2008 annual report MOSENERGO annual report 2008 annual report 2008 The 2008 annual report of MOSENERGO was approved by MOSENERGO Board of Directors on April 27, 2009 and submitted to the Annual General Meeting of MOSENERGO Shareholders for approval on June 30, 2009 Contents A synopsis of MOSENERGO 4 Mission of MOSENERGO . 4 MOSENERGO Today . 5. MOSENERGO in Figures . 5 MOSENERGO's Production Capacities in Moscow and Moscow Region . 6. Address of the Chairman of the Board of Directors 8 Address of the Chairman of Executive Board 10 1. MOSENERGO in the Country, Area and Industry 12 1.1. The Area and Market . 12 1.2. MOSENERGO Legislative Environment . .12 1.3. Risk Management . .13 1.4. Major Events in 2008 . 15. 2. Electric Energy Generation and Sales 20 2.1. Functioning of the Electric Power Wholesale Market . .20 2.2. Electric Power Tariffs . 23. 2.3. Sales of Electric Power by WEM Sectors . .25 2.4. MOSENERGO Share in the WEM . 25. 3. Heat Production and Sales 26 3.1. Heat Production . 26 3.2. Heat Tariffs . 28. 3.3. Heat Sales Structure in Moscow Area . .29 3.4. MOSENERGO Share in the Heat Consumers Market . 29. 4. Analysis of performance results and financial state 34 4.1. Performance of MOSENERGO in 2008 . .39 4.2. Credit Portfolio Management . 39. 4.3. Analysis of the Balance Structure . .39 4.4. Analytical financial state Ratios . 39. p see the indicated page of the Annual Report 5. Engineering Support of Production 42 5.1. Procurement of Fuel . 42 5.2. Maintenance Efforts . 43. 5.3. Procurement Activities . 44 6. Technologies and Innovations 46 6.1. Engineering Policy and Energy Efficiency . 46 6.2. Information Technologies and Telecommunications . 47. 7. Investments in Production 50 7.1. Fulfillment of Investment Program . 50 7.2. Investment Strategy . 53. 8. Social Responsibility 54 8.1. Human Resources Work . 54 8.2. Occupational Health and Safety . 55. 8.3. Social Programs . .56 8.4. Environmental Protection . 56. 9. Corporate Governance 58 9.1. Corporate Governance Principles . 58 9.2. Shareholder Meeting . 59. 9.3. Board of Directors . .59 9.4. Executive Bodies . 69. 9.5. Audit Commission . 75 10. Changes in the Company’s Organizational Structure Introduced in 2008 76 11. Shares and Stock Market 80 11.1. Share Capital . 80 11.2. Securities Market . 81. 11.3. Dividends . .82 12. Accounting Statements 84 12.1. MOSENERGO Management’s Opinion of Accounting Statements . 84 12.2. Opinion of the Internal Audit Commission . 85. 12.3. Audit Report . .86 12.4. Balance Sheet as at 31 December, 2008 . 89. 12.5. Profit and Loss Statement for 2008 . .92 12.6. Capital Change Report for 2008 . 94. 12.7. Cash Flow Statement for 12 months 2008 . 98 12.8. Annex to the Balance Sheet for 2008 . 100. 12.9. Explanotory Note of MOSENERGO to Annual Accounting Statments for 2008 . 106 13. Additional Information 136 13.1. Information on Material Facts . 136 13.2. Resolutions adopted by Shareholders Meeting . 136. 13.3. Corporate Governance Code – compliance Information . .139 13.4. Information about concluded interested – party Transaction . 147. 13.5. Glossary . .148 13.6. Contact Information . 149. 13.7. MOSENERGO Site Map . 150 13.8. Internet Supplement to the Annual Report 2008 . 151 s see the indicated page of MOSENERGO web-site at www.mosenergo.ru “To our shareholders and investors”/”Reports”/”Annual reports”/”Internet Supplement to the Annual Report 2008” A synopsis of MOSENERGO MOSENERGO’s mission is to provide consumers with electrical energy and heat generated on the basis of advanced resource-saving production technologies by the environmentally friendly equipment meeting the best ecological standards and to provide Company’s shareholders with fair income. Structure of MOSENERGO Share Capital Structure of MOSENERGO Share Capital as of 31.12.2007 as of 31.12.2008 MOSENERGO account 0.35% 3.41% Natural persons 3.97% 15.01% RAO UES of Russia Legal entities and nominee holders without taking persons 1.67% affiliated with Moscow Government into account 15.77% Moscow Government represented by Moscow Department of Property and persons affiliated 26.44% with Moscow Government 26.44% 53.47% GAZPROM 53.47% 4 MOSENERGO annual report 2008 MOSENERGO Today The Company’s installed electric power generating capacity is MOSENERGO is a compactly located complex comprising of 11 9. thousand MW and installed heat capacity is 34 9. thousand technologically and economically interrelated generation facilities . Gcal/h (40 6. thousand MW) . All Company’s power plants are co-generators of electrical MOSENERGO core businesses are electric energy and power energy and heat with a common operation mode relying on a generation for supply to the wholesale market, heat production, shared capacity reserve and a centralized operational and dis- sales of heat to end-users in Moscow and Moscow Region . patching control system . MOSENERGO in Figures Key performance indicators UOM 2007 2008 Installed electrical capacity MW 11,117.3 11,904.3 Installed heat capacity Gcal/h 34,297.4 34,897.4 Electricity generation mln. kWh 63,673.3 64,273.9 Heat production thou. GCal 65,556.5 62,439.7 Employees persons 16,544 13,580 Principal financial and economic indicators UOM 2007 2008 Assets Mln. RUR 148,037.6* 160,702.8 Equity capital Mln. RUR 118,310.2* 123,232.6 Investments Mln. RUR 29,846.7 29,714.5 Proceeds from sales of products Mln. RUR 78,324.7 94,779.4 Profits on sales Mln. RUR 4,550.9 4,687.5 Pre-tax profits Mln. RUR 2,648.5 2,220.1 Net profits Mln. RUR 739.5 1,371.7 Weighted average number of shares outstanding Thou pcs. 34,968,407 39,640,220 Net earnings per share RUR 0.0211 0.0346 Number of shares at the year end Thou pcs. 39,749,360 39,749,360 Market capitalization** Bln. RUR 235.7 37.7 * after revaluation of fixed-assets groups “Substations, autotransformers, transformers, switchgears, surge protection devices, disconnecting switches, arresters, reactors, synchronous compensators traps, components for outdoor switchgears, voltage distribution units, OUT etc.”. “Pumps, compressors, ventilation equipment, electric motors, chemical water-conditioning and fuel-feeding equipment, diesel generators” and “Construction machinery, hoisting mechanisms, special-purpose transport” the assets value as of 01.01.2008 was adjusted to RUR 152,479.2 million and the share capital value to RUR 122,751.8 million; ** market capitalization was calculated on the basis of the market price per share published by ZAO MICEX Stock Exchange at the end of the relevant reporting period and the number of MOSENERGO shares issued. A synopsis of MOSENERGO 5 MOSENERGO’s Production Capacities in Moscow and Moscow Region TEP-21 TEP – 28 TEP-27 TEP-23 GRES-3 TEP – 6 1,775 / 14.91 25 / 0.21 1,060 / 8.91 1,420 / 11.93 580.28 / 4.87 24 / 0.20 4,918 / 14.09 40 / 0.11 1,876 / 5.38 4,530 / 12.98 341.38 / 0.98 139 / 0.40 A power unit No.11 CCGT-450Т has The second vapour-gas power unit CCGT- Turbine-generator set No.2 was The diesel fuel tanks No.3 and No.4 been put into operation. The prescribed 450T is commissioned. The installed electric replaced by an up-to-date model have been inspected, the water intake capacity of the electric power plant capacity of the power plant has been increased with an air-cooling generator. The has been inspected and cleaned increased by 31.5 percent, the established by 73.8 percent, the installed heating capacity installed capacity increased by heating capacity has been increased by has been increased by 19.0 percent. 10 MW and 15 Gcal/h 6.5 percent. TEP-11 330 / 2.77 1,011 / 2.90 TEP-16 10 disconnect switches (110 kV) with 360 / 3.02 HPP-1 a pneumatic drive were replaced by 10 electric-driven disconnect 1,484 / 4.25 95 / 0.80 switches. Preparation of construction of the 951 / 2.73 power unit – CCGT-420 with the capacity Power halls No.1 and 2 have been 420 MW has been started. reconstructed; all-station waste water disposal units have been commissioned; a complex of measures has been taken in order to reduce the emission of pollutants into the atmosphere; a noise-muffler on air-suction unit of the energy boiler No.22 has been mounted. TEP-9 TEP – 25 TEP-12 210 / 1.76 TEP-8 560 / 1.61 1,370 / 11.51 408 / 3.43 605 / 5.08 30 protection sets for installation of 4,088 / 11.71 2,043 / 5.85 PASS type switches for lines 110 kV 2,192 / 6.28 Hydrodynamic clutches for network The turbine-generator set PT-80/100-130 “TEP-9- Kozhukhovo” and “TEP-9 – In 2008 TEP-8 was acknowledges the pumps have been installed according No.9 was modernized. Avtozavodskaya-2» were commissioned best economy object of the South- to the regulated drive implementation in 2008. Eastern District of Moscow with respect program. to civil protection issues, prevention and liquidation of emergency situations. TEP-22 1,310 / 11.01 3,606 / 10.33 Ultra-sound measuring devices for the pipelines of the heating network Installed electrical capacity, MW/Share charge have been commissioned; in MOSENERGO’s installed electrical TEP-26 TEP-17 network water consumption metering capacity, % TEP – 20 devices for the TEP’s auxiliaries have as of December 31, 2008 1,410 / 11.85 192 / 1.61 been into experimental operation. 730 / 6.13 4,006 / 11.48 712 / 2.04 2,400 / 6.88 Power unit No.8 CCGT-420 with the Partial reconstruction of the electric Installed heat capacity, Gcal/h/Share A polymer water catcher was mounted capacity 420 MW is under construction.