2006 Social Responsibility and Corporate Sustainability Report (стр. 3 )

Thus, there is sustained growth of thermal loads in Krasnoyarsk, both as of today, and in the long term prospect. To cover the expected heat deficiency construction of new power capacities on the left bank of the city is needed.

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STRATEGY ACTIVITIES DIRECTED TO CORPORATE GOVERNANCE DEVELOPMENT

Adoption of the Corporate Governance Code

The Company approved the internal Code of Corporate Governance. The principles put in its basement are to provide:

-  Real possibility for all shareholders, irrespective of the owned stake in the Company, to exercise their rights related to the participation in the Company.

-  Strategic governance of the Company’s operation by the Board of Directors and its effective control over activity of the executive bodies; accountability of the Board of Directors to the General Meeting of shareholders.

-  Necessity for the executive bodies to reasonably and conscientiously manage the current activity of the Company; their accountability to the Board of Directors and the General Meeting of Shareholders;

-  Timely and full disclosure of information on the Company, including information on its financial position, economic indicators, property and governance structure.

-  Effective control over financial and economic activity of the Company.

-  The rights of the Company’s employees provided by the legislation, development of partner relations between the Company and the employees in the decision of social issues and regulation of the working conditions.

-  Active cooperation of the Company with investors, creditors and other interested persons with a view of increase in assets of the Company, share and other securities’ costs.

The JSC “Yenisei TGC (TGC-13)” Code of corporate governance is based on the Russian legislation, Code of corporate behavior recommended to application by the FCS and also on the principles of corporate governance recognized in the international practice, such as ОECD (Organization for Economic Cooperation and Development) Principles of corporate governance.

Pursuant to the Code the corporate governance of the Company is based on the following principles:

Accountability. The Code provides the accountability of the Company’s Board of Directors to all shareholders pursuant to ­ the current legislation and serves as a guide for the Board of Directors at developing strategy and carrying out guidance ­ and control over activities of the executive bodies of the Company.

Justice. The Company undertakes to protect shareholders’ rights and to ensure equal attitude to all ­ shareholders. The Board of Directors grants all shareholders an opportunity to have effective protection in case their rights are infringed.

Transparency. The Company ensures duly disclosing ­ trustworthy information about all ­ essential facts concerning its activity, including its financial position, social ­and ecological indicators, results ­ of activities, structure of the property and management ­ of the Company, and also availability of such information to all interested persons.

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Responsibility. The Company recognizes the rights of all interested persons provided by the current legislation­ and strives for cooperation with such persons with the purpose of the Company’s development and ­ maintenance of financial stability­.

Strengthening the Board of Directors’ role

One of priority directions of the JSC “Yenisei TGC (TGC-13)” corporate governance system development is strengthening the Board of Directors’ role. For this purpose effective committees on the most significant directions of the Company’s current activity and development are to be established under the Board of Directors.

In 2006 the Committee on reliability was established in the Company. In 2007 the Company plans:

-  To expand the structure of the Committee on reliability and to include in its structure representatives of minority shareholders (first of all – OJSC "SUEC").

-  To establish under the Board of Directors the following committees (also with the participation of representatives of the minority shareholders):

Committee on audit.

Committee on personnel and remunerations.

Committee on strategy, investments, finance and budget.

Implementation of the above stated directions will allow the shareholders through the representatives in the Board of Directors not only to supervise everything occurring in the Company, but also to make key decisions, in particular, related to the movement of the Company’s assets, etc., and through representatives in the Committees - to estimate, weigh, make interim decisions on the issues that have not been considered by the Board of Directors yet.

Besides, an important direction is the development of the corporate governance system by subsidiaries and dependent companies. The JSC “Yenisei ТGC (ТGC-13)” interacts with subsidiaries and dependent companies (SDC) pursuant to the requirements of the legislation of the Russian Federation, the Charter and the JSC “Yenisei ТGC (ТGC-13)” internal documents, charters of subsidiaries and dependent companies.

The principle goals of the JSC “Yenisei TGC (TGC-13)” interaction with the SDCs are:

-  Maintenance of sustained financial development, profitability of performance, increase of investment appeal of the Company and SDC;

-  Ensuring protection of rights and secured by the Law interests of shareholders of the Company and the SDCs;

-  Balance of relations of shareholders, officials and members of labor collectives of the Company and SDCs, prevention of conflicts between them and within the specified groups;

-  Working out and implementation of the coordinated and effective investment policy of the Company and SDCs.

The document securing major principles and regulations on corporate governance of SDCs is the Order of interaction with economic companies stocks (shares) of which are owned by the JSC “Yenisei ТGC (ТGC-13)”. Pursuant to the stated Order the Company’s interaction with SDCs is carried out while accepting appropriate decisions (decisions of general meetings of shareholders, Boards of Directors, Auditing Commission, Management Boards and sole executive bodies within their competence) by the governing and controlling bodies of SDCs.

In the process of the corporate governance development the Company will aspire to promote principles of corporate governance in regards of subsidiaries and dependent companies.

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Transition to the international standards of financial reporting

The requirement for the financial reporting being prepared in accordance not only with the Russian standards, but also with the international standards of financial reporting (ISFR) is one of the most essential obstacles for the Company to pass listing on the Russian exchange floors and demands hiring highly skilled specialists, not to say of the high price of consulting services on transforming the financial reporting of the emitter. In this connection the problem of the Company’s transition to ISFR is among the most prior.

In 2007 the Company plans to publish the first 2006 reporting pursuant to the ISFR. The Auditor is the international company KPMG. In the future the reporting is to be prepared and published not only annually, but also quarterly.

Carrying out the balanced dividend policy of the Company

While estimating dividend payments the Company’s policy will be based on the balance of interests of the Company and its shareholders, on strict observance of the shareholders’ rights, provided by the current legislation of the Russian Federation, the Charter and the internal documents of the Company.

The Company will aspire, along with capitalization growth, to increase the amount of dividends paid to the shareholders proceeding from:

·  the amount of the received net profit for a year;

·  demands of the Company for maintenance of the required level of financial and technical condition, provision of prospects of the production development;

·  the Company’s investment activity;

·  necessity of increase of investment attractiveness of the Company.

Dividend payment terms will be:

·  availability of net profit of the Company;

·  absence of restrictions on dividend payments, provided by the Russian Federation legislation;

·  recommendations of the Board of Directors on the amount of dividends;

·  resolution of the General Meeting of Shareholders of the Company on dividend payments.

The policy of the Company relating dividends provides:

-  Creation of the transparent and clear mechanism of dividend estimation;

-  Providing the most convenient for the shareholders order of dividend payments;

-  Measures excluding incomplete or untimely payment of the declared dividends.

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Swans live in loving couples, helping each other and other "families". A nestling yet not strong enough hides up under a wing – he wouldn’t survive without protection of adult birds.

The majority of swan pairs forms strong unions.

The majority of the Yenisei TGC (TGC-13) employees keep loyalty to their enterprises. The personnel rotation is low - only 4,5 %.

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SOCIAL RESPONSIBILITY AND CORPORATE SUSTAINABILITY

The target of the Company’s social policy is the well-being of the region of its activity. In this connection the Company’s activity is guided by the following aspects of social strategy:

-  Increase of thermal power availability for the population and business consumers (responsibility for infrastructure development).

-  Preservation of the environment.

-  Care for employees.

-  Contribution to the image of territories.

-  Improvement of the cities’ social and cultural environment.

The JSC “Yenisei ТGC (ТGC-13)” puts considerable efforts for the activity in the social sphere to favorably influence the Company’s and the stakeholder development, so that it wouldn’t be a social burden and represent social investments into sustainable development of the Company and the regions of its presence.

The JSC “Yenisei ТGC (ТGC-13)” shares the common approach of the OJSC RAO “UES of Russia” to determination of the specificity of corporate social responsibility in the electric power industry, including responsibility for reliable functioning and development of social infrastructure, management of consequences of the power companies’ impact on the environment, society and economy.

Effective work with public expectations includes their revealing, defining the responding position of the Company, and, in case of expediency, their considering in corporate policies, development strategy and the Company’s current performance.

In its cooperation with the interested parties the Company realizes its responsibility for establishing mutually beneficial partner, public, transparent relations based on regular and meaningful dialogue.

All this has defined ethical principles the Company is guided in its activity.

Responsibility for the social infrastructure development

The electric power industry plays a special role in the national economy as the basic living condition of the Russian society and business development. Power industry is a public infrastructure aimed at providing any and each diligent user at any geographical point of the country the services that are recognized as significant and critical for life-support.

To achieve this, the required infrastructure capacity, i. e. ability of the power companies to serve the available and predicted demands of consumers should be ensured. Besides, reliability of critical elements of public infrastructure, also at the expense of regulation of fuel supplies and maintenance of standard power reserves, development of network throughput and determination of technical regulations, etc. should be provided.

Responsibility for social infrastructure is not only the guarantee of reliable and uninterrupted electric power supply, but the guarantee of its availability, to wit:

-  Territorial availability, when the most distant, economically depressive areas are uninterruptedly supplied with electricity and thermal power;

-  Price availability, when prices on electric and thermal power are economically proved and socially acceptable;

-  Organizational availability, when the power companies’ service rules are transparent, well-known and acceptable, and in case they are followed no user can be refused the services.

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The JSC “Yenisei ТGC (ТGC-13)”, as a component of social infrastructure of the region, sees its contribution to the maintenance of performance and development of the social infrastructure so that to ensure the appropriate level of capacity and reliability of the Company’s plants, and to make electricity and heat supply available to the existing and prospective consumers. The Company pays special attention to the price on electricity and heat to be fair - in accordance with the electric power industry reform plan it is the primary goal of the power companies.

It is obvious that no power company can fulfill the social infrastructure requirement on its own. The JSC “Yenisei ТGC (ТGC-13)” shares corporate responsibility for functioning and development of the branch with other power industry entities: the state, infrastructure organizations, companies working under the liberalized market conditions and self-regulating associations in the electric power industry.

Ensuring the right to power

A power consumer should have a possibility to receive qualitative electric and thermal power in the required quantity, in due time and under fair price. This is only possible when the power companies’ activity is organized economically efficiently (expediently). Therefore the JSC “Yenisei ТGC (ТGC-13)” in its activity seeks to find the balance between the rights of power consumers and the necessity of the Company to be economically well-founded and effective.

Quality of the corporate governance system

Any public company aspiring to increase its market capitalization should consistently form the reputation basement of its business. It is possible when the company implements up-to-date standards and principles of corporate governance focused on the company’s active interaction with the interested parties. The JSC “Yenisei ТGC (ТGC-13)” seeks to create an effective system of corporate governance ensuring the Company’s openness for the interested parties and their involvement into decision-making processes.

Behavior in the electric power market

Full liberalization of the electric power and capacity market is essentially important for the country’s electric power industry. This is only possible if all the market participants observe the principle of fair competition and show interest to establishing a fair market price on the electric power. The JSC “Yenisei ТGC (ТGC-13)” does everything possible to prevent discrediting the idea of a free electric power market.

Responsibility for the investment resources’ use

Any company involving investments on a public basis, is responsible for their effective and target use. It is possible, if the company has professional management of investment projects. The JSC “Yenisei ТGC (ТGC-13)” seeks to create an advanced system of investment projects control ensuring transparency, efficiency and a minimum risk level of the Company’s investment activity for all the interested parties.

Environmental safety

Business of the power company should be based on the principles of environmental safety. This is possible, if the power companies of Russia develop efficient environment management.

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The JSC “Yenisei ТGC (ТGC-13)” strives to be aware of the ecological consequences of its activity and is willing to take all possible measures to decrease its impact on the environment.

Participation in the regions’ development

Large companies are responsible for the influence they render on the life of local communities. This is possible only when there are real partnership relations between the authorities and local communities.

The JSC “Yenisei ТGC (ТGC-13)” seeks to consistently participate in the complex development of the regions of its presence on the basis of principles of partnership, trust and dialogue with local communities, regional and municipal authorities.

Personnel development

One of the principle responsibilities of any company is care for those who creates its wealth, - the employees. This care is effective, if contributions to the personnel development are steady, predicted and are carried out on a regular basis.

The JSC “Yenisei ТGC (ТGC-13)” seeks to provide its employees with a competitive wage level, adequate working conditions and ample opportunities for the professional level and career growth.

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INTERACTION WITH STAKEHOLDERS

Ensuring the Company’s information openness

An important factor for all-round estimation of the Company’s activity by the stakeholders is the information policy carried out by the Company.

In its activity the JSC “Yenisei ТGC (ТGC-13)” is guided by principles of transparency and information openness, ensuring the stakeholders’ rights to timely reception of true information on the Company’s activity in the scope provided by the current legislation.

The procedure of information disclosure is in full conformity with the requirements of the legislation. The Regulations on the information policy regulates streams of the information to be disclosed for the purpose of ensuring transparency of the Company’s activity and, at the same time, protecting against information distortion. Major principles of disclosing information are availability of the information to be compulsory provided to all the stakeholders, its reliability and completeness, so that to ensure reasonable balance between the Company’s openness and its commercial interests.

Besides, in its corporate policy Yenisei ТGC takes into account information demands of the business community, consumers, partners, political groups, regional and municipal authorities, local population. Considering that implementation of the Company’s development strategy, current and perspective projects requires establishing effective relations with various target audiences, the Company gives close attention to the informational flows’ management. Any interested person, after sending an inquiry, can get a qualified comment of the Company’s experts and specialists within the limits not breaking confidentiality and retaining a trade secret. For the most complete satisfaction of the interested persons’ demands the information on the Company is placed on the corporate site www. ***** regularly updated and actively visited by target groups.

The site has the Company’s Director General “Direct Line”. All visitors of the corporate site - shareholders, analysts, representatives of investment community, employees of the Company, journalists, etc. - have a possibility to ask a question.

The Company initiates public discussion of the most significant proposals in the field of organizing industrial and economic, ecological, investment activity of the Company, tariff regulation, development of the region’s power complex. The Company’s top management actively cooperates with the regional and municipal authorities in solving problems of the development of the power complex, social and economic sphere of the region, legal regulation of power business.

To ensure effective informational interaction with the public the Company formed a regular pool of journalists. A program of training seminars and consultations for journalists allowing them to know more about the problems of the branch and the processes occurring in the Company has been worked out and implemented.

The Company regularly informs the mass media on all major events of its activity, on its financial position, industrial indicators, changes in the share capital structure, management so that its activity was impartially covered in mass-media.

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As a necessary element of information openness the Company considers mutual communications with mass-media. Besides disclosing of the obligatory information and providing journalists with the news, the Company considers timely and impartial responding to mass media inquiries to be a necessary condition of effective communications. Thus the Company’s press-service adheres to the following principles:

-  Availability of the Company’s top management comments.

-  Assistance to journalists while accumulating information and preparing materials.

-  Non-manipulating journalists.

-  Absence of censorship.

An effective form of interaction with mass-media directed to the Company’s information openness enhancing is organization of regular business meetings of the Company’s Director General and his deputies with editors and journalists of regional mass-media.

As the basic instruments of informing the community on the Company’s performance are used:

-  Establishment of long-term partner relations with printing and electronic mass media. Regional representations of federal printing editions and news agencies, correspondent's offices of the federal TV channels, the most influential inter-regional editions, leading business regional mass-media are the priority for cooperation.

-  Regular covering in mass-media the working meetings, meetings with the participation of the Company’s and the subsidiaries’ management.

-  Arranging interviews of the representatives of the Company’s governing bodies in the leading printing (business papers) and electronic (TV, news agencies) mass-media.

-  Carrying out special events - briefings, press conferences, press-tours - on a regular basis.

-  Arranging joint activities with the press-services of the regions’ administrations.

-  Creation, maintenance and timely updating the Company’s corporate web site.

The corporate site is planned to be used for carrying out sociological polls that will make it possible to find out the public point of view on the Company’s performance with the high-scale of accuracy.

-  Arranging and holding regular corporate events for the Company’s employees.

-  Holding round tables with the participation of the Company’s management to provide the results of the Company’s activity and development prospects to the stakeholders.

-  Submitting the information on the Company’s performance (sending out press releases, brochures, reports) to the leading branch analytical agencies, analysts of investment companies and banks.

The list of the information subject to disclosure, the order and terms of disclosing the information are determined by the JSC “Yenisei TGC (TGC-13)” Regulations on Information Policy approved by the Board of Directors.

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At disclosing information the Company is guided by principles:

Principle of completeness and reliability of the information to be disclosed, according to which the Company provides to all the interested persons true information, not avoiding thus negative information on the Company itself, in the scope generating the most complete concept of the Company and the results of its activity.

Principle of availability of the information according to which the Company uses channels of distribution of the information on its activity, assuring free and easy access of shareholders, creditors, prospective investors and other interested persons to the information to be disclosed.

Principle of balanced information which means, that the information policy of the Company is based on reasonable balance of the Company’s transparency for all the interested persons, on the one hand, and confidentiality on the other hand, for the maximum realization of shareholders’ rights to the information on the Company’s performance under condition that confidential or insider information is protected.

Principle of regularity and timeliness of information disclosure which defines that the Company submits shareholders, creditors, prospective investors and other interested persons information on its activity in the terms provided by the regulatory legal acts of the Russian Federation and the Company’s internal documents.

The Company’s approach to interaction with stakeholders and to risk management

The Company considers itself obliged to contribute to the social and economic development of the regions of its presence, co-operating in the mentioned sphere with the regional governments and local authorities. The problem of planning and strategy development of the regions cannot be solved by the Company as the adequate estimation of the social and economic development can be given only by the authorities and local self-government institutions capable to consider all features and territory problems in a complex, most efficiently distribute resources and guarantee synchronization of efforts of business, authorities and population in this direction. Thus the Company finds it necessary:

-  To use the stakeholder dialogue as the mechanism of consideration of interests of all the interested parties *;

-  To make contribution to the social and economic development of the regions of its presence;

- Not to replace and not to substitute obligations and the role of local self-government institutions and local communities.

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* Under stakeholders or interested parties are meant groups capable to influence the activity of the organization or, on the contrary, be influenced by the rendered services and the activities related to that.

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Table 4. Stakeholders’ Chart as related to the JSC “Yenisei TGC (TGC-13)” activity.

Stakeholder	Definition criterion	Stakeholder’s key interests	Way of cooperation with the key interests
Consumers	Is based on the principle of interdependency. The Company provides the consumers with the power and the consumers are to pay for it. But the Company cannot stop providing power to the majority of consumers in case of the consumers’ failure to pay.	Keeping up the power price growth. Availability of power and transparent rules of connecting the networks (for industrial consumers)	Public position and explanatory work on the issues related to pricing. Direct line with the Director General (the Company’s site) for most timely reacting to complaints. Participation of the Company in the working out of the region’s development strategy. Legislative approval of the connection charge and the order of connecting to the Company’s heat mains.
The State	Influences the Company’s activity conditions and financial indicators of the Company’s business through the system of laws, standards and tariffs.	To provide smooth and painless transition to the market ways of business management in the power industry keeping tariffs down	Cost-saving as a way of low tariffs compensation, work with RPC for the approval of the economically reasonable tariffs, PR activity with the population for the promotion of power saving in every-day life.
OJSC RAO “UES of Russia”	The Company depends on RAO as the key shareholder of the Company	Has no long-term strategic interests in the Company.	Duly implementation of all reform plans.
OJSC “SUEC”	Is the second-large shareholder of the Company. Owns a blocking share holding.	Has long-term strategic interests in the Company. It is interested in controlling interest consolidation.	Duly and full informing on the Company’s activity results and strategic initiatives. Introduction of SUEC representatives to the Committees under the Board of Directors

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Stakeholder	Definition criterion	Stakeholder’s key interests	Way of cooperation with the key interests
Other minority shareholders *	Obligations provided by the Law on the joint stock companies and the Company’s corporate policy	The shareholders’ possibility to execute their rights. Interest in the increase in the Company’s capitalization	Entering amendments to the Charter extending the Board of Directors’ authorities for the establishing under the Board of Directors committees on corporate governance, audit, strategic development, human resources and remunerations comprising the shareholders’ representatives
Regional authorities	It’s an active party in developing the political and investment strategies of the region’s development, influences the tariffs through RPC.	To have politically loyal governing body included into the region’s development context. Keeping down tariffs for the population.	Participation in the plans and programs of the regional development, understanding and realizing the challenges the region faces in the whole, promoting development initiatives not related to the Company’s activity area exclusively, understanding of the business social responsibility
Local authorities	In accordance with the proximity factor (frequency of interaction)	To ensure the cities’ social and housing infrastructure development. Control over communal power industry.	Coordination of the cities’ development plans and investments in the heat generation volume increase and extension of the heating system infrastructure

*Besides the OJSC “SUEC”, the minority shareholders of the Company (owning more than 0,1 % of shares) as of December, 31st, 2006 are: