga, JSC area of the Republic of Branch of IDGC of Volga, JSC area of the Chuvash Re- Mordovia: 26.1 th. km²; population: 834.76 th. residents public: 18.3 th. km²; population: 1,251.62 th. residents

57% 72 %

Ulyanovsk Distribution Grids Branch of IDGC of Volga, JSC area of the Ulyanovsk region: 37.2 th. km²; population: 1,292.80 th. residents

52 %

Samara Distribution Grids Orenburgenergo Branch of IDGC of Volga, JSC area of the Samara re- Branch of IDGC of Volga, JSC area of the Orenburg gion: 53.6 th. km²; population: 3,215.53 th. residents region: 123.7 th. km²; population: 2,033.07 th. residents

61% 58% IDGC OF VOLGA ANNUAL REPORT 2012 COMPANY INFORMATION

COVERAGE OF MARKET OF ELECTRIC POWER TRANSMISSION SERVICES

58%

58% IDGC of Volga 42% of ТGО 01 www.mrsk-volgi.ru EXCELLENT ENERGY! 016 | 017

The following major companies carry out the similar activities in the territory of IDGC of Volga, JSC functioning the Saratov Saratov City Electric Network Enterprise, CJSC region Oblkommunenergo, JSC Gazpromenergo, LLC the Samara Samara City Electric Networks, CJSC region Samara Network Company, CJSC Energoneft Samara, JSC the Ulyanovsk Municipal Unitary Enterprise Ulyanovsk City region Electric Networks (MUP UlGES) Ulyanovsk Network Company, JSC Aviastar - Joint Power Supply Enterprise, CJSC the Orenburg Orenburgenergoneft, LLC region State Unitary Enterprise Orenburg Municipal Electric Networks South-Ural Branch of Gazpromenergo, LLC the Penza Penza Gorelektroset, CJSC region Network Company, LLC

the Republic Technical Firm WATT, CJSC of Mordovia Mordovia Electric Heat Network Company, JSC

the Chuvash Municipal Technologies, LLC Republic Kanash City Electric Networks, JSC

The key consumers of services delivered by IDGC Holding, and retail energy markets (the major participants are JSC are the following sales companies formed as a result Mezhregionenergosbyt, JSC and Rusenergosbyt, LLC). of reforming RAO UES of Russia, JSC: Samaraenergo, JSC; Saratovenergo, JSC; Ulyanovskenergo, JSC; Mordovia Energy Sales Company, JSC; Penzaenergosbyt, JSC; Orenburgenergosbyt, JSC; Chuvash Energy Sales Company, JSC; as well as participants of wholesale IDGC OF VOLGA ANNUAL REPORT 2012 COMPANY INFORMATION

KEY FACTS OF 2012 AND EVENTS OF THE REPORTING DATE

>> JANUARY >> MAY ̤̤ Grid Control Center of Samara Distribution Grids, a ̤̤ The Company congratulated veterans of the Great branch of IDGC of Volga, JSC, started to take over Patriotic War. operational functions. ̤̤ The Victory Banner Event was held in all branches of ̤̤ Young specialists of Chuvashenergo, a branch of IDGC of Volga, JSC. IDGC of Volga, JSC, became holders of Chuvash Pres- ̤̤ The Company continues optimizing power metering ident’s Scholarship “For Special Purposefulness”. system. ̤̤ The team of Mordovenergo, a branch of IDGC of >> FEBRUARY Volga, JSC took the medal place in II All-Russian ̤̤ The meeting of the Youth Council of the Company KVN Games. was held in Saratov. ̤̤ IDGC of Volga, JSC took part in the 18th International >> JUNE Specific Exhibition “Power Industry”. ̤̤ IDGC of Volga, JSC gained ISO 9001:2008 certifica- ̤̤ IDGC of Volga, JSC and Gagarin’s Saratov State Tech- tion. nical University entered into a long-term agreement ̤̤ The Board of Directors of IDGC of Volga, JSC passed for basical complex relations in the field of scientific, the resolution on placement of documentary inter- innovation and educational activities. est-bearing non-convertible exchange-traded unreg- ̤̤ Representatives of Orenburgenergo, a branch of IDGC istered (bearer) bonds subject to mandatory central- of Volga, JSC, took part in the exhibition “Oil. Gas. ized storage in the total amount of 7 billion rubles. Energo — 2012”. ̤̤ General Meeting of shareholders of IDGC of Volga, ̤̤ Sportsmen of IDGC of Volga, JSC won the Fourth JSC was held in Saratov. All-Russian Winter Spartakiada Games of power ̤̤ Specialists of Ulyanovsk Distribution Grids, a branch engineers of the distribution power grid complex. of IDGC of Volga, JSC, install new power meters. ̤̤ IDGC of Volga, JSC took part in the First All-Russian ̤̤ 5th anniversary of the Company. youth contest of high-tech innovation ideas and projects “Power Industry of Future”. >> JULY ̤̤ Grid Control Center of Orenburgenergo, a branch of >> MARCH IDGC of Volga, JSC, took over operational functions. ̤̤ Power generated by Chuvashenergo, a branch of ̤̤ Reconstructed 110/10 kV substation “Bessonovka” IDGC of Volga, JSC, was approved by Quality Cer- switched to a new scheme. tificate. ̤̤ IDGC of Volga, JSC joined the International Com- ̤̤ First 2012 Meeting of Scientific andT echnical Coun- mittee for Distribution Electric Power Grids SIRED. cil of IDGC of Volga, JSC was held in the Ulyanovsk region. >> AUGUST ̤̤ IDGC of Volga, JSC and Vavilov’s Saratov State Agri- ̤̤ IDGC of Volga, JSC, adopts a new technology of ex- cultural University (SGAU) entered into a long-term amination of the electric power grid facilities. agreement for basic complex relations in the field ̤̤ Penzaenergo, a branch of IDGC of Volga, JSC, com- of scientific, innovation and educational activities. pleted the reconstruction of 110 kV power transmission line “Serdobsk-Kolyshley-2”. >> APRIL ̤̤ Chuvashenergo, a branch of IDGC of Volga, JSC, com- ̤̤ Collective agreement of Chuvashenergo, a branch of pleted the repair of 110 kV power transmission line IDGC of Volga, JSC, was announced the best agree- “Kanash-Tyaga-1,2”. ment in Chuvashia. ̤̤ IDGC of Volga, JSC took part in the IV Saratov In- ̤̤ The campaign “Distribution Grid Complex for dustrial Forum. Environmental Safety” was launched in all ar- ̤̤ New members of the Board of Directors of IDGC of eas of responsibility of IDGC of Volga, JSC. Volga, JSC were elected at the extraordinary General Meeting of Shareholders of the Company. 01 www.mrsk-volgi.ru EXCELLENT ENERGY! 018 | 019

>> SEPTEMBER >> DECEMBER ̤̤ The team of IDGC of Volga, JSC took the first place in ̤̤ Orenburgenergo, a branch of IDGC of Volga, JSC, was the Fouth All-Russian Summer Spartakiada Games awarded the Gold Sign as a winner of the Regional of power engineers of IDGC Holding, JSC . Contest “Quality Leader of the Orenburg region — ̤̤ The Government of the Saratov region and IDGC of 2012”. Volga, JSC entered into a cooperation agreement. ̤̤ Grid Control Center of Ulyanovsk Distribution Grids, ̤̤ Election of the Chairman of the Board of Directors a branch of IDGC of Volga, JSC, expanded the scope of the Company and new members of Committees of operational functions. under the Board of Directors of IDGC of Volga, JSC. ̤̤ Chuvashenergo, a branch of IDGC of Volga, JSC, com- ̤̤ Completed overhaul of 110/6 kV substation “Tingo- missioned the 10-0.4 kV power transmission line vatovo” in the Chuvash Republic. in the Karamyshevo settlement of the Kozlovskiy district (the Chuvash Republic) after reconstruction. >> OCTOBER ̤̤ Grid Control Center of Mordovenergo, a branch of ̤̤ NonprofitP artnership “RID” assigned higher rating of IDGC of Volga, JSC, started to take over operational NRKU 7+ “Advanced Practice of Corporate Govern- functions. ance” (Corporate Governance National Rating scale) to IDGC of Volga, JSC. ̤̤ Chuvashenergo, a branch of IDGC of Volga, JSC, completed the planned overhaul of 110 kV power Events occurred after the transmission line “Batyrevo-1,2”. reporting date ̤̤ Ryabikin V.A., General Director of IDGC of Volga, JSC, was awarded the commemorative medal “Marshal >> FEBRUARY 2013 Vasiliy Chuykov” of the Russian Federation Ministry ̤̤ Penzaenergo, a branch of IDGC of Volga, JSC, started of Civil Defence and Emergency Response. to discharge duties of a guaranteeing supplier in the ̤̤ The Company readjusted long-term parameters for Penza region tariff regulation of the activity (method of profitability of invested capital — RAB). >> MARCH 2013 ̤̤ A certificate of preparedness of IDGC of Volga, JSC ̤̤ Chuvashenergo, a branch of IDGC of Volga, JSC, com- for operation during the autumn-winter season missioned the Grid Control Center 2012-2013 was signed. ̤̤ Chuvashenergo, a branch of IDGC of Volga, JSC, >> APRIL 2013 completed modernization of Raduga 110/10 kV ̤̤ According to the modifications and additions to the substation. Articles of Association of the Company registered on ̤̤ Orenburgenergo, a branch of IDGC of Volga, JSC, April 04, 2013 by the Interdistrict Inspection of the completed modernization of Aeroport 110/10 kV Federal Tax Service for Moscow No. 46 basing on substation. the resolution of the extraordinary General Meeting ̤̤ Moody’s Rating Agency assigned international credit of Shareholders of IDGC Holding, JSC dated March rating Ba2 to the Company. 23, 2013 passed to fulfill the Order of RF President ̤̤ Samara Distribution Grids, a branch of IDGC of Volga, No. 1567 “On Open Joint-Stock Company “Russian JSC, completed modernization of N.Gankino 35 kV Grids” dated November 22, 2012, Open Joint-Stock substation. Company “Interregional Distribution Grid Companies Holding” (IDGC Holding, JSC) was renamed as Open >> NOVEMBER Joint-Stock Company “Russian Grids” (Rosseti, JSC). ̤̤ Construction of 110/35/10 kV station “Tsvetochnaya” ̤̤ The Board of Directors of IDGC of Volga, JSC passed was launched in Penza. the resolution on placement of documentary inter- ̤̤ Grid Control Center of Penzaenergo, a branch of est-bearing non-convertible exchange-traded unreg- IDGC of Volga, JSC, started to take over operational istered (bearer) bonds subject to mandatory central- functions. ized storage in the total amount of 18 billion rubles. ̤̤ The annual report of IDGC of Volga, JSC ranked first at the XV Annual federal contest of annual reports of Moscow Exchange in the category “Best annual report of the Volga Federal District”. ̤̤ The annual report of the Company took the first place in the category “Major Players of Stock Market” at the annual contest of annual reports among joint-stock companies of the Saratov region.

* Hereinafter referred to as “JSC «IDGC Holding»”. Starting April 04, 2013, the Company was renamed as Joint stock сompany “Russian Grids” (JSC “Russia Grids”). IDGC OF VOLGA ANNUAL REPORT 2012 COMPANY INFORMATION

MAIN RESULTS OF THE YEAR

Production results

KPIs Number of 35-220 kV 2010 Capacity of 35-220 kV 2010 substations, pcs 1,691 substations, MVA 26,893.2

2011 2011 1,690 1,690 27,294.7 27,107.2 NUMBER OF 6-10-35/0.4 2010 Capacity of 2010 KV TRANSFORMER 44,096 6-10-35/0.4 kV 7,245.14 SUBSTATIONS, PCS transformer 2011 substations,, MVA 2011 44,793 44,352 7,393.44 7,285.44 Length of power 2010 Length of power 2010 transmission line 214,689.9 transmission 223,265 (circuits), km line (route), km 2011 2011 224,380.2 223,752.9 215,786.8 215,168.3 Electric power 2010 Actual electric 2010 transmission 56,367.76 power losses (%) 6.90 services (million kWh) 2011 2011 57,462.18 57,622.80 6,36 6.80 Connected 2010 capacity (kW) 158,222.8

2011 300,689.6 214,340

Financial results

RAS Revenue (thousand 2010 from power 2010 rubles) 39,420,367 transmission services 38,736,860 parameters 2011 2011 45,763,581 47,827,153 45,124,134 47,222,117 from technological 2010 connection services 276,478

2011 416,273 266,345 Net Income (thousand 2010 Net worth (thousand 2010 rubles) 262,267 rubles) 40,643,611

2011 2011 1,161,973 1,305,932 42,910,010 41,948,921 Net assets per 2010 Income per 1 share 2010 1 share (rub.) 0.231 (rub.) 0.0015

2011 2011 0.240 0.235 0.0065 0.0073 01 www.mrsk-volgi.ru EXCELLENT ENERGY! 020 | 021

EBITDA (thousand 2010 EBITDA margin 2010 rubles) 4,686,352 0.12

2011 2011 7,056,018 5,614,208 0.15 0.12 DEBT 2010 Return on sales (%) 2010 (thousand rubles) 5,038,331 4.58

2011 2011 10,714,087 6,856,985 6.58% 4.65

IFRS Revenue (thousand 2010 from power 2010 rubles) 39,560,330 transmission services 38,736,861 parameters 2011 2011 45,908,232 48,037,179 45,142,081 47,288,882 from technological 2010 connection services 360,200

2011 431,233 325,718 Operating expenses 2010 EBITDA (thousand 2010 (thousand rubles) 38,488,062 rubles) 3,981,135

2011 2011 42,302,462 45,746,931 7,211,256 5,687,962 Results of operating 2010 Profit before tax 2010 activity (thousand 1,166,808 (thousand rubles) 888,445 rubles) 2011 2011 3,564,495 2,407,110 3,228,248 2,156,801 Net financial expenses 2010 Net worth (thousand 2010 (thousand rubles) 278,363 rubles) 21,700,712

2011 2011 336,247 250,309 25,639,476 23,465,228 Profit and total 2010 Basic and diluted 2010 annual profit 567,499 earnings per share 0.0032 (thousand rubles)) (rub.) 2011 2011 2,374,255 1,764,516 0.0133 0.0099 Net debt (thousand 2010 Coefficient “Net 2010 rubles) 3,806,842 debt/EBITDA” 0.96

2011 2011 8,695,908 4,993,632 1.21 0.88 ROE, % 2010 Return on EBITDA, % 2010 2.65% 10.06%

2011 2011 9.67% 7.81% 15.71% 11.84% Profitability of sales 2010 (net profit), % 1.43%

2011 5.17% 3.67% IDGC OF VOLGA ANNUAL REPORT 2012 STRATEGY AND FUTURE DEVELOPMENT

STRATEGY 02 AND FUTURE DEVELOPMENT

Mission of IDGC of Volga, JSC is to effectively use the distribution grid assets of the Company, maintain their reliability and raise investment resources for the benefit of each shareholder and the Company.

Major strategic target of IDGC of Volga, JSC is to provide to investors and evaluate the efficiency of resource reliable and steady power supply to power consumers consumption and quality of managerial work. while cutting down on the cost of power transmission and ensuring equal access to power grids that generate The milestones in solving strategic objectives for IDGC profit to the Company. of Volga, JSC are as follows: Strategic development of the Company is aimed at ̤̤ to reduce the physical deterioration of distribution building innovative and efficient distribution grid complex grid assets up to 50% by 2020; that is able to meet the demands of economic growth and ̤̤ to increase the operating effectiveness by 2020 to the social modernization in the regions where the Company level of effectiveness of distribution grid companies operates. in advanced economies; ̤̤ to establish the reserve of transfer capacity of electric Major strategic target of the Company can be achieved grids forestalling the economic development by 3 provided that the following strategic objectives are years by 2020; completed: ̤̤ to ensure the profitability of investments in the dis- ̤̤ ensuring system reliability and safety to maintain tribution grid complex at the level of profitability of stable operation of distribution grid complex in the companies with comparable market risks in the Rus- region, safe operation of main and auxiliary equip- sian Federation; ment and facilities, prevention of hazards to life of ̤̤ to raise funds needed to implement massive fixed population; assets renewal for higher reliability and quality of ̤̤ sustainable development of quality and volume of services and more efficient business activity of dis- power transmission services, ensuring environment tribution grid companies; safety, formation of infrastructural basis for eco- ̤̤ to introduce innovative technologies corresponding nomic development of the region; to the best world standards in the area of electric ̤̤ growth of the Company value that implies a continu- energy distribution and at each stage of technologi- ous increase in revenues and profitability, expansion cal process. and qualitative renewal of the Company’s asset port- To reach the above objectives the Company needs both folio to satisfy the interests of the shareholders, to additional large-scale financial resources and qualitative make IDGC of Volga, JSC and its projects attractive modifications in power transmission activities. 02 www.mrsk-volgi.ru EXCELLENT ENERGY! 022 | 023

In order to perform a major mid-term renewal of fixed specified in the Collective Agreements entered into with assets and fulfill the governmental task for top-priority regional committees of public association “All-Russian selection of RAB-based regulation method, all branches Elektroprofsoyuz”, implemented the repair and investment of the Company switched to a new investment method of programs in full, took special measures to reduce power regulation starting January 01, 2011. losses in distribution grids that allowed to achieve the In 2012, to fulfill the requirements of the Decree of economic effect to the amount of 342 million rub. RF Government No. 1178 dated December 29, 2011, the Company successfully “reloaded” long-term regulation parameters and extended the regulation period that will expire no sooner than July 01, 2017. Despite the limitations on increase in power transmission tariffs, in 2012 the Company gained a positive financial result with net profit amounting to 1,162 million rub., ensured a high degree of financial stability and independence, discharged the obligations to its personnel

The improvement in reliability of power supply to consumers, enhancing system safety for 2013

1,451 million rub. 7,680 million rub.

7,773 million rub.

7,680 million rub. the investment expenditures 7,773 million rub. the fixed production assets 1,451 million rub. the repair costs IDGC OF VOLGA ANNUAL REPORT 2012 STRATEGY AND FUTURE DEVELOPMENT

The Company planned the following works for 2013: The budgeted costs associated with the purchase of elec- 1_ The improvement in reliability of power supply to tric grid facilities in 2013-2017 amount to 45 million rub. consumers, enhancing system safety: 5_ Rise of the investment attractiveness of the Company • in 2013, the planned investment expenditures of through planned transition of all branches to RAB- the Company amount to 7,680 million rub., the regulation since 2011. input of fixed production assets — 7,773 million 6_ Execution of R&D projects in 2013-2017 to imple- rub. in compliance with the investment programs ment and use advanced technologies: for 2012-2017 duly approved by the RF constitu- • development of transformer oil recovery intensi- ent entities; fier; • the repair costs for 2013 are planned at the level • use of reclosers designed for de-icing automatic of 2012 and amount to 1,451 million rub. control; 2_ The improvement in quality of the Company’s ser- • development and fabrication of 110 kV AC vacuum vices through development of information space switch with one break per pole; (web-resources, databases and IP-telephony) for • development of wire monitoring device designed service consumers will allow to provide them with to detect failures and icing on 35-110 kV power full, updated and accurate information about the transmission lines, etc. Company’s activities and to monitor the interaction The budgeted aggregate innovation costs in 2013-2017 between the clients and responsible structural sub- amount to 1,252 million rub. divisions of the Company. Increasing responsibility 7_ Improvement of management and operational ef- for achievement of target quality indicators. ficiency through implementation of strategy in the 3_ Improvement of the efficiency of operating and in- field of information technologies, automation and vestment costs through reduction of unit cost of telecommunications. works, implementation of optimal technical solu- In addition to the Company’s tasks set for 2013 within its tions and cutting power losses. core activities (power transmission), starting February 01, 2013, IDGC of Volga, JSC will discharge duties of a guaran- To perform this task, the Company develops and takes teeing supplier in the Penza region pursuant to the Order measures under the Energy Savings and Increased En- of RF Ministry of Energy No. 29 dated January 24, 2013. ergy Efficiency Program and Cost Management Plan. The budgeted aggregate economic effect of CMP implementation in all areas of the Company’s activities for 2013 amounts to 805 million rub., namely: ̤̤ operating activity — 193 million rub.: • carrying out of regulated procedures — 74 million rub.; • reduction in power losses — by 106 million rub. (67.9 mln kWh); • reduction in heat energy losses — by 1.4 million rub. (1.4 Gcal); • reuse of commodities and materials — 7 million rub.; • refining of repair technologies — 5 million rub.; ̤̤ investment activity — 303 million rub. as a result of carrying out of regulated procedures. ̤̤ maximization of the result of other (extraordinary) activities — 261 million rub. ̤̤ receipt of additional revenue from adding unaccount- ed power consumption to the net power supply and implementation of the Program of the long-term development of electric power metering systems — 47 million rub. 4_ Business integration, power grids consolidation and increase of market presence. 02 www.mrsk-volgi.ru EXCELLENT ENERGY! 024 | 025

THE BUDGETED AGGREGATE ECONOMIC EFFECT OF CMP, 2013

74 million rub.

by 106 million rub.

by 1.4 million rub. 04

03 805 7 million rub. MILLION RUB. 5 million rub.

01 193 million rub. operating activity — 74 million rub. carrying out of regulated procedures 02 303 million rub. investment activity — by 106 million rub. reduction in power losses — by 1.4 million rub. reduction in heat energy losses 03 261 million rub. maximization — 7 million rub. reuse of commodities and materials of the result of other (extraordinary) — 5 million rub. refining of repair technologies activities 04 47 million rub. receipt of additional revenue IDGC OFOF VOLGAVOLGA AnnANNUALual REPORT report 2012 2012 COMPANY INFORMATION

EXCELLENT FOR EFFECTIVE CORPORATE GOVERNANCE!

03 02

01 01 www.mrsk-volgi.ru EXCELLENT ENERGY! 026 | 027 EXCEL- NATIONAL CORPORATE GOVERNANCE RATING LENT FOR EFFECTIVE 7+ CORPORATE 6+ 7 GOVERNANCE

2009 2010 2012 IDGC of Volga, JSC rating was raised to ‘Advanced Corporate Governance Practices’ level by the National Corporate Gover- nance Rating

17,857.78 million rubles share capital of IDGC of Volga, JSC Rebrova as of December 31, 2012 Natalya Leonidovna Deputy General Director for Corporate Governance 18,207 of IDGC of Volga, JSC “Transparency number of shareholders of IDGC of Volga, JSC and openness are the pillars of our management. These are the keys 198.58 million rubles to our high total dividends paid on performance.” shares (including taxes) as of December 31, 2012 IDGC OF VOLGA ANNUAL REPORT 2012 SECURITIES 03 SECURITIES

Share capital

The authorized capital of IDGC of Volga, JSC amounting to 17,857,780,114.60 rub. is divided into 178,577,801,146 shares with a par value of 10 kop. each. Number of declared shares — 37,398,854 pcs of ordinary registered shares with par value of 10 kopecks each to the total par value amount of 3,739,885.40 rub. Owners of the ordinary registered shares declared by the Company for placement have the similar rights as owners of placed ordinary shares. The Company placed no preferred shares. According to the notice of Non-Profit Partnership “National Depositary Center” No. АЭ-11/2108 dated March 25, 2008, the international identification code ISIN (International Securities Identification Number) — RU000A0JPPN4 was assigned to the shares of IDGC of Volga, JSC. The ordinary shares of IDGC of Volga, JSC were added to the index of MICEX SC (MICEX Start Cap Index), index for shares of companies of basic capitalization. 03 www.mrsk-volgi.ru EXCELLENT ENERGY! 028 | 029

Issue history

Date of the state State registration number of Number Method Authorized registration of the the securities issue of shares of placement capital basing securities issue on the results of securities issue (rub.)

October 10, 2007 1-01-04247-Е 100,000,000 Purchase of shares by the 10,000,000.00 sole founder member of the Company — RAO UES of Russia, JSC

March 20, 2008 1-01-04247-Е-001D 51,756,840,992 Conversion of shares 17,857,780,114.60 1-01-04247-Е-002D 11,558,321,461 of Distribution Grid (according to the Reports 1-01-04247-Е-003D 9,553,277,567 Companies into on additional issues of 1-01-04247-Е-004D 2,712,970,897 additional ordinary Company’s securities 1-01-04247-Е-005D 12,953,643,326 registered shares registered by the Federal 1-01-04247-Е-006D 1,155,126,447 of IDGC of Volga, JSC in Financial Markets Service 1-01-04247-Е-007D 88,787,620,456 case of takeover of Russia on April 24, 2008)

On July 31, 2008, the Federal Financial Markets Service of Russia cancelled individual numbers (codes) of additional issues of securities (after expiry of 3 months from the date of the state registration of the reports on additional issues of the Company’s ordinary registered uncertified shares)

Statistics on registered persons*

Type of share holder Number of share holders % of total number of shares

Owners — individuals: 18,062 2.694

__ residents of the Russian Federation 18,036 2.6851

__ non-residents of the Russian Federation 26 0.0089

Owners — legal entities Including: 130 4.0854

__ residents of the Russian Federation 119 4.0586

__ non-residents of the Russian Federation 11 0.0268

Nominal holders 12 0.0268

Trustees 2 0.0019

Pledge holders 0 0

Shares of unidentified persons 1 0.0092

Total 18,207 100

* as of December 31, 2012 without data on clients of nominee holders. IDGC OF VOLGA ANNUAL REPORT 2012 SECURITIES

Information on shares in crossholding

IDGC Holding, JSC 67.626 %

IDGC of Volga, JSC 0.00002%

Structure of share capital

Others 20.74% JSC ENERGYO “IDGC Holding” SOLUTIONS 67.63% RUSSIA (CUPRUS) LIMITED 11.10% 2012 The Russian Federation represented by the Federal Agency for State Property Management 0.53%

* the information given as of July 04, 2012 - the date of issue of register of shareholders of IDGC of Volga, JSC (last date when the nominal holders disclose the register of shareholders owning the shares held by these nominal holders) entitled to participate in the general meeting of shareholders of the Company. 03 www.mrsk-volgi.ru EXCELLENT ENERGY! 030 | 031

Stock market

May June AUGUST 2008 2009 2011

In May 2008, the shares were In June 2009, the listing In August 2011, the shares were added to the lists of RTS, JSC and procedure was carried out and transferred to the Quotation List MICEX SE, CJSC — “Securities the shares were added to the “А”, Tier II, of MICEX SE, CJSC accepted for circulation but not Quotation List “B” of MICEX SE, added to quotation lists” CJSC

Dynamics of transactions (according to MICEX information) in 2012, pcs.

700

600

500

400

300

200

100

0 01.12 02.12 03.12 04.12 05.12 06.12 07.12 08.12 09.12 10.12 11.12 12.12 IDGC OF VOLGA ANNUAL REPORT 2012 SECURITIES

Dynamics of capitalization of IDGC of Volga, JSC (basing on the results of trading at MICEX in 2012)

40% 30% 20% 10% 0% -10% -20% -30% -40% 01.12 02.12 03.12 04.12 05.12 06.12 07.12 08.12 09.12 10.12 11.12 12.12

— Capitalization of IDGC of Volga, JSC — MICEX index — MICEX index of power industry

Dynamics of share quotations and trading volumes and events having significantly effect on these changes (basing on the results of trading at MICEX in 2012)

Rubles Mln pcs 2 0.12 120 3 1 14 15 12 13 18 0.09 11 90

9 0.06 4 8 60 7 16 17 5 10 6 0.03 30

0 0 03.01 23.01 12.02 03.03 23.03 12.04 02.05 22.05 11.06 01.07 21.07 10.08 30.08 19.09 09.10 29.10 18.11 08.12 28.12 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012

— Dynamics of trading volumes — Dynamics of closing share price 03 www.mrsk-volgi.ru EXCELLENT ENERGY! 032 | 033

1— press releases on prospects for tariff regulation for 18 — discussion of issues on transactions relating to IDGC companies in mass media privatization or transfer of management functions to 1-2 regional IDGC in 2013 at the meeting of RF Vice-Prime 2, 8, 11, 15, 17 — periodical press releases on privati- Minister Arkadiy Dvorkovich and analysts of investment zation of one of the subsidiaries of IDGC Holding, JSC in banks (attended by Aleksander Novak, management team 2013 as a pilot project intended to increase the efficiency of FGC UES, JSC and RusHydro, JSC) held on December 17 of operations of FGC UES, JSC and Holding

3 — publishing information on extension of period for making tariff decisions

4 — publishing information on the planned transfer of IDGC Holding, JSC in management of FGC UES, JSC

5 — holding the General Meeting of Shareholders of the Company and making decision on payment of dividends basing upon the results of 2011

6 — «reloading» of RAB regulation starting July 01, 2012 in 6 out of 7 branches of the Company; extension of the RAB regulation period until July 01, 2017. In addition, starting July 01, 2012, the growth of tariff for electric power transmission of 11% (maximum possible value) was adopted for all Company’s branches

7 — approval and signing of the agreement for transfer of functions of the managing company of IDGC Holding, JSC to FGC UES, JSC;

9 — election of new members of the Board of Directors at the extraordinary General Meeting of Shareholders of IDGC of Volga, JSC

10 — publishing «strong» financial results according to IFRS for the first half-year of 2012 exceeding the level forecasted by experts (analysts of investment companies)

12 — Nonprofit Partnership «RID» increased the corporate governance rating of IDGC of Volga, JSC up to NRKU 7+ “Advanced Practice of Corporate Governance” on Cor- porate Governance National Rating scale

13 — the Company was assigned an international credit rating Ba2 with the international rating agency, Moody’s Investors Service, (rating outlook — “Stable”) and a national credit rating Aa2.ru (Company’s solvency as compared to other Russian borrowers) with Moody’s Interfax

14 — the Company readjusted long-term parameters for regulation of the activity (full «reloading» of RAB regulation)

16 — disclosure of the Company’s accounting statements issued in compliance with IFRS (net profit of IDGC of Volga, JSC for nine months of 2012 decreased by two times as compared to the similar period in 2011) IDGC OF VOLGA ANNUAL REPORT 2012 SECURITIES

Dividend policy

The Regulation on Dividend Policy of IDGC of Volga, JSC prepared in compliance with the applicable law of the Russian Federation, Company’s Articles of Association, Guidelines of the Corporate Governance Code of IDGC of Volga, JSC and other internal documents of the Company was adopted by the resolution of the Board of Directors of the Company dated August 24, 2010 (Minutes No. 2 dated August 25, 2010).

The Dividend Policy of IDGC of Volga, JSC implying that Meeting of Shareholders to pass a final resolution on the calculation of dividends is based on the balance of payment (omission) of dividends. interests of the Company and its shareholders, on respect and strict observance of rights of shareholders aims to improve Company’s attraction for investors and to increase the growth of its market capitalization. The Board of Directors of the Company recommends the amount of dividends on ordinary shares basing upon financial performance indicators of the Company and submits this issue for consideration by the General

Company’s dividend history

Period Net profit Total amount of dividends on Amount of dividends on one Report on payment of declared (thousand rubles) ordinary registered shares ordinary registered share (rub.) (distributed) dividends on (thousand rubles) Company’s shares

2007 1,101,197 Resolutions not to pay dividends basing on the results of the year were passed 2008 808,083 by the annual General Meetings of Shareholders 2009 141,607

2010 262,267

2011 1,305,932 200,007 0.00112 As of December 31, 2012 the total amount of paid dividends on shares amounted to – 198,581,425.32 rub. (including taxes). Paid dividend percentage of declared dividends on shares – 99.29%

2012 1,161.973 291,082 (plan) 0.00163 (plan) — 03 www.mrsk-volgi.ru EXCELLENT ENERGY! 034 | 035

0.00163 (plan)

291,082 (plan)

291,082 (plan) Total amount of dividends * note: Resolution on payment of dividends and amount of dividends on ordinary registered shares on one share basing on the 2012 results will be passed at the annual General Meeting of Shareholders of the Company in 2013. (thousand rubles) 0.00163 (plan) Amount of dividends on one ordinary registered share (rub.) IDGC OF VOLGA ANNUAL REPORT 2012 CORPORATE GOVERNANCE

CORPORATE 04 GOVERNANCE

Structure and principles of corporate governance

Corporate governance system of IDGC of Volga, JSC was formed in compliance with the applicable law and internal regulatory documents (including the Corporate Code of Conduct adopted in the Company) and is subject to continual improvement with account of Russian and international best practices.

based on the following principles

justice responsibility respect and protection of rights and the executive bodies of the Company interests of all shareholders despite of shall ensure reasonable, fair and effective their participation in the authorized capital management of the routine operations for of the Company the benefit of the Company

transparency reporting timely, adequate and full disclosure of responsibility of the Management to significant facts relating to the Company’s shareholders for effective management activities, including its financial condition, and proper control of the Company’s social and environmental indicators, activities and operation in compliance performance, ownership structure and with the approved decision-making management of the Company, as well as system provision of free access to the necessary information for all interested persons 04 www.mrsk-volgi.ru EXCELLENT ENERGY! 036 | 037

The Company timely fulfills all corporate procedures, English. The English version of the Company’s website respects rights and interests of shareholders and contributes to higher transparency of the Company’s observes legal requirements relating to mandatory activities and gives equal access to the information for information disclosure. This year IDGC of Volga, JSC all interested persons. showed a high level of disclosure of financial and nonfinancial information on its activities via its regularly updated website and annual and quarterly reports. The Company discloses information both in Russian and

The annual report of IDGC of Volga, JSC for 2011 was ranked first at the XV Annual federal contest of annual reports of Moscow Exchange MICEX-RTS, JSC in the category “Best annual report of the Volga Federal District” 155 Russian and foreign companies of oil&gas, energy, metallurgy, telecommunication, consumers and other economy sectors took part in the contest in 2012.

The annual report of IDGC of Volga, JSC for 2011 was ranked first at the annual contest of annual reports among joint-stock companies of the Saratov region in the super category “Major Players of Stock Market” specially launched in 2012. The contest was organized by the Regional Branch of the Federal Service for Financial Markets of Russia in the South-East region jointly with the regional Chamber of Commerce and Industry. Along with the main contest committee, the annual reports were evaluated by professional participants of the securities market who ranked the annual report of IDGC of Volga, JSC at the top.

In addition to principles specified in the Company’s Code ommendations of international best practice of corporate of Corporate Governance, the Company is committed to governance, and is characterized by low risks of losses observing key rules of corporate conduct detailed in the that owners may incur as a result of poor quality of cor- Corporate Code of Conduct recommended by the Federal porate governance. Commission for the Securities Market (FCSM) of Russia. Information on adherence to the Corporate Code of Con- duct of FCSM of Russia is shown in Appendix No. 2 to the Annual Report of IDGC of Volga, JSC. Basing on the results of monitoring, Non-ProfitP artnership “Russian Institute of Directors” assigned higher rating of NRKU 7+ “Advanced Practice of Corporate Governance” (Corporate Governance National Rating scale) to IDGC of Volga, JSC. According to the Corporate Governance National Rating scale, the Company observes legal requirements to the corporate governance, most of recommendations of Russian Corporate Code of Conduct and separate rec- IDGC OF VOLGA ANNUAL REPORT 2012 CORPORATE GOVERNANCE

CORPORATE GOVERNANCE RATING HISTORY

October 2012 Raised 7+

October 2011 Confirmed 7

December 2010 Raised 7

December 2009 Raised 6+

February 2009 Assigned 6 7+ 04 www.mrsk-volgi.ru EXCELLENT ENERGY! 038 | 039

Management and supervisory bodies*

Structure of the management and supervisory bodies of IDGC of Volga, JSC

External control Internal control of financial and business Top management of financial and business activities of the Company body activities of the Company

General Internal Audit Auditor meeting of shareholders Commission

Strategic Executive bodies management body CommitteS

Management Committee Board for Reliability Board of Chairman of the Directors Committee for Management Strategy and Board — General Development Director

Committee for Technological Internal body controlling Connection financial and business to Electric activities of the Company Grids

Personnel and Award Committee Internal Audit and Risk Audit Management Committee Department

Structures forming the system of control of * pursuant to the requirements of RF law for personal data protection, information on members of the management and control bodies of financial and business activities of the Company IDGC of Volga, JSC was disclosed upon their written consent. Structures preparing recommendations on strategic issues of the Company’s development for the Board of Directors IDGC OF VOLGA ANNUAL REPORT 2012 CORPORATE GOVERNANCE

General Meeting of Shareholders

The General Meeting of Shareholders is the top for convening an extraordinary General Meeting of management body of the Company making decisions on Shareholders to consider the issue on early termination the most important aspects of the Company’s activities. of powers of members of the Board of Directors. Procedure for convening and holding the General Meeting Pursuant to the Federal Law “On Joint-Stock of Shareholders of IDGC of Volga, JSC is set forth in the Companies” and Articles of Association of the Company, Federal Law “On Joint-Stock Companies” and other on June 01, 2012 (Minutes No. 28 dated June 05, 2012), legal acts of the Russian Federation, the Charter and the the Board of Directors of IDGC of Volga, JSC considered Procedure for Convening and Holding the General Meeting this request and passed resolution on convening an of Shareholders of IDGC of Volga, JSC. extraordinary General Meeting of Shareholders to decide Two General Meetings of Shareholders were held on the issue on early termination of powers of members during the reporting period. of the Board of Directors of IDGC of Volga, JSC elected at At the General Meeting of Shareholders of the the annual General Meeting of Shareholders. Company held on June 13, 2012 to evaluate the results of The extraordinary General Meeting of Shareholders activities in 2011, the shareholders passed the resolution was held on August 23, 2012. on payment of dividends on ordinary shares basing on The full text of the resolutions passed by the General the results of 2011, approved the annual report and Meeting of Shareholders of the Company is posted on the accounting statements of the Company for 2011 (including corporate web-site of the Company: http://goo.gl/DGNte the Profit and Loss Statement), Company’s Auditor and elected members of the Board of Directors and Internal Audit Commission of the Company. To approve the restated Regulation on procedure for convening and holding the meetings of the Board of Directors of the Company. On May 29, 2012, IDGC Holding, JSC (owner of 67.63% of voting shares of the Company) sent a request

Board of Directors

The Board of Directors of IDGC of Volga, JSC carries out policies, assessment of the performance of executive corporate management of the Company’s activities except bodies of the Company and management, adoption for the issues to be referred to the General Meeting of of corporate governance procedures, approval of Shareholders under the law of the Russian Federation transactions and supervision over overall business activity and Articles of Association of the Company. of the Company. The Board of Directors acts within the authority In 2012, three memberships of the Board of provided by the Federal Law “On Joint-Stock Companies” Directors managed the Company. and other legal acts of the Russian Federation, the Articles The Board of Directors of the Company encompasses of Association and the Procedure for Convening and representatives of various groups, thus the membership Holding meetings of the Board of Directors of IDGC of of the Board of Directors of the Company may be Volga, JSC. considered as well balanced relating to the interests of The Board of Directors is charged with strategic all present shareholders. management, elaboration of plans for strategic and financial development, determination of investment 04 www.mrsk-volgi.ru EXCELLENT ENERGY! 040 | 041

Board of Directors acting from June 10, 2011 till June 13, 2012 *

Perepelkin Aleksey Yuryevich Member of the Management Board, Deputy General Director for Corporate Governance Chairman of the Board of Directors and Property Management of IDGC Holding, JSC

Ryabikin Vladimir Anatolyevich General Director of IDGC of Volga, JSC

Varvarin Aleksander Viktorovich Managing Director for Corporate Relations and Legal Support of RSPP (Russian Union of Industrialists and Entrepreneurs)

Vasilyev Sergey Vyacheslavovich Member of the Management Board, Director for Legal Issues of IDGC Holding, JSC

Gavrilova Tatiana Vladimirovna Analyst of Representative Office ofS pecialized Research Limited, LLC

Golubev Pavel Vladilenovich Head of the Department for Organization of Operation, Technical Services and Repairs of IDGC Holding, JSC

Gromov Oleg Aleksanderovich General Director of the Branch of SO UES, JSC – UDM for Middle Volga

Kulikov Denis Viktorovich Executive Director of Association for Protection of Investors Rights

Martsinkovskiy Gennadiy Olegovich Head of the Capital Construction Department of IDGC Holding, JSC

Nikonov Vasiliy Vladislavovich Director of the Department for Electric Power Engineering Development of Minenergo of Russia

Pankstyanov Yuri Nikolayevich Head of the Charging Policy Department of IDGC Holding, JSC

* job positions as of the date of election

Board of Directors acting from June 13, 2012 till August 23, 2012 *

Murov Andrey Evgenyevich General Director Deputy, IDGC Holding, JSC Chairman

Ryabikin Vladimir Anatolyevich General Director of IDGC of Volga, JSC

Adler Yuri Veniaminovich Head of the Section for Standards and Methodology within the Department of Corporate Governance and Cooperation with Shareholders of IDGC Holding, JSC

Varvarin Aleksander Viktorovich Managing Director for Corporate Relations and Legal Support of RSPP (Russian Union of Industrialists and Entrepreneurs)

Vasilyev Sergey Vyacheslavovich Member of the Management Board, Director for Legal Issues and Interactions with Entities Operating in Electricity Markets, IDGC Holding, JSC.

Gavrilova Tatiana Vladimirovna Analyst of Representative Office ofS pecialized Research Limited, LLC

Inozemtsev Vladimir Vyacheslavovich Head of the Power Transmission and Energy Savings Department, IDGC Holding, JSC

Nikonov Vasiliy Vladislavovich Director of the Department for Electric Power Engineering Development of Minenergo of Russia

Pankstyanov Yuri Nikolayevich Head of the Charging Policy Department of IDGC Holding, JSC

Perepelkin Aleksey Yuryevich Member of the Management Board, Deputy General Director for Corporate Governance and Property Management of IDGC Holding, JSC

Remes Seppo Ukha General Director of Kiuru, LLC

* job positions as of the date of election IDGC OF VOLGA ANNUAL REPORT 2012 CORPORATE GOVERNANCE

Board of Directors elected on August 23, 2012 *

Murov Andrey Evgenyevich First Deputy Chairperson of the Management Board of FGC UES, JSC, Executive Chairman of the Board of Directors Director of IDGC of Volga, JSC

Ryabikin Vladimir Anatolyevich General Director of IDGC of Volga, JSC

Bashindzhagyan Astkhik Artashesovna Chief Specialist Expert of the Corporate Governance Section within the Department of Corporate Governance, Pricing Environment and Control&Audit Activities in fuel-and- power sectors controlled by the Ministry of Energy of the Russian Federation

Balayeva Svetlana Aleksanderovna Head of the Investment Department of IDGC Holding, JSC

Varvarin Aleksander Viktorovich Managing Director for Corporate Relations and Legal Support of RSPP (Russian Union of Industrialists and Entrepreneurs)

Gavrilova Tatiana Vladimirovna Analyst of Representative Office ofS pecialized Research Limited, LLC

Inozemtsev Vladimir Vyacheslavovich Head of the Power Transmission and Energy Savings Department, IDGC Holding, JSC

Merzlikina Marya Vladimirovna Head of the Corporate Finance Department of FGC UES, JSC

Pankstyanov Yuri Nikolayevich Head of the Charging Policy Department of IDGC Holding, JSC

Remes Seppo Ukha General Director of Kiuru, LLC

Streltsov Sergey Viktorovich General Director of MES of Volga (Trunk Electric Networks), a branch of FGC UES, JSC

* job positions as of the date of election

Board of Directors Murov Andrey EvgenYevich Chairman of the Board of Directors Ryabikin Vladimir Anatolyevich Born in 1970. Born in 1965. Nationality: Russia Nationality: Russia Education: higher. Graduated from Saint Petersburg State Education: higher. Graduated from the Russian State University, degree in Legal Science, Doctor of Economics. Open Technical University of Railway Transport, majoring Positions held in the Company and other organizations in “Automatics, telemechanics and communications for over last five years: railway transport”. 2007 – 2012 – General Director of Pulkovo Airport, JSC; Positions held in the Company and other organizations 2012 – Deputy General Director of IDGC Holding, JSC over last five years: Starting June, 2012 – First Deputy Chairman of the 2007 – 2008 – Deputy General Director – Technical Management Board of FGC UES, JSC; starting July, 2012 Director of IDGC of Volga, JSC; – Executive Director of IDGC Holding, JSC; 2008 – Deputy General Director for Technical Issues, Chief Elected as a member of the Management Board of FGC Engineer of IDGC of Volga, JSC UES, JSC by the resolution of the Board of Directors of Since December 12, 2008 – General Director, Chairman FGC UES, JSC passed on September 11, 2012. of the Management Board of the Company. Owns no shares of IDGC of Volga, JSC. Owns no shares of the Company 04 www.mrsk-volgi.ru EXCELLENT ENERGY! 042 | 043

Bashindzhagyan Astkhik Artashesovna Merzlikina Mariya Vladimirovna Born in 1990. Born in 1985. Nationality: Russia Nationality: Russia Education: higher. Graduated from State University of Education: higher. Graduated from Federal State Management, degree in Management of Organization. Educational Institution of Higher Occupational Education Positions held in the Company and other organizations “Financial University at the Government of the Russian over last five years: Federation”, degree in Accounting, Analysis and Audit. 2010 – 2011 – sales manager, agent relationship specialist Positions held in the Company and other organizations of OOO “GorKom”; over last five years: 2011 – 2012 – chief expert of the team for relationships 2007 – 2009 – lead specialist of the corporate finance with RF Ministries and Agencies under the corporate section of the Corporate Finance Department of OAO governance service of OAO “DVEUK”; “WGC-1”; Since 2012 – Chief Specialist – Expert of the Corporate 2009 – 2010 – chief specialist of the office of investment Governance Section within the Department of Corporate project financing and relationship with intergovernmental Governance, Pricing Environment and Control&Audit financial institutes of the CorporateF inance Department of Activities in fuel-and-power sectors controlled by the the Financial Activity Unit of INTER RAO-UES, JSC; Ministry of Energy of the Russian Federation 2010 – Advisor of the Deputy Chairman of the Since September 12, 2012 – Member of Committee for Management Board of FGC UES, JSC; Strategy and Development under the Board of Directors 2010 – 2012 – Deputy Head of Corporate Finance of IDGC of Volga, JSC. Department of FGC UES, JSC; Owns no shares of the Company. Starting 2012 – Head of Corporate Finance Department of FGC UES, JSC; Since September 12, 2012 – Member of Audit Committee under the Board of Directors of IDGC of Volga, JSC. Owns no shares of the Company.

Varvarin Aleksandr Viktorovich Gavrilova Tatiana Vladimirovna Born in 1975. Born in 1982. Nationality: Russia Nationality: Russia Education: higher. Graduated from A.S. Griboedov Institute Education: higher. Graduated from State University – of International Law and Economics, Moscow (majoring Higher School of Economics (majoring in “Management” in “Legal Science”). and “Economics”). Positions held in the Company and other organizations Positions held in the Company and other organizations over last five years: over last five years: Since 2009 – Managing Director for Corporate Relations Since 2006 – Analyst of the Representative Office of and Legal Support of Russian Union of Industrialists and Specialized Research Limited, LLC. Entrepreneurs. Since September 12, 2012 – Member of Committee Since September 12, 2012 – Member of Committee for for Strategy and Development, Audit Committee and Technological Connection to Electric Grids under the Personnel and Award Committee under the Board of Board of Directors of IDGC of Volga, JSC; member of Directors of the Company. Committee for Strategy and Development under the Board Owns no shares of the Company. of Directors and Personnel and Award Committee under the Board of Directors of the Company. Owns no shares of the Company. IDGC OF VOLGA ANNUAL REPORT 2012 CORPORATE GOVERNANCE

Inozemtsev Vladimir Vyacheslavovich Streltsov Sergey Viktorovich Born in 1980. Born in 1959. Nationality: Russia Nationality: Russia Education: higher. Graduated from Omsk State University Education: higher. Graduated from Pavlodar Industrial (OmGTU), degree in Electric Power Supply to Industrial Institute, degree in Electric Grids and Systems. Enterprises. Positions held in the Company and other organizations Positions held in the Company and other organizations over last five years: over last five years: 2008 – 2010 – General Director of Trunk Electric Networks 2008 – 2010 – Head of Department of Electric Power of Volga (MES of Volga), a branch of FGC UES, JSC; Transmission and Client Relationship of IDGC Holding, 2010 – 2011 – General Director of MES of Western Siberia, JSC; a branch of FGC UES, JSC; Since 2010 – Head of the Power Transmission and Energy Starting 2011 – General Director of MES of Volga, a branch Savings Department, IDGC Holding, JSC. of FGC UES, JSC; Since September 12, 2012 – Chairman of Personnel and Since September 12, 2012 – Member of Personnel and Award Committee under the Board of Directors of IDGC Award Committee under the Board of Directors of IDGC of Volga, JSC. of Volga, JSC. Owns no shares of the Company. Owns no shares of the Company.

Pankstyanov Yuri Nikolayevich Remes Seppo Ukha Born in 1980. Born in 1955. Nationality: Russia Nationality: Finland Education: higher. Graduated from State University of Education: higher. Graduated from Oulu University Management, qualified asM anager. (Finland), qualified as Economist, and Turku Higher Positions held in the Company and other organizations School of Economics and Business Management (Finland). over last five years: Candidate of Economic Science. Since 2008 – appointed as Head of the Charging Policy Positions held in the Company and other organizations Department of IDGC Holding, JSC. over last five years: Since September 12, 2012 – Member of Personnel Since 2007 – General Director of Kiuru, LLC; and Award Committee, Committee for Strategy and Since September 12, 2012 – Chairman of Audit Committee Development and Audit Committee under the Board of and member of Committee for Strategy and Development Directors of IDGC of Volga, JSC. under the Board of Directors of IDGC of Volga, JSC. Owns no shares of the Company. Owns no shares of the Company.

BalaYeva Svetlana Aleksanderovna Born in 1973. Nationality: Russia Education: higher. Graduated from State Management Academy, qualified as Economist-Manager. Positions held in the Company and other organizations over last five years: Since 2008 – Head of the Investment Department of IDGC Holding, JSC. Since September 12, 2012 – Member of Audit Committee under the Board of Directors of IDGC of Volga, JSC. Owns no shares of the Company. 04 www.mrsk-volgi.ru EXCELLENT ENERGY! 044 | 045

The members of the Board of Directors did not sell or buy the Company during the period of work of the Board of shares of IDGC of Volga, JSC during 2012. Directors. This creates incentives for the members to be In 2012, types, amount and payment of remunera- responsible and perform the functions of the Board of tions and compensations to the members of the Board Directors effectively and align their actions with the in- of Directors were governed by the Regulation on remu- terests of shareholders. nerations and compensations payable to members of the The total amount of awards paid to all members of Board of Directors of IDGC of Volga, JSC approved by the the Board of Directors of IDGC of Volga, JSC in 2012 was annual General Meeting of Shareholders convened on May 11,687,153.00 rubles (including individual income tax). 30, 2008. During 2012, 28 meetings of the Board of Directors Members of the Board of Directors are paid remu- of the Company took place, including 2 meetings held in neration for participation in meetings plus additional re- presentio and in absentia. In general, the Board of Direc- muneration calculated basing on the results of evaluation tors of the Company passed resolutions on 292 issues. of performance of the Board of Directors. Two types of additional remuneration are specified in the Regulation: for net profit performance according to the annual accounting statements approved by the annual General Meeting of Shareholders and for higher market capitalization of

Key issues considered at the meetings of the Board of Directors of IDGC of Volga, JSC in 2012 (by categories)

Corporate governance of subsidiaries and affiliates 31 Control of performance of executive Financial bodies management 83 55

Personnel management Organizational issues 22 28

Strategic development of the Company Other issues 56 17 IDGC OF VOLGA ANNUAL REPORT 2012 CORPORATE GOVERNANCE

Issues on production and financial activities of the ̤̤ Implementation of production assets Company were regularly added to the agenda and management system. considered at the meetings of the Board of Directors. Implementation of production assets management The most important resolutions passed by the Board system contributes to achievement of the Company’s of Directors of the Company in 2012 encompassed strategic goals: increase in the efficiency of operating resolutions on the following issues: costs, ensuring required reliability of power transfer ̤̤ convening and holding annual and extraordinary and distribution through effective use of resources General Meeting of Shareholders of the Company; and management of production assets basing on the ̤̤ business planning, planning of investments and balance of costs, risk and assets capacity. procurement activities of the Company; ̤̤ Modifying the Key Performance Indicators ̤̤ consideration of reports of the General Director of system applicable to the General Director and the Company on various aspects of the Company’s top management of the Company. activities; New system of KPIs was developed to enhance ̤̤ insurance coverage; environmental policy; monitoring and improve labor motivation of the ̤̤ participation in other organizations; Company’s employees. ̤̤ regulatory and legal control of the Company’s ̤̤ Submission of requests for tariff regulation using activity, including approval of various regulations the Regulatory Asset Base method (RAB-based governing main aspects of the Company’s activities; regulation) to the regulatory bodies. ̤̤ defining Company’s opinion on the issues on the This resolution was passed to fulfill the Decree ofRF agenda of meetings of the Board of Directors and Government No. 1178 “On Price Setting Method for general meetings of shareholders of subsidiaries Regulated Prices (Tariffs) inE lectric Power Industry” and affiliates of IDGC of Volga, JSC; dated December 29, 2011 (as amended by the Decree ̤̤ approval of interested party transactions of the RF Government No. 663 dated June 30, 2012).

The Company thoroughly monitors issues on top- The full text of the resolutions passed by the Board of priority activities and development strategy of the Directors in 2012 is posted on the corporate web-site of Company, including: the Company: ̤̤ Construction and operation of fiber optic http://goo.gl/04yrI communication lines Construction and operation of fiber optic communication lines (FOCL) at the power industry facilities contributes to higher manageability and monitoring of the grid, development of existing corporate services and implementation of new corporate services. At the present time FOCL are the most rapidly developing communication system due to extremely high capacity, significant length of regeneration sections and lower operating costs. 04 www.mrsk-volgi.ru EXCELLENT ENERGY! 046 | 047

Participation of members of the Board of Directors in the meeting of the Board of Directors and Committees in 2012

Full name of the members of the Terms of powers of the Committees Under The Board Of Directors Board of Directors Board of Directors Board Of Audit Strategy and Reliability Personnel Techno- Directors development and Award logical Connection to Electric Grids

Participation of members of the Board of Directors in the meetings in 2012*

Adler Yuri Veniaminovich 13.06.2012 —23.08.2012 3/3 1/1 1/1

Balayeva Svetlana Aleksanderovna since 23.08.2012 10/10 2/2

Bashindzhagyan Astkhik since 23.08.2012 10/9 7/5 Artashesovna

Varvarin Aleksander Viktorovich 10.06.2011 — 13.06.2012 28/28 15/15 12/12 2/2 13.06.2012 — 23.08.2012 since 23.08.2012

Vasilyev Sergey Vyacheslavovich 10.06.2011 — 13.06.2012 18/16 6/6 13.06.2012 — 23.08.2012

Gavrilova Tatiana Vladimirovna 10.06.2011 — 13.06.2012 28/25 3/3 15/15 3/3 13.06.2012 — 23.08.2012 since 23.08.2012

Golubev Pavel Vladilenovich 10.06.2011 — 13.06.2012 15/14 3/3

Gromov Oleg Aleksanderovich 10.06.2011 — 13.06.2012 15/0

Inozemtsev Vladimir 13.06.2012 — 23.08.2012 13/13 1/1 3/3 Vyacheslavovich since 23.08.2012

Kulikov Denis Viktorovich 10.06.2011 — 13.06.2012 15/15 6/6 8/6 3/3

Martsinkovskiy Gennadiy 10.06.2011 — 13.06.2012 15/14 Olegovich

Merzlikina Mariya Vladimirovna since 23.08.2012 10/8 2/2

Murov Andrey Evgenyevich 13.06.2012 — 23.08.2012 13/13 since 23.08.2012

Nikonov Vasiliy Vladislavovich 10.06.2011 — 13.06.2012 18/4 13.06.2012 — 23.08.2012

Pankstyanov Yuri Nikolayevich 10.06.2011 — 13.06.2012 28/27 9/9 15/13 4/4 13.06.2012 — 23.08.2012 since 23.08.2012

Perepelkin Aleksey Yuryevich 10.06.2011 — 13.06.2012 18/18 6/6 8/8 13.06.2012 — 23.08.2012

Remes Seppo Ukha 13.06.2012 — 23.08.2012 13/10 3/3 7/7 since 23.08.2012

Ryabikin Vladimir Anatolyevich 10.06.2011 — 13.06.2012 28/28 13.06.2012 — 23.08.2012 since 23.08.2012

Streltsov Sergey Viktorovich since 23.08.2012 10/9 3/3

* number of meetings that possibly attended by a member of the Board of Directors / number of meetings attended by a member of the Board of Directors. IDGC OF VOLGA ANNUAL REPORT 2012 CORPORATE GOVERNANCE

Committees of the Board of Directors

Five Committees were formed and operate at the Board status, goals and objectives, rights and responsibilities, of Directors of IDGC of Volga, JSC: structure and membership of each Committee. When ̤̤ Audit Committee performing its functions, the Committees shall comply ̤̤ Committee for Strategy and Development with the Federal Laws and other regulations of the ̤̤ Committee for Reliability Russian Federation, the Articles of Association of the ̤̤ Personnel and Award Committee Company, the Regulation on the Procedure for Convening ̤̤ Committee for Technological Connection to Electric and Holding the Meetings of the Board of Directors of the Grids Company and the Decisions of the Board of Directors of the Company. The activities of the Committees are intended to increase According to the approved regulations on the efficiency of work of the Board of Directors through Committees, members of the Committees are elected for preliminary consideration of the most important issues the period until the first meeting of theB oard of Directors referred to the Board of Directors and preparation of of the Company with new membership. Powers of any relevant recommendations. The Committees are not the member of the Committee may be terminated by the management bodies of the Company and have no right to Board of Directors of the Company. Three memberships act on behalf of the Company. The Committees function of Committees operated in 2012. in compliance with the Regulations which cover the legal

Audit Committee

The Committee is in charge of preparation and submission as an expert. The expert helps to prepare well grounded of recommendations (conclusions) on financial and and thoroughly worked out recommendations for the business activities to the Board of Directors of the Board of Directors of the Company and to identify and Company relating to preparation for and carrying out of eliminate possible defects in the systems of internal audit inspections, improvement of the system of reporting control and risk management. and internal control of the Company. The number of members of the Audit Committee Since 2010, an employee of the Department of under the Board of Directors of the Company set by the Internal Audit and Risk Management of IDGC Holding, JSC Board of Directors shall be at least 3 (three) persons. has been involved in the activities of the Audit Committee

Current membership of the Audit Committee * (approved by the Company Board of Directors on September 12, 2012)

Remes Seppo Ukha General Director of Kiuru, LLC (Chairman of the Committee)

Balayeva Svetlana Aleksanderovna Head of the Investment Department of IDGC Holding, JSC

Gavrilova Tatiana Vladimirovna Analyst of Representative Office of Specialized Research Limited, LLC

Merzlikina Mariya Vladimirovna Head of the Corporate Finance Department of FGC UES, JSC

Pankstyanov Yuri Nikolayevich Head of the Charging Policy Department of IDGC Holding, JSC

* job positions as of the date of election 04 www.mrsk-volgi.ru EXCELLENT ENERGY! 048 | 049

Information on the Committee activity in 2012

During the reporting period the Audit Committee held http://goo.gl/XT4Lo 9 meetings. Resolutions passed by the Audit Committee under the Board of Directors of IDGC of Volga, JSC are posted on the corporate web-site of the Company:

Committee for Strategy and Development

The task of the Committee is to prepare recommendations The number of members of the Committee for Strategy for the Board of Directors on development of top-priority and Development under the Board of Directors of the directions, strategic goals and main principles of the Company set by the Board of Directors shall be at least Company’s strategic development. 3 (three) persons.

Current membership of the Committee for Strategy and Development * (approved by the Company Board of Directors on September 12, 2012)

Pankov Dmitriy Leonidovich Director for Strategy, Development and Innovations of IDGC Holding, JSC (Chairman of the Committee)

Bashindzhagyan Astkhik Artashesovna Chief Specialist – Expert of the Corporate Governance Section within the Department of Corporate Governance, Pricing Environment and Control&Audit Activities in fuel-and- power sectors controlled by the Ministry of Energy of the Russian Federation

Varvarin Aleksander Viktorovich Managing Director for Corporate Relations and Legal Support of RSPP (Russian Union of Industrialists and Entrepreneurs)

Gavrilova Tatiana Vladimirovna Analyst of Representative Office ofS pecialized Research Limited, LLC

Gritsenko Andrey Vitalyevich General Director of KAPITAL – Upravleniye Aktivami (Assets Management), JSC

Pankstyanov Yuri Nikolayevich Head of the Charging Policy Department of IDGC Holding, JSC

Podlutskiy Sergey Vasilyevich Department Deputy Head, Head of Section for Consolidated Analytics of External Production Resources within the Investment Department of IDGC Holding, JSC

Puchkova Irina Yuryevna Deputy General Director for Economics and Finance of IDGC of Volga, JSC

Rebrova Natalya Leonidovna Deputy General Director for Corporate Governance of IDGC of Volga, JSC

Remes Seppo Ukha General Director of Kiuru, LLC

Son Stanislav Romanovich Managing Director of Xenon Capital Partners

Stepanova Mariya Dmitryevna Deputy Head of the Department of Corporate Governance and Cooperation with Shareholders of IDGC Holding, JSC

Tsiku Ruslan Kimovich Head of the Business Planning Department of IDGC Holding, JSC

* job positions as of the date of election IDGC OF VOLGA ANNUAL REPORT 2012 CORPORATE GOVERNANCE

Information on the Committee activity in 2012

In 2012, 15 meetings of the Committee for Strategy and on the corporate web-site of the Company: Development were held, including one meeting in the form http://goo.gl/GJv72 of joint attendance. Resolutions passed by the Committee for Strategy and Development under the Board of Directors are posted

Committee for Reliability

The Committee for Reliability is responsible for making efficiency of these measures for meeting the requirements recommendations (opinions) to the Board of Directors of overall reliability. of the Company regarding the assessment of the Com- The number of members of the Committee for Reli- pany’s technical agencies performance, completeness ability under the Board of Directors of the Company set and adequacy of measures taken following accidents or by the Board of Directors shall be at least 5 (five) persons serious technological breakdowns as well as analysis of and at most 7 (seven) persons.

Current membership of the Committee for Reliability * (approved by the Company Board of Directors on September 12, 2012)

Golubev Pavel Vladilenovich Director for Operations, Maintenance and Repairs (Head of the Department for (Chairman of the Committee) Operations, Maintenance and Repairs) of IDGC Holding, JSC

Gritsenko Andrey Vitalievich General Director of KAPITAL – Upravleniye Aktivami (Assets Management), JSC

Kucherenko Vladimir Ivanovich Deputy General Director for Technical Issues, Chief Engineer of IDGC of Volga, JSC

Lavrov Andrey Borisovich Head of the Section for Innovation-Driven Processes and Cost Estimate within the Department of Capital Construction of IDGC Holding, JSC

Pankov Dmitriy Leonidovich Director for Strategy, Development and Innovations of IDGC Holding, JSC

Puchkova Irina Yuryevna Deputy General Director for Economics and Finance of IDGC of Volga, JSC

Taranov Igor Mikhailovich Head of Computer-Based Process Management Systems (ASTU) of IDGC Holding, JSC

* job positions as of the date of election

Information on the Committee activity in 2012

During the reporting period the Committee for Reliability http://goo.gl/ETX0g held 7 meetings. Resolutions passed by the Committee for Reliability under the Board of Directors are posted on the corporate website of the Company: 04 www.mrsk-volgi.ru EXCELLENT ENERGY! 050 | 051

Personnel and Award Committee

The Committee was formed to increase the efficiency of The number of members of the Personnel and Award management of the Company’s development through Committee under the Board of Directors of the Company preparation of reasonable recommendations for the set by the Board of Directors shall be at least 3 (three) Board of Directors and management bodies of the Com- persons. pany required to resolve personnel, social and corporate governance issues.

Current membership of the Personnel and Award Committee * (approved by the Company Board of Directors on September 12, 2012)

Inozemtsev Vladimir Vyacheslavovich Head of the Power Transmission and Energy Savings Department, IDGC Holding, JSC (Chairman of the Committee)

Varvarin Aleksander Viktorovich Managing Director for Corporate Relations and Legal Support of RSPP (Russian Union of Industrialists and Entrepreneurs)

Gavrilova Tatiana Vladimirovna Analyst of Representative Office of Specialized Research Limited, LLC

Pankstyanov Yuri Nikolayevich Head of the Charging Policy Department of IDGC Holding, JSC

Streltsov Sergey Viktorovich General Director of MES of Volga (Trunk Electric Grids), a branch of FGC UES, JSC

* job positions as of the date of election

Information on the Committee activity in 2012

During the reporting period the Personnel and Award http://goo.gl/LMItp Committee held 12 meetings. Resolutions passed by the Personnel and Award Com- mittee under the Board of Directors are posted on the corporate web-site of the Company:

Committee for Technological Connection to Electric Grids

The major responsibility of the Committee is to assess The number of members of the Committee for Techno- the effectiveness of technological connection services logical Connection to Electric Grids under the Board of provided by the Company, make recommendations on in- Directors of the Company set by the Board of Directors house procedures and standards for technological connec- shall be at least 5 (five) persons. tion, provide customers with transparency of the activity and equal access to the services regarding technological connection of customers to power grids of the Company. IDGC OF VOLGA ANNUAL REPORT 2012 CORPORATE GOVERNANCE

Current membership of the Committee for Technological Connection to Electric Grids * (approved by the Company Board of Directors on September 12, 2012)

Varvarin Aleksander Viktorovich Managing Director for Corporate Relations and Legal Support of RSPP (Russian Union (Chairman of the Committee) of Industrialists and Entrepreneurs)

Komarov Valentin Mikhailovich Deputy Head of the Department for Long-Term Development and Technological Connection – Head of the Section for Technological Connection Management of IDGC Holding, JSC

Kucherenko Vladimir Ivanovich Deputy General Director for Technical Issues ¬– Chief Engineer of IDGC of Volga, JSC

Pyatigor Viktor Ivanovich Deputy General Director for Development and Sales of Services of IDGC of Volga, JSC

Rebrova Natalya Leonidovna Deputy General Director for Corporate Governance of IDGC of Volga, JSC

Fateyev Maksim Albertovich President of the Chamber of Commerce and Industry for the Saratov region

* job positions as of the date of election

Information on the Committee activity in 2012

The Committee for Technological Connection to Electric http://goo.gl/2BwSY Grids held 5 meetings in the reporting period. Resolutions passed by the Committee for Techno- logical Connection to Electric Grids under the Board of Directors are posted on the corporate web-site of the Company:

Amount and procedure for payment of remunerations The total amount of awards paid to all members of the and compensations to members of committees under Committees under the Board of Directors of the Company the Board of Directors are specified in the Regulations on in 2012 was 1,460,079.00 rubles (including individual in- remunerations and compensations payable to members come tax). of committees adopted by the Board of Directors of the Company. Remuneration is paid to members of the Committees for participation in the meetings basing on the budget of the Committee formed at the meetings of the Committee and submitted for approval by the Board of Directors of the Company. 04 www.mrsk-volgi.ru EXCELLENT ENERGY! 052 | 053

Management Board

Management Board is a collegial executive body in charge In 2012, the following modifications were made to the of achievement of goals, implementation of the develop- membership of the Management Board: ment strategy and policy of the Company, management ̤̤ At the meeting held on July 25, 2012 (Minutes No. of routine operations within the area of competence 1), the Board of Directors passed the resolution established by resolutions of the General Meeting of on termination of powers of Solostovskiy Viktor Shareholders and the Board of Directors. The activities Nikolayevich, a member of the Company’s Manage- of the Management Board shall be governed by the law ment Board, and on election of Zaretskiy Dmitriy Lvo- of the Russian Federation, Articles of Association of the vich, Deputy General Director for Capital Construction Company, other internal documents of the Company and of IDGC of Volga, JSC, to the Management Board; Regulation on Management Board of IDGC of Volga, JSC. ̤̤ At the meeting held on December 21, 2012 (Minutes The Management Board includes the most qualified No. 9), the Board of Directors passed the resolu- and experienced specialists in major functional areas of tion on termination of powers of Pyatigor Viktor management required to manage the routine operations Ivanovich, a member of the Management Board, and of the Company. According to the Articles of Association on election of Kulyev Vyacheslav Igorevich, Deputy of the Company, the General Director of the Company acts General Director for the Development and Sales of as the Chairman of the Management Board of IDGC of Services of IDGC of Volga, JSC, to the Management Volga, JSC. Board. Current membership of the Management Board is 9 (nine) persons. Awards and compensations are paid to the members of the Management Board in accordance with the employ- In 2012, 28 meetings of the Management Board were ment agreements. held to preliminary consider and prepare recommenda- According to the resolution of the Board of Directors tions for the Board of Directors on the following key is- of IDGC of Volga, JSC dated March 13, 2012 (Minutes No. sues referred to the Board of Directors of the Company: 19 dated March 15, 2012), members of the Management ̤̤ top-priority activities and strategy of the Company; Board are classified as Top Managers of the Company of ̤̤ making decisions on participation of the Company the 1st category. Material incentives for Top Managers in other organizations; are specified in theR egulation on the monetary incentives ̤̤ approval of target (adjusted) key performance indica- and employment benefits for theT op Management of IDGC tors (KPIs) and progress reports; of Volga, JSC adopted by the resolution of the Board of ̤̤ approval of the business plan (adjusted business Directors of the Company dated July 22, 2011 (Minutes plan), including the investment program and quar- No. 2 dated July 26, 2011). terly performance report thereon, as well as approval The total amount of awards and compensations paid (adjustment) of benchmark values of the Company’s to the members of the Management Board in 2012 was cash flow. 1,420,802.08 rubles (including individual income tax).

According to sub-clause 5, clause 22.2., Article 22 of the Articles of Association of IDGC of Volga, JSC, the Man- agement Board of the Company also copes with issues referred to top management bodies (General Meetings of Shareholders) of business entities with 100% of authorized capital owned by the Company. IDGC OF VOLGA ANNUAL REPORT 2012 CORPORATE GOVERNANCE

Members of the Management Board of IDGC of Volga, JSC

Ryabikin Vladimir Anatolyevich Kucherenko Vladimir Ivanovich Chairman of the Management Board Deputy Chairman of the Management Board Born in 1965. Born in 1957. Nationality: Russia Nationality: Russia Education: higher. Graduated from the Russian State Education: higher. Graduated from Saratov Polytechnic Open Technical University of Railway Transport, majoring Institute, degree in Electric Power Supply to Industrial in “Automatics, telemechanics and communications for Enterprises of Cities and Agricultural Industry. railway transport”. Positions held in the Company and other organizations Positions held in the Company and other organizations over last five years: over last five years: 2008-2009 – Acting Deputy General Director for Technical 2007-2008 – Deputy General Director – Technical Director Issues, Chief Engineer of IDGC of Volga, JSC; of IDGC of Volga, JSC; Since 2009 – Deputy General Director for Technical Issues 2008 – Deputy General Director for Technical Issues ¬– – Chief Engineer of IDGC of Volga, JSC; Chief Engineer of IDGC of Volga, JSC; Starting 2010 – Acting Deputy General Director of IDGC of Since 2008 – General Director, Chairman of the Volga, JSC, Director of Samara Distribution Grids; Management Board of IDGC of Volga, JSC. Since September 12, 2012 – member of the Committee Owns no shares of the Company. for Reliability and the Committee for Technological Connection to Electric Grids of the Board of Directors of the Company. Zaretskiy Dmitriy Lvovich Owns no shares of the Company. Born in 1967. Nationality: Russia Education: higher. Graduated from Saratov Polytechnic Kulyev Vyacheslav Igorevich Institute, degree in Electric Power Supply to Industrial Born in 1971. Enterprises of Cities and Agricultural Industry, and from Nationality: Russia Saratov State Social and Economic University, degree in Education: higher. Graduated from Volga Academy Finances and Credit. of Public Service, degree in State and Municipal Positions held in the Company and other organizations Administration. over last five years: Positions held in the Company and other organizations 2008 – 2009 – Head of the Logistics Section of the Material over last five years: Supply and Logistics Department of IDGC of Volga, JSC; 2007 – 2009 – Deputy Director of Representative office 2009 – 2012 – Director for Material Supply and Logistics, in the Volga district for commercial activity of OOO Head of the Department of IDGC of Volga, JSC; “Managing Company “Energobalans”; Since 2012 – Deputy General Director for Capital 2009 – 2012 – Director for Power Transmission of IDGC Construction of IDGC of Volga, JSC. of Volga, JSC; As of December 31, 2012, the member holds shares Since 2012 – Deputy General Director for Development of IDGC of Volga, JSC (share in the authorized capital – and Sales of Services of IDGC of Volga, JSC. 0.00052%, ordinary shares – 0.00052%). Owns no shares of the Company. 04 www.mrsk-volgi.ru EXCELLENT ENERGY! 054 | 055

Ponomarev Vladimir Borisovich Puchkova Irina Yuryevna Born in 1950. Born in 1963. Nationality: Russia Nationality: Russia Education: higher. Graduated from Saratov State Education: higher. Graduated from Saratov Institute of University named after N.G. Chernyshevsky, degree in Economics (majoring in «Industry Planning») and Volga Geological Survey and Mineral Deposit Search. Academy of Public Service (majoring in «State and Positions held in the Company and other organizations Municipal Administration»). over last five years: Positions held in the Company and other organizations 2007-2009 – Deputy General Director for Security and over last five years: Controlling of IDGC of Volga, JSC 2007-2011 – Head of the Economy Department of IDGC Since 2009 – Deputy General Director for Security of IDGC of Volga, JSC; of Volga, JSC. Since 2011 – Deputy General Director for Economics and Owns no shares of the Company. Finance of IDGC of Volga, JSC. Since September 12, 2012 – member of the Committee for Strategy and Development and the Committee for Rebrova Natalya Leonidovna Reliability of the Board of Directors. Born in 1960. Owns no shares of the Company. Nationality: Russia Education: higher. Graduated from Saratov Polytechnic Institute, degree in Economy and Organization of Machine- Tamlenova Irina Alekseyevna Building Industry. Born in 1965. Positions held in the Company and other organizations Nationality: Russia over last five years: Education: higher. Graduated from Saratov Polytechnic 2008 – 2009 – Head of Department of Corporate Institute, degree in Economy and Organization of Motor Governance of IDGC of Volga, JSC; Transport. Since 2009 – Deputy General Director for Corporate Positions held in the Company and other organizations Governance of IDGC of Volga, JSC. over last five years: Since September 12, 2012 – member of the Committee 2008 – 2009 – Chief Accountant of Volga Production for Strategy and Development and the Committee for Department of Saratov Distribution Grids, a branch of Technological Connection to Electric Grids of the Board IDGC of Volga, JSC; of Directors of the Company. Since 2009 – Chief Accountant – Head of the Accounting As of December 31, 2012, the member holds shares and Reporting Department of IDGC of Volga, JSC. of IDGC of Volga, JSC (share in the authorized capital – Owns no shares of the Company. 0.000035%, ordinary shares – 0.000035%).

Frolov Sergey Petrovich Born in 1960. Nationality: Russia Education: higher. Graduated from Ulyanovsk Polytechnic Institute, degree in Electric Power Supply to Industrial Enterprises and Cities. Positions held in the Company and other organizations over last five years: Since 2008 – Deputy General Director – Director of the Branch of IDGC of Volga, JSC – Ulyanovsk DG. Owns no shares of the Company. IDGC OF VOLGA ANNUAL REPORT 2012 CORPORATE GOVERNANCE

Ryabikin Kucherenko Puchkova Vladimir Anatolyevich Vladimir Ivanovich Irina Yuryevna Chairman of the Management Deputy Chairman Board of the Management Board

Zaretskiy Rebrova Kulyev Dmitriy Lvovich Natalya Leonidovna Vyacheslav Igorevich

Ponomarev Tamlenova Frolov Vladimir Borisovich Irina Alekseyevna Sergey Petrovich 04 www.mrsk-volgi.ru EXCELLENT ENERGY! 056 | 057

Vladimir Anatolyevich Ryabikin, General Director, Chairman of the Management Board

General Director

The General Director is a sole executive body in charge tors and one-off bonus for fulfillment of special important of routine management of the Company’s activities and tasks and for national and departmental awards of the RF implementation of its strategy. The General Director is Ministry of Energy and corporate awards of IDGC Hold- a key element of the corporate governance structure. ing, JSC Responsibilities of the General Director of the Company include all matters concerning management of current Since 2008, the General Director of IDGC of Volga, JSC is operations of the Company, excluding matters assigned Vladimir Anatolyevich Ryabikin. to the responsibility of the General Meeting of Sharehold- ers, the Board of Directors and the Management Board Vladimir Anatolyevich Ryabikin was born on January 24, of the Company. 1965. He graduated from the Russian State Open Technical General Director is in charge of the routine opera- University of Railway Transport in 1996. tions of the Company according to the financial and busi- In 2007, employed with IDGC of Volga, JSC as a ness plan. The General Director shall conscientiously, Deputy General Director – Technical Director of IDGC of timely and effectively execute resolutions passed by the Volga, JSC. Since April 2008 – Deputy Director General for Board of Directors and General Meeting of Shareholders Technical Issues – Chief Engineer of IDGC of Volga, JSC. of the Company. On December 12, 2008 he was elected as the General Employment conditions, rights and obligations of the Director of IDGC of Volga, JSC. General Director are established by the law of the Russian Member of the Board of Directors of the Company. Federation, Articles of Association of the Company and Recognized with national and industrial awards employment contract with terms and conditions defined for contribution to development of the power industry. by a person authorized by the Board of Directors of the In 2012, Ryabikin Vladimir Anatolyevich was awarded a Company. Title of Honor “Veteran of Distribution Grid Complex” for The General Director of the Company is paid in ac- professional progress and achievements. cordance with the Regulation on the financial incentive program for the General Director of IDGC of Volga, JSC. The Regulation contains the amount of quarterly and annual remuneration for achieving key performance indica- IDGC OF VOLGA ANNUAL REPORT 2012 CORPORATE GOVERNANCE

Internal Audit Commission

The Internal Audit Commission of the Company is a per- the effective law of the Russian Federation and Articles manently acting body for internal control of IDGC of Volga, of Association of the Company. Members of the Internal JSC that is responsible for regular overseeing the busi- Audit Commission appointed by the General Meeting of ness and financial activities of the Company, its officials Shareholders will hold office until the next annual meeting. and management bodies to ensure compliance with the The General Meeting of Shareholders may vote for early laws of the Russian Federation, the Articles of Associa- termination of powers of all and individual members of tion of the Company and other Regulations and Policies the Internal Audit Commission. According to the Articles of the Company. of Association of the Company, the number of members The Internal Audit Commission functions inde- of the Internal Audit Commission of the Company is five pendently of the officials of the management bodies of persons. During the reporting year, the financial and busi- the Company. The Commission shall act in compliance ness activity of the Company was monitored by two mem- with the Regulation on Internal Audit Commission of the berships of the Internal Audit Commission. Company describing the legal status, goal and objectives, rights and obligations, structure and membership of the Internal Audit Commission. The procedure for nomination of members to the Internal Audit Commission of the Company is provided by

Internal Audit Commission acting from June 10, 2011 till June 13, 2012 *

Alimuradova Izumrud Aligadzhiyevna Director for Internal Audit and Risk Management (Head of Internal Audit and Risk (Chairman of Internal Audit Commission) Management Department) of IDGC Holding, JSC

Arkhipov Vladimir Nikolayevich Head of Security Department of IDGC Holding, JSC

Bikmurzin Adel Fyaritovich Chief Expert of Section for Standards and Methodology within the Department of Corporate Governance and Cooperation with Shareholders of IDGC Holding, JSC

Sinitsyna Olga Sergeyevna Chief Expert of Section of Internal Audit, Auditory Checks and Expertise within the Department of Internal Audit and Risk Management of IDGC Holding, JSC

Filippova Irina Aleksanderovna Leading Expert of Section of Internal Audit, Auditory Checks and Expertise within the Department of Internal Audit and Risk Management of IDGC Holding, JSC

* job positions as of the date of election

Internal Audit Commission elected on June 13, 2012 *

Alimuradova Izumrud Aligadzhiyevna Director for Internal Audit and Risk Management (Head of Internal Audit and Risk (Chairman of Internal Audit Commission) Management Department) of IDGC Holding, JSC

Arkhipov Vladimir Nikolayevich Head of Security Department of IDGC Holding, JSC

Belyaev Nikolay Aleksanderovich Leading Expert of Audits and Expertise Section within the Department of Internal Audit and Risk Management of IDGC Holding, JSC

Kormushkina Lyudmila Dmitriyevna Head of Audits and Expertise Section within the Department of Internal Audit and Risk Management of IDGC Holding, JSC

Meshalova Galina Ivanovna Senior Expert of Audits and Expertise Section within the Department of Internal Audit and Risk Management of IDGC Holding, JSC

* job positions as of the date of election 04 www.mrsk-volgi.ru EXCELLENT ENERGY! 058 | 059

Alimuradova Izumrud Aligadzhiyevna Meshalova Galina Ivanovna Chairman of the Internal Audit Commission Born in 1957. Born in 1971. Nationality: Russia Nationality: Russia Education: higher. Graduated from North Ossetian State Education: higher. Graduated from V.I. Lenin Dagestan University (SOGU) (Vladikavkaz), degree in Industry Plan- State University, majoring in “Economic theory”. Candidate ning. of Economic Science. Positions held in the Company and other organizations Positions held in the Company and other organizations over last five years: over last five years: 2004–2009 — Chief Specialist of Management Consulting 2003–2009 — Director for Development of OOO “Ener- Department, OOO “Energoconsulting”; goconsulting”; Since 2009 — Chief Expert of Audits and Expertise Section 2009–2010 — Head of Internal Audit and Risk Manage- within the Department of Internal Audit and Risk Manage- ment Department of IDGC Holding, JSC ment of IDGC Holding, JSC Since 2010 — Director for Internal Audit and Risk Man- Owns no shares of the Company. agement (Head of Internal Audit and Risk Management Department) of IDGC Holding, JSC. Owns no shares of the Company. Belyaev Nikolay Aleksanderovich Born in 1965. Nationality: Russia Arkhipov Vladimir Nikolayevich Education: higher. Graduated from Moscow State Corre- Born in 1956. spondence Teacher Training Institute, degree in History, Nationality: Russia and from Russian Presidential Institute of Advanced Pro- Education: higher. Graduated from Novosibirsk Electro- fessional Training for Government OfficialsRAGS , degree technical Institute of Communication, qualified asT el- in Construction Cost Estimating and Pricing. ecommunications Engineer. Positions held in the Company and other organizations Positions held in the Company and other organizations over last five years: over last five years: 2006–2009 — Chief Specialist of Estimate and Repair De- 2006–2009 — General Director of Rustel, CJSC; partment of the Executive body of Moscow United Electric 2009–2011 — First Deputy Head of Security Department Grid Company, JSC; of IDGC Holding, JSC 2009–2010 — Chief Specialist of Estimate and Repair De- Since 2011 — Head of Security Department of IDGC Hold- partment of the General Directorate of Mosenergo, JSC; ing, JSC. 2010–2011 — engineer of estimate and contractual work Owns no shares of the Company. of OOO “IPK-Stroy”; Since 2011 — Leading Expert of Audits and Expertise Section within the Department of Internal Audit and Risk Kormushkina Lyudmila Dmitriyevna Management of IDGC Holding, JSC. Born in 1956. Owns no shares of the Company. Nationality: Russia Education: higher. Graduated from Far East Academy of Economics and Management, degree in Accounting and Audit. Positions held in the Company and other organizations over last five years: Head of Audits and Expertise Section within the Depart- ment of Internal Audit and Risk Management of IDGC Holding, JSC Owns no shares of the Company. IDGC OF VOLGA ANNUAL REPORT 2012 CORPORATE GOVERNANCE

The members of the Internal Audit Commission did not for participation in the inspection (audit) of the financial sell or buy the shares of the Company during the report- and business activity and is compensated for all actual ing period. expenses incurred by the member as a result of participa- The types, amount and payment of remunerations tion in the inspection. and compensations to the members of the Internal Audit The total amount of awards and compensations paid Commission are governed by the Regulation on Remu- to the members of the Internal Audit Commission in 2012 nerations and Compensations Payable to Members of the was 613,800.00 rubles (including individual income tax). Internal Audit Commission of IDGC of Volga, JSC approved Resolutions passed by the Internal Audit Commis- by the annual General Meeting of Shareholders of IDGC sion are posted on the corporate web-site of the Company: of Volga, JSC (Minutes of the Management Board of RAO http://goo.gl/a4omp UES of Russia, JSC No. 1751 пр/3 dated October 05, 2007) as well as by the modifications made to the Regulation approved by the annual General Meeting of Shareholders of IDGC of Volga, JSC convened on May 30, 2008 (Minutes No. 1/2008 dated June 07, 2008). According to the Regulation, the member of the In- ternal Audit Commission is paid a one-off remuneration

External auditors

The external audit of the accounting (financial) statements porting Standards (IFRS) shall not be considered by the is the most important element of the main system for Board of Directors and shall not be approved by the annual control of the financial and business activity of the Com- General Meeting of Shareholders. The issue on amount pany performed by the shareholders. Pursuant to Article of remuneration of the auditor appointed to check state- 1 of the Federal Law No. 307-FL “On Audit Activity” dated ments prepared in compliance with IFRS shall not be re- December 30, 2008 and Article 86 of the Federal Law No. ferred to the Board of Directors of the Company. The audit 208-FZ “On Joint-Stock Companies” dated December 26, company involved in the audit of IFRS financial statements 1995, the auditor performs the independent inspection of of subsidiaries and affiliates of IDGC Holding, JSC was the financial and business activity of the Company basing selected by the Central Procurement Committee of IDGC on its accounting (financial) statements in order to give Holding, JSC. opinion on reliability of these statements. KPMG, CJSC audited the statements of IDGC of Vol- According to sub-clause 11, clause 10.2 of the Arti- ga, JSC for 2012 issued in compliance with IFRS. The cost cles of Association of the Company, the nominee auditor of Auditor’s services for auditing the above statements shall be approved by the General Meeting of Shareholders amounted to 4,720,000 rubles (inclusive of VAT). of IDGC of Volga, JSC. No non-audit services were delivered by the Auditor By the resolution of annual General Meeting of during the reporting period. Shareholders of IDGC of Volga, JSC dated June 13, 2012 (Minutes No. 5/2012 dated June 15, 2012), KPMG, CJSC was elected to check the Company’s statements prepared in compliance with Russian Accounting Standards (RAS) for 2012. The Auditor is a member of Non-Profit Part- nership “Audit Chamber of Russia” (registration number 10301000804) and other professional organizations, business unions and associations. The amount of Auditor’s remuneration shall be fixed and adopted by the Board of Directors of the Company. In 2012, the cost of services for auditing statements of IDGC of Volga, JSC prepared in compliance with RAS delivered by the Auditor amounted to 1,563,460 rubles (inclusive of VAT). Pursuant to the law of the Russian Federation and internal regulatory documents of the Company, the nominee auditor of the consolidated financial statements issued in compliance with the International Financial Re- 04 www.mrsk-volgi.ru EXCELLENT ENERGY! 060 | 061

Information on the Company’s transactions

In 2012, IDGC of Volga, JSC did not enter into transac- Appendix No. 3 to this Annual Report contains the list tions defined as “large-scale transactions” by the Federal of transactions performed by the Company in 2012 and Law “On Joint-Stock Companies” or other transactions recognized as interested party transactions according to subject to the Procedure on approval of large-scale trans- the Federal Law “On Joint-Stock Companies”. actions in accordance with the Articles of Association of the Company. IDGC OF VOLGA ANNUAL REPORT 2012 INTERNAL CONTROL AND RISK MANAGEMENT SYSTEM

INTERNAL 05 CONTROL AND RISK MANAGEMENT SYSTEM

Model of the Internal Control and Risk Management System

The internal control and risk management system (ICRMS) ̤̤ current control: regulation and standardization of of IDGC of Volga, JSC is an element of the corporate gov- business processes, development of control pro- ernance system of the Company encompassing various cedures and establishing responsibility of business procedures, methods and control mechanisms developed process participants by management levels; by the Board of Directors and executive bodies of the Com- ̤̤ follow-up control: auditing control of statement reli- pany to ensure efficient internal control of the Company’s ability, assets integrity, compliance of financial and financial and business activities. business operations with the law, Articles of Associa- tion and local regulations, internal audit of efficiency ICRMS key objectives: of organization of business processes and ICRMS, ̤̤ effective achievement of strategic and corporate control of adherence to the corporate ethics, anti- goals of the Company; bribery control. ̤̤ improvement of quality of the Company’s corporate governance system; ̤̤ increase in operating and investment performance of the Company.

The measures intended to improve ICRMS are taken at all levels of the Company’s management with the following control milestones: ̤̤ preliminary control (risk management system): detection, evaluation and management of risks (threats and opportunities) to achieve the corporate and strategic goals, and detection and management of risks of economic and energy safety; 05 www.mrsk-volgi.ru EXCELLENT ENERGY! 062 | 063

Main risk factors

The activities of IDGC of Volga, JSC involve risks to be by the Company as the most crucial factors existing at taken into account by investors. Key risk factors classified the present time are described in the below paragraphs.

Country and regional risks

Country and regional risks are first of all conditioned by cost of capital, exchange rates of world currencies and macroeconomic factors existing at the global level and at inflation. the level of the Russian Federation and separate regions. Like in other BRICS countries, the economy of the The above factors may have an adverse impact on credit Russian Federation classified as the developing economy opportunities, liquidity indicators, investment and operat- is sensitive to the global recessionary trends. This sen- ing performance and, finally, on shareholder value of the sitivity is caused by the dependence of the economy on Company. In addition, recessionary trends in the global energy carrier prices, low volumes and volatility of Rus- economy have a negative effect on volumes of produc- sian financial market, transient condition of the national tion output and electricity consumption that may result bank system. in lower revenue of the Company. To minimize macroeconomic risk effects, the Com- Key factor of the macroeconomic risk is the persist- pany takes measures intended to optimize the share of ing global financial recession having impact on key indica- borrowed funds in the overall capital structure, raise long- tors of raw material and financial markets: prices of fuel term loans at fixed interest rates and to increase the ef- and power resources and other raw material resources, ficiency of operating and investment costs.

Regulatory risks (industry risks)

Core activities: delivery of services for electric power activities of the Company. To minimize the above risk fac- transmission and technological connection to electric tors, the Company pursues the balanced policy intended power grids (regulated by the government). to increase the efficiency of investment and operating ac- The policy of tariff regulation aims at restraining the tivities aimed at cutting costs and planning structure of growth of electric power tariffs that may limit tariff -re sources of activity financing in the optimal way. sources used to carry out the investment and operating

Financial risks

The planned financial and economic model of the Company effect on the Company’s financial condition. Proceeding generates factors that may cause shortage of funds for from the plans of the Central Bank of Russia aiming at the financing the investment and operating activities. inflation control and inflation forecast for the immediate The most important factors of the financial market are period, the inflation will have no significant effect on the rooted in defects of mechanisms for electric power retail Company’s financial results. market. Meanwhile, the results of the financial and business activity are potentially affected by other risk factors. Exchange risks Unfavorable changes in foreign currency to Ruble ex- Inflation risks change rate may influence on indicators of the operating The negative effect of the inflation on the financial and and investment performance of the Company. business activity of the Company may involve losses of The exchange risks have minor effect on the Com- actual receivables value, increase in payable interests on pany, as all settlements with contractors are performed loans and in cost of construction of facilities under the in Russian currency. However, the Company purchases investment program. The present inflation rate has minor imported goods and equipment, thus the considerable IDGC OF VOLGA ANNUAL REPORT 2012 INTERNAL CONTROL AND RISK MANAGEMENT SYSTEM

growth of the exchange rate may increase prices of pur- Liquidity risks chased products. Therefore, the Company pursues policy The activities of IDGC of Volga, JSC are affected by risk aiming at import substitution and signing long-term factors that may lower the liquidity and financial stability agreements with fixed prices of purchased products. of the Company. Cross-subsidization of consumers groups and poor payment discipline in the retail electric power Interest risks market are the most important factors. Dynamics of change of the refinancing rate of the Russian To attenuate this risk factor, the Company monitors Central Bank shows the macroeconomic situation and ex- the capital structure and establishes optimal parameters erts impact on credit cost. Higher credit rates may cause of credits, as well as takes measures to cut volumes of unplanned increase of the Company’s debt expenses. In cross-subsidization and optimization of circulating capital order to lower the interest risk, the Company pursues a structure. well-balanced loan policy oriented to optimization of the credit portfolio structure and minimization of costs associated with credit servicing.

Operational and technological risks

The Company carries out its activities in various regions To reduce the probability of operational and technological with different climate conditions.T he activities of the Com- risks, the Company takes measures intended to increase pany are affected by potential emergency situations that reliability of power supplies to consumers and prevent may occur as a result of acts of God (heavy and frozen risks of technological violations. rains, freshets and floods, snowy drifts, etc.) and that may cause system malfunctions and low performance of the equipment of the electric grid distribution complex and unreliable power supplies to consumers of the Company. Operational and technological risks having effect on reliability of power supplies are associated first of all with physical deterioration and obsolescence of electric grid assets, violation of conditions and modes of operation of the electric grid equipment, failure to fulfill repair programs. 05 www.mrsk-volgi.ru EXCELLENT ENERGY! 064 | 065

Investment (project) risks

The Company carries out the investment activity intended of commissioned capacities, develop and implement to upgrade and expand the network infrastructure the system for comparative analysis of unit cost of facing the risk of lower efficiency and depreciation of construction and installation works and materials, form capital investments when implementing the investment, the management system for innovation activities and innovation development and R&D programs. automatize the investment management system. Growing volumes of the investment programs require considerable financial resources (Company’s own resources and borrowings) meeting parameters of RAB- regulation representing a factor of the investment risk. To attenuate the investment risk, the Company develops the investment programs with account of the following key criteria of efficiency: improvement of availability of the network infrastructure, reduction of wear and upgrading of the electric grid facilities, higher loading of commissioned capacities. To include the investment projects while developing the investment program, these projects shall be coordinated with plans of territorial and regional development. In addition, the Company monitors the implementation and financing of investment programs and analyzes causes of deviation of actual results of implementation of these investment programs from the planned values. The Company introduces the project management of the investment activities, including management of risks of investment project implementation. The Company takes measures intended to improve the quality of project implementation and efficiency of investments into the existing network, cut the unit construction cost, achieve higher loading

Compliance risks

Frequent changes in the law of the Russian Federation activity. To mitigate this risk, the Company monitors under conditions of governmental regulation of the the efficiency of processing of requests and inquiries of industry and a wide range of regulatory requirements consumers, regulates and monitors timely disclosure of and restrictions are risk factors associated with information in compliance with the law of the Russian the Company’s failure to observe the law and other Federation. regulations, requirements of regulatory and supervisory Modifications made to the tax law (higher tax rates bodies, as well as the Company’s internal documents or changed procedure for tax calculation) may result in containing the internal policy, rules and procedures lower profitability indicators and higher tax burden of (compliance risk). the Company. The activities of the Company are regulated and The Company owns, rents or is entitled for controlled by various authorities. In addition, as a unlimited use of most of land plots accommodating company with state participation, the Company executes distributing facilities. The law establishes the time for orders of the President and Government of the Russian reregistration of right of unlimited use of ownership or Federation. Thus, the compliance risk factors are of rental before January 01, 2015. In order to mitigate the special importance. above factor, the Company implements the program for As a subject of the natural monopoly, the Company reregistration of right of unlimited use. may incur risks of recognition of antimonopoly The Federal Financial Markets Service of Russia legislation breaches relating to delivery of services for regulates and supervises the activity of the Company technological connection, disclosure of information on relating to observation of the requirements established services rendered by the Company and procurement by the securities law of the Russian Federation, IDGC OF VOLGA ANNUAL REPORT 2012 INTERNAL CONTROL AND RISK MANAGEMENT SYSTEM

including the disclosure of information on material The Company monitors modifications made to the facts that may have a significant impact on the cost of applicable law covering various aspects of the financial securities as well as control of illegal use of insider and business activities of the Company. information. To attenuate the above risk factors, the Company takes measures intended to improve the compliance control. In 2012, the Board of Directors of the Company adopted local documents prepared to increase the efficiency and transparency of the financial and business activities of the Company and bribery control.

Insider information control system

Legal requirements related to the insider information are The follow-up compliance control implies the analysis of: established for the Company as an issuer as a result of ̤̤ dynamics of prices of the Company’s financial instru- placement of the Company’s financial instruments atR us- ments in the organized markets sian trading floors: Moscow Exchange MICEX-RTS, JSC ̤̤ impact of news on the dynamics of prices of financial (shares and bonds). instruments Pursuant to the internal control policy of the Com- ̤̤ transactions involving the Company’s securities de- pany, to meet the legal requirements the Company carries clared in notices sent by insiders to the Company. out three types of compliance control relating to the insider information: preventive, current and follow-up control.

The preventive compliance control features the following procedures: ̤̤ Development of rules for formation of the list of the Company’s insiders ̤̤ Preparation of the list of the Company’s insider information ̤̤ Development of rules for circulation of the insider information ̤̤ Development of rules for performing operations with the Company’s insider financial instruments ̤̤ Entering into insider information confidentiality agreements and addenda to employment contracts with insider employees of the Company.

To improve the preventive control system, the Board of Directors of the Company adopted the Corporate Code of Conduct regulating the corporate responsibility and conduct ethics for insider employees of the Company.

The current compliance control carried out in the Com- pany features the following control procedures: ̤̤ Maintaining the list of insiders ̤̤ Recording notices of adding to or exclusion from the list of insiders and of transactions involving the Company’s securities settled by insiders ̤̤ Monitoring of compliance with the rules for settling transactions involving the Company’s insider financial instruments on the basis of information (notices) of operations performed by insiders ̤̤ Monitoring of compliance with the insider information law at the precontractual stage. 05 www.mrsk-volgi.ru EXCELLENT ENERGY! 066 | 067

Shareholder value risks

The Company fulfills the opportunities of management of of its activities in compliance with the approved tariff and the Company’s further growth and profitability under the balance decisions, monitors the fulfillment of the approved Strategy of the Company until 2015 and for the long-term business plan, works out territory development programs period up to 2020. The growth of the Company’s share- (including the approval of amounts and sources of financ- holder value is affected by many factors of the internal ing of investment programs) jointly with local authorities. and external environment. The Company was entered into the register of natural monopolies regulated by the government in compliance with the Russian law. Therefore, the federal and regional bodies in charge of tariff regulation fix and regulate tariffs for services delivered by the Company. To restrain the growth of electric power tariffs set for end consumers, the Government may limit the parameters of tariff growth and thus indicators of profitability of the Company’s services. By lowering the effect of subjective factors on the process of making tariff decisions, switching to RAB-based regulation mitigates the shareholder value risk, but not fully eliminates this risk. Fulfillment of long-term parameters of RAB-regulation (including the rate of profitability and return on investments) is a prerequisite for achieving the shareholder objectives. To mitigate this risk factor, the Company implements the cost management program, ensures well-balanced planning IDGC OF VOLGA ANNUAL REPORT 2012

EXCELLENT FOR FINANCING!

positive net profit generated by the 1,162 million rubles Company in 2012 www.mrsk-volgi.ru EXCELLENT ENERGY! 068 | 069 EXCEL- LENT FOR FINANCING 71% THE EQUITY IN THE COMPANY’S ASSETS

Puchkova Irina Yuryevna 4 5,76 4 mln. rub. Deputy General Director The revenue of the Company for Economics and Finance of IDGC from sales totaled for 2012 of Volga, JSC “We see rational financial policy mln. rub. 4 2,910 as our main objective Net worth of the Company in 2012 that results in steady financial condition of the company.” 7,056 mln. rub. 1,162 million rubles EBITDA IDGC OF VOLGA ANNUAL REPORT 2012 FINANCIAL ACTIVITY

FINANCIAL 06 ACTIVITY

BASIC FINANCIAL AND ECONOMIC INDICATORS

KPIs 2010 2011 2012 actual actual actual

Revenue (thousand rubles) 39,420,367 47,827,153 45,763,581

from power transmission services 38,736,860 47,222,117 45,124,134

from technological connection services 276,478 266,345 416,273

Production cost (thousand rubles) 36,640,243 44,476,389 41,626,153

Gross income (thousand rubles) 2,780,125 3,350,764 4,137,428

Management expenses (thousand rubles) 973,537 1,127,986 1,125,465

Revenue from sales (thousand rubles) 1,806,588 2,222,778 3,011,963

Other income (thousand rubles) 5,354,272 2,414,692 1,607,538

Other expenses (thousand rubles) 6,289,742 3,165,720 2,488,700

interest on loans 305,644 265,563 477,560

Profit before tax (thousand rubles) 871,117 1,471,750 2,130,801

Income tax and similar payments (thousand rubles) 608,850 165,818 968,828

Net profit (thousand rubles) 262,267 1,305,932 1,161,973* including:

Reserve fund 13,113 65,297 58,098

profit for development purposes 249,154 1,040,628 812,793

dividends 0 200,007 291,082

Net assets per 1 share (rub.) 0.231 0.235 0.240

Income per 1 share (rub.) 0.0015 0.0073 0.0065

Dividends per 1 share (rub.) 0.000 0.0011 0.00163*

* resolution on net profit distribution and amount of dividends on one share basing on the 2012 results will be passed at the annual General Meeting of Shareholders of the Company in 2013. 06 www.mrsk-volgi.ru EXCELLENT ENERGY! 070 | 071

KPIs 2010 2011 2012 actual actual actual

EBITDA (thousand rubles) 4,686,352 5,614,208 7,056,018

DEBT (thousand rubles) 5,038,331 6,856,985 10,714,087

DEBT/EBITDA 1.08 1.22 1.52

EBITDA margin 0.12 0.12 0.15

Return on sales (%) 4.58% 4.65% 6.58%

ANALYSIS OF FINANCIAL STATE AND RESULTS OF OPERATIONS

In 2012, the revenue of the Company from sales totaled 45,763,581 th. rub., including the revenue from power transmission — 45,124,134 th. rub. or 98.6% of the aggregate income.

It should be noted that the setting of tariffs for core tual net profit in 2011). The key factor resulted in lower operations of the Company has the following key par- financial result relating to the net profit in 2012 is higher ticular features having a significant effect on the amount profit tax as compared to 2011 with account of adjust- of incomes: ment of the profit tax for 2008-2010 through adding of ̤̤ Starting July 01, 2012, the tariff decisions were made costs associated with mobilization training (657 million relating to long-term parameters of regulation of the rub.) to the overhead costs and applying a special coef- Company’s branches using the method of profitability ficient 2 (according toA rticle 259.3 of RF Tax Code) to the of invested capital (for Samara Distribution Grids — depreciable fixed assets relating to the use of fixed assets starting November 01, 2012) — “reloading” of RAB for operation in the aggressive environment and/or high parameters; meanwhile, no change of regulation rotation to the amount of 292 million rub. method is planned until July 01, 2017; During the reporting period the net assets per ̤̤ application of uniform (boiler) tariffs for electric 1 share amounted to 0.240 rub. (0.005 rub. or 2% higher power transmission services delivered to consumers than in 2011). of the relevant regions with account both of neces- Profit for 1 share reduced and amounted to 0.0065 sary gross revenues (GR) of the Company and GR of rub. for 1 share. other regional distribution grid companies and FGC In 2012, EBITDA amounted to 7,056,018 th. rub. UES, JSC. (1,441,810 th. rub. or 26% higher than in 2011). In 2012, the return on sales amounted to 6.58% Thus, the incomes from the core activities gained as (1.93% higher than in 2011). a result of changes in electric power transmission tariff are based on the schemes of mutual settlements of the Company with other grid companies using the adopted “boiler formation” scheme. In 2012, the cost of services sold amounted to 41,626,153 th. rub., administrative expenses — 1,125,465 th. rub. In 2012, the net profit of IDGC of Volga, JSC amounted to 1,161,973 th. rub. (143,959 th. rub. lower the ac- IDGC OF VOLGA ANNUAL REPORT 2012 FINANCIAL ACTIVITY

KPIs 2011 2012

Net worth (thousand rubles) 41,948,921 42,910,010

Debt to equity and reserves ratio (%) 36.81 41.78

Receivables turnover ratio (times) 9 12

Overdue payables (%) 3.30 2.11

Return on total assets (%) 2.28 1.91

Return on capital (%) 3.11 2.71

Current liquidity ratio 1.16 1.40

Quick liquidity ratio 1.03 1.17

Absolute liquidity ratio 0.28 0.40

Asset/equity ratio 0.73 0.71

Debt/equity ratio 2.72 2.40

The increase of net worth of the Company by 961,089 Debt/equity ratio shows the portion of equity per 1 ruble thousand rubles is primarily associated with increase in spent to finance the company’s assets. In 2012, this ratio book value of fixed assets. dropped down to 2.40 as of December 31, 2012. In addi- Debt to equity and reserves ratio indicates a measure tion, DEBT/EBITDA ratio increased up to 1.52. Insignifi- of a company’s financial leverage. Compared to the same cant degradation of these ratios was caused by expand- period last year, the Company’s dependence on borrowed ing credit portfolio as a result of growing volumes of the capital increased in connection with increase in long-term Company’s investment program. liabilities. The analysis of the main financial and economic In 2012, the receivables turnover increased as a re- indicators of the reporting period showed that the busi- sult of lower receivables. ness activity of IDGC of Volga, JSC is marked by a stable In 2012, the outstanding payables of the Company financial condition due to the reasonable financial policy decreased down to 2.11 % of total liabilities of the Com- pursued by the management of the Company. pany. As compared to 2011, the profitability indicators ex- hibit a minor negative dynamics caused by the gained net profit in the amount of 1,161,973 th. rub. (lower than in 2011 by 143,959 th. rub). In 2012, the asset/equity ratio (the assets covered by the equity of the Company) equal to 0.71 shows significant share of own financing sources and high financial stability of the Company. The current ratio (key solvency indicator) is 1.40. The trend of excess of current assets over short-term liabilities persists during the analyzed period showing that the Company has enough funds to settle its liabilities. In general, the Company improved its current ratios during the analyzed period. One of the main criteria of the Company’s solvency is the absolute liquidity ratio. In 2012, this ratio was equal to 0.40 showing a relatively high solvency and sufficient sources to discharge current liabilities of the Company. 06 www.mrsk-volgi.ru EXCELLENT ENERGY! 072 | 073

LOAN POLICY

In 2012, the main aims of the loan policy of IDGC of 4_ register bonded loans totaled 7,000,000,000 (seven Volga, JSC were: billion) rubles with Moscow Exchange MICEX-RTS, ̤̤ to optimize the structure of the Company’s credit JSC; portfolio; The exchange-traded bonds of IDGC of Volga, JSC ̤̤ to borrow sufficient funds required to finance the were assigned the following issue identification investment program; numbers: 4B02-01-04247-E dated July 11, 2012 ̤̤ to minimize debt servicing costs. and 4B02-02-04247-E dated July 11, 2012; Information on listing process of exchange-traded In order to achieve the set goals, IDGC of Volga, JSC bonds of IDGC of Volga, JSC is published on the web- continuously monitored the situation on loan capital site of Moscow Exchange MICEX-RTS, JSC (http:// market and optimized its credit portfolio. Despite of goo.gl/rdeHu). growing loan interest rates, general uncertainty on the loan capital market and liquidity shortage in the banking sector, the loan policy adopted by the Company allowed to: 1_ create a high-quality credit portfolio with preserva- tion of optimal balance between the acceptable level of interest risk took by the Company when raising 5_ obtain an international credit rating and national long-term borrowed capital and profit received from credit rating. its main activities and investment projects includ- On October 12, 2012 IDGC of Volga, JSC was as- ing those for which purposes such borrowings were signed an international credit rating Ba2 with the raised; international rating agency, Moody’s Investors Ser- 2_ borrow sufficient funds required to finance the invest- vice. The ratings outlook is “stable”. In addition, the ment program; Company was assigned a national credit rating Aa2. 3_ maintain the 2012 weighted average interest rate of ru (Company’s solvency as compared to other Rus- 7.84% per annum (significantly lower than the refi- sian borrowers) with Moody›s Interfax. nancing rate of the Russian Central Bank);

According to Moody’s, the ratings outlook of IDGC of Volga, JSC is stable, as the Company pursues realistic development plans and adjusts its activities with account of tariff dynamics, availability of financing sources and overall economic situation. IDGC OF VOLGA ANNUAL REPORT 2012 FINANCIAL ACTIVITY

LOAN DEBT DYNAMICS OF IDGC OF VOLGA, JSC IN 2012, TH. RUB.

10,700,000 7,700,000 7,700,000 7,700,000 6,200,000 6,200,000 6,300,000 5,900,000 5,900,000 5,900,000 6,850,000 6,850,000 6,850,000

31.12 31.01 29.02 31.03 30.04 31.05 30.06 31.07 31.08 30.09 31.10 30.11 31.12 2011 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012 06 www.mrsk-volgi.ru EXCELLENT ENERGY! 074 | 075

DYNAMICS OF LOAN DEBT AMOUNT (BILLION RUB.), WEIGHTED AVERAGE RATE OF IDGC OF VOLGA, JSC IN 2012 (% PER ANNUM)

8.6%

10 8.5 8.4%

8.2% 9

8.1

8.1 8.0% 8.1

7.8 7.9 8

7.8 7.8 7.8%

7.8 7.8 7.7 7.7 7.6% 7 7.6

7.4%

7.2%

5 7.0% 6.85 6.85 6.85 5.90 5.90 5.90 6.30 6.20 6.20 7.70 7.70 7.70 10.70 31.12 31.01 29.02 31.03 30.04 31.05 30.06 31.07 31.08 30.09 31.10 30.11 31.12 2011 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012

Loan debt amount, billion rub. weighted average interest rate, % per annum IDGC OF VOLGA ANNUAL REPORT 2012 FINANCIAL ACTIVITY

LONG-TERM FINANCIAL INVESTMENTS

Subsidiaries and affiliates of IDGC of Volga, JSC as of December 31, 2012 are:

№ Name Registration Core Authorized capital, Company›s Subsidiary’s Subsidiary›s Participation ground and address of the subsidiary date activity of the subsidiary rub. participation in the revenue, th. rub. financial result, th. authorized capital of rub. the subsidiary (%)

Core subsidiaries Core subsidiaries

1. Open Joint-Stock Company 12.01.11 activities to support normal operation of electric 1,000,000 100% 75,812 20,980 Disposal by the Company Energoservice of Volga (Energoservice of Volga, JSC). power grids; 149A, ul. Moskovskaya, Saratov 410012, the Russian Federation

Non-core subsidiaries Non-core subsidiaries

2. Open Joint-Stock Company 27.08.02 rendering sanatorium and health resort 10,807,921 100% 12,167 52 Reorganization by succession in the form of takeover Social Sphere-M treatment services; of Mordovenergo, JSC by the Company 50, pr. Lenina, Saransk, the Republic of Mordovia, the Russian rendering hotel accommodation services. Federation

3. Open Joint-Stock Company 22.04.04 transportation of passengers and cargoes by 90,860,000 99.99% 166,832 449 Reorganization by succession in the form of takeover Chuvash Auto Transport Company, JSC road; of Chuvashenergo, JSC by the Company 21, ul. Promyshlennaya, Novocheboksarsk, the Chuvash Republic, delivery of services for vehicle rental, the Russian Federation maintenance and repair

4. Open Joint-Stock Company Solnechniy Sanatorium- 26.08.04 medical care, consulting, expert, tour operator, 42,540,000 99.99% 67,291 465 Reorganization by succession in the form of takeover Preventorium information, organization and management of Orenburgenergo, JSC by the Company 58, ul. Turbinnaya, Orenburg, Russia. services 06 www.mrsk-volgi.ru EXCELLENT ENERGY! 076 | 077

More detailed information on the subsidiaries is shown on the Company’s website http://www.mrsk-volgi.ru/, Section «About the Company/Subsidiaries» Appendix No. 1 contains information on participation of IDGC of Volga, JSC in commercial organizations with a maximum participation in the authorized capital of 50%

Core subsidiaries Core subsidiaries

Non-core subsidiaries Non-core subsidiaries

EXCELLENT 07 FOR PRODUCTION!

TOTAL LENGTH 02 OF POWER TRANSMISSION 224,380.2 km LINES BY CIRCUITS 03 07 www.mrsk-volgi.ru EXCELLENT ENERGY! 078 | 079 EXCEL- LENT FOR PRODUCTION 6,4% actual losses of power due to electric power distribution into grids

mln. kW*h 57,462 Kuliev volume of electric power Vyacheslav Igorevich supplies Deputy General Director for Development and Sales of Services of IDGC of Volga, JSC. 526 MW “We try to take volume of connected capacity proactive measures at the technological connec- to meet growing needs tion in power across the region.” 1,4 4 8 mln. rub. cost of actually completed repair work IDGC OF VOLGA ANNUAL REPORT 2012 PRODUCTION ACTIVITY

PRODUCTION 07 ACTIVITIES

PRODUCTION POTENTIAL

Length of power transmission lines by circuits as of January 01, 2013 (km)

Branch Power transmission lines (km), including by voltage

220 kW 110 kW 35 kW 10 kW 6 kW 0,4 kW

Saratov DG 11.4 8,404.9 5,016.6 22,296.1 1,387.2 16,274

Samara DG - 6,112.2 3,199.2 10,898.3 1730.1 96,28.4

Ulyanovsk DG - 2,487.8 1,740.7 9524.8 41 8,671.8

Mordovenergo - 2,024.7 1,044.3 8,215.2 1.5 7,706.5

Orenburgenergo 11.7 5,709.1 5,525.1 19,494 400.4 11,706.8

Penzaenergo - 3,201.3 2,441.8 12,943.6 595.3 13,407.3

Chuvashenergo - 1,960.3 666.6 9204.3 76.8 9,193

IDGC of Volga, JSC 23.1 29,900.3 19,634.3 92,576.3 4,232.3 76,587.8

Branch Power transmission lines (km), including by voltage

110 kW 35 kW 10 kW 6 kW 0.4 kW

Saratov DG 1.4 39.1 61.0 8.4 62.1

Samara DG 2.9 43.7 54.2 121.3 24.1 07 www.mrsk-volgi.ru EXCELLENT ENERGY! 080 | 081

Branch Power transmission lines (km), including by voltage

110 kW 35 kW 10 kW 6 kW 0.4 kW

Ulyanovsk DG - 8.7 21.9 0.6 -

Mordovenergo - - 82.0 13.2 96.3

Orenburgenergo 4.5 - 297.5 36.9 274.5

Penzaenergo - 4 46.2 25.1 44.0

Chuvashenergo - - 23.4 16.2 12.9

IDGC of Volga, JSC 8.8 95.5 586.2 221.7 513.9

Branch Saratov DG Samara DG Ulyanovsk Mordov- Orenburg- Penzaenergo Chuvash- IDGC of DG energo energo energo Volga, JSC

Power 53,390.2 31,568.2 22,466.1 18,992.2 42,847.1 32,589.3 21,101 222,954.1 transmission lines, total

Cable lines, total 172 246.2 31.2 191.5 613.4 119.3 52.5 1,426.1

Total 53,562.2 31,814.4 22,497.3 19,183.7 43,460.5 32,708.6 21,153.5 224,380.2

Number and capacity of step-down substations as of January 01, 2013 (pcs, th. kWA) Parameters Total 35-220 35/6-10 kW 110 kW 220 kW 6-10-35/0.4 kW substations, substations substations substations kW transformer including: substations, total

number 528 260 267 1 8,971 Saratov DG capacity 7,717.4 1,288.6 6,303.8 125 1,299.34

number 267 137 130 - 5,304 Samara DG capacity 6,445.4 1,028.9 5,416.5 - 968.81

number 171 93 78 - 5,285 Ulyanovsk DG capacity 2,505.3 523.6 1,981.7 - 930.88

number 124 53 71 - 3831 Mordovenergo capacity 1,379.9 182.5 1,191.4 - 669.76

number 303 209 94 - 10,045 Orenburgenergo capacity 3,940.7 1,232.4 2,708.3 - 1,738.6

number 196 106 90 - 6,605 Penzaenergo capacity 3,059.9 685.6 2,374.3 - 941.1

number 101 26 75 - 4752 Chuvashenergo capacity 2,252.1 201.9 2,050.2 - 844.95

1,690 884 805 1 44,793 IDGC of Volga, JSC 27,294.7 5,143.5 22,026.2 125 7,393.44 IDGC OF VOLGA ANNUAL REPORT 2012 PRODUCTION ACTIVITY

POWER TRANSMISSION AND DISTRIBUTION

Production activity outcome in 2012

Branch Grid output, mln Grid power supply to consumers and adjacent Losses kW*h TGO (within DGC), mln kW*h mln kW*h %

Saratov Distribution Grids 10,155.44 9,341.07 814.37 8.02%

Samara Distribution Grids 21,171.54 20,308.92 862.63 4.07%

Ulyanovsk Distribution Grids 5,210.86 4,735.58 475.28 9.12%

Orenburgenergo 13,003.91 12,154.30 849.62 6.53%

Penzaenergo 4,367.80 3,975.63 392.17 8.98%

Mordovenergo 2,647.69 2,411.10 236.59 8.94%

Chuvashenergo 4,808.58 4,535.59 272.99 5.68%

IDGC of Volga, JSC 61,365.83 57,462.18 3,903.64 6.36%

Electric power transmission services, million kW*h

0 1000 2000 3000 4000 5000 6000 9,425.61 Saratov DG 9,341.07 20,199.99 Samara DG 20,308.92 4,609.12 Ulyanovsk DG 4,735.58 12,782.62 Orenburgenergo 12,154.30 3,774.97 Penzaenergo 3,975.63 2,332.90 Mordovenergo 2,411.10 4,497.59 Chuvashenergo 4,535.59 57,622.80 IDGC of Volga, JSC 57,462.18

2011 2012 07 www.mrsk-volgi.ru EXCELLENT ENERGY! 082 | 083

In 2012, by the order of RF Ministry of Energy No. 374 In 2012, the volume of services delivered by Orenbur- “On approval (rejection) of offering electric grid facilities genergo, a branch of IDGC of Volga, JSC, declined as a covered by the unified national (all-Russia) electric grid result of deduction of: for rent to territorial grid organizations” dated August 25, ̤̤ 249.293 million kW*h from the volume of services 2011, partial deduction of volume of the services for pow- for power transmission delivered to Orenburg Min- er transmission to «last mile» consumers delivered by the erals, JSC starting March 01, 2012 by the decision following branches of IDGC of Volga, JSC was performed: of the Ninth Arbitration Court of Appeal of Moscow Saratov Distribution Grids, Orenburgenergo, Penzaenergo No. 09АП-1331/2012-GC dated March 01, 2012 (with and Chuvashenergo. regard to case No. А40-83306/11-102-666); Reduction in the volume of services delivered by ̤̤ 418.913 million kW*h from the volume of services for Saratov Distribution Grids, a branch of IDGC of Volga, JSC, power transmission delivered to «last mile» consum- originates from lower power consumption by Mezhre- ers of JSC FGC UES starting June 01, 2012 according gionenergosbyt, JSC decreased by 288.160 million kW*h to the departure schedule; in 2012 (as compared to 2011). ̤̤ 96.543 million kW*h in July, 2012 basing on the results of recalculation of the volume of services for power transmission delivered to Buruktal Nickel Plant, JSC (consumer of Orenburgenergosbyt, JSC) during the period from January till June, 2012 by the Ninth Arbitration Court of Appeal of Moscow No. 09АП-8967/2012-GC dated May 29, 2012 (with regard to case No. А40-115557/11-72-758).

ACTUAL LOSSES OF POWER IN 2011-2012, kW*h

Branch/IDGC Loss of electric power

Actual, 2011 Actual, 2012 Change

kW*h, M %2 kW*h, M % kW*h, M1 %

Saratov Distribution Grids 906.21 8.77% 814.37 8.02% -91.84 -0.75%

Samara Distribution Grids 957.27 4.52% 862.63 4.07% -94.64 -0.45%

Ulyanovsk Distribution Grids 517.82 10.10% 475.28 9.12% -42.54 -0.98%

Orenburgenergo 891.79 6.91% 849.62 6.53% -42.18 -0.37%

Penzaenergo 391.41 9.39% 392.17 8.98% 0.75 -0.42%

Mordovenergo 268.08 10.31% 236.59 8.94% -31.48 -1.37%

Chuvashenergo 274.89 5.81% 272.99 5.68% -1.90 -0.14%

IDGC of Volga, JSC 4,207.47 6.90% 3,903.64 6.36% -303.83 -0.53%

1 Calculated as the difference between the value of 2012 and the value 2 power losses level in 2011 was calculated under conditions of 2011 comparable to 2012

As compared to 2011, the level of electric power losses in the Company in 2012 was decreased by 303.83 million kW*h (absolute value) or by 0.53% (relative value). IDGC OF VOLGA ANNUAL REPORT 2012 PRODUCTION ACTIVITY

Energy saving and improvement of energy efficiency. Structure of energy saving program

Effects of measures are considered as target indicators In 2012, the actual numerical value of target indicators for energy saving and improvement of energy efficiency under sub-programs amounted to: in compliance with the energy saving programs. The ex- ̤̤ 104.82 million kW*h or 370.05 million rub. (exclusive pected target indicators for 2012 amount to 82.219 million of VAT) for purpose-oriented measures; kW*h or 330.762 million rub. (exclusive of VAT). In 2012, ̤̤ 20.78 million kW*h or 53.83 million rub. (exclusive of the effect amounted to 125.602 million kW*h or 423.881 VAT) for non purpose-oriented measures. million rub. (exclusive of VAT). Sources of financing of the energy saving program: The planned numerical value of target indicators for ̤̤ investment program in the amount of 2,689.65 mil- 2012 under sub-programs amounted to: lion rub.; ̤̤ 62.87 million kW*h or 279.70 million rub. (exclusive ̤̤ energy audit program in the amount of 73.94 mil- of VAT) for purpose-oriented measures; lion rub.; ̤̤ 19.34 million kW*h or 51.06 million rub. (exclusive of ̤̤ repair program in the amount of 3.08 million rub. VAT) for non purpose-oriented measures.

Consumption of energy resource for production and business needs (with account of power supply points of lessees)

№ Item Unit of 2012 p/p measurement* Planned Actual

1. Energy resources supplied under sales contracts, total th. rubles 511,552.07 395,108.08

1.1. electric power th. rubles 443,875.60 345,175.96

th. kW*h 119,191.50 115,303.54

1.2. heat power th. rubles 52,552.79 43,281.89

Gcal 49,156.34 43,359.97

1.3. cold water supply th. rubles 7,908.73 4,743.90

th. m3 341.93 248.01

1.4. hot water supply th. rubles 647.93 275.26

th. m3 10.53 7.51

1.5. natural gas th. rubles 6,567.02 1,631.07

th. m3 1,518.95 585.14

* monetary amounts are inclusive of VAT 07 www.mrsk-volgi.ru EXCELLENT ENERGY! 084 | 085

Power losses reduction actions

IDGC of Volga, JSC takes a range of measures intended to In 2012, the plan for reduction of energy losses (in optimize (cut) losses within its top-priority activity. Due physical units) was fulfilled for 152.76%. to these measures, in 2012, the energy saving amounted As a result of the implementation of targeted meas- to 125.602 million kW*h (342.048 million rub.). ures the amount of savings amounted to 104.824 million As a result of implementation of the purpose-ori- kW*h (310.240 million rubles.), Economies on activities for ented measures, the energy saving amounted to 104.824 which the reduction in losses is associated in nature, was million kW*h (310.240 million rub.); and the energy sav- 20,779,000 kW*h (31,809,000 rubles). The plan to reduce ing from measures indirectly associated with reduction in electricity losses for the year 2012 (in natural units) was losses amounted to 20.779 million kW*h (31.809 million executed by 152,76%. rub.).

Mandatory energy audit

To meet the requirements of the federal law relating to the The revealed potential for energy saving and im- energy saving and improvement of energy efficiency, IDGC provement of energy efficiency amounted to 111.737 th. of Volga, JSC organized the mandatory energy audit and tons of reference fuel (651.23 million rub. at the aver- development of the energy passport during 2011-2012. age tariffs for 2012), including the potential for reduction Totally, 2,772 facilities were audited, including 1,431 of power losses in the amount of 295.55 million kW*h electric grid facilities. (603.76 million rub. at the average tariffs for 2012). Totally, the Company took 230 measures aimed at energy saving and improvement of energy efficiency, including 169 measures intended to cut power losses.

Number of individuals connected to the Company’s grids for electric power supplies for public utility needs

Branch Number of metering points per individual consumers (pcs)

Saratov DG 313,901

Samara DG 205,672

Ulyanovsk DG 178,057

Mordovenergo 154,659

Penzaenergo 316,695

Orenburgenergo 240,137

Chuvashenergo 214,459

Total for IDGC of Volga, JSC 1,623,580 IDGC OF VOLGA ANNUAL REPORT 2012 PRODUCTION ACTIVITY

TECHNOLOGICAL CONNECTION TO ELECTRIC GRID

Demand for technological connection

In 2012, the branches of IDGC of Volga, JSC received tal capacity of 1,658,909.7 kW, including 12,327 requests 18,004 requests for technological connection with the to- from individuals for 114,319.5 kW.

Dynamics of demand for technological connection services

Number of request for Capacity, kW technological connection, pcs

15,000 150,000

10,000 100,000

5,000 50,000

0 16,524.0 18,004.0 0 1,125,404.7 1,658,909.7 2011 2012 2011 2012

During the period under review, IDGC of Volga, JSC signed 16,375 contracts for technological connection for 594,751.6 kW.

Number of request for Capacity, kW technological connection, pcs

500,000 15,000 400,000

10,000 300,000 200,000 5,000 100,000

0 15,376.0 16,375.0 0 481,838.9 594,751.6 2011 2012 2011 2012 07 www.mrsk-volgi.ru EXCELLENT ENERGY! 086 | 087

The growth of volumes of satisfaction of technological the capacity under signed contracts increased by 23.4% connection demand was observed in 2012: the number (by 112,912.7 kW). of contracts increased by 6.5% as compared to 2011 and

Volume of connected capacity per groups of consumers and branches. Dynamics of connected capacity

Connected capacity, kW

80,000

60,000

40,000

20,000

0 88,401.70 4247.90 0 9,799.10 18,801.90 305 4,377.30 68,223.50 3,059.00 2,510.90 73,661.50 27,302.00 up to 15 kWТ from 15 to 100 kW from 100 to 670 kW more than 670 kW

0.4 kW 6-20 kW 35-110 kW

In 2012, IDGC of Volga, JSC performed the actual tech- The dynamics of quantity of executed contracts is also nological connection under 12,210 contracts with total positive (as compared to the previous period, this indicator capacity of 300,689.6 kW (in addition, for generation fa- increased by 21.3%). cilities: 1 for 225,000 kW), including 70,962.3 kW under contracts signed with individuals. As compared to 2011, the volume of connected capacity increased by 40.3%. kW Pcs

12,000 300,000 9,000 200,000 6,000 100,000 3,000

0 0 2011 2012 2011 2012 IDGC OF VOLGA ANNUAL REPORT 2012 PRODUCTION ACTIVITY

In 2012, the volume of unsatisfied demand for technologi- As compared to 2011, the volume of unsatisfied demand cal connection basing on the number of requests that the for technological connection increased both in number branches of IDGC of Volga, JSC failed to execute was 685 and capacity of unexecuted requests by 104.5% and 80% pcs for the total capacity of 283,753 kW, including offers respectively. rejected by consumers (514 contracts for 252,505.6 kW).

Pcs kW 600 200,000 400 100,000 200

0 0 2011 2012 2011 2012

Analysis of the structure of requests by industries

Individuals Agriculture, hunt and forestry Fishing industry Mining Section D. Processing industry Generation and distribution of electricity, gas and water (TGO electric grids) Generation and distribution of electricity, gas and water (other) Construction Wholesale and retail trade; repair of vehicles, etc. Hotels and restaurants Transport and communication Financing activities Transactions involving immovable property, rent and delivery of services Public administration and military security; mandatory social services Education Health care and social services Other public, social and personal services Housekeeping services Activities of extraterritorial organizations Other 07 www.mrsk-volgi.ru EXCELLENT ENERGY! 088 | 089

Analysis of the structure of requests By capacity

Number of individuals connected to the Company’s grids for electric power supplies for public utility needs

Branch Number of executed contracts

Pcs For total capacity (N), kW

Saratov Distribution Grids 934 8,963.3

Samara Distribution Grids 2,299 24,444

Ulyanovsk Distribution Grids 922 8,458

Orenburgenergo 1,391 11,621.3

Penzaenergo 1,147 8,963.5

Chuvashenergo 997 2,991

Mordovenergo 944 5,521

Total for IDGC of Volga, JSC 8,634 70,962.3

Information on federal purpose-oriented programs implemented by the Company’s branches, «Affordable Housing» and other federal purpose-oriented programs

Item Federal purpose-oriented program, region Availability of Number Time Actual No. requests for of signed and scope implementation technological contracts for of the program of programs connection technological (in money (in money connection terms), terms), million rub. million rub.

1 Development of education for 2011-2015 (the Orenburg none 1 40 40 region) (2012)

2 Development of physical culture and sports for 2006-2015 none 3 - - (the Orenburg region)

3 Development of Russian transport system for 2010-2015 yes 1 50.037 50.037 (the Orenburg region) (2012)

4 Development of broadcasting in the Russian Federation for none 64 618.997 618.997 2009-2015 (the Orenburg region) (2012)

5 Development of education for 2011-2015 (the Orenburg none 1 40 40 region) (2012)

6 Additional guarantees for social support rendered to yes 108 1.338 1.338 orphans and children without parental care (the Penza (2012) region)

7 Affordable housing (the Ulyanovsk region) yes 2 18,616.977 - (2013)

07 www.mrsk-volgi.ru EXCELLENT ENERGY! 090 | 091

COMPANY’S USE OF POWER RESOURCES

Item Type of energy resource Volume in physical terms Volume, th. rub. (inclusive of No. VAT)

1. Heat energy, Gcal 43,359.97 43,281.89

2. Electric energy, th. kW*h 115,303.54 345,175.96

3. Fuel and lubricants

3.1. Fuel AI 80 l 2,427,426.98 60,006.41

3.2. Fuel AI 92 l 10,348,308.23 260,273.03

3.3. Fuel AI 95 l 932,484.65 30,484.70

3.4. Diesel fuel (l) 5,626,423.20 145,299.77

3.5. Natural gas (th. m3) 585.14 1,631.07 IDGC OF VOLGA ANNUAL REPORT 2012 TARIFF POLICY

TARIFF 08 POLICY

IDGC of Volga, JSC is a company involved in activities regulated by the Government: delivery of electric power transmission services and technological connection of consumers.

Decisions made at the governmental level are important JSC. The principle of this method is the attraction of infor the Company and have effect on the Company’s profit- vestments into the power industry with return within a ability, financial stability and attraction for investors. long period (35 years) without exceeding the limit tariff In 2012, the RF Government pursued the policy of growth. tight restraint of electric power tariffs launched in 2011 as a result of liberalization of electric power and capacity To meet the legal requirements, the Company’s branch- retail market. es jointly with the executive authorities of the RF con- In 2012, the Government passed a number of funda- stituent entities adjusted and coordinated all long-term mental tariff regulations governing the activities of regula- parameters for RAB-regulation with the Federal Tariff tory bodies, network organizations and service consumers Service of Russia. Thus, the following resolutions were over a long period. passed: ̤̤ extension of the first long-term regulation period Decree No. 1178 “On Price Setting Method for Regu- with the expiry date not earlier than July 01, 2017; lated Prices (Tariffs) in Electric Power Industry” dated ̤̤ alteration of long-term parameters of tariff regula- December 29, 2011 adopted by the RF Government tion in compliance with borrowing criteria; changed both tariff regulation time and regulation sys- ̤̤ change of invested capital amount; tem. Meanwhile, the preset annual rate of tariff growth ̤̤ approval of long-term investment programs for the shall not exceed the forecast indicator of social and period from 2012 through 2017; economic development of the Russian Federation. In ̤̤ approval of indicators of reliability and quality of de- addition: livered services for the period through 2017. ̤̤ annual tariff change was rescheduled from January 01 to July 01; Thus, successful reapproval of long-term parameters con- ̤̤ mandatory adjustment (reapproval) of long-term firmed the priority of the RAB-based regulation method RAB parameters was introduced, and the first regula- before other regulation methods: «costs +» and long-term tion period was extended at least to July 01, 2017; indexing method. ̤̤ rules of using the method of profitability of invested The tariffs for electric power transmission services capital to regulate tariffs of organizations delivering and technological connection delivered by the Company electric power transmission services were modified. in 7 regions are set by a competent executive body of RF constituent entity in the domain of the state regulation of Starting January 01, 2011, the method of RAB-based tariff tariffs individually for each branch of the Company. regulation was applied to the branches of IDGC of Volga, 08 www.mrsk-volgi.ru EXCELLENT ENERGY! 092 | 093

By the volume of electric grid assets almost in all ter- In 2012, the «upper boiler» scheme was introduced in the ritories within the area of responsibility of IDGC of Volga, Chuvash Republic. Other areas serviced by the Company JSC, the branches have a significant market share among were covered by the «mixed boiler» scheme implying that all grid companies of the region. the branches act both as network service payers and re- In each region, the grid tariffs were set with account ceivers of power transmission services basing on con- of particular features of tariff setting method: the regula- tracts signed with sales companies and direction of net tory body adopts a proper «boiler» method for forma- electric power flow. tion of a common price of services for end consumers The below graph shows the dynamics of change in regardless of technological connection to a network or- average tariffs for power transmission services in the ganization. The applicable «boiler formation» schemes branches of IDGC of Volga, JSC per 1 kWh of boiler pro- are seldom subjected to annual changes. ductive supply for 2011-2012:

Average electric power transmission tariff, rub./MWh

0 300 600 900 1200 1500 Chuvashenergo 764.3 734.2 +4.1%

Penzaenergo 1,443.5 1,415 +2%

Orenburgenergo 1,091.8 1,342.4 -18.7% 860 Mordovenergo +4.7% 821 Ulyanovsk 832.8 +9.4% Distribution Grids 761.4 Saratov 1,041.3 +3.1% Distribution Grids 1,010.4

Samara 520.4 Distribution Grids 503.9 +3.3%

IDGC of Volga, 838.9 -4.4% JSC 877.6

2011 2012 IDGC OF VOLGA ANNUAL REPORT 2012 TARIFF POLICY

The average electric power transmission tariff of IDGC of of Volga, JSC the share of which has a different effect on Volga, JSC includes the cost of services of FGC UES, JSC the average tariff over IDGC of Volga, JSC. purchase of losses from guarantying suppliers, services of In 2012, the share of own costs of the branches in inferior territorial grid organizations and necessary costs the structure of the average tariff is 40%. associated with maintenance of power facilities of IDGC

Structure of average tariff for electric power transmission through the grids of IDGC of Volga, JSC in 2011-2012

22%

28% 40% 36% 2011 2012

23% 12% 25%

13%

Maintenance rate TGO rate FGC rate Loss rate 08 www.mrsk-volgi.ru EXCELLENT ENERGY! 094 | 095

The end consumer of electric power is mostly interested According to a new mandatory requirement, the executive in a general average electricity tariff with account of all authorities of the RF constituent entities shall set sev- components, including costs of the wholesale market eral types of technological connection rates: standardized (generation, networks of FGC UES, commercial infrastruc- rates (in 2001 prices), per 1 kW of maximum capacity (in ture of the wholesale market) and retail market (regional current prices) and in the form of formulas. network organizations and guaranteeing suppliers). These rates are approved with account of the invest- Since 2011, the Government has regulated only the ment component encompassing costs of new «last mile» electric grid complex and sales markup of guaranteeing construction. suppliers approved at the regional level; as for the whole- The costs of the following measures were excluded sale market, the price is formed under the influence of from costs previously added to the investment component demand, price and offer of the electric power and capacity. of the price: organization of the automated power meter- The fraction of the network and sales component in ing, telemechanics (remote control and measurements), the final electricity tariff set for consumers is not subject relay protection automation devices, communication to annual violent fluctuations and amounts up to 29%, devices; capacitive current compensation and profit tax thus the maximum fraction of 71% having impact on the expenses. growth of tariffs for the end consumer is assigned to the The above changes covered the tariff resolutions federal component. on payment for technological connection passed by the The governmental changes made in regulations in regulatory bodies for 2013. 2012 also covered the principles of tariff setting for tech- In 2012, the technological connection rates only for nological connection services. two branches were changed, namely: tariff resolution on In September, 2012, new methodological instruc- Saratov Distribution Grids (after expiry of its period on tions for calculation of price of the technological connec- December 31, 2011) and Samara Distribution Grids (as the tion to electric grids were adopted and rules for techno- tariff was not changed for three years from 2009 till 2011). logical connection (lower cost of technological connection The below table shows the changes in technologi- almost for all categories of consumers and shorter con- cal connection prices for the most in demand category nection time) were adjusted. of consumers — legal entities with connected capacity of power facilities of up to 100 kW and voltage of 0.4 kV.

Branch 2011 2012 Deviation,% (rub./kW exclusive of VAT) (rub./kW exclusive of VAT)

Saratov DG 4,353 4,679 7.4%

Samara DG 870 1,099 26.3%

Ulyanovsk DG 749 749 0%

Orenburgenergo 2,272 2,272 0%

Mordovenergo 94 94 0%

Chuvashenergo 2,115 2,115 0%

In 2012, the regulatory bodies passed 200 resolutions on individual tariffs for technological connection for the branches of IDGC of Volga, JSC. The tariff for technological connection set for the privileged consumers according to the list defined by the current legislation remains unchanged, 550 rub./connection (inclusive of VAT). IDGC OF VOLGA ANNUAL REPORT 2012

EXCELLENT FOR INVESTMENTS ACTIVITY!

03 THE GROWTH OF CAPITAL INVESTMENT AS COMPARED 122% TO 2011 www.mrsk-volgi.ru EXCELLENT ENERGY! 096 | 097 EXCEL- LENT FOR INVESTMENT ACTIVITY 62.1% FINANCING OF THE INVESTMENT PROGRAM BY MEANS OF THE COMPANY’S OWN SOURCES

mln. rub. Zaretskiy 11,089 Dmitriy financing of capital invest- Lvovich ments in 2012 Deputy General Director for Capital Construction of IDGC of Volga, JSC “Upgrade, renovation 780 MVA and improvement transformer capacity being of equipment reliability introduced are the main directions of our investments.” 1,753 km length of power lines being installed IDGC OF VOLGA ANNUAL REPORT 2012 INVESTMENT ACTIVITY

INVESTMENT 09 ACTIVITY

PARAMETERS OF INVESTMENT ACTIVITY

Implementation of the Investment Program in 2012: — capital investment 9,246.155 million rub.; — commissioned fixed assets in the amount of 8,741.457 million rub.; — amount of financing 11,088.882 million rub.;

Commissioned facilities: — power transmission line 1,752.7 km; — transformer capacities 780,15 MVA. 09 www.mrsk-volgi.ru EXCELLENT ENERGY! 098 | 099

Main parameters of investment program implementation for 2012, million rub.

IDGC/branch 2012 год

Capital investments Fixed assets Financing Capacity Capacity growth (exclusive of VAT) commissioning (inclusive of commissioning VAT) MVA km MVA km

Mordovenergo 491.180 616.253 579.155 106.33 44.98 85.51 28.09

Orenburgenergo 2,332.845 2,087.446 2,622.317 115.70 690.22 67.17 311.71

Penzaenergo 1,086.869 830.774 1,223.957 22.05 216.78 10.98 114.17

Samara DG 1,994.140 1,946.314 2,745.281 109.94 226.15 70.38 113.16

Saratov DG 2,084.858 2,074.638 2,529.164 263.38 312.69 43.92 71.13

Ulyanovsk DG 596.227 548.089 674.576 100.18 77.70 40.66 26.22

Chuvashenergo 614.166 598.006 656.931 62.58 184.19 28.00 143.10

Executive Board 45.871 39.939 57.501 - - - -

Total for IDGC of Volga, JSC 9,246.155 8,741.457 11,088.882 780.15 1,752.70 346.62 807.58

Dynamics of capital investments volumes, million rub.

IDGC/branch Capital investment volume

2010 2011 2012

Mordovenergo 331.169 435.239 491.180

Orenburgenergo 1,203.502 1,860.037 2,332.845

Penzaenergo 528.102 784.176 1,086.869

Samara DG 804.658 1,548.941 1,994.140

Saratov DG 893.378 1,997.368 2,084.858

Ulyanovsk DG 226.249 507.923 596.227

Chuvashenergo 259.005 403.697 614.166

Executive Board 7.448 30.456 45.871

Total for IDGC of Volga, JSC 4,253.512 7,567.836 9,246.155 IDGC OF VOLGA ANNUAL REPORT 2012 INVESTMENT ACTIVITY

Dynamics of capital investments, million rub.

10,000 9,246.155

8,000 7,567.836

6,000

4,000 4,253.512 2,332.845 1,997.368 2,084.858

2,000 1,994.14 1,860.037 1,548.941 1,203.502 1,086.869 893.378 784.176 804.658 614.166 507.923 596.227 528.102 403.697 435.239 491.18 331.169 226.249 259.005 30.456 45.871 0 7.448 Mordov- Orenburg- Penzaenergo Samara DG Saratov DG Ulyanovsk DG Chuvash- Executive Total for energo energo energo board IDGC of Volga, JSC

2010 2011 2012

The growth of capital investments was observed in IDGC The major portion of capital inestments in 2012 was used of Volga, JSC and its branches within the area of respon- to upgrade, reconstruct and improve the operational reli- sibility of IDGC of Volga, JSC in 2010-2012. In 2012, the ability of the distribution electric grid complex in order to Company’s capital investments increased by 4,992.643 prevent aging of electric grid equipment, maintain opera- million rub. or by 117.4% as compared to 2010 and by tional characteristics of electric grid equipment within the 1,678.319 million rub. or by 22.2% as compared to 2011. acceptable range, develop the business of electric grid The growth of capital investment observed in 2012 services, boost the sales of electric power transmitted as compared to 2010 and 2011 is rooted in higher amount through the grids by connection of new consumers, en- of funds invested into capital projects covered by tariff sure system reliability of the grid and continuous supply resolutions of the constituent entities of the Russian Fed- of the required volume of electric power. eration within the area of responsibility of IDGC of Volga, JSC and in switching to RAB-regulation. In all Company’s branches, the tariffs have been set on the basis of long-term regulation parameters using RAB method of return on invested capital. 09 www.mrsk-volgi.ru EXCELLENT ENERGY! 100 | 101

Trend and structure of capital investments

In IDGC of Volga, JSC

In IDGC of Volga, JSC the actual capital investment in 2012 ̤̤ 136.469 million rub. for purchase of fixed asset amounted to 9,246.155 million rub. The amount of new fixed assets totaled 8,741.457 million Including: rub.; and 1,752.702 km of power transmission lines were ̤̤ 7,478.466 million rub. for technical upgrading and commissioned. Transformer capacity input amounted to reconstruction; 780.154 MVA. ̤̤ 1,631.220 million rub. for new construction and expansion of existing facilities;

In Mordovenergo, a branch of IDGC of Volga, JSC

In Mordovenergo, a branch of IDGC of Volga, JSC the ac- transformers with the capacity of 2х40 MVA and 0.162 tual capital investment amounted to 491.18 million rub. km of power transmission lines. 2_ “Expansion of the energy production and techno- Including: logical complex 110/6 kV substation “Vostoch- ̤̤ 179.572 million rub. for technical upgrading and re- naya” (new construction). construction; Location: ul. Suschinskogo, Saransk, the Republic ̤̤ 300.520 million rub. for new construction in 2012; of Mordovia. ̤̤ 11.088 million rub. for purchase of fixed assets. Project goals and objectives: The actual amount of new fixed assets totaled 616.253 ̤̤ to replace worn and out-of-date equipment; million rub. ̤̤ to enhance reliability of power suppl. 44.979 km of power transmission lines were commissioned. Transformer capacity input amounted to In 2012, the capital investment amounted to 62.366 mil- 106.330 MVA. lion rub. In 2012, the construction of 1st start-up complex Transformer capacity input amounted to 106.330 MVA. was completed. The Company commissioned 2.219 km Main facilities constructed in 2012 are as follows: of power transmission lines. 1_ Construction of 110/10 kV substation “Erzya” Works planned for 2012 were fully completed. (new construction). Location: ul. Vesennyaya, Saransk, the Republic of Mordovia.

Project goals and objectives: ̤̤ to construct new production facilities; ̤̤ to reduce the capacity shortage.

In 2012, capital investments amounted to 189.326 million rubles. In 2012, the construction of 1st start-up complex was completed. The Company commissioned power IDGC OF VOLGA ANNUAL REPORT 2012 INVESTMENT ACTIVITY

In Orenburgenergo, a branch of IDGC of Volga, JSC

In Orenburgenergo, a branch of IDGC of Volga, JSC the In 2012, the Company completed the construction of actual capital investment amounted to 2,332.845 mil- 110 kV power transmission line “Kiembay – Priisk—Ku- lion rub. mak — Svetly”, 2 stage, 67.47 km. Works planned for 2012 were fully completed. including: 2_ Reconstruction of “Aeroport” substation (com- ̤̤ 1,846.211 million rub. for technical upgrading and plex reconstruction of the substation along with reconstruction; replacement of transformers with two 25 MVA ̤̤ 439.244 million rub. for new construction in 2012; transformers, 2 and 3 stages) (modernization ̤̤ 47.390 million rub. for purchase of fixed assets in and technical upgrading). 2012. Location: 21 km, Nezhinskoye Roadway, Nezhinka village, Orenburgskiy district, the Orenburg Region. The actual amount of new fixed assets totaled 2,087.446 million rub. Project goals and objectives: 690.22 km of power transmission lines were commis- ̤̤ to provide reliable power supply; sioned. ̤̤ accumulation of capacity reserve for further connection of industrial and administrative and household Transformer capacity input amounted to 115.7 MVA. consumers of the Orenburg district. Main facilities constructed in 2012 are as follows: 1_ 110 kV power transmission line “Kiembay — In 2012, capital investments amounted to 168.226 mil- Priisk-Kumak — Svetly” instead of the exist- lion rubles. ing one (2 stage) (new construction). Location: Svetlinskiy district, Yasnenskiy district, Works completed in 2012: the Orenburg Region. ̤̤ replacement of the obsolete and worn-out equipment at the outdoor switchgear ORU-110 kV; Project goals and objectives: ̤̤ replacement of a power transformer TMTN- ̤̤ to enhance reliability of power supply; 10000/110 with a transformer TDN-25000/110; ̤̤ to improve transfer capacity of 110 kV power transmission line. Works planned for 2012 were fully completed. Capacity input was 25 MVA (2 stage). In 2012, capital investments amounted to 1.355 million rubles.

In Penzaenergo, a branch of IDGC of Volga, JSC

In Penzaenergo, a branch of IDGC of Volga, JSC Transformer capacity input amounted to 22.047 MVA. the actual capital investment amounted to 1,086.869 Main facilities constructed in 2012 are as follows: million rub. 1_ Reconstruction of 110 kV power transmission line “Mokshan-Novaya-B.Demyanovsk” including: (modernization and technical upgrading). ̤̤ 986.650 million rub. for technical upgrading and re- Location: Nizhnelomovskiy and Mokshanskiy dis- construction; tricts, the Penza Region. ̤̤ - 98.959 million rub. for new construction in 2012; ̤̤ - 1.261 million rub. for purchase of fixed assets in Project goals and objectives: 2012. ̤̤ to ensure reliable electric power supply of the existing consumers; The actual amount of new fixed assets totaled 830.774 million rub. In 2012, capital investments amounted to 164.993 mil- 216.779 km of power transmission lines were com- lion rubles. missioned. 09 www.mrsk-volgi.ru EXCELLENT ENERGY! 102 | 103

Works completed in 2012: Project goals and objectives: ̤̤ Installation of multi-sided metal supports (106 pcs) ̤̤ to ensure reliable electric power supply of the exist- and metallic angle-tension towers (39 pcs); ing consumers. ̤̤ Installation of lightning protection cable MZ-11.0-V- OZh-N-R – 29.863 km. In 2012, capital investments amounted to 110.639 mil- ̤̤ Installation of a heat-resistant aluminum-steel wire lion rubles. – ASPT 185/43 – 29.863 km. ̤̤ Crossing over the federal public road M-5 «Ural». Works completed in 2012: ̤̤ replacement of the equipment at the outdoor switch- Works planned for 2012 were fully completed. gear ORU-110 kV. The facility will be commissioned in Q4, 2015 after recon- ̤̤ Installation of the reactive power compensation de- struction of the entire section of 110 kV power transmis- vice. Installation of URZA equipment and automated sion line. information and measuring systems for electric power metering. 2_ Reconstruction of 110/10 kV substation “No- ̤̤ Reconstruction of a substation control building. vaya” (modernization and technical upgrading. Location: Nizhniy Lomov, Nizhnelomovskiy district, Works planned for 2012 were fully completed. the Penza Region. The facility was put into operation in Q4, 2012

In Samara Distribution Grids, a branch of IDGC of Volga, JSC

In Samara Distribution Grids, a branch of IDGC of Volga, ̤̤ to ensure easy connection of new consumers. JSC, the actual capital investment amounted to 1,994.140 million rub. Works completed in 2012: ̤̤ reconstruction of 35 kV outdoor switchgear including: ̤̤ installation of 6 kV cells in the indoor switchgear; ̤̤ 1,585.322 million rub. for technical upgrading and reconstruction; Works planned for 2012 were fully completed. ̤̤ 357.397 million rub. for new construction in 2012; Capacity input in 2012 was not planned. ̤̤ 51.421 million rub. for purchase of fixed assets in 2012. 2_ Connection of generation facilities of Novokuy- byshevskaya CHP The actual amount of new fixed assets totaled 1,946.314 Location: Novokuybyshevsk urban district, the Sa- million rub. mara Region. 226.146 km of power transmission lines were commissioned. Project goals and objectives: ̤̤ connection of generation facilities to eliminate Transformer capacity input amounted to 109.935 MVA. capacity shortage in the Novokuybyshevsk district Main facilities constructed in 2012 are as follows: 1_ 110 kV substation “Krasnoglinskaya”: Re- Transmission of capacity of Novokuybyshevsk CHP-1 after construction with replacement of the power installation of the power unit GTU-200 MW featuring three transformator 1х31.6 and 1х40 with 2х63 MVA gas turbines with the unit capacity of 77 MW. transformers; reconstruction of 110 kV, 35 kV In 2012, capital investments amounted to 203.698 mil- outdoor switchgears and 6 kV indoor switch- lion rubles. gear (modernization and technical upgrading) In 2012, capital investments amounted to 150.196 Works completed in 2012: million rubles. ̤̤ construction of reinforced concrete supports and Location: 20A, Moskovskoye Roadway, Mekhzavod metal supports; settlement, Krasnoglinskiy district, Samara, the Sa- ̤̤ installation of the wire and overhead protection cable; mara Region. ̤̤ cable routing; ̤̤ construction of 35 kV and 110 kV cells; Project goals and objectives: ̤̤ construction of 110 kV outdoor switchgear. ̤̤ to enhance reliability of power supply to consumers; IDGC OF VOLGA ANNUAL REPORT 2012 INVESTMENT ACTIVITY

Works planned for 2012 were fully completed. Facility “Reconstruction and new construction of 110 Capacity input in 2012 was 23.574 km. kV power transmission line “Novokuybyshevskaya-3” Including: (NkCHP-1 – the substation “Kryazhskaya”)”: ̤̤ Construction of open transition points No.1, 2 at 110 Facility “Installation of overhangs of 110 kV power kV outdoor switchgear; transmission line NK-5 at 220 kV substation “Novokuy- ̤̤ Construction of the new double-circuit section of 110 byshevskaya” with construction of new 110 kV power kV power transmission line (5.326 km). transmission lines “Novokuybyshevskaya-5” (NkCHP-1 — the Novokuybyshevskaya substation) and 110 kV pow- Joint suspension section of 110 kV power transmission er transmission line “Novokuybyshevskaya-6” (NkCHP-2 line “NK-3” (supports Nos. 41-89) (No. 41 on the circuit - the Novokuybyshevskaya substation)”: of 110 kV “Utyos-2”) with the existing 110 kV power ̤̤ Installation of new reinforced concrete and metal transmission line “Utyos-2” up to support No.75, and supports; 110 kV power transmission line “Utyos-1” (supports ̤̤ Installation of a 4.8 km long new wire AS-240/32 Nos. 76-89): along the route of the power transmission line (6 ̤̤ Installation of new overhead protection cable; wires); ̤̤ Installation of wires AS-185/29, AS 120/24; ̤̤ Installation of fiber optic communication lines (FOCL). Section of new 110 kV power transmission line “NK-3” (support No. 89 - cell No. 13 of 110/35/6 kV substation Facility “Construction of 110 kV power transmission “Kryazhskaya”): line “Construction of a branch line from 110 kV power ̤̤ Construction of overhangs of the circuit of 110 kV transmission line “Dubovoumetskaya-2 at the Brizol power transmission line “NK-3” substation” (construction of a branch line from 220 kV ̤̤ Replacement of the wire and overhead protection substation “Novokuybyshevskaya”)”: cable. ̤̤ Installation of wires AS185 – 0.585 km (0.183 km along the route) on a new support; Facility “Construction of 35 kV high-voltage cable line ̤̤ Installation of the overhead protection cable MZ-9.2- KNPZ-1 (the substation “Kryazhskaya-GPP-1 KNPZ”)”: V-OZh-N-R – 0.12 km (0.088 km along the route) ̤̤ Installation of supports and a wire AS 150/24 (3 between the new support and the existing support wires) - 0.165 km. No. 167, between the new support and the portal of ̤̤ Installation of 35 kV transition point. 220 kV substation “Novokuybyshevskaya”. ̤̤ Routing of 35 kV cable line (0.485 km)

Facility “Reconstruction and expansion of 110 kV and 35 kV line cells of 110/35/6 kV substation “Kryazhskaya”:

̤̤ reconstruction and expansion of 110, 35 kV cells

In Saratov Distribution Grids, a branch of IDGC of Volga, JSC

In Saratov Distribution Grids, a branch of IDGC of Volga, 312.693 km of power transmission lines were commis- JSC, the actual capital investment amounted to 2,084.858 sioned. million rub. Transformer capacity input amounted to 263.384 MVA. including: ̤̤ 1,937.887 million rub. for technical upgrading and Main facilities constructed in 2012 are as follows: reconstruction; 1_ Reconstruction of 110/35/6 kV substation “Za- ̤̤ 127.706 million rub. for new construction in 2012; padnaya” in Saratov (modernization and techni- ̤̤ 19.265 million rub. for purchase of fixed assets in cal upgrading). 2012. Location: 187, ul. Shelkovichnaya, Saratov.

The actual amount of new fixed assets totaled 2,074.638 Project goals and objectives:: million rub. ̤̤ to provide reliable power supply. 09 www.mrsk-volgi.ru EXCELLENT ENERGY! 104 | 105

In 2012, the Company installed a new block and modular – Orlov Gay” (27.025 km). During reconstruction of 110 kV substation control building manufactured by TM Samara- power transmission line “Ershov – Orlov Gay”, the Com- Elektroshchit, CJSC, control cabinets and telemechanics pany replaced faulty reinforced concrete supports (8 pcs), (relay protection and automation equipment) on the mi- installed 103 reinforced concrete supports and 4 anchor croprocessor base. metal supports, as well as replaced line accessories, insu- In 2012, capital investments amounted to 137.144 lators, vibration dampers and overhead protection cable. million rubles. In 2012, capital investments amounted to 21.692 million rubles. 2_ Reconstruction of 110/35 kV substation Works planned for 2012 were fully completed. “Storozhovka” (modernization and techni- Capacity input in 2012 was 27.025 km. cal upgrading). Location: Storozhovka village, Tatischevskiy district, 4_ Construction of 110/35/10 kV substation “Khop- the Saratov Region. er-1” (new construction) Location: Balashov, the Saratov Region. Project goals and objectives: ̤̤ to provide reliable power supply. Project goals and objectives: ̤̤ to improve reliability of power supplies to the exist- Works completed in 2012: ing consumers; ̤̤ installation of two transformers TDTN-40000/110- ̤̤ to reduce the capacity shortage. U1 (2 х 40 MVA); ̤̤ installation of modular integrated transformer sub- This project covered the construction of an up-to-date station (M) - 110-AKhL1-5N. two-transformer 110/35/10 kV substation (2х25 MW) at a new site near the existing 110 kV substation “Khoper”: Works planned for 2012 were fully completed. ̤̤ Installation of 10 kV KRUM with cabinets D 12 P - 4 Capacity input was 80 MVA. modules; In 2012, capital investments amounted to 46.167 million ̤̤ Installation of supports for overhangs of 35 and 110 rubles. kV power transmission lines (5 anchor supports in- The facility was put into operation in Q4, 2012. stalled); ̤̤ Installation of a power transformer TDTN-25000- 3_ Reconstruction of 110 kV power transmission 110U1; line “Ershov — Orlov Gay” (modernization ̤̤ Dismantling, tackling and installation of a power and technical upgrading). transformer TDTN-25000-110U-1 at 110/35/10 kV Location: Yershovskiy district, the Saratov Region. substation “Khoper”; ̤̤ Installation of the equipment of 110/35 kV outdoor Project goals and objectives: switchgear. ̤̤ to provide reliable power supply to consumers. In 2012, capital investments amounted to 114.654 mil- This 110 kV power transmission line is a backbone line lion rubles. having considerable effect on reliability of power supply Works planned for 2012 were fully completed. to three districts of the Saratov region. Capacity input in 2012 was 50 MVA, capacity gain In 2012, the Company completed the second stage of – 25 MVA. reconstruction of 110 kV power transmission line “Ershov The facility was put into operation in Q4, 2012.

In Ulyanovsk Distribution Grids, a branch of IDGC of Volga, JSC

In Ulyanovsk Distribution Grids, a branch of IDGC of Volga, including: JSC, the actual capital investment amounted to 596.227 ̤̤ 578.954 million rub. for technical upgrading and re- million rub. construction; ̤̤ 127.706 million rub. for new construction in 17.273; ̤̤ the fixed assets were not purchased in 2012.

The actual amount of new fixed assets totaled 548.089 million rub. IDGC OF VOLGA ANNUAL REPORT 2012 INVESTMENT ACTIVITY

77.698 km of power transmission lines were commis- Works planned for 2012 were fully completed. sioned. Transformer capacity input amounted to 100.182 2_ Reconstruction of 110/6 kV substation “Avto- MVA. zapchast” (modernization and technical upgrading). Main facilities constructed in 2012 are as follows: Location: 1, ul. Prokofieva, Zasviyazhskiy district, Ulyanovsk. 1_ Reconstruction of 110/10 kV substation “Tsen- tralnaya” (modernization and technical up- Project goals and objectives: grading). ̤̤ to provide reliable power supply; Location: 7, ul. Kuybysheva, Leninskiy district, Uly- ̤̤ to increase the volume of electric power transmis- anovsk. sion.

Project goals and objectives: In 2012, capital investments amounted to 51.359 million ̤̤ to provide reliable power supply; rubles. ̤̤ to increase the volume of electric power transmission. Works completed in 2012: ̤̤ installation of 110 kV modular integrated trans- In 2012, capital investments amounted to 82.293 million former substation; rubles. ̤̤ installation of a new 25 MVA transformer; ̤̤ installation of a modular substation control building; Works completed in 2012: ̤̤ installation of protection panels in the substation ̤̤ installation of 110 kV modular integrated trans- control building. former substation; ̤̤ installation of 110 kV equipment; Works planned for 2012 were fully completed. ̤̤ installation of protection and control cabinets in the Capacity input in 2012 was 25 MVA. substation control building.

In Chuvashenergo, a branch of IDGC of Volga, JSC

In Chuvashenergo, a branch of IDGC of Volga, JSC, the ac- Project goals and objectives: tual capital investment amounted to 614.166 million rub. ̤̤ to satisfy growing needs of consumers for electric capacity and power; including: ̤̤ to improve reliability of power supplies to the exist- ̤̤ 317.999 million rub. for technical upgrading and re- ing consumers. construction; ̤̤ 290.122 million rub. for new construction in 2012; In 2012, capital investments amounted to 53.241 million ̤̤ 6.045 million rub. for purchase of fixed assets in rubles. 2012. Works completed in 2012: The actual amount of new fixed assets totaled 598.006 ̤̤ installation of a power transformer TRDN-25000 – 2 million rub. pcs.; 184.192 km of power transmission lines were commis- ̤̤ installation of 110 kV equipment. sioned. Transformer capacity input amounted to 62.580 MVA. Works planned for 2012 were fully completed. Capacity input was 50 MVA

Main facility constructed in 2012 is as follows:

1_ Reconstruction of 110/10 kV substation “Ra- duga” (modernization and technical upgrading). Location: 3, ul. Kadykova, Cheboksary, the Chuvash Republic. 09 www.mrsk-volgi.ru EXCELLENT ENERGY! 106 | 107

In the Executive Board of IDGC of Volga, JSC

The actual capital investment amounted to 45.871 mil- The actual amount of new fixed assets totaled 39.939 lion rub. million rub.

Structure of capital investments in 2012 and for 2013-2017

The estimated amount of capital investments in the con- amount of 44,692 million rub. or 85.9%, new construc- struction, upgrading and reconstruction of the facilities of tion in the amount of 7,181 million rub. or 13.8 %; other IDGC of Volga, JSC for the 2012-2017 period totals 52,012 investments (purchase of fixed assets) – 140 million rub. million rub., including upgrading and reconstruction in the or 0.3 %.

Structure of capital investments upgrading new construction and reconstruction 13.8% 85.9%

other 0.3% 2012 IDGC OF VOLGA ANNUAL REPORT 2012 INVESTMENT ACTIVITY

The main portion of capital investments was allocated for ̤̤ Installation of emergency control and operational upgrading and reconstruction, improvement of reliability automatic equipment; of operation of the distribution electric grid complex re- ̤̤ Installation of teleautomatic and communication quired to prevent the obsolescence process as well as to systems; ensure the acceptable performance of the electric grid ̤̤ Measures for counter-terrorism security of the fa- equipment, system reliability of the grid and continuous cilities. supply of the required volume of electric power. The main target activities covered by the investment pro- The investment program was formed with account of gram of the Company for 2012-2017 are as follows: re- the following target activities: newal of the main and auxiliary equipment, improvement ̤̤ renewal of the main and auxiliary equipment; of the energy efficiency and energy saving. ̤̤ Energy saving and improvement of energy efficiency;

Capital investments and commissionning of fixed assets for 2012-2017, million rub.

5,000 4,750.68

4,000

3,000 2,877.00 2,620.05 2,501.90 2,503.95 2,332.84 2,165.77 2,000 2,084.86 1,994.14 1,744.38 1,718.54 1,693.94 1,679.04 1,493.89 1,413.80 1,341.37 1,264.23 1,167.12 1,192.63 1,086.87

1,000 1,044.50 1035.95 786.55 750.95 760.06 620.41 615.40 596.23 614.17 533.53 505.91 527.26 491.18 454.48 465.51 401.12 372.27 365.04 331.16 302.39 314.64 320.26 45.87 28.91 27.91 0 23.60 26.46 25.03 2012 2013 2014 2015 2016 2017

Samara DG Saratov DG Ulyanovsk DG Mordovenergo Orenburgenergo Penzaenergo Chuvashenergo Executive Board 09 www.mrsk-volgi.ru EXCELLENT ENERGY! 108 | 109

As compared to the actual progress of implementation of the investment program in 2012, the amount of capital investments under the investment program adopted by IDGC of Volga, JSC for 2013 was decreased by 16.9%, for 2014 — decreased by 17.4%, for 2015 — decreased by 3.3%, for 2016 — increased by 37%, for 2017 — decreased by 36.9%. The above amounts of capital investments calculated with account of conditions of the annual financial stability of the Company match the investment component set under tariff balance decisions.

Commissionning of fixed assets for 2012-2017, million rub.

5,000 4,825.15

4,000

3,000 2,911.63 2,768.39 2,620.74 2,554.75 2,352.26 2,087.45 2,000 2,074.64 1,946.31 1,796.42 1,785.01 1,633.68 1,475.60 1,481.97 1,435.32 1,434.36 1,336.10 1,302.31 1,142.06 1,000 1,091.64 841.80 830.77 810.70 747.59 752.92 724.86 628.49 608.09 616.25 598.01 569.99 548.09 497.37 456.83 419.78 390.49 326.51 372.49 321.98 318.07 291.93 287.82 28.91 39.94 26.46 25.03 23.60 0 27.91 2012 2013 2014 2015 2016 2017

Samara DG Saratov DG Ulyanovsk DG Mordovenergo Orenburgenergo Penzaenergo Chuvashenergo Executive Board IDGC OF VOLGA ANNUAL REPORT 2012 INVESTMENT ACTIVITY

As compared to the actual volume of commissioned fixed 2014 and by 32% in 2017, and will be increased: by 6.5% in assets in 2012, the volumes of commissioning of the fixed 2015 and by 41.8% in 2016. Each year, the planned volume assets under the investment program adopted by the of commissioning of fixed assets will not be less than the Company will be reduced: by 11.1% in 2013, by 8.3% in planned amount of depreciation to be accrued.

Long-term investment program

Criteria for adding investments projects to the long- According to the Decree of the RF Government No. 977 term investment program: “On Investment Programs of Subjects of Electric Power ̤̤ lowering obsolescence of the equipment; Industry” dated December 01, 2009, all investment pro- ̤̤ necessity of ensuring and improving power supply grams of the branches were approved by the executive reliability; authorities of the RF constituent entities. ̤̤ actual and real necessity for new construction or reconstruction of added facilities; According to the investment program approved by the ̤̤ discharging liabilities before SO UES, JSC; executive authorities of the RF constituent entities for ̤̤ lowering volumes of the construction in progress; 2012-2017, the planned financing in 2013-2017 will ̤̤ executing design and survey works, reducing vol- amount to 50,276.357, including: umes of unexecuted design and survey works. ̤̤ in 2013 – 8,902.647 million rub.; ̤̤ in 2014 – 9,090.468 million rub.; ̤̤ in 2015 – 10,160.548 million rub.; ̤̤ in 2016 – 14,295.088 million rub.; ̤̤ in 2017 – 7,827.607 million rub. 09 www.mrsk-volgi.ru EXCELLENT ENERGY! 110 | 111

Capital investments for 2012-2017 million rub.

12,000

9,000

6,000

3,000

0 9,246.2 7,679.9 7,632.9 8,942.7 12,673.7 5,838.3 2012 2013 2014 2015 2016 2017 Total for IDGC of Volga, JSC IDGC OF VOLGA ANNUAL REPORT 2012

EXCELLENT FOR INNOVATIONS

500503

371 www.mrsk-volgi.ru EXCELLENT ENERGY! 112 | 113 EXCEL- LENT FOR INNOVATIONS 100% IMPLEMENTATION OF INNOVATION TECHNOLOGIES AND EQUIPMENT

24 billion rub. total amount of financing of the Innovation-Driven Development Program for Kucherenko 2011-2016 Vladimir Ivanovich Deputy General Director for Technical Issues, Chief Engineer of IDGC of Volga, JSC 3.8 billion rub. financing of the Innovation- “We pursue the policy Driven Development Program of innovation-based in 2012 development which is designed to create a world-calss modern and 87.7 million rub. effective infrastrucure”. financing of research and development projects in 2012 IDGC OF VOLGA ANNUAL REPORT 2012 PRODUCTION ACTIVITY

INNOVATIVE 10 DEVELOPMENT

Innovations at IDGC of Volga, JSC are implemented in ac- the economic and energy efficiency of power supplies to cordance with the Innovative Development Program de- consumers of IDGC of Volga, JSC. veloped for the period 2011—2016. Innovations at IDGC To finance theI nnovative Development Program of Volga, JSC are implemented in accordance with the during the period 2011—2016, 24 billion rub. (inclusive Innovative Development Program developed for the pe- of VAT) are allocated, including 2.4 billion rub. (inclusive riod 2011-2016 and aimed at formation of an effective of VAT) to finance R&D projects. mechanism for implementation of the innovation cycle To finance theI nnovative Development Program in the core activities to contribute to favorable conditions in 2012, 3.8 billion rub. were allocated (inclusive of VAT), for creation of an up-to-date electric grid infrastructure including 87.7 million rub. (inclusive of VAT) to financeR &D meeting the highest global standards in order to improve projects.

Key stages of organization and structure of business processes of innovative activity

Development, analysis Implementation of innovation Registration of rights and selection of innovation concepts, R&D, development to intellectual concepts and projects, and fabrication of pilot property objects marketing researches, market products survey

Gaining economic effect from Implementation and Implementation of pilot the implementation commercialization of projects and trial run of innovation solutions innovation products basing of innovation products on the results of the trial run

Monitoring of operation of the Company’s innovation system, supervision of execution of the innovation program and projects, adjustment of the innovation program 10 www.mrsk-volgi.ru EXCELLENT ENERGY! 114 | 115

One of the basic provisions of the Innovative Development “Donetskaya – Syrtinskaya” of Oenburgenergo, a Program involves the development and implementation of branch of IDGC of Volga, JSC, a PLM – Monitor 2 R&D projects both for the current year and future period system of monitoring of 35-110 kV power transmis- to be executed under contracts entered into with leading sion lines was put into operation for determination of education institutions, external scientific organizations, places of failure and glaze-ice accretions with PLM small and medium business. – Observer and PLM – Sensor monitoring devices. In accordance with the Innovative Development Pro- 6_ At 110/6 kV power transmission line “Parkovaya” of gram of IDGC of Volga, JSC, 19 R&D projects were planned Chuvashenergo, a branch of IDGC of Volga, JSC, a for the year 2012; 15 out of them were fully completed fast system of automatic regulation of compensa- whilst 4 are ongoing multi-year projects. tion current in 6-35 kV grids was put into operation. Most R&D projects in 2012 were implemented in as- 7_ At 110/6 kV power transmission line “Parkovaya” of sociation with small and medium-sized innovative com- Chuvashenergo, a branch of IDGC of Volga, JSC, a panies. Besides, 8 out of 15 implemented R&D projects system of suppression of one-phase short-circuits were fulfilled in association with universities of Saratov, was put into operation, which is based on the princi- Cheboksary, and Novosibirsk. ple of maintaining a resonance mode of compensation and optimal parameters of integrity of the circuit In 2012, the following innovative equipment was in- of zero sequence. stalled at IDGC of Volga, JSC within the framework of 8_ At 110/10/6 power transmission line “Kirovskaya” of R&D projects: Chuvashenergo, a branch of IDGC of Volga, JSC, dry 1_ At 10 kV power transmission line, feeder 1002 of equipment for compensation of capacitive ground 110/35/10 kV substation “Lugansk” of Pravoberezh- current in 6-10 kV distribution grids was put into op- noye Operating Department of Saratov Distribution eration and consists of an arc-suppression coil and Grids, a branch of IDGC of Volga, JSC, a system of a terminal (neutral-phase forming) transformer for melting of glaze-ice accretions was installed based connection of the arc-suppression coil. on a recloser with remote control and automatic system of deicing control. The automated deicing facility In 2012, the following innovative technologies were de- was designed for rated current up to 630 A, rated veloped and implemented at IDGC of Volga, JSC within breaking current 20 kA and is intended to melt ice the framework of R&D projects: on overhead power transmission lines of the follow- 1_ Regeneration of transformer oil with the use of an ing classes: 10 kV and 6 kV, three-phase alternating ejector and changing ballast load in the super-high current, frequency 50 Hz of the systems with any frequency field of the resonator cavity. operating mode of the neutral conductor. 2_ Melting of ice on 6-10 kV overhead power transmis- 2_ At Pravoberezhnoye Operating Department of Sara- sion lines with the use of an automated facility of tov Distribution Grids, a branch of IDGC of Volga, JSC, deicing based on a recloser with remote control and a mobile unit was put into operation for the regenera- automated system of deicing control. tion of transformer oil SVChURM-10000. The mobile 3_ Monitoring of wires of 35-110 kV power transmis- unit is a complex of equipment for heating, clean- sion lines for determination of places of failure and ing, degassing, and regeneration of transformer oil glaze-ice accretions with the use of high-frequency mounted on a truck trailer. impulses with the recording of changes of controlled 3_ At Pravoberezhnoye Operating Department of Sara- parameters. tov Distribution Grids, a branch of IDGC of Volga, JSC, 4_ High-speed system of automatic regulation of 110 kV whole suspension-line long-rod porcelain compensation current in mid-voltage grids, which insulators (type LP75/22/1240-3400) were put into is based on the principle of changing parameters of operation, which are intended for insulation and fas- magnet-coupled circuits. tening of wires on overhead power transmission lines 5_ Compensation of capacitive ground current in 6-10 kV and have high mechanical strength and improved distribution grids with the use of dry power equip- dielectric characteristics. ment. 4_ At 110 kV power transmission line “Buzulukskaya – Savelievskaya” of Orenburgenergo, a branch of IDGC of Volga, JSC, a system of monitoring of the condition of insulation of cable and overhead lines (type OVM-3) was put into operation, which is intended for recording of short-time short circuits and insulation failure with significant energy that do not cause failure of the line. 5_ At 110 kV power transmission line “Kuvandykskaya – Dubenskaya” and 35 kV power transmission line IDGC OF VOLGA ANNUAL REPORT 2012 HUMAN CAPITAL AND SOCIAL RESPONSIBILITY

HUMAN CAPITAL 11 ASSETS AND SOCIAL RESPONSIBILITY

Company’s Human Resources Policy

In the conditions of the current market economy, an effi- In accordance with strategic goals of the Company’s de- cient and appropriately conducted human-resources policy velopment, the following tasks of the human resources of the management of IDGC of Volga, JSC increases the policy have been determined: trust of partners and facilitates the formation and further ̤̤ priority of development and career development of strengthening of a favorable image of the Company in all own human resources of the Company; regions of operations. ̤̤ planning of development of personnel with the maxi- The basis of the human resources policy is the prin- mum use of the potential of labor resources; ciple of retention and development of highly-qualified em- ̤̤ formation of competent and highly professional ployees, recruitment of personnel who conform to high team-spirited workforce; requirements to professional and personal qualities of ̤̤ provision of training, retraining, and advanced train- employees. ing for personnel; Implementing the human resources policy, the Com- ̤̤ creation of required conditions of labor and rest, so- pany is oriented at establishment of long-term labor re- cial protection, provision of guarantees and privileges lations with employees based on the principles of social to employees of the Company; partnership and compliance with labor legislation. The major lines of human resources policy: Based on these provisions, the main goals of the human ̤̤ preparation of personnel development programs to resources policy of the Company are: solve current and future tasks of the Company based ̤̤ ensuring well-trained staff capable to address the on the improvement of training systems and career Company’s objectives in all spheres of its business promotion of employees; operations; ̤̤ development of motivational mechanisms that en- ̤̤ retaining and replenishing the Company’s human sure interest in the final results and growth of labor resources; satisfaction; ̤̤ attracting personnel reserve to implement new ̤̤ development of the system of recruitment and reten- managerial decisions; tion of highly qualified personnel at the Company; ̤̤ increasing the qualitative level of personnel and im- ̤̤ development of new and implementation of the cur- proving the efficiency of human resources utilization; rent social programs of the Company. ̤̤ improving the personnel motivation and incentive system; ̤̤ developing and maintaining a high staff morale and group atmosphere in the Company. 11 www.mrsk-volgi.ru EXCELLENT ENERGY! 116 | 117

Personnel level and structure

Dynamics of the average headcount of IDGC of Volga, JSC in 2010–2012

0 5,000 10,000 15,000 20,000

2010 21,147

2011 21,287

2012 21,371

In 2012, the average headcount of the Company’s staff The staff sufficiency by the end of 2012 was 97%, active amounted to 21,371 persons, that means an increase by personnel turnover as compared with 2011 reduced by 84 people or by 0.4% as compared with 2011. 0.5% and amounted to 6.1%.

Dynamics of the personnel structure of IDGC of Volga, JSC by categories over 2010–2012

0 20 40 60 80 100

57.7% 25.5% 16.8% 2010

57.1% 26.0% 16.9% 2011

56.4% 26.6% 17.0% 2012

Managers Specialists and white collars Workers

The principal share of the Company’s workforce is clas- by the creation of functional subdivisions that provide sified as the “workers” category – 56.4%, the share of for practical implementation of the provisions of Federal “managers” category – 17% and “specialists and white Law No. 261 “On Energy Saving and Increase of Energy collars” – 26.6%. Efficiency”. The quantitative and qualitative personnel Analyses of the dynamics of the personnel struc- structure complies with specifics of activities of IDGC of ture indicate that over the last three years the fraction of Volga, JSC, allowing to successfully achieve current and workers has somewhat decreased, which is determined long-term objectives. IDGC OF VOLGA ANNUAL REPORT 2012 HUMAN CAPITAL AND SOCIAL RESPONSIBILITY

The staff of IDGC of Volga, JSC includes people of all age Comparative analyses over the last three years indicate groups. The majority of the Company’s staff is under 45 a gradual growth of the fraction of young specialists and (about 58%); of whom over 9% are young people under 25. a decrease in the relative number of employees who are Thus, over half of the employees are people in the most 45 years old or older. productive age-group, and the Company’s management emphasizes this fact in planning the Company’s strategic development.

Dynamics of the age personnel structure of IDGC of Volga, JSC over 2010–2012

0 20 40 60 80 100 9.1% 24.2% 37.9% 4.6% 2010 24.3% 9.3% 24.2% 37.1% 5.0% 2011 24.4% 9.3% 23.9% 36.7% 5.4% 2012 24.7%

Working pensioners 25-35 From 45 to pension age Under 25 35-45

The staff of IDGC of Volga, JSC is characterized by an op- For the replenishment and development of human re- timal balance between young enterprising employees and sources potential, branches of the Company have intro- skilled and professional employees sharing their experi- duced a new system of wages, which, due to the increase ence with the youth. of the percentage of the basic bonus for the fulfillment It should be noted that as of December 31, 2012 over of main production and commercial indices, allowed in- 72% of the Company’s staff had higher or secondary voca- creasing wages of technical service personnel. Wages in tional education. The majority of young people, employed the branches of the Company are indexed to the rate of by the Company, has higher education or is graduating inflation each quarter of the year. from the higher educational institutions. The Company carries out a systemic work aimed at increasing attractiveness of IDGC of Volga, JSC as employer in the eyes of potential candidates: the Company performs occupational guidance among schoolchildren, students of elementary, secondary, and higher professional education, develops the system of mentor coaching, training, and motivation of workforce. 11 www.mrsk-volgi.ru EXCELLENT ENERGY! 118 | 119

Dynamics of the education personnel structure of IDGC of Volga, JSC over 2010-2012

0 20 40 60 80 100 31.8% 32.8% 35.3% 2010

30.5% 33.3% 36.2% 2011

27.6% 34.6% 37.8% 2012

Higher education Secondary vocational education Secondary/incomplete secondary education

Within the framework of the Program of Support and ̤̤ occupational guidance is performed in affiliated Development of Human Resource Potential in 2012, schools; occupational lessons, lessons of electrical IDGC of Volga, JSC performed the following actions safety, and Doors Open Days at the enterprises of aimed at recruitment and retention of personnel, in- the Company are held; crease of staff sufficiency and reduction of personnel ̤̤ cooperation is carried on with educational institu- turnover in the Company: tions of professional education that provide training ̤̤ branches of the Company, based on the developed of specialists and workers in the major disciplines rules of monitoring of the need for human resources, of the Company; conducted studies of the need for personnel in re- ̤̤ program of training, retraining, and advanced training mote areas that experienced difficulties in recruit- of personnel (including in-house training) is implement of workforce; mented; ̤̤ Regulations of Mentor Coaching were developed ̤̤ pool of candidates to managerial positions was and introduced, the framework of which includes formed and is maintained in up-to-date condition; training and adaptation of new employees at their ̤̤ at the branches and at the executive board of the workplaces; Company, pools of young specialists to manage- ̤̤ Non-governmental Pension Program is performed, rial positions, including candidates to positions of which allows recruitment of young workers and managers of district electrical grids were formed; specialists; ̤̤ system of financial and non-financial motivation of ̤̤ the branches of the Company enjoy active work of personnel is developed; Youth Councils and Veterans Councils that unite most ̤̤ wages of employees are indexed to the inflation rate qualified former employees of the Company. Their to maintain the competitive level of wages at the potential – knowledge and experience – is used for labor market; the interests of the distribution electrical grid com- ̤̤ contests of professional skills are organized and plex; held.

Personnel training and development

Training and retraining of personnel at IDGC of Volga, JSC tions on Training and Certification of Managers and Spe- is conducted in accordance with the Rules of Personnel cialists of IDGC of Volga, JSC in the Sphere of Industrial Relations at Organizations of Electric Power Industry of Safety and Energy Safety. the Russian Federation, Regulations on Training and Re- In 2012, the number of managers who underwent training of Personnel of IDGC of Volga, JSC, Procedure of training amounted to 18.2% of the total number of trained Personnel Development of IDGC of Volga, JSC, Regula- IDGC OF VOLGA ANNUAL REPORT 2012 HUMAN CAPITAL AND SOCIAL RESPONSIBILITY

employees; for specialists and white collars this figure Pools of candidates are formed for the following posi- was 14.3%, and for workers – 67.5%. tions: The ratio of all educational events to the headcount ̤̤ top managers of personnel is over 100%, 53% of the average headcount ̤̤ mid-level managers (from the level of department participated in out-of-house educational events. managers); The 2012 plan was implemented in full. Actual ex- ̤̤ managers of production subdivisions (including po- penditures for personnel training incurred during the re- sitions of managers of district electrical grids and porting period comply with the budgeted costs. Training operations managers); Centers set up by the Company are key partners of IDGC of Volga, JSC in the sphere of professional training and Each candidate was recommended to be included into the retraining of production personnel: Energetik-Orenburg pool of candidates to managerial positions by the imme- Training Center in Orenburg, Energetik Interdistrict Train- diate or a superior manager. Inclusion into the pool of ing Center in Saransk, Chuvash Computer Training Center candidates was based on competitive selection, results of in Cheboksar. production activities of the candidate were taken into ac- Alongside equipped classrooms, these educational count, presence of leader’s potential, learning capabilities, institutions have training grounds for practical mastering mobility (readiness to move to another locality). of skills during training. A broad list of educational pro- The pool of candidates to managerial positions in- grams of the Computer Training Center allows performing cludes 1,053 employees of the Company and each of them the following types of educational activities: is assigned with a target position. ̤̤ professional training, retraining, and advanced train- Plans of individual development were made for ing of workers; members of pools of candidates to managerial positions ̤̤ additional professional training of workers for the who needed additional training to occupy target manage- right to execute hazardous operations; rial positions and candidates were trained in accordance ̤̤ additional professional (pre-certification) training of with such plans in 2012. managers and specialists who work at hazardous For employees, who are members of pools of candi- production sites; dates to positions of managers of district electrical grids, ̤̤ training of managers and specialists of the electric internship training was organized at the executive board power industry in labor safety. of the Company’s branches. In 2012, 53 employees from the Company’s manage- In order to maintain the qualification level of personnel of rial personnel reserve were assigned to senior positions. branches of IDGC of Volga, JSC and provision of enterpris- In 2012, in order to get young specialists involved es with young specialists with account to the particular into the solution of current problems of the electric grid features of the distribution grid complex, cooperation with complex, increase their professional competency, and industry-specific educational institutions of higher and promote their career development, the Company con- secondary professional education is performed. tinued development of the pools of candidates of young At all branches of IDGC of Volga, JSC, in the sphere of specialists to managerial positions, which included most interaction with the institutions of industry-specific higher promising employees under 35 years with higher educa- and secondary education, contractual in-house practical tion and a pronounced potential for development. training for students and Doors Open Days in production The pools of young candidates to managerial posi- subdivisions of the branches are organized, which are tions at the Company’s branches currently include 260 aimed at getting students of higher education and special employees. The pool of young candidates to managerial secondary education familiarized with the activities of the positions of the Company includes 74 employees (includ- Company. In 2012, over 640 students passed introduction ing employees of the executive board and branches). practical training and pre-graduation practical training at Four employees were included into the pool of the Company. candidates to managerial positions of the distribu- One of the key objectives of IDGC of Volga, JSC in the tion grid complex – so called “Young specialists as a field of human resources management is preparation bulwark of IDGC Holding, JSC”. There is an employee and training of the personnel reserve. among them who successfully passed competitive se- The Company carries out activities aimed to cre- lection and was included into the list of participants of ate the managerial personnel reserve and the reserve of the Second Integrated Program of Moscow Managerial young specialists. School “Skolkovo” for innovations and an employee who The managerial personnel reserve is created and kept was included into the pool of candidates to managerial up-to-date in order to promptly and in a qualitative manner positions under the Governor of the Chuvash Republic. meet the Company’s demand for well-trained people to In 2012, 23 young specialists from the pool of candidates enter management positions in IDGC of Volga, JSC. to managerial positions were promoted to higher positions. 11 www.mrsk-volgi.ru EXCELLENT ENERGY! 120 | 121

In order to develop professional competency and mana- personnel management, and psychology of communica- gerial potential of employees who are included into the tions were held as part of in-house training. pool of candidates to managerial positions, in-house and In 2013, the Company and its branches are to carry out-of-house training was organized for such employees. activities aimed at professional development of young Business training workshops for general management, specialists forming the personnel reserve.

Social policy

The Company develops an active social policy aimed at ̤̤ voluntary medical insurance; recruitment, development, and retention of qualified per- ̤̤ insurance against on-the-job accidents and occu- sonnel motivated to achieve assigned goals. The Company pational diseases; creates favorable conditions for the development of social ̤̤ physical and intellectual development of employees security and improvement of working conditions for all and their family members; workers. ̤̤ ensuring leisure time activities and rehabilitation treatment for employees; The Company’s social policy has the following focus ar- ̤̤ assistance for young people and protection of their eas: social, economic and labor rights; ̤̤ provision of social benefits and protection in compli- ̤̤ assistance for non-working pensioners ance with the collective agreements; ̤̤ non-state pension schemes;

COLLECTIVE AGREEMENT

Collective Agreement is a legal instrument regulating for employees in such cases as a child birth, marriage social and labor relations in the Company and ensuring registration (first), death of close relatives, for mothers that the existing level of social benefits and protection for on maternity leave, as well as compensation of expenses employees is preserved. In 2012, a new Collective Agree- for upkeep of children in preschool educational institutions ment was signed between IDGC of Volga, JSC and the and other payments. Besides, additional paid leaves for trade unions of employees of the Company’s branches. social purposes were provided to employees (childbirth, According to the Collective Agreements, in 2012 marriage, drafting of employee’s children to the Army of the Company’s branches provided material assistance the Russian Federation, and death of family members).

Non-state pension schemes

Non-state pension schemes implemented by the Com- By all means, it provides a motivating factor contributing pany include such programs as “Supporting” and “Parity”. to increased social protection once employees become Besides, the Company ensures formation of additional qualified for a pension. (non-state) pension for its employees. Under the Parity Pension Program, employees are given the option of financing their pension savings jointly with the Company. IDGC OF VOLGA ANNUAL REPORT 2012 HUMAN CAPITAL AND SOCIAL RESPONSIBILITY

Insurance

In compliance with the Company’s Insurance Protection insurance against industrial accidents and occupa- Program, over the year 2012 employees of IDGC of Volga, tional diseases. JSC were covered by voluntary medical insurance and

ensuring leisure time activities and rehabilitation treatment

For the purposes of healthy way of life, physical and In order to improve the level of professional competency intellectual development of employees and their of personnel, following Order IDGC of Volga, JSC No. 54 family members, the Company carries out sports and dated February 08, 2012 “On competitions in professional recreation activities including promotion of sport-for-all skills of personnel of IDGC of Volga, JSC”, during the pe- events for its employees, providing access to sports fa- riod of July 23-27, 2012, the training ground of Krasno- cilities, organizing and hosting various sports events and chetayskiy District Electric Grid of Alatyrskoye operating competitions. Department of Chuvashenergo, a branch of IDGC of Volga, The Company places a special focus on ensuring JSC hosted competitions in professional skills among the leisure time activities and rehabilitation treatment for teams of insulation service and over-voltage protection employees and their family members. One of the direc- of electric equipment of IDGC of Volga, JSC. The competitions of the social policy is the organization of children’s tions enjoyed the participation of seven teams, one team holidays oriented at protection and promotion of health, from each of the branches, who were winners of their and occupancy of children and teenagers for the period division’s competitions in professional skills. Following of school holidays. The Company provides partial and, in the results of the competitions, the first prize was won by some cases, full compensation of the price of vouchers the team of Samara Distribution Grids, which later repre- to children’s holiday camps. sented IDGC of Volga, JSC at the All-Russian Competitions In 2012, IDGC of Volga, JSC held the children’s draw- in Professional Skills of IDGC Holding, JSC. ing contest “United Grid – United Country”, initiated by In the period of September 09-15, 2012, 110/10/10 FGC UES, JSC. Children of employees of the executive kV substation “Yubileynaya” of Astrakhanenergo, a board and branches of the Company, over 80 young artists branch of IDGC of the South, JSC hosted All-Russian aged 4 to 14 years, took part in the contest. The biggest competitions in professional skills among teams of insu- numbers of drawings came from Orenburgenergo and lation services and over-voltage protection of electrical Samara Distribution Grids. The drawings of the winners equipment at the distribution complex of IDGC Holding, of the preliminary round of the contest were sent for the JSC (hereinafter referred to as “All-Russian Competi- participation in the final stage of the contest “United Grid tions”), which enjoyed the participation of respective – United Country”. competition winners in professional skills of IDGC of In 2012, the Company organized and hosted annual Volga, JSC, Tyumenenergo, JSC, IDGC of Urals, JSC, spartakiad sports events for the teams of the Company’s Lenenergo, JSC, IDGC of Center, JSC, IDGC of Center branches. Following the results of corporate Spartakiad and Volga Region, JSC, IDGC of the South, JSC, Kubanen- Sports Games held at each branch, corporate sports ergo, JSC, MOESK, JSC, IDGC of North Caucasus, JSC, teams were formed for the participation in the Third IDGC of Siberia, JSC, Yantarenergo, JSC, IDGC of North Summer Spartakiad Sports Games of IDGC of Volga, West, JSC, Baskiria Distribution Grids, JSC. Following JSC. These events were intended for the formation and the results of the competition, IDGC of Volga, JSC won development of corporate culture and creation of fa- the 3rd prize thus confirming the high level of person- vorable staff morale.A ccording to the tradition, a united nel’s qualification. sports team of IDGC of Volga, JSC was formed according On the New Years’ Eve, members of the executive to the results of held competitions and took part in the board of IDGC of Volga, JSC visited Orphan Asylum No. 1 Forth All-Russian Summer Spartakiad Sports Games with the charity mission “Hurry up for good deeds”. The of Distribution Grid Companies and won the first prize. Youth Council and the Social Policy Group of the Company From May 27 till June 1, 2012, the Second All- were the initiators of this event. Russian Games of Merry and Inventive Power Engineers . Club of the distribution power grid complex were held at Lenenergo, JSC (St. Petersburg). According to the competition results, the team of Mordovenergo branch, which represented IDGC of Volga, JSC, won the second prize. 11 www.mrsk-volgi.ru EXCELLENT ENERGY! 122 | 123

Assistance for young people and protection of their social, economic and labor rights

Assistance for young people and protection of their Within the framework of its corporate policy, the Company social, economic and labor rights is one of priority ar- carries out diversified and consistent activities associated eas of the Company’s social policy. Activities in this area with its young specialists. All branches of the Company ensure retention of young specialists, their adaptation and have set up their own Youth Councils. Special attention is integration in collaborative team environment and provide given to professional training, social protection and ad- a highly skilled and competent workforce able to address aptation of young specialists. challenges of future economic and technical development of the power industry.

SOCIAL SUPPORT unemployed pensioners

In order to support the veteran movement, the Company’s In 2012, IDGC Holding, JSC together with the Chairmen branches have set up the Councils of Veterans consoli- of the Council of Veterans and the Youth Council initiated dating old-timers of the power sector and non-working and held a number of events to commemorate the 67th pensioners registered with the Company. anniversary of the victory in the Great Patriotic War. The Pensioners tend to be one of the most disadvan- Company’s employees took part in the International Relay taged social groups, sensitive to social and economic Race called “From Motherland of heroic deeds – to Moth- perturbations. Hence, ensuring social security and wel- erland of a Hero”, launched in the Pskov region. As part fare of retired employees is one of the focus areas of the of this event, IDGC Holding, JSC received replica Victory Company’s activities. Activities in this area are fulfilled Banners and these banners were handed over to employ- according to the program for non-governmental pension ees of all district electric grids at solemn meetings held provision in the form of non-governmental pension pay- according to the approved schedule. In 2012, veterans of ments. Besides, non-working pensioners are provided the Company took part in the campaign “Let Us Save the with financial aid on the eve of jubilee dates due to their Forest Energy”. Besides, excursions were organized for hard financial standing and need for medical treatment. veterans to newly commissioned or reconstructed power On the eve of public and professional holidays (Defender sites (substations, grid control centers), museums and of the Motherland Day, Victory Day, International Day of memorials. Senior Citizens), cultural events are held for non-working pensioners. IDGC OF VOLGA ANNUAL REPORT 2012 LABOUR SAFETY AND ECOLOGICAL POLICY

LABOUR SAFETY 12 AND ECOLOGICAL POLICY

Company’s activity on labour safety

In 2012, the Injury Risk Reduction Program of IDGC of In the reporting period, the Program planned 1,726 meas- Volga, JSC for 2012-2015 (hereinafter referred to as ures of labor safety for the total of 339,379.96 thousand the Program) approved by the Board Directors of the rub. All planned measures were fully completed within Company, was fulfilled in the following major lines: the set timeframe, the total amount of funding was ̤̤ improvement of the system of labor safety manage- 372,319.85 thousand rub. ment; For the reduction of injury risks in third parties at the ̤̤ organization of activities aimed at preventing ac- equipment of IDGC of Volga, JSC, activities were held in cidents and occupational diseases, top-priority ac- accordance with the Plan of Measures for 2012 for Reduc- tions for the reduction of risks identified in production tion of Injury Risks in Third Parties at Equipment of IDGC activities; of Volga, JSC approved by the Board of Directors of the ̤̤ prevention of on-the-job accidents resulting from Company. In the reporting period, the said Plan included common diseases; 248 measures; all planned measures were fully completed ̤̤ practical training (hands-on training) of employees; within the set timeframe, the total amount of funding was ̤̤ increase of control over the observance of labor 102,881.2 thousand rub. safety standards and rules; ̤̤ increase of the level of organization of work of re- In 2012, the following measures were performed ac- cruited personnel; cording to the Plan: ̤̤ increase of the level for functioning of the system for ̤̤ preventing electrical injuries in children and teenag- operation and technological control; ers; ̤̤ organization of safe operation of special equipment; ̤̤ measures preventing electrical injuries in third par- ̤̤ increase of responsibility and performance discipline ties; of employees. ̤̤ assessment of equipment in operation and bringing it to conformity with safe operation requirements (including equipment located at inhabited localities, on the territories of schools, preschool institutions, sanatoriums and recreation institutions). 12 www.mrsk-volgi.ru EXCELLENT ENERGY! 124 | 125

As part of the Target Communications Program for ̤̤ provision of personal protection equipment – Injury Risk Reduction in Third Parties at Equipment 223,030.7 thousand rubles. of IDGC of Volga, JSC, which was started in 2012, the following activities were performed: Testimonies to the adequacy and efficiency of selected ̤̤ information on electrical safety issues and preven- activities of the Company in the sphere of labor safety tion of children’s electrical injuries were published in 2012: in mass media (social advertising and broadcasting ̤̤ absence of injuries in third parties, children’s injuries, of videos); and occupational diseases; ̤̤ lectures were organized at children’s educational and ̤̤ increase of efficiency of unannounced inspections health institutions by representatives of the branches conducted by managers and specialists; of IDGC of Volga, JSC on the topic “Electric Power ̤̤ increase in the level of practical training of personnel. Hazard. Rules of Conduct near Electric Sites”; ̤̤ visual campaign materials aimed at prevention of children’s injuries were placed in the areas crowded by children and adults (schools, children’s health institutions, administrative buildings, shops, etc.); ̤̤ in the period April-July 2012, instructive talks were held with schoolchildren, school teachers, teachers and children of kindergartens, educational and catering personnel of children’s health institutions for electrical safety; ̤̤ joint work was organized with representatives of local police, governmental regional agencies of the Russian Federation, agencies of education for prevention of children’s injuries and propaganda of electrical safety.

For the purposes of the Program of PR activities for prevention of injuries in third parties at electric sites of subsidiaries and affiliates of IDGC Holding, JSC, in the period of September 1-30, 2012, IDGC of Volga, JSC held 387 lessons in schools in the area of operations of the Company on the topic “Hazard of Electric Power”. Visual campaign materials were provided to schools. For the purposes of training of personnel of the Company, 3,718 practical exercises were held in 2012, including 2,131 demonstration exercises of admission of work teams to operations.

In 2012, the Company’s personnel were provided with personal safety equipment, tools, accessories, and safety equipment in accordance with current standards. In 2012, the Company spent 357,279.7 thousand rub. for labor safety measures, including: ̤̤ activities aimed at prevention of accidents – 92,421.6 thousand rubles; ̤̤ hygienic measures aimed at prevention of occupational diseases – 21,907.9 thousand rub. ̤̤ activities aimed at general improvement of labor conditions – 19,919.5 thousand rubles; IDGC OF VOLGA ANNUAL REPORT 2012 LABOUR SAFETY AND ECOLOGICAL POLICY

Ecological policy

One of the key aspects of the Company’s social respon- motor vehicles (in compliance with the relevant sibility is environmental protection and conservation of measurement schedules); natural resources. In accordance with the Federal Laws ̤̤ laboratory-instrumental measurements of atmos- of the Russian Federation “On Protection of the Environ- pheric air were taken at the places of temporary ment”, “On Protection of Atmospheric Air”, “On Production storage of mercury lamps and spent transformer and Consumption Waste”, and Decrees of the Government oil. Results of the measurements indicated zero ex- of the Russian Federation, IDGC of Volga, JSC approved ceedance of maximum allowable concentrations of the corporate Policy in the sphere of quality management, contaminants in all measurements. occupational and labor safety, environmental protection, which, as one of the most important directions, defines Protection and rational use of water resources: the goals and tasks of environmental activities. ̤̤ programs of ground water monitoring were devel- The Company has a license that entitles the Com- oped and approved in the prescribed manner; pany to collect, use, neutralize, transport, and dispose of ̤̤ site ground water monitoring was conducted at hazardous wastes. water intake facilities and data were obtained that Besides, production of potable water for personnel described water-bearing strata, volume of under- and technical water supply from artesian wells, is also ground water used, exogenic processes, technical carried out in conformity with appropriate licenses. condition of water-supply wells, and contamination For the efficient fulfillment of functions in environ- sources of underground water; mental protection activities, all branches of IDGC of Volga, ̤̤ control of the quality of potable water was per- JSC have adequately trained and certified personnel for formed. Underground water log books were started handling hazardous waste, etc. For these purposes, 107 according to forms POD-11 and POD-12. Meters for employees of the Company had a relevant training in 2012. control of potable water intake were installed; In 2012, in accordance with the Regulations on the ̤̤ agreements with licensed organizations for seasonal Organization of Activities for Internal Environmental Audit measurements of level and temperature of artesian by the branches of IDGC of Volga, JSC, internal environ- water were signed; mental audits were conducted for 114 industrial sites. ̤̤ at subdivisions, water was pumped out from oil receivers at substations; the condition of drain oil-re- In 2012, in accordance with applicable legislation, IDGC ceiving devices at substations was checked. Inspec- of Volga, JSC performed a number of planned activities tions of equipment of oil facilities and collection of and measures in the sphere of environmental protec- spilt petroleum products were conducted as required. tion, which included the following major directions: Protection and rational use of land: Protection of atmospheric air: ̤̤ draft rates of waste generation and disposal were de- ̤̤ in 2012, in accordance with the legislation of the veloped and approved at regional agencies of Rospri- Russian Federation in the sphere of environmen- rodnadzor (Russian Federal Agency for Oversight of tal protection and atmospheric air protection, the Natural Resource Usage) and waste disposal limits branches of IDGC of Volga, JSC developed schedules were obtained; of maximum allowable emissions and obtained per- ̤̤ agreements for collection of municipal solid wastes mits for emissions of contaminants; and industrial wastes and transportation to landfills ̤̤ during the year, inventory lists were compiled of of municipal solid wastes were signed (re-signed); emission points; ̤̤ waste of 1st class of hazard (luminescence lamp ̤̤ for the purposes of compliance with maximum al- waste) were submitted to deactivation to local li- lowable emission rates, instrumental measurements censed organizations; of atmospheric air were taken at Cyclone units and ̤̤ clean up of forest residues was performed as re- dust precipitation chambers in order to confirm the quired after wood harvesting for power transmis- absence of exceedance of maximum allowable con- sion lines; centrations of contaminants with the participation of ̤̤ sampling and assays of soil in the territory of indus- accredited laboratories; trial sites were performed by accredited laboratories. ̤̤ measurements of toxicity levels and exhaust smoke The results of the conducted studies indicated zero capacity of exhaust gases coming from engines of exceedance over allowable concentrations of petroleum products in soil; 12 www.mrsk-volgi.ru EXCELLENT ENERGY! 126 | 127

̤̤ asphalt coating at the sites of temporary storage of wastes was timely repaired; ̤̤ containers for temporary storage of wastes were purchased (manufactured); ̤̤ during the year, the primary accounting of generation and movement of wastes at all branches of IDGC of Volga, JSC was performed; ̤̤ specialized accredited laboratory performed assays of wastes of 1-5 classes for the determination of the wastes component composition. Passports of hazardous wastes were developed.

In 2012, environmental control costs amounted to 16,314.6 thousand rubles, including: ̤̤ the costs of protection of the environment from production and consumption wastes increased from 7,011.9 thousand rub. in 2011 to 8,511.4 thousand rub. in 2012. This is associated with the increase of prices and tariffs for the services of licensed organizations for the reception and burial of wastes and with the increase in the generation of wastes associated with repair activities at the Company on the whole; ̤̤ costs of atmospheric air protection in 2012 amounted to 4,321.4 thousand rub. Regular activities were performed for instrumental control of efficiency of operation of gas treatment facilities, dust precipitation chambers and other sources to avoid excess emissions and fines; ̤̤ costs of protection and rational use of water resources amounted to 3,482.2 thousand rub.; an increase in 2012 occurred due to the increase of prices for water delivery and waste water collection.

For the purposes of avoidance of excess emission payments for environmental pollution, IDGC of Volga, JSC undertook the following measures: ̤̤ excluded cases when established maximum allowable levels of emissions and pollutants and emplaced waste volumes are exceeded; ̤̤ obtained, in a timely manner, duly issued permis- sions for emissions and pollutants and limits for waste emplacement. IDGC OF VOLGA ANNUAL REPORT 2012 REFERENCE AND CONTACT INFORMATION

REFERENCE 13 AND CONTACT INFORMATION

Information on the Company

“Interregional Distribution Grid Company of Volga”, Authorized capital: Joint-Stock Company (IDGC of Volga, JSC). 17,857,780,114.6 rubles (178,577,801,146 ordinary Open Joint-Stock Company “Interregional Distribution registered uncertified shares with a par value 10 kopecks Grid Company of Volga” (hereinafter referred to as IDGC each). of Volga, JSC, the Company) Information on state registration of the issue of Location: securities of the Company: 42/44, ul. Pervomayskaya, Saratov, the Russian 1-01-04247-Е registered on October 10, 2007 by the Federation. Regional Department of the Federal Service for Financial Markets in the South-East Region Postal address: 42/44, ul. Pervomayskaya, 410031 Saratov, the Russian Internet website: Federation. www.mrsk-volgi.ru

Information on state registration of the Company: E-mail: Certificate of State Registration of Legal Entity issued [email protected] by Interdistrict Federal Tax Office No. 8 in the Saratov region with the conferral of state registration number Tel. (8452) 30-26-32, 1076450006280, date of entry –June 29, 2007. Fax (8452) 28-32-02 13 www.mrsk-volgi.ru EXCELLENT ENERGY! 128 | 129

Information on the Company’s branches

Samara Distribution Grids, Branch of IDGC of Volga, JSC

Address: building 133, ul. Novo-Sadovaya 106B, 443068 Internet website: Samara http://goo.gl/h8MbV

Saratov Distribution Grids, Branch of IDGC of Volga, JSC

Address: 42/44, ul. Pervomayskaya, 410031 Saratov, the Internet website: Russian Federation http://goo.gl/pSe24

Ulyanovsk Distribution Grids, Branch of IDGC of Volga, JSC

Address: 48, ul. Yefremova, 432042 Ulyanovsk Internet website: http://goo.gl/YVk3f

Mordovenergo, Branch of IDGC of Volga, JSC

Address: 50, prospect Lenina, 430003 Saransk Internet website: http://goo.gl/6EwtU

Penzaenergo, Branch of IDGC of Volga, JSC

Address: 1/2, ul. Pushkina/ul. Gladkova, 440000 Penza Internet website: http://goo.gl/P9XYt

Orenburgenergo, Branch of IDGC of Volga, JSC

Address: 44, ul. Marshala G.K. Zhukova, 460024 Orenburg Internet website: http://goo.gl/7SeIF

Chuvashenergo, Branch of IDGC of Volga, JSC

Address: 4/4, prospect I. Yakovleva, Cheboksary, 428000, Internet website: the Chuvash Republic http://goo.gl/n2ndH IDGC OF VOLGA ANNUAL REPORT 2012 REFERENCE AND CONTACT INFORMATION

Information on auditor

Closed Joint-Stock Company KPMG (KPMG, CJSC)

Location: Internet website: office 3035, pr. Olimpiyskiy 18/1, Moscow 129110 www.kpmg.ru

Postal address: E-mail: 11, Gogolevskiy bulvar, Moscow, 121019 [email protected] Tel.: (495) 937-44-77, Fax: (495) 937-44-99 13 www.mrsk-volgi.ru EXCELLENT ENERGY! 130 | 131

Information on registrar

Limited Liability Company “Reestr-RN” (Reestr-RN, LLC)

Location: Internet website: building 3-4, Podkopayevskiy per. 2/6, 109028 Moscow www.reestrrn.ru

Postal address: E-mail: P.O.B. 4, 115172 Moscow [email protected]. Tel.: (495) 411-79-11, Fax: (495) 411-83-12 License to carry out register-keeping activities for Register No. 10-000-1-00330 dated December 16, 2004 issued by the Federal Service for Financial Markets of Russia.

Contact details of departments for relations with shareholders and investors

Office of Interaction with Shareholders and Investors Tel.: (8452) 30-24-89, Fax: (8452) 28-34-82 of the Department of Corporate Governance and Interaction with Shareholders: E-mail: Yulia Gennadyevna Burtseva — Head of Office [email protected], [email protected]

Contact information for mass media

Public Relations Department: E-mail: Yulia Valentinovna Usova — Head of Department [email protected]. Tel.: (8452) 30-26-78, Fax: (8452) 28-34-43

Official press organ for disclosure of information

Rossiyskaya Gazeta Newspaper. IDGC OF VOLGA ANNUAL REPORT 2012 APPENDIX

Appendices APPENDIX 1

INFORMATION ON PARTICIPATION IN OTHER COMPANIES AND NON-PROFITABLE ORGANIZATIONS

Information on participation of IDGC of Volga, JSC in authorized capitals of commercial organizations

№ Name and address of commercial Core activity of subsidiaries and affiliates Company’s participation organization interest in the capital of subsidiaries and affiliates (%)

1. Open Joint-Stock Company "Group of Companies ——production and economic activities under the project 2.32% Mordovian GRES" of construction of Mordovian GRES; Saransk, the Republic of Mordovia, the Russian ——construction, installation, start-up and finishing Federation works under the project of construction of Mordovian GRES.

2. Open Joint-Stock Company Interregional Distribu- ——exercising rights of a shareholder (participant) in 0.00002% tion Grid Companies Holding business entities shares of which are owned by the Ulanskiy pereulok 26, Moscow 107996 Company; ——exercising powers of executive bodies in joint-stock and other business entities according to the procedure established by the law and specified in signed contracts.

3. Open Joint-Stock Company “Second Generating ——generation of electric and heat energy; 0.00002% Company of Electric Power Wholesale Market” ——supply (sales) of electric and heat energy; Solnechnodolsk settlement, Izobilnenskiy district, the ——obtaining (purchase) of electric and heat energy. Stavropol Territory, the Russian Federation

4. Open Joint-Stock Company “E.ON Russia” ——generation of electric and heat energy and capacity; 0.00002% building 34, ul. Energostroiteley 23, Surgut, the Khanty- ——supply (sales) of electric energy and capacity, Mansi Autonomous Area - Yugra, the Tyumen region, including in the electric power (capacity) wholesale the Russian Federation market; ——supply (sales) of heat energy and utility resources.

5. Open Joint-Stock Company “Enel OGK-5” ——generation of electric and heat energy; 0.00001% ul. Khokhryakova 10, Yekaterinburg 620014, the ——supply (sales) of electric and heat energy; Sverdlovsk region, the Russian Federation ——obtaining (purchase) of electric and heat energy in the electric power (capacity) wholesale market.

6. Open Joint-Stock Company “Territorial Generating ——generation of electric and heat energy (capacity); 0.00001% Company No. 1” ——supply (sales) of electric and heat energy (capacity), ul. Bronevaya 6B, St. Petersburg 198188, the Russian heat carrier; Federation ——obtaining (purchase) of electric and heat energy (capacity), heat carrier.

7. Open Joint-Stock Company “Territorial Generating ——exercising powers of executive bodies in joint-stock 0.00001% Company No.2” and other business entities according to the procedure pr. Oktyabrya 42, Yaroslavl 150040, the Yaroslavl region, established by the law and specified in signed contracts; the Russian Federation ——supply (sales) of electric and heat energy. www.mrsk-volgi.ru EXCELLENT ENERGY! 132 | 133

№ Name and address of commercial Core activity of subsidiaries and affiliates Company’s participation organization interest in the capital of subsidiaries and affiliates (%)

8. Open Joint-Stock Company of Power Industry and ——generation of electric and heat energy; 0.00001% Electrification M“ osenergo” ——supply (sales) of electric and heat energy; building 3, pr. Vernadskogo 101, Moscow 119526 ——obtaining (purchase) of electric and heat energy (capacity).

9. Open Joint-Stock Company “Kvadra - Generating ——supply (sales) of electric and heat energy; 0.00001% Company” ——obtaining (purchase) of electric and heat energy ul. Timiryazeva 99v, Tula 300600, the Russian Federation (capacity).

10. Open Joint-Stock Company “Territorial Generating ——supply (sales) of electric and heat energy; 0.00001% Company No. 5” ——obtaining (purchase) of electric and heat energy Komsomolskiy pr. 48, Perm 614990 (capacity).

11. Open Joint-Stock Company “Territorial Generating ——exercising powers of executive bodies in joint-stock 0.00001% Company No. 6” and other business entities according to the procedure ul. Alekseevskaya 10/16, Nizhniy Novgorod 603950, the established by the law and specified in signed contracts; Russian Federation ——supply (sales) of electric and heat energy.

12. Open Joint-Stock Company “Volga Territorial Gen- ——generation of electric and heat energy; 0.00001% erating Company” ——supply (sales) of electric and heat energy; ul. Mayakovskogo 15, Samara, the Russian Federation ——obtaining (purchase) of electric and heat energy (capacity).

13. Open Joint-Stock Company “Territorial Generating ——supply (sales) of electric and heat energy; 0.00001% Company No. 9” ——obtaining (purchase) of electric and heat energy Komsomolskiy pr. 48, Perm, the Russian Federation (capacity).

14. Open Joint-Stock Company “Territorial Generating ——supply (sales) of electric and heat energy; 0.00001% Company No. 14” ——obtaining (purchase) of electric and heat energy in the ul. Lazo 1, Chita 672020, the Russian Federation electric power (capacity) wholesale market.

15. Open Joint-Stock Company “Federal Grid Company ——delivery of power transmission and distribution 0.00001% of Unified Energy System” services; ul. Akademika Chelomeya 5A, Moscow 117630 ——delivery of electric grid connection services.

16. Open Joint-Stock Company “Federal Hydrogenerating ——generation of electric power and/or capacity; 0.00001% Company –RusHydro” ——supply (sales) of electric energy. ul. Respubliki 51, Krasnoyarsk, the Krasnoyarsk Territory

17. Open Joint-Stock Company “INTER RAO UES” ——generation of electric and heat energy; 0.00001% building 3, ul. Bolshaya Pirogovskaya 27, Moscow ——ensuring reliable operation of electric and heat 119435, the Russian Federation networks.

18. Open Joint-Stock Company “RAO Energy System ——generation of electric power and/or capacity; 0.00002% of East” ——supply (sales) of electric energy. ul. Shevchenko 28, Blagoveshchensk 675000, the Amur region IDGC OF VOLGA ANNUAL REPORT 2012 APPENDIX

Information on participation of IDGC of Volga, JSC in non-profitable organizations

№ Name and address of non-profitable Date of entry Core activity organization in organization

Groups of legal entities (associations and unions)

1. All-Russian Association of Electric Power December 08, Cooperation, representation and protection of interests of industrial em- Industry Employers (Association RaEl) 2008 ployers before governmental authorities, local authorities, labor unions, building 1, ul. Avtozavodskaya 14/23, associations thereof and other organizations of salaried employees and Moscow 115280, Russia other associations.

Non-profitable partnerships

2. Non-profitable Partnership “Scientific December 01, Activities of professional organizations, scientific researches and develop- and Technical Council of UnifiedE nergy 2008 ments in the domain of natural and technical sciences. High-priority re- System” (NP “NTS UES”) searches, R&D programs. building 1, Vorontsovskiy per. 2, Moscow 109044, Russia

3. Non-ProfitableP artnership “Association December 07, Prevention of any damage to life or health of individuals, property of indi- of Organizations Involved in Construc- 2009 viduals or legal entities, governmental or municipal property, environment, tion, Reconstruction and Overhaul of flora and fauna, cultural heritage facilities (including historical and cultural Power Facilities, Grids and Substations monuments) of nations living in the Russian Federation caused by defects “Energostroy” (NP “Energostroy”) of works affecting safety of capital projects and performed by members of building 1, Ulanskiy pereulok 26, Moscow the Partnership. 107996, Russia

4. Non-ProfitableP artnership “Association January 25, Prevention of any damage to life or health of individuals, property of indi- of Organizations Involved in Preparation 2010 viduals or legal entities, governmental or municipal property, environment, of Project Documents for Power Facili- flora and fauna, cultural heritage facilities (including historical and cultural ties, Grids and Substations “Energo- monuments) of nations living in the Russian Federation caused by defects of proekt” (NP “Energoproekt”) works relating to project documents preparation affecting safety of capital building 1, Ulanskiy pereulok 26, Moscow projects and performed by members of the Partnership. 107996, Russia

5. Non-ProfitableP artnership “Union of En- November 26, Improvement of quality of works relating to energy audit and delivery of ergy Auditors and Energy Service Com- 2010 energy services. Prevention of any damage to life or health of individuals, panies” (NP “Union of Energy Auditors property of individuals or legal entities, governmental or municipal property, and Energy Service Companies”) environment, flora and fauna, cultural heritage facilities (including historical office XXXVI, building 2, Leningradskoe and cultural monuments) of nations living in the Russian Federation caused shosse 8, Moscow 125171, Russia by defects of works (services) performed (delivered) by members of the Partnership.

6. Non-Profitable Partnership “National June 19, Scientific and technical, scientific and research, technological, experimental Committee SIRED". Electric Distribution 2012 design and information researches and development; replication, develop- Grids” (NP “National Committee SIRED”) ment and commissioning of software and hi-tech products.M arketing, en- office 17n, Nevskiy pr. 147, St. Petersburg gineering, implementation, consultation, legal, information, promotion and 193024 intermediary services; launching centers, offices and agencies delivering the above services in the domain of economy, law and management. Organiza- tion and conducting of exhibitions, trade exhibitions, fairs, presentations, business meetings, meetings according to interests, workshops, symposia, contests, performances, festivals, auctions, cultural, entertainment and sports events.

7. Non-ProfitableP artnership “Council for December 24, Participation in development of rules of wholesale and retail electricity mar- Organizing Efficient System of Trading 2012 kets and proposals for modifications and additions thereto. Development at Wholesale and Retail Electricity and and approval of the form of the agreement for connection to trade system Capacity Market” (NP “Market Council”) of the wholesale market, wholesale market procedures, standard forms of office 7, Krasnopresnenskaya nab. 12, contracts required to sell electric power, capacity and other products circulat- Moscow 123610, Russia ing in the wholesale market and to deliver services relating to circulation of the above products in the wholesale market. Establishing the maintaining procedure and maintaining a register of wholesale market participants; making decisions on assigning or cancellation of the status of the wholesale market participant. www.mrsk-volgi.ru EXCELLENT ENERGY! 134 | 135

№ Name and address of non-profitable Date of entry Core activity organization in organization

Institutions

1. Private Educational Institution of Ex- April 01, 2008 Training for skilled labor personnel (workers and employees) under main and tended Vocational Education and Pro- (as a result additional vocational education programs: retraining and advanced training fessional Training “Mordovian Training of reorganization for workers and specialists. Center “Energetik” (ChOU “Mordovian by succession) Training Center “Energetik”) ul. Bolshevistskaya 11, Saransk 7430003, the Republic of Mordovia, the Russian Federation

2. Non-State Educational Institution “Chu- April 01, 2008 Training for skilled labor personnel (workers and employees) under main and vash Educational Course Complex” (NOU (as a result additional vocational education programs: retraining and advanced training “Chuvash Educational Course Complex”) of reorganization for workers and specialists. building 43, prospekt Moskovskiy, by succession) Cheboksary 428017, the Chuvash Republic, the Russian Federation

3. Private Educational Institution of Ex- April 01, 2008 Training for skilled labor personnel (workers and employees) under main and tended Vocational Education and Pro- (as a result additional vocational education programs: retraining and advanced training fessional Training “Educational Center of reorganization for workers and specialists. “Energetik-Orenburg” (ChOU UTs “En- by succession) ergetik-Orenburg”) ul. Aksakova 3, Orenburg 460024, the Russian Federation IDGC OF VOLGA ANNUAL REPORT 2012 APPENDIX

APPENDIX 2

INFORMATION ON ADHERENCE TO CORPORATE CODE OF CONDUCT

(Prepared in compliance with the Order of the Federal Commission for the Securities Market No. 03-849/р dated April 30, 2003. “On methodical recommendations for content and form of presentation of information on adherence to the Corporate Code of Conduct in annual reports of joint-stock companies”)

№ Provision of Corporate Code of Conduct Observed or Note non-observed

1 2 3 4

General Meeting of Shareholders

1. Giving notice of General Meeting of Share- Observed The procedure for giving notice of General Meeting of Shareholders of the holders to shareholders at least 30 days Company to shareholders is specified in clause 11.5,A rticle 11 of the Articles before the date of the meeting regardless of Association of the Company. of issues on its agenda, unless longer noti- The Company shall publish the notice of General Meeting of Shareholders in fication period is provided by the law. the Rossiyskaya Gazeta newspaper and on the Company’s website at least thirty (30) days before the date of the meeting.

2. Access to the list of persons entitled to take Observed The Company observes the requirements of Article 51 of the Federal Law part in the General Meeting of Sharehold- “On Joint-Stock Companies”: the Company will submit the list of persons ers made available to shareholders from entitled to take part in the General Meeting of Shareholders upon request of the date of the notice of General Meeting persons on this list having at least 1 percent of votes. Personal identification of Shareholders until the end of the in- information and postal address of individuals added to the above list will be presence General Meeting of Shareholders submitted upon their consent. or until the end date of submission of voting bulletin in case of the absentee General Meeting of Shareholders.

3. Submission of information (materials) for Observed According to clause 11.7, Article 11 of the Articles of Association, share- preparation to the General Meeting of Share- holders of IDGC of Volga, JSC may familiarize themselves with materials for holders to shareholders via electronic com- the General Meeting of Shareholders in the office of the Company’s execu- munication means, including Internet. tive body and other places specified in the notice of the General Meeting of Shareholders within 20 days before the date of the General Meeting of Shareholders or, if the agenda of the General Meeting of Shareholders contains the issue of reorganization of the Company, within 30 days before the date of the General Meeting of Shareholders. This information (materials) is made available to persons taking part in the General Meeting of Sharehold- ers during the meeting. The procedure for familiarization of persons entitled to participate in the General Meeting of Shareholders with the information (materials) on issues on the agenda of the General Meeting of Shareholders and the list of this information (materials) will be established by the Board of Directors of the Company. Moreover, according to clause 4.1 of the Regulation on procedure for preparation and holding of General Meeting of Shareholders, in addition to other ways of bringing to notice of the Company’s shareholders, the information materials concerning the issues on the agenda of the General Meeting of Shareholders shall be posted on the Company’s website before the expiry of the preset period for giving notice of the General Meeting of Shareholders to shareholders. The above materials shall be also published in English. www.mrsk-volgi.ru EXCELLENT ENERGY! 136 | 137

№ Provision of Corporate Code of Conduct Observed or Note non-observed

4. A shareholder shall have the possibility of Partially According to sub-clause 2, clause 6.2., Article 6 of the Articles of Associa- adding an issue on the agenda of the General observed tion of the Company, the shareholders are entitled to propose issues on the Meeting of Shareholders or of requesting to agenda of the General Meeting of Shareholders according to the procedure convene the General Meeting of Sharehold- established by the law of the Russian Federation and Articles of Associa- ers without giving an extract from the regis- tion of the Company. According to clause 13.1, Article 13 of the Articles of ter of shareholders, if the share rights of this Association of the Company, a shareholder(s) of the Company holding as shareholder are recorded in the system of a joint owner(s) at least two (2) percent of voting shares of the Company, maintaining of the register of shareholders; is(are) entitled to put the issues on the agenda of the annual General Meet- or sufficiency of an extract from the depot ing of Shareholders and propose nominees for the Board of Directors and account to exercise the above rights, if the Internal Audit Commission of the Company (the number of nominees shall share rights of this shareholder are recorded not exceed the quantitative composition of the relevant body) within 60 days in the depot account. after the expiry of the financial year.

5. The Articles of Association or internal docu- Partially The Articles of Association and internal documents of the Company do not ments of the joint-stock company shall con- observed contain this provision, as the presence of these persons at the General Meet- tain the requirement for physical presence ing of Shareholders is not required by the law of the Russian Federation. of the General Director, members of the However, according to clause 5.2.3. of Article 5.2. of the Code of Corpo- Management Board, members of the Board rate Governance of IDGC of Volga, JSC, the Company ensures the physical of Directors, members of the Internal Audit presence of members of the Board of Directors, executive bodies, Internal Commission and Auditor of the joint-stock Audit Commission and Auditor of the Company at the General Meeting of company at the General Meeting of Share- Shareholders, if possible, and authorizes these persons to answer ques- holders. tions of the shareholders.

6. Nominees shall be present at the General Partially The physical presence of these nominees at the General Meeting of Share- Meeting of Shareholders in case of consid- observed holders is not required by RF law. The Articles of Association contains no eration of issues on election of members special provision. Practically, in case of consideration of issues on election of of the Board of Directors, General Director, members of the Board of Directors, General Director, members of the Man- members of the Management Board, mem- agement Board and members of the Internal Audit Commission, nominees bers of the Internal Audit Commission and are given invitations to participate in the General Meeting of Shareholders. issue on approval of the Auditor of the joint- stock company.

7. Internal documents of the joint-stock com- Observed The procedure for registration of persons entitled to participate in the Gen- pany shall contain the procedure for regis- eral Meeting of Shareholders is established by clause 5.1, Article 5 of the tration of participants of the General Meeting Regulation on procedure for preparation and holding of General Meeting of Shareholders. of Shareholders.

Board of Directors

8. The Articles of Association of the joint-stock Observed According to sub-clause 19, clause 15.1., Article 15 of the Articles of As- company shall authorize the Board of Direc- sociation of the Company, the competency of the Board of Directors cov- tors to annually approve the financial and ers approval of the business plan (adjusted business plan), including the economic plan of the joint-stock company. investment program and performance report thereon, as well as approval (adjustment) of benchmark values of the Company's cash flow.

9. Risk management procedure approved by Observed The Risk Management Policy of IDGC of Volga, JSC was approved by the the Board of Directors shall be available in resolution of the Board of Directors of IDGC of Volga, JSC dated June 18, the joint-stock company. 2010 (Minutes No. 20). A new version of the Risk Management Policy of IDGC of Volga, JSC was approved by the resolution of the Board of Directors of IDGC of Volga, JSC dated August 22, 2012 (Minutes No. 3).

10. The Articles of Association of the joint- Observed According to sub-clause 12, clause 15.1., Article 15 of the Articles of As- stock company shall authorize the Board of sociation of the Company, the Board of Directors is empowered to elect the Directors to make decision on suspension General Director of the Company and to terminate powers of the General of powers exercised by the General Direc- Director, including by making resolution on early termination of the employ- tor appointed by the General Meeting of ment contract. Shareholders. IDGC OF VOLGA ANNUAL REPORT 2012 APPENDIX

№ Provision of Corporate Code of Conduct Observed or Note non-observed

11. The Articles of Association of the joint-stock Observed The Board of Directors determines the number of members of the company shall empower the Board of Direc- Management Board, elects members of the Management Board and tors to set requirements to professional set wages and compensations for members of the Management Board. skills and wages of the General Director, The Board of Directors is also authorized to terminate powers (including members of the Management Board, heads employment contracts) of members of the Management Board, bring the of the main structural subdivisions of the General Director and members of the Management Board to disciplinary joint-stock company. responsibility, make resolutions on payment of incentives to these persons according to RF labour law, approve and modify the organizational structure of the executive body of the Company, approve Regulations on the Monetary Incentive for the General Director and Top Managers of the Company, approve the list of Top Managers, approve nominees for particular positions in the executive body of the Company, make resolutions on nomination of the General Director for national awards (sub-clauses 13, 33, 41, 42, 43, 44 clause 15.1., Article 15 of the Articles of Association). In addition, pursuant to clause 21.4, Article 21 of the Articles of Association, the Board of Directors is authorized to make resolutions on formation and early termination of powers of the executive bodies of the Company, unless otherwise provided by the federal law and Articles of Association of the Company. The Board of Directors may terminate powers of the General Director and members of the Management Board and form new executive bodies (clause 21.10, Article 21 of the Articles of Association).

12. The Articles of Association of the joint-stock Observed Pursuant to clause 21.6., Article 21 of the Articles of Association, the Chair- company shall empower the Board of Direc- man of the Board of Directors or a person authorized by the Board of Direc tors to approve terms and conditions of em- tors shall sign the employment contract on behalf of the Company. In addi- ployment contracts signed with the General tion, pursuant to clause 21.7, Article 21 of the Articles of Association, the Director and members of the Management Board of Directors or a person authorized by the Board of Directors of the Board. Company will establish terms and conditions of the employment contract with the General Director and members of the Management Board and, pursuant to clause 21.9, Article 21 of the Articles of Association of the Company, will exercise rights and powers of employer relating to the General Director and members of the Management Board.

13. The Articles of Association or internal docu- Non-observed The Articles of Association and other internal documents of the Company ments of the joint-stock company shall state do not contain this requirement. that votes of members of the Board of Di- rectors holding the position of the General Director and members of the Management Board shall not be taken into account when approving terms and conditions of employment contracts with the General Director (managing company, top managers) and members of the Management Board.

14. The Board of Directors of the joint-stock Observed The Board of Directors comprises at least 3 (three) independent directors. company shall comprise at least 3 independent directors meeting the requirements of the Corporate Code of Conduct.

15. The Board of Directors of the joint-stock Observed According to the Order of the Company No. 241 “On information disclosure company shall not comprise persons con- in the quarterly report of the issuer of issuable securities of IDGC of Volga, victed of economic crimes or crimes against JSC” dated July 21, 2011, this information is requested from members of public authorities, interests of public service the Board of Directors of the Company on a quarterly basis. and service in local authorities or incurred The Board of Directors of the Company elected at the annual General Meeting administrative punishment for law violations of Shareholders held on June 13, 2012 does not comprise these persons. relating to entrepreneurial activities, financ- The Board of Directors of the Company elected at the extraordinary General es, taxes and charges, securities market. Meeting of Shareholders held on August 23, 2012 does not comprise these persons. www.mrsk-volgi.ru EXCELLENT ENERGY! 138 | 139

№ Provision of Corporate Code of Conduct Observed or Note non-observed

16. The Board of Directors of the joint-stock Observed According to the Order of the Company No. 241 “On information disclosure company shall not comprise persons act- in the quarterly report of the issuer of issuable securities of IDGC of Volga, ing as a participant, General Director (Top JSC” dated July 21, 2011, IDGC of Volga, JSC requests this information from Manager), member of the management body members of the Board of Directors of the Company on a quarterly basis. or employee of a legal entity competing with The Board of Directors of the Company elected at the annual General Meeting the joint-stock company. of Shareholders held on June 13, 2012 does not comprise these persons. The Board of Directors of the Company elected at the extraordinary General Meeting of Shareholders held on August 23, 2012 does not comprise these persons.

17. The Articles of Association of the joint-stock Observed According to clause 10.8., Article 10 of the Articles of Association, the elec- company shall state that members of the tion of members of the Board of Directors is performed through cumulative Board of Directors are elected through cu- voting. mulative voting.

18. The internal documents of the joint-stock Observed According to clause 4.1.6., Article 4.1. of the Code of Corporate Governance, company shall oblige members of the Board members of the Board of Directors shall act in good faith and with due dili- of Directors to avoid any actions that will gence in the interests of the Company and all shareholders of the Company. or may cause a conflict of interest between Each director undertakes to attend all meetings of the Board of Directors. these members and the joint-stock com- Members of the Board of Directors realize their responsibility before share- pany, and should any such conflict arise, holders and are committed to discharging their management duties with members of the Board of Directors shall due care maintaining and contributing to the growth of the Company's stock give information about this conflict to the value as well as ensuring protection and possibility to exercise sharehold- Board of Directors. ers' rights. Members of the Board of Directors undertook to have ongoing dialogue with shareholders. Members of the Board of Directors are responsible for formation and implementation of the Company's development strategy. Members of the Board of Directors avoid disclosing and using confidential information about the Company for personal advantage. Members of the Board of Directors undertook to avoid any actions that may cause a conflict of interests between these members and the Company. Should any such conflict arise, a member of the Board of Directors shall give information about this conflict to theB oard of Directors and avoid voting on issues related to this conflict. Moreover, according to clause 3.5. of the Regulations on the procedure for convening and holding the meetings of the Board of Directors of IDGC of Volga, JSC, when exercising rights and discharging duties members of the Board of Directors shall act in the interests of the Company and exercise their rights and discharge their duties in relation to the Company in a fair and reasonable way.

19. The internal documents if the joint-stock Observed The requirements for provision of information on the insider transactions company shall oblige members of the Board are stipulated in the Regulation on Insider Information of IDGC of Volga, of Directors to notify (in writing) the Board of JSC approved by the resolution of the Board of Directors of IDGC of Volga, Directors of their intent to settle any trans- JSC dated December 26, 2011 (Minutes No. 13 dated December 28, 2011). action involving securities of the Company In accordance with Appendix No. 2 to the Regulation on Insider Information where they hold the position as members of IDGC of Volga, JSC, members of the Company’s Board of Directors are of the Board of Directors or Company’s sub- ranked as the 1st category insiders. sidiaries (affiliates), as well as to disclose Insiders of the 1st category shall be obliged to submit a written confirmation information on transactions involving these of the number of Insider Financial Instruments of the Company owned by the securities settled by members. insider as of the end of reporting quarter and transactions involving Insider Financial Instruments of the Company settled by the insider throughout the reporting quarter (directly or through authorized agents) within 30 days from the last date of the reporting quarter.

20. The internal documents of the joint-stock Observed According to clause 18.2., Article 18 of the Articles of Association of the company shall state the meetings of the Company, meetings of the Board of Directors shall be held when necessary, Board of Directors to be held at least once but at least once per six weeks. per six weeks.

21. Meetings of the Board of Directors of the Observed In 2012, meetings of the Board of Directors were held at least once per six joint-stock company shall be held at least weeks. During the reporting year, 28 meetings of the Board of Directors of once per six weeks during the year covered IDGC of Volga, JSC were held. by the annual report of the joint-stock company. IDGC OF VOLGA ANNUAL REPORT 2012 APPENDIX

№ Provision of Corporate Code of Conduct Observed or Note non-observed

22. The internal documents of the joint-stock Observed Specified inA rticles 6, 7 and 8 of the Regulations on the procedure for conven- company shall contain the procedure for ing and holding the meetings of the Board of Directors of IDGC of Volga, JSC. holding meetings of the Board of Directors.

23. The internal documents of the joint-stock Observed The requirements for obtaining preliminary approval of the Company’s company shall state that the Board of Direc- transactions in the amount exceeding 10 percent of the book value of such tors shall approve transactions of the joint- assets according to the data of the accounting statements as of the last stock company in the amount exceeding 10 reporting date by the Board of Directors of IDGC of Volga, JSC are stipulated percent of the value of the Company’s as- in sub-clause 38(a), clause 15.1., Article 15 of the Articles of Association sets, except for transactions settled in the of the Company. course of routine business activity.

24. The internal documents of the joint-stock Observed According to clause 3.2., Article 3 of the Regulations on the procedure for company shall entitle members of the Board convening and holding the meetings of the Board of Directors of IDGC of of Directors to receive information from Volga, JSC, any members of the Board of Directors may send written re- executive bodies and heads of the main quests for documents and information required to make decision on issues structural subdivisions of the joint-stock to be resolved by the Board of Directors directly to the General Directors of company in order to discharge their duties, the Company (other person acting as a sole executive body of the Company) as well as liability for failure to provide such and through the Corporate Secretary. information.

25. Availability of the Strategic Planning Com- Observed The Committee for Strategy and Development under the Board of Direc- mittee under the Board of Directors or tors of IDGC of Volga, JSC was formed under the resolution of the Board of charging other Committee (except for Audit Directors of the Company on November 30, 2009. Committee and Personnel and Award Com- mittee) with strategic planning duties.

26. Availability of the Committee of the Board Observed The Audit Committee under the Board of Directors of IDGC of Volga, JSC of Directors (Audit Committee) that recom- was formed under the resolution of the Board of Directors of the Company mends the Auditor of the joint-stock com- on November 13, 2008. pany to the Board of Directors and deals with this Auditor and Internal Audit Commission of the joint-stock company.

27. The Audit Committee shall comprise only Observed The Audit Committee comprises independent and non-executive directors. independent and non-executive directors.

28. The Audit Committee shall be headed by an Observed The Committee is headed by a person acting as an independent member of independent director. the Board of Directors of the Company.

29. The internal documents of the joint-stock Observed This right is specified in clause 4.3 and clauses 8.1-8.4 of the Regulations company shall entitle all members of the on the Audit Committee under the Board of Directors of IDGC of Volga, JSC. Audit Committee to have access to any documents and information of the joint-stock company and oblige members to avoid any disclosure of the confidential information.

30. Formation of the Committee under the Observed The Personnel and Award Committee under the Board of Directors of the Board of Directors (Personnel and Award Company was formed under the resolution of the Board of Directors of IDGC Committee) charged with development of of Volga, JSC on February 20, 2009. criteria for selection of nominees for the Board of Directors and preparation of the award policy of the joint-stock company.

31. The Personnel and Award Committee shall Observed The Committee is headed by a person not being a member of the Board of be headed by an independent director. Directors of the Company.

32. The Personnel and Award Committee shall Observed The Personnel and Award Committee does not comprise any official of the not comprise officials of the joint-stock Company. company.

33. Availability of the Risk Committee under the Non-observed This Committee of the Board of Directors was not formed. Board of Directors or charging other Com- mittee (except for Audit Committee and Per- sonnel and Award Committee) with duties of the above Committee. www.mrsk-volgi.ru EXCELLENT ENERGY! 140 | 141

№ Provision of Corporate Code of Conduct Observed or Note non-observed

34. Availability of the Committee for Corporate Non-observed This Committee of the Board of Directors was not formed. Conflict Settlement under the Board of Di- rectors or charging other Committee (except for Audit Committee and Personnel and Award Committee) with duties of the above Committee.

35. The Committee for Corporate Conflict Set- Non-observed This Committee of the Board of Directors was not formed. tlement shall not comprise officials of the joint-stock company.

36. The Committee for Corporate Conflict Set- Non-observed This Committee of the Board of Directors was not formed. tlement shall be headed by an independent director.

37. Availability of internal documents of the Observed ——The procedure for formation of the Committee under the Board of joint-stock company approved by the Board Directors is specified in Article 19 of the Articles of Association. of Directors stating the procedure for forma- ——The Board of Directors of the Company approved the following provisions: tion and work of the Committee under the ——Regulation on the Audit Committee under the Board of Directors of the Board of Directors. Company; ——Regulation on the Personnel and Award Committee under the Board of Directors of the Company; ——Regulation on the Committee for Strategy and Development under the Board of Directors of the Company; ——Regulation on the Committee for Reliability under the Board of Directors of the Company; ——Regulation on the Committee for Technological Connection to Electric Grids under the Board of Directors of the Company.

38. The Articles of Association of the Company Non-observed The Articles of Association of the Company contains no requirements for shall contain the procedure for determining the procedure of determining the Board of Directors' quorum required to the Board of Directors' quorum required to ensure obligatory participation of independent directors in the meetings of ensure obligatory participation of independ- the Board of Directors. ent directors in the meetings of the Board The Articles of Association of the Company was developed on the basis of of Directors. the law of the Russian Federation. According to RF law, the quorum for the meetings of the Board of Directors shall be specified in the Articles of Association of the Company, but at least half of the elected members of the Board of Directors of the Company shall be present for the quorum. Pursuant to clause 18.12., Article 18 of the Articles of Association, the quorum required for the meeting of the Board of Directors shall be at least half of elected members of the Board of Directors of the Company.

Executive bodies

39. Availability of the Collegial Executive Body Observed According to clause 21.1., Article 21 of the Articles of Association of the (Management Board) of the joint-stock Company, daily operation of the Company is managed by the sole executive company. body (General Director) and Collegial Executive Body (Management Board).

40. The Articles of Association or internal docu- Non-observed The Articles of Association and internal documents of the Company do not ments of the joint-stock company shall state oblige the Management Board to approve transactions with immovable that the Management Board shall approve property and raising loans by the Company (except for major transactions transactions with immovable property and and transactions related to the routine business activity of the Company). raising loans by the joint-stock company According to sub-clause 7, clause 22.2., Article 22 of the Articles of (except for major transactions and transac- Association, the Management Board of the Company is charged with making tions related to the routine business activity decisions on any transactions with property, works or services in the amount of the joint-stock company). of 1 to 25 percent of the book value of the Company’s assets, according to the data of the accounting statements as of the last reporting date (except for the cases stipulated in sub-clause 38, clause 15.1., Article 15 of the Articles of Association). IDGC OF VOLGA ANNUAL REPORT 2012 APPENDIX

№ Provision of Corporate Code of Conduct Observed or Note non-observed

41. The internal documents of the joint-stock Observed The Board of Directors and Management Board of IDGC of Volga, JSC company shall contain the procedure for consider issues on settlement of transactions uncovered by the financial approval of transactions uncovered by the and business plan as these transactions are added to adjustments of the financial and business plan of the joint-stock business plan and cash flow plan reviewed by theB oard of Directors of the company. Company and Management Board, respectively. The Company introduced documents regulating the process of business planning and cash flow management: ——Standard of business planning of IDGC of Volga, JSC approved by the Board of Directors of IDGC of Volga, JSC (Minutes No. 6 dated January 11, 2008); ——Procedure for formation of income and expenses budget and cash flows of IDGC of Volga, JSC and generation of reports thereon approved by the order of the General Director of IDGC of Volga, JSC No. 173 dated May 28, 2010.

42. The executive bodies shall not comprise per- Observed According to the Order of the Company No. 241 “On information disclosure sons acting as a participant, General Director in the quarterly report of the issuer of issuable securities of IDGC of Volga, (Top Manager), a member of the manage- JSC” dated July 21, 2011, IDGC of Volga, JSC requests this information from ment body or an employee of a legal entity members of the Board of Directors of the Company on a quarterly basis. competing with the joint-stock company. The executive bodies of the Company do not comprise such persons.

43. The executives bodies of the joint-stock Observed According to the Order of the Company No. 241 “On information disclosure company shall not comprise persons con- in the quarterly report of the issuer of issuable securities of IDGC of Volga, victed of economic crimes or crimes against JSC” dated July 21, 2011, IDGC of Volga, JSC requests this information from public authorities, interests of public service members of the Board of Directors of the Company on a quarterly basis. and service in local authorities or incurred The executive bodies of the Company do not comprise such persons. administrative punishment for law violations relating to entrepreneurial activities, finances, taxes and charged, securities market. Should a managing company or a top manager discharge duties of a sole executive body, the General Director and members of the Management Board of the managing company or Top Manager shall meet the requirements to the General Director and members of the Management Board of the joint-stock company.

44. The Articles of Association or internal docu- Non-observed This provision is not stipulated in the Company’s Articles of Association ments of the joint-stock company shall pro- and internal documents. hibit the managing company (Top Manager) to discharge similar duties in a rival company and to have other property relations with the joint-stock company except for delivering services as a managing company (Top Manager).

45. The internal documents of the joint-stock Observed Specified in sub-clause 4.2.7, clause 4.2.,A rticle 4 of the Code of Corporate company shall oblige the executive bodies Governance of IDGC of Volga, JSC. to avoid any actions that will or may cause a conflict of interest between these bodies and joint-stock company, and should any such conflict arise, the executive bodies shall give information about this conflict to the Board of Directors.

46. The Articles of Association or internal docu- Non-observed This provision is not stipulated in the Company’s Articles of Association ments of the joint-stock company shall con- and internal documents. tain the criteria for selection of a managing company (Top Manager). www.mrsk-volgi.ru EXCELLENT ENERGY! 142 | 143

№ Provision of Corporate Code of Conduct Observed or Note non-observed

47. The executive bodies of the joint-stock com- Partially The General Director submits reports on the Company’s activities (including pany shall submit monthly reports on activi- observed performance of his/her duties), implementation of resolutions of the General ties of these executive bodies to the Board (see p. 130) Meeting of Shareholders and the Board of Directors of the Company of Directors. according to the procedure and within the time specified in the internal documents of the Company. Furthermore, the reports are submitted in compliance with the applicable RF law, plan of activities of the Board of Directors and in cases stipulated in separate resolutions of the Board of Directors of the Company.

48. Contracts signed by the joint-stock com- Observed Contracts signed with the members of the Management Board and General pany with the General Director (managing Director establish responsibility for any breach of provisions on the use of company, Top Manager) and members of the confidential and inside information. Management Board shall establish responsibility for any breach of provisions on the use of confidential and inside information.

Secretary of the Company

49. The joint-stock company shall appoint a Partially According to Article 20 of the Articles of Association of IDGC of Volga, JSC special employee (Secretary of the Com- observed and Section 4 of the Regulation on procedure for convening and holding the pany) in charge of ensuring observation of (see p. 130) meetings of the Board of Directors of IDGC of Volga, JSC, the Corporate procedural requirements guaranteeing the Secretary was appointed in the Company. exercise of rights and legitimate interests The Department of Corporate Governance and Cooperation with Shareholders of the Company’s shareholders by the bod- is in charge of ensuring observation of procedural requirements guaranteeing ies and officials of the joint-stock company. the exercise of rights and legitimate interests of the Company’s shareholders by the bodies and officials of the joint-stock company.

50. The Articles of Association or internal docu- Observed The Corporate Secretary of IDGC of Volga, JSC discharges his/her duties ments of the joint-stock company shall con- in compliance with the Regulation on procedure for convening and holding tain the procedure for appointment (election) the meetings of the Board of Directors of IDGC of Volga, JSC describing of the Secretary of the company and duties the procedure for appointment (election) of the Secretary of the Company, of the Company’s Secretary. duties, rights and obligations of the Company’s Secretary.

51. The Articles of Association of the joint-stock Non-observed The Articles of Association do not contain these requirements. company shall contain requirements to a nominee for the position of the Secretary of the Company.

Material corporate actions

52. The Articles of Association or internal docu- Observed According to the Articles of Association of the Company, the management ments of the joint-stock company shall re- bodies of the Company (General Meeting of Shareholders and the Board quire the approval of a major transaction of Directors) are in charge of making decisions on approval of major before it is settled. transactions in cases specified in Chapter X of the Federal Law “On Joint- Stock Companies” (sub-clause 24. clause 15.1., Article 15 of the Articles of Association and Article 79 of the Federal Law “On Joint-Stock Companies” (sub-clause 17, clause 10.1., Article 10 of the Articles of Association).

53. An independent appraiser shall be invited to Observed According to sub-clause 47, clause 15.1., Article 15 of the Articles of appraise the market value of the property Association of the Company, the Board of Directors is in charge of approving involved in a major transaction. a nominated independent appraiser(s) selected to appraise the value of shares, property and other assets of the Company in cases specified in the Federal Law “On Joint-Stock Companies”, Articles of Association of the Company and separate resolutions of the Board of Directors. IDGC OF VOLGA ANNUAL REPORT 2012 APPENDIX

№ Provision of Corporate Code of Conduct Observed or Note non-observed

54. The Articles of Association of the joint-stock Non-observed The Articles of Association do not contain these requirements. company shall prohibit to perform any ac- According to clause 21.14., Article 21 of the Articles of Association, when tions intended to protect interests of the ex- exercising rights and discharging duties, the General Director and members ecutive bodies (members of these bodies) of the Management Board of the Company shall act in the interests of the and members of the Board of Directors of Company and exercise their rights and discharge their duties in relation to the joint-stock company and discriminating the Company in a fair and reasonable way. against shareholders (in particular, the Arti- cles of Association shall prohibit the Board of Directors to pass resolution on additional issue of securities convertible into shares or securities entitling to purchase Company’s shares before the end of the expected period of share acquisition, even if the Board of Directors may pass this resolution pursuant to the Articles of Association) in case of purchase of big stakes in the joint-stock company (take-over).

55. The Articles of Association of the joint-stock Non-observed The Articles of Association of the Company do not contain this requirement. company shall oblige to invite an independ- Observed by the Company in compliance with the requirements of the ent appraiser to evaluate the present market Federal Law “On Joint-Stock Companies”. value of shares and possible changes in the market value of shares after the take-over.

56. The Articles of Association of the joint-stock Observed The Articles of Association do not contain this requirement. company shall not contain any provisions relieving the purchaser of obligation to propose shareholders to sell their ordinary shares of the Company (issuable securities convertible into ordinary shares) in case of take-over.

57. The Articles of Association or internal doc- Non-observed The Articles of Association and internal documents of the Company do not uments of the joint-stock company shall contain this requirement. Observed by the Company in compliance with the oblige to invite an independent appraiser to requirements of the Federal Law “On Joint-Stock Companies”. evaluate the share conversion ration in case of reorganization.

Information Disclosure

58. Availability of the internal document contain- Observed The Regulation on Information Management Policy of IDGC of Volga, JSC ing rules and approaches of the joint-stock was adopted by the Board of Directors on August 29, 2007 (Minutes No. 2). company for information disclosure (Regu- lation on Information Management Policy).

59. The internal documents of the joint-stock Partially The information is disclosed in accordance with the applicable laws of company shall contain the requirements observed the Russian Federation and the Regulation on the Company’s Information for information disclosure on share place- Management Policy. ment goals, persons intending to purchase shares under placement (including any big stake) and participation of chief executives of the joint-stock company in purchase of the Company’s shares under placement.

60. The internal documents of the joint-stock Observed According to sub-clause e, clause 2.2. of the Regulation on procedure for company shall contain a list of information, preparation and holding of General Meeting of Shareholders of IDGC of Volga, documents and materials to be provided to JSC, the list of information, documents and materials to be provided to the shareholders to solve issues on the agenda shareholders to resolve issues on the agenda of the General Meeting of of the General Meeting of Shareholders. Shareholders shall be approved by the Board of Directors of the Company when preparing for the General Meeting of Shareholders.

61. Availability of a website of the joint-stock Observed The Company has a website for disclosure of information about the company and regular disclosure of informa- Company: http://www.mrsk-volgi.ru/ tion about the joint-stock company via this The Company timely updates the content of the corporate website, including website. by disclosing information according to the Regulation on Information Management Policy of the Company. www.mrsk-volgi.ru EXCELLENT ENERGY! 144 | 145

№ Provision of Corporate Code of Conduct Observed or Note non-observed

62. The internal documents of the joint-stock Observed According to sub-clauses 5.2.8.2. and 5.2.8.3. of the Regulation on company shall contain the requirement for Information Management Policy, the Company discloses information on disclosure of information on transactions shares of the Company, its subsidiaries and affiliates owned by members of settled by the joint-stock company with the executive bodies and affiliated persons stating the number and category persons classified as chief executives of of shares and information on transactions settled between the above persons the joint-stock company according to the and the Company. Articles of Association, as well as on transactions settled by the joint-stock company with organizations with over 20 percent of the authorized capital directly or indirectly owned by the chief executives of the joint- stock company or organizations upon which these chief executives may have a significant impact.

63. The internal documents of the joint-stock Observed According to sub-clause 5.2.10. of the Regulation on Information company shall contain the requirement for Management Policy of IDGC of Volga, JSC, the Company discloses disclosure of information on all transac- information on material transactions. tions that may influence the market value of shares of the joint-stock company.

64. Availability of the internal document (ap- Observed The Regulation on Insider Information of IDGC of Volga, JSC was adopted by proved by the Board of Directors) on the the Board of Directors on December 26, 2011 (Minutes No. 13). use of the material confidential information on activities of the joint-stock company, shares and other securities of the Company and transactions therewith that may have a significant impact on the market value of shares and other securities of the joint-stock company in case of its disclosure.

Control of financial and business activities

65. Availability of procedures for internal control Observed New version of the Internal Control Policy of IDGC of Volga, JSC was of the financial and business activity of the approved by the resolution of the Board of Directors of IDGC of Volga, JSC joint-stock company approved by the Board dated August 22, 2012 (Minutes No. 2). of Directors.

66. Availability of a special subdivision of the Observed The organizational structure of the executive body of IDGC of Volga, JSC joint-stock company ensuring the observa- encompasses the Internal Audit and Risk Management Department. tion of internal control procedures (internal The General Meeting of Shareholders elects the Internal Audit Commission of control and audit service). the Company to control the financial and business activities of the Company (clause 24.1, Article 24 of the Articles of Association of the Company).

67. The internal documents of the joint-stock Observed According to clause 24.1., Article 24 of the Articles of Association, IDGC company shall oblige the Board of Directors of Volga, JSC shall set the number of members of the Internal Audit to determine the structure and membership Commission. of the control and audit service of the joint- The requirements to the membership of the Internal Audit Commission are stock company. specified in clause 4.6. of theR egulation on the Internal Audit Commission of the Company.

68. The control and audit service shall not Observed The control and audit service does not comprise these persons. comprise persons convicted of economic crimes or crimes against public authorities, interests of public service and service in local authorities or incurred administrative punishments for law violations relating to entrepreneurial activities, finances, taxes and charged, securities market.

69. The control and audit service shall not com- Observed The control and audit service does not comprise these persons. prise members of the executive bodies of the joint-stock company and participants, General Director (Top Manager), members of the management bodies or employees of a legal entity competing with the joint-stock company. IDGC OF VOLGA ANNUAL REPORT 2012 APPENDIX

№ Provision of Corporate Code of Conduct Observed or Note non-observed

70. The internal documents of the joint-stock Partially Pursuant to clause 7.5. of the Regulation on the Internal Audit Commission company shall state the time for submission observed of the Company, the requested documents and materials shall be furnished of documents and materials to the control to the members of the Internal Audit Commission within 2 (two) business and audit service for evaluation of financial days from the date of the request. and business operations and responsibility According to clause 6.1.2. of the Regulation on internal control procedures of the officials and employees of the joint- of IDGC of Volga, JSC, all documents necessary to perform inspections shall stock company for failure to submit the be provided by the directors of the Company’s subdivisions, branches and above documents and materials. representative offices within three days upon requests of the Company’s subdivision in charge of the internal control/audit.

71. The internal documents of the joint-stock Observed According to clause 8.6, Section 8 of the Regulation on the Internal Audit company shall oblige the control and audit Commission of IDGC of Volga, JSC, one copy of the report (opinion) issued service to notify the Audit Committee (or by the Internal Audit Commission will be retained by the Secretary of the the Board of Directors of the joint-stock Internal Audit Commission, one copy will be sent to the Chairman of the company) of any violations. Board of Directors of the Company and one copy — to the General Director of the Company.

72. The Articles of Association of the joint- Non-observed The Articles of Association of the Company do not contain this procedure. stock company shall oblige the control and audit service to perform the preliminary evaluation of feasibility of operations uncovered by the financial and business plan of the joint-stock company (nonstandard operations).

73. The internal documents of the joint-stock Non-observed The internal documents of the Company do not contain this procedure. company shall contain the procedure for approval of nonstandard operations by the Board of Directors.

74. Availability of the internal document Observed The internal audit procedure is described in Section 7 of the Regulation on (approved by the Board of Directors) the Internal Audit Commission of IDGC of Volga, JSC. describing the procedure for inspecting the financial and business activity of the joint- stock company approved by the Internal Audit Commission.

75. The Audit Committee shall evaluate the Observed ——According to the Regulation on the Audit Committee under the Board of auditor’s report before submission to Directors of IDGC of Volga, JSC, the Committee is in charge of: shareholders at the General Meeting of ——supervision of annual independent audit of consolidated financial Shareholders. statements and accounting statements of the Company; ——evaluation of nominee auditors of the Company.

Dividends

76. Availability of the internal document (ap- Observed The Board of Directors of IDGC of Volga, JSC adopted the Regulation on proved by the Board of Directors) used by the Dividend Policy of the Company on August 24, 2010. Board of Directors to consider recommendations on the amount of dividends (Regulation on Dividend Policy).

77. The Regulation on Dividend Policy shall Observed Clause 4.1. of the Regulation on Dividend Policy of the Company contains contain the procedure for calculation of a the procedure for calculation of the amount of dividends basing upon the minimum portion of the net profit of the joint- results of the financial period; clause 3.4. contains the conditions for non- stock company allocated to pay dividends and payment or partial payment of dividends on preference shares with dividends conditions for non-payment or partial pay- specified in theA rticles of Association of the Company (in case of placement ment of dividends on preference shares with of these shares). dividends specified in the Articles of Associa- No preference shares were placed by the Company during the reporting tion of the joint-stock company. period. www.mrsk-volgi.ru EXCELLENT ENERGY! 146 | 147

№ Provision of Corporate Code of Conduct Observed or Note non-observed

78. Publishing the information on the dividend Observed The procedure for disclosure of the information on resolutions passed by policy of the joint-stock company and modi- IDGC of Volga, JSC relating to the issues of dividend payment is established fications made to this policy in the periodical by the applicable RF law and Articles of Association of the Company: specified in theA rticles of Association of the ——publishing in the Rossiyskaya Gazeta newspaper; joint-stock company for publication on no- ——publishing in the newsline of press agencies authorized by the federal tices of general meetings of shareholders, as executive authority for the securities market to distribute information well as posting the above information on the disclosed in the securities market; website of the joint-stock company. ——publishing on the web-pages of the Company (http://www.mrsk-volgi. ru/ru/aktsioneram_i_investoram/ korporativnoe_upravlenie/sobraniya_ aktsionerov/ and http://www. mrsk-volgi.ru/ru/aktsioneram_i_investoram/ raskritie_informatsii_obcshestvom_i_otchetnaya_informatsiya/ informatsiya_o_sucshestvennih_faktah/), and publishing for all interested persons on the website of the Company http://www.mrsk-volgi.ru/ru/aktsioneram_i_investoram/informatsiya_ dlya_aktsionerov/informatsiya_o_dividendah/. IDGC OF VOLGA ANNUAL REPORT 2012 APPENDIX

APPENDIX 3

OVERVIEW OF INTERESTED PARTY TRANSACTIONS APPROVED BY THE BOARD OF DIRECTORS

№№ Minutes details of the Parties to the transaction Interested party Subject of the transaction Transaction Value Company's Board of Directors' meeting

1. Meeting of the Board of Contractor: ChAK, JSC; Pursuant to Article 81 of the Federal Law “On Joint Stock The Contractor undertakes, at its own risk and upon the Customer's request, to provide overhaul services Shall not exceed Directors dated 09.02.2012 Customer: IDGC of Volga, JSC Companies”, this agreement shall be considered as the interested for tractor and special-purpose machinery of Alatyrsky, Northern and South Production Departments 562,860 rubles (Minutes No. 16) (Chuvashenergo, Branch of IDGC of party transaction involving the interests of IDGC Holding, JSC, the of Chuvashenergo, a branch of IDGC of Volga, JSC in compliance with the Specification agreed by the (VAT inclusive) Volga, JSC). Company’s shareholder holding over 20 percent of the Company’s Parties (Appendix No. 1 to the Agreement) deemed to be an integral part thereof. voting shares; with ChAK, JSC, the Company’s affiliate, being a party to the transaction.

2. Meeting of the Board of Customer: IDGC of Volga, JSC; Pursuant to Article 81 of the Federal Law “On Joint Stock Companies”, The Customer requests, and the Contractor undertakes to provide services on mandatory energy 95,157,807 rubles 04 kop. Directors dated 09.02.2012 Contractor: Energoservice of Volga, JSC this agreement shall be considered as the interested party transaction inspection in the following branches of IDGC of Volga, JSC: Saratov Distribution Grids, Ulyanovsk (VAT inclusive) (Minutes No. 16) involving the interests of IDGC Holding, JSC, the Company’s Distribution Grids, Samara Distribution Grids, Orenburgenergo, Chuvashenergo, Mordovenergo and shareholder holding over 20 percent of the Company’s voting shares; Penzaenergo; and to issue an energy passport of IDGC of Volga, JSC basing upon the results of the with Energoservice of Volga, JSC, the Company’s affiliate, being a above energy inspection for 2011-2012 in compliance with the Customer's Statement of Work. party to the transaction. To submit the energy passport of IDGC of Volga, JSC for en expert review by a Self-Regulatory Organization in the field of energy inspection (SRO). To provide the Customer with the energy passport of IDGC of Volga, JSC approved according to the requirements of the Federal Law No. 261-FL "On Energy Savings and Increased Energy Efficiency and on Amendments to Certain Legislative Acts of the Russian Federation" dated November 23, 2009 and to the requirements of the Law of the Ministry of Power of Russia No.182 dated April 19, 2010.

3. Meeting of the Board of Customer: IDGC of Volga, JSC; Pursuant to Article 81 of the Federal Law “On Joint Stock Companies”, The Contractor undertakes, as requested by the Customer, to provide services for pre-trip medical 304,340 rubles 10 kop. Directors dated 02.03.2012 Contractor: Solnechniy Sanatorium- this agreement shall be considered as the interested party transaction examination of the drivers — employees of the service of mechanical means and transport within the (VAT exempt) (Minutes No. 17) Preventorium, JSC. involving the interests of IDGC Holding, JSC, the Company’s production department of Orenburg city Electrical Grids of Orenburgenergo, a branch of IDGC of Volga, shareholder holding over 20 percent of the Company’s voting shares; JSC, at the pre-trip examination room located at the following address: 58, ul. Turbinnaya, Orenburg, with Solnechniy Sanatorium-Preventorium, JSC, the Company’s (one pre-trip examination at weekdays and weekends, 35 drivers per day maximum), and the Customer affiliate, being a party to the transaction. undertakes to accept and to pay for the services provided. Pre-trip medical check-up services are provided for the drivers having trip sheets and driver’s licenses at the Health Unit located at: 58, ul. Turbinnaya, Orenburg. Hours of pre-trip check-up services: 07.30 a.m. till 10.00 a.m.

4. Meeting of the Board of Customer: IDGC of Volga, JSC; Pursuant to Article 81 of the Federal Law “On Joint Stock Companies”, The Contractor undertakes to provide, and the Customer undertakes to accept sanatorium and health 9,329,144 rubles 33 kop. Directors dated 02.03.2012 Contractor: Solnechniy Sanatorium- this agreement shall be considered as the interested party transaction resort treatment services (voucher-based) for the Customer’s employees according to the Schedule (VAT exempt) (Minutes No. 17) Preventorium, JSC. involving the interests of IDGC Holding, JSC, the Company’s of sojourns (see Appendix No. 1 to the Agreement). shareholder holding over 20 percent of the Company’s voting shares; The services shall be provided at the facilities of Solnechniy Sanatorium-Preventorium, JSC, located with Solnechniy Sanatorium-Preventorium, JSC, the Company’s at: 58, ul. Turbinnaya, Orenburg. affiliate, being a party to the transaction.

5. Meeting of the Board of Customer: IDGC of Volga, JSC; Pursuant to Article 81 of the Federal Law “On Joint Stock Companies”, The Contractor undertakes to provide, and the Customer undertakes to accept and to pay for sanatorium 1,002,912 rubles 02 kop. Directors dated 02.03.2012 Contractor: Solnechniy Sanatorium- this agreement shall be considered as the interested party transaction and health resort treatment services (voucher-based) for the Customer’s retired employees according (VAT exempt) (Minutes No. 17) Preventorium, JSC. involving the interests of IDGC Holding, JSC, the Company’s to the Schedule of sojourns (see Appendix No. 1 to the Agreement). shareholder holding over 20 percent of the Company’s voting shares; The services shall be provided at the facilities of Solnechniy Sanatorium-Preventorium, JSC, located with Solnechniy Sanatorium-Preventorium, JSC, the Company’s at: 58, ul. Turbinnaya, Orenburg. affiliate, being a party to the transaction.

6. Meeting of the Board of Customer: IDGC of Volga, JSC; Pursuant to Article 81 of the Federal Law “On Joint Stock Companies”, The Contractor undertakes to provide, and the Customer undertakes to accept medical and preventive 1,790,500 rubles Directors dated 02.03.2012 Contractor: Solnechniy Sanatorium- this agreement shall be considered as the interested party transaction treatment services for the Customer’s employees (production departments of Orenburgenergo, branch (VAT exempt) (Minutes No. 17) Preventorium, JSC. involving the interests of IDGC Holding, JSC, the Company’s of IDGS of Volga, JSC: TsES, OGES, IES and administrative staff) as part of pre-hospital medical care. shareholder holding over 20 percent of the Company’s voting shares; with Solnechniy Sanatorium-Preventorium, JSC, the Company’s affiliate, being a party to the transaction. www.mrsk-volgi.ru EXCELLENT ENERGY! 148 | 149

№№ Minutes details of the Parties to the transaction Interested party Subject of the transaction Transaction Value Company's Board of Directors' meeting

7. Meeting of the Board of Customer: IDGC of Volga, JSC; Pursuant to Article 81 of the Federal Law “On Joint Stock Companies”, The Customer undertakes to provide services for psychophysical examination of 332 Customer’s 579,340 rubles Directors dated 02.03.2012 Contractor: Solnechniy Sanatorium- this agreement shall be considered as the interested party transaction employees, and the Customer undertakes to accept and to pay for the above services. (VAT inclusive) (Minutes No. 17) Preventorium, JSC. involving the interests of IDGC Holding, JSC, the Company’s PPE services include physical and psychologicaal examination, functional diagnostics, preparation of shareholder holding over 20 percent of the Company’s voting shares; monthly reports on examination results (within 5 days upon completion of examination). Cost of PPE with Solnechniy Sanatorium-Preventorium, JSC, the Company’s services shall be based on the PPE Services Price List for 2012, according to Appendix No. 1 to the affiliate, being a party to the transaction. Agreement. The services shall be provided on the basis of laboratory facilities of Solnechniy Sanatorium- Preventorium, JSC.

8. Meeting of the Board of Customer: IDGC of Volga, JSC; Pursuant to Article 81 of the Federal Law “On Joint Stock Companies”, The Contractor undertakes to organize leisure time activities for the Customer’s employees, during 728,420 rubles Directors dated 02.03.2012 Contractor: Solnechniy Sanatorium- this agreement shall be considered as the interested party transaction weekend sojourns, and the Contractor undertakes to accept and to pay for the services as set forth (VAT exempt) (Minutes No. 17) Preventorium, JSC. involving the interests of IDGC Holding, JSC, the Company’s in this Agreement. shareholder holding over 20 percent of the Company’s voting shares; Weekend sojourns take place at “Energetik” recreation camp located at: “Energetik” recreation camp, with Solnechniy Sanatorium-Preventorium, JSC, the Company’s Orenburg. The Contractor organizes sojourns for the relevant weekends based on the Clint’s requests, affiliate, being a party to the transaction. for forty (40) vouchers minimum.

9. Meeting of the Board of Customer: IDGC of Volga, JSC; Pursuant to Article 81 of the Federal Law “On Joint Stock Companies”, The Contractor undertakes to provide a package of services including accommodation and meals for 700,330 rubles Directors dated 02.03.2012 Contractor: Social Sphere-M, JSC. this agreement shall be considered as the interested party transaction 250 employees of Mordovenergo, a branch of IDGC of Volga, JSC, participating in the “Spartakiad” Sports (VAT inclusive) (Minutes No. 17) involving the interests of IDGC Holding, JSC, the Company’s Event held at “Energetik” recreation camp. shareholder holding over 20 percent of the Company’s voting shares, with Social Sphere-M, the Company’s affiliate, being a party to the transaction.

10. Meeting of the Board of Customer: IDGC of Volga, JSC Pursuant to Article 81 of the Federal Law “On Joint Stock The Contractor undertakes, as requested by the Customer, to provide services for storage, maintenance Shall not exceed Directors dated 13.03.2012 (Chuvashenergo, a branch of IDGC of Companies”, this agreement shall be considered as the interested checks, after-sales servicing, maintenance and operation of two (2) VOLKSWAGEN PASSAT B7 cars 3,000,000 rubles (Minutes No. 19) Volga, JSC); party transaction involving the interests of IDGC Holding, JSC, the and MITSUBISHI PAJERO IV car, with the following plate numbers: VIN: WVWZZZ3CZCP020017, VIN: (VAT inclusive) Contractor: ChAK, JSC. Company’s shareholder holding over 20 percent of the Company’s WVWZZZ3CZCP004819, VIN: JMBLYV98WBJ001706, and the following license plate numbers: B 185 КТ, voting shares; with ChAK, JSC, the Company’s affiliate, being a party В 186 КТ, B 917 ME respectively (the “Vehicles”), as well as to provide these Vehicles in good operational to the transaction. condition to the Customer under terms and conditions and within the time specified in the Agreement. The Customer undertakes to pay for the above services.

11. Meeting of the Board of Customer: IDGC of Volga, JSC Pursuant to Article 81 of the Federal Law “On Joint Stock The Contractor undertakes, as requested by the Customer, to provide services for storage, maintenance Shall not exceed Directors dated 13.03.2012 (Chuvashenergo, a branch of IDGC of Companies”, this agreement shall be considered as the interested checks, after-sales servicing, maintenance and operation of three (3) Ssang Yong Rexton RJ4 7,006,600 rubles (Minutes No. 19) Volga, JSC); party transaction involving the interests of IDGC Holding, JSC, the cars, and one (1) AUDI Q7 car with the following plate numbers: VIN: XU3GOA1S7Z000466, VIN: (VAT inclusive) Contractor: ChAK, JSC. Company’s shareholder holding over 20 percent of the Company’s XU3GOA1S8Z001103, VIN: XU3GOA1S8Z001514, VIN: WAUZZZ4L49D013732, with the following State voting shares; with ChAK, JSC, the Company’s affiliate, being a party Registration Numbers: B 321 EB, В 322 EB, B 325 EB, A 228 AA respectively, as well as to provide the to the transaction. above vehicles in good operational condition to the Customer under terms and conditions and within the time specified in the Agreement. The Customer undertakes to pay for the above services.

12. Meeting of the Board of Customer: IDGC of Volga, JSC Pursuant to Article 81 of the Federal Law “On Joint Stock The Contractor transfers, and the Customer accepts, for temporary possession and use on a fee basis, Shall not exceed Directors dated 13.03.2012 (Chuvashenergo, a branch of IDGC of Companies”, this agreement shall be considered as the interested motor vehicles owned by the Customer, and provides services for operation and maintenance of the 50,486,544 rubles (Minutes No. 19) Volga, JSC); party transaction involving the interests of IDGC Holding, JSC, the above vehicles (with crews). (VAT inclusive) Contractor: ChAK, JSC. Company’s shareholder holding over 20 percent of the Company’s voting shares; with ChAK, JSC, the Company’s affiliate, being a party to the transaction.

13. Meeting of the Board of Consignor: IDGC of Volga, JSC Pursuant to Article 81 of the Federal Law “On Joint Stock The Freight Forwarder undertakes, as requested by the Consignor, to deliver Consignor’s cargo to Shall not exceed Directors dated 13.03.2012 (Chuvashenergo, Branch of IDGC of Companies”, this agreement shall be considered as the interested a specific point of destination and hand it over to the person or entity (Consignee) authorized by the 9,000,000 rubles (Minutes No. 19) Volga, JSC); party transaction involving the interests of IDGC Holding, JSC, the Consignor to perform acceptance thereof, and the Consignor undertakes to pay for cargo transportation (VAT inclusive) Freight Forwarder: ChAK, JSC. Company’s shareholder holding over 20 percent of the Company’s services as set forth in the Agreement. voting shares; with ChAK, JSC, the Company’s affiliate, being a party to the transaction.

14. Meeting of the Board of Customer: IDGC of Volga, JSC Pursuant to Article 81 of the Federal Law “On Joint Stock ——The Contractor undertakes to perform, as requested by the Customer, and the Customer undertakes Shall not exceed Directors dated 13.03.2012 (Chuvashenergo, a branch of IDGC of Companies”, this agreement shall be considered as the interested to accept and pay for the following works performed by means of special-purpose motor vehicles and 8,873,000 rubles (Minutes No. 19) Volga, JSC); party transaction involving the interests of IDGC Holding, JSC, the machinery (truck-mounted cranes, mobile elevated work platforms, excavators, etc.) owned by the (VAT inclusive) Contractor: ChAK, JSC. Company’s shareholder holding over 20 percent of the Company’s Contractor: voting shares; with ChAK, JSC, the Company’s affiliate, being a party ——cargo loading/unloading; to the transaction. ——earthworks; ——work at heights (using truck-mounted cranes, mobile elevated work platforms)

15. Meeting of the Board of Customer: IDGC of Volga, JSC Pursuant to Article 81 of the Federal Law “On Joint Stock Companies”, The Contractor undertakes, at its own risk, perform repair of automotive and tractor vehicles and Shall not exceed Directors dated 13.03.2012 (Chuvashenergo, a branch of IDGC of this agreement shall be considered as the interested party transaction machinery of Chuvashenergo, a branch of IDGC of Volga, JSC, as requested by the Customer. 3,416,100 rubles (Minutes No. 19) Volga, JSC); involving the interests of IDGC Holding, JSC, the Company’s shareholder (VAT inclusive) Contractor: ChAK, JSC. holding over 20 percent of the Company’s voting shares; with ChAK, JSC, the Company’s affiliate, being a party to the transaction. www.mrsk-volgi.ru EXCELLENT ENERGY! 150 | 151

№№ Minutes details of the Parties to the transaction Interested party Subject of the transaction Transaction Value Company's Board of Directors' meeting

16. Meeting of the Board of Customer: IDGC of Volga, JSC; Pursuant to Article 81 of the Federal Law “On Joint Stock Companies”, The Contractor undertakes to provide services for preparing and holding the Event on the basis of 989,600 rubles Directors dated 04.04.2012 Contractor: IDGS of the South, JSC. settlement of this transaction by IDGC of Volga, JSC shall be Yubileynaya 110/10-10 kV operational substation of Astrakhanenergo, a branch of IDGC of the South, (VAT inclusive) (Minutes No. 21) considered as the interested party transaction: JSC, Astrakhan, on September 9-15, 2012 in compliance with the Regulation (see Appendix No. 2 to the 1_the Company’s shareholder holding over 20 percent of the Agreement), and the Customer undertakes to pay for the services provided on the terms and conditions Company’s voting shares — IDGC Holding, JSC, with the Company’s set forth in this Agreement. affiliate, being a party to the transaction. 2_the interests of the member of the Board of Directors Perepelkin A.Yu., who is at the same time a member of the Board of Directors of IDGC of the South, JSC, a party to the transaction.

17. Meeting of the Board of Lessee: IDGC of Volga, JSC (Chuvash Pursuant to Article 81 of the Federal Law “On Joint Stock The Lessor transfers, and the Lessee accepts, for temporary possession and use (under the lease), on a 27,069,186 rubles 19 kop. Directors dated 22.05.2012 energo, Branch of IDGC of Volga, JSC); Companies”, this agreement shall be considered as the interested fee basis (in return for payment of rent), the motor vehicles as defined inA ppendix No. 1, constituting an (VAT inclusive) (Minutes No. 26) Lessor: ChAK, JSC. party transaction involving the interests of IDGC Holding, JSC, the integral part of the above Agreement, excluding maintenance, technical support and operation services Company’s shareholder holding over 20 percent of the Company’s (motor vehicles without crews). voting shares; with ChAK, JSC, the Company’s affiliate, being a party to the transaction. www.mrsk-volgi.ru EXCELLENT ENERGY! 152 | 153

№№ Minutes details of the Parties to the transaction Interested party Subject of the transaction Transaction Value Company's Board of Directors' meeting

18. Meeting of the Board of Lessee: IDGC of Volga, JSC; Pursuant to the Article 81 of the Federal Law “On Joint Stock The Parties agreed as follows: 175,393 rubles 22 kop. Directors dated 31.05.2012 Lessor: Volzhskaya TGC, JSC. Companies”, this agreement shall be considered as the interested 1_To amend clause 1.3 of the Agreement for lease of non-residential premises No. ИД91-2011/57 per month (Minutes No. 27) party transaction involving the interests of the member of the Board dated April 06, 2011 (the “Agreement”) as follows: “The facility is owned by the Saratov Branch of (VAT inclusive) of Directors Nikonov V.V., who is at the same time a member of the Volzhskaya TGC, JSC.” The registration number of the building of the block of auxiliary workshops, Board of Directors of Volzhskaya TGC, JSC, a party to the transaction. ID code “D”, located at the address: bld. 16, Saratovskoye shosse, Balakovo, the Saratov Region, 413840, on accounting: 053400010046». 2_Section 2 “Rights and Obligations of the Parties to the Agreement” shall be supplemented with the following clause 2.2.2: “To unilaterally change the rental fee for the use of the Facility maximum once per year by giving a notice thereof to the Lessee at least fifteen (15) calendar days before setting a new rental fee.” 3_Clause 3.2. of the Agreement to amend as follows: “The monthly constant component amounts to 175,393 (one hundred and seventy-five thousand three hundred and ninety-three) rubles 22 kopecks, inclusive of VAT (18%) amounting to 26,754 (twenty-six thousand seven hundred and fifty-four) rubles 90 kopecks.” 4_Clause 3.7. of the Agreement to amend as follows: “The Lessee shall transfer the rental fee to the following bank account prior to the 20th day of the current month against the invoice submitted by the Lessor: INN/KPP 631537694/ 645043001 Settlement account 40702810656000001568 in the Branch No. 8622 of Sberbank of Russia, Saratov Correspondent account 30101810500000000649 BIC 046311649.” 5_Clause 3.9. of the Agreement to amend as follows: “Balakovo Power Supply Office of the Saratov Branch of Volzhskaya TGC, JSC is the Lessee’s representative under the Agreement entitled to issue work (services) acceptance certificates, invoices and invoices-proforma and to reconcile mutual settlements. Address of the Lessee’s representative: 13, ul. Akademika Zhuka”, 431800, Balakovo, the Saratov region. 6_6. To extend the duration of the Agreement till October 31, 2012. 7_7. To amend Section 8, Bank Details and Signatures of Parties, of the Agreement as follows: Lessor: Volzhskaya TGC, JSC 443100 Samara, ul. Mayakovskogo, 15 Saratov Branch of Volzhskaya TGC, JSC 410028 Saratov, ul. Chernyshevskogo, 118a Postal address: 410028 Saratov, ul. Chernyshevskogo, 124 Tel. (8452) 98-63-59, fax (8452) 28-09-00 INN/KPP 6315376946/645043001 Settlement account 40702810656000001568 in the Branch No. 8622 of Sberbank of Russia, Saratov Correspondent account 30101810500000000649 BIC 046311649 Lessee: IDGC of Volga, JSC 410031 Saratov, ul. Pervomayaskaya, 42/44 410031, Russian Federation Postal address: 410031, Saratov, ul. Pervomayaskaya, 42/44 410031, Russian Federation INN 6450925977/997450001 Settlement account 40702810256020102436 in Branch No. 8622 of Sberbank of Russia, Saratov Correspondent account 30101810500000000649 BIC 046311649 8_Other provisions of the Agreement uncovered by the Addendum shall remain unchanged, and the Parties confirm their obligations thereunder. www.mrsk-volgi.ru EXCELLENT ENERGY! 154 | 155

№№ Minutes details of the Parties to the transaction Interested party Subject of the transaction Transaction Value Company's Board of Directors' meeting

19. Meeting of the Board of Lessee: IDGC of Volga, JSC; Pursuant to the Article 81 of the Federal Law “On Joint Stock The Parties agreed as follows: 11 783 rub. 15 kop. per month Directors dated 31.05.2012 Lessor: Volzhskaya TGC, JSC. Companies”, this agreement shall be considered as the interested 1_To amend clause 1.3. of Agreement No. ИД90-2011/58 dated April 06, 2011 (the “Agreement”) as (VAT inclusive) (Minutes No. 27) party transaction involving the interests of the member of the Board follows: “Asphalt concrete road and site at the Repair and Maintenance Station are owned by the of Directors Nikonov V.V., who is at the same time a member of the Saratov Branch of Volzhskaya TGC, JSC. The registration number of the asphalt concrete road and Board of Directors of Volzhskaya TGC, JSC, a party to the transaction. site at the Repair and Maintenance Station, ID code III, located at the address: bld. 16, Saratovskoye shosse, Balakovo, the Saratov Region, 413840, on accounting: 053400020086”. 2_Section 2 “Rights and Obligations of the Parties to the Agreement” shall be supplemented with the following clause 2.2.2: “To unilaterally change the fee for the use of the Structure maximum once per year by giving a notice thereof to the Lessee at least fifteen (15) calendar days before setting a new fee.” 3_Clause 3.5 of the Agreement shall be amended to read as follows: “The monthly fee for the use of the Structure amounts to 11,783 (eleven thousand seven hundred and eighty-three) rubles 15 kopecks, inclusive of VAT (18%) amounting to 1,797 (one thousand seven hundred and ninety-seven) rubles 43 kopecks.” 4_Clause 3.4. of the Agreement to amend as follows: “The Lessee shall transfer the fee for the use of the Structure to the following bank account prior to the 20th day of the current month: INN/KPP 631537694/ 645043001 Settlement account 40702810656000001568 in Branch No. 8622 of Sberbank of Russia, Saratov Correspondent account 30101810500000000649 BIC 046311649.” 5_Clause 3.5 of the Agreement shall be amended to read as follows: “Balakovo Power Supply Office of the Saratov Branch of Volzhskaya TGC, JSC is the Lessee’s representative under this Agreement entitled to issue work (services) acceptance certificates, invoices and invoices-proforma and to reconcile mutual settlements. Address of the Lessee’s representative: 13, ul. Akademika Zhuka”, 431800, Balakovo, the Saratov region. 6_To extend the duration of the Agreement till October 31, 2012. 7_To amend Section 8, Bank Details and Signatures of Parties, of the Agreement as follows: Lessor: Volzhskaya TGC, JSC 443100 Samara, ul. Mayakovskogo, 15 Saratov Branch of Volzhskaya TGC, JSC 410028 Saratov, ul. Chernyshevskogo, 118a Postal address: 410028 Saratov, ul. Chernyshevskogo, 124 Tel. (8452) 98-63-59, fax (8452) 28-09-00 INN/KPP 6315376946/645043001 Settlement account 40702810656000001568 in Branch No. 8622 of Sberbank of Russia, Saratov Correspondent account 30101810500000000649 BIC 046311649 Lessee: IDGC of Volga, JSC 410031 Saratov, ul. Pervomayaskaya, 42/44 410031, Russian Federation Postal address: 410031, Saratov, ul. Pervomayaskaya, 42/44 410031, Russian Federation INN 6450925977/997450001 Settlement account 40702810256020102436 in Branch No. 8622 of Sberbank of Russia, Saratov Correspondent account 30101810500000000649 BIC 046311649 8_Other provisions of the Agreement uncovered by the Addendum shall remain unchanged, and the Parties confirm their obligations thereunder.

20. Meeting of the Board of Customer: IDGC of Volga, JSC; Pursuant to Article 81 of the Federal Law “On Joint Stock Companies”, The Contractor acting for the benefit of the Customer undertakes to submit 20 children’s vouchers 137,926 rubles Directors dated 31.05.2012 Contractor: Social Sphere-M, JSC. this agreement shall be considered as the interested party transaction (10 vouchers for the 1st session and 10 for the 2nd session) to the health camp “Energetik” (Sabaevo (VAT exempt) (Minutes No. 27) involving the interests of IDGC Holding, JSC, the Company’s settlement, Kochkurovskiy district, the Republic of Mordovia) for employees of Mordovenergo, a branch shareholder holding over 20 percent of the Company’s voting shares, of IDGC of Volga, JSC to the Customer. with Social Sphere-M, the Company’s affiliate, being a party to the transaction.

21. Meeting of the Board of Customer: IDGC of Volga, JSC; Pursuant to Article 81 of the Federal Law “On Joint Stock Companies”, The Contractor undertakes to provide, and the Customer undertakes to pay for health improvement and 1,033,263 rubles Directors dated 25.07.2012 Contractor: Solnechniy Sanatorium- this agreement shall be considered as the interested party transaction recreation services for children of the Customer’s employees during summer holidays at the Children (VAT exempt) (Minutes No. 1) Preventorium, JSC. involving the interests of IDGC Holding, JSC, the Company’s Recreation Camp “Energetik”, located at the address: Dubki area, Orenburg. The services are provided shareholder holding over 20 percent of the Company’s voting shares; on the basis of vouchers being mandatory accounting documents. The Contractor provides, and the with Solnechniy Sanatorium-Preventorium, JSC, the Company’s Customer purchases 99 vouchers for three successive sojourns. affiliate, being a party to the transaction. www.mrsk-volgi.ru EXCELLENT ENERGY! 156 | 157

№№ Minutes details of the Parties to the transaction Interested party Subject of the transaction Transaction Value Company's Board of Directors' meeting

22. Meeting of the Board of Customer: IDGC of Volga, JSC; Pursuant to Article 81 of the Federal Law “On Joint Stock Companies”, Under this Agreement, the Contractor undertakes, in compliance with the Requirement Specification 3,239,100 rubles Directors dated 25.07.2012 Contractor: NIITs IDGC, JSC (Research this agreement shall be considered as the interested party transaction provided by the Customer, to implement engineering design project titled “Regulation and the System (VAT inclusive) (Minutes No. 1) Engineering Center of Interregional involving the interests of IDGC Holding, JSC, the Company’s of documents regulating the procedure for set-up and maintenance of the Regulatory and Technical Distribution Grid Companies) shareholder holding over 20 percent of the Company’s voting shares; Framework for industry technical regulation system”. Scope and extent of works, technical and other with NIITs IDGC, JSC, the Company’s affiliate, being a party to the requirements to the Works to be performed under the Agreement are defined in theS tatement of Work transaction. (Requirement Specification) (seeA ppendix No. 1 to the Agreement).

23. Meeting of the Board of Customer: IDGC of Volga, JSC; Pursuant to Article 81 of the Federal Law “On Joint Stock Companies”, Under this Agreement, the Contractor undertakes, in compliance with the Requirement Specification 5,233,300 rubles Directors dated 25.07.2012 Contractor: NIITs IDGC, JSC (Research this agreement shall be considered as the interested party transaction provided by the Customer, to implement engineering design project titled “Methodological (VAT inclusive) (Minutes No. 1) Engineering Center of Interregional involving the interests of IDGC Holding, JSC, the Company’s Recommendations for selection and substantiation of generic design options for installation of FOCL Distribution Grid Companies) shareholder holding over 20 percent of the Company’s voting shares; over OPTL (Fiber Optic Communication Lines over Overhead Power Transmission Lines). Scope and with NIITs IDGC, JSC, the Company’s affiliate, being a party to the extent of works, technical and other requirements to the Works to be performed under the Agreement transaction. are defined in theS tatement of Work (Requirement Specification) (seeA ppendix No. 1 to the Agreement).

24. Meeting of the Board of Customer: IDGC of Volga, JSC (Chuvash Pursuant to Article 81 of the Federal Law “On Joint Stock The Contractor undertakes, at its own risk and upon the Customer's request, to provide repair services Shall not exceed Directors dated 30.10.2012 energo, a branch of IDGC of Volga, JSC); Companies”, this agreement shall be considered as the interested for automotive and tractor vehicles and machinery of Chuvashenergo, a branch of IDGC of Volga, JSC 2,444,692.14 rubles (Minutes No. 5) Contractor: ChAK, JSC. party transaction involving the interests of IDGC Holding, JSC, the in compliance with the Specification agreed by the Parties (Appendix No. 1 to the Agreement) and (VAT inclusive) Company’s shareholder holding over 20 percent of the Company’s constituting an integral part thereof. While performing the above works, the Contractor uses its own voting shares; with ChAK, JSC, the Company’s affiliate, being a party materials listed in the Specification. to the transaction.

25. Meeting of the Board of Lessor: IDGC of Volga, JSC (Chuvash Pursuant to Article 81 of the Federal Law “On Joint Stock Companies”, 1_Subject of Addendum No. 2 — amendments to the Non-Residential Premises Lease Agreement No. - Directors dated 30.10.2012 energo, a branch of IDGC of Volga, JSC); this agreement shall be considered as the interested party МР6/122-21-04/962 dated October 19, 2010 (hereinafter referred to as the “Agreement”) according (Minutes No. 5) Lessee: FGC UES, JSC (Main Electric transaction: to clause 6.1 of the Agreement and paragraph 1, Article 452 of the RF Civil Code. Network Enterprise of the Mid-Volga 1. shareholder of the Company — IDGC Holding, JSC. IDGC Holding, 2_In connection with the completed evaluation of the market value of the rental rate payable for usage of region, a branch of FGC UES, JSC). JSC is a shareholder of IDGC of Volga, JSC, holding over 20 percent property of IDGC of Volga, JSC and submission of Report No. MF-1377/3 dated July 26, 2012 prepared of the Company’s voting shares with FGC UES, JSC, the Company’s by the independent appraiser OOO “Institute of Appraisal of Property and Financial Activities”, the affiliate, belonging to the same group of persons as IDGC of Volga, Parties have agreed as follows: JSC, being a party to the transaction. 2.1 to amend clause 3.1 of the Agreement as follows: 2. interests of the member of the Board of Directors Murov A.E., who “Starting September 01, 2012, the monthly lease payment for possession and use of the Premises is at the same time a member of the management bodies of FGC UES, shall amount to 63,975 (sixty-three thousand nine hundred and seventy-five) rubles 47 kopecks, JSC, a party to the transaction inclusive of VAT in the amount of 9,758 (nine thousand seven hundred and fifty-eight) rubles 97 kopecks in compliance with the Calculation (Appendix No. 3) deemed to be an integral part of the Agreement. Amount of the rental fee is based on Report No. MF-1377/3 dated July 26, 2012 prepared by the independent appraiser OOO “Institute of Appraisal of Property and Financial Activities” (Appendix No. 4) deemed to be an integral part of the Agreement.” 2.2 appendix No. 3 “Calculation of the payment for the use of the Premises” to the Agreement shall be revised as per Appendix No. 1 to the Addendum No. 2 constituting an integral part thereof. 2.3 appendix No. 4 “Copy of the Report prepared by the independent appraiser” to the Agreement shall be approved in its restated version as per Appendix No. 2 to the Addendum No. 2 constituting an integral part thereof. 3_Any other provisions of the Agreement not covered by the Addendum No. 2 shall remain unchanged and binding upon both Parties.

26. Meeting of the Board of Customer: IDGC of Volga, JSC (Orenburg Pursuant to Article 81 of the Federal Law “On Joint Stock Companies”, Under this Agreement, the Contractor undertakes, as requested by the Customer, to provide corporate 247,950 rubles Directors dated 30.10.2012 energo, a branch of IDGC of Volga, JSC); this agreement shall be considered as the interested party transaction event management services for Orenburgenergo, a branch of IDGC of Volga, JSC (see Appendices Nos. (VAT inclusive) (Minutes No. 5) Contractor: Solnechniy Sanatorium- involving the interests of IDGC Holding, JSC, the Company’s 1 and 2 to the Agreement). Preventorium, JSC. shareholder holding over 20 percent of the Company’s voting shares; with Solnechniy Sanatorium-Preventorium, JSC, the Company’s affiliate, being a party to the transaction.

27. Meeting of the Board of Customer: IDGC of Volga, JSC (Orenburg Pursuant to Article 81 of the Federal Law “On Joint Stock Companies”, Under this Agreement, the Contractor undertakes, as requested by the Customer, to provide corporate 339,500 rubles Directors dated 30.10.2012 energo, a branch of IDGC of Volga, JSC); this agreement shall be considered as the interested party transaction cultural event management services for Orenburgenergo, a branch of IDGC of Volga, JSC (see Appendices (VAT inclusive) (Minutes No. 5) Contractor: Solnechniy Sanatorium- involving the interests of IDGC Holding, JSC, the Company’s Nos. 1 and 2 to the Agreement). Preventorium, JSC. shareholder holding over 20 percent of the Company’s voting shares; with Solnechniy Sanatorium-Preventorium, JSC, the Company’s affiliate, being a party to the transaction.

28. Meeting of the Board of Customer: IDGC of Volga, JSC (Orenburg Pursuant to Article 81 of the Federal Law “On Joint Stock Companies”, The Contractor undertakes to provide, and the Customer undertakes to accept and pay for sanatorium 676,772.25 rubles Directors dated 09.11.2012 energo, a branch of IDGC of Volga, JSC); this agreement shall be considered as the interested party transaction and health resort treatment services (voucher-based) for the Customer’s employees and children of (VAT exempt) (Minutes No. 6) Contractor: Solnechniy Sanatorium- involving the interests of IDGC Holding, JSC, the Company’s employees (75 vouchers) for 7 calendar days starting December 24, 2012. The services shall be provided Preventorium, JSC. shareholder holding over 20 percent of the Company’s voting shares; at the facilities of Solnechniy Sanatorium-Preventorium, JSC, located at: 58, ul. Turbinnaya, Orenburg. with Solnechniy Sanatorium-Preventorium, JSC, the Company’s affiliate, being a party to the transaction. www.mrsk-volgi.ru EXCELLENT ENERGY! 158 | 159

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29. Meeting of the Board of Customer: IDGC of Volga, JSC (Orenburg Pursuant to Article 81 of the Federal Law “On Joint Stock Companies”, The Contractor undertakes to provide, and the Customer undertakes to accept and pay for sanatorium 5,739,028.68 rubles Directors dated 09.11.2012 energo, a branch of IDGC of Volga, JSC); this agreement shall be considered as the interested party transaction and health resort treatment services (voucher-based) for the Customer’s retired employees according (VAT exempt) (Minutes No. 6) Contractor: Solnechniy Sanatorium- involving the interests of IDGC Holding, JSC, the Company’s to the Schedule of sojourns (see Appendix No. 1 to the Agreement). The services shall be provided at Preventorium, JSC. shareholder holding over 20 percent of the Company’s voting shares; the facilities of Solnechniy Sanatorium-Preventorium, JSC, located at: 58, ul. Turbinnaya, Orenburg. with Solnechniy Sanatorium-Preventorium, JSC, the Company’s affiliate, being a party to the transaction.

30. Meeting of the Board of Lessee: IDGC of Volga, JSC; Pursuant to Article 81 of the Federal Law “On Joint Stock Companies”, Subject of the Addendum — amendments to the Electric Grid Facilities Lease Agreement No. 111218/ – Directors dated 09.11.2012 FGC — FGC UES, JSC. this agreement shall be considered as the interested party эсх-2011/23 dated October 06, 2011. (Minutes No. 6) transaction: 1_The Parties agreed to make the following amendments to the Agreement: 1_shareholder of the Company — IDGC Holding, JSC. IDGC Holding, 1.1. as a result of modifications made to the list of electric grid facilities leased under the JSC is a shareholder of IDGC of Volga, JSC, holding over 20 percent Agreement, the Parties agreed to make amendments to Appendix No. 4 to the Agreement specified of the Company’s voting shares with FGC UES, JSC, the Company’s in Appendix No. 1 to the Addendum. affiliate, belonging to the same group of persons as IDGC of Volga, 2_Other provisions of the Agreement uncovered by the Addendum shall remain unchanged, and the JSC, being a party to the transaction. Parties confirm their obligations thereunder. 2_interests of the member of the Board of Directors Murov A.E., who is at the same time a member of the management bodies of FGC UES, JSC, a party to the transaction

31. Meeting of the Board of Lessee: IDGC of Volga, JSC; Pursuant to Article 81 of the Federal Law “On Joint Stock Companies”, Subject of the Addendum — amendments to the Electric Grid Facilities Lease Agreement No. 111218/ – Directors dated 09.11.2012 FGC — FGC UES, JSC. this agreement shall be considered as the interested party эсх-2011/23 dated October 06, 2011. (Minutes No. 6) transaction: 1_The Parties agreed to make the following amendments to the Agreement: 1_shareholder of the Company — IDGC Holding, JSC. IDGC Holding, 1.1. as a result of modifications made to the list of electric grid facilities leased under the JSC is a shareholder of IDGC of Volga, JSC, holding over 20 percent Agreement, the Parties agreed to make amendments to the Appendices Nos. 1, 2, 3, 4, 5, 6 and of the Company’s voting shares with FGC UES, JSC, the Company’s 7 to the Agreement specified inA ppendices Nos. 1, 2, 3, 4, 5, 6 and 7 to the Addendum respectively. affiliate, belonging to the same group of persons as IDGC of Volga, 1.2. to amend clause 7.1. of the Agreement as follows: JSC, being a party to the transaction. “7.1. The Parties agreed that the lease payment for the use of the Facilities shall amount to 2_interests of the member of the Board of Directors Murov A.E., who 2,414,842 (two million four hundred and fourteen thousand eight hundred and forty-two) rubles is at the same time a member of the management bodies of FGC for the period of 360 calendar days. The VAT amount shall be added to the above lease payment UES, JSC, a party to the transaction pursuant to the law of the Russian Federation.” 1.3. to amend clause 7.2 of the Agreement as follows: “7.2. The Lessee shall monthly transfer the lease payment to the FGC’s settlement account before the 15th day of the current month. The amount of the monthly lease payment shall be calculated as the product of the number of days in the month and 1/360 of the Agreement value.” 2_Other provisions of the Agreement uncovered by the Addendum shall remain unchanged, and the Parties confirm their obligations thereunder.

32. Meeting of the Board of Lessee: IDGC of Volga, JSC; Pursuant to Article 81 of the Federal Law “On Joint Stock Companies”, Subject of the Addendum — amendments to the Electric Grid Facilities Lease Agreement No. 111218/ – Directors dated 09.11.2012 FGC — FGC UES, JSC. this agreement shall be considered as the interested party эсх-2011/23 dated October 06, 2011. (Minutes No. 6) transaction: 1_The Parties agreed to make the following amendments to the Agreement: 1_shareholder of the Company — IDGC Holding, JSC. IDGC Holding, 1.1. as a result of modifications made to the list of electric grid facilities leased under the JSC is a shareholder of IDGC of Volga, JSC, holding over 20 percent Agreement, the Parties agreed to make amendments to the Appendices Nos. 1, 2, 3, 4, 5, 6 of the Company’s voting shares with FGC UES, JSC, the Company’s and 7 to the Agreement specified in the Appendices Nos. 1, 2, 3, 4, 5, 6 and 7 to the Addendum affiliate, belonging to the same group of persons as IDGC of Volga, respectively. JSC, being a party to the transaction. 1.2. to amend clause 7.1. of the Agreement as follows: 2_interests of the member of the Board of Directors Murov A.E., who “7.1. The Parties agreed that the lease payment for the use of the Facilities shall amount to is at the same time a member of the management bodies of FGC 2,359,453 (two million three hundred and fifty-nine thousand four hundred and fifty-three) rubles UES, JSC, a party to the transaction. 54 kopecks for the period of 360 calendar days. The VAT amount shall be added to the above lease payment pursuant to the law of the Russian Federation.” 1.3. to amend clause 7.2 of the Agreement as follows: “7.2. The Lessee shall monthly transfer the lease payment to the FGC’s settlement account before the 15th day of the current month. The amount of the monthly lease payment shall be calculated as the product of the number of days in the month and 1/360 of the Agreement value.” 2_Other provisions of the Agreement uncovered by the Addendum shall remain unchanged, and the Parties confirm their obligations thereunder.

33. Meeting of the Board of Party 1: SO UES, JSC; Pursuant to Article 81 of the Federal Law “On Joint Stock Companies”, Subject of the Addendum is the amendments to the Agreement for technological cooperation between – Directors dated 29.11.2012 Party 2: IDGC of Volga, JSC. this agreement shall be considered as the interested party transaction SO UES, JSC and IDGC of Volga, JSC to ensure reliable operation of UES of Russia. (Minutes No. 7) for IDGC of Volga, JSC, involving the interests of IDGC Holding, JSC, the Company’s shareholder holding over 20 percent of the Company’s voting shares, with Kravchenko V.M. (member of the Board of Directors of IDGC Holding, JSC), the Company’s affiliate, being at the same time a member of the Board of Directors of SO UES, JSC, a party to the transaction. www.mrsk-volgi.ru EXCELLENT ENERGY! 160 | 161

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34. Meeting of the Board of Contractor: IDGC Holding, JSC 3_Pursuant to Article 81 of the Federal Law “On Joint Stock The Contractor undertakes to provide services on operation and development of distribution grid complex 17,637,110.85 rubles per month Directors dated 29.11.2012 Customer: IDGC of Volga, JSC; Companies”, this agreement shall be considered as the interested to the Customer on the terms and conditions set forth in this Agreement, and the Customer undertakes (exclusive of VAT) (Minutes No. 7) party transaction: to accept and pay for the services on the terms and conditions set forth in this Agreement. 4_1. the Company’s shareholder holding over 20 percent of the Company’s voting shares — IDGC Holding, JSC, being a party to the transaction. 5_2. the interests of the member of the Board of Directors Perepelkin A.Yu., who is at the same time a member of the Board of Directors of IDGC of the South, JSC, a party to the transaction.

35. Meeting of the Board of Customer: IDGC of Volga, JSC; Pursuant to Article 81 of the Federal Law “On Joint Stock Companies”, The Parties agreed to make the following amendments and additions to Agreement No. 120429 dated 91,359,015.29 rubles Directors dated 29.11.2012 Contractor: Energoservice of Volga, JSC this agreement shall be considered as the interested party transaction March 07, 2012 and Appendix No. 2 thereto: (inclusive of VAT) (Minutes No. 7) involving the interests of IDGC Holding, JSC, the Company’s To add the following clause 1.3. to Section 1 “Subject of Agreement”: “To submit the reports of the shareholder holding over 20 percent of the Company’s voting shares; energy passport of IDGC of Volga, JSC for an expert review by a Self-Regulatory Organization in the with Energoservice of Volga, JSC, the Company’s affiliate, being a field of energy inspection. Duration of services for an expert review of the reports — according to the party to the transaction. Service Schedule (Appendix No. 3)”. Appendices Nos. 2, 3 shall be deemed void. To add the redrafted Appendices Nos. 2, 3 to the Agreement. Renumber clauses 1.3 and 1.4 of Section 1 to 1.4 and 1.5 Clause 3.1 of the Agreement shall be amended as follows: “The price of services delivered under the Agreement shall be 91,359,015 (ninety-one million three hundred and fifty-nine thousand and fifteen) rubles 29 kopecks, inclusive of VAT (18%) amounting to 13,936,120 (thirteen million nine hundred and thirty-six thousand one hundred and twenty) rubles 98 kopecks basing upon calculation of the price of compulsory energy inspection (Appendix No. 2 to this Agreement).” As a result of change of the legal address of Energoservice of Volga, JSC, clause 8 of the Agreement shall be amended as follows: “Legal Addresses, Bank Details and Signatures of Parties”: “Contractor”: Energoservice of Volga, JSC New legal address: 4 floor, 149A, ul. Moskovskaya, 410600 Saratov, the Russian Federation New location: 4 floor, 149A, ul. Moskovskaya, 410600 Saratov, the Russian Federation Settlement account 40702810256000001285 Saratov Sberbank branch No. 8622, Saratov Correspondent account 30101810500000000649 BIC 046311649; INN (Taxpayer Identification Number): 6450945684 KPP (Tax Registration Reason Code): 645001001; OGRN (Primary State Registration Number): 1116450000061 OKPO (All-Russian Classifier of Enterprises and Organizations): 69440184 New tel. 67-47-40, 67-42-11 “Customer”: IDGC of Volga, JSC INN 6450925977 KPP 997450001 OGRN 1076450006280 Settlement account: 40702810256020102439 in the Operational Office of Saratov Branch No. 8622 of OAO “Sberbank of Russia” Correspondent account: 30101.810.5.0000.000.0649 BIC 046311649 OKPO 96956370 OGRN: 1076450006280 Location: 42/44, ul. Pervomayskaya, 410031 Saratov, the Russian Federation Postal address: 42/44, ul. Pervomayskaya, 410031 Saratov, the Russian Federation Tel. (8452)30-25-33 www.mrsk-volgi.ru EXCELLENT ENERGY! 162 | 163

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APPENDIX 4

Financial (accounting) Statements under RAS

BALANCE SHEET as of December 31, 2012

Company: IDGC of Volga, JSC Codes Taxpayer Identification Number: 6450925977/997450001 form as per OKUD 0710001 Activity Type: electric power transmission Date (year, month, day) 2012 12 31 Legal Form/Property Category: Open Joint-Stock as per OKPO 96956370 Company Joint federal and foreign ownership INN 6450925977 Measurement Unit: thousand rubles as per OKVED 40.10.2 Location (address): 42/44, ul. Pervomayskaya, as per OKOPF/OKFS 47 31 Saratov 410031. as per OKEI 384 Tel.: (845-2)30-26-32, fax: (845-2)73-69-09

ASSETS

Com- ASSETS Index As of December 31, As of December 31, As of December 31, ments code 2012 2011 2010

1 2 3 4 5 6

Section I. NON-CURRENT ASSETS

5.1 Intangible assets 1110 62,636 83,711 104,786

including:

——Transactions on purchase of intangible assets in 1111 – – – progress

5.2 Results of research and development activities 1120 46,378 266 917

including:

——Costs related to research and development activities 1121 5,932 – – in progress

5.3 Fixed assets 1130 53,112,750 48,465,892 44,722,983

——Land plots and land use facilities 1131 58,163 31,445 27,938

——Buildings, machinery, equipment and structures 1132 44,608,383 42,109,296 40,472,603

——Other types of fixed assets 1133 5,665,928 4,025,352 2,634,827

——Construction-in-progress 1134 2,484,612 2,043,185 1,513,371 www.mrsk-volgi.ru EXCELLENT ENERGY! 164 | 165

Com- ASSETS Index As of December 31, As of December 31, As of December 31, ments code 2012 2011 2010

1 2 3 4 5 6

——Down payments to fixed assets under construction 1135 223,872 212,979 74,244

——Materials for non-current assets under construction 1136 71,792 43,635 –

Income-yielding investments in tangible assets 1140 – – –

5.4 Long-term financial investments 1150 101,711 101,739 100,855

——Investments in affiliated companies 1151 101,529 101,529 100,529

——Investments in other organizations 1153 182 210 326

5.7 Deferred tax assets 1160 187,152 312,234 179,832

Other non-current assets 1170 30,396 32,431 94,562

Section I, total. 1100 53,541,023 48,996,273 45,203,935

Section II. CURRENT ASSETS

5.5 Stock 1210 1,066,143 957,444 925,393

——Raw materials, materials and other similar assets 1211 1,066,068 956,905 924,117

——Work-in-progress costs 1213 – – –

——Finished products and goods for resale 1214 75 539 1,276

Value added tax on assets purchased 1220 159,833 20,598 39,473

5.6 Accounts receivable 1230 3,730,722 5,108,628 2,902,814

Accounts receivable falling due in more than 12 month 1231 25,534 78,231 164,594 after the reporting date

——Buyers and customers 123101 10,127 22,621 14,963

——Bills receivable 123102 – – –

——Prepaid expenses 123103 2,784 7,453 7,477

——Other debtors 123104 12,623 48,157 142,154

Accounts receivable falling due within the next 1232 3,705,188 5,030,397 2,738,220 12 month after the reporting date

——Buyers and customers 123201 3,054,044 3,332,763 1,961,074

——Bills receivable 123202 – – 9,132

——Prepaid expenses 123205 265,242 430,081 336,545

——Other debtors 123206 385,902 1,267,553 431,469

Short-term financial investments (exclusive of cash 1240 – – – equivalents)

Cash and cash equivalents 1250 2,056,725 1,988,681 1,452,355

——Cash account 1251 87 103 118

——Settlement accounts 1252 2,056,638 1,988,575 1,452,237

——Other cash 1254 – 3 –

Other current assets 1260 263,779 296,139 235,862

Section II, total. 1200 7,277,202 8,371,490 5,555,897

BALANCE 1600 60,818,225 57,367,763 50,759,832 IDGC OF VOLGA ANNUAL REPORT 2012 APPENDIX

LIABILITIES

Com- LIABILITIES Index As of December 31, As of December 31, As of December 31, ments code 2012 2011 2010

1 2 3 4 5 6

Section III. CAPITAL AND RESERVES

Authorized capital 1310 17,857,780 17,857,780 17,857,780

Re-assessment of noIl-current assets 1340 18,521,141 18,608,284 18,689,911

Incremental capital (without re-assessment) 1350 – – –

Reserve Funds 1360 304,411 239,114 226,001

Undistributed profit (uncovered loss) 1370 6,211,963 5,228,151 3,853,705

——of previous years 1371 5,049,990 3,922,219 3,791,473

——of the reporting period 1372 1,161,973 1,305,932 62,232

Section III, total. 1300 42,895,295 41,933,329 40,627,397

Section IV. LONG-TERM LIABILITIES

5.6 Loans and credits 1410 10,700,000 6,850,000 5,035,000

——Bank credits falling due in more than 12 months after 1411 10,700,000 6,850,000 5,035,000 the reporting date

5.7 Deferred tax liabilities 1420 1,658,323 1,193,735 611,927

Estimated liabilities 1430 – – –

Other liabilities 1450 386,777 256,202 451,169

Section IV, total. 1400 12,745,100 8,299,937 6,098,096

Section V. SHORT-TERM LIABILITIES

5.6 Loans and credits 1510 14,087 6,985 3,331

——Bank credits falling due within the next 12 months 1511 14,087 6,985 3,331 after the reporting date

Accounts payable 1520 4,168,288 5,267,782 2,709,597

——Suppliers and contractors 1521 2,814,665 3,450,897 1,072,319

——Employee payroll liabilities 1523 353,579 334,082 298,221

——Accounts payable to slate non-budgetary funds 1524 145,685 125,667 130,923

——Tax payables 1525 162,205 175,222 201,555

——Advances received 1526 554,219 998,024 742,164

——Dividends payable 1527 1,697 – –

——Other accounts payable 1528 136,238 183,890 264,415

Deferred revenue 1530 13,761 989 944 www.mrsk-volgi.ru EXCELLENT ENERGY! 166 | 167

Com- LIABILITIES Index As of December 31, As of December 31, As of December 31, ments code 2012 2011 2010

1 2 3 4 5 6

5.7 Estimated liabilities 1540 952,217 1,825,496 1,313,414

Other liabilities 1550 29,477 33,245 7,053

Section V, total. 1500 5,177,830 7,134,497 4,034,339

BALANCE 1700 60,818,225 57,367,763 50,759,832

General Director V.A.Ryabikin

Chief Accountant I.A. Tamlenova

February 15, 2013 IDGC OF VOLGA ANNUAL REPORT 2012 APPENDIX

PROFIT AND LOSS STATEMENT for January–December of the year 2012.

Comments Item name Index January-December January-December code 2012 2011

1 2 3 4 5

Operating incomes and expenses

Proceeds 2110 45,763,581 47,827,153

Including:

——Power transmission and distribution services 2111 45,124,134 47,222,117

——Technological connection services 2112 416,273 266,345

——Lease of assets 2116 81,588 91,490

——Other goods, products, works, industrial services 2117 134,529 242,115

——Other goods, products, works, non-industrial services 2118 7,057 5,086

6.1 Cost value of goods, products, works and services sold 2120 (41,626,153) (44,476,389)

Including:

——Power transmission and distribution services 2121 (41,339,344) (44,151,019)

——Technological connection services 2122 (154,261) (130,632)

——Lease of assets 2126 (31,255) (32,442)

——Other goods, products, works, industrial services 2127 (90,993) (152,213)

——Other goods, products, works, non-industrial services 2128 (10,300) (10,083)

Gross margin 2100 4,137,428 3,350,764

Administrative expenses 2210 (38) –

Sales profit (loss) 2200 3,011,963 2,222,778

6.4 Other incomes and expenses

Income from participation in other organizations 2310 1 1

Interests receivable 2320 43,872 13,139

Interests payable 2330 (477,560) (265,563)

Other incomes 2340 1,563,665 2,401,552

Other expenses 2350 (2,011,140) (2,900,157)

Profit (loss) before tax 2300 2,130,801 1,471,750

6.3 Current profit tax 2410 (377,287) (683,241)

Including permanent tax liabilities (assets) 2421 488,158 741,811

6.3 Changes in deferred tax liabilities 2430 (455,094) (387,069) www.mrsk-volgi.ru EXCELLENT ENERGY! 168 | 169

Comments Item name Index January-December January-December code 2012 2011

1 2 3 4 5

6.3 Changes in deferred tax assets 2450 (81,937) 34,149

Other 2460 (54,510) 870,343

Net profit (loss) 2400 1,161,973 1,305,932

Comments Item name Index January-December January-December code 2012 2011

1 2 3 4 5

FOR REFERENCE

Result of re-assessment of non-current assets not included 2510 in the net profit

Result of other transactions not included in the net profit 2520 (loss) of the reporting period

Cumulative financial result of the period 2500 1,161,973 1,305,932

6.2 Basic earnings (loss) per share 2900 0.0065 0.0073

Diluted earnings (loss) per share 2910 – –

General Director V.A.Ryabikin

Chief Accountant I.A. Tamlenova

February 15, 2013 IDGC OF VOLGA ANNUAL REPORT 2012 APPENDIX

APPENDIX 5

AUDITOR’S REPORT on accounting (financial) statements for Shareholders of Open Joint-Stock Company Interregional Distribution Grid Company of Volga for 2012

Auditor details

Full name of the Company: Limited Liability Company KPMG

Location: Room 3035, 18/1 Olympiyskiy Avenue, Moscow, 129110.

Postal address: Stage 31, Block C, 10 Presnenskaya Embankment, Moscow, 123317.

State registration: State Registration Certificate No. 011.585 dated May 25, 1992 issued by the Moscow Registration Chamber; State Registration Certificate Series 77 No. 005721432 dated August 13, 2002 issued by the Interregional Inspectorate of the Ministry of Taxation of Russia No. 39, Moscow; Entered into the Uniform State Register of Legal Entities under primary state registration number 1027700125628.

Membership in Self-Regulating Organization of Auditors: The Company is a member of the NonprofitP artnership “Institute of Professional Auditors” Self-Regulating Organization of Auditors; Entered into the Register of Auditors and Auditing Companies of the above Self-Regulating Organization of Auditors under primary registration number 10301000804.

Auditee details

Full name of the Company: Open Joint-Stock Company Interregional Distribution Grid Company of Volga

Abbreviated name of the Company: IDGC of Volga, JSC.

Location: 42/44, ul. Pervomayskaya, Saratov, 410031, Russia.

Postal address: 42/44, ul. Pervomayskaya, Saratov, 410031, Russia.

State registration: State Registration CertificateS eries 64 No. 0022630786 dated June 29, 2007 was issued to the Company by the Interregional Inspectorate of the Federal Tax Service No.8 of the Saratov region; Entered into the Uniform State Register of Legal Entities under primary state registration number 1076450006280.

We have audited the submitted accounting statements of ̤̤ Profit and loss statement for the year of 2012; Open Joint-Stock Company Interregional Distribution Grid ̤̤ Statement of changes in capital for the year of 2012; Company of Volga for year 2012 in 16 pieces including: ̤̤ Cash flow statement for the year of 2012; ̤̤ Balance sheet as of December 31, 2012; ̤̤ Explanatory note. www.mrsk-volgi.ru EXCELLENT ENERGY! 170 | 171

Auditee’s responsibility for accounting statements Opinion The Executive Board of the Auditee is responsible for We believe that the accounting statements in all material execution, submission and reliability of the accounting aspects give a true and fair view of the financial situation statements in accordance with the applicable rules of of IDGC of Volga, JSC as of December 31, 2012, the results the Russian Federation as well as for the internal control of its financial-economic activities as well as its cash system regulating the execution of accounting statements flow for 2012 in compliance with the rules of the Russian containing no material misstatements resulting from Federation regulating accounting statements execution. unfair acts or mistakes. Additional information Auditor’s responsibility The accounting statements for 2012 were audited by Our responsibility is to express an opinion on the another Auditor. Basing upon the audit results, the reliability of every substantial aspect of the statements auditor’s report dated February 10, 2012 contains an based on our audit procedures. We executed the audit unmodified opinion. in compliance with the Federal standards of auditing activities. The standards require abidance by applicable ethic norms as well as planning and execution of the audit in such a way that could provide reasonable assurance that the accounting statements contain no material misstatements. The audit consisted of audit procedures aiming at reception of audit evidence confirming accounting statements indexes and the information disclosure. The choice of audit procedures is based on the assessment of risk of material misstatements resulting from unfair acts or mistakes. When estimating the risk we analyzed the internal control system that provides execution and reliability of accounting statements. Our goal was to determine the right audit procedures but not to express our opinion on the internal control system effectiveness. The audit also included estimation of the applicable accounting policy and relevance of estimated figures received by the Executive Board of the Auditee as well as the general appraisal of the accounting statements. We believe that obtained audit results allow us to draw an opinion on the reliability of the accounting statements.

Director of KPMG, LLC T.E. Krasnihina (warrant of October 1 № 38/10) February 28, 2013 IDGC OF VOLGA ANNUAL REPORT 2012 APPENDIX

APPENDIX 6

CONSOLIDATED FINANCIAL STATEMENTS IFRS on the financial statements “IDGC of Volga”, JSC, 2012

Contents

INDEPENDENT AUDITORS’ REPORT 173 CONSOLIDATED STATEMENT OF FINANCIAL POSITION 174 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 176 CONSOLIDATED STATEMENT OF CASH FLOWS 176 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 178 notes TO THE CONSOLIDATED FINANCIAL STATEMENTS 178 www.mrsk-volgi.ru EXCELLENT ENERGY! 172 | 173

Auditors’ Report

To the Shareholders and Board of Directors subsidiaries (the «Group»), which comprise the OJSC Interregional Distribution Grid Company of consolidated statement of financial position as at 31 Volga December 2012, and the consolidated statements of We have audited the accompanying consolidated comprehensive income, changes in equity and cash flows financial statements of OJSC Interregional Distribution for 2012, and notes, comprising a summary of signiticant Grid Company of Volga (the «Company») and its accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair determines is necessary to enable the preparation of presentation of these consolidated fmancial statements consolidated financial statements that are free from in accordance with International Financial Reporting material misstatement, whether due to fraud or error. Standards, and for such internal control as management

Auditors’ Responsibility

Our responsibility is to express an opinion on the fair to fraud or error. In making those risk assessments, the presentation of these consolidated financial statements auditor considers internal control relevant to the entity’s based on our audit. preparation and fair presentation of the consolidated We conducted our audit in accordance with Russian financial statements in order to design audit procedures Federal Auditing Standards and International Standards that are appropriate in the circumstances, but not for the on Auditing, Those standards require that we comply purpose of expressing an opinion on the effectiveness of with ethical requirements and plan and perform the the entity’s internal control. audit to ohtain reasonable assurance about whether the An audit also includes evaluating the appropriateness consolidated financial statements are free from material of accounting policies used and the reasonableness of misstatement. accounting estimates made by management, as well as An audit involves performing procedures to obtain evaluating the overall presentation of the consolidated audit evidence about the amounts and disclosures in financial statements. the consolidated financial statements, The procedures We believe that the audit evidence we have obtained selected depend on the auditor’s judgment, including is sufficient and appropriate to express an opinion on the assessment of the risks of material misstatement the fair presentation of these consolidated financial of the consolidated financial statements, whether due statements.

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of t 31 December 2012, and its financial position of the Group as at 31 December 2012, and its financial perfonnance and its cash flows for 2012 in accordance with International Financial Reporting Standards. IDGC OF VOLGA ANNUAL REPORT 2012 APPENDIX

Audited entity: OJSC International Distribution Grid Com- Independent auditor: ZAQ KPMG. a company incorpo- pany of Volga rated under the Laws of the Russian Federation, a part of Registered in the Unified State Register of Legal Entities the KPMG Europe LLP group, and a member firm of the on 29 June 2007 by Inter-district tax inspectorate No 8 of KPMG network of independent member firms affiliated Saratov region. with KPMG International Cooperative («KPMG Interna- Registration No. 1076450006280, Certificate series 64N o. tional»), a Swiss entity. 002263079. Registered by the Moscow Registration Chamber on 25 42/44 Pervomayskaya street, Saralov, Russia, 410031 May 1992. Registration No. 011.585. Entered in the Unified State Register of Legal Entities on 13 August 2002 by the Moscow Inter-Regional Tax Inspec- torate No.39 of the Ministry for Taxes and Duties of the Russian Federation, Registration No. 1027700125628, Certificate series 77 No. 005721432. Member of the Non-commercial Partnership «Chamber of Auditors of Russia». The Principal Registration Number of the Entry in the State Register of Auditors and Audit Organisations: No.l0301000804.

Director T.E. Krasnihina

(warrant of October 1 № 38/10) KPMG, LLC March 29, 2013 Мoscow, Russian Federation

www.mrsk-volgi.ru EXCELLENT ENERGY! 174 | 175

Consolidated Statement of Financial Position as at 31 December 2012

(in thousands of Russian Rubles, unless otherwise stated) Note 31 December 2012 31 December 2011

ASSETS Non current assets Property, plant and equipment 7 37,020,153 31,266,118 Intangible assets 8 102,925 105,338 Other non-current assets 9 593,220 603,445

Total non current assets 37,716,298 31,974,901 Current assets Inventories 10 1,081,621 974,903 Income tax receivable 230,577 1,021,252 Trade and other receivables 11 3,407,321 3,706,673 Prepayments for current assets 12 325,840 430,870 Cash and cash equivalents 13 2,088,351 2,014,301 Other current assets 14 17,192 12,996

Total current assets 7,150,902 8,160,995 TOTAL ASSETS 44,867,200 40,135,896 EQUITY AND LIABILITIES Share capital 15 17,857,780 17,857,780 Retained earnings 7,781,696 5,607,448

Total equity 25,639,476 23,465,228 Non-current liabilities Deferred tax liabilities 25 2,080,603 1,623,997 Employee benefits 16 892,527 864,933 Loans and borrowings 17 10,718,545 6,921,232 Trade and other payables 18 384,626 195,754

Total non-current liabilities 14,076,301 9,605,916 Current liabilities Loans and borrowings 17 65,714 86,701 Trade and other payables 18 4,716,977 6,617,313 Income tax payable 6,960 5,943 Other taxes payable 19 361,772 354,795 Total current liabilities 5,151,423 7,064,752

Total liabilities 19,227,724 16,670,668 TOTAL EQUITY AND LIABILITIES 44,867,200 40,135,896 These consolidated financial statements were approved by management on 29 March 2013 and were signed on its behalf by:

General Director V.A.Ryabikin

Chief Accountant I.A. Tamlenova

The consolidated statement of financial position is to be read in conjunction with the notes to, and forming part of, the consolidated financial statements set out on pages 178 to 213. IDGC OF VOLGA ANNUAL REPORT 2012 APPENDIX

Consolidated Statement of Comprehensive Income for the year ended 31 December 2012

(in thousands of Russian Rubles, unless otherwise stated) Note Year ended Year ended 31 December 2012 31 December 2011

Revenue 20 45,908,232 48,037,179

Operating expenses 21 (42,302,462) (45,746,931)

Other (expenses)/income, net 23 (41,275) 116,862

Operating profit 3,564,495 2,407,110

Finance income 24 44,418 13,418

Finance costs 24 (380,665) (263,727)

Profit before income tax 3,228,248 2,156,801

Income tax expense 25 (853,993) (392,285)

Profit for the year 2,374,255 1,764,516

Total comprehensive income 2,374,255 1,764,516

Earnings per share - basic and diluted (in RUB) 15 0.0133 0.0099

The consolidated statement of financial position is to be read in conjunction with the notes to, and forming part of, the consolidated financial statements set out on pages 178 to 213.

Consolidated Statement of Cash Flows for the year ended 31 December 2012

(in thousands of Russian Rubles, unless otherwise stated) Note Year ended Year ended 31 December 2012 31 December 2011

OPERATING ACTIVITIES:

Profit before income tax for the year 3,228,248 2,156,801

Adjustments for:

——Depreciation and amortisation 7,8 3,602,343 3,267,434

——Allowance for/(reversal) of impairment of accounts receivable 275,951 (133,459)

——Reversal of provision for obsolescence (12,102) (15,870)

——Finance costs 380,665 263,727

——Finance income (44,418) (13,418)

——(Gain)/loss on disposal of property, plant and equipment (5,058) 5,481

——(Reversal of impairment losses)/impairment of construction in progress (9,978) 10,590

——Accounts payable written-off (12,999) (34,321)

——Other non-cash transactions 78,950 58,758

Operating profit before working capital changes and income tax paid 7,481,602 5,565,723

Working capital changes:

——Decrease/(increase) in trade and other receivables 22,234 (1,318,674)

——Decrease/(increase) in prepayments 106,197 (79,259) www.mrsk-volgi.ru EXCELLENT ENERGY! 176 | 177

Note Year ended Year ended 31 December 2012 31 December 2011

——Increase in inventories (94,616) (53,923)

——(Increase) /decrease in other current assets (4,196) 296

——Decrease in other non-current assets 10,225 11,270

——(Decrease)/increase in trade and other payables (1,949,232) 2,616,817

——Increase in long-term liabilities 27,594 126,370

——Increase in taxes payable other than income 6,977 5,589

Cash flows from operations before income taxes and interest paid 5,606,785 6,874,209

——Income tax paid 394,305 (538,376)

——Interest paid (518,476) (290,644)

Net cash flows from operating activities 5,482,614 6,045,189

INVESTING ACTIVITIES:

——Acquisition of property, plant and equipment (8,957,289) (7,190,704)

——Proceeds from disposal of property, plant and equipment - 8,045

——Acquisition of intangible assets (28,911) -

——Proceeds from sale of investments - 9,132

——Interest received 44,418 13,418

Net cash flows used in investing activities (8,941,782) (7,160,109)

FINANCING ACTIVITIES:

Proceeds from loans and borrowings 5,850,000 7,300,000

Repayment of loans and borrowings (2,000,000) (5,485,000)

Repayment of finance lease liabilities (116,775) (161,279)

Dividends paid (200,007) -

Net cash flows from financing activities 3,533,218 1,653,721

Net increase in cash and cash equivalents 74,050 538,801

Cash and cash equivalents at beginning of year 2,014,301 1,475,500

Cash and cash equivalents at end of year 2,088,351 2,014,301 The consolidated statement of financial position is to be read in conjunction with the notes to, and forming part of, the consolidated financial statements set out on pages 178 to 213. IDGC OF VOLGA ANNUAL REPORT 2012 APPENDIX

Consolidated Statement of Changes In Equity for the year ended 31 December 2012

(in thousands of Russian Rubles, unless otherwise stated) Share capital Accumulated Profit Total equity

As at 1 January 2011 17,857,780 3,842,932 21,700,712

Profit and total comprehensive income for the year - 1,764,516 1,764,516

As at 31 December 2011 17,857,780 5,607,448 23,465,228

As at 1 January 2012 17,857,780 5,607,448 23,465,228

Profit and total comprehensive income for the year - 2,374,255 2,374,255

Dividends - (200,007) (200,007)

As at 31 December 2012 17,857,780 7,781,696 25,639,476

The consolidated statement of changes in equity is to be read in conjunction with the notes to, and forming part of, the consolidated financial statements set out on pages 178 to 213.

Note 1. Background

(a) The Group and its operations no. 250 of 27 April 2007) of the Russian Open Joint-Stock Open Joint-Stock Company “Interregional Distribution Grid Company RAO “United Energy Systems of Russia” (here- Company of Volga” (hereafter, the “Company” orO JSC IDGC after, “RAO UES”). of Volga) and its subsidiaries (together referred to as the The Company’s registered office is 42/44P ervomay- “Group”) comprise Russian open joint-stock companies skaya Street, Saratov, Russian Federation, 410031. as defined in the Civil Code of theR ussian Federation. The The Group’s principal activity is the transmission and Company was set up on 29 June 2007 based on Resolu- distribution of electricity and the connection of customers tion №191p of 22 June 2007 and pursuant to the Board of to the electricity grid. Directors’ decision (board of directors’ meeting minutes

The Group’s significant subsidiaries are:

Name % owned

31 December 2012 31 December 2011

OJSC Chuvashskaya avtotransportnaya kompaniya 99.99 99.99

OJSC Sanatoriy Solnechny 99.99 99.99

OJSC Sotsialnaya Sfera-M 100 100

OJSC Energoservis Volgi 100 100

As at 31 December 2012 and 31 December 2011 the Rus- legal, tax and regulatory frameworks continue develop- sian Government owned 55.95% of the voting ordinary ment, but are subject to varying interpretations and fre- shares and 7.01 % of the preference shares of IDGC Hold- quent changes which together with other legal and fiscal ing, which in turn owned 67.63% of the Company. impediments contribute to the challenges faced by entities The Government of the Russian Federation influences operating in the Russian Federation. The consolidated fi- the Group’s activities through setting power transmission nancial statements reflect management’s assessment of and distribution tariffs. the impact of the Russian business environment on the operations and the financial position of the Group. The (b) Russian Business environment. future business environment may differ from manage- The Group’s operations are primarily located in the Russian ment’s assessment. Federation. Consequently, the Group is exposed to the economic and financial markets of theR ussian Federation which display characteristics of an emerging market. The www.mrsk-volgi.ru EXCELLENT ENERGY! 178 | 179

Note 2. Basis of preparation

(a) Statement of compliance Information about critical judgments in applying account- These consolidated financial statements (hereinafter “Fi- ing policies that have the most significant effect on the nancial Statements”) have been prepared in accordance amounts recognised in the Financial Statements is in- with International Financial Reporting Standards (“IFRSs”). cluded in the following notes: ̤̤ Note 7 – Property, plant and equipment; (b) Basis of measurement ̤̤ Note 11 – Trade and other receivables; The Consolidated Financial Statements are prepared on ̤̤ Note 16 – Employee benefits. the historical cost basis except: ̤̤ Financial investments classified as available-for-sale (e) Changes in presentation are stated at fair value; ̤̤ Property, plant and equipment were revalued to de- (i) Reclassification of comparatives termine deemed cost as part of the adoption of IFRSs Certain comparative amounts have been reclassified to as at 1 January 2006. conform to the current year’s presentation.

(c) Functional and presentation currency The national currency of the Russian Federation is the Rus- sian ruble (“RUB”), which is the functional currency for Company and its’ subsidiaries and the currency in which these Consolidated Financial Statements are presented. All financial information presented inR ussian Rubles has been rounded to the nearest thousand.

(d) Use of judgments, estimates and assumptions The preparation of Financial Statements in conformity with IFRSs requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from those estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

Note 3. Significant accounting policies

The accounting policies set out below have been applied (ii) Acquisitions from entities under common control consistently to all periods presented in the Financial state- Business combinations arising from transfers of interests ments, and have been applied consistently by Group enti- in entities that are under the control of the shareholder that ties. controls the Group are accounted for as if the acquisition had occurred at the beginning of the earliest compara- (a) Basis of consolidation tive period presented or, if later, at the date that common control was established; for this purpose comparatives are (i) Subsidiarie revised. The assets and liabilities acquired are recognised Subsidiaries are entities controlled by the Group. The fi- at the carrying amounts recognised previously in the con- nancial statements of subsidiaries are included in the fi- solidated financial statements of the acquired entities.T he nancial statements from the date that control commences components of equity are added to the same components until the date that control ceases. within Group entity, except that any share capital of the The accounting policies of subsidiaries have been acquired entities is recognized as part of share premium. changed when necessary to align them with the policies Any cash or other contribution paid for the acquisition is adopted by the Group. recognized directly in equity. IDGC OF VOLGA ANNUAL REPORT 2012 APPENDIX

(iii) Investments in associates (equity accounted investees) the Group becomes a party to the contractual provisions Associates are those entities in which the Group has sig- of the instrument. nificant influence, but not control, over the financial and The Group derecognises a financial asset when the con- operating policies. Significant influence is presumed to tractual rights to the cash flows from the asset expire, exist when the Group holds between 20% and 50% of the or it transfers the rights to receive the contractual cash voting power of another entity. Investments in associates flows on the financial asset in a transaction in which sub- are accounted for using the equity method. The consoli- stantially all the risks and rewards of ownership of the dated financial statements include the Group’s share of the financial asset are transferred. Any interest in transferred income and expenses of equity accounted investees, after financial assets that is created or retained by theG roup is adjustments to align the accounting policies with those of recognised as a separate asset or liability. the Group, from the date that significant influence com- Financial assets and liabilities are offset and the net mences until the date that significant influence ceases. amount presented in the statement of financial position When the Group’s share of losses exceeds its interest in when, and only when, the Group has a legal right to offset an associate, the carrying amount of that interest (includ- the amounts and intends either to settle on a net basis or ing any non-current investments) is reduced to nil and the to realise the asset and settle the liability simultaneously. recognition of further losses is discontinued, except to The Group has the following non-derivative finan- the extent that the Group has an obligation or has made cial assets: loans and receivables and available-for-sale payments on behalf of the investee. financial assets.

(iv) Transactions eliminated on consolidation Loans and receivables Intra-group balances and transactions, and any unrealised Loans and receivables are financial assets with fixed or de- income and expenses arising from intra-group transac- terminable payments that are not quoted in an active mar- tions, are eliminated in preparing the financial statements. ket. Such assets are recognised initially at fair value plus Unrealised gains arising from transactions with equity any directly attributable transaction costs. Subsequent to accounted investees are eliminated against the investment initial recognition loans and receivables are measured at to the extent of the Group’s interest in the investee. Unre- amortised cost using the effective interest method, less alised losses are eliminated in the same way as unrealised any impairment losses. Loans and receivables comprise gains, but only to the extent that there is no evidence of trade and other receivables. impairment. Cash and cash equivalents comprise cash balances with original maturities of three months or less. (b) Foreign currency Available-for-sale financial assets (i) Foreign currency transactions Available-for-sale financial assets are non-derivative fi- Transactions in foreign currencies are translated to the nancial assets that are designated as available-for-sale respective functional currencies of the Group entities at and that are not classified in any of the previous catego- exchange rates at the dates of the transactions. Monetary ries. The Group’s investments in equity securities and cer- assets and liabilities denominated in foreign currencies at tain debt securities are classified as available-for-sale the reporting date are translated to the functional currency financial assets. Such assets are recognised initially at at the exchange rate at that date. Non-monetary assets fair value plus any directly attributable transaction costs. and liabilities denominated in foreign currencies that are Subsequent to initial recognition, they are measured at measured at fair value are retranslated to the functional fair value and changes therein, other than impairment currency at the exchange rate at the date that the fair value losses (see Note 3(h)(i) and foreign currency differences was determined. Foreign currency differences arising in on available-for-sale debt instruments (see Note 3(b)(i)), retranslation are recognised in profit or loss, except for are recognised in other comprehensive income and pre- differences arising on the retranslation of available-for- sented within equity in the fair value reserve. When an sale equity instruments which are recognised in other investment is derecognised or impaired, the cumulative comprehensive income. gain or loss in other comprehensive income is transferred to profit or loss. (c) Financial instruments Other (i) Non-derivative financial instruments Other non-derivative financial instruments are measured Non-derivative financial instruments comprise invest- at amortised cost using the effective interest method, less ments in equity and debt securities, trade and other re- any impairment losses. Investments in equity securities ceivables, cash and cash equivalents, loans and borrow- that are not quoted on a stock exchange and where fair ings, and trade and other payables. value cannot be reliably measured are stated at cost less The Group initially recognises loans and receivables impairment losses. and deposits on the date that they are originated. All other financial assets are recognised initially on the date at which www.mrsk-volgi.ru EXCELLENT ENERGY! 180 | 181

(ii) Non-derivative financial liabilities ity of the related equipment is capitalised as part of that The Group initially recognises debt securities issued on equipment. When parts of an item of property, plant and the date that they are originated. All other financial li- equipment have different useful lives, they are accounted abilities are recognised initially on the date at which the for as separate items (major components) of property, Group becomes a party to the contractual provisions of plant and equipment. the instrument. Gains and losses on disposal of an item of property, The Group derecognises a financial liability when plant and equipment are determined by comparing the its contractual obligations are discharged or cancelled or proceeds from disposal with the carrying amount of prop- expire. erty, plant and equipment, and are recognised net within Financial assets and liabilities are offset and the net “other income” in profit or loss. amount presented in the statement of financial position when, and only when, the Group has a legal right to offset (ii) Subsequent costs the amounts and intends either to settle on a net basis or The cost of replacing part of an item of property, plant and to realise the asset and settle the liability simultaneously. equipment is recognised in the carrying amount of the item The Group has the following non-derivative finan- if it is probable that the future economic benefits embodied cial liabilities: loans and borrowings and trade and other within the part will flow to the Group and its cost can be payables. measured reliably. The costs of the day-to-day servicing Such financial liabilities are recognised initially at fair value of property, plant and equipment are recognised in profit less any directly attributable transaction costs. Subse- or loss as incurred. quent to initial recognition these financial liabilities are measured at amortised cost using the effective interest (iii) Depreciation method. Depreciation is calculated based on the depreciable amount, which is the cost of an asset, or other amount (d) Property, plant and equipment substituted for cost, less its residual value. Depreciation is recognised in profit or loss on a (i) Recognition and measurement straight-line basis over the estimated useful lives of each Items of property, plant and equipment, except for land, part of an item of property, plant and equipment, since this are measured at cost less accumulated depreciation and most closely reflects the expected pattern of consumption impairment losses. The deemed cost of property, plant of the future economic benefits embodied in the asset. and equipment at 1 January 2006, the date of transition Leased assets are depreciated over the shorter of the lease to IFRSs, was determined by reference to its fair value at term and their useful lives unless it is reasonably certain that date. that the Group will obtain ownership by the end of the lease Cost includes expenditure that is directly attributable term. Depreciation commences in the month following the to the acquisition of the asset. The cost of self-constructed acquisition or, in respect of internally constructed assets, assets includes the cost of materials and direct labour, in the month following the month an asset is completed any other costs directly attributable to bringing the asset and ready for use. Land is not depreciated. to a working condition for its intended use, and the costs The estimated useful lives for the current and com- of dismantling and removing of assets and restoring the parative periods are as follows: site on which they are located, and capitalised borrowing costs. Purchased software that is integral to the functional-

Type of property, plant and equipment Useful lives (in years)

Buildings 15-50

Transmission networks 5-20

Equipment for electricity transformation 5-20

Other 1-30

(e) Intangible assets Subsequent expenditure is capitalised only when it in- Intangible assets that are acquired by the Group, which creases the future economic benefits embodied in the have finite useful lives, are measured at cost less accumu- specific asset to which it relates. All other expenditure, lated amortisation and accumulated impairment losses. including expenditure on internally generated goodwill and brands, is recognized in profit or loss as incurred. IDGC OF VOLGA ANNUAL REPORT 2012 APPENDIX

Amortisation is recognised in profit or loss on a straight- value of the estimated future cash flows discounted at line basis over the estimated useful lives of intangible the asset’s original effective interest rate. Losses are assets from the date that they are available for use. The recognised in profit or loss and reflected in an allowance estimated useful lives for the current and comparative account against receivables. Interest on the impaired periods are 3 to 10 years. asset continues to be recognised through the unwinding of the discount. When a subsequent event causes the (f) Leased assets amount of impairment loss to decrease, the decrease Leases in terms of which the Group assumes substantially in impairment loss is reversed through profit or loss. all the risks and rewards of ownership are classified as Impairment losses on available-for-sale investment finance leases.U pon initial recognition the leased asset is securities are recognised by transferring the cumulative measured at an amount equal to the lower of its fair value loss that has been recognised in other comprehensive and the present value of the minimum lease payments. income, and presented in the fair value reserve in equity, Subsequent to initial recognition, the asset is accounted to profit or loss.T he cumulative loss that is removed from for in accordance with the accounting policy applicable other comprehensive income and recognised in profit or to that asset. loss is the difference between the acquisition cost, net of Leases, other than finance leases, are treated as any principal repayment and amortisation, and the current operating leases, and leased assets are not recognised fair value, less any impairment loss previously recognised on the Group’s statement of financial position. Operating in profit or loss. Changes in impairment provisions at- lease payments (net of benefits granted by the lessor) are tributable to time value are reflected as a component of recognised in profit or loss on a straight line basis over interest income. the lease term. If, in a subsequent period, the fair value of an impaired available-for-sale debt security increases and the (g) Inventories increase can be related objectively to an event occurring Inventories are measured at the lower of cost and net re- after the impairment loss was recognised in profit or loss, alisable value. The cost of inventories is determined on the then the impairment loss is reversed, with the amount weighted average cost method, and includes expenditure of the reversal recognised in profit or loss. However, im- incurred in acquiring the inventories, production or con- pairment losses on equity investments are not reversed version costs and other costs incurred in bringing them through profit or loss.A ny subsequent recovery in the fair to their existing location and condition. Net realisable value of an impaired available-for-sale equity investments value is the estimated selling price in the ordinary course is recognised in other comprehensive income. of business, less the estimated costs of completion and selling expenses. (ii) Non-financial assets The carrying amounts of the Group’s non-financial assets, (h) Impairment other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there (i) Financial assets is any indication of impairment. If any such indication ex- A financial asset is assessed at each reporting date to ists, then the asset’s recoverable amount is estimated. For determine whether there is any objective evidence that it is goodwill and intangible assets that have indefinite lives impaired. A financial asset is impaired if objective evidence or that are not yet available for use, recoverable amount indicates that a loss event has occurred after the initial is estimated each year at the same time. An impairment recognition of the asset, and that the loss event had a loss is recognised if the carrying amount of an asset or its negative effect on the estimated future cash flows of that related cash-generating unit (CGU) exceeds its estimated asset that can be estimated reliably. recoverable amount. Objective evidence that financial assets (including The recoverable amount of an asset or cash-gener- equity securities) are impaired can include default or ating unit is the greater of its value in use and its fair value delinquency by a debtor, restructuring of an amount due less costs to sell. In assessing value in use, the estimated to the Group on terms that the Group would not consider future cash flows are discounted to their present value otherwise, indications that a debtor or issuer will enter using a pre-tax discount rate that reflects current market bankruptcy, the disappearance of an active market for a assessments of the time value of money and the risks security. In addition, for an investment in an equity se- specific to the asset.F or the purpose of impairment test- curity, a significant or prolonged decline in its fair value ing, assets that cannot be tested individually are grouped below its cost is an objective evidence of impairment. together into the smallest group of assets that generates An impairment loss in respect of a financial asset cash inflows from continuing use that are largely inde- measured at amortised cost is calculated as the dif- pendent of the cash inflows of other assets or groups of ference between its carrying amount, and the present assets (the “cash-generating unit”). The goodwill acquired www.mrsk-volgi.ru EXCELLENT ENERGY! 182 | 183

in a business combination, for the purpose of impairment line basis over the average period until the benefits testing, is allocated to cash-generating units that are ex- become vested. To the extent that the benefits vest im- pected to benefit from the synergies of the combination. mediately, the expense is recognised immediately in An impairment loss is recognised if the carrying profit or loss. amount of an asset or its cash-generating unit exceeds The Group recognises all actuarial gains and losses its recoverable amount. Impairment losses are recognised in profit or loss for the reporting period under the 10% in profit or loss. Impairment losses recognised in respect corridor of the post-employment benefit obligation. of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and (iii) Other non-current employee benefits then to reduce the carrying amount of other assets in the The Group’s net obligation in respect of long term em- unit (group of units) on a pro rata basis. ployee benefits other than pension plans is the amount An impairment loss in respect of goodwill is not of future benefit that employees have earned in return for reversed. In respect of other assets, impairment losses their service in the current and prior periods; that benefit recognised in prior periods are assessed at each reporting is discounted to determine its present value. The discount date for any indications that the loss has decreased or no rate is the yield at the reporting date on government bonds longer exists. An impairment loss is reversed if there has that have maturity dates approximating the terms of the been a change in the estimates used to determine the Group’s obligations and that are denominated in the same recoverable amount. An impairment loss is reversed only currency in which the benefits are expected to be paid. The to the extent that the asset’s carrying amount does not calculation is performed using the projected unit credit exceed the carrying amount that would have been deter- method. Any actuarial gains or losses are recognised in mined, net of depreciation or amortisation, if no impair- profit or loss in the period in which they arise. ment loss had been recognised. (iv) Short-term benefits (i) Employee benefits Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related (i) Defined contribution plans service is provided. A defined contribution plan is a post-employment benefit A liability is recognised for the amount expected to be plan under which an entity pays fixed contributions into a paid under short-term cash bonus or profit-sharing plans separate entity and will have no legal or constructive ob- if the Group has a present legal or constructive obligation ligation to pay further amounts. Obligations for contribu- to pay this amount as a result of past service provided by tions to defined contribution pension plans, includingR us- the employee and the obligation can be estimated reliably. sia’s State pension fund, are recognised as an employee benefit expense in profit or loss in the periods during which (j) Provisions services are rendered by employees. Prepaid contributions A provision is recognised if, as a result of a past event, are recognised as an asset to the extent that a cash refund the Group has a present legal or constructive obligation or a reduction in future payments is available. that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the (ii) Defined benefit post-employment plans obligation. Provisions are determined by discounting the A defined benefit plan is a post-employment benefit plan expected future cash flows at a pre-tax rate that reflects other than a defined contribution plan. The Group’s net current market assessments of the time value of money obligation in respect of defined benefit pension plans is cal- and the risks specific to the liability. The unwinding of the culated separately for each plan by estimating the amount discount is recognised as finance cost. of future benefit that employees have earned in return for their service in the current and prior periods; that benefit (k) Revenue is discounted to determine its present value, and any un- recognised past services are deducted. The discount rate (i) Electricity distribution and sales of electricity is the yield at the reporting date on government bonds Revenue from distribution and sales of electricity is recog- that have maturity dates approximating the terms of the nised in profit or loss based on an act of services rendered Group’s obligations and that are denominated in the same containing the physical volume of electricity distributed currency in which the benefits are expected to be paid. The or sold. The act is prepared based on a monthly report of calculation is performed annually by a qualified actuary electricity consumption (prepared in physical volumes) using the projected unit credit method. for each customer. The tariffs for distribution and sales When the benefits of a plan are improved, the por- of electricity on regulated market are approved by the tion of the increased benefit relating to past service by government agencies of the constituents of the Russian employees is recognised in profit or loss on a straight- Federation in the sphere of the state energy tariff regula- IDGC OF VOLGA ANNUAL REPORT 2012 APPENDIX

tion within the range of cap and/or floor tariffs approved method. Dividend income is recognised in profit or loss by the Federal Service on Tariffs. on the date that the Group’s right to receive payment is established. (ii) Connection services Finance costs comprise interest expense on borrow- Revenue from connection services represents a non-re- ings, financial leasing, foreign currency losses, discount on fundable fee for connecting the customer to the electricity financial instruments and impairment losses recognised grid network. The terms, conditions and amounts of these on financial assets other than trade receivables.B orrowing fees are negotiated separately and are independent from costs that are not directly attributable to the acquisition, fees generated by electricity transmission services. construction or production of a qualifying asset are recog- Revenue for connection to the power network is recognised in profit or loss using the effective interest method. nised either at the full amount at the moment of actual Foreign currency gains and losses are reported on connection of the customer to the network or by reference a net basis. to the stage of completion. (o) Income tax expense (iii) Other services Income tax expense comprises current and deferred tax. Revenue from installation, repair and maintenance ser- Income tax expense is recognised in profit or loss except vices and other sales is recognized when the services to the extent that it relates to a business combination, are provided or when the significant risks and rewards of or items recognised directly in equity, in which case it is ownership of the goods have passed to the buyer. recognised in equity. Current tax is the expected tax payable on the tax- (l) Government subsidies able income for the current period, using tax rates enacted Government subsidies that compensate the Group for or substantively enacted at the reporting date, and any low electricity tariffs are recognised in profit or loss in the adjustment to tax payable in respect of previous periods. same periods in which the respective revenue is earned. Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and (m) Other expenses liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised (i) Lease payments for the following temporary differences: the initial recog- Payments made under operating leases are recognised nition of assets or liabilities in a transaction that is not a in profit or loss on a straight-line basis over the term of business combination and that affects neither accounting the lease. Lease incentives received are recognised as an nor taxable profit, and differences relating to investments integral part of the total lease expense, over the term of in subsidiaries to the extent that it is probable that they will the lease. not reverse in the foreseeable future. In addition, deferred Minimum lease payments made under finance leases tax is not recognised for taxable temporary differences are apportioned between the finance expense and the re- arising on the initial recognition of goodwill. Deferred tax is duction of the outstanding liability. The finance expense measured at the tax rates that are expected to be applied is allocated to each period during the lease term so as to to the temporary differences when they reverse, based on produce a constant periodic rate of interest on the remain- the laws that have been enacted or substantively enacted ing balance of the liability. by the reporting date. Deferred tax assets and liabilities Contingent lease payments are accounted for by re- are offset if there is a legally enforceable right to offset vising the minimum lease payments over the remaining current tax assets and liabilities, and they relate to income term of the lease when the contingency no longer exists taxes levied by the same tax authority on the same taxable and the lease adjustment is known. entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their (ii) Social expenditure tax assets and liabilities will be realised simultaneously. To the extent that the Group’s contributions to social A deferred tax asset is recognised for unused tax programs benefit the community at large and are not re- losses, tax credits and deductable temporary differences stricted to the Group’s employees, they are recognised in to the extent that it is probable that future taxable profits profit or loss as incurred. will be available against which temporary difference can be utilised. Deferred tax assets are reviewed at each report- (n) Finance income and costs ing date and are reduced to the extent that it is no longer Finance income comprises interest income on funds probable that the related tax benefit will be realised. invested (including available-for-sale financial assets), dividend income, gains on the disposal of available-for- (p) Earnings per share sale financial assets, discount on financial instruments, The Group presents basic earnings per share (“EPS”) data and foreign currency gains. Interest income is recognised for its ordinary shares. Basic EPS is calculated by dividing as it accrues in profit or loss, using the effective interest the profit or loss attributable to ordinary shareholders of www.mrsk-volgi.ru EXCELLENT ENERGY! 184 | 185

the Company by the weighted average number of ordinary ̤̤ Amendments to IFRS 7 Financial Instruments: Dis- shares outstanding during the period. closures - OffsettingF inancial Assets and Financial Liabilities contain new disclosure requirements for (q) Segment reporting financial assets and liabilities that are offset in the An operating segment is a component of the Group that statement of financial position or subject to mas- engages in business activities from which it may earn ter netting arrangements or similar agreements. revenues and incur expenses, including revenues and ex- The amendments are effective for annual periods penses that relate to transactions with any of the Group’s beginning on or after 1 January 2013, and are to other components. All operating segment’s results are be applied retrospectively. reviewed regularly by the Management Board to make ̤̤ IFRS 9 Financial Instruments will be effective for decisions about resources to be allocated to the segment annual periods beginning on or after 1 January and assess its performance and for which discrete financial 2015. The new standard is to be issued in phases information is available. Segment financial information is and is intended ultimately to replace International presented in the Financial Statements in a manner similar Financial Reporting Standard IAS 39 Financial In- to those provided to the Management Board. The amount struments: Recognition and Measurement. The first of each segment item reported is the measure reported to phase of IFRS 9 was issued in November 2009 and the Management Board. Total amounts of segment infor- relates to the classification and measurement of mation are reconciled to those in the Financial Statements financial assets.T he second phase regarding classi- (see note 6). fication and measurement of financial liabilities was published in October 2010. The remaining parts of (r) New Standards and Interpretations not yet adopted the standard are expected to be issued during 2013. A number of new Standards, amendments to Standards The Group recognises that the new standard intro- and Interpretations are not yet effective as at 31 Decem- duces many changes to the accounting for financial ber 2012, and have not been applied in preparing these instruments and is likely to have a significant im- consolidated financial statements.O f these pronounce- pact on Group’s consolidated financial statements. ments, potentially the following will have an impact on The impact of these changes will be analysed during the Group’s operations. The Group plans to adopt these the course of the project as further phases of the pronouncements when they become effective. standard are issued. The Group does not intend to The Group has not yet analysed the likely impact of adopt this standard early. The Standard has not yet the new Standard on its financial position or performance. been endorsed in the Russian Federation. ̤̤ IFRS 10 Consolidated Financial Statements will be ̤̤ IAS 19 (2011) Employee Benefits. The amended effective for annual periods beginning on or after 1 standard will introduce a number of significant January 2013. The new standard supersedes IAS 27 changes to IAS 19. First, the corridor method is Consolidated and Separate Financial Statements and removed and, therefore, all changes in the present SIC-12 Consolidation – Special Purpose Entities. IFRS value of the defined benefit obligation and in the fair 10 introduces a single control model which includes value of plan assets will be recognised immediately entities that are currently within the scope of SIC-12 as they occur. Secondly, the amendment will elimi- Consolidation – Special Purpose Entities. Under the nate the current ability for entities to recognise all new three-step control model, an investor controls an changes in the defined benefit obligation and in plan investee when it is exposed, or has rights, to variable assets in profit or loss.T hirdly, the expected return returns from its involvement with that investee, has on plan assets recognised in profit or loss will be the ability to affect those returns through its power calculated based on the rate used to discount the over that investee and there is a link between power defined benefit obligation. The amended standard and returns. Consolidation procedures are carried shall be applied for annual periods beginning on forward from IAS 27 (2008). When the adoption of or after 1 January 2013.T he amendment generally IFRS 10 does not result a change in the previous applies retrospectively. consolidation or non-consolidation of an investee, ̤̤ IAS 27 (2011) Separate Financial Statements will no adjustments to accounting are required on initial become effective for annual periods beginning on application. When the adoption results a change in or after 1 January 2013.T he amended standard car- the consolidation or non-consolidation of an investee, ries forward the existing accounting and disclosure the new standard may be adopted with either full requirements of IAS 27 (2008) for separate financial retrospective application from date that control was statements with some clarifications. The require- obtained or lost or, if not practicable, with limited ments of IAS 28 (2008) and IAS 31 for separate retrospective application from the beginning of the financial statements have been incorporated into earliest period for which the application is practica- IAS 27 (2011). ble, which may be the current period. IDGC OF VOLGA ANNUAL REPORT 2012 APPENDIX

̤̤ IFRS 12 Disclosure of Interests in Other Entities will the use of other titles is permitted. The amendment be effective for annual periods beginning on or after shall be applied retrospectively from 1 July 2012. 1 January 2013. The new standard contains disclo- ̤̤ Amendments to IAS 32 Financial Instruments: Pres- sure requirements for entities that have interests entation - OffsettingF inancial Assets and Financial in subsidiaries, joint arrangements, associates and Liabilities do not introduce new rules for offsetting unconsolidated structured entities. Interests are financial assets and liabilities; rather they clarify widely defined as contractual and non-contractual the offsetting criteria to address inconsistencies involvement that exposes an entity to variability of in their application. The Amendments specify that returns from the performance of the other entity. an entity currently has a legally enforceable right The expanded and new disclosure requirements to set-off if that right is not contingent on a future aim to provide information to enable the users to event; and enforceable both in the normal course evaluate the nature of risks associated with an en- of business and in the event of default, insolvency tity’s interests in other entities and the effects of or bankruptcy of the entity and all counterparties. those interests on the entity’s financial position, The amendments are effective for annual periods financial performance and cash flows.E ntities may beginning on or after 1 January 2014, and are to early present some of the IFRS 12 disclosures early be applied retrospectively. without a need to early-adopt the other new and ̤̤ Various Improvements to IFRSs have been dealt amended standards. with on a standard-by-standard basis. All amend- ̤̤ IFRS 13 Fair Value Measurement will be effective ments, which result in accounting changes for pres- for annual periods beginning on or after 1 Janu- entation, recognition or measurement purposes, ary 2013. The new standard replaces the fair value will come into effect for annual periods beginning measurement guidance contained in individual after 1 January 2013. The Group has not yet ana- IFRSs with a single source of fair value measure- lysed the likely impact of the improvements on its ment guidance. It provides a revised definition of financial position or performance. fair value, establishes a framework for measuring fair value and sets out disclosure requirements for fair value measurements. IFRS 13 does not introduce new requirements to measure assets or liabilities at fair value, nor does it eliminate the practicability exceptions to fair value measurement that currently exist in certain standards. The standard is applied prospectively. Comparative disclosure information is not required for periods before the date of initial application. ̤̤ Amendment to IAS 1 Presentation of Financial Statements: Presentation of Items of Other Com- prehensive Income. The amendment requires that an entity present separately items of other comprehensive income that may be reclassified to profit or loss in the future from those that will never be reclassified to profit or loss.A dditionally, the amendment changes the title of the statement of comprehensive income to statement of profit or loss and other comprehensive income. However, www.mrsk-volgi.ru EXCELLENT ENERGY! 186 | 187

Note 4. Determination of fair value

A number of the Group’s accounting policies and disclo- (c) Non-derivative financial liabilities sures require the determination of fair value, for both fi- Fair value, which is determined for disclosure purposes, nancial and non-financial assets and liabilities. Fair values is calculated based on the present value of future principal have been determined for measurement and / or disclo- and interest cash flows, discounted at the market rate sure purposes based on the following methods. When ap- of interest at the reporting date. In respect of the liabil- plicable, further information about the assumptions made ity component of convertible notes, the market rate of in determining fair values is disclosed in the notes specific interest is determined by reference to similar liabilities to that asset or liability. that do not have a conversion option. For finance leases the market rate of interest is determined by reference to (a) Investments in equity and debt securities similar lease agreements. The fair value of held-to-maturity investments and available-for-sale financial assets is determined by reference to their quoted bid price at the reporting date. The fair value of held-to-maturity investments is determined for disclosure purposes only.

(b) Trade and other receivables The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. This fair value is determined for disclosure purposes.

Note 5. Financial risk management

(a) Overview (b) Credit risk The Group has exposure to the following risks from its use Credit risk is the risk of financial loss to the Group if a of financial instruments: customer or counterparty to a financial instrument fails ̤̤ credit risk to meet its contractual obligations, and arises principally ̤̤ liquidity risk from the Group’s cash and cash equivalents, receivables ̤̤ market risk. from customers and investment securities.

This note presents information about the Group’s exposure (i) Trade and other receivables to each of the above risks, the Group’s objectives, poli- The Group’s exposure to credit risk is influenced mainly by cies and processes for measuring and managing risk, and the individual characteristics of each customer. To manage the Group’s management of capital. Further quantitative the credit risk, the Group attempts, to the extent possible, disclosures are included throughout these consolidated to demand prepayments from customers. financial statements. Prepayments for connection services are routinely The Board of Directors has overall responsibility for the included in the customer service contracts. establishment and oversight of the Group’s risk manage- The customer base for electricity transmission ser- ment framework. vices for each of the Group’s entities is limited to several The Group’s risk management policies are estab- distribution companies and a small number of large man- lished to identify and analyse the risks faced by the Group, ufacturing enterprises. Payments are tracked regularly to set appropriate risk limits and controls, and to monitor and electricity transmission customers are advised of any risks and adherence to limits. Risk management policies failures to submit timely payments. and systems are reviewed regularly to reflect changes in The Group does not require collateral in respect of market conditions and the Group’s activities. The Group, trade and other receivables. through its training and management standards and pro- The Group establishes an allowance for impairment cedures, aims to develop a disciplined and constructive that represents its estimate of anticipated losses in re- control environment in which all employees understand spect of trade and other receivables. The main component their roles and obligations. of this allowance is a specific provision that relates to individually significant exposures. IDGC OF VOLGA ANNUAL REPORT 2012 APPENDIX

(ii) Cash and cash equivalents profits and cash flows from operating activities are largely The Group attempts to minimise the credit risk exposure not dependent on the changes in market interest rates. for current and deposit accounts with banks by placing temporarily available funds only with the banks that are (e) Capital management lendors to the Group. Management’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confi- (c) Liquidity risk dence and to sustain future development of the business. Liquidity risk is the risk that the Group will not be able to Management monitors the level of dividends to ordinary meet its financial obligations as they fall due.T he Group’s shareholders. Management seeks to maintain a balance approach to managing liquidity is to ensure that it will al- between the higher returns that might be possible with ways have sufficient liquidity to meet its liabilities when higher levels of borrowings and the advantages and se- due. curity afforded by a sound capital position. Neither the Company nor any of its subsidiaries are (d) Market risk subject to externally imposed capital requirements. Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect theG roup’s income or the value of its holdings of financial instruments.T he objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

(i) Currency risk The Group does not have any significant exposure to currency risk on sales, purchases and the borrowings, be- cause no significant sales, purchases, or borrowings are denominated in a currency other than the functional currency of the Group, which is Russian Rubles.

(ii) Interest rate risk The Group’s interest rate risk arises from short-term and long-term borrowings. Changes in interest rates impact primarily loans and borrowings by changing either their fair value (fixed rate debt) or their future cash flows (variable rate debt). The majority of interest rates on current and non-current borrowings are fixed. The Group’s operating

Note 6. Operating segments

The Management Board of the Company has been deter- ̤̤ Transmission Segments – Mordovia region, Chu- mined as the Group Chief Operating Decision-Maker. vashia region, Orenburg region, Penza region, Sa- The Group’s primary activity is the provision of elec- mara region, Saratov region, Ulianovsk region – tricity transmission services within the regions of the branches of IDGC Volga; Russian Federation. The internal management reporting ̤̤ Other Segments – other Group companies. system is based on segments relating to electric energy Unallocated items comprise corporate balances of the transmission in separate regions of the Russian Federa- Company’s headquarters which do not constitute an option (branches of the Company) and segments relating to erating segment under IFRS 8 requirements. other activities (represented by separate legal entities). Segment items are based on financial information The Management Board regularly evaluates and reported in statutory accounts and can differ significantly analyses the financial information of the segments re- from those for financial statements prepared under IFRS. ported in the statutory financial statements of respective The reconciliation of items measured as reported to the segments. Management Board with similar items in these Consoli- In accordance with requirements of IFRS 8 based on dated Financial Statements includes those reclassifications the information on segment revenue, profit before income and adjustments that are necessary for financial state- tax and total assets reported to the Management Board ments to be presented in accordance with IFRS. the following reporting segments were identified: www.mrsk-volgi.ru EXCELLENT ENERGY! 188 | 189

Information regarding the results of each reportable segment is included below. Performance is measured based on segment revenue and profit before income tax, as included in the internal management reports that are reviewed by the Management Board. Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries. IDGC OF VOLGA ANNUAL REPORT 2012 APPENDIX

(i) Information about reportable segments for the year ended 31 December 2012 Transmission Transmission

Saratov region Orenburg region Samara region Penza region Ulianovsk region Chuvashia region Mordovia region Other Total

Revenue:

Electricity transmission 9,156,185 12,207,921 9,796,751 5,127,007 3,634,122 3,216,927 1,985,222 - 45,124,135

Connection to the electricity network 52,457 78,810 42,017 14,687 154,485 31,369 42,448 - 416,273

Other revenue 16,975 123,346 20,708 30,436 5,178 12,500 13,674 122,297 345,114

Total revenue from external customers 9,225,617 12,410,077 9,859,476 5,172,130 3,793,785 3,260,796 2,041,344 122,297 45,885,522

Inter-segment revenue - 357 - - - - - 199,806 200,163

Total revenue 9,225,617 12,410,434 9,859,476 5,172,130 3,793,785 3,260,796 2,041,344 322,103 46,085,685

Segment operating profit/(loss) 460,924 735,228 903,005 (349,581) 781,945 191,061 (158,093) 33,997 2,598,486

Segment finance income 9,187 10,652 8,686 5,426 3,233 3,411 3,276 549 44,420

Segment finance costs (189,996) (8,089) (112,864) (23,413) (13,604) (36,932) (92,661) - (477,559)

Segment profit/(loss) before income tax 280,115 737,791 798,827 (367,568) 771,574 157,540 (247,478) 34,546 2,165,347

Segment depreciation and amortisation 1,062,472 1,028,181 1,167,164 441,560 212,952 253,501 281,826 18,258 4,465,914

Segment assets 17,659,712 10,572,165 15,123,751 4,806,082 4,271,776 4,067,878 3,241,753 262,959 60,006,076

Including property, plant and equipment 15,902,605 9,713,861 13,523,401 4,173,550 3,521,860 3,378,543 2,425,895 106,847 52,746,562

Segment liabilities 4,814,147 1,826,675 3,340,833 1,881,226 608,441 1,096,554 2,222,008 64,261 15,854,145

Capital expenditures 2,084,858 2,332,845 1,994,140 1,086,869 596,227 614,166 491,180 17,653 9,217,938

(ii) Information about reportable segments for the year ended 31 December 2011 Transmission Transmission

Saratov region Orenburg region Samara region Penza region Ulianovsk region Chuvashia region Mordovia region Other Total

Revenue:

Electricity transmission 8,542,876 15,758,546 9,331,773 5,074,605 3,448,310 3,110,138 1,955,869 - 47,222,117

Connection to the electricity network 37,697 76,628 39,791 16,621 24,068 21,246 50,294 - 266,345

Other revenue 19,386 153,975 57,685 69,833 5,639 25,387 6,417 141,414 479,736

Total segment revenues 8,599,959 15,989,149 9,429,249 5,161,059 3,478,017 3,156,771 2,012,580 141,414 47,968,198

Inter-segment revenue - 369 - - - - - 165,737 166,106

Total revenue 8,599,959 15,989,518 9,429,249 5,161,059 3,478,017 3,156,771 2,012,580 307,151 48,134,304

Segment operating profit/(loss) (245,100) 953,880 321,447 474,727 47,854 253,690 (82,325) 27,497 1,751,670

Segment finance income 2,825 2,868 2,794 1,629 980 1,059 985 184 13,324

Segment finance costs (94,643) (11,102) (78,294) (3,402) (3,496) (27,941) (46,686) - (265,564)

Segment profit/(loss) before income tax (336,918) 945,646 245,947 472,954 45,338 226,808 (128,026) 27,681 1,499,430

Segment depreciation and amortisation 905,353 906,892 1,074,147 345,690 174,001 215,969 254,843 17,319 3,894,214

Segment assets 17,274,142 9,905,723 13,799,249 4,013,019 3,715,651 3,494,724 2,596,438 245,941 55,044,887

Including property, plant and equipment 14,910,283 8,405,193 12,781,660 3,528,671 3,145,151 3,034,502 2,217,873 106,284 48,129,617

Segment liabilities 4,004,525 1,976,725 3,410,447 934,305 875,658 932,960 1,587,649 69,194 13,791,463

Capital expenditures 1,997,368 1,860,037 1,548,941 784,176 507,923 403,697 435,239 22,800 7,560,181 www.mrsk-volgi.ru EXCELLENT ENERGY! 190 | 191