Annual Report 2013

Address of the General Director



The past year proved to be a complicated year both for the Russian power industry in general and for the Company in particular, but we managed to achieve all the Company’s goals. Thanks to the concerted efforts of all IDGC of Centre’s employees, the Company managed to overcome climate abnormalities, tariff restrictions and new challenges, which came with the new functions of a supplier of last resort in the Orel, Bryansk, Kursk, Tver and Smolensk Regions. We were able to organize not only the process of transferring all the consumers in these regions on account of IDGC of Centre as new supplier of last resort, but also to improve the accessibility of services for clients, which resulted in additional economic effect.

The Company’s revenues in 2013 under RAS grew by 33.9% and reached 92.9 bln RUB, while the sales revenue increased by 22.3% to 11.5 bln RUB. Operation as a supplier of last resort brought the Company 0.4 bln RUB of net profit.

Acting in this new capacity also helped the Company to increase the paument discipline among the customers and reduce electricity losses.

Herewith, the amount of electricity transmitted through the points of delivery to end customers (“joint operation” net electricity supply) grew to 55.2 bln kWh, despite a general decline of power consumption in the country.

The share of IDGC of Centre on the electricity transmission market in the regions where the Company operates amounted to 83.4%4 in monetary terms, and the Company’s strategic goal is to continue increasing this figure in future.

Today the Company faces an ambitious challenge of reducing general and administrative expenses by 15% in 2014. The results achieved in reporting year demonstrate substantial improvement in this direction. Improvement of performance and cost optimization are not just idle words for us. The Company implemented the Cost Management Program, which helped the Company save 1.7 bln RUB last year.

Despite tariff restrictions and “picking-up” the functions of supplier of last resort, which significantly affected the financial results, the Company retained profitability and financial sustainability. It is worth noting that the Company also managed to reduce expenses on borrowing funds in 2013 – the average weighed borrowing rate during the year dropped from 8.7% to 8.2%.

Remaining the key infrastructure company in the regions of its operation, IDGC of Centre implements significant social-economic investment projects, thus eliminating the power shortage in the industrially developed regions, supplying power to new districts and increasing reliability and quality of power supply.

In 2013 additional 1,362 MVA of power was commissioned and 5,689 km of power lines were constructed. The Company increases its capacity year by year maintaining the leading position among other distribution companies in terms of its grid.

The Company is committed to continuous technological development, which allows to introduce modern equipment and apply innovative approaches to solving operating tasks. In December 2013, the Board of Directors of IDGC of Centre approved the Regulations on the Unified Technical Policy within the Power Grid Complex. The approved policy draws the Company’s attention to the most advanced technical solutions, sets the list and limits of application of technical solutions, equipment and technologies aimed at increasing the technical level of transmission, conversion and distribution of electrical energy and the processes of management, operation and development of the IDGC of Centre power grid complex.

The Company’s commitment to high corporate governance standards remains unchanged: it confirmed once again its National Corporate Governance Rating at the level of 7+ (Developed Corporate Governance Practice) assigned by the Russian Institute of Directors Non-profit Partnership. The Company received a high score from the investment community in terms of information transparency and interaction with shareholders and investors.

Summarizing all of the above, I would like to add that the events of 2013 made us stronger, increased the Company’s professionalism and opened new opportunities for further growth. I am sure that each consumer, each employee and each shareholder will soon see for themselves the positive effect of changes that the Company is undergoing.

General Director