Main Provisions of the Company's Purchasing Policy

The Purchasing Policy of the Company approved by the decision of the Board of Directors on July 18, 2008 (Minutes No. 34/2) is directed at ensuring of target and efficient spending of the Company's monetary funds, as well as receipt of economically feasible costs (market prices for products) and prevention of possible misuse by purchasing personnel.

The Company's purchasing activity is carried out in accordance with the Regulation on the Procedure for Regulated Purchases of Goods, Works, Services for the Needs of JSC IDGC of the North-West as amended (hereinafter the Regulation) approved by the decision of the Company's Board of Directors on December 28, 2011(Minutes No. 89/10). The document is developed in full compliance with the statutory wording of Federal Law No. 223 on Purchasing Goods, Works and Services by Certain Types of Legal Entities of July 18, 2011 (came into effect on January 1, 2012).

The effective Regulation provides for a high degree of transparency of purchasing activities of JSC IDGC of the North-West. All purchasing documents, including all protocols made in the course of purchasing activities and all amendments made to the documents are published on the Company's official website and on the website of the Government of the Russian Federation http://www.zakupki.gov.ru. Purchases announced on electronic trading platforms should account for at least 95% of the total volume of regulated purchasing procedures in monetary terms (this requirement does not apply to conventionally continued purchases defined in clause 1.2.4 of the Regulation).

As mandatory requirement for purchases for the amount of more than RUB 25 million, including VAT, JSC IDGC of the North-West introduces the procedure of repeated bidding aimed at the increase of the economic effect of purchasing activities of JSC IDGC of the North-West.

The Regulation is posted on the website of JSC IDGC of the North-West http://www.mrsksevzap.ru/ in section "Purchasing Activity Management".

The Regulation on the Permanent Central Tender Committee of JSC IDGC of the North-West ensuring the development and implementation of a unified policy of goods, works and services purchases for the Company's needs, the activity of which is aimed at ensuring the highest economic efficiency, was approved by the Company's Board of Directors on November 12, 2008 (Minutes No. 37/5).

Regulation of the purchasing activities of the Company:

• is carried out by application of mandatory procedures to be complied with by the purchasing personnel for each purchase with the cost of over RUB 500,000 (exclusive of VAT) (these procedures can be also applied for lower priced purchases, when deemed to be reasonable). The Company cannot divide up purchases to make regulations inapplicable thereto;
• is based on the system approach, which stipulates that the Company should have the regulation environment, established of the organizational structure of purchase management and control, trained purchasing personnel, organized purchase infrastructure;
• ensures compliance with the corporate integrity of purchase rules.
• sets authorities and responsibilities of purchasing personnel;
• is based on a reasonable use of special methods for strengthening of market rules for each particular purchase.

The sphere of actions of the Central purchasing authority — Central Tender Committee (hereinafter referred to as CTC) the composition of which shall be approved by the Company's Board of Directors includes acceptance of carrying out the purchases of products as well as control and coordination of the Company's purchasing activities.

To carry out planning and operational management of the purchasing activity, Management Department for Tender Procedures is formed in the Company, which carries out the following functions:

• development of purchasing activity methodology documents;
• ensuring of operation of the central tender committee working on a permanent basis;
• implementation of the Company's purchase procedures;
• monitoring of the Company's purchasing activity performance;
• conduction of expertise of the Company's documents for compliance thereof with effective purchasing activity standards;

• conduction of checks of the company's branches' purchasing activity;
• participation in purchase, tender and expert committees of the Company and committees of external Organizers of purchases for the Company's need;
• participation in the work of committees for review of complaints filed by purchasing activity participants against the activity of purchase and tender committees of the Company.

In order to carry out planning and operational management of the purchasing activity in JSC IDGC of the North-West separate structural subdivisions involved in purchase of goods, works and services were formed.

Description of Purchasing Methods Applied and Conditions of Selection of Purchasing Methods

In order to carry out purchasing activities the Company applies the following purchasing methods provided for by the Regulation:

• tender;
• auction;
• offer requests;
• price requests;
• competitive negotiations;
• purchase from a single source.

The main criteria affecting the choice of a purchasing method other than open tender are:

• level of complexity of purchased products;
• peculiarities of market of purchased products;
• purchasing cost;
• necessity to ensure confidentiality required for the benefit of the Company;
• purchasing period.

The list of mass media used for posting official information on purchasing is determined by resolution of the Board of Directors of February 26, 2010 (Minutes No. 54/9) and December 28, 2011 (Minutes No. 89/10).

There is "Purchasing" section on the Company's website which includes the following subsections: "Management of Purchasing Activities", "Purchase Announcement", "Information of the Current Procedures", "Purchasing Results", "Purchasing Historical Data", "Products Received with Defects", "Information on Quantity and Cost of Agreements".

Purchasing methods applied and conditions of selection thereof

Conventionally continued purchases:

• purchases of electric energy transmission services of JSC FGC UES;
• purchases of housing and utility services for the Company's needs;
• purchase of electric energy for the purpose of network loss compensation;
• lease of land plots and premises (long-term);
• other purchases of goods, works and services at the rates/prices regulated by the legislation of the Russian Federation.

E-commerce application description

In accordance with the Regulation, the Company may apply any purchasing methods with the use of virtual electronic trading platforms in the international computer network Internet for carrying out such purchases (during the whole time or at certain stages).

For the purpose of e-commerce IDGC of the North-West uses the information analytical and trade operational system "Market of Products, Services and Technologies for the Electric Power Industry" at http://www.b2b-energo.ru, trading platform of JSC IDGC Holding at http://www.b2b-mrsk.ru (in accordance with the decision of the Board of Directors of February 26, 2010, Minutes No. 54/9). Regulated purchases, analysis of the purchased products market are carried out using the functions of the above systems.

In 2012 93% of purchases of the total volume of competitive regulated purchasing procedures of JSC IDGC of the North-West were announced via electronic trading platforms.

The low (insufficient) percentage of tenders completed on the electronic trading platform is due to the following factors:

• high tariffs for tender participants, leading to an increased number of failed procedures;
• significant part of tenders was not held on electronic platforms due to the absence of tender participants or presence of only one participant;
• the insufficiently developed communication infrastructure in the territory of several branches, which prevents from wide application of a possibility to attract external organizations (among registered users) to perform repair and construction works and supply of small batches of goods with regard to product line groups;
• regional organizations are usually small in size and not willing to divert cash assets to pay for services of electronic trading platforms and have weak motivation due to the absence of competitors.

The Procedure for Formation and Implementation of the Annual Integrated Purchasing Program

In accordance with the Regulation, the procedure of purchase planning and development of the annual integrated purchasing program (hereinafter referred to as the "AIPP") shall be established based on the regulatory document on AIPP.

AIPP is the action plan for announcement of purchasing procedures and planned summation for performed purchasing procedures in the planned calendar year. AIPP is aimed at determining the volumes and value of purchases forecast date of their announcement and summation. AIPP shall be coordinated within the procedure of preparation of decision for the Board of Directors and approved by the Company's Board of Directors.

AIPP is formed based on the Company's budget and the programs determining production and economic operations of the Company.

AIPP by activity types and with statement of scheduled (limit) prices as well as correction of AIPP are published on the Company's website and official website http://www.zakupki.gov.ru within fifteen days upon approval thereof by the Company's Board of Directors.

AIPP is implemented by arrangement and scheduled purchasing in accordance with the terms, methods and volumes set forth in AIPP.

AIPP of JSC IDGC of the North-West for 2012 was approved by the decision of the Company's Board of Directors of May 16, 2012 (Minutes No. 98/19).

Annual Reporting of JSC IDGC of the North-West on Purchasing Activities by Activity Types and Purchasing Methods

The quantity of conventionally continued purchases for the 4th quarter of 2012 and the 12 months of 2012 was 164 purchases for the total amount of RUB 17,495.5 million (including VAT).

Target — RUB 14,537 million (including VAT);

Actual — RUB 13,381 million (including VAT).

Classification of types of activities:

• NC — New Construction;
• TRR — Technical Re-equipment and Reconstruction;
• ERP — Energy Repair Production;
• IT — Information Technology;
• R&D — Research and Development;
• CS — Consulting Services;
• SA — Services of Assessors;
• Other — other services.

Information on Key Indicators of AIPP for 2013

AIPP of JSC IDGC of the North-West for 2013 was approved by the decision of the Board of Directors of December 14, 2012 (Minutes No. 117/15).

In the 2013 AIPP the Company planned to carry out 639 purchases for the total amount of RUB 13,303.4 million, including VAT, in particular:

• the Company's executive apparatus — 82 purchases for the total amount of RUB 9,044.2 million.

Branches:

• Arkhenergo — 66 purchases for the total amount of RUB 209.1 million;
• Vologdaenergo — 101 purchases for the total amount of RUB 848.6 million;
• Karelenergo — 73 purchases for the total amount of RUB 270.1 million;
• Kolenergo — 57 purchases for the total amount of RUB 525.4 million;
• Komienergo — 100 purchases for the total amount of RUB 525.1 million;
• Novgorodenergo — 99 purchases for the total amount of RUB 894.2 million;
• Pskovenergo — 61 purchases for the amount of RUB 986.7 million.

The quantity of conventionally continued purchases was 44 purchases for the total amount of RUB 5,328.4 million (including VAT).