ANNUAL REPORT 2012 Grid Company ANNUAL REPORT 2 0 1 2 Grid Company APPROVED BY: Annual general meeting of shareholders JSC “Grid Company” (“Сетевая компания”) June 27, 2013 Protocol No. 30 of July 1, 2013 PRELIMINARILY APPROVED BY: Board of directors JSC “Grid Company” (“Сетевая компания”) May 23, 2013 Protocol No.12/05-2013 of May 24, 2013 Table of contents Appeal of the Chairman of the Board of JSC “Grid Company” .............................. 4 Appeal of Director General of JSC “Grid Company” ............................................. 6 1. Key Events of 2012 ........................................................................................ 8 2. General information about the Company ........................................................14 3. Analysis of financial state and results of activities .......................................... 22 4. Production activities ...................................................................................... 30 5. Investment activity and innovation development ............................................ 48 6. Corporate management ............................................................................... 58 7. Internal control and risk management system .................................................76 8. Human resource policies and social responsibility ......................................... 82 Schedules ...................................................................................................... 98 Book-keeping (financial) statement of JSC “Grid Company” for 2012 ........... 100 Data on compliance with Corporate Code of Conduct ................................109 List of transactions considered according to the federal law “On Joint-Stock Companies” transactions with a self-interest and approved by the Company’s management bodies in 2012 .................... 118 4 Grid Company 5 Dear shareholders! By the end of 2012 the industrial output in the Republic of Around 9 billion rubles has been invested into the renovation of the Tatarstan has increased by 7% thus showing a growth which is power grid in 2012. The investment program targets primarily the nearly twice as strong as that in Russia overall. The republic has republic’s most important facilities: reconstruction of the substations thus claimed the sixth position on the list of the most productive Kinderi 500 KV, Central 220 KV and construction of Yelabuga sub- industrial regions of the Russian Federation. Equally noteworthy are station 500 KV. the social-economic developments in the republic in 2012. Work- The company’s decision to encourage investment and intro- force productivity has grown by 6.4% as compared to 2011. GRP duce innovative technological solutions to the power grid of the reached 776 000 RUB per person. republic challenges us to implement projects in the near future that The republic has been consistently tackling issues of supporting would be relevant both for the country and the republic and inter- and developing real economy; major projects of federal and republic esting from a professional point of view, particularly in the sphere significance are successfully implemented in various fields of econo- of smart energy. my; preparations are nearly finished for Kazan Universiade 2013, the The company has continued its effort to develop a “Digital Sub- world’s biggest sports forum for students. station”. This technology is planned to be introduced to the power The positive developments and implementation of new projects grid of Tatarstan as part of the long-term target-oriented program are directly linked to the strong performance of the power grid of “Power supply and energy efficiency improvement” in the Republic the Republic of Tatarstan. Despite the difficulties in attracting invest- of Tatarstan from 2011 to 2015 and up to 2020.” The program was ments, the performance of the republic’s power grid infrastructure approved by Act No. 604 of the Cabinet in the Republic of Tatarstan has been stable and reliable, and its development – consistent. from 29.07.2010 as part of the project “Regional Smart Energy Net- Today we are facing the challenging task of creating a brand- work at the JSC “Grid Company” (“Сетевая компания”). In 2012 new image for the republic’s power grid. The fast growth in the the Company took preparatory steps to carry out the pilot project consumption of electric energy dictates the necessity for new in- “Digital Automated System of Energy Accounting.” It is noteworthy vestment projects for JSC “Grid Company” (“Сетевая компания”): that the project is implemented in collaboration with the leading construction of new substations and lines, reconstruction of the ex- companies of the Russian Federation and that the key equipment isting substations involving an increase in capacity and reliability of used is produced in Russia. networks. Among the most important strategic tasks faced by the com- In 2012 the Company management has focused on increasing pany in 2013 are further improvement of company management reliability and quality of power supply for the republic’s consumers efficiency, extensive effort to boost energy efficiency, and bringing as well as full-fledged implementation of the investment program. customer service to a new level. Prime Minister of the Republic of Tatarstan, Chairman of the board of directors of JSC “Grid Company” (“Сетевая компания”) I.Sh. Khalikov 6 Grid Company 7 Dear shareholders! Development and strong performance of infrastructure-based • The Company was reaccredited to comply with the JSC “Grid Company” (“Сетевая компания”) is a necessary condi- international requirements ISO 14001:2004 environmental tion for progress within all areas of economy and social sphere of management system. the Republic of Tatarstan. Equally important is the Company’s customer-oriented policy. In 2012 the Company focused on its investment program in or- JSC “Grid Company” (“Сетевая компания”) website launched der to fulfill its priority task – to provide stable and high-quality power in 2012 a new electronic service “Customer’s Profile” that allows supply to the consumers in the Republic of Tatarstan and further de- users to apply for technological connection to electric lines online velop the power grid. Capital investments for the past year reached and track the application status. 8.6 billion rubles, which is 45% of the Company’s gross profit. As Innovation is an important part of the Company’s development part of the investment program and with the purpose of providing policy. In 2012 the Company took preparatory steps to carry out reliable power supply to facilities involved in 2013 Kazan Universi- the pilot project “Digital Automated System of Energy Accounting.” ade, Kinderi 500 kV and Central Substations have been renovated. In 2013 the technical component of the project is expected to be Overhead power line 110-500 kV and distributive network facilities brought to life and tested at a test site that is under construction have been repaired. Another important undertaking of 2012 was the at the Company’s branch Kazan Power Network. The project beginning of the construction of Yelabuga Substation 500 kV, that involves such leading enterprises of the Russian Federation as is supposed to be connected to such important enterprises in the CJSC “PROFOTEK” (“ПРОФОТЕК”), engineering and technical republic as JSC “SEZ Alabuga”, JSC “Ammoniy”, JSC “TANECO” company “Systems and Technologies” (“Системы и техноло- and a few other companies. гии,”) LLC “R.V.C.” (“Р.В.С.”) A key component of the project is To sum up the Company’s output for 2012: installation of optical-fiber current and voltage transformers at the cable overhead transmission line 110 kV Magistralnaya-Kazanka • Output of electric energy transmitted through electric lines of at the Magistralnaya Substation 220 kV. The project also envisions JSC “Grid Company” (“Сетевая компания”) to consumers mounting of modern accounting meters, data acquisition and in the Republic of Tatarstan, reached a point of 22 440 transmission devices, and switchboards that comply with IEC million kWh, which is 3.6% higher than the output of the 61850. previous year. We have a challenging year ahead of us – Kazan hosts • Technological power consumed to transmit the energy Universiade, an event of a global scale. Tatarstan’s image and through electric lines totaled 1 537 million kWh or 7.7%, status depends on how confidently and reliably each and every which is 1.8% lower than the regulatory standard and 0.4% one of us works. The Company is facing a most important task of lower than the power consumed last year. providing stable and fail-safe power supply to Universiade facilities, • 20 452 applications were submitted for technological enterprises and republic residents. I believe that the Company’s connection of the applicants’ power receivers to the staff will tackle the problem professionally and honorably, with company’s electric lines, which is 23.6% more than in 2011. dignity characteristic of Tatarstan’s energy workers; and thus live 18957 contracts were signed to provide a total of 733522 up to the expectations of the republic’s leadership and its residents. mW. The number of contracts signed in 2012 is 25.6% higher In 2013 the Company will continue applying modern solutions than that of 2011. 16362 contracts with a total of 303758 and innovative technologies to reduce depreciation of power supply mW were fulfilled, which is 22.9% more than in 2011. equipment. Among the envisioned measures is implementation •