unicredit emergin europe conference sep 2011

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Key strategic priorities for 2011 - 2015, financial results for 2010 & 1H 2011 (IFRS)

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  • 1. IR PRESENTATIONKey strategic priorities for 2011-2015,financial results for 2010 & 1H 2011 (IFRS)8th Annual Emerging European Investment ConferenceLondon, September 7-8 2011

2. DisclaimerThe information in this presentation was received from the sources, which in opinion of IDGC of Centre (the Company)are reliable. Nevertheless, we do not guarantee the accuracy of the given information, which may be short or incomplete.All opinions and estimations contained in the present material reflect our opinion at the date of publication, and aresubject to the change without any notice.This presentation does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offerto purchase or subscribe for, any shares or other securities representing shares in the Company, nor shall it or any partof it nor the fact of its presentation or distribution form the basis of, or be relied on in connection with any contract orinvestment decision.The information in this presentation includes forward-looking statements. These forward-looking statements include allmatters that are not historical facts, statements regarding the Companys intentions, beliefs or current expectationsconcerning, amongother things,the Companys results of operations, financialcondition, liquidity, prospects, growth, strategies, and the industry in which the Company operates. By theirnature, forward-looking statements involve risks and uncertainties, including, without limitation, the risks anduncertainties to be set forth in the prospectus, because they relate to events and depend on circumstances that may ormay not occur in the future. The Company cautions you that forward looking statements are not guarantees of futureperformance and that its actual results of operations, financial condition and liquidity and the development of the industryin which the Company operates may differ materially from those made in or suggested by the forward-looking statementscontained in this presentation. In addition, even if the Companys results of operations, financial condition and liquidityand the development of the industry in which the Company operates are consistent with the forward-looking statementscontained in this presentation, those results or developments may not be indicative of results or developments in futureperiodsThe Company does not bear the responsibility for consequences of use of opinions containing in the present report orapplications, or for incompleteness of the information. No person is under any obligation to update or keep current theinformation contained herein.By attending the presentation you agree to be bound by the foregoing limitations.2 3. I.Key strategic priorities for 2011-2015Chief Executive Officer Dmitry Gudzhoyan3 4. Introduction Service area 102010 458 000 8 km211IDGC of Center 2 4 MCap, RUR billion3615% of the as at September 02, 20111 BelgorodenergoRussian2 Bryanskenergo population Revenue (IFRS)61 RUR billion3 Voronezhenergo Length of lines,3654 Kostromaenergo Yaroslavl km thousand* SmolenskTver5 KurskenergoSubstation capacity, MWA6 LipetskenergoBryanskIDGC of Centre Kostroma 31 404 35-110 kV Kursk Orel7 Orelenergo Lipetsk 6-10/0.4 kV15 192 Belgorod8 SmolenskenergoTambov Voronezh9 Tambovenergo Staff number 30 90610Tverenergo11Yarenergo5 7 Number of16 775 9 shareholders** 6The Company is a monopolist tariffs are regulated by the State 1 3 *- overhead power lines 0.4-110 kV ** - as at 12.05.2011 the date of registry closed4 5. Story line 2010-201109.201011.2010 12.201001.2011 06.2011 08.201112.2004 2009 Board of directors approved5 years RAB tariff system Successful The AGSM approved USD 20.1 the Regulationshad been adopted in implementation of themillion (RUR 611 million) of on the dividend policy Orelenergo andbusiness plan and thedividend payment (the pay-out based on a systemBryanskenergo investment program for ratio 12.6%). executing a set of criteriaiRAB amounts USD 3.9 billion2010, the actual volumeThe Company fulfilled its(RUR 118 bln) of CAPEX amounted to obligations to pay dividendsDecember04 103% of the plan USDon 17.08.2011As part of RAO UES reforming401 million (RUR 12IDGC of Centre and Northbillion)Caucasus had been registered forCompany stocks moved acrossRGC integration to MICEX quotation list 2.April 07The first stage of The company acquired 5 years RAB tariff Company confirmed 7+ ratingThe final structure of the Company Smart Grid 100% of Yargorelectroset , system adopted inof corporate governance (onhad been accepted, including program is the share of IDGC of Kostromaenergo,the national scale) the highest11 regional grid companies completed in Centre in regional gridTambovenergo,among all IDGCs.of central Russia (the decision ofThe board of directors of RAOBelgorod assets increased toVoronezhenergo,Company reported 1H2011UES)90%Smolenskenergo IFRS financials, and Yargorelectroset demonstrating materialMarch 08 Affiliation of RGCs growth throughoutMay 08 Listing on MICEX and RTSthe reporting period acrosskey financial indicators5 6. Strategic goals Consolidation of TGCs and abandoned power grids inConsolidation ofregionspower grid assetsManagement of inefficient owners power grids Settlement of the "last mile" and the tariff rates growth in1 the regions of TGCs Reliable sources of technical and commercial lossescalculation system establishedImprovement ofquality and reliabilityReplacement of lines and transformers on the basis ofof customer serviceseconomic expediency Implementation of the innovative projects (smart2 grid, smart metering) Increasing of the reliability indicators (SAIDI, SAIFI)Improving theefficiency of operatingWorking in accordance with the RAB methodologyactivities Assets management program (unified technical policy) Improving the procurement process3Optimization of the management structure Improvement of the Companys equity story Shareholder value growth through meeting strategic goals 1-3; Share liquidity program implementation; Possible privatization in 2013-20146 7. Company structure and key shareholdersRussian FederationShare capital 53.69% structure, % IDGC Holding Minor shareholdres 50.23 15.90 50.23% 49.77%*% %Group of companies Free float IDGC of Center, JSC 30%8.40%3.20%Subsidiaries 100%2.73% 18.091.45% % Others Yargorelectroset, Energy serviceEnergetik, JSC IDGC Holding, JSC JSC company, JSC Jamica Limited Jamica Limited Yargoreletroset, JSC is theThe main activities are 51% largest Territory Grid providing saving energy Organization in the Centralservices , energy THE BANKof New York MellonThe Bank OF NEW YORKMELLON11 operatingYarESK, JSCFederal Region. The result of acquisition of the 100%efficiencyIMMENSO Enterprises LimitedImmenso ENTERPRISESbusiness stake is that IDGC of Center LIMITED now controls more than 90%units-November of power grid assets in theEnergosoyuz Holdings Limited 11, 2009Yaroslavl regionRusenergo Fund Limited Energetik, JSC acquired the controlling stake of YarESK, JSC, which is target companyfor consolidation of power grid assets in Yaroslavl region* - including the State share 0.46%7 8. Share capital structure and corporate governanceSupreme governing body: General Meeting ofAuditorShareholdersDeveloped corporateStrategicgovernance Auditgoverning body:practice, leading positCommissionionOuter control for financialBoard of Directors 5 Committees:among IDGCs -activities of the CompanyCommitteeManagement boardon Strategy Chairman of theCommitteeManagement BoardHistory of IDGC of Center corporateon Audit General Directorrating on the national scale Committeeon personnelNRCG**Confirmed (7+)August 11 Internal Control and CommitteeUpgraded (7+) January 11Audit Department on reliabilityConfirmedJuly 09ConfirmedFebruary 09CommitteeAssigned September 08 Inner control for financialon TC* activities of the Company** National rating of corporate governance * - technological connection8 9. M&A projects - grid assets integration TGCs in IDGC of Centre service area Amount of other TGCs = 441 120 The other TGCs average share in revenue 102in IDGC of Centre service areas 20%; 100 8070 Required Gross Revenue (RGR) of the 62 60 53Company due to the assets consolidation39in regions may increase to RUR 10 billion40 25 26by 2015, RGR share may grow by 97%; 14 18 23 20 90 One of the key goals of the Company is the Belgorod VoronezhBryansk TambovSmolenskKurskTver LipetskKostroma Orel Yaroslavlintegration of power grid assets that willallow: increasing the reliability level of power supply enlarging the power distribution sales market Share of the Company in the power improving the quality of customer service transmission market, 2007-2015F balancing the tariff on power distribution 2007 2008 2009 2010 2015FMarketshare in83% 83.6%83.8% 84% 97%terms ofmoney9 10. Integration key steps Providing monopoly on power grid services market in the regions ofpresence with more than 97% share; Target/ Long-term target program for the consolidation of power grid assets have Programbeen developed and approved (power grid assets consolidation plan for2011 - 2015) Company consolidates the assets primarily in 3 ways: acquisition ofpower grid, long term property rent, purchase of shares of power grid Methods andcompanies; advantages The basic advantages of consolidation are as follows: implementation of consolidation of a unified technical policy, the development of a unified schemeof long-term development of power grids, improving the reliabilityof electricity supply to consumers of all categories, increasing ofpower grid capacity It is planned in 2011 to consolidate municipal power grid assets of the Plans forVoronezh region, to acquire the property in the Lipetsk region and to 2011-2015consolidate the assets in the Tver region; Program provides working with more than 5 thousand owners10 11. Dynamics of lossesOutput Change,Dynamics of losses, Year % 2006-2011 (F) kW (thousand) p.p. 12%20066 2