Dear Shareholders!

The last year was very difficult for both the sector and JSC “Quadra - Power Generation”. Imperfect legislation, inefficient tariff formation and regulation of the electricity and capacity market, heat market, absence of market incentives for construction and modernization of energy facilities have affected the performance of many enterprises within of the sector, including JSC “Quadra - Power Generation”.

However, despite the adverse external conditions, JSC “Quadra - Power Generation” has made every effort to ensure the stable operation of the Company and reliable power supply to consumers.

In 2014, optimization of the Company asset structure continued; in particular, integration of regional branches and uniting of generating assets was completed, which reduced expenses for administrative staff. In addition, JSC “Quadra - Power Generation” worked to obtain the status of a unified heat supply entity in the regions of its presence. Currently, the Company is a unified heat supply entity in the Smolensk, Kursk, Orel, Belgorod Regions in its heat supply zone.

Besides, the Company worked actively to increase production efficiency and reduce costs. Within this framework, cooling tower #4 at the Lipetsk HPP-2 was put into operation and the first stage of block-modular boiler plant of 20 MW in capacity was launched in the town of Lebedyan, the Lipetsk Region, main and intra-district heating grids were constructed in Eletsky microdistrict of the city of Lipetsk, heating mains #1, 2 were reconstructed in the city of Elets. In addition, more than 12 km of shabby heating grids were replaced using modern insulation materials.

In 2014, the Company continued to switch to direct settlement of accounts with heat consumers in the regions of its presence. JSC “Quadra - Power Generation” works already using direct settlement of accounts with the population in the Belgorod, Voronezh, Kursk, Lipetsk, Smolensk and Orel Regions and the level of payments by consumers here reaches 98%. However, a high percentage of non-payment by unfair reselling consumers still remained last year. This had a negative impact on the Company’s financial results due to the necessity of additional accrual of allowance for doubtful receivables. For this reason, the Company enhanced claim-related work with debtors. During court proceedings, the Company managed to recover nearby RUR 1.4 bn in 2014.

The absolute priority in the activities of JSC “Quadra - Power Generation” is the implementation of the investment program for construction of new facilities in accordance with the obligations to the government. Currently, 6 facilities have been built and put into operation of 10 new plants envisaged by the extensive investment program. In 2014, the work continued with respect to the implementation of the remaining four investment projects: GSU-115 MW of the Diaghilev HPP, GSU-115 MW of the Alexin HPP, GSU-223 MW of Voronezh HPP-1 and GSU-115 MW of Kursk HPP-1.

Particular attention was paid to the issues of the heat supply reforming, discussion of a new model of the heat market and amendments to the existing legislation. The position of the Company was declared in all product areas and forums through their representatives in the committees and interagency groups. Signing of a new collective agreement for 2015-2017 was a significant event in the social sphere in 2014. During its development, together with trade union leaders, agreements were reached to preserve the level of labor remuneration to employees, keeping of their respective standards of living, and the observance of the Company's social responsibility to the labor team.

The year 2015, due to the difficult economic situation in the country, is going to be hard. However, despite the crisis, the Company decided to continue implementation of the investment program to upgrade generating capacities. Besides, today JSC “Quadra - Power Generation” is implementing a program to reduce costs and optimize expenses, search for internal resources to develop and improve production efficiency. In 2015, JSC “Quadra - Power Generation” will continue an open dialogue with shareholders, investors, public authorities and consumers for efficient cooperation, improvement of production and financial results.


General Director of JSC “Quadra – Power Generation”
V.L. Alexandrovich