Corporate management (стр. 1 )

Corporate management

Good quality, uninterrupted and reliable electricity supply to consumers as the result of the function of a complex and technological electricity production infrastructure cannot be achieved without an effective and stable system of management for this infrastructure. This system in our Company, a public company, brings together various participants in corporate relations on two basic levels of management: strategic and operational.

Principles of corporate management

The Kubanenergo corporate management system is an assembly of processes providing management and control of the activities of the Company. These processes include relations between shareholders, the Board of Directors and executive organs and is aimed at harmonising the interests of all those involved in corporate relations, including not only the shareholders and management bodies but also potential investors and a wide circle of other interested parties: consumers, employees, counteragents, creditors, partners and state and local associations.

Kubanenergo considers corporate management to be a means of improving the effectiveness of its activities, strengthening its reputation, growth in investment attractiveness and reducing expenditure of capital attracted.

Main principles of corporate management at Kubanenergo

1.  Accountability. The General Shareholders Meeting examines the Company’s activities every year; the Board of Directors provides strategic management of the Company’s activity and controls the work of management; the executive organs - Management Board and General Director - manage ongoing activities by the Company and are accountable to the Board of Directors and the Company’s shareholders. 2.  Fairness. The Company undertakes to protect the legal rights of the shareholders and treat all shareholders equally. 3.  Transparency. The Company ensures timely disclosure of veracious information on all significant facts regarding its activities, including its financial standing, social and environmental indicators, operating results, property and management structure, as well as providing free access to this information to all interested parties. 4.  Responsibility. The Company recognises the right of all interested parties as stipulated by legislation and aims to work with them for its development and financial stability.

Internal documents have been approved in order to systemise and ensure continuation in the practice of corporate management at Kubanenergo such as the Rules of Corporate Management, the Statement on insider information, the Statement on information policy, and the Statement on dividend policy[1]. All these documents have been developed in accordance with leading corporate management standards, including the Russian Rules for Corporate Management, and are aimed at ensuring compliance with and protection of the rights and legal interests of shareholders, investors and other interested parties.

The appendices to the Annual Report include the following materials relating to the Company’s corporate management practices:

§  review of internal documents and statements at Kubanenergo regulating the activities of its management and control bodies, as well as the functioning of key corporate management procedures;

§  report for 2011 on the Company’s compliance with the Russian Rules for Corporate Management recommended by the Federal Commission for the Securities Market of Russia, in accordance with order№03-849/r of the Federal Commission for the Securities Market of 3 April 2003 On Methodical Recommendations on the Content and Form of Presenting Information on Compliance with the Code of Corporate Conduct in Annual Reports of Public Companies.

Improving corporate management practice in 2011

Kubanenergo recognises the importance of constantly improving corporate management practice and aims to adopt new standards aims at improving management effectiveness and openness, strengthening trusts in relations with shareholders, investors and other interested parties.

Innovations in the accounting year touched all the main aspects of corporate management practice at the Company.

1. The Charter and the Statement on the order of convening and holding meetings of the Board of Directors of the company stipulate the frequency of meetings by the management body - not less than once every six weeks. This amendment complies with the Russian Rules for Corporate Management.

2. A Board of Directors Committee for Technological Connection has been set up. Providing quality electricity supplies and a high level of service for customers is one of the Company’s strategic priorities. To achieve maximum effectiveness of the work of the Board of Directors on questions to do with this field a corresponding Committee was set up. The main task of the Committee for Technological Connection was set by recommendations developed by the Board of Directors on questions of ensuring operational openness and undiscriminating access to technological connection services by consumers to Kubanenergo electricity networks.

3. Active work by Board of Directors’ Committees. Committees of the Board of Directors (for reliability, auditing, strategy, development, investment and reform, personnel and reward) continue to ensure the effectiveness of the Company’s work. During 2011 members of the Board of Directors received timely recommendations from the Committees on all questions included in the agendas of Board of Directors meetings, which made it possible for them to considered and well founded decisions.

4. Improving risk management. Taking into account the recommendations of the Audit Committee the Board of Directors approved Statements on the control environment and the risks of a range of business processes in the Company’s activities. These statements include detailed descriptions of the business processes, the risks associated with them and a list of control procedures - actions making it possible to avoid (reduce) the likelihood of the risk occurring or to avert their consequences.

5. Developing practices in working with investors. To organise constant dialogue with investors and financial analysts in the corporate management department and work with shareholders Kubanenergo has created a position for a person responsible for carrying out Investor Relations functions.

In 2011 the Expert RA ratings agency analysed the quality of management at the Company and the results meant that Kubanenergo was awarded a Level 7 rating for management quality (developed corporate management practice). Factors having a positive effect on the Company’s rating were the high level of observance of shareholder rights and organisation of the work of executive bodies, as well as the high level of organisation of control systems for financial and operating activity. Factors limiting the rating were identified by the agency’s analysts to include a medium low level of observance of shareholders rights in receiving dividends, an acceptable level of organisation and work of the Board of Directors, as well as a medium low level of organisation of corporate and social responsibility.

In the future the Company will continue work aimed at raising its corporate management level.

Shareholders general meeting

The Shareholders General Meeting is the highest management body of the Company.

In accordance with the the Kubanenergo Charter the following questions in particular lie within the competence of the:

·  amendments and additions to the Charter внесение;

·  reorganisation and liquidation of the Company;

·  increasing or reducing the equity capital of the Company;

·  segmentation or consolidation of Company shares;

·  decisions on the Company making additional offers of stock converted into share;

·  election of members of the Board of Directors and the Revision Commission of the Company and early termination of their authority;

·  approving annual reports, annual accounts, distribution of profit (including paying dividends);

·  decisions on approving major transactions as well as transactions in which there is an interest in the cases stipulated by the Federal law On Publically Owned Companies;

·  approving internal documents regulating the activities of bodies of the Company;

·  decisions on remuneration and (or) compensation of members of the Board of Directors and Revision Commission.

Preparation for and holding Kubanenergo general shareholders meetings is carried out in accordance with the legislation of the Russian Federation and the Statement on the order of preparing and holding general meetings of shareholders of the company[2].

In 2011 there were two general shareholders meetings: the annual meeting and an extraordinary meeting.

Date of general shareholders meetings	Most important decisions taken at the meeting[3]
14 June 2011 Annual general shareholders meeting (Protocol №29 of 16.06.2011) Owners of 95.7% of the total of voting shares issued took part in the meeting	1.  Annual report and annual accounts for 2010 results approved. 2.  Distribution of profit approved (the Company made a loss of 1 942 073 000 rubles in 2010). Decision taken not to pay dividends for 2010. 3.  Decision taken not to pay additional fees for serving on the Board of Directors for 2010 to members of the Board of Directors not working in the state sector. 4.  Members of the Board of Directors and Revision Commission elected. 5.  Company Auditor approved - NP Consult. 6.  New revision of the Company Charter approved.. 7.  New revision of the Statement on the order of convening and holding meetings of the Board of Directors of the company approved.
23 November 2011  Extraordinary general shareholders meeting (Protocol №30 of 28.11.2011) Owners of 95.7% of the total of voting shares issued took part in the meeting	Decision taken to increase equity capital at the Company be making an additional share offer to a total value of 9 rubles.

Board of directors

The work of the Board of Directors

The Board of Directors carries out overall management of the Company’s activities with the exception of questions within the competence of the Shareholders General Meeting, and plays a fundamental role in managing the Company.

Members of the Board of Directors recognise their responsibility to the shareholders and consider their main task to be honest and competent execution of the obligations of managing the Company, ensuring support and growth in value of its shares, as well as protection of shareholders’ legal rights and their ability to realise these. The Board of Directors creates and supports all necessary mechanisms to control the activities of executive bodies of the Company, including monitoring and assessing its results.

In accordance with the Kubanenergo Charter the following questions in particular lie within the remit of the Board of Directors of the Company:

·  determining priority areas of activity and development strategy for the Company;

·  convening annual and extraordinary general shareholders meetings;

·  determining the price (monetary value) of property, prices of offering and buyback of shares in the Company;

·  acquisition and realisation of shares offered by the Company in the circumstances stipulated by the Federal law On Publically Owned Companies;

·  electing the General Director of the Company and early termination of his authority;

·  electing members of the Management of the Company and early termination of their authority;

·  recommendations to the general shareholders meeting on the amount of fees and compensation to be paid to members of the Revision Commission and determining the size of the fee to be paid to the auditor;

·  recommendations on the size of dividends on shares and the order of payment;

·  approving internal documents at the Company;

·  approving the business plan, including the investment programme, and quarterly reports on their execution;

·  setting up branches and opening offices, as well as their liquidation;

·  decisions on the Company participating in other organisations;

·  setting the borrowing policy of the Company;

·  approving major transactions as well as transactions in which there is an interest in the circumstances stipulated by the Federal law On Publically Owned Companies ;

·  consideration of reports from the General Director on the Company’s activities and on execution of decisions taken by the general shareholders meeting and the Board of Directors;

·  approving the order of the Company’s work with other organisations in which they play a part;

·  determining the Company’s position on main agenda questions for shareholders general meetings and meetings of the Boards of Directors of subsidiaries and affiliates;

·  preliminary approval of decisions for the company to carry out the following transactions:

–  transactions, the subject of which is fixed assets of the Company in an amount more than 10% of the balance value of its aggregated fixed assets;

–  transactions related to transfer of ownership or possible transfer of ownership of property which is fixed assets, non-material assets, uncompleted construction, with the aim of whose use is transmission, dispatching, distribution of electricity;

–  transactions related to uncompensated transfer of Company property or property rights (requirements) to itself or to a third part; transactions related to deliverance from property obligations towards itself or a third party; transactions related to uncompensated provision of services by the Company to a third party;

·  determining the procurement policy of the Company, as well as approving the annual integrated purchasing programme;

·  approving target values of key indicators of Company effectiveness and reports on their execution;

·  determining the policy of the Company relating to improving reliability of the distribution network and other electricity network facilities, including approving strategic programmes on developing the electricity network and improving its reliability and safety;

·  setting up committees of the Board of Directors of the Company, electing their members and early termination of their authority.

The Statement on the order of convening and holding meetings of the Board of Directors of the company[4] sets the make up and order of formation of the Board of Directors, the rights, duties and responsibilities of its members, the order for convening and holding its meetings, the order for making decisions, as well as other questions regarding its work. The Board of Directors is elected as eleven members by the general shareholders meeting for a period lasting until the next annual general shareholders meeting.

Members of the Board of Directors[5]

The current Board of Directors was elected at the annual general shareholders meeting held on 14 June 2011

ФОТО	Nikolai Nikolaevich Shvets, 1956 Chairman of the Board of Directors Currently General Director and Chairman of the Management Board at MRSK Holding Other positions held: Chairman of the Board of Directors, MRSK North Caucasus, MOESK, Lenenergo, Tyumenenergo, Yantarenergo Member of the Supervisory Committee at NTS EES Member of the Board of Directors at MRSK Holding Vice President, member of the Management Board, member of the Management Bureau at SoyuzMash Rossii Education: All Union Correspondence Polytechnical Institute, Zhukov Military Command Academy, Military Academy of the General Staff of the Armed Forces of the Russian Federation, PhD in Economic Sciences, Associate Member of the Academy of Military Sciences First/last election to the Board of Directors: 30.06.2010 / 14.06.2011.
ФОТО	Alisher Izatovich Arifov, born in 1952, died 3 May 2012. Alisher Arifov was First Deputy General Director and Senior Engineer at RN-Seti. Other positions held: Member of the Board of Directors at Kubanskie Magistralnie Seti, TRK, Tomskie Magistralnei Seti Education: Moscow Order of Lenin Energy Institute qualifying in Industrial Energy, Moscow Energy Institute qualifying in Business Economics and Management First/last election to the Board of Directors: 14.06.2011 / 14.06.2011.
ФОТО	Gauni Bausinovich Gulaev, 1956 Currently Vice President and Member of the Management Board of Rosneft Other positions held: Member of the Board of Directors of Rosneft-Dagneft, Tomskneft, Grosneftegaz, Udmutneft, Kubanskie Magistralnie Seti, Polyanoe Siyanie, Vostsibneftegaz, Ingneft, VChNG Member of the Supervisory Council at RN-Astra Education: Oktyabrskii Oil College, Ufimskii Oil Institute, PhD in Technical Sciences First/last election to the Board of Directors: 14.06.2011/ 14.06.2011.
ФОТО	Aleksei Vladimirovich Demidov, 1976 Currently Deputy General Director for Economy and Finance, member of the Management Board at MRSK Holding and acting General Director at MRSK North Caucasus Other positions held: Chairman of the Board of Directors at MRSK Sibir, MRSK North Caucasus Member of the Board of Directors at Lenenergo ОАО Chairman of the Audit Committee of the Board of Directors of Kubanenergo Education: St Petersburg Trade and Economics Institute First/last election to the Board of Directors: 14.06.2011 / 14.06.2011.
ФОТО	Anna Yurevna Katina, 1982 Currently Head of Department for Corporate Management and Investor Relations, MRSK Holding Other positions held: Member of the Board of Directors at Zavod Reto, Berendeevsko, Tsarskoselskaya Energoservisnaya Kompaniya, Lenenergo Energoservisnaya Kompaniya Member of the committees for auditing and for personnel and compensation of the Board of Directors of Kubanenergo Education: Moscow Humanitarian University. First/last election to the Board of Directors: 29.06.2009 / 14.06.2011.
ФОТО	Andrei Sergeevich Kolyada, 1984 Currently Head of Department for Property Organisation in the Fuel and Energy and Coal Mining Industry of the Management Board of the Infrastructure Section and Organisation of Military Production Sector of the Federal Property Management Agency Other positions held: Member of the Board of Directors at Mosenergostroi, Elektrotsentromontazh, Institut Energosetproekt, Trest Gidromontazh, Nedra Member of the Audit Committee at SO EES, RusGidro, FSK EES. Education: State University of Management (Moscow), Institute of Management in Energy Production First/last election to the Board of Directors: 30.06.2010 / 14.06.2011.
ФОТО	Khasan Mushtafaevich Likhov, 1983 Currently Deputy Director of the Department for Economic Regulation of Property Relations in the Fuel and Energy Sector at the Ministry for Energy of Russia Other positions held: Member of the Board of Directors at MRSK Yuga Education: Academy of Economic Security of the Ministry of Internal Affairs of Russia (Moscow) First/last election to the Board of Directors: 30.06.2010 / 14.06.2011.
ФОТО	Aleksandr Andreevich Pukhalskii, 1957 Currently Director of the Department of Energy Production at Nosneft Other positions held: Member of the Board of Directors at Kubanskie Magistralnie Seti, RN-Energo, Tomskenergoremont, Tomskelektrosetremont, Tomskie Magistralnei Seti, Tomskaya Energosbitovaya Kompaniya, TRK Education: North Caucasus Mining and Metallurgical Institute, the Academy of National Economy under the Government of the Russian Federation, PhD in Technical Science First/last election to the Board of Directors: 10.03.2009 / 14.06.2011.
ФОТО	Aleksei Valerevich Sannikov, 1965 Until December 2011 was Deputy General Director and member of the Management Board of MRSK Holding Other positions held: Member of the Board of Directorsat Tyumenenergo, Yantarenergo, MRSK Yuga President and member of the Board at Energostroi Education: Nizhegorodskii Lobachevskogo State University First/last election to the Board of Directors: 14.06.2011 / 14.06.2011.
ФОТО	Georgee Akhmedovich Sultanov, 1954 Currently General Director and Chairman of the Management Board at Kubanenergo Education: Krasnodar Polytechnical Institute, PhD in Technical Sciences First/last election to the Board of Directors: 14.06.2011 / 14.06.2011.
ФОТО	Sergei Evgenevich Yurchuk, 1966 Currently Director of Finance at MRSK Holding Other positions held: Member of the Board of Directors at Lenenergo, MOESK, MRSK Yuga, MRSK Urala Member of the Audit Committee of the Board of Directors of Kubanenergo Chairman of the Committee for Audit and Strategy, Development, Investment and Restructuring of the Board of Directors at MRSK Yuga Member of the Audit Committee of the Board of Directors at MOESK Education: Economics Faculty at Moscow Lomonosova State University First/last election to the Board of Directors: 14.06.2011 / 14.06.2011.

Board of Directors

Elected at the annual general shareholders meeting on 30 June 2010, powers terminated on 14 June 2011

1.  Nikolai Nikolaevich Shvets, Chairman of the Board of Directors, General Director and Chairman of the Management Board at MRSK Holding

2.  Pavel Vladilenovich Golubev, Head of Department for Organisation and Operation and Maintenance and Report at MRSK Holding

3.  Aleksei Vladimirovich Demidov, Deputy General Director for Economics and Finance, member of the Management Board at MRSK Holding

4.  Anna Yurevna Katina, Section Head in the Department of Corporate Management and Investor Relations at MRSK Holding

5.  Andrei Sergeevich Kolyada, Deputy Head of Property Organisation in the Fuel and Energy and Coal Mining Industry of the Management Board of the Infrastructure Section and Organisation of Military Production Sector of the Federal Property Management Agency

6.  Vyacheslav Mikhailovich Kravchenko, General Director of RN-Energo

7.  Khasan Mushtafaevich Likhov, Deputy Director of the Department for Economic Regulation of Property Relations in the Fuel and Energy Sector at the Ministry for Energy of Russia

8.  Aleksandr Andreevich Pukhalskii, Director of the Department of Energy Production at Rosneft

9.  Aleksei Valerevich Sannikov, until December 2011 was Deputy General Director and member of the Management Board at MRSK Holding

10.  Mikhail Efimovich Stavskii, until 11 October 2010 was Vice President of Rosneft

11.  Grigorii Mikhailovich Kharenko, Deputy General Director for Corporate Management at Lenenergo

All persons who were in 2011 or are currently members of the Board of Directors of the Company are citizens of the Russian Federation.

Information about the positions held by members of the Board of Directors: current Board of Directs as at 21 December 2011; previous Board of Directors as at the time of their election.

There were no transactions in the accounting year between the Company and persons acting as members of the Board of Directors of Kubanenergo in 2011.

With the exception of Sergei Evgenefich Yurchuk no member of the Board of Directors of Kubanenergo owns shares in the Company or its subsidiaries and affiliates. At 31 December 2011 Sergei Evgenefich Yurchuk owned 2166 ordinary shares (0.002% of the equity capital) in Kubanenergo.

In the accounting year members of the Board of Directors of Kubanenergo did not undergo any training at the expense of the Company.

Meetings of the Board of Directors In 2011 meetings of the Board of Directors were held more frequently than once a month: in total there were 21 meetings, of which two were in person and in absentia with the remainder being by poll. Involvement by members of this management body in the accounting year totalled 72.7% on average.

Participation by members of the Board of Directors in meetings in 2011

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

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18

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21

date of meeting members of the Board

08.02.

05.03

23.03.

13.04.

19.04.

05.05.

30.05.

06.06.

10.06.

20.07.

29.07.

05.09.

14.09.

05.10.

11.10.

17.10.

18.11.

30.11.

15.12.

21.12.

30.12.

Golubev PV

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·

·

·

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·

These members were not included in the Board of Directors elected at the annual general shareholders meeting of 14 June 2011

Kravchenko VM

o

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o

o

o

o

o

o

o

Stavskii ME

o

o

o

o

o

o

o

o

o

Kharenko GM

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·

Shvets NN

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·

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Demidov AV

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o

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Katina AYu

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o

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Kolyada AS

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o

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Likhov KhM

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·

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·

·

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·

·

·

·

·

·

·

·

·

Pukhalskii AA

o

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o

o

o

o

o

o

·

o

o

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o

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o

o

o

·

o

o

o

Sannikov AV

o

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o

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o

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o

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o

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o

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o

o

Arifov AI

These members elected to the Board of Directors of the Company by decision of the annual general shareholders meeting on 14 June 2011

o

o

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o

o

o

o

o

·

o

o

o

Gilaev GG

o

o

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o

o

o

o

o

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o

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o

Sultanov GA

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·

Yurchuk SE

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· / o

present/absent

in person and in absentia meetings (not less than half the members of the Board of Directors are present at the meeting and in voting on agenda items the written opinions of absent members are taken into account)

by poll

Decisions by the Board of Directors During 2011 the Board of Directors considered 227 questions covering practically all spheres of activity at the Company. The following were among the most important decisions[6]: