Annnual report JSC IDGC of Center and Volga Region 2011

ANNUAL REPORT

INNOVATIONS IN OPERATION

JSC IDGC OF CENTER AND VOLGA REGION

2011

Preliminary approvedby the decision of the Board of Directors

of JSC IDGC of Center and Volga Region

Minutes № 101 as of May 10, 2012

General Directorof JSC IDGC of Center and Volga Region

E.V. Ushakov

Chief accountant – The Head of Accountingand Tax Reporting Departmentof JSC IDGC of Center and Volga Region

I.Yu. Rodionova

JSC IDGC of Center and Volga Region management is performed in conformity

with the requirements of ISO 9001, OHSAS 18001 and ISO 14001.

ANNUAL REPORT OF JOINT STOCK COMPANY

INTERREGIONAL DISTRIBUTING GRID COMPANY OF CENTER AND VOLGA REGION

FOR 2011

NIZHNY NOVGOROD, 2012

2 3JSC IDGC OF CENTER AND VOLGA REGION ANNUAL REPORT 2011

THE ELECTRONIC VER SION

Liability Limitation

Information on the Company

Address to Shareholders

Map of New Innovative Capacity, 2011

4

5

10

14

History of Industry and the Company

Position in the Industry and Operations

Company Structure

Strategic Priorities and Development Prospects

Board of Directors Report on Priority Areas

18

20

24

32

36

BUSINESS OVERVIEW 171

Accounting Policy

Analysis of Financial Performance

Distribution of Profit

Credit Policy

Tariff Policy

Non-Current Assets

40

42

47

48

51

61

392 ANALYSIS OF THE FINANCIAL CONDITION AND PERFORMANCE RESULTS

Technical Policy

Development and Innovations

Repair and Operational Activities

Perspective Development

Operative and Technological Process Control

Development of IT Infrastructure and Information Technologies

98

100

106

110

117

122

TECHNICAL POLICY AND INNOVATIVE DEVELOPMENT

974

General Information

Key Performance Indicators

Energy Transmission

Technological Connection to Grids

Reliability Provision

Energy Saving and Improvement of Energy Efficiency

Power Consumption for Production and Economic Needs in 2011

Customer Policy

Quality Policy

68

72

72

78

85

86

88

90

95

BUSINESS ACTIVITIES REVIEW 673

CONTENTS

Audit Commission

Auditor

198

201

AUDIT COMMISSION AND THE AUDITOR 1979

Internal Control System

Risk Management

Risk overview

Human Resources Policy

Social Policy and Charity

Labor Protection

Prevention and Liquidation of Emergency Situations at Distribution Power Grid Complex Facilities

Environmental Protection

Taxation

Non-Financial Reporting

206

210

210

220

230

235

240

243

248

249

INTERNAL CONTROL AND RISK MANAGEMENT SYSTEM

HUMAN RESOURCES POLICY AND SOCIAL RESPONSIBILITY

PUBLIC RELATIONS, GOVERNMENT AUTHORITIES, INTERNATIONAL COOPERATION, CONGRESS AND EXHIBITION ACTIVITIES

205

219

251

10

11

12

GLOSSARY 259

REFERENCE INFORMATION 264

Parameters of Investment Activities

Direction and Structure of Capital Investments

Long-Term Investment Program

128

130

145

INVESTMENT ACTIVITIES 1275

Structure and Principles of Corporate Governance

Management Bodies

General Shareholder Meeting

Board of Directors

Remuneration to the Members of the Board of Directors

Committees of the Board of Directors

Management Board

Remuneration to the Members of the Management Board

General Director

Remuneration to the General Director

Information on the Transactions Made by the Company in 2011 which are Recognized by the Legislation of the Russian Federation as Transactions in which there is Interest, and Major Transactions

Participation in Non-Commercial Organizations

170

174

174

176

182

184

186

191

193

194

195

195

CORPORATE GOVERNANCE 1698

Stakeholders

Interaction with Shareholders and Investors

Disclosure of Information

162

166

166

INTERACTION WITH STAKEHOLDERS 1617

Securities

Shareholders

Shares of the Company on the Stock Market

Dividend Policy

Dividend Payout

149

151

152

158

159

SHAREHOLDERS’ CAPITAL 1476

SUPPLEMENTS

1. Conclusion of the Internal Audit Commission

2. RAS Accounting (Financial) Reporting for 2011, including Independent Auditor’s Opinion

3. IFRS Consolidated Financial Statements for 2011, including Independent Auditor’s Report

4. Detailed data on members of the Board of Directors, Committees of the Board of Directors, Management Board and Audit Commission

5. Information on the Company’s Compliance with the Corporate Conduct Code

6. Interested Party Transactions Completed in 2011

7. Information on Participation in Commercial Organizations with the share of less than 50%

8. Information on the Structure of the Property and its Changes

9. Information on Land Plots

10. Key Rights of the Shareholders

Supplements are placed at USB data stick, attached to the Annual Report.

QR-CODE

QR-code (from English Quick Response) – electronic

«barcode».

Digital version of Annual Report or its separate sec-

tion is available after scanning of QR-code by mo-

bile phone using programs QR Reader for iPhone, QR

Droid (for ANDROID), QuickMark (for Windows Mo-

bile) , KAYWA (for any telephone) and others.


The present Annual Report of JSC IDGC of Center and

Volga Region for 2011 (hereinafter referred to as the An-

nual Report) has been prepared on the basis of information

available to the Company at the moment of preparation of

the Annual Report.

The Annual Report contains information on the results

of 2011, as well as forward-looking statements and

declarations concerning intentions, opinions and cur-

rent expectations of the Company in regard of the re-

sults of the Company activities, its financial condition,

liquidity, growth prospects, strategy and the develop-

ment of the industry the Company is engaged in. Due

to their nature, such forward-looking statements are

characterized by the presence of risks and uncertainty

factors, as far as they pertain to the events and depend

on the circumstances which are not necessarily to hap-

pen in the future.

The words “intends”, “strives”, “expects”, “assesses”,

“plans”, “considers”, “assumes”, “can”, “should”, “would”,

“will continue” and the like are used, as a rule, to indicate

the forward-looking nature of statements and may sug-

gest the risk of non-occurrence of events or actions speci-

fied, depending on a variety of factors.

The Company warns that the forward-looking statements

do not guarantee future results. Actual results of the ac-

tivity of the Company, its financial condition and liquid-

ity, as well as the development of the industry of which

the Company is a member, may differ considerably from

those presented in the forward-looking statements herein.

Besides, even if said values correspond to the pro-forma

statements contained in this Annual Report, they are not

indicative of similar results and events in the future.

The Company does not give any direct or supposed as-

surances and guarantees and does not bear any respon-

sibility in case of losses which can be incurred by natural

persons or legal entities as a result of using the forward-

looking statements of this Annual Report by any reason,

directly or indirectly. The specified persons should not

rely on the forward-looking statements, containing in the

Annual report, as they are not the unique possible suc-

cession of events.

Except in cases stipulated by the law, the Company shall

not be obliged to re-consider or confirm its expectations

or assessments, or to publish updates and changes of the

forward-looking statements contained in the Annual Re-

port in connection with subsequent events or the receipt

of new data.

LIABILITY LIMITATION COMPANY OVERVIEW

Joint Stock Company Interregional Distribution Grid Com-

pany of Center and Volga Region (JSC IDGC of Center and

Volga Region) is a subsidiary company of JSC IDGC Holding,

the largest Russian energy company. JSC IDGC of Center

and Volga Region is the key supplier of power distribu-

tion and technological connection services in nine regions

of the Russian Federation – Vladimir, Ivanovo, Kaluga,

Kirov, Nizhny Novgorod, Ryazan, Tula Regions, Mariy El

and Udmurtia Republics.

JSC IDGC of Center and Volga Region includes branch-

es – Vladimirenergo, Ivenergo, Kalugaenergo, Kiroven-

ergo, Marienergo, Nizhnovenergo, Ryazanenergo, Tule-

nergo, and Udmurtenergo. They supply power to over

13 million residents of the Central and Volga Federal

Districts, covering over 408 thousand sq. km.

The company operates:

• 1,548 high-voltage feeding centers 35/110/220 kV

with the total capacity of 29,354 MVA

• 44,205 km of power transmission lines 35 - 220 kV

• 26.63 km of high-voltage of cable lines with the volt-

age of 35 - 110 kV

• 263,391 km of distribution power grids

• 59,053 of transformer substations 6-35/0.4 kV

Consumers of the Company are: over 300 thousand enti-

ties in oil recovery, engineering, metal, woodworking and

chemical industries, railway transport, agriculture, con-

struction businesses, housing, utilities and social infra-

structure companies; and over 13 million of private con-

sumers (population).

RUB 11.3 billion

263,391 km59,053 pcs.

9 branches >13 mln residents >408 thousand km2

CHARTER CAPITAL OF THE COMPANY IS:

Distribution power grids:Transformer substations 6-35/0.4 kV:

Includes: JSC IDGC of Ceter amd Volga Region provides electricy:


10,958

2441,269

4,232

627

876

1,531

3,184

3,480

4,056

800

988

1,139

6,6134,855

2009 2010 2011

EBITDA, RUB mln

Interest to be paid

Depreciation

Profits tax

Net profit

2009 2009 20092010 2010 20102011 2011 2011

REVENUE, RUB mln NET PROFIT, RUB mln NET ASSETS, RUB mln

54,395

1,269 41,17647,191

24439,920

64,404 4,232 45,297

Indicator Unit 2009 * 2010 * 2011 2011/2010 (absolute increase)

2011/2010 (relative increase), %

Total revenue, incl.

Power transmission

Technological connection

Other sources

RUB million

RUB million

RUB million

RUB million

47,191

45,689

1,175

328

54,395

53,106

954

335

64,404

63,249

816

339

10,009

10,143

-139

4

18

19

-15

1

Capitalization RUB million 20,455 34,181 16,581 -17,195 -51

EBITDA RUB million 4,855 6,613 10,958 4,346 66

Net profit RUB million 244 1,269 4,232 2,963 234

Net assets RUB million 39,920 41,176 45,297 4,121 10

Profit per share RUB 0.0022 0.0113 0.0376 0.0263 234

Dividend per share RUB 0 0.00125 0.00280 0.0015 124

Share price at year end RUB/share 0.1815 0.3033 0.1471 -0.1562 -51

FINANCIAL PERFORMANCE

* Since January 01, 2011, company accounting and reporting were amended (Orders of the Russian Ministry of Finance №66n of July 02, 2010 and №186n of December 24, 2010). To align the data, we presented 2009-2010 indicators in accordance with the adjusted reporting for 2009-2010.

Indicator Unit 2009 2010 2011 2011/2010 (absolute increase)

2011/2010 (relative increase), %

Number of 35 kV and higher SS units 1,542 1,541 1,548 7 +0.45

Capacity of 35 kV and higher SS thousand MVA 28.49 28.61 29.35 1 +2.59

Number of TSS (DSS) of 6-35/0.4 kV units 58,639 58,845 59,621 776 1.32

Length of power transmission line circuits, networks

km 261,972 262,320 263,391 1,071 +0.41

Length of power transmission line circuits, routes

km 251,581 251,930 253,106 1,176 +0.47

Output to grid million kWh 56,175 59,492 59,653 161 +0.27

Productive supply million kWh 50,889 54,100 54,299 199 +0.37

Total losses million kWh 5,286 5,392 5,354 -38 -0.71

Total losses % 9.41 9.06 8.97 -53 -0.09

Power connected per technological connection agreements

MW 362.06 331.01 364.09 33.08 +10

Number of electric grids employees (payroll)

persons 21,559 22,074 22,269 195 +0.01

2009 20092010 20102011 2011

OUTPUT TO GRID, mln kWh POWER LOSSES, %

59,492

56,175

59,6539.41

9.068.97

SHARE CAPITAL STRUCTURE

16.82%GENHOLD LIMITED 20.64%

Other5.4%

Energosouz Holdings Limited

6.74%ENERGYO SOLUTIONS

RUSSIA (CYPRUS) LIMITED

50.4%JSC IDGC Holding

PRODUCTION PERFORMANCE

SHAREHOLDERS’ CAPITALas of May, 14 2012

8 9

Length of power transmission line circuits, km

Number of 35 kV and higher SS, units

Number of TSS (DSS) of 6-35/0.4 kV, units

Capacity of 35 kV and higher SS, thousand MVA

LEGEND

JSC WGC-3 Cherepetskaya SDPP / 1,285 MW Suvorov, Tula Region04

JSC WGC-2 Ryazanskaya SDPP / 2,650 MW Novomichurinsk, Ryazan Region05

Ryazan branch of Novoryazanskaya CHPP Ltd.

Novoryazanskaya CHPP / 425 MW Ryazan07

JSC RusHydro Nizhegorodskaya HPP / 520 MW Zavolzhye, Nizhny Novgorod Region08

JSC GAZ CHPP GAZ / 580 MW Nizhny Novgorod09

Ivanovskiye CCGTs branch of JSC INTER RAO UES

Ivanovskiye CCGTs branch of JSC INTER RAO UES / 650 MW

Komsomolsk, Ivanovo Region06

JSC Udmurtneft JSC SIBUR-Neftekhim JSC Kirovo-Chepetsk Chemical Plant1,145 863 697~2% ~2% ~1%05 07 09

JSC LUKOIL-Nizhegorodnefteorgsintez JSC Belkamneft JSC Schekinoazot908 767 529~2% ~1% ~1%06 08 10

38,584 km

224 units

0301 0902

KIROVENERGO

25,296 km

219 units

5,673 units

3.68 ths. MVA

050301 0802

UDMURTENERGO

12,412 km

88 units

2,969 units

1.13 ths. MVA

02 0302

MARIENERGO

59,530 km

259 units

14,255 units

5.20 ths. MVA

02

06

01

04

03

07

0801

09

NIZHNOVENERGO

263,391 km

1,548 units

59,621 units

29.35 ths. MVA

TOTAL

27,061 km

152 units

6,319 units

2.92 ths. MVA

0103

KALUGAENERGO

LARGEST GENERATING COMPANIES OF THE COMPANY’S FOOT-PRINT, PROVIDING CAPACITY TO GRIDS OF THE COMPANY

JSC TGC-6 Ivanovskaya CHPP-3 / 330.0 MW Ivanovo

Vladimirskaya CHPP-2 / 400.5 MW VladimirNovogorkovskaya CHPP / 305.0 MW Kstovo, Nizhny Novgorod RegionSormovskaya CHPP / 340.0 MW Nizhny NovgorodDzerzhinskaya CHPP / 580.0 MW Dzerzhinsk, Nizhny Novgorod Region

JSC TGC-5 Kirovskaya CHPP-3 / 160.0 MW Kirovo-Chepetsk, Kirov Region

Kirovskaya CHPP-4 / 320.0 MW KirovYoshkar-Olinskaya CHPP-1 / 195.0 MW Yoshkar-Ola, Mariy El RepublicIzhevskaya CHPP-1 / 78.0 MW IzhevskIzhevskaya CHPP-2 / 390.0 MW Izhevsk

JSC Kvadra Dyagilevskaya CHPP / 110 MW Ryazan

Novomoskovskaya SDPP / 261 MW Novomoskovsk, Tula RegionKaluzhskaya CHPP-1 / 48.9 MW Kaluga

01

02

03

LARGEST INDUSTRIAL CONSUMERS

JSC RZD (Russian Railways) 3,710

Share of the Company’s productive supply, % Consumption volume, million kWh

Gazprom Transgaz Nizhny Novgorod Ltd.

Name of Plants

Generating company

Generating company

Name of Plants/ /Installed

capacityInstalled capacity

Location Location

3,708

01 JSC Transneft1,571~3%~7% 03

JSC Volga1,328~2%~7% 0402

32,047 km

172 units

7,155 units

4.10 ths. MVA

01 100403

TULENERGO

15,283 km

141 units

3,806 units

2.62 ths. MVA

030601

IVENERGO

21,967 km

139 units

4,713 units

3.30 ths. MVA

01 0301

VLADIMIRENERGO

31,211 km

154 units

6,014 units

3.45 ths. MVA

01 0305 0703

RYAZANENERGO

8,717 units

2.94 ths. MVA

Kirov

Izhevsk

Yoshkar-Ola

Nizhny Novgorod

Ivanovo

Vladimir

Ryazan

Tula

Kaluga

10 11

ADDRESS TO SHAREHOLDERS.

JSC IDGC OF CENTER AND VOLGA REGION ANNUAL REPORT 2011

In 2011, JSC IDGC of Center and Volga Region made a sig-

nificant step towards an innovative and efficient distribu-

tion grid infrastructure in the operations area.

The Company’s successful performance in the report-

ing period has had a positive effect on the year-end fi-

nancial results. In 2011, the Company’s revenue totaled

RUB 64.4 billion, with gross profits amounting to RUB

7.3 billion.

In 2011, the Company’s Board of Directors convened

25 meetings, bringing up for discussion more than 320 is-

sues vital for the strategic development of the distribution

grids. Approval of the programs of innovative develop-

ment and consolidation of the Company’s power grid as-

sets is literally a milestone in the modernization of the

Russian power industry.

While growth rates of the world and Russian economy

were declining, the Company took efforts to maintain li-

quidity of its shares and fuel investor’s interest. In June

2011, the profits were distributed among the Company’s

shareholders for the first time. At the year-end 2010, the

dividends paid totaled RUB 141 million. In 2011, the Com-

pany published its first social report for 2009-2010.

The measures taken to improve investment attractive-

ness produced a positive effect on the Company’s securi-

ties. At the beginning of 2012, the Company’s shares were

transferred to the MICEX quotation list A Level 1, the capi-

talization totaling RUB 16.6 billion at the year-end 2011.

In 2012, the Company will keep on researching and im-

plementing knowledge and expertise gained by the IDGC

holding power distribution grids and its strategic partners,

as well as advancements of the fundamental, applied and

industry-related science in order to enhance competitive-

ness of the national economy and meet the targets of the

socio-economic development of the Russian Federation.

I would like to thank the Company’s management

and employees, shareholders and members of the Board

of Directors for their valuable contribution to main-

taining the Company’s goodwill and upholding high

standards of corporate culture, ensuring sustainable

development and financial stability. I am convinced

that JSC IDGC of Center and Volga Region will achieve

all its goals and its contribution to the strengthening

of the distribution power grid complex of Russia will re-

main notable.

Sincerely, Chairman of the Board of Directors

of JSC IDGC of Center and Volga Region

Aleksey Perepelkin

IN 2011, JSC IDGC OF CENTER AND VOLGA REGION

MADE A SIGNIFICANT STEP TOWARDS AN INNOVATIVE

AND EFFICIENT DISTRIBUTION GRID INFRASTRUC-

TURE IN THE OPERATIONS AREA.

DEAR SHAREHOLDERS!

12 13

ADDRESS TO SHAREHOLDERS.


LAST YEAR THE COMPANY MADE A SIGNIFI-

CANT STEP TOWARDS SMART POWER INDUSTRY.

FULL TRANSITION OF ALL ITS BRANCHES

TO THE RAB METHOD CREATED A STEADY

PLATFORM FOR THAT.

In 2011, the Company set its top priority on forming a new

grid infrastructure of the innovative distribution power

complex.

Last year the Company made a significant step towards

smart power industry. Full transition of all its branches

to the RAB method created a steady platform for the

latter as the Company’s investment program for the re-porting period increased 1.6 times amounting to RUB 13.6 billion. The Company managed to carry out proj-

ects of large scale and vital importance for the region.

Launching of the first start-up facility of the SS Sozvezdie

220/110/10 kV in the Kaluga region increased reliability

of the power supply in the whole Obninsk energy cluster.

In the Udmurtia Republic, the first line of the grid with

the Smart Grid elements was constructed. In the Vladimir

region, the Company launched SS Pokrov 110/35/10 kV,

where, along with the capacitor bank, controlled shunt

operator was installed, which has so far been the only

one in power systems of 110 kV in the Central Russia.

The Company’s program of innovative development for 2011-2016 provides for increasing power efficiency and

ecological safety of the power transmission and distribu-

tion as well as introduction of the new generation grid –

Smart Grid.

In 2011, the Company put into operation new power fa-

cilities which were required for the development of the

regions. New power capacities totaled 1,263.9 MVA.

On the whole, over the last year the Company connected more than 19 thousand consumers.

In the reporting year, the Company fulfilled its repair

program entirely. Facilities repaired included 225 substa-

tions with voltage ranging from 35 to 110 kV, 36 thou-

sand kilometers of 0.4-110 kV overhead electric lines and

more than 8 thousand distribution points and 6-10/0.4 kV

transformer substations. Actual repair costs totaled RUB 2.8 billion.

The Company attaches great importance to the profes-

sional training, enhancement of the talent pool, social

responsibility towards its consumers and society on the

whole, integrated communications and international co-

operation.

In 2011, the Company received a Diploma from the Gov-

ernment of the Russian Federation for its outstanding

achievements in terms of quality of the power transmis-

sion and distribution services. The fact that the Company’s

performance is marked by the Government second year

in a row proves that the Company moves in the right devel-

opment direction which is aimed at increasing reliability

of the power supply.

I believe that the Company’s achievements in 2011 are

largely due to honest management and success-driven

employees. Undoubtedly, with such an asset as a coordi-

nated and goal-motivated team the Company will reach all

the objectives necessary to create an integral innovative

state-of-the-art power grid infrastructure.

Sincerely, General Directorof JSC IDGC of Center and Volga RegionEvgeny Ushakov

DEAR SHAREHOLDERS!


Vladimirenergo branch

Renovation of SS 110/35/10 kV Pokrov (Volginsky, Petushki District, Vladimir Region)Capacity of capacitor bank - controlled shunt reactor: 25 MvarLaunched October 25, 2011

Project aims and objectives: Introduction of the controlled shunt reactor led to establishment of capacitor bank - controlled shunt reactor system for the volt-age of 110 kV with the capacity of 25 Mvar with sliding control of reactive power to increase the transmission capacity of power grids, maintain normal voltage level and reduce power losses.

Innovative component:Innovative portion financing amounts to RUB 39,230.9 thousand. Renovation included instal-lation of the first controlled shunt reactor RTDU 25000/110-UHL-1 at JSC IDGC of Center and Volga Region with the capacity of 25 Mvar. The planned ecomonic effect jointly with the capacitor bank 110 kV is RUB 1,802 thousand.

Ivenergo branch

Construction of SS 110/6 kV Ivanovskaya-15 (1st launch phase)(Ivanovo, Ivanovo Region) SS capacity: 40 MVA Launched December 27, 2011

Project aims and objectives: Implementation of the project will eliminate capacity deficit in the central part of the city and create an opportunity to connect new power consimers to grids of Ivenergo branch, as well as enable even distribution of load among the existing substations to enhance reliability of comsumer power supply and reduction of technical losses.

Innovative component:Innovative portion financing amounts to RUB 15,104 thousand. Construction employed innovative materials: SF6 circuit breakers LTB-145 D1/В, dry-type transformers TSZ-630/6 U1 with the capacity of 630 kVА for the system of own needs with the voltage of 6/0.4 kV, polymer-shelled overvoltage limiters, motor disconnecting switches RGPZ.

Kalugaenergo branch

Construction of SS 220/110/10 kV Sozvezdie (1st launch phase)(Borovsk district, Kaluga Region, near Dobrino)SS capacity: 250 MVALaunched November 08, 2011

Project aims and objectives: Power supply to Industrial Park Vorsino – a cluster of plants to produce various goods – and increased reliability of power aupply to consumers at 110 kV grid.

Innovative component:Innovative portion financing amounts to RUB 26,401.4 thousand. Construction included installation of ATDTsTN-250000/220У1 autotype transformer with the capacity of 250 MVA produced by OAO ZTR. Advanced SF6 circuit breakers 220 kV HPL 245B1 and 110 kV VEB-110-II-40/2500 UHL1 were used, as well as mea-suring current transformers 220 and 110 kV TG, voltage trans-formers 220 kV and 110 kV SRV, state-of-the-art disconnecting switches 220 kV RG and 110 kV RGP. Fiberglass was used for the main communications channel and transmission of TM, TU, TS and TI signals.

Udmurtenergo branch

Construction of SS 110/10kV Soyuznaya with overhead access lines 110 kV (Ustinovsky district, Izhevsk, Udmurtia Republic)SS capacity: 80 MVALaunched November 03, 2011

Project aims and objectives: National programs on housing and plans for comprehensive de-velopment of Izhevsk vacant areas stipulate construction of new microdistricts Aeroport and Vostochny, including new residential areas, office buildings, retail and entertainment centers, utilities, social facilities and infrastructure. Project implementation will provide power to newly built districts of the city, increase the number of feeding centers with the secondary voltage of 10 kV, ensure reservation for the current grids of 10 kV.

Innovative component:Innovative portion financing amounts to RUB 27,000 thousand. Construction employed innovative equipment: SF6 circuit break-ers 110 kV VEB-110, microporcessor relay protection and auto-mation devices Sirius, vacuum circuit breakers 10 kV BB/TEL-10, advanced systems of teleautomation and automation.

Ryazanenergo branch

Renovation of SS 110/10 kV Esenino (Fedyakino, Rybnoe District, Ryazan Region)SS capacity: 20 MVA Launched November 22, 2011

Project aims and objectives: Increased power supply reliability. Decision on renovation was made on the basis of joint draft Agreement № 34-1/4 «On in-teraction of the Ryazan Region Government and JSC RAO UES of Russia for development of Ryazan Region power system and assurance of reliable supply to consumers» dated February 18, 2008. The project was implemented within the time set by the Agreement.

Innovative component:Innovative portion financing amounts to RUB 29,043.7 thousand. Renovation included the following innovative equipment: SF6 dead-tank circuit breakers VEB-110-40/2500 UHL1, relay protec-tion and automation boxes ShE produced by CJSC Radius Avtoma-tika, SF6 current transformers TGFM-110 U1, SF6 voltage trans-formers ZNG-110 U1, vacuum circuit breakers BB/TEL-10.

MAP OF NEW INNOVATIVE CAPACITY, 2011

Kirov

Izhevsk

Yoshkar-Ola

Nizhny Novgorod

Ivanovo

Vladimir

Ryazan

Tula

Kaluga

BUSINESS OVERVIEW01

Automated information system of energy metering and control (AISEMC) with Smart

Grid elements, implemented in the village of Karakulino, the Udmurt Republic, en-

ables implementation of control over consumption of energy resources, and obtain-

ing of authentic data from metering tools, which serve as a basis for development

of energy saving actions

18 19

01 BUSINESS OVERVIEW


HISTORY OF INDUSTRY AND THE COMPANY

KEY STAGES OF INDUSTRY DEVELOPMENT

1.1

A country-wide unified energy infrastructure was established.

The signs of slowdown in the development of the industry began to show in, with the upgrade

of production facilities lagging behind the electric power consumption growth.

The power industry was privatized, followed by the establishment of the territorial power com-

panies. JSC RAO UES of Russia was established to control 118 subsidiary and dependent com-

panies, or practically all electrical energy assets of the country.

The necessity for urgent large-scale transformations contributing to the upgrade of basic ca-

pacities, the increase in industry efficiency and the improvement of reliability and safety of

consumer power supply became evident.

Large-scale electrification of the country according to the Plan adopted by the State Com-

mission on the Electrification of Russia was performed accompanied by the construction of

regional heat power and hydro-electric stations.

Major steps were taken to develop heavy and energy industry, including the electricity

distribution sector.

Post-war restoration of the destroyed electric power grid complex of the country was performed.

Unified Energy System was established, accompanied by implementation of major state-support-

ed energy projects, including the developments in the field of atomic energy and the construction

of nuclear power stations.

Early 20th century

Late 1980s

1990s

Late 1990s

1920s–1930s

1930s

1940s

1960s

Formation of Russian Electric Power Industry

Privatization and Reform

20TH CENTURY

The reform of the industry was launched. Aims and objectives of the reform are defined by Order

№ 526 of the Government of the Russian Federation “On the Reform of Electric Power Industry

of the Russian Federation” dated July 11, 2001. The reform involved changes in the structure of

the power industry, which included the separation of naturally monopolistic (electrical energy

transmission and operative dispatch control) and potentially competitive (production and sale

of energy, repair and service) functions. The vertically integrated companies which performed

these functions were replaced by organizations specializing in selected activities. The com-

panies were integrated by their activities and operations areas. The reorganization took place

from 2001 to 2008, RAO UES of Russia was dismissed on July 01, 2008.

As a result of reorganization of JSC RAO UES of Russia, JSC IDGC Holding was spun off

www.holding-mrsk.ru. It owns 50.4% of shares of JSC IDGC of Center and Volga Region and

the controlling interest in more than ten interregional distribution grid companies and other

subsidiary and dependent companies.

The data on new target structure of the industry after the reform are shown at the web site

of JSC RAO UES of Russia www.rao-ees.ru under Power Industry Reform.

Details of power industry reforms are also available at the Company’s web site www.mrsk-cp.ru

under “About the Company / Power Industry Reform” and the official site of the Russian Ministry

of Energy www.minenergo.gov.ru under “Activities / Power Industry / State of the Industry”.

Early 21st century

21TH CENTURY

20 21



JSC Vladimirenergo

JSC Ivenergo

JSC Kalugaenergo

JSC Kirovenergo

JSC Marienergo

JSC Nizhnovenergo

JSC Ryazanenergo

JSC Tulenergo

JSC Udmurtenergo

Charter capital RUB 10 million

JSC IDGC of Center and Volga Region / Charter capital RUB 11.3 billion

Branches: Vladimirenergo, Ivenergo, Kalugaenergo, Kirovenergo, Marienergo, Nizhnovenergo, Ryazanenergo, Tulenergo, Udmurtenergo

Completion of reorganization

as affiliation

Extraordinary General Sharehold-xtraordinary General Sharehold-

ers Meetings of nine DGC and JSC

IDGC of Center and Volga Region

on affiliation

The new configuration of IDGC

approved by the Government of

Russia

Agreements concluded with nine

DGCs on the transfer of functions

of the sole executive body (CEO)

JSC IDGC of Center

and Volga Region is registered

FEBRUARY 29, 2008

JUNE 28, 2007

Q3 2007

FEBRUARY 19, 2007

DECEMBER 2007

CEODetails of the Company his-

tory are shown at the Compa-

ny’s web site www.mrsk-cp.ru

under “About the Company /

History of the Company”

The establishment of JSC IDGC of Center and Volga Region is an integral part of the reform of the Russian electric power industry.

HISTORY OF THE COMPANY

POSITION IN THE INDUSTRY AND OPERATIONS1.2

Pow

er r

etai

l com

pani

es

WHOLESALE ELECTRIC POWER MARKET

RETAIL ELECTRONIC POWER MARKET

JSC FGC UES

JSC IDGC of Center and Volga Region

Territorial grid companies

Comsumer of the power supply

Allied power systems

Consumers of the wholesale market TGC, WGC

Electric power flows

Elecrtic power transmission





Purchase of elecrtic power

Purchase of power losses

Purchase of power losses

Purchase of elecrtic power


Direction of financial payments

Today JSC IDGC of Center and Volga Region is the largest

grid organization in the areas of its presence. Its core

business is transmission of power.

REVENUE BREAKDOWN BY TYPE OF ACTIVITY IN 2011

0.53%Ower activities

98.21%Transmission

of power

1.27%Technological connection to grids

22 23



JSC IDGC of Center and Volga Region is a natural monopo-

list. Subject to Order № 263-e of the Federal Tariff Ser-

vice dated June 27, 2008, the Company is included into the

registry of subjects of natural monopoly in the fuel and

energy industry, regulated and controlled by the state.

The tariffs (prices) for the services of the Company are

set by the regulatory bodies of the corresponding regions

of the Russian Federation.

The key trend of the power industry in the recent two

years has been increased power supply to consumers

due to post-crisis restoration of the country’s economy

and improved macroeconomic indicators. In the previous

year, GDP growth was estimated by Rosstat as 4.3%, and

industrial production growth as 4.7% year on year. Power

consumption grew by 1% to 1,030.5 billion kWh in 2011.

Performance of JSC IDGC of Center and Volga Region large-

ly corresponds to the general trends in industry develop-

ment. In the reporting year, productive supply of power

by the Company increased by 0.4% against 2010, and the

number of technological connections grew by 21.1%, their

capacity increasing by 10%. More detailed description of

macroeconomic factors influencing JSC IDGC of Center

and Volga Region performance is available at the Com-

pany’s web site www.mrsk-cp.ru under “For Shareholders

and Investors / Information about the Company’s finan-

cial-economical activity / Review of macroeconomic

factors and risks”.

JSC IDGC of Center and Volga Region holds a domineering

position on the market in the regions of its footprint, both

in power transmission and in technological connection

of consumers’ power receivers to grids. The major share

of power supplied to consumers passes along the grids

owned by the Company.

As estimated by JSC IDGC of Center and Volga Region, the

overall volume of the power transmission market of 2011

comprised 52,581 million kWh in natural terms, the share

of JSC IDGC of Center and Volga Region being 60%.

INDUSTRY OVERVIEW

MARKET SHARE OF THE COMPANY

YEAR ON YEAR GROWTH OF KEY PRODUCTION INDICATORS IN 2011

+0.4%

+21.1%+10.0%

PRODUCTIVE POWER SUPPLY

NUMBER

TECHNOLOGICAL CONNECTIONS

CAPACITY

Note: Productive supply of the Company is stated in relation to the consumers, connected directly to the grids of the

Company’s branches.

The major companies engaged in similar activities in

the Company’s operations areas include the following

territorial grid organizations:

• JSC Vladimir Region Electric Power Company, Vladimir;

• Municipal Unitary Enterprise Gorelektroset, Murom,

the Vladimir Region;

• Municipal Unitary Enterprise Gorelektroset, Kirov;

• Municipal Enterprise Gorseti, Obninsk, the Kaluga

Region;

• Regional Grid Company Ltd, Kirov;

• Gazpromenergo Ltd, Nizhny Novgorod;

• JSC GAZ, Nizhny Novgorod;

• Municipal Unitary Enterprise Ryazan Municipal

Power Grids;

• JSC Russian Railways - in all operations areas;

• JSC Tula Municipal Power Grids;

• Udmurtenergoneft, Izhevsk.

Services of JSC IDGC of Center and Volga Region are in-

tended for direct consumers on the wholesale and retail

markets – organizations and individuals, as well as re-

tail companies (major consumers), supplying power to

end users. The Company works with the following large

retail companies:

• JSC Vladimirenergosbyt;

• JSC Ivenergosbyt;

• JSC Kaluga Retail Company;

• JSC Kirovenergosbyt;

• JSC Marienergosbyt;

• JSC Nizhny Novgorod Retail Company;

• JSC Ryazan Retail Company;

• JSC Tula Retail Company;

• JSC Udmurtia Retail Company;

• Rusenergosbyt Ltd in six operations areas.

92% of the technological connection customers is made by preferential customers connected to the grids of up to 15 kW.

Since 2009, the number of applications from preferen-

tial consumers grew more than twice.

The year 2011 saw a considerable increase in the de-

mand for technological connection from large consum-

ers (over 750 kVA). In a number of regions, the tech-

nological connection tariff was adopted without

the investment component; as a result, the number

of applications and the total contracted capacity of this

category increased twice against the previous year.

CONSUMERS OF SERVICES

POWER TRANSMISSION MARKET IN 2011 (VOLUME OF PRODUCTIV SUPPLY TO CONSUMERS)

60%31,335 млн кВтч


40% 21,246 млн кВтч Other territorial grid organizations (TGO)

24 25



JSC IDGC OF CENTER AND VOLG A REGION E XECUTIV BODY

JSC Berendeevskoye (100%)

JSC Luchinskoye (100%)JSC Sanatorium -

preventorium «Energetik» (100%)

JSC IEC EnergoefficiencyTechnologies (51%)

JSC ATU (100%) CJSC Svet (100%)JSC Tulenergokomplekt (50%)

NINEO Educational Center «Energetik»

(Kirov)

NEI PPSE Educational Course Center

(Tula)

NEI EducationalCenter «Energetik»

(Izhevsk)

Educational Center «Energetik»

(Kaluga)

PEI Vladimir Educational Center

«Energetik»(Vladimir)

NEI IvanovoEducational Center

(Ivanovo)

PEI Educational Center «Energetik-NN»

(Nizhny Novgorod)

PD: Production Departaments RPG: Regions of power grid

PD: 4 RPG: 19

VladimirenergoBranch

PD: 3 RPG: 20

IvenergoBranch

PD: 9 RPG: 57

NizhnovenergoBranch

PD: 4 RPG: 26

RyazanenergoBranch

PD: 4 RPG: 28

TulenergoBranch

PD: 3 RPG: 27

UdmurtenergoBranch

PD: 5 RPG: 41

KirovenergoBranch

PD: 3 RPG: 14

MarienergoBranch

PD: 4 RPG: 26

KalugaenergoBranch

Network of CorporateEducatonfl Ctnters

SubsidiariesDependentcompanies

COMPANY STRUCTURE1.3

• Reliability and responsibility. The Company is

a part of a single power system, providing 24/7 for

the activity of seven regions and two republics of

the Central and Volga Federal Districts. The Com-

pany is responsible to consumers, and decisions

made by its employees are primarily based on the

principle of reliable power supply to customers.

• Client-oriented approach. Economic development

of the regions in which the Company operates pre-

supposes increased requirements of consumers

to the level of service and quality. The Company

is always oriented at the interests of consumers and

strives to satisfy their needs.

• Teamwork. Professionalism, mentoring and involve-

ment of employees in ongoing improvements are the

Company’s key advantages.

The underlying principles of the Company are permanent

performance improvement with a view to successful

business development, growth in shareholders’

and employees’ welfare, responsibility of the Company

to the country in terms of seamless power supply.

SYSTEM OF VALUES

STRATEGIC PRIORITIES AND DEVELOPMENT PROSPECTS

1.4

WE ARE RESPONSIBLE IN OUR WORK TO THE COUNTRY, PARTNERS,

EMPLOYEES AND SHAREHOLDERS.

“

”

WE ARE TARGET-ORIENTED PEOPLE WHO SET WELL-DEFINED GOALS AND ATTAIN THEM.

INTEGRITY, RELIABILITY AND PROFESSIONALISM ARE THE BASIS

OF RELATIONS WITH OUR BUSINESS PARTNERS.

WE ARE FRIENDLY, HONEST AND OPEN IN OUR MUTUAL RELATIONS.

THE BASIS OF OUR CULTURE IS A PERMANENT DRIVE TOWARDS PERFECTION.

26 27



MID-TERM GOALS

Increased operational and investment efficiency

Improved relations with consumers, society and investors

Company growth (value added)

Increased level of quality and reliability of power supply

Retention of tariff sources of investment into grid upgrade and development

1. Reduced costs of repair, operation, control and auxil-

iary functions per consumer

2. Introduction of reliable metering of the volume and

cost of commercial and technical power losses and

their reduction programmes

3. High load of introduced capacity, increase in responsi-

bility of regional authorities and investors for loading

capacities built for them

4. Increased return on investment due to effective rang-

ing and selection of projects and results tracking

5. Reduction of unit cost of construction due to intro-

duction of standard solutions, increased transparency

of unit costs

6. Increased quality of project implementation due to

introduction of project management principles

7. Personnel development

1. Targeted policy to enhance trust to the Company 2. Increased transparency of operations, implementation

of the pronciple “tariffs for quality and reliability”

1. Introduction of innovative equipment and

technologies

2. Improved business process management

1. Establishment of a system of reliable assessment of

power supply quality and reliability

2. Increased responsibility for achievement of targets in

quality and reliability

1. Retention of RAB system and adjustment of its

parameters

2. Building a government position on the necessity to

reduce the number of territorial grid organizations

3. Systemic solution to the problem of cross-subsidy and

retention of the Company’s revenues

4. Solution to the problem of non-payment by retail

companies

IMPLEMENTATION TOOLS

RELIABLE HIGH-QUALITY SUPPLY OF POWER

FOR GROWING DEMANDS OF THE ECONOMY

AND THE SOCIAL SECTOR OF THE FOOTPRINT

REGIONS AT SERVICE RATES ACCEPTABLE FOR

CONSUMERS

MISSION, GOALS AND TOOLS OF THEIR IMPLEMENTATION

28 29



STRATEGY DEVELOPMENT

JSC IDGC of Center and Volga Region and expectations of the key market stakeholders

JSC IDGC of Center and Volga Region is a part of the

Russian power distribution grid system. The key share-

holder of the Company is JSC IDGC Holding, with the

53.7% share of the government in it.

JSC IDGC Holding is a governmental agent for manage-

ment of distribution grids and the industry leader. As a

backbone organization, JSC IDGC Holding performs gen-

eral industry tasks within the framework of the subsid-

iary companies controlled by it, sets unified standards

of work and ensures development and promotion of op-

timum industry regulation mechanisms.

November 22, 2011, decision of the JSC IDGC Holding

Board of Directors approved the Strategy of JSC IDGC

Holding Development till 2015 and prospective devel-

opment till 2020.

JSC IDGC of Center and Volga Region, being a subsidiary

of JSC IDGC Holding, follows this Strategy. The Company

develops and follows the Plan of its Implementation till

2015 and Prospective Development till 2020. Expecta-

tions of all key market stakeholders towards JSC IDGC of

Center and Volga Region are taken into account.

Investment community

Consumers

JSC FGC UES

Regions and local authorities

Personnel

Securities of JSC IDGC of Center and Volga Region are an efficient instrument

of investment, ensuring their refundability, reliability, yield and liquidity

JSC IDGC of Center and Volga Region covers the economy’s needs of distribution capacities, being a reliable partner to executive bodies of Russian regions in planning and implementation of regional territorial development programs, a conscientious taxpayer and employer

JSC IDGC of Center and Volga Region is an effectively organized company with a transparent and clear system of corporate governance, offering opportunities for maximum unlocking of the employees’ potential

JSC IDGC of Center and Volga Region is a company aimed at high-quality services – reliable and uninterrupted power supply, timely and transparent technological connection to power grids at affordable prices

JSC IDGC of Center and Volga Region is a reliable partner ensuring coordinated

development of power grid system of the region and pursuing unified technical policy

SHORT-TERM STRATEGY AS VIEWED BY THE MANAGEMENT

LADA PODOLSKAYADEPUTY GENERAL DIRECTOR FOR CORPORATE GOVERNANCE

“We pay considerable attention to sustaining the

high level of corporate management and information

openness. Transition of our Company to first-level

quotation list A in February 2012 proves that this

work is efficient. Increased capitalization and ensuring

shareholders’ rights have always been a key task of our

company development.

Increase in social responsibility of business is also

important for us. In 2011, we issued the Company’s first

Social Report for 2009–2010.

Considering the nature of our business, an important

aspect is development of the Company’s talent

pool. In the reporting year, we developed programs

for recruitment and induction of young employees,

the system of mentoring was reintroduced. In 2012,

we plan to develop programs for development of

management potential of the most promising young

employees and implement a number of other social

projects.

A promising area of the Company’s property development

is consolidation of local power grid systems within the

Company’s footprint. To implement this task, we plan

to acquire territorial grid companies owning these

systems or to sign long-term lease contracts with them.

Considerable attention will still be paid to construction

of new power grid facilities.”

OLGA TIKHOMIROVADEPUTY GENERAL DIRECTOR FOR ECONOMICS AND FINANCE

“The main event of 2011 in the sphere of tariff regulation

for power distribution services was complete transition

of the Company’s branches to long-term RAB-based tariff

regulation, which, inter alia, enables considerable increase

in investment to power grid facilities development.

At the same time, the document governing the Company’s

economy in the short term is Order №1172 of the Russian

Government dated December 27, 2010, according to which,

starting May 01, 2011, tariffs for power transmission for

2011 must be reviewed on the basis of increase in the

average regional tariff no more than 15%. As a result,

the amount of the required gross revenue of JSC IDGC

30 31



of Center and Volga Region considered in defining the

single (boiler) tariffs for power transmission in 2011

was reduced by RUB 3,047 million. It was largely due to

reallocation of the required gross revenue of branches by

years within the limits of the long-tram regulation period.

To fulfill this task and to ensure even growth in tariffs in

the nearest years, a decision was taken for Vladimirenergo

and Kalugaenergo branches to extend the period of long-

term regulation from three to five years.

The current rules of long-term tariff regulation encourage

the Company to improve its efficiency and reduce operating

costs, which will remain a priority for our Company in the

nearest years.

In 2011, within the framework of this task, we already

implemented a wide range of measures aimed at

improvement of business processes, reduction in power

losses, optimization of procurement and increase in

energy efficiency without impact on the quality of

power grid servicing. The efforts made by the Company

employees in various functional areas were beneficial for

its financial performance – in 2011, net profit amounted

to RUB 4.2 billion, which is almost three times as much

as the pre-crisis year 2008. While regulating authorities

keep restricting the power tariff growth, the Company

will continue performing its obligations and rationally

using assets to retain financial stability”.

VLADIMIR SHITTSDEPUTY GENERAL DIRECTOR FOR CAPITAL CONSTRUCTION

“In 2011, our Company implemented an investment

program in the amount of RUB 13,569 million. It is the

largest yearly investment in the history of the Com-

pany. Approximately 19,840 new consumers were con-

nected with the total capacity of 364.09 MVA. Such

capital investments were possible largely due to com-

plete transition of all our branches to RAB regulation.

The Company received an opportunity to increase pow-

er facilities construction and renovation volume, grad-

ually solve the problems of distributing grids deprecia-

tion, upgrade the grid infrastructure, thus contributing

to social and economic development of the regions it

covers. In 2011, new facilities were introduced, cur-

rent ones renovated, first facilities with smart-grid

elements were introduced in several regions, project

management of capital construction was launched.

In the nearest future, the Company will continue invest-ing in increased reliability of consumer power supply, reduction in fixed assets depreciation, building condi-tions for connection of new capacities and regional de-velopment”.

SERGEY ANDRUS

DEPUTY GENERAL DIRECTOR

FOR TECHNICAL ISSUES – CHIEF ENGINEER

“In 2011, the Company increased productive supply of power

against the previous year. Moreover, we increased the vol-

ume of maintenance and repairs program, considerable

funds were sent to finance clearing and expansion of routes,

we completed implementation of pilot projects for distribut-

ing grids with new topology of power transformers.

We follow the drive to upgrade of the grid facilities and

establishment of the new power grid infrastructure in

the basis of large-scale technological renovation and

construction of new-generation grids.

Our plans include integration of advanced achievements

of industry and academic science in the distributing

power grid system. Transition to “smart” power industry

will reduce costs of technical operation of grids, reduce

losses and increase productive supply. The Program for

the Company’s Innovative Development for 2011–2016

adopted in July 2011, stipulates introduction of inno-

vative equipment, technologies and materials, as well

as implementation of a large number of research and

development technologies. It will further enhance the

Company’s market position.

Moreover, a key objective of the Company’s develop-

ment in the nearest future is gradual removal of restric-

tions on the transmission capacity of distributing grids.

We believe that the key means to perform this task are

to ensure economic efficiency of the decisions made, to

employ new technological solutions, to arrange coor-

dinated development of distributing and main grids, as

well as generating facilities. Such comprehensive ap-

proach will eventually enable free connection of new

consumers, boost power supply reliability for the cur-

rent ones, meet the average mid-term demand for pow-

er and capacity, and develop stable and favorable condi-

tions for additional investment in the regions.

As far as client relations are concerned, the Company

will continue implementation of a client-oriented ap-

proach. We aim at increasing consumer loyalty by im-

provement in the service quality, including provision

and development of remote and interactive services and

ensuring territorial accessibility of services”.

32 33



STRATEGIC OBJECTIVES AND THEIR IMPLEMENTATION

№ Priorities, objectives and measures for their implementation

Results of 2011 Plan for 2012 and later

1. Increase in reliability and quality of the services provided

1.1. Training of Customer Service Centers employees. Completed in accordance with the adopted training program. Improvement in the client service by ensuring better competence of employees.

1.2 Standardization of consumer service processes in the Company and increase in the service quality.

The following Standards were adopted: • Consumer satisfaction. Requirements to organization of assessment and

analysis of consumer satisfaction degree;• Consumer relations management system. Corporate design of Customer

Service Centers and single dress code for Customer Service Centers employees, business ethics principles;

• System of centralized service for consumers.

Development of the Standard on consumer relations system. Requirements for client relations during restoration of technical specifications and alignment of supplements to power supply contracts.

Alignment of customer service system with the Standard on the system of centralized service for consumers.

1.3. Ensuring efficient work of «Clients / Internet reception» section at the Company’s web site and development of new information sections to meet client needs.

The structure of «Clients / Internet reception» section was updated and new information sections at the Company’s web site were introduced: «Planned disconnection schedule» and «Current data on emergency disconnection».

Arrangements for regular updating of «Clients / Internet reception» section and analysis of feedback from consumers.Creation of «Power Saving» section at the Company’s web site.

Update of questionnaires at sites of branches.

1.4 Extension of client service network.Opening new customer service centers.

Three new Customer Service Centers opened:• in Petushki (Vladimirenergo branch);• in Navashino (Nizhnovenergo branch);• in Karakulino (Udmurtenergo branch).

Opening of the Unified Information Center (held January 23, 2012) and Customer Service Center in Balakhna (Nizhnovenergo branch).

1.5. Compliance with service reliability indicatorsapproved by territorial regulators.

Deviations from the approved indicators by reliability of services rendered did not exceed the acceptable level.Planned reliability indicators were achieved.

Measures to achieve the approved targets of service reliability.

1.6. Timely and high-quality completion of repairs. Repair and maintenance program was fully completed in the amountof RUB 2,844.25 million, which is 10% higher than the level of 2010.

Performance of repair program for 2012 in the amount of RUB 2,629.1 million.

1.7. Standardization of repair and maintenance procedures.

A new Standard issued: “Requirements for Organization and Management of Repairs and Maintenance at JSC IDGC of Center and Volga Region” STO 01–015–2011.

Analysis of production processes.Identification of the need to update certain provisions of the Standard “Requirements for Organization and Management of Repairsand Maintenance at JSC IDGC of Center and Volga Region” STO 01–015–2011.

1.8. Business process optimization for the Companyby quality management tools.

25 new standards for the Company were made. Development of nine organization standards and four production instructions in 2012.Update of 18 standards.

2. Increased operational and investment efficiency

2.1. Regulation of cost estimates in capital construction on the basis of new technical specifications and regulating documents in cost estimates.

Regulatory documents implemented. Alignment of processes to the documents issued and update of the documents when required.

2.2. Transition to project managementin capital construction.

Works performed to introduce project management and the respective software. Implementation and improvement of project management.

2.3. Construction control in accordance with requirements of regulators.

Construction control was carried out in accordance with requirements of regulatory documents.The Company’s regulatory documents were updated.

Alignment of processes to the documents issued and update of the documents when required.

2.4. Introduction of an integrated system of internal control and risk management.

Methodological Recommendations for risk management were adopted.Provisions on control environment and business process risks were adopted in the following areas:• commercial metering and sales of power transmission services;• procurement;• sales of technological connection services;• operations.The Company’s General Director issued orders on implementation and adjustment of these provisions.

Ensuring effective functioning of the system of internal control and risk management.

2.5. Introduction of the system of production assets management.

The necessary methodology, regulations and instruments were made, templates created for collection of data on the Company equipment.The pilot branch, Kirovenergo, fully completed data collection for the main grid equipment, data collection for the distributing grid started.The company began introduction of production assets management system on the basis of SAP ERP at other branches of the Company.In 2011, technical places and over half of the equipment units of the Company’s main grid were introduced into SAP ERP.

Completion (in 2012) of SAP ERP introduction of main and distributing grids equipment, implementation of calculation for equipment status and failure consequences, as well as implementation of production program planning.

34 35



№ Priorities, objectives and measures for their implementation

Results of 2011 Plan for 2012 and later

2.6. Operations efficiency increase. EBITDA growth rate exceeded the Company revenue growth rate against 2010.(EBITDA grew by 66%, revenue – by 18%).

Further implementation of a set of measures to boost operations efficiency, including reduction of power losses, administrative costsand inventory optimization.

3. Increased investment attractiveness

3.1. Transition to long-term RAB-based tariff regulation. Starting January 01, 2011 all Company branches use long-term RAB-based tariff regulation.

Further activities, including cooperation with regulatory bodies aimed at tariff approval on the basis of installed long-term parametersand regulations of the current legislation.

3.2. Achievement of planned return on equity ensured by cash flow.

The Company’s return on equity is 10.19% (the planned indicator was 7.49%). Achievement of planned return on equity set by the Board of Directors.

3.3. Maintenance of impeccable credit history. In 2011, liabilities to pay the principal amount, interest and other expenses related to servicing borrowed funds were fully and in due time met by the Company.

Unconditioned performance of the Company’s liabilities within the framework of contracts with creditors.

3.4. Efficient IR program. Establishment and maintenance of long-term relations with shareholders and investors.

IR Program for 2011 was implemented.Company shares were transferred to quotation list А, second level at MICEX stock exchange.Dividend was accrued and paid for the Company shares.

Implementation of the IR Program for 2012 approved by the General Director.Assurance of the Company’s informational transparency considering the needs of investment community.Transfer of Company shares to quotation list А of the first level at MICEX (completed February 20, 2012).

3.5. Development of the corporate governance system. Following best practices of corporate governance.

New versions of the Charter and internal documents of the Company regulating management activities were executed and adopted.Efficient operations of the Company management were ensured, including committees of the Board of Directors.

Corporate procedures in accordance with the effective Russian legislation.Update of the Company’s internal documents in line with the legislative requirements and control of their efficient implementation.

4. Increased energy efficiency and innovative development

4.1. Development of programs for power saving and increase in energy efficiency of branches in accordance with requirements of regional regulatory authorities.

The programs were developed fully and approved by the Company’s Board of Directors. Mandatory energy examination of the Company’s branches was made.

Unconditioned compliance with the target indicators of the Program for Power Saving and Energy Efficiency for 2012–2016.Update of the Company branches’ programs for power saving and energy efficiency.Receipt of the Company’s single energy passport.

4.2. Upgrade of consumer power metering points. The plan for the reporting year was competed by 100% – 29,597 metering pointswere upgraded.

Compliance with the Company’s Program of Perspective Development of the Billing Systems.

4.3. Reduction in the power resources spendingon production and administrative needs; reductionof power losses.

The planned measures were fully completed. Planned activities and reduction in power resources spending by over 10% by 2017.

4.4. Development of the Program of Innovative Development for 2011 – 2016.

The Program of Innovative Development was drafted and approved by the Company’s Board of Directors in July 2011.Innovative development indicators for 2011 were largely met.

Adjustment of the Program of Innovative Development in 2011–2016 and compliance with the planned indicators of 2012.

5. Increased availability of power grid infrastructure

5.1. Provision of information to potential consumers to estimate the main parameters and risks of business projects considering technological connection opportunities.

The Company’s web site shows data on the current capacity reserve by supply source.

Monthly update of the information disclosed by the Company and response to consumer inquiries.

5.2. Provision of information on the procedure of works to examine new power receivers.

The Company’s web site shows the Procedure of Works to Examine New Power Receivers with the Capacity of up to 15 kW for individuals and up to 100 kW for legal entities or individual entrepreneurs with power supply from one source.

Increased awareness of consumers on the procedures for connection of their receivers (for individuals – up to 15 kW, legal entitiesor individual entrepreneurs with the capacity of 15 to 100 kW, one power supply source).

6. Human capital development

6.1. Performance of employer’s obligations under Collective Labor Agreement between JSC IDGCof Center and Volga Region and its employees.

Employer’s obligations under Collective Labor Agreement between JSC IDGCof Center and Volga Region and its employees for 2009–2011 are met.

Full compliance of the Company with obligations under Collective Labor Agreement for 2009–2011, considering Agreement on amendmentsand additions to that agreement and its extension for 2012. Development and approval of the Collective Labor Agreement for subsequent periods.

6.2. Compliance with the indicator of staffing level (standard is 90%).

The Company’s indicator of staffing level is 96.36%. Maintenance of stable staffing levels and prevention of their decrease below the standard.

6.3. Achievement of the planned level of the number of employees involved in various programs of training, retraining and vocational training.

191% of the average headcount of the Company’s employees were trained. Compliance with approved plans of training.

36 37



1. Transition to RAB-based tariff regulation (Minutes

№44 of the Board of Directors dated September 15,

2009)1.

Within this priority area, in 2011, the Board of Directors

considered the report of the Company’s General Direc-

tor on fulfillment of the Board of Directors instructions

on transition to RAB-based tariff regulation (Minutes

№70 dated February 28, 2011).

2. Registration of title for real estate, registration/

re-registration of land plot use for the period of

2011–2014 including processing of data on borders

of protective areas of grid facilities (Minutes of the

Board of Directors №64 dated November 01, 2010).

Within this priority area, in 2011, the Board of Directors

made the following decisions:

• considered information of the Company’s General Di-

rector on registration of title for real estate, registra-

tion/re-registration of land plot use for 2010 (Minutes

№72 dated March 30, 2011);

• approved the adjusted program for registration of title

for real estate, registration/re-registration of land plot

use for the period of 2011–2014 including processing

of data on borders of protective areas of grid facilities

(Minutes №90 dated November 25, 2011).

3. Development of the Program of Innovative Develop-

ment (Minutes of the Board of Directors №70 dated

February 28, 2011).

Within this priority area, the Program of Innovative De-

velopment was executed and approved by the Board of

Directors (Minutes №81 dated July 27, 2011). Moreover,

the Board of Directors ordered the General Director the

following:

• to ensure adjustment of the Program’s parameters

in line with the updated business plan indicators (in-

cluding those of the investment program), including

unit-by-unit synchronization of the Program’s target

activities with capital construction facilities in invest-

ment programs approved in accordance with the leg-

islation;

• to submit a report on the Program implementation for

consideration of the Board of Directors quarterly.

December 27, 2011, the Board of Directors considered

a report on the Program of Innovative Development

implementation in 9 months of 2011 (Minutes №93).

4. Compliance by the Company with the level of reli-

ability and quality of the services rendered set by the

regulations (Minutes №84 of the Board of Directors

dated August 30, 2011).

Within this decision, the Board of Directors also or-

dered the following to the Company’s General Director:

• to provide information to the Board of Directors on re-

liability levels and quality of the services by all Com-

pany branches subject to tariff regulation on the basis

of long-term regulation parameters in the previous re-

porting year (estimate period of tariff regulation);

• to provide proposals to the Board of Directors

on planned reliability levels and quality of the services

by all Company branches по for each year (estimate

period of tariff regulation) within the long-term tariff

regulation period;

• in case of adjustment of the required gross revenue

forming the basis for tariff calculation, considering the

achievement of the indicators set by the regulator, to

provide proposals on adjustment of the planned reli-

ability and quality indicators to the Board of Directors

at the end of the reporting year;

BOARD OF DIRECTORS REPORT ON PRIORITY AREAS

1 Hereinafter in the section, for each priority area we indicate the decision of the Board of Directors which indicated this area as a priority.

• to submit reports to the Board of Directors of compli-

ance with regulatory documents for setting indicators

of reliability and quality of services rendered by the

Company branches.

5. Implementation of construction management sys-

tem for key investment projects (Minutes №86

of the Board of Directors dated September 30, 2011).

Under this priority area, the Order of the General

Director approved the Regulations for implementation

of the construction management of the Company’s key

investment projects.

December 27, 2011, the Board of Directors considered

the report on the results of the construction manage-

ment system implementation for key investment proj-

ects and the launch of the system (Minutes №93).

6. Approval of the Program for Consolidation of Power

Grid Assets (Minutes №88 of the Board of Directors

dated October 31, 2011).

Under this decision of the Board of Directors, the Pro-

gram for Consolidation of Power Grid Assets of JSC

IDGC of Center and Volga Region was approved for

2011–2015, the General Director was ordered to im-

plement target indicators of the Program and report

to the Board of Directors on its implementation an-

nually.

ANALYSIS OF THE FINANCIAL CONDITION AND PERFORMANCE RESULTS

02

Mobile electric laboratory LVI-3MG (high-voltage tests laboratory) is intended

to hold tests of electric equipment of substations and power electric cables,

and localize damages in cables using the equipment of preliminary and exact

localization

40 41



The accounting methods and the accounting policy used

by the Company in 2011 are specified in the Policy on

Accounting of the Company for 2011 approved by Order

№489 of the General Director of the Company dated De-

cember 31, 2010, with the amendments introduced under

Orders №255 dated June 14, 2011 and №462 October 04,

2011.

Accounting is performed in compliance with the unified

guidelines and rules, based on the unified accounting

technologies for all business operations of the Company.

The Company’s accounting records form an organized sys-

tem of collecting, registering and generalizing monetary

data concerning the Company’s assets and liabilities and

their movement. Accounting is performed by continuous-

ly and comprehensively registering and documenting all

business operations of the Company on the basis of and in

ACCOUNTING POLICY2.1

compliance with the requirements of the current legisla-

tion of the Russian Federation.

For the purposes of accounting the sales of products

(works, services) and assets of the Company to third-party

organizations are reflected in the accounting records as

the products (works, services, assets) are shipped (per-

formed, rendered, transferred), and upon the presentation

by the buyers of settlement documents. For the purposes

of taxation the receipts and costs are recognized by the

accrual method.

The Accounting Statement of the Company has been based

on the Russian regulatory documents on accounting,

namely the following: Federal Law №129-FZ “On Account-

ing” dated November 21, 1996, the Policy on Account-

ing and Reporting in the Russian Federation, approved

by Order №34n of the Ministry of Finance of the Russian

Federation dated July 29, 1998, the Provisions for the Ac-

counting approved by orders of the Ministry of Finance of

the Russian Federation, by Order №66n of the Ministry of

Finance of the Russian Federation “On the Forms of Ac-

counting Statements of Organizations” dated July 02, 2010

(as revised on October 05, 2011), the Plan of Bookkeeping

Accounts of Financial and Economic Activities and the In-

struction for its Use, approved by Order №94n of the Min-

istry of Finance of the Russian Federation dated October

31, 2000 (in the current version).

The main provisions of the accounting policy are set out

on the website of the Company at www.mrsk-cp.ru in the

section «Disclosure of the information and the accounting

information / The financial information and the reporting».

Four branches of JSC IDGC of Center and Volga Region

– Ivenergo, Kirovenergo, Marienergo and Nizhnoven-

ergo, adopted a new RAB-based tariff regulation sys-

tem. Thus, all branches of the Company completed the

phased transition to RAB-based regulation.

KEY EVENTS OF THE YEAR

JANUARY

january february march april may june july august september october november december

42 43



The revenues of JSC IDGC of Center and Volga Region

in 2011 totaled RUB 64,404 million, the year-on-year

increase amounting to 18%. The key factors contributing

to the growth in revenue included an increase in

productive supply of electric power to consumers due

to an overall growth of industrial production and a

consequent increase in power consumption, as well as

an increase in tariffs for power transmission services set

for the Company by the regulatory bodies.

* As of January 01, 2011, amendments have been introduced into the accounting and reporting of organizations (Orders of the Ministry of Finance of the Russian Federation №66n dated July 02, 2010 and №186n dated December 24, 2010). To ensure the comparability of the data, the indices for 2009-2010 are presented in accordance with the adjusted accounting statements for 2009-2010.

Financial performance, 2009-2011

ANALYSIS OF FINANCIAL PERFORMANCE2.2

Index Unit of meas-urement

2009* 2010* 2010 vs 2009 (absolute increase)

2010 vs 2009 (relative increase), %

2011 2011 vs 2010 (absolute increase)

2011 vs 2010 (relative increase), %

Revenues, including RUB million

47,191 54,395 7,204 15 64,404 10,009 18

from electric power transmission

RUB million

45,689 53,106 7,417 16 63,249 10,143 19

from technological connection

RUB million

1,175 954 -220 -19 816 -139 -15

from otheractivities

RUB million

328 335 7 2 339 4 1

Costs RUB million

44,369 50,422 6,053 14 57,089 6,667 13

Gross profit, including RUB million

2,822 3,973 1,151 41 7,315 3,342 84

from electric power transmission

RUB million

1,712 3,052 1,340 78 6,649 3,597 118

from technological connection

RUB million

911 724 -187 -21 492 -232 -32

from otheractivities

RUB million

199 197 -2 -1 174 -23 -12

Net profit RUB million

244 1,269 1,025 421 4 232 2 963 234

EBITDA RUB million

4,855 6 613 1,757 36 10,958 4,346 66

Return on assets % 0.40 1.94 1.55 389 5,34 3.39 175

Returnon equity

% 0.61 3.08 2.47 405 9,34 6.26 203

The costs (cost value) of the Company in 2011 increased

by RUB 6,667 million, representing a 13% increase

compared to 2010. This happened mainly due to an

increase in mandatory costs, namely a considerable

growth of the costs related to compensating for

energy losses and the costs associated with power

transmission services rendered by the distribution grid

companies of JSC FGC UES. The increase in these costs

was caused by an increase in volumes of electric power

transmission and in tariffs established by the regulatory

bodies. Besides, there was a considerable increase in

depreciation costs due to the commissioning of fixed

assets under a large-scale investment program.

As the cost growth rate was slower than that of the

revenues, this resulted in an increase in EBITDA, as well

as in gross and net profit of the Company. Net profit in

2011 was 3.3 times higher than in 2010 and totaled RUB

4,232 million.

The growth of profit resulted in a considerable increase

in the indices of profitability describing the return on

assets and equity of the Company.

CAPITAL STRUCTURE OF THE COMPANY1

ASSETS STRUCTURE, RUB million

65,687

13,607

As of Dec 31, 2011

56,031

9,257

As of Dec 31, 2010

51,361

9,945

As of Dec 31, 2009

Current assets

Non-current assets

1 As of January 01, 2011, amendments have been introduced into the accounting and accounting statements of organizations (Orders of the Ministry of Finance of the Russian Federation № 66n dated July 02, 2010 and № 186n dated December 24, 2010). To ensure the comparability of the data, the indices for 2009-2010 are presented in accordance with the adjusted accounting statements for 2009-2010.

THE YEAR-ON-YEAR GROWTH

OF THE MAIN FINANCIAL INDICES IN 2011

+234%+66%+18%

NETPROFIT

EBITDA

REVENUES

0%

100%

20%

40%

60%

80%

44 45



The assets structure of the Company is characterized

by a significant share of non-current assets amounting

to 83% as of the end of the reporting year. This is due

to the implementation of an investment program aimed

at upgrading the fixed assets. Non-current assets are

comprised mainly of fixed assets (91%) and construction

in progress (7%). The share of the former increased

compared to the previous year, while the share of the

latter decreased.

The major share of the Company’s liabilities is comprised

of equity (capital and reserves) accounting for 57% as of

the end of the reporting year. 2009-2011 saw a gradual

decrease in this share as the Company raised long-term

borrowings in order to fund its investment program. As of

the end of the reporting year, long-term debt accounted

for 32% of the Company’s liabilities. In 2011, all branches

of the Company adopted a RAB-based tariff regulation

system, which in the long run will ensure the return of the

funds used for investment activity.

The share of short-term debt within the structure of

liabilities demonstrated a year-on year decrease from

12% to 11%. Accounts payable comprise the major share

of short-term debt (72%); short-term credits and loans

used for financing the Company’s current needs account

for 21%.

EQUITY AND DEBT STRUCTURE, RUB million

45,297

25,462

8,535

As of Dec 31, 2011

41,148

16,631

7,509

As of Dec 31, 2010

39,887

9,521

11,899

As of Dec 31, 2009

Short-term debt

Long-term debt

Equity

100%

20%

40%

60%

80%

0%

Financial ratios

During the reporting year, the debt/equity ratio describ-

ing the degree of the Company’s dependence on borrow-

ings and determining the amount of risk to the creditors

increased from 58.67% to 75.05%. This happened mainly

because the Company raised long-term credits and loans

for the implementation of its investment program.

In the reporting period, the cover of debt servicing pay-

ments, which is calculated as a ratio of net profit and de-

preciation during the period to the amount of liabilities

and interest on them to be repaid in the reporting period,

increased from 187.65% to 442.24% due to an increase in

sources of debt coverage, namely the undistributed profit

for the reporting year and depreciation charges accrued in

the reporting period.

Overdue long and short-term debt amounted to 0.16%

in the reporting period. Its low level proves that the Com-

pany shows good financial discipline.

The Company’s working capital and quick assets ratios,

which describe its ability to redeem its liabilities by means

of current assets, conform to the norm. As of the end

of the reporting period, they amounted to 1.59 and 1.46

respectively.

The equity/assets ratio, which shows the share of equity

in the total funds of the Company, was also normal; in the

reporting period it amounted to 0.57.

The Company’s net assets are calculated under the procedure for calculating net assets of a joint-stock company established

by Order №10n of the Ministry of Finance of the Russian Federation and Order №03-6/pz of the Federal Service for Financial

Markets of the Russian Federation dated January 29, 2003.

As of the end of 2011, the Company’s net assets totaled RUB 45,297 million, demonstrating a year-on-year increase

by RUB 4,121 million, or 10%. This growth resulted from an increase in undistributed profit in the reporting year.

Index Unit of measurement

2009* 2010* 2011

Net assets RUB million 39,920 41,176 45,297

Debt to equity ratio % 53.70 58.67 75.05

Cover of debt servicing payments % 227.28 187.65 442.24

Overdue accounts payable % 1.42 0.03 0.16

Quick assets ratio - 0.75 1.11 1.46

Working capital ratio - 0.82 1.22 1.59

Equity/assets ratio - 0.65 0.63 0.57

Equity to debt ratio - 1.87 1.71 1.33

Receivables turnover times 7.78 11.39 11.30

* As of January 01, 2011, amendments have been introduced into the accounting and reporting of organizations (Orders of the Ministry of Finance of the Russian Federation №66n dated July 02, 2010 and №186n dated December 24, 2010). To ensure the comparability of the data, the indices for 2009-2010 are presented in accordance with the adjusted accounting statements for 2009-2010.

46 47



The Company’s financial stability is also described by the

equity to debt ratio. During the reporting period it de-

creased from 1.71 to 1.33 due to an increase in the share

of borrowings within the Company’s capital structure.

The receivables turnover, which shows how fast the buyers

pay back their debts to the Company, was characterized by

a slight year-on-year decrease from 11.39 to 11.30 due to

an increase in accounts receivable.

Overall, as of the end of 2011, the financial condition of

JSC IDGC of Center and Volga Region can be described as

stable, its financial ratios being normal, which proves the

Company’s liquidity and solvency. The Company’s opera-

tional efficiency is high by the standards of the power in-

dustry. Moreover, the Company is actively developing by

implementing a large-scale investment program financed

both from the Company’s own sources and from long-term

borrowings.

In the reporting year JSC IDGC of Center and Volga

Region achieved all target values of the Key Performance Indicators (KPIs) approved by the Board of Directors of

the Company on September 20, 2011 (Minutes №85).

KPIS OF THE COMPANY AND INFORMATION ON THEIR IMPLEMENTATION

Indicator Unit of measurement

2011

Planned Actual

Return on Equity (ROE)secured by cash flow*

% 7.49 10.19

Losses of energy intended for supply % 9.11** 8.97

Investment program implementation efficiencyduring current quarter (in terms of period and cost)

% ≥ 95 103

Prevention of the number of accidents exceeding the limitfor the accidents complying with p.2.1. of the Instruction

- 0 0

Systemic indicator of interruption of consumer powersupply (for 6kV feeders and higher)

- < 1 < 1

Systemic indicator of the average duration of powersupply interruptions (for 6kV feeders and higher)

- < 1 < 1

* ROE is calculated from the net profit secured by cash flow, which corresponds to the net profit (line 2 400 of the Profit and Loss Statement) minus the difference of the following items of the annual accounting statement adjusted for the profit tax:

- the profit of the past years identified in the reporting period (minus profit tax);- the writing off of accounts payable (minus profit tax);

- the income from the re-evaluation of financial investments and equity securities circulated on the stock market;- the writing off of restructured tax penalties and fines.

** The indicator is calculated including 30% of the volume of services provided to the “last mile” consumers on the basis of a court decision and/or direct agreements they have concluded with JSC FGC UES; if these volumes are excluded, the losses of energy amounts to 9.14%.

Implementation of KPIs in 2011

The net profit of JSC IDGC of Center and Volga Region for 2011 totaled RUB 4,232,120 thousand. The net profit is calculated based on the data from the Company’s accounting statements. In compliance with the Articles

of Association of the Company, the decision on the distribution of profit is made by the General Shareholders Meeting.

Under Article 8 of the Articles of Association the Com-

pany has established a Reserve Fund designated for cov-

ering losses, redeeming the bonds and repurchasing the

shares of the Company if no other funds are available.

The Articles of Association stipulate that the amount of

obligatory annual contributions to the Reserve Fund shall

amount to 5% of the net profit until it reaches the amount

of 5% of the Company’s charter capital. As of the end of

the reporting period, the Reserve Fund comprised RUB

517.149 thousand, accounting for 4.6% of the charter capi-

tal. 2012 will see the completion of the formation of the

Reserve Fund; to achieve this, it is planned to contribute RUB 46,340 thousand.

Since the establishment of JSC IDGC of Center and Volga

Region, a substantial share of its net profit has been al-

located annually for production development, which in-

volves the implementation of an investment program

aimed at enhancing the reliability and quality of supplying

electric power to consumers. Based on the 2011 results,

it is planned to allocate RUB 3,870,226 thousand for the development of the Company.

In the reporting year, a decision on dividend payout was

made for the first time in the history of the Company. The

amount of net profit allocated for dividend payouts for

2010 totaled RUB 141.000 thousand. The report on divi-

dend payment can be found in the section “Shareholders’

Capital” on page 159 of the Annual Report. The Company

plans to allocate RUB 315,554 thousand for dividend pay-outs for 2011.

Index 2008 ** 2009 2010 2011 planned

Undistributed net profit 1,428,560 426,939 1,397,757 4,232,120

Reserve fund 71,428 21,347 69,888 46,340

Production development 1,357,132 405,592 1,186,869 3,870,226

Dividends 0 0 141,000 315,554

* The distribution of net profit for 2008-2010 is presented in accordance with the decisions of the General Shareholders Meeting of the Company. The amount of undistributed net profit corresponds to the data in the accounting statements as of the end of the reporting year.** Due to reorganization of the Company in the form of affiliation of distribution grid companies with the Company, which was completed on February 29, 2008, the total net profit for 2008 includes the following:

the net profit of JSC IDGC of Center and Volga Region as the management company for the period from January 01, 2008 till February 28, 2008;

the net profits of regional grid companies affiliated with reorganized JSC IDGC of Center and Volga Region for the period from February 29, 2008 till December 31, 2008;

the net profit of the executive body of reorganized JSC IDGC of Center and Volga Region for the period from February 29, 2008 till December 31, 2008.

Distribution of net profit for 2008-2011*, RUB thousand

DISTRIBUTION OF PROFIT2.3

THE AMOUNT OF DIVIDEND PAYMENTS FOR 2010

THE FIRST DECISION ON DIVIDEND PAYMENT IN THE HISTORY OF THE COMPANY

RUB 141,000 thousand

48 49



CREDIT POLICY2.4

In 2011, the total amount of borrowings raised by the

Company exceeded RUB 10.5 billion, including more

than RUB 6.7 billion designated for financing investment

activity. All these funds were raised without any pledge from the Company.

Currently the payments under all loan agreements

constituting the Company’s credit portfolio involve

only interest payments (while previously the terms and

conditions of loan agreements included a variety of fees

and payments, such as fees for providing the credit,

payment for opening a credit line, payment for reserving

borrowed funds, credit servicing payments, etc.).

The Company seeks to minimize the interest rates on

borrowed funds by constantly cooperating with partner

banks. As of January 01, 2011, the average rate for the

Company’s credit portfolio amounted to 8.04% p.a.

Starting with the second half of 2011, there appeared a

trend towards an increase in the cost of borrowed funds

in financial markets, which is clearly demonstrated by the

dynamics of the MosPrime 6M rate. During the reporting

year this rate grew by almost 3 percentage points reaching

the level of 7.33% p.a. However, the change in the average

rate for the Company’s credit portfolio amounted to less

than 0.5 percentage points, as the rate increased from

8.04% to 8.46% p.a. The average rate for the Company’s

credit portfolio grew mainly in Q4 of the reporting year.

The refinancing rate in 2011 changed three times: the rate

increased twice, up to 8.25% p.a.; however, at the end of

the year it was reduced to 8.0% p.a.

Amount outstanding as of December 31, 2010

Raisedin 2011

Redeemedin 2011

Interestaccrued in

2011

Interestpaid in 2011

Reclassificationof debt **

Amount outstanding as of December 31, 2011

Long-term borrowings 13,893,377 10,535,766 - 1,325,389 1,273,890 -3,067,290 21,413,353

Reserves* - 1,436,819 - 29,184 29,184 - 1,436,819

Refinancing of credit portfolio 4,828,732 2,410,702 - 406,453 356,536 -2,012,716 5,276,635

Financing of investment activity 9,064,645 6 ,688,245 - 889,751 888,169 -1,054,574 14,699,899

Short-term borrowings 1,602,005 - 2,955,657 54,968 55,298 3,067,290 1,713,307

Refinancing of credit portfolio 1,189,170 - 2,055,874 36,459 36,745 2,012,716 1,145,726

Financing of investment activity 412,836 - 899,784 18,509 18,554 1,054,574 567,581

TOTAL 15,495,383 10,535,766 2,955,657 1,380,356 1,329,188 - 23,126,659

* The transformation of debt from long-term to short-term with a repayment period of less than one year.

Information on the changes in the credit portfolio in 2011, RUB thousand

** The funds were raised in 2011 in order to refinance the credit portfolio and finance the investments in 2012.

DINAMICS OF INTEREST RATES IN 2011

4.38 4.31

4.40

6.72

8.258.25

8.00

7.757.937.99

8.028.04

7.33

8.00

8.46

Jan 01, 2011 Apr 01, 2011 July 01, 2011 Oct 01, 2011 Jan 01, 2012

The average weighted rate for the credit portfolio of JSC IDGC of Centerand Volga Region

The MostPrime 6M rate

The refinancing rate of the Central Bank of the Russin Federation

50 51



As of December 31, 2011, JSC IDGC of Center and Volga

Region has no overdue debts relating to the redemption

of the principal amount, interests and the credit servicing

payments.

The Company expects to be assigned a credit rating by

one of the leading international rating agencies in the

nearest future.

THE STRUCTURE OF THE CREDIT PORTFOLIO BY BANKS AS OF DECEMBER 31, 2011

21%Sviaz Bank

9%Barclays Bank PLC

10%Sberbank of Russia

58%Gazprombank2%

Bank of Moscow

AS OF THE END OF THE YEAR ARE THE KEY PARAMETERS OF THE CREDIT POLICY IN 2011

OF BORROWINGS RAISED FOR FINANCING INVESTMENTS,

THE AVERAGE RATE FOR THE CREDIT PORTFOLIO AMOUNTING TO 8.46% P.A.

> RUB 6.7 billionTariffs for power transmission services are established by

executive bodies of the federal subjects of Russia in the

sphere of state tariff regulation.

Under Federal Law №35-FZ “On Power Industry” dated

March 26, 2003, from January 01, 2011 the state regula-

tion of tariffs for power transmission services provided

by territorial grid companies created through reorganiza-

tion of joint-stock electric power companies is performed

based on long-term regulation parameters.

The long-term parameters of state regulation of tariffs

in the power industry include: the degree of reliability

and quality of services in line with long-term invest-

ment programs, the basic level of operational costs, the

amount of invested capital, the rate of return, the pay-

back period, etc.

In the reporting year the branches of JSC IDGC of Center

and Volga Region completed a phased transition to the

long-term regulation of tariffs for power transmission ser-

vices based on the Regulatory Asset Base (RAB):

• from January 01, 2009 – Ryazanenergo and Tulenergo

branches;

• from January 01, 2010 – Vladimirenergo, Kalugae-

nergo and Udmurtenergo branches;

• from January 01, 2011 – Nizhnovenergo, Ivenergo,

Kirovenergo and Marienergo branches.

The adoption of RAB-based regulation has been approved

by the resolutions of the Federal Tariff Service (FTS) of the

Russian Federation.

This method of long-term tariff regulation enables to at-

tract long-term investments, improve the reliability and

quality of services and optimize operational costs.

TARIFFS FOR POWER TRANSMISSION SERVICES

The tariff policy adopted by JSC IDGC of Center and Volga

Region is aimed at efficient management of controllable

activities, namely electric power transmission and

technological connection services. The key principles

of the Company’s tariff policy comprise establishing

optimal tariffs and ensuring the high quality of services.

TARIFF POLICY2.5

AT TR AC TING LONG-TERM IN V ESTMENT S

IMPROVING THE RELIABIL IT Y AND QUALIT Y OF SERVICES

OP TIMIZ INGOPER ATIONAL COST S

THE EXPECTED IMPACTOF RAB-BASED REGULATION

52 53



Branch Year Basic level of operational costs

Operational costs efficiency index

Amount of invested capital

Net working capital

Rate of return on invested capital

on the capital invested prior to RAB-based regulation

on newly invested capital

RUB million % RUB million RUB million % %

RAB-based regulation since January 01, 2009

Ryaz

anen

ergo

2009 1,097.6 - 5,713 82 6 12

2010 1 9 12

2011 1 12 12

2012 1 12 12

2013 1 11 11

Tule

nerg

o 2009 1,269.7 - 8,813 183 6 12

2010 1 9 12

2011 1 12 12


Vlad

imire

nerg

o

2010 1,135.7 - 7,210 140.2 6 12

2011 1,13 9 12

2012 1,13 12 12

2013 1,13 11 11

2014 1,13 11 11

Kalu

gaen

ergo

2010 922.7 - 9,818 134.3 6 12

2011 1 9 12

2012 1 12 12

2013 1 11 11

2014 1 11 11

Udm

urte

nerg

o 2010 970.9 - 5,639 124.8 6 12

2011 1 9 12

2012 1 12 12

RAB-BASED REGULATION PARAMETERS IN THE BRANCHES OF JSC IDGC OF CENTER AND VOLGA REGION

Branch Year Basic level of operational costs

Operational costs efficiency index

Amount of invested capital

Net working capital

Rate of return on invested capital

on the capital invested prior to RAB-based regulation

on newly invested capital

RUB million % RUB million RUB million % %


Iven

ergo

2011 669.2 - 3,847 80.5 6 12

2012 1,5 9 12

2013 1,5 11 11

2014 1,5 11 11

2015 1,5 11 11

Kiro

vene

rgo

2011 1,472 - 5,498 121.4 6 12

2012 1 9 12

2013 1,5 11 11

2014 2 11 11

2015 2,5 11 11

Mar

iene

rgo

2011 513.7 - 4,047 87 6 12

2012 1 9 12

2013 1 11 11

2014 1 11 11

2015 1 11 11

Niz

hnov

ener

go

2011 4,356.8 - 31,094 768.3 6 12

2012 1 9 12

2013 1 11 11

2014 1 11 11

2015 1 11 11

54 55



DINAMICSOF THE AVERAGE TARIFF IN 2010-2011 kop./kWh

2010 2011 2011*

* Taking into account the revised tariff resolutions in compliance with the Order №1172 of the Government of the Russian Federationdated December 27, 2010

Tariff Resolutions on Electric Power Transmission Services for 2011

In compliance with the current legislation, before the

beginning of the year the regulatory bodies of the fed-

eral subjects of Russia in the operations area of JSC

IDGC of Center and Volga Region adopted the following

tariff resolutions for 2011:

• the average tariff for power transmission services

amounted to 120.2 kopecks per kWh, which exceeds

the 2010 tariff by 24%;

• the approved required gross revenue (RGR) amounts to

RUB 71,025 million, which exceeds the 2010 revenue by

33%.

Vladimirenergo

Ivenergo

Kalugaenergo

Kirovenergo

Marienergo

Nizhnovenergo

Ryazanenergo

Tulenergo

Udmurtenergo

108.7138.9

125.0

64.8

94.2

129.3

92.6

108.2

80.0

91.1

113.4

77.9

115.1

101.9

128.1

176.1

133.0

141.9

99.4

71.8

108.4

101.1

127.3

148.6

106.5

124.5

88.2

Branch 2010 2011 2011* 2011 vs 2010 (relative increase), %

2011* vs 2010 (relative increase), %

Vladimirenergo 108.7 138.9 125.0 28 15

Ivenergo 64.8 77.9 71.8 20 11

Kalugaenergo 129.3 176.1 148.6 36 15

Kirovenergo 91.1 101.9 101.1 12 11

Marienergo 108.2 141.9 124.5 31 15

Nizhnovenergo 94.2 115.1 108.4 22 15

Ryazanenergo 92.6 133.0 106.5 44 15

Tulenergo 113.4 128.1 127.3 13 12

Udmurtenergo 80.0 99.4 88.2 24 10


96.7 120.2 109.9 24 14

Average tariffs in 2010-2011, kop./kWh

* Taking into account the revised tariff resolutions in compliance with the Order №1172 of the Government of the Russian Federation dated December 27, 2010

Note: the average tariff for power transmission services

has been calculated in accordance with the new tariff

resolutions of the regulatory bodies and excluding the

cross-subsidization of Nizhnovenergo and Tulenergo

branches.

However, in order to contain the growth of tariffs for the

services provided by natural monopolies, in compliance

with the Order №1172 of the Government of the Russian

Federation dated December 27, 2010, the regulatory bod-

ies of the subjects of the Russian Federation were instruct-

ed to revise the 2011 tariffs for power transmission ser-

vices from May 01, 2011 assuming that the year-on-year

growth of the average single-rate tariff shall not exceed

15%.

In accordance with the instruction of the Government of

the Russian Federation, the regulatory bodies adopted the

following new tariff resolutions for 2011:

• the average tariff for power transmission services

amounts to 109.9 kopecks per kWh, which exceeds the 2010 tariff by 14%;

• the approved required gross revenue (RGR) amounts

to RUB 65,708 million, which exceeds the 2010 rev-

enue by 23%. In 2011, the Federal Tariff Service made a decision to

extend the long-term regulation period for Vladimi-

renergo and Kalugaenergo branches from three to five

years (2010-2014).

56 57



RAB-BASED METHOD: THE STRUCTURE OF THE REQUIRED GROSS REVENUE

INITIALLY INVESTED CAPITAL BASE NEW INVESTMENTS

PAYBACK+ RETURN ON CAPITAL MANDATORY COSTS OPERATIONAL COSTS

Regulatory asset base

Required gross revenue

PAYBACK PERIOD35 YEARS

Used for financing mandatory costs (federal factors,rent, leasing, taxes, etc.)

Used for financing core activities (operations) Expected to decrease in the long term due to the use of efficiency index

PAYBACK PERIOD35 YEARS

Rate of return on initial capital 6.9 and 12 % (from 2013 – 11%)

Rate of returntill 2013 - 12%

from 2013 – 11%

Allocated for:• development (under the obligations on the approved development

investment program)• dividends, interests on credits, social expenses

REQUIRED GROSSREVENUE GROWTHIN 2011COMPARED TO 2010

37% 23%38% 8%

25% 15%

30% 25%

22% 25%

48% 25%

53% 22%

44% 26%

30% 15%

20% 15%

34% 33%

23% 23%

57% 16%

47% 10%

79% 37%

43% 29%

7% 7%20% 19%

Taking into account the revised tariff resolu-tions in compliance with the Order №1172 of the Government of the Russian Federation dated December 27, 2010

Without taking into account the tariff solutions’ revision

Total RGR RGR for grid maintenance

Vladimirenergo

Ivenergo

Kalugaenergo

Kirovenergo

Marienergo

Nizhnovenergo

Ryazanenergo

Tulenergo

Udmurtenergo

58 59



Branch Total RGR RGR for the maintenance of grids (excluding the services of JSC FGC UES, energy to compensate for energy losses, the services of territorial grid organizations)

2010 2011 2011* 2011 vs 2010 (relative increase), %


2010 2011 2011* 2011 vs 2010 (relative increase), %


Vladimirenergo 5,456 7,457 6,714 37 23 2,192 3,015 2,375 38 8

Ivenergo 1,954 2,446 2,252 25 15 936 1,126 1,076 20 15

Kalugaenergo 4,514 6,676 5,636 48 25 2,425 3,797 2,803 57 16

Kirovenergo 4,831 5,801 5,756 20 19 2,148 2,305 2,305 7 7

Marienergo 2,080 2,994 2,625 44 26 650 1,165 889 79 37

Nizhnovenergo 18,717 24,424 23 454 30 25 6,947 9,297 9,214 34 33

Ryazanenergo 4,240 6,473 5,184 53 22 2,063 3,024 2,259 47 10

Tulenergo 6,308 7,727 7,854 22 25 3,326 4,087 4,087 23 23

Udmurtenergo 5,416 7,026 6,233 30 15 1,665 2,389 2,149 43 29

TOTAL for the Company

53,517 71,025 65,708 33 23 22,351 30,205 27,157 35 22

Growth of required gross revenue in 2010-2011, RUB million

* Taking into account the revised tariff resolutions in compliance with the Order №1172 of the Government of the Russian Federation dated December 27, 2010

TARIFFS FOR TECHNOLOGICAL CONNECTION SERVICES

Under Article 23.2 of Federal Law №35-FZ «On Power In-

dustry» dated March 26, 2003, from January 01, 2011 the

payment for technological connection shall not include in-

vestment expenses related to renovation of electrical grid

facilities, including the connections between the facilities

of territorial grid organizations and the facilities compris-

ing the unified national (all-Russian) electric grid, except

for the costs associated with construction of electrical grid

facilities, ranging from existing electrical grid facilities to

power receivers to be connected.

These costs are taken into account when establishing the

tariffs for power transmission services.

In compliance with the above-mentioned law, during

2011, the regulatory bodies of the subjects of the Russian

Federation revised the amount of payment for the follow-

ing branches of the Company: Vladimirenergo, Ivenergo,

Kalugaenergo, Kirovenergo, Marienergo, Nizhnovenergo

and Ryazanenergo branches.

DINAMICS OF THE AVEREGEPAYMENT FOR TEHNOLOGICAL CONNECTION IN 2010-2011, RUB/kW

Notes:

• Vladimirenergo: the diagram (2011-2012) reflects the

average approved standard rate used for calculating

the amount of payment for operations that do not

involve investment-related costs.

• Kirovenergo: the tariffs for technological connection

for 2010 were differentiated by territory (city and

region). This differentiation is not valid from 2011.

• Marienergo and Ryazanenergo: from 2011, two

variants of the tariff for technological connection have

been established, including and excluding investment-

related costs.

• Ivenergo: from 2011, the tariff for technological

connection does not include investment-related costs.

Vladimirenergo

Ivenergo

Kalugaenergo

Kirovenergo

Kirovenergo

Marienergo

Nizhnovenergo

Ryazanenergo

Tulenergo

Udmurtenergo

10,655955955

9,248

11,503

11,300

7,351

1,860

364

226

4,271

7,998

486

7,685

1,409

7,775

11,075

56

1,409

400

70

486

119

583

773

7,344

54

583

400

70 2010 2011 2012

The sity of Kirov

The Kirov region

7,685119

8,0261,400

60 61



Dynamics of the Average Tariff for Technological Connection to the Grids of JSC IDGC of Center and Volga Region

7,669 -59% -30%3,155 2,202

2010 2011 2012

RUB/kW RUB/kW RUB/kW

The decrease in the average tariff for technological con-

nection to power grids was caused mainly by the fact that

investment-related costs, including those related to the

development of the existing infrastructure, had been ex-

cluded from the tariff.

The adopted tariff resolutions on technological connec-

tion to the grids of JSC IDGC of Center and Volga Region

stipulate favorable terms of payment for the services pro-

vided: if the customer contract demand does not exceed 15

kW (including the power previously connected in the given

connection point), the customer owns facilities belonging

to the third category of power supply reliability (per one

power source) and the distance from the boundaries of the

customer’s land plot and the electrical grid facilities of the

relevant voltage class operated by the grid organization

to which the request has been submitted does not exceed

300 m in cities, towns and urban-type villages or 500 m

in the rural area, the tariff for technological connection of

such customer shall not exceed RUB 550.

The shortfalls in revenue from the connection of such cus-

tomers are taken into account when setting the tariff for

power transmission services.

TARIFFS FOR TECHNOLOGICAL CONNECTION SETON THE BASIS OF STANDARD TARIFF RATES

In 2011, the following standard tariff rates used for calcu-

lating the tariffs for technological connection have been

set for Vladimirenergo branch:

• tariffs for the operations that do not include invest-

ment-related costs are calculated in RUB/kW (this rate is

differentiated by voltage and connected power range);

• tariffs for construction of 1 km of overhead and cable lines

depending on the cable type and the method of cable

laying (in a trench or in a pipe) are calculated in RUB/km;

• tariffs for construction of substations, per line depend-

ing on the voltage of the transformer to be installed,

are calculated in RUB.

TARIFFS FOR CUSTOM-TAILORED TECHNOLOGICAL CONNECTION

The main part of the property of JSC IDGC of Center and

Volga Region is comprised of electrical grid complexes and

independent power assets with the voltage of 110 kV and

lower, which are used for transmission, distribution and

transformation of electric power.

In 2011, the Company acquired facilities mainly through

new construction under the investment program.

In the reporting year, the fixed assets were upgraded

mainly by renovation.

In the cases stipulated by the existing legislation, the

tariffs for technological connection are calculated on an

individual basis.

The total number of custom-tailored technological

connections performed by the Company in 2011 was

3.8 times higher than in 2010, mainly due to the fact that

in certain subjects of the Russian Federation investment-

related costs had been excluded from the tariffs for

technological connection.

Overview of technological connections at standard tariff rates in 2011

Overview of custom-tailored technological connections in 2010-2011

Numberof contracts

Customer contractdemand, MW

Payment underthe contract, RUB million

Total, including 189 52.9 39.2

includinginvestments

19 14.5 33.2

net ofinvestments

170 38.4 6.0

Period Number of custom-tailored technological connections

Customer contract demand, MW

Number of approved technological connections *

Tariff for technological connection set by the regulatory body, RUB million

2010 109 192.8 61 947.8

2011 413 451.9 389 1,152.8

* The tariff for custom-tailored technological connection submitted to regulatory bodies that was not approved in 2011 will be set in 2012.

NON-CURRENT ASSETS2.6

PROPERTY COMPLEX2.6.1

62 63



The share of rented assets within the Company’s fixed

assets is small. The Company rents medium and low-

voltage power grids owned by local authorities. The

rental agreements are concluded in order to ensure

reliable power supply to electricity consumers.

In 2011, the Company continued to use the equipment

held on a lease. The facilities operated on a leasehold

basis are acquired by the Company in compliance with

the terms and conditions of the agreements.

In order to terminate non-core activities, in the

reporting period JSC IDGC of Center and Volga Region

continued to follow the Regulations on the Procedure

for Operation of the Housing and Utilities approved by

the resolutions of the Board of Directors (Minutes №50

dated December 25, 2009, Minutes №88 dated October

31, 2011). Under this program, during the reporting year

26 facilities provided to residents for accommodation

before 2004 passed into their ownership.

The information on the structure of the Company’s

property complex and the changes therein during 2011

is provided in Supplement №8 to the Annual Report.

The key activities of the Company in the sphere of

land ownership in 2011 included creating land plots

for existing line facilities pertaining to power grids

in compliance with the requirements of Federal Law

№137-FZ «On Effecting the Land Code of the Russian

Federation» dated October 25, 2001. The rental

agreements have been concluded for land plots with

a total area exceeding 72 ha.

The information on the land plots used by the Company

in the reporting period is provided in Supplement №9 to

the Annual Report.

JSC IDGC of Center and Volga Region makes long-term

financial investments in the form of joint ventures and

investments in shares and ownership interests of other

companies.

The Company has agreements on joint ventures that do not

imply the subsequent registration of results in the form of

ownership of shares or interest in the charter capital.

These investments are aimed at generating income after

the facilities under construction are commissioned and/or

ensuring the operation of grid facilities to generate profit.

The information on the joint ventures of the Company

is disclosed in the issuer’s quarterly reports for 2011 (p.

3.2.6.), which can be found on the Company’s website

at www.mrsk-cp.ru in the section «Disclosure of the

information and the accounting information / Quarterly

reports».

JOINT VENTURES

LONG-TERM FINANCIAL INVESTMENTS2.6.2

The corporate governance system of JSC IDGC of Center

and Volga Region includes six subsidiaries and one depen-

dent company. Six of these companies were established

prior to the establishment of the Company, and JSC IDGC

of Center and Volga Region became the successor in title

to the shares of these companies through the affiliation of

nine distribution grid companies. One more company was

established by the Company together with other parties

in 2010.

The Board of Directors of the Company approved the

Procedure for the Interaction of JSC IDGC of Center and

Volga Region with Companies whose Shares and Interests

are Owned by the Company (Minutes №35 dated March

25, 2009). The full text of the document can be found on

the Company’s website at www.mrsk-cp.ru in the section

«About the Company / Internal documents» . The Pro-

cedure regulates the key issues of corporate interaction

between the Company and its subsidiary and dependent

companies, specifies the procedures for making key deci-

sions and exercising corporate control.

The detailed information on the subsidiary and dependent

companies of the Company is disclosed on the Company’s

website at www.mrsk-cp.ru in the section «About the Com-

pany / Information on the subsidiary and dependent compa-

nies of the Company».

SUBSIDIARY AND DEPENDENT COMPANIES

FORMS OF CORPORATE CONTROL OVER THE SUBSIDIARY AND DEPENDENT COMPANIES

SHAREHOLDERS’ CONTROL

FINANCIALCONTROL

Developing and implementing unified business processes,

internal documents and reports in the subsidiary and

dependent companies

Planning and overseeing the financial and business

operations of the subsidiary and dependent companies

Formulating the HR policy of the subsidiary and dependent companies and overseeing its

implementation

Formulating the development strategy of the subsidiary and

dependent companies and overseeing its implementation

Participation of the Company’s representatives in the

management bodies of the subsidiary and dependent

companies

MANAGERIALCONTROL

64 65



As of December 31, 2011 participating in core activities; other subsidiary and

dependent companies are engaged in non-core activities.

* The share of the Company in the charter capital of the subsidiary and dependent companies equals to the share of the Company’s voting shares in these companies.

SUBSIDIARY AND DEPENDENT COMPANIES

№ Full and abbreviated name and locationof subsidiary and dependent companies

Registration date Key activities Chartercapital, RUB

The Company’s ownership interest in the charter capital of subsidiary and dependent companies*, %

Revenue,RUB thousand

Net profit/loss, RUB thousand

Subs

idia

ry c

ompa

nies

1 Closed Joint-Stock Company Svet (CJSC Svet), 8 Lunacharsky Street, Bor town, Nizhny Novgorod Region

March 06, 1998 Electric power transmission. 2,402,883 100 27,832 915

2 Open Joint Stock Company Berendeevskoye (JSC Berendeevskoye), Berendeevka settlement, Lyskovo District, Nizhny Novgorod Region

February 06, 2004 Production, processing and marketingof agricultural products.

54,670,600 100 30,394 1,548

3 Open Joint Stock Company Luchinskoye (JSC Luchinskoye), Luchinskoye settlement, Sobinsky District, Vladimir Region

June 27, 2003 Production, processing and marketingof agricultural products.

58,630,410 100 7,909 -7,274

4 Open Joint Stock Company Automobile Transport Unit (JSC ATU),50 Yuzhnaya Street, Orichi settlement, Orichevsky District, Kirov Region

October 14, 2003 Transportation services, motor vehicle servicing, maintenance and repair, services for re-equipment and assessment of motor vehicles.

205,063,407 100 722,877 11,854

5 Open Joint Stock Company Sanatorium-preventorium «Energetik» (JSC Sanatorium-preventorium «Energetik»),10 Aviatsionnaya Street, Izhevsk, Republic of Udmurtia

January 10, 2003 Healthcare, medical treatment,accommodations and catering services.

46,953,097 100 33,766 -674

6 Open Joint Stock Company Interrigional Energoservice Company Energoefficiency Technologies (JSC IEC Energoefficiency Technologies),6 Proviantskaya Street,Nizhny Novgorod

December 27, 2010 Energy services. 20,000,000 51 55,300 2,770

Dep

ende

nt

com

pany 7 Open Joint Stock Company Tulenergokomplekt (JSC Tulenergokomplekt),

101a Timiryazev Street, TulaJune 19, 2002 Material supply, operation and servicing

of motor transport, transportation services.83,333,000 50 32 -42,679

FINANCIAL INVESTMENTS IN OTHER SHARES AND INTERESTS

The information on the Company’s participation in

commercial organizations in which the Company’s

interest is less than 50% is provided in Supplement № 7

to the Annual Report.

BUSINESS ACTIVITIES REVIEW

03

Complex CB-CSR (capacitor banks — controlled shunt reactor) at S 110/35/10 kV “Pokrov”

enables controlling reactive power flows in the transit between the Vladimir and Moscow

energy systems. It is a unique for the present and the most powerful (25 MVAr) compensating

tool in the energy systems of the Central Russia as regards 110 kV voltage

68 69

03 BUSINESS ACTIVITIES REVIEW


NOVEMBER 29

New Customer Service Centers were opened in the Navashino city, Novgorod region (the Nizhnoven-ergo Branch).

MARCH 10 APRIL 15,DECEMBER 27 AUGUST 30

New Customer Service Centers were opened in the Petushki city, Vladimir region (Vladimirenergo Branch).

OCTOBER 25

At the SS Pokrov in the Vladimiren-ergo Branch a controlled reactive power source for 25 MVAr in power systems of 110 kV was installed, which has so far been the only one in the Central Russia (BSK-UShR).

Programs of Energy Saving and Im-provement of Energy Efficiency for 2011, 2012 and 2013-2016 were ap-proved by the Board of Directors.

New Customer Service Centers were opened in the Karakulino village, Udmurtia Republic (the Udmurten-ergo Branch).



Key activities of JSC IDGC of Center and Volga Region are

the following:

• Energy transmission via Company’s electrical grid

facilities with the voltage range from 220-0.4 kV

(owned by as a property or on other legal grounds);

• Services of technological connection to the Company’s

power grids.

Company’s tariff policy is regulated by the following state

regulatory authorities: the Federal Tariff Service of the

Russian Federation and executive bodies in the regions

of the Russian Federation engaged in the state tariff regu-

lation.

GENERALINFORMATION

3.1Main Characteristics of the Company’s Power Grid Facilities

Branch Length of powertransmission line, km

Number of SSwith the voltage of 35 kV and higher

Capacity of SS with the voltage of 35 kV and higher, MVA thousand

Numberof 6-10kV DPs

Number of 6-35/0.4 kVTSSs

Networks Route

Vladimirenergo 21,967 20,754 139 3.30 4 4,709

Ivenergo 15,283 14,267 141 2.62 6 3,800

Kalugaenergo 27,061 26,274 152 2.92 59 6,260

Kirovenergo 38,584 37,374 224 2.94 17 8,700

Marienergo 12,412 11,924 88 1.13 13 2,956

Nizhnovenergo 59,530 57,491 259 5.20 227 14,028

Ryazanenergo 31,211 29,871 154 3.45 42 5,972

Tulenergo 32,047 30,661 172 4.10 182 6,973

Udmurtenergo 25,296 24,490 219 3.68 18 5,655

TOTAL 263,391 253,106 1,548 29.35 568 59,053

70 71



Electric power from the power plants to the customers

is transmitted via power grids.

In 2011, total power volume of 59,653 million kWh were supplied via Company’s grid from the grids of the JSC FGC UES and allied power grid systems. 54,299 million kWh were transmitted to the customers and regional grid companies. Energy losses totaled 5,354 million

kWh which accounted for 8.97% of the power supplied to the Company’s grids.

Key Power Supply Indicators of in 2011

To fulfill its obligations to the retail companies the Com-

pany is the consumer of the services rendered by:

• JSC FGC UES, according to the agreements with it the

grids of Unified National Electric Grid are used for

power supply to the distribution grid;

• Territorial Grid Organizations, according with

agreements with them their grids are used for power

supply to the end consumers.

In order to offset energy losses in the Branches’ grids,

agreements to purchase the losses are concluded. They

can be also included in the agreements on power trans-

mission services with energy retail companies.

The following agreements are concluded to provide ser-

vices to the Company’s consumers, namely more than

140 thousand legal entities and 2.5 million utility consum-

ers, directly connected to the branch grids. In 2011, out

of total 506 agreements, 9 were concluded with JSC FGC

UES, 18 and 479 with direct consumers and Territorial Grid

Organizations respectively.

* P.p. – percentage point.

IN 2011, 59,653 mln kW OF ELECTRIC POWER IN TOTAL WERE SUPPLIED IN THE COM-PANY’S GRID FROM THE GRIDS OF JSC «UES FGC» FROM THE PRODUCERS OF ELECTRIC POWER AND NEIGHBORING GRID COMPANIES.

POWER TRANSMISSION

Unit of measure

2009 2010 2011 2011/2010 (absolute increase)

2011/2010 (relative increase, %)

Power output kWh million 56,175 59,492 59,653 161 0.27

Productive Supply kWh million 50,889 54,100 54,299 199 0.37

Losses kWh million 5,286 5,391 5,354 -37 -0.69

% 9.41 9.06 8.97 - 0.09 P.p.* -0.99

Technological Connection (TC) is a set of technical and

organizational measures, which ensure actual connec-

tion of the customers’ facilities to the power grid facili-

ties of the grid company.

The procedure of technological connection complies

with the Regulations on Technological Connection of

Consumer Power Receivers, Energy Production Facili-

ties and Power Grid Facilities Owned by Organizations

and Other Persons to the Power Grids, approved by the

Decree No. 861 of the Government of the Russian Fed-

eration, dated December 27, 2004 (in the version of the

Decree No. 1178 of the Government of the Russian Fed-

eration, dated December 29, 2011).

Scope of the Regulations:

• connection power receivers put into operation for

the first time;

• increasing capacity of the already connected power

receivers under construction;

• modifying category of the power supply reliability,

changing connection points or type of production

activity of the already connected power receivers

which do not require reconsideration of the

connected power volume, but do modify the scheme

of the external power supply.

In 2011, the Company concluded 44,050 agreements on

technological connection with total connected power of

1,147.45 MW and carried out 19,840 connections of the

customers’ power receivers with total connected power

of 364.09 MW.

The Company’s other activities include maintenance

and repair of the power grid facilities owned by the

third companies, testing of power equipment, repair and

replacement of the energy metering devices, property

leasing, services of placement of advertisement and

telecommunications equipment on the power grid fa-

cilities, etc.

TECHNOLOGICAL CONNECTION

OTHER ACTIVITIES

54,299 million kWh

44,050 1,147.45 MW

PRODUCTIVESUPPLY

Agreementsfor technological connection with total power volume of

KEY INDICATORS IN 2011 IN THE MAIN OPERATIONS OF JSC IDGC OF CENTER AND VOLGA REGION

72 73



Branch Planned Actual Planned to Actual (relative increase), %

PowerOutput

Productive Supplyon the territory of the Company / branch

Losses PowerOutput

Productive Supply on the territory of the Company / branch

Losses Power Output

Productive Supplyon the territory of the Company/ branch

Losses

Volume % of outputto grid

Volume % of outputto grid

Volume % of output to grid

Vladimirenergo 6,533 5,865 668 10.23 6,431 5,788 643 9.99 -1.6 -1.3 -3.8 -0.2

Ivenergo 3,390 3,240 150 4.42 3,359 3,220 139 4.14 -0.9 -0,6 -7.2 -0.3

Kalugaenergo 4,581 3,907 674 14.72 4,544 3,770 774 17.04 -0.8 -3.5 14.8 2.3

Kirovenergo 5,591 5,166 426 7.61 5,519 5,117 402 7.28 -1.3 -0.9 -5.7 -0.3

Marienergo 2,713 2,488 225 8.31 2,740 2,535 204 7.46 1.0 1.9 -9.4 -0.9

Nizhnovenergo 18,347 16,460 1,887 10.28 18,444 16,608 1,836 9.95 0.5 0.9 -2.7 -0.3

Ryazanenergo 4,556 4,239 317 6.95 4,518 4,235 283 6.27 -0.8 -0.1 -10.6 -0.7

Tulenergo 6,435 5,730 705 10.96 6,251 5,577 674 10.78 -2.9 -2.7 -4,4 -0.2

Udmurtenergo 7,790 7,382 408 5.24 7,848 7,449 399 5.08 0.7 0.9 -2.3 -0.2

TOTAL 59,935 54,475 5,460 9.11 59,653 54,299 5,354 8.97 -0.5 -0.3 -1.9 -0.1

Key Power Transmission Indicators in 2011, kWh million

PRODUCTION PERFOMANCE IN 2009-2011

2009 2010 2011

LOSSES, %

9.41

9.068.97

At the year-end 2011, power transmission totaled 54,299 million kWh which is 198 million kWh (0.37%) more than the previous year.

KEY PERFORMANCE INDICATORS3.2

ENERGY TRANSMISSION3.2.1

20112010

59,49259,653

54,100 54,299

5,391 5,354

Power output

Productiv supply

Losses

2009

56,17550,889

5,286

Volume of Power Transmission Services in 2010-2011, kWh million

Branch 2010 2011 2011/2010, (ab-solute increase)

2011/2010, (rela-tive increase), %

Vladimirenergo 5,764 5,788 24 0.42

Ivenergo 3,327 3,220 -107 -3.22

Kalugaenergo 3,768 3,770 2 0.04

Kirovenergo 5,276 5,117 -159 -3.01

Marienergo 2,559 2,535 -24 -0.92

Nizhnovenergo 16,225 16,608 383 2.36

Ryazanenergo 4,193 4,235 41 0.99

Tulenergo 5,804 5,577 -227 -3.91

Udmurtenergo 7,184 7,449 265 3.68

TOTAL 54,100 54,299 198 0.37

74 75



Actual Energy Losses in 2010-2011

Branch 2010 2011 2011/2010

kWh million

%* kWh million

% (absolute increase),kWh million

(relative in-crease), %

Vladimirenergo 649 10.11 643 9.99 -6 -0.12

Ivenergo 150 4.36 139 4.14 -11 -0.22

Kalugaenergo 654 14.80 774 17.04 120 2.24

Kirovenergo 401 7.45 402 7.28 1 -0.18

Marienergo 216 8.12 204 7.46 -12 -0.67

Nizhnovenergo 1,902 10.60 1,836 9.95 -66 -0.65

Ryazanenergo 300 6.67 283 6.27 -17 -0.41

Tulenergo 719 11.02 674 10.78 -45 -0.24

Udmurtenergo 401 5.38 399 5.08 -2 -0.30

TOTAL 5,391 9.18 5,354 8.97 -38 -0.21

* In 2010, conditions were comparable to those in 2011(except for the last mile facilities in the Branches Ivenergo, Kirovenergo, Marien-ergo, Nizhnovenergo, Udmurtenergo, which had direct agreements with JSC FGC UES in 2011)

Actual energy losses in the Company’s electrical grids

totaled 5,354 million kWh which accounted for 8.97%

of the energy intended for supply. As compared to 2010,

energy losses decreased by 38 million kWh (0.21%) tak-

ing into account 2% increase of the supply (in 2010, sup-

ply in the comparable conditions totaled 58,178 million

kWh). It is due to the Company’s persistent efforts that

losses are decreasing.

In 2011 the biggest part in the Company’s total pro-

ductive supply to end consumers was accounted for by

industrial customers (29%), who were followed by the

population (7%). Supply to the Territorial Grid Organiza-

tions totaled 49%. Structure of power consumption by

groups of customers has been stable over the years. Sig-

nificant share of high voltage energy transmission (63%)

is due consumption by large industrial customers.

COMPANY’S POWER SUPPLY BY VOLTAGE IN 2011

14%LV

17%MV2

63%HV

6%MV1

Earnings Generated from Power Transmission Services

In 2011, the Company’s earnings generated from power

transmission services totaled RUB 63,249 million less

VAT which is 0.1% more than had been planned in the

business-plan. It is RUB 10,143 million (19%) more than

the previous year and RUB 17,560 million (38%) than the

earnings in 2009.

In 2011, providers of last resort (POLR) accounted for

77% (RUB 49,263 million less VAT) of the earnings thus

taking the first place and outstripping energy retail or-

ganizations with 19% (RUB 11,952 million less VAT), end

consumers with 3% (RUB 1,619 million less VAT), and

related territorial grid companies with 1% (RUB 415 mil-

lion less VAT).

STRUCTURE OF REVENUES GENERATED FROM POWER TRANSMISSION

SERVICES PER CONSUMER GROUPS IN 2011

COMPANY’S POWER SUPPLY BY CONSUMER GROUPS IN 2011

5%Transport

2%Agriculture

29%Industrial

7%Population and equalentities

4%Non-industrial customers

49%Territorial grid organizations

3%State and municipal organizationsand ower budget consumers

3%Over consumers

19%Energy retail companies

77%POLR

1%Territorial grid organizations

76 77



Information on the Accounts Receivable from Power

Transmission

As of December 31, 2011 the Company’s accounts re-

ceivable totaled RUB 4,836 million, including current

debt of RUB 3,585 million (74%) and overdue debt of

RUB 1,252 million (26%). Receivables turnover in the

reporting period totaled 24 days. Overdue debt to the

total earnings generated from energy transmission ser-

vices ratio was 1.68%.

Accounts Receivable (Debt) for Power Transmission Services , RUB million

Branch Consumer debt (including VAT)as of December 31, 2010

Consumer debt (including VAT)as of December 31, 2011

Total Current Overdue Total Overdue Including disput-able debts

Total Including disputable debts

Total Including disputable debts

Vladimirenergo 336 251 85 38 741 437 304 235

Ivenergo 194 109 85 49 236 174 62 2

Kalugaenergo 328 264 64 6 175 169 6 6

Kirovenergo 570 439 131 0 503 503 0 0

Marienergo 269 211 58 35 400 238 161 161

Nizhnovenergo 1,031 471 561 557 830 567 263 0

Ryazanenergo 275 275 0 0 247 247 0 0

Tulenergo 661 653 8 1 1,097 757 340 339

Udmurtenergo 519 431 88 56 607 491 116 55

TOTAL 4,184 3,104 1,080 742 4,836 3,585 1,252 798

STRUCTURE OF ACCOUNTS RECEIVABLE FROM POWER

TRANSMISSION SERVICES IN 2010-2011, RUB mln

742 798

338 454

3,104

3,585

As of December 31, 2011

As of December 31, 2010

Current

Overdue (less disputable)

Disputable

In 2011, consumer debts for energy transmission ser-

vices increased by RUB 652 million.

Receivables turnover did not change as compared to

2010 level. Overdue debt to the total earnings gen-

erated from energy transmission services ratio de-

creased by 0.02%.

Increase in the current debt in the reporting period was

due to the rise of the tariff rates for power transmission

services as weight average one-part tariff rate increased

by 19% in 2011 as compared to the previous year.

Four of the Company’s branches managed to reduce

overdue debt. These are Ivanenergo (by RUB 20.18 mil-

lion), Kalugaenergo (by RUB 58.12 million), Kirovener-

go (by RUB 130.8 million) and Nizhnovenergo (by RUB

297.94 million).

Growth of the Company’s total overdue debt was due to its

increase in the following four branches: Vladimirenergo

(by RUB 218.63 million), Marienergo (by RUB 107.45 mil-

lion), Tulenergo (by RUB 332.18 million) and Udmurten-

ergo (by RUB 33.56 million).

The increase in the overdue accounts receivable was

caused by consumers’ disputes and breach (in the case

of two branches) of the terms of payment stated in

the contract.

As of December 31, 2011 disputable debt totaled RUB

798.39 million.

STRUCTURE OF DISPUTED DEBT PER

CONSUMER GROUPS IN 2011

0%End consumers

11%Energy retail companies

0%Territorial

grid organizations

89%POLR

78 79



STRUCTURE OF DISPUTED DEBT BY CAUSES OF DISAGREEMENT

In 2011, as a result of processing claims for collection of

debts the Company’s claims for total sum of RUB 608.93

million were upheld in court. The Company won 97.08% of

the claims which is 2.28% less than in 2010.

As of December 31, 2011, 3.49% of the overdue debt was

restructured, 60% are enforced by legal action, 9.48% are

claimed for collection (new overdue debt) and 21.63% are

under bankruptcy proceedings initiated against the cus-

tomers.

In 2011, the Company received 50,244 applications for

technological connection of power receivers to the Com-

pany’s grids; total customer contract demand amounted to

1,719 MW.

All the branches experience steady increase in the number

of applications, growth registered in 2010 and 2011 was

49% and 47% respectively. As compared to 2009 the num-

ber of applications more than doubled. The Company also

received three applications for technological connection

of generating facilities with total power of 92 MW.

TECHNOLOGICAL CONNECTION TO GRIDS3.2.2

NUMBER OF APPLICATIONS

FOR TEHNOLOGICAL CONNECTION

IN 2009-2011

2%Energy losses in the grids

of Territorial Grid Organizations

2%Volume of power transmitted

to the legal entities and persons

6%Type of tariff

(one-part/two-part tariff)

6%Volume of power transmitted to the apartment building (including public utilities)

84%Capacity used in calculations

22,858

2009 2010 2011

34,134

50,244

DISTRIBUTION OF CUSTOMER CONTRACT

BY CATEGORIES OF CONNECTION

Note: applications for generating facilities are not included

Totally, connection categories ‘over 750 кW (0.4-20 кV)’

and ‘up to 15 kW’ account for the biggest part (40% and

27% respectively). The category ‘over 750 кW (35-110

кV)’ accounts for the smallest share of 4%.

Branch 2009 2010 2011

Number ofapplications

Total cus-tomercontract de-mand, MW


Total cus-tomercontract de-mand, MW


Total cus-tomercontract demand, MW

Vladimirenergo 2,695 41.16 3,890 71.49 4,948 177.97

Ivenergo 828 92.22 1,219 67.15 1,730 57.55

Kalugaenergo 3,993 167.94 5,697 133.64 8,662 288.27

Kirovenergo 2,523 41.10 3,953 74.06 5,451 112.37

Marienergo 853 20.82 1,475 23.49 1,882 31.47

Nizhnovenergo 6,450 205.55 8,916 220.51 13,851 531.08

Ryazanenergo 1,400 54.20 2,259 50.50 3,266 96.71

Tulenergo 1,848 168.12 3,523 141.90 6,634 292.78

Udmurtenergo 2,268 73.90 3,202 90.97 3,820 131.21

TOTAL 22,858 865.01 34,134 873.71 50,244 1,719.41

Customer Contract Demand and the Number of Applications by Branches in 2009-2011

4%68 MW over 750 kW (35-110 kV)

22%375 MW from 100 to 750 kV (0.4-20 kV)

7%127 MW

from 15 to 100 kW (0.4-20 kV)

27%456 MW

up to 15 kW (0.4-20 kV)

40%693 MW over 750 kW (0.4-20 kV)

80 81



DISTRIBUTION OF THE CUSTOMER DEMAND BY TYPES OF ECONOMIC ACTIVITY

ACROSS THE BRANCHES OF JSC IDGC OF CENTER AND VOLGA REGION, MW

In 2011, the Company concluded the total number of

44,050 agreements on technological connection of

power receivers with total connected power of 1,147.45

MW. 93% of the contracts were concluded with prefer-

ential consumers (both legal and physical entities) re-

questing the power range of up to 15 kV.

Vladimirenergo

Ivenergo

Kalugaenergo

Kirovenergo

Marienergo

Nizhnovenergo

Ryazanenergo

Tulenergo

Udmurtenergo

Vladimirenergo

Ivenergo

Kalugaenergo

Kirovenergo

Marienergo

Nizhnovenergo

Ryazanenergo

Tulenergo

Udmurtenergo

Vladimirenergo

Ivenergo

Kalugaenergo

Kirovenergo

Marienergo

Nizhnovenergo

Ryazanenergo

Tulenergo

Udmurtenergo

Vladimirenergo

Ivenergo

Kalugaenergo

Kirovenergo

Marienergo

Nizhnovenergo

Ryazanenergo

Tulenergo

Udmurtenergo

11 5

120 42

3 1

41 13

12 19

181 76

6 2

55 50

6 3

13 9

5 2

419 105

14 8

58 16

66 24

134 69

11 5

86 30

Industry Agriculture

Communiti and social sphere Physical persons

Growth in the number of applications is accompanied by

the corresponding growth in the number of concluded

contracts for technological connection. In 2010, the in-

crease was 48% as compared to the previous year, and

in 2011 the respective growth was 46%.

In 2009 and 2010, customer contract demand did not

change significantly as it totaled 610 MW and 601 MW

respectively. However tariff rates, lowered in 2011,

led to 91% increase (as compared to the previous year)

in the customer contract demand under contracts for

technological connection.

The Number of Concluded Contracts for TC and Customer Contract Demand in 2009-2011

COMPARATIVE ANALYSIS OF CONTACTS CONCLUDED IN 2010–2011

IN TERM OF NUMBER AND POWER RANGE

Branch 2009 2010 2011

Number of Contracts

Total ContractDemand, MW

Number of Contracts


Number of Contracts


Vladimirenergo 2,419 35.24 3,633 48.13 4,422 107.71

Ivenergo 774 52.23 1,012 56.31 1,485 35.60

Kalugaenergo 3,407 98.87 4,935 102.19 7,031 150,10

Kirovenergo 2,268 33.16 3,373 56.05 4,817 90.01

Marienergo 830 19.86 1,369 18.83 1,775 23.71

Nizhnovenergo 5,459 127.67 7,754 125.35 12,337 367.97

Ryazanenergo 1,333 48.39 2,093 41.09 2,823 81.22

Tulenergo 1,747 133.92 3,031 84.24 5,873 184.63

Udmurtenergo 2,108 61.08 2,906 69.33 3,487 106.50

TOTAL 20,345 610.42 30,106 601.52 44,050 1,147.45

Note: contracts for generating facilities are not included

up to 15 kW

144163

2011/2010 Quantitive Comparison

2011/2010 Power Comparison

from 15 to 100 kW

183 181

from 100 to 750 kW

212222

over 750 kW

227211

82 83



NUMBER OF CONTRACTS CONCLUDED BY TECHNOLOGICAL CONNECTION

VOLUME OF CONNECTED POWER UNDER TC CONTRACTS CONCLUDED IN 2011, MW

The largest share of concluded contracts and customer

contract demand falls within ‘up to 15 kV’ category.THE POWER CONNECTED IN 2011, MW

170over 750 kW (0.4–20 kV)

109from 15 to 100 kW (0.4–20 kV)

3over 750 kW (35–110 kV)

17over 750 kW (35–110 kV)

1,996from 15 to 100 kW (0.4–20 kV)

346over 750 kW (0.4–20 kV)

922from 100 to 750 kW (0.4–20 kV)

276from 100 to 750 kW (0.4–20 kV)

40,959up to 15 kW (0.4–20 kV)

399up to 15 kW (0.4–20 kV)

364

2009 2010 2011

331

362

TOTAL POWER CONNECTED UNDER TC CONTRACTS IN 2011, MW

Totally, categories ‘up to 15kV’ and ‘from 100 to 750 kV’

account for the biggest share of the connected power.

156

40

87

69

12

up to 15 kW (0.4–20 kV)

from 15 to 100 kW(0.4–20 kV)

from 100 to 750 kW(0.4–20 kV)

over 750 kW (0.4–20 kV)

over 750 kW (35–110 kV)

TECHNOLOGICAL CONNECTION RESULTS

FOR 2009-2011, number

20112010

34,134

50,244

30,106

44,050

16,38219,840

Applications filed

Contracts concluded

Connections

2009

22,85820,345

15,363

In the reporting period the trend of refusals from offers

and contract termination persisted. Physical persons ac-

count for the most part of such refusals and contract

terminations.

84 85



As compared to 2010, the number of contracts termi-

nated at the applicant’s initiative increased by 26%. The

number of applicants’ refusals from offers experienced

31% increase which is due to the rise in the number

of concluded contracts.

Technological Connections Performance Against the Plan

NUMBER OF TERMINATED CONTRACTS AND REFUSALS

FROM OFFERS BY TC CONTRACTS IN 2011

618

1,748

Contracts Terminated Refusals from Offers

up to 15 kW (0.4–20 kV)

legal entities

up to 15 kW (0.4–20 kV)phys. pers.

from15 to 100 kW(0.4–20 kV)

from 100 to 750 kW

(0.4–20 kV)

over 750 kW (0.4–20 kV)

212

520

179

402

143

314

43

84

45

TOTAL POWER CONNECTED IN 2011, MW

Planned Actual

300

364

NUMBER OF CONNECTIONS IN 2011, number

Planned Actual

16,600

19,840

Key Performance Indicators (KPI) used by the Company

to assess efficiency of management of the distribution

power grid complex include the following indicators in

terms of reliability:

• systemic indicator of interruption of consumer

power supply (total power undersupply in case of

power system disturbances (kWh) to productive

supply ratio for the reporting period);

• systemic indicator for the average duration of power

supply interruptions (total duration of power system

disturbances to the total number of disturbances ratio).

From year to year the Company is significantly im-

proving its KPI.

In 2011, as compared to the previous periods, the

Company’s overall disturbance rate has shown a sta-

ble declining trend, which is due to the timely and ef-

fective measures devised on the basis of an analytical

survey into the causes of disturbances, as well as to

implementation of the Company’s repair and invest-

ment programs.

Reliability Indicators

Note: the information contains no data on power system

disturbances registered due to severe weather conditions

and excluded from the KPIs calculations.

AVERAGE DURATION OF POWER SYSTEM NUMBER OF DISTURBANCES IN 2009-2011

DISTRUBANCES IN 2009-2011, hours

RELIABILITY PROVISION3.3

Unit of Measure

2009 2010 2011 2011/2010 (absolute increase)

2011/2010, (relative increase),%

Number of powersystem disturbances

2,732 2,711 2,695 -16 -0.59

Undersupply of power kWh thousand

2,605 2,213 2,184 -29 -1.31

Average duration of power system disturbances

hours 5.7 5.0 4.9 -0.1 -2

5.72,732

2009 20092010 20102011 2011

5.0

2,711

4.92,695

over 750 kW (35–110 kV)

86 87



In 2011, most interruptions of power supply are due to the

following reasons:

• forest trees falling on the power transmission lines;

• aging insulation and equipment material.

In the Company’s programs for energy saving and im-

provement of energy efficiency the following target in-

dicators are used:

1. Energy losses including consumption of the

substations.

2. Power consumption for production and economic

needs.

3. Availability of modern power metering devices in

the retail market in compliance with the Program

of Prospective Development of Metering Systems

(commercial power metering within the branches’

accountability; commercial power metering at the

customers’ power devices; technical power metering

at the branches’ substations).

Following are the target figures of the indicators set for

2011-2016.

Target Energy Saving and Energy Efficiency Indicators in 2011

In 2011, all the targets were achieved to the full extent.

ENERGY SAVING AND IMPROVEMENTOF ENERGY EFFICIENCY

3.4

Target Indicator Unit of Measure

Planned Actual Actual/Planned(absolute increase)

Actual/Planned,(relative increase), %

Energy loss during transmission kWh million

5,460.09 9.11%

5,353.71 8.97%

-106.38 -2

Power consumption for productionand economic needs

kWh million

120.73 119.08 -1.65 -2

Consumption of heat power for productionand economic needs

Gcal 48,905.87 45,646.4 -3,259.47 -7

Consumption of cold and hot waterfor production and economic needs

m3, thousand

584.05 485.09 -98.96 -17

Consumption of natural gas for production and economic needs

m3, thousand

4,080.41 3,695.2 -385.21 -9

POWER UNDERSUPPLY

IN 2009-2011, kWh thousand

2,605

2009 2010 2011

2,2132,184

The Company’s Energy Saving Program consists of the fol-

lowing subprograms:

• Target programs, which include measures to reduce

energy losses such as organizational and technical

measures, reduction of power consumption for

production and economic needs;

• Non-target programs, which include the

development program of the billing systems and

renovation program.

The Company spent total of RUB 599.2 million on the tar-

get programs, RUB 553.3 million on the development pro-

gram of the billing systems and RUB 6,303.1 million on the

renovation program.

Funds for the Energy Saving Program came from the in-

vestment program in the amount of RUB 6,983.3 million

and repair program in the amount of RUB 306.6 million.

Implementation of the Energy Saving and Energy Efficiency Program in 2011

Subprogram Units of mea-sure


Actual/Planned (relative increase), %

Measures to reduce energy losses (organizational and technical measures)

kWh million 24.15 90.73 66.58 276

RUB million 76.9 282.3 205.4 267

Measures to reduce power con-sumption for production and economic needs, including:

RUB million 13.7 20.7 7 51

Electric power kWh million 3.74 4.82 1.08 29

Heat power Gcal 1,643.1 2,079.57 436.47 27

Hot and cold water m3, thousand 15.09 23.06 7.97 53

Natural gas m3, thousand 82.39 117.33 34.94 42

Development Programof the Billing Systems

kWh million 20.09 21.18 1.09 5

RUB million 71.3 77.4 6.1 9

Renovation Program kWh million 1.11 7.1 5.99 540

RUB million 1.9 12.92 11.02 580

88 89



Power Consumption for Production and Economic Needs in 2011

Note:

• Data is given according to the metering results, in

RUB thousand, including VAT

• No other power sources were used in the reporting

period

• The Company owns buildings and premises with

total area of 732,311.6 square meters and rate of

power consumption of 0.09 TFOE per square meter

Type of Power Source Unit of Mea-sure


Actual/Planned (relative increase),%

Power resources supplied by sup-ply (sales) agreements, including:

RUB, thousand 951,001 879,253 -71,748 -8

Electric power RUB, thousand 507,590 400,030 -107,560 -21

kWh, thousand 120,733 119,076 -1,657 -1

Heat power RUB, thousand 64,173 60,060 -4,113 -6

Gcal 48,905.87 45,646.40 -3,259 -7

Cold water supply RUB, thousand 8,826 8,543 -283 -3

m3, thousand 579.27 480.79 -98 -17

Hot water supply RUB, thousand 436 295 -141 -32

m3, thousand 4.78 4.30 0 -10

Natural gas RUB, thousand 17,090 14,860 -2,230 -13

m3, thousand 4,080.41 3,695.20 -385 -9

Fuel, including RUB, thousand 395.4 395.4 0 0

TFOE 20,870.58 19,830.11 -1,040 -5

gasoline RUB, thousand 301.6 301.6 0 0

TFOE 15,861.64 15,070.88 -790.76 -5

Diesel fuel RUB, thousand 89.4 89.4 0 0

TFOE 4,591.53 4,362.62 -228.91 -5

Residual oil RUB, thousand 4.4 4.4 0 0

TFOE 417.41 396.61 -21 -5

Measures to Reduce Technological Losses in 2011

REDUCTION OF TECHNOLOGICAL ENERGY LOSSES

Measures to reduce power needed for the distribu-

tion process include the following: disconnection of

power transformers at two (or more) (220)110/35/10

kV; 110(35)/10 kV transformer substations at low load

mode; disconnection of 10/0.4 kV package transformer

substations with seasonal load; balancing phase loads

in 0.4 kV grids by redistribution of the connected cus-

tomers; increasing cross-section of the overloaded 10 kV

and 0.4 kV power transmission line cables; replacement

of the overloaded/underloaded power transformers;

optimization of load distribution and working modes

of the distribution power grids. At the year-end 2011,

Company’s total technological losses were reduced by

28.17 million kWh which is 1.31 million kWh less than

the previous year.

Measures Reduction,kWh million

Disconnection of power transformers at two transformer substations and substationswith seasonal load

1.388

Disconnection of a power transformers at the transformer substation with two(or more) transformers at low load mode

10.095

Reduction of power consumption at the substation for its own needs 6.259

Installation of the power-factor correction units 1.412

Balancing phase loads in 0.4 kV grids 1.052

Replacement of overloaded/underloaded transformers 1.009

Reduction of repair time of the power grids equipment 0.179

Replacement of the wires to increase cross-section of the overloaded transmission line cables 2.224

28.2 million kWh 83.1 million kWhOF TECHNOLOGICAL LOSSES OF NON-TECHNIC LOSSES

REDUCTION OF POWER LOSSES IN 2011

90 91



In the Company’s branches customers are attended to

at the Customer Service Centers (CSC).

Customers are free to chose one of the three inter-

action channels: face-to-face, long-distance and via

web-site, depending on their individual capacities and

preferences.

Customers can be served face-to-face in the CSC and

in the regional power grids and production units in the

presence of authorized persons. Authorized persons in

the production units and regional power grids can con-

sult the customer on technological connection to the

grid and power transmission services. Customers can

also file an application or a claim to the Company as

well as enquire about other power companies operat-

ing in the region.

CUSTOMER POLICY 3.5

CUSTOMER SERVICE CENTERS OPENED IN 2006-2011

REDUCTION OF NON-TECHNIC ENERGY LOSSES

In 2011, the set of measures taken to upgrade the power

metering systems and identify unmetered power con-

sumption resulted in 83.046 million kWh reduction of

other (commercial) energy losses.

Implementation of the Program of Prospective Develop-

ment of Metering Systems. In 2011, 29.597 commercial

thousand metering devices were installed/replaced which

resulted in 21.18 million kWh saved in the reporting pe-

riod.

Replacement of 0.4 kV HVL branch lines to buildings.

In the reporting period, 6.972 thousand naked cable HVL

branch lines to the buildings were replaced with insu-

2006 2007 2008 2009 2010 2011

1. VLADIMIR 1. ALEXANDROV

2. GUS-KHRUSTALNY

3. KOVROV

4. MUROM

5. IVANOVO

6. KINESHMA

7. NIZHNY NOVGOROD

8. RYAZAN

9. TULA

1. TEIKOVO

2. KALUGA

3. OBNINSK

4. KIROV (Kaluga region)

5. KALUGA (2)

6. KIROV

7. SLOBODSKOY

8. YOSHKAR-OLA

9. DZERZHINSK

10. ARZAMAS

11. IZHEVSK

12. SARAPUL

13. GLAZOV

1. KSTOVO 1. SEMENOV

2. ZAVJYALOVO

1. PETUSHKI2. NAVASHINO3. KARAKULINO

For an immediate consultation within the Company’s

competence any customer on Russian Federation terri-

tory can call 8-800-100-33-00. It is a toll-free hot-line

set up to provide centralized long-distance customer

service.

At the Company’s web-site www.mrsk-cp.ru in the ‘Cus-

tomers Relations’ section customers can access the

section ‘Internet Consulting Room’ where they can get

acquainted with laws and regulations applicable to the

Company’s operations, enquire about concluding pub-

lic contracts for technological connection and power

transmission, fill in a questionnaire, ask a question and

receive an answer via mail, email or telephone depend-

ing on their preferences.

lated wire lines. At the same time metering devices were

installed outside buildings thus preventing unmetered

energy consumption, unauthorized energy consumption

and any external interference affecting proper operation

of the device. In the reporting period, these measures

resulted in 0.637 million kWh decrease in energy losses

as compared to 2010.

92 93



The Company’s Customer Service Centers pursue the

following goals and objectives:

• Forming customer loyalty by providing quality

services and ensuring customer satisfaction;

• Tailoring the Company’s operations to the customers’

interests;

• Increasing number of customers by improving the

quality of customer service;

• Establishing individual approach to the customers;

• Ensuring maximum availability of information to the

customer;

• Collecting and processing information on customer

service.

It is one of the main functions of the CSCs to receive,

consult and provide assistance in the submission of ap-

plications for technological connection to the Compa-

ny’s grids as well as to process applications/claims.

Within the framework of the customer-oriented policy

the Company is constantly developing end-to-end cus-

tomer services. In addition to the existing 27 CSCs which

cover the operations area of 9 branches the Company

opened three more CSCs in Petushki (Vladimirenergo),

Navashino (Nizhnovenergo) and Karakulino (Udmurten-

ergo).

In order to ensure customer loyalty by providing qual-

ity customer service the Company has developed unified

requirements for the customer service. In 2011, the fol-

lowing requirements were approved: STO 01-016-2011

on Corporate Design of the Customer Service Centers

and Unified Dress Code, Principles of Professional Eth-

ics, STO 01-025-2011 on the Requirements for Organi-

zation of Evaluation and Analysis of the Customer Satis-

faction, and STO 01-040-2011 on the Requirements for

the Organization of Processing of Customer Applications

(Claims), the System of Centralized Customer Services.

Also in the reporting year the Company devised the set

of measures to enforce compliance of the service sys-

tem with the Standard STO on the System of Centralized

Customer Services approved by the Board of Directors

on August 15, 2011.

In order to inform customers of the planned outages

or power disturbances the Company publishes notifica-

tions in the sections ‘Schedule of the Planned Outages’

and ‘Latest Information on Power Disturbances’ on the

Company’s corporate web-site and main pages of the

branches’ web-sites. For the customers’ information

phone numbers of the Company’s hot-lines are provided

on the web-site.

As a measure to improve infrastructure of customer ser-

vice in the CSCs video monitors were installed in the

CSCs to display visual reference data on technological

connection services, energy saving and power safety.

Information boards were also updated in the CSCs.

3 NEW CSCS,OPENED IN 2011

INCLUDING:

30 CUSTOMER SERVICECENTERS,INCLUDING

In order to collects customers’ feedback and assess their

satisfaction with the quality of customer service in the

Company’s branches, questionnaires were carried out

face-to-face and via the web-site. The number of ques-

tionnaires completed in 2011 equaled 2,063 with the

average mark of 4.8, in 2010 and 2009 the respective

numbers were 1,606 and 1,461, which means that an in-

crease in 2011 and 2010 as compared to 2009 was 41%

and 9.9% respectively. Most customers complimented

availability of technical information and accompany-

ing documents (21%), organization of services provision

(20%), completeness and accessibility of the consulta-

tions (18%).

NUMBER OF RESPONSES MARK

RESULTS OF THE CUSTOMER SATISFACTION QUESTIONNAIRE

WITH THE QUALITY OF SERVICES PROVIDED

BY JSC IDGC OF CENTER AND VOLGA REGION

Compliance with the terms of services provision

Completeness and accessibityof the consultations

Organization of services provision

Politeness of the employeesin the Customer Service Centre

Availability of technical information and accompanyng documents

Transport accessibity

1,444 4.7

1,647 4.8

1,874 4.8

1,293 4.9

1,957 4.8

1,125 4.5

Number of the customers, who have filled in a questionnaire

1,461 2,063

2009 2011

сustomers сustomers

1,606

2010

сustomers

94 95



According to the customer feedback in 2011, operational

efficiency has increased which can be confirmed by the

stable growth of the number of application as compared

to the previous years and increasing usage of different

communications channels to their full extent.

On the basis of 2009-2011 performance a stable growth

of the Company’s customers can be observed as the to-

tal number of applications has increased by 83.69% over

three years (in 2009, the number of applications totaled

160,759, in 2010 – 230,470, and in 2011 – 295,118).

NUMBER OF APPLICATIONS TO BRANCHES OF THE COMPANY IN 2009-2011

32,07944,306

64,031

8,245

34,845

37,380

6,720

5,673

29,123

3,113

3,581

9,808

62,141

11,894

6,565

23,640

15,171

6,950

49,995

12,648

83,254

13,689

11,636

34,315

18,896

9,152

47,497

2009 2010 2011

In 2011, the Company continued to improve operational

efficiency and reliability of energy supply including en-

hancing management practices of the grid complex in

the following spheres:

• quality of management;

• occupational health and labor safety system;

• environmental management.

At the year-end 2011, an independent certifying author-

ity confirmed compliance of the integrated manage-

ment system with the international standards ISO 9001,

ISO 14001 and OHSAS 18001.

In order to increase reliability and efficiency of power

production, develop power transmission services, and

enhance management of business processes the follow-

ing practices are regulated by the Company’s innovative

development program: power quality control, require-

ments for evaluation and analysis of customer satis-

faction, the system of centralized customer services,

customer relations management, rationalizing and in-

ventive activities, innovative activities, relations with

contractors on the question of rescue and recovery op-

erations, management of design estimates, etc. Total of

25 organizational standards were devised.

The Policy on Quality, Occupational Health, Labor Safe-

ty and Environment Protection is the cornerstone of the

Company’s integrated management system. In 2011,

under this policy uttermost attention was devoted to

increasing energy saving and energy efficiency, improv-

ing quality of customer service and maintaining innova-

tive development.

Due to continuous efforts at optimization of the opera-

tions last year saw significant growth in the quality of

the production processes and level of environmental

protection and labor safety.

The Company participated in the annual competition

for the award from the Government of the Russian Fed-

eration in terms of quality. Criteria used for evaluation

of the competing companies motivate them to employ

modern management techniques, which allow increas-

ing efficiency of the operations by seeking new market

segments, making necessary changes and cutting ex-

penses. Due to its significant progress in this sphere the

Company received a Diploma in the competition.

According to the plans for 2012, the Company’s Inte-

grated Management System will be developed by ex-

tending the area of certification to the branches and

confirming appliance of the Company’s power manage-

ment with the international standard 50001.

QUALITY POLICY3.6

ISO 9001 ISO 14001 OHSAS 18001

COMPLIANCE OF THE COMPANY INTEGRATED MANAGEMENT SYSTEMWITH INTERNATIONAL STANDARDS

Vladimirenergo

Ivenergo

Kalugaenergo

Kirovenergo

Marienergo

Nizhnovenergo

Ryazanenergo

Tulenergo

Udmurtenergo

TECHNICAL POLICY AND INNOVATIVE DEVELOPMENT

04

Rapidly mounted support for a double-circuit power line, which has been patented by the

Company, is temporarily installed for quick elimination of emergencies related to damages

of supports at 35-110 kV lines. It is unloaded, assembled and mounted without application

of heavy special equipment, it does not demand setting up a foundation

98 99

04 TECHNICAL POLICY AND INNOVATIVE DEVELOPMENT


The Board of Directors approved the Program of Innova-tive Development for 2011-2016.

The target program of information technology and tele-communications development for 2012-2016 was devised

within the framework of the JSC IDGC Holding’s projects.

Pilot projects of Corporate Information Management Sys-tem (CIMS) development were launched in the spheres of

repairs and maintenance automation, financial operations,

accounting and human resources management.

NOVEMBERJULY DECEMBER



In order to develop and achieve high results it is neces-

sary to renew and improve technologies and equipment

used in the Company’s operations on a regular basis.

The guideline to the introduction of new equipment and

technology is the Regulation on Technical Policy of the

JSC IDGC of Center and Volga Region, approved on April

18, 2008. Its updating started in the fourth quarter of

2011. The revised version of the Regulation will be put to

approval by the Board of Directors in April 2012.

TECHNICAL POLICY4.1 The key objectives of the Company’s Technical Policy in the

distribution grid complex include:

• Avoiding depreciation of the fixed assets through mod-

ernization and employment of innovative equipment

and technology in the construction, reconstruction and

technical re-equipment of the grids;

• Adoption of the state-of-the-art technology with the

modern means of diagnostics and monitoring, as well

as information and measuring systems;

• Increasing transmission capacity of the grid; reduction

of energy losses in the distribution power grids in order

to increase their operational efficiency;

• Overcoming the tendency of equipment differentiation

used at the reconstruction and capital construction

sites of one branch without project feasibility study;

• Ensuring compliance with the unified requirements

and approaches to implementation of the Technical

Policy.

100 101



The Program of Innovative Development in the JSC IDGC of Center and Volga Region for 2011-2016 was developed

and approved by the Board of Directors (Minutes No. 81, as

of July 27, 2011).

The main objectives of the Program include:

• Research & Development;

• innovations in the investment program;

• development of IT-infrastructure and information

technology;

• enhancing talent pool;

• improvement of the business processes management.

For the monitoring purposes the Program establishes 11 indicators of innovative development. In 2011, most of the

targets were achieved, including the following:

• one patent (№111566) was received for a pre-engi-

neered double circuit pole for the 35-110 kV over-

head lines designed for temporary use while liqui-

dating emergencies related to the pole damages

in the regions of difficult access, without employing

large-size equipment;

• energy losses totaled 8.97% (compare to the planned

9.17%);

• average duration of the total power supply disturbances

was 0.2536 min (compare to the planned 0.2591 min);

• the level of teleautomation of 35-110 substations was

32%;

• the share of profits generated by innovative services

totaled 0.21% (compare to the planned 0.21%);

• RUB 488.9 thousand were allocated to personnel

training in the sphere of innovations (compare to the

planned sum of RUB 341.3 thousand);

• two new business processes were introduces and six

existing were upgraded in order to improve manage-

ment of the business processes.

In 2011, the following R&D projects were realized:• a pre-engineered double circuit pole for the 35-110 kV

overhead lines has been designed for temporary use

while liquidating emergencies related to the pole dam-

ages in the regions of difficult access, without employ-

ing large-size equipment;

KEY REGULATORY DOCUMENTS

Federal Laws: Decrees of the Government of the Russian Federation :

• Federal Law of the Russian Federation No. 184-FZ on

Technical Regulation, of December 27, 2002;

• Federal Law of the Russian Federation No. 35-FZ on Elec-

tric Energy, of March 26, 2003;

• Federal Law of the Russian Federation No. 261-FZ on

Saving Energy and Increasing Energy Efficiency, and on

Amendments to Certain Legislative Acts of the Russian

Federation on Electric Energy, of November 23, 2009;

• Decrees of the Government of the Russian Federation :• Decree No. 526 on Reforming the Power Industry of the

Russian Federation of July 11, 2001; • Decree No. 977 on the Investment Programs for the

Power Industry (along with the Regulations on Approv-al of the Investment Programs of the Power Industry State-owned Enterprises and Grid Companies, Regula-tions on Control of the Implementation of Investment Programs of the Power Industry Companies), of Decem-ber 01, 2009;

• Decree No. 160 on the Order of Establishment of the Protected Zones Around Power Grid Facilities and Spe-cial Conditions of Land Use Within Such Zones, of Feb-ruary 24, 2009.

DEVELOPMENT AND INNOVATIONSTHE PROGRAM OF INNOVATIVE DEVELOPMENT

4.2

• the method of detecting furan compounds in the trans-

former oil has been developed, certified and launched

into operation;

• the project of feasibility study on the concrete compo-

sition modified with the dispersion of multi-wall car-

bon nanotubes for production of reinforced concrete

poles for 0.4-10 kV overhead lines was developed;

• the project of feasibility study on production of an

electricity cable with non-magnetic core made of high-

nitrogen stainless steel was developed;

• an integral program for calculating efficiency of the

lightening arrester system for the overhead lines was

developed.

Actual investments in R&D in the reporting period totaled RUB 24.18 million. Out of 27 research works 10 were com-

pleted, and the rest 17 are left for 2012.

In 2011, the costs of the program of introduction of the

new equipment, materials and technology during recon-

struction and new construction works totaled RUB 755.32

million, with the economic effect reaching RUB 70.00 mil-

lion. R&D costs amounted to RUB 16.83 million.

Orders of JSC RAO UES of Russia: Regulations of JSC RAO UES of Russia and JSC FGC UES:

• No. 338 on Measures to Reduce Energy Losses in the Pow-

er Grids, of June 01, 2005;

• No. 68 on Approval of the Target of the Functional Mod-

el of Operative Dispatch Control in the Power Industry

of the Russian Federation, of January 30, 2006;

• No. 291, General Provisions (Concept) of the Technical

Policy in the Power Region of the Russian Federation,

of June 19, 2008.

• No. 364r/469r. on Measures to Create the Systems

of Commercial Metering in the Retail Markets in the

DGC, of December 28, 2007;

• No. 199r/171r on Implementation of the Regulations

on Equipment, Technology and Materials Assessment

in the JSC FGC UES, of June 10, 2008;

• The Strategy of Establishing/ Modernizing Billing Sys-

tems of the Retail Energy Market in the Branch Grids of

the JSC IDGC of Center and Volga Region (approved by

the Management Board of the JSC IDGC of Center and

Volga Region ob March 30, 2010).

RUB 70 million

RUB 17 million

RUB 755 millionEconomical effect:

R&D costs:

Total costs:

IMPLEMENTATION OF THE PROGRAM FOR

INTRODUCTION OF NEW EQUIPMENT, MATERIALS

AND TECHNOLOGY DURING RECONSTRUCTION

AND NEW CONSTRUCTION WORKS IN 2011

102 103



INTRODUCTION OF EQUIPMENT, TECHNOLOGY

R&D FINANCING IN 2011-2016

AND MATERIALS IN 2009-2011, RUB mln

34 R&D projects are planned for 2012 with total equity

financing of RUB 211.89 million. Total sum intended for

R&D in 2011-2016 exceeds RUB 3.6 billion.

RUB 3,634.05 million2012–2016 гг.

Inciuding RUB 211.89 millionin 2012 г.

RUB 24.18 million2011 г.

39.4 18.557.5

194.6

387.6

694.1

18.5

6.1

3.8

201120102009

New technology

New electricalequipment

New equipment at the dispatcher centers

R&D

252.5

412.2

772.2

0.0 0.0 16.8

TECHNICAL COUNCIL

In 2011, 5 meetings of the Technical Council were sum-

moned in accordance with the yearly plan. The following

issues were discussed:

• organization of operative and technological process

control during emergency recovery works;

• planning access routes to the accident spots. Auton-

omous supply points, reclosers. Establishment of the

protected zones. Emergency reserves.

• organization of clearing of the routes for the over-

head lines, cooperation with the contractors;

• development of the Program of Innovative Develop-

ment for 2011-2016, including R&D program;

• quality of the technical tasks for projecting,

building and construction works under the invest-

ment program and in compliance with technical

regulations. Expertise of the project group leaders

in charge of the priority projects;

• consideration of the Company’s Regulation on Inno-

vative Development;

• special features of the obligatory power inspections

in the power grids in accordance with the Federal

Law No.261-FZ, of November 23, 2009.

23 permanent members of the Technical Council are

comprised of the managers and experts of the executive

bodies and branches of the Company. In 2011, there

were no significant changes in the membership of the

Council.

Within the framework of its innovative activity the Com-

pany strives to unlock innovative potential of the young

people, encourages its creativity and promotes its innova-

tive projects.

In November 2011, the First All-Russian Youth Contest

of the Scientific Innovative Ideas and Projects “Power

Industry of the Future” was launched. It was organized

by the JSC IDGC Holding in cooperation with the Coor-

dination Council for Youth Affairs in the Scientific and

Educational Spheres of the Presidential Council of the

Russian Federation for Science, Technology and Educa-

tion and under the auspices of the Society of the Sup-

porters of Fundamental and Sectoral Sciences Develop-

ment in Favor of the Power Industry “Power Industry of

the Future”.

As a result of the regional round of the contest, the Expert

Group in the Company’s operation area of the Company

chose 5 best projects out of 27, the winners proceeded to

the next, federal round of the contest.

These projects included the following two projects of the

Vladimirenergo Branch:

• prototype of the automatic individual indicator of the

pace voltage;

• R&D work of the prototype of an insulating rod (the

rod for the voltage indicators and installation of the

mobile protective earthing systems, operative rods,

measuring rods and rods for phasing kit) intended for

operation at the open 6-220 kV power grid facilities in

adverse weather conditions (high air humidity).

The other projects were presented by the Ivanovo State

Power University (1 project) and Kazan State Power Engi-

neering University (2 projects).

The Chairman of the Expert Group, General Director of JSC

IDGC of Center and Volga Region Evgeny Ushakov com-

ment on the results: ‘The Power Industry of the Future will

not do without innovations. And our goal is to help the

young generation to put their knowledge to practice and

unlock their creative and scientific potential’.

104 105



“We strive to never stop at what we have achieved and

continue working at the new R&D projects so that they

are in demand and applicable in the power industry”,

says Sergey Andrus, the Deputy General Director for

Technical Issues – Chief Engineer of JSC IDGC of Center

and Volga Region.

Development and implementation of the measures on the

control over reactive power flows in the branch power

grids complies with the requirements of the Order of RAO

UES of Russia No. 893 on the Improvement of Stability and

Technical and Economic Efficiency of the Power Distribu-

tion Grids and Consumer Power Supply Systems by Means

of Control of Reactive Power Flows and Normalization of

Voltage Levels, of December 11, 2006.

A proprietary standard STO 0901-008-2010 on the Re-

quirements for the Organization of Reactive Power Flow

Control was approved and put into effect by the Order

of JSC IDGC of Center and Volga Region, dated October

22, 2010.

The Target Programs for the reactive power flow control

in the branch power grids for 2011 were developed and

approved on January 12, 2011.

THE PROGRAMS OF THE CONTROL OVER REACTIVE POWER FLOWS

Members of the Technical Council observe the results of the development of the pre-engineered 35-110 kV pole on March 31, 2011 (on the premises of JSC Muromenergomash, Murom)

Implementation of these Programs resulted in the follow-

ing achievements:

• Installation of 3 capacitor banks with the total capac-

ity of 6.75 MVAr (two of them at the 110/35/6 kV Mozh-

ga substation at the 1st and 2nd bus sections 6 kV of

the Udmertenegro Branch, one capacitor bank at the

SS 110/6 kV Ludinovo substation at the 1 bus section

6 kV);

• At the SS Pokrov 110/35/10 kV along with the 25 MVAr

capacitor bank at 110 kV a 25 MVAr controlled shunt

operator was installed with the voltage of 110 kV and

the capacity of 25 MVAr,along with the capacitor bank

with the voltage of 110 kV and the capacity of 25 MVAr

installed in 2010;

• Design and exploration works for installation of 9

capacitor banks with total capacity of 35.5 MVAr at 6

substations owned by Vladimirenergo, Nizhnovenergo,

Ryazanenergo, Tulenergo, and Udmurtenergo;

• 4,907 metering devices were installed at the substations

owned by the Company’s branches and at the limits of

the consumers’ balance responsibility. The devices for

the metering of active energy were replaced with multi-

functional electronic devices capable of simultaneous

metering of active energy and reactive power;

• 6-110 kV capacitor banks at the branch substations

generated 1,207,339 MVAr·hours which is 121,310

MVAr hours (10.04%) more than in 2010;

• 28 consumers with total capacity of 7.8 MW were con-

nected to the power grids.

As of January 1, 2012, total capacity of capacitor operators

amounted to 268.64 MVAr which is 5.61 MVAr more than

on January 1, 2011.

Launching of 4 new 6-10 kV capacitor operators with total

capacity of 4.8 MVAr at the Vladimirenergo and Tulenergo

substations is planned for 2012.

In 2011, implementation of the Program of the Control

over Reactive Power Flows cost RUB 289,378.63 thou-

sand.

Economic effect from the Target Program implementa-

tion totaled 54,136.1 thousand kWh which accounts for

RUB 94,370.3 thousand.

IMPLEMENTATION OF THE PROGRAM

FOR REACTIVE POWER CONTROL IN 2010-2011, MVar

20112010

263.03268.64

41.95

6.7512.40

35.50

Capacitor banks, installed capacity

Capacitor banks, launched

Сapacitor banks, design and exploration

106 107



In 2011, target figures set in the Repair Program were

fully achieved.

Costs of the fixed assets repair in the reporting period totaled RUB 2,844.29 million. (RUB 1,571.26 million for non-contracted and RUB 1,273.03 million for contracted repair works), which is 10% more than in 2010.

Repair Costs by the Types of Power Equipment in 2009-2011, RUB million

REPAIR PROGRAM

REPAIR AND OPERATIONAL ACTIVITIES4.3

REPAIR COSTS OF THE POWER GRID FACILITIES IN 2011, RUB million

10%Buildings and facilties RUB 289.3 million16%

35-220 kV overhead linesRUB 448.2 million

8%Other

RUB 222.7 million

48%0.38-10 kV distribution grids RUB 1,364.8 million

18%35-220 kV substations

RUB 519.2 million

Power Equipment 2009 2010 2011 2011/2010, (absolute increase), RUB million

2011/2010, (relative increase),%

35-220 kV substations 424.5 509.9 519.2 9.3 1.82

35-220 kV overhead lines 346.7 376.6 448.2 71.6 19.01

0.38-10 kV distribution grids 1,013.2 1,123.6 1,364.8 241.2 21.47

Buildings and facilities 246.5 290.9 289.3 -1.6 -0.55

Other costs 129.9 278.2 222.7 -55.5 -19.95

In 2011, in order to enhance reliability of the power

grids the Repair Program included clearing of overhead

line routes of 12,791 ha, which has been the largest

such measure in the previous years.

Figures of the 2011 Repair Program exceed those of

2008-2010 program due to redistribution and optimiza-

tion of the costs with respect to energy efficiency of the

operations (transition to non-contracted repair works).

Implementation of the Repair Program in figures, 2011

Works Unit 2011

Thorough maintenance of 35-110 kV substations number 225

Thorough maintenance of 35-220 kV transformers number 657

Clearing of routes for 0.4-220 kV overhead lines ha 12,791

Thorough maintenance of 6-10/0.4 kV transformersubstations (distributing points)

number 8,008

Replacement of defective poles of 0.4–110 kV overhead lines number 32,795

THOROUGH MAINTENANCE OF 35-110 KV

SUBSTATIONS, number

THOROUGH MAINTENANCE OF 6-10/0.4 KV

TRANSFORMER SUBSTATIONS, number

118

7,922212

5,616

2167,952225 8,008

2008 20082009 20092010 20102011 2011

RUB 2,844 million +10%COSTS OF THE FIXED ASSETS REPAIR IN 2011

AS COMPAREDTO 2010

108 109



REPLACEMENT OF DEFECTIVE POLES

OF 0.4–110 KV OVERHEAD LINES, number

REPAIR COSTS IN 2008-2012 RUB million

CLEARING OF ROUTES FOR 0.4-220 KV

OVERHEAD LINES, ha

Repair Costs of the Basic Production Assets, RUB million

Repair Costs 2008 2009 2010 2011 2011/2010, (absolute increase),RUB million

2011/2010, (relative increase), %

Total 1,577.0 2,160.8 2,579.2 2,844.3 265.1 10.27

Non-contracted, including 600.0 827.3 1,318.2 1,571.3 253.1 19.2

material and technical resources 303.8 490.4 750,7 827.9 77.2 10.28

Contracted 977.1 1,333.5 1,261.0 1,273.0 12 0.95

In 2011, non-contracted repair costs increased by 19.2% as compared to 2010.

17,850 7,937

24,0529,891

28,73411,824

32,79512,791

2008 20082009 20092010 20102011 2011

1,592

1,037

2012план

1,571

1,273

2011

1,318

1,261

2010

827

1,334

2009

600

977

2008

Non-contracted Contracted

DISBURSEMENT OF CAPITAL INVESTMENTS FOR RECONSTRUCTION

DISBURSEMENT OF CAPITAL INVESTMENTS BY TYPES OF POWER

AND TECHNICAL RE-EQUIPMENT IN 2008-2011 RUB million

GRID FACILITIES IN 2011, RUB million

RECONSTRUCTION AND TECHNICAL RE-EQUIPMENT

In 2011, target figures set in the Reconstruction and Tech-

nical Re-equipment Program were achieved fully.

In 2011, the actual disbursement of capital investments intended for reconstruction and technical re-equipment totaled RUB 9,894.05 million, which is 62% more than in 2010.

9,894.05

2011

6,108.97

2010

4,496.67

2009

5,724.14

2008

5.3%RUB 523.2 millionEAD of future years

18.9%RUB 1,868.6 millionOther

7.4%RUB 728 million

35-220 kV overhead lines

7.0%RUB 696.9 million

Equipment, not included in the construction estimates

26.7%RUB 2,639.1 million

0.38-20 kV distribution grids

34.8%RUB 3,438.3 million35-220 kV substations

110 111



Company’s perspective development includes measures in

the following spheres:

• Development of the grid infrastructure in order to sat-

isfy long-term and middle-term demand for electric

energy and power;

• analysis of the load capacity of the power facilities and

development of the target measures to be included in

the investment program in order to eliminate the “bot-

tlenecks” in the branch power systems and to ensure

technological connection to the Company’s power grid

of JSC IDGC of Center and Volga Region;

• assessment of relevance of the current schemes and

programs of power grids development, and coordina-

tion of the aforementioned schemes and development

programs with the executive authorities in the regions

of the Russian Federation;

• development and conclusion of agreements with the

authorities of the regions of the Russian Federation,

which stipulate priority measures to develop and im-

prove reliability of the power grid facilities;

• settlement of issues related to technological connec-

tion with JSC FGC UES and the affiliated grid organiza-

tions;

• cooperation with the generating companies to con-

clude agreements on technological connection of the

generating facilities to the power grids;

• cooperation with JSC FGC UES, JSC SO UES, and the ex-

ecutive authorities of the regions of the Russian Feder-

ation on synchronization of the terms of new construc-

tion and reconstruction of the power grid facilities;

• development of schemes for the external power supply

of the IPD facilities and assessment of feasibility of the

suggested measures in order to guarantee the design

and construction terms;

• control of compliance with the federal target pro-

grams;

• cooperation with the local and federal executive au-

thorities on development of the grid infrastructure.

Reconstruction and Technical Re-equipment Works in 2011

Works Units of measure

2011

Replacement of 35-110 kV isolating switchesand shorting plugs for SF6 circuit breakers

number 28

Replacement of 35-110 kV oil circuit breakersfor vacuum and SF6 circuit breakers

number 99

Replacement of 6-10 kV oil circuit breakers for vacuum ones number 415

Reconstruction of 35-110 kV overhead lines km 84.6

Reconstruction of 0.4-10 kV overhead lines km 1,483

Replacement of SN and SK type storage batteries at 110 kV substations SS 21

Installation of 6-10 kV reclosers number 68

Reconstruction of relay protection and automatic equipmentat 35-110 kV, including replacement for microprocessor-based devices

SS 21

PERSPECTIVE DEVELOPMENT4.4

PLANS AND PROGRAMS OF PERSPECTIVE DEVELOPMENT

Stages of Preparation of the Development Program for the Power Industry in the Region of the Russian Federation

Plans and programs for development of power industry

in the regions of the Russian Federation are developed

in accordance with the Decree No. 823 of the Govern-

ment of the Russian Federation, of October 17, 2009 and

are subject to approval by the executive authorities of

the regions for a five-year period.

The main target of the plans and programs is to devel-

op grid infrastructure and generating facilities, satisfy

long-term and middle-term demand for electric energy

and power, form stable and favorable investment cli-

mate in the power construction sphere.

In 2011, development plans and programs were devised

for all the regions within the Company’s operations area.

Specially designated work groups (coordinating coun-

cils) coordinate development of the aforementioned

plans and programs with the executive authorities of

the regions of the Russian Federation. The coordinat-

ing councils are present in all of the regions within the

Company’s operations area.

OUTLINE AND PROGRAM OF THE RUSSIAN REGION POWER SYSTEM DEVELOPMENT

OUTLINE AND PROGRAM OF UNIFIED ELECTRIC

SYSTEM OF RUSSIA

PROJECTION OF POWERAND CAPACITY DEMAND

CONTRACTS AND APPLICATIONS FOR

TECHNOLOGICAL CONNECTION

RELIABILITY ENHANCEMENT

MEASURES

112 113



Implementation of the Plan

and Program of the Perspective Development

of the Power Industry in the Kaluga Region

Since 2007 Kaluga Region has demonstrated the highest

rates of growth and industry localization in the Company’s

operations area. Significant growth of economic activity is

accounted for by the foreign companies, which locate their

industrial forces in the region.

The work group in charge of power industry development

in the Kaluga Region was established on January 31, 2011.

It is comprised of the representatives of the Kaluga Region

administration, JSC SO UES, JSC FGC UES and JSC IDGC

of Center and Volga Region and chaired by the Governor

of the region.

The main plan for development of the industrial potential

requires construction of industrial parks.

At present, 4 industrial parks equipped with the necessary

infrastructure – Vorsino, Grabtsevo, Rosva, Kaluga-Yug –

are under development. Around 40 investment projects

are implemented there. In Obninsk, a biotechnopark is be-

ing created, the only one in Russia so far.

Over five years of the systematic development of the elec-tric power complex in the Kaluga Region power consump-tion to the full load rose by 27% from 749 MW to 950 МW.

Implementation of the 2011 Development Program in the

Kaluga Region resulted in improvement of the scheme and

operating conditions in the most perspective Kaluga and

Obninsk districts and elimination of the infrastructure re-

strictions.

JSC IDGC of Center and Volga Region tookthe following measures: • 1 quarter 2011 – construction of Mirnaya-Vorsino

110 kV circuit;

• 4 quarter 2011 – construction of Denisovo-Rusinovo

110 kV overhead lines;

• 2011 – construction of new 110 kV SS Detchino, Ros-

va-2, Ahlebshino;

• 4 quarter 2011– transition of the Vorsino SS

to 220 kV — 1st line.

JSC FGC UES took the following measures:• 4 quarter 2011 – reconstruction of 220 kV SS Sputnik

4х125 MVA;

• 4 quarter 2011 – reconstruction of 220 kV SS Mirnaya

4х125 MVA;

• 4 quarter 2011 – construction of 220 kV overhead ac-

cess lines at the Vorsino SS;

• 2014 – reconstruction of SS Orbita 220kV 2х200 MVA;

• 2016 – construction of a new 500 kV power supplier.

In order to adopt a unified approach to the issues con-

cerning perspective development, territorial planning and

implementation of the investment projects of the SMEs

the Company’s branches have developed the power dis-

tribution plans which visualize the load level of 35-110 kV

substations depending on their location.

THE MAP OF THE POWER DISTRIBUTION AMONG THE COMPANY’S BRANCHES

114 115



In order to facilitate use of the maps, interactive ver-

sions have been introduced in the Nizhnovenergo and

Tulenergo branches.

Interactive versions made on the geodetic base provide

an option of scaling down from the whole region to the

individual settlements and streets.

• Nizhnovenergo branch:

the map on the web-site www.nne.mrsk-cp.ru in the

section Customer Relations/ The map of power load

at the Nizhnovenergo substations.

• Tulenergo:

the link to the map on the web-site www.tulenergo.

ru in the section Customer Relations/ Technological

Connections/ Obligatory Disclosures on the Techno-

logical Connections/ Current and projected reserve

at the power suppliers.

On-line interactive maps allow cooperation with the

regional authorities of the Russian Federation and po-

tential investors on the question of developing the grid

complex depending on the customer demand.

Introduction of the interactive maps in other branches

is planned for the nearest future.

Agreements on the development of the power systems

in the regions of the Russian Federation are concluded

in order to ensure reliable and stable functioning of the

power system in the middle-term, eliminate existing (or

projected) limitations in power supply, implement pro-

grams of comprehensive development of social infra-

structure, satisfy the power demand, implement long-

term development programs and achieve strategic goals

of the power industry.

In 2011, the Company prepared conclusion of the agree-

ments on cooperation between JSC IDGC Holding and

an Administration of the region of the Russian Federa-

tion. As a result in 2011 such agreements were signed

by the President of the Republic of Udmurtia and the

Governor of the Kaluga Region. Agreements with the

administrations of Ryazan, Nizhny Novgorod and Tula

Regions are ready to be signed.

In the reporting period continued implementation

of the previously concluded agreements with the re-

gional administrations. To obtain information on 2011

largest projects refer to the Investment Activity section

of the Annual Report.

In the Company’s operations area there are three generat-

ing companies: JSC TGC-5 and JSC TGC-6 under the super-

vision of the holding company CJSC IES, and JSC Quadra.

CJSC IES implements the priority investment program Dia-

dem which is designed until 2015 and includes the follow-

ing projects:

• The Rubin Project – installation of two gas turbine

units with total capacity of 188 MW as part of the

expansion of the Novogorkovskaya CHPP (Nizhny

Novgorod Region). As projected, one gas turbine will

operate at 220 kV, and another one at 110 kV.

• Topaz Project – installation of the generation facili-

ties with the capacity of 263 MW at 110 kV as part of

the expansion of the Kirovskaya CHPP-3.

• Zircon Project – installation of the generating facili-

ties with the capacity of 220 MW at 110 kV as part of

the expansion of the Izhevskaya CHPP-1.

AGREEMENTS WITH THE ADMINISTRATIONSOF THE REGIONS OF THE RUSSIAN FEDERATION

TECHNOLOGICAL CONNECTION OF THE GENERATING FACILITIES

NEW GENERATION FACILITIES WITHIN THE FOOTPRINTOF JSC IDGC OF CENTER AND VOLGA REGION

TulaKaluga

Vladimir

Ryazan

Yoshkar-OlaIvanovo

Kirov

Izhevsk

Nizhny Novgorod

2011 21.7 MW

Obninskaya CHPP

2013 230.0 MW

Vladimirskaya CHPP

2014 400.0 MW

Avtozavodskaya CHPP

2013 188.0 MW

Kirovskaya CHPP-4

2013 236.0 MW

Kirovskaya CHPP-3

2013 220.0 MW

Izhevskaya CHPP

2014 376.0 MW

Novogorkovskaya CHPP

2017 900.0 MW

Nizhegorodskaya CHPP

2020 1,150.0 MW

NIZHEGORODSKAYA NPP

2011 18.0 MW

GTCHPP

2013 115.0 MW

Dyagilevskaya CHPP

2011 36.9 MW

Kaluzhskaya CHPP

2012 190.0 MW

Novomoskovskaya SDPP

Also CJSC IES launches additional generating facilities

at the Vladimirskaya CHPP-2 with the capacity of 230

MW at 220 kV and 110 kV, and at the Kirov CHPP-4 with

the capacity of 188 MW at 110 kV.

JSC Quadra launches generating facilities at the Novo-

moskovskaya SDPP (Tula Region) with the capacity of

190 MW and Dyagilevskaya CHPP (Ryazan Region) with

the capacity of 115 MW.

In 2011, Kaluzhskaya CHPP-1 was launched. The Com-

pany is fulfilling the agreement on technological con-

nection of the Obninskaya CHPP with the capacity of

21.7 MW with the OJSC “Kaluga Retail Company” and

co-generating facility of 18 MW of GT CHPP Energo Ltd.

116 117



In 2011, at the new construction and reconstruction

sites 24 applications for technological connection to the

Unified National Electric Grid were prepared and filed to

the JSC FGC UES. 15 agreements on technological con-

nection to the JSC FGC UES grids were concluded.

The UNEG power grid facilities in the Company’s opera-

tions area are distributed among three branches of JSC

FGC UES, namely the Bulk Power System (BPS) of Cen-

ter, the BPS of Ural and the BPS of Volga. 10 out of 82

JSC FGC UES supply points which are situated within the

Company’s operations area have limitations on techno-

logical connection (closed supply points).

Closed supply points are situated in two regions of the

Russian Federation, namely Kaluga Region (SS Kaluzhs-

kaya 500 kV and SS Mirnaya 220 kV) and Nizhny Novgorod

Region (SS Luch 500 kV, SS Zarechnaya 220 kV, SS Bor-

skaya 220 kV, SS Bobylskaya 220 kV, SS Sergach 220 kV, SS

Kudma 220 kV, SS Oka 220 kV and SS Etilen 220 kV).

As a result of synchronization of the investment pro-

grams of JSC FGC UES and JSC IDGC of Center and Volga

Region and in compliance with the agreements con-

cluded with the executive authorities of the Nizhny

Novgorod and Kaluga Regions, JSC FGC UES is eliminat-

ing limitations on additional technological connections

to the 220 kV (500 kV) power suppliers.

In the Kaluga Region two substations — SS Mirnaya

220 kV and SS Sputnik 220 kV — are under reconstruc-

tion, construction of the new SS 550 kV in the Obninsk

energy cluster has started.

In the Nizhny Novgorod Region SS Zarechnaya 220 kV,

SS Borskaya 220 kV, SS Kudma 220 kV, and SS Luch

500 kV are under reconstruction. In order to reinforce

and increase reliability of the power supply in the north-

ern parts of the Nizhny Novgorod Region the Company

resumed construction of overhead electric lines be-

tween SS Semenov 220 kV and SS Uzlovaya.

Implementation of these projects in the Kaluga and

Nizhny Novgorod Regions will help to unlock full indus-

trial potential, increase reliability of power supply and

carry out investment projects of the large companies.

In compliance with the Federal Law No. 161-FZ Con-

cerning Housing Development, of July 24,2008, the

Company cooperates with the Russian Housing Devel-

opment Foundation (RHD Foundation) on the questions

of developing grid infrastructure and technological

connections to the Company’s grids. The Company has

developed the projects of power supply of the capital

construction sites owned by the RHD Foundation in the

Nizhny Novgorod Region (construction sites in the No-

vinki village of the Bogorodsky district), Kirov Region

(construction site in the Shutovschina village of the

Kirovo-Chepetsk district), Ryazan Region (construction

site in the Polkovo village), Republic of Mariy El (con-

struction site in Yoshkar-Ola, Petrova Str., Zagury vil-

lage of the Medvedevsky district) and the Republic of

Udmurtia (construction sites in the Pervomaysky settle-

ment of the Zavyalovsky district and Borisovo village of

the Sarapulsky district).

TECHNOLOGICAL CONNECTION TO THE UNEG FACILITIES

IMPLEMENTATION OF THE FEDERAL TARGET PROGRAMS

Operative and technological process control consists of

nine Grid Control Centers (one in every branch), 39 opera-

tive dispatch services and 252 operative dispatch control

centers created on the basis of the grid districts.

Structure of the OTD of JSC IDGC of Center and Volga Region

OPERATIVE AND TECHNOLOGICAL PROCESS CONTROL4.5

EOC

19 DCC 26 DCC 26 DCC 26 DCC

41 DCC 57 DCC 27 DCC 16 DCC 14 DCC

3 UNIT ODS 4 UNIT ODS 4 UNIT ODS 3 UNIT ODS

5 UNIT ODS 9 UNIT ODS 4 UNIT ODS 4 UNIT ODS 3 UNIT ODS

GCCKIROVENERGO

GCC NIZHNOVENERGO

GCCTULENERGO

GCCMARIENERGO

GCC VLADIMIRENERGO

GCCIVENERGO

GCC KALUGAENERGO

GCC RYAZANENERGO

GCC UDMURTENERGO

118 119



All of the branches have well-equipped grid control cen-

ters (GCC) which carry responsibility for operative and

technological process control of the branches’ distribution

power grids and cooperate effectively with the contractors

on the question of operative dispatch and technological

control.

The tasks of GCCs can be divided into operational and non-

operational.

Operational tasks in the operative and technological pro-

cess control include:

• Control over the power grid mode;

• Organization and implementation of emergency pre-

vention activities;

• Organization of repair works and operational mainte-

nance of the power grid facilities.

Non-operation tasks of GCCs which are aimed at research

and analysis include the following:

• Organization of long-term and short-term planning

of the repair works at the overhead lines, power grid

equipment and facilities;

• Development of operational documentation;

• Organization of cooperation with the operative staff in

the branches;

• Organization of the scheduled events;

• Response to the power grid disturbances;

• Cooperation with the GCCs of the allied distribution

power grids, GCCs of the JSC FGC UES branches and

other agents in the power industry, and consumers on

the question of operative power grid control;

• Organization of safe operation at the power transmis-

sion lines, power grid equipment and facilities which

are maintained by the branches, issuing permits for

preparing work places and rights of access to the repair

works of the line crews to the power transmission lines

and equipment of the substations;

• Coordination and control of terms of repair works at

the power transmission lines, power grid equipment

and facilities, including liquidation of emergency situ-

ations;

• Introduction and launching soft/hardware solutions to

the computational and analytical tasks (calculation of

the mode of the power grid, calculating short circuits

and the settings for relay protection and automatics

equipment, assessment of the mode condition, etc.),

training systems, operative informational complexes,

dispatcher ‘adviser’ and others;

• Monitoring and analysis of the technological distur-

bances and damages of the power grid facilities. De-

velopment of the organizational and technological

measures to reduce the causes of the disturbances and

damages.

In order to fulfill the goals and ensure reliability of the

software and hardware facilities in the Company’s GCCs

constant technical assistance and upgrading of the soft-

ware is provided. As part of the development of operative

and informational complexes in the GCCs new software

modules are introduced in order to enhance efficiency of

the dispatcher services and increase response speed in

case of emergency for quick decision-making.

EOC (EMERGENCY OPERATIONS CENTER)

ENSURES ENTRY OF ON-LINE REPORTING

INFORMATION FROM THE COMPANY’S

FACILITIES AND ENABLES TO PERFORM

CENTRALIZED CONTROL AND COOR-

DINATION IN CASE OF AN EMERGENCY

AND WIDE-SCALE BREAKDOWNS.

In 2011, the GCCs of the Vladimirenergo and Nizhnovener-

go branches assumed operational functions. Therefore, all

of the Company’s GCCs have operational functions, which

allows development of the unified hierarchy of the opera-

tive and technological process control in the branches.

Adoption of the one stop principle with the superior dis-

patcher centers ensure reliability and high quality power

supply, elimination of the technological disturbances and

restoration of the power supply in the shortest time pos-

sible.

In order to develop and improve the system of data col-

lection and transfer, analyze technological disturbances

and projections of their progress and consequences, an

Emergency Operations Center of the JSC IDGC of Center

and Volga Region was created in the Company’s executive

body in 2011.

An Emergency Operations Center (EOC) allows timely

receipt of operative and reporting data on emergencies,

technological disturbances, consequences of adverse

weather conditions and acts of God, fires and accidents

at the Company’s facilities. EOC also enabled the Com-

pany to centralize control over resources involved into

the emergency recovery activities, coordinate activity in

the branches and third parties in case of emergencies and

mass disturbances of the power system, and to organize

cooperation of the Company’s executive body with the

branches, authorities and regional and local departments

of EMERCOM. EOC is equipped with office supplies, means

of communication and display of shared information, and

necessary informational materials.

Equipment of GCCs with modern software and means of

display of shared information allows real time tracking

of performance of the branches’ equipment, controlling

equipment of the power grid facilities equipped with

the means of teleautomation and telemetering and con-

nected to the GCC’s software, and controlling voltage,

power load of equipment, electric power flows of 35 kV

and higher in the main grid.

GRID CONTROL CENTERS. DISPATCHER CENTERS EQUIPMENT

Branch GCC type Type of the information display equipment

Kirovenergo Operative Information Com-plex Dispatcher

Video wall DSch-7

Udmurtenergo SK-2003 Clarity Margay DLP 50 display cubes

Marienergo ENMAC Barco OverView 705 display cubes

Nizhnovenergo PSIcontrol Barco OverView c DR+67-DL display cubes

Ivenergo PSIcontrol Video wall SchD-5U4.2

Vladimirenergo PSIcontrol Barco OverView c DR+67-DL display cubes

Ryazanenergo PSIcontrol Barco OverView c DR+67-DL display cubes

Tulenergo PSIcontrol Barco OverView c DR+67-DL display cubes

Kalugaenergo KOTMI-NT Video wall SchD -1

120 121



In 2011, maintenance of the relay protection and automat-

ics equipment and stability control schemes included the

following measures:

• Total of 2,031 adjustments, 12,327 tests, 1,426 first

preventive inspections, 9,212 preventive inspections

and 11,440 preventive restorations were carried out;

• 3,938 units of electromechanical, microelectronic and

microprocessor protection and automatics equipment

and stability control schemes were commissioned;

• Outdoor bus sections of switchgear and control gear at

6-10 kV were equipped with short circuit protection de-

vices, total of 80 SS (157 bus sections) were equipped

in accordance with the relevant schedule;

• Measures stipulated by the target program for re-

placement of obsolete relay protection and automat-

ics equipment were fulfilled, which complies with the

Company’s technical policy concerning replacement

of the equipment with expired service lives, increas-

ing reliability, efficiency and technical standards of the

particular power grid nodes, implementation of the

measures prescribed by the Company’s informational

letters.

In 2011, total of 1,674 units of equipment were replaced in

compliance with the branches’ target programs.

The Company’s top priority in the nearest future will be re-

placement of relay protection and automatics equipment

which have expired service life mainly with the micropro-

cessor technology in order to reduce total depreciation of

equipment and increase its reliability.

In the sphere of relay protection of devices and automa-

tion the Company strives to pursue the unified technical

policy aimed at stable and reliable functioning of the pow-

er grid facilities owned by the distribution grid companies

within the Company’s operations area in the normal and

emergency mode.

The Company takes the following measures a regular basis:

• maintenance of the existing systems, relay protec-

tion and automatics equipment and stability control

schemes in operable state;

• replacement of obsolete systems, relay protection and

automatics equipment and stability control schemes;

• improvement of systems, relay protection and auto-auto-

matics equipment and stability control schemes.

Relay protection and automatics equipment and stability control schemes as of December 31, 2011

AUTOMATED SYSTEMS OF DISPATCH AND PROCESS CONTROL

Equipment and schemes Number %

Total 150,543 100

Electromechanical devices 130,128 86.4

Microelectronic devices 6,442 4.3

Microprocessor devices 13,973 9.3

Devices with expired service life 83,942 55.7

IN 2011, TOTAL OF 1,674 UNITS OF EQUIPMENT WERE REPLACED IN COMPLIANCE WITH THE BRANCHES’ TARGET PROGRAMS.

In order to increase reliability of the relay protection and

automatics equipment the Company will take the follow-

ing measures:

• Installation of the arc protection equipment and fault

recorders at the substations;

• Upgrading automatic schemes at the power grid fa-

cilities (automatic reclosers, automatic transfer circuit-

breaker, under-frequency load shedding equipment);

• Upgrading gas detector relay of the transformers;

• Upgrading protection equipment on the basis of the

direct-action relay;

• Replacement of the cable lines of the secondary pro-

tection circuits;

• Installation of the fault locators at 35-110 kV overhead

lines;

• Replacement of ART-1N automatic units for the adjust-

ment of voltage of power transformers with the RNM-1

microprocessor terminals.

Besides, the main goal of the maintenance personnel re-

mains conducting of the scheduled preventive inspections

of the relay protection and automatics equipment.

In 2011, development of the Automated Systems of Dis-

patch and Process Control had the following results:

• According to the approved programs for development

of communication and data transfer systems (CDTS)

37 110-35 kV SS were teleautomized and upgraded,

46 additional communication channels were installed;

• Two modern telephone switches were launched in the

Kirovenergo and Tulenergo branches;

• The program for repair of the automated system of dis-

patch and process control (ASDPC) was fulfilled.

At present the Company disposes of 1,623.8 km fiber-optic

communication lines, 814.29 km are owned by the Com-

pany and the rest are under lease. Fiber-optic communica-

tion lines are the most promising communications channel

which meets the modern standards.

To equip the control rooms with operative and information-al complexes, the following technical solutions are used:• GCC level: PSI control, ENМAC AG;

• Unit and distribution zone level: OIC Dispatcher, OIC Kot-

mi NT.

Automated information and measuring system of commer-

cial metering of energy equipment which is used in the

Company is thoroughly maintained.

Operative and Informational Complexes Used by the Company’s Branches

Complex Number of work places

Branches

OIC SK-2003 10 Udmurtenergo

ENMAC AG 19 Marienergo

PSI control 22 Nizhnovenergo, Vladimirenergo, Ivenergo, Ryazanen-ergo, Tulenergo

OIC Dispatcher 133 Kirovenergo, Udmurtenergo, Marienergo, Nizhnoven-ergo, Ryazanenergo, Kalugaenergo

OIC Kotmi NT 56 Tulenergo, Kalugaenergo

OIC Konus 19 Vladimirenergo

122 123



The main goals of Automated Systems of Process Control

in 2012 are the following:

• Achieving the level of teleautomation at the substa-

tions according to the program of innovative develop-

ment;

• Further development of the Grid Control Centers (GCC)

in order to ensure quality operational functions to be

performed by the branches in the sphere of operation-

al and technological control;

• Further building and upgrading of the main and stand-

by SS - 110 kV communications channels, SS-110 kV

telemechanics systems in compliance with the require-

ments of JSC UES of Russia and implementation of the

coordinated programs for development of the commu-

nication and data transfer systems (CDTS);

• Further improvement of the Corporate Multi-Service

Communications Network (CMSCN) in order to ensure

operable stare to the corporate services in the whole

Company;

• Equipping the Company’s production units with the

state-of-the-art IT, telecommunication and communi-

cation devices and their timely upgrading.

Key achievements in the information technologies sphere in 2011

DEVELOPMENT OF IT INFRASTRUCTUREAND INFORMATION TECHNOLOGIES

4.6

CIMS IT ASPC

Corporate Information Management System

IT infrastructure and telecommunications

ASPCAutomated System of Process Control

1. Pilot SAP-based projects of CIMS

development in the fields of auto-

mation of finance and economic ac-

tivity and personnel management

were fulfilled

2. System of management of large in-

vestment projects based on Oracle

Primavera software was introduced

3. Project on conditioning of the main

equipment of 35kV and higher grids

based on CIMS ТОРО SAP ERP was

fulfilled

1. System of guaranteed electric sup-

ply to the Data Processing Center

(DPS) and Line Equipment Room

including diesel driven generator

was put into operation

2. Super-computer based hardware

and software complex produced in

Sarov was put into operation

3. Structured Cable Network (SCN) of

the Executive body building was

created

1. 37 110–35 kV SS were telemecha-

nized, 46 connection channels were

established

2. Command-staff cars based on the

off-road vehicles were created,

cars of mobile emergency response

teams were re-equipped with the

means of communication

3. Call center and reserve studio of vid-

eo conference communication were

created on the basis of Emergency

Operations Center

MEASURES AND PROJECTS TO INCREASE OBSERVABILITY CONTROLLABILITY

AND RELIABILITY OF ASDPC AND IT INFRASTRUCTURE

In 2011, development of IT infrastructure and informa-

tion technology produced the following results:

1. Within the framework of the JSC IDGC Holding’s com-

mon corporate projects, ITT strategy of JSC IDGC of

Center and Volga Region for 2012-2016 was developed.

2. Telemechanics systems were modernized, 37

SS 110-35 kV were teleautomized, and 46 additional

ASDPC communication channels were established

in compliance with the approved development pro-

grams for communication and data transfer systems

(CDTS).

3. Two up-to-date digital telephone stations (ATS) at

the Kirovenergo and Tulenergo Branches were com-

missioned.

4. The program for repair of the automated system of

dispatch and process control (ASDPC) was fulfilled.

5. The core of the Company’s corporate computer net-

work was upgraded.

6. Exploration and design works were carried out in

compliance with the Federal Law No. 152-FZ on Per-

sonal Data, of July 27, 2006 which regulates person-

al data processing. As part of the EAD works local

computer network of the Company’s executive body

was upgraded. PCs of the users who handle personal

data are united into separate segments (local com-

puter networks) which are connected to the main

computer network via protected switchboards. All

users who handle personal data have special soft-

ware installed on their PC which allows access only

after entering personal password.

7. Exploration and design works (first stage) on intro-

duction of the centralized customer servicing are

fulfilled; it provides an opportunity for twenty-four-

hour receipt of the applications on technological

disturbances in the power grid and provision of in-

formation on emergency recovery works. Customer

Service Centers and Emergency Operations Center

are created and launched into operation.

8. Spare studio for videoconferences is established the

Emergency Operations Center.

9. As part of the measures to ensure reliable and unin-

terrupted operation of ASDPC and liquidation of the

consequences of the emergencies and act of God (icy

rains) mobile emergency response teams were fully

re-equipped.

10. Mobile communications centers are equipped with

cross-country vehicles as command post vehicles in

all the branches and executive body of the Company.

11. The Pilot project of creating and incorporating of the

Corporate Information Management System (CIMS) on

the SAP ERP basis in the Tulenergo branch. A system of

124 125



automatic accounting of the financial and operational

performance, personnel and payroll was created and

introduced into the operational process, now it is pre-

pared to be duplicated in other branches.

12. In accordance with the JSC IDGC Holding’s standards

on project control the system of control over large

investment projects on the basis of the Oracle Pri-

mavera software was introduced. This solution was

integrated with the system of automatic computa-

tion and issuing of the estimate documentation.

13. In the Kirovenergo branch the pilot project of creat-

ing and introducing certification of the main facili-

ties in the 35 kV and higher power grid on the basis

of CIMS Repairs and Maintenance SAP ERP.

14. Hardware and software complex was launched into

operation on the basis of the super-computer pro-

duced in Saratov and adapted to the Company’s in-

frastructure including VMware vSphere 4 virtualiza-

tion platform.

15. As part of the upgrading Company’s IT infrastruc-

ture:

• Line equipment room was transferred from the third

to the first floor into the specially equipped room,

structured cabling system of the left wing in the

Company’s executive body building was created;

• The system of uninterrupted power supply in the

data processing center and line equipment room was

established, it includes three uninterrupted power

suppliers and diesel driven generator;

• The system of gaseous fire suppression in the data

processing center was launched into operation;

• The system of data backup measures on the basis

of the tape library was launched into operation.

At present all IT services of crucial importance are

backed up on the magnetic tape which allows its

quick restoration.

16. Computer classes were created in the Company’s

branches in order to increase computer literacy and

provide staff with training on use of informational

technology.

Computer class in the Southern Power

Grids Unit of the Kirovenergo branch

17. Starting from 2011 the Company’ unified domain

structure will include executive body, Nizhnoven-

ergo, Ryazanenergo, Kirovenergo and Tulenergo

branches which provides these units with developed

infrastructure and IT services on the Microsoft Win-

dows Server platform and allows launching of the

unified effective message subsystem on the basis of

Microsoft Exchange.

18. As a result of implementation of the program for cost

reduction cost savings on cellular and long-distance

communication totaled 3.1% and 9.8% respectively.

19. In November 2011, the Udmurtenergo branch fin-

ished the first stage of the project Power Efficient

Facility which introduces the advanced power grid

technology. The Smart Grid project will significantly

increase the quality of power supply in the Karaku-

lino village owing to the state-of-the-art technology

and equipment.

Its main advantage is automatic reaction to any chang-

es in the power system which ensures maximum reli-

able and uninterrupted power supply. Other advantages

of the smart grids include long service life, high stability

and adaptability to adverse weather conditions, safe ex-

ploitation and high level of protection from damages.

Smart Grids Project in the Udmurtenergo Branch

Further development of IT services is planned for 2012 in order to increase efficiency of operation and reduce op-erational costs.

SMART GRID IS A RAMIFIED INSTRUMENTA-

TION AND CONTROL SYSTEM WHICH IS BASED

ON THE UP-TO-DATE INFORMATION

TECHNOLOGY.

DISPATCH BOARD

LONG-PILLAR TRANSFORMER SUBSTATION

KARAKULINO 110/35/10 SSISET CONTROL ROOM

RECLOSERELECTRICITY METERS OF THE CONSUMERS

OPERATIVE INFORMATION COMPLEX «DISPATCHER»

DISPATCHER MULTI FUNCTION DEVICEPOLLING SERVER

GSM

Radi

o ch

anne

l

Remote controlled equipment for load disconnection

System of collection and transmis-sionof telemetrydata from the facility on the state of equipment and operating condition

Radi

o ch

anne

l

ASDS

INVESTMENT ACTIVITIES05

Modern sulfur hexafluoride circuit breakers of 110 kV, used for construction

and modernization of substations, they are completely fire- and explosion-proof,

they have high breaking capacity and long service life

128 129

05 INVESTMENT ACTIVITIES



The Development Investment Program (DIP) of the JSC

IDGC of Center and Volga Region is formed in accordance

with the development plans of the regions, the techni-

cal condition of power grids and the available sources of

financing formed on the basis of tariff and balance reso-

lutions.

Starting from 2010, the Development Investment Program

is planned, implemented and reported in accordance with

the provisions of the Decree № 977 of the Government

of the Russian Federation “On the Investment Programs

of the Subjects of Power Industry”, dated December 1,

2009.

Disbursement of capital investments in 2011 comprised

RUB 13,568.796 million, including:

• RUB 3,205.172 million for the new construction projects;

• RUB 9,894.043 million for reconstruction and technical

re-equipment;

• RUB 451.601 million for purchase of fixed assets;

• RUB 17.980 million for intangible assets.

Actual commissioning of fixed assets comprised RUB

14,383.675 million. Actual financing comprised RUB

15,913.796 million.

The length of power transmission lines and transformer

capacity put into operation comprised 3,086.45 km and

1,263.88 MVA respectively.

KEY ASPECTS OF FORMATION OF THE DEVELOPMENT INVESTMENT PROGRAM REPORT

PARAMETERS OF INVESTMENT ACTIVITIES5.1

The corrected Investment Program was approved

by the Board of Directors of the Company (as a part

of the business plan) and by the Ministry of Energy of

the Russian Federation. The initial Investment Pro-

gram of the Company for 2011 was approved in the

Q4 of 2010.

Cost and Physical Parameters of Investment Activities in 2011

Branch Disbursement, excluding VAT

Commissioning of fixed assets

Financing, including VAT

Commissioning of capacity

Capacity increase

RUB, million RUB, million RUB, million MVA km MVA km

Vladimirenergo 1,231.85 776.217 1,491.164 32.22 225.59 26.25 71.00

Ivenergo 404.671 502.982 478.844 53.47 46.23 46.27 45.86

Kalugaenergo 2,157.946 2,712.538 2,527.846 421.37 682.96 374.92 486.33

Kirovenergo 638.563 610.954 730.634 45.87 271.97 41.37 223.67

Marienergo 277.211 257.059 319.282 12.54 68.96 12.22 63.31

Nizhnovenergo 3,112.252 3,142.028 3,654.003 117.00 701.49 95.66 452.43

Ryazanenergo 776.999 849.031 910.569 56.90 147.78 29.59 65.97

Tulenergo 4,151.096 4,434.096 4,855.939 419.02 622.27 189.87 39.84

Udmurtenergo 800.228 1,083.820 924.005 105.50 319.20 90.50 206.00

Executive body 17.980 14.950 21.510 0.00 0.00 0.00 0.00

TOTAL for the Company

13,568.796 14,383.675 15,913.796 1,263.88 3,086.45 906.6 1,654.4

SEPTEMBER


130 131



DYNAMICS OF CAPITAL INVESTMENTS, RUB mln

5.2

Vladimirenergo Ivenergo Kalugaenergo Kirovenergo Marienergo Nizhnovenergo

348.503

826.235

1,231.850

119.624 171.467

404.671

1,338.434

1,622.856

2,157.946

340.629

638.563

83.664 159.194277.211

2,348.195

1,643.454

3,112.252

2009 2010 2011

The gap charts

VOLUMES OF DISBURSEMENT OF FIXED CAPITAL INVESTMENTS IN 2011

119.170

Ryazanenergo Tulenergo Udmurtenergo TOTAL for the CompanyExecutive body

1,058.712

673.476776.999

969.974

2,195.308

4,151.096

256.261

768.916800.228

5.937 12.767 17.980

6,648.474

8,414.302

13,568.796

RUB 13,568.796 millionCOMPRISED

The works performed in 2011 to implement the measures

on capital construction include the following:

• Putting into operation of 1,263.88 MVA, including: dur-

ing new construction – 347.6 MVA, during reconstruc-

tion – 916.2 MVA.

• Construction of 592 transformer substations (TSS) and

distribution transformer substation (DTSS) with the in-

stalled power of 130.41 MVA.

• Constructing anew of 44.2 km 110–35 kV HVL, 415.5

km 0.4-10 kV power transmission lines.

• Putting into operation of four power-factor correction

units for the total capacity of 31.75 MVAr.

• Reconstruction of 1,483.03 km of 0.4-10 kV power

transmission lines built in 1975–1989, and 84.6 km

of 35–110 kV HVL, which were in unsatisfactory

or unsuitable technical condition according to the

related normative and technical documents (The

decision to reconstruct the powered facilities was

made based on the analysis of data on the volumes

of power transmitted and the technical condition

of power transmission lines and high social signifi-

cance of these facilities).

• Replacement of oil circuit breakers at 35–110 kV

substation was made in order to improve reliability

of power supply of the consumers, to reduce the op-

eration costs and to sustain the lives and health of the

employees. Items that were replaced:

· MV 110 kV for SF6 circuit breakers 110 kv – 33 items;

· MV 35 kV for SF6 circuit breakers (vacuum circuit

breakers) 35 kV – 64 items;

· MV 6–10 kV for vacuum circuit breakers 6–10 kV –

415 items.

Oil circuit breakers are prone to physical and functional

wear to a greater extent.

According to the measurements, the speed performance of

the majority of oil circuit breakers are below the norm. The

actuating mechanisms of the circuit breakers are unstable

and cannot be adjusted (unstable operation of actuators).

Many features of the circuit breakers do not comply with

RD 34.45-51.300-97 “The Range and Norms of Electrical

Equipment Testing”. The cells equipped with such circuit

breakers are fire and explosion dangerous.

• The replacement of physically and functionally depre-

ciated equipment at SS 35–110 kV (performed in ac-

cordance with the approved target programs) included

the following:

· replacement of isolating switches and shorting

plugs (IS and SP) for SF6 circuit breakers (28 items)

at the 110 kV SS;

· replacement of 110 kV oil-filled bushings for bush-

ings with solid isolation (12 items);

· replacement at SS 110 kV of stick-pedestal porce-

lain insulators for polymeric ones (57 items) at the

SS 110 kV;

· replacement of SN and SK type storage batteries at

21 SS 110 kV;

· reconstruction of relay protection and automatics

equipment at SS 35–110 kV, involving the replace-

ment of physically and functionally depreciated

equipment by the following items:

· replacement of automatic units for the adjust-

ment of voltage of power transformers at 17 SS;

· replacement of microprocessor-based emer-

gency control automatics at 16 SS, including

replacement of under-frequency load shedding

equipment by microprocessor-based equipment

at 12 SS, replacement of 110 kV line protection

panels for microprocessor-based ones (21 item),

and installation of arc protection equipment

at 95 SS.

DIRECTION AND STRUCTURE OF CAPITAL INVESTMENTS

132 133



• Reconstruction of SS Pokrov 110/35/10 kV. Installation of controlled shunt reactor RTDU 25000/110-UKhL-1.

Targets and objectives of the project: increase of transmission capacity of the grid, main-

taining of normal levels of voltage and reduction of energy losses.

• Reconstruction of SS 35/6 Plyos with replacement of four power transformers with capac-

ity of 1.8 MVA by two transformers with capacity of 4 MVA.

Targets and objectives of the project: improvement of reliability of power supply of the

consumers and work of the equipment.

• SS 110/35/10 kV Arsaki. Extension of 110 kV outdoor switchgear.

Targets and objectives of the project: improvement of reliability of the equipment and

increase of transmission capacity of the grid.

• Melenki–Fursovo 110 kV HVL. Construction of a new line.

Targets and objectives of the project: increase of transmission capacity of the grid and

improvement of reliability of power supply of the consumers.

• SS 110/6 kV Lizunovo. Construction of SS 110 kV 2х10 MVA.


consumers and creation of possibility to connect new power supply consumers.

• Construction of the first outdoor start-up facility of the new SS 110/6 kV Ivanovskaya 15 with capacity of 40 MVA with 110 kV HVL.

Targets and objectives of the project: ensuring connection of the new power supply

consumers and even load re-distribution between existent substations for improvement

of reliability of power supply of the consumers and reduction of technical energy losses.

Projects implemented in 2011 include:


Projects launched in 2011 include:

Technical re-equipment and reconstruction:



New construction:

New construction:

VLADIMIRENERGO BRANCH:

IVENERGO BRANCH:

THE MOST SIGNIFICANT PROJECTS IMPLEMENTED BY THE BRANCHES OF THE COMPANY PUT INTO OPERATION OR LAUNCHED IN 2011

SS Pokrov

SS Ivanovskaya-15

SS Lizunovo

SS Arsaki

134 135



• Construction of SS 220/110/10 kV Sozvezdie. Autotransformer ATDTsTN 250000/220U1

with a capacity of 250 MVA has been put into operation at the facility.


consumers and creation of possibility to connect new power supply consumers (LLC

Vorsino Industrial Park).

• Construction of SS 110/35/10 kV Tovarkovo. Two transformers TDTN 16000/110/35/10

have been established.

Targets and objectives of the project: development of 110/35 kV network, improvement

of reliability of power supply of the consumers, creation of possibility to connect new

power supply consumers.

• Reconstruction of SS 35/10 kV SSK with transfer to 110 kV (1st stage of the 2nd phase).

Targets and objectives of the project: improvement of reliability of power supply

of the consumers of village Raduzhny of Novovyatsky District of Kirov Region, ensuring

connection of the new power supply consumers in the area of intense high-rise and indi-

vidual low-rise construction.

• Reconstruction of 110 kV outdoor switchgear of Sanchursk 110/35/10 kV SS with installa-

tion of 110 kV section circuit breaker.


consumers and work of the equipment.

• Reconstruction of SS 110 kV Rosva with replacement of 110 kV transformers and transfer

to 220 kV voltage.


consumers and creation of possibility to connect new power supply consumers.

• Reconstruction of SS 35/10 kV SSK with establishment of T1 with capacity of 16 MVA, in-

stallation of 35 kV HVL access lines and installation of 35 kV indoor switchgear (2nd stage

of the 2nd phase).


consumers of village Raduzhny of Novovyatsky District of Kirov Region, ensuring connec-

tion of the new power supply consumers in the area of intense high-rise and individual

low-rise construction.





New construction:




KALUGAENERGO BRANCH:

KIROVENERGO BRANCH

SS Sozvezdie

SS SSK

SS TovarkovoSanchursk

SS Rosva

136 137



• Reconstruction of SS 110/10 kV Zarechnaya. Targets and objectives of the project: improvement of reliability of work of the equip-

ment and reliability of power supply of the consumers of Zarechny District of Yoshkar-Ola,

including Ice Stadium, Swimming Pool and Sports and Recreation Center Spartak.

• Reconstruction of SS 110/10 kV Medvedevo, SS 110/10 kV Kozmodemiansk, SS 110/35/10 kV Kundysh, SS 110/10 kV Melkovka. Targets and objectives of the project: improvement of reliability of work of the equipment

and power supply of the consumers.

• Reconstruction of SS 35/6 kV Mokroe with replacement of T-2 4 MVA power transformer

by 10 MVA power transformer (2nd phase).

Targets and objectives of the project: improvement of reliability of work of the equipment


• Power supply for the area of residential development at the left bank of the Malaya Kok-

shaga River.

Targets and objectives of the project: ensuring of power supply of the consumers of the area

of residential development at the left bank of the Malaya Kokshaga River in Yoshkar-Ola.

• Construction of SS 35/10 kV Uzhovka-2 with installation of 2х4 MVA power transformers.

Targets and objectives of the project: development of 35 kV network, improvement of reli-

ability of power supply of the consumers, creation of possibility to connect new power

supply consumers.

• Construction of SS 35 kV Chernukha with installation of 2х4 MVA power transformers.

Targets and objectives of the project: development of 35 kV network, improvement of reli-

ability of power supply of the consumers, creation of possibility to connect new power

supply consumers.

• Reconstruction of NiGRES–Zavolzhskaya 110 kV HVL, 8.72 km.

Targets and objectives of the project: improvement of reliability of 110 kV network







New construction:

New construction:


MARIENERGO BRANCH:

NIZHNOVENERGO BRANCH

Power supply of residential development

SS Mokroe SS Uzhovka-2

138 139



• Reconstruction of SS 35/10 kV Bolon

with replacement of 1.8 MVA transformer by 5.6 MVA one.


and power supply of the consumers of Klepikovsky District of Ryazan Region. Creation of

possibility to connect new power consumers.

• Reconstruction of SS 110 kV Dashki with replacement of the substation equipment (3rd stage).


and power supply of the consumers in Ryazan.

• Reconstruction of SS 110 kV Yesenino

with replacement of 2.5 MVA power transformers by 10 MVA.



• Reconstruction of SS 110 kV Skopin

with replacement of 20 MVA power transformer by 25 MVA one.






Measures taken under the Agreement “On Interaction between the Government of Ryazan Region and JSC FGC UES of Russia over Development of the Electric Power System of Ryazan Re-gion and Ensuring Reliable Power Supply for Its Consumers” dated February 18, 2008. № 34 ¼:

RYAZANENERGO BRANCH

• Technical re-equipment of 0.4–10 kV HVL in Karakulino village with replacement of the

wooden poles by those made of reinforced concrete, and cables by insulated wire line,

modernization of reporting system, establishment of ASC of the SS (1st phase).

Targets and objectives of the project: improvement of quality and reliability of power sup-

ply of the consumers of Karakulino village, Udmurtia Republic, ensuring safety of usage

of distribution grids, reduction of energy losses.

• Construction of Soyuznaya 110/10 kV SS with 110 kV HVL access lines in Ustinovsky Districts

of Izhevsk with installation of two 110 kV power transformers with capacity of 2х40 MVA.


of the consumers, ensuring power supply of the perspective construction in Aeroport

and Vostochny neighborhoods in Izhevsk.



New construction:

UDMURTENERGO BRANCH

SS Yesenino SS Skopin

HVL in Karakulino village SS Soyuznaya

140 141



• Reconstruction of SS 110/10/6 kV Perekop (2nd phase).

• Targets and objectives of the project: improvement of reliability of work of the equipment

and power supply of the consumers; creation of possibility to connect new power supply

consumers and ensuring power supply of the perspective construction in the Center of

Tula.

• Complex reconstruction of SS 110 kV Privokzalnaya with replacement of 2х25 transform-

ers by 2х40 MVA ones.


consumers of Tula and creation of possibility to connect new power supply consumers.

• Reconstruction of SS 110/35/6 Yasnogorsk with replacement of 2х63 MVA transformers,

reconstruction of 110 kV open switchgear.


consumers of Yasnogorsky, Zaoksky and Leninsky Districts of Tula Region: creation of pos-

sibility to connect new power supply consumers.

• Reconstruction of SS 110 kV Yuzhnaya with installation of 25 MVA power transformer.


of the consumers and ensuring power supply of the perspective construction in Tula.

• Complex reconstruction of SS 35 kV Medvenka with transfer to 110 kV voltage and

with installation of 2х25 MVA transformers, construction of 110 kV open switchgear,

reconstruction of 35 kV open switchgear, installation of the two sections of 6 kV voltage

switchgear and control gear.


and power supply of the consumers in Tula.

• Reconstruction of Luzhnoe–Malakhovo 110 kV HVL with replacement of poles, cables,

and insulation, 24.1 km.


of the consumers in Dubensky and Schekinsky Districts of the Tula Region.



TULENERGO BRANCH

SS Yasnogorsk

SS Perekop

SS Medvenka

SS Privokzalnaya

SS Yuzhnaya

142 143



Branch 2011 2012 plan 2013 plan 2014 plan 2015 plan 2016 plan 2017 plan

Vladimirenergo 1,231.850 379.591 1,019.558 1,008.610 1,047.670 1,243.160 1,371.229

TREaR 862.720 233.575 558.329 683.637 784.637 1,110.582 1,074.457

New construction 339.319 142.316 451.229 290.108 233.115 105.809 260.079

Other 29.811 3.700 10.000 34.865 29.918 26.769 36.693

Ivenergo 404.671 409.832 201.879 251.879 271.879 281.878 291.879

TREaR 163.567 348.538 127.714 135.824 188.650 174.548 218.199


Other 0.973 0.000 8.694 0.000 0.000 0.000 0.000

Kalugaenergo 2,157.946 1,792.507 1,233.859 1,571.025 1,694.910 2,072.936 2,336.497

TREaR 1,287.148 516.401 452.161 588.833 842.155 1,322.237 1,412.817

New construction 851.886 1,270.341 771.698 975.921 848.780 750.699 923.680

Other 18.912 5.765 10.000 6.271 3.975 0.000 0.000

Kirovenergo 638.563 440.790 720.775 1,130.960 1,308.029 1,427.351 1,410.018

TREaR 589.001 296.573 687.524 723.759 907.342 822.294 830.842


Other 38.133 27.522 11.590 6.845 33.652 15.291 16.200

Marienergo 277.211 131.472 412.278 542.479 674.512 921.808 1,010.553

TREaR 150.256 72.852 299.799 439.809 560.885 715.552 649.431


Other 1.952 0.354 1.598 8.398 4.736 16.725 0.000

Nizhnovenergo 3,112.252 2,123.904 2,302.549 2,631.650 3,470.237 3,818.461 4,975.182

TREaR 1,550.332 961.906 1,902.103 1,695.951 2,711.169 2,004.278 3,204.692

New construction 1,203.678 1,106.263 340.446 875.699 699.068 1,754.183 1,710.490

Other 358.242 55.736 60.000 60.000 60.000 60.000 60.000

Ryazanenergo 776.999 523.791 501.663 705.767 974.743 1,210.497 1,537.295

TREaR 719.993 501.294 490.771 705.767 962.396 1,210.497 1,537.295


Other 0.071 0.200 0.000 0.000 0.000 0.000 0.000

Tulenergo 4,151.096 1,340.000 1,311.235 1,565.216 1,557.820 1,585.039 1,630.719

TREaR 3,943.058 1,200.726 1,224.147 1,538.110 1,362.208 1,417.902 1,573.257


Other 9.157 3.226 0.678 0.212 0.000 0.000 0.000

2012–2017 DEVELOPMENT INVESTMENT PROGRAM DISTRIBUTION, AS COMPARED TO 2011, RUB million (excluding VAT)

Branch 2011 2012 plan 2013 plan 2014 plan 2015 plan 2016 plan 2017 plan

Udmurtenergo 800.228 500.350 854.379 1,273.135 1,489.416 1,497.606 1,586.172

TREaR 609.988 401.090 580.722 806.336 945.327 1,067.786 997.372


Other 12.330 0.000 0.429 2.717 0.750 0.580 1.800

Executive body 17.980 13.365 13.365 13.365 13.365 13.365 13.365

TREaR 17.980 13.365 13.365 13.365 13.365 13.365 13.365


Other 0.000 0.000 0.000 0.000 0.000 0.000 0.000

TOTAL for the Company 13,568.796 7,655.602 8,571.541 10,694.087 12,502.581 14,072.101 16,162.909

TREaR 9,894.043 4,546.320 6,336.634 7,331.391 9,278.134 9,859.041 11,511.728

New construction 3,205.172 3,012.779 2,131.918 3,243.387 3,091.416 4,093.695 4,536.487

Other 469.581 96.503 102.989 119.308 133.031 119.365 114.693

Including programs

Technological connection 3,276.619 4,139.591 2,249.028 2,372.519 2,238.180 2,075.623 1,886.140

Renewal of the main and auxiliary equipment

6,779.644 3,925.327 4,128.000 4,817.627 6,588.097 5,945.574 8,383.271

Energy saving and improvement of energy efficiency

6,901.315 3,146.142 3,907.285 4,859.011 6,470.945 7,330.369 9,427.187

Establishment of systems of emergency and secure automation

212.052 112.470 82.805 231.726 219.566 189.284 305.874

Establishment of sys-tems of teleautomation and communication

380.650 225.146 401.953 426.232 627.746 469.568 499.358

Establishment of devices for regulation of voltage and compensation of reactive power

87.296 11.968 26.262 91.513 88.045 164.703 161.979

Usage of innovative tech-nologies and equipment

1,597.359 1,028.407 1,362.892 1,710.261 2,063.474 2,278.155 2,763.258

Measures on anti-terror-ism security

144.380 132.222 155.597 131.551 114.930 176.297 201.556

Replenishment of the emergency reserve

4.116 0.000 0.000 0.000 0.000 0.000 0.000

144 145



Investment Program of the JSC IDGC of Center and Volga

Region for 2011 has been implemented by 99% in the

volume of RUB 13,568.796 million with a plan of RUB

13,766.247 million.

ANALYSIS OF CAPITAL INVESTMENTS STRUCTURE

2011 CAPITAL INVESTMENT STRUCTURE

23.6%New construction

72.9%Technical re-equipment

and reconstruction

3.5%Other

It is assumed that in 2012–2017 the volume of capital

investment disbursement should increase by the aver-

age 16% per year and reach RUB 16,162.909 million in

2017. Total increase for this period should reach RUB

69,858.82 million. It is assumed that the higher levels of

reconstruction and modernization of existent electrical

grid facilities should contribute to the increase of capital

investment cost in 2012–2017. Average annual increase

of technical re-equipment and reconstruction cost should

reach 21%.

DYNAMICS OF CAPITAL INVESTMENT COMMISSIONING ACCORDING

TO 2011–2017 DEVELOPMENT INVESTMENT PROGRAM, RUB million net of VAT

In 2011, Investment Program financing comprised RUB

15,913.796 million (including VAT). In 2012, planned vol-

ume of the Investment Program financing comprises RUB

8,919.223 million (including VAT). In the following years

the volume of financing will increase by the average 16%

per year and reach RUB 18,472.244 million (including

VAT) in 2017, with total RUB 80,744.386 million (includ-

ing VAT) in 2012–2017.

LONG-TERM INVESTMENT PROGRAM5.3

RUB 18,472 million BY 2017 REACHES

16%

PARAMETERS OF THE INVESTMENT PROGRAM FINANCING PLANNED FOR 2012–2017

AVERAGE ANNUAL INCREASE

2011 2012 2013 2014 2015 2016 2017

2,000

0

8,000

14,000

4,000

10,000

16,000

6,000

12,000

Vladimirenergo

Ivenergo

Kalugaenergo

Kirovenergo

Marienergo

Nizhnovenergo

Ryazanenergo

Tulenergo

Udmurtenergo

Executive body

plans:

SHAREHOLDERS’ CAPITAL06

Digital route search receiver ABRIS TM-8 (aviation board radio integration system, (8ch mode))

is aimed to search for power and telephone cables, engineering communications in the ground

148 149

06 SHAREHOLDERS’ CAPITAL



The Company’s shares were transferred to the MICEX quo-

tation list A Level 2.

The General Shareholders Meeting decided to pay the dividends for the first time. At the year-end 2010, the divi-

dends paid totaled RUB 141 million.

MAY JUNE

The charter capital of JSC IDGC of Center and Volga Region

totals RUB 11,269,781,704.30 (eleven billion, two hun-

dred and sixty nine million, seven hundred and eighty one

thousand, seven hundred and four, point thirty).

The Company has issued and placed 112,697,817,043 (one

hundred billion, six hundred and ninety seven million,

eight hundred seventeen thousand, forty three) ordinary

shares with the nominal value of 10 kopecks each.

The number of authorized shares is 2,182,957 (two million,

one hundred and eighty two thousand, nine hundred and

fifty seven) of ordinary registered shares with the value of

10 kopecks each. These shares are the difference between

the number of authorized shares (112,600,000,000) and

the number of shares (112,597,817,043) issued during the

reorganization of the Company, which took place in 2008

in the form of merger with the distribution grid companies.

The Company issued no preferred shares.

After the reporting date: February 2012.The Company’s shares were transferred to the MICEX quo-


Company’s shares retained their presence in the MSCI Rus-

sia Small Cap Index structure.

SECURITIES6.1

NOVEMBER FEBRUARY 2012


150 151



The Company holds shares of JSC IDGC Holding due to the

legal succession of the shares of JSC RAO UES of Russia

from JSC Kirovenergo which was merged with the Com-

pany. During the reorganization of JSC RAO UES of Rus-

sia the shareholders of the latter were given the shares

of a number of power industry companies, including JSC

IDGC Holding.

THE COMPANY’S ISSUES OF SHARES

Cross Holding as of December 31, 2011

Issue Date of the issue registration

State Registration Num-bers of the Issue

Number of shares I the issue

Nominal Value, RUB

Initial (primary) issue August 20, 2007 1-01-12665-Е 100,000,000 0.1

Additional Issue 001 February 21, 2008 1-01-12665-Е-001D 9,933,178,038 0.1









Additional Issue 010 February 21, 2008 1-01-12665-Е-010D 665,242,563 0.1


Additional Issue 012 February 21, 2008 1-01-12665-Е-012D 327,892,112 0.1



Primary and additional issues combined (July 01, 2008)

August 20, 2007 1-01-12665-Е 112,697,817,043 0.1

Total number of shares outstanding 112,697,817,043 0.1

Name of the Share-holder

Number of shares Nominal Value of the Share, RUB

Nominal Value of the Investment, RUB

% of the Charter Capital Ordinary Preferred

Information on the shares of JSC IDGC of Center and Volga Region held by JSC IDGC Holding

JSC IDGC Holding 56,799,338,107 — 0.1 5,679,933,810.7 50.4

Information on the shares of JSC IDGC Holding held by JSC IDGC of Center and Volga Region


2,080,389 — 1.0 2,080,389 0.005

* Ow – Owner, NH – Nominee holder. Note: The information above contains no data on the cus-

tomers of nominee holders.

Note: The Company has no data on the existence

of the shareholdings exceeding 5%, except for the above-

mentioned.

STRUCTURE OF THE SHAREHOLDERS’ CAPITAL (5% AND MORE)

STRUCTURE OF THE SHAREHOLDERS’ CAPITAL ON THE DATE OF COMPILING THE LIST OF PERSONS ENTITLED TO PARTICIPATION IN THE ANNUAL SHAREHOLDERS MEETING (EXCEEDING 5%)

Type Full (Abbreviated) name Address % of the Charter Capital

as of December 31, 2010

as of December 31, 2011

Ow Open Joint Stock Company Interregional Distribution Grid Companies Holding (JSC IDGC Holding)

26 Ulansky Lane, Moscow 107996, Russia

50.40 50.40

NH Closed Joint Stock Company Depositary Clearing Company (JSC DCC)

4/7, building 1,Vozdvizhenka Str.,Moscow 125009, Russia

35.83 33.72

NH Closed Joint Stock Company National Depositary Center (JSC NDC)

1/13, building 8,Sredny Kislovsky Lane,Moscow 125009, Russia

— 5.83

Other 13.77 10.05

TOTAL 100 100

Name % of the Charter Capital

as of May 6, 2011 as of May 14, 2012

JSC IDGC Holding 50.40 50.40

Jamica Limited 16.82 0

GENHOLD LIMITED 0 16.82

Energosouz Holdings Limited 5.40 5.40

ENERGYO SOLUTIONS RUSSIA (CY-PRUS) LIMITED

— 6.74

Other 27.38 20.64

TOTAL 100 100

SHAREHOLDERS6.2

152 153



SHAREHOLDERS STATISTICS

RIGHTS OF THE SHAREHOLDERS

Type of the Shareholder As of December 31, 2010 As of December 31, 2011

Number of Shareholders

% of the Charter Capital



Owners – physical persons 19,502 4.281 19,199 4.055

Owners – legal entities 154 0.383 154 0.383

State Property (Russian Federation, regions of the Russian Federation )

4 1.006 4 1.006

Nominee Holders 14 94.330 15 94.556

Beneficial owners 1 < 0.001 1 < 0.001

TOTAL 19,675 100 19,373 100

Type of the Shareholder As of December 31, 2010 As of December 31, 2011





Residents of the Russian Federation 19,636 99.920 19,332 99.920

Non-residents of the Russian Fed-eration

39 0.080 41 0.080

TOTAL 19,675 100 19,373 100

Note: The information above contains no data on the cus-

tomers of nominee holders.

Rights of the shareholders are stipulated by the legislation

of the Russian Federation (Federal Laws and other regu-

latory acts) as well as the Charter of JSC IDGC of Center

and Volga Region. The Company guarantees that the rights

of shareholders are properly respected. The basic rights

of shareholders are stated in the Supplement №10 of the

Annual Report.

In 2011, the Company’s shares were traded on the lead-

ing Russian stock exchanges: СJSC MICEX Stock Exchange

(MICEX) and JSC RTS (RTS) (trade code MRKP).

After consolidation of the primary and 14 additional issues

on July 1, 2008 the Company’s shares of the primary (con-

solidated) issue are traded under the registration number

1-01-12665-Е.

SHARES OF THE COMPANY ON THE STOCK MARKET6.3

Stock Market

Starting date without listing procedure

Starting date the quotation list B

Starting date in the quotation list A Level 2

Exclusion from the list of the Quotation list of shares due to closing or RTS *

Starting date inn the quotation list A Level 1

MICEXApril 7, 2008 September 23,

2008

May 18, 2011 — February 27, 2012

RTS — December 19, 2011 —

* JSC RTS closed due to reorganization in the form of merger with CJSC MICEX.

THE COMPANY’S SHARES ARE INCLUDED IN THE FOLLOWING INDICES:

• Since July 15, 2008 — MICEX SC (MICEX Start Cap Index);

• Since September 15, 2008 — RTS-2 Index, RTSeu (Electric Utilities);

• Since October 27, 2008 to July 25, 2010, since January 25, 2011 to July 24, 2011 — MICEX PWR;

• Since November 11, 2009 — MSCI Russia Small Cap Index (MSCI Barra International Analytical Agency).

In 2011, the Company’s capitalization decreased to RUB

16.6 billion which accounted for 50.9% drop as compared

to 2010 due to negative market trend (MICEX Index and

MICEX PWR decreased by 16.9% and 40.2% respectively)

and revision of the tariff rates. Maximum capitalization in

2011 amounted to RUB 37.6 billion; minimum capitaliza-

tion was RUB 16.3 billion.

In 2011, the trading volume of the Company’s shares at

MICEX Stock Exchange reached RUB 1,414.39 million

(6,112.5 million shares), on the RTS Stock Exchange it to-

taled RUB 52.59 million (239.75 million shares).

RUB 1,414.39 million

RUB 52.59 million

IN 2011, THE TRADING VOLUME OF THE COMPANY’S SHARES AT MICEX STOCK EXCHANGE

RTS STOCK EXCHANGE —

RUB 37.6 billion

RUB 16.3 billion

Maximum capitalization in 2011

Minimum capitalization

154 155



Market Features

Parameter Unit of measure

December 31, 2009*

December 30, 2010*

2010/2009, (absolute increase), %

December 30, 2011

2011/2010, (relative increase), %

Closing Price ** RUB 0.1815 0.3033 67 0.14544 -52

Capitalization RUB million 20,454.7 34,181.2 16,390.8

VWAP (Volume Weighted Average Price)**

RUB 0.182 0.2997 65 0.14713 -51

Capitalization RUB million 20,511.0 33,775.5 16,581.2

EV RUB million 30,734 46,525 51 33,362 -28

EV/EBITDA — 6.33 7.04 11 3.04 -57

P/E (capitalization / net profit) — 83.8 26.9 -68 3.92 -85

P/S (capitalization / revenues) — 0.43 0.63 47 0.26 -59

EV/RAB — — 0.55 — 0.36 -35

* Since January 1, 2011 the Company’s accounting and financial statements were adjusted in accordance with the Order of the Ministry of Fi-nance of the Russian Federation No. 66n, of July 2, 2010 and No.186n of December 24, 2010. In order to ensure comparability of the data, figures for 2009-2010 are presented in accordance with adjusted accounting and financial statements for 2009-2010. ** According to MICEX data

Reduced capitalization in 2011 led to reduction of

the EV – Enterprise Value which equals market capital-

ization plus debt capital less cash and its equivalents.

EV/EBITDA coefficient, which is mostly taken into account

when evaluating investment attractiveness of the Compa-

ny, reduced by 57% due to the decrease in EV and growth

of EBITDA by 66%.

P/E (Price-to-Earnings) ratio shows how much investors

are willing to pay per dollar of earnings. P/S (Price-to-

Sales) ratio reflects market value of the sales unit.

In 2011, growth of the revenues and net profit totaled 18%

and 234% accordingly as compared to 2010. As capitaliza-

tion figured fell, it led to reduction of P/E and P/S ratios.

EV/RAB ratio is used to compare the companies which have

adopted long-term RAB-based tariff regulation. Reduction

of the figures in the reporting period was caused by the

decrease of the Enterprise Value and growth the RAB by

9% following to the growth in investments in 2011.

The Company’s Share Price in 2009-2011, RUB

* According to MICEX data

VWAP (Volume Weighted Average Price)*

2009 2010 2010/2009, (absolute increase), %

2011 2011/2010, (relative increase), %

Maximum of the Year 0.2047 0.3137 53 0.3331 6.2

Minimum of the Year 0.0839 0.1859 122 0.1449 -22

DYNAMICS OF THE COMPANY’S SHARE PRICES AND MICEX INDICES IN 2011

The Company’s Shares MICEX PWR MICEX Index

-60%

-20%

+20%

-40%

0%

December 30,2010

February 13, 2011 March 30, 2011 May 14, 2011 June 28, 2011 August 12, 2011

1 2 3 4

The Main Factors which Determined Stock Exchange

and Share Price Fluctuations in 2011

1. Instruction of the Government of the Russian Federa-

tion to ensure that the consumer prices for electric en-

ergy rise by no more than 15% in 2011;

2. Start of the tariff adjustments for 2011in the Compa-

ny’s branches by the regulatory bodies of the regions


3. Decision by the Company’s General Shareholders Meet-

ing to pay the dividends at the year-end 2010;

4. Lowering of the credit rating of the USA by Standard

& Poor’s;

5. Information on termination of the direct contracts

by JSC FGC UES, concluded with the large consumers

in 2009-2010 in the number of regions of the Russian

Federation, starting on January 1, 2012. September 26, 2011 November 10, 2011 December 25, 2011

5

156 157



The Trading Volume of the Company’s Shares at MICEX and RTS Stock Exchanges in 2010-2011

Number RUB

2010 2011 2011/2010, (absolute

increase), %

2010 2011 2011/2010, (relative

increase), %

MICEX 5,752,287,700 6,112,502,000 6.3 1,438,681,344 1,414,389,350 -1.7

RTS 690,054,785 239,753,216 -65 166,224,613 52,594,665 -68

TOTAL 6,442,342,485 6,352,255,216 -1.4 1,604,905,957 1,466,984,015 -8.6

The Company has developed and adopted the yearly plan

for interaction with the shareholders and investors.

Throughout the year the Company’s management took

part in the meetings with the investors, shareholders,

and stock exchange analysts at the investment forums,

conferences, round tables, which has improved trans-

parency and openness of the Company and contribut-

ed to the growth of understanding of the Company’s

THE TRADING VOLUME OF THE COMPANY’S SHARES

AT MICEX IN 2011, million pcs.

0

300

600

150

450

750

900

January February March April May June July August September October November December

January February March April May June July August September October November December

DYNAMICS AND NUMBER OF TRANSACTIONS

WITH THE COMPANY’S SHARES AT MICEX IN 2011. number, %

operations and perspectives connected with transfer

to the RAB regulation by the investors.

On February 20, 2012, in accordance with the Order No.

169-r of CJSC MICEX the Company’s shares were trans-

ferred to the MICEX quotation list A Level 1 from the quo-


Transfer of the shares to the quotation list A Level 1,

which has the highest requirements in terms of corporate

management, information disclosure and liquidity of the

securities, stems from the Company’s hard work of many

years which was aimed at increasing the investment at-

tractiveness.

The fact that the Company’s shares are included in this list

broadens the circle of potential shareholders on account

of institutional investors, pension and insurance funds.

In 2011 as well as in previous years, in order to increase

liquidity of the shares the Company has involved market-

makers at MICEX and RTS Stock Exchanges.

Due to consistent implementation of these measures

we expect the Company’s capitalization to be restored

in 2012-2013 in case of a positive market trend.

QUOTATION LIST A LEVEL 1 SINCE FEBRUARY 2012, THE COMPANY’S SHARES HAVE THE HIGHEST MICEX LISTING

Average number of transactions per day Average bid-offer spread at the closing time

0 0

80 1.0

160 2.0

40 0.5

120 1.5

200 2.5

num. %

158 159



The Company recognizes how important it is for the share-

holders to receive income in the form of the dividends

from their investments made by purchasing the Company’s

shares. The Company has adopted a transparent and acces-

sible to the shareholders mechanism of determining the

sum of dividends and other payments and established the

most convenient for the shareholders procedure of divi-

dend payment. The Company also takes all necessary mea-

sures to rule out incomplete or late payment of dividends

declared.

The Company’s dividend policy aims to recognize and ob-

serve rights of all the shareholders, to provide necessary

conditions for increasing capitalization and investment at-

tractiveness of the Company and to ensure effective bal-

ance between dividend payment and Company develop-

ment.

In order to make sure that the mechanism of determin-

ing the amount and procedure of dividend payment are

transparent the Board of Directors has approved the

Regulation on the Dividend Policy (Minutes No. 61, as

of September 1, 2010) which establishes conditions, pro-

cedure, terms and form of dividend payment. The Regu-

lation can be accessed on the Company’s corporate web-

site www.mrsk-cp.ru in the ‘About the Company/ Internal

Documents’ section.

In accordance with the Regulation on the Dividend Policy

the decision to pay out the dividends can be taken when

the following conditions are observed simultaneously:

availability of net profit less re-evaluation of financial in-

vestments; the year-end debt/EBITDA ratio does not ex-

ceed three (otherwise redemption of the debt is a priority);

the targets for the reliability of power supply are achieved

(otherwise profit is distributed so as to take measures on

enhancing reliability of power supply and services quality).

If all of the abovementioned conditions are observed the

amount of dividend payments is determined as the year-

end remainder of the net profit (less re-evaluation of the

financial investments) after it was allocated for the man-

datory reserves, investments and offsets for the opera-

tional losses of the previous years.

DIVIDEND POLICY6.4

RUB 141 million

THE AMOUNT OF DIVIDENDS AT THE YEAR-END 2010 — THE FIRST EVER DECISION TO PAY THE DIVIDENDS

Note: The figures were calculated on the basis of the year-

end financial statements.

Dividend Yield

Unit of measure

At the year-end 2007




At the year-end 2011 (planned)

Basic earnings per share RUB 0.0007 0.0152 0.0038 0.0124 0.0376

Diluted EPS RUB 0.0007 0.0152 0.0038 0.0124 0.0376

Dividend payout ration % 0 0 0 10.1 7.5

Dividend per share RUB - - - 0.00125 0.00280

* The dividend paid was less than 100% of the dividend accrued due to the absence of the banking and post details of some shareholders in the share register system.

* In the instances stipulated by p.p.1 of p.3 of the Article 284 of the Tax Code of the Russian Federation.

TAX LIABILITIES OF SHAREHOLDERS

Dividend Payout

Tax Rates on the Securities Income, %

The taxes imposed on legal and physical persons in con-

nection with the outstanding equity securities of the

Company are regulated by:

• the Tax Code of the Russian Federation;

• other regulatory and legal documents adopted in ac-

cordance with the Tax Code of the Russian Federation.

The Date of the Decision to Pay the Dividends (the date of the annual General Shareholders Meeting)

Dividends Accrued, RUB million

Dividends Paid as of December 31, 2011, RUB million

% of the Dividends Accrued

June 14, 2011 141.0 139.4 98.87%*

Type of Income Legal Entities Physical Persons

Residents Non-residents Residents Non-residents

Yield 9 or 0 * 15 9 15

Proceeds from securities sales 20 20 13 30

INTERACTION WITH STAKEHOLDERS

07

Independent device “recloser” is used for automatic disconnection and repeated powering in 6-10 kV

distribution grids, analyzes operating modes of the grid and performs its reconfiguration in emergency

modes automatically. It is equipped with means of remote control and operation

162 163

07 INTERACTION WITH STAKEHOLDERS



PRINCIPLES OF THE COMPANY’S INTERACTION WITH STAKEHOLDERS:

• RESPECTOPINIONOFTHESTAKEHOLDERS

• TIMELYINFORMSTAKEHOLDERSANDINTERACTON A REGULARBASIS

• MUTUALLYFULFILLTHEIRLIABILITIES

Work of JSC IDGC of Center and Volga Region is based on

constant interaction with a wide range of stakeholders with

whom the Company maintains an open and constructive dia-

log. Channels of communicating the information are chosen

so that to provide maximum availability of information.

The Company’s success is closely related to the image that

it creates in the business environment. Positive image of

JSC IDGC of Center and Volga Region is a guarantee of trust

of its partners. On August 30, 2007, the order of the Gen-

eral Director of JSC IDGC of Center and Volga Region ap-

proved the CorporateConductCode–a listofprinciplesof theCompany’sactivity, its rules,normsofbehaviorofits employees. Compliance with the Corporate Conduct

Code promotes establishment of single corporate culture

within the Company, as well as efficient interaction be-

tween all its units, and guarantees high level of business

ethics to our partners.

STAKEHOLDERS7.1

JANUARY SEPTEMBERAPRIL SEPTEMBER, NOVEMBERSEPTEMBER NOVEMBER

Participation in the “Forum Rus-sia–2011” Investment Forum held by IC Troika-Dialog.

Participation in the Investment Fo-rum “VTB Capital RUSSIA CALLING: London Session”.

Annual General Shareholders Meet-ing of JSC IDGC of Center and Volga Region made a decisiontopaythedividends for the first time in its history.

The Board of Directors approved the new version of the Policy on Procedure of Regulated Purchase of the Goods and Services changing the procedure of pur-chase in the Company due to significant changes in the legislation of the Russian Federation.

Correspondence of the integrated management sys-tem of JSC IDGC of Center and Volga Region to the requirement of the international standards ISO9001,ISO14001andOHSAS18001 approved.

Winning the industry competition “Organizations of High Social Ef-ficiency in Power Industry–2011” in nomination “TheBest InnovativeProject in the Field of Social Part-nership”.

The Company received a diploma of the competition AwardoftheGov-ernment of the Russian Federationinthefieldofquality for the second time.

Winning the industry competition “Organizations of High Social Ef-ficiency in Power Industry–2011” in nomination “TheBestGridOrga-nizationofHighSocialEfficiencyinPowerIndustry”.

The Annual Report 2010 became the best Annual Report in three contests held on regional and federal levels.

IR–service of the company was rec-ognized as TheBestInteractionwithShareholders and Investors Service of the JSC IDGC Holding group of com-panies.

FEBRUARY 2–4 DECEMBER MAY 31 – JUNE 2 JUNE 14

Gradual transition of all Branches of the Company to RAB-regulation is completed.


164 165



CHANNELSOFINTERACTIONWITHSTAKEHOLDERS

• Setting prices(tariffs) for regulated types of ac-

tivity

• Approval of the investment programs and report-

ing on their implementation

• Teams developing schemes and Program of prod-

pective development of power energy

• Agreements on interaction for development

of power industry in regions

• Reporting to authorities and disclosure of informa-

tion and reporting of the issue in accordance with

current legislation

• Work meetings and mutual activities with repre-

sentatives of the regional authorities

• Taxation

STAKEHOLDERS INTERSTSOFTHESTAKEHOLDERS

• Reliable and sustainable functioning of the energy system

• Efficient incorporation of the Company to the system of state regulation

• Implementation of the programs of complex development of the systems

of social infrastructure

• Implementation of the long-term projectsaimed at development of the

power industry

• Meeting the medium and long term demand for electricity and capacity

• Attraction of additional investments to regions and creation of the new

work places

• Taxation

AUTHORITIES(federal, regional and municipal

authorities of the RF)

• Dynamic growth and development of the Company

• Effectiveness

• Increase of capitalization of the Company

• Transparency activities and management in the Company

SHAREHOLDERSANDINVESTORS

• General Shareholders Meeting

• Annual and Social Reports, informational bro-

chures and leaflets

• Regular meetings, negotiations involving manage-

ment of the Company

• Press conferences, presentation and forums

• Federal and regional media

• Corporate Web-site

• Surveys of shareholders and investors

• Mutually beneficial and long-term collaboration

• Gaining profit

• Timely and exact implementation of the agreements

• Fair competition

PARTNERS(suppliers and contractors)

• Procurement procedures

• Negotiations

• Proposals



• Workshops and conferences including meetings

of the Technical Committee of the Company

• Social programs in the regions of presence

• Federal and regional media (print, television and

radio)

• Press-conferences, PR-actions, workshops, forums

and competitions

• Meeting of the top managers with veterans, stu-

dents and other social groups


• Measure to prevent electric shocks

• Social and economic development of the regions of presence

• Environmental protection

• Energy security

• Charity

• Development of Science (R&D)

SOCIETY

• Service centers

• Single Informational Center

• Single federal hotline

• Pools and surveys

• Corporate Web-site (Internet reception)


• Press-conferences, workshops and forums

• Reliable, uninterrupted and quality power supply

• High quality of service

• Transparency and accessibility of information on activities the Company

• Meeting the needs in the services of the Companies

CONSUMERS

• Collective agreement and internal documents

within the framework of social responcibility of the

Company

• Councils of Veterans and Councils of the Young

Specialists

• Trade unions

• Corporate means of communication

• Work with talent pool

• Coaching of the personnel

• Cultural and sports activities

• Decent standard of living

• High level of social protection

• Opportunities for personal and professional growth

• Occupational Safety

• Improving the status of the job of power engineer

PERSONNEL

166 167



The Company is public and struggles for informational

transparency and openness, taking into consideration best

Russian and world practice in the field.

The Company’s policy on the disclosure of information

is based on the following principles:

• periodicity and timeliness;

• information availability;

• completeness and accuracy of the information dis-

closed;

• reasonable balance between openness and the protec-

tion of the Company’s commercial interests.

Interaction with shareholders and investors is provided by

special IR unit within the JSC IDGC of Center and Volga

Region – Investor and Shareholder Relations Division of

the Corporate Governance Department. Contacts of its

specialists are available at the Web-site of the Company

www.mrsk-cp.ru at the page For Shareholders and Inves-

tors/ Contacts.

18eventsof interactionwithshareholdersandinvestors

were held in 2011, including meetings with the represen-

tatives of the investor community, participation of the

top-managers of the Company in Russian and international

investment forums, presentations, press-conferences, An-

nual General Shareholders Meeting, the Board of Directors

and its Committees meetings conducted in presentio.

The Company pays special attention to establishment of

constructive interactions with minority shareholders and

foreign investors.

Investors from over 20 countries of the world own the

shares of JSC IDGC of Center and Volga Region. In order to

improve its relations with them, the Company struggles

to improve quality of the English version of its Web-site

www.mrsk-cp.ru/en and organizes meetings of the top

management with the foreign investors.

According to the Russian Federation legislation and inter-

nal documents of the Company, the full information for

shareholders and investors is available at the Web-site of

the Company www.mrsk-cp.ru at the page For Sharehold-

ers and Investors.

IR Calendar of the Company for 2012 is available at the

Web-site of the Company www.mrsk-cp.ru at the page For

Shareholders and Investors/ Calendar for Investors.

DISCLOSURE OF INFORMATION7.3

INTERACTION WITH SHAREHOLDERS AND INVESTORS

7.2

DISCLOSUREOFINFORMATION

* Text of the documents is available at the web-site of the Company www.mrsk-cp.ru at the page About the Company/ Internal documents.

RegulatoryDocuments

InformationDisclosureChannels

Legislation of the Russian Federation, norma-tive documents of the controlling and regulatory bodies (FFMS, FAMS, etc.)

The Company’s site at www.mrsk-cp.ru

JSC Interfax newsfeed at http://disclosure.interfax.ru/

Izvestia newspaper, in cases stipulated by The Company’s Charter

Submission to regulatory bodies

Disclosure upon enquiries from persons

Internal documents approved by the Board of Directors:• Code of Corporate Governance• Regulation on information Policy• Regulation for the Indider Information*

The Company’s site at www.mrsk-cp.ru

Meetings, conferences, briefings, Round tables etc.

Leaflets, reports, brochures and other informa-tion materials

Information coverage of activities in mass media (interviews, articles, etc.)

Distrivution of Information among the represen-tatives of the investment community

MANDATORY VOLUNTARY(ADDITIONAL)

CORPORATE GOVERNANCE08

Multipurpose loader crane MLC-200 is equipped with crane, elevating and drilling equipment,

which enables installation of a support of a power line during 20 minutes

170 171

08 CORPORATE GOVERNANCE



General Shareholders Meeting was held, where the new

versions of the Charter of the Company and a range of in-

ternal documents regulating the work of the management

bodies were approved.

The Board of Directors made a decision to prolong the powers of the General Director of JSC IDGC of Center and Volga Region, Mr. Evgeny Viktorovich Ushakov for one year and one month more, until July 27, 2012 inclusively, and

to extend the Labor Agreement with him.

JUNE 14 JUNE 27

The Board of Directors of the Company approved the num-

ber of the members of the Committees of the Board of Di-

rectors and appointed employees to them.

The Board of Directors approved the new edition of the Regulation for the Insider Information of the Company.

JULY 18 DECEMBER 27

Corporate governance is a system of processes ensuring

communication between the management bodies of the

Company, shareholders and other stakeholders, reflecting

the balance of their interests and aimed at improvement of

the efficiency of the Company.

The managers of JSC IDGC of Center and Volga Region

continuously analyze the best Russian and international

practices of corporate governance, adhering to the policy

of constant improvement of the corporate governance sys-

tem, ensuring its compliance with the best international

standards.

The Code of Corporate Governance of JSC IDGC of Center

and Volga Region is based on the legislation of the Rus-

sian Federation, the Company’s Charter, the Corporate

Code recommended by Instruction №421/r of the Federal

Financial Markets Service (FFMS), dated April 4, 2002, as

well as on the internationally recognized principles of cor-

porate governance, such as the Principles of Corporate

Governance of the OECD (Organization for Economic Co-

operation and Development).

The text of the Code of Corporate Governance of the Company

is available at the Web-site of the Company www.mrsk-cp.ru

at the page “About the Company/ Internal documents”.

STRUCTURE AND PRINCIPLES OF CORPORATE GOVERNANCE

8.1

DOCUMENTS DEFINING THE PRINCIPLES OF CORPORATE GOVERNANCE

Strictly adhering to the provisions of the Code of Corpo-

rate Governance, the Charter of the Company, and of other

internal documents, the Company confirms its intention to

contribute to the enhancement of the practice of proper

corporate governance.

As instructed by the Board of Directors (Minutes №8 dated

February 18, 2008) the General Director of the Company

submitted the Report on the adherence of the Code of Cor-

porate Governance by the Company. The Report is submit-

ted each 6 months and annually.

On August 30, 2011, the Board of Directors amended its

earlier decision on Approval of the Code of Corporate

Governance of the Company made on February 18, 2008.

According to this document, the General Director of the

Company should annually (in the Annual Report) provide

information on abidance by the Corporate Conduct Code in

form and composition regulated by the federal executive

body for the securities market.

This decision should help the Company to optimize finan-

cial expenses for preparation of the Annual Report of the

Company while abiding by the regulations of the FSFM of

Russia.

Information on abidance by the Corporate Conduct Code

is available in the Supplement №5 to the Annual Report.


172 173



On September 27, 2008 the Consortium of the Russian In-

stitute of Directors and Expert RA rating agency assigned

to JSC IDGC of Center and Volga Region the national rat-ing of corporate governance of “6+” – “Developed Prac-tice of Corporate Governance”. This rating proves that

the Company’s corporate governance risks are low, as the

Company adheres to the requirements of the Russian law

in the field of corporate governance and implements the

majority of recommendations contained in the Russian

Corporate Conduct Code, as well as certain recommenda-

tions of the international best practices of corporate gov-

ernance. The information on the assignment of the rating

and the report on the practices of corporate governance in

the Company are available at the Web-site of the Company


tors/ Information on Evaluation of Corporate Governance

Practice.

JSC IDGC of Center and Volga Region improves its corpo-rate governance practices on an on-going basis:

March 30, 2011 — The Board of Directors of the Company

made a decision to implement changes to the Policy on

HR and Remuneration Committee of the Board of Direc-

tors, which helped to increase the authority of the said

Committee.

June 14, 2011 — The General Shareholders Meeting ad-opted the new version of the Company’s Charter and the

following internal documents regulating activity of the

Company’s management bodies:

• Regulation on the Procedure of Preparation and Hold-

ing the General Shareholders Meeting;

• Regulation on the Order of Convening and Holding the

Meetings of the Board of Directors;

• Regulation on the Management Board.

The key changes in the Charter and said internal docu-

ments relate to the changes of the current legislation


July 18, 2011 — The Board of Directors of the Company ap-

proved quantitative and personal composition of the Com-

mittees of the Board of Directors. According to this deci-

sion, the number of the members of the Audit Committee

was increased from 5 to 7 people, of HR and Remuneration

Committee – from 5 to 7 people, of the Strategy and De-

velopment Committee – from 11 to 12 people.

The number of minority shareholders of the Company in Committees has increased which positively affected the

process of discussing and making decisions on important

issues which are likely to have an impact on the interests

of shareholders, helped to form an objective opinion on

the discussed issues and contributed to strengthening of

the investors’ confidence to the Company.

December 27, 2011 – The Board of Directors approved a

new version of the Provision on Insider Information of the

Company.

The key targets of this provision are the following:

• ensure implementation of the legislation in the field of

usage of the insider information;

• organize activities to ensure confidentiality of the in-

sider information;

• set basic principles of legitimate usage and protection

of the insider;

• ensure protection of the rights of the shareholders, in-

vestors and participant of organized financial markets.

There are a number of normative documents adopted in

the Company, which regulate the activities of the Com-

pany’s management and control bodies. The texts of the

corporate internal documents are available at the Web-

site of the Company www.mrsk-cp.ru at the page About

the Company/ Internal documents.

ACCOUNTABILITY FAIRNESS TRANSPARENCY RESPONSIBILITY

KEY PRINCIPLES OF CORPORATE GOVERNANCE IMPLEMENTED BY JSC IDGC OF CENTER AND VOLGA REGION

GENERAL INFORMATION ON MANAGEMENT AND CONTROL BODIES

GENERAL SHAREHOLDERS MEETING

App

rova

l

AUDITOR

GENERALDIRECTOR

El

ecti

on

AUDITCOMMISSION

MANAGEMENTBOARD

BOARD OF DIRECTORS

STRATAGY AND DEVELOPMENT

COMMITTEE

HR AND REMUNERATIONS

COMMITTEE

RELIABILITYCOMMITTEE

COMMITTEE FOR TECHNOLOGICAL

CONNECTIONTO POWER GRIDS

AUDIT COMMITTEE

CORPORATESECRETARY

Elec

tion

Repo

rts,

inst

ruct

ions

Reports

Instructions

Conc

lusi

ons,

min

utes

of t

he a

udit

Cert

ifi ca

te o

f Aud

it

Election, instr

uctio

ns

Repo

rts

Cert

ifi ca

te o

f Audit

Reports, instructionsElection, instructions

Organization of activities

Election

Establishment, election

Repo

rts,

inst

ruct

ions

Reports

174 175



MANAGEMENT BODIES8.2

The General Shareholders Meeting – supreme manage-

ment body of the Company used by the shareholders to

exercise their rights to participate in the management of

the Company;

The Board of Directors – management body responsible

for the Company’s strategy development and the general

management of the Company’s operations. The Board of

Directors also controls the activities of the executive bod-

ies of the Company;

The Management Board and General Director – executive

bodies of the Company responsible for management of the

Company’s operations. The area of responsibility of these

executive bodies includes all issues pertaining to daily ac-

tivities of the Company, except for the issues which relate

to the responsibility of the General Shareholders Meeting,

or the Board of Directors of the Company. The executive

bodies are accountable to the Company’s Board of Direc-

tors and the General Shareholders Meeting;

The Audit Commission – a body responsible for the control

of financial and economic activities of the Company and

accountable to the General Shareholders Meeting of the

Company.

The Company confirms that the members of management

and control bodies and the Committees of the Board of Di-

rectors of the Company agreed to process personal infor-

mation according to the paragraph 4 article 9 of the Fed-

eral Law №152-FZ “On Personal Information” dated July

27, 2006, in order to disclose information in accordance

with the Federal Law №208-FZ “On Stock Companies” dat-

ed December 26, 1995, Federal Law №39-FZ “On the Stock

Market” dated April 22, 1996 and Statement on Disclosure

of Information by the Issuers of Securities, approved by the

order of Federal Service for Financial Markets of Russia on

October 4, 2011 №11-46/pz-n.

The General Shareholders Meeting is the supreme man-

agement body of the Company, with the authority to deal

with the most significant issues pertaining to the Com-

pany’s operations, as specified in the current legislation

of the Russian Federation and in Article 10of the Charter

of JSC IDGC of Center and Volga Region. The text of the

Charter can be freely accessed at www.mrsk-cp.ru at the

page About the Company/ Internal Documents.

The issues that fall within the area of responsibility of the

General Shareholders Meeting of the Company are the fol-

lowing:

• introduction of modifications and amendments to the

Charter or approval of the new version of the Charter;

• reorganization of the Company;

• liquidation of the Company, appointing the Liquidation

Commission and approval of the intermediate and final

liquidation balance;

• determination of the quantity, nominal value, category

(type) of declared shares and rights granted by these

shares;

• increase of the charter capital of the Company by in-

creasing the nominal value of the shares or by placing

additional shares;

The corporate system of management and control bodies includes:

GENERAL SHAREHOLDERS MEETING8.2.1

• decrease of the charter capital of the Company by

decreasing the nominal value of the shares or by pur-

chasing the Company’s shares to reduce the number of

shares outstanding, or by redeeming the shares pur-

chased or bought back;

• splitting and consolidation of the Company’s shares;

• determination of the quantitative composition of the

Company’s Board of Directors, election of its members

and early termination of their authorities;

• election of the members of the Audit Commission and

early termination of their authorities;

• approval of the Auditor of the Company;

• approval of annual reports, annual accounting state-

ments, including profit and loss statements (the ac-

counts of profits and losses), and the distribution of

profits (including the payment (declaration) of divi-

dends, except for the profit distributed as dividends for

the Q1, H1 and for M9 of the FY) and the Company FY

losses;

• payment (declaration) of dividends for the Q1, H1, and

for M9 of the FY;

• making decisions on the approval of transactions in

cases specified by Federal Law №208 “On Joint Stock

Companies”;

• making decisions on the participation in financial in-

dustrial groups, associations and other unions of com-

mercial organizations;

• dealing with other issues, as specified by Federal Law

“On Joint Stock Companies” and the Company’s Charter.

The Company established the Policy for the Preparation

and Holding of the General Shareholders Meeting of JSC

IDGC of Center and Volga Region regulating in detail the

procedures of the General Shareholders Meetings.

In 2011, one General Shareholders Meeting was held.

On June 14, 2011 the Annual General Shareholders Meet-ing was held (Minutes №4), resulting in the following resolutions:1.1. Approve the Annual Report, the annual accounting

statements, including the Profit and Loss Report based on

the 2010 FY results;

1.2. Approve distribution of profit (losses) of the Company

for 2010 FY;

1.3. Pay the dividends up on common shares of the Com-

pany based on the 2010 FY results;

2. Elect the Board of Directors of the Company;

3. Elect the Audit Commission of the Company;

4. Approve the Auditor of the Company;

5. Approve the new version of the Charter of the Company;

6. Approve new versions of the Regulation on the Proce-

dure of Preparation and Holding the General Shareholders

Meeting, Regulation on the Order of Convening and Hold-

ing the Meetings of the Board of Directors, Regulation on

the Management Board of the Company.

7. Pay the remuneration to the members of the Board of

Directors who are not the civil servants for work within the

Board of Directors in an amount provided for the Regula-

tion on Remuneration to the Members of the Board of Di-

rectors of the JSC IDGC of Center and Volga Region.

There were no extraordinary General Shareholders Meet-

ings in 2011.

The materials and decisions made at the General Share-

holders Meetings can be freely accessed at the Web-site of

the Company www.mrsk-cp.ru at the page “For Sharehold-

ers and Investors/ The General Shareholders Meeting”.

176 177



The Board of Directors of JSC IDGC of Center and Volga

Region operates in accordance with the legislation of the

Russian Federation, the Company’s Charter, and the inter-

nal documents of the Company.

In accordance with Article 15 of the Company’s Charter,

the Board of Directors exercises the general manage-

ment of the Company, except for the issues which relate

to the area of responsibility of the General Shareholders

Meeting.

The main tasks set before the Board of Directors of the

Company are the following:

• definition of the Company’s development strategy

aimed at improvement of its market capitalization and

attractiveness for investors, maximum profitability

and increase of the Company’s assets;

• implementation and protection of the rights and le-

gitimate interests of the shareholders of the Com-

pany as well as assistance in resolution of corporate

conflicts;

• ensuring full, reliable and objective disclosure of infor-

mation about the Company for the shareholders and

stakeholders;

• establishment of effective mechanisms of internal

control;

• regular assessment of the work of executive and man-

agement bodies of the Company.

To implement the tasks mentioned above, the Board of Di-

rectors is guided by the following principles:

• making decisions on the basis of reliable information

about the Company’s activity;

• making no restriction of the rights of shareholders

BOARD OF DIRECTORS8.2.2

4%Issues concerning the activity of the

Committees of the Board of Directors

21%Issues concerning approval of the

transactions with interest

3%Issues concerning approval of the Insurance Companies and Auditors

10%Issues concerning position

of subsidiary and dependent companies

14%Financial and economic issues

13%Issues concerning reports of the

Management Board and the General Director

8%Issues concerning preparation to the AGSM

27%Other issues

MAIN GROUPS OF ISSUES CONSIDERED BY THE BOARD OF DIRECTORS

to participate in the Company’s management, receive

dividends and information about the Company;

• achieving a balance of interests of different groups of

shareholders and the making the most objective deci-

sions by the Board of Directors in the interests of all

shareholders.

The information on the activities of the Board of Directors

and its personal membership is available at the Web-site

of the Company www.mrsk-cp.ru at the page About the

Company/ Management Authorities/ Board of Directors of

the Company.

The operations of the Board of Directors are regulated

by the Policy on the Procedure for the Summoning and

Holding of Meetings of the Board of Directors of JSC IDGC

of Center and Volga Region.

The resolutions at the meetings of the Board of Directors

are carried by the majority of votes of the members of

Board of Directors present at the meeting, except for the

cases specified in the legislation of the Russian Federation

and the Company’s Charter.

The quorum for holding a meeting of the Board of Direc-

tors comprises at least half of the number of the elected

members of the Board of Directors of the Company.

25 meetings of the Board of Directors of JSC IDGC of Cen-

ter and Volga Region were held in 2011 (with two of them

held in presentio and in absentia) dealt with more than

320 issues.

Issues concerning ap-proval of the transactions with interest

Issues concerning the activity of the Committees of the Board of Directors

Issues concerning position of subsidiary and depen-dent companies

Issues concerning reports of the Management Board and the General Director

Financial and economic issues

Issues concerning ap-proval of the Insurance Companies and Auditors

Issues concerning prepa-ration to the AGSM

Other issues

COMPARATIVE ANALYSIS OF THE MAIN GROUPS

OF ISSUES CONSIDERED BY THE BOARD OF DIRECTORS , number

51100

1526

4545

1320

1310

1326

1820

1815

1829

5923

2411

6333

2009 2010 2011

178 179



The members of the Board of Directors of JSC IDGC of Center and Volga Region, as elected by the Annual General Share-holders Meeting on June 16, 2010 (Minutes №3 dated June 21, 2010)are the following (the positions held by the members are specified at the moment of election):

1. Perepelkin Aleksey Yurievich — the Chairman of the Board of Directors of JSC IDGC of Center and Volga Region, mem-ber of the Management Board, Deputy General Director for Corporate Governance and Property of JSC IDGC Holding.

2. Branis Aleksander Markovich — Director of the Repre-sentative office of the Prosperity Capital Management (RF) Ltd.

3. Inozemtsev Vladimir Vyacheslavovich — Head of the De-partment of Power Transportation and Energy Saving of JSC IDGC Holding.

The acting members of the Board of Directors of JSC IDGC of Center and Volga Region were elected by the General Shareholders Meeting on June 14, 2011 (Minutes №4) (the positions held by the members are specified at the moment of elec-tion):

Perepelkin Aleksey Yurievich member of the Management Board, Deputy General Director for Corporate Governance and Property of JSC IDGC HoldingMr. Perepelkin was elected to the Board of Directors of JSC IDGC of Center and Volga Region twice: on June 16, 2010 and on June 14, 2011.

Ushakov Evgeny Viktorovich General Director of JSC IDGC of Center and Volga RegionMr. Ushakov was elected to the Board of Di-rectors of JSC IDGC of Center and Volga Re-gion three times: on June 22, 2007, on May 30, 2008 and on June 14, 2011.

Sergutin Aleksey VladimirovichDirector for Economy of JSC IDGC Holding

Mr. Sergutin was elected to the Board of Di-rectors of JSC IDGC of Center and Volga Re-gion twice: on June 16, 2010 and on June 14, 2011.

Mekhanoshin Boris IosifovichDeputy General Director – Technical Director of JSC IDGC Holding

Mr. Mekhanoshin was elected to the Board of Directors of JSC IDGC of Center and Volga Re-gion for the first time on June 14, 2011.

Pokrovsky Sergey Vadimovich Expert of the Investor Protection As-sociationMr. Pokrovsky was elected to the Board of Directors of JSC IDGC of Center and Volga Re-gion for the first time on June 14, 2011.

Chairman of the Board of Directors of JSC IDGC of Center and Volga Region

Deputy Chairman of the Board of Directors of JSC IDGC of Center and Volga Region

The full information about the members of the Board of Directors of the Company is presented in the Supplement №4 to the Annual Report.

According to Article 16 of the Com-

pany’s Charter, the quantitative

membership of the Board of Direc-

tors is 11 (eleven) members During

2011 the Board of Directors of the

Company comprised of two mem-

berships.

MEMBERS OF THE BOARD OF DIRECTORS

Mashtakov Sergey Aleksandrovich Deputy Director of the Department of Operative Control and Management in Power Industry and Mobilization Preparation in the Fuel and Energy In-dustry of the Ministry of Energy of the Russian Federation.Mr. Mashtakov was elected to the Board of Directors of JSC IDGC of Center and Volga Re-gion for the first time on June 14, 2011.

Filkin Roman AlekseevichCo-Director, Power Industry and Engi-neering of the Representative office of the Prosperity Capital Management (RF) Ltd.

Mr. Filkin was elected to the Board of Direc-tors of JSC IDGC of Center and Volga Region three times: on June 19, 2009, June 16, 2010 and on June 14, 2011.

Kolesnik Dmitry Grigorievich Assistant of the General Director of JSC IDGC Holding

Mr. Kolesnik was elected to the Board of Directors of JSC IDGC of Center and Volga Region twice: on June 16, 2010 and on June 14, 2011.

Chistyakov Vladimir Sergeevich First Deputy General Director of the CJSC Energy Union Investment Holding

Mr. Chistyakov was elected to the Board of Directors of JSC IDGC of Center and Volga Region three times: on June 19, 2009, June 16, 2010 and on June 14, 2011.

Branis Aleksander Markovich Director of the Representative office of the Prosperity Capital Management (RF) Ltd.

Mr. Branis was elected to the Board of Direc-tors of JSC IDGC of Center and Volga Region three times: on May 30, 2008, on June 16, 2010 and on June 14, 2011.

Sharkova Yulia Eduardovna First Deputy Head of the Department for Electric Energy Transportation and Energy Saving of JSC IDGC Holding.

Mrs. Sharkova was elected to the Board of Di-rectors of JSC IDGC of Center and Volga Region for the first time on June 14, 2011.

4. Kolesnik Dmitry Grigorievich — Assistant of the General Director of JSC IDGC Holding.

5. Okley Pavel Ivanovich — member of the Management Board, Deputy General Director – Technical Director of JSC IDGC Holding.

6. Sergutin Aleksey Vladimirovich — Director for Economy of JSC IDGC Holding.

7. Spirin Denis Aleksandrovich — Director for Corporate Gov-ernance of the Representative office of the Prosperity Capi-tal Management (RF) Ltd.

8. Syutkin Sergey Borisovich — General Director of the Branch of JSC SO UES of the Operative Dispatch Depart-ment of Center.

9. Filkin Roman Alekseevich — Co-Director, Power Industry and Engineering of the Representative office of the Pros-perity Capital Management (RF) Ltd.

10. Chistyakov Vladimir Sergeevich — First Deputy General Di-rector of the CJSC Energy Union Investment Holding.

11. Shogenov Valery Mukhamedovich — Deputy Director of Department of Economic Regulation and Property Rela-tions in Fuel and Energy Industry of the Ministry of Energy of the Russian Federation.

180 181



Participation of the Members of the Board of Directors in the Meetings of the Board of Directors and the Committees in 2011

Note: the first figure shows the total number of meetings

(for the reporting period), the second figure shows for the

number of meetings attended by the member of the Board

of Directors.

Name Information on Participation in Meetings

Board of Directors Audit Committee Strategy and Development Committee

HR and Remunera- tions Committee

Reliability Committee Committee for Technological Connection to Power Grids

January 1, 2011 – June 14, 2011

Perepelkin Aleksey Yurievich 10/10 4/4 7/7 5/5

Branis Aleksander Markovich 10/10

Inozemtsev Vladimir Vyacheslavovich 10/10 2/2 7/6

Kolesnik Dmitry Grigorievich 10/10 5/5

Okley Pavel Ivanovich 10/10 2/2

Sergutin Aleksey Vladimirovich 10/10 4/4 7/7 5/5

Spirin Denis Aleksandrovich 10/9 5/5 5/5

Syutkin Sergey Borisovich 10/10

Filkin Roman Alekseevich 10/10 4/4 7/7

Chistyakov Vladimir Sergeevich 10/9 4/4 5/5 5/5 2/2

Shogenov Valery Mukhamedovich 10/10 7/7

June 15, 2011 – December 31, 2011

Perepelkin Aleksey Yurievich 15/15 6/5 11/10 5/4

Kolesnik Dmitry Grigorievich 15/15 6/6 5/5

Mashtakov Sergey Aleksandrovich 15/12

Mekhanoshin Boris Iosifovich 15/15 6/6

Sergutin Aleksey Vladimirovich 15/15 6/6 11/11 5/5

Ushakov Evgeny Viktorovich 15/15 11/11

Sharkova Yulia Eduardovna 15/15 5/5

Chistyakov Vladimir Sergeevich 15/11 6/6 5/5 2/2

Pokrovsky Sergey Vadimovich 15/15 6/6 5/4

Branis Aleksander Markovich 15/14

Filkin Roman Alekseevich 15/15 6/6 11/10 5/4

Average percent of participation of the members of the

Board of Directors in the meetings is 96%. More than 70%

of the meetings of the Board of Directors of the Company

were attended by 100% of the Board of Directors.

96%Average percent of participation of the members of the Board of Directors in the meetings

182 183



REMUNERATION TO THE MEMBERS OF THE BOARD OF DIRECTORS

According to According to Federal Law №208-FZ “On Joint

Stock Companies” dated December 26, 1995 and the Com-

pany’s Charter, resolutions on the payment of remunera-

tions and/or compensations to the members of the Board of

Directors are carried by the General Shareholders Meeting.

The Annual General Shareholders Meeting approved

a Policy on the Payment of Remunerations and Compen-

sations to the Members of the Board of Directors of JSC

IDGC of Center and Volga Region (Minutes №1, dated May

30, 2008).The Policy determines the criteria for the remu-

neration due to the members of the Board of Directors.

The text of the Policy is available at the Web-site of the

Company www.mrsk-cp.ru at the page About the Compa-

ny/ Internal Documents.

The key criterion for the payment of remuneration to a

member of the Board of Directors is the participation of

the member in the meetings of the Board of Directors. The

members of the Board of Directors may also be entitled to

additional remuneration for the net profit of the Company

recorded in the annual accounting statements approved

by the General Shareholders Meeting, or for the increase

of the market capitalization of the Company during the

period of work of the elected members of the Board of

Directors.

The expenses of a member of the Board of Directors re-

lated to visits to the Company’s facilities, meetings with

shareholders and investors, participation in the General

Shareholders Meetings, and dealing with other issues per-

taining to the functions of the member of the Board of

Directors are subject to compensation.

The internal documents of the Company specify no non-

material remuneration for the members of the Board of

Directors.

General amount of the remuneration paid to the mem-bers of the Board of Directors during 2011 comprised 13,233,142 RUB (without deduction of the income tax for

individuals), including:

• 8,950,452 RUB – for participation in the meetings

of the Board of Directors of the Company;

• 4,282,690 RUB – additional remuneration for the net

profit of the Company recorded in the annual account-

ing statements approved by the General Shareholders

Meeting;

• 0 RUB – additional remuneration for increase of the

market capitalization;

• 0 RUB – compensation of expenses.

TRAINING OF THE MEMBERS OF THE BOARD OF DIRECTORS

There was no training of the members of the Board of Di-

rectors conducted in 2011 at the Company’s cost.

REMUNERATION TO THE MEMBERS OF THE BOARD

OF DIRECTORS IN 2009–2011, RUB mln

Total

11.173

16.298

13.233

2009 2010 2011

CORPORATE SECRETARY OF THE COMPANY

According to Article 20 of the Company’s Charter, to pro-vide for the proper preparation and conducting of General Shareholders Meetings, and to ensure the operation of the Board of Directors, the Board of Directors may elect the Corporate Secretary of the Company.

The Policy on the Corporate Secretary of JSC IDGC of Cen-ter and Volga Region was approved by the Board of Direc-tors of the Company on February 18, 2008 (Minutes №8).

The text of the Policy is available at the Web-site of the Company www.mrsk-cp.ru at the page “About the Compa-ny/ Internal Documents”.

Mrs. Guseva Yulia Stanislavovna, the current Corporate Secretary, was elected according to the resolution of the Board of Directors of the Company (Minutes №58 dated June 25, 2010 and Minutes №79 dated June 27, 2011).

Year of birth: 1975.

Education: higher, professional – the Nizhny Novgorod

Commercial Institute.

Below listed are all positions held by Mrs. Guseva in the Company and other organizations during the last 5 years and presently, including part-time positions:

Mrs. Guseva owns no shares of the Company.

Period Organization Position

from till

2007 Present JSC IDGC of Center and Volga Region

Head of the Corporate Relations Division, Corporate Gover-nance and Relations with Shareholders Department

2010 Present JSC IDGC of Center and Volga Region

Corporate Secretary (part time)

2005 2007 JSC Nizhnovenergo Head of the Corporate Governance Division, Head of the Corporate and Legal Relations Division

For capitalization For net profit For meetings

0 4.455 6.717

9.349 1.397 5.551

0 4.283 8.950

Guseva Yulia Stanislavovna — Head of the Corporate Relations Division of the Corporate Governance and Relations with Shareholders Department of JSC IDGC of Center and Volga Region

184 185



Audit Committee Strategy and Development Committee HR and Remunerations Committee Reliability Committee Committee for Technological Connec-tion to Power Grids

Web-site containing information on the authorities and composition of the Com-mittee, as well as on the decisions made by it

www.mrsk-cp.ru page About the Company/ Management Authorities/ Board of Directors of the Company/ Committees of the Board of Directors

Established July 31, 2008 July 31, 2008 July 31, 2008 October 12, 2007 February 19, 2009

Regulating documents* Policy on the Audit Committee of the Board of Directors

Policy on the Strategy and Development Committee of the Board of Directors

Policy on the HR and Remunerations Committee of the Board of Directors

Policy on the Reliability Committee of the Board of Directors

Policy on the Committee for Techno-logical Connection to Power Grids of the Board of Directors

Number of the members:• January – June 2011• July – December 2011

57

1112

57

77

55

Acting members of the Committee ap-proved b the Board of Directors on July 18, 2011

1. Perepelkin Aleksey Yurievich 2. Sergutin Aleksey Vladimirovich 3. Kolesnik Dmitry Grigorievich4. Mekhanoshin Boris Iosifovich5. Chistyakov Vladimir Sergeevich 6. Pokrovsky Sergey Vadimovich7. Filkin Roman Alekseevich

1. Kurbatov Mikhail Yurievich 2. Perepelkin Aleksey Yurievich 3. Pankov Dmitry Leonidovich 4. Sergutin Aleksey Vladimirovich 5. Lavrova Marina Aleksandrovna6. Bogacheva Irina Vladimirovna7. Ushakov Evgeny Viktorovich 8. Zharikov Aleksey Nikolaevich9. Bykova Nataliya Aleksandrovna10. Klaptsov Aleksey Vitaliyevich11. Filkin Roman Alekseevich12. Shevchuk Aleksander Viktorovich

1. Perepelkin Aleksey Yurievich2. Kolesnik Dmitry Grigorievich3. Sergutin Aleksey Vladimirovich4. Sharkova Yulia Eduardovna5. Chistyakov Vladimir Sergeevich6. Pokrovsky Sergey Vadimovich7. Filkin Roman Alekseevich

1. Vasiliev Sergey Borisovich2. Dobakhyants Yulia Vladimirovna3. Shvedko Marina Eugenievna4. Andrus Sergey Timofeevich 5. Polovnev Igor Georgievich6. Spirin Denis Aleksandrovich7. Zharikov Aleksey Nikolaevich

1. Chistyakov Vladimir Sergeevich2. Andrus Sergey Timofeevich 3. Podolskaya Lada Aleksandrovna4. Komarov Valentin Mikhailovich5. Polovnev Igor Georgievich

Number of Meetings in 2011. Total, including face-to-face

100

182

100

121

40

Total amount of remuneration paid to the members of Committee in 2011 (RUB)**

278,123.00 842,038.00 271,097.50 323,916.50 113,965.50

* Texts of the Policies on Committees are available at the Web-site of the Company www.mrsk-cp.ru at the page About the Com-pany/ Internal documents.

** The remuneration is paid to the members of the Committee for participation in the meetings in accordance with the budget of the Committee approved by the Board of Directors of the Compa-ny. After the approval of the Board of Directors, the members of the Committee may receive remuneration for expenses related to implementation of their duties. The amount of these remunera-tions, as well as the regulations and terms of the payment are set by the special decisions of the Board of Directors. The internal documents of the Company specify no non-material remunera-tion for the members of the Board of Directors.

COMMITTEES OF THE BOARD OF DIRECTORS8.2.3

The full information about the members of the Board

of Directors of the Company is presented in the Supple-

ment №4 to the Annual Report.

186 187



COMPARATIVE ANALYSIS OF THE MAIN GROUPS

OF ISSUES CONSIDERED BY THE MANAGEMENT BOARD, numberMANAGEMENT BOARD8.2.4

The Management Board is the collective executive body

intended to directly manage the Company, as guided by

the resolutions of the General Shareholders Meeting and

the Board of Directors, and acting in accordance with the

law of the Russian Federation, the Company’s Charter and

other internal documents of the Company.

The key tasks of the Company’s Management Board are

the following:

• ensuring the observance of the rights and legitimate

interests of the Company shareholders;

• developing suggestions on the Company’s develop-

ment strategy;

• implementing the Company’s financial and economic

policy, developing decisions on the major issues relat-

ing to the Company’s current economic operations and

coordinating the operation of the Company’s divisions;

• increasing the efficiency of the systems of internal

control and risk monitoring;

• ensuring high level of income from the assets of the

Company and the maximal profit from the Company’s

operations.

The activities of the Company’s Management Board are

regulated by the Company’s Charter, the Policy on the

Management Board, and the Code of Corporate Gover-

nance.

The information on personal composition and authority

of the Management are available at the Web-site of the

Company www.mrsk-cp.ru at the page About the Compa-

ny/ Management Authorities/ Management Board.

54 meetings of the Management Board of the Company

were held in 2011, with 30 of them held in form of absen-

tee vote (via polls) and 24 of them in a form of physical

presence.

During these meetings, decisions on 342 issues falling un-

der the authority of the Management Board were made.

5%Transactions exceeding 1%

of the balance value of assets

29%Financial and economic activities

of subsidiary and dependent companies

5%Other issues

14%Financial and economic activities

of the Company

11%Recommendations to the Board of Directors members

36%Governance of educational centers

THE MAIN GROUPS OF ISSUES CONSIDERED BY THE MANAGEMENT BOARD

To provide for efficient operation of the Company’s Board

of Directors and the making of weighted and substantiated

decisions, the Management Board performed preliminary

consideration and submitted to the Board of Directors the

recommendations on the issues that fall within the frame-

work of reference of the Board of Directors, including the

following:

• strategic and operational priorities of the Company;

• approval of the target (adjusted) values for the Com-

pany’s KPI and the reports on their fulfillment;

• recommendations on the amount of dividend on shares

and the dividend payment procedure;

• approval of candidates for the position of independent

auditors;

• decisions on the Company’s participation in other or-

ganizations;

• pre-approval of transactions relating to the transfer

of the Company’s property free of charge.

The recommendations developed by the Management

Board were taken into account by the Company’s Board

of Directors when making corresponding decisions.

Financial and economic activities of subsidiary and dependent companies

Recommendations to the Board of Directors members

Governance of educational centers

Financial and economic activities of the Company

Transactions exceeding 1% of the balance value of assets

Other issues

23100

3675

4898

5120

2537

1838

9820

21150

17123

2009 2010 2011

188 189



The membership of the Management Board was approved

by the resolution of the Board of Directors (Minutes №9,

dated March 5, 2008). The modifications were made ac-

cording to the resolutions of the Board of Directors (Min-

utes №10, dated March 24, 2008; Minutes №17, dated June

25, 2008; Minutes №21, dated September 24, 2008 and

Minutes №55, dated April 30, 2010).

The full information about the members of the Management

Board of the Company is presented in the Supplement №4

to the Annual Report.

The current membership of the Management Board con-sists of nine members, namely the following.

Nikitushkin Evgeny VladimirovichHead of the Treasury of JSC IDGC of Center

and Volga Region

Tikhomirova Olga VladimirovnaDeputy General Director for Economics and Fi-

nance of JSC IDGC of Center and Volga Region

Ushakov Evgeny Viktorovich General Director of JSC IDGC of Center and Vol-

ga Region

MEMBERS OF THE MANAGEMENT BOARD Chairman of the Management Board

Yashanina Irina ViktorovnaDeputy General Director – Head of Executive

Office of JSC IDGC of Center and Volga Region

Andrus Sergey Timofeevich Deputy General Director for Technical Issues – Chief Engineer of JSC IDGC of Center and Volga Region

Podolskaya Lada AleksandrovnaDeputy General Director for Corporate Gover-

nance of JSC IDGC of Center and Volga Region

Shitts Vladimir ViktorovichDeputy General Director for Capital Construc-

tion of JSC IDGC of Center and Volga Region

Vedernikov Andrey YurievichDeputy General Director for Development and

Services of JSC IDGC of Center and Volga Re-

gion

Prepodobny Aleksander VasilievichDeputy General Director for Security of JSC

IDGC of Center and Volga Region

Deputy Chairman of the Management Board

190 191



Participation of the Members of the Management Board in the Meetings of the Management Board and the Committees of the Board of Directors of the Company in 2011

Name Information on the Meetings

Management Board

Strategy and Development Committee

Reliability Com-mittee

Committee for Techno-logical Connection to Power Grids

Ushakov Evgeny Viktorovich 54/45 18/18

Andrus Sergey Timofeevich 54/45 12/8 4/3

Vedernikov Andrey Yurievich 54/49

Nikitushkin Evgeny Vladimirovich 54/45

Podolskaya Lada Aleksandrovna 54/48 4/4

Prepodobny Aleksander Vasilievich 54/50

Tikhomirova Olga Vladimirovna 54/43 7/7

Shitts Vladimir Viktorovich 54/46

Yashanina Irina Viktorovna 54/50

1. The first figure is the total number of meetings a mem-

ber of the Management Board was authorized to partici-

pate in, while the second figure is the number of meetings

actually attended by a member of the Management Board.

2. The members of the Management Board are not the

members of the Audit Committee and HR and Remunera-

tion Committee.

Note:

86.6%Average percent of participation of the members of the Management Board in the meetings

REMUNERATION TO THE MEMBERS OF THE MANAGEMENT BOARD

According to the resolution of the Board of Directors of

JSC IDGC of Center and Volga Region, the Chairman of the

Management Board conditions and signs labor agreements

with the members of the Management Board.

All members of the Management Board are included in

the list of the top managers of JSC IDGC of Center and

Volga Region by the Board of Directors of the Company.

The remunerative incentives for the Top Managers of the

Company are regulated by the Policy on Remunerative

Incentives and Benefits of the Top Managers of JSC IDGC

of Center and Volga Region (new version approved by

the Board of Directors on July 18, 2011, Minutes №80),

which intends to increase the efficiency of management

of the Company’s property and finance.

In the first half of 2011, the members of the Management

Board of the Company were entitled to the monthly re-

muneration for implementation of their duties which de-

pended on the amount of the minimal monthly rate of a

first grade worker (according to the additional agreements

to the labor agreements of the of the Management Board).

Starting from July 18, 2011 according to the new version

of the Policy on Remunerative Incentives and Benefits of

the Top Managers, the members of the Management Board

receive personal monthly addition in the amount of 15% of

the official salary.

The full information on remuneration for the members of

the Management Board is available in the quarterly re-

ports of the issuer (paragraph 5.3) which are available at

the Web-site of the Company www.mrsk-cp.ru at the page

Issuer’s information disclosure / The financial information

and the reporting/ Quarterly reports.

The quarterly and yearly bonuses for the Top Managers

depends on the degree of fulfillment of the KPI set by the

General Director of the Company, which are related to the

Company’s strategy. The KPI are measurable and motivate

an employee to achieve results and ensure objective as-

sessment of the employee results.

Note: sums without deduction of the income tax for individuals.

Remuneration to the Members of the Management Board for 2009–2011

1,519.7 2,031.5 2,782.6

2009 2010 2011

RUB thousand RUB thousand RUB thousand

192 193



Due to the changes in the legislation on organization

of the procurement in 2011, S. T. Andrus, V. V. Shitts

and A. V. Prepodobny took a part in the seminar Federal

Law №223-FZ dated July 18, 2011 “On procurement of

goods and services by certain kinds of legal entities” as

a guideline. In February 2012, in order to receive the

certificate for compliance with ISO 50001 S. T. Andrus

underwent training in Internal audits of the systems

of energy management based on the ISO 50001:2011

standard.

The information on trainings received by the General

Director is available in the paragraph General Director

of the Annual Report.

Policy on Remunerative Incentives and Benefits of the

Top Managers provides for non-recurrent bonuses for the

essential accomplishments and in case a top manager is

granted an award from the state, the industry, the Min-

istry of Energy of the Russian Federation, or JSC IDGC

Holding.

Due to their high professionalism and personal contri-

bution to development of the power industry, a number

of the members of the Management Board of JSC IDGC

of Center and Volga Region were awarded with indus-

try awards of the Ministry of Energy of the Russian Fed-

eration, corporate awards of the JSC IDGC Holding and

awards of the Government and Governor of the Nizhny

Novgorod Region.

TRAINING OF THE MEMBERS OF THE MANAGEMENT BOARD

KPI provide for the assessment of the following:

• reliability of the power grids;

• level of power losses;

• repair programs;

• investment program

• level of net profit;

• Return on Equity (ROE);

• fulfillment of agreements for technological connec-

tion;

• level of collectability of payments due for the trans-

mission of energy;

• adherence to the schedule of corporate procedures;

• absence of suits lost on procedural grounds;

• absence of economic losses caused by mala fide con-

tractors;

• timeliness of work to collect overdue debts for services

provided in electric power transmission;

• timeliness of submission and the completeness of ac-

counting and tax reports.

In accordance with Article 23 of the Company’s Charter

the issues falling within the framework of reference of the

General Director include all issues pertaining to the man-

agement of the daily operations of the Company, except

for the issues that fall within the competence of the Gen-

eral Shareholders Meeting, the Board of Directors and the

Management Board.

The Company’s General Director presents for the consid-

eration of the Board of Directors the reports on the fulfill-

ment of resolutions (assignments) of the Board of Direc-

tors of JSC IDGC of Center and Volga Region, the quarterly

reports on the operation of the Company’s Management

Board and other reports in compliance with the current

legislation, the operations plan of the Board of Directors

and the internal documents of the Company.

The General Director has fulfilled all assignments of the

Board of Directors of JSC IDGC of Center and Volga Region

for 2011.

GENERAL DIRECTOR8.2.5

Ushakov Evgeny Viktorovich – Chairman of the Manage-

ment Board, General Director of JSC IDGC of Center and

Volga Region (the Company’s Sole Executive Body)

Year of birth: 1964.

Education: higher professional, Lenin Komsomol Chely-

abinsk Polytechnic Institute.

Below listed are all positions held by Mr. Ushakov in the Company and other organizations during the last 5 years

and presently, including part-time positions:

Period Organization Position

From Till

2007 Present JSC IDGC of Center and Volga Region General Director

2008 Present JSC IDGC of Center and Volga Region Chairman of the Management Board

2011 Present JSC IDGC of Center and Volga Region The Member of the Board of Directors

2009 2010 Council of the Veterans of Power Industry Non-Commercial Partnership

The Member of the Supervisory Board

2007 2009 JSC IDGC of Center and Volga Region The Member of the Board of Directors

2007 2008 JSC Nizhnovenergo The Member of the Board of Directors

2007 2008 JSC Ivenergo The Member of the Board of Directors

2007 2008 JSC Kirovenergo The Member of the Board of Directors

2007 2008 JSC Ryazanenergo The Member of the Board of Directors

194 195



2007 2008 JSC Udmurtenergo The Member of the Board of Directors

2007 2008 JSC Tulenergo The Member of the Board of Directors

2007 2008 JSC Kalugaenergo The Member of the Board of Directors

2005 2007 JSC IDGC of Ural and Volga The First Deputy General Director

Mr. Ushakov was elected the Company’s General Director

on June 28, 2007 for the period of 3 years. The labor agree-

ment with Mr. Ushakov was extended on June 25, 2010

till June 27, 2011, and on June 27, 2011 till July 27, 2012

inclusively.

The labor conditions, the guarantees and compensations

for the General Director during the fulfillment of his duties

are determined by the labor agreement, the conditions of

which are determined by a person authorized by the Com-

pany’s Board of Directors.

The Policy on Remunerative Incentives for the General

Director, which is a supplement to the labor agreement,

regulates the amount of quarterly and yearly bonuses for

the achievement of the target KPI, and envisages non-

recurrent bonuses for the performance of special assign-

ments and for awards received from the State, the Minis-

try of Energy of the Russian Federation, or from JSC IDGC

Holding.

The KPI are formed on the basis of the Company’s develop-

ment strategy. The KPI are used to assess the reliability of

power grids, the implementation of the investment pro-

gram, the net profit received by the Company, the return

on equity, and the level of power losses. The data on KPI

are presented in the paragraph “Analysis of Financial State

and Results of Work” of this Annual Report.

The awards received by Mr. Ushakov for his personal con-

tribution to the development of power industry include:

• The title of the Honorary Worker of the Unified Energy

System of Russia from JSC RAO UES of Russia, 2004

• The title of the Honorary Power Engineer from the

Ministry of Energy of the Russian Federation, 2009

• National Award “Honored Power Engineer of the Rus-

sian Federation”, 2011

Also Mr. Ushakov has the following awards:

• The Letter of Gratitude from the Government of the

Nizhny Novgorod Region, 2007

• The Certificate of Merit from the Governor of the Nizh-

ny Novgorod Region, 2009

• Badge of Honor “For development of the distribution

grid complex” from JSC IDGS Holding, 2011

ASSESSMENT OF THE INPUT

As of December 31, 2010 Mr. Ushakov owned 0.0612% of the ordinary shares of the Company.As of December 31, 2011Mr. Ushakov owned 0.0767% of the ordinary shares of the Company.

The Company has no information about the transactions

on acquisition or alienation of the shares of JSC IDGC

of Center and Volga Region made by Mr. Ushakov in 2011.

In 2011, Mr. Ushakov was included into the Book of Honor

of the JSC IDGC Holding.

On behalf of His Holiness Patriarch of Moscow and All Rus-

sia Mr. Ushakov was awarded the Order of the Reverend

Seraphim of Sarov of the 3rd grade in 2009 and the Order

of the Revered Sergius of Radonezh of the 3rd grade in

2010 for his major contribution to fostering the coopera-

tion with the orthodox establishments.

In accordance with the Policy on the Training of Per-

sonnel of the Company, the General Director passed

the professional development program “Conducting en-

ergy audits to improve efficiency and energy savings”

in 2011.

TRAINING OF THE GENERAL DIRECTOR

In 2011, there were no transactions made by the Company,

which would be recognized by the legislation of the Rus-

sian Federation as major.

All transactions in which there was interest were conduct-

ed by the Company under the general market conditions

and were approved by the Board of Directors. Full informa-

tion on these transactions is available in the Supplement

№6 to the Annual Report.

As on December 31, 2011, the Company in fifteen differ-

ent non-commercial organizations or regional and federal

level, and exercises the functions of the founding member

in seven non-commercial educational organizations in op-

eration areas.

The full information on the non-commercial organiza-

tions in which the Company participates or is a found-

ing member is available at the Web-site of the Company


tors/ List of Non-Commercial Organizations.

Information on the corporate network of the educational

centers of the Company is disclosed in the chapter “Hu-

man Resources policy and Social Responsibility” at the

page 227 of the Annual Report. There were no changes

in the framework of the Company’s participation in the

non-commercial organizations in 2011.

The Company plans to actively participate in non-commer-

cial organizations and to develop the educational centers

where the Company is the founding member.

INFORMATION ON THE TRANSACTIONS MADE BY THE COMPANY IN 2011WHICH ARE RECOGNIZED BY THE LEGISLATION OF THE RUSSIAN FEDERATION

AS TRANSACTIONS IN WHICH THERE IS INTEREST, AND MAJOR TRANSACTIONS

PARTICIPATIONIN NON-COMMERCIAL ORGANIZATIONS

8.3

8.4

REMUNERATION TO THE GENERAL DIRECTOR

AUDIT COMMISSION AND THE AUDITOR

09

No-contact current indicator ILCI EM3008 (independent line current indicator –

electric meter) is used to measure load at electric inputs of apartment houses

in order to eliminate electricity plundering

198 199

09 AUDIT COMMISSION AND THE AUDITOR


The Audit Commission approved the conclusion on the re-

sults of financial and economic audit of the Company

for 2010.

The Audit Commission approved the act of financial

and economic audit of the Company for 2010.

APRIL 11 MAY 16

The Annual General Shareholders Meeting approved the

Company Auditor to carry out audit of financial (account-

ing) statements for 2011 (Limited Liability Company Fin-

Expertiza) and elected new members of the Audit Com-

mission.

The Audit Commission approved the act of financial

and economic audit of the Company for 9 months of 2011.

JUNE 14 DECEMBER 21


The Audit Commission is a permanently functioning

body of internal control of the Company, controlling

on a regular basis the financial and economic activi-

ties of the Company, its separate subdivisions, officers

of the Company’s management bodies and structural

divisions of the Company’s executive body for compli-

ance with the legislation of the Russian Federation,

the Company’s Charter and the Company’s internal

documents. The Audit Commission acts in the interests

of the Company’s shareholders. The Audit Commission

is accountable to the Company’s General Shareholders

Meeting.

In accordance with the Federal Law № 208 FZ “On Joint

Stock Companies” dated December 26, 1995, the frame-

AUDIT COMMISSION

9.1 work of reference of the Audit Commission is determined

by the Company’s Charter (Article 24 of the Charter

of JSC IDGC of Center and Volga Region). The functions

of the Audit Commission are also described in the Reg-

ulation on Audit Commission of JSC IDGC of Center and

Volga Region, approved by the resolution of the Com-

pany’s General Shareholders Meeting (Minutes № 1751

pr/2) dated October 05, 2007. The full text of the Char-

ter and the Regulations is available at the Company’s web

site www.mrsk-cp.ru under “About the Company / Charter

and Internal Documents”.

Key objectives of the Audit Commission include:

• controlling the Company’s financial and economic

activities;

• monitoring the compliance of the Company’s financial

and economic operations with the legislation of

the Russian Federation and the Company’s Charter;

• independent assessment of information on the fi-

nancial condition of the Company.

In 2011, the Audit Commission held six meetings in ab-

sentia, with the agenda consisting of eight issues. Minutes

of the meetings are available at the Company’s web site

www.mrsk-cp.ru under “About the Company / Financial

and economic activity control authorities”.

According to the plan of Audit Commission, in the report-

ing year it held two audits of the Company’s financial

and economic activity: for 2010 and 9 months of 2011.

KEY FUNCTIONS


200 201



The number of the Company’s Audit Commission members

is determined by p. 24.1 of Article 24 of the Company’s Char-

ter. The Audit Commission consists of 5 (five) members.

During the reporting period there were two compositions

of the Audit Commission.

There were no transactions between the Company and In-

ternal Audit Commission members in 2011.

Details of the Company’s Audit Commission members are

shown in Supplement №4 to the Annual Report.

The Company confirms that the members of the Audit

Commission agree to disclose personal information.

From January 01, 2011 to June 13, 2011, the Audit Com-

mission consisted of persons elected by the Annual Gen-

eral Shareholders Meeting on June 16, 2010

(Minutes №3 dated June 21, 2010) (positions are indi-

cated as of the moment of election):

The current composition of the Audit Commission was

elected by the Annual General Shareholders Meeting on

June 14, 2011

(Minutes №4) (positions are indicated as of the moment

of election):

1. Alimuradova Izumrud Aligadjievna (Head of the Audit

Commission) – Director for Internal Audit and Risk

Management (Head of the Department) of JSC IDGC

Holding;

2. Arkhipov Vladimir Nikolaevich – Head of the Security

Department of JSC IDGC Holding;

3. Rokhlina Olga Vladimirovna – Chief Expert on Audit

Organization of the Department of Internal Audit and

Risk Management of JSC IDGC Holding;

4. Filippova Irina Aleksandrovna – Leading Expert

of the Department for Internal Audit, Revision and Due

Diligence of the Internal Audit and Risk Management


5. Ivanova Ksenia Valerievna – Head of the Division

of Information Disclosure of the Department

of Corporate Governance and Shareholder Relations

of JSC IDGC Holding.

1. Alimuradova Izumrud Aligadjievna (Head of the Audit

Commission) – Director for Internal Audit and Risk

Management (Head of the Department) of JSC IDGC

Holding;

2. Arkhipov Vladimir Nikolaevich – Head of the Security


3. Bogachev Igor Yurievich – Leading Expert of the

Department for Internal Audit, Revision and Due



4. Filippova Irina Aleksandrovna – Leading Expert

of the Department for Internal Audit, Revision and Due



5. Stepanov Vitaly Andreevich – Leading Expert

of the Department for Shareholder Relations of the

Corporate Governance and Shareholder Relations

Department of JSC IDGC Holding.

MEMBERS OF THE AUDIT COMMISSION

The Auditor performs independent audit of the Com-

pany’s accounting and financial (accounting) statements

and draws a conclusion on their accuracy and compli-

ance of the accounting procedures with the legislation


Auditors are selected for audit of RAS financial (account-

ing) statements of JSC IDGC of Center and Volga Region

by JSC IDGC Holding. The Audit Committee of the Board

of Directors assesses the auditor’s qualification, per-

formance and compliance with the requirements of in-

dependence, providing a conclusion on the candidate

auditor. The Company’s Board of Directors proposes

a candidate auditor for consideration and approval

at the General Shareholders Meeting of the Company.

According to the Regulations on Remunerations and Com-

pensations to Members of the Audit Commission of the

Company, as approved by the Annual General Sharehold-

ers Meeting (Minutes № 1, dated May 30, 2008), members

of the Audit Commission are entitled to non-recurrent re-

muneration for the participation in the audit of the Com-

pany’s financial and economic activities. The amount of re-

muneration is equivalent to twenty five minimal monthly

tariff rates of a first grade worker, as established by the

Tariff Agreement for the power industry of the Russian

Federation (hereinafter referred to as the Agreement),

valid for the period of the audit, taking into account the

readjustment established by the Agreement. The amount

of remuneration due to the Chairman of the Company’s

Audit Commission is 50% more. Remunerations to experts

who are not members of the Audit Commission are paid by

the Company on the basis of agreements concluded by the

Company with such experts. The conditions of such agree-

ments are subject to approval by the Company’s Board

of Directors.

In the reporting period, there were no transactions be-

tween the Company and members of the Audit Commis-

sion of JSC IDGC of Center and Volga Region.

Remuneration to Audit Commission membersfor participation in the Audit Commission in 2009-2011, RUB

Note: the amounts are indicated before individual income tax deduction.

REMUNERATION OF THE AUDIT COMMISSION MEMBERS

Payment 2009 2010 2011

Remuneration 1,345,925 345,488 988,200

Compensations 1,200 0 12,616

TOTAL 1,347,125 345,488 1,000,816

AUDITOR9.2

202 203



Subject to the decision of the Annual General Sharehold-

ers Meeting of the Company dated June 14, 2011 (Minutes

№4), Auditor of JSC IDGC of Center and Volga Region for fi-

nancial (accounting) statements audit in 2011 was Limited

Liability Company FinExpertiza.

LLC FinExpertiza is a member of Audit and Consult-

ing Group FinExpertiza (CPA Associates International),

providing a wide range of services on audit, legal, tax,

financial and investment consulting, valuation, account-

ing and taxation, strategic planning and marketing re-

search, and IFRS application.

LLC FinExpertiza is a member of the following profession-

al communities:

• Non-profit partnership Russian Auditing Chamber

(Certificate №4209)

• Association of Russian Banks (Certificate №1305)

• Non-profit partnership Russian Society of Appraisers

Partnership (Certificate №897)

• Russian Society of Appraisers

(Certificate №0060/77-1111-2001)

• Russian Society of Appraisers

(Certificate №0977/77-1111/06)

• Russian Manager Association.

August 22, 2011, the Company signed Agreement

№495-08-а for audit services with LLC FinExpertiza

in the amount of RUB 2,499.995 thousand with VAT.

LLC FinExpertiza audited RAS financial (amounting)

statements of JSC IDGC of Center and Volga Region

for 6 months of 2011. Fees paid to LLC FinExpertiza

in 2011 amounted to RUB 1,249.998 thousand. No other

(non-audit) services were rendered to the Company by

LLC Fin Expertiza in 2011.

From January 01, 2011 to June 13, 2011, the Auditor, as

approved by the decision of the Annual General Share-

holders Meeting of the Company (Minutes №3) was CJSC

AAF Auditinform (License №Е003505 dated March 04,

2003).

Under Sub-Item 14, Item 15.1., Article 15 of the Company

Charter, the auditor’s fee is approved by the Company’s

Board of Directors. The fee paid to CJSC AAF Auditinform

in 2011 amounted to RUB 1,416 thousand.

AUDIT OF FINANCIAL (ACCOUNTING) STATEMENTS

RUB 1,416 ths.Fee paid to CJSC AAF Auditinform:

RUB 1,250 ths.Fee paid to LLC FinExpertiza:

Auditors are selected for audit of IFRS consolidated finan-

cial statements of JSC IDGC of Center and Volga Region by

JSC IDGC Holding. In 2011, audit of IFRS consolidated fi-

nancial statements of JSC IDGC of Center and Volga Region

was performed by CJSC KPMG.

CJSC KPMG is a member of the following professional

communities:

• Non-profit partnership Russian Auditing Chamber

• Association of European Businesses

• Russo-British Chamber of Commerce

• American Chamber of Commerce

• Japanese Business Club

• International Business Leaders Forum

• US - Russia Business Council

• Canada Eurasia Business Association of Russia

• Association of Russian Banks

• National Council on Corporate Governance

• Russian Union of Industrials and Entrepreneurs

• Russian Private Equity and Venture Capital Association

• Russian-German Chamber of Commerce

• French Chamber of Commerce and Industry in Russia.

The value and procedures of payment for Auditor’s ser-

vices related to audit of IFRS financial (accounting) state-

ments of JSC IDGC of Center and Volga Region are stipu-

lated by a contract between the Company and the Auditor.

In 2011, the following payments were made to CJSC KPMG:

• RUB 9,399 thousand with VAT for audit of IFRS

consolidated financial statements of JSC IDGC

of Center and Volga Region in 2010 (Contract

№C-MSKZ-10-00892 dated October 12, 2010, signed by

JSC IDGC of Center and Volga Region and CJSC KPMG);

• RUB 944 thousand with VAT audit of IFRS

consolidated financial statements of JSC IDGC of

Center and Volga Region in 6 months of 2011 г.

(Contract №C-MSKZ-11-00884 dated September 19,

2011), signed by JSC IDGC of Center and Volga Region

and CJSC KPMG).

AUDIT OF CONSOLIDATED FINANCIAL STATEMENTS

RUB 10,343 ths.Fee paid to CJSC KPMG:

INTERNAL CONTROL AND RISK MANAGEMENT SYSTEM10

Local device of registration of lightning current enables assessment of intensity of storm

activity and taking of steps to increase lightning protection of power lines

206 207

10 INTERNAL CONTROL AND RISK MANAGEMENT SYSTEM


Audit Committee of the Board of Directors of the Company

approved Methodological Recommendations to Risk Man-

agement of JSC IDGC of Center and Volga Region.

The Board of Directors of the Company approved Regula-

tions on Control Environment and Risks for three key busi-

ness processes: Commercial Metering and Sale of Power

Transmission Services, Purchasing Activities and Techno-

logical Connection.

APRIL 21 JUNE 7

The Board of Directors of the Company approved Regu-

lation on Control Environment and Risks for the business

process Operational Activities.

JULY 18


In order that the Company developed properly, the sys-

tem of internal control and risk management (hereinafter

referred to as SIC&RM) of JSC IDGC of Center and Volga

Region is implemented and constantly improved.

The system of internal control of the Company is aimed at

solution of the following tasks:

• ensure management of activity and achievement of the

strategic goals of the Company in the most efficient

way;

• ensure the compliance with the requirements of the leg-

islation of the Russian Federation, industry and other

standards and the Company’s local normative docu-

ments, as well as ensure compliance with legislation on

insider information;

• ensure timely identification and analysis of risks in

the Company’sactivities;

• provide for the accuracy and correctness, of the Com-

pany’sfinancialandmanagementreports;

• ensure the fulfillment of the Company’s financial

and economicplans;

• provide for the investors’ trust to the Company and its

management bodies

• protect the assets of the shareholders and investors;

• protect the assets of the Company and use the Com-

pany’s resources effectively;

• build the optimal organizational and functional struc-

ture of the Company.

INTERNAL CONTROL SYSTEM10.1

The Company developed the following local regulat-

ing documents for the development and improvement of

SIC&RM approved by the Board of Directors of the Com-

pany(Minutes№57datedJune15,2010):

• TheRiskManagementPolicy determines the key prin-

ciples of the organization, implementation and control

of risk management processes in the Company. The

Policy also determines the priorities concerning the

system of risk management.

• TheInternalControlPolicy determines the mandatory key

principles of organization of the system of internal con-

trol and forms a uniform approach to the implementation

of theprocessesofinternalcontrolintheCompany.

InApril2011theAuditCommitteeoftheBoardofDirec-

tors approved Methodological Recommendations to Risk

Management(Minutes№12/14datedApril21,2011).The

document has been developed to establish a uniform ap-

proach and methods of revealing, assessment and minimi-

zation of the risks at all levels of corporative management,

as well as a uniform scale for risk assessment.

InJune–July2011theBoardofDirectorsapprovedRegula-

tions on Control Environment and Risks on the following

business processes:

• Commercial Metering and Sale of Power Transmission

Services, Purchasing Activities and Technological Con-

nection(Minutes№79datedJune7,2011);

• Operational Activities (Minutes№ 80 dated July 18,

2011).


DOCUMENTSREGULATINGTHESYSTEMOFINTERNALCONTROLANDRISKMANAGEMENT

208 209



Regulation on Control Environment and Risks of the

business processes is a basis for development of the lo-

cal documents regulating the control environment of the

business processes. It sets responsibility for implementa-

tion of the control procedures and stages of the process

and consists general characteristics of the business pro-

cess: information on the participants and owners of the

business process, list of internal and external regulatory

documentation for the process, targets of the process and

their decomposition, graphic description of the business

process. The Regulation also contains recommendations

on development of the measures for its implementation.

Setting and implementation of these documents to the

work of the Company has helped to solve the following

tasks:

• set responsibility of the management for achieving the

goals of the business processes and implementation

of control procedures at the all levels of management

(Company – Branches);

• define controlling points for the business processes,

identify risks and formalize control procedures;

• control the level of risk ensuring transparency of the

business processes.

To implement the approved local internal control and risk

management norms (Risk Management Policy and Inter-

nal Control Policy) and to provide for functioning and

improvementofefficiencyoftheinternalcontrolproce-

dures, theWork Group for implementation of the Inte-

gratedSystemofRiskManagementandInternalControl

(hereinafter referred to as ISRM and IC) established in

2010 continued itswork on the following directions in

this reporting year:

• quarterly update of the risk passports and monitoring

of the status of implementation of the measures to

minimize risks;

• monitoring of the measures to minimize key system

risks of the Company;

• setting the owners of the key risks on the key business

processes;

• adaptation and introduction of Regulations on control

environment and risks of the business processes ap-

proved by the Board of Directors of JSC IDGC of Center

andVolgaRegionin2011.

In order of further improvement of SIC&RM the work

on assessment,update,monitoringtheexistentandfind-

ing the new risks, development the risk management ac-

tivities and control over their implementation will contin-

ue. The Company plans to implement uniform information

systems and technologies to the control procedures imple-

mentation and preparation of reporting on SIC&RM.

Therearethreetypesofcontrolwithinthesystemof in-

ternal control and risk management of the JSC IDGC

of CenterandVolgaRegion:preventive(precautionary),

current and audit (follow-up).

Preventive control is responsibility of corresponding

departments of the Company. The Report on key risks

is formed on a quarterly basis, the risks are constantly

monitored and assessed, and measures of risk manage-

ment are developed and implemented.

Current control development is performed in the

framework of improvement of control environment of

the business processes through their standardization,

approval Regulations on control environment and risks

of the business processes by the Board of Directors

IMPROVEMENTOFTHESYSTEMOFINTERNALCONTROLANDRISKMANAGEMENT

SUBJECTSOFTHESYSTEMOFINTERNALCONTROLANDRISKMANAGEMENT.DISTRIBUTIONOFRESPONSIBILITY

with preliminary review by the Audit Committee, de-

termination of the control points, risks, internal and

external risk factors and control procedures. Current

control is the responsibility of the specialized de-

partments of the Company. Current control includes

the following:

• monitoringofthebusinessprocessesefficiency;

• control procedures decreasing risks integrated into the

business processes;

• monitoring of the key risk indicators of the business

processes;

• relation of control pints of the business processes and

KPIs of the Company.

Auditcontrol is implemented via control activities and

audits conducted by the Department for Internal Audit

and Risk Management. The audit control includes the

following:

• analysisofthefinancialandeconomicactivitiesofthe

Company;

• verification of the authenticity and integrity of ac-

counting and reporting;

• verificationofcompliancewithlawsandinternalregu-

lations;

• development and implementation of control measures

toeliminateviolationsanddeficienciesidentifieddur-

ing inspections;

• assessment of the effectiveness of internal control and

risk management.

According to the Policies of internal control and risk man-

agement, the processes of SIC&RM are arranged by the

“distribution model”: participants of SIC&RM of the Com-

pany, performing control on different levels, are all em-

ployees of JSC IDGC of Center and Volga Region.

The system of internal control and risk management

is anintegratedpartofthewholemanagementsystemof

the Companyandisaimedat its improvement.SIC&RM

is based on the principle of accountability of all its par-

ticipants.

The management bodies of the Company perform control

of SIC&RM effectiveness through the control bodies.

The Company’s internal control subjects are the following:

• The Board of Directors;

• Audit Committee of the Board of Directors;

• General Director;

• Department for Internal Audit and Risk Management;

• Specialized departments of the Company.

TARGETFUNCTIONSOFTHESYSTEMOFINTERNALCONTROLANDRISKMANAGEMENTOFTHECOMPANY

• ENSURING PROTECTION AND SAFETY OF ASSETS

• MORE EFFICIENT USE OF RESOURCES;

• REDUCTION OF RISKS

• COMPLIANCE WITH RUSSIAN LEGIS-LATION AND LOCAL REGULATIONS;

• INTEGRITY AND RELIABILITY OF DATAOFMANAGEMENTANDAC-COUNTING REPORTING

210 211



1Theinformationonauthority,compositionandmeetingsoftheAuditCommitteein2011canbefoundin“CorporateGovernance”Sectiononp.184ofthisAnnualReport.

RISK MANAGEMENT10.2

RISKMANAGEMENTISAPROCESSPERFORMEDBYTHETOPMANAGERSANDSPECIALISTSATALL

LEVELSOFTHECOMPANY’SANDITSSTRUCTURALDEPARTMENTSMANAGEMENT.ITINCLUDES

IDENTIFICATION,ASSESSMENTANDRANKINGOFTHERISKS,ASWELLASTHEIMPACTONTHERISKS

WITHINTHE“RISKAPPETITE”TOPROVIDEREASONABLEASSURANCEREGARDINGTHEACHIEVE-

MENTOFSTRATEGICANDOPERATIONALOBJECTIVESOFTHECOMPANY.

STRATEGICANDENVIRONMENTALRISKS

AKEYCRITERIONFORTHECLASSIFICA-

TIONOFRISKSISTHEFUNCTIONALAREAS

OF THE COMPANY’SOPERATIONS.

REGULATORYRISKS

The Board of Directors approves the internal control policy

andassesses its efficiency.TheBoardofDirectors is re-

sponsible for the approval of the general strategy of in-

ternal control.

The Audit Committee1 of the Board of Directors as-

sesses the effectiveness of the procedures of internal

control in the Company (including monitoring of the

Department for Internal Audit and Risk Management).

The General Director is responsible for development,

introduction and effective functioning of the system

of internal control and risk management of the Com-

pany.

Department for Internal Audit and Risk Management as-

sessestheadequacy,sufficiencyandefficiencyofcontrol

procedures and performs the assessment of the imple-

mentation of control procedures by those involved in the

Company’s business processes. The Department is ac-

countable to the Audit Committee, informing the Commit-

tee on quarterly basis on the violations in financial and

economic activities, including the facts of non-compli-

ance, or improper compliance with the Company’s internal

documents.

Specialized departments of the Company are responsible

for monitoring of the implementation of the control proce-

dures and risk management.

Strategic are the risks related to the development, im-

plementation and monitoring of the Company’s devel-

opmentstrategy.Saidrisksdirectlyinfluencetheimple-

mentation of the Company’s goals.

Risksrelatedtopoliticalandeconomic

situationinthecountryandregion

The forecast of electricity consumption and develop-

ment of energy production in the regions of JSC IDGC

of Center and Volga Region presence is determined by

macroeconomic factors and economic conditions of

the country in general. The company is exposed to the

risksrelatedtothe impactof theworldfinancialcrisis

on the social and economic development of our coun-

try. Abrupt worsening of foreign economic conditions in

2008–2009causedasharpdecreaseofexportandthe

outflowofcapital.Thisresultedinaconsiderabledown-

fall of industrial production, trade and investments. The

decrease in industrial production and the reduction of

energy consumption lead to a decrease in the Company

earnings.

According to the basic variant of development of the

economy in2012–2014, in theconditionof implemen-

tation of the state policy aimed at improvement of the

investmentclimate,competivenessandefficiencyofthe

business, stimulation of the economic growth and mod-

ernization. In relatively favorable conditions, economic

growth in 2012 will comprise 3.7%, in 2013–2014 –

4–4.6%per year. Nevertheless, in spite of recovery of

the country’s economy, its growth rates are still not

sufficientlystable.Takingintoaccounthighlevelofde-

pendence from external economic environment, there

is a possibility of the slowdown of the Russian economy

to1.5–2.5%in2012–2013and3.7%in2014incaseof

worsening of the global economy.

The Company plans a range of measures aimed at im-

proving efficiency in conditions of unstable economic

situation, i.e. reduction of operational costs, optimiza-

tion of contractor relations, optimization of contractual

relations with consumers, and of accounts receivable

collection, and provision for optimal tariff and balance

solutions in the regions of presence.

Risksrelatedtothegeographicalspecifics

ofthecountryandregion

Risks related to the geography of the regions are inter-

ruption of power supply resulting in losses due to unfa-

vorableweather conditions. To decrease the influence

of those risks, the Company implements a range of mea-

sure aimed at preparedness of the power grid complex

to the autumn and winter; preparedness of each branch

of the Company for autumn and winter season is subject

to certification. The branches are experienced in suc-

cessful and timely elimination of consequences of the

acts of God influencing the equipment and infrastruc-

ture of power grids.

Risksrelatedtothetariffregulation

The main regulatory risks are those related to changes

in the state tariff regulation policy. Lately, the Russian

Government has been constraining growth of tariffs for

services of natural monopolies.

212 213



Risks related to the tariff regulation of the Company’s

operations are the following:

InthepartofimplementationoftheparametersofRAB

regulation:

• review of previously established long-term regulation

parameters;

• reallocation of required gross revenues over the years

of long-term regulatory period in order to restrict the

growth of tariffs;

• introduction of changes to existing legislation, the

consequences of which affect the reduction of previ-

ously established long-term management of the re-

quired gross revenue.

Inthepartofobtainingtariffrevenue:

• shortfall in tariff revenue due to reduction of the ac-

tual energy consumption compared to the discounted

value when approving tariffs for electric power trans-

mission;

• introduction of changes to existing legislation, the

consequences of which affect collection of the tariff

revenue.

In order to reduce the impact of these risk factors the Com-

pany is implementing the following activities:

• interacting with the tariff regulators of the subjects of

theRussianFederationonjustificationtheRGR;

• interacting with the Federal Tariff Service of Russia

onconfirmingtheparametersofbalance(energycon-

sumption, reported capacity, amount of technological

losses) in the Consolidated forecasted balance of pro-

duction and supply of electric energy (power) for the

following year at the level of Company’s offers;

• interacting with the Federal Tariff Service of Russia

on introducing modifications to the Russian legisla-

tion regulating the prices of electric power at various

markets;

• implementing systemic measures on the reduction of

theCompany’scosts,fulfillmentofadoptedliabilities

in implementation of the investment programs and

reaching set indicators of reliability and quality of ser-

vices.

Risksrelatedtotheindustryregulation

Absence of strict regulation of relations between dis-

tribution grid companies and JSC FGC UES may lead to

losses related to the termination of leases of “last mile”

with JSC FGC UES. To minimize that risk, the Company

performs the following activities:

• controlling adherence to contract terms with JSC FGC

UES (by maturity) and the timeliness of extension of

contracts;

• monitors the electric power supply to consumers of

the “last mile” and analyzes changes in technological

losses.

The main consumers of the Company’s services are the

retail companies which perform supply of the power en-

ergy to the end consumers. There is a risk of increase of

the accounts receivable due to violation of the payment

behavior by the end consumers of electric power and a

need for additional credits.

The Company performs weighted credit policy and ac-

counts receivable management in order to optimize its

amount and ensure the debt repayments.

Risksrelatedtotheanti-monopolyregulation

Anti-monopoly regulation sets its own norms for the le-

gal relations such as procedure of transactions on acqui-

sition and restructuring of business entities, the realiza-

tion of large property complexes, etc.

The Company is a natural monopoly and thus is exposed

to the risk of recognition of violation of the anti-mo-

nopoly legislation in provision of its services of power

transmission and of technological connection. To mini-

mize that risk, the Company controls the technological

connection for the compliance with the current law, in-

cluding the observance of the terms for attending to the

applications and enquiries of the consumers and timely

disclosure of information.

Financial risks are the ones related to financial stability

and the structure of the Company’s capital, as well as to

thedecreaseofprofitandliquidity,thefluctuationsofcur-

rency exchange rates, the changes of interest rates and

the credit risks.

Currencyandinterestrisks

The Company actively attracts the loans to be used as

sourcesoffinanceforinvestmentprogram,aswellasfor

daily economic operations, exposing itself to the risk of

losses related to increase of the interest rates on credits

and loans.

To minimize interest rates on the credit portfolio, the Com-

pany performs the following activities:

• attracting to the participation in auctions the major

Russian banks capable of lending much at compara-

tively low interest rates;

• diversifying the credit portfolio, thus enabling the

implementationofaflexiblefundraisingpolicywhich

helps avoiding the involvement with a single major

creditor;

• conducting negotiations on the lowering of inter-

est rates on existing credit agreements in case of a

decrease of interest rates on the banking services

market.

Risksrelatedtotheinflation

TheworkoftheCompanyisexposedtoinflation.Accord-

ingtothedataoftheRussianStatisticalService,theinfla-

tionin2011comprised6.2%,whichislowertheinflation

rateof2010(8.8%).

Thenegativeimpactofinflationonthefinancialandeco-

nomic activities of the Company may be expressed in de-

valuation of accounts receivable in case of a considerable

postponement or a delay of payments, appreciation of

the services of contractor organizations resulting in the

increase of the Company’s costs. To minimize that risk,

the Company performs the following activities to manage

overdue accounts receivable:

• monitoring of delayed and disputable accounts receiv-

able;

• processing claims for the collection of accounts receiv-

able, etc.

Risksrelatedtoinabilityofcontractors

toperformtheirliabilities

The contractor is chosen according to the tender proce-

dures of the Company assessing the terms of agreement,

business reputation and paying capacity of the contractor,

aswellastheriskofnon-fulfillmentofthecontractand

sufficiencyof thecontractor’s resources.Nowtheriskof

non-fulfillmentoftheliabilitiesofthesupplycontract is

assessed by the Company as minor.

The majority of the Company’s contractors are power sup-

ply consumers.

Growth of overdue (uncollectable) accounts receivable

on the energy transmission contracts is a risk related to

non-fulfillmentoftheliabilitiesofpaymentfortheenergy

transmission services.

The Company process claims in order to develop judicial

practice and create positive precedents of recovery of the

disputed debt, controls implementation of the sched-

ule of activities to reduce accounts receivable for energy

transmission services.

FINANCIALRISKS

2010 theinflation 2011

8.80%

6.20%

214 215



Risksrelatedtotheinabilitytoputintooperationthein-

vestmentsubjects

The implementation of the investment program of the

Companyisexposedtotherisksofnon-fulfillmentofthe

liabilities of putting into operation of the investment ob-

jects. This may be caused by the following reasons:

• worsening of the contractor’s work organization

(change of the leaders of the contractor company, ab-

sence of clear organizational structure, high employee

turnover, absence of own equipment, etc.);

• change of relations between the contractor organi-

zations and subcontractors without approval of the

client;

• receiving important feedback from the coordinating

organizations.

These risks may be decreased by the following measures:

• timely assessment of the quality of work of the con-

tractor organizations;

• approval of attracted subcontractor organizations

at thestageoftenderprocurementprocedures;

• monitoring of compliance with the normative terms

of authorizationtoputtheobjectintooperationfrom

the supervisors and the validity of the imposed com-

ments.

Risksrelatedtoprovisionofsafeusageofproductionfa-

cilitiesandtoenergyefficiency

Inappropriate use of equipment, violations of the rules

ofoccupationalandfiresafety,penetrationoftheout-

sider to the territory of the power grid facilities may

cause accidents and disruptions in the supply of elec-

tricity to consumers. In order to prevent these risks,

the Company requires strict compliance with the rules

of operation of electric plants, performs security mea-

sures ensuring operational safety of the energy objects,

monitors the status of equipment, tools and protection

devices.

Risksrelatedtothereliabilityofthepowersupply

Operational and technological risks affecting reliability

of the energy supply are related to physical and moral

depreciation, violation of operating conditions and op-

eration modes of the power grid equipment, untimely

performance of technical maintenance and repair. Mea-

surestominimizetheserisksareaimedatidentification

of the bottlenecks, grid renovation, implementation of

the target programs on the grid complex reliability im-

provement,continuouscontroloffiresafetyandtheop-

eration of electric plants, equipment, buildings and con-

structions, implementation of the program for the repair

of energy facilities.

Risksrelatedtothepersonnelmanagement

Risks related to the personnel management can be divided

in the following two groups:

• risks of organizational development related to

decrease of efficiency of management decisions,

violation of optimality of the business processes

causing increase of costs of the Company due to in-

efficient organizational structure and dilution the

responsibility;

• risks of personnel management related to low staff-

ing and high personnel turnover, non-fulfillment of

the liabilities taken by the Company under the current

Industry Tariff Agreement and Collective Agreement,

lawsuits from the fired employees, systematic viola-

tion of the labor behavior and decrease of the Com-

pany’sefficiency.

OPERATIONALANDTECHNOLOGICALRISKS

To minimize those risks the Company performs the follow-

ing actions:

• development and establishment of procedures and

regulations for all types of business processes in the

Company;

• monitoring the KPI system for the employees of the

Company in accordance with function performed by

them;

• building constructive partner relations with trade

unions;

• fulfillmentoftheconditionsofthecurrentCollective

Agreement;

• abidance with the labor legislation, solution of the la-

bor arguments in a pre-trial order through the Commis-

sion on labor arguments;

• implementation of the Program for support and devel-

opment of the human resources.

Risksrelatedtothepurchaseactivitiesandlogistics

Functioning of the electric grid complex is affected badly

by the risks related to inefficiencyofpurchaisingopera-

tions, e. g. non-optimal pricing for the supplies of equip-

ment, materials and services rendered/supplied by con-

tractor organizations, violations of the terms of of supply

and contractor agreements, decrease of transparency

of theprocurementprocedures.

To mitigate these risks, the Company monitors compli-

ance with the timeline of purchase procedures, provision

of technical specifications, and execution of contracts.

It alsomonitorspermanentlythepricesformaterialsand

equipment.

ITrisks

Physical and moral depreciation, violation of operating

conditions and operation modes of the corporate comput-

er network (CCN) and violation of the procedure of gaining

access to the information and work in the Company’s infor-

mation systems leads to malfunctions of the information

systems.

TopreventtherisksinthefieldofIT,specializedservices

of the Company are constantly monitoring the CCN, de-

velopment and implementation of the target programs of

increasing reliability of the IT infrastructure, controlling

access and work of the users with the informational sys-

tems of the Company.

The major risks of the operating activities of the Company

are the following risk related to investment operations:

• improper and untimely implementation of investment

projects;

• exceeding the set prices of projects included in the in-

vestment program;

• increasing volumes of construction in progress.

Thebasicmeasuresof riskmanagement in thisfieldare

the following:

• controlling and monitoring the terms of commission-

ing of the facilities included into the annual invest-

ment program;

• controlling the performance of obligations by the con-

tractors;

• fostering the responsibilities for the preparation and

agreement of technical assignments and for the con-

ducting of internal expert assessment of design docu-

ments.

INVESTMENTRISKS

216 217



Risksrelatedtothecorporategovernance

Risks of the corporate governance are those related to the

interaction between the Company and its shareholders,

and providing them with their rights.

Company estimates the risks related to the complaints

and lawsuits of the shareholders caused by violation

of theirrightswhensigningthecontractsinwhichthere

is interestand inmajor transactionswith theCompany

as negligible.

Risksrelatedtothepropertymanagement

Due to the fact that the most distributed assets of the

Company are located at the land plots of unknown owner-

ship, the Company cannot sign the leases with their own-

ers. It causes emergence of the risks of penalties related

to usageofthoselandplots.

To minimize these risks, the Company developed and

implemented the target program of registration of own-

ership of the residential property, registration/renewal

of the rightsofuseoflandconsideringpreparationof in-

formation about the boundaries of protected zones of pow-

er transmission facilities. Dynamics of the works shows

that the Company will perform full renewal of the earlier

receivedrightofpermanent(perpetual)usageof theland

plots in time set by the current legislation and not taking

the said risks.

The negative changes of external and internal busi-

ness environment, actions of the majority shareholders,

negative scenario of business development of the object

offinancialinvestmentsoftheCompanymaycausethe

risk of losing the right of property (loss of control) re-

gardingtheobjectsoffinancialcapital,depreciationof

itscosts,lose/disputingbythethirdpartiesofthelegal

right of the Company to the assets. In order to minimize

theserisks,theCompanyperformsmonitoring ofthe fi-

nancial condition of the companies in which the Com-

pany is participating and strict accounting of the rights

tofinancialinvestments.

Risksrelatedtothechangesintaxandenvironmentlegis-

lation,aswellasincustomsandcurrencyregulation

Changes in tax legislation and ambiguous interpretation

of certain provisions of the laws may cause legal risks

for the Company. Increase of tax rates or the changes in

the procedure and the terms of calculation and payment

of taxesmayleadtodecreaseoftheCompany’snetprofit

which will result in decrease of the paid dividends. On

the other hand, the latest legislative initiatives of the

state authorities were aimed at easing of the taxation

burden and establishment of themore flexible system

of taxation regulations. In order to minimize these risks,

the Company conducts continuous analysis of the legal

base, including explanations and commentaries on taxa-

tion issues in order to calculate and pay taxes in strict

compliance with the current legislation of the Russian

Federation.

Incaseofsignificantchangestothelegislationontaxes

andfeestheCompanywillplanitsfinancialandeconomic

activities considering such changes.

The probability of emergence of the risks related to the

changes in Environment protection legation is low. The

amendmentstotheFederalLaw№7-FZOnEnvironment

ProtectionasofJanuary10,2002proposedbytheMinis-

tryofNaturalResourcesandEcologyin2008–2010,sup-

pose increased corporate responsibility for violation of the

environment legislation. The Company takes into account

the correspondent ecological regulations when perform-

ing its operations.

Taking into account that the Company does not export its

production to the external markets, the changes in cur-

COMPLIANCERISKS

rency and customs legislation will not have serious impact

on the work of the Company and will not create legal risks

for it.

Taxationrisks

Today, the tax relations in the Russian Federation are reg-

ulated by Tax Code of the RF and a range of federal and

regional laws.

The Company fully complies with the tax laws affecting

its operations and carries out constant monitoring of its

changes, which, however, does not eliminate the potential

risk of disagreement with the relevant authorities on the

matters permitting an ambiguous interpretation.

In the short-term perspective, the Company does not

foresee emergence of any serious risks to its financial

and economic activities related to the changes in the tax

legislation.

Incaseofsignificantchangestothelegislationontaxes

andfeestheCompanywillplanitsfinancialandeconomic

activities considering such changes.

Risksrelatedtothecourtwork

Legal risks management is aimed at minimizing of legal

consequences that could negatively affect the Company’s

operations.

In general, legal risks management is based on the im-

provement of the process of legal registration of the

documents and support of the Company’s activities. To

minimize the legal risks, all Company’s business processes

exposed to those risks should be subjected to the compul-

sory legal expertise.

There are no objective conditions requiring changes of the

legal practice in a fashion that it may cause risk to the

existenceoftheCompany.Incaseofsignificantchangesin

thelegalpracticetheCompanywillplanitsfinancialand

economic activities considering such changes.

HUMAN RESOURCES POLICY AND SOCIAL RESPONSIBILITY

11

Pyrometer AKTAKOM AP-2527 allows to check t of heating of contact joints surfaces

in switching centres in the contactless way — from a safe distance and without equip-

ment switching-off

220 221

11 HUMAN RESOURCES POLICY AND SOCIAL RESPONSIBILITY


AUGUST

Safety Week in the Company’s branches.

The Company has published Social Report for the first time.

MAY – JUNE

Quick power supply restoration of the territories, subject

to extreme consequences of a very strong atmospheric

cyclone. 147 teams totaling 790 people and 154 units

of special vehicles took part in the emergency recovery

works.

DECEMBER 26JANUARY 5

SEPTEMBER 20-22 DECEMBER 29

The structure of talent pool of young specialists of JSC

IDGC of Center and Volga Region was approved.

The First Festival of KVN of JSC IDGC of Center and Volga

Region took place in Kirov.

The Company took part in training programs on liquida-

tion of electric energy system disturbances, developed

by JSC IDGC Holding and implemented together with other

interregional distribution grid companies.

Conclusion of the Agreement on changes and amend-

ments to the 2009-2011 Collective Labor Agreement

of JSC IDGC of Center and Volga Region and its prolonga-

tion till 2012.

OCTOBERSEPTEMBER

2010 2011


Human resources policy of the Company is formed in ac-

cordance with the requirements of the Russian legislation,

Tariff Agreement for the power industry (TA) in 2009-2011,

Collective Labor Agreement of JSC IDGC of Center and Vol-

ga Region in 2009-2011, and OHSAS 18001, ISO 14001,

ISO 9001 standards.

HUMAN RESOURCES POLICY

11.1 The primary objective of the human resources policy is to

meet the Company’s demand for workforce of the required

quality and quantity, fully and promptly. The Company

gives special attention to improving quality and efficiency

of the use of human resources, encouraging personnel to

achieve Company’s objectives and develop its professional

skills. High demands for personnel of power grid complex

require significant investments in social and professional

development of the Company’s employees.


222 223



The basic principle of the Company’s human resources

policy is to bring together its own interests and the in-

terests of each employee to achieve maximum production

and economic performance.

One of the main objectives of the Company’s human re-

sources policy is to maintain, supply and develop its human

resources potential in accordance with the development

of the distribution grid complex, specific characteristics of

the regional footprints and social and economic develop-

ment trends of the country.

On the basis of analysis of the current internal and ex-

ternal personnel situation of the Company, the following

main activities of the Company have been stated in the

Program on support and development of human resources

potential for the purpose of maintaining, supplying and

developing human resources potential of JSC IDGC of Cen-

ter and Volga Region:

• To define a specific category of employees whose re-

tention is crucial to the Company;

• To develop and implement measures to increase the

share of young employees, in particular in the produc-

tion departments (workers and engineers);

• To strengthen cooperation with the leading Russian

institutions of secondary and higher education giving

special attention to specialized energy institutions and

university departments;

• To develop a system of training, retraining and ad-

vanced training of personnel using a high potential

of the regional training centers and flexible training

methods;

• To strengthen work with talent pool;

• To strengthen work aimed at ensuring psychophysical

occupational safety of personnel.

In 2011, the average personnel number of JSC IDGC of Cen-

ter and Volga Region amounted to 21,728, a 0.9 percent

increase as compared to 2010 level. The increase in the

average personnel number as compared to the previous

year results from the employment of new personnel in the

Company at the end of 2010 to perform the following du-

ties: to form the volume of rendered services on energy

transmission; to perform non-contracted works on tech-

nological connection of preferential customers; to work

in new Customer Service Centers; to conduct capital con-

struction in connection with an increase in the investment

program.

NUMBER, ROTATION, AND STRUCTURE OF PERSONNEL

21,728 Averege personnel number

2009–2011 PERSONNEL NUMBER, pers.

20,062

2009 2010 2011

21,53421,728

10.3%Ryazanenergo

4.4%Marienergo

11.3%Kalugaenergo

2011 PERSONNEL NUMBER IN THE COMPANY

The analysis of personnel rotation shows that workers

and specialists account for the major part of employees

employed in 2011 (65.3% and 28.0% respectively). The

special attention was given to personnel selection: 42.8%

of employees with higher professional education and

32% of employees with vocational secondary education

were employed.

Efficiency of the current human resources policy is con-

firmed by a consistently low staff turnover throughout

the history of the Company. The Company is not exposed to the risk of mass layoff.

2011 Personnel Rotation

2011 Staff Turnover in the Company

Employed Dismissed

1,473 pers. 1,278 pers.

Total turnover Total turnover

5.9% 0.90%

The staffing level approximates to 100 percent and has

been stable over a period of the last three years.

Staffing level

December 31,2009

December 31,2010

December 31,2011

96.20% 96.60% 96.36%

1.3%Executive body

10.2%Vladimirenergo

6.7%Ivenergo

9.7%Udmurtenergo

11.5%Kirovenergo

11.9%Tulenergo

22.7%Nizhnovenergo

224 225



The Company’s personnel structure, by categories, is con-

ditioned by the specific operations of distribution grid

companies: workers account for more than a half of the

total personnel number.

The average age of the Company’s employees was 42 years

in 2011. The Company has an optimal human resources

structure by age categories: employees aged 25 to 45 ac-

count for 50% of total personnel number. They show the

highest performance and qualification rates. The analysis

of the structure of employed personnel by age categories

proves the efficiency of the Company’s policy aimed at in-

creasing the share of young employees: 68% of workers

employed in 2011 and 75% of employed specialists and

office workers are under 35; and 69.4% of employed execu-

tives are under 45.

2009–2011 PERSONNEL STRUCTURE, BY CATEGORIES

2009-2011 PERSONNEL STRUCTURE, BY AGE CATEGORIES

56%

5.5%6.0%6.1%

28%

24.3%23.7%22.9%

25.4%25.2%25.9%

35.9%36.5%37.1%

2011

2011

56%

28%

16%

2010

2010

56%

28%

16%

2009

2009

Executives

Specialists and office workers

Workers

Working pensioners

45 to retirement

35 to 45

25 to 35

Under 25

8.9%

100%

100%

0%

0%

8.5%7.9%

16%

The education level of the Company’s employees remains

high for several years, which is conditioned by production

needs and high requirements to personnel qualification.

Dynamics of qualification structure of the Company’s per-

sonnel shows an increase in the share of personnel with

academic degrees and higher professional education

on the one hand, and a decrease in the share of personnel

with low education level on the other hand.

2009-2011 QUALIFICATION STRUCTURE OF PERSONNEL

>41.5 THOUSAND PERS. 191%OR of the average personnel number

THE NUMBER OF TRAINED PERSONNEL OF THE COMPANY IN 2011

Transition of JSC IDGC of Center and Volga Region to the

innovative way of development requires higher demands

for qualification of production personnel. The methods

used by the Company to carry out training and retrain-

ing of personnel with reference to advanced training for

new facilities and implementation of new equipment and

technologies, target training of talent pool and young

specialists, and integration of scientific work into the

PERSONNEL TRAINING AND DEVELOPMENT

2.4%2.1%1.6%

33.8%32.6%32.0%

29.9%29.9%29.6%

32.2%33.3%34.5%

201120102009

Junior secondary

Secondary

Vocational secondary

Higher professional

Candidates and doctors of science, two and more higher professional educations

1.7%2.1%2.3%100%

0%

226 227



Percentage of employees involved in training, retrain-ing and advanced training programs, % of the average personnel number

Personnel training costs, % of payroll

2009-2011 PERCENTAGE OF TRAINED EMPLOYEES

2011 NUMBER OF TRAINED EMPLOYEES, BY CATEGORIES,

AND PERSONNEL TRAINING COSTS

% OF THE TOTAL NUMBER OF TRAINED EMPLOYEES

training system allow to improve personnel knowledge

and form human resources potential that can ensure

the innovative development of the Company. The train-

ing system is based on the standard requirements of the

Management System for Professional Training, Retrain-

ing and Advanced Training, and Occupational Health and

Safety (STO 0401-148-2010) developed in accordance

with ISO 9001:2000, OHSAS 18001:2007.

Subject to increasing personnel training needs, the

Company selects the most effective, modern and

high-quality training programs from the training ser-

vices available on the market, such as on-site training

with teachers from educational institutions, reduction

of training terms due to self-training and correspon-

dence courses, on-the-job training when tutors share

their professional skills with their trainees, distance

learning (video conferences and Internet classes). These

methods allow to increase the number of trained em-

ployees and optimize training costs.

In 2011, the number of trained personnel amounted

to 41,465 pers., a 23 percent increase as compared to 2010

level; it amounts to 191% of the average personnel num-

ber of the Company.

132%

20092009 20102010 20112011

157%

191%

0.650.60

0.85

18%Executives

65%Workers

17%Specialists and office workers

From year to year, there has been a wider use of potential

of a Network of Corporate Training Centers of the Com-

pany which includes seven licensed non-profit education-

al organizations meeting the demand for technical staff

training.

In 2011, the Company updated the list and contents

of the training programs, modernized the technical basis

of education, implemented new forms of distance learning,

expanded the scope of training licenses issued to train-

ing centers in accordance with the demand for personnel

training, increased the number of retired power engineers

and highly qualified Company’s employees to perform

teaching. Taking into account the demand for technical

staff training concerning market based services provided

by grid companies, the management of the Company has

developed a corporate training program, expanded the

training license to one of the training centers and invit-

ed the teachers from Izhevsk State Technical University.

In 2011, 60% of the trained employees of the Company

completed training programs in a Network of Corporate

Educational Centers.

NEI Ivanovo Educational Center

Tv: 37,463 pers./ hour

Pt: 60%

NST: 8 pers.

NVT: 31 pers.

Educational Centers of the Company

NEI PPSE Tula Educational Course Center

PEI Vladimir Educational Center «Energetik»

PEI Educational Center «Energetik-NN»

NEI Educational Center «Energetik»

Educational Center «Energetik»


Pt: 69.8%

NST: 12 pers.

NVT: 74 pers.


Pt: 89.2%

NST: 6 pers.

NVT: 23 pers.


Pt: 67.2%

NST: 5 pers.

NVT: 54 pers.


Pt: 93.9%

NST: 11.5 pers.

NVT: 8 pers.


Pt: 47.3%

NST: 57 pers.

NVT: 42 pers.

Tv: 115,412.5 pers./ hour

Pt: 30.7%

NST: 28 pers.

NVT: 49 pers.

NINEO Educational Center «Energetik»

Tv: Training volume, in 2011

Pt: the Company’s personnel training

NST: The number of staff tutors

NVT: The number of visting tutors

TulaKaluga

Vladimir

Ivanovo

Kirov

Izhevsk

Nizhny Novgorod

228 229



Educational center Date of Estab-lishment

Location Total area

Training rooms,sq. m.

Administrative premises,sq. m.

Dormitory / num-ber of rooms,sq. m. / items

Educational Center "Energetik"

May 05, 2003 5 Ogarev Street, Kaluga

860.7

345 365.7 150/ 38

NEI PPSE Tula Educational Course Center

June 19, 2002 101a Timiryazeva Street, Tula

278.3

214.4 63.9 no

NINEO Educational Center "Energetik"

December 30, 2002

9 Lomonosov Street, Kirov

8,420.09

2,497.50 2,789.39 3,133.2/ 169

NEI Ivanovo Educa-tional Center

February 16, 2005

3b Suzdalskaya Street, Ivanovo

85.5

59.1 26.4 no

NEI Educational Center "Energetik"

March 28, 2003

22a Voroshilov Street, Izhevsk

2,917.4

966.8 1,406.90 543.7/ 57

PEI Educational Center "Energetik-NN"

November 02, 2009

26 Sormovskoe Shosse, Nizhny Novgorod

527.9

220.1 307.8 no

PEI Vladimir Educational Center "Energetik"

October 29, 2009

91 Bolshaya Nizhegorodskaya Street, Vladimir

157.5

115.1 42.4 no

COOPERATION WITH EDUCATIONAL INSTITUTIONS

For the purpose of expansion of cooperation with the lead-

ing Russian institutions of secondary and higher profes-

sional education, the Company has selected the basic edu-

cational institutions in its regional footprints to perform

training in several specialties that are key specialties for

the distribution grid complex.

The Company carries out cooperation with the institu-

tions of secondary and higher professional education in

the following areas: target training of the Company’s

employees considering the specific characteristics of

the distribution grid complex; support of professional

dynasties – assigning children of the Company’s em-

ployees to educational institutions for the purpose of

receiving higher education in energy specialties in ac-

cordance with the target quota of state-financed places;

participation of the Company’s employees in the train-

ing process; career guidance courses for trainees; job

placement of young specialists; organization of intern-

ship and pre-graduation practice for students and ad-

vanced training courses for tutors for the purpose of

studying the modern power industry and the require-

ments to personnel training.

Four employees of the Company study the target MBA

program International Economic Cooperation in the En-

ergy Sector (program “Economics”, specialization “In-

ternational Energy Sector”) within the framework of co-

operation with Moscow State Institute of International

Relations MFA Russia (MGIMO-University) (Moscow).

TALENT POOL

Under the Program for Support and Development of Hu-

man Resources Potential, the Company continues to form

and develop the talent pool which includes 1,379 candi-

dates in 2011. The talent pool of highly qualified special-

ists allows to establish an effective system of investment

in personnel development, which increases significantly

the non-material motivation of employees and helps to

keep them in the Company.

In 2011, 53 employees of the talent pool were appointed to senior positions.

In 2011, the talent pool of young specialists was formed

on a competitive basis for the purposes of providing op-

portunities for professional development of young spe-

cialists, increasing the level of their professional train-

ing and developing managerial competencies. 1,033

employees of the Company aged under 35 participated

in the contest on formation of the talent pool. All the

candidates passed the selection procedure including the

assessment of managerial competencies and motivation

components: focus on development, desire to prove out,

willingness to changes, responsibility, foresight and per-

spective thinking. Additional selection criteria included

possession of an academic degree, involvement in social

and academic life of the Company, and ability to generate

innovative proposals.

According to the contest results, 383 young specialists

were included in the talent pool of the Company’s branch-

es; 33 most ambitious employees were included in the tal-

ent pool of young specialists of the Company; 17 of them

were included in the talent pool “Young Support of IDGC

Holding”.

The system of talent pool training is based on the indi-

vidual planning for personnel development on key compe-

tencies of the Company. Individual plans for personnel de-

velopment in accordance with the assessment results and

the level of competencies development also include the

following training components: advanced training in the

target position; inclusion in the creative and work groups

to deal with technical and organizational issues; providing

supply for the period when the regular employee is absent;

preparation of drafts of documents, instructions, and re-

ports; involvement as tutors.

In 2011, 61% of employees of the talent pool completed

occupational training in specialized educational institu-

tions on their occupational profiles. In institutions of high-

er education, there is a correspondence target training

program in energy specialties meant for the young spe-

cialists with vocational secondary education included in

the talent pool to be appointed to one of the key positions

of the Company, namely head of regional electric grids in

remote rural areas.

Various training programs of the Company on the devel-

opment of leadership qualities and managerial skills pro-

mote capacity building of employees of the talent pool.

The program is aimed at training masters and managers

with specialization in the international energy sector.

In order to increase the education level of the technical

staff, the Company performs target personnel training in

energy specialties meeting the demands of professional

activity of personnel, within the framework of cooperation

with Kazan State Energy University (Kazan).

In accordance with the existing Presidential Program on

the Preparation of the Managerial Personnel for the Na-

tional Economy of the Russian Federation, the number

of the Company’s managers who completed this training

program in the local educational institutions is constantly

growing.

230 231



OCCUPATIONAL SKILLS CONTESTS

The Company regularly holds occupational skill contests

to evaluate the professional level of technical staff. Such

contests promote quality performance and occupational

safety in grid equipment maintenance, best practice

sharing and implementation of sophisticated methods

of checking, assessment and personnel training.

In 2011, 1,188 employees of the Company participated in

such contests. Altogether, the Company held 33 contests

including the following:

• skills contests among maintenance personnel of distri-

bution electric grids;

• skills contests among vehicle drivers;

• show contests on fire safety;

• show contests on occupational safety.

Social policy of the Company focuses on the topical is-

sues of social development of employees, improvement of

working conditions, social protection of employees, pro-

viding employees with recreation and medical services.

The Company considers the creation of favorable condi-

tions for effective work and professional growth of em-

ployees and provision of opportunities for fair wages and

development of corporate culture to be the primary objec-

tives of the Company’s social policy.

Along with fair wages, the Company motivates its employ-

ees by providing a broad range of social benefits, guar-

antees, and compensations under the Collective Agree-

ment in addition to those established by the legislation

of the Russian Federation. These benefits, guarantees, and

compensations include the following:

• voluntary health insurance and accident and illness

insurance;

• support of socially vulnerable families;

• financial assistance to employees going on vacation;

• financial assistance to employees on marriage and

baby birth occasions;

• financial assistance on organization of funeral of em-

ployees and non-working pensioners;

• financial assistance to employees on anniversary dates;

• benefits to employees retired on disability pensions;

• benefits to children of parents who lost their lives on

the job;

• providing conditions for recreation and health im-

provement of employees;

• summer camp vouchers and New Year presents to em-

ployees’ children;

• occupational pension plans.

According to the performance of JSC IDGC of Center and

Volga Region in 2011, the Company for the third time

took the prize-winning place in the nomination “The

Best Grid Entity of the Electric Power Industry of High

Social Efficiency” and took the 3rd stage in the nomina-

tion “The Best Innovative Project in the Field of Social

Partnership” of the sector competition “Arrangement of

High Social Efficiency in Electric Power Industry – 2011”.

These achievements show that the Company adheres to

high standards of social responsibility to its employees.

The Company performs in full the obligations fixed by the

legislation of the Russian Federation, Tariff Agreement

for the power industry of the Russian Federation in 2009-

2011, and the current Collective Agreement.

SOCIAL POLICY AND CHARITY11.2

INSURANCE COVERAGE PROGRAM

NON-STATE PENSION PROVISION

The Regulation on Insurance Coverage of JSC IDGC of Cen-

ter and Volga Region contemplates voluntary health insur-

ance (VHI) and accident and illness insurance.

The program on accident and illness insurance of employ-

ees involves payment of compensation in the case of in-

sured accident.

The voluntary health insurance program involves ambu-

latory, hospital and dentist treatment in the specialized

regional and Moscow healthcare centers. The voluntary

health insurance enables employees to select the medi-

cal institution with a view to his/her health problems and

location of the institution, to reduce the period of medical

examination and treatment which, in turn, has a positive

effect on the employees’ performance.

Along with the basic medical services, the voluntary health

insurance program contemplates an annual influenza and

tick-borne encephalitis vaccination, medical examinations

and rehabilitation treatment. In 2011, 300 Company’s em-

ployees received rehabilitation treatment in health resorts


The occupational pension plan is an important incen-

tive to all categories of employees. In 2011, the Com-

pany continued to implement its Program for Non-state

Pension Provision (NPP) aimed at ensuring the high

standard of living of employees of retirement age and

creating conditions for effective dealing with human

resouces issues related to attraction, retention and mo-

tivation of personnel. NPP of the Company’s employees

is implemented through the Non-Government Energy

Industry Pension Fund.

NPP STRUCTURE

Parity PlanThe employee and the Com-pany fund employee’s pension schedule jointly and severally on pro data basis and under specific rules

Corporate PlanThe Company funds additional employee’s pension provision from its own funds

Co-Financing ProgramThe employee, the Company and the state co-finance employee’s pension schedule under Federal Law №56-FZ dated April 30, 2008

232 233



The total number of the Company’s employees and pen-

sioners involved in the non-state pension provision

schemes under the Corporate Plan in late 2011 amounted

to 16,000 pers., and the number of the Parity Plan partici-

pants totaled 8,000 pers. The average rate of monthly oc-

cupational pension payable to retired employees in 2011

amounted to RUB 2,511, a 9% increase as compared to

2010 level (RUB 2,295).

HEALTH IMPROVEMENT AND RECREATION OF EMPLOYEES’ CHILDREN

CORPORATE CULTURE DEVELOPMENT

The Company always places emphasis on health improve-

ment and recreation of employees’ children. In 2011, it dis-

tributed 767 children’s summer camp vouchers, which is

138 vouchers more than in the previous year. Payment

was made from employer’s funds and partial compensa-

tion of costs by local government bodies.

The Company places great emphasis on the development

of its corporate culture and maintenance of traditions. Val-

ues and norms of the existing corporate culture are fixed

in the Corporate Code of Ethics of JSC IDGC of Center and

Volga Region which helps to create the spirit of coopera-

tion in the Company and to maintain efficient interaction

among the Company’s units, and guarantees our partners

ethical business practice.

The Company pays special attention to the measures

aimed at commemorating the historic events and preserv-

ing traditions of the Russian power industry, thus ensuring

the continuous development of the Russian distribution

grid complex. The branches of the Company have their

own museums which inform the visitors on the history of

power industry in the regional footprints.

To facilitate the informal communication among the em-

ployees, the Company pays special attention to corporate

events, such as the Power Engineers’ Day, Defender of the

Fatherland Day, International Women’s Day. The employ-

ees of the Company willingly prepare for such events.

The Company celebrates the Power Engineers’ Day by

holding the regular contest of children’s drawings. The

winning pictures were sent to the children’s drawing con-

test held by JSC IDGC Holding and the best drawings were

used to illustrate advertising booklets and calendars.

More than 100 employees of the Company participated in

the Poetry contest devoted to the Power Engineers’ Day.

Eight best poetical works were sent to the second stage of

the contest held by JSC IDGC Holding.

2010

The average rate of monthly occupational pension payable to retired employees

2011

2,295 +9%RUB

2,511RUB

767 CHILDRENof employees were provided with tourist vouchers to children’s holiday camps

VETERANS OUTREACH

YOUTH OUTREACH

In 2011, the Council of Veterans of JSC IDGC of Center and

Volga Region which involves 3,701 employed and 3,460

retired veterans (pensioners) of power industry contin-

ued its work. There are 710 Great Patriotic War veterans,

homefront workers, concentration camps prisoners and

citizens of Leningrad in Blockade. Each veteran has more

than 20-years track record in the energy sector.

The main 2011 events organized and held by the Council

of Veterans included the following:

• taking part in preparing for celebrations of the 66th

anniversary of the victory in Great Patriotic War;

• taking part in the historical and memorial event “Re-

lay Banner of Victory — 2011” held together with the

Board of Young Specialists and in the international re-

lay of the memory and gratitude “Homeland of feat —

To Homeland of Hero”;

• organization of the memorial grief rally with the par-

ticipation of the members of the team of All-Russia

Automobile “Energy Rally” devoted to the 125th an-

niversary of electrification of Russia;

• taking part in preparing and participation in a meeting

with representatives of the Council of war and labor

veterans - power engineering specialists of the Minis-

try of energy of Russia, who had the cruise on the me-

morial places of labor and military glory of the Volga-

Kama cascade;

The members of the Council of Veterans took part in sum-

marizing the results of the first all-Russia youth compe-

tition of high technology innovative ideas and projects

“Power Industry of the Future”.

One of the main objectives of the Company’s human re-

sources policy is involvement and retaining of highly

qualified specialists that possess creative and academic

potential, extensive professional knowledge and clear

views of the latest achievements of Russian and foreign

power industry.

For this purpose, the Company performs regular work in

schools which is aimed at developing and improving the

long-term forms of vocational guidance of students and

selection of the most experienced students to send them

to target training in institutions of higher and secondary

education, providing them with the opportunity of further

job placement in the Company.

In 2011, more than 16,000 students attended career

guidance courses. The Company always participates in

the state certification commissions of universities, in job

placement of the graduates in energy specialties, in se-

lection of the most power industry oriented students to

provide them with internship in the units of the Company.

In 2011, graduates from institutions of higher education

amounted to 7% of the total number of employed person-

nel, more than 500 students did internship and obtained

their degrees in the field of Company’s operations.

To improve efficiency of professional and social adapta-

tion of young employees in the life of the Company un-

der the Program for Support and Development of Human

Resources Potential, the Company developed the Program

for Production Adaptation of Young Specialists. The Com-

pany gives great attention to the development of mentor-

ing programs.

To build efficient relations with its young employees,

the Company established the Board of Young Specialists

which includes young and ambitious employees striving

for career growth and professional development in the

Company, and seeking to take an active part in the deci-

sion-making process on the most important issues.

234 235



The Board of Young Specialists faces the following chal-

lenges: fostering the process of professional and social

adaptation of young employees, providing assistance in

professional development, boosting creative and techni-

cal initiatives of young personnel and encouraging their

participation in business and cultural life of the Company

and its units.

In 2011, the representatives of the Board of Young Special-

ists in the delegation of JSC IDGC Holding participated in

All-Russia Youth Innovation-Related Forum “Seliger 2011”;

they took an active part in discussions on creation of youth

innovation centers and implementation of energy saving

projects, and developed their own projects.

In spring 2011, young energy specialists together with the

Council of Veterans participated in the “Power Grid Com-

plex for the Environmental Protection” Campaign and con-

tributed to restoration of the natural balance disrupted by

hurricanes, fires, and sleets in 2010-2011.

In September of the reporting year, the Board of Young

Specialists organized the First Festival of KVN among the

teams of the Company’s branches and its executive body.

The winners – the team of Kirovenergo branch – repre-

sented JSC IDGC of Center and Volga Region at the first

festival of The Club of Cheerful and Sharp-Witted Energy

Specialists of the distribution grid complex. The festival

was held by JSC IDGC Holding in Kislovodsk.

SPORTS, HEALTH AND FITNESS

CHARITY

JSC IDGC of Center and Volga Region makes health and

fitness promotion efforts and develops mass participa-

tion sports by purchasing vouchers for swimming pool

and sport centers attendance for the purposes of en-

couraging healthy lifestyle of employees. The teams of

branches adequately represent the Company in regional

inter-branch competitions.

In 2011, the Company sponsored the Third All-Russia

Summer and Winter Games of Power Engineers of the

distribution grid complex. The qualifying competitions

of the Company involved 2,100 employees. Based on the

results of the final competitions, the Company formed

the combined teams to participate in the games spon-

sored by JSC IDGC Holding.

2011 Track Record of the Employees of JSC IDGC of Center and Volga Region

Being a socially oriented company, JSC IDGC of Center

and Volga Region is aware of its responsibility to the so-

ciety.

In 2011, employees of the Company organized a fund-

raising campaign and provided targeted assistance to

individuals and organizations on their demand in the

amount of RUB 350 thousand.

In autumn of the reporting year, under the “Illustrated

books for little blind children” program, the Company’s em-

ployees sent 119 sets of picture books, created with a view

to the specific perceptive function of visually impaired chil-

dren, to specialized kindergartens and libraries in nine re-

gional footprints. The funds in the amount of RUB 573.3

thousand necessary for book purchasing were raised by the

Company’s employees at the end of 2010.

Under the Best New Year Tree campaign timed to the Power

Engineers’ Day, the Company’s employees organized New

Year celebrations and gave presents to 56 children in or-

phanages in the regional footprints. The children received

New Year presents, toys, books, sports goods and house-

hold appliances totalling RUB 1,558 thousand.

Sports Place

Summer Games:

team place V

track and field IV

volleyball III

kettlebell lifting V

Sports Place

Winter Games:

team place III

crosscountry skiing II

table tennis III

swimming VI

chess V

LABOR PROTECTION, INJURIES AND DISEASES

One of the important Company’s performance indicators

includes industrial and occupational safety indicators.

In 2011, the following objectives were defined as priorities

for ensuring occupational safety: unconditional compli-

ance with the law requirements; enhancing occupational

safety and social protection of employees; protection of

their life and health at workplace; reducing risks of indus-

trial injuries and diseases.

The work on labor protection performed in the reporting

year resulted in absence of occupational diseases; cut-

ting costs incurred in compensations payable for work-

ing in harmful and dangerous conditions; improved per-

formance, increasing level of social and legal protection

of employees.

Positive results in 2011 were achieved through imple-

menting the Action Plan to Ensure Health and Labor Pro-

tection of Employees in 2011-2013.

LABOR PROTECTION11.3

RUB 272.5 million

2011 INVESTMENT IN HEALTH AND LABOR PROTECTION OF EMPLOYEES OF THE COMPANY

236 237



This Action Plan was developed following the results of

analysis of injuries, external and internal audit inspec-

tions, comments and proposals from occupational safety

managers. It is aimed at:

• providing personnel and workplaces with up-to-date

protection facilities and devices;

• accident prevention;

• sanitary and engineering measures to prevent illnesses;

• measures to improve working environment.

Along with enhancing control over compliance with the

occupational safety rules, improving quality of teamwork

spot checks and enhancing disciplinary actions against

violators, the Company contemplates material incentives

to employees for working without violations of the occu-

pational safety rules. The Regulation on Bonus Payment

for Safe and Accident Free Work were developed for the

above mentioned purposes.

The Company also developed and approved local regula-

tory documents containing the requirements to human

resources management and the requirements to selection

and exploitation procedure of individual protective gear

by employees.

In 2011, JSC IDGC of Center and Volga Region channelled

RUB 272.5 million for health and labor protection mea-

sures, including the means of integration into the grid com-

plex of a fundamentally new materials and ideas, meant

to ensure the security of energy specialists in their daily

production activities. In particular, the Company started

the trial operation of shielding sets of safety clothes which

protect personnel working with HVLs under induced volt-

age. Two branches – Kalugaenergo and Udmurtenergo –

implement the trial operation of stationary voltage indi-

cators in switchgear cells. When an employee approaches

the cell under voltage, these indicators produce an audible

warning signal.

2009–2011 LABOR PROTECTION COSTS TRENDS, RUB mln

179.0

226.5

209.022.0

30.537.8

37.7

16.616.5

12.3

13.29.2

201120102009

Working environment improvement

Accident prevention measures

Sanitary and hygienic measures

Providing employees with IPG

251.0

287.0272.5

ASSESSMENT OF WORKPLACES. BRINGING WORKPLACES IN LINE WITH THE APPLICABLE STANDARDS

The personnel is outfitted with tools, safety equipment,

safety clothes and devices to ensure safe work for the pur-

poses of protecting employees from hazardous factors and

ensuring good performance. Today, the Company provides

its employees with all necessary safety equipment in ac-

cordance with the established standards.

In 2011, the Company’s primary objective related to pro-

viding its personnel with individual protective gear was

purchasing special clothes resistant to electric arc. The

Company channelled RUB 184 million for these purposes

or 67.5% of the total labor protection costs and 88% of the

total employees’ individual protection gear costs.

Unit costs of labor protection per employee in 2011

amounted to RUB 12.51 thousand, a 5.7% decrease as com-

pared to 2010 level. Unit costs of employees’ individual

protective gear in 2011 amounted to RUB 9.6 thousand,

The Company carries out regular assessment of work-

places to define working conditions. JSC IDGC of Center

and Volga Region has totally 16,396 workplaces subject

to assessment. It has carried out assessment of 14,768

workplaces and drafted further assessment schedules

for 2012. The assessment detected 6,836 workplaces

of 3.1-3.3 working conditions category and no work-

places of 4th category, and the Company planned to im-

prove working conditions. In 2011, it performed 100%

of projected measures of the total number of 522.

WORKING CONDITIONS CATEGORIES AS A RESULT OF WORKPLACES ASSESSMENT

12%Hazardous (3.2)

2%Hazardous (3.3)

32%Hazardous (3.1)

54%Optimal and acceptable (1 and 2)

OUTFITTING PERSONNEL WITH SAFETY EQUIPMENT, TOOLS AND FITTINGS

238 239



a 8.3% decrease as compared to 2010 level. The decrease

in unit costs of labor protection in the reporting year is

achieved under the Cost Management Program (CMP) by

optimization of purchase costs.

Thus, safety clothes and individual protection gear costs

were reduced when fulfilling the quota of safety clothes

distribution.

2009-2011 UNIT COSTS OF LABOR PROTECTION

PER EMPLOYEE, RUB thousand

8.89

10.479.60

3.58 2.80 2.91

201120102009

Other labor protection measures

Providing employees with individual protective gear

12.47 13.27 12.51

When selecting protective equipment, the Company takes

into consideration both protective properties (for example,

electric current protection) and usability. Thus, temporary

ground connections which are installed without lifting to

pylons (from the ground) not only exclude contact with

live conductive parts under voltage but also accumulate

and simplify workplace preparation. The priority is given

to the recent developments of safety equipment previ-

ously not applicable or applicable in limited scope.

EMPLOYEES’ PSYCHOPHYSIOLOGICAL CHECKUPS

Using the methods of psychophysiological checkups (PPC)

provides a comprehensive evaluation of psychophysiologi-

cal fitness of a candidate or employee to perform his/her

professional duties and assessment of his/her functional

status and efficiency. In 2011, 3,236 employees were sub-

ject to PPC and all of them have passed checkups. In 2010

and 2009, the checkup was passed by 2,774 and 2,156 em-

ployees respectively. The number of employees included

in the “risk group” was 409 pers. in the reporting year,

405 pers. in 2010, 346 pers. in 2009. The share of employ-

ees included in the “risk group” decreased from 14.6% to

12.6%. This decrease was due to rehabilitation treatment.

After PPC, each employee is given recommendations on

improving his/her level of psychological adaptation. If

necessary, employees are provided with psychological

consulting and treatment and recommendations for addi-

tional examination by medical specialists under voluntary

health insurance.

PERSONNEL TRAINING

As far as the human factor occupies a major place in af-

fecting a long-term success of the Company, it uses vari-

ous forms of personnel training and development, includ-

ing traditional methods (education, instruction, etc.) and

energy sector-specific ones, in particular, special simula-

tion training and skill drills at training ranges. The units of

the Company are equipped with training ranges and new

computer training aids and simulators. The Company’s

units operate 226 rooms for occupational safety training.

All simulators allow to simulate accidents, generate sce-

narios for their liquidation and fully meet the existing

requirements. The Company employs the following simu-

lators and training systems: TWR-12, TRES, TERS, MODIS,

Fenix, ASOP-Expert, Centurion, Centest and Dopusk. The

reduced average period of liquidation of electric energy

system disturbances proves the efficiency of using soft-

ware systems to train operating and maintenance per-

sonnel.

Special CPR training devices (mainly GOSHA) are used to

train the skills of applying first paramedical aid in acci-

dents.

LABOR PROTECTION FUNDED BY SOCIAL INSURANCE FUND

Labor Protection preventive measures funded by contri-

butions to Social Insurance Fund (SIF) included purchas-

ing safety clothes and shoes (for the amount of RUB 5,613

thousand) and health resort treatment vouchers for em-

ployees working with hazardous and dangerous industrial

factors (for the amount of RUB 512 thousand).

CORPORATE TECHNICAL CONTROL SYSTEM

Corporate technical control system (TCS) operates in the

Company on the basis of the Regulation on the Corporate

Technical Control System in Electric Grid Company within

the operations area of JSC IDGC Holding. Production control

has a multilevel structure and is exercised by the following

operating and maintenance personnel (continuous control):

individuals appointed by branch unts (production depart-

ments) to be responsible for the condition and safe opera-

tion of power plants, buildings and structures; business

units heads and their deputies, specialists, production de-

partment managers (periodic control). The frequency of in-

spections is defined by the approved schedules for branches

and production departments of the Company.

The industrial control and occupational safety service and

management of production departments and business units

control management and efficiency of the production con-

trol in each production department. The industrial control

performance criteria include the following:

• minimizing defects and deficiencies detected by the

government and superior industry bodies and cutting

costs of their elimination;

• reducing technical violations, including personnel er-

rors, and their economic damage;

• reduced number of injuries.

HEALTH PROTECTION AND ENHANCED OCCUPATIONAL SAFETY

All the Company’s efforts in the field of labor protection

are primarily aimed at protecting life and health of our em-

ployees.

The Company meets the challenges of improving work-

ing environment, cutting workplaces with unfavourable

working conditions and promoting healthy lifestyle. The

Action Plan to Ensure Health and Labor Protection of Em-

ployees in 2011-2013 contemplates the close cooperation

between JSC IDGC of Center and Volga Region and the

regional authorities on labor protection issues. This will

allow the Company to implement priority projects of the

government policy on labor protection and social partner-

ship.

240 241



To improve stable operation of the distribution power grid

complex and minimize risks of emergency situations (ES)

of natural and anthropogenic character, the Company de-

veloped and implemented in 2011 a package of main and

additional organizational and technical measures, which

contemplates the following:

1. Additional extension and cleaning of openings on OL

6-110kV; the total area of cleaned and extended open-

ings on OL accounted for 13,728 ha.

2. Implementation of reclosers to create loop systems

and scheme and operating conditions for reliable

consumer power supply; the Company purchased 74

reclosers in 2011.

3. Additional purchase of reserve sources of power sup-

ply (RSPS); in 2011, the Company purchased 294 units

including 79 units of 30 kW and more. Altogether, the

Company has 627 RSPS and 5 mobile modular substa-

tions (MMSS).

4. Replenishment of communication facilities: in 2011,

the Company purchased 151 radio stations (15 por-

table and 136 auto); 143 navigators (141 portable and

2 auto); 5 satellite phones, 145 mobile phones; 415 SIM

cards of different mobile communication operators; 7

radio masts to extend radius of action of radio station.

5. Replenishment of special all terrain vehicles (ATV); in

2011, the Company purchased 366 units of vehicles

and 8 wagon hostels.

6. Creation of mobile teams; in 2011, the Company formed

76 teams (419 pers.), equipped with 165 units of special

vehicles, packed meal, and small tools and equipment.

7. Contract work. To promote cooperation on prevention

and liquidation of accidents and ES, to minimize the

emergency recovery works (ERW) period, the Company

developed and concluded (prolonged) 328 agreements

(259 with the local authorities in the regions (cities)

and the Ministry of Emergency Situations depart-

ments, 62 with contracting organizations, airlines and

other power industry subjects, 7 agreement with sub-

sidiary and dependent companies of JSC IDGC Holding:

JSC IDGC of the Ural, JSC IDGC of Volga, JSC IDGC of the

North-West, JSC IDGC of Center, JSC IDGC of the South,

as well as JSC Tyumenenergo and JSC MOESK).

8. The Company approved the list of OL 110kV that are

situated in woodland and provide system reliability,

power supply for the most important social and infra-

structure facilities (airports, railways, heat and water

supply facilities, health services, etc.).

9. Creation of a system of temperature control. In 2011,

five branches of the Company inspected 10 OL 110kV,

conducted aerial survey (laser scanning and photog-

raphy), heat monitoring and magnetoscopia of OL ca-

bles, installed temperature sensors and base stations,

installed a server (concentrator) for data collection

and processing. Implementation of this system allows

both to maintain the network mode and to evaluate

operational status, which reduces the risk of accident,

minimizes period of liquidation of the accident, and

optimizes operating costs through timely identification

and elimination of defects of equipment.

10. Creation of the Allocated Resources Management Sys-

tem to perform the emergency recovery works (ARMS

ERW). At the first stage of implementation of the sys-

tem, it is necessary to create a geoinformation system

reflecting the geographical location and key specifica-

tions of OL and SS 35 kV and more. In 2011, the Com-

pany took coordinates of all OL and SS 35 kV and more

PREVENTION AND LIQUIDATION OF EMERGENCY SITUATIONS AT DISTRIBUTION POWER GRID COMPLEX FACILITIES

11.4

2011 MEASURES ON PREVENTION AND LIQUIDATION OF EMERGENCY SITUATIONS

and issued registration certificates of OL and SS 35 kV

and more, of mobile teams (MT) and MT of contracting

organizations, certificates of emergency stock ware-

houses and their nomenclature numbers.

ARMS ERW provides the following:

• Efficiency of managerial decisions on the emergency

recovery works in the power grid complex, control over

their implementation and informing the Management

of JSC IDGC Holding and its subsidiary and depen-

dent companies, the federal executive authorities and

agencies on the procedure of ERW using the Allocated

Resources Management System;

• Automated process of collection, processing, transfer

and storage of operative reported information on the

consequences of accidents and emergency situations

and ERW procedure;

• Visualization of the reported information with the

gridding of ERW location, scaling feature, possibility of

receiving information on power grid equipment, avail-

ability and allocation of resources used in ERW;

• Contol over the vehicle movement of mobile teams in-

volved in ERW.

11. Amending the Resolution on the Emergency Response

Team (ERT) to specify the duties, operating regime and

other changes necessary for ensuring coordinated ac-

tions on ERW. The Company formed 10 ERT that are

provided with special all terrain command and staff

vehicles (CSV) meant for autonomous operations at

ERW location. CSV have all necessary equipment, com-

munication facilities and information material suffi-

cient for efficient work of ERT.

12. Informing population. Hotline numbers of JSC IDGC of

Center and Volga Region and its branches on the is-

sues of consumer power supply are given on the web-

sites of the Company and its branches, as well as in the

mass media. For the purpose of informing population

on electric energy system disturbances and the ERW

procedure, the Company sent contacts of the relevant

managers and operative personnel to executive au-

thorities and local government bodies.

13. Creation of a system of operational financing in cases

of emergency. Heads of the units and chief engineers

of the branches are provided with corporate bank cards

with the limit of RUB 50-100 thousand to meet the ex-

penditures on essential needs.

14. Creation of the reserve bankroll system in the amount

of RUB 56 million (3% of the Repair fund of the Com-

pany), meant for liquidation of ES consequences. The

procedure of creation, storage, use, and replenish-

ment of emergency stock is carried out in accordance

with the approved Resolution on Emergency Stocks of

Material and Technical Resources and Equipment for

Power Grids. At the present time the Company has a

100% emergency stock.

15. Personnel training in the field of civil defense (CD)

and protection from emergency situations; in 2011,

the Company organized the training under the exist-

ing regulatory documents. The following institutions

perform training of personnel of relevant categories:

Advanced Training Institute for Executive Officers and

Specialists of Fuel and Energy Industry, educational

training centers specializing in CD and ES of the re-

gions, inter-regional training courses of CD, on-the-job

training in training groups. The following methods

and techniques are used in the training process: edu-

cational classes, theoretical and practical training, or-

ganization of drills and training programs (command

and staff, staff, tactical and special, integrated). The

following documents are developed and maintained:

• Plans of the main measures in the field of CD and pro-

tection from emergency situations of natural and an-

thropogenic character, ensuring fire safety for a year;

• Records on training of executive officers and personnel

of Volunteer Emergency Response Team of Civil De-

fense in the field of CD and protection from ES;

• Applications for admission to training in the field of CD

and protection from ES for a year.

242 243



The training base in the branches and production depart-

ments of the Company allows to perform highly qualified

personnel training in the field of CD and protection from

ES. The branches have 16 special classes devoted to CD

and ES; stands devoted to CD and protection from ES, the

material is regularly renewed; educational materials; tu-

torials on IPG and radiation and chemical survey devices;

electronic materials. Control over preparation and per-

forming training classes was exercised by scheduled in-

spection of the branches. In 2011, the Company performed

169 joint training classes aimed at practicing coordinated

actions during the ES liquidation. Training classes ensured

practicing the following measures: quick transition into

the operational readiness, personnel actions in case of

emergency evacuation from administrative and produc-

tion buildings, fire extinguishing in buildings and at power

industry facilities. According to the total final assessment,

the organization of personnel training meets the neces-

sary requirements.

Joint Research Center operates in the Company. It exer-

cises control and forecasting of possible major electric en-

ergy system disturbances and ES (of natural, anthropogen-

ic and other character) in power industry in nine subjects

of the Russian Federation. The Center provides collection,

processing, exchange and transfer of operative production

information, promotes cooperation between the relevant

power industry subjects, organizations, etc.

Emergency situations of natural character. In 2012, the

forecasted number of ES of natural character is equal to

2009-2010 level. High water conditioned by high level

The List of Measures Taken in 2011 to Maintain the Distribution Power Grid Complex Facilities Required for Stable Func-tioning of the Economy and the Population’s Survival during Wartime

Measures Implementation costs, RUB thousand

Maintenance of OL 0.4-10 kV 981,051.48

Maintenance of OL 35-110 kV 448,228.48

Maintenance of SS 35-110 kV 466,513.20

Cleaning and extension of routes OL 0.4-10 kV 415,652.76

Maintenance of TSS (closed TSS, packaged TSS, distributing SS) 316,298.05

Maintenance of cable lines 0.4-220 kV 67,485.06

Maintenance of relay protection and automatics equipment 52,640.74

Maintenance of the system of dispatch and process control 57,341.75

Maintenance of production buildings 135,372.68

Maintenance of administrative buildings 153,915.06

Measures to improve anti-terrorism security of power grid facilities 141,592.00

2012 FORECASTING OF EMERGENCY SITUATIONS AT THE DISTRIBUTION POWER GRID COMPLEX FACILITIES

of water lifting will arise in conditions of exceeding air

temperature together with the liquid precipitation of more

than 15-20 mm for more than 2-3 days.

In the Volga Federal District (the Udmurtia Republic, the

Mariy El Republic, the Nizhny Novgorod Region and the

Kirov Region), low water levels during the freezing period

and forecasted abnormally low temperatures in January

2012 condition river ice thickness exceeding the aver-

age annual norm by the ice drift period and strong frost

penetration of certain river stretches, which poses threat

of ice blockage. In the case of low level of snow cover

that reduce stream capacity, long-term ice blockages and

high levels of water are likely to occur. The fire hazard

for 2012 will be forecasted after snow cover is accumu-

lated and temperature conditions in the growing season

are specified. In 2012, in the Central Federal District (the

Ivanovo Region, the Vladimir Region, the Ryazan Region,

the Kaluga Region) and in the Volga Federal District

(the Mariy El Republic, the Nizhny Novgorod Region and

the Kirov Region), the process of forest breakdown will

be continuous in plantations disrupted by windbreaks

and forest fires, which increases the risk of trees fall-

ing (including on power transmission lines), extension of

deadwood areas and, therefore, occurrence of fire haz-

ard. The subjects where the risks of forest fires spreading

over to settlements is extremely high are situated in the

Volga Federal District (the Nizhny Novgorod Region) and

in the Central Federal District (the Vladimir Region and

the Ryazan Region). The main reasons for accidents at

power grid facilities under unfavorable weather condi-

tions include falling of trees and their branches on power

transmission lines cables, wind load on power transmis-

sion lines, which increases the risk of mass disturbances

of the power system and occurrence of ES. Dangerous

weather event (such as squally wind, heavy precipitation,

hail, sleet sticking) are forecasted in all regional foot-

prints of the Company.

Emergency situations of anthropogenic character. In 2012,

there is a 12-15% decrease in the forecasted number of

anthropogenic fires in the Russian Federation as compared

to 2011 level. The forecasted risk of accidents at power

grid complex facilities is 1-3% lower than in 2011. There is

a continuously high risk of ES at regional and higher levels

caused by fires and explosions at arsenals of the Ministry

of Defense. The ES risk conditioned by accidents in public

life support systems are forecasted up to intermunicipal

levels in all regional footprints of the Company. In 2011,

electric energy system disturbances at the Company’s fa-

cilities were liquidated as soon as possible and did not

lead to ES.

The measures taken by JSC IDGC of Center and Volga Re-

gion in 2011 on maintenance of power grids (including in

buildings and constructions), measures on improving re-

liability, target programs for modernization and replace-

ment of equipment, implementation of new equipment

and technologies within the framework of investment ac-

tivity will allow to provide reliable and quality consumer

power supply in 2012 and to minimize the liquidation pe-

riod of major electric energy system disturbances.

JSC IDGC of Center and Volga Region considers environ-

mental protection activities to be an integral part of its

obligations, being aware of the necessary maintenance

of ecological balance and ensuring ecologically stable so-

cial and economic development of the Company.

ENVIRONMENTAL PROTECTION11.5

ISO 14001

Compliance of the system of environment management of JSC IDGC of Center and Volga Region with international standards

244 245



In 2011, the amount of production and consumption waste

generated by JSC IDGC of Center and Volga Region in-

creased due to outdated equipment disposal and repairs

of buildings and structures.

2009-2011 ENVIRONMENTAL PROTECTION COSTS, RUB thousand

2009-2011 PRODUCTION AND CONSUMPTION

WASTE GENERATION, tons

The Company has implemented and successfully operates

the environmental management system subject to ISO

14001 requirements. One of the primary objectives of the

quality, professional health, occupational safety and en-

vironmental protection policies of JSC IDGC of Center and

Volga Region is the rational use and preservation of natu-

ral resources, decreasing negative environmental effects,

and reducing the significance of environmental aspects.

4,968.8

134.0 144.6 134.0

5,351.3 5,717.0

2,691.8

4,174.44,380.3

4,755.1

1,710.9 826.8

4,323.5

1,764.7

2,180.9

2,445.2

7,859.0 8,211.7

2011

2011

2010

2010

2009

2009

Environmental protection from production and consumption waste

Atmospheric air protection

Protection and rational use of water resources

V class

IV class

I–III class

11,984.1

6,073.1

6,705.87,334.3

14,921.2 14,755.5

Waste temporary stored in the departments’ indus-

trial sites have the minimum environmental effect since

the Company makes the following efforts:

• all generated waste is ranged by hazard classes which

define treatment methods;

• the Company appointed officers responsible for pro-

duction and consumption waste recycling;

• Company’s departments have equipped sites for tem-

porary waste collection (sites and containers) subject

to sanitary, hygienic and environmental requirements;

• carrying out regular production environmental control

to prevent negative effects.

IV class waste (65%) and V class waste (33%) account for

the major part of production and consumption waste gen-

erated by JSC IDGC of Center and Volga Region in 2011.

I – III class waste account for 2% only.

2011 WASTES STRUCTURE, BY HAZARD CLASSES, tons

2009–2011 PAYMENTS FOR NEGATIVE

ENVIRONMENTAL EFFECTS, RUB thousand

562.2641.2

929.174.881.5

86.9

3,009.52,857.3

2,761.5

201120102009

Waste disposal payments

Payments for atmospheric air emissons

Payments for waste discharges into water bodies

3,646.53,580.0

3,777.5

33%2,445.2 V class

65%4,755.1IV class

2%134.0 I–III class

246 247



In 2011, the Company performed its environment protec-

tion policy under the Program for Environmental Safety

and Reasonable Use of Natural Resources for 2011-2013 ap-

proved by the Company.

In general, JSC IDGC of Center and Volga Region has ful-

filled the 2011 Program for Environmental Safety and Rea-

sonable Use of Natural Resources both in terms of the pro-

jected tasks and funding.

Atmospheric Air Protection.

The Company has regularly carried out analytical control

of compliance with the pollutant emissions standards and

instrumental control of the gas cleaning unit performance.

Water Resource Protection.

The Company carried out instrumental control of pollu-

tion content in rain and melt waters and waste waters

discharged into city sewage systems, monitored the

quality of extracted water in terms of its compliance

with the sanitary and hygiene standards, evaluated sub-

surface water reserves and purchased fluid level gages

for artesian wells.

Land Protection and Rational Land Use.

JSC IDGC of Center and Volga Region is licensed to col-

lect, use, detoxify, transport and dispose of hazardous

waste. In 2011, the Company gave great attention to de-

veloping the sites for temporary waste disposal and pur-

chasing containers; the Company concluded agreements

on waste disposal and recycling with the licensed orga-

nizations. Under the Stockholm Convention on Persistent

Organic Pollutants ratified by the Russian Federation, in

2011, the Company transferred 21,42 tons of capacitors

containing polychlorinated biphenyls to the specialized

agencies for disposal.

Technical Measures include the implementation of new advanced solutions and technologies:• Replacing outdated equipment (oil circuit break-

ers) with up-to-date vacuum breakers with high per-

formance capability, high reliability rates, which

are flameproof and environmentally-friendly.

• The use of self-supporting isolatedwires (SIW) reduces

hazardous effects on the fauna.

Using New Technologies for Environmental Protection in 2010-2011

MAIN AREAS OF OPERATIONS:

Unit 2010 2011 2011/2010 (absolute growth)

2011/2010 (relative growth), %

Vacuum breakers 35 kV number 89 148 59 66

Vacuum breakers 10 kV number 7,445 8,762 1,317 18

SIW on OL 0.4 kV km 2,295.6 3,789.5 1,493.9 65

SIW on OL 6-10 kV km 1,126.3 1,589.5 463.2 41

Fauna Protection

In 2011, the branches of JSC IDGC of Center and Volga Re-

gion continued work on fauna protection from the conse-

quences of production operations.

To strengthen control over the implementation of mea-

sures, all branches developed special Programs for Fauna

Protection in 2011-2013.

The Company constructs barriers around the poles of OL

35-110 kV to eliminate a possibility of bird nesting. SIW

and special bird protection devices are used on OL 6-10 kV.

In 2011, the Company purchased more than 4 thousand of

such devices used mainly on OL covering the territories of

reserves and wildlife preserves.

In the reporting year, under the agreement with the Eco-

logical centre “Dront”, the Company performed work on

planning the fauna protection measures during the opera-

tion of OL 6-10 kV of Nizhnovenergo branch.

The works resulted in the following:

• Length and spacing of OL 6-10 kV was defined within

the territories of ornithological importance for the re-

gion;

• The procedure was defined to implement the fauna

protection measures on OL taking into consideration

the differentiated assessment of risk level of certain

OL parts.

Qualifications of Personnel Responsible

for Environment Protection

Professional training, retraining and advanced training of

specialists in environment protection is performed regu-

larly by attending seminars, advanced training courses at

educational institutions and other organizations holding

the relevant license.

Environmental Audit Information

In 2011, the Company continued to carry out environmen-

tal audits of JSC IDGC of Center and Volga Region to detect

incompliance with the requirements of environment pro-

tection laws and ISO 14001 and define the basic measures

to mitigate the negative environmental effects.

Environmental audits carried out in the reporting year

have shown no material violations in environmental pro-

tection, however there are certain discrepancies. Relying

on the audit results, the Company delivered comments

and recommendations and projected measures to elimi-

nate the detected defects.

In 2011, the Company organized and carried out 15 envi-

ronmental audits.

The primary objectives of Environmental Protection Policy

for 2012 of JSC IDGC of Center and Volga Region include:

• Developing the system of environmental management;

• Implementation of the Program for Environmental

Safety and Reasonable Use of Natural Resources for

2011-2013 and the Program for Fauna Protection in

2011-2013;

• Measures on OL 6-10 kV (use of SIW and special bird

protection devices) to prevent animals and birds

deaths;

• Measures on implementation of up-to-date equipment,

which reduces the risk of negative environmental ef-

fects.

248 249



JSC IDGC of Center and Volga Region is a bona fide

and responsible taxpayer which complies with all provi-

sions of tax legislation of the Russian Federation.

In 2011, the Company was an award winner at the

IV Annual International Prize “The Best Taxpayer –

2011”. The Prize was established by Foundation for

Promotion of Entrepreneurship at the initiative of the

State Duma members and is approved by the State

Duma, the Federation Council of Russia, the Accounts

Chamber of the Russian Federation, Ministry of Eco-

nomic Development of the Russian Federation, the

Council of Ministers of the Union State of Russia and

Belarus, Moscow City Duma, Association of Regional

Banks of Russia, and Russian Taxpayers Union.

On the basis of 2011 financial results, the department

of Federal Tax Service of the Russian Federation in the

Nizhny Novgorod Region acknowledged JSC IDGC of Cen-

ter and Volga one of the best responsible taxpayers - legal

entities in the Nizhny Novgorod Region.

Subject to tax legislation of the Russian Federation, the

Company shall pay the following taxes: value added tax;

profit tax; property tax; land tax; other taxes; fees to non-

budget funds of the Russian Federation.

The total amount of taxes and fees paid by the Company

in the reporting year accounted for RUB 6,202 million,

a 14% increase as compared to 2010 level. The changes

in the tax burden are conditioned by an increase in vol-

ume of rendered services on power transmission.

TAXATION11.6

2009-2011 Tax Contributions of the Company, RUB million

Budget levels 2009 2010 2011 2011/2010 (absolute growth)

2011/2010 (relative growth), %

Federal budget 1,375.7 2,161.4 1,760.0 -401.4 -19

Consolidated budget of the Russian Federation

1,444.4 1,706.3 2,159.4 453.1 27

Non-budget funds of the Russian Federation

1,356.9 1,583.1 2,282.6 699.5 44

TOTAL 4,177.0 5,450.8 6,202.0 751.2 14

> RUB 6.2 billion

THE AMOUNT OF TAXES AND FEES PAID BY THE COMPANY IN 2011 IN ACCORDANCE WITH TAX LEGISLATION OF THE RUSSIAN FEDERATION

In 2011, JSC IDGC of Center and Volga Region developed

its first Social Report for 2009-2010 and issued it in the

section Disclosure of Information by the Issuers of Equity

Securities/Social Reports www.mrsk-cp.ru. The Social Re-

port was developed in accordance with АА 1000 AS stan-

dards and GRI guidelines – GRI Application Level B+. Bu-

reau Veritas Certification Russia prepared an independent

certification of social reporting.

Issue of the Social Report demonstrates the positive im-

age of JSC IDGC of Center and Volga Region as a reliable

partner. The Report shall give coverage of corporate so-

cial responsibility of the Company, demonstrate develop-

ment trends and show both the Company’s responsible

approach to its main activity concerning regular consumer

power supply and its great attention and responsibility to

employees and partners of the Company, to environment,

cultural traditions of its regional footprints. Social report-

ing is a part of an integrated development process of the

Company, the process of implementation of the planned

measures and evaluation of their results.

NON-FINANCIAL REPORTING 11.7

2009-2010 SOCIAL REPORT IN ACCORDANCE WITH АА 1000 AS STANDARDS AND GRI

GUIDELINES – GRI APPLICATION LEVEL B+

THE FIRST EXPERIENCE OF THE COMPANY IN PRESENTING REPORT ON SUSTAINABLE DEVELOPMENT

PUBLIC RELATIONS, GOVERNMENT AUTHORITIES, INTERNATIONAL COOPERATION, CONGRESS AND EXHIBITION ACTIVITIES

12

Snow and swamp-going vehicle GAS 34039-32, caterpillar type, is intended for transportation of brigades

of energy specialists in difficult access areas, it is widely used in the grid complex for elimination of conse-

quences of technological breaks as a result of spontaneous natural phenomena

252 253

12 PUBLIC RELATIONS, GOVERNMENT AUTHORITIES, INTERNATIONAL COOPERATION, CONGRESS AND EXHIBITION ACTIVITIES


Start of the action “Let’s Preserve

the Forest Energy” for the compen-

sational planting of the trees.

Start of international relay race

dedicated to memory and gratitude

“Homeland of a Deed to the Home-

land of the Hero” in the Tula Region.

“Relay Race of the Victory Flag”.

APRIL 23 MAY 4 MAY 5 – JUNE 22

Press conference dedicated to the

results of the Company’s prepara-

tion to the autumn and winter of

2011–2012.

Participation in the 14th Interna-

tional Industrial Exhibition “Electric

Grids of Russia 2011.”

Summing up the results of the 4th

annual competition “Energy of Cre-

ation” for the best media coverage

of the JSC IDGC of Center and Volga

Region activity in 2010–2011.

NOVEMBER 3 NOVEMBER 29 – DECEMBER 2 DECEMBER 10



Development of integrated communications, increase

of publicity capital (image cost) and implementa-

tion of events within uniform external and internal

corporate information policy of JSC IDGC Holding

and subsidiary and dependent companies are impor-

tant elements of the system of strategic management

of the Company.

Among priority directions of this activity there are

forming ideas, strategies and implementation of

plans on effective communications with representa-

tives of business and expert community, bodies of

state authority and administration, social (including

youth and veteran ones) and religious organizations

and mass media in order to harmonize relations with

external environment and raise the business reputa-

tion of the Company.

D E V E L O P M E N T O F I N T E-G R AT E D CO M M U N I C AT I O N S

I N C R E A S E O F P U B L I C I T Y C A P I TA L

I M P L E M E N TAT I O N O F U N I F O R M E X T E R N A L

A N D I N T E R N A L I N F O R M A-T I O N A L P O L I C Y

PRIORITIES OF THE COMMUNICATION POLICY, A PART OF THE SYSTEM OF STRATEGIC

MANAGEMENT OF THE COMPANY

254 255



During 2011 in order to decrease reputational risks of

the Company and to strengthen its positive image by the

Public Relations Department, the following events were

realized within the target communicational programs and

projects: preventing injuries to third parties in the trans-

mission facilities; preparation and passing autumn-winter

period; introducing the system of centralized servicing of

service consumers and promoting “hot lines” in the dia-

logue with the population; energy conservation and en-

ergy efficiency, including communication campaigns on

equipping apartment and private houses with electric en-

ergy metering devices; compensatory tree planting (within

the target communicational program JSC IDGC Holding

Electricity Distribution Complex – to environmental pro-

tection).

During the reporting year the Company continued to

form favorable communication environment, supporting

informational and organizational interaction with repre-

sentatives of the structures, representing the interests of

certain groups of population. Social responsibility of the

Company and its readiness to have a constructive dialogue

with business community are confirmed by the agreements

on cooperation, signed in 2011 between JSC IDGC of Cen-

ter and Volga Region subsidiaries and regional divisions of

All-Russia Public Organization of Small and Medium En-

terprises OPORA RUSSIA, All-Russia Public Organization

Delovaya Russia, Public Association All Russian Electricity

Trade Union and Federation of Independent Trade Unions

of Russia.

In cooperation with regional divisions of All Russian Or-

ganization for Voluntary Assistance to the Army, Air force

and Navy (AROVAAAN), implementation of communica-

tional events was continued in order to attract the most

motivated, professional and patriotic youth to electric

power industry of the country.

For ensuring continuity of working generations in the

electric grid complex, building traditions of mentoring

and strengthening the stability of the Company devel-

opment, great attention was paid to communication

with industry veterans and youth. JSC IDGC of Center

and Volga Region has conducted a series of events with

the active participation of Council of Young Specialists

and Council of Society Veterans: historical and memo-

rial event «Relay Race of the Victory Flag», Internation-

al relay of memory and gratitude “Homeland of a Deed

to the Homeland of the Hero”, planting trees within eco-

logical campaign “Electricity Distribution Complex –

to environmental protection”.

Employees of the Company have conducted compensatory

plantings of the record among IDGC/DGC number of seed-

lings of coniferous and deciduous trees - more than 400

thousand – at the territory of nine regions in the Center

and Volga Region.

JSC IDGC of Center and Volga Region Council of Young

Specialists also took part in the All-Russian Youth Edu-

cational Forum “Seliger 2011”, in the first All-Russian

Contest of Innovative Ideas and Projects “Energy of the

Future”, organized by the United Council for Youth of

Electricity Distribution Complex in cooperation with Co-

ordinating Council for Youth Issues in Scientific and Ed-

ucational Spheres under the RF President and Scientific

PUBLIC RELATIONS12.1

EMPLOYEES OF THE COMPANY HAVE CONDUCTED COMPENSATORY PLANTINGS OF THE RECORD AMONG IDGC/DGC NUMBER OF SEEDLINGS OF CONIFEROUS AND DECIDUOUS TREES — MORE THAN 400 THOUSAND

Department “Fuel and Energy Complex Security Chal-

lenges”, which was widely and systematically covered

by the Company in the media.

Also in accordance with the instructions of the President

of Russia Dmitry Medvedev, the work on creating Youth

Innovation Centers (YIC) has been started at the terri-

tory of the Company’s activities in the united YIC system

of IDGC holding in order to attract to research activities

creative young specialists of JSC IDGC of Center and Volga

Region, as well as talented studying youth and students,

young scientists and scientific staff of the areas of respon-

sibility to generate ideas and develop innovative solutions

for modernization of the electricity distribution complex

and electric power of Russia.

The staff of Public Relations Divisions of the Company

took an active part in temporary press centers, created

in order to provide full information on the events, relevant

to the industry – All-Russia competition of professional

skills of operational and maintenance personnel of elec-

tricity distribution networks of JSC IDGC Holding in Volog-

da and the 14th International Exhibition “Electric Grids

of Russia - 2011” in Moscow.

In 2011, the Company issued four numbers of the corporate

magazine “The Bright Life”. For team building of JSC IDGC

of Center and Volga Region, other channels of intra-corpo-

rate communication were used as well, including informa-

tion displays, Intranet, the official website www.mrsk-cp.ru,

intellectual game “KVN of Power Engineers”.

In order to position as a leading regional power grid com-

pany and to improve reliability of power supply to JSC

IDGC of Center and Volga Region consumers, construc-

tive cooperation is established with regional and munic-

ipal bodies of governmental authorities and administra-

tion. During 2011, government officials, representatives

of municipalities and local government, cultural and

educational institutions participated in All-Russia En-

vironmental Campaign, initiated and organized by JSC

IDGC Holding, “Electric Grid complex – for the environ-

ment” (“Let’s Preserve the Forest Energy”), in the grand

opening of new and reconstructed power grid facilities

(SS Sozvezdie and SS Tovarkovo in the Kaluga Region,

SS Soyuznaya in the Udmurt Republic, SS Ivanovs-

kaya-15 in the Ivanovo Region, SS Alimkin in the Tula

Region, etc.). In order to ensure reliable power supply

for the consumers, Company representatives also par-

ticipated in the meetings of regional headquarters for

security of energy supply and other events, organized

by the authorities.

COMMUNICATION WITH THE STATE AUTHORITIES

12.2

256 257



During 2011 in the federal and regional mass media

21,344 materials have been published with reference to

JSC IDGC of Center and Volga Region and its branches.

More than 70% of reports and publications were prepared

on the basis of the materials, distributed by the Company.

More than 85% of information was posted at the Internet

resources that met the needs of the modern audience. At

that broad geography of the print media and its business

and social orientation contributed to the fact that the in-

formation about different aspects of the Company activi-

ties was communicated to the target audience. All publica-

tions were mostly positive or neutral, contained accurate

and reliable information. Over 55% of the publications in

the print media were made on a free basis, which is a sign

of interest of the media in a long-term partnership with

JSC IDGC of Center and Volga Region.

The main theme of the posts: production activities of JSC

IDGC of Center and Volga Region; introduction of inno-

vative technologies, implementation of production pro-

grams, including introduction of large power facilities;

technical connection of consumers; preparing and passing

the autumn-winter period; increasing energy efficiency;

corporate events; work with youth and veterans; staff

training; human resources development; protection of la-

bor; environmental policy and other topics.

Number of negative articles was less than 0.03% of total

number of materials. Negative materials, related to mass

power outages caused by natural disasters were not iden-

tified.

JSC IDGC of Center and Volga Region is targeted at promo-

tion of international cooperation in order to ensure inte-

gration of best practices and methods, high technologies

in the sphere of transmission and distribution of electricity

into its operational activities.

COMMUNICATIONS WITH THE MEDIA

INTERNATIONAL COOPERATION

12.4

12.5

21,344 MATERIALS 0.03 PERCENTIn federal end regional mass media: Number of negative articles:

<

In order to develop the system of feedback on the website

of the Company and branches, Internet-reception is oper-

ating. During 2011 came more than 550 questions, profes-

sionally considered and given an adequate solution for the

benefit of the applicants.

WORK WITH CITIZENS AND PUBLIC ORGANIZATIONS REQUESTS

12.3

550 QUESTIONS>Internet reception offices have already received:

In order to strengthen the positive image and investment

attractiveness of the Company during 2011, JSC IDGC of

Center and Volga Region participated in five exhibitions,

investment and industry forums. The largest of these was

the 14th International Exhibition “Electric Grids of Rus-

sia – 2011”, in which took part the representatives group

of the Company, consisting of 96 people under the leader-

ship of General Director E. Ushakov in the joint delegation

of IDGC Holding. At the general display of IDGC Holding

the Company signed the Agreement with CJSC Obninsk

Power Technology Company, also during meeting and

negotiations it laid the fundamentals for communica-

tions with more than 10 domestic and foreign enterprises

of electrotechnical industry.

During the reporting year, on the basis of the Kalugae-

nergo branch a Russo-French seminar on the use

of promising approaches of Smart Grid and Smart Me-

tering format took place. The seminar was attended by

leading specialists of European electric grid company

ERDF. This communication allowed to carry out bench-

marking of Russian and European experience of power

supply systems, used when creating JSC IDGC Holding

Development strategy for the period until 2015 and for

the perspective until 2020.

International contacts of JSC IDGC of Center and Volga

Region also made it possible to implement a number

of important social projects. In 2011 the Company start-

ed the International relay of the memory and gratitude

“Homeland of a Deed to the Homeland of the Hero”

in the area of responsibility of the Tulenergo branch,

initiated by the Coordinating Council of the electricity

distribution complex. In Krapivna village of the Tula Re-

gion in May 2011 pilot twin agreements on cooperation

between municipalities Krapivenskoe of the Schekino

District of the Tula Region, Gostomel town of the Kyiv

Region (Ukraine) and Bachki village of the Brestovats

Commune (Republic of Serbia) were concluded.

Patriotic ties are formed based on the fate of the Hero

of the Soviet Union, pre-war electrician of Tulenergo,

D. Zaitsev, who became a worthy example for similar

communications not only IDGC/DGC, but also other Rus-

sian economic entities, both to perpetuate the memory

of the defendants of the Fatherland, the heroes of En-

ergy, and in order to create social and psychological ba-

sis between electric grid companies in CIS and non-CIS

countries in the process of improving cooperative ties.

CONGRESS AND EXHIBITION ACTIVITIES12.6

GLOSSARY AND REFERENCE INFORMATION

Diesel generator is an independent power source — it is intended for reserve supply

of electricity to consumers in case of emergencies

260 261



AIMS CME – Automated Information and Measuring Sys-

tem of Commercial Metering of Energy

ASDPC – Automated System of Dispatch and Process

Control

BGC – Backbone Grid Company

BPS – Bulk Power Systems

CB RF – Central Bank of Russian Federation

CEO – chief executive officer

CHPP – combined heat power plant

CIMS – Corporate Information Management System

CJSC – Closed Joint Stock Company

CL – Cable Line

CMP – Cost Management Program

CMSCN – Corporate Multi-Service Communications

Network

CSC – Client Service Center

DGC – Distribution Grid Company

DTSS – Distributing Transformer Substation

EBITDA – earnings before interest, taxes, depreciation

and amortization

EV – enterprise value

FTS – Federal Tariff Service

GCC – Grid Control Center

GSM – General Shareholders Meeting

GVS – Gas-insulated Vacuum Switch

H1, H2 – Half-year (first and second)

HPP – Heat Power Plant

HR – Human relations, interaction with personnel

HVL – High Voltage Line

IDGC – Interregional Distribution Grid Company

IFRS – International Financial Reporting Standards

IR – Investor Relations

IT – Information Technologies

JSC – Joint Stock Company

JSC FGC UES – Open Joint Stock Company Federal Grid

Company of the Unified Energy System

JSC IDGC Holding – Open Joint Stock Company Interre-

gional Distribution Grid Companies Holding

JSC IDGC of Center and Volga Region – Joint Stock Com-

pany Interregional Distribution Grid Company of Center

and Volga Region

JSC RAO UES of Russia – Russian Joint Stock Company

of Energy and Electrification UES of Russia

JSC SO UES – Open Joint Stock Company System Operator

of the Unified Energy System

KPI – Key Performance Indicators

Ltd. – Limited Inc.

MICEX – Moscow Interbanking Currency Exchange

MSCI Russia Small Cap Index – index of international

analytic agency MSCI Barra

RAB – Regulalatory Asset Base

ABBREVIATIONS

GLOSSARY

NPP – Non-state Pension Provision

NPP – nuclear power plant

OECD – Organization for Economic Cooperation and De-

velopment

OL – Overhead Line

POLR – Provider of Last Resort

R&D – research and development

RAS – Russian Accounting Standards

ROA – return on asset

ROE – return on equity

SAP – integrated automated management system by SAP

AG; before 2005 the full official name was Systems, Ap-

plications and Products in Data Processing

SF6 – sulphur hexafluoride

SS – substation

STR – standard tariff rates

TGC – Territorial Generating Company

TGO – Territorial Grid Organization

TREaR — Technical re-equipment and reconstruction

TSS – transformer substation

VAT – Value Added Tax

VV – Vacuum Switch

WGC – Generating Company of the Wholesale Energy

Market

bln – billion

Gcal gigacalorie – unit of heat measurement

kV kilovolt – voltage measuring unit

kWh kilowatt-hour – unit of measurement of real power

mln – million

RUB – Russian Ruble

USD – US Dollar

VA, kVA, MVA voltampere, kilovoltampere, megavoltam-pere – units of measurement of full electric capacity

Var, kVar, MVar, var, kilovar, megavar – units of measurement

of reactive capacity

W, kW, MW watt, kilowatt, megawatt – units of measurement

of active (real) power

UNITS OF MEASUREMENT

262 263



Capitalization – market value of a company. Calculated as

the share price multiplied by their number.

Company – JSC IDGC of Center and Volga Region.

Compensation of reactive power – stimulation of the

balance of reactive power in the grid node to adjust the

voltage. The same stimulation in distribution grids is

exercised to lower the losses of energy.

Consumer/Customer/Client – a recipient of the results of

the business process (products, services). A consumer may

be internal, the one within the organization, who uses the

results (output) of the preceding business process, and

external, the one outside the organization who uses or

consumes the results (output) of the organization.

Distribution Grid Company, DGC – a joint stock company

established in the result of separation of power joint stock

companies per the types of activity on the basis of power

grid facilities which are not included into the unified

national (all-Russian) energy grids.

Dividend – a share of the Company’s net profit allocated

among shareholders.

Electric Energy (Power) System – an electric part of the

energy system and the electric energy receivers united

by the common process of production, transmission,

distribution and consumption of power.

Interregional Distribution Grid Company, IDGC – a joint

stock company formed according to the territorial

principle.

MICEX Index – the composite stock price index weighted

against the market capitalization, which includes 30 most

liquid shares of the Russian issuers listed on MICEX. The

MICEX index is one of the major indicators of the Russian

stock market, calculated from September 22, 1997 (with

the base value of 100 points).

Net Assets – the value determined by way of deduction of

a company’s liabilities from its total assets.

Power Industry – a branch of the Russian economy which

includes economic relations arising during the production

(including the combined production of electric and heat

energy) and transmission of energy, operative dispatch

control, marketing and consumption of energy using

production facilities and other property articles (including

those that form a part of the Unified Energy System

of Russia), which are owned by the subjects of the power

industry or other persons as property or on other legal

grounds set by the federal laws. The power industry is the

basis for the functioning of the economy and sustainment.

Productive supply – the amount of power transmitted

to end consumers connected to the grids of a power grid

organization.

Power transmission line – an electric installation

consisting of wires, cables, insulating elements

and bearing structures, intended to transmit the energy

between two points of energy system with possible

intermediate take-off.

Quotation list – a number of securities listed for trading

and presented as a list structure under separate sections.

Regulatory Asset Base – a system of tariff formation

based on the long-term regulation of tariffs. The system is

intended to attract major investments to the industry. The

system is based on ensuring the return of the Company’s

funds invested in assets in a period which corresponds

to the service life of the assets in order to obtain rated

income. The rate of income determined by the state

should correspond to the level of risks in grid companies

and make the industry attractive for investors.

Residents of RF and Non-residents of RF – Tax-payer

residents are physical persons, who live in the Russian

Federation not less than 183 calendar days during 12

TERMS

months in succession. The period of a physical person

staying in RF does not break during short trips (less than 6

months) with the purpose of taking medical treatment or

studying (p.2 of Article 207 of the Tax Code).

Risk appetite – the amount of risk the Company is ready

to take on.

RTS Index – the free-float stock index of the Russian stock

market. It is calculated on the basis of 50 most liquid

securities of the largest dynamic Russian companies,

whose business is in key sectors of Russian economy

presented at MICEX (before December 19, 2011 – at RTS).

Calculated in USD.

RTS power index (RTSeu) – dollar-based index of power

industry shares. Industry indicators are weighted against

the market capitalization indices of the most liquid shares

of the Russian issuers listed on MICEX (before December

19, 2011 – at RTS).

Smart Grid – an elaborate metering and control system

based on modern information technologies.

Smart Metering – power metering using “smart”

technologies.

Stock Market – a share of financial market covering the

organized trading of securities through different stock

exchanges and OTC market.

Subsidiary and dependent companies – legal entities in

which the Company owns over 20% o voting shares, or due

to a major interest in their authorized capital, or under

a concluded agreement, or in which the Company may

determine the decisions made by these legal entities due

to some other reasons.

Technical Design Assignment – a technical document

which sets a full scope of requirements for the product, its

manufacture, control and acceptance.

Unified National (all-Russian) Energy Grid, UNEG –

a system of power grids and other power grid facilities

owned by the subjects of power industry as property or on

the basis of some other legal grounds set by the federal

laws, which provides for stable power supply to consumers,

the functioning of the wholesale energy market, and the

parallel operation of the Russian energy system and the

energy systems of foreign countries.

264 265



Full Name Joint Stock Company Interregional Distribution Grid Company of Center and Volga Region

Abbreviated Name JSC IDGC of Center and Volga Region

Primary State

Registration Number

1075260020043

TIN / TRRN 5260200603 / 997450001

Bank Detains The Branch of Gazprombank (JSC)

in Nizhny Novgorod

Settlement account: 40702810500010001930

RCBIC 042202764

Correspondent account: 30101810700000000764

Location and Postal Address 603950, 33, Rozhdestvenskaya Street, Nizhny Novgorod, Russia

E-mail Address [email protected]

Internet Site www.mrsk-cp.ru

General Director Ushakov Evgeny Viktorovich

Tel. (reception room): +7 (831) 431-83-59

Fax (reception room): +7 (831) 431-85-51

Investor Relations Investor Relations e-mail: [email protected]

Koltunov Vladimir Igorevich, the Head of the Corporate Governance Department

Tel.: +7 (831) 431-83-43

E-mail: [email protected]

Kiseleva Natalia Gennadievna, the Head of the Investor and Shareholder Relations Division

of the Corporate Governance Department

Tel.: +7 (831) 431-74-46


Corporate Secretary Guseva Yulia Stanislavovna, the Head of Corporate Relations Division of the Corporate

Governance Department

Tel.: +7 (831) 431-74-30


REFERENCE INFORMATION Press Center Novikova Galina Vladimirovna, the Head of the Public Relations Department

Tel.: +7 (4842) 71-63-49


Petrovskaya Lydmila Sergeevna, the Head of PR Division of the Public Relations Department

Tel.: +7 (831) 431-74-48


Customers’ hot line 8-800-100-33-00

Virtual Reception Room for

Customers

http://www.mrsk-cp.ru/?id=279

Vladimirenergo 600016,106, Bolshaya Nizhegorodskaya Street, Vladimir

Tel.: +7 (4922) 21-57-61 Fax: +7 (4922) 21-55-65

Ivenergo 153000, 8/2, Krutitskaya Street, Ivanovo

Tel.: +7 (4932) 38-63-71 Fax: +7 (4932) 33-99-17

Kalugaenergo 248009, 35, Grabtsevskoye Highway, Kaluga

Tel.: +7 (4842) 71-63-59 Fax: +7 (4842) 56-56-11

Kirovenergo 610000, 51, Drelevskogo Street, Kirov

Tel.: +7 (8332) 64-76-50 Fax: +7 (8332) 69-13-71

Marienergo 424006, 39a, Panfilova Street, Yoshkar-Ola, Mariy El Republic

Tel.: +7 (8362) 42-52-92 Fax: +7 (8362) 41-28-80

Nizhnovenergo 603950, 33, Rozhdestvenskaya Street, Nizhny Novgorod

Tel.: +7 (831) 431-93-59 Fax: +7 (831) 431-93-81

Ryazanenergo 390013,12, MOGES Street, Ryazan

Tel.: +7 (4912) 20-43-50 Fax: +7 (4912) 20-44-30

Tulenergo 300012, 99, Timiryazeva Street, Tula

Tel.: +7 (4872) 32-77-69 Fax: +7 (4872) 32-71-14

Udmurtenergo 426004, 30, Sovetskaya Street, Izhevsk, Republic of Udmurtia

Tel.: +7 (3412) 66-15-66 Fax: +7 (3412) 66-15-22

INFORMATION ON BRANCHES

266 267



Full Name Closed Joint Stock Company Joint Stock Auditing Firm Auditinform

Abbreviated Name CJSC JSAF Auditinform

PSRN 1027739185044

Location 129164,4, Yaroslavskaya Street, Moscow, Russia

Postal Address 107078, P/O 150, Moscow

Tel./Fax +7 (495) 933-81-65

Internet Site www.auditinform.ru

Permission to exercise the activities

License № E003505, issued by the Ministry of Finance of the Russian Federation on March 4, 2003 to perform auditing activities. License expiry date: March 4, 2013.

Full Name Limited Liability Company FinExpertiza

Abbreviated Name LLC FinExpertiza

PSRN 1027739127734

Location 69 Prospect Mira, Moscow, 129110, Russia

Postal Address 69 Prospect Mira, Moscow, 129110, Russia

Tel./Fax +7 (495) 775-22-00

Internet Site www.finexpertiza.ru


Non-profit partnership Russian Auditing Chamber, №10201028038

INFORMATION ON THE AUDITOR

Since June 14, 2011

Since Jan 01, 2011 to June 14, 2011

Full Name Joint Stock Company Central Moscow Depositary

Abbreviated Name JSC CMD

Location 105082, 34-8, Bolshaya Pochtovaya Street, Moscow

Telephone +7 (495) 221-13-33

Fax +7 (495) 221-13-83

Internet Site www.mcd.ru

E-mail [email protected]

TIN 7708047457

PSRN 1027700095730


License № 10-000-1-00255, issued by the Federal Commission on Securities Market on September 13, 2002 to maintain the registry. The License is limitless since Feb 02, 2011

Company Head Agafonova Natalia Viktorovna, the Chairwoman of the Management Board

Full Name Joint Stock Company Registrar R.O.S.T.

Abbreviated Name JSC Registrar R.O.S.T.

Location 107996,18-13 Stromynka Street, Moscow

Telephone +7 (495) 771-73-35

Fax +7 (495) 771-73-35

Internet Site www.rrost.ru

E-mail [email protected]

TIN 7726030449

PSRN 1027739216757


License № 010-000-1-00264, issued by the Federal Commission on Securities Market on December 3, 2002 to maintain the registry. The License is limitless

Company Head Zhiznenko Oleg Mikhailovich, the General Director

INFORMATION ON THE REGISTRAR

Prior Dec 16, 2010 the services for the keeping and maintenance of the registry of shareholders of JSC IDGC of Center

and Volga Region were rendered by JSC CMD:

After Dec 16, 2010 the services for keeping and maintenance of the registry of shareholders of JSC IDGC of Center

and Volga Region are rendered by JSC Registrar R.O.S.T.:

WWW.MRSK-CP.RU

Annnual report JSC IDGC of Center and Volga Region 2011

Investor Relations

Transcript of Annnual report JSC IDGC of Center and Volga Region 2011