ANNUAL REPORT IDGC OF CENTER AND VOLGA REGION, PJSC JOINING EFFORTS ANNUAL REPORT 2018 | JOINING EFFORTS

JOINING EFFORTS INFORMATION ABOUT THE REPORT

The Annual Report of IDGC of Center and Volga Region for 2018 (hereinafter “the Annual Report”) represents the production and financial results and covers certain aspects of the Company’s corporate governance activities. The Annual Report also includes a brief disclosure of information about the Company’s activities associated with its sustainable growth using certain elements of the GRI Standards methodology, and identifying the UN goals, to which the Company is committed. A more detailed information disclosure on sustainable development issues in full compliance with the requirements of the GRI Standards methodology is provided as part of a specialized report published on the Company’s official website every two years (https://www.mrsk-cp.ru/stockholder_investor/ disclosure_reporting_info/sotsialnye-otchety/). The Annual Report was prepared based on the effective data available to the Company at the time of its drafting. Financial and economic indicators contained in the Annual Report comply with the IFRS, unless otherwise specified. In a number of sections of the Annual Report, figures for the previous periods and expectations, forecasts or plans of the Company regarding future periods are provided to demonstrate the dynamics of significant processes. The information disclosed in the Annual Report, with the exception of financial results under the IFRS, does not include subsidiaries and affiliates of IDGC of Center and Volga Region, as they do not have a significant impact neither on the Company’s performance indicators, nor on the results of its activities aimed at sustainable development. Compared to the 2017 Annual Report, the scope of the disclosed information remains unchanged. The Annual Report was prepared in accordance with all official documents regulating the disclosure of information in annual reports of joint stock companies, including the requirements of the Central Bank of the Russian Federation and the Moscow Exchange, as well as the recommendations of the Corporate Governance Code. CONTENTS

COMPANY PROFILE 8

Key Performance Indicators 9

History of the Company’s Development 12

Statement of the Chairman of the Board of Directors of IDGC of Center and Volga Region, PJSC 16

Statement of the Director General of IDGC of Centre, PJSC, the Мanagement Сompany 18

Corporate Structure and Regional Reach 22

Core Assets 24

Business Model 26

Industry Overview and Competitive Analysis 28

STRATEGY 38

Digitization 46

Integration of IDGC of Center and Volga Region, PJSC with IDGC of Centre, PJSC 50

Innovation Development 52

Investment Program 54

Improving Power Supply Reliability and Quality 58

PERFORMANCE RESULTS 60

Production Results 62

RAS Financial Results Analysis 66

IFRS Financial Results Analysis 70

SUSTAINABLE DEVELOPMENT 74

Corporate Management System for Sustainable Development 76

Stakeholder Engagement and Stakeholder Map 78

Concern for Environmental Protection 81

Procurements and Supplier Relationships 85

Human Capital Management and Social Responsibility 87

CORPORATE GOVERNANCE 98

Corporate Governance Principles 100

Corporate Governance Audit 101

Assessment of Compliance of the Corporate Governance Level with the Corporate Governance Code 102

Corporate Governance System 104

Shareholder Value Formation 148

ANNEXES AND CONTACT INFORMATION 156 THE ANNUAL REPORT 2018 | JOINING EFFORTS COMPANY STRATEGY PERFORMANCE SUSTAINABLE CORPORATE PROFILE RESULTS DEVELOPMENT GOVERNANCE

FIRST RESULTS OF THE JOINT EFFORT EFFICIENCY IMPROVEMENT THROUGH THE JOINT WORK WITH IDGC OF CENTRE, PJSC IN 2018

SAVINGS DUE TO A TRANSFER TO REPAIRS BASED ON THE TECHNICAL CONDITION, SAVINGS DUE TO AN OPTIMIZATION OF THE CENTRALIZED EMERGENCY STOCK, RUB mn RESERVE ENERGY SOURCES, FORMATION OF UNIFIED CREWS FOR RECOVERY WORKS, RUB mn In September 2017, the authority of the sole executive body of IDGC of Center and Volga Region, PJSC, was 93.3 30.3 37.9 -1.0

transferred to IDGC of Centre, PJSC. 36.9 63.0

Within a short period, the following was achieved:

Consolidation of best corporate Combining the operational and governance practices situational management of the SAVINGS DUE TO THE OPTIMIZATION OF COSTS AND TERMS OF PAYMENTS FOR SAVINGS DUE TO CONSOLIDATED PURCHASES, RUB mn network complexes of the two LOCAL GRID OPERATORS, RUB mn companies 191.0 91.0 226.0 42.0

184.0 Comprehensive network Combining emergency stocks and 100.0 modernization programs for 20 backup energy sources regions of both companies activities

Automation of data collection on the Application of uniform customer readings of metering instruments and service standards staff performance SAVINGS DUE TO REDUCED ELECTRIC POWER LOSSES ACHIEVED THROUGH THE IMPROVED PROCESS OF DETECTION AND STOPPING OF UNACCOUNTED ELECTRICITY CONSUMPTION, RUB mn

139.0 Unification of the process of cost of Transfer of authority for the

work formation and introduction of a approval of technical conditions 116.5 Plan single directory of prices for material and signing of grid connection and technical resources using standard contracts of over 150 kW from the technical specifications branches to the executive office Actual 22.5

Deviation

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EXPECTED EFFECTS DIGITIZING GRIDS BY 2030: [[ Improve the reliability and availability of electric power supply TIMES REDUCTION OF In December 2018, a concept of Digital Transformation 2030 was THE AVERAGE ACCIDENT approved in the course of the face-to-face meeting of the Board 2 ELIMINATION TIME of Directors of PJSC Rosseti. The concept involves a complete transformation of the power grid infrastructure of the affiliated companies by 2030 through the introduction of digital technologies and solutions. TIMES [[ Cut down the expenses 1,5 when implementing HIGHER AVAILABILITY investment programs OF TECHNOLOGICAL THIS WILL HELP TO DO THE FOLLOWING: CONNECTION TO ELECTRICITY NETWORKS

[[ Ensure that the [[ Reduce BY infrastructure is ready electric power for new technological losses challenges 30 % REDUCTION OF LINE LOSSES, OPERATING COSTS, AND COSTS OF THE ACQUISITION AND [[ Build the most accurate MODERNIZATION OF POWER forecast models of [[ Significantly reduce the GRID ASSETS behavior of the network operating and investment and its components expenses of grid operators BY

[[ Create a set of additional 50 % services for clients KEY EVENTS OF THE 1ST STAGE OF THE CONCEPT LOWER SADI/SAIFI IMPLEMENTATION IN IDGC OF CENTRE, PJSC, AND IDGC OF CENTER AND VOLGA REGION, PJSC: All measures to implement the program of digital transformation of BY the power grid infrastructure will be taken as part of the existing tariff [[ Digital power distribution zone (PDZ) and balance solutions, i.e. based on the possibilities of the investment 10 % [[ programs of grid operators, which will not affect the end user tariff. The Digital substation INCREASE IN THE LIFE [[ OF ASSETS payback of the program, as well as the effects obtained, are expected to Development of digital radio communication [[ increase the amount of dividend payments. Creation of unified network control centers of all voltage types

4 5 THE ANNUAL REPORT 2018 | JOINING EFFORTS COMPANY STRATEGY PERFORMANCE SUSTAINABLE CORPORATE PROFILE RESULTS DEVELOPMENT GOVERNANCE SUSTAINABLE DEVELOPMENT COMMUNICATION ISO 9001:2015 IS THE GOAL CHANNELS FOR SERVICE USERS: ISO 14001:2015 IN ITS ACTIVITIES, IDGC OF CENTER AND VOLGA REGION, PJSC, IS OPEN FOR DIALOG AND COOPERATION WITH THE OHSAS 18001:2007 PUBLIC AND ALL INTERESTED PARTIES SERVICE ISO 50001:2011 32 CENTERS CONFIRMED COMPLIANCE WITH INTERNATIONAL STANDARDS THAT SAID, Respect for the opinions and interests of all parties THE COMPANY IS CALL CENTER “HOT LINE” GUIDED BY THE Timely sharing of information TH PLACE FOLLOWING PRINCIPLES: Regular interaction 8-800-100-33-00 6 IN THE RANKING OF 150 LARGEST Open and productive collaboration COMPANIES IN RUSSIA AND KAZAKHSTAN IN TERMS OF Mutual execution of the assumed obligations ENVIRONMENTAL AND ENERGY EFFICIENCY SECTION “FOR CONSUMERS” THE COST OF ENVIRONMENTAL PROTECTION, INTERACTION WITH THE YOUTH ON THE CORPORATE WEBSITE RUB mn PARTICIPATION IN THE FIRST ALL-RUSSIAN TRAINING SESSIONS FOR THE REPRESENTATIVES OF ROSSETI 1,189 GROUP OF COMPANIES:

[[ Buiding up cooperation between Rosseti Group 1,006 INTERACTIVE SERVICES 34.3 852 Companies during the process of accidents elimination 70,000 “PERSONAL OFFICE” [[ Assistance to regional grid operators in 61,000 AND “ONLINE RECEPTION” 25.6 52,000 improving the energy supply reliability and reducing energy losses 21.6 18.5 Number of pupils, who have taken part in [[ the Company’s training for electrical injuries Unique experience and new professional skills prevention, ppl for participants 2019 2016 2017 2018 2016 2017 2018 Number of students, who have undertaken a (estimated) [[ work experience internship in the Company, Substantial improvement of the regional ppl MESSENGERS network infrastructure and quality of life of the WHATSAPP AND VIBER population

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COMPANY PROFILE KEY PERFORMANCE INDICATORS AND UN SUSTAINABLE DEVELOPMENT IDGC OF CENTER AND VOLGA REGION, PJSC IS: GOALS CONTRIBUTION The key supplier of power distribution and grid connection services in Vladimir, Ivanovo, Kaluga, Kirov, Nizhny Novgorod, Ryazan, and Tula Regions, Mari El and Udmurtia Republics The subsidiary of the largest Russian energy company PJSC Rosseti, since PRODUCTION INDICATORS September 11, 2017 is managed by IDGC of Centre, PJSC

PRODUCTION CAPACITIES GRID CONNECTION

30.36 46,672 46,585 45,896 THE KEY OBJECTIVES OF IDGC OF CENTER AND VOLGA REGION, PJSC, 272.75 30.13 275.11 1,088 ARE THE FOLLOWING: 951 909

271.18 30.08

Assurance of a reliable, Improving operating efficiency, 2016 2017 2018 2016 2017 2018 high-quality and secure investment appeal and market Length of transmission lines, thou. Km Installed capacity, MW power supply to the capitalization Substation capacity, thou. MVA Number of contracts performed, regions of operation units

ELECTRICAL SUPPLY, Innovative development mn kWh Seamless connection of of assets and implementing 54,745.2 54,004.4 consumers to power grids 7.9,% measures within the programs 53,963.2 7.8,% of digitization and energy 8.9,% performance improvement 50,374.5 Increasing availability of 49,770.7 the grid infrastructure and 49,120.5 improving service quality Human capital assets development 2016 2017 2018

Grid output

Output from the grid to consumers and LGO

Electric power losses

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FINANCIAL INDICATORS INDICATORS OF SUSTAINABLE DEVELOPMENT

94.2 91.0 CARE FOR THE EMPLOYEES, ENVIRONMENTAL CARE, 78.4 RUB mn RUB mn

25.6 415.3 420.8 403.1 21.6 25.8 25.5 18.5 16.9 23.4 24.0 107.4 109.7 96.5 10.1 13.2 11.4 11.7 3.7 2.0 3.6 1.0 1.6 4.9

2016 2017 2018 2016 2017 2018 2016 2017 2018

Revenue, RUB bn Costs of occupation safety Investments in the environmental protection Net profit, RUB bn measures Costs of employee training and Compensations for negative environmental impact EBITDA, RUB bn education Fuel and energy resources economy EBITDA margin, %

INVESTMENT ACTIVITIES, PROCUREMENTS, RUB mn RUB bn 0.0402 42.4 4,535,749

4,229.0

ALL-TIME 4,330.0 25.2 4.61 HIGH 4,349.8 21.9 1,440.4 6,143.9 18.3 4,994.5 13.2 2.55 0.0113 2.97 0.0084 1,329,045 3,230.6 1,262.7 1,245.6 0.0056 942,560 219.3 713.1 0.0028 0.0043 634,489 0.0031 0.0013 315,554 478,966 349,363 195.1 141,000 1,588.8 6.7 1,144.2 972.4 2016 2017 2018 2010 2011 2012 2013 2014 2015 2016 2017 2016 2017 2018 2016 2017 2018

EV/EBITDA Stated dividends on all shares, RUB thou. Other All procurements P/E Stated dividends on 1 share, RUB Investment projects Procurements from the small and medium-sized enterprises

Reconstruction, upgrade, retrofitting

Grid connection

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HISTORY OF THE COMPANY’S KEY EVENTS OF 2018 DEVELOPMENT AND KEY EVENTS CORPORATE GOVERNANCE

OF 2018 The Board of Directors of IDGC of Center and Volga Region, PJSC, approved a new version of the Company’s Regulations on the Dividend Policy. The approved dividend policy is aimed to FEBRUARY enhance the Company’s investment appeal and is brought in compliance with the Russian legislation, including the Decree of 2018 the Government of the Russian Federation No. 1094-r dated May 29, HISTORY OF THE COMPANY’S DEVELOPMENT 2017 “On Establishing the Position of the Shareholder – the Russian Federation in a public joint stock company, the shares of which are the federal property.” Establishment of IDGC of Center and Volga Region, OJSC, as a 2007 subsidiary of OAO RAO UES of Russia based on nine grid distribution companies (GDC).

In the course of the Annual General Meeting of Shareholders of IDGC of Center and Volga Region, PJSC, a new Board of Directors was elected, new versions of the Charter and the Regulations on the Board of Directors, IDGC of Center and Volga Region, JSC, was restructured, GDCs ceased JUNE the Management Board, and on the payment of remuneration and 2008 their activities as joint stock companies and began to operate as 2018 compensation to the members of the Audit Commission were approved; regional branches. it was also decided to make a dividend payment at 0.040247 RUB per an ordinary share totaling 4.5 RUB bn. Trading of shares of IDGC of Center and Volga Region, JSC, began on the stock exchanges of OAO RTS and ZAO MICEX. IDGC Holding, OJSC, received a controlling share in IDGC of Center and Volga Region, OJSC, previously owned by OAO RAO UES of Russia.

Following the results of a corporate governance assessment, the Russian Institute of Directors (RID), a non-profit partnership, revised the NOVEMBER rating of IDGC of Center and Volga Region, PJSC, changing it from NCGR 7 2018 to NCGR 7+ (Advanced Corporate Governance Practice) on the scale of the National Corporate Governance Rating (NCGR®). The authority of the sole executive body of IDGC Holding OJSC was 2012 transferred to the Federal Grid Company of Unified Energy System.

IDGC Holding OJSC was renamed into OJSC Rosseti. An integrated management system of IDGC of Center and Volga 2013 Region, PJSC, underwent a compliance audit, confirming that the management processes and provision of services for electric DECEMBER power transmission and distribution, as well as grid connection of 2018 consumers comply with the requirements of international standards ISO 9001:2015, ISO 14001:2015, OHSAS 18001:2007 , ISO 50001:2011. The authority of the sole executive body of IDGC of Center and Volga 2017 Region, PJSC, was transferred to IDGC of Centre, PJSC.

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DIGITIZATION AND INNOVATION DEVELOPMENT EMPLOYEES AND TRADE UNIONS

IDGC of Center and Volga Region, PJSC, took part in the event called As part of a working group established by Rosseti group of companies “Russia Health and Safety Week” (RHSW), organized by the Russian and leading manufacturers of telecommunications infrastructure, Ministry of Labor and Social Protection and the Interregional Association JULY experts of IDGC of Centre, PJSC, and IDGC of Center and Volga Region, APRIL for the Promotion of Safe Labor Conditions “ETALON”. Trends and PJSC, started developing a design concept of a unified digital automated 2018 prospects for the development of measures promoting occupational 2018 communication network of the domestic power grid complex. The safety, ensuring safe labor conditions and protecting the health of project involves a reduction of the labor costs of network maintenance employees were the main topics of discussion. by creating a unified control center to monitor the status and network settings in each subsidiary of Rosseti. A management team of the management company IDGC of Centre, PJSC, had a meeting with the employees of the three branches of IDGC of Center and Volga Region, PJSC: Nizhnovenergo, MAY Vladimirenergo, and Ivenergo. The attendees discussed the issues of 2018 reducing electric power losses and increasing the payment discipline of sales companies, the matters of grid connection, interaction with ENSURING SECURITY AND RELIABILITY OF POWER SUPPLY regional grid operators, social policy, and digitization of power grids.

The representatives of IDGC of Centre, PJSC, and IDGC of Center and The management team of IDGC of Center and Volga Region, PJSC, and SEPTEMBER Volga Region, PJSC, took part in a large-scale combined training session IDGC of Centre, PJSC, held a meeting with the members of the Board organized by the Ministry of Energy and the Russian Emergency Ministry, JULY of Representatives of Primary Trade Union Organizations of IDGC 2018 of Center and Volga Region. The attendees discussed the issues of called “Ensuring security of power supply to consumers of the Central 2018 Federal District during the autumn-winter period of 2018-2019.” regulation of social and labor relations and implementation of the Collective Agreement, along with the prospects of personnel and social policy of the Company for the near future. It was agreed that similar meetings will be held on a regular basis.

INTERACTION WITH CONCERNED PARTIES AND SUSTAINABLE DEVELOPMENT

INVESTMENT COMMUNITY SUPPLIERS

IDGC of Center and Volga Region, PJSC, took the lead in the composite loyalty rating of the largest customers making purchases from small The management of IDGC of Centre and IDGC of Center and Volga Region and medium-sized enterprises (SMEs). The rating was compiled by MARCH organized an “Analyst Day” for the representatives of the investment the VCIOM based on a survey of small and medium-sized businesses 2018 community, dedicated to the performance of companies in 2017 and involved in supplies of goods and services to infrastructural forecasts for 2018. monopolies and companies partially owned by the government. MAY 2018 IDGC of Center and Volga Region, PJSC, held an open day for SOCIETY suppliers and potential procurement parties.

For three years in a row, IDGC of Centre, PJSC, and IDGC of Center and SEPTEMBER - Volga Region, PJSC, support the All-Russian Festival #ВместеЯрче OCTOBER (#BrighterTogether) held in the regions of the country. During the festival, the energy sector representatives organize and hold events 2018 aimed at modeling an energy-efficient lifestyle.

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restraining the growth of tariffs, improving the quality and availability of STATEMENT OF THE CHAIRMAN OF THE BOARD services for the power transmission and technological connection to the power grid, and the qualitative extension of consumer services. OF DIRECTORS OF IDGC OF CENTER AND VOLGA REGION, Another priority of the Company’s development in 2018 was to increase the productivity of a complex partnership with IDGC of Centre, PJSC. The advantages of such cooperation include the possibility to consolidate the best PJSC practices of corporate and operational management, to coordinate network maintenance in 20 regions located in close proximity to each other, as well as to combine procurement, emergency supplies, backup energy sources, and operational information exchange. Despite the tasks set being long-term, they have already been partially reflected in the operating and financial results of both companies for 2018.

IMPROVING CORPORATE GOVERNANCE AND INCREASING INVESTMENT APPEAL MANAGEMENT OF SUSTAINABLE GROWTH OF IDGC OF CENTER AND VOLGA REGION IS BASED ON In 2018, IDGC of Center and Volga Region performed an internal audit to assess the corporate governance’s effectiveness. Based on this assessment, AN INTEGRATED SYSTEM DEVELOPED IN ACCORDANCE large-scale work was carried out to improve corporate governance practices WITH INTERNATIONAL STANDARDS and bring them in compliance with the recommendations of the Corporate Governance Code. In particular, restated versions of the Charter, the Regulations on the Board of Directors, the Regulations on the Management AT YEAR-END 2017, A RESOLUTION WAS Board, the Regulations on Dividend Policy, and a number of internal ADOPTED TO PAY OUT RECORD HIGH documents regulating the activities of the management and supervision DIVIDENDS OVER THE ENTIRE PERIOD bodies of the Company were approved. OF THE COMPANY’S ACTIVITY The updated version of the Regulations on Dividend Policy was an important factor in increasing the Company’s investment appeal, since the major Dear Shareholders! Dear Investors! changes that were introduced concerned the procedure for determining the amount of dividend payout. For example, in 2018, at the annual General In 2018, the Board of Directors, the management and 4,535,749 Meeting of Shareholders of IDGC of Center and Volga Region, a resolution was other employees of the Company, took all measures adopted to pay out record high dividends for 2017 over the entire period of the to ensure that IDGC of Center and Volga Region RUB THOU. Company’s activity: 4,535,749 RUB thou. successfully and at the highest professional level continued to execute its main task of providing reliable Essential stages of performance improvement of the Board of Directors in 2018 and high-quality electric power supply to consumers were the approval of the Insurance Coverage Program, which included the in Russia, and also achieved well-deserved results in liability insurance of members of the Board of Directors, and a development improving its operations, corporate governance, and of a new methodology, according to which a self-evaluation of performance of interaction with shareholders and investors. the Board of Directors and Committees of the Company’s Board of Directors was carried out for the first time in 2019. INDUSTRY TRENDS AND STRATEGIC PRIORITIES STRATEGIC APPROACH TO SUSTAINABLE DEVELOPMENT A key trend to determine the development of the Russian power grid complex in the coming years Management of sustainable growth of IDGC of Center and Volga Region is consists in the implementation of the “Digital based on an integrated system developed in accordance with international Transformation 2030” concept. It implies a complete standards ISO 9001:2015, ISO 14001:2015, OHSAS 18001:2007, ISO 50001:2011, and transformation of the power grid infrastructure of all involves a proactive interaction with a wide range of concerned parties. In the companies of PJSC Rosseti by 2030 through the addition to the interactions during day-to-day work, the Company publishes a introduction of digital technologies. specialized Report on Sustainable Development every two years. In 2018, this Report was first prepared in accordance with the GRI Standards methodology. In this regard, the year 2018 became a starting point of a new stage of development for IDGC of Center and Volga Region. In accordance with the industry-wide Chairman of the Board of Directors trends, one of the Company’s strategic priorities was of IDGC of Center and Volga Region to introduce the intelligent power grid management A.I. Kazakov systems based on digital technologies. Already in the past year, the Company started implementing pilot projects to build intelligent networks. We expect that replication of the pilot projects in the presence regions of IDGC of Center and Volga Region will significantly increase the observability, manageability, and, as a result, the operational efficiency of the Company’s power grid facilities by 2022. In addition, the expected effects of digitization include

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STATEMENT OF THE DIRECTOR GENERAL OF IDGC OF CENTRE, PJSC, THE MANAGEMENT COMPANY OF IDGC OF CENTER AND VOLGA REGION, PJSC

Resulting from persistent efforts to reduce the time and simplify the grid APPLICATIONS FOR GRID CONNECTION connection procedure, in 2018 the Company received more than 57 thou. applications for technological connection to the power grid, which is 2.3 % more than in 2017. Besides, a number of grid connection contracts increased THE USE OF INNOVATIVE TECHNOLOGIES AND by 2.1 % in 2018 compared with 2017. The average time for execution of grid PROGRAMS AND THE INSTALLATION OF ENERGY- connection contracts in 2018 was 62 days, which is 10 days less than in 2017. EFFICIENT EQUIPMENT WILL SIGNIFICANTLY IMPROVE > 57,000 THE EFFICIENCY OF THE COMPANY MANAGEMENT 2018 IFRS FINANCIAL RESULTS ANALYSIS AND THE QUALITY AND PERFORMANCE OF CUSTOMER SERVICE In 2018, the overall revenue of IDGC of Center and Volga Region was 94.2 RUB bn, having increased by 3.5 % compared to 2017. Its growth was essentially promoted by the increase in common pot and individual tariffs for power transmission services and the exclusion of load losses from the cost calculations since August 1, 2017. Compared with 2017, the operating expenses in 2018 increased by 5.0 % and equaled 79.3 RUB bn. The main factors of this change included an increase in the cost of purchased electricity to compensate for the losses due to a raise in the weighted average price of electric power on the wholesale market, an increase in tariffs for services of PJSC FGC UES and local grid distribution Dear Shareholders, Investors, Partners and companies, as well as indexation of wages of the Company’s employees. Colleagues! As a result, the Company maintained financial stability and closed 2018 with IDGC of Centre, PJSC became a management company 2018 EBITDA a net profit of 11.7 RUB bn, which is 3.2 % higher than the result of 2017. The of IDGC of Center and Volga Region in 2017. This fact Company’s EBITDA for 2018 was 24.1 RUB bn, which is 2.6 % higher than in 2017. imposes a special responsibility, since one could evaluate the management efficiency in IDGC of Centre itself judging by the performance indicators of IDGC IMPLEMENTATION OF INVESTMENT AND MAINTENANCE PROJECTS of Center and Volga Region. Therefore, the present Annual Report contains not only a detailed overview In 2018, IDGC of Center and Volga Region completed a number of important of the success achieved in the past period, but also 24.1 investment projects aimed at improving the efficiency of the network the issues of concern that we had to face and solve RUB BN infrastructure and arranged electric power supply to new social and during the day-to-day activities of IDGC of Center and manufacturing sites. Within the year, the Company commissioned over 663 Volga Region, as well as strategic objectives set for the MVA of transformer capacity and more than 3,511 km of power lines. In 2018, Company at this stage of its development. Now, let me power facilities built by IDGC of Center and Volga Region to supply sports briefly list the main ones. venues with electric power successfully passed the test, having ensured reliable and fail-safe power supply to sports venues of the 2018 FIFA World Cup. ANALYSIS OF PRODUCTION RESULTS FOR 2018 A completion of a high-priority investment project “Construction of 220/110/10 kV Sozvezdie SS, phase 3.2” became a 2018 milestone event for In 2018, IDGC of Center and Volga Region kept its IDGC of Center and Volga Region. Its implementation made it possible to leading position in the market of electric power improve the reliability of power supply to consumers of Obninsk generation transmission and grid connection services in center and to provide power supply to the residents of a large industrial nine regions of Central Russia. Moreover, between estate Vorsino, located on the border of Kaluga and Moscow Regions. The total January 1 and March 31, 2018, the Company acted funding of the investment program in 2018 exceeded 12.2 RUB bn. as a guaranteeing supplier in Vladimir Region. Moreover, in 2018, a large-scale repair program was carried out. A major In 2018, the amount of services rendered by overhaul that was completed on time and on high quality level included 38.5 IDGC of Center and Volga Region involving power thou. km of 0.4-220 kV power transmission lines, 8,166 transformer substations, transmission equaled 47,400.2 mn kWh, which is 1.9 % 48 units of​ 35-110 kV power transformers, and 4,704 units of switching lower than in 2017. This is due to the fact that the “last equipment. Overall, the costs of the repair program in 2018 exceeded 3.7 mile” mechanism used in Nizhny Novgorod Region and RUB bn. the Republic of Mari El was taken out of service as of July 1, 2017.

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Works on repairs, reconstruction, and equipment upgrade at the existing Company’s branches. The implementation of Digital Substation and Digital PDZ power facilities and the construction of new ones carried out in 2018 have projects is planned in the regions selected for pilot testing. These projects significantly improved the reliability and quality of power supply in the involve reconstruction and modernization of electricity-generating equipment, regions serviced by the Company and reduced the power shortage of main automation of electrical networks, installation of smart metering devices, power substations. and improvement of the dispatch control system. To this end, agreements on strategic cooperation have already been signed with the administrations of Ryazan, Kaluga, and Vladimir Regions, as well as the Udmurt Republic. ACCOMPLISHMENTS IN SUSTAINABLE DEVELOPMENT The use of innovative technologies and programs and the installation of energy-efficient equipment will significantly improve the efficiency of the Traditionally, IDGC of Center and Volga Region pays considerable attention company management and the quality and performance of customer service. to the issues of sustainable growth and development, which include energy conservation, occupational safety, implementation of social securities for Director General medical care and non-state pension coverage for the employees, reduction of of IDGC of Centre, PJSC, a management company harmful impact on the environment, and many other things. of IDGC of Center and Volga Region, PJSC TOTAL FUNDING OF THE INVESTMENT In the course of its activities, the Company constantly cooperates with I.V. Makovskiy PROGRAM IN 2018 different stakeholders. Among them are the representatives of regional environmental organizations (for example, the Nizhny Novgorod Ecological Center “Dront” and the Russian Birds Conservation Union, Ivanovo Branch), regional and local authorities, and various public organizations. Doors open days and excursions for schoolchildren and students of industry-specific universities and secondary specialized educational institutions are regularly held in the branches of the Company, along with students’ meetings with the management and other experts. In the course of such meeting the young >12.2 people are given the opportunity to visit electricity generation facilities and RUB BN meet the experienced specialists of the power industry to help them make a decision about their future profession. One of the most significant achievements of 2018 in the field of sustainable development was a successful implementation of the plan of actions to reduce electric power losses in the networks. As result, the actual energy loss was reduced by 137 mn kWh in comparison with 2017. Participation of IDGC of Center and Volga Region in the first All-Russian training session for the representatives of Rosseti Group of Companies, which took place in 2018 in Dagestan and Tver Region, was an unprecedented event in terms of its scale and significance. As part of the session and as an aid to the regional electricity companies, the Company’s specialists performed substantial work aimed at reducing energy losses, improving the reliability of energy supply and the quality of life of the population in these regions. In 2018, it was the third time when the employees of IDGC of Centre and IDGC of Center and Volga Region took part in the All-Russian Energy Saving Festival #ВместеЯрче (#BrighterTogether), during which, within 2018, its organizers COMPLETED OVERHAUL held more than 450 events to inform the population about the modern OF THE POWER TRANSMISSION LINES energy-saving technologies and to help model an energy-efficient lifestyle.

EXPECTATIONS AND PLANS FOR 2019

It is expected that in 2019 the volume of power transmission services will remain approximately at the level of 2018, having increased within 3 mn kWh or 0.01 %, while the revenue growth for power transmission services will be 38.5 approximately 5.7 %. THOU. КМ In 2019, IDGC of Center and Volga Region plans to start implementing large-scale investment projects as part of the implementation of the Digital Transformation 2030 concept of PJSC Rosseti. During 2019, unified network control centers (UNCC) will be organized in all

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84 % 85 % 63 % 42 % 97 % Tver CORPORATE STRUCTURE AND REGIONAL Smolensk 72 % % Share of the grid connection market of the region, % 98 % Yaroslavl % Share of the power transmission market of the region, % REACH 77 % Kaluga Bryansk 3 Kostroma % Orel Tula 89 Vladimir Ivanofo 65 % 7 1 2 % Kursk 94 % Ryazan Nizhny % 86 Kirov 58 Липецк Novgorod 67 % 6 Belgorod 5 IDGC of Center IDGC of Centre 12 and Volga Region Tambov 11 13 Yoshkar-Ola 50.4 % Voronezh 14 86 % 8 4 38 % BRANCHES 10 Izhevsk 9 91 % THE PRIMARY ACTIVITY IS TO TRANSMIT (TRANSFER) AND DISTRIBUTE THE ELECTRIC POWER AND TO 42 % PROVIDE GRID CONNECTION SERVICES SUBSIDIARIES PRIMARY ACTIVITIES Area, thou. Population, Power Substation sq. km mn people transmission lines, capacity, MVA Energetik Health thou. km Resort, JSC 10 [[ Medical rehabilitation and health resort treatment 1 100 % Vladimirenergo 29 1.38 23.85 3.56 2 Ivenergo 21 1.01 16.19 2.61 [[ Supply (sale) of electric and heat energy at the specified tariffs in accordance Svet, JSC with the dispatch schedules of electric and heating loads 3 11 [[ Receipt (purchase) of electric power from the electric energy (power) wholesale Kalugaenergo 30 1.01 30.34 3.41 100 % market [[ Receipt (purchase) of heat and electric energy from the producers 4 Kirovenergo 121 1.28 39.43 2.98

[[ Design, installation and commissioning of metering stations for electricity, hot 5 MEK Energoeffektivniye and cold water supply, heat energy, gas, boiler plants and supporting processing Nizhnovenergo 77 3.30 62.71 5.34 Tekhnologii, JSC 12 equipment, and maintenance of facilities; 51 % [[ Assessment and reduction of energy losses, optimization of payments for 6 Ryazanenergo consumed energy resources, implementation of turnkey energy conservation 40 1.12 29.35 3.50 projects 7 Tulenergo 26 1.49 33.94 4.17 Berendeyevskoe, JSC* [[ Crop farming 13 100 % [[ Livestock breeding 8 [[ Production, processing and marketing of agricultural products Marienergo 23 0.68 12.70 1.11 ATH, JSC [[ 14 Transport services 9 Udmurtenergo 42 1.51 26.61 3.68 100 % [[ Repair, service and maintenance of vehicles

* 1. On December 25, 2018, the Board of Directors of IDGC of Center and Volga Region made a decision to terminate the Company’s participation in Berendeyevskoye JSC through a carve-out of shares.

22 23 THE ANNUAL REPORT 2018 | JOINING EFFORTS COMPANY STRATEGY PERFORMANCE SUSTAINABLE CORPORATE PROFILE RESULTS DEVELOPMENT GOVERNANCE

AGE STRUCTURE OF SUBSTATION EQUIPMENT, %

5.43 10.41 0.98 1.62 3.28 3.64 11.10 4.97 5.10 3.20 13.05 9.74 29.22 13.71 31.65 18.39 28.89 CORE ASSETS 23.25 15.75 31.45 27.47 38.03 27.62 28.31 62.53 35.52 30.03 40.20 33.93 39.17 IDGC OF CENTER AND VOLGA REGION CONTROLS THE FOLLOWING: 57.19 48.89 45.53 44.62 35.80 37.47 27.50 23.44 24.21 27.71 Under 25 years old 25 to 37 years old

37 to 50 years old HIGH-VOLTAGE 50 years old and older SUPPLY CENTERS

Ivenergo Tulenergo Kirovenergo Marienergo Kalugaenergo Region, total Vladimirenergo Nizhnovenergo Ryazanenergo Udmurtenergo

TRANSFORMER IDGC of Center and Volga 1,550 SUBSTATIONS 35/110/220 KV AGE STRUCTURE OF POWER GRIDS, % 671 WITH A TOTAL THOU. 0.32 5.19 0.11 0.01 0.01 1.75 1.05 3.13 0.37 1.84 UNITS 6.69 29.22 0.71 6.55 0.93 46.89 17.15 6.44 CAPACITY 63,694 47.96 30.36 MVA 6-10 KV 59.51 38.53 32.02 44.20 55.74 6—35/0.4 KV 43.07

65.59 60.53 46.27 61.17

48.79 50.60 50.20 51.36 39.67 37.70 38.73 ELECTRIC DISTRIBUTION 267,589 KM Under 25 years old NETWORKS OVERHEAD POWER LINES 25 to 37 years old 0.4—220 KV 37 to 50 years old 50 years old 7,524 KM and older CABLE LINES Ivenergo Tulenergo 275.11 Marienergo Kirovenergo 0.4—110 KV Kalugaenergo THOU. KM Region, total Vladimirenergo Nizhnovenergo Ryazanenergo Udmurtenergo

IDGC of Center and Volga

EQUIPMENT TECHNICAL CONDITION AND DOWNTIME RISK ANALYSIS

THE CURRENT LEVEL OF DEPRECIATION OF FIXED ASSETS (23.25 %) MAKES IT POSSIBLE TO CARRY OUT THE Health of PRIMARY ACTIVITIES OF THE COMPANY SUCCESSFULLY AND FULLY, ENSURING HIGH RELIABILITY AND QUALITY equipment OF ELECTRIC POWER SUPPLY TO CONSUMERS. Failure effect Good Satisfactory Unsatisfactory Inadequate PROPER TECHNICAL CONDITION, AS WELL AS TECHNICAL CHARACTERISTICS OF THE POWER SUPPLY FACILITIES High 7,595 4,990 828 621 THAT ARE REQUIRED BY THE OPERATING CONDITIONS, ARE ENSURED BY THE SCHEDULED MAINTENANCE, Medium 47,468 25,813 3,778 3,005 REPAIR WORKS, RECONSTRUCTION, RETROFITTING, AND UPGRADING OF THE FACILITIES. Low 113,913 52,492 8,023 9,400

Insignificant 4,509,755 4,647,920 356,798 253,833

24 25 THE ANNUAL REPORT 2018 | JOINING EFFORTS COMPANY STRATEGY PERFORMANCE SUSTAINABLE CORPORATE PROFILE RESULTS DEVELOPMENT GOVERNANCE

VALUE CREATION FOR THE STAKEHOLDERS

BUSINESS FOR THE ELECTRIC POWER CONSUMERS: FOR THE EMPLOYEES: Power transmission to consumers 47,400.2 mn kWh Wages 10,224.9 RUB mn MODEL Execution of grid connection contracts 45.9 thou. units Occupation safety and protection of the Average grid connection time 62 days employees’ health 421.0 RUB mn Professional and advanced training 109.7 RUB mn FOR THE SHAREHOLDERS: Dividends 4,535,749 RUB thou. FOR POWER COMPANIES: Changes in capitalization 2018/2017 -11.31 % Reduction of accidents на 15.7 % Reduction of electric power losses на 3.1 % FOR THE STATE: Detection and stopping of the unaccounted Taxes 16.0 RUB bn and non-contracted consumption 6.7 mn kWh Compliance with the Strategy for Development of the Electric Grid Complex of the Russian Federation FOR THE SOCIETY IN GENERAL: Cooperation with the executive authorities of the constituent entities of the Russian Environmental protection 34.26 RUB mn Federation in planning and delivering regional programs for regional development Compliance with the international standards ISO 9001:2015, ISO 14001:2015, OHSAS 18001:2007, ISO 50001:2011

STRATEGIC PRIORITIES KPI RISK EXPOSURE PRIORITY DEVELOPMENT AREAS 5 Reliability and quality of Zero increase in the number of major accidents 1. Tariff-associated risks 6 services provided Achievement of the reliability level of services provided 2. Risk of power transmission curtailment 1. Maximizing synergistic effects from collaboration Reduction of specific operating expenses (costs) 3. Risks associated with grid with IDGC of Centre, PJSC: Reduction of specific investment costs connection services provided to 1 Operating and the applicants 2 • Consolidation of the best practices of corporate governance, operating investment efficiency Increase in the process utilization of power grid 16 equipment 4. Risk of non-payments by and situational management of the two companies • Coordinated network maintenance in 20 regions located in close proximity Compliance with the commissioning schedule consumers 15 3 5. Risks associated with political and to each other Consolidated net cash flow economic downturn in the country • Combining procurement, emergency supplies and backup energy sources Consolidated operating profit (EBITDA) and region 14 4 • Prompt exchange of information and development of uniform standards in all Investment appeal Consolidated net debt / EBITDA 6. Risks of conflicts and labor areas disputes, imposition of the state of • Comprehensive modernization programs Compliance with the plan of measures to reduce the emergency in the regions accounts receivable 7. Geographical risks (natural 13 5 2. Digitization: Energy efficiency Rate of electric power loss disasters, transport links cut-off, • Introduction of intelligent power grid management systems based on digital and support of the etc.) technologies Effectiveness of innovation innovation development 8. Risks of exchange rate changes 12 6 • Obtaining reliable end-to-end data on consumption, operating modes of a network, and its 9. Risks of interest rate changes elements in real time Availability of the power Compliance with the terms of grid connection grid infrastructure 10. Risks of inflation effects • Significant reduction in the number of dispatch points and creation of unified network control 11. Legal risks 11 7 centers • Introduction of a unified outage control system for all voltage levels in all areas 12. Compliance risk 10 8 • Transformation of the system of emergency response and recovery operations management Development of human Improving labor efficiency 13. Reputation risk 9 • Improvement of the grid connection rate capital assets Zero increase in the casualty toll 14. Strategy risk • Laying the groundwork for new consumer services 15. Operational and technological risk 16. Investment risk

RESOURCES PRODUCTION FINANCIALS INVESTMENT APPEAL

1 Human: 2 Power transmission: 3 Revenue, Net cost, 4 Profit receipt and distribution, RUB mn Directions • Average staff number, ppl 22,315 • Electric supply, mn kWh 54,004 RUB mn RUB mn • With occupational education, % 88 • Net supply, mn kWh 49,771 Power transmission 88,852.6 74,088.0 9,347.1 6,464.8 Industrial: Performed technological connections to the grids 925.5 954.0 • High-voltage supply centers, pcs. 1,550 • Quantity, pcs. 45,896 Grid connection • Distribution electric grids, thou. km 275.11 • Total power, MW 951 Sales of electric power and capacity 3,315.9 2,889.0 • Transformer substations, pcs. 63,694 781.8 478.0 • Distribution points, pcs. 671 Cost of repairs of basic production facilities, RUB bn 3.8 Additional services 4,535.7 • Installed capacity, thou. MVA 30.36 Commissioning of new facilities, pcs. 305 • Ensuring a temporary limited access to the infrastructure facilities to install the applicants’ Intellectual: Cost of the Innovative Development Program, RUB mn 583.13 • Intangible assets value, RUB mn 70.24 equipment Net profit Undistributed profit • Patents and certificates, pcs. 30 • Installation and replacement of metering • Costs for innovation, RUB mn 526 instruments Reputation: • Maintenance of the applicants’ facilities Dividends • Moody’s long-term corporate credit rating Ва1 2017 EBITDA indicator equals 23,439 RUB mn • Rating of the Russian Institute of Directors NRKU 7+ Development (77.4 % increase compared to 2016 Revenue Net cost 26 27 THE ANNUAL REPORT 2018 | JOINING EFFORTS COMPANY STRATEGY PERFORMANCE SUSTAINABLE CORPORATE PROFILE RESULTS DEVELOPMENT GOVERNANCE

DYNAMICS OF ELECTRIC POWER CONSUMPTION IN THE UES OF RUSSIA IN 2017-2018

103.36 INDUSTRY OVERVIEW AND 100.47 97.83

100.60 94.33 99.69 COMPETITIVE ANALYSIS OF THE 92.10 89.82

92.52 92.49 COMPANY’S POSITION, INVESTMENT 90.59 84.74 88.40 80.06 79.50 79.05 84.21 79.51 APPEAL HIGHLIGHTS 76.56 80.00 79.07 78.76 77.03 74.75 AN OVERVIEW OF THE INDUSTRY WITH TRENDS AND FORECASTS January February March April May June July August September October November December

2017

2018

According to the System Operator’s data, Functional report on the UES of Russia in 2018 Climate in the Industry in 2018 CAPACITY INDICATORS OF THE UES OF RUSSIA IN 2018, MWH 243,243 In 2018, electricity consumption in the UES of Russia was The annual maximum power demand within the UES By the end of 2018, the total installed capacity of the 226,224 1,055,559 mn kWh, which is 15,679.1 mn kWh or 1.51 % more of Russia was recorded on December 24, 2018 and was power plants of the UES of Russia reached 243,243.2 MW, than in 2017. The increase is due to the following: equal to 151.9 GW, which is 0.7 GW higher than the annual which is 1.4 % more than in 2017. 153,546 maximum of 2017. The maximum load of the UES of Russia [[ a decrease in the average annual temperature by power plants per one hour of maximum power demand An increase in the installed capacity was conditioned by 0.6 °C relative to 2017, which led to an increase in was 153.6 GW, which is 1.5 GW (1.0 %) higher than in 2017. the following factors: power consumption of about 5.0 bn kWh; [[ In 2018, new record high values of power consumption commissioning of new generating equipment with [[ an increase in electric power consumption by were recorded in a number of power distribution capacity of 4,792.1 MW; Installed capacity as of Dec. Available capacity of Power plants load under industrial enterprises (mainly metallurgical and 31, 2018 power plants under annual annual maximum demand for zones. Among them is Kaluga Region serviced by IDGC [[ maximum demand for capacity woodworking enterprises, as well as oil and gas increasing the installed capacity of the generating of Center and Volga Region. The all-time high of power capacity pipeline and railway transport facilities). equipment due to its remarking – 294.8 MW. consumption in Kaluga Region reached 1,160 MW on According to the System Operator’s data, Functional report on the UES of Russia in 2018 Generating equipment of the power plants of the UES of On the territory serviced by IDGC of Center and Volga January 26, 2018, which is 34 MW higher than the previous Russia with a total capacity of 1,950.4 MW was taken out Region, LLC Gazprom Transgaz Nizhny Novgorod noted the all-time peak value reached in 2014. of service. largest increase in electricity consumption in 2018 in the power system of Nizhny Novgorod Region. In 2018, the electric power generated by the power plants of the UES of Russia, including the power THE STRUCTURE OF ELECTRIC POWER GENERATION IN THE plants of industrial enterprises, reached 1,070,922.4 UES OF RUSSIA IN 2017-2018, MWH, % mn kWh, which is 1.6 % more than in 2017

131.0 563.0 217.8 758.4 202,917.0 0.01 % 0.05 % 0.02 % 0.07 % 19.25 % 204,356.9 19.08 % Industry Trends and Forecasts up to 2024.

According to the Forecast for the Social and Economic of Russia dated February 28, 2018, by the end of 2024 Development of the Russian Federation until 2024, the demand for electric energy in the UES of Russia is prepared by the Ministry of Economic Development estimated to be 1,131.661 bn kWh. It is expected that the of Russia, by 2024, electric power production will be most significant factor in the electricity consumption 1,163.1 bn kWh. Despite the fact that thermal power plants increase during these years will be the substantial growth will continue to support the most part of electricity of electricity consumption in the IES of the East due to 178,901.6 TPP 16.98 % 183,759.8 production in 2024, according to the Ministry of Economic the merger with the Western and Central power districts 17.16 % HPP Development of Russia, it is expected that the share of of the Republic of Sakha (Yakutia). 2018 TPPs in the structure of power production will be cut 2017 NPP While the electric power production and consumption down to 63.4 %, the share of NPPs will increase to reach WPP strongly depend on the temperature factor, fluctuation of 19.5 %, and the share of HPPs will increase up to 16.6 %. SPP their growth rates within the range of 0.3-0.6 % per year is According to the Scheme and Program for the possible, depending on the temperature deviations from 671,349.4 Development of the Unified Energy System of Russia for the long-time average annual values. 63.70 % 681,829.5 63.67 % 2018-2024, approved by order of the Ministry of Energy

According to the System Operator’s data, Functional report on the UES of Russia in 2018 28 29 THE ANNUAL REPORT 2018 | JOINING EFFORTS COMPANY STRATEGY PERFORMANCE SUSTAINABLE CORPORATE PROFILE RESULTS DEVELOPMENT GOVERNANCE

COMPARISON WITH PEER COMPANIES IN TERMS OF FINANCIAL GAIN IN ELECTRIC POWER GENERATION AND CONSUMPTION IN THE UES OF RUSSIA OVER THE PREVIOUS YEAR FOR 2018-2024, % AND INVESTMENT PERFORMANCE

1.9 RETURN ON INVESTED CAPITAL (ROIC), % EBITDA, RUB BN 1.8 1.5 39.4 18 1.1 29.6 1.0 1.0 14 24.0 0.9 1.0 12

0.7 Gain in electric power production (according to 17.4 0.6 1.0 the Ministry of Economic Development of the 7 7 7 11.8 8.5 0.9 0.9 0.9 Russian Federation, Forecast for the social and 5 4 8.3 7.6 economic development of the Russian Federation 7.2 6.0 1 5.1 up to 2024) 0.5 IDGC of Northern 2018 2019 2020 2021 2022 2023 2024 IDGC of North-WestLenenergo Caucasus Gain in electric power consumption (according to the Ministry of Energy, Scheme and Program for Actual Estimated the Development of the Unified Energy System of TRK TRK Russia for 2018-2024) MOESK MOESK Lenenergo IDGC of Volga IDGC of UralsKubanenergo IDGC of Center IDGC of SouthIDGC of CentreIDGC of Siberia IDGC of VolgaIDGC of Urals Kubanenergo IDGC of South -5 -6 IDGC of Centre IDGC of Siberia and Volga Region IDGC of North-West

IDGC of Northern Caucasus

IDGC of Center and Volga Region

EV / EBITDA EBITDA MARGIN, % The maximum power consumption in the UES of Russia in [[ the obligations of electricity producers under the 2024 is expected to be 167,495 MW. agreements of capacity supply to the wholesale market; 6,524.1 It is expected that by 2024 the installed capacity of the 5,715.3 38.0 power plants of the UES of Russia will reach 249,092.7 MW. [[ the investment programs of electricity producers 4,868.1 -55 The expected dynamics of the installed capacity for approved by the Ministry of Energy of the Russian 3,477.5 25.9 25.5 3,062.5 24.8 the period through to 2024 was created based on the Federation in 2017; 3,024.5 3,011.1 2,845.7 18.5 18.5 16.5 16.3 existing plans for commissioning of new generating 14.5 [[ the obligations of electricity producers whose 1,780.1 1,566.8 11.0 equipment, as well as for taking out of service, upgrading, 8.5 8 capacity was selected for supply up to 2021 according 1,245.5 748.7 and reconstructing the existing generating equipment of to the competitive procedure results; electric power plants in accordance with the following: [[ the orders of the Ministry of Energy of the Russian TRK TRK Federation on the approval of decommissioning of MOESK MOESK Lenenergo Lenenergo Kubanenergo IDGC of Urals IDGC of Volga IDGC of Volga Kubanenergo IDGC of Urals generation facilities; IDGC of Siberia IDGC of South IDGC of Centre IDGC of Centre IDGC of South IDGC of Siberia [[ the proposals of electricity producers (November- IDGC of North-West IDGC of North-West

December 2017). IDGC of Northern Caucasus IDGC of Northern Caucasus IDGC of Center and Volga Region IDGC of Center and Volga Region

P / E ANNUAL MAXIMUM DEMAND FOR POWER, MW DIVIDEND YIELD (CALCULATION BASED ON DIVIDENDS PAID IN 2018 IN VIEW OF THE RESULTS OF 2017), %

167,495 166,298 26.7 14.3 165,111 13.5 163,392 22.8 12.1 161,927 7.7 159,360 6.5 4.6 5.7 5.4 4.9 4.6 4.3 4.1 2.3 153,546 3.2 2.5 1.5 1.8 1.6 1.5 MAXIMUM POWER CONSUMPTION IN THE UES OF RUSSIA IN 2024 IS EXPECTED TRK TRK 2018 2019 2020 2021 2022 2023 2024 MOESK MOESK Lenenergo Lenenergo IDGC of Urals KubanenergoIDGC of South IDGC of Volga IDGC of Volga IDGC of Urals Kubanenergo IDGC of Siberia IDGC of Centre IDGC of SouthIDGC of Centre IDGC of Siberia Actual Estimated 167,495 IDGC of North-West IDGC of Center and Volga Region IDGC of Center and Volga Region Bloomberg data According to the Russian Ministry of Energy, the Scheme and Program for the Development of the Unified Energy System of Russia for 2018-2024. MWH

30 31 THE ANNUAL REPORT 2018 | JOINING EFFORTS COMPANY STRATEGY PERFORMANCE SUSTAINABLE CORPORATE PROFILE RESULTS DEVELOPMENT GOVERNANCE

FACTORS OF INVESTMENT APPEAL Regions of Activity With Effective Demand The Company operates in the economically favorable regions where about 9 % of the country’s population lives. These are LINE LOSSES Proven Corporate Governance Stable Credit Ratings the regions with a stable volume of gross regional product, which ensures a high demand for electric power year on year. 2017 2018 Quality Ratings assigned by the international rating agency Moody’s: Rating assigned by the NP “Russian Institute of Favorable Climatic Conditions Directors” on the scale of the National Corporate [[ Ba1 long-term credit rating on the international 7.98 % 7.84 % Governance Rating (NCGR®): NCGR 7+ (Advanced scale, with a “stable” outlook; Corporate Governance Practice). A favorable climate in the area of the Company’s production [[ Ba1-PD probability of default rating. activity causes only minor losses in the networks and Compliance with the requirements of international increases their availability for maintenance, which reduces the Rating assigned by Expert Rating Agency: standards ISO 9001:2015, ISO 14001:2015, OHSAS amount of costs and has a positive effect on the Company’s 18001:2007, ISO 50001:2011 was confirmed during [[ ruAA credit rating, with a “stable” outlook. profits. compliance audits. THE TOTAL SUM OF DIVIDENDS Line losses have dropped from 7.98 % (2017) to 7.84 % (2018) DECLARED ON THE COMPANY’S SHARES and amounted to 4.23 bn kWh (the average value of line losses in Russia is about 10 %). Stable IFRS Financials and High Dividend 4,535,749 Yield RUB THOU. In 2018, the net income was 11.7 RUB bn, EBITDA was 24.1 MARKET PLACE RUB bn, net assets (as of December 31, 2018) equaled 54.7 RUB bn, and the Debt/EBITDA ratio (as of December 31, 2018) was 1.1. IDGC of Center and Volga Region operates in the electric A significant part of the electric power supplied to power industry on the territory of nine constituent enti- consumers is transmitted through the Company’s net- In 2018, at year end 2017, record high dividends were declared. EBITDA ties of the Russian Federation. The company is a natural works. In all areas of the Company’s power transmission The total sum of dividends declared on the Company’s shares monopoly entity2. services, there are local grid operators (LGO) that provide was 4,535,749 RUB thou., while the declared dividends per similar services for the transfer of electric power. Most of In the service areas, IDGC of Center and Volga Region share equaled 0.0402 RUB. these organizations are state and municipal property. holds a leading position in the market of power transmis- sion services and technological connection of consumer Potential for Company’s Development 24.1 power receivers to the grid. Participation in the transformation of the power grid complex of Russia, in accordance with the Digital Transformation RUB BN 2030 concept approved in December 2018 by PJSC Rosseti presupposes the establishment of 8 unified NCCs, 13 digital WHOLESALE POWER MARKET PDZs, and 7 digital substations in the Company as early as in 2019. Electric power 2018 NET PROFIT Wholesale market Related power The planned commissioning of fixed assets for 2016-2022, producers PJSC FGC UES 1 consumers systems according to the approved investment program , is 91,082 (TGC, WGC, etc.) RUB mn. The program includes new construction and reconstruction of 25,878 km of power lines and commissioning of 3,704 MVA of transformer capacity (taking into account the actual work performed in 2016-2018). 11.7 IDGC of Center and Volga Region Local grid operators RUB BN

Guaranteed suppliers and retail companies Retail market consumers

RETAIL POWER MARKET

2 According to the Order of the Russian Federal Tariff Service No. 236-e dated June 27, 2008 IDGC of Center and Volga Region is included into the Register of Natural Monopoly Entities in the fuel and energy complex regulated and controlled 1 Order of the Ministry of Energy of Russia dated December 24, 2018 No. 28@. by the government.

32 33 THE ANNUAL REPORT 2018 | JOINING EFFORTS COMPANY STRATEGY PERFORMANCE SUSTAINABLE CORPORATE PROFILE RESULTS DEVELOPMENT GOVERNANCE

23 Place on the Market of Power Transmission Services TARIFF FORMATION The main competitors engaged in the similar activities on the territory of operation of IDGC of Center and Volga Region are The core activities of IDGC of Center and Volga Region (power transmission and grid connection services) are regulated the following local grid operators (LGO): SHARE OF THE POWER TRANSMISSION by the state. [[ Udmurtenergoneft, LLC, Izhevsk; SERVICES MARKET IN THE REGIONS OF THE [[ Izhevsk Power Grids, JSC; COMPANY’S OPERATION IN 2018, %* Tariffs for Power Transmission Services 77 [[ VOEK, JSC, Vladimir; Tariff regulation of power transmission services is carried out on a long-term basis according to the Federal Law No. [[ Ryazan Municipal Distribution Power Grids, MUE; 35-FZ “On the Power Industry”. [[ Tula Municipal Power Grids, JSC; 77 % [[ Russian Railways, JSC – in seven regions of presence. MODES OF REGULATION APPLIED TO THE COMPANY’S BRANCHES

RETURN ON INVESTED CAPITAL METHOD (RAB), % LONG-TERM INDEXATION OF NECESSARY GROSS PROCEEDS METHOD (NGP) The company renders power transmission services to consumers, both organizations and the public, in the 2022 IDGC of Center and Volga Region wholesale and retail markets, and cooperates with last resort 2021 suppliers and distribution companies that supply electric Other local grid operators 2020 power to end consumers. The largest partners – the last 2019 resort suppliers – of IDGC of Center and Volga Region are the 2018 following: 2017 [[ 2016 TNS Energo NN, PJSC; 10 2015 [[ TNS Energo Tula, JSC; 2014 SHARE OF THE GRID CONNECTION 2013 [[ TNS Energo Mari El, PJSC; SERVICES MARKET IN THE REGIONS 2012 OF THE COMPANY’S OPERATION 2011 [[ Kaluzhskaya Sbytovaya Kompaniya, PJSC; 90 IN 2018, % 2010 [[ Kirov branch of EnergosbyT Plus, OJSC; 2009 [[ Udmurt branch of EnergosbyT Plus, OJSC; IVENERGO TULENERGO KIROVENERGO MARIENERGO [[ KALUGAENERGO RYAZANENERGO Ryazanskaya Sbytovaya Kompaniya, PJSC; VLADIMIRENERGO NIZHNOVENERGO UDMURTENERGO [[ Rusenergosbyt, LLC, in nine regions of presence; 90 % [[ Rusenergoresurs, LLC, in seven regions of presence.

In 2018, three branches of the Company entered into The general condition of tariff regulation in 2018 for all IDGC of Center and Volga Region a new regulatory period; these are Vladimirenergo, branches was a federal level restriction on the growth of Kirovenergo and Udmurtenergo. With that said, the return tariffs for network services starting from July 1, 2018: Other local grid operators on invested capital method (RAB) remained applicable [[ for the class “population” – no more than 5 %; for Vladimirenergo and Kirovenergo branches. Starting in 2018, the RAB method of tariff regulation was changed [[ for the class of “other” consumers – no more than for Udmurtenergo branch to the long-term indexation 3 %. Place in the Market of Grid Connection Services method. The main competitors of IDGC of Center and Volga Region [[ RGRES, MUE; in rendering the services of technological connection of [[ ROEK, JSC; DYNAMICS OF THE AVERAGE COMMON POT TARIFF FOR POWER TRANSMISSION SERVICES IN THE REGIONS OF THE COMPANY’S OPERATIONS, applicants to the power grid are local grid operators that KOP./KWH work in large cities of the regions of presence. [[ Udmurtia Power Grids, LLC; 5.7 239.5 3 237.3 232.0 231.6 2 230.1 227 [[ 226.2 212.7 214.7 212.9 209.9

The largest of them are the following: 208.4 212.7

Votkinsk Municipal Power Grids, MUE. 209.4 209.6 205.1 208.6 200.3 202.5 206.8 198.5 191.4 194.2 186.8 187.5 192.2 174.1

[[ 171.7 170.5 Vladimir Regional Power Grid Company, JSC; 174.9

Most of the applications for grid connection come from 177.5 158.6 167.4

private persons and small and medium businesses. 158.2

[[ 130.9 122

Ivanovo Municipal Power Grid, JSC; 146.8 121.2 Their essential share consists of the applications for grid 117.1 [[ Interconnected Power Grids, JSC; connection with the contracted capacity of up to 15 kW and from 15 kW to 150 kW, received from the reduced fare [[ Gorelectroseti of Obninsk, ME; beneficiaries. [[ Gorelectroseti of Kirov, JSC; IDGC OF CENTER AND VLADIMIR REGION IVANOVO REGION KALUGA REGION KIROV REGION THE MARI EL REPUBLIC NIZHNY NOVGOROD RYAZAN REGION TULA REGION THE UDMURT [[ Kommunenergo, OJSC; VOLGA REGION, TOTAL REGION REPUBLIC [[ Yoshkar-Ola HPP-1, MUE; 2016 2017 2018 2019 (AS OF JANUARY 1, 2019)

* The share is calculated based on the NGP of IDGC of Center and Volga Region and its subsidiaries and affiliates, and the total NGP of other regional grid operators, taken into account when approving the common pot tariffs for branches in 2018. 34 35 THE ANNUAL REPORT 2018 | JOINING EFFORTS COMPANY STRATEGY PERFORMANCE SUSTAINABLE CORPORATE PROFILE RESULTS DEVELOPMENT GOVERNANCE

Following the decisions made by the regulatory DYNAMICS OF NGP-PRODUCING BRANCHES OF IDGC In terms of organizational measures, the standardized According to the investment measures, the approved authorities of constituent entities of the Russian OF CENTER AND VOLGA REGION, RUB MN, RUB MN rates and rates per unit of maximum capacity have been tariff rates are differentiated following the Methodological Federation, the following tariff-balance parameters were approved in RUB per one connection and in RUB per Guidelines3 for the voltage level, grade of material, type of effective for IDGC of Center and Volga Region in 2018: 1 kW, respectively. With that said, in Ryazanenergo branch, equipment used, and execution method. [[ the rates per unit of maximum power are approved per the average common pot tariff for power 94,561 98,039 84,214 ranges of maximum connected power. transmission services was 198.5 kop./kWh, which is 86,707

5.8 % higher than in 2017; 47,647 47,813 42,723 [[ the approved common pot NGP was 94,561 RUB mn, 41,837 which is 7,854 RUB mn (or 9 %) higher than in 2017; AVERAGE STANDARDIZED TARIFF RATES FOR COVERING THE EXPENSES OF LOCAL GRID OPERATORS IN 2018 [[ 12,503 12,706 the approved in-house required gross profit of the 12,132 12,491 (the rates within the min-max range depend on the voltage level, grade of material, type of equipment used, and operation method) 12,996 13,207 Company’s branches was 47,647 RUB mn, which is 11,786 11,760 24,314 4,924 RUB mn (or 11.5 %) higher than in 2017. 18,459 21,415 19,733 Range of rates by DYNAMICS OF THE AVERAGE RATES OF CHARGE branches The largest increase in the in-house NGP in comparison Rates PER UNIT OF MAXIMUM POWER 2016 2017 2018 2019 with 2017 was in the following branches: Nizhnovenergo Min Max 2,577 2,449 (by 18.6 %), Marienergo (by 17.5 %), Kalugaenergo (by 2,221 In-house NGP Grid connection by the organizational 14.6 %), Ryazanenergo (by 13.4 %), Tulenergo (by 10.2 %), 5,940 28,435 2,030 measures, RUB/unit Udmurtenergo (by 8.7 %) and Vladimirenergo (by Servivces of PJSC FGC UES 5.8 %). The increase in the in-house NGP of branches Construction of overhead power lines, Losses 272,263 4,523,543 is primarily associated with a compensation of the rub/km accumulated NGP evening-out, provision of sources of Services of the other local grid organizations investment programs funding, as well as compensation Construction of cable power lines, rub/ 647,881 6,575,259 of lost income on actual basis of activity. km Construction of islanding points, rub/ 1,097,644 12,260,101 unit 2016 2017 2018 2019

Construction of transformer substations, 1,184 72,119 rub/kw 2019

Construction of distribution transformer 9,862 16,919 Tariffs for Grid Connection Services substations, rub/kw According to the current legislation of the Russian Federation on rendering services for technological connection to power grids, a regulatory period tariff and a tariff requested by the grid operator are approved. 2,577 RUB/KW REGULATORY PERIOD TARIFF Providing Preferential Terms for Payment for Grid Connection [[ standardized tariff rates; boundaries to power supply facilities with voltage level of [[ rates per unit of maximum power; up to 20 kV is less than 10 km, and the maximum power In 2018, a number of benefits were provided for Fully exempt from paying the investment costs of grid of the connected power receivers is less than 670 kW. The [[ formula of payment for grid connection. technological connection of power receivers. The cost connection are the applicants whose maximum power, applicant chooses the payment rate when concluding a for the grid connection was 550 RUB (VAT included) per with regard to the previous connections, does not exceed The applicant has a right to choose the type of payment grid connection contract. one connection for the applicants complying with the 150 kW. rate independently, if the distance from the property following conditions: In respect to legal entities or individual entrepreneurs [[ maximum power, with regard to the previous who apply for grid connection with the maximum TARIFF REQUESTED BY THE GRID OPERATOR connections at this point, should be less than or connected capacity of over 15 but less than or equal to [[ equal to 15 kW; 150 kW, an interest-free installment plan is applied, with payment for technological connection to the To check the resolutions (decisions) adopted by the 95 % of the payment for grid connection to be paid within [[ the third category of reliability (one power supply territorial electric distribution networks of power regulatory authorities of the constituent entities of the a period of up to 3 years. receivers of individual consumers with the maximum Russian Federation for 2018 regarding the establishment source) at the voltage level up to 20 kV; power of at least 8,900 kW and at a voltage level of at of standardized tariff rates and rates per 1 kW of [[ the distance from the applicant’s property least 35 kV, and of power generation facilities; maximum power, visit: http://tp.mrsk-cp.ru/tariffs/ boundaries to power supply facilities of the required . [[ payment for the grid connection in accordance with tariff_decisions_on_board/ voltage class should not exceed 300 m in cities and an individual project. According to the Federal Law No. 35-FZ dated December urban-type settlements and 500 m in rural areas. 30, 2015 “On the Power Industry”, the approved standardized rates and rates per unit of maximum power are the same for all local grid operators in the regions, which belong to the area of responsibility of IDGC of Center and Volga Region.

3 Order of the FAS of Russia No. 1135/17 dated August 29, 2017.

36 37 THE ANNUAL REPORT 2018 | JOINING EFFORTS COMPANY STRATEGY PERFORMANCE SUSTAINABLE CORPORATE PROFILE RESULTS DEVELOPMENT GOVERNANCE

ENSURING THE RELIABILITY AND QUALITY OF SERVICES PROVIDED

ENHANCING OPERATIONAL AND INVESTMENT PERFORMANCE

ENHANCING THE INVESTMENT APPEAL STRATEGY

DIGITIZATION 46 IMPROVING ENERGY INTEGRATION OF IDGC OF CENTER AND VOLGA REGION, PJSC EFFICIENCY AND SUPPORT WITH IDGC OF CENTRE, PJSC 50 OF THE INNOVATION DEVELOPMENT INNOVATION DEVELOPMENT 52

INVESTMENT PROGRAM 54 IMPROVING POWER SUPPLY RELIABILITY AND QUALITY 58 DEVELOPMENT OF HUMAN CAPITAL ASSETS

STRATEGIC OBJECTIVES INCREASING THE AVAILABILITY OF IDGC OF CENTER AND AFFORDABILITY OF POWER AND VOLGA REGION GRID INFRASTRUCTURE

38 39 THE ANNUAL REPORT 2018 | JOINING EFFORTS COMPANY STRATEGY PERFORMANCE SUSTAINABLE CORPORATE PROFILE RESULTS DEVELOPMENT GOVERNANCE

STRATEGY, RISKS, AND POSSIBILITIES STRATEGIC OBJECTIVES, IMPLEMENTATION OF THEM IN 2018, AND PLANS FOR 2019 Ensuring the reliability and quality of services provided KPIs in 2018: FOR DEVELOPMENT 1. • Zero increase in the number of major accidents • Achievement of the reliability level of services provided ≤ 1.00

1.1. Training of the employees of customer service centers (CSC)

Achievements in 2018 Plans for 2019 STATEMENT OF THE DIRECTOR GENERAL Training was organized for the following staff members: The organization for training employees of the service IGOR VLADIMIROVICH MAKOVSKIY • employees of the service implementation unit working implementation unit interacting with clients working in the with clients and heads of power distribution zones of Company’s branches in the sphere of Additional Services. Dear Shareholders, Investors and Partners! Tulenergo branch working for direction of "Additional mn. In the future, we plan to expand the practice of Services"; When defining the strategy of IDGC of Center and mutual integration to the other areas of activities of • employees and managers interacting with high-profile Volga Region, we strive to improve the reliability, both companies. applicants of the Nizhnovenergo branch; safety and efficiency of the Company’s power grid At the end of 2018, strategic priorities of IDGC of • employees of power distribution zones of these complex above all. In view of this, special attention Center and Volga Region included the introduction branches: Ivenergo, Kirovenergo, Marienergo, has been given to the implementation of investment of digital-based intelligent power management Udmurtenergo. and repair programs throughout the entire history systems. The initiative is based on the Target of the Company’s operation. The year 2018 was 1.2. Improving the quality of long-distance customer service model of digital transformation of the PJSC Rosseti no exception. The result of our efforts was a power grid complex before 2030, developed by PJSC commissioning of 3,511.8 km of electrical grids and Rosseti. It implies a complete transformation of Achievements in 2018 Plans for 2019 663.6 MVA of transformer capacity, and a reduction the power grid infrastructure of all the companies Informing of the service users with the help of Viber Optimization of Company branches’ operation in the field of in the specific accident rate by 15.7%, a reduction of PJSC Rosseti by 2030 through the introduction messenger was arranged. customer service. in SAIDI and SAIFI indicators by 37.5% and by 25.8%, of digital technologies. The main benefits of digital respectively, compared with the same figures for 1.3. Organizing effective work of the section “For Consumers” on the Company’s corporate website transformation expected by IDGC of Center and Volga 2017. Region include the following: an improvement in Achievements in 2018 Plans for 2019 At the same time, in 2018, we continued the work reliability and efficiency of obtaining information begun at the end of 2017 to unite the operational about the state of power grids, the sources of power Price lists for additional services of the Company’s Disclosure of information on the corporate website, branches were updated. complying with the Uniform Standard of Quality of Services and situational management of power grids with losses, the location of vehicles and maintenance Provided by Grid Operators to Consumers, approved by the IDGC of Centre, PJSC. The companies service 20 personnel of the Company, a reduction of the time Order of the Ministry of Energy of the Russian Federation regions located in close proximity to each other, and cost of repair and restoration works, an increase No. 217 dated April 6, 2015. allowing for an achievement of a significant in the reliability and manageability of the power efficiency increase. Specifically, at year-end 2018, system. We expect that we will be able not only to 1.4. Standardization of customer service processes in the Company and improvement of quality of service the economic benefit of measures, including those test the proposed solutions and technologies in the aimed at staff rightsizing, optimization of emergency Company's 13 power distribution zons already in Achievements in 2018 Plans for 2019 reserves and backup power, exceeded 1,515 RUB 2019, but also to evaluate their efficiency. Documentation updated: Remodeling of business processes for the transition of • Regulations on Processing of Applications Submitted Company’s branches to a two-level management system. by the Service Users of IDGC of Center and Volga Region; • Regulations on Alteration of Power Supply Facilities STRATEGIC PRIORITIES, TASKS, AND IMPLEMENTATION OF THEM of IDGC of Centre, PJSC, and IDGC of Center and Volga Region for Customers’ Benefit.

1.5. Compliance with indicators of reliability of services rendered as specified by the regional regulatory authorities Strategic priorities of development of IDGC of Center and [[ increasing the availability and affordability of power Volga Region are based on the Strategy for the Power Grid grid infrastructure; Complex Development, approved by the decree of the Achievements in 2018 Plans for 2019 [[ human capital assets development. Government of the Russian Federation No. 511-p dated • Deviations of indicators of reliability of services Achievement of the target indicators of reliability of services April 3, 2013. These priorities include: An important factor of the successful growth of the rendered from the approved values did not exceed the rendered. acceptable values; Company in accordance with its strategic priorities is the [[ ensuring the reliability and security of the Company’s system of key performance indicators. Bonus awarding • Reliability targets were reached. power grid complex, improving the quality of services of all top managers of the Company on the quarterly and provided; 1.6. Calculation of the Saidi and Saifi indicators of the reliability level at year-end 2018 annual basis depends on the KPIs established by the [[ increasing operational and investment efficiency; Board of Directors. For each of the KPIs, a relative share in Achievements in 2018 Plans for 2019 the amount of bonuses paid is identified. [[ improving investment appeal and market Compared with 2017, there was a 29 % reduction in Saidi In 2019, Saidi and Saifi values are expected to be at the 2018 capitalization; values and 25 % reduction in Saifi values. level. [[ innovation-driven growth and energy efficiency of assets;

40 41 THE ANNUAL REPORT 2018 | JOINING EFFORTS COMPANY STRATEGY PERFORMANCE SUSTAINABLE CORPORATE PROFILE RESULTS DEVELOPMENT GOVERNANCE

1.7. Timely and quality repair works 2.3. Construction compliance monitoring in accordance with the requirements of regulatory authorities

Achievements in 2018 Plans for 2019 Achievements in 2018 Plans for 2019 The overhaul of the following facilities and equipment Planned to perform overhaul of the following: Construction supervision in accordance with the Ensuring compliance of the processes with the published was completed on time and on high-quality level: • 35.7 thou. km of 0.4-220 kV PTLs; requirements of regulatory documents. documents and updating the documents, if necessary. • 38.5 thou. km of 0.4-220 kV power transmission lines; • 7,956 units of transformer substations; Updating of the following internal documents: • 8,166 transformer substations; • 39 units of ​35-110 kV power transformers; • Procedure for construction compliance monitoring at • 48 units of ​35-110 kV power transformers; facilities of the power grid complex of IDGC of Centre • 4,417 units of switching equipment. and IDGC of Center and Volga Region; • 4,704 units of switching equipment. • Arrangement of acceptance control of products 1.8. Implementation of the target program involving clearing and expanding forest corridors for the overhead lines for construction and reconstruction of power grid facilities of IDGC of Centre and IDGC of Center and Volga Region. Achievements in 2018 Plans for 2019 A standard-form contract for construction monitoring The total area of the cleared and expanded territory was Clearing and expanding the forest corridors in the total area services at facilities was approved. 17,859 ha, including a 1,076 ha extension for the 6-110 kV of 16,549 ha, including a 192 ha extension for the 6-10 kV overhead lines. overhead lines. 27 people were registered in the national registry of specialists in the field of construction management. 1.9. Improving management efficiency, optimization and standardization of business processes in all branches using an integrated management system 2.4. Reduction of operating expenses pursuant to the Russian Federation Government Decree No. 2303-П13 dated April 16, 2015 on reduction of specific operating expenses by at least 2-3 % per year

Achievements in 2018 Plans for 2019 Achievements in 2018 Plans for 2019 108 regulatory documents were developed and updated. Update of 51 effective regulatory documents. Roughly, a 4.1 % value was achieved (the results are Ensuring the achievement of the target figures set by the 1.10. Maintaining an integrated management system in accordance with international standards ISO 9001, ISO 14001, ISO summed up by the Board of Directors). business plan. 50001, OHSAS 18001 in all branches

Achievements in 2018 Plans for 2019 Enhancing the investment appeal Compliance audits were performed. Compliance of audits procedures. KPIs in 2018: 3. • Consolidated net cash flow ≥ 3,218.0 RUB mn • Consolidated operating profit (EBITDA) for Q1, HY and 9 months of the reporting year ≥ 0, for the year ≥ 3 % • Consolidated net debt/EBITDA for Q1, Q2, Q3, Q4 ≤ 3.0 • Compliance with the plan of measures to reduce the accounts receivable ≥ 100.0 % Increasing operational and investment efficiency KPIs in 2018: 3.1. The achieved target indicators include net profit, EBITDA, profitability 2. • Reduction of specific operating expenses (costs) ≥ 2.0 % • Reduction of specific investment costs ≤ 1.00 Achievements in 2018 Plans for 2019 • Increase in the process utilization of power grid equipment Net profit is 9,347 RUB mn with the target of 5,264 Ensuring the achievement of target figures set by the RUB mn, EBITDA is 21,831 RUB mn with the target of 16,711 business plan4. • Compliance with the commissioning schedule ≥ 90 % RUB mn, EBITDA margin is 23.3 % with the target of 17.7 %. 2.1. Regulation of standardization of costs in capital construction 3.2. Effective IR program. Establishing and maintaining long-term relationships with shareholders and investors

Achievements in 2018 Plans for 2019 Achievements in 2018 Plans for 2019 Control over the activities of branches in terms of Development of a unified system of standardization of costs IR-program for 2018 was carried out. Carrying out the IR program for 2019. standardization of costs was carried out. in the Company. Dividends on the Company’s shares were attributed and Ensuring the Company’s transparency with regard to the 2.2. Implementation of project management in capital construction paid out (4,535,749 RUB thou. and 4,495,2495 RUB thou., needs of the investment community. respectively).

Achievements in 2018 Plans for 2019 Control over timely commissioning of facilities. Timely commissioning of facilities and updating of Updating the procedure of operational acceptance of documents regulating this process, if required. 35-110 kV and 0.4-20 kV completed construction projects.

4 Business plans of the Company are created in accordance with RAS. 5 As of December 31, 2018.

42 43 THE ANNUAL REPORT 2018 | JOINING EFFORTS COMPANY STRATEGY PERFORMANCE SUSTAINABLE CORPORATE PROFILE RESULTS DEVELOPMENT GOVERNANCE

3.3. Сorporate governance development. Following the best and acknowledged practice of corporate governance

Achievements in 2018 Plans for 2019 Increasing the availability and affordability of power grid infrastructure Following the results of corporate governance Assessment of corporate governance and information KPIs in 2018: assessment, the Russian Institute of Directors, NP, support of the National Corporate Governance Rating. 5. • Compliance with the terms of grid connection ≤ 1.1 upgraded the Company’s corporate governance rating Implementation of corporate procedures in accordance with to NCGR 7+. the legislation of the Russian Federation. 5.1. Providing potential consumers with information to evaluate key parameters and risks of business projects with regard The following internal documents were eddited and Updating of internal documents in compliance with the to the opportunities for grid connection approved: requirements of the legislation and recommendations of • Regulations on the Board of Directors; the Corporate Governance Code, control over their effective Achievements in 2018 Plans for 2019 implementation. • Regulations on the Management Board; Public meetings with consumers were held to discuss Holding of public meetings with existing and potential • Regulations on payment of remunerations and Performance self-assessment of the Board of Directors and access to the power grid infrastructure in each region. consumers to discuss access to the power grid compensations to the members of the Audit Committees of the Board of Directors. infrastructure, including applications filing for grid Commission; connection in electronic form. • Regulations on the dividend policy; 5.2. Managing the procedures of interaction with applicants during technological connection to power grid in accordance • Regulations on the information policy. with the legislation in force Effective operation of the Company’s management bodies was ensured. Achievements in 2018 Plans for 2019 3.4. Maintaining an impeccable credit history Guidelines on the “Procedure of rendering the services Maintaining the procedures of interaction with applicants of technological connection of power plants to the power during technological connection to power grid in accordance grids of IDGC of Centre, PJSC, and IDGC of Center and with the legislation in force. Achievements in 2018 Plans for 2019 Volga Region, PJSC” was put into effect. Performance of obligations to pay the principal amount Unconditional fulfillment of payment obligations under loan of debt, interest, and other expenses related to handling agreements. 5.3. Reduction of grid connection terms, class of consumers: up to 15 kW of borrowed resources in a timely manner and in full. Improving energy efficiency and support of the innovation development Achievements in 2018 Plans for 2019 A share of contracts, under which the works on Performance of the maximum number of works using own KPIs in 2018: construction, reconstruction or upgrade of 0.4-10 kW resources. 4. • Rate of electric power loss ≤ 8.79 % distribution networks were carried out using own • Effectiveness of innovation ≥ 90 % resources, while performing the obligations under contracts of technological connection of power receivers 4.1. Development and implementation of programs for energy conservation and increasing energy efficiency of branches in to the grid reached 44%. accordance with the requirements of regional regulatory authorities

Achievements in 2018 Plans for 2019 Full implementation of measures within the Program of Ensuring unconditional fulfillment of targets for the Program Development of human capital assets energy conservation and energy efficiency improvement. of energy conservation and energy efficiency improvement. KPIs in 2018: Consumption of fuel and energy resources for Updating of the Programs of energy conservation and operational and economic needs reached 43,121 toe, energy efficiency improvement in the branches. 6. • Improving labor efficiency ≥ 2.00 % which is lower than the target of 2,460 toe; water • Zero increase in the casualty toll consumption was equal to 183 thou. m3, which is lower than the target of 29.1 thou. m3. 6.1. Fulfillment of the Company’s obligations under the Collective Agreement with the employees for 2016-2018

4.2. Upgrade of electric power metering points Achievements in 2018 Plans for 2019 The obligations under the Collective Agreement were Fulfillment of the Company’s obligations under the Achievements in 2018 Plans for 2019 fulfilled to the full extent. Collective Agreement to the full extent. Annual plan fulfillment by 91 %: 30,656 metering points Implementation of the Program for long-term development were upgraded. of power metering systems. 6.2. Compliance with the regulatory requirement on the Company’s staffing level: 90 %

4.3. Ensuring innovation-driven development Achievements in 2018 Plans for 2019 The Company’s staffing level indicator was met by 98 %. Maintaining a stable staffing level and preventing it from Achievements in 2018 Plans for 2019 non-complying with the standard. Completion of the annual plan for the implementation of Implementation of pilot projects of 35-110 kV digital the Innovative Development Program 2016-2020 with an substations and digital power distribution zones as part of 6.3. Achievement of the target number of staff, who participated in various training, retraining, and advanced training outlook for 2025 by 94 %, including: the digital transformation concept. programs • purchase of innovation-based equipment, materials Carrying on with the implementation of five R&D contracts, and technologies worth 521.97 RUB mn; acquisition of patents and certificates, commercialization of Achievements in 2018 Plans for 2019 • handling of works under five R&D contracts worth the R&D results. 56 % of the average number of the Company’s staff Performance of the approved plans for staff training. 54.70 RUB mn; Conducting tendering procedures, and concluding received training. • human resources development worth 6.40 RUB mn. agreements for three R&D projects.

44 45 THE ANNUAL REPORT 2018 | JOINING EFFORTS COMPANY STRATEGY PERFORMANCE SUSTAINABLE CORPORATE PROFILE RESULTS DEVELOPMENT GOVERNANCE

DIGITIZATION ESSENTIAL STEPS PLANNED FOR THE IMPLEMENTATION OF THE “DIGITAL TRANSFORMATION 2030” CONCEPT

ESTABLISHMENT OF UNIFIED CONTROL CENTERS FOR 0.4-220 KV NETWORKS Benefits: • reducing capital costs on modernization of network management points as part of the “DIGITAL TRANSFORMATION 2030” implementation of the "Digital Transformation 2030" technologies; • enhancing fail-safe operation of the power system and a level of automation of the electric power complex management; AT THE END OF 2018, PJSC ROSSETI ADOPTED A “DIGITAL TRANSFORMATION 2030” CONCEPT. ITS GOAL IS TO • achieving a high level of reliability of data on the state of the electric power complex. TRANSFORM THE EXISTING LINE OF BUSINESS PROCESSES IN POWER GRID COMPANIES BY 2030 THROUGH THE INTRODUCTION OF DIGITAL TECHNOLOGIES THAT ALLOW FOR A RAPID ANALYSIS OF LARGE AMOUNTS OF DATA. ESTABLISHMENT OF DIGITAL OPERATIONAL DISPATCH RADIO COMMUNICATION Benefits: The “Digital Transformation 2030” concept is supposed to be implemented in accordance with the specifically developed Target Model of digital transformation of the PJSC Rosseti power grid complex before 2030. • improving communication reliability and quality; • expanding the coverage over the entire territory of the regions of responsibility.

CONSTRUCTION OF UNIFIED 35-110 KV DIGITAL SUBSTATIONS IN ALL BRANCHES THE FOLLOWING ARE THE MAIN PRINCIPLES OF THIS TARGET MODEL: OF THE COMPANY Benefits: • reducing capital costs and operating costs during the construction and operation of power grid facilities.

INSTALLATION OF AUTOMATED NAVIGATION AND DISPATCH SYSTEM TO MANAGE THE COMPANY’S ENTIRE MOTOR VEHICLE FLEET Benefits: COMPLETE TRANSFORMATION • administrating continuous and effective control over the location of vehicles and consumption of OF THE POWER GRID INFRASTRUCTURE fuel and lubrication materials; PLATFORM-BASED SOLUTIONS, OF ALL THE COMPANIES OF PJSC ROSSETI DEVELOPMENT OF A UNIFIED • enhancing traffic safety. DIGITAL ENVIRONMENT, AND INTRODUCTION OF PROVISION OF ELECTRICIANS WITH MOBILE COMMUNICATION AND INFORMATION CYBERSECURITY TECHNOLOGIES DEVICES Benefits: • improving the quality of scheduled, unscheduled, and emergency recovery works; • reducing the risk of injuries among operational staff; • improving labor efficiency of personnel. ACCUMULATION OF 100 % OF DATA WITHIN TECHNOLOGICAL AND CORPORATE INFORMATION SYSTEMS AUTOMATION OF THE 6-10 KV DISTRIBUTION NETWORK Benefits: • reducing the time for finding a site of damage and determining its nature; • reducing the time for localization of the affected area; • reducing the power supply recovery time; • reducing operating expenses on operational management; INTERCONNECTION OF ALL • reducing the amount of the lost load. INFORMATION DIGITAL FLOWS BASED ON CLOUD TECHNOLOGIES DEVELOPMENT OF THE AUTOMATED CONSUMPTION METERING SYSTEM Benefits: • time-sensitive localization of areas of electric power losses and effective measures to reduce commercial electric power losses; • enhancing the observability of the 0.4-10 kV network condition; ACCUMULATION OF DATA WITHIN THE • reducing operating costs of developing the scope of services provided and improving their UNIFIED NETWORK CONTROL CENTERS IN consistency. THE AMOUNT SUFFICIENT FOR PROCESS AND SITUATION MANAGEMENT

46 47 THE ANNUAL REPORT 2018 | JOINING EFFORTS COMPANY STRATEGY PERFORMANCE SUSTAINABLE CORPORATE PROFILE RESULTS DEVELOPMENT GOVERNANCE

Arzamas rural power district was chosen A modern multi-purpose software and hardware ACTION PLANS FOR 2019 as a site for the implementation of the first complex will allow for real-time monitoring of pilot project for establishing a digital power the operation of all substations and transmission distribution zone. The choice was primarily lines in the area of the power company’s​ conditioned by the possibility of integration responsibility. Any changes in the power IN 2019, IDGC OF CENTER AND VOLGA REGION PLANS TO START IMPLEMENTING PROJECTS TO BUILD of a digital 110/10 substation Vyezdnoye and a equipment operation will instantly be displayed THE FOLLOWING: digital power distribution zone inside the same on the screen installed in the NCC and on the territory. monitors of control engineers.

To enable automatic identification and The pilot project to create a digital power localization of faults in the electric grid, distribution zone as part of the Arzamas rural the electricity-generating equipment will power district is planned to be implemented by 8 13 7 be fitted with auto-reclosers, motor-driven the end of 2020. Its cost is roughly estimated UNIFIED NETWORK CONTROL 13 DIGITAL POWER DISTRIBUTION DIGITAL disconnecting switches, voltage control to be approximately 400 RUB mn. The company CENTERS ZONES SUBSTATIONS sensors on 0.4 kV transmission lines outgoing expects that once the digital power distribution from transformer substations, and three- zone is put into operation, the running expenses phase sets of line fault indicators. To optimize on the power grids and the impact on the staff the process of acquiring data on energy will decrease, the working environment will WHEN IMPLEMENTING THESE PROJECTS, THE COMPANY WILL TEST THE NEW TECHNOLOGY AND EVALUATE ITS consumption and to prevent the cases of its become safer for the employees, and, should any VALIDITY AND EFFICIENCY. BASED ON THE RESULTS OBTAINED, A MATRIX OF GENERIC ENGINEERING SOLUTIONS illegal use, 6,104 digital metering devices will process upsets occur, the troubleshooting time WILL BE GENERATED WHICH, IN TURN, WILL ALLOW FOR FURTHER IMPLEMENTATION OF DIGITAL TECHNOLOGIES be installed. will be reduced. IN THE COMPANY’S POWER GRID COMPLEX AT AN ACCELERATING PACE.

TELECOMMUNICATIONS IDGC of Center and Volga Region has built INFORMATION TECHNOLOGIES USED IN COMPANY OPERATIONS and extensively uses a dispatch radio In 2018, the Company continued to develop communication system based on the modern IN 2018 communication channels based on the radio equipment. This system allows for the technology of fiber optic communication lines management of emergency response and (FOCL). These communication channels allow maintenance teams. In 2018, the Company AUTOMATED DISPATCH CONTROL SYSTEMS (ADCS) In 2018, the following were also developed: for transmission of technological information arranged for an installation of wireless communication channels based on cellular [[ new Programs for updating and expanding data to all levels of decision-making, significantly communication networks, as well as wireless In 2018, IDGC of Center and Volga Region continued to acquisition and transmission systems for all increasing the reliability and observability broadband networks based on their own implement Programs for upgrading and expanding data branches of the Company, which take into account of electricity generation facilities of the infrastructure. acquisition and transmission systems, as well as the the Agreement on technological cooperation between Company’s branches. Despite the high cost Programs for development of the computer-aided process SO UPS, OJSC, and IDGC of Center and Volga Region and extended period of FOCL construction, management systems in nine branches of the Company. dated July 7, 2017; they offer some clear advantages over other ADCSs were introduced in the standby control centers data transmission technologies in terms of BUSINESS APPLICATIONS AND AUTOMATION [[ of the power distribution zones of two branches of the requirement specifications for the survey and design both reliability and channel capacity. OF BUSINESS PROCESSES Company. of the network control centers for all branches of the Company following the Development Concept for a Also in 2018, the Company simultaneously In 2018, IDGC of Center and Volga Region process and situation management system within the continued to work on fitting the 35 kV upgraded the automated system of power grid complex of PJSC Rosseti. and 110 kV substations with satellite communication to use as a channel administrative document flow and introduced Company branches have installed the unified data for backup communication and data automated systems for auditing and control, computing systems for electric power metering based on transmission. Besides, the satellite as well as planning and reporting on the Piramida-Seti software. communication is used at remotely located investment activities. This made it possible substations where the construction of other to further increase the transparency of communication channels is not economically operations and manageability of the sound. Company.

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Field of unification of business INTEGRATION OF IDGC OF CENTER Events scheduled for 2019 Expected benefits processes AND VOLGA REGION, PJSC WITH [[ [[ disposal of a part of the non- transition to a two-level management core assets; CORPORATE GOVERNANCE, system [[ staff rightsizing IDGC OF CENTRE, PJSC PERSONNEL MANAGEMENT, AND ORGANIZATION DESIGN [[ [[ acquisition of non-exclusive rights to As of September 11, 2017, the powers of the sole executive reducing operating expenses and capital costs; use software products; [[ body (SEB) of IDGC of Center and Volga Region were increasing the capacity of [[ association and unification of business processes; [[ delegated to IDGC of Centre, PJSC. This agreement was arrangement of a common domain and corporate communication signed upon the decisions of the Boards of Directors of [[ implementation of optimal solutions and best a centralized e-mail system; channels; [[ [[ both companies aimed at a significant increase of their management practices. USE OF CORPORATE increase in leased server capacity for providing end-users with access operational and financial efficiency. hosting a Corporate Information System to the automated system of Over the long term, it is expected that the joint AND TECHNOLOGICAL COMPUTER-AIDED for Resource Management (CISRM); administrative document flow The primary targets of the initiated project aimed at management of two power grid companies will simplify [[ (ASAD) consolidating the process and situation management of and catalyze the solution of tasks in various areas of MANAGEMENT SYSTEMS creating a common call-center for the grid complex of IDGC of Centre and IDGC of Center their activities. First, the plan is to reduce the time of consumers using short 1UV(x) numbers and Volga Region include: emergency recovery works, to improve the intelligence [[ carrying out partial maintenance of the exchange in emergencies, and to consolidate the [[ arranging a unified excellence and control center; production assets management system centralized emergency stock and backup power sources. (PAMS) by own efforts; [[ increasing manageability of operational processes; Combining the resources will allow IDGC of Centre and [[ integrated implementation of innovative [[ reduction of costs for IDGC of Center and Volga Region to reduce the operating [[ simplifying the procedures of cash flow planning and technologies; purchasing software and costs and improve the quality of the power grid complex, coordination; [[ innovative products; as well as to increase financial stability and investment composite procurement of innovative [[ appeal of both companies. products; receipt of license royalties; [[ optimization of the сentralized [[ reduction of unscheduled and REPAIR AND MAINTENANCE Events Held in 2018 and First Results emergency stock and backup power emergency works; ACTIVITIES supply sources; [[ record of accidents in a single [[ The financial and economic benefits of IDGC of Center [[ transfer to repairs based on the technical condition; formation of united teams to perform software package and Volga Region obtained in 2018 due to joint work with emergency recovery works; [[ optimization of the previously combined emergency IDGC of Centre, PJSC, reached 1,515.1 RUB mn, which is [[ transfer to repairs based on the stock and backup power supply sources of the two 55.9 % (or 543.3 RUB mn) higher than the target. technical condition companies; The number of activities executed by IDGC of Center and [[ handling of consolidated procurements; [[ Volga Region in 2018, which allowed for the achievement savings in procurement; [[ [[ of the stated savings, included the following: [[ reducing the expenses on transportation of the handling of consolidated procurements; reducing the expenses [[ [[ management; sale of unused vehicles on transportation of the optimization of lease relations due to the shut-down management of the Company’s executive branch and transition to [[ optimization of costs and terms of payments for local INVESTMENT ACTIVITIES a two-level management system; grid operators; [[ growth of revenue through [[ staff rightsizing; [[ reduction of electric power losses due to the rendering of grid connection introduction of a unified automation system of data [[ [[ arrangement of a common domain and a centralized increasing the efficiency of detection services and provision of accumulation; e-mail system of the two companies; and stopping the unaccounted additional services; [[ [[ growth of revenue through rendering of grid electricity consumption; reduction of electric power [[ acquisition of non-exclusive rights to use software connection services. [[ down-flow optimization; losses; products; [[ [[ IMPLEMENTATION AND application of generic solutions for optimization of costs and terms of payments for local grid DEVELOPMENT OF SERVICES connecting the applicants’ power supply facilities to the power grids operators; [[ achieving the level of accounts receivable turnover

Events Scheduled for 2019

In 2019, an even wider range of activities is planned. These activities are aimed at unifying and rationalizing all areas of activities of IDGC of Centre and IDGC of Center and Volga Region.

50 51 THE ANNUAL REPORT 2018 | JOINING EFFORTS COMPANY STRATEGY PERFORMANCE SUSTAINABLE CORPORATE PROFILE RESULTS DEVELOPMENT GOVERNANCE

[[ development of a regional network of charging infrastructure for electric cars, including the INNOVATION DEVELOPMENT installation of five charging stations for electric cars in four branches (Kalugaenergo, Nizhnovenergo, Ryazanenergo and Tulenergo). CREATION AND EXPANSION OF THE CHARGING Transition to an integrated efficiency of business STATION NETWORK IS ONE OF THE PRIORITY The key document in accordance with which the Company’s innovation and R&D policy is formed is the Innovative processes and automation of control systems TASKS OF THE ROSSETI GROUP. THE GROUP Development Program of IDGC of Center and Volga Region for 2016-2020 for further extension until 2025, approved by IDGC of Center and Volga Region implements a complex the decision of the Board of Directors on March 30, 2017 (Minutes No. 262 dated April 3, 2017). innovation project on the development of the assets CONSISTENTLY IMPLEMENTS THE ALL-RUSSIAN management system (PAMS). The goal of the project is to PROGRAM OF CHARGING INFRASTRUCTURE optimize the distribution of costs for the implementation DEVELOPMENT, TO CREATE THE CONDITIONS FOR of the repair program, minimizing the risks of electric THE IMPLEMENTATION OF AUTONOMOUS PUBLIC The main goal of the innovative-driven development of IDGC of Center and Volga Region is to make a transition to 6 equipment failures, which directly affects the SAIFI AND PRIVATE ELECTRIC TRANSPORT. the electric grid of a new technological setup, with brand new characteristics of reliability, efficiency, accessibility, indicator. manageability, and focus on customer. As part of this project, in 2018, the Company carried out The three phases of the Program include the IDGC of Center and Volga Region has 8 patents for invention, 17 patents for utility model, 4 certificates of state the following work: development of basic process design solutions, registration of computer programs, and 1 certificate of state registration of database. The Company signed 19 licensed [[ completion of the information system of IDGC of the implementation of pilot projects and the and equivalent contracts. At year-end 2018, IDGC of Center and Volga Region received a total of 1.1 RUB mn of licensed gradual deployment of charging infrastructure contract fees. Center and Volga Region in accordance with the revised text indexes of status (TIS); throughout Russia. A positive consequence of In 2018, IDGC of Center and Volga Region transferred 521.9 RUB mn (VAT excluded) for the implementation of the the implementation of this Program will be an [[ automation of the function for calculating the Innovative Development Program, which is 9.4 % higher than the previously planned amount. intensive innovation activity, development and probability of equipment failure at the power supply commercialization of the applied R&D results in the facilities; field of electric drive technologies, electric power [[ automation of planning and accounting for the actual storage, and their use in the methods and systems INNOVATION PROJECTS implementation of the production program; of battery charging. Development of the charging [[ infrastructure and network of charging stations The main areas of the innovation-driven development of Over the long term, the introduction of "digital integration of the PAMS software products, GIS- is a global trend followed by the economically IDGC of Center and Volga Region are the following: substation" technologies will reduce the time and money systems and applied software systems of PJSC developed countries. spent on the design, construction, commissioning, and Rosseti with business intelligence systems of IDGC of [[ transition to digital substations of various voltage operation of substation equipment, improve the reliability Center and Volga Region. classes 35-110 (220) kV; and operation speed of relays and automation devices, Furthermore, in 2018, two projects were implemented [[ transition to digital active-adaptive networks with and improve the metrological characteristics of secondary aimed at upgrading a unified information management distributed intelligent system of automation and devices and systems. system with data integration in the operative-information Innovative Proposals control; complex “Dispetcher” in Vladimirenergo and Ivenergo Efficiency of the Company’s production activity is [[ Transition to digital active-adaptive networks transition to comprehensive efficiency of business branches. improved not only through the introduction of new processes and automation of control systems; Active-adaptive electric network is a self-regulating Application of New Technology and Materials technology and equipment with the more advanced [[ application of new technology and materials in energy supply system which provides energy consumption characteristics of energy consumption, reliability electrical power industry. analysis and ensures energy accumulation in case The most important projects of the Company in this area and durability, but also through the consideration of of excess generation and its output into the network are the following: Most of the innovation projects implemented by the innovative proposals of the employees. in case of energy shortfall. It is capable of automatic Company are integrated in nature, meanwhile covering [[ reconstruction of the 110 kV overhead lines No. 101, In 2018, 9 proposals were registered in IDGC of Center and readjustment in emergencies, maintaining uninterrupted several innovative technologies or solutions related to 108, 106, 107, and 169 of Nizhnovenergo branch using Volga Region, 7 of which were recognized as innovative power supply to consumers in optimal modes and different areas. a specifically designed uncoated wire of the new proposals, and 2 are still under consideration. informing the adjacent systems on the events taking generation, grade ACCR (patent No. 119514), which Transition to digital substations of various voltage place in the network. The mutually complementary In 2018, the proposals for technical improvement were allows for ensuring high mechanical and structural classes 35-110 (220) kV members of such a network are generation sources, implemented in the following areas: reliability in critical areas (intersections of roads, main and residential electric grids with their substations, [[ information technology, communication systems (3 Since 2014, IDGC of Center and Volga Region has been railway tracks, rivers, etc.); as well as consumers, both those who have their own applications); working on studying the best practices of employing [[ reconstruction of sections of the 6-10/0.4 kV generation sources capable of outputting excess power [[ operation of substation equipment (2 applications); digital substation technologies and assessing a possibility distribution network using insulator arresters MCIA- into the network and those who do not. [[ of their use in construction or reconstruction of the 20 (patent No. 142989), overhead line supports made relay protection and emergency control automatics (1 Company’s facilities. Today, IDGC of Center and Volga An active-adaptive electric network implies a flexible of nanomodified reinforced concrete SVm-110 and application); Region has seven facilities in different developmental interaction of all its participants based on modern SVm-95 (patent No. 140055), and pile TS-10/0.4 kV [[ operation of special equipment (1 application). stages and their implementation with the use of digital technologies and a unified smart control system. (patent No. 99905). The total amount of remuneration paid to the authors for substation technologies is being considered. In 2018, IDGC of Center and Volga Region implemented the Process design solutions used in these projects are the 2018 was 0.026 RUB mn. In 2018, the Company began working on two of these following projects in this area: results of research and development performed at IDGC projects, namely: of Centre, PJSC, and IDGC of Center and Volga Region. [[ establishment of a smart digital system for Their implementation allows for an improvement of [[ automation and management of 110-35 kV power reconstruction of the 110/35/10 kV substation the reliability and security of power supply facilities of supply centers and the adjacent sections of the 6-10 Vyezdnoye of Nizhnovenergo branch; distribution networks. [[ creation of a digital substation based on a kV network (38 projects in eight branches); distributed 2-level protection system at the 35/6 kV [[ automation of 6(10)/0.4 kV distribution networks, Aeroport substation of Udmurtenergo branch, with arrangement of communication channels, and their the implementation of IEC 61850 standards. integration into OMS/DMS systems (14 projects in five branches); 6 System Average Interruption Frequency Index. 52 53 THE ANNUAL REPORT 2018 | JOINING EFFORTS COMPANY STRATEGY PERFORMANCE SUSTAINABLE CORPORATE PROFILE RESULTS DEVELOPMENT GOVERNANCE

INVESTMENT PROJECTS IMPLEMENTED IN 2018 CAPITAL INVESTMENT FINANCING INVESTMENT STRUCTURE, RUB MN INCLUDING VAT Cost parameters for 2018, RUB mn Scope of Branch and name of the project Benefits work Capital New fixed Funding investment assets PROGRAM By the investment sectors NEW CONSTRUCTION

Improving power supply reliability 15,063.4 of Kirov Kirovenergo branch: "Construction The investment program of IDGC of Center and Volga 5,683 km of of 35-110 kV overhead line Vyatka- Connection of a new residential 62.7 38.1 179.6 Region is put together with regard to the regional 12,230.2 1,223.4 power lines area Chistye Prudy with a 133.9 Chizhi (2nd start-up facility)" development plans, technical condition of the electrical 11,132.6 population of around 40 thou. 853.0 networks, and available sources of funding. Since 2010, 1,025.5 people 8,747.9 the Company relies on the provisions of the Russian 1,533.9 118.7 54.9 713.1 Ensuring a reliable power supply Federation Government Decree No. 977 dated December 1, 219.3 701.8 8,419.3 and grid connection of consumers 2009 “On Investment Programs of Electric Power Industry 2.1 6,143.9 Kalugaenergo branch: in Obninsk power center of Kaluga Entities” when planning the investment programs, their 268.5 195.1 4,994.5 250 MVA "Construction of the 220/110/10 kV Region; implementation, and rendering reports on the execution transformer 432.4 450.4 468.9 3 230,6 Sozvezdiye substation, of investment projects. capacity Power supply to the residents of construction phase 3.2" Vorsino industrial estate on the The 2018 investment program of IDGC of Center and border of Kaluga and Moscow Volga Region was approved by the Order of the Russian 4,349.8 4,330.0 4,229.0 4,433.8 Regions Federation Ministry of Energy No. 28@ dated December RECONSTRUCTION 24, 2018. The capital investment in 2018 was 11,160.0 2016 2017 2018 2019 RUB mn, the amount of financing – 12,230.2 RUB mn. In (expected) Nizhnovenergo branch: 2018, the Company commissioned 3,511.8 km of power "Reconstruction. SS-110kV Improving reliability of power Sotsgorod. Operating department 40 MVA grids and 663.6 MVA of transformer capacity, which equals Other investment projects supply to consumers in Central power grids. Replacement transformer 135.3 115.2 150.6 10,183.5 RUB mn of fixed assets worth. Avtozavodsky city district, Nizhny Purchase of land lots for investment projects of Т-1 ТРДН-31500/110/6 (power capacity Novgorod Other new construction of power grid facilities transformer) with ТРДН- COST AND PHYSICAL PARAMETERS OF THE COMPANY’S INVESTMENT Investment projects within the scheme and programs of 40000/110/6 (40 MVA)" ACTIVITIES IN 2018 electricity industry long-term growth Ryazanenergo branch: Reconstruction, upgrade, retrofitting "Reconstruction of 110kV Improving reliability of power Grid connection overhead line Sasovo-Kustarevka 7,505 km of supply to consumers, industrial 663.6 37.0 34.6 37.8 3,511.8 (replacement of 40 supports, power lines and agricultural development of 12,230.2 insulators and 7.9 km of АС-150 Sasovsky district, Ryazan Region 22.1 wire), 7.505 km" 11,160.0 41.9 886.3 10,183.5 41.0 382.3 Udmurtenergo branch: Improving reliability of power 790.2 1,782.1 "Reconstruction of 110 kV overhead supply to oil production 1,690.5 14 % line Kama-RP Mostovoye-1, 2 circuit enterprises of PJSC Udmurtneft, 716.8 549.0 6,122 km of 1,443.0 116.0 in the span of supports No. 25-96, PJSC Belkamneft, industrial 12.2 10.5 14.1 1,117.9 power lines 1,260.4 101-127, with replacement of the companies and domestic 978.2 6.3 234.6 31.3 448.0 wire with a high-temperature one household of Sarapul district of 929.6 4 % (2 stage)" the Udmurt Republic. 2,830.6 556.4 2,736.3 383.1 Vladimirenergo branch: 2,144.7 245.7 102.6 3 % "Reconstruction of the 110 kV 40 MVA Improving reliability of power 222.5 221.8 1,426.9 316.6 453.0 9,617.0 Murom substation (replacement transformer 60.9 51.8 53.8 79 % supply to consumers of Murom 1,267.7 1,201.5 of Т-1 31.5 MVA with 40 MVA) with capacity By sources of funding power augmentation (8.5 MVA)" 420.0 1,796.2 1,807.8 1,954.0 in 2018 81.4 274.6 INVESTMENT PROJECTS SCHEDULED FOR IMPLEMENTATION IN 2019 242.8 235.9 4.3 Cost parameters for 2018, RUB mn 1,683.1 1,665.0 1,803.7 84.1 732.5 Scope of Branch and name of the project Benefits Capital New fixed work Funding investment assets Expenditure, Input of Financing, Transformer Power lines NEW CONSTRUCTION RUB mn, capital funds, RUB mn, capacity commissioning, w/o VAT RUB mn with VAT commissioning, km Kirovenergo branch: "Construction MVA of 110/35/10 kV Urvantsevo substation with incoming 40 MVA Reliable power supply to consumers Udmurtenergo Kirovenergo overhead lines of 110 kV (1st Scheduled Own funds transformer in the southwestern part of Kirov and 145.5 141.5 priority) (installation of a T1 for Q4 2019 Tulenergo Kalugaenergo capacity the surrounding suburban areas Raised funds 40 MVA transformer, 110 kV Ryazanenergo Ivenergo Payment for grid connection outdoor switchgear, 10 kV indoor switchgear)" Nizhnovenergo Vladimirenergo Other Marienergo 54 55 THE ANNUAL REPORT 2018 | JOINING EFFORTS COMPANY STRATEGY PERFORMANCE SUSTAINABLE CORPORATE PROFILE RESULTS DEVELOPMENT GOVERNANCE

for stable operation of the electric power industry and ensuring the connection of consumers; OVERALL, THE COMPANY IS PLANNING [[ increasing the anti-sabotage and anti-terrorism In December 2018, another step was taken in Kaluga Region towards digital transformation of the Company’s TO ALLOCATE 104,669 RUB MN (VAT security of energy facilities; power grid complex: Sozvezdiye substation was brought into full capacity. Sozvezdiye Substation is one of INCLUDED) TO THE LONG-TERM [[ the most up-to-date power facilities in the country, fitted with additional telecontrol systems providing full developing the systems of communication, INVESTMENT PROGRAM observability of power equipment, modern systems of relay protection, and automation. The connection between telemechanics, and data transmission to increase the the internal networks and dispatch centers of the respective levels is carried out using digital protocols. The manageability of networks and reduce the emergency OVER 2016-2022. automation degree of the substation allows for both monitoring the power facility from the control center and response time. managing it. The capital investment during this period Sozvezdiye substation will increase the reliability of power supply to industrial consumers in Kaluga Region, should be 91,117 RUB mn. It is expected including 39 residents of the Vorsino industrial estate and the large Freight Village Vorsino railway terminal, that the cumulative new fixed assets which is a part of the New Silk Road between Beijing and Berlin. for 2016-2022 will reach 92,003 RUB mn w/o VAT. 25,730 km of power lines will be built and reconstructed and 3,677 MVA of transformer capacity will be commissioned.

PLANNED COST AND PHYSICAL PARAMETERS OF THE COMPANY’S INVESTMENT ACTIVITIES UP TO 2022 20,172 17,964 18,219 18,028 16,109 17,338 15,517 15,319 15,594 15,063 13,660 13,329

Financing, RUB mn, with VAT Capital investments, RUB mn, w/o VAT Capital funds commissioning, RUB mn, w/o VAT

2019 2020 2021 2022

4,207 642 643 4,070 3,967 THE COMPANY’S INVESTMENT PLANS THROUGH 2022 554 3,322 The Company develops its investment plans through 2022 The implementation of the Long-term investment 425 in accordance with the Long-term investment program of program will allow to complete the following tasks: IDGC of Center and Volga Region for 2016-2022, approved [[ maintaining the operational availability of the by the Order of the Russian Federation Ministry of equipment necessary for a reliable, uninterrupted, Energy No. 28@ dated December 24, 2018. This Program and high-quality power supply to consumers; is developed with due regard to the development plans of the regions, the technical condition of power grids, [[ carrying out activities to reduce production costs, the significance of power supply facilities, guidance for including by improving the equipment performance, revenues from power transmission, and revenues under developing the systems for metering of consumed grid connection contracts. The Program is also in line with energy resources; the goals and objectives of the Unified technical policy of [[ upgrading of fixed assets; the distribution power grid. 2019 2020 2021 2022 2019 2020 2021 2022 [[ ensuring safety of equipment and personnel; [[ providing the required capacity of electric networks Power lines commissioning, km Transformer capacity commissioning, MVA

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IMPROVING POWER SUPPLY ACTUAL PERFORMANCE OF CERTAIN TYPES OF REPAIR WORK IN 2016-2018

17,914 3,563 2,878 RELIABILITY AND QUALITY 17,408

15,379 1,034 Improving reliability and quality of power supply to consumers is one of the strategic growth priorities of IDGC of Center and Volga Region. Reliability indicators are also ACCIDENT RATES 2016 2017 2018 2016 2017 2018 the key criteria for evaluating the performance of the Company’s departments and its management. Clearing and expansion of OHL Restringing of OHL routes 0.4-110(220) 16,960 16,793 routes routings 0.4-110(220) kV, ha kV, km In 2018, the Company managed to reduce the accident 14,150 rates drastically. This was achieved through well-timed 11.11 10.85 expert analysis of the causes of earlier accidents and 8.99 performed repairs. 179,952 5,264 To reduce the number of accidents, every year the 162,281

Company works in the following areas as part of the repair 139,213 program implementation: 4,704 4,457 [[ clearing and expansion of lines of routes; 2016 2017 2018 [[ replacement of uninsulated wires with self-supporting insulated conductors on 0.4-10 kV overhead lines; Number of accidents, units 2016 2017 2018 2016 2017 2018 [[ replacement of insulators on overhead lines of 6 kV Specific accident risk, per 1,000 units and above; of equipment Replacement of insulators Repair of switching devices on TS, units on OHL routes (TS), units [[ installation of auto-reclosers in 6-10 kV distribution networks. 1,744 1,294

1,228

ACTUAL REPAIR COSTS IN 2016-2018 AND EXPECTATIONS FOR 2019, RUB MN 18

2016 2017 2018 By asset type By the the way of performance management

SAIFI – System Average Interruption Frequency Index, units 10 3,840 3,758 3,783 3,595 3,595 3,840 3,758 3,783

632 613 535 620 THE MAIN CAUSES 454 449 537 623 1,327 1,311 1,430 1,309 OF ACCIDENTS IN 2018, 4,749 % 9 1,640 1,714 1,769 1,702 3,467 2,269 2,529 2,328 2,474 407 389 334 272 2,166 220 171 243 187 233 217 229 181 11 85 64 119 337 2016 2017 2018 2019 2016 2017 2018 2019 (expected) (expected) Forces of nature 52 OHL 35-220 kW By a contractor Thunderstorms 2016 2017 2018 SS 35-220 kW Independently Exposure to birds and animals ETL 0.4-10 kW Other SAIDI - System Average Interruption Duration Index, hours TS 6-10/0.4 kWh Equipment deterioration Buildings and structures

Motor vehicles

Other

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FINANCIAL RAS RESULTS

PERFORMANCE RESULTS IFRS

PRODUCTION RESULTS ELECTRIC POWER TRANSMISSION

GRID CONNECTION PRODUCTION RESULTS 62

RAS FINANCIAL RESULTS ANALYSIS 66

IFRS FINANCIAL RESULTS ANALYSIS 70

60 61 THE ANNUAL REPORT 2018 | JOINING EFFORTS COMPANY STRATEGY PERFORMANCE SUSTAINABLE CORPORATE PROFILE RESULTS DEVELOPMENT GOVERNANCE

OPERATING RESULTS

DELIVERY POWER STRUCTURE

2.7 2.3 16.3 PRODUCTION RESULTS 3.3 4.6 Power Transmission

18.1 12.8

THE MAIN LINE OF BUSINESS OF IDGC OF CENTER AND VOLGA REGION IS POWER TRANSMISSION SERVICES BY CLASS OF CUSTOMERS, % BY VOLTAGE LEVEL, %

In 2018, the amount of power transmission POWER TRANSMISSION SERVICES, 33.3 services equaled to 47,400.2 mn kWh, which is MN KWH 1.9 % (or 908 mn kWh) less than in 2017. The following are the main reasons for the decline: 65.6 [[ the “last mile” mechanism applied in Nizhny 4,842.7 54,745.2 53,963.2 Novgorod Region and the Republic of Mari 54,004.4 El ceased to be effective, and the consumers 41.1 were switched over to direct agreements with 50,374.5 49,770.7 49,120.5

PJSC FGC UES, starting from July 1, 2017; 48,446.3 48,308.2

47,400.2 Local grid operators High voltage (110 kV) [[ transition of PJSC Siburneftekhim to a direct Industrial consumers Medium voltage (10-35 kV) agreement with PJSC FGC UES, starting from 4,370.6 Population and similar consumers Low voltage (0.4 kV) October 1, 2017 4,233.7 Non-industrial consumers Under comparable conditions (exclusive of 2016 2017 2018 the figures of the “last mile” consumption and Transport PJSC Siburneftekhim), the reduction in power Agriculture Electricity output to the grid transmission would have been 0.01 %, or 5 mn kWh, Municipal and other budget-funded consumers in comparison with 2017. Net delivery (within the balance attribution of the Company's branch) Amount of power transmission services provided (with regard to the support of the last resort supplier functions) Electricity losses TO REDUCE ELECTRIC POWER LOSSES, IDGC OF CENTER AND VOLGA REGION IS TAKING MEASURES TO IDENTIFY AND STOP THE IN 2018 THE COMPANY DETECTED, NON-CONTRACTUAL AND OFF-THE-METER A positive factor for the Company’s performance was In 2019, the Company expects a slight growth in the STOPPED AND INTEGRATED INTO A NET CONSUMPTION that between January 1, 2018 and March 31, 2018, IDGC of volume of power transmission services compared to the SUPPLY THE ILLEGALLY CONSUMED Center and Volga Region acted as a last resort supplier figures for 2018 (0.01 % or 3 mn kWh). POWER WORTH in Vladimir Region in the area of operations of Vladimir The structure of net power supply from the Company’s Power Supply Company, PJSC7. As of April 1, 2018, the networks remains stable year on year, and 2018 was no functions of the last resort supplier in the region were In 2018, the Company detected, stopped, exception. High voltage power transmission prevailed transferred to OOO ESV8. and integrated into a net supply the illegally (65.6 %) due to a large share of big industrial consumers consumed power of 6.7 mn kWh, which made (33.3 %). MN KWH it possible to prevent an increase in costs in 6.7 the amount of 27 RUB mn, VAT included.

7 Decision of the Ministry of Energy of Russia dated Friday, June 23, 2017 (order No. 550). 8 Decision of the Ministry of Energy of Russia dated March 20, 2018 (order No. 166).

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Grid Connection CONNECTED CAPACITY STRUCTURE

30 1 18.0 IDGC OF CENTER AND VOLGA REGION PROVIDES ALL-INCLUSIVE SERVICES OF TECHNOLOGICAL CONNECTION OF CONSUMERS AND POWER PRODUCERS TO ELECTRIC POWER SYSTEMS

According to the results of 2018, the average time for execution of grid connection contracts was 62 days, which is 10 days less than in 2017 (72 days). 0.4 0.6 2.2

GRID CONNECTION SERVICES 11.1

BY CLASS OF APPLICANTS, % BY INDUSTRY, % NUMBER OF APPLICATIONS SUBMITTED AND CONTRACTS CAPACITY, MW SIGNED, PCS

7 12.0 2,162.8 2,157.4 59,286 57,617 56,304 50,554 47,438 1,754.1 46,441 46,672 46,585 45,896

1,201.3 11 1,088.3

1,007.1 51 950.9 909.2 812.9 3.0 51 4.0 48.7

Up to and including 15 kW Individuals Retail 2016 2017 2018 2016 2017 2018 Over 15 kW - up to and including 150 kW Agriculture, forestry, fishery Transport and communications Number of submitted applications Contracted capacity Over 150 kW and less than 670 kW Industry Health care, education, social services Number of signed contracts Peak capacity by signed contracts No less than 670 kW Electricity, gas and water supply Other Number of executed contracts Connected capacity Generation Construction

ACCORDING TO THE RESULTS OF 2018, THE AVERAGE TIME FOR EXECUTION -10 DAYS Additional Services OF GRID CONNECTION CONTRACTS DAYS LESS THAN IN 2017 Apart from the electric power transmission and grid connection, which are the Company’s main activities, IDGC of 62 Center and Volga Region constantly strives to extend the scope of provided services. They are commercial in nature and are not subject to mandatory state regulation. In 2018, their list was expanded significantly, and now these services include: The number of grid connections executed by the Company depends on the [[ current state and plans for the economic development within the regions of arranging outdoor lighting systems; In 2018, to improve the efficiency of the additional operation. In 2018, IDGC of Center and Volga Region received over 57 thou. [[ The largest share of the power maintenance and repair of electric power services implementation, the Company introduced applications for technological connection of power receivers to the grids, system and electrical equipment; a new regulation on the reconstruction of power which is 2.3 % more than in 2017. The number of contracts signed in 2018 connected to the grids of IDGC of Center and Volga Region in [[ supply facilities in the best interests of customers increased by 2.1 % compared with 2017, while the number of executed grid reconstruction of power supply facilities in and changed the procedure for calculating the connection contracts decreased by 1.5 %. 2018 was made up of individuals the best interests of customers; (463 MW, or 48.7 %). At the cost of additional services. The employees of [[ In 2018, capacity indicators in applications and grid connection contracts same time, compared with 2017, provision of technical capacities; the Company’s branches received training in the increased dramatically compared with 2017: the contracted capacity necessary sales techniques. the greatest relative growth of [[ testing and diagnostics of electrical increased by 23.0 %, the maximum capacity under the signed contracts the connected capacity was equipment; increased by 23.9 %, and the connected capacity (under the executed observed in the "Construction" [[ contracts) grew by 4.6 %. This is explained by the transfer of some applicants sector (by 128.4 %); the installation and replacement of metering from the “up to 15 kW” category to the “15-150 kW” category due to the largest relative reduction of instruments; change in the Russian Federation legislation as of October 1, 20179 as well as the connected capacity was [[ execution of works, which are the customers’ THANKS TO THE WORK CARRIED OUT IN 2018, the increased number of large-scale applicants. attributed to the “Industry” responsibility, when carrying out the THE COMPANY MANAGED TO ENSURE REVENUE sector (by 55.1 %). procedure of grid connection; GROWTH FROM THE SALES OF ADDITIONAL [[ energy audit and energy service; SERVICES BY 90.8 %, OR FROM 313.2 RUB MN [[ design and construction of energy facilities. TO 597.8 RUB MN 9 As of October 1, 2017, the cost of grid connection of power receivers with a maximum capacity of 150 kW does not include the costs associated with the construction of power supply facilities: from the existing power supply facilities to connected power receivers and/or electricity generation facilities.

64 65 THE ANNUAL REPORT 2018 | JOINING EFFORTS COMPANY STRATEGY PERFORMANCE SUSTAINABLE CORPORATE PROFILE RESULTS DEVELOPMENT GOVERNANCE

RAS FINANCIAL ANALYSIS Factor Analysis of Net Cost Change Key Financial and Economic Indicators, RAS FACTORS OF REVENUE, RUB MN At year-end 2018, a volume of expenses attributable to the net cost reached 79,458.1 mn kWh, which is 4.9 % (or 5,172.2 192.1 -2,695.1 363.0 3,709.8 mn kWh) higher than in 2017. The following are the 93,875.9 Indicators (RUB mn) 2016 2017 2018 Change, % 90,843.7 main reasons for the change in net cost: Revenue from sales of products (services) 78,480.5 90,843.7 93,875.9 3.3 [[ 1,450.5 RUB mn increase in the cost of the electric Net cost of products (services) 66,536.0 74,372.0 78,409.1 5.4 power purchased for a compensation for losses due to the rise of the weighted average price of electricity Gross profit 11,944.5 16,471.7 15,466.8 -6.1 on the wholesale market by 7.6 %, and the exclusion of load losses cost from the calculations, starting from Management expenses 1,150.1 1,149.0 901.8 -21.5 August 1, 2017; Selling and marketing expenses 6.5 227.3 147.2 -35.2 [[ 719.4 RUB mn increase in the cost of PJSC FGC UES Profit (loss) from sales 10,787.9 15,095.4 14,417.8 -4.5 services due to the growth of tariff rates on network maintenance and on the payment of normative losses Interest receivable 153.3 220.5 130.2 -41.0 of electric power, as well as due to the exclusion of load losses cost from the calculations, starting from August Interest payable 2,332.0 2,168.9 1,513.3 -30.2 1, 2017; activities Revenue in 2017 transmission Revenue in 2018 Income from affiliation with other companies 6.1 5.7 3.2 -43.7 [[ Revenue from powerRevenue from power Revenue from other 1,635.7 RUB mn increase in the cost of services of local power and capacity Other income 2,610.3 8,224.5 4,658.6 -43.4 grid distribution companies due to the growth of indi- grid connection services vidual tariffs for power transmission services approved Revenue from sales of electric Other expenses 6,678.8 7,112.4 4,705.8 -33.8 for local grid organizations for 2018; [[ Profit (loss) before taxes 4,546.9 14,264.9 12,990.9 -8.9 204.3 RUB mn increase in personnel costs due to the indexation of staff wages in compliance with the terms FACTORS OF NET COST CHANGE (WITH REGARD TO ADMINISTRATIVE AND SELLING EXPENSES), RUB MN Profit tax and other payments 1,445.8 3,264.3 3,643.8 11.6 of the Current Industry Tariff Agreement, Collective Net profit (loss) 3,101.1 11,000.6 9,347.1 -15.0 Agreement, and Regulations on compensation and benefits of the Company’s employees. 6,058.0 84.0 -2,663.0 230.0 79,458.0 EBITDA 13,335.4 23 401.1 21,832.4 -6.7 75,749.0 Factors of Change in Other Expenses and Factor Analysis оf Revenue Change Income At year-end 2018, other income of IDGC of Center and Volga Indicators (RUB mn) 2016 2017 2018 Change, % Region, including interest receivable and income from affil- iation with other companies, was 4,792.0 RUB mn, which is Revenue from sales of products (services), including: 78,480.5 90,843.7 93,875.9 3.3 43.3 % (or 3,658.7 RUB mn) less than in 2017. This change was ultimately caused by a reduction in the volume of recovered Electricity transmission 77,386.6 83,680.3 88,852.6 6.2 provisions for doubtful debts. There is also an increase Grid connection services 859.6 733.4 925.5 26.2 in accrued interest, penalties, and court-ordered forfeits found in favor of the Company based on the results of the Net cost in 2017 transmission Net cost in 2018 Sales of electric power and capacity - 6,011.0 3,315.9 -44.8 claim-related work. Net cost of power Net costconnection of power services grid power and capacity Other activities 234.4 418.8 781.8 86.7 At year-end 2018, other expenses of IDGC of Center and Net cost of sales of electricNet cost of other activities Volga Region, including interest payable, was 6,219 RUB mn, which is 33.0 % (or 3,062.3 RUB mn) less than in 2017. The At year-end 2018, the service revenue of IDGC of Center load losses cost from the calculations starting from main reason for this development consists in the reduction in the volume of accrued provisions for doubtful debts and and Volga Region reached 93,875.9 mn kWh, which is 3.3 % August 1, 2017; PROCEEDS FROM SALES OF SERVICES (or 3,032.2 mn kWh) higher than in 2017. The following are estimated liabilities. [[ decrease in revenue from resale of electric power OF IDGC OF CENTER AND VOLGA REGION the main factors of the change in revenue: and capacity by 2,695.1 RUB mn, explained by the fact Shifts in income and expenses in 2018 relative to 2017 led to AS OF YEAR-END 2018 [[ 5,172.3 RUB mn revenue growth from implementing that, starting from April 1, 2018, the Company was no a decrease in the Company’s net profit by 15.0 % (or 1,653.5 power transmission services due to the increase longer operating as a last resort electricity supplier RUB mn). It reached 9,347.1 RUB mn. in common pot and individual tariffs for power in Vladimir Region. 3.3 % transmission services, as well as the exclusion of 93,875.9 RUB MN

66 67 THE ANNUAL REPORT 2018 | JOINING EFFORTS COMPANY STRATEGY PERFORMANCE SUSTAINABLE CORPORATE PROFILE RESULTS DEVELOPMENT GOVERNANCE

Factor Analysis of Changes in Assets, Capital and Liabilities The total assets and liabilities of the Company in 2018 increased by 13.0 % (or 13,185.6 RUB mn). In the capital structure, non-current assets had the largest relative share: Indicators (RUB mn, unless otherwise specified) 2016 2017 2018 Change, % at year-end 2018, their share was 73.2 %. The following are Assets 91,982.7 101,517.7 114,703.3 13.0 the main factors for the increase in the Company’s assets in 2018: As of December 31, 2018, the amount of Non-current assets, incl.: 75,305.7 77,701.3 83,957.1 8.1 [[ increase in the aggregate value of fixed assets by 8.3 % overdue accounts receivable for power Permanent assets 73,529.1 75,889.1 82,217.3 8.3 (or 6,328.1 RUB mn) due to the commissioning of new transmission services before provision for fixed assets during the investment program execution doubtful debts deduction was as follows: Construction in progress 1,883.8 1,791.3 2,652.3 48.1 and a purchase of fixed assets under an agreement with [[ total – 11,712.9 RUB mn, of which Long-term financial investments 321.5 306.3 299.1 -2.3 Izhevsk Power Grids, JSC; 6,906.4 RUB mn shall be recovered in a [[ court of law; Other 1,455.1 1,505.9 1,440.7 -4.3 increase in accounts receivable by 19.3 % (or 3,550.0 RUB mn), due to an increase in the debt of the [[ 988.8 RUB mn, of which 492.9 RUB mn Current assets, incl.: 16,677.0 23,816.4 30,746.2 29.1 last resort suppliers TNS Energo Nizhny Novgorod, PJSC, shall be recovered in a court of law – for and TNS Energo Tula, JSC, while the debt on energy sales Provisions 1,555.1 1,197.5 1,725.8 44.1 the period between July 1, 2017 and April was relieved by 1,123 RUB mn; 1, 2018, when the Company was a last Long-term receivables 18.3 5,855.4 2,772.9 -52.6 [[ increase in the remaining balance in the Company’s resort supplier in the area of operations of Vladimirenergosbyt, PJSC. Short-term receivables 12,920.5 12,544.3 19,176.9 52.9 current bank account by 74.7 % (or 2,826.7 RUB mn). In the structure of the Company’s liabilities, its own sources During 2018, uncollectible debts for the Short-term financial investments 45.8 33.8 32.5 -3.9 (capital and reserves) had the largest relative share: at supplied electric power worth 0.6 RUB mn Financial resources 1,674.1 3,785.2 6,611.9 74.7 year-end 2018, their share was 58.4 %. In 2018, the amount of were written off. stockholder equity increased by 7.7 % (or 4,815.3 RUB mn) due Other 463.2 400.1 426.3 6.6 to the increase in the undistributed profit. Capital and reserves 52,460.5 62,140.3 66,955.6 7.7 The amount of the Company’s accounts payable in 2018 increased by 101.4 % (or 8,018.8 RUB mn) due to the increase Long-term liabilities 23,277.1 29,366.7 22,094.8 -24.8 in the debts for the following: Long-term credits and loans 18,186.7 24,082.0 16,683.5 -30.7 [[ settlements with suppliers and contractors worth Other 5,090.4 5,284.7 5,411.3 2.4 1,891 RUB mn (settlements with LGO, payments to INCREASE IN THE AGGREGATE VALUE OF contractors for capital construction, and trade payables FIXED ASSETS Short-term liabilities 16,245.1 10,010.7 25,652.9 156.3 for the purchase of electric power to compensate for the losses); Short-term credits and loans 6,268.3 - 7,667.2 - [[ settlements with other creditors in the amount of % Accounts payable 8,872.4 7,906.4 15,925.2 101.4 6,352 RUB mn as a result of making payments to the 8.3 counter parties through the use of agency and letter of 6,328.1 Other 1,104.5 2,104.3 2,060.6 -2.1 credit agreements; RUB MN [[ advance payments received worth 206 RUB mn.

ASSESTS, EQUITY AND LIABILITIES, RUB MN Furthermore, a decrease in the current tax and fees liabili- ties by 347 RUB mn had an impact on the shift in accounts payable. 6,290.8 114,703.3 15,642.2 114,703.3 6,255.8 4,815.3 -7,271.9 Short-term credits and loans in 2018 increased by 7,667.2 101,517.7 101,517.7 RUB mn as a result of the conversion of long-term debt into short-term debt in compliance with the remaining maturity period (reclassification). The amount of long-term credits and loans decreased by 7,398.4 RUB mn due to the reclassification of debts on a loan. There was a 1.1 % (or 268.7 RUB mn) increase in the total debt on credits and loans due to the attraction of credit resources to fund the Company’s investment program.

Current assets Assets over 2017 Assets over 2018 Noncurrent assets Liabilities over 2017 Capital and reservesLong-term liabilitiesShort-term liabilities Liabilities over 2018

68 69 THE ANNUAL REPORT 2018 | JOINING EFFORTS COMPANY STRATEGY PERFORMANCE SUSTAINABLE CORPORATE PROFILE RESULTS DEVELOPMENT GOVERNANCE

In 2018, the overall revenue of IDGC of Center and Volga [[ growth of revenue from grid connection services due to IFRS FINANCIAL ANALYSIS Region increased by 3.5 % (or 3,211 RUB mn) compared to a spike in the number of connections of large facilities 2017 and reached 94,213 RUB mn. The main factors for its to the Company’s power grids; change were the following: Key Financial Results, IFRS [[ decrease in revenue from the sales of electric power [[ increase in revenue from power transmission by and capacity by 44.8 % (or 2,695 RUB mn), explained 6.2 % (or 5,172 RUB mn) due to the growth of uniform by the fact that, starting from March 31, 2018, Indicators (RUB mn, unless otherwise specified) 2016 2017 2018 Change, % (common pot) and individual tariffs for power Vladimirenergo branch was no longer operating as a transmission services, as well as the exclusion of load last resort electricity supplier in Vladimir Region. Revenue 78,386 91,002 94,213 3.5 power losses from the cost calculations starting from Operating expenses 71,625 75,551 79,322 5.0 August 1, 2017, which were included in the prices (tariffs) Operating results 7,405 16,989 17,090 0.6 on the wholesale market of electric power; Operating margin, % 13.7 16.6 18.1 -0.6 pp EBITDA 13,212 23,439 24,055 2.6 Factor Analysis of Operating Expenses Change EBITDA margin, % 16.9 25.8 25.5 -0.3 pp Profit 3,612 11,353 11 722 3.2 Indicators (RUB mn, unless otherwise specified) 2016 2017 2018 Change, %

Profit margin, % 4.6 12.5 12.4 -0.1 pp Operating expenses, incl.: 71,625 75,551 79,322 5.0 Earnings per share, RUB 0.0320 0.1007 0.1040 3.3 Staff remuneration expenses 15,869 17,102 15,136 -11.5 Debt / EBITDA ratio 1.83 1.03 1.012 10.0 Deprecation 5,969 6,645 6,969 4.9 Equity to total assets ratio 0.6 0.6 0.5 - Impairment / (reversal of impairment) of permanent assets (14) (102) 255 -350.0 Current liquidity ratio 1.0 1.8 1.1 -38.9 Electric power for technological loss compensation 10,380 9,504 10,955 15.3 Total receivables and payables ratio 1.4 2.1 1.3 -35.0 Electric power for sales - 3,799 1,741 -54.2 Purchased electric and heat power for own requirements 404 419 413 -1.4 Factor Analysis of Revenue Change Other tangible expenses 2,448 2,707 2,860 5.7 Electric power transmission services 28,717 30,992 33,337 7.6 Indicators (RUB mn, unless otherwise specified) 2016 2017 2018 Change, % Repair and maintenance services 1,506 1,467 1,624 10.7

Revenue, incl.: 78,386 91,002 94,213 3.5 Other works and production services 174 184 346 88.0 Electricity transmission 77,100 83,680 88,853 6.2 Taxes and fees, other than profit tax 894 998 1,498 50.1 Grid connection services 861 734 926 26.2 Rent 352 334 441 32.0 Sales of electric power and capacity - 6,011 3,316 -44.8 Insurance 153 143 142 -0.7 10 Other revenue 425 577 1,118 93.7 Other services of third-party organizations 1,599 1 ,211 1,311 8.3 Expected credit loss reserve 2,759 (1,724) 745 -143.2 Reserves (49) 1,059 219 -79.3 Other expenses 882 810 1,331 64.3 FACTORS OF REVENUE CHANGE, RUB MN In 2018, the operating expenses of IDGC of Center and the inclusion of load losses cost in the cost structure, 193 Volga Region increased by 5.0 % (or 3,771 RUB mn) starting from August 1, 2017; 5,172 -2,695 541 94,213 compared to 2017 and amounted to 79,322 RUB mn. The 91,002 [[ expenses on electric power purchase for further sale main factors for this change were the following:: due to being a last resort supplier in Vladimir Region [[ reduction of expenses for staff remuneration due in Q1 2018; to the sequestration of obligations under employee [[ growth of expenses for power transmission services benefit plans upon employment termination; due to the indexation of tariffs for services provided [[ increase in depreciation due to implementation of the by local grid companies and an increase in the investment program and the introduction of new fixed amount of rendered services; assets; [[ increase in taxes and fees caused by the increase in [[ increase in expenses for compensation for power property tax expenses due to the changes in the tax losses, which occurred due to the growth of the rate as part of the gradual repeal of benefits. weighted average price of the purchased power, and

Revenue in 2017 transmission Revenue in 2018

connection servicespower and capacity Revenue from electricityRevenue from power grid

Revenue from sales of Revenueelectric from other activities

10 Communication services, security, consulting, legal and audit services, software and maintenance costs, as well as transportation and other services.

70 71 THE ANNUAL REPORT 2018 | JOINING EFFORTS COMPANY STRATEGY PERFORMANCE SUSTAINABLE CORPORATE PROFILE RESULTS DEVELOPMENT GOVERNANCE

FACTORS OF OPERATING EXPENSES CHANGE ASSETS, CAPITAL AND LIABILITIES, RUB MN

100 2,469 -840 521 107 -1 79,322 500 1,451 2,345 157 162 10,139 103,650 15,735 103,650 75,551 -1,966 324 357 -2,058 -6 153 3,608 7,559 -9,548 89,903 89,903

Rent Reserves services Insurance Deprecation services profit tax compensation Other expenses Capital party organizations Electric power for forsales own requirements Repair and maintenance Other services of third- Assets 2017 Assets 2018 Impairment / (reversal of Other financial expenses Operating expenses in 2017 Taxes and fees, other than Operating expenses in 2018 Current assets Staff remuneration expenses Electric power transmission Expected credit loss reserve Noncurrent assets Long-term liabilitiesShort-term liabilities Purchased electric and heat power impairment)Electric of permanent power for assets technological loss Other works and production services Capital and liabilities 2017 Capital and liabilities 2018

Factors of Change in Other Important Financials Increase in the EBITDA by 2.6 % (or 616 RUB mn) and A reduction of net debt by 12.8 % (or 2,588 RUB mn) Throughout 2018, total assets and liabilities of the Short-term credits and loans for 2018 increased by in profits by 3.2 % (or 369 RUB mn) was achieved in was due to an increase in the balance at the end of the Company increased by 15.3 % (or 13,747 RUB mn). Non- 7,667.2 RUB mn as a result of the conversion of long-term consequence of a cut-down in the Company’s financial reporting period. current assets have the largest relative share in the liabilities into short-term ones in compliance with the expenses and improvement in the operating results, asset profile. In 2018, asset growth amounted 5.0 % (or remaining maturity period (reclassification). The amount In 2018, current liquidity ratio decreased by 38.9 % including a considerable reduction of the amount of 3,608 RUB mn). The main factors for this growth were the of long-term credits and loans decreased mainly for the compared with 2017 due to an increase in short-term power losses. On the whole, the increase in the Company’s following: same reason. An increase in the general debt service and liabilities in the context of an increase in accounts profits is a result of major efforts to reduce the operating [[ loan obligations was caused by the attraction of credit payable and loans, along with the borrowings as a result increase in the value of fixed assets as a result of expenses and the cost of credit portfolio servicing, as well resources to fund the Company’s investment program. of reclassification of long-term liabilities into short-term the investment program execution and purchase of as to optimize production business processes. ones. fixed assets under an agreement with Izhevsk Power Grids, JSC; A slowdown in the turnover of accounts receivable was [[ caused by the growth of overdue receivables of retail increase in accounts receivable due to an increase companies. in the debt of the last resort suppliers TNS Energo Nizhny Novgorod, PJSC, and TNS Energo Tula, JSC; Factor Analysis of Changes in Assets, Capital, and Liabilities [[ the capital value increased by 16.0 % (or 7,559 RUB mn) due to the increase in the Company’s Indicators undistributed profit. 2016 2017 2018 Change, % (RUB mn, unless otherwise specified) Assets 79,798 89,903 103,650 15.3 Non-current assets 62,976 71,815 75,423 5.0 Current assets 16,822 18,088 28,227 56.1 Capital 37,453 47,121 54,680 16.0 Long-term liabilities 26,013 32,709 23,161 -29.2 incl. long-term credits and loans 18,187 24,082 16,684 -30.7 Short-term liabilities 16,331 10,073 25,808 156.2 incl. short-term credits and loans 6,268 - 7,667 -

72 73 THE ANNUAL REPORT 2018 | JOINING EFFORTS COMPANY STRATEGY PERFORMANCE SUSTAINABLE CORPORATE PROFILE RESULTS DEVELOPMENT GOVERNANCE

IMPROVING RELIABILITY AND QUALITY, ENSURING SAFETY OF CONSUMERS

SUSTAINABLE ENSURING DEVELOPMENT OCCUPATIONAL SAFETY

ENSURING ENVIRONMENTAL SAFETY CORPORATE MANAGEMENT SYSTEM FOR SUSTAINABLE DEVELOPMENT 76

STAKEHOLDER ENGAGEMENT AND STAKEHOLDER MAP 78

CONCERN FOR ENVIRONMENTAL PROTECTION 81

ENERGY PROCUREMENTS AND SUPPLIER RELATIONSHIPS 85 EFFICIENCY IMPROVEMENT HUMAN CAPITAL MANAGEMENT AND SOCIAL RESPONSIBILITY 87

74 75 THE ANNUAL REPORT 2018 | JOINING EFFORTS COMPANY STRATEGY PERFORMANCE SUSTAINABLE CORPORATE PROFILE RESULTS DEVELOPMENT GOVERNANCE

SUSTAINABLE DEVELOPMENT The following are the main members of the Integrated Management System, who, consequently, have the general authority to ensure sustainable growth of IDGC of Center THE SCOPE AND TARGET VALUES OF CORPORATE MANAGEMENT SYSTEM FOR SUSTAINABLE and Volga Region: KPI, INCLUDING THE INDICATORS OF [[ Board of Directors; SUSTAINABLE DEVELOPMENT, ARE SET DEVELOPMENT [[ executive bodies – IDGC of Centre, PJSC, the ANNUALLY BY THE DECISION OF THE management company, and the Management Board; COMPANY’S BOARD OF DIRECTORS. Sustainable development of IDGC of Center and Volga Region is ensured by the Integrated Management System, [[ which is based on four international standards: ISO 9001:2015, ISO 14001:2015, ISO 50001:2011, and OHSAS management representative in charge of the REPORTS ON THEIR ACHIEVEMENT 18001:2007. Integrated Management System; ARE REVIEWED AT THE LEVEL OF [[ Quality Management Department, which is a THE COMMITTEES OF THE BOARD STRUCTURE OF THE INTEGRATED MANAGEMENT SYSTEM subdivision in charge of organizing the operation of OF DIRECTORS: BY THE STRATEGY the Integrated Management System; AND DEVELOPMENT COMMITTEE, [[ subdivisions of the Company involved in the operation PERSONNEL AND REMUNERATION of management systems. COMMITTEE, RELIABILITY COMMITTEE. ility, qua A significant part of the KPIs used in evaluating operations liab lity, a and calculating the remuneration of the top management, g re nd vin ly, as well sec including a sole executive body of the Company (IDGC ro supp as th ur p gy e q it of Centre, PJSC, the management company), is related to Company in 2007. The main document regulating its Im er tion services f ua y n ec or l various aspects of sustainable growth. These performance execution is the Policy concerning quality, occupational f e nn con ity o co su indicators include: safety and health, and environmental protection. id m [[ gr e non-occurrence of major accidents; Moreover, there is a considerable number of internal f r regulatory documents of IDGC of Center and Volga o s [[ achievement of the reliability level of services Region which establish uniform standards for the g provided; h in Company to manage and organize business processes t c l k ISO 9001:2015 [[ rate of electric power loss; in all its branches using the tools of the Integrated a u r e d o E Management System. n [[ h e Quality effectiveness of innovation; r w s t The main results of the Integrated Management System d o u [[ g a Management improving labor efficiency; n r operation to ensure the sustainable growth of the n f i a i s t System (QMS) p n [[ Company are generally the following: d zero increase in the casualty toll. y n r g t u o l e [[ e improving reliability, quality, and security of energy e d In December 2018, as part of the development and c d f n i u supply, as well as the quality of grid connection n a v improvement of the Integrated Management System, the i c OHSAS 18001:2007 c s c , i services for consumers;

t

ISO 14001:2015 r Company underwent a compliance audit, successfully l

s a i

o

a o

e [[ f confirming compliance with the requirements of

Occupational Health Environment n ensuring occupational safety and health protection

n

n

e

o

m international standards by all of its branches with the

o

y of employees, including reducing the total number

a r

i and Safety System Management System

o

t e certification scope “Process control and rendering of c

e of accidents at work; l

a t

n

b (OHSAS)

p (EMS) services: electric power transmission and distribution, grid i

p t

v [[ improvement of energy efficiency;

m

a connection of consumers”. i m u

t

l

u

c e

i

[[

s

e c

n ensuring environmental safety. f

Independent auditors carried out a thorough examination

a

l

s

o

o

f

a of management and production activities of IDGC of e

t

g

n

t

o

n Center and Volga Region. They also evaluated the system o

y t i

i

r

t ISO 50001:2011 of processes, resource management, investment activity, e

c

u

h

e s t personnel management, planning, internal control systems,

t

n

o Energy Management customer affairs, and other areas of the Company’s

E r p System (EnMS) sustainable development. Following the international standards, the Integrated Management System is introduced and improved in IDGC of Center and Volga Region since the establishment of the Im y pro ienc ving energy e c of p ies roduction activit

76 77 THE ANNUAL REPORT 2018 | JOINING EFFORTS COMPANY STRATEGY PERFORMANCE SUSTAINABLE CORPORATE PROFILE RESULTS DEVELOPMENT GOVERNANCE

STAKEHOLDER ENGAGEMENT AND STAKEHOLDER MAP Regular Stakeholder Engagement Stakeholder interests Stakeholder engagement format THE SPECIAL ASPECTS OF IDGC OF CENTER AND VOLGA REGION OPERATION IMPLY INTERACTION WITH A WIDE STAFF (COMPANY'S EMPLOYEES, TRADE UNION, YOUNG PROFESSIONALS BOARD, VETERANS ADMINISTRATION) ARRAY OF PARTIES CONCERNED (STAKEHOLDERS). THE COMPANY’S SUSTAINABLE DEVELOPMENT IN GENERAL AND [[ Adequate standard of living [[ Collective Agreement ITS COMMERCIAL SUCCESS IN PARTICULAR CLOSELY DEPEND ON THE QUALITY OF THIS INTERACTION. MAINTAINING [[ High level of social security [[ Veterans administrations and Young professionals AN OPEN AND CONSTRUCTIVE DIALOG ALLOWS FOR CREATION OF A FAVORABLE IMAGE OF THE COMPANY IN THE [[ Opportunities for personal and professional growth boards [[ BUSINESS ENVIRONMENT. A RESPONSIBLE CARE AND PROPER CONSIDERATION OF THE STAKEHOLDERS’ INTERESTS 3 [[ Occupational safety Trade unions [[ WHEN MAKING CORPORATE DECISIONS ARE IMPERATIVE FOR EFFECTIVE BUSINESS GROWTH. [[ Promoting the status of the energy worker’s Corporate communications profession [[ Candidate pipeline [[ Personnel training Stakeholder Map [[ Cultural and sports events To create an effective system of interactions, the main groups of stakeholders were identified and a map of SHAREHOLDERS AND INVESTORS stakeholders was generated. The categorization criteria included common interests and expectations of stakeholders [[ Dynamic growth and business development [[ General Meeting of Shareholders from IDGC of Center and Volga Region, the nature of their influence on the achievement of the Company’s strategic [[ Performance efficiency [[ Annual and social reports, informational booklets and goals, as well as the tools used by the Company for interaction. [[ Capitalization growth brochures [[ [[ Transparency of activities and management Meetings with management [[ Press conferences, presentational events, forums [[ Federal and regional media [[ Corporate website [[ Surveys of shareholders and investors As a major factor in identifying a place ' BUSINESS PARTNERS (SUPPLIERS AND CONTRACTORS) of each of the selected groups on STAKEHOLDER MAP the stakeholder map, the degree of [[ Mutually beneficial and long-term cooperation [[ Procurement procedures interdependence (mutual influence) of the EXTERNAL ENVIRONMENT [[ Stable financial situation [[ Negotiations Company and stakeholders based on both [[ Profit from cooperation [[ Commercial offers an intersection and conflict of interests was [[ Timely and accurate fulfillment of contractual [[ Corporate website used. The degree of interdependence was obligations [[ Federal and regional media expertly rated on the scale of 1 to 3: CONTACT ENVIRONMENT [[ Fair competition [[ Topical workshops and conferences

3 in-house stakeholders whose points well-being directly depends on the successful development of the Company, including shareholders, investors, and employees; IN-HOUSE CONCERNED PARTIES Staff (Company's employees, trade union, Young 2 contact audience with which the Professionals Board, Veterans administration) points Company cooperates on a regular basis, including consumers and SHAREHOLDERS STAFF Shareholders and investors partners, as well as the government AND INVESTORS (Company's employees, trade Business partners (suppliers and contractors) agencies, regulatory, and union, Young Professionals Board, supervisory authorities; Veterans administration) Consumers 3 1 external environment parties State (federal, regional and local authorities, point 2 concerned whose interaction with 1 specialist regulatory authorities and organizations) the Company is indirect or limited, including public organizations, CONSUMERS BUSINESS STATE 0 Society (population in the regions of Company’s people outside of the Company’s PARTNERS (federal, regional, and local operations, nature conservation and social circle of customers, media, (suppliers and authorities, expert regulatory organizations, mass media) educational institutions, as well as contractors) authorities and organizations) scientific and expert community. Scientific organizations and industry-specific universities

Degree of cooperation between IDGC of Center and Volga Region and concerned parties, points SOCIETY SCIENTIFIC ORGANIZATIONS (population in the regions of Company’s AND INDUSTRY-SPECIFIC operation, nature conservation and public UNIVERSITIES organizations, mass media)

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Stakeholder interests Stakeholder engagement format Stakeholder Engagement in Identifying Substantive Issues CONSUMERS Additional interaction with all stakeholder groups takes [[ economic performance; place as part of generation of the Report on Sustainable [[ Reliable, uninterrupted, and high-quality power [[ Customer service centers [[ ensuring reliable and quality power supply, including Development. In particular, during the preparation of the supply [[ United information center emergency preparedness; [[ latest Report on Sustainable Development for 2016-2017, High quality service [[ Unified federal “hotline” [[ [[ published in November 2018, a survey of stakeholders was customer service. Transparency and availability of information about [[ Polls, surveys conducted to identify substantive issues for disclosure the Company’s activities Furthermore, the Report on Sustainable Development for [[ Corporate website (online reception) according to the GRI Standards methodology. Along with [[ 2016-2017 contained information on occupational safety, Fast and easy procedure of grid connection [[ the survey, the results of media monitoring were used to Federal and regional media social policy, environmental safety, and anti-corruption [[ identify the issues related to the Company that caused Press conferences, topical workshops and forums efforts as equally important activities for the Company’s a massive public outcry. As a result, the list of the most sustainable development. STATE (FEDERAL, REGIONAL AND LOCAL AUTHORITIES, SPECIALIST REGULATORY AUTHORITIES AND ORGANIZATIONS) significant issues included the following: [[ [[ When disclosing information about sustainable Reliable and stable operation of the power system Tariffs for regulated activities development in the Annual Report, we use the obtained [[ [[ Implementation of programs for integrated Coordination of the investment programs and reports results and focus on a similar list of sustainable issues. development of the infrastructure systems on their execution [[ Implementation of long-term projects aimed at the [[ Working groups for designing schemes and programs development of the power industry for the future development of the electric power [[ Satisfaction of mid- and long-term electric power industry and capacity demand [[ Agreements on engagement on the issues of CONCERN FOR ENVIRONMENTAL PROTECTION [[ Attraction of additional investment to the regions development of the electric power industry of the and creation of new jobs regions [[ [[ Tax liabilities Reporting to the authorities and disclosing Environmental Policy information in accordance with the legislation of the Russian Federation [[ Working meetings and joint events with the IDGC OF CENTER AND VOLGA REGION REGARDS THE The Company has implemented and now successfully uses representatives of the regional authorities an environmental management system in accordance [[ Payment of taxes ENVIRONMENTAL PROTECTION AS AN INTEGRAL PART OF ITS DAILY OPERATION, FULLY RECOGNIZING THE NEED TO with the requirements of the international standard ISO 14001:2015. In 2018, the environmental management SOCIETY (POPULATION IN THE REGIONS OF COMPANY’S OPERATION OUTSIDE OF THE CIRCLE OF CUSTOMERS, NATURE MAINTAIN THE ENVIRONMENTAL BALANCE AND ENSURE CONSERVATION AND PUBLIC ORGANIZATIONS, MASS MEDIA) system was recertified. In 2018, 102 specialists in the field ENVIRONMENTALLY SUSTAINABLE SOCIAL AND ECONOMIC of ecology received occupational training, retraining, and [[ [[ Reliable, uninterrupted, and high-quality power Social programs in the regions of presence DEVELOPMENT OF THE COMPANY. advanced training following profession-oriented programs. supply [[ Federal and regional media (press, TV, and radio) [[ The Company closely cooperates with the representatives Providing employment [[ Press conferences, press-releases, promotional events, [[ In 2017, IDGC of Center and Volga Region started to of regional environmental organizations (Nizhny Novgorod Transparency of the Company’s activities topical workshops, forums, contests implement the Environmental policy of the power grid [[ [[ Ecological Center “Dront”, the Russian Birds Conservation Social and economic development of the regions Management meetings with veterans, students, complex, the target of which is a consistent limitation of Union, Ivanovo Branch, etc.) as well as the state of presence schoolchildren, etc. the environmental impact of the fuel and energy complex [[ [[ environmental structures. Ecological safety, environmental protection Corporate website through reducing emissions (discharges) of pollutants [[ Energy security [[ Measures to prevent electrical injuries into the environment and cutting down waste generation [[ Implementation of social programs during production and consumption. At the same time, [[ Charity the Company approved a Plan of activities of IDGC of [[ Transparency and regularity of information update Center and Volga Region, PJSC, for the implementation about the Company’s activities of the environmental policy in 2017-2019 and a Program for environmental safety and rational use of natural SCIENTIFIC ORGANIZATIONS AND INDUSTRY-SPECIFIC UNIVERSITIES resources, 2017-2021.

[[ Promotion of science and education [[ Innovative development programs [[ Integration of advanced achievements of the [[ Joint R&D sectoral research into the distribution power grid [[ Scientific conferences and exhibitions [[ Introduction of effective innovation technologies [[ Cooperation agreements with universities [[ Demand for young and promising personnel from [[ Research to practice conferences the Company [[ [[ Joint competitions of graduation projects on the Improvement and development of joint electric industry topics educational programs [[ Students’ teams

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STRUCTURE OF EXPENDITURES FOR THE STRUCTURE OF COMPENSATIONS FOR EMISSIONS OF HARMFUL SUBSTANCES WATER WITHDRAWAL, THOU. М3 WASTE GENERATION, THOU. Т ENVIRONMENTAL PROTECTION, RUB THOU. NEGATIVE ENVIRONMENTAL IMPACT, INTO THE ATMOSPHERE, Т. RUB THOU. 7.99 7.61 34,255.6 3,731.0 109.4 109.9 6.96 207.9 3.49 15,428.3 3.69 2,978.5 3.45 25,608.2 21,570.6 2,406.3 186.8 2,033.2 105.2 4.42 18,510.5 13,620.4 3.84 3.38 2,367.2 17 7.1 13,156.5 1,631.2 10,975.3 13,474.7 2,029.7 0.08 0.08 0.13 8,812.7 1,627.3 2016 2017 2018 2016 2017 2018 2016 2017 2018 4,963.1 4,794.2 37.5 5,352.6 714.9 Class I-III Class IV Class V 2,741.0 3,451.0 3,175.1 3.5 3.9 39.2 2016 2017 2018 2019 2016 2017 2018 2019 (estimated) (estimated) To minimize the negative environmental impact of waste, To ensure preservation of biodiversity, the Company For protection of the atmospheric air For discharge into water bodies the Company takes the following measures: conducts operation in these territories in full compliance For protection and sustainable use of water resources For discharge into the atmosphere with the established requirements, which imply the [[ a hazard class is established for all waste, For protection of the environment against production For waste disposal following: waste and hazardous substances determining the directions to its handling and management; [[ deciding against clearing overhead line routings using herbicides; [[ the Company’s industrial facilities are equipped with sites for temporary accumulation of waste [[ deciding against clearing power transmission line in compliance with sanitary and environmental forest corridors during mating season; requirements; Atmospheric Air Protection Protection and Rational Use of Water [[ equipping overhead lines with bird protection [[ The Company regularly conducts in-process analytical Resources the corporate officials are appointed to handle devices. monitoring of compliance with standards for emissions hazardous waste; The household and production needs of the Company As part of the implementation of the Environmental of pollutants and an instrumental verification of the [[ are provided by the municipal and other water supply almost all waste (over 99 %) is transferred to safety program, in 2018, the Company’s branches efficiency of gas-cleaning plants with the assistance of systems and 11 underground sources (wells) that are on specialized third-party organizations, which have purchased and installed on the overhead lines 5,196 bird the accredited laboratories. For all production sites of the the books of the Company. All available wells are licensed the appropriate licenses, for its subsequent use, protection devices. This made it possible to protect birds Company with stationary emission sources (boiler houses, for the right to use subsurface mineral resources. In 2018, neutralization, and disposal in accordance with the and reduce the risk of emergency shutdowns involving mechanical workshops, welding stations, forging shops, water intake from the underground sources was about concluded agreements. birds along approximately 150 km of overhead lines. etc.), maximum permissible emissions (MPE) projects have 6.5 %. been developed and the appropriate permits have been Over 2018, IDGC of Center and Volga Region did not As part of the environmental campaign, the employees obtained. In 2018, new equipment was installed and water supply record any events of spill of substances harmful to the of the Company’s branches participated in activities systems were repaired and replaced, resulting in a environment. However, the Company constantly implements aimed at restoring the natural balance, including tree The Company pays a lot of attention to reducing a reduction of water consumption by 5.2 %. measures aimed at preventing and eliminating the planting, urban and rural improvement and greening, as negative environmental impact of vehicles transporting consequences of such events. well as the improvement of the areas around production personnel and material resources and implements the The environmental services regularly carried out departments and the power distribution zone. following measures: instrumental verification of the pollutant load in For example, IDGC of Center and Volga Region made wastewater discharged into municipal sewage systems provisions for rapid acquisition of data on petroleum [[ when planning the activities, the logistics of trips is and monitored the quality of groundwater produced. products spills and introduced an environmentally safe Energy Conservation and Energy worked out and optimal routes are used; neutralizing agent for petroleum products to prevent soil The branches of IDGC of Center and Volga Region did not Efficiency Improvement [[ road vehicles are regularly checked for compliance contamination. Moreover, in 2018, the Company continued to discharge wastewater into water bodies. with technical standards for atmospheric emissions; replace oil-containing equipment for the vacuum and gas- As part of the Program of Energy Conservation and Energy insulated one, which reduces the risks of soil contamination Efficiency Improvement for the period through to 202211 [[ transport and other mobile vehicles are banned from and contributes to fire safety. By the end of 2018, the IDGC of Center and Volga Region carried out the following use if the pollutant load in their emissions exceeds Protection of Ground from Industrial number of vacuum and gas-insulated equipment reached activities in 2018: replacing bulbs in lighting systems with the established technical standards. Waste and Hazardous Substances 29.9 % of the total equipment. LEDs, replacing outdated and worn-out electric boilers with modern automatically controlled ones, sealing and The most waste generated during production and Biodiversity Protection insulating buildings, and installation of power-saving business operations of IDGC of Center and Volga Region transformers and devices for automatic switching on/off in 2018 was class of hazard IV (49.5 %) and V (48.6 %). A The areas of the Company’s operation include national systems for heating of substation equipment. relative share of I–III classes of hazard waste is relatively parks (Meshchera, Ugra, Mariy Chodra, Nechkinsky), small – 1.9 %. federal partial reserves and wildlife sanctuaries (Nurgush, Klyazminsky, Muromsky, Tarusa, etc.), as well as specially protected natural areas of local significance.

11 Approved by the decision of the Board of Directors of IDGC of Center and Volga Region dated August 10, 2018 (Minutes No. 328).

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As a Result, by the End of 2018, the PROCUREMENTS AND SUPPLIER RELATIONSHIPS Company Achieved the Following Results: IN 2018, IT WAS THE THIRD TIME WHEN THE EMPLOYEES OF IDGC OF CENTRE [[ reduction of electric power consumption over the AND IDGC OF CENTER AND VOLGA REGION PROCUREMENT ACTIVITIES OF IDGC OF CENTER AND VOLGA REGION IS REGULATED BY THE UNIFORM PROCUREMENT year: 2.61 mn kWh in physical terms and 10.1 RUB mn STANDARD OF PJSC ROSSETI 12. in monetary value, which exceeds the target by TOOK PART IN THE ALL-RUSSIAN ENERGY 1.85 thou. kWh and 7.5 RUB mn. (the excess is explained CONSERVATION FESTIVAL #ВМЕСТЕЯРЧЕ by the inclusion of unscheduled replacement of (#BRIGTHERTOGETHER) SUPPLY CHAIN lighting system bulbs with LEDs); [[ reduction of heat power consumption over the year: During the festival, the energy sector Activities Procurement methods 7 Gcal in physical terms and 13 RUB thou. in monetary representatives organize and hold events PROCUREMENT value, which corresponds to the target; aimed at modeling an energy-efficient lifestyle. More specifically, employees of the VOLUME [[ reduction of natural gas consumption: 340 thou. m3 energy industry took part in city festivals in physical terms and 2 RUB thou. in monetary 62.8 % Open tenders and auctions in Yoshkar-Ola, Bryansk, Voronezh, Ivanovo, value, which is lower than the target (the decrease Kaluga, Kirov, Kursk, Lipetsk, Ryazan, Tambov, is caused by the redistribution of costs of actions and Tver Regions, having organized quizzes, Reconstruction, retrofitting, 24.6 % aimed to optimize natural gas consumption and their and upgrading 42.2 races, quests, and drawing contests for reallocation to the upgrade of lighting systems). 24.0 % Framework agreements children, and informed the consumers 3,431 3,826 about modern power-saving technologies, 2,838 equipment for efficient power use, and energy Energy repair production, 10.4 % 25.2 maintenance conservation. Open days and trips to power 18.3 1.6 % facilities were held in a number of regions. Open invitations to tender COMBINED EXPENSES In total, over 450 events were held during the FOR ENERGY EFFICIENCY year, with over 35,000 participants from 123 New construction 5.3 % settlements. Procurements from a sole 7.3 % supplier based on failed public processes 3.21 IT procurements 2.3 % 2016 2017 2018 RUB MN 3.9 % Sole supplier Number of purchases, units Other procurements 57.4 % Total amount of purchases w/o VAT, RUB bn 0.4 % Public price inquiries

When making purchases, IDGC of Center and Volga Region is guided by the following principles: [[ timely and complete satisfaction of the Company’s Following the stated principles, IDGC of Center and Volga needs in products with the adequate price, quality, Region uses the following procurement optimization reliability, and energy efficiency; tools: [[ efficient use of funds; [[ use of electronic trading platforms; [[ regularly increasing the possibility of legal entities [[ procurement planning; and individuals to participate in the Company’s [[ purchases from small and medium-sized enterprises. procurement procedures and attracting new participants; [[ contributing to the development of fair competition; [[ ensuring maximum transparency of procurement; [[ prevention of corruption and other improper actions during procurement.

12 The Uniform Procurement Standard of PJSC Rosseti (Procurement Regulations) was approved by the Board of Directors of PJSC Rosseti (Minutes No. 2691 dated May 31, 2017, developed in compliance with the Federal Law No. 223-FZ dated July 18, 2011 “On Purchasing Goods, Works and Services by Certain Types of Legal Entities”.

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Use of Electronic Trading Platforms HUMAN CAPITAL MANAGEMENT AND SOCIAL RESPONSIBILITY To publish information about orders, IDGC of Center and Volga Region uses a specialized official website of the Russian Federation (www.zakupki.gov.ru), electronic trading platforms of Personnel and Social Policy IN 2018, IDGC OF CENTER AND VOLGA PJSC Rosseti (www.etp.rosseti.ru), B2B-Center (www.b2b-center.ru), KEY ELEMENTS OF THE COMPANY’S PERSONNEL REGION TOOK THE LEAD IN THE as well as the official websites of the Company www.mrsk-cp.ru( ) and its branches. AND SOCIAL POLICY COMPOSITE LOYALTY RATING OF THE LARGEST CUSTOMERS OF SMALL AND In 2018, 100 % of the total number of procurement procedures was carried out using electronic trading platforms and 100 % of MEDIUM-SIZED ENTERPRISES the total procurement volume in terms of value. With that said, the share of open procurement procedures in the purchasing The rating was developed by the structure was 93.6 % of the total number of procurement Agency for Strategic Initiatives and procedures and 96.1 % of the total procurement volume in terms compiled by the Russian Public of value. Opinion Research Center (VCIOM) based on a survey of small and medium-sized businesses which are Purchases from Small and Medium-Sized the largest suppliers of goods and services to infrastructural monopolies Enterprises CORPORATE CULTURE and companies partially owned by the To fulfill the executive order of the Russian Federation government. During the survey, small Government No. 867-p dated May 29, 2013 On approval of the and medium-sized entrepreneurs action plan (“Road Map”) “Expanding access of small and evaluated cooperation with the TOP medium-sized enterprises to the procurements of infrastructural SAFETY AND WORK CULTURE 50 largest customers in terms of six monopolies and companies partially owned by the government”, target indicators: overall satisfaction the Company has developed and implements a Partnership with interaction with large companies, program between IDGC of Center and Volga Region, PJSC, and small carrying out procurement procedures, and medium-sized enterprises. implementation of a partnership THE PERSONNEL AND SOCIAL POLICY OF program, information support for In 2018, the Company made 3,583 purchases from the small and procurement activities, contractual medium-sized enterprises worth 18,997,382.76 RUB thou. (VAT IDGC OF CENTER AND VOLGA REGION IS relations, and contribution to included), which equals 51.6 % of the total procurement volume in AIMED AT FORMING A COHESIVE TEAM SOCIAL BENEFITS AND technological development. IDGC of terms of value. OF EMPLOYEES WHOSE PROFESSIONAL GUARANTEES Center and Volga Region was ranked COMPETENCE, RESPONSIBILITY, MUTUAL the best in four of these aspects: RESPECT, AND HONESTY ENSURE THE carrying out procurement procedures, contractual relations, implementation COMMERCIAL SUCCESS AND SUSTAINABLE of a partnership program, and DEVELOPMENT OF THE COMPANY. STAFF MOTIVATION contribution to technological THEREFORE, IDGC OF CENTER AND VOLGA development. REGION SEEKS TO CREATE FAVORABLE WORKING CONDITIONS, ALONG WITH AN ATMOSPHERE OF TRUST AND COOPERATION. Procurement Improvement STAFF TRAINING AND During 2018, the following measures were taken to improve the organization and carrying out procurement: THE PERSONNEL AND SOCIAL POLICY DEVELOPMENT OF THE COMPANY IS DEVELOPED ACCORDING TO THE REQUIREMENTS OF THE RUSSIAN FEDERATION LEGISLATION, [[ quarterly assessment of [[ training the employees of [[ informing small and medium- THE SECTORAL TARIFF AGREEMENT IN STAFFING procurement effectiveness; procurement departments of sized enterprises about the THE POWER INDUSTRY, THE COLLECTIVE the branches along with the Company’s procurement AGREEMENT BETWEEN THE EMPLOYEES executive office to organize activities. AND THE EMPLOYER, IDGC OF CENTER AND and implement procurement VOLGA REGION, PJSC, AS WELL AS THE activities; The measures taken allowed the INTERNATIONAL STANDARDS ISO 9001:2015, ORGANIZATION DESIGN Company to obtain an economic OHSAS 18001:2007, AND ISO 50001:2011. advantage based on the results of procurement procedures worth 482.2 RUB mn, VAT included, or ECONOMIC ADVANTAGE RUB BASED ON THE 1.0 % of the target declared value MN of competitive purchases. PROCUREMENT PROCEDURES 482.2

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Staff Number and Structure Candidate Pool Program Cooperation with Universities and Secondary Specialized Educational Institutions and Recruiting Young THE AVERAGE NUMBER OF According to the candidate pool program, the current In 2018, the average number of staff of IDGC of Center Professionals STAFF OF IDGC OF CENTER employees have priority during recruiting staff: at least and Volga Region was 22,315, which is 0.69 % lower AND VOLGA REGION than in 2017. The change in the average staff number 60 % of vacant senior management positions are filled by IDGC of Center and Volga Region attracts young is a result of dismissal of employees in the energy the internal candidates. professionals with specialized professional education through cooperation with universities and secondary sales department, since the Company was no longer The effectiveness of a candidate pool directly depends specialized educational institutions located in the operating as a last resort supplier in Vladimir Region, on the conditions created for the professional growth regions of its branches’ operation. In 2018, 1,189 students starting from April 1, 2018. 22,315 of succession pool members and their preparedness of electrical engineering departments undertook an to work in new conditions. The Company has approved Over the past three years, the staffing level of PEOPLE internship in the Company. During the summer work target positions for each succession pool member, the Company has been stable, maintained at the season, 221 students were involved with the Company’s developed individual professional growth plans, and minimum level of 97 %. In 2018, the average age of student teams, and 283 students received training as identified mentors from the most competent employees the Company’s employees remained at the level of part of target preparation (those who had good academic THE NUMBER AND ACTIVE TURNOVER OF STAFF whose main task is to assist succession pool members in 2017 and was 43 years. About 88 % of the Company’s performance received a study allowance from the employees have vocational education and training, mastering the target positions. 22,470 Company). and over the past three years this figure has increased 22,315 The executive candidate pool is created at two levels: in Open days and trips for schoolchildren and students by 2 percentage points. 22,278 0.9 the Company (at the positions of deputy directors general, of universities and secondary specialized educational 0.6 deputy directors of branches in certain areas of activity, In 2018, the level of active staff turnover was 0.9 %. institutions are regularly held in the branches of the and heads of subdivisions of the executive office) and The Company is currently working on its reduction. In Company along with students’ meetings with the 0.3 in branches (heads of divisions of management offices, more specific terms, the system of psychophysiological management and other experts. In the course of such production departments, PDZ and managers, and chief examinations is being improved to be used in the meetings, the young people are given the opportunity engineers of production departments and PDZ). In 2018, process of recruitment to identify which candidates to visit the electricity generation facilities and meet the the executive candidate pool included 2,888 of the most are the most suitable in terms of qualifications and experienced specialists of the power industry to help high-potential employees of the Company. In 2018, of the professional competence and are the most motivated them make a decision about their future profession. to work for the Company. Adaptation programs for 2016 2017 2018 602 appointments to senior positions of the branches and young professionals are being implemented the Company’s executive office, 465 (77 %) positions were filled with internal candidates. Average staff number. ppl Active turnover of staff. %

11.6 9.7 0.9

10.3 Selection, Recruitment, and 10.3 Professional Development of Staff 6.5 THE ENERGY INDUSTRY SPECIALISTS ARE VERY SCRUPULOUS ABOUT THE PREPARATION OF THE MEMBERS The main tools of career development in IDGC of Center and Volga Region include candidate pool OF STUDENT TEAMS FOR THE WORK SEASON programs, job rotation, and personnel mobility As a prerequisite for the admission to power The employees of IDGC of Center and Volga Region programs within both the Company and the power ASSIGNMENT OF STAFF TO BRANCHES. % grid complex as a whole. This not only allows for 23.4 facilities, each member of a student team has to developed a program of edutainment and social timely filling of vacant positions with qualified pass a medical examination and receive safety events for students. The students visited the power personnel, but also gives employees some instructions. The students are provided with special facilities and museums of the branches, took part additional opportunities to gain new experience, clothing and protective equipment necessary for safe in sports competitions, met with the veterans of thus supporting their interest and motivation. 11.5 work at power grid facilities. the energy sector and representatives of the youth During the work period of the summer of 2018, the councils, and attended competitions of professional Personnel Mobility and Job Rotation Program student teams took part in the construction of grid excellence. Besides that, the students took part in the Personnel mobility and job rotation program is connection facilities, assembly and repair of poles All-Russian competition for the best student team aimed at supplying qualified personnel to those of power transmission lines, electrical installation, of the power grid complex, where their creativeness areas with staffing issues. As part of this program, cable installation and insulation, and equipment was evaluated, along with performance indicators. the Company participates in building of a single 11.6 installation. Moreover, the students were engaged in Young people participated in the competitions of corporate database of vacancies and candidates’ 4.2 disposing of slash when clearing the forest corridors, photography, video clips, publications, and wall resumes within the power grid complex. taking readings of power metering devices, improving newspapers. power facilities, and executing documentation on Vladimirenergo Nizhnovenergo grid connections. Ivenergo Ryazanenergo

Kalugaenergo Tulenergo

Kirovenergo Udmurtenergo

Marienergo Executive office

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In general, training of the Company’s employees (55 %, 6,877 people) is carried out based on corporate training centers. The main advantages of their use are IN 2018, TO IMPROVE THE as follows: PROFESSIONAL SKILLS OF IN MARCH-APRIL 2018, IDGC OF CENTER AND VOLGA REGION HELP ORGANIZE AND HOLD THE FIRST ALL- [[ creation of harmonised standards and methods of education; MAINTENANCE PERSONNEL, RUSSIAN ACADEMIC COMPETITION OF ROSSETI [[ development of the educational principles that comply with the POPULARIZE BEST PRACTICES In the regions of the Company’s operation, 411 high school students from 78 settlements of Vladimir, Company’s strategic plans; AND PROMOTE THE PRESTIGE Ivanovo, Kaluga, Kirov, Nizhny Novgorod, Ryazan and Tula Regions, and the Republics of Mari El and [[ prompt response and redesign of the educational process; OF VOCATIONAL PROFESSIONS, Udmurtia took part in the academic competition. The academic competition included an assessment of [[ 6 EXPERTS AND 6 PARTICIPANTS theoretical knowledge in physics, mathematics, and computer science, as well as the ability to use this use of the Company’s training facilities; FROM IDGC OF CENTER AND knowledge when solving the applied problems of electric power engineering. This academic competition [[ cost reduction; helps power grid companies to find talented students with technical creativity and innovative thinking VOLGA REGION TOOK PART who are planning to be employed in the power industry and involve them in the development of [[ personnel qualifications comply with the Company’s needs to the greatest IN THE WORLDSKILLS OPEN advanced infrastructure and technological projects relevant to the power grid complex of the Russian extent possible; CORPORATE CHAMPIONSHIP OF Federation. [[ evaluation of the training effectiveness. PROFESSIONAL SKILLS “YOUNG PROFESSIONALS”. THE AREAS The Company also places its employees for training in industry-specific universities and secondary specialized educational institutions, such as: OF COMPETENCE WERE THE FOLLOWING: Staff Training and Development [[ national Research University Moscow Power Engineering Institute and its branches; Each employee of the Company receives ongoing training. The introduction [[ state Educational Institution of Higher Professional Education Ivanovo of modern technologies, as part of digitization of electrical networks as well, State Power University named after V.I. Lenin; increase the requirements as it relates to the skill level of operational and TOOK PART IN THE OFF-THE-JOB administrative staff of the Company. The Company organizes proactive training TRAINING EVENTS [[ skopin Electrotechnical College; of staff to work at the newly commissioned facilities and master new technology [[ “OPERATION OF CABLE and aims to integrate scientific work into the educational and production pro- standardization, Metrology and Certification Academy and its branches; POWER TRANSMISSION cess. The main areas of training include the following 13: [[ petersburg Power Engineering Institute of Professional Development and LINES” [[ professional training (retraining) of blue-collar employees to obtain a its branches. field-oriented profession, or a secondary (sideline) vocational profession; 12,534 [[ advanced training of staff of basic vocational professions; PEOPLE Professional Skills Competitions [[ advanced training of managers and Company’s experts; The Company regularly holds professional skills competitions for the operational staff that promote the advanced working methods and improve [[ training and certification of personnel for the right to perform a certain type the quality and safety of work. of work. In 2018, about 1.4 thou. employees of the Company took part in 48 such events, A share of employees, who in 2018 took part in the off-the-job training events, including the skills competitions in the following: to the average headcount was 56 % (12,534 people), which is 1 percentage point “MAINTENANCE AND REPAIR [[ (164 people) lower than in 2017. The largest share among them, 94 % (11,819 repair and maintenance of distribution networks; OF RELAY PROTECTION AND people), is held by the operational staff. [[ vehicle drivers; AUTOMATION EQUIPMENT” [[ electricity metering crews; [[ fire safety;

[[ occupational safety.

STRUCTURE OF TRAINED LABOR FORCE AND TRAINING COSTS Employee Remuneration and Engagement 0.9 0.8 A uniform and transparent remuneration system for all occupational groups 0.8 57 56 55 allows IDGC of Center and Volga Region to attract and retain experienced staff “SMART ELECTRIC POWER 51 members and contributes to their interest in the result of work. METERING SYSTEM” Remuneration of the Company’s employees is composed of the tariff 33 32 component (tariff rates / basic salaries) and a variable component (additional payments as a percentage of the tariff rate / basic salary). For all employees

Percent of staff, who have undergone day of the production departments and divisions of the executive office ensuring release training, % operation of the production departments of the branches, there is a single Incl. in corporate training centers, % wage rate scale. For the administrative staff of the branches and the executive Training costs - wages fund ratio office employees, the basic salary ranges are applied. 2016 2017 2018

13 Regulated by the Provisions of the Personnel and Social Policy of IDGC of Center and Volga Region, PJSC, the Procedures for Personnel Management, the Provisions on Training and Development of Personnel of IDGC of Center and Volga Region, PJSC, and the requirements of the Personnel Management Rules for the Electric Power Industry Organizations of the Russian Federation.

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The current wage system provides for the following: The annual increase in the average wages is provided [[ payment of benefits to employees who retire due to [[ providing children of employees with vouchers to by the indexation of wages once in six months by the disability; summer camps or leisure-and-health institutions, as [[ imposition of tariff rates / basic salaries based value of the actual consumer price index in the Russian well as New Year’s gifts; on the qualifications, professional aptitude, and [[ payment of benefits to children of employees who Federation. experience of the employee; died in the workplace; [[ non-state pension schemes for employees. IDGC of Center and Volga Region has a system of key [[ longevity pay; [[ providing conditions for recreation and health performance indicators (KPI) for personnel assessment, improvement of employees; [[ additional payments and bonuses depending on the tied up with the Company’s strategic goals. Individual KPIs functions performed, volume of work performed, and are determined for every subdivision and every official. working conditions; Decisions on awarding the employees with bonuses are made with regard to compliance with these indicators. [[ current bonuses (according to the results of work Non-State Pension Schemes (NPS) KPIs of operational personnel and specialists are tied to over a month, quarter, year) for the results of the fulfillment of current tasks, while bonus awarding of As part of the NPS program, the Company regularly transfers pension production and business activities; the top and middle managers is tied to the achievement contributions to contracted non-state pension fund, and those employees who [[ one-time bonuses for performance of particularly of the Company’s medium- and long-term objectives. reach pension qualification age can count on payments from the non-state AVERAGE MONTHLY NON-STATE PENSION important tasks; pension fund, along with government benefits. NPS Program includes: INCREASED The most distinguished labor collectives and individual [[ [[ additional bonuses for successful passing of the employees are presented with national, industry, and “Corporate Plan”, under which the Company fully finances additional non- autumn-winter period by branches, for the quality corporate awards. In 2018, 96 employees of IDGC of Center state pension coverage of its employees at its own expense; BY and Volga Region received awards from the Ministry of organization of this process, agreeing on and making [[ “Parity Plan”, which implies that the employee and the Company jointly, Energy of the Russian Federation (departmental awards), decisions on issuing technical specifications for grid in certain proportions and according to certain rules, contribute to the 158 people received corporate awards from PJSC Rosseti, 13.4 % connection; employee’s pension fund; [[ more than 2,800 employees received industry awards and bonuses as per the results of the contest “Accident- one employee was awarded a national award. [[ “Co-Financing Plan”, which implies that the employee, the Company, and Free and Safe Department of Power Grids of IDGC of the government co-finance the employee’s pension in accordance with the Center and Volga Region” contest. Federal Law of the Russian Federation No. 56-FZ dated April 30, 2008. The average monthly non-state pension granted to the retired employees in 2018 exceeded the level of 2017 by 13.4 %. AS PART OF THE REGULATIONS Housing Policy ON STRATEGIC HOUSING, THE RECEIVED AWARDS FROM THE COMPENSATIONS WERE RECEIVED BY MINISTRY OF ENERGY OF THE RUSSIAN RECEIVED CORPORATE AWARDS IDGC of Center and Volga Region helps the employees to improve their living FEDERATION FROM PJSC ROSSETI RECEIVED INDUSTRY AWARDS conditions. The Company introduced the Regulation on the housing policy to attract and retain highly skilled specialists and young talents. In 2018, 85 employees of the Company received reimbursements for their rent, and 29 employees received compensation for a part of the costs of mortgage loan >100 interest. 96 158 > 2,800 EMPLOYEES EMPLOYEES PEOPLE EMPLOYEES

Social Assistance of Employees IN THE SPRING OF 2018, SHORTLY BEFORE VICTORY DAY, THE EMPLOYEES OF IDGC OF CENTER Collective Agreement AND VOLGA REGION IN ALL REGIONS OF THE COMPANY’S OPERATION WERE WORKING ON THE The main document specifying the benefits package of the employees of IDGC of Center and Volga Region is the IMPLEMENTATION OF THE MEMORIAL PROJECT "THE LIGHT OF MEMORY" Collective Agreement put together in accordance with the Sectoral Tariff Agreement in the power industry of the Russian Federation. It establishes a consolidated list of additional benefits, guarantees, and compensations provided to the Company’s employees above the norms stipulated in the legislation of the Russian Federation and the Sectoral To preserve the memory of participants and events of war, each branch of the Company collects data Tariff Agreement in the power industry of the Russian Federation. These include: for commemorative museum exhibitions, sections of photographs, and memories of participants of combat are created on the websites, meetings of the veterans dedicated to the Great Victory are [[ voluntary health insurance (VHI); [[ financial assistance to employees on such occasions held. Every year, the Company’s employees actively participate in the improvement of memorials and as marriage, birth or adoption of a child, as well as [[ accident and health insurance; monuments to soldiers who died during the World War II participate in solemn processions with the the child’s birthday (from 1 to 3 years inclusive); veterans and lay wreaths on monuments to fallen soldiers. [[ provision of additional paid leave for family reasons; [[ financial assistance in organizing funerals of [[ support for socially vulnerable families; employees and their close relatives; [[ financial assistance to employees during the annual [[ financial assistance to employees for anniversary paid leave; celebrations;

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Organization of Recreation and Health Improvement Veterans Support Industrial and Occupational Safety Structure of costs for occupational safety for Children and labor protection, RUB mn In 2018, the Coordination Veterans’ Council of the When ensuring industrial safety in its divisions, the Company is governed The cost of vouchers for children of the employees to Company continued its work. The Council supervises the by local regulatory documents that cover the rules for conducting work, children’s camps and leisure-and-health institutions are activities of nine Veterans’ Councils of the Company’s procedure of using personal protective devices, selection of counterparts, and 415.3 420.8 403.1 partially covered out of the funds of the Company and branches, which unite 5,450 working and 4,706 retired procedure of execution of contractors’ work at the Company’s energy facilities. local government authorities. In 2018, over 500 children veterans of the power industry, including 232 veterans The Company also has effective Regulations on the system of responding 13.8 6.2 14.6 23.0 of the World War II, home front workers, prisoners 19.8 18.0 used such vouchers. to violations of occupational safety requirements, which state that only 60.1 55.8 of concentration camps, and residents of besieged employees complying with the rules of occupational safety could receive the 59.2 Health, Fitness and Sports Leningrad. Each of the veterans has worked in the power wage bonus in full. industry for over 20 years. The requirements for compliance with safety rules are imposed not only on IDGC of Center and Volga Region strives to promote 309.5 323.4 335.8 In 2018, the non-state retirement benefits were provided the personnel of the Company, but also on the employees of contracting health, fitness and popular sport. The Company organizes to 4,713 veterans, and financial assistance to 256 organizations working at the Company’s energy facilities. These requirements Health Days, sport competitions, and tourist gatherings participants of the World War II. The Company continued are mandatory and are stipulated in the contracts signed with contracting of branches in the regions of presence. Season tickets to its work on an electronic almanac consisting of archival organizations. 2016 2017 2018 swimming pools and sports centers are purchased for the documents, photographs, and recorded memories of employees. the veterans of World War II and power industry. It also Monitoring and registering of the violations of occupational safety and workplace hygiene is carried out as part of the comprehensive, targeted, For labor conditions improvement Branch teams represent the Company in regional inter- keeps updating the online Museum of Power Industry and thematic inspections, as well as during such activities as, for example, industry competitions with honor. In 2018, the combined “Living History” at the Company’s corporate website For accidents prevention Occupational Safety Day, Fire Safety Day, Operational Worker Day, a day with teams of IDGC of Center and Volga Region took part in at — http://www.mrsk-cp.ru/press/special_projects/ For sanitary measures zhivaya-istoriya/. the crew, etc. the Rossetti Cup tournaments in skiing, volleyball, indoor For PPE provision soccer, hockey, table tennis, running, and swimming. IDGC of Center and Volga Region created occupational safety committees with the participation of management and trade union representatives, at meetings of which the results of work on occupational safety of various departments THE OVERALL EXPENSES OF are reviewed, proposals for improving working conditions and preventing THE COMPANY FOR ENSURING injuries are analyzed, and additional measures on occupational safety are OCCUPATIONAL SAFETY AND developed. PROTECTION OF THE EMPLOYEES In 2018, IDGC of Center and Volga Region recorded one case of occupational HEALTH injury, which is the same result as in 2017. There were no cases of occupational health problems among personnel. In 2018, the overall expenses of the Company for ensuring occupational safety and protection of the employees’ health reached 420.8 RUB mn, which is 1.3 % 420.8 RUB MN higher than in 2017. In 2019, more than 430 RUB mn is planned to be allocated for these purposes. In particular, in 2018, fundamentally new in terms of design, means for fall SPENT ON PERSONAL PROTECTIVE protection were purchased along with special kits for protection against EQUIPMENT WITH RADICALLY NEW induced voltage when working on overhead power lines and induced voltage DESIGN meters. 13.5 RUB mn was spent for these purposes, which accounts for 3 % of the total costs of occupational safety measures and 4 % of the total costs of providing employees with personal protective equipment 13.5 RUB MN

Team of Kalugaenergo Branch at the VI Hockey Tournament of IDGC of Centre, PJSC Prevention of Injuries among the Population

IDGC of Center and Volga Region takes part in screens, displays in commercial centers, educational Industrial Safety, Occupational Safety, and Prevention of Injury among the international, state, sectoral, regional, and municipal institutions, and public transport). About 8,300 articles programs and activities aimed at ensuring industrial were published and posted on social media. The Population safety and preventing injuries among the population: Company organized multi-regional Internet contests on World Day for Safety and Health at Work, Children’s Day electric safety rules, in which more than 1,000 children One of the important performance indicators and a factor [[ Implementation of sanitary measures to prevent (in terms of ensuring safety of electricity-generating and teenagers took part. As part of extensive work of the of sustainable development of IDGC of Center and Volga occupational diseases; equipment for children), all-Russian meetings and branches of IDGC of Center and Volga Region on electric Region is ensuring industrial safety for the personnel [[ Implementation of measures for a general exhibitions on occupational and industrial safety, injury prevention among fishermen, cottagers, drivers of of the Company and the population of the regions of improvement of working conditions. regional and district competitions on occupational safety, heavy-duty vehicles, and children, more than 103 thou. presence. To this end, the Company is working on the educational programs on the issues of electric safety, printed and souvenir products were distributed. following: themed drawing competitions, and a number of other [[ equipping staff and workplaces with new, modern events. protection devices and gear; In 2018, the Company broadcast video and audio promos [[ accident prevention activities; on electric safety for children and adults through all available channels (mass media, EMERCOM system

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EVERY YEAR IDGC OF CENTER AND VOLGA REGION EXECUTES A LARGE-SCALE ELECTRIC SAFETY PROGRAM TO Development of Regions of Company’s Operation and Charity Projects REDUCE THE RISK OF ELECTRICAL INJURIES AMONG THE POPULATION Every year IDGC of Center and Volga Region implements Group of Companies. In 2018, the largest of these events various infrastructural, social, and charity projects and was the Company’s participation in the first All-Russian assists in spiritual and social economic development of Training Session for the Representatives of Rosseti Group In the autumn of 2018, the employees of the branches the areas where it operates. of Companies, which took place in Dagestan and Tver Region. This training session is unprecedented in scale of IDGC of Centre and IDGC of Center and Volga Region All-Russian Training Sessions for the Representatives of and significance for the Russian power grid industry organized a social campaign “Keep the Current Shut” in Rosseti Group of Companies 823 settlements in the regions of operation. This campaign was meant to draw the attention of the public to electrical In addition to its own socially significant and injuries caused by reckless behavior of citizens finding infrastructural projects, IDGC of Center and Volga Region themselves near power facilities with damaged locks. More is actively involved in similar initiatives of the Rosseti than a thousand activists took part in the campaign. They placed special informational stickers on the doors of 2,700 INVOLVEMENT OF IDGC OF CENTRE AND IDGC OF CENTER AND VOLGA REGION IN THE TRAINING SESSION OF THE ROSSETI GROUP OF power facilities, urging citizens to react and call the power COMPANIES: company if the door of the facility was open or a lock was damaged. One call could save several lives. In a number In Dagestan In Tver Region of regions, the campaign still continues. All production PEOPLE AND 786 people 10,785 people departments of energy companies will be involved to cover EQUIPMENT INVOLVED 279 units of equipment 1,169 units of equipment the maximum number of power facilities. [[ clearing of 12.7 thou. ha and expansion of 1.1 ha lines of routes; [[ replacement of 2,599 supports [[ replacement of 549 km of bare non-insulated wires with self- of overhead power lines; supporting insulated wires; [[ mounting of 163 km of self- [[ replacement of 12 thou. supports of overhead lines; supporting insulated wire; COMPLETED WORK [[ repair of 327 transformer substations; [[ repair of 3 transformer substations; [[ elimination of defects due to accidents on 22,356 km of power [[ lines; AT THE BEGINNING OF THE SUMMER HOLIDAYS OF 2018, THE EMPLOYEES OF IDGC OF CENTER AND VOLGA installation of 6,685 metering instruments [[ construction of 549 lines of 10 kV with self-supporting insulated REGION HELD ABOUT 200 EVENTS TO PREVENT ELECTRIC INJURY AMONG CHILDREN, IN WHICH MORE THAN wire 9,000 CHILDREN AND TEENAGERS FROM THE REGIONS OF THE COMPANY’S OPERATION PARTICIPATED On the one hand, the All-Russian training session of forces and assist regional grid operators in improving the specialists of Rosseti Group of Companies allowed the energy supply reliability and reducing energy losses. Energy specialists held themed festivals, creative Apart from schoolchildren, preschoolers and their for perfecting cooperative work of the companies of the It served as an extra boost for the social and economic quizzes and adventure games with the aim to parents took part in the event. The employees of Group when eliminating accidents, and for all participants development of the regions where it was held and remind schoolchildren of the need to observe the IDGC of Center and Volga Region gave a number of to acquire new professional skills and unique experience. significantly improved the quality of life of the local rules of behavioral safety near power facilities and entertaining lessons on electric safety in children On the other hand, it gave the opportunity to combine population. the necessity for caution when handling electrical day-care institutions in Nizhny Novgorod, and the appliances. For example, in the Udmurt Republic, first family fishing festival was held in Tula Region. Charity Projects Employees of Kalugaenergo branch took part in the the energy specialists together with the library The energy industry specialists gave an awareness- city charity event “Collect a Box of Courage” to support No. 24 of Izhevsk launched the Electric Safety Library raising talk on the importance of observance of IDGC of Center and Volga Region helps orphanages and children with cancer. The money raised from the project. Ivanovo energy specialists organized one electric safety rules during fishing to more then 300 boarding schools, charities, health care and education employees’ salaries was used to buy toys for young of the stages of the quest as part of the annual city teams who attended the event. institutions, participates in the restoration and repair patients at the hematology department of the Kaluga campaign called Safe Holidays based in Ivanovo City of cultural monuments in the regions of operation, and Regional Children’s Hospital. The social and educational public page Children and Youth Craft Hall. provides targeted assistance to children with serious "Elektropatrul" is a community on the social network illnesses, the disabled, elderly, and veterans. The employees of Ryazanenergo branch took part VKontakte created by the employees of IDGC of in the TV and radio marathon “Deepest Gratitude to Center and Volga Region for children, parents, and Every year, on the Power Specialists’ Day, the Company the Veterans”, transferring the funds raised from the teachers, which is dedicated to the electric safety. In runs a traditional campaign “The Brightest Christmas employees’ wages to Ryazan regional branch of the 2018, the community had over 94,500 hits. There are Tree”. As part of this campaign the Company’s Russian Non-Governmental Charitable Foundation for about 1,800 members of the community, including representatives organize New Year celebrations and buy Veterans (Pensioners) of War, Labor, and Armed Forces. children and adults. The Company also posts videos presents for orphans in the regions of the Company’s IDGC of Center and Volga Region funds the oldest on electric safety on its official YouTube channel. presence using the funds raised by the Company’s Nizhny Novgorod sports club HC Start, which honorably Moreover, in June 2018, the Company’s ninth inter- employees. Along with sweet gifts, children receive toys, represents the region in the Russian Superleague year on regional Internet contest on the electric safety rules, books, sports equipment, household appliances and year. "Elektroznaniya i Prizomania", took place. much more. Every year, the Company participates in the program In 2018, Udmurtenergo branch donated to a local public “Illustrated Books for Little Blind Children”, purchasing organization, the foundation "Soobshchestvo", which series of books, which are designed to meet the specific supports and furthers civil initiatives, promotes the needs of visually impaired and blind children, for development of municipal entities, and helps with social specialized day-care institutions and libraries in the problems of the residents of the Udmurt Republic. regions of the Company’s presence. For many years IDGC of Center and Volga Region has been a sponsor of the professional football club CSKA.

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SHAREHOLDER VALUE FORMATION

CORPORATE GOVERNANCE

CORPORATE GOVERNANCE PRINCIPLES 100

CORPORATE GOVERNANCE AUDIT 101

ASSESSMENT OF COMPLIANCE OF THE CORPORATE GOVERNANCE LEVEL WITH THE CORPORATE GOVERNANCE CODE 102

CORPORATE GOVERNANCE STRUCTURE 104

SHAREHOLDER VALUE FORMATION 148

CORPORATE RISK MANAGEMENT GOVERNANCE SYSTEM SYSTEM

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CORPORATE GOVERNANCE AUDIT Internal Audit of Corporate Governance Efficiency CORPORATE GOVERNANCE In 2018, IDGC of Center and Volga Region performed an 2018). Based on the results, the Company implemented a set internal audit to assess the corporate governance efficiency. of measures aimed at improving the systems of corporate The results of the audit were reviewed and approved by the governance, internal control, and risk management. Audit Committee (Minutes No. 14/100 dated March 27, 2018) An internal audit to assess the quality of corporate and the Board of Directors (Minutes No. 313 dated April 28, CORPORATE GOVERNANCE PRINCIPLES governance at year-end 2018 will be held in Q3 2019. Independent Assessment of Corporate Governance Quality The corporate governance system of IDGC of Center and Volga Region is based on the In February 2018, following the inspection of the corporate of different companies. It reflects the opinion of independent requirements of the legislation of the Russian Federation, the Moscow Exchange listing governance system conducted in 2017 by the non-profit experts about the development level of corporate governance partnership Russian Institute of Directors, IDGC of Center in the company and its compliance with international and rules, and the recommendations of the Corporate Governance Code. and Volga Region was assigned the corporate governance Russian best practices. rating NCGR 7 – Advanced Corporate Governance Practice, The assessment of the Russian Institute of Directors confirms on the National Corporate Governance Rating scale (NCGR®). that the Company complies with the requirements of the In November 2018, the Company’s rating was upgraded to Russian Federation legislation on corporate governance NCGR 7+. and follows a significant number of recommendations of THE CORPORATE GOVERNANCE PRINCIPLES OF IDGC OF CENTER AND VOLGA REGION NCGR is an indicator of the corporate governance quality, the Russian Corporate Governance Code. The risks of loss of INCLUDE: which makes it possible to compare the development level of owners associated with the corporate governance quality are corporate governance and the risks related to it in the context evaluated as quite low. Changes in Corporate Governance of the Company in 2018 EQUAL AND FAIR TREATMENT In 2018, to improve the corporate governance quality, IDGC of (CGC), the Company developed and approved the following OF ALL SHAREHOLDERS Center and Volga Region implemented the following measures: restated internal documents regulating the activities of the [[ ensuring the possibility of electronic voting at the annual management and control bodies: General Meeting of Shareholders at the end of 2017; [[ Charter (approved by the decision of the Annual General [[ development and approval of the Insurance Coverage Shareholders’ Meeting dated June 1, 2018, Minutes No. 12); COMMITMENT OF THE BOARD Program for 2019, which includes liability insurance for the [[ Regulations on the Board of Directors (approved by the OF DIRECTORS members of the Company’s Board of Directors (Minutes decision of the Annual General Shareholders’ Meeting No. 345 dated December 28, 2018); dated June 1, 2018, Minutes No. 12); CONTROL AND ACCOUNTABILITY [[ preparation of the Report on Sustainable Development [[ Regulations on the Management Board (approved by the OF THE EXECUTIVE BODIES TO THE for 2016-2017 in accordance with the requirements of the decision of the Annual General Shareholders’ Meeting BOARD OF DIRECTORS GRI Standards methodology and its publication on the dated June 1, 2018, Minutes No. 12). Company’s official website available to the public: https:// [[ Regulations on payment of remunerations and www.mrsk-cp.ru/upload/documents/SO16-17rus.pdf; compensations to the members of the Audit Commission [[ development and approval of the Methodology14, in (approved by the decision of the Annual General TIMELY AND FULL accordance with which, in 2019, the Board of Directors Shareholders’ Meeting dated June 1, 2018, Minutes No. 12); DISCLOSURE OF of IDGC of Center and Volga Region and the Board’s [[ Regulations on the information policy (approved by the Committees conducted the first-ever self-assessment of EFFECTIVE OPERATION CORPORATE INFORMATION decision of the Annual General Shareholders’ Meeting performance. OF INTERNAL CONTROL dated March 30, 2018, Minutes No. 311); [[ AND RISK MANAGEMENT SYSTEMS In 2018, to bring corporate governance in compliance with the Regulations on the dividend policy (approved by the current legislation, the requirements of the Moscow Exchange, decision of the Annual General Shareholders’ Meeting and the recommendations of the Corporate Governance Code dated February 2, 2018, Minutes No. 300. Plans to Improve Corporate Governance Quality TRANSPARENT AND FAIR REWARD SYSTEM In 2019, IDGC of Center and Volga Region will continue to As part of improving the efficiency of the management bodies, improve corporate governance practice to comply with the IDGC of Center and Volga Region will initiate the process of best Russian and international practices. First of all, the internal documents updating to bring them in compliance Company plans to carry out further work to promote corporate with the requirements of the legislation, regulatory institutions governance level, to analyze the best practices in general. and best practices of corporate governance, and will improve It plans to improve the Company’s corporate governance certain procedures for organizing the work of management following the results of the 2018-2019 performance self- bodies. assessment of the Board of Directors and Committees of the Board of Directors, along with the evaluation of the candidate SOCIAL RESPONSIBILITY to Board of Directors. Furthermore, the Company will proceed AND STAKEHOLDER ENGAGEMENT to improve the interaction with shareholders on expanding the capabilities of the “Personal Shareholder's Office” Internet service.

14 Methodology for assessing the work of the Board of Directors and Committees of the Board of Directors of IDGC of Center and Volga Region (approved by the decision of the Board of Directors on November 30, 2018, Minutes No. 338).

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Number of principles Status of compliance with the criteria as of year-end 2018 ASSESSMENT OF COMPLIANCE OF THE CORPORATE Section recommended by the Code Complied Not complied Partially complied GOVERNANCE LEVEL WITH THE CORPORATE GOVERNANCE CODE I. Shareholders’ rights and fair treatment of shareholders in the exercise of their rights 1.1. 6 6 - - 1.2. 4 3 - 1 17 1.3. 2 2 - - Methodology of Assessment 1.4. 1 1 - - In 2014, the Bank of Russia approved the Corporate II. The Company’s Board of Directors Governance Code (CGC) and recommended it for use by 2.1. 7 7 - - 9 joint-stock companies with listed securities. 2.2. 2 2 - - This report contains the Company’s results of assessment 2.3. 4 4 - - of the current corporate governance level compliance with 2.4. 4 2 2 - the principles of the CGC. The assessment was carried COMPLIANCE WITH PRINCIPLES out substantively by the Company and is based on a OF THE CORPORATE GOVERNANCE 2.5. 3 2 - 1 CODE AS OF THE END OF 2018, % comparison with the CGC recommendations, provisions 74 2.6. 4 2 - 2 of the existing internal documents, and the Company’s corporate governance practices. Comments are provided 2.7. 4 2 - 2 regarding those CGC principles, which, in the opinion 2.8. 6 2 2 2 of the Company, are being not complied or partially 2.9. 2 - 1 1 complied. III. Corporate Secretary of the Company Assessment Results 3.1. 2 2 - - Complied IV. System of remuneration for members of the Board of Directors, executive bodies, and other key executive employees of the In 2018, the number of CGC principles complied by the Not complied Company Company significantly increased. Partially complied 4.1. 4 4 - - 4.2. 3 3 - - 4.3. 3 1 1 1 V. Risk management and internal control system 5.1. 4 4 - - 5.2. 2 2 - - VI. Disclosure of information about the Company, information policy of the Company 6.1. 2 1 - 1 I 6.2. 3 3 - - 6.3. 2 2 - - VII. Major corporate action I. Shareholders’ rights and equitable II 7.1. 3 - 1 2 VII 12 treatment of shareholders in the exercise of their rights 7.2. 2 1 - 1

23 II. The Board of Directors of the Company Total 79 58 7 14

III. Corporate Secretary of the Company 1 IV. System of remuneration for members 6 2 of the Board of Directors, executive bodies and other key executive employees of the Company VI III 5 V. Risk management and internal control 3 system

VI. Disclosure of information about the Company, information policy of the Company

VII. Major corporate action V IV 2018

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Report on the General Meeting of Shareholders in 2018 10. Approval of the revised Regulations on the CORPORATE GOVERNANCE STRUCTURE Management Board of IDGC of Center and Volga In 2018, one General Meeting of Shareholders was held. Region. It took place on June 1, 2018, as a collective meeting, with 11. Participation of IDGC of Center and Volga Region in attendance by the shareholders. After the Meeting, the the self-regulating association Society of Prospecting CORPORATE MANAGEMENT CONTROL AND AUDITING following decisions were made: FUNCTIONS FUNCTIONS Engineers in Construction (Association “SPEC”). GOVERNING BODIES [[ the Company’s Annual Report and the annual accounting (financial) statements of the Company for 2017 were approved; Board of Directors AUDIT COMMISSION [[ the proposed distribution of profit (losses) of the The Board of Directors of IDGC of Center and Volga Region Company for 2017 was approved; exercises general management of the Company, except GENERAL MEETING AUDITOR [[ the decision was made to pay dividends equal to for the issues which relate to the area of responsibility of OF SHAREHOLDERS 4,535,749 RUB thou. on ordinary shares of IDGC of the General Meeting of Shareholders in accordance with Center and Volga Region based on the results of 2017 the legislation of the Russian Federation, the Company’s (0.040247 RUB per one ordinary share); Charter, and the internal documents. [[ members of the Company’s Board of Directors and The resolutions of the meetings of the Board of Directors the Audit Commission were elected; are passed by the majority of votes of the Board members [[ present at the meeting, except for the cases set out by the Ernst & Young was approved as the Company’s legislation of the Russian Federation and the Company’s auditor; Charter. The quorum for holding a meeting is at least a [[ revised Charter of the Company, the Regulations half of the elected members of the Company’s Board of MANAGEMENT COMPANY – on the Board of Directors, the Regulations on the Directors. Meetings of the Board of Directors are held IDGC OF CENTRE, PJSC BOARD OF DIRECTORS MANAGEMENT BOARD Management Board, and the Regulations on Payment regularly, at least once every six weeks. of Remuneration and Compensation to the Members Information about the work of the Board of Directors of the Audit Commission were approved. and its members is available on the Company’s official BOARD OF DIRECTORS’ COMMITTEES Materials and resolutions of the General Meetings of website: https://www.mrsk-cp.ru/about/management/ Shareholders are available on the Company’s official directors/. WORKFLOW MANAGEMENT OF THE website: https://www.mrsk-cp.ru/about/management/ BOARD OF DIRECTORS STRATEGY AND DEVELOPMENT meeting/decisions/. COMMITTEE Agenda of the General Meeting of Shareholders in 2019 CORPORATE SECRETARY IN 2018-2019, THE FIRST-EVER SELF- PERSONNEL AND REMUNERATION 1. Approval of the Annual Report, the annual accounting ASSESSMENT OF PERFORMANCE OF THE COMMITTEE (financial) statements of the Company. BOARD OF DIRECTORS AND COMMITTEES OF 2. Distribution of the Company’s profit (including THE BOARD OF DIRECTORS WAS CARRIED payment (declaration) of dividends) and losses OUT ACCORDING TO THE METHODOLOGY RELIABILITY COMMITTEE according to the year-end results of 2018. FOR ASSESSING THE WORK OF THE BOARD 3. Election of members to the Company’s Board of Directors. OF DIRECTORS AND COMMITTEES OF THE 4. Election of members to the Company’s Audit BOARD OF DIRECTORS OF IDGC OF CENTER GRID CONNECTION COMMITTEE Commission. AND VOLGA REGION, APPROVED BY THE 5. Approval of the Company’s auditor. DECISION OF THE BOARD OF DIRECTORS 6. Making changes and amendments to the Charter of DATED NOVEMBER 30, 2018 (MINUTES AUDIT COMMITTEE IDGC of Center and Volga Region. NO. 338) 7. Making changes and amendments to the Regulations on the Board of Directors of IDGC of Center and Volga Region. The Board of Directors analyzed its own needs in 8. Approval of the revised Regulations on payment of professional expertise, experience, and business General Meeting of Shareholders remuneration and compensation to members of skills, and considered whether the quantitative composition of the Board of Directors meets the The General Meeting of Shareholders is the Company’s The Company approved the revised Regulations on the the Board of Directors of IDGC of Center and Volga 15 Company’s needs and satisfies the interests of the supreme management body. The scope of its powers General Meeting of Shareholders , which specifies, point Region. shareholders. The results of the assessment, the includes the issues of reorganizing and liquidating by point, the procedure for preparing and holding general 9. Approval of the revised Regulations on the General average score for which was 4.55, were reviewed at the Company, amending the Charter and changing the meetings of shareholders. Shareholders Meeting of IDGC of Center and Volga the meeting of the Personnel and Remuneration size of the authorized capital, issuing and delisting Region. Committee and approved by the Board of Directors of securities, determining the composition and (Minutes No. 365 dated May 31, 2019). remuneration of the Board of Directors and the Audit Commission, along with the other fundamental issues of the Company’s operation.

15 Regulations on the General Shareholders’ Meeting, revised (approved by the decision of the Annual General Shareholders’ Meeting dated June 5, 2017, Minutes No. 11).

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Report on the Work of the Board of Directors in 2018 2018 The key issues of 2018 considered by the Board of Directors with a breakdown by the Company’s strategic development priorities include: In 2018, the Board of Directors of IDGC of Center and Volga Region held 46 meetings (3 of them were held in person and by absentia voting); 189 Strategic development issues were discussed. priorities of the Key issues considered by the Board of Directors in 2018 Company

46 189 [[ information about the execution of regulatory legal acts on the establishment of indicators of Reliability and quality of service reliability and quality in Vladimirenergo, Kirovenergo, and Udmurtenergo branches for MEETINGS ISSUES services provided 2018-2022 was considered FREQUENCY OF THE MEETINGS [[ OF THE BOARD OF DIRECTORS IN 2018 The updated version of the scenario conditions for making of the investment program of IDGC of Center and Volga Region was approved 7 7 [[ The draft amendments to the investment program of IDGC of Center and Volga Region for 2018- 6 6 2022 were approved 5 [[ An updated version of the Program for the disposal of non-core assets of IDGC of Center and Volga 4 Region and the procedure for organizing the sale of non-core assets were approved [[ An updated version of the Regulations on the work of the Central Purchasing Authority of IDGC of 3 Center and Volga Region was approved 2 2 2 2 [[ The 2018-2022 business plans of IDGC of Center and Volga Region Group were approved: the RAS- Operating and invest- based composite plan and IFRS-based consolidated plan ment efficiency [[ 0 Updated versions of the Standard specifications and the Business-planning regulations of IDGC of Center and Volga Region were approved [[ A refined development plan for the Production Assets Management System of IDGC of Center and April May June July March Volga Region for 2016-2019 was approved January August October February November December September [[ The Company’s participation in the AO Ispytatelny Stend Ivanovskoy GRES was terminated by disposal of shares [[ The updated Program for modernization (renovation) of the power supply assets of IDGC of Center 23.3 1.0 11.4 1.6 and Volga Region for 2018-2026 was approved 4.8 [[ The amendments was introduced to the scenario conditions for making of the investment program 5.8 of IDGC of Center and Volga Region 5.1 [[ Revised Regulations on the dividend policy of IDGC of Center and Volga Region were approved [[ 81.9 The work plan of the Company’s Internal Audit Department for 2018 was approved [[ The Company’s insurers were approved [[ 9.5 STRUCTURE OF ISSUES CONSIDERED VOTING STRUCTURE Provision of charitable assistance in 2018 was approved and the Company’s sole executive body was entrusted to ensure its financing without compromising the planned financial result at year- BY THE BOARD OF DIRECTORS AT THE MEETINGS OF THE BOARD end 2018 IN 2018, % OF DIRECTORS IN 2018, % [[ The report on the process and price audit of the Company’s investment projects was considered [[ The timed action plans of the Company’s activities to reduce overdue receivables for power 19.6 transmission services were approved 6.9 [[ The candidacy of the organizer of exchange bonds issuance of IDGC of Center and Volga Region was approved Investment appeal [[ The reports of the sole executive body and the Management Board of the Company on the 29.1 organization and performance of the internal control and risk management systems, including the implementation of measures to improve these systems, were reviewed [[ The amounts of transactions involving property, which are subject to prior approval by the Compa- ny’s Board of Directors Interested-party transactions For [[ Activities of the Board of Directors’ Against Chairperson of the Company’s Board of Directors was elected Committees [[ Position considering on question of Abstained Composition of the Committees of the Board of Directors of IDGC of Center and Volga Region were subsidiaries and affiliates approved Consideration of reports of executive Did not take part in voting [[ bodies Procedure for assessing the work of the Board of Directors and Committees of the Board of Direc- tors of IDGC of Center and Volga Region was approved Financial and ecenomic issues [[ Internal audit, control and risk A decision was made to subscribe to the Uniform Procurement Standard of PJSC Rosseti management Preparation for tha Annual General Shareholders’ meeting Other

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[[ The updated Program of Energy Conservation and Energy Efficiency Improvement of IDGC of Center Key competencies of the members of the current Board of Directors and Volga Region through to 2022 was approved Main competencies [[ The program of measures on reduction of electric power losses in the grid complex of IDGC of Center and Volga Region for 2018-2022 was approved Members of the Energy efficiency and Period of service on the Board of Directors Finance [[ The report of the company’s sole executive body on the implementation of the investment project Board of Directors Legal Corporate support of the innova- Strategy and Construction of Smart Networks was reviewed issues governance tion development audit [[ The plan for decommissioning PCB-containing equipment of IDGC of Center and Volga Region for 2018-2023 was approved ALEXANDER Less than one year (elected for the first time on June 1, [[ IVANOVICH + + - - The consolidated procurement plan for innovative and/or high-tech products for 2019-2023 was 2018) approved KAZAKOV

[[ The decision for the Company to acquire fixed assets, namely, the power grid complex Izhevsk DENIS Availability of the power Less than four years (elected four times: June 16, 2015; Power Grids, JSC, the purpose of which is to transmit and distribute electric power, was prelimi- LVOVICH + - - + grid June 9, 2016; June 5, 2017; and June 1, 2018) narily approved GURIYANOV

[[ The program of non-state pension provision of the employees of IDGC of Center and Volga Region VITALY Less than one year (elected for the first time on June 1, in 2019 was approved ANATOLYEVICH + - - - 2018) [[ The target key performance indicators of the Director General of IDGC of Center and Volga Region DOMNICH for 2018 were approved Development of human YURY Less than two years (elected two times: August 22, 2012; capital assets [[ The draft agreement on the extension of the terms of the Collective Agreement between the KAZBEKOVICH + - - - and June 1, 2018) employees and the employer, IDGC of Center and Volga Region, for 2019 was preliminarily approved ZAFESOV [[ Reports on the compliance with the KPIs of the sole executive body of IDGC of Center and Volga OLEG Less than two years (elected two times: June 5, 2017; and + - + - Region for Q1 and Q2 2018 were approved YURYEVICH ISAEV June 1, 2018)

ANDREY Less than one year (elected for the first time on June 1, VLADIMIROVICH — + + + 2018) Members of the Board of Directors MOROZOV VLADIMIR Less than one year (elected for the first time on June 1, LEONIDOVICH + - - - 2018) STRUCTURE OF THE CURRENT BOARD OF DIRECTORS, PPL PELYMSKY

LARISA 1 1 1 2 Less than one year (elected for the first time on June 1, ANATOLYEVNA - + - - 10 2018) 1 4 ROMANOVSKAYA

Over seven years (elected eleven times: June 19, 2009; ROMAN 2 June 16, 2010; June 14, 2011; June 22, 2012; August 22, 2012; ALEKSEYEVICH + + - + June 18, 2013; June 26, 2014; June 16, 2015; June 9, 2016; 2 BY DURATION OF SERVICE ON FILKIN June 5, 2017; and June 1, 2018) BY STATUS BY AGE BY GENDER THE BOARD OF DIRECTORS OF IDGC OF CENTER AND VOLGA REGION Over seven years (elected eleven times: June 19, 2009; VLADIMIR June 16, 2010, June 14, 2011; June 22, 2012; August 22, 2012; SERGEYEVICH + — — — June 18, 2013; June 26, 2014; June 16, 2015; June 9, 2016; CHISTYAKOV 7 June 5, 2017; June 1, 2018)

5 ALEXANDER 6 Less than five years (elected five times: June 26, 2014; VIKTOROVICH + + + + Non-executive directors 34-44 y.o. Men Less than 1 year June 16, 2015; June 9, 2016; June 5, 2017; June 1, 2018) SHEVCHUK Independent directors 45-60 y.o. Women 1 to 7 years

Professional executives Over 60 y.o. Over 7 years

Executive directors

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During 2018, the Company had two compositions of the Board of Directors. Between June 5, 2017 and June 1, 2018, the Not an independent director. Board of Directors included 16: [[ Yury Nikolayevich Mangarov (Chairperson of the [[ Oleg Yuryevich Isaev; Board of Directors); [[ Ashot Mikhaylovich Kobelyan; [[ Nikolay Nikolayevich Varlamov (Deputy Chairperson [[ Roman Alekseyevich Filkin; of the Board of Directors); [[ Vladimir Sergeyevich Chistyakov; [[ Dmitry Leonidovich Bokhun; [[ Alexander Viktorovich Shevchuk; [[ Denis Lvovich Guriyanov; [[ Oleg Romanovich Fedorov. [[ Tatyana Alexandrovna Ivanova;

The current Board of Directors elected by the decision of the General Meeting of Shareholders of June 1, 2018 (Minutes No. 12) includes the following people17: OLEG YURYEVICH ISAEV

VITALY ANATOLYEVICH DOMNICH Director General of IDGC of Centre, PJSC. Does not have any shares of IDGC of Center and Volga Region or Chief of the Strategic Projects Administration of the subsidiaries and affiliates. Strategic Development Department of PJSC Rosseti. Was elected to the Board of Directors of IDGC of Center and Volga Does not have any shares of IDGC of Center and Volga Region or Region twice: June 5, 2017 and June 1, 2018. subsidiaries and affiliates. Born in 1969. Was first elected to the Board of Directors of IDGC of Center and In 1992, graduated from Krasnoznamenny Military Institute with a Volga Region on June 1, 2018. degree in Law and an awarded qualification of a Lawyer. In 2004, Born in 1978. graduated from the Russian Academy of Public Administration under the President of the Russian Federation with a degree In 1998, graduated from the State University of Management with in state and municipal management (awarded qualification – a degree in Management. Manager). In 2011-2012, completed occupational retraining in ALEXANDER IVANOVICH KAZAKOV DENIS LVOVICH GURIYANOV Electric Power Industry Management. In 2014, he became a Doctor Over the past five years, he held the following positions: member of Law. of the Board of Directors of IDGC of Center and Volga Region Chairperson of the Board of Directors of IDGC of Center Director of the Department of Corporate Governance (June 2018 – present), member of the Board of Directors of IDGC Over the past five years he held the following positions: member and Volga Region, Chairperson of the Board of Directors and Interaction with Shareholders and Investors of PJSC of Northern Caucasus, PJSC (May 2018 – present), acting Director of the Board of Directors of IDGC of Center and Volga Region of DVEUK, JSC, Chairperson of the Board of Directors of Rosseti. of the Strategic Development Department, Chief of the Strategic (June 2017 – present), acting Director General of IDGC of Center Projects Administration of the Strategic Development Department IDGC of Centre, PJSC, professional director. Does not have any shares of IDGC of Center and Volga Region or and Volga Region (November 2016 – September 2017), Chairperson of PJSC Rosseti (July 2017 – present), Deputy Head of Division, of the Management Board of IDGC of Center and Volga Region Does not have any shares of IDGC of Center and Volga Region or subsidiaries and affiliates. Assistant Administrator, Department Head of the Tariff Regulation (November 2016 – September 2018), member of the Board of subsidiaries and affiliates. Was elected to the Board of Directors of IDGC of Center and Volga in the Electric Power Industry (December 2013 – July 2017). Directors of PJSC MOESK (June 2016 – June 2018), member of the Kazakov was first elected to the Board of Directors of IDGC of Region four times: June 16, 2015, June 9, 2016, June 5, 2017 and Board of Directors of IDGC of Centre, PJSC (June 2013 – present), IDGC of Center and Volga Region has no information about Center and Volga Region on June 1, 2018. June 1, 2018 Director General of IDGC of Center, PJSC (April 2013 – September transactions on acquisition or disposal of the Company’s shares Born in 1977 2018), Chairperson of the Management Board of IDGC of Centre, He was born in 1948. made by the person in 2018. PJSC (December 2012 – September 2018), member of the Board of In 1971, he graduated from the Sergo Ordzhonikidze Moscow Graduated from The Peoples' Friendship University of Russia, the Moscow Chamber of Commerce and Industry Union (October Engineering Economical Institute with a degree of an Master of Laws. A member of the Audit Committee of the Board of Directors of IDGC of Center and Volga Region since June 29, 2018. 2012 – May 2016). engineer-economist. Over the past five years, he held the following positions: Over the past five years, he held the positions of a Chairperson Director of the Corporate Governance Department, Director of Not an independent director. IDGC of Center and Volga Region has no information about of the Board of Directors of IDGC of Centre, PJSC (May 2018 – the Department of Corporate Governance and Interaction with transactions on acquisition or disposal of the Company’s shares present), and a Chairperson of the Board of Directors of DVEUK, Shareholders and Investors (April 2013 – present), member of made by the person in 2018. JSC (December 2011 – Present). the Board of Directors of JSC “NIC UES” (June 2018 – present), member of the Board of Directors of IDGC of Northern Caucasus, Not a member of any Committee of the Board of Directors of IDGC IDGC of Center and Volga Region has no information about PJSC (June 2017 – present), member of the Board of Directors of Center and Volga Region. transactions on acquisition or disposal of the Company’s shares of IDGC of Center and Volga Region (June 2015 – present), made by the person in 2018. Not an independent director. member of the Board of Directors of PJSC FITS (November Not a member of any Committee of the Board of Directors of 2014 – present), member of the Board of Directors of IDGC of IDGC of Center and Volga Region. Siberia, PJSC (June 2014 – June 2014), member of the Board of Not an independent director. Directors of Sevkavkazenergo, JSC (June 2014 – present), member of the Board of Directors of VOLS-VL Administration, JSC (March 2014 – present). IDGC of Center and Volga Region has no information about transactions on acquisition or disposal of the Company’s shares made by the person in 2018. A member of the Audit Committee, and a Chairperson of the Personnel and Remuneration Committee of the Board of Directors of IDGC of Center and Volga Region since August 10, 2018.

16 Details about the members of the Board of Directors of IDGC of Center and Volga Region, acting as of June 5, 2017 to June 1, 2018, are contained in the Company’s 2017 Annual Report, published on the Company’s official website: https://www.mrsk-cp.ru/stockholder_investor/disclosure_reporting_info/godovye-otchety/. 17 The positions are indicated as of the time of election.

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YURY KAZBEKOVICH ZAFESOV ANDREY VLADIMIROVICH MOROZOV VLADIMIR LEONIDOVICH PELYMSKY LARISA ANATOLYEVNA ROMANOVSKAYA

Director of the Procurement Department of PJSC Rosseti. Legal Director of the Professional Investors Association, Deputy Chief Engineer of PJSC Rosseti. Chief Adviser for PJSC Rosseti. Does not have any shares of IDGC of Center and Volga Region or recognized as an independent director by the decision of Does not have any shares of IDGC of Center and Volga Region or Does not have any shares of IDGC of Center and Volga Region or subsidiaries and affiliates. the Board of Directors of IDGC of Center and Volga Region subsidiaries and affiliates. subsidiaries and affiliates. dated June 29, 2018 (Minutes No. 322). Was elected to the Board of Directors of IDGC of Center and Volga Was first elected to the Board of Directors of IDGC of Center and Was first elected to the Board of Directors of IDGC of Center and Region twice: August 22, 2012 and June 1, 2018. Does not have any shares of IDGC of Center and Volga Region or Volga Region on June 1, 2018. Volga Region on June 1, 2018. subsidiaries and affiliates. Born in 1975. Born in 1972. Born in 1972. Was first elected to the Board of Directors of IDGC of Center and In 1999, graduated from Lomonosov Moscow State University Volga Region on June 1, 2018. In 1995, graduated from the Akmolinsk Agricultural Institute with In 1995, graduated from Samara State Economic Academy with a with a degree in Management. In 1997, graduated from Moscow a degree in “Electrical Engineering; Electrification and Automation degree in Economics. State University of Food Production with an awarded qualification Born in 1978. of Agriculture”. of “Industrial Engineer”. In 2006, received an academic degree Over the past five years, she held the following positions: Advisor In 2000, graduated from the Russian Academy of Law of the Over the past five years, he held the following positions: Director and Chief Advisor for PJSC Rosseti (October 2017 – present), of Candidate of Economic Science at the Russian Presidential Ministry of the Russian Federation with a degree in Law. Academy of Public Administration. General of TransneftElektrosetServis, LLC (July 2018 – present), member of the Board of Directors of IDGC of Center and Volga In 2016, received a Master of Laws degree, LLM, from Harvard Law member of the Board of Directors of IDGC of Center and Volga Region (June 2018 – present), member of the Board of Directors of Over the past five years, he held the following positions: member School. Region (June 2018 – present), member of the Board of Directors IDGC of Centre, PJSC (May 2018 – present), member of the Board of the Board of Directors of IDGC of Center and Volga Region of IDGC of North-West, PJSC (June 2018 – present), Deputy Chief of Directors of PJSC MOESK (June 2018 – present), member of the (June 2018 – present), member of the Board of Directors of IDGC Over the past five years, he held the following positions: member Engineer of PJSC Rosseti (April 2016 – July 2018). Board of Directors of IDGC of Urals, PJSC (May 2018 – present), of Urals, OJSC (May 2018 – present), member of the Board of of the Board of Directors of IDGC of Center and Volga Region Director General of Ensol, LLC (April 2014 – October 2017), Director Directors of Tyumenenergo, JSC (June 2017 – present), member (June 2018 – present), member of the Board of Directors of IDGC of Center and Volga Region has no information about General of Svoy Khleb, LLC (January 2011 – March 2014). of the Board of Directors of Lenenergo, PJSC (June 2014 – June IDGC of South, PJSC (June 2018 – present), Legal Director of the transactions on acquisition or disposal of the Company’s shares 2016), Director of the Procurement Department and Director of Professional Investors Association (September 2017 – present), made by the person in 2018. IDGC of Center and Volga Region has no information about the Procurement Activities Department of PJSC Rosseti (May 2013 member of the Board of Directors of Ulyanovsky Avtomobilny transactions on acquisition or disposal of the Company’s shares Not a member of any Committee of the Board of Directors of IDGC made by the person in 2018. – present), Director General of Energostroysnabkomplekt UES, JSC Zavod, OJSC (May 2008 – May 2014), Head of the Legal Department of Center and Volga Region. (October 2009 – present), a member of the Board of Directors of of the NCH Advisors, Inc, Moscow office (September 2003 – August A member of the Personnel and Remuneration Committee of Energostroysnabkomplekt UES, JSC (January 2010 – present). 2015). Not an independent director. the Board of Directors of IDGC of Center and Volga Region since IDGC of Center and Volga Region has no information about IDGC of Center and Volga Region has no information about August 10, 2018. transactions on acquisition or alienation of the Company’s shares transactions on acquisition or disposal of the Company’s shares Not an independent director. made by the person in 2018. made by the person in 2018. A member of the Audit Committee of the Board of Directors of A member of the Audit Committee of the Board of Directors of IDGC of Center and Volga Region since June 29, 2018. IDGC of Center and Volga since June 29, 2018, and Strategy and Development Committee of the Board of Directors of IDGC of Not an independent director. Center and Volga Region since July 20, 2018. An independent director.

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VLADIMIR SERGEYEVICH CHISTYAKOV ROMAN ALEKSEYEVICH FILKIN ALEXANDER VIKTOROVICH SHEVCHUK

First Deputy Director General of JSC Investment Holding Director (electric power industry, machine building) of Executive Director of the Professional Investors 2015 – present), member of the Board of Directors of OGK-2, PJSC (June 2015 – present), member of the Board of Directors of “E-Union”. the Representative branch of the company Prosperity Association. Recognized as an independent director IDGC Center and Volga Region (June 2014 – present), Executive Does not have any shares of IDGC of Center and Volga Region or Capital Management (RF) Ltd. (Minutes 322 of the Board of Directors of IDGC of Center Director of the Non-Profit Organization Professional Investors subsidiaries and affiliates. Does not have any shares of IDGC of Center and Volga Region or and Volga Region dated July 2, 2018). Association (March 2014 – present), member of the Board of subsidiaries and affiliates. Directors of UAZ, OJSC (April 2013 – February 2014), member of the Was elected to the Board of Directors of IDGC of Center and Volga Does not have any shares of IDGC of Center and Volga Region or subsidiaries and affiliates. Board of Directors of MOSTOTREST, PJSC (June 2012 – June 2016), Region eleven times: June 19 2009, June 16, 2010, June 14, 2011, Was elected to the Board of Directors of IDGC of Center and Volga member of the Board of Directors of IDGC of Centre, PJSC (June June 22, 2012, August 22, 2012, June 18, 2013, June 26, 2014, June 16, Region eleven times: June 19 2009, June 16, 2010, June 14, 2011, Was elected to the Board of Directors of IDGC of Center and Volga 2011 – June 2017), Deputy Executive Director, Chief Expert, Expert 2015, June 9, 2016, June 5, 2017 and June 1, 2018. June 22, 2012, August 22, 2012, June 18, 2013, June 26, 2014, June 16, Region five times: June 26, 2014, June 16, 2015, June 9, 2016, June 5, of the Non-Profit Organization Professional Investors Association 2015, June 9, 2016, June 5, 2017 and June 1, 2018. Born in 1959. 2017 and June 1, 2018. (2001 – March 2014). Born in 1983. In 1981, graduated from Saratov Chernyshevsky State University Born in 1983. IDGC of Center and Volga Region has no information about transactions on acquisition or disposal of the Company’s shares with a degree in radio physics and electronics. In 2005, graduated from the Finance Academy under the In 2005, graduated from the Finance Academy under the Government of the Russian Federation with a degree in «Finance made by the person in 2018. Over the past five years, he held the following positions: First Government of the Russian Federation with a degree in «Finance and Credit”. Deputy Director General of JSC Investment Holding “E-Union” and Credit”. A member of the Personnel and Remuneration Committee of the Board of Directors of IDGC of Center and Volga Region since (April 2008 – present), Director General of Tolyattinsky Over the past five years, he held the following positions: member Over the past five years, he held the following positions: Transformator, LLC (June 2010 – present), member of the Board of of the Board of Directors of JSC Kamensk-Uralsky Non-Ferrous August 10, 2018, Chairperson of the Audit Committee of the Board member of the Board of Directors of Detsky Mir, PJSC (May of Directors of IDGC of Center and Volga, and member of the Directors of IDGC Center and Volga Region (June 2009 – present), Metal Working Plant (June 2016 – December 2016), a member of 2018 – present), member of the Board of Directors of TGC-1, PJSC member of the Board of Directors of JSC Elektrotsentronaladka the Board of Directors of IDGC of the North-West, PJSC (March Strategy and Development Committee of the Board of Directors (June 2017 – December 2017), member of the Board of Directors of IDGC of Center and Volga Region. (JSC ETN) (August 2009 – present). 2014 – present), a member of the Board of Directors of TGC-2, of IDGC of Urals, JSC (June 2016 – present), member of the Board OJSC (June 2013 – February 2018), member of the Board of IDGC of Center and Volga Region has no information about of Directors of IDGC of the North-West, PJSC (June 2016 – present), An independent director. Directors of Urengoitruboprovodstroi, OJSC (August 2012 – March transactions on acquisition or disposal of the Company’s shares member of the Board of Directors of IDGC of Centre, PJSC (June 2015), member of the Board of Directors of Kurganmashzavod, made by the person in 2018. OJSC (June 2012 – June 2014), member of the Board of Directors of A member of the Grid Connection Committee, and Personnel and Dalenergomontazh, OJSC (June 2012 – November 2016), member Remuneration Committee of the Board of Directors of IDGC of of the Board of Directors of Smolenskaya Energoremontnaya Center and Volga Region until June 15, 2018. Kompaniya, OJSC (May 2012 – September 2018), member of the Board of Directors of Prokatmontazh, OJSC (April 2012 – April Not an independent director. 2014), member of the Board of Directors of IDGC of the South, PJSC (July 2009 – present), Co-director (electric power industry, mechanical engineering) at the representative office of Prosperity Capital Management (RF) Ltd. (October 2009 – March 2015), member of the Board of Directors of IDGC of Center and Volga Region (June 2009 – present), member of the Board of Directors of IDGC of Centre, PJSC (June 2009 – present), member Conflict of Interest of the Board of Directors of TGC-6, OJSC (April 2006 – December In 2018, none of the members of the Board of Directors of IDGC of Center and Volga Region: 2014), member of the Board of Directors of OJSC NESS (June 2012 – June 2014). [[ had family ties with the officials at the Management and/or Control Bodies for financial and business IDGC of Center and Volga Region has no information about operations of IDGC of Center and Volga Region, PJSC; transactions on acquisition or disposal of the Company’s shares [[ was held administratively liable for financial improprieties, offense regarding tax and fees or security market, made by the person in 2018. or had any criminal record for economic crimes and/or crimes against the state; A member of the Strategy and Development Committee of the [[ Board of Directors of IDGC of Center and Volga Region until June held any positions in management bodies of commercial organizations during the period when bankruptcy 15, 2018. proceedings were instituted related to the above-mentioned organizations and/or one of the bankruptcy procedures provided for by the legislation of the Russian Federation was introduced; Not an independent director. [[ had a conflict of interest with the executive bodies of the Company.

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Attendance at the Meetings of the Board of Directors Committees of the Board of Directors NUMBER OF THE MEETINGS HELD BY THE BOARD OF DIRECTORS’ COMMITTEES IN 2018 There are five Committees of the Board of Directors of IDGC of Center and Volga Region: Strategy and Development Committee, Audit Committee, Personnel 22 and Remuneration Committee, Reliability Committee, PARTICIPATION OF MEMBERS IN THE MEETINGS OF THE BOARD OF DIRECTORS BETWEEN JANUARY 1 AND JUNE 1, 2018 and Grid Connection Committee. These Committees 16 16 16 16 are advisory bodies, which preliminarily consider the 21 21 21 21 21 21 21 21 21 21 21 21 21 21 21 21 21 21 21 21 21 21 21 most important issues of the Company’s activities and 16 produce recommendations to the Board of Directors. 16 9 11 20 20 20 20 20 20 20 20 Their main goal is to ensure that the Board of Directors performs its functions effectively in compliance with 7 19 19 the principles stipulated in the Corporate Governance 6 5 Code. 2

Strategy and Personnel and Reliability Grid Connection Audit Committee Development Remuneration Committee Committee Committee Committee

MANGAROV VARLAMOV BOKHUN GURYANOV IVANOVA ISAEV KOBELYAN FEDOROV FILKIN CHISTYAKOV SHEVCHUK YURY NIKOLAY DMITRY DENIS TATYANA OLEG ASHOT OLEG ROMAN VLADIMIR ALEXANDER NIKOLAEVICH NIKOLAEVICH LEONIDOVICH LVOVICH ALEXANDROVNA YURYEVICH MIKHAILOVICH ROMANOVICH ALEKSEYEVICH SERGEYEVICH VIKTOROVICH

Face-to-face Total number of meetings, in which a member of the Board of Directors could participate By correspondence Number of meetings, in which a member of the Board of Directors actually participated Strategy and Development Committee Number of meetings, in which a member of the Board of Directors participated by absentee voting The main task of the Strategy and Development Committee is to develop and give recommendations to the Company’s Board of Directors on the following matters: [[ identifying priority areas, strategic goals, and basic [[ monitoring the implementation of the adopted PARTICIPATION OF MEMBERS IN THE MEETINGS OF THE BOARD OF DIRECTORS BETWEEN JUNE 2 AND DECEMBER 31, 2018 principles of the Company’s strategic development; programs and projects; [[ increasing the Company’s investment appeal, [[ financial planning, defining the Company’s dividend 25 25 25 25 25 25 25 25 25 25 25 25 25 25 25 25 25 25 25 25 25 25 25 25 improving investment activities, and making policy; 24 24 reasonable investment decisions; [[ 23 23 23 23 23 assessing the Company’s performance efficiency;

18 [[ adjusting the current development strategy of the [[ 17 controlling the organization and operation of the risk Company; management system. The current composition 18 of the Strategy and Development Committee was approved by the decisions of the Board of Directors dated July 20, 2018 (Minutes No. 324) and November 22, 2018 (Minutes No. 337): [[ Evgeny Alexandrovich Olkhovich (Chairperson of the [[ Dmitry Sergeyevich Kapustin, Head of the

KAZAKOV GURYANOV DOMNICH ISAEV ZAFESOV MOROZOV PELYMSKY ROMANOVSKAYA CHISTYAKOV FILKIN SHEVCHUK Committee), Deputy Director General for Strategic Administration for Innovation-Based Technical Policy ALEXANDER DENIS VITALY OLEG YURY ANDREY VLADIMIR LARISA VLADIMIR ROMAN ALEXANDER IVANOVICH LVOVICH ANATOLYEVICH YURYEVICH KAZBEKOVICH VLADIMIROVICH LEONIDOVICH ANATOLYEVNA SERGEYEVICH ALEKSEYEVICH VIKTOROVICH Development and Technological Innovations, PJSC and Energy Performance Improvement, PJSC Rosseti; Rosseti; [[ Andrey Vladimirovich Morozov (independent Total number of meetings, in which a member of the Board of Directors could participate [[ Pavel Vladimirovich Grebtsov, Deputy Director director), Legal Director of the Professional Investors Number of meetings, in which a member of the Board of Directors actually participated General for Economics, PJSC Rosseti; Association; [[ [[ Number of meetings, in which a member of the Board of Directors participated by absentee voting Sergey Vasilyevich Podlutsky, Head of the Aleksey Igorevich Pavlov, Director of the Treasury Consolidated Planning and Reporting Office of the Department of PJSC Rosseti; Investment Activities Department of PJSC Rosseti; [[ Alexander Viktorovich Shevchuk (independent [[ Aleksey Nikolaevich Zharikov, Director of the director), Executive Director of the Professional Department for Corporate Policy and Shareholder Investors Association; Relations of JSC ETN; [[ Roman Alekseyevich Filkin (non-executive director), The average percentage of attendance of the meeting by the Board of AVERAGE PERCENTAGE OF THE MEETINGS [[ Alexander Valerievich Inozemtsev, Deputy Director Director (electric power industry, machine building) Directors’ members was 98 %. Of the 46 meetings of the Company’s Board ATTENDANCE BY THE BOARD OF General for Economics and Finance, IDGC of Centre, of the Representative office of Prosperity Capital of Directors, 36 meeting were held with 100 % attendance of the Board’s DIRECTORS’ MEMBERS PJSC; Management (RF) Ltd. members. Training of the Members of the Board of Directors 98 % In 2018, there was no training of the Members of the Board of Directors organized at the Company’s expense.

18 The positions are indicated as of the time of election.

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Report on the Work of the Strategy and Development Committee in 2018 [[ approval of reports on the implementation of business plans over different periods; [[ consideration of a report on corrective and preventive measures to eliminate the flaws identified during process and price audits of reports on the implementation of investment PARTICIPATION OF THE COMMITTEE MEMBERS IN THE MEETINGS OF THE STRATEGY AND DEVELOPMENT COMMITTEE: programs over different periods; [[ Monitoring the approval of reports of the sole executive body of the Company on the Company’s Investment Program implementation over various periods; Participation in the meetings of the implementation of the Committee adopted programs and [[ consideration of a report on measures taken to prevent deviations when implementing the projects Company’s Investment Program in 2018; Members of Strategy and Development Committee Number of Number of [[ approval of a report on the Company’s Innovative Development Program implementation for meetings meetings the 2017; accessible for member actually members took part in [[ consideration of a report on the implementation of the Company’s investment projects included in the list of priorities Yevgeny Alexandrovich Olkhovich 22 22 [[ approval of the revised Regulations on the dividend policy of the Company; Dmitry Borisovich Akopyan 6 6 [[ Financial planning, defining amendments to the Regulations on the dividend policy of the Company; Pavel Vladimirovich Grebtsov 11 10 the Company’s dividend [[ approval of the Order of placement of temporarily disposable monetary resources of the policy Company; Sergey Vasilievich Podlutsky 16 15 [[ approval of the Order of the Company’s payments Aleksey Nikolaevich Zharikov 22 22 Assessing the Company’s [[ approval of reports on the KPI achievement by the Director General Alexander Valerievich Inozemtsev 22 22 performance efficiency [[ consideration of reports of the sole executive body on the Company’s key operational risks Dmitry Sergeyevich Kapustin 22 18 over various periods; Andrey Vladimirovich Morozov 11 11 Controlling the organization [[ consideration of reports of the sole executive body on the organization, operation and and operation of the risk effectiveness of the risk management system, including information on the implementation Aleksey Igorevich Pavlov 22 22 management system of measures of risk management system improvement; [[ Alexander Viktorovich Shevchuk 22 22 preliminary review of the “Risk Management System” section of the Annual Report of IDGC of Center and Volga Region Roman Alekseyevich Filkin 22 22

Irina Alexandrovna Shagina 11 11

Anna Leonidovna Zvyagintseva 11 11 Personnel and Remuneration Committee

IN 2018 STRATEGY AND DEVELOPMENT The main task of the Personnel and Remuneration Committee is to develop and give recommendations to the COMMITTEE HELD Company’s Board of Directors on the following matters: AND CONSIDERED [[ determining the amount of remuneration paid to the [[ criteria for selecting candidates to the Company’s In 2018, the Strategy and Development Committee held 22 members of the Company’s Board of Directors; Board of Directors, members of the collective executive body, and a person to serve as the meetings, in the course of which 48 issues were considered. [[ principles and criteria for determining the amount of 22 48 sole executive body of the Company, as well as a remuneration paid to the members of the Board of MEETINGS ISSUES preliminary assessment of these candidates; Directors, members of the collective executive body, and the person serving as the sole executive body of [[ regular assessment of performance of the person the Company (including the management company serving as the sole executive body (management Tasks of the Strategy and Key issues considered followed by the provision of recommendations to the Board of Directors or the manager), as well as determining the essential company, manager) and members of the collective Development Committee terms of contracts with them; executive body of the Company, and preparation [[ approval of business plans (the RAS-based composite plan and IFRS-based consolidated of proposals for the Board of Directors on their Identifying priority areas, plan) for 2018-2022; reappointment. strategic goals, and basic [[ approval of the medium-term implementation plan of the Company’s Innovative 19 principles of the Company’s The current composition of the Personnel and Remuneration Committee of the Board of Directors of IDGC of Center Development Program for 2018-2020, including the R&D plan; strategic development and Volga Region was approved by the decision of the Company’s Board of Directors dated August 10, 2018 (Minutes [[ approval of the Information Technology, Automation, and Telecommunication Policy No. 328): [[ [[ Increasing the Company’s [[ execution and amendment of plans for disposal of non-core assets of the Company, Denis Lvovich Guriyanov (Chairperson of the Alexander Viktorovich Shevchuk (independent investment appeal, improving preliminary review of registers of the non-core assets for various dates; Committee, non-executive director), Director of the director), Executive Director of the Professional investment activities, Department of Corporate Governance and Interaction Investors Association. [[ amendments to the Company’s investment program for 2016-2022; and making reasonable with Shareholders and Investors of PJSC Rosseti; investment decisions [[ termination of the Company’s participation in Berendeyevskoye JSC by disposal of shares [[ Larisa Anatolyevna Romanovskaya, (non-executive Adjusting the current [[ adjustment of the Programs of Energy Conservation and Energy Efficiency Improvement of director), Chief Adviser for PJSC Rosseti; development strategy of the the Company for 2017-2022 Company

19 The positions are indicated as of the time of election.

118 119 THE ANNUAL REPORT 2018 | JOINING EFFORTS COMPANY STRATEGY PERFORMANCE SUSTAINABLE CORPORATE PROFILE RESULTS DEVELOPMENT GOVERNANCE

Report on the Work of the Personnel and Remuneration Committee in 2018. [[ approval of reports on the KPI achievement by the Director General of the Company over Regular assessment of various periods; performance of the management [[ company and members of the performance results of Deputy Directors General of the Company – Director of Ivenergo branch and Director of Marienergo branch; PARTICIPATION OF THE COMMITTEE MEMBERS IN THE MEETINGS OF THE PERSONNEL AND REMUNERATION COMMITTEE: collective executive body of the Company, and preparation [[ approval of reports of the management company on the services provided under the of proposals for the Board of agreement No. 7700/00313/17 dated September 11, 2017 on the delegation of powers of Participation in the meetings of the Directors on their reappointment the sole executive body of IDGC of Center and Volga Region to IDGC of Centre, PJSC, over Committee different periods

Members of the Personnel and Remuneration Committee Number of Number of [[ preliminary approval of the transition of the Company’s branches to a two-level meetings meetings the management system; accessible for member actually [[ preliminary approval of the merger of the power distribution zone of the branches: members took part in Other Kalugaenergo, and Tulenergo; Denis Lvovich Guriyanov 9 9 [[ preliminary approval of the establishment of the production department of Izhevsk Larisa Anatolyevna Romanovskaya 9 9 Power Grids in the Udmurtenergo branch of IDGC of Center and Volga Region, PJSC Alexander Viktorovich Shevchuk 9 9 Reliability Committee Nikolay Nikolayevich Varlamov 7 7 The main task of the Reliability Committee is to develop and give recommendations to the Company’s Board of Yury Nikolayevich Mangarov 7 7 Directors on the following matters: Vladimir Sergeyevich Chistyakov 7 7 [[ analysis of production programs, plans for retrofitting [[ inspection of programs aimed at prevention and and upgrading, reconstruction, new construction and reduction of risks of injury to the Company’s repair of power supply facilities, analysis of their personnel and third parties in the Company’s IN 2018 PERSONNEL AND REMUNERATION development and execution from the point of view of electrical installations, as well as control over their COMMITTEE HELD AND CONSIDERED meeting the requirements for operational reliability implementation; In 2018, the Personnel and Remuneration Committee and technical condition of electrical networks; [[ monitoring and evaluation of the Company’s held 16 meetings, in the course of which 29 issues were [[ assessment of completeness and sufficiency of engineering teams in terms of ensuring reliability of considered. 16 29 measures according to the results of accident electrical networks and industrial safety; investigation, following the Rules for investigating the MEETINGS ISSUES [[ analysis of the internal technical control system of causes of accidents in the electric power industry 20, the Company; and monitoring their implementation; [[ examination of the occupational safety management Tasks of the Personnel and Key issues considered followed by the provision of recommendations to the Board of [[ analysis of the quality of investigation into the system of the Company; Remuneration Committee Directors causes of technological violations (accidents); [[ inspection of the implementation program for Determining the amount of [[ inspection of the Company’s emergency response [[ environmental policy; remuneration paid to the special bonuses to the Company’s Director General at year-end 2016 in terms of the work (preparedness, organization and conduct of members of the Company’s Board achievement of the KPI “Effectiveness of Innovation” emergency response, and restoration work at power [[ examination of fire and industrial safety systems. of Directors supply facilities);

Principles and criteria for 21 determining the amount of The current composition of the Reliability Committee of the Board of Directors of IDGC of Center and Volga Region was remuneration paid to the approved by the decision of the Company’s Board of Directors dated August 10, 2018 (Minutes No. 328): members of the Board of [[ [[ Directors, members of the Vasily Vladimirovich Rozhkov (Chairperson of the Alexander Viktorovich Pilyugin, First Deputy Director [[ approval of the procedure for assessing the work of the Board of Directors and collective executive body, and Committee), Head of the Production Planning Office General, Chief Engineer of IDGC of Centre, PJSC; Committees of the Board of Directors of the Company the person serving as the sole of the Process Management Department of PJSC [[ Igor Georgievich Polovnev, Financial Director of the executive body of the Company, Rosseti; as well as determining the Professional Investors Association; [[ Aleksey Nikolaevich Zharikov, Director of the essential terms of contracts with [[ Sergey Vladimirovich Shpilevoy, Deputy Head of them Department for Corporate Policy and Shareholder the Analytical Management of the Situation and Relations of JSC ETN; [[ termination of powers of a member of the Company’s Management Board, and the Analytical Center of PJSC Rosseti. election of a member of the Company’s Management Board; [[ Alexander Valerievich Inozemtsev, Deputy Director Criteria for selecting candidates [[ preliminary assessment of the candidates for the Company’s Board of Directors; General for Economics and Finance, IDGC of Centre, to the Company’s Board of [[ PJSC; Directors, members of the preliminary approval of candidates for certain positions in the executive office of the collective executive body, and Company, determined by the Company’s Board of Directors; a person to serve as the sole [[ consideration of the executive candidate pool and the youth candidate pool of the executive body of the Company, Company; as well as a preliminary [[ assessment of these candidates recognition of Oleg Romanovich Fedorov, a member of the Board of Directors of the Company, as an independent director

20 Approved by the Decree of the Government of the Russian Federation No. 846 dated October 28, 2009. 21 The positions are indicated as of the time of election

120 121 THE ANNUAL REPORT 2018 | JOINING EFFORTS COMPANY STRATEGY PERFORMANCE SUSTAINABLE CORPORATE PROFILE RESULTS DEVELOPMENT GOVERNANCE

Report on the Work of the Reliability Committee in 2018 Inspection of the Company’s [[ implementation of the administrative and technical measures for preparation of the emergency response work Company’s power grid complex for the 2018 FIFA World Cup; (preparedness, organization, and [[ preparation of the Company for operation during the high-water season of 2018; PARTICIPATION OF THE COMMITTEE MEMBERS IN THE MEETINGS OF THE RELIABILITY COMMITTEE: conducting emergency response, as well as restoration work at power [[ preparedness of the Company for work during the autumn-winter period of supply facilities) 2018-2019 Participation in the meetings of the Inspection of programs aimed at Committee prevention and reduction of risks of [[ Members of the Reliability Committee Number of injury to the Company’s personnel implementation of measures within the programs aimed at reduction of risks of Number of meetings meetings and third parties in the Company’s injury to the Company’s personnel and third parties at power grid facilities in 2017 the member actually accessible for electrical installations, as well as took part in members control over their implementation [[ Vasily Vladimirovich Rozhkov 8 8 implementation of the Program of reliability improvement at the Company’s facilities in 2017 over different periods; Aleksey Nikolaevich Zharikov 16 16 [[ reports on the Company’s repair program implementation over various periods; Alexander Valerievich Inozemtsev 16 15 [[ implementation of the Timed action plan to bring the existing system of process management of the distribution power grid complex of the Company’s branches in Alexander Viktorovich Pilyugin 16 16 compliance with the basic target models for 2017; [[ Igor Georgievich Polovnev 16 16 implementation of a refined development Plan for the Production Assets Monitoring and evaluation of the Management System of IDGC of Center and Volga Region for 2016-2018 over 2017; Sergey Vladimirovich Shpilevoy 8 8 Company’s engineering teams in [[ terms of ensuring reliability of implementation of the Program for elimination of “bottlenecks” in the Company’s power grid complex over 2017; Vladimir Leonidovich Pelymsky 8 8 electrical networks and industrial safety [[ implementation of the Program of reliability improvement at the Company’s Vladimir Petrovich Suchkov 8 8 facilities; [[ the state of the fixed assets of the Company’s energy facilities; IN 2018 RELIABILITY COMMITTEE HELD [[ the Company’s progress over the fire hazard period of 2018; AND CONSIDERED [[ the Company’s progress over the storm period of 2018; [[ In 2018, the Reliability Committee held 16 meetings, report on performance of the Company’s engineering teams aimed at ensuring reliable operation of the Company’s power grids in the course of which 43 issues were considered. 16 43 Examination of the occupational [[ implementation of measures for prevention of erroneous and incorrect actions of MEETINGS ISSUES safety management system staff in 2017 Inspection of the implementation [[ a plan for decommissioning PCB-containing equipment of IDGC of Center and Volga program for environmental policy Region for 2018-2023 Key issues considered followed by the provision of recommendations to the Board of Tasks of the Reliability Committee Directors Grid Connection Committee [[ approval of a refined development plan for the Production Assets Management System of IDGC of Center and Volga Region for 2016-2019; The main task of the Grid Connection Committee is to develop Analysis of production programs, plans for retrofitting and upgrading, [[ approval of the updated Program for modernization (renovation) of the power supply and give recommendations to the Company’s Board of reconstruction, new construction, facilities of IDGC of Center and Volga Region for 2018-2026; Directors on the following matters: and repair of power supply facilities, [[ preliminary approval of the transition of of IDGC of Center and Volga Region [[ improvement of the legal framework of the antitrust law analysis of their development and branches to a two-level management system; execution from the point of view and ensuring equal-opportunity access to the services of of meeting the requirements for [[ preliminary approval of the merger of the power distribution zone between the technological connection of consumers to power grids; branches of IDGC of Center and Volga Region: Kalugaenergo, and Tulenergo; operational reliability and technical [[ improvement of the Company’s internal rules and condition of electrical networks [[ preliminary approval of the establishment of the production department of Izhevsk standards for ensuring equal-opportunity access to the Power Grids in the Udmurtenergo branch of IDGC of Center and Volga Region services of technological connection of consumers to Assessment of completeness and power grids; sufficiency of measures according to [[ principles and criteria for assessing the Company’s the results of accident investigation performance efficiency regarding technological following the Rules for investigating [[ report on the quality analysis of the investigation into the causes of technological connection of consumers to power grids; the causes of accidents in the electric violations (accidents) and the assessment of completeness and sufficiency of power industry and monitoring their measures developed as a result of the investigation of technological violations [[ assessment of the Company’s performance efficiency implementation. (accidents) regarding technological connection of consumers to Analysis of the quality of power grids; investigations into the causes of [[ technological violations (accidents) analysis of the current situation in the Company regarding technological connection of consumers to power grids.

122 123 THE ANNUAL REPORT 2018 | JOINING EFFORTS COMPANY STRATEGY PERFORMANCE SUSTAINABLE CORPORATE PROFILE RESULTS DEVELOPMENT GOVERNANCE

The current composition22 of the Grid Connection Committee of the Board of Directors of IDGC of Center and Volga Tasks of the Grid Connection Key issues considered followed by the provision of recommendations to the Board of Region was approved by the decision of the Company’s Board of Directors dated August 10, 2018 (Minutes No. 328), with Committee Directors revisions dated August 31, 2018 (Minutes No. 330): [[ [[ Improvement of the legal framework Alexander Yurievich Korneyev (Chairperson of the Dmitry Nikolaevich Skripalshchikov, Head of the of the antitrust law and ensuring [[ the Company’s participation in designing the Scheme and Program for the Committee), Director of the Department of Long-Term Office of Long-Term Network Development at the equal-opportunity access to the development of the electric power industry of the constituent entities of the Russian Network Development and Grid Connection, PJSC Department of Long-Term Network Development and services of technological connection Federation in 2018 Rosseti; Grid Connection, PJSC Rosseti; of consumers to power grids [[ Vladimir Alexandrovich Davydkin, Head of the Office [[ Igor Georgievich Polovnev, Financial Director of the of Grid Connection Regulations at the Department Professional Investors Association; of Long-Term Network Development and Grid [[ [[ Vladimir Sergeyevich Chistyakov, First Deputy Director Improvement of the Company’s execution of a plan of corrective measures to eliminate violations/flaws identified in Connection, PJSC Rosseti; General of JSC Investment Holding “E-Union”. internal rules and standards for view of the results of the internal “Audit of the business process for grid connection ensuring equal-opportunity access in terms of recording complaints and appeals and checking their validity”; to the services of technological [[ analysis of the grid connection of small and medium-sized businesses over different Report on the Work of the Grid Connection Committee in 2018 connection of consumers to power periods and the implementation of measures to increase the availability and grids affordability of grid connection

PARTICIPATION OF THE COMMITTEE MEMBERS IN THE MEETINGS OF THE GRID CONNECTION COMMITTEE:

[[ review of information on the achievement of indicators of quality of the rendered Participation in the meetings of the services established by the regulatory authorities of the constituent entities of the Committee Russian Federation in 2017; [[ Members of the Grid Connection Committee Number of Number of reports on the activities on grid connection, including information on the grid meetings meetings the Assessment of the Company’s connection of generating facilities and the consideration of complaints over different accessible for member actually performance efficiency regarding periods; members took part in technological connection of [[ consumers to power grids report on the achievement of KPIs over different periods: compliance with the terms of grid connection and increase in the process utilization of power grid equipment; Alexander Yurievich Korneyev 9 9 [[ analysis of the utilization of connected capacities and cost-effectiveness of expenses Vasily Sergeyevich Kukharenko 5 5 of IDGC of Center and Volga Region for technological connection to electric grids over 2012-2017 and forecast for 2018-2020 by classes of customers Vladimir Alexandrovich Davydkin 4 4 [[ approval of the schedule for the execution of works on grid connection under grid Dmitry Nikolaevich Skripalshchikov 4 4 connection contracts of the Company, which are overdue as of different dates; [[ analysis of the activities of IDGC of Center and Volga Region on network development Igor Georgievich Polovnev 9 9 planning and information exchange with the executive authorities about the future growth of the grid complex of the constituent entities of the Russian Federation in Vladimir Sergeyevich Chistyakov 9 8 the areas of the Company’s responsibility; Analysis of the current situation in [[ analysis of the grid connection of small and medium-sized businesses over different Nataliya Ivanovna Sokolova 5 5 the Company regarding technological periods and the implementation of measures to increase the availability and connection of consumers to power 5 5 affordability of grid connection; Alexander Viktorovich Pilyugin grids [[ recommendations to the Company’s Board of Directors on the current state of the 5 4 Oleg Romanovich Fedorov Company’s performance in terms of technological connection of consumers to the power grids over different periods; [[ review of information on the Company’s compliance with the current legislation of the Russian Federation in terms of provision of grid connection services over In 2018, the Grid Connection Committee held 9 meetings, in different periods the course of which 20 issues were considered. IN 2018 GRID CONNECTION COMMITTEE HELD AND CONSIDERED 9 20 MEETINGS ISSUES

22 The positions are indicated as of the time of election.

124 125 THE ANNUAL REPORT 2018 | JOINING EFFORTS COMPANY STRATEGY PERFORMANCE SUSTAINABLE CORPORATE PROFILE RESULTS DEVELOPMENT GOVERNANCE

IN 2018 AUDIT COMMITTEE HELD AND Audit Committee In 2018, the Audit Committee held 16 meetings, in the course of CONSIDERED which 39 issues were considered. The main task of the Audit Committee is to develop and give recommendations to the Company’s Board of Directors on the following matters: 16 39 [[ consideration of the accounting (financial) audit and selection of an auditor; MEETINGS ISSUES statements of the Company and supervision over the [[ arrangement and ensuring independence and process of their preparation; objectivity of the internal audit function; [[ supervision over the systems of risk management, Key issues considered followed by the provision of recommendations to the Board of [[ performance management of the system of Tasks of the Audit Committee internal control, and corporate governance; Directors counteracting unethical practices on the part of the [[ supervision over the performance of an external Company’s employees and third parties. Consideration of the accounting (financial) [[ accounting (financial) statements of the Company for various periods prepared in statements of the Company accordance with RAS and IFRS The current composition 23 of the Audit Committee of the Board of Directors of IDGC of Center and Volga Region was and supervision over the approved by the decision of the Company’s Board of Directors dated June 29, 2018 (Minutes No. 322): process of their preparation [[ [[ the report of the sole executive body and the Management Board of the Company on Alexander Viktorovich Shevchuk (Chairperson of the Chief of the Strategic Projects Administration of the the organization and performance of internal control, including information about the Committee, independent director), Executive Director Strategic Development Department of PJSC Rosseti; implementation of improvement actions; of the Professional Investors Association; [[ [[ Yury Kazbekovich Zafesov (non-executive director), reports of the Company’s internal audit on the assessment of the effectiveness of the [[ Denis Lvovich Guriyanov (non-executive director), Director of the Procurement Department of PJSC internal control, risk management, and corporate governance systems over various periods; Director of the Department of Corporate Governance Rosseti; [[ the content of the Internal Control System section of the Company’s Annual Report; and Interaction with Shareholders and Investors of [[ Andrey Vladimirovich Morozov (independent [[ PJSC Rosseti; Supervision over the systems information from the management on the implementation of the Company’s Internal director), Legal Director of the Professional Investors of risk management, internal Control Policy; [[ Vitaly Anatolyevich Domnich (non-executive director), Association. control, and corporate [[ reports of the Internal Audit Department on the implementation of work plans over governance different periods and the results of the internal audit; [[ report on the results of the implementation of measures to comply with the requirements of the legislation of the Russian Federation regarding the control of insider information in IDGC of Center and Volga Region over different periods; Report on the Work of the Audit Committee in 2018 [[ functional specification and essential terms of the contract for rendering of services for an independent assessment of the internal control system efficiency; [[ significant aspects of the Company’s accounting policy in 2018 and planned changes for PARTICIPATION OF THE COMMITTEE MEMBERS IN THE MEETINGS OF THE AUDIT COMMITTEE: 2019 [[ terms of carrying out procurement procedures for selecting an external auditor for the right to conclude a contract for auditing the Company’s accounting (financial) statements; Participation in the meetings of the [[ information given in writing, provided by the external auditor on the main problems of Committee the Company’s accounting (financial) statements over different periods, and information Members of the Audit Committee of the Company’s management about fundamental adjustments made following the Number of meetings Number of meetings Supervision over the performance of an external results of the external audits of the accounts and records; accessible for the member actually [[ members took part in audit and selection of an candidacy of the Company’s external auditor to perform an audit of the Company’s auditor accounts and records over different periods; Nikolay Nikolayevich Varlamov 8 8 [[ amount of payment for the auditor’s services to carry out an audit of the Company’s accounting (financial) statements over different periods; Oleg Romanovich Fedorov 8 7 [[ evaluation of efficiency of the external audit of the Company’s accounting (financial) statements over various periods Tatyana Alexandrovna Ivanova 8 8 [[ candidacy of the Director of the Internal Audit Department of IDGC of Center and Volga Region and his remuneration; Alexander Viktorovich Shevchuk 16 16 [[ the internal audit report on the implementation of the action plan and the performance Denis Lvovich Guriyanov 16 16 results of the internal audit over different periods; [[ results of the self-assessment of the internal audit quality and the implementation of Vitaly Anatolyevich Domnich 8 8 measures for the development and improvement of the internal audit of the Company; Arrangement and ensuring [[ the situation with the correction and reward of the former Head of the Internal Audit Yury Kazbekovich Zafesov 8 8 independence and objectivity Department of the Company; of the internal audit function [[ Andrey Vladimirovich Morozov 8 8 the internal audit report on the results of the identification and disposal of non-core assets of the Company; [[ the budget and a work plan of the Company’s Internal Audit Department for various periods; [[ amendments to the Plan of actions on development and improvement of performance of the internal audit of IDGC of Center and Volga Region for 2017-2019 [[ Efficiency management of implementation of Corrective action plans to eliminate the flaws identified by the Company’s Internal Audit Commission, the Company’s internal audit, external control the system of counteracting (supervision) bodies, the implementation of measures in response to informing about unethical practices on potential cases of the employees’ unscrupulous practice, as well as the results of the part of the Company’s investigations conducted following various periods; 23 The positions are indicated as of the time of election. employees and third parties [[ results of anti-corruption monitoring at the end of various periods

126 127 THE ANNUAL REPORT 2018 | JOINING EFFORTS COMPANY STRATEGY PERFORMANCE SUSTAINABLE CORPORATE PROFILE RESULTS DEVELOPMENT GOVERNANCE

Corporate Secretary Report on the Work of the Management Board in 2018 Management Board Members The Corporate Secretary of IDGC of Center and Volga [[ assisting the members of the Board of Directors and In 2018, the Management Board held 47 meetings, in the In 2018, the powers of two members of the Management Region acts upon the Charter and the Regulations on the Committees of the Board of Directors of the Company course of which 121 issues were considered. Board of IDGC of Center and Volga Region were terminated: Artem Evgenievich Kuranov and Olga Corporate Secretary of the Company, approved by the in exercise of their functions; The following are the main issues of 2018 previously Vladimirovna Tikhomirova 24. As of September 19, 2018, in decision of the Board of Directors dated September 26, considered by the Management Board and submitted to [[ arranging the interaction between the Company accordance with paragraph 23.3 of the Company’s Charter, 2016 (Minutes No. 242). the Board of Directors: (represented by the Board of Directors and the the position of the Chairperson of the Management [[ The corporate secretary is functionally subordinate to Director General) and its shareholders, as well as priorities and strategy of the Company; Board of the Company was taken by Igor Vladimirovich the Board of Directors of the Company. Their main task is storage of the Company’s documents. [[ approval of target values (adjusted values) of key Makovskiy. to ensure that the governing bodies and officials of the The Company’s Corporate Secretary is obliged to submit performance indicators (KPIs) of the Company and Company comply with procedural requirements, which In March 2019, the authority of the member of the her progress report to the Personnel and Remuneration reports on their achievement; guarantee the exercise of rights and legal interests of the Management Board of IDGC of Center and Volga Region Committee and the Board of Directors of the Company [[ recommendations on the dividend amount on shares Company’s shareholders. Konstantin Alexandrovich Mikhaylik was terminated. every year, no later than 30 calendar days before the and the order of its payment; Vitaly Olegovich Akulichev became a member of the The core functions of the Corporate Secretary are the Annual General Meeting. The recommended form of the [[ approval of candidacies for independent assessors; Management Board (Minutes No. 351 dated March 5, 2019). following: report is an annex to the Regulations. In 2018, the report [[ making decisions regarding Company’s affiliation with of the Corporate Secretary of IDGC of Center and Volga [[ arranging the preparation and ensuring the holding other organizations; Region was preliminary reviewed by the Personnel and of the General Shareholders’ Meeting according to [[ IN 2018 MANAGEMENT BOARD HELD AND Remuneration Committee of the Board of Directors on preliminary approval of transactions involving the requirements of the current legislation of the CONSIDERED March 30, 2018 (minutes No. 12/104) and approved by a transfer of the Company’s property without Russian Federation, the Charter, and other internal the decision of the Board of Directors dated May 18, 2018 compensation. documents of the Company; (minutes No. 316). [[ ensuring the work of the Board of Directors and 47 121 Committees of the Board of Directors of the MEETINGS ISSUES Company;

YULIA STANISLAVOVNA GUSEVA 11 5 Corporate Secretary of IDGC of Center and Volga Region Over the past five years, she held the following positions: Head of the Corporate Relations Division of the Corporate Governance and (elected by the decision of the Company’s Board of 6 42 Directors dated June 19, 2017 (Minutes No. 273), Head Shareholder Relations Department of IDGC of Center and Volga Region (2007 – present), member of the Board of Directors of JSC of the Corporate Relations Division of the Corporate ATU (June 2017 – June 2018), member of the Board of Directors of Governance and Shareholder Relations Department. Energetik Health Resort, JSC (June 2017 – June 2018), member of 25 Does not have any shares of IDGC of Center and Volga Region or the Board of Directors of MEK Energoeffektivniye Tekhnologii, JSC 21 subsidiaries and affiliates. (June 2018 – present). Born in 1975. IDGC of Center and Volga Region has no information about STRUCTURE OF ISSUES STRUCTURE OF MEETINGS HELD BY transactions on acquisition or alienation of the Company’s shares CONSIDERED BY THE MANAGEMENT THE MANAGEMENT BOARD Graduated from Nizhny Novgorod Commercial Institute with a made by the person in 2018. degree in Law. In 2014, she received occupational retraining at the BOARD 2018, % IN 2018, UNITS Higher School of Economics, National Research University, having Not related to any members of the governing bodies and completed the Presidential program on management training shareholders of the Company. Has no criminal record, did not for the national economic enterprises of the Russian Federation commit administrative offense in the field of business, finance, (Innovation Management). taxes and fees or security market). 13 The remuneration of the Corporate Secretary for 2018 was 571,325 RUB (before deduction of a personal income tax). 3 21 Held in the form of absentee voting Financial and economic activity Management Board Held in the form of joint attendence The Management Board is a collective executive body [[ implementing the Company’s financial and Reccomendations to board members intended to manage the Company directly, as guided by economic policy, developing decisions on the major Management of subsidiaries and affiliates the resolutions of the General Meeting of Shareholders issues related to the Company’s current economic Management of training centers and the Board of Directors. The Management Board operations, and coordinating the operation of the operates in accordance with the legislation of the Russian Company’s units; Transactions over 1 % of the book value of assets Federation, the Charter, Regulations on the Management Efficient risk management [[ increasing the efficiency of the internal control and Board, and the Corporate Governance Code of the risk monitoring systems; Other Company. [[ ensuring a high level of income from the Company’s The key objectives of the Management Board are as assets and the maximum profit from the Company’s follows: operations. [[ ensuring respect for the rights and legitimate interests of the Company’s shareholders; 24 Decision of the Board of Directors dated July 20, 2018 (Minutes No. 324). [[ preparing proposals concerning the Company’s development strategy;

128 129 THE ANNUAL REPORT 2018 | JOINING EFFORTS COMPANY STRATEGY PERFORMANCE SUSTAINABLE CORPORATE PROFILE RESULTS DEVELOPMENT GOVERNANCE

As of December 31, 2018, the current Management Board The Sole Executive Body – the Management Company of IDGC of Center and Volga Region25: The sole executive body is responsible for management of the The sole executive body completed all assignments of the Board day-to-day operations of IDGC of Center and Volga Region, except of Directors of IDGC of Center and Volga Region for 2018. IGOR VLADIMIROVICH MAKOVSKIY INNA VITALIEVNA GROMOVA for matters that are the responsibility of the General Meeting of Deputy Director General for Human Resource Shareholders, the Board of Directors, or the Management Board The authority of the sole executive body of IDGC of Center and Chairperson of the Management Board, Director General Management and Organization Design of IDGC of Centre, of the Company. Volga Region was delegated to the management company, IDGC of Centre, PJSC, following the decision of the Annual General of IDGC of Centre, PJSC, the management company of PJSC, the management company of IDGC of Center and The sole executive body presents the reports on fulfillment of Shareholders’ Meeting dated June 5, 2017. IDGC of Center and Volga Region. Volga Region. resolutions of the Board of Directors and other reports for the consideration of the Board of Directors in compliance with the current legislation, the operations plan of the Board of Directors, ALEXANDER VIKTOROVICH PILYUGIN KONSTANTIN ALEXANDROVICH MIKHAYLIK and the internal documents of the Company.

Deputy Director General of IDGC of Centre. Deputy Chairperson of the Management Board, first Management Company Details Deputy Director General, Chief Engineer of IDGC of Centre, PJSC, the management company of IDGC of Public Joint-Stock Company “Interregional Distribution Grid Complete trade name Center and Volga Region. Company of Center” Abbreviated company name IDGC of Centre, PJSC Read more about the members of the Management Board on the Agreement No. 7700/00313/17 dated September 11, 2017 on the VYACHESLAV ALEXANDROVICH GOREV Company’s official website:http://www.mrsk-cp.ru:443/about/ Grounds for the delegation of authority delegation of authority of the sole executive body of IDGC of management/board_of_directors/. Center and Volga Region to IDGC of Centre, PJSC Deputy Director General for Capital Construction of IDGC Address Russia, Moscow of Centre, PJSC, the management company of IDGC of INN (TIN) 6901067107 Center and Volga Region. OGRN 1046900099498 Phone number +7(495) 747‑9292 Fax +7(495) 747‑9295 Email address [email protected] Information on license to carry out activities on the management of investment funds, mutual investment funds and private None Participation in the Meetings of the Management Board pension funds Internal Control System The average percentage of attendance of the THE AVERAGE PERCENTAGE meetings by members of the Management Board OF THE MEETINGS ATTENDANCE BY The Internal Control System of IDGC of Center and Volga 1 is at the level of heads of the Company’s was 71 %. MEMBERS OF THE MANAGEMENT BOARD Region is integrated into the general management system line of units and subdivisions: they are responsible 71 % defense of the Company and is regulated by the Company’s for achievement of results and control Internal Control Policy, approved by the decision of the the compliance with the job descriptions Board of Directors dated March 11, 2016 (Minutes No. 216). and the managerial instructions by the Its main objective is to provide reasonable guarantees of subordinates; PARTICIPATION OF MEMBERS IN THE MEETINGS OF THE MANAGEMENT BOARD IN 2018 achievement the following goals: is at the level of control units: they ensure [[ operational efficiency and strong performance of the the implementation of and compliance with 47 47 47 47 Company, including achievement of financial and 2 the Company’s Policies regarding internal

32 operating results, protection of the Company’s assets; line of control, risk management, environmental defense protection, compliance with safety 25

25 [[

24 compliance with applicable laws and local 22 22 23 22 regulations, quality assurance, etc.; regulations in the Company’s commercial activities

15 15 and financial accounting; is at the level of the Internal Audit Department: using a risk-based approach, [[ reliability and timeliness of accounting (financial) it examines and reports to the Board of 0 0 and other reports. 3 Directors and top management on how MAKOVSKIY ISAEV MIKHAYLIK PILYUGIN GOREV GROMOVA TIKHOMIROVA KURANOV Structure of the Internal Control System line of efficiently the Company assesses and IGOR OLEG KONSTANTIN ALEXANDER VYACHESLAV INNA OLGA ARTEM defense manages its risks, and how effectively the VLADIMIROVICH YURYEVICH ALEXANDROVICH VIKTOROVICH ALEXANDROVICH VITALYEVNA VLADIMIROVNA EVGENYEVICH The Internal Control System of IDGC of Center and internal control is carried out on the first Volga Region is built in a way that makes it possible for and second lines of defense. the control procedures to be carried out continuously and cover all aspects of the Company’s activities. The Total number of meetings, which a member of the Board of Directors could attend Internal Control System of IDGC of Center and Volga Number of meetings, in which a member of the Board of Directors actually participated Region is based on the “three lines of defense” model, which means the internal control in the Company is administered at three levels:

25 Was elected by the decisions of the Board of Directors of the Company dated June 25, 2008 (Minutes No. 17), dated October 14, 2016 (Minutes No. 243), dated November 1, 2016 (Minutes No. 245), dated December 1, 2016 (Minutes No. 249), dated July 10, 2017 (Minutes No. 275), and July 20, 2018 (Minutes No. 324).

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STRUCTURE OF THE INTERNAL CONTROL SYSTEM Audit Commission The Audit Commission is a permanent internal control During 2018, there were two compositions of the Audit Board of Directors Audit Commission body regularly monitoring the Company’s financial and Commission of IDGC of Center and Volga Region. Between business activities, its separate divisions, officials of the June 5, 2017 and June 1, 2018, the Commission included management bodies, and subdivisions of the executive the following members elected by the decision of the Management Company – office for compliance with the legislation of the Russian Annual General Shareholders’ Meeting dated June 5, 2017 IDGC of Centre, PJSC Management Board Federation, the Charter, and internal documents of the (Minutes No. 11) 26: Company. The Audit Commission acts in the interests [[ Marina Alekseyevna Lelekova (Chairperson of the of the Company’s shareholders and reports only to the Audit Commission), Head of the Internal Audit and 1ST LINE OF DEFENSE General Meeting of Shareholders. Board of Directors’ Audit Control Department of PJSC Rosseti; The operation of the Audit Commission is regulated by Heads of Subdivisions and Departments Committee [[ Svetlana Anatolievna Kim, Head of the Administration the Company’s Charter and the revised Regulations on for Audit Activities of the Control and Review the Audit Commission of IDGC of Center and Volga Region Department at PJSC Rosseti; approved by the resolution of the General Shareholders’ Collegiate Bodies Other Committees of the [[ (Commissions, Working Groups) Board of Directors Meeting dated June 6, 2017 (Minutes No. 11). Elena Alexandrovna Kabizskina, Deputy Head of the Internal Audit Office of the Internal Audit and Control The key objectives of the Audit Commission of the IDGC of Department at PJSC Rosseti; Center and Volga Region are the following: 3RD LINE OF DEFENSE [[ Oksana Alekseyevna Medvedeva, Chief Expert of the [[ control of the financial and business operations of 2ND LINE OF DEFENSE Internal Audit Office of the Internal Audit and Control the Company; Department at PJSC Rosseti; Middle Offices:: Internal Audit [[ independent assessment of reliability of the data Department [[ Elena Stanislavovna Erandina, Chief Expert of the • Internal Control and Risk Management contained in the Company’s Annual Report and the Control and Expert Office of the Internal Audit and Department annual accounting (financial) statements. • Legal Department Control Department at PJSC Rosseti. • Department of Anti-Corruption Policy In 2018, three in-person meetings of the Audit Implementation Commission of IDGC of Center and Volga Region were held, during which 10 issues were reviewed and the • Security Department Company’s financial and business operations over 2017 • Corporate Governance and Shareholder were audited. On December 17, 2018, an audit of the Relations Department Company’s financial and business operations over 2018 • Case Management Department was initiated. • Occupational Safety Department • Department of Industrial Monitoring and Reliability The current Audit Commission was elected by the decision of the Annual General Shareholders’ Meeting dated June 1, • Quality Management Department 2018, (Minutes No. 12)27: • Technical Supervision Center MARINA ALEKSEYEVNA LELEKOVA ELENA ALEXANDROVNA KABIZSKINA

Internal Audit Department Deputy Head of the Administration for Audit Activities of Chairperson of the Audit Commission, Head of the [[ the Control and Review Department of PJSC Rosseti. The Internal Audit Department is the unit responsible Program on Assurance and Improvement of Internal Internal Audit and Control Department of PJSC Rosseti. for the implementation of the internal audit function in Audit Quality approved by the decision of the She does not have any shares of IDGC of Center and Volga She does not have any shares of IDGC of Center and Volga the Company. It is under the direct control of the Board Company’s Board of Directors dated December 29, Region or subsidiaries and affiliates. Region or subsidiaries and affiliates. of Directors, which monitors and organizes the operation 2016, (Minutes No. 252); Born in 1964. of this unit, including the approval of performance [[ in-house standards of internal audit and standards Born in 1961. Was elected to the Audit Commission of IDGC of Center and plans and reports on their implementation, adoption of of practical application, developed according to the Was elected to the Audit Commission of IDGC of Center and budgets, and approval of decisions on the appointment, Volga Region three times: June 9, 2016, June 5, 2017, and June 1, International Professional Standards of Internal Volga Region six times: June 18, 2013, June 26, 2014, June 16, 2015, 2018. dismissal, and remuneration of an executive. In 2018, the Audit. June 9, 2016, June 5, 2017, and June 1, 2018. Internal Audit Department included 12 people. Over the past five years, she held the following positions: The Internal Audit Department receives feedback Over the past five years, she held the following positions: member of the Audit Commission of IDGC of Center and Volga The operations of the Internal Audit Department of IDGC from the Audit Committee of the Board of Directors in Chairperson of the Audit Commission of IDGC of Center and Region (2016 – present), Deputy Head of the Administration of Center and Volga Region are regulated by the following various forms, including questionnaires filled out by its Volga Region (2013 – present), Head of the Internal Audit and for Audit Activities of the Control and Review Department of documents: members. The satisfaction rate of the Audit Committee Control Department, Director of the Monitoring Department and PJSC Rosseti (2014 – present), Head of the Administration for [[ Director of the Internal Audit and Control Department of PJSC Methodological Support of the Internal Audit Department of PJSC the Company’s Internal Audit Policy and the Code of with performance of the Internal Audit Department Rosseti (2013 – present). Ethics for Internal Auditors approved by the decision is calculated as a ratio of the weighted average score MOESK (2013-2014). of the Board of Directors dated March 11, 2016 on the questionnaire forms of the voting members to (Minutes No. 216), as amended on February 28, 2017 their total number. Following the results of 2018, the (Minutes No. 258); Audit Committee of the Board of Directors assessed the [[ Regulations on the Internal Audit Department performance of the Internal Audit Department as “satisfy”. approved by the decision of the Board of Directors dated August 24, 2016, (Minutes No. 238); 26 The positions are indicated as of the time of election. 27 The positions are indicated as of the time of election.

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OKSANA ALEKSEYEVNA MEDVEDEVA Over the past five years, she held the following positions: member of the Audit Commission of IDGC of Center and Volga External Audit Region (2017 – present), Head of the Administration for Audit The external auditor carries out an independent audit Board of Directors of IDGC of Center and Volga Region Chief Expert of the Administration for Audit Activities of Activities of the Control Department, Head of the Administration the Control and Review Department of PJSC Rosseti. for Audit Activities and Internal Audit of the Internal Audit of the accounting records and financial (accounting) proposes the candidacy of an auditor for consideration and Control Department, Head of the Administration for Audit statements of the Company and draws up an opinion and approval at the General Meeting of Shareholders of She does not have any shares of IDGC of Center and Volga Region Activities of the Control and Review Department of PJSC Rosseti about their reliability and compliance of accounting the Company. or subsidiaries and affiliates. (2013 – present). procedures with the legislation of the Russian Federation. Ernst & Young was appointed as the Company’s auditor to Born in 1978. The central procurement committee of PJSC Rosseti conduct the audit of the financial (accounting) statements Was elected to the Audit Commission of IDGC of Center and Volga selects the external auditor, and the Audit Committee for 2018 by the resolution of the Annual General Meeting Region four times: June 16, 2015, June 9, 2016, June 5, 2017, and of the Board of Directors of IDGC of Center and Volga of Shareholders of IDGC of Center and Volga Region dated June 1, 2018. ARTEM NIKOLAEVICH KIRILLOV Region assesses its qualifications, quality of work, and June 1, 2018 (Minutes No. 12). Ernst & Young was also Over the past five years, she held the following positions: compliance with the requirements for independence selected to audit the consolidated financial statements of member of the Audit Commission of IDGC of Center and Volga Deputy Head of the Administration for Audit Activities of and makes a conclusion on the auditor’s candidacy. The IDGC of Center and Volga Region for 2018. Region (2015 – present), Chief Expert of the Control Department, the Control and Review Department of PJSC Rosseti. Chief Expert of the Control and Review Department of PJSC Auditor Information Rosseti (2014 – present), Division Head of the Control and Audit He does not have any shares of IDGC of Center and Volga Region Department of Federal Grid Company UES, OJSC (2011-2014). or subsidiaries and affiliates. Abbreviated company name Ernst & Young

Born in 1984. Russian Federation, 115035, Moscow, ul. Sadovnicheskaya Address Naberezhnaya, 77, bld. 1 Was elected to the Audit Commission of IDGC of Center and Volga Region twice: June 26, 2014 and June 1, 2018 SVETLANA ANATOLIEVNA KIM INN 7709383532 Over the past five years, he held the following positions: member of the Audit Commission of IDGC of Center and Volga Region OGRN 1027739707203 Head of the Administration for Audit Activities of the (2018 – present), member of the Audit Commission of IDGC of Phone number +7 (495) 705-97,00, +7 (495) 755-,9700 Control and Review Department of PJSC Rosseti. Center and Volga Region (2014-2015), Head of the Investment Audit Division of the Administration for Audit Activities and She does not have any shares of IDGC of Center and Volga Region Fax +7 (495) 755-9701 Internal Audit of the Internal Audit and Control Department, or subsidiaries and affiliates. Deputy Head of the Administration for Audit Activities of the Email address www.ey.com/ru/. Born in 1981. Control Department, Deputy Head of the Administration for Audit Activities of the Control and Review Department of PJSC Rossetti A member of the Russian Union of Auditors, a Self-Regulatory Was elected to the Audit Commission of IDGC of Center and Volga (2013 – present). Organization of Auditors (SRO RSA), and is included in the Membership in a self-regulatory organization Region twice: June 5, 2017 and June 1, 2018. register of auditors and audit organizations of the SRO RSA under the main registration entry number 11603050648.

Evaluation and Improvement of the Internal Control System IDGC of Center and Volga Region and Ernst & Young On December 25, 2018, the Company and Ernst & In 2018, the Internal Audit Department conducted an [[ a responsibility assignment matrix for business entered into the audit services contract No. ECU-2018- Young also signed a contract No. TAS-2018-00279 for a internal evaluation. According to its results, the maturity processes of IDGC of Center and Volga Region was 00137 dated August 3, 2018, to audit the reporting comprehensive review of the financial and economic level of the Company’s Internal Control System as of the developed and approved; prepared in compliance with RAS and IFRS, the cost operations of IDGC of Center and Volga Region, including end of 2017 was 4.9 points out of 6, which conforms to the of which was 5,988.895 RUB thou. (VAT included). The the examination of maturity of information systems and [[ the work on specification of charts and matrices of “optimal” level of maturity. amount of remuneration paid to Ernst & Young in 2018 the assessment of risk management and internal control controls and risks for all the Company’s business under this contract reached 3,683.170 RUB thou. with VAT. systems. An external independent evaluation was made by a processes was completed; consortium of Ernst & Young Assessment and Consulting [[ assessment of design and operating efficiency of Services and RSM RUS. control procedures for the Company’s business Risk Management System Based on its results, as of March 31, 2019, the Company’s processes was made; IDGC of Center and Volga Region runs a Risk Management environment, or ownership interests of its shareholders Internal Control System was recognized as effective. [[ heads of subdivisions performed a self-assessment System (RMS). The purpose of the RMS is to ensure and investors. With regard to the recommendations issued in 2019, sustainable continuous operation and development of of efficiency of the control procedures and the To develop the Company’s RMS, a revised Risk the Company will develop a plan to maintain the the Company through timely identification, assessment Internal Control System of the business processes Management Policy of IDGC of Center and Volga Region effectiveness of the Internal Control System. The Board and effective management of risks that threaten to under their supervision. was approved by the decision of the Board of Directors of Directors plans to review the results of the external hamper the effective running of business or damage the dated March 21, 2016 (Minutes No. 217). evaluation of the Internal Control System effectiveness in reputation of the Company, health of its employees, the 2019. On April 28, 2018, the Company’s Management Board approved a Performance Plan for the Improvement of the Internal Control System and Risk Management System for 2018 (Minutes No. 12/562). According to this plan, in 2018, MATURITY LEVEL OF THE COMPANY’S the following key measures were implemented: INTERNAL CONTROL SYSTEM AT YEAR-END 2018 POINTS 4.9 “OPTIMAL” LEVEL

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Parties of the Risk Management System Parties of the Main functions Risk Management Main functions In accordance with the Company’s Risk Management Parties of the Process In accordance with other internal documents Risk Management Policy Process In accordance with the Company’s Risk Management Policy In accordance with other internal documents Executive [[ ensuring the establishment and maintenance In accordance with the Charter of the Company: [[ [[ bodies (the of an effective RMS by applying common regular reports to the Board of Directors of the Company The Board of approval of internal documents, which define In compliance with the Company’s restated Charter Company’s approaches and standards developed and for the establishment and maintenance of an effective Directors of the the organization and functioning of the RMS; dated June 4, 2018 (Minutes No. 12 of the Annual General Management approved for Rosseti Group of Companies; RMS and internal control Meeting of Shareholders): Company [[ approval of the Risk Management Policy; Board, [[ responsibility for the compliance with [[ definition of principles and approaches to the management [[ annual review of reports from the executive decisions of the Board of Directors on the organization of the RMS and internal control; company – bodies concerning the organization, organization and operation of the RMS [[ IDGC of performance and effectiveness of the RMS, assessment of key operational risks (both financial Centre, PJSC) and non-financial) and establishment of an assessment of the RMS functioning and [[ production of recommendations for its acceptable risk magnitude; Risk owners timely risk identification and evaluation; In accordance with the Provisions of IDGC of Centre, PJSC “On [[ the Distribution of Responsibility and Authority between the improvement; [[ management of examination and evaluation of the selection of a risk response methods; [[ timely development and organization of risk Deputy Directors General, Heads directly reporting to the [[ annual review of a report from the internal operation of the RMS and internal control done at management activities; Director General and Deputy Directors General – Directors audit unit on the RMS efficiency; least once a year; [[ regular risk monitoring; of the Branches of IDGC of Centre, PJSC, dated January 22, [[ [[ consideration of the results of external annual review of organization, operation and [[ provision of timely informing of the 2018 (order No. 19-TsA) as amended on April 11, 2018 (order efficiency of the RMS and internal control No. 177-TsA): independent evaluation of the RMS efficiency in Company’s executive bodies on the results of [[ case of its execution risk management work; ensuring regular monitoring of status of risks of the [[ supervised processes; Strategy and [[ monitoring the efficiency of risk management In accordance with the Regulations on the Strategy and ensuring effective interaction with the risk [[ management unit regarding documents ensuring timely update of risks of the supervised Development procedures; Development Committee of the Board of Directors of IDGC processes; of Center and Volga Region dated July 31, 2018 (Minutes and reporting generated as part of risk Committee [[ performance assessment of risk management [[ ensuring a quarterly analysis and rating of factors No. 19) as amended and supplemented on March 24, 2016 management activities measures and RMS improvements; contributing to the realization of risks of the supervised (Minutes No. 217): [[ preliminary consideration of reports from the processes; [[ control over the organization and functioning of the [[ executive bodies concerning the organization arranging the development and adoption of measures for RMS; and performance of the RMS prior to their risk management of the supervised processes [[ review of reports from the executive bodies on the presentation to the Board of Directors; [[ timely identification and/or minimization of organization, performance and efficiency of the RMS, Performers [[ analysis of proposals for the RMS improvement, of risk risks in accordance with job descriptions and internal documents defining the organization and including the identification of risks and management regulating documents; - development strategy of the RMS, Risk Management adjustment of risk parameters; actions [[ implementation of measures aimed at risk Policy and proposals for their improvement prior to [[ management timely and in full preliminary review of the Company’s internal their submission to the Board of Directors; documents defining the organization and [[ [[ assessment of completeness, efficiency and results of Risk general coordination of risk management functioning of the RMS along with the the implementation of measures worked out by the Management processes, including the interaction of all the Risk Management Policy and subsequent executive body for managing significant (key) risks Division – RMS participants; amendments thereto prior to their approval by Internal [[ introduction of methodology documents into the Board of Directors; Control the Company that would ensure the process [[ preliminary consideration and preparation of and Risk of risk management and the RMS operation; [[ a statement on the text of the RMS-concerning Management organization of RMS training of the Company’s Department section of the Company’s Annual Report prior to employees; [[ its approval by the Board of Directors timely aggregation of information on all identified risks and drafting of proposals for [[ - Audit preliminary review of the results of the RMS In accordance with the Regulations on the Audit updating the risk register; Committee of efficiency evaluation and examination of Committee of the Board of Directors of IDGC of Center [[ ensuring monitoring of the risk management and Volga Region dated March 14, 2016 (Minutes No. 216) the Board of compliance with the provisions of the Policy process in the Company and the controlled as amended and supplemented on November 2, 2016 Directors of the based on the internal auditor’s report on the entities according to the established Company stated issues prior to their submission to the (Minutes No. 246): [[ procedure; Board of Directors at least once a year, preliminary review of the [[ timely and full provision of all stakeholders report from the Internal Audit on the efficiency of (including the Company’s executive bodies) the internal control system, RMS and corporate with information on the main trends, risks, governance, as well as preliminary review of reports challenges and threats in the Company’s based on the external independent assessment of activities the efficiency of the internal control system, RMS and [[ corporate governance; Internal Audit internal independent assessment of the RMS efficiency and provision of recommendations [[ drafting of proposals for improving the RMS, internal Division – Internal Audit to the risk management unit aimed control, and corporate governance practices Department at improving the RMS efficiency and In accordance with the Charter of the Company: performance; - [[ [[ Verification and analysis of the financial position of informing the Company’s executive bodies Audit [[ the Company, its financial solvency, performance of and the Board of Directors (the authorized review of reports prior to their submission to committee of the Board of Directors) on the Commission of the Board of Directors the internal control system and the RMS, liquidity of the Company assets, debt-equity ratio, correctness and timeliness RMS status of accrual and payment of bond interests, and yield on other securities

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Main Factors, Assessment of Significance and Dynamics of Risks Risk significance Level of significance CRITICAL SIGNIFICANT MODERATE Measures aimed at minimization of risk № Risk Name Risk Description assessment consequences and Risk dynamics significance Measures aimed at minimization of risk № Risk Name Risk Description assessment 4 RISKS The risk is conditioned by the lack of Provision of customers with bills for power consequences and ASSOCIATED available procedures that motivate transmission services with information about dynamics WITH NON- the service consumers to pay for punitive measures for breach of payment PAYMENT FOR power transmission services in due obligations as stipulated by the effective Industry Risks THE PROVIDED time, as well as by macroeconomic legislation. POWER factors (decline of financial solvency Initiating an examination of non-payment issues 1 TARIFF Government-implemented policy Drafting and submission of proposals for the TRANSMISSION of consumers). at the meetings of the regional collegiate bodies ASSOCIATED of tariff regulation considers the economic justification of the Company’s expenses SERVICES chaired by the executive bodies of the constituent RISKS need for inflation control and to the regulatory authorities of the constituent (INCURRING OF entity of the Russian Federation. makes provisions for adjustment of entities of the Russian Federation. DISPUTABLE AND regulated tariffs for grid operators in INDISPUTABLE Execution of measures aimed at reduction Continuous implementation of the program to of overdue debts for the rendered power 2017-2019 making them lower than the save the Company’s costs. OVERDUE actual inflation index while prices on ACCOUNTS transmission services and resolution of disputes the wholesale market increase higher Fulfillment of commitments under investment RECEIVABLE) as specified by the Standard of Claim-Related than anticipated. It preconditions a programs and energy efficiency programs. BY SERVICE Work of IDGC of Center and Volga Region. risk that the regulatory authorities Ensuring the achievement of the target reliability CONSUMERS Ensuring 100 % coverage of the total amount of impose tariff options, which could and quality of the services rendered. overdue receivables by taking measures for debt not guarantee collectability of recovery. economically sound proceeds. Country and regional risks 2 RISK OF DECLINE The risk is conditioned by a possible Monthly monitoring of power consumption of the OF POWER slowdown of electric power sales and largest consumers in the regions. 5 RISKS The risks are conditioned by a A program of activities aimed at improving the ASSOCIATED decline in the economic activity efficiency of work is being implemented: TRANSMISSION an optimization of external power Conducting cycle inspections of electric power WITH POLITICAL of the constituent entities of the [[ SERVICES supply schemes by heavy consumers. metering systems, check taking of readings. reduction of costs of operating activities; AND ECONOMIC Russian Federation in the regions of [[ Preparation of electric power balances for ENVIRONMENT the Company’s operations, increase optimization of contractor relationships; substations based on the technical electric power IN THE COUNTRY of loan fund costs, which, in its turn, [[ optimization of contractual relations with metering, identification of network sections with THE REGION may result from unstable external consumers; excess normative losses, performing surprise conditions, international sanctions, [[ management of accounts receivable; inspections to identify off-the-meter and non- credit rating downgrade and [[ ensuring optimal tariff and balance decisions contractual consumption. escalation of inflationary exposure. in the regions of the Company’s operation. Conclusion of power transmission contracts with The impact may lead to reduction the prerequisite submission of planned electric of Company’s revenue and its To ensure stability of settlements, monetary power consumption in order to correctly include shareholder value. transactions of IDGC of Center and Volga Region the consumption in the business plan of the are handled in high reliability banks partially Company. owned by the government; to minimize the debt load, there are restrictions on the volume and 3 RISKS The risks are conditioned by the Clarification of obligations under the grid interest rate of raised borrowed funds. ASSOCIATED following: connection contracts and explanation of the To optimize the investment activities, the WITH [[ probable shortage of funding for Applicants’ risks in the event of failure to fulfill investment programs are developed with regard RENDERING activities carried out under the the obligations under these contracts (punitive to the order of priority of implementation of THE GRID grid connection contracts; measures, extension of time of grid connection). investment projects, with the exception of projects CONNECTION [[ Complaint management in terms of that do not have funding. SERVICES TO failure to fulfill the obligations under the grid connection reimbursement of expenses for grid connection by APPLICANTS 6 RISKS The risks are conditioned by probable Enhancing engineering and physical protection of contract by the applicant; the Applicant. ASSOCIATED acts of unlawful interference into the facilities by: [[ Monitoring of applications, generation of forecasts failure of the applicants to use WITH POSSIBLE operation, including terrorist attacks, [[ for grid connection (including the geography of carrying out anti-terrorist exercises and drills; the capacity obtained through CONFLICTS AND in particular, those committed by growth) to project the volume of applications and [[ grid connection. THEIR ASPECTS, global terrorist groups, as well as organizing and maintaining the established the scope of obligations of the grid company for IMPOSITION OF nationalists from certain countries. internal access and site access control along These factors may cause a decline the coming year. with physical protection; in the Company’s revenues from grid THE STATE OF These acts could have a negative Control of compliance with the specifications [[ connection. EMERGENCY AND effect on the Company’s operation. ensuring security equipment serviceability. and the terms of drafting the grid connection PROTESTS IN Carrying out preventive measures for the contracts. THE REGIONS Company’s personnel. Control over fulfillment of obligations under grid Improving cooperation with law enforcement connection contracts. and supervisory authorities, intelligence Building of consumer trust in the company by agencies, regional and municipal regulatory and offering an easy and clear explanation about the administrative authorities, including that under process of grid connection (posting information the existing Agreements with territorial authorities on the Company’s official website, developing a of the Federal Security Service, Ministry of Interior, method of informing the applicants, monitoring and EMERCOM of the Russian Federation. the quality of work of customer service centers). Monitoring of the criminal and socio-economic situation in the area of the Company’s​ responsibility

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Risk Risk significance significance Measures aimed at minimization of risk Measures aimed at minimization of risk № Risk Name Risk Description assessment № Risk Name Risk Description assessment consequences consequences and and dynamics dynamics

7 RISKS The risks are conditioned by natural The regions where the Company operates have a Legal risks ASSOCIATED and climatic emergencies (exposure well-developed transport infrastructure and are WITH to hurricanes, heavy downpours, not subject to risks associated with disruption 11 LEGAL RISKS Risks associated with changes in the Mitigation of legal consequences having a negative GEOGRAPHIC floods, snowdrifts, ice formation, of transportation due to remoteness and/or legislation, court practice covering impact on the Company’s activities. FEATURES OF power supply interruption due to inaccessibility. the Company’s activities, balance of Constant monitoring of changes in the legislation THE COUNTRY fires, explosions in residences and so convenience with other electric power of the Russian Federation, including explanations The Company implements a set of measures to industry entities. AND REGION, on). As a result, electric power supply prepare the electric grid complex for the autumn and comments concerning its application. INCLUDING and transport connection in the and winter period with each branch of the Constant monitoring of changes in the application HIGHER RISK region could be interrupted. Company being validated for preparedness for the of the legislation of the Russian Federation in OF NATURAL autumn and winter period. court practice. CALAMITIES Preliminary due diligence of legal disputes; AND POSSIBLE The branches of IDGC of Center and Volga Region INTERRUPTION have a long-term experience of successful Legal review of transactions with contractors. OF TRANSPORT and prompt elimination of natural disaster CONNECTION consequences affecting the power grid equipment 12 COMPLIANCE Risks associated with sanctions of the Implementation of the requirements of Article and infrastructure. RISKS regulatory authorities due to potential 13.3 of Federal Law On Countering Corruption, noncompliance of the Company’s Anti-Corruption Policy of PJSC Rosseti and its Financial risks activities with the legal requirements, subsidiaries and affiliates. local policies and other binding 8 EXCHANGE RATE Adverse effect of changing foreign This risk does not have significant influence Improvement of the regulatory and legal regulatory documents. RISKS exchange rates on the results of the on the financial position of the Company as it framework of corruption counteractions. Company’s financial and business makes settlements with contractors in rubles and Development of a uniform understanding of operations. has neither obligations in foreign currency nor the Company’s position on non-acceptance obligations bound to foreign currency. of corruption in any form or aspect among employees, shareholders, partners and contractors. Joining a corporate effort to fight and prevent 9 RISKS ASSOCIATED Influence on potential escalation of Engaging the largest Russian banks capable of corruption. WITH CHANGES IN Company’s expenses associated with accommodating with a sufficient amount of credit Legal education and building a foundation for INTEREST RATES raising credit funds for financing the resources at relatively low rates in participation in law-abiding behavior of the employees, consulting investment programs. auctions for fund raising. Should the situation in and training of personnel. the financial markets degrade, working with these Identification and clearing of conflict of interests. banks allows the issuer: [[ to smooth the surges of interest rates on Reputation risk borrowed funds received; [[ 13 REPUTATION The risk is associated with a possible The Company constantly updates the public about to reduce the likelihood of early repayments RISK failure to perform obligations to its activities and the activities of its branches and of loans, which may be the result of interest clients and partners. has well-established relations with the media. rate development. In compliance with the requirements for The terms of the existing line of credit agreements mandatory disclosure, the Company publishes of the emitter provide for a proportional increase full information on its official website in a timely in the interest rate on loans only due to an manner. increase in the key rate of Bank of Russia. The Company has established cooperation 10 INFLATION RISKS Impact of the consumer price index A factoring scheme of settlements with the and business communications with the press growth on interest costs, cost level Company’s debtors is implemented. representatives of the regional and municipal authorities, departments of the EMERCOM, social and profitability level and, as a Interim measures where the Company provides consequence, on the Company’s organizations, and the leading editorial offices in bank guarantees as securing consensus are used the regions. financial position and capability to in court proceedings. This allows for a seizure fulfill obligations. of the contractor’s accounts, which, in turn, Strategy risk stimulates a faster debt recovery. 14 STRATEGY RISK The risk of the Company’s failure to To minimize this risk, the Company takes the achieve strategic goals and objectives following measures: due to potential changes in internal [[ delimitation of powers of management and external business environment of bodies in terms of decision-making; the Company. [[ control over implementation of these decisions; [[ development of business plans and control over their implementation; [[ monitoring of changes in the legislation of the Russian Federation and the existing regulatory documents;

140 141 THE ANNUAL REPORT 2018 | JOINING EFFORTS COMPANY STRATEGY PERFORMANCE SUSTAINABLE CORPORATE PROFILE RESULTS DEVELOPMENT GOVERNANCE

Risk significance RISKS MAP Measures aimed at minimization of risk № Risk Name Risk Description assessment consequences and dynamics [[ monitoring of resources (including financial, TARIFF RISKS material and technical, and human resources) to achieve the strategic goals; INVESTMENT RISK A RISK OF DECLINE OF POWER TRANSMISSION SERVICES [[ ensuring continuous staff development. RISKS ASSOCIATED WITH RENDERING THE GRID Risks associated with Company’s activities OPERATIONAL AND TECHNOLOGICAL RISK CONNECTION SERVICES TO APPLICANTS

15 OPERATIONAL Decrease of reliability of power Grid renovation, implementation of target RISKS ASSOCIATED WITH NON-PAYMENT AND supply to consumers resulting from programs to improve reliability and technical FOR THE PROVIDED POWER TECHNOLOGICAL such factors as natural or human- condition of the grid. STRATEGY RISK TRANSMISSION SERVICES RISK made emergencies, which cause On-condition repair of the facilities based on the operation interruption of electrical risks and disconnection data. grid equipment; a large number of RISKS ASSOCIATED WITH POLITICAL equipment with higher-than-normal Identification of causes and preconditions of AND ECONOMIC ENVIRONMENT IN THE service life; non-compliance with the fires for the development of organizational and REPUTATION RISK COUNTRY AND REGION regulatory and technical requirements technical protective measures to prevent fires at as related to exceeding the specified the sites. permitted values of technological Taking measures to eliminate the causes of violations of fire safety requirements at the parameters of electrical grid RISKS ASSOCIATED WITH POSSIBLE MODERATE equipment. facilities. CONFLICTS AND THEIR ASPECTS COMPLIANCE RISKS Staff management: training, professional development. SIGNIFICANT Community outreach, development of PR RISKS ASSOCIATED WITH GEOGRAPHIC programs. LEGAL RISKS FEATURES OF THE COUNTRY AND REGION Constant and periodic control over fire safety and CRITICAL operation of power plants, equipment, buildings and structures. INFLATION RISKS EXCHANGE RATE RISKS Drafting and updating the regulations on technological interaction with related power industry entities (RPE). RISKS ASSOCIATED WITH CHANGES IN INTEREST RATES

16 INVESTMENT Reduction of sources of funding for Timely funding of the investment program RISK the Company’s investment programs facilities, compliance with the time-frames in the event of weakening of its of payment under the contracts signed with financial and economic standing, contractors. Corruption Prevention and Counteraction and, as a result, a decrease in the Conducting claim-related works with contractors proceeds while the investment violating contractual obligations. The activities of the department responsible for of Anti-Corruption Policy Implementation of the Anti- programs are not executed. Deadline management for procurement corruption prevention and counteraction in IDGC of Corruption Compliance Procedures Office. In 2018, the Failure to comply with the scheduled procedures, compliance with contract conclusion Center and Volga Region are organized in compliance Company received five appeals about possible facts of dates of putting into operation time-frames. with the Anti-Corruption Policy of PJSC Rosseti and its corruption. the facilities constructed under Weekly monitoring of the construction process subsidiary affiliates, approved by the decision of the the investment programs due to When carrying out procurement procedures, the Company under the investment program. Board of Directors of IDGC of Center and Volga Region contractors’ and suppliers’ failure to follows the requirements of a uniform Anti-Corruption dated February 28, 2017 (Minutes No. 258). discharge their obligations or do so Control over the scope of commissioning of Standard for inspecting procurement activities. It annual investment program facilities. in time. In 2018, the department was working on the following: involves an assessment of the degree of trustworthiness Control over the quality and timely execution of and integrity of contractors, exception of possible design and survey works. [[ development of in-house policies and procedures as conflicts of interest, affiliation or other abusive practices part of the implementation of the requirements of Designer’s supervision. associated with positions held in the Company. Over 2018, Art. 13.3 of the Federal Law of the Russian Federation 80,022 expenditure and revenue agreements and 6,047 No. 273-FZ “On Countering Corruption” dated additional agreements concluded by the Company passed December 25, 2008; these verification procedures. [[ review and verification of information on possible IDGC of Center and Volga Region independently facts of corruption and other corruptive practices in implements measures to prevent and counteract the Company. corruption and takes an active part in collective In the event of identification of a possible corruptive anti-corruption initiatives. In particular, the Company practice, the employees, contractors and other individuals cooperates on these issues with the Chamber of and legal entities, should file an appeal through the Commerce and Industry of the Russian Federation, Company’s website, a hot line, mail or during a personal all-Russian public organizations Russian Union of appointment. All appeals received by the Company, which Industrialists and Entrepreneurs, Delovaya Rossia, OPORA meet the criteria of corruption, are always recorded into RUSSIA and others. the register of complaints and appeals by the Department

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Identification and Clearing of Conflicts [[ the information declared by the candidates was verified, then a conclusion was made whether the Payment of remuneration to members of the Board of In 2018, a compensation of expenses was not paid to the of Interests candidates should fill the vacant positions or not; Directors of IDGC of Center and Volga Region is made as members of the Company’s Board of Directors. Non-fi- a one-off payment and is calculated based on the results nancial reward of the members of the Board of Directors [[ The conflicts of interest are managed by the Company’s every year, the Company collects, analyzes and for the period from the election of a candidate to the is not provided for by the Company’s internal documents. Commission on Corporate Ethics Compliance and Conflict evaluates the declarations of conflicts of interest both Board of Directors of the Company up to the election of a Over 2018, wages, bonuses and commission fees were not of Interest Resolution, formed following the Order of of newly employed and the current staff members; new Board of Directors. paid to the members of the Board of Directors who were PJSC Rosseti No. 35 dated March 4, 2015 “On Measures to [[ not the Company’s employees. the Commission on Corporate Ethics Compliance The total remuneration paid to the members of the Board Prevent Corruption: Preventing and Resolving a Conflict of and Conflict of Interest Resolution of IDGC of Center Interests in PJSC Rosseti”. of Directors in 2018 was 31,614,350.52 RUB before deduc- and Volga Region held 4 meetings, which resulted in tion of personal income tax. The members of the Board of In 2018, to prevent conflicts of interest, the Company took identification and resolution of 15 pre-conflict and 8 Directors elected on June 1, 2018 will receive remuneration the following measures: conflict situations. in the course of 2019 after the relevant decision is made at the Annual General Meeting of Shareholders of the [[ candidates applying for vacant positions in the Company following the results of 2018. Company filled out the declarations of conflict of interest; Personal remuneration paid to members of the Company’s Board of Directors in 2018, RUB (without deduction of personal income tax) Members of the Board of Directors For participation in the For an increase in the market meetings of the Board Total capitalization of the Company REMUNERATION AND MOTIVATION of Directors Nikolay Nikolayevich Varlamov 900,000.00 2,362,927.36 3,262,927.36 Remuneration of Members of the Board of Directors Roman Alekseyevich Filkin 761,538.46 2,362,927.36 3,124,465.82 Decisions on payment of remuneration and (or) Remuneration is not paid to the following people: Vladimir Sergeyevich Chistyakov 813,461.54 2,362,927.36 3,176,388.90 compensation to the members of the Board of Directors [[ members of the Board of Directors, in respect Alexander Viktorovich Shevchuk 888,923.08 2,362,927.36 3,251,850.44 of IDGC of Center and Volga Region are made by the of which the federal law prescribes a restriction General Meeting of Shareholders. The criteria for Denis Lvovich Guriyanov 761,538.46 2,362,927.36 3,124,465.82 or prohibition on receipt of any payments from assessing the amount of remuneration are established commercial organizations; Oleg Romanovich Fedorov 813,461.54 2,362,927.36 3,176,388.90 by the restated Regulations on payment of remuneration Yury Nikolayevich Mangarov 900,000.00 2,362,927.36 3,262,927.36 and compensation to members of the Board of Directors [[ members of the Board of Directors who are also of IDGC of Center and Volga Region, approved by the members of the Collective Executive Body of the Dmitry Leonidovich Bokhun 692,307.69 2,362,927.36 3,055,235.05 resolution of the Annual General Meeting of Shareholders Company. Oleg Yuryevich Isaev 28 0.00 0.00 0.00 dated June 16, 2015 (Minutes No. 9). Tatyana Alexandrovna Ivanova 761,538.46 2,362,927.36 3,124,465.82 Ashot Mikhaylovich Kobelyan 692,307.69 2,362,927.36 3,055,235.05 Total remuneration 7,985,076.92 23,629,273.60 31,614,350.52

STRUCTURE AND FORMATION OF REMUNERATION PAID IN 2018 TO THE MEMBERS OF THE BOARD OF DIRECTORS, RUB (AT YEAR-END 2017, BEFORE PERSONAL INCOME TAX DEDUCTION)

Total remuneration REMUNERATION PAID TO THE MEMBERS OF THE BOARD OF of the members DIRECTORS IN 2016-2018 (BEFORE DEDUCTION OF A PERSONAL Remuneration of Members of Committees of the Board of Individual remunerations INCOME TAX), RUB. (BEFORE DEDUCTION OF A PERSONAL INCOME TAX) Directors of the Board of Directors

INCREMENTS: Remunerations to members of Committees of the Number of meetings The total number of 31,614 meetings of the Board attended by a member of +30 % - Company’s Board of Directors are paid in cash for each the Board of Directors in the of Directors between the period between the AGMS Annual General Meetings of to the Board Chairman meeting within 30 days after it was held. The amounts of shareholders (AGMS) 24,516 +20 % - Not more remunerations are defined by the Regulations on payment 23,629

7,985,076.92 to the Chairman of a than. Вbase of remuneration and compensation to members of Commit- S = В × n/m Committee base (900,000 RUB) tees of the Board of Directors of IDGC of Center and Volga 15,823 +10 % - Region, approved by the decision of the Company’s Board Basic part of the remuneration. Calculated based on the RAS to the members of the 7,534 revenue for the fiscal year. Board Committee of Directors dated August 29, 2016 (Minutes No. 239).

A basis for calculating the remunerations of the members 8,693 7,985 of the Board of Directors’ Committees is the minimum 7,534 monthly tariff rate of a first-grade worker (MMTR) with +0.0175 % OF THE INCREASE IN THE MARKET CAPITALIZATION Not more than 5% of RAS net profit regard to the indexation, established by the Industry Tariff 2016 2017 2018 23,629,273.60 (according to the results of the fiscal year) (for the period from the election of a member of the Board Agreement in the power industry of the Russian Federation of Directors until the election of a new Board) as of the date of the Committee meeting. For participation in meetings of the Board of Directors 2018 For an increase in the Company’s market capitalization For participation in meetings of the Board of Directors

For an increase in the Company’s market capitalization 28 The remuneration was not accrued and was not paid to O.Yu. Isaev in compliance with art. 2. of the restated Regulations on payment of remuneration and compensation to members of the Board of Directors of IDGC of Center and Volga Region.

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Remuneration for participation in the work of Committees of the Board of Directors Remuneration of the Management Company, IDGC of Centre, PJSC For each in-person meeting, in which the For each meeting in absentia, in which member participated the member participated IDGC of Center and Volga Region pays remuneration to Variable Remuneration Component the management company, IDGC of Centre, PJSC, for acting A variable remuneration component is paid to the To the Members of the Board of Direc- as the sole executive body. The remuneration consists 2×MMTR 1×MMTR management company based on the results of evaluation tors’ Committee of two parts: a constant component and a variable of its performance as the sole executive body. To the Secretaries of the Committees the component. 1×MMTR 0,5×MMTR The variable remuneration component is paid for each Board of Directors Constant Remuneration Component reporting year and is calculated on the basis of the KPIs, To the Chairs of the Committees the 3×MMTR 1,5×MMTR A constant remuneration component is paid to the the list of which, along with the approval procedure and Board of Directors management company monthly for the exercise of the calculation, is specified in the annex to the contract with powers of the sole executive body. the management company. For a 100 % achievement of all KPIs, the variable remuneration component is 3 % of the The remuneration is not accrued nor paid to the mem- ation by sending an appropriate application to the Its size is determined within the expense budget and is net profit of IDGC of Center and Volga Region, calculated bers of the Company’s Board of Directors, in respect of Management Company, IDGC of Centre, PJSC. In 2018, calculated following the Methodology for establishing under RAS. which the federal law prescribes a restriction or pro- none of the members of the Committees of the Board the constant remuneration component for exercising the hibition on receipt of any payments from commercial of Directors refused to accept the remuneration. powers of the sole executive body, which is an annex to In 2018, the size of the variable component of year-end organizations. the contract concluded with the management company. 2017 remuneration of the management company was Apart from the remuneration, the members of the Com- In 2018, the size of the constant remuneration component 129,840 RUB thou. If the management company achieves If the Chairperson or members of the Committees of mittees of the Board of Directors of IDGC of Center and of the management company was 10,820,013 RUB 37 kop., 100 % of all KPIs, the size of the variable component of the Company’s Board of Directors are also members of Volga Region are compensated for the actual expenses including VAT 1,650,510 RUB 51 kop. year-end 2018 remuneration will be 280,412 RUB thou. the Board of Directors, the remunerations are paid in associated with participation in meetings of the Commit- accordance with the terms and conditions of payment tees, namely, travel and accommodation expenses, daily to the members of the Board of Directors and are allowances, etc., in the manner and scope approved by Remuneration of Members of the Audit Commission approved by the General Meeting of Shareholders. the General Meeting of Shareholders. In 2018, compen- sation for expenses associated with participation in the A member of the Committee of the Board of Directors According to the Regulations on payment of remuneration meetings of the Committees was not paid. may, in whole or in part, refuse to receive a remuner- and compensation to members of the Audit Commission of IDGC of Center and Volga Region, approved as amended by the decision of the Annual General Meeting of Shareholders dated June 4, 2018 (Minutes No. 12), the REMUNERATION PAID TO THE MEMBERS OF THE BOARD OF DIRECTORS’ COMMITTEES IN 2018, remuneration is paid to a member of the Company’s RUB (BEFORE DEDUCTION OF A PERSONAL INCOME TAX) Audit Commission on the basis of performance over the 1,366,565 business year and depends on his or her participation in the work of the Audit Commission.

552,409 REMUNERATION PAID TO THE MEMBERS OF THE AUDIT COMMISSION 375,245 IN 2016-2018, RUB (BEFORE DEDUCTION OF A PERSONAL INCOME TAX)

0 0 796.0

Audit Committee Strategy and Development Personnel and Reliability Committee Grid Connection Committee 793.3 Committee Remuneration Committee

Remuneration of Members of the 775.5 Management Board REMUNERATION PAID TO THE MEMBERS OF THE MANAGEMENT BOARD IN 2016-2018, All members of the Management Board are top managers of RUB (BEFORE DEDUCTION OF A PERSONAL INCOME TAX) IDGC of Center and Volga Region and work on the basis of employment contracts with the Company. Remuneration of 2016 2017 2018 the members of the Management Board is regulated by the 107,935.8 Regulation on financial incentives and benefits package of top managers of IDGC of Center and Volga Region, approved by the decision of the Board of Directors dated June 8, 2016 (Minutes No. 231). Following this Regulation, the members 62,304.4 59,688.5 of the Company’s Management Board are granted a market premium worth 15 % of the fixed official salary for exercising their powers. A dismissal of a member of the Management Board from a full-time position in the Company is not a reason for termi- 2016 2017 2018 nation of his or her powers as a member of the Management Board and termination of the relevant employment contract.

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SHAREHOLDER VALUE FORMATION Company’s Bonds In 2018, the following unplaced bonds of the IDGC of [[ exchange bonds series БO-04 with the nominal Center and Volga Region were on the List of securities value of 5 RUB bn and the maturity of 10 years Share Capital admitted to trading in MICEX Stock Exchange, CJSC: (identification number of the issue 4B02-04-12665-E dated May 23, 2013). [[ exchange bonds series БО‑02 with the nominal Company’s Shares value of 5 RUB bn and the maturity of 10 years On October 10, 2016, MICEX Stock Exchange, CJSC assigned (identification number of the issue 4Б02-02-12665-E an identification number to the Program of Exchange As of December 31, 2018, the authorized capital of IDGC of The number of authorized shares is 2,182,957 units of dated May 23, 2013); Bonds series 001Р of IDGC of Center and Volga Region. Center and Volga Region is 11.27 bn RUB and is split into registered ordinary shares with a par value of 10 kop. Exchange bonds of the Company with the total nominal 112,697,817,043 ordinary shares with a par value of 10 kop. each. These shares were formed as the difference [[ exchange bonds series БO-03 with the nominal value up to 25 RUB bn and the maturity of up to 30 years each. The Company did not place any preferred shares. between authorized (112,600,000,000 units) and placed value of 5 RUB bn and the maturity of 10 years will be floated under the Program. The program has (112,597,817,043 units) shares in the course of the (identification number of the issue 4Б02-03-12665-E indefinite duration. Company’s reorganization in 2008 through merger with 9 dated May 23, 2013); grid distribution companies (GDC). No additionally issued shares were placed in 2018. Registrar of the Company Issues of shares of IDGC of Center and Volga Region The Company’s register of security holders has been SHARES IN IDGC OF CENTER AND VOLGA maintained and stored by VTB Registrar, which has been Issue registration State registration Number of shares in REGION, PJSC, HELD BY PJSC ROSSETI Issue Par value, RUB successfully rendering the registrar services for over 20 date number of the issue the issue, units years. First issue 20/08/2007 1—01—12665-Е 100,000,000 0.1

Additional share issue 001 21/02/2008 1—01—12665-Е‑001D 9,933,178,038 0.1 Cross-Holding and Primary Beneficiary

Additional share issue 002 21/02/2008 1—01—12665-Е‑002D 5,238,075,351 0.1 The Company holds shares in PJSC Rosseti due to the legal succession of the shares of RAO UES of Russia, OJSC from Additional share issue 003 21/02/2008 1—01—12665-Е‑003D 10,154,553,057 0.1 Kirovenergo, OJSC by its merger with IDGC of Center and 50.4 % Volga Region, OJSC. During the reorganization of RAO UES Additional share issue 004 21/02/2008 1—01—12665-Е‑004D 8,579,998,539 0.1 of Russia, OJSC the shareholders in the latter were given OF THE AUTHORIZED CAPITAL Additional share issue 005 21/02/2008 1—01—12665-Е‑005D 4,095,509,962 0.1 shares in a number of power industry companies, including IDGC Holding, OJSC (currently PJSC Rosseti). Additional share issue 006 21/02/2008 1—01—12665-Е‑006D 31,184,103,348 0.1 Cross-holding of IDGC of Center and Volga Region as of December 31, 2018 Additional share issue 007 21/02/2008 1—01—12665-Е‑007D 13,343,991,837 0.1 Par value of Par value of % of the Additional share issue 008 21/02/2008 1—01—12665-Е‑008D 7,567,715,086 0.1 Number of ordinary Shareholding the share, the investment, authorized shares, units Additional share issue 009 21/02/2008 1—01—12665-Е‑009D 9,990,288,421 0.1 RUB RUB capital Shares in IDGC of Center and Volga Region, 56,799,338,107 0.1 5,679,933,810.7 50.4 Additional share issue 010 21/02/2008 1—01—12665-Е‑010D 665,242,563 0.1 PJSC, held by PJSC Rosseti Additional share issue 011 21/02/2008 1—01—12665-Е‑011D 2,574,822,120 0.1 Shares in PJSC Rosseti held by IDGC of Center 2,080,389 1.0 2,080,389.0 0.001 and Volga Region, PJSC Additional share issue 012 21/02/2008 1—01—12665-Е‑012D 327,892,112 0.1

Additional share issue 013 21/02/2008 1—01—12665-Е‑013D 7,749,197,134 0.1 Therefore, the Russian Federation is the primary Federation, or municipal entities in the management of Additional share issue 014 21/02/2008 1—01—12665-Е‑014D 1,193,249,475 0.1 beneficiary of IDGC of Center and Volga Region. IDGC of Center and Volga Region, PJSC (golden share) is not stipulated. Combining first and additional The special right to participation of the Russian 20/08/2007 1—01—12665-Е 112,697,817,043 0.1 issues (Jul. 1, 2008) Federation, the constituent entities of the Russian

Total number of outstanding shares 112,697,817,043 0.1 The number of publicly owned shares in PJSC Rosseti as of March 31, 2019

Number of shares, units % of the authorized Shareholding capital Ordinary Preferred

Federal Agency for State Property 176,729,514,113 145,523,224 88.04 Management

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REGISTER OF SHAREHOLDERS OF THE IDGC of Center and Volga Region is not aware of any IDGC OF CENTER AND VOLGA REGION Shareholding Structure shareholdings exceeding 5 %, except for those disclosed COMPRISES by the Company. The Company is not aware of any shareholders that may acquire or have acquired a degree 27.47 45.98 3.62 of control disproportionate to their shareholdings in the Company, including pursuant to shareholder agreements. 19,065 PEOPLE EQUITY CONCENTRATION AS OF MAY 7, 201829

Number of Share in the total number of Share in the equity Number of shares on the account accounts accounts, % capital, % SHARE CAPITAL STRUCTURE BY MAJOR SHAREHOLDERS OF THE ENTITIES HAVING THE RIGHT TO 1—1,000 2,906 12.13 <0.01 COMPANY (5 % SHARE AND MORE) 0.004 PARTICIPATE IN THE GENERAL 1,001—10,000 5,898 24.61 0.02 AS OF DECEMBER 31, 2018, % MEETING OF SHAREHOLDERS AS OF 6.26 MAY 7, 2018, % 10,001—100,000 6,503 27.14 0.26 100,001—1,000,000 6,980 29.13 2.08

15.87 1,000,001—10,000,000 1,428 5.96 3.30

10,000,001—100,000,000 214 0.89 4.82

100,000,001—1,000,000,000 28 0.12 11.20 50.40 50.40 1,000,000,001—10,000,000,000 3 0.01 12.05

PJSC Rosseti, owner PJSC Rosseti 10,000,000,001—56,799,338,107 2 0.01 66.27

The National Settlement Depository, nominee shareholder Genhold Limited Total 23,962 100.00 100.00 Other Energyo Solutions Russia (Cyprus) Limited

Shares held by the government Shareholders rights are recognized by the Russian laws

Other and by Charter of the IDGC of Center and Volga Region. The Company guarantees a proper observance of rights.

As of December 31, 2018, the register of shareholder of the IDGC of Center and Volga Region comprises 19,065 owners. Stock Market

Status of the Company’s Shares

Since 2008, after consolidation of the primary issue Moscow Exchange, under registration number 1-01-12665-Е, Information about shareholders (excluding data on customers of nominee shareholders) and 14 additional issues of the Company’s shares, the with the ticker MRKP. As of December 31, 2018, the As of December 31, 2017 As of December 31, 2018 ordinary shares of IDGC of Center and Volga Region have Company’s shares are listed in the Second Tier quotation been traded on the leading Russian stock market, the list. Shareholder type Share of the Number of Number of Share of the authorized holders holders authorized capital, % History of the Company’s shares presence in the Quotation Lists of the Moscow Exchange Date of quotation capital, % Admission to the List of non-listed securities April 7, 2008 Owners – individuals 18,790 3.388 18,907 3.309 Admission to Quotation List B September 23, 2008 (incl. non-residents) 24 0.008 27 0.008 Admission to Quotation List А2 May 18, 2011 Owners – legal entities 149 0.29 150 0.279 Admission to Quotation List А1 February 27, 2012 (incl. non-residents) 12 0.07 13 0.07 Admission to Quotation List А2 April 8, 2014 Nominees 7 96.318 6 96.408 Admission to Quotation List of the First (Top) tier June 9, 2014

Trustees 1 < 0.001 1 < 0.001 Admission to Quotation List of the Second tier January 31, 2017

Unidentified owner's accounts 1 0.004 1 0.004

Total 18,948 100 19,065 100

29 The date of compilation of the list of persons entitled to participation in the General Shareholders Meeting.

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INCLUSION OF THE COMPANY’S SHARES INTO THE BASIS FOR CALCULATION OF THE STOCK INDEXES

Tickers Weight of the Company’s Index of stock securities in index as of 1 2 3 4 566 7 8 9 10 11 12 exchanges December 31, 2018, %

Medium and small capitalization-weighted Index of the Moscow Exchange MCXSM 1.44 20 % Medium and small capitalization-weighted Index of the Moscow Exchange, USD RTSSM 1.44

Electric Power Industry Index of the Moscow Exchange MICEX PWR 3.75

Electric Power Industry Index of the Moscow Exchange, USD RTSeu 3.75

The Moscow Exchange Broad Market Index MICEXBMI 0.07

The Moscow Exchange Broad Market Index, USD RUBMI 0.07 0 % MOEX Regulated Companies Index RCI 3.33

CHANGES IN SHARE PRICE, CAPITALIZATION AND INDEXES OF THE MOSCOW EXCHANGE

Change, 2016 2017 2018 2018/2017, %

Share price (minimum), year end, RUB 0.1461 0.2964 0.2641 -10.90 -20 %

Share price (maximum), year end, RUB 0.1493 0.3021 0.2662 -11.88 30.12.2017 28.02.2018 30.04.2018 30.06.2018 31.08.2018 31.10.2018

Share price (at close), year end, RUB 0.1480 0.3015 0.2650 -12.11 Shares of IDGC of Center and Volga Region, PJSC the Moscow Exchange Index Share price (weighed average), year end, RUB 0.1477 0.2989 0.2651 -11.31 the Electric Power Industry Index

Capitalization (at weighted average price), year end, RUB mn 16,645.47 33,685.38 29,876.19 -11.31

Moscow Exchange index (at close), year end 2,232.72 2,109.74 2,369.33 12.30

Electric Power Industry index (at close), year end 1,984.16 1,816.30 1,608.85 -11.42 TRADED VALUE AND A NUMBER OF TRANSACTIONS WITH THE COMPANY’S SHARES IN 2016-2018

Regulated Company Index (at close), year end 1,154.55 1,142.84 1,161.42 1.63 The volume of trading in shares of IDGC of Center and VALUE OF TRADING IN SHARES OF IDGC Volga Region on the Moscow Exchange (basic mode T+) OF CENTER AND VOLGA REGION ON THE at year-end 2018 was 16,287.56 mn units, which is 3,399.09 MOSCOW EXCHANGE (BASIC MODE T+) mn units more than at year-end 2017. In 2018, 135,016 The following events influenced the trends of trade of the Company’s shares: transactions with the Company’s shares were made, which is 21,212 transactions more than in 2017. 1. The Russian Institute of Directors (RID), a non-profit 7. Publication of accounting (financial) RAS results of partnership, following the results of a corporate the Company for H1 2018. According to the Moscow Exchange Index Committee, as governance assessment, assigned IDGC of Center and of December 31, 2018, the free-float ratio of IDGC of Center 8. Publication of consolidated financial IFRS statements 16,287.56 Volga Region a rating NCGR 7 (Advanced Corporate and Volga Region was 27 %. of the Company for 6 months of 2018. Governance Practice) on the scale of the National MN UNITS Corporate Governance Rating (NCGR®). 9. Publication of accounting (financial) RAS results of the Company for 9 months of 2018. 2. Publication of accounting (financial) RAS results of the Company for 2017. 10. Publication of consolidated financial IFRS statements TRADING VOLUMES OF STOCKS OF IDGC OF CENTER AND VOLGA REGION ON THE MOSCOW EXCHANGE IN 2018, MN PCS of the Company for 9 months of 2018. 3. Publication of consolidated financial IFRS statements of the Company for 2017. 11. The Russian Institute of Directors (RID), a non-profit 2,465.35 partnership, following the results of a corporate 4. Publication of accounting (financial) RAS results of governance assessment, upgraded a rating of IDGC of 1,896.40 the Company for Q1 2018. Center and Volga from NCGR 7 to NCGR 7+ (Advanced 1,470.45 1,539.62 1,638.36 5. Publication of consolidated financial IFRS statements Corporate Governance Practice) on the scale of the 1,170.44 1,120.44 1,102.34 1,076.80 of the Company for three months of 2018. National Corporate Governance Rating (NCGR®). 967.10 857.37 982.89 6. Holding of the Annual General Meeting of 12. The progress review by Igor Makovskiy of the first Shareholders of IDGC of Center and Volga Region with hundred days of his work as the Director General the announcement of voting results and decisions of IDGC of Centre, PJSC, the management company taken, including on the issues of dividend payment of IDGC of Center and Volga Region, during a press January February March April May June July August September October November December for 2017. conference in Interfax.

152 153 THE ANNUAL REPORT 2018 | JOINING EFFORTS COMPANY STRATEGY PERFORMANCE SUSTAINABLE CORPORATE PROFILE RESULTS DEVELOPMENT GOVERNANCE

SPREAD DYNAMICS AND A NUMBER OF TRANSACTIONS ON IDGC OF CENTER AND VOLGA REGION SHARES ON THE MOSCOW EXCHANGE IN 2018 ACCRUED DIVIDENDS UNAPPROPRIATED BALANCE, RUB THOU.

100.0 1,100,581 0.37 0.36 841 0.33 0.30 0.0402 3,101,137 0.29 0.29 4,535,749 0.26 0.18 0.23 587 592 42.9 567 543 942,560 1,329,045 515 0.25 502 523 477 476 25.0 25.4 41.2 6,464,832 425 25.0 10.1 7.5 0.0118 1,772,092 338 0.19 0.0056 0.0084 0.15 0.0043 942,560 0.0013 0.0028 0.0031

Average number of transactions a day 2010 2011 2012 2013 2014 2015 2016 2017 2015 2016 2017 Average spread at the end of the trading session, % January February March April May June July August September October November December The amount of dividend payments per share, RUB Business development (accourding to the decision of the Annual Meeting of Shareholders) Share of dividends in net profit,% Dividends Dividend Policy

The dividend policy of IDGC of Center and Volga The changes were aimed at bringing the Company’s PAY OUT OF RECORD HIGH DIVIDENDS Region is focused on the observation of the rights of dividend policy in compliance with the Decree of the OVER THE ENTIRE PERIOD OF THE RUB all the Company’s shareholders, on the provision of Government of the Russian Federation No. 1094-p dated COMPANY’S ACTIVITY: THOU. necessary conditions to improve the capitalization May 29, 2017 and mainly applied to the procedure for 4,535,749 and the investment appeal of the Company and on the determining the amount of dividend payments. maintenance of effective balance in the distribution According to the restated Regulations on the dividend of net profit between dividend payments and the policy of IDGC of Center and Volga Region, two dividend development of the Company. The Company has a clear In 2018, at the annual General Meeting of Shareholders of who is a securities market professional, did not exceed 10 amounts are calculated based on the results of the algorithm for the shareholders for determining the IDGC of Center and Volga Region, a resolution was adopt- business days; the period of dividend payout to the other reporting year: based on the RAS net profit and the IFRS amount of dividends; it also provides the shareholders ed to pay out record high dividends over the entire period shareholders registered in the register was 25 business net profit. In fact, the largest amount of the two is paid with a convenient payment procedure. of the Company’s activity: 4,535,749 RUB thou., which days from the record date. to the shareholders reduced by the amounts of interim corresponds to 0.040247 RUB per one ordinary share of The amount of dividends transferred to the federal bud- By the decision of the Board of Directors of IDGC of Center dividends previously paid for the results of three, six and the Company. June 12, 2018 was chosen as a record date. get in 2018 at year-end 2017 was 180,371.73 RUB. As of the and Volga Region dated February 2, 2018, an updated nine months of the reporting year. In compliance with the current legislation, a period of the end of 2018, there are no outstanding dividend payments version of the Regulations on the dividend policy of the dividend payout to a nominee shareholder and a trustee, Company (Minutes No. 300) was approved. to the federal budget.

DIVIDEND PAYOUT HISTORY 30

Reporting Amount of Amount of Date of decision Dividend Amount of Share of Dividend yield period for which accrued dividend payout on the dividend share in net paid dividends, the paid out at the year- Interaction with Shareholders and Investors dividends were dividends, per one share, payout profit, % RUB thou. dividends, % end 31, % accrued and paid RUB thou. RUB IDGC of Center and Volga Region is constantly engaged in [[ March 20, 2018: Analyst Day for the representatives activities to promote capitalization, liquidity and corporate of the investment community, dedicated to the transparency and protects the rights and legitimate Company’s performance in 2017 and forecasts for 2018; 2010 14/06/2011 141,000 10.1 0.0012511337 139,226.14 98.74 0.4 interests of its shareholders and investors. When [[ August 31, 2018 and November 23, 2018: telephone 2011 22/06/2012 315,554 7.5 0.0028 312,475.43 99.02 1.9 disclosing information to shareholders and investors, conferences with the representatives of the the Company follows the principles of timeliness, 2012 18/06/2013 478,966 25.0 0.00425 473,179.30 98.79 2.5 investment community with a broadcast of completeness and availability. 2013 26/06/2014 634,489 25.0 0.00563 626,199.15 98.69 8.3 presentations on the Internet based on the results of In IDGC of Center and Volga Region, a specialized IR-unit published consolidated financial statements, IFRS, for 2014 16/06/2015 349,363 25.4 0.031 345,404.93 98.87 3.2 is in charge of the interaction with shareholders and 6 months of 2018 and for 9 months of 2018; 2015 09/06/2016 942,560 100.0 0.008363605 932,796.19 98.96 13.3 investors: the Division for Interaction with Shareholders [[ posting of information required for disclosure in and Investors of the Corporate Governance and 2016 05/06/2017 1,329,045 42.9 0.011793 1,314,867.76 98.93 8.0 compliance with the law on the official website along Shareholder Relations Department. Contact details for with the IR-releases, newsletters and presentation 2017 01/06/2018 4,535,749 41.2 0.040247 4,495,248.59 99.11 13.5 communication with the Division’s experts is available materials. on the Company’s website: http://www.mrsk-cp.ru/ stockholder_investor/contacts/. The Company proceeded with its practice of prompt submission of the current information about the The following are the major projects executed by IDGC of Company’s financial and business activities at the request Center and Volga region for shareholders and investors in of shareholders, analysts of investment companies and 2018: other stakeholders.

30 As of December 31, 2018, the deviation from 100 % payment of the accrued dividends is due to the fact that some shareholders included in the system for maintaining the register of shareholders have no or unreliable information about bank and postal details for transferring the income. 31 The value is calculated as (the ratio of dividends per one share to the weighted average price of one share at year-end) * 100 %.

154 155 THE ANNUAL REPORT 2018 | JOINING EFFORTS

Preliminary Calendar of Events for Shareholders and Investors for 2019

[[ February 22, 2019 [[ July 1, 2019 – July 31, 2019 Financial results of 2018 (IFRS); Financial results for H1 2019 (RAS); [[ March 28, 2019 [[ August 1, 2019 – August 31, 2019 Analyst Day, dedicated to the release of IFRS reporting Financial results for H1 2019 (IFRS); for 2018. Organizer: IDGC of Centre; [[ August 1, 2019 – August 31, 2019 [[ March 19, 2019 Audio-webcast dedicated to the release of IFRS Financial results 2018 (IFRS); reporting for H1 2019. Organizer: IDGC of Centre; [[ March 22, 2019 [[ October 1, 2019 – October 31, 2019 Approval of the Company’s business plan for 2019; Financial results for 9 months of 2019 (RAS); [[ April 26, 2019 [[ November 1, 2019 – November 30, 2019 Financial results for Q1 2019 (RAS); Financial results for 9 months of 2019 (IFRS); [[ April 3, 2019 [[ November 1, 2019 – November 30, 2019 Annual Exchange Forum (plenary and panel sessions). Annual Investment Meeting “RUSSIA CALLING!” Organizer Moscow Exchange; (one-on-one meeting, panel discussions). Organizer: [[ May 1, 2019 – June 14, 2018 VTB Capital; Meetings with minority shareholders before the Annual [[ November 1, 2019 – November 30, 2019 General Meeting of Shareholders; Audio-webcast dedicated to the release of IFRS [[ June 1, 2019 – June 30, 2019 reporting for 9 months of 2019. Organizer: IDGC Financial results for Q1 2019 (IFRS); of Centre; [[ [[ June 1, 2019 – June 30, 2019 December 1, 2019 – December 31, 2019 2018 year-end Annual General Meeting of Shareholders. Annual seminar “Improvement of the Policy on Organizer IDGC of Center and Volga Region; Interactions with Shareholders and Investors of Distribution Grid Companies”. Organizer: PJSC ROSSETI. [[ June 1, 2019 – June 30, 2019 Investment Conference. Organizer: Renaissance Capital;

Annexes and Contact Information REPORT ON THE COMPLIANCE WITH PRINCIPLES AND RECOMMENDATIONS OF THE CORPORATE GOVERNANCE CODE link >> INFORMATION ABOUT MAJOR TRANSACTIONS AND INTERESTED PARTY TRANSACTIONS link >> ACCOUNTING STATEMENTS OF THE COMPANY FOR 2018 COMPLYING WITH RAS, AND AUDITOR REPORT link >> FINANCIAL STATEMENTS OF THE COMPANY FOR 2018 COMPLYING WITH IFRS, AND AUDITORAL REPORT link >>

Registrar Information

Name Joint Stock Company VTB Registrar Place of Business 23 Pravdy ul., 127015 Moscow Mailing address P.O.B. 54, 127137 Moscow Phone number +7 (495) 787-44-83 Website http://www.vtbreg.ru/ Email [email protected] Federal Financial Markets Service License for maintenance of register No. 045-13970- License 000001 dated February 21, 2008 for an indefinite term Director General Konstantin Sereyevich Petrov Vladimir Branch of JSC VTB Buiness address/mailing address: 45 Traktornaya ul., 600005 Vladimir Registrar Phone number: +7 (910) 775-53-75, +7 (980) 755-72-21 Kaluga Branch of JSC VTB Business address/mailing address: 3-23 Saltykova-Shchedrina ul., 248002 Kaluga Registrar Phone number: +7 (910) 775-53-75, +7 (980) 755-72-21 Nizhny Novgorod Branch of JSC Business address/mailing address: 32 Bolshaya Pecherskaya ul., 603155 Nizhny VTB Novgorod Federal Financial Markets Service License for maintenance of register No. 045-13970- Permit 000001 dated February 21, 2008 for an indefinite term

156 156 INFORMATION ON THE AUDITOR Name Ernst & Young Limited Liability Company

Location Russia, 115035, Moscow, Sadovnicheskaya nab. 77, bld. 1

Phone/Fax +7 (495) 755-9700/+7 (495) 755-9701

Адрес электронной почты [email protected]

Self-regulatory organization of auditors «Russian Union of Auditors» (SRO RUA). Membership in a self-regulatory 107031 Russian Federation, Moscow, Petrovsky per. 8 page 2 organization The main registration number of the record in the Register of Auditors and Auditing Organizations of the SRO RUA: 11603050648.

CONTACT DATA Public Joint Stock Company Interregional Distribution Grid Company of Name Center and Volga Region

Location and postal address 33 Rozhdestvenskaya Street, Nizhny Novgorod, 603950, Russia

E-mail [email protected]

Website www.mrsk-cp.ru

Tel / fax (reception office): +7 (831) 431-83-59 /+7 (831) 433-38-06

IR Division

Head Natalia G. Kiseleva

E-mail [email protected]; [email protected]

Phone +7 (831) 431-74-46

Press center

Head Anjelika V. Sherbakova

E-mail [email protected]

Phone +7 (831) 431-74-00

Call center 8-800-100-33-00

Internet reception for customers https://utp.mrsk-cp.ru/Pages/default.aspx ANNUAL REPORT 2018 | JOINING EFFORTS