Financial risks

Insufficient elaboration of retail energy market mechanisms is a factor of risks related to discrepancies between grid and supply companies on energy consumption volumes, receivables increase and low repayment discipline. To minimize the risks the Company takes measures on the elimination of reasons for consumer conflicts, on decrease of receivables for energy transmission services as well as collects court practices and creates positive precedents.

To improve administration of receivables for transmission services a special commission was created by the CEO Decree.

Relations between distributive grid companies and FSK in terms of last mile contracts are not also regulated by the legislation. Despite the statutory right to conclude contracts related to the lease of FSK facilities in 2010-2011 many large industrial consumers juridically transited to direct contracts with FSK. These factors lead to the risk of decrease in transition volumes due to cancellation (non-extension) of last mile contracts with FSK. Risk management in FSK interaction is aimed at precise observance of contract conditions, timely extension of contracts. We also continuously monitor and analyze court practice.

Inauthentic forecast of energy and capacity balance, unmetered and illegal consumption are factors of risks of possible deviation of actual productive supply and energy consumption from planned figures as well as decrease of connection volumes. To minimize the risks we monitor energy consumption, prepare forecast taking into account existing dynamics of consumption, productive supply and connection requests. To improve consumer relations IDGC of Urals takes measures to inform consumers on connection; we arranged Client Service Centers and publish information on connection on our official web-site.

IDGC of Urals, OAO, like other gridcos, purchases energy for compensation of own losses at free market prices that grow every month. Local regulators approve energy transmission revenues without regard to the cost of losses purchased at non-regulated prices, and IDGC of Urals incurs additional expenses. Key directions for risk minimization are execution of Loss Decrease Program as well as negotiations with local regulators on calculating the expenses in RGR of future regulation periods after approval of drop-out revenues from non-regulated prices by the federal body.