Property Management and Consolidation

Commentary-interview of the Deputy Director General for Corporate Governance and Property A.S. Starostin

In 2015, the Company achieved good results in terms of consolidation. The last three years were marked by active work: the simplified electronic application submission system has started to bring results. However, the overall economic downturn caused reduction of construction volumes, decrease in the number of potential consolidation objects, i.e., new grids of real estate developers. The electric facilities of individuals (first of all, owners of countryside houses and summerhouse communities) often do not meet the technical requirements and therefore cannot be accepted for registration on the balance.

In 2016, the Company will continue its efforts in the field of LGO grids consolidation.

In December 2015, the Company signed a long-term property lease contract with local grid operator CJSC “Oktyabrskaya Elektroset” (with annual NGR in 2016 equal to 107 mln rubles). The lease contract came into force on January 1, 2016. PJSC MOESK operates the electric grid which supplies electric power to Oktyabrsky town, residential building and commercial premises in Ramensky district and Malakhovka town in Moscow region. The property’s worth is 1,394 c.u.; it includes 7 distribution transformer stations and 28 transformer stations with the installed transformer power rating 68.5 MVA; 10-0.4 kV overhead power line with 183 km length.

The Company plans to execute a similar transaction for another municipal district in Moscow region in H1 2016.

Largest Consolidation Transactions in 2015

Stock of shares (25% + 1 share) of OJSC “Energotsentr” (acquisition)

OJSC “Energotsentr” is a subsidiary of PJSC MOESK. The Company owns 5 large feed centers in Moscow region with various degree of readiness (installed power — 909 MVA, net supply at optimum load — 3 bln kW•h, value of grid property — 4,582 c.u.).

Following the transaction completion, PJSC MOESK acquired complete control over the subsidiary (the participation interest was increased to 100%). The acquisition cost was 120 mln rubles.

Assets of Naro-Fominsk Grid in New Moscow (lease)

PJSC MOESK signed 2 lease agreements to realize the transaction: with OJSC Naro-Fominsk Electric Grid Company and JSC “Mosoblenergo” (sublease of municipal facilities of Naro-Fominsk Grid located in in Troitsky and Novomoskovsky Administrative Districts). OJSC “NESK”’s operation in the capacity of a LGO was terminated.

The consolidated property includes 14 (packaged) transformer stations with transformer capacity of 10.5 MVA, 14 km of electric transmission lines and private property — 122 packaged transformer stations with transformer capacity of 35.3 MVA, 213 km of electric transmission lines.

Summarized Indicators of Consolidation in the Frameworks of Agreements on Loss Compensation with no Consideration

In 2015, the Company consolidated 3,810 c.u. of electric grid assets, including 831 km of transmission lines and transformers with installed power of 575 MVA in exchange for no consideration and on account of receivables for delivered maintenance services.

Share of PJSC MOESK in RGR in Moscow

Share of PJSC MOESK in RGR in Moscow region

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