Dear Shareholders!

RusHydro Group unites 400 electric power facilities, including 71 hydroelectric power stations, 35 thermal power plants, over 100,000 km of electric networks, three geothermal power plants, and sales assets. The combination of assets makes the RusHydro Group a unique global power generating company that ranks third among the world’s hydro power corporations in terms of installed capacity.

In 2016, the Russian electricity market showed moderate growth. The installed capacity of generating stations increased by 0.4%, electricity consumption by 1.7 %, electricity generation by 2.1 % compared to 2015. In these conditions, RusHydro Group retained one of the leading positions among Russian generating companies, showing significant growth in key financial and economic indicators (revenue + 8.2 %, EBITDA +36.7 %, Net profit + 46.4 %).

High financial results are ensured by a record level of HPP development and consistent management efforts aimed at optimizing all managed operating costs of the Group and selling large assets that do not affect the Group’s core business. Operating expenses for the year 2016 grew significantly below inflation – only 0.2 % as a result of the reduce transaction costs program.

RusHydro Group is one of the largest consumers of goods, works and services in the country. The effectiveness of procurement procedures is of special importance to us. A Central Purchasing Commission was created, which united all the companies of RusHydro Group, including RAO ES of the East. The specialized subsidiary company “RusHydro-Snabzhenie” began to operate. Approaches to procurement management are unified, including work to increase the share of purchases from small and medium-sized businesses. In 2016, the optimization of procurement procedures brought savings of more than 13 billion rubles. This is 5.7 % of the planned cost of the RusHydro Group’s purchases. In addition, the optimization of the previously concluded contracts value brought more than 4 billion rubles.

During 2016, RusHydro continued to cooperate with prospective energy-intensive industrial consumers, whose goal is to contract new generation and consumption facilities, as well as to implement joint investment projects, designed to create conditions for reliable energy supply to existing enterprises and prospective consumers, including in the advanced development zone.

Sergey Kirov
Member of the Management Board – First Deputy CEO