Rosseti Volga : Annual Report 2022

GRI 102-46

ABOUT THE REPORT

GRI 102-1

GRI 102-50

GRI 102-54

This Integrated Annual Report (the "Annual Report", "Report") was prepared using the information available to Public Joint Stock Company Rosseti Volga ("Rosseti Volga, PJSC", "Rosseti Volga", the "Company") at the time of its preparation, and includes an overview of operating results and key events for 2022.

The Annual Report contains information on the Company's goals and priorities, its performance in the reporting year as compared to previous periods, the corporate governance and risk management systems, and its approaches to sustainability management, corporate and social responsibility. The data provided in the Annual Report and specifically the financial and economic performance indicators calculated on the basis of the accounting (financial) statements prepared in accordance with the Russian Accounting Standards (RAS), include information about the activities of Rosseti Volga. The data provided in the Annual Report containing the performance indicators from the consolidated financial statements prepared under IFRS, include information about the activities of Rosseti Volga Group of Companies.

The Report was prepared in accordance with the Global Reporting Initiative Guidelines (GRI Standards version), GRI G4 Electric Utilities Sector Disclosures, International Framework, Stakeholders Engagement Standard (АА1000SES).

The Annual Report was prepared in accordance with:

• Federal Law No. 208-FZ dated December 26, 1995 "On Joint Stock Companies" (hereinafter referred to as the Federal Law "On Joint
  Stock Companies")
• Bank of Russia Regulation No. 714-П "On disclosure of information by issuers of issue-grade securities" dated March 27, 2020
• recommendations of the Corporate Governance Code approved by the Board of Directors of the Bank of Russia on March 21, 2014 and recommended by the Bank of Russia Letter No. 06-52/2463 dated April 10, 2014 for the use by Joint Stock companies whose securities are admitted to organized trading (hereinafter, the
  "Corporate Governance Code of the Bank of Russia")
• requirements of Rosseti Volga, PJSC to the accounting (financial) statements of the subsidiaries.

The Report also contains indicators of achievement of UN Sustainable Development Goals.

This Report is intended for a wide range of stakeholders.

Key topic

The key topic of the Report is the "Energy of new horizons". Our goal is to show how Rosseti Volga implements the digital transformation program with absolutely new characteristics of reliability, efficiency, availability, controllability and customer centricity aimed at enhancing the service quality, mitigating the adverse effects on the environment and health, and at improving the quality of life of residents in the regions serviced by the Company.

New information in the Report

The Integrated Annual Report contains the additional information on performance of Rosseti Volga, PJSC in the area of sustainable development and social responsibility. The sections "Development Strategy", "Business Model", "Key Performance Indicators", "Personnel Management", and "Environmental Protection" were updated. The sustainable development report contains sections on sustainable development management, sustainable development risk management and assessment, and information on ESG ratings.

Disclaimer

This Annual Report contains forward-looking statements that reflect the expectations of Rosseti Volga's management. These forward- looking statements are not based on any actual circumstances and are not guarantees of future performance. The Company shall not assume any liability for any losses that may be incurred by individuals or legal entities acting in reliance on these forward-looking statements. Such forward-looking statements in each specific case constitute only one of the few possible case scenarios and shall not be interpreted as the most probable scenarios.

Some indicators specified in the tables, graphs and diagrams in this Annual Report may differ from the sum of summands as a result of rounding.

CONTENTS AND NAVIGATION

ENERGY OF NEW ACHIEVEMENTS

1. PRESENTATION PART

ADDRESS OF THE CHAIRMAN OF THE BOARD OF DIRECTORS.. . . 6

ADDRESS OF THE GENERAL DIRECTOR. . . . . . . . . . . . . . . . . 7

COMPANY SNAPSHOT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 History of the Company . . . . . . . . . . . . . . . . . . 10

Geography and structure of the Company services .	.	. . . . . 12
Business model . .	. . . . . . . . . . . . .	.	.	.	.	.	. 14
Key events of reporting year. .	. . . . . . . .	.	.	.	.	.	. 16
Key performance indicators . . .	. . . . . . . . . . . .						18

PROCUREMENT ACTIVITY . . . . . . . . . . . . . . . . . . . . . . . . . . 95

Regulatory control of procurement activity . . . . . . . . . 95 Procurement activity principles. . . . . . . . . . . . . . . 95 Purchasing structure . . . . . . . . . . . . . . . . . . . 96 Structure of purchases from SME entities . . . . . . . . . . 96

Information on building responsible supply chain . . . . . . . 97

ANTI-CORRUPTION POLICY AND SAFETY

OF ECONOMIC ACTIVITIES. . . . . . . . . . . . . . . . . . . . . . . . . . 99 INFORMATION DISCLOSURE.. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 102

2. STRATEGIC REPORT

SECTOR OVERVIEW	. . . . . . . . . . . . .	22
Market overview and competitive landscape	. . . . . . . . .	22
Macroeconomic trends of reporting year . .	. . . . . . . . . 23
DEVELOPMENT STRATEGY	24
Strategic goals. .	. . . . . . . . . . .	. . . . . . . .	24

Definition and achievement of strategic priorities. . . . . . . . . . . . . . 26

KEY PERFORMANCE INDICATORS . . . . . . . . . . . . . . . . . . . . 28 KEY RISKS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

5. CORPORATE GOVERNANCE REPORT

MEMORANDUM OF MAJORITY SHAREHOLDER . . . . . . . . . . 106

CORPORATE GOVERNANCE OVERVIEW. . . . . . . . . . . . . . . 108 Corporate governance structure . . . . . . . . . . . . . . 109 Main changes in the area of corporate governance. . . . . . 110 Plans for 2023 and the medium-termperiod. . . . . . . . . 111 Assessment of the corporate governance level. . . . . . . . 111

EXECUTIVE BODIES.. .	. . . . . . . . . . . . . . . . . . . . . . . . . . .	152
General Director	152
Management Board . .	. . . . . . . . . . . . . . . .	. 153
SYSTEM OF REMUNERATION FOR MANAGEMENT
BODIES OF THE COMPANY	159
PREVENTION OF CONFLICT OF INTERESTS	163

3. BUSINESS PERFORMANCE

OPERATIONAL PERFORMANCE. . .	. . . . .	. . .	. . . . . . . . . . .	36
Production activity outcome. .	. . . . . . .	. .	. . . .	36
Technological connection . .	. . . . .	. . . . .	. . . . . 38
Communications with service users. .	.	. . . . .	. . . . . 39
Additional (non-tariff) services . .	. . .	. . . . . . . . . . 42
Information on technical condition of grids	. . . . . . . . .	44

INVESTMENT ACTIVITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Parameters of investment activity. . . . . . . . . . . . . . 46 Long-terminvestment program . . . . . . . . . . . . . . 49 Managing the quality of capital construction . . . . . . . . . 51

TECHNOLOGICAL DEVELOPMENT, INNOVATION AND R&D. . 52 Innovation-drivendevelopment.. . . . . . . . . . . . . . 52 Key innovative projects to be implemented in the reporting period . . .54 Technical policy . . . . . . . . . . . . . . . . . . . . . 55 Import substitution and interaction with equipment manufacturers . . . . . . . . . . . . . . . . . . . . . 55

FINANCIAL PERFORMANCE.. . . . . . . . . . . . . . . . . . . . . . . . 56 Key financial and economic indicators . . . . . . . . . . . . 56 Credit ratings and bonded loans . . . . . . . . . . . . . . 59

TARIFF POLICY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 Tariffs for electricity transmission services . . . . . . . . . . 60 Charges for technological connection. . . . . . . . . . . . 62

GENERAL MEETING OF SHAREHOLDERS . . . . . . . . . . . . . . 116

BOARD OF DIRECTORS.. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 117 Composition of the Board of Directors . . . . . . . . . . . 118 Report of the Board of Directors. . . . . . . . . . . . . . 126 Assessment of performance of Board of Directors . . . . . . 133

COMMITTEES OF COMPANY'S BOARD OF DIRECTORS	134
Audit Committee	136
Committee for Strategy . .	. . . . . . . . . . . . . . .	139
Committee for Reliability	. 142
Personnel and Awards Committee . .	. . . . . . . . . .	. 145
Committee for Technological Connection to Electric Grids. . .	148
CORPORATE SECRETARY	. . . . . . . . . . . . . . . .	151

INTERNAL CONTROL, RISK MANAGEMENT
AND INTERNAL AUDIT	164
INTERNAL AUDIT COMMISSION	168
EXTERNAL AUDITOR	172
MANAGEMENT OF SUBSIDIARIES	174
SHARE CAPITAL AND CIRCULATION OF SECURITIES	175
Structure of share capital	175
Trading in securities - key figures	177
Capitalization . .	. . . . . . . . . . . . . . . . . . .	179
Distribution of profit and dividend policy	. 179
Communication with shareholders and investors	. 181

4. SUSTAINABLE DEVELOPMENT REPORT

SUSTAINABLE DEVELOPMENT MANAGEMENT . . . . . . . . . . . 66 Contribution to achievement of UN Sustainable

Development Goals . . . . . . . . . . . . . . . . . . . 68 Sustainable development risk management and assessment. . 70 ESG ratings . . . . . . . . . . . . . . . . . . . . . . 70

HUMAN RESOURCES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 Results of implementation of human resources policy . . . . . 72 Personnel training and development. . . . . . . . . . . . . 73 Employee remuneration system . . . . . . . . . . . . . . 75 Youth policy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 Social policy. . . . . . . . . . . . . . . . . . . . . . 77 Human rights . . . . . . . . . . . . . . . . . . . . . . 79

OCCUPATIONAL HEALTH AND SAFETY. . . . . . . . . . . . . . . . . 81 Occupational health . . . . . . . . . . . . . . . . . . . 81 Occupational safety . . . . . . . . . . . . . . . . . . . 82

ENVIRONMENTAL PROTECTION. . . . . . . . . . . . . . . . . . . . . . 83

Environmental policy. . . . . . . . . . . . . . . . . . . 83

Environmental protection performance. . . . . . . . . . .87 Power consumption and saving.. . . . . . . . . . . . . . 88

INTERACTION WITH STAKEHOLDERS	90
MANAGEMENT SYSTEMS	94

6. ADDITIONAL INFORMATION

INFORMATION ABOUT THE REPORT AND MATERIALITY. . .	184	CONTACT INFORMATION	192
STANDARD COMPLIANCE TABLES	188	GLOSSARY AND ABBREVIATIONS	194

APPENDICES

APPENDIX 1. REPORT ON FULFILLMENT OF PRINCIPLES		APPENDIX 2. REPORT ON RELATED PARTY
AND RECOMMENDATIONS OF THE CORPORATE		TRANSACTIONS MADE BY ROSSETI VOLGA, PJSC
GOVERNANCE CODE OF THE BANK OF RUSSIA	196	IN 2022.. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 234

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Address of the Chairman of the Board of Directors. . . . . . . . . . . 6

Address of the General Director . . . . . . . . . . . . . . . . . . 7

Company snapshot . . . . . . . . . . . . . . . . . . . . . . . 8

Authorized	Majority shareholder	Service	The average
capital	Rosseti, PJSC	territory	headcount
18.831	67.97%	7	20,364

billion rubles

regions

persons

	Presentation	Strategic	Business	Sustainable development	Corporate	Additional	Appendices
	part	report	performance	report	governance report	information

ADDRESS OF THE CHAIRMAN

OF THE BOARD OF DIRECTORS GRI 102-26

Dear shareholders, investors, and partners,

Due to consistent and effective solutions of the Board of Director and management team, the electric grid company achieved all target financial and business performance indicators and successfully handled major tasks under unfavorable economic conditions.

ENERGY OF NEW ACHIEVEMENTS

ADDRESS OF THE GENERAL

DIRECTOR GRI 102-14

Dear shareholders, investors, and partners,

In 2022, Rosseti Volga, PJSC pursued the Development Strategy of Rosseti Group for the period until 2030. The development of the Company's electric grid complex aimed at migrating to absolutely new characteristics of reliability, efficiency, availability, and controllability of the electric grids.

The Company committed to ensuring safe and uninterrupted operation of the grid systems in seven regions of the Volga Federal District, implementing the advanced technologies, increasing the automation degree of power facility control, ensuring power grids consolidation, and enhancing service availability. The Company is an infrastructural basis for economic development of the regions within the Company's responsibility area that forms a reliable platform for further development of different business areas and high living standards.

The Company's high solvency, systemic importance and attractiveness for the investment community was confirmed by AA + (RU) credit rating with stable rating outlook assigned by the Analytical Credit Rating Agency.

In 2022, the Company pursued the innovative development and technological transformation of the electric grid complex, and active implementation of new R&D projects that increase automation of the operational control processes. The business priority plans of the Company were based on the documents approved by the Board of Directors of the Company, including Plan of activities aimed to develop the production assets management system of Rosseti Volga, PJSC for 2022-2024, and Road Map for the development of value-added(non-tariff) services of Rosseti Volga, PJSC. The above documents established ways to tackle the important objectives for enhancing the production performance and developing new business areas.

Last year, the Company had to deal with the issues of primary importance such as switching to the use of domestic equipment, components, materials and software for the electric grid complex in the shortest time possible. Ensuring trouble-free operation of the critical information infrastructure and cybersecurity was one of the top priorities. The Company made a lot of progress in this area, and will pursue these efforts in 2023.

Key objectives of the Board of Directors and management team involve increasing the efficiency of all business processes, reducing costs, expanding the scope of services and service offerings, and balancing interests of the regions, customers, shareholders, and investors. I am sure that clear strategy, high operational performance indicators, significant technological and professional potential is a key to further development of the Company as an advanced and innovative electric grid company.

Best regards,

Aleksey Valerievich Molsky

Chairman of the Board of Directors

of Rosseti Volga, PJSC

In 2022, a highly automated 110/10 kV substation, Sazanley, equipped with the intelligent process control system was put into operation in the Saratov region.

The present-day business environment is marked by the dynamic growth and integration of smart technologies and platform solutions into key business aspects of the companies in order to boost the efficiency and build new business processes, products and services.

The digital transformation of the electric grid complex pushes on to a whole new level of technological control in the power sector, and gives new opportunities for consumers. The implementation of high-tech projects is key to switching to the electric grid complex control system based on integration of all processes and automated processing of bulk data.

In 2022, the Company maintained uninterrupted power supply to consumers of the Saratov, Samara, Penza, Orenburg, and Ulyanovsk regions, the Republic of Mordovia and the Chuvash Republic, and achieved all target operational performance indicators.

The Company performed a full package of activities involving technical maintenance and repair of electric grid facilities without any delay, that guaranteed the effective preparation for smooth and continuous operation during the autumn-winter season. To that effect, the Company allocated 5,256 million rubles in 2022.

The Company brought the investment program into action, including reconstruction and technical upgrading of the electric grid facilities. The program budget exceeded 9.6 billion rubles. Last year, the capacity of

174 MVA was put into operation. The most significant projects included reconstruction of major feeding centers, Bezymyanka-3 110/10 kV substation and Pestravka 110/35/10 kV substation in the Samara region.

Enhancing the customer centricity is one of the top priorities of the Company. In order to deal with consumers in the most effective way, the Company opened a 24/7 contact center and offered online services that become more and more popular. In 2022, the revenue from the expanding range of value- added services increased by 47% as compared to the previous period. The Company also pursues the EV charging station program. In 2022, three charging stations of Mode 4 type (fast-charge) were put into operation in the Saratov and Samara regions.

In general, the Company's achievements in 2022 showed that despite challenging macroeconomic conditions, the Company is able to follow its strategic growth path and ensure reliable operation and technological development of the electric grid complex in seven regions of the Volga Federal District.

Best regards,

Aleksandr Ilyich Gavrilov

General Director

of Rosseti Volga, PJSC

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