Address of the General Director to Shareholders and Investors

Dear Shareholders and Investors!

D. O. GudzhoyanIDGC of Centre, JSC was established in 2004 within the scope of reforming of RAO UES of Russia, JSC. Since then we have come a long way and today IDGC of Centre, JSC is one of the leaders of distribution grid complex. To sum up the results of 2011, IDGC of Centre, JSC has surely achieved good financial, economic and performance indicators by the end of the year. High efficiency of the Company management bodies allowed us to progress in the conditions of continuous economic growth in the Central Russia regions in the territory of which IDGC of Centre, JSC is operating. In 2011, the Company increased the amount of electric power transmission by 1.4% as compared to the previous year. The revenue, EBITDAEarnings Before Interest, Tax, Depreciation and Amortisation; indicator showing the profit of the Company before deduction of income taxes, accrued interest on loans and depreciation and net profit indicators increased by 13%, 26% and 11% accordingly as compared to the results of the previous year.

Speaking of figures and indicators, we should not forget of the main task of the Company: reliable and continuous supply of electric power for 11 regions of the Central Federal District of Russia. This task has been fulfilled perfectly in spite of winter abnormal climatic events, such as the “frozen rain” or hurricane winds took place again in some regions under conditions of the temperature minimum. The Company power engineers have successfully passed through these difficulties having prevented all serious cases. It testifies to high level of readiness of the power grid network to emergency situations, expert tactical and technical management, and efficiency of our everyday work, forming of sufficient reserves ensuring reliability of grid facilities.

It should be mentioned that 2011 was also devoted to innovative development in our Company. IDGC of Centre, JSC provided all necessary conditions for promotion of new ideas; the Innovative Development Program for 2011–2016 has been approved and is being realized; a large investment program has been fulfilled which is based on applying new technologies and most up-to-date equipment.

Approval of the Innovative Development Program for 2011—2016 is an important stage in solution of a strategic task of increasing the technological development level and reaching the leading position in the branch. The program provides for channeling a substantial amount of monetary funds for implementation of innovations within 6 years. Expenses provided by the Innovative Development Program will amount to more than 3% of the Company revenue indicators.

Within the review period, we carried out the work meant for the future in such fields as implementing projects for increasing energy efficiency and realization of projects within the scope of modern IT solutions.

Increase of energy efficiency is one of the main strategic objectives of IDGC of Centre, JSC, so the Company not only implements innovative technologies within the grid complex, but also develops projects for efficient energy consumption. Specialists work over realization of the programs related to applying multiple-tariff meters, infrared heating, energy-saving bulbs, devices for reactive power compensation, energy-saving household appliances and alternative energy sources, and carry out work among the consumers introducing the best solutions for efficient energy consumption.

In 2011, IT specialists of IDGC of Centre, JSC have successfully accomplished the project for optimization of corporate information system for resources administration. Applying of progressive IT solutions in power system management in the Company is necessary for operating in new economic conditions. Realization of this project helped to increase efficiency for solutions in financial accounting, managing flows of monetary funds, technical maintenance, equipment repair, and provided the opportunity for processing of information on occurred power outage on a real time basis. Besides, the project resulted in more than double reduction of operation expenses for use and guaranteed reserve of computer powers for future development of IDGC of Centre, JSC.

One more essential task at the current stage of development of the distribution power grid sector is increasing investment attractiveness. In 2009, IDGC of Centre, JSC was one of the first Russian energy companies started switch to the new tariff regulation system in its regions of presence; the final stage is switch to RAB of the remaining 4 branches and “Yargorelektroset”, JSC, affiliated company.

It should be noted that while switch of the Company branches to RAB-based regulation since 2009, capital investments of the Company have increased by 2.3 times which is caused by fixed assets renovation aimed at reduction of the wear degree of the equipment and infrastructure of distribution power grid complex, meeting the growing demand for electric power and realization of regional programs in the Russian Federation subjects.

Within the scope of working with the new tariff regulation system and taking into account the adjustments set by FTS (Federal Tariff Service) of Russia in 2011 for tariff regulation using return on invested capital method, the Company has developed a long-term investment program for 2012–2017 and agreed it with regulating regional bodies. The program provides for major construction and renovation of power grid facilities and lifting grid restrictions in respect of connection of new consumers to grid networks.

Upon the whole, IDGC of Centre’s investment program for 2011 provided for capital deployment at the level of RUB 15 bn., within the review period 102% of planned investments have been deployed. Realization of the investment program within the review period allowed us to commission more than 4.5 thousand power lines and 1,490 MVAMegavolt-Ampere. Unit of measurement of electrical capacity of transformer capacity.

One of the factors of further balanced development of the Company is also corporate governance system complying with the best international and Russian practices. In 2011, IDGC of Centre, JSC held the same leading position in the sphere of corporate governance, in January 2011 the company rating rose to Level 7+ (Advanced Corporate Governance) which is the highest rating among the distribution grid complex companies.

The Company management pays great attention to efficient relations with shareholders and representatives of investing community. Within the review year, the IDGC of Centre IR Division, according to a poll held involving the analysts of investment banks and companies, was declared by IDGC Holding, JSC to be the best unit in the distribution power grid industry for the second consecutive year.

We are constantly improving our corporate governance, standards of relations with shareholders and representatives of investing community, the Company dividend policy, increase the level of information disclosure, take measures aimed at liquidity growth for our shares, involve experienced managers to management. Carrying out of these measures is aimed at increase of shareholder value of the Company, growth of its investment attractiveness.

All operating results of the Company prove that our work within 2011 has been successful, that we have fulfilled all the tasks set before the Company and gained good economic and performance results.

General Director
D. O. Gudzhoyan