RusHydro Presents Results of BoD Meeting

OREANDA-NEWS. June 25, 2015. Board of Directors took note of the information on the status of implementation of four priority projects in the Far East of Russia: Blagoveschenskaya TPP (2nd stage), Yakutskaya TPP No.2 (1st stage), TPP in Sovetskaya Gavan’, and Sakhalinskaya TPP No. 2 (1st stage), as of March 31, 2015.

All projects had been approved by the Federal agency of assessment (FAU Glavgosexpertiza), technological assessment and price audit of projects had been completed, the general contractors for each project had been selected. The 2nd stage of the Blagoveschenskaya TPP is 60% ready. The construction of the plant should be completed in the end of 2015. The main facilities of the Yakutskaya TPP No.2 and TPP in Sovetskaya Gavan’ are being installed.

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The Board of Directors approved the amendments to the annual procurement plan of RusHydro for 2015.

The amendments provide for changes to implementation and funding plans of projects included in the Company’s comprehensive modernization program, target values of the program remained unchanged.

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The Board of Directors approved the report on interim results of 2015 business-plan execution for the 1st quarter of 2015 (including reports on implementation of investment program (including comprehensive modernization program) and annual procurement plan for the 1^st quarter of 2015).

Electricity generation and output by RusHydro’s power plants in the 1^st quarter of 2015 totaled 101.2% and 102.1% of the planned volumes respectively.

Financing of the investment program in the 1st quarter of 2015 amounted to RUB 12.16 bn or 100% of funding plan for the 1^st quarter of 2015 and 19% of the annual plan. Actual financing of technical rehabilitation and modernization projects in the 1^st quarter of 2015 totaled RUB 2.01 bn or 100% of the plan for the 1^st quarter of 2015 and 7% of the annual plan of RUB 30.75 bn.

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The Board of Directors approved the report on the Company’s Management performance in 2014.

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The Board of Directors approved promissory notes exchange agreements between RusHydro and Sulak HydroCascade, qualified as interrelated interested party transactions, and determined the price limit of these agreements in the amount of RUB 156 mn.

RusHydro acquires the promissory notes of Sberbank of Russia and/or Gazprombank and exchanges them for own promissory notes of Sulak HydroCascade in the amount of up to RUB 156 mn to use them to pay for construction of the Gotsatlinskaya HPP. The promissory notes of Sulak HydroCascade will be paid from funds received by Sulak HydroCascade from electricity and capacity sale, or from capitalization of debt.

The Board of Directors approved an Addendum No. 2 to the agreement between RusHydro and NP Hydropower of Russia, qualified as interested party transaction. The price of the agreement remains unchanged.

According to the agreement NP Hydropower of Russia should develop the list of the company’s standards. The Addendum provides for small changes to the initial list of standards and schedules of works.

The Board of Directors approved sale and purchase agreement(s) for non-interest bearing promissory notes in the amount of RUB 261,510,239.57 from VolgaHydro to RusHydro, qualified as interested party transaction(s).

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The Board of Directors approved the performance reports of Chairmen of Committees of the Company's Board of Directors for 2014 corporate year.

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The Board of Directors approved the amended corporate governance Code of RusHydro.

The amended corporate governance Code complies with the main principles and guidelines of the Corporate Governance Code approved by the Bank of Russia, the specific character of RusHydro’s activities, as well as the applicable corporate governance practice of the Company.

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The Board of Directors approved the list of measures aimed at reduction of operating expenses, their target values and changes to the long-term development program of RusHydro Group.

Key areas of operating activity improvement are:

• improvement of energy efficiency of operating assets;
• reengineering of business processes and control system organization;
• creation of assets life cycle management system (equipment, buildings, facilities);
• automation of business processes.

Measures aimed at reduction of operating expenses of RusHydro for 2015-2019 provide for reduction of costs to the level that allows for safe operation of generating facilities.

RusHydro’s measures aimed at reduction of operating expenses include:

• decrease in costs of materials as a result of tender procedures;
• decrease in costs of operational works and services (decrease in costs of services through reduction of prices of equipment and contractors’ materials, reduction of terns of the equipment outages);
• decrease in labor expenses through optimization of the Company’s organizational structure and business processes;
• decrease in costs of non-operating services and other expenses (reduction of number of consulting services through alignment and automation of business processes, decrease in communication costs).

Changes to the long-term development program of RusHydro Group provide for inclusion of key performance indicator “Reduction of operating costs” by not less than 2% annually for 2015-2019 and methodology for its calculation.

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The Board of Directors resolved to:

1. Add the following point to “Preferences” section of procurement regulation: “A coal should be purchased from coal producers; the coal delivery agreements should be valid for not less than 1 year”.
2. Commission Evgeny Dod, Chairman of the Management Board – General Director of RusHydro, to include the abovementioned point to the procurement regulation of the Company’s subsidiaries and affiliates through September 1, 2015.

The documents are amended in order to comply with the government’s guideline of June 1, 2015.