2014 Social Responsibility and Corporate Sustainability Report
1 Federal of Unified Formula Grid Company Energy System for Corporate Sustainability 2014 Social Responsibility and Corporate
Managing Economic Contribution to the Environmental Sustainability Report Impacts Development of Society Impacts
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Federal Grid Company’s formula for corporate sustainability is based on three key components — aspects of corporate social responsibility: managing economic impacts, contribution to Social the development of society, and environmental Responsibility impacts. Constant focus on the above aspects enables us to meet all our commitments to stakeholders.
2 3 Contents
Key Performance Indicators 6 5. Special Areas of CSR 6.3. Managing 112 Appendices Environmental Impacts 2014 Key Events 8 Management Appendix 1. 141 61 6.3.1. Environmental Impact 112 12 5.1. Ensuring Reliability and Implementation Statement from the Chairman Management System of the Company’s CSR of the Management Board Uninterrupted Operations of UNEG 6.3.2. Environmental 117 and Sustainable About this Report 14 Performance Developmnet Plans 5.2. Energy Efficiency and 71 and Commitments in 2014 16 Awards and Achievements Energy Management Appendix 2. GRI G4 Content 144 5.3. Import Substitution 76 7. Stakeholder Index – Electric Utilities Sector Supplement 1. About our Company Engagement 154 125 Appendix 3. The List 1.1. Company Profile 19 7.1. Stakeholders and of Specially Protected Stakeholder Engagement 1.2. Company’s Role within 26 6. Core Areas in Sustainable Natural Areas where Mechanisms Federal Grid Company Стратегия Технологии Управление Персоналthe Industry and Region Development 133 Operates 79 7.2. Public Hearings 6.1. Managing Economic on 2014 Report Impacts Appendix 4. Total Number 158 Стратегия Технологии Управление Персонал 137 of IUCN Red List Species 2. Governance System 79 7.3. External Assurance 6.1.1. Economic Performance Statement and National Conservation 31 2.1. Strategy 6.1.2. Anti-Crisis Initiatives 85 List Species and Understanding and their Impact on of Sustainable Development Stakeholders 34 2.2. Corporate Governance 6.1.3. Tariff Setting and its 86 2.3. Risk Management 40 Transparency for Consumers Glossary and Abbreviations 159 2.4. Ethics in Governance 42 6.1.4. Procurement 88 Contacts 161 2.5. Anti-Corruption Activities 44 6.2. Contribution to the 90 Development of Society
6.2.1. Human Resource 90 3. Materiality of Disclosures 48 Management 6.2.2. Health and Safety 100 4. Power Supply for 2014 6.2.3. Social and Youth Policy 107 Winter Olympic Games 52 6.2.4. Taking Care 110 in Sochi of Veterans 6.2.5. Charity and Sponsorship 111
4 5 Key Performance Indicators
Technological Connection: Share of Equipment Summary Data: Operational Employee Turnover, % Training Hours Per Total Number of Employees Number of Contracts Procured from Russian benefit of Energy Saving Employee, Average, Injured at Company’s Facilities, Not exceeding Completed Manufacturers, % Initiatives, as of 31 December 10% hours/person persons 2014, tonnes of fuel equivalent 8 329 7 298 306 7.8% 273 95% 28 28 27,028.1 6.3% 6.5% 18 18
3 44.5% 48% 12,557.8 11,821.8 30.5% 50 49 40 40 17%
2012 2013 2014 2015 2012 2013 2014 2015 2030 2012 2013 2014 2012 2013 2014 2015 2012 2013 2014 2015 2012 2013 2014 forecast plan plan plan plan Administrative, managerial and support personnel Operating employees
Process Disturbances Average Length of Electricity Average Employee Accident Rate at Voluntary Medical Housing Programme Costs, Outages, Pp Age, years Company’s Facilities Insurance Costs, mln RUB mln RUB
39.6 185.7 39.1 39.3 172.2 180.6 0.319 351.59 2,596 331.29 334.03 330.34 0.285 2,286 0.0482 0.0475 0.046834 Plan 117.6 1,956 Fact
0.124 0.0241 0.0199 0.01992
2012 2013 2014 2012 2013 2014 2012 2013 2014 2012 2013 2014 2012 2013 2014 2015 2012 2013 2014 2015 plan plan
Non-Governmental Pension Payment of Taxes Current Environmental Costs, mln RUB Programme Costs, mln RUB to Budgets 20,156.2 of Various Levels, 55.0 98.8 mln RUB 89.6 320.7 327.3 327.3 5,119.7 306 73.2 13,081,9 37.2 22.3 60.3 9,980,2 73.5 Local 20.6 7.7 3,229.6 11.3 for protection of water bodies 70.7 Regional 16.5 4.8 2,954.3 14,981.5 4.3 for air protection Federal 50.1 9,778.8 41.6 44.5 for protection of land resources from production and consumption waste 35.6 6,955.2 for implementation and certification of an environmental management system 3.2 4.2 7.8 3.9 3.0 1.6 1.7 other 2012 2013 2014 2015 2012 2013 2014 2012 2013 2014 2015 plan plan
6 7 2014 Key Events
JANUARY MARCH APRIL Credit rating Energy efficiency AUGUST Preparations for the Olympic Communication with the Key performance indicators International rating agency S&P lowered The Company approved the Energy Saving Investment programme Games Customer Council its long-term foreign and local currency and Efficiency Programme for 2015-2019. On 15 April 2014 the Board of Directors rating on Federal Grid Company to RUB595 million will be allocated for this The Ministry of Energy approved a Federal A meeting of a Command & Control The first meeting of the Customer Council adopted the Company’s business plan BBB– with a Negative outlook. The rating programme, and its process and economic Grid Company’s investment programme Centre for Power Supply to Sports and (uniting the customers of Federal Grid for 2014, projections for 2015-2018, revision followed a similar revision of the effect will be equivalent to 32,400 tonnes for 2014. According to this document, City Facilities in Sochi during the 2014 Company’s services) was held in Moscow. and a methodology for the calculation sovereign credit ratings on the Russian of fuel equivalent. the Company should complete the Olympic Games (headed by Alexander Public associations, small and medium and evaluation of the Key Performance Federation. construction of several large facilities Novak, Russian Minister of Energy) stated businesses, energy selling organisations Indicators (KPIs) for the top managers Energy management by year-end, such as 330 kV Pulkovskaya that Federal Grid Company had fully and the Company’s largest customers of Federal Grid Company. The approved MAY substation, 220 kV OPS-11, and four power met its obligations to prepare energy participated. The meeting discussed KPI methodology is targeted at the Federal Grid Company received a transmission lines for ESPO-1 oil pipeline, infrastructure facilities in Sochi to the the key activity areas of the Council improvement of operational efficiency and Building HR capacity certificate confirming the consistency of its including the transmission line from the Winter Olympics. and the Company in 2014 and medium reliability of services, higher capitalisation environmental management system with Neryungry HPP. term, including actions of the Company’s and better investment attractiveness About 2,100 students from 34 higher the requirements of international standard investment programme. Twenty-two of Federal Grid Company. KPIs include education institutions and 3 specialised ISO 50001:2011. The certificate confirmed Council members were elected. operational, financial and economic secondary schools of Russia took part in the Company’s commitment to the global indicators, among others such advanced the annual Day of Federal Grid Company. governance principles and organisation Cooperation with WWF Russia ones as ROIC (return on invested capital) Graduates learned about vacancies in of energy saving and energy efficiency and TSR (total shareholder return). the Company, and first and second year initiatives, as well as successes of its Federal Grid Company took part in the students learned about electric power energy policy. annual action “Earth Hour” organised by Reduction of accident rate industry professions for which the demand the World Wide Fund for Nature (WWF is the highest. Russia). The Company turned off lights JULY for one hour at its facilities, in the office The Global Energy Prize buildings in its headquarters and regional international award Student construction teams branches. The fifth season of Federal Grid Company’s International cooperation FEBRUARY student construction teams opened. The opening ceremony was held in the A delegation of Federal Grid Company Open hearings on the Company’s Company’s office building in Moscow. Ten headed by Andrey Murov, Chairman of the investment programme student construction teams had been Management Board, took part in the 45th formed. They include 123 students of CIGRE session in Paris. At this forum, the Public hearings at the Russian Ministry the Moscow Energy Institute. The teams Company’s Research and Technical Centre of Energy reviewed the draft investment worked on 9 facilities in 5 Federal Grid signed several agreements with Alstom programme of Federal Grid Company for At the Russian National Meeting “On the Company’s branches. Grid and KEMA, international producers 2015-2019. The format of public hearings Outcomes of Autumn and Winter Period of hardware and software. The Company’s made it possible for all stakeholders, of 2013-2014 at Electric Power Facilities” management also took part in a discussion including the Customer Council and the management of Federal Grid Company of cooperation between Russia and EU industrial companies, to take part in the reported that the number of accidents at members and localisation of production in discussion and offer their proposals about the Company’s facilities dropped by 17.8% A ceremony of awarding The Global Russia. the Company’s plans. Credit rating as compared to the previous autumn and Energy Prize (which Federal Grid Company winter period. Relative to the 2011-2012 co-founded) was held at the International International rating agency Fitch Ratings autumn and winter period, the reduction Economic Forum in St. Petersburg. Corporate governance affirmed the Company’s long-term rating was 26%. Experts of the Russian Institute of BBB. JUNE Directors assigned a National Corporate Innovations Governance Rating Score of 7+ to Federal Annual meeting of shareholders Federal Grid Company’s Research Grid Company. This rating is consistent and Technical Centre developed a new The annual meeting of shareholders with the indicator “Well-Developed Credit rating format of the electricity transmission of Federal Grid Company was held in Corporate Governance Practices.” Experts line for Moscow, St. Petersburg and Moscow on 27 June 2014 to discuss the pointed out that the Company complies The international rating agency Moody’s other largest Russian cities. This is a 2013 results. The shareholders approved with the Russian legislation and follows Investors Service affirmed the Baa3 cable high-temperature superconducting the Company’s annual report, financial the majority of recommendations of the international scale rating of Federal Grid DC transmission line (CHTS-DCTL). statements, the new Board of Directors, international best governance practices. Company: by credit quality the Company Such transmission lines will help to Auditing Commission, auditor, and the belongs to the investment category, which address some acute problems inherent distribution of the 2013 profit and losses. attests to the stability of its key areas of Credit rating to large metropolitan areas. The pilot They also took a decision to pay dividends operations and high financial stability transmission line will be laid in downtown for Q1 2014 at RUB436,803,164.51. as macroeconomic factors and market International rating agency Moody’s St. Petersburg. environment deteriorate. affirmed the Company’s rating at Baa3 with a Stable outlook.
8 9 SEPTEMBER OCTOBER Building HR capacity Seasonal preparedness DECEMBER Environmental responsibility Investment programme Federal Grid Company completed the Federal Grid Company received a Support to The Hermitage licensing of Personnel Training Centres. certificate of preparedness for the 2014- The Board of Directors approved the The Russian Ministry of Energy approved All its branches (MES) were licensed by 2015 autumn/winter period (heating A large exhibition “The Hermitage of Environmental Policy of Federal Grid a Federal Grid Company’s investment the Moscow City Education Department to season). Based on an inspection held Her Imperial Majesty” was opened on 8 Company. The management commits itself programme for 2015-2019. The Company provide teaching services. Licenses will by an intergovernmental commission December 2014 in Nikolaevsky Hall of the to implement the environmental policy and is to commission 55.5 thousand MVA of expand the Company’s training capacity which included officials from the Ministry Winter Palace. Federal Grid Company is corporate obligations. This will minimise transformer capacity and 12.4 thousand and help it to teach its own employees of Energy, Rostekhnadzor, SO UPS and the partner of this exhibition. The event the adverse impact on environment, kilometers of electricity transmission but also implement complex educational Rosseti, the preparedness of Federal Grid is held on the occasion of the 250th enhance social responsibility and improve lines. The priority areas of the investment projects for external customers. Company’s grid facilities to the peak loads anniversary of the State Hermitage. investment attractiveness. programme are to maintain the current in winter was confirmed. Before that, the Director of The Hermitage Mikhail reliability levels by 2019, prevent Import substitution Company’s branches (8 MES – backbone Piotrovsky and Andrey Murov, Chairman Support of a chess tournament Long-term development accident rate growth, deliver capacity electric grids and 41 PMES – backbone of the Management Board of Federal programmme to 11 generation facilities with the total Executive Order No. 455 dated 10 October electric grid enterprises) had received Grid Company, took part in the opening The Fourth Open Chess Tournament of the capacity of 6.7 GW, and fully implement 2014 approved a Programme for Import preparedness certificate. ceremony. energy sector employees (in memory of The Russian Government approved a corporate obligations under governmental Substitution of Equipment, Technologies, Mikhail Botvinnik) was held with support Long-Term Development Programme of programmes (including implementation of Materials and Systems for 2015-2019. Building HR capacity of Federal Grid Company. Eighteen teams Federal Grid Company for 2015-2019 with strategically important projects). According to this programme, the share of of the Russian electric grid complex a Forecast through 2030. The Company’s procured imported electrical equipment Federal Grid Company and Moscow participated, including teams from Federal priorities will be to improve efficiency, Smart grids will be gradually reduced to a level which Energy Institute signed two documents, an Grid Company’s branches, subsidiaries reduce operational costs by 25% and is approved by the federal and industry- Agreement on Support of Educational and and associates, JSC Russian Grids, investment costs by 30% by 2017 against Federal Grid Company provided 5.9 MW of wide regulations. Youth Policy and a Plan of Joint Actions the Moscow Oblast Energy Committee, 2012, improve reliability of power supply electric power capacity to the new facilities for 2014-2015. Andrey Murov, Chairman “Energy Without Borders” Foundation, and and implement projects of national of Skolkovo innovation centre, such as The Company approved (Executive of the Management Board of Federal Grid others. The total number of participants importance. Hypercube, Matryoshka and Technopark Order No. 445 dated 6 October 2014) a Company, met with the students of Moscow was 72. buildings, and charging stations for cars methodology for assessment of local Energy Institute as a guest lecturer. He Energy supply to a new terminal (the first in Skolkovo). This work was part content in manufacturing of electrical told them about the key priorities in the of Pulkovo Airport of the second stage of building a smart equipment, used by Federal Grid to identify long-term development of the Russian distribution grid for the future centre of domestic manufacturers. electric grid complex, the Company’s Reliability of operations Russian science. future projects, and cooperation with Credit rating higher education institutions and academic Federal Grid Company commissioned the Energy supply to Formula organisations. final segment of the energy ring around St. Petersburg, i.e. 330 kV Vasileostrovskaya One Grand Prix International rating agency Moody’s substation. A 22.4 kilometre cable line 330 Investors Services affirmed Federal Grid Environmental management kV Severnaya – Vasileostrovskaya – Zavod Federal Grid Company fully met Company’s long-term global rating Baa3 The Company’s Headquarters and Ilyich (with a segment running under the its obligations to prepare energy with a Negative outlook. infrastructure facilities in Sochi to branches confirmed the consistency of sea in the Gulf of Finland) was launched Formula One Grand Prix. Energy supply its environmental management with the concurrently with this substation. Andrey involves new closed substations 110 kV NOVEMBER international standard ISO 14001:2004. Murov, Chairman of the Management Cooperation with Professional “Ice Palace” and “Imeretinskaya,” and Based on external audits, Bureau Board of Federal Grid Company, said Football Club CSKA (PFC CSKA) Federal grid Company commissioned modernised 220 kV Psou substation with Cooperation with the Russian Veritas Certification (an international that the ring circuit would greatly a new 330 kV Pulkovskaya substation the total transformer capacity of more Geographical Society certification body) issued a consistency improve reliability of power supply to the Within the partner agreement with PFC which will enable to eliminate an energy than 800 MVA. certificate to MES East and reaffirmed customers and make it possible to connect CSKA, Federal Grid developed a number Andrey Murov, Chairman of the shortage in the developing Moskovsky the existing certificates at the Company’s new city facilities (including those that are of visual materials on electrical safety and Management Board of Federal Grid district of Saint Petersburg. In addition, Cost reduction Headquarters and branches: MES South, being built for the 2018 FIFA World Cup) to prevention of third party electrical injuries Company, held a meeting with a search the substation has become the main supply MES North-West and MES Centre. the energy system. at backbone grid facilities. Pictures of team of the Leningrad oblast branch of centre for the new terminal of Pulkovo Federal Grid Company approved several football players from the club were used the Russian Geographical Society before Airport and facilities that ensure energy documents that will help to reduce Environmental protection in the above materials. The project was its 2015 expeditions to the Gulf of Finland supply for the International Exhibition and operational and capital costs of project intended for wide audience, including islands. The meeting was a part of the Convention Centre “ExpoCentre” and its documentation for the power grid facilities. At their working meeting, Federal Grid small craft owners, hunters and anglers, First RGS Festival that was held at the infrastructure. High quality of documentation will be Company and the World Wide Fund for pilots of small aircrafts, extreme sports Central House of Artists in Moscow. maintained by raising the typisation level Nature (WWF Russia) agreed to continue enthusiasts, residents nearby substations Federal Grid Company is the official of technical solutions. Implementation cooperation during the annual action and transmission lines. In 2014, Federal partner of project “Gogland Complex of block design approaches that envision “Earth Hour.” Besides, the Company Grid Company and PFC CSKA cooperated Expedition” which is related to research repeated application of technical received updated databases and map actively. It is expected that cooperation on the Outer Islands in the Gulf of Finland decisions will be carried out by Federal data about regional and federal specially between the parties will continue over the (they belonged to Sweden, Finland and Grid Company in partnership with its protected natural areas in five Russian next year. Research and Technical Centre, Centre Russia but were never the focus of regions in the Amur River basin and in for Engineering and Management of systemic academic studies). the neighbouring countries. This was Construction of the Unified Energy System, done in order to improve the efficiency MES and Technical Supervision Centre. and environmental safety of the energy industry and protection of biodiversity.
10 11 Statement from the Chairman of the Management Board
Dear readers, colleagues and partners! Design and implementation of innovations is an integral part approved a Programme for Import Substitution of Equipment, of UNEG development and improvement of its performance. Technologies, Materials and Systems for 2015-2019. The share of Financial and operational results that Federal Grid Company Federal Grid Company considers it important to develop procured imported electrical equipment should not exceed 10% achieved in 2014 provide evidence of the Company’s strong domestic electrical engineering industry. In 2014, the Company by 2020. positions, its successful strategy for sustainable development. In our operations we are primarily focused on improving reliability, efficiency and quality of electricity supply.
Federal Grid Company is committed to clear principles of corporate social responsibility with due account of economic, environmental and social impacts. During the last year, the “The major objectives will be to improve internal Company devoted special attention to the implementation of charitable, social and environmental programmes, most of efficiency, to reduce operating costs by 25% by 2017, which are long-term ones. and reduce investment costs by 30% against 2012” Federal Grid is one of the largest public electric grid companies in terms of the length of electricity transmission lines and transformer capacity. About 50% of all energy consumption in Russia is of electricity transmitted via the Company’s grids. The Company has been recognised to be a monopoly operator of the Unified National Electric Grid (UNEG) for the purpose of In 2014, the Board of Directors approved the Federal Grid’s comfortable working conditions by ensuring and maintaining its maintenance and development. Its overriding priority is to Environmental Policy which highlights the new priority areas competitive wage and salary levels, by implementing a housing ensure the accessibility of the energy infrastructure and the of environmental development guided by the environmental programme and making arrangements to support young reliable uninterrupted operations of electric grid facilities. On 21 doctrine, fundamentals of the government policy in the families and honored specialists of electric power industry. The May 2012, pursuant to the Decree of the President of the Russian environmental development of the Russian Federation. The Company continuously improves its techniques and methods Federation, Vladimir Putin, the Company was included in the list Company’s environmental activities were broadly recognised of occupational safety, and implements advanced training and of companies of strategic importance. and awarded at the competition “100 Best Organisations of skill development programmes for all categories of employees. Russia” in the “Environment and Environmental Management” The necessary conditions for personal development and career category. Federal Grid Company received the “Planet’s Golden growth are created within Federal Grid. Bough” as recognition of its efforts to preserve a balanced ecosystem. In conclusion, I would like to thank all our employees for their professional and well coordinated work. This particular factor The Company’s effective operations are determined not only best reflects the Company’s unique potential, which, I believe, by economic indicators. A good work environment, a sense of will be fully achieved through our joint actions. “Our strategic goals are to ensure customer satisfaction with stability is critically important. We guarantee our employees the quality of services, including tariff levels and technological connection timeframes, and to maintain the Company’s financial stability and increase the return on equity for shareholders”
As of the end of 2014, the electricity supply was 515.3 billion Our strategic goals are to ensure customer satisfaction with kWh. We implemented several large infrastructure projects: the quality of services, including tariff levels and technological Chairman construction of the St. Petersburg energy ring and a large supply connection timeframes, and to maintain the Company’s financial of the Management centre – 500 kV Enisei substation – was completed, external stability and increase the return on equity for shareholders. Board energy supply to the Vostochny Spaceport was ensured, all obligations were met in respect of energy supply for oil industry The Programme for Energy Saving and Energy Efficiency Andrey facilities – the Vankor Field and the Eastern Siberia–Pacific for 2015-2019 has been approved. In order to implement the Ocean oil pipeline. requirements of International Standard ISO 50001:2011, the Murov Energy Management System of Federal Grid Company and of It should be particularly noted that the Long-Term Development several branches received a compliance certificate. In its work, Programme of Federal Grid Company was the first among the Company is trying to follow the best international practices programmes of natural monopoly entities approved by the of energy saving and improving energy efficiency, and this has Russian Government. The major objectives will be to improve been confirmed by an independent audit. internal efficiency, to reduce operating costs by 25% by 2017, and reduce investment costs by 30% against 2012.
12 13 About the Report
Since 2007, Federal Grid Company has been publishing annual The 2014 Report also describes how the Company manages its reports on social responsibility and corporate sustainability (Social economic impact and the corporate social responsibility, contributes Reports). This is the Company’s eighth non-financial report; it to the environmental protection, what anti-crisis initiatives and describes operations in 2014. The previous 2013 Social Report was import substitution policy it implements. The Report reviews the published in June 2014. outcomes of anti-corruption initiatives and summarises the results of the 2014 Sochi Olympic and Paralympic Games. G4-28 G4-29 G4-30 The Report describes the Company’s medium-term and long-term plans. These plans are tentative and depend on numerous variables. Therefore, actual outcomes might differ substantially from those This Report is based on the following projections that are included in this Report. international standards: The Company continues to follow its tradition of cooperation with stakeholders. This is why on 13 April 2015 the Report was offered to stakeholders for review at the public hearings. The results of these 1. Sustainability Reporting Guidelines (v. G4) hearings and stakeholder recommendations were incorporated of the Global Reporting Initiative (GRI); in the Report. The minutes of the hearings were agreed with the participants in the dialogue and included in the Report (see 7.2. 2. GRI sector disclosures for electric Public Hearings on 2014 Report). An external assurance statement is utilities; also included in the report (see 7.3. External Assurance Statement). G4-33 3. AA1000SES Stakeholder Engagement Standard. The 2014 Report and the Company’s previous reports are available on the official corporate website at http://www.fsk-ees.ru/eng/investors/company_reports/. Federal Grid Company declares the consistency of its 2014 Social Responsibility and Corporate Sustainability Report with Please refer any questions related to the 2014 Report and its GRI G4, in accordance with the “core” disclosure level. The table contents to the Department for External Communications indicating the location of the standard reporting elements and and Government Relations at: +7 (495) 710-95-95, and e-mail: indicators is available in Annex 2. [email protected]. G4-32 G4-31
Federal Grid’s performance results, financial and economic indicators that are included in the Social Report are based on our RAS financial statements. G4-17
The Report contains information about operations of Federal Grid Company and MES branches of Federal Grid Company.
In accordance with the requirements of GRI G4, our 2014 Social Responsibility and Corporate Sustainability Report (hereinafter “the 2014 Report”) evaluated materiality of the information disclosed. The list of aspects that are material for the Company, and their priority is based on a stakeholder survey and a Company’s management opinion survey (for details, see Section 3).
The priority topics for the 2014 Report are as follows:
Energy efficiency and energy Reliability of UNEG Import substitution management
14 15 AWARDS AND ACHIEVEMENTS
1. The Minister of Energy Alexander Novak awarded winner in the “Annual Report/Utility” category supply to the facilities of the 27th World Summer organisational health and safety management in Andrey Murov, Chairman of the Managing Board, of MarCom Awards 2014. Universiade in 2013 was held in Kazan. Employees 2014 in the nomination “The Best Organisation of for the preparation of the energy system in Sochi of MES Ural were highly appreciated for their the City of Khabarovsk in the Area of Occupational and acknowledged the Company’s concerted 6. The Company won the annual Adam Smith contribution to the preparation and conduct Health and Safety among Production efforts in providing energy supply to the 22nd Russian CFO Awards-2014 in the category “Best of the Universiade: they received a Letter of Organisations with a Headcount up to 250 Winter Olympic Games and 11th Paralympic Financial Control & Planning”. An independent Acknowledgment from the President of Tatarstan. Persons”. Games. The Company’s results were summarised jury acknowledged a high professional level of at a meeting of the Energy Command & Control the Company’s financial function and its efficiency 14. Top managers of the Federal Grid branch 20. The Federal Grid branch – MES Centre – received Centre headed by the Minister of Energy. in planning, reporting and business management – MES North-West – received a Letter of a thank-you letter from the search group Trizna in the Company. Acknowledgment from the Energy and for the assistance in searches and reburial of 2. On May 16, badges of honour “For Contribution Engineering Committee of the government of remains of soldiers killed in the Great Patriotic in the Construction of Olympic Facilities” were 7. Top managers of MES South (a branch of Saint Petersburg for their high achievements in War. awarded in Moscow. More than 50 professionals Federal Grid Company) were given the first and the electricity industry and major contribution in who represented the Ministry of Energy, Federal second-class national awards “For Merit to the the successful implementation of the Agreement 21. The Federal Grid branch – Valdayskoe enterprise Grid Company, the Russian electric grid complex Fatherland” for their major contribution in the between Federal Grid Company and Saint of MES Centre – received a diploma “The Best and organistions that took part in the design and development of the fuel and energy complex and Petersburg on ensuring reliable electricity supply 2013 Insurer for Compulsory Pension Insurance construction of the energy facilities in the Sochi long lasting conscientious service, including to the city and arranging conditions for consumer in the city of Tver and Kalinin District” from the region received awards. contribution in the uninterrupted power supply connection to electric grids (commissioning of the Office of the RF Pension Fund. when conducting Winter Olympic and Paralympic 330 kV Pulkovskaya substation). 3. Federal Grid Company’s employees received Games in Sochi. 22. The Federal Grid branch – Volga-Donskoye thank-you letters from the President of 15 The Company branch – MES Volga – won the enterprise of MES Centre – received a Olympstroy for their high professionalism, 8. The Federal Grid branch – MES South – received competition “The Best Industrial Investment diploma “The Best Organisation of the Year dedicated work and substantial personal a Diploma of Merit of the Governor of Krasnodar Project of Nizhny Novgorod” for successful for Occupational Health and Safety” from the contributions in the construction of energy Krai for ensuring smooth operation of facilities comprehensive reconstruction of the 220 kV Volgograd Regional Office of the RF Social facilities in Sochi. during the preparation and conduct of the Zarechnaya substation. Insurance Fund. 22nd Winter Olympic Games and 11th Winter 4. Federal Grid Company won the competition Paralympic Games in Sochi. 16. The Company branch – Krasnoyarsk enterprise 23. The Federal Grid branch – Chernozemnoye “100 Best Organisations of Russia” in the of MES Siberia – was one of five companies enterprise of MES Centre – received a “Environment and Environmental Management” 9. Thank-you letters from the President of ANO in Krasnoyarsk Krai that were awarded the honorary certificate “For Excellence in Military category. The Company’s Department of Sochi 2014 Organising Committee were received “Certificate of Confidence in the Employer.” Registration and Reservation” from the Head of Environmental Policy Implementation received by the Federal Grid branch – MES South. The certificate was awarded at an extended local Administration of Starooskol city district of the “Planet’s Golden Bough” for its contribution meeting of the Krasnoyarsk Krai Inter-Ministerial the Belgorod Oblast. in the preservation of a balanced ecosystem. 10. The Federal Grid branch – MES South – received Coordination Council for Occupational Health and A decision to award a badge of honour was a Letter of Acknowledgement from the Governor Safety. 24. The Federal Grid branch – Zabaikalskoye taken by a Nonpartisan Public Council and the of Krasnodar Krai for its active role in the enterprise of MES Siberia – received a Steering Committee of the competition “100 preparation and conduct of the 2014 Formula 1 17. The Company branch – MES South – received “Certificate of Trust to the Employer” signed by Best Organisations of Russia: Environment and Russian Grand Prix and GP2 and GP3 races in won a contest and received a diploma “The Best the Head of the State Inspection of the Republic Environmental Management”. Sochi. Organisation of Work of Occupational Health and of Buryatia, the President of the Chamber of Safety Service” among enterprise of the city of Commerce and Industry of the Republic of 5. Federal Grid Company’s Annual Report was 11. Top managers of the Federal Grid branch – MES Zheleznovodsk. Buryatia, and the Chairman of Trade Union awarded in several categories of Russian and North-West – were given a Diploma of Merit of Association of the Republic of Buryatia. international competitions. Thus, it was a winner the Governor of Saint Petersburg for their major 18. The Company branch – MES Ural – received in the category “The Best 2013 Annual Interactive contribution in the development of the energy an award for successful improvement of civil 25. The Federal Grid branch – Khakasskoe enterprise Report” at the 8th competition of annual reports engineering complex of Saint Petersburg and defense and the protection of people from of MES Siberia – received a Social Responsibility held in St. Petersburg. the commissioning of a 330 kV Pulkovskaya emergency situations. Good results were Certificate confirming its status of a fair insurer substation. achieved via better quality and larger number of of the Republic of Khakassia. Expert RA rating agency announced Federal trainings. Head of the government of Leninsky Grid Company a winner in the nomination “The 12. The Federal Grid branch – MES Western Siberia district (Ekaterinburg) thanked Federal Grid 26. The Federal Grid branch – Omsk enterprise of Best Annual Report (Non-financial Sector)” in its received an award from the System Operator Company employees for their concerted and MES Siberia – was awarded a prize “The Bear competition of annual reports for 2013. “For Major Contribution in Ensuring the Reliable precise actions in civil defense. Insurer of the Omsk Region for Compulsory Operations of UES of Russia in 2014.” Pension Insurance” (among enterprises with a The Company became a platinum winner in the 19. The Federal Grid branch – MES East – became headcount from 100 to 500 persons). “Writing/Annual Report” and “E-Communication/ 13. A recognition ceremony for the energy sector a winner in the review contest for the best E-Annual Report” categories and a gold employees who ensured the reliable electricity
16 17 1.1. COMPANY PROFILE About our Company G4-7 G4-3 Open joint-stock company “Federal Grid Company of Unified of new producers and consumers to UNEG. Besides, Federal Grid Energy System” (hereinafter Company, Federal Grid Company, Company transmits electricity between the energy systems of Federal Grid, JSC FGC UES) was established in 2002, in Russia and the neighbouring countries. accordance with Russia’s electricity industry reform package, as a management organisation of the Unified National (All-Russia) Federal Grid is committed to the Electric Grid (“UNEG”) for the purpose of its maintenance and development. Federal Grid Company’s 2014 net Company’s long-term sustainable revenue amounted to RUB168,940.8 In accordance with the Federal Law “On Electric Power million, including: development and to creating values Industry” No. 35-FZ dated 26 March 2003, Federal Grid Company is a natural monopoly in the area of electricity transmission • Electric power transmission services – through UNEG and is responsible for the reliable electricity for all stakeholders through the RUB159,881 million; supply for customers in the Russian Federation. consistent implementation of our G4-4 • Connection to UNEG – RUB7,001.4 million; mission — to ensure energy safety • Other operations – RUB2,058.4 million. of electricity consumers in the Location of the organisation’s headquarters Russian Federation by maintaining G4-5 5a Akademika Headquarters are and developing an infrastructure Chelomeya str., Moscow, CAPITAL located at: that would ensure the transmission Russia 117630 Federal Grid Company’s equity as at end-2014 amounted to RUB855,250,506,000. of electricity and capacity. Phone: 8 800 200 18 81 Federal Grid Company’s debt as at end-2014 Fax: (495) 710-96-41 amounted to RUB262,316,008,000. G4-9 E-mail: [email protected]
Website: www.fsk-ees.ru/eng/
Federal Grid Company is a national operator of the largest share of Federal Grid UNEG1. The Company’s main function is to ensure the transmission Company’s 2014 of electricity from the generating stations to the electricity load net revenue 168.9 centres including the receivers of the distribution grid companies. bn In order to perform this function, Federal Grid Company transmits RUB electricity along its grids and provides technological connection =
1.1.Company 1.2. The Company’s Role Profile in the Industry and Region Federal Grid Company’s key activities + + Management of the Unified National Electric Grid Services of electricity transmission via UNEG (UNEG) in the Russian Federation
About
our Company Maintenance of UNEG facilities in appropriate Technological connection services in the area of condition and providing technical supervision UNEG development
1 Some segments of UNEG are managed by other regional operators (such as JSC Grid Company of the Republic of Tatarstan, Bashkiria Grid Company, Irkutsk Grid Company and JSC RES).
18 19 ABOUT OUR COMPANY / COMPANY PROFILE
Organisational Structure of Federal Grid SHAREHOLDERS’ EQUITY Company’s Management As of 31 December 2014, the charter capital of Federal Grid A B Company amounted to RUB637,332,661,531.50 and was divided C into 1,274,665,323,063 ordinary registered non-documentary General Meeting of Shareholders shares with a nominal value of RUB0.50 each. D In accordance with the Company’s Articles of Association, the number of authorised shares was 72,140,500,768 ordinary registered shares with a nominal value of RUB0.50 each and a Board of Directors total nominal value of RUB36,070,250,384. Authorised ordinary shares offer the same rights as outstanding ordinary shares.
On 20 February 2014, the Company placed additional ordinary registered shares with a nominal value of RUB0.50 each. % Chairman of the Management Board During the additional issue, 7,524,307,067 shares (or 79.78% of the total number of securities of the additional issue to be placed) were placed. As a result of the placement, the Company received funds in the amount of RUB3.762 billion. Management Board The Russian Federation, which acquired shares to the E amount of RUB3.756 billion, was the main participant in the additional issue. The remainder of the outstanding shares, Corporate Headquarters in the amount of RUB6 million, was acquired by minority shareholders. The Company has allocated funds received from the additional issue for constructing and commissioning of the most important electricity transmission lines to improve Share Capital Structure of Federal Grid Company* Federal Grid branches – Backbone Electric Grids (MES) the reliability of power supply in the Republic of Sakha and Buryatia, as well as facilities for the Winter Olympics in Sochi. A JSC Centreenergoholding 3%
B Kopernik Global All-Cap Fund 2% Technical MES MES MES MES MES MES MES MES Supervision C Index Energetiki of FGC UES, LLC 1% Cenre North-West Volga South Ural West Siberia Siberia East Centre D Others 14%
E JSC Russian Grids 80% Federal Grid branches – Backbone Electric Grid Enterprises (PMES)
SHARE CAPITAL STRUCTURE Nizhne- Valdaiskoye Bryanskoye Kaspiyskoye Permskoye Vostochnoye Zabaikalskoye Amurskoye ORGANISATIONAL STRUCTURE Volzhskoye The Company has more than 400,000 shareholders. The JSC Russian Grids, which owns 80.13% of the share capital, is the OF FEDERAL GRID COMPANY’S Company’s majority shareholder. The Russian Federation, Verkhne- Sredne- Zapadno- Vyborgskoye Kubanskoye Sverdlovskoye Tsentralnoye Primorskoye represented by the Federal Agency for State Property MANAGEMENT Donskoye Volzhskoye Sibirskoye Management (Rosimushchestvo), owns 0.59% of the share capital. SPPC Yuzhno- Karelskoye Samarskoye Rostovskoye Yuzhnoye Krasnoyarskoye Khabarovskoye Bely Rast Uralskoye On 17 June 2013, Russian Grids and Rosimushchestvo signed The functional structure of Federal Grid a shareholders’ agreement regarding the holding of shares, Company includes: present or future, and voting in Federal Grid Company. Yamal- Volgа-Donskoye Leningradskoye Nizhegorodskoye Stavropolskoye Orenburgskoye Kuzbasskoye Nenetskoye To improve interactions with shareholders, Federal Grid • Executive Office (located in Moscow); Company analysed its shareholder register and identified the key groups of holders of ordinary shares and depository receipts. As • 8 branches – backbone electric grids Vologodskoye Novgorodskoye Sochinskoye Omskoye of the end of 2014, the Company’s free float was 18.2%. The main (MES); minority shareholders of the Company are institutional investors and holding companies, with retail investors accounting for • 41 branches – backbone electric grid Moskovskoye Severnoye Tomskoye 3.36%. enterprises (PMES);
27% of the Company’s free float includes foreign institutional • 1 branch – Technical Supervision Centre investors, such as major global funds focused primarily on Priokskoye Khakasskoye Russia, whose assets under management exceed USD1 billion: (TSC); Kopernik Global All-Cap Fund, Vanguard International Equity Index Fund, MarketVectors ETF Trust Russia ETF, and BlackRock • 1 branch – Special Purpose Production funds. Centre “Bely Rast”). Chernozemnoye
Federal Grid Company’s management is not aware of any shareholders that own more than 5% of the outstanding shares, Volgа-Okskoye except those mentioned above. G4-13
20 21 ABOUT OUR COMPANY / COMPANY PROFILE
MANAGING SUBSIDIARIES AND ASSOCIATES The following Company’s documents regulate the process of managing subsidiaries and associates, as well as other entities in which Federal Grid participates: The Procedure for Interaction with Subsidiaries and Associates of Federal Grid Federal Grid Company has 21 subsidiaries and associates that operate in different industries, primarily those that support electric grid facilities. Two subsidiaries (JSC Tomsk Trunk Grids and JSC Kuban Trunk Grids) are backbone grid companies. Company, approved by the Board of Directors, serves as the basic document setting corporate Procedure for Interaction with Subsidiaries and Associates of procedures through which the Company Federal Grid Company manages its subsidiaries and associates
Subsidiaries and Associates of Federal Grid Company Regulations on Managing Subsidiaries and Associates and Other Entities in which Federal Grid Company has an Ownership The main forms of interaction between the Company Interest and its subsidiaries and associates are as follows: Subsidiaries and associates that operate in various industries including those supporting electric grid facilities of Federal Grid Company (share in authorised capital) Standard for Structural Units of Federal Grid Company on Building Consideration by the Board of Directors of issues regarding positions Positions and Instructing Representatives of the Company in of the Company representatives on draft agenda items of General General Meetings of Shareholders and Boards of Directors of Meetings of Shareholders and meetings of Boards of Directors JSC JSC Road Maintenance JSC OES GruzRosenergo Subsidiaries and Associates of subsidiaries and associates CJSC APBE (100%) Volgaenergosnabkomplekt and Construction Company (50%) (100%) (100%)
Procedure for KPI calculation and Target Achievement Evaluation Participation in drafting proposals and decision-making by governing CJSC Severovostokenergo in Subsidiaries and Associates of Federal Grid Company bodies of subsidiaries and associates through the Company JSC Mobile GTES (100%) JSC ESSK EES (100%) (49%) representatives in General Meetings of Shareholders and meetings of Boards of Directors of subsidiaries and associates
Federal Grid Company’s Order on Approval of Standards and JSC Elektrosetservis UNEG JSC Kubanskiye Magistralnye Seti JSC MUS Energetiki (100%) Model Regulations on Managing Subsidiaries and Associates, and (100%) (48.999%) Consideration by the Management Board of issues within its other regulatory and administrative documents of Federal Grid competence that relate to interaction between the Company and its Company subsidiaries and associates
JSC R&D Centre of FGC UES Index Energetiki – FGC UES JSC Energotechkomplect (100%) LLC (100%) (48.999%)
IT Energy Service LLC JSC CIUS EES (100%) JSC Nurenergo (76.99%) (39.999%)
JSC Tomskiye Magistralnye Seti JSC Chitatechenergo (100%) JSC ENIN (38.24%) (52.025%)
JSC GVC Energetiki JSC UEUK (33.33%) (50.0031%)
22 23 STRATEGIC OVERVIEW Federal Grid Company’s business model is aimed at ensuring the sustainable development of the Company BUSINESS MODEL Long-Term Value Creation in the long term and the creation of values for all stakeholders through consistent implementation of our mission
RESOURCES STRATEGIC GOALS AND OBJECTIVES VALUE CREATION
MISSION OF JSC FGC UES Financial SHAREHOLDERS AND GOVERNMENT INVESTORS To ensure energy security of consumers in • Growth of share value and assets • Increase return on equity AUTHORITIES Russia through maintaining and developing dividends for shareholders and • Equity • Reduce operational and investment costs Russian Government, the electricity transmission infrastructure investors • Maintain financial sustainability Ministry of Energy, • Interest income for debt providers • Debt FTS • Payment of national taxes
Tariffs WHOLESALE N T MAJOR ELECTRICITY AND E C O Services E M R CONSUMERS OF CAPACITY MARKET G P O A R ELECTRIC ENERGY N A Supply of A T grid companies, Production • Develop UNEG infrastructure in order to prevent M E • New facilities: electricity electric power factories, Russian assets constraints on economic growth and capacity C G transmission lines and substations I O Railways • Ensure reliability and quality G INVESTMENTS Payment V • Reliable energy supply to • UNEG facilities: E E and others of energy supply to customers T Purchase for services R consumers for development of the A of electricity N R economy 1. Transmission lines • Consolidate all facilities of UNEG electric grids and capacity for A T compensation N • Mutually beneficial co-operation • Maintain a competitive level of tariffs on S 2. Substations C of losses with suppliers and contractors electricity for industrial development GENERATION E • Energy security of the State • Ensure quality customer service FACILITIES Services ELECTRICITY TRANSMISSION
Payment Payment for services for services TECHNOLOGICAL Services Intellectual CONNECTION • Development of new assets • Develop research and innovation capacity F I technologies for higher SUPPLIERS AND N • Develop and put in place new technologies A • Patents T production efficiency CONTRACTORS N • Substitute imports in order to support N C • Energy saving and increased • Licenses E RESEARCH innovative development of the Russian energy I energy efficiency within the A INNOVATIONS M INSTITUTIONS, • Software sector L E Company and across the country M G CERTIFICATION A A N N AND EDUCATIONAL A A ORGANISATIONS G M E M K T E I S H N T R E S T A T Human E • Wages/salaries, social assets • Develop and train personnel A N security and opportunities for • Provide social support D • Employees T professional development for • Establish a talent pool H employees • Employees’ experience and for a “smart” energy sector E HUMAN professional expertise PU RESOURCES • Job creation that drive economic • Cooperate with higher education institutions BL growth in the country • Corporate culture IC
CORE PROCESSES AUXILLIARY PROCESSES Electricity Technological Investments Innovations transmission connection Implementation Development and In accordance This is a service of projects to implementation Technical Energy saving Health with Russian package to build new and of innovative maintenance and energy and Safety Natural laws, services connect power to reconstruct technologies and repairs efficiency assets • Ensure environmentalisation and improve receivers of energy efficiency of the electric grid of electricity the existing in the process consumers, Social • Balance between the use of • Water operations transmission as well as facilities of the of modernising responsibility via UNEG are electric grid UNEG natural resources and the • Reduce air emissions of hazardous generating and Procurement HR policy • Air substances monopoly transmission infrastructure electric grid efficiency of economic activities operations facilities to with a view to infrastructure Environment • Energy resources • Reduce water consumption regulated Federal Grid’s improve the by the State electric grids. reliability of 24 UNEG 25 ABOUT OUR COMPANY / COMPANY’S ROLE WITHIN THE INDUSTRY AND REGION
1.2. THE COMPANY’S ROLE IN THE INDUSTRY AND REGION
GEOGRAPHY AND SCOPE OF ACTIVITIES
Russian Federation International Cooperation
Federal Grid Company operates in 77 Russian regions. The territory on which Federal Grid Company facilitates the transit of electric power over Russia’s Being a management organisation of UNEG and cross-border electricity Under these agreements, the Company and electric power the Company’s facilities are located is divided into zones of responsibility customs border and operates as a technical contactor under commercial transmission lines of all voltage classes, Federal Grid Company: systems of 11 countries (Azerbaijan, Belarus, Georgia, for corporate branches, known as backbone grid companies, and their local contracts of importers and exporters on the Wholesale Electricity and Kazakhstan, China, Latvia, Lithuania, Mongolia, Ukraine, Finland Customer Accounts G4-EU3 enterprises (or MES and PMES). Underpopulated territories with no large Capacity Market (WECM). • coordinates commercial contracts for the import/export of electricity and and Estonia) exchange commercial metering data. Territorial grid organisation provides their engineering support; 161 customers – such as Chukotka, Kamchatka, Magadan oblast, Sakhalin, G4-6 G4-8 Power supply organisation Nenets Autonomous District and Republic of Altai – are not integrated into As of the end of 2014, electricity supply for the bordering countries via UNEG Consumer • arranges and implements commercial metering of electricity transmitted UNEG because they do not have economic conditions necessary for laying was 10.572 mln kWh on net basis. 88 electricity transmission lines and establishing large substations. along cross-border electricity transmission lines; Federal Grid Company continually modifies and improves its Distribution grid company 110 There are currently several agreements in force, stipulating parallel systems in relation to those of foreign power systems on issues 53 85 To supply electricity for Russian customers in Bryansk, Pskov and operation of the Russian UES with the electric power systems of foreign • measures actual volumes of electricity that has been transmitted across pertaining to the harmonisation of legislation / regulations 36 Kaliningrad oblasts, the Company entered into contracts with the relevant states. The parties to these agreements are Federal Grid Company and the State border, and arranges for their customs clearance (declaration). within the global electricity industry, as well as to form and 55 42 organisations of Latvia, Lithuania, Estonia and the Republic of Belarus to paid economic entities of Georgia, Kazakhstan, the Baltic countries and the synchronise the electricity and capacity markets in accordance 65 93 32 45 electricity transit services through the electric grids of these countries. Republic of Belarus. The Company also signed an Inter-system Agreement In order to measure the volume of electricity transmitted through each cross- with intergovernmental initiatives. This work is done with CIS 53 53 53 52 G4-6 with Finland. It also signed agreements on technical support of parallel border transmission line, Federal Grid Company and foreign counterparts Electric Power Council (CIS EPC) and its commissions, including operations with Ukraine, the Republic of Belarus, Azerbaijan and Mongolia. signed agreements concerning the metering of cross flows via a particular the Commission for Operating and Engineering Coordination of 2011 2012 2013 2014 cross-border transmission line. Collective Operation of CIS and Baltics Energy Systems (COTC), BRELL Power Systems Committee, task forces in the CIS EPC Executive Committee, and Fingrid (Finland). G4-DMA Operating Performance Results in 2014, mln kWh G4-9
The Company’s Power Grid Assets and Branches JSC FGC UES 2010 2011 2012 2013 2014
Electricity supply 3. MES Western Siberia 4. MES Siberia 5. MES South 6. MES Volga to the grids of 1. MES Centre 2. MES North-West distribution grid companies, direct SS - 196 / 95,999 MVA SS - 100/ 38,622 MVA SS - 84 / 36,800 MVA SS - 118 / 44,271 MVA SS - 143 / 27,476 MVA SS - 88 / 32,254 MVA consumers and 470,648 484,664 498,288 509,737 507,521 independent PTL - 193 / 13,283 km PTL - 332 / 24,210 km PTL - 346 / 12,120 km PTL - 185 / 12,486 km PTL - 463 / 28, 971 km PTL - 278 / 14,516km energy joint- stock companies PMES PMES PMES PMES PMES PMES (AO-energo), net Valdaiskoye Bryanskoye Vostochnoye Zabaikalskoye Kaspiiskoye Nizhne-Volzhskoye Verkhne-Donskoye Vyborgskoye Tsentralnoye Zapadno-Sibirskoye Kubanskoye Sredne-Volzhskoye 2 Karelskoye Yuzhnoye Krasnoyarskoye Rostovskoye Samarskoye Volga-Donskoye Electricity supply 1 Volga-Okskoye Leningradskoye Yamal-Nenetskoye Kuzbasskoye Stavropolskoye Nizhegorodskoye Novgorodskoye Omskoye Sochinskoye via UNEG to Vologodskoye 15,716 19,285 15,769 12,974 10,572 Moskovskoye Severnoye Tomskoye neighbouring Priokskoye Khakasskoye Chernozemnoye states, net*
Electricity losses 3 22,526 22,553 21,946 22,262 21,261 6 7 within UNEG 7. MES Ural 8. MES East regional 5 SS - 105 / 41,894 MVA SS - 90 / 14,820 MVA branches Length of Electricity Transmission Lines PTL - 242 / 16,520 km PTL - 192 / 16,689 km 4 of Federal Grid G4-EU4 51 Company PMES PMES Permskoye Amurskoye Backbone As at 31 December 2014, Federal Grid Company had: Electric Grid Sverdlovskoye Primorskoye 8 Yuzhno-Uralskoye Khabarovskoye Enterprises Orenburgskoye 41 (PMES) • 134,525,031 km of overhead electricity transmission lines (OHLs). Technical Supervision 1 Centre • 368,621 km of cable transmission lines (cable lines). Special Purpose • 775,307 km of aerial cable lines. Unified National Electric Grid (UNEG) Production Centre power 1 “Bely Rast” • 3,125,653 km of overhead electricity transmission lines that it substations owned on other sound legal right. transmission 2 231 units/ 924 units/ Backbone 6-1150 kV Electric Grids lines 0.4-750 kV * PTLs and SSs the ownership rights to which have been duly registered for Federal Grid Company and 138.8 thousand km* (SS) 332 133 МVА* (MES) (PTL) other owners, excluding leased PTLs and SSs with 10 kW voltage and lower operating on the territory 8 of Krasnodar Krai and the Far East Federal University on Russky Island
2626 27 ABOUT OUR COMPANY / COMPANY’S ROLE WITHIN THE INDUSTRY AND REGION
MARKET POSITIONS AND THE COMPANY’S CONTRIBUTION 2014, and its growth in 2009-2013 was followed by a decline in to the transition to the measuring of services by the actual terms of kWh of transmitted electric power. Given the existing average arithmetic capacity, Federal Grid Company anticipates TO THE DEVELOPMENT OF UES tendencies and the abovementioned factors, and with regard that the market of its services will contract.
The infrastructural nature of the energy sector, particularly constrained the capacity of the electric grid services market. The projected changes in the number of Federal Grid Company’s customers are shown in the chart below. the electric grids, makes the volume and mix of Federal Grid Electricity consumption in 2014 was 2.96 billion kWh below Company’s services highly dependent on the overall economic the projected level, and increased by 3.89 billion kWh (0.38%) environment. In the reporting year, the economic situation relative to 2013. It has been almost flat over the last three years. Changes in the Number of Federal Grid Company’s Customers (including the forecast for 2015-2019) Electricity Consumption in Russia in 2010-2014 and Forecast for 2015-2020, billion kWh 630 610 2015 2016 2017 2018 2019 2020 580 2010 2011 2012 2013 2014 forecast forecast forecast forecast forecast forecast 480 450 Electricity consumption in UES 961.7 1,000.7 1,016.5 1,009.8 1,013.9 1,016.3 1,028.7 1,045.1 1,053.7 1,061.4 1,084.3 417 of Russia
292
207 163 Share of Federal Grid’s Largest Consumers in Terms of Revenues from Electricity 150 Transmission Services, 2014
A JSC Tyumenenergo 9.72% 2010 2011 2012 2013 2014 2015* 2016* 2017* 2018* 2019* B JSC IDGC Centre 9.65% A C JSC Moscow Integrated Electricity Grid 9.18% Number of customers * forecast Company D JSC IDGC Ural – Sverdlovenergo 4.48% B E JSC Lenenergo 4.40% The number of Federal Grid Company’s customers will increase term because new “points of growth” will appear in the F JSC Kubanenergo 3.27% largely through territorial grid organisations (TGO), and direct economy. Thus, the largest relative increase of the transmission G JSC Far Eastern Distributive Grid Company 3.07% consumers (energy selling organisations acting in the interests of services is expected in UES East and UES South, including via C consumers), including the “last mile” consumers. The “last mile” implementation of nationwide investment projects. K H JSC IDGC Ural – Chelyabenergo 3.01% principle will be discontinued on 1 July 2017 in 16 Russian regions, as required by law. However, the distribution grid companies will The volume of exported services might be expected to increase % I JSC RUSAL – Krasnoyarsk Aluminum Plant 2.21% remain the largest customers of Federal Grid’s services. because of the ruble depreciation. D J JSC IDGC Centre and Privolzhie – 2.14% Nizhnovenergo The geography of energy consumption and the volume of E K Others 48.87% transmission services will change somewhat in the medium F H G J I INDUSTRY ORGANISATIONS AND COMMISSIONS
Given the remaining uncertainty about the future economic barely influence. The market price movements will largely Federal Grid Company, represented by the Deputy Chairman of Directorate represent the Company in the Subcommittee for the development, the Company reduces its operations and depend on the organic fuel prices, primarily gas prices, and the Managing Board, is a member of the Supervisory Council Common Electricity Market of the Eurasian Economic Union. investments in physical terms and faces stronger financial market competition. The trend constraining the increase in which is a collective governance body of the Market Council, They are involved in drafting and approval of the Concept of the constraints (weaker revenues and financing opportunities). the volume of services provided by Federal Grid Company a non-profit partnership. In accordance with the laws and Common Electricity Market of the Eurasian Economic Union. This is driven, first, by the ongoing economic stagnation and, will continue unless incentives to cut costs emerge in the regulations of the Russian Federation, Articles of Association second, by a trend toward energy saving and the development segments of wholesale generation and distribution grids of the Market Council and Regulations on the Market Council, Federal Grid Company takes part in the work of the Executive of autonomous and distributed generation. Furthermore, the (about 85% of the price). The long-term forecast of the Russian a member of the Supervisory Council is authorised to veto Committee of the CIS Electric Power Council. The Executive changed procedure for calculating the volume of services in Ministry of Energy does not include a large gap between the amendments in the Trade System Accession Agreement in which Committee is mandated to draft documents that ensure physical terms makes a major impact. increase of electricity prices and inflation rate (except for some Federal Grid Company is a statutory party. the functioning of the CIS Electric Power Council; draw up years), thus confirming a high likelihood of the energy saving regulatory, methodological, reference and information-sharing The latter factors seem to be long-term ones. Therefore, in scenario and the development of autonomous and distributed Besides, the Deputy Chairman of the Management Board documentation in the electric power sector; and coordinate the the period of economic recovery and growth the Company generation. represents Federal Grid Company in the Advisory Committee work of permanent and temporary bodies of the CIS Council. will not be able to influence the trend toward the contraction on Electric Power at the Board of the Eurasian Economic G4-16 of the “larger” energy sector. Incentives for its contraction The volume of electricity transmission services (in MW of Commission. Three Federal Grid’s officers from the Customers depend on the market electricity price which the Company can declared capacity) has been gradually declining in 2009- and Market Engagement Department and Laws & Regulations
28 29 2.1. STRATEGY AND UNDERSTANDING OF SUSTAINABLE DEVELOPMENT
“Sustainable development means development that meets the needs of Federation. Besides, the Company must ensure accelerated Governance System the present without compromising the ability of future generations to development of the national grid infrastructure in order to meet meet their own needs”. This is the definition offered in 1987 by the the increasing future needs of the national economy. UN World Commission on Environment and Development, and the Company is guided by it in its operations. Management of Federal Grid Company understands the Company’s responsibility for the public infrastructure not only as The unified national electric grids are a public infrastructure that the need to ensure safe, reliable and uninterrupted energy supply is controlled by the State and has strategic importance for Russia, but also as accessibility to the customers. This is why one of our Federal Grid Company views its economic and social stability, and for maintaining the country’s most important tasks is to seek a balance of public and economic integrity. interests in the Company’s operations. sustainable development through the Federal Grid Company, as a natural monopoly and operator of In this context, Federal Grid Company highlights specific activities prism of such values as conservation UNEG, ensures electricity transmission among main substations that are inherent to it as an electric grid company, in addition and load centres via backbone electric grids and is responsible to basic activities that are traditionally related to sustainable of environment (in the broad sense), for the reliable electricity supply to customers in the Russian development. and continuity and consistency of its policy. The strategic objectives of improving the efficiency of operations, SUSTAINABLE DEVELOPMENT ACTIVITIES rational utilisation of resources and providing reliable energy supply The core sustainable development Company-specific activities in sustainable to customers also fully pertain to activities are: development include: the implementation of Federal Grid Company’s sustainable development policy.
Management The Company’s Management Ensuring reliable Energy efficiency and of economic contribution to the of environmental electricity supply energy management 2.1. Strategy and Understanding impacts development of impacts of Sustainable Development society 2.3. Risk + + Management
2.2. Corporate Governance The key aspect of Federal Grid Company’s social responsibility Managing social and employee impact is the Company’s main + is to ensure reliable power supply. Reliable power supply is activity in sustainable development. The Company is responsible characterised by the minimum number of disruptions in the to its employees for good labour conditions, labour safety, electricity transmission grid, and this helps the Company stable merit-based remuneration, and opportunities for to meet its obligations to users in full. In order to ensure personal development. In order to achieve this targeted vision, uninterrupted power supply, the Company conducts consistent the Company runs internal and external training programmes, and comprehensive work, including a large-scale repair and improves its labour remuneration system, takes efforts to reduce Governance investment programme and widening the existing power the accident rate, and adds new benefits to its corporate social System transmission line right-of-way, and arranges for the timely package. emergency recovery work.
The Company regularly monitors emissions / discharges + Improvement of energy efficiency and development of energy of pollutants and the level of physical impact, and controls saving technologies have always been key priorities for Federal generation and subsequent treatment of waste. It takes efforts to Grid Company. Implementation of energy efficient technologies protect animals and plants (including birds on power transmission
2.4. Ethics 2.5. Anti-Corruption + will help to cut costs but also benefit the environment in regions lines), plants forests, controls noise impact and protects humans in Governance Activities where the Company operates. An energy management system from electromagnetic effect. plays an important role in improving the Company’s energy efficiency.
The Company’s contribution to the development of regions where it operates is through stable tax payments, cooperation with local suppliers, and investments in the electric power system in the regions where it operates.
30 31 GOVERNANCE SYSTEM / STRATEGY AND UNDERSTANDING OF SUSTAINABLE DEVELOPMENT
TRANSPARENCY AND ACCOUNTABILITY HISTORY OF CSR PRACTICES AND SUSTAINABLE DEVELOPMENT IN THE COMPANY
Federal Grid Company is responsible to its shareholders for The Company takes effort to build long-term mutually beneficial meeting its investment obligations. As a socially responsible relations with stakeholders, respects their opinions, assures company, Federal Grid regularly discloses non-financial reports. that all its obligations will be met and, in turn, requires that The understanding of the Company’s contribution to energy sector and the Company became increasingly In order to make sustainable development reports consistent with stakeholders meet their obligations. sustainable development began with implementation, more aware of the fundamental importance to bring expectations of the public, the Company maintains dialogues with in 2006-2008, of an initiative of JSC RAO UES of Russia young people to the Company because the future of stakeholders. The Company is committed to inform stakeholders in a timely to introduce sustainable development reporting in the national electric grid infrastructure will depend manner about all aspects of its operations that are relevant to the energy sector. At that time Federal Grid Company on their professionalism. This is why year 2011 Moreover, key stakeholders (including regional authorities, them, including via reporting mechanisms. Information about made its first Corporate Sustainability and Social was declared to be the “Year of Young Specialists local governance bodies, business partners and communities) implementation of transparency and accountability principles in Responsibility Report for 2007. That report was the of Federal Grid Company,” in order to highlight put various requirements to it. Efficient work with stakeholders the Company’s operations is available in Section 7 “Stakeholder Company’s first attempt to describe its operations the Company’s key priority in CSR and sustainable include meeting of their expectations, outlining the Company’s Engagement” and Annex 1 “Implementation of the Company’s CSR in terms of contribution in, and impact on, different development for 2011 and beyond. response position and – wherever expedient – taking their and Sustainable Development Plans and Commitments in 2014 areas of the country’s life, non-financial risks and expectations into account in corporate policies, development and Objectives for 2015.” engagement with stakeholders in the context of On the other hand, the Russian Federation is the strategy and current operations. ideology and values of corporate social responsibility Company’s main shareholder, and the Company (CSR) and sustainable development (SD). cannot ignore its position in identifying the key issues of its agenda for sustainable development. Leaders The Company defined the correlation of CSR and SD of the country view corruption as one of the most in the following way: CSR is a practice of responsible important challenges and a threat to sustainable conduct of business and a form of organisation of development of the Russian Federation. INTEGRATION OF SUSTAINABLE DEVELOPMENT the Company’s operations in response to the public STRATEGY AND OBJECTIVES agenda in SD. In turn, the SD agenda is understood This is why management of Federal Grid Company as a list of problematic situations, contexts and topic took a decision to describe in detail issues of youth that are recognised both by the Company and its policy and anti-corruption policy in the 2011 Report. Federal Grid Company views sustainable development through the The Company strives to maintain a balance between economic stakeholders as important in the long term. Besides, prism of such values as conservation of environment (in the broad rationality and the solution of social and environmental issues. It also this agenda states that the Company and stakeholders The 2011 Report focused on implementation of the sense), and continuity and consistency of its policy. strives to focus on those aspects of sustainable development that are ready to invest in the solution of these problems. Company’s youth policy as a part of HR management have paramount importance for stakeholders. process. In 2012, the Company focused on the The strategic objectives of improving the efficiency of operations, The Company’s public position on CSR issues had management of human capital in general. rational utilisation of resources and providing reliable energy supply Regular open communication with stakeholders plays an important been drafted in the 2007 Report as a CSR management to customers also fully pertain to implementation of Federal Grid role because it helps to better understand their expectations and use tool, i.e. it formulated principles of solutions and Year 2012 was special for the Company because it was Company’s sustainable development policy. a targeted approach to set a corporate social responsibility agenda. the Company’s actions in stakeholder engagement. the tenth anniversary of Federal Grid. This is why the This position specified the Company’s responsibility Report presented a retrospective overview of Federal to stakeholder groups. The subsequent fine-tuning Grid Company’s efforts in building a socially-oriented and clarification of the public position in the 2008 company. Report reaffirmed the importance and relevance of this tool of responsible business. The Company Preparation for the 22nd Winter Olympic Games continued to master the standards of SD reporting and 11th Paralympic Games in Sochi was one of and establishment of full-fledged CSR management the main events in 2014. This is why the priority practices. topic in the 2013 Report was “Energy Supply to the 22nd Winter Olympic Games and 11th Paralympic to ensure a fair distribution to strengthen environmental While drawing up its 2009 and 2010 Reports, the Games in Sochi.” Federal Grid Company recognises of economic value and assess to integrate Corporate Social protection and improve the Company began moving from the principled and its responsibility when it participates in such the economic expediency of Responsibility (CSR) strategy in generalised management of its responsibility to large-scale projects, and takes efforts to perform energy efficiency of grid implementing innovations and internal business processes the management of specific aspects that have the its obligations. During the project, the Company operations new technologies highest importance for stakeholders. In 2009-2010, modernised more than 326 kilometers of electricity after several major accidents in the energy sector transmission lines and prepared 36 electric (particularly at the Sayano-Sheshenskaya HPP), grid facilities; 13 of them were built anew. This management of UNEG reliability and safety became infrastructure will help the Sochi region to develop the top priority. In 2010-2011, the most important as a mountain climate resort. and publicly relevant issues were management of innovations and development of UNEG, as well as The Company’s 2014 Report focused on three priority matters pertaining to the development of the entire topics: reliability and sustainable operation of UNEG; Federal Grid Company strategic priorities in sustainable development energy sector. In fact, these two topics were the energy efficiency and energy management; and import basis of Federal Grid Company’s public agenda on substitution policy. The importance of these priority sustainable development. This is why the 2009 Report topics is to demonstrate how the Company maintains and 2010 Report focused on them. the sustainability of the energy sector to external and internal economic, industrial and natural threats, and In 2011, issues of reliability and innovative to other destabilising factors (including geopolitical development did not lessen in importance. Yet, the ones). to ensure innovative to build a talent pool to develop responsible to improve labour development of the for the smart energy HR management protection and national energy sector sector; practices industrial safety
For further details about the Company’s strategy, see the 2014 Annual Report.
32 33 GOVERNANCE SYSTEM / CORPORATE GOVERNANCE
2.2. CORPORATE GOVERNANCE Organisational Structure of Governing Bodies of Federal Grid Company
General Meeting of Shareholders HR and Remuneration Committee Federal Grid Company pays much attention to shareholder and Federal Grid Company follows the advanced standards of investor engagement, and takes efforts to continuously improve corporate governance, consistently integrates new requirements its corporate governance system. and recommendations in its CG system, and continuously improves the tools and procedures of its implementation.
Chairman of the Board of Directors Audit Committee Corporate Governance Principles Board of Directors (11 members)
Strategy Committee Chairman of the Management Board
Management Board (Management Board and its Chairman administer the day-to-day operations of the Company and report directly to the General Meeting of Shareholders and the Board of Directors) Investment Committee TRANSPARENCY ACCOUNTABILITY FAIRNESS RESPONSIBILITY We are committed to Our Board of Directors We are committed to Federal Grid recognises the timely and accurate is accountable to all protecting shareholder the rights of all disclosure of all material shareholders in accordance rights and treating all stakeholders, as provided The Board of Directors consists of 11 members. information on the with the applicable shareholders, owning the for by applicable Company’s business, legislation, and the same quantity of shares of legislation, and aims and free access to Company’s executive the same type (category), to cooperate with them this information for all bodies are accountable equally for the purpose of the The Board of Directors Elected at the Annual General Meeting of Shareholders on 27 June 2014 stakeholders to the General Meeting Company’s growth and G4-38 of Shareholders and the financial stability Board of Directors Year of first Position, place of employment No. Name election to the (positions as at 31 December 2014) Board of Directors
Chief Executive Officer, 1. Oleg BUDARGIN 2010 CORPORATE GOVERNANCE SYSTEM Chairman of the Management Board of JSC Russian Grids
Chairman of the Management Board of Non-profit Partnership Market Council, 2. Maxim BYSTROV Chairman of the Management Board of JSC Trade System Administrator 2014 Structure of Governing Bodies of the Wholesale Energy Market First Deputy CEO (Economy & Finance), 3. Andrey DYOMIN 2014 According to the Articles of Association, Federal Grid Company para 20.2 of the Articles of Association, the Chairman of the member of the Management Board of JSC Russian Grids has the following governing bodies: Management Board and the Management Board report to the General Meeting of Shareholders and the Company’s Board of 4. Boris KOVALCHUK Chairman of the Management Board of JSC INTER RAO UES 2012 • General Meeting of Shareholders; Directors. 5. Vyacheslav KRAVCHENKO Deputy Minister of Energy of the Russian Federation 2012 • Board of Directors; The Board of Directors, while providing strategic guidance to the Member of Boards of Directors of JSC SUEK, JSC IRDG Siberia and JSC Russian 6. Sergey MIRONOSETSKIY 2014 Company, regularly considers issues related to the improvement Grids • Management Board; of management efficiency, implementation of the corporate environmental and social policies, and maintenance of financial 7. Andrey MUROV Chairman of the Management Board of JSC FGC UES 2013 • Chairman of the Management Board. sustainability. These issues determine the tasks that are set for Assistant at the Expert Division in the Administrationof the President the Company’s executive bodies, and their implementation is 8. Georgy NOZADZE 2014 The General Meeting of Shareholders (GMS) is the supreme controlled. of the Russian Federation governing body of Federal Grid Company. In its activity the G4-35 Special Representative of the President of the Russian Federation on International General Meeting of Shareholders is governed by the laws of the 9. Sergey SHMATRO 2008 – 2010; 2013 Cooperation in the Electric Power Industry Russian Federation, the Company’s Articles of Association and the Regulations on the procedure for Preparing and Holding the Federal Grid’s Board of Directors is responsible for overall 10. Nikolay SHULGINOV First Deputy Chairman of the Management Board of JSC SO UPS 2013 General Meeting of Shareholder. leadership of the Company, except in matters that are in General Director of JSC Centreenergoholding, the competence of the General Meeting of Shareholders in 11. Denis FEDOROV 2011 In accordance with Article 69 of the Federal Law “On Joint Stock accordance with the Federal Law “On Joint Stock Companies” and General Director of Gazpromenergoholding LLC Companies,” the Company’s executive bodies (Chairman of the Company’s Articles of Association. It oversees implementation the Management Board and the Management Board) arrange of GMS decisions, as well as rights and lawful interests of the for implementation of decisions made by the General Meeting Company’s shareholders. of Shareholders and Board of Directors. In accordance with
34 35 GOVERNANCE SYSTEM / CORPORATE GOVERNANCE
The Management Board and the Chairman of the Management the General Meeting of Shareholders, the Board of Directors Key Performance Indicators and Remunerations of the Federal Grid Board – collective and sole executive bodies – are responsible and the Management Board. The Chairman is responsible for for the day-to-day operations of Federal Grid Company and implementing the Company’s strategy and setting goals and Leadership report to the General Meeting of Shareholders and the Board objectives for business and financial activities, accounting of Directors. The Management Board acts in accordance with and reporting, production & commercial activities, HR, Articles of Association and the Regulations on the Management R&D, investment and corporate policies, safety and security The Directors’ remuneration is governed by the Regulations on Remuneration to members of the collective executive body Board approved by the GMS. The competence of the Chairman arrangements, legal and organisational support of the Company’s Remuneration and Compensation to Members of the Board of includes salary and bonuses. Bonus payments are made in of the Management Board includes all matters of day-to-day activities. Directors of Federal Grid Company, as approved by the Annual accordance with the Regulations on Terms and Conditions of management of the Company apart from those reserved to G4-36 General Meeting of Shareholders on 29 June 2012. The amount Employment Agreements and on Calculation of Remuneration of remuneration to each Board member for his/her contribution and Compensation Paid to Senior Executives of Federal Grid to the operations of the Board of Directors depends on the total Company approved by the Board of Directors. In accordance with number of the Board of Directors’ meetings held during the the abovementioned document bonuses are paid based on the previous corporate year and the number of meetings attended achievement of targets for key performance indicators (KPI). The Committees by the Board member. Remuneration is paid in case of positive KPIs, their target values and calculation methods are subject to net profit for the respective fiscal year according to Russian approval by the Company’s Board of Directors. Four committees have been established within the Board of Directors of Federal Grid Company. Accounting Standards. The following KPIs were applied in 2014.
Committees of the Board of Directors G4-34 Annual and Semi-annual KPIs The Committee’s activity is aimed at considering new investment projects and programmes, as Investment Committee well as improving and developing the Company’s investment policy. Annual KPIs Quarterly KPIs The Committee has been established to consider and develop recommendations to the Board of Directors on issues relating to UNEG development, effective operation of the wholesale • Indicative TSR (total shareholder return) • No major accidents Strategy Committee electricity market, process management of electric grids, implementation of investment projects in the area of electric grid and UNEG development, innovative technologies and other • ROIC (return on invested capital) • Zero increase in the number of people injured in accidents issues related to UNEG development. • Cost reduction for the acquisition of goods, works and services • Financial leverage (debt to equity ratio) The Committee has been established to assist the Board of Directors in the establishment of HR and Remuneration Committee • Reduced operational costs efficient and transparent remuneration practices, HR policy and succession policy. • Electricity losses in the grid used by Federal Grid Company to The Committee performs the following key functions: evaluation of candidates to be the provide electricity transmission services Company’s external auditors and drafting recommendations to the Board of Directors regarding the appointment of external auditors, the conduct of annual independent audit; review of the • Reliability of services provided by the Company Audit Committee Company’s financial statements and results of the external audit of the financial statements • Reduced investment costs with respect to their compliance with Russian legislation, International Financial Reporting Standards, Russian Accounting Standards, etc. • Meeting schedules for commissioning power facilities • Meeting schedules for technological connection
Avoidance of Conflicts of Interests in the Board of Directors Remuneration to Senior Executives in 2014, RUB thousand G4-51 There are mechanisms in Federal Grid Company designed to avoid • Members of the Management Board can hold positions in the conflicts of interests in the supreme governing body – Board of governance bodies of other organisations only upon approval by Directors: the Company’s Board of Directors. In accordance with Federal Indicator Value Grid Company’s internal documents, a person who acts as a • Board members are recommended to refrain from dealing in sole executive body cannot be the Chairman of the Company’s Remuneration for contribution in the work of the governing body - the Company’s securities during the period when they have Board of Directors. Members of the Management Board cannot access to insider information. hold more than 25% of seats in the Board of Directors. Salary 93,344
• Board members have an obligation not to disclose insider • Chairman and members of the Management Board must Bonuses 140,152 information. disclose their holdings of Federal Grid Company’s securities and about their sale (divestiture) and / or purchase in Commission - • Board members have to disclose information on the ownership accordance with the laws of the Russian Federation. Benefits - of the Company’s securities. G4-41 Reimbursement of expenses - • If a conflict of interest arises, the Board member shall make it known to the colleagues and refrain from voting on the relevant Other types of remuneration 32,438 issue. TOTAL 265,934
36 37 GOVERNANCE SYSTEM / CORPORATE GOVERNANCE
Activities of the Board of Directors in 2014 CSR and SD Management Framework
CSR area Key regulatory documents Department in charge In 2014, the Board of Directors held 36 meetings, of which eight were in the form of joint presence, and considered 429 issues. Reliability of power supply • Unified Technical Policy Operations & Process Management Department During the reporting period, the Board of Directors adopted the • Long-Term Development Programme of Federal Grid Company • Fixed Assets Renovation programme Procedure for Organisation of following corporate documents: for 2015-2019 and Prospects through 2030; Recovery Works Innovative Development Department • Operation and Maintenance Rules Technological Development Department • Standard for business planning in Federal Grid Company; • Standard for conducting a public technological and price audit of investment projects; • Long-Term Development Programme of JSC FGC UES for 2015-2019 Industrial Assets Management • Methodology for Calculation and Evaluation of Key and Prospects through 2030 Department Performance Indicators for Federal Grid’s Senior Management • Civil Society, Customer and Government Engagement Policy; Energy efficiency • Energy Saving and Energy Efficiency Programme of JSC FGC UES Innovative Development Department for 2014; and energy management for 2015-2019 • Regulations on the Strategy Committee at the Board of Technological Development Department • Standard for establishing and adjusting key performance Directors of Federal Grid Company (new version); • Long-Term Development Programme of JSC FGC UES for 2015-2019 indicators of Federal Grid Company; and Prospects through 2030 • Regulations on the Investment Committee at the Board of • Federal Grid Company’s environmental policy (new version); Directors of Federal Grid Company (new version).
Import substitution • Programme for Import Substitution of Equipment, Technologies, Department of Summary Planning and Materials and Systems for 2015-2019 Organisation of Procurement • Methodology for Assessment of Localisation of Manufacturing of Department of Development of Electrical Equipment in the Russian Federation Technologies for Manufacturing of Electrical Equipment • Innovative Development Policy Innovative Development Programme Improvement of the Corporate Governance System R&D Programme Innovative Development Department • Long-Term Development Programme of JSC FGC UES for 2015-2019 HR Training Centre In 2014, implementation of a new Code of Corporate Governance • To update rules that regulate the General Meeting of and Prospects through 2030 drawn up by the Bank of Russia began in Russia. In order Shareholders, Board of Directors and its committees. Anti-corruption activities • Anti-Corruption Policy Board of Directors to implement it successfully, the Company analysed the and internal control consistency of its CG standards with the provisions of the Code. • To adopt a new version of the Code of Corporate Governance • Anti-Corruption Programme of Anti-Corruption Activities and Operational Control and Procedural for Federal Grid Company. Management of Conflicts of Interests in JSC FGC UES for 2012-2014 Compliance Department Based on this analysis, the Company drew up an action plan • Code of Corporate Ethics Economic Security Department (“road map”) to introduce the key provisions of the Code in the • To improve the remuneration system for members of the Company’s corporate governance framework. Company’s governance and control bodies. • Regulations on Management of Conflicts of Interests; • Procedure for Management of Information about Owners of This action plan envisions consistent integration of CG • To establish a position of Corporate Secretary. Participants in Procurement (prospective counterparties) and requirements and recommendations and implies the entire Counterparties of JSC FGC UES range of key changes and tendencies in the regulation of • To broaden objectives of the Audit Committee at the Board of corporate relations, including the following actions: Directors and build an internal audit framework. Responsibility • HR Policy External Communications and to the community Government Relations Department • Social Policy • To update the Articles of Association with regard to • To improve the internal control and risk management system. Customer and Market relations recommendations offered by the new Code (largely those • Youth Policy Department about the expansion of authority of the Board of Directors • To clarify Federal Grid Company’s information policy that • Civil Society, Customer and Government Engagement Policy Social Policy Department and the latest amendments in the Civil Code of the Russian would take into account the new CBR requirements to issuers (approved in 2014) Federation). of securities. HR Management and Organisational • Regulations on Financial Support to Veterans of JSC FGC UES Projects Department • Programme of Support to the Company Veterans Health and Safety Department • Long-Term Development Programme of JSC FGC UES for 2015-2019 HR Training Centre and Prospects through 2030
Economic responsibility • Long-Term Development Programme of JSC FGC UES for 2015-2019 Corporate Governance Department and Prospects through 2030 SUSTAINABLE DEVELOPMENT IN CORPORATE GOVERNANCE Treasury and Corporate Finance • Standard for Conducting a Public Technological and Price Audit of Department Investment Projects External Communications and CSR and SD activities in the Company are managed in accordance The highest strategic level of this system is the Board of Directors Government Relations Department with corporate governance procedures and standards. The key which approves high-level regulatory documents (Policies, structural elements of the CSR and SD management system in the Strategies, and Concepts). In some cases, before a document Economic Planning and Budgeting Company are its regulatory documents and structural units that is adopted by the Board of Directors, it must be approved by Department are responsible for the management of certain aspects of CSR ministries and agencies and discussed at meetings of the Environmental • Environmental Policy (new version dated 2014) Environmental Policy Implementation and SD. Government of the Russian Federation. responsibility Department • International standard for environmental management ISO The highest operational level for the CSR and SD management 14001:2004 system is the Chairman of the Company’s Management Board. • Executive order “On Organisation of Environmental Protection Activities in JSC FGC UES”
38 39 GOVERNANCE SYSTEM / RISK MANAGEMENT
2.3. RISK MANAGEMENT Authorities and Responsibilities of the Participants of Internal Control System
Federal Grid Company pays much attention to risk assessment promptly to the changing environment and use the available Audit Commission Confirms the reliability of data contained in the Company’s annual report, accounting balance sheet, and profit and and risk management. Proactive participation of all resources as efficiently as possible. Systemic risk management loss statement; performs audits of the Company’s financial and operational activities departments and employees in identification and assessment of activities make it possible for the Company to set and adjust existing risks and opportunities helps the Company to respond corporate strategy and achieve its objectives. Board of Directors Builds up the Internal Control System, sets its policy and monitors performance of the ICS; reviews the results of internal control; regularly evaluates the effectiveness of the ICS; and ensures continuous improvement of internal control procedures
THE COMPANY’S APPROACH Audit Committee Evaluates the Company’s Internal Control System, develops recommendations to the Board of Directors on its further improvement; plans internal audits and reviews its results; performs the Company’s financial statement TO RISK MANAGEMENT analysis and the analysis of the external audit results; assesses candidates for the position of the Company’s auditor; develops recommendations to the Board of Directors on the selection of candidates for the position of external auditors, conduct of an annual independent audit and auditors’ fees In order to ensure effective risk management, Federal Grid aimed at improving the efficiency of Federal Grid Company Company approved the Risk Management Policy and the operations in the short and long term, and at ensuring its Procedure for Application of the Risk Management Policy. sustainable continuous functioning and development via timely Chairman of the Provides organisational support and scheduling of internal controls, makes decisions based on the outcomes of the identification, assessment and response to risks that threaten Management Board controls, and makes proposals to the Board of Directors regarding the improvement of internal control procedures In accordance with the Risk Management Policy, the efficient business operations and reputation of Federal Grid fundamental objective of the risk management system is to Company, the health of its employees, the environment, and the Internal Control and Risk Plans and performs internal audits of business processes, governance system, internal control and risk lower the risks to an acceptable level which is approved by property interests of shareholders and investors. Management Department management system, and organisation design of the Company and its subsidiaries and associates Federal Grid Company’s Management Board. This Policy is Plans and performs audits of financial and operational activities of the Company and its subsidiaries and associates Plans and performs construction audit and review of projects within the Company’s investment programme Analyses risks and operational and investment efficiency enhancement potentials in the course of long-term INTERNAL CONTROL AND RISK planning of operating and investing activities Organises effective internal control and risk management system, evaluates the effectiveness of risk management MANAGEMENT SYSTEM in the Company and its subsidiaries and associates Plans and conducts audit of information systems, identifies and assesses risks of IT Strategy implementation and operation The internal control system in Federal Grid Company is a part of the governance system which is Other control units In accordance with Federal Grid Company’s HR Management Policy, the Executive Team performs strategic, implemented by the Company’s authorised bodies and officers and ensures the achievement of internal methodological and control functions control goals and objectives in the Company, its subsidiaries and associates. Their aims are as follows: In accordance with Executive Order No180 dated 10 April 2014 “On the Organisational Structure of the Executive Team,” heads of functions in the Company’s Executive Team (members of the Management Board of Deputy Chairmen of the Management Board) are authorised to oversee the performance of branches of Federal Grid Company, its subsidiaries and associates along functional lines
Control procedure owners Organise and implement control procedures within business processes in accordance with job descriptions and provisions of the Company’s regulatory and administrative documents
Authorities and Responsibilities of the Participants of the Risk Management System
Management Board Reviews and approved the overall corporate risk matrix, risk code and risk minimisation actions
Risk owners Ensure effective risk management including risk identification and assessment, and compulsory inclusion of the Стратегия Технологии Управление Персонал necessary funding for risk management actions in the respective budgets and business plans Members of the to conduct the to ensure safety, high to ensure reliability to ensure compliance with Management Board, government policy performance and efficiency of all reports made the laws of the Russian Deputy Chairmen of the in the electric power of business operations in the by the Company, Federation and the Company’s Management Board, heads of the Company’s structural sector Company, its subsidiaries and its subsidiaries internal rules and regulations units associates and associates Control procedure owners Organise and implement control procedures in business process; identify and assess risks, plan and conduct actions to reduce the likelihood of risks and / or mitigate their impact Employees of the Company’ structural units
The corporate internal control and risk management system is governed by the Regulations on Internal Control System adopted by Internal Control and Risk Plans and conducts an internal audit of the risk management system; analyses risk and operational and investment the Board of Directors (minutes No. 170 dated 3 August 2012). Management Department efficiency enhancement potentials in the course of long-term planning of operating and investing activities; organises the risk management system and evaluation of its effectiveness
40 41 GOVERNANCE SYSTEM / ETHICS IN GOVERNANCE
2.4. ETHICS IN GOVERNANCE Employees Professionalism People are the Company’s greatest asset. Uninterrupted power The nature of the Company’s business imposes high requirements to The development and strengthening of a corporate culture which thousand-strong team largely depends on how employees supply for the regions, important companies, cities and towns employee professionalism which is why we approach the matter of is based on principles and values shared by all employees is a understand the Company’s moral and professional guidelines in depends on the well-coordinated, conscientious and, if need be, forming our staff with particular attention. Providing everyone with key priority of Federal Grid Company in the HR management. the same way. In order to maintain high ethical standards among selfless work of the Company’s employees. Therefore, the Company equal opportunities to prove themselves, we encourage those who Federal Grid is a unique infrastructure company that unites the Federal Grid Company employees we have a Code of Corporate values each employee, regardless of age, gender, nationality are the best, creating conditions for their career growth. and position, providing equal opportunities for successful work, main electric power generation and consumption facilities in Ethics, and issues of ethics are frequently discussed by the Responsibility the country in one system. The concerted work of our many- Board of Directors. professional development and career growth. We also maintain the continuity of generations, ensuring the transfer of professional Each of us has a responsible attitude toward performing his/her knowledge and traditions from long-serving staff members to junior duties. The Company strives to provide its employees with fair employees. wages, an attractive benefits package and safe and comfortable working conditions. CODE OF CORPORATE ETHICS Development The Company’s ticket to success is constant renovation, the ability Trust to develop and implement new technologies. Federal Grid requires Trust in colleagues and confidence in their professionalism, fairness The Code of Corporate Ethics is the fundamental document The Code outlines the corporate mission, strategic priorities, each employee not only to meet the qualification requirements at the and openness allows us to deal successfully with our tasks and that lays the foundations of Federal Grid Company’s corporate goals and values. It also contains rules and norms of employee time of employment, but to strive towards constant development. enhances our authority in the eyes of partners and consumers. The culture. It is based on the global best CG practices and is aimed behavour in different situations, and recommendations on the fact that the coordination and development of the Unified National at raising the level of corporate culture in all Company units. efficient use of the Company’s assets and resources in order to Effectiveness Electric Grid in Russia has been entrusted to Federal Grid is an prevent conflicts of interests. Federal Grid Company is a unified team focused on a common evidence of a strong confidence in the Company on the part of goal. Our purpose is to be a unified network. The Company strives society and the Government. We value our reputation and strive to to complete all tasks clearly, on time and with no more than maintain and improve it through day-to-day reliable and high quality Mission of Federal Grid Company economically justifiable costs. work.
The main purpose (mission) of Federal Grid Company is to would ensure the transmission of electric power and capacity ensure energy safety of electric power customers in the Russian from electric power plants to large energy-intensive customers Federation by maintaining and developing an infrastructure that and distribution grids.
Observance of employee rights
Strategic Priorities of Federal Grid Company In its engagement with employees, Federal Grid Company tries to adhere to the highest ethical standards.
Reliability is increased through upgrading equipment, improving Reliability of electricity supply is our key strategic priority to management and enhancing labour productivity. In 2014, the Company did not report any In 2014, Federal Grid Company, its In 2014, Federal Grid Company did not which Federal Grid takes a responsible approach as it underpins violations of social employment rights in counterparties and subcontractors use any forced or compulsory labour the welfare of the whole country – from the smooth-running of Innovations the process of hiring or on the job. There did not use unlawful child labour. The because every employee’s functional large enterprises to the lighting of every home. Federal Grid constantly strives to improve electricity supply were no discriminatory abuses of power specifics of the technological process duties are regulated by job descriptions for consumers and implements innovative technologies by security guards toward the Company at the Company’s existing facilities and regulations on the Company’s Efficiency and equipment for this purpose. In the context of innovative employees or citizens. and those that are under construction structural units. eliminate any risk of using child labour.. The key efficiency factors are the implementation of innovative development, there is a gradual transition of UNEG to a new G4-HR3 G4-HR6 technologies and the high level of professionalism of our level – becoming a smart grid network that ensures reliable, G4-HR5 employees. The Company’s economic and productive efficiency high-quality and effective interaction between electricity consumers and producers.
The Code of Corporate Ethics is available on the corporate website and web portal. It is published in other corporate media and placed on stands in the offices of the Company’s executive team and branches. Besides, the Code was distributed among the Company employee, and every employee received a copy. TOOLS TO ENSURE ETHICAL GOVERNANCE G4-56 In order to monitor compliance with the Code of Corporate Ethics The main objectives of the Central Commission’s are: and improve the efficiency of efforts to prevent conflicts of 1. to address pre-conflict situations; interests, a Central Commission for Compliance with Corporate Ethic Standards and Conflict of Interests (hereinafter “Central 2. to settle conflicts of interests related to employees of ABIL Value Ring RELI ITY Commission”) has been established (Administrative Order No. Federal Grid Company’s executive team, the Central 141 dated 18 March 2014). Commission members, general directors (directors) of branches and directors of subsidiaries and affiliates; RE Federal Grid Company’s value ring ESS SP EN ON V S 3. to investigate violations of corporate ethics and standards of TI I C B shows how strategic goals (outer circle) E IL corporate governance in the Company; F I The work of the Central Commission F T Y E
is based on three main elements: 4. to consider information related to the work of commissions are achieved with the help of corporate
D for compliance with corporate ethics standards and conflict values (inner circle), with a key role E V EMPLOYEES of interests in branches, subsidiaries and associates; E
Y
L T Independence of decision making O C being played by the Company’s biggest S 5. other issues including those related to non-compliance with
P I U N N M R E the Central Commission’s decisions. N E T I asset – its employees. N C O T I V F The Central Commission members are appointed by the A F T P M I RO IS E Objectivity of decision making Chairman of the Management Board. Besides representatives O FESSIONAL N of Federal Grid Company, the Commission includes an official from the Ministry of Energy (who is also the coordinator for implementation of directives issued by the Government of the Russian Federation). Collective decision making
42 43 GOVERNANCE SYSTEM / ANTI-CORRUPTION ACTIVITIES
2.5. ANTI-CORRUPTION ACTIVITIES In 2014, implementation of the Company’s Anti-Corruption Policy developed along the following lines:
Improvement 1. Besides the new version of the Anti-Corruption Policy, several internal regulations that describe how to implement Anti-corruption activities are a strategic objective in the corruption policy. Therefore, the Company takes into account all of regulatory anti-corruption procedures were added to the general anti-corruption regulations. development of Federal Grid Company. We are fighting any cases applicable requirements of the Russian laws in this area. framework 2. In order to provide for better implementation of the Government directives aimed at ensuring the transparency of of corruption which is viewed as one of systemic threats to the finances and operations of Federal Grid Company, its subsidiaries and associates, and at preventing a conflict of stability and national security. The outcomes of anti-corruption activities are supervised by interests, the Company adopted a new version of the Procedure for handling information on the chain of ownership Federal Grid Company’s Chairmen of the Management Board (potential counterparties) of procurement participants and counterparties of Federal Grid Company, its subsidiaries and associates. Federal Grid Company as a government-owned entity follows the and Board of Directors. 3. In order to strengthen control over timely and sound implementation of the abovementioned directives, the Company principles and priorities that are stated in the government anti- established a procedure whereby a list of contracts signed by Federal Grid Company, its subsidiaries and associates is to be submitted every month to the Department of Operational Control & Compliance (DOCC). In order to advance and improve the corporate culture and improve the prevention of conflicts of interests: • The Company adopted Regulations on the Central Commission for Compliance with Corporate Ethic Standards and Conflict of Interests. • Members of the Central Commission were appointed. They include Federal Grid Company’s executives and a MANAGING ANTI-CORRUPTION ACTIVITIES representative of the Ministry of Energy who is also the coordinator for implementation of directives issued by the Government of the Russian Federation. • A new version of the Regulations on Handling Conflicts of Interests was approved. Since 2012, Federal Grid Company has an Anti-Corruption • A “tone from the top” in the process of building up a zero Policy, which aims to design and implement measures for tolerance culture and establishment of a corporate system for preventing and fighting corruption. Communication 1. The Company held several video conferences for employees of its Corporate Headquarters, branches, subsidiaries the prevention of corruption, eliminate its root causes and and Training on Anti- and associates. These conferences focused on anti-corruption efforts, transparency of the Company’s financial and conditions, and strengthen anti-corruption attitudes among Corruption Policies business operations and the work in the respective automated systems. All employees of all categories from the • Involvement of employees in the development and Corporate Headquarters and branches of Federal Grid Company were invited to participate. employees. and Procedures implementation of anti-corruption standards and procedures. 2. DOCC employees (4 persons, including head of the subdepartment and 3 chief experts) received training on how to G4-SO4 comply with the Russian and international anti-corruption laws and on issues of building up a system of compliance Anti-corruption laws were amended in 2014, and this required • Adequacy of anti-corruption procedures to the risk of control and corruption risk management. improvements in Federal Grid Company’s Anti-Corruption corruption. 3. All employees of all categories from the Corporate Headquarters and branches of Federal Grid Company (1,562 Policy. The new version of the Anti-Corruption Policy which is employees in 2014), including new ones, study the corporate Anti-Corruption Policy, Code of Corporate Ethics and consistent with the best Russian and international practices was Regulation on the Settlement of a Conflict of Interests. All these employees sign an agreement on compliance with • Effectiveness of anti-corruption procedures: taking anti- approved by the Board of Directors in January 2015. the Federal Grid Company’s Anti-Corruption Policy. corruption measures that ensure easy implementation and 4. Regular one-on-one consultations are provided to the Company employees on how to prevent and fight corruption, yield tangible results. settle a conflict of interests and implement the respective regulatory and administrative documents of Federal Grid The Anti-Corruption Policy serves as a fundamental document Company. which specifies the key principles and requirements aimed • Liability and inevitability of punishment for the Company 5. The Company regularly carries out explanatory work with contract managers and counterparties if there are at preventing corruption and ensuring compliance with the employees regardless of their position, length of service and refusals to sigh anti-corruption clauses to contracts with Federal Grid Company. applicable anti-corruption legislation. other conditions if employees are engaged in corruption. 6. The Company provided regular methodological assistance to the Corporate Headquarters units and branches in anti- corruption expert evaluation of documents. The implementation of our Anti-Corruption Policy is based on • Openness of business: sharing of information about the the following principles: Company’s anti-corruption standards with partners, Automation • The Company commissioned an automated system “Recording of the Beneficiaries of Counterparties of Federal Grid Company and its Subsidiaries and Associates”, which has been created for the automated collection and analysis of counterparties and the public. of activities • Consistency of the Anti-Corruption Policy with the applicable information received from the contractors about their owners, including beneficiaries. legislation and generally accepted norms. • The Company developed and put in place a special information retrieval system (IRS) designed for the automated • Continuous control and regular monitoring of effectiveness of contractor data verification and due diligence assurance in the government databases. anti-corruption standards and procedures. • Safeguarding the lawful rights and interests, protection of business reputation of the Company’s employees, partners and counterparties in the course of anti-corruption actions. Anti-Corruption Monitoring
Anti-corruption monitoring of the Company’s operations is an 5. The Central Commission of Federal Grid Company held several integral fundamental element in the implementation of the Anti- meetings on compliance with the norms of corporate ethics Corruption Policy in Federal Grid Company. The following anti- and settlement of a conflict of interests. Similar commissions ANTI-CORRUPTION TASKS corruption monitoring actions were taken in 2014: at the Company branches also held meetings.
The Company’s anti-corruption tasks are: 1. In order to implement directives issued by the Government of 6. The Company monitored requests for payments under bank the Russian Federation, Federal Grid Company, its subsidiaries guarantees that the Company sent to the guarantor banks • To implement Article 13.3 of the Law on Anti-Corruption. • To prevent corruption offences and ensure liability for them. and associates sent monthly reports to the Ministry of Energy, because counterparties failed to meet their obligations. Rosfinmonitoring and Federal Taxation Service about their • To implement compliance control (including anti-corruption • To develop in shareholders, partners, counterparties, contracts, and described the entire chain of its counterparties’ In 2014, the Company presented 206 requests for payments under compliance control). members of the governance and control bodies and employees owners. bank guarantees, to the total amount of RUB20.8 billion. uniform understanding of the Company’s position about • To build up an efficient legal mechanism for the prevention and zero tolerance towards corruption in all its forms and 2. The Company continuously monitored the timely and proper In 2014 the Company did not make corruption risk assessment. fight of corruption. manifestations. implementation of anti-corruption directives issued by the In 2015, it intends to make a list of corruption risks and risk Government of the Russian Federation. assessment procedures. • To build up an efficient practical mechanism for • To minimise the risk of involving the Company in corruption G4-SO3 implementation of actions to prevent and fight corruption. activities. 3. The Company conducted an employee survey in order to study the perception of corruption in Federal Grid Company, understanding of the corporate Anti-Corruption Policy by In 2014 Federal Grid Company did not report any confirmed employees, evaluate the efficiency of its implementation, and incidents of corruption. improve anti-corruption efforts in the Company. G4-SO5 4. In order to prevent cases of corruption the Company organised and held a declaration of a conflict of interests by the management team.
44 45 GOVERNANCE SYSTEM / ANTI-CORRUPTION ACTIVITIES
Anti-Corruption Activities Management Structure PLANS FOR 2015
BOARD OF DIRECTORS Anti-corruption laws were amended in • Revise and improve its existing anti- Outlines anti-corruption policy and monitors its 2014. As a result, the Company needed corruption regulations. to improve its corporate Anti-Corruption implementation Policy and take additional actions aimed • Draw up a list of corruption risks and at preventing corruption and monitoring assessment procedures for these risks. of compliance with the Russian and INTERNAL CONTROL international anti-corruption laws. • Organise regular training of the CHAIRMAN OF THE MANAGEMENT BOARD OPERATIONAL CONTROL & OFFICER Company employees on the prevention Is in charge of ACP implementation COMPLIANCE DEPARTMENT Coordinates control Organises and monitors actions In 2015, Federal Grid Company joined the and fight against corruption, effective functions in the Company, aimed at implementation of the Anti-Corruption Charter of the Russian Russian anti-corruption legislation and its subsidiaries and Company’s anti-corruption policy Business. A ceremony of awarding the the respective internal regulations. associates Certificate of Joining the Anti-Corruption CENTRAL COMMISSION FOR GENERAL DIRECTORS OF THE COMPANY’S Charter (No. (2041 dated 13 March 2015) • Take organisational, explanatory and COMPLIANCE WITH CORPORATE was held at the international conference other actions that are aimed at ensuring ETHIC STANDARDS AND BRANCHES, SUBSIDIARIES “Public-Private Partnership in the Fight employee compliance with restrictions CONFLICT OF INTERESTS AND ASSOCIATES and bans and at the performance of Reviews issues related to Are in charge of Against Corruption”. The conference was compliance with the Company’s implementation of the organised by the Russian Chamber of duties to fight corruption. Code of Corporate Ethics, Company’s anti-corruption Commerce and Industry, United Nations standards of corporate conduct and policy in subsidiaries and Office on Drugs and Crime (UNODC), and • Establish a procedure whereby certain settlement of conflicts of interests associates International Anti-Corruption Academy categories of the Company’s officers (IACA). will report when they receive gifts in relation to their position or performance The economic effect Federal Grid Company plans to implement of their job duties; and a procedure for of anti-corruption relinquishing, evaluating and selling monitoring of the following anti-corruption measures in OFFICERS IN CHARGE procurements in 2014 2015: such gifts, and crediting the proceeds to 440 the corporate budget. BRANCH, SUBSIDIARY AND OF ANTI-CORRUPTION exceeded mln RUB ASSOCIATE-LEVEL COMMISSIONS ACTIVITIES IN THE • Take part in collective anti-corruption FOR COMPLIANCE WITH COMPANY’S events. CORPORATE ETHIC STANDARDS BRANCHES, AND CONFLICT OF INTERESTS SUBSIDIARIES AND ASSOCIATES
ANTI-CORRUPTION AUDITS
The Department of Operational Control & Compliance held the The following basic violations were detected during the review of following audits in 2014: the above documents:
• An audit of bank guarantees issued as security of offers of • incomplete documentation package; participants in the procurement procedures. False bank guarantees to more than RUB33 million were identified in • unreliable documents; 2014. • missing memo about the chain of owners and consent for the • An anti-corruption audit of 3,588 regulatory and processing of personal information about the procurement administrative documents and their drafts in the Company’s participant; executive team and branches. • incomplete disclosure of counterparties’ beneficiaries; • An anti-corruption review of documentation packages under 9,489 transactions (including procurement procedures; 100% • violated procedure of approval of documents; of suppliers were audited), including: • no sufficient rationale of procurement; G4-SO9 -- Review of documents received from potential contractors • overpriced market value; (procurement participants) supporting 8,037 transactions, of which documents supporting 2,434 transactions were not • affiliation of procurement participants. approved or were sent back for correction; Based on the anti-corruption review of transaction documents, -- review of documents submitted to the Central Tender actions were taken aimed to prevent and/or compensate losses Commission (CTC) and Permanent Tender Commission and missed profit. (PTC) on 1,452 transactions, of which documents under 194 transactions were not approved or were sent back for G4-SO3 correction.
46 47 While making its 2014 Social Responsibility and Corporate list of topics that included the specifics of management in Sustainability Report, Federal Grid Company assessed for the Company, issues of economic performance, social and materiality the topics reported, in accordance with the GRI environmental impacts, etc. Federal Grid Company used several Sustainability Reporting Guidelines (GRI G4). When the Company methods and techniques for identifying materiality in order to Materiality identified material aspects, it reviewed the most complete ensure reliability of information. of Disclosures
G4-18 STEPS OF DETERMINING MATERIALITY
Step 1 Defining a list of possible material aspects
Determining materiality includes Federal Grid Company’s operations were reviewed, and an updated list of sustainable considering relevance and signifi- development aspects was drawn up on the basis of GRI G4 Guidelines. cance of information when identifying priority aspects and developing a materiality matrix. Step 2 Prioritisation of material aspects
Federal Grid Company strives to report only such information which is relevant and material for stakeholders. In order to prioritise the material aspects of the Company’s operations, we conducted a survey among our top managers and stakeholders. The survey helped to identify the key aspects in the Company’s operations and their impact
on the Company and stakeholders. =
Step 3 Developing a materiality matrix
Materiality Based on the feedback received from top managers and stakeholders, we draw up of Disclosures a materiality map which vividly presents operational aspects that are of primary importance for Federal Grid Company. It also shows differences in the relevance of
selected aspects for the Company and its stakeholders. = An average score was assigned to each aspect depending on its impact on the Company and its stakeholders.
Aspects in the “red” zone and “blue” zone on the materiality map were treated as priority aspects that are subject to compulsory disclosure.
The horisontal axis shows relevance to the Company, and the vertical axis demonstrates relevance for its external stakeholders.
48 49 MATERIALITY OF DISCLOSURES
Reporting of Material Aspects and Boundaries1.
Priori- Disclosures Materiality Matrix Material aspect and its number Disclosure of this aspect in the Report (G4-DMA) 1 ty zone on this aspect 36 6 19 G4-DMA 6.1. Managing economic impacts G4-ЕС1 6.1.1.Economic performance 4,5 42 1. Economic performance G4-ЕС2 11 20 G4-ЕС3 6.2.1. Human Resource management G4-ЕС4 6.3.2. Environmental Performance 5 17 10 39 G4-DMA G4-EN3 6. Energy G4-EN6 5.2. Energy efficiency and energy management 2 G4-EN7 13 4 9 11. Compliance with environmental protection G4-DMA 6.3. Managing environmental impacts 4 37 45 requirements G4-EN29 6.3.2. Environmental Performance 26 18 G4-DMA 6.2.1. Personnel management 3 35 8 38 17. Employment G4-LA1 6.2.3. Social and youth policy 43 7 G4-LA2 12 40 G4-DMA 6.2.1. HR management 18. Employee / Management relations G4-LA4 3,5 23 21 27 41 Appendix 2. GRI G4 Content Index – Electric Utilities Sector Supplement 16 G4-DMA 15 25 19. Occupational health and safety G4-LA6 6.2.2. Health and Safety 14 24 G4-DMA 30 20. Training and education G4-LA9 6.2.1. Human Resource management 32 34 G4-LA10 Red zone G4-DMA 3 33 31 G4-SO3
Relevance for external stakeholders external stakeholders for Relevance 36. Anti-corruption 2.5. Anti-corruption activities 22 G4-SO4 G4-SO5
46 44 1.2. Company’s role within the industry and region 37. Company's contribution in government policy G4-DMA 5.3. Import substitution making G4-SO6 6.1.1. Economic performance 28 Appendix 2. GRI G4 Content Index – Electric Utilities Sector Supplement 2,5 G4-DMA 29 38. Prevention of competition G4-SO7 6.1.4.Procurement 5. Special areas of CSR management G4-DMA 39. Compliance with legislative requirements G4-SO8 6. Core areas in sustainable development 6.3.2. Environmental performance 1,5 2 2,5 3 3,5 6.3. Managing environmental impacts 42. Customer health and safety G4-DMA G4-PR1 6.3.1. Environmental impact management system Relevance for the Company 45. Compliance with the product responsibility G4-DMA 5. Special areas of CSR management requirements G4-PR9 7.1. Stakeholders and stakeholder engagement mechanisms Aspects 2. Presence in the labour markets in the regions G4-DMA G4-ЕС5 6.2.1. Human resource management 1 Economic performance 18 Employee / management relations 35 Communities where the Company operates G4-ЕС6 G4-DMA Presence in the labour markets in the 36 Anti-corruption actions 3. Indirect economic impacts G4-ЕС7 6.1.1. Economic performance 2 19 Occupational health and safety regions where the Company operates G4-ЕС8 Contribution to government policy G4-DMA 20 Training and education 37 4. Procurement practices G4-EC9 6.1.4. Procurement 3 Indirect economic impacts making G4-DMA 6.3. Managing environmental impacts Equal remuneration 5. Materials G4-EN1 21 6.3.2. Environmental performance 4 Procurement practices for men and women 38 Prevention of competition G4-EN2 G4-DMA 5 Materials Compliance with legislative 6.3. Managing environmental impacts 22 Diversity and equal opportunities 39 7. Water G4-EN8 requirements G4-EN9 6.3.2. Environmental performance G4-EN10 6 Energy Assessment of suppliers’ employment 23 G4-DMA relations Supplier assessment for impact G4-EN11 7 Water 40 on society in the regions where the 8. Biodiversity G4-ЕN12 6.3.2. Environmental performance G4-EN13 Labour practices grievance Company operates G4-EN14 8 Biodiversity 24 mechanisms G4-DMA Grievance mechanisms for social G4-EN19 9 Emissions, effluents and waste 41 impacts in the regions where G4-EN20 25 Investments 9. Emissions, effluents and waste G4-EN21 6.3.2. Environmental performance the Company operates G4-EN22 Environmental impacts of the 26 Non-discrimination Blue zone G4-EN23 10 reporting Company’s products and 42 Customer health and safety G4-EN24 services Freedom of associations 10. Environmental impacts of the reporting G4-DMA 6.3. Managing environmental impacts 27 G4-EN27 and collective bargaining 43 Product and service labeling Company’s products and services 6.3.2. Environmental performance Compliance with environmental 6.3. Managing environmental impacts 11 12. Transport G4-DMA protection requirements 28 Child labour 44 Marketing communications G4-EN30 6.3.2. Environmental performance G4-DMA 12 Transport Compliance with the product 13. Total investments in environmental protection G4-EN31 6.3.2. Environmental performance 29 Forced and compulsory labour 45 responsibility requirements G4-DMA General investments 26. Non-discrimination G4-HR3 2.4.Ethics in governance 13 30 Security practices in environmental protection 46 Customer privacy 6.2.1.Human Resource management 6.2.2. Health and Safety 31 Rights of indigenous groups 35. Communities G4-DMA Company’s management of suppliers' G4-SO2 7. Stakeholder engagement 14 Appendix 2. GRI G4 Content Index – Electric Utilities Sector Supplement environmental impact Assessment of the Company’s units 32 for observance of human rights 40. Supplier assessment for impacts on society in G4-DMA 2.5. Anti-corruption activities 15 Supplier environmental assessment the regions where the Company operates G4-SO9 6.1.4.Procurements Supplier assessment for human rights' 33 G4-DMA 16 Environmental grievance mechanisms observance 43. Product and service labeling G4-PR5 6.1.1.Economic performance 34 Human rights grievance mechanisms 17 Employment 1 Aspect boundaries: JSC FGC UES G4-20 Aspects are not material outside the organisation. G4-21
50 51 The 22nd Winter Olympic and 11th Paralympic Games were held energy supply to the entire Sochi region during the 22th Olympic in Sochi in February and March 2014. They were a milestone and 11th Paralympic Games was critical for the country and the for the Russian Federation. This major international event was world. Federal Grid Company passed with flying colours in its preceded by many years of preparations in which Federal Grid handling of this role. Power Supply for 2014 Company played a proactive role. Reliable and uninterrupted Winter Olympic Games in Sochi THE COMPANY’S ROLE IN THE PREPARATIONS TO THE 22ND OLYMPIC At all stages of preparation for the AND 11TH PARALYMPIC GAMES IN SOCHI 22nd Winter Olympic Games and
11th Winter Paralympic Games, Federal Grid Company fully met its obligations to prepare Sochi energy infrastructure for the Winter Olympics and Paralympics and for further development of the city of Sochi as an alpine resort. Federal Grid Company paid special attention to ensure an uninterrupted During 2008 – 2014, construction has been completed of the • 500 kV OHL – 160.281 km; backbone electric grid infrastructure, and the following facilities power supply to all Olympic facilities, have been built and reconstructed: • 220 kV OHL – 423,134 km; both in the design and construction • 36 electric grids facilities (including 13 from green field) • 110 kV OHL – 1.763 km; of the Olympic power system and in • 326.6 km of transmission lines (including 187.7 km of overhead • 110 kV cable lines – 108.364 km; lines and 138.9 km of cable lines) terms of facilities management and • 10 kV cable lines – 440.34km; • 14 substations with a total capacity of 1,715 MVA. maintenance. Particular attention 3. the number of line / substation subdistricts is 5/4; 1. The total installed transformer capacity amounts to 2,506.64 was paid to preventive measures. МVA; 4. the number of motor and special-purpose vehicles is 207;
2. the length of electricity transmission lines in chains is 5. the number of employees was 714 persons; the staffing level 1,133.882 km, including: was 90.61 %.
Power Supply for 2014
Winter Olympic Games in Sochi =
52 53 POWER SUPPLY FOR 2014 WINTER OLYMPIC GAMES IN SOCHI
CONNECTING MAJOR OLYMPIC FACILITIES TO THE GRID EVALUATION OF THE COMPANY’S PERFORMANCE DURING THE 2014 WINTER OLYMPIC AND PARALYMPIC GAMES IN SOCHI In the course of preparation for and conducting of the Olympic Games, more than 110 Olympic facilities with a total capacity of The performance of the Company and its employees in the during preparation for and conducting of the 2014 Olympic and 397.5 MW were connected to the electric grids of Federal Grid course of preparation for and conducting of the 22nd Olympic Paralympic Games and in the autumn and winter of 2013-2014. Company, including the following major sporting facilities: Games and 11th Paralympic Games was highly appreciated by This was the result of correct decisions during preparation for the Russian Ministry of Energy. the autumn and winter period of 2013-2014, and the employment • Fisht Central Stadium (capacity of 40,000) The Minister of Energy Alexander Novak awarded Andrey of an optimal management scheme in the Sochi PMES with Murov, Chairman of the Company’s Management Board, for regard to operations of UNEG facilities and distribution grids. • Big Ice Hockey Arena (capacity of 12,000) the preparation of energy infrastructure facilities in Sochi and appreciated the Company’s concerted efforts in providing energy After the 22nd Olympic Games in Sochi, experts of the • Small Ice Hockey Arena (capacity of 8,000) supply to the 22nd Winter Olympics and 11th Paralymics. International Olympic Committee highly appraised the Company’s efforts in the preparation of the electric power • Bolshoy Ice Dome (capacity of 12,000) According to Minister Novak, Russian energy workers’ infrastructure to the Games and organisation of power supply performance in Sochi deserves the highest appraisal because during the Olympics. • Indoor Speed Skating Rink (capacity of 8,000) over the past six years the city has turned into one of the most reliable power regions in Russia, with state-of-the-art Approximately 2,000 of employees of Federal Grid Company, its • Ice Cube Curling Centre (capacity of 3,000) equipment. subsidiaries, and contractor organisations were engaged during • Bobsleigh track There were no process disturbances that could have affected the Olympics. About 1,300 members of the “Olympic Team” of the functioning of the Olympic facilities, and the Company Federal Grid received special training and were able to act in • Ski jumping centre and Nordic combined track ensured reliable and efficient performance of the Sochi PMES various emergency situations.
• Three alpine ski resorts with hotel complexes: Gornaya Karousel, Rosa Khutor, and Laura Costs of Preparation to the Sochi Olympic and Paralympic Reliable power supply of Olympic facilities during the 22th • Main media centre Winter Olympic and 11th Winter Paralympic Games was the Games highest priority for Federal Grid Company. To ensure a reliable • Adler – Krasnaya Polyana combined (rail and motor) road power supply to the Olympic facilities, each of them was The total costs of Federal Grid Company’s investment to RUB40.1 billion; the share of federal funds in this period was connected to multiple power sources. In particular, the Fisht programme in the Sochi energy district in 2009-2014 amounted RUB14.8 billion. • Shore reinforcement structures of the Imereti lowland. stadium, where the Olympics opening and closing ceremonies were held, was connected to four sources. POWER RELIABILITY DURING THE OLYMPIC AND PARALYMPIC GAMES
Goryachiy Kluch At all stages of preparation for the Olympics, Federal Grid construction of the Olympic power system and in terms of Company paid special attention to ensure an uninterrupted management and maintenance. Particular attention was paid to 500 kV SS, open-type – power supply of all Olympic facilities, both in the design and preventive measures. under reconstruction Dzhubginskaya TPP Centralnaya Peak Power Consumption 220 kV SS Shepsi The Company ensured sustainable operations in the Sochi The maximum design load for the energy district during the Olympic and Paralympic Games, electric grid during 683 including in the periods of peak power consumption. The the Olympics was as MW high as Constructed 110 kV SS, maximum design load for the electric grid during the Olympics the absolute Dagomys 661 MW enclosed-type was as high as 661 MW (the absolute maximum value was 683 maximum value MW). The total power consumption of sports facilities reached Sochi Sochi 86.2 MW in the coastal and mountain clusters. These values Constructed 110 kV SS, TPP Chernomorskaya open-type were 480 MV in 2008 and 559 MV in 2012, which means that the load had been increasing even without the Olympic demand.
500 kV PTL The total energy consumption during the 22nd Olympic Games changed as follows: The total power 220 kV PTL consumption of Izumrudnaya Krasnopolyanskaya sports facilities Constructed 110 kV PTL HPP • peak load in the evening: from 584 MW on 14 February 2014 to reached 86.2 Adler Krasnaya 661 MW on 8 February 2014; MW Psou Polyana TPP TPP • peak load in the morning: from 562 MW on 15 February 2014 to Laura 649 MW on 7 February 2014.
Sportivnaya The recorded peak load on 3 February 2014 amounted to 683 MW Poselkovaya HPP Imeretinskaya in the whole Sochi energy district. Rosa Msymta The total energy consumption of sports facilities during the 22nd Khutor Peak loads: Olympic Games changed as follows: Vremennaya Veseloye (‘Temporary’) • in the coastal cluster: from 27 MW on 8 February 2014 to 49.8 Ice Dome • the opening ceremony required 1,637 MW (some load was on Inguri the customer’s diesel generator sets); MW on 13 February 2014; Bzybi HPP • the closing ceremony required 1,521 MW (some load was on • in the mountain cluster: from 55 MW on 15 February 2014 to 65 the customer’s diesel generator sets). MW on 18 February 2014.
54 55 POWER SUPPLY FOR 2014 WINTER OLYMPIC GAMES IN SOCHI
Sochi, additional temporary 0.4 – 10 kV electric grids were built Duty Shifts at the Sochi PMES Facilities during the 22nd Winter Olympic Games with a connection to the external power grid and the use of and 11th Winter Paralympic Games in 2014 diesel generator sets. Internal resources, The Company took measures to avoid emergency situations including the staff Additional No. Unit Notes where the maximum consumption exceeds the total available of Sochi PMES / MES resources capacity of the power sources in the Sochi district. The excess South demand was designed to be met by the mobile gas turbine power plants (hereinafter, “MGTPPs”) with a capacity of 202.5 Organisation of round-the-clock duty watches of 47 line MW. The nine-station complex was based at three platforms – 1. PTL service staff 112 127 teams for servicing of PTLs Additional resources – 127 employees of MES of JSC Federal Grids Psou, Sochi TPP, and Liquefied petroleum gas (LPG) substation. The MGTPPs were placed on trailers, which enabled moving Diesel power plant servicing Organisation of round-the-clock duty watches of 17 teams in 2. 4 134 the equipment from one platform to another and promptly staff the mountain cluster and Imereti lowland responding to any shortages of electricity. Staff of the prompt response Organisation of round-the-clock duty watches of 50 prompt teams (PRT) to service 10 kV Advantages of MGTPPs include a small footprint, low number response teams to service 10 kV heat centres / distribution 3. heat centres / distribution 120 103 of maintenance staff, low noise levels, and the capability to centres in the mountain cluster and Imereti lowland centres in the mountain cluster produce the rated power only seven minutes after the launch of Including 53 employees of JSC Electrosetservice UNEG the station. and Imereti lowland Organisation of round-the-clock duty watches of 4 teams to Additionally, the design included an entire park of diesel 4. 110 / 10 kV CTL servicing staff 8 - service 110 / 10 kV cable lines in the mountain cluster and generator sets (DGS’s): 88 in the mountain cluster and 59 in Imereti lowland the coastal cluster. Another 19 generators were allocated Organisation of round-the-clock duty watches of the The reliability of the power supply was ensured by two power to serve the needs of the city. This park of diesel generator Maintenance & repair staff of 5. 10 - maintenance & repair staff at the Krasnaya Polyana rings (circuits) – one in the coastal cluster and the other in sets, unprecedented in scale, had a total capacity of 122.1 MW, 220 / 110 SS the mountain cluster. In the mountain cluster, the power ring including power from the contracting companies. Thus, even the maintenance & repair section included the Laura, Poselkovaya, Mzymta, and Rosa Khutor design peak load at the maximum power consumption was fully Staff of the Information substations, as well as the local generation facility – the covered. & Process Systems, Organisation of round-the-clock duty watches of 4 IPSCCS 6. 4 - Krasnopolyanskaya HPP. In the coastal cluster, to transmit Communications and teams in Krasnaya Polyana and Imeretinskaya stations electricity from the new Adler TPP, overhead and cable lines Also, the design provided for the capability to obtain additional Corporate Systems (IPSCCS) were built, also connected as a ring to improve reliability. In power output from the TPP of the Tuapse oil refinery of up to 100 MW. Staff of the relay protection of Organisation of round-the-clock duty at the relay protection 7. 17 24 automatic controls units of automatic controls units
5 diagnostic teams: 220 / 110 kV OHL, 220 / 110 SS, 10 kV 8. Staff of the diagnostic service 13 - Staff Performance During the Olympics heat / distribution centres, 110 / 10 kV cable lines To organise smooth operation of the Sochi power system, sessions was conducted and a 24-hour operating schedule was approximately 2,000 of the top energy experts of Federal Grid developed for the operating, line, and maintenance personnel. Company, its subsidiaries, and contractor organisations were Two systemic emergency trainings were held with the staff of engaged during the Olympics. All members of the “Olympic Sochi PMES, Sochi ES, Kuban regional dispatch division, TPP, Team” of Federal Grid received special training, including NHPP and organisations that provided power supply to the psychological guidance, for responding to various emergency Olympic facilities. situations. Prior to the start of the Olympics, a series of training
Emergency Response and Fire Drills in January-December 2013 and January-March 2014
Number of trained employees
No Employee category 2013 2014
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total Jan Feb Mar
1 SS operating staff 72 49 61 76 37 32 44 34 50 43 54 242* 794 81 62 67
2 DGC operating staff 16 6 12 10 4 17 13 7 11 8 5 14 123 12 7 11
TOTAL 88 55 73 86 41 49 57 41 61 51 59 256 917 93 69 78
* Including 191 drills conducted in December 2013 for employees of MES South, JSC Rosseti and JSC Electrosetservice UNEG involved in operations of Sochi PMES.
To minimise the risk of power supply interruptions, site map To improve monitoring of the status of the lines and to prevent diagrams were developed with markings for emergency failures, 50 teams with a total of 248 people were assembled reserve locations, line sections, service areas for the and a special disposition scheme for the repair crews of the respective line sections, and routes for delivery of modular power transmission line services was tested. They were mobile substations from the permanent storage base to the responsible for the power facilities located within a two-hour The Company assigned 685 staff and contracted employees works.Contractors provided 380 employees and 134 vehicles. substations. range from the place of duty, which, when necessary, enabled to the 2014 Olympics (these include 288 employees of MES There were no emergency outages at Federal Grid Company’s significant reductions in the travel times to the facilities. The South / Sochi PMES, and 386 employees from MES / IDGC facilities in the Sochi energy district that provided uninterrupted range of responsibility for each team was no greater than 12 and JSC Electrosetservice UNEG). It signed 4 contracts with power supply to the Olympic facilities. Other owners reported 7 kilometers. external organisations for possible emergency and repair emergency outages.
56 57 POWER SUPPLY FOR 2014 WINTER OLYMPIC GAMES IN SOCHI
POWER SUPPLY CONTROL CENTRE PLANS FOR FURTHER DEVELOPMENT OF THE SOCHI ENERGY INFRASTRUCTURE To enable operational decision-making, the Power Supply and location of the repair crews, equipment available in the Control Centre (PSCC) for the Olympic facilities – a hardware emergency reserves, as well as the availability and location Large-scale construction of the power facilities in the Sochi area Construction of Olympic Facilities and Development of the City and software complex, first of its kind in Russia, that controls of autonomous sources of electricity, machinery, and vehicles was not only aimed at the power supply to the facilities involved of Sochi as a Mountain Resort, approved by the RF Government power supply to the city, was built and commissioned for used to carry out emergency and recovery operations. in the Olympic Games, but also at the development of Sochi as a Decree No. 991 dated December 29, 2007. industrial operation. It is essentially an interactive system for mountain resort. This objective is stated in the Programme for decision-making on the issues of external power supply, as well The information system installed at the Centre enables as the command centre that controls the infrastructure of the analysing and visualising data on the status of the lines Olympic facilities through the internal power supply (control of and substations and the resources available and timing of the 10/6-0.4 kV intrafacility grid of the Olympic facilities). As a emergency repairs, as well as prompt communication with result, PSCC enabled information exchange between all power the repair crews. Thus, PSCC enables early preparation Freed-up Capacity consuming installations of the resort city of Sochi and the for potential problematic situations at the facilities of the Olympic facilities. consumers and the main and distribution grid complexes, Federal Grid Company currently has certain spare capacity in Committee”, (such as concert venues, temporary shopping and, most importantly, reduction of the times required to fix the Sochi region, and this capacity will gradually diminish in the centres, checkpoints, etc.). The capacity available for further In particular, the Centre has current information about the malfunctioning equipment and minimise the consequences of course of the region’s business development. Since 1 May 2014, development of the Imereti lowland districts and Krasnaya work being carried out on the electric systems, composition such malfunctions. the Company will have 79.5 MV of freed-up capacity that was Polyana within the area of the substations constructed by Federal used for the temporary facilities of ANO “Sochi 2014 Organising Grid Company is currently 100-150 MW.
The Use of Freed-Up Capacity
1. The freed-up capacity will be used to improve the reliability Khutor alpine ski resort and other facilities, will all remain of energy supply to the customers and socially important connected to the grid, among other facilities. facilities in Sochi by connecting the distribution grids of JSC Kubanenergo. In September 2012, the RF Government 4. Many of the hotels were designed as apartment suites in Decree No. 665 came into effect, which essentially imposed accordance with the Olympics construction programme, with a moratorium on connecting to the grid electric facilities of the intention of conversion into residential housing (including electricity consumers in the municipality of the city of Sochi installation of electric stoves), which also requires electricity. for the period of organising and holding the 22nd Olympic Winter Games and 11th Paralympic Winter Games of 2014. 5. The Imereti and Krasnaya Polyana ODGs created by Federal Pursuant to the decree, any facilities that were not included Grid Company for the remote control of the electric grid in the Olympic program but require connection to the grid will facilities during the Olympic and Paralympic Games continue be connected upon expiration of the moratorium in April 2014. to operate in the post-Olympic period. The ODG operations are The pent-up demand, i.e., the capacity under the agreements aimed at improving the reliability of the power supply system for connecting to the grid non-Olympic facilities of JSC for the new sports and tourism infrastructure and the key “Kubanenergo”, entered into but not performed, is 281.2 MW public facilities of the city of Sochi. (Letter No. 301-52-3-161 from JSC “Kubanenergo”, dated 18 December 2013). The electricity infrastructure of Sochi currently has enough spare capacity for the business and residential infrastructure 2. The construction of the power facilities in the Sochi area was to freely grow and develop. Federal Grid Company is capable not only aimed to supply power to the facilities involved in the of meeting any demand for capacity, whether for a large Olympic Games, but also for the development of the city of shopping centre in the city centre or for a cable car station. The Sochi as a mountain resort, as outlined in the Programme for new consumers, including energy-intensive facilities, can be Construction of Olympic Facilities and Development of the City confident in the stability of the power supply. of Sochi as a Mountain Resort, approved by the RF Government EFFICIENCY OF THE DISPATCH CONTROL SYSTEM Decree No. 991 dated December 29, 2007. By the time of the start of the Olympic Games, under this Program, Federal Grid had entered into agreements for an operational load on the In each of the Olympic clusters, based at the 220 kV Poselkovaya ODG employees maintain a single operational electronic logbook Olympic facilities of 383.257 MW, including those with JSC SS in Krasnaya Polyana and at the 220 kV Psou SS in the where data is updated automatically based on the analysis of the “Kubanenergo” (distribution grids) for a transmission capacity Imereti lowland, for the first time in Russia, centres were built reported parameters of the technical condition of the power facilities. for the Olympic facilities of 75.6071 MW. These agreements to control the group of substations – the Krasnaya Polyana continue in force, and the owners of connected facilities pay for operational dispatch group (ODG) and the Imereti ODG. This The Imereti and Krasnaya Polyana ODGs continue to operate in the capacity. enabled unified continuous remote control of the 10 kV power post-Olympic period. The ODG operations are aimed at improving the facilities, quick assessment of their actual condition, as well reliability of the power supply system for the new sports and tourism 3. Most of the sports facilities built for the Olympics will continue as predicting and preventing undesirable developments. The infrastructure and the key public facilities of the city of Sochi. to operate as designed. The Fisht Stadium is scheduled to host ODGs are integrated into the automated process control system the FIFA World Cup in 2018. (APCS), which allows creating automated workstations (AWS’s) that perform the remote process control of the power facilities. The Bolshoy Ice Dome is used for training of the KHL hockey team. In October 2014, the Olympic Park will host the Russian stage of the Formula One Grand Prix. Thanks to the well-coordinated operations of the Krasnaya Polyana and Imereti ODGs, all the The Big Ice Hockey Arena, the bobsleigh track, the combined venue for skiing and biathlon competitions, the mountain facilities of the Olympic Sochi power complex Olympic village (1,100 seats), the motor road, Psekhako Ridge, operated in normal mode and no power failures the JSC “Gazprom” alpine resort centre, including the cable were reported. lifts, ski slopes, engineering and transport facilities, the Rosa
58 59 5.1. ENSURING RELIABILITY AND UNINTERRUPTED OPERATIONS OF UNEG
Special Areas of CSR Management The Unified National (All-Russian) Electric Grid (UNEG) is a is mandated to ensure accelerated development of the backbone technological infrastructure which has strategic importance grid infrastructure in order to meet the increasing demand of for Russia and maintains the country’s integrity, as well as the economy in the years ahead. economic and social stability. Our management is fully aware of the Company’s responsibility Federal Grid Company as a UNEG management organisation for the management and development of UNEG which has that ensures electricity transmission via backbone electric grids public importance not only in terms of ensuring safe, reliable between large electric power stations, substations and load and uninterrupted power supply but also in providing non- nodes, is responsible for reliable power supply to its customers discriminatory access to the Company’s services. across the Russian Federation. Besides, Federal Grid Company
5.1. Ensuring Reliability and Uninterrupted Operations of UNEG OPERATIONAL PROCESS CONTROL AND SITUATION MANAGEMENT OF UNEG FACILITIES +
Since 2010, Federal Grid Company has developed a system of • to draft schedules for electricity consumption constraints in operational process control of UNEG facilities in order to ensure case of breakdown and to apply such constraints if requested reliable and high-quality electricity supply. by dispatch centres of JSC SO UPS;
The main objectives of the UNEG operational process control and • to connect the electric grid facilities and power receivers to 5.3. Import situation management are: automatic breakdown controls; Special Areas Substitution of CSR • to ensure safe and reliable operation of the UNEG facilities; • to conduct round-the-clock monitoring of operational situation + and reporting to the Company’s management about it in order Management • to participate in drafting and implementation of UNEG to prevent emergency situations at the Company facilities and development programmes in cooperation with control centres whenever such situations occur; to control the preparedness, of JSC SO UPS, including adherence to certain operation organisation and implementation of post-accident repairs; modes; • to provide information and analytical support to the Company’s • to ensure the required level of observability and controllability executives and command & control centres in taking decisions of the UNEG facilities; about UNEG management in the course of prevention and in liquidation of accidents, contingency and emergency • to ensure effective operation of the unified system of training situations; and professional advancement of operating personnel; • to organise duty teams of the Company’s executives on non- • to minimise process disturbances in UNEG caused by working days and holidays; + operating employee errors; • to organise information sharing with the situation centres 5.2. Energy Efficiency and Energy • to minimise losses in the course of electricity transmission of JSC Russian Grids, fuel-and-energy complex entities, SO, Management through UNEG grids; Ministry of Energy of the Russian Federation, HydroMetCentre of Russia, the Ministry of Emergency Situations, Russian • to plan actions for the repair, commissioning, modernisation/ Railways, telecom operators and other entities in contingency reconstruction and maintenance of electric grid equipment; and emergency situations.
60 61 SPECIAL AREAS OF CSR MANAGEMENT / ENSURING RELIABILITY AND UNINTERRUPTED OPERATIONS OF UNEG
When addressing issues of operational process control, the Company is guided by the following principles for system design and Service Reliability and Quality Indicators operation: Regulation period • structural unification of the operational process control • ensuring effective teamwork with JSC SO UPS when the latter Indicator 2011 2012 2013 2014 2015 units, implementation of the uniform technical policy for their performs operational dispatch control of UNEG facilities; technological and information support; Plan Actual Plan Actual Plan Actual Plan Actual Plan • ensuring effective teamwork with subsidiaries and associates • optimal allocation of non-operational and operational of JSC Russian Grids when performing operational process Service reliability level* 0.0490 0.0346 0.0483 0.0241 0.0475 0.0199 0.0468 0.0198 0.03602 functions and responsibilities among the operational process control of facilities of the electric grid complex; control units; Service quality level ** 1.2599 1.1983 1.2410 1.2101 1.2224 1.1088 1.2040 1.1520 1.23908 • efficient use of HR capacity of the operational process control • inability to mis-assign operational functions to divisions that units for the needs of the other Company’s units and divisions; * Indicator value is determined by duration of electricity outages and is calculated as a ratio of actual aggregate duration of all electricity outages over a calculation are not directly in charge of the operation of the relevant period (an hour) to the maximum number of consumer connection points over the regulation period. facilities; • ensuring continuous preparedness of the Company’s staff to liquidate the consequences of contingency and emergency ** Indicator value is calculated as a ratio of the number of applications sent by consumers in accordance with the regulatory requirements within the relevant regulation period to the difference between the number of draft contracts sent to the applicants in accordance with the procedure for making contracts for technological connection • ensuring continued readiness of electric grid equipment and situations; and the number of draft contracts sent behind the time limit. operating personnel to change technological operation modes or operating conditions of the UNEG facilities if required by • maintaining the required level of competence to represent and JSC SO UPS; protect the Company’s interests when dealing with electric power entities and electricity consumers. • maintaining the technological operation modes of UNEG electric grid equipment in accordance with the authorities, the Measures to Improve System Performance concluded contracts and the rules of the wholesale electricity market; Implementation of the automated process control system (APCS) Implementation of APCS and transition to the operation of on the next generation substations together with the creation of substations that do not constantly need on-duty personnel will the full-service Grid Control Centres at PMESs makes it possible enable the Company to reduce service costs, time for eliminating to transfer functions of operational service of substations process disturbances, as well as the perform simultaneous to GCCs’ personnel, and these SS will be transferred to the situation analyses at the facility and in the grid adjacent to In 2014, the following results were achieved due to successful problem solving in the area of operational process control: category of substations that do not constantly require on-duty substations. personnel.
• no violations of the UNEG overvoltage standard occurred; • next generation substations with advanced automated equipment control systems were designed and commissioned; The Company continued to work on improving regulatory framework. The following internal regulatory acts were drafted in 2014: • the number of process disturbances caused by operating employee errors did not increase (4 errors in 2014 against 4 in • the Company optimised the time and resources in the process • Standard instruction on operating service of the next The following internal documents were revised: 2013); of liquidation of contingency and emergency situations and generation SS 35-220 kV that do not constantly require on- during post-accident repairs; duty personnel; • Regulations on the procedure for issuing permits for the • the number of process disturbances caused by gross errors of preparation of workplaces and access of teams to work on the operating employees reduced (no errors in 2014 against 1 in • Thirty-six Grid Control Centres (GCC) in the Company’s • Functional requirements to relay protection & automatic electricity transmission lines and equipment of Federal Grid 2013); branches (PMES) became partially operational, and 4 GCCs in equipment and sub-commutation for ensuring their remote Company’s substations; PMES were fully operational. control via hardware and software complexes; • the level of achievement of key performance indicators, such G4-EU6 • Standard instruction for operating personnel of Federal Grid’s as outage schedule compliance rate and outage duration rate, • Instruction on the procedure of operational talks and substations on performing inspections of equipment and remained high; transmission of operational messages in Federal Grid devices. Company.
Number of Process 2,596 187 Disturbances 2,286 348 188 1,954 211 Volga 323 152 292 111 East 300 295 Western Siberia 322 122 199 North-West 317 375 298 Siberia 295 216 Ural 499 470 374 Centre
South 361 287 293
2012 2013 2014
62 63 SPECIAL AREAS OF CSR MANAGEMENT / ENSURING RELIABILITY AND UNINTERRUPTED OPERATIONS OF UNEG
TECHNICAL POLICY OF FEDERAL GRID COMPANY
The Unified Technical Policy is the key instrument for optimising in the short and medium term with an appropriate industrial and reducing the full costs of ownership of the electric grid and environmental safety based on innovative development complex facilities with a sound level of reliability on the part principles that provide non-discriminatory access to electric of the UNEG. Its aim is to identify the key technical areas that grids for all market participants. enhance the electric grid complex’s reliability and efficiency ENSURING RELIABILITY IN SPECIAL PERIODS
The Unified Technical Policy has the following objectives: Weather and climatic conditions make a strong All compulsory and additional actions aimed at impact on the Company’s operations. Federal Grid ensuring the reliable performance of electrical grid Company prepares electric grid equipment, buildings facilities in the river flood period were completed. As a and facilities in advance for operation under low result, substation equipment, overhead transmission temperatures and peak loads during the autumn/ lines, buildings and facilities were in good operational 1. to ensure reliable supply of electricity to the customers; Federation, and encourage enhancement of R&D and project winter period, and in case of natural anomalies during conditions after the flood. capacity. periods of river floods, fires and thunderstorms. 2. to improve the technologies for operations, servicing and These are called “special periods” in our operations. repairs; Implementation of the Unified Technical Policy will help Federal Grid Company to optimise investments, improve the electric grid MEASURES TO IMPROVE 3. to reduce investments in and operations costs of facilities; complex’s efficiency, reduce its operational costs, strengthen the system-wide reliability of UNEG and meet the increasing demand Autumn/winter period RELIABILITY OF POWER 4. to minimise an environmental impact; for electricity. On 7 November 2014, the Commission of the Russian SUPPLY IN 2014 Ministry of Energy issued a certificate No 70-2014 5. to create incentives for manufacturing of state-of-the- confirming the Company’s readiness for operation In 2014, we continued consistent work on raising art equipment and engineering structures in the Russian during the 2014-2015 autumn/winter period. reliability at Federal Grid Company’s facilities and achieved marked successes. The number of accidents Federal Grid Company successfully completed the dropped by 14.5% as compared to the previous year, 2014-2015 autumn/winter period. A set of measures although the maintenance workload (number of implemented within the investment programme and Benefits from Implementation of UTP electric equipment items) has been increasing (up by repairs in 2014 enabled us to ensure overall reduction 5.06% in 2014). of the accident rate in the Unified National Electric Grid and the reliable power supply to consumers. Measures taken by the Company have resulted in Expectations from Unified Technical Policy’s implementation Compared with the same period of the last year, the reducing per-unit accident rates (number of accidents accident rate decreased by 15.7%. The most significant to the maintenance workload ratio) over the past three decrease was recorded in Central Russia and in the years, on average, by 16% a year. Far East – by 31% and 28% respectively. The accident rate has been reduced because of the 30% decrease of the following actions: Reduction of electricity Reduction in the areas probability of system Load levelling Thunderstorm losses occupied by substations emergencies • implementation of maintenance and repair plans and Fire danger period and target programmes; Compulsory and additional actions aimed at fire protection of the electric grid facilities were developed • implementation of equipment renovation and implemented in the course of preparations for the programmes; fire danger period. TOTAL ACCIDENT RATES IN 2010-2014 • implementation of a set of measures to ensure top- The situation in the thunderstorm and fire periods level preparedness for emergency situations; was monitored by the Situation & Analytical Centre. • personnel professional development. Key Accident Rate Indicators G4-EU29 Information about thunderstorms and emergency situations in forests due to forest fires at the Number of Accidents at municipal, regional, inter-regional and federal levels The number of accidents dropped in all regions 2012 2013 2014 Federal Grid Company’s was shared with Federal Grid Company’s senior where the Company operates, particularly in MES Indicator North-West and MES Ural that reduced the number of Plan Actual Plan Actual Plan Actual management daily. Facilities in 2010-2014 accidents in 2014 by one third against 2013. Number of outages 3,005 2,559 2,223 3,260 River Floods Two thirds of all accidents in 2014 were at the power Maximum number of transmission lines, and one third – at substations. 2,871 connection points in the 13,261 13,570 13,869 In order to ensure reliable operations of its electrical 2,596 calculation period grids, Federal Grid Company developed and Accidents at power transmission lines were largely 2,286 implemented an action plan to minimise the impact of caused by the natural and climatic factors (70%), Total duration of electric power 1,954 639.18 319.95 644.58 270.07 649.54 276.24 river floods on the operations of grid equipment. This including lightning overvoltage (41%). Accidents outages, hours action plan was based on the Company’s experience in at substations were largely caused by the wear Average duration of electric previous years and on hydrological forecasts. of obsolete equipment and infant failures of new 0.0482 0.0241 0.0475 0.0199 0.046834 0.01992 equipment (33% and 30% of accidents, respectively). power outages Daily monitoring during the river floods is conducted by the Situation & Analytical Centre. The monitoring In 2014, undersupplied electric power in Federal Grid Company amounted to 1,561.83 data are shared with the Federal Grid Company’s top MWh. management.
2010 2011 2012 2013 2014
64 65 SPECIAL AREAS OF CSR MANAGEMENT / ENSURING RELIABILITY AND UNINTERRUPTED OPERATIONS OF UNEG
Accident Prevention Actions
Post-accident repairs are regulated by the Procedure for • the Company draws up emergency response exercise Organisation of Post-Accident Repairs approved by Federal Grid programs to liquidate various accidents and emergency Company’s Executive Order No. 795 dated 27 December 2013. situations. The aim of these programmes is to train coordinated actions of Federal Grid Company’s employees in In order to improve electric grid facilities’ preparedness to removing disturbances at UNEG electricity facilities, including post-accident repairs, Federal Grid Company, subsidiaries and drills with participation of contractor organisations, units of associates of JSC Russian Grids drew up site map diagrams with JSC Russian Grids, Ministry of Emergency Situations, and markings for locations of repair team, contractor organisations regional executive authorities. and emergency reserve. In 2014, the Company held 27,476 accident exercises, fire drills G4-EU21 combined with accident or post-accident repairs, and fire drills and exercises conducted jointly with the Ministry of Emergency Federal Grid Company draws up and implements annual plans Situations, regional and municipal authorities. of organisational and technical events in order to ensure and maintain emergency preparedness to post-accident repairs and In 2014, Federal Grid Company held 298 exercises jointly with meet the deadlines for emergency response: the regional branches of the Ministry of Emergency Situations, city governments and regional executive authorities. These • the Company revises SS and OHL datasheets, model charts exercises focused on training employees to cooperate during for dynamic response to process disturbances on primary liquidation of emergency situations that might cause power equipment of substations and network schedules for interruptions under low temperatures. performing emergency recovery work on OHLs, information on availability and scheduling of machinery among line subdistrics; All branches of Federal Grid Company signed contracts / agreements with the regional branches of the Ministry of Emergency Reserve • the Company signs agreements with contractors on Emergency Situations (89 contracts / agreements). cooperation during liquidation of accidents at Federal Grid The Company has a sufficient emergency reserve including a • full-time coordination of duty officers from Federal Grid’s Company’s electric grid facilities; Forty-nine duty stations that maintain safe electricity supply in pool of major units. The following efforts are taken in order Operational Process Control Department and the Company the Russian regions work on a permanent basis in the Federal to better prevent and/or liquidate process disturbances at the branches is organised with respect to the readiness for • agreements are signed between Federal Grid Company’s Grid branches. Branch representatives are actively involved in electric grid facilities:: emergency recovery work and control thereof. The Company’s branches and subsidiaries / associates of JSC Russian Grids their operation. management is promptly informed on the progress of accident on cooperation in the prevention and liquidation of accidents • the Company and subsidiaries of JSC Russian Grids arranged and emergency recovery work; and emergencies at electric grid facilities; Sixty-nine exercises to be conducted jointly with the Ministry of regular sharing of information about the existing emergency Emergency Situations and local governments are scheduled for reserve and its locations; drew up the combined grid operation • schedules are made up for the use of Mobile Situational and • agreements on information sharing are signed between 2015. maps indicating the location of repair teams and contractors, Analytical Centres (MSAC) that serve as a basis for ensuring Federal Grid Company’s branches and hydrometeorology & emergency reserve bases; the MSAC’s task performance, personnel training and full- environment monitoring centres in order to provide timely time readiness for operation. A full-time control over the use warning about changes of weather conditions with a view to • the status of transmission lines is video-archived during their of MSAC is organised. improving operations of UNEG electric grid facilities; inspections, walk-arounds and fly-arounds;
• Federal Grid Company and the Ministry of Emergency • the Company has 335 diesel-driven generators with a total Situations (including its regional offices) implement an action capacity of 96.5 MW to cover its own electricity needs at plan to prevent and mitigate risks of emergency situations and substations and in administrative buildings; liquidate such situations caused by process disturbances at UNEG electric grid facilities. The procedure of cooperation is regulated by Agreement No 2-4-38-5 dated 8 February 2010, 49 and by respective agreements between the Ministry’s regional duty stations Fixed Assets Renovation Programme offices and Federal Grid Company’s branches. that maintain safe electricity supply • executives of Federal Grid Company’s branches are included The Fixed Assets Renovation Programme is aimed at ensuring In 2014, the Company allocated RUB21.4 billion for renovation. in the staff of regional duty stations; the reliable and efficient operation of the electric grid complex It commissioned 1,846 MVA and 95.3 km at the facilities that by replacing the Company’s fixed assets that are retired due underwent full renovation. • in order to prevent and/or liquidate power disruptions caused to their wear and obsolescence. The Renovation Programme by process disturbances at UNEG electric grid facilities includes the following main sections: In order to improve reliable power supply at UNEG facilities (including those caused by dangerous natural events or and reduce the number of process disturbances, we have been other emergencies, and prevent and minimise risks during • full reconstruction of UNEG facilities; implementing a Programme for Improving the Reliability of special periods in UNEG operations, Federal Grid Company Primary Equipment at SS and OHL in Federal Grid Company. organises and maintains duty stations. Their work is guided • partial reconstruction of UNEG facilities; The programme focuses on modernisation of the Company’s by a Regulation on Duty Stations of Federal Grid Company primary equipment by installing state-of-the-art nodes and approved by the Company’s executive order No. 621 dated 30 • programmes of full equipment replacement; structural elements that substantially improve the performance December 2014; exercises69 are scheduled characteristics and the servicing personnel’s safety. to be conducted jointly • diagnostic systems programme; • the Company organises everyday monitoring of mass media with the Ministry of In accordance with Federal Grid Company’s investment with respect to information on emergency situations, forest Emergency Situations • programme for accumulation an emergency reserve and programme for 2015-2019 (Executive Order No. 807 of the and local fires, floods, ice rains, and other natural climatic events that governments procurement of equipment and materials; Ministry of Energy, dated 31 October 2014), the renovation are dangerous for UNEG, and to mass outages in allied grids of programme stipulates the commissioning of 12,395 MVA and subsidiaries and associates of JSC Russian Grids; • reserve programme for emergency recovery work; reconstruction of 788 km of electricity transmission lines. The total funding under this programme in 2015-2019 amounts to • the Company makes weekly forecasts of considerable • programme for improving the efficiency of the main fixed RUB111.3 billion. consumer constraints and power deliveries of electric power assets at Federal Grid Company’s substations and overhead plants, as well as UNEG facilities’ outage analyses; transmission lines.
66 67 SPECIAL AREAS OF CSR MANAGEMENT / ENSURING RELIABILITY AND UNINTERRUPTED OPERATIONS OF UNEG
ENSURING RELIABILITY IN FEDERAL GRID COMPANY AND GLOBAL PEERS Average Age of Substation Equipment (transformers)
A comparative analysis is based on a sample of 109 companies that The sample does not include companies with operations that are -18% transmit electricity along backbone lines, including 36 companies fully analogous to the specifics of Federal grid Company (including operating in the climatic zones similar to those in the Russian the size of service area, climate, regulations, and macroeconomic 29 1 28 28 Federation . environment), so the peer analysis was made by comparing certain 27 26 characteristics. 25
22 21
Average Age of Power Transmission Line Structures
-22% The best 25% Average The worst 25% The best 25% Average The worst 25% JSC FGC JSC FGC UES 2011 UES 2013 37 35 34 33 Countries with hard weather Total sample of backbone grid companies conditions 28 26 25 The “number of power interruptions / length of power transmission At the same time the quality of accident management and lines” ratio in Federal Grid Company is higher than average for investments in the upgrade of equipment help Federal Grid Company countries with unfavourable climates but it is not the worst among to maintain undersupply of electricity at the average level in both peers. samples.
The best 25% Average The worst 25% The best 25% Average The worst 25% JSC FGC UES 2011 PLANS FOR 2015 Countries with hard weather Total sample of backbone grid companies conditions The Company formulated its plans and objectives for reliable implemented in 2015 (as part of Federal Grid Company’s operation of its electric grid facilities in 2015: approved investment programme);
1. To raise the operational safety level, particularly labour • Programme for replacement of voltage transformers with protection of Federal Grid Company’s employees who organise voltage class 110-750 at the Company’s facilities, to be Average Age of Substation Equipment (circuit breakers) and conduct work at the operating electric installations. implemented in 2015 (as part of Federal Grid Company’s approved investment programme); 2. Complete technical maintenance & repairs under the 2015 -14% targeted programmes in accordance with Executive Order • Programme for replacement of autotransformers, to be No. 232 dated 22 April 2011 “On the Approval of Procedures” implemented in 2015 (as part of Federal Grid Company’s within the 2015 budget. approved investment programme); 26 26 25 3. To complete the following work scheduled for 2015 within • Programme for improving the reliability of equipment at 24 24 23 the spending limits and in accordance with the Management the Company’s substations and OHL (approved by Federal Board decisions on the approval of income and expenditure Grid Company’s Management Board, Minutes No. 1267 budget (excerpt from Minutes No. 1282/2 of the meeting of the dated 7 November 2014) which includes a programme 21 Management Board, dated 30 December 2014: for modernisation of autotransformers, shunt reactors 20 and oil circuit breakers, programme for modernisation • Action plan to improve reliable power supply at the facilities of disconnecters with voltage class 110 kV and above, of JSC Russian Railways for 2010-2020 (approved by Federal and a programme for replacement and strengthening of Grid Company’s Management Board); OHL towers and refurbishing of OHLs via replacement of porcelain insulation; The best 25% Average The worst 25% The best 25% Average The worst 25% JSC FGC JSC FGC • Programme to replace air circuit breakers with voltage UES 2011 UES 2013 class of 330-750 kV at the Company’s facilities (approved by • Programme for widening of the UNEG power transmission Federal Grid Company’s Management Board); lines right-of-way in 2015 (as part of Federal Grid Company’s approved investment programme); Countries with hard weather Total sample of backbone grid companies • Programme for improving the protection of power conditions transmission lines against thunderstorms (approved by • Programme of special diagnosis of equipment or facilities in the Federal Grid Company’s Management Board); poorer condition, in accordance with work volumes for 2015;
1 Statnett, Svenska Kraftnat, Red Electrica, Ivo Voimansiirto Oy, Landsvirkjun, National Grid (UK), Northern Electricity, Scottish Power, HydroQuebeck (Canada), • Programme for replacement of oil circuit breakers, • Programme for improving fire protection at Federal Southwestern Electricity Board American Electric Power, Central Main Power, Consolidated Edison, Consumers Power, Detroit Edison, Duke Power Company, Empire disconnectors and short-circuiting switches with voltage Grid Company’s UNEG facilities (as part of Federal Grid District, Entergy, Georgia Power, Gulf States Utilities, Metropolitan Edison, Missouri Public Service, New England Electric System, NY State Electric & Gas, Ohio Edison, class of 110-220 kV at the Company’s facilities (approved by Company’s approved investment programme); Pacific Gas & Electric, Portland General Electric, Public Service Electric & Gas, San Diego Gas & Electric, Sierra Pacific Power, Southern California Edison, Tampa Federal Grid Company’s Management Board); Electric Co., Virginia Power, Wisconsin Power & Light, Eastern Electricity, PLN, Taiwan Power Corporation, Powergrid, PLN, Powergrid , ACTEW Advance Energy AGL, Orion, Powerco Ltd, PowercorPower New Zealand, Transgrid, Tarong EnergyTransend, Electric Generating Authority of Thailand, Province Electricity Board (China), • Programme to accumulate an emergency reserve and HuaNeng International Power Develop. Corp., JiangSu, Nat. Power Corp. (Philippines), Punjab State Electricity Board (India) and others. • Programme for replacement of current transformers with procure equipment and materials in 2015 (as part of Federal voltage class 110-750 kV at the Company’s facilities, to be Grid Company’s approved investment programme); 2 Canada, Nordic countries, the north of the USA, and the north of Great Britain (36 companies).
68 69 SPECIAL AREAS OF CSR MANAGEMENT / ENSURING RELIABILITY AND UNINTERRUPTED OPERATIONS OF UNEG
• Programme to procure cars, special-purpose equipment at UNEG substations (STO 56947007- 5.2. ENERGY EFFICIENCY AND ENERGY MANAGEMENT vehicles and machinery in 2015 (as part of 29.240.10.030-2009, Directive No. 176p of Federal Grid Company’s approved investment Federal Grid Company, dated 18 May 2009); programme); Improving energy efficiency and the development of energy an important role in the improvement of the Company’s energy • Methodology for assessment of technical saving technologies have always been among the top priorities efficiency. In 2014, Federal Grid Company paid special attention • Programme to establish the overhead line conditions of buildings and structures at Federal for Federal Grid Company. Implementation of energy efficient to the refining of its energy management system and making it guard zones in accordance with the work Grid Company’s facilities (STO 56947007- technologies helps the Company to cut costs and makes a positive consistent with the international standards. volumes for 2015; 29.240.119-2012, Executive Order No. 190 of impact on environment. An energy management framework plays Federal Grid Company, dated 11 April 2012). • Actions to restore the working capacity of emergency blocking at substations; 9. To conduct certification of chemical laboratories in accordance with Executive Order No. 70 of Federal THE COMPANY’S ENERGY POLICY • Actions to mitigate the risks of power supply Grid Company, dated 14 February 2014 “On the disruptions in the regions with high risks of Approval of the Procedure for Certification of power supply disruptions – to be implemented Chemical Laboratories in JSC FGC UES.” The Energy Policy (approved by a decision of Federal Grid Company’s • to take managerial and investment decisions with regard of in 2015 in accordance with an executive order Board of Directors on 24 August 2012) outlines corporate goals and priorities in energy saving and energy efficiency; issued by the Ministry of Energy (a decision 10. To organise, monitor and analyse the formation objectives in energy saving and improving energy efficiency. It also taken by a meeting chaired by Deputy Minister of data about technical condition of the primary establishes the priority areas and principles of implementing actions • to maintain scientific validity of the Energy Policy; A. V. Cherezov, Minutes No. ChA-599pr dated 24 electric grid equipment with voltage class 110 aimed at energy saving and improving energy efficiency. December 2014). kV and above at SS and OHL in accordance with • to maintain international cooperation in the employment of Directive No. 674p of Federal Grid Company, dated The Company’s Energy Policy is aimed at the establishment and energy efficient technologies; 4. To implement Federal Grid Company’s investment 11 October 2012 “On the Approval of the Procedure development of a corporate framework for energy management, programme approved by Executive Order No. for Planning, Tests, Measurements and Formation as well as conditions and opportunities for continuous monitoring • to provide open and available information about the Company’s 807 issued by the Ministry of Energy, dated 31 of Data about Technical Condition of Electric Grid and the use of the corporate capacity in energy saving and energy initiatives in energy saving and energy efficiency and October 2014, “On the Approval of Federal Grid Equipment in JSC FGC UES”. These initiatives efficiency. cooperate with stakeholders. Company’s Investment Programme for 2015-2019” are aimed at better and more sound planning with regard to decisions taken by the Management of activities to maintain and/or recover the Top managers of the Company and its branches, as well as relevant The priority areas of the Energy Policy are: Board (excerpt from Minutes No. 1282/2 of the performance of equipment and raise the reliability departments of the executive team, are in charge of the Energy Management Board meeting dated 30 December level. Policy implementation. • to put in place innovative and energy saving equipment and 2014) and an adjustment plan for 2015. technologies; 11. To organize the professional training of personnel 5. To update (extend) agreements with contractor in accordance with the “Rules of HR Management • to develop and implement organisational and information- organisations, related electric grid organisations, in the Electric Power Sector Organisations of the sharing initiatives in energy saving; Ministry of Emergency Situations, RosHydroMet Russian Federation” approved by Executive Order etc. These agreements will help to minimise No. 49 of the Ministry of Fuel and Energy, dated 19 The Energy Policy has the following goals: • to conduct R&D, design & development and process works; the time for post-accident repairs at the power February 2000. implement their results and use them in business; transfer facilities. 1. To improve the Company’s energy efficiency. energy efficiency technologies; 12. To analyse failures of new equipment during the 6. To raise the level of security and anti-terrorist burn-in period; identify systemic defects in design, 2. To assist with implementation of the • to develop and improve the organisational and regulatory protection at electric grid facilities, including via manufacturing and installation technique, and government’s energy saving and energy framework for energy saving management; actions under investment programme “Protection organise claim settlement. efficiency strategy. of Federal Grid Company’s Electric Grid Facilities” • to organise and conduct periodic energy inspections (including by equipping the facilities with engineering and 13. To take necessary actions for reducing the injury 3. To provide priority support of the Energy mandatory ones) at the Company’s facilities; technical security devices. rate and the number of accidents at Federal Grid Policy areas in the Company’s operations. Company’s electric grid facilities. • to establish requirements to the energy efficiency of the 7. To take actions based on investigations of primary equipment and products that are procured for the accidents and implement comprehensive Company; programmes for elimination of irregularities and improvement of the grid reliability. The Energy Policy objectives are to reduce: • to implement projects of new construction, reconstruction, technological renovation and modernisation with regard to 8. To conduct timely technical inspections of • the process consumption of electricity during its transmission energy saving and energy efficiency; equipment of substations, electricity transmission via the Unified National Electric Grid (UNEG); lines, buildings and installations, and full • to train, develop and inform the Company’s employees examination of buildings and structures in • the consumption of energy resources in the Company’s on issues of energy saving, energy efficiency and energy accordance with: buildings, structures and installations; management;
• The procedure of organising regular technical • the consumption of fuel and lubricants by the Company’s • to improve organisation and management of energy saving and inspections and extension of service life motor transport and special-purpose vehicles. energy efficiency on the basis of the international standard ISO of equipment of substations, electricity 50001:2011, as well as standards, laws and regulations of the transmission lines, buildings and installations, The key principles of the Energy Policy are as follows: Russian Federation. and full examination of buildings and structures in Federal Grid Company’s branches (MES and • to implement laws and regulations on energy saving and PMES) (Executive Order No. 1001 of Federal Grid energy efficiency; Company, dated 28 December 2010); • to improve energy efficiency continuously in business • Methodological guidelines for conducting operations; regular technical inspections of UNEG overhead electricity transmission lines (STO 56947007- • to ensure reliability, safety and economic efficiency in the 29.240.01.053-2010, Executive Order No. 620 of course of actions targeted at energy saving and energy Federal Grid Company, dated 24 August 2010); efficiency;
• Methodological guidelines for conducting • to be responsible for energy saving and energy efficiency at all regular technical inspections of electrical levels of the Company’s governance;
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ENERGY MANAGEMENT IN FEDERAL GRID COMPANY Functional Model of Energy Management System in Federal Grid Company Energy management in Roles in EMS Roles in EMS Federal Grid Company is aimed at reducing the • To ensure implementation and operation of the Company’s • To organise institutional, and methodological support to • To approve Regulations on Energy Policy and Regulations on EMS energy management system implementation of the Company’s energy policy and ESEE • To approve Federal Grid Company’s Energy Saving Programme consumption of energy • To provide overall management of EMS, distribute EMS- • To ensure the Company’s communication with the relevant FEDERAL GRID COMPANY’S • To appoint the EMS officer related authority and duties federal executive authorities and organisations in the MANAGEMENT BOARD • To analyse EMS operation resources in the Company, • To organise the development of the Company’s energy process of implementation of ESEE and corporate EMS reducing the process policy and its communication to employees and • To approve a programme of internal audits of the (Chairman consumption of electricity stakeholders Company’s EMS of the ManagementBoard • To organise ESEE implementation actions • To monitor implementation of decisions based on a review during its transmission via • To organise efforts on including ESEE-related KPIs in KPIs of EMS by top managers backbone electric grids and, of the Company’s branches in general, at improving the EMS officer Roles in EMS Company’s operational and (Deputy Chairman • To plan, organise, and approve programmes and conduct internal of the Management Board) economic efficiency. Roles in EMS audits • To monitor implementation of auditors’ recommendations • To draft and update the Energy Policy • To decide on the structure of EMS documentation, • To submit a report about implementation of the Company’s internal In order to ensure • To conduct an energy analysis To define ESEE-related organise the drawing up of EMS documents audit plan to the Internal Control Commissions compliance with the goals, objectives and KPIs • To identify operations connected with high energy Process Development Internal Control & Risk international standard • To select ESEE-related actions; develop an ESEE consumption Management Department programme and ensure its implementation • To monitor and review implementation of the Company’s Department ISO 50001:2011 “Energy • To define competency requirements for employees in ESEE programme and KPIs management systems charge of ESEE • To analyse reasons for non-implementation of ESEE • To ensure the Company employees’ awareness of ESEE; programme; organise corrective and preventive actions – Requirements with inform representatives of the Company’s branches about for the Company’s energy saving programme guidance for use,” drawing up and implementation of ESEE programme the corporate energy management system of Federal Grid Company, its Roles in EMS branches (MES Volga and Departments at the Corporate Headquarters Branches of JSC FGC UES — MES Samara PMES) received • To coordinate , implement and control actions aimed — EMS participants* at implementing ESEE programme in relation to the Roles in EMS a compliance certificate authority of the Company’s executive team Officer in charge of in QII2014. The certificate • To coordinate / approve EMS documentation • To collect, analyse, summarise and submit to PDD information about process • To manage operations that involve high energy consumption of electricity in UNEG and implementation of actions aimed at EMS implementation was issued by ZAO Bureau consumption during operation of special-purpose and Production & reducing electricity losses in UNEG and operation at the Customer and • To complete forms of Annexes 1, 3 and 4 to executive order No. 12-e of FTS, dated Veritas Certification Rus, a motor vehicles Administrative branch level • To collect, analyse and summarise information about Market Engagement 25 . 01 . 2011 and send them to PDD 100% subsidiary of a leading implementation of ESEE , programme with respect to Support Department Department • To coordinate / approve EMS documentation certification company the executive team’s facilities; submit , quarterly and • To organise, develop and implement corrective / preventive actions based on annual reports to PDD reviews of ESEE programme implementation, EMS audits in the Company’s Bureau VeritasCertification • To develop and take corrective and warning actions branches and review of EMS Units of branches EMS internal auditors in Holding (France). based on ESEE programme performance reviews, that are EMS internal audits of EMS in the Company’s branches, and the Company’s branches review of EMS participants The certificate proves that Roles in EMS Federal Grid Company Economic Planning is committed to the • To coordinate financing of the energy saving programme implementation within and Budgeting the approved budget international principles of Roles in EMS Department • To coordinate the energy saving programme with respect to available sources of energy saving and energy operational activities • To submit reports about the number of equipment items Roles in EMS Roles in EMS efficiency and reaffirms at substations to the Customers & Market Engagement Plant Assets that the Company has a Department at request or in accordance with the Management • To communicate the energy policy and • To develop sound energy policy and approved organisational and administrative documents Department energy saving programme to branch programmes for • To coordinate / approve EMS documentation Roles in EMS employees internal audits of an efficient management • To develop and implement corrective / preventive actions • To prepare baseline data for conducting EMS in the branches based on reviews of ESEE programme implementation, • To ensure financing of the energy saving programme implementation within the system. investment programme energy surveys and send Information • To conduct internal EMS internal audits in the Company’s branches and a Investment Planning to PDD audits of EMS at review of EMS • To coordinate ESEE programme with respect to available sources of financing and Reporting from the funds of the Company’s investment programme • To make proposals about KPI values, the Company’s energy saving initiatives and pilot Headquarters and Re-certification and internal Department • To coordinate / approve EMS documentation audits of the Company’s • To develop and implement corrective / preventive actions based on reviews of projects branches : collect ESEE programme implementation, EMS audits in the Company’s branches and • To implement energy saving initiatives the outcomes of energy management review of EMS in accordance with the energy saving internal audits Roles in EMS programme budget and within the of EMS; assess system are scheduled projected KPI values consistency with for 2015-2019 in order to • To organise professional training, retraining and Personnel Training • To outline competency requirements the legislative confirm compliance with the professional development of employees, responsible for Centre for employees in charge of the energy requirements at ESEE, as well as EMS internal auditors Roles in EMS saving programme and EMS-related the Corporate international standard ISO • To coordinate / approve EMS documentation training needs Headquarters and 50001:2011. • To develop and implement corrective / preventive actions • To implement projects of reconstruction and modernisation of buildings and • To draw up and coordinate EMS branches based on reviews of ESEE programme implementation, Reconstruction installations, equipment of substations and power transmission lines with due documentation • To inspect EMS internal audits in the Company’s branches and a regard to the energy saving requirements • To manage operations connected with compliance with review of EMS Department • To coordinate / approve EMS documentation high energy consumption the procedures • To develop and implement corrective / preventive actions based on reviews of • To monitor and analyse the energy of collection, ESEE programme implementation, EMS audits in the Company’s branches and saving programme implementation and processing and review of EMS KPI performance in the branches storage of EMS • To collect, analyse and summarise records information about the energy saving • To explain the Roles in EMS programme implementation and outcomes of internal send quarterly and annual reports audits of EMS to • To include key ESEE parameters in the branches’ KPIs Roles in EMS to PDD about implementation of the representatives of • To coordinate / approve EMS documentation HR Management programme in the branches the audited units • To develop and implement corrective / preventive actions and Organisational • To consider energy saving requirements in design • To ensure unified measurements, • To make reports based on reviews of ESEE programme implementation, Design Department Design Department • To coordinate / approve EMS documentation maintain metering devices always ready about completed EMS internal audits in the Company’s branches and a • To develop and implement corrective /preventive actions based on reviews of to take measurements required for the internal audits review of EMS ESEE programme implementation, EMS audits in the Company’s, branches and calculation of KPIs that are related to of EMS at the review of EMS ESEE Corporate • To develop and implement corrective Headquarters and / preventive actions based on reviews branches of ESEE programme implementation, Company — JSC FGC UES * Procurement procedures and financing of energy saving actions under Federal Grid EMS audits in the Company’s branches EMS — energy management system of JSC FGC UES Company’s Energy Saving Programme are only within the limits of the Company’s and review of EMS ESEE — energy saving and improvement of energy efficiency approved budget NOTE: FOR ALL UNITS OF JSC FGC UES
72 73 SPECIAL AREAS OF CSR MANAGEMENT / ENERGY EFFICIENCY AND ENERGY MANAGEMENT
FEDERAL GRID COMPANY’S ENERGY SAVING AND ENERGY EFFICIENCY PROGRAMME FOR 2010-2014
In 2014, Federal Grid Company completed the Programme for international standard ISO 50001:2011 “Energy management with guidance for use” (national standard RF GOSTR R ISO • reducing the process energy consumption in UNEG; Energy Saving and Improving Energy Efficiency for 2010-2014 systems – Requirements with guidance for use”; 50001-2012); that had been adopted in accordance with the Russian laws. A • ritting the buildings, structures, and installations that are similar programme is adopted for 2015-2019. • to improve energy efficiency of the Company’s electric grid • to conduct audits of Federal Grid Company’s energy part of Federal Grid facilities with metering devices for water, facilities and equipment. management system for its consistency with the international natural gas, thermal energy, and electrical energy; The energy saving and energy efficiency programmes have the standard ISO 50001:2011; following goals: The main objectives of energy saving and energy efficiency for • reducing the electrical and thermal energy consumption in 2015 are: • to draw up and refine Federal Grid Company’s internal rules buildings, structures, and installations owned by Federal Grid • to ensure saving and rational use of energy resources and and regulations on energy saving, energy efficiency and reduce the process consumption of electricity during its • to implement the Programme for Energy Saving and Improving energy management. • reducing the consumption of fuel and lubricants used by transmission via the UNEG lines by improving the energy Energy Efficiency for 2015-2019; Federal Grid to provide the electricity transmission services efficiency of Federal Grid Company’s facilities and equipment; Energy saving and energy efficiency measures that had been through UNEG, per 1 km of distance travelled by motor • to improve organisation and management of energy saving and scheduled for 2014 and implemented in accordance with the vehicles. • to put in place a system of energy management and conduct energy efficiency on the basis of the international standard Programme include the following key areas: certification of the Company’s operations on the basis of the ISO 50001:2011 “Energy management systems – Requirements
CASE STUDY: IMPLEMENTATION OF ENERGY SAVING TECHNOLOGIES The key initiatives for reduction of consumed fuel and lubricants: Process impact The establishment of an energy efficient substation dispatch centre at 500 kV Nizhegorodskaya SS of the measures • daily inspections of pressure in tires; G4-EU8 taken to reduce the consumption • adjustment of fuel consumption norms; 107.1 of energy/fuel The goal of this project was to provide • actions to insulate the building in order The project of power a comprehensive solution for reducing to increase the thermal resistance and RUB mln • thorough control over the use of energy consumption for the substation’s reduce the thermal capacity which is transformer heat vehicles; own needs. This solution included: necessary for heating the building of the recovery and utilisation substation dispatch centre; • procurement of injection engine test • a system for transformer cooling for heating the substation benches; management (oil pumps and blowers) in • modernisation of the heating system, premises, one of the first Economic impact order to reduce energy consumption for installation of devices for individual such projects in Russia, of the measures 96.1 • optimisation of transport routes via the transformer blowing and cooling; regulation of temperature in buildings taken to reduce mln kWh using satellite navigation for continuous monitoring; and climatic zoning in order to avoid was implemented by JSC the consumption or 11,821.8 • a system for the transformer heat overheating and maintain the necessary of energy/fuel R&D Centre of JSC FGC tonnes of fuel • optimisation of transport routes and extraction and a heat pump system temperatures in the dispatch centre; equivalent for utilisation of transformer heat and UES for Federal Grid clarification talks with the personnel; heat losses in transformers for heating • automation of the heating system Company. wherever possible, priority loading with the building of the substation dispatch whereby weather compensation the least possible consumption of fuel. centre; mechanisms will be used for ensuring The Company achieved these results by energy in buildings, structures and comfortable conditions for personnel. implementing energy saving initiatives. installations: In 2014, the effect of initiatives aimed at the reduction of consumed resources In order to reduce process consumption • insulation of buildings and structures; for administrative needs across the (losses) of electricity in UNEG, Federal Company amounted to 447.7 tonnes of fuel equivalent (861.56 thousand kWh, 1,880 VOLUME AND STRUCTURE OF DIRECT AND INDIRECT ENERGY USE; VOLUME OF Grid Company is taking the following • replacement of wooden windows with Gcal, 56,400 litres of fuel and lubricants), measures: energy efficient ones; ENERGY SAVING; LOSSES IN GRIDS or RUB6.559 million. • initiatives to optimise the circuit and • replacement of old incandescent lamps In 2014, actual losses of electric power in Results of implementation of the Energy Saving and Energy Efficiency Programme in Federal mode parameters in operation and daily with new energy saving ones (including Federal Grid Company’s grids* amounted Grid Company in 2014 G4-EN3 G4-EN7 G4-EN6 management of electric grids; LED lamps); to 21,261 million of kWh, or 4.13% of electric power supplied from the grids. • initiatives aimed at reducing the electric • installation of a lighting management Economic impact of the measures power consumption for substations’ own Electric power supply from the grids Process impact of the system (motion sensors); taken to reduce the consumption reduced by 0.9% as compared to 2013, and Volume measures taken to reduce the Specific value needs; of energy/fuel consumption of energy/fuel electric power losses dropped by 1,001 RUB thousand, excluding VAT • replacement of old doors (mostly • initiatives to build, reconstruct and million kWh, or 4.5%. 21,261,083.45 96,112.33 wooden ones) with new energy efficient Process electricity consumption in UNEG, o/w: - 107,100.86 develop electric grids, and commission ones; mln kWh mln kWh energy saving equipment. G4-EU12 Electricity consumption for the Company's 968,709.95 5,584.47 1,232.87 kWh /1 5,849.25 own needs mln kWh mln kWh notional unit • modernisation of the ventilation and air The process effect of initiatives aimed conditioning systems; 32,551.64 104,36 Electricity consumption in buildings 861.56 3,027.85 at reducing electricity losses across the mln kWh mln kWh / m2 Company amounted to 96.112 million * The Company notes that there are no established • installation of reflecting screens behind practices and methodology for calculating GRI G4- 44.39 1.88 0.0418 kWh in 2014, or 11,821.8 tonnes of fuel Thermal energy consumption in buildings 1,800.51 heaters; EN5 (energy intensity) for electric grid companies, thousand Gcal thousand Gcal Gcal /m3 equivalent, and economic effect amounted in particular, for including process losses during 8,232.34 32.92 0.18257 to RUB107.100 million. electricity transmission in the calculation of energy Gasoline consumption 997.66 • appointment of in-charge persons; consumption. Therefore, this indicator is not included thousand liters thousand liters liter/km in the 2014 Report. The Company intends to study the 6,960.78 23.48 0.36322 The key measures aimed at reducing best practices based on the 2014 reporting, and will then Diesel consumption 733.00 • optimisation of heating device thousand liters thousand liters liter/km the consumption of electric and thermal consider the possibility and methodology of disclosing performance (organisational initiative). GRI G4-EN5 in the years ahead.
74 75 SPECIAL AREAS OF CSR MANAGEMENT / IMPORT SUBSTITUTION
5.3. IMPORT SUBSTITUTION The Programme implementation tools are as follows: support of manufacturing of electrical equipment by the Russian companies; • entering into long-term supply contracts with the leading PROGRAMME FOR SUBSTITUTION OF IMPORTED EQUIPMENT, international manufacturers of electrical equipment. These • information support to the Russian manufacturers, including contracts should envision: support for encouraging the use of their products in the TECHNOLOGIES, MATERIALS AND SYSTEMS IN 2011 – 2014 manufacture of localised items. • deep localisation of manufacturing of electrical equipment in the Russian Federation (including the manufacturing of spare Federal Grid Company has been successfully pursuing the policy Power Machines and Toshiba (Japan)), a plant to produce 110- parts and creation of R&D and/or engineering teams, etc.); of purchasing equipment from domestic manufacturers. This 750 kV transformers in St. Petersburg was commissioned on • procurement of spare parts produced by the Russian has been a particularly important activity over the past years as 15 December 2013 in village Metallostroy (Kolpino district, St. manufacturers; part of the corporate anti-crisis action plan which improves the Petersburg). The targeted localisation level should be 55% by Criteria for Assessment of Import Company’s sustainability and independence of operations. 2018. • establishment of joint ventures with the Russian manufacturers of electrical equipment and industry-specific Substitution Efficiency in 2015- As part of initiatives aimed at import substitution and improving Purchases of transformers produced by “Power Machines – information sharing systems (software and hardware energy safety of Russia, Federal Grid Company entered into 97 Toshiba. High-Voltage Transformers” LLC for Federal Grid complexes of APCS, automated information-sharing and 2019 cooperation agreements with electric engineering companies, Company amounted to 1,457 MVA in 2014. measuring system of commercial metering of electric power The main expected result of this Programme is to increase the including 79 agreements with manufacturers of electrical In 2014, the Company signed agreements for supply of Russian- (AIIS CME, management of industrial assets) and transfer of share of electrical equipment which is produced by the Russian equipment; 74 of them are Russian companies. made electrical grid equipment (100% of the total procurements) technologies to them; manufacturers and characterised by a high level of localisation of In 2014-2015, Federal Grid Company increased the share of to the total amount of RUB896 million: manufacturing in Russia in the total procurements of electrical • entering into long-term supply contracts with the Russian primary electrical grid equipment manufactured by the Russian equipment for Federal Grid Company. • autotransformers; manufacturers of electrical equipment and industry-specific producers from 30.5% to 44.5%. information sharing systems that would require the process In this context, the following are used as criteria to assess the • power transformers; Federal Grid Company encourages the production of electrical level that will be at least as high as the level achieved by Programme efficiency: grid equipment in the Russian Federation. foreign counterparties; • shunt reactors. • an increased share of domestically-manufactured electrical In 2011-2014, the Company signed long-term supply contracts In order to eliminate the administrative barriers for import • support of R&D, engineering, development of an industrial equipment in the Company’s procurements as compared to with several leading foreign manufacturers. These contracts substitution, the Company’s representatives proactively infrastructure and other necessary initiatives by the Russian 2014; include deep localisation of production in the Russian Federation. manufacturers in order to improve the existing types of participated in the discussion and drawing up of proposals to the • a higher level of localisation of electrical equipment Federal Law “On Industrial Policy” (to encourage localisation equipment, technologies and materials and develop new ones; Under a long-term contract for supply of electrical grid equipment manufacturing in the Russian Federation; of production in the Russian Federation). The participants and with localisation of production in the Russian Federation which • engagement with the authorities, professional communities, Russian producers encouraged the Ministry of Industry and Trade • an increased number of manufactured innovative products and Federal Grid Company signed with Siemens – Transformers LLC higher education institutions, research institutes, research to consider the lowering of customs duties on spare parts for high- implemented technologies that have been developed under (a subsidiary of international corporation Siemens in Voronezh), and manufacturing associations, industry and business voltage electric equipment which is not manufactured in Russia. joint projects run by Federal Grid Company and the Russian localisation of production achieved 77.5%. associations on issues pertaining to the encouragement and (G4-DMA) manufacturers – relative to the previous year. Under a long-term supply contract with Hyundai Electrosystems In order to improve the methodology for assessment of LLC (a subsidiary of South Korean company Hyundai Heavy production localisation in Russia, Federal Grid Company drew Industries) a plant to produce 110-500 kV gas insulated switchgear up and approved a special policy approach (Executive Order No. Key Areas of Import Substitution in Federal Grid Company cubicles was commissioned on 25 January 2013 in the city of 445 dated 6 October 2014). The Company proactively assesses Artyom (Primorie region). Its maximum capacity is expected to localisation of production of electrical equipment and develops Share of domestically manufactured equipment in procurements reach 350 cubicles a year by 2017. Equipment group criteria for classifying manufacturers located in the Russian 2019 2030 Under a long-term supply contract with Power Machines – Federation as domestic manufacturers. Primary electrical equipment Toshiba. High-voltage Transformers (a joint venture of JSC 110-750 kV power transformers, autotransformers 70% 110-750 kV shunt reactors 77% 110-500 kV variable shunt reactors 64% 110-750 kV circuit breakers 51% 95% 110-750 kV disconnectors 81% NEW IMPORT SUBSTITUTION PROGRAMME FOR 2015-2019 110-500 kV current transformers 57% The key goal of the new Programme is to build efficient and • to improve the regulatory framework and methodological 110-500 kV voltage transformers 41% (in accordance with the productive cooperation with the manufacturers of electrical support of cooperation with the producers of electrical 110-500 kV Switch-gear gas-insulated cubicles 30% equipment for achieving the objectives that are defined in the equipment; Energy Strategy of the 110-330 kV power cable insulated by cross-linked polyethylene 39% Russian Federation through policy of innovative development, energy saving and energy 2030 and the JSC Russian • to lower the cost of electrical equipment procured by the efficiency, and to implement the unified Technical Policy, Secondary equipment Grids’ Policy of Engagement Company through import substitution and raising the with the Society, Customers including: Relay protection and automatic devices 66% and Government) localisation level; Emergency control automatics 92% • to raise the energy safety of the country by promoting • to improve information openness of the Company’s Automatic process control systems 38% the establishment and further development of domestic procurements. manufacturers of electrical equipment that meets the modern Communications systems 55% standards and quality / reliability requirements; The key areas include: • to promote innovative development and modernisation of • drawing up methodological guidelines and regulations for companies in the Russian electrical manufacturing industry; import substitution and localisation of production of electrical Implementation Risks of the 2015 – 2019 equipment; • to develop a competitive market for electrical equipment in the Russian Federation. • organisation of Federal Grid Company’s procurements in such Import Substitution Programme a way as to meet the targeted increased share of purchases The Programme has the following main objectives: Programme implementation constraints: These constraints are expected to be eliminated in 2015 – 2019 from domestic manufacturers; because manufacturing localised in Russia will develop, Russian 1. possible unpreparedness of the electrical engineering • to promote the development of a competitive Russian market of manufacturers’ products will become more competitive, and • cooperation with manufacturers of electrical equipment on industry due to a reduced number of products manufactured state-of-the-art electrical equipment; laws and regulations will provide better protection of the issues of import substitution; by the Russian producers and a large share of failures as • to promote the development of a multidimensional industry- Russian markets and promote import substitution. All this • implementation of innovations in the electrical equipment compared to foreign analogues; wide innovative infrastructure; will help to increase the share of Russian-made equipment in manufacturing process. 2. possible lack of legislative provisions about the priority of Federal Grid Company’s procurements. • to promote the development and improvement of technologies domestically-made electrical equipment in the government- for the manufacturing of new types of electrical equipment; owned companies’ procurements.
76 77 6.1. MANAGING ECONOMIC IMPACTS Core Areas 6.1.1. ECONOMIC PERFORMANCE in Sustainable Federal Grid Company’s consistent efforts aimed at improving the Russian Federation and regions where it operates. Federal Development the economic performance helps to provide a broad range of Grid Company’s future is linked to the development of Russia economic benefits for all stakeholders. The Company proactively and achievements of the country. contributes to the development of economy and infrastructure of
Economic Performance Indicators
Key Aspects of Social and Economic Impact Management, RUB thousand G4-EC1
Component 2014 2013 2012 6.3. Managing Environmental ECONOMIC VALUE GENERATED Impacts Revenues 175,999 327 160,712,026 143,484,851
ECONOMIC VALUE DISTRIBUTED
Economic value distributed, 69,630,912 70,491,920 62,602,964
o/w:
Core Areas in Sustainable Operating costs 38,997,501 40,319,171 37,242,997 Development Wages and salaries, and other employee payments and benefits 20,140,562 19,944,749 18,551,998
Payments to providers of capital 0 0 0
Payments to the government 9,606,719 9,997,882 6,466,405
Community investments 886,130 230,118 341,564
ECONOMIC VALUE RETAINED
Economic value retained 106,368,415 90,220,106 80,881,887 6.1. Managing Economic Impacts
Tax Payments
Table. Tax Payments in 2012-2014, RUB thousand 6.2. Contribution to the Development of Society Budget 2012 2013 2014
Federal 6,955,213 9,778,823 14,981,528
Regional 2,954,328 3,229,579 5,119,726
Local 70,689 73,527 54,976
Total: 9,980,230 13,081,929 20,156,230
78 79 CORE AREAS IN SUSTAINABLE DEVELOPMENT / MANAGING ECONOMIC IMPACTS
Technological Connection The Company strives to improve transparency and accessibility The launching of this portal was a step towards better of technological connection to the electric grids. Our customers communication with the regional authorities on how to increase have interactive access to the Technological Connection Portal grid capacity and avoid risks of overinvestment. Technological connection (TC) is an integrated service that Federal Grid Company’s Major Technological at http://www.fsk-ees.ru/eng/, which provides full and up-to- involves actual connection of power receivers (power units) Connection Projects in 2014 date information about technological connection to customers. of potential counterparties to the electric grid facilities. The Company provides services for technological connection Capacity, of consumers, distribution grid companies and electricity Project MW generation facilities. G4-DMA Abinsk Electromechanical Plant, Krasnodar Territory 200 The key areas of improving the quality of the technological connection services: • Timely inclusion of the TC projects in the corporate investment Plant of Ural Mining and Metallurgical Company, 120 programme and subsequent timely official recording of the Tyumen oblast Action plan “Improving Accessibility of Energy • Synchronisation of TC schedules with the customers; performed work; Taganrog Metallurgical Works, Rostov oblast 107 Infrastructure” (Resolution No. 1144-r of the • Proposed amendments to the laws with respect to • Optimisation of procurement and internal procedures; Government of the Russian Federation, dated 30 Mikheevsky Mining & Processing Plant, Chelyabinsk technological connection; 40 June 2012) involves: oblast • Improved oversight of works performed by contractor organisations. • reduction in periods and stages of Eurocement Group plant, Voronezh oblast 37 technological connection Gazprom Neft Omsk Oil Processing Plant, Omsk oblast 32 • synchronisation of the industry development Investment Policy across the country with the potential of the Oil pumping stations, Krasnodar Territory 28 backbone electric grid complex Angara rocket base, Arkhangelsk oblast 14 The main objectives of Federal Grid Company’s investment infrastructure in Eastern Siberia and the Russian Far East policy are modernisation and improving reliability of the unified (including the facilities associated with the expansion of the Chemical weapons destruction facility, Udmurt Republic 6 energy system which is necessary for uninterrupted power capacity of BAM and the Trans-Siberian Railway, and work supply to the customers. As part of its investment activities, the separately from the energy systems of the Baltic States when Company implements projects for construction of new electric the operating modes of the BRELL energy ring are changed. 1 In 2014, Federal Grid entered into 226 contracts for Technological Connection: Number grid infrastructure facilities and reconstruction of existing G4-EC8 technological connection, down by 65% from 2013. In the of Contracts Completed ones. Federal Grid Company is most actively involved in the reporting year, the total maximum capacity was 2.3 GW for power supply of such projects as international forums and major The total funds invested in 2014 amounted to RUB90.86 billion, technological connection of consumers and distribution grid 2012 2013 2014 2015 plan sporting events, oil transportation projects, and development including RUB66.58 billion (73%) for financing new construction companies, and 1.4 GW for electricity production facilities. programmes for the Russian regions. projects and RUB24.28 billion (27%) for technical upgrade and Number of contracts 329 298 273 306 reconstruction. completed A fundamental principle of Federal Grid Company’s investment G4-EC7 policy in terms of the development of UNEG and laying of electricity transmission lines is to minimise the adverse impact Customer-Oriented Approach on the communities. The Company plans and performs all Financing of the investment programme was carried out using construction works in detour of residential areas, and takes only Federal Grid’s own funds, the Company did not use any The Company’s customer-oriented approach in technological transformer capacity which is free for TC), as well as about the utmost efforts not to relocate residential buildings due to funds from the federal budget in 2014. connection is to inform the customers better about stages of rules and regulations that govern this activity, guidelines on how construction of its power infrastructure facilities. G4-EC4 technological connection to its electric grids and the capacity customers themselves can calculate the fee for technological G4-EU20 G4-EC7 for connecting them to the feeding centres (the volume of connection, and to monitor the execution of requests for TC. Implementation of a Long-Term Programme Financing of Investment Activities, under Tariff Constraints Changes of the Customer Satisfaction RUB bn In 2014, the Russian Ministry of Energy approved Federal Grid Level in 2011-2014 G4-PR5 10 184.7 Company’s adjusted investment programme for 2014 in the 167.0 179.9 9.5 Federal Grid Company meets volatile economic environment and with regard to initiatives 149.7 the timelines prescribed by law aimed at achieving higher investment efficiency. The goal to 90.,9 9 improve investment efficiency is achieved through an action plan Transparency of preliminary which includes: calculations of TC services 8.5 Employees are ready to solve 2010 2011 2012 2013 2014 disputable issues efficiently • improvement of procurement activities; 8 Form of a standard request Efficient sharing of information • development and multiplication of the best design solutions for technological connection 7.5 for the construction and operation of the power facilities; about the process of As a result of the investment programme implementation in 7 technological connection 2014, we commissioned 5,069 MVA of transformer capacity • reduction in administrative costs, including automation and and 3,331.31 km of transmission lines in 2014. As a result optimisation of the project management structure. Accessibility of information Form and content of a standard of the investment programme implementation in 2014, we about technological contract for technological commissioned 5,069 MVA of transformer capacity and 3,331.31 The adjusted Programme will help to maintain and improve the connection connection km of transmission lines in 2014. reliability of the unified system. It will also ensure reliable power Federal Grid Company staff supply to facilities of national significance. Implementation of G4-EC8 friendliness and politeness the Company’s investment programme is aimed at removing grid Quality of availavle information restrictions, ensuring the quality and accessibility of services In 2014, residential buildings were not displaced during the for electricity transmission and technological connection of construction of the power infrastructure facilities. Quality and outcomes of 2011 2013 the customers, reliable operation of the Eastern Siberia – design and survey works Pacific Ocean oil pipeline, development of the electrical grid G4-EU22 2012 2014
1 The number of contracts with direct consumers, regional grid companies and electricity production facilities.
80 81 CORE AREAS IN SUSTAINABLE DEVELOPMENT / MANAGING ECONOMIC IMPACTS
Focus Areas of Federal Grid’s Investment Programme: • ensuring uninterrupted power supply of UES Russia working In general, the Company’s investment programme is Commissioning of Fixed Assets in 2014 separately from the energy systems of Ukraine; optimised in such a way as to balance the need to complete the construction of electric grad facilities that began in the past • removing grid restrictions, ensuring the quality and years, and finance new investment projects. The programme Central Federal District North-Western Federal District Siberian and Far Eastern Federal Districts accessibility of services for electricity transmission and will also ensure full power delivery by the power plants that technological connection for the customers; had been scheduled for commissioning in 2013-2015 (CDC, • Power delivery of Vladimirskaya-2 CHP • Reliable electricity supply to connected • Power delivery of Sayano-Shushenskaya (230 MW) consumers KC Port and Novy Gorod LLC HPP and improving reliability of power Rosatom, JSC RusHydro). It allows to continue implementation supply to SAZ and Khaz aluminum plants • Full reconstruction of 220 kV Sputnik SS • Power delivery of Lenigradskaya NPP-2, unit 1 • synchronisation of the development programmes with the of the reconstruction and renovation programmes, maintain the • Power delivery of PGU-235, Astrakhan (1,170 MW) • Facilities included in the federal targeted programme “Economic and Social generating facilities and distribution grids; rate and high volumes of capacity commissioning by completing • Reliable electricity supply to consumers in the Development of the Russian Far East and the almost constructed facilities, and outline measures for southern districts of Komi and Bayonny Island Transbaikal Region until 2013 energy systems • improving the efficiency of the backbone electric grids by the technological connection of customers, development of • Improving reliability of electricity reducing the costs and implementing energy efficiency backbone grids and improving reliability of power supply to • Electricity supply to customers of Luga energy supply to the existing customers and district in the Lenigrad oblast energy system connection of new customers in the city of programmes; customers in the period ahead. Krasnoyarsk • External electricity supply for the • establishing an effective system for the management of UNEG extension of ESPO-1 operations to improve the observability of the electric grid 835 facilities. 384.06
505 1600 73.52 914.45
1562 Investment Projects of National Significance 567 1216.42 742.86 Preparations for 2018 FIFA World Cup 593 (paragraph 3) dated 26 June 2013 and a Prime Minister Medvedev’s assignment No. DM-P9-381s (paragraph 4) dated Southern and North Caucasian Federal Districts Volga & Ural Federal Districts In December 2010, FIFA executive committee chose Russia as the 4 July 2013, the Company is working on the “Feasibility Study • Power delivery of Rostov NPP, unit 3 • Power delivery of Saratov HPP and Balakovo host of the 2018 FIFA World Cup. of Construction of 750 kV Leningradskaya – Belozerskaya OHL” NPP, strengthening of cross-grid connections • Increase in the 330 kV grid capacity between Middle Volga – Ural which should include a list of necessary facilities. Dagestan energy system and the rest of UES • Power delivery of Beloyarsk NPP, unit 1 (880 MW) Preparations for the 2018 FIFA World Cup include the construction Commissioned MVA, 2014 South. Connection of 330 kV Artyom SS to the energy system. Improving reliability of • Power supply to Vankor field and reconstruction of stadiums and infrastructure facilities in To date, materials of this feasibility study have been coordinated electricity export to Azerbaijan • Power delivery of Urengoi HPP (450 MW) 11 Russian cities: Moscow, St. Petersburg, Kaliningrad, Nizhny with all relevant parties. There is a plan of actions that would • Power delivery of Dzhubga CHP Commissioned lines (km), 2014 Novgorod, Samara, Saransk, Volgograd, Rostov-on-Don, Sochi, compensate the effects of reduced capacity of the electrical Yekaterinburg and Kazan (electric grid facilities are within the connections of IPS (Integrated Power System) Centre and IPS responsibility of JSC Grid Company). North-West and change the operating modes of the BRELL energy ring (Byelorussia – Russia – Estonia – Latvia – Lithuania). Federal Grid Company contracted a special design organisation Investment Programme for 2015-2019 to design circuits of external power supply during preparations The Company’s investment programme includes the construction for the 2018 FIFA World Cup. A Programme of Preparation for of overhead transmission lines 330 kV Novosokolniki – The Ministry of Energy approved a Federal Grid Company’s At the same time the Company’s investment programme reflects the 2018 FIFA World Cup in the Russian Federation was drawn Talashkino, 330 kV Pskov – Luzhskaya, 750 kV Leningradskaya investment programme for 2015-2019 (Executive Order No. 807 the demand for its services by economic entities. Given the up and adjusted on the basis of this work. The programme was – Belozerskaya, approach lines of 330 kV Leningradskaya – Balti dated 31 October 2014) in the total amount of RUB563.7 billion changed economic environment at the end of the reporting year, approved by Resolution No. 518 of the Government of the Russian OHL to 330 kV Kingisepp SS, reconstruction of 330 kV Talashkino including VAT. the programme had been adjusted by the date of the publication Federation, dated 20 June 2013. SS and modernisation of the existing emergency control of this Report. The adjustment is in the process of approval by the automatics at substations Leningradskaya, Chudovo and Pskov. The total amount of investments planned for 2015-2019 is federal authorities. In order to ensure power supply to the stadiums and sports RUB563.7 billion to finance introduction of 55,500 MVA of capacity training centres related to the 2018 FIFA World Cup, Federal and 12,400 km of transmission lines into the fixed assets of Grid Company installed two one-dimensional cells 110 kV to 220 Compensatory actions relating to separate Federal Grid Company. kV Chesmenskaya SS and is taking actions to extend 110 kV DS operations of the UES of Russia and UES of (Distribution Substation) at 220 kV R-4 SS and 110 kV DS at 220 kV Koysug SS for connecting 110 kV Sportivnaya SS in Rostov-on- Ukraine Parameters of Federal Grid Company’s Investment Programme for 2015-2019 Don. In order to ensure reliable power supply to the north-western part Furthermore, in 2014 Federal Grid Company commissioned of the Rostov energy system under separate operations of UES of 2015 2016 2017 2018 2019 Total Parameter 330 kV Vasileostrovskaya SS and 330 kV Pulkovskaya SS in St. Russia and UES of Ukraine, Federal Grid Company’s investment Financing, million RUB 108,172 134,865 115,238 103,544 101,868 563,687 Petersburg, and is constructing 6 electric grid facilities. This work programme includes the installation of a 125 MV transformer at is part of the projects that ensure the reliability of the electric grid 220 kV Pogorelovo SS and construction of 80 kilometres of a 220 kV Length of commissioned OHL, km 776 2,760 5,025 1,478 838 10,876 system in general and the connection of the distribution complex transmission line between cities of Shakhty and Donetsk (in Rostov feeding centres that are necessary for reliable power supply to oblast). These facilities are scheduled to be commissioned in 2016. Commissioned transformer capacity, MVA 5,638 13,050 14,674 5,366 3,522 42,250 the facilities that will be used during the 2018 FIFA World Cup.
Implementation of these projects will help to meet the FIFA Development of BAM and Transsib power requirements to reliable and uninterrupted power supply to the infrastructure Federal Grid Company’s Investment Programme is aimed at facilities; the development of the electrical grid infrastructure sports and related facilities during the World Cup games in the achieving the following priority objectives: in Eastern Siberia and the Russian Far East, including that normal and post-accident modes. associated with the expansion of the capacity of BAM and the An investment project “Development of the Electric Grid • modernisation and improving reliability of the unified energy Trans-Siberian Railway); Infrastructure in Eastern Siberia and Russian Far East, Including system operations, required to provide uninterrupted power Actions to strengthen contacts between UES BAM and Transsib” includes actions aimed at the development supply to customers; • ensuring reliable operation of UES Russia working separately North-West and Centre of Baikal-Amur and Transsiberian railways within the Eastern from the energy systems of the Baltic States, in order to Polygon of JSC RZD’s railways network, and reliable power supply • ensuring electricity supply to the facilities of national compensate the effects of reduced capacity of the electrical to the existing and prospective customers in Eastern Siberia and significance (scheme for external power supply of the Eastern connections of IPS (Integrated Power System) Centre and IPS In order to ensure reliable operation of Russia’s unified energy Russian Far East. Siberia – Pacific Ocean oil pipeline and oil & gas industry North-West and change of the operating modes of the BRELL system and reliable power supply to customers at UES North- energy ring; West, and to implement a President Putin’s assignment No.
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An increase of load of up to 1.2 GW to provide power supply to Under its contracts with JSC AK Transneft for technological Agreement with the Ministry of Energy RZD’s Eastern Polygon is expected during implementation of the connection and in accordance with its own investment and Ministry of Transport of the Russian BAM and Transsib reconstruction project. This means that the programme, Federal Grid Company builds and reconstructs its need to build an appropriate electric grid infrastructure is driven electric grid facilities in order to provide technological connection Federation largely by the development of BAM and Transsib railways network of the ESPO pipeline facilities to the electric grids in Irkutsk and is critical for the railways industry. oblast, Republic of Sakha (Yakutia), the Jewish Autonomous Federal Grid Company, the Ministry of Energy, the Ministry of Grid Company will buy this infrastructure out during seven years Oblast, Amur oblast, Khabarovsk and Primorie territories. Transport and Phoenix company signed a quadripartite agreement and put it on its balance sheet for its further operation as part of Implementation of this investment project will lay the ground for about the development of infrastructure for power supply of a the Unified National Electrical Grid. industrial growth in the Siberian and Far Eastern federal districts In 2014, the Company provided technological connection for 220 multifunctional transshipment seaport Bronka which is being built and promote the use of the transit capacity of the Russian kV SS (2х25 MVA) at the oil pumping station NPS-11, 220 kV SS in St. Petersburg. Backbone facilities (including Lomonosovskaya The total cost of the project will be about RUB4 billion; the Federation. (2х25 MVA) at NPS-15, and 220 kV SS (2х25 MVA) at NPS-19. Over substation) will be built in the process of establishment of a maximum capacity of the power receivers will not exceed 200 MW. 220 km of single-chain 220 kV OHLs were built and commissioned special-purpose vehicle (SPV). The parties agreed to assist The construction and connection of the electric grid infrastructure Furthermore, implementation of this project will smooth price during implementation of these projects. with the establishment and operation of SPV and exchange any is scheduled to be completed in the spring of 2016. fluctuations across regions and substantially improve the necessary information about social and economic development reliability of power supply to the customers in the southern areas The Company schedules technological connection of additional of St. Petersburg and Leningrad oblast, development of electric Bronka complex is built in the new cargo area of the Big Port St. of Irkutsk oblast, northern districts of the Republic of Buryatia, facilities for energy supply to ESPO in 2015-2019 (NPS-6, 7, 23, 26, grids and improvement of reliable operations of the electric grid Petersburg. The new sea terminal will help to meet the region’s Transbaikal krai and Amur oblast. 29, 32) with a total capacity of 92.728 MV, and additionally increase complex in the region. increasing demand in the sea cargo handling services and make the delivery of capacity for NPS-11,15,16,17,18,19 by 81 MW. St. Petersburg more attractive as a major player on the European Federal Grid Company intends to draw up project documentation market of sea shipping services. The first stage of Bronka seaport Power supply to the East Siberia–Pacific by end-2014, have it evaluated by the government experts and is expected to be constructed in 2015. Ocean oil pipeline provide control and supervision of power facilities in the process of construction. After all the necessary facilities are built, Federal
The construction of the East Siberia–Pacific Ocean oil pipeline (ESPO) is the largest project of the last decades which is implemented by JSC AK Transneft for the transportation of Russian oil to the lucrative markets of the Asia Pacific region. 6.1.2. ANTI-CRISIS INITIATIVES AND THEIR IMPACT Its implementation has two stages, ESPO-1 from Taishet to ON STAKEHOLDERS Skovorodino with a total capacity of up to 30 million tonnes to be increased to 80 million tonnes of oil a year (2,700 kilometres), and Year 2014 was challenging for the global economy. The Russian The Company assessed the economic situation in Russia and ESPO-2 from Skovorodino to Kozmino. economy was not an exception, and felt the impact of the worldwide, and drew up an action plan aimed at overcoming crisis. Federal Grid Company, as one of the largest Russian economic difficulties and improving the Company’s efficiency in corporations, was also hit by the adverse economic trends. the challenging economic environment.
Agreements with Government Authorities Anti-Crisis Action Plan Agreement with the Government of Agreement with the Federal Service for State
Krasnoyarsk Krai and a gold mining company Registration, Cadastre and Cartography Impact of the Crisis We are now working on the tools that would help overcome any Polyus possible difficulties in our engagement with contractors. Federal Grid Company and Federal Service for State Registration, The crisis in the Russian economy might affect Federal Grid The Government of Krasnoyarsk Krai, Federal Grid Company and Cadastre and Cartography (Rosreestr) signed a cooperative Company in four areas: Anti-Crisis Initiatives a gold mining company Polyus signed a cooperation agreement agreement at the international economic forum in St. Petersburg. for implementation of an “Angara-Yenisei Cluster” project. The • A drop in demand for electricity transmission services. document was signed at the 11th Krasnoyarsk Economic Forum The document is aimed at eliminating the legal ambiguity related In 2014, Federal Grid drew up a Programme for Long- in the presence of First Deputy Prime Minister Igor Shuvalov, to capital construction and registration of title on real estate • Increasing nonpayments by the market players. Term Improvement of Efficiency of Federal Grid Company, Krasnoyarsk krai Governor Lev Kuznetsov and CEO of Polyus Gold in the power industry in cases that are not fully regulated by Its Subsidiaries and Associates. The programme tightens International Limited Pavel Grachev. law. The agreement will also help to reduce the administrative • Increased costs of imported equipment (its share in 2014 regulatory requirements to the technical, economic and barriers and timeframes for making decisions on construction exceeded 50%) in the ruble equivalent due to the exchange organisational level of operations. It is also aimed at Viktor Tomenko, Chairman of Krasnoyarsk Krai government, and operation of federal facilities included in the UNEG market volatility. establishing the appropriate business processes that would help pointed out that this agreement could be treated as the first Development Strategy. the Company to maintain lower operational and investment costs step in implementation of the “Angara-Yenisei Cluster” project. • Constrained access to external sources of funding due to more which it has achieved, and continuously improve its performance Based on the principles of public-private partnership, this Implementation of this agreement will simplify access to publicly expensive loans. while retaining highly reliable and sound power supply. project is aimed at the development of industrial potential of available data for reservation and withdrawal of land plots Krasnoyarsk Krai. “We agreed today to unite efforts of the for state needs (including information about any registered Engagement with Suppliers and Contractors The Management Board of Federal Grid Company also approved government and investors for the establishment of a power encumbrances and restrictions). Moreover, the document should an Action Programme (“road map”) to ensure financial infrastructure the absence of which prevents the extension of our outline “one window” provisions, including those that would during the Crisis sustainability and higher efficiency of the Company’s operations existing production capacities and construction of new ones,” he pertain to the Multifunctional Centres organised by Rosreestr. in 2014-2015 (including a set of anti-crisis initiatives). This emphasised. In order to minimise the financial risks in the unstable economic programme is aimed at cost-cutting and earning additional Thus, the agreement will help to implement the Russian Strategy environment, Federal Grid Company is using fixed prices in its revenues. He meant the construction of 220 kV Taiga SS and 220 kV for Development of the Energy Sector according to schedule. contracts with foreign producers and Russian contractors. Razdolinskaya – Taiga OHL which should be an extension of the The Action Programme has the following goals: power transmission line which runs from Boguchanskaya HPP It is important to note that the Company makes centralised to the facilities of Polyus. This will help the company to increase procurements of equipment, thus reducing the costs and • to achieve the best balance between the objectives of the output. minimising the risks of nonpayment by the contractors. Company’s investment growth, shareholder value and Moreover, the Company invites manufacturing plants to bid. profitability;
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• to ensure the Company’s financial sustainability, as well as in the Strategy is 15% by 2017) and investment costs by 17.03% efficient and effective business operations. as compared to 2012 (the target for 2014 is 10%); Tariff rates for electricity transmission services, RUB/MW*month and their The cost management programme has been running in the • reduction in the Company’s administrative and managerial previous period growth (%) Company for many years. It is aimed at efficient management of costs by 15% relative to 2013 in accordance with Directive No. available sources in order to achieve the Company’s objectives. 2454p-P13 of the Government of the Russian Federation, dated 23 April 2014. 123,328.44 134,964.06 134,589.17 It becomes a corporate procedure for the long term. 116,782.52 111,083.35 87,868.77 Efforts to reduce the Company’s operational costs are based Thus, Federal Grid Company received net profit of RUB5,137 58,159.01 +9.4% 48,170.26 +11% –0.3% on an integrated approach. It is aimed at identifying those costs million in 2014 – for the first time in the past years. Proposals +32.9% +26.4% that could be optimised while maintaining the highest possible were made to pay dividends. +51.1% +9.3% +20.7% reliability of the network and avoiding interruptions in the power supply. Related long-term efficiency programmes are being In 2015, the Company is ready to respond flexibly to any changes 2008 2009 2010 01.01.2011- 01.04.2011- 01.07.2012- 01.07.2013- 01.07.2014- drawn up for the main cost items. in the economic environment, and intends to continue its cost 31.03.2011 30.06.2012 30.06.2013 30.06.2014 30.06.2015 management activities. According to the Company’s business In order to optimise the amount and structure of production and plan for 2015-2019, it intends to cut the operational costs by 30% administrative costs and lower the cost of services, Federal by 2017, which is twice above the target set in the Development Grid Company developed a set of measures that would help it to Strategy for the Russian Electric Grid Complex for 2015-2020. cut operational costs (per one unit of the serviced equipment) In accordance with Government Resolution No. 1045 dated 12 Standard Tariff Rate relative to the 2012 level. Put options will be financed by the Company’s own sources of December 2009, differential tariff rates are set for electricity funding, and its debt portfolio will be downsized. Financing transmission services to maintain electric grid facilities within Implementation of large-scale cost optimisation actions in of the investment programme for 2015-2019, approved by the UNEG for the North Caucasus Republics and Stavropol Territory. In 2013, the FTS of Russia approved the fee for technological Federal Grid Company, its subsidiaries and associates had the Ministry of Energy, is being revised in order to maintain the The table below includes tariff rates and their previous period connection based on a formula using a standard rate per following results: Company’s financial sustainability while ensuring the reliable growth: kilowatt of power connected, not including the investment work of its equipment. Concurrently with the downsizing of its component of the payment. Setting these rates enables us to • outstripping reduction in operational costs by 21.7% as investment programme, Federal Grid takes steps to find sources reduce to a common denominator the costs of the technological compared to 2012 in accordance with the Development of financing for projects that have national significance, including Tariff rates for electricity transmission connection work (except for the cost of construction Strategy for the Russian Electric Grid Complex (the target set issuance of infrastructure bonds. services for the North Caucasus Republics and (reconstruction) of electric grid facilities) in different regions. Stavropol Territory This also significantly reduces the time required to connect applicants to the electric grids of Federal Grid Company, because in the absence of the need to perform construction Previous,period, Period RUB/MW*month (reconstruction) of electric grid facilities for technological growth,% connection, Federal Grid can independently calculate the fee 6.1.3. TARIFF SETTING AND ITS TRANSPARENCY FOR 2010 37,845.23 - based on the formula and without the need to contact the FTS of Russia. CONSUMERS 01.01.2011-31.03.2011 46,029.88 21.6% In accordance with the Order of the FTS of Russia No. 1753-e Tariff setting is an integral part of the Federal Grid’s operations. In the area of tariff management the Company is guided by the best 01.04.2011-30.06.2012 43,783.55 15.7% dated 30 December 2013, a standard tariff rate R1 for 2014 has practices and up-to-date standards. Federal Grid’s priority is to set fair and transparent tariffs for all categories of consumers. 01.07.2012-30.06.2013 48,540.01 10.9% remained at RUB27.56/kW, excluding VAT.
01.07.2013-30.06.2014 53,119.60 9.4% In accordance with the Order of the FTS of Russia No. 2387- From 01.07.2014 52,923.13 - 0.37% e dated 23 December 2014, a standard tariff rate R1 for 2015 has been set at RUB28.61/kW, excluding VAT, broken down by State Regulation of Tariffs activities. Tariffs for electricity transmission services provided by Federal Grid Company are subject to state regulation and are approved by the Federal Tariff Service (FTS). The Standard Tariff Rate is the rate that covers the cost of the technological include the investment costs for the construction connection of power receivers of electricity (reconstruction) of electric grid facilities for RAB Methodology (regulatory asset base) consumers and electrical grid facilities owned technological connection, and is based on 1 kW of To calculate tariffs for each year of the regulatory order to avoid a sharp increase in tariff rates the by grid companies or other entities, as well as maximum power (RUB/kW). period, the required gross revenue is determined RAB-based method provides a smooth-running the technological connection activities, does not by summing a return value, return on invested mechanism, which involves redistributing the capital and expenses required to provide services required gross revenue during the long-term on electricity transmission through UNEG. In regulatory period. Measures to limit tariff growth
Since 2010, as a part of measures to improve the investment In addition, the RAB Methodology encourages companies to provide The Government is currently implementing a policy to limit tariffs The FTS of Russia issued an Order No. 297-e/3 dated 09 attractiveness of the electric power industry, tariffs for Federal reliable and high-quality services. If a company fails to achieve for natural monopolies. December 2014 that approved tariffs for the services provided by Grid’s services on electricity transmission through UNEG have been the quality and reliability target values, a decreasing coefficient is Federal Grid on electricity transmission through UNEG for 2015- established based on a return on invested capital method (RAB- applied to its revenue. The FTS’s decision to establish 2011–2014 Thus, in compliance with the Resolution of the RF Government No. 2019; and the long-term regulatory parameters for the UNEG- regulation). tariffs includes targets for service reliability and quality indicators 1307 dated 30 December 2013, the FTS of Russia was assigned to operating organisation for 2015-2019. Based on the approved for the UNEG-operating organisation for the period of 2011–2014. set tariffs for the Company’s services for the period from 1 July tariffs, tariff growth will be 7.5% in 2015, 5.5% in 2016 and 4.5% The above method of tariff regulation guarantees a recovery and 2014, but not exceeding the tariffs in force as at 30 June 2014. In annually in 2017-2019. return on invested capital as it enables a grid organisation to get this connection, the FTS of Russia approved the adjusted tariff funds for paying interests (coupon yield) on borrowings and for rates for the electricity transmission services through UNEG since Tariff increase will be about a half of the anticipated inflation rate, repayment and/or refund of borrowings. 01 July 2014 (the FTS’s Order No. 69-e/1 dated 26 March 2014). and the operational costs efficiency index is set at 3% for 2015-
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2019. This means that the Company will need to make substantial Actions that the Company is taking and expects to take in future Procurement activities in 2014 cuts of its operational costs. At the same time, significant inflation are aimed at reducing costs within the approved tariffs and and currency risks, including a possible increase in the consumer parameters of RAB regulation, as well as reducing deficit of price index will have a strong impact on the Company’s revenue in tariff sources of financing. As procurement procedures are organised in the regions where Regulated procurements in 2014 by type the longer term. the Company branches are located, a great number of local suppliers and contractors are involved therein.
Up to 75% of local suppliers and contractors participate in procurement in each region. In order to perform highly Value of purchases 6.1.4. PROCUREMENT specialised work, organisations may be involved that perform Share in the under Number of such work throughout the territory of the Russian Federation. total value of procurement procedures The Federal Grid’s primary focus is on modernisation and When constructing and commissioning power facilities, new purchases, % Procurement System procedures, development of the Unified National Electric Grid (UNEG). Since its jobs are created, and local residents and people from related RUB bn establishment, the Company has invested in the construction of Federal Grid Company conducts its procurement activities industries are employed. new electric grid facilities and reconstruction of existing ones. in strict compliance with the Regulations on Procurements, Open tender 75,9 782 80,4% adopted in 2005. When implementing the investment programme, as well as annual Volume of purchases of Federal Grid Company Open request for quote 0,6 245 0,7% repair and target programmes, Federal Grid Company implements Procurement methodological framework Open request for proposals 8,1 2 084 8,6% procurement activities aimed at purchasing the necessary in the regions in 2014 G4-EC9 equipment and services on the competitive market. The Company The following framework underpins the Company’s procurement Sole source 6,0 828 6,4% Procedures conducted in 2014, is interested in cooperation with manufacturers of highly efficient activities: Share in overall total Restricted tender 1,5 1 1,6% electrical equipment, building and engineering contractors that are N Region able to ensure high quality of work and optimal lead time, as well as • legislation of the Russian Federation (Civil Code, Federal Law volume of amount, RUB number of purchases, % Minor purchase 1,1 4 254 1,2% environmental and social responsibility. No 135-FZ, 94-FZ, 223-FZ); thousand procedures G4-DMA • public procurement experience; 1 Siberia 4.67% 4,425,132.80 1 910 Ordinary purchase 1,0 3 770 1,1% • international best practices; • procurement standards of JSC RAO UES of Russia. 2 Centre 24.25% 22,789,476.90 2 339 Total 94,2 11 964 100%
3 East 9.38% 8,863,353.40 962 Federal Grid strives to engage small and medium businesses in 4 South 10.75% 10,147,087.90 1 205 its procurement procedures. In compliance with the Government Resolution No. 1352 dated 11 December 2014, a list of goods, Federal Grid’s Procurement Principles: 5 Volga 11.12% 10,490,708.80 1 602 works and services to be purchased from SMEs only was 6 Ural 17.10% 16,141,810.30 1 302 approved. Openness Justification 7 North-West 12.64% 11,838,193.30 1 537 In 2014, subject to the Decree of the Russian Government The rules that regulate the arrangement of procurement are The Rules require that every decision should be justified No. 867-r dated 29 May 2013 “On Approving an Action Plan publicly available at http://www.fsk-ees.ru/eng/. Information and documented in order to increase the efficiency of 8 West Siberia 10.09% 9,524,127.00 1 107 about violations of these rules can be sent to Federal Grid’s purchases and to prevent corruption. Any decision in (“Roadmap”) on Improving the Access of Small and Medium- Central Tender Commission, which composition is also the course of procurement should be made collectively. Total: 100.00% 94,219,890.40 11 964 Sized Enterprises to Procurements of Infrastructure Monopolies disclosed at the Company’s website. The Commission is Tender award decision shall be made by the Tender and State-Owned Companies”, the Company approved a composed of Company employees, representatives from the Commission, and the following criteria are taken into Partnership Programme between Federal Grid Company and Russian Ministry of Energy and the Federal Anti-Monopoly account: small and medium-sized enterprises and started to maintain a Service of Russia. The annual procurement programme is • commercial appeal (bid price, terms of payment); In 2014, Federal Grid Company conducted 11,964 procurement register of SMEs who have joined the Programme. announced at the Company’s website and at the electronic procedures for the total amount of RUB94,219.9 million, of which trading facility “TPS Elektra”. • product quality, 92% were competitive purchases. An Advisory Body has been established to consider issues • technical specifications, of ensuring efficiency of Federal Grid’s procurement, which The economic effect of the procurement procedures in 2014 was includes, among others, small and medium-sized business • warranty liabilities; RUB5,102.9 million (is defined as a difference between the ceiling entities. Competitiveness • supplier credibility. and actual procurement prices). Procurement is regulated in such a way that priority is given to open tenders that provide the highest possible level of competition. Any limitation on competition must be fully justified and agreed to collectively. Standard requirements to contractors and to evaluation of bids are provided for by the Regulations and are publicly available. Developing the Company’s procurement activities
To improve the Federal Grid’s procurement activities, on 12 September 2014 the Board of Directors approved a new version of the Regulations on Procurement. The document is available on the corporate website http://www.fsk-ees.ru/eng/ and contains the following amendments: Procurement policy and procedures enable to spend funds effectively In 2014, there were 13 complaints filed by organisations to the RF and per their intended purpose, and to obtain economically justified Federal Antimonopoly Service in respect of their rights’ violation in • cancellation of price threshold for the Regulations’ scope • exclusion of sections “Certification” and “Attestation”; expenditures (market prices for products). the procurement procedures conducted by Federal Grid Company. of application (a new version of the Regulations cover all Upon investigation, 7 complaints were found to be justified, and 6 purchases from RUB0); • specification of definition “adjustment of bids/proposals of complaints – to be unjustified. participants”; • exclusion of such procurement methods as “competitive G4-SO7 negotiations” and “small purchase”; • optimisation of the number of hard copy originals to be submitted by participants of electronic procurements.
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6.2. CONTRIBUTION TO THE DEVELOPMENT OF SOCIETY
6.2.1. HUMAN RESOURCE MANAGEMENT
The Company’s key strategic goal in the area of human resource management is to improve efficiency and employee engagement in order to provide reliable operation of the Unified National Electric Grid for ensuring economic growth in Russia and uninterrupted energy supply for consumers throughout the country.
To achieve the above goal, the Company focuses on: in the effective implementation of the corporate long-term objectives engagement; • improving the Company’s operating efficiency through the increase in labour productivity and quality, optimal use of • satisfying material and social needs of employees according to human capacity for the benefits of the Company; their contribution to the achievement of the Company’s goals and objectives. • timely meeting the Company’s needs in a skilled workforce, employee ongoing development, training and involvement
Goals and Objectives of HR Policy
The HR Policy of Federal Grid Company is an integrated system Company’s structural units, creating conditions for of employee engagement aimed at achieving the Company’s effective development and use of human resources, strategic goals, developing and maintaining electric grids and meeting the employee social and economic needs and substations, improving reliability of UNEG facilities’ operation, expectations. The Company strives to create conditions and implementing the Company’s investment programme. for the optimal use of workforce capacity, strengthening The HR Policy is also aimed at ensuring the balance between of corporate culture, efficient motivation and professional economic and social effect of the human resources involvement, development of employees. ensuring availability of a skilled workforce needed for the • to ensure a continuous growth of professional qualifications of employees for completing tasks on improving reliability of the The Company strives to create conditions UNEG facilities’ operation; for the optimal use of workforce capacity, strengthening of corporate culture, efficient • to create and improve a talent pool in order to ensure the most effective use of the Company’s workforce capacity; motivation and professional development of The HR Policy is aimed at: employees. • to develop corporate culture and maintain a positive working climate.
Performance management focused on the performance of HR Policy includes the following inter-related areas – employees and structural units and underpinned by a system Ensuring the balance Creating conditions components of the human resource management system: of key performance indicators aimed at increasing labour between economic for effective and social effect of development and productivity became one of the priority tasks within the the human resources use of human • improving an organisational and management structure and Company’s HR policy in 2014. involvement resources personnel planning; This focus area includes the following measures: • personnel training and development; • motivation and remuneration of labour; • reduction of administrative and managerial staff through optimisation of functional duties; • social support; • performance management; • reduction of operating personnel through optimisation of maintenance and repair of power facilities with due account • employment relations; for the Company’s priorities on improving reliability, safety Timely meeting Meeting the • administrative support; and operational efficiency of the electric grid complex. the Company’s employee social divisions’ needs in a and economic • internal communications and development of corporate For the purpose of the development strategy of the RF electric skilled workforce needs and culture. grid complex approved by the Resolution of the RF Government expectations No. 511-r dated 03 April 2013, and in order to reduce costs and The above components may be modified and take on a new ensure the operating efficiency of Federal Grid Company under significance caused by the Company’s development trend the tariff policy changes, the Company implemented a 10% and changes in external conditions, thought keeping with the reduction of administrative and managerial staff compared with principle of the policy continuity. the prior year.
Key objectives of HR Policy:
• to attract qualified personnel in order to meet current and future challenges of the Company;
• to create conditions for retaining and optimal use of highly qualified employees;
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Changes in headcount, persons Key HR Indicators Breakdown of employees by category, %
Changes in average headcount, persons1 Unit/Branch 2012 2013 2014 At the end 16,1% 15,9% 16,4% 16,3% 16,0% Corporate of 2014, the 5% 1,031 977 895 headcount of decrease on Headquarters Federal Grid 2013 (25,741 Company was 24,518 employees). 25,123 MES Centre 5,367 5,409 5,264 42,8% 42,1% 41,2% 42,9% 40,7% employees 24,460 24,362 23,332 MES North West 2,489 2,612 2,592 21,965 MES Volga 2,262 2,287 2,180 In 2014, 5% 3% -3% the average 6% 41,1% 42% 42,4% 40,8% 43,3% headcount of 3% MES South 2,616 2,734 2,667 lower than in the Federal Grid prior year (25,123 was 24,362 employees) 2010 2011 2012 2013 2014 MES Ural 2,822 2,837 2,722 employees 2010 2011 2012 2013 2014 MES Siberia 3,967 4,000 3,873 Workers Management G4-9 Professional Employees MES Western Siberia 1,973 2,104 2,069 Senior managers are appointed in accordance with job requirements and in MES East 1,933 2,034 2,006 compliance with the Regulations on Recruitment to Federal Grid Company and in Headcount by Branches, persons Technical Supervision strict compliance with the Russian legislation. 90% of senior managers were hired 0 129 94 Centre from the local community of Russian regions where the Company operates. Technical 94 G4-EC6 Supervision 129 Total 24,460 25,123 24,362 Centre
2,006 2014 2,034 MES East 1,933 2013 Table. Total number of employees by employment type, contract and region, persons G4-10 1,816 2012 1,753 2011 including part-time employees and 2,069 including average headcount (full- MES Western 2,104 2010 Branch Headcount, total those employed under civil law time employment) Siberia 1,973 contracts (part-time employment) 1,727 1,507 MES Centre 5,327 5,264 63
3,873 MES North West 2,648 2,592 56 4,000 MES Siberia 3,967 MES Volga 2,183 2,180 3 3,873 3,739 MES South 2,674 2,667 7
2,722 MES Ural 2,736 2,722 14 2,837 MES Ural 2,822 2,778 MES Siberia 3,894 3,873 21 2,774 MES East 2,086 2,069 17 2,667 2,734 MES Western Siberia 2,006 2,006 0 MES South 2,616 Technical Supervision 2,387 94 94 0 2,060 Centre Total 23,648 23,467 181 2,180 2,287 MES Volga 2,262 2,171 1,502 Gender Profile Employee Turnover Traditionally, electric power industry is male dominated – 80.2% In 2014, employee turnover rate was 6.5%. As of 31 December 2,592 of employees, the share of female employees is 19.8%. 2014, the Company’s staffing level is 96.7% of its target value. 2,612 MES North 2,489 The target turnover rate is not more than 10% . West 2,338 2,048 5,264 Headcount by gender and gender ratio G4-LA12 5,409 MES Centre 5,367 Employee 7.80% 5,186 6.50% 5,689 turnover rate, 6.30% Men Women Total % 895 977 19,667 4,851 24,518 Corporate 1,031 Headquarters 1,055 80.2% 19.8% 100% 892
2012 2013 2014
1 In the reporting year, there were no minority group members, as well as other indicators of diversity in the Company’s governing bodies and among employees.
92 93 CORE AREAS IN SUSTAINABLE DEVELOPMENT / CONTRIBUTION TO THE DEVELOPMENT OF SOCIETY
Employee turnover by age group, gender and region G4-LA1 Breakdown of employees by age group, persons G4-LA12
2010 2011 2012 2013 2014 Number of Of whom Average Employee employees under 25 years old 1,394 1,520 2,360 2,658 2,476 Branch headcount, turnover rate, terminated, persons % Under 30 Over 30 years 25 – 50 years old 14,957 16,874 16,499 17,070 16,183 persons Men Women years old old 50 years old – pension age 5,402 5,526 5,574 5,356 5,418
MES Centre 5,264 348 6.6 260 88 129 219 Working pensioners 523 683 698 657 441
MES North West 2,592 126 48 103 23 50 76 Percentage of employees MES Volga 2,180 42 1.9 31 11 17 25 Employees by age, % G4-LA12 eligible to retire in the MES South 2,667 310 11.6 273 37 135 175 next 5-10 years of the total 2.3% 2.8% 2.8% 2.5% 1.8% headcount as of 31 December MES Ural 2,722 153 5.6 108 45 58 95 2014, % 24.3% 22.5% 22.2% 20.8% 22.1% G4-EU15 MES Siberia 3,873 210 5.4 158 52 83 127 Share of MES East 2,069 137 6.6 113 24 55 82 Branch employees MES Western Siberia 2,006 89 4.4 78 11 38 51 67.1% 68.6% 65.6% 66.3% 66.0% MES Centre 13.2 – 26.9 Technical Supervision Centre 94 14 14.8 14 0 1 13 MES North West 9.6 – 21.9 MES Volga 11.3 – 23.8 In accordance with the current legislation of the Russian Federation, employees receive notification on significant changes to MES South 9.9 – 21.6 employment terms and conditions not less than 2 months prior to the event occurrence. 6.3% 6.2% 9.4% 10.3% 10.1% MES Ural 10.6 – 22.9 G4-LA4 2010 2011 2012 2013 2014 MES Siberia 11.2 – 21.8 MES East 8.3 – 16.8 Working pensioners 50 years old – pension age MES Western Siberia 5.9 – 17.3 Federal Grid’s staffing level, Number of hired and terminated employees, 25-50 years old Under 25 years old % persons
98.2 5,778 5,235
4,415 97 4,155 4,239 Material Incentives Differentiation of wages and salaries is determined by the level of complexity and importance of the work performed, qualifications 3,152 of an employee and his/her impact on the Company performance. A well-developed employee motivation model serves as a key 95.6 96.7 factor in achieving strategic and current corporate objectives. To retain key personnel and ensure a certain level of their income, in 2014 the Company continued to provide wage indexation for Principles of the Company’s employee motivation system are employees under “workers” category by the value of actual based on the following: growth in the consumer price index in accordance with the provisions of the Electricity Industry Tariff Agreement for 2013- 95 • a unified approach to employee remuneration aimed at 2015. Wage indexation for all employees of PMESs is expected in motivating them to achieve corporate goals and objectives 2015. and considering an employee performance and his/her contribution to the achievement of key performance targets 2012 2013 2014 2010 2011 2012 2013 2014 set for employees, structural units and the Company as a Terminated Hired whole; Changes in employee average wage/salary, RUB • meeting material and non-material needs of employees to In 2014, 3,152 employees were hired by Federal Grid Company, and 4,415 employees were terminated, among them 1,339 persons determine a competitive compensation package that considers 62,042 64,091 resigned voluntary, 1,044 persons were terminated due to staff optimisation, and 569 persons resigned upon mutual agreement of regional specific features and business peculiarities and 58,032 the parties. Staff termination measures are implemented in accordance with labour legislation. includes, among other things, incentive award programme 50,512 53,078 G4-EU20 (corporate awards, honourary titles, honourary certificates, appreciation letters, etc); 9% 7% 3% • organising annual competitions among employees of the 5% Age Structure Company branches for ensuring reliable operation of Employee average age, equipment with further awarding branches and enterprises that demonstrated the best performance and the highest years old 2010 2011 2012 2013 2014 Over the last few years, a tendency has has achieved an optimal balance of young, results in the implementation of new technologies with the been observed towards a decrease in enthusiastic employees and experienced, 39.6 titles “Best Branch of Federal Grid Company – MES” and “Best average age of the Company employees. highly qualified staff members who 39.3 Enterprise of Federal Grid Company – PMES”. The Company does not apply a gender-based approach to During the period from 2012 to 2014, the ensure the continuity of generations and remuneration for men and women who perform the same job average age has decreased from 39.6 to the transfer of professional knowledge 39.1 Federal Grid Company has established and maintains an functions. 39.3 years. The majority of the Company’s and skills. employee compensation system that takes into account position G4-LA13 staff (57%) are employees of the most categories, performance results of the Company branches and economically and socially active age, i.e 2012 2013 2014 structural units, as well as specifics of regional labour markets under 40 years old. Thus, the Company and an individual contribution of each employee.
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Average salary and average wage of men and women by region, RUB Personnel structure by educational level, %
Average salary, RUB Average wage, RUB 58.7% 59.3% 60.9% Regions where the Company operates 56.1% Men Women Men Women 52.1% Centre 24,730 25,280 129,640 137,780 North-West 16,060 16,930 60,150 58,340 38.9% Volga 13,910 13,150 46,750 44,250 36.0% 33.0% 33.0% 33.1% South 14,540 15,250 56,240 56,110 Ural 14,930 16,100 46,600 46,820 West Siberia 25,890 24,530 91,060 89,200 Siberia 19,160 18,830 61,230 60,560 8.6% 7.5% 7.8% 7.2% East 21,690 21,980 74,710 75,300 0.3% 0.3% 0.4% 0.4% 0.4% 5.5% 0.1% 0.1% 0.1% 0.1% 0.1%
Ratio of standard entry level wage of Federal Grid’s employees to local minimum wage by region 2010 2011 2012 2013 2014 G4-EC5 Doctor’s Degree Secondary vocational education Candidate’s Degree Secondary general education Cost of living in the Minimum wage Regional coefficient, Minimum wage in the MES region of the MES Higher professional education Regions where the Company operates of a first class Northern and regional branch/cost of living in the branch location, worker, RUB bonuses, % region, % RUB Centre 13,772 1.16 12,542 109 North-West 15,101 1.29 9,332 161 Volga 12,943 1.03 8,666 142 Employee Professional Development Programmes South 12,943 1.03 7,603 170 Ural 13,963 1.19 8,146 171 In 2014, 15,440 employees, 62% of total headcount, were involved Siemens, Alstom Grid, GE, ABB. To improve employee awareness West Siberia 24,829 2.11 12,875 192 in various types of training. Training of operating personnel in the area of environmental protection, environmental training (12,648 employees) made up the largest part of all programmes was organised, including under videoconference mode. Siberia 18,195 1.54 9,748 186 (82%). East 20,725 1.78 12,196 169 G4-LA10 A special attention was paid to training in safe working practices with consideration of up-to-date requirements. 152 employees of Federal Grid were given training that enabled them to 6,700 employees were trained in the Company’s personnel perform an objective assessment of working conditions at the Personnel Training and Development training centres. For the purpose of simulator training, 287 workplaces. A software package ASOP-Expert is used in the emergency response exercises were organised. course of training, pre-examination training and testing.
Federal Grid Company places a high priority on personnel They include training simulators, laboratories with relay To develop a talent pool for the industry, Federal Grid was training as it considers a high level of professional qualification protection and emergency automatic equipment, and electric Average hours of training for one employee implementing initiatives to provide young employees with the to be one of the key factors driving the reliable operation of grid training areas equipped with advanced technical training per year by employee category, hour/person opportunities for professional growth, and to attract talented UNEG. aids and prototype equipment. The simulation classes are made G4-LA9 and active youth into the industry. as scaled-down models of dispatch control centres and allow us Training of operating personnel is one of the Company’s to organise emergency response exercises for operators of Grid The programme of cooperation with the leading industry-specific Average training priorities; it has continuous and systemic character and is Control Centres of the Company branches. Employee category higher education institutions implemented in 2014 in all regions delivered in two modes: maintaining and development. hours where the Company operates, included projects aimed at Women 32 addressing issues of improving education in the power industry The Company has its own training centres, which moved to a Employee Educational Level in order to bring knowledge and skills of graduates closer to the new professional level in August 2014 – they received a license Industrial personnel Men 48 current operating requirements of the Company. for educational activity. The license increases the Company’s The Company imposes high requirements to the educational Total: 40 opportunities and enables not only to train our employees, but level and qualification of employees. Educational structure of Practical training for students was ogranised at the Federal Women 16 also to implement serious education projects for outside clients. employees has remained unchanged over the last few years. Grid’s facilities and personnel training centres, and the projects Administrative and managerial personnel Men 20 Employees with higher education prevail (60.9%); the share of and maintenance personnel Applied Bachelor’s Programme and School for Young Engineers were Today, the licensed Personnel Training Centres of Federal Grid employees with secondary vocational education is 38.6%. Total: 18 implemented, under which 28 senior power engineering students Company appear to be comprehensive educational complexes. received additional theoretical and practical knowledge. The Company employees were actively involved in the institutions’ educational process with regard to improving the programmes/ Headcount by educational level, persons In 2014, within one of the Company’s strategic activity areas on courses for electric power engineering and developing topics for creating conditions for import substitution development and early essays and graduate theses. localisation of electrical manufacturing in the territory of the Russian Education 2010 2011 2012 2013 2014 Federation, the training was organised for the Company’s specialists 383 employees of Federal Grid Company were trained under Higher professional education, including: 10,584 13,795 14,741 15,256 14,935 at the production sites of the largest Russian manufacturers retraining and professional development programmes at the of power equipment, such as Energomash (Ekaterinburg) – premises of higher education institutions. Doctor’s Degree 8 14 19 24 28 Uralelectrotyazhmash, and Tolyattinsky Transformator. Candidate’s Degree 54 83 95 97 94 Under the federal programme “Training and Retraining of Besides, the joint corporate training programmes were Executive Talent Pool (2012-2015)”, one of the Company’s mid- Secondary vocational and secondary general education 9,665 10,711 10,276 10,364 9,461 successfully implemented with the equipment suppliers Ekra, level executives received training at Lomonosov Moscow State Total: 20,249 24,506 25,017 25,741 24,396 Energoinnovations, Uralenergoservice, Prosoft-systems, RT Soft, University.
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In 2014, a team of 10 young specialists from the Federal Grid’s Employees of MES branches were engaged in the Youth Round Non-Governmental Pension Programme succession pool took part in the 3rd International Forum “Energy Table of JSC Russian Grids within the 18th St Petersburg Saving and Energy Efficiency” ENES 2014. Economic Forum. In 2004, a Non-Governmental Pension Programme of Federal • encouragement of employees for their services to Federal Grid Company has been launched to ensure a good standard Grid Company and the electric power industry, and for their of living for Federal Grid employees who reach pension age, to continuous and dedicated work. increase high performance motivation, to attract and retain highly qualified personnel. Since that time, the Programme has been Since the Programme launch, a non-governmental pension from Awards Policy successfully implemented. Federal Grid funds has been granted to 4,295 employees. G4-EC3 In 2014, RUB327,335 thousand was allocated for the non- In order to increase high performance motivation, provide moral • 1,913 employees were given corporate awards of JSC Russian governmental pension to 634 employees who acquired a right and material incentives for employees, Federal Grid Company Grids, among them 1,669 employees were awarded the The main principles of the Programme are as follows: for crediting funds to their individual retirement account in the has successfully implemented an Employee Recognition Russian Grids’Memorial signs for their contribution to reliable reporting year. Programme for encouraging its employees with State awards, operation of Olympic electric grid facilities in the city of Sochi; • a unified approach to organisation of non-governmental awards of the RF Government, of the Russian Ministry of Energy, pension scheme in Federal Grid Company; The implementation of the above Programme enabled to obtain a of the All-Russian Sectoral Association of Employers in Electric • 184 employees were awarded a Commemorative medal “ХХII high motivational effect, to award employees a competitive non- Power Industry (Association RaEl), JSC Russian Grids and Winter Olympics and ХI Winter Paralympics, Sochi 2014”; • a differentiated approach to setting amounts of non- governmental pension, to rejuvenate personnel and to retain corporate awards. governmental pension; highly qualified staff. • 2,532 employees were given corporate awards for their The following corporate awards were launched in Federal contribution to the development of and services to Grid Company: a title “Honoured Employee of Federal Grid Federal Grid Company, including the highest awards: the Company”; a title “ Veteran of Federal Grid Company”; a badge title “Honoured Employee of Federal Grid Company” (3 of honour “For contribution to the development of Federal Grid employees), the badge of honour “For contribution to the Company”, First Class and Second Class; a badge of honour development of Federal Grid Company”, First Class (3 Succession Pool of Federal Grid Company “For Professional Skills”; a badge of honour “For Construction employees). 93 employees were awarded the badge of honour and Reconstruction of Electric Grid Facilities”; obtaining a place “For Professional Skills” for their high performance and Two types of succession pool have been created in Federal Grid Succession pool, persons on the “Board of Honour”; a Honorary Certificate; a Letter of qualifications, 43 employees were awarded the badge of Company: Commendation. The Company branches and substations that honour “For Construction and Reconstruction of Electric Grid ensure reliable operation of equipment and demonstrate the Facilities”, of whom 9 employees are from subsidiaries and 1. Tactical succession pool for the production and technical Number of succession pool best performance and the highest results in the implementation associates/contracting agencies. 16 employees were awarded facilities of Federal Grid – MES (412 employees) has been members appointed to the badge of honour “For contribution to the development of of new technologies are awarded with titles “Best Branch of created to improve the reliability of electric grid facilities Type of succession pool superior positions Federal Grid Company – MES”, “Best Enterprise of Federal Grid Federal Grid Company”, Second Class; 9 employees obtained and to build an optimal vocational qualification structure target Company – PMES Group” and “Best Substation of Federal Grid a place on the “Board of Honour” of Federal Grid Company. of personnel, as well as to establish a succession pool of others positions Company”. 22 employees were given a title “Veteran of Federal Grid qualified candidates able to take vacant positions promptly. Company” for their long and effective service in the electric Tactical succession pool for the An Employee Recognition Programme provides for awarding grid complex. The tactical pool covers positions of the head and deputy head of production and technical facilities of 25 15 employees who have rendered great service to the State, subdivisions of Federal Grid branches whose functions include Federal Grid – MES electric power industry, Federal Grid Company, demonstrate Employees of Federal Grid brunches were given awards of the the organisation and performance of operation, maintenance Succession pool for the position of high performance and management efficiency, or achieve great subjects of the Russian Federation. and repair of electric equipment and devices of the electric grid 2 8 results in the operation, construction and re-construction complex within five key areas of Federal Grid activities: PMES’ Director of electric grid facilities, in creation and implementation of For ensuring reliable operation of equipment, implementation new technologies, or have implemented advanced labour of new technologies and the advanced labour management • Relay protection and automation management techniques, have demonstrated professionalism techniques, the title “Best Branch of Federal Grid Company – Federal Grid Company maintains a policy of employee internal in prevention or mitigation of accidents, restoration of power MES” was awarded to MES Ural, the title “Best Enterprise of • Operation of substation equipment rotation and promotion. The Company strives to make the facilities, who are respected by colleagues, and promote Federal Grid Company – PMES” was awarded to Samarskoe promotion mechanism fully transparent and underpinned by corporate values. PMES of MES Volga, and the title “Best Substation of Federal • IT systems equal opportunities for all employees, fair assessment of their Grid Company” was awarded to 500 kV Tambovskaya SS of MES performance, knowledge and expertise, business and personal In 2014, awards were given to 4,981 employees of Federal Grid Centre. • Operative process control qualities. The Federal Grid’s succession pool is updated Company, its subsidiaries and associates, and contractors, regularly, and its members are the priority candidates for mid– including: • Electric powers transmission lines and top-level managerial vacancies.
• 75 employees received State awards of the Russian Federation 2. Succession pool for the position “Director of Federal and the Government of the Russian Federation for their Grid branch – PMES” (92 employees) has been created to services to the State, including their major contribution to the strengthen the HR capacity, to identify the most valuable, construction and ensuring reliable operation of the Olympic high-potential employees for their further development, electric grid facilities in Sochi; as well as to mitigate HR risks related to withdrawal and professional level of the existing PMES’ Directors. • 6 employees were given the Honourary Certificate of the 4,981 CIS Electric Power Council for their contribution to the In order to develop the professional competencies of candidates development of integrated processes in the power industries employees awarded from the tactical personnel reserve, a mentorship programme upon the of CIS countries; Federal Grid recommendation has been launched which requires each candidate to complete Company, its of Federal Grid his individual training plan under the supervision of his mentor • 190 employees were awarded by the Russian Ministry of subsidiaries Company in 2014 within ten months. As of the end of 2014, 412 succession pool Energy for their services to the electric power industry, and associates, members completed their individual training plan. including with the title “Honoured Energy Worker” (8 and contractors employees), with Honorary Certificates (70 employees) and Letters of Commendation (112 employees);
• 81 employees were awarded by the Association RaEl, including 7 employees who were given the title “Veteran of the Electric Power Industry” for their lasting personal contribution to the electric power industry development;
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Occupational Injury Rate in Federal Grid • 2 employees when working at UNEG facilities (SSs and OHLs), Plans for 2015 including 1 with fatality; Company For the purpose of the development strategy of the RF electric 2. Optimisation of functional organisation: • 1 employee in traffic accident caused by a third party. grid complex approved by the Resolution of the RF Government As of the end of 2014, the following types of injury were reported: No. 511-r dated 03 April 2013, and in order to implement • optimisation of processes and functions, management In general, the number of accidents, injured employees and the Long-Term Development Programme of Federal Grid hierarchy; • electric arc exposure – MES Volga; fatalities decreased in 2014 compared with 2013: Company as it pertains to measures aimed at increasing labour productivity, a set of measures is expected to be implemented in • levelling of man-loading; • falling from height – MES Siberia; • the number of accidents decreased by 1.6 times (from 5 to 3); 2015 having the most serious impact on stakeholders: • reducing lost work time. • traffic accident – MES Centre. • the number of injured employees decreased by 2.6 times (from 1. Slack time analysis and reducing lost time: 8 to 3 persons); 3. Improvement of efficiency of operating personnel training Three accidents happened in the Federal Grid branches – MES, • optimisation of man-loading; programmes, determination of training priorities: resulted in injures for three employees: • the number of fatalities decreased by half (from 2 to 1 person).
• improving of repair planning; • feasibility analysis of automated accounting system for trained operating personnel. • implementing standard maintenance schemes. Injury and Fatality Rate at Company’s facilities Динамика уровня общего и смертельного травматизма на объектах Компании 1.153 6.2.2. HEALTH AND SAFETY 25 1.040
0.880 Health and Safety Management System and Policy 20
0.700 To ensure effective operation of the occupational health and accordance with the Regulations on Health and Safety 15 0.654 safety management system (OHSMS) and to prevent occupational Committee of Federal Grid Company approved in 2012. There 0.542 accidents and diseases, Federal Grid Company adopted the are 49 Committees in Federal Grid Company with a total 0.523 Regulations on Health and Safety Management System (Order membership of 963 persons. In the reporting year, 317 meeting 0.511 0.426 No. 100 dated 28 February 2012) that determine occupational were held and 1,187 issues were considered. All decisions of the 10 0.327 0.512 health and safety policy and the OHSMS operating procedures. Committees were implemented. 0.254 0.231 0.302 G4-LA5 The Federal Grid’s Resolution No. 158 dated 15 March 2012 0.148 approved a regularly updated list of the existing laws and 5 regulations of the Russian Federation and organisational and The Electricity Industry Tariff Agreement also covers 0.181 0.190 0.187 0.149 0.160 0.145 administrative documents that provide for occupational health occupational health and safety topics. 0.114 0.113 0.102 0.071 and safety requirements and are needed for the OHSMS effective G4-LA8 0 0.037 operation in Federal Grid Company. 20022002 20032003 20042004 20052005 20062006 20072007 20082008 20092009 20102010 20112011 20122012 20132013 20142014 The Company’s focus areas in occupational health and safety are Another important element of the OHSMS is a workforce as follows: involvement in the creation of healthy and safe working Injury frequency rate Fatality frequency rate conditions through the appointment of the authorised persons • elimination of workplace injuries and occupational diseases; who performs health and safety monitoring in their structural
units, including monitoring of the compliance with the health and The following specific indicators are used for objective assessment of injury rate: Rif – injury frequency rate, and Rff – fatality • promotion of safe conduct and the development of the safety requirements by the employees. 997 authorised persons frequency rate. accident-prevention skills among employees; in the health and safety area were appointed in 1319 structural units of PMES branches. Among them, 876 persons received • continuous improvement of working conditions. training at the special health and safety courses. Values of Rif and 0.46 Occupational health and safety issues are among the top Rff in branches priorities for the Company’s management team. A Key and Corporate performance Indicator “No fatal workplace injuries or group Headquarters in accident with at least one person severely injured” has been introduced to measure performance of the Company senior 2014 managers and the heads of its branches – MES and PMES. G4-LA6 0.26 0.26
A Health and Safety Committee (the Committee) is one of the 0.19 elements of the occupational health and safety management Injury frequency rate system. It is composed of 21 persons, including representatives 0.12 from the Departments of the Corporate Headquarters, First Deputies of General Directors (Chief Engineers) of MES Fatality frequency rate branches and the Company subsidiaries and associates. The 0.04 Committee is a collective consultative body that formulates an occupational health and safety policy. In 2014, three meetings 0 0 of the Committee were held devoted to the development of MES Volga MES MES JSC FGC occupational injury prevention measures. Siberia Centre UES Health and Safety Committees (the Committees) are also established in Federal Grid branches. They operate in
100 101 CORE AREAS IN SUSTAINABLE DEVELOPMENT / CONTRIBUTION TO THE DEVELOPMENT OF SOCIETY
Measures to improve occupational safety Injuries to the Public at Company facilities
Measures to prevent injuries, improve occupational health and • viewing videos with safety instructions for operation (line In 2014, the following third party injuries were reported: The main focus areas of the Programme are: safety, eliminate major and recurrent violations of health and segments and work sites); safety requirements were taken in accordance with the Federal • 3 persons were injured due to their non-compliance with the • liaisons with government authorities, regulatory authorities, Grid’s Action Plan for employee injury risk reduction and the • giving topical lessons on supply procedures and standard requirements of the Rules for establishing exclusion zones law-enforcement agencies, community relations, including Programme for monitoring compliance with health and safety distribution of protective clothing; of electric grid facilities and special conditions for utilisation communications with summer visitors, gardeners and standards at the Company’s facilities. of land plots located within such zones approved by the amateur anglers; • site induction training of contractors’ personnel; Resolution of the RF Government No. 160 dated 24 February The main focus areas of the above Programmes were as follows: 2009 (fishing within the exclusion zone of 220 kV OHL, • measures to prevent electrical injuries among children and • transporting an examination commission to assess personnel • employee training in health and safety, health and safety unauthorised connection of a garage to 0.23 kV grid within the teenagers, including from problem families, and children knowledge; knowledge assessment; exclusion zone of 220 kV OHL); without parental care; • holding Labour Protection Days and conducting inspections of • training and practical application of behaviour-based safety • 1 person was injured due to intrusion into a -6/0.4 kV • measures to prevent electrical injuries among employees of working teams, including surprise inspections; audit organised for the purpose of intelligible explanation of transformer SS for the purpose of non-ferrous metal theft. outside organisations and contractors, including with owners- risks and possible consequences of safety violations; G4-EU25 drivers of heavy trucks and lifting machines, who operate • conducting special assessment of working conditions at close to power facilities; enterprises. • involvement of protective clothing producers to make In order to prevent third party injuries, including child injuries, a employees fully aware of the importance and configuration of Programme of public and information events aimed at reducing • measures to prevent theft of equipment and materials at clothing and instruct them to use it properly; In accordance with the Federal Grid’s Resolution “On Approval third person injury risks at Federal Grid facilities was approved power facilities. of the Procedure for Equipping Permanent Health and Safety by the Federal Grid’s Order No. 145 dated 21 February 2014. • arranging safe working practices at electrical facilities; Offices” No. 832r dated 14 December 2010, all permanent health and safety offices in MES and PMES are equipped with: • safety arrangements for vehicle operation; • stands for protection equipment demonstration, visual aids; A set of measures were implemented in 2014 within the above Programme (see the Table below).
• monitoring compliance with occupational health and safety • robots-simulators for hands-on skill practice in first aid; laws and regulations of the Russian Federation; Measures to improve health and safety • a demonstrative set of personal protective equipment; • assessment and mitigation of health and safety risks; No. 2014 • video-conferencing equipment for personnel distant training Measures • implementing technologies that ensure occupational safety. and evaluation, slide show projectors; Measures to prevent electrical injuries among summer visitors, gardeners and amateur anglers
To improve occupational safety, the Company takes safety • personal computers for knowledge assessment using 1. Preparation of information materials on electric injury prevention and their publication in local media, pcs 55 measures before repairs, performs injury risk assessment software “ASOP-expert” and “OLIMPOKS” (for employee 2. Preparation and distribution of printed materials for various target audiences, including with the involvement of volunteers and 1,710 and develops corrective actions. The Company also monitors training in knowledge assessment in industrial, fire and representatives from non-governmental organisations, pcs compliance with safe working practices by repair teams. Besides, energy safety), Modus, Fenix, Retren); 3. Making and placement of warning plates, pcs 13,032 in 2014 the following additional measures for occupational safety were taken: • a high-performance laptop, digital camera, recorder, printer, 4. Making and placement of warning plates, RUB thousand 4 ,654.4 • a behavior-based safety audit was implemented aimed at LCD television, laser pointer, video-projector with a screen; 5. Preparation of health and safety audio and video materials and their placement at local radio stations and TV channels, pcs 1 changing attitude of employees to conscious observance of Equipping the crossing points of electricity transmission lines with water bodies with the warning plates about prohibition or safety practices, which resulted in improving employee safety • videos on various topics; 6. danger of fishing within an OHL exclusive zone, pcs 32 behaviour; • posters and magazines on health and safety, fire safety and Measures to prevent electrical injuries among children and teenagers • mobile video recorders were used aimed at recording the industrial safety. 7. Data updating on power facilities within the area of responsibility of the branches located in populated areas in order to place 816 most dangerous actions of employees working at electrical additional warning signs around the fenced area and on OHL supports, pcs facilities; Since 2012, a comprehensive programme for improving 8. Conducting guided tours for schoolchildren to power facilities, pcs 73 occupational health and safety conditions at the Company 9. Conducting lessons on electrical safety for schoolchildren, pcs 50 • Labour Protection Days and Road Traffic Safety Months were facilities has been implemented. organised; 10. Preparation of handouts on child electrical safety and their distribution in educational organisations, pcs 1,990 11. Organising and holding a children drawing contest on electrical safety, number of PMES 14 • efficient operation of 50 permanent and 17 mobile health Total costs for improving and safety offices was organised to promote safe working occupational health and safety Measures to prevent electrical injuries among employees of outside organisations and contractors conditions and to train personnel to use safe practices, taking conditions, RUB mln 12. Distribution of preventive printed materials on the rules of operation in OHL exclusion zones in the divisions of the Sate Traffic 2 account of up-to-date safety standards; Safety Inspectorate that perform official registration of special vehicles, and in sensor monitoring and inspection stations, pcs 163.7 Measures to prevent electrical injuries in case of the unauthorised electric grid connection • stress-release rooms for operating personnel of substations are in operation; 140.2 Making of leaflets on fatal danger of the unauthorised electric grid connection and their and distribution among private 13. housing residents, number of PMES 8 • a review competition was conducted for the best organisation 119.3 Measures for technical evaluation and compliance of electrical facilities of work in the area of health and safety among MES and PMES 14. Conformance inspection of OHL wire dimensions with the electrical installation standards, number of PMES 41 branches; Checking availability, correct placements, readability and sufficiency of warning and information signs on OHL supports, SS 15. doors and fences, number of PMES 41 • a scheduled assessment of working conditions was performed at 5,935 workplaces. Checking availability of grounding risers, grounding loops. their integrity and compliance with the electrical installation 16. standards, making sample checks and measurements in accordance with the maintenance schedule, number of PMES 41 17 mobile health and safety offices operate in Federal Grid branches that are used for: • holding training seminars on safety issues, behavior-based The results of the Programme implementation were as follows: • 40% decrease in third party injuries, including decrease in safety audit in remote work sites; fatalities from 6 to 2 persons; 2012 2013 2014 • absence of electrical injuries among children in 2014; • workplace first aid training; • decrease in illegal actions of the public with respect to power facilities.
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Protection of Employees from Occupational Hazards Breakdown of classes 98.72 Breakdown of classes of working conditions of working conditions at 5,935 workplaces to be assessed (before Since 2002, no cases of occupational diseases have been under Production Conditions”, the maximum permissible level assessment) registered in Federal Grid Company. Health screening and of electromagnetic field intensity is 60 kV/m, with the exposure before and after the health checks are provided to monitor employee health. lasting less than one hour per work shift. special assessment Breakdown of classes of working conditions of working conditions at 5,935 workplaces assessed (after When conducting a special assessment of working conditions, The employees are protected from EMF through the on 2014, % assessment) exposure to electromagnetic fields (EMF) is assessed. According organisational measures, including guarding of EMF effect to measurements performed by the specialised organisations, zones, increase of the workplaces and employees’ distance from 43.8 36.5 the level of electromagnetic field intensity at substations: the EMF sources that ensures the compliance with the maximum possible level, and engineering and technical measures (the • does not exceed 5 kV/m at permanent workplaces; implementation of new technologies and the use of individual 15.0 protective equipment (EP-1-summer, EP-3-winter). 4.6 • is in the range from 5 to 30 kV/m at temporary workplaces for 1.20 0.08 repairs.
In accordance with the Sanitary Regulations and Standards Class 2 Class 3.1 Class 3.2 Class 3.3 (SanPiN) and the section entitled “Electromagnetic Fields
As at 01 January 2015, workplaces with harmful working conditions (class 3.1 and higher) represented 24.6%. Results of Special Assessment of Working Conditions
D E In 2014, the special assessment of working conditions was RUB9,607,390 were spent for the assessment of working conducted in 29 PMES branches and 4 MES branches of Federal conditions, of which RUB6,594,182.2 using budget funds of MES C Grid Company. The assessment covered 5,935 workplaces with and PMES branches, and RUB3,013,208 with refunds from the A Class 2 71.4% 8,128 employees. Social Insurance Fund of the Russian Federation. Breakdown of classes B of working conditions in B Class 3.1 14.9% Federal Grid Company (with consideration C Class 3.2 8.2% % of the assessment D Class 3.3 1.5% conducted in 2014), % E Newly created 4.0% A Cost sharing for conducting special assessment of working conditions in 2014, RUB mln
3,013 E D A – refunded from The number of workplaces with harmful working conditions has • exclusion of the assessment of working conditions by indicators SIF of the RF, RUB mln C decreased due to: “electromagnetic field” and “non-ionizing radiation from A under RUB1,000 12.7% personal computers”; 1. ensuring compliance of workplaces with the health and B RUB1,001 – RUB2,000 67.1% safety requirements, improving occupational sanitation and • exclusion of the assessment of working conditions by indicators conveniences during the last three years; “intellectual and emotional intensity”, “work pattern” in the C RUB2,001 – RUB3,000 14.4% 6,594 % “work intensity” factor; MES and PMES D RUB3,001-RUB4,000 3.4% 2. a differentiated estimation of exposure time (in different budgets, working areas) based on data from the automated operation 4. cancellation of Sanitary Regulations 2.2.4/2.1.8.562-98 “Noise RUB mln E RUB4,001 – RUB5,000 2.4% recording system; at workplaces, in private and public premises, and on the territory of residential development”. B 3. the following changes to the Procedure of special assessment of working conditions: Fire Safety • change in the approach to the assessment of work intensity (work intensity was assessed using 23 indicators, and working The Company has a Programme for enhancing and upgrading fire conditions were considered harmful if at least 6 indicators safety at the Company’s facilities for the period of 2011–2017. The were assigned class 3; today, 6 indicators are used for the Programme implementation has resulted in the improvement of assessment, and working conditions are considered harmful if fire safety over the last few years. As at the end of 2014, the total at least one of the indicators is assessed as harmful); amount of the Programme was RUB1.06 billion. The Programme 3. 5 workplaces obtained a harmful class 3.2 of working Following the results of the special assessment of working has been implemented for the mount of RUB301.5 million. conditions. conditions: • change in the assessment of working conditions by factors: “noise”, “overall vibration”, “local vibration”, “infrasound” and In 2014, emergency response exercises and fire trainings were According to the assessment, the number of workplaces with 1. an allowable class 2 of working conditions was assigned to “airborne ultrasound”, for which uniform maximum acceptable conducted (further details are available in the Table below). harmful working conditions reduced by 62.2% and amounts 5,859 workplaces; limits were set regardless of work difficulty and intensity; 1.28% of the total number of workplaces whose working 2. 71 workplaces obtained a harmful class 3.1 of working conditions were assessed in 2014. • exclusion of the assessment of “microclimate” (was relevant to conditions; regions of the Far North and equated localities);
• exclusion of the daylight coefficient within the factor “light environment”;
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The number of emergency response exercises and fire trainings for operative personnel of Grid 6.2.3. SOCIAL AND YOUTH POLICY Control Centres of MES, PMES, and SS in 2014, pcs
During 2014, three fires occurred at the Company’s substations The key objective of the Company’s social policy is to retain long- current financial situation and the strategy to reduce operational Quarter Plan Actual owing to manufacturing defects of high-voltage bushings of the term employment relations with highly qualified employees, costs, the Company maintains a socially-oriented policy. improve efficiency and employee engagement in order to provide Federal Grid Company is currently implementing consistent and 1 552 567 autotransformers. reliable operation of the Unified National Electric Grid for efficient measures aimed at maintaining and developing social 2 721 775 ensuring economic growth in Russia and uninterrupted energy programmes. MES East 3 627 721 supply for consumers throughout the country. Despite of the 4 570 631 Total 2,470 2,694 Fires and Burnings at Federal 1 797 865 Grid facilities 2 814 944 MES Siberia 3 800 854 4 830 885 Total 3,241 3,548 1 504 576 12 Fires total 2 542 697 Burnings total MES Western Siberia 3 494 567 4 490 530 Total 2,030 2,370 1 662 802 2 689 1,023 MES Ural 3 690 825 Benefits Package 4 696 846 Total 2,737 3,496 A benefits package offered to Federal Grid employees is an effective tool to improve employee motivation, including non-financial 1 motivation. 1 617 674 243 107 1 2 645 740 91 MES Volga 3 545 663 Attracting and retaining highly qualified employees 4 546 795 2 58 The Company does not have a collective bargaining agreement, Total 2,353 2,872 Benefits Package Objectives so social and labour relations and other relations directly 1 732 823 associated with them were regulated in 2014 in accordance • Pension plan 2 713 804 with the RF Electricity Industry Tariff Agreement for 2013- 2015 (hereinafter referred to as the Tariff Agreement) which MES South 3 707 742 • Support programmes for 3 is directly applicable to the Company. The All-Russian 4 704 724 2010 2011 2012 2013 2014 Company veterans 116 industrial association of employers in the electricity industry Total 2,856 3,093 *Burning means an uncontrolled combustion beyond a Motivating personnel for long- • Rewards scheduled for represented the Company’s interests as an employer when 1 1,577 1,709 special point and entailing no losses. term employment anniversaries and retirement negotiating and entering into the Tariff Agreement. The Company representatives were actively involved in the drafting the Tariff 2 1,416 1,492 dates Agreement and the Company’s proposals were taken into MES Centre 3 1,379 1,672 • Rewards for pensioners consideration in its conclusion. 4 1,165 1,259 scheduled for professional and The social and labour relations in the Company are regulated Total 5,537 6,132 anniversary dates in accordance with local regulations made in compliance with Employee attraction and 1 704 827 • Housing rent compensation retention the Russian legislation and provisions of the Tariff Agreement. 2 617 721 Some provisions of the Company’s local regulations improve • Voluntary medical insurance MES North-West 3 728 856 employment conditions as compared with the Russian legislation and the current provision of the Tariff Agreement. 4 728 867 Promoting employee health, • Accident insurance The Company ensures an increase in wage/salary level through Total 2,777 3,271 wellbeing and productivity indexation following the growth in consumer prices for goods • Compensation for wages lost 1 6,145 6,843 and services, ensures performance-related pay, guarantees through temporary disability the observance of statutory standards for working hours and 2 6,157 7,196 • Financial assistance connected leisure time, implements measures for improving occupational JSC FGC UES 3 5,970 6,900 with scheduled leaves, health and safety, offers various benefits to employees, that marriages, childbirths, and eventually contributes towards the improvement of the Company 4 5,729 6,537 funerals performance, increase in its competitiveness on the industry- 24,001 27,476 Providing social support to specific and territorial labour markets, attraction and retention employees1 • Extra leave of qualified employees in the Company.
• Monthly payments to employees G4-11 with many children or children with disabilities
1 Payments to full-time, part-time and temporary employees are made in accordance with an employment agreement, the Electricity Industry Tariff Agreement and the Labour Code of the Russian Federation.
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Social Programmes Implemented in 2014 Developing Corporate Culture
Federal Grid Company implements a number of social In 2014, Federal Grid continued to implement its Housing Policy Among the Federal Grid’s social projects, especially important programmes aimed at improving the quality of life of its which aims to attract and retain employees who play a key role are initiatives that focus on developing corporate culture, employees, addressing their housing problems, developing in the ensuring uninterrupted electricity supply to consumers maintaining the continuity of generations within the electric corporate culture, maintaining the continuity of generations and improving reliability of UNEG operation. The Housing Policy grid complex, building respect and interest for industry-specific within the electric grid complex, promoting health and active is focused on highly qualified operating personnel and young professions, promoting family values, health and active lifestyle lifestyle of employees. The major part of social programmes specialists. of employees, improving the Company’s image. was developed with consideration of business needs. In 2014, 193 company-owned apartments were commissioned Since 2010, the Company has implemented the Dynasty and provided for rent to the Company employees. To provide Programme aimed at fostering labour traditions and improving qualified personnel for UNEG power facilities that are in remote employee loyalty. In 2014, a traditional Doors Open Day was areas or under construction, a corporate housing stock of organised within the Programme in all regions where the Federal Grid Company has been created, numbering 647 living Company operates. The event included guided tours to the accommodations. The Companmy’s corporate housing stock Company’s most important substations for more than 1400 covers such regions as the Khanty-Mansi Autonomous Okrug children of the Company employees. – Yugra, Yamalo-Nenets Autonomous Okrug, the Tyumen and Amur Regions, Primorsky Krai, the Khabarovsk and On the eve of Power Engineers’ Day, a children’s drawing contest Krasnoyarsk Regions, Zabaykalsky Krai, Chechen Republic, “Lightful Profession” was organised with participation of more Stavropol Krai, Krasnodar Krai, the Moscow, Saratov and than 450 employees’ children from four to twelve years old. Leningrad Regions. Families with many children were provided Following the contest, a festive event was organised for winners with three-room flats, married couples – with two-room flats, and participants. and young single specialists – with one-room flats. The Company holds activities within the corporate programmes participated in competitions between companies of the Fuel and In addition, Federal Grid provides corporate assistance that aim to strengthen health, encourage an active lifestyle Energy Complex supported by the RF Ministry of Energy. according to its commitments assumed in 2011-2013 under the among employees thus contributing to productivity gain. programme for improving employees’ housing conditions. In In November 2014, Federal Grid, together with JSC R&D Centre 2014, corporate assistance in the form of interest-free loans and In 2014, Federal Grid Company continued to organise volleyball of FGC UES, organised a chess tournament in memory of Mikhail compensations was rendered to 788 employees, including 328 and indoor soccer trainings, offer partial reimbursement of gym Botvinnik – a chess-player and an outstanding scholar in power young specialists. membership. The Company’s volleyball and indoor soccer teams engineering.
For employees whose activities involve moving to another place, the Company compensates rental costs. In 2014, Federal Grid helped 526 employees, including 355 young specialists, with housing rent. The total costs for compensation of employee Youth Policy rental payments amounted RUB92 million.
In 2014, corporate In order to execute the assignment of the RF President, in 2014 Federal Grid Company has adopted a comprehensive approach assistance in the the Company implemented an initiative on organising health- to building strong relationships with young people, attracting form of interest- 788 328 improving rest of employees of Federal Grid branches in the and retaining young specialists. The main focus areas were free loans and employees, young Federal Grid 51 13 compensations was specialists Republic of Crimea. From 01 May 2014 until the end of the year, formulated in the Federal Grid’s Youth Policy approved by the Company Russian higher specialised including education secondary schools rendered to 314 employees and their family members rested in health Order No. 607 dated 07 October 2011. In accordance with the cooperates on various institutions resorts and children’s health camps of the Republic of Crimea. above document, the strategic areas in building relationships with aspects with youth are as follows:
1. improving the Company’s attractiveness as a future work place for students of higher education institutions and specialised Compensation of rental costs to employees secondary schools, developing mutually beneficial cooperation been trained at the Company’s facilities, were hired by Federal with industry-specific education institutions; Grid Company. Annually, Federal Grid hires more than 400 graduates from higher education institutions. Number of employees, persons 2. occupational socialisation and adaptation of young employees Year Total costs, RUB in Federal Grid corporate environment, promoting professional In April – May 2014, a traditional annual Day of Federal Grid growth, building a pro-active attitude; Total including young specialists Company was organised in 34 leading technical higher education institutions and 3 specialised secondary schools involving more 3. promoting professions of electrical engineering, drawing the than 2,100 students. 2012 653 334 110,646,734 schoolchildren’s interest to Federal Grid operations. To support teaching and learning process, familiarisation In order to attract the best graduates to the Company, facilitate tours are regularly organised to the Company power facilities 2013 624 421 116,196,089 their quick adaptation and increase motivation in the long-term for students of higher education institutions and specialised engagement, a number of projects are implemented, including secondary schools. In 2014, 1,082 students took familiarisation 2014 526 355 92,032,422 cooperation with higher education institutions and specialised tours to Federal Grid. secondary schools and social programmes for young specialists. On 18 November 2014, the Chairman of the Federal Grid’s Today, Federal Grid Company cooperates on various aspects Management Board, Andrey Murov held a meeting with students with 51 Russian higher education institutions and 13 specialised of National Research University Moscow Power Engineering secondary schools. The main area of cooperation with educational Institute. They discussed the development prospects of the institutions is still the organising practical and pre-degree Company and the related issues of training young professionals. training for students. Over the course of 2014, more than 640 students got practical skills at the Company’s facilities; Overall, more than 4,000 students, lecturers and the Company temporary jobs with time wage were created for 200 of them. employees took part in Federal Grid’s activities aimed at In 2014, 50 students were involved in the Company’s target cooperating with educational institutions. scholarship programme. Upon graduation, 41 students, who had
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6.2.4. TAKING CARE OF VETERANS 6.2.5. CHARITY AND SPONSORSHIP
Federal Grid Company considers charity to be one of the key areas of social policy, which ensures positive social environment for the purpose of sustainable development of the territories where the Company operates.
In accordance with the regulatory and administrative documents approved in the Company, Federal Grid provides charity support to individuals and legal entities.
The main areas of the Federal Grid’s charity support are: activities in the educational, scientific and cultural fields, public awareness campaigns, in the field of physical culture and sport, protection of buildings, facilities and territories of historic, cultural or environmental importance, activities in the field of health care, assistance for those who have suffered from natural disasters.
The Company has provided charity support to such nonprofit organisations as the Russian Red Cross, Amur Tiger Centre, Charitable Fund “Russian Child Fund”, public organisation “Children disabled from childhood”, patriotic organisation “Eternal Flame” and other organisations. At the end of 2014, Federal Grid has started making Federal Grid Company devotes much attention to social Federal Grid pays a special attention to the support of arrangements to support an expedition of the Russian protection of veterans. Federal Grid Company opened a museum educational activities. In the reporting period, the Company Geographical society to the islands of the Gulf of Finland. Being of the development of electric grid complex provided support to Moscow Power Engineering Institute, a partner, the Company takes part in the creation of a microsite Implementation of social policy and provision of financial in Volga Region Ivanovo State Power University, Samara State Technical “Virtual journey through the Gulf of Finland islands” and in the assistance to the Company’s veterans is governed by the University, Tambov State Technical University, and Ekaterinburg preparations for celebration of the 70th anniversary of Victory Regulations on Financial Aid to Veterans of Federal Grid Power Secondary Technical School. Charitable donations were Day that will include meetings with veterans-geographers, Company approved by the Order No. 331 dated 20 December sent for reconstruction and renovation of premises, equipping hydrographers and power engineers. 2005. The Regulations provide for uniform conditions for all laboratories and training workshops, construction of student employees to fall under the category “veteran of Federal Grid dormitories. In December, with the participation of the Company, a large- Company” and uniform standards for the provision of financial scale exhibition “Hermitage of Her Imperial Majesty” was aid. The Company’s veterans are non-working pensioners of Federal Grid Company also gives much attention to the opened in Nikolaevsky Room of the Winter Palace in Saint Federal Grid Company and other organisations of electric grid sponsorship of various cultural, educational and socially- Petersburg arranged to coincide with the 250th anniversary of complex that had operated prior to the creation of Federal Grid, oriented activities. the State Hermitage Museum. with a continuous employment in the electric grid complex not less than 10 years, veterans of the Great Patriotic War, workers of labour front and other persons categorised as veterans of the Great Patriotic War pursuant to the RF legislation.
In line with the above Regulations, a lump sum payment is made to veterans annually for the Company Day (June 25) and for the professional holiday – Power Engineers’ Day. Federal Grid provides an ongoing support to participants of the Great Patriotic War and workers of labour fronts. Veterans receive monthly pension supplements, subsidies for medical treatment and medicine, as well as lump sum payments for national holidays, including the Victory Day. As a substantial part of the systemic support, veterans are provided with additional health care services in the best health institutions of region. G4-DMA (former EU19)
Federal Grid Company actively engages with and provides assistance to the Council of War and Labour Veterans of the Electric Power Industry. In 2014, the Company organised celebrations for more than 300 veterans dedicated to Victory Day and the Power Engineers’ Day. The Company participates in the annual ceremony of wreath-laying to the Unknown Soldier’s Grave and the Monument to Marshal Georgy Zhukov, organised Federal Grid opened the Museum devoted to the electricity by the Council of Power Industry veterans. industry of Volga Region. The permanent exhibition covers a period from 50th years of the last century to the present days. The indoor exhibition includes documents and belongings of The Company plans to organise joint activities for Federal Grid’s people who stood at the origins of high voltage electric grid veterans and veterans of the industry. complex, as well as equipment of the years of 1950-1960. The outdoor area includes equipment brought from substations Representatives from the Council of Power Industry Veterans that are under total reconstruction. Employees from all are included in the Expert Council of Federal Grid Company and enterprises of MES Volga, as well as power industry veterans are actively involved in drafting solutions aimed at ensuring were involved in the collection of exhibit items for the museum. reliable operation and development of the electric grid complex.
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6.3. MANAGING ENVIRONMENTAL IMPACT Environmental Policy
Federal Grid Company takes a responsible approach to transmission and distribution of power. For these purposes, the The above goal can be reached through achieving the following environmental protection, aimed at improving environmental Company implements its Environmental Policy. objectives: safety, ensuring the reliable and environmentally safe • ensuring environmental safety and rational utilisation of natural resources in the course of the Company’s operations, prevention and elimination of accidents resulted in negative 6.3.1. ENVIRONMENTAL IMPACT MANAGEMENT SYSTEM effects on the environment; • compliance with the environmental legislation of the Russian Federation and other requirements relating to the Approach to Environmental Protection environmental aspects of Federal Grid;
Ensuring environmental safety and rational utilisation of natural Environmental Management System (EMS) for compliance with • continual improvement of the environmental management resources is vital for Federal Grid operations. The Company the requirements of the international standard ISO 14001:2004. system, involvement of employees in the activities aimed at mitigating the environmental risks, improving environmental implements its environmental strategy based on the ecological G4-15 doctrine of the Russian Federation and taking into account performance and ensuring rational use of natural resources; basic principles of the State policy in the area of environmental development of the Russian Federation, principles of the Electric The Company is guided by the precautionary principle and aims • efficiency enhancement of the budget planning and the use of Grid Complex Development Strategy, the Policy for Innovative to avoid any presumptive environmental damage even in those financial resources allocated for environmental activity; Development, Energy Saving and Improving Energy Efficiency areas where no scientific evidence of any environmental abuse of JSC Russia Grids, and the Environmental Policy of Federal is available. Decisions that involve elimination or mitigation • making environmental commitments with account of Grid Company, as well as opinions of the leading environmental of negative environmental impact are adopted at the stage of the development prospects of the electricity industry, organisations. designing the electric grid facilities and are approved in the The Company operates in accordance with the Environmental technological upgrade, improvement of electricity course of public hearings and in dialogues with stakeholders. Policy approved by the Federal Grid’s Board of Directors in transmission and distribution processes, implementation of energy saving initiatives, decrease in energy losses in The Company is committed to embed voluntary international G4-14 2014. The Environmental Policy of Federal Grid Company and environmental standards in its practices and to certify its a Concept of Environmental Development of the Electric Grid transportation; Complex were developed in pursuance of the RF Government Executive Order “On Approval of the Electric Grid Complex • ensuring innovative development in the area of environmental Development Strategy” No. 511-r dated 03 April 2013, and in safety and rational utilisation of natural resources using the best available environmental practices and technologies; Environmental Laws and Regulations accordance with the ecological doctrine, the Energy strategy of Russia for the period through 2030, and the Policy for Innovative Development, Energy Saving and Improving Energy Efficiency of • support of effective cooperation with international and The main Russian laws and regulations and Federal Grid’s organisational and administrative documents JSC Russia Grids. Russian government and non-government organisations, relating to environmental safety are as follows (as at 2014): scientific and educational institutions actively involved in The underlying principles of the Federal Grid’s Environmental addressing environmental protection issues; • Federal Law “On Environmental Environmental Protection in Federal of the International Standard ISO Policy are as follows: Protection” No. 7-FZ dated 10 Grid branches – MES and PMES” No. 64 14001:2004 in MES East” No. 93r dated • building up the Federal Grid’s image as an environmentally January 2002; dated 12 February 2014; 27 February 2014; • recognition of the constitutional right to a healthy responsible and environmentally-friendly company. environment; • Federal Law “Water Code of the • Administrative Order “On Approval of • Administrative Decree “On Conducting The Company management assumes responsibility for meeting Russian Federation” No. 74-FZ dated Quantitative Environmental Targets of an Internal Audit of the Environmental • responsibility for environmental protection when making the commitments established by the Environmental Policy. All 03 June 2006; JSC FGC UES for 2014-2016” No. 227 Management System in the Corporate management and investment decisions on the development of employees of the Company, as well as contractors’ staff, who dated 15 May 2014; Headquarters of JSC FGC UES” • Federal Law “On Sanitary and Federal Grid facilities in the RF regions; work for the Company, are aware of the goals and objectives of No. 214 r dated 18 April 2014; Epidemiological Welfare of the • Administrative Order “On Drafting our Environmental Policy. Population” No. 52-FZ dated 30 a Programme for Implementing the • Administrative Decree “On Performing • energy saving and rational utilisation of natural and energy March 1999; Environmental Policy” No. 343 dated 08 an Environmental Analysis in Federal resources in the Company’s operations; August 2014; Grid branches – MES and PMES” • Federal Law “On Protection of No. 232r dated 29 April 2014; • scientific validity of the Federal Grid’s Environmental Policy Atmospheric Air” No. 96-FZ dated 04 • Administrative Order “On the and promotion of research in the area of environmental impact May 1999; Environmental Policy of JSC FGC UES” • Administrative Decree “On Performing of facilities; No. 572 dated 10 December 2014; an Environmental Analysis in • Federal Law “On Production and Subsidiaries and Associates of JSC Consumption Waste” No. 89-FZ • Administrative Decree “On Approval • giving preference to the best available technologies in order FGC UES” No. 462r dated 27 August dated 24 June 1998; of Documents on Environmental to minimise potential environmental damage caused by the 2014; Management System of JSC FGC UES” Federal Grid’s operations; • Federal Law “On Fauna” No. 52-FZ No. 686r dated 11 October 2013; • Administrative Decree “On Conducting dated 24 April 1995; a Re-Certification Audit in the • priority of preventive measures over measures to eliminate • Administrative Decree “On Approval • Federal Law “On Specially Protected Corporate Headquarters of JSC FGC negative environmental impacts; of the Regulations on Industrial Natural Areas” No. 33-FZ dated 14 UES” No. 482r dated 03 September Environmental Control and the March 1995; 2014; • international cooperation in the area of environmentally Instruction on Waste Management in friendly and energy-saving technologies and equipment; • Federal Law “On Water Supply and Federal Grid branches – MES and PMES” • Administrative Decree “On Approval Wastewater Disposal” No. 416-FZ No. 56r dated 30 January 2013; of the Lists of Laws and Regulations • openness and availability of environmental information, dated 07December 2011; and organisational and administrative • Administrative Decree “On Approval of ensuring that all stakeholders are informed on accidents documents of JSC FGC UES relating to Standard Environmental Action Plan of happened, their environmental impacts and measures to • Administrative Order “On environmental aspects of operations Federal Grid branches –MES and PMES” eliminate them. Organisation of Environmental of JSC FGC UES” No. 566r dated 03 No. 903r dated 28 December 2012; Activity of JSC FGC UES” No. 949 October 2014. dated 15 December 2010; The Environmental Policy of Federal Grid Company aims to • Administrative Decree “On Implementing mitigate the negative environmental impacts of electricity • Administrative Order “On Approval the Environmental Management System transmission and distribution. of the List of Documents on in Compliance with the Requirements
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Areas of Environmental Activity and Environmental Measures
The Company’s environmental activity covers the following • enhancement of environmental monitoring; areas: • creation of a Environmental Management System that 1. Strict compliance with the provisions of the Russian meets the requirements of the international standard ISO environmental legislation, including: 14001:2004; Managing Environmental Impact at the Stages of Design and Construction of Power Facilities • compliance with the environmental safety requirements at • involvement of the Company’s personnel in the activities all life-cycle stages of electric grid facilities; aimed at mitigating the environmental risks and negative environmental impact; • serving the Company’s interests through active participation In compliance with the requirements and principles Federal Grid Company does not use static capacitor in the environmental law-making; • development of the environmental training and retraining of the RF legislation, standards, regulations and banks impregnated with trichlorobiphenyl, and programmes for the Company’s employees. specifications, as well as organisational and plans to decommission equipment containing • improvement of normative and technical regulation of the administrative documents, such as: trichlorobiphenyl and to hand it over to specialised Company’s environmental activity enabling compliance with 4. Implementation of the environmentally-friendly and energy- institutions for further utilisation and recycling by the legislative requirements. saving equipment and technologies. • Regulations of JSC Russian Grids on Uniform 2025. Technical Policy of the Electric Grid Complex 2. Efficiency enhancement of the budget planning and the use of 5. Promotion of innovative development in the area of approved by the Board of Directors of JSC Russian In the reporting year, the Federal Grid branches – financial resources allocated for environmental activities. environmental safety and rational use of natural resources. Grids (Minutes No. 138 dated 23 October 2013; MES Centre, MES Ural and MES South – handed over 4,134 static capacitors containing trichlorobiphenyl, 3. Improvement of the environmental management system 6. Building up the Federal Grid’s image as a environmentally • Environmental Policy of Federal Grid Company with a total weight of 172.6 tonnes, to specialised through: responsible company. approved by the Board of Directors (Minutes No. institutions for utilisation. Reconstruction and 230/15 dated 30 September 2014); re-equipping of the Company’s facilities involve a mandatory replacement of such equipment. • Industry-Specific Operation and Maintenance Rules By now, a quarter of the equipment containing for Electric Power Plants and Electric Grids of trichlorobiphenyl has been removed and utilised. Federal Grid’s activities on ensuring environmental safety in compliance with the requirements of the Russian the Russian Federation approved by the Russian environmental legislation and industry-specific requirements include implementation of organisational and technical Ministry of Energy (Order No. 229 dated 19 June The Sanitary Rules and Regulations of the Russian measures. 2003); Federation (hereinafter, “SanPin”) contain strict standards for the impact of electric and magnetic • Company standards approved by Federal Grid’s fields on biological objects. The basic principle of Organisational measures: Technical measures: administrative orders, etc., protection of public health against electromagnetic development of draft waste generation and disposal limits, as well as arranging sites for temporary storage of waste; fields of power transmission lines is establishing standards for permissible discharges and emissions; when selecting equipment and technologies used at health protection areas and buffer zones for the repair (reconstruction) of the systems and devices of the oil facilities; Federal Grid Company, environmental requirements UNEG facilities. The size of the health protection development of health protection area designs; repair (reconstruction) of the water and sewerage systems, treatment are to be met at the following stages: areas is determined based on the health regulations registration of licenses for subsoil use and groundwater resource plants for utility/industrial wastewater and storm water, and artesian for permissible levels of noise, electromagnetic assessment projects, development of sanitary protective zone designs; wells; • design; radiation, and other physical factors on the outer treatment facilities maintenance; measures to protect the wildlife (installation of bird deterrent and border of the health protection area. All of the repellent devices, etc.); • expert examination of design documentation; Company’s facilities are designed, constructed, laboratory analysis of the quality of air, wastewater, and groundwater; and operated in full compliance with SanPin revegetation of land disturbed by operation of the electric grid • preparation of tender documentation for the 2.2.1/2.1.1.1200-03, “Health protection areas laboratory observations of the physical effects (electromagnetic facilities. radiation and acoustic exposure); right to conclude equipment supply contracts and health impact classification of enterprises, (gas insulated circuit breakers, gas insulated G4-PR1 In 2014, the following technical measures were implemented: installations, and other facilities. New edition.” This switchgears, transformers, static capacitors, etc.). SanPin article defines the boundaries of Overhead the systems and devices of the oil receivers were repaired environmental protection program training; line guard zone as follows: at 47 facilities; The environmental component in equipment agreements for the handling of waste generated. sites for temporary storage of waste were arranged at 98 facilities; selection includes optimisation of land allocation for • 20 m for OHLs with a voltage of 330 kV; In 2014, the following organisational measures were implemented: sewerage systems, treatment plants for utility wastewater and substations and transmission lines, reduction of the storm water were reconstructed at 59 facilities; negative impact on the environment, including on • 30 m for OHLs with a voltage of 500 kV; 3 draft standards for permissible discharges, 91 draft waste fauna, reduction in electricity transmission losses generation standards and waste disposal limits, 90 draft standards 1 bird deterrent and 6,467 bird repellent devices were installed on and improvement of UNEG energy efficiency. • 40 m for OHLs with a voltage of 750 kV; for permissible emissions, 50 health protection area designs, 29 overhead lines; drinking water protective area designs were developed; 4,134 static capacitors with trichlorobiphenyl, with a total weight In June 2011, the RF Government ratified the • 55 m for OHLs with a voltage of 1,150 kV. 427 employees were trained on various environmental training of 172.6 tonnes, were handed over to specialised institutions for Stockholm Convention on Persistent Organic programmes; utilisation. Pollutants. In accordance with the provisions of For substations under construction and 34 licenses for subsoil use were received for the purpose of Part II of the Convention, the Parties have agreed reconstruction, the boundaries of Overhead underground water abstraction; to eliminate the use of polychlorinated biphenyls line guard zones are determined in the design geological survey of underground water resources was conducted All technical measures help to maintain a healthy environment in equipment (e.g. transformers, capacitors or documentation. on Federal Grid’s operation facilities. on 82 deposits; other receptacles containing liquid stocks) by 2025. G4-PR1 Subject to the State obligations, when selecting 1,404 laboratory analyses were made of the quality of air, wastewater equipment for reactive power compensation, and groundwater, and of the physical effects.
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Environmental Management System 6.3.2. ENVIRONMENTAL PERFORMANCE
To ensure a high quality of the environmental management, Veritas Certification conducted external audits and confirmed the Company has committed to practice voluntary mechanisms the EMS compliance with the requirements of the international for environmental responsibility based on international standard ISO 14001:2004, the Company’s adherence to voluntary In 2014, the following reduction Federal Grid Company carries out its standards ISO 14000, thus implementing the Assignment of environmental commitments, the high level of employee of negative environmental impact environmental activities in accordance with the RF President “On the Need for State-Owned Companies to awareness and engagement, understanding of the role and was achieved against 2013 figures: Ensure Application of Voluntary Mechanisms for Environmental responsibility in the area of Federal Grid’s environmental Environmental Action Plans that are approved Responsibility” (subparagraph “l” of paragraph 1 of the List of management. annually. Assignments No. Pr-1640 dated 6 June 2010). In 2014, the Company managed to reduce EMS implementation Since 2011, the Corporate Headquarters and branches have been and certification costs in MES East by 37% and 30% respectively working on the systematic implementation and certification of compared with 2011. Reduction in unit prices for works on the Environmental Management System (EMS) for compliance EMS implementation and certification fully conforms to the with the requirements of the international standard ISO Company’s policy for reducing operating expenses, including 14001:2004. expenses for consulting services.
In accordance with the decisions of the Company’s Board of In 2014, the Company’s Board of Directors made an informed Directors, EMS was implemented and certified for compliance decision to implement in 2015 the Environmental Management with ISO 14001:2004 in MES North-West, MES Centre and MES System in the remaining four branches – MES Siberia, MES East during the period from 2012 to 2014. Compliance audits Volga, MES Ural and MES Western Siberia, and to receive, in decrease decrease decrease in decrease in volume decrease in above- in water limit payments by of the EMS of the Corporate Headquarters and Federal Grid case of the successful certification audit, a single certificate of in wastewater gross pollutant of waste disposed in consumption by discharge by branches are conducted annually. In 2014, experts from Bureau conformity for Federal Grid Company. discharge by landfills by 7.8% 9.6% 13.3% 19.6% 4.8%
Engagement with Environmental Organisations (G4-EN27)
The Company engages with various Russian and international Being a socially responsible and environmentally-friendly organisations on issues of environmental protection, company, Federal Grid implemented the following initiatives in environmental safety and rational utilisation of natural 2014: resources, such as: All-Russian public organisation “Russian ENVIRONMENTAL PROTECTION EXPENDITURES Birds Conservation Union”, information agency “Interfax-ERA”, • The Chairman of the Federal Grid’s Management Board, non-governmental organisation “World Wide Fund for Nature” Andrey Murov, and WWF Russia Director, Igor Chestin, made Federal Grid Company is committed to strict compliance with Capital expenditures allocated to protection (WWF Russia). a joint statement on their commitment to a worldwide event the Russian environmental legislation. For this purpose, the of the environment, RUB mln Earth Hour held on 29 March 2014. Within the above event, from Company performs a continuous monitoring of the Russian laws G4-24 8:30 pm to 9:30 pm, Federal Grid turned off non-essential and regulations brought into force in the area of environmental indoor lighting at more than 200 facilities. protection. The above monitoring enables timely and accurate Capital expenditures allocated to 2012 2013 2014 WWF Russia and other partners among non-governmental budget allocation for environmental activities. protection of the environment environmental organisations participate in public hearings of the • An up-to-date database and cartographic materials on the Federal Grid’s non-financial reports, as well as of environmental regional and federal specially protected natural areas of five Annually, Federal Grid branches (MES and PMES) make planned 113.95 173.14 81.16 impact assessment of major infrastructure projects. Active RF subjects within the Amur River Basin were handed over by environmental action plans indicating current needs in involvement of WWF Russia enables to improve the quality the World Wide Fund for Nature to Federal Grid Company with environmental activities and costs for their implementation. actual 82.12 133.65 126.97 of documents in terms of improving public awareness about a view to increase efficiency and environmental safety in the the Federal Grid’s environmental policy and environmental power industry and to preserve biodiversity. The environmental protection costs of Federal Grid Company management system. include capital expenditures and current expenditures and are Current expenditures are allocated to the following activities: G4-DMA (former EU19) G4-37 linked to the current operational needs. • development of draft waste generation and disposal limits; Capital expenditures are allocated to the following activities: • development of draft standards for permissible discharges; • arranging sites for temporary storage of waste; • development of draft standards for permissible emissions; • repair (reconstruction) of the systems and devices of the oil receiving facilities; • development of health protection area designs;
• repair (reconstruction) of the water and sewerage systems, • registration of licenses for subsoil use and groundwater treatment plants for utility/industrial wastewater and storm reserve assessment projects; water, and artesian wells; • treatment facilities maintenance; • measures to protect the wildlife (installation of bird deterrent and repellent devices, etc.); • laboratory analysis of the quality of air, wastewater, and groundwater; • revegetation of land disturbed by operation of the electric grid facilities. • laboratory observations of the physical effects (electromagnetic radiation and acoustic exposure); G4-EN31 • environmental protection program training;
• agreements for the handling of waste generated;
• implementation of an environmental management system.
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Current expenditures allocated to protection Environmental costs and investments, RUB The above-limit payments for negative environment impact are It should be noted that above-limit payments decrease annually of the environment, RUB mln mln due to the following reasons: as a result of obtaining the required permits. In particular, above-limit payments decreased in 2014 by 7.8% compared with • failure to have permits for pollutant discharge and emission, 2013. waste disposal; Current expenditures 2014 plan 2014 fact 2015 plan 2015 In 2014, the regional offices of the RF Rosprirodnadzor for environmental 2012 2013 2014 (plan) Environmental costs and investments 160.6 225.8 155.2 • waste disposal to landfills that are not included in the State (Environmental Protection Agency) have conducted a scheduled protection register of waste disposal facilities, due to a lack of the latter audit of Federal Grid branch – Karelskoe PMES, and two Total, including: 60.3 73.2 98.8 89.6 within the location area of production facilities; unscheduled audits of Federal Grid branches – Vologodskoe PMES and Volga-Okskoe PMES. Based on the results of the for protection of water • absence of the RF laws and regulations that govern the audits, 3 compliance orders were issued, while the total amount 16.5 20.6 37.2 22.3 bodies procedure for development and approval of standards for of the fines was RUB80,000 – RUB30,000 to individual company Environmental expenditures, permissible discharge onto the terrain and for issuance of the officers and RUB50,000 to the legal entity. for air protection 4.3 4.8 11.3 7.7 RUB mln appropriate permits. G4-EN29 G4-SO8
for protection of land resources from 35.6 41.6 44.5 50.1 Collection, Storage and Utilisation of Production production and consumption waste and Consumption Waste 126.97 for implementation 133.65 In the course of operations of the Company’s branches – MESs under the existing agreements, to the specialised institutions for and certification of 82.12 3.9 3.2 4.2 7.8 and PMESs–wastes of Russian National (GOST) hazard classes’ further recycling, utilisation and final disposal on landfills. an environmental 98.83 I-V are generated. All types of waste generated are transferred, G4-EN23 management system 60.33 73.07
other 0 3.0 1.6 1.7 2012 2013 2014 Waste generation, thousand tonnes Current expenditures Capital expenditures Waste generation 2012 2013 2014 The total amount of the Company’s environmental expenditures Total, including: 13.29 15.7 14.25 and investments in 2014 was RUB225.8 million, of which Analysis of changes in environmental expenditures for the prior I hazard class 0.05 0.01 0.09 RUB98.8 million for current environmental costs. periods indicates a tendency for an annual moderate increase. II hazard class 0.02 0.01 0.01 III hazard class 0.56 0.41 0.72 IV hazard class 5.07 6.7 6.25 Payments for Negative Environmental Impact V hazard class 7.59 8.57 7.18 Transferred to specialised institutions for treatment or reuse 4.44 6.38 5.92 Transferred to specialised institutions for landfill disposal 8.71 8.57 8.16 Pursuant to the provisions of Article 16 of the Federal Law “On Federal Grid branches (MES and PMES) for pollutant emissions Environmental Protection” No. 7-FZ dated 10 January 2002, from stationary and mobile facilities, discharges of pollutants, and payments for negative impact on the environment are made by waste disposal. Changes in waste generation, Changes in transferred waste volumes, thousand tonnes Payments for negative environmental thousand tonnes impact, RUB mln 15.70 Payments for negative 8.57 environmental impact, RUB mln 8.71 8.16 2012 2013 2014 14.25 4.44 6.38 5.92 13.29 Payments for negative environmental 2012 2013 2014 impact 7.12 7.55 6.86 Total, including: Transferred to specialised institutions for treatment or reuse 2.8 for air emissions of pollutants, of 0.16 0.18 0.17 Transferred to specialised institutions for disposal which: 2.9 2.6 2012 2013 2014 • within limit values 0.13 0.16 0.16 • above limit values 0.03 0.01 0.01 The main factor for changes in waste generation volumes is The technological processes related to electricity receipt, the commissioning of new facilities, as well as the repairs and transmission and distribution at the Company’s facilities do not for discharge of pollutants into 4.8 2.51 2.53 2.14 maintenance works at the Federal Grid’s production facilities. include both the use of recycled waste and waste reuse. water bodies, of which: 4.2 4.3 G4-EN2 • within limit values 1.6 1.43 0.90 Overall, there is an annual increase in volume of waste transferred for further reuse and treatment and, consequently, Federal Grid Company does not use raw materials, semi- • above limit values 0.9 1.11 1.24 a decrease in volume of waste disposed in landfills, which manufactures products (materials) in its operating process. for waste disposal, of which: 4.45 4.84 4.55 2012 2013 2014 indicates the reduction of negative environmental impact. G4-EN1
• within limit values 2.49 3.19 3.25 within limit values above limit values Transportation of workforce and materials used for the • above limit values 1.95 1.65 1.30 Company’s operations is carried out for short distances and does not have a significant environmental impact. G4-EN30
118 119 CORE AREAS IN SUSTAINABLE DEVELOPMENT / MANAGING ENVIRONMENTAL IMPACTS
Protection and Rational Utilisation of Water Resources Air Protection
In the course of production activities of Federal Grid Company air pollutant emissions occur from stationary sources (wood/metal- Water consumption at the industrial facilities of Federal Grid However, there is an annual decrease in wastewater discharge working machines, parking places, diesel driven generators, oil-filled equipment, welding stations, etc.). Company is based on centralised water supply, use of imported into the surface water bodies due to the reduced water water, as well as water withdrawal from surface and underground consumption. water sources. Gross air pollutant emissions, tonnes The water is subsequently used to meet the technical, drinking, Changes in wastewater discharge fire, and technological needs. into the surface water bodies, Changes in air pollutant emissions, thousands of m3 tonnes Volume and sources of water withdrawal, 88.3 Gross air pollutant emissions 2012 2013 2014 thousand m3 88 Total, including: 114.7 162.7 184.0 184.00 Water withdrawal and receiving 2012 2013 2014 solid 5.7 7.1 5.9 Total, including: 1317.4 1282.7 1160.1 85.8 162.70 gaseous and liquid, of which 109.0 155.6 178.1 • from surface sources 78.6 73.6 68.7 • from underground sources 687.1 657.8 643.2 2012 2013 2014 sulfur dioxide 0.7 1.0 1.1 114.7 • from other sources (municipal carbon oxide 27.4 39.0 42.8 water systems and private 551.7 551.3 448.3 Volume of wastewater discharged into the bottled water suppliers) nitrogen oxides 3.1 4.8 6.0 environment and into the sewerage system, (equivalent to NO2 ) thousands of m3 hydrocarbons (without volatile 53.2 77.0 49.6 Volume of wastewater discharged Changes in water consumption, 2012 2013 2014 organic compounds) 3 into the environment thousands of m volatile organic compounds 18.5 21.1 68.4 Total, including: 1157.0 581.6 558.6 1 282.7 other 6.05 12.7 9.6 Wastewater discharged into surface 88.3 88.0 85.8 1 317.4 water bodies, of which: 1 160.1 2012 2013 2014 • without treatment 0 0 0 • insufficiently treated 76.2 57.3 65.5
2012 2013 2014 • treated as required 12.1 30.7 20.3 Total volume of air pollutant emissions has increased annually permissible emissions were developed for 27 facilities of MES owing to the extended inventory of new sources of emissions URAL, 10 facilities of MES North-West and 5 facilities of MES Wastewater discharged onto the The reduced water consumption in 2014 was due to a decrease terrain, of which: 1068.6 493.6 472.8 (SF6 insulated equipments, welding stations, garages, Western Siberia. in the need, the reduction in losses as a result of maintenance, workshops, etc.). In 2014, new draft standards for maximum G4-EN21 • without treatment 854.3 292.4 246.6 repairs, and reconstruction of the water supply systems, as well as optimisation of water consumption recording (installation of • insufficiently treated 56.8 0 0 water meters). • treated as required 157.5 201.2 226.2 A considerable contribution to the decrease in water consumption Protection of Flora and Fauna Volume of wastewater discharged was made by Federal Grid branches – MES East, MEAS Siberia into the sewerage 2012 2013 2014 and MES Volga. Wastewater discharged into the G4-EN8 municipal sewerage system 687.3 680.5 535.6 In accordance with the uniform technical policy of the electric • measures on the electric grid facilities aimed to protect the grid complex, the Company takes all reasonable steps to reduce wildlife (fitting the OHL poles with special devices to prevent Water withdrawal at the Company’s facilities has no significant the impact of electric grid facilities on animals and birds, birds nesting on the structural elements of the poles, use of impact on the water sources used. It should be noted that Federal including through: bird deterrent and bird repellent devices, etc.) Grid branches – MES – perform a continuous monitoring of quality Volume of wastewater discharged into and availability of water withdrawn from surface and underground the environment and into the sewerage • restriction of industrial and construction activities on the The protection of birds is one of the concerns that have been water bodies for their assessment. system, thousands of m3 areas of special conservation interest; raised through stakeholder engagement. In 2014, measures to protect birds from electric shock were implemented G4-EN9 at 500/220/110 kV OHL of MES Centre and MES East. 1 bird 1157 • making management and investment decisions with due account of environmental impact assessment, development deterrent and 6,467 bird repellent devices were installed on The use of recycled water is in place at a number of substations 581.6 558.6 of measures aimed at mitigating and eliminating negative overhead lines. of the branches of Federal Grid – MES East, MES Ural, and MES environmental impact; G4-27 North-West. The total volume of reused water in 2014 amounted 687.3 680,5 535,6 to 25 million m3, which is more than 22 times the total volume of 2012 2013 2014 • use of innovative materials and technologies that ensure the water used for technical, drinking, and industrial needs. the compliance with environmental requirements and Monitoring conducted in the area of 500 kV OHL within the G4-EN10 Volume of wastewater discharged into the sewerage minimisation of negative environmental impact. territory of the National Park “Smolny” (Republic of Mordovia) Volume of wastewater discharged into the environment located within the area of operations of Nizhegorodskoe PMES, In the course of operations of Federal Grid Company negative Federal Grid Company uses the following technologies and found significant changes in species diversity and bird population initiatives in its operations: size in the area of 500 kV OHL. Changes in population in the environmental impact is caused by wastewater discharge into the In 2014, water consumption across the Company decreased by biotopes in question is due to both phenological conditions of surface water bodies and onto the terrain. 9.6% compared with 2013, the volume of wastewater discharged • self-supporting insulated and protected wires that allow us certain years, and changes in biocenotic factors in habitats Wastewater (industrial, storm water, and technical) from the in 2014 decreased by 13.3% compared with 2013. The decrease to mitigate negative environmental impact through narrowing affected by 500 kV OHL in operation and maintenance. Company’s facilities is discharged through the public sewerage in wastewater discharge resulted directly from the reduction in the width of right-of-way in wooded areas, and prevent the system, into the surface water bodies and onto the terrain. water consumption. destruction of birds; The most critical factors causing changes in land ecosystems, G4-EN22 including areas adjacent to 500 kV “Ylianovskaya – Severnaya” In 2014, no accidental oil spills were recorded. • high towers with the conductors over top of the valuable trees’ and “Ulianovskaya – Yuzhnaya” OHL, are as follows: G4-EN24 crown;
120 121 CORE AREAS IN SUSTAINABLE DEVELOPMENT / MANAGING ENVIRONMENTAL IMPACTS
In 2014, electricity consumption in UNEG was 21,261 mln kWh, The Company does not assess financial and other risks related
• climatic and phenological fluctuations (seasonal revegetation work is carried out upon completion of that is equivalent to 10.9 mln tonnes of СО2 emissions. to climate change. and of certain years), particularly changes the construction, reconstruction, or modernisation G4-ЕС2 in surface soil moisture and development of of the electric grid facilities. Finished facilities In 2014, the economic effect of measures within the Programme grassland and shrub vegetation; are put into operation by Federal Grid only after all for Energy Saving and Improving Energy Efficiency with regard revegetation measures provided for in the design to the reduction of electricity losses was 96,112.33 kWh, which is • cutting and thinning of undergrowth at certain documentation are completed. equivalent to СО2 emissions reduction by 49.4 tonnes. sections of 500 kV OHL corridors; G4-ЕN13 G4-ЕN19
• forest fires and the subsequent long-term The Company operates in the specially protected transformation of vegetation. (G4-ЕN12) natural areas. For further details, please see Appendix 3 to the Report. Plans for 2015 In the course of the Company’s operations, no shifts G4-ЕN11 of and/or damages to habitats were recorded. • to achieve environmental targets for 2015 approved by the In order to maintain a healthy environment and ensure Company (Order No. 227 dated 15 May 2014); Electric grid companies affect the condition of The number of species in the IUCN Red List and environmentally sensitive development, the Board of Directors the national protected species list with habitats in vegetation, mainly in the construction of power lines of Federal Grid Company made a decision to develop a • to revise the Company’s corporate standards for when creating openings in wooded areas or clearing the specially protected natural areas affected by Programme for Implementation of the Environmental Policy operations of the Company total of 156, including environmental safety at all life cycle stages of the electric grid vegetation along power lines. Vegetation (trees and of the Company for the period of 2015-2019. Besides the facilities. shrubs) is controlled when conducting scheduled plants – 62 species; mushrooms – 3 species; animals environmental and economic effects, the Programme is aimed at inspections of OHL along the full length through – 91 species. For further details, please see Appendix improving the Company’s social value. recording of height and density of new growth in 4 to the Report. In order to implement the provisions of the Federal Grid’s order to take measures for its timely removal. G4-ЕN14 In 2014, a draft Programme for Implementation of the Environmental Policy, the environmental targets for 2014-2016 Environmental Policy was developed that includes the following were approved by the Company (Order No. 227 dated 15 May Clearing of vegetation along power lines is key measures: 2014. performed manually, mechanically, or with the use of herbicides that are approved for use in the Russian • ensuring environmental safety in accordance with the Federation and do not have a negative impact on Clearing volume, 2014 requirements of the RF environmental legislation; the environment. Chemical clearing is not used in Environmental targets for 2014-2016, % • improvement of normative and technical regulation of the protected nature reserves or protected water areas. • manual clearing – 27905.605 ha; No pest control is performed. Company’s environmental activity; • mechanical clearing – 8726.456 ha; Decrease by year (compared Recovery of vegetation and terrain is performed • building up the Federal Grid’s image as an environmentally with the prior year) • chemical clearing – 4856.294 ha. No. Environmental target in accordance with disturbed land revegetation responsible and environmentally-friendly company; projects. In the vast majority of the cases, the 2014 2015 2016 • innovative development in the area of ensuring environmental Reduction of waste transferred safety and rational utilisation of natural resources. 1. for landfill disposal against the 1% 1% 1% total volume of waste The Programme’s implementation is scheduled for 2015-2019. Decrease in water consumption The Programme will allow us to: 2. against the total number of 1% 1% 1% facilities • build an effective system for managing environmental Decrease in violations of the protection, including implementation of the environmental environmental legislation detected in the course of management system and improvement of the environmental 3. 2% 2% 2% literacy of Federal Grid employees; environmental control against Climate Change saving equipment, including with replacement of the annual number of the overloaded and installation and commissioning • minimise negative environmental impact of the Company’s inspected facilities The Company’s emissions contain no ozone-depleting of auxiliary power transformers at the existing operations using the best available environmental practices substances that contribute to climate change. substations, optimisation of the load on the electric and technologies; G4-ЕN20 grids through the construction of overhead lines and substations; • promote the implementation of environmentally efficient In 2015, the Company also plans to implement, together with innovative technologies that ensure green economic growth; the representatives of the WWF Russia and the Russian Birds The Company is not covered by emissions trading • cutting electricity and thermal energy consumption Conservation Union, a joint monitoring of the efficiency of schemes for managing CO2e emissions or in buildings, structures and installations owned by • coordinate joint efforts on updating and improving a legislative measures conducted by the Federal Grid branch – MES East – to equivalents. Federal Grid Company; and regulatory framework, as well as technical specifications prevent death of Oriental Storks on power transmission lines G4-ЕU5 in the area of environmental protection. and to coordinate activities aimed at protecting Oriental Storks • cutting consumption of fuel and lubricants used and preventing emergency outages caused by storks’ activity. To reduce indirect greenhouse gas emissions, the by Federal Grid to provide electricity transmission The main tasks in the field of environmental activity of Federal Company worked out measures to reduce electricity services through UNEG. Grid Company in 2015 are: losses and approved the Programme for Energy Saving and Improving Energy Efficiency of Federal Note: • to approve the Programme for Implementation of the Grid Company for the period of 2010-2014, that Environmental Policy for the period of 2015-2019; includes the following key areas: In accordance with the guidelines for technical documents for joint implementation projects • to improve the Company’s environmental control and • cutting in-process electricity consumption when on GHG emission trading, 1 kWh of electricity reporting; transmitting via UNEG through optimisation of saved is equivalent to 511 g/kWh in CO2 the circuit and mode parameters in operation emission reduction units. • to implement the Environmental Management System in the of electric grids and commissioning of energy- Federal Grid branches – MES Siberia, MES Volga, MES Ural and MES Western Siberia, to arrange the certification of the whole Company for compliance with the ISO 14001:2004 requirements;
122 123 7.1. STAKEHOLDERS AND STAKEHOLDER ENGAGEMENT MECHANISMS Stakeholder Engagement
To ensure reliable, uninterrupted and high-quality energy maintain stakeholder relationships and partnerships based on supply to customers across the Russian Federation, Federal trust, mutual benefit and transparency, and to engage in regular Grid Company bears responsibility for effective maintenance and constructive dialogue. of a backbone grid infrastructure of the Russian Federation and UNEG development. To achieve this objective, the Company In the preparation of the Report, a management opinion survey should cooperate directly with all its stakeholders, including was conducted upon which we created a stakeholder map and electric energy industry entities, regulators, equipment suppliers, analysed stakeholder interests. contractors involved in the construction of electric grid facilities, G4-25 research institutions and consumers. Federal Grid strives to
Federal Grid Company strives to List of Stakeholder Groups
maintain stakeholder relationships Federal Grid Company’s stakeholders include G4-24 and partnerships based on trust, 1. Shareholders. 6. State Control (Supervisory) Bodies, 11. People in regions where the mutual benefit and transparency, Regulators. Company operates. 2. Clients/Customers. and to engage in regular and 7. Professional Associations and 12. Mass Media. 3. Business Partners, Suppliers and Industry Organisations. constructive dialogue. Contractors. 13. Educational Institutions. 8. Government Authorities. 4. Organisations representing interests 14. Environmental NGOs. of the Company employees. 9. Scientific Community. 15. Social and Charitable NGOs. 5. Local Authorities. 10. Company Management.
Stakeholder Map
2,5
7.1. Stakeholders and 2 7.2. Public Hearings 2 + Stakeholder Engagement + on 2014 Report Mechanisms
11 1 1,5 3 9 Stakeholder 10 8 Engagement 15 4 14 1 7 5 6
+ 7.3. External Assurance Statement The Company's impact on stakeholders 0,5 13 12
0 0,5 1 1,5 2 2,5 Stakeholders' impact on the Company
The Company engages with its stakeholders giving due multilateral discussions, congress and exhibition arrangements, consideration to their expectations. Federal Grid uses various sharing information through mass media – all these mechanisms for engagement (see Table. Stakeholder Engagement communication channels are regularly used by the Company and Mechanisms). Participation in forums and conferences, enable for constructive dialogue with stakeholders.
124 125 STAKEHOLDER ENGAGEMENT / STAKEHOLDERS AND STAKEHOLDER ENGAGEMENT MECHANISMS
Shareholder Engagement in 2014 G4-26 Shareholder group Expectations/Interests Engagement mechanisms
Shareholder Engagement Mechanisms • Promoting industry-specific science and education • Engagement with scientific organisations and 9. Scientific Community • Applying high performance innovative technologies placing orders for R&D Shareholder group Expectations/Interests Engagement mechanisms • Obtaining information on the Company’s development prospects • Road Show 10. Company Management • Engagement within the Company’s core activities • Delivering of strategy objectives • Conferences for investors
• Transparency of business processes • One-to-one meetings with shareholders and • Obtaining information on the Company’s 1. Shareholders, investors telephone communication. development prospects • Growth in shareholder value • Press releases under the required disclosures • Infrastructure development 11. People in the regions where • Implementing social and charitable programmes • Annual general meetings of shareholders and the • Creating jobs in regions where the Company the Company operates Company’s statutory reporting operates • Conducting public hearings • Implementing social projects • Creating and arranging meetings of the Consumer Council • Reducing negative environmental impact • Ensuring the reliable and uninterrupted electricity • Distributing SPV mechanism to accelerate 2. Clients/ Customers supply consumer access to UNEG • Holding media events (briefings, press-points, and • Openness and flexibility in consumer relations • Transparency of business processes others) • Signing cooperation agreements with Rosneft, 12. Mass Media RZD and other companies • Ensuring information accessibility of the • Distributing press releases on a timely basis Company’s activities • Handling requests from mass media • Signing agreements with Russian and foreign • Creating transparent competitive environment manufacturers 3. Business Partners, • Promoting industry-specific science and education Suppliers and Contractors • Using a market based pricing model • Supporting domestic suppliers in access to foreign • Signing cooperation agreements with higher • Personnel training and ensuring generational markets 13. Educational institutions education institutions, guest lecturing continuity • Organising students’ teams • Taking measures for attracting and retaining young • Applying high performance innovative technologies • Creating decent working conditions specialists • Cooperation with the World Wide Fund for Nature • Implementing a Corporate Housing Programme 4. Organisations representing • Health and Safety (WWF Russia) interests of the Company • Doors Open Days • Providing opportunities for professional and • Cooperation with the All-Russian Research employees personal growth • Holding professional skill competitions Institute for Environmental Protection of the RF Ministry of Natural Resources • Social support • Ensuring professional training, including within the 14. Environmental NGOs • Reducing negative environmental impact “Knowledge Days” • Cooperation with the All-Russian public organisation “Russian Birds Conservation Union” • Obtaining information on the Company’s • Cooperation with the Information Agency development prospects “Interfax ERA” • Signing cooperation agreements • Infrastructure development • Implementing social and charity programmes • Company’s performance and development 5. Local Authorities • Tax liabilities prospects • Public consultations • Information disclosure on corporate website 15. Social and Charitable NGOs • Creating jobs in regions where the Company • Key events operates • Public reports • Signing cooperation agreements • Social responsibility • Implementing social programmes
• Passing through regular inspections 6. State Control (Supervisory) • Compliance with the Russian legislation and • Arranging regular meetings Bodies, Regulators requirements • Cooperation Engagement with Shareholders
• Obtaining information on the Company’s and Investors • Arranging regular meetings 7. Professional Associations development prospects and Industry Organisations • Information disclosure on corporate website In 2014, Federal Grid held a series of one-to-one meetings with Chairman of the Management Board, Andrey Kazachenkov, who • Cooperation investors in line with the Company’s policy on improving investment is responsible for financial matters in the Company, acted as a attractiveness among the financial market participants. The speaker. • Ensuring the reliable and uninterrupted power participants were given the Company’s performance results and supply discussed prospects for investing in its securities. In December 2014, the Chairman of the Management Board • Meeting obligations under the investment of Federal Grid Company, Andrey Murov, held a meeting with • Implementing priority public sector projects programme The Company specialists held conference calls with investors investors. At the meeting, Mr. Murov told investors about the • Transparency and efficiency of operations, meeting • Signing several cooperation agreements with 8. Government Authorities following the publication of the IFRS financial statements for 2015-2019 electric grid complex development strategy. The with the needs of the economy public authorities (Rosreestr, regional agencies) 2013 financial year and the first half of 2014. The First Deputy meeting was held for the second time, and we expect them to • Openness and flexibility in consumer relations • Drafting, approving and implementing the import become a tradition. substitution programme • Supporting the domestic power plant industry, encouraging import substitution
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Engagement with Business Partners, Federal Grid cooperates regularly with JSC Trading System • Federal Anti-Monopoly Service of the Russian Federation; The above activities are carried out in accordance with the Plan Administrator of Wholesale Electricity Market (JSC TSA) on for participation of JSC Russian Grids in the improvement of Suppliers and Contractors reconciliation of electricity losses in UNEG within price/non- • Central Energy Customs of Federal Customs Service; laws and regulations of the Russian Federation for 2013-2014. price WECM zones, optimisation and facilitation of electricity • Non-profit partnership Market Council (being a member of the Counterparties within cross-border relations and customs supply points’ registration, improvement of commercial Attitudes of Federal Grid Company are recorded in the proposals Council, Federal Grid engages with it in accordance with the clearance: metering systems, simplification of the procedure for confirming submitted to the Government of the Russian Federation, the RF legislation). the commercial metering systems’ compliance with the WECM chambers of the Federal Assembly of the Russian Federation, • JSC Aserenergy (Azerbaijan); technical requirements. and federal executive authorities concerning draft laws and In order to ensure the observance of rights and responsibilities regulations that are under consideration of the above federal • State Industrial Association “Belenergo” (Belarus); There are currently several agreements in force, stipulating of the parties to service agreements for electricity transmission public authorities. The Company representative substantiate parallel operation of the Russian UES with the electric power through UNEG, Federal Grid conducts a regular monitoring of their proposals being actively engaged in working groups • Elering AS (Estonia); systems of foreign states. The parties to these agreements amendments to the Wholesale Market Accession Agreement established in the federal executive bodies, committees and are Federal Grid Company and economic entities of Georgia, initiated by members of the Market Council’s Supervisory Board, commissions of the Federal Council and the State Duma. • Litgrid AB (Lithuania); Kazakhstan, the Baltic countries and the Republic of Belarus, as organisations of commercial and technology infrastructure, and well as an Inter-system Agreement with Finland. The Company other members of the Market Council. Discussions of issues The representatives of Federal Grid branches, subsidiaries and • JSC Augstsprieguma tikls (Latvia); also signed agreements on technical support of parallel relating to the principles of commercial electricity metering, associates protect the Company’s interests when dealing with operations with Ukraine, the Republic of Belarus, Azerbaijan improvement of the procedures for compliance assessment local offices of federal executive bodies, executive authorities of • Georgian State Electrosystem LLC (Georgia); and Mongolia. of automated electricity metering systems, as well as the the subjects of the Russian Federation, non-governmental and procedure for establishing and distributing load losses in the other organisations. • JSC KEGOC (Kazakhstan); In accordance with the existing agreements concerning UNEG grids are regularly organised by the Market Council, JSC the metering of cross flows via cross-border electricity TSA and the RF Ministry of Energy. Federal Grid participates in Federal Grid Company regularly interacts with the Ministry of • North-East Electric Grid Company of the People’s Republic of transmission lines, Federal Grid exchanges fiscal metering the above discussions and stands for the necessity to simplify Energy of the Russian Federation and the non-profit partnership China (PRC); data with electric power systems of 11 countries (Azerbaijan, and speed up the wholesale market procedures in order to Market Council to discuss amendments to the Russian laws the Republic of Belarus, Georgia, Kazakhstan, China, Latvia, minimise potential costs of electricity transmission service and regulations, to address issues not currently covered by • State Electric Grid Corporation of China (PRC); Lithuania, Mongolia, Ukraine, Finland, Estonia). customers when entering the wholesale market and to ensure legislation, to participate in consensus meetings regarding draft the transparency of settlements under transmission service amendments to the Wholesale Electricity (Capacity) Market • Trade and Economic Company “Lun Huadian” (PRC); On 7 February 2001, a BRELL Agreement on parallel operation contracts. Accession Agreement and to agree on meeting agenda and was signed between Federal Grid Company and the energy to work out a unified position of the Russian Federation when • JSC Central Regional Electricity Transmission Grid (Mongolia); companies of Belarus (SIA Belenergo), Estonia (ELERING AS), To confirm the compliance of commercial metering systems with interacting with international organisations, the Supervisory Latvia (JSC Augstsprieguma tikls) and Lithuania (LITGRID AB). the WECM technical requirements and to avoid application of Board of the Market Council, approving a regulatory standard for • State Enterprise “NPC Ukrenergo” (Ukraine); penalties for Federal Grid’s failure to comply with the provisions process losses in UNEG, to provide information under laws and of the WESM Regulations, the Company works closely with JSC regulations, etc. • Fingrid Oyj (Finland); Once a year, the parties of the Agreement hold top level meetings to coordinate their cooperative work, and interact on a Trading System Administrator regarding amending the WECM regular basis at the BRELL Committee of the energy systems. Regulations with respect to simplification of the procedures for Federal Grid Company together with the Ministry of Energy • CIS Electric Power Council; confirming the compliance of commercial metering systems of the Russian Federation develops amendments to the RF with the WECM technical procedures considering the specifics of Government Resolution No. 1178 dated 29 December 2011, RF • JSC Inter RAO. To supply electricity to Russian customers in Bryansk, Pskov and Kaliningrad oblasts, the Company entered into contracts with Federal Grid’s operation at WECM. No cases of non-compliance Government Resolution No. 1172 dated 27 December 2010, the relevant organisations of Latvia, Lithuania, Estonia and the with laws and regulations concerning the provision and use of and RF Government Resolution No. 24 dated 21 January 2004, At the end of 2014, a partnership agreement was signed with Republic of Belarus to pay for electricity transit services through products and services have been identified in Federal Grid’s which allow for payment of losses in the wholesale electricity JSC Rosneft on oil products supply for backbone grid complex. the electric grids of these countries. operations. (capacity) market by Federal Grid’s counterparties at the prices G4-PR9 calculated by JSC TSA, and for payment of actual capacity at Federal Grid Company and its counterparties at the wholesale Pursuant to an agreement dated 20 November 2009 and the wholesale market. A Draft Resolution of the RF Government market – JSC Financial Settlements Centre, generating and signed by the governments of the Russian Federation and the “On Approval of Amendments to certain acts of the Government energy supply companies – have entered into standard electric Republic of Kazakhstan about measures to ensure the parallel Engagement with Government Authorities of the Russian Federation Aimed at Improving the Procedure power (capacity) purchase agreements to compensate losses operation of the unified energy systems of Kazakhstan and for Determination of an Amount of Capacity Purchased at the at WECM; commercial representation agreement on the basis Russia, the Company entered into a contract for the electricity Wholesale Market to Supply to Members of the Public and of which JSC Financial Settlements Centre enters into electric transit. Subject to the above contract, Federal Grid has paid Federal Grid Company’s attitude towards the state policy is Equated Consumers, and of an Amount of Capacity Purchased power (capacity) purchase agreements on behalf of Federal for the electricity transit through the territory of Kazakhstan formed in the course of drafting, expert examination, discussion by the Organisation that Manages the Unified (All-Russian) Grid Company, as well as service agreements of infrastructure since May 2010. and support in public authorities of draft laws and regulations National Electric Grid” is currently under consideration by the organisations at the wholesale electricity and capacity market. that affect the Company’s interests. Government of the Russian Federation. Federal Grid Company is involved in activities of the Executive Committee of CIS Electric Power Council whose tasks are as Federal Grid’s involvement in the above activities enables The principles for determination of committed capacity of grid follows: consideration of specific features of the operation and organisations and the procedure for calculation of reserved development of the electric grid facilities and the Company capacity and its payment by the ultimate consumers are among • to draft documents that support operation of the CIS Electric itself, including in the following areas: the topics regularly raised by the Russian Ministry of Energy and Power Council; the FTS of Russia. Federal Grid is fully engaged in discussions • building relationships among the participants of electricity and submits its proposals regarding the above issues to • to ensure preparation of standards, guidelines, manuals and and capacity markets; stakeholders. other relevant documentation in the field of electric power • provision of electricity transmission services; industry; • technological connection to electric grids of power receivers • to coordinate activities of permanent and ad hoc bodies of the of consumers, including small and medium-sized business CIS Council. entities, power generation facilities, etc;
Engagement with Control (Supervisory) • industrial safety of hazardous production facilities; Bodies and Regulators • establishment of the procedure for development, coordination and approval of investment programmes; Federal executive bodies, regulators and control bodies: • improvement of land, urban planning and forest legislation of • Ministry of Energy of the Russian Federation; the Russian Federation. • Federal Tariff Service of the Russian Federation;
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Engagement with Environmental Non- The Company respects the trade union members’ rights granted by the Russian legislation in force: it does not interfere in the Governmental Organisations G4-EU19 activities and does not prevent from the creation of primary trade unions, provides the equipped premises free of charge In line with the Cooperation Agreement between Federal Grid when there is a need, transfers money for social and cultural Company and the World Wide Fund for Nature (WWF Russia, and other events. Federal Grid Company engages with trade the Chairman of the Federal Grid’s Management Board, Andrey unions in the field of occupational health and safety, when Murov, and WWF Russia Director, Igor Chestin, made a joint regulating social and labour relations and other relations statement on their commitment to a worldwide event Earth Hour directly related thereto. held on 29 March 2014. Within the above event, from 8:30 pm to 9:30 pm, Federal Grid turned off non-essential indoor lighting at Participation in Forums and Conferences more than 200 facilities.
In addition, within the above agreement, an up-to-date database In February, the Federal Grid delegation took part in the and cartographic materials on the regional and federal specially 2014 Krasnoyarsk Economic Forum, where the government protected natural areas of five RF subjects within the Amur River of Krasnoyarsk Krai, Federal Grid Company and Polyus Gold Basin and the territories of the neighboring states were handed Mining Company signed a tripartite cooperation agreement on over by the WWF Russia to Federal Grid Company with a view implementation of the global project “Angar-Yenisey Cluster”. to increase efficiency and environmental safety in the power industry and to preserve biodiversity. The Chairman of the Management Board, Andrey Murov, held a number of meetings at the St. Petersburg International WWF Russia and other partners among non-governmental Economic Forum, including with the heads of the companies environmental organisations participate in public hearings of the Schneider Electric and ABB, and signed an agreement with Federal Grid’s non-financial reports, as well as of environmental the Federal Service for State Registration, Cadastre and impact assessment of major infrastructure projects. Active Cartography. In addition, the Federal Grid representatives took involvement of WWF Russia enables to improve the quality of part in the panel discussion of the Russian Ministry of Energy. documents and the public awareness about the Federal Grid’s The Global Energy awards ceremony supported by Federal Grid environmental policy and environmental management system. Company became one of the key events of the Forum.
In 2015, the Company also plans to implement, together with the representatives of the WWF Russia and the Russian Birds Meeting with Foreign Representatives The Consumer Council is an expert collective body expert Conservation Union, a joint monitoring of the efficiency of In August 2014, Federal Grid took part in the 45th Session of the collective body that represents the interests of all consumer measures conducted by the Federal Grid branches – MES East International Council on Large Electric Systems CIGRE. During 2014 was eventful in terms of Federal Grid’s meetings with groups and public associations of business community and Amurskoe PMES – to prevent death of Oriental Storks on the forum, the Federal Grid Scientific and Technical Center representatives of foreign states and companies responsible for regarding the delivery of the strategy of the RF electric grid power transmission lines and to coordinate activities aimed at signed a few agreements with the companies KEMA and Alstom the operation of electric grids. complex, including the improvement of accessibility of energy protecting Oriental Storks and preventing emergency outages Grid and KEMA. Meeting were also held with the companies infrastructure, customer-oriented approach of Federal Grid caused by storks’ activity. Siemens and Alstom Grid, where the matters were discussed At the beginning of the year, the meeting was held with Company. In addition, the establishment of the Consumer on import substitution and implementation of joint projects on Kazakhstan Electricity Grid Operating Company KEGOC and Council serves to create a public control tool. constructing energy facilities. an agreement was reached to expand cooperation in the area Engagement with Employee Representatives of parallel operation of the energy systems of Kazakhstan and Meetings of the Consumer Council are held on a regular basis. At the International Investment Forum Sochi-2014, the round Russia. In 2014, three meeting were held and the following matters were Since 2004, the Company has been a member of the All- tables were held with participation of Andrey Murov on the role considered: Russian Association of Employers in Electricity Industry, of Fuel and Energy Complex in the Russian economy and the At the working meeting held in June in Tbilisi and attended by which represents the Company’s interest in relationships development of Far East infrastructure. the Chairman of the Federal Grid’s Management Board, Andrey • key areas of the Federal Grid’s activity and its results in 2012- with the Non-Governmental Association “All-Russian Electric Murov, and the Vice-Prime Minister, the Minister of Energy 2013; Trade Union”, which is a representative of electricity industry In November, at the Third International Forum on Energy Saving of Georgia, Khaha Kaladze, issues were discussed on the employees. and Energy Efficiency ENES 2014, the Federal Grid CEO told cooperation between Federal Grid Company, GruzRosenergo and • drafting of the Federal Grid’s investment programme for 2015- about the improvements in the Company’s governance system, INTER RAO, potential construction of cross-border electricity 2020 adjusted for tariff constraints; The number of trade union members in the Company is about 7% reduction of transmission losses and new developments for transmission line and building an infrastructure to extend (1,700 employees) of the total number of employees; there are transmission facilities. electricity supply to Georgia and its transit to third countries. • Federal Grid’s approval of the RF Government draft resolution 13 primary trade union organisations created in the Company regarding obligations of consumers to pay for electricity branches. Engagement with the Russian manufacturers of electrical transmission services, taking account of payment for reserve equipment was a key topic at the working meeting held in June capacity, and regarding interaction of retail electricity market for the Federal Grid executives and the representatives of Power participants; Grid Corporation of India Ltd. • implementation of innovative technologies in UNEG; Several meetings were held in 2014 between the Federal Grid representatives and a Finnish company Fingrid Oyj and • conducting a technology and price audit of the Federal Grid’s agreements were signed on technological and organisational investment projects in 2013-2014. aspects of the two-way trade in electricity between Russia and Finland. Representatives of the following organisations compose the Consumer Council: Siberian Generating Company LLC, the Engagement with Service Consumer Council Energy Development Fund, JSC TSA, the Non-Profit Partnership of Guarantee Suppliers and Power Supply Companies, JSC INTER RAO UES, Melalenergofinance LLC, JSC NLMK, RUSAL, In order to implement the assignments of the RF President, JSC Tyumen Power Supply Company, JSC IDGC Ural, Technosbyt Vladimir Putin, announced at the St. Petersburg Economic LLC, Moscow Power Engineering Institute, the Non-Profit Forum in 2013, and the Order of JSC Russian Grids “On Partnership of Housing and Utility Sector Development, Implementation of the Assignment Following the 2013 St. Rusenergosbyt LLC, the All-Russian Non-Governmental Petersburg Economic Forum” No. 359 dated 25 June 2013, Organisation “Committee for the Support of Reforms of the Federal Grid Company established a Council of Service Russian President”, OPORA ROSSII, the Non-Profit Partnership Consumers of Federal Grid Company (hereinafter referred to as “Council of Power Producers”, CJSC Russia Coper Company. the Consumer Council). G4-DMA (former EU19)
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Stakeholder Engagement in the Report Preparation 7.2. PUBLIC HEARINGS ON 2014 REPORT Process G4-26
Dialogues with stakeholders are an integral part of the process agreed with the participants and is included in this Report (see MINUTES of social report preparation. A feedback from experts and 7.2. Public Hearings on 2014 Report). stakeholders enables to fully disclose the key subjects of of Public Hearings on 2014 Corporate Sustainability and Social Responsibility Report the report and to cover matters that are of top-priority for External assurance statement is also included in this Report of Federal Grid Company of Unified Energy System stakeholders. (see 7.3. External Assurance Statement).
Following the tradition of a stakeholder engagement, the Such an approach contributes to a better performance under Company submitted its 2014 Social Responsibility and Corporate the priority areas of corporate social responsibility and a The Public hearings on the 2014 Corporate Sustainability and Social Responsibility Report of Federal Grid Company were held on Sustainability Report for stakeholder representatives at a public higher level of stakeholder satisfaction. Federal Grid Company April 13 2015 from 10:30 a.m. to 1:00 p.m. at the Conference hall at 9/11 B. Nikolovorobinsky per., Moscow. hearing held on 13 April 2015. observes a considerable synergetic effect of the dialogue and the resource pooling. The participants received the following informational materials before the meeting: The results of this dialogue, the stakeholder proposals were G4-26 taken up on the 2014 Report. The Minutes of the dialogue was • invitation to the Public hearings; • materiality checklist;
• hearing agenda • draft 2014 Corporate Sustainability and Social Responsibility Report. • list of participants; Response to key topics and concerns raised through stakeholder engagement G4-27 • speaker presentations;
Concerns/proposals of participants Report section where the concerns will be responded
1. Response to stakeholder concerns raised through stakeholder engagement in the preparation of the 2013 Report The meeting was attended by the following persons: 2.1. Strategy and Sustainable Development 1.1. To disclose the corporate governance system in terms of CSR issues. 2.2. Corporate Governance 2.3. Risk Management JSC FGC UES: Corporate Development Agency “Da-Strategy” 1.2. To highlight risks in the CSR area. 2.4. Ethics in Governance First Deputy Chairman of the Moderator 2.5. Anti-Corruption Activities 1. Andrey KAZACHENKOV 11. Jan ZAGIDULLIN Management Board Director General 1.3. To describe relations with industry veterans. 6.2.4. Taking Care of Veterans 6.2.1. Human Resource Management Deputy Chairman of the 12. Alexandra VOLODINA Project Manager 6.2.2. Health and Safety 2. Vladimir DIKOY Management Board – Chief 1.4. To give details on the interaction with employees as stakeholders. 6.2.3. Social and Youth Policy Engineer 13. Dmitry KRASNOV Analyst-Advisor 6.2.4. Taking Care of Veterans Deputy Chairman of the 2. Response to stakeholder concerns raised at the Public hearings on the 2014 Report (13 April 2015) 3. Natalia OZHEGINA Analytical Centre of the RF Government Management Board 2.1. To provide information how the Company is going to engage with 14. Dmitry KHOMCHENKO Advisor bachelors graduated in 2015, including which positions they may expect 6.2.1. Human Resource Management Deputy Chairman of the 4. Nikolay SHVETS to occupy. Management Board World Wide Fund for Nature (WWF Russia) The response was given at the Public hearings on the 2014 2.2. To disclose clearly defined qualification requirements to all job levels, and Report and recorded in the Minutes, see 7.2. Public Hearings on Head of the Department Programme Director for to describe a career development mechanism. the 2014 Report. 5. Nikolay LEONOV for Environmental Policy 15. Alexey KNIZHNIKOV Environmental Policy of the Fuel Implementation and Energy Complex 2.3. To give details on air emissions with a breakdown by source of emissions In the next reporting cycle for 2015. in order to record maximum emissions and to strive to reduce them. Head of the Department for Moscow Power Engineering Institute 2.4. To start consultations with environmental organisations and to include 6. Kirill LUNIN Electrical Manufacturing biodiversity indicators and indicators related the specially protected areas Scheduled for 2015. Technology Development Head of the scientific research into performance indicators. laboratory of the Electric Energy Deputy Head of Corporate 16. Vladimir TULSKY System Department, Ph.D. in 2.5. To separate “indigenous minorities” as a stakeholder category. In the next reporting cycle for 2015. Governance Department – Head 7. Taiana KOVALENKO Engineering Science, Assistant 2.6. To inform stakeholders on public hearings in advance, approximately in of Securities and Informational In the next reporting cycle for 2015. Professor 2-3 weeks. Support Appendix 4. Total Number of IUCN Red List Species and National Institute of Pricing and Regulation of Natural Monopolies 2.1. To update an Appendix with a list of IUCN Red List species. Deputy Department Head – Head Conservation List Species 8. Georgiy KOLESNIK of Import Substitution and Local First Deputy Dean of the Content of Electrical Manufacturing Management Faculty, professor Not responded: the Company does not have a collective 17. Irina VOLKOVA 2.8. To disclose information on engagement with employee representatives, in bargaining agreement; the social and labour relations and other of the Global Economy and Global Deputy Head of the Department particular, on the regulation of social and labour relations in the Company relations directly associated with them were regulated in 2014 in Policy Faculty, Doctor of Science 9. Georgy RESHETNIKOV for External Communications and branches based on collective bargaining agreements. accordance with the RF Electricity Industry Tariff Agreement for Government Relations 2013-2015. Strategy Partners Group
2.9. To disclose information about wage and salary indexation by employee Acting Head of the Department for 18. Alexander GASILOV Project Director 6.2.3. Social and Youth Policy 10. Anna PETRAKOVA category. Social Programmes 2.10. To provide data on energy consumption and environmental impacts In the next reporting cycle for 2015. broken down by regions.
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Elena Zubakina All-Russian Electric Trade Union International Institute of Energy Policy and Diplomacy of MGIMO 5. Stakeholder proposals and University of the Russian Ministry of Foreign Affairs recommendations Ms. Zubakina supported the proposals made by Mr. Knizhnikov Head of the Division for Social and assessed the quality of a section devoted to biodiversity 19. Alexander GUSCHIN and Labour Relations and Leading analyst of the Centre for protection. She recommended adjusting or excluding an 23. Maria RIABOVA Remuneration of Labour Strategic Studies The moderator, Mr. Zagidullin, proposed stakeholder Appendix 4 with a list of species classified by IUCN Red List representatives to speak and assess the previously distributed categories. Russian Birds Conservation Union Massa LLC text of the draft Report in terms of completeness and materiality of disclosures, and to make their proposals and Elena Zubakina emphasised the Federal Grid’s efforts towards 20. Elena ZUBAKINA Development Director 24. Alexander SLAVINSKY Chairman of the Board of Directors recommendations to Federal Grid Company for how to arrange greening. its work in future. RaEl Association Ivanovo State Power University Alexander Rogulin All speakers among the stakeholder representatives gave a Mr. Rogulin noted the improved structuredness of the 2014 Specialist of the Office of Social and Dean of the Electric Power Faculty, positive assessment to the 2014 Report, considered the latter to Corporate Sustainability and Social Responsibility Report of 25. Alexander SOROKIN 21. Anton ZUEV Labour Relations in the Electricity Professor be a substantial contribution to the development of stakeholder Federal Grid, the successful implementation of the GRI G4 Industry relations, the Company’s corporate governance, and increase in reporting standards. JSC Institute Energosetproekt transparency and accountability. Power Industry Veterans Council He stressed that Federal Grid Company has supported the Head of the Division for The speakers made a number of specific recommendations Veterans Council for many years. According to him this work 22. Alexander ROGULIN Deputy Director 26. Alexander STRELNIKOV Development of Power Delivery on the text of the Report and on Federal Grid’s plans and should be carried out on a scheduled basis and be reflected in all Schemes and Energy Audit commitments. corporate documents.
Vladimir Tulsky Alexander Sorokin The speaker expressed his appreciation for an active student Mr. Sorokin supported the proposals made by Vladimir Tulsky engagement. He proposed to disclose the Company’s attitude and noted the Federal Grid’s contribution to personnel training. toward the electricity quality and the relevant measures taken He suggested giving more details on this topic in the Report. 1. Opening the reliability of UNEG is the Company’s primary objective and a in 2014. specific aspect of its social responsibility. Alexander Slavinsky An opening speech was delivered by Andrey Kazachenkov, First Mr. Tulsky asked how the Company plans to engage with Mr. Slavinsky expressed his gratitude for confidence that Federal Deputy Chairman of the Management Board, and member of the The speaker commented on changes in performance indicators university students who graduate in 2015 and which positions grid places through purchasing equipment manufactured by Management Board of Federal Grid Company. He thanked the related to reliability of electric grid facilities in 2014, particularly they may expect to occupy. their plant, for a constructive dialogue throughout the year, for participants for their attention to the Company and for the time the accident rate (for the year and for the autumn and winter the assistance to domestic manufacturers in their engagement they had devoted to the Public hearings on the 2014 Corporate period), elimination of process disturbances at substations He proposed to disclose clearly defined qualification with foreign electric grid companies, including certification of Sustainability and Social Responsibility Report of Federal Grid and overhead lines during the autumn and winter period. Mr. requirements to all job levels, and to describe a career Power Grid Corporation of India Ltd. Company (hereinafter – the Report). He spoke about the focus Dikoy then gave the necessary explanations regarding the development mechanism. areas of the Company’s sustainable development activities and implementation of plans and budgets under Maintenance and He made comments on the definition of a domestic emphasised that the Company considers the Report preparation Repair and the target programmes, as well as the manpower Alexey Knizhnikov manufacturer. process to be very useful from a practical standpoint. The loading. The speaker told about the programmes for improving The speaker pointed out the Company’s efforts toward speaker went on to say about a responsible attitude to the reliability implemented through equipment modernisation. environmental protection, particularly the approval of a new Alexander Guschin Report preparation and confirmed the commitment to disclose environmental policy that indicates a Company’s systemic Mr. Guschin thanked for invitation and for the response to non-financial information in accordance with the international The Chief Engineer paid a special attention to occupational approach to managing its environmental impact. He highlighted recommendations made last year. standards. health and injuries at the Federal Grid facilities, both among close working relationships with the World Wide Fund for Nature employees and third parties. Vladimir Dikoy noted a positive (WWF Russia) in 2014. He suggested that the Report should include information on Mr. Kazachenkov noted that despite the adverse macroeconomic trend for a decrease in the number of injured persons. engagement with employee representatives, in particular, on environment, issues of the Company’s sustainability and social Alexey Knizhnikov noticed a great progress in the 2014 Corporate the regulation of social and labour relations in the Company responsibility remain of key importance. 4. Federal Grid’s Import Substitution Policy: Sustainability and Social Responsibility Report of Federal Grid in branches based on collective bargaining agreements. terms of the compliance with the GRI G4 reporting standards. To moderate the Public hearings, the floor was given to Jan achievements, challenges, plans Alexander Guschin recommended wage and salary indexing for Zagidullin, the Director General of the Corporate Development The speaker noted a trend for an increase in emissions in the all employee categories and disclosing this information in the Agency “Da-Strategy”. He briefed the participants about the A presentation was made by Nikolay Shvets, who emphasised reporting year and proposed to give details on air emissions with Report. hearing agenda and pointed out that they all will have an a public significance of an import substitution policy of a breakdown by source of emissions in order to record maximum opportunity to express their opinions on the completeness and infrastructure companies and gave explanations about the emissions and to strive to reduce them. Alexander Martynov materiality of information disclosed in the Report and to give existing regulatory framework for import substitution in Russia. (Director of INTERFAX-ERA, submitted his comments by email) their recommendations in respect of the Company’s prospects. He stated the necessity to start consultations with Mr. Shvets referred in detail to the results of the Import environmental organisations and to include biodiversity Mr. Martynov suggested that the next Report should include data 2. 2014 Corporate Sustainability and Social Substitution Programme, which has been implemented in indicators and indicators related the specially protected areas on environmental impacts and abusive practices (grid losses) Federal Grid Company since 2011, and told about the new version into performance indicators. broken down by regions, including: Responsibility Report of Federal Grid of the Programme for 2015-2019, its goals and objectives, performance criteria, and mentioned key indicators for an Because of the fact that the 100th anniversary of Russia’s • changes in air pollutant emissions; Georgy Reshetnikov, Deputy Head of the Department for increase in the share of purchased home equipment. protected areas system will be celebrated in 2016, the speaker External Communications and Government Relations, described suggested that the Company’s plans for 2016 should provide • changes in water consumption; the details of the Report preparation process: determining In addition, the speaker stressed the importance of the system for the Company’s involvement in special measures as part of materiality, developing the Report structure and content, giving for implementing import substitution processes, which includes the Federal Grid’s environmental policy implementation and • changes in wastewater discharge into the surface water the rationale for choosing the key topics. He also told how the the Programme for import substitution, rules and procedures the development of partnership relations with environmental bodies; stakeholder comments and recommendations made through the for its implementation and a methodological framework. Mr. organisations. stakeholder dialogue last year were responded. Shvets highlighted that in these activities the Company is closely • changes in waste generation volumes; engaged with JSC Russian Grids. Mr. Knizhniov also proposed to separate “indigenous minorities” 3. Federal Grid Company’s responsibility for as a stakeholder category. • volume of wastewater discharged into the environment and The presentation also included the challenges for into the sewerage system; ensuring UNEG reliability implementation of import substitution measures and the means He recommended informing stakeholders on public hearings in to address them. advance, approximately in 2-3 weeks. • gross air pollutant emissions; Vladimir Dikoi, Deputy Chairman of the Management Board and Chief Engineer of Federal Grid Company, stressed that ensuring • in-process electricity consumption in UNEG;
134 135 STAKEHOLDER ENGAGEMENT / PUBLIC HEARINGS ON 2014 REPORT
• electricity consumption in buildings and constructions; personnel training centres, student construction brigades, 7.3. EXTERNAL ASSURANCE STATEMENT a programme “Industry-Focused Practical Training”, etc. • thermal energy consumption in buildings and constructions; Details on all these activities are disclosed in the Report.
• fuel consumption (petrol, diesel oil). • With regard to employee qualification requirements – such External Assurance Statement requirements are given in the form of professional standards and are developed by JSC Russian Grids for the electricity on 2014 Social Responsibility and Corporate 6. Summing-up industry. Upon their approval, the Company is ready to explain certain aspects relating to Federal Grid Company. Sustainability Report of Federal Grid Company In their closing remarks the Federal Grid representatives thanked all the participants for their comments and proposals to • With regard to the Veterans Council – the Company expressed the Report and the Company’s plans and commitments. Based its readiness to amend the Report section devoted to veterans on the results of the discussion, the following elements that in accordance with the proposals made by the Veterans need to be improved were noted: Council. General Information release of non-financial reports (this is the eighth report) merit an approval. To improve the quality of its reports Federal Grid Vladimir Dikoy: • With regard to wage indexation – in 2014, the Company We have been commissioned by the Management of Federal organises dialogues with stakeholders thus demonstrating its • With regard to electricity quality – the Company will try to provided wage indexation fro employees under “workers” Grid Company to carry out an evaluation of the 2014 Social willingness to maintain an open discussion on topical issues of disclose more details about the ensuring of electricity quality, category only. Indexation for all employees of PMESs is Responsibility and Corporate Sustainability Report (hereinafter its activities and to increase transparency of the Company and including work with such major consumers as JSC Russian expected since 1 January 2015. – the Report) in terms of completeness and materiality of the the whole electricity industry. Grids and JSC Russian Railways. information disclosed and responsiveness of the Federal Grid Georgy Reshetnikov: management to stakeholder comments and proposals. For this Highlighting and detalisation of information on the Company’s Nikolay Shvets: • With regard to Public hearings – in future the Company will try end, the Company gave us an opportunity to participate in the priorities in the area of social responsibility and sustainable • With regard to ecology – the Company will try to respond to to inform stakeholders on Public hearings not later than in 2 Public hearings on the 2014 Social Responsibility and Corporate development is an obvious advantage of the Report. Ensuring all recommendations in the 2014 Report and expresses its weeks. Sustainability Report of Federal Grid Company, where we could UNEG reliability, energy efficiency and energy management, willingness to consider the possibility to include biodiversity freely express our opinion on the issues discussed. import substitution became the main topics of the 2014 indicators and indicators related the specially protected areas • With regard to indigenous minorities – The Company will Report. The Report also describes how the Company manages suggested by the WWF Russia into performance indicators. try to respond to this recommendation when preparing the its corporate social responsibility and economic impacts, next Report, as currently there is no appropriate analytical Assurance Process contributes to society development and environment protection, • With regard to import substitution – the Company confirmed information on this issue. what anti-crisis measures it takes and what were the results of its commitment to promote its procedures for evaluating Our Statement is based on the comparative analysis of two anti-corruption activities. The Report also includes the results domestic manufacturers at the federal level. Moderator, versions of the Report (draft Report and its final version), on of operations aimed at ensuring power supply for 2014 Winter the analysis of speeches, comments, answers to our questions Olympics and Paralympics in Sochi. Natalia Ozhegina: Director General we received from the Federal Grid managers in the course of • With regard to bachelor engagement – the Company has of the Corporate Development Agency “Da-Strategy” the hearings. We were also able to evaluate how the Company developed a number of measures to reduce potential risks, representatives responded to the comments and proposals of Materiality including the project School for Young Engineers Applied Jan Zagidullin stakeholders. Bachelor’s Programme). In addition, the Company has a Traditionally, the Report contains the comprehensive mentorship programme with individual development plans, The Report has been evaluated against the following criteria: information on the scope and geography of the Company activities, corporate governance practice, internal control • Alignment of the Report with the requirements of the chosen and risk management systems. It also provides the integrated standards and Sustainability Reporting Guidelines (GRI G4 and information on the Company’s approaches and performance АA1000SES) in the specific areas of CSR management (ensuring reliability, innovative development, anti-corruption practices), gives a close • Consistency with the sustainable development context look at the issues of economic and environmental impact, covers the topics of HR policy and stake holder relations. The continuity • Adherence to the main reporting principles of the content as against previous reports allows for the readers’ understanding of the Company’s directions for the long-term • Materiality of the topics reported sustainable development.
• Completeness and information balance Balance • Responsiveness to stakeholder requests We give a positive evaluation of the level of balance achieved • Credibility and consistency of data reported in the 2014 Report. Sufficient information is provided on all the key areas of activity in the field of sustainable development, the The results of our analysis are presented in the form of the management approaches in these areas are reported, both the external assurance statement where we reported our own successful aspects of the Company’s activities and those that opinions on which we have come to an agreement. We express require improvement are covered. our opinions as individual members of the society and not as representatives of the organisations we work. We have not received any remuneration from the Company for the time spent Stakeholder Inclusiveness for this work. Our communications with the Company Management were arranged at a high level which, in our opinion, contributed to the Evaluation improvement of the quality and disclosure of information. In the course of the Public hearings we were given an opportunity to In general, our evaluation of the Report in terms of the format make comments and proposals on information disclosure and and scope of the information provided is positive. We are not further development of the draft of the Report. aware of any facts that put in doubt the reliability of the reported information. We recommend that the Company should have more active dialogues with stakeholders when preparing non-financial The Company’s efforts to inform the society on its activities reports in the next reporting cycle, use their results for in the filed of sustainable development in the form of regular determining material aspects of sustainable development
136 137 STAKEHOLDER ENGAGEMENT / EXTERNAL ASSURANCE STATEMENT
activities to disclose them in the Report, and involve a broader Recommendations SIGNATURES OF THE ASSURANCE TEAM MEMBERS: range of stakeholders in the above dialogues. When finalising this Report and preparing non-financial report for future periods, the Company should pay special attention to Responsiveness the disclosure of the following topics:
The Company Management responded to the comments and • environmental impact: to provide data broken down by Alexey KNIZHNIKOV proposals of stakeholders both within the Public hearings regions, data on air emissions, rational utilisation and land World Wide Fund for Nature (WWF Russia), Programme Director and by updating and amending the final version of the Report. recultivation, and on biodiversity; for Environmental Policy of the Fuel and Energy Complex In particular, the Report includes detailed information on HR management (engagement with bachelors, employee • social impact: to disclose in details the process and results representatives, the Veterans Council) and environmental of engagement with local communities in regions where the impact management (data was updated on IUCN Red List Company operates, and with indigenous minorities; species). In addition, the Company has made commitments to disclose details on air emissions with a breakdown by source • governance system: to describe in more detail processes for Elena ZUBAKINA of emissions, carry out consultations with environmental establishing good practices and a comprehensive sustainable Russian Birds Conservation Union, Development Director organisations and include biodiversity indicators and indicators development management system. related the specially protected areas into performance indicators, to separate “indigenous minorities” as a stakeholder In addition, we would like to propose the following measures for category and disclose engagement results, as well as to improve the Company’s stakeholder engagement: the report preparation process in order to involve stakeholders in advance informing them about any upcoming events • to plan stakeholder engagement ahead; (dialogues, hearings) in 2-3 weeks. Vladimir TULSKY • in addition to public hearings, to hold dialogues with Moscow Power Engineering Institute, Head of the scientific research We are pleased to note that our proposals with regard to future stakeholders on key topics of reports within a report laboratory of the Electric Energy System Department, Ph.D. in reports made within the discussion on the 2013 non-financial preparation process. Engineering Science, Assistant Professor report, were responded in the 2014 Report. The above comments and recommendations do not detract from the merit of the 2014 Report. We hope that Federal Grid Company will gradually implement plans and commitments in the field of CSR and sustainable development contained in this Alexander SOROKIN Report, and will develop its stakeholder engagement practices. Ivanovo State Power University, Dean of the Electric Power Faculty, Professor
Alexander GUSCHIN All-Russian Electric Trade Union, Head of the Division for Social and Labour Relations and Remuneration of Labour
Arkadiy ZAMOSKOVNY RaEl Association, Director General
Alexander ROGULIN Power Industry Veterans Council, Deputy Director
Alexander SLAVINSKY Massa LLC, Chairman of the Board of Directors
Alexander STRELNIKOV JSC Institute Energosetproekt, Head of the Division for Development of Power Delivery Schemes and Energy Audit
138 139 APPENDIX 1. IMPLEMENTATION OF THE COMPANY’S CSR AND SUSTAINABLE DEVELOPMENT PLANS AND COMMITMENTS IN 2014
No. Tasks Progress status Comments
1. Ensuring reliability of power supply
Revise certificates for substations and overhead lines, model charts for dynamic response to process disturbances on primary equipment 1.1. of substations and network schedules for performing emergency Implemented recovery work on OHLs, information on availability and scheduling of machinery among line sections
Enter into cooperation agreements with contractors on accident- 1.2. Implemented caused damage control of electric grid equipment of JSC FGC UES
Make cooperation agreements between Federal Grid branches and subsidiaries and associates of JSC Russian Grids on preventing 1.3. Implemented and eliminating accidents and emergency recovery at electric grid facilities
Make agreements between Federal Grid branches and hydro- meteorological and environmental monitoring centres on 1.4. communication for the purpose of early warning about weather Implemented change to improve reliability of operation of UNEG electric grid facilities
Implement a set of measures together with the Russian Ministry of Emergency Situations, including with its local offices, aimed at 1.5. preventing emergencies, reducing emergency risks and responding Implemented to emergencies caused by process disturbances at UNEG electric grid facilities
Organise and provide support to duty stations of JSC FGC UES that aim to prevent interruptions of electricity supply and/or take remedial actions when such interruptions are caused by process Appendices 1.6. Implemented disturbances at UNEG electric grid facilities, including due to natural hazards or other emergencies, as well as to avoide and mitigate risks that arise during operations in special periods
Carry out everyday monitoring of Mass Media with respect to information on emergency situations, forest fires, floods, ice rains, 1.7. and other natural climatic events that are dangerous for UNEG, and Implemented to mass outages in allied grids of subsidiaries and associates of JSC Russian Grids
Make weekly forecasts of considerable consumer constraints and 1.8. power deliveries of electric power plants, as well as UNEG facilities' Implemented outage analysis
Develop programmes for emergency response drills on accident response and recovery at UNEG electric grid facilities, including 1.9. with participation of contractors, divisions of JSC Russian Grids, Implemented the Russian Ministry of Emergency Situations, and territorial administrations
2. Energy efficiency and energy management
Implement the Energy Saving and Energy Efficiency Programme for The Programme for 2010-2014 has 2.1. 2010 – 2014 (approved by the Management Board of JSC FGC UES, Implemented been 105% (operational benefit) and Minutes No. 979/2 dated 27 July 2011) 108% (economic benefit) completed.
The Programme for 2015-2019 has Develop an Energy Saving and Energy Efficiency Programme for been approved by the Management 2.2. Implemented 2015-2019 Board of JSC FGC UES (Minutes No. 1239/3 dated 06 June 2014)
140 141 APPENDICES
No. Tasks Progress status Comments No. Tasks Progress status Comments
In the second quarter of 2014, Activities are currently underway Implement and certify the Environmental Management System of the corporate system of energy under the agreement for the EMS MES East, to confirm the certification status of the Executive Office Improve the energy saving and energy efficiency management management of Federal Grid 8.2. Implemented implementation in MES branches: and the branches MES South, MES North-West and MES Centre. based on the requirements of ISO 50001:2011 “Energy management Company, for its Corporate Volga, Ural, Western Siberia and 2.3. Implemented Prepare for the certification of the whole Company in 2015 systems – Requirements with guidance for use” (RF national Headquarters and two branches Siberia standard GOST R ISO 50001-2012) (MES Volga and Samarskoe PMES) was certified and a certificate of Improve the environmental training and retraining programmes, compliance was issued 8.3. develop environmental training programmes adapted to the specifics Implemented of the operation of electric grid facilities 3. Import Substitution Policy In accordance with the Agreements Increase the share of procured home electrical equipment against Revise the Company's corporate standards for environmental safety for drafting standards and technical 3.1. Ongoing 8.4. Implemented 2014 at all life cycle stages of the electric grid facilities documentation entered into in 2014, the completion date is 31 August 2015 The above tasks are stated in the Increase the level of localisation of electrical equipment 3.2. Ongoing Import Substitution Programme for manufacturing in Russia To the extent of decommissioning 2015 – 2019, the first progress report Continue work on decommissioning and disposal of equipment 8.5. Implemented of equipment containing will be made at the end of 2015 containing trichlorobiphenyl Increase the number of innovative products and technologies that trichlorobiphenyl 3.3. had been developed within the joint projects of JSC FGC UES and Ongoing domestic manufacturers and accepted in production Participate actively in the discussions of the draft federal laws and If and when draft law are submitted 8.6. to initiate amendments to certain legislative acts of the Russian Implemented for consideration 4. Internal Control System Federation
Engagement with CIS Electric Power Improve the Company’s internal control and risk management Maintain and develop the achieved level of regular interaction with Council, Science and Technology system based on the results of the analysis of local regulations and the key stakeholders in the field of environment, including the organisational and administrative documents of JSC FGC UES and 8.7. Implemented Council of Unified Energy System, For details on measures for improving representatives of the state authorities and non-governmental its subsidiaries and associates that regulate the existing internal Russian Union of Industrialists and 4.1. Implemented the internal control system, see environmental organisations on issues of public concern control and risk management system, develop and submit for Entrepreneurs paragraphs 5.1 and 5.2 below approval to the Chairman of the Company’s Management Board a Programme for Improving the Internal Control System of JCS FGC In accordance with the Forest UES Use Rules for Constructing, Consider indirect forest damage when constructing electricity Reconstructing and Operating 8.8. Implemented 5. Anti-corruption activities and security transmission lines Infrastructure Facilities approved by the Decree of Federal Forestry Improve communication using advanced information technologies Agency No. 223 dated 10 June 2011 that will enable to enhance efficiency of data processing and 5.1. Implemented Extend cooperation with the WWF within the agreement signed for reporting on contracts concluded together with the information 8.9. Implemented about the contractors' chain of ownership, including beneficiaries specific projects
KPI is assessed based on To automate the process of verifying information on contractors and As of the date of publication of this Consider the possibility of the development of KPI for reducing 5.2. Implemented 8.10 Implemented implementation of environmental their owners in the official government databases Report negative environmental impact management activities 6. Assistance in social and economic development of territories where the Company operates 9. Development of non-financial reporting and stakeholder dialogue in the CSR area Support domestic industry and energy constructing complex through In 2014, the volume of procured home 6.1. Implemented Prepare the 2014 Social Responsibility and Corporate Sustainability making supply orders equipment was 44,5%. 9.1. Implemented Report of JSC FGC UES 7. Personnel, social and youth policy 9.2. Disclose corporate governance system in terms of CSR issues Implemented 7.1. Involve higher education institutions in innovative activities Implemented 9.3. Disclose risks in the CSR area Implemented Ensure cooperation between higher education institutions and 7.2. Personnel Training Centres of JSC FGC UES to share experiences Implemented 9.4. Describe engagement with industry veterans Implemented and hold joint training events 9.5. Disclose details on the engagement with employees as stakeholders Implemented 8. Environmental protection Enter in cooperation agreements with regional authorities and other 1. Programme for Implementation of organisations: Environmental Policy for 2015-2019 9.6. Implemented 1. Implemented has been approved by the Order No. • Additional cooperation agreement between JSC FGC UES and Develop a Programme for Implementation of Environmental Policy 150 dated 31 March 2015. Skolkovo Foundation for 2014-2016 and improve the environmental control and reporting, 8.1. including the implementation of the integrated automated system 2. Further implementation of the 2. Implemented for technical data control and transfer as related to environmental integrated automated system for within the pilot activities in all Federal Grid branches technical data control and transfer project in MES is possible if funds are available and North-West upon addressing comments to the pilot project.
142 143 APPENDICES
APPENDIX 2. GRI G4 CONTENT INDEX – ELECTRIC UTILITIES SECTOR Indicator No. Indicator description Disclosure Section/Notes SUPPLEMENT Index Significant changes during the reporting period regarding the organisation’s size, structure, ownership, or its supply chain, including: Indicator No. Indicator description Disclosure Section/Notes • changes in the location of, or changes in, operations, Index including facility openings, closings, and expansions; 13. G4-13 • changes in the share capital structure and other capital Full 1.1. Company Profile Strategy and Analysis formation, maintenance, and alteration operations (for private sector organisations); Statement from the most senior decision-maker of the • changes in the location of suppliers, the structure of the organisation about the relevance of sustainability to the Statement from the Chairman of 1. G4-1 Full supply chain, or in relationships with suppliers, including organisation and the organisation’s strategy for addressing the Management Board selection and termination sustainability Whether and how the precautionary approach or principle is 6.3.1. Environmental Impact 14. G4-14 Full 2.3. Risk Management addressed by the organisation Management System 2. G4-2 Description of key impacts, risks, and opportunities Full For further details, see 2014 Externally developed economic, environmental and social 2.5. Anti-Corruption Activities Annual Report 15. G4-15 charters, principles, or other initiatives to which the Full 6.3.1. Environmental Impact organisation subscribes or which it endorses Management System Organisational Profile Memberships of associations (such as industry associations) 3. G4-3 Name of the organisation Full 1.1. Company Profile and national or international advocacy organisations in which the organisation: 4. G4-4 Primary brands, products, and services Full 1.1. Company Profile • holds a position on the governance body; 1.2. Company’s Role within the 16. G4-16 Full • participates in projects or committees; Industry and Region 1.2. Company’s Role within the • provides substantive funding beyond routine membership 5. G4-5 Location of the organisation's headquarters Full Industry and Region dues; • views membership as strategic The number of countries where the organisation operates, and names of countries where either the organisation has 1.2. Company’s Role within the Identified Material Aspects and Boundaries 6. G4-6 Full significant operations or that are specifically relevant to the Industry and Region sustainability topics covered in the report A list of all entities included in the organisation’s consolidated 17. G4-17 Full About this Report financial statements or equivalent documents 7. G4-7 Nature of ownership and legal form Full 1.1. Company Profile Explanation of the process for defining the report content and Markets served (including geographic breakdown, sectors 1.2. Company’s Role within the the Aspect Boundaries; explanation how the organisation has 8. G4-8 Full 18. G4-18 Full 3. Materiality of Disclosures served, and types of customers and beneficiaries Industry and Region implemented the Reporting Principles for Defining Report Content Scale of the organisation, including: A list all the material Aspects identified in the process for • Total number of employees 19. G4-19 Full 3. Materiality of Disclosures • Total number of operations defining report content 1.1. General Information • Net sales (for private sector organisations) or net revenues 9. G4-9 Full 6.2.1. Human Resource (for public sector organisations) Reporting, for each material Aspect, the Aspect Boundary Management • Total capitalisation broken down in terms of debt and equity 20. G4-20 within the organisation, including the list of entities or groups Full 3. Materiality of Disclosures (for private sector organisations) of entities included in p. 3.2 for which the Aspect is material • Quantity of products or services provided Reporting, for each material Aspect, the Aspect Boundary • Total number of employees by employment contract and outside the organisation, including the list of entities or groups 21. G4-21 Full 3. Materiality of Disclosures gender; of entities, and geographical locations for which the Aspect is • total number of permanent employees by employment type material and gender; • total workforce by employees and supervised workers and The effect of any restatements of information provided in No restatements have been 22. G4-22 Full by gender; previous reports, and the reasons for such restatements made • total workforce by region and gender and whether a 6.2.1. Human Resource 10. G4-10 substantial portion of the organisation’s work is performed Full Significant changes from previous reporting periods in the Management 23. G4-23 Full 3. Materiality of Disclosures by workers who are legally recognised as self-employed, Scope and Aspect Boundaries or by individuals other than employees or supervised workers, including employees and supervised employees of Stakeholder Engagement contractors; • any significant variations in employment numbers (such 7.1. Stakeholders and as seasonal variations in employment in the tourism or 24. G4-24 A list of stakeholder groups engaged by the organisation Full Stakeholder Engagement agricultural industries) Mechanisms The Company does not have a 7.1. Stakeholders and collective bargaining agreement; The basis for identification and selection of stakeholders with 25. G4-25 Full Stakeholder Engagement the social and labour relations whom to engage Mechanisms Percentage of total employees covered by collective bargaining and other relations directly 11. G4-11 Full agreements associated with them were regulated in 2014 in accordance The organisation’s approach to stakeholder engagement, with the RF Electricity Industry including frequency of engagement by type and by stakeholder 7.1. Stakeholders and Tariff Agreement for 2013-2015. 26. G4-26 group, and an indication of whether any of the engagement Full Stakeholder Engagement was undertaken specifically as part of the report preparation Mechanisms 12. G4-12 Description of the supply chain Full 1.1. Company Profile process
144 145 APPENDICES
Indicator Indicator No. Indicator description Disclosure Section/Notes No. Indicator description Disclosure Section/Notes Index Index
Key topics and concerns that have been raised through The remuneration policies for the highest governance body 41. G4-51 Full 2.2. Corporate Governance stakeholder engagement, and how the organisation has 7.1. Stakeholders and and senior executives for the types of remuneration 27. G4-27 responded to those key topics and concerns, including through Full Stakeholder Engagement its reporting. Report the stakeholder groups that raised each Mechanisms Ethics and Integrity of the key topics and concerns The organisation’s values, principles, standards and norms of 42. G4-56 Full 2.4.Ethics in Governance Report Profile behaviour such as codes of conduct and codes of ethics
28. G4-28 Reporting period Full About this Report Specific Standard Disclosures. Category: Economic
29. G4-29 Date of most recent previous report Full About this Report Aspect: Economic Performance
30. G4-30 Reporting cycle Full About this Report 43. G4-DMA Disclosures on management approach Full 6.1. Managing Economic Impacts
31. G4-31 Contact point for questions regarding the report or its contents Full Contacts 44. G4-ЕС1 Direct economic value generated and distributed Full 6.1.1.Economic Performance
About this Report Financial implications and other risks and opportunities for 6.3.2. Environmental 45. G4-ЕС2 Full The “in accordance” option the organisation has chosen. The the organization’s activities due to climate change Performance Appendix 2. GRI G4 Content Index GRI Content Index for the chosen option. The reference to the 32. G4-32 Full – Electric Utilities Supplement External Assurance Report, if the report has been externally Coverage of the organisation's defined benefit and pension 6.2.1. Human Resource 46. G4-ЕС3 Full assured. 7.3. External Assurance plan obligations Management Statement 47. G4-ЕС4 Financial assistance received from government Full 6.1.1. Economic Performance The organisation's policy and current practice with regard to 7.3. External Assurance 33. G4-33 Full seeking external assurance for the report. Statement Aspect: Market Presence
Corporate Governance 6.2.1. Human Resource 48. G4-DMA Disclosures on management approach Full Management Governance structure of the organisation, including committees of the highest governance body, including Ratios of standard entry level wage by gender compared to 6.2.1. Human Resource 34. G4-34 Full 2.2. Corporate Governance 49. G4-ЕС5 Full committees responsible for decision-making on economic, local minimum wage at significant locations of operation Management environmental and social impacts Proportion of senior management hired from the local 6.2.1. Human Resource 50 G4-ЕС6 Full Process for delegating authority for economic, environmental community at significant locations of operation Management 35. G4-35 and social topics from the highest governance body to senior Full 2.2. Corporate Governance executives and other employees Aspect: Indirect Economic Impacts
Information on whether the organisation has appointed an 6.3. Managing Environmental executive-level position or positions with responsibility for 51. G4-DMA Disclosures on management approach Full 36. G4-36 Full 2.2. Corporate Governance Impacts economic, environmental and social topics, and whether post holders report directly to the highest governance body Development and impact of infrastructure investments and 52. G4-ЕС7 Full 6.1.1. Economic Performance services supported Processes for consultation between stakeholders and the highest governance body on economic, environmental and 6.3.2. Environmental Significant indirect economic impacts, including the extent of 37. G4-37 Partial 53 G4-ЕС8 Full 6.1.1. Economic Performance social topics. If consultation is delegated, describe to whom Performance impacts and any feedback processes to the highest governance body Aspect: Procurement Practices Composition of the highest governance body and its committees by: 54. G4-DMA Disclosures on management approach. Full 6.1.4. Procurement • executive or non-executive; • independence; Proportion of spending on local suppliers at significant • tenure on the governance body; 55. G4-EC9 Full 6.1.4. Procurement • number of each individual’s other significant positions and locations of operation 38. G4-38 Full 2.2. Corporate Governance commitments, and the nature of the commitments; • gender; Category: Environmental • membership of under-represented social groups; • competences relating to economic, environmental and Aspect: Materials social impacts; • stakeholder representation 6.3. Managing Environmental 56. G4-DMA Disclosures on management approach Full Impacts Processes for the highest governance body to ensure conflicts of interest are avoided and managed. Information on whether 6.3.2. Environmental 57. G4-EN1 Materials used by weight or volume Full conflicts of interest are disclosed to stakeholders, including, Performance 39. G4-41 Full 2.2. Corporate Governance as a minimum: cross-board membership; cross-shareholding with suppliers and other stakeholders; existence of controlling 6.3.2. Environmental 58. G4-EN2 Percentage of materials used that are recycled input materials Full shareholder; related party disclosures Performance
The highest committee or position that formally reviews and External Communications 40. G4-48 approves the organisation’s sustainability report and ensures Full and Government Relations that all material Aspects are covered Department
146 147 APPENDICES
Indicator Indicator No. Indicator description Disclosure Section/Notes No. Indicator description Disclosure Section/Notes Index Index
Aspect: Energy 6.3.2. Environmental 75. G4-EN20 Emissions of ozone-depleting substances (ODS) Full Performance 5.2. Energy Efficiency and Energy 59. G4-DMA Disclosures on management approach Full Management 6.3.2. Environmental 76. G4-EN21 NO , SO , and other significant air emissions Full x x Performance 5.2. Energy Efficiency and Energy 60 G4-EN3 Energy consumption within the organisation Full Management Aspect: Effluents and Waste
The Company does not have 6.3.2. Environmental 77. G4-EN22 Total water discharge by quality and destination Full standard procedures and Performance methodology to calculate the GRI G4-EN5 indicator for electric 6.3.2. Environmental 78. G4-EN23 Total weight of waste by type and disposal method Full grid companies. Therefore, Performance 61. G4-EN5 Energy intensity None this indicator is not included in the 2014 Report. The Company 6.3.2. Environmental 79. G4-EN24 Total number and volume of significant spills Full plans to study best practices for Performance 2014 reports and to consider the possibility to disclose this Aspect: Products and Services indicator in future. 6.3. Managing Environmental 5.2. Energy Efficiency and Energy 80. G4-DMA Disclosures on management approach Full 62. G4-EN6 Reduction of energy consumption Full Impacts Management Extent of impact mitigation of environmental impacts of 6.3.2. Environmental 5.2. Energy Efficiency and Energy 81. G4-EN27 Full 63. G4-EN7 Reductions in energy requirements of products and services Full products and services Performance Management Aspect: Compliance Aspect: Water 6.3. Managing Environmental 6.3. Managing Environmental 82. G4-DMA Disclosures on management approach Full 64. G4-DMA Disclosures on management approach Full Impacts Impacts Monetary value of significant fines and total number of non- 6.3.2. Environmental 6.3.2. Environmental 83. G4-EN29 monetary sanctions for non-compliance with environmental Full 65. G4-EN8 Total water withdrawal by source Full Performance Performance laws and regulations
6.3.2. Environmental 66. G4-EN9 Water sources significantly affected by withdrawal of water Full Aspect: Transport Performance 6.3. Managing Environmental 6.3.2. Environmental 84. G4-DMA Disclosures on management approach Full 67. G4-EN10 Percentage and total volume of water recycled and reused Full Impacts Performance Significant environmental impacts of transporting products 6.3.2. Environmental Aspect: Biodiversity 85. G4-EN30 and other goods and materials for the organisation’s Full Performance operations, and transporting members of the workforce 6.3.2. Environmental 68. G4-DMA Disclosures on management approach Full Performance Aspect: Overall
Operational sites owned, leased, managed in, or adjacent to, Appendix 3. The List of Specially 6.3. Managing Environmental 86. G4-DMA Disclosures on management approach Full 69. G4-EN11 protected areas and areas of high biodiversity value outside Full Protected Natural Areas where Impacts protected areas Federal Grid Company operates Total environmental protection expenditures and investments 6.3.2. Environmental Description of significant impacts of activities, products, and 87. G4-EN31 Full 6.3.2. Environmental by type Performance 70. G4-ЕN12 services on biodiversity in protected areas and areas of high Partial Performance biodiversity value outside protected areas Category: Social – Sub-Category: Labour Practices and Decent Work 6.3.2. Environmental 71. G4-EN13 Habitats protected or restored Partial Aspect: Employment Performance 6.2.1. Human Resource Appendix 4. Total number of 88. G4-DMA Disclosures on management approach Full Management IUCN Red List species and Total number of IUCN Red List species and national national conservation list 72 G4-EN14 conservation list species with habitats in areas affected by Full species with habitats in specially Total number and rates of new employee hires and employee 6.2.1. Human Resource operations, by level of extinction risk 89. G4-LA1 Partial protected natural areas where turnover by age group, gender and region Management Federal Grid Company operates 6.2.3. Social and Youth Policy Aspect: Emissions Payments to full-time, part- Benefits which are standard for full-time employees of the time and temporary employees 6.3.2. Environmental 73. G4-DMA Disclosures on management approach Full 90. G4-LA2 organisation but are not provided to temporary or part-time Full are made in accordance with Performance employees, by significant locations of operation an employment agreement, the Electricity Industry Tariff 6.3.2. Environmental 74. G4-EN19 Reduction of greenhouse gas (GHG) emissions Full Agreement and the Labour Code Performance of the Russian Federation
148 149 APPENDICES
Indicator Indicator No. Indicator description Disclosure Section/Notes No. Indicator description Disclosure Section/Notes Index Index
Aspect: Labour/Management Relations Aspect: Child Labour
6.2.1. Human Resource Operations and suppliers identified as having significant risk 91. G4-DMA Disclosures on management approach Full Management 105. G4-HR5 for incidents of child labour, and measures taken to contribute Full 2.4.Ethics in Governance to the effective abolition of child labour In accordance with the current legislation of the Russian Aspect: Forced or Compulsory Labour Federation, employees receive Minimum notice period(s) regarding operational changes, notification on significant 92. G4-LA4 Full Operations and suppliers identified as having significant risk including whether these are specified in collective agreements changes to employment terms for incidents of forced or compulsory labour, and measures 106. G4-HR6 Full 2.4.Ethics in Governance and conditions not less than to contribute to the elimination of all forms of forced or 2 months prior to the event compulsory labour occurrence Category: Social – Sub-Category: Society Aspect: Occupational Health and Safety Aspect: Local Communities 93. G4-DMA Disclosures on management approach Full 6.2.3. Social and Youth Policy 6.2.1. Human Resource Percentage of total workforce represented in formal joint Management 6.2.2. Health and management–worker health and safety committees that 107. G4-DMA Disclosures on management approach Full 94. G4-LA5 Full 6.2.2. Health and Safety Safety help monitor and advise on occupational health and safety 7. Stakeholder Engagement programs The Company has no operations Type of injury and rates of injury, occupational diseases, lost Operations with significant actual or potential negative with significant actual or 108. G4-SO2 Full 95. G4-LA6 days, and absenteeism, and total number of work-related Partial 6.2.2. Health and Safety impacts on local communities potential negative impacts on fatalities, by region and by gender local communities
Health and safety topics covered in formal agreements with 96. G4-LA8 Full 6.2.2. Health and Safety Aspect: Anti-Corruption trade unions 2.5. Anti-Corruption Activities 109. G4-DMA Disclosures on management approach Full Aspect: Training and Education 6.2.5. Charity and Sponsorship
6.2.1. Human Resource Total number and percentage of operations assessed for risks 97. G4-DMA Disclosures on management approach Full 110. G4-SO3 Partial 2.5. Anti-Corruption Activities Management related to corruption and the significant risks identified
Average hours of training per year per employee by gender, 6.2.1. Human Resource Communication and training on anti-corruption policies and 98. G4-LA9 Full 111. G4-SO4 Full 2.5. Anti-Corruption Activities and by employee category Management procedures
Programs for skills management and lifelong learning that 6.2.1. Human Resource 112. G4-SO5 Confirmed incidents of corruption and actions taken Full 2.5. Anti-Corruption Activities 99. G4-LA10 support the continued employability of employees and assist Full Management them in managing career endings Aspect: Public Policy
Aspect: Diversity and Equal Opportunities 1.2. Company’s Role within the 113. G4-DMA Disclosures on management approach Full Industry and Region Composition of governance bodies and breakdown of employees per employee category according to gender, age 6.2.1. Human Resource Total value of political contributions by country and recipient/ No financial and in-kind political 100. G4-LA12 Full 114. G4-SO6 Full group, minority group membership, and other indicators of Management beneficiary contributions were made diversity Aspect: Anti-competitive Behaviour Aspect: Equal Remuneration for Women and Men 115. G4-DMA Disclosures on management approach Full 6.1.4. Procurement 6.2.1. Human Resource 101. G4-DMA Disclosures on management approach Full Management Total number of legal actions for anti-competitive behaviour, 116. G4-SO7 Full 6.1.4. Procurement anti-trust, and monopoly practices and their outcomes 6.2.1. Human Resource Ratio of basic salary and remuneration of women to men by Management Remuneration 102. G4-LA13 Full Aspect: Compliance employee category, by significant locations of operation system does not take gender into account. 5. Special Areas of CSR Management 117. G4-DMA Disclosures on management approach Full Category: Social – Sub-Category: Human Rights 6. Core Areas in Sustainable Development Aspect: Non-discrimination Monetary value of significant fines and total number of 6.3.2. Environmental 103. G4-DMA Disclosures on management approach Full 2.4.Ethics in Governance 118. G4-SO8 non-monetary sanctions for non-compliance with laws and Full Performance regulations Total number of incidents of discrimination and corrective 104. G4-HR3 Full 2.4.Ethics in Governance actions taken
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Indicator Indicator No. Indicator description Disclosure Section/Notes No. Indicator description Disclosure Section/Notes Index Index
Aspect: Supplier Assessment for Impacts on Society Category: Social – Sub-Category: Society
2.5. Anti-Corruption Activities 6.2.4. Taking Care of Veterans 119. G4-DMA Disclosures on management approach Full 6.1.4. Procurement 6.3.2. Environmental G4-DMA Stakeholder participation in decision making processes Performance 136. Full Percentage of new suppliers that were screened using criteria (former EU19) related to energy planning and infrastructure development 7.1. Stakeholders and 120. G4-SO9 Full 2.5. Anti-Corruption Activities for impacts on society Stakeholder Engagement Mechanisms Aspect: Customer Health and Safety 137. EU20 Approach to managing the impacts of displacement Full 6.1.1. Economic Performance 6.3. Managing Environmental 121. G4-DMA Disclosures on management approach Full Contingency planning measures, disaster/emergency 5.1. Ensuring Reliability and Impacts G4-DMA 138. management plan and training programs, and recovery/ Full Uninterrupted Operations of (former EU21) Percentage of significant product and service categories restoration plans UNEG 6.3.1. Environmental Impact 122. G4-PR1 for which health and safety impacts are assessed for Full Management System Number of people physically and economically displaced and improvement 139. G4-EU22 Full 6.1.1. Economic Performance compensation, broken down by type of project Aspect: Product and Service Labeling Category: Social – Sub-Category: Product Responsibility 123. G4-DMA Disclosures on management approach Full 6.1.1. Economic Performance Number of injuries and fatalities to the public involving 124. G4-PR5 Results of surveys measuring customer satisfaction Full 6.1.1. Economic Performance 140. G4-EU25 company assets, including legal judgments, settlements, and Full 6.2.2. Health and Safety pending legal cases of diseases Aspect: Compliance 5.1. Ensuring Reliability and 5. Special Areas of CSR 141. G4-EU29 Average power outage duration Full Uninterrupted Operations of 125. G4-DMA Disclosures on management approach Full Management UNEG
Monetary value of significant fines for non-compliance with 7.1. Stakeholders and 126. G4-PR9 laws and regulations concerning the provision and use of Full Stakeholder Engagement products and services Mechanisms
The Electric Utilities Sector Disclosures
General Standard Disclosures for the Electric Utility Sector
Number of residential, industrial, institutional and commercial 127. G4-EU3 Full 1.1. Company Profile customer accounts
Length of above and underground transmission and 1.2. Company’s Role within the 128. G4-EU4 Full distribution lines by regulatory regime Industry and Region
6.3.2. Environmental 129. G4-EU5 Allocation of CO2e emissions allowances or equivalent Full Performance
Category: Economic
5.1. Ensuring Reliability and G4-DMA Management approach to ensure short and long-term 130. Full Uninterrupted Operations of (former EU6) electricity availability and reliability UNEG
Research and development activity and expenditure aimed 5.1. Ensuring Reliability and G4-DMA 131. at providing reliable electricity and promoting sustainable Full Uninterrupted Operations of (former EU8) development UNEG
Transmission and distribution losses as a percentage of total 5.2. Energy Efficiency and Energy 132. G4-EU12 Full energy Management
Category: Environmental
Approaches for pest and vegetation management along 6.3.2. Environmental 133. G4-DMA Full transmission and distribution corridors Performance
Biodiversity of offset habitats compared to the biodiversity of 6.3.2. Environmental 134. G4-EU13 Full the affected areas Performance
Category: Social – Sub-Category: Labour Practices and Decent Work
Percentage of employees eligible to retire in the next 5 -10 6.2.1. Human Resource 135. G4-EU15 Full years broken down by job category and by region Management
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APPENDIX 3. THE LIST OF SPECIALLY PROTECTED NATURAL AREAS Location (RF region, Federal Grid Company Land plot area, No. Type of land title territory, oblast, city, Name of SPNA Facility ha WHERE FEDERAL GRID COMPANY OPERATES etc.)
Zabaikalskoe PMES Location (RF region, Federal Grid Company Land plot area, No. Type of land title territory, oblast, city, Name of SPNA 220 kV Mysovaya – Vydrino Facility ha 14 etc.) HVL (HVL-273)
MES Centre 220 kV Mysovaya – Baikal State Nature 15 3.5418 Lease Republic of Buryatia Baykalskaya HVL (HVL-274) Biosphere Reserve Upper Don PMES 500 kV Irkutsk – 16 220 kV Yuzhnaya Usman Gusinoozernaya SDPP HVL Tiagavaya HVL/220 kV Russia, Voronezh Oblast, Voronezh State Nature 1 35.8 Lease Kirovskaya-Post 474 Verkhnehacsky District Biosphere Reserve MES East Tiagavaya HVL (11.944 km) Khabarovskoye PMES Volga-Don PMES Khekhzir-Gidroliznaya HVL 500 kV Balashovskaya- with a branch to Kruglikovo/t 2 Lipetskaya 1 HVL (8,468 km, 0.3157 SS L-227 and Khekhzir – Bolshekhekhtsirsky State 17 48.0 Lease Khabarovsk Territory towers NN 894 – 915) Dormidontovka/t with a Nature Reserve Lease branch to Kruglikovo/t L-228 Novokhopersky District, Hopersky State Nature 500 kV Balashovskaya- from tower 14 to tower 38 Lipetskaya 2 HVL (with branch Voronezh Oblast Reserve 3 line to Novovoronezhskaya 0.8406 MES Ural NPP), 8.777 km, towers NN 894 – 916. South-Ural PMES
Moskovskoe PMES Ilmen State Reserve 22.7 (protected named after V.I. Lenin 500 kV Zlatoust- Chelyabinsk Oblast, 220 kV Kashira-Oka HVL 1,2 18 zone), 0.5865 Lease (the Ural Branch of the Moscow Oblast, Prioksk Terrace State Chelyabinskaya HVL Miass Urban District 4 220 kV Kashirskaya HPP – 11.97 Actual use (under towers) Russian Academy of Serpukhov District Biosphere Reserve Oka 1 HVL, 2 chain Sciences)
Priokskoe PMES Permskoe PMES
500 kV Smolenskaya NPP – Kaluga Oblast, 500 kV Votkinskaya HPP- Udmurt Republic, 5 0.984 Permanent use 19 0.064 Lease Nechkinsky National Park Kaluzhskaya HVL Yukhnovsky District Vyatka HVL Votkinskiy District Ugra 220 kV Cherepet – Liteynaya MES South 6 0.135 National HVL Kaluga Oblast, Lease Park Rostovskoe PMES 220 kV Cherepet – Kozelsky District 7 0.051 330 kV Novocherkassk SDPP Rostov Oblast, Tsementnaya HVL 20 2.0637 Lease Lysegorka – South HVL Kuibyshevsky District 500 kV Smolenskaya NPP – Kaluga Oblast, Kaluga Zaseki State 8 2.912 Lease Rostov Oblast, Mikhaylovskaya HVL Ulyanovsky District Nature Reserve 21 220 kV HVL R20 – T10 1 c 0.5356 Lease Kamennaya Balka Myasnikovsky District Chernozemnoye PMES Rostov Oblast, 22 220 kV HVL R40 – Т15 1.2435 Lease Chulekskaya Balka 500 kV Novobryanskaya – Myasnikovsky District Elets HVL (commissioned in Orel Oblast, Khotynetsky Orel Polesye National 9 185.5 Lease 500 kV Rostov NPP – Shakhty Rostov Oblast, 1977, towers NN 212 – 308, District Park 23 0.2719 Lease Dendrological Park length 26.5 km) HVL Volgodonsk 220 kV Novocherkassk SDPP Rostov Oblast, Persianovskaya Steppe MES Siberia 24 0.1905 Lease – NZB HVL Oktyabrskiy District Reserve Khakasskoe PMES 220 kV Pogorelovo – Rostov Oblast, Kamensky 25 0.0339446 Lease Glubokaya River Chalks 500 kV Sayano-Shushenskaya Donetskaya HVL District 10 HPP – Novokuznetskaya HVL 500 kV Rostov NPP – Shakhty (HVL – 541) 26 0.6612 Lease 26.61 Lease Republic of Khakassia Shorsky National Park HVL Rostov Oblast, 500 kV Sayano-Shushenskaya Donskoy Nature Park 220 kV Tsimlyanskaya SDPP – Tsimlyansky District 11 HPP – Novokuznetskaya HVL 27 0.40525 Lease (HVL-542) SH30 HVL 500 kV HVL – 505 Rostov NPP 220 kV Shushenskaya tower 28 0.9328 Lease Rostov Oblast Wetlands 12 – Minusinskaya HVL tower – Tikhoretsk No.1 Rostov Oblast, – Veselovskoe Water (D-37/38) Shushensky Pine Forest 0.07488 Lease Krasnoyarsk Territory 220 kV HVL DSS Volgodonsk Proletarsky District Storage Reservoir and National Park 29 1.4255 Lease Manych-Gudilo Lake 220 kV Sushenskaya tower – Salsk 13 –Turan HVL (D-46)
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Location (RF region, Location (RF region, Federal Grid Company Land plot area, Federal Grid Company Land plot area, No. Type of land title territory, oblast, city, Name of SPNA No. Type of land title territory, oblast, city, Name of SPNA Facility ha Facility ha etc.) etc.)
Stavropolskoe PMES Sanitary protection zone L-392 330 kV Kondopoga – Kondopoga District, not within the Martsialnie Petrozavodsk HVL, 9 towers far from the Kondopoga Located on the territories 42 0.16 Lease Vody Sanatorium having Stavropol Territory, NN 81-90 (3 anchor towers town, near Martsialnie 30 330 kV Mashuk SS 5.5107 Lease of health recreation areas a status of health resort Pyatigorsk and 6 suspension towers) Vody village and resorts forests Located on the territories 330 kV HVL -03 HPP-2 – Stavropol Territory, 35 kV Aerial Cable Line 31 0.0662 Lease of health recreation areas Mashuk Zheleznovodsk Lyaskelya-Valaam N 1, 632 and resorts wooden towers: 90 anchor towers and 542 suspension 330 kV HVL-04 Mashuk – Located on the territories Stavropol Territory, towers 35 kV Aerial Cable 0.162 Republic of Karelia. 32 Prokhladnaya. The land plot 0.0662 Lease of health recreation areas Sortavalsky District, Zheleznovodsk Line Lyaskelya Valaam N2, Valaam Archipelago is part of human settlements and resorts 43 Lease in the northern part of 632 wooden towers: 90 Nature Park anchor and 542 suspension Ladoga Lake, in 22 km Kubanskoe PMES towers from the continent. 220 kV Psou-Poselkovaya Krasnodar Territory, 33 10.66 Easement Sochi National Park 35 kV Valaam SS 0.130 HVL Sochi National Park 6 kV Valaam DPS 0.232 Krasnodar Territory, the 500 kV Vardane-Psou HVL city of Sochi, Central, Specially Protected 34 segment up to the Georgian 3.0917 Use Lazarevsky, Khosta, and Natural Reservations border Adler Districts
220 kV OHL 220 kV Psou SS – Krasnodar Territory, Specially Protected 35 tower N 47 (11.06 km) up to 0.229368 Actual use the city of Sochi, Adler Natural Reservations the Georgian border District
220/110/10 kV Dagomys SS – Krasnodar Territory, the Located within the second 36 the land plot is part of human 3.86 Actual use city of Sochi, Lazarevsky zone of mountain-sanitary settlements District, Dagomys protection
220/110/10 kV Dagomys SS – Krasnodar Territory, Located within the second 37 the land plot is part of human 2.59 Actual use the city of Sochi, Adler zone of mountain-sanitary settlements District, village Veseloe protection
MES Volga
Nizhegorodskoe PMES
500 kV Ulyanovskaya Severnaya HVL (new name – Veshkaima-Osinovka) (24.47 Republic of Mordovia, 38 km), 500 kV Ulyanovskaya 244.4 Lease Smolny National Park Ichalkovsky District Yuzhnaya HVL (new name – Veshkaima-Arzanasskaya) (24.4 km)
Middle Volga PMES
500 kV Volzhskaya HPP Samara Oblast, named after Lenin-Veshkaim 1.481 under Samarskaya Luka 39 Lease Stavropolsky District, (Kuibyshevskaya-Yuzhnaya) supports National Park Zhigulevsk town HVL (14.91 km)
Low-Volga PMES
220 kV Saratov HPP-Kubra 4.5 under 40 Lease Saratov Oblast Khvalinsky National Park HVL (2.52 km) supports
MES North-West
Karelskoe PMES
L-397 330 kV Kolskaya NPP – Monchegorsk HVL, towers NN 91-105 (10 suspension Murmansk Oblast, towers and 4 anchor towers) Monchegorsk District Lapland State Biosphere 41 on the territory of the reserve 0.515 Lease (western part of Kola Nature Reserve L-398 330 kV Kolskaya NPP Peninsula) – Monchegorsk HVL, towers NN 88-102 (10 suspension towers and 4 anchor towers)
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APPENDIX 4. TOTAL NUMBER GLOSSARY AND ABBREVIATIONS OF IUCN RED LIST SPECIES AND NATIONAL CONSERVATION LIST 1 SPECIES A process which helps the Company to understand stakeholder interests, expectations and concerns, to Stakeholder Engagement engage stakeholders in the Company activities and the decision-making process, taking into account their concerns. 62 plant species 3 fungus species An interactive communication between the Company and its stakeholders, performed on a voluntary basis, Stakeholder Dialogue 91 animal species so that the interests and motives of the parties involved are updated.
A complex of production facilities and other property items of the electric power industry interconnected by a Unified Energy System (UES) of unified production process, including the combined generation of electric and thermal power, and electricity Russia transmission under the centralised operational dispatch control.
A major part of the UES of Russia, a complex of electric grids and other grid facilities that ensure a Unified National (All-Russian) sustainable electricity supply to consumers, the wholesale electricity market performance, and a parallel Electric Grid (UNEG) operation of the UES of Russia and the electric power systems of other countries.
In a broad sense, is a group of individuals and legal entities that can affect or be affected by the Company’s activities. In a strict sense, stakeholders are public and local authorities, commercial entities, public and Stakeholder non-profit organisations, whose attitudes and actions towards the Company are of public nature and focused on the protection of socially significant and group interests.
An integrated performance indicator of the Company, a structural unit or a certain official that reflects the Key Performance Indicator (KPI) achievement of the target for the relevant target period.
Company Joint Stock Company “Federal Grid Company of Unified Energy System”, JSC FGC UES
The Company’s understanding of the sustainable development, its characteristics and goals at the industry, local, regional and/or global level, the degree of the Company’s impact within the corresponding geographic Sustainability context context, as well as the influence of the main sustainability issues on the Company’s long-term strategy, risks and opportunities.
A regularly updated set of commitments that corresponds to the Company’s specifics and the development level and is developed voluntarily with the participation of key stakeholders, and is aimed at implementing Corporate social responsibility, the internal and external social programmes that contribute to the Company’s development (increase in CSR output, improvement in service quality, development of corporate brand), improving its image, as well as extending the constructive stakeholder relations.
Reliability of power supply An uninterrupted electricity supply to all consumers as needed and of proper quality.
Autiumn winter period A period of maximum consumption of electricity and thermal energy at low outside temperatures.
A set of management activities and mechanisms aimed to orginise, control and improve the operation Power supply reliability control processes, operational control, repairs and renovation of the UNEG facilities, and to train employees in the above areas of the Company activities.
Such a development which meets the needs of the present without compromising the needs of future Sustainable development generations.
1 A list of all species names is available in the Russian version of the Report
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APCS – Automated Process Control IPS – Integrated Power System SD – Sustainable Development CONTACT INFORMATION System IUCN – International Union for SS – Substation BRELL – Belarus, Russia, Estonia, Latvia Conservation of Nature and Natural and Lithuania Resources TC – Technological Connection
CBR – Central Bank of Russia JSC – Joint Stock Company TPP – Thermal Power Plant
CCGT – Combined-Cycle Gas Turbine KPI – Key Performance Indicator TSR – Total Shareholder Return Address: 15A Akademika Chelomeya str., CEO – Chief Executive Officer LED – Light Emitted Diode UES – Unified Energy System Moscow 117630, Russia
CHTS-DCTL – Cable high-temperature LLC – Limited Liability Company UNEG – Unified National Electric Grid Call-Cenre: 8-800-200-18-81 superconducting DC transmission line MGTPP – Mobile Gas Turbine Power Plant VAT – Value Added Tax For calls from neighbouring countries CHP – Combined Heat and Power Address and beyond: +7 (495) 710-93-33 MES – Backbone Electric Grid WECM – Wholesale Electricity and CIS – The Commonwealth of Independent Capacity Market Fax: +7 (495) 710-96-55 States MICEX – Moscow Interbank Currency Exchange VRP ACS – Voltage and Reactive Power Е-mail: [email protected] CIS EPC – CIS Electric Power Council Automatic Control System Website: http://www.fsk-ees.ru/eng/ MPEI – Moscow Power Engineering CSR – Corporate Social Responsibility Institute WWF – World Wide Fund for Nature (World Wildlife Fund) DGS – Diesel Generator Set MSAC – Mobile Situational and Analytical Centre DOSS – Department of Operational Control & Compliance NGPP – Non-Governmental Pension Chairman of the Management Board Units of measure CEO of Federal Grid Company Program Andrey Murov DSS – Digital Substation bn – billion NPP – Nuclear Power Plant EMS – Environmental Management Gcal – gigacalorie System ODG – Operational Dispatch Group GW – gigawatt ESUPCN – Energy System’s Unified OHL – Overhead Line Process Communications Network km – kilometer CEO Reception Phone: +7 (495) 710-90-90 OHTL – Overhead Transmission Line FFMS – Federal Financial Market Service kV – kilovolt OHSMS – Occupational Health and Safety GCC – Grid Control Centre Management System kW – kilowatt
GDR – Global Depository Receipt OPS – Oil Pumping Station kWh – Kilowatt-hour Dmitry Klokov GMS – General Meeting of Shareholders RAS – Russian Accounting Standards l – litre Director of External Relations Phone: +7 (495) 710-90-86 E-mail: [email protected] GRI – Global Reporting Initiative PMES – Backbone Electric Grid mln – million Enterprise HPP – Hydro Power Plant MVA – megavolt-ampere PSCC – Power Supply Control Centre HIFs – Hazardous Industrial Facilities MW – megawatt PTL – Power Transmission Line HR – Human Recourses pcs – pieces Department for External Olga Frolova R&D – Research and Development Communications and Government Phone: +7 (495) 710-95-95 HVL – High Voltage Line Relations RAB – Regulatory Asset Base E-mail: [email protected] IFRS – International Financial Reporting Standards ROIC – Return on Invested Capital
IDGC – Inter-regional Distribution Grid RPD – Rate of Process Disturbances Company RUIE – Russian Union of Industrialists ICS – Internal Control System and Entrepreneurs Comments and feedback are welcome. Your opinions and proposals regarding corporate social responsibility and UNEG reliability will help us to improve operations of Federal Grid Company.
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