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Memorandum of the controlling shareholder — PJSC Rosseti regarding controlled electric grid companies

Purpose of ownership and plans for controlling interest

Federal Grid Company – Rosseti, Public Joint Stock Company (PJSC Rosseti) is a public joint stock company with the state’s share in the authorized capital of 75.2780 % from placed shares1.

In January 2023, PJSC Rosseti, in connection with the completion of the reorganization in the form of the merger to it of Public Joint Stock Company Russian Grids, Far Eastern Energy Management Company – UNEG, Joint Stock Company, Tomsk Transmission Grids, Open Joint Stock Company and Kuban Transmission Grids, Joint Stock Company, became the parent company of the Rosseti Group, which manages the transmission and distribution grid complexes of the Russian Federation.

PJSC Rosseti owns a controlling stake in 17 key distribution electric grid companies2: Rosseti Kuban, PJSC, Rosseti Lenenergo, PJSC, Rosseti Moscow Region, PJSC, Rosseti Volga, PJSC, Rosseti North-West, PJSC, Rosseti Northern Caucasus, PJSC, Rosseti Siberia, PJSC, Rosseti Ural, PJSC, Rosseti Centre, PJSC, Rosseti Centre and Volga region, PJSC, Rosseti South, PJSC, PJSC TRK, Rosseti Tyumen, JSC, Rosseti Yantar, JSC, RES, JSC, Energetik, JSC, Electromagistral, JSC. PJSC Rosseti considers these controlled blocks of shares as strategic assets, the alienation of which is not planned.

Key asset challenges

The key task of PJSC Rosseti in the field of management of these subsidiaries is the development of the power grid complex based on advanced innovative technologies to meet consumer demand and solve the problems of socio-economic growth of the Russian Federation.

PJSC Rosseti has determined the strategic priorities for the development of the Group of Companies:

  • ensuring reliable, high-quality and affordable power supply, as well as promoting the energy security of the Russian Federation;
  • ensuring further increase in the efficiency of the core business, including through the implementation of digital technologies and innovations;
  • development of new areas of activity (non-tariff services and consumer services) through digital transformation to ensure the company’s resilience to changes in the industry;
  • implementation of sustainable development principles.

Corporate governance principles

PJSC Rosseti manages the Group’s companies in accordance with uniform corporate standards aimed at ensuring the efficiency of business processes, controlling their quality, and minimizing all types of corporate risks.

PJSC Rosseti, as the controlling shareholder, is fully aware of the importance of improving corporate governance in the Group’s companies, seeks to ensure disclosure and transparency of their activities, as well as to implement the recommendations of the Corporate Governance Code in their business practices.

PJSC Rosseti, following the best practices of corporate governance, annually ensures the presence of independent directors on the Boards of Directors of the Rosseti Group of Companies, whose shares are traded on exchanges, in a number sufficient to comply with the listing rules and corporate governance principles. To ensure the independence and objectivity of the work of the Boards of Directors of the Rosseti Group of Companies, it is planned to maintain the number of independent directors in their composition at a level not less than the current one.

Also, representatives of PJSC Rosseti take part in the annual General Meetings of Shareholders of the Group’s companies in order to build a dialogue with minority shareholders on the prospects for the company’s development.

PJSC Rosseti guarantees compliance with the market principles in the implementation of financial and economic activities by the Group’s companies.

PJSC Rosseti, as the controlling shareholder, supports the initiatives of the Group’s companies to protect the rights and interests of minority shareholders.

The dividend policy in the Rosseti Group of Companies is based on strict observance of the rights of shareholders provided for by the legislation of the Russian Federation and is focused on increasing the investment case of the Group’s companies whose securities are admitted to on-exchange trading, as well as the growth of their market capitalization.

The amount of dividends recommended for payment is set by the Boards of Directors of the companies of the Rosseti Group based on financial results, including those determined based on data of consolidated financial statements in accordance with IFRS.

1 Taking into account the placed shares of the additional issue of securities (state issue number 1-01-65018-D-109D dated 21.08.2023).

2 PJSC TRK provides services under the brand Rosseti Tomsk.