2014 Annual report

Letter of the Chairman of the Company’s Board of Directors

Dear Shareholders,

2014 was an anniversary year for the Company, marking 10 years since JSC IDGC of the North-West was founded. The Company has come a long way since then: we have built up a professional team and have extensively modernized and updated all our production assets, thereby improving the reliability of power supply to our end consumers.

Over these years, the Company’s Board of Directors has not only performed strategic management, but has also successfully coped with current pressing issues, helping to allocate Company resources correctly and achieve objectives set by shareholders as effectively and as efficiently as possible.

The Company’s Board of Directors is subject to constant change, but each Board chosen represents a community of professionals. Members of the Board of Directors act reasonably, in good faith and responsibly, fully respecting the Company’s and the shareholders’ balance of interests and making informed and balanced decisions. During the last reporting period alone, over 250 issues were reviewed at 28 meetings of the Board.

Whatever the issues reviewed by the Board of Directors may be — from planning the Company’s operations to approval of Company policy with regard to various business activities, each decision is made with only one aim in mind — to ensure that IDGC of the North-West remains a stable, profitable and attractive company, both for its highly-skilled staff and for investors alike.

The range of Company policy documents adopted in 2014 was conceived and developed with this aim in mind. These policy documents included the Internal Auditing Policy, the Internal Control Policy, and Risk Management Policy. An energy saving and increased energy efficiency program up to 2019 was also adopted by the Company, in addition to a timetable of measures designed to develop a management system for the Company’s production assets in 2014–2015 and an IT, Automation and Telecommunications Strategy Road Map up to 2016.

Those issues currently facing the Company that were not fully resolved this past year, were mainly due to external factors — the industry’s incomplete regulation, and our partners’ and end consumers’ economic difficulties. Under its scope of functions, the Board of Directors approved a schedule of measures aimed at reducing debt to the Company and monitored its implementation. Stabilizing debt rate is one of the results of this initiative.

Another area of business that the Board of Directors focuses on is encouraging the Company’s management to address the objectives set by shareholders. The target values of the annual key performance indicators of the Company’s General Director and Senior Management were approved at the Board meetings, and the quarterly performance reports were reviewed.

The Company’s Board of Directors demonstrated the ability to respond promptly to any external challenges, while remaining sensitive to the issues facing the Company. Despite the fact that not all objectives set by shareholders were fully met in 2014, foundations were established to achieve stable results in 2015.

I would like to thank the 2014 Board of Directors for all its effective and efficient work and I hope that the new Board of Directors will be successful in maintaining JSC IDGC of the North-West quality and rate of progress.

Yours faithfully,

Chairperson of the Board of Directors

JSC IDGC of the North-West Svetlana Zholnerchik