Meeting with RusHydro General Director Nikolai Shulginov

MIL OSI – Source: President of Russia – The Kremlin – English –

Headline: Meeting with RusHydro General Director Nikolai Shulginov

President of Russia Vladimir Putin: Good afternoon, Mr Shulginov.

How long have you been working in this position?

Chairman of the Board and General Director of PJSC RusHydro Nikolai
Shulginov
: It will
be ten months in just a few days.

Vladimir Putin:
Nine months is a symbolic term.

Nikolai Shulginov: These nine months went by like a single week, and were filled with big
and exciting challenges.

Vladimir Putin:
Is everything working out well?

Nikolai Shulginov: Yes, it is.

Vladimir Putin:
Did you have any doubts about accepting this post?

Nikolai Shulginov: Yes I did. But not anymore. Let me start by thanking you, Mr President,
for giving me this opportunity to discuss issues related to the operations of this
major energy holding. These issues require your approval or decision.

Vladimir Putin:
Very well, I would like to ask you to start by answering two questions. What is
the progress in turning the company around? And what are the results of the first six months of the year? After that, we can discuss the issues that you
mentioned.

Nikolai Shulginov: There is positive momentum in the 2015 operational and financial
results. Energy output increased despite lower water levels. Revenue was up 5.8
percent. Most importantly, IFRS net profit rose, it was up 12.5 percent
compared to 2014. All in all, these are quite positive results. Of course,
there was an increase in operating expenses, but it was still lower than the rate of inflation. We have drawn some conclusions. You are probably aware of the fact that we have commissioned the main equipment at the Blagoveshchenskaya
heating and power station, which is being built under your executive order. The remaining work will be completed this year.

At the end of the year, we sharply
changed our approach, focusing on efficiency and streamlining costs.
Cost-cutting measures, especially in terms of operating costs, have already
been factored into the 2016 business plan at a level of 9 percent, which is 9.2
billion rubles. These costs can be managed, since they relate to management
operations. Consequently, cost cutting will not affect the reliability of the plant’s
assets.

I will report on investment costs a little later. We started working on this issue, and continue this year, i.e.
making it systemic in nature. Together with the Ministry of Economic
Development we have agreed to hold an independent audit. We have to find more
cost-cutting opportunities. We are already working on it.

As for investment costs, our policy
is to abandon inefficient projects that will never yield a return. We are even
reviewing existing contracts. For example, we have reviewed the contract with
Austria’s Voith Hydro to reduce expenses by 7 billion rubles simply by dealing
with some of the intermediary companies.

Vladimir Putin:
Did you eliminate them?

Nikolai Shulginov: Yes.

To be
continued.

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