OJSC Kubanenergo
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Address to Shareholders by the General Director

Dear Shareholders, Partners, and Colleagues!

The absolute priority of OJSC Kubanenergo’s industrial and economic activities in 2014 was to ensure reliable operation of the distribution grid complex of the region during the 2014 Olympic and Paralympic Winter Games in Sochi.

The Company complied with all its obligations for uninterrupted power supply of urban infrastructure in Sochi during the Games, as confirmed by numerous high awards and thanks letters for the Company’s hard work and professionalism of its management and employees.

The year 2014 was marked by Company projects aimed at solving strategic tasks of improving the accessibility of energy infrastructure for consumers, development of customer service, reconstruction of the electric grid complex and the construction of new power facilities.

By the end of the reporting period, the Company mastered an investment program in the amount of RUB 9.177 bln. The volume of financing of design and survey, construction and installation, commissioning works, and acquisition of equipment and materials amounted to RUB 8.442 bln. The company commissioned more than 500.2 MVA of transformer capacity, and more than 1.5 thousand kilometers of power lines.

Gavrilov A.I.

The volume of capital investments on Olympic power facilities amounted to RUB 6.301 bln without VAT, and for financing RUB 4.771 bln, including VAT. Altogether more than 374.8 MVA of capacity was implemented and 1.1 thousand kilometers of power lines.

Electricity supply to the Company’s network amounted to 21.572 billion kWh in 2014. The increase from the previous year in the amount of 730.8 million kWh (3.5%) was due to an increase in demand for electricity due to the active development of the region, especially in the Sochi power district. The normative ratio of power losses for 2014 was fulfilled.

In the reporting year, the Company performed 16.8 thousand contracts for technological connection for a total capacity of 543 megawatts, which is 1.7% more than planned. The company connected the following applicants to the power grids: OJSC INTER RAO – Electric Power Plants (80 MW), CJSC PDK Apsheronsk (22.8 MW), LLC Mobile Gas Turbine Power Plant (112.82 MW), LLC Novocity (8.7 MW), CJSC PIK-Kuban (4.3 MW). In 2014, the Company entered into more than 29,500 contracts for technological connection to electric networks for a total capacity of 591 megawatts, for a total value of RUB 1.187 bln (without VAT). The amount of money collected amounted to RUB 1.444 bln, which is 18% more than planned.

An important trend in the Company’s industrial activity of is the implementation of the Program of energy saving and energy efficiency – reducing technological losses, reducing energy consumption for production and economic needs. In 2014, the Company obtained an effect in terms of reducing the loss of electricity to 75.925 million kWh, which is RUB 115.6 mln, and reducing costs for the purchase of energy resources for production and economic needs of RUB 0.506 mln.

In the context of the implementation of measures required to ensure reliable power supplies to the XXII Olympic Winter Games and XI Paralympic Winter Games in Sochi, the loss from the financial and economic activity of OJSC Kubanenergo in the reporting period amounted to RUB 3.633 bln.

During the reporting year, the Company continued implementation of the Innovation Development Program. The Company conducted industrial exploitation and implementation of innovative production activities and high-tech products, and conducted cooperation with universities, research organizations, and small and medium-sized businesses. As part of the Rugrids-Electro 2014 international electric power forum, the company was awarded 3rd place for the best innovative project implemented.

The Company carried out technical upgrading, reconstruction, repair and maintenance of power facilities within the established regulations and terms of volumes. The repair program for 2014 was carried out by more than 100%.

The Company spent RUB 142.8 mln on labor protection measures in 2014, which is RUB 17.9 mln more than in 2013. The unit costs for labor protection per employee in 2014 amounted to RUB 17.5 thou rubles, which is RUB 2.3 thou more than in 2013.

In order to improve the quality of customer service, the Company expanded the functionality of the “Personal Account” interactive service on the Company website in 2014. Using on-line services, consumers can apply for replacement and installation of electricity meters, and enter their current meter reading.

A priority activity of the Company during the reporting period was to work with staff to create conditions for improving workers’ skills. The Company has 24 agreements on cooperation with educational institutions of vocational education. The Company’s key vocational partners are NOU Kubanenergo Training Center, South-Russian State Technical University named after M.I. Platov, FGBOU VPO Azov-Black Sea State Agroengineering Academy (city of Zernograd), FGBOU VPO Russian Academy of National Economy and Public Administration under the President of the Russian Federation, FGBOU VPO Belgorod State Technological University in the name of V.G. Shukhov, Moscow State Technological University named after Bauman, and others.

The Company faces challenges for further development, modernization and expansion of electricity infrastructure in the region in 2015. The main focus will be on the Sochi, South-West and Central Power Districts. The priority areas in the field of grid connection are development of the Temryuk District and the Novorossiysk Industrial Zone. It will be necessary to carry out not only the timely commissioning of new and reconstructed facilities, but also to improve the efficiency of key business processes in the company and make them profitable.

Overall, based on year-end results, OJSC Kubanenergo fulfilled its main task – to provide reliable, high-quality power supplies to consumers, and strengthen the company’s image, which has great significance for the stable social and economic development of the Krasnodar Territory and the Republic of Adygea.

 

General Director
OJSC Kubanenergo                                                                                            A.I. Gavrilov