Dear Shareholders, Partners, and Colleagues!

The absolute priority of PJSC Kubanenergo’s activities in 2015 was to complete all tasks entrusted on the Company for the ensuring reliable and uninterrupted power supply and technological connections to the power grids of the Company.

During the reporting period the Company showed sustainable growth, efficiency, reliability and stability in the achievement of business goals.

By the end of the reporting period, the Company mastered an investment program in the amount of 8.3 billion Rubles.  The volume of financing of design and survey, construction and installation, commissioning works, and acquisition of equipment and materials amounted to 9.9 billion Rubles.

The company commissioned more than 382 MVA of transformer capacity, and more than 1.0 thousand kilometers of power lines.

The total connected capacity for executed agreements on technological connections amounted to 691 MW with an over-fulfillment of the plan of 4.34 %.

General Director PJSC Kubanenergo A.I. Gavrilov

In 2015, the Company entered into more than 29,500 agreements for technological connection to power grids for a total capacity of 718 MW and with a total value of 4.877 billion Rubles (excluding VAT). The amount of collected funds amounted to 2,774 billion Rubles. (including VAT), which is 25 % above the planned level.

An important trend in the Company’s activity is the implementation of the Program of Energy Conservation and Energy Efficiency. In the context of this Program implementation in 2015 the Company obtained an impact in terms of reducing the loss of electricity to 79.3 million kWh and reducing costs for the purchase of energy resources for production and economic needs of 1.8 million Rubles.

The electric power supply to the grids amounted to 22.033 billion kWh. The increase in power supply in the amount of 459.9 million KWh (2.13 %), as compared with the previous year, is due to an increase in consumer demand for electricity in view of the active development of the region. The normative ratio of power losses for 2015 was fulfilled.

In 2015, the Company continued the implementation of the Innovation Development Program. The Company conducted development, industrial exploitation and implementation of innovative decisions, equipment and technologies. Also PJSC Kubanenergo conducted cooperation with universities, research organizations, and small and medium-sized businesses. The mechanism for the introduction of innovative technologies was developed. Such systems as management system, system of production assets management, risk management and internal control systems were improved.

PJSC Kubanenergo successfully passed final assessment of the Commission of the Russian Ministry of Energy checking the preparation of the power grid complex for the autumn-winter period. As a result of the Commission assessment basing on the assessment report PJSC Kubanenergo obtained a Certificate of readiness for the autumn-winter period of 2015/2016.

In order to increase the efficiency and to improve financial and economic conditions of PJSC Kubanenergo leading to financial stability and sustainable positive financial result a plan of measures to improve efficiency, economic and financial conditions of the Company was developed. A list of internal and external events improving the efficiency of business processes in the Company was determined.

In 2015, the specific costs per 1 c.u. at 2012 values equaled 6.48 thousand Rubles/c.u., which is 10 % reduction in operating expenses for the reporting period to the level of 2012. This positive trend is the result of systematic work on optimization of the Company’s costs connected to the enterprise’s production activities.

At the end of 2015 the amount of net profits generated by the Company reached 1.452 billion Rubles (5.084 billion Rubles in excess of the previous year level). This increase is due to growing revenue for the electricity transmission caused by net supplies growth.

In 2015, PJSC Kubanenergo achieved a reduction of the joint debt ratio to the EBITDA indicator to the level of 2.23.

In order to improve the quality of customer service in 2015, the Company expanded the functionality of the Personal Account interactive service on the Company website in terms of technological connections and customers services. Further development of the functionality of the Personal Account interactive service is projected.

Together with colleagues from other power systems PJSC Kubanenergo participated in the restoration of power supply on the Crimean peninsula at the end of 2015. 29 teams consisting of more than 200 people and 58 equipment units were involved in the recovery operations. In the course of works the Company’s personnel connected to the backup power supply sources 340 socially important facilities of the republic, including 193 schools.

The Company faces challenges for further development, modernization and expansion of electricity infrastructure in the region in 2016. The main focus will be on the South-West and Central power districts requiring electricity infrastructure improvement.

The priority areas in the field of technological connection are development of the Temryuk District, including power supply of electricity demands of national importance investment project Construction of Transport Passage through the Kerch Strait, construction of the mountain skiing tourist resort Lagonaki as well as mitigation of the deficit in electric power capacity in large industrial and residential centers of the region - Krasnodar, Novorossiysk, Tuapse.

The main part of investments under the long-term investment program of PJSC Kubanenergo for 2016-2020 shall be spent for reconstruction and technical re-equipment of the existing power grids.

Overall, based on year-end results, PJSC Kubanenergo fulfilled its main task to provide reliable, high-quality power supplies to consumers, and to strengthen the Company’s image, which has great significance for the stable social and economic development of the Krasnodar Territory and the Republic of Adygea.

General Director
PJSC Kubanenergo                                                                                                         A.I. Gavrilov