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Annual Report 2015
RU

When developing all elements of the corporate governance system, adjusting them in response to new requirements and challenges of the external environment, we are constantly guided by the key principles of corporate governance set out in the Federal Grid’s Corporate Governance Code.

Maria Tikhonova

Deputy Chairperson, member of the Management Board of Federal Grid Company

High Standards of Doing Business

The Management Board and the Chairman of the Management Board – collective and sole executive bodies – are responsible for the day-to-day operations of the Company, ensure efficient implementation of the Company’s objectives and the delivery of its strategy.

Key matters reserved for the Management Board
  • Developing and submitting for the Board’s consideration the Company’s business priorities and long-term plans for their implementation
  • Preparing reports on the implementation of resolutions of the General Meeting of Shareholders and the Board of Directors of Federal Grid Company
  • Exercising of powers of General Meeting of Shareholders of wholly-owned subsidiaries of the Company
  • Submitting for the Board’s consideration business and financial performance reports of the Company’s subsidiaries and associates
  • Addressing other issues of managing the day-to-day operations of Federal Grid Company in accordance with its Articles of Association, resolutions of the General Meeting of Shareholders and the Board of Directors
Key matters reserved for the Chairman of the Management Board
  • All matters of managing the day-to-day operations of the Company, except of those reserved for the General Meeting of Shareholders and the Board of Directors

Interaction between the Board of Directors and Executive Bodies

In accordance with the Company’s Articles of Association and internal documents, the Chairman and members of the Management Board regularly report to the Board on their performance, including:

  • On the implementation of the Long-Term Development Programme and Investment Programme
  • On the implementation of the Company’s business plan and achievement of the KPI targets
  • O n the establishment and operation of the internal control and risk management system
  • On the implementation of resolutions of the General Meeting of Shareholders and the Board of Directors

Dealing with Conflicts of Interest of Executives

The Company has developed and now implements a comprehensive system for dealing with conflicts of interest of members of the executive bodies that enables us to prevent possible conflict situations and minimise an adverse effect for the Company’s interests.

A ‘conflict of interest’ of Company employees, including the executives, is defined by the Company’s internal documents, and the following obligations of the latter are provided:

  • To declare his/her affiliation
  • To report a conflict of interest or likelihood of conflict and its cause, including interests in transactions
  • To refrain from actions that will or may lead to a conflict between his/her interests and the Company’s interests
  • To refrain from discussing and voting on matters in which he/she has a conflict of interest
  • To report on his/her holding of the Company securities and transactions therewith

All external appointments of the Management Board members are subject to the consent of the Company’s Board of Directors

Membership of the Management Board
as of 31 December 2015

Changes to the membership of the Management Board in 2015
On 25 August 2015, the Board of Directors decided to terminate the authorities of the Management Board member Andrey Kazachenkov (Minutes No. 281 dated 28 August 2015).
A new member was elected instead of him – Maria Pichugina.

ANDREY MUROV


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Chairman of the
Management Board,
member of the Federal
Grid’s Board of Directors

Management Board member since 2012

Areas of Responsibility:

  • Managing the day-to-day operations of the Company, organising the work of the Management Board

Born in 1970 In 1993, graduated from St Petersburg State University with a degree in Jurisprudence; in 1998, took a special retraining course in Financial Management at the Inter-disciplinary Institute of Advanced Training and Retraining for Executives. In 2009, graduated from the State University of Civil Aviation with a degree in Freight Regulation and Air Transport Management. PhD in Economics

Experience:

2007–2012 – General Director of JSC Pulkovo Airport
2012–2013 – Deputy General Director, Acting General Director, Executive Director, member of the Management Board of JSC Holding of Inter-regional Distribution Grid Companies (since 04.04. 2013 – JSC ROSSETI)
since 2013 – Chairman of the Management Board of Federal Grid Company

External appointments:

Member of the Board of Directors of PJSC ROSSETI, PJSC Inter RAO, JSC SO UES, Chairman of Non- Profit Partnership “Russian National Committee of International Council on Large Electric Systems (RNC CIGRE)

Holds no shares in the Company

VALERY GONCHAROV


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First Deputy Chairman of
the Management Board
Member of the Investment
Committee of the BoD1

Management Board member since 2013

Areas of Responsibility:

  • Development and customer relations
  • Information technology and special projects
  • Environment and developing equipment manufacturing techniques
  • Innovations and R&D management
  • Investment planning, design and procurement
  • Strategic development
Born in 1963
In 1987, graduated from Leningrad Shipbuilding Institute. PhD in Economics.

Experience:

2006–2012 – Deputy Director for Economics and Finance of JSC Roszheldorproject
2012–2013 – Deputy Chairman of the Management Board of Federal Grid Company, Deputy Executive Director for Investments of JSC Holding of Interregional Distribution Grid Companies
since 2013 – First Deputy Chairman of the Management Board of Federal Grid Company

Holds no shares in the Company

ALEXANDER VASILIEV


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Deputy Chairman of the Management Board

Management Board member since 2014

Areas of Responsibility:

  • Security issues
Born in 1958
In 1982, graduated from Leningrad Mechanical Institute with a degree in Mechanical Engineering; in 2003, graduated from St Petersburg State University of Economics and Finance with a degree in Economics; in 2007, graduated from St Petersburg Institute of Foreign Economic Relations, Economics and Law with a degree in Jurisprudence

Experience:

2003–2010 – Head of Moscow Region Department of the RF State Committee for Control over Drug and Psychotropic Trafficking
2010–2011 – Deputy Director, Director of Security Department of JSC MMC Norilsk Nickel
2011–2014 – Deputy Head of the Federal Customs Service
since 2014 – Deputy Chairman of the Management Board of Federal Grid Company

Holds no shares in the Company

VLADIMIR DIKOY


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Deputy Chairman of the Management Board – Chief Engineer

Management Board member since 2013

Areas of Responsibility:

  • Maintenance and Repairs
Born in 1954 In 1981, graduated from Moscow Power Engineering Institute with a degree in Electric Power Supply of Industrial Enterprises, Cities and Agriculture. PhD in Technical Sciences.

Experience:

2008–2009 – Deputy Director General for Production of JSC Glavsetservice of UNEG
2010–2013 – Deputy Chief Engineer of Federal Grid Company
since 2013 – Deputy Chairman of the Management Board – Chief Engineer of Federal Grid Company

External appointments:

Chairman of the Board of Directors of JSC Mobile Gas Turbine Electric Power Plants and JSC Dalenergosetproekt, member of the Board of Directors of JSC Elektrosetservis of UNEG and JSC Tomsk Trunk Grids

Share in the Company’s ordinary stock: 0.0000219%

ALEXANDER ZARAGATSKY


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Deputy Chairman of the Management Board

Management Board member since 2014

Areas of Responsibility:

  • Legal, property and general administrative matters
Born in 1976 In 2001, graduated from St Petersburg Law Institute of the General Prosecutor Office with a degree in Jurisprudence; in 2002, graduated from St Petersburg Institute for Management and Economics with a degree in State and Municipal Management. PhD in Economics

Experience:

2007–2013 – Chief of Staff of the Chairman of St Petersburg Legislative Assembly
since 2013 – Deputy Chairman of the Management Board of Federal Grid Company

Holds no shares in the Company

MARIA PICHUGINA


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Deputy Chairperson of the
Management Board

Management Board member since 2015

Areas of Responsibility:

  • Economy, finance and subsidiaries Maintenance and Repairs
Born in 1980
In 2003, graduated from the State University – Higher School of Economics with a degree in Finance and Credit

Experience:

2008–2012 – held senior positions in commercial companies
2013 – Deputy Director of the Department for Development of Electric Energy Industry of the Russian Ministry of Energy
since the end of 2013 – Director for Economy and Finance of Federal Grid Company

External appointments:

member of the Board of Directors of JSC R&D Centre of FGC UES, Index Energetiki- FGC UES LLC, JSC Nurenergo, member of the Supervisory Board of JSC IPS SakRusenergo

Holds no shares in the Company

NIKOLAY POZDNYAKOV


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Deputy Chairman of the Management Board

Management Board member since 2014

Areas of Responsibility:

  • Information technology and special projects
Born in 1979 Graduated from Moscow State University with a degree in Physics and Higher School of Economics with a degree in Economics

Experience:

2009–2013 – Head of Investment Project Monitoring, Head of Investment Planning and Reporting Department of Federal Grid Company
2013–2014 – Deputy General Director for Investments of JSC ROSSETI
since 2014 – Deputy Chairman of the Management Board of Federal Grid Company

External appointments:

General Director of JSC Centre for Engineering and Construction Management of UES, member of the Board of Directors of JSC Energotekhcomplect

Share in the Company’s ordinary stock: 0.0000938%

MARIA TIKHONOVA


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Deputy Chairperson of the Management Board

Management Board member since 2013

Areas of Responsibility:

  • Corporate governance
Born in 1980 Graduated from Volga-Vyatka Academy of Public Service with a degree in Public and Municipal Administration, Higher School of Economics with MBA Finance. PhD in Economics.

Experience:

2008–2012 – Head of Corporate Management and Economic Analysis Unit of the Department, Director of the Department for Economic Regulation and Property Relations in the Fuel and Energy Complex of the Russian Ministry of Energy since 2013 – Deputy Chairman of the Management Board of Federal Grid Company

Holds no shares in the Company

DMITRY SHISHKIN


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Internal Control Director

Management Board member since 2013

Management Board member since 2013

  • Internal Control and Risk Management
  • Operational controlling and compliance procedures
Born in 1967.
In 1992, graduated from the Higher School of the KGB of the USSR named after Dzerzhinsky with a degree in Jurisprudence

Experience:

2009–2012 – Deputy Director for Security of Gazprom EP International Services B.V., Moscow
2013 – Security Director of JSC Moscow Unified Electric Grid Company
since 2013 – Internal Control Director of Federal Grid Company

External appointments:

member of the Board of Directors of JSC Energostroysnabkomplekt and JSC Centre for Engineering and Construction Management of UES, Chairman of the Audit Commission of JSC Moscow Communication Centre of Energy Systems, member of the Audit Commission of JSC R&D Centre of FGC UES, JSC Mobile Gas Turbine Electric Power Plants, PJSC Inter RAO

Holds no shares in the Company

1 Decision of the Board of Directors dated 20 August 2015 (Minutes No. 280 dated 24 August 2015).

Activities of the Management Board in 2015

As part of its work in the reporting year, the Management Board continued to implement the approved Programme of activities (‘roadmap’) to ensure financial sustainability and improve the economic efficiency of the Company for 2014– 2015.

78
meetings
788
matters considered, including
647
recommendations to the Board of Directors

Other matters, which received particular focus during the year, were the following:

  • Adjustments to a General scheme for building and developing the Energy System’s Unified Process Communications of Federal Grid Company aimed at determining the main directions for the development of telecommunication infrastructure necessary for the operation of dispatch and process control and corporate governance of the Company
  • Approval of a Concept for disposal of subsidiaries and other entities in which Federal Grid participates that provides for spinning off the strategic assets and financial responsibility centres and determines the primary areas for development of key subsidiaries
  • Review of projects of the Federal Grid’s investment programme for 2016–2020, as well as draft adjustments to the investment programme for 2015
  • Monitoring of the implementation of the technical maintenance and repair programme, as well as the programme for managing the Company’s non-core assets
  • Making decisions on charitable assistance and consideration of matters of social assistance to Federal Grid’s employees

Remuneration of the Management Board

In accordance with the Regulations on Terms and Conditions of Employment Agreements and Determination of Remuneration and Compensation for Senior Managers of Federal Grid Company approved by the Board of Directors on 17 June 2010, remuneration for senior managers is determined by their employment agreements. Remuneration includes a fixed component (salary) and a variable component (bonuses). Bonuses are tied to key performance indicators (KPIs) of senior managers.

In 2015, the Company applied a system of quarterly and annual bonuses based on the Methodology for Calculation and Evaluation of Key Performance Indicators for Federal Grid’s Senior Management approved by the Board of Directors (Minutes No. 243 dated 22 December 2015).

The major changes to the 2015 Methodology compared with the same methodology for the prior year were as follows:

  • An indicator Cost Reduction for the Acquisition of Goods (Work, Services) was excluded from the list of KPIs due to its expiration (in accordance with the assignment of the RF President No. Pr-846 dated 02 April 2011, the above indicator was measured over three three years – from 2012 through 2014
  • An indicator Total Shareholder Return (TSR) has been changed from indicative to target (included in the senior management bonus plan)
  • Target values of some indicators were updated in accordance with the Company’s business plan: Reduction in Operating Expenses (Costs), Reduction in Investment Costs, Electricity Losses

In case any of the KPIs is not met, then the bonuses of all members of the Management Board, including the Chairman, are decreased by a certain percent depending on the indicator significance level. The most significant quarterly KPIs are No increase in major accidents (40% weighting) and Preventing Increase in the Number of Injured in Accidents (40% weighting). The most significant annual KPIs, with a 15% weighting each, are ROIC, Achieving Reliability Level of Services, and Meeting Deadlines for Technological Connection.

All KPIs that are applied to motivate senior managers are included in the Federal Grid’s Long-Term Development Programme approved by the Board of Directors (Minutes No. 243 dated 22 December 2014).

 

Strategic Objective KPI 2014 2015 2016
Actual values Target values Actual valuesKPI Evaluation (met/ not met)Target values
Reliability of energy supply to customers No increase in major accidents 0* no increase no increase met no increase
Preventing Increase in the Number of Injured in Accidents no increase no increase no increase metno increase
Achieving reliability level of services 1** 1** 0.3 met≤ 1
Effective management Reduction in operating expenses (costs) 21.7% at least 14.2% 24.2% met ≥ 10.5%
Reduction in investment costs 17.03% at least 15% 18.3% met≥ 23%
Electricity losses 4.13% not higher than 4.27% 4.09% met≤ 4.13%
Workforce productivity - at least 17% 21.5% met≥ 3.9 RUB thousand/ man hour
Development of UNEG infrastructure and implementation of projects of national significance Meeting schedules for commissioning 106.2% at least 95% 115.5% met ≥ 95%
Maintenance of financial stability ROIC (Return on Invested Capital) 1.86 at least 0.9 1.8 met ≥ 0.9
Financial leverage ratio 0.44 not higher than 1,5*** 0.43 met-
TSR (Total Shareholder Return) -50.5% higher than the average value for the past three years before the reporting year by the amount set out by the Board of Directors (-46.3%) 28.0% met> than the value of change in the MOEX RCI (Regulated Companies Index) by a positive value set by the Board of Directors
Effective engagement with customers Meeting deadlines for technological connection 0.72 not higher than 1.1 1.0236 met ≤ 1.1

Remuneration of members of the Management Board in 2015, RUB thousand

  All members including the Chairman*
Remuneration for contributions to the Management Board’s operations 0
Salary 110,601
Bonuses 194,291
Commission 0
Benefits 0
Reimbursement of expenses 0
Other types of remuneration 28,770
Total                            333,662

Remuneration of the Chairman of the Management Board in 2015, RUB thousand

  Chairman of the Management Board
Remuneration for contributions to the Management Board’s operations 0
Salary 29,143
Bonuses 51,693
Commission 0
Benefits 0
Reimbursement of expenses 0
Other types of remuneration 18
Total 80,854

During the reporting year, the Company did not provide any loans (credits) to members of the Management Board.

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