Risks relating to safe operation of production facilities and energy efficiency / Risks relating to personnel management / Procurement and logistics risks

Risks relating to safe operation of production facilities and energy efficiency

The Company’s activities are potentially linked to violation of operating conditions and critical changes to the parameters of operating equipment, as well as the possibility of emergencies and critical situations at electricity network facilities. Among these risks the following stand out:

• system occurrences related to providing safe operation of production facilities and reliability of power supply;
• the risk of switching to a mode of operation with forced (allowable) power exchange;
• the risk of one-off sharp increase in load in excess of the plan in connection with natural disasters.

To minimise the chances of these risks the Company takes the following actions:

• analysing the situation in order to anticipate the occurrence of the risk in carrying out the production plan and taking measures to protect against its effects;
• insuring property, vehicles, public liability, as well as accident insurance for employees;
• drawing up a programme for maintenance and repair works;
• taking actions to improve the reliability of the electricity network, including by monitoring procurement and the quality of equipment and materials delivered.

Risks relating to personnel management

The energy sector is a high technology one and requires corresponding staff qualifications. At the current time the situation regarding labour resources is difficult, manifesting itself in a shrinking in the intake of qualified industrial staff into the electricity energy sector. If the current trend should continue Kubanenergo could be confronted in the long term with a shortage of qualified industrial staff, so the Company assesses this risk as medium.

To minimise this risk the Company regularly holds meetings with students in specialist higher educational established to offer them work placements at Kubanenergo production facilities. in addition, work is being carried out in the Company to provide training and ongoing training to personnel, and a system for forming and development a personnel reserve has been adopted. To recruit and retain staff at the Company various social programmes are being carried out, medical insurance and supplementary pension are provided, and events in health and safety are carried out.

Procurement and logistics risks

The main risks related to procurement are risks of reduction in procurement transparency, failure to meet deadlines, and the cost of goods being higher than was planned.

To reduce these risks the Company has organised effective control to spend funds as per their intended purpose. This is carried out by competitive tendering involving the b2b-energo information and analysis trading website. The transparency of purchases made by the Company is confirmed by the large proportion of open trade procedures. Organisation of procurement management is provided by the Central Procurement Office, which sets Kubanenergo policy in the field of procurement.