FACTS AND FIGURES 2010

121,700 KM

of total transmission line length

13.6 MLN SQ. KM

of area covered by the Company


RUR1 BLN

investment in 2010 R&D and pilot projects

311,000 MVA

of transformer capacity


98,58%

of revenues from electricity transmission

RUR952.4 BLN

2010-2014 investment program

22,000 EMPLOYEES

 


RUR453.9 BLN

market capitalization as of 30 December, 2010

Federal Grid Company is the largest publicly traded electricity transmission company in the world in terms of the length of transmission lines and transformer capacity. Its unique infrastructure is a backbone of the Russian economy.

Federal Grid Company is the largest energy company in Russia by market capitalization. Federal Grid’s shares are included on the MSCI Emerging Markets and MSCI Russia indices.

The largest part of our revenues is generated via tariffs for electricity transmission, approved by the Russian Federal Tariff Services (FTS) based on the RAB tariff regulation. Our major consumers are regional distribution grid companies, retail electricity supply companies and large industrial enterprises.

The future of the Company’s significant growth is based on a large scale investment program, as well as on our management’s commitment to innovation and modernization.

WHY FEDERAL GRID COMPANY?

01

Large scale operations and stable demand

As a natural monopoly, Federal Grid Company is a critical part of the Russian economic infrastructure and the backbone of the national electricity sector Russian consumers’ stable demand for the Company’s services underpins its long-term prospects, whereas its role as the backbone of the country’s energy infrastructure reinforces its exclusive status.

02

State support

Playing a fundamental role in the Russian electricity sector infrastructure, Federal Grid Company receives significant support from the Russian Government. In 2010 RUR11 billion was allocated from the Russian budget to improve the UNEG efficiency, to increase the capacity and stability of energy facilities connected with the upcoming 2014 Olympic and Paralympic Games in Sochi, and to finance “Economic and Social Development of the Russian Far East and Trans-Baikal for the Period to 2013” Federal Target Program.

As the controlling shareholder of 79.48% of the Company’s shares, the Russian Government actively participates in our operations both through the Board of Directors, which is chaired by Sergei Shmatko, Russian Minister of Energy, and at the level of various departments and regulatory bodies that coordinate the development programs and the electricity sector regulatory framework.

03

Advanced Tariff Regulation System

The Company's electricity transmission tariffs are calculated based on the Regulatory Asset Base (RAB). It allows the Company to improve operational efficiency, increase financial transparency and ensure fair and predictable returns on invested capital. The 2010 transition to RAB-based regulation provided a stable cash flow and guaranteed financing of the Company's investment program. In 2010 after switching to the RAB-based regulation method, Federal Grid Company's tariffs increased 51.1% compared with 2009.

04

Reliability and Control

The UNEG reliability is maintained by the collective efforts of our dedicated management team and personnel. The Company's multi-level internal technical control system is aimed at maintaining an ample and continuous electricity supply using organizational, technical, informational, methodological, regulatory and preventive measures.

05

Established development program

The Company's 2010-2014 investment program was approved by the Russian Government on 12 November, 2010. Federal Grid Company prioritizes the following program tasks: the UNEG development to enhance its reliability; the implementation of agreements with regional authorities to ensure stable electricity supply to consumers; the connection of power generating units to the UNEG; and the development and implementation of technologies and infrastructure to maintain and enhance a competitive electricity and capacity market. Under the investment program, the Company intends to invest more than RUR952 billion between 2010 and 2014. Implementing this large-scale investment program is expected to stimulate a robust expansion in the Company's business and asset base.

Key Activities of Federal Grid Company:

  • Managing the UNEG
  • Providing electricity transmission services and connecting WECM participants to the electricity grid
  • Investment activities in UNEG development
  • Maintaining the electricity grid system
  • Engaging in the UNEG technical supervision of the UNEG grid facilities

SWOT Analysis

Strengths: Weaknesses:
  • Favorable tariff regulation regime (RAB))
  • Natural monopoly status
  • High level of state support
  • Government plans to retain minimum 75% stake in the Company
  • Stable financial position
  • Market situation has little impact on corporate cash flows; the majority of revenues does not depend on actua energy consumption
  • Experienced management team
  • Need to invest in grid asset renovation given current depreciation
Opportunities: Threats:
  • Asset growth through grid construction to provide electric energy to developing regions and new infrastructure facilities
  • Considerable potential for upgrading the business’ operating efficiency via RAB regulation
  • Focus on innovative development and use of the newest technologies
  • Absence of free cash flow due to implementing a large scale investment program
  • Regulatory risks connected with changes in RAB regulation parameters
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