SOCIAL REPORT TIME MOVES on Joint Stock Company Interregional Distribution Grid Company of Center and Volga Region

SOCIAL REPORT TIME MOVES ON Joint Stock Company Interregional Distribution Grid Company of Center and Volga Region

SOCIAL REPORT for 2009-2010

We love You and lighted windows LIABILITY LIMITATION

The present Social Report of JSC IDGC of Center and Volga Region for 2009-2010 (hereinafter referred to as the Social Report) has been prepared on the basis of information available to the Company at the moment of its preparation.

The Social Report contains information on the results of activities in 2009-2010, as well as forward-looking statements and declarations concerning intentions, opinions and current expectations of the Company in regard of the results of its activities, its financial condition, liquidity, growth prospects, strategy and the development of the industry the Company is engaged in. Due to their nature, such forward-looking statements are characterized by the presence of risks and uncertainty factors, as far as they pertain to the events and depend on the circumstances which are not necessarily to happen in the future.

The words “intends”, “strives”, “expects”, “assesses”, “plans”, “considers”, “assumes”, “can”, “should”, “would”, “will continue” and the like are used, as a rule, to indicate the forward-looking nature of statements and may suggest the risk of non-occurrence of events or actions specified, depending on a variety of factors.

The Company warns that the forward-looking statements do not guarantee future results. Actual results of the activity of the Company, its financial condition and liquidity, as well as the development of the industry of which the Company is a member, may differ considerably from those presented in the forward-looking statements herein. Besides, even if said values correspond to the pro-forma statements contained in this Social Report, they are not indicative of similar results and events in the future.

The Company does not give any direct or supposed assurances and guarantees and does not bear any responsibility in case of losses which can be incurred by natural persons or legal entities as a result of using the forward- looking statements of this Social Report by any reason, directly or indirectly. The specified persons should not rely in full on the forward-looking statements, containing in the Social Report, as they are not the unique possible succession of events.

Except in cases stipulated by the law, the Company shall not be obliged to re-consider or confirm its expectations or assessments, or to publish updates and changes of the forward-looking statements contained in the Social Report in connection with subsequent events or the receipt of new data. COMPANY HYMN Words and music by N. Zhukov

In the midst of the Volga wilderness, where roads are few Workers stay busy from morning till dusk Laying power lines to lighten the dark In the heart of Russia

CHORUS The Company’s Mission will not be forgotten As enthusiastic corporate employees Sing the Company’s praise in the name of Russia In line with hallowed traditions

We will expand the horizon with grids To glorify our Motherland We will drive darkness away, and in the cloud-free world Will receive our reward in full

CHORUS Open to truth and unified With the unique corporate brand In our thoughts both now and forever Stable we were and stable we will be.

CHORUS Ecological Safety The Company Priorities for 2011 11 and Environment Protection 12 and Beyond 109 96 Environment Protection Policy 97 Observance of Environmental Legislation Independent Certiﬁ cation 98 Observance of Environmental Standards 13 of the Social Report 99 Development and Implementation 112 of Special Environmental Programs 102 Quality of Environmental Management (in compliance with ISO 14000) 14 Supplements 102 Production Environmental Control 120 Evaluation Table of GRI G3 Conformance 103 Environment Protection Costs and Payments for Environment Pollution 128 Glossary 105 Consumed Resources 131 Reference Information 106 Implementation of Lean Technologies 134 Feedback Questionnaire 106 Cooperation with Environmental Authorities and Organizations

10 The Company and Public 90 Goals and Parameters of Social Policy in Regions 91 Implementation of Social Programs 92 Volume and Structure of Social Expenses 92 Government and Public Organizations Relations 94 Adherence to the Tax Legislation. Payments to Non-Budget Funds

9 The Company and Consumers 83 Tariff Policy 84 Technological Connection of Consumers The Company and Employees 86 Discounted Categories 7 67 Provisions for the Retired and the Veterans 87 Quality of Services as Assessed by Customers 68 Corporate Culture 69 Support of Mass Physical Culture and Sports 70 Workmanship Competitions 70 Healthcare The Company 71 Healthcare Costs Dynamics 8 and its Business Partners 72 Establishment of Safe Labor Conditions 72 Safety of Production Processes 75 Principles of Cooperation and Mutual Responsibility 73 Establishment of Positive Psychological Climate, 76 Purchasing Operations. Suppliers and Contractors Corporate Involvement and Mutual Responsibility 79 Participation in Non-Commercial Organizations Address of the General About the Company 1 Director 3 11 Operations Geography Corporate Social Responsibility 12 The Company Structure (CSR) and Sustainable 13 Scope of Operations 2 Development 15 Strategic Goals and Tasks 3 The Key CSR Principles 4 Stakeholders Relations 8 Public Recognition 4 Performance Indicators 17 Key Performance Indicators 18 Key Financial and Economic Indicators 19 Quality Management System 22 Cost Management Program 22 Program for Decrease of Losses

Provisions for Reliability, 5 Safety and Continuity of Power Supply

26 Implementation of Advanced Technologies 32 Investment Activity 35 Investment Projects 37 Repair Activities 38 Fire Safety 40 Prevention of Thefts of Energy, Electric Equipment, Components of Power Transmission Lines and other Material Assets 41 Measures on Improvement of Facilities Security 42 Prevention of Children’s Injuries Resulting from Electroshock. Educational Activities

7 The Company and Employees 6 The Company and Shareholders 57 HR Management Policy 44 Corporate Governance 58 Human Rights and Equal Opportunities 46 Shareholder’s Capital Structure 58 Labor Compensation and Motivation 47 Protection of the Shareholders Rights 60 Analysis of the Employee Social Benefits Package 48 Dividend Policy 61 Programs of Social Support 49 Capitalization Management 63 Organization of Training, Re-Training and Advanced 50 Information Policy Training of Personnel 52 Property Management 65 Trade Unions Relations 54 Consolidation of Power Grid Assets 65 Youth Policy 54 Internal Control 66 Practical Methods of Attracting Young Specialists 55 Risk Management Address of the General Director Social Report / Address of the General Director 1

The occupational skills and experience of our workforce is the Company’s most valuable asset, as the high efficiency of operations for the entire grid complex of Russia’s Center and Volga Regions depends on these factors. We are fully aware that our employees service electric installations under high voltage at considerable heights on a daily basis and we value the human capital we have. The Company pays significant attention to labor protection and industrial safety.

To upgrade them, in 2010, JSC IDGC of Center and Vol- Dear Friends! ga Region invested RUR 287 million. We are aware of the environmental impact produced You are about to begin reading the first Social Report by the operations of the Company and other indus- of JSC IDGC of Center and Volga Region. Our Company try players. Environmental impact implies the impact is committed to making its operations transparent and on the lives of people living in regions in which the easily understandable for the general public. That is Company operates. Therefore, we are interested in why you are invited to read the document below. the environmental safety of the Company’s business. JSC IDGC of Center and Volga Region has implemented This Report is drafted in accordance with GRI recom- an environmental monitoring system, which complies mendations for reporting in the sphere of steady de- with ISO 14001 international requirements and func- velopment with the level of GRI application “B+”. tions successfully. For attestation of the Report the Company brought in In 2010, the total amount invested by the Company in an independent audit company. environmental safety was RUR 14.9 million. С С+ B B+ A A+ As a socially responsible organization, we contribute to Self-declaration V the development of nine Russian regions, which form Independent V attestation the sphere of the Company’s responsibility. JSC IDGC of Center and Volga Region is a responsible taxpayer. Since its founding, the Company has implemented an active social policy. In 2010, the Company carried out its tax obligations in full, paying RUR 5.4 billion to different In April, 2011, at an industry competition organized level budgets. by the All-Russian Power Industry Trade Union and the RaEl Association, the Company received the title Best The Company is committed to continue operating in Grid Organization for High Social Efficiency in the In- compliance with social responsibility principles, which dustry for the third time. is, in my opinion, a key to upgrading competitiveness in our business. The title was granted not by chance, as a decent salary and personnel motivation are set by the Collective Bar- Sincerely, gaining Agreement adopted by the Company in 2008. Evgeny Ushakov, General Director of JSC IDGC The Agreement stipulates a quarterly indexation of of Center and Volga Region salaries in accordance with the consumer price index, as well as the provision of a range of additional benefits and guarantees for the Company’s workforce.

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Corporate Social Responsibility (CSR) and Sustainable Development 3 The Key CSR Principles 4 Stakeholders Relations 8 Public Recognition Social Report / Corporate Social Responsibility (CSR) and Sustainable Development 3

THE KEY CSR PRINCIPLES

The corporate social responsibility and sustainable development constitute the vital principles of operations of JSC IDGC of Center and Volga Region. The activities in these spheres are implemented to ensure the reliable and uninterrupted supply of power to consumers, to establish safe and efficient workplaces, to provide for the social protection of employees and their family members, to facilitate the professional development of the personnel, to contribute to the favorable social situation in the areas of operation and to protect the environment from negative impacts.

The sustainable development of JSC IDGC of Center and Volga Region is the development of the Company’s business aimed at economic efficiency, social welfare and the preservation of environmental friendliness.

The activities of the Company in economic, social and environmental spheres, and the interaction with the stakeholders, involving the briefing of the latter on the results achieved by the Company represent the key aspects of implementation of the corporate social responsibility.

The Company’s key CSR principles are the following:

Openness. Transparency. The principles of implementation of the social policy, social programs and their implementation mechanisms shall be well-defined and comprehensible.

Publicity. Any information concerning CSR, except for the confidential shall be made available to the public.

Accuracy. Any withholding or falsification of CSR information are unacceptable.

Interaction. The social policy is built on the interaction with all stakeholders with mandatory feedback from the recipients of social programs.

Consistency in time. The Company is responsible for the current and past activities, as well as for the future impact of the Company’s operations on the outside world.

Consistency in space. The CSR principles are universally applicable to all regional branches of the Company.

Significance and timeliness. The implemented CSR programs shall be timely and in demand.

Efficiency. The funds spent on the implementation of programs shall contribute to the solution of problems, with program results evaluated and accounted for periodically.

Adherence to the law and legal norms.

Implementation of advanced technologies aimed to ensure the safety and reliability of functioning of consumer power supply systems.

Socially-oriented policy in the field of HR management.

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STAKEHOLDERS RELATIONS

The power industry is fundamental for economic and social life of the country, thus influencing its technological development directly. Sustainable functioning of Russia’s unified power grid complex is not possible without the reliable and efficient operations of distribution grids, which form the end link in the supply of power to consumers, and are in direct interaction with end users.

The power industry impacts the quality of life in the country directly and in a variety of ways, functioning as a public infrastructure.

As an element of this public infrastructure, JSC IDGC of Center and Volga Region is committed to provide for the following:

• efficient and reliable consumer power supply;

• innovative development of assets;

• upgrading of operational and investment performance.

Substations, power transmission lines and cable systems are the power arteries of the country. Today with the development rates evolving, the power engineers have to adjust their business processes. In need of new power capacities are new living quarters, trading and business centers, production sites and global projects, such as the establishment of the infrastructure to host the World’s Football Championship.

The transfer to a new RAB-based system of tariff regulation proved to be a way out of this complex situation. The Company operates on the basis of RAB regulation since January 2011. The implementation of programs involves not only the construction of new facilities, but the consolidation of grid facilities on the territory of the region on the whole (meaning purchase and reconstruction of outdated grids and existing facilities).

The Company is engaged in continuous interaction with stakeholders. The Company’s major stakeholders include service receivers, shareholders, the Company’s employees, suppliers, contractors, regulatory bodies, public organizations and mass media.

The Company makes every effort to maintain an open dialog with the stakeholders and to develop it continuously. Social Report / Corporate Social Responsibility (CSR) and Sustainable Development 5

The Needs of Stakeholders

JSC IDGC of Center and Volga Region

Consumers Suppliers and contractors

Provision of reliable, uninterrupted and efﬁcient power Fair competition supply

Timely and accurate Continuous improvement of fulﬁllment of contract the quality of services obligations

Provision of accurate informa- Mutually beneﬁcial tion about the Company cooperation

Shareholders and Investors Public Employees

Contributing to social and Dynamic growth and Provision economic development of the development of the Company of decent living standards operations areas

Contributing to the develop- Provision Capitalization growth ment of education, culture and of social guarantees sports

Provision of opportunities for Efﬁcient operations Protection of environment personal and occupational growth

Disclosure of the Company information. Transparency Energy security Labor safety growth

Stakeholders Needs. Research and Interaction Methods

Stakeholders Stakeholders Needs Research Methods Interaction Methods Provision of decent living standards. Surveys and questionnaires. Provision of social guarantees. Employee satisfaction Workforce meetings. Employees Provision of opportunities for monitoring. personal and occupational Corporate mass media. Cultural development. and sportive events. Labor safety.

General Shareholders Meeting. Assessment of achieve- Dynamic growth and developments. Annual Report. ment of the Company. Assessment of production Meetings and negotiations. Operational efficiency. Shareholders and and financial results. Conferences, forums and road Capitalization growth. shows. investors Assessment of impact of The Company information external factors on the Com- Presentations. disclosure. Transparency pany’s performance. Corporate Internet and website. improvement. Analysis of shares liquidity. Correspondence and feedback.

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Stakeholders Stakeholders Needs Research Methods Interaction Methods Fair competition. Survey of the opinions of Organization of purchase tenders. suppliers and partners Timely and accurate perfor- Meetings and negotiations. concerning their satisfaction mance of contract obligations. with the purchase processes. Corporate Internet and website. Mutually profitable coopera- Assessment of quality of tion. Suppliers and purchased goods, works and contractors services. Assessment of mutual value of cooperation. Maintenance of feedback with suppliers and contractors. Provision of reliable uninter- Customer satisfaction moni- Surveys and questionnaires. rupted and efficient power toring. Telephone hot line. supply. Analysis of the customers’ Corporate Internet and website. Consumers Continuous improvement of perception of the quality of the quality of services. services. Provision of accurate information on the Company services. Support for social and eco- Efficiency analysis of public Social programs for the operations nomic development of opera- relations. areas. tions areas. Analysis of trust to the Com- Publications in regional mass Support for the development pany demonstrated by local media. of education, culture and communities. Meetings of the Company manage- Public sports. Study of perception of the ment with veterans, students and Environmental protection. Company by the public. other social groups. Energy security. Informing the population. Measures on the prevention of power injuries.

Corporate Standards and Regulations on Stakeholders Relations

Stakeholders Regulatory Documents Collective Bargaining Agreement. Code of Corporate Ethics. Regulations on the Assessment of Personnel. Regulations on the Certification of Personnel. Regulations on the Training and Development of Personnel. Regulations on Non-state Pension Provisions of the Employees. Regulations on the Official Business Trips of the Employees. Employees Regulations on the Insurance Coverage. Regulations on Labor Compensations of the Employees. Regulations on the Commission on Social Issues. Regulations on the Leaves of the Employees. Regulations on the Granting to the Employees of JSC IDGC of Center and Volga Region of State, Industry and Corporate Awards Granted by JSC IDGC Holding, JSC IDGC of Center and Volga Region, and the Executive and Legislative Bodies of the Subjects of the Russian Federation. Social Report / Corporate Social Responsibility (CSR) and Sustainable Development 7

Stakeholders Regulatory Documents

Charter of JSC IDGC of Center and Volga Region. Corporate Governance Code. Regulations on the Preparation and Holding of the General Shareholders Meeting.

Shareholders and Regulations on the Convocation and Holding of Meetings of the Board of Directors. investors Regulations on the Committees of the Board of Directors. Regulations on the Dividend Policy. Regulations on the Information Policy. Shareholders Relations Policy.

Regulations on Contractual Work. Regulations on Claims Administration. Regulations on the Tender Commission for Insurance Coverage Services. Suppliers and contractors Regulations on the Central Tender Commission. Purchase Policy. Regulations on the Purchase of Goods, Works and Services for the Needs of JSC IDGC of Center and Volga Region.

Program of PR Events to Educate the Consumers in the Procedure for the Technological Connec- tion to Power Grids of All Voltage Classes. Requirements for the Implementation of the Program of PR Events to Educate the Consumers in the Procedure for the Technological Connection to Power Grids of All Voltage Classes. Regulations on the Administration of Tariffs for the Transmission of Energy. Consumers Regulations on the Administration of Technological Connection Fees. Regulations on Claims Administration. Regulations on Consumer Applications to JSC IDGC of Center and Volga Region Submitted through “A Single Reception Window”. Regulations on the Processing of Customer Applications (Complaints).

Regulations on the Information Policy. List of Power Grids Target Programs Implemented by JSC IDGC of Center and Volga Region. Regulations on Enhanced Responsibility for the Provision of Uninterrupted Reliable Operation of the Power Grid Complex of JSC IDGC of Center and Volga Region. Public Regulations on the Interaction with State Supervisory Bodies During the Performance of State Inspections. Procedure for the Establishment of Protective Zones and the Provision for Normal Operation of Power Grids.

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PUBLIC RECOGNITION

Award/Nomination Contest/Event Date Organizers The official website of JSC IDGC of Center and Volga Region was recognized as the “Golden Website-2008” – IX From October best in the Central Federal District (semi- All-Russian Open Internet 2008 till Auramedia Ltd final) and took the second place during Contest. February 2009 the final competition.

JSC IDGC of Center and Volga Region became the leader of the composite March 30, rating of economic efficiency of Expert Magazine 2009 interregional distribution grid companies (IDGC). The Administration of the Krasnodar Region with the VI Open Contest of Joint Stock participation of the Federal The Annual Report of JSC IDGC of Center Companies’ Annual Reports September 18, Service for Financial Mar- and Volga Region won the Best Debut held within the frameworks of 2009 kets, the Russian Union of nomination. VIII International Investment Industrialists and Entre- Forum “Sochi 2009”. preneurs, and the Russian Institute of Directors. The Second Annual Conference The Department of Corporate Governance of Shareholder and Investor October 6, was awarded the title of the Best HR JSC IDGC Holding Relations Departments of the 2009 Service 2009. Distribution Grid Complex. JSC IDGC of Center and Volga Region became the third in the rating of the major November, Expert Volga Analytical power industry companies of the Volga 2009 Center Region for 2008.

The 2008 Annual Report of JSC IDGC of Center and Volga Region won The Best The XII Annual Federal Contest Annual Report of the Issuer of the Volga of Annual Report and Websites Securities Market Magazine November 18, Federal District nomination and became held within the frameworks with the official support 2009 the third in The Best Design, Printing and of the VI Federal Investment from MICEX. Concept of the Annual Report nomina- Forum. tion.

The XII Annual Contest of The Annual Report of JSC IDGC of Center Annual Reports held within and Volga Region for 2008 won The Best November 20, the frameworks of the An- JSC RTS Stock Exchange Annual Report of the Issuer of the Volga 2009 nual Meeting of RTS Stock Federal District nomination. Exchange with the issuers.

PR Department of JSC IDGC of Center and Volga Region was awarded a diploma for ConTEKst Contest of PR de- December 3, The Ministry of Energy of the best special project in Customer Rela- partments 2009. the Russian Federation tions Project nomination.

The compliance of the Management System of JSC IDGC of Center and December Bureau Veritas Certification Volga Region with ISO 9001:2000, ISO 2009 Rus 14001:2004 and OHSAS 18001:2007 has been confirmed. Social Report / Corporate Social Responsibility (CSR) and Sustainable Development 9

Award/Nomination Contest/Event Date Organizers

JSC IDGC of Center and Volga Region The High Social Efficiency The All-Russian Associa- won the second place in The Best Grid Organizations in Power Indus- From February tion of Employers of Power Organization of High Social Efficiency try-2009 All-Russian Industry till April 2009 Industry. nomination. Competition.

JSC IDGC of Center and Volga Region won the second place in The Best Power The High Social Efficiency From February The All-Russian Associa- Industry Grid Organization of High Social Organization in Power Industry 24 till April tion of Employers of Power Efficiency nomination and The Best – 2010 All-Russian Industry 28, 2010 Industry. Practice of Employee Relations in Power Competition. Industry Organization.

“Bright Life” Corporate Magazine The PR Department of the Image-Media Publishing designed by the PR Department of JSC Year-2009, the Second All- April, 2010 House and Press Service IDGC of Center and Volga Region took the Russian Competition. Magazine second place. The Administration of the Krasnodar Region with the participation of the VII Contest of Joint Stock Com- Federal Service for Finan- JSC IDGC of Center and Volga Region panies’ Annual Reports held September 18, cial Markets, the Russian won The Level of Information Disclosure within the frameworks of Sochi 2010 Institute of Directors, the nomination. 2010 IX International Invest- National Association of the ment Forum. Participants of the Securi- ties Market (NAUFOR) and Deutsche Börse Group. The Executive Body of JSC IDGC of Center and Volga Region and 9 regional branch- September Illustrated Books For Little es of the Company became the owners Charity event 2010 Blind Children Charity Fund. of Golden and Silver Certificates of the participants of Books for Gifts Program. The Thirteenth Annual JSC IDGC of Center and Volga Region The Council for the granting Competition for the Prizes of received a diploma for the achievement October 20, of Prizes of the Government the Government of the Russian of considerable results in the field of 2010 of the Russian Federation in Federation in the Field of quality. the Field of Quality. Quality.

Corporate Governance Department of JSC The Third Annual Seminar IDGC of Center and Volga Region became “IR in the Distribution Grid November 10, JSC IDGC Holding. the Best Shareholder and Investor Rela- Complex – Year Results and 2010 tions Department - 2010. Development Trends”.

The XIII Federal Contest of The Annual Report of JSC IDGC of Center Annual Reports and Websites and Volga Region for 2009 won The Best November 17, held within the frameworks Securities Market Magazine. Annual Report of the Issuer of the Volga 2010 of the VII Federal Investment Federal District nomination. Forum.

The Annual Report of JSC IDGC of Center and Volga Region for 2009 won two nom- inations, namely The Best Annual Report JSC RTS Stock Exchange of the Issuer of the Volga Federal District The XIII Federal Contest of November 19, jointly with Standard & and The Best Disclosure of Information in Annual Reports. 2010 Poors rating agency. the Annual Report by the Companies with the Market Value Ranging from RUR 10 to 100 billion.

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About the Company 11 Operations Geography 12 The Company Structure 13 Scope of Operations 15 Strategic Goals and Tasks Social Report / About the Company 11

OPERATIONS GEOGRAPHY

Joint Stock Company Interregional Distribution Grid Company of Center and Volga Region (JSC IDGC of Center and Volga Region), a subsidiary of JSC IDGC Holding, is the main supplier of services for the transmission of energy and technological connection to the grids in the Vladimir, Ivanovo, Kaluga, Kirov, Nizhny Novgorod, Ryazan, Tula Regions and the Republics of Mariy El and Udmurtia.

supplies energy to over number of employees territory in excess

> . million > thousand > thousand people14 living in the4 Central 22 414 persons square kilometers and Volga Federal Districts of Russia

Ivenergo Kirovenergo Vladimirenergo Kalugaenergo

Nizhnovenergo Tulenergo Marienergo Ryazanenergo Udmurtenergo

time moves on THE COMPANY STRUCTURE

PEI Vladimir NEI Ivanovo Educational PEI Educational NEI PPSE NEI Educational Network Educational NINEO Educational Educational Center Center Tula Educational Center Center Center “Energetik” of Corporate Center “Energetik” “Energetik” “Energetik” (Kirov) “Energetik-NN” Course Center Training Centers (Vladimir) (Ivanovo) (Kaluga) (Nizhny Novgorod) (Tula) (Izhevsk)

JSC JSC JSC IEC Energoefﬁciency Subsidiary JSC Berendeevskoye СJSC Svet JSC ATU Luchinskoye Sanatorium-preventorium Technologies (100%) (100%) (100%) Companies (100%) Energetik (51%) (100%)

Dependent JSC Tulenergokomplekt Company (50%)

Aleksandrovsk Power Grids Vladimir Power Grids Gusev Power Grids Kovrov Power Grids Vladimirenergo Production Department Production Department Production Department Production Department Branch

Distribution Zones (5) Distribution Zones (5) Distribution Zones (3) Distribution Zones (6)

Kineshma Power Grids Ivanovo Power Grids Teikovo Power Grids Ivenergo Production Department Branch

Distribution Zones (6) Distribution Zones (8) Distribution Zones (6)

Kaluga Municipal Power Grids Kaluga Power Grids Kirov Power Grids Obninsk Power Grids Kalugaenergo Production Department Production Department Production Department Production Department Branch

Distribution Zones (7) Distribution Zones (11) Distribution Zones (8)

Northern Power Grids Southern Power Grids Western Power Grids Yaransk Power Grids Vyatka-Polyansk Power Grids Kirovenergo Production Department Production Department Production Department Production Department Production Department Branch

Distribution Zones (12) Distribution Zones (12) Distribution Zones (6) Distribution Zones (6) Distribution Zones (5)

Yoshkar-Ola Power Grids Sernur Power Grids Gornomariysk Power Grids Marienergo Production Department Production Department Production Department Branch

Distribution Zones (6) Distribution Zones (5) Distribution Zones (3)

Arzamas Power Grids Balakhna Power Grids Kstov Power Grids Nizhny Novgorod Cable Grids Semenovo Power Grids Nizhnovenergo Production Department Production Department Production Department Production Department Production Department Branch

Distribution Zones (9) Distribution Zones (6) Distribution Zones (8) Distribution Zones (3) Distribution Zones (5)

Sergach Power Grids Uren Power Grids Southern Power Grids Central Power Grids Production Department Production Department Production Department Production Department Executive Body of JSC IDGC Center and Volga Region

Distribution Zones (8) Distribution Zones (6) Distribution Zones (8) Distribution Zones (4)

Ryazan Power Grids Oka Power Grids Skopin Power Grids Sasov Power Grids Ryazanenergo Production Department Production Department Production Department Production Department Branch

Distribution Zones (6) Distribution Zones (6) Distribution Zones (8) Distribution Zones (6)

Tula Power Grids Novomoskovsk Power Grids Suvorov Power Grids Efremov Power Grids Tulenergo Production Department Production Department Production Department Production Department Branch

Distribution Zones (7) Distribution Zones (8) Distribution Zones (8) Distribution Zones (5)

Central Power Grids Southern Power Grids Glazov Power Grids Udmurtenergo Production Department Production Department Production Department Branch

Distribution Zones (8) Distribution Zones (11) Distribution Zones (8) Social Report / About the Company 13

SCOPE OF OPERATIONS

Today JSC IDGC of Center and Volga Region is the largest grid organization in the operations areas.

The key activities of the Company are the following: transmission of electric power; technological connection to electric grids.

In the structure of the Company’s revenues as of 31.12.2010 there are: • 97.73 % – power transmission services; • 1.75 % – services for technological connection; • 0.62% – other activities.

Power transmission is the key activity of the Company.

JSC IDGC of Center and Volga Region is a natural monopoly. Subject to the Order № 263-e of the Federal Tariff Service dated 27.06.2008 the Company is included into the registry of natural monopolies in the fuel and energy complex, regulated and controlled by the State. The tariffs (prices) for the Company’s services are set by the regulatory bodies of the corresponding subjects of the Russian Federation.

JSC IDGC of Center and Volga Region holds a domineering position on the market in the operations areas. The major share of energy supplied to the consumers passes along the grids owned by the Company. As estimated by JSC IDGC of Center and Volga Region, the overall volume of the energy transmission market in 2010 comprised 52,620 million kWh.

Being the owner of the most diversified network of 0.4-110 kV power grids within the operations areas, the Company also occupies a domineering position on the market for technological connection of customer power equipment to the grids of the Company.

The Company’s Business Model

JSC IDGC of Center and Volga Region

Marginal tariff growth The Order on the setting Requests for the Coordination of transition of tariffs for the energy tariff setting to tariff RAB-regulation transmission and technological connection

Federal Tariff Service Regional Tariff Services

Energy transmission Money

Consumers, retail companies

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Power Transmission Services Market in 2010

Being the largest grid organization, JSC IDGC of Center and Volga Region contributes to the industrial development of operations areas.

19,472 kWh million 33,147 kWh million JSC IDGC of Center and Volga Region is one of the major employers in operations areas (with the number of employees comprising 22,074 on 31.12.2010).

JSC IDGC of Center and Volga Region is also one of the major purchasers of goods, works and services in operations Productive supply of power to consumers of JSC IDGC of Center and Volga Region areas with the yearly purchase volume in 2010 amounting to RUR 56,162,335,200.00. Productive supply of power from TGO grids

Value Chain in Power Industry, the Company’s Commercial Segment

RusHydro Energy retail companies JSC IDGC of Center TGC and Volga Region Last resort providers

WGC Losses

Output to the grid Output to Direct consumers FGC Territorial supply Productive – the participants grid organizations of the wholesale energy market Others

Losses

 Technological losses due to physical processes involved in the energy transmission  Commercial losses – errors of power metering system, unaccounted consumption

The facilities managed by JSC IDGC of Center and Volga Region include 1,541 high voltage 35/110/220 kV power supply centers of the total capacity of 23,613 MVA, 44,409 km of 35/220 kV power transmission lines, and 21.53 km of 35/110 kV high voltage cable lines. The total length of power distribution grids comprises 262,320 km, while the total number of 6-10/0.4 kV distribution and transformer substations is 58,845. Social Report / About the Company 15

STRATEGIC GOALS AND TASKS

The Company’s mission is to establish and ensure the reliable functioning of the innovative distribution grid complex meant to satisfy social and economic development needs of the regions where the Company operates.

JSC IDGC of Center and Volga Region is responsible for the environmental and technological safety of production activities, and for the balancing of the interests of its shareholders, investors and customers.

The strategic goal is to maximize the Company’s value by way of intensive development on the energy transmission market, and the improvement of operational performance, the reliability of consumer power supply and the quality of services. The Company’s key priorities are the following: • improvement of the business efficiency; • expansion of the market for power grid services and control over it; • provision of the functioning of the power grid complex, taking into account the guarantees of reliability and safety; • increase of the investment attractiveness and the market capitalization; • innovative development; • establishment of highly efficient management system and professional workforce.

The development strategy of JSC IDGC of Center and Volga Region concerning the increase of its market share consists in strengthening of the Company’s position in the region as the second tier grid organization and in in- tegrating the power grid complex of third tier grid organizations. The implementation of programs of consolidation of power grid assets constitutes an essential component of the Company’s strategy, including the entering to the Company balance of ownerless power grid facilities to provide for the reliable consumer power supply in operations areas.

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Performance Indicators 17 Key Performance Indicators 18 Key Financial and Economic Indicators 19 Quality Management System 22 Cost Management Program 22 Program for Decrease of Losses Social Report / Performance Indicators 17

KEY PERFORMANCE INDICATORS

2010/2009, 2010/2009 Indicator 2008 2009 2010 change % Number of 35 kV and higher substations 1,541 1,542 1,541 -1 -0.06 Capacity of 35 kV and higher substations, 27.9 28.5 28.6 0.1 0.35 MVA thousand Number of 6-35/0.4 kV TSS 58,155 58,086 58,281 195 0.34 Number of 6-10 kV distributing points 557 553 564 11 1.99 Length of power transmission lines (circuits), km 262,187 261,972 262,320 348 0.13 Length of power transmission lines (route), km 251,976 251,581 251,930 349 0.14 Total volume of power grids, conditional units, 963 1,068 1,084 16 1.50 thousand Grid output, kWh million 61,122 56,175 59,492 3,317 5.90 Productive supply, kWh million 55,431 50,889 54,100 3,211 6.31 Total losses, kWh million 5,691 5,286 5,392 106 2.01 Total losses, % 9.31 9.41 9.06 -0.35% -3.72 Total volume of power connected per 516.26 362.06 331.01 -31.05 -8.58 technological connection agreements, MW PPE depreciation, % 65.6 64.5 63.6 -0.9 -1.40 Number of employees engaged in the power grid 19,446 21,559 22,074 515 2.39 complex (payroll)

*The yearly data are specified as on the year end. Note: the decrease in the number of 35 kV SS specified above was caused by the writing off of 35 kV SS in Ivenergo Branch. The Administration of the Yuzhsky Municipal District and the authorities of the Ivanovo Region decided it was inexpedient to reconstruct Bolshoye Settlement after it was burned down in the result of the fire on July 26, 2010. The settlement was the only consumer of the power supplied by the SS which was written off.

2010 Structure of Energy Supply to End Consumers per Consumer Groups

3% Industrial Consumers 53% 15% Transport

Agriculture 6% Non-industrial Consumers

State and Municipal Organizations and Other Budgetary Consumers 13% Population and the like 5% 6% Territorial Grid Organizations

In 2010 the major share of the Company’s total energy output to end consumers was traditionally made by industrial consumers (53%) and population (15%). The percentage of consumers across the groups stays nearly the same from year to year.

time moves on 18 Social Report / Performance Indicators

KEY FINANCIAL AND ECONOMIC INDICATORS

Key Performance Results of the Company

2010/2009 Index 2008 2009 2010 2010/2009, % (change) Total revenues (RUR million) including: 31,686 47,191 54,395 7,204 15

from power transmission 29,529 45,689 53,106 7,417 16

from technological connection 1,811 1,175 954 -221 -19

from other sources 346 327 335 8 2

Capitalization (RUR million) * 10,030 20,455 34,181 13,726 67

EBITDA (RUR million) 5,223 5,139 6,774 1,635 32

Net proﬁ t (RUR million) 1,429 427 1,398 971 227

Net assets (RUR million) 39,969 40,524 41,913 1,389 3

Earnings per share (RUR) 0.0152 0.0038 0.0124 0.0086 227

Dividends per share (RUR) 0 0 0.0013** 0.0013 -

Share price at the YE (RUR/share) 0.0890 0.1815 0.3033 0.1218 67

* - on the basis of MICEX data ** - planned data.

Revenues of the Company in 2010 EBITDA of the Company in 2010

6,774 RUR million 54,395 RUR million Capitalization of the Company in 2010 34,181 RUR million Social Report / Performance Indicators 19

QUALITY MANAGEMENT SYSTEM

To ensure the successful and efficient use of the quality management system of JSC IDGC of Center and Volga Region, in 2008, the Company implemented the Plan for the Development and Implementation of the Integrated Management System (hereinafter referred to as IMS), which consists of the following:

• Quality Management System (QMS);

• Occupational Health and Safety Management System (OHSAS);

• Environmental Management System (EMS).

According to the Plan, the IMS was developed and implemented in accordance with the requirements of international standards applicable to the Company’s managing activities.

In December 2008, the compliance of the Company’s management of production processes was officially confirmed by an international certifying body. The Company’s management complies with the following international standards:

• ISO 9001:2000;

• OHSAS 18001:2007;

• ISO 14001:2004.

The principles of management and quality criteria formulated in the above standards include the best international practices in establishing competitive businesses.

The key systemic document pertaining to the IMS in question is the Policy of the Top Management of JSC IDGC of Center and Volga Region on Quality, Occupational Health, Safety and Environmental Protection (hereinafter referred to as the Policy).

In accordance with the level of responsibility for the quality of services, occupational health and safety of the personnel and third parties at the power facilities, and for the protection of environment, required of the Com- pany, the Policy contains the main principles of management, as well as the Company intentions and activities in these fields, namely the following:

the Company’s goals and tasks can only be realized on condition that all norms on reliability and quality of consumer power supply are adhered to;

the Company recognizes the priority of lives and safety of its employees and third persons at power facilities over the production performance;

the Company adheres to the rational use and preservation of natural resources, as well as to the reduction of negative impact of the Company’s production activities on the environment.

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To implement the Policy, the management of JSC IDGC of Center and Volga Region undertook the following obligations and responsibilities:

to adhere to the requirements of the legal acts of the Russian Federation and other requirements pertaining to the provision of quality power supply to consumers and the maintenance of occupational health, safety and environmental protection;

to make decisions taking into account the consumer requirements, and the provisions for the occupational health and safety of employees and third persons at power facilities, as well as the minimization of environmental damage and pollution;

to reduce the risks and to prevent threads associated with emergency situations, injuries, negative impact on the health of the Company employees, the environment and the safety of third persons at power facilities, taking into account the priority of preventive measures over the measures for the liquidation of negative consequences;

to maintain an open dialog with the public and all stakeholders interested in the Company’s activities, concerning the issues of the quality of services, occupational health, safety and environmental protection;

to adhere to the requirements and to improve the efficiency of the quality management system, occupational health, safety and environmental protection.

The documented, approved by the General Director and available to all stakeholders, the Policy is targeted at:

• improvement of the Company’s activities;

• improvement of its performance;

• enhancement of the consumer satisfaction due to the improvement of management based on the requirements of the international standards ISO 9001:2000, OHSAS 18001:2007 and ISO 14001:2004.

During 2009-2010 the Company continued working on enhancement of safety, reliability and efficiency of energy production and consumer power supply, including the improvement of the power grid complex management.

The Company’s Technical Council analyzed the level of technical development, normative provisions and the organization of production on regular basis. These analyses led to decisions pertaining to the implementation in JSC IDGC of Center and Volga Region of the improvements management system.

The Company proceeded with the improvement of processes associated with customer servicing. Due to continuous optimization the quality of production processes improved significantly, with the level of environmental safety of production increasing and considerable improvements in labor safety. Such results are confirmed by the certificates of conformity with ISO 9001, OHSAS 18001 and ISO 14001 international standards, received earlier. Social Report / Performance Indicators 21

The processes regulated by the Policy include:

• new construction and reconstruction of power facilities;

• operations management;

• energy saving and improving energy efficiency;

• maintenance and repair of electric equipment, etc.

The Company branches continue to improve the quality of customer servicing, arranging the algorithms of customer relations within the frameworks of the complex system of customer relations management.

In 2010, JSC IDGC of Center and Volga Region participated in the thirteen annual contest for the prizes of the Russian Government in the field of quality.

The criteria used to assess the contest participants encourage the enterprises and organizations to use advanced management tools which enable them to increase the efficiency of their operation by searching for new market segments, the implementation of required changes, and the reduction of costs, which is especially important in today’s economic conditions.

Since its establishment the Company achieved considerable success in this field and became the laureate of the contest.

Based on the results of 2009 and 2010 the compliance of the Company’s IMS was officially confirmed by an international certifying body. The Company’s IMS complies with international standarts:

14001 18001 9001

time moves on 22 Social Report / Performance Indicators

COST MANAGEMENT PROGRAM

In accordance with the Company strategy the efforts of JSC IDGC of Center and Volga Region are intended to establish an innovative and efficient power distribution grid complex, which will satisfy social and economic development needs of the regions where the Company branches operate. The increase of economic efficiency is one of the key priorities of these efforts.

Economic efficiency implies continuous analysis and improvement of organizational processes, engineering equipment and organizational culture of the Company in order to motivate and channel the efforts of all employees in the direction of reduction of operating costs.

The Company’s Cost Management Program is implemented since 2009. The Program includes high priority measures for the reduction of costs associated with energy transmission, as said costs have direct influence on checking to the tariffs for energy for end consumers, thus having great social and economic significance.

The total economic effect from the implementation of cost reduction measures in 2009-2010 exceeded RUR 2.6 billion.

PROGRAM FOR DECREASE OF LOSSES

The decrease of losses in power grids is one of the key priorities of the Company in its efforts to increase the efficiency of the power grid complex. The implementation of the Program is especially vital for the regions experiencing energy deficit, as it enables the Company to increase the productive supply, and to improve the quality and reliability of power supply, using additional and new capacities for the connection of consumers. The decrease of commercial and technical losses enables the Company to invest greater sums in repair and technical re-equipment of energy facilities, thus resulting in slowing down the tariff rates growth.

Implementing its technical and environmental policies, the Company uses advanced materials, energy saving equipment and processes, applying new systems of energy distribution management. This provides for essential decrease of energy losses, as well as the improvement of reliability of consumer power supply and environmental safety of power facilities. Social Report / Performance Indicators 23

2008-2010 Energy Balance

2010/2009 2010/2009, Index 2008 2009 2010 (change) % Supply to grids, kWh million 61,122 56,175 59,492 3,317 5.90% Productive supply, kWh million 55,431 50,889 54,100 3,211 6.31% Total losses, kWh million 5,691 5,286 5,392 106 2.01% Total losses, % 9.31 9.41 9.06 -0.35 -3.68

Compared with 2009 the supply of energy to the grids in 2010 increased by 3,317 million kWh, with the volume of energy supplied to end consumers and the Territorial Grid Organizations (productive supply) increasing by 3,211 million kWh. Taking into account the increase in losses caused by the increase of energy supplied to the grids and conditioned by physical conditions valid during the transmission (meaning the increase of load losses) and the losses of energy in newly commissioned equipment, the decrease of relative losses achieved in 2010 comprised 0.35% as compared with 2009.

The decrease of energy losses

9. 41% 9. 06% 2009 2010

The measures implemented in 2009-2010 to decrease energy losses include the following:

the Central Commission of JSC IDGC of Center and Volga Region for the decrease of energy losses was established, together with the corresponding Commissions in the Company’s branches;

there were developed plans for the level of losses for each branches, Production Unit and Distribution Zone of the Company, with personal responsibilities delegated to the heads of such production units and distribution zones;

the Central Commission for the decrease of energy losses held monthly meetings to review the reports of the leaders of the Company branches on the decrease of energy losses;

the Central Commission held visiting and extended sessions in Vladimirenergo, Kalugaenergo, Nizhnovenergo, and Tulenergo during which certain weak places were revealed in the branches in questions with corresponding conclusions made to set an example for other branches in order to prevent similar mistakes from occurring in the future.

All of the above resulted in energy losses below the normative values set by the Orders of the Ministry of Energy of the Russian Federation for the branches of JSC IDGC of Center and Volga Region.

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Adherence to the norms of energy losses in 2010

Energy losses Branch Normative value for 2010 Actual for 2010 Change kWh million %* kWh million %* kWh million %* Vladimirenergo 628.59 10.31 648.60 10.11 -12.55 -0.20

Ivenergo 220.00 6.51 150.22 4.32 -76.15 -2.19

Kalugaenergo 628.50 14.85 654.30 14.80 -2.42 -0.05

Kirovenergo 458.37 8.77 401.07 7.07 -96.78 -1.70-

Marienergo 316.96 13.39 216.08 7.79 -155.51 -5.60

Nizhnoenergo 1,901.97 10.49 1,901.97 10.49 0.00 0.00

Ryazanenergo 320.90 7.35 299.88 6.67 -30.36 -0.68

Tulenergo 769.66 12.29 718.83 11.02 -82.84 -1.27

Udmurtenergo 411.00 5.42 400.52 5.28 -10.48 -0.14

Total for the Company 5,655.94 9.50 5,391.47 9.06 -467.09 -0.44

* The percentage of normative losses is specified in accordance with the tariff-balance resolution.

The energy efficiency of distribution companies is defined by:

• increase of productive supply; • accurate measurement of transmitted kilowatts; • optimization of energy transmission.

In order to decrease the technological losses the Company:

advances the qualification of its personnel;

installs energy efficient equipment and devices compensating reactive power;

optimizes the operation of systems of calculated and technical measurement;

improves operations related to the balancing of power facilities and load nodes. Social Report / Performance Indicators 25

Provisions for Reliability, Safety and Continuity of Power Supply

26 Implementation of Advanced 40 Prevention of Thefts of Energy, Electric Equipment, Components of Technologies Power Transmission Lines and other Material Assets 32 Investment Activity 41 Measures on Improvement of Facilities Security 35 Investment Projects 42 Prevention of Children’s Injuries Resulting from Electroshock. 37 Repair Activities Educational Activities 38 Fire Safety

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IMPLEMENTATION OF ADVANCED TECHNOLOGIES

The successful development of the Company consists in continuous update and enhancement of technologies and equipment used in the industry.

The key document regulating the implementation of new equipment and technologies is the Regulations on Technical Policy in Distribution Grid Complex of JSC IDGC of Center and Volga Region approved on 18.04.2008.

A list of equipment published on the Company’s website, which is subject to certification by JSC IDGC Holding and JSC FGC UES for the application by the Company branches during planning of repair programs, reconstruction and technical re-equipment was monitored and updated regularly.

JSC IDGC of Center and Volga Region is a member of INVEL and NTS UES non-commercial partnerships. The membership provides for the timely receipt by the Company of industry-specific approved normative documents and allows the Company to use the latest information on new equipment and technologies of domestic and foreign development, thus facilitating their speedy deployment, as well as to use databases on industry-specific innovative developments and to obtain advice on the issues of interest.

During 2009, 7 specialists of the Company’s management body and branches participated in 12 meetings of commissions attached to JSC R&D Center of Power Industry and engaged in the certification of new equipment and technologies for the application in IDGC power grids.

Implementation of New Equipment, Materials and Technologies in 2009-2010

Costs, RUR million 6.13 New technologies

18.5 New electric equipment 387.6

194.6 New equipment for dispatch departments

39.4 18.5

2009 2010

In 2010, the costs associated with the implementation of new equipment, materials and technologies during reconstruction and new construction comprised RUR 412.20 million, whereas the economic effect amounted to RUR 42.00 million. Social Report / Provisions for Reliability, Safety and Continuity of Power Supply 27

The advanced electric equipment, materials and technologies implemented during new construction, reconstruction and technical re-equipment include the following:

PSI Control hardware and software complex for technical re-equipment of the Grid Control Center;

SF 6 and vacuum circuit breakers;

SF 6 measuring transformers;

self-supported insulated wires (SSIW) type drive during the reconstruction and new construction;

control current microprocessor systems with SHOT type maintenance-free batteries;

RZDPOM-6/300 type plunger-regulated ground-fault neutralizer equipped with Bresler-0127 control panel at Iv-4 SS (Ivenergo Branch) to compensate the ground faults of capacitance currents;

microprocessor cabinets for relay protection and automation, control current microprocessor cabinets with maintenance-free batteries, microelectronic relays;

RNM-1 type microprocessor devices for the adjustment of transformer voltage;

cable insulated by cross-linked polyethylene;

Pasolink communications equipment;

OV-705 Projection module 70’’ XGA DL display cubes, hardware and software for the Grid Control Centers.

ADVANCED EQUIPMENT USED IN POWER DISTRIBUTION GRIDS OF JSC IDGC OF CENTER AND VOLGA REGION IN 2009-2010

The Regulations on Technical Policy in the Power Distribution Grid of JSC IDGC of Center and Volga Region stipulates the mandatory use during reconstruction and new construction of advanced electric equipment which provides for the decrease of accident risks and the increase of safety and efficiency of operation.

In 2009-2010, the Company used a broad range of various equipment and materials manufactured according to the current requirements and having improved operating characteristics.

The number of oil circuit breakers used in power grids is decreasing continuously due to their orderly replacement with SF 6 and vacuum circuit breakers. The replacement is in line with environmental and safety requirements. The operation costs are also reduced due to the lengthening of overhaul life. The fire risks are reduced due to the absence of oily arc suppression medium.

The total number of 6-10 kV vacuum circuit breakers installed during the reporting period comprised 1,310. The number of 35 kV and 110 kV SF 6 circuit breakers installed during the same period comprised 27 and 55 respectively. The first 110 kV vacuum circuit breaker in the history of JSC IDGC of Center and Volga Region was installed at Klepiki 110 kV SS owned by Ryazanenergo branch in 2010.

time moves on 28 Social Report / Provisions for Reliability, Safety and Continuity of Power Supply

and enables the laying of hidden grids, thus contribut- JSC IDGC of Center and Volga Region implements a ing to the ease of branching of the grids to suit the target program for the replacement of 6-10 kV oil consumer needs. This also results in decreasing the circuit breakers for vacuum ones. On 01.01.2011 dimensions of the lines. the total number of vacuum circuit breakers amounts to 7,445 or 26% of the total number of Due to the insulation, the self-supporting wire prevents circuit breakers. the theft of energy.

Reclosers (sectionalizing points with vacuum circuit The crossing of wires from wind blows becomes impos- breakers) equipped with microprocessor relay protec- sible, as well as the short circuits between the phase tion and automation and the devices for gathering and conductors or between the phase and the ground. transferring data to the dispatch board become more Therefore the risk of uncontrollable fire in case of fall- and more popular recently. Functionally reclosers can ing of a wire to the ground is reduced greatly. be fitted with remote control systems to enable the switching on/off of the reclosers remotely. Reclosers The use of self-supporting wire on 6-10 kV overhead allow for the maintenance-free selection of a section transmission lines proved especially effective for the of the faulty grid while maintaining normal operation protection of birds from injury resulting from contact for all power consumers. with electric wires.

JSC IDGC of Center and Volga Region operates over The total length of self-supporting wire (SSIW-2) hung 130 (8.7%) reclosers consisting of 1,477 sectionalizing on 0.4 kV lines in 2009-2010 comprises 989.13 km. The points. The number of reclosers installed during the same (SSIW-3) for 6(10) kV lines comprises 446.54 km. reporting period comprises 49. The strengthening of insulation of current-carrying In accordance with the Target program for the control parts on 35-110 kV SS was first used by JSC IDGC of of reactive power flows 11 capacitor banks 6(10)-110 Center and Volga Region to increase the reliability of kV 50.3 MVAr were installed during the reporting pe- operation and to decrease the probability of overlap- riod. The capacitor banks enable the normalization of ping on 6-35 kV busbar bridges, caused among others voltage levels, the improvement of quality and the de- by birds and animals. crease of energy losses in power grids. Among these installed in 2010 there is 110 kV 25 MVAr capacitor Rayhem polymer insulation manufactured by Tyco bank at Pokrov SS owned by Vladimirenergo. The com- Electronics is used at Cherkutino SS (Vladimirenergo), missioning of 25 MVAr controlled shunt reactor at Kokshaisk SS (Marienergo) and Kuznetchikha SS (Nizh- the same SS is planned for 2011. The capacitor bank novenergo). in conjunction with the controlled shunt reactor will allow for the gradual adjustment of reactive power Further plans envisage the strengthening of insula- flows. tion of current-carrying parts at 1 or 2 35-110 kV substations in each of the Company’s branches. The self-supporting insulated wire (SSIW) was used on 0.4-10 kV overhead power transmission line since In 2009-2010, the Company used multisided metal 2007. The proven insulation enables to ensure the safe poles in the construction of overhead transmission operation of the overhead line in the vicinity or even lines. The length of the lines constructed using such in contact with the trees. The insulation also allows multisided metal poles is growing to comprise 25 km the use of the same poles to hang hot wires of differ- on 01.01.2011. The use of metal multisided poles pro- ent voltage and even telephone wires. There emerges longs the service life of overhead transmission lines a possibility to hang overhead lines using buildings, to 40-50 years and the material of the poles can be which results in savings, as there is no need to con- disposed of completely. struct poles. This also saves space on the pavements Social Report / Provisions for Reliability, Safety and Continuity of Power Supply 29

Apart from the power equipment, the condition of In November 2010, the Company concluded an relay protection and automatics is also of great im- agreement with JSC Muromenergomash, which portance. Much attention is given to the replacement will supply to JSC IDGC of Center and Volga Re- of the off-market electric-mechanical and electronic gion PM-110 type poles (321 poles in 2011 and equipment with the microprocessor and microelec- 403 poles in 2012) and PM-35 type poles (7 poles tronic complexes and microprocessor relays for all in 2012). voltage levels. To increase the reliability of operation of the pedestal- stick insulation at 35-220 kV SS there were 312 poly- Microprocessor devices can integrate the functions mer insulators installed to replace the porcelain ones. of a number of electromechanical protection devices, This prevents the damage of insulators especially when while taking up much less space. The maintenance the temperature of the ambient air falls below or rises of microprocessor-based protective devices is much above zero. This also eliminates equipment damage, cheaper and less laborious. Many types of electro- improves the reliability of consumer power supply and mechanical protective devices are off the market decreases the load on the staff. already, therefore it is hard to find spare parts and components for them. To provide for the connection of new consumers and to improve the reliability of power supply the power transformers were replaced in 2009-2010 for the more On 01.01.2011 the total number of microproces- powerful ones: sor relay protection and automatic devices used on 0.4-110 kV SS comprised 9,820 or 6.74% of the • number of transformers replaced on 110 kV SS total number of relay protection and automatic de- comprised 35, with the power totaling 945.5 MVA; vices. • number of transformers replaced on 35 kV SS comprised 24 with the power totaling 76 MVA; In 2010, there were four multifunctional power metering RM-175 devices from SATEC company in- • The number of transformers replaced on 6(10) kV stalled in switchgear cells at Kuznetchikha SSes transformer substations comprised 346 with the (Nizhnovenergo), which allow for controlling the power totaling 63.04 MVA. values of active and reactive power, as well as the To improve the reliability of functioning of the substa- parameters of the energy quality in accordance with tions’ equipment and to normalize the voltages there GOST 13109-97. took place the following replacements of: To improve the controllability the Grid Control Centers • voltage adjustment units of power transformers of all of the Company’s branches were equipped with on 23 substations; BARCO display equipment. PSI AG hardware and soft- • under frequency load shedding devices with mi- ware complexes for the processing and transfer of data croprocessor ones on 7 SS; were installed together with the display equipment. • automatic protective devices with microprocessor ones on 9 SS; To reconstruct the existing SSes and replace unservice- able equipment, the Company’s branches purchased • 110 kV lines protective panels with microproces- 110/10/6 kV MPPS type substations in 2009-2010. sor ones on 64 SS; • control relay cells with up-to-date ones on 6-10 kV SS, with the total number of replacements comprising 583; • installation of up-to-date arc protection on 38 substations.

time moves on 30 Social Report / Provisions for Reliability, Safety and Continuity of Power Supply

Each of said substations consists of two semi-trailers housing a power transformer and a distributing gear. All equipment is assembled, adjusted and ready for use. The deployment of a mobile substation after the transportation takes almost no time, as all one has to do is to connect the cable lines to the low voltage device. After that the substation is ready for operation.

The optic-fiber cables are laid to provide for the communication facilities. The following optic-fiber lines are used for mounting onto overhead transmission lines: • integrated into the ground wire; • wrapped around the wire; • hung on poles (in case of self-supporting fiber-optic communication lines).

The total length of fiber-optic communication lines hung across JSC IDGC of Center and Volga Region comprises 1,386 km.

Compared with the copper cable, fiber-optic cables increase the data transfer speed and improves the data acquisition time, providing for a possibility to extend communication channels to transfer greater amounts of data on the condition of power grids and substations.

To provide the members of mobile teams at power facilities of JSC IDGC of Center and Volga Region with reliable means of communication the Company purchases digital radio stations to be mounted in motor cars used for the transportation of mobile teams. Additionally these vehicles are also equipped with satellite communication facilities.

The development and enhancement of telephone and dispatch communications is based on the implementation of advanced digital telephone stations, such as MiniCom DX-500 and AVAYA communications platform.

The Company puts to operation additional STM-1 and STM-4 communication channels on yearly basis. The communication channel is formed using NATEKS and NortelNetworks synchronous multiplexors.

Domestic manufacturers of the communications equipment used by the Company include JSC NPO Telekom, Analyst Telecom Systems Ltd, Uralenergoservis Ltd and many others.

Teleautomatics equipment used at the facilities of JSC IDGC of Center and Volga Region includes hardware and software telemetry complexes, ISET controllable units, “Distribution TeleSystems” data management teleautomatic complexes, and “Dispatcher”, “Kotmi NT” and “Konus” data processing complexes.

The domestic manufacturers most popular with the Company include JSC Elektrotsentrnaladka, NTK Interface Ltd and JSC NTC RISSA.

The complexes used today are suitable for a variety of tasks:

including the scanning of teleautomatic devices;

storing data in databases;

enabling the dispatch personnel to view the operating schemes with the values of telesignals and telemeasurements in real time;

performing the remote control over the equipment. Social Report / Provisions for Reliability, Safety and Continuity of Power Supply 31

The operators of these complexes can edit or remove mnemonic schemes, switching forms, logbooks, text documents, etc. The means of remote configuration and monitoring enable the remote administration of the equipment.

A new device from Transresurs-M was purchased by Marienergo Branch - a plate used to cover the cable in a trench.

It is made of composite filled polymer based on wollastonite, a natural mineral. Due to unique properties of wollastonite the strength of cable protection plates made of the mineral by far exceeds the strength of traditional materials. The plates are lightweight and very durable, even when compared to traditional brick.

The use of said plates results in improved efficiency and time savings, not to mention the reduction of costs associated with the manufacture of bricks.

To organize the works pertaining to the maintenance of overhead transmission lines in severe natural environment, off-highway vehicles are required, equipped depending on the scope of works.

To serve the interests of its branches, the Company purchases TREKOL cross-country vehicles for the transportation of mobile teams. The vehicles are equipped with seamless low pressure tyres, thus making them suitable for crossing deep snow, marshes, quick sands and water barriers.

Besides, the chassis of GAZ, KAMAZ and URAL trucks are equipped with different machinery:

• drills;

• cranes;

• different skylifts and lifting equipment.

time moves on 32 Social Report / Provisions for Reliability, Safety and Continuity of Power Supply

INVESTMENT ACTIVITY

GOALS AND TASKS OF INVESTMENT ACTIVITY

The key priorities of the mid-term investment policy include the following:

• the decrease of PPE depreciation in order to improve the reliability of power supply for existing consumers, to increase safety and to reduce operational costs of the existing power grids;

• the construction of new facilities and the expansion of power grids in order to connect new consumers, provided new agreements for technological connection are concluded and prepayments are received.

The growth of depreciation channeled to the IPD in 2009-2011 comprised 13.6% for 2009-2010 and 12% for 2010-2011. The profit from energy transmission and directed for investments will depend on the implementation of the long-term tariff policy and currently comprises RUR 1,748.7 million for 2011. The growth of 2010-2011 borrowings is caused by the transition to Regulatory Asset Base (RAB) method.

The investment program of JSC IDGC of Center and Volga Region is implemented in accordance with the schemes and prospective development programs worked out by the executive authorities of the subjects of the Russian Federation in line with the Decree of the Government of the Russian Federation № 823 “On the Schemes and Programs of Prospective Development of Power Industry”, dated 17.10.2009:

Vladimirenergo Branch – the Development Scheme of 35-110 kV and higher grids of the Vladimir Power Grids for the period of up to 2015;

Ivenergo Branch – the Program for the Prospective Development of Electric Power Industry of the Ivanovo Region for the 2010-2015 period;

Kalugaenergo Branch – the Scheme and the Program of Development of Power Industry of the Kaluga Region for the 2010-2014 period;

Kirovenergo Branch – the Program of Development of Power Industry of the Kirov Region for the 2010-2014 period;

Nizhnovenergo Branch – the Program of Development of Power Industry of the Nizhny Novgorod Region for the 2010-2014 period;

Ryazanenergo Branch – the Program of Development of Power Industry of the Ryazan Region for the 2010- 2015 period;

Tulenergo Branch – the Scheme and Program of Development of Power Industry of the Tula Region for the 2010-2014 period.

The programs of development of power industry of the republics of Mariy El and Udmurtia are under development.

The agreements on cooperation between the administrations of the subjects of the Russian Federation of the implementation of measures on improvement of reliability of power supply and the provisions for the connection of new consumers to the grids of JSC IDGC of Center and Volga Region are developed to ensure the reliable and sustainable functioning of the energy system in the middle term, as well as for the elimination of existing Social Report / Provisions for Reliability, Safety and Continuity of Power Supply 33

(forecasted) limitations in consumer power supply and for the implementation of complex programs for the development of social infrastructure and for the full satisfaction of demand for energy, and for the implementation of long-term projects intended to develop the power industry and to achieve the strategic goals.

JSC IDGC of Center and Volga Region participates in the implementation of the federal target programs. To adhere to Federal Law № 161 “On the Support of Housing Construction”, dated 24.07.2008, the Company cooperates with the Federal Fund for the Support of Housing Construction (SHC Fund) in the field of development of grid infrastructure and the connection of facilities to the power grids of JSC IDGC of Center and Volga Region.

In 2009, within the frameworks of implementation of the “Affordable and Comfortable Housing – for the Citizens of Russia” Federal National Project the “Housing” Program was deployed on the territory of the Ivanovo Region.

The Program covers two housing projects:

• Moscovsky Housing Estate Region in the city of Ivanovo (with the declared capacity of 6 MW);

• Sukhovo-Deryabikhsky Housing Estate Region №2 in the city of Ivanovo (with the declared capacity of 2 MW).

The technological connection of housing estates will be initially performed using the existing grids. To connect new capacities, construction of the new Ivanovskaya-16 110/6 kV SS is planned.

In 2010, the options for the power supply of housing construction on land plots owned by SHC Fund were developed for the Nizhny Novgorod Region (Tchaadaev Street, Gagarin Av. in Nizhny Novgorod), the Kirov Region (Solnetchny Bereg and Zinovy housing estates region in Kirov and Shutovschina settlement), the Ryazan Region (Yaltunovo settlement), the Mariy El Republic (Medvedevo town) and the Republic of Udmurtia (Iyulskoye village).

KEY INDICATORS OF THE COMPANY’S INVESTMENT ACTIVITIES

PPE Commissioning

PPE commissioning, excl. VAT, RUR million Branch 2008 2009 2010 Vladimirenergo 463.160 549.732 772.074 Ivenergo 307.4 41 111.316 151.001 Kalugaenergo 427.433 746.455 1,678.773 Kirovenergo 585.349 123.959 323.411 Marienergo 133.321 94.233 167.826 Nizhnovenergo 1,595.279 2,542.822 1,309.637 Ryazanenergo 528.445 1,444.716 861.594 Tulenergo 650.633 913.668 1,571.335 Udmurtenergo 633.696 395.864 438.309 The Executive Body 23.007 5.26 12.774 JSC IDGC of Center and Volga Region 5,347.763 6,928.025 7,286.734

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Transformer Capacities and Power Transmission Lines Commissioning Capacity commissioning, MVA Capacity commissioning, km Branch 2008 2009 2010 2008 2009 2010 Vladimirenergo 95.72 77.7 93.64 275.42 82.4 342.34 Ivenergo 2.35 17.1 4.29 98.47 21.7 36.43 Kalugaenergo 54.87 141.0 196.67 135.11 52.1 515.96 Kirovenergo 100.00 9.5 21.19 261.90 35.9 221.25 Marienergo 4.21 2.9 3.86 22.66 2.6 39.37 Nizhnovenergo 16.00 172.0 45.00 306.44 192.0 446.52 Ryazanenergo 103.22 369.6 262.26 204.66 110.3 175.12 Tulenergo 16.00 100.4 30.25 146.08 69.8 283.78 Udmurtenergo 40.00 40.0 54.12 49.91 98.5 165.69 JSC IDGC of Center and Volga Region 432.37 930.1 711.28 1,500.65 665.3 2,226.47

Capital Investments Structure (excl. VAT), RUR million

2010 Investment Activity 2008 2009 Planned Actual % Total 8,137.22 6,648.47 8,246.817 8,414.302 102% Power facilities, including: 6,628.78 5,917.49 6,702.815 6,834.138 102% Technical re-equipment and reconstruction, 3,669.75 3,587.31 4,306.973 4,397.176 102% including: Power Transmission Lines 1,306.659 645.694 2,389.218 2,400.979 100% Substations 2,363.090 2,941.611 1,917.755 1,996.197 104% New construction and enlargement of existing 2,147.23 2,052.00 2,098.604 2,094.644 100% facilities, including: Power Transmission Lines 670.920 227.395 773.659 748.268 97% Substations 1,476.311 1,824.605 1,324.945 1,346.376 102% Other power grid facilities (automation, communi- 811.801 278.189 297.238 342.317 115% cation) Power metering and control devices, including: 210.055 10.088 160.324 160.988 100% Automated Information and Measuring System of Commercial Metering of Energy of the wholesale 32.478 1.568 0.875 0.863 99% market as part of the investment program Other energy metering and control equipment 0.671 0.006 51.384 48.913 95% PSW for future construction 461.091 365.187 479.383 395.270 82% Other production and economic facilities 354.384 211.694 312.309 301.035 96% Equipment not included into construction budgets 372.78 128.137 499.106 631.252 126% Non-production facilities 0 0 0 0 Capex, intangible assets 59.825 0.615 0.029 0.029 100% Long-term financial investments PPE purchase 50.309 15.26 92.852 91.589 99% Reference: Capex related to technological connection of con- 2,277.41 2,666.33 2,737.111 2,594.996 95% sumers Social Report / Provisions for Reliability, Safety and Continuity of Power Supply 35

INVESTMENT PROJECTS

The major investment projects implemented in the Company branches are listed below. These projects will allow for the essential improvement of reliability of regional power supply and the establishment of capacity reserve for the connection of new consumers in the operations areas.

Information on the Major Facilities of JSC IDGC of Center and Volga Region Included in Investment Program

Facility Remainder Funds Estimated of funds used Start/end Branch Capacity, expenses, to be within IPD Facility dates of the Project Result Achieved MVA/km RUR used as of in 2010, project million 01.01.2010, RUR RUR million million

Creation of capacity Construction of reserve, technological Akhlebinino 110/35/10 Kalugaenergo 50 MVA 2008-2016 455.75 253.43 77.07 connection of consumers: kV SS with overhang Frost Ltd and Artstroy HVL-100 kV Ltd.

Creation of capacity Reconstruction of Rosva reserve, technological 110 kV in the Kaluga connection of consumers: Kalugaenergo Region, involving the 57 MVA 2008-2011 607.75 401.58 5.06 Lemkon-Invest Ltd and replacement of 110 kV JSC Corporation of De- transformers velopment of the Kaluga Region.

Creation of capacity Reconstruction of Vorsino reserve, technological Kalugaenergo 110 kV SS with the trans- 580 MVA 2008-2016 855.54 734.32 101.69 connection of consumers: fer to 220 kV Vorsino Industrial Park Ltd.

Reconstruction of Orbita- Sputnik 110 kV HVL with Power output from Kalu- branching to Kvan 110 kV zhskaya HPS-1. Improve- SS, Mayak 110 kV SS, and ment of reliability and SDV 110 kV SS; construc- efficiency of power sup- Kalugaenergo tion of HVL overhung to 1.7 km 2008-2016 81.22 30.62 7.38 ply of socially significant Kaluzhskaya HPS-1 110 and industrial consumers kV SS with the establish- connected to the Kaluga ment of Orbita-KHPS-1 power system node. with the branching to Kvan 110 kV SS, SS 1

Technological connection of new consumers in Nizhny Novgorod. The 110 kV SS, Varvarskaya Nizhnovenergo 126 MVA 2007-2012 962.55 932.03 80.76 project is implemented SS-2 with 110 kV CL within the frameworks of Agreement № 399/P2, dated 27.12.2006

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Technological connection of new consumers in Nizhny Novgorod. The Strelka 110 kV SS with Nizhnovenergo 80 MVA 2008-2011 582.98 383.94 23.24 project is implemented 110 kV HVL within the frameworks of Agreement № 399/P2, dated 27.12.2006

Technological connection of new consumers Kuznetchikhinskaya-2 in Nizhny Novgorod. The Nizhnovenergo 110 kV SS with 110 kV 126 MVA 2008-2015 863.92 898.32 22.44 project is implemented HVL within the frameworks of Agreement № 399/P2, dated 27.12.2006

Technological connection of new consumers in Nizhny Novgorod. The Sennaya 110 kV SS with Nizhnovenergo 126 MVA 2008-2012 1,067.60 1,107.49 17.14 project is implemented 110 kV cable line within the frameworks of Agreement № 399/P2, dated 27.12.2006 Construction of Puschino 220 kV SS (Fakel SS) with Creation of capacity overhung to Fakel-Puschi- reserve, technological no 110 kV HVL 1st circuit, connection of consum- Puschino-Vozha 110 kV ers, improvement of HVL, Fakel-Puschino reliability of the Ryazan Ryazanenergo 110 kV HVL 2nd circuit, 200 MVA 2007-2010 784.36 7.6 7.6 Power Node. The project Puschino-Dyagilevo 110 is implemented within kV HVL with branching (to the framework of Agree- Okruzhnaya SS, Pechat- ment № 34-1/4, dated naya SS). Pre-commission- 18.02.2008 ing and construction of 220 kV overhung Improvement of reliability of power supply, creation of capacity reserve, connection of new consumers Reconstruction of Dashki within the frameworks of Ryazanenergo 110 kV SS (the first and 126 MVA 2009-2010 132.95 61.59 61.59 implementation of “Af- the second stages) fordable and Comfortable Housing”, “Healthcare” and “Sports Development” federal and regional programs

Improvement of reliability of power supply, creation of capacity re- Reconstruction of Polya- serve, connection of new ny 110/10 kV SS involv- consumers within the ing the replacement of Ryazanenergo 80 MVA 2009-2010 100.20 38.39 38.39 frameworks of implemen- TDN-1000/110 kV power tation of “Affordable and transformers with two 40 Comfortable Housing”, MVA transformers “Healthcare” and “Sports Development” federal and regional programs

Creation of capacity reserve of 52 MW during Construction of Soyuz- the complex construc- Udmurenergo naya 110/10 kV SS with 80 MVA 2008-2011 427.17 427.99 270.11 tion of Aeroport and 110 kV HVL overhung Vostochny residential housing areas in Izhevsk Social Report / Provisions for Reliability, Safety and Continuity of Power Supply 37

REPAIR ACTIVITIES

In 2009-2010, the specialists of JSC IDGC of Center and Volga Region performed all planned repairs of power grid facilities on time and in full. The volume of the repair program comprised RUR 2.1 billion and RUR 2.58 billion for 2009 and 2010 correspondingly. The successful implementation of the Company’s 2009-2010 repair program and additional measures taken to improve the reliability of power grids contributed to the Company’s increased efficiency, as well as to the reduction of disturbances and failures in consumer power supply. The above factors also minimized the damage caused by icy rains and snow storms which occurred in the areas serviced by the Company in 2009-2010 winter. Due to the measures taken, the specialists of JSC IDGC of Center and Volga Region managed to prevent large-scale damage of the energy system and interruptions in consumer power supply. The Company uses advanced methods of equipment diagnostics, which enable timely identification and restoration of the most vulnerable grid areas and elements. From the moment the Company was established, preference is given to diagnostics under working voltage, i.e. without disconnecting the consumers. In 2010, climatic conditions made the Company to adjust the progress of its repair program. Summer hurricanes and fires contributed to the increase of the repairs required by the grid complex. The Company replaced the poles and wires damaged by the storms with new ones. The repairs also included the reconstruction of power transmission lines in devastated areas. Items purchased during the implementation of repairs included additional communications equipment, special vehicles for quick transportation of mobile teams and materials to remote areas, quickly-erected poles and devices for the identification of damaged locations. The number of repair personnel in Ryazanenergo, Kirovenergo, Tulenergo and Udmurtenergo was increased considerably, which resulted in greater efficiency during the implementation of emergency and off-schedule works.

Repair Costs per Groups of Electric Installations, RUR million

2008 2009 2010 2010/2009 Costs, Costs, Costs, Difference, Groups of Electric % of the % of the % of the Costs RUR RUR RUR RUR Installations total costs total costs total costs growth, % million million million million 35-220 kV SS 372.7 23.6% 424.5 17.7% 509.9 18.0% 85.4 20% 35-220 kV HVL 149.3 9.5% 346.7 16.0% 376.6 14.6% 29.9 9% 0.38-10 kV distribu- 698.8 44.3% 1,013.2 46.9% 1,123.6 43.6% 110.4 11% tion grids Buildings 212.0 13.4% 246.5 11.4% 290.9 11.3% 44.4 18% and constructions Other costs 144.1 9.1% 129.9 8.0% 278.2 12.5% 148.3 114%

The facilities repaired in 2009 include over 200 substations and over 5 thousand kilometers of 35-110 kV power transmission lines, nearly 6 thousand transformer stations and some 24 thousand kilometers of distribution grid lines. The facilities repaired in 2010 include 216 35-110 kV substations, 32.1 thousand kilometers of overhead power transmission lines of all voltage classes, 8 thousand transformer substations and distributing points and over 1200 power transformers. Physical indicators of the 2010 repair program exceed 2008-2009 levels due to re-distribution and optimization of costs taking into account the energy efficiency of production.

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FIRE SAFETY

The management of JSC IDGC of Center and Volga Re- To minimize the risk of occurrence and development of gion pays much attention to the provision of fire safe- fires and to protect the power facilities, the personnel ty. The adherence to fire safety requirements is strictly and the population from fires the following measures controlled by fire-engineering commission established intended for further improvement of fire safety were in all branches of the Company, and by fire inspector- developed and implemented: ates of the EMERCOM of Russia. continuous monitoring of fire risks and interac- The system of fire safety implemented at JSC IDGC of tion with local EMERCOM and hydro meteoro- Center and Volga Region contains measures on the logical authorities; prevention of fire risks during the operation of produc- inspection of the systems of fire water supply tion buildings and constructions, as well as electric and fire prevention automatics; installations. Special attention is given to the adherence to fire safety requirements during operations in periodic inspections of fire protection equip- forests, while performing maintenance of overhead ment and special devices; power transmission lines. equipment of branches with primary fire protec- The Company personnel undergo periodic training on tion devices and fire safety signs; fire safety, with the fire safety improved continuously. Of special effect are fire safety and emergency situ- inspection of HVL sections passing through forest ations training of the personnel involving the use of areas prone fires during high fire risk season; professional staff and equipment of territorial EMER- publication of articles on fire protection of power COM structures. grids in local mass media during spring and sum- All branches of the Company hold annual contests for mer seasons; the best fire safety provisions in order to improve the mineralization of land strips in places where fire fire safety conditions and to provide for fire protec- from forests, peat land and fields is likely to be tion of the branches and to identify the departments caught by buildings and equipment (protective best in fire safety. The results of these contests dem- strips along the perimeter of substations, the onstrate high degree of fire safety of production and ditching of wooden poles). administrative buildings, and electric installations, as well as high level of personnel training and the ability The provision of security of power facilities and their of the employees to practically use the skills of fire protection from intrusions is in the focus of the Com- extinguishing, which is confirmed by the stable op- pany’s attention, comprising the control over the engi- eration of the power grid complex during the year of neering security systems of power facilities, including 2010, when the risks of fire were immense. the fire protective automation systems. In 2010, the costs related to the implementation of In 2010 the Company developed the Complex Program measures on improvement of fire safety comprised on Anti-Terrorist Measures to Protect the Facilities of RUR 127 million. Said measures included the instal- JSC IDGC of Center and Volga Region for the 2010-2015 lation of fire alarm systems on 67 facilities, the treat- Period. The Program is presently under implementa- ment of over 100 thousand square kilometers of struction. The Guidelines for the Equipment of Facilities of tures and cable lines by flame retardants, the purchase JSC IDGC of Center and Volga Region with Anti-Terror- of over 3 thousand fire extinguishers and other fire ist Engineering Devices have been developed in ac- protection devices. The costs planned for fire safety cordance with the Program. The Guidelines establish provisions in 2011 will comprise over RUR 160 million. Social Report / Provisions for Reliability, Safety and Continuity of Power Supply 39

the general technical policy for the equipment of facilities of JSC IDGC of Center and Volga Region with engineering protection and security devices, including fire protection automatics.

Continuous efforts of the Company staff to provide for fire safety ensures a high degree of fire safety of all facilities of JSC IDGC of Center and Volga Region.

SECURITY PROVISIONS Continuous efforts of the Company staff to provide for fire safety ensures The Department of Security is responsible for secu- a high degree of fire safety of all facilities of JSC IDGC of Center and Volga Region. rity provisions in JSC IDGC of Center and Volga Region. The Department operates in close cooperation with all structural units of the Company, as well as with re- provement of the systems of physical and engi- gional law enforcement, controlling agencies and mu- neering-technical protection of the power grid nicipal authorities. complex facilities; control over the implementation of measures on the protection of specially In 2009-2010 the security priorities of the Company controlled facilities from the terrorist activities, included: as implemented within the frameworks of im- timely collection of accounts receivable by way plementation of complex, target and repair proof improving pre-contracts preparation and the grams; checking of potential business partners; provisions for the safekeeping of data pertaining to organization and implementation of effective state and commercial secrets and the protection of control over the tenders procedures and pur- the Company’s information resources; chasing activities; prevention of thefts of components of power improvement of efficiency of the audits of finan- transmission lines, electric equipment and mate- cial and economic activities of the Company’s rial assets; branches and the SDCs performed jointly with improvement of cooperation with the prosecu- the Internal Control and Audit Department; tor’s office, the law enforcement agencies, and reduction of energy losses, identification and the municipalities in the field of energy trans- prevention of energy thefts performed by way of mission, technological connection, and the pre- unmeasured and non-contracted consumption. vention of thefts of energy, electric equipment, The prevention is accomplished using special components of concrete poles and power trans- equipment and technical devices; mission lines;

identification and prevention of violations in the improvement of the personnel training on emer- sphere of technological connection and energy gency situations. transmission;

protection of the Company interests from illegal operations of legal entities and physical persons which may result in economic or reputational damage;

development and implementation of measures on the prevention of terrorist activities; im-

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PREVENTION OF THEFTS OF ENERGY, ELECTRIC EQUIPMENT, COMPONENTS OF POWER TRANSMISSION LINES AND OTHER MATERIAL ASSETS

Based on the analysis of energy losses in power grid complex, the Company implemented measures on the identification and prevention of theft of energy by household consumers and legal entities of different proprietary forms. The measures were implemented in cooperation with corresponding structural units of the Company and the territorial law enforcement agencies.

The measures implemented jointly with the territorial law enforcement agencies in 2009-2010 included 391 checks and raids.

The measures implemented resulted in the identification of 31,126 cases of non-contracted and unmeasured consumption of energy amounting to RUR 280,100,947 including 9 cases involving the use by consumers of special devices facilitating energy theft and the lowering of energy consumption. The damage reimbursed to the Company amounted to RUR 41,820,864.

The law enforcement agencies opened 123 criminal cases based on the facts of energy theft. The number of persons held responsible for criminal and administrative offence comprised 87 and 67 correspondingly.

The measures implemented in 2009-2010 revealed 200 cases of theft of electric wires, transformer substation equipment and other material assets amounting to RUR 13,412,450. The number of criminal cases opened by law enforcement agencies comprised 108, with 15 persons held responsible for criminal offence.

The measures implemented by the Company jointly with the law enforcement agencies resulted in the prevention of 9 cases of theft of electric equipment, components of power transmission lines and other material assets from the Company’s power grid facilities.

The management of the Company branches, production units and distribution grid zones, as well as of the security departments of the Company maintain continuous cooperation with district and settlement administrations, the representatives of the prosecutor’s office and the territorial law enforcement agencies, performing periodic inspections of non-ferrous metal reception stations and using the opportunities provided by the local mass media and trust line telephone numbers. Social Report / Provisions for Reliability, Safety and Continuity of Power Supply 41

MEASURES ON IMPROVEMENT OF FACILITIES SECURITY

In 2009-2010 the measures on improvement of physi- The Company’s Engineering Department prepared a list cal, anti-vandal and anti-terrorist security of the Com- of 110 kV and higher substations, grid control centers pany’s power grid facilities were implemented as and united dispatch departments which are most sig- planned and in accordance with the requirements of nificant for the provision of secure and safe power sup- the current legislation of the Russian Federation, the ply of the cities with the population of one million and internal regulatory documents of the Ministry of En- greater. ergy of the Russian Federation, JSC IDGC Holding and JSC IDGC of Center and Volga Region. The Company’s Security Department performed additional measures pertaining to the inspection of 110/35/10-06 kV substations and other Company facilities. The inspections were performed jointly with the staff of the Federal Security Service and the Min- istry of Internal Affairs. The inspections performed jointly with the staff of the above mentioned law en- The number of command post exercises and other training on anti-terrorist forcement agencies covered 2,361 Company facilities. activities performed by the Company in 2009-2010 with the participation of Based on the results of the inspections measures were the territorial bodies of the Federal Security Service, the Ministry of Internal Affairs and EMERCOM comprised 474. developed for the creation of systems for providing engineering and technical security of the facilities. The Company’s Department of Security checked the anti-terrorist security of the power grid facilities in all the The measures implemented in 2010 included: Company’s branches, inspecting their engineering and technical safety. The drawbacks revealed are eliminated • the power grid facilities of the Company with the as planned. personal operated 24 hours a day were equipped with 144 alarm buttons connected to the cen- The measures performed by the Company in 2009- tralized security console controlled by the non- 2010 to improve the functioning of the territorial grid departmental security forces of the Ministry of organizations and to maintain them in operable condi- Internal Affairs of the Russian Federation; tion, as well as to train the personnel on actions in case of the terrorist threat included the installation of • were additionally established 20 guard posts. security and fire alarm systems and access control sys- The staff of all production units of the Company branch- tems, the repair and installation of Egoza type barbed es was regularly trained on alerting, gathering and the wire fencing, video surveillance systems, the systems course of action of the management and employees in of perimeter security alarms, etc. case of a potential or actual sabotage or terrorist acts, In 2009-2010 the number of the Company facilities and the onset of natural or technogenic emergencies at covered by security devices including security and fire energy facilities. alarm systems, perimeter security alarms, fire protec- The number of command post exercises and other tion automatics, access control systems and video sur- training on anti-terrorist activities performed by the veillance systems increased by 131. The length of Egoza Company in 2009-2010 with the participation of the type barbed wire fencing comprised 819 m, while the territorial bodies of the Federal Security Service, the length of concrete fencing comprised 2,140 m. The total Ministry of Internal Affairs and EMERCOM comprised costs related to the above reached RUR 115,447,000. 474.

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PREVENTION OF CHILDREN’S INJURIES RESULTING FROM ELECTROSHOCK. EDUCATIONAL ACTIVITIES

Children are most likely to suffer from injuries resulting such as posters, bookmarks, magnets, lesson timeta- from electroshock and improper handling of electric- bles, calendars and stickers. The children took part in ity and electric devices. Therefore the Company is en- quiz games, visited energy facilities and safety briefing gaged in continuous educational activities intended rooms on the territory of the Company branches. to prevent such injuries. These activities usually be- The Company also offered an alternative option for come more intensive as summer season and long hol- the schools located in far-off regions, consisting in idays approach. The main purpose of these activities the possibility to download video materials and learn- is to educate children in the handling of electricity, as ing materials from the corporate website http://www. well as to train them on the rules of safety while near mrsk-cp.ru/?id=12165, in order for the teachers to con- electric facilities. duct vital lessons on electric safety for the students Starting from 2007, the Company acts as the initia- later. tor, developer and organizer of periodical educational, sportive and other informational events on the territory of the operation areas. The Company specialists bring their projects and educational programs to schools, libraries, kindergartens, and school and vacation camps. The Company specialists also cooperate with mass media. The main advantage of these educational materials lies in the fact that they take into account the psychology of today’s children and young people with their love for internet communications. Children are least of all informed of danger, caused by improper handling The lessons on electric safety are taught in the form of electricity. Therefore, JSC IDGC of Center and Volga Region is engaged of entertaining animated films, flash games and online in continuous educational activities intended to prevent children’s injuries resulting from electroshock. contests.

During 2010-2011 school year hundreds of schools of The projects of the Company gain continuous support nine Russian regions participated in the mass raids of from the district, as well as regional departments of the Company, which organized extra-curricular lessons education. For example, the department of education on electric safety. A film was made to enliven these of the Vladimir Region recommended the Company’s lessons, together with didactic and printing materials, set of learning materials dedicated to the rules of children’s conduct in the vicinity of energy facilities and the rules of handling of household electric appliances for the use in all educational establishments during extra-curriculum lessons throughout the academic year.

Starting from 2007, JSC IDGC of Center and Volga Region acts as the initia- tor, developer and organizer of periodical educational activities on electric safety on the territory of the operation areas. Social Report / The Company and Shareholders 43

The Company and Shareholders

44 Corporate Governance 50 Information Policy 46 Shareholder’s Capital Structure 52 Property Management 47 Protection of the Shareholders Rights 54 Consolidation of Power Grid Assets 48 Dividend Policy 54 Internal Control 49 Capitalization Management 55 Risk Management

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CORPORATE GOVERNANCE

High level of corporate governance is one of the factors contributing to the success of the Company’s business. The efficient mechanisms of corporate governance enable the Company to balance and protect the interests of all stakeholders, as well as to pre-condition long-term development of the Company. The management of JSC IDGC of Center and Volga Region analyses the best Russian and international practices of corporate governance, adhering to the policy of continuous improvement of the system of corporate management to ensure the compliance with the best international standards.

The Corporate Governance Code of JSC IDGC of Center and Volga Region (hereinafter referred as the Code) is based on the Russian law, the Charter of the Company, the Corporate Conduct Code recommended for use by Order № 421/r of the Federal Commission for the Securities Market, dated on 04.04.2002 and the internationally recognized principles of corporate governance, such as the Principles of Corporate Governance of OECD (the Organization for Economic Cooperation and Development). The text of the Code is available at: http://www.mrsk-cp.ru/?id=6483.

The supreme management and control bodies of the Company consist of:

the General Shareholders Meeting – a supreme governing body of the Company used by the shareholders to exercise their right to participate in the Company’s management;

the Board of Directors – a governing body responsible for the development of the Company’s strategy and the general management of its operations, as well as for the control over the executive bodies;

the Management Board and the General Director – the executive bodies of the Company engaged in managing its daily operations. The framework of reference of the executive bodies covers all issues pertaining to the management of the Company’s daily operations, except for the issues which are within the powers of the General Shareholders Meeting or the Board of Directors. The executive bodies are accountable to the Company’s Board of Directors and the General Shareholders Meeting.

the Audit Commission is a body controlling financial and economic operations of the Company. The Audit Commission is accountable directly to the Company’s General Shareholders Meeting.

Thus, the Company shareholders can exercise their right to participate in corporate management through the General Shareholders Meeting including election of the members of the Board of Directors, as well as through the Committees of the Board of Directors.

The Board of Directors of JSC IDGC of Center and Volga Region consists of 11 members, 10 of whom are independent directors.

During 2009 the Board of Directors of JSC IDGC of Center and Volga Region conducted 20 meetings (with one of them in the form of joint attendance), the number of issues reviewed comprised 304. In 2010, the Board of Directors of JSC IDGC of Center and Volga Region conducted 18 meetings (with two of them in person and in absentia), while the number of issues reviewed exceeded 250.

The target KPI target values to be used for the assessment of efficiency of the top managers of JSC IDGC of Center and Volga Region in 2010 were approved by the Board of Directors on 24.05.2010 (Minutes № 56). Social Report / The Company and Shareholders 45

2010 Planned and Actual KPIs

№ Indicator Planned 2010 Actual 2010

1 Return on Equity (ROE) secured by cash ﬂ ow, % 2.15 3.19

2 Losses of energy targeted for supply, % 9.38 9.06

Investment program implementation efﬁ ciency during current quarter 3 ≥ 95 109 (in terms of period and volume), % Prevention of the number of accidents exceeding the limit for the 4 accidents complying with p. 2.1. of the Instruction of the Ministry 0 0 of Energy of Russia, dated 29.12.2000 Systemic index of interruption of consumer power supply 5 <1 <1 (for 6 kV feeders and higher) Systemic index of the average duration of power supply interruptions 6 <1 <1 (for 6 kV feeders and higher)

Based on the performance results of JSC IDGC of Center and Volga Region for the year, the 2010 KPIs have been achieved.

2009 Planned and Actual KPIs

№ Indicator Planned 2010 Actual 2010

1 Return on Equity (ROE) secured by cash ﬂ ow, % 0.0 0.93

2 Losses of energy targeted for supply, % 9.78 9.41

Investment program implementation efﬁ ciency during current quarter 3 ≥ 95 105.5 (in terms of period and volume), % Prevention of the number of accidents exceeding the limit for the 4 accidents complying with p. 2.1. of the Instruction of the Ministry 0 0 of Energy of Russia, dated 29.12.2000 Systemic index of interruption of consumer power supply 5 <1 <1 (for 6 kV feeders and higher) Systemic index of the average duration of power supply interruptions 6 <1 <1 (for 6 kV feeders and higher)

Based on the performance results of JSC IDGC of Center and Volga Region for the year, the 2009 KPIs have been achieved.

More detailed information on the composition, powers and activity the supreme governing bodies of the Com- pany is available in “About the Company – Management Authorities” Section at http://www.mrsk-cp.ru/en.

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SHAREHOLDER’S CAPITAL STRUCTURE

The Company’s charter capital totals RUR 11,269,781,704.30.

The number of authorized shares comprises 2,182,957 ordinary registered shares with the nominal value of 10 (ten) kopecks each share. Said shares are the difference between the authorized shares (112,600,000,000 shares) and the shares (112,597,817,043 shares) issued under the reorganization of the Company, which took place in 2008 in the form of incorporation with the Company the distribution grid companies.

The Company issued 112,697,817,043 (One hundred and twelve billion, six hundred and ninety seven million, eight hundred and seventeen thousand and forty three) ordinary shares with the nominal value of 10 kopecks.

The Company issued no preferred shares.

Shareholder’s Capital Structure (5% and more)*

16.82% 50.40% JSC IDGC Holding

5.40% Jamica Limited

as of 06.05.2011 Energosouz Holdings Limited Others 27.38%

*Valid on 06.05.2011 (the date a list of persons authorized to participate in the General Shareholders Meeting held on 14.06.2011 was prepared.) Social Report / The Company and Shareholders 47

PROTECTION OF THE SHAREHOLDERS RIGHTS

The key principles of the Company’s corporate governance are:

Accountability

The accountability of the Company’s Board of Directors to all shareholders in compliance with the current law of the Russian Federation is used by the Board of Directors as guidelines for the development of the Company’s strategy and for the control over the operation of the executive bodies of the Company.

Justice

The Company undertakes to protect the rights of shareholders and to ensure unbiased attitude towards all shareholders. The Board of Directors entitles all shareholders to protection in case their rights are violated.

The Company provides for the protection of rights and legitimate interests of its shareholders by:

• ensuring reliable recording of ownership rights for the shares and a possibility to freely and quickly dispose the shares;

• ensuring a possibility for the shareholders to participate in the management of the Company by making decisions on the most vital issues of the Company’s activity at the General Shareholders Meeting;

• ensuring a possibility for the shareholders to participate in the Company’s profits.

Transparency

The Company provides for the timely disclosure of accurate information on all essential facts pertaining to the Company’s activity, including:

• information on the Company’s financial position;

• social and environmental indicators;

• performance results;

• structure of the Company’s assets and corporate governance;

The Company also makes the above information available to all stakeholders.

Responsibility

The Company recognizes the rights of all stakeholders in accordance with the current law of the Russian Federation and makes every effort to cooperate with such persons for the sake of the Company development and financial stability.

time moves on 48 Social Report / The Company and Shareholders

DIVIDEND POLICY

The Company recognizes the importance for the shareholders of receiving income in the form of dividends from their investments made in the form of purchase of the Company shares. To ensure the transparency of the mechanism of determining the size of dividends and the procedure of dividend payment, the Company’s Board of Directors approved the Regulations On Dividend Policy (Minutes №61, dated 01.09.2010), which sets the conditions, procedure, terms and forms of dividend payment. The text of the Policy is available at http://www.mrsk-cp.ru/?id=6483.

The Dividend Policy of JSC IDGC of Center and Volga Region is intended to ensure the maximal observance of rights of all shareholders of the Company and to establish conditions enabling the growth of the Company’s capitalization and its investment attractiveness, as well as to balance the net profit channeled for dividend payment and for the Company development.

According to the approved Regulations On Dividend Policy, a decision to pay dividends is subject to simultaneous compliance with the following conditions:

availability of the net profit excluding re-evaluation of financial investments;

YE debt/EBITDA ratio does not exceed 3 (otherwise the redemption of debt becomes a priority);

targets for the reliability of power supply are achieved (otherwise the profit is distributed so as to implement measures on the increase of reliability of power supply and the quality of services).

If all of the above conditions are met, the size of dividends to be paid is determined as the remainder of the net profit (excluding re-evaluation of financial investments) for the period after net profit is distributed to form mandatory reserves, investments and to compensate for the operations losses of the previous years.

Dividend Yield Information

Results of 2010 Results of 2007 Results of 2008 Results of 2009 (planned)

Basic earnings per share, RUR 0.0007 0.0152 0.0038 0.0124

Diluted EPS, RUR 0.0007 0.0152 0.0038 0.0124

Dividend payout ratio, % 0 0 0 10.1

Dividend per share, RUR - - - 0.0013 Social Report / The Company and Shareholders 49

CAPITALIZATION MANAGEMENT

An efficient investor and shareholder relations program is one of the key tools of capitalization management.

During the year the Company management participated in meetings with investors, shareholders and stock market analysts which were conducted at investment forums, conferences and round tables. Their involvement contributed to the transparence and openness of the Company, thus improving the understanding by the investors’ community of the Company’s activities and the prospects related to the transfer to RAB regulation.

To increase the shares liquidity, in 2010 the Company used market makers on MICEX and RTS stock exchanges, as said measures proved to be effective during the previous years.

The development of corporate governance system is no less important for the growth of the Company’s capitalization. New versions of the Company’s Charter and of a number of internal documents were developed and approved in 2009-2010. The period is also marked by the effective work of the Company’s executive bodies.

To complement the reports prepared in accordance with the Russian Accounting Standards (RAS), the Company prepares and publishes audited reports prepared in accordance with the International Financial Reporting Standards (IFRS).

The 2010 was a successful year for the Company on the stock market. The Company’s capitalization increased by 67.11% and outpaced MICEX Index and MICEX Index – Power Industry, which grew by 23.2% and 44.1% respectively. As of 30.12.2010, the Company’s capitalization reached RUR 34,181,247,909.14.

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INFORMATION POLICY

The communication processes management performed in line with the information policy is an integral part of the Company’s strategic management.

The Company’s policy on the information disclosure is based on the following principles:

• periodicity and timeliness;

• information availability;

• completeness and accuracy of the information disclosed;

• reasonable balance between the Company openness and the protection of its commercial interests.

Disclosure of information

Voluntary Mandatory (Additional)

Legislation of RF, normative documents of Internal documents approved by the Board the controlling and regulatory bodies of Directors: (FFMS, FAMS and others) • Code of Corporate Governance; • Regulation of Information Policy; * Regulatory Documents • Insider Information Policy.

The Company’s site at www.mrsk-cp.ru The Company’s site at www.mrsk-cp.ru

JSC Interfax newsfeed at Meetings, conferences, brieﬁngs, http://disclosure.interfax.ru/ round tables, etc.

Izvestia newspaper, in cases Leaﬂets, reports, brochures and other stipulated by the Company's Charter information materials

Submission to regulatory bodies Information coverage of activities in mass media (interviews, articles, etc.)

Disclosure upon enquiries from persons Distribution of Information among the representatives of the investment Information Disclosure Channels community

*The text of the documents is available at: http://www.mrsk-cp.ru/?id=6483. Social Report / The Company and Shareholders 51

Information Disclosure on the Company’s Website

The Company adheres to the Regulations on Information Disclosure and the Regulations on Insider Information approved by the Company’s Board of Directors (Minutes №8, dated 18.02.2008), and the Corporate Governance Code approved by the Board of Directors (Minutes №52, dated 24.02.2010).

The said documents specify the rules and approaches of information disclosure, as well as a list of information and documents subject to disclosure. The Regulations on Information Disclosure also defines the procedure and terms of information disclosure.

The Company’s external website www.mrsk-cp.ru provides full access to the information which is disclosed by the Company in compliance with the law of the Russian Federation and the Regulations on Information Disclo- sure. All information disclosed is available in Russian and English languages synchronously.

Within the frameworks of voluntary (additional) information disclosure the following information is disclosed at the Company’s corporate website:

• general information about the Company;

• information on the Company securities and share performance;

• information on the Company’s dividend policy;

• information on the Company’s management and controlling bodies and decisions made;

• information on the Company’s material transactions;

• information on the Company’s key events;

• information on the Company’s financial and economic activities;

• information on the Company’s key activities and information for consumers;

• other information, as specified in the Company’s Regulations on Information Disclosure.

The Company’s Information Transparency Rating

It’s the second year in a row that JSC IDGC of Center and Volga Region is the list of the Russian major companies with the most liquid shares. The list is used by Standard and Poor’s to assess the information transparency of the major Russian companies. The information transparency of the Company was significantly improved in 2010.

JSC IDGC of Center and Volga Region as Rated by Standard and Poor’s

Position in the rating Information transparency Average rating of 90 Year Dynamics (consisting of 90 companies) index, % companies, % 2010 24 68.35 57.5 2009 57 54 56

The full research results are available at http://www.standardandpoors.ru/

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PROPERTY MANAGEMENT

The fixed assets owned by JSC IDGC of Center and Volga The children’s health camp named after Yu. A. Gagarin. Region include the property used to perform the key ac- During the 2009-2010 summer periods 960 children tivity of energy transmission, as well as of different so- rested in the camp. cial, cultural and housing estates.

Socially-oriented facilities (children’s camps, sanatori- ums, sporting complexes, diners, housing estates) not related to the production and technological processes are not used by the Company in its operational activities. In a number of cases the costs related to the maintenance and service of property assets exceed the revenues generated by these assets. In 2009-2010 the total costs for the maintenance of the Company’s non- production assets comprised RUR 44,122 thousand, Starting from 2008, JSC IDGC of Center and Volga Region performed the while the revenues totaled RUR 20,616 thousand. complex of activities for the reconstruction of the famous Shukhov Tower (Dzerzhinsk, the Nizhny Novgorod Region), which deserves universal cultural The costs incurred by the Company and related to the value, as considered by the UNESCO’s experts. non-core assets activities are conditioned by the social significance of such assets. Below listed are some of The building of the sporting complex in the Repub- these assets: lic of Udmurtia (77, Dragunov Street, Glazov) operates according to its intended use, rendering services to the The Shukhov Tower, a cultural property site located in population. the city of Dzershinsk, the Nizhny Novgorod Region is one of the two highrise multi-sectional hyperboloidal In some cases the maintenance of property assets in structures designed by the architect V.G. Shukhov still condition suitable for operation constitutes the only standing in Russia. According to the western special- possible way to use the property. The purchase of ists, the Tower is of universal cultural value and de- such assets by third parties not interested in using the serves to be included into the World’s Cultural Herit- property according to its intended use may lead to the age List compiled by UNESCO. The Tower is used as loss by the property of its social functions. Such assets one of the two supports for the power transmission include Energetik Stadium in the city of Uren of the line built in 1929 to cross the Oka River. As the owner Nizhny Novgorod Region, and Energetik Health Facility of this property. JSC IDGC of Center and Volga Region in Tchuvash-Otary village of the Republic of Mariy-El. performed a set of measures for the preservation and These assets are socially-oriented, and their disposal restoration of the Tower. The first two stages of recon- should be agreed with the authorities interested in struction started in 2008 involved the reconstruction further functioning of such assets. of all 16 damaged supports of the Tower (of 46) and the strengthening of the Tower frame. To prevent possible underwashing of the Tower foundation the Oka A positive example of preserving the social signifi- River shoreline was strengthened during the second cance of an asset which is planned for disposal is stage of the reconstruction. A walking embankment set by the building of the training center located at was also built near the Tower. Presently the third stage 17g Zubkova Street, Ryazan. of the Tower reconstruction is in progress. Once the reconstruction is finished the Tower will become one of the Region’s tourist attractions. Social Report / The Company and Shareholders 53

Besides the information obtained in the result of ca- According to the agreement with the Government of dastral formation of land plots occupied by the power the Ryazan Region and the Administration of Ryazan, grid facilities of JSC IDGC of Center and Volga Region the Company performs measures intended to facilitate is recorded into the State Registry of Immovable the direct selling of the training center to Ryazan Mu- Property, thus forming the data content of topical ca- nicipality. The training center will be used as a pre- dastral maps (texts and maps), including the public school educational institution. ones, which are integrated into a unified information JSC IDGC of Center and Volga Region also owns utility system available for unlimited number of users. and housing facilities, which satisfied the needs of the The documents resulting from land planning (setting Company at the moment the Company was founded. boundaries for the protection zones of power grid fa- Today the Company ceases the performance of non- cilities) form the Unified State Information Fund. The core activities, including the servicing of utility and land planning documents included into the State In- housing estates (hereinafter referred as UHE). formation Fund constitutes the federal property. The To implement the strategies approved by the Board documents are used by the state authorities for the of Directors in relation to UHE, a regulation was ap- development of plans of social and economic develop- proved on the procedure of disposal of UHE owned by ment of the territories. JSC IDGC of Center and Volga Region (Minutes №50 of the Board of Directors of JSC IDGC of Center and Volga Region, dated 25.12.2009). The procedure provides for the differential approach to the selling of UHE assets, involving the use of benefits in relation to certain categories of persons (taking into consideration their length of service, material conditions, age and circumstances preceding the receipt of housing). The procedure provides for the targeted sale of UHE assets without any tenders.

Apart from UHE assets, the Company also owns engineering infrastructure assets (water and gas supply systems, ducting, etc.) the maintenance of which in operable condition and the performance of running repairs and overhauls is vital for the functioning of “connected” housing estates with their residents.

Therefore the measures taken by the Company to re- lieve social tension and conflicts and to provide support for the citizens to document their title to their housing make the procedure of selling the Company’s non-core assets more complicated and prolonged, but the effect achieved is in line with the socially responsible position of the Company.

In the field of regulation of land rights the participation of JSC IDGC of Center and Volga Region in the formation of local budgets from payments for the use of lands is worthy of noting.

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CONSOLIDATION OF POWER GRID ASSETS

The Program of consolidation of power grid assets under the Company’s management is one of the key social priorities of the Company.

Purchasing and reconstructing the depreciated power transmission lines and transformer substations, JSC IDGC of Center and Volga Region provides for the improvement of reliability of power supply of connected consumers, the latter including the power receivers owned by private persons and social establishments. The reconstruction of the grids within the frameworks of the Program of consolidation eliminates the need for the consumers to re-document the technological connection to the new power transmission lines. The establishing of control by the Company over the facilities significantly decreases the risk of accidents and injuries related to third persons and to children especially.

INTERNAL CONTROL

The Company has approved the Regulations on the Internal Control Procedures. The Regulations defines the basic concepts of the Company’s internal control system, including the goals of internal control, the principles of functioning of the system, its functions, as well as the procedures and methods of internal control. The Regula- tions also defines the accountability of structural units within the system of internal control. The approval of the Regulations provides for the transparency and formalization of the Company’s internal control system, ensuring the continuity of practices and principles set by the document, constituting a guideline for the Company’s structural units for the improvement of the internal control system.

Subjects of the Company’s Internal Control and their Authorities

Subjects of the Company’s internal Authorities control Approves the internal control policy and assesses its efficiency. The Board of Directors is respon- Board of Directors sible for the approval of the general strategy of internal control.

Audit Commission Performs regular “auditing” control of the Company’s financial and economic activities.

Audit Committee of Performs general assessment of efficiency of the Company’s internal control procedures the Board of Directors (including based on the reports of the Internal Control and Audit Department).

General Director Responsible for the functioning and efficiency of the Company’s internal control procedures.

Assesses the adequacy and efficiency of control procedures, as well as the implementation of procedures by the participants of the Company’s business processes. The Department is account- Internal Control and able to the Audit Committee and each quarter informs the Committee on the work fulfilled and Audit Department on the violations in financial and economic activities revealed in course of checks, including the facts of non-adherence/improper adherence to the internal documents approved by the Com- pany.

Core divisions Responsible for monitoring and performance of control procedures and risk management. Social Report / The Company and Shareholders 55

RISK MANAGEMENT

Risk management is a process consisting of making and implementing managerial decisions aimed at decreasing the probability of adverse effects and minimizing possible losses caused in the result of such effects.

JSC IDGC of Center and Volga Region consider the following risk categories:

strategic risks – the ones associated with the development, implementation and monitoring of the Com- pany’s strategy and having direct impact on the Company’s performance (such risks are subdivided on country, regional and industry risks);

regulatory risks – the ones associated with tariff, antimonopoly and industry regulations;

financial risks – the ones associated with:

• financial stability;

• the structure of the Company’s capital;

• profitability and liquidity decrease;

• currency fluctuations;

• credit risks and interest rate fluctuations.

operational and technological risks – the ones associated with the following:

• interruptions in power transfer, the reliability of power supply, systemic disturbances and the reliability of engineering processes used or implemented;

• purchasing activities, logistics and deliveries;

• selection, management and turnover of employees, the personnel motivation system and process organization efficiency;

• advanced training and mentorship.

law (legal) risks – the ones associated with compliance with law requirements, asset management and corporate governance, as well as with intellectual property issues.

Detailed information on the Company’s risks and the related actions aimed at minimizing losses is available in 2009 and 2010 annual reports: http://www.mrsk-cp.ru/?id=10687, http://www.mrsk-cp.ru/?id=16390.

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The Company and Employees

57 HR Management Policy 67 Provisions for the Retired and the Veterans 58 Human Rights and Equal Opportunities 68 Corporate Culture 58 Labor Compensation and Motivation 69 Support of Mass Physical Culture and Sports 60 Analysis of the Employee Social Beneﬁ ts Package 70 Workmanship Competitions 61 Programs of Social Support 70 Healthcare 63 Organization of Training, Re-Training and Advanced 71 Healthcare Costs Dynamics Training of Personnel 72 Establishment of Safe Labor Conditions 65 Trade Unions Relations 72 Safety of Production Processes 65 Youth Policy 73 Establishment of Positive Psychological Climate, 66 Practical Methods of Attracting Young Specialists Corporate Involvement and Mutual Responsibility Social Report / The Company and Employees 57

HR MANAGEMENT POLICY

The competitiveness of JSC IDGC of Center and Volga One of the key priorities of the Company’s HR policy Region as an up-to-date organization is determined by consists in supporting and developing the HR poten- its ability to quickly adapt to on-going environmental tial, taking into account the development trends of the changes and to maintain technological processes at power grid complex, the specifics of the regions and the high level. This requires uninterrupted improvement dynamics of social and economic development of the of management processes based on organizational in- country. novations. Based on the analysis results of the current HR situa- The Company employees are its most valuable as- tion in the Company, as well as the external HR con- set. The efficiency of any organization depends on ditions in view of the necessity to preserve, compen- the qualitative characteristics of its staff. The strict sate for and develop the HR potential, the following requirements set before the personnel of the power priorities have been determined, as formulated in the grid complex require considerable investment in so- Program for the Support and Development of the HR cial and professional development of the Company Potential of JSC IDGC of Center and Volga Region: employees. • identification of a special category of employees The Company’s HR management policy complies with the retention of whom is of paramount impor- the requirements of the Russian law, the Power In- tance for the Company; dustry Tariff Agreement for 2009-2011 (hereinafter • development and implementation of measures referred to as PITA), the Collective Bargaining Agree- on the rejuvenation of the Company’s personnel, ment between the employer and the employees of JSC especially the production employees (workers, as IDGC of Center and Volga Region for 2009-2011 and well as engineering and technicians); OHSAS 18001:2007 standard. • fostering of cooperation with the leading Rus- The main goal of the Company’s HR management poli- sian establishments for higher, secondary and cy is to fully and timely satisfy the Company’s demand vocational occupational education, with special in human resources of proper quality and quantity. The attention paid to industry-specific educational policy is focused on the improvement of quality and establishments and chairs; efficiency of use of the Company’s HR potential and the proper motivation of personnel, as well as on en- • development of the system of training and re- suring its professional development. training of personnel in view of the use of opportunities provided by the regional training centers and the implementation of flexible teaching techniques; The basic principle of the HR policy consists in drawing together the interests of the Company • focusing on the HR reserve; and the interests of each employee in order to • intensification of actions aimed at greater psycho- achieve maximal production and economic results. logical and physiological safety of the operating staff.

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HUMAN RIGHTS AND EQUAL OPPORTUNITIES

JSC IDGC of Center and Volga Region operates in accordance with the Russian legislation and international law, which prohibits any forced labor and discrimination.

The Company recognizes the rights of its employees to decent work conditions, protection from occupational risks, formation of trade unions and protection of their rights by way of collective negotiations. The Company makes every effort to establish favorable work conditions, and the atmosphere of confidence and cooperation. The Company employees have equal rights and opportunities for professional development and promotion irrespective of their sex, age, nationality, as well as religion or political views. The Company employs no underage personnel.

LABOR COMPENSATION AND MOTIVATION

The policy of JSC IDGC of Center and Volga Region on labor compensation and motivation of personnel is intended for the establishment of conditions which ensure the increase in efficiency, effective self-actualization and occupational development of each employee.

A uniform system of labor compensation based on the principles of uniformity, transparency, equal rates for the labor of equal value, depending on the qualification of each employee, the complexity of labor and the quantity and quality of labor is used in all structural units of the Company. The uniform tariff schedule contains 19 labor compensation tariff levels with gradual increase. The system of tariff rates is based on the principle of discrimination of jobs and functions performed by specialists and line leaders. The jobs and functions are distinguished by:

• scale;

• complexity;

• degree of responsibility;

• qualification requirements.

In accordance with the conditions of the current Collective Bargaining Agreement and the Regulations on Labor Compensation for the Employees of the Company Branches, the minimal tariff rate of a first grade worker (hereinafter referred to as MTR) exceeds the same set by the Industry Tariff Agreement in the power industry of the Russian Federation by 45%. The excess is the result of a similar decrease of current bonuses. The re-distribution of payroll fund so as to increase the fixed amount of labor compensations resulted in greater loyalty of the personnel and lowered the rate of personnel turnover, thus enabling the Company to retain highly qualified employees and to attract young specialists. This contributed to the increased attractiveness of the Company as the employer and the strengthening of the organizational stability. Social Report / The Company and Employees 59

The MTRGW is adjusted quarterly in accordance with Besides, in accordance with the approved Program for the consumer price index based on the data provided the Support and Development of the Company’s HR by the Federal Statistics Service. Potential, the Company makes every effort to continuously increase the amount of labor compensation for The variable share of labor compensations includes employees of certain trades and positions, the attrac- monthly and year-end bonuses. The system of bonus- tion and retention of whom is essential for the organi- es for the Company’s managers depends on the Key zation. Subject to such increase are tariff rates of the Performance Indicators (KPIs). The KPIs are associated personnel engaged in key and deficit trades. Their of- with the Company’s goals, thus encompassing all em- ficial rates are increased after the assessment of their ployees. The motivation of each employee is based on professional qualifications. The employees of the Re- the achievement of the individual key performance in- lay Protection and Automatics Service are entitled to dicators, which are the integral part of the balanced rate increase for each authorization to independently system of the Company’s indicators. Such motivation perform technical maintenance (calculations) of the enables the streamlined functioning of all structural relay protection and automatic devices. units of the Company, contributing to the achievement of the Company’s goals. The weighting of bonus indi- The Company’s priority in the field of labor compensa- cators allows for the determination of priorities set for tion is to provide for competitive labor compensation the personnel. for all employees of the Company. In 2009-2010 the average labor compensation of the Company employ- All employees of the Company can participate in ees exceeded the same paid to the employees of other the development of their individual KPIs, which organizations in all regions of the Company’s presence. are associated with the goals and tasks set for the The maintenance of such higher average salaries in the Company. The KPIs are updated annually, depend- regions is all the more justified, as there is strong com- ing on the Company’s strategic goals. petition among the regional employers to win the attention of highly qualified workforce.

The Company’s system of additional motivation is used In 2008 the ratio between the average salary paid by to encourage the activities of separate employees and the Company and the same paid by other organizations groups of employees on improving the forms and (large and medium sized) in the regions comprised methods of the Company’s operation, to support the 1.68, whereas the same ratio for 2009 and 2010 com- personnel involvement and to provide incentives for prised 1.88 and 1.8 respectively. Despite the 2010 ten- the creative approach. dency of decreasing the difference in labor compensations paid by the Company branches and other regional Subject to additional bonuses are: organizations, the Company’s rates are still competi- • the employees involved in the performance of tive. Having provided decent labor compensations for tasks to which special requirements are set in re- all its employees, the Company encourages the interest lation to terms, quality, responsibility and signifi- of the personnel in the final performance results. cance for the industry and the Company;

• the personnel engaged in organization, coordination and issuance of engineering specifications for technological connection;

• the employees of the Company’s branches production units who contributed to the implementation of the Company’s results;

• the employees engaged in the preparation of the Company branches for operation in autumn and winter seasons.

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ANALYSIS OF THE EMPLOYEE SOCIAL BENEFITS PACKAGE

The Company’s social policy includes programs and measures aimed at the solution of the most urgent tasks of social development of the workforce, such as the improvement of work conditions, the social security provisions for the employees, and the organization of rest and healthcare facilities.

Apart from decent labor compensation the Company encourages the work of its employees by a variety of social benefits, guarantees and compensations provided to the employees in accordance with the Collective Bargaining Agreement in excess of the norms set by the law of the Russian Federation.

The Company’s social responsibility formulated in the Collective Bargaining Agreement includes the following benefits:

voluntary medical insurance of the employees, as well as accident and ill health insurance;

support for socially disadvantaged families;

monetary support for the employees going on vacation;

monetary support for the employees in cases of child delivery and marriage registration;

monetary support in cases of organization of funerals of present and resigned employees;

monetary support in cases of jubilee events;

subsidies for the employees resigning due to disability;

subsidies for children, whose parents died in the result of production-related accidents;

establishment of rest and healthcare facilities for the employees;

provision of children’s camps vouchers and New Year gifts for the children of the employees;

non-state pension provision for the employees.

The main task of the Company’s management in the sphere of social policy consists in the establishment of conditions facilitating efficient functioning of employees, their professional development, as well as providing them with opportunities for decent earnings and developing corporate culture. Social Report / The Company and Employees 61

PROGRAMS OF SOCIAL SUPPORT

For the 2009 results, JSC IDGC of Center and Volga Region ranked the 2nd in the “Best Grid Organization for High Social Efficiency” nomination at the All-Russian industry competition “The Organization of High Social Efficiency”. A year later the Company was recognized the Best Grid Organization for High Social Efficiency and also became the best in the “Best Practice of Employee Relations in Power Industry Organization”. These awards confirm the Company’s commitment to high standards of social responsibility in relation to its employees. The Company fulfills the obligations set by the Russian law, the Industry Tariff Agreement in the Power Industry of the Russian Federation for 2009-2011 and the current Collective Bargaining Agreement.

The per capita costs related to the implementation of social programs in 2009 and 2010 comprised RUR 30 thousand and RUR 26.8 thousand respectively.

INSURANCE COVERAGE PROGRAM

The Company’s Regulations and the Policy for Insurance Coverage of All Employees of JSC IDGC of Center and Volga Region stipulate the voluntary medical insurance against accidents and illnesses.

The Program of Voluntary Medical Insurance covers polyclinic and dental medical services rendered by the best regional and Moscow-based medical establishments. The voluntary medical insurance entitles an employee to choose medical establishments taking into account the characteristics of a particular illness, and the location of the establishment, thus reducing the duration of medical examination and treatment, which in turn improves the efficiency of the Company employees.

Together with the basic medical services, the voluntary medical insurance covers the annual vaccination of the Company employees against influenza and tick-borne encephalitis, the performance of initial and periodic medical examinations and rehabilitation treatment.

During 2009-2010 about 800 Company employees received rehabilitation treatment in different medical establishments of the Russian Federation.

NON-STATE PENSION PROVISION

In 2009-2010 the Company proceeded with the implementation of the Program for Non-state Pension Provi- sion. The program is implemented through the Non-Governmental Energy Industry Pension Fund. The Program includes:

Parity Plan envisaging a joint and proportional co-financing of employee pension by the employees and the Company under specific rules;

Corporate Plan implemented at the cost of the Company providing financing for non-state pension provision of its employees;

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Co-Financing Program according to which an employee, the Company and the government jointly provide financing for the employee’s pension plan in accordance with the Federal Law of the Russian Federation №56-FZ “On Additional Insurance Payments to the Cumulative Part of the Labor Pension and on the State Support for the Formation of Pension Accruals”, dated 30.04.2008.

As of the end of 2010 the total number of the Company employees covered by the corporate pension plan comprised about 16 thousand, while the number of those involved in the Parity Pension Plan comprised some 9 thousand.

In 2010 the average amount of non-governmental pension for the employees comprised RUR 2,295, which is 3% higher than in 2009 (RUR 2,221).

Average amount of monthly non-state pension

RUR2,221 RUR2,295 2009 2010

Non-state pension provision serves as the effective driver to encourage the employees of all categories, as the Company’s activity is focused on the provision of social support of the Company employees after their resigna- tion.

ORGANIZATION OF HEALTH AND RECREATIONAL FACILITIES FOR THE CHILDREN OF THE EMPLOYEES

The provision of health and recreational facilities for the children of the employees is in the focus of the Com- pany’s attention. In 2010, 629 children of the employees received vouchers to health summer camps.

A slight decrease in the number of children (compared with 720 in 2009) was caused by the re-arrangement of procedures for the organization of recreational facilities for children and the interaction with local authorities, and the procedures of reimbursement of a share of costs related to the purchase of vouchers.

The vouchers are purchased by the employer, with a share of their cost compensated by local authorities. The share of voucher cost paid by the Company employees varied from 0 to 40%, depending on voucher cost. Social Report / The Company and Employees 63

ORGANIZATION OF TRAINING, RE-TRAINING AND ADVANCED TRAINING OF PERSONNEL

One of the key priorities of the Company’s HR management lies in occupational training, re-training and advanced training of the personnel. The system of training is based on the requirements of “The System of Manage- ment of Occupational Training, Re-training, Advanced Training, and Occupational Health and Safety” Standard (STO 0401-148-2010, developed in accordance of the requirements of ISO 9001:2000, OHSAS 18001:2007). Said standard defines a unified organizational and technical policy on training, re-training and advanced training of all employees of the Company and sets uniform requirements for the forms, content and periodicity of training programs and examinations, taking into account the requirements of the state regulatory documents and the specific nature of the Company’s activities.

The number of employees involved in different programs of training, re-training and advanced training in 2010 comprised 33,746 (compared with 26,450 in 2009) or 157% from the total workforce of the Company. In 2010 the costs related to training comprised 0.60% of the Company’s gross payroll fund (compared with 0.65% in 2009).

2009 Financial costs related to training of personnel, 0. 65% % of gross payroll fund -0. 05%

2010 0. 60%

Number of employees involved 2010 33 835 persons in different programs of training, re-training and advanced training +7 385 persons 2009 26 450 persons

The Company provides for on-location training of its employees by way of transfer of occupational skills by mentors. The knowledge of the federal laws, rules, norms and instructions on maintenance, labor safety, and of other special rules and normative documents is checked at work places.

The development of distance training facilities enables the Company to increase the share of trained personnel avoiding the travel costs. It also facilitates on-location training.

High professionalism of the Company employees is maintained in close cooperation with the leading regional educational establishments which often serve as bases for the Company’s personnel advanced training and re- training. The cooperation with the Kazan State Energy University resulted in providing state-funded educational facilities for the Company employees and their children who receive their first higher education, majoring in power industry. The cooperation with other industry-specific higher educational establishments is based on the similar model.

time moves on 64 Social Report / The Company and Employees

In 2010, a specialized industry-specific chair of Economy and Management in Power Industry was established in a joint effort with the Moscow State Institute for Foreign Relations (MGIMO). The chair was established to implement targeted MBA program on Management and Regulation of Economic Activities in International Power Industry. Two employees of the Company are enlisted to the program.

The training of production and engineering staff of the Company is accomplished by a network of Corporate Training Centers Network, consisting of seven organizations.

In 2010, the number of employees trained on 230 educational programs comprised 5,205, or 49% of the total number of trained employees, representing 10% increase compared to 2009. The cost of training of employees using the Corporate Training Centers Network comprised 60% of the total costs spent for the advanced training of employees.

Close informational and technical cooperation among the training centers and the Company branches contributes to the streamlining of engineering processes and the methods of training, thus linking the training and the professional activities of the employees. The training programs are updated in accordance with the tasks of the Company, with continuous expansion of the existing curriculum by was of inclusion of new programs on energy saving and energy efficiency.

Training of production and engineering staff of the Company is accomplished by a network of Corporate Training Centers Network.

To increase the effectiveness of training on trades used for the performance of works, the Company established a tradition to form the teaching staff from the qualified retired industry professionals, as well as from highly qualified specialists of the Company.

Taking into account the nature and conditions of the Company activities, JSC IDGC of Center and Volga Region implement measures for the selection and training of managerial staff of different levels. The Program for the Support and Development of the Company’s HR Potential implies the training of the members of the succession pool. In 2010 the number of the Company’s succession pool members comprised 1,006 employees. The succession pool members are selected from the most promising employees who possess professional and personal characteristics required for filling-in the vacant managerial positions and for the efficient and successful achievement of the Company’s goals and tasks. The members of the succession pool undergo different advanced training programs, which enable them to efficiently act within the framework of reference of a position for which they are candidates. They also participate in conferences, meetings, seminars and work group briefings in order to learn about the latest achievements and to get practical skills.

The number of the members of the succession pool promoted in 2009-2010 comprised 145. Social Report / The Company and Employees 65

TRADE UNIONS RELATIONS

The interests of the Company employees in development of HR policy, strategy and the employee relations are represented by an elective trade union body, which represents and protects the collective and individual social and labor rights and interests of the employees.

The primary trade union organizations existing in the branches and the executive body of JSC IDGC of Center and Volga Region are integral parts of the All-Russian Power Industry Trade Union. The activities of these organizations are coordinated by the Council of Representatives of the Company’s Primary Trade Union Organizations.

The interaction between the Company and the trade union organizations is based on the principles of equal rights, mutual respect and due consideration of rights and legitimate interests of the parties to this social partnership. The trade union organizations participate in the formation and implementation of social programs which provide for decent standards of living and favorable labor conditions for the Company employees. They also control the compliance with the labor law, the Industry Tariff Agreement and the existing Collective Bargaining Agreement. The Council of Representatives of the Company’s Primary Trade Union Organizations periodically informs the Company management on the position of the workforce towards new initiatives and the Company development projects.

In accordance with the Tariff Agreement in Power Industry for 2009-2011 and the current Collective Bargain- ing Agreement the Company transfers to the trade union organizations at least 0.3% of the amount of the labor compensation fund for the organization of cultural and sportive events.

YOUTH POLICY

Due to the necessity to timely fill up the HR potential of the Company, the attraction and retention of young specialists constitutes one of the priorities of the Company’s HR and social policy. To facilitate efficient interaction with young employees a Council of Young Specialists was established in 2010, consisting of the promising young employees who are ready to build their careers in the Company and to actively participate in the solution of issues vital for the Company.

The major tasks set before the Council of Young Specialists include:

• acceleration of professional and social adaptation of young employees;

• support of their professional growth;

• development of creative and scientific youth initiatives;

• encouragement of their active participation in the production and cultural activities of the Company and its branches.

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PRACTICAL METHODS OF ATTRACTING YOUNG SPECIALISTS

The Company pays much attention to the attraction and adaptation of young specialists. Young specialists are selected among the graduates of the leading higher education establishments of the country, as well as among the graduates of the regional establishments for secondary and initial occupational training.

The annual occupational guidance events performed by the Company among the students of educational establishments include the following:

overview excursions involving the visits to the production units of the Company;

lectures on the history and today’s achievements of the power industry;

scientific-practical conferences and seminars on electric safety conducted by highly qualified specialists of the Company.

To facilitate comprehensive cooperation in educational and scientific field the Company concluded cooperation agreements with the leading higher education establishments, such as the Ivanovo State Energy University (Ivanovo), the Vyatka State University (Kirov), the Mariy State University (the energy department) (Yoshkar-Ola) and the Kazan State Energy University (Kazan).

Based on these cooperation agreement concluded by and between JSC IDGC of Center and Volga Region and the establishments for higher and secondary occupational training the students do their practical training in the Company, and many of them defend their theses dedicated to the activities performed by the Company to become later the Company employees.

According to the agreement concluded by the Company and the educational establishment for the period of practical training, the Company provides the students with mentors selected from the most experienced technical and engineering staff of the Company. The mentors help the students to adapt and transfer their knowledge and experience.

To facilitate comprehensive cooperation in educational, scientific and scien- Activities of JSC IDGC of Center and Volga Region performed to attract young tific-practical field JSC IDGC of Center and Volga Region concluded coopera- specialists include overview excursions to the production units of the Com- tion agreements with the leading higher education establishments. pany.

In 2010, more than 500 students did their practical training in the production units of the Company. Social Report / The Company and Employees 67

PROVISIONS FOR THE RETIRED AND THE VETERANS

The Company’s social responsibility also involves the provision of material support for the former employees, most of whom receive monthly non-governmental pensions from the Company. The participants of World War Two and home front workers receive material support on the Victory Day. The relatives of the resigned and the veterans are provided with material support for the organization of funerals of the latter.

The Company established the Council of Veterans of JSC IDGC of Center and Volga Region in 2009. The Council consists of 6,770 members, including 3,492 working veterans and 3,278 resigned veterans.

The number of veterans of the World War Two, the workers of the home front, the prisoners of war stockade and the inhabitants of Leningrad under siege comprises 815 persons, including 7 working veterans. The length of service of each of the veterans of the power grid complex is at least 20 years.

The main events organized by the Company’s Council of Veterans in 2010 include the following:

participation in the preparation for the celebration of the 65th Anniversary of the Victory in the World War Two and the carriage of the Victory Banner through all Company branches and the Company’s executive body;

organization of events dedicated to the Day of Senior Citizens;

participation in the first conference of the members of labor dynasties and the chairmen of youth councils attended by the members of the Coordination Council of Veterans of JSC IDGC of Center and Volga Region;

performance of sociological surveys intended to explore the living standards of the veterans;

publication of materials dedicated to veterans on the branches’ web-sites.

Festive awarding of a veteran of the electric power industry with industrial The Company pays great attention to historic-memorial activities, preserving award. the best traditions of the national electric power industry and securing succession in the development of distribution grid complex of Russia.

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CORPORATE CULTURE

The Company pays much attention to the develop- for the improvement of social and labor conditions in ment of corporate culture as this is a powerful tool the Company. to motivate all Company units and employees for the The Company pays much attention to measures in- achievement of common goals. The values and norms tended to commemorate and preserve the historic of the existing corporate culture are listed in the Code events and traditions of the domestic power industry, of Conduct of JSC IDGC of Center and Volga Region. thus ensuring the continuous development of the Rus- The Code of Conduct serves to regulate the employee sian power grid complex. The branches of the Compa- relationships, to describe the rules of business ethics ny have their own museums which inform the visitors and to define the relationships with business partners. on the history of power industry in their regions. The adherence by the employees to the norms of the Code of Conduct contributes to the creation in the Company of the cooperative environment, and to the To facilitate the informal communication among the maintenance of efficient interaction among the Com- employees the Company makes every effort to cele- pany units, thus guaranteeing high business ethics to brate corporate events, such as: the Company partners. • the Powermen’s Day;

The Company established and improves a system • the Company Birthday; of internal communications, which enables timely • the Homeland Defender’s Day; and objective notification of employees on issues related to the Company’s activities. “Bright Life” • the International Women’s Day. corporate magazine serves to inform the employ- The Company employees feel inspired when preparing ees on major events in the Company. for such events.

Each issue of the magazine contains materials and in- The annual Children’s Drawings Competition involving terviews authored by the Company management, in- the participation of the employees’ children became a forming the employees on the Company development tradition with the Company. The Competition is con- trends and answering the most frequently asked ques- ducted to celebrate the Powermen’s day. The best tions. The magazine also reports on individual con- drawings are sent to participate in the similar compe- tributions made to the projects implemented by the tition organized by JSC IDGC Holding and the drawings Company. that win the competition are later used to illustrate the Company’s presentation booklets and calendars. Other corporate mass media also play an important role in the formation of corporate culture. The Com- pany website and information boards serve to inform the employees on performance results and Company events, as well as on the industry-wide decisions.

In order to timely identify problems and to reduce the social risks of the Company the employees’ requests are processed, facilitating the maintenance of an open and fruitful dialogue between the employees and the management of the Company. This practice contributes to greater information transparency, encouraging the initiatives of the employees concerning the offers Social Report / The Company and Employees 69

SUPPORT OF MASS PHYSICAL CULTURE AND SPORTS

In order to support and develop the healthy way of life of its employees, JSC IDGC of Center and Volga Region organizes physical culture and sports related activities and encourages going in for sports among the Company employees by purchasing season tickets for visiting swimming pools and sports centers.

The employees of JSC IDGC of Center and Volga Region are active participants of All-Russian Power Industry Olympics organized by JSC IDGC Holding. The Company organizes annual qualifying competitions the winners of which become the members of teams entitled to participate in the Power Industry Olympics.

The Company employees are traditionally good at:

• track and field athletics;

• table tennis;

• ski race;

• volleyball;

• chess.

For two years in a row the Company was the champion of the All-Russian Winter Power Grid Olympics.

Each year JSC IDGC of Center and Volga Region organizes summer and winter To support the healthy way of life of the Company’s employees, JSC IDGC of Olympics for the Company’s employees. Center and Volga Region develops sports related activities among its employees.

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WORKMANSHIP COMPETITIONS

To access the professional skills of the employees and The competitions are conducted in conditions maxi- to share the experience and to implement the best mally resembling real ones, thus enabling the employ- production practices, the Company holds annual Best ees to drill their practical skills in order not only to im- in Workmanship competitions which contribute to the prove the quality of performance, but to increase their improvement of quality and safety of works pertaining preparedness for emergency situations. to the servicing of the power grid complex equipment.

In 2010, the number of employees participating in such competitions exceeded 1,000. The number of competitions and contests exceeded 38, including: • competitions among the teams servicing high voltage power transmission lines; • the Best Driver competitions; • review competitions on fire safety; • review competitions on labor safety.

HEALTHCARE

The main goal of all efforts of the Company is to preserve the lives and health of all Company employees.

The Company does its best to improve the labor conditions and to decrease the number of workplaces with adverse labor conditions. The Program on occupational and health safety for 2009-2010 and the Program developed for 2011-2013 imply active cooperation with regional authorities on labor safety issues. The cooperation enables the implementation of priorities of the state policy on healthcare and social partnership. The program was developed based on the results of internal and external audits and accident reviews, as well as remarks, recommendations and suggestions received from safety engineers.

The results of the Company healthcare and safety measures performed in 2010 included: • absence of occupational deceases; • decrease in the number of workplaces with adverse labor conditions; • increase in productivity; • improvement of social and legal protection of employees. Social Report / The Company and Employees 71

HEALTHCARE COSTS DYNAMICS

Labor Safety Costs Dynamics 2008-2010 Per Employee Labor Safety Costs

287 16 RUR 13.27 251 million 12.47 RUR 12 2.8 million 9.36 3.58 178 8 2.81 10.47 RUR 8.89 million 4 6.55

на2008 31.12.2008 г. 2009 2010 0 RUR thousand 2008 2009 2010

For other labor safety measures

For PPE for employees

In 2010, the per employee health and labor safety costs comprised RUR 13.27 thousand, which exceeds the 2009 level by 6.4%. The per employee costs invested in 2010 in the purchase of personal protection equipment (PPE) comprised RUR 10.47 thousand (17.7% growth compared to 2009).

All of the above enables the Company to provide its employees with up-to-date protection equipment and devices for the safe performance of works. The factors taken into account when selecting the protection equipment include not only the protective properties, but the presence of hazards as well (electric current, for example) and the ease of operation as well. Therefore preference is given to innovative safety designs which have no or limited application history.

The Collective Bargaining Agreement stipulates for the issue of additional protective equipment in excess of the amounts set by the standard norms, as well as of cleaning pastes and protective hand crèmes.

In 2010, the Company channeled RUR 287 million for health and labor safety measures.

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ESTABLISHMENT OF SAFE LABOR CONDITIONS

The labor and workplace safety indicators belong to the Company’s key efficiency indicators. The Company’s priority goals include the strict adherence to the requirements of the law, the improvement of labor and social safety of employees, the preservation of the lives and health of employees engaged in labor activities and the decrease in the number of production accidents and occupational illnesses.

The goals above are implemented successfully due to the use of integrated system of labor and environmental safety management in compliance with OHSAS 18001:2007 and ISO 14001:2004 international standards.

SAFETY OF PRODUCTION PROCESSES

Taking into account the industry-specifics, the maintenance of production safety and the safe condition of equipment and engineering processes is the key priority of the Company. So called “human factor” is of essence for the provision of safety, therefore along with the greater control over the adherence to safety rules by the production personnel and greater responsibility for safety violations, there envisaged are material incentives for the employees for working in compliance with labor safety rules. In view of the above the Regulations on Bonus Payments for Safe and Accident Free Organization of Labor was worked out and adopted. Social Report / The Company and Employees 73

ESTABLISHMENT OF POSITIVE PSYCHOLOGICAL CLIMATE, CORPORATE INVOLVEMENT AND MUTUAL RESPONSIBILITY

It is well known that the psychological environment in which the workforce interacts has a great influence on the outcome of the collective efforts, as well as on the satisfaction with the process and the results.

The Company pays much attention to the establishment and maintenance of positive psychological climate, which contributes to the increase of satisfaction of the workforce with the results, and the formation of the feeling of pride for the Company. Positive climate also contributes to the increased occupational value and the establishment of conditions for the comprehensive development of employees as a team and to the satisfaction of social needs of the employees. Other aspects optimized by the positive psychological climate include improved relations among the members of the workforce and the management.

It also facilitates the establishment of new traditions and conditions for increased labor productivity and reduced workforce turnover, providing a considerable social and economic effect.

Evgeny Ushakov, the General Director:

ON PRINCIPLES

My motto is “Always act decently” – do not walk over dead bodies, do not “sell”, do not betray the moral principles. I thank my lucky stars for not putting me in situations where I had to make moral choices, or forced to become a traitor or to act contrary to my beliefs. I wish my luck would stay with me, for the people to remember the good I’ve done. I believe in higher justice, for I know for sure that the mean-spirited get their punishment. Each time I hear that someone dishonorable is in trouble, I find myself in mixed feelings. I try not to feel sardonic, but can’t help feeling satisfied, as each time my choice not to act low gets confirmed.

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The Company and its Business Partners

75 Principles of Cooperation and Mutual Responsibility 76 Purchasing Operations. Suppliers and Contractors 79 Participation in Non-Commercial Organizations Social Report / The Company and its Business Partners 75

PRINCIPLES OF COOPERATION AND MUTUAL RESPONSIBILITY

The key partners of JSC IDGC of Center and Volga Region in the field of capital construction are the contractor organizations specializing in land and engineering surveys and development of design and estimate documents, and performing installation, assembly and start-up works.

The contractor organizations are selected on the basis of tenders. The requirements set for contractor organizations performing the above works are contained in “The Instructions on the Development of Technical Design Specifications for the Purchase of Works Related to the Items of the Investment Program” as approved by the Order № 345 of JSC IDGC of Center and Volga Region, dated 16.09.2008.

The requirements set for the contractor organizations are the following:

• availability of licenses for the performance of works specified;

• availability of experience in the performance of similar works;

• availability of qualified personnel to perform the works.

To control the inclusion in technical design specifications of the requirements set for the contractor organizations the Company uses the following levels of control:

technical departments of the executive body of JSC IDGC of Center and Volga Region check and submit for approval all necessary works for replacement of 35 kV and higher power transformers;

the Deputy Director for Technical Issues – Chief Engineer of a corresponding branch approves technical project specifications;

the Deputy Director for Capital Construction of a corresponding branch submits for approval technical project specifications;

heads of departments of a corresponding branch submit for approval technical project specifications;

structural units of a corresponding branch develop technical project specifications.

The partner relations of JSC IDGC of Center and Volga Region with contractor organizations are reflected in the contracts. The standard form “Contractor Agreement for the Performance of Installation, Assembly and Start-up Works” has been approved by the Company’s Order №53, dated 02.03.2009, whereas a standard form “Contractor Agreement for the Performance of Project and Survey Works” has been approved by the Company’s Order №446, dated 05.12.2008. The standard contractor agreements contain requirements for the amount of prepayments, the acceptance procedures, the documents handled by the contracting parties and the terms of performance of works.

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PURCHASING OPERATIONS. SUPPLIERS AND CONTRACTORS

PRINCIPLES OF ORGANIZATION OF PURCHASING OPERATIONS

To perform purchasing operations the executive body of JSC IDGC of Center and Volga Region established specialized units which are guided by the Regulations on the Procedure of Regulated Purchases of Goods, Works and Services to Satisfy the Needs of JSC IDGC of Center and Volga Region, approved by the Company’s Board of Directors (Minutes №11, dated 31.03.2008). The Regulations is based on the key provisions of the Federal Law №94-FZ, dated 21.07.2005 which stipulates the requirements for the organization of the state purchases. The Regulations is also based on the provisions of the Civil Code of the Russian Federation and the Standards for the Organization of Purchasing Operations.

The Company’s purchasing operations are based on the following principles:

Transparency

To ensure the transparency all information on planned and actual purchases is published on the Company’s website http://www.mrsk-cp.ru/. The majority of competitive purchasing for the needs of JSC IDGC of Center and Volga Region is accomplished using B2B-MRSK e-commerce website hosted by JSC IDGC Holding at http://www. b2b-mrsk.ru.

Competitiveness

To establish the competitive environment the purchasing procedures are performed using open tenders. All required information on the Company’s purchasing procedures and these of the Company branches is published on B2B-MRSK e-commerce website. When purchasing basic electrical equipment, the priority is given to manufac- turing plants and their official dealers.

Feasibility

The collective decisions on the selection of suppliers are made by the purchasing commissions. The bids are assessed from the engineering standpoint. The economic evaluation of the bids refers to the feasibility of the price. Such approach enables the Company to flexibly account for price-quality ratio, which is essential for the performance of works or the delivery of required equipment.

Timeliness

The timeliness of purchasing procedures is a required pre-requisite to ensure the continuity and reliability of production process, which is intended for the uninterrupted supply of energy to consumers. Social Report / The Company and its Business Partners 77

The decisions on the major purchases are made by the Central Tender Commission (CTC) of JSC IDGC of Center and Volga Region. The decisions pertaining to the selection of suppliers and contractors based on the results of regulated competitive purchasing procedures are made by the CTC and the Permanent Tender Commissions (PTC) of the Company branches. The tender commissions use the services of expert groups consisting of specialists with knowledge, experience and good standing in corresponding occupational fields.

2010 Purchases Number of % from the Actual purchase % from the total Purchase Procedures purchases total number amounts, purchase amount performed of purchases RUR thousand Total number of regulated purchases of 3,117 20,946,036.8 goods, works and services, including: open tenders 710 22.8% 14,547,685.9 69.5% closed tenders 1 0.0% 13,475.5 0.1% open competitive negotiations 30 1.0% 510,935.3 2.4% open requests for offers 1,957 62.8% 4,527,505.4 21.6% closed requests for offers 3 0.1% 6,610.0 0.0% open requests for quotes 28 0.9% 17,216.5 0.1% single source purchases in the results of 157 5.0% 734,558.3 3.5% failed open procedures single source purchases 231 7.4% 588,050.0 2.8%

The number of open purchase procedures in 2010 comprised 2,882 (92.5% from the total number of purchases). The actual purchase amount comprised RUR 20,337,901.3 thousand (97.1% from the total purchase amount).

The number of purchases performed using e-commerce websites comprised 1,280 with the total purchase amount comprising RUR 11,602,158.6 thousand.

Comparison of 2010 Planned and Actual Purchases

Planned in Actual in RUR Planned/Actual, Purchase Procedure RUR thousand, thousand, % including VAT including VAT Total number of regulated purchases of goods, works and 24,343,859.6 20,946,036.8 86.0% services, including: total number of open purchase procedures 23,748,906.6 20,337,901.3 85.6% open tenders 17,824,343.9 14,547,685.9 81.6% closed tenders 0.0 13,475.5 0.0% open competitive negotiations 572,128.0 510,935.3 89.3% open requests for offers 5,336,315.9 4,527,505.4 84.8% closed requests for offers 6,903.0 6,610.0 95.8% open requests for quotes 16,118.8 17,216.5 106.8% single source purchases in the result of failed open 0.0 734,558.3 0.0% procedures single source purchases 588,050.0 588,050.0 100.0%

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Purchasing Operations Comparison, 2010 versus 2009

2010 2009 Number of Actual purchase Actual purchase Number of Purchase procedures purchases amounts, amounts, purchases made made RUR thousand RUR thousand Total number of regulated purchases of 3,117 20,946,036.8 1,407 8,690,213.3 goods, works and services, including: open tenders 710 14,547,685.9 394 5,930,168.9 closed tenders 1 13,475.5 24 123,111.9 open competitive negotiations 30 510,935.3 0 0 closed requests for offer 1,957 4,527,505.4 599 1,031,870.7 closed requests for offers 3 6,610.0 10 12,848.9 open requests for quotes 28 17,216.5 15 10,346.5 single source purchases in the result of 157 734,558.3 72 318,612.8 failed open procedures single source purchases 231 588,050.0 293 1,263,253.6

In 2010 the number of purchases accomplished via open procedures increased and reached 92.5% of all purchases (compared with 76.7% in 2009).

Number of purchasing operations

76. 7% 92. 5% 2009 2010

SUPPLIERS AND CONTRACTORS

The Company’s policy on interaction with suppliers and contractors is based on the choices made using universal market tools. The use of universal market tools implies the development of competitive forms of purchasing of products, works and services, which are based on non-discriminating tenders. JSC IDGC of Center and Volga Region is interested in the formation of stable and mutually profitable relations with the suppliers of products, works and services.

When purchasing contracted works and services, much attention is paid to the experience and the availability of material and HR resources, as these factors are of essence when determining a winning bidder. Social Report / The Company and its Business Partners 79

PARTICIPATION IN NON-COMMERCIAL ORGANIZATIONS

As of 31.12.2010 the Company participates in fifteen different regional or federal non-commercial organizations, being the founder in seven non-commercial organizations in the regions of operations.

The Company’s participation in non-commercial organizations proves the reliability of the Company as a business partner and indicates high business standing of JSC IDGC of Center and Volga Region among the major energy and industrial companies of Russia.

The Company participates in a number of non-commercial partnerships engaged in activities similar to the core activities of the Company. The Company is an active participant of federal, as well as regional associations of employers. It also cooperates with the Chamber of Commerce and Industry of the Russian Federation and is a member of a number of regional chambers of commerce and industry. A list of non-commercial organizations in which the Company is the participant is given below.

The Company plans to continue its participation in non-commercial organizations, contributing to the development of training centers established by the Company.

Detailed information on non-commercial organizations in which the Company is a participant or a founder is available at http://www.mrsk-cp.ru/?id=2931.

Information on Non-Commercial Organizations, as of 31.12.2010

Membership Name Key functions of a non-commercial organization date organizations Non-commercial Non-commercial

Participation in non-commercial organizations

Consideration of the most urgent issues pertaining to the functioning of the UES and its elements. Expert assessment of different projects and works. Analytical reviews Scientific-Technical Council of concepts and strategies of development of the UES, 20.11.2008 of the Unified Energy System. including new equipment and processes, priority studies, research and advanced development, technical regulations and standardization, publishing activities in the power industry.

Support for the improvement of quality and safety of construction and assembly works performed at capital Association of Organizations construction facilities, assistance to the development Implementing Construction, Recon- 02.11.2009 of cooperation in construction industry on the territory

Non-commercial partnershipsNon-commercial struction and Capital Repair of Energy of the Russian Federation and abroad, support for the Objects, Grids and Substations improvement of mechanisms protecting the construction ENERGOSTROY. market from dishonest players (self-regulated organization).

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Membership Name Key functions of a non-commercial organization date organizations Non-commercial Non-commercial

Development and approval of the Partnership’s normative documents, which are mandatory for all its Association of Organizations Imple- members. Development and implementation of com- menting Project Documentation for plex measures for the improvement of the quality of 25.12.2009 Energy Objects, Grids and Substations architectural and construction design (design of capital ENERGOPROJEKT. construction facilities), and the improvement of other design-related activities performed by the members of the Partnership (self-regulated organization).

Research activities in the fields which are of professional interest for the members of the Partnership; implementation of progressive methods of organization of invest- Association of Investor Relations 24.12.2009 ment processes; informational and methodic assistance Specialists. and provisions for the members of the Partnership; protection of legitimate rights and representation of the interests of the members of the Partnership. Non-commercial partnershipsNon-commercial

Improvement of the quality of energy audits and the rendering of energy services; interaction and cooperation on The Union of Energy Auditors issues pertaining to the development and implementa- 26.11.2010 and Energy Service Companies. tion of energy efficient and energy saving technologies. The Union is preparing documents to receive the status of a self-regulated organization.

Assistance to Russian organizations and entrepreneurs in Chamber of Commerce and Industry their activities; representation and protection of eco- 16.12.2008 of the Russian Federation. nomic interests of the members of the Chamber at home and abroad.

Vyatka Chamber of Commerce 16.12.2008 and Industry. The Nizhny Novgorod Region Chamber Representation of the interests of small, medium and 23.06.2009 of Commerce and Industry. large business in the regions of operation and abroad, encompassing all spheres of activity, such as industry, The Ryazan Chamber of Commerce 28.12.2009 domestic and foreign trade, agriculture, financial system and Industry. and services. The Tula Chamber of Commerce

Chambers of commerce and industry 29.10.2009 and Industry. Provision of non-governmental pension benefits for the members of the Fund, based on voluntary agreements The Non-State Pension Fund of Electric for non-governmental pension provision concluded with 29.02.2008

Fund Power Industry. the contributors of the Fund in favor of the members of the Fund, irrespective of the governmental pension provisions.

Cooperation, representation and protection of interests All-Russian Association of Electric Energy of the industry employers in relations with federal and 10.10.2008 Sector Employers. local authorities, trade unions, trade union associations

Employers and other employee organizations and associations. associations Social Report / The Company and its Business Partners 81

Membership Name Key functions of a non-commercial organization date organizations Non-commercial Non-commercial

Coordination of the members’ activities in the sphere of Regional Association of Employers The social, economic and labor relations; representation and Vladimir Region Employers and Manu- 16.12.2008 protection of rights and legitimate interests of the mem- facturers Association. bers of the Association.

Formation of streamlined position of the Council mem- Non-commercial Organization Kirov bers on the regulation of social, economic and labor Region Employers Association – Asso- 11.12.2008 relations and the protection of this position in relations ciation of Economic Managers. with trade unions, trade union associations and federal and local authorities. Employers associations Employers Coordination of activities of the Association members The Nizhny Novgorod Region Manufac- in the sphere of social, economic and labor relations; 23.10.2009 turers and Entrepreneurs Association. representation and protection of legitimate rights and interests of the Association members.

Performance of the functions of the founder Non-state Educational Institution of Primary Professional and Supplemen- 29.02.2008 tary Education Tula Educational Course Center (Tula city).

Non-commercial Educational Institution Educational Center “Energetik” 29.02.2008 (Izhevsk city).

Non-commercial Educational Institution Educational activities; Ivanovo Educational Center 29.02.2008 scientific and pedagogical activities; training of work- (Ivanovo city). ers and specialists; scientific research and experiments; training and certification of employees engaged in Non-state Non-commercial Educational design, construction, assembly, adjustment, manufacture Institution for Professional Training of and operation of hazardous facilities; organization of

Establishments Employees and Additional Education 29.02.2008 seminars, topical exhibitions, best in occupation compe- Educational Center “Energetik” titions. (Kaluga city).

Private Educational Institution Educa- tional Center “Energetik-NN” (Nizhny 02.11.2009 Novgorod city).

Private Educational Institution Educational Center “Energetik” 29.10.2009 (Vladimir city).

Educational activities; scientific and pedagogical activities; training of workers and specialists, methodic, consulting and informational Non-state Independent Non-commercial support for the organizations and individual employees Educational Organization Educational 29.02.2008 in organizing the occupational training; provision of Center “Energetik” (Kirov city). occupational guidelines for the young; organization of seminars, topical exhibitions and best in occupation

mercial organization mercial competitions. Independent non-com- Independent

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The Company and Consumers

83 Tariff Policy 84 Technological Connection of Consumers 86 Discounted Categories 87 Quality of Services as Assessed by Customers Social Report / The Company and Consumers 83

TARIFF POLICY

The tariff policy of JSC IDGC of Center and Volga Region In the period from 01.01.2009 till 31.12.2010 the is determined by the state and intended to provide for average tariff for technological connection fell by 57% efficient management of the Company’s key activities, from RUR 8,168 to RUR 3,529 per kW. namely the services for the energy transmission and The set tariff solutions for technological connection the technological connection to the power grids. The enable to approach to each technological connection tariff policy is also intended for the modernization of applicant individually, minimizing the tariff charged power grid complex and the social and economic de- for TC. The approved tariffs are differential, as they velopment of regions, as well as for the prevention of may or may not include investment costs. excessive growth of tariffs. Besides, in accordance with the current law certain In 2009-2011, upon the initiative of JSC IDGC of Center categories of consumers are entitled to the following and Volga Region all branches of the Company imple- discounts for technological connection: mented a staged transfer to long-term tariff regulation based on the Regulatory Asset Base (RAB). • RUR 550 for a single technological connection with the customer declared capacity demand of Ryazanenergo and Tulenergo branches – from up to 15 kW inclusively; 01.01.2009; • payments by installments during 3 years from the Vladimirenergo, Kalugaenergo and Udmurtenergo moment of actual technological connection for branches – from 01.01.2010; consumers with the customer declared capacity demand ranging from 15 to 100 kW inclusively. Nizhnovenergo, Ivenergo, Kirovenergo and Mari- energo – from 01.01.2011.

The transition to RAB regulation enables the Company to solve the industry’s vital problems, such as the establishment of favorable conditions for the attraction of long-term investments to modernize fixed assets, improve the reliability and quality of services and to reduce operational costs.

The main advantage of RAB regulation lies in the ability to prevent excessive tariff growth while making considerable capital investments.

The implementation of a new method of tariff regulation also enabled the Company to decrease the tariffs charged for technological connection by excluding from the tariff a considerable amount of investment costs intended for the construction of power supply centers and the reconstruction of power grid facilities required for the performance of technological connection.

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TECHNOLOGICAL CONNECTION OF CONSUMERS

In 2010, the branches of JSC IDGC of Center and Volga Region accepted 34,134 thousand requests for the technological connection of energy receivers to the power grids of the Company. The total customer contract demand amounted to 873.7 MW. As compared with 2009, the number of requests increased by 49%, while the increase of the customer contract demand comprised 1%. Customer Declared Capacity Demand and Number of Requests for Technological Connection Received by the Company Branches in 2009 and 2010

Requests 2009 2010 Branch For total capacity, For total capacity, Number of requests Number of requests MW MW Vladimirenergo 2,695 41.16 3,890 71.49 Ivenergo 828 92.22 1,219 67.15 Kalugaenergo 3,993 167.94 5,697 133.64 Kirovenergo 2,523 41.10 3,953 74.06 Marienergo 853 20.82 1,475 23.49 Nizhnovenergo 6,450 205.55 8,916 220.51 Ryazanenergo 1,400 54.20 2,259 50.50 Tulenergo 1,848 168.12 3,523 141.90 Udmurtenergo 2,268 73.90 3,202 90.97 Total for the Company 22,858 865.01 34,134 873.71

Distribution of Declared Capacity Demand per Connection Categories in 2010

47.82 MW (5%) 293.25 MW 278.79 MW Up to 15 kW (0.4-20 kV) (34%) (32%) From 15 to 100 kW (0.4-20 kV)

From 100 kW to 750 kW (0.4-20 kV)

Over 750 kW (0.4-20 kV)

74.90 MW Over 750 kW (35-110 kV) (9%) 178.96 MW (20%)

As is evident from the above diagram, the major shares of the declared capacity demand, namely 34% and 32%, fall within the connection category of over 750 kW (0.4-20 kV) and of up to 15 kW (0.4-20 kV), whereas the lesser share of 5% fall within the connection category of over 750 kW (35-110 kV).

As compared with 2009, the number of agreements for the technological connection of energy receivers increased by 48% in 2010, while the volume of the declared capacity under agreements concluded fell by 1.5%. Social Report / The Company and Consumers 85

Comparison Table for the Number and Capacity of Agreements for Technological Connection, in 2009 and 2010

Number of concluded agreements 2009 2010 Branch Number For the total Number For the total of agreements capacity, MW of agreements capacity, MW Vladimirenergo 2,419 35.24 3,633 48.13 Ivenergo 774 52.23 1,012 56.31 Kalugaenergo 3,407 98.87 4,935 102.19 Kirovenergo 2,268 33.16 3,373 56.05 Marienergo 830 19.86 1,369 18.83 Nizhnovenergo 5,459 127.67 7,754 125.35 Ryazanenergo 1,333 48.39 2,093 41.09 Tulenergo 1,747 133.92 3,031 84.24 Udmurtenergo 2,108 61.08 2,906 69.33 Total for the Company 20,345 610.42 30,106 601.52

The result of the analysis of the diagrams “Number of Agreements for TC Concluded in 2010” and “Total Volume of Capacity per TC Agreements in 2010” show that the greatest number of agreements concluded and the corresponding volume of capacity is concluded with physical persons. Number of Agreements for TC concluded in 2010 Total Volume of Capacity per TC Agreements

36.67 MW 3 73 24,202 211.86 435 135.39 MW 193 MW

897

4,301 124.66 32.74 MW MW 48.85 11.34 MW MW

Up to 15 kW phys. persons (0.4-20 kV) Up to 15 kW phys. persons (0.4-20 kV)

Up to 15 kW legal entities (0.4-20 kV) Up to 15 kW legal entities (0.4-20 kV)

From 15 to 100 kW (0.4-20 kV) From 15 to 100 kW (0.4-20 kV)

From 15 to 100 kW (discounted cat.) (0.4-20 kV) From 15 to 100 kW (discounted cat.) (0.4-20 kV)

From 100 kW to 750 kW (0.4-20 kV) From 100 kW to 750 kW (0.4-20 kV)

Over 750 kW (0.4-20 kV) Over 750 kW (0.4-20 kV)

Over 750 kW (35-110 kV) Over 750 kW (35-110 kV)

The newly connected capacity per the agreements for technological connection concluded in 2009 and 2010 comprised 362.06 and 331.01 MW respectively.

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DISCOUNTED CATEGORIES

In 2010, the number of requests for the connection of capacity of up to 15 kW from discounted consumers category increased considerably.

According to the Rules for the Technological Connection to Power Grids, the category of discounted consumers includes physical persons and legal entities who requested the technological connection for the connecting capacity of up to 15 kW (including capacity connected to the grid in this point previously).

The tariff for the technological connection of consumers included in the category mentioned above comprises RUR 550 for a single connection.

The diagram below reflects the change in the demand for the technological connection of consumers of the discounted category.

Number and Capacity Volume of Requests up to 15 kW, in 2009 and 2010

278,794 153,177 kW kW 32,054 20,955

Number Capacity Volume 2009 2010 2009 2010

In 2010 were concluded 30,106 agreements for the technological connection, whereas the total capacity comprised 601.5 MW, with 95% of agreements concluded upon requests from physical and legal persons, requesting the capacity of up to 15 kW.

During 12 months of 2010 JSC IDGC of Center and Volga Region performed 15,425 thousand technological connections to the power grids. The facilities connected included small enterprises and individual construction facilities owned by physical persons. The number of connections of discounted consumers increased by 8% compared to 2009. The total capacity volume up to 15 kW connected in 2009 and 2010 is represented in the diagram below. Total Capacity Volume of Discounted Category Consumers up to 15 kW Connected in 2009 and 2010

2009

89.49 112.84 2010 Social Report / The Company and Consumers 87

QUALITY OF SERVICES AS ASSESSED BY CUSTOMERS

CUSTOMER POLICY Any customer of JSC IDGC of Center and Volga Region can address his/her written request or complaint to Based on the concept of the customer-oriented policy any of the Company’s manager. All requests are for- JSC IDGC of Center and Volga Region develops the sys- warded to the departments of the executive body or tem of all-inclusive customer service. To complement the branches for further processing and the elimina- the existing 24 Customer Service Centers (CSC) which tion of drawbacks, if necessary. covers the entire servicing territory of nine branches, including the remote areas, a new CSC started to The virtual communication is facilitated through the operate on August 2, 2009 in the town of Kstovo (Nizh- Internet Reception Room at the Company’s website novenergo Branch). In 2010 the network of Customer and at the websites of the Company branches. Service Centers continued to expand, with new CSCs The Internet Reception Room serves to provide any cus- opened on August 16 (Zavjyalovo village, Udmurt- tomer with information on the normative and legal base energo Branch) and on September 2 (Semenov town, that regulates the operations of JSC IDGC of Center and Nizhnovenergo Branch). Volga Region, as well as on the procedure of conclud- To make the services more convenient and accessible, ing public agreements for the technological connection JSC IDGC of Center and Volga Region provides its cus- and the power transmission. A customer may also use tomers with three communication options, including the Internet Reception Room to submit a request or a face-to-face, distant and virtual communication, de- complaint or to receive answers to his/her questions by pending on the customer possibilities and preferences. any suitable means (post, e-mail, telephone).

Face-to-face servicing of customers is performed by To ensure the openness and transparency, in 2009 the the existing customer service centers, with the partici- Company approved and effected “External Communi- pation of administrators of production divisions and cations and Mass Media Relations. Procedure for the the regional power grids. Information Disclosure by a Participant of the Energy Market” internal standard. The CSC specialists provide customer support including explanatory work, the filling-in of the required The guidelines for the assessment of the quality of ser- documents and assistance in meeting all conditions vicing of the Company customers are effective from required for the technological connection. 2009. The guidelines enable the Company to control the quality of customer relations and to assess the ef- After consulting a CSC, a customer may have at his/ ficiency of operations in the Company branches. her disposal all information on the technological connection to power grids and the power transmission. To facilitate the performance of communicative func- The customer may also submit an application or file a tion, intended for the establishment and maintenance claim (complaint), or get information on the operation of customer feedback and to complement the face- of other regional energy companies. to-face surveys, in 2010 the Company introduced an interactive questionnaire for the customers to leave The distant customer services across the entire service their opinions, comments and suggestions on the im- territory of JSC IDGC of Center and Volga Region is ac- provement of customer service. The questionnaire is complished using 8-800-100-33-00 toll-free hotline accessible at the websites of the Company branches, telephone number. Dialing the number any customer such as http://www.vladimirenergo.ru/clients/anketa. may get an answer to his/her questions, or leave his/ php. Additional information makes the assessment of her comments or suggestions on the technological the Company’s efficiency of customer relations more connection and the transmission of energy. comprehensive.

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Keeping in mind the ultimate goal of informing the customers, in 2010 the Company introduced a new mechanism of cooperation. The customers living in the Nizhny Novgorod Region can now assess the availability of free capacities for the technological connection themselves, adjusting their plans accordingly. The interactive map of the capacities of Nizhnovenergo is available at http://www.nne.elektra.ru/karta/index.php.

The Company performance results for 2009-2010 illustrate a stable tendency for the customer base growth. As compared with 2009, the total number of requests increased by 43.36% (with 160,759 and 230,470 thousand requests in 2009 and 2010 respectively). The number of customers attending the customer service centers in person increased by 78.4%, as compared with 2009.

The number of customers using interactive services is also on the rise. In 2010 the number of applications made through the Internet increased by 77.63%. The number of telephone calls increased by 9.78%.

Distribution per Communication Channels and Applications Growth, 2010 vs 2009

Written applications 5.3% submitted through ofﬁces 177.35%

52.2% Other 78.4%

Distant applications 42.1% (through the Internet Reception Room/E-mail) 9.78%

Distant applications 0.2% (over the telephone) 77.63%

0.2% Other 85.25%

Growth rate

Number of applications

In 2011 JSC IDGC of Center and Volga Region plans to further develop the system of customer service and to establish three new customer service centers in Petushki town (Vladimirenergo Branch), Navashino town (Nizh- novenergo Branch) and Karakulino village (Udmurtenergo Branch). Social Report / The Company and Public 89

The Company and Public

90 Goals and Parameters of Social Policy in Regions 91 Implementation of Social Programs 92 Volume and Structure of Social Expenses 92 Government and Public Organizations Relations 94 Adherence to the Tax Legislation. Payments to Non-Budget Funds

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GOALS AND PARAMETERS OF SOCIAL POLICY IN REGIONS

The main goal of the Company’s social policy is to ensure the wellbeing of the regions in which the Company branches operate. The Company makes every effort to align its social activities with the needs of the regions inhabited by the Company employees.

As a major employer and taxpayer, the Company recognizes its responsibilities to the public. Ensuring reliable power supply in the regions of operation, the Company contributes to the social and economic development of the subjects of the Russian Federation.

The key trends of the Company’s social policy in the regions of operation are the following:

improvement of social environment;

provision of charity assistance;

contribution to regional development while implementing the investment program.

Contribution of JSC IDGC of Center and Volga Region to the Implementation of “Health” Na- tional Priority Project

From the very start of implementation of the project the Company improved the reliability of power supply for a dozens of medical establishments and institutions by:

• construction of new power supply facilities for the provision of stand-by power supply for medical facilities;

• reconstruction of the existing power supply systems;

• installation and assembly of automatic stand-by power supply activation devices;

• provision of medical facilities with stand-alone sources of power supply. Social Report / The Company and Public 91

IMPLEMENTATION OF SOCIAL PROGRAMS

The branches of JSC IDGC of Center and Volga Region participate in the programs on improvement of settlements, provide assistance in the repair and reconstruction of socially significant facilities and organization of festivities.

The Company provides support to the Russian Ortho- dox Church in the reconstruction of churches and the organization of festive events. The employees of the Company branches organized a voluntary fund rising to commemorate the 100th anniversary of the Svyato-

Uspensky Church (Vladimir city), to reconstruct the The traditional annual event called “The Brightest New Year Tree” scheduled Knyaz-Vladimirsky Church (Vladimir city), the Sera- to the Powermen’s Day involves the fund rising for the organization of New Year festivities for the children living in children’s homes and boarding phim Sarovsky Church (Yoshkar-Ola city) and the build- schools. ing of the Mariy Episcopate. During the preparation for the celebration of the Day of the Reverend Seraphim Sarovsky (August 1) the Company implements a set of The traditional annual event called “The Brightest organizational and engineering measures to improve New Year Tree” scheduled to the Powermen’s Day in- the reliability of power supply of the Holy Trinity Seraphim volves the fund rising for the organization of New Year Monastery in Diveevo (the Nizhny Novgorod Region). festivities for the children living and children’s homes and boarding schools in the regions of operation. In 2009 the Company employees participated in the voluntary fund rising to provide material sup- In 2010, the children living in 56 children’s homes report to the families of those who died, suffered or ceived the New Year gifts, toys, sports equipment and gone missing in the result of the major accident at household appliances for the total sum of RUR 1,411 Sayano-Shushenskaya hydro electric power station. thousand. The amount collected comprised RUR 4.5 million. Traditionally the employees of the Company take part In June 2010, the employees of the Company’s execu- in “Books for Gifts” charity action which is intended tive body and Nizhnovenergo Branch participated in to help the blind and weak-sighted children to over- the charity event involving the collection of essentials come the limitations of their disability. In 2009-2010 (clothing and kitchenware) for those who suffered the Company employees collected RUR 559 thousand from naturally occurring fires in the Nizhny Novgorod for 144 sets of illustrated books. Region.

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VOLUME AND STRUCTURE OF SOCIAL EXPENSES

Source: 2010 IFRS

RUR thousand 2009 2010 Expenses related to social 68,634 32,171 and charity programs

GOVERNMENT AND PUBLIC ORGANIZATIONS RELATIONS

The General Director of JSC IDGC of Center and Volga Region E.V. Ushakov has built constructive mutual relationships with the heads of regional administrations across the Company’s entire area of responsibility. The Company has concluded agreements with the administrations of the regions and republics, according to which JSC IDGC of Center and Volga Region performs its obligations pertaining to the putting to operation of new energy facilities and the establishment of power facilities pool to satisfy the customers demand for the technological connection.

To contribute to the development of the regional energy systems the Company has developed comprehensive programs which synchronize the plans of the regional governments and these of the Company branches. Such cooperation enables the parties to solve the problem of energy deficit in a comprehensive and productive manner.

The issues pertaining to the tariff policy are usually discussed at the meetings of the representatives of the Com- pany and the regions. In 2009-2010, the Company proceeded with the transfer of the branches to the new system of tariff regulation – RAB regulation.

The commissioning of energy facilities significant for the development of the regions is performed with direct participation of the representatives of the regional authorities.

The regional power supply safety headquarters headed by the regional leadership are established in all regions of operations of the Company. The managers of the Company and its branches participate in the work of said power supply safety headquarters.

The major share of consumers of the Company services is made of small and medium enterprises. In 2009 JSC IDGC of Center and Volga Region launched a close cooperation with the regional branches of the “RUSSIA’S SUPPORT” - the all-Russian public organization for small and medium business, in the area of the Company responsibility. Being fully aware of the fact that the development of entrepreneurship is the basis for the economic wellbeing of the subjects of the Russian Federation, the Company maintains a dialog with businessmen on practical issues relating to the technological connection to the Company grids of small and medium enterprises, as well as on energy efficiency and energy saving. Social Report / The Company and Public 93

Issues also under discussion include the possibilities of scientific and technical cooperation between the Compa- ny and the entrepreneurs and the implementation of principles and mechanisms of fair distribution of resources during discounted technological connection, and the participation of small and medium business in the development of power grid complex.

In six branches of the Company located in:

• the Vladimir Region;

• the Ivanovo Region;

• the Ryazan Region;

• the Tula Region;

• the Mariy El Republic; there were concluded agreements with the Russian Voluntary Associations for Assistance to Army, Aviation and Fleet on the lease of aviation equipment to perform reconnaissance flights over the regions with disturbed power supply. In progress are the negotiations pertaining to the conclusion of other agreements with the Association.

During the reporting period the Company continued its cooperation with the Volga Federal District branches of “Business Russia” – the All-Russian Public Organization. The cooperation facilitates a constructive dialogue between the Company and the entrepreneurs on the possibilities of development of today’s SME in the regions of the country, maintaining an open and coordinated interaction with the new generation businessmen.

In particular, the parties of the cooperation make joint efforts on the improvement of legal and normative basis relating to power industry and technological connection, and form the conditions for the decrease of energy tariffs in the Nizhny Novgorod and Kirov Regions, and the republics of Mariy El and Udmurtia.

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ADHERENCE TO THE TAX LEGISLATION. PAYMENTS TO NON-BUDGET FUNDS

JSC IDGC of Center and Volga Region is a major taxpayer. The Company branches form the pool of major taxpayers in nine regions, providing for the budget revenues of the Vladimir, Ivanovo, Kaluga, Kirov, Nizhny Novgorod, Ryazan, and Tula Regions, as well as of the republics of Mariy El and Udmurtia.

In accordance with the Tax Code of the Russian Federation, the taxes paid by the Company include:

• Value Added Tax;

• Profit Tax;

• Property Tax;

• Land Tax;

• other taxes;

• payments to non-budget funds of the Russian Federation.

JSC IDGC of Center and Volga Region is a conscientious taxpayer, which complies with all the norms of the law of the Russian Federation.

2008-2010 Taxes and Fees Paid by the Company

Budget Levels 2008 2009 2010 Federal Budget 1,860.8 1,375.7 2,161.4 Consolidated budget of the Russian 1,261.9 1,444.4 1,706.3 Federation Non-budget funds of the Russian 866.3 1,356.9 1,583.1 Federation Total 3,989.0 4,177.0 5,450.8

The total amount of taxes and fees paid during the reporting period comprised RUR 5,450.8 million, which exceeds the 2009 level by 30%. During 2009-2010 social payments due to the employees, including salaries, pension, medical and tax payments were paid in full. Social Report / Ecological Safety and Environment Protection 95 Ecological Safety and Environment Protection 96 Environment Protection Policy 102 Production Environmental Control 97 Observance of Environmental Legislation 103 Environment Protection Costs and Payments 98 Observance of Environmental Standards for Environment Pollution 99 Development and Implementation of Special 105 Consumed Resources Environmental Programs 106 Implementation of Lean Technologies 102 Quality of Environmental Management 106 Cooperation with Environmental Authorities (in compliance with ISO 14000) and Organizations

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ENVIRONMENT PROTECTION POLICY

Being one of the largest interregional distribution grid companies of Russia, JSC IDGC of Center and Volga Re- gion considers the environment protection to be an integral part of its daily operations, as the Company is fully aware of the necessity to maintain the ecological balance and to provide for environmentally sustainable social and economic development of the society.

One of the goals of implementation of the Company’s Policy in the Field of Quality, Occupational Health, Labor Safety and Environment Protection lies in the rational use and preservation of natural resources, the reduction JSC IDGC of Center and Volga Region considers the environment protection to of negative environmental impact and the decrease in be an integral part of its daily operations. the significance of environmental aspects.

The implementation of the above goal is based on the solution of the following tasks:

observance of the requirements of the Russian law, analysis of the current legislation on environmental protection and development of the Company’s regulatory documents taking into account ecological requirements;

technical re-equipment and implementation of new technologies with the gradual removal from service of outdated equipment;

performance of planned activities undertaking the projects optimal from the environmental and economic standpoint;

performance of periodic production and environmental control;

adherence to the requirements of ISO 14001:2004;

regulation of the negative environmental impact;

construction and reconstruction of power facilities with minimal damage to the land;

training of employees in order to increase their environmental awareness and their personal responsibility for the environmental conditions;

making of organizations operating on the territories of the Company’s enterprises based on contractor or lease agreements responsible for environmental safety. Social Report / Ecological Safety and Environment Protection 97

OBSERVANCE OF ENVIRONMENTAL LEGISLATION

In accordance with STO 01-031-2011 Company Standard on the Organization of the Assessment of Compliance of JSC IDGC of Center and Volga Region Facilities with the Requirements of the Environmental Legislation and Sanitary-Hygienic Criteria, the Company performs periodic monitoring of the environmental legislation and the rational use of natural resources on the federal, the regional and the local levels.

The development of the drafts of normative documents and the obtainment of permissions for emissions and the quotas for the disposal of wastes are performed in accordance with the requirements of the environmental legislation.

Each production site of JSC IDGC of Center and Volga Region has its limit of maximum permissible emissions of pollutants to the atmospheric air, as well as the limits of waste formation and their disposal. Each site also has permissions for the emission of pollutants and the limits for their disposal.

The production environmental control exercised by the Company is intended to control the compliance with the set norms of environmental impact and the efficiency of operation of the environment protection equipment. The control procedures implemented in 2009-2010 revealed no excess of environmental impact.

In 2009-2010, the Company proceeded with the environmental audit of its branches performed as part of the internal engineering control system. The audits were intended to reveal any incompliance with the requirements of the environmental legislation and of ISO 14001:2004.

In 2010, the Company performed 15 environmental audits.

As the results of them recommendations and measures for elimination were issued.

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OBSERVANCE OF ENVIRONMENTAL STANDARDS

The system of environmental management of JSC IDGC of Center and Volga Region complies with the requirements of ISO 14001:2004, which fact is confirmed by the Certificate of Compliance issued in the end of 2008 by Bureau Veritas Certification Rus certification authority.

To improve the Company’s system of environmental safety management the Company develops and updates periodically the internal environmental safety standards listed below:

STO 01-030-2011 Structure of the Environmental Safety Management System;

STO 0502-014-2010 Production Environmental Control – Procedure for Organization and Performance of Works;

STO 0103-301-2008 Management of Environmental Aspects;

STO 01-031-2011 Organization of Assessment of Compliance of JSC IDGC of Center and Volga Region Facili- ties to the Requirements of the Environmental Legislation and the Sanitary-Hygienic Criteria;

STO 01-032-2011 Organization of Basins Protection;

STO 01-033-2011 Organization of Airshed Protection;

STO 01-034-2011 Organization of Protection of Land and Entrails from Pollution, Littering and Impoverish- ment.

In accordance with Plan-Act-Analyze-Improve main concept of ISO 14001:2004 the Company is continuously engaged in:

• planning of measures on environmental protection;

• performance of the production environmental control and the planned measures on environmental protection;

• analysis of the production environmental control performed and the identification of environmental aspects and their significance, as well as the identification of the requirements of the environmental legislation;

• determination of trends for the improvement of environmental protection activities. Social Report / Ecological Safety and Environment Protection 99

DEVELOPMENT AND IMPLEMENTATION OF SPECIAL ENVIRONMENTAL PROGRAMS

JSC IDGC of Center and Volga Region is interested in the environmental safety of its production activities. In 2009-2010 the Company branches implemented the environmental protection measures formulated in the annual operating order of JSC IDGC of Center and Volga Region and the Program for the Environmental Safety and the Rational Use of Natural Resources for 2009-2010.

The Program above has been implemented by the Company in full, both in regard of the measures planned, and of the financing.

The Company 2010 environmental activities included:

Protection of Atmospheric Air

The Company performed periodic production analytical control over the adherence to the pollutant emission norms, as well as the instrumental monitoring of the operating efficiency of gas-cleaning plants. Emission norm projects were developed to obtain corresponding permissions. The transportation vehicles were controlled for smokiness and toxicity. The atmospheric air impact in sanitary and protection zones was subjected to instrumental monitoring.

Protection of Water Resources

The content of pollutants in rain, snowmelt and waste waters drained to municipal sewages was controlled, together with the quality control of underground waters for the compliance with sanitary-hygienic norms. The Company assessed the volume of underground waters reserve and purchased water gauges.

Protection and Rational Use of Lands

JSC IDGC of Center and Volga Region is licensed to collect, use, deactivate, transport and dispose of hazardous wastes. In 2010 the Company continued with the timely development of projects for the norms of waste generation and the limits for their disposal. The Company constructed sites for the temporary storage of wastes, purchased waste containers and concluded agreements for the burial and disposal of production and consumer wastes with organizations licensed to perform the activities in question.

Technical Measures

In 2010 the Company finished the construction of the sound barrier for Severnaya SS (Kirovenergo Branch). The noise protection systems installed enabled the Company to bring the acoustic impact to the acceptable normative level. The Company also performed repairs of the oil receivers at substations to prevent the pollution of water basins and lands with oil products. The oil-filled high-voltage bushings were replaced by bushings with solid insulation. The car washes were equipped with recyclable water supply systems.

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The technical measures performed involved also the use of promising (in view of environmental aspects) processes and solutions, which are listed below.

Replacement of oil circuit breakers with vacuum ones. As different from the oil circuit breakers, the vacuum circuit breakers are fire proof and environmentally friendly. The number of vacuum circuit breakers operated by JSC IDGC of Center and Volga Region grows with each passing year. The number of 35 kV vacuum circuit breakers installed in 2010 comprised 14, while their total number is 89. The number of 10 kV vacuum circuit breakers installed in 2010 comprised 567, while their total number is 7,445.

35 kV vacuum circuit breakers 10 kV vacuum circuit breakers

2010 89 2010 7,445

+14 +567 2009 75 2009 6,878

The use of self-supporting insulated wires. During the reporting period the length of 0.4 kV power transmission lines based on the use of self-supporting insulated wires (SSIW) increased by 752.96 km, to comprise 2,295.60 km. The length of 6-10 kV power transmission lines increased by 410.20 km to comprise 1,126.38 km.

The use of SSIW enables the Company to decrease the adverse environmental impact by reducing the width of clearings cut in forests during the construction of power transmission lines and during the operation of HVLs. The use of SSIW also allows for complete elimination of birds’ mortality.

SSIW on 0.4 kV HVL SSIW on 6-10 kV HVL

2010 2,295.6 km 2010 1,126.4 km

+753 km +410.2 km

2009 1,542.6 km 2009 716.2 km

MEASURES FOR THE PROTECTION OF FAUNA

To strengthen the control over the implementation of environmental protection measures, all branches of the Company have developed programs for the protection of fauna for 2011-2013.

During 2010 the branches of JSC IDGC of Center and Volga Region proceeded with the protection of fauna. The places of mass nesting of birds 35-110 kV HVLs are equipped with guards to prevent the landing or nesting of birds on HVLs. The sealing off of the cable leads, in-between cells cable channels and high voltage sections inspection windows in switchgear and control gear are continuously monitored for possible intrusion of animals. The hazardous areas are sealed with shrinkable insulation materials. Social Report / Ecological Safety and Environment Protection 101

The most efficient way to protect birds from electric shocks resulting from contacts with high-voltage power lines is the use of self-supporting insulated wires and special bird-protection devices on 6-10 kV HVLs. To comply with bird protection requirement, JSC IDGC of Center and Volga Region purchased 984 bird-protection devices in 2010 to equip high-voltage lines of Marienergo and Ivenergo branches. The total length of 6-10 kV HVLs equipped with bird-protection devices in 2010 comprised 32.8 km. The high-voltage lines to be equipped with bird-protection devices in the first place include those going through the territories of natural reserves and wild forests. REMOVAL FROM OPERATION AND DISPOSAL OF PCB CONTAINING EQUIPMENT

The removal from operation of the electric equipment containing poly-chlorinated biphenyls (PCBs) is accomplished in accordance with the repair plans. The equipment removed from service is stored in air-tight metallic containers for temporary storage.

The total weight of PCB-containing capacitors handed over by the Company during the reporting period to a specialized organization for disposal comprised 29.37 tons. The cost of disposal comprised RUR 1,550.85 thousand.

By the end of 2010 the total weight of PCB-containing capacitors on the balance of the Company branches comprised 187.07 tons. The planned removal from operation and the handing over to specialized organizations for disposal is to be finished by 2017.

Dynamics of Removal from Service of PCB-Containing Equipment (tons)

200.0 61.5 4.7 150.0 1.0 72.6 63.3 100.0 39.4 1.0 17.5 1.0 1.0

50.0 38.1 83.5 80.9 71.6 67.2 67.2 1.0 1.0 29.1 29.1 29.1 0.0 0.0

2010 2011 2012 2013 2014 2015 2016 2017 2018

In service Removed from service Stand-by

To improve the environmental protection activities, the Company management approved the Program for Environ- mental Safety and Rational Use of Natural Resources for 2011-2013. The Program was approved in the end of 2010.

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QUALITY OF ENVIRONMENTAL MANAGEMENT (IN COMPLIANCE WITH ISO 14000)

The implementation in JSC IDGC of Center and Volga Region of an integrated system of environmental management in compliance with the international standards was launched in 2008. A Certificate, confirming the compliance of the Company’s management system with the requirements of ISO 9001:2000, ISO 14001:2004, and OHSAS 18001:2007 was obtained in the end of 2008.

In 2010 in order to comply with the requirements of STO (СТО) 0103-301-2008 The Management of Environmental Aspects, the Company updated its assessment of the environmental impact. The assessment serves to analyze the dynamics of changes in the significance of the environmental aspects and to appraise the effect of the measures performed. A list of normative and regulatory requirements pertaining to the environmental protection and the rational use of natural resources is correlated with the environmental aspects of the Company’s activities continuously.

In 2010 the executive body of JSC IDGC of Center and Volga Region performed a compliance audit of the integrated management system of the Company, which confirmed the compliance of the Company activities with the requirements of ISO 9001:2000, ISO 14001:2004, and OHSAS 18001:2007.

PRODUCTION ENVIRONMENTAL CONTROL

The following types of instrumental analytical control were performed in JSC IDGC of Center and Volga Region during the reporting year in accordance with the schedule of the production environmental control: control of pollutants at the emission sources for the compliance with the maximum permissible levels: no violations were registered; control of the efficiency of operation of the gas cleaning plants (centrifugal separators used at wood processing facilities): the operation efficiency of centrifugal separators complies with the technical specifications; control of the pollutants in the atmospheric air at the border of the sanitary protection zones: no excessive pollutant concentrations were registered; control of the composition of rain and thaw waters in the fugitive surface drainage; control of the quality of water in water supply wells: the quality of water complies with the sanitary norms; control of the noise generated by substations located in housing areas.

The measurement and assessment of the factors of working environment and processes was performed within the frameworks of the certification of workplaces and the sanitary-hygienic control accomplished in 2010. The measurement protocols confirm the compliance of air pollutants concentrations with the maximum permissible concentrations, while the level of noise was found to be within the acceptable limits. Social Report / Ecological Safety and Environment Protection 103

ENVIRONMENT PROTECTION COSTS AND PAYMENTS FOR ENVIRONMENT POLLUTION

The costs related to the protection of environment tend to increase due to increasing prices for the services rendered by third-party organizations. An increase of environment protection costs in 2010 was caused by the measures undertaken to dispose of capacitors containing PCB.

Environment Protection Costs of JSC IDGC 2010 Environment Protection Costs, of Center and Volga Region for 2009-2010 by Categories

36% 53%

11,984.1 14,921.2 RUR thousand RUR thousand

2009 2010 11%

Water resources protection costs

Atmospheric ari protection costs

Cost of protection from production and consumer wastes

Payments for Negative Environmental Composition of Payments for Negative Impact in 2009-2010 Environmental Impact in 2010

18% 80% 3,646.5 3,580.0 2% RUR thousand RUR thousand

2009 2010

For wast drainage For emissions

For waste disposal

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Production and Consumer Wastes Formation Dynamics, ton

6,705.76 6,073.14 ton ton

2009 2010

The major share of production and consumer wastes generated in the result of the Company operations falls within the IV (65%) and the V (33%) classes of hazard, with wastes of the I and the II classes comprising only 0.2%.

Composition of wastes per classes of hazard (2010)

2% 1 class – 0%

2 class – 0% 33% 3 class

4 class

5 class

65%

The environmental impact of wastes temporarily stored at production sites of the Company divisions is minimal due to the fact that:

• all wastes are separated by classes of hazard, which determine the method of wastes handling;

• production areas are equipped with temporary waste accumulation facilities (sites, containers, etc.) in compliance with the sanitary-hygienic and environmental requirements. Each Company division has an official responsible for the handling of production wastes;

• wastes generated in the result of production and economic activities are handed over to third-party licensed organizations for further disposal. Social Report / Ecological Safety and Environment Protection 105

CONSUMED RESOURCES

The water for the production and household need of the Company units is supplied by third-party organizations, as well as from the underground sources which are on the balance of the Company. The Company consumes no water from surface water basins and no discharge of waste waters to the surface water basins is performed

Dynamics of Water Resources Consumption

628 639 thousand cubic thousand cubic 93% meters meters

2009 2010

from underground sourses

from third-party organizations

All artesian wells on the balance of the Company are properly licensed. Much attention is paid to the compliance with the conditions contained in licenses for the use of entrails.

In 2009-2010, the assessment of water reserves available for the household and drinking water supply from six wells of Nizhnovenergo branch was performed.

To control the level of water, the Company purchased water gauges. The quality of water from underground sources is controlled periodically, with analytical control performed by third-party accredited laboratories. The Company records the amount of water consumed and controls the water supply limits of water. The wells are surrounded by sanitary protection zones.

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IMPLEMENTATION OF LEAN TECHNOLOGIES

The Company pays much attention to the protection of forests and lands during the construction of new power transmission lines and the clearing of HVL routes from greener. To comply with the requirements of fire and sanitary safety, the Company clears the forests from ground wood generated during the clearing of HVL routes. The construction of HVLs with the use of self-supporting insulated wires facilitates the decrease in clearing width, thus reducing the environmental impact.

To reduce the consumption of writing paper the Company implemented the electronic document flow.

Many meetings are conducted in video-conference format, which also contributes to the reduction of environmental impact by decreasing the emissions from mobile sources and saving motor car fuel.

COOPERATION WITH ENVIRONMENTAL AUTHORITIES AND ORGANIZATIONS

In line with the provisions of the Company’s Policy on Quality, Occupational Health, Labor Safety and Environ- ment Protection JSC IDGC of Center and Volga Region is open to the dialogue and cooperation with the public and all stakeholders.

Based on the agreement with the Nizhny Novgorod Dront Environmental Protection Center, a survey was performed on the territory of Nizhnovenergo branch to assess the hazards of 6-10 kV HVL for birds. Following the recommendations prepared by the ornithologists the hazardous sections of the HVL were equipped with bird protection devices.

JSC IDGC of Center and Volga Region is an active participant of the project “Electric Power Distribution Complex for Environment Protection” - an all-Russian tree planting initiative developed by JSC IDGC Holding to restore the natural balance damaged in the result of natural disasters in 2010-2011, which led to the elimination of 140 thousand trees. Social Report / Ecological Safety and Environment Protection 107

The employees of 9 branches of the Company and its executive body have planted over 40 thousand of conifer and foliage trees in areas which bore the greatest damages in the result of the last year’s natural disasters. The initiative was implemented in close cooperation with the representatives of the regional offices of United Russia Party, as well with the regional representatives such public organizations as Delovaya Rossiya (Business Russia), Opora Rossii (Russia’s Support), the Russian Association of Voluntary Assistance to Army, Aviation and Fleet, the All-Russian Association for the Protection of Environment and the Greens – the Russian Environmentalist Party.

The Company’s 2011 environmental priorities include:

development of the system of environmental management;

performance of environmental audit;

performance of environmental protection measures planned for 2011 in accordance with the Company’s approved Program for Environmental Safety and Rational Use of Natural Resources for 2011-2013;

performance of production environmental control;

timely obtainment of permissions for emissions and waste disposal;

observance of conditions contained in licenses for the use of entrails;

timely transfer of wastes of 1-5 classes of hazard for disposal and burial;

equipment on the territories of production bases and distribution of sites for the temporary storage of production and consumer wastes;

performance of engineering measures on 6-10 HVLs (involving the use of SSIW and bird protection devices) passing through natural reserves, in order to prevent the elimination of rare birds;

performance of engineering measures to implement the up-to-date equipment with reduced environmental impact.

time moves on 109 The Company Priorities for 2011 and Beyond THE COMPANY PRIORITIES FOR 2011 AND BEYOND

Improvement of reliability and quality of services rendered by the Company.

Implementation of advanced non-destructive methods of diagnostics which do not require the switching off of the equipment, as specified by the Diagnostics Development Program.

Performance of the operating functions of the Grid Control Center (GCC) in Vladimirenergo and Nizhnovenergo branches (2011).

Improvement of the customer services due to the increased awareness of the employees.

Development of the Company’s internal standards for the assessment and analysis of the degree of customer satisfaction, and the code of conduct of customer service center employees.

Periodic update of the content of “For the Cus- tomers. The Internet Reception Room” section at the corporate website; the analysis of the customer feedback and the implementation of new services.

Obtainment of new certificates for the integrated management system in connection with the expiry of the current certificates (2008-2011).

Increase of the operations and investment efficiency.

Provision for the compliance of the Company’s processes with the published documents and periodic update of the latter.

Testing of the pilot project management system in one of the branches of the Company and the final implementation of the project management.

Provision for the efficient functioning of the system of internal control and risk management.

время вперед 110 Social Report / The Company Priorities for 2011 and Beyond

Further implementation of measures intended to Achievement of target values on the consump- improve the operations efficiency, including the tion of energy resources spent to satisfy the pro- implementation of measures on decreasing the duction and economic needs and on the level of losses of energy, the reduction of administrative energy losses. costs and the optimization of inventory. Performance of measures on the decrease of Increase of the Company’s investment attractiveness. energy losses.

Further cooperation with the regulatory bodies Improvement of accessibility of the power grid infra- intended to approve the tariffs on the basis of structure. the established long-term parameters and the Monthly update of information on the current norms of the current legislation. power supply capacity reserve at the Company’s Making of the Company’s ROE to exceed 10% in website and response to customer requests. the next five years. Provision of the extension of payment for all ap- Unconditional observance of the contact obliga- plicants who applied for such extension. tions to the creditors. Development of human capital. Fulfillment of the Investor Relations Program Fulfillment of the Company obligations specified for 2011 approved by the Order of the General in the Collective Bargaining Agreement for 2009- Director and the provision for the Company’s 2011; development and approval of the Collec- transparency, taking into account the needs of tive Bargaining Agreement for future years. the investment community. Performance of staffing provisions for the Com- Further development of the system of corpo- pany. rate governance with the update of internal documents in line with the current legal require- Fulfillment of approved plans of personnel ments, followed by the compliance control. training. Maintenance of the Company shares in quota- tion lists of CJSC MICEX (A2) and JSC RTS (B).

Improvement of energy efficiency and innovative development.

Monitoring of standardization documents on energy saving, improvement of energy efficiency and update of the Company’s internal documents.

Performance of comprehensive energy audits of the Company branches (2011). Development and approval of the Company’s Program on energy saving and improvement of energy efficiency in accordance with the requirements of the regional regulatory bodies. Update of the corresponding programs of the Company branches.

Performance of measures on energy saving developed in the result of energy audit. Social Report / The Company Priorities for 2011 and Beyond 111

112 Independent Certiﬁcation of the Social Report

time moves on 112 Social Report / Independent Certiﬁ cation of the Social Report

INDEPENDENT CERTIFICATION OF THE SOCIAL REPORT This is addressed to Joint Stock Company Interregional Distribution Grid Company of Center and Volga Region

Introduction This audit certification is referred to the Social Report of Joint Stock Company Interregional Distribution Grid Company of Center and Volga Region for 2009-2010 (hereinafter referred to as the Report). The Report has been prepared by Joint Stock Company Interregional Distribution Grid Company of Center and Volga Region (hereinafter referred to as the Company), which is responsible for the gathering, systema- tization and representation of all data in the Report. Bureau Veritas Certification Rus is responsible for the certification of the Report to the Company only. It undertakes no responsibility to any party for the decisions made, postponed or cancelled based on this certification.

Tasks and Level of Certification 1. To assess the nature and the degree of the Company compliance with the principles of inclusiveness, significance, and response set out in AA1000 Accountability Principles Standard (APS) 2008. 2. To assess the quality of the information disclosure by the Company in the field of sustainable development based on АА1000 Assurance Standard (AS) 2008. 3. To assess the degree and the quality of engagement of stakeholders in the reporting process based on AA1000 Stakeholder Engagement Standard (SES) 2011. 4. To assess the compliance of the Report with B+ level (the Company’s self-assessment) based on Global Reporting Initiative Sustainability Reporting Guidelines, version G3 2006. 5. To provide recommendations on the development of corporate governance within the frameworks of social reporting. 6. To apply “reasonable” certification level, specified by АА1000AS (2008) and International Standard on Assurance Engagement ISAE-3000. The verification of the Report was performed taking into account the information published on the Company’s website http://www.mrsk-cp.ru, as well as the materials published in various periodicals, including “Bright Life” corporate magazine, “Energy and Industry” and “Industrial Weekly” power industry newspapers, “Nizhegorodskaya Pravda”, “Nizhegorodsky Rabochiy” regional newspapers, and the materials broadcasted by “Vesti Privolzhjya”, “Rossiya 24” and “Volga” TV channels.

Methodology • Interviewing the Company’s management and specialists on the essential economic, social and environmental aspects of the Company operations, as well as on obligations, priorities and goals in the field of sustainable development and the means and ways and the degree of achievement of the above goals. Social Report / Independent Certiﬁ cation of the Social Report 113

• Verifying the achievement of 2009-2010 goals in the field of sustainable development set by the Com- pany in the period preceding the reporting one. • Verifying the documents and data which describe the results of approaches to the management of economic, social and environmental aspect used by the Company. • Verifying the Company’s processes of gathering, processing, analyzing and documenting the data included in the Report. • Verifying the adequacy of a number of statements and data contained in the Report by way of a visit of the testifier to the Company and its Nizhnovenergo branch in June 2011, and by interviewing the top management, the senior offices and the specialists of a number of structural units on the issues pertaining to the environmental management, the health and labor safety, the performance indicators, the social and HR policy and the corporate communications. • Analyzing the selection of data published by mass media and the statements made by third parties which describe the Company’s commitment to the values of sustainable development in order to prove the validity of statements contained in the Report. • Analyzing the results of the audit for the compliance of the Company’s integrated system of management with ISO 9001, ISO 14001, and OHSAS 18001 performed by Bureau Veritas Certification Rus in December 2010. • Verifying the compliance of the Report and the information published on the corporate website with AA1000AS (2008), AA1000APS (2008), and AA1000SES (2011) standards and GRI recommendations. • Controlling the efficiency of the stakeholders’ feedback on reporting.

Limitation of the Certification • The certification does not cover the performance indicators beyond the 2009-2010 current reporting timeframe. • The certification involved no attendance of public events (dialogues with stakeholders) conducted by the Company. • The certification does not take into account any statements expressing the opinions, beliefs or intentions of the Company relating to any future actions. • At the operational level, the certification was limited by the visits in June 2011 to the Company headquarters (in Nizhny Novgorod) and to one of its branches, namely Nizhnovenergo.

Basis of Our Opinion The certification was based on the analysis of the confirming information provided by the Company management and its structural units, as well as on the data of the state statistical reports, and the data received from available sources, using analytical validating procedures. The certification takes into account the industry-specific activities of the Company and existing confidentiality limitations.

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A selective “reasonable” level verification of data contained in the Report provides fewer guarantees for the certification as compared with the complete verification of all data (performed at the highest level). The certification of numeric data contained in the Report should not be considered absolutely adequate for the identification of all possible inaccuracies. At the same time the information gathered during the certification is sufficient for the formation of our conclusions based on the “reasonable” level of certification, in relation to the nature and the degree of compliance of the Company with the principles of in- clusivity, significance and response set out by AA1000APS (2008) standard, and in relation to the quality of information disclosure on the sustainable development performance in accordance with АА1000AS (2008) standard and GRI recommendations.

Our Conclusion • From the viewpoint of the corporate public reporting the Report adequately reflects the Company performance indicators. • The Report is rendered comprehensively. It is accurate, objective, conclusive and balanced in content. While lacking excessive details, the Report contains information in the volume required by the stakeholders. The Report contains explanations of abbreviations and technical terms. The text of the Report is illustrated by graphs, diagrams and drawings, which helps to perceive the information contained in the Report. • The Company exercises efficient approaches to the management that facilitate identification of essential economic, social and environmental aspects of the Company’s operations, planning, management and improvement of the corresponding processes, and determination of the corresponding expectations of the stakeholders. The approaches allow the Company to reflect the above in its policy and to provide timely response. • The systems of the organization and control of public reporting processes used by the Company’s management are fully in line with the Company’s mission, its policies, procedures and resources. • The social reporting forms a part of the process of designing of the Company’s development strategy, implementation of planned measures and assessment of their results. • The top management of the Company demonstrates leadership and commitment to the principles of social responsibility, as well as their personal participation in the preparation of the Report.

Compliance of the Report with AA1000APS (2008) Principles Principle 1. Inclusiveness • The information presented in the Report, as well as the direct and indirect evidence obtained allows for the arrival to the conclusion that during the preparation of information for the inclusion into the Report the interests of the key stakeholders were taken into account. Social Report / Independent Certiﬁ cation of the Social Report 115

• The Company identified 5 groups of stakeholders and developed a strategy of cooperation with them. It also determined the content, goals and spheres of interaction which correspond to the scope and the limits of the Report. • The stakeholders are engaged in the process of determination of essential aspects of the Company operations. • In case of conflict of interests the Company applies efficient mechanisms for their mutual coordination. • The Company developed the procedures and mechanisms for the measurement, monitoring and assessment of the quality of stakeholder relations. • The Company assesses the degree of realization of the identified interests of stakeholders. • The key tools used to inform the stakeholders and cooperate with them are reports, including the Re- port in question. Other means include meetings of the Company’s top management with the staff of the executive body (the headquarters) and the production units of the branches, information and press releases, interviews, negotiations, conferences, forums, questionnaires, the Company’s website, mass media publications, audits and verifications, written requests and claims filed with the Company and its branches, and other open access mechanisms.

Principle 2. Significance of the Information Presented • The Company implemented the mechanism of identification of significant (essential) aspects of the Company’s operations, which is based on clear-cut and comprehensive criteria of significance, taking into account the industry specifics and GRI recommendations on the principles of reporting. During the reporting period the significant aspects of the Company operations were updated continuously. • The Report is a balanced and validated rendering of information on economic, social and environmental aspects essential for the stakeholders, which determine the Company’s sustainable development performance. When identifying the significant aspects, the Company took into account the key external and internal operational factors. • The scope of the Report includes the executive body (the headquarters) and the Company’s branches. • The Report discloses essential information on the maintenance of economic stability of the Company and the implementation of its investment program. The Report provides assessment of the fulfillment of social obligations for 2009-2010 as viewed by the Company. It also assesses the social and regional significance of the investment projects. The degree of attention the Report pays to different topics is proportional to their relative significance. • The Company demonstrates the awareness of the concept of sustainable development and uses objective data when reflecting different topics in its Report. The Report contains future prospects of sustainable development for 2011 and over a long period. • The format used to present the information in the Report enables the users of the Report to identify the

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positive and negative tendencies of the Company’s performance, as well as the Company’s achievements and unsolved problems in view of economic, environmental and social aspects. • The information on essential aspects of the Company’s sustainable development presented in the Re- port is adequately traceable in the processes of gathering, processing, transferring and representing of data. • The information presented in the Report, the annual report and on the Company’s website is essential for the stakeholders, as it may influence their future decisions and conduct in relation to the Company. • Based on the analysis of the data contained in the Report and the interviews conducted, no essential aspect of the sustainable development is missing or excluded from the Report. The Report covers all significant events that occurred during the reporting period. It also contains performance indicators specified by GRI. • The Report contains adequate information on the Company’s compliance with the norms of the Russian legislation and other normative and legal acts.

Principle 3. Responding to the Expectations of Stakeholders • Presently we are not aware of any topics which could have been, but were not disclosed in the Report, and in which the Company failed to respond to the substantiated inquiries of the stakeholders. • The client-oriented approach is the key principle of the Company operations. The customer requirements are satisfied by providing the customers with reliable and efficient power supply and technological connection to the grids performed in short time. The positive image of the Company as a reliable business partner is formed by the proven system of production control of the quality of energy and the diagnostics of the equipment; by timely elimination of defects revealed; by the performance of planned repairs in short time; by high qualification of the personnel and the continuity of training, and by the efficient customer relations in the regions of operation. The problems are eliminated after their key causes are identified. The Company pays much attention to the prevention of power supply problems. The problems are prevented also by the realization of the investment program intended for technical re-equipment and the implementation of innovative technologies. • The opinions and expectations of the Company shareholders are taken into account by way of implementation of the corporate governance principles. • The interests of the Company employees are taken into account by concluding the collective bargaining agreement between the management and the council of representatives of the primary trade union organizations. • The Company’s charity activities are performed in the form of implementation of target projects of support provided to schools and kindergartens, children’s homes, the children with disabilities, and to the Russian Orthodox Church. The Company branches actively participate in programs on improvement of settlements, providing assistance in the repair and reconstruction of socially significant facilities in the regions of operation. Social Report / Independent Certiﬁ cation of the Social Report 117

• The right of the population for the positive environment is realized through the planned environment protection activities of the Company. The Company has implemented and certified a continuously developing integrated system of management of environment, labor and occupational health safety. The Company performs periodic analytical and instrumental control over the compliance with the norms of emissions and discharge of pollutants. The implementation of a variety of organizational and engineering measures resulted in the positive dynamics of environmental impact indicators.

Compliance of the Report with GRI Recommendations The Report has been prepared in compliance with the recommendations of GRI Guidelines on sustainable development. The Report contains information on all standard reporting elements, as well as on the GRI performance indicators. In general the Report complies with level B+. The absence in the Report of detailed information on certain GRI performance indicators is conditioned by their insignificance for the stakeholders and the negligibility of their contribution as compared with the core operations of the Company.

Degree and Quality of Engagement of the Stakeholders in Accordance with АА1000SES (2001) In general the process of public reporting complies with AA1000SES (2011) recommendations. This refers to identification of the stakeholders, primary identification of significant issues, the determination of the strategy, goals and the degree of engagement, the setting of the plans, forms and schedules of the structured interaction and the organization of engagement and response to the engagement challenges.

Recommendations on Development of Corporate Governance in Relation to Social Reporting • Specification of the procedure for implementation of reporting principles set out in the GRI Guidelines on reporting on sustainable development (element 3.5 of the Guidelines), and the methods of measurement of data and calculations, including assumptions and guidelines for the preparation of indicators and other data included in the report (element 3.9). • Performance of the internal audit of the Company’s social reporting and the representation of materials in future reporting cycles. • Development and implementation of the system of social responsibility management in compliance with SA 8000 Standard and ISO 26000 Guidelines. • Broadening of the scope of GRI performance indicators on labor protection and industrial safety (LA group of indicators) and on public relations (SO group of indicators). • Articulation in the reports of the plans pertaining to the broadening of the scope of future reports.

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Statement of Bureau Veritas Certification Rus on Independence, Neutrality and Expertise • Closed Joint Stock Company Bureau Veritas Certification Rus is an independent professional international company, which specializes on services for accredited certification of different systems of management (the systems of quality management, occupational health, environmental safety and social responsibility, etc.). • Bureau Veritas Certification Rus declares that this Certification is an independent assessment of a third party auditor. Bureau Veritas Certification Rus has no commercial interests in the activities of the Company, except for the rendering of the certification services in question.

Certifying Organization CJSC Bureau Veritas Certification Rus June 30, 2011.

Vladimir Mityashin – the leading auditor, Ph.D. in Economics. Supplements

120 Evaluation Table 131 Reference Information of GRI G3 Conformance 134 Feedback Questionnaire 128 Glossary 120 Social Report / Supplements

EVALUATION TABLE OF GRI G3 CONFORMANCE

GRI Contents Details Page Notes Indicator 1.1. Statement from CEO 1 1.2. Description of key impacts, risks, and opportunities 55 2.1 Name of the organization Title page Title page, 2.2. Primary brands, products, and/or services lists 2 and 4, list 13 Details also included in the 2010 Operational structure of the organization, including Company’s Annual Report, page 14 2.3. main divisions, operating companies, subsidiaries, 12 http://www.mrsk-cp.ru/?id=16390 and joint venture and posted on the corporate site at www.mrsk-cp.ru. 2.4. Location of organization’s headquarters 132 The Company operates in the Russian 2.5. Number of countries where the organization operates 11 Federation. 2.6. Nature of ownership and legal form 11 Markets served (including geographic breakdown, 2.7. 11 sectors served, and types of customers) 2.8. Scale of the organization 11 Significant changes during the reporting period The Company has not prepared or 2.9. regarding size, structure, or ownership published the Social Report before. 2.10. Awards received in the reporting period 8 3.1. Reporting period Title page The Company has not prepared or 3.2. Date of most recent previous report (if any) published the Social Report before. The Company intends to prepare and 3.3. Reporting cycle publish the Social Report annually. Contact point for questions regarding the report or 3.4. 132 its contents 3.5. Process for defining report content 5-6 List, 1 3.6. Boundary of the report 5-6 List, 1 State any specific limitations on the scope or 3.7. No limitations. boundary of the report

Basis for reporting on joint ventures, subsidiaries, leased facilities, outsourced operations and other No such information is included in 3.8. organizational units that can significantly affect the Report. comparability from period to period and/or between organizations

Data measurement techniques and the bases of calculations, including assumptions and techniques 3.9. 1, 3 underlying estimations applied to the compilation of the Indicators and other information in the report Social Report / Supplements 121

GRI Contents Details Page Notes Indicator

Explanation of the effect of any re-statements of The Company has not prepared or 3.10. information provided in earlier reports, and the published the Social Report before. reasons for such re-statement

Significant changes from previous reporting periods The Company has not prepared or 3.11. in the scope, boundary, or measurement methods published the Social Report before. applied in the report

Table identifying the location of the Standard 3.12. 120 Disclosures in the report Policy and current practice with regard to seeking 3.13. 112 external assurance for the report

For more details see the 2010 Governance structure of the organization, including Company’s Annual Report and the main committees under the highest governance body 4.1. 44 Company’s website at responsible for specific tasks, such as setting strategy www.mrsk-cp.ru, section “About the or organizational oversight Company”/”Administration”.

Indicate whether the Chair of the highest governance 4.2. No, he is not. body is also an executive officer

For organizations that have a unitary board structure, state the number of members of the highest 4.3. 44 governance body that are independent and/or non- executive members

Mechanisms for shareholders and employees to 4.4. provide recommendations or direction to the highest 44 governance body

Linkage between compensation for members of the highest governance body, senior managers, and 4.5. executives (including departure arrangements), and 45 the organization’s performance (including social and environmental performance)

Processes in place for the highest governance body 4.6. 44 to ensure conflicts of interest are avoided

Process for determining the qualifications and exper- Qualifications and expertise are tise of the members of the highest governance body 4.7. 44 determined by shareholders and is for guiding the organization’s strategy on economic, considered in voting. environmental, and social topics

Internally developed statements of mission or values, codes of conduct, and principles relevant to 4.8. 15, 73 economic, environmental, and social performance and the status of their implementation

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GRI Contents Details Page Notes Indicator

Procedures of the highest governance body for over- seeing the organization’s identification and management of economic, environmental, and social perfor- 4.9. 54 mance, including relevant risks and opportunities, and adherence or compliance with internationally agreed standards, codes of conduct, and principles

Processes for evaluating the highest governance 4.10. body’s own performance, particularly with respect to 45 economic, environmental, and social performance

The Company uses no such Explanation of whether and how the precautionary terminology but runs its business to 4.11. approach or principle is addressed by the organiza- minimize any negative environmental tion impacts.

Externally developed economic, environmental and 4.12. social charters, principles, or other initiatives to The Company has no such charters. which the organization subscribes or endorses

Memberships in associations (such as industry as- 4.13. sociations) and/or national/international advocacy 79 organizations List of stakeholder groups engaged by the organiza- 4.14. 4 tion Basis for identification and selection of stakeholders 4.15. 4 with whom to engage Approaches to stakeholder engagement, including 4.16. frequency of engagement by type and by stakeholder 4 group Key topics and concerns that have been raised through stakeholder engagement, and how the 4.17. 4 organization has responded to those key topics and concerns, including through its reporting Significant financial assistance received from No such assistance received in the ЕС4 government reporting period.

Policy, practices, and proportion of spending on ЕС6 locally-based suppliers at significant locations of 76 operation

The critical criteria for hiring emloyees for any level positions is his/her meeting the educational, psychophysiological and other Procedures for local hiring and proportion of senior requirements applicable to the ЕС7 management hired from the local community at loca- 66 prospective position. The Company tions of significant operation does not apply the policy of discrimination on the ground of national origin, gender, or registration within the Company’s presence regions. Social Report / Supplements 123

GRI Contents Details Page Notes Indicator

Development and impact of infrastructure investments and services provided primarily for public ЕС8 90-91 benefit through commercial, in-kind, or pro bono engagement

Information is available in the 2010 Annual Report of the Company, page 71. http://www.mrsk-cp.ru/?id=16390 Energy consumption for industrial and economic needs in 2010

Name Unit 2010 thousand electric energy 122,319.71 EN4 Indirect energy consumption by primary source kWh thermal energy Gcal 50,292.67 cold water thousand 3 589.17 supply m hot water thousand 3 5.25 supply m thousand natural gas 3 3,659.62 m motor petrol tons 8,754.04

EN8 Total water withdrawal by source 105 Company’s water withdrawal Water sources significantly affected by withdrawal of EN9 is unessential to the supplying water organization.

Percentage and total volume of water recycled and The Company uses no recycled water EN1O re-used systems. There is no water discharge EN21 Total water discharge by quality and destination (as this indicator is defined in GRI Guidelines). EN22 Total weight of waste by type and disposal method 104 No dangerous substance spills are EN23 Total number and volume of significant spills recorded. Initiatives to mitigate environmental impacts EN26 of products and services, and extent of impact 99 mitigation

Percentage of products sold and their packaging EN27 Not acceptable for the Company. materials that are reclaimed by category

Total environmental protection expenditures and EN3O 103 investments by type

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GRI Contents Details Page Notes Indicator Information is available in the 2010 Total workforce by employment type, employment Company’s Annual Report, LAI contract, and region pages 190-192 http://www.mrsk-cp.ru/?id=16390.

Information is available in the 2010 Total number and rate of employee turnover by age Company’s Annual Report, LA2 group, gender, and region pages 190-192 http://www.mrsk-cp.ru/?id=16390.

Benefits provided to full-time employees that are not LA3 provided to temporary or part-time employees, by 58 types of key operations

Percentage of employees covered by collective LА4 All employees. bargaining agreements Minimum notice period(s) regarding operational In accordance with the applicable LA5 changes, including whether it is specified in law; the standard is set forth in the collective agreements Industry Tariff Agreement.

Rates of injury, occupational diseases, lost days, and LA7 absenteeism, and number of work-related fatalities 70 Partially. by region

Education, training, counseling, prevention, and risk-control programs in place to assist workforce LA8 63 members, their families, or community members regarding serious diseases

Set forth in the Industry Tariff Health and safety topics covered in formal LA9 Agreements and Collective agreements with trade unions Agreement. Programs for skills management and lifelong learning that support the continued employability LА11 57 Partially. of employees and assist them in managing career endings

Information is available in the 2010 Composition of governance bodies and breakdown Company’s Annual Report, of employees per category according to gender, LA13 pages 190-192 age group, minority group membership, and other http://www.mrsk-cp.ru/?id=16390 indicators of diversity Partially.

Legal review of agreements submitted to the legal support Percentage and total number of significant department involves the inspection investment agreements that include human rights of compliance with the applicable HR1 clauses or that have undergone human rights law, including laws to protect human screening rights set forth in the Constitution of the Russian Federation, and other regulations. Social Report / Supplements 125

GRI Contents Details Page Notes Indicator

Operations identified in which the right to exercise freedom of association and collective bargaining may HR5 None. be at significant risk, and actions taken to support these rights

Operations identified as having significant risk for All Company’s employees are above HR6 incidents of child labor, and measures taken to 58 18. contribute to the elimination of child labor

Operations identified as having significant risk for incidents of forced or compulsory labor, and The Company uses no forced or HR7 measures to contribute to the elimination of forced or compulsory labor. compulsory labor

Total number of incidents of violations involving HR9 No such violations have occurred. rights of indigenous people and actions taken

Total value of financial and in-kind contributions to No such contributions have been S06 political parties, politicians, and related institutions made. by country

Life cycle stages in which health and safety impacts of products and services are assessed for improve- Non-essential for the Company’s PR1 ment, and percentage of significant products and services. services categories subject to such procedures Practices related to customer satisfaction, including PR5 87 results of surveys measuring customer satisfaction Installed capacity, broken down by primary energy EU1 17 source and by regulatory regime This is non-essential for the Company Net energy output broken down by primary energy EU2 as its operations are not related to source and by regulatory regime energy generation. Information is available in the 2010 Number of residential, industrial and commercial Company’s Annual Report, EU3 customer accounts page 66 http://www.mrsk-cp.ru/?id=16390.

Length of overhead and underground transmission EU4 17 and distribution lines by regulatory regime

This is non-essential for the Company Allocation of CO2e emissions allowances or equiva- as its operations are not related EU5 lent, broken down by carbon trading framework to electrical or thermal energy generation. Management approach to ensure short and long-term EU6 32 electricity availability and reliability

Demand-side management programs including EU7 residential, commercial, institutional and industrial 86 Discount consumers. programs

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GRI Contents Details Page Notes Indicator

Research and development activity and expenditure EU8 aimed at providing reliable electricity and promoting 26 sustainable development

This is non-essential for the Company Provisions for decommissioning of nuclear power EU9 as its operations are not related to sites nuclear energy.

This is non-essential for the Company Average generation efficiency of thermal plants by as its operations are not related EU11 energy source and by regulatory regime to electrical or thermal energy generation.

Transmission and distribution losses as a percentage EU12 17 of total energy

Programs and processes to ensure the availability of EU14 57, 66 a skilled workforce

Policies and requirements regarding health and EU16 safety of employees and employees of contractors 70-71 and subcontractors

Days worked by contractor and subcontractor EU17 employees involved in construction, operation & Not reported by the Company. maintenance activities

Stakeholder participation in the decision making EU19 process related to energy planning and infrastructure 32 development This indicator in not essential for the Company (its operations are not EU20 Approach to managing the impacts of displacement related to a large-scale acquisition of land from landowners).

Contingency planning measures, disaster/emergency EU21 management plan and training programs, 41 and recovery/restoration plans

This indicator in not essential for Number of people physically or economically dis- the Company (its operations are not EU22 placed and compensation, broken down by type of related to any physical or economic project displacement of people).

Programs, including those in partnership with government, to improve or maintain access to electricity EU23 83-87 and customer support services

Practices to address language, cultural, low literacy EU24 and disability related barriers to accessing and safely 83-87 using electricity and customer support services Social Report / Supplements 127

GRI Contents Details Page Notes Indicator

This indicator in not essential for the Company (the law sets forth Percentage of population unserved in licensed distri- mechanisms to provide technical EU26 bution or service areas of the reporting company connection and energy transmission services to population (bonus connection)).

Decisions to disconnect customers Number of residential disconnections for non-pay- from energy supply are made by EU27 ment, broken down by duration of disconnection and guarantee suppliers or utilities by regulatory regime companies. The Company keeps no records of disconnections.

The Company makes no calculations EU28 Power outage frequency of this indicator. No calculation data are available.

This is non-essential for the Company Average plant availability factor by energy source and as its operations are not related EU3O by regulatory regime to electrical or thermal energy generation.

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GLOSSARY

Abbreviations CJSC – Closed Joint Stock Company CJSC MICEX – Closed Joint Stock Company Moscow Interbank Currency Exchange CSC – Customer Service Center CSP – Central Security Post CSR – Corporate Social Responsibility CTC – Central Tender Commission DP – Distributing Point DZ – Distribution Zone EBITDA – Earnings Before Interest, Taxes, Depreciation and Amortization EMERCOM of Russia – Emergency Control Ministry of Russia EMS – Environmental Management System FCSM RF – Federal Commission for the Securities Market of the Russian Federation FL – Federal Law FSB (FSS) of Russia – Federal Security Service of Russia FTS of Russia – Federal Tariff Service of Russia GCC – Grids Control Center HPS – Heat Power Station IDGC – Interregional Distribution Grid Company IFRS – International Financial Reporting Standards IMS – Integrated Management System IP – Investment Program IR – Investor Relations JSC – Joint Stock Company JSC FGC UES – Joint Stock Company Federal Grid Company of Unified Energy System JSC IDGC Holding – Joint Stock Company Interregional Distribution Grid Companies Holding JSC IDGC of Center and Volga Region – Joint Stock Company Interregional Distribution Grid Company of Center and Volga Region JSC RTS – Joint Stock Company Russian Trade System Stock Exchange KPI – Key Performance Indicators Ltd. – Limited Liability Company Social Report / Supplements 129

MPC – Maximum Permissible Concentration MTR – Minimal Tariff Rate NPP – Non-State Pension Provision OECD – Organization for Economic Cooperation and Development OHSAS – Occupational Health and Safety Management System OL – Overhead Line PCB – Poly-Chlorinated Biphenyl PSW – Project and Survey Works PTC – Permanent Tender Commission PTL – Power Transmission Line PU – Production Unit QMS – Quality Management System RAB – Regulatory Asset Base RaEL Association – All-Russian Industry Association of Electric Energy Employers RAS – Russian Accounting Standards ROE – Return On Equity calculated as the Company’s net profit to the annual average shareholder capital RTS – Russian Trading System Stock Exchange SDC – Subsidiary and Dependent Companies SS – Substation SSIW – Self-Supporting Insulated Wire TC – Technological Connection TGO – Territorial Grid Organization TSS – Transformer Substation UHE – Utility and Housing Estates VAT – Value Added Tax

Units of Measurement kV – kilovolt, a unit used to measure voltage kW, MW – kilowatt, megawatt, the units used to measure active (real) power kWh – kilowatt-hour, a unit used to measure real power MVA – megavolt-ampere, the unit used to measure full electric capacity Mvar – megavar, the unit used to measure reactive power

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Terms Capitalization – the market value of a company, calculated as the product of the share price multiplied by the total number of shares. Compensation of reactive power is a stimulation of the balance of reactive power in the grid node to adjust the voltage. The same stimulation in distribution grids is exercised to lower the losses of energy. Consumer/Customer is a recipient of the results of the business process (products, services). A consumer may be internal, the one within the organization, who uses the results (output) of the preceding business process, and external, the one outside the organization who uses or consumes the results (output) of the organization. Dividend – a share of the Company’s net profit distributed among the shareholders. Electric Power Industry – a branch of the Russian economy which includes economic relations arising during the production (including the combined production of electric and heat energy) and transmission of energy, the operative dispatch control, marketing and consumption of energy using production facilities and other property articles (including those that form a part of the Unified Energy System of Russia), which are owned by the subjects of the power industry or other persons as property or on other legal grounds set by the federal laws. The power industry is the basis for the functioning of the economy and life sustenance. Interregional Distribution Grid Company (IDGC) – a joint stock company formed according to the territorial principle. MICEX Index – the composite stock price index weighted against the market capitalization, which includes 30 most liquid shares of the Russian issuers listed on MICEX. The MICEX index is one of the major indicators of the Russian stock market, calculated from 22.09.1997 (with the base value of 100 points). MICEX Power Index (MICEX PWR) – the index of shares of power industry companies. Industry indexes are the stock price indexes of the most liquid shares of the Russian issuers which trade on MISEX SE, as weighted against the market capitalization. Net Assets – the value determined by way of deduction from the accounted assets of a joint stock company of the sum of its accounted liabilities. Power transmission line is an electric installation consisting of wires, cables, insulating elements and bearing structures, intended to transmit the energy between two points of energy system with possible intermediate take-off. Productive supply is the energy volume transmitted to end consumers connected to the grids of an energy grid organization. Regulated Asset Base is a system of tariff formation based on the long-term regulation of tariffs. The system is intended to attract major investments to the industry. The system is based on ensuring the return of the funds invested in the Company assets in a period which corresponds to the service life of the assets in order to obtain rated income. The rate of return determined by the state should correspond to the level of risks in grid companies and make the industry attractive for investors. Stock Market is a part of financial market covering the organized securities trading on different stock exchanges and over-the-counter securities market. Subsidiary and dependent companies – legal entities in which the Company owns more than 20% of voting shares due to the major interest in their charter capital, or due to a concluded agreement, or in which the Com- pany may determine the decisions made by these legal entities due to some other reasons. The Company – JSC IDGC of Center and Volga Region. Social Report / Supplements 131

REFERENCE INFORMATION

Full Name Joint Stock Company Interregional Distribution Grid Company of Center and Volga Region

Abbreviated Name JSC IDGC of Center and Volga Region Primary State Registration 1075260020043 Number TIN/TRRN TIN 5260200603 TRRN 997450001 The Branch of Gazprombank (JSC) in Nizhny Novgorod Bank Details Settlement account: 40702810500010001930 RCBIC 042202764 Correspondent account: 30101810700000000764 Location 603950, 33, Rozhdestvenskaya Street, Nizhny Novgorod, Russia

Postal Address 603950, 33, Rozhdestvenskaya Street, Nizhny Novgorod, Russia

E-mail [email protected]

Internet Site www.mrsk-cp.ru Ushakov Evgeny Viktorovich General Director Tel. (reception room): +7 (831) 431-83-59, Fax (reception room): +7 (831) 434-11-22 Investor Relations Department e-mail: [email protected]

Koltunov Vladimir Igorevich, the Head of the Corporate Governance Department Tel.: +7 (831) 431-83-59, Shareholder and Investor E-mail: [email protected] Relations Kiseleva Natalia Gennadievna, the Head of the Shareholder and Investor Relations Division Tel.: +7 (831) 431-74-46 E-mail: [email protected] Guseva Yulia Stanislavovna, the Head of Corporate Affairs Division of the Corporate Governance Department The Corporate Secretary Tel.: +7 (831) 431 74 30 E-mail: [email protected] Novikova Galina Vladimirovna, the Head of the Department for Relations with Authorities, Public Organizations and Mass Media Tel.: +7 (4842) 71-63-49 E-mail: [email protected] Press Center Petrovskaya Lydmila Sergeevna, the Head of the Public Relations Division of the Department for Relations with Authorities, Public Organizations and Mass Media Tel.: +7 (831) 431-74-48 E-mail: [email protected] Customers’ hot line 8-800-100-33-00 Virtual Reception Room http://www.mrsk-cp.ru/?id=279 for Customers

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Information on Branches

600016, 106, Bolshaya Nizhegorodskaya Street, Vladimir Vladimirenergo Tel.: +7 (4922) 21-57-61 Fax: +7 (4922) 21-55-65 153000, 8/2, Krutitskaya Street, Ivanovo Ivenergo Tel.: +7 (4932) 38-63-71 Fax: +7 (4932) 33-99-17 248009, 35, Grabtsevskoye Shosse, Kaluga Kalugaenergo Tel.: +7 (4842) 71-63-59 Fax: +7 (4842) 56-56-11 610000, 51, Drelevskogo Street, Kirov Kirovenergo Tel.: +7 (8332) 64-76-50 Fax: +7 (8332) 69-13-71 424006, 39a, Panfilova Street, Yoshkar-Ola, Mariy El Republic Marienergo Tel.: +7 (8362) 42-52-92 Fax: +7 (8362) 41-28-80 603950, 33, Rozhdestvenskaya Street, Nizhny Novgorod Nizhnovenergo Tel.: +7 (831) 431-93-59 Fax: +7 (831) 431-93-81 390013, 12, MOGES Street, Ryazan Ryazanenergo Tel.: +7 (4912) 20-43-50 Fax: +7 (4912) 20-44-30 300012, 99, Timiryazeva Street, Tula Tulenergo Tel.: +7 (4872) 32-77-69 Fax: +7 (4872) 32-71-14 426004, 30, Sovetskaya Street, Izhevsk, Republic of Udmurtia Udmurtenergo Tel.: +7 (3412) 66-15-66 Fax: +7 (3412) 66-15-22

Information on the Auditor

Full Name Closed Joint Stock Company Joint Stock Auditing Firm Auditinform

Abbreviated Name CJSC AAF Auditinform

PSRN 1027739185044

Location 129164, 4, Yaroslavskaya Street, Moscow, Russia

Postal Address 107078, P/O 150, Moscow

Tel./Fax +7 (495) 933-81-65

Internet Site www.auditinform.ru

Permission to exercise License № E003505, issued by the Ministry of Finance of the Russian Federation on the activities March 4, 2003 to perform auditing activities. License expiry date: March 4, 2013. Social Report / Supplements 133

Information on the Registrar

Till 16.12.2010 the services for the keeping and maintenance of the registry of shareholders of JSC IDGC of Center and Volga Region were rendered by JSC TSMD.

Full Name Joint Stock Company Central Moscow Depositary

Abbreviated Name JSC TSMD

Location 105082, 34-8, Bolshaya Pochtovaya Street, Moscow

Telephone +7 (495) 221-13-33

Fax +7 (495) 221-13-83

Internet Site www.mcd.ru

E-mail [email protected]

TIN 7708047457

PSRN 1027700095730

Permission to exercise License № 10-000-1-00255, issued by the Federal Commission on Securities Market on the activities September 13, 2002 to maintain the registry. The License is limitless

Company Head Agafonova Natalia Viktorovna, the Chairwoman of the Management Board

After 16.12.2010 the services for keeping and maintenance of the registry of shareholders of JSC IDGC of Center and Volga Region are rendered by JSC Registrar R.O.S.T.

Full Name Joint Stock Company Registrar R.O.S.T.

Abbreviated Name JSC Registrar R.O.S.T.

Location 107996, 18-13 Stromynka Street, Moscow

Telephone +7 (495) 771-73-35

Fax +7 (495) 771-73-35

Internet Site www.rrost.ru

E-mail [email protected]

TIN 7726030449

PSRN 1027739216757

Permission to exercise License № 010-000-1-00264, issued by the Federal Commission on Securities Market on the activities December 3, 2002 to maintain the registry. The License is limitless

Company Head Zhiznenko Oleg Mikhailovich, the General Director

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FEEDBACK QUESTIONNAIRE

You have just finished reading the Social Report of JSC IDGC of Center and Volga Region for 2009-2010. The Com- pany is interested in your opinion on the Report and we’d appreciate your assistance in improving the quality of the Company’s reporting. We would like you to answer the questions below.

You can send the filled-in form using the communications channels listed below:

• Fax: (831) 431-83-91;

• Postal address: 603950, 33, Rozhdestvenskaya Street, Nizhny Novgorod (marked “2009-2010 Social Report”);

• E-mail: [email protected].

1. What is your opinion of the Social Report of JSC IDGC of Center and Volga Region for 2009-2010 in terms of the following:

• credibility to the information presented 5 4 3 2

• ease of navigation 5 4 3 2

• design and structure 5 4 3 2

• style 5 4 3 2

(5 – excellent, 4 – good, 3 – satisfactory, 2 – not satisfactory)

2. What section of the Social Report do you find the most/the least interesting for you?

3. What additional information would you like to find in the next Social Report of JSC IDGC of Center and Volga Region?

4. Other comments: Social Report / Supplements 135

5. Please, specify the group of stakeholders you belong two (no more than two positions):

Company employee

Trade Union representative

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Representative of local authorities

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Mass media representative

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Other (please, specify)

6. Would you like to receive social reports of JSC IDGC of Center and Volga Region in the future?

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If yes, leave your address details please:

7. Your contact information:

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THANK YOU VERY MUCH FOR YOUR TIME!

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