Dear shareholders,

Last year, the domestic economy began reviving after the global financial crisis and the business activity recovery was marked both in Russia and abroad. The year became especially significant for the Russian electric energy industry, full of important events and key decisions of the state and investors, some outcomes whereof may be estimated nowadays already. The Russian Federation Government adopted the basic decisions in regard to the parameters of the long-term market capacity; Power Purchase Agreements (PPA) were executed.

The positive changes in the economic life have impacted the results of the JSC TGC-1 business activity as well, which, by some parameters, have surpassed our expectations. The Company has demonstrated once again its ability to effectively exploit the advantage of a unique combination of heat and hydroelectric generating facilities. The increase in the combined generation share in the total volume of production has become the dominant factor for the year results.

With a view to successful achievement of the primary objective of execution of the largescale investment programme, we increased the volume of its financing by committing to reconstruction and modernisation over RUR18bn, which is more than the planned amount.

Thereby, last year two new hydroelectric units were put into operation at Vuoksinskie HPPs Cascade in the Leningrad Oblast, construction of the first combined cycle gas turbine unit in TGC-1 was completed at Pervomayskaya CHPP, and the main works on the 450MW CCGT-unit of Yuzhnaya CHPP were finished. Upon the commissioning of the 450MW CCGT-unit of Yuzhnaya CHPP in April 2010, this CHPP has again become the most powerful station of TGC-1 and the largest in the North-West of Russia.

The advanced technologies and high-efficiency equipment with the principally new degree of reliability are used in the course of our investment projects implementation. It provides acquiring of the substantial saving of energy resources and environmental impact decreasing to the minimum.

Furthermore, a number of key decisions in regard to financing of the projects were adopted. Foundation of SPV with Leader Asset Management gave a new impetus to the implementation of the project of CCGT-unit construction at Pravoberezhnaya CHPP.

The establishment of an affiliate JSC St. Petersburg Heating Grid, which took place last year, acted to raise reliability and heating grid infrastructure development of Northern Capital.

The decisions on the Company’s participation in the construction of a heating main from Apatitskaya CHPP to Kirovsk were also taken. The project provides for transition of the urban heat supply system to heat energy consumption from Apatitskaya CHPP, which will enhance the economical efficiency of the station possessing a considerable spare capacity.

The year of 2010 became a jubilee one since JSC TGC-1 celebrated its five-year anniversary. At first sight, this is a young company, but it comprises the stations founded more than a century ago. I believe this combination of energy and experience can assure an extraordinary success!

I am sure that the joint efforts of the Company’s Board of Directors, Management, and shareholders will contribute to TGC-1 dynamic development and ensure the reliable and uninterrupted power supply to consumers of the Russian North-West in the future as well.

Kirill Seleznev
Board Member, JSC Gazprom
Chairman of the Board of Directors, JSC TGC-1



Dear shareholders,

Summing up the results the TGC-1 activity in 2010, we may say that this period has become a period of stable growth both for the economic life and for the energy industry of Russia. The increase in electricity consumption occurred in the regions of the TGC-1 presence; the growth of consumption in St. Petersburg and the Leningrad Oblast made over 7%, in the Republic of Karelia almost 6% and about 1% in the Polar Region at that. The positive dynamics has developed in the heat energy consumption as well, which impacted the operation of our electric power plants.

The total electricity output by the TGC-1 plants, including Murmanskaya CHPP, exceeded 27bn kWh in 2010. The heat useful output was registered at the level of 28mn GCal, which is 8.8% bigger than the figure of 2009. The electricity generation at CHPPs increased meanwhile by almost 11%. Thereby, we have given a good growth of electricity generation at our CHPPs against the background of the electricity production loss due to the low water content at our HPPs. The efficient operation on the wholesale electricity market as well as in the sector of non-regulated contracts for electricity and capacity purchase has become the second significant positive factor, which impacted the results of the reporting period.

All that allowed us to ensure the TGC-1 revenue growth by almost 32% as compared to 2009 and fix this figure at the level of RUR50bn. The operating profit made up about RUR5.9bn, having increased by 53.3% as compared to the previous year. The Company’s net profit has grown by 7.2% to RUR3.6bn. Meanwhile, in 2010 we increased both the amounts of financing of the projects for modernisation and capital construction, and the investments in the repair and maintenance programmes.

The year of 2010 was ample for us for the events, which have already impacted or will impact the TGC-1 operation in the nearest years. I would like to point out some of them. We have accomplished the project, which has been discussed from the time of the TGC-1 establishment. The Company’s headquarters moved from the building in Marsovo Pole to a new contemporary office. We evaluate the moving in several aspects altogether, in particular: the comfortable conditions provided for the employees favourably influence on the Company’s internal climate and the office maintenance cost reduction impacts directly the performance financial and economic indicators.

Furthermore, in the preceding year the history of one of the oldest electric power plants of our country, the first heat power plant of the GOELRO Plan, Krasny Oktyabr CHPP-5 came to an end. The station put into operation in October 1922 is closed, and energy supply of the regions, which it provided with light and warmth for almost 90 years, is completely transferred to Pravoberezhnaya CHPP. We have been prepared for this project for five years. This is the first experience in the history of current Russia of decommissioning of not individual outdated units, but the whole electric power plant that called forth a solution of the complex of organizational and engineering problems. The equipment, which had faithfully served for many decades, has given place to new assembly units. It is symbolic that Krasny Oktyabr CHPP went into the history in the year of the 90th anniversary of the GOELRO Plan. Then, in 1920, a young country was in need of energy. Today it needs a new electric energy industry. Efficient refurbishment of the assets and dynamic development is our paramount objective for the immediate coming years.

The year of 2010 has shown that the fruitful cooperation of the TGC-1 employees and shareholders, Board of Directors and Management enhances the Company’s competitive capability and serves for the benefit of the north-west region and its economic development.

Andrey Filippov
General Director,
Chairman of the Board, JSC TGC-1