Our People are Our Main Asset 2 Federal Grid3 Company of Unified Energy System Social Responsibility and Corporate Sustainability Report 2 3 2 3 2 3 Our People are Our Main Asset 2 Federal Grid3 Company of Unified Energy System Social Responsibility and Corporate Sustainability 2 Report 3 Contents Annotation 4 Statement of the Chairman of the Management Board 5 Federal Grid Company General Corporate Governance Information General Information 8 Federal Grid Company’s Governance Structure 16 Organizational Structure 12 Top Executives’ KPIs 19 The Company’s Mission and Values 14 External Quality Ratings of Corporate Governance and Information Transparency 20 07 15 Internal Control System The Risk Management System 21 25 Understanding of Corporate Human Resources Social Responsibility and Management Sustainable Development Personnel Management 40 The Basic Ideas of the The Formation of Attracting and Developing Young Professionals 52 Company Responsibility Non-financial Reporting 30 in Federal Grid Company Staff Trainin 56 Public Agenda for 34 Social Programs 62 Sustainable Development CSR and Sustainable Labor Protection 66 31 Development: 2012 Key Events 36 29 39 6 Managing of the Anti-corruption and Prevention Economic Impact of Conflict of Interests System Key Aspects of Social and Economic Impact JSC Federal Grid Implementation of Management 72 Company`s Anti-Corruption Policy Anti-Corruption Policy 90 and Program for Participation in Implementation of Large Scale Anti-corruption and National Projects 83 Program for Prevention of Corruption and Settlement Settlement of Conflict of Tariff Policy 85 of Conflict of Interests in Interests in Federal Grid Russian Grids: Federal Grid Company and IDGC Federal Grid Company for Company in 2012 95 Holding 87 2012-2014 94 2013 Plans 100 71 89 Environmental Impact Stakeholders Relations Management Environmental Impact Management System in the Stakeholders Relations in 2012 118 Company and its DSCs 102 Dialogue with Stakeholders, "Human Capital Key Indicators of the Environmental Impact 104 Management in Federal Grid Company" 129 Company`s Initiatives in the Field of Protection of the Public Hearings on Draft Report 137 Environment 112 Conclusion on the Results of Public Assurance 144 101 117 APPENDICES APPENDIX 1. The UNEG Reliability Provisions 148 APPENDIX 5. A Table of Stakeholders’ Suggestions Pertaining to the Disclosure of Information in the Report, APPENDIX 2. Innovative Development of the UNEG 154 Voiced at the Dialogue on 05.04.2013 and at the Public APPENDIX 3. GRI Guidelines Indicators (G 3.1 and the Hearings on 26.04.2013 166 Industry Protocol for Electric Power Industry), Reflected APPENDIX 6. A List of Natural Areas in Preferential in the Report 159 Protection (NAPP) Accessible for JSC FGC UES for the APPENDIX 4. A Report on the Fulfillment of the 2012 CSR Purposes of Operation 168 Plans and Obligations of JSC FGC UES (Draft) 165 Independent Assurance of Social Reporting 171 Glossary and Abbreviations 178 148 6 Annotation Federal Grid Company’s 2012 Report on Social Responsibility and Corporate Sustainability is the sixth report of Federal Grid Company (the Company) in the field of sustainable development, demonstrating the Company's focus on increasing the level of transparency and the quality of stakeholder engagement. This Report has been prepared in accordance with the following international standards: GRI Sustainability Reporting Guidelines (version 3.1) and Energy Protocol, Reporting Guidelines by Transparency International, an international non-governmental corruption research organization, AA1000SES Stakeholder Engagement Standard. The Report covers the activities of The Report also describes the Federal Grid Company, its branches – approaches to the management of Backbone Electric Grids (MES), as well sustainable development, efficiency in as directly subordinated subsidiaries the socio-economic impact, and dependent companies listed in environmental impact figures, paragraph 1.1 of the Report. The GRI approaches to the implementation of application level is B +. anti-corruption activities undertaken by the Company during the reporting period, as well as information on reliability assurance and innovative ”Human Capital development. Management in Federal The Report includes information on the execution of the 2012 plans and Grid Company” is the commitments. priority theme of this To know the stakeholders’ opinions, in Report. the preparation of this Report, the Company held a dialog with stakeholders on the topic "Human The previous report was devoted to the Capital Management in Federal Grid implementation of the Company’s Youth Company” on April 5, 2013. Policy as part of the personnel After the Report had been prepared, it management process. Therefore, we was discussed at the public hearing can assume that the 2012 Report focus held on the basis of the AA1000SES is more large-scale compared to the standard. One of the outcomes was the previous report. signing by the stakeholders’ representatives of the Opinion on public assurance of the Report. 4 Statement of the Chairman of the Management Board DEAR COLLEAGUES, PARTNERS AND FRIENDS! The principles of sustainable development the public reporting over the past six and corporate social responsibility are years has enabled the intake of objective among the Company’s main priorities that feedback from the public. have been determining the activity of the Company since it was founded. In turn, 2012 was a special year for the Company, marking its 10th anniversary. In this regard, this Report presents a retrospective look at our work in the formation of the socially oriented company in recent years. Our achievements are the It is also important for us that the Federal Grid CompanyFederal Grid Company’s result of hard work from all sustainable development activities have the employees of Federal earned the approval of state authorities, partners and the professional community. Grid Company. It is them In 2012, the Ministry of Energy of the who are the pride and the Russian Federation marked Federal Grid Company’s contribution to the key value of the company! development of social policy in the power industry. The Company’s 2011 Social Responsibility and Sustainability Report was recognized as the best social report in the country, and in the framework of Awareness of the role of each employee in the Second St. Petersburg International the overall success changes approaches Legal Forum, Federal Grid Company was to personnel development – from human named one of the leaders in the resources management to human capital implementation of anti-corruption policy management. Therefore, Federal Grid among the power industry enterprises of Company places high emphasis on the Russian Federation. attracting young professionals and Carrying out its mission to ensure a interacting with universities, develops the reliable energy supply to the country, reserve personnel system, and actively Federal Grid Company is counting on the implements new housing programs. Our support of all interested parties - experience is invaluable, and the shareholders and investors, universities, Company will use it in making future research institutions, and equipment plans for the development of corporate manufacturers. social policy. Goals can only be achieved together! Kind regards, Oleg Budargin Chairman of the Management Board, Federal Grid Company 6 Federal Grid Company General Information Federal of Unified Grid Company Energy System FEDERAL GRID COMPANY GENERAL INFORMATION General Information Federal Grid Company of the Unified Energy System was established in 2002 in accordance with Russia’s power sector reform as an organization to manage the Unified National Electric Grid (UNEG) for its maintenance and development. The Company’s headquarters are for the reliable reliability of the supply of located at 117630, Moscow, Academic electricity supply in the territory of the Chelomeya Street, 5A. Russian Federation. In accordance with Federal Law № 35-FZ "On Electric Power Industry" The Company operates almost on dated 26.03.2003, Federal Grid Company is a natural monopoly that provides the entire territory of the Russian services for the electricity transmission Federation. The Company’s electric of electricity though the Unified National grid facilities are located in 75 Electric Grid (UNEG) and is responsible Russian regions. Company’s geographical scope MES NORTH-WEST MES CENTER MES WESTERN SIBERIA MES URALS MES VOLGA MES EAST MES SIBERIA MES SOUTH 8 The number of consumers with which Number of the Company's the Company signed agreements for electricity transmission through the Consumers UNEG has significantly increased during the 2008-2012 period. Growth in the number of consumers is due to: — Implementation of new technological 150 158 207 connections to the UNEG; 105 121 — Step-by-step termination of the "last 2008 2009 2010 2011 2012 mile" mechanism etc. The main consumers of technological — Construction and reconstruction of connection to the Company’s grids are: integrated real estate facilities; — Large-scale business (oil and — Distribution grid companies. steelmaking industries, manufacture of construction materials, etc.) Major Consumers of Technological Connection to Federal Grid Company's Grids % % 5% 54Large-scale business (oil and Distribution41 grid companies Other steelmaking industries, manufacture of construction materials, etc.) The structure of major consumers of — Retail suppliers (RS); the UNEG-based electricity —