Address of the General Director

History

DEAR SHAREHOLDERS,


In 2011, JSC “MOESK” strengthened its leading positions among the companies of the Russian power grid sector by successfully implementing a wide range of measures to improve the quality and reliability of power supplies to consumers in the Moscow area.

The past year was devoted to the implementation of a large-scale campaign to prevent potential major technological disruptions at facilities and on power transmission lines. The Company has fully taken into account the lessons learned from dealing with the aftermath of abnormal weather conditions that affected the region in December 2010 and January 2011. The problems that were revealed were subjected to a thorough analysis and the results formed the basis for the program to prevent emergencies on power transmission lines.

As part of this program, the Company’s branches have set up 190 mobile disaster recovery teams equipped with all-terrain vehicles. The specialized vehicle fleet has been considerably increased. Up to 80 mobile power stations may be involved in dealing with potential emergencies at JSC “MOESK” branches, including 50 power stations with lower power of 10 kW, 140 hydraulic hoists and 258 field service team vehicles. The size of crews operating feeder and distribution centers were increased, as were the standards for the emergency backup of equipment and materials.

« The COMPANY HAS FULLY TAKEN INTO ACCOUNT THE LESSONS LEARNED FROM DEALING WITH THE AFTERMATH OF ABNORMAL WEATHER CONDITIONS THAT AFFECTED THE REGION IN DECEMBER 2010 AND JANUARY 2011 »

One of the most important aspects of the program was the clearing of firebreaks. In 2011, more than 5,000 hectares of routes for overhead lines with capacity of 0.4-220 kV were cleared of trees and shrubs. Firebreaks for overhead lines with capacity of 35-220 kV covering an area of 2,420 hectares and overhead lines with capacity of 0.6-10 kV covering an area of 452 hectares were brought into regulatory compliance. Non-insulated wires were also replaced with self-supported insulated conductors on 1,401 kilometers of overhead lines with capacity of 0.4-10 kV passing through woodlands and populated areas.

The Company allocated 5.2 billion rubles for the repair and modernization program last year. This is a significantly higher amount than in 2010.

As a result of all the aforementioned measures in 2011, the number of technological disruptions in the zone of responsibility of JSC “MOESK” declined 12% in 2011 compared to 2010. Therefore, we now have the right to speak not only about improved preparedness for weather challenges but also a respectable margin of safety in the power distribution grid of the nation’s capital and the surrounding area.

In 2011, due to the proper arrangement by Company management of the priorities for the main areas of activity, improvements were recorded in all key financial and operating indicators: revenue totaled 126.5 billion rubles, up 14.4% from the previous year, net profit was 17.1 billion rubles (growth of 9.2%), productive electricity output increased to 75.5 billion kWh, and losses from overall output in the grid fell to 10.33%. The positive dynamics in key financial and operating indicators demonstrate the stable position of JSC “MOESK.”

The Company successfully implemented an ambitious investment program during the reporting year. Capital investments totaled 110% of the projected amount, or 29.5 billion rubles.

« The NUMBER OF TECHNOLOGICAL DISRUPTIONS IN THE ZONE OF RESPONSIBILITY OF JSC “MOESK” DECLINED 12% IN 2011 COMPARED TO 2010 »

Among the main projects completed in 2011, we must note the startup of the MGU 110/20 kV substation, which is equipped with the latest innovative equipment that fully meets the requirements for reliability, efficiency and safety.

JSC “MOESK” continued the policy of improving its focus on customers in 2011. The Company connected almost 15,000 consumers to power grids in Moscow and the Moscow Region last year, while customer relations departments processed some 400,000 applications from consumers of the Company’s services. In 2011, the Company implemented a program to improve customer focus, part of which involved establishing an information portal for grid connections. With this new resource, now consumers with external access may not only obtain reliable and current information about the load of and ability to connect to the feeder centers of JSC “MOESK” but also detailed, almost step-by-step instructions on the grid connection procedure, a package of the necessary documents and their registration. One feature of the new resource is the opportunity to submit an application by email and monitor its progress online through all the different stages. In order to improve the quality of services, the JSC “MOESK” Customer Service Center has switched to a twelve-hour operating mode. As part of the customer focus campaign, the Company has also established an anti-corruption commission and adopted a Code of Corporate Ethics.

« THE COMPANY SUCCESSFULLY IMPLEMENTED AN AMBITIOUS INVESTMENT PROGRAM DURING THE REPORTING YEAR. CAPITAL INVESTMENTS TOTALED 110% OF THE PROJECTED AMOUNT, OR 29.5 BILLION RUBLES »

In 2011, the Company adopted the innovative development program for 2011-2016 and the period until 2020. Total financing for the program should amount to 86.8 billion rubles before 2020. The goal of the Company’s innovative development has been defined as improving the economic and energy efficiency of power supplies to consumers by ensuring the innovative development of JSC “MOESK” through the establishment of modern power grid infrastructure that complies with global standards.

The Company is already implementing real innovative projects today. One of them, MOESK-EV, aims to set up a network of charging stations for electric transport. JSC “MOESK” fully prepared the first phase of a charging station network for electric vehicles in Moscow in late 2011 and opened the first stations in early 2012.

Last year, the JSC “MOESK” quality management system underwent a successful recertification audit for compliance with the requirements of the international standard ISO 9001:2008. The JSC “MOESK” system for environmental management, occupational safety and professional health and safety also confirmed its compliance with the requirements of the international standards ISO 14001-2004 and OHSAS 18001-2007. The scope of certification was expanded for the first time: along with the Company, its branch Moscow Cable Networks was also certified.

Summing up the Company’s results in 2011, we can confidently say that the balanced investment program as well as the programs for energy conservation, risk management and lean manufacturing, integrated communication and international cooperation measures, and the accumulated staff potential – all of these components taken together will enable JSC “MOESK” to successfully fulfill its objectives in the future and remain one of the leading companies in the energy industry.

Respectfully,
General Director
A.P. Konovalov