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

Ownership purpose and plans for controlled blocks of shares

PJSC Rosseti is a public holding company with the state’s share in the authorized capital of 88.04 %, created in accordance with Decree of the President of the Russian Federation of 22 November 2012 No. 1567 to increase the efficiency and development of the electric grid complex of the Russian Federation, as well as coordinate work on management of this complex through subsidiaries and affiliates.

PJSC Rosseti owns a controlling stake in 14 key distribution electric grid companies1 (PJSC Rosseti Kuban, PJSC Rosseti Lenenergo, PJSC Rosseti Moscow Region, PJSC Rosseti Volga, PJSC Rosseti North-West, PJSC Rosseti Northern Caucasus, PJSC Rosseti Siberia, JSC IDGC of Urals, IDGC of Centre, PJSC, IDGC of Centre and Volga Region, PJSC, PJSC Rosseti South, PJSC TRK, JSC Rosseti Tyumen, JSC Yantarenergo) and 1 transmission electric grid company (PJSC FGC UES).

PJSC Rosseti considers the specified controlled blocks of shares as strategic assets, the disposal of which is not planned.

Key tasks regarding the assets

The key task of PJSC Rosseti in the management of these subsidiaries, according to the Development Strategy of Rosseti’s group of companies for the period up to 2030, approved by the Board of Directors of PJSC Rosseti (Minutes of 26 December 2019 No. 388), is the development of the power grid complex based on advanced innovative technologies to meet the needs of consumers and the Russian economy, taking into account the increase in the profitability of shareholders and the possibility of professional growth of employees.

PJSC Rosseti identified the strategic development priorities of the Group:

  • provision of reliable, high-quality and affordable power supply in the new digital environment;
  • ensuring further increase in the efficiency of the core business for electric energy transmission;
  • promotion of legislative initiatives aimed at developing the industry;
  • maintaining a balance of interests for all parties: the state / consumers / shareholders / investors;
  • 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;
  • promoting energy and environmental safety and security.

Corporate governance principles

PJSC Rosseti manages the companies of the group in accordance with common corporate standards aimed at ensuring the efficiency of business processes, controlling their quality, minimizing all types of corporate risks.

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

Following the best corporate governance practices, PJSC Rosseti annually ensures the presence of independent directors on the Boards of Directors of Rosseti’s Group of Companies, whose shares are traded through on-exchange trading, in an amount 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 Rosseti’s Group of Companies, it is planned to maintain the number of independent directors in their composition at a level not fewer than the current one.

Representatives of PJSC Rosseti also take part in annual general meetings of shareholders of the group’s companies to build a dialogue with minority shareholders on prospects for the company’s development.

PJSC Rosseti guarantees adherence to market principles in the conduct of financial and economic activities by the companies of the group.

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

PJSC Rosseti pursuant to Order of the Government of the Russian Federation dated 29 May 2017 No. 1094-r undertakes to ensure that no less than 50 % of net profit, determined according to data of financial statements, including consolidated ones, compiled in accordance with International Financial Reporting Standards, taking into account the adjustment of the net profit provided for by the specified Order of the Government of the Russian Federation, to be allocated to pay dividends on shares of the group’s companies.

[1] PJSC IDGC of North-West provides services under the brand Rosseti North-West.

JSC IDGC of Urals provides services under the brand Rosseti Ural.

IDGC of Centre, PJSC provides services under the brand Rosseti Centre.

IDGC of Centre and Volga Region, PJSC provides services under the brand Rosseti Centre and Volga Region.

PJSC TRK provides services under the brand Rosseti Tomsk.

JSC Yantarenergo provides services under the brand Rosseti Yantar.

PJSC FGC UES provides services under the brand Rosseti FGC UES.