6.1 SOCIAL RESPONSIBILITY PRINCIPLES

Federal Grid Company’s corporate social responsibility (CSR) represents the Company’s complex responsibilities toward interested parties in the sphere of managing the Company’s impact on the surrounding environment, society and economy. The Company voluntarily undertakes these responsibilities and ful? lls them publicly when interacting with interested parties. These principles are oriented on ensuring sustainable development and implementation of the Company’s strategy.

Our responsibility toward the state and consumers consists of ensuring the reliable and uninterrupted power supply of the UNEG objects, modernizing all objects in the UNEG power supply network in a timely manner; developing and introducing innovative technologies, contributing to an increase in the energy e? ectiveness of the UNEG, preventing and promptly ? xing technological breakdowns; utilizing funds invested in the Company by the Government in a transparent and e? ective manner.

Other important aspects of the Company’s CSR include:

  • Responsibility toward environment – for minimizing negative environmental impact;
  • Responsibility toward suppliers and contractors – creating a transparent competitive environment and market mechanism for pricing,
  • Responsibility toward personnel – for creating appropriate labor conditions and opportunities for professional and personal growth.

Strengthening Corporate Culture

Federal Grid Company’s corporate culture, including values as well as standards of behavior and work, forms the corporate perception for its employees, stimulates feelings of responsibility, prompts the realization of succession and helps build correct reactions to events taking place in the Company. It also creates a feeling of safety. We consistently work to develop corporate culture and our e? ort is also aimed at creating a feeling of a? nity with our team of employees and the acceptance of our development philosophy, methods of work, form and subject matter of relationships inside the Company.

In 2010, Federal Grid Company actively worked to develop a new Corporate Ethics Code. Significant changes in the Russian power sector and in the Company itself, as well as the Company’s goal to conform with global best corporate governance practices, made replacing the previous document necessary. The new Code project contains an ideological (mission, goals and values) and normative (general rules of conduct; prohibited conduct; chapters, descriptions of separate risks) parts. It is expected that the new Corporate Ethics Code will be adopted by the Company’s Board of Directors in 2011.

To preserve professional traditions educate the youth and recognize longstanding conscientious labor in the beginning of 2010 the Company launched the Dynasty of Federal Grid Company program. During the year, contests for the title of best dynasty were held in the branches of Federal Grid Company – MES. The contest counted not only production indicators of dynasty members, but also their overall length of corporate service.

In terms of organizing corporate events, the most popular and accessible events are traditionally sports competitions. In 2010 the Third Summer Olympics of Federal Grid Company was held. Preliminary rounds were organized at the corporate branch level and final contests took place in Moscow from 28 to 30 June. More than 2,500 Company’s employees participated in the Olympics

Cooperation with universities training specialists in the power industry continued. In 2010, the Company cooperated with 45 profiled educational institutions. Days of Federal Grid Company were held for students, during which corporate managers spoke about primary development directions for the UNEG, promising the implementation of innovative corporate projects and the Company’s need for highly qualified specialists.

In summer 2010 the Company re-launched organizing work for summer student groups. At sites of Federal Grid Company’s MES Center branch, 50 students from the Moscow Power Engineering Institute working line brigades carried out swath clearing and assembled metal constructions for power line columns in the Ivanovo, Vladimir and Moscow Regions.

Social Responsibility and Corporate Sustainability Reports

Since 2008 the Company has published an annual Social Responsibility and Corporate Sustainability Report; these Reports present separate corporate mechanisms, ensuring the quality of corporate work and the absence of economic, environmental and social impact in the regions in which the Company is present. Reports are prepared in accordance with GRI sustainability reporting framework guidelines (version G3). Interactions with interested parties during preparation of the Reports are based on the principles of the Stakeholder Engagement Standard AA 1000 SES. As part of the process of preparing the Annual Report, the Company conducts conversations with interested parties, during which key issues of the Report are discussed and disclosure requests are gathered. Prior to publication, the prepared text of the Report undergoes public discussion in one or another form (in person or in absentia publicly held hearings).

Federal Grid Company reports are included in the National Registry of Corporate Non-Financial Reports, which was formed by the Russian Union of Industrialists and Entrepreneurs (RUIE).

The full text of Federal Grid Company’s social responsibility and corporate sustainability reports can be found on our web site http://www.fsk-ees.ru/about/corporate_social_responsibility/

Interactions with Stakeholders

CSR implementation is performed through regular interactions and dialogues with external interested parties (stakeholders).

List of key stakeholders:

  • Government;
  • minority shareholders;
  • consumers;
  • local state authorities in Russian Federation subjects;
  • environmental community;
  • contractors and suppliers;
  • corporate employees;
  • other energy companies (generation companies, System Operator, IDGCs).

As part of 2010 CSR management, the Company carried out the following interactions:

  • with shareholders and investors (annual general meetings of shareholders; meetings of the Company’s managers with investment bank and nvestment fund analysts; consultative meetings with minority shareholders – physical persons; online seminars for investors; the participation of top management in conferences organized by investment banks);
  • with local authorities of Russian Federation subjects and energy companies (concluding cooperation agreements in the ? eld of UNEG development and the coordination of development plans);
  • with personnel (implementation of the Dynasty Program, the Open Doors Day, conducting the Third Summer Olympics, organizing summer student groups, etc.);
  • with suppliers and contractors (Concluding agreements on cooperation with companies including Alstom Grid, Siemens AG, Elektrozavod, Ener 1 and others).

In 2010 the Company participated in the St. Petersburg International Economic Forum and the Sochi-2010 International Investment Forum, at which they signed more than 10 agreements with Russian and foreign producers and developers of electrotechnical equipment.

One of the most important tasks in interacting with external interested parties is participation by the Company’s employees in rule-making activity. In 2010, our experts participated in forming more than 10 ministerial decrees and/or governmental regulations, related to the order of land utilization, utilization and protection of forests, ensuring a reliable and high quality power supply, organizing the power supply for the XXII Olympics in Sochi and other issues.

Key 2010 Measures Important for Sustainable Development and Social Responsibility:

  • Elaboration on and adoption of a Policy for the innovative development and modernization of the UNEG, including creating a new generation electric grid in Russia – smart grid;
  • Adoption of the Program on implementing the Company’s 2011-2013 environmental policy;
  • Development of Federal Grid Company’s Import Replacement Program aimed at use of locally produced equipment, technologies, materials and systems;
  • Extension of the period for long term RAB-based tariff regulation on the provision of services for Federal Grid Company to 5 years;
  • Adoption of the program to create training centers for Federal Grid Company’s production personnel, with realization from 2010 till 2012;
  • Adoption of the Program to address corruption and settle conflicts of interests in the Company for 2010-2011;
  • Development of the Long-term Program for Corporate Assistance to Improve Housing Conditions for Federal Grid Company’s Employees (submitted for adoption to Federal Grid Company’s Management Board).
  • Development of a new Corporate Ethics Code (submitted for adoption to Federal Grid Company’s Management Board);
  • Conducting dialogues with external interested parties “Information disclosure on Federal Grid Company’s activities in the sphere of ensuring and managing operational safety of the UNEG.”

Charitable Aid

Federal Grid Company is a socially-oriented Company that offers a program of charitable aid to physical persons. In addition, in 2010, the Company sponsored numerous sports, cultural, scienti? c and charitable organizations in the amount of approximately RUR83 million.