In the accounting year as a whole the main production task at Kubanenergo — providing a quality and uninterrupted supply of electricity to consumers — was completed.

Within the programme of works for moving to executing periodic quality control of electricity in-house the following questions were resolved in 2011:

• the electrical quality test laboratory was accredited;
• in electricity network branches electricity quality control groups were set up;
• personnel groups were trained in electricity quality control on the Means of Measuring Electricity Quality Parameters, qualifying to make the measurements.

At 1 January 2012 442 periodic measurements of electricity quality parameters had been carried out, as well as 105 unscheduled measurements after complaints by consumers regarding electricity quality.

The measurement protocols (with steady-state voltage deviation results not conforming to GOST 13109–97) were forwarded to distribution network branch services for technical actions to be determined to bring distribution networks in line with GOST standards for electricity quality.

In 2011 the first stage of the Programme for Development of Central Customer Service was completed and customer service centres were opened in all branches of Kubanenergo.

Technical refitting, renovation, modernisation and new construction of the electricity network in order to reduce depreciation at power facilities is a priority for Kubanenergo. At the same time modern high technology equipment is being used, the best examples of Russian production or good quality imported equipment.

However, in the conditions of the financial situation existing at Kubanenergo and the price policies adopted, the limited resources for the investment programme make it impossible to completely resolve the problem through updating fixed assets.

To a large extent the problem of high rates of depreciation of electricity networks at the current time is being resolved in the Sochi electricity network branch as a result of renovation carried out there and construction as part of the programme for construction of Olympic facilities and development of the city of Sochi as a mountain resort.

In the remaining Kubanenergo branches reducing the rates of depreciation of fixed assets in the near future will depend on allocating sufficient resources and quality work on the repair and maintenance programmes for electricity networks to maintain them in a reliable, safe and serviceable condition.

In the accounting year the Board of Directors took a number of decisions aimed at ensuring the successful realisation of strategic aims to increase efficiency at Kubanenergo. In particular, a business plan (including an investment programme) was approved for 2011 which stipulated the following basic parameters:

• tariff reduction on power delivery services in 2011 as part of the actions of decree № 1172 of 27 December 2010 by the Government of the Russian Federation;
• carrying out actions planned in the programme for managing expenditures and aimed at reducing accountable expenditure;
• carrying out the 4.7 billion ruble investment programme;
• expenditures for the Innovation Development Programme

In 2011 the actions of Company management were aimed at optimising expenditure and, accordingly, reducing losses. As part of the financial restructuring programme at Kubanenergo for 2010–2012 approved by the Board of Directors actual loss according to the results for 2011 was reduced compared to the previous year by 28% and totalled 1 862 million rubles.

In addition, during 2011 the Company carried out planned work to reduced accountable spending. As a result of integrated actions aimed at optimising expenditures, the actual amount of specific operating costs for the accounting period totalled 11 121 rubles to one conventional unit with a plan for 11 343 rubles to one conventional unit, which means a 2% saving on these expenditures.

At the current time the size of the scheduled tariff on electricity transfer makes it impossible for Kubanenergo to create an electricity network operating reserve of sufficient capacity to be ahead of demand in the developing economy in the region.

Of the 724 substations at Kubanenergo, 147 substations in the 35 kilovolt and higher class were included in List of Overloaded Substations at Kubanenergo at 1 January 2012, and these do not have an operating reserve until they are renovated and transformer capacity is increased.

As part of the development of the Kuban electrical network and in view of the predicted economic growth in the region (approximately 4.5% a year) the Master Plan and Programme for Long Term Development for Electricity Supply in Krasnodar Region for 2012–2016 approved in 2011 by the Administration of Krasnodar Region it is planned to bring into operation ninety five 35–110 kilovolt substations with a combined capacity of 3 445.6 megavolt ampere (MVA) (35 kilovolt substations: 285.1 MVA; 110 kilovolt substations: 3 160.5 MVA) and addition of a 102.27 kilometer long 35 kilovolt power line and a 809.69 kilometer 110 kilovolt cable, which should satisfy the predicted consumer demand of 1.5 gigawatts. The most promising areas of development of the 0.4–110 kilovolt electricity distribution network for 2012–2016 are Sochi energy district which is to host the Olympics and the South West energy district in the region, as well as the strategically important Central energy district.

Thus, in the Sochi energy district it is planned to add eleven 110 kilovolt substations with a combined capacity of 615 MVA and an 276.6 kilometer 110 kilovolt power line. For the South West energy district it is planned to add 22 substations, of which the combined capacity of the 110 kilovolt substations will be 642 MVA, with the 35 kilovolt substations producing 21 MVA, as well as a 307.2 kilometer 110 kilovolt power line. In the Central energy district 31 substations with a combined capacity of 1277.6 MVA (110 kilovolt stations producing 1189 MVA and 35 kilovolt stations producing 88.6 MVA), and 270.4 kilometers of 110 kilovolt line and 27 kilometers of 35 kilovolt line.

The work mentioned will make it possible to significantly raise the level of reliability of the system and reduce the number of closed power supply centre overall throughout the Kuban energy network by at least 10%.

To modernise its energy production assets the Company is carrying out large scale investment programmes agreed by the Ministry for Energy of the Russian Federation and taking into the prospects for development of the economy in Krasnodar Region and the Republic of Adegeya.

The result of innovation activity in the Company in 2011 was the introduction of the following innovation technologies and equipment:

• laser aeroscanning of the Sochi electricity district 110 kilovolt power lines, the results of which are used to plan renovation of the of the 110 kilovolt lines to Olympic facilities and operations on a daily basis;
• multi-sided utility poles for 110 kilovolt lines which take up less space than lattice towers, which is important in the urban environment;
• Aero-Z steel core wiring which have high capacity, are more resistance to icing and sleet adhesion;
• modular integrated transformer substations (MITS) for receiving, transforming and distributing electricity. One of the advantages of MITS is that they are factory assembled, which significantly reduces construction times; compact layout of equipment significantly reduces the area occupied by substations, the working life of this equipment is at least 25 years;
• the latest electric line tester in addition to two in operation. The tester has instruments produced by Seba KMT, a world leader in manufacturing instruments to determine the location of damaged points in underground lines. The modern instrumentation of such testers makes it possible not only to find damaged areas of cable more quickly and accurately by using nondestructive methods to check the condition of insulation, but also to carry out testing of lines during commissioning and periodical performance testing;
• spiral type overhead line accessories produced by Elektrosetstroiproekt (Moscow) for wire connections in loops and spans;
• overhead surge suppressors without ground wires to protect 110 kilovolt lines from power surges which makes it possible to avoid the risk of ground wires and their falling on power lines;
• cables with cross-linked polyethylene insulation which have such as advantages as higher operating temperature, being suitable for installation on extremely uneven lines, exceptional reliability and less expenditure on renovation and maintenance, it weighs less and has a smaller allowable radius in bends;
• PASS MO gas-insulated self contained cells produced by Elektroinzhiniring (Ekaterinburg) which are exceptionally reliable, have higher switching capacity and low operating costs.

Within the framework of the Programme for Long Term Development of Energy Metering on the Retail Electricity Market projects for intelligent metering have been developed in Kubanenergo networks, in accordance with which work is being carried out to replace meters with microprocessor electricity meters and a range of actions are being undertaken to include them in an automated accounting system. Results for 2011 show that in the Sochi energy district data collection has been automated with 7,873 meters.

To ensure return on investment in the distribution network sector Kubanenergo investment programme includes facilities intended to improve reliability and functioning of the electricity distribution network sector, as well as facilities to ensure the economic efficiency of the programme.