Management Statement

Chairman of
the Management Board
Oleg Budargin

Our utmost priorities include relability, efficiency and safety of operations of the grid complex

DEAR COLLEAGUES,

We are pleased to present the third consolidated social report of the Company. The report provides full information about our results in the areas of social responsibility and sustainable development, presents our goals for the future, and outlines our prospects.

We understand that economic efficiency and business development in the contemporary world are not possible without greater social and environmental responsibility; all the more so because the Company operates in 69 Russian regions and employs more than 190,000 people.

The Company’s social responsibility is inseparable from its operating activities. Our unquestionable priorities are the reliability, efficiency, and operational safety of the electricity grid sector. Carrying out large capital investment projects, introducing resource-saving technologies, and creating new power facilities are aimed at the sustained development of MRSK Holding, enhanced energy security of the country, and greater competitiveness of the Russian economy.

The Company takes part in implementing top-priority national projects, which are vital to improving national wellbeing and boosting Russia’s image abroad. This primarily involves preparations for the 2014 Winter Olympics. In 2012, we carried out large-scale work on the electricity supply for the Winter Olympics facilities. Overall, MRSK Holding is responsible for 16 facilities, including five 110-kV substations (three of them have already been put into operation) and nine 110-kV power lines, with a length of over 250 kilometers. Another important project is the Sochi distribution network, with approximately 800 kilometers of overhead and cable lines.

The year 2012 witnessed significant changes in the Russian power grid sector. The Russian Government adopted a stronger stance on regulating the sector and keeping down electricity tariffs. The decision on the integration of FGC UES into the Russian Grids1 was the most significant event after the introduction of electric power industry reforms. In the context of sustainable development, this means that it is necessary to streamline internal accountability and control processes and raise social and environmental responsibility standards because of the increased scale of the Group’s operations.

An important area of our social responsibility policy is to prevent emergency situations. The Company’s system for preventing and remedying such situations was put to the test in July 2012. Floods and deteriorating weather conditions led to massive power outages in the Krasnodar Territory. Distribution grid company employees promptly eliminated the consequences of the natural disaster, ensuring the reliable operation of electric grids. IDGC of South organized voluntary fundraising to help the flood victims.

Looking back on 2012, I would like to note that the Company managed to achieve substantial results in the major areas outlined in its long-term development strategy and to lay the foundations for its further growth. We continued to systematically work on increasing energy efficiency, developing non-financial reporting, and on improving the transparency of our activities.

We are convinced that a partnership of business, the government, and society, and one based on transparency and mutual respect for their interests, is the only way to ensure the sustained development of any company. I am confident that the Company’s reorganization will enable us to be more effective in addressing the issues of our social and environmental policies and will begin a new chapter in the successful development of the Russian electricity distribution grid sector.

Chairman of the Management Oleg Budargin
Board Federal Grid Company
Russian Grids

On March 23, 2013, the Extraordinary General Meeting of Shareholders of MRSK Holding resolved to rename the Company JSC Russian Grids. On April 4, 2013, the corresponding amendments to the Company’s Articles of Association were state-registered by the registration agency.