Macroeconomic Analysis

Factors that determine the Russian economy as a whole and influence the electricity sector,
Specific factors as the drivers of the sectoral development
Factors in the descending value
State tariff regulation
Description Electricity transmission and grid connection services are state-regulated activities. Tariffs for the Company's services approved by regulators directly affect the amount of revenue received
Current health The Government of the Russian Federation implements a Tariff Policy based on the "inflation minus" principle
Setting tariffs below the economically sound level will lead to underfunding through tariff sources of the Company's current activities and Investment Program
Measures to minimise the impact (if possible) Economic justification of the costs included in tariffs, including negotiations to factor in the economically justified expenses that are in excess of the costs currently incorporated into the tariffs and the revenue shortfalls incurred during the past periods due to reasons beyond the Company’s control
Consistent cost cutting and Investment Program optimising
Implementation of measures to improve pricing in the industry in cooperation with ROSSETI
Power consumption dynamics
Description Changing energy consumption has direct relevance to the health of the industry
Current health

Actual power consumption in the Unified Energy System of Russia in 2020 reached 1,033.7 bn kWh, down 2.4% year-on-yearSource: Report on the performance of the UES of Russia in 2020 (Operational Dispatch Office of the South — Krasnodar region and the Republic of Adygea)..

Actual power consumption in the Krasnodar region and the Republic of Adygea in 2020 amounted to 27,420.5 mln kWh, down 207.6 mln kWh or 0.8% year-on-yearSource:

Measures to minimise the impact (if possible) A range of activities to develop new (non-tariff) types of business and increase non-tariff sources of income
Price dynamics on the Wholesale Electricity and Capacity Market
Description Changes in electricity prices in the wholesale electricity market (WEM) directly affect the amount of compensation for electricity losses in power grids and, accordingly, on all the Company's activities
Current health The single-supply price of electricity on the WEM in 2020 showed a 3.4% increase year-on-year.
Measures to minimise the impact (if possible) Measures to reduce power losses in the grids
Current health of the industry
Description The health of the industry directly affects all aspects of the Company's activities
Current health Heavy wear of the main generating and grid equipment
Reduction of the Investment programs in the industry
Default in payment
Tariff policy leading to both under-reporting of financial indicators (cost-plus pricing) and actual unprofitableness of some companies
Reducing power consumption against a backdrop in declining industrial production due to the introduction of restrictive measures to prevent the spread of COVID-19
Measures to minimise the impact (if possible) Implementing the concept of digital transformation
Introducing the cost management system
Introducing the up-to-date Company’s management tools, automating key functions to improve management decision-making