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Social responsibility and corporate sustainability report 2015
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Our Role within the Industry

Map
309 PTLs
14,400 km

PMES
MES North-West

Bryanskoye

Vyborgskoye

Karelskoye

Leningradskoye

Novgorodskoye

Severnoye

102 SSs
39,983 MVA

PMES
MES North-West

Bryanskoye

Vyborgskoye

Karelskoye

Leningradskoye

Novgorodskoye

Severnoye

466 PTLs
29,052 km

PMES
MES Centre

Valdaiskoye

Verkhne-Donskoye

Volga-Donskoye

Volga-Okskoye

Vologodskoye

Moskovskoye

Priokskoye

Chernozemnoye

197 SSs
96,658 MVA

PMES
MES Centre

Valdaiskoye

Verkhne-Donskoye

Volga-Donskoye

Volga-Okskoye

Vologodskoye

Moskovskoye

Priokskoye

Chernozemnoye

187 PTLs
12,502 km

PMES
MES Volga

Nizhne-Volzhskoye

Sredne-Volzhskoye

Samarskoye

Nizhegorodskoye

88 SSs
32 256 MVA

PMES
MES Volga

Nizhne-Volzhskoye

Sredne-Volzhskoye

Samarskoye

Nizhegorodskoye

346 PTLs
12 212 km

PMES
MES South

Kaspiiskoye

Kubanskoye

Rostovskoye

Stavropolskoye

Sochinskoye

144 SSs
27 243 MVA

PMES
MES South

Kaspiiskoye

Kubanskoye

Rostovskoye

Stavropolskoye

Sochinskoye

243 PTLs
16 660 km

PMES
MES Ural

Permskoye

Sverdlovskoye

Yuzhno-Uralskoye

Orenburgskoye

106 SSs.
41 906 MVA

PMES
MES Ural

Permskoye

Sverdlovskoye

Yuzhno-Uralskoye

Orenburgskoye

198 PTLs
13,572 km

PMES
MES Western Siberia

Vostochnoye

Tsentralnoye

Yuzhnoye

Yamal-Nenetskoye

84 SSs
36 820 MVA

PMES
MES Western Siberia

Vostochnoye

Tsentralnoye

Yuzhnoye

Yamal-Nenetskoye

332 PTLs
23 897 km

PMES
MES Siberia

Zabaikalskoye

Zapadno-Sibirskoye

Krasnoyarskoye

Kuzbasskoye

Omskoye

Tomskoye

Khakasskoye

120 SSs
44 915 MVA

PMES
MES Siberia

Zabaikalskoye

Zapadno-Sibirskoye

Krasnoyarskoye

Kuzbasskoye

Omskoye

Tomskoye

Khakasskoye

200 PTLs
16 763 km

PMES
MES East

Amurskoye

Primorskoye

Khabarovskoye

90 SSs
14 720 MVA

PMES
MES East

Amurskoye

Primorskoye

Khabarovskoye

* PTLs and SSs the ownership rights to which have been duly registered for Federal Grid Company and other owners, including facilities with 0.4–110 kV voltage but excluding PTLs and SSs with 10 kW voltage and lower that operate on the territory of Krasnodar Krai under longterm lease agreements.

Geography and Scope of Activities

Russian Federation

Federal Grid Company operates in 77 Russian regions. The territory in which the Company’s facilities are located is divided into zones of responsibility for corporate branches – backbone electric grids (MES), and their local enterprises (PMES). Underpopulated territories with no large customers – such as Chukotka, Kamchatka, Magadan Oblast, Sakhalin, Nenets Autonomous Okrug and Altai Republic – are not integrated into UNEG because they do not have economic conditions necessary for laying electricity transmission lines and establishing large substations.

The main consumers of the Federal Grid’s services are:G4-12

  • The main consumers of the Federal Grid’s services are:
  • territorial grid organisations (TGC);
  • power supply organisations (PSO);
  • large enterprises – electricity consumers;
  • electricity exporters.

Length of power transmission lines G4-EU4

  • As at 31 December 2015, Federal Grid Company owned 134,534.859 km of overhead transmission lines (OHLs) (in 2014 – 134,525.031 km)
  • As at 31 December 2015, Federal Grid Company owned 396.210 km of cable transmission lines (cable lines) (in 2014 – 368.621 km)
  • As at 31 December 2015, Federal Grid Company owned 943.052 km of aerial cable lines (in 2014 – 775.307 km)
  • As at 31 December 2015, length of power transmission lines leased by Federal Grid Company was 3,182.660 km (in 2014 – 3,125.653 km)

2012–2015 contracts for electricity transmission services via UNEG, pcs G4-EU3

International Cooperation

As of the end of 2015, electricity supply to the bordering countries via UNEG was

16.018
bn kWh on net basis

Federal Grid Company facilitates the transit of electric power over Russia’s customs border and operates as a technical contactor under commercial contracts of importers and exporters on the Wholesale Electricity and Capacity Market (WECM).

Federal Grid Company and economic entities of Georgia, Azerbaijan, Kazakhstan, the Baltic countries and the Republic of Belarus. The Company also signed an Inter-system Agreement with Finland. It also signed agreements on technical support of parallel operations with Ukraine, the Republic of Belarus, and Mongolia.

Being a management organisation of UNEG and crossborder electricity transmission lines (CBETL) of all voltage classes, Federal Grid Company:

  • coordinates commercial contracts for the import/export of electricity and provides their engineering support;
  • arranges and implements commercial metering of electricity transmitted along CBETL;
  • measures actual volumes of electricity that has been transmitted across the State border, and arranges for their customs clearance (declaration).

In order to measure the volume of electricity transmitted through each CBETL, Federal Grid Company and foreign counterparts signed agreements concerning the metering of cross flows via a particular CBETL. Under these agreements, the Company and electric power systems of 11 countries (Azerbaijan, Belarus, Georgia, Kazakhstan, China, Latvia, Lithuania, Mongolia, Ukraine, Finland and Estonia) exchange commercial metering data. G4-6 G4-8

Federal Grid Company continually modifies and improves its systems in relation to those of foreign power systems on issues pertaining to the harmonisation of legislation / regulations within the global electricity industry, as well as to form and synchronise the electricity and capacity markets in accordance with intergovernmental initiatives. This work is done with CIS Electric Power Council (CIS EPC) and its commissions, including the Commission for Operating and Engineering Coordination of Collective Operation of CIS and Baltics Energy Systems (COTC), BRELL Power Systems Committee, task forces in the CIS EPC Executive Committee, and Fingrid (Finland). G4-DMA

Market Positions

Federal Grid Company ensures electricity transmission via backbone grids and provides services for technological connection to its grids.

Goods and services markets that belong to natural monopoly mostly depend on the overall economic environment. Primarily domestic consumption and electricity export supplies affect the Russian market of electricity transmission services. According to the System Operator of UES1, in 2015 electricity consumption across the unified energy system (UES) of Russia reduced by 0.55% compared to 2014, to 1,008.3 billion kWh. Export to the neighbouring countries increased by 25% but it accounts for a small share in electricity consumption in UES of Russia (less than 2%).

Electricity consumption in Russia in 2011–2015, bn kWh

Electricity consumption in UES of Russia

2011 2012 2013 2014 2015 plan 2015 actual
1,000.7 1 016,5 1,009.8 1,013.9 1,016.31,008.3

2015 Federal Grid’s Largest Customers in Terms of Revenue from Electricity Transmission Services, %

1 Source: System Operator of the Unified Energy System, “Report about Operations of UES of Russia in 2015.”
Federal Grid manages the Unified National Electric Grid, ensures electricity transmission through backbone lines and provides services for technological connection to electric grids

Business Model

The business model of Federal Grid Company is aimed at ensuring sustainable development of the Company in the long term and creating values for all stakeholders through consistent implementation of our mission

Resources

(figures are given as of 31 December 2014)
  • Equity
  • Debt

RUB 854.5 billion

of equity

RUB 257.8 billion

of debt portfolio
  • UNEG electric
    grid facilities

138.8 thousand km

of transmission lines

924

substations
  • Patents, Licenses, software
  • R&D

RUB 3.3 billion

of intangible assets

RUB 0.4 billion

for R&D financing
  • Employees’ experience, skills and expertise

94% of employees

with higher or secondary vocational education

24.5 thousand

of employees
  • Water and energy recourses

1.16 million m3

of water consumption

968.7 million kWh

of electricity for substation needs

MISSION OF FEDERAL GRID COMPANY

To ensure reliable operation and development of UNEG that will be adequate to economic growth, and demonstrate high economic efficiency and cost minimisation

Business Model

STRATEGIC GOALS AND OBJECTIVES

  • Increase return on equity
  • Reduce operating and investment costs
  • Maintain financial sustainability
  • Develop UNEG infrastructure
  • Ensure reliability and quality of electricity supply to customers
  • Consolidate all facilities of UNEG electric grids
  • Ensure quality customer service
  • Develop research and innovation capacity
  • Develop and implement new technologies
  • Substitute imports in order to support innovative development of the Russian energy sector
  • Develop and train personnel
  • Provide social support
  • Establish a talent pool for a ‘smart energy’ sector
  • Engage with higher education institutions
  • Ensure environmentalisation and improve energy efficiency of the electric grid operations
  • Reduce air emissions of hazardous substances
  • Reduce water consumption

VALUE CREATION FOR STAKEHOLDERS

RUB 847 million

of dividends for 2014

33%

economic value added (EVA)

RUB 30.6 billion

of interest on debt obligations

RUB 23.5 billion

of tax payments
Shareholders and investors
Government authorities
People in the regions where we operate

1,115 km

of transmission lines
commissioned

7,58 thousand MW

of transformer capacity commissioned
Consumers
Suppliers and contractors

RUB 484 million

allocated for R&D Programme

30 new

intellectual property items registered
Consumers
Scientific community

23,899

jobs

More then 15 000

employees were trained during the year

RUB 248 million

of environmental costs and investments

10,4%

Reduction in water consumption
Educatiion institutions
Employees
People in the regions where we operate

11,7%

Waste reduction
RISKS
Federal Grid manages the Unified National Electric Grid, ensures electricity transmission through backbone lines and provides services for technological connection to electric grids

CORE BUSINESS PROCESSES

ELECTRICITY TRANSMISSION

Services of electricity transmission via UNEG are monopoly operations regulated by the State

TECHNOLOGICAL CONNECTION

A service package to connect power receivers of consumers, as well as generating and transmission facilities to Federal Grid’s electric grids

CONSTRUCTION AND RECONSTRUCTION

Implementation of projects on constructing new and reconstructing the existing facilities of electric grid infrastructure to improve the reliability of UNEG

AUXILIARY PROCESSES

Maintenance and Repairs

A package of operations to maintain operational capability and good condition of equipment

Procurement

A set of measures aimed at meeting the Company’s needs in goods and services

Energy Saving and Energy Efficiency

Measures to reduce the volume of consumed energy resources while retaining their beneficial effect

HR Policy

A system of employee engagement that aims at creating conditions for effective development and use of human resources

Industrial Safety

Prevention of accidents at UNEG facilities and readiness to localise and liquidate the fallout of accidents

Social Responsibility

Meeting of voluntary commitments toward stakeholders in order to ensure the Company’s sustainable development

Environment

Minimisation of negative environmental impact when providing electricity transmission services

Federal Grid Company at the Wholesale Electricity (Capacity) Market

Subject to the statutory procedure of the Russian Federation, Federal Grid Company buys electricity at the wholesale electricity and capacity market (WECM) in order to compensate actual losses in UNEG. The above activity is governed by the following legal acts and regulations:

  • Federal Law “On Electric Energy” No. 35-FL dated 26 March 26 2003
  • Rules for non-discriminatory access to electricity transmission services and provision thereof approved by the RF Government Resolution No. 861 dated 27 December 2004
  • Rules for the wholesale electricity and capacity market approved by the RF Government Resolution No. 1172 dated 27 December 2010
  • Agreement for joining the trade system of the wholesale market and wholesale market regulations that are annexes to the above Agreement

Since 01 July 2015, amendments to the Wholesale Market Rules has come into effect pursuant to which Federal Grid Company buys capacity in the amount calculated based on actual peak consumption.

In 2015, the cost of electricity and capacity bought by Federal Grid to compensate losses amounted RUB14.332 billion, net of VAT, including at WECM RUB6.452 billion for electricity and RUB7.845 billion for capacity. In addition, in accordance with the Federal Law “On Electric Energy” No. 35-FZ dated 26 March 2003, Federal Grid Company buys electricity to compensate actual losses in distribution grids of Krasnodar Krai that are on the Company’s books. The cost of electricity bought by Federal Grid to compensate losses in distribution grids was RUB0.035 billion, net of VAT.

Actual electricity losses in the Company’s grids in 2015 amounted to 23,478 million kWh. The relative level of 2015 losses was 4.47% of electricity supplied

Operating Performance Results in 2011–2015, mln kWh G4-9

  2011 2012 2013 2014 2015
Electricity supply via UNEG to consumers 509,287 517,131 519,983 515,250 525,769
Electricity losses within UNEG 22,553 21,946 22,262 21 261 23,478

by the grid. As compared to 2014, it increased by 0.34%, or 2,217 million kWh as electricity supply increased by 2.04%. The increase of electricity losses was caused by changes in the operational mode of UNEG in 2015, as well as changes in the load of power stations, redistribution of customers’ load. G4-EU11

For further details about measures to reduce electricity losses, see section 4.2. “Energy Efficiency and Energy Management”.

Industry Organisations and Commissions

Government Commission for the Electric Power Industry Development

The Commission is a coordinating body established to ensure coordinated actions of the interested federal executive authorities and executive authorities of the RF constituent entities on matters of prospective development of the electric power industry in the Russian Federation.

The Chairman of the Federal Grid Management Board, Andrey Murov, is a member of the Commission.

Details about the Commission and its membership are available on the website of the RF Government http://government.ru/department/144/about/ and http://government.ru/info/21190

CIGRE (Russian National Committee of CIGRE)

International Council on Large Electric Systems – CIGRE (Conseil International des Grands Réseaux Électriques – CIGRE) is the largest international organisation in the field of electric power. Founded in 1921, now it joins experts and scientists form 90 countries. Its sphere of interests covers all aspects of power systems operation: from economic issues to scientific and technological achievements. CIGRE’s organisational model is based on creation of National Committees that bring together industry players and institutions of a certain country. The CIGRE’s Central Office is in Paris (France).

The Russian National Committee (RNC CIGRE) is one of the leaders on CIGRE, both in terms of the number of members and because of a high level of energy research. RNC ensures the rational application of the world experience of the electricity industry development in our country. It assists in technical, economical, political, sociological research in areas related to power industry.

The RNC CIGRE has 59 collective and 496 individual members, including Federal Grid Company, JSC SO UES, PJSC Rosseti, Moscow Power Institute and others.

On 2 September 2015, the Chairman of the Federal Grid Management Board, Andrey Murov, was elected a Chairman of the RNC CIGRE.

Further details about the CIGRE’s activities are available on the website http://www.cigre.ru/

Representatives of Federal Grid Company are engaged in the work of:

  • expert workshop “Import Substitution in Fuel and Energy Complex” of the Energy Committee of the State Duma of the Russian Federation
  • coordinating research council on issues of the implementation of a sub-programme “Development of the production of composite materials and products therefrom” at the RF Ministry of Industry and Trade;
  • All-Russian public organisation ”Russian Engineering Union”;
  • Research division for infrastructure development of the Academy of Military Science.

Federal Grid Company interacts with public organisations (Russian Union of Industrialists and Entrepreneurs, OPORA ROSSII, Russian Engineering Union, TRAVEK Association), research institutions, etc., on the development of technologies of manufacturing electrical equipment.

Federal Grid Company, represented by the Deputy Chairman of the Managing Board, Alexey Molsky, is a member of the Supervisory Board, which is a collective governing body of the Market Council, a non-profit partnership. In accordance with the laws and regulations of the Russian Federation, Articles of Association of the Market Council and Regulations on the Supervisory Board of the Market Council, a member of the Supervisory Board is authorised to veto amendments in the Trade System Accession Agreement in which Federal Grid Company is a statutory party.

Besides, the Deputy Chairman of the Management Board, Alexey Molsky, represents Federal Grid Company in the Advisory Committee on Electric Power at the Board of the Eurasian Economic Commission. Three Federal Grid’s officers from the Customers and Market Engagement Department and Laws & Regulations Directorate represent the Company in the Subcommittee for the Common Electricity Market of the Eurasian Economic Union. They are involved in drafting and approval of the Concept of the Common Electricity Market of the Eurasian Economic Union. G4-16

For further details about the engagement with public authorities, see the Governance for Sustainable Development section > Stakeholders and Stakeholder Engagement.

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