Legal risks

The table demonstrates the evaluation of risk importance and its dynamics, with due regard to existing risk passports and expertise according to the following scales:

Importance scale
Critical
Significant
Moderate
Risk importance dynamics
Increase of risk importance
Importance remains unchanged  
Decrease of risk importance

Risk type

Risk description

Measures minimizing the risk consequences

Evaluation of risk importance and its dynamics

Legal risks

  1. Changes of legislation, ambiguous interpretation (namely, tax rate increase), possible contradictions between federal legislation and regulatory documents issued by regional authorities, absence of judicial practices on several legal documents.
  2. Risks related to losses caused by inaccurate legal processing and support of the Company’s operations.
  3. Risks related to shareholder relations (registration of ownership; greenmailing or wrecking of GSMs).
  4. The Company is exposed to risks when a shareholder may litigate major transactions and interested-party transactions (when such transactions are concluded without proper preliminary approval by the BoDBoard of Directors or GSM or approved under an improper procedure).
  5. Risks related to changes of requirements to licensing of main operations or ownership of facilities with limited circulation (Main line of activities of the Company is energy transmission and connection to networks and is not subject to licensing).
  6. Risks related to loss of consumers contributing at least 10% of overall revenues. The risk is related to the withdrawal of large consumers in a situation when other companies build grid facilities.
  7. Risks related to changes in legislation on energy sector. FSTFederal Tariff Service Act #209-e/1 dd. 11.09.2012 on the approval of the guidelines on connection fee determination has approved new guidelines enforced since 11.12.2012. Risks of the Company lie in possible differences from regulator opinions regarding regulatory documents on energy sector.
  8. Despite the requirement of the legislation to include all connection-related expenses (that are not included into connection fee) into the tariffs, it is impossible to do this practically - FSTFederal Tariff Service Act #1198-e dd. 01.09.2014 has approved serious changes related to connection fees for consumers demanding below 150 kWKilowatt/hour into the guidelines on connection fee determination (#209-e/1 dd. 11.09.2012): since 01.10.2015 no more that 50% of costs related to last-mile activities are included and since 01.10.2017 these activities are not included at all. Meanwhile expenses on the construction of grid facilities from existing grid facilities to power receivers, not included into fees for the connection of power receivers under 150 kWKilowatt/hour, are included into expenses of a grid company calculated in transmission tariffs, since transmission tariffs have ultimate levels, excess of which is subject to the approval by the Federal Tariff Service.
  9. Government Act #542 dd. 11.06.2014 permits to include into transmission tariffs expenses, related to income tax on connection and not included into connection fees, shortfall in income from privileged connection (under 15 kWKilowatt/hour) apart from investment program or connection expenses to superior grid companies that are also not included into connection fees. At the same time FSTFederal Tariff Service Act #215-e/1 dd. 11.09.2014 on the approval of the guidelines on the calculation of shortfall in income from connection does not stipulate the norms. In fact, FSTFederal Tariff ServiceAct #215 has not implemented the mechanism stipulated by Government Act #542 but introduced the following restrictions related to shortfall in income from privileged connection (under 15 kWKilowatt/hour): no excess over approved standardized connection fees.
  1. Our register is administered by a professional registrar with a good background, operating on the stock market since early 1990-s and occupying tops of the registrar ratings.
  2. The Company arranges information interaction with shareholders (information disclosure under regulatory documents) as well as meetings with shareholders to discuss vital issues of the Company’s operations.
  3. The Company plans its further operations with de regard to changes in legislation and judicial practices.
  4. The Company implements the strategy of grid asset consolidation in the service area that will potentially increase energy transmission volumes due to registration of the ownership of grid assets.

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