2011

RusHydro Group’s corporate sustainability and social responsibility report © 2011 JSC RusHydro

About the Report This report reflects the essential facts and results of the operations of the RusHydro Holding in 2011 in three main areas of sustainable development achievement: ensuring the safety and reliability of the power supply, natural resources and environmental conservation and the responsible management of social impacts on the personnel of the Holding’s companies and local communities.

Official site of the RusHydro Holding: www.rushydro.ru Central Office Address: 51 Architect Vlasov Street, Moscow, Russia, 117393.

Forward-Looking Statements Data relating to the future provided in the Report based on forward-looking information. Such words as “believes,” “anticipates,” “expects,” “estimates,” “intends,” “plans” and similar expressions indicate that in this case these are forward-looking statements. Actual results may differ significantly from the plan and target indicators, expected results, estimates and intentions contained in the forward-looking statements. Forward-looking statements are only valid at the date of the Report. The Company does not guarantee that the expected results of operations contained in the forward-looking statements will actually be achieved, so they should not be considered as the most likely or standard scenario.

The Method of Report Preparation The Report was prepared using the Electric Utility Sector Supplement of the Global Reporting Initiative (GRI) Guidelines.

Compliance level with the GRI

C C+ B B+ A A+

Self-declaration

Third party verification

GRI verification Table of Contents

© 2011 JSC RusHydro 1. The Company in 2011 4

Industry Context and Strategy 13 The State of and Prospects for the Hydro-Power Industry in Russia 13 About the Report The Electricity and Power Market 15 This report reflects the essential facts and results of the operations of the RusHydro Holding in 2011 in three Interconnection of the Company’s Strategy main areas of sustainable development achievement: ensuring the safety and reliability of the power supply, with Sustainable Development Objectives, Declared by the UN 16 natural resources and environmental conservation and the responsible management of social impacts on the Implementing the Company’s Strategy personnel of the Holding’s companies and local communities. and Sustainable Development Objectives 17 Сorporate Governance 26 Highest Management Bodies 26 Official site of the RusHydro Holding: www.rushydro.ru Improving Corporate Governance Quality 27 Central Office Address: 51 Architect Vlasov Street, Moscow, Russia, 117393. 2. Ensuring the Reliability and Safety of Hydro-power Facilities and Infrastructure 30 Reliability Control System 33 Forward-Looking Statements Supply Chain: Interacting with Equipment Data relating to the future provided in the Report based on forward-looking information. Such words as and Service Suppliers 38 “believes,” “anticipates,” “expects,” “estimates,” “intends,” “plans” and similar expressions indicate that in this case these are forward-looking statements. Actual results may differ significantly from the plan and target indicators, expected results, estimates and intentions contained in the forward-looking statements. 3. Energy Efficiency and New Generation 42 Forward-looking statements are only valid at the date of the Report. The Company does not guarantee that the Energy Efficiency Management 44 expected results of operations contained in the forward-looking statements will actually be achieved, so they should not be considered as the most likely or standard scenario. 2011 Program Implementation 44 New Generation 46 The Company’s Contribution to International Cooperation on Addressing Climate Change 49 The Method of Report Preparation The Report was prepared using the Electric Utility Sector Supplement of the Global Reporting Initiative (GRI) 4. Natural Resources and Environmental Conservation 52 Guidelines. Responsible Water Usage 54 Long-term Effects of Hydro-power Facilities 57 Compliance level with the GRI Construction of Hydro-power Facilities 59 Environmental Policy Implementation 60 C C+ B B+ A A+ 5. Social Responsibility 68

Employee Description 70 Occupational Safety and Health 72 Self-declaration Human Resources Development 74 Employee Motivation System and Social Policy 75 Social Support for Families of Employees That Lost Their Lives or Were Injured in the Sayano-Shushenskaya HPP Accident 78 Third party Regional Support 80 verification 6. Appendices 84 Appendix 1. About the Report and the Reporting Process 86 GRI verification Appendix 2. GRI Content Index 88 Appendix 3. On Electricity and Capacity Markets 96 Appendix 4. Reference Information 98

1 RusHydro Holding RusHydro Group’s corporate 2011 sustainability and social responsibility report

Message from the Chairman of the Management Board

Dear Colleagues,

I present to you the Company’s fourth advanced international experience and works report on social responsibility and corporate with leaders in the equipment manufacturing sustainability. In business, RusHydro field. traditionally pays special attention to the Using the latest technology ensures maxi­ social and environmental components. For mum environmental protection and rational the Company’s management team, this part water resource usage in Russia. of work is no less important than increasing market capitalization or constructing new However, the environmental component is generating facilities. necessary, but not the only condition for the successful execution of social obligations The past year has been a major landmark for assumed by RusHydro. Charity is one of the the Company. In 2011, by purchasing RAO most important directions of the Company’s ES of the East, RusHydro’s installed capacity activities. In all operating areas, RusHydro increased one-third to 35.2 GW. Prior to takes an active part in supporting low- 2015, the Company also plans to introduce income citizens, the disabled and pensioners, 10.4 GW of new capacity. Of course, the providing sponsorship to educational and creation of new generating facilities provides medical institutions, as well as scientific and a strong impetus to regional development in sporting organizations. those regions where our facilities are located and makes a significant contribution to Of course, the main value of the Company strengthening Russian energy security and is its employees. Caring for the Company’s addressing socio-economic development. staff, their social protection and providing them with the most comfortable working During the construction of new facilities and environment possible is a key factor in the upgrading of existing ones, RusHydro implementing RusHydro’s social policy. most carefully worked out issues related to reliability and safety. Last year, the Company Building a dynamic development strategy adopted a comprehensive modernization of RusHydro, the Company’s management program, under which up to 50% of the total team works closely with all stakeholders: hydro-generators park would be replaced. the government, shareholders and the In this work, the Company uses the most public at large. One of the Company’s main

2 IndustryMessage fromContext the Chairman RusHydro Group’s corporate 1.0 ofand the Strategy Management Board sustainability and social responsibility report

priorities is searching for and maintaining balanced interests. I think that the most important condition for effectively resolving this problem is work based on the principles of maximum transparency and openness. The Company’s entire management team adheres to these principles and we hope that in the future RusHydro`s contributions to Russia’s socio-economic development will increase in proportion with its business success.

Sincerely, Yevgeny Dod, Chairman of RusHydro’s Management Board

3 The Company 1.in 2011

The Company in 2011

Industry Context and Strategy

The State of and Prospects for the Hydro-Power Industry in Russia

The Electricity and Power Market

Interconnection of the Company’s Strategy with Sustainable Development Objectives, Declared by the UN

Implementing the Company’s Strategy and Sustainable Development Objectives

Сorporate Governance

Highest Management Bodies

Improving Corporate Governance Quality The Company 1.in 2011

The Company in 2011

Industry Context and Strategy

The State of and Prospects for the Hydro-Power Industry in Russia

The Electricity and Power Market

Interconnection of the Company’s Strategy with Sustainable Development Objectives, Declared by the UN

Implementing the Company’s Strategy and Sustainable Development Objectives

Сorporate Governance

Highest Management Bodies

Improving Corporate Governance Quality RusHydro Holding RusHydro Group’s corporate 2011 sustainability and social responsibility report

1. The Company in 2011

The RusHydro Holding1 is one of the largest The Company’s shares are traded on the energy companies, occupying a leading highest quotation list of Russia’s leading position in Russia’s hydro-power sector. The stock exchange – CJSC MICEX and traded Company’s generating facilities are located outside the Russian Federation in the form in 18 Russian regions, as well as abroad (in of Global and American Depository Receipts Armenia). The main hydro-generating assets (GDRs and ADRs) on the Main Market of the are united in 19 branches of RusHydro2. London Stock Exchange (LSE) and on the US OTC market (OTCQX). As of the end of 2011, the installed capacity3 of objects under the Holding’s control was Since listing in 2008, the Company’s shares 35.2 GW4. Based on this indicator, the are the “blue chip” of the Russian stock Company holds second place among the market and during the past four years, the world’s largest hydro-generating companies. shares have been on the list of the ten most The main type of electricity generation is liquid securities traded on CJSC MICEX. hydro-power engineering. Also, the Company’s shares are included in The Company supplies electricity and power. the calculation base for major stock indices The subsidiary JSC ESC RusHydro5 organizes in Russia: the MICEX index, branch indices of sales activities. The Holding owns 100% –1 the electric power industry (MICEX PWR and share of this Company’s shares. Energy sales RTSeu) and foreign indices: MSCI Russia, companies (see fig. The RusHydro Holding MSCI Emerging Market, MSCI Global Value Structure) are guaranteeing suppliers and Growth. of electricity in four Russian regions: Open Joint Stock Company RAO Energy the Republic of Bashkortostan and the Systems of the East (JSC RAO Energy Krasnoyarsk, Ryazan and Chuvash Systems of the East6) was the largest Republics. The Company’s main consumers acquisition in 2011. In accordance with a are energy sales companies – wholesale Russian Government Resolution (07.07.2011, market participants. Therefore, the structure No. 1174r), a majority of shares owned by of consumers does not include consumers of the Russian Federation was transferred in electricity and power that depend exclusively payment for RusHydro shares, issued under on power supply from the Holding facilities. the additional share issue7. The RusHydro Holding also includes research JSC RAO Energy Systems of the East and design and exploration and engineering operates in all regions of the Far Eastern organizations. Federal District. The region has considerable

4 1 The installed capacity of 35.2 GW includes JSC KamGEK, JSC Here and hereinafter in the Report, the terms RusHydro Holding, Pavlodolskaya HPP, JSC RAO UES of the East the Company and the Holding are synonymous, unless otherwise indicated 5 Open Joint Stock Company “Retail Electricity Company RusHydro” 2 See “About the Report and the Reporting Process” section. The 6 This asset, as well as other acquisitions made in 2011, are not twentieth branch of RusHydro (Corporate University) is not included in this Report – the limits of reporting, see the section included in performance indicators “About the Report and the reporting process” 3 An explanation and interpretation of abbreviations and acronyms 7 More information about the asset is presented in the 2011 Annual are presented in the Glossary Report

6 The Company in 2011 RusHydro Group’s corporate 1.0 sustainability and social responsibility report

growth potential for both electricity Plant and Joint Stock Company Sakhalinskaya consumption and deliveries abroad. Energy Company. Companies included in JSC “RAO Energy Another acquisition was shares of JSC Systems of the East” produce electricity International Energy Corporation (Armenia); and thermal energy; fulfill energy transfers the main asset of this company is the Sevan- and energy distribution, sales and other Hrazdan Cascade HPPs (seven HPPs with a activities. According to 2011 results, these total installed capacity of 561 MW), as well Companies have produced 30,367 million as the purchase of Energy Sales Company of kWh of electricity and 31,045 million Gcal Bashkortostan (LLC ESCB). of thermal energy. Shares of the Holding’s sales companies were acquired by RusHydro In collaboration with one of Europe’s largest and then transferred to INTER RAO UES in energy companies ALSTOM Power Holdings exchange for shares of this Company. a joint venture for manufacturing power equipment was established in the Republic In addition, in 2011, the following assets were of Bashkortostan. acquired: the Angara HPP Cascade, shares of Joint Stock Company AO Yakutskenergo, In sales activities connected with the creation JSC Far Eastern Energy Company, JSC Trest of a system services market in 2011, the Gidromontazh, Open Joint Stock Company Company began to provide services to regulate Kamchatsky Gas – Energy Complex, Joint reactive power without the generation of Stock Company Pavlodolskaya Hydro-power electrical energy (system services).

Installed capacity and net energy volume produced* in 2011, by primary sources of energy and the regulatory regime

Electric power Installed capacity, Region Sources of energy generation, million Regulatory regime MW kWh

Far East and Siberia Water 10,516.0 31,609.25 WEPM/ regulated Center Water 11,392.1 35,503.63 tariffs and free prices South and North Water 2,670.3 6,802.55 Caucasus

TOTAL for JSC 24,578.4 73,915.43 RusHydro

Water / WEPM / SDCs of RusHydro** Geo-thermal 1,537.5 3,136.13 regulated tariffs Energy and free prices

TOTAL for 26,115.9 77,051.6 the RusHydro Holding

Note: * Excluding JSC RAO UES of the East, JSC Pavlodolskaya HPP, JSC KamGEK ** Including JSC Geotherm, branch of JSC Kolymaenergo – Kolyma HPP, CJSC MEC, JSC Pauzhetskaya GeoPP

7 RusHydroRusHydro Holding Holding RusHydroRusHydro Group’s Group’s corporate corporate 20112011 sustainabilitysustainability and and social social responsibilityresponsibility report report

GEOGRAPHY Kislogubskaya Tidal PP Egvenkinotskaya TPP 34 MW Chaunskaya CHPP 34.5 MW

Anadyr CHPP 56 MW

Anadyrskaya Gas Engine CHPP 29.65 MW Lenhydroproject Kolyma

Vedeneyev VNIIG ST. PETERSBURG

Lena

Zagorskaya PSHPP 1200 MW

Kolyma

Zagorskaya PSHPP-2 Kolyma 840 MW Cascade of Verkhnevolzhskiye HPPs 466.6 MW Labytnangi Mobile PP 73 MW NIIES Mosoblhydroproject Yenisey Ust-Srednekanskaya HPP 570 MW MOSCOW Ob Urengoy Mobile PP 72 MW Hydroproject institute Ryazan retail energy company K Arkagalinskaya TPP 224 MW a m a Nizhegorodskaya HPP 520 MW Kyzym Mobile PP 72 MW Lena Kolymskaya HPP 900 MW Chuvash retail energy company Cheboksarskaya HPP 1370 MW Tolmachyovskiye HPPs 45.2 MW Magadanskaya CHPP 96 MW Kamskaya HPP 522 MW Ob Yakutskaya TPP 320 MW Zhigulevskaya HPP 2341.5 MW Votkinskaya HPP 1020 MW Cascade of Viluysky HPPs 680 MW Verkhne-Mutnovskaya GeoPP 12 MW Kamchatskiye CHPPs 406.8 MW

Saratovskaya HPP 1360 MW Bashkortostan retail energy company Yakutskaya TPP-2 170 MW Mutnovskaya GeoPP-1 50 MW Ob Yenisey Volga Mirninskaya TPP 72 MW Volzhskaya HPP 2592.5 MW Lena Pauzhetskaya GeoPP 12+2.5 MW Cascade of Kubanskiye HPPs 476.6 MW Kalmykskaya WPP

Zelenchugskaya Volga PSHPP 140 MW Karachaevo-Cherkessian Branch, HPP 160.6 MW Lena Kabardino-Balkarian Angara Boguchanskaya HPP 3000 MW Chulmanskaya CHPP 48 MW Nikolaevskaya CHPP 130.6 MW Branch 155.5 MW HPP of the Northern Ossetian Branch 76.9 MW Novosibirskaya HPP 455 MW Yenisey Nerunginskya TPP 570 MW Zeya Komsomolskiye CHPPs (1,2) 265.5 MW ARMENIA Zaramagsky Dagestan Branch 1381.8 MW n HPPs 15+342 MW a Sakhalinskaya TPP 252 MW d Amurskaya CHPP 285 MW z l. Sevan Zeyskaya HPP 1330 MW

a Cotsatlinskaya HPP 100 MW R

Yenisey Komsomolskaya CHPP-3 360 MW Irganayskaya HPP 400 MW Krasnoyarskenergosbyt Amur Zeya Sevan-Razdan Cascade 561 MW Angara Ob Lena Bureya SovgavanskayaAmur CHPP 120 MW Byreyskaya HPP 2010 MW Neporozhniy Sayano-Shushensky l. Baikal Yuzhno-Sakhalinskaya CHPP-1 225 MW Branch 6721 MW Nizhne-Bureyskaya HPP 320 MW Zeya Blagoveshenskaya CHPP 280 MW Maya TPP 92.85 MW Amur Yuzhno-Sakhalinskaya Raychikhiskaya TPP 102 MW CHPP-1 5th power unit-1 91 MW Khabarovskiye CHPPs 1155 MW

OPERATING HPP TIDAL PPS Primorskaya TPP 1467 MW

OPERATING HPPS WIND PPS UNDER RENOVATION Artyomovskaya CHPP 400 MW

Far-Eastern Energy Company Partizanskaya TPP 203 MW OPERATING HPPS RETAIL COMPANIES IN PROGRESS GTU-CHPP on the base of Vladivostok Vladivostok CHPP-2 497 MW CHPP-2 and Central Steam-Water Boiler Plant RESEARCH AND GEOPP DESIGN ORGANIZATIONS 8 HPPS UNDER CONSTRUCTION THENMAL PPS UNDER CONSTRUCTION

THENMAL PPS GEOGRAPHY Kislogubskaya Tidal PP Egvenkinotskaya TPP 34 MW Chaunskaya CHPP 34.5 MW

Anadyr CHPP 56 MW

Anadyrskaya Gas Engine CHPP 29.65 MW Lenhydroproject Kolyma

Vedeneyev VNIIG ST. PETERSBURG

Lena

Zagorskaya PSHPP 1200 MW

Kolyma

Zagorskaya PSHPP-2 Kolyma 840 MW Cascade of Verkhnevolzhskiye HPPs 466.6 MW Labytnangi Mobile PP 73 MW NIIES Mosoblhydroproject Yenisey Ust-Srednekanskaya HPP 570 MW MOSCOW Ob Urengoy Mobile PP 72 MW Hydroproject institute Ryazan retail energy company K Arkagalinskaya TPP 224 MW a m a Nizhegorodskaya HPP 520 MW Kyzym Mobile PP 72 MW Lena Kolymskaya HPP 900 MW Chuvash retail energy company Cheboksarskaya HPP 1370 MW Tolmachyovskiye HPPs 45.2 MW Magadanskaya CHPP 96 MW Kamskaya HPP 522 MW Ob Yakutskaya TPP 320 MW Zhigulevskaya HPP 2341.5 MW Votkinskaya HPP 1020 MW Cascade of Viluysky HPPs 680 MW Verkhne-Mutnovskaya GeoPP 12 MW Kamchatskiye CHPPs 406.8 MW

Saratovskaya HPP 1360 MW Bashkortostan retail energy company Yakutskaya TPP-2 170 MW Mutnovskaya GeoPP-1 50 MW Ob Yenisey Volga Mirninskaya TPP 72 MW Volzhskaya HPP 2592.5 MW Lena Pauzhetskaya GeoPP 12+2.5 MW Cascade of Kubanskiye HPPs 476.6 MW Kalmykskaya WPP

Zelenchugskaya Volga PSHPP 140 MW Karachaevo-Cherkessian Branch, HPP 160.6 MW Lena Kabardino-Balkarian Angara Boguchanskaya HPP 3000 MW Chulmanskaya CHPP 48 MW Nikolaevskaya CHPP 130.6 MW Branch 155.5 MW HPP of the Northern Ossetian Branch 76.9 MW Novosibirskaya HPP 455 MW Yenisey Nerunginskya TPP 570 MW Zeya Komsomolskiye CHPPs (1,2) 265.5 MW ARMENIA Zaramagsky Dagestan Branch 1381.8 MW n HPPs 15+342 MW a Sakhalinskaya TPP 252 MW d Amurskaya CHPP 285 MW z l. Sevan Zeyskaya HPP 1330 MW

a Cotsatlinskaya HPP 100 MW R

Yenisey Komsomolskaya CHPP-3 360 MW Irganayskaya HPP 400 MW Krasnoyarskenergosbyt Amur Zeya Sevan-Razdan Cascade 561 MW Angara Ob Lena Bureya SovgavanskayaAmur CHPP 120 MW Byreyskaya HPP 2010 MW Neporozhniy Sayano-Shushensky l. Baikal Yuzhno-Sakhalinskaya CHPP-1 225 MW Branch 6721 MW Nizhne-Bureyskaya HPP 320 MW Zeya Blagoveshenskaya CHPP 280 MW Maya TPP 92.85 MW Amur Yuzhno-Sakhalinskaya Raychikhiskaya TPP 102 MW CHPP-1 5th power unit-1 91 MW Khabarovskiye CHPPs 1155 MW

OPERATING HPP TIDAL PPS Primorskaya TPP 1467 MW

OPERATING HPPS WIND PPS UNDER RENOVATION Artyomovskaya CHPP 400 MW

Far-Eastern Energy Company Partizanskaya TPP 203 MW OPERATING HPPS RETAIL COMPANIES IN PROGRESS GTU-CHPP on the base of Vladivostok Vladivostok CHPP-2 497 MW CHPP-2 and Central Steam-Water Boiler Plant RESEARCH AND GEOPP DESIGN ORGANIZATIONS

HPPS UNDER CONSTRUCTION THENMAL PPS UNDER CONSTRUCTION

THENMAL PPS RusHydro Holding RusHydro Group’s corporate 2011 sustainability and social responsibility report

RusHydro Holding

JSC Vedeneyev VNIIG JSC SSGER (100%) JSC MC Hydro OGC (100%) JSC SHPP of Dagestan (100%) (100%)

JSC NIIES JSC RAO Energy Systems of East (69,28%) JSC REMIC (100%) share of registered charter capital LLC SHPP KCR (100%) (100%) in compliance with the Charter

JSC Lengydroproject JSC ESC RusHydro JSC Turboremont VCC (100%) LLC Fiagdonskaya (100%) (100%) (100%- 1 share)

JSC ESCO UES LLC Verkhnebalkarskaya SHPP JSC Hyroremont VCC (100%) JSC Yuzhno-yakutsky HEG (100%) (100%) (100%)

JSC Renewable Energy JSC Zamaragskye HPPs (98,35%) JSC Electroremont VCC (100%) Engineering Center (100%) JSC Small HPPs of Altay (100%)

JSC Nijne-Zeyskaya HPP JSC HydroEnergeneering Siberia JSC Leningradskaya PSHPP (100%) JSC Zagorskaya PSHPP-2 (100%) (100%) (100%)

JSC Nijne-Bureyskaya HPP LLC Energy Index HydroOGC JSC Geoterm (92,79%) JSC Boguchnskaya HPP (2,89%) (100%) (0,1%)

JSC Nijne-Kureyskaya HPP JSC Kolymaenergo (98,76%) JSC SS ATC (100%) JSC SEC (17,77%) (100%)

JSC Dalnevostochnaya WPP JSC Krasnoyarskaya HPP (0,117%) JSC SC SSHPP (100%) JSC Trust Hydromontazh (33,54%) (100%)

JSC Verkhane-Mutnovskaya JSC Ust-Srednekanskaya HPP JSC UEMC (20,6%) JSC DEC (1,04%) GeoPP (48,04%) (41,48%)

JSC Karachayevo-Cherckesskaya HGC JSC Sulaksky HydroCascade (100%) JSC Zharki (25% + 1 share) JSC Hydroinvest (100%) (100%)

LLC IT Energy Service JSC Malaya Dmitrovka (100%) JSC INTER RAO UES (2,09%) JSC ChirkeyGEStroy (75%-1share) (19,99%)

RUSHYDRO JSC Yakutskenergo (29,8%) LLC Hydroservice (100%) “HYDROOGK POWER COMPANY LIMITED” INTERNATIONAL B.V. (100%) (100%) JSC Pavlodolskaya HPP (100%) JSC Technopark Rumyantsevo (1 share) RUSSUNHydro limited (50%) “HYDROOGK ALUMINIUM COMPANY LIMITED” JSC Construction Customer JSC KamHEC (96,58%) JSC GVC Energetici (42,53%) (100%) of Boguchanskaya HPP (49%)

JSC Construction Contractor JSC Irkutskenergo (0,01%) of Boguchansky Aluminum Plant (49%) Repairs Generation Construction Supply JSC Construction Contractor JSC Construction Customer of Boguchinskaya HPP (51%) Construction Institute Management Company Non-Core of Boguchansky Aluminum Plant (51%)

10 The Company in 2011 RusHydro Group’s corporate 1.0 sustainability and social responsibility report

RusHydro Holding

JSC Vedeneyev VNIIG JSC SSGER (100%) JSC MC Hydro OGC (100%) JSC SHPP of Dagestan (100%) (100%)

JSC NIIES JSC RAO Energy Systems of East (69,28%) JSC REMIC (100%) share of registered charter capital LLC SHPP KCR (100%) (100%) in compliance with the Charter

JSC Lengydroproject JSC ESC RusHydro JSC Turboremont VCC (100%) LLC Fiagdonskaya (100%) (100%) (100%- 1 share)

JSC ESCO UES LLC Verkhnebalkarskaya SHPP JSC Hyroremont VCC (100%) JSC Yuzhno-yakutsky HEG (100%) (100%) (100%)

JSC Renewable Energy JSC Zamaragskye HPPs (98,35%) JSC Electroremont VCC (100%) Engineering Center (100%) JSC Small HPPs of Altay (100%)

JSC Nijne-Zeyskaya HPP JSC HydroEnergeneering Siberia JSC Leningradskaya PSHPP (100%) JSC Zagorskaya PSHPP-2 (100%) (100%) (100%)

JSC Nijne-Bureyskaya HPP LLC Energy Index HydroOGC JSC Geoterm (92,79%) JSC Boguchnskaya HPP (2,89%) (100%) (0,1%)

JSC Nijne-Kureyskaya HPP JSC Kolymaenergo (98,76%) JSC SS ATC (100%) JSC SEC (17,77%) (100%)

JSC Dalnevostochnaya WPP JSC Krasnoyarskaya HPP (0,117%) JSC SC SSHPP (100%) JSC Trust Hydromontazh (33,54%) (100%)

JSC Verkhane-Mutnovskaya JSC Ust-Srednekanskaya HPP JSC UEMC (20,6%) JSC DEC (1,04%) GeoPP (48,04%) (41,48%)

JSC Karachayevo-Cherckesskaya HGC JSC Sulaksky HydroCascade (100%) JSC Zharki (25% + 1 share) JSC Hydroinvest (100%) (100%)

LLC IT Energy Service JSC Malaya Dmitrovka (100%) JSC INTER RAO UES (2,09%) JSC ChirkeyGEStroy (75%-1share) (19,99%)

RUSHYDRO JSC Yakutskenergo (29,8%) LLC Hydroservice (100%) “HYDROOGK POWER COMPANY LIMITED” INTERNATIONAL B.V. (100%) (100%) JSC Pavlodolskaya HPP (100%) JSC Technopark Rumyantsevo (1 share) RUSSUNHydro limited (50%) “HYDROOGK ALUMINIUM COMPANY LIMITED” JSC Construction Customer JSC KamHEC (96,58%) JSC GVC Energetici (42,53%) (100%) of Boguchanskaya HPP (49%)

JSC Construction Contractor JSC Irkutskenergo (0,01%) of Boguchansky Aluminum Plant (49%) Repairs Generation Construction Supply JSC Construction Contractor JSC Construction Customer of Boguchinskaya HPP (51%) Construction Institute Management Company Non-Core of Boguchansky Aluminum Plant (51%)

11 RusHydro Holding RusHydro Group’s corporate 2011 sustainability and social responsibility report

Key performance indicators of the RusHydro Holding in 2011

Generated 77,052 million kWh of electricity8

The net supply of electricity was 75,732 mln. kWh9

Profit – RUR 30,622 million10

36% of investments (RUR 34,092.03 million) were channeled to provide for the technical re-equipment and reconstruction of hydro-power objects

Emission abatement of greenhouse gases due to modernization and the repowering of energy objects11 was 50.047 thousand tons

Payroll staff12 is 11.3 thousand people

Costs for charitable and sponsorship activities – RUR 1,111 million13

8 Ex cluding JSC RAO UES of the East, JSC Pavlodolskaya HPP, and JSC KamGEK, because these assets were acquired in 2011 9 Ex cluding JSC RAO UES of the East, JSC Pavlodolskaya HPS and JSC KamGEK 10 The indicator refers to JSC RusHydro 11 In terms of CO2 12 See the limits of reporting in the section “About the Report and the Reporting Process” 13 Including costs approved by decisions of the Board of Directors (Minutes No. 126 as of 26.05.2011 and Minutes No. 127 as of 28.06.2011) Industry Context RusHydro Group’s corporate 1.0 and Strategy sustainability and social responsibility report

Industry Context and Strategy

The strategic objectives of the RusHydro The State Holding include: of and Prospects Providing for the safe and reliable for the Hydro-Power operation of the Company’s facilities Industry in Russia The Company, as a producer of electricity which society requires, recognizes its As of the beginning of 2012, the electrical social responsibility. Providing for the safe energy complex of the Unified Energy and reliable functioning of equipment and System of Russia (UES of Russia) includes waterworks for society and the environment more than 600 power plants with a total and taking into account the economic capacity exceeding 5 MW. The total installed feasibility of funds allocated to minimize capacity of the electric energy complex was risks and reduce potential damage is one of approximately 218 GW (and approximately the Company’s key strategic goals. 230 GW taking into account isolated power systems). Thermal power stations (TPS), Improving energy efficiency through the the share of which substantially exceeds the development of electricity production share of HPPs and NPPs (see the diagram from renewable energy sources (RES) below), dominate the power engineering The Company makes every effort to increase sector. the share of renewable energy sources In Russia, the total volume of consumption (RES) in the energy balance, working to and electricity generation is made up of take a leading position in Russia in using indicators of electricity consumption and renewable energy. This goal is achieved by generation by facilities located in the Unified commissioning new generation facilities, Energy System of Russia and facilities that as well as by increasing the consumption operate in isolated power systems15. In 2011, of “clean” energy produced at corporate these indicators increased slightly (just over facilities, all while increasing energy 1%); 1,040.4 billion kWh of electricity was efficiency. generated and electricity consumption was Increasing the Company’s value 1,021.1 billion kWh. The Company seeks to maximize its value The Energy Strategy of Russia for the period for the country, shareholders, society and till 2020 implies an increase in electricity employees14. consumption, including in connection with plans to accelerate the development of natural resources in Western and Eastern

14 More detailed information about the state of the industry, the 15 Taimyrskaya, Kamchatkaya, Sakhalinskaya, Magadanskaya, electricity and power market, and the Company’s strategy – see Chukotskaya and the power systems of central and northern the Annual Report Yakutia

13 RusHydro Holding RusHydro Group’s corporate 2011 sustainability and social responsibility report

The Installed Capacity Structure From the Russian Energy Strategy for the of Power Plants of UES of Russia period till 2020 by Type of Generation16 The strategic objectives of power sector development are: • Reliable energy supply to the economy and the country’s population; 10.6%

20.7% • Preserving the integrity and development of the Russian Unified Energy System and its integration with other power systems on the Eurasian continent; • Improving operational performance and ensuring the sustainable development of the electrical energy industry based on new advanced technologies; • Reducing the harmful environmental 68.8% impact and approaching European environmental standards. ТPSs HPPs NPPs The Russian Federation has significant hydro-power potential and the possibility

Source: according to EFA, Rosstat for further HPP development. Currently, the Russian electrical energy industry ranks fourth in the world based on installed Siberia, the Far East, the Northern European capacity and output. and Caspian Regions. Russia’s designed fuel-energy balance implies upgrading the electricity Advantages of the hydro-power indu­ production structure, including improving stry: the utilization of hydro-power industry • HPPs are a key element in ensuring the potential, primarily via the completion of system reliability of Russia’s Unified pre-existing objects. Energy System; It is also planned to increase the export of • The lack of a fuel component in electricity energy resources, while at the same time produced by the HPPs contributes unconditionally satisfying domestic needs. to reducing the cost dependence of electricity on changes in fossil fuel costs; • To produce electric power, the HPPs use renewable energy sources (RES) that contribute to global efforts in the fight to reduce greenhouse gas emissions.

16 D ata as of the beginning of 2011

14 Industry Context RusHydro Group’s corporate 1.0 and Strategy sustainability and social responsibility report

The State policy in renewable energy Global experience shows a trend toward sources (RES) for the period till 2030 the maximum development of hydro- implies adopting measures to support these potential, even in the presence of other directions and create favorable conditions energy resources. A striking example is for attracting investments. It was announced Norway, which has large reserves of natural that the planned performance of electricity gas. The electric energy industry is almost production based on renewable energy by entirely based on HPPs. Another example 2030 would be at least 80 – 100 billion kWh is Canada, which in many ways has similar per year. natural conditions to Russia. In Canada, HPPs provide more than 60% of electricity. Currently, the world’s hydro-power industry However, fundamental decisions, including is experiencing a genuine renaissance that those related to tariff policy, have not yet is associated with large-scale construction of been adopted; this hampers the actively a large number of large HPPs in developing developing industry sector. countries – China, India, Brazil, Ethiopia and others17.

The Electricity and Power Market “At the current consumption rate of 4.6 billion tons of standard fuel Currently, the Russian Federation has a per annum, all actual fossil fuel two-level (wholesale and retail) electricity reserves (including the dirtiest and power market. According to legislation, coal and the most dangerous all HPPs with installed capacity of more than uranium) will be ample to meet 25 MW sell electricity only on the wholesale mankind’s needs for 1,500 years. electricity and power market (WEPM). However, bear in mind that Almost all of RusHydro’s HPPs are WEPM all types of energy resources subjects. are used for other activities, such as chemistry, so that the real resource depletion term is Since January 1st, 2012, the wholesale much less. Utilizing water as a market has been 100% liberalized, so renewable energy source can the sales of electricity and power18 under increase civilization’s “lifetime” regulated agreements on the electrical rate roughly twice – saving 2.2 billion schedule are affected only with respect to tons of standard fuel. Now, there population and similar consumer groups, as is not another factor, which well as in terms of special categories also greatly affects human for guaranteeing suppliers, as development stability”. identified by the regulator19. This

17 Source: Kommersant-Annex Eternal Energy R. Khaziakhmetov, from 30.08.2011 Director for Technical Policy 18 at RusHydro For more information about the electricity and power markets refer to Appendix 3 19 Operating in the North Caucasus Republics, Tuva and Buryatia

15 RusHydro Holding RusHydro Group’s corporate 2011 sustainability and social responsibility report

measure ensures the availability of electricity Interconnection for vulnerable consumer groups. of the Company’s In the future, changes in the Rules of retail Strategy electricity and the power market: they affect with Sustainable the rules of trade on the retail market HPPs (PSPs) of retail generation and the rules of Development activity for guaranteeing suppliers. Objectives, Declared by the UN From January 1st, 2011, on the power market, there is a new model of competitive Sustainable development ideas are restricted capacity selection – the long-term capacity for the RusHydro Holding: the task of market (LTCM). From this year, under combating poverty and upgrading the quality regulated agreements, power is supplied of life of the world’s population declared only in volumes required to supply the by the United Nations involves expanding population and the associated consumer access to electricity and further advances in categories. Transferring to the LTCM, which technology to provide people with warmth, experts consider the main achievement of light and food. electrical energy industry reform, creates numerous benefits for market participants Taking into account the role of the electrical and consumers: guarantees payment to energy industry for life support systems and power suppliers during the construction every day human activity in the modern of new facilities, contributes to increased world, power supply reliability is a primary competition among suppliers; and ensures responsibility for companies operating in the the return of investment on construction and industry. new generation.

Share of the RusHydro Holding on the Market by Basic Products

Electricity Capacity

Year Consumption in the Generation of Installed capacity of Total installed capacity Russian Federation, the Holding, Share Russian power plants, of the Holding’s power Share million kWh million kWh MW plants, MW

2009 942,825 81,607 8.7% 211,846 25,402 12.0%

2010 988,961 72,002 7.3% 214,869 25,506 11.9%

2011 1,021,100 77,052 7.5% 218,146 26,116 12.0%

Sources: consumption figures in Russia – JSC SO UES, the Holding’s figures – RusHydro The Holding’s figures include branches of JSC RusHydro, the Kolymskaya HPP, JSC Geotherm, JSC Pauzhetskaya GeoPP and JSC IEC

16 Industry Context RusHydro Group’s corporate 1.0 and Strategy sustainability and social responsibility report

Sustainable development and the Implementing efficient management of the hydro- the Company’s Strategy power industry is one of the tasks which are set today by the global community; and Sustainable and it is reflected in the RusHydro Development Objectives Holding’s Strategy. The Strategy is implemented through the decomposition of corporate strategic Formulating and following global regulations objectives across all management levels. and standards in the field of hydro-power Strategy implementation success is engineering and the operation of energy determined by the degree of achieving target facilities is now a global trend. RusHydro’s strategic indicators. production program and the comprehensive The main instruments to implement the modernization program addressed these Strategy are Priorities of the Company’s objectives. development for the current year (herei­ The Holding’s strategy plays an important nafter – Priorities) and the strategic role in upgrading energy efficiency via the implementation plan. Both documents refer development of electricity production from to the annual strategic management cycle. renewable energy sources. The main mechanisms for achieving In recent years, the international community sustainable development are: has actively discussed the conservation of • The Investment Program; the planet’s freshwater and the rational use of water resources. Similar objectives were • The Innovative Development Program; set in the Company’s Environmental Policy • The corporate risk management system. and Innovative Development Program.

The management of aspects of sustainable An important role is given to interactions development carried out in the Holding is with stakeholders. With a number of key distributed within core business processes. stakeholder groups (RES market participants, The interaction between RusHydro’s branches dedicated/industry organizations, regulatory and central office (including defining roles bodies, expert and scientific communities), and responsibilities) is governed by the the Company cooperates on a regular basis, Provisions of the branches and the Regulation participating in the following initiatives and on the allocation of functions between organizations: the executive apparatus and branches. • In the activity of the Russian Technology The general principle is as follows: the Platforms; development strategy, establishing plans, the definition of the methods and standards • Improving industry standards; is within the executive apparatus domain and • Working with international organizations implementation of the plans in accordance and in joint projects. with standards, regulations and provisions is within the domain of the branches.

17 RusHydro Holding RusHydro Group’s corporate 2011 sustainability and social responsibility report

The Investment Program RusHydro’s investment program, in terms of new construction, is one of the largest in The investment programs approved on the Russian energy sector. Facilities under an annual basis are a list of investment construction are an economic development projects for which capital investments are factor in Siberia, the Far East and the South made. Funded programs are aimed, inter of Russia. alia, to increase the reliability and safety of generating facilities, as well as to develop the economic potential of Russian regions. The Innovative Development Program In 2011, the actual amount of program financing was RUR 94.8 billion20. The task of hydro-generation technological development is the need to invest in Many concerned parties are involved in the groundbreaking research and development. decision-making process on fulfilling the By innovation (introduction), the Company investment program. The project is formed means the end result of innovation based on proposals of Management Board implemented in a new or improved form: members who are directional curators of investment projects. Projects are ranked • The product being sold on the market; based on economic efficiency and aggregate • Technical processes; risks. When ranking, the direct orders of • Management processes; the Russian executive power requiring the implementation of certain projects are taken • Information and telecommunication into account. tech­ ­no­­logy.

Characteristics of Objects Under Construction*

Capacity, Facilities Economic role Region MW

The BEMA Project (the Boguchansk The Angara River. Boguchanskaya Energy and Metallurgical 3000 The Krasnoyarsk HPP Association): the aluminum, pulp Territory and paper industry

Bureya HPP 2010 The Amur cluster: mining and The Bureya River, smelting, cement, oil and gas Amur Region Lower Bureya industry 320 HPP

* Еxcluding data on the investment program of RAO ES of the East.

20 Ex cluding data on the investment program of RAO ES of the East. More information on financing and implementing the investment program in general, see the 2011 Annual Report.

18 Industry Context RusHydro Group’s corporate 1.0 and Strategy sustainability and social responsibility report

Capacity, Facilities Economic role Region MW

Ust- Gold mining, the development of The Kolyma Srednekanskaya 570 the mineral resource base, the River, the HPP mining industry Magadan Region

Irganayskaya 400 HPP Koisu Avar River, Dagestan Gotsatlinskaya 100 HPP

The Ardon River, Zaramagskie HPP 352 Power supply of Russia’s southern Republic of North regions Ossetia-Alania

The Cherkesk Region of the Kabardino- Zaragizhskaya 28.8 Balkaria Republic, SHP the outlet canal Aushegerskaya HPP

The aul Kumysh Upgrading the reliability of power – Village. supply in the energy system Zelenchukskaya Pravokubansky, 140 of the North Caucasus; HPP – PSP The Karachay- alignment of the daily schedule Cherkess of runoff Kuban Republic

Alignment of the daily schedule The Cunha River, Zagorsk PSPP-2 840 of heterogeneity in loads (the the Moscow regulation of electric modes) Region

Development and production of major TPP constructions in Experimental- a floating version as a prototype Long Bay in the industrial North for powerful TPPs. Barents Sea, TPP, including 12 Getting and accumulating the Murmansk research and experience in the design of hydro- Region development power structures in the marine environment of the northern regions

19 RusHydro Holding RusHydro Group’s corporate 2011 sustainability and social responsibility report

Planned Financing for RusHydro`s The agent for the execution of the Innovative Innovative Development Program, Development Program is the research RUR mln. and design complex of RusHydro, which provides for the 100% implementation of the Company’s orders performed at the 6,000 trust scientific and technical fund expense. 5,120 5,000 4,837 In 2010, re-organization of the research and design complex of RusHydro was started: 4,000 4,075 3,505 the a new development concept of research 3,245 3,000 institutes owned by the Company was 2,000 formulated, new indicators were developed,

1,000 stimulating, in particular, the management of research and designed institutes to upgrade 0 the effectiveness of innovative activity. 2011 2012 2013 2014 2015

Source: RusHydro “The construction of HPPs has always been an impetus for the economic and industrial The program21 is implemented in two development of an area, stages and includes three planning horizons site improvements and (by implementation term). In 2011, the the construction of new cities. Board of Directors approved the amount of HPPs created regional industrial financing for the program till 2015. clusters, combining the In 2011, seven new projects were launched extraction and processing under the program. Since the program’s of natural resources, start-up, 15 projects, totaling more transportation, tourism than RUR 2.5 billion, have gone through and services”.

corporate procedures and progressed to the Yevgeny Dod, procurement stage. Chairman of RusHydro’s Management Board

Dynamics of R&D costs, RUR mln.

2009 2010 201122

Costs Revenue %* Costs Revenue % Costs Revenue %

60.65 78,995.0 0.08 19.52 88,979.5 0.02 2,482.5 99,236 2.5

Source: RusHydro Note: *% – the share of costs in revenue 21 For more information on the Innovative Development Program, see the 2011 Annual Report 22 2011 revenues including SDCs involved in the implementation of the program

20 Industry Context RusHydro Group’s corporate 1.0 and Strategy sustainability and social responsibility report

Evaluation of the Implementation of Key Performance Indicators in 2011

The actual The actual value Value, scheduled value at the end at the end of The Program’s KPIs for the reporting of the previous the reporting year reporting year year

Percent of revenue channelled to finance innovative development at 0% 3% 3.9% its own expense

Percent of revenue spent for financing 0.02% 2% 2.5% R&D at its own expense

The share of financing of projects implemented with the participation of scientific and educational institutions 0% 10% 11% in the total financing of nnovative development23

The share of innovative development projects implemented with the 0% 25% 31% participation of small- and medium- sized companies

The number of Russian patents placed on the Company’s balance sheet for 11 units 20 units 35 units the year

The number of international patents, placed on the Company’s balance 0 units 3 units 1 unit sheet for the year

Labor productivity (number 21.28 person/ 21 person/ 17 person/ of employees per 100 МВт installed MW MW MW capacity)

Source: RusHydro

23 Including sub-contracting

21 RusHydro Holding RusHydro Group’s corporate 2011 sustainability and social responsibility report

Priorities for the Development of Science, Processes and Technology

Technology area Innovative technological directions

• Diagnostics and monitoring Reliability and • Reducing the impact of human factors safety • Extending the life of objects

• Electric energy generation technology from renewable New generation sources (wind, sun, earth, waves and currents)

• Upgrading generation technologies Energy • Reducing the loss of electricity, heat, water efficiency • Energy recovery

• Reducing harmful anthropogenic impacts on nature Ecology • Reclaiming and restoring the ecosphere

• Water resource management • Water storage Water • Water treatment • Efficient use of water resources

• Design methods Materials and • Development of new materials and methods for their technologies for application construction • New technology for facilities` construction

Materials and • New construction materials technologies for • Materials Processing Technology, leading to more generation efficient generation

• Knowledge management systems • Technological Process Control Systems IT projects • System of dimensional modeling and the management of objects

Personnel • Innovative personnel training, from schools development

Business • Corporate governance processes • Business Process Management

22 Industry Context RusHydro Group’s corporate 1.0 and Strategy sustainability and social responsibility report

Risk Management approved requirements, local regulations are approved and centralized control over Risk management is an important component their execution is exercised. The Company’s of corporate governance and one of the representatives take part in important key factors in implementing sustainable events and round tables to change laws that development principles. The Company has are carried out by legislative, executive and established risk management system24, judicial authorities, public associations and aimed at the timely adaptation of RusHydro other concerned parties. Holding to changes in the internal and external environment. All risks are under the careful attention of the Risk management is embedded in the Company’s management team, measures strategic management process and the to control them control are formulated as personnel motivation system. Qualitative specific tasks and activities and clear and and quantitative methods of risk assessment measurable criteria for their execution are are introduced; modern methods of formulated. The tasks and activities for assessing possible losses based on statistics, managing strategic risks are included in the engineering calculations and financial Plan for Implementing the Strategy. mathematics are used. The database for different types of risks is formed; the The Risk Management division constantly strategic risks register is updated every year. interacts with the staff of the Central office The RusHydro Holding seeks to comply with and corporate branches. Employees have international and national risk management the opportunity to upgrade their skills in risk standards (for example, COSO ERM 2004 management, participating in seminars and and ISO 31000). In the reporting year, conferences both in Russia and abroad. a new version of the Internal Control and The Holding constantly develops its risk Risk Management Policy was approved. management system, improving the quality An independent evaluation of the quality of of managerial information about the risk the Company’s risk management system has profile and actions to minimize it, building a been conducted annually. Representatives culture of risk-oriented management, when of independent organizations conduct decision-making and the management of enterprise surveys and based on its results, current operational processes are carried out measures are approved to address concerns. in view of possible consequences. For the technological support of the risk In 2011, the Company developed a corpo­ management process, an automated system rate standard Methods for Analyzing of internal control and management has Scenarios and the Risks of Accidents and been implemented. Catastrophic Situations at Hydro-power Plants and Developing Measures to Prevent The Company monitors legislative changes and Eliminate Them. Key risk indicators and supervises the implementation of laws (KRIs), including for risks associated with and regulations in all business processes. The the injuries of personnel, system events, Legal department produces regular bulletins on the subject. To implement the newly involving the disconnection of consumers and social consequences and environmental risks

24 The full risk management system is presented in the Annual were developed. The method of evaluating Report. Risks which are specific to activities in the sustainable and optimizing operational risks of the development field are presented in the relevant sections of the Report. production program, including the risks

23 RusHydro Holding RusHydro Group’s corporate 2011 sustainability and social responsibility report

of environmental damage and reputation, Platform “Advanced technologies of renewable has been successfully tested. A number energy” (hereinafter – the Plat­form). The of catastrophic risk surveys for HPPs were result of Platform activity in the mid-term conducted; measures for the impact on risks will be new research, design, equipment were introduced. Assessments and public manufacturing, engineering, construction hearings on the social and environmental and operation of generating facilities using risks of investment projects were conducted. the renewable energy source industry. The Platform involves 43 organizations. In some branches, including the Sayano- Shushenskaya HPP, in 2011 the survey In 2011, institutionalization of the Platform was conducted by representatives of LLC began: work and governing bodies were Insurance Brokerage Willis CIS, Suregrove organized, a research and development Limited, as well as by representatives of plan was developed and a pilot project to international insurance market companies. develop a new type of wind-power plant was launched25.

Participation in Technology Platforms Future aspirations are not only in the Hol­ In addition, RusHydro participates in four ding’s corporate programs, but also in the TP RF: collective initiatives in which the Company is • Small Distributed Power Generation involved, interacting with concerned parties (Coordinator – CJSC Agency for Fore­ on a regular basis. casting Balances in the Power Sector); The technology platforms of the Russian • Environmental Development Technologies Federation (TP RF) are communication (Coordinator – The Russian State Hydro- platforms, where a single vision of the future meteorological University); development of strategically important sectors of the national economy is formed • Oceanic development (Coordinator – and priority technology projects are Group Marine Information Systems Agat); discussed and implemented. As part of TP • Smart Energy System of Russia (Coor­ RF efforts in Russia, educational institutions, dinator – FSI Russian Energy Agency). financial institutions, science and businesses are combined to develop, produce and use Participation in their work will contribute to innovative products. achieving the Company’s strategic goals. The creation of the TP RF was initiated by the Russian Government Commission on High Technical Regulation Technologies and Innovations. As a result of communication, it should start up innovative An important area of interaction with projects by the activity line of the TP, that is concerned parties is joint work with market profitable for both participants (they receive participants on industry standards. money for project implementation) and the country (the development of strategically 25 More detailed information about the activities of the Platform important economic sectors). can be found on RusHydro’s web site in the section Technology Platform «Advanced technologies for renewable power In 2010, RusHydro acted as the founder and generation”: http://rushydro.ru/company/energy_efficiency/emerging_ became the coordinator of the Technology technologies

24 Industry Context RusHydro Group’s corporate 1.0 and Strategy sustainability and social responsibility report

The RusHydro Holding together with and technical information on advanced other companies (SO UES and Federal development, used in the hydro-power Grid Company) aim efforts at developing industry, has been formed. The systematic industry standards, in which requirements collection of such information helps to make for operating the Unified Energy System as a managerial decisions for the development single process system should be determined. of RusHydro’s technical system, taking into account the current state of scientific and The main new normative space formation technological progress. The timely updating burden devolves on to the RusHydro Holding. of RusHydro’s technical and environmental The standardization program has been used policies, based on advanced solutions, can by the Company for several years. In 2011– 2012, 45 standards will be developed. upgrade the reliability and safety of existing facilities and save time and resources when implementing projects. Participation in International In 2011, implementation of the project to Organizations and Joint Projects translate the Hydro-power Sustainability RusHydro participates in the International Assessment Protocol, in conjunction with Commission on Large Dams (ICOLD), the International Hydro-power Association which is an international non-governmental (IHA) and the World Wildlife Fund (WWF), organization that brings together scientists, continued. designers and hydro-power plant builders There was a re-positioning of RusHydro (hereinafter – the Commission). The organi­ in the international hydro-power sector. za­tion defines international rules and RusHydro is among the global industry requirements for the design, construction leaders which are “platinum sponsors” of and operation of large dams. the IHA, actively involved in implementing The Company’s activity in the Commission strategy on priority support for hydro-power is conducted via the Russian National that meets sustainable development criteria. Committee on Large Dams (RUSCOLD). There has been a growth in the number of Representatives of the RusHydro Holding supporters for this strategy: in 2011, the Vice on a continuing basis participate in various President for sustainable development of the technical committees, such as: “Dam World Bank Inger Andersen expressed the Safety,” “Dams for the hydro-power sector,” need to end the period of artificial barriers to “Design calculations for dams” and “Concrete hydro-engineering; the Inter-governmental for dams.” Commission meetings are held Panel on Climate Change recognized hydro- annually, as a part of this, representatives power (without an artificial distinction of the Company deliver reports, participate between “small” and “large”) as the largest in the work of the Executive Committee and existing renewable energy source, providing Symposium, hydro-engineering exhibitions for 16% of world electricity production. and technical tours during the course of RusHydro’s participation in the IHA project which they visit hydro-power industry to introduce the “Assessment procedure for facilities in the host country. the conformity of hydro-power projects with As a result of the interaction and based sustainable development criteria” will launch on foreign experience in the design, the use of international decision-making construction, operation and reconstruction of instruments that extend the scope of new HPPs, the management bulletin on scientific hydro-engineering.

25 RusHydro Holding RusHydro Group’s corporate 2011 sustainability and social responsibility report

Сorporate Governance

An important role in implementing the As of December 31st, 2011, the Company’s Company’s strategy, including sustainable charter capital was RUR 290,302,702,379, development issues, belongs to the corporate divided into 290,302,702,379 ordinary governance system. For the Company, registered non-documentary shares with a corporate governance means a system of par value of 1 ruble per share. relations between shareholders/investors and management aimed at effective management, control over the achievement of strategic objectives and risk reduction. Highest Management Corporate governance is carried out in ­accor­ Bodies dance with Russian legislative requirements, the Corporate Conduct Code, the FCSM The Board of Directors ensures adherence decision from 04.04.2002 No 421/p and to policies and the efficient use of assets requirements of the Stock Exchanges and the financial resources of the Company. on which the Company’s securities are In the reporting period, the Board of circulated. The corporate governance system Directors consisted of 13 members, six is based on principles enshrined in RusHydro’s of whom are independent directors. The Corporate Governance Code (Approved by Deputy Chairman of the Board of Directors the Company’s Board of Directors April 2nd, is V.I. Danilov-Danilyan, a renowned expert 2010 (Minutes #94)). in the sustainable development field and

List of Persons Holding Shares of the Charter Capital of RusHydro26 (without disclosing nominees)

The Russian Federation on behalf of the Federal Agency for 60.3819% State Property Management

ING BANK (EURASIA) CJSC (Closed Joint Stock Company) 13.0221%

CJSC DCC 7.5986%

Non-bank credit organization CJSC National Settlement 9.0463% Depository

Other individuals and legal entities 9.951%

TOTAL 100%

26 Due to the fact that RusHydro is in the process of placing additional shares, details included outstanding shares 26 Сorporate Governance RusHydro Group’s corporate 1.0 sustainability and social responsibility report

the Director of the Water Problems Institute by the Company’s Board of Directors, the at the Russian Academy of Sciences. Chairman of the Management Board and Members of the Management Board, as Members of the Board of Directors are well as individual indicators (financial and actively involved in managing the Company: operational). in 2011, 26 meetings of the Board of Directors were held, two of them in the form of joint attendance. The number of meetings of the Board of Directors increased during the Improving Corporate second half of the year. At meetings of the Governance Quality Board of Directors issues that are relevant to sustainable development, including: power Providing for greater transparency and supply insurance, charitable projects and greater responsibility of the management measures to support operational areas were to shareholders and other concerned parties discussed. is one of the important tasks of corporate governance. During the reporting period, The remuneration system for the Board of measures aimed at upgrading corporate Directors was approved in 2010 and detailed governance, in line with international in the 2010 Annual Report. Remuneration standards and norms, were taken. is determined by the formula, but can not exceed one million rubles. Preventing Illegal Activities The responsibility for implementing the Hol­ding’s strategy is assigned to top ma­ In 2011, a full-time Confidence Line, opera­ nagement,­ which is liable jointly and ted by RusHydro’s internal control and risk severally for the results. Remuneration management unit, was introduced. The to the Chairman of the Management Company’s employees and contractors may Board and members of the Management apply to the Confidence Line if they suspect Board depends on implementation of key illegal activities on the part of management performance indicators (KPIs) established or other employees.

Remuneration to Members of the Highest Management Bodies, RUR thousand

Top management bodies 2011 2010 2009

The main managerial staff (members of the Board of Directors, members of the 1,018,515.97 147,550.42 101,828.91 Management Board, the Chairman of the Management Board)

Members of the Audit Commission not paid27 249.44 421.43

27 R emuneration and compensation was not charged or paid to members of the Company’s Audit Commission who are limited or prohibited by Russian Federal Law from receiving payments from commercial organizations 27 RusHydro Holding RusHydro Group’s corporate 2011 sustainability and social responsibility report

For the year, approximately 60 complaints include: Regulations on insider information were received and 30% of these were (Approved by the Company’s Board of consistent with the objective of the Con­ Directors August 1st, 2011 (Minutes #129)), fi­dence Line. Complaints were handled in as well as the Order On the Implementation accordance with internal regulations and of Regulations on Insider Information for dealt with in strict confidentiality; inspections RusHydro28. were carried out and findings were presented In 2011, the Regulations on Insider Infor­ to management for further actions. mation and the List of Insider Information The Holding’s procurement policy was in its new version were approved. The reviewed and an item was added on disclosing documents were developed in accordance data with respect to the entire chain of with Russian Federal Law On Countering the owners, including beneficiaries (including misuse of insider information and market the ultimate ones) with confirmation by the manipulation29 and taking into account relevant documents. international practices, for example, the Rules of Disclosure and Transparency Beginning in 2012, preparation for a (Disclosure and Transparency Rules) for the comprehensive program to prevent illegal Financial Services Agency of Great Britain. activities by the Holding’s employees was begun. Under the program, the following The Regulations set limits. In particular, rules will be defined: insiders may not use information known • Acceptable standards of employee to them to carry out operations with the behavior; Company’s financial instruments; transfer such information or make recommendations • The procedure for resolving conflicts of to third parties, or compel or induce them interest; to purchase or sell financial instruments. • The procedure for employees’ reaction in Members of the Board of Directors, members case they are induced to carry out illegal of the Management Board, the Chairman of activities; the Management Board, members of the Audit Commission, the Company’s top managers • Measures to prevent abuse by officers and other persons are included in the list of and in the case of such situations – insiders. Notifications were addressed to all the procedure for investigating, taking persons included in the list of insiders. actions and resolving the effects. The officer, whose responsibilities include The Company plans to conduct an information monitoring compliance with Russian legislative campaign to raise awareness of ethical requirements on insider information and the standards and norms of acceptable behavior Company’s internal documents adopted in for employees. In the future, subsidiaries accordance with it, including the Provision and dependent companies will be draw into on insider information, was specified by an the scope of the program. Order of RusHydro. The quarterly report on implementing these requirements is

Insider Information

Procedures related to the use of insider 28 Entered into force 30.01.2012. The relevant sub-sections were created on the web site of the Company: http://www.rushydro. information are strictly defined by local ru/investors/disclosure/info_insiders normative acts of the Company. These 29 No . 224-FZ of 27.07.2010

28 Сorporate Governance RusHydro Group’s corporate 1.0 sustainability and social responsibility report

.submitted to the Audit Committee under the General Meeting of Shareholders. The the Board of Directors. The Committee, in amount of dividends may not exceed that its turn, shall submit an annual report to the recommended by the Board of Directors. The Company’s Board of Directors. General Meeting of Shareholders may decide not to pay dividends as well. RusHydro paid dividends to its shareholders Informing Shareholders and Investors in 2005, 2006, 2007 and 2011. All persons, The Company believes that its investors who were registered as shareholders of the and shareholders are extremely important Company as of the relevant date, received a concerned parties and pays considerable dividend in accordance with decisions of the attention to communicating with them. During General Meeting of Shareholders. the year, Holding representatives attended A dividend payment (following FY 2010 more than 20 road shows and conferences. results) was RUR 0.00860091 per share in Several visits to production facilities were 2011. organized for investors and analysts. Guided by the objective to meet investors’ needs for operational information, RusHydro Shareholders’ Right to Participate is moving to submitting IFRS financial in the Company Management statements on a quarterly basis. Shareholders that hold in aggregate at least In 2011, the Regulation on RusHydro’s 2% of the voting shares of RusHydro are Information Policy in its new version was entitled to propose any issues to the agenda approved by the Company’s Board of of the General Meeting of Shareholders Directors August 1st, 2011 (Minutes #129). and nominate candidates to the Board of Directors and the Audit Commission; the number of which cannot exceed the number Shareholders` Right to Share of members of the body. in Corporate Income Distributions In 2011, the shareholders nominated According to RusHydro’s Articles of Asso­ candidates for the management and control ciation, a resolution concerni ng the payment bodies, as well as proposed issues adopted of annual dividends, including the amount by the Board of Directors to include in the of the annual dividend and the payment agenda of the Annual General Meeting of form thereof for shares shall be adopted by Shareholders.

29 Ensuring the Reliability and Safety of Hydro-power 2.Facilities and Infrastructure

Reliability Control System

Supply Chain: Interacting with Equipment and Service Suppliers Ensuring the Reliability and Safety of Hydro-power 2.Facilities and Infrastructure

Reliability Control System

Supply Chain: Interacting with Equipment and Service Suppliers RusHydro Holding RusHydro Group’s corporate 2011 sustainability and social responsibility report

2. Ensuring the Reliability and Safety of Hydro-power Facilities and Infrastructure

One of the Holding’s key strategic objectives to the concept, ensuring reliability in the is to ensure reliable energy supply and the industry is based on a combination of the safe operation of equipment and hydro-power necessary requirements and mechanisms, structures for people and the environment. both economic and technological, as well as strengthening corporate responsibility. The reliability concept in the power sector Generating companies should be responsible

The concept of ensuring reliability in the for electricity production reliability, electrical power sector has been developed by and technological vitality and participation in RAO UES of Russia in 2005. According the modes` control.

ENSURING RELIABILITY IN THE POWER SECTOR

ECONOMIC MECHANISMS Industry-specific standards

Non-life MARKET CREATION insurance

Mutual response-bility Reliably of market Tariff System satisfying participants Differentiation Services Market demand

32 Ensuring the Reliability RusHydro Group’s corporate 2.0 and Safety sustainability and social responsibility report

Reliability of equipment, based on forecast energy Control System consumption in regions, the water content of rivers and the requirements of industry The main problem of Russia’s hydro- standards. The Program’s measures are power sector is the high depreciation of planned for the mid-term (6 years) and equipment (a few HPPs have equipment with long-term (15 years). depreciation of less than 25%). To identify and analyze insurance risks, RusHydro and its branches focus on surveys (independent technical reviews) mainstreaming reliable, accident-free are conducted at production assets; a key and safe operation of HPPs and upgrading risk indicators system (indicators) and limits operational efficiency. (check digits) are introduced, including monitoring the protection of objects in the Approaches to Control case of natural disasters. The approaches are used to ensure power In 2011, the Board of Directors approved supply reliability and the safety of equipment, a Comprehensive Modernization Program buildings and structures, enshrined in (CMP) for RusHydro’s generating objects RusHydro’s Technical Policy (put in to place for the 2012–2025 period. Its mission is in 201130). The Production Program, which to maintain the safety and reliability of includes several sub-programs, is the RusHydro’s generating objects in the long- instrument for implementing the Technical term. Program financing for the 2012–2025 Policy. period will be RUR 445.5 bln in forecast The Production Program is formed on the prices, while the 2012 to 2020 period, it is basis of assessing results of the state required to finance 86% of its value.

PRODUCTION PROGRAM

The Technical Upgrading The Repairs The Maintenance The Research and Plan Plan Program Rehabilitation (NIR) Program

Permanent Maintaining Performing Surveying and upgrading an operable state scheduled analyzing of worn of equipment maintenance the state and during its work of equipment, expired life service life for equipment surveying span equipment in turnaround and analyzing time the safety of hydro-power structures

30 Ma terials are published on the site http://www.rushydro.ru/company/safety/tech_policy 33 RusHydro Holding RusHydro Group’s corporate 2011 sustainability and social responsibility report

“We conducted a “critical” “Once again, I would like to analysis of the TPR program draw attention to a RusHydro for the period till 2020 with a program ... By 2020, at view to 2030, which identified” HPPs belonging to the bottlenecks”. Let me remind you Company, no hydro- that this program was developed power units will be at the peak of the global economic operating beyond crisis. The global environment their service life”.

certainly left its mark on the Sergey Shmatko, structure of technical solutions in Russian Minister of Energy the program. Therefore, the CMP has several key differences from TPR. First, it The TPR program aims at completely upgrading the The TPiR program is based on a comprehensive Holding’s generating objects as modernization program for generating objects single technological complexes, of the RusHydro Group for the 2012–2025 including machinery and period. equipment, which by the end of In 2010, the program was substantially TPR have spent their normative revised, financing amounts were re- operational life. The goal is to distributed and priorities were set. Investment ensure downtime and a minimal growth is explained by the appearance of an reduction in HPP generation. In additional opportunity to finance the program addition, the companies` common in the necessary amount due to consistent plant systems will be upgraded; liberalization of Russia’s electricity and power the main production processes market. will also be automated. Most of the funds are channeled to purchase Modernization plans will be hydro-turbine equipment, electrical developed with the involvement equipment, the creation of automated of general design engineers of process control systems and the creation of the energy companies. The CMP security system at the objects. provides numerous innovative In accordance with the comprehensive technical solutions. In developing modernization program for generating objects the program, the recommendations of the RusHydro Group for the 2012–2025 of the Government and period, the increase in installed capacity of the Parliamentary Committees and the existing objects, compared with 2011, will be RTN on the results of investigations 779 MW and the incremental increase in in to the accident at the electricity generation will be 1,375.6 Sayano-Shushenskaya HPP million kWh. were taken into account”. Key projects for the 2011 to 2013 B. Bogush, period include: modernization of member of RusHydro’s Management Board the Volga-Kama HPPs Cascade objects and generating facilities of the North Caucasus.

34 Ensuring the Reliability RusHydro Group’s corporate 2.0 and Safety sustainability and social responsibility report

Financing the Program

Units Indicator 2007 2008 2009 2010 2011 of measure

RusHydro billion 56.12 54.62 54.31 99.22 94.8 investment rubles

billion 7.6 8.7 8.6 18.6 34.1 rubles TPR % of 14% 16% 16% 19% 36% investments

Source: RusHydro

In 2011, major completed projects was approved. The interaction between the included: a new hydro-power unit with executive apparatus, the technical services increased capacity measures (+10 MW) of the branches and the general designers was put into operation at the Uglich HPP; and research organizations for the R & D capacity measures at the Volga HPP and program was also organized; as a result of the Zhigulevskaya HPP increased; the this, R & D volume increased more than 10 Irganayskaya HPP was restored; and times compared with 2010. reconstruction of the generating unit at In 2012, the Company plans to reconstruct the Saratov HPP was completed (the power and modernize equipment (hydro-turbines, transformer was replaced). hydro-power generators, etc.) at the Volga In 2011, numerous decisions aimed at further HPP, the Saratovskaya HPP, the Miatlynskaya upgrading reliability control were made. The HPP, the Cheboksary HPP, the Mainskaya Regulations on the Design Organization HPP, the Votkinskaya HPP, the Zhigulevskaya (the general designer of objects for the HPP, the Zeya HPP, the Novosibirskaya HPP comprehensive modernization of RusHydro) and the Kuban HPP Cascade.

Implementation of the Program, financing, RUR mln.

30,000.00

25,000.00

20,000.00

15,000.00

10,000.00

5,000.00

0

Center South Far East Siberia PLAN ACTUAL

35 RusHydro Holding RusHydro Group’s corporate 2011 sustainability and social responsibility report

The procurement program was approved. results of investigations of the accident at Project partners include the largest Russian and the Sayano-Shushenskaya HPP. Program foreign companies, such as: Power Machines, implementation costs, in the amount of RUR Iberdrolla, Alstom, UEC, Foyt, Turboatom, etc. 15.7 million for the 2011–2013 period, are included in the TRP program. Ensuring Facility Safety

To strengthen comprehensive measures on Protection Against Terrorism preventing accident situations, the 2010– In connection with the probability of an 2015 Program for the Safe Operation of occurrence of local conflicts, the Company RusHydro Hydro-power Facilities has been may face the risk of terrorism. To reduce this implemented. It is based on instructions risk, measures to ensure security are carried and recommendations obtained from the

Implementation of the TPR Program, Implementation of the TPR Program, the Center the South

0% 9% 14% 0% 1% 8% 13% 17% 1% 9% 20%

19% 9%

31% 4% 18% 20% 3% 4%

Zhigulevskaya HPP Volga HPP Upper Volga HPP Cascade Kuban HPP Cascade; Votkinskaya HPP Irganaysky branch Kamskaya HPP Dagestan branch Nizgegorodskaya HPP Nothern-Ossetia branch Saratovskaya HPP Karachaevo-Cherkssky branch Cheboksary HPP Kabardino-Balkarsky branch The Zagorskaya HPP Karachaevo-Cherkesskaya HGC Executive apparatus Zaramagsky HPPs Corporate Hydro-power University

36 Ensuring the Reliability RusHydro Group’s corporate 2.0 and Safety sustainability and social responsibility report

Implementation of Production Programs, RUR mln.

2,000,000

1,500,000

1,500,000

1,000,000

500,000

0

Center South Far East Siberia

REPAIR MAINTENANCE RESEARCH

out constantly; and basic facilities are with law enforcement agencies to protect insured, including against terrorist attacks. objects against the commitment or threat of commitment of terrorist attacks. On The protection of objects is carried out by a enterprise grounds, access control and specialized organization within the Russian internal security policy have been introduced. Ministry of Energy. Interactive plans exist

The Program to Safely Operate Hydro-power Facilities

Video surveillance Organizational Technological systems and arrangements procedures wireless communication

Single office Surveys involving Creating emergency of the chief engineer; expert organizations and regime control and manufacturers; automatics; Analytical Center for safety and reliability control Additional protection Creating supervisory of the hydro-power and interlocks control and structures and basic for the safe disconnection telecommunication systems. facility system; of equipment in case of emergency Permanent expert situations; commissions on the safe operation of high-head HPPs; Power control and setting load priorities Re-engineering business for generating units; processes of the scientific and engineering complex. Installing vibration and thermal monitoring systems;

Additional standby power supplies, etc.

37 RusHydro Holding RusHydro Group’s corporate 2011 sustainability and social responsibility report

The Сompany routinely inspects target hardness RusHydro’s branches was 99. The index has and trains staff, including conducting anti- remained relatively stable over the past four terrorism exercises and training. Together years. with the Russian Agency for Civil Defense and Almost half of the incidents are associated Emergency Situations, assessments of the most with equipment damage (45 cases), including dangerous threats and the development of plans the incapacitation of obsolete machinery, to prevent and eliminate possible consequences the failure of protective devices, project are carried out at generating facility locations. errors and incorrect installation. Twelve accidents were related to HPP staff errors and 3 accidents occurred due to the fault Fire Safety of the contractor’s personnel. To reduce the Fire safety measures in the hydro-power accident rate related to human error, joint sector are subject to requirements from emergency response exercises, specialized numerous regulatory acts. At Holding objects, training of the HPPs’ response personnel and a fire safety system operates, including: a fire the contractors’ operation and maintenance prevention system, a fire protection system personnel are conducted. and complex organizational and technical measures to insure safety regulations. Safety declarations for hydro-power structures have been formalized. Supply Chain: Interacting with Equipment and Service Suppliers Climatic Events The success of programs to modernize and Given the importance of global climate change construct hydro-power facilities is largely and its possible impact on RusHydro objects, dependent on interactions with suppliers of the Company’s specialists considered the equipment and technology, as well as sub- possibility of participating in the project of contractors who perform various types of UNDP GEF on adaptation to climate change work. The effectiveness of joint work can in Central Asia and Kazakhstan. In addition, directly affect the safety and reliability of technical feasibility including the water the Company’s facilities. The Holding places content factor and the assessment of its special emphasis on interacting with these impact on electricity generation is developed groups of stakeholders. at the Company’s facilities.

Procurement Policy Accident Conditions Procurement activity is regulated by the To improve the investigation and listing of Regulation on Procurement for the Needs accidents and incidents that occurred at of RusHydro, as approved by the Board of dangerous production facilities, the Standard Directors in 2011. Permanent committees Procedures for Investigating and Listing that include managers and specialists of Accidents and Incidents. Standards and different corporate departments, including Requirements” was approved. the economic security service and the During the reporting period, the number production and technical department, make of technological incidents (accidents) in purchases.

38 Ensuring the Reliability RusHydro Group’s corporate 2.0 and Safety sustainability and social responsibility report

Dynamics of the Number of Incidents at RusHydro Objects

100

98 99 98 96

94 95 92

90 90 88

2008 2009 2010 2011 Number of incidents

Source: RusHydro

The commissions shall consider, evaluate and winner. In this way, the first control stage rank participants’ applications by the degree is conducted. The Company is directly in of the participants` preference; qualified contact with the contractor, identifying external experts are engaged to select the possible directions and the volume of

Case. The project to reconstruct the power house includes removing working areas to flood- Restoration free areas. of the Sayano-Shushenskaya HPP (SSHPP) During the final stage in 2013–2014, four generating units restored in 2010 will be Restoration work at the HPP is carried out replaced. in strict accordance with the rehabilitation plan approved by the Russian Government As a result of work performed, the SSHPP Commission. will be fully equipped with completely new and modern equipment, which has In 2010, the first stage of work was improved operating performance and meets completed: four generating units with a all reliability and safety requirements. Its capacity of 640 MW each were renewed. term of service will increase to 40 years; Following the year results, the HPP the maximum efficiency factor for new produced more than 10 billion kWh of turbines will be 96.6%. electricity. The system of vibration control equipment and process protection for Lessons from the SSHPP: The Zagorsk equipment was strengthened. PSPP field is located in an area of complex geo-technical conditions. In connection In 2011, the second stage was started. with the accident at the SSHPP, changes During this stage, six new generating units were made in the Zagorsk PSPP-2 project: were installed and an automatic control All attended rooms were removed from the system for that equipment was created. area of potential flooding.

39 RusHydro Holding RusHydro Group’s corporate 2011 sustainability and social responsibility report

cooperation. At the third stage, the quality control system for equipment and mounting “In terms of quality, Russian becomes effective. companies that manufacture HPP power equipment meet international standards. Russian Suppliers There is no significant The vast majority of domestic equipment technological gap, such manufacturers are involved in reconstructing as exists in the thermal existing HPPs. On the one hand, support energy sector”. for domestic producers is the policy of the R. Alzhanov, Deputy Chairman Russian Ministry of Energy, and the RusHydro of the Management Board – Holding pursues this policy. Another reason Chief engineer of RusHydro is the fact that the overwhelming proportion of basic HPP facilities is produced by Russian organizations, with which the Holding has long-standing close ties and long-term Basic cooperation principles with foreign contracts. This allows the Company to move partners: to a new form of cooperation – purchase • Ensuring commercial efficiency and integrated services which, apart from increasing operational reliability in using supplying equipment, also include design, foreign technologies, solutions and mounting, commissioning and service equip­ment compared with its Russian support till the end of service life. analogues; • Creating joint engineering and manufac­ International Cooperation turing ventures to transfer advanced and innovative technologies with maximum The Company is involved in international production localization in Russia; technological cooperation with major compa­ nies – producers. RusHydro’s techni­cal policy • Providing integrated solutions, as well as is aimed at introducing the best international providing for available after-sales service. offers in the power plant engineering sphere. In its plans, the Company focuses on the use “We can not talk about any of ultra-reliable, hi-tech and energy-saving technological backwardness of equipment. Russian manufacturers compared Partner selection is carried out in several with Western manufacturers. stages. RusHydro establishes direct contacts We do not need to catch up with with potential contractors and explores options anybody, because even today for joint activities. Joint working groups, which Russian suppliers introduce bring together the most competent experts new technologies that from both sides, are formed. They develop allow equipment to meet specific proposals and cooperation terms. all reliability and safety This approach provides for the advanced requirements”. introduction of the most advanced solutions B. Bogusz, member of RusHydro’s and technologies to achieve high reliability Management Board and safety levels.

40 Ensuring the Reliability RusHydro Group’s corporate 2.0 and Safety sustainability and social responsibility report

The most significant examples of these partnerships are as follows. Example. In cooperation with the French company Renewal of the Saratov HHP ALSTOM Power Holdings, the Company constructs a plant to produce hydro-power RusHydro’s investment in the turnkey and auxiliary equipment for small and mini installation and replacement of 21 HPPs and integrated safety systems in the hydro-turbines and one generating Republic of Bashkortostan. Cooperation unit at the Saratov HPP at the end Agreements were signed in February 2011 of 2025 will exceed 1 billion euros. in Ufa in the presence of Russian President The Austrian company Voith Hydro Dmitry Medvedev. In the future, the Company GmbH & Co. KG is well-known as will produce equipment for HPPs with greater the world leader in providing non- power. It is expected that equipment for polluting hydro-power equipment mini-HPPs will come on to the market by and a world leader in the design and 2013. The ALSTOM Power Holdings Company construction of HPPs. Voith Hydro is also involved in modernizing the Kuban acts as the project developer, as HPPs Cascade. well as the equipment manufacturer. The Company is the developer of Interaction with Hyundai has been initiated. hydro-turbines; the design of which Possible cooperation is promising, because completely eliminates the ingress of Hyundai produces a wide range of equipment. engine oil into water and reduces the In cooperation with Voith Hydro GmbH & injury to and mortality of fish while Co.KG., the Company plans to establish in passing through turbines. Russia a joint venture to produce hydro- Commissioning of the renewal power equipment to modernize the Saratov turbine is planned for 2015. Further HPP. during a 10-year period, specialists of the Austrian company will gradually deliver sets of new generation Quality Control hydro-turbines. The reliability and safety of the Saratov HPP will rise The quality control system for manu­ to a new level and the performance facturing­ and mounting in replacing, of the HPP will also increase. The reconstructing and modernizing large Companies will also implement joint equipment was developed. For this projects at the Zaramagskaya and purpose, specialized organizations (ANO Miatlynskoi HPPs, among others. Soyuzexpertiza CCI of RF, SSC of RF and SPA TSNIITMASH) have been engaged. Agreements with manufacturers of large generating equipment include requirements­ for mandatory after-sales The Company maintains a single information- service (maintenance service) during analytical database of contractors and a the equipment’s service life. There are register of unscrupulous contractors. In also measures to increase the liability of 2011, claims related to work performed suppliers and contractors in manufacturing were initiated against eight companies- and supplying equipment and materials. contractors.

41 Energy Efficiency 3.and New Generation

Energy Efficiency Management

2011 Program Implementation

New Generation

The Company’s Contribution to International Cooperation on Addressing Climate Change Energy Efficiency 3.and New Generation

Energy Efficiency Management

2011 Program Implementation

New Generation

The Company’s Contribution to International Cooperation on Addressing Climate Change RusHydro Holding RusHydro Group’s corporate 2011 sustainability and social responsibility report

3. Energy Efficiency and New Generation

Energy efficiency tops the agenda for Energy Saving and Energy Efficiency and companies and regulators in most developed Innovative Development at JSC RusHydro. economies. Taking into account power As part of upgrading the energy efficiency generation specifics, RusHydro adheres to management system, in 2011, the Company an approach based on both efficiency and developed the corporate standard “Energy modernization. Efficiency and Energy Saving – Norms and Requirements” for its HPPs and PSHPPs. Energy Efficiency Management JSC RusHydro’s energy efficiency target: from 2011–2020 energy generation growth In 2010, JSC RusHydro’s Management Board of up to 3.3 billion kWh (4.04%). approved the Program related to energy- saving and enhancing the Company’s energy for 2010–201531. The program defines three basic areas for 2011 Program the Company to make energy efficiency efforts across all Holding companies: Implementation • Enhancing energy efficiency at operating Increasing the Energy Efficiency HPPs; of Operating HPPs • Optimizing water resource usage; Efforts aimed at upgrading the capacity and efficiency of hydro-power units and reducing • Reducing energy consumption to meet electricity losses at power transformers the Company’s own needs. brought the Company 89 million kWh growth HPP consumption volumes to a large extent in long-term average output per annum. depend on water content and the generation In value terms, the effect can exceed RUR mode set by the system operator. In this 90 million. context, JSC RusHydro selected an indicator Progress to date has been the result of referred to as “ensuring growth in energy synergies from the technical rehabilitation generation” to develop the Program for and modernization program (technological loss reduction by replacing turbines and units, upgrading the quality and volume 31 The Program is designed to comply with Federal Law No. 261 of repairs and installing the latest energy- (November 23rd, 2009) on Energy Saving and Energy Efficiency and Amendments to Some Regulations of the Russian Federation saving equipment and devices).

44 Energy Efficiency RusHydro Group’s corporate 3.0 and New Generation sustainability and social responsibility report

Key Results of Energy Efficiency Efforts

Reduction in carbon Installed capacity growth under Long-term average output growth* Fuel economy* dioxide equivalent TRR Program atmospheric emissions*

thousand tons of thousand tons per MW million kWh/year fuel oil equivalent year per year

25.5 88.588 22.946 44.582

* Effects from these efforts will be fully realized in 2012. Efforts are carried out across the following facilities: the Volzhskaya HPP, the Zhigulevskaya HPP, the Kamskaya HPP, the Cascade of Verkhnevolzhskiye HPPs, the Cheboksarskaya HPP, the Saratovskaya HPP and the Cascade of Kubanskiye HPPs

Source: RusHydro

Cutting Energy Consumption Members of the self-regulated organization for Internal Needs in the energy audit sphere authorized to carry out energy audits include JSC NIIES, Energy saving in sales is achieved by reducing JSC Ryazan Energy Supply Company, JSC technical and commercial energy losses and improving energy resource accounting. Key efforts include: Case study: • Introducing new methods of consumption Hospitals and schools to pay less forecasts; As part of the 2010–2015 Program • Streamlining procurement; on Energy Saving and Upgrading • Introducing sophisticated consumption Energy Efficiency, RusHydro accounting systems. carried out energy audits at three Businesses that do not have heavy energy institutions in the Ryazan Region: consumption (e.g. design and engineering the Paninskaya General Education companies) are predominantly switching School, the Shilovsky Social and from incandescent lamps to energy efficient Rehabilitation Center for Minors ones. These companies are also introducing and the Ryazan Regional Clinical automated control systems to monitor Cardiology Health Center. lighting and heating, etc. As a result, these organizations will essentially cut utilities costs. For example, the Clinical Cardiology Energy Audit Services Health Center will save RUR 1.8 The Company provides services to carry out million annually or 40% of the energy audits and issue energy passports organization’s costs for energy and for facilities. The services are provided both water consumption. to holding entities and external consumers.

45 RusHydro Holding RusHydro Group’s corporate 2011 sustainability and social responsibility report

Chuvashskaya Energy Supply Company and and small HPP sites, both as part of pilot JSC Krasnoyarskenergosbyt. projects and regular system operations, such as hydro-power potential research at In 2001, energy audits were carried out at river basins in the North Caucuses, Siberian, four RusHydro branches and JSC Geoterm North-Western and the Privolzhsky Federal and JSC Leningradskaya PSHPP, as well as at Regions. This enables the Company to select four research institutes. These energy audits the most challenging design and construction were also carried out for several external technologies. If any incentives are provided consumers, including social organizations. at the State level, the body of the Company’s experience will enable it to start large-scale Employee Training implementation of these solutions. The energy-saving and energy efficiency In 2011, the Company continued research training module is included in the training and pilot projects in the tidal and geo-thermal program for HPPs operating employees. In energy sector and small river energy. 2011, the Company organized lectures for some categories of production and technical staff members designed in accordance Geo-thermal Energy with their training level and involvement in The Company’s geo-thermal energy sector is energy-saving procedures. represented by existing plants in Kamchatka JSC NIIES held seminars engaging the (the Pauzhetskaya GeoPP, the Verkhne- Institute’s specialists to deliver lectures to Mutnovskaya GeoPP and the Mutnovskaya staff members engaged in planning technical GeoPP, the two latter plants are included in efforts related to equipment. The program the JSC Geoterm subsidiary). As of January involved round-table discussions, where 1st, 2012, the total installed facility capacity participants shared their experience and was 76.1 MW and annual generation was energy audit outcomes. approximately 400 million kWh. The Company is developing a distance The project “Installed Capacity Increase at training course to be launched in 2012. The the Mutnovskaya GeoPP…” was suspended course is included in the Training Curriculum due to a lack of a clear energy supply contract, Calendar of the Corporate University and will the lack of approval by the Kamchatka consist of theoretical studies, practice and regional authorities (due to objections to laboratory work and assessment tests. connections) and uncertain balance status. In 2011, the Company continued construction of the binary power unit at the Pauzhetskaya New Generation GeoPP to be commissioned for experimental operation in the next year. RusHydro’s Innovation Development Pro­ gram names energy efficiency improvement via expanding the use of other RES (wind Wind Energy power and geo-thermal, etc.) as one of the Due to low performance, the Dalnev­os­ Company’s strategic goals. toch­naya Wind PP construction project was RusHydro Holding carries out surveys and excluded from the Federal Target Program research on wind sites, geo-thermal fields “Economic and Social Development of the

46 Energy Efficiency RusHydro Group’s corporate 3.0 and New Generation sustainability and social responsibility report

Key Pilot RusHydro Holding Projects in the RES Sector

Project name RES type Region Capacity Phase

Binary power unit The Geo-thermal at the Pauzhetskaya Kamchatka 2.5 MW Construction heat GeoPP Region

Increasing installed The capacity at the Geo-thermal Kamchatka 13 MW Design Mutnovskaya GeoPP heat Region by using waste heat

Development and rationale for small Russian Up to Water river and non-energy Federation 30 MW energy hydro-power facility regions each management plans

The Research, Republic Small HPPs: start of of North - Fiagdonskaya construction Ossetia- Water Alania energy - Verkhne-Balkarskaya The Republic of Kabardino- - Zaragizhskaya Balkaria

The experimental The tidal plant at Dolgaya Tidal energy Murmansk 12 MW Design Bay (the Severnaya Region Tidal PP)

The The Dalnevostochnaya Primorsky 21–24 Wind PP on Popov Wind energy Design Region, МВт Island Vladivostok

The The Nizhnaya Volga Volgograd Up to 1 Wind Wind energy Wind Farm Region GW measurements

* Projects “Installed Capacity Increase at the Mutnovskaya GeoPP…” Nizhnaya Volga and the Dalnevostochnaya Wind PP were excluded from the 2011 investment program

47 RusHydro Holding RusHydro Group’s corporate 2011 sustainability and social responsibility report

Far East and Transbaikal Regions till 2013” above-mentioned prerequisites. It may take and RusHydro’s investment program. regional initiatives to push this situation out of a deadlock. Several Russian regions have Wind park construction projects (the passed their own regulations to encourage Volgograd Region) on the Volga River RES growth without waiting for federal have been suspended to continue wind resolutions33. measurements at the site.

Support needed Small River Energy RES projects are expensive global technology, In Russia, HPPs up to 30 MW are qualified as which require significant investment. United small hydro-power industry (GOST Р51238- States private companies which invest in 98). Energy sources may include: small- construction, in particular, geo-thermal and medium-sized rivers, spillway level projects, are granted tax benefits (up to 22%) differences at lakes and irrigation channels, and annual federal aid (up to $1.5 billion) etc. for R&D, development and implementation The small hydro-power sector is important for of pilot projects. In order to encourage remote, difficult and isolated energy deficient geo-thermal heat supply, the United States regions that are not connected to the unified federal government also covers the cost energy system, as well as for local water of well drilling. Similar laws are adopted in supply for small towns and communities. almost all EU countries to increase the RES The small HPPs are environmentally friendly share in energy balance to 20% from the and have a set of increasingly marketable current 6% by 202032. indirect effects, such as water catchment, On November 23rd, 2011, the State Duma a technology for accumulating drinking approved amendments to the Federal Law water for further use. on the Energy Industry which contemplate The Company developed the 2025 forecasting creating new opportunities to use the development plan for the small hydro-power capacity market mechanism to encourage sector. For implementation, the Russian RES growth on the wholesale market and Federation must adopt a legal framework to imposing priority energy purchase on the efficiently support RES growth. retail market by grid companies in volumes necessary to compensate for energy The forecast contemplates commissioning losses. Government Order No. 1178 (from small HPPs exceeding 850 MW before 2025. December 28th) modified pricing rules in An optimistic assessment of small HPP terms of procedures for setting prices and construction prospects during the period in tariffs. Nevertheless, the capacity market question is one order higher. model was not introduced: no regulations RusHydro’s investment program includes were passed to create a favorable investment only some pilot projects, such as the environment for the RES and no government Verkhne­­ ­­balkarskaya, Zaragizhskaya and preferences, breaks or subsidies were granted to said investors. According to academician Pavel Bezrukikh, 32 Source: Nezavisimaya Gazeta, Low Carbon Development Path, February 8th, 2011 no RES growth may be attained without the 33 Ibid

48 Energy Efficiency RusHydro Group’s corporate 3.0 and New Generation sustainability and social responsibility report

Fiagdonskaya Small HPPs, due to delay in The Company’s approving the expected regulatory novation. Contribution In addition, the Company launched a pilot project to construct the Barsuchkovskaya to International Small HPP in the Stavropol Region in 2011. Cooperation Plant commissioning is scheduled for 2014 on Addressing Climate and the investment amount will exceed RUR Change 400 million (in current prices). Three hydro- power units of 1.6 MW each will be installed The Company’s operations help to mitigate at this small HPP. Average annual energy the human impact of the climate due to generation at the Barsuchkovskaya Small hydro-genation specifics. The Comprehensive HPP will total 29.3 million kWh. Modernization Program (CMP) implemented to increase energy generation will contribute Important developments in 2011 included to meeting global challenges of preventing launching the basic investment project climate change. for the development and rationale for the plan to use the hydro-power potential of small and medium-sized rivers and non- In 2011, actual coal-equivalent energy energy hydro-power facilities to develop generation by RusHydro enabled the the small hydro-power sector of the North Company to cut carbon dioxide emissions 68 Caucasus, Privolzhsky, North-Western million tons or approximately 29 million tons and Siberian Federal Regions (based on of fossil fuel. technological research, surveys, processing and information sharing). RusHydro Holding made proposals on the The Company prepared several joint projects system-level development of the small (JP) on the Irganayskaya HPP, the Kashtahau hydro-power sector to projects covered HPP and facilities of the Far East Generating by the State program on energy efficiency Company (the Vladivostoksk TPP-1, the and energy industry development and the Vladivostoksk TPP-2 and the Severnaya federal target program “The 2010–2020 Boiler Station) for 3,928,000 units34. Water Utilization System Development RusHydro is working with Global Carbon in Russia” and the sector-based target (the Netherlands) to implement the above- program “The 2012–2020 Development of mentioned joint projects. An audit of these the Small Hydro-power Industry on Small- projects was started in 2011. and Medium-Sized Rivers and at Non-Energy Hydro-power Facilities”. Implementation of the above and any other possible joint projects (such as the Bureyskaya HPP and the Cascade of Zelenchugskiye HPPs) by 2014 will enable the Company to raise several hundred million rubles to re-invest in the hydro- power sector. RusHydro’s research and development program includes the project “Feasibility

34 A preliminary estimate as of the reporting date Study of RusHydro’s HPP Reservoirs under

49 RusHydro Holding RusHydro Group’s corporate 2011 sustainability and social responsibility report

Operation and Construction”, developed by Modern technology makes it possible to burn VHIIG and NIIES. wood with minimum emissions compared with the same emissions from burning natural RusHydro also puts into practice other gas. Unlike coal, wood burning emits fewer initiatives aimed at reducing greenhouse pollutants, such as nitrogen and sulphur, and gases. In 2011, the Company developed a generates less ash. project to convert the Cheremushki Electric Boiler Plant and the coal boiler plant of the The joint involvement of the Company and Maina Village (the Republic of Khakassia) to the Federal Agency for Water Resources in bio-fuel. The boiler plants will use wood as this project may stabilize thermal energy the main energy source. This will also meet tariffs for retail consumers mostly by cutting the challenge of recovering large amounts of heat generation costs. Thus, the project will wood that has accumulated in the Sayano- contribute to meet environmental, economic, Shushenskaya HPP reservoir. social and infrastructure challenges.

50 Energy Efficiency RusHydro Group’s corporate 3.0 and New Generation sustainability and social responsibility report

51 Natural Resources and Environmental 4.Conservation

Responsible Water Usage

Long-term Effects of Hydro-power Facilities

Construction of Hydro-power Facilities

Environmental Policy Implementation Natural Resources and Environmental 4.Conservation

Responsible Water Usage

Long-term Effects of Hydro-power Facilities

Construction of Hydro-power Facilities

Environmental Policy Implementation RusHydro Holding RusHydro Group’s corporate 2011 sustainability and social responsibility report

4. Natural Resources and Environmental Conservation

The Company supports the conservation Responsible Water Usage of natural resources and the environment within the scope of its authority. The Water is the main resource for the hydro- environmental policy of the Holding involves power industry. Responsible water usage annual efforts aimed at mitigating negative policy35 is the focus for sustainable sector effects of hydro-power facilities. development on a global scale as other

Agriculture: Farming in dry regions

Water supply Water transport: to retail Expanding the length and wholesale and width industrial of navigation passes consumers Water resources

Fishing: Energy industry: Fish breeding Energy generation and catching

Tourism: Boosting recreational appeal and landscape value

35 International practice prefers the term “balanced water use;” however, the term “responsible water use” seems more appropriate in the Russian context

54 Natural Resources and RusHydro Group’s corporate 4.0 Environmental Conservation sustainability and social responsibility report

consumers also use water (see picture). International practice highlights several “Sustainable de­ve­ aspects of well-balanced water use: the lopment”­ is a globally preservation of fresh water quality, water used term which best discharge levels satisfactory for all users and describes decision- the effect of dams on fish stocks. making principles to develop any energy strategy or investment programs. Water Quality In the 21st century, water is Reservoirs (with no external pollution sources and a good bed) do not essentially contribute increasingly becoming the most to water quality deterioration. The increased precious resource. Predicting water amount brings down the concentration a global water crisis, experts of pollutants brought by the sewage water believe that countries rich in of industrial, utility and agricultural facilities. water resources will have a Thus, the quality of reservoir water is rather great advantage for favorable high to allow for it to be used for supply and development, provided that they irrigation. realize this new reality now and manage to develop a reasonable It should be noted that other water consumers growth strategy. Right now, (industrial companies and utilities) which dispose of water into rivers and reservoirs Russia may get ready to develop also bear social responsibility for preserving its water-intensive industries and fresh water quality. export its water resources. RusHydro undertakes reasonable measures It is important to understand that to mitigate technical impacts from its most water reservoirs in Russia facilities (such as oil leakage from its hydro- are not constructed to operate power units). As part of its TMR project, as HPPs, since Russia cannot the Company replaces its equipment and afford to use water reservoirs elements for environment-friendly units for power generation. Ninety which prevent such incidents. percent of water reservoirs are The Company makes other efforts to this constructed to collect all available end, such as cleaning reservoirs from water to use for agriculture floating trash (floating wood). A special fleet purposes and community water was formed at the Bureyskaya HPP for this supply. Regulated river flows purpose. continuously irrigate 240 million hectares of land worldwide to grow about half of the world’s International Cooperation total agricultural products. The for Sustainable Development energy sector is just one of many In 2011, RusHydro, Alstom Hydro France, water consumers”. LLC Alstom and JSC Unified Energy Company R. Khaziakhmetov, signed an agreement to comprehensively Director for Technical Policy at RusHydro renovate and modernize the Cascade of

55 RusHydro Holding RusHydro Group’s corporate 2011 sustainability and social responsibility report

Kubanskiye HPPs. The project is planned research and information system “HPP to be implemented within ten years. It will Cascade Dispatch Center” to develop and improve water quality in Sengileyevskoye streamline the mid-term planning system Lake and mitigate sediment accumulation for water and energy scheduling for the in the Novotroitsky Reservoir. The Company Cascade of Volzhsko-Kamsky HPPs. The will also address the problem of agricultural Company entered into an agreement with land reclamation in the Stavropol Region the Astrakhan Regional Government. and the North Caucasus Federal District, RusHydro is launching a hydro-meteo­ upgrading the existing water supply and rological monitoring system at the Sayano- water drainage systems and non-energy Shushenskaya HPP Reservoir Basin and hydro-power facilities. on the Gilyuy River (the Zeyskaya HPP). In 2012, the Company plans to develop a program to establish the hydro- Integrated Use meteorological network covering all other of Water Reservoir Resources RusHydro facilities. The issues of integrated use and protection of water facilities are regulated by the Federal Agency for Water Resources and Stakeholders’ standpoint: Low Water on its local branches which work together with the Volga River the local executive bodies. The Company is According to farmers and fishermen, the a lessee of such water facilities. Holding is Volzhskaya HPP is the key negative factor not authorized to make decisions related affecting the Volga floodplain. They believe to water use schedules; however, it is its operation caused water deficiency in involved in efforts made to meet any arising the region. All interested parties proposed challenges. regulating the operation of all hydro-power The last two years saw continuous low-water plants of the Volzhsko-Kamsky Cascade with periods with a low water level in the Volga a single document that would fix rigid dates River after the snow melting period. In 2011, and water discharge amounts. the low-water period also affected several This issue was addressed at a meeting with other regions with reduced flows in Siberian Russian President Dmitry Medvedev (held rivers. in Astrakhan in August 2011). Experts and To address operational matters, RusHydro officials expressed different views on the representatives were included in the work of events. In particular, they predicted that the the Inter-departmental Operating Teams to water level would continue to fall during the define operation patterns for the Volzhsko- next 20 years, regardless of dam operation. Kamsky Cascade, the Angaro-Yeniseysky No uniform opinion on the reasons for this Cascade and the Zeyskaya and Bureyskaya situation was stated. The problem of long- HPPs reservoirs. The Inter-departmental term hydrological forecasts is far from Operating Teams made decisions on ensuring being resolved: river level fluctuations are integrated water usage within these regions. related to some unclear climate changes, the reasons of which and effects are still The Company continuously upgrades its disputed by scientists. internal control processes and systems. In particular, it started to upgrade its

56 Natural Resources and RusHydro Group’s corporate 4.0 Environmental Conservation sustainability and social responsibility report

Long-term Effects • Subsidiaries and branches help local of Hydro-power Facilities stakeholders (e.g., reserves) preserve or restore bio-diversity; According to various research outcomes, • The reservoirs are constructed with a view hydro-power facilities may in the long run to the engineering protection of valuable cause local changes in the composition and agricultural lands, which essentially number of biological resources, marginal reduces possible damage from floods. erosion, locality flooding, bogging, salting, This measure is most efficient in monsoon aridization of downstream river basins, climates (such as for the Zeyskaya HPP weather changes in adjacent areas and earth reservoir); movement due to local earthquakes, as well as other consequences. • During floods, water consumers are properly notified of possible river levels, in accordance with weather forecasts and Environmental Impact Management may take necessary measures; Not all effects may be compensated for by • The Company makes efforts to protect the reactive approach. Some impacts are fish stock. irreversible and become a cost paid for VNIIG named after Vedeneyev B.E., a sub­ energy supply. Some measures are beyond si­diary of RusHydro, developed a set of the scope of the Company and require research environmentally-focused projects, the joint efforts of different organizations which include the development of a geo- (scientific, public and local, etc.) and federal information system for environmental and regional programs to balance regional monitoring and flooded areas forecast development. systems. The Company joined the Project “Con­serv­ a­ tion of Bio-diversity in Policy and Programs for Energy Sector Development in Russia,” Biodiversity developed by UNDP/GEF to contribute to The Company undertakes both recovery putting this idea into practice. In 2011, efforts and preventive projects to reduce the project was approved by UNDP/GEF for negative impacts on biodiversity, such as: implementation by RusHydro, the Russian Ministry of Natural Resources and UNDP. • Slow flooding of the reservoir bed allows large animals to leave the flooded area In its current operations, RusHydro and its (as shown by research at the Bureyskaya subsidiaries use approaches that seamlessly HPP36); fit in with the Company’s business: • Reduction in the number of and changes • The construction of new facilities is more in river fish species are compensated by focused on nature preservation measures fish protection and other efforts; than projects implemented in previous decades; • Concerned organizations may re-plant rare plant species. • The Holding’s research organizations carry out research work, the outcomes of which are used for feasibility studies and 36 See, for example: http://russiandams.ru/sites/russiandams/files/ the design of projects; review-page/files/svodniy_otchet_bur_ges_2009.pdf

57 RusHydro Holding RusHydro Group’s corporate 2011 sustainability and social responsibility report

The IHA Global Energy Forum held in Brazil temperature and air humidity, which is in 2011 presented a project for aeration beneficial for agriculture. protection of hydrobionts. The project was Today, VNIIG named after Vedeneyev B.E. developed jointly by Russian scientists proposes an innovative project to develop a from the St. Petersburg Forest Engineering monitoring program for climatic parameters Academy, the Hydro-power Machines in the reservoir cascade impact area. The Center and the Scientific and Development project will enable researchers to register the Association on the Research and Design cross impact on adjacent reservoirs and their of Power Equipment named after Polzunov combined effect on the regional climate. The and submitted to NIIES, a subsidiary of the project will forecast climate changes during Holding. the facility’s lifetime and during subsequent The main project idea is to use aeration commissioning of power plants; it will also protection systems to eliminate pressure define the maximum allowable energy load surges in turbine rotor wheels, which in the region and the impact of specific destroy plankton and young fish. Eventually, plants on the regional climate. more than 80% of plankton and young fish safely pass the turbines. Otherwise, 90% of hydrobionts are killed in units without these Stakeholders’ point-of-view: types of protection systems. Is the Bureyskaya HPP hazardous?! The proposed method is universal, efficient A team of more than 100 scientists from and easy to introduce (no HPP suspension 20 research institutes in the Far East is needed). The protection systems improve decided to observe environmental processes equipment performance. The innovation caused by the Bureyskoye Reservoir. method was patented in Russia and According to Sergey Sirotsky, Director of the recommended for application as the sole International Hydro-power Environmental protection method for hydrobionts. The Monitoring Center, scientific investigations method was tested at the Ust-Ilimskaya and of reservoirs were carried out irregularly and Volzhskaya HPPs in 1990s. each scientist pursued his or her own specific interest. This time, they sought to review the system of inter-related processes. The Micro-Climate Changes research showed the following results: RusHydro believes that even the largest Meteorologists found no macro-climate reservoirs impact the climate covers over a changes due to HPP construction. There is comparatively small area in adjacent regions only a slight softening effect within areas and that downstream pools are affected adjacent to the coastline. No water quality even less. changes are seen. According to Y.M. Matarzin37, the area of Fishery biologists found favorable conditions the climatic impact for a large reservoir, for cold water fish breeding (including such as Kamskoye, is almost equal to the grayling, taimen and lenok) created below reservoir surface area. Moreover, the scope the dam. Above the dam, they found of impact is comparable for natural lakes. Lakes and reservoirs have a softening 37 Y.M. Matarzin is a hydrographer and professor at Perm State effect on water by increasing ambient University; he established a new trend in land hydrology (Reservoir Hydrology) and became a leading scientist in this field

58 Natural Resources and RusHydro Group’s corporate 4.0 Environmental Conservation sustainability and social responsibility report

Case study 1. No harm done to trout Case study 2. Artificial Reefs In 2011, the Karachayevo-Cherkessk Commissioning of the Kashkhatau branch of RusHydro completed HPP in 2010 marked the completion of renovating water intake and constructing the second construction phase of the a state-of-the-art fish-passing and fish Cascade of Nizhne-Cherkesskiye HPPs. protection facility as part of the 2011– JSC Hydroproject Institute, a subsidiary 2013 Program for Environmental Policy of RusHydro, was the project’s general Implementation. This allows Askaut designer and carried out designer River trout to flow unhindered up and supervision of construction. down the river with no risk of getting The project contemplated a special-type into the hydro-power unit and dying. of fish protection screen. Most plants Sergey Pryganov, First Deputy Director use either artificial screening or gradient and chief engineer: “This is a unique fish- fish protectors. The Aushigerskaya passing facility. It simulates mountain HPP uses a more natural approach to river rapids and enables fish to go up the prevent fish from the hazard using river for spawning by-passing the hydro- specially generated underflow (water jet power unit. This means that all fish will curtains). safely reach the spawning area”. Alexander Ivanov, chief specialist of the Similar previous generation blocking Water and Environmental Protection screens were fitted with nets that Department, the Hydroproject Institute: regularly clogged with trash and “We plan to create an underwater fish flooded over. The new fish pass has a path of artificial reefs to link the river reliable design with an electric gradient mouth with the fish pass. Eventually, fish protection device: the electrodes reefs will become fully integrated with radiating electric impulses are fixed in the the natural environment and be no water and direct fish on the proper route. less favorable for fish than its natural It was the first experience of Karachay- habitat”. Cherkessia in constructing a fish pass facility with such a sophisticated fish protection device. The Branch Director, Grigor Saryatikyan, called it the most successful one in the country. minnows on which pike feed. Today, pike Construction fishing attracts fishermen to the Bureau of Hydro-power Facilities River from across the Amur River Region. The dam had no effect on fish spawning: People around the world are ambiguous scientists noted increased fish capacity both about evaluating the impact of large-scale in the downstream pool and the lake part of hydro-power construction projects on the the reservoir. environment, living standards and social

59 RusHydro Holding RusHydro Group’s corporate 2011 sustainability and social responsibility report

conditions, regardless of any economic Communicating with Stakeholders benefits offered by dam construction. Environmental and any related reputation RusHydro seeks to properly review and risks are carefully reviewed by the Company, prevent environmental and social challenges, together with regulatory bodies and the which may arise in connection with hydro- community, including project environmental power construction projects. review (PER). Where applicable, the parties open public counseling offices and hold public discussions of PER findings. Invitations to Environmental Risk Analysis participate in these discussions are posted At each phase of any investment project on the Company’s web site, specifying the lifecycle (HPP design, construction and date and time of these events. The web site operation), specific efforts are made to shall also contain PER materials and other comply with environmental protection laws helpful information. and to prevent adverse effects. Thus, the In December 2011, RusHydro made a Ust-Srednekanskaya HPP was designed to resolution to hold comprehensive PER public exclude all communities and localities from hearings related to the project of con­ the flood zone. structing the Cheboksarsky Hydro-power The new project design phase involves a System on the Volga River (public hearings mandatory engineering and environmental are scheduled for 2012). survey to take into account any possible adverse effects and efficiently employ all benefits of the project. Environmental Policy Although landscape planning has a material Implementation effect on selecting the construction site, the project design involves minimal landscape RusHydro approved the Environmental changes. Policy,38 which covers all organizations included in the RusHydro Holding. To pursue its Environmental Policy, the Company Areas of Responsibility develops environmental programs for its branches and subsidiaries. Subject to the Russian Water Code, the HPP reservoir is federal property and, therefore, federal executive bodies and federal bodies Environmental Management Systems of Russian constituents are the customers (EMS) for preparing the reservoir flood zone. Local authorities are responsible for upgrading The Environmental Management Systems transport and any other communication, as (EMS) are an important part of such well as the relocation of citizens from the programs. The following organizations flood zone. The Company is responsible for have been certified for compliance with engineering protection of the flood zone. international standards as of year-end 2011: In accordance with the law, the Company • The Environmental Management System must take measures to preserve any cultural (ISO 14001): the Volzhskaya HPP, the heritage which may be located within the 38 Published at: http://www.rushydro.ru/file/main/global/company/ reservoir flood zone during construction. safety/environmental/ecopolicy.pdf

60 Natural Resources and RusHydro Group’s corporate 4.0 Environmental Conservation sustainability and social responsibility report

Zhigulevskaya HPP, the Kamskaya HPP, RusHydro developed the Plan “Introduction the Cheboksarskaya HPP, the Zagorskaya and Certification of Management Systems in HPP, the Cascade of Kubanskiye HPPs and accordance with ISO 9001, ISO 14001 and the Frishter Kolymskaya HPP, a branch of OHSAS 18001 across RusHydro’s branches JSC Kolymaenergo; and SDCs for 2012–2020”. • The system for professional health and The Company is developing the Standard safety management (OHSAS 18001): the “Environmental Protection Management Cascade of Verkhnevolzhsky HPPs and System. General Provisions”. the Cascade of Kubanskiye HPPs; • Quality management system (ISO 9001): Environmental Performance the Nizhnegorodskaya HPP. In accordance with these programs, the Company made numerous efforts to reduce environmental impact and environmental Case study risk management, including technical The Zhigulevskaya HPP Audit upgrading and renovating of facilities and water protection measures at water facilities The Company completed the and waste disposal. Key environmental environmental management sys­ performance and numbers for the reporting tem recertification audit at the period are shown in the tables39. Zhigulevskaya HPP branch. The auditors inspected two areas: energy generation and supply to the Unified Air Energy System of Russia. Atmospheric pollutant emission sources The auditors highlighted impro­ include: main plant equipment, machinery ve­ment confirming continuous equipment and repair, molding, painting and growth and good environmental other work performed by subsidiaries and performance at the plant, including: contractors. - Regular environmental training; The main reasons for reduced atmospheric - Strong improvement in infrastruc­ ­ pollutant emissions included the following: tu­re support; • Transfer of vehicles to the balance sheet - Improvement in handling dangerous of other entities (the Bureyskaya HPP); substances at the chemical analysis • Transfer of plant equipment for renova­ site; tion (modernization/upgrading) (JSC - Practical training on emergencies Geoterm, the Kabardino-Balkarian branch and the sophisticated technical and the Sayano-Shushenskaya HPP); outfitting of emergency rescue • Reduced scope of repair work (the services for emergency oil spill Saratovskaya HPP, etc.). response; and - Environmental awareness cam­ paigns held by the branch. 39 The numbers refer to JSC RusHydro, JSC Geoterm, JSC Pauzhetskaya GeoPP and JSC Kolymskaya HPP

61 RusHydro Holding RusHydro Group’s corporate 2011 sustainability and social responsibility report

Several plants made an inventory of emission The Holding’s organizations seek to use only sources and developed draft standards for those materials and equipment which have atmospheric pollutant emissions to specify minimal adverse environmental impact. pollutant emissions and, consequently, modified emission details (reduced numbers).­

Atmospheric emissions, tons

Solid Sulfur oxide Carbon oxide Nitrogen oxide

Name

2010 2011 2010 2011 2010 2011 2010 2011

The Bureyskaya HPP 0.257 0.056 0.034 0.011 0.342 0.148 0.006 0.041

The Volzhskaya HPP 4.523 4.523 0.027 0.027 1.909 1.909 0.534 0.534

The Votkinskaya HPP 0.809 0.018 0.955 0.099

JSC Geoterm 0.152 0.382 0.023 0.034 0.282 0.298 0.047 0.109

The Dagestan branch 0.506 0.736 0.157 0.019 7.403 1.58 0.754 0.148

The Zhigulevskaya HPP 114.262 114.262 0.146 0.146 2.834 2.834 0.565 0.565

The Zagorskaya PHSPP 0.213 0.213 0.012 0.0121 0.767 0.767 0.085 0.085

The Zeyskaya HPP 0.735 0.374 0.006 0.024 0.224 0.225 0.024 0.025

The Irganayskaya HPP 0.021 0.021 0.001 0.001 0.143 0.143 0.002 0.002

The Kabardino- 1.886 1.854 0 0 0 0 0.009 0.01 Balkarskiy branch

The Kamskaya HPP 0.042 0.041 0 0.0001 0.034 0.034 0.003 0.003

The Karachayevo- 0.009 0.023 0 0 0.117 0.16 0.018 0.018 Cherkessky branch

The Cascade of 0.037 0.037 0.003 0.003 0.283 0.283 0.032 0.032 Verkhnevolzhskiye HPP

62 Natural Resources and RusHydro Group’s corporate 4.0 Environmental Conservation sustainability and social responsibility report

Solid Sulfur oxide Carbon oxide Nitrogen oxide

Name

2010 2011 2010 2011 2010 2011 2010 2011

The Cascade of 0.029 0.03 0.001 0.001 0.182 0.289 0.019 0.022 Kubanskiye HPP

The Kolymskaya HPP 0.834 0.803 0.002 0.002 1.266 1.266 0.002 0.002

The Nizhegorodskaya 0.299 0.299 0.001 0.001 0.484 0.484 0.001 0.001 HPP

The Novosibirskaya HPP 0.082 0.082 0.001 0.001 0.002 0.002 0.017 0.017

The Saratovskaya HPP 0.386 0.468 0.001 0.001 0.195 0.195 0.027 0.028

The Sayano- 5.217 1.808 0.014 0.001 1.905 0.541 0.916 0.054 Shushenskaya HPP

The North Ossetia 0 0 0 0 0.14 0.088 0.049 0.031 branch

The Cheboksarskaya 0.289 0.291 0 0 0.024 0.024 0 0 HPP

The Pauzhetskaya GeoPP 0 0 0 0 0 0 0 0

TOTAL 129.78 127.11 0.43 0.30 18.54 12.23 3.11 1.83

Water • Installation of snow-melt and rain water drainage system from HPP buildings and Key efforts to manage sewage water quality cleaning and registration systems for in the reporting period included: drainage flows from HPP buildings (the • Water quality control in water facilities Volzhskaya HPP); (all energy facilities); • Development of a project to set up a • Quality monitoring of drainage, storm drainage water treatment system (the and regenerated water and utility fluids Zhigulevskaya HPP) and the project for (all energy facilities); storm sewage renovation (the Zeyskaya HPP and the Cheboksarskaya HPP); • Operation (all energy facilities) and the construction­ of water treatment facilities • Chemical analysis of drainage water (the Novosibirskaya HPP); samples, chemical and bacteriological

63 RusHydro Holding RusHydro Group’s corporate 2011 sustainability and social responsibility report

tests of storm water (most RusHydro A marked reduction in sewage volume is seen branches and the Kolymskaya HPP). in several facilities. The Zagorskaya PSHPP showed a steep drop in this figure since To prevent reservoir pollution, the Company 2010 due to a lower water level (because carried out replacement, renovation and of construction of the Zagorskaya PSHPP-2) modernization of hydro-turbine equipment, and reduced its drainage water volume. The renewed rotor wheel compactors and Kolymskaya HPP reduced pollution content renovated drainage units, among other in domestic waste by using physical and efforts.

Water discharge

Total amount of waste water discharge, thousand m3

Name

2010 2011

The Bureyskaya HPP 88.10 82.25

The Volzhskaya HPP 0 0

The Votkinskaya HPP 0 0

JSC Geoterm 272.76 276.46

The Dagestan branch 14.80 19.60

The Zhigulevskaya HPP 56.46 56.46

The Zagorskaya PHSPP 3,335.72 2,961.30

The Zeyskaya HPP 10.16 10.37

The Irganayskaya HPP 1.82 1.82

The Kabardino-Balkarskiy branch 0.00 0.03

The Kamskaya HPP 0 0

The Karachayevo-Cherkessky branch 0 0

64 Natural Resources and RusHydro Group’s corporate 4.0 Environmental Conservation sustainability and social responsibility report

Total amount of waste water discharge, thousand m3

Name

2010 2011

The Cascade of Verkhnevolzhskiye HPP 98.90 100.61

The Cascade of Kubanskiye HPP 0 0

The Kolymskaya HPP 21,699.48 18,743.54

The Nizhegorodskaya HPP 89.39 53.51

The Novosibirskaya HPP 1,463.00 997.00

The Saratovskaya HPP 0 0

The Sayano-Shushenskaya HPP 1,900.53 831.93

The North Ossetia branch 0.05 0.05

The Cheboksarskaya HPP 325.40 267.40

Total 29,356.58 24,402.34

chemical treatment, advanced ion treatment oxygen used for oxidation. The COD test of coagulation on the zeolite filter and oil waste water will use sophisticated domestic product coagulation on the carbon filter. equipment. The new method will improve the relevancy and quality of controlling waste water discharge in the Volga River. The Cheboksarskaya HPP will introduce a new method of chemical analysis for waste water from energy generation. The Wastes environmental monitoring process for waste water discharge will be extended to add the Waste sources include HPP buildings and “chemical oxygen demand” (COD) test. This structures, the operations of plant units and test is used to measure the amount of organic any associated activities aimed at supporting compounds in water by the amount of fixed business operations. It is not uncommon

65 RusHydro Holding RusHydro Group’s corporate 2011 sustainability and social responsibility report

Waste Disposal

Hazard Class Unit 2010 2011

Total weight of waste production by class ton 23,729.46 38,141.54

Class 1 ton 9.42 11.31

Class 2 ton 34.28 19.13

Class 3 ton 1,160.82 952.97

Class 4 ton 6,340.14 7,206.23

Waste disposal volume ton 3,497.13 740.44

Class 1 ton 0.7 0

Class 2 ton 5.71 0.26

Class 3 ton 463.09 481.38

Class 4 ton 94.7 6.23

Transferred waste volume ton 19,561.68 38,123.64

Class 1 ton 6.91 11.03

Class 2 ton 2.63 15.61

Class 3 ton 697.70 476.71

Class 4 ton 6,365.06 7,242.18

Waste removal volumes ton 241.74 42.36

Class 1 ton 0.01 0

Class 2 ton 18.92 0.09

Class 3 ton 10.16 0.12

Class 4 ton 4.34 1.41

66 Natural Resources and RusHydro Group’s corporate 4.0 Environmental Conservation sustainability and social responsibility report

that subsidiaries located within the HPP area Impact Research carry out repairs and auxiliary work. 2011 environmental programs involved Main wastes (Class 4 and 5 hazardous a set of projects to assess HPP impact on materials) include wastes (sludge) environmental components: from mechanical and biological sewage • The Zagorskaya PSHPP: evaluation of treatment, textile, construction and other free-water-service evaporation from wastes, miscellaneous waste of paper and upper and lower reservoirs; carbon, glass, asphaltic concrete or asphalt mix, reinforced concrete, scrap brick and • JSC Geoterm: baseline environmental reinforced concrete units, sawdust and survey of water facilities; crops, garbage from power plant screens, • The Nizhegorodskaya HPP: field survey of etc. This waste is mostly transferred to other the Volga River at the baseline and control companies for treatment. stations and evaluation of the plant’s Hazardous class 1 and 2 waste (mercury- impact on water biological resources vapor lamps, expired luminescent mercury of the Gorkovsky and Cheboksarsky tubes replaced with energy saving lamps) Reservoirs environment ( similar projects is transferred for disposal to authorized in terms of biological impact have been companies. fulfilled at the Saratovskaya HPP); • The Dagestan Branch: monitoring of the fodder base and stocking fish within the bio-sphere reserve; • The Sayano-Shushensky hydro-power facilities: environmental monitoring of the impact zone within the bio-sphere reserve.

Costs of Environmental Actions and Penalties, rubles

2010 2011

Environmental action spending 119,925.50 227,179.89

Penalties 0.00 0.00

67 5.

Employee Description

Occupational Safety and Health

Human Resources Development

Employee Motivation System and Social Policy

Social Support for Families of Employees That Lost Their Lives or Were Injured in the Sayano- Shushenskaya HPP Accident

Regional Support 5.

Employee Description

Occupational Safety and Health

Human Resources Development

Employee Motivation System and Social Policy

Social Support for Families of Employees That Lost Their Lives or Were Injured in the Sayano- Shushenskaya HPP Accident

Regional Support RusHydro Holding RusHydro Group’s corporate 2011 sustainability and social responsibility report

5. Social Responsibility

Employee relations are based on the idea growth and increased construction scope. that human resources are the Company’s The number of RusHydro employees on the key value. RusHydro is committed to payroll as of December 31st, 2011 is 6,014 making its employees aware that their (5,730 employees as of December 31st, personal progress is a major contributor 2010). to the Company’s general success and RusHydro (including its branches) demon­ growth. strates a clear trend in increasing the share of specialists (41.1%) and reducing the share of workers (35.5%, both figures are Employee Description as of year-end 2011). Employee head count grows on the back of new asset acquisition In 2011, the average employee head count followed by changes in their management in the main generating and construction structure. companies of RusHydro40 totaled 11.3 thou­ sand (versus 10.6 thousand in 2010). This The percentage of employees with higher change accounts for construction personnel education degrees has also risen to 66.8%

RusHydro Personnel Structure by Category, as of December 31st, 2011

35.5% 23.4%

1.1% 39.9%

Executives

Specialists

Office staff

Workers

40 The list of companies is set forth in the Reports and Reporting Procedure section 70 Social Responsibility RusHydro Group’s corporate 5.0 sustainability and social responsibility report

RusHydro Personnel Structure Dynamics, by Category, %

50 45 40.2 41.1 40 38.7 43.6 42.8 35 37.4 30 34.4 36.3 35.5 33.0 25 20 23.5 22.8 23.9 23.6 23.4 15 10 5 0

1/1/2008 1/1/2009 1/1/2010 1/1/2011 1/1/2012

Workers Specialists and other office staff Executives

(year-end 2011) up from 52.3% (early means that the Company has successfully 2008). The share of unskilled employees met its goal of providing its facilities with went down 6.8 percentage points. This highly qualified employees.

RusHydro Personnel Structure by Age

4.6%

25.3%

40.4%

Up to 25 years old

25–35 years old 29.7% 35–45 years old

Over 45 years old working retirees

71 RusHydro Holding RusHydro Group’s corporate 2011 sustainability and social responsibility report

RusHydro Personnel Structure Dynamics by Category, %

40 36.4 36.1 35.3 35.3 35 34.3

30 27.9 26.8 26.2 26.6 29.7 25 26.1 26.3 25.3 20 23.5 25.1 15

10 8.2 8.0 7.7 6.4 6.1 5 0 5.1 4.6 4.3 4.2 4.6

1/1/2008 1/1/2009 1/1/2010 1/1/2011 1/1/2012

Up to 25 years old 25–35 years old 35–45 years old 45 years old to retirement age Working retirees

• By late 2011, the share of 35–45 year old Management System workers increased 3.4 percentage points The Company’s KPIs include the Reliability compared with early 2011. The share Criterion, which cover such indicators as the of working retirees went down to 6.1% Fatal Accident and Group Accident Prevention from 8.2% during the last four years. and Occupational Injury Rate Ratio. Both Compared with the beginning of 2011, indicators are controlled by the Holding’s the number of 25–35 year old employees authorized employees and top management. also went down 2.6 percentage points in late 2011. The management system for industrial and occupational safety is based on the following principles: • Personal responsibility of managers and Occupational Safety direct reports; and Health • Preventive actions and efforts;

The Company is committed to protecting • Empowerment of all RusHydro personnel the safety and health of its personnel, in to take part in the management system particular, workers occupied in the generating operation; and construction business. The systemic • Reducing the risk of exposure to adverse approach to health and safety procedures circumstances and mitigating effects, if is set forth in several local regulations and they occur; and corporate standards binding all RusHydro • Mandatory compliance with all health Holding members. and safety measures by all contractors performing work on Company projects.

72 Social Responsibility RusHydro Group’s corporate 5.0 sustainability and social responsibility report

The Holding carries out industrial control of HPP and the Neporozhniy Sayano- compliance with industrial safety measures Shushenskaya HPP). at hazardous work sites. The regulations As of year-end 2011, the Company carried on industrial control across subsidiaries out job certification by work environment and affiliates are approved with regional at all RusHydro branches and developed agencies of the Federal Environmental, relevant compliance measures. Engineering & Nuclear Supervision Agency (Rostekhnadzor). Employees are provided with all necessary individual and collective protective gear. They regularly pass mandatory health checks The Company made the following efforts in (at least annually). All employees complete 2011: monthly safety and fire prevention training and annual first aid training and take part in • Continued to implement the Action Plan to regular practical fire training. The Company prevent occupational injuries at RusHydro holds monthly Safety Protection Days, which facilities scheduled till 2013; involve all staff members. • Continued to develop its industrial control system which contemplates automated information sharing between the Employee Fitness Control Company and Rostekhnadzor. The system The psychological service at the Sayano- is planned to be introduced in 2012; and Shushensky Training Center at Corporate –– Carried out internal technical audits Hydro-power University diagnoses and of industrial and labor safety in the treats psycho-physiological conditions of Company’s branches (the Cascade employees. These methods allow for the of Kubanskiye HPPs, the Kabardino- review of more than 25 psycho-physiological Balkarskiy branch, the Karachayevo- parameters which may affect employee Cherkessky branch, the North Ossetia fitness. The relaxation room is fitted with branch, the Dagestan branch, the sophisticated equipment to train employees Irganayskaya HPP, the Bureyskaya to use self-control skills to adjust their

Occupational Injury Rates

Indicator 2009 2010 2011

IR (injury rate ratio) 4.020 0.804 0.838

Number of accidents 20 4 4

including accidents 13 0 1 with fatalities

Note: numbers refer to RusHydro branches

73 RusHydro Holding RusHydro Group’s corporate 2011 sustainability and social responsibility report

psycho-emotional and psycho-physiological HR Priority Development Concept state. The approved HR Priority Development In 2011, the Company examined the fitness Concept “From New School to Job41”, included of 341 employees from Operating Teams at the following key efforts made in 2011: HPPs including the Zhigulevskaya HPP, the Volzhskaya HPP, the Cascade of Kubanskiye HPP, the Zeyskaya HPP, the Bureyskaya HPP, Corporate Elevator – New School the Irganayskaya HPP, the Chirkeyskaya • 12 training seminars for 360 teachers HPP, the Cascade of Sulakskiye HPPs and the in 146 schools in regions in which the Cascade of Verkhnevolzhskiye HPPs. Company is present on using teaching Based on diagnostic findings, the experts aids in school lessons on the hydro-power analyzed the status and other parameters of industry; Operating Team members before and after • Development and distribution of an the working shift, with a view to their age and animated­ guide “Water Secrets”; work record and developed recommendations for streamlining their psychological load and • The first sector-based school Olympiad the program for rehabilitation and training. “Education Energy” for secondary school students in grades 7–11; The branches held stress management courses for shift engineers at hydro-power • Vocational programs (energy industry units and seminars “Filtration and Telemetry classes) for secondary school students in Control of the Foundation-Dam Status” and the Cheremushki Village and the cities of “Daily Management of Basic HPP Facility Krasnoyarsk and Volzhsky; Modes” for shift managers. • Sayansky Summer Energy Industry School, a unique educational project for high school students. Human Resources Development Corporate Elevator – Educational RusHydro sees human resources deve­ Institution/University lopment­ as a strategic avenue to ensure • As part of the strategic partnership agree­ efficient implementation of its current and ment with the Siberian Federal University prospective goals and objectives. Personnel in 2011, RusHydro annually drafts a list spending is viewed as a critical element in of relevant graduation thesis themes and human resource investment. enrolls students for on-the-job practice The Company assesses the risk of key and employment; personnel shortages as substantial. Subject • A strategic partnership agreement with to the Strategic Risk Management Plan, the Moscow Energy Institute; Company has implemented advanced HR growth programs and generated a human • Cooperation agreements with technical resources and incentive and social benefit schools and colleges to develop training system. These measures should ensure long- term competitive advantages to engage and retain qualified employees. 41 The Concept is set forth in the 2010 Report on Social Responsibility and Sustainable Development

74 Social Responsibility RusHydro Group’s corporate 5.0 sustainability and social responsibility report

programs on professions as required by human resource work is based on the the Company. following principles: • Strategic focus – HR goals and tasks are in line with the Company’s development Corporate Elevator – The Company goals and the generation of strategic • The Company approved a procedure for corporate competencies; compensation payment to children of • Reliability – using personnel assessment RusHydro employees who study field- and training technologies based on high specific professions. In 2011, scholarships predictability and reliability; and compensation were awarded to 37 children of employees, who are • Development – creating opportunities for A-level students. This encourages work- professional employee growth. family traditions and boosts professional Extensive opportunities for personnel profes­ prestige: sional development (including simulation • Development and commissioning the training) are provided within the network Corporate Simulator; of Practical Training and Information Centers and cooperation with sector-based • Talent pool training (young professionals secondary and higher education professional under 30). institutions.

Continuous Education Employee Motivation The continuous education system enables System and Social Policy employees to develop their competencies in line with occupational responsibilities and Fair remuneration and social programs are for the purposes of rotating and replacing important drivers of quality and performance workers to train human resources. Efficient improvement.

Comparative Analysis of Employees Completing Training and Advanced Training Courses, (number of employees)

10,000 7,884

8,000

4,936 6,000 4,081 5,679 4,000

2,000 3,168 1,941 0

2009 2010 2011

Total Incl. Corp. University

75 RusHydro Holding RusHydro Group’s corporate 2011 sustainability and social responsibility report

A new bonus system for Central Office compared with the previous year. In addition, employees, based on the individual connected with the birth of the child, his contribution of each member, was introduced father (an employee of a RusHydro branch) in 2011. The Company modified the receives the right to a short-term holiday. applicable adjusting factors for meeting KPIs For worker-parents of children in grades in the incentive system for top managers 1-4, an additional holiday day is provided and branch staff members, as well as September 1st (the first day of school). defined key professions (positions) in the The Company pays a significant share of branches’ production units and increased children’s kindergarten costs, as well. their remuneration 15%. In 2011, the Company allocated 42.2 million rubles for financial aid to employees related to important events in their lives. Collective Agreement The Company reviewed and streamlined The Company takes care of the well-being mechanisms to implement several programs, and social protection of its employees and such as programs for healthcare and resort families and provides a social benefits and treatment and travelling recreation for guarantees package. Social commitments employees and their families. Total funding are set forth in Collective Agreements for this program amounted to RUR 50,261.8 concluded by RusHydro branches. thousand. In December 2010, RusHydro’s Board of Directors approved a new version of the Company’s branch template for the 2011– The total amount of funds allocated for 2013 Collective Agreement. The document benefits and guarantees under the Collective offers significant improvements in social Agreement was RUR 400 million. guarantees for corporate employees. The main focus of this new Collective Agreement Thirteen RusHydro subsidiaries have also is on benefits to attract young specialist and signed collective agreements, which mostly qualified employees. In 2011, the Company stipulate additional benefits and guarantees allocated RUR 901.5 thousand to pay similar to the ones established by RusHydro scholarship to employees’ children who are branches. A-level students in power engineering. Other SDCs failed to conclude these A key social policy priority is support granted agreements due to their small size, lack of to families with children. From 2011, trade unions and/or employees’ initiative birth (adoption) grants for each child was to enter into such agreement. Additional increased 50% to 15 minimal monthly salary benefits and guarantees to employees of payments for first category workers. This these companies are regulated by local helped facilitate a 22% increase in the birth normative acts. rate among the Company’s employees (to 258 in 2011 compared with 211 in 2010). In addition to payments stipulated by law, Non-State Pension Coverage the Collective Agreement establishes a child- care leave payment for three years in the The Company strives to develop non-State amount of 2 minimum monthly salaries (RUR pension coverage (NPC) for its employees. 8,704), a 73% increase in this payment Providing employees with competitive

76 Social Responsibility RusHydro Group’s corporate 5.0 sustainability and social responsibility report

retirement benefits will give them confidence Additionally, all Company employees can in their future and help the Company forecast access corporate support in their relationships and recruit new employees in a timely with banks, real estate agencies and manner for soon to be vacant posts. It will insurance companies that offer better-than- also revitalize the team. average market conditions (lower mortgage interest rates, better loan consideration In 2011, the NPC program included a new timing and competitive insurance rates, “Well-Deserved Retirement” pension plan, etc.). which enables employees to generate additional retirement savings. The Company In 2010, a total of 149 employees participated also introduced new additional factors into in the Housing Program. the Support Program to encourage the timely retirement of employees.

Sports-related Projects Insurance Program To expand its sports-related efforts, to In 2011, RusHydro upgraded its Insurance encourage healthy lifestyle and wellness Coverage Program for employees. RusHydro and to strengthen positive communication annually revises and signs agreements among Company employees, the Company for voluntary health insurance (VHI) and held the Chairman of the Management Board voluntary accident and illness insurance Cup Football Tournament in summer 2011. to expand and upgrade the list of medical The tournament was held in two stages: the services available to employees. The qualifying round (regional) where 20 teams Program involves 100% of the Company’s representing HPPs, SDCs and the Company’s branches work force. The Company also headquarters competed for a place in the helps employees purchase voluntary health finals. Qualification games were held in four insurance policies for family members at groups. attractive rates. The final round was hosted by the Neporozhny Sayano-Shushenskaya HPP. The four winners­ in the qualification round Housing Program competed for the main prize: the RusHydro The housing improvement program was executive team, JSC Turboremont-VKK, introduced in 2007. Eligible members the Dagestan branch and the Bureyskaya include young employees under 30 years of HPP. The JSC Turboremont-VKK team age who do not own a separate residential won the tournament cup. The award property, professionals who were offered ceremony was hosted by Evgeny Dod, branch positions and relocated from a Chairman of the Management Board, who different location and key and highly skilled awarded the winning Cup. The Chairman professionals. The Company’s corporate of the Management Board also awarded support takes the following principal forms: first, second and third place teams a purpose non-interest-bearing loan, with certificates and merit badges for com­pensation for interest paid on home “Contributions to Sports Development” mortgages and compensation for housing and presents (I-Pads, I-Phones and rental expenses. I-Pods).

77 RusHydro Holding RusHydro Group’s corporate 2011 sustainability and social responsibility report

Social Support approved allocating RUR 185 million to for Families address social implications of the accident. As of December 31st, 2011, RusHydro spent of Employees That Lost 172.6 million rubles to extend financial aid Their Lives or Were and continue payments. Injured in the Sayano- Shushenskaya HPP Accident The Coordination Council

Since the first day of the Sayano- RusHydro management and the Government Shushenskaya HPP accident, the Company of Khakassia established a joint Coordination has rolled out a major social support Council to provide targeted assistance to and rehabilitation program for affected bereaved families and injured employees. The employees and families of those killed in the Coordination Board includes representatives accident. The accident killed 75 employees of Khakassia’s Government, RusHydro, the of the Sayano-Shushenskaya HPP (SSHPP) Sayanogorsk Administration, the IDGC and contractors, an additional 60 people Holding, and different public and trade union were injured. RusHydro’s Board of Directors organizations.

Payments to SSHPP injured parties, million rubles

One-time payments to bereaved 6.0 families during the first months after the accident 6.0 4.7 5.5 Apartment purchases for bereaved families and 1.6 the re-payment of their mortgages 8.8 Monthly allowances to families with children

Personal scholarships to children 28.1 of employees killed in the accident

Non-governmental pensions to bereaved family members

112.0 Payments to injured employees Payments to the persons which were at the territory of the station during the accident

Purchase of ambulance cars and construction of a playground in Cheryomushki

78 Social Responsibility RusHydro Group’s corporate 5.0 sustainability and social responsibility report

The Council held six meetings in the two The Program contemplates renovating years of its operation (from February 2010 numerous social infrastructure facilities in the to April 2011) and reviewed 377 applications Cheremushki Settlement, due to their poor from injured employees and bereaved condition and the changed social needs of families. local residents. RusHydro has implemented the highest priority tasks in the amount of The Coordination Council approved financial RUR 212 million. assistance to purchase four apartments for bereaved families and targeted financial aid In June 2011, RusHydro’s Board of Directors to a large range of injured persons. Payouts approved the List of Program Efforts for the were made available to parents of employees following years and the size of its financing in killed in the accident: 55 people received a the amount of RUR 500 million. The largest total of RUR 7.5 million, coming from funds projects include: raised as part of RusHydro’s charitable • Renovating two buildings of the local program “We’re With You, Sayano”. hospital; The program for resort therapy and • Current repairs of the School No. 1 buil­ treatment of those injured in the accident ding; and their family members started June 2010 and is designed to last for 5 years. As • Construction of the Practice Training and of December 31st, 2011, the program has Innovation Center; covered 276 people. The program includes • Renovation and equipment for the Hydro- four service areas: Medication Support power Unit Laboratory at the Siberian Service, Children’s Health Camps, Resort Federal University; Therapy and the Fitness Health Center. A total of RUR 7.5 million was spent under • Construction of a roofed ice stadium; the program. • Renovation of the JSC CSC SSHPP Sports The sixth meeting of the Coordination Center; Council in 2011 summarized its operation • Construction of a hostel for students of results: all the Council’s objectives have the Sayano-Shushensky branch of the been successfully met; and a total of RUR Siberian Federal University. 60.47 million in voluntary donations raised by charitable foundations has been used to implement the decisions of the Coordination Council. Public Reception Office In March 2010, the Chairman of the Social Infrastructure Development in Management Board made a decision to the Cheremushki Settlement establish the Public Reception Office where all RusHydro, with support from the Government employees may contact Company executives of the Republic of Khakassia and the with any questions. The most intense efforts Administration of Sayanogorsk, developed are made by the Cheremushki Reception the 2010-2014 Program for Integrated Office, which addresses the concerns of Social Infrastructure Development in the bereaved families and injured employees Cheremushki Settlement. and all other citizens.

79 RusHydro Holding RusHydro Group’s corporate 2011 sustainability and social responsibility report

The Reception Office operates on the Regional Support principles of social partnership with regional and municipal authorities and public Social responsibility is an integral and organizations in Khakassia. Appeals are important part of RusHydro’s operations. reviewed by RusHydro experts, Khakassia Taking an active part in the economic and Government members, departments and social life of the regions in which it is present, units of the Sayanogorsk City Administration the Company develops long-term projects and commercial and public regional entities. aimed at meeting social and educational Each applicant receives consultations challenges. and advice on his/her matter. Thus, the For this reason, the Company’s corporate Cheremushki Art School applied for financial strategy includes the Charity and Spon­ aid to purchase a new piano. A special sorship Program focused on educating a new ceremony was held November 2011 to generation of professional power engineers deliver the instrument. and creating a favorable social environment in

Main requests Number

Financial aid 246

Resort treatment 16

Education 6

Household matters 5

Repairs and renovation of social facilities in Cheremushki 15

Children’s kindergarten enrollment 10

Training and employment 31

Other 53

As of December 31st, 2011, the Public all regions in which the HPPs operate. Pursuing Reception Office received 382 applications its approved charitable and sponsorship from Cheremushki citizens. The Office concept, the Company allocates funds to assist reviewed and acted on all requests. the following entities and individuals: • Low-income citizens, disabled and reti­red persons, mostly via charity funds, orga­ niza­tions and institutions;

80 Social Responsibility RusHydro Group’s corporate 5.0 sustainability and social responsibility report

• Retired energy engineers and honored This assistance also covers regular schools, indu­stry workers; music schools and creative teams. • Children’s organizations and institutions; The Company took part in the Clean Energy to Children project to help in constructing • Medical institutions and healthcare and renovating children’s neighborhood organizations; playgrounds and sport facilities in the • Promoting the restoration of Russia’s Stavropol Region and children’s playgrounds historical and architectural monuments in the Saratov Region to promote a healthy and the development of culture, lifestyle among young adults. education, science and sports. • Energy Development, a Student Project Competition Sail of Hope The competition was held for the third time in 2011. Its main objectives include: In 2011, RusHydro continued to implements creating a favorable environment to unlock its long-term charity program, Sail of young people’s potential, assisting them Hope. The program is aimed at supporting in completing professional education and children from vulnerable families to unlock pursuing their most challenging professional their creative potential and talents, develop and career ambitions. Nine nominations were children’s sports and professional guidance. announced for the year’s theme: “Energy The Sail of Hope program combines social and Innovation” in three areas: the Modern adjustment and education, including: Hydro-power Industry and its Development professional training in areas related to the Prospects; the Smart Power Plant; and power industry and additional professional Future Energy. Nine winners were selected training. The program offers several avenues in a two-stage qualification contest among to pursue. 100 applicants from 41 Russian universities. • Support to Children’s Homes and The Company extended financial assistance Children’s Educational Institutions to St. Petersburg Technical University, the The Company provides financial assistance Moscow State Construction University and in building construction and maintenance the Higher School of Economics. and the purchase of equipment and teaching • Charitable Environmental Campaigns aids, etc. RusHydro also implements charity projects to develop new talents, build In 2011, the Company continued to pursue children’s playgrounds, support children’s its 7-year oBEREGai (Save!) campaign, sport clubs and organizations and socialize which engages volunteers (schoolchildren, disabled children. All RusHydro branches teachers and Company employees) to clean traditionally host New Year’s charity rivers and river banks where the Company’s parties and events dedicated to the Day of HPPs are located. Knowledge, Children’s Day, the Day of Water The Company also continued to work with and other public holidays. the Khingansky Preserve to pursue the In 2011, RusHydro supported children from Moy Zhyravlik (My Little Crane) project; 16 orphanages, 6 social adjustment centers arranged summer shifts in an environmental for minors and physically challenged children tourist camp in cooperation with the Zeysky and more than 10 sport schools and clubs. Preserve, the field school at the Volgo-

81 RusHydro Holding RusHydro Group’s corporate 2011 sustainability and social responsibility report

Case 1. The oBEREGai Campaign in campaign is based on their cooperation Dagestan to carry out social and environmental monitoring of the Bureysky hydro- Almost 100 students, teachers and system impact zone where experts from employees of the Irganayskaya HPP the Khingansky Preserve took an active cleaned up trash from the banks of the part. Irganay Reservoir. Volunteer teams could be seen everywhere along the road to During the program, children from Shamilkala. We visited a school where the Boarding School 5 in the Novobureyskaya ceremony to mark the achievements of this Village and Children’s Home 16 in the campaign was held. According to Saygid Novoraychikhinsky Village become Magomedov, an environmental engineer aware of the most interesting natural at the Irganayskaya HPP, participants phenomena – the Red-Crowned Crane and cleaned about 15 kilometers of coast the Oriental White Stork. These species line. The mountain reservoir is the only belong to the list of the most protected source of clean drinking water for the local species; and the Khingan Preserve is community and the place where people involved in artificially breeding them and love to relax, bathe and fish. The volunteers re-introducing them back to nature. removed 300 packs of trash during several According to zoologist Vyacheslav hours of work. The Shamilkalinsky school Kastrikin, “Recently, the areal census of team won the challenge cup, which it birds has been unavailable to preserves received from Magomed Abdurakhmanov, for financial reasons, but young volunteers Deputy Head of the Education Office of the this year helped us to cover more territory Untsukulsky District. The volunteers also with our registration than we usually received T-shirts, baseball caps, biscuits manage to do with our own efforts…” and drinks. The cordon at the Zhuravliny Preserve Source: Dagestanskaya­ Pravda, was the most exiting experience for the Makhach­kala, October 19th, 2011. children. Here, at Lake Kleshensky, the experts incubate birds from eggs brought from different parts of the world. The Case 2. Children Make Friends with children helped to take care of cranes, Cranes storks and swans: they fed small birds, The Bureyskaya HPP and the Khingansky observed their behavior, went fishing to Preserve have completed their joint envi­ bring them food and cleaned their cages. ron­mental and educational program They were made aware of their biology “Moy Zhuravlik 2010.” In the summer, and learned how to distinguish them in flight. children from the orphanage and the boarding school were made aware of the Oksana Suzko, Director of Children’s procedure for raising birds entered into House 16 of the Novoraychikhinsky the Red Book and helped to take care Village, said: “Along with the avalanche of small birds to prepare them for their of new knowledge, our children had an release in to nature. The campaign was unforgettable opportunity for recreation supported by RusHydro. and recovery”. Moy Zhuravlik is not the first joint project Source: Amurskaya Pravda, for Burea and Khingan ecologists. This Blagoveshensk, November 24th, 2010.

82 Social Responsibility RusHydro Group’s corporate 5.0 sustainability and social responsibility report

Akhtubinsk Floodplain Nature Preserve and Opera and Ballet Theater, the Krasnoyarsk the All-Russian environmental marathon State Opera and Ballet Theater, the Astrakhan “Samarskaya Luka”. Musical Theater and the Spivakov National Philharmonic Orchestra. • Children’s Sports Projects The Company also supported a request These projects involve fitting out gym from the administration and residents of halls and fitness centers with necessary Novosibirsk to join a project to restore the equipment, making repairs and maintaining historical memorial complex (including a sporting areas and sports events. As general memorial desk and panel), Conquerors of Ob, sponsor of Russia’s Whitewater Foundation, which is located next to the Novosibirskaya the Company provides essential support to HPP. The monument is dedicated to the its operations. Sail of Hope became a winner courage of hydro-power workers who con­ in the charity programs contest held as part structed the power plant in severe Siberian of the All-Russian Project “2011 Corporate winter conditions. Charity Leaders,” nominated as the best program to encourage local community The Company helps to finance events development and to upgrade the social dedicated to anniversary celebrations held environment in the regions in which it is in the cities in which it is present, such as present. the 20th anniversary of the Republic of Khakassia which included a concert by José Carreras. Culture, Knowledge and Socially- Being a flagship of the Russian economy, focused Projects RusHydro was most willing to support social RusHydro also participated in several projects initiatives launched by the government aimed at preserving moral and spiritual and set forth in the Russian President’s values and reviving historical traditions. social address. The Civil Initiative Fund One of them involved an integrated program STRATEGY-2020 acted as an international to renovate and develop the area of the public research center responsible for Sretensky Patriarchal Monastery of the implementing social modernization policy in Russian society. The Company extended Russian Orthodox Church (the Moscow charitable assistance to support such all- Patriarchate); the history of which is closely Russian projects as the All-Russian Frontline related to the history of the Russian state and People’s Program Strategy 2020. and the Orthodox Church. As part of the program to preserve cultural heritage, the Company provided support to In 2011, RusHydro charity and sponsorship the Moscow Easter Festival, the Mariinsky spending totaled RUR 1,111 million42.

42 Including costs approved by resolutions of the Board of Directors (Minutes No. 126 from May 26th, 2011 and Minutes No. 127 from June 28th, 2011)

83 6. Appendices

Appendix 1 Appendix 2

Appendix 3 Appendix 4 6. Appendices

Appendix 1 Appendix 2

Appendix 3 Appendix 4 RusHydro Holding RusHydro Group’s corporate 2011 sustainability and social responsibility report

Appendices

operations­ of sales companies and Appendix 1. non-production assets (research and About the Report development, etc.). and the Reporting The following criteria have been used to Process define the list of companies included in the scope of reporting: The corporate sustainability and social responsibility report (“the Report”) reflects • RusHydro’s controlling interest or strong material events in RusHydro’s operations impact on financials and operations of during the 2011 calendar year (from January companies within RusHydro Holding; 1st to December 31st). the Report includes companies in which RusHydro owns 51% or more, operating in This is the Company’s fourth non-financial power generation or facility construction; report. The previous report was released in 2011 and contained information about the • Strong environmental impact of facilities Company’s operations during the 2010 ca­ and infrastructure as produced by hydro- lendar year. The Company reports its non- power generating facilities; projects for new financial performance on an annual basis. facility and infrastructure construction;­ The report is prepared in accordance with • Significant social impact as produced by the Global Reporting Initiative (GRI) Electric projects for new facility and infrastructure Utility Sector Supplement. construction; companies with a large head count (more than 50 employees). The Report’s scope is set forth as follows: The Report reflects operations of RusHydro • Quantitative data: Holding companies operating within the –– Economic and production figures for Russian Federation; foreign assets are RusHydro Holding (including limita­ only mentioned when the Company’s scale tions as contained herein); of operations is described, along with key changes during the reporting period. –– Environmental, social and production As compared with the previous report, figures across RusHydro’s branches the scope of reporting has been expanded that the Company uses to evaluate to present corporate actions across both performance; RusHydro branches and a number of its –– For a number of SDCs: certain produc­ SDCs. tion, environmental and social figures. The scope of reporting does not include • DMA: information contained in the Report assets acquired in 2011; for core companies, applies to the Central Office of RusHydro, only brief summaries are provided. RusHydro branches and generating SDCs; Considering the information above, the scope • Descriptive information and certain of reporting for 2011 includes the following quanti­tativ­ e data are provided for the companies:

86 Appendices RusHydro Group’s corporate 6.0 sustainability and social responsibility report

RusHydro’s branches JSC Renewable Energy Engineering Center Bureyskaya HPP JSC Nizhne-Bureyskaya HPP Volzhskaya HPP JSC Nizhne-Zeyskaya HPP Votkinskaya HPP JSC Nizhne-Kurejskaya HPP Dagestan Branch JSC Far East Wind Power Plant Zhigulevskaya HPP JSC Zagorskaya PSHPP-2 Zagorskaya PSHPP JSC Zaramagskiye HPPs Zeiskaya HPP JSC South Yakutia HGC Irganaiskaya HPP JSC Sulakskiy HydroCascade Kabardino-Balkarian Branch JSC Chirkeigesstroy Kamskaya HPP JSC Hydro-Engineering Siberia Karachay-Cherkessian Branch JSC Malye HPPs of Dagestan Cascade of Verkhnevolzhskiye HPPs LLC Malye HPPs of Karachaevo-Cherkessia Cascade of Kubanskiye HPPs LLC Fiagdonskaya Malaya HPP Nizhegorodskaya HPP LLC Verkhnebalkarskaya Malaya HPP Novosibirskaya HPP JSC Malye HPPs of Altai and JSC Saratovskaya HPP Boguchanskaya HPP Sayano-Shushenskaya HPP Northern Ossetian Branch Production figures Cheboksarskaya HPP (installed capacity, electricity output): JSC Geoterm SDCs: SC Kolymaenergo’s branch – Kolymskaya HPP Social figures (head count): CJSC International Power Corporation JSC Leningradskaya PSHPP JSC Pauzhetskaya GeoPP JSC Karachaevo-Cherkessia Hydro-power Company JSC Geoterm Environmental figures (emissions, effluents and waste): JSC Kolymaenergo JSC Geoterm Pavlodolskaya HPP JSC Kolymaenergo’s branch – JSC KamHGC Kolymskaya HPP

JSC Karachaevo-Cherkessia Hydro-power

JSC Pauzhetskaya GeoPP 9 5 Company UES 3 9 87

4 8 3 2 7 0 1 RusHydro Holding RusHydro Group’s corporate 2011 sustainability and social responsibility report

Appendix 2. GRI Content Index

Standard Disclosures and GRI Performance Indicators as Presented in the Report

Reporting Page Availability element/GRI Indicator description of the on the web Additional information link/ Direct answer indicators Report site

Partial availability for 1.2 2, 1.1–1.2 Strategy and analysis * (see the Industry Context 13–26 and Strategy section)

6–13, Sections: Company in 2011, 26, 81 Corporate Governance 2nd 2.1–2.10 Organizational profile * (ownership structure), page Support for Territories of the of Presence (awards) cover

Installed capacity, broken down by EU1, EU2 13 * Company in 2011 section primary energy source and regulatory regime

3.1–3.3, On the Report and Reporting 3.6–3.8, Report profile 17 Process section 3.11

Head of the Corporate Governance Department 3.4 Contact point Maxim V. Zavalko [email protected] +7 (495)225-3232, ext. 1025

The Report’s contents have been defined by identifying significant issues in the reports of companies operating in the industry and (partially) issues discussed with stakeholders Process for defining 3.5 during the reporting report content period (during hearings on environmental impact assessment, performance of Technology Platforms, and international organizations that the Company is a member of)

88 Appendices RusHydro Group’s corporate 6.0 sustainability and social responsibility report

Reporting Page Availability element/GRI Indicator description of the on the web Additional information link/ Direct answer indicators Report site

Protocols of the GRI Guidelines Data measurement have been used, in some cases 3.9 techniques and the not fully (indicators have been bases of calculations partially disclosed)

Reasons for re- No re-statements have been 3.10 statements of used information

Table identifying the location 3.12 88 of Standard Disclosures in the report

Policy and current The Company has used no practice with regard external assurance for its first 3.13 to seeking external four reports, but may use assurance for this type of assurance during the report the next reporting period

Corporate Governance section, 4.1–4.3, Corporate Governance 26–27 • indicators 4.1 and 4.2 – see the 4.5, 4.6 annual report

Mechanisms for shareholders and employees to provide Section: Social Support for 4.4 78 recommendations or Families of… direction to the highest governance body

A member of the Board of Directors is V. I. Danilov- Danilyan, a prominent sustainable development expert, Process for determining whose involvement ensures due the qualifications and attention to the issue concerned expertise of members here. Overall, the qualifications 4.7 of the highest 26 and expertise of candidates governance body nominated to the Board for guiding the of Directors are defined by their organization’s strategy track record. The Company

uses no special criteria to

define qualifications regarding

environmental or social issues. 9 5 3 9 89

4 8 3 2 7 0 1 RusHydro Holding RusHydro Group’s corporate 2011 sustainability and social responsibility report

Reporting Page Availability element/GRI Indicator description of the on the web Additional information link/ Direct answer indicators Report site

The Code of Corporate Ethics was approved (see 2010 annual Internally developed report) statements of mission The key documents and updates 4.8 • or values, codes of aimed at shareholders and conduct, etc. investors are made available on the Company’s web site at www. rushydro.ru/investors/disclosure

Procedures of the highest governance body for overseeing the organization’s Highest Governance Bodies 4.9 identification and 26–27 section management of economic, environmental and social performance

Processes for Implementation of the evaluating the highest Company’s Strategy and 4.10 17 governance body’s own Sustainable Development performance Objectives section

Explanation of whether and how the precautionary Construction of Hydro-power 4.11 60 approach or principle Facilities section is addressed by the organization

Externally developed economic, To date, the Company has not environmental, and subscribed to or endorsed any social charters, charters or initiatives known 4.12 principles or other in Russia, but is planning to do initiatives to which the so during the next reporting organization subscribes period. or endorses

Memberships in associations (such as Alignment of the Company’s industry associations) 4.13 17 Strategy with Sustainable and/or national/ Development Objectives section international advocacy organizations

90 Appendices RusHydro Group’s corporate 6.0 sustainability and social responsibility report

Reporting Page Availability element/GRI Indicator description of the on the web Additional information link/ Direct answer indicators Report site

The Company is engaged with key stakeholders on a regular basis as part of the organizations and communication platforms, public 17, 18, hearings on environmental Stakeholder 24, 38, impact assessment, etc. 4.14–4.17 * engagement 57, 60, Examples of such engagements 81 and actions taken based on it are available in this report. No special measures have been taken in the reporting period related to the development of the Report.

Management Disclosure Approach

Economic performance The Company in 2011 and Market presence Economic 13, 14 Industry Context and Strategy Indirect economic sections impacts

Management approach to ensure short- and Section: Ensuring Reliability EU6 long-term electricity 33, 40 and Safety…; Sub-section: availability and Supply Chain reliability

Demand-side management programs aimed at different Energy Efficiency and New EU7 consumer groups 44 Generation section and at changing the electricity consumption model

Research and development activity and expenditures Innovative Development EU8 aimed at providing 18 * Program sub-section

reliable electricity and

promoting sustainable

development 9 5 3 9 91

4 8 3 2 7 0 1 RusHydro Holding RusHydro Group’s corporate 2011 sustainability and social responsibility report

Reporting Page Availability element/GRI Indicator description of the on the web Additional information link/ Direct answer indicators Report site

Materials, water, bio- diversity Emissions. effluents Preserving Natural Resources Environment 55 and waste and the Environment section Products and services, transport, overall

Employment, labor/ management relations, Labor occupational health 71 Social Responsibility section practices and safety, training and education, diversity and equal opportunities

Personnel Potential Processes to ensure the Development, Motivational EU14 availability of a skilled 75–77 System and Social Policy workforce sub-sections

The Company’s key approach Investment and to observing human rights procurement practices, is compliance with all Russian Human non-discrimination, legislative requirements. rights freedom of association The Company does not operate and collective in countries with a high risk bargaining of human right violations.

Community, corruption, public policy, anti- 38, 54, Society competitive behavior, 81 compliance

Stakeholder participation in the decision-making Construction of Hydro-power EU19 process related to 60 * Generating Facilities sub-section energy planning and infrastructure development

Approach to managing Construction of Hydro-power the impact of the EU20 60 Generating Facilities displacement of power sub-section industry infrastructure

92 Appendices RusHydro Group’s corporate 6.0 sustainability and social responsibility report

Reporting Page Availability element/GRI Indicator description of the on the web Additional information link/ Direct answer indicators Report site

Contingency planning measures, disaster/ emergency Section: Ensuring Reliability EU21 management plan 33 and Safety… and training programs, and recovery/ restoration plans

Product Section: Ensuring Reliability 33 responsibility and Safety…

Financial implications and other risks and Section: Ensuring Reliability ЕС2 opportunities for the 33 and Safety… organization’s activities due to climate change

Policy, practices, and the proportion of spending on locally- ЕС6 40 Sub-section: Supply Chain based suppliers at significant operating locations

Understanding and Implementation of the describing significant Company’s Strategy and ЕС9 indirect economic 17 Sustainable Development impacts, including the Objectives section extent of the impacts

Planned capacity Sections / sub-sections: Current against projected State and Outlook of Hydro- electricity demand over 13, 44, power Generation…, Energy EU10 the long-term, broken 60 Efficiency and New Generation, down by energy source Construction of Hydro-power and regulatory regime Generating Facilities

Initiatives to provide Program Implementation EN6 energy-efficient … 46 in 2011 sub-section products and services

Water sources Company withdraws no water

EN9 significantly affected by 8, 9, 16 and is a water consumer

the withdrawal of water instead 9 5 3 9 93

4 8 3 2 7 0 1 RusHydro Holding RusHydro Group’s corporate 2011 sustainability and social responsibility report

Reporting Page Availability element/GRI Indicator description of the on the web Additional information link/ Direct answer indicators Report site

Strategies Long-Term Impact of Hydro- EN14 for managing 57 power sub-section bio-diversity impacts

Initiatives to reduce Sub-sections: New Generation, EN18 greenhouse gas 46,54 Contribution to International emissions Cooperation…

Environmental Policy ЕN20 NOx, SOx air emissions 61–62 Implementation

Total water discharge ЕN21 63 See above by quality

Total weight of waste EN22 by type and disposal 65 See above method

Initiatives to mitigate Sub-sections: New Generation, environmental impacts ЕN26 46, 54 Contribution to International of products and Cooperation… services

Monetary value of significant fines … Environmental Policy EN28 for non-compliance 61–62 Implementation with environmental laws and regulations

Total environmental EN30 protection expenditures 61–62 See above and investments

Total workforce by employment type, LA1 71 Employee Description employment contract and region

Benefits provided to full-time employees that are not provided Motivational System and Social LA3 76–77 to temporary or part- Policy time employees, by major operation

94 Appendices RusHydro Group’s corporate 6.0 sustainability and social responsibility report

Reporting Page Availability element/GRI Indicator description of the on the web Additional information link/ Direct answer indicators Report site

LA7 Rates of injury, etc. 73 Occupational Safety

Programs for skill Human Resources LA11 management and 75 Development lifelong learning

Under Russian Labor Code (Article 413, Illegal Strikes) and under Article 55 of the Russian Constitution, strikes in companies directly engaged in providing vital services to the population (including power) are illegal and are not allowed.

The Company reserves its employees’ right to meet and create organizations Operations identified that represent their in which the right interests. A system has to exercise freedom been established to HR5 of association and represent employees’ collective bargaining interests regarding social may be at significant aspects of employment. risk… Trade unions are engaged in social dialogue with the Employer .

Existing Collective Bargaining Agreements (of the Company’s branches) are among the best in the industry, which helps to minimize the risk of disruptions caused by strikes and large-scale redundancies.

Nature, scope, and effectiveness of any Social Support for Families programs and practices of…, Support for Territories SO1 that assess and 78, 81 in which the Company

manage the impact

is present of operations on

communities 9 5 3 9 95

4 8 3 2 7 0 1 RusHydro Holding RusHydro Group’s corporate 2011 sustainability and social responsibility report

Reporting Page Availability element/GRI Indicator description of the on the web Additional information link/ Direct answer indicators Report site

Public policy positions and participation New Generation, Engagement SO5 18, 46 in public policy in Technological Platforms development and lobbying

Life cycle stages in which the health and safety Construction of Hydro-power PR1 impact of products 60 Facilities and services are assessed for improvement

The following indicators are not relevant for The following indicators are not material the Company: EU3, EU4, EU5, EU9, EU11, for the Company: EU23, EU24, EC7, EN16, EU12, EN27, EU22, PR3, PR4, PR6, EU26 – EN17, EN19, EN23, EN24, EN29, LA8, HR6, EU29. HR7, PR8.

Appendix 3. Electric Power Market On Electricity There are numerous sectors in the wholesale and Capacity Markets market with different deal conditions and delivery terms: the regulated agreements There are two types of commodities traded sector, non-regulated agreements segment, the day-ahead market and the balancing on the wholesale market: electricity and market. capacity. Sellers and buyers are generating companies, electricity export/import opera­ Prices (tariffs) for delivery under regulated tors, sales companies, grid companies and agreements are calculated under price large consumers. Wholesale market subjects indexation formulas set forth by a federal can act both as sellers and buyers. regulator.

96 Appendices RusHydro Group’s corporate 6.0 sustainability and social responsibility report

For electricity and capacity producers provide it to individual consumers and equal included in aggregate balance, supplies consumption categories. under regulated agreements may not On the long-term market, competitive exceed 35% of the total amount of supplies capacity selection is based on delivery of electricity (capacity) to the wholesale period demand forecast prepared by the market, as defined by the balance resolution System Operator. If actual demand for for the respective producer. capacity exceeds the forecast, adjustments Electricity not covered by regulated to competitive selection are made. agreements is sold at non-regulated prices During the competitive selection procedure, under non-regulated agreements, on the preferred capacity is that commissioned the day-ahead market and the balancing under capacity supply agreements (CAAs) market. and agreements with NPPs and HPPs similar Under non-regulated agreements, market to it. Capacity not selected under the players are free to define their contractors, competitive procedure is not paid for except delivery prices and amounts. for capacity of generating facilities needed On the day-ahead market, the commercial to maintain the technological regimes of operator (OJSC ATS) is responsible for the operations of the power system or heat competitive selection of price bids provided energy supplies (forced generators). The by supplies and buyers one day ahead of capacity and electricity of forced generators actual electricity delivery. The price is set by are paid for under the tariff set by the balancing demand with supply and applies to Russian Federal Tariff Service (FTS). all market players. In particular, the entire capacity of HPPs Electricity volumes sold under bilateral located in the second pricing zone is sold agreements and on the day-ahead market under the tariff only provided that there comprise planned electricity consumption. is a Regulated Agreement in place for the However, actual consumption is always respective HPP in the delivery year signed to different from planned levels. Discrepancies ensure supplies to individual consumers and from planned output/consumption are traded equal categories. in real time on the balancing market. In zones with limited competition, ceilings on capacity prices are set for the competitive selection procedure. Capacity Market In December 2010, the first campaign to sell Since 2008, capacity trading has been based CAAs was successfully completed. A heat on competitive capacity selection carried out power generating facility commissioned by the System Operator, making it possible under a capacity supply agreement is to sell part of capacity at non-regulated guaranteed to receive capacity payments prices. for a period of ten years (15 years for On January 1st, 2011, a new competitive agreements similar to CAAs that are signed capacity selection model was introduced – for NPPs and HPPs), which ensures CapEx the long-term capacity market. Starting this and OpEx reimbursement. RusHydro has

year, capacity under regulated agreements signed capacity supply agreements similar

9 5 is supplied only in the amounts needed to to CAAs. 3 9 97

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Appendix 4. Tariff Service’s register of Last Resort Reference Information Suppliers. LRSs are obliged to sign power supply agreements with every client that Abbreviations contacts them provided that the latter have a proper connection to electric grids. The RES – renewable energy sources LRS status applies to a certain territory as RRDIHE – Russian Research and set forth by the register. Development Institute of Hydro-power Pump storage hydro-power plant – Equipment a type of hydro-power plant used to PSHPP – pump storage hydro-power plant compensate for daily curves in the electricity load schedule. PSHPPs both generate and HPP – hydro-power plant consume electricity. EF – efficiency factor Hydrobionts – sea and fresh-water KPI – key performance indicator organisms that constantly live in water. Amphibians also pertain to hydrobionts. NIIES – JSC Research Institute for Energy Construction Competitive capacity selection – a market mechanism that enables wholesale market EIA – environmental impact assessment players who have qualified for the procedure WEM – wholesale electricity and capacity to bid for capacity sales in an amount that market does not exceed the maximum available capacity accounted for by the Russian REM – retail electricity and capacity market Federal Tariff Service in the forecast balance SSHPP – the Sayano-Shushenskaya HPP for the respective regulating period. Buyers are obliged to pay for the entire capacity TRaM – technical rehabilitation and selected under this procedure in their price modernization zone. Suppliers in each price zone are jointly FTP – federal target program responsible for fulfilling obligations to supply capacity. Capacity – special commodity which by Metric Symbols purchasing it market players obtain the right GW – gigawatt; 1 GW = 1,000 MW to demand that the seller maintain generating (megawatts) equipment ready to produce electricity of a defined quality in the amount needed to kWh – kilowatt-hour meet the market player’s electricity demand. Gcal – gigacalorie; 1 Gcal= 1,000 cal Generator capacity regulating range – range of active capacity changes for the generator provided for by regulating devices. Key Terms and Notions Systemic services – maintaining required Pond – part of a water facility (river or reliability and quality of operations for the channel) adjacent to a dam or gateway. power system. Last resort supplier – a power sales System Operator of the Unified Energy company included in the Russian Federal System – a specialized organization

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solely responsible for prompt centralized the accumulation of water; 2) differential dispatching and management of the Russian between the levels of the standard headwater Unified Energy System. elevation and the level of water at any moment in the RD phase, in m. Long-term average annual output of electricity – arithmetic mean of electricity Installed capacity – the largest active output by a hydro-power plant for a electric capacity allowing an electric unit considerable period of time (at least 40 to to operate for a long period of time with 60 years). no extra load as set forth by technical regulations or the equipment passport. The Reservoir drawdown – 1) a decrease in the installed capacity of an energy system is the reservoir’s water level when consumption is total nominal active capacity of generators larger than what the reservoir obtains from

at power plants that constitute the system.

9 5 3 9 99

4 8 3 2 7 0 1 51, Arhitektora Vlasova street, Moscow, 117393, Russia +7 495 225 32 32, +7 495 984 63 29 [email protected]