OAO Mosenergo - Annual Report 2010


	Address by the Chairman of the Board of Directors The key priority in the activities of Mosenergo - the largest territorial generating company in Russia and the largest supplier of heat in the world – is to ensure reliable supply of heat and electricity to the consumers in Moscow and Moscow region. Last year the power plants of the Company generated 65 billion kWh of electricity, which is 5.2% more than in 2009. Heat delivery increased by 6.8% to 69.9 Gcal. The share of generating capacities commissioned during the recent years in the total output of Mosenergo has been growing steadily. Electricity generation at the new power units grew in 2010 by 10.2% and amounted to 8 billion kWh. Construction of highly efficient combined cycle units with the efficiency in excess of 50%, implementation of the state-of-the-art power engineering technologies, replacement of the aged equipment are among the priority tasks of the Company. Achieving these tasks greatly improves technical performance of the power units, enhances fuel consumption efficiency and minimizes the environmental impact of the power plants. The Company is already a leader of the Russian power industry in terms of the rate of commissioning of new generating capacities. In 2007-2008, three new combined cycle steam-gas power units with the total rated power of 1325 were commissioned at the power plants of Mosenergo; in 2010 construction of the SGU-420 Unit №8 of TPP-26 was completed. As of today, this is the most modern combined cycle plant in Russia, with the efficiency as high as 59%. Construction of the SGU-420 unit at TPP-12, SGU-420 units at TPP-16 and TPP-20 and GTE-65 gas turbine facility at TPP-9 pursuant to the capacity rendering agreements signed during the last year will result in the increase of the total installed capacity of the Company by 1120 MW. These power units are scheduled to be commissioned in 2012-2014. The measures taken to reduce operational costs, ensure financial stability and improve personnel management methods and instruments were also aimed at improving overall efficiency of the Company. Stable operations along with implementation of a large scale investment program should contribute to further strengthening of the leading position of Mosenergo among the Russian generating companies. In 2010, Mosenergo continued the efforts to enhance energy efficiency. Renovation and installation of new equipment, routine maintenance activities, measures taken to optimize equipment loading and operating modes allowed achieving substantial saving of fuel, reducing in-house power consumption and thereby obtaining tangible economical benefit. The Company is a constant member of the energy saving program of Moscow, annually contributing to improvement of effectiveness of the use of energy resources. One of the foremost priorities for the Company is environment protection. A system of ecological management compliant with the international standard ISO 14001:2004 has been implemented in Mosenergo. The power plants of the Company are equipped with automated environmental monitoring systems. Annual programmes of measures to minimized effluents and improve processing of wastewater are in place. One of the most important principles of Mosenergo in the area of corporate management is to observe the balance between the immediate interests of the Company shareholders and the need for its further development. An important milestone in evolution of the corporate management system of the Company was approval in December 2010 by the Board of Directors of dividend policy defining the principles of distribution of the Company profits. I feel confident that joint efforts of the Board of Directors, Company management and shareholders will continue facilitating dynamic growth of the Company. K.G. Seleznev Member of Gazprom Executive Board Chairman of Mosenergo Board of Directors


	Address by the Director General Dear shareholders! In 2010 Mosenergo succeeded in reliably and uninterruptedly providing electric energy and heat to industries and general public. Over the year, the financial performance of the Company has improved substantially. Thus, EBITDA increased by 17% compared to 2009 and amounted to 21 billion roubles whereas net profit reached the record level of 7.6 billion roubles, which is 69% over the net profit of the previous year. In December 2010, Dividend policy of Mosenergo was approved by the decision of the Board of Directors. The established procedure of calculation of the amount of dividends allows paying 5% to 35 % of the net profit of the company as dividends under the condition that the reserve fund is fully created as according to the Articles of Association. In 2010 we successfully fulfilled all the tasks for the year, the most important of which was the implementation and further dissemination of the “Lean production” program at the plants operated by Mosenergo and in the General Directorate. The principal objectives of the Program were to increase reliability of equipment operation and to minimize the production expenses of the Company. The tools and procedures being implemented at the affiliates of the company are designed to eliminate all the possible kinds of production losses and to increase overall efficiency of operation. The integrated program of lean production is presently in place at the thermal power plants TPP-23, TPP-21, TPP-11, and TPP-25. Implementation is in progress at TPP-8, TPP-20, TPP-27, TPP-12, and TPP-22. Overall economic effect of implementation of the “Lean production” program at four affiliates of Mosenergo in 2010 amounted to 344.4 million roubles. The ongoing transformations significantly affected operation of power plants. Major initiatives are intended for enhancing reliability of equipment operation and minimizing fuel consumption. Equipment reliability can be increased by means of standardization of equipment walkdown programs and implementation of tools and instrumentation for visualization and accounting of defects. Fuel consumption can be decreased at the expense of minimization of the deviations of the key technical and economic parameters from the prescribed values, standardization of the choice of auxiliary equipment, control of in-house power consumption. More attention is also being given to decreasing deviations of the operating modes from the dispatcher schedules with the aid of tools standardizing personnel actions. Overall economic effect from the optimization of operations in 2010 amounted to 2010. In the framework of development of continuous improvement system, an innovation Committee was established in the General Directorate with the participation of the representatives of technical services and investment department. A set of meeting was organized at the affiliates to generate ideas for improvement; united electronic database of improvement ideas started functioning. 480 measures were suggested in 2010 with the overall economic effect of 250 million roubles. Some of these measures are under implementation at the moment. Implementation of the program of measures in the area of labor and environment protection. In order to strengthen labor and employee health protection and minimize the risk of accidents, a service for safety, labor protection and ecology independent of the technical service and plant directors and reporting directly to the CEO was established. In 2010, analysis of risks was performed and strategic program of labor protection activities for 2011-2014 was produced. Most of the measures from the “30 Program” – a program of simple visible initiatives aimed to enhance labor protection – have been implemented. Thus, standard section about penalties for violation of labor protection routines was introduced into contractual agreements with contractor organizations. In order to enhance motivation and involve the managerial, administrative and technical personnel into labor protection and accident prevention activities, the safety, labor protection and environmental unit introduced a quarterly in-depth audit of all the power plants of Mosenergo by mobile brigades of the labor protection and fire safety service of the general directorate rating the plant performance as a result of such audits. Operating personnel of the affiliates was trained in six standard operational procedures, which decreased the risks associated with human performance in case of abnormal situations. “Labor protection days” are held at the affiliates of Mosenergo on a monthly basis, weekly information leaflets of the safety, labor protection and environmental unit are circulated to all the plants, display stands with visual information about occupational injures are installed at all the plants. Expense optimization and monitoring In 2010, a series of expense optimization and monitoring activities were performed in the Company. Despite the 37% increase of expenses for fuel (mostly caused by substantial increase of fuel prices), the rate of growth of prime cost in 2010 did not exceed the rate of growth of revenues. Increase of the recurring expenses by 9% without amortization and depreciation is on the whole consistent with the 2010 inflation rate (8.8%). This growth was mostly due to one-time events. The main share in the structure of recurring expenses belonged to labor remunerations (+3.7%), which according to the accounting standards included one-time payments of severance benefits and other expenses for personnel in relation to liquidation of non-production affiliates and organizations. Exclusive of these non-recurring payments, labor remuneration expenses decreased by 3.3%. Maintenance activities were continued to be contracted out in 2010. Specifically, the Central Mechanical Maintenance Plant consolidated earlier was separated from Mosenergo. Besides that, other important projects were initiated and being developed in the Company in order to further increase effectiveness of its operation: extension of usage and addition of new SAP software modules, development of heating business of the Company, continued design and construction of new generating capacities under Capacity Supply Agreements. All these areas will remain among the priorities for 2011. V.G. Yakovlev Director General of Mosenergo


	Company portrait in figures Mosenergo today: 15 power plants production of 6% of the electricity generated in the Russian Federation supply of 67% of the total electricity consumption of Moscow region 70% in the heat market of Moscow

Company portrait in figures

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Mosenergo is producing 6% of the electricity generated in the Russian Federation
the power plants electric installed capacity is of 11.9 thousand MW and heat installed capacity is of 40.5 thousand MW
Mosenergo is supplying 67% of the total electricity consumption of Moscow region
Mosenergo occupies 70% of the market of heat supply of Moscow


	Major Events of 2010


	Major Events of 2010 March March 16 Financial reporting according to the Russian Accounting Standards for 2009 issued April April 6 Mosenergo announced successful beginning of full scale commercial operation of SAP ERP and SAP BI systems in the General Directorate and in the production affiliates of the Company April 16 Financial reporting according to the Russian Accounting Standards for 2009 issued May May 27 Financial reporting according to the Russian Accounting Standards for the first quarter of 2010 issued June June 4 Mosenergo paid the first coupon yield on the bonds of 03 series (the total size of the issue – 5 billion roubles). Total payments amounted to 255.55 thousand roubles (51.11 roubles per share). June 15 Financial reporting according to the IFRS for the first quarter of 2010 issued An "Analyst day” was held in Mosenergo, during which a visit to TPP-26 was arranged. The participants of the event toured the operational units of the plant and the construction site of the combined cycle unit SGU-420. June 16 Annual Shareholder Meeting of Mosenergo took place. July July 5 A member of the Executive Board, head of the Department of marketing and processing of gas and other liquid carbohydrates of “Gazprom” OJSC Kirill Seleznev was elected a Chairman of the Board of Directors of Mosenergo. The first deputy to the Mayor of Moscow in the Moscow Government Petr Biryukov was elected a Deputy Chairman of the Board of Directors of Mosenergo. July 23 A meeting with the representatives of investment funds and banks was held in Mosenergo in the framework of the “Power industry day” organized by Goldman Sachs. A presentation was made by Mosenergo in the corporate office and a tour of TPP-26 organized in the framework of the meeting. August August 5 Financial reporting according to the Russian Accounting Standards for the first half of 2010 issued. August 26 Mosenergo paid the ninth coupon yield on the bonds of 02 series (the total size of the issue – 5 billion roubles). Total payments amounted to 182.47 thousand roubles (38.15 roubles per share). The company also paid the second coupon yield and redeemed the issue of on the bonds of BO-02 series (the total size of the issue – 2 billion roubles). Total payments amounted to 114.18 thousand roubles (57.09 roubles per share). September September 10 Financial reporting according to the IFRS for the first half of 2010 issued September 14 On September 17 2010, Mosenergo paid the eights coupon yield on the bonds of 01 series (the total size of the issue – 5 billion roubles). Total payments amounted to 288.55 thousand roubles (62.33 roubles per share). September 27 Tests of electrical equipment of the Unit 8 SGU-420 were successfully conducted at TPP-26 operated by Mosenergo. Two unit transformers and two in-house power supply transformers of the Unit under construction were commissioned. October October 25 In the framework of contracting the capacity supply agreements, an agent agreement was signed between Mosenergo and “Financial arrangement center” CJSC. The capacity supply agreement covers nine facilities with the total rated power of 2882.5 MW. Implementation of a number of investment project of Mosenergo had been already completed by the time of signing the agreement. In 2007-2009, four facilities with the total rated power of 1341 MW were commissioned (power units of TPP-21, TPP-27 and GTU-TPP in Pavlovsky Posad). October 26 Mosenergo stopped being a shareholder of “Mosenergo heating company" OJSC. November November 10 Financial reporting according to the Russian Accounting Standards for the first 9 months of 2010 issued November 18 Mosenergo was declared a winner of the XIII Federal contest of annual reports and corporate websites in the nomination "For best disclosure of information for investors on the website". December December 3 Mosenergo paid the second coupon yield on the bonds of 03 series (the total size of the issue – 5 billion roubles). Total payments amounted to 255.55 thousand roubles (51.11 roubles per share). December 6 The first regulatory audit of the corporate system of ecological management was conducted at Mosenergo. The audit that was carried out by the certification authority “Bureau Veritas Certification” confirmed compliance of the system with the international standard ISO 14001:204. Shares of Mosenergo started to be traded on RTS Standard. December 9 Mosenergo and Alstom Power signed a Memorandum of understanding, according to which the companies intend to develop combined cycle technologies and integrated solutions for the power units of heating and power plants in order to modernized and renovate the power supply infrastructure of Mosenergo. December 10 The Board of Directors of Mosenergo decided to call an unscheduled General shareholder meeting of the Company on February 25 2001 per a request of a shareholder - Department of Property of Moscow. The agenda for the meeting includes election of the new Directorial Board members. December 21 Financial reporting according to the IFRS for the first 9 months of 2010 issued December 22 A series of trial startups with connection of the gas turbine of the Unit 8 SGU-420 to the grid was successfully performed at TPP-26 operated by Mosenergo.


	Production In 2010 Mosenergo generating company ensured stable operation of the power plants and reliable supply of heat and electricity to the customers in Moscow and Moscow region. Electricity generation – 64.97 billion kWh Heat supply – 69.9 million Gcal Total installed capacity – 11,900.08 MW

Electricity

The electricity generation in 2010 amounted to 64.97 billion kWh (+5.2% compared to 2009).
The generation at the new generating capacities increased in 2010 to 8.0 billion kWh (+10.2%). The share of the new generating capacities over the year reached 12.4%.
The increase of electricity generation is mostly attributable to growth of electricity consumption in the Russian Federation.

Heat

The amount of heat supply reached 69.9 million Gcal (+6.8% compared to 2009).
This growth in 2010 was caused by lower ambient temperatures during the heating season and transfer of heat from RHS in the summer.
88.3% of annual supply of heat is supplied during the heating season.

The total installed capacity and the fuel consumption

The total installed capacity of Mosenergo in 2010 amounted to 11,900.08 MW.

The use of reference fuel amounted to 26,722 thousand tons.

Actual specific consumption of oil equivalent for:

electricity generation increased to 252.0 g/kWh
heat supply amounted to 166.0 kg/Gcal


	Distribution In 2010, there was an increase in sales of electricity and capacity, as well as expansion of the client base. To minimize the risk of decreasing heat sales Mosenergo is implementing a project of improvement of efficiency of heating business.

Capacity sales and the client base

The sales in 2010 increased compared to the previous reporting period:

Electricity – by 2,873 thousand MWh (4.5%)
Capacity – by 139.3 MW (1.2%)
Heat supply – by 4,636 thousand Gcal (7.6%)

The client base was expanded by 128 new energy supply contracts.

Risks

Risks of decreasing heat sales arise on account of:

increasing temperatures during the heating seasons (except for 2009/2010)
implemented energy saving policy,
minimization of new construction within Moscow boundaries.

In order to minimize the effect of these factors and to increase sales of heat, Mosenergo is implementing a project of improvement of efficiency of heating business.


	Investment and maintenance activities To maintain a high level of safety, reliability and economic performance of Company in 2010 projects from investment and maintenance programs were successfully implemented.


	Investments The investment program is formed based on the principles of economic efficiency of capital investment, transparency of the purposes and consistency with the production targets and Company strategies. Investment projects category: Strategic Efficiency Reliability Compulsory Other Technical renovation and modernization of the equipment of the Company affiliates will allow maintaining high level of safety, reliability and economic performance and increasing sales of electricity and heat.


	Maintenance During 2010, the Company was implanting the maintenance module of the corporate information management system SAP. A program of prevention of incidents and technology violations was formulated. All the programs of maintenance of equipment, metal state diagnostics, maintenance of transformers and buildings were fully accomplished.


	Enhancement of production reliability and efficiency In 2010, Mosenergo continued the implementation of the programs aimed to enhance production efficiency and reliability: “Lean production” Energy saving program "Change of management standard and implementation of CIS" “Effective communication"


	“Lean production” Implementation of the “Lean production” project was proceeding according to the approved plan: the project is complete at the TPP-11, -21, -23, and -25; TPP-8, -20, and 27 are in trial operation the implementation of the project at all the power plants is expected to be completed by 2012.


	Energy saving program In 2010 Mosenergo has produced and approved a “Program of energy saving of Mosenergo for the period of 2010-2015”. Total saving of fuel and energy resources amounted to 148 million roubles.


	SAP projects The implementation of a three-year program of "Change of management standard and implementation of CIS" continues. The first stage, titled “Forsazh” was accomplished. In 2010 (transformation benchmark) the improvement of the processes of planning and control was performed (the projects “Forsazh-Maintenance” and “Forsazh-Heat sales” were realized).


	“Effective communication" In 2010 a number of activities in the framework of the project “Effective communication" was implemented: corporate standards of information exchange were established; the principles of cross-functional interaction of departments were started to employ; a large flow of information transferred into electronic form.

Analysis of financial results

billion roubles	2009	2010
Revenues	122.2	143.8
The prime cost of commodity products and services	105.1	134.1
EBITDA	17.8	21.0
Net profit	4.5	7.6

Revenues

	2009, billion roubles	2010, billion roubles	Change, %
Sale of marketable products (before VAT)	112.2	143.8	28.2
including sales of electricity and heat	104.1	141.2	35.1
Other goods and services	8.1	2.6	67.9

Prime cost

billion roubles	2009	2010
Commodity products, including:	105.1	134.1
energy	97.4	131.3
other products	7.7	2.8
Total costs of maintenance of power plants (including the maintenance by own maintenance departments)	4.9	4.9
Expenses for personnel	8.5	8.6
EBITDA	17.8	21.0


	Other profits and expences The income from disposal of property, plant and equipment in 2010 was lower than in 2009. The profits from sales of securities and other financial investments increased.

Net profit

billion roubles	2009	2010
Net profit	4.5	7.6


	Liquidity and credit portfolio management The inflow of cahs from operations increased by 33%. No changes of the structure of borrowed capital occurred in 2010. The credit portfolio of the Company decreased by 1,941 million roubles. The Company does not have any overdue debts.


	Liquidity and credit portfolio management The inflow of cahs from operations in 2010 was higher than in 2009 by 33%. No changes of the structure of borrowed capital occurred in 2010. The credit portfolio of the Company decreased in 2010 by 1,941 million roubles. This reduction was associated with the following: redemption of the face value of the bonds of the BO-02 series in the amount of 2,000 million roubles on August 26 2010; change of euro exchange rate to rouble. The weighted average interest rate for the borrowed funds in 2010 was 9.24% per year, which is 3.08% less than in the previous year. This decrease of the interest rate was caused by stabilization of the situation on the domestic and international financial market and change of the structure of the credit portfolio towards larger share of long term credits with lower interest rates. The Company does not have any overdue debts. The Company fully complies with the covenants of the credit agreements: the ratio of debt to profits before interest, profit tax and depreciation is less than 1.

Analysis of the balance structure

million roubles	2009	2010
PPE	131,628	126,903
Current assets	57,497	73,184
Accounts payable	14,205	17,658


	Analysis of the balance structure The property, plant and equipment as of December 31 2010 decreased by 4,725 million roubles compared to December 31 2009 (from 131,628 million roubles to126,903 million roubles) or by 3.6%. The change that occurred over the reporting period was caused mostly by almost twofold excess of the amortization and depreciation accrued during the year over the cost of new commissioned facilities. The structure of current assets is dominated by: accounts payable – 50%, short term financial investments – 34%, and inventories – 9%. The current assets of Mosenergo increased in 2010 by 15,686.7 million roubles, mostly at the expense of the change of the amount of payables. Short term financial assets also increased due to 24.5 billion roubles of unallocated funds having been deposited. This amount mostly occurred after repayment of a loan issued and from the revenues from operations. The increase of inventories was mostly due to larger amount of reserve fuel as of the end of the year by 1,877.9 billion roubles. The payables increased insignificantly – by 261.5 million roubles or 0.7%. The Company is continuously striving to strengthen the financial discipline of the customers and to collect overdue payables for the energy supplied. Advance payments decreased by 2,077.3 million roubles over the reporting period due to completion of construction of new units at the TPP-26. Own capital of Mosenergo increased by 6,184.6 million roubles mostly due to increased net profit and the results of revaluation. The accounts payable increased in comparison with 2009 by 3,453.1 million roubles or by 24.3%, mostly due to increase fuel prices and heat transmission tariffs. The share of the accounts payable in the Company balance was 8% as of the end of the reporting year (7% in 2009). All the debt is current, having occurred according to the contractual covenants.


	Analytical coefficients characterizing the financial status of the Company The stability of the Company's credit portfolio conditioned the same stability of the coefficients of absolute and current liquidity.


	Analytical coefficients characterizing the financial status of the Company As of the end of 2010, insignificant changes of the absolute and current liquidity coefficients occurred compared to 2009. Stability of these parmeters is explained by lack of changes in the structure of the Company credit portfolio. The cost of net assets of the Company increased due to the increase of current assets. The growth of the capital turnover coefficient is caused by high rates of revenue growth. The accounts payable turnover coefficient increased due to the rates of revenues in 2010 having been highter than the rate of growth of the accounts payable. Average grand total assets of Mosenergo increased by 4.7% compared to 2009. The revenues from sales of the product increased by 28.1% compared to 2009. The profit margine increased insignificantly, since the growth rate of revenues was only slightly higher than the growth rate of the prime cost.


	Personnel management and social programs The average stuff of the company in 2010 was 9,033 employees. Average monthly wages of the own personnel of Mosenergo in 2010 was 61.7 thousand roubles. Implementation of measures of stuff motivation and education continued in 2010.


	Personnel numbers and structure Results of the implementation of reorganization activities in 2010: the average stuff of the company decreased; average monthly wages of the own personnel increased; the fraction of young employees (under 30 years) increased.


	System of incentives for personnel Key objectives of the company policy: establishing transparent and flexible system; ensuring clear correlation between the remuneration of employees and the results of their work.


	Social programs In the framework of Mosenergo social policy several programs were implemented in 2010: Medical insurance of the employees; Sports events (Corporate Olympics of Mosenergo); Assistance to pensioners (a program of non-state pension plans for the employees) and to the participants of the Great Patriotic War; Organization of the recreation of the children of Mosenergo employees.


	Personnel training and development The first annual assessment of personnel was conducted in 2010. Staff training was conducted in different directions: SAP-Maintenance system; “Lean production”; program of development of management skills.


	Labor protection A service for safety, labor protection and ecology reporting directly to the CEO was established. Strategic program of labor protection activities for 2011-2014 was produced.


	Labor protection In 2010 a service for safety, labor protection and ecology reporting directly to the CEO was established. Key objectives of the service: to enhance labor safety and employee health protection; to decrease the risk of recurrence of accidents. Strategic program of labor protection activities for 2011-2014 was produced. Expenses for fire and industrial safety.


	Environment protection Results of the Company's regular measures for environmental protection: total amount of wastes decreased by 10.2 thousand tons to 130.1 thousand tons total volume of liquid effluents amounted to 371.0 million m³


	Environment protection Expenditures on conservation activities in 2010 amounted to 166.4 mln roubles. Emissions of pollutants from the Company power plants amounted to 55.3 thousand tonnes (+0.9% compared with 2009). Total volume of liquid effluents amounted to 371.0 million m³ (-0.2 million m³). Total amount of wastes amounted to 130.1 thousand tons (-10.2 thousand tons).


	Main principles Underlying principles of the Company's corporate governance are laid out in the OJSC Mosenergo's Corporate Governance Code. maintaining the hierarchy and the balance of interests of all the interested persons; transparency of activities; social responsibility and adherence to ethical norms; optimisation of the Company structure.


	Main principles Main principal of corporate governance: BoD's accountability to shareholders and the accountability of the Company's executive bodies to the Company's management bodies; safety and efficiency of stock ownership rights; transparency of activities; Company's social responsibility and adherence to ethical norms. The most important objectives: maintaining the balance of interests of all the interested persons; organisation of operations of the BoD committees; active participation of the Company in management of its affiliate structures; optimisation of the Company structure.


	The management and control bodies The management bodies of the Company: General Shareholder Meeting; Board of Directors. The executive bodies: General Director; Executive Board. Supervision of the Company financial and business activities is the responsibility of the Mosenergo Audit Committee.


	General shareholder meeting The supreme governing body of Mosenergo. The General Shareholder Meeting dedicated to the results of the Company operations in 2009 was held on June 16 2010.


	Board of Directors and its committees The Board of Directors of Mosenergo is the Company governing body that is responsible for the general supervision of the Company's activities, with the exclusion of resolving issues under the authority of the General Meeting of Shareholders. During 2010 the BoD of Mosenergo held 17 meetings.


	Internal Audit Commission In order to exercise control over the Company's financial and business activities, the General Meeting of Shareholders elects five members of the Audit Commission.


	Management Management of Mosenergo's current operations is carried out by a single executive body – the General Director and a collegiate executive body – the Executive Board. The Board of Directors Meeting of 31.05.2010 made changes to the Executive Board composition.


	Remunerations The aggregate amount of the remuneration paid to members of the BoD in 2010 totaled 5,458,621 roubles. The aggregate amount of remuneration paid to the members of the Executive Board totaled 3,582,268 roubles.


	Remunerations According to the Company Charter remunerations and/or compensations of expenses incurred while performing functional responsibilities are entitled to: members of the BoD. The aggregate amount of the remuneration in 2010 totaled 5,458,621 roubles; members of the Audit Commission; General Director of the Company; members of the Executive Board. The aggregate amount of remuneration in 2010 totaled 3,582,268 roubles.


	Changes in the Company structure In 2010, the organizational and structural changes in the Company were conducted to achieve strategic objectives and solve current tasks.


	Changes in the Company structure The activities aimed at optimisation of the Company's organisation were implemented in 2010: disposition of several subsidiaries of OJSC Mosenergo; corresponding amendments in the Company Charter. Functions performed by the affiliates to be disposed of are being transferred to other affiliates and the central office of Mosenergo or are being contracted out.


	History of Mosenergo Mosenergo's history is closely interrelated with the history of development of economics, society and culture of Russia.


	History of Mosenergo: 1886–1917 The Joint Stock Company of Electric Lighting was founded in 1886 by Carl Fyodorovich Siemens, a Saint- Petersburg merchant of the First Guild, who was the Head of the Siemens&Halske Representative Office. Although the Company was founded in Saint-Petersburg, the new enterprise's managing board raised a concern to prepare ground for the company's operations in Moscow at its first meeting. On July 31, 1887 the executive board of the '1886 Society' approved the contract to set up electric lighting of the Postnikova Passage on Tverskaya street in Moscow. This date is acknowledge as the founding date of the electric power system in the Moscow region. At the end of 1888 the company successfully completed the task to construct the first centralised power plant: electric power was supplied by Georgievskaya power plant. On November 28, 1897 the company hosted a festive celebration for the opening of the Moscow Municipal Power Station (MMPS) Raushskaya (now HPS-1), and on February 15, 1907 the company launched the second station - MMPS-2 Tramvaynaya. The next important stage of development of the electric power system of Moscow was to decision to construct in the vicinity of Moscow a large power plant fired with local fuel, made by the administrator of the Moscow department of the ’1886 Society’ Robert Eduardovich Klasson. Construction of the plant intended to use a new type of fuel was a major project involving development of new technologies and creation of an entire peat extraction industry. In 1912, the company commenced the construction of the world's first district power plant operating on peat in the Bogorodsk district. In April of 1913 the new company, Moscow Joint Stock Society “Elektroperedacha” was founded to utilise the capacity generated by the new station. The plant itself started operating in 1914, and in 1915 it started to work in parallel with the Raushskaya station.


	History of Mosenergo: 1917–1930 Joint stock companies “Electric Lighting 1886 Society” and Elektroperedacha successfully operated until October 1917. After the October Revolution the stations were nationalised and ceased operations under their previous ownership in December 1917. The management of state power stations was delegated to the Power Department of the Supreme Council of Public Property. At the same time, in December 1917, Ivan Ivanovich Radchenko and Alexander Vasilievich Vinter made proposals conserning further development of Moscow power industry. These proposals became the basis for the first State Plan for the Electrification of the whole country, GOELRO. In December 1920, the GOELRO plan was ratified by the VIII All-Russia Soviet Council. According to the plan, the volume of capacity of the Moscow power system was intended to increase almost by the factor of four within 10 to 15 years. Total capacity was to increase from 93 to 340 thousand kW. Pursuant to the GOELRO plan, several stations were built in the Moscow region, namely Kashirskaya TPP (now TPP- 4), Shaturskaya TPP (now TPP-5), Krasnopresnenskaya TPP (now a subsidiary of TPP-12), TPP-6 and TPP-8. One of the key events of the period was the completion of the Russia's first 110 kW voltage power line between Kashira and Moscow, as well as two-circuit ring of power lines and electric power substations around Moscow with the voltage of 115 kW. Commissioning of the power ring gave Moscow a reliable power supply system.


	History of Mosenergo: 1930–1946 In 1930ies, the workers of the Moscow power supply system known until 1932 as MOGES (Unified Management of Power Plants of the Moscow Region) started the activities to provide centralised district heating to the Soviet capital. March 1931 saw the launch of the first heating main from MTTP-1 and the foundation of a specialised enterprise for maintenance and development of the Moscow district heating network. The development of the power system was put on hold by the start of the Great Patriotic War. Part of the equipment was destroyed, some was evacuated and total capacity of Mosenergo sunk two-fold. Nevertheless, Moscow power engineers managed to maintain continuous supply of power to the city's defence facilities; they constructed high-voltage obstacles for the enemy troops, assembled power-generating trains for the liberated regions of the country. Restoration of power industry started right after the successful counteroffensive campaign of the Soviet Army in winter of 1941-1942. As early as by 1945, Mosenergo has already managed to achieve pre-war level of installed capacity.


	History of Mosenergo: 1946–1993 In 1946, Mosenergo started using a new type of fuel: HPS- 1 started burning natural gas. In the same year, Moscow power system was connected to Ivanovo, Yaroslavl and Gorky power system and in 1956, the first link of the Unifies Power System of the European part of Russia was launched after the installation of a high-voltage power line from Kuybyshev to Moscow. Within the framework of the Unified Power System in 1960, the country brought into operation first units of TPP-22, and for the first time in the USRR a 1,000 mm heat pipeline was installed at TPP-22. On October 22, 1963 Mosenergo launched TPP-21 shortly followed by TPP-23, TPP-25 and TPP-26. In 1970ies Mosenergo successfully implemented 250 MW thermal power generating units with supercritical steam parameters. Such a unit was first constructed at the TPP-22 and became a base unit for other heat and power plants: TPP-21, 23, 25 and 26. Development of district heating system remained a pending issue for Mosenergo, especially during mass construction of residential apartments in the city when district heating pipelines with the length of 20-30 kilometers and pipeline diameters of 1,200-1,400 mm started to be built from the new powerful TPP. Simultaneously, intensive grid development was in progress, with the power transmission lines of 750 kV voltage being extensively constructed. Total length of the high voltage power transmission lines increased drastically. Two high-voltage 220 kV rings were closed around Moscow, soon followed by 500 kV rings. On December 30, 1987 Mosenergo brought into operation the first hydroelectric generating set of the Zagorsk Pumped-storage Hydro Plant - a unique power unit regulating peak loads in the grid system. In 1990 Moscow Grid absorbed Ryazan TPP-24, and in 1992 it acquired TPP-28 in Moscow.


	History of Mosenergo: 1993–2010 In 1993, the production association Mosenergo was transformed into an open joint stock company. In 2005 OJSC Mosenergo developed and started the implementation of the Programme for Development and Technical Upgrade, including planning, construction and commissioning of new generating facilities on the sites of operational power plants in the energy-deficient regions, heat and electricity demand nodes with developed infrastructure. On November 22 of 2007, less than two years since the start of construction, TPP-27 launched a combined cycle steam-gas power unit with rated electric power of 450 MW and heat output of 300 Gcal. In June 2008, a unit of the same type was put into operation on TPP-21, and in December of the same year the Company installed yet another 450 MW steam-gas power unit on TPP- 27. Currently Mosenergo is constructing a fourth 420 MW (e) combined cycle power unit at TPP-26. French company Alstom acts as a general contractor for the construction project.


	Structure of the energy sector of Russia After the completion of the structural reform of the Russian power industry, control and supervision functions previously carried our primarily by the ”RAO UES of Russia” OJSC were transferred to: Government of the RF, governmental authorities, industry infrastructure organisations.


	Government of the Russian Federation At the governmental level, industry regulation is performed by: Government Commission for the Development of Power Industry, Government Commission for Safety of Power Supply, Ministry of Energy. The key management body in the power industry is the Ministry of Energy, which develops and implements public policy, as well as regulations, codes and standards in the fuel and energy sector of economy.


	Governmental authorities Federal Antimonopoly Service (FAS) of Russia Federal Tariff Service (FTS)


	Industry infrastructure organisations Industry infrastructure organisations working with Mosenergo: UES System Operator Federal Grid Company UES of Russia MRSK Holding “Market council for organization of effective operation of the wholesale and retail electricity and capacity trading systems” Administrator of the Trading System “Centre for Financial Settlements” CJSC


	Risk management implies prevention of risks in production and financial activities of Mosenergo, as well as minimising possible negative outcomes of such risks.


	Mosenrego shares are listed in the Russian MICEX and RTS (Standard section) stock exchanges.


	The Dividend policy of Mosenergo determines the principles followed by the Mosenergo Board of Directors in drafting the recommendations to shareholders related to profit distribution options, including payment of dividends. The dividends are paid within no more than 180 days after adoption of the decision. The dividends are paid as the part of the net profit of the company.


	Within the framework of Informational Policy implementation Mosenergo organised 13 press tours to the Company’s power plants in 2010. The Company published 41 press releases; more than 300 publications were issued in printed media and 18 TV broadcasts on federal and regional channels. Besides that, Mosenergo participated in major industry exhibitions and conferences.


	“Lean production” Implementation of the “Lean production” project was proceeding according to the approved plan: the project is complete at the TPP-11, -21, -23, and -25; TPP-8, -20, and 27 are in trial operation the implementation of the project at all the power plants is expected to be completed by 2012.


	Safety, labor protection and ecology project 2


	Investment projects project 3


	Forsazh project project 5


	Development of the heating business project 6


	Glossary BoD Board of Directors CCP Combined Cycle Plant CJSC Closed Joint Stock Company FAS Federal Anti-monopoly Servise FCCMS Federal Committee for Capital Market and Securities FFMS Federal Financial Market Service FTS Federal Tariff Service IFRS International Financial Reporting Standards LLC Limited Liability Company MICEX Moscow Interbank Currency Exchange MOEK Moscow United Energy Company NPP Nuclear Power Plant o.e. oil equivalent OGK Generating Company of a wholesale electricity market OJSC Open Joint Stock Company PSHS Pumped Storag Hydro Station RAS Russian Accounting Standards RTS Russian Trade System (stock exchange) SDPP State-owned District Power Plant SGU Steam and Gas Unit SO UES System Operator of the Unified Energy System SPP State-owned Power Plant ST Steam turbine TGK Territorial Generating Company TPP Thermal Power Plant UES Unified Energy System (grid) VAT Value Added Tax Measurement unit Gcal – Giga calorie, unit of measurement of heat Gcal/h – Giga calorie, unit of measurement of thermal power kV – kilo Volt , unit of measurement of electric potential kWh– kilo Watt hour , unit of measurement of electric energy


	Contact Information Investors relations Department: Pavlova Ekaterina Head of the Department phone: (495) 957-1-957 (ext. 37-67) pavlovaea@mosenergo.ru Voronchikhin Denis Leading expert phone: (495) 957-1-957 (ext. 34-57) voronchikhinds@mosenergo.ru Contacts for shareholders: Sivova Tatiana Senior specialist of the corporate management department phone: (495) 957-1-957 (ext. 32-10) Mosenergo OJSC web site: www.mosenergo.ru Mailing address: Vernadskogo prospect, 101 bld. 3, Moscow, 119526 Information about the Auditor: “PriceWaterhouseCoopers Audit” CJSC Kosmodamianskaya embankment 52 bld. 5, Moscow phone: (495) 967-60-00, Fax: (495) 967-60-01 hotline@ru.pwc.com www.pwc.com Information about the Registrar “SR-DRAGa” CJSC Novocheremushkinskaya street 71/32, Moscow phone: (495) 719-40-44, (495) 719-39-29, (495) 719-39-30 info@draga.ru www.draga.ru

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