Corporate Social Responsibility and Sustainability Report 2017

Corporate Social Responsibility and Sustainability Report Table of Contents

Message from the Director General 6

Our Report ROSSETI in 2017: Results and Development of the Achievements Reporting System 10 Identified Material Topics 10 Operating Data Collection and Financial Methodology 12 Performance 42 Dividend Payment 43 Principal Provisions 4 of the Dividend Policy 1 of ROSSETI 43 Profit Distribution 44 Procurement 44 Company Profile International Projects, Nationwide and Regional Events 48 Company History 16 International Projects 48 Business Model 18 Regions of Operations 20 Main Activities 23 Customer Relations 23 High-Quality and Accessible Power Infrastructure 25 2 Innovation 26 Governance 27 Human Resource Charters and Membership Development in Associations 31

Basic Principles of and Approaches to Human Resource Management 52 Personnel Characteristics 52 Youth Policy 53 Occupational Guidance and Cooperation 5 with Schools 56 Cooperation with Educational Institutions 56 Development of Young Employees’ Competencies 57 Our Sustainability Remuneration Strategy and Social Support 57 Cooperation with the All-Russian Sustainability Priorities 34 Electrounion 58 Stakeholder Engagement 35 Personnel Training Risk Management 37 and Human Resource Corporate Ethics Development 59 and Anti-Corruption 39 Occupational Safety 59 Corporate Culture 61 Awards 3 and Achievements 61 Corporate Social Responsibility and Sustainability Report 2017 Social Responsibility and Sustainability T I Corporate R O SSE Society Relations List of Diagrams

External Communications 64 Diagram 1 — ROSSETI Materiality Matrix Based on the Results 12 of the Stakeholder Survey Corporate Website 64 Diagram 2 — ROSSETI Group History 16 Mass Media 64 Diagram 3 — Business Model of the ROSSETI Group 18 Social Networks 64 Diagram 4 — Regions of Operations of the ROSSETI Group 20 Social and Diagram 5 — Main Subjects of Customer Inquiries 23 Charitable Projects 65 Diagram 6 — Changes in Inquiries in 2013–2017 23 Diagram 7 — Changes in the Number of Customer Service Offices 25 and Face-to-Face Inquiries in 2013–2017 Diagram 8 — Changes in Network Connection in 2013–2017, pcs. 25 Diagram 9 — ROSSETI’s Governance Structure 30 6 Diagram 10 — Subjects of the Issues Considered by the Board 31 of Directors in 2017 Diagram 11 — Map of the Mutual Influence of the ROSSETI Group’s 35 Stakeholders Environmental Diagram 12 — Subjects of Allegations on the Hotline in 2017 39 Protection Diagram 13 — Opex Structure, mn RUB 42 Diagram 14 — Structure of Noncurrent Assets, mn RUB 43 Diagram 15 — Structure of Current Assets, mn RUB 43 Diagram 16 — Cost Breakdown by Activity, thsd RUB 44 Understanding Diagram 17 — ROSSETI’s Economic Effect by Year 44 of Environmental Diagram 18 — Regulated Procurement Procedure Breakdown 45 Responsibility 68 by Purchasing Method; Changes in Procurement Environmental on the Electronic Trading Floor Management 68 Diagram 19 — Stages of Procurement Procedures 45 Diagram 20 — Share of Purchases from Small and Medium-Sized 45 Key Environmental Businesses Performance Indicators 69 Diagram 21 — Personnel of the ROSSETI Group by Occupational 53 7 Air Protection 69 Category and by Gender Water Protection Diagram 22 — Personnel of the ROSSETI Group by Educational 53 Level and by Age and Conservation 69 Diagram 23 — Number of Student Labor Brigades of the ROSSETI 56 Land Protection Group and Conservation 70 Diagram 24 — Average Monthly Pay in the ROSSETI Group 58 Waste Management 70 and in Russia, thsd RUB Biodiversity Conservation 70 Diagram 25 — ROSSETI SDCs’ Occupational Injury Rates 60 and Causes of Injuries Energy Consumption Diagram 26 — Information on ROSSETI in Media Outlets by Attitude 64 and Energy Efficiency 70 Diagram 27 — Payments for Adverse Environmental Impacts 68 Voluntary in 2017 Environmental Diagram 28 — Water Consumption in 2016–2017, thsd cbm 69 Initiatives 71 Diagram 29 — Waste by Hazard Class in 2017, thsd tonnes 70

List of Tables

Table 1 — List of Material Topics 11 Table 2 — Targets in the “Getting Electricity” Ranking 26 Appendices of Doing Business Table 3 — ROSSETI Group’s Membership in Professional and 31 Industry Associations Table 4 — Sustainability Goals of the ROSSETI Group 34 Compliance Table Table 5 — Stakeholder Engagement of the ROSSETI Group 36 to the GRI Standards 74 Table 6 — Risk Management of the ROSSETI Group 38 General Disclosures 74 Table 7 — Operating Results of ROSSETI in 2017 42 Topic-Specific Table 8 — Financial Results of ROSSETI in 2017 42 Disclosures 76 Table 9— Staff on the Payroll by Subsidiary/Dependent 52 Sector Disclosures 77 Company in 2017 Table 10 — Awards and Achievements of the ROSSETI Group’s 61 External Assurance 78 Employees in 2017 Glossary Table 11 — Environmental Protection Expenses of the 69 and Abbreviations 81 ROSSETI Group in 2017 8 Contact Information 82 Table 12 — Gross Air Pollutant Emissions of the ROSSETI 69 Group in 2016–2017, tonnes www.rosseti.ru/eng 6 ROSSETI Corporate Social Responsibility and Sustainability Report 2017 M P Board Management the of and Chairman General Director avel L essage fromessage the Director G ivinsky

The number of grid accidents has been been has accidents grid of number The customers. all for supply electricity rupted uninter and areliable securing continue to essential it made loads Increasing (+1.7%). consumption energy by panied accom was year reporting the in growth Economic 1.5%. by grew and recession from recovered economy the Russian years, difficult 2017, In two sumption. after con electricity producers’ and industrial in households’ changes from inseparable is operator grid anational as Group SETI ROS the of development sustained The approach. taken an appropriate have we that 2017 in confirm results Our development. and long-term performance financial high to achieve sector grid enable the electric can focused customer and friendly environmentally oriented, socially being only that We believe years. have not changed forsustainability many of principles and objectives Our spheres. and social environmental, the economic, in effectiveness our and activities Group’s the ROSSETI about to learn stakeholders all allow will Company, our by prepared traditionally that this document, hope We ROSSETI. of Report Sustainability and Responsibility Social 2017 Corporate the to you to present pleased We are D ear Colleagues: ear eneral - - - - development and introducing innovative innovative introducing and development technological continuous pursuing without competitive more to become able be not will ROSSETI challenges, global new With 2030. by completed be will sector grid of the electric that the digitalization and regions Russian to all extended be will they that intended is it projects, pilot these of operation test the After control. process of operational system information automated integrated an with grid smart a of element key the is Center Control Generation Small and Network the gion, Re Kaliningrad the in Created system. and hardware software a Russian-made iSAS, using monitored and controlled is substation the of 2017.in operation The Krasnoyarsk in operation into put was tion substa digital first Russia’s projects. pilot several out carrying already and grids of electric for the digitalization strategy a formulating is ROSSETI losses. energy reduce and efficient more much sector grid electric the make will which grid, asmart to build is term medium the in goal strategic our circumstances, these In period. 11% by same the down over gone have losses Electricity to decrease. continues 2012 and since 20% almost by reduced - - technology. The Company approved the of the Electric Grid Sector. Additionally, the Russian Union of Industrialists and modernization program for the electric ROSSETI continued in 2017 to implement Entrepreneurs (RSPP): ROSSETI became grid sector in 2017 to implement innova- environmental measures in accordance a leader in RSPP’s Responsibility and tions, enhance electricity supply reliability with the plan adopted for the Year of Envi- Transparency index in 2017. and make its grid infrastructure environ ronmental Protection in Russia. A major This Report is a result of close coopera- mentally friendlier. The effectiveness accomplishment was measures taken by tion between the Company and stakehold- of the Company’s innovation policy was ROSSETI in accordance with the Stock- ers in 2017. It is our intention to continue appreciated by the Russian International holm Convention to eliminate the use of to communicate openly and constructively Energy Forum in Saint Petersburg on power equipment containing polychlori- with all those who are interested in the April 25, 2017. ROSSETI was recognized nated biphenyls. The Company’s achieve- sustained development of the Russian as the best innovation company in the ments in environmental protection were electric grid sector. electric power industry and became the recognized by the Live Planet television prizewinner in the category “For a Con- network and the Modern Media Research tribution to the Innovative Development of Institute (MOMRI). For the first time in its Sincerely, the Fuel and Energy Sector.” history, ROSSETI was ranked among the The scale of the ROSSETI Group’s opera- top three companies in their environmen- Pavel Livinsky tion, along with the strategic significance tal responsibility ranking in 2017. Director General and Chairman of the energy industry, implies high social ROSSETI strives to systematically en- of the Management Board responsibility and involvement in attaining hance its non-financial reporting system ROSSETI important governmental goals. The by applying best practices and world Company continued in the reporting year standards. For instance, the 2017 Report to carry out several major projects: power is in accordance with the new version of supply infrastructure facilities for the 2018 the sustainability reporting standards re- FIFA World Cup; energy security for the leased by the Global Reporting Initiative — Kaliningrad Region. GRI Standards. All our non-financial An important element of ROSSETI’s reports are subject to external assurance responsible business is a careful attitude by independent experts. To identify its toward nature. In the reporting year, the material topics, the Company conducts Company reached a new level in this area annual stakeholder surveys. Our efforts by approving the Environmental Policy to improve reporting were recognized by www.rosseti.ru/eng

1section

Our Report ROSSETI publishes non-financial reports annually to inform stakeholders of the key results in economic, environmental and social spheres 10 ROSSETI Corporate Social Responsibility and Sustainability Report 2017 OUR REPORT reports prepared a survey questionnaire questionnaire a survey prepared reports non-financial of preparation the on group working the stakeholders, with sultation con preliminary after purpose, this For updated. was topics material for Report this in included matrix materiality The stakeholders. external and internal both by significant considered topics material Group’s ROSSETI the to identify studies tinued comprehensive con year, Company the reporting the In I D R Our and 33 topic-specific Standards. The The Standards. topic-specific and 33 Standards universal modular three with accordance in are Report this in disclosed indicators the and sections the of contents The Standards. —GRI Initiative porting Re Global the by released standards of reporting version the sustainability new the with accordance in is Report This index in 2017.and Transparency Responsibility RSPP’s in aleader became year. ROSSETI reporting the in again nity therecognition from commu professional received area this in efforts Company’s The standards. world and practices best by applying system reporting financial non- its to enhance strives ROSSETI social_report/. www.rosseti.ru/eng/investors/reports/ http:// at website corporate Company’s the on available are reports the of versions Electronic future. the in cycle reporting intendsCompany to keep using an annual 2017. July in The published 2016in was activities Company’s the on Report ability Sustain and Responsibility Social porate Cor Theprevious non-financialreports. of publication regular the by evidenced is which and transparency, sustainability of principles the on based is Group SETI ROS the of strategy development The dentified Material T Material dentified evelopment of the R eport - - - - - - opics - eporting Systemeporting sustainability on the scale of high/medi of scale the on sustainability Company’s the on topic every of impact the to assess asked were Respondents and social. environmental, economic, namely groups, three into divided were questionnaire survey the in contained topics The decisions. and assessments stakeholders’ andentities influencing Group’s ROSSETI the of impacts social and environmental, economic, material the reflecting topics relevant 25 covering and for the management of social and and social of management the for and reporting of improvement the for ment instru effective an are experts by provided and Recommendations Report. the in contained disclosures in confidence increases which activities, sustainability Company’s the assessing experts dent indepen by assurance to external subject are reports non-financial ROSSETI’s > > > > > > Report: Sustainability and bility Responsi Social 2017 Corporate the of ics top following to the given was precedence survey, the of results the on Based Report. the in disclosed to be topics material the to identify survey astakeholder conducted ROSSETI GRI, by recommended As Disclosures. Sector Utilities Electric GRI the and AA1000SES, and (Guidance Responsibility) on Social 26000:2010 ISO of guidelines ommended rec and principles the used Report of this the preparation In addition, Report. this to prepare option Core the used Company

Research and Development and Research (Social) Compliance Management Demand-Side Performance Economic Response and Planning Disaster/Emergency Reliability and Availability comments comments - - - - - specific disclosure in this Report. this in disclosure specific topic- one least at makes ROSSETI Standards, GRI the by required As topic. each for lated calcu was sustainability for materiality of value mean the and system, a score into translated were answers The ers. stakehold key and divisions of heads the were surveyed those Among um/low/zero. [email protected]. at email by 4or Belovezhskaya, ul. to Moscow, mail by ROSSETI of Relations and Investor and Shareholder ment Board Manage the and Directors of Board the for Support for Administrative the Division contacting by feedback send and activities Company’s the of aspects non-financial the on information further request can You Relations. Investor and Shareholder and Governance Corporate for ment Depart the by coordinated is reports cial non-finan ROSSETI’s of preparation The Assurance”. “External Appendix in contained are experts by provided tions and recommenda Comments reports. future in disclosure for topics new suggest and Report the in contained disclosures of completeness and quality the assess who experts, by study and evaluation for submitted was Report this 2018, May In indicators. target key in changes disclose and ROSSETI of Policy mental andapproving implementing the Environ of implications the to assess mendations recom experts’ independent of account took 2017 Report the of preparation The continuous basis. a on activities of aspects environmental

- - - - - - Table 1 List of Material Topics

Item Topic Disclosures as per the GRI Standards

1 Economic performance of the ROSSETI Group 201–1 Direct economic value generated and distributed 201–4 Financial assistance received from government

3 Procurement transparency of the ROSSETI Group. Selection of bona fide 204–1 Proportion of spending on local suppliers suppliers, engagement of local suppliers at locations of the Company’s operation

4 Anti-corruption 205–1 Operations assessed for risks related to corruption 205–2 Communication and training about anti-corruption policies and procedures 205–3 Confirmed incidents of corruption and actions taken

7 Energy consumption. The ROSSETI Group’s desire to reduce energy consumption 302–2 Energy consumption outside of the organization and efficiently use energy 302–4 Reduction of energy consumption

12 Environmental compliance of the ROSSETI Group’s services 307–1 Non-compliance with environmental laws and regulations

13 Demand-side management Total number and subjects of customer inquiries

14 Availability and reliability Number of network connections

15 Disaster/emergency planning and response Total number of process failures (accidents)

16 Research and development Programs to introduce innovative technical solutions and related expenses

17 Employment. The Company’s investment in human resources. Reduction of 401–1 New employee hires and employee turnover employee turnover. The Company’s desire to hire qualified employees at various 401–2 Benefits provided to full-time employees that are not provided to temporary locations of operation or part-time employees

19 Occupational health and safety 403–2 Types of injury and rates of injury, occupational diseases, lost days, and absenteeism, and number of work-related fatalities 403–3 Workers with high incidence or high risk of diseases related to their occupation 403–4 Health and safety topics covered in formal agreements with trade unions

20 Training and education. Training programs of the ROSSETI Group 404–1 Average hours of training per year per employee 404–2 Programs for upgrading employee skills and transition assistance programs 404–3 Percentage of employees receiving regular performance and career development reviews

25 Social compliance 419–1 Non-compliance with laws and regulations in the social and economic area

The survey of external stakeholders and After consultation with the Company’s employees made it possible stakeholders and the to assess the significance (importance) of each processing of the results material topic for ROSSETI and identify the of the survey, the materiality topic boundaries for the Report. As compared matrix was adjusted. with the previous year, stakeholder involvement All topics were divided into notably increased, which is evidenced by the three groups. larger number of received questionnaires and the expanded format of preliminary consultation.

High-priority Important Significant topics material topics material topics

> Availability and Reliability > Demand-side Management > Use of Natural Resources > Water > Disaster/Emergency > Energy Consumption > Effluents and Waste > Biodiversity Planning and Response > Employment > Local Communities > Emissions > Compliance (Environmental) > Training and Education > Company and Supplier > Equal Remuneration > Occupational Health > Anti-competitive Behavior Human Rights Assessment for Women and Men and Safety and Monopoly Practices > Indirect Economic Impacts > Freedom of Association > Compliance (Social) > Procurement Transparency > Anti-corruption and Collective Bargaining > Research and Development > Labor/Management > Economic Performance Relations www.rosseti.ru/eng

11 12 ROSSETIROSSETI Corporate Social Responsibility and Sustainability Report 2017 OUR REPORT RO Diagram 1 Materiality SS Materiality Matrix B Matrix Materiality ETI

low Materiality for stakeholders high hi gh 13 14 15 1 ased on the R ased 17 4 16 25 3 19 7 20 esults of the Stakeholder of esults Survey 12 18 5 2 Materiality f Materiality Policy of ROSSETI. Policy Information the in defined are holders and other stake to shareholders closed dis documents and data of list and the The Standards). (GRI guidelines GRI by the recommended as to disclosure subject are that activities Group’s ROSSETI of the aspects non-financial the about data and information contains Report This Methodology D ata Collection Collection ata 24 6 methods and means of disclosure disclosure of means and methods or RO 23 21 11 SS 22 ETI 9 - - 8 10 The material topics analyzed in detail in the 2017 Report are highlighted with the sign.

low 1 Economic performance of the ROSSETI 12 Environmental compliance of the Group ROSSETI Group’s services 2 Indirect economic impacts. Services 13 Demand-side management supported and infrastructure investments at locations of operation 14 Availability and reliability 3 Procurement transparency of the 15 Disaster/emergency planning and ROSSETI Group. Selection of bona response fide suppliers, engagement of local suppliers at locations of the Company’s Research and development operation 16 Employment. The Company’s Anti-corruption 17 4 investment in human resources. Reduction of employee turnover. 5 Anti-competitive behavior and monopoly The Company’s desire to hire qualified practices employees at various locations of 6 Use of natural resources from both operation renewable and nonrenewable sources 18 Labor/management relations, 7 Energy consumption. The ROSSETI involvement of employees in Group’s desire to reduce energy negotiations on possible operational consumption and efficiently use energy changes, prompt notice provided to employees prior to the implementation 8 Water. Increased efficiency of the of the Company’s significant operational Company’s use of water resources changes 9 Biodiversity. Control of the Company’s Occupational health and safety impact on biodiversity at locations of 19 operation 20 Training and education. Training programs of the ROSSETI Group 10 Emissions. Reduction of greenhouse gas emissions 21 Equal remuneration for women and men 11 Effluents and waste. Control of the volume of effluents. Production waste 22 Freedom of association and collective management bargaining 23 Local communities. Protection of the rights of indigenous and small- numbered peoples at locations of the The boundaries and depth Company’s operation 24 Company and supplier human rights of the topics selected assessment for disclosure take into 25 Social compliance account the results of the stakeholder survey and the scores resulting from the questionnaire survey.

The main sources of information contained in this Report management reports IFRS consolidated decisions press releases stakeholder results of ROSSETI financial statements of ROSSETI’s published on interviews of the stakeholder management bodies ROSSETI’s corporate survey website http://www.rosseti.ru/ eng/ To ensure data comparability and assess The quantitative data are presented using changes in the Company’s performance, generally accepted metrics and standard the key indicators, including those re conversion factors. commended for disclosure under the GRI Standards, are presented for the reporting year and at least two previous years. www.rosseti.ru/eng

2section

Company Profile ROSSETI is a strategic asset of the government. The Company is engaged in electricity transmission and distribution and comprises electricity transmission grids and interregional and regional electricity distribution grid companies. Company Profile rofile

P Company History

ompany The ROSSETI Group is the largest, systemically important electric grid company in Russia C and a strategic asset of the government. The Company is a global leader in electricity transmission and distribution. The Company is headquartered in Moscow.

Diagram 2 ROSSETI Group History 2012 2013 2014

The year of structural The Company’s formation The Long-Term Development transformations related is complete on April 4, 2013. Program of the Company to the consolidation receives approval. of transmission The Company acquires a and distribution grids. controlling interest in FGC UES. The Company brings into operation several policies The Strategy for Development intended to unify and of the Electric Grid Sector of the synchronize subsidiaries’ Russian Federation receives approaches in all areas of work. approval.

Number of substations

465 thsd units 473 thsd units 480 thsd units

Transformer capacity

403.6 MVA* 743.6 GVA 751.0 GVA

Length of power lines

1,963 thsd km 2,262 thsd km 2,290 thsd km

Number of grid SDCs’ employees

thsd thsd thsd 188.8 people 221.6 people 218.0 people

Position in the “Getting Electricity” ranking of the WB’s Doing Business rankings

Corporate Social Responsibility and Sustainability Report 2017 Social Responsibility and Sustainability T I Corporate R O SSE 143 16 * Installed substation capacity 2015 2016 2017

On June 30, 2015, the Company’s ROSSETI is active in developing The Program to Renew Electric new corporate name, Public integration projects in Eurasia. Grid Facilities receives approval. Joint Stock Company ROSSETI, is approved. The Company pays dividends for The Environmental Policy of the the 1st quarter of 2016, including Electric Grid Sector is brought The Board of Directors of dividends on ordinary shares for into operation. ROSSETI approves the Risk the first time in its history. Management Policy, the Internal It is decided that dividends Audit Policy, the Internal Control of 3.8 billion rubles will be paid Policy, and the Schedule of for 2016. Improving the Operating and Investment Efficiency and Reducing Expenses.

490 thsd units 496 thsd units 502 thsd units

761.0 GVA 773.0 GVA 782.0 GVA

2,300 thsd km 2,314 thsd km 2,344 thsd km

thsd thsd thsd 216.0 people 216.0 people 215.0 people

29 30 10 www.rosseti.ru/eng

17 Diagram 3 Business Model rofile P ROSSETI adheres to the principles of consideration to the interests of all key electricity transmission and distribution sustainability and social responsibility in stakeholders: shareholders and investors, technology, including using digital solu-

ompany all areas of its activities. The Company’s the Company’s employees, governmental tions. ROSSETI intends to extend its acti C business model is oriented toward authorities, equipment manufacturers vities in new unregulated business areas securing a reliable, high-quality, and and partners, public organizations and and develop international cooperation, affordable power supply by building a media. which will additionally improve efficiency developed infrastructure and introducing With new technological challenges faced and help apply foreign best practices in innovative technology. ROSSETI manag- by the global energy industry, ROSSETI’s the Russian energy industry. es day-to-day grid operations with due strategic goal is to introduce advanced

MACROECONOMY

GLOBAL TECHNOLOGICAL CHALLENGES

GENERATORS • Nuclear power plant • Thermal power plants • Hydraulic power plants • Renewable energy sources • Small generation • Foreign energy systems

MEDIA

LABOR UNION ORGANIZATIONS Corporate Social Responsibility and Sustainability Report 2017 Social Responsibility and Sustainability T I Corporate R O SSE

18 ENVIRONMENT LAWS

REGULATOR AND GOVERNMENTAL AUTHORITIES Russian Government, Federal Agency for State Property Management, Ministry of Energy, Ministry of Economic Development, Federal Antimonopoly Service, Regional Energy Commissions, Federal Agency for Technical Regulation and Metrology, Federal Accreditation Service, Federal Service for Environmental, Technological and Nuclear Supervision

TARIFFS ENERGY STANDARDIZATION RELIABILITY SUPERVISION AND QUALITY OF SERVICES

SHAREHOLDERS AND INVESTORS ROSSETI Group • Government • Minority shareholders • Bondholders PRODUCTIVE ASSETS

CUSTOMERS (network connection, electricity transportation)

• Government • Suppliers of last resort (retailers) • Market Council • Territorial grid organizations outside the ROSSETI Group • Direct customers • Foreign energy systems

BN KWH OF TRANSMITTED 748.2AND DISTRIBUTED ELECTRICITY

EQUIPMENT 215 MANUFACTURERS 2.34 502 FOREIGN PARTNERS MN KM thsd thsd OF POWER LINES SUBSTATIONS TOTALING EMPLOYEES OF GRID SDCS

781GVA

DISPATCHING, BALANCING, MUTUAL PAYMENTS www.rosseti.ru/eng System Operator, Trading System Administrator, Financial Settling Center TAXES 19 20 ROSSETI Corporate Social Responsibility and Sustainability Report 2017 COMPANY PROFILE R R Sergey Dyomin Sergei Streltsov Alexander Letyagin Igor Makovsky Andrey Ryumin Diagram 4 Center MES North IDGC of Y LENENERGO Northwestern Federal Distric Federal Distric antarenergo egions of the RO 91 Far Eastern Federal District Siberian Federal District Urals Federal District Volga Federal District North Caucasian Federal District Southern Federal District Central Federal District Northwestern Federal District egions of Operations of egions - WestMES North 01 09 23 07 15

26 06 39 20 - 05

West ts 61 of 32 31 46 08

the Russian Federation 57 36 67 34 40 30 48 60 71 68 50 77 62 69 53 t 58 64 78 33 13 47 76 SS 37 73 52 63 21 44 35 Group’sETI O 10 56 12 16 02 83 60 53 78 47 39 35 29 11 51 10 Code Region 43 29 18 51 District Nenets Autonomous Pskov Region Novgorod Region Saint Petersburg Leningrad Region Kaliningrad Region Vologda Region Arkhangelsk Region Komi Republic Murmansk Region Republic ofKarelia Territory/Region 74 59 92 91 87 65 49 41 38 02 16 83 RussianRegion s Without ROSSETI 66 45 11 Sevastopol (SouthernFederal District) Republic ofCrimea(SouthernFederal District) Chukotka Autonomous District (Far Eastern Federal District) Sakhalin Region(Far Eastern Federal District) Magadan Region(Far Eastern Federal District) Kamchatka Territory (Far Eastern Federal District Irkutsk Region(SiberianFederal District) Republic ofBashkortostan (Volga Federal District) Republic ofTatarstan (Volga Federal District) Nenets Autonomous District (Northwestern Federal District) perations Naryan-Mar Pskov Veliky Novgorod Saint Petersburg Kaliningrad Vologda Arkhangelsk Syktyvkar Murmansk Petrozavodsk Center Administrative 72 83 ’

s 86 55 Presence 54 no presence Pskovenergo (IDGCofNorth-West) Novgorodenergo (IDGCofNorth-West) LENENERGO Yantarenergo Vologdaenergo (IDGCofNorth-West) Arkhenergo (IDGCofNorth-West) Komienergo (IDGCofNorth-West) Kolenergo (IDGCofNorth-West) Karelenergo (IDGCofNorth-West) Branch Interregional GridCompany’s Regional GridCompany/ 22 89 70 04 42 19 17 24 no presence MES) Novgorodskoye PMES(North-West (North-West MES) Karelskoye PMES Leningradskoye PMES, Vologodskoye PMES(CenterMES) Severnoye PMES(North-WestMES) Karelskoye PMES(North-WestMES) Entity Electriity TransmissionGrid no presence 38 03 Central Federal District

MOESK Region Territory/Region Administrative Regional Grid Company/ Electricity Transmission Grid Pyotr Sinyutin Code Center Interregional Grid Company’s Entity Branch IDGC of Centre Oleg Isaev 77 Moscow Moscow MOESK Moskovskoye PMES (Center MES) 50 Moscow Region IDGC of Center and Volga Region Oleg Isaev 76 Yaroslavl Region Yaroslavl Yarenergo (IDGC of Centre) Valdayskoye PMES (Center MES) Center MES 69 Tver Region Tver Tverenergo (IDGC of Centre) Sergey Dyomin 36 Voronezh Region Voronezh Voronezhenergo (IDGC of Centre) Verkhne-Donskoye PMES (Center MES) North-West MES 48 Lipetsk Region Lipetsk Lipetskenergo (IDGC of Centre) Sergei Streltsov 68 Tambov Region Tambov Tambovenergo (IDGC of Centre) 57 Oryol Region Oryol Oryolenergo (IDGC of Centre) Chernozyomnoye PMES (Center MES)

31 Belgorod Region Belgorod Belgorodenergo (IDGC of Centre)

46 Kursk Region Kursk Kurskenergo (IDGC of Centre)

44 Kostroma Region Kostroma Kostromaenergo (IDGC of Centre) Vologodskoye PMES (Center MES)

33 Vladimir Region Vladimir Vladimirenergo (IDGC of Center and Volga Region)

37 Ivanovo Region Ivanovo Ivenergo (IDGC of Center and Volga Region)

87 71 Tula Region Tula Tulenergo (IDGC of Center and Volga Priokskoye PMES (Center MES) Region)

40 Kaluga Region Kaluga Kalugaenergo (IDGC of Center and Volga Region)

62 Ryazan Region Ryazan Ryazanenergo (IDGC of Center and Volga Region)

32 Bryansk Region Bryansk Bryanskenergo (IDGC of Centre) Novgorodskoye PMES (North-West MES) 67 Smolensk Region Smolensk Smolenskenergo (IDGC of Centre)

49 ROSSETI pursues a systematic policy to consolidate territorial grid organizations

14 and increase its own market share in 41 accordance with the Strategy for De- velopment of the Electric Grid Sector of the Russian Federation Until 2030. The integration of regional energy systems will improve the efficiency of day-to-day operations and create the conditions for the development of regional smart grids.

65 Continuation on the following page

27 28 The ROSSETI Group’s electric grid companies 75 79 operate in 80 Russian regions. 25

Volga Federal District

IDGC of Volga Region Territory/Region Administrative Regional Grid Company/Interregional Electricity Transmission Grid Code Center Grid Company’s Branch Entity Vladimir Ryabikin 64 Saratov Region Saratov Saratov Distribution Networks (IDGC of Volga) Nizhne-Volzhskoye PMES (Volga MES) IDGC of Center 73 Ulyanovsk Region Ulyanovsk Ulyanovsk Distribution Networks (IDGC of Volga) Sredne-Volzhskoye PMES (Volga MES) and Volga Region Oleg Isaev 58 Penza Region Penza Penzaenergo (IDGC of Volga) IDGC of Urals 21 Chuvashi Republic Cheboksary Chuvashenergo (IDGC of Volga) Sergey Dregval 13 Republic of Mordovia Saransk Mordovenergo (IDGC of Volga) Volga MES 12 Republic of Marij El Yoshkar-Ola Marienergo (IDGC of Center and Volga Region) Vladimir Vashkevich 63 Samara Region Samara Samara Distribution Networks (IDGC of Volga) Samarskoye PMES (Volga MES) Urals MES 52 Nizhni Novgorod Region Nizhni Novgorod Nizhnovenergo (IDGC of Center and Volga Region) Nizhegorodskoye PMES (Volga MES) Eugeniy Zhuykov Vologodskoye PMES (Center MES) 59 Perm Territory Perm Permenergo (IDGC of Urals) Permskoye PMES (Urals MES)

43 Kirov Region Kirov Kirovenergo (IDGC of Center and Volga Region)

18 Udmurtian Republic Izhevsk Udmurtenergo (IDGC of Center and Volga Region)

56 Orenburg Region Orenburg Orenburgenergo (IDGC of Volga) Orenburgskoye PMES (Urals MES)

16 Republic of Tatarstan Kazan no presence Permskoye PMES, Orenburgskoye PMES (Urals MES) Samarskoye PMES, Sredne-Volzhskoye PMES (Volga MES) www.rosseti.ru/eng

02 Republic of Bashkortostan Ufa no presence Permskoye PMES, 21 Orenburgskoye PMES, Yuzhno-Uralskoye PMES (Urals MES) Sredne-Volzhskoye PMES (Volga MES) 22 ROSSETI Corporate Social Responsibility and Sustainability Report 2017 COMPANY PROFILE Aleksey Maltsev Eugeniy Zhuykov Sergey Dregval Sergey Savchuk Alexander Solod Yuri Zaytsev Andrey Yepifanov Dmitry Ochaykin Oleg Petrov Vitaly Ivanov Sergey Dyomin Alexander Solod Boris Ebzeev Alexander Gavrilov Western Siberia MES Urals IDGC of Tyumenenergo Urals South EastMS Far Eastern Federal Distric SiberiaMES TDC IDGC of North Center MES South IDGC of Siberian Federal Distric IDGC of Kubanenergo Southern Federal Distric MES Federal Distric MES MES Cauc Urals Northern Cauc Siberia South asian Federal Distric

t asu t t

t t 70 42 38 24 55 54 22 19 17 04 75 03 87 65 49 41 79 27 25 14 28 Code Region Code Region 89 86 72 74 45 66 Code Region 26 20 15 09 07 06 05 Code Region 92 91 34 30 61 23 01 Code Region 08 Tomsk Region Kemerovo Region Irkutsk Region Krasnoyarsk Territory Omsk Region Novosibirsk Region Altai Territory Republic ofKhakassia Republic ofTuva Republic ofAltai Trans-Baikal Territory Republic ofBuryatia Territory/Region District Chukotka Autonomous Sakhalin Region Magadan Region Kamchatka Territory Region Jewish Autonomous Khabarovsk Territory Primorie Territory (Yakutia) (southernpart) Republic ofSakha Amur Region Territory/Region Autonomous District Yamalo-Nenets Autonomous District Khanty-Mansijsk Tyumen Region Chelyabinsk Region Kurgan Region Sverdlovsk Region Territory/Region Stavropol Territory Chechen Republic Ossetia-Alania Republic ofNorth Republic Karachay-Cherkess Republic Kabardino-Balkarian Republic ofIngushetia Republic ofDagestan Territory/Region Sevastopol Republic ofCrimea Volgograd Region Astrakhan Region Rostov Region Republic ofKalmykia Krasnodar Territory Republic ofAdygeya Territory/Region Stavropol Grozny Vladikavkaz Cherkessk Nalchik Nazran Makhachkala Center Administrative Tomsk Kemerovo Irkutsk Krasnoyarsk Omsk Novosibirsk Barnaul Abakan Kyzyl Gorno-Altaisk Chita Ulan-Ude Center Administrative Salekhard Khanty-Mansijsk Tyumen Chelyabinsk Kurgan Yekaterinburg Center Administrative Sevastopol Simferopol Volgograd Astrakhan Rostov-on-Don Elista Krasnodar Maikop Center Administrative Anadyr Yuzhno-Sakhalinsk Magadan Kamchatsky Petropavlovsk- Birobidzhan Khabarovsk Vladivostok Yakutsk Blagoveshchensk Center Administrative TDC Kuzbassenergo-RES (IDGCofSiberia) no presence Krasnoyarskenergo (IDGCofSiberia) Omskenergo (IDGCofSiberia) no presence Altaienergo (IDGCofSiberia) Khakasenergo (IDGCofSiberia) Tyvaenergo (IDGCofSiberia) of Siberia) Gorno-Altaisk ElectricityNetworks(IDGC Chitaenergo (IDGCofSiberia) Buryatenergo (IDGCofSiberia) Grid Company’sBranch Regional GridCompany/Interre Tyumenenergo Chelyabenergo (IDGCofUrals) no presence Sverdlovenergo, ENCE(IDGCofUrals) Grid Company’sBranch Regional GridCompany/Interre Stavropolenergo (IDGCofNorthernCaucasus) Chechenenergo (IDGCofNorthernCaucasus) Caucasus) Sevkavkazenergo (IDGCofNorthern of Northern Caucasus) Karachaevo-Cherkesskenergo (IDGC Kabbalkenergo (IDGCofNorthernCaucasus) Ingushenergo (IDGCofNorthernCaucasus) Caucasus) Dagestan GridCompany(IDGCofNorthern Grid Company’sBranch Regional GridCompany/Interre no presence no presence no presence no presence no presence no presence no presence no presence no presence Grid Company’sBranch Regional GridCompany/Interre no presence no presence Volgogradenergo (IDGCofSouth) Astrakhanenergo (IDGCofSouth) Rostovenergo (IDGCofSouth) Kalmenergo (IDGCofSouth) Kubanenergo Grid Company’sBranch Regional GridCompany/Interre MES) Kuzbasskoye PMES(Siberia MES) Zabaykalskoye PMES(Siberia (Siberia MES) Krasnoyarskoye PMES (Siberia MES) Zapadno-Sibirskoye PMES (Siberia MES) Zapadno-Sibirskoye PMES MES) Khakasskoye PMES(Siberia no presence MES) Zabaykalskoye PMES(Siberia Grid Entity Electriity Transmission (Western SiberiaMES) Yamalo-Nenetskoye PMES (Western Siberia MES) Vostochnoye PMES Tsentralnoye PMES, (Western Siberia MES) Yuzhnoye PMES (Urals MES) Yuzhno-Uralskoye PMES (Urals MES) Sverdlovskoye PMES Grid Entity Electriity Transmission no presence no presence no presence no presence (East MES) Khabarovskoye PMES (East MES) Primorskoye PMES Amurskoye PMES(EastMES) Yuzhno-Yakutsky LUCh, Amurskoye PMES(EastMES) Grid Entity Electriity Transmission (South MES) Stavropolskoye PMES (South MES) Kaspiyskoye PMES Grid Entity Electriity Transmission no presence no presence (Center MES) Volgo-Donskoye PMES (South MES) Rostovskoye PMES Sochinskoye PMES(SouthMES) Kubanskoye PMES, Grid Entity Electriity Transmission Main Activities Customer Relations

Effective and successful customer Diagram 5 Instances of communication relations are a priority for the ROSSETI Main Subjects of Customer Inquiries with customers are constantly Group. The core of this work is a custom- Network Electricity billing er-focused approach. ROSSETI strives connection metering on the increase, which to enhance customer loyalty as a result Electricity Ancillary proves that this area of the of improved affordability of services and distribution services Company’s activities is very higher service quality. Power outages Other (service important. The number of Via all channels of communication with quality, contact customers (face-to-face inquiries, remote Maintenance service quality complaints of electric grid information, etc.) inquiries by telephone or on the Internet), facilities decreased from 254,000 the ROSSETI Group received 4.8 million to 183,000 by 2017. inquiries in 2017, or 7% more than in 2016. 6 Most requests and inquiries concerned 8 Diagram 6 network connection services (53%). The 6 Changes in Inquiries in 2013–2017 second most popular subject among cus- 1 tomers was power outages (24%). Com- Total inquiries, thsd pcs. pared with 2016, the number of requests 53 and inquiries related to ancillary services % Service quality complaints, thsd pcs. 24 grew by 1 pp.

2 4,823 4,506 4,259 4,286 3,763 The key channels of communication with customers are as follows:

254

customer service customer service customer service 204 185 190 183 offices by telephone on the Internet 1.7 2.7 209 2013 2014 2015 2016 2017 million visits in 2017, million calls in 2017, thsd inquiries in 2017, or a decrease of 10% or an increase of 23% or an increase of 23%

The increased importance of the Internet as a channel of communication with customers, along with the decreased number of visits to customer service offices, is due to the development of online customer service and a wider range of online services offered by the ROSSETI Group. The number of online requests and inquiries has annually increased by an average of 90% over the past five years. In 2017, 96,800 network connection requests were received via the Internet. www.rosseti.ru/eng

23 24 ROSSETI Corporate Social Responsibility and Sustainability Report 2017 COMPANY PROFILE O nline Customer Service Customer nline in several areas. in several relations. redesigned It was stakeholder ROSSETI’s of instrument important an updatedThe became portal expanded. was services of range the and changed, was concept website the SDCs’ websites. In 2017, on functionalities service customer electronic and (Портал-ТП.рф) services grid electric of portal uniform the on based is service customer Group’s online ROSSETI The

requesting entities. potential and existing with webinars) ing (includ meetings public held regularly branches their and SDCs ROSSETI all 2017, In functionalities. online and vices ser new about awareness customers’ to raise strives Group ROSSETI The surveys. customer to conduct created was an questionnaire online of services, bility accessi and quality the to monitor order in Additionally, quality. service customer about complaints make or services about to inquiries send customers enabling forms inquiry online with equipped are websites SDCs’ and portal The E4. connection operations the gridorganization’snetwork of tolerancesastothescope connection prices,takingaccount Calculator fornetwork INTERA and facilities power to find easier it makes interface user-friendly The capacity. available shows which above, and kV 35 rated for main substations utilization of map uniform the contains portal The I3. number alower by proved is functionality this of efficiency The signatures. digital by electronically contracts nection con network into enter and requests tion connec can submit network users Portal E 2. the procedure with comply organizations grid whether to verify entities requesting allows information This for services. requests to handle required time and stages the about information to obtain enable customers login pages Personal 1. E mproving the quality of network connection services connection network of quality the mproving xpanding the functionality of personal login pages personal of the functionality xpanding nsuring the accessibility of services of the accessibility nsuring nabling customer feedback nabling customer C TI V E S ER V I C E S requirements operations subjecttotechnical account ofthegridorganization’s connection prices,taking Scientific calculatorfornetwork using using - - - - - of energy companies and authorities. companies of energy efforts joint requiring issues of discussion fruitful to the contributed connection, network of process the in participants key the among dialog for aplatform provided Forum The RUSSIA. OPORA of members that are associations and entrepreneurial organizations, public companies, grid with along Initiatives, for Strategic the Agency and Energy of Ministry Russian the by attended was event The Issues.” Current Experience, Projects, sible Networks: “Acces Connection onForum Network of the 5th All-Russian the organizers among was 2017, October In ROSSETI functionalities. interactive special has portal The rates. their utilization including characteristics, their technical about information obtain services. connection network of provision the up speed helped This contracts. signing for organizations to grid visits personal of description. performance service avisual and sheet adata with furnished is service each and type, activity by cataloged are services all navigation, of ease For requests. their handling for prices electricity meterinstallation Calculator forapproximate - Face-to-Face Customer Service Diagram 7 A well-developed customer service net- In accordance with the Uniform Customer Changes in the Number of Customer work ensures that the ROSSETI Group’s Service Quality Standards, the face- Service Offices and Face-to-Face Inquiries services are easy to reach. As at the to-face customer service network was in 2013–2017 end of 2017, the Company operated 919 streamlined in 2017 to ensure equally Number of customer service offices, pcs. customer service offices, including 118 high service quality in all regions served customer service centers and the others by the ROSSETI Group. Number of face-to-face inquiries, thsd pcs. being customer service points at local The Company strives to providing con- divisions of SDCs. venient conditions in customer service The number of visitors to the ROSSETI offices. All offices are fitted with modern 1,912 Group’s customer service offices was equipment such as electronic queue 1,829 1,747 about 1.7 million in the reporting year, management systems, payment termi- 1,527 or 10% less than in 2016. The decrease nals, and self-service information kiosks. 1,331 in personal visits was largely due to Beginning in 2015, the ROSSETI Group a wider range of online services. carries out projects to develop the integration with multifunctional centers for governmental and municipal services in relation to network connection requests. 734 986 941 933 919

2013 2014 2015 2016 2017

Customer Service by Telephone

Remote customer service by telephone requirements. The number of people centers, by mail, and on the Internet. uses SDCs’ call center numbers, num- surveyed exceeded 60,000. The surveys The respondents surveyed in writing and bers of operational dispatching units, and focused on the quality and affordability of online (58,000 people) accounted for 96% hotline numbers. The principal goals of network connection services, including: of all those who contacted SDCs in 2016. call centers are to receive and handle > compliance with the prescribed About 4,000 respondents were additionally customers’ incoming calls and provide network connection deadlines; surveyed by call center representatives. a customer with necessary information. > convenience of customer service Beginning in 2016, an online inquiry form In 2017, the Company received a total of offices’ location and working hours; is available on the portal of electric grid 2.7 million inquiries by telephone, or 23% > qualifications and efficiency of services. The results of the surveys enabl more than in 2016. personnel; ed the ROSSETI Group to identify prob- The ROSSETI Group made more than > availability of information about the lems and develop measures to improve 100 surveys in 2017 to find how satisfied electricity connection procedure. service quality. customers are with service quality and ROSSETI SDCs conduct customer surveys assess the fulfillment of the ISO 9001 by asking questions at customer service

High-Quality and Accessible Power Infrastructure

Diagram 8 ROSSETI’s network Changes in Network Connection in 2013–2017, pcs. connection services make it submitted network connection signed network connection completed network connection requests contracts contracts possible to keep up with the public demand for electricity, 478 488 479 476 475 thus creating the conditions

383 383 369 393 365 384 363 374 for sustained socioeconomic 346 development in the regions 262 of the Group’s operations.

2013 2014 2015 2016 2017 www.rosseti.ru/eng

25 26 ROSSETI Corporate Social Responsibility and Sustainability Report 2017 COMPANY PROFILE tive development. innova of area the in projects large-scale several completed 2017,In ROSSETI 4) 3) 2) 1) development: innovative of areas high-priority four sees Company The > > documents: two by defined are activities innovation Company’s the of objectives and areas principal The and customer orientation. manageability, accessibility, efficiency, of reliability, characteristics improved with supply electricity new to atechnologically over to switch is goal strategic ROSSETI’s modernization. its in factor and an important economy Russian the of development sustained the for tion aprecondi is innovations of introduction the activities, Company’s the of nature infrastructural the Given priorities. term long- ROSSETI’s of one is potential vation inno and scientific its of development The I in 2018. in the“GettingElectricity” ranking a position amongthetop 20economies in this area isto enable Russia to reach Business rankings. Thekey target connection indicators oftheDoing plan to attain thekey electricity In 2017,ROSSETI updated theaction Table 2 T Cost (%ofincomepercapita) Time Number ofprocedures Position inthe“GettingElectricity”rankingofDoingBusiness Indicator

nnovation argets in the “Getting E “Getting the in argets scale; alarge on kV 35–110 rated (220) stations sub digital introduce and over switch mation of control systems; control of mation auto to the and processes business of efficiency integrated to the over switch the electricity industry. the electricity in materials and technologies new use grids; digital adaptive to actively over switch Term Plans Until 2025. Until Term Plans Long- with 2016–2020 for ROSSETI of Program Development Innovative of ROSSETI; Enhancement Policy Efficiency and Energy Conservation, InnovativeDevelopment, Energy lectricity” R lectricity” > > > > accessibility are asfollows: ROSSETI Group’s power infrastructure for 2017,theactualindicators ofthe According to theWorld Bank’s report

electricity connection: 83days. time required to obtain an capita; connection: 41.5%ofincome per cost ofobtaining anelectricity obtain anelectricity connection: 3; number ofprocedures required to position intheranking: 10th; anking of D of anking - - - - - > > > initiative: EnergyNet the of part as projects several out carry entities Group’s ROSSETI The conventional with lower compared grids. 30% be will costs operation their scale, alarge on introduced are grids such When for customers. supply reliability electricity double than to more possible it make and minimal human intervention, require systems, and self-repair self-diagnostics have grids Smart exchange. energy of ture infrastruc grid acommon into integrated and consumers of producers ecosystem an Energy, of Internet the creating at aimed EnergyNet, is energy smart for projects NTI main the of One (NTI). tiative Ini Technology National governmental in implementing the participation through of tomorrow of Russia’s energy smart development to the contributes ROSSETI

Krasnoyarsk and Tyumen. Krasnoyarsk in substations of digital construction networks; electricity burg Peters of resources the using cluster energy adaptive actively an of creation district; grid electric smart Yantarenergo oing B oing usiness A Switching over to Actively daptive D daptive % days pcs. – Unit igital Grids signature. ments can besigned withadigital involving aretail company. Alldocu a network connection request without nization inthecourse ofsubmitting supply contract through agridorga- are now able to enter into apower frastructure accessibility. Customers in thereporting year to ensure gridin- implemented animportant initiative All oftheROSSETI Group’s entities 1,852 281 10 183 2012 - - - in regions. other Russian projects digitalization grid for used be also Region. Yantarenergo’s will experience Kaliningrad the of districts to all project grid electric of implementing the smart experience the to extend decided ROSSETI of 27,June Directors of 2017, Board the On 2018. in completion for scheduled is 3 Phase 2; Phase 1and Phase of pletion com successful the 2017 saw year The > > > phases: three of consists project The district. grid electric asmart creates ROSSETI, of support the with Yantarenergo, where area apilot is Region Kaliningrad The

321 135 4 60 2015 situation control systems. control situation and process operational integrated of introduction system: control uniform tion; consump electricity and remotely plan to monitor independently customers on pilot meters sites to enable smart of installation metering: intelligent networks; 15 for kV system automation distributed a of introduction grid: adaptive actively ment. an ordinance oftheRussian Govern- businesses andimplemented under ROSSETI for smallandmedium-sized connection schedule developed by based onthemodel90-daynetwork “Electricity (Network) Connection” part inintroducing theTarget Model In 2017,ROSSETI SDCstook anactive 41.5 83 3 10 2017 20 90 3 20 2018 (plan) - - Developing the EV Charging > 107 Mode 3 stations, 22 kW AC, June 1, 2017 Infrastructure recharging an electric vehicle within MOESK and KAMAZ signed an agreement 2–6 hours, located at shopping centers, for strategic cooperation in innovation. The chain stores, filling stations, municipal agreement provides for the design of an The ROSSETI Group’s innovation activities parking lots, and airports. electric truck-based mobile accumulator. contribute to the development of green In cooperation with Concern Radio-Elec- technologies in Russia. For instance, the tronic Technologies, ROSSETI designed Company is involved in the nationwide a new 50 kW DC charging station. In July program to develop the electric vehicle 2017, the station began to be test-operated June 2, 2017 charging station infrastructure and, in Solnechnogorsk. Based on the results ROSSETI, KAMAZ, SOLLERS, Rostelecom, beginning in 2012, constructed 130 EV of the test operation, it will be decided on Peter the Great St. Petersburg charging stations. 65 stations are located the mass production of initial batches of Polytechnic University, the Central in Moscow and the Moscow Region such charging stations. Scientific Research Automobile and Automotive Engines Institute (NAMI), and and the same number in other regions, The development of the EV infrastruc- the Center for Strategic Research “North- namely Saint Petersburg, Sochi, Yaroslavl, ture requires consolidated efforts on the West” Foundation signed a multilateral memorandum of intent to establish the Yekaterinburg, Ryazan, Oryol, and Valaam part of numerous market participants. National Consortium for Development Island. The total number of charging sta- ROSSETI is active in cooperating with of Autonomous, Connected and Electric tions across the country is about 300. other companies and organizations to Vehicles. ROSSETI built two types of charging reach this goal. The Company initiated stations: several projects in 2017 to develop the EV > 23 Mode 4 stations, 55 kW DC, recharg- charging infrastructure in the long run. August 17, 2017 ing an electric vehicle within 15–20 ROSSETI and GAZ Group entered into minutes, located along outbound routes an agreement for cooperation in the use and at places with heavy traffic; of modern motor vehicles for Russian electric grid facilities.

Governance

The Company operates a developed Governance bodies of ROSSETI: Decisions of the General Meeting of governance system that meets advanced > General Meeting of Shareholders; Shareholders may be announced at the Russian and international standards. > Board of Directors; General Meeting of Shareholders during ROSSETI views the improvement and in- > Management Board (collegial executive which voting takes place and should be creasing effectiveness of governance as a body); communicated as the Voting Report to precondition for the Company’s sustained > Director General (sole executive body). the persons entitled to participate in the development. The highest governance body used by General Meeting of Shareholders. In 2017, the General Meeting of Sharehold- shareholders to exercise their right to The Board of Directors has the leading ers approved restated versions of basic in- participate in the Company’s governance role in formulating, approving, and updat- ternal documents, namely the Company’s is the General Meeting of Shareholders. ing the goals and values of ROSSETI and Articles of Association, the Regulations for The procedure for convening, preparing, the mission and development strategy the General Meeting of Shareholders, and holding, and summarizing the General of the electric grid sector. The Strategy the Regulations for the Board of Directors. Meeting of Shareholders of ROSSETI is Committee of the Board of Directors is re- In addition, updated versions of articles of defined by the Articles of Association and sponsible for the preliminary preparation association and internal documents were the Regulations for the General Meeting of and refinement of proposals in this area. formulated for 45 entities of the ROSSETI Shareholders. The working bodies of the The Board of Directors is elected by Group in the reporting year. General Meeting of Shareholders are as the General Meeting of Shareholders The Company’s efforts to enhance its gov- follows: for a term of one year as nominated by ernance system received recognition from > Presidium; shareholders holding at least 2% of voting the investor community. Upon assessing > Presiding Officer of the General shares. The General Meeting of Share- the implementation of the ROSSETI Meeting of Shareholders; holders may decide on the early termi- Group’s corporate, social, and environ- > Counting Commission; nation of powers only with regard to all mental policies, FTSE Russell added the > Secretary of the General Meeting members of the Board of Directors. Company’s securities to the FTSE4Good of Shareholders. The members of the Board of Directors Emerging Index in June 2017. The index is ROSSETI should hold the General Meeting should not do any acts that will or may designed to measure the performance of of Shareholders every year, not earlier lead to a conflict between their interests companies demonstrating strong environ- than five months and not later than six and the interests of the Company and, in mental, social, and governance practices. months after the end of the financial year. the event of the existence or occurrence of The inclusion of ROSSETI’s securities After the reporting period, the Company such conflict, should disclose information in the FTSE4Good Index will make the introduced information and telecom- on the conflict to the Board of Directors. Company attractive to a greater number of munications facilities in 2018 to provide international investors, along with social shareholders with remote access to investment funds, whose decision-making participating in the General Meeting of process is focused on environmental and Shareholders, discussing agenda items, social factors. and deciding on issues put to a vote. www.rosseti.ru/eng

27 28 ROSSETI Corporate Social Responsibility and Sustainability Report 2017 COMPANY PROFILE www.rosseti.ru/eng

Diagram 9 ROSSETI’s Governance Structure COMPANY PROFILE

GENERAL MEETING OF SHAREHOLDERS

319,694 shareholders

Corporate Secretary Board of Directors Executive bodies

15 members (5 independent directors)

Director General

Management Board

Audit Committee 4 members — members of the Board of Directors (only independent directors, including the Chairman)

Strategy Committee 20 members, including 5 members of the Board of Directors (3 independent directors)

Nomination and Remuneration Committee 4 members — members of the Board of Directors (only independent directors, including the Chairman)

Investment, Technical Policy, Reliability, 18 members, and Innovation Committee including 2 members of the Board of Directors (2 independent directors, Corporate Social Responsibility and Sustainability Report 2017 Social Responsibility and Sustainability T I Corporate R O SSE including the Chairman) 30 Diagram 10 In 2017, there was one change of the determined by the decisions adopted by Subjects of the Issues Considered composition of the Board of Directors of the Board of Directors and the committee by the Board of Directors in 2017 ROSSETI. The 15 members of the Com- regulations. Finance, investment, pany’s Board of Directors elected by the With the aim of supervising the imple- and R&D 16% General Meeting of Shareholders in 2016 mentation of instructions issued by the included four independent directors. The Board of Directors, the Company analyzes, Approval of internal 4% 15 members of the Company’s Board of on a quarterly basis, information on the documents Directors elected in 2017 included five implementation of such decisions. Any independent directors. member of the Board of Directors may Strategic planning 7% The Board of Directors acts in accordance in writing request, whether directly or and development with the annually approved Action Plan. through the Corporate Secretary, that the 4% Meetings of the Board of Directors are Director General provide the documents KPIs held at least once every six weeks. The and information necessary to make a Chairman of the Board of Directors may decision. Such documents and information Procurement 2% decide to hold an unscheduled meeting to should be made available to the members Budget and monitoring of the discuss urgent issues. The committees of of the Board of Directors not later than five financial and economic 6% the Board of Directors are formed for the business days after receipt of the request condition preliminary review of the most important therefor. Audit, control, and risks 4% issues falling within the competence of ROSSETI’s collegial executive body is the the Board of Directors. Decisions of the Management Board. The number of its Administration of SDCs with committees are deemed to be recommen- members is determined by the decision respect to key issues of their 34% dations. The members, competence, and adopted by the Board of Directors at the operations operating procedure of the committees are suggestion of the Director General. Other 23%

In 2017, the Board of Directors held 37 meetings (six in person and 31 in absentia), considering 164 issues. The most important issues concerning sustainability included as follows: approval of the approval of the review of the Concept approval of a restated approval of the Corporate approval of the Dividend Environmental Policy of Information Technology, of Setting up the version of the Uniform Code of Ethics and Policy of ROSSETI the Electric Grid Sector Automation, and Foundation for Research, Procurement Standard of Business Conduct Telecommunications Development, and ROSSETI of ROSSETI Policy of ROSSETI Innovation Support (ITT Policy) of ROSSETI

In 2017, an external consultant was The independent experts evaluated The recommendations provided by the engaged by the ROSSETI Group for personal knowledge, experience, and experts are to be included in the action the first time to make an independent competencies of members of the Board plans. Detailed information on the performance evaluation of the Board of of Directors and its committees. The final members of the Board of Directors, the Directors, committees of the Board of evaluation report is subject to review by the Management Board, and the Director Directors, and members of the Board Nomination and Remuneration Committee General is disclosed in Section “Corporate of Directors in accordance with the and the Board of Directors of ROSSETI. Governance” of the Annual Report of evaluation technique prepared by the ROSSETI for 2017. Russian Institute of Directors.

Charters and Membership in Associations

ROSSETI is an active member Table 3 of professional and industry ROSSETI Group’s Membership in Professional and Industry Associations associations, contributing to the resolution of HR, social, Organization ROSSETI’s Contribution employment, and technological All-Russia Trade Association ROSSETI is a participant in the sectoral system of social partnership, implementing a of Employers in the Power uniform policy in social and employment relations. The Company’s representatives are problems for the development Industry members of the management and control bodies of the RaEl Association. of the Russian energy indus- Council on Professional ROSSETI takes part in the Council’s activities related to monitoring the labor market, Qualifications in the Electric developing professional standards and organizing their application, updating educational try. In addition, the Company’s Power Industry standards, accrediting professional education programs, and setting up a uniform certification system for professional qualifications in the electric power industry. representatives are members of Corporate Educational and ROSSETI facilitates the acquisition of knowledge and the enhancement of business and federal educational and meth- Scientific Center of Unified professional skills among personnel engaged in the electric power industry. The Company Energy System (Nonprofit participates in the General Meeting of Members of the Partnership and in the Supervisory odological associations of higher Partnership) Board of the Partnership. and secondary occupational WorldSkills Russia As an Associated Partner of WorldSkills Russia, ROSSETI contributes to introduce innovative educational technologies, establishing uniform requirements for employee education institutions for Group proficiency and ensuring practice-oriented training in order to develop the social and professional mobility of young employees.

13.00.00 (Electric and Thermal Russian Union of The principal goal of RSPP is to safeguard business interests and create a favorable Power) of educational and train- Industrialists and business climate in Russia. Representatives of ROSSETI are members of the Commission Entrepreneurs Russian on Power Engineering, the Committee on Corporate Relations, and the Committee on ing programs. Association of Employers Digital Economy of RSPP and take part in defining the position of RSPP on legislative

(RSPP) initiatives and development areas of the relevant activities. ROSSETI’s Director General www.rosseti.ru/eng Pavel Livinsky is a member of the RSPP Board. 31

Our Sust

social responsibility andenvironmental protection

and balance between economic efficiency, ROSSETI strives for sustainable growth ainability Stra

tegy 3 section

www.rosseti.ru/eng 34 ROSSETI Corporate Social Responsibility and Sustainability Report 2017 OUR SUSTAINABILITY STRATEGY Sustainability Goals of the RO the of Goals Sustainability Table 4 safe and areliable securing However, ers. stakehold with communication of results to the according adjusted be can which activities, sustainability-related of its areas strategic several identifies ROSSETI P Sustainability S Our E care Employee relations D stakeholders R E Sustainability Goal nvironmental responsibility nvironmental conomic security egular communication with communication with egular evelopment of customer evelopment of customer and social and environmental responsibility. environmental and social and expectations, stakeholder efficiency, economic among balance optimal to an keep strives sectorelectric grid and an factor important competitiveness. in its ROSSETI Sustainability is an integral element of the long-term development of strategy the ustainability S ustainability SS riorities Group ETI > > > > > > > > > > > > > Material TopicsoftheReport ROSSETI Group’sservices Environmental complianceofthe energy consumption andefficientlyuse Group’s desiretoreduceenergy Energy consumption.TheROSSETI programs oftheROSSETIGroup Training andeducation. Occupational healthandsafety locations ofoperation qualified employeesatvarious The Company’s desiretohire Reduction ofemployeeturnover. investment inhumanresources. Employment. TheCompany’s Availability andreliability Demand-side management Social compliance Research anddevelopment response Disaster/emergency planningand Anti-corruption Company’s operation local suppliersatlocationsofthe fide suppliers,engagementof ROSSETI Group.Selectionofbona Procurement transparencyofthe ROSSETI Group Economic performanceofthe - velopment of the Electric Grid Sector of of Sector Grid Electric the of velopment for De Strategy the in contained are SETI ROS of goals sustainability principal The history. Company’s the throughout priority unconditional an remains supply power trategy trategy > > > > > > > > > > > Key CorporateDocuments Efficiency EnhancementProgram Energy Conservationand Uniform TechnicalPolicy Innovative DevelopmentProgram Grid Sector Environmental PolicyoftheElectric Occupational SafetyPolicy Business Conduct Corporate CodeofEthicsand and Government Relations Policy onSociety,Customer, and Government Relations Policy onSociety,Customer, Innovative DevelopmentProgram Risk ManagementPolicyofROSSETI Companies ofROSSETI and SubsidiariesDependent Anti-Corruption PolicyofROSSETI - - specific aspects of sustainability. governing documents corporate internal and 2030 Until Federation Russian the Section 7. Environmental Resource Section 5. Human Section 2. CompanyProfile Relations Section 6. Society Section 4. Sustainability Section 3. Our Section 1. OurReport Section 4. Section 2. CompanyProfile Section oftheReport Protection Development Achievements Results and ROSSETI in2017: Strategy Achievements Results and ROSSETI in2017: Stakeholder Engagement

Adhering to the principles of sustainability EXTERNAL INTERNAL in ROSSETI’s activities means implies STAKEHOLDERS STAKEHOLDERS constant communication with external and internal stakeholders. During regular consultation with stakeholders in the course of preparing non-financial reports, > Customers of the Company > Shareholders of the Company ROSSETI applies the principles of materi- and SDCs and SDCs > Territorial grid organizations > Employees of the Company ality and stakeholder engagement, which > Federal and regional and their family members help establish constructive and mutually authorities > Management of the Company beneficial relations with all groups of > Investors and SDCs stakeholders. > Manufacturers of electrical > All-Russian Electrounion The key groups of ROSSETI’s and SDCs’ equipment stakeholders are defined by the Policy > International partners and on Society, Customer, and Government organizations Relations. > General public (public organizations and the media)

Diagram 11 Map of the Mutual Influence of the ROSSETI Group’s Stakeholders

Federal authorities Regional authorities Management of the Company and SDCs

Customers

International partners General public Shareholders TGOs All-Russian Electrounion and organizations and investors ETI Group SS e RO h Equipment Employees

s on t manufacturers older h e k ta f s e o c luen f n I

Influence of the ROSSETI Group on stakeholders

The ROSSETI Group’s approach to stakeholder engagement is based on the following priorities:

Comply with legal Ensure the Ensure regular Keep the interests Ensure openness Assess effective- requirements and efficiency and and constructive of stakeholders in and transparency ness and improve fulfill other obliga- effectiveness of relations with balance business on a tions assumed by the Company’s all stakeholder constant basis the Group’s entities activities groups www.rosseti.ru/eng

35 36 ROSSETI Corporate Social Responsibility and Sustainability Report 2017 OUR SUSTAINABILITY STRATEGY Stakeholder E Table 5 Customer organizations Territorial grid and investor Shareolders authorities and regional Federal Stakeholders ngagement of the RO > > of Communication Channels > > > > > > > > > > > Networks” Connection “Accessible Russian ForumonNetwork roundtables oftheAnnualAll- Expert discussionsaspartof Organizations) of TerritorialPowerGrid Noncommercial Partnership Joint activities(withinthe sustainability reports social responsibilityand reports andcorporate Publication ofannual of Shareholders Annual GeneralMeeting new legalregulations) amendments toandenacting with theaimofinitiating Rulemaking Commission Rulemaking (activitiesofthe conferences, andforums Duma, parliamenthearings, of roundtablestheState Expert discussionsaspart inquiry forms) Feedback (throughonline publications inthemedia) of theGroup’sentities, рф andcorporatewebsites (disclosures onПортал-ТП. Distribution ofinformation center hotlines complaints, etc.)andviacall information, receiptof provision ofreference of requestsforservices, service centers(receipt Consultations atcustomer conferences investor forums,and one meetingswithinvestors, Exchange ofviewsatone-on- Hotlines, repliestoinquiries results the publicationofIFRS Conference callsfollowing website andnewswires Disclosures ontheCompany’s SS ETI Group when necessary during theyear Communication Frequency of when necessary when necessary during theyear during theyear during theyear during theyear when necessary every year when necessary every year once ayear Key SubjectsandIntere > > > > > > > > > > > > > > > > > > > Efficient handlingofcustomerrequests framework Improvement oftheregulatoryandlegal conditions ofcustomerservice Territorial accessibilityandconvenient connections Timely andaffordablenetwork Prompt accidentrecoverywork standards and qualitywiththetransitiontoglobal Improved electricitysupplyreliability government between gridorganizationsandthe legislation asrelatedtorelationships Necessity fortheimprovementof issues ofmarketoperation information spaceregardingthekey Necessity forthecreationofacommon Timely andcompletedisclosures governance Transparent andefficientcorporate Higher marketcapitalization for investors Improved appealoftheCompany Efficient useofbudgetaryfunds Maintenance ofsocialstability sector Operating safetyoftheelectricgrid and technical standards Compliance withlegalregulations development programs and implementationofregional authorities inrelationtotheplanning with Russianregionalandmunicipal cooperation basedonagreements Measures toensureconstant prepared bygovernmentalauthorities of energy-related draftdecisions Discussion andexpertexamination grid facilities operation anddevelopmentofelectric of resources connectedwiththe Necessity fortheoptimaldistribution Highlits in2017 > > > Main issues: Experience, CurrentIssues”onOctober5,2017. Network Connection“AccessibleNetworks:Projects, The Companytookpartinthe5thAll-RussianForumon of theROSSETIGroup. Plan toEstablishtheFederalCustomerServiceCenter The CompanyformulatedandimplementstheAction on 2016. The numberofportalvisitorsincreasedby25%in2017 for approximateelectricitymeterinstallationprices. calculators fornetworkconnectionprices,calculator online questionnaireform,showcasefordisclosures, was equippedwithnewelectronicfunctionalities: The portalofelectricgridservices(Портал-ТП.рф) in 2017. decreased toanaverageofthreeintheROSSETIGroup The numberofelectricityconnectionprocedureswas forums, workinggroups,andexpertcouncils. In 2017,ROSSETIregularlyparticipatedineconomic Academy ofSciences. and theInstituteofStateLawRussian roundtable discussionsorganizedbytheStateDuma In thereportingyear,ROSSETItookpartinfive by authorities. was activeindealingwith15draftregulationsprepared improve sectorallegislation.Inaddition,theCompany The Companysubmitted18initiativesin2017to executive authorities. by commentsandproposalssubmittedtofederal electric gridsector’sentities,including99covered relation totherightsandlegitimateinterestsof 314 draftregulationswereprocessedin2017 rubles waspaidasdividendsfor2016. Shareholders ofROSSETI,anamount3.784million As resolvedbytheAnnualGeneralMeetingof Investors visitedSDCs’productionfacilities. including callsdiscussingthepublishedIFRSresults. The Companyorganizedconferencecallsforinvestors, in 2017. Company’s andSDCs’shareholderswereheld representatives ofinvestmentbanksandthe One-on-one andcollectivemeetingswith the workofelectricitysupplysecurityheadquarters. October—November 2017in71Russianregionsduring meteorological phenomena.Thedrillstookplacein large-scale poweroutagescausedbyhazardous The Companyconductedunscheduleddrillstoremedy and medium-sizedbusinessesinRussia Accessibility ofelectricgridinfrastructureforsmall years of electricgridinfrastructureoverthepreviousfive Results ofgrids’workonenhancingtheaccessibility introducing thetargetmodelfornetworkconnection improving theregulatoryandlegalframework, Results offederalexecutiveauthorities’workon Заинтересованные Каналы взаимодействия Частота Ключевые темы и интересы Основные мероприятия в 2017 году стороны взаимодействия

> Negotiations and meetings during the year > Reliable and predictable partner Over 600 manufacturers supply the ROSSETI Group relations with equipment and materials. They are engaged to > Publications in the media during the year implement the Corporate Import Substitution Plan > Support for domestic manufacturers of ROSSETI. The share of purchases from foreign > Competitive purchases when necessary manufacturers was reduced to 8.8% in 2017. Manufacturers > Mutually beneficial cooperation of electrical > Participation in conferences during the year The Company entered in an agreement with ROSATOM equipment and forums > Fair competition in 2017 to devise domestic process solutions.

> Accurate fulfillment and transparency In the reporting year, the Company signed a of contractual obligations cooperation agreement with REP Holding to introduce domestic innovations.

ROSSETI expanded cooperation with Belarusian manufacturers of electrical equipment.

> Negotiations and meetings during the year > Reliable and predictable partner The Company took part in major conferences and relations exhibitions in 2017, which resulted in signing several > Publications in the media during the year cooperation agreements with regional authorities, > Close cooperation with international financial and educational institutions, and other > Corporate media outlets, during the year partners in the development of the organizations interested in the development of the International including the website electric power industry, the international electric grid sector. partners and integration of grid infrastructure, and organizations > Competitive purchases when necessary the introduction of international best In cooperation with major European and Asian electric practices in the area of power supply utilities, ROSSETI continued to develop integration > Participation in conferences during the year projects in Eurasia. and forums

> Distribution of information during the year > Reliability, relevance, and completeness On March 29 and 30, 2017, ROSSETI participated in on the Company’s and SDCs’ of information the “Arctic: Territory of Dialogue” International Arctic websites Forum in Arkhangelsk. > Enhanced transparency and openness > Publications in the media during the year of activities As a strategic partner, ROSSETI took part in the St. General public Petersburg International Economic Forum from June 1 > Advice from media centers during the year > High professionalism in communications to June 3, 2017.

> Exchange of views during the year > Support for socially important initiatives As a general partner of the Power Grids of the Future event, ROSSETI was a member of the Russian stand > Meetings, forums, during the year > Cultural development at EXPO 2017 in Astana from August 28 to September and business breakfasts 3, 2017. > Child assistance As a strategic partner, ROSSETI took part in Russian > Support for physical culture and sports Energy Week from October 4 to October 7, 2017.

Risk Management The ROSSETI Group’s activities involve are defined by the Risk Management Pol- ny’s sustained development. These risks various risks that may affect the imple- icy of ROSSETI. The general coordination are as follows: mentation of strategic plans. ROSSETI of risk management processes comes > tariff risks; applies the reasonable precautionary within the purview of the risk manage- > risk associated with the decreased vol- principle. The Company strives to regu ment division, namely the Strategic ume of electricity distribution services; larly identify hazards, assess risks associ- Development Department. The Strategic > risk of impaired electricity supply ated with its activities, and take appropri- Development Department is indepen- reliability; ate risk management measures. dent of the controlling and internal > risks associated with possible military The Company operates a risk manage- inspection division and the internal audit conflicts and their implications, impo- ment system covering ROSSETI and SDCs division, which ensures the allocation of sition of the state of emergency, and and aimed at ensuring the sustained and responsibilities and precludes conflicts strikes; continuous operation and development of of interest. > risks associated with the geographi- the Company through the timely identifi- Risk management is a continuous and cy- cal characteristics of the country and cation, assessment, and management of clical process within the general manage- regions; risks that threaten the operating efficiency ment system of the ROSSETI Group and > legal and compliance risks. of the electric grid sector. includes the following main stages: goal The Company’s financial and non-financial The fundamental principles, goals, setting, risk identification, risk assess- risks are analyzed in detail in the Annual objectives, distribution of responsibilities ment, risk response, and risk monitoring. Report of ROSSETI for 2017 (Section “Risk among risk management system partici- This Report describes the most significant Management System”, pp. 108-112). pants, and the nature of their interaction non-financial risks affecting the Compa- www.rosseti.ru/eng

37 38 ROSSETI Corporate Social Responsibility and Sustainability Report 2017 OUR SUSTAINABILITY STRATEGY R Table 6 Tariff risks Industry-Specif Rsks Risks Risk ofimpairedelectricitysupplyreliability of electricitydistributionservices Risk associatedwiththedecreasedvolume Legal andcompliancerisks Legal Risks etc. due toremotenessand/orinaccessibility, disasters, interruptionstotransportation including thepotentialeffectsofnatural characteristics ofthecountryandregions, Risks associatedwiththegeographical the regions of thestateemergency,andstrikesin conflicts andtheirimplications,imposition Risks associatedwithpossiblemilitary Country andRegionalisks isk Management of the RO SS ETI revenues it possibletoobtaineconomicallyfeasible impose apooloftariffsthatwouldnotmake Possibility thatregulatoryauthoritiesmay Brief Description supply reliability (malfunctions) andimpairedelectricity Failures ofelectricalequipment large customers and changesinexternalelectricitysupplyfor Possible decreaseinelectricityconsumption losses penalties involvingsubstantialfinancial entities, impositionoflegalorregulatory the Companyandotherelectricitysector to thebalancebetweeninterestsof relating totheCompany’sactivities,changes Changes tolegislationandjudicialpractice electricity supplyandtransportation can resultininterruptionstotheregion’s to fires,domesticgasexplosions,etc.)that floods, snowdrifts,icing,poweroutagesdue (hurricanes, heavyrains,highwaterand Natural andclimaticemergencies operation oftheelectricgridsector Failure toensuretheuninterrupted Group > > > > > > > > > > > > > > Main Factors conditions of electricgridequipment and critical changesinoperating Failure tofulfillworkingconditions an expired standardoperatinglife High proportionofequipmentwith of electric gridequipment impairing theoperatingcapability Natural andanthropogenicemergencies in-house generationfacilities customers, increasinglywideuseof External electricitysupplyusedby Overall declineinelectricitydemand amid internationalsanctions adverse changesinmarketconditions Economic contractioninRussiaand decisions the courseofmakingtariffandbalancing from theindicatorstakenintoaccountin and capacityconsumptionaredifferent Fact thattheactualindicatorsofelectricity connection costsareontherise existing andnewpreferentialtermswhile connection servicesaresubjectto Lost incomeduetothefactthatnetwork the courseofapprovingtariffs expenses nottakenintoaccountinfull Grid companies’economicallyfeasible applicable totheelectricgridsector Regulatory requirementsandrestrictions regulation industry issubjecttogovernmental Federation underconditionswherethe Changes inthelawsofRussian Long-term climaticchanges Weather conditions including actsofterrorism Illegal interferenceinSDCs’operations, > > > > > > > > > > > > > > > > > > > Management Measure as negligible. Such risksareassessedbytheCompany as negligible. Such risksareassessedbytheCompany Association oftheCompany. the applicablelawsand/orArticlesof and economicactivitiesprovidedforby transactions, andotheraspectsoffinancial planned corporateprocedures,conducted The Companyconductslegalreviewof conditions. loads, andcontrolofabnormalweather glaze icecontrol,controlofexcesswind of criticalchangesinwaterbodylevels, areas aswildfiresuppression,control the RussianFederation,includinginsuch and theHydrometeorologicalCentreof Disaster ReliefoftheRussianFederation, Ministry ofCivilDefense,Emergenciesand of EnergytheRussianFederation, The CompanycooperateswiththeMinistry of remedyingemergencysituations. The Companyworksonreducingthetime and situationcontrolsystems. improve automatedoperationalprocess Measures aretakentodevelopand enhancement programs. conservation andenergyefficiency The Group’sentitiesimplementenergy purposes ofpricingandbusinessplanning. of electricitydistributionservicesforthe Measures aretakentoforecastthevolume for electricityandcapacity. Work isdoneonmonitoringthedemand Claim-related workisdone. of tariff regulation. systematically improvetheprinciples executive authoritiesinorderto The Companyinteractswithfederal the structureoffinancingsources. at reducing costsandoptimallyplanning investing andoperatingactivities,aimed policy onimprovingtheefficiencyof The CompanyandSDCspursueabalanced Policy. and principles oftheAnti-Corruption Employees complywiththeprovisions corruption system. The Companyiscommittedtotheanti- Claim-related workisdone. are monitored. Changes tolegislationandjudicialpractice Disaster ReliefoftheRussianFederation. Ministry ofCivilDefense,Emergenciesand The Group’sentitiesinteractwiththe Emergencies aremonitored. security ofelectricgridfacilities Efforts aremadetoensurethesafetyand activities. production personnelandcontroltheir training andadvancedfor Measures areimplementedtoprovide standard operatinglife. proportion ofequipmentwithanexpired Measures arecarriedouttoreducethe Corporate Ethics and Anti-Corruption ROSSETI views anti-corruption and ROSSETI Group approved the Corporate principles. Compliance with the provisions compliance with business ethics as the Code of Ethics and Business Conduct (a of the Code is mandatory for all employ- fundamental principles of sustainability. restated version of February 22, 2017). ees. ROSSETI also welcomes adherence In order to manage issues related to cor- The Code contains the Company’s most to the Company’s standards on the part of porate conduct and business ethics, the important rules of conduct and business partners, contractors, and customers.

Corporate Values of the ROSSETI Group

Reliability Efficiency Safety Human Resources Social Responsibility

The Company strives to The Company under- The Company applies The key resource of the Company’s The Company adheres to secure a reliable and stands its responsibility a strictly regulated and operations is its employees. The Company the principles of social uninterrupted elec- to shareholders, inves- balanced approach to strives to create safe working conditions, responsibility in its activities tricity supply for the tors, and partners and the implementation enable employees to develop their poten- and gives much attention to Russian economy and strives to improve its of security measures tial, and provide opportunities for profes- environmental protection, social sector, taking the operating efficiency and and works to prevent sional self-actualization. Achieving the occupational safety, and the necessary measures make its business more and avoid potential Company’s strategic goals and objectives implementation of social to ensure the safety of attractive to investors offenses. set by the government depends to a large programs. subsidiaries’ electric and more transparent. extent on high qualifications and integrity power facilities. of employees.

The ROSSETI Group takes systematic Plan for 2016–2017, the ROSSETI Group and protect shareholder rights, the ROS- measures to avoid and prevent corrup- approved several internal anti-corruption SETI Group operates an anti-corruption tion. In accordance with the Strategy for documents in the reporting year. These hotline. The main page of the Company’s Development of the Electric Grid Sector of documents specify the following mecha- website (rosseti.ru) contains a banner with the Russian Federation, ROSSETI should nisms: contact information for sending messages coordinate anti-corruption efforts of all > managing conflicts of interest; with allegations of fraud and corruption. grid organizations. These efforts are su- > investigating and examining allegations At present, allegations can be reported by: pervised by the Department for Economic of corruption and protecting whistle > completing the contact form on the cor- Security and Anti-Corruption of ROSSETI. blowers; porate website in the section “Anti-Cor- For anti-corruption purposes, the > verifying information on the owner ruption Policy”; ROSSETI Group approved a uniform stra- chain of counterparties of ROSSETI and > calling the hotline at +7 (495) 664 8494; tegic document, namely the Anti-Corrup- ROSSETI SDCs, including beneficiaries > sending a written message to: 121353, tion Policy of ROSSETI and Subsidiaries (including ultimate beneficiaries); Moscow, ul. Belovezhskaya, 4; and Dependent Companies of ROSSETI. > handling personal information in dis- > visiting the Company’s office in person. All employees of the Company and subsi closing information on the owner chain In 2017, the Company received 277 reports diaries are caused to read the document. of counterparties; on alleged violations of customer rights, In December 2016, the document was > implementing anti-corruption noncompliance with the Corporate Code amended to comply with changes to standards of procurement. of Ethics and Business Conduct, and Russian anti-corruption legislation. In order to combat fraud and corruption corruption offences, with more than half Under the National Anti-Corruption offence, enhance business transparency, of the reports received on the hotline.

Diagram 12 Subjects of Allegations on the Hotline in 2017

network connection violations 95 Each allegation was

HR violations 38 followed by investigations. No allegations of corruption abuse of authority 36 were found justified in 2017. procurement violations 35

unbilled and noncontractual 19 consumption of electricity 12 alleged employee corruption 42 other www.rosseti.ru/eng

ROSSETI A ROSSETI strives for long-term economic growth, CHIEVEMEN TS RESUL gradually reducing operating expenses

and improving financial results

2017: AND 4 section

www.rosseti.ru/eng 42 ROSSETI Corporate Social Responsibility and Sustainability Report 2017 ROSSETI IN 2017: RESULTS AND ACHIEVEMENTS * 128,217 Electricity Losses 8.93 Electricity Losses 73,334 Delivery toNetworks 821,497 RO of ROSSETI*in2017 Operating Result Table 7 Federation. Russian the of Sector Grid Electric the of lopment Deve for Strategy the of implementation the for prerequisite akey and of aspect important most the as performance views Company The efficiency. business high to acieve strives ROSSETI O R Opex Structure,mnRUB Diagram 13 United PowerSystem the specialoperationmodeofRussia’s Data withoutelectricitylossescausedby perating and Financial P Financial and perating SS O ETI 125,088 142,870 SSET Group % % I in 2017: R mn kWh 109,287 mn kWh economic economic 181,530 42,216 24,832 18,269 1,912 5,067 * able and uninterrupted power supply. power uninterrupted and able areli for responsible are and operations of their regions the in distribution and sion transmis in electricity engaged are SDCs supply. ROSSETI electricity high-quality and areliable to secure is activities ing operat ROSSETI’s of goal principal The Financial R Financial Table 8 Th re city delivery and tariff indexation tariff and delivery city electri to increased due 8.6%, or rubles, billion 62.3 by increased distribution and transmission electricity from revenues Indicator Revenue, including: Operating expenses Net other(expense)/income EBITDA Net profit Net cashflowsfromoperatingactivities According totheROSSETIGroup’sIFRSauditedconsolidatedfinancialresults Other and amortization Depreciation losses electricity network for compensation for Electricity purchased services sion anddistribution Electricity transmis- Employee benefits network connection electricity transmissionanddistribution e m s increase of 18.3% on 2016. more than in 2016. 313.7 was EBITDA billion in rubles 2017, or an Group made anet profit of 137.1ROSSETI billion or 39.4% rubles, constantly to improve financial works its In performance. 2017, the to achieve strives satable economic and growth ROSSETI ult erformance ain f ain in t s in esults and A esults of RO of esults a c h tor e reportin s c ontributin SS assets Impairment offixed Provisions of receivables Impairment except profit tax Taxes andlevies for resale Electricity purchased ETI period were a were g period * in 2017* in to i g to 2017 bnRUB 52.4 784.2 948.3 779.3 22.3 313.7 137.1 212.4 - - - m pro chievements decreased from 9.34% to 8.93%. from decreased losses Electricity 2016. in than more 2017, in kWh 0.27% or million 821,497 was to networks delivery ROSSETI’s prove efficiency prove to im 1.1%, or to measures due rubles, 9billion by decreased expenses operating s f v e ollow m ent 2016 bnRUB 68.1 721.9 901.0 788.3 30.7 265.2 98.3 175.6 in t s in s : h e Group’ Yo Change% (23.1) 8.6 5.2 (1.1) (27.4) 18.3 39.5 21.0 s f inan c - ial ial Reducing expenses and improving The book value of the ROSSETI Group’s Diagram 14 operating efficiency without detriment to noncurrent assets at the end of 2017 Structure of Noncurrent Assets (mn RUB) the reliability, quality, and accessibility of totaled 2,116.2 billion rubles, or 8% higher services are high on the ROSSETI Group’s than in 2016. The increase in the value list of priorities. The following programs of noncurrent assets resulted from the were specifically formulated to this end in higher value of fixed assets due to the 2017: commissioning of new facilities under the > Program to Improve the Operating capital investment program. Non-cur- 175,925 Efficiency and Reduce Expenses of the rent receivables increased by 23.2 billion mn rub ROSSETI Group for 2017–2021; rubles to 74.5 billion rubles, largely due to 2017 > Action plan to optimize ROSSETI’s a rise in debts under network connection expenses with due consideration to contracts with payment in installments for subsidiaries according to the indepen- services provided and due to the signing dent audit results. of agreements to restructure interest on short-term trade receivables. 1,940,227 Fixed assets 16,758 Intangible assets 883 Investments in associates and joint ventures

74,483 Non-current receivables 76,623 Other investments and financial assets In 2016 current assets 7,178 Deferred tax assets decreased by 4.4% to 293.2 bn rubles

Diagram 15 The EBITDA margin reached Structure of Current Assets, MN RUB 33.1% in the reporting year

102,054 (an increase of 3.7 percentage points on 2016) due to a rise 35,050 Inventories in revenues from electricity Other investments and financial assets distribution and measures 4,528 Income tax prepayments under the Operating Efficiency 2017 149 Trade and other receivables and Cost Reduction Program Cash and cash equivalents of the ROSSETI Group.

151,466

Dividend Payment Principal Provisions of the Dividend Policy of ROSSETI

ROSSETI’s dividend policy is based on a > the amount of dividends should be at > measures should be taken to ensure balance of the interests of the Company least 50% of net profit according to that dividends are paid on a quarterly and its shareholders and investors. the Company’s financial statements, basis, provided that there is net profit In the reporting year, the Board of Direc- including consolidated financial in accordance with Russian Accounting tors approved a restated version of the statements prepared in accordance Standards, less income and expense Regulations for Dividend Policy, defining with International Financial Reporting associated with the revaluation of sub- the basic principles of dividend payment: Standards, less: sidiaries’ shares traded in the securi- > the mechanism for determining the > income and expense associated with ties market. amount of dividends and defining the the revaluation of subsidiaries’ shares ROSSETI’s decision to pay dividends is in dividend payment procedure should be traded in the securities market, compliance with the Company’s Articles of maximally transparent (comprehensi- > financial support for the development Association, the Regulations for Dividend ble); plans of subsidiaries, Policy, the applicable laws, and directives > an upward trend should be ensured in > actual investments paid under the and ordinances of the Government of the relation to dividend payouts, provided investment programs approved Russian Federation. that the Company’s net profit grows; by the Russian Ministry of Energy; www.rosseti.ru/eng

43 44 ROSSETI Corporate Social Responsibility and Sustainability Report 2017 ROSSETI IN 2017: RESULTS AND ACHIEVEMENTS of allpurchases. inclusive ofVAT,or14.8% 83.2 reporting yearwas competitive proceduresinthe The economiceffectof Rating. ROSSETI ranked among the top top the among ranked ROSSETI Rating. Transparency the National Procurement in Transparency” “Guaranteed award, highest the received Group ROSSETI the year, reporting the In procedures. ment of procure and transparency openness the of principles to the attention special paying providers, service and contractors, suppliers, selects responsibly ROSSETI profit for 2016 was distributed as follows: as distributed 2016was for profit net the requirements, to legal pursuant 2017, 30, June on and Shareholders of ing Meet General Annual the by resolved As rubles. 21,396,843,000 was market securities the in traded of shares subsidiaries’ the revaluation from expense and income less 2016, in profit net The companies. dependent and subsidiaries in ROSSETI by held shares of revaluation the from to income due largely rubles, 222,440,531,000 of profit anet in 2016 in resulted performance andoperating financial ROSSETI’s P P bn rubles, Cost BreakdownbyActivity,bnRUB Diagram 16 rofit Distribution rofit facilities ing ofelectric grid technical upgrad - Rehabilitation and grid facilities expansion ofelectric New construction and rocurement Other purchases IT purchases operations and maintenance repair, general repair, Power equipment - - procurement procedures in the amount amount the in procedures procurement 34,000 2017 in was SDCs its and ROSSETI by made purchases of number total The outlook. positive same the with 2017, in Quality) Management curement Pro 9(High RKZ at quality management procurement ROSSETI’s reaffirmed RA) (Expert RAEX addition, In category. this in companies government-linked three > > > > ROSSETI’s EconomicEffetbyYear Diagram 17

ROSSETI, % ROSSETI, bnRUB ment. pay dividend rubles: 3,784,970,000 years; previous of losses of covering rubles: 193,295,997,000 development); and stability financial to their relation in subsidiaries of plans development the for support (financial development and 17,611,873,000 investments rubles: of Association; Company’s Articles the under fund reserve the of level necessary the to reach fund reserve 7,747,691,000 Company’s the rubles: 2013 66.8 12.5 12.2 2014 52.9 12.3 42.7 2015 50.9 12.6 2016 63.1 13.0 120.9 2017 83.2 14.8 145.9 - 158.5 - facilities (30%, or 145.9 billion rubles). billion 145.9 or (30%, facilities grid electric of upgrading technical and rehabilitation the with along rubles), lion bil 158.5 or (33%, facilities grid electric of expansion and construction new the with associated were purchases of majority VAT. of inclusive The rubles, billion 480 of federal budget as at January 1, 2018. January at as budget federal to the to pay arrears no 2017. were There in rubles 1,151,883,000 totaled budget federal to the paid dividends ROSSETI’s > > 2017, in paid including: was 2016 for rubles 2,000,000,000 of amount an rubles, 1,784,970,000 of amount the 2016 of in 1st quarter the 2016in for paid dividends interim to the addition In

Company’s history). the in first the holders, share ordinary for dividends (declared shares ordinary on dividends rubles: 1,235,608,000 rence shares, rence prefe on dividends rubles: 764,392,000 3 9 25 % 30 33 - ROSSETI strives to enhance the trans- Diagram 18 parency of procurement, including by Regulated Procurement Procedure Breakdown by Purchasing Method; selecting most suppliers electronically. Changes in Procurement on the Electronic Trading Floor In 2017, the share of competitive purchas- 12 es through electronic trading floors was Public competitive 23 bidding 99%. 99.0% Public requests In 2017, ROSSETI received 64 reports on for quotations 98.2% 98.8% violations of the legislation on procure- 0 Public requests 98.2% ment. The Company’s goal is to minimize for proposals 4 such allegations in the future by ensuring Public competitive the transparency of purchases and strictly % 5 negotiations 97.0% complying with laws. Public auctions Sole source 56 purchases 2013 2014 2015 2016 2017

Supplier Relations

The supplier selection procedure is car- > formal (compliance with the procedure > qualifications (experience of fulfill- ried out in accordance with the require- and rules for bids, bid deadlines, and ing similar contracts, reliability and ments of procurement documentation. bid contents); business reputation, human resources, The bid evaluation criteria are approved > financial (assessment of the financial materials and equipment). by the procurement commission, depend- condition of a bidder); ing on the method, type, and subject of > legal (terms and conditions of the Customer relations are implemented purchases awarded. Compliance of a bid contract); through a general scheme of seven with the established selection criteria is > commercial (commercial terms and sequential stages: from budgeting to considered by the members of the pro- conditions of a bid); contract completion. curement commission and by experts in > technical (compliance with the terms the following main categories: of reference);

Diagram 19 Stages of Procurement Procedures

Budget Procurement Procurement Procurement Decision of the Contract Contract Plan Documents Procedure Procurement Performance Commission

ROSSETI continues work on long-term Diagram 20 (three-year) contracts and framework Share of Purchases from Small and Medium-Sized Businesses agreements with manufacturers of pri- total share of purchases from small share of direct purchases from small mary electrical equipment. The ROSSETI and medium-sized businesses, inclu- and medium-sized businesses after Group cooperates with more than 23,000 sive of subcontracts procurement procedures that may suppliers of electric grid equipment and apply only to small and medium-sized contractors from 82 Russian regions. At businesses the same time, there are no foreign companies among the suppliers and contrac- ROSSETI Group, average Share of 70% purchases tors of the Company and its SDCs. from small and In the reporting year, ROSSETI increased medium-sized 58% businesses the share of purchases from small and for 2017 as medium-sized businesses. For instance, 50% prescribed by purchases from small and medium-sized the resolution of the Russian businesses reached 233 billion rubles, Government or about 70% of total procurement procedures. In addition, the volume of purchases exclusively from small and 29% medium-sized businesses increased: 24% 23% 19% 99 billion rubles, or 30% of all purchases 18% (63 billion rubles in 2016, or 23% of all 13% 10% purchases). www.rosseti.ru/eng

2013 2014 2015 2016 2017 2017 45 46 ROSSETI Corporate Social Responsibility and Sustainability Report 2017 ROSSETI IN 2017: RESULTS AND ACHIEVEMENTS www.rosseti.ru/eng

47 48 ROSSETIROSSETI Corporate Social Responsibility and Sustainability Report 2017 ROSSETIНАША INСТРАТЕГИЯ 2017: RESULTS УСТОЙЧИВОГО AND ACHIEVEMENTS РАЗВИТИЯ I R and Nationwide I nternational P nternational nternational P nternational international energy projects. energy international large-scale of implementation the for entities coordination with along North–South), and GPA, (BRELL, associations energy States), Union, Commonwealth of Independent Economic (Eurasian associations integration of bodies consultancy and advisory the in participates On aconstant basis, ROSSETI remains. Eurasia integration for in systems energy further potential for significant the of 11 neighboring countries, and to connected the networks are grids power Russian present, At companies. grid electric foreign leading with relations partnership of development the and cooperation to international great pays attention utilities, ROSSETI one of theAs world’s electric largest rojects rojects; rojects; egional E egional

vents Nort > > > 2017: in place took with the feasibility study designers plement the project. Three meetings im to to measures further and project for the energy corridor North-South agreement study signed a feasibility Russia and Georgia, Armenia, of ities util electric 2016, 15, September On October 12–13, 2017, Tbilisi. in October 2017, Stuttgart; in 27–28, April 2017, Tbilisi; in 7–8, Februaru h-Sout h E ner g y Corridor - - before July 1, 2019. July before states member EAEU the by signed be to is and market electricity common Union’s the of development and tion, damentals for the formation, opera fun legal the specifies document The 2018. 26, on period January theafter reporting Union. The agreement was approved Market of Economic the Eurasian Agreement for the Common Electricity the of formulation the inb part took ROSSETI year, reporting the In energy. in Space Economic Single the and Union Customs the of states member the coordinate to formed is Energy Committee on Advisory The EAEU U E assistance. andreliability, emergency possible supply, supply increased electricity electricity for systems energy the ing synchroniz and connecting of project the on year reporting the ,in worked Company the Azerbaijan and Georgia, of companies energy with Armenia, In together addition, meetings. the of all in participated ROSSETI ura nion ( s ian Ec ian EAEU ) onom ic

- - Commonwealth of Independent States (CIS) BRELL Energy Ring GLobal Energy (Belarus, Russia, Integration ROSSETI is active in participating ROSSETI is a member of the Executive Estonia, Latvia, in the Electric Power Council of the Committee of the Electric Power and Lithuania) The Global Energy Interconnection Commonwealth of Independent Council of the Commonwealth of Development and Cooperation Orga- States, taking measures to be involved Independent States with the following nization (GEIDCO) was established on In 2017, representatives of ROSSETI in the Council’s activities related to functions: the initiative of the People’s Republic took part in 33 meetings of the BRELL the operation of he electric power > determine Russia’s areas of inte- of China in March 2016 with the goal Committee on Energy Systems industry. The Company pays Russia’s gratioin with the CIS member states of the phased creation of an inter- (September 21–22) to approve the voluntary membership fee of 65% of in energy and develop integratedin- continental energy system that will draft of the regulations for the pro- the budget (Russia’s share) aproved dustry development programs; integrate the world’s electric power cedure and conditions for repairs to by the Council. > prepare international agreements, grids and transfer most of them to interstate power lines connecting the legal and technical regulations, clean energy sources. BRELL energy systems and approved methodologies, and other In collaboration with GEIDCO, amendments to the regulations for the energy-related documents; ROSSETI held the international operational dispatching control of the > implement decisions of the Council conference “Eurasian Energy System synchronous BRELL energy sustem of the Heads of State and the Heads Integration: Prospects for Global operation due to the integration of the of Government of the Common- Energy Interconnection Development Baltic energy systems and amend- wealth of Independent States. and Silk Road Economic Belt Creation” ments to the Instructions to Prevent The 51st meeting of the Electric Power on April 18, 2017. The event was and Remedy Failures in the BRELL Council took place on November 4, 2017, attended by representatives of the Energy Systems. with the participation of ROSSETI’s State Duma of the Russian Federation, Director General Pavel Livinsky and the Ministry of Energy of the Russian ROSSETI’s Deputy Director General Federation, the Ministry for the for Strategic Development Yevgeny Development of the Russian Far East, Olkhovich. and leading Russian and intrnational utility companies, research centers, and higher education institution. The number of conference participants exceeded 120.

Russia-Finland Energy Corridor

ROSSETI continued in 2017 to coope rate with Fingrid Oyj. For instance, the Company completed the modeling of the Finnish and Russian electricity markets. The results of the study will provide the basis for proposals to modernize the Vyborg transformer facilities and show the development areas of Finnish-Russian electricity transmission. www.rosseti.ru/eng

HUMAN

ROSSETI isaresponsible employer. TheCompany strives to ensure allconditions for occupational safety, career

DEVEL

development, and employee potential realization

RESOURC E OPMENT 5 section

www.rosseti.ru/eng 52 ROSSETI Corporate Social Responsibility and Sustainability Report 2017 HUMAN RESOURCE DEVELOPMENT to Human R Human to * includingSDCsand subsidiary SDCsengagedinthegridbusiness undertheCompany’smanagement Staff onStaff the P Table 9 P > > > > > > management: resource to human approach Company’s the underlie principles following The potentialand employee realization. development, career safety, occupational for conditions all ensure entities Group’s ROSSETI The development. sustained Company’s the of factor akey and value main the are employees ROSSETI’s B R Human TDC Yantarenergo Tyumenenergo LENENERGO* Kubanenergo IDGC ofSouth IDGC ofNorthernCaucasus* MOESK IDGC ofNorth-West IDGC ofUrals* IDGC ofSiberia* IDGC ofVolga FGC UES IDGC ofCenterandVolgaRegion* IDGC ofCentre Total forSDCsengagedinthecorebusiness Company

ersonnel Characteristics ersonnel Russian Federation. Russian the of Industry Power Electric the in Agreement Rate Wage Sectoral the in set forth and responsibility partnership social of principles the with complying reason; any for discrimination preventing growth; productivity workforce ently, ensuring including effici to work employees motivating development; career maximal for employees’ the conditions creating ment; environ personnel auniform creating of operations; ticularities par regional to the due consideration with management human resource to approaches unified introducing asic P (216,000 people in 2016). subsidiaries in 2017 215,000 was people electric grid on of the ROSSETI’s payroll staff The ayroll by Subsidiary/ rinciples of and A esource Management esource esources Development esources D 1.5 2.2 7.4 7.5 8.5 13.6 14.3 14.5 14.7 15.7 19.9 21.3 21.9 22.5 29.6 215.1 Staff onthePayrollin2017,ousandpeople ependent Company in Company ependent 2017 - - > > > community the professional by recognized were management source re human in achievements ROSSETI’s

“Creating the Future.” the “Creating Practices Best Employers’ Among Contest All-Russian 5th the of Lift” “Social category: the in first ranked were students and schoolchildren for programs Group’s ROSSETI the Initiatives; Strategic for Agency the by organized forum 2018 Mentor the during recognized was ment move Worldskills the withing students and employees young for mentoring prize; grand the received application consolidated and ROSSETI’s companies, energy oriented socially best the among Energy of Ministry Russian the by organized contest the of categories five in prizes and diplomas received entities Group’s ROSSETI the pproaches pproaches

- - > management: resource human of goals following the define 2017–2020 for documents policy and strategic Group’s ROSSETI The > > > > > > >

satisfy the long-term demand for per for demand long-term the satisfy vation and social programs. social and vation moti personnel of system the develop implement youth policy projects; policy youth implement competitions; nizing and holding open professional orga including movement, Worldskills the with cooperation up build ing; train corporate of system the develop helping young employees; and brigades) labor student and ships, extern student training, dual (through expand system: mentoring the improve zation); digitali to the industry’s consideration due (with competencies professional promising and current to form ments establish educational with cooperate management; resource human into assessment dent and indepen standards of professional introduction qualifications: professional industry-specific of system the develop sonnel for smart energy; for smart sonnel accounted for 77%. men workers; were than half of the employees sector’sgrid activities; more electric the of particularities year duereporting to the the in unchanged remained Company’s personnel of the structure The ing mentoring practices ------Diagram 21 Personnel of the ROSSETI Group by Occupational Category and by Gender

executives men men men specialists women women women workers 10 16 14 % % 48 % % 52 32 86 52 90

The share of employees Diagram 22 with higher and secondary Personnel of the ROSSETI Group by Educational Level and by Age professional education continued to grow: 1.2 pp higher education basic/general employed retirees 35 to 45 secondary education in the year (to 46.8%). The secondary 45 to retirement age under 35 professional average age of the Company’s education employees in 2017 was 41.9 42.1 45.7 46.8 8.2 7.6 8.2 years (41.7 years in 2016); 34.1 33.7 33.7 about one-third of the

workforce was young people 39.9 38.7 38.4 25.2 26.3 26.9 aged under 35. 32.5 32.4 31.2 18 15.6 14.8

2015 2016 2017 2015 2016 2017

The operation of the electric grid sector is personnel turnover was 4.6% in 2017 secured by the highly qualified and stable (4.5% in 2016); the staffing level, including workforce. The ROSSETI Group’s average production personnel, remained at 97%.

Youth Policy

The main areas of the youth policy are as follows: One of the key areas of ROSSETI’s personnel and social policy is the planning and timely satisfaction of the Company’s demand for qualified personnel. This goal occupational guidance for cooperation with educa- stimulation of young cannot be reached without the implemen- schoolchildren: develop tional establishments: employees’ competency tation of a systematic youth policy, the a system of special-pur- practice-oriented training development: establish projects of which apply to young profes- pose classes and study for students at higher and and develop the youth sionals employed by the ROSSETI Group’s groups, organize subject secondary occupational personnel reserve, carry entities, students, and schoolchildren. olympiads, select school education institutions out youth projects, includ- graduates for education ing innovation contests at energy-related higher and regional and sectoral education institutions and youth forums specialized secondary education institutions www.rosseti.ru/eng

53 54 ROSSETI Corporate Social Responsibility and Sustainability Report 2017 HUMAN RESOURCE DEVELOPMENT www.rosseti.ru/eng

55 56 ROSSETI Corporate Social Responsibility and Sustainability Report 2017 HUMAN RESOURCE DEVELOPMENT > 2017: in mented imple were measures of range A whole operations. its of regions all in establishments education supplementary and schools with cooperates ROSSETI and development, guidance, pational occu adaptation, dren’s professional for schoolchil Under targeted projects O ducational I Educational with Cooperation Number ofStudentLaborBrigadestheROSSETIGroup Diagram 23

ccupational Guidance and Cooperation with Schools Schools with ccupational Guidance Cooperation and established for senior schoolchildren; for senior established were classes special energy-related 2010 Power Engineering. Power of Institutions Education of Higher of the Consortium members are that universities including operations, their institutions in the regions of educational with cooperate SDCs constantly ROSSETI Institute. In addition, Moscow Power Engineering the is sector grid electric in personnel training for the ROSSETI of partner general The institutions. education secondary specialized 135 universities and 185 including establishments, educational with relations partnership maintains Group ROSSETI The 48 2011 350 2012 745 - 1,352 2013 - - nstitutions more than 10,000 students. 10,000 than more for internships and externships, studies, practical provided Group ROSSETI the year. per 2017, In to 40% up of increase an trainees: of number the in change upward an is There years. two past the over pay for working students 1,500 about including entities, Group’s ROSSETI the at training practical received have students 27,000 about years, four past the Over pay. with work including internships, and externships, studies, practical with students provide can entities Group’s The operation. grid in skills practical with professionals qualified young promising attracting at aimed is entities Group’s ROSSETI the at The organization of student externships > > >

1,560 2014 children; school for organized were facilities Company’s to the tours introductory Centre; tion Educa Sirius the of studies project ed energy-relat for provided was support schools; secondary in scienceoptional natural for classes groups study of management and tion organiza the for provided was support 1,183 2015 1,504 2016 1,886 2017 - - - Russian Federation. Russian the of Science and Education of Ministry the from gratitude of aletter in recognized was movement brigade labor student the of development to the and policy youth government’s the of implementation the to contribution ROSSETI’s Federation. Russian the of districts federal eight in facilities power 450 than more of tion construc the in 2017. part in took They students 1,886 including years, eight for Company the of brigades labor student in involved were institutions educational 100 than more at students 8,500 over expanded: and coverage geography its project, the of implementation the During Student Brigades. and Russian Group ROSSETI the by organized activities other and cultural, sport, social, in part take students season, working the During people, and recruit young qualified people. young of adaptation social and pational occu the support jobs, engineering rize popula to facilities grid electric at work Student arelabor brigades organized for educational centers. educational from live they far how and parents their by supported financially can they how of regardless talented children, support and occupations engineering popularize to is projects these of goal key The >

osrain Festival). Conservation Energy All-Russian #ВместеЯрче forums, contests, (creativity projects social and youth Company’s the in involved were schoolchildren - - Another area where the Company works applications has increased, the geog- the contest, held as part of the Interna- with young people is the implementation raphy of contests has expanded, and tional Forum on Energy Efficiency and of education and research projects. The the number of participating universities Energy Development “Russian Energy most significant events in 2017 were and submitted graduation and research Week,” included 20 best papers. the contest among qualification gradua papers has increased. For instance, ROSSETI and its SDCs are active in tion papers of bachelor’s and master’s 227 papers from 26 universities were modernizing training centers. With the degree holders from engineering submitted for the contest of graduation ROSSETI Group’s assistance, the ener- universities on the subjects of electricity papers in 2017 (68 papers from 15 uni- gy-related lecture hall of the Moscow and power engineering and the “Energy versities in 2015), 46 graduation papers Power Engineering Institute, the labora- Breakthrough” All-Russia Contest of were selected and submitted for the tory of the Relay Protection and Energy Energy Innovations and Projects. second stage of the contest for evalua- System Automation Department, and a Over the years of the implementation of tion by experts, who are employed by the lecture room of the Electric Power Re- these projects, the quality of submitted ROSSETI Group’s entities. The final of search Institute were repaired in 2017.

Development of Young Employees’ Competencies

The ROSSETI Group carries out a whole Members of the youth personnel reserves Russian and foreign electric utilities. range of programs that help young regularly participate in international, SPIEF 2017 included projects of youth employees realize their full potential and nationwide, and sectoral events, including teams from Russia, Germany, Belarus, develop their professional and managerial those organized by ROSSETI. For instance, France, and China. The jury decided to competencies. young employees of the ROSSETI Group award the contest’s grand prize to the To improve the professional and mana took part in the following forums in 2017: Russia team for the use of grid energy gerial skills of young employees, the > International Forum of Young Power accumulators and high-temperature youth personnel reserve program is Engineers and Industrialists (Forsage); superconductor technology. implemented at all management levels > Mashuk North Caucasian Youth Forum; An indicator of how the youth personnel of the ROSSETI Group. In order to ensure > International Forum on Energy Efficien- reserve of the ROSSETI Group is profes- the widest possible coverage of young cy and Energy Development “Russian sional and competent was its successful employees at the lowest organizational Energy Week”; performance at the World Festival of levels (production departments, electric > International Youth Forum “Biryusa Youth and Students in the category “The grid districts), quotas are established for Territory of Initiative Youth”; Industry of the Future”. The members of their participation in the qualifying events > International Youth Energy Forum the Company’s youth personnel reserve, for inclusion in the personnel reserve. organized by ROSSETI as part of the along with their colleagues from major According to the results of the qualifying official program of the St. Petersburg corporations, such as ROSATOM, events, youth personnel reserves are International Economic Forum (SPIEF). ROSCOSMOS, Rostec, Rosneft, Nor- formed at regional level (branches), inter- The project is aimed at developing nickel, RusHydro, and Rostelecom, and regional level (companies), and corporate the ROSSETI Group’s youth person- representatives of 33 countries created level (ROSSETI Group). The total number nel reserve, which is overseen by tomorrow’s trends. Three of the five ideas of youth personnel reserves is more than ROSSETI, and establish professional recognized as the best are under develop 3,000 people. In total, about 5,000 people and partner communication among ment, with members of the Company’s are involved in corporate youth projects. the young employee communities of youth personnel reserve directly involved.

Remuneration and Social Support

Remuneration paid to the Company’s > regular employee bonuses for attained The unified approaches to remuneration employees is based on the standards key performance indicators and indivi for ROSSETI SDCs’ employees are based contained in the Sectoral Wage Rate dual performance results; on the following fundamental principles of Agreement in the Electric Power Industry > remuneration for the longevity of work labor compensation: and the collective bargaining agreements for electric utilities; > employees are provided with benefits, of ROSSETI SDCs. The employee compen- > bonuses for specific work according to guarantees, and compensation pay- sation system of ROSSETI SDCs includes the effects of performance; ments in accordance with the modern the permanent and variable parts of pay > one-off bonuses for special work and approaches to employee motivation; composed of the following payments: governmental, sectoral, and corporate > personal employee performance and > base pay (basic salaries) indexed under awards. employee contributions to the achieve- the collective bargaining agreements ment of corporate goals and objectives SDCs and local regulatory documents; are analyzed; > additional incentive pay and compen- > pay is maintained at a competitive level; sation for nonstandard and special > pay is increased as workforce producti employment conditions; vity grows. www.rosseti.ru/eng

57 58 ROSSETI Corporate Social Responsibility and Sustainability Report 2017 HUMAN RESOURCE DEVELOPMENT 52 ing agreements, which define the employ the define which agreements, ing bargain collective sign SDCs ROSSETI All SWRA. the of standards the joined and Tyvaenergosbyt, tion Company namely Tomsk subsidiaries, Distribu two 2017, In (SWRA). Industry Power Electric the in Agreement Rate Wage Sectoral the under of partnership social system toral sec auniform in participate companies grid all Currently, level. industry federal at partnership to social parties Electrounion, All-Russian the and Industry Power the in of Employers TradeAll-Russia Association the with interacts regularly Company The employees. to its responsibility social of standards to high committed is ROSSETI A the with Cooperation Russian Federation. or 1.3timestheaveragepayin Group in2017was The monthlyaveragepayintheROSSETI > > > > ments in2017,including: employees received additionalpay- In additionto basepay, the ment; camps andhealthresort treat- associated withchildrecreation partial compensation for expenses close relatives; child birth(adoption),deathof nection withmarriageregistration, one-time benefitpaymentsin connection withjubilees andholidays; one-time benefitpaymentsin con- vacation pay; employees. among tension social eliminated and motivation employee influenced significantly which terms, Group in real in the ROSSETI In 2017, the grew pay average thsd rubles Company’s > > motivation. Priorityisgiven to the employee recruitment, retention, and with employment issues related to the conditions for effectively dealing coverage program, whichcreates implements thenon-state pension living standards, theROSSETI Group To provide retirees withadequate housing improvements. payments underprograms of 3 years; nity leave for children aged1.5to payments to employees onmater- - - - - ll- Director of the RaEl Association, and the the and Association, RaEl the of Director General the ROSSETI, of Office trative Adminis the of Head the and Director General Deputy the of participation the 2017 with December and April in held were meetings working entities, Group’s ROSSETI the at partnership to social issues topical to discuss order In agents. bargaining collective and SWRA the under obligations all fulfilled entities Group’s ROSSETTI 2017, In the organizations. union labor primary of obligations the with along and compensation, guarantees, benefits, additional time, remuneration, recreation and working to establish er’s obligations Average MonthlyPayintROSSETIGroupandRussia,hsdRUB Diagram 24 ROSSETI Group 2010 21.0 29.0 R ussian E ussian 2011 23.4 32.1 10,000 people currently employed about 60,000people, includingaround SDCs’ councils ofveterans comprise the Coordinating CouncilofVeterans. veteran movement issupervisedby conferences. Theelectric gridsector’s take partinresearch andtraining as teachers, andinvitingthemto labor dynasties, engagingveterans the mentoring movement, forming and isprovided through developing ensures intergenerational continuity Support for theindustry’s veterans corporate SupportProgram. lectrounion 2012 26.6 34.8 related related Russian Federation - 2013 30.0 40.0 and their members. family employees for treatment rehabilitation and recreation organized events, cultural and sport held traditionally, Electrounion All-Russian the of units with together management, SDCs’ 2017,In ROSSETTI initiatives. joint of mentation and the imple companies, grid electric at jobs of attractiveness maintained the salaries, personnel to increased related issues and 2016–2017 in SDCs ROSSETI at standards SWRA the implementing of results the discussed meetings The of Electrounion. the All-Russian Chairman 2014 32.5 43.6 resort therapy. jubilees andreceive sanatorium- benefit paymentsin connection with camps. Veterans are provided with prisoners ofNaziconcentration of theSiegeLeningrad, andchild War, homefront workers, survivors are veterans oftheGreat Patriotic in theindustry. About3,000people 2015 34.0 46.2 2016 36.8 49.4 2017 52.0 39.1 - Personnel Training and Human Resource Development

A key element of the tion personnel: such employees accounted use of WorldSkills techniques in the edu- personnel and social policy for 92% of the trainees. cational process), which makes it possible of the ROSSETI Group is the Production personnel training is generally to assess the quality of the educational based on a network of corporate training process and reduce the time of graduates’ human resource development centers. These are 32 establishments professional adaptation. system built on the principles licensed to provide additional professional In order to recruit qualified personnel for of continuity, practicability, training in 39 regions where the ROSSETI the Company, enable employees to acquire and feasibility. Group’s entities have lecture halls, labo- new experience, and keep employees ratories, training grounds, and technical occupationally motivated, the Company Employees’ professional competencies are libraries. Corporate training centers pro- operates personnel reserve programs. maintained and developed by the corporate vided 58% of training events in 2017. As a key mechanism for career develop- personnel training system employs a vari- As an active member of the WorldSkills ment, personnel reserves are established ety of training methods aimed at identifying movement and an associate member of at all management levels, from electric the research and innovation potential of WorldSkills Russia, ROSSETI develops grid districts to the electric grid sector as employees: corporate education programs, competencies in the key activities for the a whole, and cover the positions from line webinars, knowledge days, and target- electric grid sector: “Operation of Cable managers to chief executives of electric oriented projects. Overall, under the off-the- Power Lines,” “Maintenance and Repair grid companies. Updated on an annual ba- job training, retraining, and advanced of Relay Protection Devices,” “Operation sis, the personnel reserves consist of over training programs, 58.7% of ROSSETI of Measuring Instruments in Electric 15,000. In providing personnel for electric SDCs’ employees received training in 2017. Grids.” Every year, the main competencies grid companies, preference is given to Including on-site training provided with the of the electric grid sector are assessed in current employees: internal candidates involvement of experienced employees as open corporate championships in order to accounted for more than 70% of manage- teachers and mentors, simulator-based evaluate the professional knowledge and rial appointments in 2017. Comprehensive training, and self-training distance skills of young professionals, the introduc- programs aimed at the development of learning, training programs cover 100% of tion of advanced technologies and modern individual employee competencies, the for- employees. methods of work. Work is done on the mation of skills of team and project work, The particularities of the electric grid involvement of colleges in the WorldSkills the realization of the professional potential sector’s activities determine the scope and movement (direct participation in competi- of employees are implemented in relation regularity of training provided for produc- tions in energy-related competencies, the to the personnel reserve members.

Occupational Safety

The ROSSETI Group’s main goal of occu- > regular assessment of working con- In accordance with Article 226 of the pational safety is to conserve the life and ditions under the Labor Code of the Labor Code of the Russian Federation, health of employees. The Company opera Russian Federation; financing for improvements in working tes the following systems to ensure safe > evaluation of employee knowledge, conditions and occupational safety should working conditions, reduce occupational compliance with the Standard “Uni- be at least 0.2% of production expenses. injury rates, and prevent electricity-relat- form Content and Style of Information SDCs’ occupational safety expenses were ed injuries: Support for the Prevention of Electrical 5.01 billion rubles in 2017 (3.74 billion > occupational safety management Injuries in the Electric Grid Sector”; rubles in 2016). system; > implementation of comprehensive tar- Comprehensive occupational safety mea- > system of response to the failure of geted programs to reduce injury risks sures taken by the ROSSETI Group in 2017 ROSSETI SDCs’ employees to comply for SDCs’ personnel and outsiders at reduced the occupational injury rate as with occupational safety requirements electric grid facilities; compared with 2016: (coupon system); > compliance with the schedule for elimi- > the number of accidents decreased by > model comprehensive injury risk nating injury-risk equipment integrated 8.1% (from 37 to 34); mitigation program for personnel of into repair plans, maintenance plans, > the total number of injured persons subsidiaries and dependent companies and capex programs. decreased by 13.6% (from 44 to 38). of ROSSETI SDCs and outsiders at Occupational safety measures are The number of fatalities remained at 19. electric grid facilities. supervised by ROSSETI’s branch, the In 2017, one occupational disease was The Procedure for Conducting the Pre- Technical Supervision Center (TSC), and recorded (for the first time) at IDGC of shift Inspection and Monitoring the Health the Occupational Safety Commission Siberia’s branch, Altaienergo. of Production Personnel Employed by the (OSC) of ROSSETI. The TSC executive arm In 2017, the injury rate was 0.1768 casual- ROSSETI Group’s Electric Grid Entities conducted 2,833 unscheduled inspections ties per 1,000 employees. Compared with and Operating Electrical Installations was of working crews in the reporting year. 2016 and 2014, the rate decreased by 14% brought into use in 2017. The inspections found 4,738 violations, and 43.6% respectively. Compared with the Special measures are taken by ROSSETI and the work of 163 crews was suspended average rate for three years (2014–2016), SDCs to ensure safe work, such as: until their violations were remedied. the year 2017 saw a decrease of 27.6%. www.rosseti.ru/eng

59 60 ROSSETI Corporate Social Responsibility and Sustainability Report 2017 HUMAN RESOURCE DEVELOPMENT categories of employees: categories different for services following the cludes in program The ROSSETI. standards insu health voluntary comprehensive the on based is coverage insurance Employee basis. aprobationary on working employees and employees part-time for except Group, ROSSETI the of employees full-time 100% covers plan insurance personal The subsidiaries. by payable insurance health and иaccident insurance health voluntary guaranteed have yees emplo Group’s ROSSETI the subsidiary, every by approved coverage insurance of provisions and standards the Under employees. for insurance life and health out takes Group ROSSETI the safety, industrial and occupational of tion protec comprehensive to the addition In diseases. and accidents tional occupa from workers for insurance with and workplace the in conditions working to safe ensure employer’s responsibilities the of adescription with Safety” cupational “Oc section the contain agreements ing bargain collective Group’s ROSSETI The ROSSETI SDCs’OccupationalInjuryRateandCaueofnjurie Diagram 25

0.137 2017 2016 FGC UES rance program, fulfilling the high high the fulfilling program, rance 0.137

IDGC of Siberia 0.304

0.300 0.177

TDC 0.647

Tyumenenergo 0.404 average rate for 2017 IDGC of Urals 0.381

IDGC of Volga 0.141 0.094 - 0.074 - - IDGC of South - -

0.119 Kubanenergo rance programs, every year providing providing year every programs, rance insu health voluntary under coverage insurance and expanding quality service to improving committed is Company The terms. have on insurance corporate to members family employees’ enables Group ROSSETI the security, social raise to order In Russia. across centers care health and for-profit departmental, tal, governmen best the by provided services medical of range awide contain program insurance health voluntary corporate The > > > > > > > > > > 0.471 in Russia; care medical emergency treatment; rehabilitation for-profit acutecare; care; dental cal diseases, etc. diseases, cal oncologi of treatment and diagnostics institutions;research leading at treatment and diagnostics encephalitis); tick-borne and influenza (including vaccination services); medical (on-site physician office care; hospital and scheduled emergency care); (including domiciliary outpatient care IDGC of Northern Caucasus 0.134 0.139 0,ХХХ 0,ХХХ 0.135 IDGC of Center and Volga Region decrease intherate 0.045 increase intherate 0.102 IDGC of Centre 0.135 0.475 MOESK 0.274

0.340 IDGC of North-West 0.136

0.483 LENENERGO 0.719 - -

- Yantarenergo 0.926 but also duringbut hours. nonworking also duties, official their of period the for only not insurance have employees and world, the around valid is employees Group’s ROSSETTI the for coverage Insurance hospitalization. emergency or disability, injury, illness, death, of event the in relatives) (their yees to emplo payable indemnity insurance guarantees for personnel programs rance insu health and accident voluntary The increased. been were amounts insurance individual of amounts the addition, In workers. of treatment rehabilitation the and diseases oncological of treatment and diagnostics to the related services included programs insurance health voluntary the time, first the For services. medical of list to the added were events insured new and employees, Group’s ROSSETI the for programs insurance health voluntary the in included were in 2017, instance, institutions medical new national For best and regional hospitals. at the care medical the necessary receive to opportunities increased with employees by impact andhazard(2013–2017) Breakdown ofSDCs’caualtie 105 accidents Traffic a height Falling from impacts mechanical External 6 6 26 factors and hazardous Other incidents Drowning shocks Electric 65 52 Corporate Culture ROSSETI believes that corporate culture is one of the important factors in the Company’s successful development and an effective instrument for improving personnel efficiency. The formation of corporate culture is facilitated by an established system of internal corporate communications. The key channels of communication within ROSSETTI are the Rossiyskie Seti Corporate Newspaper and the internal corporate portal.

Internal Corporate Portal Rossiyskie Seti Corporate Newspaper Corporate Events Every year, the ROSSETI Group ROSSETI’s internal corporate portal The Rossiyskie Seti newspaper is Sport and cultural events are approves the plan of corporate is designed to make employee one of the largest corporate sectoral a traditional part of ROSSETI’s sport events and holds tournaments communication simpler and more publications in Russia. The principal corporate culture. The ROSSETI in futsal, volleyball, ice hockey, effective. The portal enables joint purpose of the newspaper is to Group’s entities pay great attention basketball, skiing, table tennis, work on projects and documents. inform the Company’s employees promoting a healthy lifestyle, swimming, chess, and athletics. The monthly number of portal visitors about the most important news, increasing the interest of employees ROSSETI employees also take an is about 70,000. All employees can promising activities, and challenges in popular sport and physical culture. active part in sectoral competitions personally access the portal (both faced the Company. The publication More than 30% of the Company’s held with the support of the Russian from the workplace and remotely). is an effective instrument for internal employees are regularly engaged in Ministry of Energy and participate in The portal has the following communication policy and serves as physical training and sports. physical exercise events. functionalities: an important element of the corporate ROSSETI SDCs create all necessary In addition to a healthy lifestyle, an > find and systematize data from culture of the ROSSETI Group. conditions for sports and corporate important corporate value of ROSSETI various internal and external The nationwide newspaper and sport events: is the continuity of generations, sources; SDCs’ regional supplements have > recreation facilities are leased; patriotic education, and respect > store documents, completed forms, a circulation of more than 50,000, > corporate discounts are provided for the profession of the energy and other files in databases; distributed in all regions of the for fitness centers; worker. In celebration of Company > manage key internal regulations ROSSETI Group’s operations. > training is provided for various Day, ROSSETI holds the Children’s and orders; In 2017, The Rossiyskie Seti corporate sports; Drawing Contest “ROSSETI: Children > publish materials created by newspaper began to be published in > employees are regularly invited to Are Drawing!” every year. In 2017, employees; a new digital format. The electronic take part in regional and nationwide the contest was dedicated to the > do joint work, for example, create version of the publication is available sport competitions. environment and nature conservation. joint working areas. at газетароссети.рф. The contents It contributed to providing of the newspaper are regularly environmental and esthetic education updated, for example, in relation and involving children and adolescents to the development of the Russian in the study of the history and nature electric grid sector, the introduction of Russia. 259 drawings made by of innovations, and grid digitalization. children of ROSSETI employees took part in the final of the contest. The winners were 27 young participants.

Awards and Achievements

Table 10 Awards and Achievements of the ROSSETI Group’s Employees in 2017

Award Type Number of Awardees

Russian governmental awards 33, including 10 recipients of letters of honor and commendations from the President 4,490 of the Russian Federation employees of the ROSSETI Group received governmental, departmental, Official awards of the Ministry of Energy of the Russian 1,099 sectoral, and corporate awards for Federation achievements and special contributions Awards of the All-Russia Trade Association of Employers 1,148 to the development of Russia’ electric grid in the Power Industry sector in 2017. Corporate awards of ROSSETI 2,210 www.rosseti.ru/eng

Society Rela

Absolute priority for theCompanyisto secure ROSSETI realizes itsresponsibility for society. a reliable and uninterrupted power supply

tions 6 section

www.rosseti.ru/eng 64 ROSSETI Corporate Social Responsibility and Sustainability Report 2017 SOCIETY RELATIONS Interfax and RNS newswires. RNS and Interfax the on disclosed also is Group ROSSETI the about information Official videos. and includingsages, photos, releases, press mes information 600 around published year, www.rosseti.ru/eng/ reporting In the 2017. in 977,000 2013, in visitors 692,000 about year: every grows visitors of website number The communications. external of instrument akey remains ru/eng/) website corporate The (www.rosseti. W Corporate nal communications: exter of practice and policy reputational the govern that documents main several has Company The divisions. relations public SDCs’ and to ROSSETI’s assigned is communications external of nagement ma The events. significant Company’s the about stakeholders and informing audiences target with dialog maintaining at aimed communications external of asystem develops consistently ROSSETI E S xternal Communications xternal reporting year). reporting the in publications of number media outlets (12% of the total 26,977 in various publications SDCs. events The resulted in and Company the of facilities media events, including at tours and press other 987 organized ROSSETI media, of relations the with part As ociety R ociety channels of communication. of channels In order to promote external communications, Group systematically several uses the ROSSETI ebsite elations - - Mass Media Mass by Attitude Information onROSSETIinMediaOutlets Diagram 26 about the events in the Company. the in events the about stories 280 issued radio and Television media. nationwide the in were publications the of 60% than 2016). More in (68,200 year reporting the in articles 73,500 than more in mentioned was ROSSETI 226,587. 2017 in was SDCs its and Company the about publications of number total The audience. target its and publication to aparticular interest of topics on comments provide to editors and journalists with often more to interact strives Company the addition, In digitalization. grid and innovation as such areas business to strategic related topics on and materials information of quality the on focusing policy, information to the attention shifted 2017,In ROSSETTI security. information ensuring of goals current Company’s the with line in dated up was year, document the reporting the In society. and journalists with relations of the culture develop and helped activities its on information of efficiency and quality the to improve Company the allowed document The 2015. in Policy munications Com Uniform the Implementing of dule Sche the approved Group ROSSETI The Policy Communications ofSchedule I Positive mentions Negative mentions Neutral mentions 9.0 niform themplementing Uniform 12.5 % 78.5 - - Siberia (17,349publications). (21,808 publications),andIDGCof Centre (24,107publications),FGCUES Region (31,410publications),IDGCof way wereIDGCofCenterandVolga were mentionedinthemostoften The ROSSETIGroup’sentitiesthat media. social in feedback of system established an and information, of accessibility and openness of principles to the mitment com Company’s the content, unique of generation to the due was indicators tive qualita and quantitative of improvement The 23%. by rising coverage user with 17%, by increased subscribers of number year, the previous to the Compared users. 120,000 about reached year reporting the in audience total the and subscribers, Group’s companies have than more 17,000 YouTube, The OK. and Twitter, Instagram, VK, Facebook, networks: social popular most the on are accounts corporate SDCs’ and Company’s The networks. of is social communication channels external Group’s ROSSETI the of One and other stakeholders. customers with relations efficient have and Company the of image and reputation a positive maintain helps which ROSSETI, of image arecognizable to form possible it made messages key and solutions visual Unified Company. the of equipment special and vehicles of branding the to unify amended was year, document the reporting the In 2015. in approved was Management Identity Corporate of Schedule The Management I ofSchedule Corporate Social N Social etworks dentity dentity - - Social and Charitable Projects

The implementation of social and charitable projects is one of the main forms of social responsibility of the ROSSETI Group. ROSSETI’s charitable activities are in accordance with the Regulations for the Procedure for Establishing and Using the Sponsorship and Charity Fund.

The main areas of the Company’s charitable activities:

support for projects support for physical social support and protection for people, including protection and proper social rehabilitation in education, science, culture and popular financial assistance to low-income people, maintenance of of orphans, children culture, the arts, and sport the social rehabilitation of unemployed and buildings, facilities, without parental care, instruction disabled people and other people who are not able and areas of abandoned children, to independently exercise their legitimate rights historical, cultural, and children in difficult and interests and environmental situation importance

On a constant basis, the ROSSETI Group pating in the rehabilitation of nationally Every year, ROSSETI SDCs cooperates with the Con-nection Deaf- important cultural facilities and imple- carry out charitable projects Blind Support Foundation under pro- menting socially important projects. Every in education, science, culture, grams aimed at support and rehabilitation year, ROSSETI’s subsidiaries provide for deaf and blind people. ROSSETI SDCs assistance to the Spaso-Preobrazhen- the arts, and instruction, are active in interacting with the Foun- sky Stauropegic Valaam Monastery, the contributing to the spiritual dation by providing volunteers and being Gregory of Nazianzus Charitable Founda- growth and socioeconomic involved in the Deaf-Blind Co-Family. tion, and other organizations and temples Beginning in 2015, ROSSETI regularly of the Russian Orthodox Church. development of the regions holds charitable fairs where the Compa- In order to preserve and increase the where the Group’s entities ny’s employees can buy toys and candles unique population of the Siberian tiger and have operations. The made by the Foundation’s wards. restore its natural habitat, ROSSETI every total amount of charitable The ROSSETI Group regularly supports year (beginning in 2013) provides support the Russian Orthodox Church, partici- for the Siberian Tiger Center. assistance was 3,155.36 million rubles in 2017. www.rosseti.ru/eng

ROSSETI contributes to environmental protection and strives

Environmen t for environmentally friendly world for future generations Prote ction 7 section al

www.rosseti.ru/eng 68 ROSSETI Corporate Social Responsibility and Sustainability Report 2017 ENVIRONMENTAL PROTECTION s Th the event of an accident. an of event the in spills oil to prevent order working good in kept are reactors and transformers of receivers Oil environment. the on impacts adverse possible preventing transformers of receivers oil and drain oil emergency of insulation bushings); repair (rehabilitation) solid with replaced are bushings oil-filled breakers, and gas-insulated vacuum with replaced are breakers circuit (oil equipment oil-filled of replacement tion: moderniza equipment is activities mental environ ROSSETI’s of area important An tal examination. environmen to governmental subject are documents project and SDCs ROSSETI of facilities designed all Examination,” Environmental “On Law Federal the with accordance in addition, In environment. the on impacts adverse to prevent ects proj of assessment for environmental amechanism has Group ROSSETI The E use rational most the with development as dynamic the Company’s operation defined which Sector, Grid Electric the of Policy Environmental the of approval the 2017 in was system management mental environ the of development the in stage Asignificant environment. the for spect re is responsibly business ROSSETI’s of aspects important most the of One E of Understanding Protection Environmental and materials a listofprohibitedtechnologies work ontheecosystem;contains methods, andmechanismsof impact ofharmfulsubstances, solutions excludingthenegative apply themostmoderntechnical obligations oftheCompanyto contains theprinciplesand U niform TechnicalPolicy: pe nvironmental Management Management nvironmental e under ci f ied in t s tandin h e f g ollowin g o f RO SS possible toreduceСО which ultimatelymakesit of electricitytransportation, maintain theproductionprocess conventional fuelrequiredto to decreasetheamountof of reducingelectricitylosses defines thegoalsandobjectives Enhancement Program: and Energy fficiency Energy Conservation c ETI orporate do ’ s en - - nvironmental R nvironmental - - - - v iron Payments forAdvereEnironentalImpactin2017,hsRUB Diagram 27 (32% lowerthanin 2016) thsd RUB 27,773.6 environmental impactstotaled Group’s paymentsforadverse In thereportingyear,ROSSETI and decreasing production waste. (effluents) emissions pollutant reducing by burden environmental the limit tically to systema is activities environmental Group’s ROSSETI the of goal the Policy, Environmental with accordance In conservation. environment and resources natural of m 2 c emissions ental re ental u m ent s Payments foreffluentstowaterbodies : s operation ofelectricalequipment failures andaccidentsinthe the risksassociatedwithprocess improve reliability,andeliminate of electricitytransportation, effectiveness andefficiency possible toensurethemaximum technical solutionsmakesit the introductionofmodern harmful substancesatfacilities; systems thatreplacetheuseof technologies, materials,and ensures thedevelopmentofnew Program: Innovative Development pon Payments forwastedisposal Payments forairemissions s ibility i ibility esponsibility above-standard above-standard above-standard above-standard s al standard standard standard standard s Total o o 59.4 217.9 194.4 258.3 277.3 452.7 ROSSETI’s non-financial reports. non-financial ROSSETI’s in assessing involved regularly are experts (Russia).Nature Environmental for Fund Wide World Center, the and Tiger the Union, Siberian Conservation Bird Russian the as such organizations, environmental with relations partnership develop and maintain SDCs and Company the instance, For issues. environmental on dialogue ataimed effective building is and groups stakeholder all with tion interac active on based is responsibility to environmental approach ROSSETI’s ROSSETI. of Center, a branch Supervision of the Technical safety and industrial tional occupa for department the by conducted are activities environmental of control organization,The coordination, and on environmental protectionwere for noncompliance withthelaws In thereportingyear,penalties 601.0 (883,000 rublesin2016) thsd RUB 8,691.4 9,009.1 18,352.2 18,764.5 - 27,043.6 27,773.6 - Key Environmental Performance Indicators

Key environmental protection measures implemented on the ROSSETI Group’s entities

Air protection Water protection and Land protection Waste treatment Biodiversity conservation and conservation conservation

Table 11 Environmental Protection Expenses of the ROSSETI Group in 2017

Expense Type Annual Expenses (thsd RUB)

water protection and conservation 152,759.0

air protection 51,544.0

land protection (including production and consumption waste management expenses) 246,300.0

bird protection equipment for electric grid facilities 98,388.0

Total 548,9910

Air Protection

The main sources of air pollution from Table 12 ROSSETI’s production activities were ve Gross Air Pollutant Emissions of the ROSSETI Group in 2016–2017, tonnes hicles, vehicle repair equipment, welding equipment, metalworking and wood- Air Pollutant Emissions 2016 2017

working machines, painting and drying solid substances 165.15 172.7

chambers, and mineral oil facilities. including: The ROSSETI Group’s gross air pollutant solid fuel ash 27.5 8.62 emissions were 1,621.2 tonnes in 2017. gaseous and liquid substances 1,383.1 1,448.5

including:

sulfur dioxide 79.72 75.7

carbon oxide 569.04 621.1

nitrogen oxide (rebased to NO2) 214.53 220.3 hydrocarbons (net of volatile organic compounds) 53.8 50.3

volatile organic compounds 432.51 430.5

other gaseous substances 33.5 50.6

Total 1,548.25 1,621.2

Water Protection and Conservation

The Company’s water supply sources are Diagram 28 Surface water removal was centralized networks, water supply wells, Water Consumption in 2016–2017, thsd cbm and surface water bodies. ROSSETI’s 2017 1,780.3 goals are water conservation and efficient 2016 1,745.6 wastewater treatment. 118.9 The ROSSETI Group’s water consumption thsd cbm in 2017 totaled 2,610,200 cbm in 2017, including

1,940,500 cbm of utility water, 585,900 844.2 cbm of water for business purposes, and 694.2 Surface water removal to 83,800 cbm for other purposes. Compared centralized sources totaled with 2016, water consumption decreased 118 87.9 by 3.8%. 17.7 34.1

1,999.0

other thsd cbm in 2017 surface sources sources centralizedsources sources

underground www.rosseti.ru/eng

69 70 ROSSETI Corporate Social Responsibility and Sustainability Report 2017 ENVIRONMENTAL PROTECTION > > > follows: as are areas main 2015–2019. Program’s for The Program Enhancement Efficiency and Energy vation Conser Energy consolidated the for basis the provided document This Policy. ment Enhance Efficiency and Energy vation, Conser Energy Development, Innovative the by defined are conservation resource and reduction consumption of energy objectives and goals Group’s ROSSETI The E 1%. by decreased waste of amount the 2016, with Compared and disposal. decontamination for tonnes 28,800 and dumping for tonnes organizations, includingoutside 73,900 to transferred tonnes 102,700 including 2017, in waste of tonnes of 103,630 tal ato generated Group ROSSETI The nergy Consumption and E and Consumption nergy tricity; elec of quality required the maintain and structures; buildings administrative of needs the and facilities grid electric of consumption heat and ty electrici for needs business the reduce andsion distribution; in transmis losses electricity reduce of its operations. in the regions conservation to biodiversity attention particular gives ROSSETI W L B and P and iodiversity Conservation iodiversity aste Management aste was 63.6 hectares in 2017, 63.6 hectares was or 12 times as much as in 2016. (rehabilitation) an of role. important area of damaged plays The rehabilitated also land land restoration environmental The laws. protection environmental and regulations health of accumulation waste Such areas. areas are equipped accordance in strict public with and maintenance organization the oversees Company the contamination, from To land protect rotection and Conservation and rotection ------social campaigns in 80 Russian regions regions Russian 80 in campaigns social Company’s the 2017 included October in September– Festival Conservation The All-Russia #ВместеЯрче Energy Week). sian Energy Rus Festival, (#ВместеЯрче measures promotion conservation energy in several part took year, ROSSETI reporting the In rubles. million 205 about 2017 totaled for buildings and industrial administrative of needs business the for resources ergy en of consumption the reducing of terms in program the of effect economic The > > > provided. was care agrotechnical and etc.), pine, pitsund mulberry, walnuts, (chestnuts, trees of types different 4,500 than more with provided was site 9-hectare The forests. to restore initiative in 2017 the in participated Park, National Sochi with together representatives, Company’s The Waste byHazardClassin2017,thsdtonne Diagram 29 2.42 other; 33.78 hazard class IV; 67.43 hazard class V; for illumination and other equipment. other and illumination for devices conservation energy introduce installations; electrical for devices monitoring heat introduce equipment; outdated replace

nergy E nergy fficiency 65 % - - 98,081 98,081 bird protectionequipmentunits efficiency measures. efficiency energy Group’s ROSSETI the of veness effecti the proved which ranking, the in leaders the among were SDCs ROSSETI utilities. electric 90 included ranking final Week.” Energy The “Russian Development Energy and Efficiency Energy on Forum International the at place took 2015–2016 for companies grid electric for Energy of Ministry the by Russian prepared ranking efficiency 2017, 6, energy the October On workers. energy with meetings and compositions, of contests quests, tion, conserva on energy and weeks lessons with provided were and kindergartens Schools conservation. energy to promote 46,717 in2015). at electric gridfacilities(83,529in2016, were installedin2017toprotectbirds 33 2 1.85 2% hazard class III; 0.19 <1% hazard class II; 0.38 <1% hazard class I; - Voluntary Environmental Initiatives

As an environmentally responsible company, ROSSETI actively participates in various public environmental events and implements a whole range of its own environmental protection programs.

Decommissioning of PCB-Containing Certification and Improvement of the Bird Protection of Electric Grid Facilities Equipment Environmental Management System In 2017, ROSSETI brought into use the A high-priority area of the Company’s In order to improve employees’ skills in Organization Standard “Bird Protection environmental security is the decommis- environmental protection and environmen- Equipment for Overhead Power Lines and sioning of equipment containing poly- tal security, ROSSETI SDCs provided train- Outdoor Switchgear of Substations.” The chlorinated biphenyls (PCBs). The plan ing for 1,470 employees in 2017. Employees standard contains guidelines on the use of: to implement Russia’s obligations under received training in the following areas: > devices designed to protect birds the Stockholm Convention on Persistent > environmental security for executives from electric shocks or other injuries Organic Pollutants contains a ban on the and employees; related to overhead power lines or cable operation of PCB-containing equipment > environmental security in waste overhead power lines and substation from 2025. management; equipment; 14,277 units of PCB-containing equipment > introduction of environmental > bird protection equipment designed to (trichlorodiphenyl-filled static capacitor management systems and internal prevent (reduce) the adverse impact of banks) were sent to licensed specialist audit of environmental management birds on overhead lines and substations organizations for decontamination/de- systems in accordance with ISO and, as a consequence, reduce the ac- struction in 2017, or 1.8 times as many as 14001:2015. cident rate related to birds and improve in 2015–2016. the operating reliability of electric grid facilities.

Several important environmental events took place in the regions of the ROSSETI Group’s operations.

1. 2. 3. 4. 5. Over 1,000 bird protection 10 kV overhead line towers In order to protect rare Bird protection equipment Bird protection equipment equipment units were were extraordinarily species of birds in UNESCO’s was provided for the was installed on 10 kV installed on 10 kV overhead provided with bird protection Volga-Akhtuba Floodplain overhead line in Lake overhead line towers in line towers in Donguzlovsky equipment in Svetlinsky biosphere reserve (Volgograd Pleshcheyevo Nature Park. Smolenskoye Poozerye Nature Sanctuary Nature Sanctuary (Orenburg Region), 2,500 bird protection The nature park located National Park, which is (Chelyabinsk Region). Region). Bird protection equipment units were in the southwest of the internationally important as Donguzlovsky Nature equipment was installed at additionally installed in Yaroslavl Region is home a bird biosphere reserve. Sanctuary was created to the request of the Russian the nature reserve in the to more than 210 species The park is a habitat for 190 protect aquatic birds. With Bird Conservation Union. reporting year. The Volga- of birds, including those on species of birds, such as the an area of 6,000 hectares, Akhtuba Floodplain is a the Red Book of the Russian osprey, the golden eagle, the nature reserve is home habitat for rare birds such Federation (the white- the white-tailed eagle, the to over 85 species of birds, as the Levant sparrowhawk, tailed eagle, the osprey, short-toed snake eagle, the including those on the the Eurasian oystercatcher, the peregrine falcon, the peregrine falcon, and the Red Book of the Russian the black-winged stilt, the black stork, and the willow black stork. Federation, such as the black-tailed godwit, and, ptarmigan). Dalmatian pelican, the mute the local symbol, the white- swan, the whooper swan, the tailed eagle. great egret, the white-tailed eagle, the greater spotted eagle, and many others.

In the reporting year, the Company’s environmental measures were recognized by the Live Planet television network and the Modern Media Research Institute (MOMRI). For the first time, ROSSETI was ranked among the top three environmentally responsible companies. www.rosseti.ru/eng

Appendic es 8 section

www.rosseti.ru/eng 74 ROSSETI Corporate Social Responsibility and Sustainability Report 2017 APPENDICES General D General to the GRI S Compliance Table 102–25 102–24 102–23 102–22 102–21 102–20 102–19 102–18 102–17 102–16 102–15 102–14 102–13 102–12 102–11 102–10 102–9 102–8 102–7 102–6 102–5 102–4 102–3 102–2 102–1 Index isclosures Conflicts ofinterest Nominating andselectingthehighestgovernancebody Chair ofthehighestgovernancebody Composition ofthehighestgovernancebodyanditscommittees Consulting stakeholdersoneconomic,environmental,andsocialtopics Executive-level responsibilityforeconomic,environmental,andsocialtopics Delegating authority Governance structure Mechanisms foradviceandconcernsaboutethics Values, principles,standards,andnormsofbehavior Key impacts,risks,andopportunities Statement fromseniordecision-maker 2. Strategy Membership ofassociations External initiatives Precautionary Principleorapproach Significant changestotheorganizationanditssupplychain Supply chain Information onemployeesandotherworkers Scale oftheorganization Markets served Ownership andlegalform Location ofoperations Location ofheadquarters Activities, brands,products,andservices Name oftheorganization GRI Indicator 4. Governance 3. EthicsandIntegrity 1. OrganizationalProfile tandards

Corporate EthicsandAnti-Corruption,p.39 Risk Management,p.37 Governance, p.27 Governance, pp.27–31 Governance, pp.27–31 Governance, pp.27–31 Stakeholder Engagement,pp.36–37 Governance, pp.27–31 Governance, pp.27–31 Governance, p.30 Corporate EthicsandAnti-Corruption,p.39 Corporate EthicsandAnti-Corruption,p.39 Risk Management,pp.37–38 Message fromtheDirectorGeneral,pp.6–7 p. 31 Charters andMembershipinAssociations, p. 31 Charters andMembershipinAssociations, Risk Management,p.37 Company History,pp.16–17 Procurement, pp.44–45 Business Model,pp.18–19 Personnel Characteristics,pp.52–53 Regions ofOperations,pp.20–22 Main Activities,p.23 Business Model,pp.18–19 Governance, p.27 Regions ofOperations,pp.20–22 Company Profile,p.16 Main Activities,pp.23-25 Company Profile,p.16 Location fDisclosure p. 91) Annual Report(Section“BoardofDirectors,” More detailedinformationisdisclosedinthe No conflictsofinterestinthereportingyear Company ROSSETI isnotanexecutiveofficerofthe The ChairmanoftheBoardDirectors pp. 82–93) Annual Report(Section“BoardofDirectors,” More detailedinformationisdisclosedinthe the partofemployeesandthirdparties effectiveness ofpreventingmisconducton Directors isresponsibleforsupervisingthe The AuditCommitteeoftheBoard “Company Profile,”p.19) Also disclosedintheAnnualReport(Section System,” pp.108–112) Annual Report(Section“RiskManagement More detailedinformationisdisclosedinthe No significantchanges Partially disclosed p. 13) Annual Report(Section“CompanyProfile,” More detailedinformationisdisclosedinthe Legal form:publicjoint-stockcompany Nature ofownership:sharedownership The CompanyoperatesonlywithinRussia Its Implementation,”pp.36–28) in theAnnualReport(Section“Strategyand ROSSETI’s developmentstrategyisdisclosed Comments/ ExternalAssurance Index GRI Indicator Location of Disclosure Comments/ External Assurance

102–26 Role of the highest governance body in setting purpose, values and strategy Governance, pp. 27–31

102–27 Collective knowledge of highest governance body Governance, pp. 27–31 Information on the competencies and industry-specific experience of the members of the Board of Directors of ROSSETI is disclosed in the Annual Report (Section “Board of Directors,” p. 90)

102–28 Evaluating the highest governance body’s performance Governance, pp. 27–31 The results of the performance evaluation and self-assessment of the Board of Directors are disclosed in the Annual Report (Section “Board of Directors,” pp. 90–91)

102–30 Effectiveness of risk management processes Governance, pp. 27-31

102–31 Review of economic, environmental, and social topics Governance, p. 31

102–32 Highest governance body’s role in sustainability reporting The Report is subject to approval by the Department for Corporate Governance and Shareholder and Investor Relations of ROSSETI

102–33 Communicating critical concerns Governance, p. 31 Disclosed in the Annual Report (Section “Committees of the Board of Directors,” pр. 99–103)

102–34 Nature and total number of critical concerns Governance, p. 31 Disclosed in the Annual Report (Section “Committees of the Board of Directors,” pp. 102–103)

102–35 Remuneration policies Principal Provisions of the Dividend Policy of ROSSETI, pp. 43–44

102–36 Process for determining remuneration Principal Provisions of the Dividend Policy of ROSSETI, pp. 43–44

102–37 Stakeholders’ involvement in remuneration Profit Distribution, p. 44

102–38 Annual total compensation ratio Profit Distribution, p. 44 Disclosed in the Annual Report (Section “Control System,” pp. 94–95)

102–39 Percentage increase in annual total compensation ratio Profit Distribution, p. 44

5. Stakeholder Engagement

102–40 List of stakeholder groups Stakeholder Engagement, p. 35

102–41 Collective bargaining agreements Cooperation with the All-Russian Electrounion, p. 58

102–42 Identifying and selecting stakeholders Stakeholder Engagement, pp. 34–35

102–43 Approach to stakeholder engagement Identified Material Topics, pp. 10–11 Stakeholder Engagement, p. 35

102–44 Key topics and concerns raised Identified Material Topics, pp. 10–11

6. Reporting Practice

102–45 Entities included in consolidated financial statements Development of the Reporting System, p. 10 Regions of Operations, pp. 20–22

102–46 Defining report content and topic Boundaries Identified Material Topics, pp. 10–11 Data Collection Methodology, pp. 12–13

102–47 List of the material topics Identified Material Topics, pp. 11–13

102–48 Restatements of information No such restatements

102–49 Changes in the reporting Development of the Reporting System, p. 10

102–50 Reporting period Development of the Reporting System, p. 10

102–51 Date of the most recent report Development of the Reporting System, p. 10

102–52 Reporting cycle Development of the Reporting System, p. 10

102–53 Contact point for questions regarding the report Development of the Reporting System, p. 10 Contact Information, p. 82

102–54 Claims of reporting in accordance with the GRI Standards Development of the Reporting System, p. 10

102–55 GRI content index Appendices, pp. 74–77

102–56 External assurance Development of the Reporting System, p. 10 Appendices, pp. 78–80 www.rosseti.ru/eng

75 76 ROSSETI Corporate Social Responsibility and Sustainability Report 2017 APPENDICES T 401–2 401–1 103–3 103–2 307–1 103–1 401 103–3 103–2 103–1 307 302–2 302–4 103–3 103–2 205–3 103–1 302 205–1 205–2 103–3 103–2 103–1 205 204–1 103–3 103–2 103–1 204 201–4 201–1 103–3 103–2 Index 103–1 201 opic-Specific D or part-time employees Benefits providedtofull-timeemployeesthat arenotprovidedtotemporary New employeehiresandturnover Evaluation ofthemanagementapproach Management approachanditscomponents Non-compliance withenvironmentallawsandregulations Explanation ofthematerialtopicanditsBoundaries Employment SOCIAL TOPICS Evaluation ofthemanagementapproach Management approachanditscomponents Explanation ofthematerialtopicanditsBoundaries Environmental Compliance Energy consumptionoutsideoftheorganization Reduction ofenergyconsumption Evaluation ofthemanagementapproach Management approachanditscomponents Confirmed incidentsofcorruptionandactionstaken ENVIRONMENTAL TOPICS Explanation ofthematerialtopicanditsBoundaries Energy Operations assessedforrisksrelatedtocorruption and procedures Communication andtrainingaboutanti-corruptionpolicies Evaluation ofthemanagementapproach Management approachanditscomponents Explanation ofthematerialtopicanditsBoundaries Anti-corruption Proportion ofspendingonlocalsuppliers Evaluation ofthemanagementapproach Management approachanditscomponents Explanation ofthematerialtopicanditsBoundaries Procurement ractices Financial assistancereceivedfromgovernment Direct economicvaluegeneratedanddistributed Evaluation ofthemanagementapproach Management approachanditscomponents GRI Indicator ECONOMIC TOPICS Explanation ofthematerialtopicanditsBoundaries Economic Performance isclosures Remuneration andSocialSupport,p.57 Personnel Characteristics,p.52 to Human ResourceManagement,p.52 Basic PrinciplesofandApproaches Youth Policy,pp.53–57 to Human ResourceManagement,52 Basic PrinciplesofandApproaches Sustainability Priorities,p.35 Environmental Management,p.68 Identified MaterialTopics,pp.10-11 Environmental Management,p.68 Responsibility, p.76 Understanding ofEnvironmental Sustainability Priorities,p.35 Identified MaterialTopics,pp.10–11 p. 70 Energy ConsumptionandEfficiency, p. 70 Energy ConsumptionandEfficiency, Environmental Management,p.68 Responsibility, p.68 Understanding ofEnvironmental Sustainability Priorities,p.35 Corporate EthicsandAnti-Corruption,p.39 Identified MaterialTopics,pp.10–11 Governance, p.31 Corporate EthicsandAnti-Corruption,p.39 Corporate EthicsandAnti-Corruption,p.39 Corporate EthicsandAnti-Corruption,p.39 Identified MaterialTopics,pp.10–11 Procurement, p.45 Procurement, pp.44–45 Governance, p.27 Procurement, pp.44–45 Sustainability Priorities,p.35 Identified MaterialTopics,pp.10–11 pp. 42–43 Operating andFinancialPerformance, Governance, p.27 Sustainability Priorities,p.35 Location fDisclosure Identified MaterialTopics,pp.10–11 The rateofemployeeturnoverwas4.5% in 2017 environmental lawstotaled601,000rubles Penalties forfailuretocomplywith Review,” p.29–30) Disclosed intheAnnualReportSection“Market allegations onthehotlinewereinvestigated No incidentsofcorruptionwerefound.All system wasmadein2017 No externalevaluationoftheriskmanagement procurement procedures businesses accountforabout70%oftotal Purchases fromsmallandmedium-sized Report (Section“Government Assistance,” p. 59) detailed informationisdisclosedintheAnnual subsidiaries totaled121millionrubles.More Government subsidiesforROSSETI’s government assistance,includingsubsidies. In thereportingyear,ROSSETIdidnotreceive Comments/ ExternalAssurance Index GRI Indicator Location of Disclosure Comments/ External Assurance

403 Occupational Health and Safety

103–1 Explanation of the material topic and its Boundaries Identified Material Topics, pp. 10–11

103–2 Management approach and its components Sustainability Priorities, p.35 Occupational Safety, pp. 59–60

103–3 Evaluation of the management approach Occupational Safety, pp. 59–60 Governance, p. 27

403–2 Types of injury and rates of injury, occupational diseases, lost days, Occupational Safety, p. 60 and absenteeism, and number of work-related fatalities

403–3 Workers with high incidence or high risk of diseases related to their occupation Occupational Safety, pp. 59–60

403–4 Health and safety topics covered in formal agreements with trade unions Occupational Safety, pp. 59–60

404 Training and Education

103–1 Explanation of the material topic and its Boundaries Identified Material Topics, pp. 10–11

103–2 Management approach and its components Basic Principles of and Approaches to Human Resource Management, p. 52 Youth Policy, pp. 53–57

103–3 Evaluation of the management approach Governance, p. 27 Basic Principles of and Approaches to Human Resource Management, p. 52

404–1 Average hours of training per year per employee Personnel Training and Human Resource Development, p. 59

404–2 Programs for upgrading employee skills and transition assistance programs Personnel Training and Human Resource Development, p. 59

404–3 Percentage of employees receiving regular performance and career Personnel Training and Human Resource development reviews Development, p. 59

419 Socioeconomic Compliance

103–1 Explanation of the material topic and its Boundaries Identified Material Topics, pp. 10–11

103–2 Management approach and its components Sustainability Priorities, p. 35

103–3 Evaluation of the management approach Governance, p. 27

419–1 Non-compliance with laws and regulations in the social and economic area Procurement, pp. 44–45 Significant penalties for failure to comply with laws and regulations in the social and economic area was deemed to be not material for the Company

Sector Disclosures

Index GRI Indicator Location of Disclosure Comments/ External Assurance

ECONOMIC TOPICS

Research and Development

EU8 (ex) Research and development activity and expenditure aimed at providing reliable Innovation, pp. 26–27 electricity and promoting sustainable development

System Efficiency

EU12 Transmission and distribution losses as a percentage of total energy Operating and Financial Performance, pp. 42–43

ENVIRONMENTAL TOPICS

Biodiversity

G4–EN12 Description of significant impacts of activities, products, and services on Biodiversity Conservation, p. 70 biodiversity in protected areas and areas of high biodiversity value outside protected areas

SOCIAL TOPICS

Subcategory: Responsibility for products

Access

EU24 (ex) Practices to address language, cultural, low literacy and disability related Occupational Safety, p. 59 barriers to accessing and safely using electricity and customer support services

EU28 Power outage frequency Disclosed in the Annual Report (Section “Operating Activities” p. 55)

EU28 Average power outage duration Disclosed in the Annual Report (Section “Operating Activities,” p. 55)

Disclosure

EU23 (ex) Programs, including those in partnership with government, to improve Customer Relations, pp. 23–25 or maintain access to electricity and customer support services High-Quality and Accessible Power Infrastructure, p. 25 www.rosseti.ru/eng

77 78 ROSSETI Corporate Social Responsibility and Sustainability Report 2017 APPENDICES cedures, the stages of procurement, the the procurement, of stages the cedures, pro procurement regulated of structure the detail: in activities procurement ROSSETI’s describes 2017 Report The ROSSETI. by done was which fied, speci are pages the if justified and logical is approach this simultaneously, reports annual and social its publishes ROSSETI Since Report. Annual the in disclosed ally addition with information pages the fies speci table GRI the indicators, several For year. reporting the in place took that events the importantly, most and, topics key the communication, of quency fre the communication, of channels the described Company the stakeholders, of group each For Report. the in detail great in disclosed is topic important this ment, engage in stakeholder Company’s efforts the to note necessary particularly is It mendations. recom GRI the with accordance in was topics material identifying for procedure The matrix. materiality topic the in ed present are results its and stakeholders, and internal external among conducted was survey Aquestionnaire Report. the of contents the forming and topics material to identifying respect with commendations re GRI the implemented Company The option. Core the of requirements and principles the with compliance for sufficient is and (GRI Standards) Initiative Reporting Global the by released Standards Reporting lity Sustainabi the of version latest the with accordance in prepared is Report The able development. sustain of context the in performance its and Company the about information cial non-finan containing document balanced and complete asufficiently to be ROSSETI of Report and Sustainability Responsibility Social 2017 Corporate the found We have Sustainable Business Founder andEditor-in-Chief, Certified GRITrainer;CSRExpert; R E ostislav Kurinko ostislav xternal A xternal ssurance - - - - - - - - scribed: de were activities ROSSETI’s of areas the following instance, For indicators. protection environmental of variety whole a disclosed Company the material, ered consid were oftopics the GRI Standards environmental and only two environment the on impact adverse amaterial have not do operations ROSSETI’s Although > > > > detail: more in made be disclosures following the that ed recommend is it report, non-financial ing follow the in practices best To implement facilities. Group’s at ROSSETI tional guidance externships and student occupa including policy, youth the of tion descrip adetailed to note like We would safety. occupational and development, and training to personnel approaches the Company’s system, remuneration the personnel, Group’s the of structure the about information detailed disclosed ROSSETI employer. a large is Company the because logical, quite seems which development, resource to human given is 2017 Report the in attention Considerable information. of representations visual best the for infographics chain supply with asection contain additionally Report 2018 the that We recommend detail. in and ly correct disclosed is Chain), (Supply 102-9 Disclosure namely Standards, GRI the of indicator important very and mandatory a Therefore, disclosed. are businesses medium-sized and small from purchases Separately, years. for five effect economic the in changes and costs, of breakdown

by employee category and region. and category employee by employees to Men): Women of neration Remu and Salary Basic of (Ratio 405–2 group; age and gender by employees Employees): and Bodies Governance of (Diversity 405–1 gender;by leave, parental took that employees of rates retention leave): (Parental 401–3 region; gender, and group, age by turnover employee of rate the Turnover): ployee Em and Hires 401–1 Employee (New ------The materiality matrix shows that this this that shows matrix materiality The of Company’s operations. particularities the to due ROSSETI for is significant conservation and energy consumption energy of topic the that obvious is It cial reporting. non-finan in trend aglobal also is which informationcloses onrisks, non-financial dis Company the how to see stakeholders for important is It risks. HR as such risks, non-financial of list expanded an contains report next the that We recommend awhole. as Company the of level transparency the raise and to stakeholders interest greatest the of are they because topic, material each for indicators of number maximum the close dis report next the that recommend we However, topic. material one least at for requirements disclosure the with comply should organization the met: is option the Core with for compliance Standards GRI the of requirement key the Therefore, topic. each for disclosed were indicators to three one table, GRI to the According topics. material 13 identified Company The reports. non-financial ROSSETI’s in disclosures of completeness and quality the to improve mendations recom several to provide like We would Report. the of contents the understand holders Undoubtedly, stake this helps structure. and governance presence, geographic model, business matrix, materiality topic Company’s the presents effectively and logically Report The infographics. by nied accompa is year reporting the in tivities ac Company’s the of description The tion. recogni special deserves disclosures of visualization to the approach ROSSETI’s impacts. environmental adverse for payments and expenses protection environmental discloses Report the that noteworthy is It > > > > >

biodiversity conservation. biodiversity waste management; waste land protection and conservation; protection land water protection and conservation; water protection airprotection; ------topic is one of the most material for the Alexander Kochetkov The Report highlights ROSSETI’s key goals Company. However, only two GRI indica- in the area of sustainability: economic tors out of five were disclosed in relation Doctor of Science (Politics); Professor at the Faculty security, regular communication with of Russian Politics, Lomonosov Moscow State to this topic. One of these disclosures was University; stakeholders, development of customer made in the social report, and the other Member of the Scientific and Expert Council under relations, employee care, and environmen- in the annual report. We recommend that the Chairman of the Federation Council of the tal responsibility. In our opinion, it would Federal Assembly of the Russian Federation. the next non-financial report contain more be reasonable to show in the following detailed information related to this topic The regular publication of non-financial reports how the Company’s development by using the indicators proposed in the reports is an important component of the goals correlate with the Sustainable De- GRI Standards. For example, the following ROSSETI Group’s responsible business velopment Goals set by the United Nations disclosures can be included: practices: the Corporate Social Respon- in “Transforming our World: the 2030 > 302–1 (Energy Consumption Within the sibility and Sustainability Report is issued Agenda for Sustainable Development.” Organization); for the eighth time. This shows that the It can be stated that the most important re- > 302–3 (Energy Intensity); Company consistently develops its report- sults of ROSSETI’s activity in the reporting > 302–5 (Reductions in Energy Require- ing system and steadily moves toward period reflect the Company’s commitment ments of Products and Services). information openness and transparency. to the principles of responsible business The 2017 Report insufficiently describes It can be stated that ROSSETI has accumu- practices. For instance, the Report contains social and charitable projects. The Com- lated certain experience in personnel pol- sufficiently complete information about pany’s approaches to social policy are icy implementation, charitable activities, the Company’s procurement policies and clear, and charitable contributions were environmental protection, and anti-cor- practices and about a responsible approach indicated, but the Company did not specify ruption over these years. That is why it was to the selection of suppliers, contractors, its charitable projects and their results. very interesting to read the Report to track and service providers and emphasizes the To increase stakeholder confidence in changes in the key indicators, assess the principles of the transparency of procure- disclosures, we recommend that the quality and completeness of disclosures, ment procedures. The procurement policy Company choose 3 or 4 charity, sponsor- and analyze the results achieved by the of the ROSSETI Group in the reporting peri- ship, volunteering, or other significant Company. In addition, with public hearings od received the highest award, “Guaranteed projects and describe them in detail, about the draft law on public non-financial Transparency,” in the National Procure- stating the principal objectives of the pro reporting, the practical experience of such ment Transparency Rating. jects, the implementation stages, and the a large government-linked company as One of the key topics of the Report is the completed measures. Although the GRI ROSSETI is of particular interest to the innovative development of ROSSETI. In the Standards do not include such require- expert community. context of Russia’s economy digitalization, ments, detailed information on charitable Reading the 2017 Report makes it possible the Company’s strategic goal is to modern- activities in a non-financial report is com- to conclude that the document contains ize the electric grid sector and build smart mon practice for both Russian and foreign significant and complete information on grids. The Report provides information organizations. all key aspects of the Company’s respon- concerning the implementation of pilot pro By providing assurance for the 2017 Cor- sible business practices. The document is jects for grid digitalization in Krasnoyarsk porate Social Responsibility and Sustain- prepared in accordance with the Sustain- and the Kaliningrad Region. At the same ability Report of ROSSETI, we confirm that ability Reporting Standards released by time, the Company discloses its plans to the Company complies with the provisions the Global Reporting Initiative (GRI Stan- complete grid digitalization by 2030. and recommendations of the GRI Stan- dards), which ensures the continuity and In general, the Report makes it possible to dards and adheres to the principles of dis- consistency of information from different form a systematic opinion about the goals closing balanced, comparable, accurate, reporting cycles. It is also possible to note and results of ROSSETI’s sustainability timely, clear, and reliable information. We that the Report is informative, disclosing activities in 2017, showing the Company’s recommend that the Company consider changes in a considerable number of key comprehensive approach to management the possibility of additionally having its indicators for three years. The Report also in this area. Recognizing the high quality future reports verified and evaluated by has a section relating to the procedure of the document, I would like to support the Global Reporting Initiative or provid- for selecting the material topics identified ROSSETI’s commitment to the princi- ed with assurance by other independent in the process of communicating with ples of responsible business practices organizations. stakeholders and taking into account their and wish the Company every success in www.rosseti.ru/eng opinions. achieving its goals. 79 80 ROSSETI Corporate Social Responsibility and Sustainability Report 2017 APPENDICES Agreement in the Electric Power Indus Power Electric the in Agreement Rate Wage Sectoral the of provisions the with accordance in industry power tric elec the in partnership social of system uniform the in participation and of ples princi to the adherence on emphasis an with policy, youth and communications, internal management, human resource of area the in policy social Company’s the and relations customer discloses manner, In a comprehensive the Report and technologies. products innovative of introduction the and of services, and affordability quality the of improvement the activities, core Company’s to the related issues key all discloses ROSSETI of Report tainability Sus and Responsibility Social Corporate 2017 The development. sustainable and governance, corporate responsibility, to social attention great pays ROSSETI company, utility electric a Russian As Power IndustryoftheRussianFederation Council onProfessionalQualificationsintheElectric Director General,RaElAssociation;Chairman, A rkady Zamoskovny rkady - - - - hiring and retaining qualified personnel personnel qualified and retaining hiring of possibility the on effect positive most the has which Federation, Russian the in pay average the 1.3 times 2017 in was pay average monthly The employees. among and tension eliminated social motivation employee influenced significantly which 2017, in terms real in employees Group’s ROSSETI the for pay average the in crease in an to achieve possible it made ments, agree bargaining and collective industry power electric the in standards SWRA the implemented are under which employees, SDCs’ ROSSETI of system remuneration the of formation the to approaches Unified SWRA. the with dance in accor of partnership social system sectoral uniform the of members now are Group ROSSETI the of companies grid all 2017; in therefore, standards SWRA the joined and Tyvaenergosbyt, Company Two Tomsk subsidiaries, Distribution Association). (RaEl industry power electric Russian the in partnership social of level sectoral federal at employers of representative authorized the with relations of opment devel the on afocus with and (SWRA) try - - - - of qualifications. assessment independent the for ments instru of introduction the and programs, educational of accreditation public and the professional standards, professional of development the including fications, Quali Professional of System National the of segment sectoral the forming in entities Group’s ROSSETI the of activities concerning information detailed more include reports that recommend we years, future in reporting To social enhance 2017. in and sustainability responsibility social rate corpo Company’s the about disclosures high-level contains Report the general, In of personnel. motivation and retention, recruitment, to the related issues management human resource of resolution for the effective conditions the create and generations of continuity the to ensure possible it makes veterans industry’s the for support and programs Group’s coverage pension non-state ROSSETI the of implementation The reliability. and stability supply power improving considerably thus Group, ROSSETI the in - - - Glossary and Abbreviations

Conflict of interest: a situation where the Power supply reliability: an uninterrupt- Abbreviations personal interest (direct or indirect) of an ed electricity supply for all customers with BRELL: the agreement for the parallel op- employee of the Company affects or may the proper quality in the required quantity. eration of the energy systems of Belarus, affect the proper performance of his or Russia, Estonia, Latvia, and Lithuania her official duties and where there is or Risk: a threat of the negative impact of ex- EAEU: Eurasian Economic Union may be a conflict between the personal ternal and internal factors on the achieve- EBITDA: earnings before interest, tax, interest of an employee and the rights and ment of the Company’s corporate goals. depreciation, and amortization legitimate interests of the Company, which GRI: Global Reporting Initiative may be detrimental to the interests of the Stakeholder engagement: the process IDGC: interregional distribution grid Company. that helps the Company understand the company interests, expectations, and concerns IFRS: International Financial Reporting Corruption: bribery, abuse of power, com- of stakeholders and engage them in its Standards mercial bribery, or any other illegal use by activities and decision-making with due ISO: International Organization for Stan- employees of their positions contrary to consideration to their problems. dardization the legitimate interests of the Company in RaEl Association: All-Russia Trade Asso- order to gain an advantage. Subsidiaries: for the purposes of this ciation of Employers in the Power Industry Report, subsidiaries are economic entities PCBs: polychlorinated biphenyls Material topic: (as applicable to sustain- engaged in electricity transmission and ROSSETI: Public Joint Stock Company ability reports) a topic that reflects the distribution and network connection and ROSSETI company’s significant economic, environ- controlled by ROSSETI by virtue of its SDCs: subsidiaries and dependent com- mental, and social impacts or affects the majority equity holding or in accordance panies assessments and decisions of sharehold- with agreements or otherwise. SPIEF: St. Petersburg International Eco- ers, investors, and other stakeholders. nomic Forum Stakeholders: individuals and organi- SWRA: Sectoral Wage Rate Agreement Network connection: a core service pro- zations that can be materially affected vided by ROSSETI and making it technical- by the Company’s activities and services Units of Measurement ly possible to consume (deliver) electricity and individuals and organizations whose kV (kilovolt): unit of voltage, 1,000 volts (capacity). The service includes an actual actions can affect the Company’s activities kWh (kilowatt-hour): unit of electric power electricity connection. and performance. output, 1,000 watts-hour GW (gigawatt): unit of electric power out- Non-financial reporting: the publication put, 1,000,000,000 watts of information about the organization’s MW (megawatt), unit of electric power activities in the context of social responsi- output, 1,000,000 watts bility and sustainable development, which MVA (megavolt-ampere): unit of apparent reflects the interaction with stakeholders power, 1,000,000 volt-amperes and performance in the economic, environmental, and social areas. List of Subsidiaries and Dependent Companies 1. FGC UES 2. MOESK 3. LENENERGO 4. Tyumenenergo 5. IDGC of Centre 6. IDGC of Center and Volga Region 7. IDGC of Volga 8. IDGC of North-West 9. IDGC of Siberia 10. TDC 11. IDGC of Urals 12. IDGC of South 13. IDGC of Northern Caucasus 14. Chechenenergo 15. Kubanenergo 16. Yantarenergo www.rosseti.ru/eng

81 82 ROSSETI Corporate Social Responsibility and Sustainability Report 2017 APPENDICES Email: [email protected] Email: 4 ul. Belovezhskaya, Moscow, 121353, Russia, Address: ROSSETI Company Stock Joint Public Full name: corporate below. specified detail contact the using by aquestion ask or opinion your communicate You can general. in activities sustainability its of effectiveness the also but reporting its of quality the only not improve constantly Company the help information non-financial to disclose Stakeholders’ proposals to expects receive feedback.ROSSETI Report, and Sustainability Responsibility Social 2017 Corporate the publishing By I Contact

nformation Shareholder/ R Email: [email protected] 5333 +7Telephone: 995 (495) ROSSETI Relations, Investor and Shareholder and of Directors and the Board Management Board for the Support Administrative for Division the of Head Deputy Stepanova, Maria Contact: elations D elations epartment I nvestor nvestor

Email: [email protected] 5333 +7Telephone: 995 (495) Division Relations Public and Communications Chief Expert, Nedelko, Ilya Contact: Media R elations