Annnual report JSC IDGC of Center and Volga Region 2011;MRKP

1. ANNUAL REPORT 2011
JSC IDGC OF CENTER AND VOLGA REGION
INNOVATIONS IN OPERATION

2. Preliminary approved
by the decision of the Board of Directors
of JSC IDGC of Center and Volga Region
Minutes № 101 as of May 10, 2012
ANNUAL REPORT
OF JOINT STOCK COMPANY
INTERREGIONAL DISTRIBUTING GRID COMPANY
OF CENTER AND VOLGA REGION
FOR 2011
General Director
of JSC IDGC of Center and Volga Region
E.V. Ushakov
Chief accountant – The Head of Accounting
and Tax Reporting Department
of JSC IDGC of Center and Volga Region
I.Yu. Rodionova
NIZHNY NOVGOROD, 2012
JSC IDGC of Center and Volga Region management is performed in conformity
with the requirements of ISO 9001, OHSAS 18001 and ISO 14001.

3. CONTENTS
Liability Limitation 4 5 INVESTMENT ACTIVITIES 127 11 HUMAN RESOURCES POLICY 219
Information on the Company Parameters of Investment Activities 128 AND SOCIAL RESPONSIBILITY
5
Human Resources Policy 220
Address to Shareholders 10 Direction and Structure 130
THE ELECTRONIC Map of New Innovative Capacity, 2011 14
of Capital Investments Social Policy and Charity 230
VER­SION Long-Term Investment Program 145 Labor Protection 235
Prevention and Liquidation of Emergency Situations 240
1 BUSINESS OVERVIEW 17 at Distribution Power Grid Complex Facilities
6 SHAREHOLDERS’ CAPITAL 147
History of Industry and the Company 18 Environmental Protection 243
Securities 149
Position in the Industry and Operations 20 Taxation 248
Shareholders 151
Company Structure 24 Non-Financial Reporting 249
Shares of the Company on the Stock Market 152
Strategic Priorities and Development 32
Dividend Policy 158
Prospects
Dividend Payout 159 12 PUBLIC RELATIONS, GOVERNMENT 251
Board of Directors Report on Priority Areas 36 AUTHORITIES, INTERNATIONAL COOPERATION,
CONGRESS AND EXHIBITION ACTIVITIES
7 INTERACTION WITH STAKEHOLDERS 161
2 ANALYSIS OF THE FINANCIAL CONDITION 39 Stakeholders 162 GLOSSARY 259
AND PERFORMANCE RESULTS
Interaction with Shareholders and Investors 166
Accounting Policy 40
Disclosure of Information 166
REFERENCE INFORMATION 264
Analysis of Financial Performance 42
Distribution of Profit 47
8 CORPORATE GOVERNANCE 169
Credit Policy 48 Structure and Principles of Corporate Governance 170
Tariff Policy 51 Management Bodies 174
Non-Current Assets 61 General Shareholder Meeting 174
Board of Directors 176 SUPPLEMENTS
3 BUSINESS ACTIVITIES REVIEW 67
Remuneration to the Members 182
General Information 68 of the Board of Directors Supplements are placed at USB data stick,
Key Performance Indicators 72 Committees of the Board of Directors 184 attached to the Annual Report.
Energy Transmission 72 Management Board 186
1. Conclusion of the Internal Audit Commission
Technological Connection to Grids 78 Remuneration to the Members 191
Reliability Provision 85 of the Management Board 2. RAS Accounting (Financial) Reporting for 2011, including
Independent Auditor’s Opinion
Energy Saving and Improvement 86 General Director 193
of Energy Efficiency Remuneration to the General Director 194 3. IFRS Consolidated Financial Statements for 2011,
including Independent Auditor’s Report
Power Consumption for Production 88 Information on the Transactions Made by the Company 195
and Economic Needs in 2011 in 2011 which are Recognized by the Legislation 4. Detailed data on members of the Board of Directors,
of the Russian Federation as Transactions in which Committees of the Board of Directors, Management
Customer Policy 90
there is Interest, and Major Transactions Board and Audit Commission
Quality Policy 95 Participation in Non-Commercial Organizations 195
QR- CODE 5. Information on the Company’s Compliance
with the Corporate Conduct Code
QR-code (from English Quick Response) – electronic 4 TECHNICAL POLICY 97 9 AUDIT COMMISSION AND THE AUDITOR 197
AND INNOVATIVE DEVELOPMENT 6. Interested Party Transactions Completed in 2011
«barcode». Audit Commission 198
Technical Policy 98
Auditor 201 7. Information on Participation in Commercial Organizations
Digital version of Annual Report or its separate sec- Development and Innovations 100 with the share of less than 50%
tion is available after scanning of QR-code by mo- Repair and Operational Activities 106 10 INTERNAL CONTROL 205
bile phone using programs QR Reader for iPhone, QR AND RISK MANAGEMENT SYSTEM 8. Information on the Structure of the Property
Perspective Development 110 and its Changes
Droid (for ANDROID), QuickMark (for Windows Mo- Internal Control System 206
Operative and Technological Process Control 117
bile) , KAY WA (for any telephone) and others. Risk Management 210 9. Information on Land Plots
Development of IT Infrastructure 122
and Information Technologies Risk overview 210 10. Key Rights of the Shareholders
2 JSC IDGC OF CENTER AND VOLGA REGION ANNUAL REPORT 2011 3

4. LIABILITY LIMITATION COMPANY OVERVIEW
The present Annual Report of JSC IDGC of Center and The Company does not give any direct or supposed as-
Volga Region for 2011 (hereinafter referred to as the An- surances and guarantees and does not bear any respon-
nual Report) has been prepared on the basis of information sibility in case of losses which can be incurred by natural CHARTER CAPITAL OF THE COMPANY IS:
RUB 11.3 billion
available to the Company at the moment of preparation of persons or legal entities as a result of using the forward-
the Annual Report. looking statements of this Annual Report by any reason,
directly or indirectly. The specified persons should not
The Annual Report contains information on the results rely on the forward-looking statements, containing in the
of 2011, as well as forward-looking statements and Annual report, as they are not the unique possible suc-
declarations concerning intentions, opinions and cur- cession of events.
rent expectations of the Company in regard of the re-
sults of the Company activities, its financial condition, Except in cases stipulated by the law, the Company shall Joint Stock Company Interregional Distribution Grid Com- The company operates:
liquidity, growth prospects, strategy and the develop- not be obliged to re-consider or confirm its expectations pany of Center and Volga Region (JSC IDGC of Center and • 1,548 high-voltage feeding centers 35/110/220 kV
ment of the industry the Company is engaged in. Due or assessments, or to publish updates and changes of the Volga Region) is a subsidiary company of JSC IDGC Holding, with the total capacity of 29,354 MVA
to their nature, such forward-looking statements are forward-looking statements contained in the Annual Re- the largest Russian energy company. JSC IDGC of Center • 44,205 km of power transmission lines 35 - 220 kV
characterized by the presence of risks and uncertainty port in connection with subsequent events or the receipt and Volga Region is the key supplier of power distribu- • 26.63 km of high-voltage of cable lines with the volt-
factors, as far as they pertain to the events and depend of new data. tion and technological connection services in nine regions age of 35 - 110 kV
on the circumstances which are not necessarily to hap- of the Russian Federation – Vladimir, Ivanovo, Kaluga, • 263,391 km of distribution power grids
pen in the future. Kirov, Nizhny Novgorod, Ryazan, Tula Regions, Mariy El • 59,053 of transformer substations 6-35/0.4 kV
and Udmurtia Republics.
Consumers of the Company are: over 300 thousand enti-
The words “intends”, “strives”, “expects”, “assesses”,
ties in oil recovery, engineering, metal, woodworking and
“plans”, “considers”, “assumes”, “can”, “should”, “would”, JSC IDGC of Center and Volga Region includes branch-
chemical industries, railway transport, agriculture, con-
“will continue” and the like are used, as a rule, to indicate es – Vladimirenergo, Ivenergo, Kalugaenergo, Kiroven-
struction businesses, housing, utilities and social infra-
the forward-looking nature of statements and may sug- ergo, Marienergo, Nizhnovenergo, Ryazanenergo, Tule-
structure companies; and over 13 million of private con-
gest the risk of non-occurrence of events or actions speci- nergo, and Udmurtenergo. They supply power to over
sumers (population).
fied, depending on a variety of factors. 13 million residents of the Central and Volga Federal
Districts, covering over 408 thousand sq. km.
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
Transformer substations 6-35/0.4 kV: Distribution power grids:
the Company is a member, may differ considerably from
59,053 pcs. 263,391 km
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.
Includes: JSC IDGC of Ceter amd Volga Region provides electricy:
9 branches >13 mln residents >408 thousand km2
4 JSC IDGC OF CENTER AND VOLGA REGION ANNUAL REPORT 2011 5

5. FINANCIAL PERFORMANCE PRODUCTION PERFORMANCE
R E V E N U E, RUB mln N E T P RO F I T, RUB mln N E T A S S E T S, RUB mln O U T P U T TO G R I D, mln kWh POW E R LO S S E S, %
64,404 4,232 45,297 59,653
59,492 9.41
54,395
47,191 9.06
1,269 41,176
56,175 8.97
39,920
244
2009 2010 2011 2009 2010 2011 2009 2010 2011 2009 2010 2011 2009 2010 2011
Indicator Unit 2009 * 2010 * 2011 2011/2010 2011/2010 Indicator Unit 2009 2010 2011 2011/2010 2011/2010
(absolute (relative (absolute (relative
increase) increase), % increase) increase), %
Total revenue, incl. RUB million 47,191 54,395 64,404 10,009 18 Number of 35 kV and higher SS units 1,542 1,541 1,548 7 +0.45
Power transmission RUB million 45,689 53,106 63,249 10,143 19 Capacity of 35 kV and higher SS thousand MVA 28.49 28.61 29.35 1 +2.59
Technological connection RUB million 1,175 954 816 -139 -15 Number of TSS (DSS) of 6-35/0.4 kV units 58,639 58,845 59,621 776 1.32
Other sources RUB million 328 335 339 4 1 Length of power transmission km 261,972 262,320 263,391 1,071 +0.41
line circuits, networks
Capitalization RUB million 20,455 34,181 16,581 -17,195 -51
Length of power transmission km 251,581 251,930 253,106 1,176 +0.47
EBITDA RUB million 4,855 6,613 10,958 4,346 66 line circuits, routes
Net profit RUB million 244 1,269 4,232 2,963 234 Output to grid million kWh 56,175 59,492 59,653 161 +0.27
Net assets RUB million 39,920 41,176 45,297 4,121 10 Productive supply million kWh 50,889 54,100 54,299 199 +0.37
Profit per share RUB 0.0022 0.0113 0.0376 0.0263 234 Total losses million kWh 5,286 5,392 5,354 -38 -0.71
Dividend per share RUB 0 0.00125 0.00280 0.0015 124 Total losses % 9.41 9.06 8.97 -53 -0.09
Share price at year end RUB/share 0.1815 0.3033 0.1471 -0.1562 -51 Power connected per technological MW 362.06 331.01 364.09 33.08 +10
connection agreements
* Since January 01, 2011, company accounting and reporting were amended (Orders of the Russian Ministry of Finance №66n of July 02, 2010 and №186n Number of electric grids employees persons 21,559 22,074 22,269 195 +0.01
of December 24, 2010). To align the data, we presented 2009-2010 indicators in accordance with the adjusted reporting for 2009-2010.
(payroll)
E B I T DA, RUB mln SHAREHOLDERS’ CAPITAL
10,958
1,139 S H A R E CA P I TA L S T R U CT U R E as of May, 14 2012
4,056
16.82%
6,613 GENHOLD LIMITED
20.64%
4,855 988 1,531 Other
800 5.4%
Interest to be paid 3,480
Energosouz
3,184 4,232 Holdings Limited
Depreciation
50.4%
Profits tax 876
6.74% JSC IDGC Holding
627
Net profit 1,269 ENERG YO SOLUTIONS
244 RUSSIA ( C Y PRUS ) LIMITED
2009 2010 2011
6 JSC IDGC OF CENTER AND VOLGA REGION ANNUAL REPORT 2011 7

6. Share of the Company’s productive supply, % Consumption volume, million kWh
JSC Kirovo-Chepetsk
LARGEST INDUSTRIAL ~7% 3,710 01 JSC RZD (Russian Railways) ~3% 1,571 03 JSC Transneft ~2% 1,145 05 JSC Udmurtneft ~2% 863 07 JSC SIBUR-Neftekhim ~1% 697 09 Chemical Plant
CONSUMERS ~7% 3,708 02 Gazprom Transgaz ~2% 1,328 04 JSC Volga ~2% 908 06 JSC LUKOIL- ~1% 767 08 JSC Belkamneft ~1% 529 10 JSC Schekinoazot
Nizhny Novgorod Ltd. Nizhegorodnefteorgsintez
KALUGAENERGO VLADIMIRENERGO IVENERGO
27,061 km 6,319 units 21,967 km 4,713 units 15,283 km 3,806 units
152 units 2.92 ths. MVA 139 units 3.30 ths. MVA 141 units 2.62 ths. MVA
Kirov
03 01 01 01 03 01 06 03
Izhevsk
UDMURTENERGO KIROVENERGO
TULENERGO RYAZANENERGO
Yoshkar-Ola
Ivanovo 25,296 km 5,673 units 38,584 km 8,717 units
32,047 km 7,155 units 31,211 km 6,014 units
219 units 3.68 ths. MVA 224 units 2.94 ths. MVA
172 units 4.10 ths. MVA 154 units 3.45 ths. MVA
Nizhny Novgorod
Vladimir
02 01 03 05 08 02 01 03 09
03 04 01 10 03 05 07 01 03
NIZHNOVENERGO MARIENERGO TOTAL
59,530 km 14,255 units 12,412 km 2,969 units
263,391 km 59,621 units
259 units 5.20 ths. MVA 88 units 1.13 ths. MVA
Ryazan
1,548 units 29.35 ths. MVA
Kaluga
01 08 01 02 03 02 02 03
Tula
09 04 06 07
Generating Name Installed Location Generating Name Installed Location LEGEND
/ /
company of Plants capacity company of Plants capacity
LARGEST GENERATING 01 JSC TGC-6 Ivanovskaya CHPP-3 / 330.0 MW Ivanovo 04 JSC WGC-3 Cherepetskaya SDPP / 1,285 MW Suvorov, Tula Region
Length of power
COMPANIES OF THE Vladimirskaya CHPP-2 / 400.5 MW Vladimir transmission line
Novogorkovskaya CHPP / 305.0 MW Kstovo, Nizhny Novgorod Region circuits, km
COMPANY’S FOOT- 05 JSC WGC-2 Ryazanskaya SDPP / 2,650 MW Novomichurinsk, Ryazan Region
Sormovskaya CHPP / 340.0 MW Nizhny Novgorod
PRINT, PROVIDING Dzerzhinskaya CHPP / 580.0 MW Dzerzhinsk, Nizhny Novgorod Region Number of TSS
CAPACITY TO GRIDS Ivanovskiye CCGTs branch Ivanovskiye CCGTs branch Komsomolsk, Ivanovo Region (DSS) of 6-35/0.4 kV,
06 of JSC INTER RAO UES units
02 JSC TGC-5 Kirovskaya CHPP-3 / 160.0 MW Kirovo-Chepetsk, Kirov Region of JSC INTER RAO UES / 650 MW
OF THE COMPANY
Kirovskaya CHPP-4 / 320.0 MW Kirov
Yoshkar-Olinskaya CHPP-1 / 195.0 MW Yoshkar-Ola, Mariy El Republic Number of 35 kV
Ryazan branch Novoryazanskaya CHPP / 425 MW Ryazan and higher SS,
Izhevskaya CHPP-1 / 78.0 MW Izhevsk 07 of Novoryazanskaya CHPP Ltd. units
Izhevskaya CHPP-2 / 390.0 MW Izhevsk
08 JSC RusHydro Nizhegorodskaya HPP / 520 MW Zavolzhye, Nizhny Novgorod Region Capacity of 35 kV
03 JSC Kvadra Dyagilevskaya CHPP / 110 MW Ryazan and higher SS,
Novomoskovskaya SDPP / 261 MW Novomoskovsk, Tula Region thousand MVA
Kaluzhskaya CHPP-1 / 48.9 MW Kaluga 09 JSC GAZ CHPP GAZ / 580 MW Nizhny Novgorod
8 9

7. ADDRESS TO SHAREHOLDERS.
DEAR SHAREHOLDERS!
In 2011, JSC IDGC of Center and Volga Region made a sig- industry-related science in order to enhance competitive-
nificant step towards an innovative and efficient distribu- ness of the national economy and meet the targets of the
tion grid infrastructure in the operations area. socio-economic development of the Russian Federation.
The Company’s successful performance in the report- I would like to thank the Company’s management
ing period has had a positive effect on the year-end fi- and employees, shareholders and members of the Board
nancial results. In 2011, the Company’s revenue totaled of Directors for their valuable contribution to main-
RUB 64.4 billion, with gross profits amounting to RUB taining the Company’s goodwill and upholding high
7.3 billion. standards of corporate culture, ensuring sustainable
development and financial stability. I am convinced
In 2011, the Company’s Board of Directors convened that JSC IDGC of Center and Volga Region will achieve
25 meetings, bringing up for discussion more than 320 is- all its goals and its contribution to the strengthening
sues vital for the strategic development of the distribution of the distribution power grid complex of Russia will re-
grids. Approval of the programs of innovative develop- main notable.
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 Sincerely, Chairman of the Board of Directors
2011, the profits were distributed among the Company’s of JSC IDGC of Center and Volga Region
shareholders for the first time. At the year-end 2010, the Aleksey Perepelkin
dividends paid totaled RUB 141 million. In 2011, the Com-
pany published its first social report for 2009-2010.
IN 2011, JSC IDGC OF CENTER AND VOLGA REGION
The measures taken to improve investment attractive-
MADE A SIGNIFICANT STEP TOWARDS AN INNOVATIVE
ness produced a positive effect on the Company’s securi-
AND EFFICIENT DISTRIBUTION GRID INFRASTRUC- ties. At the beginning of 2012, the Company’s shares were
TURE IN THE OPERATIONS AREA. 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
10 JSC IDGC OF CENTER AND VOLGA REGION ANNUAL REPORT 2011 11

8. ADDRESS TO SHAREHOLDERS.
DEAR SHAREHOLDERS!
In 2011, the Company set its top priority on forming a new The Company attaches great importance to the profes-
grid infrastructure of the innovative distribution power sional training, enhancement of the talent pool, social
complex. responsibility towards its consumers and society on the
whole, integrated communications and international co-
Last year the Company made a significant step towards operation.
smart power industry. Full transition of all its branches
to the RAB method created a steady platform for the In 2011, the Company received a Diploma from the Gov-
latter as the Company’s investment program for the re- ernment of the Russian Federation for its outstanding
porting period increased 1.6 times amounting to RUB achievements in terms of quality of the power transmis-
13.6 billion. The Company managed to carry out proj- sion and distribution services. The fact that the Company’s
ects of large scale and vital importance for the region. performance is marked by the Government second year
Launching of the first start-up facility of the SS Sozvezdie in a row proves that the Company moves in the right devel-
220/110/10 kV in the Kaluga region increased reliability opment direction which is aimed at increasing reliability
of the power supply in the whole Obninsk energy cluster. of the power supply.
In the Udmurtia Republic, the first line of the grid with
the Smart Grid elements was constructed. In the Vladimir I believe that the Company’s achievements in 2011 are
region, the Company launched SS Pokrov 110/35/10 kV, largely due to honest management and success-driven
where, along with the capacitor bank, controlled shunt employees. Undoubtedly, with such an asset as a coordi-
operator was installed, which has so far been the only nated and goal-motivated team the Company will reach all
one in power systems of 110 kV in the Central Russia. the objectives necessary to create an integral innovative
state-of-the-art power grid infrastructure.
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.
LAST YEAR THE COMPANY MADE A SIGNIFI- In 2011, the Company put into operation new power fa-
cilities which were required for the development of the
CANT STEP TOWARDS SMART POWER INDUSTRY.
regions. New power capacities totaled 1,263.9 MVA. Sincerely, General Director
FULL TRANSITION OF ALL ITS BRANCHES On the whole, over the last year the Company connected of JSC IDGC of Center and Volga Region
more than 19 thousand consumers. Evgeny Ushakov
TO THE RAB METHOD CREATED A STEADY
PLATFORM FOR THAT. 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.
12 JSC IDGC OF CENTER AND VOLGA REGION ANNUAL REPORT 2011 13

9. Ivenergo branch Project aims and objectives:
Implementation of the project will eliminate capacity deficit in
Construction of SS 110/6 kV the central part of the city and create an opportunity to connect
Ivanovskaya-15 (1st launch phase) new power consimers to grids of Ivenergo branch, as well as
(Ivanovo, Ivanovo Region) enable even distribution of load among the existing substations
SS capacity: 40 MVA to enhance reliability of comsumer power supply and reduction
Launched December 27, 2011 of technical losses.
Innovative component:
Innovative portion financing amounts to RUB 15,104 thousand. Kirov
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
Vladimirenergo branch with the voltage of 6/0.4 kV, polymer-shelled
overvoltage limiters, motor disconnecting
Renovation of SS 110/35/10 kV switches RGPZ. Izhevsk
Pokrov (Volginsky, Petushki District,
Vladimir Region)
Capacity of capacitor bank - Yoshkar-Ola
controlled shunt reactor: 25 Mvar Ivanovo
Launched October 25, 2011
Udmurtenergo branch
Project aims and objectives: Nizhny Novgorod
Introduction of the controlled shunt reactor led to establishment Vladimir
Construction of SS 110/10kV
of capacitor bank - controlled shunt reactor system for the volt-
Soyuznaya with overhead access lines
MAP OF NEW
age of 110 kV with the capacity of 25 Mvar with sliding control
110 kV (Ustinovsky district, Izhevsk,
of reactive power to increase the transmission capacity of power
Udmurtia Republic)
grids, maintain normal voltage level and reduce power losses.
SS capacity: 80 MVA
Innovative component:
Innovative portion financing amounts to RUB INNOVATIVE Project aims and objectives:
Launched November 03, 2011
CAPACITY,
39,230.9 thousand. Renovation included instal- National programs on housing and plans for comprehensive de-
lation of the first controlled shunt reactor RTDU Ryazan
velopment of Izhevsk vacant areas stipulate construction of new
25000/110-UHL-1 at JSC IDGC of Center and Volga microdistricts Aeroport and Vostochny, including new residential
Kaluga
2011
Region with the capacity of 25 Mvar. The planned areas, office buildings, retail and entertainment centers, utilities,
ecomonic effect jointly with the capacitor bank Tula
social facilities and infrastructure. Project implementation will
110 kV is RUB 1,802 thousand. 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.
Ryazanenergo branch Innovative component:
Innovative portion financing amounts to RUB 27,000 thousand.
Renovation of SS 110/10 kV Construction employed innovative equipment: SF6 circuit break-
Kalugaenergo branch ers 110 kV VEB-110, microporcessor relay protection and auto-
Esenino (Fedyakino, Rybnoe
District, Ryazan Region) mation devices Sirius, vacuum circuit breakers 10 kV BB/TEL-10,
Construction of SS 220/110/10 kV Innovative component:
SS capacity: 20 MVA advanced systems of teleautomation and automation.
Sozvezdie (1st launch phase) Innovative portion financing amounts to RUB 26,401.4 thousand.
Launched November 22, 2011
(Borovsk district, Kaluga Region, near Construction included installation of ATDTsTN-250000/220У1
Dobrino) autotype transformer with the capacity of 250 MVA produced
SS capacity: 250 MVA by OAO ZTR. Advanced SF6 circuit breakers 220 kV HPL 245B1 Project aims and objectives: Innovative component:
Launched November 08, 2011 and 110 kV VEB-110-II-40/2500 UHL1 were used, as well as mea- Increased power supply reliability. Decision on renovation was Innovative portion financing amounts to RUB 29,043.7 thousand.
suring current transformers 220 and 110 kV TG, voltage trans- made on the basis of joint draft Agreement № 34-1/4 «On in- Renovation included the following innovative equipment: SF6
Project aims and objectives: formers 220 kV and 110 kV SRV, state-of-the-art disconnecting teraction of the Ryazan Region Government and JSC RAO UES dead-tank circuit breakers VEB-110-40/2500 UHL1, relay protec-
Power supply to Industrial Park Vorsino – a cluster of plants switches 220 kV RG and 110 kV RGP. Fiberglass was used for the of Russia for development of Ryazan Region power system and tion and automation boxes ShE produced by CJSC Radius Avtoma-
to produce various goods – and increased reliability of power main communications channel and transmission of TM, TU, TS assurance of reliable supply to consumers» dated February 18, tika, SF6 current transformers TGFM-110 U1, SF6 voltage trans-
aupply to consumers at 110 kV grid. and TI signals. 2008. The project was implemented within the time set by the formers ZNG-110 U1, vacuum circuit breakers BB/TEL-10.
Agreement.
14 JSC IDGC OF CENTER AND VOLGA REGION ANNUAL REPORT 2011 15

10. 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
01 BUSINESS OVERVIEW

11. 01 BUSINESS OVERVIEW
1.1
HISTORY OF INDUSTRY AND THE COMPANY
KEY STAGES OF INDUSTRY DEVELOPMENT
20TH CENTURY 21TH CENTURY
Formation of Russian Electric Power Industry
Early 20th century A country-wide unified energy infrastructure was established. Early 21st 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
1920s–1930s Large-scale electrification of the country according to the Plan adopted by the State Com-
of the Russian Federation” dated July 11, 2001. The reform involved changes in the structure of
mission on the Electrification of Russia was performed accompanied by the construction of
the power industry, which included the separation of naturally monopolistic (electrical energy
regional heat power and hydro-electric stations.
transmission and operative dispatch control) and potentially competitive (production and sale
1930s Major steps were taken to develop heavy and energy industry, including the electricity of energy, repair and service) functions. The vertically integrated companies which performed
distribution sector. 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
1940s Post-war restoration of the destroyed electric power grid complex of the country was performed.
from 2001 to 2008, RAO UES of Russia was dismissed on July 01, 2008.
1960s 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 As a result of reorganization of JSC RAO UES of Russia, JSC IDGC Holding was spun off
of nuclear power stations. 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.
Privatization and Reform
The data on new target structure of the industry after the reform are shown at the web site
Late 1980s The signs of slowdown in the development of the industry began to show in, with the upgrade
of JSC RAO UES of Russia www.rao-ees.ru under Power Industry Reform.
of production facilities lagging behind the electric power consumption growth.
1990s The power industry was privatized, followed by the establishment of the territorial power com- Details of power industry reforms are also available at the Company’s web site www.mrsk-cp.ru
panies. JSC RAO UES of Russia was established to control 118 subsidiary and dependent com- under “About the Company / Power Industry Reform” and the official site of the Russian Ministry
panies, or practically all electrical energy assets of the country. of Energy www.minenergo.gov.ru under “Activities / Power Industry / State of the Industry”.
Late 1990s 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.
18 JSC IDGC OF CENTER AND VOLGA REGION ANNUAL REPORT 2011 19

12. 01 BUSINESS OVERVIEW
HIS TO RY O F T H E CO M PA NY
The establishment of JSC
IDGC of Center and Volga JUNE 28, Q3 FEBRUARY 19, DECEMBER FEBRUARY 29,
2007 2007 2007 2007 2008
Region is an integral part
of the reform of the Russian
electric power industry. JSC IDGC of Center Agreements concluded with nine The new configuration of IDGC E�������������������������������
xtraordinary General Sharehold- Completion of reorganization
and Volga Region is registered DGCs on the transfer of functions approved by the Government of ers Meetings of nine DGC and JSC as affiliation
Charter capital RUB 10 million of the sole executive body (CEO) Russia IDGC of Center and Volga Region
on affiliation
CEO
Details of the Company his-
tory are shown at the Compa-
ny’s web site www.mrsk-cp.ru JSC Vladimirenergo JSC Kirovenergo JSC Ryazanenergo JSC IDGC of Center and Volga Region / Charter capital RUB 11.3 billion
under “About the Company / JSC Ivenergo JSC Marienergo JSC Tulenergo Branches: Vladimirenergo, Ivenergo, Kalugaenergo, Kirovenergo, Marienergo,
History of the Company” JSC Kalugaenergo JSC Nizhnovenergo JSC Udmurtenergo Nizhnovenergo, Ryazanenergo, Tulenergo, Udmurtenergo
1.2
POSITION IN THE INDUSTRY AND OPERATIONS
Today JSC IDGC of Center and Volga Region is the largest
grid organization in the areas of its presence. Its core
W H O L E S A L E E L E CT R I C POW E R M A R K E T
business is transmission of power.
Allied power Consumers of the
JSC FGC UES TGC, WGC Purchase of
systems wholesale market
elecrtic power
Elecrtic power Elecrtic power R E V E N U E B R E A K D OW N B Y TY P E O F ACT I V I TY I N 2011
transmission transmission
Purchase of
power losses
Power retail companies
JSC IDGC of Center and Volga Region
Elecrtic power
transmission
Elecrtic power
transmission
Elecrtic power 1.27%
transmission
Territorial grid companies Technological
98.21%
Purchase of
connection to grids
power losses
Elecrtic power
transmission Transmission
of power
Comsumer of the power supply
Purchase of
elecrtic power 0.53%
Ower activities
R E TA I L E L E CT RO N I C POW E R M A R K E T
Electric power flows Direction of financial payments
20 JSC IDGC OF CENTER AND VOLGA REGION ANNUAL REPORT 2011 21

13. 01 BUSINESS OVERVIEW
JSC IDGC of Center and Volga Region is a natural monopo- energy industry, regulated and controlled by the state. POW E R T RA N S M I S S I O N M A R K E T I N 2011 ( VO L U M E O F P RO D U CT I V S U P P LY TO CO N S U M E R S )
list. Subject to Order № 263-e of the Federal Tariff Ser- The tariffs (prices) for the services of the Company are
vice dated June 27, 2008, the Company is included into the set by the regulatory bodies of the corresponding regions
registry of subjects of natural monopoly in the fuel and of the Russian Federation.
60% 40%
21,246 млн кВтч
31,335 млн кВтч
INDUSTRY OVERVIEW Other territorial grid
JSC IDGC of Center
and Volga Region organizations (TGO)
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 YEAR ON YEAR GROWTH OF KEY
and improved macroeconomic indicators. In the previous PRODUCTION INDICATORS IN 2011
year, GDP growth was estimated by Rosstat as 4.3%, and Note: Productive supply of the Company is stated in relation to the consumers, connected directly to the grids of the
industrial production growth as 4.7% year on year. Power Company’s branches.
consumption grew by 1% to 1,030.5 billion kWh in 2011.
TECHNOLOGICAL CONNECTIONS The major companies engaged in similar activities in • Regional Grid Company Ltd, Kirov;
+21.1%
Performance of JSC IDGC of Center and Volga Region large- the Company’s operations areas include the following • Gazpromenergo Ltd, Nizhny Novgorod;
ly corresponds to the general trends in industry develop- NUMBER territorial grid organizations: • JSC GAZ, Nizhny Novgorod;
ment. In the reporting year, productive supply of power • JSC Vladimir Region Electric Power Company, Vladimir; • Municipal Unitary Enterprise Ryazan Municipal
+10.0%
by the Company increased by 0.4% against 2010, and the • Municipal Unitary Enterprise Gorelektroset, Murom, Power Grids;
the Vladimir Region; • JSC Russian Railways - in all operations areas;
number of technological connections grew by 21.1%, their CAPACITY
• Municipal Unitary Enterprise Gorelektroset, Kirov; • JSC Tula Municipal Power Grids;
capacity increasing by 10%. More detailed description of
• Municipal Enterprise Gorseti, Obninsk, the Kaluga • Udmurtenergoneft, Izhevsk.
macroeconomic factors influencing JSC IDGC of Center
Region;
+0.4%
and Volga Region performance is available at the Com-
pany’s web site www.mrsk-cp.ru under “For Shareholders PRODUCTIVE
and Investors / Information about the Company’s finan- POWER SUPPLY CONSUMERS OF SERVICES
cial-economical activity / Review of macroeconomic Services of JSC IDGC of Center and Volga Region are in- 92% of the technological connection customers
factors and risks”. tended for direct consumers on the wholesale and retail is made by preferential customers connected to the
markets – organizations and individuals, as well as re- grids of up to 15 kW.
tail companies (major consumers), supplying power to
end users. The Company works with the following large Since 2009, the number of applications from preferen-
retail companies: tial consumers grew more than twice.
• JSC Vladimirenergosbyt;
MARKET SHARE OF THE COMPANY • JSC Ivenergosbyt; The year 2011 saw a considerable increase in the de-
• JSC Kaluga Retail Company; mand for technological connection from large consum-
JSC IDGC of Center and Volga Region holds a domineering As estimated by JSC IDGC of Center and Volga Region, the
• JSC Kirovenergosbyt; ers (over 750 kVA). In a number of regions, the tech-
position on the market in the regions of its footprint, both overall volume of the power transmission market of 2011
• JSC Marienergosbyt; nological connection tariff was adopted without
in power transmission and in technological connection comprised 52,581 million kWh in natural terms, the share
• JSC Nizhny Novgorod Retail Company; the investment component; as a result, the number
of consumers’ power receivers to grids. The major share of JSC IDGC of Center and Volga Region being 60%.
• JSC Ryazan Retail Company; of applications and the total contracted capacity of this
of power supplied to consumers passes along the grids • JSC Tula Retail Company; category increased twice against the previous year.
owned by the Company. • JSC Udmurtia Retail Company;
• Rusenergosbyt Ltd in six operations areas.
22 JSC IDGC OF CENTER AND VOLGA REGION ANNUAL REPORT 2011 23