ANNUAL REPORT

2018 Preliminary approved by the Board of Directors of Mosenergo Minutes No. 63 of «06» may 2019

MOSENERGO ANNUAL REPORT 2018

Director General of Gazprom Energoholding LLC, Mosenergo managing company

Denis Fedorov CONTENTS 12 SUSTAINABLE DEVELOPMENT 7 page 64 COMPANY DEVELOPMENT 12.1 Headcount and Staff Structure 66 12.2 Corporate Culture 67 page 23 12.3 Staff Training and Development 68 12.4 Motivation and Social Programs 69 12.5 Occupational Health and Safety 70 1 4 8 10 12.6 Environmental Protection 72 Addresses INVESTMENT CORPORATE GOVERNANCE 13 page 2 APPEAL RESULTS OF page 43 ADDITIONAL INFORMATION page 12 OPERATING 10.1 Memorandum on Gazprom PJSC’s AND APPENDICES ACTIVITIES intentions regarding controlled companies, namely Mosenergo PJSC, MOEK PJSC, OGK-2 PJSC, page 76 page 27 and TGK-1 PJSC 44 13.1 Information Policy 78 10.2 Underlying Principles 44 8.1 Power generation 28 13.2 Mosenergo History 78 10.3 General Meeting of Shareholders 45 8.2 Sales 31 13.3 Financial Statements according to IFRS 82 10.4 Board of Directors 46 8.3 Fuel Supply 33 13.4 Glossary 86 2 5 10.4.1 Members of the Board of Directors 47 8.4 Investment and Maintenance 13.5 Contact Information 87 10.4.2 Committees of the Board of Directors 49 MOSENERGO INFORMATION Activities 34 8.4.1 Investments 34 10.5 Executive Bodies 51 PROFILE FOR INVESTORS 8.4.2 Maintenance and Repairs 36 10.6 Board of Internal Auditors 51 10.7 Remuneration 52 page 6 page 14 3 6 9 11 BUSINESS KEY CORPORATE ANALYSIS OF FINANCIAL RISK MANAGEMENT MODEL EVENTS OF 2018 RESULTS page 54 page 38 page 10 page 21 11.1 Mosenergo’s Risk Management System 56 9.1 Revenue 40 11.2 Substantial risks for Mosenergo during the reporting period 57 9.2 Prime Cost 40 11.2.1 Industry Risks 57 9.3 Other Incomes and Costs 40 11.2.2 Production Risks 58 9.4 Net Profit 41 11.2.3 Financial Risks 60 9.5 Liquidity and Loan Portfolio Management 41 11.2.4 Legal Risks 60 9.6 Balance Sheet Analysis 41 11.2.5 Risks related to activities of Mosenergo 61 9.7 Financial Position Indicators 41 11.3 Ensuring the compliance of activities with the requirements of anti-corruption laws aimed against illegal use of insider information and market manipulation 62 MOSENERGO | 3 MOSENERGO | 5 Address of the Chairman of the Address of the Managing Mosenergo Board of Directors Director « IN 2019, THE COMPANY CONTINUES TO STRIVE FOR FAIL-SAFE OPERATION OF INDUSTRIAL EQUIPMENT AND INCREASING OPERATIONAL EFFICIENCY « AND FINANCIAL STABILITY. I AM CONFIDENT THAT, WITH JOINT EFFORT GAZPROM STRIVES TO ACHIEVE SUCCESSFUL AND EFFECTIVE FROM MOSENERGO’S MANAGEMENT AND EMPLOYEES, WE SHOULD BE DEVELOPMENT OF MOSENERGO IN THE INTEREST OF ALL SHAREHOLDERS. ABLE TO REACH THE OBJECTIVES SET FOR THE COMPANY, WHICH WILL I AM CONFIDENT THAT THE JOINT WORK OF THE BOARD OF DIRECTORS FURTHER SOLIDIFY MOSENERGO AS THE LEADER OF THE RUSSIAN POWER AND MANAGEMENT, WITH SUPPORT FROM THE SHAREHOLDERS, WILL MAKE INDUSTRY THE COMPANY MORE PROFITABLE AND SUCCESSFUL GOING FORWARD « « Dear Shareholders, Dear Shareholders, One of the most important events of by 6% to RUB 23.77 bln while the Mosenergo the BB+ rating with a In 2018, just like in previous years, improvement of corporate culture. at TPP-22. The Company is currently 2018 was the approval of Gazprom’s gross profit increased by 1.1% and positive outlook. Later that year, in Mosenergo successfully solved the In 2018, high professionalism working to transfer the power plant Strategy for Power Industry for the amounted to RUB 199.05 bln. June, the rating was increased to task of ensuring stable and fail-safe and determination of Mosenergo to oil-gas fuel management and operation of production facilities to eliminate burning coal as fuel years 2018-2027 by the Gazprom In accordance with Gazprom’s BBB- rating with a stable outlook. employees have been confirmed by which provide consumers from altogether. Board of Directors. For the past ten Strategy for Power Industry for the In May 2018, the BBB- rating with a the results of competitions within Moscow with electricity and heat. years, Gazprom has created Russia’s years 2018-2027, a key strategic goal stable outlook given to Mosenergo the industry. Staff of TPP-22 and Mosenergo’s management undertakes Electricity output by Mosenergo largest vertically integrated energy of providing steady profit increase by Fitch remained unchanged. TPP-25 took the first and second measures caused by a decrease power plants increased by 0.8% and place respectively in the competition in revenues from capacity sales, holding which unites assets in the and retain high level of reliability of In November 2018, Russian rating to 58.32 billion kWh, compared to the of operating personnel teams held which is linked to termination of field of electrical and thermal power providing consumers with electrical agency Expert assigned Mosenergo same figure of 2017. At the same time, by Gazprom Energoholding Group. capacity contracts. Mosenergo production, as well as thermal power. the ruAAA credit rating with a stable total volume of electricity generated Employees of these two power plans to strengthen its financial power transmission and sales. Key The Company continues to outlook. Rating agency experts using combined cycle power units plants occupied seven top spots in stability by implementing several production companies of Gazprom modernize equipment and noted Mosenergo’s high quality increased by 3% and amounted to the professional ranking. Employees promising projects. Mosenergo’s Group currently provide regular operation aimed at increasing of corporate governance, strong 17 billion kWh. Heat supply from of Mosenergo became winners of 2027 Development Program electrical power and are financially operating efficiency. Mosenergo market positioning, importance of collectors of thermal power plants the Contest of professional skills of presupposes participation in a stable, both as separate entities and is implementing several promising the company for the economy of and municipal and local power plants environmental protection experts, brand new TPP modernization as a group. projects aimed at securing financial Moscow and Moscow Oblast in equaled 82.3 million Gcal which is the Young Specialist and Rationalizer program, an increase in operating Mosenergo was Gazprom’s first asset stability, increasing gross profits, and terms of infrastructure, high level of 3.6% more than last year. Contest of Gazprom Energoholding efficiency due to decommissioning in the power industry and the first decreasing fixed costs. operating margin, and low debt. Mosenergo achieved success on Group, as well as the International of inefficient capacities, an increase the wholesale market as well. The Competition of Scientific, Technical in paid capacities of combined-cycle Russian company to undertake large- As part of implementing programs Mosenergo is consistently working to company ranked first in the Market and Innovative Developments held power units, an increase in service scale construction of new combined aimed at modernizing equipment, minimize its environmental impact. Counsel association rating which under the auspices of the Ministry of intervals and normative periods of cycle power units. Seven large special attention is paid to In 2018, the company received the reflects the performance of power- Energy of the Russian Federation. equipment operation, implementation combined cycle power units with developing cooperation with Russian Moscow Government award in the generating equipment manufactured of a program aimed at improving the total capacity of 2.9 GW have manufacturers. Thus, reconstruction field of environmental protection for One of the Company’s key areas of by various companies in the industry. activities is environmental protection. primary cost-performance ratio of been commissioned at Company’s of TPP-22’s power unit 9 is the project involving the transfer of In recent years, Mosenergo has In 2018, Mosenergo confirmed TPPs, switching of heat load from power plants. The share of high- underway. After the reconstruction, TPP-22 from coal to natural gas. done an enormous job of optimizing the compliance of the Company’s MOEK boilers to Mosenergo sources, efficient capacities in Mosenergo’s commissioning of the most powerful Dear Shareholders, Gazprom strives current equipment and ensuring Environmental Management System and optimization of water-chemistry total output is increasing annually. In extraction turbine in Russia, T-295, is to achieve successful and effective its efficient use and operation. As a (EMS) to ISO 14001:2015. Mosenergo conditions at TPP-21, TPP-23, and 2018, it amounted to 29.1%. scheduled for 2021. development of Mosenergo in the result of this, electricity generation constantly increases the level of TPP-25. Last year, Mosenergo managed Successful development of interest of all shareholders. I am fuel rate has decreased significantly production’s environmental safety In 2019, the Company continues to perform well financially despite Mosenergo under the leadership confident that the joint work of the and amounted to 227 g per kWh. This and decreases harmful environmental to strive for fail-safe operation of the limiting factor of termination of of Gazprom is underlined by Board of Directors and management, is still one of the lowest values in the impact of power plants. In 2018, industrial equipment and increasing contracts regarding the provision of high ratings given by the largest with support from the shareholders, entire heat generation industry. thanks to environmental activities operational efficiency and financial combined cycle power units at TPP- international and Russian rating will make the company more Mosenergo strives to ensure implemented, the pollutant emissions stability. I am confident that, with joint 21 and TPP-27. This is the reason agencies. In February 2018, Standard profitable and successful going sustainable development of its decreased throughout the company, effort from Mosenergo’s management why the net profit in 2018 decreased & Poor’s once again assigned forward. business, paying plenty of attention despite an increase in electricity and and employees, we should be able to both financial and social aspects. heat generation. Last year, the share to reach the objectives set for the Among the key areas of Mosenergo’s of coal in Mosenergo’s fuel balance Company, which will further solidify activities are industrial and labor decreased to 0.79%, compared to Mosenergo as the leader of the security, staff development, and 1.51% in 2017. Coal is used as fuel only Russian power industry.

Chairman of the Mosenergo Board of Directors, Managing Director of Mosenergo, Kirill Seleznev Aleхander Butko

4 | ANNUAL REPORT 2018 INSTALLED ELECTRIC CAPACITY AT THE END 12,798 OF THE PERIOD MW

199,047 REVENUE 2018 RUB million

6 | ANNUAL REPORT 2018 MOSENERGO | 9

Mosenergo is the largest regional Mosenergo is the climatic development All Mosenergo’s power plants use power-generating company in the leader. The Company’s TPPs utilize ecologically-compliant fuel gas. Russian Federation and one of the the automated atmospheric pollutant largest heat-generating companies in emission monitoring system. the world. « « MOSENERGO OWNS WITH AN INSTALLED Mosenergo is also the leader in Power plants owned by Mosenergo Mosenergo develops the largest ELECTRICAL CAPACITY OF fuel efficiency. It demonstrates the provide over 60% of electricity consumed network of charging stations for lowest specific power-supply fuel in the Moscow Region and more than 90% electric cars and has these cars 12.8 GW rate among all power-generating of heat necessary to supply the entire city for internal use. AND A HEAT companies in Russia. This is due to of Moscow. CAPACITY OF combined generation of heat and 15 43.1 THOU. GCAL / H electric energy. POWER PLANTS

Key performance indicators Key financial indicators1, RUB million

Change 2017 2018 Change 2018/2017 2017 2018 2018/2017 Revenue 196,825 199,047 +1.1% Installed electric capacity at the end of the period, MW 12,873 12,798 -0.6% Prime cost (163,191) (170,705) +4.6% Installed heat capacity at the end of the period, Gcal / h 42,761 43,136 +0.9% Sales profit 33,634 28,341 -15.7% Gross electricity generation, million kWh 57,864 58,316 +0.8% Net profit 25,282 23,770 -6.0% Electricity output, million kWh 52,999 53,456 +0.9% 31.12.2017 31.12.2018 Change 2018/2017 Total electricity sales, million kWh 60,251 60,195 -0.1% Non-current assets 191,270 203,934 +6.6% Heat output, thou. Gcal 79,447 82,291 +3.6% Current assets 88,471 88,872 +0.5% Electricity generation fuel rate, gfe / kWh 226.3 227.0 +0.3% Long-term liabilities 23,476 19,489 -17.0% Heat generation fuel rate1, kg / Gcal 163.6 163.4 -0.1% Short-term liabilities 28,130 16,810 -40.2%

1 Including boilers 1 According to RAS

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FUEL SUPPLY PRODUCTION SALES COAL «

WHOLESALE ELECTRICITY FUEL MARKET: OIL « ∞∞ Day-ahead market ∞∞ Regulated contracts ∞∞ Balancing markets DIESEL « ELECTRIC ENERGY « FUEL « AND POWER GRID CAPACITY MARKET: COMPANIES « ∞∞ Capacity supply contracts ∞∞ Competitive capacity outtake GAS TPPs ∞∞ Regulated contracts « ∞∞ Forced mode «

MAINTENANCE HEAT ENERGY « & REPAIRS « « « «

BOILER STATIONS CONSUMERS MOSENERGO | 13 Financial performance EBITDA (RUB million) and EBITDA margin (%)

70 000 25%

60 000 22.4% 21.3% 20% 44,093 50 000 17.6% 42,421 33,513 40 000 14.7% 15% 10.1% 24,129 30 000 10% 16,056 20 000 5% 10 000

0 0 2014 2015 2016 2017 2018

EBITDA, RUB million

EBITDA margin

Low debt

70 000 3 2.4 60 000 1.8 2 50 000 44,207 1 39,151 1 40 000 33,815 0.1 30 000 отр. 0

20 000 -1 10 000 2,790 -2 0 2014 2015 2016 2017 2018 -3 -10 000

-20 000 -10 964 -4

net debt, RUB million

net debt / EBITDA margin

High fuel efficiency Power generation fuel rate, gfe / kWh

300 241.3 250 232.6 232.3 226.3 227.0

200

150

100

50

0 2014 2015 2016 2017 2018

1 According to RAS and the Company’s management accounting MOSENERGO | 15 MOSENERGO | 17 Authorized capital1

Mosenergo’s shares are listed on the A1 quotation list of the Moscow Exchange. 3.5 400.000.000 Mosenergo’s depositary receipts are listed in the over-the-counter markets of Europe and the USA. MOSENERGO’S AUTHORIZED CAPITAL IS Stock tickers. 350.000.000

∞∞ Moscow Exchange – MSNG; AGMS, Operating results, dividend ∞∞ Bloomberg – MSNG; 2017 approval

39,749,359,700 ∞∞ Level 1 Program Code on the OTC market of the New York Stock 3 300.000.000 RUB Exchange – AOMOY; ∞∞ Level 1 Program Code (WKN) on the OTC market of the Frankfurt Stock Exchange – 899416 39,749,359,700 250.000.000 PCS Credit ratings IFRS 2017 2.5 ORDINARY REGISTERED IFRS, 6 200.000.0001 Date of months 2018 UNCERTIFICATED SHARES, Rating agency Rating score EACH WITH A PAR VALUE assignment IFRS, 3 months 2018 OF 1 RUB Fitch Ratings BBB-/stable outlook 09.11.2018 RA experts assigns 150.000.000 RAS 2017 ruAAA rating to Standard&Poor’s BBB-/stable outlook 25.06.2018 Standard & Poor’s Mosenergo improves Mosenergo’s rating to BBB- Expert Rating ruAAA/stable outlook 09.11.2018 Agency 2 100.000.000

50.000.000 20.05%

IFRS, 9 months 2018 1.5 0 Equity Market in 2018 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec The shares of Mosenergo, the key Mosenergo shares were sold in MICEX index and electric power large volumes and were of periodic index showed negative dynamics. nature, with active phases of sales in Negative dynamics of the Russian the beginning of each quarter. The stock market in general and graph below represents upswings Traded value, RUB

Mosenergo shares in particular of trading volumes of stocks (left Share price, RUB is linked to introduction of new axis is the price per share, right economic sanctions against several axis is the trading volume) in the Russian corporations and their beginning of Q2, Q3, and Q4. 53.50% 26.45% shareholders in the first six months Despite the active trading, average of 2018. This lead to a substantial daily trading volume in 2018 was cash outflow from the Russian stock about RUB 43 mln, which is worse market, particularly of stocks owned than in 2017 (over RUB 65 mln). One Gazprom Energoholding LLC by non-residents. Another reason for noteworthy fact was the substantial the cash outflow was the increase trading volume of Mosenergo shares Dividend Policy of interest rates by the US Federal during the last two trading days of The City of Moscow represented by the Department of Municipal Mosenergo’s Dividend Policy was The amount of dividends is The following principles are Reserve System. Withdrawal of funds 2018. The trading volume was RUB Property approved by the Board of Directors calculated from the Company’s adhered to when calculating the from the Russian market stopped 0.46 bln, or 4.3% of the entire annual on September 12, 2017. net profit as reflected in the annual amount of dividends: and transformed into cash inflow at share turnover. Other Individuals and Legal Entities Mosenergo’s Dividend Policy has financial statements produced in ∞∞ transparency of the mechanism the end of the year. been developed in compliance accordance with the requirements for defining the dividend with the applicable laws of the of the laws of the Russian payment; Federation. Russian Federation, the Code of ∞∞ balance between short-term Corporate Conduct recommended (immediate income) and long- THE MAXIMUM PRICE by the Central Bank of the Russian term (Company development) OF A MOSENERGO SHARE Federation, Mosenergo’s Articles of shareholder interests; 2.9775 RUB Association, and Mosenergo’s internal ∞∞ focus on increasing the THROUGHOUT 2018 WAS documents. Company’s investment appeal and market capitalization. 1 As of December 31, 2018

16 | ANNUAL REPORT 2018 MOSENERGO | 19

The calculation of dividends is ∞∞ part of the net profit, as After the General Meeting of carried out in the following order: recommended by the Board Shareholders makes the decision, the ∞∞ part of the net profit is allocated of Directors, is used to pay dividends are paid out. to the reserve fund as stipulated dividends; Total amount of dividends paid by the Company’s Articles of ∞∞ remaining part of the net profit by Mosenergo for 2017 was RUB Association; after deductions is at disposal of 6,573,135,165, or 26% of net profit. As ∞∞ the allocation of funds from the Board of Directors. of December 31, 2018, the Company the net profit to the reserve In order to make decisions on paying paid dividends for 2017 in the amount funds ceases when the fund dividends, the Board of Directors of RUB 6,543,601,663, or more than reaches the amount required introduces recommendations 99.5% of the declared total amount of by the Company’s Articles of concerning the amount to be paid to dividends. Association; the General Meeting of Shareholders.

Mosenergo Depositary Receipt Programs

Level 1 Reg.S Rule 144-А

Coefficient 1:50 shares 1:50 shares 1:50 shares

Receipts are intended Receipts are intended for Receipts can be traded for private offering to a wider range of private Brief Info freely on the OTC market a restricted number of professional investors than in the US and Europe. institutional investors, 144-A, outside the US. primarily in the US.

Year of issue 1997 2008 2008

ISIN US0373763087 US61954Q2093 US61954Q1004

Depositary bank The Bank of New York Mellon

Depositary Receipts Outstanding

31.12.2016 31.12.2017 31.12.2018 2018/2017

Level 1 units 9,035,686 11,565,022 8,175,213 -29.3%

Reg.S units 150,851 149,507 145,946 -2.4%

Rule 144-А units 21,530 14,349 14,349 0.0%

Total units 9,208,067 11,728,878 8,335,508 -28.9%

18 | ANNUAL REPORT 2018 MOSENERGO | 21

February >> May 14 August 13 November 12 Release of Mosenergo’s financial Release of Mosenergo’s financial Release of Mosenergo’s financial February 27 statements for Q1 2018 according to the statements for the first six statements for the nine months Standard & Poor’s Rating Services approved International Financial Reporting Standards months of 2018 according to the of 2018 according to the Mosenergo’s credit rating at BB+ with a May 31 International Financial Reporting International Financial Reporting positive outlook. Annual General Shareholder Meeting of Standards. Standards. Mosenergo. November 14 March >> September >> According to an order of the March 5 June >> Mosenergo won the contest Ministry of Energy of the Russian Release of Mosenergo’s financial of environmental and climatic Federation, Mosenergo obtained Staff of TPP-22 and TPP-25 took the first a certificate of readiness for work statements for 2017 according to the and second place respectively in the initiatives “Climatic Development Russian Accounting Standards. Leader”, held by the Moscow in the fall and winter season competition of operating personnel teams (FWS) of 2018-2019. March 12 held by Gazprom Energoholding Group. Six Department of Natural Resources Management and Environmental Release of Mosenergo’s financial teams representing the Group’s generating companies like Mosenergo, OGK-2, and Protection. The project of December >> statements for 2017 according to the increasing environmental TGC-1 participated in the competition. Mosenergo confirmed the International Financial Reporting Standards. efficiency of TPP-22 by compliance of Environmental June 25 transferring from coal to natural Management System (EMS) April >> Standard & Poor’s Rating Services increased gas fuel became the winner to ISO 14001:2015. Inspection Mosenergo’s credit rating to BBB- with a in the “Best Eco-Innovations” Employees of Mosenergo became related to compliance with positive outlook. category. winners of the International Competition standard requirements took place of Scientific, Technical and Innovative in the General Directorate and Developments aimed at the development July >> October >> two branches of the Company, of fuel, energy, and resources industry held July 4 October 31 Ufayev TPP-11 and TPP-25. under the auspices of the Ministry of Energy Mayor of Moscow Sergey Sobyanin visited December 12 of the Russian Federation. Release of Mosenergo’s financial TPP-20 and saw new exhibits of the statements for the nine months Mosenergo won the Moscow April 28 Museum of Mosenergo and Moscow Power of 2018 according to the Russian Government Prize in the domain Release of Mosenergo’s financial Industry. Accounting Standards. of environmental safety. The statements for Q1 2018 according to the aforementioned project related Russian Accounting Standards. August >> November >> to increasing environmental efficiency of TPP-22 by May >> August 1 November 9 transferring from coal to natural Release of Mosenergo’s financial Expert Rating Agency assigned gas fuel was named the best May 4 statements for the first six months of 2018 Mosenergo an ruAAA credit eco-friendly energy project. Fitch Rating Agency approved Mosenergo’s according to the Russian Accounting rating (reserved for non-financial credit rating at BBB- with a stable outlook. Standards. companies). The outlook is stable.

20 | ГОДОВОЙ ОТЧЕТ 2018 KEY COMPANY DEVELOPMENT PROJECTS:

Completing the program for decommissioning of ineffective capacities

Commissioning of prototype model of the most powerful Russian heating turbine

Increasing paid capacities of CCGT, service intervals, and normative service life

Implementation of the program aimed at improving primary technological and economic factors of TPPs

Completion of activities related to switching heat loads from boilers of MOEK to Mosenergo sources within the boundaries of Old Moscow

22 | ANNUAL REPORT 2018 MOSENERGO | 25

of modernization projects will depend Moscow stationary sources will Technological development: use of servicing foreign-made equipment. ∞∞ development of Mosenergo’s on the results of the competitive be reduced by 20%. Rejection new technologies and innovations Mosenergo carries out these activities subsidiaries and affiliates, such selection procedure. It is believed that from using coal at TPP-22 First and foremost, technological in accordance with the unified as Mosenergoproekt and Central more effective generation may lead will significantly improve the development presupposes the approach of Gazprom Energoholding Repair and Machinery plant. to increased incomes of modernized environment in Moscow’s South- transition to modern level of Group. In addition to introducing The projects are supposed to stations and will increase energy Eastern Administrative Okrug and digitization, including computers, domestic engineering solutions increase the internal efficiency of efficiency and reliability of energy make the lives of more than one means of communication, and in the field of automated process subsidiaries and affiliates, increase supply to consumers. million people and employees methods of storage, processing, and control systems, the Company is revenue in existing areas of of TPP-22 healthier and more display of information that constitute working to reduce the dependence activity, as well as to develop new Increasing operating efficiency comfortable; the term “digital enterprise.” Digital of maintenance and repair services activities; efficiency is one the key priorities for ∞∞ implementation of the program technologies should become of generating companies on foreign ∞∞ establishment of infrastructure Mosenergo in terms of development. aimed at improving primary Mosenergo’s competitive advantage suppliers of gas turbine equipment. for the development of electric It includes projects aimed at: technological and economic in all types of activities, including Business diversification vehicle market. ∞∞ increasing the performance factors of TPPs. Measures taken production, sales, and ancillary Mosenergo will continue to move Control over the implementation factor; as part of the program should processes. towards business diversification up to of the development program is ∞∞ decreasing specific fuel equivalent provide a decrease in specific fuel Furthermore, within the framework 2027 by implementing the following planned through the use of an consumption; equivalent consumption thanks to of development of new technologies measures: integrated approach to project the reduction of primary technical ∞∞ achieving reliability; and automation, overaged and ∞∞ as part of the optimization of management and a system of and economic performance obsolete control systems are the heat supply scheme, it is management motivation, which ∞∞ achieving safety; to normative and, if possible, modernized and replaced by high- planned to further implement are implemented and operate in ∞∞ achieving sustainability. initial design values, optimization end automated process control measures to consolidate the heat- Mosenergo. of included equipment, and Among the key projects are: systems. As a result, by 2027, the generating sources of Gazprom As a result of the implementation decreasing in-house needs of share of primary equipment fit with Energoholding Group in Old of these initiatives, in 2027 ∞∞ completing the program for power plants; decommissioning of ineffective automated process control systems Moscow under the auspices the company should become capacities: transferring SDPP- ∞∞ completion of activities related should increase to 99.5%. When of Mosenergo. The project’s the most efficient territorial 3 and TPP-17 into the boiler to switching heat loads from choosing technological and software objective is to plan to transfer generating company in Russia, station mode, as well as boilers of MOEK to Mosenergo automation tools, fully functional several boiler stations of MOEK in ensuring reliable energy supply decommissioning of obsolete and sources within the boundaries software packages designed in Russia favor to Mosenergo; to consumers, while maintaining of Old Moscow. Effects from will be given preference over other inefficient equipment at TPP-16 ∞∞ connection of additional boilers financial stability and high EBITDA implementing the program are options. and TPP-20; and new heat supply zones margin. achieved due to decreasing Imports phaseout is a key area of (provided that economic feasibility ∞∞ commissioning of prototype fuel consumption for heat and application of modern technologies is ensured for Mosenergo due model of the most powerful electricity generation in the TPP aimed at reducing the risks of to an increase in the heat load Russian T-295 heating turbine + boiler system when replacing increasing the cost / non-delivery of of operating thermal and power at TPP-22 (unit 9). This project condensate electricity output with is implemented in cooperation critically important spare parts and plants); heating cycle output (fuel effect); materials and the impossibility of with the Ural Turbine Factory and due to reduction in conditionally is aimed at the replacement of a In October 2018, the 2017 Mosenergo fixed and conditionally variable turbine with a more powerful one, Development Program was drawn operation costs, and sales of as well as additional equipment up, where four key directions are assets from decommissioned in the existing unit of the main determined: boiler stations; building; 1. modernization of generating ∞∞ optimization of water chemistry ∞∞ increasing paid capacities of capacities as part of the conditions at TPP-21, TPP-23, and combined-cycle plants, service COMMOD program; TPP-25. intervals, and normative service 2. increasing operating efficiency; life. Up to this point, Mosenergo’s 3. technological development management have initiated and (imports phase-out, automation, implemented and the Board of digitization, and innovation); Directors have approved measures 4. business diversification. aimed at increasing service intervals and paid capacities in Modernization of generating relation to combined-cycle plants INCREASING capacities as part of the COMMOD at TPP-16, TPP-26, and TPP-20. program (approved by the Order Approaches to modernization OPERATING EFFICIENCY IS ONE THE KEY PRIORITIES No. 43 of the Government of of the remaining gas turbines of CCP-220 at TPP-12, CCP-420 at FOR MOSENERGO IN TERMS OF the Russian Federation “On DEVELOPMENT. IT INCLUDES PROJECTS modernization of generating TPP TPP-21, and CCP-420 at TPP-27 AIMED AT: facilities” dated January 25, 2019 is are currently being developed; ∞∞ increasing the one of the prerequisites for long- ∞∞ reconstruction of boiler stations performance factor; term development of Mosenergo at TPP-22 in order to transfer all ∞∞ decreasing specific fuel and provision of stable and fail-safe units from coal to natural gas equivalent consumption; supply of electricity to consumers. A and fuel oil combustion. As a ∞∞ achieving reliability; preliminary requirement of equipment result of implementation of this modernization has been formed by project, conditionally fixed costs ∞∞ achieving safety; the Company, and the list of priority for the maintenance of coal will ∞∞ achieving sustainability. projects for the years 2022-2024 has be reduced, marginal profits will been put together. The final number be increased, and emissions from

24 | ANNUAL REPORT 2018 58,316 POWER GENERATION VOLUME million kWh +0.8%

HEAT 82,291 SUPPLY thou Gcal +3.6%

SPECIFIC FUEL EQUIVALENT 227 CONSUMPTION kWh

26 | ANNUAL REPORT 2018 MOSENERGO | 29

Overall, the Company generated 82.3 mln Gcal of heat. The share of DHP and 8.1 Power generation BHP is 13.0%. Heat from Company’s TPPs was supplied to consumers in the amount of 71.6 mln Gcal, which is 4.2% higher than in 2017. IN 2018, MOSENERGO’S GENERATING OPERATIONS WERE NOT SUBJECT TO ANY MAJOR DISRUPTIONS; THE In 2018, the campaign to transfer heat loads from DHPs and BHPs to HEAT SUPPLY COMPANY ENSURED STABLE OPERATION OF POWER PLANT EQUIPMENT AND RELIABLE SUPPLY OF HEAT AND Mosenergo TPPs continued. The total amount of heat transferred was 5,345.3 IN 2018 POWER TO CONSUMERS IN MOSCOW AND THE MOSCOW REGION. thou. Gcal (7.5% of the total heat output of TPPs). Mosenergo’s annual-average against 2017 increased by 306 MW Heat supply by CSA facilities amounted to 6.3 mln Gcal, which is 22.0% more installed capacity in 2018 amounted and equaled 2,234 MW. At the same than the last year. The share of CPPs in heat supply structure was 8.8% (+1.3% MLN GCAL compared to 2017). 82.3 to 12,797.9 MW and 43,016.5 Gcal time, the reserve capacity decreased MOSENERGO’S INSTALLED / h, including 12,797.6 MW and (-359 MW). The share of the reserve CAPACITY IN 2018 Heat supply by Mosenergo in 2018 was 3.6% more than in 2017, which is due to MORE THAN 33,923.82 Gcal / h from TPPs; capacity decreased from 26% in 2017 lower outside temperatures during the heating period (-1.8°С). Heat supply by IN 2017 BY 3.6% 0.3 MW and 9,092.68 Gcal / h in total to 23% in 2018. boiler stations decreased by 0.6%. from DHPs and BHPs. In these conditions, Mosenergo Mosenergo’s annual-average installed optimized the composition of the 12,797.9 Ambient air temperature1, Тaa,°C electrical capacity decreased by operating equipment; these activities 111.86 MW and thermal capacity were aimed at reducing condensate MW increase by 182.9 Gcal / h against production by transferring less season 2017 due to conducting the following efficient equipment to the reserve ca year activities: pacity. heating summer On January 1, 2018, turbine Power generation volume of SPE in 43,016.5 2017 +6.4 +0.6 +15.4 generator #4 (type T-75-90, total 2018 amounted to 41.3 billion kWh, GCAL / H capacity of 75 MW / 165 Gcal/h) was which is comparable to the levels of 2018 +6.6 -1.2 +17.9 decommissioned from TPP-4; 2017. On February 1, 2018, two water- Power generation volume under heating boilers (120 Gcal / h each) capacity-supply agreements (CSA) Heat output from collectors, thou. Gcal were commissioned at TPP-20; totaled 17.0 billion kWh, which is 3.0% On May 1, 2018, the Frezer DHB higher than in 2017. The share of CSA Plant 2017 2018 Change (capacity of 300 Gcal / h) was facilities in the general structure of demothballed. power generation in 2018 reached SPP‑1 1,413 1,449 +2.5% 29.2%, which is 0.65% higher than in As a result, Mosenergo’s installed 2017. SDPP‑3 310 309 -0.3% capacity at the end of 2017 equaled In 2018, electricity generation by 12,797.90 MW and 43,135.51 Gcal / h, Power generation volume, TPP‑8 2,689 2,833 +5.4% including 0.3 MW and 9,193.31 Gcal / CPPs according to the heating 1,255 1,229 -2.1% h from DHPs and BHPs. cycle amounted to 7.3 bln kWh million kWh TPP‑9 and increased by 32.2%, compared Power generation volume in 2018 2,319 2,426 +4.6% to 2017. The share of electricity TPP‑11 amounted to 58.3 billion kWh, which Plant 2017 2018 Change generated by CPPs according to the is 0.8% higher than in 2017. TPP‑12 3,383 3,491 +3.2% heating cycle increased by 9.6% and SPP‑1 246 229 -6.7% Dynamics of power generation amounted to 43.3%. TPP‑16 3,216 3,525 +9.6% volumes was divergent throughout The share of CPPs in the structure of SDPP‑3 127 109 -14.1% the year and amounted to the 508 539 +6.1% the heating cycle equaled 20.2% and TPP‑17 following: TPP‑8 1,973 2,060 +4.4% increased by 4.5%, compared to 2017. TPP‑20 4,768 4,988 +4.6% ∞∞ a growth of 1.2 billion kWh, or Generation of electricity according to TPP‑9 1,140 1,052 -7.7% 2.9%, during the heating season; the condensation cycle at Mosenergo TPP‑21 10,627 11,167 +5.1% TPP‑11 1,530 1,611 +5.3% ∞∞ a decrease of 0.7 billion kWh, or TPPs decreased by 0.6 bln kWh, or by TPP‑22 8,768 9,189 +4.8% 4.0%, during the summer season. 2.7%. TPP‑12 2,728 2,813 +3.1% The reason for the decrease of The structure of condensation TPP‑23 8,871 9,208 +3.8% TPP‑16 3,673 3,832 +4.3% power generation volumes during generation has undergone a 7,984 8,506 +6.5% the heating season was the decrease significant change: for the group of TPP‑17 201 209 +3.8% TPP‑25 in duration of generating equipment operating equipment, the growth TPP‑26 8,855 9,031 +2.0% in the reserve list (as was required by was 0.7 billion kWh (+ 5.9%), for CPP TPP‑20 5,543 5,099 -8.0% the System Operator), as well as the facilities the decrease was 1.3 billion TPP‑21 7,997 7,950 -0.6% TPP‑27 3,710 3,696 -0.4% decrease in night load. kWh (–11.8%). The summer decline in production TPP‑22 5,194 4,851 -6.6% TPP total 68,675 71,586 +4.2% volumes is associated with the optimization of equipment TPP‑23 6,560 6,705 +2.2% RHPPs, DHS, BHPs 10,771 10,705 -0.6% composition in order to reduce the TPP‑25 6,434 6,740 +4.8% Mosenergo 79,447 82,291 +3.6% share of economically inefficient condensation production by steam- TPP‑26 8,638 9,455 +9.5% powered equipment by stopping inefficient equipment and transferring TPP‑27 5,881 5,601 -4.8% power to the CCP group. Total 57,864 58,316 +0.8% In 2018, the capacity in repairs 1 According to the heating season dates 28 | ANNUAL REPORT 2018 MOSENERGO | 31

The rate of using the annual-average installed capacity of the Mosenergo’s The increase in fuel consumption in 2018 is due to the increase in the power plant turbines in 2018 amounted to 52.0% (+0.8% against 2017), including production of heat and electricity at power plants of Mosenergo. the increase of 0.5% for the operating equipment, and 1.7% for CSA facilities. In 2018, the Company’s specific fuel equivalent consumption amounted to FUEL CONSUMPTION FOR Factors of growth of the load factor were the increase in generation due to 227.0 g / kWh of electricity and 163.4 kg / Gcal of heat, including 0 g / kWh and HEAT AND ELECTRICITY PRODUCTION IN 2018 the decrease in equipment downtime to cold reserve, in night unloading, and 155.8 kg / Gcal for RHPP, DHP, and BHP respectively. in installed capacity thanks to decommissioning of thermal batteries at unit Specific fuel equivalent consumption by Mosenergo’s TPPs (without boilers) 4 of TPP-17. was 227.0 g / kWh of electricity (+0.7 g / kWh against 2017) and 164.5 kg / Gcal 25,580,443 (-0.5 kg / Gcal against 2017) of heat; including 206.1 g / kWh (-7.9 g / kWh TFE Installed capacity load factor,% against 2017) and 146.6 kg / Gcal (+0.3 kg / Gcal against 2017) for CSA facilities; 236.1 g / kWh (+4.5 g / kWh) and 166.2 kg / Gcal (-0.3 g / Gcal) for SPE facilities. INCLUDING RHPP, DHP, AND BHP Load factor for Factors that had positive influence on the cost-effectiveness Load factor for heat, % 1,668,255 Name electricity, % of equipment operation: ∞∞ optimization of equipment composition in order to increase the share of TFE 2017 2018 Change 2017 2018 Change electricity generation by CSA units while increasing the group’s efficiency, Total for due to the redistribution of heat loads towards CPPs; Mosenergo, 51,2 52,0 0,8 37,4 38,18 0,78 ∞∞ lower outside temperatures in February and March 2018; including ∞∞ reduction of the share of inefficient summer modes in the structure Operating of electricity generation, including due to the shutdown of inefficient 47,0 47,5 0,5 38,1 38,3 0,2 equipment equipment.

CSA facilities1 65,8 67,5 1,7 31,0 37,1 6,1 Factors that negatively influenced the economy in 2018: ∞∞ shorter duration of the heating season in 2018 (216 days), compared to 2017 (225 days); there was an extension of the heating season from May The rate of using the annual-average installed capacity of the Mosenergo’s 10 to May 18, 2017; power plant turbines in 2018 amounted to 52.0% (+0.8% against 2017), including the increase of 0.5% for the operating equipment, and 1.7% for CSA facilities. ∞∞ significant decrease in heat loads during the summer period (average outside air temperature is higher by 2.5°C); Factors of growth of the load factor were the increase in generation due to the decrease in equipment downtime to cold reserve, in night unloading, and in ∞∞ deterioration of operating modes in the Q4, that is, an increase in the installed capacity thanks to decommissioning of thermal batteries at unit 4 of share of water-heating boilers by 5% and a decrease in the share of heat Energy sales, thou. MWh TPP-17. supply by exhaust steam by 5%.

49,133 48,420 Fuel Consumption, tfe 50 000

Station 2017 2018 Change 40 000 SPP‑1 278,259 281,139 +1.0% 8.2 Sales 30 000 SDPP‑3 87,760 81,946 -6.6% 20 000 11,775 Total electricity sales in 2018 was equivalent to the previous reporting period 11,117 TPP‑8 922,063 975,725 +5.8% and amounted to 60,195.36 thou. MW. Total sales of capacity in 2018 equaled 10 000 11,440 MW (-0.8% or -87 MW decrease against 2017). 0 TPP‑9 485,461 418,624 -13.8% A slight decrease in capacity sales in 2018 can be explained by an increase in 2017 2018 TPP‑11 708,592 755,306 +6.6% the amount of underdelivery in the COM sector RC TPP‑12 1,110,519 1,160,376 +4.5% Revenue from sales of electricity and capacity in 2018 totaled RUB 116,443.95 mln, which is RUB 2,470.42 mln or 2.1% less than in 2017. Free sector TOTAL TPP‑16 1,218,146 1,246,073 +2.3% Prices and Tariffs Sales of Mosenergo-generated electricity in 2018 was TPP‑17 140,883 147,428 +4.7% conducted on the wholesale market of electricity and capacity (hereinafter TPP‑20 1,973,028 1,897,827 -3.8% referred to as WMEC) at market prices and regulated tariffs. The sale of electricity and / or capacity at regulated tariffs was conducted: TPP‑21 3,255,730 3,362,350 +3.3% ∞∞ under regulated contracts (RC) to supply public consumers and their Capacity sales, MW TPP‑22 2,596,281 2,579,232 -0.7% equivalent (RC sector); TPP‑23 2,883,239 3,024,919 +4.9% ∞∞ under contracts related to generating equipment the capacity of which is supplied in forced mode (the equipment list is defined by Order of the TPP‑25 2,649,997 2,848,016 +7.5% Government of the Russian Federation No. 2065-p dated October 15, 10 000 8,786 8,567 TPP‑26 3,275,349 3,463,545 +5.8% 2015). 8 000 TPP‑27 1,741,860 1,669,682 -4.1% All heat energy is supplied to Moscow and the Moscow Region retail markets at regulated tariffs. 6 000 2,873 TPP total 23,327,167 23,912,188 +2.5% 4 000 2,741

RHPPs, DHS, BHPs 1,669,077 1,668,255 -0.1% 2 000

Mosenergo 24,996,244 25,580,443 +2.3% 0 2017 2018

RC

Free sector TOTAL 1 Including gas turbines of TPP-30, Pavlovsky Posad

30 | ANNUAL REPORT 2018 MOSENERGO | 33

Price 2017 2018 Change Heat Energy Customers

Average weighted sale price of electricity, RUB / MWh, including: 1,193.08 1,246.06 +4.4% as of 31.12.2017 as of 31.12.2018 Average weighted RC tariff rate, RUB / MWh 859.00 880.07 +2.5% Customer (customer category) Connected Connected Share in net Share in net Average weighted sale price in the free sector, RUB / MWh 1,268.67 1,335.07 +5.2% contractual heat contractual heat supply, % supply, % Average weighted sale price for new capacity, RUB / MWh per month 1,055,014.49 1,001,502.02 -5.1% load, Gcal / h load, Gcal / h

Average weighted sale price for old capacity, RUB / MWh per month 135,870.05 138,364.89 +1.8% MOEK PJSC (wholesale reseller): 91.8% 40,829 94.6% 42,017 Including from boilers transferred to Average weighted tariff for heat energy, RUB / Gcal, including: 951.31 976.11 +2.6% 13.6% 5,812 13.0% 6,072 Mosenergo Average weighted tariff for heat generation and sales, RUB / Gcal 927.47 966.63 +4.2% Mosenergo TPP (wholesale reseller) 1.4% 916 2.0% 999 The key factors affecting electricity for CSA facilities such as TPP-21, tariff for heat energy set by and capacity prices are as follows: TPP-26, TPP-27, TPP-30, and Mosenergo is the annual revision of Industrial enterprises (retail) 1.6% 1,171 1.4% 1,002 ∞∞ increase in fuel prices; TPP-9 of the share of reimburs- tariffs conducted by the Department able costs, reflecting the forecast of Economic Policies and Public-sector organization (retail) 0.2% 62 0.1% 35 ∞∞ a change in legislation, starting profit from sales of electric energy Development of Moscow and the from January 2018; in accordance Other legal entities (retail) 3.9% 1,479 1.1% 937 for periods after the expiration of Committee on Prices and Tariffs of with the Order of the Govern- the delivery period for CSA facili- the Moscow Region for consumers; General public, housing ment dated September 2, 2017 ties (clarification of the procedure the values are adjusted according partnerships and associations, etc. 1.1% 148 0.8% 108 No. 1065 on the calculation of the for calculating the share in the to indexes of social and economic (retail) COM price indexation factor, the regulatory framework in accor- development for 2018. In addition, calculation takes into account the dance with the Order of the Gov- the weighted-average tariff was Total 100% 44,605 100% 45,099 CPI value reduced by 0.1% (previ- ernment dated September 2, 2017 affected by assigning a status of the ously, the CPI decrease by 1% was No. 1065); single heat-supply organization to taken into account). The indexed The increase in MOEK PJSC’s share in the consumption structure was caused by the reduction of the customer base of MOEK PJSC and gradual renewal price of COM in 2018 amounted ∞∞ deadline for deliveries according Mosenergo due to the gradual resigning of contracts on behalf of MOEK PJSC, in connection with MOEK PJSC’s status of of heat-supply contracts with this to 119.7 thou. RUB / MW; to CSAs and transfer of CSA facil- the single heat-supply organization of Moscow. ities of TPP-21 with an installed organization, as well as by the ∞∞ adjustment (since January 2018) capacity of 425 MW and TPP- redistribution of the structure of of the share of compensated 27 with an installed capacity of consumers that purchase heat costs for TPP-20 — this value 450 MW into the COM category. energy from collectors and through reflects the forecast profit of elec- grids of MOEK PJSC from energy Since heat energy is a regulated tricity sales; sources in Moscow and the Moscow activity, the key reason for the 8.3 Fuel Supply ∞∞ adjustment (since January 2018) Region, as differentiated by types of increase in the weighted-average heat carrier: steam and hot water. Natural gas remained the main fuel in the 2018 fuel balance. The share of gas in the fuel balance amounted to 98.89%. Coal (0.79%) and fuel oil (0.30%) were both used by Mosenergo’s power plants as back-up fuels. The share of diesel fuel totaled 0.02% in 2018. Heat Energy Sales and Revenue

Indicator 2017 2018 Change Heat energy sales revenue, RUB mln 75,215 79,971 +6.3% 0.79% 1.51% Total sales, thou. Gcal 79,065 81,928 +3.6% 0.30% 0.02% 0.06% 0.02% 98.89% 98.41% Average tariff, RUB/Gcal 951 976 +2.6%

The increase in heat energy revenue by 6.3% and sales by 3.6% is due to colder weather in 2018. GAS

FUEL OIL 2018 2017 COAL DIESEL FUEL

HEAT ENERGY SALES EXCEEDING 2017 BY REVENUE IN 2018 79,971 RUB MILLION 6.3%

32 | ANNUAL REPORT 2018 MOSENERGO | 35 For 12 months of 2018, the fuel balance structure changed as follows Results of Implementing Most Important Investment Projects by Class. against the same period of 2017: COMBUSTION ∞∞ gas combustion increased by 0.48%; GAS ∞∞ technical upgrading of the EK-10 EK-7; ∞∞ coal combustion decreased by 0.72%; Strategic: gas consumption scheme, TPP- ∞∞ TPP-20, replacement of EK TP-87 20; ∞∞ fuel oil combustion increased by 0.24%; One of the key strategic investment water economizer, 10th unit; ∞∞ diesel fuel combustion did not change. 0.48% projects is the “Full Equipment ∞∞ technical upgrading of automatic ∞∞ TPP-22, replacement of steam- safety controls and gas supply The increase in gas combustion share is due to lower coal consumption Reconstruction at Energy Unit supply pipes of 2nd and 3rd units COAL No.9” at TPP-22, which includes systems of the PTVM-100 water- of the 7th boiler. due to an increase in its market price and decreasing cost-effectiveness of heating boiler, 3rd unit of the replacement of the overaged steam 3. Projects aimed at improving the its use compared to natural gas on condition of simultaneous extension of Perovo DHP; consumption of equivalent fuel. The increase in fuel combustion share is due to turbine T-250/300-240 unit No. reliability of the process control its planned combustion in accordance with the drawdown schedule for renewal 0.72% 9 by a cutting-edge combined- ∞∞ technical upgrading of gas system, reduction of the risk of of stocks during the heating period in 2017 / 2018 and 2018 / 2019. cycle turbine T-295/335-23.5 consumption schemes of PTVM- technological failures of outdated FUEL OIL manufactured by the Ural Turbine 180 water heating boilers, 7th unit automated process control Stable and reliable fuel supply to all Mosenergo’s power plants in 2018 Factory. The new series of Ural- of TPP-22; systems, and saving fuel through was achieved as a result: made machines is to take the place ∞∞ technical upgrading of gas more accurate maintenance of of overused T-250 turbines. The ∞∞ gas supply in full compliance with current agreements; 0.24% consumption schemes of PTVM- the equipment operation mode: Company prioritizes this project as 180 water heating boilers, 8th unit ∞∞ modernization of the automated ∞∞ formation of sufficient stand-by reserves of fuel in compliance with orders T-250 turbines are key heat suppliers DIESEL FUEL of TPP-22. process control system of the and recommendations of the Ministry of Energy of the Russian Federation of Moscow. They hold a 40% share 2. Fire safety projects at Mosenergo EK-7 boiler, type TP-80, including and the Moscow City Government. in the overall installed capacity of branches: the replacement of fuel-oil the Company. In total, 19 T-250 0% ∞∞ TPP-21, equipping the operating burners at TPP-12; Fuel Consumption by Mosenergo Power Plants turbines had been put into operation for Mosenergo. After installation and premises of fuel oil pumping ∞∞ modernization of the EB-2 control commissioning of the modernized stations Nos. 1 and 2 with system at TPP-27; Unit of Change automatic fire-extinguishing 2014 2015 2016 2017 2018 energy unit No.9 at TPP-22, the ∞∞ technical upgrading of software measurement 2018/2017 decision on further reconstruction systems: of the automated process control will be made in regards to T-250 Gas million cu. m 20,407 19,516 21,693 21,063 21,693 +2.99% 3. Projects aimed at compliance system of boilers Nos. 1, 2, 3 and turbines that operate at Company’s with normative documents: automation of equipment at BHP- Coal thou. tfe 543 755 700 441 238 -46.02% power plants. ∞∞ TPP-11, replacement of the firing- 11 at TPP-16; technical upgrading up steam pipe of boilers 7 to 9; of software of the automated Fuel oil thou. tfe 4 7 2 11 55 +380.96% process control system of boilers ∞∞ TPP-25, technical upgrading Efficiency: Nos. 1, 2, 3, 4 at TPP-20. of water purification plants, ∞∞ Reducing in-house power namely, equipping them with consumption: ventilation breakdown alarms and Other: ∞∞ TPP-12, replacement of three KsV emergency ventilation systems. 8.4 Investment and Maintenance 125-140 pumps with three KsD 1. Projects aimed at reducing the 125-140 pumps loss of heat energy and heat transfer agents, increasing Activities ∞∞ Measures to increase the Reliability: the reliability of heat supply to production efficiency: 1. Enhancement of reliability of consumers: ∞∞ TPP-21, replacement of the power output system of the ∞∞ reconstruction of heating main pipe system of the built-in station: 8.4.1 Investments No. 37, TPP-12. bundle,GT-7. ∞∞ TPP-9, replacement of the Within the framework of the Invest- Mosenergo’s key investment areas ∞∞ forwarding process automation; transformer at the 7th unit with a 2. Projects aimed at the ment Program, Mosenergo continues are: new one; establishment of physical ∞∞ mitigating negative environmental protection systems at branches of to implement strategic initiatives Mandatory: ∞∞ TPP-21, replacement of stator of ∞∞ enhancing safety of facilities by impact of power plants by means Mosenergo to increase the level aimed at maintaining high level of 1. Projects aimed at technical G-11A generator; means of modernizing outdated of technical upgrades and taking of protection of branch territories. safety, efficiency, and reliability of equipment; outdated equipment out of upgrade of gas-consumption and ∞∞ TPP-27, replacement of stator of heat and power generation. gas-distribution diagrams and 3. Modernization projects in the ∞∞ enhancing efficiency of operation; G-31 generator. increasing safety of operation of field of information technology, For 2018, the Investment Program equipment monitoring and ∞∞ eExtending the scope of these diagrams: 2. Projects aimed at increasing telecommunications, and financing plan totaled RUB 14,934.38 diagnostics; environmental activities at power reliability of boilers: mln (VAT included); actual financial communications aimed at ∞∞ minimizing specific fuel plants. amount of the Investment Program ∞∞ TPP-20, replacement of improving the quality of storage consumption when generating A sufficient amount of funds was RUB 14,925.36 mln, so the plan collectors and coil piles, 4th unit, and transmission of information electricity and heat by means of was allocated to development was 99.94% complete. introducing cutting-edge and of information, communication high-efficiency equipment; technology, and safety and control systems.

34 | ANNUAL REPORT 2018 MOSENERGO | 37 8.4.2 Maintenance and Repairs Additional Repair Work on Thermal Mechanical Equipment, units Equipment Maintenance and Repair, units. IN 2018, ALL MAINTENANCE Type of Work 2017 2018 AND SERVICE PROGRAMS ON Major Medium- Routine ALL THERMAL, MECHANICAL, Equipment type Industrial repair of turbine rotors 33 36 Overhaul Level Repair Maintenance AND ELECTRICAL EQUIPMENT Replacement of turbine rotary blades / disks 10/1 11/1 WERE FULLY CARRIED OUT Power generation units 3 4 13 Rotor replacement 1 2 IN LINE WITH THE APPROVED 18 13 50 Replacement of components in the flow-through section of MAINTENANCE SCHEDULE, ON Boilers 3 8 the turbine cylinder TIME, AND WITHIN THE BUDGET Turbines 17 4 47 Replacement of the pipe system of heaters and condensers 15 13 Gas turbines - - 8 Replacement of bearings in the lower supports of 6 5 Water-heating boiler 2 0 103 regenerative air heaters Boilers (CCP) - 1 14 Gas turbines (CCP) 2 - 12 Additional Repair Work on Electrical Mechanical Equipment, Turbine generators 1 - 7 units (CCP)

WB (DHP / BHP) - - 121 Type of Work 2017 2018 Generators 26 8 81 Repair of generator rotors, with removal of retaining 9 11 Transformers 6 - 201 rings and their subsequent defect detection Repair of generators’ contact rings 2 4 110-500 kV switches 6 1 - Replacement of stators - 2 Rewedging of stators - 1 Replacement of the upper bar of stator winding 1 3 Building and Facilities Repair, units. Partial stator rewinding 1 1 Facility or Total Replacement of a generator rotor 1 - Type of Work 2017 2018 Building for Mosenenrgo Replacement of a generator rotor with a backup one 1 1 Replacement of high-voltage bushing 6 10 Cooling Repair 32 16 59 units Replacement of oil coolers 2 3 towers Inspection 8 7

Repair 32 46 Smoke stacks 198 units Inspection with Information on maintenance of CPP units Industrial Safety 36 18 Expertise Branch 2017 2018 Repair - - Liquid fuel Mechanical testing did not take place Mechanical 84 units Inspection with TPP‑9 tanks Industrial Safety 10 10 due to insufficient operating time testing Expertise Mechanical TPP‑12 Mechanical testing Inspection with testing Buildings and 1267 units Industrial Safety 253 293 Mechanical structures TPP‑16 Hydraulic testing Expertise testing Hydraulic TPP‑20 Mechanical testing testing Hydraulic TPP‑21 (ГТ‑11Б, В) Mechanical testing testing TPP‑26 C2 (hydraulic testing) Mechanical TPP‑27 (ГТ‑31) Mechanical testing testing Mechanical TPP‑27 (ГТ‑32) Mechanical testing testing Mechanical TPP‑27 (ГТ‑41) Hydraulic testing testing TPP‑27 (ГТ‑42) Hydraulic testing

36 | ANNUAL REPORT 2018 199 REVENUE RUB billion

24 NET PROFIT RUB billion

1 According to RAS MOSENERGO | 41 9.1 Revenue 9.4 Net Profit REVENUE

The Company’s revenue for 12 months of 2018 increased by 1% Mosenergo’s net profit amounted to RUB 24 bln, which is 6% less against 12 months of 2017 and totaled RUB 199 bln. Revenues than in 2017. from electricity sales increased by RUB 3 bln (+4%), primarily due to the 4% increase in the weighted-average price, and amounted RUB199BILLION RUB 75 bln. Revenues from capacity sales for 12 months of 2018 came to RUB 41.0 bln (-12% or RUB 6 bln against 2017) 9.5 Liquidity and Loan Portfolio due to a decrease in the revenue of the CSA sector, which may FROM SALES be explained by expiration of agreements regarding providing OF HEAT Management capacities to two CSA facilities. Revenues from sales of heat amounted to RUB 80 bln (+6% or RUB 5 bln against 2017) due No debt financing was performed in 2018. As of December 31, to 4% increase in the sales volume, which is related to colder +6% 2018, the loan portfolio of the Company amounted to RUB 5.1 bln. weather during the heating season of 2018 and a 3% increase of The weighted-average interest rate on borrowings for 12 months the average tariff. FROM CAPACITY SALE of 2018 equaled 8.1400% for borrowings made in rubles, and 1.7289% for borrowings made in foreign currency. -12% No past-due debts or loans were registered. 9.2 Prime Cost

FROM ELECTRICITY Prime cost of Mosenergo’s commercial output in 2018 increased SALES by RUB 8 bln (+5%) against 2017 and equaled RUB 171 bln (prime 9.6 Balance Sheet Analysis cost of electricity and capacity amounted to RUB 86 bln, prime cost of heat to RUB 82 bln, and of other products - to RUB 3 bln). +4% As of December 31, 2018, fixed assets decreased by RUB 10 bln Higher prime cost in 2018 (compared to 2017) is primarily due to against December 31, 2017 (from 162 to RUB 172 bln). higher fuel costs (RUB +7 bln). The Company’s equity increased by RUB 28 bln due to an incre- Fuel costs increased due to an increase in weighted average fuel ase in retained earnings of RUB 18 bln, as well as an increase in price and fuel consumption volume caused by growth of heat and additional capital as a result of revaluation of non-current assets electricity generation. by RUB 10 bln. As of December 31, 2018, accounts payable decreased by RUB 0.99 bln against December 31, 2017, mostly due to the increase in liabilities to suppliers and contractors. Furthermore, tax and trade 9.3 Other Incomes and Costs liabilities decreasedм

Increase of other incomes by RUB 3.9 bln (from RUB 5.7 bln in 2017 to RUB 9.6 bln in 2018) was due to the following factors: ∞∞ an increase in reversal allowance amount by RUB 1.7 bln; 9.7 Financial Position ∞∞ income from revaluation of assets totaling RUB 1.6 bln; Indicators ∞∞ an increase in income (RUB +0.9 bln) related to sales of basic assets, inventory, intangible assets, and other non-current The current liquidity ratio increased by 3.39 pp. against 2017 and assets; amounted to 7.0 p.p. (the increase was due to the reduction of ∞∞ a decrease in the value of tangible assets from the write-offs, short-term liabilities). except for emergency ones by RUB 0.6 bln; The receivables turnover increased against 2017 and amounted to ∞∞ increase in other income by RUB 0.3 bln. 67 days (+2 days). This is due to the growth of accounts receivable (+4%) higher than the revenue growth (+1%). Sales profitability decreased from 17.09% in 2017 to 14.24% in 2018 thanks to the 16% revenue profit decrease.

THE CURRENT LIQUIDITY RATIO

7.0INCREASED BY 3.39 p.p. AGAINST 2017

40 | ANNUAL REPORT 2018 42 | ANNUAL REPORT 2018 MOSENERGO | 45

other organizations where the deciding on all matters associated Gazprom Energoholding LLC since 10.1 Memorandum on Gazprom PJSC’s Company acts as a member. with management of the Company’s May 21, 2015 under an agreement The management bodies of current activities, other than those with the Company. The supervision intentions regarding controlled the Company are the General placed within the competence of the of the Company’s financial and Shareholders’ Meeting and the Board General Meeting and the Board of business activities is the responsibility of Directors. The functions of the Directors of the Company, have been of the Board of Internal Auditors of companies, performed by managing company Mosenergo. namely Mosenergo PJSC, MOEK PJSC, OGK-2 PJSC, and TGK-1 Company’s sole executive body PJSC

POWER INDUSTRY IS STRATEGICALLY SIGNIFICANT FOR GAZPROM GROUP. FOR THE LAST DECADE, THE RUSSIAN GREATEST VERTICAL-INTEGRATION POWER GENERATION HOLDING WAS ESTABLISHED WITHIN GAZPROM PJSC, 10.3 General Meeting of Shareholders WHICH UNITES ASSETS OF POWER AND HEAT GENERATION, TRANSMISSION AND SALES OF HEAT, AND ASSETS OF RELATED SEGMENTS. The General Meeting of corporate governance practices. The The shareholders also elected the Energy assets are consolidated in Mosenergo PJSC, MOEK PJSC, OGK-2 of power supply reliability. Shareholders of Mosenergo is established procedure guarantees new Board of Directors and Board Gazprom Energoholding LLC, a PJSC, and TGK-1 PJSC are the integral Gazprom PJSC exercises corporate the supreme governing body of the equal treatment of all Company of Internal Auditors of the Company Gazprom PJSC’s subsidiary which part of Gazprom Group; disposal of governance according to unified Mosenergo that makes it possible shareholders. and approved the Company’s holds controlling stakes of Mosenergo, the above-mentioned assets is not corporate standards, understanding for shareholders to exercise their Auditor; a resolution was adopted TGK-1 PJSC, and MOEK PJSC (the considered. the importance of improving right to take part in the Company’s The General Meeting of concerning remunerations and single heat supply organization in The priority task of electric energy corporate governance of subordinate management, as well as giving them Shareholders of Mosenergo that compensations to the Members of Moscow). Centerenergoholding PJSC course of Gazprom PJSC is gradual companies; also, it seeks to ensuring access to the information about the was dedicated to the results of the the Board of Directors. (Gazprom Energoholding’s subsidiary) development of companies, ensuring transparency and publicity of Company’s activities, achievements, Company’s operations in 2017 was holds the controlling stake of OGK-2 stable growth of their financial subordinate companies’ activities. and plans. The procedure for the held on May 31, 2018. This meeting The meeting approved a new PJSC. performance indicators, and support preparation and holding general approved Mosenergo’s Annual revision of the Mosenergo’s Articles shareholder meetings complies Report for 2017 and its financial of Association, revised Regulations with the laws of the Russian statements, as well as the distribution on the Mosenergo’s General Meeting Federation. This procedure is of the Company’s profits in 2017. It of Shareholders, Regulations on the defined in the Company’s Articles of was decided to pay dividends on Mosenergo’s Board of Directors, Association and in the Regulations ordinary shares of the Company for Regulations on the Mosenergo’s 10.2 Underlying Principles on Mosenergo’s General Meeting 2017 in the amount of 0.16595 RUB Board of Internal Auditors. Moreover, of Shareholders of the Company, per one ordinary registered share resolutions were adopted regarding The corporate governance in protection in the event of any the preliminary discussion of topics which is believed to follow the best of the Company in cash within the approval of transactions in which the the Company is based on the breach of rights; to be considered at meetings of the deadlines set by the applicable laws. Company is interested legislative regulations of the Russian ∞∞ transparency of activities, Board of Directors by committees, Federation, the Company’s Articles disclosure of accurate and through interaction between of Association, the Corporate information on significant facts the Company’s departments and Governance Code, which is approved and data about the Company’s subdivisions with shareholder by the Central Bank of the Russian activities; providing required representatives. Federation, as well as on established access to information, as well Mosenergo’s most important international principles of corporate as maintaining reasonable corporate governance objectives governance. balance between the Company’s are: The underlying principles of the transparency and the pursuit of its Company’s corporate governance commercial interests; ∞∞ maintaining the balance of all shareholders’ interests as well as are stated in Mosenergo Corporate ∞∞ the Company’s social those of other persons concerned Governance Code approved by the responsibility, including in the continued development of Board of Directors on November 27, adherence to quality standards, the Company; 2006. environmental regulations, and creating the most progressive ∞∞ maintaining the required level The Company’s corporate working conditions; of transparency and access to governance is based on the Company information; following: ∞∞ adherence to ethical norms preventing staff abuse of official ∞∞ organizing the operations of the ∞∞ the Board of Directors’ positions, which could damage Board of Directors’ Committees accountability to shareholders both the Company and third with the participation of major and the accountability of the parties, including the illegal shareholder representatives, Company’s executive bodies to use of confidential and insider Company specialists, and the Company’s management information. independent experts; bodies, as well as a sense of ∞∞ ensuring the Company’s trust in relations between Mosenergo’s strategy to improve participation in the management all participants of corporate corporate governance includes of its affiliate structures, the governance; systematic updating of the Company’s internal regulations, participation of the Company’s ∞∞ safeguarding of stock ownership development of the activities of representatives in assemblies, rights and the possibility of an committees of the Company’s Board meetings of the executive bodies unrestricted and fast disposal of of Directors, improving the quality and other corporate events of the stock owned by shareholders, of materials prepared for meetings the Company’s affiliates and as well as the provision of of the Board of Directors, including subsidiaries, non-profit, and shareholder access to effective

44 | ANNUAL REPORT 2018 MOSENERGO | 47 10.4 Board of Directors 10.4.1 Members of the Board of Directors1 Biographical data on the members of Mosenergo’s Board of Directors can also be found of Mosenergo’s website, www.mosenergo.ru Members of the Board of Directors of Mosenergo as of December 31, 2017: Kirill Gennadyevich Seleznev Gasan Gizbullagovich of Directors - Head of Information Gasangadzhiyev and Analytical Division of the Kirill Gennadyevich Seleznev (Chairman) Chairman of the Board of Directors Member of the Board of Directors Financial Markets Department. Andrey Yurievich Berezin Aleхander Sergeevich Ivannikov Vladimir Igorevich Pogrebenko Year of birth: 1974 2016: Deputy Director General for Education: higher Year of birth: 1965 Aleхander Aleхanderovich Butko Pavel Anatolyevich Livinskiy Valery Gennadyevich Pyatnitsev Market Investments, IK REGION JSC Positions held for the last 5 years and Education: higher Anatoly Anatolyevich Gavrilenko Irina Vasilyevna Mironova Denis Vladimirovich Fedorov Interest in the issuer’s authorized at present: Positions held for the last 5 years and Valery Aleхanderovich Golubev Elena Vladimirovna Mikhaylova Pavel Olegovich Shatsky capital: none Since 2013: Gazprom PJSC, Member at present: Issuer’s ordinary shares held: none of the Board of Directors, Head of the 2013-2017: MOSGAZ JSC, Director Mosenergo Annual General Meeting of Shareholders was held on May 31, 2018, at which the Company’s new Marketing Division, Gas and Liquid General. Elena Vladimirovna Mikhaylova Hydrocarbons Processing, Head of Board of Directors was elected. The new composition of the Mosenergo’s Board of Directors includes: Since 2017: Head of Moscow Member of the Board of Directors the Department Department for Housing and Utility Year of birth: 1977 Kirill Gennadyevich Seleznev (Chairman) Since 2013: Gazprom Mezhregiongaz Services. Education: higher Andrey Yurievich Berezin Aleхander Sergeevich Ivannikov Andrey Igorevich Seregin LLC, General Director (part-time). Interest in the issuer’s authorized Aleхander Aleхanderovich Butko Konstantin Vasilyevich Komissarov Denis Vladimirovich Fedorov Interest in the issuer’s authorized capital: none Positions held for the last 5 years and at present: Gasan Gizbullagovich Gasangadzhiyev Elena Vladimirovna Mikhaylova Andrey Viktorovich Khorev capital: none Issuer’s ordinary shares held: none Since 2013: Gazprom PJSC, Member Valery Aleхanderovich Golubev Vladimir Igorevich Pogrebenko Pavel Olegovich Shatsky Issuer’s ordinary shares held: none Valery Aleхanderovich Golubev of the Board, Head of the Department Andrey Yurievich Berezin Member of the Board of Directors of Property Management and Corporate Relations. According to the results of voting Mosenergo’s Collective In 2018, the most important agenda Member of the Board of Directors Year of birth: 1952 at the Annual General Meeting of Agreement; topics for which the Company’s Since 2013: Gazprom Mezhregiongaz Year of birth: 1982 Education: higher Shareholders, powers of the following Board of Directors was responsible, LLC, Deputy Director General of ∞∞ approval of the general structure Education: higher members of the Board of Directors of the Company’s executive body; were preliminarily examined by the Positions held for the last 5 years and Corporate and Property Relations were terminated: A.A. Gavrilenko, Board of Directors’ Committees. The Positions held for the last 5 years and at present: ∞∞ approval of members of the (part-time). P.A. Livinskiy, I.V. Mironova, and V.G. Company’s current Committees are at present: committees of the Company’s Since 2013: Gazprom PJSC, member Interest in the issuer’s authorized Pyatnitsev. These members were the Audit Committee, the Strategy Board of Directors; 2013-2018: Department of Property of the Board of Directors, Deputy capital: none replaced by G.G. Gasangadzhiyev, and Investment Committee, the of Moscow, Head of the Department Chairman of the Management Board. K.V. Komissarov, A.I. Seregin, and A.V. ∞∞ defining the status of members Human Resources and Remuneration Issuer’s ordinary shares held: none of Corporate Relations and Financial Interest in the issuer’s authorized Khorev. of the Company’s Board of Committee, and the Reliability Assets, Deputy Head of the Directors; capital: none Vladimir Igorevich Pogrebenko The Mosenergo’s Board of Directors Committee. Department. Issuer’s ordinary shares held: none Independent member of the Board of met 16 times in 2018. The most ∞∞ determination of the During the reporting year, the Board Since 2018: GUP MTsVDNT MOSKVA, remuneration to the auditor and Directors important topics considered by the of Directors’ Committees presented Director General. Aleхander Sergeevich Ivannikov Board of Directors included the approval of terms of agreement to the Board of Directors their Year of birth: 1978 Interest in the issuer’s authorized Member of the Board of Directors following: concluded with the latter; recommendations on the following Education: higher capital: none Year of birth: 1966 ∞∞ approval of Mosenergo 2018 ∞∞ determination of the Company’s matters: Positions held for the last 5 years and Issuer’s ordinary shares held: none Business Plan; credit policy; ∞∞ consideration of the accounting Education: higher at present: ∞∞ determination of the procurement ∞∞ approval of the risk management statements of Mosenergo for 2017 Aleхander Aleхanderovich Butko Positions held for the last 5 years and 2013-2014: Deputy Head of the policy; and the opinion provided by the at present: policy, including approval of the Member of the Board of Directors Department of Property of Moscow. annual integrated procurement ∞∞ Company’s participation in other Company’s Auditor; Since 2013: Gazprom PJSC, First Year of birth: 1964 2014-2015: VDNKh LLC, Director program for 2018 (phase 2); organizations; ∞∞ consideration of the candidacy Deputy Head of the Finance and General. of the Auditor of Mosenergo for Education: higher Economics Department, Head of ∞∞ approval of revised Regulations of ∞∞ approval of the reports of 2016-2018: PARK INVEST LLC, 2018; Positions held for the last 5 years and Department 816. Mosenergo procurements, works, Gazprom Energoholding LLC on Director General. and services; the provision of services under ∞∞ approval of the Mosenergo at present: Interest in the issuer’s authorized Interest in the issuer’s authorized the agreement of transfer of Business Plan for 2018; 2013-2014: Mezhregionenergostroy capital: none ∞∞ approval of the 2018 Insurance capital: none Program; authorities of the sole executive ∞∞ approval of and reports on the OJSC, Director General Issuer’s ordinary shares held: none body of Mosenergo; Issuer’s ordinary shares held: none ∞∞ convening and preparing the business plan performance and 2013-2015: Mezhregionenergostroy Konstantin Vasilyevich Komissarov Company’s Annual Meeting of ∞∞ consent to making transactions in the Company’s KPIs; OJSC, Director General Andrey Igorevich Seregin which the Company is interested; Independent member of the Board of Shareholders on 2017 results; ∞∞ adjustment of the Investment 2014-2015: CEI LLC, Director General. Member of the Board of Directors ∞∞ approval of transactions regarding Program of Mosenergo and other Directors ∞∞ approval of the 2019-2021 Since 2015: Mosenergo, Managing Year of birth: 1983 the Company’s estate property. important Company matters. Director Year of birth: 1976 Education: higher Interest in the issuer’s authorized Education: higher Positions held for the last 5 years and capital: none Positions held for the last 5 years and at present: Issuer’s ordinary shares held: none at present: 2013-2017: Federal Agency for State 2013-2016: Locko-Bank JSC, Head Property Management, Deputy Head of Information and Analytical Division of Department for Restructuring of of the Financial Markets Department, State Organizations and Management Advisor to the Chairman of the Board

1 As of December 31, 2018 46 | ANNUAL REPORT 2018 MOSENERGO | 49 of Rosimushchestvo’s Privatized May 17, 2018: purchase of ordinary Positions held for the last 5 years and Assets registered uncertified shares in the at present: 10.4.2 Committees of the Board of Directors 2017-2018: Department of Property amount of 1,556,000 pcs; Since 2013: Gazprom Energoholding 10.4.2.1 Audit Committee of Moscow, Head of Department for May 18, 2018: purchase of ordinary LLC, Deputy Head of the Division, Corporate Relations and Financial registered uncertified shares in the Head of the Division of Corporate Members of the Audit Committee Members of the Committee: Members of the Committee until Assets amount of 1,179,000 pcs; Relations and Control — Corporate approved by the decision of the Aleхander Sergeevich Ivannikov – June 29, 2018: Board of Directors on June 29, 2018: 2018-2018: Ministry of Science May 21, 2018: purchase of ordinary Secretary, Deputy Head of the Independent Member of the Board chairman – V.G. Pyatnitsev, members and Higher Education of the registered uncertified shares in the Corporate Relations Board, Head of of Directors of Mosenergo, Gazprom of the Committee: A.A. Gavrilenko, A.S. Russian Federation, Deputy Head amount of 1,326,000 pcs; the Corporate Activities Board, Chairman of the Committee: PJSC Head of the Department; Ivannikov, V.I. Pogrebenk Vladimir Igorevich Pogrebenko – of Department for Corporate May 22, 2018: purchase of ordinary Deputy Director for Corporate and Konstantin Vasilyevich Komissarov – Independent Member of the Board of Governance registered uncertified shares in the Property Matters — Head of the Board an independent member of the Directors of Mosenergo; Interest in the issuer’s authorized amount of 839,000 pcs; Interest in the issuer’s authorized Board of Directors, Mosenergo PJSC; Deputy Director General for Market Andrey Viktorovich Khorev – capital: none May 23, 2018: purchase of ordinary capital: none Investments, IK REGION JSC»; Independent Member of the Board of Issuer’s ordinary shares held: none registered uncertified shares in the Issuer’s ordinary shares held: none Directors, Mosenergo PJSC; Advisor to amount of 2,262,000 pcs. Denis Vladimirovich Fedorov Director General, TPS Group LLC». As a result of said transactions, Member of the Board of Directors total number of ordinary registered 10.4.2.2 Strategy and Investment Committee Year of birth: 1978 uncertified shares owned by the Members of the Committee Energoholding LLC Deputy Director Directors of Mosenergo; Education: higher person amounts to 18,466,000 pcs. approved by the Board of Directors General for Capital Construction; Valery Gennadyevich Pyatnitsev – Positions held for the last 5 years and The share of participation in the of Mosenergo on June 29, 2018: Elena Pavlovna Egorova – Deputy FINAM JSC Strategy Director; at present: issuer’s authorized capital after the change is 0.046456% Chairman of the Committee: Managing Director, Mosenergo Denis Vladimirovich Fedorov – Since 2013: Gazprom PJSC, Head of Valery Aleхanderovich Golubev — Director for Efficiency and Control; a member of the Board of Directors of the Board of Electric Energy Sector The share of the issuer’s ordinary a member of the Board of Directors Anna Aleksandrovna Efimova – Mosenergo, Gazprom PJSC Head of Development and Marketing. shares owned by the person after the change is 0.046456%. of Mosenergo, Gazprom PJSC Deputy Deputy Managing Director, Mosenergo the Board; Gazprom Energoholding Since 2013: Gazprom Energoholding Chairman of the Board Director for Legal Matters LLC Director General; LLC, Director General; Andrey Viktorovich Khorev Members of the Committee: Evgeny Nikolaevich Zemlyanoy – Pavel Olegovich Shatsky – Since 2013: Centerenergoholding Independent Member of the Board of Andrey Yurievich Berezin — Gazprom Energoholding LLC Deputy a member of the Board of Directors of PJSC, Director General. Directors a member of the Board of Directors Director General for Economics and Mosenergo; Gazprom Energoholding As of January 1, 2018, the Year of birth: 1972 of Mosenergo, Deputy Head of the Finance; LLC, First Deputy Director General. participation share of the person in Education: higher Department of Property of Moscow; Konstantin Vasilyevich Komissarov – Members of the Committee until the issuer’s authorized capital was Aleхander Aleхanderovich Butko — an independent member of the June 29, 2018: Positions held for the last 5 years and 0.001075%; a member of the Board of Directors Board of Directors, Mosenergo PJSC; chairman – V.A. Golubev, members at present: A transaction on the disposal of Mosenergo, Mosenergo Managing Deputy Director General for Market of the Committee: E.V. Andreeva, A.Yu. of ordinary uncertified shares Since 2018: TPS Group LLC, Advisor Director; Investments, IK REGION JSC Berezin. A.A. Butko, V.B. Gryaznov, to Director General. of Mosenergo (427,400 pieces) Valentin Borisovich Gryaznov – Irina Yurievna Korobkina – Gazprom Yu.E. Dolin, E.P. Egorova, A.A. Efimova, executed by the member of the Board PJSC Deputy Head of Board; E.N. Zemlyanoy, I.Yu. Korobkina, V.I. Pavel Olegovich Shatsky Gazprom PJSC Head of Department’s of Directors on January 19, 2018. Advisor; Vladimir Igorevich Pogrebenko – Pogrebenko, V.G. Pyatnitsev, D.V. After that, the share of this member Member of the Board of Directors Fedorov, P.O. Shatsky. Yury Efimovich Dolin– Gazprom Independent Member of the Board of of the Board in the issuer’s registered Year of birth: 1972 capital amounted to 0%; Education: higher 10.4.2.3 HR and Remuneration Committee The share of a person in the issuer’s Positions held for the last 5 years and authorized capital has changed as at present: Members of the Committee Deputy Director General for Market a result of a number of transactions approved by the Board of Directors Investments, IK REGION JSC Since 2013: Gazprom Energoholding involving the purchase of ordinary on June 29, 2018 LLC, First Deputy Director General Vladimir Igorevich Pogrebenko – registered uncertified shares, carried Chairman of the Committee: Independent Member of the Board out during on May 11, May 14 to 18, Interest in the issuer’s authorized Pavel Olegovich Shatsky — of Directors of Mosenergo; and May 21 to 23, 2018: capital, %: 0.001132 a member of the Board of Directors of Andrey Viktorovich Khorev – Issuer’s ordinary shares held, %: May 11, 2018: purchase of ordinary Mosenergo; Gazprom Energoholding Independent Member of the Board of 0.001132 registered uncertified shares in the LLC, First Deputy Director General. Directors, Mosenergo PJSC; Advisor to amount of 2,923,000 pcs; By the Resolution of the Mosenergo Members of the Committee: Director General, TPS Group LLC. May 14, 2018: purchase of ordinary Board of Directors dd. September Aleхander Sergeevich Ivannikov – Members of the Committee until registered uncertified shares in the 30, 2016, Mosenergo Corporate Independent Member of the Board June 29, 2018: amount of 3,322,000 pcs; Secretary was elected. of Directors of Mosenergo, Gazprom chairman – P.O. Shatsky, members May 15, 2018: purchase of ordinary Alexey Mikhaylovich Gusev PJSC Head of the Department; of the Committee: A.A. Gavrilenko, registered uncertified shares in the Konstantin Vasilyevich Komissarov – V.G. Pyatnitsev. amount of 4,425,000 pcs; Mosenergo Corporate Secretary Year of birth: 1980 Independent Member of the Board May 16, 2018: purchase of ordinary of Directors, Mosenergo PJSC; registered uncertified shares in the Education: higher amount of 634,000 pcs;

48 | ANNUAL REPORT 2018 MOSENERGO | 51 10.4.2.4 Reliability Committee 10.5 Executive Bodies Members of the Committee Sergey Faritovich Mukhametov – the authority of one of Committee approved by the Board of Directors Deputy Head of the Technical members, Sergey Faritovich According to the Resolution of the Rights and responsibilities of the operations, except those placed on June 29, 2018 Department; Gazprom Energoholding Mukhametov, was terminated, and extraordinary General Meeting of managing organization to manage within the competence of the General Chairman of the Committee: LLC Head of the Operations Andrei Viktorovich Kalashnikov, Shareholders of Mosenergo dd. May the Company’s daily operations are Meeting of Shareholders and the Department; Gazprom Energoholding’s Deputy Mikhail Vladimirovich Fedorov – 20, 2015, the powers of the sole defined by the Russian Federation Board of Directors of the Company. Director for Production and Head Gazprom Energoholding LLC Sergey Aleхanderovich Petelin – executive body were transferred to laws, the Company’s Articles of The share of Gazprom Energoholding of the Technical Management Operations Director Deputy Head of Production; Gazprom the managing organization: Gazprom Association, and an agreement LLC holding in Mosenergo’s Energoholding LLC, Head of Department, was elected to the Energoholding Limited Liability concluded with the Company. The Members of the Committee: authorized capital equals 53.5%. Production Department; Committee. Company (INN 7703323030, OGRN managing organization decides on Sergey Nikolaevich Lenyov – Deputy Mosenergo’s ordinary shares held by Vsevolod Georgievich Pleshivtsev – Members of the Committee until 1037739465004). issues associated with management Managing Director, Mosenergo Chief Gazprom Energoholding LLC equals First Deputy Head of Moscow June 29, 2018: of the Company’s day-to-day Engineer; 53.5%. Department for Housing and Utility Committee Chairman – M.V. Fedorov, Roman Viktorovich Litvinov – Services; Committee members: S.N. Lenev, Gazprom PJSC Deputy Head of the Mikhail Vladimirovich Sorokin – R.V. Litvinov, K.V. Moskvin, Division; Gazprom PJSC Head of the Division. S.F. Mukhametov, S.A. Petelin, Konstantin Vladimirovich Moskvin – V.G. Pleshivtsev, M.V. Sorokin. By the decision of the Board of Deputy Chief Engineer, Mosenergo Directors of Mosenergo dated August 10.6 Board of Internal Auditors Head of the Equipment Operation 23, 2018, the following changes were Department; IN ORDER TO EXERCISE CONTROL Members of the Board of Internal ∞∞ Margarita Ivanovna Mironova: made to the Reliability Committee: OVER THE COMPANY’S FINANCIAL Auditors as elected by the General First Deputy Head of the Board AND BUSINESS ACTIVITIES, Meeting of Shareholders of Administration, Gazprom PJSC THE GENERAL MEETING OF Mosenergo on May 31, 2018: Head of the Department; Attendance of meetings of Board of Directors and its Committees in 2018 SHAREHOLDERS OF THE COMPANY ∞∞ Anatoly Anatolyevich Kotlyar: ∞∞ Marat Khasanovich Salekhov: ELECTS FIVE MEMBERS TO THE Gazprom PJSC Head of the Gazprom PJSC Head of the Strategy and BOARD OF INTERNAL AUDITORS. Department; Department; Audit HR and Remuneration Name Board of Directors1 Investment The Company’s Board of Internal Committee Committee ∞∞ Yury Andreevich Linovitsky: ∞∞ Andrey Nikolayevich Tabelsky: Committee Auditors operates in accordance with Gazprom Energoholding LLC, Head Deputy Head of Moscow the laws of the Russian Federation, the of the Internal Audit Department of Department of Property Members of the Board of Directors throughout the entire 2018 Company’s Articles of Association, and the Gazprom Personal LLC internal K.G. Seleznev 16/16 100% the Regulations on the Company’s audit project; Board of Internal Auditors. A.Yu. Berezin 12/16 75% 75% A.A. Butko 16/16 100% 100% V.A. Golubev 16/16 100% 100% A.S. Ivannikov 15/16 94% 100% 100% E.V. Mikhaylova 16/16 100% V.I. Pogrebenko 16/16 100% 100% 100% 100% D.V. Fedorov 16/16 100% 100% P.O. Shatsky 16/16 100% 100% 100% Members of the Board of Directors from January 1, 2018, to May 31, 2018 A.A. Gavrilenko 7/8 87% 100% 100% P.A. Livinskiy 4/8 50% I.V. Mironova 4/8 50% V.G. Pyatnitsev 8/8 100% 100% 100% 100% Members of the Board of Directors starting from May 31, 2018 G.G. Gasangadzhiyev 8/8 100% K.V. Komissarov 8/8 100% 100% A.V. Seregin 7/8 87% A.V. Khorev 8/8 100% 100%

1 The ratio of the number of meetings attended by a director to the number of meetings held during the period during which the director was a member of the Board of Directors and the relevant Committee.

50 | ANNUAL REPORT 2018 MOSENERGO | 53 10.7 Remuneration

In accordance with the Company’s The total amount of the additional and business activities in 2018 equaled Articles of Association and remuneration element based on the 871,584.75 RUB. the decision of the General Company’s performance shall not The amount of remuneration Shareholders’ Meeting of the exceed five percent of the Company’s to the managing organization is Company, members of the net profit earned during the fiscal year determined by the agreement Company’s Board of Directors when the current members of the for the transfer of powers of the are entitled to remuneration and Board of Directors were elected into Company’s sole executive body / or compensation for expenses office. to the managing organization and incurred while performing their The additional remuneration totaled 40,442,059.83 RUB (VAT functions as members of the component based on the Company’s included) for the period between Company’s Board of Directors. performance is not paid to members January 1 and March 31, 38,055,000 The amount, type, and procedure of the Board of Directors who RUB (VAT included) for the period for payment of remuneration and attended fewer than half of all between April 1 and September 30, compensation to the members of meetings of the Board of Directors and 38,415,000 RUB for the period Mosenergo’s Board of Directors are (from the date of their election until between October 1 and December provided for in the Regulations on termination of their authority). 31. Actual remuneration to the Determination of the Amount of The total amount of remuneration managing organization in 2018 totaled Remuneration and Compensation to to the members of the Board of 135,712,531 RUB (VAT included). Members of the Board of Directors Directors in 2018 totaled 64,002,543 of Mosenergo, approved by the RUB, including: bonuses for General Meeting of Shareholders participation in the executive of the Company on May 31, 2016. body operation (37,176,336 RUB), Members of the Board of Directors salaries (20,533,177 RUB), premiums that cannot receive remuneration (6,080,340 RUB), and other from commercial organizations under remuneration (212,690 RUB). the Russian Federation laws do not The payment of remuneration receive it. and compensation to members According to these Regulations, the of the Board of Internal Auditors remuneration for members of the is carried out according to the Board of Directors consists of basic Regulations on Payment of and additional components. Remuneration and Compensation The basic remuneration component to Members of the Board of constitutes remuneration paid to Internal Auditors of Mosenergo, members of the Company’s Board approved by the General Meeting of Directors for their participation in of Shareholders of the Company meetings of the Board of Directors. on June 10, 2015. The amount of remuneration paid is Members of the Company’s Board of equivalent to four minimal monthly Internal Auditors receive a one-time rates of a first-grade employee, set payment for their participation in the by the industry-wide tariff agreement inspection (audit) of the Company’s of the power sector of the Russian financial and business activities. The Federation as of the date when a amount paid equals 25 minimum meeting of the Company’s Board of monthly wages of a first-grade Directors is held, taking into account employee established by an industry- indexation set under the above wide tariff agreement of the power agreement. sector of the Russian Federation for The additional remuneration the period of inspection (audit), taking component is paid to members of into account the indexation stipulated the Company’s Board of Directors by the Agreement. according to the results of the Members of the Company’s Board financial year, in the event of the of Internal Auditors are reimbursed Company’s generating net profit. for their traveling expenses when The decision to pay additional they participate in the Board of remuneration to the members of Internal Auditors’ meetings related the Board of Directors is adopted by to inspections, according to the the General Meeting of Shareholders Company’s regulations on the of the Company. The decision of reimbursement of business travel the General Shareholders’ Meeting expenses in force at the time of such of the Company on the payment meetings or inspections. of the additional component of Total amount of remuneration for remuneration to the members of the participation in operations of the body Board of Directors shall determine the controlling the Company’s financial total amount of such remuneration.

52 | ANNUAL REPORT 2018

MOSENERGO | 57 The main results of RMS functioning in 2018:

11.1 Mosenergo’s Risk Management ∞∞ the authority of the sole responsibilities at the interaction directions for the development executive body in the field of stages, and describes the nature and improving of the RMS of System risk management, regulated by of their interaction; Mosenergo for the years 2018- the Risk Management Policy, 2019; MOSENERGO SEES ITS RISK MANAGEMENT (RMS) AND INTERNAL CONTROL SYSTEM AS ONE OF THE MOST ∞∞ key documents in the domain of was transferred to the Managing risk management for 2018 were ∞∞ in order to form the internal IMPORTANT ELEMENTS OF CORPORATE GOVERNANCE AND CARRIES OUT A COMPREHENSIVE RISK MANAGEMENT Director of Mosenergo PJSC; POLICY WHICH COVERS ALL LEVELS OF GOVERNANCE AND IS BASED ON BEST INTERNATIONAL PRACTICE AND drawn up and approved based environment of the RMS, training ON PRINCIPLES OF THE CODE OF CORPORATE CONDUCT RECOMMENDED BY THE CENTRAL BANK OF THE ∞∞ high-level documents, such as on the results of identifying risks was conducted in the field of RUSSIAN FEDERATION. the updated Risk Management in business processes, assessing risk management for heads Policy and Regulation on the identified risks, and developing of departments and deputy risk management system, were risk response measures. These managing directors; The objectives set by the Company’s RMS as determined by the Risk Management Policy are:: approved, defining the goals, documents are the Company’s ∞∞ procedures for quarterly objectives, elements, and Risk Register, the Company’s Risk monitoring of the RMS and ∞∞ ensuring reasonable confidence the legislation of the Russian advisory body with the authority participants of the RMS; Passport, and the Company’s Risk informing the Operating in achieving goals and solving Federation and internal to coordinate issues related to ∞∞ the Regulation on interaction Management Plan; Committee about the risks and problems, improving sustainability documents of the Company, organizing and increasing the of risk management system ∞∞ the Company’s Risk List was risk response measures taken and performance; as well as its subsidiaries and effectiveness of RMS. participants was approved; approved; it assigns responsibility have been introduced; organizations. ∞∞ increasing the level of corporate Functions of the Risk Management this Regulation determines the for the management of each ∞∞ a package of internal regulatory governance, strengthening the The participants of the RMS are Division are performed by the head procedures for interaction of identified risk to the Risk Owners; documents on financial, confidence of investors and other the Company’s Board of Directors, of the Company’s risk management participants at various levels of ∞∞ the RMS Development Plan was operational, and credit risk has stakeholders; the Board of Directors’ Audit activities. In order to ensure the risk management process, approved. It determines the been developed. ∞∞ ensuring safety of assets, as Committee, the Sole Executive Body independence and objectivity, the distributes functions and well as the completeness / Managing Director, the Operating activities of the head of the risk and accuracy of financial, Committee, the Risk Owners, the management division are structurally management, and other Risk Management Division, and the differentiated from the activities Below are the key priorities in the development of the RMS in 2019: reporting; Internal Audit Department. related to the internal audit function and audit / inspection departments. ∞∞ integration of the RMS and ∞∞ development of normative and ∞∞ development of approaches to ∞∞ ensuring compliance with The Operating Committee is an internal control system; methodological foundation for defining the permissible risk level ∞∞ integration of the RMS into the the RMS; for the Company; Distribution of key functions among the participants of the RMS: Company’s business processes, ∞∞ increasing competency of ∞∞ establishment of a dedicated risk including project management; Company employees in the field department. 1. the Company’s Board of the RMS, provides for the activities, forms proposals for ∞∞ development of models of of risk management and internal Directors approves the general establishment and maintenance an acceptable level of risk, quantitative risk assessment; control; risk management policy and of the operation of the RMS, provides methodological the permissible level of risk, determines the principles support for the risk receives information on the for the functioning and management processes, most significant risks, considers development of the RMS, develops RMS documents, the results of functioning of determines the Risk Owners, prepares consolidated risk 11.2 Substantial risks for Mosenergo the RMS, and makes decisions and approves local normative reporting, and informs the on conducting a periodic acts in the domain of risk management bodies about the during the reporting period assessment of RMS functioning; management; organization and the operation 2. the Audit Committee of the 4. the Internal Audit Department of the RMS; Board of Directors monitors conducts an independent 7. the Risk Owners make 11.2.1 Industry Risks the reliability and efficiency assessment of the effectiveness decisions on risk management of the RMS, carries out a of the RMS; issues in the assigned functional Exposure of Mosenergo to industry risks is caused by participation in sales of electricity and capacity on the wholesale preliminary review, and issues 5. the Operating Committee areas of activity, monitor market using regulated and unregulated (free) contracts, including sales at free (unregulated) prices determined by recommendations on matters reviews the RMS documents, the reliability and efficiency competitive selection of price bids from buyers and suppliers carried out one day prior to the start of delivery, as well within the competence of annual reports on functioning of RMS functioning within as in sales of electricity at free (unregulated) prices determined by competitive selection of bids from suppliers with the Board of Directors in the of the RMS, and the quarterly their competence, monitor regulated consumption carried out no later than an hour before the supply of electricity in order to form a balanced domain of risk management; results of monitoring the RMS; risk management activities mode of production and consumption. within their competence, and 3. the Sole Executive Body / 6. the Risk Management Division The industry risks for Mosenergo includes the following: implement the stages of the risk Managing Director determines forms a unified RMS policy, management cycle in the fields the order of implementation coordinates risk management and ensures functioning of that they are responsible for. Risks Related to Regulation of Tariffs Heat is supplied at indexed tariffs of tariffs that do not cover the Prices and Tariffs of the Moscow set by the Department of Economic economically reasonable costs Region in order to approve an Policy and Development of Moscow necessary for heat production. economically reasonable level of and the Committee on Prices and Mosenergo constantly works with tariffs. The Company implements Tariffs of the Moscow Region. the FAS of Russia, the Department of programs to improve operational Restrictions associated with the Economic Policy and Development efficiency aimed at reducing marginal index of citizens’ payments of Moscow, and the Committee on production costs and saving up fuel. may lead to the establishment

56 | ANNUAL REPORT 2018 MOSENERGO | 59 Risks Related to Decrease of Demand on Heat (or Demand Replacement by Competition) into account, the regulatory carried with minimum specific decommissioning of obsolete and parameters of equipment fuel consumption; inefficient equipment, fuel supply The volume of demand for electricity ∞∞ when planning output volumes Company’s generators; operation are maintained to ∞∞ implementation of the management, property insurance. and heat is influenced by external and scheduling maintenance ∞∞ analysis of the operation of ensure that nominal loads can be factors, such as outdoor temperature, and repairs, average daily and participants in the wholesale the working conditions of industrial seasonal temperature fluctuations electricity and capacity enterprises, regional development over previous periods are taken market, taking into account Production risks, including those related to industrial safety and labor and environmental rates, the introduction of energy- into account; the optimization of equipment protection saving technologies, and the volume ∞∞ optimizing load and composition operation modes; special of electricity exchange in the Moscow of the generating equipment attention is paid to the reliability Mosenergo has organized permanent a service contract was concluded as well as accident insurance; region. of power plants by means of of energy supply to consumers; activities to identify, assess, and with a professional emergency conducts obligatory medical In order to reduce the impact of this distributing heat loads between new efficient technologies are manage risks associated with rescue team (hereinafter referred examinations of personnel and risk, Mosenergo implements the sources; enhancement of introduced, and obsolete and production activities, including those to as PERT), developed, and specific assessments of working following measures: source efficiency by virtue of inefficient equipment is replaced. in terms of labor protection, industrial agreed with PERT management; conditions, exerts control over shifting boiler station loads to the safety, and environmental protection. plans of measures for the compliance with sanitary norms The greatest attention is paid to the localization and liquidation of the in order to minimize the impact following most significant risks in this consequences of accidents at of harmful and hazardous Risks of Prices on Day-Ahead Market Decreasing Lower Than Fuel Consumption for Electricity field: HPFs; training sessions are held factors; provides personnel with Production ∞∞ prevention of man-made on the readiness of personnel necessary means of individual accidents and emergency risks; to accidents at HPFs; technical and collective protection, and audits of industrial safety and is constantly working on the The commissioning of new To manage this type of risk, discussions take place as part of ∞∞ prevention of risks to life and compliance with the requirements development of a culture of safe capacities, changes in the output by Mosenergo optimizes the delivery operation of such association as NP health of production personnel of energy supervision; and fire behavior of personnel; Rosenergoatom and RusHydro in the schedule depending on the emerging Market Council and Council of Power associated with industrial injuries; conditions of declining consumption market prices at different hours of the Producers. stations equipped with necessary ∞∞ implements an industrial ∞∞ prevention of the risk of fires at and increasing competition can lead day. Representatives of the Company equipment and personnel have safety management system, a Company’s facilities; to an unfavorable change in prices participate in the development and been organized at large power labor protection management and, consequently, to a decrease in discussion of changes in regulatory ∞∞ prevention of risks associated plants; system, and an environmental the profitability of the wholesale of acts governing the activities of entities with the possibility of non- ∞∞ engages specialized expert management system; conducts electricity. in the electric power industry. These compliance of technical organizations to monitor regular audits of the effectiveness condition, management of technical condition, perform of these systems; operation, and maintenance and technical certification and ∞∞ monitors legislation in the repair of equipment, buildings, 11.2.2 Production Risks diagnostics, assess equipment field of industrial safety, labor and structures with current resource, and review industrial protection, and environmental Mosenergo considers the following and future (newly introduced) and the retrofitting and upgrading personnel, the timely conduct safety of equipment, buildings, control in order to take timely production risks associated with regulatory requirements in the program; of necessary technical and and structures; measures to bring the technical unscheduled changes in the field of industrial safety, fire safety, ∞∞ implementation of the pipeline diagnostic examinations of ∞∞ conducts personnel training condition, management of operating mode of generating and labor and environmental replacement program, the equipment; in specialized training centers operation, maintenance and equipment, failures of technological protection. equipment, and the resulting program of continuous ∞∞ monitoring the progress of and directly at TPPs, as well repair of equipment, technical interruptions in the supply of monitoring and diagnostics of repairs, scheduling overhauls ∞∞ To manage these risks, as additional vocational devices, buildings, and electricity and heat: pipelines used to supply heat, of turbines, boilers, turbine Mosenergo utilizes the following education, training, and structures to current and future risk response measures: ∞∞ equipment accidents; as well as boilers, turbines, and generators, transformers, and certification of personnel in the (newly introduced) regulatory the main equipment installed at units; ∞∞ the Company organized and field of industrial and energy requirements; ∞∞ accidents during heat supply; power plants; Mosenergo also ∞∞ maintaining and increasing carried out production control security; provides commercial ∞∞ introduced an automated ∞∞ disruptions in production ensures timely conclusion of personnel’s competence: over compliance with industrial insurance of property, means environmental monitoring system processes; agreements with suppliers of conducting seminars, continuing safety requirements at hazardous of transport, and civil liability that helps to prevent the risk of ∞∞ unscheduled repairs of materials and equipment and the education, pre-examination production facilities (hereinafter of the Company for causing exceeding the environmental equipment; availability of specialized tools training and knowledge tests, referred to as HPFs); non-standard harm as a result of accidents at standards for emissions of and spare parts at the branches ∞∞ exceeding the duration / cost of emergency training, simulator emergency rescue teams were hazardous facilities, voluntary harmful substances. for emergency repairs. It also scheduled repairs; training, communicating the created in Company’s branches; medical insurance of personnel, cooperates with MOEK in terms causes of accidents to personnel ∞∞ non-compliance with criteria of joint mode management of branches in order to prevent when generating equipment to prevent the emergence of the recurrence of such events, Risks of technological connection is involved with RPFC (rated modes that contribute to the conducting extraordinary primary frequency control) and Mosenergo considers such events to communication channels used to uninterrupted operation of the deterioration of equipment; personnel briefings and testing GPFC (general primary frequency be risk events due to malfunctions transmit telemetry information from dispatch communication of power ∞∞ ensuring the availability of fuel the knowledge level of personnel control); of the dispatch communication power plants to Moscow Regional plants, including ensuring the reserves, the performance of who committed the accident, channels from power plants to Dispatch Office. availability of backup communication ∞∞ inefficient operation of enterprises that receive, store, and participation in the corporate Moscow Regional Dispatch Office channels for the transmission of equipment. transport reserve and emergency and All-Russian competitions of Mosenergo regularly implements or the malfunctioning of the telemetry information. ∞∞ Mosenergo implements the fuel; meeting of current needs operational personnel; measures aimed at ensuring following measures as risk for reagents and operational ∞∞ when submitting price bids for response: materials; the conclusion of SCIGE (selecting composition ∞∞ implementation of the repair multi-year framework agreements of included generating program, including quality for the supply of materials and equipment), day-ahead market, control over its performance, equipment; and BR, equipment operation the program for improving the ∞∞ ensuring proper level of with an optimal composition reliability of equipment operation, equipment operation by shift at an optimal load is taken

58 | ANNUAL REPORT 2018 MOSENERGO | 61 11.2.3 Financial Risks 11.2.5 Risks related to activities of Mosenergo

Currency Risk Risks of court rulings applications. reduce the impact of risk factors, Exposure of Mosenergo to currency ∞∞ regularly evaluates and monitors ∞∞ It should be noted that, in Q4 2018, leading to the occurrence of In order to ensure uninterrupted Mosenergo takes the following risk is caused by the volatility of the currency risk, manages debt Mosenergo repaid part of its foreign response measures: obligations for Mosenergo: operations, Mosenergo implements exchange rate and the presence of structure, and performs cash flow currency obligations ahead of programs aimed at reducing the ∞∞ monitoring and control of work liabilities denominated in foreign planning in order to minimize the schedule. The main factor of a risk event is number of failures and the duration of / supply and other obligations of currency. need to raise borrowed funds; a change in court practice related unavailability of services. counterparties; To manage currency risk, Mosenergo ∞∞ in case of a sharp increase to appealing against bankruptcy ∞∞ retransmission of possible losses takes the following risk response in exposure to currency risk, transactions: returning to the Risk of materializing of to relevant subcontracts with measures: considers the need to restructure bankruptcy assets of funds received counterparties; a foreign currency loan. information security threats as payment for consumed heat a ∞∞ applies security of liabilities (bank month before the counterparty’s In accordance with the Federal guarantees); Credit Risk bankruptcy. In order to manage this risk, Mosenergo participates in the Law No. 187-FZ of July 26, 2017 ∞∞ controls planning and “On the Security of the Critical implementation of investment Mosenergo assesses the credit risk functioning apply (List of consumers the efficiency of using working capital development of legislative initiatives Information Infrastructure of the program contracts. of non-payment for the supplied with low payment discipline). through timely adoption of measures and also ensures that the curators Russian Federation”, entered into heat and electricity and capacity The inclusion in this list basically to pay off overdue receivables, of contracts are updated in a timely force on January 1, 2018, Mosenergo as significant. The main overdue allows companies not to fulfill their Mosenergo constantly operates the manner in case of changes in court categorizes critical information Risks associated with the amount is formed under regulated obligations in regards to payments for Committee for Control of Receivables practice, including proposals to infrastructure objects. management of non-core contracts in respect of companies electricity and capacity in full for the and Payables. In addition, when minimize adverse outcomes in similar located in the North Caucasian electricity sold to them and capacity performing procurement activities, cases. In order to manage risk factors, assets Federal District. These companies under the concluded WEMC. mechanisms are applied to reduce Mosenergo also teaches personnel Exposure to these risks is due to have the official status of “non- credit risks. the basics of information security, In order to manage credit risk, the presence on Mosenergo’s payers”. Government Order No. 1172 Risk of staffing mismatch provides timely response to identified Mosenergo continuously monitors The risks of non-payment in terms of balance sheet of non-core assets. In of October 27, 2010 formalized a list vulnerabilities in existing systems and the level of overdue receivables intragroup operations are assessed The main risk factors are the turnover order to manage these risk factors, of territories for which the features of protection tools in accordance with and implements measures aimed by Mosenergo as not significant. and insufficiency of qualified Mosenergo regularly analyzes the wholesale market are established. their type by timely updating and at reducing the level of overdue To limit the credit risk arising from operational personnel in the labor non-core assets in order to timely The agreement on accession to installing software patches. receivables, including analyzing interaction with counterparty banks, market. In order to manage this risk, register property rights and formulate the trading system confirms the counterparties for solvency and the allocation of funds is carried out Mosenergo implements training and non-core asset sale programs and list of companies located in these financial stability. In order to improve in accordance with the limits development programs for operating develops and implements measures territories to which the peculiarities of Risks associated with personnel, forms personnel reserve non-performance of the aimed at preventing the following for the Production Unit, implements investment program risks: 11.2.4 Legal Risks programs aimed at improving ∞∞ sales of non-core / inefficient personnel satisfaction, and monitors Mosenergo implements a large- assets included in the sales plan, The tax legislation of the Russian ∞∞ cancellation of the existing tax tax audits, Mosenergo regularly market wages. scale investment program which exceeding the term or at a lower Federation is subject to frequent benefits; monitors changes in tax legislation determines susceptibility to a number cost; changes, in some cases contains and judicial and administrative ∞∞ incorrect calculation and Risk of unavailability of IT of project risks, such as an increase ∞∞ decrease in profitability from the ambiguities and uncertainties, and payment of taxes due to different practices in order to ensure in prices on equipment, as well as services lease of inefficient / non-core court practice and explanations of interpretations of legal norms that compliance of the applicable material and technical resources assets; regulatory authorities often contradict tax calculation procedure and services, including the services allow ambiguous interpretation; The main risk factors are network ∞∞ claims / sanctions based on each other; therefore, tax risks may with legislation; evaluates the of subcontracting organizations ∞∞ negative changes in court infrastructure failures, equipment the results of audits performed arise related to: transactions to be carried out in and non-observance of project practice for taxpayers; and software failures, and mismatch by controlling / supervisory ∞∞ amendments to the legislation order to reduce tax risks; carries implementation dates and their ∞∞ claims / sanctions of tax of communication channels and authorities in the field of property on taxes and fees related to the out activities to improve the skills of design characteristics. In order to authorities based on the results of the requirements of business management. increase in tax rates; employees engaged in calculation on-site tax audits. and payment of taxes in the case ∞∞ the introduction of new types of In order to manage the risk of of additional taxation based on the taxes; claims / sanctions of tax authorities results of on-site tax audits, as well ∞∞ expansion of the list of objects of based on the results of on-site as provides advocacy in court. taxation;

60 | ANNUAL REPORT 2018 MOSENERGO | 63 11.3 Ensuring the compliance of activities with the requirements of anti-corruption laws aimed against illegal use of insider information and market manipulation

Internal control over compliance ∞∞ local acts have been developed with the legislation is carried out and adopted aimed at ensuring within the framework of the internal the Company’s good business control system. Below are the main practices and preventing local regulatory acts of Mosenergo and resolving conflicts of developed in compliance with the interest, such as: Regulations requirements of the legislation and on Contractual Work; the the best practices in the field of Order “On the Compliance of compliance: Mosenergo with the Procedure ∞∞ provision on procurement, for Conducting of Interested- goods, works, and services of Party Transactions”; the Order Mosenergo, which establishes “On Approving Criteria for universal rules and procedures Determining Significance of for procurement of goods, works, Procurement Violations”; the and services, eliminating any Order “On the Establishment of discrimination and unreasonable Maximum Amount of Contracts restrictions on competition Concluded with a Single Supplier with respect to procurement (Provider, Contractor)” and other participants, information documents; transparency of procurement, ∞∞ cooperation with law and targeted and economically enforcement agencies has efficient spending of funds for been established; in case there the purchase of goods, works, are reasons to believe that an and services. The procedure for employee of the Company (or conducting procurement in order another person) committed acts to reduce the risk of appealing to of corruption that have signs anti-monopoly authorities as it of an unlawful criminal act, this relates to procurement conducted information is sent to the law for the needs of Mosenergo has enforcement agencies according been approved; to the established procedure; ∞∞ provision on gaining access ∞∞ local regulatory acts of the to insider information of Company have defined divisions Mosenergo, which establishes and officials responsible for the mechanisms for preventing, the prevention of corruption. detecting, and eliminating abuse Corporate protection of organized trading in the departments perform anti- form of unlawful use of insider corruption measures; information and / or market ∞∞ in order to improve the use of manipulation. A list of information seals, a provision on registration of Mosenergo classified as insider of seals has been approved; information has been approved; ∞∞ the procedure was established ∞∞ the Code of Business Ethics, and measures are being which establishes the most undertaken to obtain information important rules of business on the chain of ownership, conduct for managers and including beneficiaries (including employees, adopted at the final ones), and / or on the Mosenergo and its subsidiaries, members of the counterparties’ except for cases of conflict of executive bodies. interest and corruption, as well as A hotline on anti-fraud, corruption, the joint work of family members and embezzlement issues is currently who are directly or indirectly in place; ongoing work is being done subordinate. to improve and develop the anti- Mosenergo has procedures in place corruption system. to ensure compliance with the requirements of anti-corruption legislation:

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SOCIAL WELFARE EXPENDITURES 236.3 FOR THE COMPANY’S EMPLOYEES RUB million

AVERAGE SALARY 4.9% GROWTH IN 2018 MOSENERGO | 67 12.1 Headcount and Staff Structure 12.2 Corporate Culture The policy of human resources management at Mosenergo Staff Turnover aims at creating an efficient mechanism of personnel management, including by developing and strengthening the corporate culture pursuing clear, open, and timely informing of workers on the Company’s activities with the feedback.

THE COUNCIL OF YOUNG STAFF WERE HIRED WERE DISMISSED TURNOVER Regular provision of information about the most important events of SPECIALISTS HELD MORE 7,945 PEOPLE IN 2018 Mosenergo is supported through the main channels of communication such THAN PEOPLE PEOPLE as the corporate newspaper “Mosenergo Vesti”, the intranet portal, social MOSENERGO’S HEADCOUNT 916 879 network pages, mass mailing, and corporate information booths. TOTALED ∞∞ 540 people on their volition, EVENTS IN 2018 For feedback from the staff, the following are used: the 24 / 7 telephone 36 ∞∞ 56 by mutual agreement, 6.96% ∞∞ 16 due to staff reduction measures or reduction hotline for employees and the dedicated e-mail address, vopros@mosenergo. ∞∞ in the number of the Company’s employees, ru. Directors of all Mosenergo’s subsidiaries and affiliates regularly hold ∞∞ and 267 for other reasons briefings. WITH Within the framework of increasing the involvement of young specialists of Educational level of Mosenergo staff as of Length of service as of December 31, 2018 Mosenergo, their quick and effective adaptation, identification and effective PARTICIPANTS December 31, 2018 use of their creative and productive potential, the Council of Young Specialists ~950 was established, which is engaged in the following activities:

19% 11% ∞∞ mass cultural events; ∞∞ technical ideas and rationalization proposals; 7% ∞∞ social events; 34% ∞∞ sports events. In 2018, the Council of Young 9% Specialists held more than 36 events with various focus. A total of 950 people participated in these events. Among these events are: dedication 9% of young specialists into energy workers, the Mosenergo Battle of Wits 15% game where Company employees 15% and students of Moscow Power 53% 28% Engineering Institute participated; as well as organizing the Battle of Wits 5 years or less 21-25 years game for young specialists as part Higher professional education 6-10 years 26-30 years of the Energy Forum Youth Day (13 Primary and secondary professional education Moscow companies working in the 11-15 years Over 31 years domain of municipal services took Secondary and complete basic education 16-20 years part in this forum). In 2018, the branches of Mosenergo Mosenergo staff breakdown Staff profile by age as of December 31, continued the quarterly “Best as of December 31, 2018 2018 Employee” contest. The best 5% employee is an employee of the company who demonstrated the 35.05% 26% most significant and outstanding been put together to honor these professionals, and ensuring the achievements that have affected mentors. These videos are often connection between generations the Company’s performance. The used in various corporate events; in the Company, the Council 23% list of the winners and excerpts furthermore, monthly columns of Veterans is in place. about the most outstanding winners dedicated to mentors are published In 2018, the Council organized are published in the corporate in the corporate newspaper. seven events, including laying of newspaper. In 2018, Mosenergo Olympics took flowers to the monument to creators In order to ensure succession and place. Employees of Mosenergo of electrified obstacles in the village retaining expertise accumulated by branches competed in 10 sports: of Nefedyevo on May 9 as part of the most experienced and qualified skiing, athletics, volleyball, futsal, celebration of the Victory Day. employees of the Company, there swimming, streetball, football In 2018, veterans of the Great 46% is a mentoring system in place. (soccer), chess, table tennis, and rifle Patriotic War were honored. The 13.71% Every year, best mentors that shooting. More than 890 Company Company’s employees, the Council 50.96% employees participated in Mosenergo 0.28% made the greatest contribution in of Veterans, and the Council of Young development and adaptation of Olympics. Specialists took active participation Management Office staff Under 25 years 35-55 years young specialists are selected in each As part of strengthening the traditions and personally congratulated Specialist staff Operational staff 25-35 years Over 55 years Mosenergo branch and have received of corporate culture, organizing 23 veterans and 120 homefront honorary certificates. Videos have the patriotic education of young workers.

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11 Company employees are currently receiving their primary higher education 12.3 Staff Training and in Moscow Power Engineering Institute. In 2018, 39 employees of the Company underwent training and professional Development retraining in Moscow Power Engineering Institute. In 2018, the Engineering Case Championship took place. 35 young employees of the Company participated in this championship. Mosenergo focuses heavily on the development of its staff in accordance with For the preparation and development of the production personnel reserve, in business objectives and mandatory legislative requirements of the Russian Fed- May 2018 the second installment of the Chief Engineer School was launched. eration. Nine technical directors took place in activities related to this school. Four REGULAR SIMULATOR- training modules of the program were run in 2018. TRAINING WAS UNDERWENT BY The comprehensive personnel development system has two key areas. First and foremost, it ensures matching the personnel’s qualification for solving cur- Starting from June 2018, the Academy of Management training program was rent tasks of the company. The other key area is personnel training for imple- implemented, in which key managers of Mosenergo are currently taking part. EMPLOYEES menting the company’s strategic plans, implying the development of skills and Seven training modules of the program were run in 2018. 1,062 competences to be demanded in the future.

OPERATIONAL EMPLOYEES In 2018, in accordance with the established periodicity of training, current and future development plans, 5,581 people, including 2,385 workers and 3,196 INCLUDING TRAININGS managers and specialists, received off-job training, including advanced training. FOR A NEW POSITION OF 12.4 Motivation and Social Programs The incentive system used by respect to 1,575 employees (21% of reputation of Mosenergo as a reliable Operating personnel, specialists, and managers of the Company undergo Mosenergo based on grades and the headcount). In 2018, the average and responsible employer and 87EMPLOYEES training at the Corporate Training Center, where target staff training programs key performance indicators provides salary in the Company grew by 4.9% partner. Social payments are made on key majors are developed and implemented. conditions for attracting and retaining against the previous year. under the collective bargaining At the simulator-training section of the Training Center, Mosenergo’s qualified personnel by offering Social welfare of workers of the agreement agreement and local operational employees are trained. In 2018, 1,062 operational employees competitive financial remuneration. company is one of the tools for regulations in force within the underwent regular training, including 87 employees who were trained for a On an annual basis, the regular sustainable development and Company. 2018 Mosenergo staff training new position. review of salaries has been held in contributes to strengthening the Within the framework of the project “Culture of Safe Behavior of the Mosenergo’s Staff.”, 271 employees underwent training as part of the “Energy of Compensation for the Costs of Holiday Packages for 43% Safety” course, and 879 employees as part of the “Job Order / Permit to Work” Employees’ Children. course. The Company also provides remote learning, which includes mandatory In 2018, 153 Mosenergo employees received compensation for holiday remote training and courses aimed at developing personal and professional packages acquired for their children for going to summer camps for rest, competences. recreation, or education. Station and interstation competitions of operating personnel of block TPPs were conducted in order to improve the level of professional training of Non-financial Motivation of Employees. SOCIAL WELFARE EXPENDITURES FOR operational personnel of TPPs. The Company pays special attention to non-financial motivation of personnel THE COMPANY’S EMPLOYEES IN 2018 In April 2018, the team of TPP-22 won the interstation competition, the team of aimed at increasing the personal outcome and achieving high production TOTALED TPP-25 won the second place. results. An efficient tool for moral stimulation of the Company’s personnel In June 2018, the same two teams won the competition of operating personnel includes awarding the most distinguished staff with state, institutional, and RUB teams held by Gazprom Energoholding Group. TPP-22 won the contest, TPP- industry-specific awards. 236.3 MLN 41% 16% 25 got the second place. As part of the development of cooperation with universities and secondary specialized educational institutions, Mosenergo cooperates with National Operational staff Research University “Moscow Power Engineering Institute”, its branch in Mosenergo social support structure Specialist staff Konakovo, Shatura Energy Vocational School, Lenin Ivanovo State Energy University, and Ivanovo Energy School in the following areas: Management ∞∞ targeted personnel training; ∞∞ on-site internship of students; 86.0% ∞∞ obtaining primary higher education by Company’s employees; 0.4% professional re-training of employees lacking industry-specific higher Voluntary health insurance 2.0% education. 3.0% Activities with veterans and homefront workers of the As part of targeted personnel training, Moscow Power Engineering Institute Great Patriotic War implements two applied bachelor education programs in the following areas: 4.8% Financial support “Thermal energy and technology” and “Electric energy and technology.” Three target groups and a total 31 of students participated in this educational program. 3.8% Accident insurance In 2018, three joint educational programs were approved in cooperation the Compensation for the costs of holiday packages for employees’ children Shatura Energy Vocational School: “Automation of technological processes Private pension provision and production (by industry)”, “Thermal power plants”, and “Power stations, networks, and systems.” 25 students participate in these educational programs. In 2018, 176 students passed their internships in Mosenergo. 61 of them were officially hired.

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working in hazardous conditions, of equal value, and a list of harmful In 2018, the supply and delivery of of milk or other equivalent food workplace factors where the use of milk to Company branch facilities was 12.5 Occupational Health and Safety items, or compensatory payments milk or other equivalent food items centralized under a service agreement that are equal to the equivalent of is recommended as a preventative with APK Shatursky LLC In 2018, the total amount of expenditure on various measures to improve occupational conditions and health and the cost of milk or other food items measure.” prevent sicknesses (across the Company) amounted to more than RUB 739 mln, which is more than 0.2% of the total production costs. Sanitary and healthcare services to employees. Availability and equipping sanitary facilities, rest-rooms, provision of medical aid, and staff recreation rooms 2018 Occupational Health and Safety Expenditure, thou. RUB In accordance with Article 223 shower cubicles, wash-rooms, these facilities are cleaned and of the Labor Code of the Russian lavatories, rooms for the storage aired. Relevant occupancy space Federation, each branch facility and handout of protective clothing), requirements are observed. The Amount, № Type of expenditure has fully equipped sanitary rooms restrooms, medical aid facilities, workplace facilities are fully equipped thou. RUB (cloakrooms, changing rooms, and staff recreation rooms. All with first-aid kits and water coolers. 1. Voluntary health insurance, milk provision 199,576 Workplace briefings (introductory, initial, secondary, and unscheduled). 2 Special evaluation of workplaces, industrial control, occupational safety training 3,714 The Company organizes workplace of the applicable laws of the Russian regular basis; standard logbooks are briefings (introductory, initial, Federation. Instructions and briefing kept for each briefing. 3 Operation of health centers, medical check-ups, seasonal vaccination 74,825 secondary, and unscheduled) in programs have been compiled and accordance with the requirements approved and are updated on a Provision of protective equipment (PPE, collective protective equipment, etc.), washing and 4 164,155 repair of clothing 5 Cleaning of premises and production area 297,307 Accident analysis TOTAL: 739,547 2017 2018

Availability of health and industrial Status of mandatory preliminary, and / or hazardous conditions.” Total number of people injured on-site, 3 1 safety services and expert staff in regular, and extraordinary medical Mandatory preliminary health checks including: the Administration offices and at check-ups (examinations) are performed when new employees the Company’s affiliated power Compulsory preliminary, regular, join the Company. Regular medical minor injuries 3 0 plants and extraordinary medical checks checks are carried out based on a major injuries 0 1 The occupational health, safety, and (examinations) in the Company named list of employees who are production auditing department are carried out in accordance with subject to regular checks. These lists lethal injuries 0 0 has 28 staff members. One of the Article 213 of the Labor Code of the are submitted to the local authorities Number of people injured in group accidents 0 0 15 occupational health and safety Russian Federation and Order of the of the Federal Service for Consumer managers oversees each power Russian Ministry of Health Care and Rights and Human Welfare Protection Frequency factor (Кч)1 0,38 0,13 plant (branch facility). In addition, Social Development No. 302n dated (Rospotrebnadzor). The Company has six independent inspectors under April 12, 2011 “On the approval of signed a medical checks agreement civil-law contracts have now been lists of adverse and / or hazardous with SOGAZ-Medservice LLC. A meeting was organized for of safe behavior on site. Additional course at the corporate safety brought in to detect any potential production factors and work for which As part of seasonal prevention and managers of the production training for personnel on injury school. occupational health and safety preliminary, regular and extraordinary vaccination against the influenza virus unit and branches to develop prevention techniques is planned breaches at any of the facilities that medical checks (examinations) are in 2018, the Company held a free measures to improve the culture as part of the Energy Security have been earmarked for major mandatory, and the Procedure for vaccination session for the personnel construction, as well as to identify the conduct of preliminary, regular, of Mosenergo, which was attended Investigation procedure for workplace accidents (procedure and any employee demonstrating signs of and extraordinary medical checks by approximately 1,000 Company timeframe) alcohol intoxication. (examination) of employees engaged employees. Investigation of workplace accidents of the Ministry of Labor of the Russian and approval of Regulations on in hard labor and work under adverse at Mosenergo is conducted in Federation No. 73 dated October specific features of industrial accident accordance with the requirements of 24, 2002 “On approval of document investigation in individual industries Special Assessment of Occupational Conditions. Articles 227–231 of the Labor Code forms required for the investigation and organizations.”. In accordance with Federal Law No. 426-FZ dated December 28, 2013 of the Russian Federation and Decree and record of industrial accidents “On special assessment of working conditions”, Mosenergo held a special assessment of working conditions at 462 workplaces in 2018. Occupational health and safety supervision A Health and Safety Day and a Safety Hour are held regularly. 180 Health Provision of personal protective equipment, protective clothing and footwear, therapeutic and preventive and Safety Days and 720 Safety Hours were held by all the branches of the nutrition, milk or other equivalent products. Company. Managers and General Directorate specialist staff were involved in Mosenergo staff are provided with PPE manufacturers. A centralized health and safety standard the work of the TPP committees. personal protective equipment, washing of special clothing of “Providing staff with detergents and In 2018, more than 51 occupational safety audits were conducted at protective clothing, and footwear personnel has been organized. decontaminants”, and the Appendix to subdivisions of Company’s subsidiaries. in compliance with the “Standard Mosenergo Collective Agreement. The provision of the Company’s staff Within the framework of cooperation with Gazprom Energoholding’s norms of provision of protective with detergents and decontaminants is Company employees are provided subdivisions, cross-audits were conducted on labor protection at OGK-2, PJSC clothing, protective footwear, and carried out in accordance with Russian with milk in accordance with Article (Novocherkasskaya GRES) and TGC-1 (Paatsjoki River Hydroelectric Plants). other personal protective equipment Federation Ministry for Health and 222 of the Russian Federation Labor Measures implemented to oversee compliance with health and safety (PPE) (Order No. 340nof the Russian Social Development Order No. 1122n, Code and Russian Federation Ministry requirements amongst contractors working at Mosenergo facilities helped to Ministry of Health Care and Social dated December 17, 2010 “On the for Health and Social Development discover and eliminate more than 8,000 violations. Provisions are made for Development dated April 25, 2011) approval of standard regulations for Order No. 45n dated February 16, enhanced inspection of the areas of capital construction. and the Appendix to the Mosenergo the free issue to staff of detergents and 2009 “On the approval of terms and Collective Bargaining Agreement. All decontaminants”, the occupational conditions for the free issue to staff PPE is purchased from leading Russian 1 Frequency factor (Кч) is calculated as the number of injured divided by 1,000 employees (according to the headcount).

70 | ANNUAL REPORT 2018 MOSENERGO | 73

As part of the Company’s system to identify, assess, and eliminate any IN 2018 ALL THE BRANCHES In 2018, Mosenergo took part in the 2nd City Climate Forum, organized by risks relating to occupational health and safety and fire safety, more than OF THE COMPANY HELD the Moscow Department of Environmental Management and Environmental 95 thousand risks of infrastructure, of which more than 85 thousand were Protection won of the Leader of Climate Development competition devoted eliminated, was identified by the end of 2018. In 2018, more than 21 thousand to environmental initiatives. Mosenergo’s project involving the transfer of TPP- risks were identified, and more than 16 thousand of them were eliminated. SAFETY 22 from coal to natural gas became the winner in the “Best Eco-Innovations” As part of the project dedicated to the development of a safe behavior culture 180 DAYS category. which is directed at achievement of the strategic objective of “0 Injuries,” SAFETY The company also received the Moscow Government award in the field of the Company has developed and put into action a Proprietary Standard for environmental protection for the project involving the transfer of TPP-22 Behavioral Security Audits (BSA). The methodology of the BSA was taught to 720 HOURS from coal to natural gas. Furthermore, the project was named the best project more than 800 employees of Mosenergo and the Company’s contractors, involving environmentally friendly technologies. including the heads of boiler units, the staff of the General Directorate, and the representatives of the management team of TER-Moscow LLC. In 2018, the trained personnel conducted more than 15,000 behavioral audits, which IN 2018 IN OCCUPATIONAL HEALTH Emissions resulted in identification and elimination of more than 18,000 dangerous AND SAFETY AND FIRE SAFETY conditions and dangerous actions of employees of branch facilities and Mosenergo Pollutant Emissions, thou. tons contractors. RISKS Informational posters about “The Golden Rules of Safe Behavior” and the > 21,000 IDENTIFIED Name / year 2014 2015 2016 2017 2018 methodology of behavioral safety audits were printed out and posted in all the Total: subsidiary facilities of the Company and connected boiler stations. 44,5 49,2 48,6 42,1 42,08 The Company has been operating a Committee on Occupational Health and Including: Safety and Commissions on Occupational Health and Safety of subsidiary Nitrogen oxides 38,2 40,0 41,5 36,7 35,6 facilities on an ongoing basis. RISKS > 16,000 ELIMINATED Sulfur dioxide 4,6 6,7 4,8 3,2 4,2 Solids 0,7 1,2 0,9 0,8 0,5

12.6 Environmental Protection Pollutant emissions by Mosenergo throughout 2018 generally decreased against the level of 2017 by 0.05% (by 0.02 thou. tons) and amounted to 42.08 In its activities, the company is guided by environmental policy, which thou. tons. The dynamics of emissions by main components: reflects the basic principles and intentions of the Company in the field of ∞∞ nitrogen oxide emissions decreased by 3.0% or by 1.1 thou. tons and environmental protection. amounted to 35.6 thou. tons; The environmental policy is communicated to the Company’s personnel, ∞∞ sulfur dioxide emissions increased 1.3 times, or by 1.0 thou. tons and newly commissioned employees, as well as the personnel of contracting amounted to 4.2 thou. tons; organizations. It acts as a guideline for making management decisions and ∞∞ emissions of solids decreased by 37.5%, or by 0.3 thou. tons, and performing day-to-day operations. amounted to 0.5 thou. tons; Mosenergo has been certified for compliance with the international standard ∞∞ including: ISO 14001 “Environmental Management Systems” since 2006 and continues to maintain a high level of environmental protection activities, constantly ∞∞ fuel-oil ash emissions increased by 3.9 times (by 0.006 thou. tons) and improving the environmental management system. Mosenergo annually amounted to 0.008 thou. tons; confirms the compliance of the environmental management system with the ∞∞ coal ash emissions decreased by 42.8% (by 0.3 thou. tons) and amounted standard. to 0.4 thou. tons. In 2018, the Russian Register Certification Association conducted a supervisory audit, as a result of which the compliance of the environmental management system with the audit criteria was confirmed. The status of the current certificate of compliance with the requirements of the international standard ISO 14001: 2015 was retained. MOSENERGO PAYS CLOSE Mosenergo participates in various events dedicated to environmental issues, ATTENTION TO ENVIRONMENTAL ensuring environmental safety and solving actual environmental problems, as ISSUES well as organizes events aimed at improving the environmental awareness of employees and the public. In 2018, study tours to the branches of Mosenergo were organized for students. Participants of the 22nd Ecological Forum visited the Mosenergo Museum, where they got acquainted with measures taken by Mosenergo to improve the environmental safety of the Company’s branches. In September, the All-Russian Energy Saving Festival #ВместеЯрче (#TogetherBrighter), organized by the Government of Moscow, was held at the Exhibition of Economic Achievements at the Industry Square. In the Mosenergo pavilion, children and parents found out about the principles of operation of TPPs. They guys applied their knowledge in practice and, at the end of the day, they painted the models of thermal power plants. In April of 2018, Mosenergo employees held traditional spring cleaning and landscaping activities at production facilities in Moscow and the Moscow Region.

72 | ANNUAL REPORT 2018 MOSENERGO | 75

Emissions of pollutants decreased due to a decline in the amount of MOSENERGO GREENHOUSE Wastewater discharge, million cu. m per year combusted coal, which is a less environmentally friendly type of fuel than GAS EMISSIONS, MLN TONS natural gas. Due to a decrease in the amount of combusted coal, ash and Name / year 2014 2015 2016 2017 2018 nitrous oxide emissions also decreased. An increase in emissions of sulfur dioxide and fuel-oil ash is caused by the Total 391.9 322.1 329.9 295.1 255.7 increased consumption of fuel oil. 2014 39.6 Partially clean 350.8 283.2 297.2 264.8 227.7 Power generating boilers at the power plants are fitted with an automated environmental monitoring system, which allows the concentration of pollutants in flue gases to be monitored in real time and, if necessary, enabling 2015 39.1 The total volume of wastewater discharged into surface water bodies totaled plant performance activities to be changed to reduce emissions. During 255.7 million cu. m, of which the volume of partially clean water totaled operation, boiler emissions did not exceed any permitted pollutant emission 227.7 million cu. m. The value of reduction of waste water discharge in 2018 standards. 2016 42.0 (against 2017) totaled 39.4 million cu. m.; such a decrease was due to lower consumption of the freed water as a result of increase in hours of heat- The Central Laboratory for Environmental Protection at the Mosenergo extraction mode of equipment, and of water consumption rationalization Department for Ecology took 349 measurements at power plant boilers, 53 2017 40.2 activities. measurements at exhaust heat boilers, and 111 measurements at water-heating boilers to determine the concentrations of nitric oxide, nitrogen dioxide, and The difference between the volume of water intake and drainage in surface carbon dioxide in flue gas and to control flue gas temperatures. 2018 40.9 water bodies is related to water consumption for heating network (MOEK), energy boilers, evaporation, droplet entrainment, and purge in circulating Throughout the year, the condition of the atmospheric air in residential areas cooling systems with cooling towers, as well as due to the fact that water is near TPPs was also monitored. In 2018, 11,040 atmospheric air samples were also discharged in the network of water utilities and Mosvodostok. taken in the immediate area near TPPs and analyzed for nitrogen oxide, carbon monoxide, sulfur dioxide, and dust content. In 2018, The Central Laboratory for Environmental Protection successfully Waste generation completed the procedure for compliance with accreditation criteria (certification accreditation No. ROOS RU.001.511836). TRENDS IN WASTE GENERATION, The contracting organization conducted industrial control over compliance THOU. TONS In 2018, waste generation decreased in comparison with 2017 due to a with pollutant emission standards at boiler stations. reduction in the production of ash dump linked to a decrease in the amount of Actual emissions of greenhouse gases (СО2) in 2018 was 2% more than in 2017 2014 119.1 coal burned. due to the increase in fuel consumption. 152.9 In 2018, a separate collection of municipal solid waste was organized at The value of reduction of emissions of greenhouse gases as a result of Mosenergo’s branches. At each facility, a site has been allocated and containers energy-saving activities (transfer of heat loads from DHPs and BHPs to TPPs, 2015 173.4 156.9 installed, which are accounted for and transported separately from other operational and technical activities, etc.) in 2018 totaled 0.8 mln tons of carbon industrial and construction waste. The limits of waste sent to the landfill were dioxide 2016 not exceeded during the reporting period. 145.7 126.5 Environmental measures In 2018, Mosenergo’s environmental expenditures amounted to RUB 208.194 Water consumption 2017 122.6 87.5 mln. Water withdrawal, million cu. m. per year 2018 78.7 50.0 Environmental measures Name / year 2014 2015 2016 2017 2018 INCLUDING ASH DUMP Water withdrawal, Mosenergo’s environmental expenditures, RUB thou 563.9 502.7 509.1 433.1 393.4 including: 2014 2015 2016 2017 2018 from surface-water bodies 509.9 447.6 455.0 383.2 343.5 Non-capital measures (prime cost) 46,808 71,350 42,574 32,015 55,356 from industrial water 44.8 45.7 45.8 42.0 42.5 conduits Waste disposal (prime cost) 57,421 31,194 35,441 41,046 62,129

from urban water supply Investment activities, including discharge 7.4 7.6 8.2 7.8 7.3 123,922 178,500 104,608 29,161 90,709 systems measurement stations from underground 1.8 1.8 0.126 0.123 0.130 Total 228,151 281,044 182,623 102,222 208,194 sources Non-capital activities carried out are aimed at meeting the requirements of The decrease in water consumption occurred due to an increase in the environmental legislation in terms of developing and obtaining permits and MOSENERGO’S ENVIRONMENTAL number of hours of equipment operation in the heat recovery mode, as well as conducting production control over the environmental impact of the branches EXPENDITURES the repair of drainage equipment and circulating conduits. of Mosenergo. The increase in water consumption from the industrial branch of Among these activities are the replacement of burners and installation of Mosvodokanal was due to the increase in heat and power generation at TPP- water-measuring equipment and noise suppressors. 23 and TPP-25. 208.2 The reduction of urban water consumption was due to a decrease in the RUB THOU. number of maintenance personnel, as well as replacement and repair of urban water pipelines.

74 | ANNUAL REPORT 2018 MOSENERGO | 77 MOSENERGO | 79

Joint stock companies “Electric Lighting 1886 Company” and “Elektroperedacha” successfully operated until October 1917. After the 13.1 Information Policy October Revolution, the stations were nationalized and ceased operations under their previous ownership in December 1917. Mosenergo has an open information in major industry exhibitions submitted by shareholders, investors, The management of state power stations was delegated to the Power policy. The Company’s operations are and conferences. Mosenergo’s government officials and the media. Department of the Supreme Council of Public Property. At the same time, regulated by corporate governance official websitemosenergo ( .ru). In The site displays quarterly and in December 1917, Ivan Radchenko and Alexander Vinter proposed further principles, generally accepted in addition, Mosenergo participated annual reports for shareholders, developments of the Moscow power industry. These proposals became respected business, as well as by in major industry exhibitions and quarterly issuer’s reports, financial the basis for the first State Plan for the Electrification of the whole country, principles of social responsibility conferences. Mosenergo’s official statements compliant with RAS and GOELRO. and a reliable partnership with website (mosenergo.ru) is the IFRS standards and information that government authorities. Mosenergo’s Company’s key information resource. may have a significant impact on the In the 1930s, the workers of the Information Policy aims to enable Since April 1, 2016, Mosenergo value of securities. Mosenergo is also Moscow power supply system, the prompt and comprehensive has moved to a new version of the present on social media networks: In December 1920, the GOELRO known until 1932 as MOGES presentation of accurate information official website in accordance with since July 2011, Mosenergo has plan was ratified by the eighth (Unified Management of Power about the Company’s activities, as the uniform corporate identity of maintained a corporate page on All-Russia Soviet Congress. Plants of the Moscow Region), well as to provide open access to such the PJSC Gazprom Group. This Facebook: https://www.facebook. According to the plan, the volume started operations to provide of capacity of the Moscow power centralized district heating to information to all stakeholders, such as website provides full information com/MosenergoNews/ Instagram: system was intended to increase shareholders, investors, government about the Company’s activities https://www.instagram.com/mosen- the Soviet capital. In March almost four-fold within 10 to 15 1931 the first heating mains officials, the mass media etc. and allows Mosenergo to respond ergo.official, VK: https://vk.com/ years. The installed capacity was from MMPS-1 was launched In addition, Mosenergo participated in a timely manner to inquiries mosenergo_official. to increase from 93 thousand to and a specialized enterprise 340 thousand kW. for the maintenance and development of the Moscow district heating network was Pursuant to the GOELRO plan, several founded. stations were built in the Moscow Region, namely Kashirskaya TPP (now The start of World War II put TPP-4), Shaturskaya TPP (now TPP- the development of the power 5), Krasnopresnenskaya TPP (now a system on hold. Part of the subsidiary of TPP-12), TPP-6 and TPP- equipment was destroyed, 13.2 Mosenergo History 8. One of the key events in this period some was redeployed and the was the completion of Russia’s first 110 total capacity of Mosenergo MOSENERGO’S HISTORY IS CLOSELY INTERRELATED TO THE DEVELOPMENT OF RUSSIA’S ECONOMICS, SOCIETY kV voltage power line between Kashira dropped twofold. Nevertheless, AND CULTURE power lines and transformers around Moscow power engineers Moscow with a voltage of 115 kV. managed to maintain a continuous supply of power to the city’s defense facilities; they constructed high-voltage obstacles to defend against enemy troops and assembled power-generating trains for the liberated regions of the country. The restoration of Joint Stock Company of Electric Lighting was founded in 1886 by Carl Siemens, a Saint- the power industry started Petersburg merchant of the First Guild who was the Head of the Siemens & Halske Representative Office. The Company was founded in Saint-Petersburg; however, at its very immediately after the first Board of Directors’ meeting, a proposal was made to prepare grounds for the Company’s In 1946, Mosenergo began to utilize a successful counter-offensive operations in Moscow. new type of fuel: SPP-1 started burning campaign of the Soviet Army On July 31, 1887, the executive board of the “1886 Society” approved the Agreement to install natural gas. In the same year, the in the winter of 1941-1942. As electric lighting in the Postnikova Passage on Tverskaya Street in Moscow. Moscow power system was connected early as 1945, Mosenergo had to the Ivanovo, Yaroslavl and Gorky already managed to achieve power systems. a pre-war level of installed capacity.

In 1912, the Company started building the world’s first peat-fired district power plant in In 1950, TPP-17 was conducted in the suburban the Bogorodsk District. In April 1913, a new town of Stupino near Moscow, in 1952 — TPP-20 company, Moscow Joint Stock Company in the south-west of Moscow, and in 1955 — TPP- “Elektroperedacha”, was founded to utilize 16 in the north-west of the capital. In 1956, the the capacity generated by the new station. The plant itself began operations in 1914 first section of the Unified Power System in the and, in 1915, started to work in parallel with European part of Russia was created with the the Raushskaya station. introduction of high-voltage power lines from Kuibyshev to Moscow.

The next important stage of development for Moscow’s electrical At the end of 1888, the Company successfully power grid was the decision to Within the Unified Power System framework in completed the construction of the first construct a large power plant fired with 1960, the country brought into operation the first centralised power plant, with electric power local fuel in the vicinity of Moscow. units of TPP-22, and for the first time in the USSR supplied by the Georgievskaya power plant. This decision was implemented by a 1,000 mm-diameter heat pipeline was installed at On November 28, 1897 the Company hosted Robert Klasson, managing director of TPP-11. On October 22, 1963 Mosenergo launched a festive celebration for the opening of the the Moscow Office of “1886 Company”. TPP-21, shortly followed by TPP-23, TPP-25 and Moscow Municipal Power Station (MMPS-1) The construction of the plant, which TPP-26. Raushskaya (now SPP-1), and on February envisioned the use a new type of fuel, 15, 1907 the Company launched the second was a major project involving the In the 1970s, Mosenergo successfully implemented station – MMPS-2 Tramvaynaya development of new technologies and 250 MW thermal power generating units with the creation of the entire peat extraction supercritical steam parameters. This kind of unit was industry. 78 | ANNUAL REPORT 2018 first constructed at TPP-22 and became the base for other heat and power plants: TPP-21, 23, 25 and 26. MOSENERGO | 81

The development of the district heating system remained a pending issue for Mosenergo, especially during the mass construction of residential apartments in After MOEK was included into the Gazprom Group in 2013, the city when district heating pipelines with the length of 20-30 kilometers and over 40 heat generating facilities of this company were pipeline diameters of 1,200-1,400 mm started to be laid from the new, powerful transferred to Mosenergo in 2014–2015. The total installed TPPs. At the same time, intensive grid development was in progress with the thermal capacity of the connected boiler houses is 8.9 extensive construction of 750 kV power transmission lines. The total length of the thousand Gcal / h — which is more than 20% of the total high voltage power transmission lines increased dramatically. Two high-voltage installed thermal capacity of Mosenergo. 220 kV rings were completed around Moscow, soon followed by 500 kV rings.

On December 30, 1987, Mosenergo brought the first hydroelectric generating set of the Zagorsk Pumpedstorage HydroPlant into operation – a unique power unit regulating peak loads in the grid system. In 1990, the Moscow Grid absorbed Ryazan TPP-24 and in 1992 it acquired TPP-28 in Moscow. A new steam and gas power unit (CCGT-220) was commissioned at TPP-12 of Mosenergo on May 1, 2015. The core equipment of the new power unit was made in Russia. The nominal power of the unit: 220 MW, the certified power at cogeneration: 211.6 MW, heat power: no less than 140 Gcal/h. After the CCGT-220 was commissioned, the installed power of TPP-12 rose by more than 50%.

On December 22, 2015, two modern steam and gas power unit were commissioned at TPP-20 of Mosenergo in Moscow and the Serov GRES of On May 20, 2015, the extraordinary OGK-2 PJSC in the Sverdlovsk Region. general shareholder’s meeting of President of the Russian Federation Mosenergo decided to transfer Vladimir Putin took part in the event powers of the company’s In 1993, the production association, through videoconference. The installed In 2007, Gazprom became the sole executive body to the Mosenergo, was transformed into an power of TPP-20 before the CCGT- strategic investor of Mosenergo, managing organization: Gazprom open joint stock company. 420 commissioning was 730 MW; heat consolidating a controlling stake Energoholding LLC. This decision power, 2,400 Gcal/h; after the unit was On April 1, 2005, in the course of (53.5% of the authorized capital) was made to improve the commissioned, the installed power reforming the Russian electric power of the Company. The Moscow management efficiency, avoid increased to 1,148 MW, and the heat industry, Mosenergo was divided into City Government became the duplication of functions, and cut power, to 2,620 Gcal/h. 14 independent companies by type owner of the blocking stake administrative expenses and other of activity: generation, transmission (26.45%) of Mosenergo. costs. At the end of 2018, an expanded of electricity, sales, energy repair, etc. inspection of the turbine’s hot gas The Mosenergo brand was retained path was conducted at the CCGT-420 by the generating Company, which of TPP-20 of Mosenergo. The power united all generating assets, with the unit became a pilot project for flexible exception of SDPP-4, SDPP-5, SDPP- In April 2014, a GTU-65 unit with service intervals, and with its introduction 24 and Zagorskaya PSP. In 2005, an AE64.3A Ansaldo Energia gas the Company will be able to reduce Mosenergo developed and started turbine (Italy) was commissioned equipment maintenance costs and the implementation of the Program at TPP-9; and in December In January 2017, Mosenergo acquired increase revenues from the supply of for Development and Retrofitting, 2014, a CCGT-420 steam-gas unit 100% share in the authorized capital of electricity and power. including the planning, construction was commissioned at TPP-16 (the Mosenergoproekt LLC, Russia’s leading and commissioning of new generating manufacturer and the supplier energy project institute, which had been facilities on the sites of operational of the basic equipment: Siemens belonging to the Company since 2010. power plants in energy-deficient (Germany)). regions and heat and electricity On December 22, 2017, the new demand nodes with developed Museum of Mosenergo and infrastructure. Moscow Power Industry was opened. On November 22, 2007, less than two years after the start of construction, TPP-27 launched a combined cycle steam-gas power unit with an electric power rating of 450 MW and heat output of 300 Gcal. In June 2008, a unit of the same type was put into operation at TPP-21, and in December of the same year the Company installed On February 10, 2017, the first heating yet another 450 MW steam-gas power turbine T-295 (manufactured by the unit at TPP-27. Ural turbine factory) was presented to Mosenergo. The turbine is to be installed at the TPP-22, replacing T-250 that had been operating as On June 30, 2011, a new 420 MWe combined-cycle power unit was put into a part of the energy unit No.9 and operation at TPP-26. This unit has the highest efficiency rate among Russian taken out of operation in 2016. The power plants – up to 59%. The general contractors in its construction were modernized energy unit No.9 of the Alstom Consortium (France) and EMAlliance JSC. TPP-22 is to be commissioned in 2021.

80 | ANNUAL REPORT 2018 MOSENERGO | 83 13.3 Financial Statements according to IFRS CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2018 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS OF 31 DECEMBER 2018 (in millions of Russian Rubles) Year ended 31 December (in millions of Russian Rubles) Indicator 2018 2017 31 December 31 December Indicator Revenue 198,870 196,056 2018 2017 Operating expenses (172,437) (163,953) Assets Current assets Impairment loss on finаnсial assеts (525) (2,893) Cash and cash equivalents 16,220 20,627 Operating profit 25,908 29,210 Short-term financial assets 10,400 - Share of loss of associates (314) (355) Trade and other receivables 40,514 51,630 Profit before finance income (expense) and profit tax 25,594 28,855 Inventories 13,815 13,499 Finance income 5,143 5,271 Income tax receivable 239 - Finance expense (3,475) (4,014) Other current assets 2,682 1,455 Profit before profit tax 27,262 30,112 Profit tax expense (5,857) (5,310) 83,870 87,211 Profit for the period 21,405 24,802 Assets held for sale 43 43 Other comprehensive income (loss): Total current assets 83,913 87,254 Remeasurement of post-еmployment benefit obligations 13 8 Non-current assets Effect of acquisition under common control - (515) Property, plant and equipment 209,691 215,994 Loss arsing from change in fair value of financial assets measured at fair value through other - (16) Investment property 1,548 2,359 comprehensive income Goodwill 187 187 Impairment loss on property, plant and equipment (2,141) Other intangible assets 509 306 Total items that will not be reclassified subsequentlyto profit or loss (2,128) (523) Investments in associates - 314 Other comprehensive loss for the period, net of tax (2,128) (523) Long-term financial assets 1,490 3,154 Total comprehensive income for the period 19,277 24,279 Trade and other receivables 15,806 12,582 Profit attributable to: 21,405 24,802 Advances for assets under construction 4,064 3,804 Owners of PJSC M osenergo 21,405 24,802 Other non-current assets 10,951 8,893 Total comprehensive income attributable to: Total non-current assets 244,246 247,593 19,277 24,279 Owners of PJSC M osenergo Total assets 328,159 334,847 19,277 24,279 Equity and liabilities Basiс аnd dilutеd еarnings per sharе for profit аttributablе to the owners of PJSC Mosenergo 0.54 0.63 Current liabilities (in Russian Rublеs) Short-term borrowings 1,295 14,561 Trade and other payables 10,223 8,674 Profit tax payable 82 64 Managing director A.A. Butko Other taxes pay able 2,535 2,775 Provisions 3 576 3 078 Chief Accountant E.Y. Novenkova Total current liabilities 17,711 29,152 Non-current liabilities Long-term borrowings 3,886 9,027 Deferred tax liabilities 28,951 29,810 Employee benefits 298 352 Trade and other payables 286 154 Total non-current liabilities 33,421 39,343 Total liabilities 51,132 68,495 Equity Share capital 166,124 166,124 Treasury shares (871) (871) Share premium 49,213 49,213 Revaluation reserve 104,276 107,206 Accumulated loss and other reserves (41,715) (55,320) Total equity 277,027 266,352 Total equity and liabilities 328,159 334,847

Managing director A.A. Butko

Chief Accountant E.Y. Novenkova

82 | ANNUAL REPORT 2018 MOSENERGO | 85

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARENDED 31 DECEMBER 2018 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 (in millions of Russian Rubles) DECEMBER 2018 Year ended 31 December (in millions of Russian Rubles) Indicator 2018 2017 Equity attributable to owners of the PJS C Mosenergo

Cash flow from operating activities Profit before finance income (expense) and profit tax 25,594 28,855 Accumulated Share Treasury Share Revalution loss and other Total capital shares premium reserve Adjustments to profit before profit tax for: reserves 15,177 15,117 Indicator Depreciation and amortisation Share of loss of associates 314 355 Year ended 31 December 2017 Impairment loss on finаnсial assеts 525 2,893 Balance as of 1 January 2017 166,124 (871) 49,213 107,442 (76,475) 245,433 Impairment loss on non-financial assets 1,898 46 Profit for the period - - - - 24,802 24,802 Change in provisions 274 285 Other comprehensive income (loss): Gain (loss) on disposal of property, plant and equipment (225) 1 644 Remeasurement of post-еmployment benefit - - - - 8 8 obligations Total effect of adjustments 17,963 20,340 Effect of acquisition under common control - - - - (515) (515) Cash flows from operations before working capital changes 43,557 49,195 Loss arsing from change in fair value of financial Changes in working capital: assets at fair value through other comprehensive - - - - (16) (16) Change in trade and other receivables (3,064) 7,486 income Change in inventories (1,728) (3,966) Transfers from revaluation surplus on property, Change in other current assets 2,119 (566) plant and equipment to accumulated loss and - - - (327) 327 - other reserves Change in trade and other payables 1,607 (776) Other - - - 91 (91) - Change in other taxes payables (other than profit tax) (536) (569) Total comprehensive income (loss) for the - - - (236) 24,515 24,279 Change in emp loyee benefit liabilities (62) (17) period Total effect of working capital changes (1,664) 1,592 Transaction with owners of PJS C Mosenergo Income tax paid (5,673) (7,178) Dividеnds deсlarеd - - - - (3,360) (3,360) Interest paid (625) (1 542) Balance as of 31 December 2017 166,124 (871) 49,213 107,206 (55,320) 266,352 Net cash from operating activities 35,595 42,067 Year ended 31 December 2018 Balance as of 1 Cash flows from investing activities January 2018 Capital expenditures (16,675) (15,239) 166,124 (871) 49,213 107,206 (55,320) 266,352 Net changes in loans issued 8,787 (10,092) Effect of changes in accounting policies - - - - (2,036) (2,036) Sale of subsidiaries, net of cash disposed 1,214 - Balance as of 1 January 2018 (restated) 166,124 (871) 49,213 107,206 (57,356) 264,316 Acquisition of subsidiaries, net of cash acquired - (16) Profit for the period - - - - 21,405 21,405 Proceeds from sale of property, plant and equipment 71 452 Other comprehensive income (loss): Remeasurement of post-еmployment benefit - - - - 13 13 Interest received 2,897 3,182 obligations Dividend received - 76, Impairment loss on property, plant and - - - (2,141) - (2,141) Placement of short-term deposits (10,400) - equipment Repayment of short-term deposits - 15,057 Transfers from revaluation surplus of property, Net cash used in investing activities (14,106) (6,580) plant and equipment to accumulated loss and - - - (789) 789 - other reserves Cash flow from financing activities Total comprehensive income (loss) for the - - - (2,930) 22,207 19,277 Proceeds from borrowings - 54 period Repayment of borrowings (19,384) (21,629) Transaction with owners of PJS C Mosenergo Dividend paid (6,549) (3,346) Dividеnds deсlarеd - - - - (6,566) (6,566) Net cash used in financing activities (25,933) (24,921) Balance as of 31 December 2018 166,124 (871) 49,213 104,276 (41,715) 277,027 Effect of foreign exchange rate changes on cash and cash equivalents 37 (36) Increase (decrease) in cash and cash equivalents (4,407) 10,530 Cash and cash equivalents at the beginning of the period 20,627 10,097 Managing director A.A. Butko Cash and cash equivalents at the end of the period 16,220 20,627 Chief Accountant E.Y. Novenkova

Managing director A.A. Butko

Chief Accountant E.Y. Novenkova

A more detailed version of the financial statement is disclosed on the official Mosenergo website at www.mosenergo.ru

84 | ANNUAL REPORT 2018 MOSENERGO | 87 13.4 Glossary 13.5 Contact Information

ADR American depository receipt RHP Regional Heating Plant NPP Nuclear power plant REC Regional Energy Commission SPHPP Pumped-storage hydro power plant BoD Board of Directors Investor Relations Department: GDR Global depository receipt SO UES System operator of the unified energy DENIS VORONCHIKHIN SDPP State-owned district power plant system Phone number: +7 (495) 957-1-957 (ext. 34-57) GTU Gas turbine unit t/e Thermal energy E-mail: [email protected] SPP State Power Plant EA, IS & EP Department of engineering audit, VMI Voluntary medical insurance industrial safety and environmental Contacts for individual shareholders: FFZ Free power transfer zone protection TATIANA SIVOVA Capacity factor Thermal power plant CF TPP Chief Specialist of Corporate Governance Department CN mode Condensing mode FTS Federal Tariff Service Phone number: +7 (495) 957-1-957 (ext. 32-10) IT Integrated testing FFMS Federal Financial Markets Service EC Efficiency coefficient RF CB Russian Federation Central Bank Mosenergo website: www.mosenergo.ru KPI Key performance indicator e/e Electric power DHP District Heating Plant TPP thermal power plant Mailing address: 101, Vernadskogo Avenue, bldg. 3, Moscow 11952 MIPC Moscow Integrated Power Company RAS Russian Accounting Standards IFRS International financial reporting IFRS International Financial Reporting Auditor: standards Standards LLC “FBK” (FBK Moscow) PPP Private pension provision district heating plant DHP 101990, Myasnitskaya Street, 44/1, Moscow PPF Private pension fund BHP block heating plant AI Accident insurance Phone number: +7 495 737-53-53 CCGT combined cycle gas turbine WGC Power generating company of the Fax: +7 495 737-53-47 SPP state power plant wholesale market E-mail: [email protected] CSA capacity supply agreement WEM Wholesale Electricity Market Website: www.fbk.ru PWHB Peak water-heating boiler RHPP regional heating power plant water- CT Commissioning trials heating boilers Registrar: SUW Start-up works RMS risk management system DRAGA JSC SPE Steam-power equipment SCIGE selecting composition of included Building 71/32, Novocheremushkinskaia Street, Moscow ST Steam Turbine generating equipment Phone number: +7 (495) 719-40-44, 719-39-29, 719-39-30 RAS Russian accounting standards WB water boiler E-mail: [email protected] DAM Day ahead market CPI consumer price index Website: www.draga.ru (a sector of the electricity market) gfe grams of fuel eqivalent

UNITS OF MEASUREMENT

Gcal (Giga calorie) unit of measurement of heat Gcal/h (Giga calories per hour) unit of measurement of thermal power kV (kilo Volt) unit of measurement of voltage kWh (kilo Watt hour) unit of measurement of electric power MW (Mega Watt) unit of measurement of electric capacity tnf tons of natural fuel tfe tons fuel equivalent

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