Annual Report 2013

Address of the Chairman of the Board of Directors

DEAR SHAREHOLDERS AND INVESTORS,

ARKHIPOV SERGEY ALEXANDROVICH
Chairman of the Board of Directors

2013 became the year of new challenges and new opportunities for IDGC of Centre. Despite the decline of the whole power sector in the previous year, Company managed to maintain the its primary direction of development aimed at implementing the strategy of the power grid complex in Russia. All the Company’s efforts were directed towards the provision of reliable, high quality and affordable power supply to the end customers.

Speaking of results achieved in the previous year, I would like to mention a significant event, which influenced all the Company’s operations. By virtue of resolutions passed by the Ministry of Energy, IDGC of Centre became a supplier of last resort in five regions of its operation. Due to professional approach of employees the Company managed to “master” this new field in a very short time, transfer electricity payments from the end customers to the generating companies and prevent the growth of liabilities to the wholesale electrical energy and capacity markets.

The Company’s efforts resulted in the increase of the overall revenues by 16.0 bln RUB (17.2%), reduction of the consumer debt for electricity transmission services by 2.1 bln RUB and decrease of electricity losses by 0.37 ppt – 9.16% of the supply to the grid.

Changes to the tariff policy introduced by the state also became one of the key events of the previous year.

A target was set to sustain economic growth by reducing the rates on services provided by natural monopolies. In our opinion, this decision fully complies with the approved strategy of the development of the power grid complex. IDGC of Centre will continue to steadily fulfill its strategic goals in 2014, in particular, to increase efficiency of operations. The Company will also draw particular attention to increasing other revenues in order to diversify income.

In 2013, the Company paid the highest dividend in its history, which amounted to 863 mln RUB. 25% of the net profit in 2012 was paid to shareholders. I believe that the positive history of dividend payments should become an additional factor in increasing investors’ interest to the Company’s shares.

In 2014 the Company is facing important tasks aimed at achieving the strategic goals. The work will be continued on taking measures for improvement in operational efficiency and increasing the reliability, quality and security of supply. The Company will continue to implement the program of consolidation of grid assets in accordance with the plan of the investment program, achieving a regular decrease in the number of the territorial grid companies in the regions of presence. IDGC of Centre has all the necessary resources to achieve these goals, and there is no doubt that we will succeed.

In conclusion, I would like to thank the management and all employees of the Company for their hard work, professionalism and achieving significant results in the area of providing reliable and high-quality services to the Company’s customers. I believe that the direction aimed at increasing the effectiveness of the Company’s performance that we took will contribute to the development of the Company and the growth of its shareholder value.

ARKHIPOV SERGEY ALEXANDROVICH
Chairman of the Board of Directors