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Strategy

Currently “IDGC of the South” JSC is considered one of the largest and the most dynamically developing power companies of Southern Federal District, moreover, the youngest one. Correctly and competently setting goals and directions of the Company’s development as well as ways and means of achieving the goals are of significant importance for the further not less successful existence in the sphere of electric utility industry.

The most important targets for developing “IDGC of the South” JSC are as follows:

Switching to tariff system by the method of return on invested capital (RAB-regulation);
Modernization and technical upgrading of electric power facilities;
Power efficiency and power saving;
Introducing management of risks arising from core activities;

Core operation is electric power transmission. Thus, power efficiency of transmission and power saving are prioritized by the Company and the Country’s economic policy (as a whole) being major strategic guidelines.

The main directions of transmission efficiency improving are as follows:

Increase in volume of services provided;
Elimination of excessive losses;
High-quality electricity metering providing true data on value of services provided exact prediction of productive supply value and rational planning of investment programs.

In implementation of power saving policy and power efficiency presupposes reserves for modernization of economy and for recovery from economic crisis consequences.

One of the ways to increase power transmission volume is to connect new consumers or to increase watt consumption of connected consumers. Technological connection gives opportunity to use the most essential form of communal infrastructure, it is a complex set of organizational and technical activities, aimed at provision of transmission to consumers’ power receivers.

Technological connection is a fundamental point, making development and prosperity available.

Technological connection activity is aimed at meeting power demands of expanding economy of the South of Russia, switching to unified scheme of payment for technological connection and arrival at unity of common interests in establishing the cost of technological connection of consumers to electric grids. Implementation of the goals provides attracting investments which act as a fillip to the Company’s development.

To provide proper level of fixed assets replacement as well as to introduce effective mechanism, which is vital for further trouble-free grid operation and for upgrade of the existing grid facilities, innovative solutions in the sphere of electric power state regulation are required today. And the most effective way of these problems solution is to adopt RAB-regulation (rate regulation by the method of return on invested capital). Introduction of RAB-regulation is first and foremost necessary to attract large-scale investments in distribution grids. RAB-regulation will make it possible for the Company to raise required capital today, and for consumers – to pay the equity not immediately, but in the course of a long period.

To raise the quality of technical policy in investment projects implementation, modernization and technical upgrading of electric power facilities “IDGC of the South” JSC developed “Regulation on Technical Policy of “IDGC of the South” JSC, Interregional Distribution Grid Company” (hereinafter referred to as Regulation). The concept of Regulation presupposes implementation of managerial, organizational and technical decisions, which are aimed at improving power efficiency, security and operational reliability of existing grids and grids under construction.

As resulting from fulfillment of the scheduled tasks any organization has different in their number and amount of finance risks. To avoid adverse impact of the risks “IDGC of the South” JSC is working on implementing risk management system. The policy (of risk management) is based on the best practice of risk management in power-generating sector and takes into account provisions of conceptual foundations of COSO ERM risk management,

Standard ISO/IEC Guide 73:2002 and of other world recognized documents in the sphere of risk management. The system of risk management provides reasonable assurance of achieving the strategic goals, preservation of assets and maintenance of the business efficiency through identification and evaluation of material events affecting the Company’s activities, as well as through monitoring of activities to control the risks.

It’s common knowledge that power engineering is the engine for progress and it is vital for economic advance always being an important factor of health, security and prosperity of the Company. “IDGC of the South” JSC jointly with “KTK-P” CJSC carries out commissioning of new facilities by constructing new substations in Republic of Kalmykia that is:

110 kV “HПС 2” Substation with 2x40 MW installed transformer capacity;
110 kV “HПС 3” Substation with 2x40 MW installed transformer capacity.

Taking part in economic development of regions in the area of responsibility “IDGC of the South” JSC stays aware of the social sphere as well. Not only overhaul of substations, increase in thickness of power transmission lines but construction of new power centers, laying of overhead and cable lines essential for technological connection of power receivers of such facilities as hospitals, rest-homes, buildings of education establishments, neighborhood units (houses and cottages), shopping centers are as well carried out in Astrakhan, Volgograd and Rostov regions. “IDGC of the South” JSC interacts with executive authorities in constituent entities of RF (Regional Administrations).

“Agreement on Cooperation between Rostov Region Administration and “RAO UES of Russia” JSC to Develop Electricity System of Rostov Region and Ensure Reliable Power Supply to Its Consumers” as well as “Program of Priority Measures for Construction and Reconstruction of Electric Power Facilities for the Period of 2012 to Avoid Power Shortages and Improve Reliability of Electricity Supply to Consumers of Rostov Region” were signed in Rostov region on June 30, 2008.

To provide secure and reliable power supply of consumers in Republic of Kalmykia Agreement on Cooperation between Administration of Kalmykia Republic and “IDGC of the South” JSC in case of supply interruption and under the threat of power failure in the region was made on November 22, 2007.

“IDGC of the South” JSC in cooperation with “IDGC Holding” JSC is presently carrying out work on making agreement on cooperation with Volgograd Region Administration. The agreement is aimed at mutually beneficial cooperation of the parties in providing reliable consumer supply and creating conditions for technological connection of consumers in Volgograd region to the grids. The subject of the agreement is creating necessary conditions for construction, overhaul, retrofitting and proper maintenance of the facilities in regional distribution grid complex to achieve the above objective.

Apart from that, “IDGC of the South” JSC is a part of coordinating body in charge of elaborating Programs and Schemes for the Development of Regional Electric Power Industry in the context of performance of Russian Federation Government Resolution No. 823 dd. 17.10.2009, which approved “Procedure for Elaboration and Approval of Schemes and Programs for Prospective Development of Power Industry in Constituent Entities of Russian Federation”.

Contributing to elaborating above mentioned schemes and programs the Company develops proposals for reconstruction and construction of electric power facilities; the proposals being based on assessing power demand of the regions, including elimination of bottlenecks of the power system, which complicate basic activities of the Company.

Development strategy
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