Annual report 2010

9. Corporate Governance System of JSC IDGC Holdinging the preparation of information concerning theboundaries of guard bands of overhead distributionlines). JSC IDGC Holding, with its SDCs, is amongRussia’s largest land users: its management andoperating companies use more than 173 thousandland plots occupying a total of 25 thousandhectares. Most of them are leased (56%); 24% aregranted for permanent use (for an indefinite term);title to 19% of plots is not defined. JSC IDGCHolding directly owns 1% of the land plots in use.For the purposes of reducing costs associatedwith the ownership of non-core assets by the SDCsof JSC IDGC Holding, the Strategy for Disposing ofNoncore Assets of JSC IDGC Holding andSubsidiaries and Dependent Companies of JSCIDGC Holding was developed. In conformity withthe Strategy the operating companies formed registers(plans of sale) of non-core assets, laterapproved at the meetings of the Boards ofDirectors of the SDCs of the Holding Company.More than 1,900 items (including fixed assets,assets-under-construction and stakes in profitmakingorganizations) were recorded in the register.The Board of Directors of JSC IDGC Holdingalso approved the register of the non-core assetsdirectly owned by the Company.Work aimed at consolidating regional electricgrids was organized in line with the core businessof JSC IDGC Holding with a view to solve the problemsof “isolation” and functional reliability ofthe distribution grid sector as part of propertymanagement. In the future, this will allow:— optimizing operating and investment costs;— raising the reliability and manageability ofthe distribution grid sector;— creating the center of responsibility forpower supply reliability and continuity;— mitigating social and political risks in theregions.Before JSC IDGC Holding organized work in thisdirection, consolidation was sporadic and mainlytook the form of purchase of abandoned electricgrid assets and stand-alone facilities from municipalitiesand corporate entities.2010 saw a number of activities aimed at harmonizingand encouraging the consolidationprocess. Major activities are as follows:1. With regard to the coordination of consolidationactivities:— JSC IDGC Holding established a specializedbody, the Working Group for theConsolidation of Electric Grid Assets, coordinatingthe Company’s activities as related tothe consolidation process;— Similar Working Groups were established bythe SDCs of IDGC Holding.2. With regard to ensuring regulatory frameworkfor transactions related to the consolidationof electric grid assets, the Company developedand approved:— priorities for the purchase of electric gridassets and decision-making criteria for theprojects of consolidation of electric gridassets;— forecast scenario conditions of engineeringand economic parameters and methodologicalrecommendations for determining theinvestment value of consolidated electricgrid assets (for appraising companies);— formats of the reports of IDGCs on the consolidationprocess implementation;— temporary methodological recommendationsfor IDGCs concerning the preparation of programsfor the consolidation of grid assets;— format of the long-term program for the consolidationof grid assets for the period2011–20153. With regard to organizing the process ofdecision-making in transactions related to theconsolidation of electric grid assets:— the Articles of Association of IDGCs wereamended with regard to purchase transactions;— authority was divided between the Board ofDirectors IDGC and CEO of IDGCs with regardto the execution of asset purchase transactions;specifically, the Board of Directors ofthe Company assumed authority for transactionsaimed at purchasing electric powerfacilities valued at more than RUB 5 millionmeeting a number of technical and economiccriteria.71