Address of the Director General of JSC Lenenergo A.V. Sorochinskiy

We are leaders in many areas of activity. Still it is necessary for us to hold these positions and to constantly improve. Today we are mobilizing all our efforts for very serious, complicated, but interesting tasks, implementation of which is resolved into one goal – JSC ­Lenenergo should become one of the most efficient power grid companies.

Dear Shareholders!

The past year can be considered with good reason successful for JSC Lenenergo. It is the year when very serious further steps on reliability strengthening were taken. From year to year we increase the volumes of financing of the repair program for which in 2013 RUB 963 mln were allocated. As in previous periods the Company has developed the program of supplementary technical measures in excess of the repair program which financing made another RUB 509 mln for ensuring reliable power supply of consumers. I would like to note that we have increased total financing of the repair program and the program of supplementary measures in 2013 compared to 2012 by 20%, and as compared with 2010 funding was increased almost twice.

In 2013 JSC Lenenergo was the first company of Rosseti holding which established a new division, Situational Analysis Center (SAC), which task is to organize both the work on prevention of emergency situations, and effective interaction, attraction and arrangement of necessary forces for operative elimination of technological violations.

I believe that today the Company is ready to the most effective work in case of emergency situations that was especially vividly reflected in mass hurricanes in the Leningrad Region in November and the first half of December. JSC Lenenergo obviously turned out to be more efficient and operative in comparison with our neighbors, including foreign countries – Finland and Estonia.

Another indicator is reduction of cable lines in St. Petersburg requiring renovation. Three years ago we had 2,100 damaged lines and, as a result, serious problems with reliability in the city. by the end of 2012 due to competent organizational decisions we managed to reduce the number of damaged lines to 1,300, and for 2013 we set the objective to reduce this indicator to 600, but yet in November we executed even more than we planned for 2014.

Implementation of the program of technical re-equipment and management solutions have enabled us to reduce the average time for elimination of technological violations in St. Petersburg for the last two years from 50.4 minutes in 2010 to 45.6 minutes in 2012. by the end of 2013 this indicator was already 43.2 minutes. All of this suggests that the work we have done in recent years within the program to enhance reliability, maintenance and investment programs were absolutely reasonable and proper steps.

Last year the Company made considerable progress from the viewpoint of capital construction: today we are building power facilities cheaper than in the Central regions, we exceed the investment program both on distribution networks and large objects. The total volume of development of capital investments in 2013 amounted to RUB 18.7 bn, input of new capacity – 907 MVA.

Within implementation of the investment program in 2013 Lenenergo reconstructed six substations of 110 kV in St. Petersburg, put in operation a new modern distribution complex of 10 kV as a part of the substation Rzhevskaya. Two substations of 35 kV and four substations of 110 kV were reconstructed in the Leningrad Region. Modernization of these energy sources significantly improved the reliability of power supply of consumers, enabled to connect new subscribers, and reduced the rate of depreciation of fixed assets.

In 2013 the project of development of network 35 kV in the Petrogradsky district, one of the largest projects in the modern history of the Company, was launched. The solution we have worked out on development of the distributive network is unique for the downtown of St. Petersburg. Such scheme of power supply is applied for the first time in the conditions of a megalopolis. The project will allow not only to ensure the enforcement of existing commitments on technological connection in the amount of 40.8 MW, but to create additional reserve for connection of applicants in the amount of 38 MW. I am pleased to note that the project developed by Lenenergo has become a winner of two competitions in the category «Best innovative project» of the regional contest «Made in St. Petersburg» and the Federal contest «Made in Russia».

Last year pursuant to the approved plans JSC Lenenergo proceeded with implementation of one of the most important for the energy system of St. Petersburg program– Renovation of cable lines 6-110 kV. Such a large and technically complex project of comprehensive upgrade of the cable network is being implemented in Russia for the first time. in 2014 we will complete the first stage of the program. 22 cable lines of 6-110 kV with the length of nearly 110 km will be reconstructed. This will significantly improve the condition of the municipal power supply system, and will enable to provide uninterrupted supply of electricity to consumers and to connect new load needed for the region’s development.

Implementation of global programs which will improve the manageability of the network also proceeds. The first of them is telemechanization of substations. Lenenergo creates a system of online transmission of all processes which occur in the network. This is an unprecedented project – we will be the country’s first grid company which has equipped all power sources 35-110 kV with telemechanics systems. Another large-scale project is modernization and optimization of the system of operative-technological management of networks which main goal is to construct a transparent and clear structure of management of the power supply system, and to reduce time for elimination of technological violations.

Net income of JSC Lenenergo in 2013 amounted to RUB 425 mln, and the volume of productive supply of electric power to the grid totaled 29,613 mln kWh. in 2013, the international rating agency Moody’s Investors Service affirmed credit rating of JSC Lenenergo at Ba2 and national rating at Aa2.ru. The Company received a high rating in terms of efficiency. The rating outlook is stable as Moody’s believes that JSC Lenenergo has sound and prudent plans to develop and adjust its business in close interaction with its shareholders taking into account the availability of funding, tariff evolution and the wider economic environment.

In 2013 as in previous years, the Company management gave particular attention to the issues of optimization of business processes in the field of technological connection. Much of what we have done in 2011-2012 is used today by most of the country’s grid companies. Therefore, we do not stop and continue to improve the processes of technological connection, perform activities on the road map to improve energy infrastructure. We understand today where our bottlenecks are: best of all and more qualitatively to construct and optimize the processes of technological connection of both individuals, and small and medium business.

At the end of last year JSC Lenenergo reached an essentially new standard of connection to electric networks– we have launched the project on technological connection in the Leningrad region without visits to the grid organization.

Now residents of the region should only call by phone and leave an application. All other stages, from development of specifications to supply of voltage and opening personal accounts in the sales company, Lenenergo will execute without calls of the client. Such a simple procedure of technological connection to power grid was introduced for the first time in Russia. We plan to expand this practice to St. Petersburg as well.

With a view of improving customer focus in 2013 JSC Lenenergo created the Council of consumers of services of the grid company. It is a collegial body composed of the heads of the network company and representatives of the main groups of consumers. The Council’s function is formation of expert opinions on activities, proposals on improving the regulatory framework, and introduction of initiatives of JSC Lenenergo and JSC Rosseti into public associations and associations of the business community.

Today JSC Lenenergo continues to be an active participant of the national project of the Agency for strategic initiatives to increase access to the energy infrastructure of Russia. ASI chose our Company as a partner in the development of mechanisms of the project at the national level, since in some areas the development of Lenenergo comes with a faster pace relative to the road map of this project.

Last year was quite difficult but also successful for the company. JSC Lenenergo has become more strong, smart and stable. We are leaders in many areas of activity. Still it is necessary for us to hold these positions and to constantly improve. Today we are mobilizing all our efforts for very serious, complicated, but interesting tasks, implementation of which is resolved into one goal – Lenenergo should become one of the most efficient power grid companies.

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