JSC Inter RAO 2013 Annual Report Chairman of the Management Board Boris Yu. Kovalchuk Approved by The Annual General Meeting of Shareholders on May 25, 2014 (Minutes dated May 25, 2014 No. 14) Chief Accountant Alexandra O. Chesnokova TABLE OF CONTENTS 1. ABOUT THE REPORT _________________________________________________________________________________________________________3 7. THE COMPANY IN THE CAPITAL MARKETS _____________________________________________________________________131 2. GENERAL INFORMATION ON INTER RAO GROUP _______________________________________________________________5 8. CORPORATE SOCIAL RESPONSIBILITY __________________________________________________________________________ 137 2.1. About Inter RAO Group _______________________________________________________________________________________________5 8.1. Approach to Sustainability _______________________________________________________________________________________ 137 2.2. The Group’s key indicators ___________________________________________________________________________________________9 8.2. Human Resources Management _______________________________________________________________________________ 138 2.3. Key events_______________________________________________________________________________________________________________ 10 8.3. Occupational Health and Safety _______________________________________________________________________________ 149 8.4. Contribution to the development of the regions of the Group’s operation _______________________ 154 3. STATEMENT FOR JSC INTER RAO SHAREHOLDERS AND OTHER STAKEHOLDERS ____________ 15 8.5. Environmental Policy _______________________________________________________________________________________________ 163 8.6. Asset security _________________________________________________________________________________________________________171 4. CORPORATE DEVELOPMENT STRATEGY __________________________________________________________________________ 19 4.1. Strategy of the Company ___________________________________________________________________________________________ 19 9. RISK MANAGEMENT _____________________________________________________________________________________________________ 175 4.2. Business model ________________________________________________________________________________________________________ 23 4.3. Investment and innovation _________________________________________________________________________________________ 24 10. PROCUREMENT_____________________________________________________________________________________________________________ 183 5. OPERATING ACTIVITY OF INTER RAO GROUP __________________________________________________________________35 11. FINANCIAL RESULTS _____________________________________________________________________________________________________ 189 5.1. Segment information _________________________________________________________________________________________________ 35 11.1. Total debt load _______________________________________________________________________________________________________ 189 5.2. Group performance results_________________________________________________________________________________________38 11.2. Cash flows _____________________________________________________________________________________________________________ 190 5.3. Generation in the Russian Federation __________________________________________________________________________40 11.3. Key indicators of financial and economic condition _______________________________________________________191 5.4. Supply in the Russian Federation________________________________________________________________________________48 5.5. Trading in the Russian Federation and Europe ______________________________________________________________ 55 12. SUPPLEMENTS _____________________________________________________________________________________________________________ 193 5.6. Engineering in the Russian Federation _________________________________________________________________________ 62 12.1. Statement of the Revision Commission ______________________________________________________________________ 193 5.7. Georgia __________________________________________________________________________________________________________________68 12.2. IFRS reports __________________________________________________________________________________________________________ 194 5.8. Armenia _________________________________________________________________________________________________________________ 74 12.3. RAS statements _____________________________________________________________________________________________________200 5.9. Moldova __________________________________________________________________________________________________________________ 79 12.4. GRI Content Index __________________________________________________________________________________________________ 205 5.10. Turkey _____________________________________________________________________________________________________________________ 82 12.5. Information on Compliance with Corporate Governance Code ______________________________________ 226 5.11. Kazakhstan _____________________________________________________________________________________________________________84 12.6. Major Transactions and Related Party Transactions ___________________________________________________ 226 12.7. Participation in other companies _______________________________________________________________________________ 226 6. CORPORATE GOVERNANCE _____________________________________________________________________________________________87 12.8. In-house regulations valid in the Company _________________________________________________________________241 6.1. Corporate Governance System and Principles ______________________________________________________________ 87 12.9. Information on fulfilling the orders of the President and the Russian Federation 6.2. JSC Inter RAO Governance Bodies _____________________________________________________________________________89 aimed at improving the economic activities of JSC Inter RAO _______________________________________ 244 6.3. General Meeting of Shareholders ________________________________________________________________________________89 12.10. Government support _______________________________________________________________________________________________ 244 6.4. Board of Directors_____________________________________________________________________________________________________ 93 12.11. Information on material litigation ______________________________________________________________________________ 246 6.5. Management Board _________________________________________________________________________________________________113 12.12. Glossary ________________________________________________________________________________________________________________ 247 6.6. Corporate Control ___________________________________________________________________________________________________ 123 6.7. Information Disclosure and External Communications__________________________________________________ 126 13. CONTACT DETAILS ________________________________________________________________________________________________________249 1. ABOUT THE REPORT 1. ABOUT THE REPORT ABOUT REPORT THE The JSC Inter RAO 2013 Annual Report differs from the Group’s The Group followed the GRI Guidelines' principles to define the previous reports. Prior to 2013, Inter RAO Group published its annual Report content: materiality, stakeholder inclusiveness, sustainability BOUNDARY OF THE REPORT reports separately from non-financial reports (reports on sustainable context, and completeness. Disclosures were selected on the basis development and environmental responsibility) each year. Based of the following methods: on the results of the analysis of stakeholders’ opinions, as well as The basis for inclusion of subsidiaries of JSC Inter RAO in the Report international corporate reporting development trends, a decision ► analysis of legislation of the Russian Federation; rests on the principles for the inclusion of companies in consolidated was made to prepare an annual report of Inter RAO Group for 2013 reports compiled per IFRS 10 Consolidated financial reports, unless (hereinafter the Report) that includes a comprehensive description of ► review of in-house regulations; specified otherwise. financial and non-financial results for the reporting period. ► expert assessment of materiality; When the information relating to HR management, occupational The main objective of the Report is to inform the stakeholders health and safety, and environmental management is disclosed, the about all material aspects of the activities of Inter RAO Group ► review of stakeholder engagement in 2013; Report boundaries may not correspond to those provided by IFRS, and properly disclose information in accordance with the following and may contain information relating to significant subsidiaries of recommendations and regulatory requirements: ► analysis of the media; JSC Inter RAO. ► “On improvement of the procedure for management of open ► analysis of reports of peer companies; joint-stock companies with shares in federal ownership and federal state unitary enterprises”, Decree of the Russian ► analysis of the results of the public assurance of the FEEDBACK Government dated December 31, 2010 No. 1214; Sustainability and Environmental Responsibility Report for