2 3 10. BASIC RISK FACTORS ASSOCIATED WITH ACTIVITY Contents OF THE COMPANY ............................................... 63 11. INVESTMENT ACTIVITIES .................................... 67 1. ADDRESS OF THE MANAGEMENT OF THE COMPANY 12. HR AND SOCIAL POLICY. TO SHAREHOLDERS ............................................... 5 SOCIAL RESPONSIBILITY .................................... 79 1.1. Address of the Chairman of the Board 12.1. HR Strategy and Policy .............................. 80 of Directors ..................................................... 5 12.2. Organizational structure ............................. 80 1.2. Address of the General Director ......................... 7 12.3. Personnel development 2. CALENDAR OF EVENTS ........................................... 8 and training ............................................. 81 12.4. Personnel structure ................................... 83 3. BACKGROUND OF THE COMPANY ........................... 10 12.5. Labour turnover ........................................ 83 12.6. Recruiting ................................................ 87 12.7. Compensation and Benefits System ............. 88 4. FINANCIAL AND ECONOMIC PERFORMANCE OF THE COMPANY ................................................ 13 12.8. Social partnership and interaction with trade union organizations .................... 89 4.1. Analysis of financial performance dynamics in comparison with the previous period ............. 14 12.9. Social Policy ............................................. 89 4.2. Analysis of solvency and the level 12.10. Social responsibility ................................... 90 of credit risk of the company ........................... 15 4.3. Dividend History ............................................ 16 5. CHARACTERISTIC OF ACTIVITY OF MANAGEMENT 13. FINANCIAL STATEMENTS WITH AND CONTROL BODIES OF THE COMPANY ............... 19 APPENDICES .....................................................101 5.1. Principles of corporate governance ................... 20 13.1. Balance sheet ..........................................102 5.2. Disclosure of information ................................ 20 13.2. Income statement ....................................104 5.3. Corporate governance rating ........................... 21 13.3. Statement of changes in equity ..................106 5.4. Management bodies of the Company ................ 22 13.4. Statement of cash flow .............................108 13.5. Appendix to balance sheet ........................109 13.6. Audit Report . ...........................................114 6. SECURITIES OF THE COmpany .............................. 37 6.1. Data on the authorized capital stock 14. Assessment OF THE audit REPOrt BY of the Company ............................................. 38 THE audit COmmittee .....................................115 6.2. Market Capitalization ...................................... 40 6.3. Data on bonds of OJSC OGK-5 ......................... 42 6.4. Circulation of depository receipts of OJSC OGK-5 .............................................. 43 15. REPORT OF INTERNAL AUDIT COMMISSION ..........117 7. ParticipatiON OF THE COmpany IN OTHER 16. INFORMATION ON OBSERVANCE BY THE COMPANY ORGANIZatiONS ................................................. 45 OF THE CODE OF CORPORATE CONDUCT ..............123 8. POSITION OF OJSC OGK-5 IN THE INDUSTRY .......... 49 17. INFORMATION ABOUT MAJOR TRANSACTIONS AND TRANSACTIONS WITH RELATED PARTIES 8.1. Competition .................................................. 50 EXECUTED BY THE COMPANY IN 2008 ..................135 8.2. Main operating indicators ................................ 53 18. THE COMPOSITION OF GENERATING Capacities ...139 8.3. Sales ........................................................... 55 19. GLOssary .......................................................143 9. STRATEGY AND PRIORITY ACTIVITIES OF THE COMPANY ................................................ 59 20. CONTACT INFORMATION ....................................147 OGK-5 2008 ANNUAL REPORT 4 5 1. Address of the management of the company to shareholders 1.1. Address of the chairman of the board of Directors Dear shareholders, I present to your attention the annual report of The efficiency of the corporate governance system OJSC OGK-5. The year of 2008 has become for the of OJSC OGK-5 based upon principles of accountability, Company the year of integration with the world energy transparency and responsibility to shareholders and leader — the company Enel. investors has been improved. Enel is the first foreign company which has come to the Implementation of investment projects is one of the Russian power market. We have become pioneers, we most priority directions designated by the Board of are under views of our colleagues and partners all over Directors. During the accounting year the management the world and we can not afford to cede leadership to of the company has been successfully implementing anybody. Leaders get the best and OJSC OGK-5 is a the investment program in practice for purposes of en- bright example of that. suring reliability and efficiency of operation of production branches and implementation of projects for construc- In 2008 eight of eleven places in the Board of Directors tion of new generation units. of the Company were taken by representatives of Enel and independent directors. Our participation in manage- Construction and modernization of capacity units have ment of the company is a new page in the history of been carried out in accordance with the terms estab- development of OJSC OGK-5. lished by the Development Strategy. The first stages have been provided with financing. We have brought to the company advanced corporate governance practices, technological innovations, and Over decades Enel made emphasis on efficient manage- a huge experience of work in a free power market. ment, safety of its employees, energy saving, introduc- No doubt, this will positively influence competitiveness tion of new technologies and, certainly, environmental and growth of the Company value. protection. In Russia our Company realizes these prin- ciples not less efficiently than in Italy or any other part Over the accounting period we have managed to do of the globe. a lot: we have built a vertically integrated structure, provided ourselves with supplies of gas, started up two We can state definitely that we fulfill the obligations as- projects of construction of the power generation units in sumed by entrance to the Russian energy sector and we Ural and Caucasus, and commenced the stage of mod- believe that the government will fulfill its obligations. ernization of the Reftinskaya GRES. I can assure you that the Board of Directors of The team of managers headed by Anatoly Yakovlevich OJSC OGK-5 will continue doing everything possible in Kopsov which which is the strongest one in the power order to maintain the maximum open and confident industry has come to management of OJSC OGK-5. relations established with the investment community. The Chairman of the Board of Directors OJSC “OGK-5” Dominique Fache OGK-5 2008 ANNUAL REPORT 6 7 1.2. Address of the General Director Dear Shareholders, In 2008 OJSC OGK-5 has been successfully working un- tion of the new system for dry ash and slag disposal will der the management of one of the largest global energy permit to optimize storage of wastes from combustion companies — Enel. Following the results of the year of solid fuel as well as to arrange processing thereof our company has demonstrated high production and which will favorably influence the ecology of the region. financial-economic indicators, stable and partner rela- tions with consumers of heat and electrical power, has Taking into consideration the given rates of design, been actively developing business, modernized and built construction and supply of equipment we state surely up-to-date energy efficient generating facilities. the term of introduction of the first steam and gas power generation units at the power plants of OJSC OGK-5 Production results of OJSC OGK-5 in 2008, notwith- as well as the system for dry ash and slag disposal — standing the deteriorating market environment and the 4th quarter of 2010. reduction of demand for electrical energy during the second half-year, have demonstrated a steady growth For the purpose of efficient responding to challenges in comparison with 2007: Power generation by power conditioned by the new macroeconomic situation the plants of OJSC OGK-5 reached 43,005 GWh and ex- Anti-Crisis Executive Management Group was formed and ceeded the level of 2007 by 12.1%. The equipment proceeded to operation in 2008 at OJSC OGK-5. The pur- availability factor has been increased up to 81.2%. The poses of the group’s work are analysis and optimization of utilization factor of installed capacity of power plants of relations with consumers of power and heat, fuel suppli- OJSC OGK-5 has increased up to 56% (compared with ers, management of costs as well as protection of eco- 51% in 2007). Heat output in 2008 exceeded the level nomic interests of the Company by legal means. of 2007 by 0.7% and amounted to 6,819 thousand Gcal. Net power output in 2008 amounted to 40,729 GWh In 2008 OJSC OGK-5 became one of the first Russian and rose by 11.6% in comparison with 2007. EBITDA energy companies adopting the Code of Ethics. The prin- amounted to 5,304 million rubles. ciples stated in the Code confirm our aspiration to develop honest, responsible and partner relations both A remarkable