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Annual Report 2015

Forward Movement towards the Future

Dear Shareholders,

Federal Grid Company demonstrates consistent improvement of its financial and operating performance for the third year in succession: accident rate is declining; investment programme has been implemented on time; the Company becomes more efficient and, as a result, more sustainable in financial terms. I would like to say that several targets of the Development Strategy for the Russian Electric Grid Complex were met ahead of schedule, particularly in terms of cost-cutting.

Much progress has been achieved in the development of the Unified National Electric Grid. The capacity delivery from the third power generating unit of Rostov Nuclear Power Plant to Kuban power system was completed, and capacity was delivered from four hydropower plants in Chelyabinsk, Sverdlovsk and Vologda Oblasts and Krasnoyarsk Krai. Federal Grid Company’s main customers include the largest mining and manufacturing corporations. The Company contributes to the building of power supply infrastructure for Vankor field in Yamal-Nenets Autonomous Okrug, the Caspian Pipeline System,

Long-Term Development Programme of Federal Grid Company is aimed at maintaining and developing the Unified National Electric Grid – a backbone electric grid infrastructure for ensuring economic growth in Russia and uninterrupted energy supply for consumers throughout the country

Vostochny Spaceport, electricity supply to Baikal-Amur and Transsiberian railways, and in many other projects that we can call unique without exaggeration. The commissioning of power transit via Kurgan- Vityaz-Voskhod that connects UES Siberia and UES Ural deserves particular attention. It was built on instructions from the Russian Government in order to strengthen the integrity of the national energy system.

Given the volatile market situation and the current trends and challenges, Federal Grid Company benefited from the Long-Term Development Programme that had been drafted in a timely way and approved by the Government of the Russian Federation in 2014. The programme helped to identify possible impacts of macroeconomic changes on the Company’s operations in advance, and to adjust the key operational vectors.

I would particularly like to highlight the results that we achieved in the first year of our import substitution programme: the share of procurements from domestic producers increased by almost twofold and reached 75%. The Company assesses localisation of production of its key suppliers by using its own methodology.

As for corporate governance, Federal Grid Company made major revisions of its Articles of Association, Corporate Governance Code and key internal documents that regulate governance bodies. This revision was made in accordance with recommendations outlined in the Russian Corporate Governance Code and Listing Rules of the Moscow Stock Exchange. The position of Corporate Secretary was established to ensure effective engagement of all stakeholders. Annual performance evaluation of the Board of Directors is made by an external independent consultant. The new tools should improve performance and strengthen customer and investor confidence in the Company.

Understanding the importance of improving corporate governance in order to make the Company more effective and attractive for investors, we make sure that the best standards are implemented at all levels of management in the Company. Corporate governance in Federal Grid Company is based on the principles of transparency, accountability, fairness and responsibility

Close co-operation of the Board members and the Company’s management helped to create a truly synergetic effect. By coordinating our perspectives and combining diverse skills and expertise we managed to improve the results for shareholders, the State, counterparties and the Company itself.

I strongly believe that a balance between ensuring the reliable operation of UNEG, economic and management efficiency will help Federal Grid Company to demonstrate positive momentum and remain a significant infrastructure company in the national economy.

Vyacheslav Kravchenko
Chairman of the Board of Directors

My Annual Report

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