Overview of macroeconomic factors

Factors that determine the state of the Russian economy in general and have an impact on the electric power industry:

GDP movement	The index of the physical volume of GDP in 2023 relative to 2022 was 103,6%.
Inflation	In 2023 the consumer price index was 107,4% from the beginning of the year.
Interest rates to attract credit resources	As of 31.12.2023, the key rate of the Bank of Russia was increased by 100 bps to 16.0% (7.5% as of 31.12.2022). This decision was due to high current inflationary pressures and rapid growth in domestic demand, including due to the high growth rate of lending. In the medium term, inflationary risks remain significant.

The dynamics of the industry development is also determined by a number of specific factors:

Factors descending in significance
State regulation of tariffs
Description	Electricity transmission and grid connection are regulated by the State. Regulatory approval of tariffs for services of the Company directly influences volumes of received proceeds.
The current state	The Government of the Russian Federation implements a tariff policy based on the inflation minus principle. Setting tariffs below the economically justified level will lead to underfunding from tariff sources of the Company’s current activities and investment program.
Measures to minimize the consequences (if available)	1. Economic justification of costs included in tariffs, including the inclusion of economically justified costs in tariffs incurred in excess of those recorded in tariffs and incurred due to reasons beyond the Company’s control over previous periods. 2. System-wise work to reduce costs and optimize the investment program. 3. Implementation jointly with PJSC Rosseti of measures to amend the current legislation of the Russian Federation in the field of pricing for services of natural monopolies to take into account the interests of distribution grid companies in setting tariffs at the retail market.
Changes of energy consumption
Description	Change of energy consumption has a direct impact on the state of the industry.
The current state	The actual consumption of electricity in the Unified Energy System of Russia in 2023 amounted to 1 121,7 billion kWh, which is 1.4% more than in the same period of 2022 (under comparable temperature conditions last year and excluding the impact of a leap year – growth is estimated at 1.7%).
Measures to minimize the consequences (if available)	A set of measures to increase non-tariff sources of income.
Changes of prices for the wholesale electricity market
Description	Changes in electricity prices on the wholesale electricity and capacity market directly affect the amount of compensation for electricity losses in electric grids and, accordingly, the entire activity of the Company.
The current state	In 2023, the one-part price of electricity on the wholesale electricity market increased by 6,0% compared to 2022.
Measures to minimize the consequences (if available)	A set of measures to reduce electricity losses in electric grids.
The current state of the industry
Description	The state of the industry has a direct impact on all aspects of the Company’s activity.
The current state	Substantial depreciation of main generating and grid equipment. Reduction of investment programs in the industry. The tariff policy, leading to both an underestimation of both financial performance (pricing on a "cost plus" basis), and the real loss making for a number of companies.
Measures to minimize the consequences (if available)	Implementation of the concept of digital transformation. The cost management system implementation. Implementation of new management tools by the Company, automation of key functions to improve the efficiency of accepting administrative decisions.