AR 2009 Eng

Annual report 2009
Opening wOrds frOm the Chairman Of the BOard Of russian railways, . d. ZhukOv
006
aCtivity Of the management and COntrOl BOdies Of jsCO russian railways

012
the COmpany's strategy and missiOn

039
summary Of the COmpanys OperatiOns and key COrpOrate events

047
Opening wOrds frOm the president Of russian railways, v. i. yakunin

007
General Shareholders Meeting

012
Railway development strategy

040
Achievements and key operating indicators

048
Board of Directors
012
Overview of key corporate events

050
COntent
disClOsures and prOjeCtiOns

008
Members of the Board of Directors

013
general infOrmatiOn On jsCO russian railways

009
Brief CVs of members of the Board of Directors of JSCo Russian Railways

014
General legal information

009
Changes in statutory activities in 2009

010
Data on participation in meetings of the Board of Directors of JSCo Russian Railways

016
List of related parties

011
Meetings of the Board of Directors of JSCo Russian Railways

017
JSCo Russian Railways

011
Issues considered at the meetings of the Board of Directors of JSCo Russian Railways
018
Committees of the Board of Directors of JSCo Russian Railways

026
President of JSCo "Russian Railways"

028
Management Board
029
Brief CVs of Members of the Management Board of JSCo Russian Railways

030
Audit Commission
036
COrpOrate gOvernanCe. Change in russian railways COrpOrate struCture in 2009. finanCial and eCOnOmiC effeCt Of the Change
059
the COmpany's Current pOsitiOn in the industry

069
freight OperatiOns
081
passenger OperatiOns
095
infrastruCture Of russian railways

1 05
Movement of Russian Railways' share of transport services market

069
Dynamics of freight turnover

083
enhancing transportation services in a time of recession

096
Condition of track infrastructure

1 05
Stage 3 of the Program for the Structural Reform of Russian Railways

059
evolution of competition in the industry

070
transportation services competitive environment

085
Condition of the power supply system

1 07
Structure of the holding company Russian Railways

063
Principles of government regulation and tariff policy applicable to Russian Railways

072
Improving the service quality

087
Automation and remote control

1 09
Certain results of subsidiaries and associates established within the structural reform
065
enhancement of transportation efficiency

091
Description of rolling stock

1 11
Performance analysis of Russian Railways' key subsidiaries

066
Diversification of the Russian Railways' freight and passenger operations based on marketing policies and bringing complex transportation products to the market
074
Locomotives
1 11
Car fleet
1 11
Russian Railways` asset management

1 13
internatiOnal aCtivities and implementatiOn Of prinCipal internatiOnal prOjeCts

117
innOvatiOn and teChnOlOgiCal develOpment Of russian railways

127
transpOrtatiOn safety
139
OCCupatiOnal safety
145
envirOnmental safety
151
International traffic and key international projects

117
Innovation development of the Company and consistent technical policy

127
Functional strategy for transportation safety and security assurance

139
120
Outcome of cooperation with foreign railway administrations and transport agencies

121
Innovative technology and railway infrastructure development

133
141
Heavy freight services

134
Cooperation with the International Union of Railways (UIC) and participation in other international organizations
122
Future of gas turbine locomotives

136
COntent
JSC Russian Railways and competitive advantages of "1520-gauge space"
Rapid and high-speed operations

131
Safe transportation Program

140
Information on unlawful interference in railway transport operation
persOnnel management
155
finanCial and eCOnOmiC results

167
investment aCtivities
191
infOrmatiOn On interested-party transaCtiOns

201
develOpment OutlOOk
2 08
Rational use of labor resources when there is less traffic

155
Revenue from transportation, infrastructure and locomotive hauling services

170
Business Priorities
191
infOrmatiOn On majOr transaCtiOns

202
Development outlook inview of market trends and potential

2 08
effective management of personnel

156
Construction-inprogress
195
Other types of activities

172
statement On deClared dividends

203
Social sphere
159
Other income and expenses

173
Acquisition, renovation and upgrading of traction rolling stock

195
Post-crisis measures, prospects, threats and risks

2 11
Housing policy
159
Youth policy
160
Cost optimization in 2009

175
Acquisition, renovation and upgrading of unpowered rolling stock

196
draft distriButiOn Of the COmpany's net prOfit earned in 2009

204
referenCe infOrmatiOn 2 13
audit repOrt majOr risk faCtOrs assOCiated with the COmpany's OperatiOns
205 2 14
appendiCes
2 19
Corporate pension system

160
Capital repairs of fixed assets

176
effectiveness of Russian Railways' investment program

197
Health care
161
Culture and sports

163
Government support for Russian Railways in 2009: subsidies, additional charter capital contributions and the impact on the results of operations
177
Court cases in 2009 in which Russian Railways was the defendant

206
Court cases in 2009 in which Russian Railways was the plaintiff

206
Charity
163
Current assets
178
Review of social activity

164
Circumstances that could potentially hinder the Companys operations

207
Debt management policy and corporate ratings

181
Debt management
181
Leasing
183
Credit ratings
183
Financial risk management

184
Improving the finance management system

186
Main changes in the 2009 financial statements

187
Opening wOrds frOm the Chairman Of the BOard Of russian railways, . d. ZhukOv
006
The year 2009 will go down in history as a time when the financial, production and infrastructure systems in our country and around the world were put to the test. The deep economic crisis affected every sector of the economy, and the loss of one link could have undone a great number of chains by which the world economy is held together. It thus became a task of national importance to maintain the stable operation of major, systemically important companies. Russian Railways, as far as its own operations are concerned, has unquestionably succeeded in this task: despite the reduced volume of freight and a curtailed investment program, the necessary working, financial and social conditions were created to sustain the companys operations and allow it to realize priority development projects and continue reforms and corporate development. Russian Railways found substantial funds for these purposes by optimizing internal resources: in 2009 the company adopted and realized a package of anti-crisis measures whose effectiveness is borne out in the year-end results: most of the financial and economic indicators are a significant improvement over the planned budget. At the same time, our strategic course of innovation-based development and the formation of an effective, competitive holding company remain unchanged. A striking example of this is the start of highspeed service in Russia. It is also important that Russian Railways has yet again upheld its reputation as a socially responsible company: by taking steps to retain human resources, we avoided having to lay off hundreds of thousands of qualified employees. The company began 2010 with a good measure of confidence in the future. This confidence comes from an objective assessment of the situation, accurate calculations and forecasts, well-thought-out actions by management and unconditional support on the part of employees and the state, which gave the company significant financial support in 2009. These funds went in part toward the construction of key Sochi Olympic facilities. The company needs to continue its course of innovation-based development, ensuring the widespread implementation of innovations and systemic breakthroughs in the area of efficiency and energy efficiency. Looking back on the past year, I think that together we have proved to ourselves and others that it is possible to strive and prevail even in the most difficult of circumstances. And for that, I am truly grateful to the entire million-strong team of Russian Railways.
. D. Zhukov Chairman of the Board of Directors of Russian Railways
OPenInG wORDS
Ladies and GentLemen,
JSCO RUSSIAn RAILwAYS
Opening wOrds frOm the president Of russian railways, v. i. yakunin
007
You are holding Russian Railways annual report for 2009, in which we are clear and open about our triumphs and failures in this year of economic challenge. Russian Railways was not intimidated by the global crisis in 2009. The company promptly and accurately assessed the potential scale of the disaster, developed a precise plan of action and mobilized its internal resources. We received considerable help from the state, which supported our anti-crisis program in both word and deed. As a result of these joint efforts, the company was able to satisfy the demand for domestic and international freight and passenger service in terms of both quality and quantity. For the first time, Russian Railways had to deal with a sharp drop in the volume of freight. Our answer to the crisis was to make our business more customer-oriented. We offered new services to freight forwarders and increased our delivery speed. Where passenger service is concerned, we offered a variety of discounts and introduced new routes and up-to-date services. One of the years high points was the launching of high-speed service between Moscow and St. Petersburg: the state-of-the-art Sapsan train went into regular service on December 17, 2009, inaugurating a new stage in the development of Russias railways. Another example of a constructive approach to the crisis this year was the further upgrading and modernization of railway infrastructure and rolling stock. Despite the companys limited abilities, new stations were opened in Izhevsk and Saransk, a new section of rail between Yaiva and Solikamsk was built, and bridges over the Amur and Ob rivers as well as many other production and socially oriented facilities were put into service. You can assess the companys financial performance yourselves by studying this report. Thanks to a range of anti-crisis measures, Russian Railways has achieved substantial savings in terms of operating costs. Thecompany posted a year-end net profit of over 14 billion rubles. We have done everything possible to maximize this figure. For me, as the companys chief executive, these dry figures, reflecting all the hours and days of hard work put in by each employee, is our common triumph. My thanks to the shareholder, partners and colleagues for your support!
V. I. Yakunin President of Russian Railways
AnnUAL RePORt 2009
dear sharehoLders, Partners and CoLLeaGues,
disClOsures and prOjeCtiOns
008
The Annual Report of Russian Railways for 2009 discloses information to provide the shareholder, represented by the Government of the Russian Federation, as well as government agencies, potential and actual investors, shippers, passengers and miscellaneous stakeholders and information users with comprehensive and relevant data on the operations of Russian Railways in 2009 and the Company's development trends. The report complies with the following standards and legal acts: the Federal Law On Joint Stock Companies; Order No. 228 of Rosimushchestvo of 26 July 2005 On the Regulation of the Activities of the Federal Agency for Federal Property Management in the Sphere of Corporate Governance (with recommendations on forming the Russian Federation's position on the adoption of the annual report of an open joint stock company whose shares are held by the Russian Federation); Decree No. 17/ps of the Federal Securities Commission (FSC) of 31 May 2002 On the Adoption of the Regulation on Additional Requirements with Respect to the Procedure for Preparing, Convening and Holding a General Shareholders' Meeting; Regulation No. 421/r of the FSC of 4 April 2002 On a Recommendation with Respect to the Application of the Code of Corporate Conduct. This report is an overview of the current situation of Russian Railways and the results of its operations for the year ended 31 December 2008 as well as the major trends which may have an impact on its future performance. For the purposes of this document, the word "Company", the pronoun "we" and its various forms refer to Russian Railways. This report contains statements that are projections. Such verbs as "consider", "assume", "expect", "intend", "plan" and their synonyms signify the current projections and the opinion of the Company's management on future results. Due to the special features of projections, they involve risks and uncertainties of a general and specific nature. In this respect, there is always a risk that preliminary estimates, projections, plans and other forecasts will not become a reality. It should be borne in mind that, under the influence of a number of material circumstances, the actual results may significantly differ from the targets, benchmarks, expected results, estimates and intentions included in the projections.
general infOrmatiOn On jsCO russian railways
009
Full name of the open joint stock company:
AnnUAL RePORt 2009
GeneraL LeGaL information
Full name of the open joint-stock company in Russian: " " (abbreviated "")
Name in English:
construction of infrastructure facilities; research and development; social services; other types of activity.
Information on the inclusion of strategic joint stock companies in the list:
Joint Stock Company Russian Railways (JSCo Russian Railways)

Certificate of State Registration:
Series 77 No. 007105126 issued on 23 September 2003

Length of the companys activity in the railway industry, years:
JSCo Russian Railways was founded by Decree No. 585 of the Government of the Russian Federation of 18 September 2003. The Companys foundation was the outcome of the first stage of reforming the railway industry in compliance with Decree No. 384 of the Government of the Russian Federation of 18 May 2001.
Constituency of the Russian Federation:
In accordance with Edict No. 1009 of the President of the Russian Federation of 4 August 2004 "Concerning Approval of the List of Strategic Enterprises and Strategic Joint Stock Companies", JSCo Russian Railways has been included in the list of open joint stock companies whose shares are owned by the Russian Federation, and the participation of the Russian Federation in the management of which is in the states strategic interests, promotes its defense capability and security, and protects its citizens morality, health, rights and legal interests.
Full name and address of the register holder:
Open Joint Stock Company Russian Railways. The Company itself maintains the shareholders register; a decision to transfer the functions of maintaining the shareholders register to the registrar was not made.
Size of charter capital, kRUB:
Moscow
Registered office:
1 594 516 219 Novaya Basmannaya 2, Moscow 107174 Russia

Postal address: Total number of shares:
1 594 516 219

Total number of shares:
Novaya Basmannaya 2 Moscow 107174 Russia

Phone:
1 594 516 219

Nominal value of ordinary shares, RUB: 1,000
+7 (499) 262-99-01
Fax:
1 000
State registration number of the issue of ordinary shares and the state registration date:
+7 (499) 262-90-95
e-mail:
1-01-65045-D of 2 December 2003.

Preferred shares:
[email protected]
Types of activity:
none
Companys principal shareholders:
freight operations; long-distance passenger operations; suburban passenger operations; provision of infrastructural services; repair and maintenance of rolling stock;
Russian Federation
010
1 594 516 219
Equitable interest of the Russian Federation in the charter capital, %:
100
Equitable interest of the Russian Federation concerning ordinary shares, %:
100
Full name and address of the companys auditor:
Closed joint stock company BDO Unicon (CJSC BDO) (by Russian standards) Address: Varshavskoye Shosse 125, Bldg. 1, Section 11, Moscow 117587 Russia Tax Identification Number: 7716021332 Main State Registration Number: 1037739271701 Telephone: +7 (495) 797-5665 Fax: +7 (495) 797-5660 E-mail: [email protected] Ernst & Young Limited Liability Company (IFRS financial statements) Address: Sadovnicheskaya Nab. 77, Bldg. 1, Moscow 115035 Russia.
Licensing the Company's activities:
As of 1 January 2009, the Companys charter capital amounted to RUB 1,583,197,819,000. By Decree No. 918-r of the Government of the Russian Federation of 7 July 2009 "Concerning an Increase in the Charter Capital of JSCo Russian Railways", it was decided in 2009 to increase the charter capital of JSCo Russian Railways by RUB 11.3 bln (eleven billion three hundred million rubles) by additionally placing 11.3 mln (eleven million three hundred thousand) ordinary registered book-entry shares with a par value of RUB 1,000 each. As of the end of the reporting period, the Company's Charter Capital amounted to kRUB 1,594,516,219.
The Company holds all the necessary licenses for core rail transport activities. JSCo Russian Railways holds a total of 1981 licenses for 38 licensable types of activities. Licenses for freight transportation by rail and freight handling were provided to JSCo Russian Railways by the Russian Ministry of Railways on 30 September 2003 for a period of 5 years (until 30 September 2008) and were not subject to reissue. On 28 August 2008, the Russian Federal Service for Transport Oversight issued Orders No. VCh-990 fs and No. VCh-991 fs on the provision of JSCo Russian Railways licenses for freight transportation by rail and for the handling of hazardous rail freight for a period of 5 years (until 28 August 2013).
GeneRAL InFORMAtIOn On JSCO RUSSIAn RAILwAYS
Amount of contribution by the Russian Federation, kRUB:
ChanGes in statutory aCtivities in 2009
011
The Companys related parties are the following: members of the Board of Directors (see subsection "Members of the Board of Directors"); the Company's President (see subsection "President of JSCo Russian Railways"); members of the Companys Management Board (see subsection "Management Board"); entities belonging to the group of entities to which JSCo Russian Railways belongs; legal entities in which the Company has the right to have at its disposal more than 20% of the total number of votes which relate to voting shares or constitute charter capital or equity capital, contributions or equitable interest of the Company. As of 31 December 2009, the Company was structurally composed of branches engaged in certain types of activity:
Railway branches:
AnnUAL RePORt 2009
List of reLated Parties
JsCo russian raiLways
October Railway Kaliningrad Railway Moscow Railway Gorky Railway Northern Railway North Caucasus Railway South-Eastern Railway Privolzhsk Railway Kuibyshev Railway Sverdlovsk Railway South Urals Railway West Siberian Railway Krasnoyarsk Railway East Siberian Railway Trans-Baikal Railway Far Eastern Railway Sakhalin Railway
Functional branches:
branches engaged in transportation (9) branches providing technical, economic and financial support (7) branches engaged in capital construction (2) branches engaged in rolling stock repairs and maintenance (16) branches operating track facilities (2) branches engaged in IT development and telecommunications (3) branches engaged in the social sphere (1) R&D branches (12) other branches (5)
The Company has representative offices in 11 countries:
Hungary (Budapest), Germany (Berlin), Iran (Teheran), China (Beijing), the Korean Peoples Democratic Republic (Pyongyang), Poland (Warsaw), Slovakia (Bratislava), Ukraine (Kiev), Finland (Helsinki), Czech Republic (Prague) and Estonia (Tallinn).
aCtivity Of the management and COntrOl BOdies Of jsCO russian railways
012
In accordance with the Charter, the following In 2009, five unscheduled general meetings management bodies were established in of the shareholders of JSCo Russian Railways were JSCo Russian Railways: held on the introduction of amendments to the General Shareholders' Meeting; Charter of JSCo Russian Railways and an increase Board of Directors; in the charter capital of JSCo Russian Railways, the President; decisions of which were formalized by Decrees Management Board. No.551 of 7 July 2009, No. 570 of 15 July 2009 The Audit Commission is the control body and No. 1209 of 31 December 2009 and by responsible for monitoring the Company's financial Instructive Regulations No. 918-r of 7 July 2009 and economic activities. and No. 2144-r of 31 December 2009 of the The Management Board headed by the Government of the Russian Federation. President of JSCo Russian Railways is the Company's Board of direCtors executive body. The Board of Directors of JSCo Russian GeneraL sharehoLders meetinG Railways oversees the Companys activity and acts on The Companys supreme governing body is the basis of the legislation of the Russian Federation the General Shareholders Meeting. The Companys and the Charter of JSCo Russian Railways, approved sole shareholder is the Russian Federation. The by Decree No. 585 of the Government of the Russian Government of the Russian Federation exercises the Federation of 18 September 2003, and the Statute powers of a shareholder on behalf of the Russian on the Board of Directors of JSCo Russian Railways, Federation. Pursuant to Article 47 of the Federal Law approved by Instructive Regulation No. 265-r of the Concerning Joint Stock Companies, decisions on the Government of the Russian Federation of 25 February numerical and personal membership of the Board 2004. of Directors of JSCo Russian Railways are adopted by the Government of the Russian Federation and officially recorded in writing. The decisions of the annual general shareholders meeting in 2009 were officially recorded by Instruction No. 894-r of the Government of the Russian Federation of 30 June 2009.
ACtIVItY OF tHe MAnAGeMent AnD COntROL BODIeS OF JSCO RUSSIAn RAILwAYS
013
The Board of Directors of JSCo Russian Railways, elected in accordance with Instruction No. 951-r of the Government of the Russian Federation of 30 June 2008, was approved in the number of 9 members (positions at the time of election): AnnUAL RePORt 2009
Members of the Board of Directors
Name
Title
A. V. Gusakov A. D. Zhukov D.G. Komissarov N.N. Kosov
A.L. Kostin A.N. Ryazanov A. V. Sharonov A.N. Shokhin V. I. Yakunin
President of the joint stock company CIG Group Deputy Prime Minister of the Russian Federation Chairman of the Board of Directors of the joint stock company Tekhnologicheskaya Kompaniya (Technological Company) First Deputy Chairman of the Management Board of the state corporation Bank for Development and Foreign Economic Activity (Vnesheconombank) President and Management Board Chairman of the joint stock company VTB Bank Chairman of the Board of Directors of the joint stock company Russian Holding Company Managing Director of the joint stock company Troika Dialog President of the Russia-wide employers association Russian Union of Industrialists and Entrepreneurs President of JSCo Russian Railways
The Board of Directors of JSCo Russian Railways, elected in accordance with Instruction No. 894-r of the Government of the Russian Federation of 30 June 2009, was approved in the number of 9 members (positions at the time of election):
Name
Title
A. V. Gusakov A. D. Zhukov D.G. Komissarov N.N. Kosov
A.L. Kostin A.N. Ryazanov A. V. Sharonov A.N. Shokhin V. I. Yakunin
Vice President of the joint stock company MICEX Deputy Prime Minister of the Russian Federation Chairman of the Board of Directors of the joint stock company Tekhnologicheskaya Kompaniya (independent director) First Deputy Chairman of the Management Board of the state corporation Bank for Development and Foreign Economic Activity (Vnesheconombank) President and Management Board Chairman of the joint stock company VTB Bank Chairman of the Board of Directors of the joint stock company Russian Holding Company (independent director) Managing Director of the joint stock company Troika Dialog (independent director) President of the Russia-wide employers association Russian Union of Industrialists and Entrepreneurs (independent director) President of JSC Russian Railways
A. D. Zhukov, Deputy Prime Minister of the Russian Federation, was elected Chairman of the Board of Directors of JSCo Russian Railways. The members of the Board of Directors of JSCo Russian Railways elected as such were not paid remuneration and compensation for the expenses which they incurred as members of the Companys Board of Directors.
014
BRIeF CVS OF MeMBeRS OF tHe BOARD OF DIReCtORS OF JSCO RUSSIAn RAILwAYS
Brief CVs of members of the Board of Directors of JSCo Russian Railways aLexander dmitriyeviCh Zhukov Chairman of the Board of Directors
From 1995,
From 1998,
Born on 1 June 1956. In 1978, graduated from the Moscow State Lomonosov University, majoring in Mathematical Economics. In 2000-2003, Deputy of the Russian State Duma (third convocation), Chairman of the Budget and Tax Committee, member of the Commission on State Debt and Foreign Assets, co-chairman of the Commission on Federal Budget Expenses for Defense and State Security. In 2003 2004, Deputy of the Russian State Duma (fourth convocation), First Deputy Chairman of the State Duma. Since 2004, Deputy Prime Minister of the Russian Federation, member and Chairman of the Board of Directors of JSCo Russian Railways.
vLadimir anatoLyeviCh Gusakov
From 1999,
From 2001,
From 2003,
From 2003,
From 2004, From 2007,
Born on 21 November 1960. In 1984, V. Gusakov From 2008, graduated from the Peoples' Friendship University, majoring in Since 2009, Mathematics. In 1989, completed postgraduate studies at the Peoples' Friendship University. PhD in Physics and Mathematics, assistant professor. In 2003, graduated from the Russian dmitry GeorGieviCh komissarov Born on 22 September 1970. In 1992, graduated Economic Plekhanov Academy, from the Moscow Finance majoring in Finance and Loans, and Institute (Finance Academy under in 2008, the Russian Academy of the Government of the Russian State Service under auspices of the Federation), majoring in International President of the Russian Federation, Currency and Credit Relations. majoring in Jurisprudence. In 1999, 1992, worked in various commercial received Qualification Certificate No. organizations. 011387 of the Federal Securities In 1994, General Director of the joint stock Commission of Russia, and in 2003, company NPK Soyuz Integration. Qualification Certificate No. 030521 In 2000, Advisor to the General Director of the of the Federal Securities Commission joint stock company Tyumenenergo. of Russia. From 2002, General Director, From 1992, chief specialist, deputy director of CJSCo Transmashholding. the department for securities of the From 2003, Chairman of the Board of Directors, Russian Federal Property Fund. CJSCo Transmashholding From 1994, deputy head of the Department for From 2006, Member of the Management Board Securities and the Financial Market, of the Russian Union of Industrialists head of the Financial Markets and Entrepreneurs, Chairman of Department of the Ministry of the Commission for Developing Finance of the Russian Federation. Machine-Building.
Vice President, Deputy Chairman of the Management Board of the joint stock bank Imperial. Deputy Chairman of the Management Board of the commercial bank Nationalny Reservny Bank (National Reserve Bank). Director of the Investments Department, member of the Management Board, Deputy General Director of the Agency for Restructuring Credit Organizations. Deputy Chairman of the federal state unitary enterprise State Investment Corporation. Advisor to the Chairman of the Management Board of CJSCo CB Moscow Mortgage Agency. Deputy General Director of CJSCo Moscow Interbank Currency Exchange. Deputy Head of the Federal Financial Markets Service. President of the limited liability company TsentrInvest Securities. President of the joint stock company CIG Group. Vice President, member of the Management Board of CJSCo Moscow Interbank Currency Exchange.
015
From 2007, Bureau Member of the Machine-Builders' Union of the Russian Federation. Chairman of the Commission for Technological Development, Protection of the Domestic Market and Cooperation under the Bureau of the Central Council of the Russian Machine-Builders' Union. Since 2008, Chairman of the Board of Directors, JSCo Technological Company. Since 2008, member of the Board of Directors of JSCo Foreign Economic Relations Association Technopromexport. Since 2008, Member of the Board of Directors of JSCo Russian Railways, Chairman of the Audit, Risk and Remuneration Committee of the BoD of JSCo Russian Railways.
nikoLay nikoLaeviCh kosov
was thanked officially several times by the Russian President; he was also awarded the Decoration of Honor "The Leader of the Russian Economy", the Honorable Badge of the Association of Russian Banks "For Services to the Banking Community" and the "Excellent Employee of Vnesheconombank" Badge; his name is in Vnesheconombanks Book of Honor. From 2004, Chairman of the Board of Directors of CJSCo Roseximbank. From 2006, Member of the Board of Directors of JSCo National Trade Bank. From 2007, Member of the Board of Directors of JSCo Belvnesheconombank. From 2008, Member of the Board of Directors of JSCo Russian Railways. Since 2009, Deputy Chairman of the Board of Directors of CJSCo Globexbank.
andrey LeonidoviCh kostin
Born on 30 June 1955 in Moscow. In 1977, graduated from the Moscow State Institute of International Affairs, majoring in International Affairs, and in 2000, from the Financial Academy under the auspices of the Government of the Russian Federation, majoring in Global Economy. PhD in Economics. In 1977 1992, consultant, senior consultant, attache, third, second and first secretary, advisor to the Embassy of the Soviet Union, and advisor to the administration of the Ministry of Foreign Affairs of the USSR. In 1992 1993, aide to the Vice President of the Russian Federation in the Russian Presidents Administration. In 1993 1998, First Deputy, General Director of the joint stock company Avtomobilny Vserossiyskiy Alyans. In 1998 2007, First Deputy Chairman, Vnesheconombank of the USSR. From June 2007, member of the Management Board of the state corporation Bank for Development and Foreign Economic Affairs (Vnesheconombank), First Deputy Chairman of Vnesheconombank. For his great contribution to the development of the Russian financial and banking system and many years of dedicated work, Mr. Kosov was awarded the Order of Honor, the medals of the Order "For Services to the Fatherland", First and Second Degrees, and
Born on 21 September 1956. In 1979, graduated with honors from Moscow State University (economic department), specializing as an international economist. PhD in Economics. In 1979 1992, worked at the Ministry for Foreign Affairs: 1979 1982, in the General Consulate of the USSR in Australia, and in 1985 1990, in the Embassy of the USSR in the UK. In 1993 1995, Deputy Head of the Foreign Investments Management Office of the bank Imperial. In 1995, elected First Deputy Chairman of the National Reserve Bank (NRB). In 1996, appointed Chairman of Vnesheconombank by Edict of the President of the Russian Federation, and in 1999 A.L. Kostins powers were extended for three years. On 10 June 2002, appointed President-Chairman of the VTB Management Board. On 4 April 2007, the supervisory board of VTB Bank decided to extend the powers of A.L.Kostin as the President-Chairman of the Management Board of JSCo VTB Bank until 2012. Is a member of the Supervisory Board of VTB Bank, Chairman of the Supervisory Board of VTB Bank (Ukraine), VTB24 and VTB Bank Northwest, Chairman of the Advisory Committee of VTB Bank Europe Plc., and member of the Board of Directors of VTB Capital.
AnnUAL RePORt 2009
016
BRIeF CVS OF MeMBeRS OF tHe BOARD OF DIReCtORS OF JSCO RUSSIAn RAILwAYS
Currently, A.L. Kostin is a member of the Board of Directors of the oil company Rosneft, JSCo Russian Railways, Sovkomflot and the Unified Aircraft Building Corporation, and is President of the Sport Gymnastics Federation of Russia.
aLexander nikoLayeviCh ryaZanov
Sharanov has written over 20 published research works and articles, and possesses 5 authors certificates of the USSR for inventions. In March 2003, received the Russian Presidents gratitude for services in implementing the states social and economic policy", and in 2006, received the honorary title Merited Economist of the Russian Federation
Born on 13 October 1953. In 1979, aLexander nikoLayeviCh shokhin A. Ryazanov graduated from the Born on 25 December 1951 in the Arkhangelsk Moscow Gubkin Institute of the Region. Petrochemical and Gas Industries, In 1974, graduated from the Moscow State majoring in Automatics and Lomonosov University, Department Telemechanics. of Economics. From 2001, Deputy Chairman of the In 1974 1982, worked at the economic research Management Board of the open joint institute State Planning Committee stock company Gazprom. of the USSR and the labor research From 2007, Chairman of the Board of Directors institute State Committee on Labor of the closed joint stock company and Social Issues of Russian Holding Company. the USSR. From 2008, member of the Board of Directors of From 1982, head of the laboratory of the Central JSCo Russian Railways. Mathematical Economics Institute Since 2009, Chairman of the Management Board of the Academy of Sciences of the of JSCo Stroytransgaz. USSR, head of the laboratory of the andrei vLadimiroviCh sharonov Economic Projection Institute of the Born on 11 February 1964. In 1986, A. Sharonov Academy of Sciences of the USSR. graduated from the Ufa Aviation From 1987, worked at the Ministry of Foreign Institute, majoring in Aviation Affairs of the USSR, aide to the Instrument-making, and in 1996, minister on economic issues, head of from the Russian Public Service the international economic relations Academy under the auspices of the department. President of the Russian Federation, From 1991, Deputy Prime Minister of the Russian majoring in Jurisprudence. Federation. At the same time, held From 1992, Chairman of the Committee on Youth the positions of Minister of Labor of the Russian Federation. and Employment, Minister of the From 2003, First Deputy Minister of Economic Economy, and Chairman of the Development and Trade of the Russian Agency for International Russian Federation. Cooperation and Development. From 2005, State Secretary, Deputy Minister of From 1998, Deputy Prime Minister of the Russian Economic Development and Trade of Federation on financial and economic the Russian Federation issues. Since 2007, Managing Director of the Troika In 1994 2002, Deputy of the State Duma of three Dialog group of companies: he convocations. During this period, supervises the preparation and First Deputy Chairman of the State execution of investment banking Duma, head of the Russia is Our transactions, participation in Home Duma Fraction, and Chairman the management of mutual of the State Duma Committee on investment funds and venture Credit Organizations and Financial funds, participation in the work of Markets. the boards of directors of portfolio From 1995, President of the State University companies, and cooperation with Higher School of Economics. Head Russian government bodies in of the department for the theory working out stock market regulating and practice of relations between mechanisms. business and power.
017
AnnUAL RePORt 2009
From 2002,
Chairman of the Supervisory Council of the Renaissance Capital Investment Group. From 2005 to 2009, member of the Social Chamber of the Russian Federation. Currently, Chairman of the Russian Union of Industrialists and Entrepreneurs. Member of the Council under the President of the Russian Federation for national priority projects and the demographic policy, the Commission under the President of the Russian Federation on the formation and preparation of a reserve of managerial personnel, the Council for Competitiveness and Entrepreneurship under
the Prime Minister of the Russian Federation, the commissions of the Government of the Russian Federation on an administrative reform, high tech and innovations, and small and medium-sized businesses. Independent director of the Board of Directors of several companies, including JSCoLukoil, JSCo TNK-BP Management, JSCo TMK and JSCoRussian Railways. Doctor of Economics, professor.
Data on participation in meetings of the Board of Directors of JSCo Russian Railways From 1 January to 30 June 2009
1 2 3 4 5 6 7 8 9 10
V.A. Gusakov A. D. Zhukov D.G. Komissarov n.n. Kosov A.L. Kostin A.n. Ryazanov A. V. Sharonov A.n. Shokhin V. I. Yakunin From 1 July to 31 December 2009
11 12 13 14
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15
16
17
18
19
20
21
22
23
24
25
26
V.A. Gusakov A. D. Zhukov D.G. Komissarov n.n. Kosov A.L. Kostin A.n. Ryazanov A. V. Sharonov A.n. Shokhin V. I. Yakunin
+ + + + + + + + +
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Meetings of the Board of Directors of JSCo Russian Railways
In 2009, the Board of Directors of JSCoRussian Railways held 26 meetings at which 156 issues were considered: The decisions of the Board of Directors have been fulfilled. From 1 January to 30 June 2009, the Board of Directors held 10 meetings at which 63 issues were considered. From 1 July to 31 December 2009, the Board of Directors held 16 meetings at which 93 issues were considered.
018
No. 1 dated 29 January 2009
ISSUeS COnSIDeReD At tHe MeetInGS OF tHe BOARD OF DIReCtORS OF JSCO RUSSIAn RAILwAYS
Issues considered at the meetings of the Board of Directors of JSCo Russian Railways
1.
2. 3. 4.
5.
6.
7. 8.
On the position of JSCo Russian Railways (its representatives) on the issue "Election of the General Director of JSCo TransContainer" on the agenda of the meeting of the Board of Directors of JSCo TransContainer. On liquidating the non-state educational institution Kindergarten No. 240 of JSCo Russian Railways. On reorganizing the non-state educational institution Kindergarten No. 49 of JSCo Russian Railways. On the position of JSCo Russian Railways (its representatives) on the issue "Election of the General Director of JSCo RailTransAuto" on the agenda of the meeting of the Board of Directors of JSCo RailTransAuto. On the position of JSCo Russian Railways (its representatives) on the issue Participation of JSCo First Freight Company in the Nonprofit Partnership Unified Producers of Railway Equipment on the agenda of the meeting of the Board of Directors of JSCo First Freight Company. On the position of JSCo Russian Railways (its representatives) on the issue Companys Participation in the Nonprofit Association Russia-wide Industry Association of Employers of Railway Transport" on the agenda of the unscheduled general meetings of shareholders of JSCo Railway Transport Research Institute, JSCo Railway Trade Company, JSCo First Non-ore Company and JSCo BetElTrans. On Setting up a Railway Express Management Office a branch of the JSCo Russian Railways. On a bonus for the President of JSCo Russian Railways and the evaluation of his Q4 2008 business performance.
No. 2 dated 16 February 2009
1. 2.
On determining the placement price of the additional shares of JSCo Russian Railways. On approving the companys registrar and the terms of an agreement with him.
No. 3 dated 20 February 2009
1.
2.
3.
4.
5.
6.
7.
On the proposals made by the Federal Agency for the Management of Federal Property to introduce changes in the work schedule of the Board of Directors of JSCo Russian Railways in the first half of 2009. On the impact of the world financial crisis on the fulfillment of the investment program and the financial status of JSCo Russian Railways, and the program for reducing the costs and optimizing the management of expenditures in the company. On approving the list of subsidiaries and affiliates in 2009 in relation to which the Board of Directors of JSCo Russian Railways adopts decisions in accordance with the first paragraph of Clause 71.23 of the Charter of JSCo Russian Railways. On the position of JSCo Russian Railways (its representatives) on the issue "Approval of JSCo TransTeleCom Company Budget for 2009" on the agenda of the meeting of the Board ofDirectors of JSCo TransTeleCom Company. On the Position of JSCo Russian Railways (its representatives) on the issue "Approval of the JSCo RZDstroy Budget for 2009" on the agenda of the meeting of the Board of Directors of JSCo RZDstroy. On the position of JSCo Russian Railways (its representatives) on the issue "Approval of the JSCo PGK Budget for 2009" on the agenda of the meeting of the Board of Directors of JSCoPGK. On the position of JSCo Russian Railways (its representatives) on the issue Approval of the JSCo TransContainer Budget for 2009 on the agenda of the meeting of the Board of Directors of JSCo TransContainer.
019
AnnUAL RePORt 2009
8.
9.
10. 11. 12.
On a change in the name of the Audit and Remunerations Committee of the Board of Directors of JSCo Russian Railways and approval of the provision on the Audit, Risks and Remunerations Committee of the Board of Directors of JSCo Russian Railways. On approving the Regulations for presenting the budgets of subsidiaries and affiliates of JSCoRussian Railways, which are included in the annually approved list, as well as the reports on their fulfillment for consideration by the Board of Directors of JSCo Russian Railways. On approving the agreements between JSCo Russian Railways and members of the Board of Directors of JSCo Russian Railways. On changing the members of committees of the Board of Directors of JSCo Russian Railways. On approving the amount to be earmarked for charity for 2009.
No. 4 dated 30 March 2009
On the position of JSC Russian Railways (its representatives) on the issue Participation of JSCoTransContainer in Transcontainer Slovakia a.s. on the agenda of the meeting of the Board of Directors of OAO TransContainer.
No. 5 dated 13 April 2009
1. 2.
On determining the placement price of the additional shares of JSCo Russian Railways. On appointing members of the Management Board of JSCo Russian Railways.
No. 6 dated 28 April 2009
1.
2.
3. 4. 5. 6. 7.
8. 9. 10. 11. 12. 13.
On the position of JSC Russian Railways (its representatives) on the issues of the general meeting of shareholders and the meeting of the Board of Directors of JSCo TransCreditBank on the agenda of the meeting of the Board of Directors of JSCo TransCreditBank. On the position of JSCo Russian Railways (its representatives) on the issue Approval of the JSCo TransCreditBank Budget for 2009 on the agenda of the meeting of the Board of Directors of JSCo TransCreditBank. On appointing a member of the Management Board of JSCo Russian Railways. On the impact of the global financial crisis on the fulfillment of the investment program and the financial status of JSCo Russian Railways. On the results of the work of the Management Office of Railway Stations a branch of JSC Russian Railways for 2008. On the prevailing state of affairs concerning work with assets, which are not in the companys sphere of specialization, in JSCo Russian Railways and its subsidiaries and affiliates. On the position of JSCo Russian Railways (its representatives) on the issue "Approval of the JSCo RZDstroy Budget for 2009" on the agenda of the meeting of the Board of Directors of JSCo RZDstroy. On approving documents concerning the establishment of the limited liability company Development of the Infrastructure on the territory of Mongolia. On setting up a Marketing Management Office a branch of the JSCo Russian Railways. On approving the Regulations concerning the Information Policy of JSCo Russian Railways. On appointing representatives of JSCo Russian Railways for participation in the general meetings of shareholders of subsidiaries and affiliates. On determining the placement price of the additional shares of JSCo Russian Railways. Miscellaneous. Announcement by A.V. Sharonov, Chairman of the Strategic Planning Committee of the Board of Directors of JSCo Russian Railways.
020
1. 2. 3. 4. 5. 6. On electing the Chairperson of JSCo Russian Railways' Board of Directors meeting. On the Auditor's Report on the financial and economic performance of JSCo Russian Railways for 2008. On the report of the Audit Commission on the financial and economic performance of JSCo Russian Railways for 2008. On the Board of Directors pre-approving the annual report of JSCo Russian Railways for 2008. On approving the 2008 annual financial statements of JSCo Russian Railways, including the statement of income. On recommendations for the annual general shareholders meeting of JSCo Russian Railways on the results of the companys performance for 2008 concerning the amount of dividends on shares and their payment procedure and concerning the distribution of net profit for the financial year. On the results of the auditor tender for the annual audit of the financial and economic performance of JSCo Russian Railways and the determination of the professional fees for the auditor's services.
No. 7 dated 25 May 2009
7.
No. 8 dated 26 May 2009
1. 2.
On liquidating the non-state educational institution Kindergarten No. 77 of JSCo Russian Railways. On approving JSCo Russian Railways' Management Board members taking secondary management positions with other entities, and on the position of JSCo Russian Railways (itsrepresentatives) on the agenda of the general shareholders meetings and the meetings of the boards of directors of the companies included in the list of subsidiaries and affiliates approved by the Board of Directors of JSCo Russian Railways, in relation to which the Board of Directors of JSCo Russian Railways adopts decisions pursuant to paragraph 1, Article 71.23 of the Charter of JSCo Russian Railways. On awarding the President of JSC Russian Railways and assessing his performance for Q1 2009.
No. 9 dated 2 June 2009
1. 2. 3. 4. 5.
6.
7.
8.
9.
On determining the placement price of the additional shares of JSCo Russian Railways. On the draft financial plan of JSCo Russian Railways for 2009. On setting up the suburban passenger company JSCo Moscow-Tversakaya Suburban Passenger Company a subsidiary of JSCo Russian Railways. On setting up the Central Traffic Management Office a branch of JSCo Russian Railways. On changing the name of the Audit and Remunerations Committee of the Board of Directors of JSCo Russian Railways and approving the Regulations on the Audit, Risks and Remunerations Committee of the Board of Directors of JSCo Russian Railways. On the position of JSCo Russian Railways (its representatives) on the issue "Approval of the Report on the JSCo TransTeleCom Company Budget for 2008" on the Agenda of the Meeting of the Board of Directors of JSCo TransTeleCom Company. On the position of JSCo Russian Railways (its representatives) on the issue "Approval of the JSCo TransTeleCom Company Budget for 2009" on the agenda of the meeting of the Board of Directors of JSCo TransTeleCom Company. On the position of JSCo Russian Railways (its representatives) on the issue "Approval of the Report on the Execution of the JSCo PGK Budget for 2008" on the agenda of the meeting of the Board of Directors of JSCo PGK. On the position of JSCo Russian Railways (its representatives) on the issue "Approval of the Report on the Execution of the JSCo TransContainer Budget for 2008" on the agenda of the meeting of the Board of Directors of JSCo TransContainer.
021
AnnUAL RePORt 2009
10.
11.
12.
13.
On the position of JSCo Russian Railways (its representatives) on the issue "Approval of the Report on the Execution of the JSCo TransCreditBank Budget for 2008" on the agenda of the meeting of the Board of Directors of JSCo TransCreditBank. On the position of JSCo Russian Railways (its representatives) on the issue "Second Offer of the Bond Issue of JSCo TransCreditBank series 02" on the agenda of the meeting of the Board of Directors of JSCo TransCreditBank. On the position of JSCo Russian Railways (its representatives) on the issue "Approval of the Report on the Execution of the JSCo Yakutia Railways Budget for 2008" on the agenda of the meeting of the Board of Directors of JSCo Yakutia Railways. On the approval of transactions between JSCo Russian Railways and KIT Finance Holding Company, and the state corporation Deposit Insurance Agency and KIT Finance Investment Bank.
No. 10 dated 11 June 2009
1.
2.
On the position of JSCo Russian Railways (its representatives) on the issue "Participation of JSCo PGK in the Coordination Transport Meeting of the CIS Countries" on the agenda of the meeting of the Board of Directors of JSCo PGK. On the position of JSCo Russian Railways (its representatives) at the unscheduled general meeting of shareholders of JSCo TransContainer on the issue "Participation of JSCoTransContainer in the Russia-wide employers association Russian Union of Industrialists and Entrepreneurs".
No. 11 dated 24 July 2009
1. 2.
3. 4. 5. 6.
7.
8. 9.
10.
On the election of the Chairman of the Board of Directors of JSCo Russian Railways (Instructions No. 2927p-P13 of the Government of the Russian Federation of 25 June 2009). On the position of JSCo Russian Railways (its representatives) on the issue "Approval of the Report on the Execution of the JSCo RZDstroy Budget for 2008" on the agenda of the meeting of the Board of Directors of JSCo RZDstroy. On liquidating the branch offices of JSCo Russian Railways, on the basis of the assets of which the joint stock company Vagonremmash was established. On reorganizing the non-state preschool educational institutions Kindergarten No. 71 of JSCoRussian Railways and Kindergarten No. 73 of JSCo Russian Railways. On liquidating a representative office of JSCo Russian Railways in Mongolia. On the position of JSCo Russian Railways (its representatives) on the issue "Election of the General Director of JSCo RZDstroy" on the agenda of the meeting of the Board of Directors of JSCo RZDstroy. On giving an annual bonus to the members of the Management Board of JSCo Russian Railways and making a summarized qualitative assessment of the performance of the Management Board of JSCo Russian Railways as a whole for 2008. On approving the assessment of the fulfillment of key performance indicators by the President of JSCo Russian Railways for 2008. On approving the decision to additionally issue ordinary registered book-entry shares of JSCo Russian Railways in the amount of 11.3 million with a face value of 1,000 rubles each, placed by means of closed subscription to the sole shareholder, i.e., the Russian Federation represented by the Government of the Russian Federation. On relieving a member of JSCo Russian Railways Management Board.
022
1. On the position of JSCo Russian Railways (its representatives) on the issue "Participation of JSCo PGK in Organizing Railway Cooperation" on the agenda of the meeting of the Board of Directors of JSCo PGK. On Setting up a Traction Management Office a branch of JSCo Russian Railways. On Setting up a Locomotive Train Repair Management Office a branch of JSCo Russian Railways. On establishing the joint stock company Volgo-Vyatsk Suburban Passenger Company. On establishing the joint stock company Sodruzhestvo. On establishing the joint stock company Perm Suburban Company. On approving lease agreements with employees members of the Management Board of JSCo Russian Railways as transactions in which interest is taken. On transferring the title of the non-state general educational institution Basic General Education School No. 53 of JSCo Russian Railways to Schuchansk District of Kurgana Region.
2. 3. 4. 5. 6. 7. 8.
1.
2.
3.
4.
5.
6. 7.
On the position of JSCo Russian Railways (its representatives) on the issue "Approval of the Report on the Execution of the JSCo YuKZhD Budget for 2008" on the agenda of the meeting of the Board of Directors of JSCo YuKZhD. On the position of JSCo Russian Railways (its representatives) on the issue Approval of the JSCo YuKZhD Budget for 2009 on the agenda of the meeting of the Board of Directors of JSCo YuKZhD. On the position of JSCo Russian Railways (its representatives) on the issue "Approval of the Report on the Execution of the JSCo Zarubezhstroytekhnologiya Budget for 2008" on the agenda of the meeting of the Board of Directors of JSCo Zarubezhstroytekhnologiya. On the position of JSCo Russian Railways (its representatives) on the issue "Participation of JSCo PGK in the Limited Liability Company Freight One Scandinavia Ov on the agenda of the meeting of the Board of Directors of JSCo PGK. On the position of JSCo Russian Railways (its representatives) on the issue "Participation of JSCo PGK in TTG Group Holding B.V. (Netherlands)" on the agenda of the meeting of the Board of Directors of JSCo PGK. On determining the quantitative and personal composition of the Strategic Planning Committee of the Board of Directors of JSCo Russian Railways and on electing its chairperson. On determining the quantitative and personal composition of the Audit, Risk and Remuneration Committee of the Board of Directors of JSCo Russian Railways and on electing its chairperson. On approving the work schedule of the Board of Directors of JSCo Russian Railways for H2 2009.
No. 14 dated 7 August 2009
1.
2. 3.
On the position of JSCo Russian Railways (its representatives) on the issue "Approval of the Report on the Execution of the JSCo Yakutia Railways Budget for 2008" on the agenda of the meeting of the Board of Directors of JSCo Yakutia Railways. On the position of JSCo Russian Railways (its representatives) on the agenda of the general shareholders' meeting and the meeting of the Board of Directors of JSCo Zheldorremmash. On awarding the President of JSC Russian Railways and assessing his performance for Q2 2009.
On the position of JSC Russian Railways (its representatives) on the issue Participation of JSCo TransContainer in the nonprofit partnership Council of the Participants in the Services Market of Rolling Stock Operators on the agenda of the meeting of the Board of Directors of JSCo TransContainer.
023
1. 2. On appointing a member of the Management Board of JSCo Russian Railways. On granting railway fare discounts to students of higher and secondary educational institutions in H2 2009.
AnnUAL RePORt 2009
No. 17 dated 28 September 2009
1. 2.
3.
4.
5.
6. 7. 8.
On reorganizing the non-state preschool educational institutions Kindergarten No. 75 of JSCoRussian Railways and Kindergarten No. 76 of JSCo Russian Railways. On reorganizing the non-state general educational institution Basic General Education School No. 54 of JSCo Russian Railways and the non-state preschool educational institution Kindergarten No. 144 of JSCo Russian Railways. On transferring the title of the non-state preschool educational institutions Kindergarten No. 60 of JSCo Russian Railways and Kindergarten No. 61 of JSCo Russian Railways to the municipal formation of the city of Smolensk. On liquidating the branches of JSCo Russian Railways, on the basis of the assets of which subsidiary joint stock companies were established to produce materials for the upper railway structure. On the position of JSCo Russian Railways (its representatives) on the issue "Election of the Chairman of the Board of Directors" on the agenda of the meeting of the Board of Directors of JSCo Yakutia Railways. On the position of JSCo Russian Railways (its representatives) on the agenda of the general shareholders' meeting and the meeting of the Board of Directors of JSCo YuKZhD. On liquidating the branch office of JSCo Russian Railways, on the basis of the assets of which the joint stock company Moscow Locomotive Repair Plant was established. On transferring the title of the non-state preschool educational institution Kindergarten No. 169 of JSCo Russian Railways to the municipal formation Myskovsky Municipal District of Kemerov Region.
No. 18 dated 1 October 2009
1.
2.
On the position of JSCo Russian Railways (its representatives) on the issue "Participation of JSCo Zheldorremmash in the nonprofit partnership Interregional Association of Railway Construction" on the agenda of the meeting of the Board of Directors of JSCoZheldorremmash. On the position of JSCo Russian Railways (its representatives) on the issue "Election of the President and Management Board Chairman of JSCo TransCreditBank" on the agenda of the meeting of the Board of Directors of JSCo TransCreditBank.
1. 2.
3.
4.
On the impact of the financial crisis on the fulfillment of the investment program and the financial plan of JSCo Russian Railways. On the position of JSCo Russian Railways (its representatives) on the issue "Participation of JSCo TransContainer in the Joint Russian-Chinese Limited Liability Company for Intermodal Shipments (Beijing) on the agenda of the meeting of the Board of Directors of JSCoTransContainer. On the position of JSCo Russian Railways (its representatives) on the issue Approval of the Adjustment of the JSCo Zarubezhstroytekhnologiya Budget for 2009 on the agenda of the meeting of the Board of Directors of JSCo Zarubezhstroytekhnologiya. On the position of JSCo Russian Railways (its representatives) on the issue Adoption of the Decision on the Placement by JSCo TransCreditBank of Interest-bearing Documented Nonconvertible Bonds of JSCo TransCreditBank to Bearer of Series 05 and 06 on the agenda of the meeting of the Board of Directors of JSCo TransCreditBank.
024
5.
6.
7. 7.1
7.2
On the position of JSCo Russian Railways (its representatives) on the issue "Approval of the Agreement on the Pledge of Immovable Property as a Transaction in the Performance of which Interest Is Taken" on the agenda of the meeting of the Board of Directors of JSCo Yakutia Railways. On developing the requirements for the content and volume of information disclosed when presenting the draft budgets of subsidiaries and affiliates, which are included in a special list, and the reports on their execution. Miscellaneous. On the results of consideration by the Strategic Planning Committee of the Board of Directors of JSCo Russian Railways of the sale in 2010 of part of the shares of JSCo Russian Railways which are in federal ownership and the drawing of additional investments in JSCo Russian Railways, inter alia, by publicly offering the shares. On the Obskaya Bovanenkovo railway infrastructural units built by the related parties of Gazprom.
1. 2. 3. 4.
5.
6. 7.
8.
On the progress of JSCo Russian Railways in 2009 in implementing the third phase of the structural railway reform. On adjusting the investment program and financial plan of JSC Russian Railways for 2009. On the drafts of the investment program and financial plan of JSCo Russian Railways for 2010 and the planned period of 2011 and 2012. On the placement by JSCo Russian Railways of the issues of nonconvertible documented interest-bearing bonds to bearer of the series 20, 21, 22, 23, 24, 25 and 26 and on the approval of the issue documents. On the placement by JSCo Russian Railways of the issues of nonconvertible documented interest-bearing stock-exchange bonds to the bearer of the series BO-01, BO-02, BO-03, BO-04, BO-05, BO-06, BO-07 and BO-08 and on the approval of the issue documents. On the concept of reforming the offices for managing the terminal warehouse complex of railways branches of JSCo Russian Railways. On the approval of the transaction concerning the provision of security by JSCo Russian Railways to Siemens Transportation System GmbH & Co. KG in the amount of 120,000,000 euro. On the position of JSCo Russian Railways (its representatives) on the agenda of the general shareholders' meeting and the meeting of the Board of Directors of JSCo YuKZhD.
No. 21 dated 2 November 2009
1. 2.
3. 4. 5.
On approving the Regulations on the Strategic Planning Committee of the Board of Directors of JSCo Russian Railways. On the position of JSC Russian Railways (its representatives) on the issue Participation of JSCoPGK in the nonprofit partnership Council of the Participants in the Services Market of Rolling Stock Operators on the agenda of the meeting of the Board of Directors of JSCo PGK. On approving the loan agreement between JSCo Russian Railways and Oy Karelian Trains Ltd as a transaction in which interest is taken. On transferring the title of the non-state preschool educational institution Kindergarten No.212 of JSCo Russian Railways to the Ziminsky Municipal Formation of Irkutsk Region. On transferring the title of the non-state preschool educational institution Kindergarten No. 160 of JSCo Russian Railways to the municipal formation Bolotninsky District of Novosibirsk Region.
1.
On the position of JSCo Russian Railways (its representatives) at the unscheduled general meetings of shareholders of JSCo Zheldorremmash and JSCo Yakutia Railways on the agenda issue "Participation of the Company in the nonprofit association Russia-wide Industry Association of Railway Transport Employers".
025
AnnUAL RePORt 2009
2. 3. 4.
On liquidating a representative office of JSCo Russian Railways in the Czech Republic. On awarding the President of JSC Russian Railways and assessing his performance for Q3 2009. On liquidating the non-state general educational institution Secondary General Education School No. 42 of JSCo Russian Railways.
1. 2. 3.
4. 5.
On establishing a subsidiary of JSCo Russian Railways for transporting passengers over long distances. On establishing the autonomous nonprofit organization Corporate University of JSCo Russian Railways. On approving the list of subsidiaries and affiliates in relation to which the Board of Directors of JSCo Russian Railways adopts decisions in accordance with Article 71.23 of the Charter of JSCo Russian Railways. On approving a transaction in whose performance interest is taken by a member of the Management Board of JSCo Russian Railways. On relieving the director of the JSCo Russian Railways branch of duties in the Great Socialist People's Libyan Arab Jamahiriya.
No. 24 dated 7 December 2009
1.
2.
3.
On the position of the JSCo Russian Railways representatives on the agenda item Approval of the Agenda for the General Shareholders' Meeting of the meetings of BoD of subsidiaries and affiliates included in the list which is annually approved by JSCo Russian Railways BoD. On the position of JSCo Russian Railways (its representatives) on the issue "Participation of JSCo RZDstroy in the nonprofit partnership Interregional Association of Architectural Building and Design Organizations" on the agenda of the meeting of the Board of Directors of JSCoRZDstroy. On liquidating the non-state specialized (correctional) educational institution for retarded pupils Specialized (Correctional) General Educational Boarding School No. 31 of JSCo Russian Railways.
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 10.1
10.2
On the drafts of the investment program and financial plan of JSCo Russian Railways for 2010 and the planned period of 2011 and 2012. On determining the placement price of the additional shares of JSCo Russian Railways. On approving the Concept and plan for the sale of shares of the subsidiaries of JSCo Russian Railways in 2010 2012. On approving the lease agreement between JSCo Russian Railways, BP Ltd. (VR Ltd.) and the company Oy Karelian Trains Ltd. as a transaction in the performance of which interest is taken. On establishing a subsidiary of JSCo Russian Railways for providing sanitary and resort services. On railway fares for students of higher and secondary educational institutions in 2010. On establishing the joint stock company Kuban Suburban Express. On establishing the joint stock company Bashkortostan Suburban Passenger Company. On establishing the joint stock company Samara Suburban Passenger Company. Miscellaneous. On approving the agreement for the maintenance of accounting and tax statements between JSCo Russian Railways and JSCo FPK as a transaction in the performance of which interest is taken. On approving the Remuneration Policy for the members of committees of the Board of Directors of JSCo Russian Railways.
026
1. On transferring the title of the non-state preschool educational institution Kindergarten No. 11 of JSCo Russian Railways to the municipal formation Kirov Municipal District of Leningrad Region. On transferring the title of the non-state preschool educational institutions Kindergartens Nos. 33-38 of JSCo Russian Railways to the city of Moscow. On transferring the title of the non-state preschool educational institution Kindergarten No. 113 of JSCo Russian Railways to the Krasnoarmeysky Municipal District of Saratov Region. On liquidating the Ishimsk mechanical plant a branch of JSCo Russian Railways. On introducing amendments to clause 9.16 of Minutes No. 10 of the meeting of the Board of Directors of JSCo Russian Railways dated 1 August 2008 on the agenda item Establishment of a Joint Enterprise for Repairing Freight Cars in Relation to the Car Repair Depot of Gryaz Southeastern Railway. On transferring the title of the non-state preschool educational institution Kindergarten No. 257 of JSCo Russian Railways to the Vaninsky Municipal District of Khabarovsk Territory. On transferring the title of the non-state preschool educational institution Kindergarten No.107 of JSCo Russian Railways to the city of Michurin of Tambov Region.
2. 3. 4. 5.
6. 7.
Committees of the Board of Directors of JSCo Russian Railways
The Strategic Planning Committee of the Board of Directors of JSCo Russian Railways and the Audit, Risk and Remuneration Committee of the Board of Directors of JSCo Russian Railways were formed in line with the decisions of the Board of Directors of JSCo Russian Railways.
Members of the Strategic Planning Committee of the Board of Directors of JSCo Russian Railways
A. V. Sharonov D.V. Golopolosov V.V. Grischenko V.M. Yevdokimenko D.G. Komissarov M.Yu. Kurbatov B. M. Lapidus V.V. Mikhailov A.N.Nedosekov I.A. Nikolaev A.N. Ryazanov A.A. Khmelnitsky
Chairman of the Committee, member of the Board of Directors of JSCo Russian Railways Departmental head of the Federal Antimonopoly Service of Russia Head of the Administration of the Federal Agency for the Management of Federal Property Deputy Head of the Federal Tariff Service of Russia member of the Board of Directors of JSCo Russian Railways Departmental Director of the Ministry for Economic Development of the Russian Federation Senior Vice President of JSCo Russian Railways Senior Vice President of JSCo Russian Railways Deputy Minister of Transport of the Russian Federation Departmental Director of the limited liability company FBK member of the Board of Directors of JSCo Russian Railways General Director of JSCo Russian Railways
027
The areas of competence of the Strategic Planning Committee of JSCo Russian Railways include the drafting of recommendations and proposals for the Board of Directors of JSCo Russian Railways on the following strategic issues: determining priority business activities for the Company; approving the Companys plans and principal business programs, inter alia, annual budgets and the Company's investment program; establishing subsidiaries and affiliates, working out the most efficient business procedures, promoting the best practices and improving management processes; ensuring the Company's productive relations with the constituent entities of the Russian Federation and local authorities, etc. In 2009, the Committee held 7 meetings, one of them jointly with the Audit, Risk and Remuneration Committee of the Board of Directors of JSCo Russian Railways, and considered 10 issues. Twenty-five issues were considered at the Committee meetings.
Members of the Audit, Risk and Remuneration Committee of the Board of Directors of JSCo Russian Railways
AnnUAL RePORt 2009
D.G. Komissarov G.B. Bulatov A. V. Gusakov N.I. Kosov G. V. Kraft I.A. Kostenets K.V. Lipa V.M. Rutgaizer A.V. Tonkikh E.A. Trubnikova A.V. Tseluev
Chairman of the Committee, member of the Board of Directors of JSCo Russian Railways Deputy Director, Department of the Ministry for Economic Development of the Russian Federation member of the Board of Directors of JSCo Russian Railways member of the Board of Directors of JSCo Russian Railways Chief Accountant of JSCo Russian Railways Head of the HR Department of JSCo Russian Railways Managing Director of JSCo Unicredit Aton President of the self-governing organization Association of the Russian Masters of Evaluation Deputy Department Director of the Ministry of Transport of the Russian Federation Managing Partner, ACG Finexpertiza Head of the Administration of the Federal Agency for the Management of Federal Property
The areas of competence of the Audit, Risk and Remuneration Committee of the Board of Directors of JSCo Russian Railways include the following: reviewing the execution of the financial and business plan of the Company and its subsidiaries and affiliates entered in a special list, ensuring efficiency of internal controls, cooperating with the Audit Commission and the Company's auditor, and working out recommendations for the Company's Board of Directors concerning remuneration policies. In 2009, the Audit, Risk and Remuneration Committee held 15 meetings, one of them jointly with the Strategic Planning Committee of the Board of Directors of JSCo Russian Railways, and considered 71 issues.
028
President of JsCo "russian raiLways" vLadimir ivanoviCh yakunin
Born on 30 June 1948 in Zakharovo, Gus Khrustalny District of Vladimir Region. In 1972, graduated from the Leningrad Institute of Mechanics. Has a doctors degree in political science. He started his professional career as a junior researcher at the State Institute of Applied Chemistry. After completing military service in the Soviet Army, worked as an engineer and then senior engineer of the Administrative Board of the State Committee on Foreign Economic Relations of the USSR Council of Ministers, headed a department at the Ioffe Physical and Technical Institute of the USSR Academy of Sciences. From 1985, was engaged in diplomatic work (Second and then First Secretary of the Permanent Mission of the USSR at the United Nations). Afterwards, Chairman of the Board of Directors of the closed joint stock company International Business Cooperation Center, and Head of the North-West District Inspectorate of the Central Control Department of the President of the Russian Federation. From October 2000, Deputy Minister of Transport of the Russian Federation. From February 2002, First Deputy Minister of Railways of the Russian Federation. From October 2003, First Vice President of JSCo Russian Railways.
By Instruction No. 786-r of the Government of the Russian Federation of 14 June 2005, he was appointed President of JSCo Russian Railways. Vladimir Yakunin is Chairman of the Board of Trustees of the National Glory Center and the Foundation of Andrei the First, President of the World Social Forum Dialogue of Civilizations, and Chairman of the Board of Trustees of the Spread-Your-Wings Charity Fund for Social Assistance to Children. From January 2006, research supervisor and Chairman of the Board of Trustees of the Center for Problem Analysis and State Management Projection under the United Nations in relation to the Russian Academy of Sciences. V. Yakunin was awarded the medal of Honor, the medal of Honored Rail Worker of JSCo Russian Railways and other honorary medals for his enormous contribution in reforming railway transport, working out a strategy for developing Russian railroads and implementing a constructive social policy, and for effective cooperation with government bodies and constituent entities of the Russian Federation, as well as with foreign railway administrations and international organizations. By Instruction No. 843-r of the Government of the Russian Federation of 12 June 2008, he was appointed President of JSCo Russian Railways.
029
Chairman of the Management Board of JSCo Russian Railways: V.I. Yakunin President of JSCo Russian Railways
AnnUAL RePORt 2009
manaGement Board
As of 31 December 2009, the Management Board of JSCo Russian Railways had 25 members, namely, V. I. Yakunin V. N. Morozov V. A. Gapanovich B. M. Lapidus V.V. Mikhailov G. V. Kraft M. P. Akulov O. Y Atkov . A. S. Bobreshov V. B. Vorobyov A. V. Vorotilkin A.A. Gorgiladze S.N. Yepifantsev G. V. Kornilov V.G. Lemeshko V.I. Reshetnikov A. G. Tishanin O. V. Toni D.S. Shakhanov V.I. Bynkov O. E. Gnedkova A. G. Ivashkin S. V. Mikhailov V. I. Starostenko President of JSCo Russian Railways First Vice President of JSCo Russian Railways Senior Vice President of JSCo Russian Railways Senior Vice President of JSCo Russian Railways Senior Vice President of JSCo Russian Railways Chief Accountant of JSCo Russian Railways Vice President of JSCo Russian Railways Vice President of JSCo Russian Railways Vice President of JSCo Russian Railways Vice President of JSCo Russian Railways Vice President of JSCo Russian Railways Vice President of JSCo Russian Railways Vice President of JSCo Russian Railways Vice President of JSCo Russian Railways Vice President of JSCo Russian Railways Vice President of JSCo Russian Railways Vice President of JSCo Russian Railways Vice President of JSCo Russian Railways Vice President of JSCo Russian Railways Head of the Legal Department of JSC Russian Railways Head of the Corporate Finance Department of JSCoRussian Railways Head of Administration of JSCo Russian Railways Head of the Corporate Communications Department of JSCo Russian Railways Head of the Moscow Railway a branch of JSCoRussian Railways (since 2 November 2009, advisor to the President of JSCo Russian Railways) Head of the West-Siberian Railway a branch of JSCoRussian Railways
A. V. Tselko
030
BRIeF CVS OF MeMBeRS OF tHe MAnAGeMent BOARD OF JSCO RUSSIAn RAILwAYS
Brief CVs of Members of the Management Board of JSCo Russian Railways vLadimir ivanoviCh yakunin President of JSCo Russian Railways
vaLentin aLexandroviCh GaPanoviCh Senior Vice President of JSCo Russian Railways
Born in 1948. In 1972, V. Yakunin graduated from the Leningrad Institute of Mechanics, Doctor of Political Sciences. From October 2000, Deputy Minister of Transport of the Russian Federation; from February 2002, First Deputy Minister of Railways of the Russian Federation; from October 2003, First Vice President of JSCo Russian Railways, and since June 2005, President of JSCo Russian Railways. Vladimir Yakunin is Chairman of the Board of Trustees of the National Glory Center and the Foundation Boris moiseyeviCh LaPidus of Andrei the First, President of the Senior Vice President World Social Forum Dialogue of of JSCo Russian Railways Civilizations, and Chairman of the Born in 1947. In 1973 and 1984, B. Lapidus Board of Trustees of the Spread graduated from the All-Union Your Wings Charity Fund for Social Extramural Institute of Railway Assistance to Children. Engineers, majoring in Railway vadim nikoLayeviCh moroZov Electrification and in Economics and First Vice President Organization of Railway Transport. of JSCo Russian Railways Doctor of Economics, professor. Born in 1954. In 1977, V. Morozov graduated Distinguished Economist of the from the Leningrad Institute of Russian Federation. He has been Railway Engineers, majoring in working in the railway sector since Railway Operations, PhD in Technical 1967. From March 1997, Head of Sciences. He has been working in the Economic Department of the the railway sector since 1971. From Russian Ministry of Railways; from June 2000, First Deputy Head of November 2003, Vice President of the Moscow Railway; from February JSCo Russian Railways, and since 2002, First Deputy Minister of August 2005, Senior Vice President Railways of the Russian Federation; of JSCo Russian Railways. from October 2003, Minister of Railways of the Russian Federation; from July 2004, Executive Director of the non-state pension fund Blagosostoyaniye (Welfare), and since August 2005, First Vice President of JSCo Russian Railways.
Born in 1955. In 1992, V. Gapanovich graduated from the Novosibirsk Institute of Railway Engineers, majoring in Rail Transport Management; transport management engineer. Distinguished Transport Worker of the Russian Federation. He has been working in the railway sector since 1974. From January 1998, Deputy Head of the West Siberian Railway; from November 2000, Chief Engineer of October Railways; from November 2003, Vice President of JSCo Russian Railways, and since June 2008, Senior Vice President of JSCo Russian Railways.
031
AnnUAL RePORt 2009
vadim vaLeryeviCh mikhaiLov Senior Vice President of JSCo Russian Railways
Born in 1969. In 1992, graduated from the State Financial Academy, majoring in Finance and Credit; economist. From May 2001, Director of the Bank Audit Department of Arthur Andersen; from April 2003, Director oLeG yurieviCh atkov Vice President of JSCo Russian Railways and General Director of Ernst & Born in 1949. In 1973, O. Atkov graduated from Young Business Consulting. Since the Moscow Sechenov Medical September 2009, Senior Vice Institute, majoring in Medical Care, President of JSCo Russian Railways. Doctor of Medicine, professor, GaLina vasiLyevna kraft Hero of the Soviet Union. Honored Chief Accountant of JSCo Russian Railways Scientist of the Russian Federation. Born in 1950. In 1973 and 1983, G. Kraft graduated From May 2002, Head of the Health from the Leningrad Institute of Department of the Ministry of Railway Engineers, majoring in Railways of the Russian Federation; Railway Automation, Remote Control from October 2003, head of the and Telecommunications and Medicare Department Economics, and in Economics and of JSCo Russian Railways, and since Organization of Rail Transport. PhD August 2005, Vice President in Economics. She has been working of JSCo Russian Railways. in the railway sector since 1973. From November 2003, Vice President aLexander serGeyeviCh BoBreshov Vice President of JSCo Russian Railways of JSCo Russian Railways Head Born in 1965. In 1988, A. Bobreshov graduated of the Investment Department of from the Leningrad Shipbuilding JSCo Russian Railways; from August Institute, majoring in Instrument2005, Vice President of JSCo Russian making; mechanical engineer. From Railways, and since December 2005, April 2000, General Director of the Chief Accountant of JSCo Russian limited liability company Expert Plus; Railways. from February 2004, Deputy Head, mikhaiL PavLoviCh akuLov Head of the Security Department Vice President of JSCo Russian Railways of JSCo Russian Railways, and since General Director of the Federal Passenger August 2005, Vice President of Management Office JSCoRussian Railways. Born in 1960. In 1982, M. Akulov graduated from the Moscow Institute of Railway Engineers, majoring in Railway Electrification; railway engineer electrical mechanic. He has been working in the railway sector since 1982. From December 2000, Head of the South-Eastern Railway; from May 2002, Deputy Minister of Railways of the Russian Federation; from December 2003, First Deputy Minister of Railways of the Russian Federation; from March 2004, Head of the Federal Railway Agency
of the Ministry of Transport of the Russian Federation; from December 2005, Vice President of JSCo Russian Railways, and since July 2009, Vice President of JSCo Russian Railways General Director of the Federal Passenger Management Office.
032
vLadimir BorisoviCh voroByov Vice President of JSCo Russian Railways
serGei nikoLayeviCh ePifantsev Secretary of State Vice President of JSCo Russian Railways Born in 1949. In 1978, V. Vorobyov graduated from
the Moscow Institute of Railway Engineers, majoring in Rail Track Engineering and Construction. PhD in Technical Sciences. Distinguished Transport Worker of the Russian Federation. He has been working in the railway sector since 1969. From June 1998, Deputy Head of the Moscow Railway; from July 2002, Head of the North Caucasus Railway, and since December 2006, Vice President of JSCo Russian Railways.
aLexey vaLerieviCh vorotiLkin Vice President of JSCo Russian Railways
Born in 1961. In 1988, A. Vorotilkin graduated from the Irkutsk Institute of Railway Engineers, majoring in Railway Electrification; PhD in Technical Sciences. He has been working in the railway sector since 1978. From GeorGy viktoroviCh korniLov Vice President of JSCo Russian Railways July 2001, Deputy Head of the West Born in 1953. In 1976, graduated from the Odessa Siberian Railway; from September Navy Engineering Institute, majoring 2005, Head of the East Siberian in Ship Machinery and Mechanisms; Railway, and since 2008, Vice mechanical engineer. From President of JSCo Russian Railways. September 1980, held operative avtandiL aydaroviCh GorGiLadZe and managing positions in the Vice President of JSC Russian Railways KGB of the USSR and in the Federal Born in 1952. In 1975, graduated from the Moscow Counterintelligence Service and the State Institute of International Affairs, Federal Security Service of Russia, majoring in International Affairs; and since 2004, Vice President international affairs specialist. From of JSCo Russian Railways. October 1998 to November 2000, vyaChesLav GriGoryeviCh Lemeshko Managing Director of the joint Vice President of JSCo Russian Railways stock trust company ADZHARGAZ, Born in 1946. In 1970, V. Lemeshko graduated from and from January 2001 to August the Moscow Institute of Railway 2005, advisor to the President of the Engineers, majoring in Railway joint stock company BIOPHARMA. Operations. Distinguished Transport From February 2006, head of the Worker of the Russian Federation. Management Office for Customs He has been working in the railway Broker Operations of JSCo Russian sector since 1970. From February Railways, and since May 2009, Vice 1997, First Deputy Head of the President of JSCo Russian Railways. Moscow Railway; from August 2003, head of the Kuybyshev Railway, and since July 2007, Vice President of JSCo Russian Railways.
Born in 1953. In 1975, graduated from the Ufimsky Aviation Institute, majoring in Electrical Machinery and Equipment; Doctor of Sociology, PhD in Psychological Sciences. From October 2000, deputy to the plenipotentiary representative of the President of the Russian Federation in the Southern Federal District; from May 2004, Chief Federal Inspector for Rostov Region of the Staff of the Plenipotentiary Representative of the President of the Russian Federation in the Southern Federal District; from December 2008, advisor to the President of JSCo Russian Railways, and since April 2009, Secretary of State - Vice President of JSCo Russian Railways.
033
Born in 1952. In 1975, V. Reshetnikov graduated Born in 1964. In 1986, graduated from the from the Leningrad Electro-Technical Voronezh Engineering and Building Institute, majoring in Automated Institute, majoring in Industrial and Control Systems; engineer and Civil Construction, and in 2003, systems technician. From July from the Northwestern Academy 2000, Deputy Chairman of the of State Service, majoring in State Management Board of Baltonexim and Municipal Management; PhD Bank; from February 2002, Head in Economics. From March 2004, of the Main Administration of the First Deputy Head and then Head of Department for Economic Protection the Capital Construction Department of the Ministry of Railways of the of JSCo Russian Railways, and Russian Federation; from October since April 2006, Vice President of 2003, Head of the Security JSCoRussian Railways. Department of JSCo Russian dmitry serGeyeviCh shakhanov Railways, from August 2004, Vice President of JSCo Russian Railways advisor to the General Director of Born in 1961. In 1988, D. Shakhanov graduated JSCo Severstaltrans; from September from the Academy of the Ministry of 2005, advisor to the President of Internal Affairs of the USSR, majoring JSCo Russian Railways, and since in Jurisprudence; attorney. From March 2007, Vice President of November 1999, Deputy General JSCo Russian Railways. Director of JSCo Lenenergo; from aLexander GeorGiyeviCh tishanin October 2005, Deputy General Vice President of JSCo Russian Railways Director of JSCo Territorial Generating Born in 1966. In 1993, A. Tishanin graduated from Company No. 1; from October 2006, the Urals Electromechanical Institute Deputy Director and then Director of Railway Engineers, majoring of Roszheldorsnab, and since in Rail Transport Management; April 2009, Vice President of railway engineer in rail transport JSCo Russian Railways. management; in 1999, graduated from the Urals State University of Railway Engineering, majoring in Enterprise Economics and Management (Railway Transport); manager and economist. He has been working in the railway sector since 1984. From April 2004, Head of the East Siberian Railway; from September 2005, Governor of Irkutsk Region, and since September 2008, Vice President of JSCo Russian Railways.
AnnUAL RePORt 2009
vaLery iLyiCh reshetnikov Vice President of JSCo Russian Railways
oLeG viLyamsoviCh toni Vice President of JSCo Russian Railways
034
vadim ivanoviCh Bynkov Head of the Legal Department of JSC Russian Railways
aLexei GeorGiyeviCh ivashkin Head of Administration of JSCo Russian Railways
Born in 1962. In 1985, V. Bynkov graduated from Born in 1956. In 1978, graduated from the Tashkent the Kalinin State University, majoring Polytechnic Institute, majoring in Jurisprudence; attorney. From June in Refrigerator and Compressor 2002, head of the legal department Machines and Installations; PhD in of the ALROSA Investment Group; Psychology. From May 1995, Deputy from April 2004, attorney at his Head of the Administration of the Attorney Office of the Bar of Tver Chilanzarsky District of Tashkent; Region; from October 2005, from November 2001, Deputy and Head of the Legal Department then First Deputy Head of the city of JSCo Russian Railways; from of Sochi, and since July 2005, December 2007, Secretary of State, Head of the Administration of Head of the Legal Department of JSCo Russian Railways. JSCo Russian Railways, and since serGey vLadimiroviCh mikhaiLov April 2009, Head of the Legal Head of the Corporate Communications Department of JSC Russian Railways.
Department of JSCo Russian Railways oLGa eduardovna Gnedkova Head of the Corporate Finance Department of JSCo Russian Railways
Born in 1960. In 1981, O. Gnedkova graduated from the Novosibirsk Institute of Railway Engineers, majoring in Accounting; PhD in Economics. She has been working in the railway sector since 1981. From May 2002, Deputy Head of Moscow Railways; head of the financial service; from September 2004, Deputy Head of Moscow Railways concerning the economy and finance; from November 2004, Head of the Finance Department of JSCo Russian Railways, and since September 2005, Head of the Corporate Finance Department of JSCo Russian Railways.
Born in 1971. In 1993, graduated from the Moscow State Institute of International Affairs, majoring in International Journalism; international journalist with knowledge of a foreign language. Member of the Journalists Union of the Russian Federation. From June 2004, advisor to the President of JSCo Russian Railways; from May 2005, Head of the Public Relations Department of JSCo Russian Railways, and since July 2006, Head of the Corporate Communications Department of JSC Russian Railways.
035
AnnUAL RePORt 2009
vLadimir ivanoviCh starostenko Advisor to the President of JSCo Russian Railways
Born in 1948. In 1970, V. Starostenko graduated from the Novosibirsk Institute of Railway Engineers, majoring in Railway Operations; railway operations engineer. Distinguished Transport Worker of the Russian Federation. He has been working in the railway sector since 1966. From February 1997, Head of the West-Siberian Railway, from May 1999, Minister of Railways of the Russian Federation; from September 1999, Head of the West-Siberian Railway; from February 2002, Head of the Moscow Railway, and since November 2009, advisor to the President of JSCo Russian Railways.
aLexander vitaLyeviCh tseLko Head of the West Siberian Railway
Born in 1956. In 1978, A. Tselko graduated from the Novosibirsk Institute of Railway Engineers, majoring in Railway Operations; railway operations engineer. Distinguished Transport Worker of the Russian Federation. He has been working in the railway sector since 1978. From November 1999, Head of the South Urals Railway, from May 2000, Deputy, First Deputy Minister of Railways of the Russian Federation, and since February 2002, Head of the West Siberian Railway.
036
The Audit Commission oversees the Companys financial and business activities and acts with regard to the legislation of the Russian Federation and the Charter of JSCo Russian Railways, approved by Decree No. 585 of the Government of the Russian Federation of 18 September 2003, and the Statute on the Board of Directors of JSCo Russian Railways, approved by Instructive Regulation No. 265-r of the Government of the Russian Federation of 25 February 2004. The members of the Audit Commission of JSCo Russian Railways, elected in compliance with Instruction No. 951-r of the Government of the Russian Federation of 30 June 2008, were approved in the number of 7 persons (the titles are those at the time of election).
Full name Title
AUDIt COMMISSIOn
audit Commission
T.V. Antipova M.P. Vinter I.V. Zelentsova A. V. Kazutin D.B. Karyakin M.Yu. Kurbatov A.S. Tsydenov
Advisor to the Administration of the Federal Agency for Federal Property Management Head of the Administration of the Federal Railway Transport Agency Deputy Head of the Administration of the Federal Railway Transport Agency Deputy Departmental Director of the Ministry of Transport of the Russian Federation Deputy Departmental Director of the Ministry for Economic Development of the Russian Federation Departmental Director of the Ministry for Economic Development of the Russian Federation Departmental Head of the Government of the Russian Federation
In F1 2009, the Audit Commission of JSCoRussian Railways held two meetings; among other things, an audit report on the financial and business activities of JSCo Russian Railways for 2008 has been prepared. The Audit Commission of JSCo Russian Railways held one meeting in F2 2009. The members of the Audit Commission of JSCo Russian Railways, elected as such in compliance with Instruction No. 951-r of the Government of the Russian Federation of 30 June 2008, were not paid remuneration and compensation for the expenses which they incurred as members of the Companys Audit Commission.
JSCo RuSSian RailwayS
037
annual RepoRt 2009
the Company'S StRategy and miSSion
038
The Company's sTraTegy and mission
039
annual RepoRt 2009
Russian Railways, a major national transportation company, aims to create infrastructure conditions that will promote innovation-based economic development and the integrity and global competitiveness of Russias transportation system as well as qualitatively satisfy the demand of the state and the public for transportation services. The operating philosophy of Russian Railways is to ensure that its corporate goals promote long-term national interests. Russian Railways pursues a policy of common destiny a combination of state, consumer and company interests. High development rates, shareholder profit, the profitability of the companys own activity, employees social and
economic security, qualitative satisfaction of customer needs and mutually beneficial cooperation with partners and suppliers are all equally important to Russian Railways. Russian Railways, as a dynamic vertically integrated national transportation company, sees its mission as effectively meeting market demand for transportation services, increasing its global competitiveness, achieving financial stability and ensuring social responsibility.
040
The main areas for the development of rail transport, including the systemically important Russian Railways, based on an ideology of innovation breakthroughs, are set forth in the Strategy for the Development of Rail Transport in the Russian Federation to 2030, approved in June 2008 by the Government of the Russian Federation. By implementing the Strategy, it will be possible to develop a qualitatively new, intelligent transport, realize transit potential and create the necessary conditions for the innovation-based development of key areas of the national economy. The Strategy calls for the construction of new rail lines to make the country more competitive and strengthen the integrity of its transportation system, to equalize the accessibility of transport for those in distant regions of the country and to create conditions for new centers of economic growth. Especially largescale construction of new railways is planned in Siberia and the Russian Far East. The targeted version of the Strategy envisages the construction of 20,700 kilometers of new rail and the renovation of over 23,000 locomotives, some 1 million freight cars and over 23,000 passenger cars and 24,500 motor railcars by 2030. The Strategy will thus result in the fundamental modernization of infrastructure, the qualitative renovation of moving stock, including full replacement of stock that has exceeded its useful life, large-scale expansion of the rail network and enhanced efficiency and safety in the industry. Infrastructure conditions will be created to ensure the countrys territorial integrity and defense capability as well as intensified growth of the Russian economy and the free movement of citizens.
Railway development stRategy
The density of the rail network will increase by 24%, completely eliminating transport capacity limitations. Four constituent entities of the Russian Federation (the Altai and Tyva republics, Magadan Region and Nenets Autonomous District) will have access to rail transport for the first time. The Strategy will also allow the Russian state, economy and society to obtain the following results: railways will become a key factor in accelerating Russian economic growth and have a multiplying effect on the growth of GDP; technological and economic efficiency of rail transport will lower the transportation costs of economic entities and so free up resources for the development of other areas of the domestic economy; a modernized and expanded rail network will open up new possibilities for the creation of regional industry-and-science clusters and smooth out uneven development between regions; the Russian rail network will become a central element of the Eurasian transportation system, promoting broad commercial relations between global economic centers; efficient and stable rail transport will enhance the overall competitiveness of the Russian economy and the countrys appeal in terms of business development and investments; rail transport will become a leader in introducing innovations and technologies and promote the development of transport machine building and other related areas of the economy; railways will become an attractive area for private investments, including investments in the construction of rail lines, the development of transportation, shipping and logistics, the operation of rolling stock and the development of services.
Prospective topology of rail network development in the Russian Federation through 2030
Other symbols Centers of population
Uelen
Construction of new rail lines to 2030
Construction of new rail lines after 2030
246
Provedeniya
311
Anguzma
STRATEGIC
STRATEGIC
148
KHABAROVSK
FREIGHT-GENERATING
Barnaul
FREIGHT-GENERATING
DISTANCE BETWEEN STATIONS INDICATED IN KILOMETERS
CENTERS OF FEDERAL DISTRICTS
Ioniveyem
90
Egvenkinot
498
HIGH-SPEED MAINLINE RAILWAYS OF OTHER ENTITIES RAILWAY FERRY CROSSING NORTHERN SEA ROUTE
Chersky Dachny
PILOT RAPID SERVICE

Novokuznetsk
CENTERS OF CONSTITUENT ENTITIES OF THE RUSSIAN FEDERATION OTHER CENTERS OF POPULATION

Pevek
RAILWAYS OF RUSSIAN RAILWAYS
TECHNOLOGICAL
305
Anadyr
OF SOCIAL SIGNIFICANCE
258
Anyuy Markovo
370
385
428
Pechenga Ust-Oloy Chokurdakh
517
Murmashi II
Lavna
Belaya River estuary
0 57
Murmansk
Ossora Ugolnaya
Ledmozero Nizhneyansk
50
Zyryanka
0 45
56
Indiga Tambey Khatanga Kharasavey
Kochkoma
Moma
249
Pskov
Petyayarvi
130
ST. PETERSBURG Naryan-Mar Ust-Kara Bovanenkovo
Petrozavodsk
Arkhangelsk
221
Buslovskaya Kamenogorsk Tiksi
Belomorsk
Verkhnekalymsk
Omsukchan
Palana
Ust-Kamchatsk
785
Klyuchi Ust-Nera Susman Magadan
Veliky Novgorod
Obozerskoye
612
Vendinga
210
331
19 0
Krasnoye Labytnangi Tazovsky Igarka
Tver
Yaroslavl
Kotlas
285
Smolensk
463
Pechora Chinyavoryk Norilsk Sosnogorsk
Vorkuta Chum Payuta
208
Dudinka Yamburg
563
234
Kaluga
113
Suzemka Nyaksimvol Priobye Polunoshnaya Khanty-Mansiysk Surgut -Akha Ult-Yagun Nizhnevartovsk Tura Korotchayevo
Orel
Tula
Ivanovo Vladimir
466
Lesnoy
Yakutsk 10
50
Bryansk Krutaborka Nadym
406
Syktyvkar Saranpaul Pangody
Troitsko-Pechorsk
40 6
122 4 Russkoye 36
Kureyka
5
Kerdem Mirny
19 58 Pravaya Lena
373
Kipenday
Kursk Prokhorovka Belgorod Solikamsk Zayachya Gorka
Lipetsk
Ryazan NIZHNY NOVGOROD
Kirov
Cheboksary
Kudymkar
Voronezh Yayva Nizhny Tagil YEKATERINBURG Salym
Saransk
Kazan
Grigoryevsk
113
Chernyanka
Tambov
Yoshkar-Ola
269
856
118
Zapolyarnaya
MOSCOW
659
25
Talnakh Salekhard
Karpogory
600
215
Vologda
Petropavlovsk-Kamchatsky Mengeno-Aldan
Kostroma
Minkun
87
Dzhebariki-Khaya Nizhny Bestyakh
49
53
Olekminsk Lensk Tummot Elvinskoye Mestorozhdeniye Pogibi140 Nogliki Nysh
450
82
Syzran
354
Chertkovo
368
20 0
538
Tyumen Tobolsk
Zhuravka
Penza
Ulyanovsk
Izhevsk Perm
Bataysk Krasnodar Muslyumovo
Ufa Techenskoye Mestorozhdeniye
156
Volgograd
Chadobets
373
Yelchimo
Alasatskoye Mesto rozhdeniye 40
Krivenkovskaya Kurgan Konovalovo Nazyvayevskoye Bely Yar
Adler Tatarskoye Omsk Yugra
Cherkessk Stavropol Tomsk
Elista
295
365 19 44
Lesosibirsk Krasnoyarsk Kemerovo
Ust-Kut Bratsk
Lena
Khrebetovo
Dzhalinda Lugokan
Tygda
Kislovodsk
Nalchik NOVOSIBIRSK Barnaul
Nazran
536
Tyrnyauz
95
Aksarayskaya
Shimanovskoye Tayshet Blagoveschensk
148
KHABAROVSK Sukpay Birobidzhan Izvestkovaya Kruglikovo
315
143
Maykop
Kochevaya
Orenburg
Yarky
Novy Uoyan
0 Chineyskoye Mestorozhdeniye Taksimo
105
Kavkazskaya
260
131
Kommunisticheskiy
Chelyabinsk
128
290
Kolpashevo
488
110
Novaya Chara
22
Koda
Kirensk
Tynda
Boshnyakovo Vysokogornaya Uglegorsk Verkhezeysk Komsomolsk-on-Amur Vanino 143 Ilinsk 25 Fevralsk Selikhin Zeya 14 1 Yuzhno-Sakhalinsk . Gar Khani Berkakut Ulak
Chagoyan
85 70
42
Ozernoye
Novorossiysk
20
Chadobetsky Mining Plant Nepa
426
ROSTOV-ON-DON
Saratov
313
298
Likhaya
Samara
00 11
Neryungri
Smirnykh
Kholmsk
30
Soldatskasya
290
Beryozovskoye Mestorozhdeniye Leninsk
Samarga
Astrakhan Topki
164
Makhachkala
Zima
Ust-Ordynsky
Aginskoye Ulan-Ude
125
Kuragino
375
Vladikavkaz
Grozny
Abakan
620
Chita
Olya
28 53
460
Biysk Mogzon Gorno-Altaysk Ust-Elegest Priargunsk Borzya Kavalerovo
Suvorovo Rudnaya Pristan
91
Irkutsk Kyzyl
Naryn
116
150
Ussuriysk Vladivostok
115
Novochuguevka
Olga Sergeyevka Nakhodka
annual RepoRt 2009
041
Routes for prospective implementation of rapid and high-speed passenger service through 2030
Main directions of rapid and high-speed passenger service direction St. petersburg moscow moscow nizhny novgorod moscow Smolensk Krasnoye (europe) moscow Kursk prokhorovka Zhuravka Rostov Rostov Krasnodar adler Rostov mineralnye Vody St. petersburg Buslovskaya moscow Smolensk Krasnoye moscow Kursk moscow nizhny novogorod moscow Kaluga Bryansk Suzemka moscow Ryazan michurinsk Saratov 859 488 Vladivostok Khabarovsk 442 ussuriysk Vladivostok 537 Saratov Volgograd 431 127 774 487 Samara Saransk, penza, Saratov 158 ekaterinburg Chelyabinsk 271 449, 388, 439 492 novokuznetsk 230, 528 549 novosibirsk omsk, tomsk, Kemerovo, Barnaul, 627, 305, 301, 1345 Krasnodar mineralnye Vody 390 463 Rostov mineralnye Vody 492 406 Rostov Krasnodar 281 650/659 moscow yaroslavl 282 distance, km
Legend
HIGH-SPEED SERVICE ROUTES VMAX UP TO 300350 KM/H
HIGH-SPEED SERVICE ROUTES VMAX UP TO 250 KM/H
RAPID SERVICE ROUTES VMAX UP TO 160200 KM/H
DEVELOPMENT OF RAPID SERVICE ON THE CENTER-SOUTH ROUTE WITH, VMAX 160200 KM/H USING THE KURSK LINE
CONSTRUCTION OF NEW LINES: PROKHOROVKA ROSSOSH, GARTMASHEVKA CHERTKOVO, CHERTKOVO LIKHAYA BATAISK, AND KRIVENKOVSKAYA ADLER
Buslovskaya
ST. PETERSBURG
Krasnoye
Smolensk
Tver
MOSCOW Yaroslavl
Kaluga
Bryansk
Suzemka
Orel
Tula
Vladimir
Kursk Prokhorovka
Ryazan NIZHNY NOVGOROD
Michurinsk
Saransk
Penza
Rossosh YEKATERINBURG
Syzran
Samara
Rostov Bataysk
Saratov
Krasnodar
Krivenkovskaya
Kavkazskaya
Volgograd
Chelyabinsk
Adler Omsk Yugra
Tomsk Kemerovo NOVOSIBIRSK Barnaul Topki
Mineralnye Vody
KHABAROVSK
Novokuznetsk
Ussuriysk
Vladivostok
042
043
Breakthrough areas of technical development covered in the Strategy include: fundamental modernization and development of rail infrastructure to increase the capacity of rail lines, improve Russias transport connections and enhance the countrys competitiveness and national security. increasing containerization of shipments and implementation of multimodal logistics systems. preparation of rolling stock and infrastructure for heavy traffic (13,8000 kilometers) in the networks principal directions and new requirements to minimize repairs and increase the productivity of rolling stock. construction of high-speed rail lines (1,500 kilometers) and creation of a rapid support network (10,900 kilometers). The development of high-speed and rapid passenger service is one of the Strategys priority tasks and a major breakthrough area for the development of Russias railways. This has to do with the need to raise passenger service to an entirely new qualitative level in order to increase the populations mobility and attract a greater number of passengers. High-speed service will transform the entire national transportation system by offering the public freedom of movement with minimal time requirements. At distances of up to 7001,000 kilometers, high-speed train travel will be comparable in terms of speed to flying, taking into account the time it takes passengers to get to the airport and then, after their flight, from the airport to their destination in addition to check-in and other formalities. High-speed mainlines will link Moscow with St. Petersburg, Nizhny Novgorod, Smolensk and Krasnoye. The choice of options for the construction of the new mainlines MoscowNizhny Novgorod and MoscowSmolenskKrasnoye (Western Border) will depend on the countrys socioeconomic development. The strategic development of rail transport in the Russian Federation to 2030 includes two stages. The first stage the modernization of rail transport (20082015) will ensure the required capacity on the main routes and involve fundamental modernization of the existing infrastructure. Rolling stock will be renovated by 2015, with the exception of stock that has exceeded its useful life. New industry technical requirements will be developed, and design and survey work and the construction of new rail lines will begin. The stage of dynamic expansion of the rail network (20162030) will involve intensive construction of infrastructure for the development of new centers of economic growth in the country. At the same time, domestic rail transport will reach a global level of technological development. Key priorities of the Strategy are the development of rail lines whose capacity has been exhausted and fundamental modernization of infrastructure in line with the best international achievements. To this end, such measures as the following are planned: construction of additional (second, third and fourth) mainlines in very busy directions; construction of sections bypassing a number of major population centers; electrification of a number of sections with a high density of freight traffic; development of stations and junctions; construction and reconstruction of engineering structures; replacement and modernization of infrastructure technology (electric power supply, automatic block signaling, etc.).
annual RepoRt 2009
044
The holding companys Strategy will be the basis for a long-term dialogue with the state and Russian and foreign partners. In 2009 work was continued to formulate and realize strategic programs and development plans for Russian Railways holding company. By a decision of the final meeting of the Russian Railways management board of December 23-24, 2009, the following key goals were set for 2010: 1. Having completed Stage III of the Program for the Structural Reform of Rail Transport, begin to implement the model for the development of Russian Railways holding company and the market of transportation services to 2015. 2. Shift to innovation-based development on a broad scale, ensuring widespread implementation of innovations and systemic breakthroughs in efficiency. 3. Substantially consolidate the holding companys market positions by increasing the quality of services and creating new transportation products. 4. Progressively develop the holding companys human resources by upgrading qualifications and providing material and moral incentives and achieve sustained growth in productivity and quality. 5. By increasing internal efficiency, engaging in dialogue with the state and improving relations with business partners, create sources for the development of Russian Railways holding company that will satisfy the economys and the publics long-range post-crisis demands for transportation services.
045
annual RepoRt 2009
SummaRy of the CompanyS opeRationS and key CoRpoRate eventS
046
Summary of the CompanyS operationS and key Corporate eventS
047
annual RepoRt 2009
The year 2009 was extremely difficult for the countrys economy as a whole as well as for Russian Railways. GDP fell 7.9%, and industrial output dropped 10.8%.The demand for rail services also declined sharply.1 The decline in domestic demand in 2009, against a backdrop of falling prices on world goods markets, national-currency devaluation and a credit deficit, led to a change in the structure of freight transportation. The volume of transportation declined to a greater degree in Russia than it did internationally.
The management of Russian Railways reacted promptly to the economic crisis and took effective anti-crisis measures, thus maintaining stable transportation services for the countrys economy and population.
Data of the Ministry of Economic Development of the Russian Federation (official site), February 3, 2010.
048
Freight handling in 2009 fell 15% year-onyear to 1,108.2 million tons (a drop of 19% was originally forecast); freight turnover (including empty private and leased cars) fell 6.3% to 2,271.4 billion ton-km; freight turnover, excluding empty cars owned by third parties and empty leased cars, fell 11.8% to 1,865.3 billion ton-km; freight turnover of empty cars owned by third parties and empty leased cars grew 32.1% to 406 billion ton-km; and passenger turnover grew 12.7% to 153.6 billion passenger-km. In 2009, 1.1 billion passengers used railway transportation services (1.3 billion in 2008, 12.0% year-on-year). In 2009 Russian Railways had a total passenger turnover of 153.6 billion passenger-km, or 87.3% of the 2008 result (175.9 billion passengerkm in 2008). Long-distance passenger traffic was 115.4 billion passenger-km, or 89.3% of the result for 2008. Suburban passenger traffic was 38.2 billion passenger-km, or 81.7% of the 2008 result. In 2009 the rail networks average freight traffic density was 29.6 million gross ton/km year (adecrease of 3.8 million gross tons). In 2009 the Company improved its qualitative indicators with respect to the utilization of rolling stock. Freight car turnaround was 7.45 days in 2009 (1.9% faster than the 7.59-day turnaround in 2008). Service speed was 41.6 km/hour in 2009 (2.5% better than the 40.6 km/hour service speed in 2008).
Unit
Achievements And key operAting indicAtors
The average weight of a freight train was 3,855 tons (1% higher than the 3,815 tons in 2008), and locomotive efficiency grew by 50,000gross ton/km, or 2.9% year-on-year. The 2009 investment program, amidst a shortage of funds, decreased to 265.7 billion rubles (taking into account all sources of financing). In 2009 the railways were supplied with 355 locomotives (455 in 2008), 643 passenger cars (1,042 in 2008) and 695 motor railcars (809 in 2008). In 2009, 47.7 km of new lines (8.2 km in 2008), 81.6 km of second lines (114.6 km in 2008) and some 161.9 km (169.5 km in 2008) of station tracks were put into service, while 167.2 km of overhead equipment and 1,671.9 km of track structure (2,723.6 km in 2008) were rebuilt. The Companys total expenses for capital repairs of fixed assets were 94.5 billion rubles in 2009 (143 billion rubles in 2008). In 2009, capital repairs were made to engineering structures in the amount of 3.7 billion rubles (7.1 billion in 2008) and to roadbeds in the amount of 2.3 billion rubles (4.2 billion rubles in 2008).
Russian Railways key performance indicators, 20072009

traffic 20072 2008 2009
handling freight turnover, of which excluding empty cars owned by third parties and empty leased cars empty cars owned by third parties and empty leased cars passenger turnover
operating efficiency
1,344.2 2,312.6 2,090.3 222.3 174.1 40.3 1,710 7.7 3,778 11,071 108.9
1,303.7 2,423.8 2,116.2 307.5 175.9 40.6 1,736 7.59 3,815 11,583 108.0
1,108.2 2,271.4 1,865.3 406.0 153.6 41.6 1,786 7.45 3,855 12,533 101.8
mln tons bln ton-km
bln passenger-km km/h th gross ton-km days tons net ton-km %
Service speed locomotive productivity freight car turnover average weight of a freight train Railcar productivity Rate of labor productivity growth
049
Total revenues Revenue from transportation, infrastructure and locomotive hauling services passenger transportation long-distance suburban freight transportation infrastructure services locomotive hauling services Revenue from other types of activities Total expenses expenses in connection with transportation, infrastructure and locomotive hauling services passenger transportation long-distance suburban freight transportation infrastructure services locomotive hauling services expenses in connection with other types of activity Profit from transportation, infrastructure and locomotive hauling services passenger transportation long-distance suburban freight transportation infrastructure services locomotive hauling services profit from other types of activity Result from other income and expenses eBitda** profit (loss) before tax net profit profitability
equity, assets and liabilities
975.6 890.4 129.5 109.4 20.1 754.9 2.8 3.2 85.2 899.0 824.6 180.0 132.2 47.8 639.4 2.3 2.9 74.4 65.8 -50.5 -22.8 -27.7 115.5 0.5 0.3 10.8 52.4 291.7 129.0 84.5 8.7 2,871.4 2,712.2 159.2 2,585.8 79.5 206.1 2,581.5 255.5
1,101.7 1,014.5 150.4 130.7 19.7 847.0 6.5 10.6 87.2 1,035.3 952.1 216.9 162.4 54.5 722.7 4.7 7.8 83.1 62.3 -66.5 -31.7 -34.8 124.3 1.8 2.7 4.1 -11.6 243.2 54.8 13.4 1.2 3,505.2 3,242.0 263.2 2,946.3 185.7 379.2 3,787.0 381.7
1,050.2 956.8 151.0 132.6 18.4 783.0 11.7 11.0 93.4 999.9 913.8 203.3 160.1 43.2 691.1 11.1 8.3 86.1 43.0 -52.3 -27.5 -24.8 91.9 0.6 2.7 7.2 10.1 269.1 60.3 14.4 1.4 3,675.3 3,470.3 205.0 2,971.9 355.1 348.4 3,849.0 265.7
RuB bln
% RuB bln
Balance-sheet currency non-current assets Current assets Capital and reserves long-term liabilities Short-term liabilities value of net assets
investments
investments
Comment on the figures for 2007: in accordance with Order No. 124 of the Ministry of Transport of August 17, 2007 Concerning Approval of the Procedure of Separate Accounting for Income, Expenses and Financial Results by Types of Activity, Tariff Components and LargeScale Operations of Russian Railways, the figures for 2007 were brought into line with the new classification ofCompany income and expenses for purposes ofcomparison.
annual RepoRt 2009
Financial results
20072
2008
2009
Unit
050
In 2009 over 7,000 km of track underwent overview oF key corporAte events capital repairs or reconstruction (nearly 15,400 km In 2009 the Company continued to renovate in2008). and modernize fixed assets in line with the tasks As a result, the condition of mainlines set forth in the Strategy for the Development of Rail improved 3 points year-on-year to a total score of 32 Transport. as of January 1, 2010 (35 as of January 1, 2009). Last year marked the beginning of a new era Total expenses of 363.8 billion rubles for the of high-speed passenger service in Russia renovation of infrastructure and rolling stock in 2009 (inDecember the high-speed electric Sapsan allowed accidents to be reduced by 30.6% (12.8% train began service between Moscow and in 2008). St. Petersburg, cutting travel time between Labor productivity increased 1.8% year-onthe two capitals down to 3 hours and year. 45minutes). A net profit of 14.4 billion rubles was The GT1-001 gas-turbine locomotive was posted. recognized in the Book of Russian Records. In 2009 reform and structural transformation Russian Railways was awarded a certificate proceeded at a rapid pace. Five subsidiaries were for creating the most powerful mainline CNG gas created in the process of the Companys structural turbine locomotive. reform (a total of 49 subsidiaries had been created in On January 23, 2009 a GT1-001 gas turbine the course of structural reform as of December 31, locomotive with a capacity of 8,300 kW was the 2009). first in the world to pull a freight train weighing Thanks to a range of anti-crisis measures, the 15,000 tons. The record was established on Companys operations were profitable for the year as the test track in Scherbinka. The test proved a whole. the locomotives ability to deliver a long, heavy The management of Russian Railways freight train (159 cars). No other locomotive in has been able to maintain a high level of social operation today can handle a train of that weight. responsibility, avoiding both large-scale layoffs and The CNG gas turbine locomotive was significant salary cuts. The Companys main efforts in developed for use on off-grid rail sections. GT1-001 the area of human resources in the crisis year of 2009 consists of two sections, one housing the turbine and were aimed at retaining human resources. Despite power block and the other a 17-ton fuel tank. Onethe sharp drop in income from transportation, human time fueling is sufficient for 750 kilometers. The gas resources have been retained and social stability turbine locomotive has a total (maximum) capacity of preserved. 8,300 kW and weighs a total of 300 tons. The Companys key anti-crisis initiatives in The first gas turbine locomotives are to be 2009 were supported by the Russian Government. put into operation in Siberia, a region rich in natural In particular, important decisions were taken to gas reserves. compensate income lost as a result of the nonindexation of rates for freight service and losses in connection with long-distance passenger service and suburban service for passengers who enjoy benefits. In addition, funds were contributed to Russian Railways charter capital for the creation of transport infrastructure in Sochi, for the construction of a section to bypass the technogenic accident zone in the vicinity of Berezniki and for the acquisition of railcars from Tver Carriage Works. More detailed information may be found in the section State support for Russian Railways in 2009: subsidies, additional charter capital contributions and the impact on the results of operations.
051
2009.
The project for the reconstruction of the American bridges in St. Petersburg an important part of the general reconstruction of the Obvodny Canal embankments came about as a result of the need to improve the transport situation: traffic along the embankments narrows near the bridges, creating traffic jams, and the bridges are too low for large trucks. This project involves general reconstruction of the bridges and related infrastructure. In order to prepare the embankment for widening of the roadway, the bridges are being lengthened, and the old supports are being replaced with stronger ones. The reconstruction of railway infrastructure involves the removal and replacement of communication lines and the construction of new water treatment facilities, electrical signal boxes, transformer substations, etc. The 39-month reconstruction of the American bridges is to cost a total of 4.5 billion rubles. On the order of 1.5 billion rubles were spent on the project in 2008. On March 31, 2009 in Paris, the President of Russian Railways, Vladimir Yakunin, took part in the signing of a strategic partnership agreement between Alstom Transport and ZAOTransmashholding. The agreement was signed by Philippe Mellier, President of Alstom Transport, and Andrei Bokarev, Chairman of the Board of Transmashholding. Under the agreement reached, Alstom Transport will provide technological and methodological support for the modernization of Transmashholdings industrial processes. Alstom and Transmashholding have agreed to form, on a parity basis, a joint company that will develop new models of rolling stock. The new products, designed for the Russian market and other CIS markets, will be produced in Russia with a 7580% level of localization. The first joint project will be the production of an electric locomotive using the base platform principle that is being developed at the Novocherkassk Electric Locomotive Plant. The first locomotive is to be presented in mid 2010. The partners also plan to continue their joint work on the production of double-deck passenger cars.
for the production of 2ES6 mainline electric freight locomotives was opened at the Ural Railway Engineering Plant (Verkhnyaya Pyshma, Sverdlovsk Region). The new locomotive is equipped with a microprocessor control system and frame-mounted traction motors. It will save on power consumption, cut down on unscheduled repairs and increase the distance between repairs. Freight capacity will be 20% higher than that of the electric locomotives used today (VL11), repairs will be 15% less laborintensive, and the distance between repairs will be 50% greater. This locomotive will replace the outdated VL 10 and VL 11. The high-tech complex is designed to put out 60 electric freight locomotives annually and unites 17 sections equipped with specialized equipment for manufacturing parts and assembling and painting electric locomotives. On May 26, 2009 Russian Railways began selling tickets on long-distance trains via a web portal using electronic (remote) registration technology. Electronic registration allows a passenger to board a train without a paper travel document. When boarding, all a passenger has to do is show the identification document that he or she indicated when ordering a ticket through the Internet. Passengers may use the new service to purchase tickets on long-distance trains via the Russian Railways web portal.
annual RepoRt 2009
In St. Petersburg, railway bridges over the Obvodny Canal were opened on February 21,
On April 27, 2009 the first startup complex
052
Dmitry Kozak and Russian Railways President Vladimir Yakunin laid a commemorative marker to inaugurate the construction of the rail section between Adler and Alpica Service Resort. The combined motor road and railway will handle passenger traffic during the 2014 Winter Olympics in Sochi. Construction will involve difficult engineering and geological conditions. Twenty-eight bridges, 28 two-level elevated roads and 59 elevated motor roads and 12 tunnels are to be built in a short period of time. The line is currently being designed. Thecombined road and railway is to be opened to traffic inAugust 2013. The project for the construction of a combined motor road and railway between Adler and Alpica Service Resort was modified in order to preserve the unique ecosystem of Sochi National Park. This will increase the cost of construction by 183 million rubles, but will ensure preservation of the relict box grove near Tunnel Complex No. 2. The Fourth International Railway Business Forum Strategic Partnership 1520 was held in Sochi
on May 28-29, 2009.
On May 27, 2009 Deputy Prime Minister
A number of agreements were signed at this event: Russian Railways, Z Sinara Group and Siemens AG signed a memorandum on the production and supply of modern Russian electric locomotives. Russian Railways and the Finnish Railways signed a memorandum of cooperation. Russian Railways and National Company Kazakhstan Temir Zholy signed an agreement to cooperate in harmonizing and unifying regulatory and technical documentation. Russian Railways and the French national railway company (SNCF) agreed to cooperate more closely in the area of rail transportation. A memorandum was signed on cooperation between the railway administrations of CISmember states and the republics of Latvia, Lithuania and Estonia to ensure a unified system of technical regulation in the 1,520-mm area.
Russian Railways and the railways of Austria, Slovakia and Ukraine signed a resolution of the Organizing Committee of the BroadGauge Rail Extension Project to complete joint work on justifying investments in the project. The forum included a show of the new uniforms for high-speed train crews. Russian Railways was represented at the sixtieth anniversary of AO Ulan Bator Railway, which was celebrated in Mongolia on June 8, 2009. At the rail station in Ulan Bator a commemorative marker was put in place with a quote from the 1949 Treaty between the USSR and the Peoples Republic of Mongolia which marked the beginning of the Ulan Bator Railway: in honor of the unbreakable friendship between the peoples of Russia and Mongolia and the feat of labor performed by the rail workers of both countries who devoted their lives to the steel rails. On the same day, a joint project was launched for the overall repair of the track structure of the Ulan Bator Railway on the 108-km Mandal Davaany section. For the first time on the Ulan Bator Railway, a so-called velvet track will be laid, increasing the safety of train traffic. As part of the anniversary celebration, a special medical train was launched which visited over 10 stations of the Ulan Bator Railway in the period from May 25 through June 3. Patients were seen by high-class Russian Railways medical practitioners. Around 800 residents of Mongolia, including over 200 children, took advantage of the service. On June 16, 2009, Russian Railways began passenger service to Montenegro, and a nonstop MoscowBar carriage went into operation. Russian Railways offers passenger service to 20 countries in Europe and Asia. Russian Railways has approved the design specifications for a line of double-deck passenger cars. The new cars will be developed at the Tver Carriage Works. The design specifications determine the required operating characteristics of the line of double-deck cars: cars with four-berth compartments, cars with two-berth compartments and staff cars. The double-deck passenger cars should have an operating speed of 160 km/hour. The cars will have bodies made of noncorrosive steel and a service life of 40 years. They will be equipped with modern air-conditioning systems and illuminated information displays, and compartments will be accessed by means of magnetic cards.
053
of Transcontainer (a subsidiary of Russian Railways) arrived in Kaluga with parts for the Volkswagen Group Rus plant. The project, launched a year and a half ago, has proved highly effective from an economic point of view, strengthening Volkswagens position on the Russian market, clearly demonstrating the competitive advantages of container rail transport and creating jobs in Kaluga Region. Today the train from Mlada Boleslav (Czech Republic) to Kaluga covers the distance of 2,005 km in four days roughly one third of the original time (twelve days). Since the project began, rail traffic has amounted to 128,000 TEUs (20-foot containers). The 35th anniversary of the start of construction on the Baikal-Amur Mainline was celebrated onJuly 11, 2009 in Tynda. The Baikal-Amur Mainline is one of the epoch-making projects in our postwar history, playing a decisive role in the countrys development and becoming a symbol of its time. You can count events like that on your fingers: we were the first in space, we built the Dnieper Hydroelectric Station and Magnitogorsk, we harnessed the atom, we opened up the Virgin Lands and we laid the Baikal-Amur Mainline, said Russian Railways President Vladimir Yakunin, opening the official ceremony on the rail station square in Tynda. The LagarAul tunnel (Far East Railway), which had been under reconstruction since 2006, was officially opened on July 14, 2009. The reconstruction involved two phases. First a new single-track tunnel was built and put into service in summer 2006. Then the builders proceeded to the second phase large-scale reconstruction of the old tunnel. Investments in the project came to around 2billion rubles. The tunnel is located on the Obluchye Khabarovsk section in the southeastern branch of the Lesser Khingan range and is 1.3 km in length. Group and Siemens AG signed a trilateral agreement for the production in Russia of electric locomotives with asynchronous traction. A developmental prototype is to be produced in 2010. Specific measures in the program for the production and purchase of electric locomotives to 2015 will subsequently be determined in line with the Russian Railways investment program. The new locomotives will be created using innovative technical solutions, systems and materials. They will fully meet all traffic safety requirements and ensure comfortable working conditions for locomotive crews. On July 16, 2009 in Munich, Vladimir Yakunin, President of Russian Railways, and Rudiger Grube, CEO of the German national railway, signed a general agreement to create an education and research center the Center of International Logistics and Supply Chain Management. The center will be created in cooperation with the Higher School of Management of St.Petersburg State University and St. Petersburg State Railway University on the Russian side and the European School of Management on the German side. As a part of efforts in 2009 to realize the Strategy for the Development of Human Resources, special attention was devoted to the development and training of toplevel managers. The Concept for a System of Extended Corporate Education for Russian Railways Managerial Personnel (theRussian Railways Corporate University) was approved. The Russian Railways Family Medical Center was opened in Moscow on August 1, 2009. It was formed in cooperation with two railway hospitals: TsB-4 (an out-of-town convalescent center in Ruza District of Moscow Region) and TsB-5 (at Perovo Station on the Moscow Railway). A home telemedicine complex allows the remote medical observation of patients at home and makes it possible for patients to consult the medical institution around the clock. The Family Medical Center was chosen by the Office of the UN High Commissar for Refugees to handle UN medical programs in Moscow. Around 1,000 children from other countries are assigned to the hospital.
annual RepoRt 2009
On July 8, 2009 the 500th container train
On July 16, 2009, Russian Railways, ZSinara
054
The Rail Station Directorate, a branch of Russian Railways, began the first stage of the Program for the Comprehensive Modernization and Development of Railway Stations to 2015. By 2012, 77 station complexes in Russia are to be brought up to international standards. The first stage (2009 2011) involves the reconstruction of 77 station complexes in Moscow, St. Petersburg, Novosibirsk, Samara and other cities with a population of over 200,000. The directorate has announced a tender for the modernization of rail stations in order to turn them into modern transport and passenger hubs. Edict No. 965 of Russian President Dmitry Medvedev On the Transfer of Federally Owned Shares of the Soviet-Mongolian Ulan Bator Railway to the Fiduciary Management of Russian Railways was signed on August 22, 2009, and an agreement between Russian Railways and Ulan Bator Railway was concluded in December 2009. The Mongolian side was presented with a version of the concept for a joint RussianMongolian project to develop Ulan Bator Railway and construct new railway infrastructure in Mongolia. Shuttle trains between Byelorussia Station and Sheremetyevo International Airport went into service on August 28. The trains make a stop at Savyolovo Station on the way to Sheremetyevo Airport and return nonstop to Byelorussia Station. At the air terminals at Byelorussia and Savyolovo stations, passengers on domestic flights may check in and check their baggage. the Krasnoyarsk Railway was opened following reconstruction. The reconstructed Nankhchul tunnel is of strategic importance to transportation on the southern stretch of the Trans-Siberian Railway. It forms part of a single complex consisting of two Nankhchul tunnels and a 10-kilometer second track. Thus, the TebaBirkchul leg (137 km) now has a double-track section, raising capacity in the MezhdurechenskAbakan direction to 32 pairs of trains per day. Over 5 billion rubles were invested in the project to reconstruct the Nankhchul tunnel and construct a bypass tunnel and second tracks on the AskizMezhdurechensk section. On September 17, 2009 Russian Prime Minister Vladimir Putin and the President of Russian Railways, Vladimir Yakunin, took part in a capsule-laying ceremony to inaugurate the construction of the Adler rail station complex. During the 2014 Winter Olympics, Adler Station will be the connecting station for three directions AdlerAlpica Service Resort, Adler Veseloye and AdlerSochi Airport and will handle the main functions involved in servicing suburban and long-distance passengers. The station is to be fully constructed by 2014. On September 25, a new railway bridge over the Ob River was opened near Kamen-na-Ob (Altai Branch of the West Siberian Railway). The new bridge will be able to accommodate growing freight traffic along this strategic direction of the West Siberian Railway above all, coal from the Kuznetsk Basin. Capacity has increased to 100 pairs of trains per day. At a cost of some 5 billion rubles, the bridge is a large-scale investment project of Russian Railways in Western Siberia. The overall length of the structure is around a kilometer; the superstructure weighs 5,000 tons; the metal structure, support structures and devices weigh 9,800 tons; and the bridges design life is at least 100 years.
On September 8 the Nankhchul tunnel on
055
The second phase of the railway bridge over the Amur River near Khabarovsk (Far East Railway) was opened on November 7. The new bridge increased the capacity on this section of the Trans-Siberian from 95 to 153 pairs of trains. The cost of the project is over 6 billion rubles. The Second Network-Wide Gathering of Russian Railways Locomotive Engineers was held in Moscow on November 9-11. The event was attended by over 300 engineers representing 17 railroads branches of Russian Railways. Delegates met with the Companys top managers and visited the Russian Railways Transport Control Center and exhibitions at the experimental track of the Russian Railroad Transport Research Institute and at the Riga Station Scientific and Technical Information Center. In November, track laying was completed on the new 53-kilometer YaivaSolikamsk rail section (Perm Territory) in the framework of a construction project. Investments in this project totaled 8.2 billion rubles in 2009. The first phase of a single-track electrified bypass of mines forming part of the BereznikovskoSolikamsk potassium salt deposit was put into service. Construction of the 53-kilometer line was completed 10 months ahead of schedule. At the second stage, in 2010, Berezniki Station will be connected to a new branch, and line stations will be developed further. It is planned that passenger trains will begin service after the second phase of construction is completed. (The subsidence zone due to a technogenic accident at a mine of Uralkaliy (Perm Region) in autumn 2006 included a section of rail bed near Berezniki Station on the Sverdlovsk Railway.) On December 17, 2009 the first high-speed Sapsan trains began service between Moscow and St. Petersburg. These high-speed electric trains in the Velaro RUS series, produced by Siemens Transport Systems, are capable of a maximum speed of 250 km/hour. The train has been certified as meeting Russian safety standards. It includes two business class cars, seven economy class cars and one restaurant car and carries a total of 554 passengers. The new Sapsan train cuts the travel time between Moscow and St. Petersburg down to 3hours and 45 minutes. This is the first segment of the National High-Speed Rail System, which is to include the lines MoscowNizhny Novgorod and Moscow Adler by 2012. Eventually, the new speeds will link the countrys major business centers: Moscow with Kursk and Samara as well as the Siberian cities of Omsk, Novosibirsk, Barnaul, Tomsk, etc. A maintenance complex for high-speed trains was opened at the Metallostroy Depot on the October Mainline. Construction work and the installation of modern equipment at the depot required over 3 billion rubles in investments. A fifth medical train, Academician Fyodor Uglov, organized on a parity basis by Russian Railways and the administration of Irkutsk Region, was presented at Yaroslavl Station onDecember 22, 2009. The train is designed to service remote settlements along the East Siberian Railroad. The medical train includes 10 cars equipped with the latest diagnostic equipment. Russian Railways has invested over 120 million rubles in the medical train, and the administration of Irkutsk Region has allocated 60 million rubles for the acquisition of medical equipment.
annual RepoRt 2009
056
In 2009 the Russian Railways brand entered a new phase of development involving the integration of brand ideology in the companys day-to-day operations. Russian Railways is moving from changes in the companys external image to deep substantive changes in the day-to-day job activities of each Russian Railways employee at all levels of company management. In 2009 Russian Railways decided to introduce new brand architecture. So-called monolithic brand architecture, in which the Russian Railways brand covers the core activities of the Russian Railways holding company, was deemed optimal. Core activities are: passenger and freight transportation and infrastructure services as well as other types of activity in the area of transportation and related servicing. Monolithic architecture does not apply to the brands of Russian Railways subsidiaries engaged in financial, information, telecommunication, construction and other activities unrelated to the holding companys transportation services. The use of monolithic brand architecture will ensure: higher quality management of the assets ofthe Russian Railways holding company amatter of special relevance during the reform process; more effective use of financial resources savings on subsidiaries and affiliates public communication expenses; economies of scale in connection with the introduction of a unified company style; faster and less costly introduction of new services on the market; more effective sales of assets on the open market; faster growth in brand capital, reinforcing the positive perception formed by internal and external auditors and thus increasing its value.
Rebranding
The transition to monolithic architecture and the widespread use by the holding company of the Russian Railways brand will further such geopolitical and social goals as the expansion of Russias sphere of influence in the global transportation industry and the strengthening of broad public faith in the governments program to ensure the availability of rail transport. The Russian Railways brand is one of Russias leading brands. It embodies the rich, 150-year-plus history of railways in Russia and belongs to one of our countrys largest companies. In addition to reputation goals, Russian Railways aims to obtain additional value for the company by effectively managing the brand as a key intangible asset.
057
annual RepoRt 2009
CoRpoRate GoveRnanCe. ChanGe in RuSSian RailwayS CoRpoRate StRuCtuRe in 2009. FinanCial and eConomiC eFFeCt oF the ChanGe
058
Corporate GovernanCe. ChanGe in russian railways Corporate struCture in 2009. FinanCial and eConomiC eFFeCt oF the ChanGe
059
annual RepoRt 2009
Stage 3 of the Program for the Structural reform of ruSSian railwayS
In 2009, the Company continued to implement Stage 3 of the Program for the Structural Reform of Rail Transport approved by Decree No.384 of the Government of the Russian Federation of 18 May 2001 and the Target Model of the Market in Railway Services at the Third Stage of Reform approved by the Government Commission for the Development of Industry, Technology and Transport on 16 May 2007, including measures to reorganize the management framework and adopt a vertically integrated structure.
Russian Railways has drafted the Target Model of the Market in Freight Railway Services to roadmap further structural transformation in the industry till 2015 (The Target Model is being discussed with federal executive bodies and market participants).
060
The 2015 Target Model defines strategic goals, priorities and focus areas in the freight railway sector, major national policy trends in freight railway services, the market structure and principles that underpin cooperation among key market participants. Implementation of the 2015 Target Model will ensure long-term stability of the sector from both economic and industrial perspectives and financial sustainability of market participants. In 2009, the Board of Directors of Russian Railways decided to establish 10 subsidiary and associated companies in order to build an efficient holding structure. The key subsidiary is the Federal Passenger Company in long-distance passenger transportation. The Federal Passenger Company was established in line with the Concept of Reforming the Long-Distance Passenger Operations Complex approved at a meeting of the Interdepartmental Commission for Implementing the Structural Reform of Rail Transport. The Government of the Russian Federation decided to gradually provide for 100% compensation for a carriers lost income as tariffs for economy-class sleeping and sitting cars were lower than an economic threshold. The decision was fully implemented in 2009 to become a major precondition for establishing the Federal Passenger Company. The Board of Directors of Russian Railways decided to establish the Federal Passenger Company on 25 November 2009. A state registration certificate was issued to the company on 3 December 2009. The company was scheduled to start operating on 1 February 2010 and to engage in transportation activities from 1 April 2010. The subsidiary was organized on the basis of Russian Railways assets required for the intended activities in long-distance passenger transportation and on the basis of the assets of the Federal Passenger Board, a special-purpose branch of Russian Railways. The key goal of the Federal Passenger Company is to set up an efficient business in longdistance passenger transportation in cooperation with government authorities. The company aims to enhance the quality of transportation services, boost economic efficiency, optimize reliance on government financing and build sources of investment for upgrading and developing its property and equipment. The company has helped ensure financial transparency of long-distance passenger services and shift away from cross financing and reliance on financial results of the freight segment. The share capital of the Federal Passenger Company is RUB 137.238 billion. Russian Railways holds 100% 1 share in the company. The principal business activities include national passenger transportation in the regulated and deregulated segments, international passenger and baggage transportation, baggage and freight baggage transportation, additional services on trains, maintenance and repairs of customers rolling stock, etc. In addition, the Board of Directors of Russian Railways decided to establish 7 suburban passenger companies, a subsidiary in health resort services (JSCo RZD ZDOROVYE) and a joint project with foreign partners for developing railway infrastructure in Mongolia (KOO Infrastructure Development). Within the structural reform of rail transport, five subsidiaries and associates have been established:
061
annual RepoRt 2009
Subsidiaries and associates established within the Program for Structural Reform in 2009
company Share capital, ruB billion Share held by russian railways, ruB billion Date of incorporation
moskovsko-tverskaya Suburban passenger Company

0.00015
0.00007 (49.99%) 0.00005 0.00010 (51%) 0.00015 0.00030 (49.3%) 0.000148 0.00030 (49.3%) 137.23824 137.23824 (99.99%) 03.12.2009 09.10.2009 11.09.2009 10.09.2009 18.08.2009
permskaya Suburban Company volgo-vyatskaya Suburban passenger Company Sodruzhestvo Federal passenger Company
In the time of reform, the Board of Directors of Russian Railways decided to set up a total of 68 subsidiaries and associates. The Program for the Structural Reform of Rail Transport envisages a gradual shift from the current model of rail transport that is predominantly organized on a geographic basis to an activity-based structure.
Improving corporate governance
Russian Railways follows best practices and standards in corporate governance and recognizes that corporate governance is prerequisite for effective business operation, a stronger investment appeal of the Company and its subsidiaries and a smooth reform of rail transport. The new governance framework of Russian Railways is built on regular management principles that provide for rigid regulation of both internal processes of subdivisions and complex pass-through processes, including technological processes, and ensures necessary conditions for applying quality management tools within the company. The new governance framework ensures management cost efficiency and lower operating risks due to the following: Faster development of key management competencies in a highly specialized area is possible using consistent management tools and technology coupled with lower requirements for the basic skill level and an improved structure of staff and labor costs.
Management personnel costs are optimized as functional redundancy is eliminated, qualification requirements and labor costs are reduced and non-productive time of the management personnel is cut back. In 2009, Russian Railways continued to gradually improve corporate governance. As recommended by expert organizations, major efforts were centered on improvements in the work of the Companys management bodies, protection of shareholder rights, control over economic and financial activities, disclosure of financial and non-financial information and corporate social responsibility. A systemic work is underway to reorganize the Companys management structure and processes in order to ensure that Russian Railways' management system is in line with the new organizational model of rail transport and implement best practices in corporate governance. The work is also aimed to improve the overall effectiveness of management and build momentum for targeted improvements in operational efficiency by: Promoting specialization; Allocating types of activity to business units; Optimizing the number of management levels for each activity type or functional area based on a number of factors;
062
Building a separate territorial management structure for each activity type or functional area based on a number of factors; Eliminating redundancy in regulation and methodological support functions, ensuring consistency of management tools and technology for each management unit and enhancing their quality by disseminating best practices over the whole network; Implementing a system of indicators to enhance integrity and promptness of controls; Delegating authority to local divisions; Building a motivation system to encourage executives and employees of business units towards a common result; Management system transformation is required not only to improve internal efficiency, but also because new companies enter the railway transportation market and relations between market participants change. Four vertically integrated branches of Russian Railways were established in 2009 as a result of management system reorganization: Center for High-Comfort Rail Service; Central Traffic Control Directorate; Traction Directorate Traction Rolling Stock Repair Directorate. The Center for High-Comfort Rail Service now comprises all Rail Centers for High-Comfort Rail Service. Rail Traffic Control Directorates have been established on railways over the whole network. The most important task is to ensure manageability and synergies in company management on the regional level as subsidiaries and associates are established and business units are created within Russian Railways. In reorganizing the management system, special emphasis has been placed on ensuring that operations of rail transport companies remain well coordinated. Tothis end, work is underway to build and test rules and
procedures for the cooperation of entities within technological processes and draft the relevant regulatory documents on a pilot ground spanning entities of Oktyabrskaya, Krasnoyarskaya and Vostochno Sibirskaya rails. Additional powers have been granted to rail managers to ensure technological and corporate coordination among subdivisions of the emerging business verticals. This made it possible to decide to transfer Rail Traffic Control Directorates on pilot railways to the Central Traffic Control Directorate at the beginning of 2010. Rail directorates for traction and traction rolling stock repairs were also established in the form of structural divisions of pilot railways and started operating in 2009. A decision was made to establish rail directorates for traction rolling stock repairs on the rail network in the form of structural divisions of the Traction Rolling Stock Repair Directorate, a branch of Russian Railways. Rail departments have been reorganized on Vostochno Sibirskaya and Krasnoyarskaya rail lines. Based on the outcomes of the implementation of a non-departmental management structure on pilot railways, a decision has been made to implement the same over the whole network. A work schedule has been approved according to which the reorganization must be finished by the end of 2010. Russian Railways have also worked to separate corporate governance from business management on an organizational basis. That will make it possible to clearly define objectives and responsibility of subdivisions and managers and provide them with powers and resources in line with the spectrum of their respective functions.
063
Transformation affected over 170,000 persons and more than 700 structural subdivisions of Russian Railways in 2009. In 2009, as part of improvements in the corporate governance framework, the Board of Directors of Russian Railways approved Regulations on Information Policy of Russian Railways, including a section devoted to insider information and aimed to prevent illicit use of information and provide additional assurance to the shareholder as to the proper protection of rights. Within its corporate strategy, Russian Railways also prepared a corporate social report for 2008. In order to improve the effectiveness of risk management and internal controls, Russian Railways has implemented a functional strategy for building an integrated internal audit and control system that will define methods of interaction with the Audit, Risks and Remuneration Committee of the Board of Directors of Russian Railways.
Structure of the holDing comPany ruSSian railwayS
annual RepoRt 2009
3.
4. 5.
6.
As of 1 January 2009, Russian Railways owns shares and equity interests in 149 companies. (For details see Appendices 9-11). In addition, the following changes have occurred in Russian Railways' ownership of shares in other companies: 1. Russian Railways sold 683,232 shares (50% 1 share) in Roszheldorproyekt in a public auction. As a result of the sale, Russian Railways interest in Roszheldorproyekt declined to 683,234 shares (over 50%). Proceeds from the sale of 50% 1 share in Roszheldorproyekt amounted to RUB 1,720billion. 2. ZAO FK Lokomotiv issued 6,000,000 additional shares with a face value of RUB 500 each. The shares were placed to TransTeleCom Company in a private offering. As a result, Russian Railways' share in the company decreased from 85% to 0,0017% as at the end of 2009.
Based on the decision of the Board of Directors of Russian Railways of 30 October 2009, Russian Railways arranged an additional share issue of South Caucasus Railway in December 2009. As much as 56,544,300 additional shares was issued with a face value of 1,000 drams each. The shares were paid by Russian Railways in 2009. As a result, the share capital amounted to 63,344,300,000 drams with Russian Railways holding 100% 1 share. In June 2009, Russian Railways acquired 45% shares in KIT Finance Investment Bank. An extraordinary General Meeting of Shareholders of ZAO Eurasia Rail Logistics (Russian Railways holds 40.1% shares in the company) decided on 2 December 2009 to liquidate ZAO Eurasia Rail Logistics. The relevant activities are currently performed. The limited liability company Infrastructure Development was created in May 2009 with Russian Railways holding 50% of the company's shares. Therefore, Russian railways owns shares in 158 subsidiaries and associates as of 1 January 2010: 86 subsidiaries (more than 50% or on other grounds); 50 associates (20% to 50%); 22 other companies (less than 20%).
064
Structure of the holding company Russian Railways
russian railways
SuBSiDiarieS anD aSSociateS
aDminiStrative Staff
Structural SuBDiviSionS
BrancheS
rePreSentationS of ruSSian railwayS
departments Boards accounting function other administrative units
Railways
(17)
hungary
(BuDaPeSt)
Branches in transportation
(9)
Germany
(Berlin)
iran
(teheran)
technical, economic and finance support

(7)
China
(Beijing)
Capital construction
(2)
dpRK
(Pyongyang)
Rolling stock repairs

(16)
poland
(warSaw)
track facilities
(2)
Slovakia
(BratiSlava)
information and communications

(3)
ukraine
(Kiev)
Finland
(helSinKi)
Social services
(1)
Czech Republic
(Prague)
R&d
(12)
estonia
(tallinn)
other
(5)
As at the beginning of 2009, Russian Railways' investments in shares and interests in other companies amounted to RUB 194,695 million (including RUB 172,018 million attributable to 44 companies established within the structural reform in 20052008). As at the end of 2009, financial investments amounted to RUB 193,367 million (including RUB 171,071 million attributable to 49 companies established within the structural reform in 20052009). Decrease in Russian Railways financial investments in companies, in which Russian Railways holds shares and interests, is mainly attributable to the sale of shares in Roszheldorproyekt and allowance charges for impairment of financial investments. In 2009, Russian Railways received RUB 1,571.7 million in dividends from its subsidiaries and associates for 2008 (including tax paid on the dividends). The planned accrual of 2009 dividends will be RUB 350 million.
065
annual RepoRt 2009
2008
0 0 0 0
certain reSultS of SuBSiDiarieS anD aSSociateS eStaBliSheD within the Structural reform
Analysis of the companies' financial and economic activities revealed that their total revenues amounted to RUB 328.428 billion in 2009 (2008: RUR 319.433 billion). In 2009, the financial and economic condition of the companies was adversely affected by slumping volumes of transportation and corporate orders, reduced demand for the companies products (services) and redundant capacities. Total assets of all subsidiaries and associates of Russian Railways (established before 2010) amounted to RUB 733.403 billion in 2009 (2008: RUB 713.322 billion). Net assets amounted to RUB258.314 billion in 2009 (2008: RUB 261.248 billion).
In 2009, Russian Railways implemented a number of anti-recession measures to reduce redundant capacities and cut costs. According to subsidiaries 2009 progress reports on the action plan for reducing costs and developing business, the actual economic effect of the efforts amounted to RUB 34 billion. Cost cuts averaged 812% of subsidiaries actual costs for 2008 with some subsidiaries reducing their costs by 20-49% in 2008. First Non-Metallic Company 49%; Sverldovskaya Suburban Company 28% Severo-Zapadnaya Suburban Passenger Company and Zheldoripoteka 27%; Yamal Railway Company 26%; Vagonremmash 23%.
Change in financial indicators of subsidiaries and associates, RUB billion

800 800 800 800
713
600 600
733
600 600
400
400
400
400
319
200
328 261
200 200
258
200
2009
TOTAL REVENUES
TOTAL ASSETS
NET ASSETS
An economic effect of RUB 3.3 billion was achieved as a result of measures for developing the companies and improving profitability. In addition, planned investments in acquiring rolling stock and developing new projects inthe subsidiaries 2009 budgets were cut by RUB87.1 billion (First Freight Company RUB 79.2 billion, Zheldoripoteka RUB 7.7 billion).
066
First Freight Company was incorporated on 26 July 2007. Its core activities are freight transportation and forwarding services. The share capital of the company is RUB 85.652 billion. Russian Railways` share is 99.99%. TransContainer was incorporated on 4 March 2006. Its core activities are national and international freight operations. The share capital of the company is RUB 13,894.8 million. Russian Railways` share is 85%. TransTeleCom Company was incorporated on 21 November 2002. Its core activities are communications engineering and operations. The share capital of the company is RUB 0.002 billion. Russian Railways` share is 99.95%. RZDstroy was incorporated on 19 January 2006. Its core activities are construction of buildings and structures of I and II criticality levels, and provision of customer/developer services. The share capital of the company is RUB 9.933 billion. Russian Railways` share is 99.99%.
Performance analySiS of ruSSian railwayS' Key SuBSiDiarieS
Railway Trade Company was incorporated on 4 June 2007. Its core activities include wholesale and retail trade. The share capital of the company is RUB 8.077 billion. Russian Railways` share is 99.99%. Vagonremmash was incorporated on 12 May 2008. Its core activities are passenger car production, passenger and freight car capital repairs, and wheel set repairs. The share capital of the company is RUB 4.074 billion. Russian Railways` share is 99.99%. BetElTrans was incorporated on 23 April 2008. Its core activities are production and sale of reinforced concrete and timber sleepers, and railroad switch bars. The share capital of the company is RUB 3.770 billion. Russian Railways` share is 99.99%.
company
total assets
net assets
revenues
net profit
unit
First Freight Company transContainer transteleCom Company RZdstroy Railway trade Company vagonremmash Beteltrans
113.31 27.57 18.18 20.89 8.79 4.99 5.95
95.88 18.74 7.38 9.58 8.09 4.24 4.33
71.47 16.35 22.04 38.37 6.83 5.07 12.02
2.14 0.022 0.103 0.005 0.006 0.008 0.325
RuB billion
067
annual RepoRt 2009
the Company'S CuRRent poSition in the induStRy
068
The Company's CurrenT posiTion in The indusTry
069
annual RepoRt 2009
MoveMent of Russian Railways' shaRe of tRanspoRt seRvices MaRket
According to Rosstat, in 2009 Russian freight turnover declined by 10.2% to 4,444.8 bln ton/km year-on-year.3 In previous year, increased freight turnover was witnessed by sea transport only (+15.5%), which mainly resulted from changes in the accounting system. The maximum decline was demonstrated by internal water freight turnover (-17.5%). Global financial crisis led to a significant decline of the Russian railway freight turnover.
In 2009, railway freight turnover declined by 11.9%, which is 2.5 times less abrupt than at the year start (-29.9% in January 2009). At the same time, decline in motor vehicle freight turnover (major competitor of the railway carriers at closeand medium-distance segment) became even worse (from 15% to 16.7%).
According to the Russian Federal State Statistics Service (official site; first assessment)..
070
4
Freight turnover, by means of transport (According to the Russian Federal State Statistics Service)
Means of transport 2009 share in overall freight turnover
bln ton-km
+/- %
2008, %
2009, %
Freight turnover including: railway4 motor vehicles sea5 internal water air (transport aviation) pipelines
against 2008 1,865.3 180.1 97.5 52.6 3.5 2,245.8
-10,2 -11.9 -16.7 +15.5 -17.5 -4.0 -8.9
100.0 42.8 4.3 1.7 1.3 0.1 49.8
100.0 42.0 4.0 2.2 1.2 0.1 50.5
Share of railway freight turnover in the evolution of coMpetition in the industRy national transportation system practically did not In the course of implementation of the change. Program for structural reforming of railway industry, In general, freight turnover decline for all almost all types of competition (interindustry, means of transport slowed down by the year-end. intermodal and international) became widespread. According to Rosstat, in 2009 public Railway transportation services will see passenger turnover in Russia declined by 8.4% yearfurther evolution of competition in those segments on-year. The most notable declines of passenger which have formed essential legal, business and turnover was seen by air and railway sectors. Thus, in technological environment. particular, railway, air and motor passenger turnover Currently, as a result of implementation of decreased by 12.7%, 8.3% and 3.4%, respectively. the third stage of railway transport restructuring, Despite the challenging market situation caused by the Russian Government stepped forward with a set the global finance and economy crisis, significant of measures acting as an impetus for interindustry decline in turnover and revenues, domestic passenger competition, including gradual increase in the fleet of services remained stable and effective. privately-owned freight cars. Today the freight car fleet managed by operators, which are independent from Russian Railways, exceeds 415 thousand rail cars. In general, (including First Freight Company) the share of private rail cars as of 1 January 2010 is 65.7% of the overall rolling stock. As the operator's business developed, the share of private rail cars in freight volume became more substantial. In 2003, the share of private owners in freight turnover was 21.8%, whereas in 2009 similar indicator reached 70.8%.
Freight turnover net of empty-run private and rented cars, as per report of Russian Railways 5 Significant increase in sea freight turnover and a sharp decline of internal water freight turnover may be among other things be explained by changes in river-sea freight accounting made by certain ship-owners, who registered their vessels as a sea transport according to OKVED instead of formerly used registration as an internal water transport (to be subject to more favorable tax regime). In 2009, aggregate internal and sea freight turnover grew by 1.4% year-on-year.
Russian railway infrastructure
Murmansk
Kaliningrad
ST. PETERSBURG
Pskov
Petrozavodsk
Arkhangelsk
Veliky Novgorod
Smolensk
Tver
Vologda
Yaroslavl
MOSCOW
Kaluga
Kostroma
Bryansk
Tula
Vladimir
Orel
Ryazan
NIZHNY NOVGOROD
Kirov
Lipetsk
Voronezh Perm Surgut
Tambov
Kazan
Penza
Neryungri
Nogliki
ROSTOV-ON-DON Tumen Chelyabinsk
Saratov
Samara
YEKATERINBURG
Ufa
Volgograd Kurgan Tomsk Omsk
Komsomolsk-on-Amur Tynda Yuzhno-Sakhalinsk
Orenburg
Mineralnye Vody
Krasnoyarsk Kemerovo NOVOSIBIRSK
Astrakhan
Nizhneangarsk
KHABAROVSK
Abakan Irkutsk
Chita
Vladivostok
annual RepoRt 2009
071
072
Russian Railways has drafted the Target pRinciples of goveRnMent Regulation and taRiff policy Model of the Market in Freight Railway Services till applicable to Russian Railways 2015. According to that Draft, Russian Railways Key areas to improve the government established the Second Freight Company which regulation of railway natural monopolies are received title to the Russian Railways' remaining rail determined by Decision No. 643 of the Government cars in order to enhance the investment appeal of of the Russian Federation dated 5 August 2009. the all-purpose rolling stock and further liberalize This document states that a key method for the market. Transfer of title to the freight cars from the government regulation of tariffs, charges and Russian Railways to the Second Freight Company fees is a method of economically justified costs. To will result in the fully market-based environment determine the amount of a tariff, an entity calculates (including pricing issues) in freight rolling stock necessary gross revenue which (in addition to operation segment. economically justified costs) includes the return on This will help to increase the volume of equity together with investments made. The Decision private investments in the upgrade the rolling stock also stipulates that the Methodology of economically fleet and also reduce Russian Railways expenses to justified costs and return on equity is determined by a operate rolling stock division. regulating body. Currently, Russian Railways has certain There is a fundamental document which sets responsibilities to develop and maintain public principles of government regulation and control over infrastructure, whereas auto transportation tariffs, charges and fees for works (services) rendered companies have no such obligations (motor roads by the railway natural monopolies, therefore, are mostly maintained by the state) which provides Federal Tariff Service should develop and approve higher competitiveness to the motor transport Methodology to calculate economically justified services. railway transportation tariffs, charges and fees for the The situation becomes even worse due natural monopoly. to non-public nature of motor transport tariffs which are freely formed based on existing market conditions and consumer demand and therefore provide additional market benefits to auto transport companies. According to Rosstat, annual growth rate in motor transport freight turnover significantly exceeds the railway freight turnover. Competition is getting more tough at the market of container deliveries, delivery of perishable goods and food as well as transportation of package cargos and other items for the distance up to 2,000 km. Inconsistent approaches to the development and maintenance of infrastructure and tariff regulation does not create suitable environment for a full-fledged transportation market.
073
Domestic transportation of passengers, baggage and cargo luggage are performed by natural monopolies and in accordance with Federal Law No. 147-FZ "Concerning natural monopolies" dated 17 August 1995 they are subject to government regulation. Tariffs for passenger, baggage and cargo luggage transportation services are set in Price List No. 10-02-16 which became effective in March 1993. Pursuant to Order of the Federal Tariff Service No. 298-t/7 dated 16 December 2004, Russian Railways may independently set long-distance transportation tariffs for passengers travelling in high-speed trains, first-class sleeping cars and compartment cars of all trains (Amendment to Decision of the Management Board of the Federal Energy Commission No. 1/3 dated 9 January 2002).
In 2009, the following tariff changes were made:
annual RepoRt 2009
Tariffs for domestic transportation of passengers, baggage and cargo luggage.
effective from 1 January In accordance with Order of Federal Tariff Service No. 368-t/7 dated 17 December 2008: tariffs set in Price-List No. 10-02-16 were indexed by a factor of 1.12 and Schedule for flexible tariff regulation by calendar periods for domestic long-distance passengers travelling in economy-class sleeping and sitting cars was applied; domestic long-distance baggage tariffs and charges for usage of own (rented) cars in high-speed, passenger, post and baggage and passenger/freight trains (except charges for usage of own (rented) cars involved in cargo luggage transportation in highspeed, passenger, post and baggage and passenger/ freight trains) set in Price-List No. 10-02-16 were indexed by a factor of 1.12; charges for usage of own (rented) cars involved in cargo luggage transportation in highspeed, passenger, post and baggage and passenger/ freight trains) were indexed by a factor of 1.16; long-distance domestic cargo luggage tariffs set in Price-List No. 10-02-16 were indexed by a factor of 0.85. 1.
In accordance with Instruction No 2883r made by Russian Railways on 30 December 2008: long-distance domestic tariffs for passengers travelling in first-class sleeping cars and compartment cars set in Price-List No. 10-02-16 were indexed as follows: effective from1 January 2009 by a factor of 1.08; effective from 1 April 2009 (for tariffs set from 1 January 2009) by a factor of 1.03; effective from 1 July 2009 (for tariffs set from 1 April 2009) by a factor of 1.035. in addition, Schedule for flexible tariff regulation by calendar periods for domestic longdistance passengers travelling in first-class sleeping cars and compartment cars was applied. 3. in accordance with Order of Federal Tariff Service No. 369-t/8 dated 17 December 2008 and telegram No. 0001231 dated 29December 2008 sent by Russian Railways: charges and fees for works and services connected to transportation of passengers, carry-on luggage, baggage, cargo luggage as well as storage of carry-on luggage, baggage, cargo luggage were set. 4. In accordance with Order of Federal Tariff Service No. 388-t/9 dated 17 December 2008: railway infrastructure tariffs with respect to Russian Railways' long-distance and suburban passenger services were indexed.
2.
074
Passenger, baggage and cargo luggage (package freight) tariffs are regulated in accordance with the following documents: Interstate Passenger Tariff Agreement approved by Railway Transport Board of CIS, the Republic of Latvia, the Republic of Lithuania and the Republic of Estonia; Agreement on the International Railway Passenger Tariff (for passenger, baggage and package freight transportation to China, Mongolia, Korea and Vietnam); West-East Tariff (for passenger travelling to West Europe); Terms of Passenger, Baggage, Parcel Freight and Cargo Transportation Effective for direct Russian/Finnish railway routes.
1. Concerning tariff standardization
International passenger tariffs
2. Concerning indexation of limits imposed on tariffs, charges and fees stipulated by Price List No. 10-01
In 2009, in accordance with the orders of the Federal Tariff Service, limits imposed on tariffs, charges and fees stipulated by Price List No. 10-01 were indexed twice and the indexation factor was the same for domestic, export and import through Russian ports and on-land border-crossing points (effective from 10 January 2009, limits imposed on tariffs, charges and fees stipulated by Price List No. 10-01 were on average indexed by a factor of 1.05; effective from 1 July 2009 on average by a factor of 1.057). In 2009, limits imposed on tariffs, charges and fess stipulated by Price List No. 10-01 were indexed on average by a factor of 1.11.
3. Concerning providing exclusive tariffs
Standardization of freight tariffs for different routes is one of the Government's priorities in railway tariff regulation set by the Government of the Russian Federation. Due to the global economic crisis, in 2008 tariff standardization woks were suspended to avoid significant change in tariff burden on entities operating in certain industries. In 2009, railway freight tariffs were indexed in a similar way for all routes.
In 2009, exclusive tariffs were applied to 262.3 mln ton of transported freight (+ 2.5% yearon-year). Revenues for the year amounted to RUB 180.4 bln, i.e. 7% higher than in 2008. Tariff support for freight transported at exclusive tariffs amounted to RUB 34.2 bln.
diveRsification of the Russian Railways' fReight and passengeR opeRations based on MaRketing policies and bRinging coMplex tRanspoRtation pRoducts to the MaRket
Ongoing changes in the global economy create new challenges for the business community. As a result of finance and economy crisis, market positions held by railway transport services providers and consumers have changed significantly; the same is true for transport machinery consumers. In a very short period of time, seller's market has been transformed to the buyer's market. Such conditions make it difficult to adapt for new market environment and to make a shift from expanding the scope of transport services to the new customer-attraction strategy. Russian Railways takes the appropriate steps and consistently creates clientoriented business by the following three strategy lines.
075
This strategy line is based on widely-spread automation and informatization of transportation process and implementation of up-to-date customer service technologies. Systematic measures to establish new forms of customer interaction include the following: implementation of legally valid electronic document workflow based on paperless technologies, including usage of electronic digital signature to prepare freight transportation-related documents; "one-stop" complex service to shippers that includes not only freight transportation services, but also provision of necessary rolling stock from other owners based on agency agreements between the carrier and owner of the rolling stock; implementation of Single Business Accounts of Customers technology enabling to pay for transportation services across the entire network of Russian Railways; implementation of e-trade floor for transport services that provide clients with all necessary information on planned freight transportation and also enable real-time delivery tracking. Shorter periods for examination and agreeing on the freight transport applications as well as opportunity to proceed with a deferred payment under the banking guarantees are also very important for customers. During the year, development of electronic document workflow, shorter examination periods for transportation applications, customer settlements through a single business accounts and other measures helped to slowdown a decline in freight turnover and to reduce inventories intended for transportation for more than 3 mln ton. Another area of focus is improvement of passenger service quality and closer interaction with regional authorities. The Company significantly extended its passenger train destinations. It also organized direct passenger services from three Moscow airports to the city center as well as launched intermodal railway service between Belarusian Railway Station and Sheremetyevo Airport.
annual RepoRt 2009
The first one is technological enhancement of the transportation services
The second strategy line is improvement of the customer interaction
In 2009, the time of freight delivery was cut by 6.2%, the most significant decline is witnessed by the following segments: ore (-20.1%), oil and oil products (-11.1%) and ferrous metals (-11.6%). Average time of freight delivery approximated 300 km/ day whereas for socially significant bulk cargo 400 km/day. Russian Railways also increased the accuracy of its deliveries. The number of delayed freight deliveries reduced by almost one third. Nearly 90% of freight was delivered within a normative period, whereas for container deliveries, where just-in-time principal is particularly important, accuracy exceeded 90%. We would like to pay special attention to a newly-established Seven Day's TranSib solution which is an innovative transport product with clear qualitative characteristics meeting demands of Eurasian market and setting new standards for a railway Community. Target priorities to improve quality of transportation services are as follows: service regularity, compliance with a fixed schedule (both for the time in transit and for arrival time), simple and clear document workflow, competitive tariffs (price-delivery criterion), stable tariff policy. As a result, in 2012 Russian Railways will have actual opportunities to deliver containers from the Russian eastern to western border in 7 days only (down 4 days from now), whereas by 2015, 7 days will be needed to deliver a container to Brest. Target strategic service quality parameters will be achieved through a set of marketing and technical and technological measures (e.g., setting particular delivery deadlines in client service agreements, more strict control over the cargo in transit arrival on schedule and systematic measures to develop technical tools and improve quality of the maintenance work). The above work is already in progress.
076
The Company is implementing new types of e-tickets, banking card payments, Internet-based booking procedures and self-service terminals. It is implementing and developing selfservice technologies to book and purchase suburban train tickets, including terminal-based payments. Prior to summer season, the Company took certain measures to reduce tariff burden on the passengers at non-regulated segment. In particular, the Company canceled its seasonal tariff increases for passengers traveling in compartment cars and first-class sleeping cars for all destinations (so-called schedule "alignment") and applied certain marketing initiatives focused on promotion of the North Caucasus' Black Sea shore destination (namely, discount for early ticket purchases as well as discounts for all southern destinations, discounts for passengers traveling in non-conditioned rail cars. Another area of focus is comfortable travel conditions. One of the ways to improve the quality of passenger transportation services provision of additional services. Positive results of the Company's efforts can be confirmed by the large number of acknowledgements received in 2009 from passengers and persons accompanying organized child groups to summer rest destinations. The Company launched first Russian highspeed passenger service. On 17 December 2009, the Company launched regular service of Sapsan trains between Moscow and Saint Petersburg, thus reducing the time needed to travel from one city to another to 3 hours and 45 minutes.
The third strategy line is quality improvement due to more complex transportation services
The Company will actively develop the following major complex transportation services: consolidation of privately-owned cars and the respective management; freight transportation based on agreed on departure/arrival schedule; freight forwarding and forming a through tariff rate; technology outsourcing; information support to transport service users (e-trade floor). Russian Railways will not only work at the domestic market, but will also make active efforts to enter to the CIS and 1520-gauge space markets following the example of Deutsche Bahn in EU. Transport service will also become more complex due to reforms of the Company's terminal warehouse operations. As a result, 500 separate freight yards will be consolidated to the unified warehouse complex providing standard logistic services across the entire country. In addition to development of up-to-date contract logistics, this complex will integrate efforts of suppliers, shippers and other persons involved in door-to-door delivery chain to provide a really complex delivery service. The Company focuses on the quality of customer service at the railway stations. The first example of such focused approach is renovation of Kursk Railway Station.
077
At that railway station the Company organized an integrated ticket center, installed new arrival/departure information boards, significantly expanded shopping area and built a shopping arcade. There is a nursery, several restaurants and a VIPlounge offering a full scope of business center services. The scope of services offered by the railway station was significantly expanded (e.g., worldwide money transfers and hotel reservations). The most notable change in the railway station's operations is organization of clear navigation of passenger flows: there are separate paths for arriving and departing passengers; all premises have clear informative signs; there is a taxi service which helps the passenger to get to any Moscow or suburban location. The Company also launched similar programs for other Moscow railway stations and stations located in Russian regions. The Company's anti-crisis measures include a client-focused approach and realization of strategic innovative projects to provide its corporate and individual customers more effective services of the high quality. Measures already taken by the Federal Passenger Directorate comprise one of the steps to form up-to-date and highly effective customer relations, which is particularly important in the unstable economic environment. The second step to establish long-term partner relations is customer loyalty program and dynamic pricing and return management system which are currently developed by the passenger service employees. Russian Railways created a Concept of customer loyalty program for long-distance passengers. In April 2010, the Company plans to launch a pilot customer loyalty program for passengers purchasing compartment and first class tickets at the Russian Railways' web-portal. The Company also intends to make that program available for all passengers effective from May-June 2011. Therefore, the Company combines customer incentives (sales promotion, certain benefits to passengers participating in customer loyalty programs, organization of an integrated communication with customers) to create a synergy effect and position Russian Railways as a client-oriented company.
Dynamic pricing and return management system (DPRMS)
annual RepoRt 2009
The Federal Passenger Directorate formed a special working group and approved the respective work schedule in order to implement up-to-date DPRMS-supporting information technologies (Regulation No. 743r dated 11 September 2009). The working group has analyzed software available on the global market, carried on preliminary negotiations and consultations with the world's top software developers. As a result, the Company established close partner relations with foreign advisors having the most significant experience in implementation of the railway return management systems (Sabre Holdings, JDA Software Group and Lufthansa Consulting).
078
To make the rolling stock usage more effective and ensure high quality operations as well as provide clear positioning on the long-distance passenger market, Russian Railways is taking certain measures to standardize its rail car fleet. Efforts focused on equipment and rollingstock standardization enable to release certain rail cars used as a "hot" reserve. Unified rolling stock turnover helps to reduce the time rail cars stay at the stations where the trains are formed, i.e. car fleet is used more intensively. Equipment standardization helps to improve procurement and ensure lower transportation costs. The first stage in that program includes a pilot launch of six premium trains in summer 2009: No. 1/2 Moscow Kazan; No. 101/102 Moscow Adler; No. 23/24 Moscow Nizhny Novgorod; No. 29/30 Moscow Novorossiysk; No. 15/16 Moscow Yekaterinburg; No. 19/20 Moscow Rostov-on-Don. Apart from the branded name, those trains have consistent style exterior (the car bodies will be painted in the Company's corporate colors silver and grey- and will bear new large logos of Russian Railways), and interior solutions; passengers travelling by those premium trains will enjoy special tariff offers and maximal comfort. A unified organization models for all such trains includes 17 cars (1 luxury car, 3 first-class cars, 10 compartment cars, 2 economy-class cars and a dining car). Such trains will be formed only from new air-conditioned rail cars equipped with environmentally-friendly toilets. Compartments in such trains will have LCD TVs and will be closed by magnet cards distributed by the conductor. Head cushions of the lower sleeping berths in the compartment have headphones plugs. Toilets will operate even at the stops.
Launch of premium branded trains
There is a refrigerator, a sink, a microwave oven and a cooler in each staff room. It also has a monitor showing all functional indicators of the car. Besides, the rail cars are also equipped with network adapters and special systems enabling to transfer the passenger rail car's technical data to the staff car. Passengers traveling by premium trains may enjoy special tariffs based on the sleeping berth location (upper/lower). In addition, the passengers purchasing tickets in 45-31 days prior the departure date will enjoy a 20% special discount. Children under 10 years travel free in luxury rail cars. The passengers may also purchase a ticket in a compartment for men or women only. In 2010 2011, the Company launches new schedule for premium trains with more destinations: No. 41/42 Moscow Saransk, 103/104 Moscow Adler, 17/18 Moscow Perm, 35/36 Moscow Nizhny Novgorod, 11/12 Moscow Adler, 33/34 Moscow Valdikavkaz.
079
annual RepoRt 2009
FReight opeRationS
080
Freight operations
081
annual RepoRt 2009
As the traffic volume demonstrates a significant decline, the priority in transportation management is to organize transportation operations in all divisions of Russian Railways at minimal cost. Other areas of focus include improvement of the rolling stock usage quality and increase in the capacity of the most important rail lines. Special attention was paid to the savings from the traction fleet usage which is the Company's most cost-consuming item. For this purpose, the Company ensures daily optimization of the number of locomotives based on actual traffic volumes. During the year, over 2,000 locomotives were transferred to Russian Railways' inventories. The Company also uses similar procedures with regard to freight rail cars, where released and non-used rail cars are transferred to a reserve
thus reducing the periods of unproductive stops at technical stations and time spent for loading operations. This year the Company significantly reduced the downtime for the transit rail cars' processing at shunting yards (by 0.4 hours) and freight rail cars (by 4.7 hours). The Company actively implements working process-updating initiatives. Early this year, the Company established 19 new secure haul distance guarantees for freight rail cars thus increasing their average distance by 56 km.
082
Implementation of new technology to pass through high speed container trains will result in mean speed increase to 1,100 km/day, whereas secure haul distance guarantees for such trains increased twice and approximate 3,000 km. The Company continued to divert a part of its railway car traffic from diesel traction railway lines onto electrified railways. Due to prompt adjustments of existing railway car traffic, over 105.9 thousand of rail cars were transferred from the diesel traction which resulted in RUB 467.2 million savings. The Company also ensures the timely return of the rail cars owned by CIS and Baltic countries. In 2009, average daily expenses for maintenance of such rail cars were reduced more than twice. In 2009, the Company focused on improvement of the quality of the rolling stock usage. During the year, the Company improved all qualitative aspects of the rolling stock usage. Turnover of a freight rail car amounted to 7.45 days or 178.8 hours (-3.4 hours year-on-year). Service speed approximated 41.6 km/h, exceeding the 2008 level and established budget indicator by 1.0 km/h. Average daily locomotive efficiency amounted to 1,786 thousand ton-km exceeding the projection and 2008 level by 50 thousand ton-km, gross. The average weight of a train was 3,855 tons (40 tons more than in 2008).
FReight opeRationS
Average daily locomotive efficiency, thousands of ton-km, gross

188 188 188 188
184.8 182.16
180 180 180
178.8
180
172
172
172
172
2007
2008
2009
Freight car turnaround, hours

1800 1800 1800 1800
1786
1736
1720
1710
1720
1720
1720
1640
1640
1640
1640
2007
2008
2009
Average weight of a train, tons

3880 3880 3880 3880
Service speed, km/h

42 42 42 42
3.855 41.6
3840 3840 3840 41.5 41.5 41.5 41.5
3.815
3800 3800 3800 41 41 41
3.778
3760 3760 3760 3760 40.5
40.6 40.3
40.5 40.5 40.5
3720
3720
3720
3720
40
40
40
40
2007
2008
2008
2007
2008
2008
083
The Company's 2009 results were negatively affected by the declined demand for transportation services caused by the global economic crisis and industrial production slowdown. In 2009, the Company transported 1,108 million tons of cargo (-15% year-on-year). At the same time, as situation in freighting industries improved in the second half of the year, Russian Railways' sales and transportation units promptly responded to initially projected tonnage
annual RepoRt 2009
CHANGE IN TONNAGE AGAINST THE RESPECTIVE PERIOD OF THE PRIOR YEAR, % AVERAGE DAILY TONNAGE, MLN. TON 2008
0
Dynamics of freight turnover
reduction of 19% and Russian Railways ended a year in a green as it slowed the reduction down to -15% due to additional freight over 53 million tons. During the year, freight turnover caught up with the 2008 level. The most significant tonnage reduction was seen in January (33.1%). November and December 2009 demonstrated 5.5% and 11.4% increases, respectively, due to low comparable data of 2008.
Dynamics of change in tonnage handled in H1 2008 versus 2009

8 8 8 8 8 8 8
0.3
6 6 6 6 6
0.9 12.3
6
19.9
4
19.1 26.3
4 4 4
3666
3141
2 2
2751
2
3003
2
3215
2
3168
2
Q3 2008
Q4 2008
Q1 2009
Q2 2009
Q3 2009
Q4 2009
There was an increase in the tonnage handled with respect to the shares of the following freight: coal (+2.2 p.p., from 22.7% in 2008 to 24.9% in 2009), oil cargo (+2.8 p.p., from 17.8% in 2008 to 20.6% in 2009), ore (+1.0 p.p., from 9.7% in 2008 to 10.7% in 2009), fertilizers (+0.3 p.p., from 3.2% in 2008 to 3.5% in 2009), grain cargo (+0.2 p.p., from 1.8% in 2008 to 2.0% in 2009). The share of minerals and construction materials, ferrous metals and timber reduced by 4.2 p.p., 0.2 p.p. and 0.6 p.p., respectively.
Share of tonnage by the freight categories

40% 40% 40% 40% 40% 40%
30%
30%
30%
30%
30%
30%
22.7%
20%
24.9%
20%
17.8%
20.6%
20%
20%
20%
20%
10%
10%
10%
9.7%
10.7%
10%
10%
10%
3.2%
0 0 0 0
3.5%
0
1.8%
GRAIN
2.0%
2009
COAL
OIL CARGO
ORE
FERTILIZERS
084
In 2009, domestic transportation declined by 203.3 million tons or 21.0% and global transportation by 45.6 million tons or 8.9%, yearon-year. Export, import and transit services declined by 3.3 million tons (0.9%), 34.3 million tons (30.7%) and 8.0 million tons (26.3%), respectively. Overall tonnage handled decline against 2003 approximates 4.5%. In 2009, the average tonnage handled daily reached 3,036 thousand tons. In November-December 2009, there was a correction of negative trend in tonnage handled during 10 months of 2009 and in Q4 2009 average tonnage handled daily saw a 0.9% increase year-onyear. In 2009, Russian Railways focused on providing stable and effective transportation services to public, corporate and individual customers amidst the financial crisis, production decline and reduced demand for railway transport services.
FReight opeRationS
2007 2009 2007 GROWTH IN THE TONNAGE HANDLED, % YEAR-ON-YEAR ABSOLUTE TONNAGE HANDLED, MILLIONS OF TONS
Dynamics of average tonnage handled daily within 20072009, in thousands of tons

4000 4000 4000 4000 4000 4000 4000
3842 3755 3686

3600
3845 3713 3700 3584 3706 3648 3746 3667 3622 3720 3663 3612
3791 3622
3788
3759
3600
3607 3459
3619
3298
3200 3200 3200 3200
3215
3085 3005 2845

2800 2800
3136
3200
3230
3191 3085 3026
3200
2952 2973
2800 2800 2800 2800
2771
2800
2400
2412
JAN FEB
2400
2400
2400
2400
2400
2400
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
NOV
DEC
Dynamics of change in tonnage handled in 2004 through 2009

450,000 450,000 450,000 450,000
105%
350,000 350,000
104%
350,000
103%
450,000
450,000
450,000
103%
350,000
97% 1 311,3 1 344,2 1 303,7

250,000 350,000 350,000
250,000
1 273,1 1 220,9
150,000 150,000
85%
250,000 250,000
250,000
150,000
150,000
150,000
1 108,2
150,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
2004
2005
2006
2007
2008
2009
085
Government's anti-crisis measures for 2009 and continued raw material export transportation trends contributed to submission of cargo for transportation and helped to slowdown a year-onyear decrease in freight transportation. In 2009, total freight traffic including empty-run stock owned by third parties amounted to 2,271.4 billion ton-km. Freight traffic net of own and rented empty-run stock decreased by 11.9% to 1,865.3 billion ton-km. In performing the structural transformations of the railway transport, Russian Railways facilitates the steady operation of the transportation system, and the accessibility, safety, and high quality of the services rendered, thus contributing to a dynamic development of the national economy. In 2009, the volume of cargo carried by Russian Railways' subsidiaries and associates accounted for 51.2% of the total cargo railway traffic in Russia. (For details see Appendices 16-18).
annual RepoRt 2009
CHANGE IN THE TONNAGE HANDLED, % YEAR-ON-YEAR AVERAGE TONNAGE HANDLED DAILY, IN THOUSANDS OF TONS
Dynamics of average tonnage handled daily in 2009, in thousands of tons
5000
5000
5000
5000
5000
5000
105.5%
4000
111.4%
81.6% 77.8% 78.2% 77.3% 79.7% 2 952.2
86.8%
87.7
88.7%
89.2%
4000 4000
3000
66.9% 2 844.6 2 412.3

2000
3 005.2
2 972.6
3 085.5
3 135.6
3 214.6
3000
3 298.5
3 229.9
3000
3 190.7
3 085.4
2000
2000
2000
2000
2000
2000
1000
1000
1000
1000
1000
1000
1000
JAN
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
NOV
DEC
In 2009, share of freight traffic of rail cars owned by third parties and rented empty-run stock in overall freight traffic grew to 17.9% (2008: 12,7%). As the share of 3 Grade freight turnover decreased by 1.7 p.p., the share of 1 and 2 Grade freight turnover grew by 0.8 p.p. and 0.9 p.p., respectively. Share of timber, minerals and construction materials, fertilizers, grain cargo and other freight reduced by 0.5 p.p., 3.5 p.p., 0.4 p.p., 0.1 p.p. and 2.0 p.p., respectively, whereas share of coal, coke, oil cargo, ore and ferrous metals increased by 3.2 p.p., 0.1 p.p., 2.6 p.p., 0.6 p.p. and 0.2 p.p., respectively.
Transportation services competitive environment
Despite negative impact of the global financial crisis, Russian Railways ensures seamless operation of transport sector, availability, security and quality of the service provided, thus contributing to stability and sustainable development of the Russian economy. The state measures aimed at implementing the railway structural reform served as a powerful incentive for the expansion of competition inside the industry. As of the end of 2009, the freight car fleet managed by operating companies independent of Russian Railways has exceeded 416 thousand cars.
086
At the freight market, there are both independent operators established by private investors (GlobalTrans, Firm Transgarant (part of FESCO Group), Eurosib, Novotrans, Transoil) and operating companies set up by major natural resources and production financial-industrial groups and holdings (Gazprotrans, LUKoil-Trans, MMK-Trans, Metalloinvesttrans, Fintrans, Sibur Trans, and Uralkali). GlobalTrans Group incorporates Russian, Ukrainian and Estonian companies (including New Forwarding Company, Sevtekhnotrans, Ukrainian New Forwarding Company and Estonian companies Spacecom and Intopex Trans) operating in various sectors of transportation business. In December 2009, the Group acquired a controlling (50%) stake in LLC Balttransservis focusing on oil cargo transportation. The Group operates over 37 thousand freight cars (including 4.8 thousand rented cars)
FReight opeRationS
RUSSIAN RAILWAYS
75
300 300 300 Russian freight car fleet, units (as of 31.12.2009)
300
300
300
225
203
225
225
225
225
225
167
150 150 150 150 150 150
109
75
106
75
56
73
75
75
75
34
0
43 17 15
0
58
72
0.4
TANKERS
17 15
0 0
INDEPENDENT PRIVATE OWNERS RUSSIAN RAILWAYS' SUBSIDIARIES AND ASSOCIATES
GONDOLA CARS
PLATFORMS
COVERED BOX CARS
OTHER
Structure of the Russian freight car fleet (as of 31.12.2009)

3.8% 42.3%
34.3%
19.6%
RUSSIAN RAILWAYS
INDEPENDENT PRIVATE OWNERS
OTHER RUSSIAN RAILWAYS' SUBSIDIARIES AND ASSOCIATES
JSC PGK
LLC Firm Transgarant is a part of FESCO Transportation Group which includes subsidiaries rendering transport services in Russia, Ukraine and Latvia. It offers railway transportation services with regard to industrial freight. The company operates approximately 15 thousand freight cars (20% of them are rented). Novotrans Holding Company is a part of Siberian Business Alliance industrial holding. It operates over 12 thousand of rail cars (gondola cars, covered boxcars, tankers, platforms). LLC Transoil provides tanker freight transportation services. Its strategic partners include JSC Rosneft, JSC Surgutneftegaz, JSCTransnfeteproduct: The company operates over 12 thousand rail cars. Transport operations of Eurosib Group are presented by Eurosib Logistics, Eurosib SPb transport systems, Eurosib Terminal. The Group operates a 11.8 thousand car fleet.
087
LLC Gazpromtrans is a pools of JSCGazprom's railway assets. LLC Gazpromtrans transports the following types of freight: sulfur, oil products, liquefied petroleum gases. The Company operates 18.8 thousand freight cars (according to the Russian Railways data). LLC Metalloinvesttrans is a transport company within Metalloinvest Holding. LLC Metalloinvesttans provides railway transportation services to JSC Mikhailovsky GOK, JSC Lebedinsky GOK, JSC OEMK, JSC Urals' Steel and other metal companies, coal open pits and ballast quarries. Its rail car fleet approximates 8.3 thousand cars. In the course of railway restructuring, the freight car market saw an increased volume of cargo carried in private-owned railcars. In 2009, share of cargo carried by third party rail cars increased to 66.2% (2008: 50.3%). In 2009, the Company's share of the rolling stock operators' market (net of subsidiaries) amounted to 33.8% only. In 2009, share of subsidiaries and associates totaled 20.1%. Low share of Russian container transportation as well as the fact that trade flows between Asia-Pacific Region and Europe are very close to Russian transport network determine a significant potential of future growth with regard to Russian large tonnage container services. Currently, Russian Railways' priority (as stipulated in Strategy-2030) is a global standard quality of Russian railway container services. The Company is seeking the ways to solve that problem. In 2009, during the crisis-driven decline in freight volumes in traditionally "railway-transported" industries the Company focused on attracting additional container customers. Thus, large container export service grew to 420 thousand TEUs due to a 23.2% increase in number of high speed container trains. In 2009, the Company started to implement the Seven Day's TranSib transportation solution which is mainly aimed at increased export of transportation services through attraction of Japan, North-West China, East and West Europe container customers.
annual RepoRt 2009
RUSSIAN RAILWAYS (NET OF SUBSIDIARIES)
25
Improving the service quality
Share of private owned cars 20042009, %

100 100 100 100 100 100 100
31.5
75 75
34.0
75
35.0 1.0
75
38.5 1.2
75
41.0
75
46.1
75
50
50
50
50
50
9.3
50
50
20.1 68.5
25 25
66.0
25
64.0
25
60.3
25
49.7
25
33.8
0 0 0 0 0 0 0
SUBSIDIARIES AND ASSOCIATES OTHER OWNERS
2004
2005
2006
2007
2008
2009
Russian Railways experiences the toughest competition from the private companies in the following areas: oil cargo (share of private companies: 73.5%); fertilizers (73.4%); ore (55.7%).
088
Aimed at strengthening of the Russian Railways' international competitive position, Seven Day's TranSib will give an impetus to domestic and export and imports container services, strengthen the Company's position at the domestic container, especially in European part of Russia, where the share of motor vehicle transportation services is very significant.
FReight opeRationS
ROUTE DELIVERIES
340
Movements in large container traffic in 20082009, TEU

type of transportation 2008 traffic, '000 teu 2009 growth rate, % 2009/2008 structure of traffic, % 2008 2009
Total6 of them: export
1,613.1 418.4
1,221.3 420.0
75.7 100.4
100.0 25.9
100.0 34.4
Dynamics in average delivery speed by the types of deliveries in 20032009, km per day
380 380 380 380 380 380 380 380
366
360 360
369
360 360 360 360 360
350
340 340 340
350
355
340
340
349 340
320
320
320
320
320
320
320
317 312 307
320
TOTAL LOADED CARS WAGON DELIVERIES
300
300
300
300
300
297
300
293 287285
280
300
CONTAINER DELIVERIES
280
280
273 267
280
282 274 272
287 283
260 280
292287 261
280
280
260
259 252 242
260
270
260
260
260
260
266
240
240
240
240
240
240
240
220
220
220
220
223 218
220
220
220
222
220
EMPTY CARS
207
200 200
210
200
217
200 200
213 207
200 200
198
180 180 180 180 180 180
166
160 160 160 160 160 160 160 160
151
140 140
TSMALL DELIVERIES
140
140
140
140
140
140
140
120
120
120
120
120
120
120
6
110
100 100 100 100 100 100 100 100
2003
2004
2005
2006
2007
2008
2009
Together with transportation of empty large containers, 2009 traffic amounted to 1,936 thousand TEU..
089
In 2009, an average speed of freight deliveries grew by 17 km/day (+6.2% yearon-year) to 290 km/day, including: loaded cars (+8.2% up to 317 km/day); empty cars (+7.2%, up to 222 km/day).
annual RepoRt 2009
WAGON DELIVERIES
92
Speed and reliability analysis with regard to freight deliveries, 2009

Dynamics of delivery reliability by types of deliveries, 20032009, %
96 96 96 96
The Company ensured higher speed with regard to the following types of deliveries: route (+4.4% up to 355 km/day); wagon (+8.7% up to 312 km/day); container (+7.7% up to 307 km/day). In 2009, the Company increased the reliability of freight deliveries. 88.5% of freight was delivered within a normative period (+2.6 p.p. year-on-year), including: loaded cars 90.7% (+3 p.p.); empty cars 84.4% (+3.2 p.p.). The Company ensured reliability of the following types of deliveries in loaded cars: route 84.4% (+2.7 p.p.); wagon 92.8% (+3.5 p.p.); container 90.4% (+2.8 p.p.).
96
96
96
96
95.70
95 95
95.20
95
95.70
95 95 95 95 95
94
94
94.00 93.60
94
94
94
94
94
93.40
93 93 93 93 93
93
92.40
92
92.60
92 92
93.10
92
92.80
93
92.30 91.40
92.00 91.40
91
92
92
91.60
91 91
91.70 90.90
91
91
91
90.70 90.40
91
TOTAL LOADED CARS

90
90.20
90 90 90 90
90
CONTAINER DELIVERIES
90.00
89 89 89 89 89
89.30 88.80
89
89
88.80
88 88 88 88 88
87.60 87.60 87.70
88
88
87
87
86.80
87
87
87
87
87
87
86
85.80 84.90
86
86
86.40
86
86
86
86
86
85
85
85
85
85.10 84.40
85
85.00 84.70
85
85
84.80 84.40 84.40
85
SMALL DELIVERIES EMPTY CARS

84
84.70
84 84 84
84
84
84
ROUTE DELIVERIES
83
83
83
83.60
83
83
83
83
82
82
82
82
82
81.70
82
81
81
81
81
81
81
81.20
81
81
80
80
80
80
80
80
80
80
2003
2004
2005
2006
2007
2008
2009
090
The Company did not manage to restore precrisis deliveries' reliability (-0.3 p.p. against 2007), including: for route and small deliveries in loaded cars (-0.6 p.p. and -6.1 p.p., respectively) and empty car deliveries (-0.3 p.p.). In 2003 2005, delivery reliability was rather high (over 90%), in 2006 2008 it steadily decreased and positive trend arose in 2009 only. In 2009, therefore, the Company increased speed and reliability of its deliveries (except small deliveries), thus demonstrating better quality of service provided to the freight-owners. The Company slowed down the trend of lower speed and reliability formed in late 2008 early 2009 and improved quality of transport services provided to shippers.
FReight opeRationS
AVERAGE DELIVERY SPEED PER ONE SHIPMENT
0
to conduct activities to establish up-todate warehouse complexes on the basis of existing facilities of Russian Railways, including preparation to joint incorporation (together with investors) of subsidiaries (associates) for the purpose of construction and operation of those warehouse complexes; to initiate, coordinate and integrate projects related to development and implementation of Russian Railways' consistent policy to develop its warehouse infrastructure.
Relative change in the speed of delivery , by types of shipment in loaded cars 20082009
10.0 10.0
+8.7% (312 km per day)
10.0
10.0
7.5
7.5
+7.7% (307 km per day)
7.5
5.0
+4.4% (335 km per day) +2.7 .. (84.4%)
5.0
5.0
5.0
+3.5 .. (92.8%)
2.5 2.5
2.5
+2,8 .. (90.4%)
2.5
DELIVERY RELIABILITY
ROUTE
WAGON
CONTAINER
To improve efficiency of transport operation through a higher competitive position of the railway transport based on update of its warehouse infrastructure, wider scope of services of the better quality and attracting additional freight flows (Order No. 72 of V. I. Yakunin, Russian Railways President, dated 9 April 2009), the Company established a specialized structural unit of Russian Railways focusing on warehouse development. Its primary goals will include: to work out system solutions to ensure development of Russian Railways' warehouse complexes. Such solutions shall be focused on better client interaction, more effective infrastructure usage, better conditions for the increase in freight processed both due to wider capacities and advanced working techniques;
To create an up-to-date warehouse infrastructure, the Company needs to integrate a complex solution which requires it to examine a lot of factors including estimate of the container service market as well as global and domestic best practices. Warehouse center is assumed to be a public facility (nondiscriminating access, tariff preferences). Therefore, the Center: 1. has developed a technical and economic assessment of the Warehouse Center: Doskino station (Nizhny Novgorod); Dzerzhinskaya Novaya station (Kaliningrad, gauge 1520, 1435);
091
borrowings, preferably issued by foreign Kleshchikha station (Novosibirsk); credit and finance organizations; Khovrino station (Moscow); project financing; 9-th km station (Krasnodar Territory, dry export financing in respect to handling port); machinery supplies; Bataysk station (Rostov region); leases of weight-lifting, warehousing and Novokuibyshevsk station (Samara region, transportation equipment, software, etc.; combined with freight river port). real estate leases; 2. has developed standard technical private equity investments. requirements to a dry port function acting as 3. In 2009, the Company completes a pilot a group of specialized and universal dry ports development of technical and economic (including customs terminals) to service sea assessment of the Bely Rast Warehouse freight capacities. Center (Moscow region) comprising the 2.1 According to these requirements, following: adry port shall: container terminal; move non-core operations from the port universal center to process industrial freight; sites; wheel transport terminal (including ensure consolidation (by ship, train, etc.); containers); perform distribution (port, region, universal warehouse complex; continent, transit, etc.); customs clearance center; provide storage; business center; render a full scope of services (customs administrative building; clearance, value-added services, etc.). motor vehicle module; 2.2 The above functions help to: engineering and transport facilities. increase the ports' estimated capacity; reduce environmental burden and city traffic; reduce investment burden arising at forming enhancement of transportation efficiency port infrastructure and ensure its faster The Company implemented Economic-based commissioning; Transportation Improvement comprehensive structure freight flows thus reducing scientific and technical project (CSTP-1), probability of abandoning trains; according to which it is testing innovative reduce transportation costs incurred by techniques to manage operations at the parties involved in transportation, etc. aggregated section and realizes projecting Therefore, sorting activities of railway and planning functions, including: technical stations are replaced by warehouse current and daily shift planning of the processing at the dry port's container terminals. railway train operations; 2.3 Financing aspects of the Warehouse daily planning of the number of locomotives and dry port project may consider to satisfy the section's freight needs; the following: automated locomotive and locomotive crew budget investments (regional budgets traffic control at closed-loop sections. regional authorities, federal budget, federal target programs of the Ministry of Transport, the Ministry for Regional Development, the Ministry for Economic Development); private equity (contributions to share capital of projected companies) and strategic investors (subsidiaries and associates, investment companies and funds, logistic, warehouse and trade operators, retail, development companies, etc.);
annual RepoRt 2009
092
The Company developed and transferred for operation new technologies and software for projection and organization of local daily shift planning to ensure proper car distribution according to freight applications, etc. In accordance with instruction of the Russian Railways' Scientific and Technical Council (Minutes No. 2, p. 6, dated 29 April 2009), the Company made preparations necessary to distribute Seven Day's TranSib solution in other railway routes. As an interim stage of the Seven Day's TranSib solution's implementation, the Company organized regular container train departures (trains are formed by JSC Transcontainer, CJSC Russian Troika) from Nakhodka-Vostochnaya and Vladivostok stations of the Far Eastern Railway to stations located at the Moscow hub starting from March 2009. Currently, average travel time is 8 days, average speed is 1,148 km/day. Besides, the Company uses an innovative high speed train passing technology to organize intermodal passenger traffic between Nakhodka Vostochnaya and Martsevo station of the North Caucasus Railway. The company also uses that technology for returning trains. Starting from April 2009, the Company sent 19 container trains from Moscow Railway Hub to Zapadno-Sibirskaya, Sverdlovskaya railways. In 2009, the Company took certain measures to improve quality and efficiency its transportation operations. It started trial progressive traction management (which includes overall locomotive fleet belonging to two or more railways) at the most important railway sections and enhanced aggregated and heavy-tonnage trains handling operations. Technological innovations and timely management decisions ensured fulfillment of all budgeted quality indicators. To ensure proper organizing of transportation at all management levels of the Central Traffic Management Office, the Company further developed its ideology assuming transition from territorially-based management to management by railway sections using the same technologies. The ideology development is presented in thecomprehensive scientific and technical project (CSTP-1). The Company decided to test the above ideology at Chelyabinsk-Rybnoye route passing through Yuzhno-Uralskaya, Kuibyshev and Moscow railways. Due to changing transportation environment and ongoing reforms in the Company's management its information needs have grown. Significant changes have been introduced to statistical accounting of the Company's operating results. Starting from 1 January 2010, Russian Railways completed transition to fullyautomated arrival/departure monitoring system for passenger trains that ensures fair assessment of the service quality, enhance responsibility of dispatcher and technical functions and improve the passenger service quality.
FReight opeRationS
093
annual RepoRt 2009
paSSengeR opeRationS
094
Passenger oPerations
095
annual RepoRt 2009
In 2009, the passenger operations division worked to fully meet existing demand and provide effective transportation services to the population as well as to ensure fast and sustainable development and improve the quality of passenger services. Over 1.1 billion people traveled by railway in 2009 (88.0% of the 2008 result), including:
Long distance 120.1 million passengers (88.5% of the 2008 result) Suburban over 1.0 billion passengers (87.9% of the 2008 result) Passenger traffic was 153.6 billion passenger/km (87.3% of the 2008 result), including: Long distance 115.4 billion passenger/km (89.3% of the 2008 result) Suburban 38.2 billion passenger/km (81.7% of the 2008 result)
096
129.2 115.4
1125 1125
1500
1500
1500
130
130
130
1159.7 1019.4
1125
97.5
97.5
97.5
750
750
750
65
65
65
46.7
375 375 375 32.5 32.5
38.2
32.5
135.7
0
120.1
0 0 0 0 0
2008 2009
LONG DISTANCE
SUBURBAN
LONG DISTANCE
SUBURBAN
Enhancing transportation sErvicEs in a timE of rEcEssion Long-distance passenger operations
Amid the economic crisis, long-distance passenger operations were most heavily affected in the deregulated segment, first-class sleeping cars and compartment cars showing a year-on-year decline of 13.5% in 2009 as compared with economy-class sleeping cars and sitting cars that dropped by a mere 7.9%. In light of the situation in the passenger transportation market, the Company revised its fare policy for first-class sleeping and compartment cars in early 2009: In 2009, rates were adjusted for inflation gradually on a quarterly basis, instead of aone-off adjustment: Q1 1.08, Q2 1.03, Q3 1.035, no adjustments were made in Q4. The flexible regulation schedule was changed in order to smooth the peaks in traffic in the time of public and school holidays. The Company managed to slow down the decline in passenger transportation in summertime, when transportation is in mass demand. In 2009, most Russian tourists chose resorts in the CIS and Russia instead of going abroad, as the results show. When the summer vacation period began (2009), the decline in passenger traffic slowed down from 14% to 8%, while traffic on the connection to the Black Sea coast of the North Caucasus grew by 4% year on year.
In order to stabilize the declining traffic, the Company took a number of steps aimed to reduce tariff burden in the deregulated segment in advance of the summer period. A 20% discount on tickets to the Black Sea coast of the North Caucasus and Mineralnye Vody made it possible to increase traffic in that direction by 4% as compared with an 8% year-on-year decline for the overall network. A 20% discount on trains No. 400 and 500 departing from 1 June to 30 September 2009 helped offer additional cost-efficient options to passengers. As many as 62,900 passengers were attracted (+6% year on year). A 10% discount for early purchase of tickets made it possible to plan supply more reliably for the whole network. As many as 41,700 passengers were attracted (+2% year on year). As the flexible tariff regulation schedule was aligned in the summer of 2009, fares for first-class sleeping cars and compartment cars could be reduced to the 2008 level (down an average of 1% in June and July and 5% in August). As a result, the decline in traffic slowed down and 1,073,500 passengers were attracted. Today passengers may bypass the traditional ticket office, i.e. choose travel conditions and pay the fare with a card on the web and receive the ticket.
Passenger departures, million people
Passenger traffic, billion passenger/km
097
Internet users have been offered a new option of electronic registration, a service eliminating the necessity to have one's ticket issued by the ticket office before boarding a train. Since 1 December 2009, the service has been available to passengers on trains No. 001 to 199, including Sapsan rapid service. Registration terminals were put in trial operation at Leningradsky Terminal in Moscow in December 2009. The kiosks do not have banking software required to purchase tickets and are intended for passengers to print out their tickets that have been paid for via the Internet. As a result, one does not have to queue at the ticket office. The Company expects to install similar terminals at all major ticket selling points in 2010. Over 3.2 million electronic tickets were purchased via the Internet in 2009, up three times year on year. Over 1.7 million tickets were booked via self-service kiosks and 43,000 tickets were printed out after electronic registration. In order to eliminate fare evasion on suburban trains, the Company contracted third-party providers to sell tickets and control that passengers do not evade paying the fare. As control was intensified, total revenues increased 19% year on year on the railway sections where such third-party providers worked. The Company established a permanent office for ensuring order at stations and neighboring areas. The following pilot projects were implemented to introduce new service types: Passengers on Alexander Nevsky train (North-Western Regional Directorate) may watch satellite TV and video films and access the Internet en route as the train has been equipped with a multifunctional information system, INBERA. Five luxury trains offer passengers an opportunity to watch movies on individual DVD players. Roughly 9,000 passengers used this service in the time of its trial operation. In some long-distance trains, passengers can enjoy good coffee made with coffee machines. The service is available from August 2009 and over 11,000 passengers have used it. In 2010, the service will expand. The Sverdlovsk Regional Directorate introduced a pilot fitness compartment in one the coaches in the Ural train from Sverdlovsk to Kislovodsk . Within the 1520 Forum, Russian Railways and Societe Nationale des Chemins de fer of France signed an agreement for future cooperation. The top priority areas of cooperation include the development of terminal facilities and interconnected electronic booking systems. The companies agreed to expand the ticket distribution network for the connection Russia-France: From 19 June 2009, using SNCFs booking system, and From 20 October 2009, using Rail Europe booking system, which was developed by SNCF and spans 13,000 sale points in 48 countries. In the near future, a new feature will be implemented that will enable selling tickets via Russian Railways' booking system and SNCFs booking system for high-speed domestic trains in France and in Russia, respectively. This will be a critical step to extending distribution channels.
Subsidiaries, associates and independent carriers
annual RepoRt 2009
Two independent carriers, CJSC TC Grand Service Express and LLC Tverskoy Express, have introduced long-distance service between Moscow and Saint Petersburg. The share of private carriers in total longdistance departures is 0.3% or 305,000 passengers. In parallel with private carriers, subsidiaries and associates of Zapadno-Sibirskaya and Sverdlovskaya railways provide long-distance passenger services. In the reporting period, they carried 1.75 million passengers on their luxury trains, or 1.5% of total long-distance departures. It is an objective of the Program for the Structural Reform of Rail Transport to establish suburban transit subsidiaries in order to reduce the loss ratio of suburban passenger operations and improve the quality of passenger services.
098
As at the end of 2009, 17 suburban passenger companies operated within the railway network. Five of them were established in 2009. All companies are engaged in the carrier business, significantly expanded their reach and operate in 38 out of 73 regions in which suburban railway connections exist. As at 31 December 2009, 17 suburban passenger carriers in which Russian Railways has participation operated in Russia: Central Suburban Passenger Company, Moskovskaya Railway Aeroexpress, Moskovskaya Railway Express-Suburban, Zapadno-Sibirskaya Railway Omsk-Suburban, Zapadno-Sibirskaya Railway Kuzbass-Suburban, Zapadno-Sibirskaya Railway Altai-Suburban, Zapadno-Sibirskaya Railway Severo-Zapadnaya Suburban Passenger Company, Oktyabrskaya Railway Krasprigorod, Krasnoyarskaya Railway Don-Suburban, Severo-Kavkazskaya Railway Volgogradtransprigorod, Privolzhskaya Railway Sverdlovskaya Suburban Passenger Company, Sverdlovskaya Railway
Suburban transportation
Express Primorya, Dalnevostochnaya Railway Federal Passenger Company Permskaya Suburban Company Volgo-Vyatskaya Suburban Company Moskovsko-Tverskaya Suburban Company Sodruzhestvo In 2009, the carriers provided transportation services to 546,984 passengers (53.7% of total departures for the network) with passenger traffic amounting to 19,582 million passenger-km (51.3% of total traffic for the network). With the existing system of rail transport management, suburban services are a loss-making segment, which is financed by revenues generated by freight operations and, partially subsidized by regional governments. In 2009, Russian Railways income from passenger operations amounted to RUB18.4billion for the whole network, excluding suburban passenger companies. Expenses were RUB43.2billion. Compensation for income shortfall was RUB2billion. Accordingly, the Company spent RUB24.8 billion to cover losses from suburban passenger operations.
099
One of the most acute issues relating to the desired break-even position of the suburban segment is fully compensating for carriers income shortfalls resulting from tariff regulation in regions and implementing Decree No. 950 of the Government of the Russian Federation to that end (Decree No. 950 of 10 December 2008 Concerning the Participation of Regional Executive Bodies for Tariff Regulation in the Russian Federation in Government Regulation and Control of the Activities of Natural Monopolies).
annual RepoRt 2009 What nEEds to bE donE:
Addressing the issue of the loss-making suburban segment of Russian Railways

What has bEEn donE:
new income and expense classification based on activity types, tariff components and work categories enacted by order of the Ministry of transport of 17 august 2007 registered bythe Ministry of Justice under no. 10196 on 27 September 2007
enacting Federal law Concerning general principles underpinning the organization of Rail transport Services for Suburban passengers
Decree of the government of the Russian Federation Concerning the participation of Regional executive Bodies for tariff Regulation in the Russian Federation in government Regulation and Control of the activities of natural Monopolies
Decree of the government of the Russian Federation Concerning approval of the Rules for Subsidizing Railway organizations to Compensate for income Shortfalls Resulting from infrastructure Service tariff Regulation in Suburban transportation
Methodology for determining economically viable tariff rates for suburban passenger transportation in constituent entities of the Russian Federation developed and submitted to the Federal tariff Service for approval (the Methodology was approved in 2002 and concurred with the Federal energy Commission, Ministry for Means ofCommunication, Ministry of Finance andMinistry of economic Development andtrade)
approving the methodology for determining economically viable tariff rates for suburban passenger transportation in constituent entities of the Russian Federation in order to calculate income shortfalls resulting from government regulation of tariffs
introducing contractual relations between carriers (Russian Railways or other) and clients (regions)
Concept of tariff Book no. 10-02-16 developed and approved by the Federal tariff Service (30 September 2006) (including tariff for infrastructure services in suburban passenger transportation (chapter iV))
gradually implementing new tariff Book no.10-02-16, including tariff for infrastructure services in suburban passenger transportation
100
Action has been taken to eliminate fare evasion in suburban trains: 1. Program has been implemented to introduce new ticket types on suburban connections: All-week tickets valid for several months, weeks or days Tickets for working days only, valid for several months, weeks or days Tickets valid on certain days of the week or dates within a month Tickets for week-ends only, valid for several months, weeks or days Tickets for a certain number of trips 2. In the summer period, additional ticket offices are operated at 270 suburban train stops. 3. In October 2009, a pilot project was implemented to introduce self-service payment kiosks from which tickets can be obtained. To encourage passengers to buy tickets from ticket offices and enhance the quality of services, the first stage of the new suburban ticket system has been implemented on Oktyabrskaya, Moskovskaya and Gorkovskaya railways to enable issuance, control and accountability of tickets valid for 10 and 20 days. Cooperation with transit police has been enhanced to ensure law and order at suburban railway facilities and provide additional security to carriers controlling officers and fare control offices. Pursuant to Regulation No. 1382r of Russian Railways of 1 July 2009 On Security Escort Services of CJSC CHOP RZD OKHRANA on Suburban Trains and to Train Ticket Sellers in 2009, escort services have been available on the Moscow Tver section of Oktyabrskaya Railway since 3 July 2009. Since 1 August and 1 September, similar activities have been undertaken on trains running in the Vitebsk direction from the Saint Petersburg hub and on the Moscow Aleksandrov section of Moskovskaya Railway, respectively. On suburban trains running in the directions mentioned above, control was arranged and is performed by joint teams of ticket sellers, law enforcement officers and representatives of private security firms.
LLC CHOP RZD OKHRANA, a subsidiary of Russian Railways, has been responsible for security at suburban passenger facilities since 2009. In addition to its direct duties, LLC CHOP RZD OKHRANA ensures that the corporate interests of Russian Railways are met by preventing abuse on the part of carriers controlling officers.
Terminal facilities
Pursuant to the instructions of the final meeting of Russian Railways' Management Board with regard to ensuring the break-even position of services provided to passengers at railway terminals and improving the quality of services, the following measures were implemented:
analyzing market lease rates
As of 1 January 2009, lease agreements were re-entered on the basis of market rates at all railway stations operated by the Directorate. As a result, income from leased assets increased by RUB 495 million or 176% in 2009 year on year.
putting vacant space in commercial use
In 2009, the Company put in commercial use roughly 5,500 sq.m of space that had been vacant. Additional annual income from leasing that space is RUB 95 million. In 2009, total lease income grew by approximately RUB 590 million year on year.
101
In January 2009, Kursky Terminal was transferred to a trustee, resulting in significant improvements in the terminals financial and economic performance: annual revenues grew more than three times as compared with the period before the renovation and transfer and profit increased more than fivefold. Revenues from lease and fee-based services for passengers amounted to RUB 298.5 million in 2009. Therefore, RUB 637 million invested in the renovation of the terminal will be compensated in full from the terminals revenues within 3.5 years.
promoting partnership with network operators
Since 2009, network operators have been encouraged to provide fee-based services to passengers and visitors at the Directorates stations. In tender procedures, network operators have been awarded contracts to operate vending machines, payment terminals, retail outlets and drug stores. This year, options worth a total of RUB 202.9 million were sold to third-party vendors for use of the Directorate's infrastructure. Options in the amount of RUB 57.7 million have been paid. Attracting network operators will help ensure high occupancy of leasable space and significantly enhance service quality over the whole grid of stations operated by the Directorate. In 2010, the Company will continue to attract network operators in such segments as catering, media products, cell phone shops, ice cream counters, personal services, etc. Additional income from selling options in 2010 is roughly estimated at RUB 350 million.
In summer, the Company implemented a pilot project, RZD Taxi, to introduce taxi service of an authorized operator at Kursky Terminal. In November, based on the positive experience, taxi operators were selected in a public tender to provide service first at terminals in Moscow, including Kievsky, Yaroslavsky, Belorussky and Leningradsky. Fees are determined on a zonal basis helping reduce the price by a factor of 2 or 3 as compared with illegal carriers. Activities have been undertaken to formalize land relations with prefectures of the Central Administrative District in Moscow in order to allocate space for taxi stands before taxi service can be introduced at other terminals. In 2010, the Company expects to implement taxi service with the brand RZD Taxi by entering in franchise arrangements primarily at off-grade and first-grade stations.
Signing contracts for the provision and operation of sanitation facilities
In August 2009, contracts were signed for the provision and operation of sanitation facilities at Kazansky, Kievsky, Paveletsky and Yaroslavsky terminals. As a result, revenues from such facilities grew by an average of 3.3 times at the terminals listed above. Annual revenues will increase by approximately RUB 70 million and profit will grow by RUB 25 million or more than 30 times. Based on the positive experience, the Directorate plans to gradually outsource services at all off-grade and first-grade stations in 2010. Inthe first place, such services include services with high economic potential such as luggage offices and porters, sanitation facilities and rooms for long stay.
annual RepoRt 2009
Completing the renovation of Kursky terminal
launching RZD taxi project
102
In 2009, RZD Transfer project was launched jointly with the Government of Moscow in order to provide free shuttle services connecting railway stations to bus stations in Moscow and sell longdistance bus tickets at such stations. First of all, the project helps build relations with road carriers and ensure consistent routes and schedules. Theobjective is to develop bus connections to localities which have no direct railway connections and partially compensate for income shortfalls from the provision of bus services from railway stations. Inaddition, cooperation with authorized road carriers at stations helps significantly improve passenger safety and prevent illegal business practices in road transportation. The initiative is also being implemented in pursuance of Instruction No. VP-P4-1814 of Prime Minister Vladimir Putin of3 April 2009 with regard to ensuring order at railway stations and in neighboring areas.
introducing additional services for passengers on Sapsan rapid trains
implementing RZD transfer pilot project
Within the project for introducing Sapsan rapid service between Moscow and Saint Petersburg, business class passengers have been provided with RZD Taxi and luxury departure lounge services. Passengers may order taxi while on the train.
establishing a network sales agency
In 2010, Russian Railways plans to establish a network sales agency with outlets at all stations of the Directorate and a shared call center, which will process orders for RZD Taxi and Transfer services, etc.
103
annual RepoRt 2009
infRaStRuCtuRe of RuSSian RailwayS
104
Infrastructure of russIan raIlways
105
annual RepoRt 2009
In 2009, the railway networks average Condition of traCk infrastruCture As at 31 December 2009: freight traffic density declined by 3.8 million gross Total length in use is 85,281 km, including tons year on year to 29.6 million gross ton/km p.a. gauge width: Average freight traffic density is sustainably 1,520 mm 84,446 km; 1,067 mm high along the main freight directions: Zabaikalskaya 805 km; 750 mm 30 km. Railway (53.1 million gross ton/km p.a.), Zapadno Total length of the main track is Sibirskaya Railway (48.2 million gross ton/km p.a.), 124,163km, including rail types: Vostochno-Sibirskaya Railway (40.3 million gross R-75 1010 km (0.8% of the total main ton/km p.a.), Gorkovskaya Railway (37.7 million track length); R-65 118,980 km (95.8% gross ton/km p.a.), Sverdlovskaya Railway (33.3 of the total main track length); R-50 and million gross ton/km p.a.), Yuzhno-Uralskaya Railway similar weight 3,441 km (2.8% of the (32.2 million gross ton/km p.a.) and Krasnoyarskaya total main track length). Railway (31.72 million gross ton/km p.a.). Track on crushed stone, graded gravel and asbestos 123,064 km or 99.5% of the total ballasted track.
106
Stretch of continuous welded rails, 000 km

80.0 80.0 80.0
67.1
40.0 40.0
70.9
74.4
80.0
40.0
40.0
2007
2008
2009
Continuous welded rails 74,403 km or 59.9% of the total main track length. Track on reinforced concrete sleepers 79,382 km or 63.9% of the total main track length. Heat-strengthened rails 111,369 km or 89.7% of the total main track length. As at 31 December 2009, 166,975,000 switches, 138 tunnels and 30,727 bridges are in use. In 2009, regular track repairs were accomplished. 7,400 km of track was repaired and commissioned, including 1,700 km of track reconstructed using investment funds. The remaining 5,700 km of track underwent capital repairs using new and used materials, medium or substantial repairs, for which capital expenditure was allocated. As the volume of capital track repairs declined in 2009, the number of track sections with exceeded tonnage capacities and expired lives increased. As at 31 December 2009, such sections totaled 19,400 km (15.7%), including 10,500 km of first- and second-grade tracks and 8,900 km of third and fourth-grade tracks. The number of main track rails with defects decreased to 81,430 (down 11,150) and their length accounted for 0.70% of the total main track length. The proportion of worn-out wooden sleepers on the main track increased to 11.57%, up 0.39% year on year from 11.18% in 2008. The number of defective crossing sleepers of wood declined by 10,000 for the whole network and was 54,400 on the main track, i.e. down 5.5%. Defective switches accounted for 1.0% of overall network switches (2008 1.3%).
The Company has continued to gradually expand the reach of continuous welded rails on reinforced concrete sleepers and resilient rail fastenings. As a result of regular reconstruction and capital repairs, the length of the main track increased in 2009: Track on reinforced concrete sleepers: by 3,000 km to 79,380 km (63.9% of the total main track length). Continuous welded rails: by 3,150 km to 74,400 km (59.9% of the total main track length). Track with type ARS and ZHBR resilient fastenings: by 1,960 km to 13,950 km (18% of the total track on reinforced concrete sleepers), including track with ARS fastenings 4,740 km and track with ZHBR fastenings 8,690 km. Track with separating layer: by 2,770 km to 18,480 km (14.9% of the total main track length). The proportion of the main track on heatstrengthened rails increased to 89.7% of the total main track. Successfully completing planned work on track improvement made it possible to increase traffic speed on sections and station main tracks with a total length of 3,200 km and 3,800 km for passenger and freight trains, respectively. Speed was increased on 395 receiving-and-departure tracks (430.7 km). On the 2009 schedule, weighted average admissible speed was 89.6 kmh and 72.2 kmh for passenger and freight trains, respectively. The condition of tracks was awarded a score of 37 points in 2009, down 5 points from 2008 (2008 42 points). The average number of inadequate quality kilometers declined by 304 to 665 year on year (2008 969 km).
107
As at 31 December 2009, there are 82,947 engineering structures with a total length of 2,481,280 running meters across the network of railroads in Russia (31 December 2008 82,898 structures, 2,465,580 running meters). Some bridges were reconstructed into pipes and data were adjusted in the process of registration. As a result, the number of railway bridges, pipe bridges and viaducts increased to 30,727 as at 31December 2009 (31 December 2008 30,949) and their total length grew to 960,900 running meters (2008 959,700 running meters). In 2009, there were 49,651 pipes (2008 50,357) and 217,670 running meters of culverts (2008 1,409,770 running meters). In the reporting period, the number of culverts increased as smaller defective bridges were reconstructed into conduits, new culverts were put in use, old culverts with an insufficient water carrying capacity were upgraded and adjustments were made to data. In the period before 2009, the overall number of pedestrian bridges increased as data were updated, some structures were upgraded or newly built and some defective bridges were dismantled. Asat 31 December 2009, there are 1,098 pedestrian bridges (172,130 running meters) (2008 968bridges). Currently, 138 tunnels (109,260 running meters) are in use across the railway network. Ensuring robust performance of technical equipment through optimized cost structure to maintain actual performance at all major levels directly responsible for the transportation safety is one of the main objectives to be accomplished in the context of cutting and saving operating expenses in line with operational capabilities and scope of work in connection with power supply equipment modernization amidst the financial crisis. The main focus is on replacing old type constructions and power supply elements and using highly robust and easily maintained networks. Failures in the Companys power supply system are caused mainly by growing depreciation rates and ageing factor. Over 53,600 km of electrified track miles are operated with service lives exceeding the norm (46%), 80% of which cover the main freight and passenger routes. Over the past ten years, ageing ratio has been increasing at a rapid pace to reach 1,500 to 3,000 km of aged equipment per annum.
annual RepoRt 2009
Bridge infrastructure
Condition of the power supply system
Railway engineering structures 20082009 Number of engineering structures Stretch of engineering structures, 000 running meters
84000 2000 2200 2400 2600
81000
82000
83000
2009
81000 82000
82947
83000
2009
84000 2000 2200 2400
2481.3 +15.7 2465.6

2000 2200 2400 2600 2600
+49
2008
81000 82000
82898
83000 84000
2008
108
The same is true for the traction substations with equipment, taking into account its service lives and physical condition, have to be upgraded at 763 traction substations (54% of the total) and 3,600 (81%) reducing and traction transformers. The share of technical failures at certain sections reaches 35% to 45% of the total number of failures. Main strategic objectives and measures include: For the transportation safety purposes, the share of tracks with expired service life should be reduced through investment programs and overhaul repairs. Used elements and equipment with low operation reliability should be replaced with high-technology and robust equipment. Complex diagnostic methods and techniques should be used on an extensive basis (periodic diagnostic of power transformers, surface diagnostic of overhead system, etc.). Functionality of track testing cars for VIKS-TS type overhead system should be enhanced, including through new control system integration.
Energy consumed by railways
3.6% 85.8% 10.6%
42.8 BILLION kWh
Electrified tracks account for 85.5% of the total freight and passenger traffic, with electrified sections comprising 50.6% of the total length of railways in Russia. For single-track hauling operations, energy consumed per km of length in use reduced by 11.3% against 2008, particularly at Kuibyshevskaya railway 23.3%, South Urals railway 22.4%, and Zapadno-Sibirskaya railway 15.8%. Given the lower traffic volumes, there was a 9.5% reduction in energy consumption in 2009. Thus, railways of Russia consumed 42.8 billion kWh of energy, of which 36.7 billion kWh was allocated to hauling operations (a 9.9% reduction), and 6.1 billion kWh to railway junctions (a 6.9% reduction). Of the total energy consumed by railways 85.8% attributes to hauling operations, 10.6% operating needs, 3.6% other consumption. In 2009, the railways consumed 4.5% of the total power supply in Russia (2008 4.7%). The electric traction efficiency is 1.71-times higher in terms of fuel consumption and 4.6-times higher in value terms as compared to diesel traction. Along with the increase in the electric traction traffic volumes from 84.0% in 2008 to 85.5% in 2009, there have been seen a reduction in the number of transportation safety violations at the electrification and power supply level. From 2006 to 2008, the number of events (number of failures) reduced by 28.7% (total reduction for Russian Railways 14.5%) as a result of comprehensive measures implemented to improve transportation safety through carrying out organizational activities, integrating new equipment and technologies, realizing investments to acquire new equipment and reinforce infrastructure. In 2009, the number of such events reduced by 4.5% year-on-year, with overhead system condition graded at 37.5 points (excellent).
TRAIN TRACTION
OPERATING NEEDS
OTHER CONSUMPTION
Energy consumption
109
Resource efficiency program implemented in 2009 at the electrification and power supply level resulted in energy and cost savings of 41.53 million kWh and RUB 74.25 million. As part of the program, 14 twelvepulse rectifier transformers were put into operation (higher capacity rate 0.940.96, energy consumption for hauling operations savings up to 2.5%, reactive energy consumption 2.5-times less), energy saved 11.03 million kWh, annual economic benefit amounted to RUB 18.13 million. Photodiode lighting systems were installed at portal structures of four stations, energy saved 3.63 million kWh, annual economic benefit amounted to RUB 6.32 million. High-mast lighting units with 144 energysaving lamps were installed, energy saved 26.87 million kWh, annual economic benefit amounted to RUB 46.8 million. Since August 2001, there have been no accidents or wrecks at the automation and remote control level. In 2009, the number of transportation safety violations (events) decreased by 17.7% year-onyear, and amounted to 28 events against 34. In 2009, the number of railroad automation and remote control system failures caused by unauthorized interference decreased by 42.3% against 2008, with a pro rata decrease in the number of trains delayed (117 trains in 2009 against 252 trains in 2008). In 2009, the number of train delays caused by unauthorized interference amounted to 7.2% of the total number. The automation and remote control systems of railroad sections adjacent to metropolises are more exposed to unauthorized interference. In 2009, the overhauling of signals and interlocking systems amounted to RUB 3.8 billion used to repair 2,700 km of interlocking (100% against the annual plan), 6,517 power switches (101%), 229 railway car retarders (101.7%), 1,478km of railway signaling system cable lines (100.4%), 66 compressor plants (100%), 32 special purpose self-propelled rolling stock vehicles (103.2%). With the decreasing traffic volume, the overhauling of the signals and interlocking system allowed maintaining the system operations and reducing the number of malfunctions by 11%. The automation and remote control division accounts for 3.5% of the Russian Railways' total fixed assets. Fixed assets of the division are financially depreciated as follows: buildings 16.57%, constructions 24.32%, transfer devices 40.67%, machinery and equipment 28.99%, transport vehicles 42.61%, production equipment and tools 56.59%.
annual RepoRt 2009
automation and remote Control
Railroad automation and remote control equipment operate across the railway network of Russia at 203 signals and interlocking locations and 1 automation and remote control maintenance center. Centers for engineering diagnostics and monitoring of railroad automation and remote control equipment operate at Oktyabrskaya, Zapadno-Sibirskaya and Severo-Kavkazskaya railways. In 4th quarter of 2009, changes were made to management structure on two pilot railroads (Krasnoyarskaya and VostochnoSibirskaya) as part of the transformation to the nondepartmental management structure. As of 31 December 2009, an average length of signals and interlocking distances is 417.6 km, with average headcount per location reaching 184 employees. Length of tracks equipped with automatic interlocking systems (AIS) and centralized traffic control is 62,055 km or 72.9% of total length of tracks in use. As of 31 December 2009, the aggregate length of double- and multi-tracks in use reaches 36,360 km, of which 29,381 km (81%) are equipped with double-sided continuously operating AIS, including main routes 24,448 km (92%) and other routes 4,934 km.
110
The work to renovate and upgrade the automation and remote control system was completed at 125 locations: 1,258 power switches, 642 km of interlocking, 498 km of centralized traffic and remote control systems. The total number of automation and remote control units (including signals and interlocking projects) renovated in 2009 comprised 2,261 power switches, 774 km of interlocking, 998 km of centralized traffic and remote control systems. In 2009, the automation and remote control department together with the industry researchers and engineers implemented the following research and engineering projects to improve the automation and remote control system: To protect microprocessors from lighting and switching overvoltage, Bombardier Transportation (Signal) LLC developed and commissioned MPC Ebilock-950 interlocking system; Foratec AT CJSC and Siemens work together to develop MPTs-MZ-F an integrated , computer-based interlocking system to protect infrastructure from lighting and switching overvoltage at three pilot locations; Automation and remote control devices such as APK-DC, ASDC, ADC-SCB were developed and are being integrated across the diagnostic system network; Based on these systems, the railroad automation and remote control diagnostic and remote monitoring centers have been established at Moscovskaya, Kuibyshevskaya, Sverdlovskaya and Gorkovskaya railways. The APC-DC remote control system functions include technical diagnostics of power supply network, supply voltage and uninterruptible power supply (UPS) quality control, with signaling point control unit and voltage and insulance monitoring system AKNSI-8 put into constant operation. Automated maintenance technology for automation and remote control system based on APC-DS (Tikhvinskaya signals and interlocking area of Oktyabrskaya railway) and ADC-SCB (Salskaya signals and interlocking area of North Caucasus railway) was put into constant operation. For the purpose of developing and integrating easily maintained, air and vandal-proof trackside signals and interlocking system in 2009 the following were put into constant operation: photodiode light-optical railway traffic lights for decentralized interlocking systems; impedance bond with secondary winding, DTSH-1-300; ZVU and PZ-5 pk car retarders for park and lump retarder positions high-speed control equipment for VUPZ-05 car retarders; developed and integrated VSP series power switch machines, switching and closing equipment for high-speed track switches (project 2956, 2968); 592 luminous traffic signs with light emitting diodes and 799 attitude director indicators with light emitting diodes were installed across the railway network as part of resource efficiency program for 2009, for the total amount of RUB 25,540 million and RUB 22,434 million, respectively. As a result of Investment and repair programs implemented in 2009, the number of violations related to transportation safety and railway transport operations at the automation and remote control level reduced by 17.7% year-onyear (28events against 43 in 2008), with the total number of failures in the automation and remote control system reduced by 14.5% (17,830 failures against 20,845 in 2008).
111
The inventory stock of Russian Railways is composed of 20,101 locomotives, including 2,409 passenger electric locomotives, 536 passenger diesel locomotives, 7,417 freight electric locomotives, 3,750 freight diesel locomotives, and 5,989 diesellocomotive shunters. The service life of 796 passenger electric locomotives (18.66%) in stock has expired, of which 483 are DC locomotives and 313 are AC locomotives.
Structure of the locomotive fleet of Russian Railways
33% 7% annual RepoRt 2009
desCription of rolling stoCk Locomotives
126 diesel locomotives, of which: freight diesel locomotives 26 units (2TE25K 5 units; 2TE25A 1 unit, and 2TE116U 20 units); passenger diesel locomotives 20 units (TEP70BS 20 units); diesel-locomotive shunters 80 units (TEM7A 15 units and TEM18D 65 units).
Modernization of the traction rolling stock in 2009
19%
37%
355 UNITS 20 101 UNITS
30% 6% 23% 12% 3%

FREIGHT DIESEL LOCOMOTIVES
31%
DIESEL-LOCOMOTIVE PASSANGER ELECTRIC SHUNTERS LOCOMOTIVES
FREIGHT DIESEL LOCOMOTIVES
DIESEL-LOCOMOTIVE PASSANGER ELECTRIC SHUNTERS LOCOMOTIVES
FREIGHT ELECTRIC LOCOMOTIVES
PASSANGER DIESEL LOCOMOTIVES
FREIGHT ELECTRIC LOCOMOTIVES
PASSANGER DIESEL LOCOMOTIVES
Involved in freight operations are 523 AC locomotives (12.3%), 876 mainline diesel locomotives (20.5%) and 1,896 diesel-locomotive shunters with expired service lives. As of the end of 2009, the Company acquired 355 units of traction rolling stock: 229 electric locomotives, of which: passenger electric locomotives 110 units (EP1M, P- 80 units and EP2K 30 units); freight electric locomotives 119 units (2ES5K 17 units, 3ES5K 49 units; E5K 8 units; 2ES4K 20 units; 2ES6 25 units);
As a result of rolling stock upgrade in 2009, the Company rehabilitated 158 locomotives; of which 68 sections of TE10 freight diesel locomotives, 90 electric locomotives: of which 55 freight electric locomotives (VL1032 units, VL80 18 units, VL11 5 units) and 35 units of ChS2 passenger electric locomotives.
112
As of 31 December 2009, the freight car fleet comprises 991,900 freight cars allocated to the Russian Federation (code 20), of which:
Fleet of freight cars allocated to the Russian Federation (code 20)
576.3 UNITS
33% infRaStRuCtuRe of RuSSian RailwayS 8%
JsCo railtransavto
Car fleet
Major freight car owners within the Russian railways group
59%
58%
991,9 UNITS
INVENTORY STOCK OF RUSSIAN RAILWAYS AND ITS BRANCHES FLEET OWNED BY FLEET OWNED AND OTHER SUBSIDIARIES OPERATED BY AND ASSOCIATES JSCO PGK
42%
CARS OWNED BY RUSSIAN RAILWAYS GROUP
FLEET OWNED BY OTHERS
24,400 cars JSCo Transcontainer 10,100 cars JSCo Refservice; 1,600 cars JSCo RailTransAvto; 7,800 cars CJSC Rusagrotrans;
Change in freight car fleet owned by Russian railways group, units

year total for russian railways group russian railways subsidiaries and associates JsCo pgk JsCo rusagrotrans JsCo transContainer JsCo refservis
2007 2008 2009
623,439 617,022 576,454
416,468 380,892 338,719
151,842 24,035 541
25,158 172,455 193,332
0 2,837 7,847
21,435 24,331 24255
6,840 10,625 10,120
1,696 1,847 1,640
(see Appendix 15 for freight car inventory stock structure)
576,500 units are cars owned by Russian Railways; 415,500 units cars owned by others. The major freight car owners within the Russian Railways group, are: 339,200 units inventory stock of Russian Railways and its branches, including 0.5 thousand of cars owned by subsidiaries and associates and used by Russian Railways (58.8% of the Companys freight car fleet). 193,300 units fleet owned and operated by JSCo PGK; 43,800 units fleet of other subsidiaries and associates (7.5% of Russian Railways fleet), of which:
New freight cars purchased
Starting from 2009, freight cars are purchased primarily by JSCo PGK, the group entity. In 2009, Russian Railways purchased 292 freight gondola cars of advanced models. JSCo PGK purchased 7,788 cars, including 3,378 cisterns, 4,401 gondola cars, 1 platform, 8 covered cars.
113
General overview of the Russian Railways assets
The charter capital of Russian Railways comprises 420,200 items of real estate. From the date of its incorporation, the Company is liable for managing 56,000 property items of social, cultural, and public value owned by the Russian Federation. As of 31 December 2009, the Company owns 385,000 property items (including land). Total property area (net of linearly stretched units) is 73,650.00 square meters, total area of the Companys land is 32,825.75 ha. For the purpose of accelerated title transfer procedures, at the date of the Companys charter capital formation, Russian Railways registered its title to 356,800 of 420,200 real estate items (approx. 85%) included in 8,622 production and technology complexes ("PTC"). At the same time, most of the registered property items composing PTC may not be sold, transferred under long-term lease agreements or otherwise disposed of. Before selling or leasing out the property the Company should decompose its PTCs. In this regard, in 2009 the Company took measures to decompose 887 PTCs in addition to those 1,238 PTCs decomposed in 2007 and 2008. Following decomposition procedures, the Company carried out technical inventory of 37,500 property items and obtained state registration certificates for 17,282 property items. As of 31 December 2009, Russian Railways and territorial administrations of the Federal Railway Transport Agency signed lease agreements for 6,078 railroad rights-of-way with a total area of 935,833 ha or 96.5% of the total railroad rights-of-way area.
1. 2.
3.
4.
Throughout its operating history the Company has been applying the following basic principles of real property management: Real estate shall be primarily used for its intended (railway) purposes; Remuneration principle: all transactions with the real estate of Russian Railways are forfees transactions. Value of each transaction is determined based on independent appraiser's valuation report. Transparency principle: all public market transactions with the real estate of Russian Railways require that Russian Railways prepare a letter of intent concerning the transaction containing reliable, complete and relevant information available to practically all potential contractors; Real estate management on a competitive basis: all transactions with real estate of Russian Railways are generally public market transactions involving professional market players (including property funds). This allows maximizing the Company's returns.
Asset base management system (ABMS)
The automated asset base management system (ABMS) was developed at the request of the Property Management Department for the purpose of maintaining integrated accounting records of the Companys assets and improving management decision making through prompt access to the property related technical information. Asset base management system was designed to account for real estate items of the Companys branches and business units, and contains mapping and contractual information. Pursuant to Russian Railways order No. 1964r, dated 21 September 2009, the system was put into trial operation across the entire railway network, functional branches and non-state institutions of the Company.
annual RepoRt 2009
russian railways` asset management
Basic principles of the Company` real estate management
114
In 2009, revenues from using real estate property in business operations comprised: RUB 5,763.49 million, net of VAT, from leasing out the Companys buildings, constructions and rail tracks, RUB 455.51 million, net of VAT, from land subleases, RUB 1,357.06 million, net of VAT, from the sale of non-core and non-operational property of Russian Railways (including RUB 234.82 million from the sale of Cheremkhovo railcar repair depot assets and Khilok railcar section of Chita railcar repair depot, pursuant to order No. 348-r of the Government of the Russian Federation, dated 20 March 2008, and orders No.634r and 635r of Russian Railways, dated 28March 2008). In 2009, the railways signed: 7,548 lease agreements for land, constructions with total area of more than 1,295 million square meters and rail tracks of more than 63,904.00 running meters, 4,530 sublease agreements for land with total area of2,161.81 ha.
Revenues from real estate management
115
annual RepoRt 2009
inteRnational aCtivitieS and implementation of pRinCipal inteRnational pRoJeCtS
116
InternatIonal actIvItIes and ImplementatIon of prIncIpal InternatIonal projects
117
annual RepoRt 2009
In line with the development strategy InternatIonal traffIc and key InternatIonal projects adopted through 2030, the international activities One of the top priorities for international of JSC Russian Railways in 2009 were focused on passenger service in 2009 was route expansion on a building upon the worldwide reach on the global global scale. Today JSC Russian Railways' passenger transportation services market. This strategy was transport services cover 59 international routes in realized amid the global financial crisis and tough 20 countries in Europe and Asia (Germany, France, competition with foreign railways and other transport Switzerland, the Netherlands, Poland, Austria, companies primarily, marine carriers. Slovakia, Czech Republic, Hungary, Romania, Bulgaria, Greece, Italy, Croatia, Serbia, Montenegro, Finland, China, Mongolia, North Korea) and in eight CIS states (Ukraine, Belarus, Moldova, Kazakhstan, Kyrgyzstan, Uzbekistan, Azerbaijan, Tajikistan).
118
In 2009, the total international passenger traffic was 20.1 million passengers, of which: 19.5 million passengers in the CIS and Baltic states; and 0.66 million passengers in other countries. Two new routes were added this year: Moscow Bar (Montenegro) and St. Petersburg Zagreb (Croatia). JSC Russian Railways developed and introduced the required technical, technological and regulatory framework to prepare for the launch of high-speed passenger service between St. Petersburg and Helsinki in 2010. In 2009, the existing international regulations were amended in line with generally accepted practices to address the timing of settlement for services. According to the new rules, payment for services is to be made in the month following the month in which the services were rendered. Besides, 2009 saw the adoption of a differentiated approach to charging late payment penalties, whereby the amount of penalty depends on the age of the debt. The CIS and Baltic states hold a dominant share (95%) in the volume of services provided by JSC Russian Railways, with other countries accounting for the remaining 5%. In 2009, passenger and freight services rendered by JSC Russian Railways to foreign railways were USD 552.1 million. The settlements for passenger services rendered by JSC Russian Railways to foreign railways totaled USD 295.0 million, down 23% year-on-year. The accounts payable to foreign railways dropped as well, though not so markedly (USD 488.6 million, down 10% year-on-year). The total cash flows from foreign railways generated by JSC Russian Railways in 2009 were USD256.7 million, down 40% year-on-year. Settlements for the use of freight wagons constitute the major item of freight settlements with foreign railways. Due to the transfer of title to freight wagons from JSC Russian Railways to newly organized wagon operators, 2009 saw a 42% yearon-year decrease in fees for the use of freight cars by foreign railways to USD 213.8 million. The fees for the use of foreign freight wagons in Russia in 2009 totaled USD 87.9 million, down 42.5% year-on-year. During 2009, JSC Russian Railways continued its international capital-intensive projects in Libya and Iran. In April 2008, JSC Russian Railways began the construction of 554 km of double tracks between Sirt and Benghazi in Libya. It is planned to build a modern double-track line with a track gauge of 1435 mm to accommodate higher rail traffic. Theconstruction will be completed in 4 years. The total project cost is EUR 2.2 billion. The construction was commenced in December 2008. In March 2008, electrification of 46 km of main tracks and station tracks between Tabriz and Azarshahr in Iran was commenced. The total project cost is EUR 8.85 million and it is scheduled for completion within 9 months (the project was effectively commenced in late May 2009). JSC Russian Railways is currently engaged in pre-contract work for the following projects in the Slovak Republic: construction of a 1520 mm railway line from Ko ice (Ganiska) to Bratislava and Vienna; establishment of an international logistics hub in Vienna; upgrading of the existing railway line between Matovce (State border) and Ganiska.
119
The Slovak side have approved the feasibility study for construction of a 1520 mm railway line between Ko ice (Ganiska), Bratislava and Vienna which was presented by JSC Russian Railways. In 2009, JSC Russian Railways completed pre-contract arrangements for the following projects: electrification of the railway line between Tehran and Meshed; construction of a new railway line between Resht (Iran), Astara (Iran) and Astara (Azerbaijan); The work towards reconstruction of the railway section between Hasan (Russia) and Rajin (Korea) and development of the container terminal inthe Rajin port is currently underway. On 22 August 2009, Russian President Dmitry Medvedev signed Decree No. 965, Concerning the Transfer of the Government Stake in the Soviet-Mongolian JSC UBZD to Trust Management of JSC Russian Railways. Acorresponding contract to formalize the relationships between the parties was signed on 17December 2009. A draft document outlining the framework of a Russian-Mongolian joint project for the development of JSC UBZD and construction of new railway infrastructure in Mongolia was submitted to the Mongolian side. JSC Russian Railways signed an agreement for the development of the Ulan-Bator railways. The program for upgrading and expansion of the local railway infrastructure was conducted following evaluation of economic feasibility of investment. Cooperation with CIS railway operators offers another promising opportunity for international expansion. At the intergovernmental meeting, the Government of Turkmenistan expressed interest in developing the country's railway infrastructure, including the construction of a new bridge over the Amu Daria river. Discussions between JSC Russian Railways and the Uzbek railways to expand the throughput capacity of the Galaba Hairaton cross-border terminal at the Uzbek-Afghani border are currently underway. Meetings to discuss opportunities for economic cooperation and expansion of joint projects were held with the representatives of Tajikistan. JSC Russian Railways continued major international projects to build on its influence in the Eurasian transportation services market and foreign infrastructure markets. Agreement No. 546 for the operation, itemized accounting and settlements for freight cars and containers used in international railway ferry line between Russia and Bulgaria (Varna) was signed between JSC Russian Railways, Bulgarian State Railways (sole owner of the Bulgarian railway network) and Anship LLC on 29 June 2009 with a view to set up a direct international rail-ferry link between Russia and Bulgaria. To provide for efficient rail-ferry service between Ust-Luga, Baltiysk and Sassnitz, JSC Russian Railways, jointly with the German side, organized a dedicated Ferry Council, which is supposed to address issues surrounding current operations and look for freight owners interested in the proposed transportation and logistics services. Development of the regulatory framework for railway ferry service between Sassnitz and Baltiysk culminated in an agreement for the use of freight wagons in the railway ferry traffic between Mukran and Baltiysk that was signed by JSC Russian Railways and DB Schenker in July 2009. A draft document outlining special terms and conditions of wagon shipments through the railferry link between Sassnitz-Mukran and Luzhskaya and a related transfer & acceptance agreement were submitted to the German side in April 2009. Despite the reduced imports of car components against the last year's figures, which was prompted by declined performance in the automotive sector due to the global financial crisis, supplies of car components from the Czech Republic, Slovakia and Germany to the Volkswagen plant in Kaluga continued.
annual RepoRt 2009
120
The effort towards technological cooperation with foreign partners crystallized in the following documents, which were signed in Sochi in May2009: cooperation documents between JSCRussian Railways and French National Railways (SNCF); an agreement between JSC TransContainer and Tatravagonka to set up a Russian-Slovakian joint venture for the freight wagon manufacture; a memorandum on expanded cooperation in infrastructure projects between JSC Russian Railways and Siemens AG; a memorandum on the production and supply of modern electric locomotives between JSC Russian Railways, Siemens AG and the Sinara Group . The following documents were signed in Slovakia (Trebi ov) on 24 May 2009 during a visit by Vladimir Yakunin, President of JSC Russian Railways: a memorandum on financing the supplies between JSC TransContainer, Tatravagonka and Export-Import Bank of the Slovak Republic; an agreement between JSC Russian Railways, Freight One Company (PGK) and Tatravagonka on the joint development of universal covered boxcars and division of the corresponding intellectual property rights; an agreement between JSC Russian Railways and Tatravagonka on the joint development of an articulated platform wagon and division of the corresponding intellectual property rights.
Technological cooperation with foreign partners
On 16 July 2009 in Munich (Germany) JSC Russian Railways, the Sinara Group and Siemens AG officially agreed to set up a joint production facility in Russia for the manufacture of electric locomotives (with an annual output of 100 units) and components thereto. The signing of the corresponding agreement was followed by a protocol on joint development and production of electric locomotives for passenger service during the Sochi 2014 Winter Olympics and Paralympics (signed in Moscow on 30 July 2009). Additionally, JSC Russian Railways and Siemens AG prepared a draft contract for the design and supply of 38 electric locomotives for suburban service and heads of agreement for the supply of 16 electric locomotives for suburban passenger service (production to be organized locally). A cooperation protocol between the Spanish Railway Infrastructure Administration (ADIF), Renfe OPeradora and JSC Russian Railways was signed in Madrid in March 2009. In July 2009, JSC Vagonremmash and Knorr-Bremze signed a joint venture agreement to establish local manufacture of rolling stock brakes at the existing facilities in Voronezh operated by Vagonremmash.
jsc russIan raIlways and competItIve advantages of "1520-gauge space"
JSC Russian Railways continued its focus on effective cooperation with its neighbors and major partners, the CIS and Baltic railways with a 1520 mm gauge, in developing freight and passenger operations. Among the striking advantages of "1520-gauge space" are reliance on consistent technological standards, historically established close links between neighboring states, common information environment, a huge transit potential owing to the unique geographical and economic landscape, efficient mechanisms to offer competitive tariffs, promote regulatory harmonization and joint investment in infrastructure projects. Aconcerted approach to capture the strategic goals
121
of "1520-gauge space" by railway operators is a main contributor to effective resource optimization and high performance. A growing market for "1520-gauge space" is becoming increasingly attractive for major international rail manufacturers and technological companies and unlocks vast opportunities for international cooperation. JSC Russian Railways seeks to capitalize on the existing advantages through maintaining an active dialogue with foreign partners within the CIS Railway Transport Council and "Strategic Partnership 1520" business forum.
outcome of cooperatIon wIth foreIgn raIlway admInIstratIons and transport agencIes
JSC Russian Railways ranks developing and strengthening bilateral and multilateral relations with the neighboring countries as a matter of strategic importance. The CIS Railway Transport Council served as an effective forum to promote cooperation with railway administrations and transport agencies. At its 50th Session held in Minsk (Belarus) on 20-22 May 2009, the Council adopted the Roadmap of priority cooperation initiatives through 2020 within the CIS in the area of transportation services. Approved by the CIS Heads, the Roadmap is intended to provide impetus for long-term enhancement of operations and improvement of international transportation services. A special focus was placed on establishment of effective cooperation framework with CIS and Baltic railway operators to promote reforms. The participants of the Session approved the terms of reference and mandate of a special Commission attached to the Council. Established on the initiative of the Russian side, the Commission will be focused on reforms and structural transformations.
The 51st Session of the Council held on 27-28 October 2009 in Tashkent (Uzbekistan) was attended by the heads of railways of Russia, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan. The results of the discussions at the Session embodied in a protocol whereby the Parties agreed to continue joint effort towards harmonizing their approaches to the development of international railway transportation service in 2010. There is a concerted effort with the State Railway Administration of Ukraine (Ukrzaliznytsya) to launch a container rail service between China and Europe that would provide an additional edge in the competitive transportation marketplace. Special promotional tariffs were established for container trains at certain route sections to attract freight away from other routes onto the China Europe route. On 1 June 2008, CJSC South Caucasus Railways, a wholly-owned subsidiary of JSC Russian Railways, took over the management of Armenia's railway network under the concession agreement, A large-scale investment program envisaged by the concession agreement was continued in 2009. JSC Russian Railways is looking into cooperation opportunities with the Republic of Abkhazia in the railway transport sector, such as the restoration of the local railway infrastructure to allow for passenger traffic and freight forwarding, including transportation of construction materials from Abkhazia to the Olympic building sites around Sochi.
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JSC Russian Railways continued the existing cooperatIon wIth theInternatIonal bilateral relationships with the railway administrations unIon of raIlways (uIc) andpartIcIpatIon In other InternatIonal organIzatIons and transport agencies of China, North Korea, In 2009, JSC Russian Railways made a Mongolia, Germany, Spain, Italy, Finland, France, significant effort to promote the Company's interests South Korea and Japan. 2009 saw the signing of and revitalize the work of UIC. a number of significant international contracts, During the sessions held in the second agreements and memoranda covering all aspects of quarter of 2009, Vladimir Yakunin, President the rail business. of JSC Russian Railways, and Jean-Pierre In support of strategic cooperation efforts, Loubinoux, UIC Director General, discussed JSC Russian Railways and Temir Zholy, the national the main lines of cooperation between railway company of Kazakhstan, organized 19 JSC Russian Railways and UIC: meetings attended by top executives and experts introduce Russian as a working language of of both companies (including participation in the meetings of UIC General Assembly (GA), discussions and negotiations between government Executive Board (EB) and European Regional authorities of the two countries). The discussions Assembly (ERA); and decisions with respect to the topics addressed organize short-term and mid-term at these meetings covered the entire range of internship at UIC Headquarters for young bilateral relations, including tariff policy, transit traffic specialists ; enhancement and property relations. introduce amendments to the new Statutes During a visit to Kazakhstan by Russian of UIC and draft Statutes of ERA to address Prime Minister Vladimir Putin on 21 May 2009, multiregional membership of JSC Russian JSC Russian Railways and Temir Zholy agreed to Railways (number of votes) and provisions cooperate in developing the pricing mechanisms for ofthe European law (EU Directives); rail freight forwarding services and to conduct joint explore new opportunities for joint work in activities in the area of terminal freight handling. such areas as international freight corridors, The corresponding documents were signed in the technical standards, security/safety, presence of the Heads of Governments of the two including ecological, economic and public countries. safety (counter-terrorism initiatives). On 28 May 2009, JSC Russian Railways The 7th Asian Regional Assembly (ARA) was and Temir Zholy signed a cooperation agreement held on 15 May 2009 in St. Petersburg to discuss and to harmonize and unify the existing regulatory and decide on priority areas of UIC activities in the Asian technical framework governing the operation of region in 2010. railway facilities and equipment. The agreement was During the year, JSC Russian Railways had a signed in Sochi at the international railway business number of multilateral and bilateral discussions with forum "Strategic Partnership 1520". UIC, including those dealing with its involvement in the Global Rail Freight Conference and "Commercial Inspection of Trains in Russia", a project launched by UIC. The JSC Russian Railways UIC Cooperation Roadmap was adopted at the Usage of Freight Wagons in International Transport Seminar that was held in Sochi on 27-28 October 2009.
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Being an active member of the General Directors' Conference of the Organization for Cooperation between Railways (OSJD), JSC Russian Railways has representation in all working bodies of this organization. A landmark event of the year was the XXIV meeting of the OSJD Conference that was held in Moscow. The meeting was attended by heads of railways from 23 countries that are active members of OSJD, as well as by associate members, observers and representatives of affiliated enterprises. The Conference adopted a number of fundamental resolutions in the area of cooperation and communications between foreign railways covering technical and operational issues, international rail freight and passenger service, combined transport, financial and economic relations, international tariffs (international passenger tariff, unified transit tariff, international transit tariff). Further steps were made to enhance the rules of use of wagons, separately for passenger and container trains (PPW and PGW). It was decided to set up the OSJD regulatory framework that would be built around the revised SMGS, SMPS, PPW and PGW. During 2009, JSC Russian Railways made a major input towards enhancement of the common CIM/SMGS consignment note to facilitate crossborder rail traffic one of the priority areas for JSC Russian Railways. The common CIM/SMGS consignment note, which is now used almost universally across all rail routes in Russia, allowed for transition from trial to regular traffic through many international transport corridors. Much effort was put towards the acceptance of the common consignment note by other key partners (Kazakhstan, China and Mongolia). Additionally, a roadmap for application of CIM/SMGS consignment note on a trial basis on transcontinental routes (TransSib) between Europe and Asia (China) was developed. Among the priorities for JSC Russian Railways on a global scale is active integration with the EU and Asian transport systems. JSC Russian Railways participates permanently in the work of the Inland Transport Committee of the UN Economic Commission for Europe (ECE) and its working parties on transport trends and economics, on rail transport, on the transport of dangerous goods, on intermodal transport and logistics and on the transport of perishable foodstuffs. In 2009, the representatives of JSC Russian Railways attended the sessions of the Steering Committee of the Trans-European Railway (TER), a project initiated by ECE to assist the integration process of European transport infrastructure systems of the ECE member countries, including Russia. JSC Russian Railways is also engaged in the work of the UN Economic and Social Commission for Asia and the Pacific (ESCAP). The experts of JSCRussian railways were actively involved in the drafting of the Intergovernmental Agreement on the Trans-Asian Railway (TAR) Network which entered into force in June 2009. A dedicated working group was established by ESCAP on 14-18 December 2009 in Bangkok (Thailand) to coordinate the development of the railway infrastructure at national sections of the TAR route. Considerable importance is attached to the relations with various structures of the European Commission (EC). Following the July 2009 consultations between JSC Russian Railways and the European Commission's Directorate General for Energy and Transport, the position paper of JSCRussian Railways regarding the expansion of the transport corridors between Europe and Asia and the development of EU transportation network was submitted to the EC. The representatives of JSCRussian Railways attended a conference hosted by the EC in Italy (The future of Trans-European transport networks: building bridges between Europe and its neighbors).
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During 2009, JSC Russian Railways participated in the events organized by the EU-Russia Industrialists' Round Table (Task Force on development of multimodal and container transportation Rotterdam, September 2009) todevelop an agreed position in the run-up to the annual meeting in Stockholm (Sweden) in November 2009. The delegation of JSC Russian Railways took part in the first preparatory conference for the 18th OSCE Economic and Environmental Forum that was held in October 2009 in Astana (Kazakhstan). The theme of the conference was promoting good governance at border crossings, improving the security of land transportation and facilitating international transport by road and rail in the OSCE region. The conference was focused on measures for border crossing facilitation, including the simplification of customs procedures, harmonization of transport strategies of the OSCE member states, enhancing the security of cross-border transit and the efficiency of international transport corridors (ITC).
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annual RepoRt 2009
innovation and teChnologiCal development of RuSSian RailwayS
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InnovatIon and technologIcal development of RussIan RaIlways
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annual RepoRt 2009
InnovatIon development of the Company and ConsIstent teChnICal polICy
As competition grows in the transport market and customers expect higher-quality and lower-cost transportation services, no systemic improvements in the performance of the rail transport complex could be achieved unless based on breakthrough, scientifically grounded solutions and innovation. The key objective set by the President of the Russian Federation is a comprehensive renewal and technological upgrading of industry and the overall economy.
Development Strategy for Rail Transport inthe Russian Federation till 2030 has been approved by the Government of the Russian Federation and defines ambitious goals for the rail transportation sector. The Strategy outlines the target status of Russian Railways. One of the fundamental principles of the Strategy is an innovative breakthrough ideology taken as a basis for the development of rail transport.
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I. R&D costs, RUBmillion
5000 5000 5000 5000 5000
4081 (0.46%)
2500 2500
4381 (0.43%)
2500
2073 (0.22%)
0
2120 (0.21%)
0
2007
2008
2009
2010 (FORECAST)
% OF RZD REVENUES
II.
Number of protection documents obtained by Russian Railways for its intellectual property, including inventions
500 500 500 500 500
396
250 250 250 250
420
250
134
0
33
2007
2008
2009
2010 (FORECAST)
III. Intangible assets on the balance sheet of Russian Railways, RUBmillion

600 600 600 600
550.0
600
393.3
300 300 300 300 300
116.4
0
2.4
2007
2008
2009
2010 (FORECAST)
The White Book of Russian Railways is a most important document, which defines strategy and priorities for innovation-based development and the target parameters of Russian Railways for the period till 2015. The White Book was developed in 2007 with contributions from the scientific community in rail transport, the Companys specialists and institutes of the Russian Academy of Sciences. Certain provisions of the White Book were actualized last year. The current structural transformation requires that the Company take serious steps to ensure consistency of innovative approaches in the development of all structural subdivisions and subsidiaries of the Company. The Concept of Consistent Technical Policy was developed last year to mark an important milestone in the reform of the Company's scientific and technical complex. The Concept describes a framework for the management of the Companys innovative activities that ensures clear links between all management levels.
In the future, Russian Railways is expected to become a hi-tech organization oriented for innovation. All business structures involved in various activities should pursue consistent policies in technological development. Most important at the third stage of reform is the risk of management disintegration in the implementation of the consistent technical policy. The consistent technical policy should back sustainable operation of Russian Railways, effective and high-quality services, high transportation safety standards and low risks relating to disintegration in technical and technological development and engineering support. The Concept of Consistent Technical Policy is a logical continuation of the Conceptual Design of the Management System of the Holding Structure Resulting from the Reform of JSCo Russian Railways. The Concept provides details regarding the development of an integrated set of technical policies.
Innovation performance indicators 20072009
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annual RepoRt 2009
Consistent scientific and technical policy of Russian Railways and its subsidiaries (Resolution No. 595 of 30 March 2007)
Goal: achieve consistency and coordination of the scientific and technical policy of Russian Railways and its subsidiaries sample tasKs aCComplIshed By sUBsIdIaRIes wIthIn sCIentIfIC and teChnICal development pRoGRams
fIRst fReIGht Company
developing a universal boxcar with axle load of 25 tf fUndamental pRInCIples 1. Consistent scientific and technical policy is a must. 2. Key technical and technological solutions are consistent. 3. economic interests of Russian Railways and its subsidiaries are balanced. 4. economic effect of use of resources is maximized. 5. implementing new equipment and technology is a must.
agreement on cooperation between Russian Railways and first freight Company
developing a gondola car with a body of aluminum alloys testing protective polymer coating for the interior surface of cars
vaGonRemmash
developing a project of simulator car, salon car and inter-regional car

tRansContaIneR
modernizing two-axle platforms into a six-axle multiple-unit platform for the transportation of three 40 ft containers
ZheldoRRemmash
total Investments of oveR RUB130mIllIon
implementing a plant for the restoration of crank shafts using nanotechnology

RempUtmash plant In KalUGa
Rail milling train Rfp-1

fedeRal passenGeR Company
technology and plant for gas-dynamic pre-repair cleaning of carriage chassis
The document defines goals, objectives, fundamental principles and methods involved in engineering activities in the area of technical and technological development and ensuring an effective consistent technological process of providing transportation services. The document also contains an analysis of key risks relating to noncompliance with the consistency principles and outlines steps towards the target status with regard to the consistent technical policy as reform proceeds. The Intellectual Property Board and the Innovation Development Center (marketing, inspection, raising external investments, cooperation with R&D institutions and manufacturers) were established within the implementation of the consistent technical policy. Approaches have been fully revised in providing scientific and technical information. To this end, the Center of Scientific and Technical Information and Libraries has been established.
In addition, a joint scientific board of Russian Railways has been established. The Board includes not only the industrys leading scientists, but also members from adjacent sciences, including academics, helping ensure a synergy of fundamental and applied research and create an effective bridge between fundamental science and practice. The Board comprises eight academicians, associate members of the Russian Academy of Sciences and six rectors representing Russias major higher education institutions. The Board should ensure concentration of the best scientific ideas, lay a long-term foundation for an effective information exchange between the business and scientific communities, and work on the principles of transparency to transform scientific discussion into practical solutions for innovative development of the industry. The newly created innovation management system provides for a process-based approach in the accomplishment of strategic objectives relating to
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the development of the holding company Russian Railways and defines the place and role of each constituent in the Companys scientific and technical complex, including use of scientific capacities of the Russian Academy of Sciences, leading R&D institutions, international R&D centers and manufacturers. The system is aimed to make the results of intellectual activities more effective and raise external governmental and private investments for innovation projects in cooperation with Russian and international partners. In order to provide regulatory support for Russian Railways' innovation activities, Requirements for Innovation Projects in Rail Transport and six industry-specific standards were developed in 2009. The current industry-related science comprises a deepest knowledge of rail technology. As a result, the Company has managed to adopt comprehensive end-to-end technology involved in transportation and ensuring transportation safety with regard to Russian Railways specific areas and types of business. Most importantly, such technology has been replicated over the whole network. It includes, but is not limited to, the following: 1. Transportation management systems in the direction Isilkul Chelyabinsk Kropachevo (1,000 km long) and traffic control software and hardware system on the main national passenger route Moscow Saint Petersburg. 2. Comprehensive automated traffic management technology in the direction Chelyabinsk Rybnoye (1,920 km). 3. Energy efficient traffic schedules in the key rail directions. Currently, over 300 passenger trains run on such schedules, ensuring annual energy savings of over 3,500,000kWh. Mathematical simulation modeling techniques have proven essential in reducing both costs and project timelines, helping achieve significant construction cost reductions in developing Sochi 2014 transport system. Use of mathematical models allowed to save of RUB 1,200 million in constructing the station Karymskaya and to fully revise the layout of the projected station Luzhskaya. Such methods will become obligatory for infrastructure development projects, including new construction and reconstruction of freight yards. Passenger car designs are tested and static and dynamic load limits are measured using mathematical modeling techniques. The Company has taken positive steps to migrate to 'intellectual rail transport involving the promotion of computer traffic safety systems, satellite control technologies and end-to-end logistics. Within Avtodispetcher complex, system solutions have been developed that will enable central management of rail traffic and have features for developing forecasts and controlling decisions in order to avoid conflicts and ensure stable traffic schedules in line with global standards, which require that deviations must not exceed 30 seconds. The traffic control system will be similar to Europes ERTMS (level 2) in its features. The transfer of important information will be organized in accordance with SINELEC safety standards. Talented, creative and active people are the key resource for innovation in addition to stateof-the-art equipment. A special role is assigned to young specialists in developing and implementing innovations. The Company is implementing Young Employees of Russian Railways, a comprehensive program that provides a smoothly running mechanism of managing and encouraging creative work of young specialists in the scientific and technical field. Within its youth policy, Russian Railways has held an annual competition among innovation projects developed by young employees, Novoye Zveno, since 2008. The competition spans the whole rail network and aims to improve Russian Railways' performance. In the past two years, over 1,200 young employees participated in the competition, more than 246 projects were developed, including 40 projects, to which organizational and financial support was provided by the management of Russian Railways. In order to keep and promote its innovation capacity, the Company has sponsored grant programs for young scientists to support research, the results of which may be implemented in Russian Railways.
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The current stage of the reform of rail transport and deregulation of the transportation market have placed on the agenda improvements in Russian Railways policy for developing the regulatory framework. Federal Law No. 184-FZ on Technical Regulation dated 27 December 2002 drastically changed the structure of regulatory documents setting requirements for goods supplied to railways and related processes. In 2009, national standards ensuring compliance with rail transport technical regulations accounted for the most significant share in all standards under development: Safety of Rail Transport Infrastructure Safety of Rolling Stock Safety of High-Speed Rail Transport To this end, the formation of Technical Committee for Standardization No. 45 Rail Transport was completed in 2009. The Federal Agency for Technical Regulation and Metrology had drafted and approved the Statement on the Technical Committee. Pursuant to the Statement, 17 subcommittees and 43 working groups of the Technical Committee No. 45 began to work, spanning 120 enterprises and 900 industry specialists. Following the approved plans, 10 interstate and national standards were developed in 2009 and became effective in 2009 early 2010. Developing rapid and high-speed rail transport will ensure improved transport connections, create more attractive conditions for passengers, increase comfort and safety in passenger transportation and reduce travel time. As a result, rail traffic will grow as passengers will choose the rail option instead of automobile or air transport, loss ratios from passenger operations will decline and environmental impacts of transport will be reduced. Organizing rapid and high-speed operations will also help reduce demand for rolling stock and support and promote further Russia's R&D and intellectual capital as domestic manufacturers will have contracts to design new equipment in line with global standards. When developing the Program for the Development of Rapid and High-Speed Operations on the Rail Network of Russian Railways till 2020 in 2006, industry institutions jointly with railway specialists and regional authorities analyzed passenger traffic for all types of transport, including Russian Railways network, and defined the key directions for rapid transport based on the stability of transport connections, passenger appeal of different directions, convenient arrival and departure times, costs to reconstruct railway infrastructure and project payback periods. On the basis of the criteria mentioned above, a target territory for rapid operation was determined spanning 21 directions a total of 7,700 km long, including 10 directions classified as economically feasible projects. When drafting the Development Strategy for Rail Transport in the Russian Federation till 2030, certain parameters of the Program for the Development of Rapid and High-Speed Operations till 2020 were adjusted based on changes in passenger traffic and social and economic situation of the overall country and specific regions. As a result, the range intended for rapid passenger services (up to 160 kmh and more) extended almost to 11,000 km for the period till 2030.
annual RepoRt 2009
Regulatory framework development
RapId and hIGh-speed opeRatIons
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High-speed passenger connections (up to 350400 kmh) are also expected to be set up. Their range will exceed 1,500 km by 2030 based on the best-case scenario. In 2006-2009, a variety of measures were implemented within the Program for the Development of Rapid and High-Speed Operations and the Development Strategy for Rail Transport. The most meaningful are: Completing design and construction on the section Saint Petersburg Moscow and launching the operation of high-speed electric trains Sapsan in late 2009. Completing design and construction on the section Saint Petersburg Nizhniy Novgorod and launching the operation of rapid electric trains Sapsan in mid-2010. Completing design and construction on the section Saint Petersburg Buslovskaya - the operation of rapid electric trains Pendolino is expected to begin in 2011. According to the Investment Datasheet, total investments in the project amount to RUB 79.7 billion, including RUB 51.7 billion provided by Russian Railways and RUB 28.0 billion provided by the Investment Fund of the Russian Federation. By the end of 2009, Russian Railways funds in the amount of RUB 27.1 billion had been utilized, including VAT (52.5% of the total costs financed by Russian Railways). In addition, design and survey work was performed in 20072008 to arrange rapid passenger operations between Moscow and Adler (Center South). The project involves upgrading Kursk line and constructing tracks from Prokhorovka to Zhuravka to Chertkovo to bypass Ukraine. In 20082009, Russian Railways conducted a study to assess technical and economic viability of the project to construct a highspeed dedicated passenger trunk connecting Saint Petersburg to Moscow. In 2009, Russia joined the club of the countries which have high-speed rail transport. On 17 December 2009, Sapsan regular service was introduced between Moscow and Saint Petersburg, so that the distance between the two cities can be covered in a mere 3 hours and 45 minutes. Sapsan trains began a new era for Russia's railways and the significance of this development reaches beyond the Companys business and the overall industry. The launch of a high-speed service is a tangible contribution of the Company in upgrading the Russian economy as required by President Dmitry Medvedev in his Address to the Federal Assembly of the Russian Federation. The next stage involves the implementation of a rapid passenger service between Saint Petersburg and Helsinki using Pendolino rapid electric trains. Amid the global financial and economic crisis and limited investment recourses, Russian Railways believes it is feasible to focus efforts on implementing the initiatives mentioned above. Specifically, the project for constructing a high-speed line between Moscow and Saint Petersburg has been approved by Glavgosekspertiza, participants and their respective contributions have been defined and construction scheduled for the period until 2017 should commence soon. Within the project Moscow Adler (Center South), it is reasonable to prioritize the section between Moscow and Kursk for arranging rapid passenger service to be extended further to Belgorod. Based on pre-project studies, preliminary activities and costs have been identified for arranging rapid passenger service (200 kmh) between Moscow and Kursk.
133
Importantly, part of the activities is InnovatIve teChnoloGy and RaIlway InfRastRUCtURe development included in other investment projects. In particular, The following innovative solutions will be the General Scheme for the Development of introduced in Russian Railways' facilities in the near Moscow Railway Hub provides for the construction future: of the additional main tracks mentioned above. 1. Extending periods between repairs to Therefore, experts estimate the total cost of the 1.1billion tons gross or 1.6 times more than activities directly relating to rapid service at RUB 40 current 700 million tons gross by: 50 billion. Using quality rails in line with global The relevant project documents must be standards (Japanese-made rails were used developed in order to evaluate required investments to construct roughly 400 km of track in more reliably. the Saint Petersburg Moscow direction Rapid passenger service in the direction and curved sections of Dalnevostochnaya Moscow Kursk Belgorod will help: and Zabaikalskaya railways in late 1990s). Develop infrastructure required for the major Operational performance indicators project for introducing rapid passenger for the rails have been high. In 2008 connection between Moscow and Adler 2009, Japanese-made rails were used to (Center South) construct certain sections of Oktyabrskaya, Disseminate a positive experience in Moskovskaya and Dalnevostochnaya railways introducing rapid passenger service in just (150 km). In 2010, the Company expects another passenger direction of Russian to construct another 540 km of track using Railways Japanese-made rails. The certification process Offer a greater variety of higher-quality has begun and will be completed in 2010 for rail transport services in the long-distance Austrian-made rails, FestAlpine. segment and, accordingly improve Russian Using high-performance resilient rail Railways competitive position in the fastenings. segment. Using reinforced concrete sleepers In addition to the Moscow Kursk direction manufactured on the basis of OLMI and Saint Petersburg Moscow high-speed technology ensuring a double increase in line, the following directions appear a top output. focus for pre-project, design and survey Using cube stones (the relevant GOST based on projected passenger traffic: standard will be developed in 2010). Rapid services (160200 kmh) Moscow Laying protective blankets of sand and Yaroslavl, Moscow Saratov Samara, gravel and using Neoweb type geogrids. Ekaterinburg Chelyabinsk, Novosibirsk In 2008, the first test section between Omsk, Moscow Smolensk Krasnoye Torbino and Borovenka, Oktyabrskaya and Moscow Bryansk Suzemka with railway, was constructed. In 2009, another extension to Minsk and Kiev, respectively, section was constructed along the Big Ring within the development of "1520-gauge of Moskovskaya railway. More sections will space" be constructed in 2010 (up to 150 km). In High-speed lines (350400 kmh) addition, a test non-ballast track will be laid in Moscow Nizhniy Novgorod (extension to the Sablino Tosno section of Oktyabrskaya Ekaterinburg) and Moscow Smolensk railway in 2010. Krasnoye (extension to Berlin). 2. Automated diagnostic and monitoring. 3. Motorized track maintenance and repairs, including: Implementing state-of-the-art technology in track maintenance and repairs for rapid and heavy-tonnage operations
annual RepoRt 2009
134
Implementing high-performance vehicles and machinery for an entire cycle of motorized maintenance and repairs. Manufacturing and implementing subballast laying machines, rail milling trains, self-propelled vacuum machines, self-propelled spreader-ditchers, highperformance self-propelled ditch cleaning machines and road-rail speed-shops used to maintain and repair track on low-activity sections. Use of enhanced-reliability supporting structures, fittings and products for the catenary system, traction substations and other power supply equipment is permitted within Russian Railways. New maintenance and repair processes for power supply equipment have been designed and product design documents have been developed. The Company aims to implement developments and ensure their maximum performance. With regard to new construction, reconstruction and enhancing of power supply equipment, the Company seeks to avoid using any technical solutions that are outdated, ineffective or comparatively unreliable or industrial products the use of which is prohibited or limited within Russian Railways.
Heavy freight services
In the past few years, Russian Railways has systematically worked to improve the efficiency of its freight operations by increasing the weight and length of freight trains, primarily on the key routes. Recently, the spread of railway sections with inadequate capacity has grown due to increased amounts of bulk freight (coal, ores, crude oil and petrochemicals, metals, minerals and construction materials) transported along international transport corridors as Russia has been involved in international economic relations. The Company has gradually responded to growing freight traffic in the past few years. Raising weight standards is one the most important steps to increase freight capacity and make the operation of railways more efficient in the competitive environment. A decision has been made to develop regulatory requirements for equipment and infrastructure maintenance on the routes where freight trains exceed 6,000 tons, including a methodology for monitoring the condition of tracks.
The work to extend receiving-and-departure tracks to the standard of 1050 m is expected to be finished in 2015 on bulk freight routes to ports and border-crossing points. Weight of trains departing from loading terminals is constantly increasing. On freight-intensive sections of Zapadno-Sibirskaya, Sverdlovskaya, Yuzhno-Uralskaya and Privolzhskaya railways, freight trains are handled that weigh 7,000, 8,000, 9,000 or 12,000 tons and consist of over 71 conventional cars. If freight traffic continues to grow in the period till 2030, the current tendency to handle heavy-tonnage trains will be vital and will make it possible to increase capacity without capital-intensive activities relating to the construction of the third and forth main tracks on heavy traffic sections of the network. It must be noted that operation of such third and fourth tracks may appear ineffective resulting in their temporary abandonment as the economy is currently unstable and traffic may decline, and besides pipelines are being constructed everywhere and there are projects to promote manufacturing. Safety equipment is undergoing tests and will ensure safety in handling heavy-tonnage and combined trains or other extra heavy and long trains using remote traction and brake control systems. Technical and economic estimates and historical practices show that in providing regular service of extra heavy and long freight trains, costs should be taken into account that may arise as a result of longer detention times at assembly and destination stations and changes in longitudinal dynamics of a moving train and additional loads on the track and rolling stock. With regard to future operating conditions, it is fundamental to take account of advantages of Tpr size when designing prospective freight cars, primarily, for transporting coal and ores.
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Passenger locomotive with asynchronous traction drive
manufacturer
annual RepoRt 2009
Implementing innovation policy by means of technology transfers
Freight locomotive with asynchronous traction drive
manufacturer
New generation boxcar
manufacturer
New generation automated hump yard facilities
manufacturer Joint venture
New generation multiple-unit rolling stock
manufacturer Joint venture ... localization 80%
Tpr-sized rolling stock has a number of benefits as compared with traditional gondola cars, such as the following: The same volume of cargo may be carried by a smaller number of rolling stock (minus20%). Railcar productivity is 9.2% higher. Railway throughput is 15% higher with the existing track infrastructure, which is designed for a unified train length. Demand for locomotives is 10% lower (unless locomotives restrict train weight) and demand for locomotive crews is 20% lower.
Operating costs relating to transportation, including specific power consumption, will reduce by 5% due to greater train weight. For the areas where trains are handled with a tonnage rating of over 6,000 tons, hard traffic schedules are required to give way to extra heavy trains. Track and power supply infrastructures must be prepared accordingly for heavy-tonnage traffic. Currently, 301 Tpr-sized freight cars are operated in a test mode.
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Russian Railways' Energy Strategy till 2030 involves gradual replacement of diesel locomotives with liquefied and compressed natural gas-driven engines. Consumption of CNG is expected to grow to 250,000 tons in 2030, while diesel consumption will decline from 345,800 tons to 160,000 tons in the same period. GT-1 gas turbine locomotive was developed jointly with Kuznetsov Research and Technology Center in Samara using conversion products (gas turbine engines). GT-1 has a capacity of 8,300 kW and runs on compressed natural gas. The locomotive was developed for use on off-grid railway routes. It consists of two sections, one of which contains a turbine and a power unit and the other contains a 17-ton fuel tank going 750 kilometers without refuelling. GT-1 is equipped with a state-of-the-art control system and safety devices. The results of the 2009 field tests make it possible to significantly advance in accomplishing the objective. The innovative type of CNG-driven traction rolling stock may be used in heavy freight operations and carry up to 15,000 tons on flatlands. Use of gas turbine locomotives on off-grid railway routes will help: Accomplish the Energy Strategy objective toreplace diesel fuel with compressed natural gas Reduce operating costs relating to fuel, energy and lubricants by 44% Reduce the emission of hazardous substances into the atmosphere by a factor of 10 as compared with diesel locomotives Increase train weight to 10,00015,000 tons on the routes in question Create new jobs, improve work environment for railway staff, develop and implement advanced technology Contribute to the development of natural resources and northern areas in Russia.
Future of gas turbine locomotives
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annual RepoRt 2009
tRanSpoRtation Safety
138
TransporTaTion safeTy
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annual RepoRt 2009
Functional strategy For transportation saFety and security assurance
In 2009, Russian Railways launched efforts to project the risk of dangerous conditions affecting infrastructure facilities and rolling stock. In line with Standards approved by Order No. 1150r of Russian Railways dated 2 June 2009, inspections and examinations of railways involve certain technological audit procedures to identify bottlenecks requiring preventive maintenance. Transportation safety status is subject to a detailed multiple factor analysis which takes account of both transportation accidents and incidents that have occurred and their economic implications. The resulting estimated data makes it possible to respond to each transportation
safety violation in a more flexible manner. Sound and substantiated indicators are used as a basis for effective management decision-making. Terms of reference have been drawn to design an automated control system for the Situation Center that will employ systems capable of monitoring individual infrastructure facilities and rolling stock.
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The need to build and develop the Safety Management System (SMS) induced Russian Railways to design the Regulation on the Approach to Setting Up Transportation Safety Management Systems within the Russian Railways group. This regulation provides for implementing transportation safety measures harmonized with foreign safety management systems. Transportation safety management systems of all companies and their divisions will perform the following key functions: 1. manage risks of adverse events; 2. attain safety targets; 3. ensure that their facilities meet established safety requirements; 4. maintain collaboration between infrastructure managers and operators (carriers). In September and October 2009, 80 specialists of the office of the Safety Supervisor were trained in organizational and practical aspects of technological audit. In 2009, a methodological framework for calculating indicators that measure the danger of transportation accidents and incidents was developed for the Company's three pilot divisions: transportation, locomotive, rail and structures. This framework, designed using factor analysis for the Company's pilot business areas, enables embedding tasks into the functionality of the Automated Control System being developed for the Situation Center. Thus, the Situation Center, in addition to control and monitoring of the current situation, will be able to prevent transportation accidents and incidents through prompt identification of factors that impact their occurrence. The Company is planning to use the Automated Control System of the Situation Center as a basis for a sub-system that would generate an optimal remediation plan to mitigate the impact of potentially most dangerous factors.
Safe Transportation Program
Under the Safe Transportation Program (the "Program"), RUB 2.7 billion (including ZhASO financing) was allocated and disbursed in 2009 to implement the most advanced and sound technology in all divisions. Over the period of the Company operation, the total of RUB 30.3 billion has been specifically invested in the Program. As part of the Program, the following equipment was placed in service in 2009: The train braking automated control system (SAUT-TsM) on 74 locomotives and 14 legs of routes; Microprocessor decoders equipped with safety features (KLUB-U) on 140 locomotives; 39 high-performance fixed stops and 37 electric derailing blocks; 1,414 recorders of service communications of locomotive crews; On-the-run diagnostic systems KTSM01D and KTSM-02 for rolling stock and locomotives, including 77 appliances and 131 derailment control devices; 59 railway crossing barriers (UZP); 10 suites of the automated system for the commercial inspection of trains (ASKO PV). Efforts were taken to replace and upgrade equipment used for clearing wrecks, accidents and derailments. In 2009, the total number of transportation safety violations across the Company, including functional branches of Russian Railways, was 0.2% down from 2008 (4,327/4,334). No wrecks, accidents, derailments or collisions with passenger and freight trains occurred in operation of 46 branch railways during the year. Dedicated effort is taken to motivate railway staff in charge of assuring transportation safety. Compensation for transportation safety services of RUB 1.8 billion was paid to 112,412 employees. TheSafe Transportation Badge along with a bonus of RUB 12 thousand was awarded to 182 employees, the total amount being RUB 2,184 thousand. The Company took planned effort to develop and adopt a regulatory framework aimed at enhancing the transportation safety process. As a result, 6 regulations were developed and adopted.
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Safety indicators
Total expenses of RUB 363.8 billion for the renovation of infrastructure and rolling stock in 2009 reduced the accident rate by 30.6%. The best safety indicator was achieved in the rail division with the number of violations down by 32% (2009 345, 2008 510). The locomotive division reduced the number of safety violations by 11% (2009 1725, 2008 1939). The automation and remote control division and power supply division succeeded in cutting the number of violations by 17.6% and 5%, respectively. In the rail car division the number of violations was up 24.5% (2009 1783, 2008 1431). The strategy of Russian Railways is toward innovation through adopting satellite-based technology and, therefore, the Company contributes to achieving the national objective of implementing the Russian GLONASS satellite navigation system by setting up a single digital coordinate space for railway infrastructure facilities. The rate of implementing domestic satellite technology in railway transportation is 35% and exceeds that in air transportation (17%). The number of facilities and vehicles equipped with satellite navigation devices is approaching 12 thousand. Over 9.7 thousand units of rolling stock have been equipped with complex locomotive safety devices (KLUB-U and KLUB-UP) as part of comprehensive safety systems implemented by Russian Railways; the devices employ a domestic satellite navigation receiver GLONASS/GPS manufactured by Izhevsk Radio Plant.
Information on unlawful interference in railway transport operation
In 2009, Russian Railways spent RUB 10.5 billion on safeguarding and protecting its facilities from wrongful acts and unwarranted interference in operation of railway transport. Russian Railways provided finance and arranged for 5,493 of its facility units to be safeguarded by security firms. In addition, 343 joint dedicated groups, including external security staff and transit police, were set up to monitor crime-prone railroad sections. In line with the 2008-2010 Program of Organizational Measures to Protect Russian Railways' Facilities from Terror Attacks, railway safety standards are being developed for high-speed services. (Fordetails see Appendix 21).
Antiterror Investment Project
In 2009, as part of the Antiterror Investment Project, Russian Railways installed Technical Security Equipment ("TSE") worth RUB 405.2 million at its facilities. TSE systems were installed at 8 most critical facilities, and upgraded at 12 terminals, 5 railway bridges and a railway tunnel. In addition, as part of the Antiterror Investment Project, technical and physical security equipment ("TPSE") was installed on the high-speed railway between Moscow and St. Petersburg (three high-speed sections, upgrading of the CCTV systems at Moskovsky and Leningradsky terminals and the railway bridge across Volga); the total amount spent from the investment program in 2009 was RUB 207 million. Oktyabrsky Regional Security Center arranged for direct security services to be carried out at the Mstinsky Most-Okulovka leg. TPSE was installed at 9 railway bridges and the 244th kilometer crossing, 3 security control points were set up at Vyalka halt, Zaozerye and Torbino station, and the district Technical Situation Center at Torbino station. As at 31 December 2009, funds of the Antiterror Investment Program were used to install TPSE at 1,019 facilities, including 280 terminals, 235bridges, 48 tunnels.
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142
During 2009, TPSE was installed at 3 terminals, an administrative building of the Privolzhskaya Railway Administration, Mobilization Base No. 47 of the Kuibyshevskaya Railway, Krasnoyarsk Vostochny marshalling off-grade station and 2 yards (marshalling and transit) of Chita-1 station. TPSE systems were upgraded at 14 terminals (including Moskovsky terminal in St. Petersburg and Leningradsky terminal in Moscow), 5 railway bridges, the tunnel at the 586th kilometer of the OtrozhkaPridacha leg of the South-Eastern Railway and some administrative buildings of the West-Siberian Railway Administration. In view of the top priority of the Sochi-2014 Investment Program, Russian Railways, together with JSC Mosgiprotrans and JSC Research Institute for Automated Systems (NIIAS), are working on the design and implementation of a comprehensive security system for Olympic venue No. 32, the combined motor and rail road between Adler and the mountain climate resort of Alpinka Service. In order to enhance the effectiveness of security and protection of Olympic venues under construction and implement progress control at construction sites, Russian Railways strengthened the Krasnodar unit of the North-Caucasus Regional Security Center. The bomb on the railway track that went off under the Nevsky Express passenger train on 27November 2009 caused Russian Railways to decide on stepping up the protection of the Moscow St.Petersburg route from unlawful interference through implementing a continuous CCTV monitoring of the tracks. Russian Government adopted Decree No.1080 dated 24 December 2009 to provide state support to Russian Railways in the form of a grant of RUB 1.0 billion for carrying out measures to protect the public railway infrastructure of the Moscow St.Petersburg route from unlawful interference in 2010. The grant of RUB 1.0 billion was remitted to Russian Railways from the federal budget under agreement No. 592d/1177 dated 28 December 2009 between the Federal Agency for Railway Transport and Russian Railways. In order to fulfill the above agreement, Russian Railways worked out an Action Plan to protect the public railway infrastructure of the Moscow St.Petersburg route from unlawful interference in 2010, approved by Russian Railways President Vladimir Yakunin on 30 March 2010. Implementation of the Action Plan is included in the Russian Railways investment program for 2010 and financed as a sub-project for Protection of Railway Infrastructure on the Moscow St. Petersburg Route from Unlawful Interference under the Antiterror Investment Project. Steps taken in 2009 reduced the number of acts of unlawful interference in operation of railway transport by 20% year-on-year (2009 1668, 2008 2070). The 1,668 recorded acts included 8 bombings. In addition, there were 91 reports of threatened terror attacks, 21 registered offences that posed threat to life and safety of Russian Railways staff, 599 foreign objects placed on rail, 93 instances of track dismantling and 796 instances of dismantling signals and interlocking equipment. Also, 2 explosive devices and 439 unattended (suspicious) objects were found. Steps taken in cooperation with transit police resulted in detaining 511 for various offences, including those of an alleged terrorist nature. This resulted in launching 191 criminal cases.
143
annual RepoRt 2009
oCCupational Safety
144
OccupatiOnal Safety
145
annual RepoRt 2009
It is the policy of Russian Railways to ensure safe working conditions, reduce the number of occupational injuries and protect life and health of its employees. In accordance with the Company's development strategy, the principal goal of its occupational safety measures is to mitigate the risk of occupational accidents and focus on the most safe processes and equipment.
Russian Railways have developed a framework of occupational safety management which is an integral part of the Company's management framework and ensures an integrated approach to, and uniform procedures for, organizing occupational safety activities at all levels. Over 4,000 employees are involved in the occupational safety framework.
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Every year Russian Railways develop a Program for Improving Working Environment and Occupational Safety Standards on the basis of proposals coming from departments, administrations, branch railways and directorates. This Program provides for centralized investment in the implementation of the most efficient technical facilities ensuring the safety of work. The Program activities are targeted at: 1. Preventing accidents; 2. Improving working conditions and preventing occupation diseases; 3. Better sanitation and amenities for employees; 4. Training in and promotion of occupation safety. Air purifiers and heat shields were provided to locomotive depots and car houses within the investment program. This was one of the measures to improve working conditions and reduce disease rates across these divisions. Occupational Safety technology suites were planned for provision to the electrification and power supply division to help reduce the probability of electric trauma in catenary system and power network. The purchase of gas analyzers along with survival gear for boiler plants and sewage systems helped mitigate the risk of intoxication during underground utility, sewage and boiler operations at its divisions dealing with civil works, water supply and sewage, communications and computer technology. Module heating units provided to the rail car, transportation management, and automation and remote control divisions improved working conditions of car inspectors and repair men, shunting masters and their assistants, rail car speed regulators, electricians and wireman of the signals and interlocking facilities. Walkie-talkies provided to signalmen reduced the risk of injury from a runover by rolling stock for employees of the rail and structures division. In 2009, a total of RUB 2.5 billion was invested in Program activities, including centralized investment of RUB 236.6 million, the remaining RUB 2.3 billion coming from the railway budget. The Company expends an annual average of over RUB 7 billion for occupational safety activities. In 2009, a total of RUB 7.8 billion from all sources of financing available to Russian Railways, or RUB 7,600 per employee was invested in improving working conditions and occupational safety. Preventive efforts taken by the Company helped maintain the downward trend in occupational injuries, including fatal ones, in 2009. At the same time in 2009, 620 employees suffered occupational injuries, of which 78 were fatal. It should be noted that a mere four injury types, including rolling stock runovers, electric traumas, falling from a height or running rolling stock and traffic accidents, account for about 70% of all fatal injuries. Russian Railways are taking measures to reduce these factors. New alerting systems to warn repair crews working on the tracks of approaching rolling stock are being designed, novel repair and maintenance technology for tracks and power equipment is being developed, protective clothing capable of shielding from the heat of an electric arc or induced voltage and other means have been included in the Standards of Distribution of Personal Protective Gear to Personnel (Order No. 582N of the Russian Ministry for Health and Social Development dated 22October 2008).
oCCupational Safety
147
To adopt new approaches to occupational health and safety management, Russian Railways have developed a new standard (STO RZD 1.15.005-2009, The System of Internal Audit of the Occupational Health and Safety Management within Russian Railways). Internal auditors will primarily focus on indentifying elements within the occupational health and safety system which require improvement. With occupational injury rates declining year by year, Russian Railways have been able to reduce the relevant expenses on public insurance claims. Russian social insurance funds reduced rates for occupational injury insurance from 1.4% of payroll in 2001 to 0.4% in 2006. As at 1 January 2010, there were 486.5 thousand positions with Russian Railways occupied by over 1 million employees, of which 229 thousand positions (578 thousand employees), or 47% of the total number, do not quite meet the sanitation standards. In 2009, over 12 thousand workplaces were brought in line with occupational safety standards, and working conditions were improved at 42.3 thousand workplaces. (For details see Appendices 19-20). One of priority objectives that is highly relevant to the rate of occupational diseases and injuries is to provide employees with modern certified individual protective gear. In 2009, RUB 2.5 billion was spent on purchases of special clothing, footwear and other individual protective gear. So as to provide better support to its personnel, Russian Railways have approved a new version of the Standards of free distribution of certified special clothing, footwear and other individual protective gear to Russian Railways personnel exposed to harmful and/or hazardous working conditions, extreme temperatures or pollution (Order No. 582N of the Russian Ministry for Health and Social Development dated 22 October 2008). The Standards include new modern types of special clothing, footwear and other personal protective gear that have passed performance tests and were assessed as good. Russian Railways arrange multilevel and ongoing training in occupational health and safety for its executives, specialists and other staff. Professional development, retraining, training in, and testing knowledge of, occupational safety are all facilitated via higher education institutions, their branches, technical colleges, training centers and railway technical schools specializing in the railway industry. Over 80 educational institutions provide training services to Russian Railways employees. In 2009, 16 thousand executives and specialists of railway and other branches of Russian Railways took occupational safety training courses. Russian Railways operate 18 occupational safety training cars that are part of a unified training system for railway divisions staff. An occupational safety training car is a mobile training facility whose primary functions include provision of methodological and administrative support for training in, and testing knowledge of, occupational safety using audio, video and computer equipment and doing preventive work in this area directly at rail line enterprises.
annual RepoRt 2009
148
Around RUB 50 million was spent on outfitting occupational safety rooms and boards in 2009. Work safety is promoted in the Company through regular publications in the Gudok newspaper and other industry media covering latest technological developments, sharing knowledge on how to enhance occupational safety management and prevent occupation injuries.
oCCupational Safety
149
annual RepoRt 2009
enviRonmental Safety
150
EnvironmEntal SafEty
151
annual RepoRt 2009
The Company performs environmental activities in accordance with Regulation No. 1480 on Environmental Management at Russian Railways approved by the President of Russian Railways Vladimir Yakunin on 2 December 2007. The Company's environmental activities are based on the Environmental Strategy of Russian Railways through 2015 and 2030 as approved by Order No. 293r of the President of Russian Railways Vladimir Yakunin dated 13 February 2009.
Environmental audit is conducted to review the compliance of the Company's environmental activities with the Russian environmental law and the environmental management system as provided in the International Standard GOST R ISO 14001. In2009, environmental audit was conducted out at 158 structural divisions of Russian Railways branches. The Company's investment project of Ensuring Environmental Safety, currently in the process of implementation, involves constructing/ reconstructing treatment facilities, acquiring environmental plants and equipment, outfitting environmental labs and purchasing oil-spill clean-up equipment. In 2009, the relevant capital expenditures amounted to RUB 322.6 million.
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The 2009 outputs of the Ensuring Environmental Safety project were as follows: 9 environmental facilities constructed, reconstructed and placed in service; 3 items of equipment for emission and wastewater treatment placed implemented; 4 mobile environmental labs outfitted in Gazel vehicles, and 29 suites of analytical instrumentation and laboratory equipment and 24 gauges for environmental control stations responsible for the environmental testing of diesel locomotives provided; 161 items of oil spill clean-up equipment purchased. Environmental facilities, plants and equipment placed in service in 2009 will help cut down waste water discharge to reservoirs and municipal sewage systems by 2.5 million m3, remove and recycle on the grounds of railway structural divisions 5,000 tons of waste. In 2009, hazardous emissions from stationary sources decreased by 20,000 tons year on year to 133,300 tons, with 26.6% of hazardous emissions from all sources captured and treated. In 2009, the Company consumed 127.3million m3 of water, or 20.6 million m3 down from 2008. Roughly 61.9 million m3 of water was consumed in operation, or 9.7 million m3 down yearon-year. Harmful discharges to surface water reservoirs totaled 14.0 million m3, or 2.9 million m3 less than in 2008. In 2009, the Company generated 2.2 million tons of operation and consumption waste, or 130,000 tons down from 2008. Of total generated waste, 23.1%, or 518,200 tons, was used and treated through process technology at structural divisions of the Company's branches. This reduction in environmental footprint was achieved through investment projects, industry-focused technology upgrade and efficient environmental management in place. Environmental charges for harmful emissions, discharges and waste storage amounted to RUB 261 million in 2009, or RUB 9 million less than in 2008. Control of harmful emissions and discharges is performed: for stationary sources: by 56 environmental labs, 9 rail car labs and 55 motor vehicle labs; for mobile sources (diesel locomotives): by 89 environmental control stations responsible for environmental testing of diesel locomotives after overhaul. In 2009, the Company's environmental divisions performed 350,000 analyses of air, wastewater and soil. Roughly 20,300 sources of harmful emissions and discharges were counted, 935volumes of environmental regulations were drawn, and 3,800 licenses for harmful emissions, discharges and waste storage were renewed with environmental agencies. Efforts to develop binding environmental regulations for structural divisions, obtain licenses for harmful emissions, discharges and waste storage, and perform environmental control helped avoid engaging third parties for these purposes and, consequently, saved the Company RUB 292.8 million. Support provided to divisions by railway environmental specialists in disputes with regional environmental agencies helped save RUB 92 million. Instrumental measurements showed that harmful emissions were below fixed limits at a number of the Company's facilities. As a result, environmental charges applied by regional divisions of the Federal Service for Environmental, Technical and Nuclear Supervision were adjusted downward by RUB 33.8 million, so the Company is charged for actual emissions only. This resulted in a saving of RUB 418.6million. In addition, the overall economic benefit gained through implementing environmental technology across the railway industry is RUB135.4million.
enviRonmental Safety
153
annual RepoRt 2009
peRSonnel ManageMent
154
Personnel ManageMent
155
annual RepoRt 2009
Rational use of laboR ResouRces when theRe is less tRaffic
As a result of the financial and economic crisis, the Company took stringent measures to reduce all types of costs and outlays. In this respect, all the subdivisions carried out a survey to find the internal resources needed to bring the quota into line with the amount of work to be done: lowefficiency production units were put under unified management, workplaces lacking work were eliminated, jobs were combined, service areas were expanded, etc.
Due to improved technology and a higher level of mechanization and automation of laborconsuming production processes, labor costs were reduced in relation to servicing, operating and repairing the rolling stock and the infrastructure. Inthis respect, the existing norms had to be revised. About 200 technological instructions and provisions were reviewed. By using the revised norm-related documents, the requirements for employees could be reduced in all the sectors while maintaining traffic safety.
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In 2009, the employees working time was effective management actively optimized. As a result, overtime hours in the of peRsonnel As of 31 December 2009, the Companys railway network was reducedt 3.2-fold against the staff was cut in relation to the level of 2008 by 7.7% 2008 figure. and constituted 1,075,700 employees, of which A shorter workday and unpaid leave reached 305,800 were managers and specialists, including their peak in Q1 2009. Starting from September 165,500 engineers and 117,700 technicians. In 2009, the structural subdivisions gradually began the Company, engineers increased by 1.7%, and to work a full workday with regard to an increase in employees with secondary special education, by traffic and income. Consequently, the application of a 1.2%. In 2009, there was no shortage of employees shorter workday was reduced 2.5-fold by December of the basic work professions. The railway network versus the beginning of 2009. and the main functional branches had 97.9% of the On the average for the year, working hours personnel required. were reduced for 475,000 employees, or 46% of all Young employees in the Company up to the employees. age of 30 constituted 22.9% in 2009. The average The anti-crisis measures taken in 2009 age of the Companys employees is 40. Women who together with the wide-scale explanatory work are managers and specialists in the Company account carried out among the employees made it possible for 55%. to fulfill the budget targets for labor payment and for the number of employees and labor productivity, and to maintain social stability in the Company. Age of all employees in the list To unite the Companys and employees interests and form a unified general 24.1% corporate approach to incentives, a new system of material stimulation was worked out in the company whereby: employees could be engaged to the greatest 23.2% extent in resolving corporate issues; employees would be more interested 2008 26.9% materially in effectively fulfilling individual as well as general corporate tasks; common principles would be established in materially stimulating all the companys employees, and a procedure would be set for 25.7% working out, and approving in the branches of JSCo Russian Railways, the provisions of awarding employees by means of a three24.1% level approach; payment of part of a bonus to an employee would be guaranteed for his/her fulfillment of individual goals when the general 22.9% production and economic results of the 2009 26.5% work of a structural subdivision or a branch worsen.
26.5%
OVER 50
FROM 40 TO 50
FROM 30 TO 40
BELOW 30
157
To consolidate the management of branches and structural subdivisions, 380 heads have been appointed by internal orders. By orders of the directors of railways, 3,200 managers were appointed, by orders of the railway department heads, 5,200 employees were appointed, and by orders of the heads of the functional branches and structural subdivisions of JSCoRussian Railways, 800 employees were appointed. The number of employees who left the railway network was reduced by 2.4% against the 2008 figure and constituted 8.7%. At the same time, with regard to the main professions, the number of employees who left the company increased from 5.4% to 6.1% among station guards, from 4.0% to 4.4% among electric locomotive drivers, from 5.6% to 6.8% among diesel locomotive drivers, and from 8.0% to 9.5% among freight and baggage handlers.
Development of the personnel potential
In the Company, personnel are managed in line with the Strategy of Management of the Personnel of JSCo Russian Railways until 2015, approved by Order No. 1819r of JSCo Russian Railways dated 31 August 2009. Importance was attached to the Strategy in order to determine the main strategic goal, the functional issues, and the key lines and measures to implement them during the period until 2015 in the sphere of personnel management with regard to the formation of the holding company of JSCo Russian Railways. The strategy of development of the personnel potential helps create reliable mechanisms to achieve the main aim, i.e., greater effectiveness of activity and the involvement of personnel in the attainment of the corporate goals of the holding company Russian Railways. With regard to the development of the Strategys strong sides and the accompanying risks and possibilities, as well as the implementation principles, its goal can be attained by resolving the following functional issues: sufficient personnel; involvement of personnel in effectively tackling corporate issues and the improvement of the incentive system; uninterrupted development of personnel and change to a training organization; life support of the personnel outside the area of work;
pursuance of an effective youth policy; improvement of corporate social responsibility and social partnership; development of the corporate system of management of personnel in the holding company. In the crisis year of 2009, measures were mainly taken to optimize the Companys numerical size and bring it into conformity with the reduced volumes of the work being done. To get rid of the excessive personnel and bring its numerical size into line with the work being done, the target Program for Promoting the Employment of the Companys Employees Being Discharged was worked out and approved for 20092011. The numerical size of personnel was mainly reduced due to natural outflow: only 1.1% of the employees (12,500 employees) were discharged due to redundancy in the Company. That is not more than in the pre-crisis year of 2008. In addition, the Company fulfilled its obligations to accept students who graduated from higher educational institutions and technical colleges and those who returned after serving in the Armed Forces of Russia: 13,500 persons. On the whole, all the personnel management tasks set by the Management Board for 2009 have been fulfilled. The Companys tasks were fulfilled as a result of the measures taken. In 2009, the work done in implementing the Strategy of Development of the Personnel Potential met on the whole the requirements of the Companys branches and other structural subdivisions for skilled employees. Particular attention was paid to the implementation of anti-crisis measures: the retraining of personnel, the training of employees for another (combined) profession, and the improvement of the employees skills. That same year, another direction was the further development of the existing system of training, retraining and improvement of skill concerning the Companys personnel, as well as its adaptation to the changing external and internal conditions. In 2009, the Concept of creating a system of additional corporate education of the managing personnel of JSCo Russian Railways (Corporate University of JSCo Russian Railways) was approved. The relevant documents were approved by the Companys Board of Directors. The Corporate University began functioning on 1 July 2010.
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158
In 2009, 60,000 employees were trained in the area of working professions, 41,000 of whom underwent retraining and acquired a second (combined) profession; 157,000 employees improved their qualification, 25,000 of whom raised their qualification rank. In 2009, the Coordination Methodological Council for Personnel Retraining was established and began to operate. In addition, distant training and tests for students of technical colleges and educational centers were introduced. Work continues to be done in reviewing model curricula for the main working professions with regard to current requirements. More than 22 model curricula for professionally training employees engaged in the locomotive, car, railroad and other sectors were reviewed in 2009. Particular attention is paid to the training of specialists in higher educational institutions and technical colleges. The Companys branches, subsidiaries and affiliates sent 3,934 employees to higher educational railway institutions for intramural education, and 3,500 employees to technical colleges, and this is in line with the Companys requirements for specialists. In all, 17,200 employees are undergoing target intramural training at higher educational railway institutions, and 13,500 employees are studying at technical colleges. This year, 12,800 students from higher educational institutions underwent practice in the Companys branches and other structural subdivisions, 4,400 of whom had paid jobs; this was also true of 9,500 students from technical colleges, 3,300 of whom had paid jobs. Students and postgraduates of the educational railway institutions were given stipends by the Company in amounts ranging from 1,500 to 4,500 rubles per month; 500 grants were given by the Company for the development of diploma projects in an amount of 35,000 rubles for students of higher educational institutions and 25,000 rubles for students of technical colleges; additional pay in the amount of 1,000 to 2,000 rubles per month was set for the state stipend for target students with good and excellent grades, and also for poorly provided and socially unprotected individuals. In 2009, 72,000 managers and specialists improved their qualification; among them, 94 managers underwent training at railway enterprises abroad. Currently, 186 promising managers of the Company are studying for an MBA in leading Russian business schools; 203 employees have successfully completed their studies, including 111 employees in 2009, 12 of whom enrolled for an MBA in prestigious business schools. Preparations have been made for the enrolment of another 16 employees. To systematically support measures in improving the quality of the services provided, cascade training has been organized for the system of quality management and traffic safety. Roughly 4,300 managers underwent training in relation to the system of quality management and leadership on the 5th cascade level.
Implementation of the collective agreement
The regulation of social and labor relations is paramount in the Companys activity. A legal document which regulates social and labor relations in the Company is the Collective Agreement of Russian Railways, which has been signed by the Company and the sole representative body of the primary trade-union organizations the Russian Trade Union of Railway Workers for 2008 2010 on the basis of the principles of social partnership. The Agreement proved to be vital in successfully regulating social and labor relations in the railway sphere and considerably helped us in carrying out our reform. It was used to create a mechanism for settling collective and individual labor disputes and to socially protect the Companys employees and retirees. In 2009, the Company fulfilled all its obligations under the Collective Agreement of Russian Railways for 2008 2010, spending 83 billion rubles to that effect. Expenses per railway employee amounted to 51,800 rubles, and per retiree, 8,400 rubles with regard to health improvement at health resorts and to medical services and other social guarantees.
159
Every quarter, the Companys Management The Companys main goal in relation to labor Board sums up the results of the network contest resources is gradually to refuse to use such anti-crisis between railway teams as well as branches, structural instruments as shorter working hours and unpaid subdivisions and employees of Russian Railways. leave. A task of no less importance is to resume wage In 2009, 683 teams won prizes in a branch indexation. contest. Among 20 teams which achieved the best A unified personnel policy of the Russian results and held first place for a year, the winners Railways holding company, which is aimed who were proclaimed with regard to the results of at the functional implementation of the the reporting period were the teams of the October, Strategy of Development of the Personnel North Caucasus, Sverdlovsk and South Urals Railways, Potential of JSCo Russian Railways for the as well as the teams of the Muromsk Division of period until 2015, is designed above all: the Gorkov Railway, the Belgorod Division of the to acquire skilled personnel and create a Southeastern Railway and the Omsk Division of the reliable staff reserve, including a reserve for West Siberian Railway. subsidiaries and affiliates; With regard to the contest results for 2009, to continuously develop it, make it more the following titles were awarded: efficient and involve it in resolving corporate Best head of the middle unit in railway issues. transportation, 103 persons; In 2010, a transition is to be made to Best master in railway transportation, the systematic development and training of the 77persons; Companys top management at the corporate Professionally the best in railway university of JSCo Russian Railways at the level of the transportation, 242 persons; best global practice. Best team of the brigade (column, area, social spheRe shift), 202 teams with 3,859 employees.
Housing policy Incentives
annual RepoRt 2009
Contests
Development prospects
In 2009, work was done in stimulating railway employees in their work and awarding them for high professional skill and many years of honest service. All types of awards were granted to 6,985 employees and persons not working in Russian Railways. State awards were granted to 115 employees, and awards of the Ministry of Transport of Russia, to 1,123 employees; 5,747 employees received corporate awards, 336 of whom received the Companys highest award, i.e. the badge of Honorary Railway Worker of JSCo Russian Railways.
Since 2005, Russian Railways has been implementing the Housing Concept to resolve two basic issues: financial support of employees who need to improve their living conditions and the creation of a housing fund to support the technological process of transportation. Particular attention is paid to young people and big families as well as single parents bringing up children. Subsidies are given gratis to the latter and account for 70% of the cost of housing space. Currently, about 10,000 employees who directly participate in supporting transportation technology live in technological housing. In addition, a young specialist is entitled to a 2% mortgage loan to buy housing. If a child is born in his family while he is repaying a subsidized mortgage loan, the Company will compensate him for the amount of 10 sq. m of the housing space he is acquiring, and if another child is born, the Company will do so for 14 sq. m of the housing space being acquired, and if a third child is born, for 18 sq. m. In 2009, 1,279 loans were officially granted for housing to be purchased by employees aged below 30, including 633 young specialists.
160
In 2009, subsidized mortgage loans were received by 2,369 employees of JSCo Russian Railways; 74.5 million rubles were spent on freeof-charge subsidies paid to big families and single parents, and 836 young employees in whose families children were born received 232.9 million rubles to repay the debt on the acquired housing. The status of young specialist has been introduced. In this respect, a young employee can, after graduation from a higher educational institution, receive an allowance in the amount of additional wages so as to compensate him as well as his family members for the expenses incurred in moving to his new place of work.
Youth policy
The pursuit of an effective youth policy as one of the seven functional goals of the Strategy of Development of the Personnel Potential is a complex task and presupposes a unified corporate youth policy. The Strategy envisages mechanisms of the corporate policy, a target audience composed of young people (training, social support), work among potential employees students and children (childrens railroads) as well as school pupils, selforganizing undertakings among young people, the creation of mechanisms to initiate innovations, support in revealing a creative potential, and involvement of young people in resolving corporate issues. Young people are the Companys main innovation source. Under the target program Young People of JSCo Russian Railways, 625 undertakings were carried out in three main directions: young professional, corporate youth culture and social guarantees. All the projects were implemented in six directions: young professional, youth self-organization, moral and patriotic upbringing, corporate leisure, health and sports and young family and social support. Currently, the task is to create a new target program until 2015. A system of attracting young people of our higher educational institutions and work in Russian Railways has been created jointly with university complexes. The Company encourages scientific research by young people: the cost of all scientific research performed by the higher educational railway institutions at the request of all of the Companys branches, subsidiaries and affiliates is roughly one billion rubles.
Tutorship has been introduced in the Company. The Corporate University is to be established for young specialists who are planning a career, and more than 200 promising young managers will study in it annually. A young employee may receive a second higher education by means of an educational loan commonly granted by the Company, or may study for an MBA in the leading Russian and foreign business schools at the Companys expense. Councils for Youth Affairs have been set up in all the branches. The following youth projects are now being implemented: New Unit, Corporate Leader, Corporate Club Team 2030, 3D Network, etc. Five projects of innovation idea leaders have been supported by the Companys Management Board and are being implemented in the network.
Work of non-state educational institutions
Russian Railways is the founder of 311 nonstate educational institutions (2 general education lyceums, 18 general education schools, 30 boarding schools, 8 educational institutions for children of preschool and young school age primary schools and kindergartens, and 253 kindergartens). The overall number of those studying and being brought up in those institutions is 42,498 children, including 37,398 children (88%) who are children of the Companys employees. All educational institutions have licenses to engage in educational activity and also have state accreditation certificates.
Corporate pension system
An important direction of the Companys activity is care for its veterans. In Russian Railways, corporate pension security is a component of an employees social package. By signing the nonstate pension security agreement and becoming a depositor participant, an employee forms a pension additionally to the state pension together with the Company on parity lines. The non-state pension fund Blagosostoyanie (Welfare) implements the corporate pension program of Russian Railways. Today, all the Companys employees can participate in the corporate system of non-state pension security. In 2009, 133,500 employees of Russian Railways signed the non-state pension security agreement. In the Company, the total number of depositors-participants reached 584,300 persons, or more than 56.1% of all the employees of Russian Railways.
161
250 000 250 000 250 000 250 000 250 000 250 000 250 000
200 000
200 000
200 000
200 000
200 000
1 650
150 000 150 000
1 803
150 000
1 955 170 250
2 122 200 000
1 429 126 200
152 200
150 000
150 000
1 196
100 000
94 000
100 000
100 000
100 000
100 000
100 000
AVERAGE AMOUNT OF PENSIONS PAYABLE ATYEAR END (AS A CUMULATIVE TOTAL), RUBLES
70 000
50 000 50 000 50 000 50 000 50 000 50 000 50 000
2004
2005
2006
2007
2008
2009
NUMBER OF PERSONS RECEIVING PENSIONSAT YEAR END, THOUSAND
Roughly 200,000 former railway employees health caRe As of 31 December 2009, Russian Railways receive corporate pension. In 2009, pensions were had 270 non-state health care institutions with set for 29,750 employees of Russian Railways, and 3.3 million people (against 3.4 million people as the average pension paid at the end of the year on an of 31 December 2008) listed for medical care. accrual basis was 2,122 rubles in 2009, being 167 In2009, 1,035,000 employees of Russian Railways rubles more than in 2008. underwent medical checkups. In 2009, employees engaged in traffic safety (1st category) underwent 327,000 (against 338,000 in 2008) medical checkups, 3,600 (against 3,500 in 2008) of whom were deemed professionally unfit. In 2009, the health care system of Russian Railways had 4 mobile consultative diagnostic centers created on the basis of railway cars and having modern medical equipment and telemedicine complexes on the Northern, Far Eastern, Krasnoyarsk and West Siberian Railways. In 2009, such a center was put into operation on the East Siberian Railway. In 2009, mobile consultative diagnostic centers made 62 trips to 284 railway stations. Roughly 44,000 persons were examined. Russian Railways has a network of telemedicine centers to effectively conduct planned and urgent video consultations with specialists of clinical centers located in Russia and abroad. As of 31 December 2009, the sanatorium and health resort facilities of Russian Railways included 14 non-state institutions of central jurisdiction with a total capacity of 2,840 places. The sanatoriums have modern medical diagnostic equipment. Most sanatoriums and health centers are located on the territory of unique resorts of Russia on the Black Sea coast of the Caucasus and Caucasian Mineral Waters.
annual RepoRt 2009
Basic indicators of non-state pension security in Russian Railways
162
In 2009, 99,168 persons (31.9% of the requirement) received medical treatment and improved their health in sanatoriums and resorts (102,040 persons in 2008), including 69,563 working railway men (70.1%) (71,018 railway men in 2008), 8,187 family members (8.3%) (9,118 family members in 2008), and 21,418 railway retirees (21.6%) (21,904 railway retirees in 2008), of whom 2,090 persons were war veterans (2,706 war veterans in 2008). All the projects are united in a set of target tasks: stimulating professionally oriented work, forming the personnel reserve, guiding young employees, instilling a sense of patriotism and loyalty to the Company, promoting a healthy way of life and developing corporate culture. In all, 18,600 employees took part in the undertakings in 20072009, including 8.200 employees in 2009. Roughly 53,000 children spend their leisure time annually at resorts owned by Russian Railways. They include over 46,000 children of the Companys employees and 7,000 children of employees of other organizations and private individuals (72 childrens health centers were open in 2009). In addition, 9,000 of the employees children spent their leisure time on the Black Sea coast in line with the Companys program. During the summer health campaign, over 75,000 children of the Russian Railways employees spend their leisure time at the Companys health resorts, including on the basis of the Mother and Child program. In 2009, roughly 173,000 people went to resorts and improved their health under the program of rest and health improvement for employees of Russian Railways, their family members and retirees at sanatoriums and health centers under railway jurisdiction, recreation centers and sanatoriums and health centers of central jurisdiction. When distributing and selling sanatorium and resort vouchers, attention is paid particularly to employees directly engaged in traffic safety.
2008
0 0
Structure of the contingent which received medical treatment in sanatoriums and health resorts of Russian Railways in 2009 against the figures for 2008, persons
80 80 80 80
71 018
60
69 563
60 60 60
40
40
40
40
20
20
20
21 904
21 418
20
9 118
0 0
8 187
2009
EMPLOYEES OF RUSSIAN RAILWAYS
FAMILY MEMBERS OF EMPLOYEES
RAILWAY RETIREES
163
Russian Railways has 207 sports facilities with 2,273 groups in the sports sections of the most popular types of sport. There are 46,105 persons in them, including 29,413 railway employees and their family members and 5,821 children under the age of14. In the reporting period, the following general corporate events were held: sports contests between employees of Russian Railways and between their children, Russian Railways Presidential Cup in volleyball, championships in the most popular types of sports, Racing Day festival, and the sports holiday Dad, Mom and I Are a Sports Family. Russian Railways financially supported childrens football matches (Locoball), basketball matches (School League) and street basketball, in which railway employees children as well as other children took part. Russian Railways has 201 cultural facilities with 1,549 clubs and 60,569 members, including 35,900 railway employees and their family members and 20,333 children below the age of 14. In 2009, the amateur art festival Russian Railways Lights Up Stars was held for the third time in a row in Russian Railways on all the 17 railways. More than 6,000 members of 976 amateur railway teams took part in it. Fatherland Defender Day, International Womens Day, Great Patriotic War Victory Day and Railway Workers Day are always celebrated in the railway network.
chaRity
annual RepoRt 2009
cultuRe and spoRts
A considerable amount of resources (40.7million rubles) was allocated to restore and support the orthodox churches on the entire territory of Russia and abroad, including the Valaam monastery for men, to build the House of Hospitality to Strangers (pilgrims home) of the Russian Orthodox Church of the Moscow Patriarchate at the Site of Baptism of Jesus Christ on the Jordan river, to restore the Parish of the Church of St. Nicholas (Kazan Diocese) in the Yudino micro-district of the city of Kazan and the church built in honor of the Smolensk Icon of Virgin Mary Odigitriya, to restore the Cathedral of the Birth of Virgin Mary in Korennaya Hermitage and the Russian Parish of the Moscow Patriarchate in Strasburg. The Company has traditionally continued to help childrens educational establishments and higher educational institutions. Over 20.8 million rubles have been allocated in this respect. In 2009, support was given especially to projects for helping children of kindergartens and boarding schools and children left without parental care. More than 44 million rubles have been allocated for this purpose. As much as 9.3 million rubles have been allocated to support sports events, and 0.6 million rubles, to help the disabled. Over 91 million rubles have been allocated to help individuals who are in a difficult situation. In 2009, transportation free of charge had on the whole cost more than 20 million rubles.
In Russian Railways, charity is an important line of corporate social responsibility. In 2009, 548 million rubles were earmarked for charity, whose main directions were the following: Preservation of the national cultural legacy. In this respect, the Company earmarked more than 104 million rubles to, inter alia, prevent accidents at the sites of the Voskresensk Novo-Ierusalimsk Stauropegion Monastery for men and support the activity of Pushkins State Fine Arts Museum. The Companys active participation in preparing for the opening (after restoration) of the Marfo-Mariinsky convent in Moscow, celebrating the 1150th anniversary of Great Novgorod, building a chapel and restoring the memorial to the fighters in the battle on the river Khalkhin Gol.
164
Russian Railways has relations with social (non-governmental) organizations dealing with issues of social responsibility, environmental protection, protection of the rights and legal interests of individuals, and social control in those spheres. Cooperation with social organizations creates the basis for developing the mechanisms of social responsibility of business, taking account of public opinion when carrying on activity in improving the social and economic position of the regions where the Company is engaged in activity and of the people living in them, and for protecting the environment and rationally using natural resources. Russian Railways is a member of the Russian Union of Industrials and Entrepreneurs (RUIE) and a signatory of the Social Charter of Russian Business. It has relations with the Chamber of Commerce and Industry of the Russian Federation concerning such issues as the implementation of the reform, and takes part in the activity of the Russia-wide Sectoral Association of Railway Employers and the Union of Transport Workers of Russia. It actively cooperates with companies and trade-union organizations on social and labor issues, and also in the joint implementation of social projects and social policy of Russian Railways. The Company seeks to implement mutual understanding and trust in its relations with trade unions, maintaining an image of a socially responsible company. Russian Railways participates in the activity of several international organizations, both functional and sectoral. They are the International Organization for Cooperation of Railways, the International Union of Railways, the Euro-Asian Transport Union, the UN European Economic Commission, the European Bureau of the World Health Organization, the International Congress of Industrialists and Entrepreneurs, and the Council for Railway Transport of the Member-States of the CIS, etc.
Review of social activity
The Companys participation in international organizations promotes mutually beneficial cooperation within the framework of international agreements, conventions, codes, etc. The main opportunities offered by such cooperation are the implementation of joint projects, informational and methodological cooperation, the Companys account in its activity of the documents adopted at the international level, and the recommendations concerning the aspects of its activity. Russian Railways assumes the obligations agreed on at the international level and expressed in the provisions on international organizations, which have the nature of an international treaty and contain the procedure for the activity of organizations, and in international treaties and conventions, such as the UN Global Treaty, and various voluntary international standards and guides.
165
annual RepoRt 2009
FinanCial and eConomiC ReSultS
166
Financial and economic results
167
annual RepoRt 2009
In 2009, amid challenging macroeconomic conditions, the Company maintained stable and efficient transportation services for the country's economy and population. The Board of Directors of Russian Railways approved a crisis management plan aimed at concentration and mobilization of internal reserves, efficient usage of limited financial resources and cost control has been implemented in full. Amidst the financial crisis and decline in industrial output, management of Russian Railways focused on ensuring the stability and financial harmony of the Company's operations.
Headcount optimization measures implemented in 2009 first of all enabled the Company to optimize the use of human resources and reduce payroll costs retaining at the same time the holding companys human resources and key employee benefits. This is evidenced by year-end results: almost all indicators outperformed the 2009 plan.
168
Improvement in operational indicators freight handling declined by 15% year on year vs. projected 19%. In 2009, the crisis management plan for a total amount of RUB 202 billion was implemented. In 2009, the Company implemented the investment program in the maximum possible amount of RUB 265.7 billion taking into account all sources of financing.
Marketing
Operational activities
The long-distance passenger transportation tariff policy and large-scale marketing effort to reduce the fare (discounts) enabled the Company to keep annual revenue from passenger transportation at the 2008 level. Amidst decline in key markets, the Company undertook exhaustive measures to retain its market position; as a result, revenue from non-transportation types of activities totaled RUB 93.4 billion which is RUB 6.2 billion higher as compared to 2008 (+7.1%).
Liquidity and financial risks
In 2009, the Company did comprehensive work to optimize its debt structure which resulted in increase in the average lending period, decrease in the share of foreign currency-denominated liabilities through their replacement with ruble borrowings and decrease in the average cost of debt capital which enabled the Company to save on interest payments approximately RUB 2billion as compared to initial plans. In 2009, the Company drafted the consolidated financial plan of the Russian Railways Group for 2010 (including financial plans of key subsidiaries of Russian Railways) which was reviewed and approved at the meeting of the Russian Government on 10December 2009. Currently, the holding company has in place a financial risk management and mitigation structure with defined responsibilities at each level of management.
Relationship with the Government
Effective working capital management amidst financial crisis has enabled the Company to resist negative trends of liquidity reduction. Hence, within the holding company, a unified cash management policy on the basis of strategic and day-today liquidity management system has been established. At the end of 2008 beginning of 2009, leading international rating agencies made a downward adjustment of the rating of Russian Railways due to similar decrease in the credit rating of the Russian Federation. In 2009, the credit rating of the Company remained at the level of the sovereign rating of the Russian Federation: Baa1 (Moodys), BBB (Standard & Poors) and BBB (Fitch); inQ4, the official forecast of rating agencies was upgraded from 'negative' to 'stable'.
In 2009, the Company paid current taxes of RUB 194.3 billion, including RUB 24.4billion to the Russian federal budget, RUB 95.3 billion to Russian regional and municipal budgets and RUB 74.7 billion to mandatory social insurance funds. Active interaction with government bodies resulted in a list of anti-crisis measures to provide government financial support to, and ensure stable operations of, Russian Railways: public funds amounted to more than RUB 100 billion.
169
In 2009, the Company saw positive performance: the net profit exceeded RUB 14.4 billion showing a 7.5% increase year on year. Along with achieving key performance indicators, the Company ensured the most effective financial management of the holding company by focusing funds on top priority areas. Key actions are
annual RepoRt 2009
UOM
aimed at mobilizing internal reserves, carrying out active marketing policy, efficient usage of financial resources and implementing international projects which are an additional source of income for Russian Railways.
Financial results, RUB bln

Indicator 2008, actual Target 2009 Actual % of actual to target % of 2009 actual to 2008 actual
Total revenue Total revenue from transportation passenger transportation, including long-distance suburban Freight transportation locomotive hauling services infrastructural services Revenue from other types of activities Total expenses Transportation expenses passenger transportation, including long-distance suburban Freight transportation locomotive hauling services infrastructural services Expenses in connection with other types of activity Total profit from operations Profit from transportation passenger transportation, including long-distance suburban Freight transportation locomotive hauling services infrastructural services Profit from other types of activity Cost of transportation Result from other income and expenses Profit before taxation Net profit
1,101.7 1,014.5 150.4 130.7 19.7 847.0 10.6 6.5 87,2 1 035,3 952,1 216,9 162,4 54,5 722,7 7,8 4,7 83,1 66,4 62,3 -66,5 -31,7 -34,8 124,3 2,7 1,8 4,1 366,2 -11,6 54,8 13,4
1,035.0 948.3 151.6 133.7 17.9 775.5 10.6 10.6 86,5 1 002,0 919,8 203,3 157,2 46,1 696,9 8,2 11,3 82,0 33,1 28,5 -51,7 -23,5 -28,2 78,6 2,4 -0,7 4,5 380,5 4,9 38,0 2,1
1,050.2 956.8 151.0 132.6 18.4 783.0 11.0 11.7 93,4 999,9 913,8 203,3 160,1 43,2 691,1 8,3 11,1 86,1 50,2 43,0 -52,3 -27,5 -24,8 91,9 2,7 0,6 7,2 376,8 10,1 60,3 14,4
101.5 100.9 99.6 99.3 102.8 101.0 103.8 110.4 108 100 99 100 102 94 99 101 98 105 152 151 101 117 88 117 113 -86 162 99 206 159 686
95.3 94.3 100.4 101.5 93.4 92.4 103.8 182.8 107,1 96,6 96,0 93,7 98,6 79,3 95,6% 105,1 236,2 103,6 75,6 68,9 78,6 86,8 71,3 73,9 100,0 33,3 178,0 102,9 -87,1 110,0 107,5
RuB bln
Kop. per 10 km RuB bln
170
profitability and cost indicators average RoR transportation cost (less depreciation) Profitability
Profitability 2008 2009 +/%
390.2 (301.2)
394.6 (304.5)
+4.3 +3.2
101.1 101.1
Kop. per 10 virtual ton-km
transportation freight transportation freight transportation, including compensation passenger transportation long-distance passenger transportation long-distance passenger transportation, including compensation suburban passenger transportation suburban passenger transportation, including compensation other types of activities
7% 17% 17% -31% -20% -8% -64% -60% 5%
5% 13% 19% -26% -17% 5% -57% -53% 8%
-2 p.p. -4 p.p. 2 p.p. 5 p.p. 2 p.p. 13 p.p. 6 p.p. 7 p.p. 3 p.p.
71.9 77.3 111.5 83.9 88.0 -70.4 89.9 87.7 172.1
RevenUe fROM TRAnspORTATIOn, InfRAsTRUcTURe And lOcOMOTIve hAUlIng seRvIces
Revenue of Russian Railways from all transportation types of activities totaled RUB 956.8 billion for 2009. The year 2009 was extremely difficult for the country's economy as a whole as well as for Russian Railways. In 2009, the industrial output decreased by almost 11%. The more profound decline in freight handling as compared to reduction in industrial output is due to the fact that the crisis primarily hit industries that are main consumers of the railways freight transportation services, in particular, the construction sector where the decrease in output of certain products amounted to 2040%. The decline in domestic demand in 2009, against a backdrop of falling prices on world goods markets, nationalcurrency devaluation and a credit deficit, led to a change in the structure of freight transportation. The volume of transportation declined to a much greater degree in Russia than it did internationally (decline by 21.1% vs. 8.9%, respectively). In 2009, the total revenue loss as a result of freight handling decline as compared to 2008 amounted to RUB 127.1 billion.
Revenue declined by RUB 57.7 billion year on year. At the same time, the developed crisis management plan has allowed not just to prepare a well-balanced financial plan but also to ensure receipt of year-end revenue of RUB 8.5 billion (0.9% above the plan).
Revenue from transportation types of activities in 2009
1.9% 13.9%
RUB 956.8 BLN
81.2% 1.1% 1.2%

INFRASTRUCTURAL SUBURBAN SERVICES PASSENGER TRANSPORTATION LONG-DISTANCE PASSENGER TRANSPORTATION
FREIGHT TRANSPORTATION
LOCOMOTIVE HAULING SERVICES
2008
2009
+/-
UOM
171
In 2009, revenue from freight transportation which accounts for the major part of revenue from all transportation types of activities (81.8%) fell below the level of the previous year by RUB 64 billion and amounted to RUB 783.0 billion. The key reason of the revenue decline y-o-y is the significant (15%) drop in freight handling in 2009 which is mainly due to decrease in potential rail freight traffic. In 2009, the freight handling volume declined by 195.6 mln tons, of which 181 mln tons (more than 90%) account for losses as a result of reduction in industrial output, including: building cargoes 77 mln tons coal 27.6 mln tons industrial commodities and molding material 17 mln tons iron and manganese ore 8.3 mln tons timber cargoes 8.2 mln tons ferrous metals 7.8 mln tons concrete 6.2 mln tons. At the same time, in 2009, the average ROR (RUB per 10 ton-km) grew only by 5% year on year with freight tariff indexation being 12.4%. This resulted in revenue loss in 2009 of RUB 52 billion. The gap between the planned tariff indexation and the actual average ROR growth rates is mainly due to the following: changes in the cargo turnover structure by types of services: increase in the share of international cargo turnover by 5.8 p.p. where the ROR is lower than that for domestic transportation services by 23%. Revenue loss amounted to RUB 8.0 billion. increase in the share of transportation in operators' own or leased cars almost by 20 p.p. (from 54% in 2008 up to 69% in 2009) at the expense of the railcar constituent not included in the tariff. Revenue loss approximated RUB 13 billion.
annual RepoRt 2009
Freight transportation
change in the structure of international freight transportation due to increase in the share of freight transit via Russian ports by 4 p.p. (coal, coke, oil and oil products, ferrous metals, grain cargo) that is subject to domestic tariffs. Revenue loss amounted to RUB 4.0 billion. increase in shipments via exit routes by 3.5 p.p. Revenue loss approximated RUB4billion. increase in freight transported at exclusive tariffs by 2.7 p.p. Revenue loss amounted to RUB 8.1 billion.
Passenger transportation
In 2009, revenue from passenger transportation amounted to RUB 151.0 billion, including revenue from long-distance passenger transportation of RUB 132.6 billion which is RUB1.9billion, or 1.5%, higher year on year. The analysis of long-distance passenger transportation has shown that the downward trend in passenger transportation emerged at the end of 2008 continued in 2009. By the end of Q1 the situation significantly deteriorated. In March 2009, the decrease amounted to 14%. The trend breakdown began in April 2009 due to opening of summer ticket sales. By the autumn, the situation significantly aggravated with the deregulated segment first-class sleeping cars and compartment cars being the most severely affected by the emerged crisis. In November, the traffic decreased by 16% as compared to 2008, including a 24% decline in compartment cars and first-class sleeping cars.
172
In 2009, the total number of long-distance OTheR Types Of AcTIvITIes Even despite the crisis, the Company passengers amounted to 120.1 million, which is maintained the upward trend in financial 11.5% less as compared to 2008. performance of other types of activities evidenced In order to stabilize the passenger turnover, during recent years. the Company has developed initiatives aimed at In 2009, Company's revenue amounted boosting demand for railway services through a to RUB 93.4 billion showing an increase of RUB flexible tariff policy and using marketing discounts in 6.1 billion (+7.0%) year on year which is due to certain trains and destinations. expansion of the range and growth in the volume of Thus, the Company implemented a largeservices provided. scale marketing action to reduce the compartment Amidst decline in key markets, management car fares by 50% (the segment most affected by of the Company undertook exhaustive measures to the crisis and accounting for the largest share of retain and strengthen its market position through passenger turnover (28%)). flexible service tariff policy and prompt response Suburban transportation to current demand which enabled the Company to In 2009, revenue from suburban passenger receive revenue in 2009 of RUB 7.2 billion which is transportation totaled RUB 18.4 billion showing a RUB 3.2 billion, or 78.1%, higher as compared to 6.7% decrease year on year. The decrease is due to 2008. expansion of the area served by suburban companies. The situation with the rolling stock repairs The actual increase in revenue as compared to 2008 is particularly worth noting. By offering the market, (under comparable conditions subject to transfer amid the crisis, reduction in prices for repair of of certain destinations to suburban companies in privately-owned cars the Company was able to keep 2009) amounted to 19.7% which corresponds to the volume of privately-owned car repairs at the prethe average for the railway network suburban tariff crisis level through, among other things, increase in increase. the volume of PGK's freight car repairs. The market Revenue from passengers traveling for a fee welcomed the decision which enabled the Company who amount for 57% in total revenue from suburban to utilize repair depot capacities, preserve jobs and transportation increased by 14.6% year on year avoid closure of repair facilities. (under comparable conditions). Qualitative improvement of social The number of suburban passengers performance (financial indicators) should be noted. exceeded 1.0 billion; the decrease in the number of Social losses declined by RUB 1.4 billion year on year. passengers carried amounted to 12.1% year on year. The tangible decrease in losses is due to using nonperforming social assets for business purposes. In 2009, 159 hostels, or 393 thousand square meters, were transferred to municipal authorities. A significant portion of revenue from other types of activities is represented by leasing services revenue (including revenue from property, freight car and electric train leasing services) which increased year on year.
173
OTheR IncOMe And expenses Revenue is mostly (by more than 70%, In 2009, other income and expenses or RUB 65 billion) represented by revenue from amounted to RUB 10.1 billion showing a rolling stock repairs RUB 19.4 billion (20.8% of RUB21.7billion increase year on year; the increase total revenue), leasing services RUB 15.4 billion was due to comprehensive anti-crisis measures (16.5%), retail and catering services and services to implemented by management of the Company. passengers on trains and at railway stations, including The key measure is application (as a part of antiprovision of bedding RUB 10.1 billion (10.8%), crisis measures implemented by the government) of social services RUB 7.3 billion (7.9%), power the Rules of Subsidizing Russian Railways from the transmission services provided to third parties Federal Budget to Compensate for the Loss of Income RUB 5.2 billion (5.6%), sales of goods, including Resulting from the Government Regulation of Freight metal scrap RUB 4.8 billion (5.2%), forwarding Railway Tariffs, Levies and Payments which enabled operations RUB 2.9 billion (3.1%). the Company to receive from the federal budget Revenue from other types RUB40.7 billion and to fill the current liquidity deficit. of activities in 2009 In addition, timely diversification of the loan portfolio and replacement of foreign currencydenominated liabilities with ruble borrowings accompanied by stabilization of the national 17% currency exchange rate have enabled the Company to decrease foreign exchange losses by RUB 17.2 21% billion as compared to 2008 and prevent risk of their RUB 93.4 occurrence in the future. BLN 11% While maintaining all major guarantees provided for by the Collective Agreement of Russian 8% Railways, in 2009 the Company managed to decrease social expenses funded by other expenses by 6% RUB1billion year on year. 28% 5% 3% At the same time, despite the decrease in 1% the number of M&A transactions and changes in ROLLING STOCK SALES OF GOODS INDUSTRIAL approaches to assess the fair value of the company, a REPAIRS PRODUCTION stake in Roszheldorproyekt (50% minus 1 share) was LEASING PROVISIONOF POWER TRANSMISSION successfully sold; respective revenue amounted to SERVICES SOCIAL SERVICES SERVICES PROVIDED RUB 1.72 billion which exceeds the carrying amount TO THIRD PARTIES of the stock by a factor of 2.5. RETAIL AND CATERING SERVICES FORWARDING Other income and expenses benefited from AND SERVICES TO PASSENGERS OPERATIONS establishment of a subsidiary based on assets of the ON TRAINS AND AT RAILWAY STATIONS Zheldorremmash directorates plants and receipt OTHER of dividends from subsidiaries of RUB 1.1 billion showing a RUB 0.6 billion increase year on year. For the purpose of progressive advance of other types of activities, its economic efficiency and financial stability, the Company has implemented measures to increase profitability of other types of activities through, among other things, strengthening competitive positions of Russian Railways at various non-transportation markets, designing and offering new services that are in demand, efficient management of liquid assets and decrease in losses from social and housing & utilities services.
annual RepoRt 2009
Freight handling change in 2009 y-o-y

Uelen
Legend
DECREASE BY 0-5% 10 11
Anguzma Egvenkinot Anadyr
1 SEVERNO KAVKAZSKAYA YUZHNO URALSKAYA ZAPADNO SIBIRSKAYA KRASNOYARSKAYA

Pevek Ioniveyem
KALININGRADSKAYA
PRIVOLZHSKAYA
Provedeniya
DECREASE BY 5-15%
OKTYABRSKAYA
DECREASE BY MORE THAN 15% 12 13 14 15 16

Chersky
SEVERNAYA
MOSKOVSKAYA
5 VOSTOCHNO SIBIRSKAYA ZABAIKALSKAYA DALNEVOSTOCHNAYA SAKHALINSKAYA

Dachny
GORKOVSKAYA
SVERDLOVSKAYA
YUGO VOSTOCHNAYA
Anyuy Markovo
8 17
KUIBYSHEVSKAYA
Pechenga Ust-Oloy Chokurdakh Belaya River estuary
Murmashi II
Lavna
Murmansk
Ossora Nizhneyansk Ugolnaya Zyryanka Verkhnekalymsk Moma Tambey Naryan-Mar Ust-Kara Bovanenkovo Khatanga Klyuchi Ust-Nera Susman Magadan Petropavlovsk-Kamchatsky Mengeno-Aldan Yakutsk Kerdem Tura Mirny Kipenday Ult-Yagun Nizhnevartovsk Salym Neryungri Tobolsk Chadobetsky Mining Plant Nepa Khani Chadobets Yelchimo Kolpashevo Konovalovo Tatarskoye Omsk Yugra Kemerovo NOVOSIBIRSK Barnaul Topki Abakan Biysk Gorno-Altaysk Ust-Elegest Kyzyl Kuragino Zima Ust-Ordynsky Ulan-Ude Irkutsk Mogzon Tomsk Nazyvayevskoye Bely Yar Lesosibirsk Koda Yarky Ust-Kut Lena Alasatskoye Mesto rozhdeniye Novaya Chara Kirensk Novy Uoyan Chineyskoye Mestorozhdeniye Taksimo Berkakut Ulak Tynda Olekminsk Lensk Tummot Elvinskoye Mestorozhdeniye Pogibi Khanty-Mansiysk Surgut -Akha Nogliki Nysh Dzhebariki-Khaya Nizhny Bestyakh Pravaya Lena Palana Omsukchan
Ledmozero
Buslovskaya Kamenogorsk Tiksi Indiga Kharasavey
Belomorsk
Kochkoma
Ust-Kamchatsk
Pskov
Petyayarvi
ST. PETERSBURG
Petrozavodsk
Arkhangelsk
Veliky Novgorod
Obozerskoye
2
Vorkuta Chum Payuta Dudinka Norilsk Igarka Yamburg Tazovsky Zapolyarnaya Pangody Kureyka Russkoye Korotchayevo Nadym Labytnangi Salekhard Saranpaul Talnakh
Karpogory
3
Pechora Chinyavoryk Sosnogorsk Troitsko-Pechorsk Krutaborka Nyaksimvol Priobye Polunoshnaya 6 Yayva Nizhny Tagil YEKATERINBURG Tyumen
Vendinga
Krasnoye
Smolensk
Vologda
Tver
Yaroslavl
Kotlas
Kaluga
MOSCOW
Kostroma
Minkun
Bryansk
Syktyvkar
Suzemka
Orel
Tula
Ivanovo Vladimir
Lesnoy
Kursk Prokhorovka Belgorod Solikamsk Zayachya Gorka
Lipetsk
Ryazan NIZHNY NOVGOROD 5
Kirov
Cheboksary
Kudymkar
Chernyanka
Tambov
Voronezh 7
Saransk
Yoshkar-Ola
Kazan
Grigoryevsk
Chertkovo
Zhuravka
Penza
Ulyanovsk
Izhevsk Perm
Syzran
Likhaya
Samara
17 Smirnykh
ROSTOV-ON-DON Muslyumovo Kurgan
Saratov 9
Novorossiysk
Bataysk Krasnodar
Volgograd
Ufa Techenskoye Mestorozhdeniye
Krivenkovskaya
Kavkazskaya 10
Kommunisticheskiy
12
Chelyabinsk
Maykop
Kochevaya
Orenburg
Boshnyakovo Vysokogornaya Uglegorsk Verkhezeysk Komsomolsk-on-Amur Vanino Ilinsk Fevralsk Selikhin Zeya 16 Yuzhno-Sakhalinsk . Gar
Adler
Cherkessk Stavropol
Elista
11
Kislovodsk
13
Khrebetovo Krasnoyarsk Tayshet Bratsk
Dzhalinda Lugokan
Tygda
Chagoyan Shimanovskoye KHABAROVSK Sukpay Birobidzhan Kruglikovo Samarga
Kholmsk
Aksarayskaya
Tyrnyauz
Soldatskasya
Astrakhan
Nalchik
Nazran
14
Ozernoye Chita
Olya
15
Blagoveschensk Beryozovskoye Mestorozhdeniye Izvestkovaya Leninsk
Vladikavkaz
Grozny
Suvorovo Aginskoye Borzya Priargunsk Naryn Kavalerovo Novochuguevka Ussuriysk Vladivostok Rudnaya Pristan Olga Sergeyevka Nakhodka
Makhachkala
174
175
In Q4 2008, in the run-up to the global financial crisis, Russian Railways was one of the first companies that managed not just to estimate the consequences and the extent of the oncoming negative developments but also to undertake some proactive measures.
2009 cost optimization program
1200 1200 1200
RUB 202 BLN 1115.8
1100
1100
1100
RUB 57.3 BLN

1000
1009.4 952.1
1000
1000
900
900
913.8
900
4% Y-O-Y
Key optimization measures focused on the following: Payroll
800
800
800
PLAN
ACTUAL
2008
RUSSIAN GOVERNMENT, 13.11.08
ACTUAL 2009
28%
RUB 202 BLN

9%
24%
21%
18%
55.8 PAYROLL (INCL. UTS)
47.4 FUEL AND POWER
36.9 AMORTIZATION
Taking into account the social responsibility and the need to retain skilled workforce in the postcrisis period, personnel was released mainly via natural outflow and retirement after reaching the pension age. Further cost optimization and retention of human resources a key factor of post-crisis development was achieved through using part-time work mode and providing unpaid leave of absence. On the average approximately 475,000 of Company's personnel were covered with these modes monthly which ensured a labor productivity increase by 1.8% year on year with the Russia-wide decrease of6%. Maintaining an appropriate salary level in the Company in 2009 was managed against the backdrop of significant traffic decrease and strict measures to reduce all cost items, including payroll costs, which enabled the Company to reduce payroll costs (inclusive of social contributions) by RUB 55.8 billion.
42.8 MATERIAL COSTS
19.1 OTHER EXPENSES
annual RepoRt 2009
cOsT OpTIMIzATIOn In 2009
Projected decrease in traffic and, as a consequence, revenue required taking prompt cost reduction measures. As a result, Russian Railways adopted a crisis management plan that envisaged cost reduction for a total amount of RUB 202 billion as compared to the initial plan reviewed at the meeting of Russian Government on 13 November 2008. The crisis management plan included both certain measures and reduction of cost items. The envisaged objective cost reduction as a result of traffic decrease amounts to 19% of the total amount saved, other measures are Company's efforts aimed directly at achieving financial harmony of its operations.
176
603 619 FinanCial and eConomiC ReSultS
PART-TIME EMPLOYEES, THOUSANDS
800 800 Payroll cost optimization 800 800 800 800 800
600
577
554 490
400
600
600
600
600
473
400
497 431 387

400 400
400
400
257
200 200 200 200 200 200
208
208
JAN
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
NOV
DEC
Program of capital repairs of fixed assets
Pricing policy
Another significant anti-crisis cost optimization measure was the cutback of the program of capital repairs of fixed assets. The program was cut by almost 30% and was aimed at top-priority assets (mainly assets related to transportation safety). As a result, the repair of buildings and constructions (other than those in disrepair) was fully excluded from the capital repairs program. In 2009, the focus was on repairs of track. A total of 7.4 thousand km of tracks were repaired through all types of repairs and commissioned, including 1.7 thousand km that were repaired and commissioned using investment funds. Physical volumes of traction rolling stock capital repairs were kept at the highest level achievable amid the crisis. In 2009, the capital repairs program was cut by approximately RUB 45 billion in total.
During the year, Russian Railways was active in restraining prices for purchased raw materials and supplies, reducing the cost of construction and repair works and brining them to the level of Q4 2007. Following constant monitoring of prices for purchased products (work, services) and conditions on the national and foreign markets, the Company was able to negotiate reduction of prices with such suppliers as EvrazHolding, Beloretsk Iron and Steel Works, Magnitogorsk Iron and Steel Works, Severstal-Metiz. Prices for products of these and other entities were reduced on average by 20%.
Personnel was released mainly via natural outflow, headcount reduction or introduciton of part-time work. However, the Company continued hiring new (primarily, young) specialists.
Optimization of prices for purchased products
The Company has negotiated with its key suppliers price reduction to the level of the 2007 year end. On the average, the prices decreased by 20% (certain prices decreased by 40%). This provided the pricing policy basis during preparation of the 2010 budget.
177
Timely repairs of track, engineering structures and roadbed are critical for steady railway operation and safety. Programs of capital repairs of rolling stock have been implemented in full. In 2009, 3,928 passenger cars, 549.5 electric multiple units, more than 11,000 freight cars, 1,142.5 electric locomotives and 1,117 diesel locomotive sections were repaired. In an effort to improve the quality services provided to passengers both in long-distance and suburban transportation, the Company performed substantial capital repairs of passenger service facilities; RUB 1.4 billion were spent for this purpose in 2009. In 2009, 5.72 thousand km of track were renewed through all types of repair. In addition, reconstruction of track resulted in rehabilitation of almost 1.72 thousand km of track. Thus, more than 7 thousand km of track were renewed through capital repairs or reconstruction in 2009. This helped improve the condition of main track by 3 points yearon-year to the total score of 32 points as of 1 January 2010. Capital repairs to improve engineering structures and roadbeds amounted to RUB 3.7 billion and RUB 2.3 billion, respectively. The Company identified the following priority areas in rehabilitation of fixed assets: assets that were repaired first and foremost included: track, engineering structures, passenger cars and electric multiple units, power transmission, communication and automation lines, etc., that is, assets directly involved in operating and transportation activities and affecting traffic safety. The Company vigorously revised technical regulations that govern repair and maintenance of fixed assets. The regulations are revised primarily so as to introduce tougher consumption standards for raw materials, supplies and spare parts used in both repairs and current maintenance and service. The Companys total expenses for capital repairs of fixed assets were RUB 94.5 billion in 2009.
annual RepoRt 2009
cApITAl RepAIRs Of fIxed AsseTs
gOveRnMenT sUppORT fOR RUssIAn RAIlwAys In 2009: sUbsIdIes, AddITIOnAl chARTeR cApITAl cOnTRIbUTIOns And TheIMpAcT On The ResUlTs Of OpeRATIOns
Recession of the Russian economy as a result of global financial and economic crisis was marked by the loss of interest of major investors in large-scale investment projects, including publicprivate partnership projects. Therefore, overall trend of the government support changed and primarily, the range of potential mechanisms of support for strategic companies was expanded. In December 2008, the Government Commission for enhancement of sustainability of the Russian economy developed a list of systematically important Russian companies. Companies in the list are deemed as priority companies for government support during the crisis. As provided for by the anti-crisis program aimed at efficient support of economic sectors, companies and population, the government support to the Russian Railways is primarily focused on creating a new industrial capacity, modernization and development of innovations in the country. Amid the global financial and economic crisis the government has a rather wide range of instruments for rendering government support to strategic companies, subject to transparent conditions for justifying and provision each measure of the government support. The year 2009 shows an active interaction and support to the company provided by the government amid unstable macroeconomic environment. An agreed interaction between the Government of the Russian Federation, relevant ministries and agencies and the Russian Railways resulted in a list of efficient lines for interaction with the government and anti-crisis measures to support Russian Railways in 2009.
178
description Amount
1. Government compensation for the loss of revenue resulting from harmonization of the passenger tariffs from (to) Kaliningrad region to (from) other regions of the Russian Federation 2. Government compensation for loss of revenue related to setting exclusive tariffs for transportation of nepheline concentrate on the rail connection apatity pikalevo 2 (oktyabrskaya railway) 3. Compensation for railway transportation of vehicles manufactured in the Russian Federation to railway stations located in the territory of the Far eastern Federal district 4. Government compensation for the loss of revenue resulting from the government regulation of long-distance passenger tariffs (economy-class sleeping and sitting cars) 5. Government compensation for loss of revenue resulting from reduced indexation of freight tariffs 6. Subsidies aimed at measures implementation to protect public railway infrastructure of the moscow St. petersburg route from unlawful interference 7. Contribution to the charter capital of the Russian Railways (Resolution no. 918-r of the RF Government dated 7 July 2009 and Regulations no. 551 of the RF Government dated 7 July 2009 and no.1209 dated 31 december 2009 "Concerning changes in the Charter of the Russian Railways, including: Contribution to the charter capital of the Russian Railways to purchase railcars from oaotver Carriage works by the Company 8. Contribution to the charter capital of the Russian Railways (Regulation of the RF Government no. 1877-r dated 16 december 2008 "Concerning increase in the charter capital of the Russian Railways" to implement the investment program of the Russian Railways as related to developing transport infrastructure for 2014 winter olympic Games. TOTAL
0.3 0.1
0.1 36.0 40.7 1.0 11.3
3.0 16.9
106.4
Such measures enabled the company to Such partial shift in focus enables retain financial and economic stability in 2009, compensating the accumulated gap between the implement a number of key investment projects innovative policy for developing the infrastructure and provide maximum possible support to related of the country and to enhance social and economic industries. value of the company in the recovery (post-crisis) Noticeable recovery of the economy and period. sustainability of the emerging economic growth in the short-term period represent the most important cURRenT AsseTs In 2009, amid financial and economic crisis achievement in implementation of the anti-crisis one of the top priorities of the Russian Railways was measures taken both by the government and "donor" ensuring the Company with the required sources of companies charged with these functions. financing, including due to maximum reduction of The government support combined with the financial cycle in order to release cash as soon as the investment and strategic trends are the basis for possible and allocate it for the financing of current the modernization activities of the company focused and investment activities, and the shift in the liability on the support for social stability and full social structure to non-current liabilities to increase the protection for the employees of the Russian Railways liquidity of the Company. and population.
Budget funds received in 2009, RUB billion
179
working capital item Managerial impact
Conservative approach to formation of the working capital Stock of material, raw materials minimizing and tough regulating of inventory and finished goods involving the used materials selling the scrap metal accounts receivable introducing standard settlement terms under agreements related to sale of goods, work and services. advances issued reducing advances issued and retaining previous terms for final settlements (30 calendar days); monetary assets minimizing cash balances on accounts. Liquidity management policy and financing with the use of current assets accounts payable Regulating trade accounts payable to the level of monthly turnover (payments should be made within 30 calendar days) and amounts of outbound payments; advances received introducing standard settlement terms under (other type of activities, transportation) agreements related to sale of goods, work and services. Financing of day-to-day operations managing financial and settlements discipline; optimizing the existing funding of the current assets (current financial needs) subject to the financial cycle of the company. liquidity and mutual settlements within developing mechanism for settlements management the Holding Company within the Holding Company.
Inventory management
As of the end of 2009, raw materials and supplies amounted to RUB 64.0 billion, a decrease by RUB 2.4 billion at the beginning of the year. Financing for purchases of raw materials and supplies was planned with account taken of available inventories, additions to inventories from the Company's own production, utilization of used materials and intra-branch reallocations. Target
figures were determined for putting excessive and slow moving inventories of raw materials and supplies into circulation. Due to infrastructural changes and the spinoff of certain activities from the Company, track structure materials currently comprise the bulk of inventories (RUB 24.9 billion, or 31.8%).
Inventory availability and changes, RUB billion

balance at 31 december 2009 Received in 2009 disposed in 2009 balance at 31 december 2009 deviation
Inventory, total: including: raw materials, supplies, other similar assets work-in-progress costs finished goods and goods for resale prepaid expenses
+/ 64.1 2.8 0.4 11.2
1,524.9 275.2 1,200.8 7.4 41.5
1,527.4 277.5 1,203.3 7.5 39.1
78.3 64.0 0.3 0.3 13.6
-2.5 -2.3 -2.5 -0.1 2.4
annual RepoRt 2009
Working capital and liquidity management activities in 2009
180
2008 2009 +/%
For transportation services trade receivables advances issued taxes and levies notes receivable payroll receivables, other accountable advances Settlements on claims other accounts receivable TOTAL
20.9 12.2 25.5 10.4 0.06 0.32 0.64 30.2 100.2
18.1 10.0 28.9 1.0 0.04 0.30 0.65 21.4 80.4
-2.8 -2.2 3.4 -9.3 -0.01 -0.02 0.01 -8.8 -19.8
86.6% 82.1% 113.4% 9.6% 77.5% 94.9% 101.3% 70.8% 80.3%
Even amid financial and economic crisis, the Company managed to prevent increase in the share of overdue accounts receivable, which amounted only to 2% of the receivables.
Accounts payable of the Russian Railways, RUB billion
2008 2009 +/%
Trade accounts payable track materials Raw materials, supplies and spare parts Fuel payables for electric energy provided by suppliers Repair works performed purchase of fixed assets Construction work performed work performed and services rendered Goods purchased and finished products other payables advances received under other operations prepayments for transportation services other accounts payable payroll payables, other accountable advances Social security payables taxes and levies payable other of which: payables to the charter capital of subsidiaries TOTAL
100.9 4.3 15.9 3.0 0.2 10.3 13.0 38.3 15.0 0.3 0.6 17.6 40.5 50.5 14.7 4.5 8.8 22.5 15.1 209.5
63.4 3.4 8.3 2.7 0.4 6.7 6.7 21.0 12.5 0.4 1.3 17.3 48.0 179.7 14.4 4.3 14.8 146.2 137.2 308.4
-37.4 -0.8 -7.6 -0.3 0.2 -3.6 -6.3 -17.3 -2.6 0.1 0.7 -0.3 7.5 129.2 -0.3 -0.2 6.0 123.7 122.1 98.9
62.9 80.9 52.2 90.2 200.0 65.2 51.6 54.8 83.0 129.8 216.7 98.3 118.7 355.8 98.0 94.3 167.7 647.8 908.6 147.2
Accounts receivable of the Russian Railways, RUB billion
181
As of 31 December 2009, accounts payable of the Russian Railways amounted to RUB 308.4 billion, an increase by RUB 98.9 billion (or 47.2%) at the beginning of the year, due to the item "Other creditors" by RUB 123.6 billion (excluding contribution to the charter capital of subsidiaries and associates), or by 547.6%, due to increase in contributions payable to the charter capital of subsidiaries by RUB 122.1 billion, (or by 808.6%) due to creation of the Federal Passenger Company in November 2009 and property contribution to the charter capital of the subsidiary in 2010. Therefore, the Company's accounts payable decreased by RUB 23.2 billion, excluding increase in the contributions payable to the charter capitals of subsidiaries. Control of the deadlines for payments under the Companies liabilities minimizes the risk of emergence of overdue payables, which amounted less than 0.5% of total accounts payable.
debT MAnAgeMenT pOlIcy And cORpORATe RATIngs Debt management
Deterioration of global financial environment in H2 2008 and in early 2009 resulted in complete closure of the Russian corporate bonds' market which was a main source of debt financing for Russian Railways. Similar situation was observed at the global capital markets thus forcing the Company to postpone its inaugural issue of Eurobonds which was earlier planned for Q4 2008. As financial institutes made their risk management policies more conservative and demanding for the borrowers, most of the top western banks significantly reduced their Russia's risk limits and suspended issuance of unsecured loans. Market for syndicated loans, where Russian Railways raised unsecured syndicated loan of USD 1.1 billion in 2008, did function properly, either. As a result, the Company's only source of liquidity were loans issued by Russian banks. However, due to a significant uncertainty in interest rates and exchange rates, at the end of 2008 and H1 2009 those loans were quite expensive and had maturity less than 1 year. Russian Railways saw a sharp increase of short-term loan portion (to 56%) in its loan portfolio as well as a significantly more expensive debt capital. As of 1 January 2009, share of the Company's liabilities denominated in foreign currencies approximated 32%, thus resulting in negative amount of loan liabilities denominated in foreign currencies that affected the Company's RAL financial results.
Therefore, in 2009 Russian Railways was mainly focused on improvement of its loan portfolio through the following debt management procedures: reduction the portion of short-term loans; reduction of loan liabilities denominated in foreign currencies; reduction of debt cost. One of the key steps to accomplish the above tasks is to replace the most expensive shortterm loans denominated in Russian Rubles and foreign currencies (that were received at the most severe period of the global crisis at the end of 2008) with long-term bonds denominated in Russian Rubles. At the end of Q1 2009, domestic bond market revived and as a part of RUB 100 billion issuance program Russian Railways placed its first two issues of corporate bonds denominated in Russian Rubles amounting to RUB 30 billion in March 2009. The Federal Financial Markets Service registered the above issuance program on 29 January 2009. Major advantage of new Eurobonds issues is that they bear a floating coupon rate tied to the CBR's rate for banking repurchase transactions (7 days). The procedure to use Russian Railways' bonds to refinance loans issued to real economy became more convenient for commercial banks, thus contributing to stable demand for Russian Railways' bonds both at primary and secondary markets. In 2009, Russian Railways placed 10 issues of bonds denominated in Russian Rubles totaling RUB 145 billion, including: 9 issues of corporate bonds as a part of issuance program declared for 2009. Maturity is 5-15 years, overall amount of bonds issued is RUB 130 billion; an inaugural issue of stock-exchange bonds totaling RUB 15 billion with a 3-year maturity.
annual RepoRt 2009
182
Amount coupon rate % Maturity Offer
RZd-10 RZd-12 RZd-13 RZd-14 RZd-15 RZd-16 RZd-17 RZd-18 RZd-19 RZd Bo-01 TOTAL
15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 10,000 15,000 145,000
15.00 14.90 13.88 13.40 12.84 14.33 14.05 14.25 13.50 9.40
2014 2019 2014 2015 2016 2017 2018 2019 2024 2012
2011 2011 2012 2012 2011 2013 2014 2011 -
Analysis of key financial covenants and ratios in 20082009

Indicators 31.12.2008 31.12.2009
Overall debt / EBITDA (x)7 average cost of borrowings, % per annum eBitda / interest expenses (x)8 Share of short-term borrowings, % Share of loans denominated in foreign currencies, % Change in Russian Railways' loan portfolio in 2009 (including translation differences), RUB billion
Instrument 2008 Amount raised
1.2 7.7 16.4 55.6 32.3
1.2 10.3 7.2 12.5 20.7
Amount repaid
2009
RUB-denominated bonds Syndicated loans project financing Bilateral loans TOTAL
79.0 39.4 15.0 161.5 294.9
145.0 2.4 259.3 406.7
14.0 8.0 1.2 363.7 386.9
210.0 33.3 16.7 60.4 320.4
In March 2009, Russian Railways was the only Russian company that managed to raise a bilateral unsecured loan from a western bank (Barclays Bank PLC) in the amount of USD 500 million. In July 2009, Russian Railways raised a bilateral unsecured loan from the European Bank for Reconstruction and Development in the amount of USD 500 million that became the largest loan issued to a Russian borrower and the greatest investment in railway industry in the bank's history. Maturity of that loan is 10 years; the grace period is 1.5 years. The above loans made it possible for the Company to reduce the interest rate borne by the USD-denominated liabilities by 2% per annum. Besides, the Company managed to agree on more favorable Net Debt/EBITDA and EBITDA/Interest Expenses ratios that proved its high credit quality despite the crisis conditions.
During 2009, the Company was actively improving its loan portfolio without a significant increase in the amounts borrowed. In JanuaryDecember 2009, net increase in Russian Railways' loan portfolio amounted to RUB 26 billion only. By the end of 2009, the above measures resulted in 75% increase of RUB-denominated loans in the Company's loan portfolio, whereas share of short-term loans (maturing in less than 1 year) reduced to 15% of the overall liabilities. Accordingly, in 2009 the Company successfully improved its debt structure and all tasks were fully completed in a timely manner.
According to recommendations of rating agencies, the indicator should not exceed 22.5 8 According to recommendations of rating agencies, the indicator should not be less than 4
7
Series of Russian Railways' bonds denominated in Russian Rubles issued in 2009, RUB billion
183
Lease financing programs are effected within the framework of the Company's Borrowing Program aimed at a complex development of the Company's financial resource base and the expansion of its presence on the Russian and global financial markets. In accordance with antitrust legislation, the Company selects its leasing counterparties on the basis of competitive bidding. In 20032007, due to leasing transactions the Company promptly renovated its rolling stock and machinery. As Russian Railways is the largest consumer of domestically-assembled machinery and equipment, RUB 107.5 billion investments were transferred to support Russian producers and develop their capacities. In September 2007, the Company's Management Board decided to reduce the number of lease-financed rolling stock purchases in the midterm. In 20082009, no rolling stock was acquired under lease contracts. As of 1 January 2009, the total volume of lease liabilities under centralized lease contracts equaled RUB 65.5 billion, including VAT. The Company allocated RUB 19.6 billion as lease payments during 2009.
Credit ratings
annual RepoRt 2009
Leasing
At the end of 2008 beginning of 2009, leading international rating agencies adjusted downward the rating of Russian Railways due to similar decrease in the credit rating of the Russian Federation: In December 2008, Standard & Poor's lowered its long-term credit rating of Russian Railways from "+" to "" with a negative outlook;
In February 2009, Fitch Ratings also lowered its long-term rating of Russian Railways from "BB+" to "BB" with a negative outlook; In January 2009, Moody's placed Russian Railways on review for possible downgrade and in April 2009 it downgrades Russian Railways' rating from "A3" to Baa1; outlook negative. Due to the above, it was very important for Russian Railways to consistently maintain its sovereign rating in 2009. During the year, the Company actively cooperated with rating agencies; it was working hard to increase transparency of its operations and regular informed lenders and investors about its financial results. In 2009, the Company's management held two meetings with analysts of top Russian and foreign investment banks: in April 2009 the meeting was dedicated to anti-crisis measure taken by Russian Railways and in October 2009 to financial results for 9 months of the year and debt management policies. All agencies noted that the Company's financial transparency has increased. In December 2009, Standard & Poor's revised its outlook for Russian Railways to stable from negative and affirmed the "BBB" long-term rating which is the same as the sovereign rating of the Russian Federation. According to the agency's analysts, Russian Railways corporate rating reflects its strategical importance for the Russian economy and its close relations with the Government. Besides, the above ratings confirm strong position of railway deliveries at the freight market and Russian Railways' position among the Russian railway freight carriers.
Russian Railways' credit ratings as of 31.12.2009

Rating Outlook
moody's Standard & poor's Fitch moody's Standard & poor's Fitch
Baa1 BBB BBB Baa1 BBB BBB
negative Stable negative negative Stable negative
184
The Company has set up a structure of financial risk management with responsibilities assigned for financial risk management and mitigation at each level. The concept of Russian Railways' financial risk management is a basis for the risk management system; it includes, inter alia, a classification and analysis of risks and describes the key risks: credit, operating, property, market risks (currency and interest rate risks) and liquidity risk. In 2009, the following activities were fulfilled to improve the risk management system: Development of a package of documents to provide for setting up a Commission for financial risk management a collegial body responsible for reviewing a number of issues of the Company's financial risk management policy; Improvement of the methodology of calculating credit limits on deposits placed with the Company's counterparty banks and bank guarantees issued by the Company's counterparties to secure their obligations. The Company has developed the necessary regulatory framework, within the framework of the current financial risk management, and on a daily basis provides for the management of: Property risks: property risks are insured with the major insurance companies. In addition, to provide for efficient and consistent property risks management the Company developed the Regulations on insurance coverage of Russian Railways, rules of procedure and methodic recommendations; Credit risks: the Company works on managing credit limits in relation to the financial institutions and the real sector enterprises. When working with its counterparties, to insure Russian Railways from risks of non-performance (improper or untimely performance) by a counterparty, the Company uses bank guarantees confirming a serious intent, due performance of obligations (including for a warranty period for supply contracts), return of advance payments and sureties from reliable companies. The amount of accepted bank guarantees and sureties is capped by respective credit limits. To ensure an efficient
fInAncIAl RIsk MAnAgeMenT
management of credit risks the Company approved the methodology of calculating respective limits, regulatory documents on working with bank guarantees and sureties; Liquidity risks: the Company performs the operating management of liquidity on the basis of balance of payments, adjusted information from business units on expected revenues and expenses, develops a dayby-day schedule of payments for the next month. These measures result in developing the Company's payment position for the purposes of analyzing its current financial solvency. Market risks: for the purposes of evaluating the currency risk significance and further identification of an instrument for the currency risk management the Company estimates the open currency position and the interest rate risk. Should the currency or interest rate risks exceed the risk appetite, the Company develops a program of hedging the currency or interest rate risks. In 2009, there were no hedging transactions. In 2009, market revaluation of the hedging transactions closed in 2008 (currency and interest rate swaps) was positive. Operating risks: financial operations are performed in accordance with the respective limits on financial investments, which are calculated based on the financial statements of banks. The major part of financial investment and corporate and retail banking services is provided by the large banks and government-supported banks. Risk management approaches used by the Company are based on the diversification principle implying the use of various risk management instruments and operations with reliable counterparties. The risk management policy excludes the use of speculative instruments of risk management as well as operations with unreliable counterparties.
185
Russian Railways pay great attention to insurance coverage of property risks. Starting from 2005, the Company has performed optimization of insurance conditions on a systemic basis, developed a uniform approach to centralized risk insurance (immovable property, freight rolling stock, passenger car fleet, locomotives and electric trains, liability of the carrier and owner of the infrastructure). In 2009, the following activities were conducted in the process of improving the Company's insurance system: Assessment of the market (actual) value of insured assets enabling to increase the insurance coverage with the same cost level; A more detailed differentiation of insured assets for the personnel of the Company, which allowed to improve the level of industrial injury insurance coverage without increasing the expenditures. In 2009, a number of major property damage cases took place such as: On 2 March 2009 the fire in the administrative building of Russian Railways. The case was settled at the end of 2009, the insurance indemnity equaled 100% of the claimed damage amount (RUB 140 million); On 21 September 2009 the natural disaster at the North Caucasus Railway in the city of Makhachkala. The losses reported to the insurance companies were compensated in full (RUB 32.1 million); On 27 November 2009 Nevsky Express passenger-train wreck at the Oktyabrskaya railway. The process of settlement is completed; the insurance indemnity equaled RUB 30 million. In 2009, the total amount of insurance indemnity under the centralized insurance agreements equaled about RUB 705.8 million (including, the year 2008 cases the bridge crash at the West Siberian railway, etc.). The assets of Russian Railways are represented by a complex technological set of railway transport facilities of strategic importance, the safekeeping of which is the commitment of Russian Railways before the State.
annual RepoRt 2009
Insurance
Russian Railways arranges for civil liability insurance of the carrier and owner of the infrastructure. This insurance contract covers the risks of Russian Railways related to personal injuries to third parties and damage to their property, as well as to the environment in the performance of the Company's primary activity. The Company gives particular attention to providing social security for its employees. One of the means to improve the social package of an employee is to provide insurance against accidents and workrelated illnesses. When an insurance event occurs, an employee receives pecuniary recompense. Throughout the duration of insurance contracts the Russian Railways' insurance coverage system was improved to include the Company's insurance regulatory framework. As part of the insurance coverage program, the terms and conditions of insurance contracts are regularly reviewed and optimized to extend the scope of coverage. Russian Railways provide for the development (including training workshops) of the personnel of the Company's branches responsible for the settlement of insurance events to ensure prompt execution of documents and receipt of monetary indemnification. Computer-aided insurance procedures and recording of insurance events allows real time tracking of changes in the area of insurance.
186
In 2009, along with efforts to overcome the financial and economic crisis consequences, the Company energetically continued to improve financial instruments providing for efficient operation of Russian Railways on the domestic transportation services market and for access to financial and investment resources of the economy. 1. In 2009, along with generating annual IFRS financial statements and as part of financial planning, the Company completed a project to develop a methodology for automated generation of a consolidated financial plan of the Russian Railways Holding Company. The plan was developed pursuant to Item 5 of Section VII of the Minutes No. 39 of the Meeting of the Russia's Government, dated 10 December 2009 On Submitting Proposals to Develop a List of Key Indicators and a Methodology of Generating a Consolidated Financial Plan and an Investment Program of Russian Railways and its Subsidiaries. 2. The Company updates the financial model on a systematic basis to ensure effective operation of all entities of the Russian Railways Holding Company and implement the final stage of the rail transport structural reform, while providing for the unbundling of various businesses and their positioning on the market.
IMpROvIng The fInAnce MAnAgeMenT sysTeM
The Company designed a unified cash management policy on the basis of its strategic and day-to-day liquidity management system, which constitutes a set of interdependent financial planning elements that function on each level of the vertically integrated Company. 4. The Company has developed a clear financial risk management system with defined responsibilities in respect of financial risk management and mitigation at each level. The underlying document for the financial risk management system is the concept for managing the financial risks of Russian Railways. This concept provided for the timely implementation of the anti-crisis policy, and, in the first instance, in respect of mitigation of the financial markets volatility. 5. In 2009, the Company drafted the consolidated financial plan of the Russian Railways Holding Company for 2010 (including financial plans of key subsidiaries of Russian Railways), which was reviewed and approved at the meeting of the Russian Government on 10 December 2009. The format of Russian Railways and 15 key subsidiaries and affiliates was used as a basis for consolidation.
3.
187
The said consolidated financial plan of the Russian Railways Holding Company was prepared on the basis of the consolidation methodology developed in accordance with the International Financial Reporting Standards (IFRS) using the adopted computer-based system of financial planning of the Russian Railways Holding Company based on SAP program modules. The Company successfully completed the IFRS-based appraisal of fair value of the assets and liabilities acquired in 2007 and 2008 and recorded it in the IFRS consolidated financial statements of Russian Railways for 2008 and 2009. Also, in 2009, the Company started to implement the project of the IFRS-based appraisal of fair value of fixed assets of the Russian Railways Group (according to the component concept), in order to accommodate the auditor's comments on the IFRS financial statements of Russian Railways.
subsidiaries and affiliates
The Company introduced certain amendments in its accounting system to provide for further optimization of the assets accounting and control. Russian Railways maintain its accounting records in accordance with Federal Law No. 129-FZ, dated 21 November 1996, On Accounting, the Statute On Accounting and Reporting in the Russian Federation approved by Order No. 34n of the Ministry of Finance of Russia, dated 29 July 1998 and the effective regulations on accounting.
Interest of Russian Railways" share capital, %
JSC yakutia Railways JSC Zheldorremmash JSC ZaRuBeZHStRoyteKHnoloGiya CJSC KttK JSC First Freight Company JSC RZdstroy JSC transcontainer CJSC yuKZhd JSC transCreditBank JSC Beteltrans JSC Federal passenger Company JSC Railway trade Company JSC Roszheldorproyekt JSC Railtransavto JSC Vagonremmash
50.00 99.99 99.99 99.95 99.99 99.99 85.00 99.99 55.07 99.99 99.99 99.99 50.00 51.00 99.99
annual RepoRt 2009
MAIn chAnges In The 2009 fInAncIAl sTATeMenTs
188
The 2009 financial statements were prepared in compliance with the requirements set forth in the Instruction on the Procedure of Preparing and Submitting Financial Statements, approved by Order No. 67n of the Ministry of Finance of Russia On the Forms of Financial Statements, dated 22 July 2003. Beginning with the 2009 financial statements, the Company adopted the Accounting Statement On Accounting for Construction Contracts (Accounting Statement 2/2008), approved by Order No. 116n of the Ministry of Finance of Russia, dated 24 October 2008. The said Accounting Statement 2/2008 sets forth the procedure of recording and disclosure in financial statements of information on revenues, expenses and financial results to be followed by contractors or subcontractors under construction contracts. Revenue and expenses associated with a construction contract are measured regardless of whether they should be billed to the customer prior to completion of the entire contract (a stage of work under the contract). In 2009, the accounting policies of Russian Railways specified: The level of significant change in the value of fixed assets from 5% to 10% as of the current date of valuation; Periods for revaluation of groups of similar fixed assets (fixed assets revaluation shall be performed every three years (earlier every year) provided the fixed asset value recorded in the financial statements does not differ significantly from their current (replacement) value); The procedure for and amount of provisions for doubtful debts (amount of provision for each doubtful debt (overdue and unsecured by guarantees accounts receivable, identified in the process of stocktaking, which are not to be restructured) more than one calendar year old (earlier more than 90 calendar days) shall be determined based on the debtors' solvency assessment and the likelihood that such debt will be repaid). The total amount of taxes accrued for 2009 equaled RUB 208.5 billion, or 115.2% on a year-toyear basis. In 2009, total of RUB 194.3 billion of taxes were paid. The total amount of taxes payable in 2009 increased as compared to taxes paid in 2008 by RUB 9.8 billion, or 5.3%. (Additional information Annexes 17, 12,23).
189
annual RepoRt 2009
inveStment aCtivitieS
190
Investment actIvItIes
191
annual RepoRt 2009
Business Priorities
Since the Company was established, its investments have demonstrated a distinct increasing trend both in absolute terms and as percentage of total expenses. The current priority of Russian Railways investment policy is to develop and renovate its infrastructure, primarily on main transit and exportbound routes. Since Russian Railways was established, substantial investments have been made to develop and enhance the infrastructure of the major railway routes: Kuzbass North-West, Kuzbass Far Eastern Transport Hub, Kuzbass Azov-Black Sea Transport Hub, which are used for transporting most of the bulk freight destined for the sea ports of Murmansk, the Baltic Sea, the Far East, the Black Sea and the Azov Sea.
Work continued to electrify routes of the Oktyabrskaya, North, South-Eastern, Kuibyshevskaya, Privolzhskaya, North Caucasus and Far Eastern Railways. Work was and is being done to renovate major bridges and tunnels within the entire railway network, reinforce the coastline to ensure traffic safety on the route section Tuapse Adler, and to renovate the Sakhalin Railway. Anumber of major freight yards and port railway stations have been constructed and reconstructed, facilities of the locomotive, car and track business units are being upgraded and re-equipped, new railway terminals are being commissioned and existing ones are being reconstructed.
192
Annual plan Actual % to the annual plan
Total olympic projects the Company's 'own' projects, including: Dedicated investment projects Renewal of rolling stock unit projects other
262.8 47.4 215.5 94.2 60.4 54.2 6.6
265.7 47.8 217.9 100.0 58.7 54.2 5.0
101.1 101.8 101.1 106.1 97.1 100.0 75.8
Approved regulations on investment activities served as a basis for automating item-by-item planning and data collection regarding performance of the Company's investment budgets, including treasury control over the intended use of funds. Controls have been introduced over the availability of design estimate documentation, tender procedures, and verification that concluded contracts are within the approved limits. Tools for performing operational analysis of budget indicators have been put in place; they cover all items and take into account historical data during the whole period of operation. The above measures have enabled to manage efficiently the investment process, both when investment budget growth was significant (2006 2008), and when the investment budget practically shrunk by half. Amid the financial crisis, the Company managed to develop promptly scenario options for the 2009 investment budget and mitigate potential financial risks. Taking into account the current financial and economic situation, and in order to avoid growing volumes of construction in progress and emergence of liabilities for Russian Railways that are not supported by sources of financing, only the first phase of the 2009 investment budget was implemented in the amount of RUB 252.4 billion. Based on the Company's performance for the first six months of 2009 and projected performance for the second half of 2009, the Board of Directors of Russian Railways at its meeting held on 30 October 2009 approved an adjustment to the Companys investment budget. The adjusted 2009 budget amounts to RUB 262.8 billion. Of the above amount, RUB 215.5 billion are allocated to the Company's 'own' projects, the balance to be used for projects related to preparing and holding the Olympic Games in Sochi.
The above investment budget was finalized on the basis of updated forecasts regarding income from business activities of Russian Railways and availability of external financing in times of financial crisis. The most significant reduction affected the dedicated investment projects section (more than a two-fold reduction). The unit projects section decreased by 1.8 times. Expenses for the renewal of rolling stock were cut by 1.3 times. Dedicated investment projects were exceeded due to early delivery of four electric trains under the project on acquiring Siemens AG highspeed rolling stock. In 2009, work under Olympic projects was conducted according to plans and schedules, namely, the Company completed constructing freight yards in the Imeretin Valley which would be needed to deliver cargoes for the construction of Olympic facilities in Sochi. The total work completed under Olympic projects amounted to RUB 47.8 billion compared to an annual limit of RUB 47.4 billion.
Investments in developing and enhancing the infrastructure
Since Russian Railways was established, substantial investments have been made to develop and enhance the infrastructure of the major railway routes: Kuzbass North-West, Kuzbass Far Eastern Transport Hub, Kuzbass Azov-Black Sea Transport Hub, which are used for transporting most of the bulk freight destined for the sea ports of Murmansk, the Baltic Sea, the Far East, the Black Sea and the Azov Sea. In this context, more than 950 km of new and second tracks and over 930 km of station tracks were constructed, about 780 km of tracks were electrified. Since establishment, Russian Railways invested in total over RUB 1.35 trillion in prices of respective years. Work has been carried out on electrifying routes of the Oktyabrskaya, North, South-Eastern, Kuibyshevskaya, Privolzhskaya, North Caucasus and Far Eastern Railways. Total electrification has been completed on the Trans-Siberian Railway and on the following routes: St. Petersburg Murmansk,
Company projects, RUB billion, net of VAT (financed from all available sources)
193
Saratov Volgograd Tikhoretskaya, Staryi Oskol Valuiki, Malenga Sumskoi Posad Obozerskaya, Syzran Sennaya. Work has been carried out to renovate major bridges and tunnels within the entire railway network, reinforce the coastline to ensure traffic safety on the route section Tuapse Adler, and to renovate the Sakhalin Railway. The construction of the 15-km long Severo-Muisk Tunnel on the BAM western section of the East Siberian Railway, the Tarmanchukansk, Kuznetsovsky and Lagar-Aulsky Tunnels on the Far Eastern Railway and a number of tunnels on the North Caucasus and East Siberian Railways was completed and the tunnels were put into operation. A number of major freight yards and port railway stations were constructed and renovated, among them: Avtovo, Orekhovo-Zuevo, Bekasovo, Losta, Novoyaroslavskaya, Lyangasovo, Liski, Kinel, Penza, Nakhodka-East, Tuapse, Novorossiisk and others. Unified traffic control centers were established on the Oktyabrskaya, North Caucasus, South-Eastern, Privolzhskaya, South Urals, Sverdlovsk, and Far Eastern Railways, thus creating conditions for the implementation of innovative control information technologies. Significant capital investments were made in re-equipping and upgrading facilities pertaining to the locomotive, car and track business units, and in safety, information technology and resource efficiency programs. New and renovated railway terminals were put into operation in St. Petersburg, Rostov-on-Don, Omsk, Novosibirsk, Krasnoyarsk, Khabarovsk, Izhevsk and some others. Projects were implemented on launching rapid suburban passenger operations on the following sections: Moscow Lyubertsy Ramenskoye, Moscow-Byelorusskaya Sheremetyevo, St.PetersburgMoskovskiy Kolpino, Yekaterinburg Koltsovo Airport, and Moscow Losinoostrovskaya Mytishchi Pushkino. One of the major problems addressed by the investment program is the renewal of Russian Railways' rolling stock. Since the Company was established, the railways have received (including under lease) over 1680 locomotives, about 4.5 thousand passenger cars, over 59 thousand freight cars, over 4 thousand multiple units. As part of social support of railway employees, some 1 million square meters of housing have been built, a significant number of healthcare and educational facilities have been modernized, and a number of sports and other facilities have been constructed. Priority financing was allocated to set up high-speed passenger traffic between St. Petersburg and Helsinki, improve approaches to the ports of Vanino and Sovetskaya Gavan including reconstruction of the section Oune-Vysokogornaya and construction of the new Kuznetsovsky Tunnel, construct a 53-km long section to bypass the technogenic accident area in the vicinity of Berezniki, and develop approaches to the new oil terminal in the Far East. In 2009, investment projects related to organizing high-speed traffic between Moscow and St. Petersburg were completed, thus enabling permanent circulation of high-speed Sapsan trains on this route and allowing to reduce the travel time between Moscow and St. Petersburg to 3 hours and 45 minutes. In 2009, the amount of RUB 60.4 billion was allocated for the renewal and upgrading of rolling stock. These funds were used to buy 355 locomotives, 643 locomotive-hauled passenger cars, 292 freight cars and 695 multiple units, and to upgrade 22.6 thousand freight cars, 158 locomotives, 110 passenger cars and 22 multiple units. Priority was given to projects which received target financing and government support. Federal budget funds received as contribution to increase the share capital of Russian Railways were allocated to the following projects: Combined (automobile and railway) route Adler - mountain resort Alpica-Service (design/survey and construction) RUB 41.5 billion; Purchase of goods from JSC Tver Carriage Works RUB 3.0 billion; Construction of a new railway section Yaiva Solikamsk of the Sverdlovsk Railway to bypass the technogenic accident area RUB 6.0 billion.
annual RepoRt 2009
194
The following projects were financed by funds raised as a result of an average 1% additional indexation of freight tariffs in 2009: Introducing intermodal transportation at the Sochi Adler Sochi Airport section; Enhancing the infrastructure of the railway route Tuapse Adler; Setting up freight yards to receive cargoes for the construction of Olympic facilities. Besides, the following projects were cofinanced: 1. By funds of the Investment Fund of the Russian Federation: Reconstruction of the Oune-Vysokogornaya section involving construction of the new Kuznetsovsky Tunnel on the Komsomolskon-AmurSovetskaya Gavan section; Introduction of high-speed passenger traffic between St. Petersburg and Helsinki. 2. By funds from the Federal Target Program for the Economic and Social Development of the Far East and Trans-Baikal Region until 2013: Expansion of the Khmylovskiy railway junction of the Far Eastern Railway and construction of the railway infrastructure on the Kuznetsovo, Nakhodka Khmylovskiy section. The Federal Railway Agency acts as a client on behalf of the government with regard to projects financed by the Investment Fund of the Russian Federation. Other external sources accounted for about RUB 0.6 billion of capital investments. Borrowed funds were primarily used to finance preventive measures under the traffic safety program and expenses to connect departmental access lines to public lines, and to co-finance the construction of railway terminals, etc. The total value of fixed assets commissioned in 2009 amounted to RUB 273.1 billion, exceeding for the first time ever annual capital expenditures. In 2009, 47.7 km of new lines, 81.6 km of second lines and some 161.9 km of station tracks were put into service, while 167.2 km of overhead equipment and 1,671.9 km of track structure were rebuilt. Besides, certain other important assets were commissioned, including: 2nd line of the combined bridge over the Amur river at the Far Eastern Railway 2,600 running meters; thus, the last singletrack section along the whole Trans-Siberian railway was removed boosting the traffic capacity of the Far Eastern section of the Trans-Siberian railway by 1.6 times; Lagar-Aulsky Tunnel on the Arkhara Khabarovsk section, Nanchkhul Tunnel of the Far Eastern Railway; Navaginsk Tunnel on the Armavir Tuapse section and the Major Novorossiisk Tunnel of the North Caucasus Railway; Bridge over the Ob river at the 605th km of the Omsk Altaiskaya section of the Siberian Railway; Bridge over the Chuna river at the 124th km of the Taishet Lena section of the East Siberian Railway; Second track of the 338 km Karmysh stretch of the Tobolsk Surgut section of the Sverdlovsk Railway; Continuously welded track on the following sections of the Trans-Baikal Railway: Aga Bulak, Razyezd 114 Shakhterskaya, Borzya Razyezd 115, Rzyezd 83 Dauriya, Bilyutui Matsievskaya; The first stage of the reconstruction of the Metallostroy multiple unit depot for servicing high-speed trains of the Oktyabrskaya Railway; Terminal for 400 passengers at Izhevsk station of the Gorkovskaya Railway; Terminal at In station of the Far Eastern Railway; Customs check-point at Skovorodino station of the Trans-Baikal Railway, etc.
Commissioning of fixed assets
195
The Khmylovskiy railway junction of the Far Eastern Railway was reconstructed and railway infrastructure was constructed on the Nakhodka Khmylovskiy section to secure oil traffic in the amount of 15 million tons; this work was conducted under the Eastern Siberia Pacific Ocean pipeline construction project. Reconstructed stations Aksaka and Dyuanka were commissioned under the project on the comprehensive reconstruction of the Komsomolskon-Amur Sovetskaya Gavan section involving the construction of the new Kuznetsovsky Tunnel. Railway traffic was opened along the new 53-km long section Yaiva Solikamsk to bypass the technogenic accident area in Perm Territory. Implementation of Russian Railways' investment program ensures systemic enhancement of efficiency and quality of the transport services provided to the country's economy which is fully in line with the goals of the Company's structural reform.
ConstruCtion-in-Progress
Taking into account implementation of investment projects covered by the Company's 2009 budget, as of 31 December 2009, construction-inprogress (CIP) amounted to RUB 266.2 billion. For the first time ever since the Company's establishment, ACquisition, renovAtion the value of commissioned assets exceeded annual And uPgrAding of trACtion capital expenditures. As a result, as of year rolling stoCk end, construction-in-progress decreased by RUB Russian Railways upgrades its suburban 12.6billion as compared to the beginning of the year. rolling stock in order to develop and enhance suburban CIP volumes at year-end result from passenger operations, increase the quality of services implementing capital intensive investment projects provided to passengers of suburban trains and improve in 2009 designed to develop and upgrade the technical condition of multiple unit stock. infrastructure, which normally take more than one The rolling stock was supplied by domestic year to complete. transport machine building enterprises at competitive prices in conformity with technical requirements established by Russian Railways. In 2009, measures undertaken by Russian Railways to renew and upgrade its rolling stock included acquisition of 695 multiple units, of them 653 electric train cars, 34 rail buses and 8 dieselelectric trains. RUB 9,226.7 million were invested in upgrading multiple units.
This concerns primarily Olympic projects. Pursuant to the Government Program on constructing Olympic facilities and developing Sochi as a mountain-climatic resort, Russian Railways was appointed as executive agent, and from 2009 effects significant amounts of capital investments. Besides Olympic projects, Russian Railways' investment program includes quite a number of other projects with lengthy construction cycles, namely: Comprehensive reconstruction of the Mga Gatchina Veimarn Ivangorod section and rail links to ports on the southern shore of the Gulf of Finland (including construction of Luzhskaya station); Introduction of high-speed passenger operation on the St. Petersburg Buslovskaya section; Reconstruction of the Komsomolsk-onAmurSovetskaya Gavan section, involving construction of the new Kuznetsovsky Tunnel; Comprehensive reconstruction of the Kotelnikovo Tikhoretskaya Krymskaya section bypassing the Krasnodar hub; Construction and reconstruction of engineering structures, etc.
annual RepoRt 2009
196
Under the 2009 investment program, RUB614.1 million were allocated to upgrade rolling stock. Actual investments in the reporting period amounted to RUB 611.9 million (99.6%) (net of VAT), of them: RUB 288.8 million were allocated to upgrade the rolling stock (22 locomotive-hauled cars, 19.5 electric multiple units and 9 diesel multiple units were upgraded); RUB 69.2 million were invested to ensure fire safety in electric trains and locomotivehauled trains; RUB 45.2 million were invested in upgrading 91 electric multiple unit bodies; RUB 99.2 million were invested in upgrading rolling stock components; RUB 109.5 million were invested in upgrading the interior of 42 electric multiple units. All cars are equipped with air conditioning systems, automatic sliding doors and automatic gangway doors. Cars bear the unified Russian Railways corporate style colors. The cars are equipped with disc type brakes which use the antiskid system produced by Knorr Bremse enabling 200,000 km of operation between repairs. Passenger trains of the new Premium class have been formed by cars of the above models and put into operation. Trains are equipped with security control and communication systems providing radiotelephone communication for the train crew, transmission of diagnostics and 'Panic Button' information to the control center, as well as GLONASS positioning of the train. A special feature of such trains is that every compartment car is equipped with a system of restricted compartment access based on magnetic keys, information and entertainment facilities playing video programs on LCD TV sets installed in each compartment with every passenger having an individual audio plug-in. All newly delivered cars are equipped with ecologically clean toilet complexes with a capacity to run for four days without service, information display panels where running text announces the next stop, time and temperature in the car. The cars are also equipped with a test system checking the technical condition of the car's equipment and transmitting information to the staff compartment. The test information is transmitted via the system of wireless communication between the cars. Water coolers are installed in all cars to provide drinking water to passengers. Upon the request of the Federal Passenger Directorate, LitTransService LLC developed a passenger car air disinfection device to ensure the well-being of passengers and enhance sanitary and epidemiological safety of passenger operations. The sample device passed trial tests and is installed in a car produced by JSC Tver Carriage Works (Model 61-4440 No. 05113212). The tests have demonstrated high operating effectiveness of the air disinfection device Megalith-2ZhT manufactured by LitTransService LLC (Russia). The application of this device gives a 3-4-fold reduction of microbes in the car's air. Routine operation of this device will be launched in February 2010.
ACquisition, renovAtion And uPgrAding of unPowered rolling stoCk
In 2009, Russian Railways acquired 643 new passenger cars for a total amount of RUB 16.6 billion. All cars were delivered to regional directorates for passenger services and put into operation. To ensure required comfort and safety levels for passengers, methodical work on equipping passenger cars accordingly was carried out in 2009. Railways received 622 passenger cars of the new 44 series product range, of them 224 compartment cars (Model 61-4440) and 325 open-plan cars, as well as 20 staff compartment cars. 50sleeping cars (Model 61-4440.03), 2interregional cars (Model 61-4458) and 1increased capacity car (Model 61-4461) were delivered. Car bodies have an extended length and are characterized by flat-corrugated side panels, separate toilet compartment on one side of the car and a special compartment to store tools.
197
The Russian Railways' investment program is generally based on the Development Strategy for Rail Transport in the Russian Federation through 2030 and the Russian Railways Rail Transport General Development Scheme. Stage 1 of the rail transport strategic development in Russia (20082015) is defined by the need to modernize all its elements, which should ensure required railway throughput on main routes, enhanced modernization of the existing infrastructure facilities, upgrade of the rolling stock fleet with removal of rolling stock whose useful life has expired; new technical requirements will be developed for equipment and technologies, design and exploration work and construction of new advanced railway lines will start. Therefore, the key underlying objectives addressed by the investment program are as follows: Eliminate throughput bottlenecks on main routes of the railway network, subject to projected traffic volume through 2015; Ensure unimpeded operation of freight trains of 6,000-6,300 tons consisting of 71conventional railway cars, subject to fixed intervals in signals and interlocking and power facilities; Manage development planning for infrastructure facilities to minimize investment and operating costs while ensuring the required traffic volume for the planned investment period; Implement a unified centralized traffic control system based on automated systems. Upgrade the Russian Railways rolling stock fleet to guarantee the projected freight and passenger traffic.
annual RepoRt 2009
effeCtiveness of russiAn rAilwAys' investment ProgrAm
To achieve these objectives, the Russian Railways investment program provides for a number of activities that would help meet the projected traffic volume via constructing additional main tracks and passing loops, enhancing railway stations, building bypasses around major railway junctions. Implementation of the investment program is usually reflected in the quantitative and qualitative measures of the Company's performance only upon ultimate completion of a project. The principal effect is normally achieved via increased railway throughput (by either eliminating bottlenecks or enhancing operational reliability). A number of projects focused on adding new operational capabilities to railway infrastructure (to enable operation of higher speed passenger trains and rolling stock with new dimensions). During the period through 2008, which saw steady growth in traffic volume, over 90% of projects were aimed at eliminating bottlenecks and improving operational performance of railways. At the beginning of 2006, the length of railway throughput bottlenecks was 4,520 km. Given the projected traffic increase on certain routes, failure to develop and enhance capacities would result in new throughput bottlenecks of 15.4 thousand km by 2010; hence, the total length of bottlenecks would almost reach 20 thousand km, of which 50% would be located on main railway network routes that operate some 80% of the total freight rail traffic. As a result of carrying out investment program activities designed to enhance throughput, the length of bottlenecks was reduced to 3.5 thousand km at the beginning of 2009. The 2009 investment budget was finalized on the basis of updated forecasts regarding income from business activities of Russian Railways and availability of external financing in times of financial crisis. Total planned 2009 investment budget volumes, as adjusted, significantly dropped as compared to actual figures achieved in 2008. In general, projects on reconstructing and upgrading the existing infrastructure are principally aimed at ensuring traffic safety.
198
This is achieved by measures on reducing the depreciation of fixed assets, enhancing the reliability of devices, equipment, machines and mechanisms, and ensuring their compliance with current traffic requirements. Besides, when implementing projects on the renewal and upgrading of the Company's fixed assets, disposed equipment, machines and mechanisms are replaced by advanced developments based on new technological and innovative solutions. Implementation of the investment program helped meet in full the demand for freight and passenger transportation services and ensure their high quality that depends on investment projects being implemented. This conclusion is supported by the movement in qualitative performance of rolling stock on the entire railway network. 2009 saw an improvement in most qualitative operating indicators. In particular, in 2009, the average freight car turnover picked up by 3.4 hours, the average section train speed increased by 1.0 km/h, the average daily freight locomotive capacity grew by 50,000 tkm (gross), and the average gross freight train weight increased by 40 tons.
199
annual RepoRt 2009
infoRmation on inteReSted-paRty tRanSaCtionS
200
InformatIon on Interested-party transactIons
201
In 2009 the Company approved the following interested-party transactions at a meeting of the board of directors: Approval of lease agreements with members of the Management Board of Russian Railways. The transaction price is determined as 15% of the market value. Protocol No. 12 of July 27, 2009. Approval of a loan agreement between Russian Railways (the lender) and Oy Karelian Trains (the borrower) in the amount of EUR 500,000. Term: until December 31, 2010. Rate: 0%; A transaction between Russian Railways (the purchaser) and Millennium Bank (the seller) involving the purchase of 194 shares of Zarubezhstroitekhnologiya for a total cost of RUB 4,151,600.
annual RepoRt 2009
4.
1.
5.
2.
Approval of a lease agreement between Russian Railways (the lessee) and Oy Karelian Trains (the lessor). Subject: 6 Pendolino Sm6 trains. The amount of payment is determined on the basis of separate lease agreements. Protocol No. 25 of December 21, 2009. Approval of an accounting agreement between Russian Railways (the provider) and FPK (the client). Term: December 3, 2009 through March 31, 2010. Amount: RUB 500,000. Protocol No. 25 of December 21, 2009.
3.
InformatIon on major transactIons
202
In 2009 the board of directors of Russian Railways decided to approve the following as major transactions: Flotation of nonconvertible interest-bearing paper bonds, Series 20-26, for a total of RUB 100 billion. Protocol No. 20 of October 30, 2009; Flotation of nonconvertible interest-bearing paper bearer bonds, Series B-01, B-02, B-03, B-04, B-05, B-06, B-07 and B-08, for a total of RUB 100 billion. Protocol No. 20 of October 30, 2009.
infoRmation on maJoR tRanSaCtionS
1.
2.
statement on declared dIvIdends
203
In 2008 the Company posted a net profit of RUB 13.4 billion, including RUB 13 billion due to the excess of a contributions monetary value over the balance-sheet value of assets transferred to the charter capital of subsidiaries. The entire amount of net profit was used to realize the Companys investment program and form a reserve fund. In its first years of operation, the Companys key indicators relating to dividend policy showed a positive trend. The downward trend in 20072008, rather than indicating a real decline in the Companys financial performance or a direct decision not to pay dividends, reflects a policy of using the bulk of net profit to finance the Companys investment program. In late 2008, in order to mitigate the financial crisiss effect on the real sector of the economy and create additional sources of financing for current operations and investment, state agencies proposed that state-owned companies revise their dividend policy and reduce or eliminate dividend payments. As a result, Russian Railways used net profit to realize its investment program.
annual RepoRt 2009
Distribution of net profit generated by Russian Railways in 2008, RUB billion

Indicator Amount %
Net profit for the period profit distribution, of which: reserve capital dividends paid on issued shares Accumulated profit, total:
13.4 0.7 0.7 0 12.7
100 5 5 0 95
draft dIstrIbutIon of the company's net profIt earned In 2009
204
In 2009 Russian Railways posted a net profit of RUB 14.4 billion. Under clause 1 of Instruction No. ISh-P13-2205 of the First Deputy Prime Minister of the Russian Federation of April 10, 2010 on the formulation of guidelines in 2010 for annual general shareholders meetings of joint stock companies, Russian Railways, as a 100% state-owned company, is to pay dividends to the state for 2009 in the amount of 25% of net profit. The remainder of net profit is to be used for the realization of the companys investment program and the formation of funds stipulated by law.
dRaft diStRibution of the Company'S net pRofit eaRned in 2009
Amount %
Distribution of net profit generated by Russian Railways in 2009, RUB billion

Indicator
Net profit for the period profit distribution, of which: reserve capital dividends paid on issued shares Accumulated profit, total:
14.4 4.3 0.7 3.6 10.1
100 30 5 25 70
major rIsk factors assocIated wIth the company's operatIons
205
In 2009, 12,640 lawsuits against Russian Railways for a total of RUB 5,121.1 million were under consideration in arbitration court. Heard (including cases whose appeal period has expired): 8,036 lawsuits for a total of RUB 3,258,695,000, of which: Not in favor of Russian Railways: 4,851lawsuits for a total of RUB 814.4 million. In favor of Russian Railways: 3,185 lawsuits for a total of RUB 2,444.3 million. Not heard: 4,604 lawsuits for a total of RUB 2,253.4 million.
annual RepoRt 2009
Court CAses In 2009 In whICh russIAn rAIlwAys wAs the defendAnt
As of January 1, 2010 the following were under consideration in arbitration court: Trial courts
Heard: 2,494 lawsuits for a total of 611.0RUB million, of which: Not in favor of Russian Railways: 1,735lawsuits for a total of RUB 199.6 million. In favor of Russian Railways: 759 lawsuits for a total of RUB 411.4 million. Not heard: 1,614 lawsuits for a total of RUB1,141.1 million.
Appellate courts
Heard: 144 lawsuits for a total of RUB104.5million, of which: Not in favor of Russian Railways: 83 lawsuits for a total of RUB 47.1 million. In favor of Russian Railways: 61 lawsuits for a total of RUB 57.3 million. Not heard: 78 lawsuits for a total of RUB25.2 million.
Cassation courts
Heard: 196 lawsuits for a total of RUB 210.1 million, of which: Not in favor of Russian Railways: 79 lawsuits for a total of RUB 17.9 million. In favor of Russian Railways: 117 lawsuits for a total of RUB 192.1 million. Not heard: 78 lawsuits for a total of RUB 161.5 million.
206
maJoR RiSk faCtoRS aSSoCiated with the Company'S opeRationS
Court CAses In 2009 In whICh russIAn rAIlwAys wAs the plAIntIff
As of January 1, 2010, the following were under consideration in arbitration court: Trial courts
In 2009, 16,835 lawsuits brought by Russian Railways against counterparties for a total ofRUB 7,781,740,100 were under consideration inarbitration court. Heard (including cases whose appeal period has expired): 11,425 lawsuits for a total of RUB 5,473,995,000, of which: In favor of Russian Railways: 10,461 lawsuits for a total of 3,793.7 RUB million. Not in favor of Russian Railways: 964lawsuits for a total of 1,680.3 RUB million. Not heard: 5,410 lawsuits for a total of 2,307.7 RUB million.
Heard: 2,434 lawsuits for a total of 1,053.6RUB million, of which: In favor of Russian Railways: 2,151 lawsuits for a total of 918.0 RUB million. Not in favor of Russian Railways: 283lawsuits for a total of 135.6 RUB million. Not heard: 2,335 lawsuits for a total of 936.3 RUB million.
Appellate courts
Heard: 387 lawsuits for a total of 165.1 RUB million, of which: In favor of Russian Railways: 182 lawsuits for a total of 118.6 RUB million. Not in favor of Russian Railways: 205lawsuits for a total of 46.5 RUB million. Not heard: 66 lawsuits for a total of 98.3RUB million.
Cassation courts
Heard: 150 lawsuits for a total of 38.1 RUB million, of which: In favor of Russian Railways: 63 lawsuits for a total of 7.5 RUB million. Not in favor of Russian Railways: 87 lawsuits for a total of 30.6 RUB million. Not heard: 38 lawsuits for a total of 16.3RUB million.
207
The Russian Railways network incurs safety risks in connection with avalanches that interrupt train service every year. These risks seriously impede the networks operations and entail significant material costs for the restoration of infrastructure. Sections that represent an avalanche hazard have a total length of 74.3 kilometers, three quarters of which are on the Krasnoyarsk, Far East and Sakhalin railways. In 2009 efforts to prevent and respond to emergencies at Russian Railways followed the plan of key measures in the area of civil defense, emergency prevention and response and fire safety at Russian Railways, approved by Russian Railways President V.I.Yakunin on December 25, 2008. In each branch of Russian Railways, committees for emergency prevention and response and fire safety operated in 2009 in accordance with the requirements of Federal Law No. 794 Concerning the Protection of the Population and Territories against Natural and Technogenic Emergencies, the Decree of the Government of the Russian Federation of December 30, 2003 Concerning the Unified State System of Emergency Prevention and Response (as amended by Decrees No. 335 of May 27, 2005 and No. 600 of October 3, 2006 of the Government of the Russian Federation), other regulatory legal acts of the Russian Federation and the charter and effective regulatory acts of Russian Railways. The tasks and measures indicated in the plans for emergency prevention and response and fire safety at branches of Russian Railways were, on the whole, accomplished.
annual RepoRt 2009
CIrCumstAnCes thAt Could potentIAlly hInder the CompAnys operAtIons
In 2009 work to revise the list of potential emergencies, their scale and consequences was completed. Practical training and drills were organized and held. A range of preventive measures were taken to increase the level of fire safety of infrastructure facilities, engineering structures and rolling stock. Special attention was devoted to emergency prevention, the reliable operation of equipment, improved operating procedures at rail stations, technical and commercial train inspection stations and diagnostic facilities, the readiness of staff and equipment to respond to potential emergencies, continuous training to upgrade the qualifications of employees working with dangerous freight, creation of the Companys own emergency response teams and the development of plans for preventing and responding to accidental spillage of transported oil and petroleum products. Last year Russian Railways developed Regulation No. 2286r of Russian Railways of November 9, 2009 Concerning Approval of the Rules for Cooperation between Russian Railways and Subsidiaries and Affiliates in Preventing and Responding to Natural and Technogenic Emergencies.
development outlook
208
The main development goals of Russian Railways are to form a high-performance holding company, expand the Companys market potential, increase its capitalization and investment appeal and reinforce its competitive advantages on strategically important markets. In the course of the structural reform of rail transport, a number of issues have arisen that must be resolved for the effective development of rail transport. Of key importance in resolving these issues is the Target Model of the Rail Freight Market to 2015, developed at the Companys initiative and approved by the Civic Chamber of the Russian Federation. The draft Target Model calls for the creation of an institution of local carriers and a maximally stable model for the development of private freight operators that is effective for the industry and attractive to investors. Priority tasks for 2010 are: effective transportation support for the national economy based on enhanced quality and innovation-based development of Russian Railways; effective management of the Russian Railways holding company based on the Strategy of Development and Target Parameters to 2015; effective cooperation with state institutions on the strategic development of rail transport based on the financial model of Russian Railways holding company; determination of the main areas for further structural transformation and their approval by federal executive bodies. On the freight market, competition in the area of freight car services will develop between private companies. A key goal for Russian Railways in 2010 is to create the Second Freight Company and make the transition to full deregulation in the railcar sector. Pursuant to a decision of the Russian Government on the need to create equal conditions on the market of freight car services and the need for further reform of the operator segment in 2009, a draft concept was developed for railway reform in the area of freight car operation and the creation of the Second Freight Company. The approaches to creating this company were approved by the Interdepartmental Commission for Railway Reform and the management board of Russian Railways. The Second Freight Companys business plan, which is currently under development, shows that this business has good development potential, provided that a number of systemic tasks are accomplished: formulation of an effective model of the transport process in conditions where all freight cars are private, development of a scheme for the operation of private Russian railcars in neighboring states and enhancement of the tariff regulation system for the markets effective functioning in new conditions. The main strategic directions for the development of Russian Railways on the freight market are: competitiveness in profitable market segments; comprehensive transportation services; accelerated development of container transport; optimal transportation of bulk freight using economies of scale and logistical technologies, active modernization of equipment and technologies in the area of freight transport. It is no less important to attract, as far as possible, the potential freight base formed by Russian and foreign manufacturers, stimulate demand for transportation and resolve the issue of tariff deregulation in competitive segments of the freight market in order to create equally favorable tariff and economic conditions for real competition between various means of transportation in the process of completing the third phase of the structural reform of rail transport.
development outlook
development outlook In vIew of mArket trends And potentIAl
Second Freight Company
209
On the passenger market, key areas for development are: development of high-speed and rapid passenger service; qualitative optimization of passenger transport logistics; development of systems of cooperation with federal and regional authorities to facilitate public transport service on a contractual basis; launching of the Federal Passenger Company and achievement of the target state of suburban service in accordance with the suburban-transport reform program; development and implementation of comprehensive investment projects for the development of new offers on the passenger market. There are also plans to continue forming Russian Railways subsidiaries to provide suburban service with the participation of constituent entities of the Russian Federation. The main strategic objective for Russian Railways holding company on the global market is, by means of active cooperation with foreign railway administrations, companies and specialized international organizations, to ensure optimal conditions for enhanced efficiency of international freight (including transit) and passenger services, scientific/technical and technological cooperation and the delivery of Russian railway advances and construction services to foreign markets. Close attention will be given to social policy and enhancing the prestige of work in the rail industry. One of the most important tasks is to increase the Companys competitiveness on the labor market and improve the staff training system in order to ensure quality freight and passenger service. The guiding principle in terms of compensation is to maintain an economically sound correlation between growth in labor productivity and real wages in the long term. The companys investment program takes the form of a portfolio of investment projects with approved project budgets and deadlines. This approach will allow a more flexible response in the medium term to changing forecasts of the countrys socioeconomic development and its key freight regions. In view of the decrease in costs due to the postponement of infrastructure and rolling-stock repair programs during the crisis, the Company has set priorities for the renovation of fixed assets in the post-crisis period. First to be repaired will be tracks, engineering structures, passenger cars and electric trains, power transmission lines, communications, automatic equipment, etc. facilities that are directly related to operations and transportation and affect the safety of train traffic. Efforts are under way to revise technical documentation regulating the repair and maintenance of fixed assets. The main purpose of this revision is to set stricter rates of consumption of raw and other materials and spare parts in repair work as well as maintenance and servicing. On the market of infrastructure services, the main areas for development are: accelerated modernization of infrastructure; elimination of problem spots in the current rail network and enhancement of transport efficiency (higher speeds, increased axle load, cost reduction, etc.); development of infrastructure in accordance with the projected rates of growth in production and capacity of other means of transportation in the Russian Federation; transportation service for new industrial centers and field development; introduction of a new model of management of the infrastructure complex on pilot railways; development and introduction of new types of track machines to extend the service life of track structure, reduce repair costs, etc. Russian Railways is also actively carrying out the states instruction on intensified development of innovations and energy efficiency and on ensuring the safety of railway facilities in all sectors of the economy. For the first time in Russia a power installation using hydrogen fuel cells was introduced in automated and communication systems. Apractical application was found for nanotechnology in repairing rolling stock and infrastructure.
annual RepoRt 2009
210

development outlook
unit
Effective innovation-based development of Russian Railways will involve such tasks as: fulfilling the main provisions of the Concept for a Unified Technical Policy of Russian Railways Holding Company; pursuing an effective policy of technical regulation in the area of rail transport;
accomplishing tasks for the scientific and technical development of Russian Railways, including the step-by-step transition to intelligent rail transport and the development of new rolling stock, infrastructure and equipment, taking into account their life-cycle cost; increasing the energy efficiency of the holding companys operations.
Increasing the Companys energy efficiency target figures of the energy strategy to 2015 Reduction in specific energy consumption for train propulsion: electric propulsion diesel propulsion Reduction in fuel/energy consumption for needs other than propulsion
3.5 4.0 4.5 5.5 13 15
energy strategy of russian railways to 2010and 2030 (updated in 2010)
target figures for energy savings and energy efficiency in 2010 Reduction in specific fuel/energy consumption for train propulsion electric propulsion
plAn for the realization of the russian railways energy strategy to 2030 in 2010 unit
0.5 (0.4%)
kwh/10,000gross ton-km
diesel propulsion
0.6 ( 0.9%)
kg of coal equivalent/ 10,000gross ton-km %
increase in the level of energy recovery Reduction in consumption of the principal types of fuel/energy resources in the stationary energy sector
6 3
measures planned for 2010
automatic train operation system diesel fuel monitoring system led lighting system aSku system diesel heating system building energy-saving system ktu-3 installation
305 systems 360 systems 883 systems 4 systems 304 systems pilot project 3 boiler houses
211
A reduction in the power requirements of the Comprehensive reconstruction of the Mga transportation process is a priority task. GatchinaVeimarnIvangorod section and Further development and modernization rail approaches to ports on the southern of the rail industry must be based, above all, on the shore of the Gulf of Finland on the October safety of freight and passenger traffic. Railway; The new anti-crisis architecture of the Comprehensive reconstruction of the Company and the country as a whole must have all . GorkyKotelnikovoTikhoretsk the qualities necessary for systemic problem solving Krymskaya section, including a bypass of the and preventive responses to probable new threats Krasnoyarsk junction on the Volga and North and challenges. Raising the safety level of train Caucasus railways; traffic involves improving the system of emergency Transportation of oil to China (phase 2) on prevention and rapid response in the area of rail the Trans-Baikal Railway; transport. Reconstruction of track structure and Realization of the companys investment comprehensive rail reconstruction on program will ensure the efficient operation of Russian all railways as well as a number of other Railways: more effective use of the Companys projects. assets above all, rolling stock reduced operating costs, higher labor productivity, further development post-CrIsIs meAsures, prospeCts, threAts And rIsks of transport control based on information The anti-crisis policy pursued by the technologies and the introduction of resource-saving Government of the Russian Federation has allowed technologies. the economy to avoid a steeper decline and make The draft investment budget of Russian a comparatively rapid recovery to positive rates of Railways for 20102012 allocates RUB 855.4 growth. billion for the renovation and development of railway According to the Russian Ministry of infrastructure, including RUB 270.5 billion in 2010, Economic Development, economic growth and RUB 285.0 billion in 2011 and RUB 299.8 billion in increased industrial output in some sectors has 2012. been accompanied by a decline in others. In 2010 In 2010 the Company plans to allocate economic activity will continue to recover. RUB 210.5 billion for its own projects (including The Ministry of Economic Development Olympic projects, which are being realized using the forecasts that inflation in Russia will be 0.40.5% in Companys own sources). April 2010. It is also planned to allocate RUB 60 billion Negative factors are still affecting the for the project for a combined motor road and railway economys development. The financial and economic between Adler and Alpica Service Resort. The project crisis has brought about a sharp drop in personal is being realized using contributions to the charter income and consumer demand on the domestic and capital of Russian Railways. world markets as well as a decline in activity on the Key tasks for 2010 in the investment part of strategic investors. program are: Thus, against a backdrop of lower inflation Organization of high-speed Sapsan train and more appreciable economic growth, the service on the MoscowSt. Petersburg and government expects that nominal GDP for the year MoscowNizhny Novgorod sections on the will be a little over RUB 43.1 trillion (as compared October, Moscow and Gorky railways; with RUB 39.0 trillion in 2009). Completion of all work on the 53-kilometer electrified YaivaSolikamsk section on the Sverdlovsk Railway. Other projects to which significant resources are to be devoted include:
annual RepoRt 2009
212
Analysts say that moods and assessments in the real sector are moderately optimistic. Auto manufacturing and investment machine building are still the most problematic sectors. Inasmuch as the budget deficit will be less than the government expects, it will be possible to continue lowering interest rates. Budget income will be greater than expected. In 2010 it is expected that economic growth rates will be high, resulting in a larger tax base outside the oil and gas sector, and the budget deficit will be modest. Budget revenues from the oil and gas sector will also grow, despite a strengthening ruble. If, however, rates remain at their current levels, monetary policy will become too tight and hold back economic growth in the country. High interest rates on the Russian financial market could stimulate a growing influx of short-term capital and cause the ruble to strengthen further. According to analysts, the economy continues to be dominated by factors responsible for the speed and depth of the economic decline: dependence on world prices for raw material exports, low domestic demand and the inability of Russian industry to satisfy it, a weak financial system and the lack of long-term money in the economy. Nonetheless, in 2010 the Central Bank forecasts a further slowing of inflation, which was only 3.2% in the first quarter of 2010 (5.2% a year earlier), and growth slowed year-on-year from 8.8% at the end of December 2009 to 6.5% as of April1, 2010. The Central Bank has reduced rates by only0.5%. In 2010 these factors will continue to affect the operations of Russian Railways, and the Companys operations will continue to depend on key indicators affecting financial performance: the volume of traffic, transport tariffs, the price of raw materials and similar assets, the tax burden, the volatility of foreign exchange rates, etc. The rates of recovery and development of the Russian economy will thus determine the dynamics of freight turnover and the key financial and economic indicators of Russian Railways.
development outlook
RefeRence infoRmation
213
The fullest and most up-to-date information on the Company is found on the Companys website: www.rzd.ru (Russian and English). The site describes the main activities and performance of Russian Railways and provides up-todate information on Company events and all aspects of the Companys activities as well as the Companys social and environmental policy. The Investors section covers the Companys financial and operating performance and includes presentations for the investment community and Company reports. Published reports. Electronic versions of the following reports are available on the Companys site (www.rzd.ru): 1. Report on the Companys activities 2. Financial statement (IFRS and RAS) 3. Quarterly financial statement 4. Issuers report
Concepts and definitions used in the Report
ul. Novaya Basmannaya, 2, Moscow 107174

Electronic mail
[email protected]
General information
Telephone: +7 (499) 262-9901

Unified telephone line of russian railways
8-800-200-6767 (free of charge from anywhere in the Russian Federation)

Corporate Finance Department (for investors)
Telephone: +7 (499) 262-5649 Fax: +7 (499) 262-8941

Corporate Communications Department (Russian Railways Press Service)
The names and words JSCo Russian Railways, JSC Russian Railways, Russian Railways, JSC RZD, RZD, the Company, the Company RZD, we and our, as used in the text of this annual report, are all equivalent and refer to JSCo Russian Railways.
Abbreviations
Telephone: +7 (499) 262-7148 Fax: +7 (499) 262-8409
USD US dollars ton-km ton-kilometers of freight turnover passenger-km passenger-kilometers of passenger turnover
annual RepoRt 2009
Legal address and central office
audit RepoRt
214
215
annual RepoRt 2009
216
217
annual RepoRt 2009
218
Appendices
219
annual RepoRt 2009
Appendix 1. Balance Sheet (Form 1) as of 31 December 2009

Asset At beginning of reporting year At end of reporting year Unit
i.non-CuRRent aSSetS intangible assets (04, 05) Costs related to science and research, experimental and construction, and engineering work (04) Fixed assets (01, 02) Construction in progress (07, 08, 15, 16) income-bearing investments in tangible assets (03, 02) long-term financial investments (58, 59) Deferred tax assets (09) other non current assets (58) TOTAL for Section I ii.CuRRent aSSetS inventory including: raw materials, supplies and other similar assets (10, 14, 15, 16) rearers and fatteners (11) work in progress-related costs (distribution costs) (14, 20, 21, 23, 29, 44, 46) finished goods and goods for resale (14, 15, 16, 41, 43) dispatched goods (45) prepaid expenses (97) other inventory and costs Vat on purchased assets (19) accounts receivable (where settlement is expected in over 12 months after the reporting date), including: trade receivables (62, 63, 76) accounts receivable (where settlement is expected within 12 months after the reporting date) including: trade receivables (62, 63, 76) Short-term financial investments (58, 59) Cash including: Cash on hand (50) Current accounts (51) Currency accounts (52) other cash (50, 55, 57) of them: transfers in transit (57) other current assets (94, 58, 76) TOTAL for section II BALANCE SHEET
2 952 163 305 130 2 685 101 293 285 792 927 5 366 949 207 531 087 15 650 087 36 188 811 3 238 888 447
3 729 851 242 346 2 772 803 931 266 215 334 8 927 816 360 735 596 19 128 750 38 468 817 3 470 252 441
RuB thousand
80 793 934
78 292 227
66 393 481 4 852 2 774 755 453 408 11 167 438 10 347 166 21 884 237 588 762 78 285 714 11 636 881 39 163 909 25 094 458 21 731 7 736 417 16 816 856 519 454 413 275 7 586 014 263 155 432 3 502 043 879
64 041 675 5 411 318 093 340 504 13 586 544 8 137 593 24 084 999 133 894 56 311 021 9 897 416 20 191 884 6 360 822 25 897 2 171 842 3 707 339 455 744 421 369 11 664 800 205 043 346 3 675 295 787
220
iii. Capital anD ReSeRVeS Charter capital (80) treasury shares (81) additional capital (83) Reserve capital (82) including: reserves established in accordance with legislation Reserves created in accordance with charter documents Retained earnings (loss) (84) TOTAL for section III iV. non-CuRRent liaBilitieS loans and borrowings (67) Deferred tax liabilities (77) other non-current liabilities (67) Restructured taxes and levies payable (68) Restructured payables to extra-budgetary funds (69) TOTAL for section IV V. CuRRent liaBilitieS loans and borrowings (66) accounts payable including: trade accounts payable (60, 76) Dividends payable (75) Deferred income (98) Reserves for future expenses (96) other current liabilities (76) TOTAL for section V BALANCE SHEET
1 583 197 819 1 197 487 754 6 763 962 6 763 962 158 566 186 2 946 015 721 1 594 516 219 1 190 097 693 7 433 979 7 433 979 179 844 072 2 971 891 963 RuB thousand
appenDiCeS
Liabilities At beginning of reporting year At end of reporting year Unit
130 735 681 44 086 036 31 908 174 853 625
297 092 748 57 935 781 25 162 355 053 691
166 837 024 209 471 257 100 861 479 4 866 252 381 174 533 3 502 043 879
30 350 023 308 342 157 63 420 192 5 657 872 4 000 081 348 350 133 3 675 295 787
221
annual RepoRt 2009
Appendix 2 Statement of off-balance-sheet items

Item description At beginning of reporting year At end of reporting year Unit
leased fixed assets (001) including capital leases leased freight cars By reference from leased fixed assets leased land plots and natural resources land and natural resources used free of charge inventory items accepted into custody (002) Consumables accepted for processing (003) Goods accepted on commission (004) equipment accepted for installation (005) numbered forms (006) Bad debt written off to losses (007) assets received as collateral for liabilities and payments (008) assets pledged as collateral for liabilities and payments (009) Depreciation of housing assets (010) Depreciation of land improvements and other similar assets (010) leased out fixed assets (011) use rights obtained for intellectual property (012) Fixed assets of no more than RuB 1,000 per unit put into operation before 1 January 2006 (013) property with useful life not exceeding 12 months put into operation (014) Housing assets without title (016) encumbered housing and utility assets held by JSCo "RZD" (017) assets on the territory of Kazakhstan and ukraine (019) assets with useful life exceeding 12 months recorded as inventory put into operation (020) Real property lacking ground for registering JSCo "RZD" title, identified upon stocktaking (021)
179 364 402 89 526 934 30 331 809 72 236 524 390 180 1 938 157 63 451 4 13 139 238 764 16 207 567 6 183 315 4 402 312 685 049 167 546 487 326 6 434 338 8 114 892 4 349 290 90 986 916 220 2 074 287 10 718 907 1 505 863
177 274 321 89 810 215 29 638 890 77 939 683 158 008 2 656 289 48 259 1 296 172 137 11 258 438 7 473 052 7 107 811 690 407 201 684 8 356 009 6 486 541 4 217 773 86 281 668 173 2 077 763 13 287 648 1 811 303
RuB thousand
222
appenDiCeS
Appendix 3 Profit and loss statement (Form 2) for January-December 2009

Item description For reporting period For comparative period of previous year Unit
inCoMe anD eXpenSeS RelateD to oRDinaRy aCtiVitieS Revenue (net of value added tax, excise duties and similar obligatory charges) including: Freight transportation long-distance passenger transportation Suburban passenger transportation infrastructure services locomotive hauling services Rolling stock repairs Construction of infrastructure facilities Research and development and experimental and construction work Social services other types of activities Cost of sales including: Freight transportation long-distance passenger transportation Suburban passenger transportation infrastructure services locomotive hauling services Rolling stock repairs Construction of infrastructure facilities Research and development and experimental and construction work Social services other types of activities Gross profit Selling expenses administrative expenses profit (loss) from sales including: Freight transportation long-distance passenger transportation Suburban passenger transportation infrastructure services locomotive hauling services Rolling stock repairs Construction of infrastructure facilities Research and development and experimental and construction work Social services other types of activities
RuB thousand 1 050 157 925 783 035 973 132 646 056 18 361 313 11 744 612 11 017 723 19 435 954 7 311 848 61 054 7 334 742 59 208 650 (999 853 882) (691 136 467) (160 137 194) (43 150 613) (11 121 070) (8 273 886) (18 825 055) (7 022 858) (34 655) (13 614 733) (46 537 351) 50 304 043 (82 649) 50 221 394 91 899 506 (27 491 138) (24 789 300) 623 542 2 743 837 610 899 288 990 26 399 (6 279 991) 12 588 650 1 101 710 458 847 037 159 130 730 157 19 676 019 6 442 599 10 581 458 19 926 487 287 266 103 759 5 900 229 61 025 325 (1 035 247 879) (722 685 769) (162 413 036) (54 501 886) (4 698 505) (7 838 118) (17 614 419) (267 149) (91 859) (13 618 675) (51 518 463) 66 462 579 (71 063) 66 391 516 124 351 390 ( 31 682 879) ( 34 825 867) 1 744 094 2 743 340 2 312 068 20 117 11 900 ( 7 718 446) 9 435 799
223
otHeR inCoMe anD eXpenSeS interest receivable interest payable income from equity participation other income other expenses pRoFit (loSS) BeFoRe taXation Deferred tax assets Deferred tax liabilities Current profit tax profit tax for previous periods unified tax on imputed income for previous periods Deferred tax assets written off to the profit and loss account Deferred tax liabilities written off to the profit and loss account expenses on penalty payments to the budget expenses on social security penalty payments pRoFit (loSS) aFteR taX
BY REFERENCE
4 038 234 (18 432 493) 1 573 197 177 111 731 (154 196 836) 60 315 227 3 706 931 (14 111 898) (34 822 516) (593 298) (60) (228 269) 262 154 (91 636) (- 10 758) 14 447 393 33 502 100 9.14 -
1 128 149 (10 739 271) 1 164 346 214 290 558 (217 460 438) 54 774 860 5 344 512 (15 146 255) (30 433 540) (1 807 211) (-162) (359 406) 354 292 (- 680 327) (7 402) 13 400 339 27 406 011 8.69 -
RuB thousand
permanent tax liabilities (assets) Basic earnings (loss) per share Diluted earnings (loss) per share
Appendix 4 Analysis of specific gains and losses

Item description profit For reporting period loss For previous reporting period profit loss Unit
Fines, penalties, punitive damages recognizedor imposed by a court (arbitration court) ruling profit (loss) brought forward Reimbursement of damages caused by nonfulfillment or improper fulfillment of obligations exchange gains/losses from foreign currency transactions Deductions to valuation reserves accounts receivable and accounts payable written off upon expiration of the recovery perio
RuB thousand 4 379 497 8 969 156 442 241 24 837 269 X 349 025 353 572 8 688 381 283 398 29 465 627 15 581 281 330 693 6 609 582 13 607 421 289 544 3 933 111 X 449 621 594 060 9 710 981 234 661 25 526 673 424 921 322 104
annual RepoRt 2009
Item description
For reporting period
For comparative period of previous year
Unit
224
appenDiCeS
Appendix 5 Statement of changes in capital (Form 3) for January-December 2009

Description Charter capital Additional capital Reserve capital Retained earnings (uncovered loss) Total Unit
Balance as of 31 December 2007 2008 Changes in accounting policies including: Changes in the RF legislation and (or) accounting regulations development of new accounting methods Significant change in the business environment Result from non-current assets revaluation including: Result from fixed asset revaluation Revaluation of deferred tax assets and liabilities in case of changes in the income tax rate under the RF legistation on taxes and levies Balance as of 1 January 2008 transferes between the capital components including: Deductions to the reserve fund allocation of the reserve fund to compensate losses write-up of non-current assets disposed use of funds received through increase in charter capital increase and (or) decrease in capital including: Result from foreign currency translation net profit (loss)
1 541 697 819 X
905 081 616 X
2 539 196 X
136 437 525 -
2 585 756 156 -
RuB thousand
X X X X
X X X 299 813 076
X X X X
(27 353)
299 785 723
299 813 076
(27 353)
299 785 723
X 1 541 697 819 -
X 1 204 894 692 (7 805 452)
X 2 539 196 4 224 766
136 410 172 3 580 686
2 885 541 879 -
(7 805 452)
4 224 766
(4 224 766)
7 805 452
13 400 339 13 400 339
X X
X X
X 13 400 339
13 400 339
225
increase in capital including: additional issue of shares increase in the par value of shares share premium funds received through increase in charter capital other proceeds Decrease in capital including: Decrease in the number of shares Decrease in the par value of shares Dividends declared other disposals Balance as of 31 December 2008 2009 Changes in accounting policies including: Changes in the RF legislation and (or) accounting regulations development of new accounting methods Significant change in the business environment Result from fixed asset revaluation including: Result from fixed asset revaluation Revaluation of deferred tax liabilities in case of changes in the income tax rate under the RF legistation on taxes and levies Balance as of 1 January 2009 transferes between the capital components including: Deductions to the reserve fund
41 500 000 1 133 974 X 42 633 974 RuB thousand
annual RepoRt 2009
41 500 000 X -
X X
X X
X X (512 200)
41 500 000 1 133 974 (1 247 660)
1 133 974 (735 460)
X X
X 1 583 197 819 X
X X X (735 460) 1 197 487 754 X
X X X X 6 763 962 X
X X (512 200) 152 878 997 -
(512 200) (735 460) 2 940 328 532 -
X X X X
X X X -
X X X X
1 583 197 819 -
1 197 487 754 (7 500 510)
6 763 962 670 017
5 687 189 158 566 186 6 830 493
5 687 189 2 946 015 721 -
670 017
(670 017)
226
allocation of the reserve fund to compensate losses write-up of non-current assets disposed including: write-up of fixed assets disposed use of funds received through increase in charter capital increase and (or) decrease in capital including: Result from foreign currency translation net profit (loss) increase in capital through: additional issue of shares increase in the par value of shares share premium funds received through increase in charter capital other proceeds Decrease in capital through: Decrease in the number of shares Decrease in the par value of shares Dividends declared other disposals Balance as of 31 December 2009
RuB thousand X X (7 500 510) 7 500 510 appenDiCeS
(7 500 510)
7 500 510
14 447 393
14 447 393
11 318 400 11 318 400 110 449 X 1 594 516 219 X X X 1 190 097 693 110 449 X X
X X X X X X X X X X 7 433 979
14 447 393 X X X X 179 844 072
14 447 393 11 428 849 11 318 400 110 449 2 971 891 963
227
ii. ReSeRVeS provisions established in accordance with legislation Reserve capital 2008 2009 Reserves established in accordance with the charter documents 2008 2009 Valuation reserves total 2008 2009 including: provisions for doubtful debts 2008 2009 of them: ncluded in the financial results 2008 2009 provisions for impairment of investments in securities 2008 2009 of them: ncluded in the financial results 2008 2009 provisions for impairment of tangible assets 2008 2009 of them: ncluded in the financial results 2008 2009 provisions for contingent liabilities 2008 2009
RuB thousand
annual RepoRt 2009
Description Opening balance Received Used Closing balance Unit
2 539 196 6 763 962
4 224 766 670 017
6 763 962 7 433 979
10 152 083 446 634
427 667 15 581 281
(10 133 116) (395 966)
446 634 15 631 949
10 129 755 374 988
377 766 14 371 167
(10 132 533) (374 988)
374 988 14 371 167
X X
X X
(9 872 716) (200 727)
X X
22 328 71 646
49 901 1 146 542
(583) (20 978)
71 646 1 197 210
X X
X X
(583) (20 798)
X X
63 572
63 572
X X -
X X 2 866 600
X X 2 866 600
228
References net assets
RuB thousand 2 950 881 973 From the budget 2 977 549 835 From non-budgetary funds
appenDiCeS
Indicator / Description Opening balance Closing balance Unit
Description
For reporting year
For previous year
For reporting year
For previous year
Unit
Government financing including: Subsidies aimed at protection of the Moscow St.petersburg railway infrastructure from unlawful acts other Compensations related to state regulation of prices and tariffs, including: Freight transportation long-distance passenger transportation Suburban passenger transportation other
1 122 775
145 607
RuB thousand
1 000 000 122 775 79 232 747 40 779 176 36 038 599 1 985 434 429 538
145 607 21 591 694 19 371 589 1 997 372 -
179 562 -
123 381 -
229
annual RepoRt 2009
Appendix 5 Statement of cash flows (Form 4) for January-December 2009

Description For reporting period For comparative period of previous year Unit
BalanCe oF CaSH at BeGinninG oF yeaR CaSH FlowS FRoM opeRatinG aCtiVitieS Cash proceeds received from customers Budget allocation other earnings Cash disbursements for: payment of goods, work, services, raw materials and other current assets payroll payment of dividends and interest payment of taxes and levies payments of other expenses net cash from operating activities CaSH FlowS FRoM inVeStinG aCtiVitieS proceeds from the sale of fixed assets and other non-current assets apart from securities and other financial investments proceeds from sale of securities and other financial investments Dividends received interest received proceeds from the repayment of loans provided to other entities (including deposits) purchase of subsidiary entities purchase of fixed assets, income-bearing investments in tangible assets and intangible assets purchase of securities and other financial investments loans provided to other entities (including deposits) net cash flows from investing activities CaSH FlowS FRoM FinanCinG aCtiVitieS proceeds from the issue of shares or other equity securities proceeds from loans and credits provided by other entities Repayment of loans and borrowings (net of interest) Repayment of financial lease obligations purchase of treasury shares net cash from financing activities net increase (decrease) in cash and cash equivalents BalanCe oF CaSH aS oF tHe enD oF tHe RepoRtinG peRioD effect of changes in the exchange rate of foreign currency to the ruble
For reference:
25 084 219 1 199 874 886 80 187 546 131 405 864 (1 167 387 907) ( 490 627 693) ( 274 658 532) ( 26 768 308) (188 038 356) (187 295 018) 244 080 389
3 505 856 1 263 550 758 21 734 384 332 277 521 (1 401 484 689) (628 002 174) (263 500 627) ( 9 717 985) (177 960 290) (322 303 613) 216 077 974
RuB thousand
1 583 703 1 723 971 1 646 293 2 850 868 27 103 730 (4 890 124) (295 305 122) (28 938) (25 753 028) (291 068 647) 28 243 400 422 121 677 (402 357 001) ( 19 752 578) 28 255 498 (18 732 760) 6 351 459 1 265 103
4 266 931 8 026 355 1 158 505 791 870 149 131 (1 885 668) (363 160 176) (173 162) ( 39 546 733) (390 372 947) 24 575 000 508 736 761 (314 508 226) (22 930 199) 195 873 336 21 578 363 25 084 219 1 120 390
Financial documents at the beginning of the year at the end of the reporting period
10 239 9 363
9 470 10 239
230
appenDiCeS
Appendix 6 Supplement to balance sheet for January-December 2009

Description Opening balance Received Disposals Closing balance Unit
intanGiBle aSSetS intellectual property (exclusive intellectual property rights) including: held by the owner of patent for an invention, industrial sample, useful model held by the owner of right to computer programs, databases, etc. held by the owner of right to integral circuity topology held by the owner of trade and service marks, name of commodity place of origin held by the owner of patent for selection achievements other Goodwill amortization of intangible assets FiXeD aSSetS Buildings Constructions and transfer devices Machinery and equipment transport vehicles production equipment and tools Draught cattle productive livestock perennial plantings other fixed assets land plots and natural objects Capital investments related to land reclamation TOTAL
RuB thousand
4 380 900
1 424 844
(5 334)
5 800 410
122 206
393 008
(4)
515 210
4 179 265 -
769 802 -
(3 274) -
4 945 793 -
5 996 73 433 1 428 737 390 399 394 2 158 930 825 458 235 370 549 557 061 7 300 878 54 963 229 211 415 589 4 338 653 3 569 407 998
2 958 259 076 645 079 14 638 261 137 928 672 67 910 378 78 317 049 966 631 2 735 239 263 318 557 300 321 546
(2 056) (3 257) (12 773 415) (6 307 457) (8 093 616) (4 428 039) (305 998) (24) (127) (465) (303 191) (275 176) (32 487 508)
6 898 332 509 2 070 559 392 264 240 2 290 552 040 518 052 132 623 446 071 7 961 511 30 836 231 481 351 661 4 382 034 3 837 242 036
231
Depreciation of fixed assets, total including: Buildings and structures Machinery, equipment and transport vehicles other Fixed assets leased out, total including: Buildings Constructions other Fixed assets mothballed Fixed assets leased, total including: Buildings Constructions other
BY REFERENCE
884 306 705 492 632 675 387 256 482 4 417 548 39 503 867 4 787 767 14 226 070 20 490 030 15 690 242 178 974 222 1 187 360 101 819 177 685 043 1 187 360 101 819 177 685 043
1 064 438 105 587 578 257 471 565 949 5 293 899 48 953 493 7 678 424 11 482 879 29 792 190 54 998 741 177 116 313 1 911 916 101 819 175 102 578 1 911 916 101 819 175 102 578
RuB thousand
Result from fixed asset revaluation Historical (replacement) cost Depriciation Change in cost of fixed assets as a result of additional construction, equipping, reconstruction, partial liquidation
114 071 623
376 395 215 76 609 492 99 406 591
Description
Opening balance
Received
Disposals
Closing balance
Unit
inCoMe-BeaRinG inVeStMentS in tanGiBle aSSetS assets for lease assets provided under lease other 5 473 166 TOTAL 5 473 166 amortization of income-bearing investments in tangible assets 106 217
RuB thousand 3 892 510 3 892 510 114 956 (222 581) (222 581) (5 894) 9 143 095 9 143 095 215 279
annual RepoRt 2009
Description
Opening balance
Closing balance
Unit
232
appenDiCeS
Appendix 7 Costs related to science and research, experimental and construction, and engineering work
Description Opening balance Received Disposals Closing balance Unit
intanGiBle aSSetS Total

By reference
RuB thousand 305 130 429 447 (492 231) 242 346
Opening balance
Closing balance
total expenses related to research and development, experimental and design, and engineering works in progress
4 619 976
For reporting period
4 343 448
For previous reporting period
total expenses related to research and development, experimental and design, and engineering works in progress with no positive result recognized as other expenses
20,257
2,417
Financial investments
Long-term Description Opening balance Closing balance Opening balance Short-term Closing balance Unit
investments in the equity of other companies, total including: investments in subsidiaries and associated companies investments in Government and municipal securities Corporate securities, total including: Debt securities (bonds, notes) loans granted Deposits other TOTAL assets in operational management of them financial investments with current market value: investments in the equity of other companies, total including: investments in subsidiaries and associated companies investments in Government and municipal securities Corporate securities, total including: Debt securities (bonds, notes) other total:
By reference
194 694 883 194 430 242 149 356 149 356 8 260 652 4 130 000 296 196 207 531 087 36 188 811
330 549 383 330 267 162 149 356 149 356 26 690 661 3 050 000 296 196 360 735 596 38 468 817
9 305 39 140 000 14 604 39 163 909 456 001
3 189 553 17 000 000 2 331 20 191 884 462 732
RuB thousand
as related to financial investments with current market value after adjustment as related to debt securities, the difference between cost and par value was recorded as financial result for the reporting period
233
annual RepoRt 2009
Appendix 8 Accounts receivable and accounts payable

Description Total Opening balance of which: Total Closing balance of which: Unit
aCCountS ReCeiVaBle 1. trade accounts receivable, total 1.1. Sale of inventory 1.2. work performed and services rendered 1.3. Receivables for power supplied to subscribers 1.4. other 2. notes receivable 3. Settlements on claims 4. Settlements with budget and non-budgetary funds on taxes and levies 5. advances issued 6. payroll receivables and other accountable advances 7. other accounts receivable 8. For transportation services TOTAL accounts receivable aCCountS payaBle 1. trade accounts payable, total track materials Raw materials, supplies and spare parts Fuel payables for power supplied by suppliers Construction work performed Repair works performed purchase of fixed assets work performed and services rendered Goods purchased and finished products other 2. payroll and other employee accounts payable 3. Social security payables 4.taxes and levies payable, total 5. local administration funds 6. notes payable 7. advances received 8. other payables 9. advances received for transportation services TOTAL accounts payable
RuB thousand 12 225 643 3 574 630 5 440 548 198 448 3 012 017 57 376 646 619 10 351 806 25 484 491 318 932 30 201 828 20 883 256 100 169 951 100 861 479 4 252 792 15 875 016 2 959 109 285 681 38 249 432 10 250 255 12 962 689 15 042 737 301 976 681 792 14 653 249 4 520 429 8 814 790 X X 17 587 339 22 574 229 40 459 742 209 471 257 1 664 668 X 20 491 72 912 1 021 953 130 703 776 666 48 324 66 260 300 237 488 X 286 155 X 249 227 147 004 1 942 127 1 570 026 79 428 880 266 2 288 416 95 090 267 690 26 755 209 961 6 237 1 895 1 239 X X 10 031 310 1 916 871 4 972 385 198 512 2 943 542 44 476 654 878 993499 28 897 343 302 824 21 380 824 18 090 866 80 396 020 63 420 192 3 441 740 8 286 798 2 670 201 456 842 20 967 154 6 681 920 6 682 384 12 486 290 391 842 1 355 021 14 366 664 4 261 797 14 782 305 X X 17 280 503 146 188 807 48 041 889 308 342 157 1 017 054 950 277 38 934 777 895 28 279 105 169 300 210 969 X 189 517 X 227 204 196 297 1 774 564 940 878 28 874 260 475 1 762 402 364 879 105 845 7 911 165 492 788 4 450 1 229 X X X X 17 273 57 674
234
appenDiCeS
Appendix 9 Investments in subsidiaries

Company Location Field of activity JSCo "RZD" share in the equity (%) as of 31 December 2009 Charter capital as of 31 December 2009 Invested by JSCo "RZD" as of 1 January 2009 2009 Received/ Disposed Invested by JSCo "RZD" as of 31 December 2009
CJSo Regio-teleCom DV
Khabarovsk
telecommunications transport transport transport transport 51.00 51.00 51.00 51.02 50.96 99.99 51.11 51.00 57.00 99.80 0.0017 82.84 80.50 50.01 99.95 74.00 51.00 99.99 51.00 99.99 51.00 51.00 99.99 99.99 99.99 99.99 99.99 99.99 200 100 100 1 811 261 15 162 765 180 100 90 124 14 529 3 000 050 10 000 21 400 999 600 2 000 100 10 4 073 726 100 2 368 936 100 100 2 330 626 161 729 259 833 12 168 70 877 410 827 2 330 625 161 729 259 832 10 140 48 812 410 827 -368 -10 140 22 065 70 877 410 827 2 330 625 161 729 259 464 4 073 726 51 2 368 936 51 -51 -51 2 368 936 4 073 726 499 900 434 012 499 900 434 012 35 4 655 888 1 628 923 6 283 264 186 328 522 15 162 764 92 51 51 371 -51 51 371 264 186 328 522 15 162 764 92 102 102 Barnaul Kemerovo omsk novosibirsk yuzhnosakhalinsk travel transport investments Sport investment Construction Construction telecommuniMoscow cations transport Rostov Volgograd Moscow Moscow Moscow Moscow Moscow
JSCo altay-prigorod* JSCo Kuzbass-prigorod* JSCo omsk-prigorod JSCo express-prigorod JSCo Zheldoremmash CJSCo eurasia intertrans JSCo Volgogradtransprigorod CJSCo transkat JSCo KRp-invest* CJSCo lokomotive Football Club JSCo BaM-invest* JSCo Zarubezhstroitechnology* CJSCo Zheldoripoteka CJSCo transteleCom JSCo Don-Suburbs* ooo energopromsbyt* JSCo Vagonremmash JSCo Sverldov Suburban Company* JSCo elteza JSCo express primorya* JSCo Krasprigorod* JSCo Kaluga plant (Remputmash) JSCo abdulino plant (Remputmash) JSCo Vereschagino plant (Remputmash)* JSCo Moscow pilot track Machine plant (Remputmash) JSCo orenburg track Repair plant (Remputmash) JSCo perm Motor Railcar Repair plant (Remputmash) JSCo Sverdlov Rail Repair and engineering plant (Remputmash)*
Moscow Manufacturing
St. petersburg Manufacturing
Moscow Manufacturing Moscow Manufacturing yekaterinburg Vladivostok Krasnoyarsk transport transport transport
Kaluga Manufacturing abdulino Manufacturing Vereschagino Manufacturing Moscow Manufacturing orenburg Manufacturing perm Manufacturing
yekaterinburg Manufacturing
99.99
419 093
419 092
-18 845
400 247
235
annual RepoRt 2009
JSCo MetalworkerRemputmash experimental plant* JSCo Roslav Railcar Repair plant Remputmash* JSCo Roszheldorproekt JSCo Roszheldorstroi JSCo Refservis* JSCo transContainer JSCo Railway technology, Control and Diagnostics Research institute JSCo all-Russian Rolling Stock Research and Design institute JSCo Saransk Railcar Repair plant JSCo Barnaul Railcar Repair plant* JSCo Roslavl Railcar Repair plant JSCo northwest Suburban passenger Company* JSCo High-Speed Mainlines* CJSCo CHop RZD oKhRana JSCo Railtransavto* JSCo Vologda VRZ* JSCo Vladikavkaz VRZ JSCo Moscow lRZ* JSCo petukhovo lMZ* JSCo alatyr MZ JSCo Krasnoyarsk eVRZ JSCo Krasny put Moscow Machine plant JSCo arena-2000* JSCo all-Russian Railway Research institute JSCo State Research institute of automated Systems JSCo First Freight Company JSCo Railway trade Company JSCo transCreditBank JSCo Gudok newspaper CJSCo High-Speed Mainlines* CJSCo South Caucasus Railway JSCo First non-Metallic Company JSCo Beteltrans JSCo transwoodService* JSCo novosibirsk Switch plant
Kaliningrad Manufacturing yaroslavl Manufacturing Moscow Moscow Moscow Moscow engineering Construction transport transport
99.99 99.99 51.00 99.99 99.99 85.00
480 801 385 253 1 366 467 9 933 153 3 491 493 13 894 778
480 800 385 252 1 366 466 9 933 152 3 491 492 11 810 561
-31 893 -19 273 -683 231 -168 396
448 907 365 979 683 235 9 933 152 3 323 096 11 810 561
omsk Moscow
Science Science
99.99 99.99 99.99 99.99 99.99 74.00 75.10 99.99 51.00 99.99 99.99 99.99 99.99 99.99 99.99 99.99 99.94 99.99 75.00 99.99 99.99 55.07 99.99 87.38 99.99 99.99 99.99 99.99 99.99
35 965 146 962 518 480 868 740 870 808 100 1 000 21 835 3 265 163 727 052 1 172 956 946 586 285 458 104 658 1 552 190 562 513 2 101 200 3 191 503 748 977 85 652 434 8 077 297 2 258 400 47 896 310 000 6 800 000 6 268 918 3 769 701 1 944 938 1 950 197
35 964 146 961 518 479 868 739 870 807 -24 313
35 964 146 961 518 479 844 426 870 807
Saransk Manufacturing Barnaul Manufacturing Roslavl Manufacturing St. petersburg Moscow Moscow Moscow transport transport Security transport
751 21 834 1 665 233 727 051 1 172 955 946 585 285 458 104 658 1 430 483 562 513 2 071 722 3 191 502 561 733 85 652 434 8 077 296 5 947 795 50 025 550 639 6 268 917 3 769 701 1 944 938 1 950 197
-751 21 834 -323 377 -69 422 -69 460 -12 678 125 706 1 341 856 657 629 1 172 955 877 125 272 780 104 658 1 556 190 562 513 -27 130 2 044 592 3 191 502 561 733 85 652 434 8 077 296 5 947 795 50 025 550 639 6 268 917 3 769 701 -55 587 1 889 351 1 950 197
Vologda Manufacturing Vladikavkaz Manufacturing Moscow Manufacturing petukhovsk Manufacturing alatyr Manufacturing Krasnoyarsk Manufacturing Moscow Manufacturing yaroslavl Moscow Moscow Moscow Moscow Moscow Moscow Moscow yerevan Social area Science Science transport Commerce Banking Mass Media transport transport
Moscow Manufacturing Moscow Manufacturing Moscow Manufacturing novosibirsk Manufacturing
236
appenDiCeS
ishim engineering plant Blak Sea Ferries limited JSCo perm Suburban Company JSCo FpK CJSo Kaliningrad-transteleCom CJSCo CentretransteleCom
ishim Manufacturing Malta perm Moscow Kaliningrad Moscow transport transport transport telecommunications telecommunications telecommunin.novgorod cations telecommuniVoronezh Chita cations telecommunications telecommuniRostov cations telecommuniSamara cations telecommuniKrasnoyarsk cations cations telecommuniKhabarovsk cations telecommuniirkutsk cations telecommuniChelyabinsk cations telecommuniSt. petersburg cations telecommuniyaroslavl cations telecommuniSaratov cations telecommuninovosibirsk cations telecommuniyekaterinburg cations telecommuniermolino village cations
99.99 51.00 51.00 99.99 49.95 49.95 49.95 49.95 49.95 47.80 40.00 40.67 39.90 39.90 35.00 25.00 25.01 25.20 25.00 25.10 25.10 0.12
216,196 1 245 625 100 137 238 246 2 000 2 000 2 000 2 000 2 000 4 000 2 000 300 2 000 2 000 2 000 2 000 1 000 2 000 600 2 000 573 203 990
216,195 635 269 51 137 238 246 999 999 999 999 999 1 912 800 122 798 798 700 500 250 504 150 502 144 250 184 544 069 135 885 992
216,195 635 269 51 137 238 246 999 999 999 999 999 1 912 800 122 798 798 700 500 250 504 150 502 144 250 320 430 061
CJSo transteleCom-nn CJSC yugo-Vostok-transtelecommunications CJSCo transteleCom-Chita CJSCo Caucasus-transteleCom CJSCo SamaratransteleCom CJSCo SibtransteleCom CJSCo SakhalintransteleCom CJSCo transteleCom-DV CJSCo BaikaltransteleCom CJSo uzhural-transteleCom CJSCo St. petersburg teleport CJSCo SevertransteleCom CJSCo VolgatransteleCom CJSCo Zap-SibtransteleCom CJSCo ural-transteleCom CJSCo transvok TOTAL
yuzhno-Sakha- telecommunilinsk
*Provision for impairment of financial investments is made for these companies.
237
annual RepoRt 2009
Appendix 10 Investments in affiliated companies

Affiliated company Location Line of activity JSCo "RZD"'s Charter share (%) as of capital as 31 December of 31 December 2009 2009 (RUB mln.) Invested by JSCo "RZD" as of 1 January 2009 (RUB mln.) Received/ Invested by Disposed (-) JSCo "RZD" as (RUB mln.) of 31 December 2009 (RUB mln.)
CJSCo Railway implementation Center CJSCo october Railway implementation Center CJSCo Railway implementation Center CJSCo Railway implementation Center CJSCo Railway implementation Center CJSCo Railway implementation Center CJSCo Railway Center for the implementation of new Methods and technologies CJSCo Krasnoyarsk Railway implementation Center CJSCo Railway implementation Center CJSCo Railway implementation Center CJSCo Railway Center for the implementation of new Methods and technologies CJSo Kaliningrad-transteleCom CJSCo tRanSpoRt teCHnoloGieS CJSCo CentretransteleCom CJSo transteleCom-nn CJSCo Southeast transteleCom JSCo Central passenger Company* CJSCo transteleCom-Chita CJSCo Caucasus-transteleCom CJSCo apsat Coalmining Company* CJSCo Rascom CJSCo oktransvneshterminal*
Chelyabinsk St. petersburg Kaliningrad n.novgorod Voronezh Samara
Manufacturing Manufacturing Manufacturing Manufacturing Manufacturing Manufacturing
49.00 49.00 49.00 49.00 49.00 49,00
200 200 200 200 200 200
98 98 98 98 98 98
98 98 98 98 98 98
novosibirsk Krasnoyarsk Chita Khabarovsk
Manufacturing Manufacturing Manufacturing Manufacturing
49.00 49.00 49.95 49.00
200 200 200 200
98 98 98 98
98 98 98 98
yaroslavl Moscow
Manufacturing Science
49.00 49.95 49.00 49.95 49.95 49.95 49.33 49.95 47.80 48.57 46.00 45.00 45.00
200 2 000 20 409 2 000 2 000 2 000 300 2 000 4 000 8 000 16 300 55 10 000
98 999 10 000 999 999 999 999 1 912 -999 -999 -999 -999 -1 912 -999
98 10 000
Kaliningrad telecommunications Moscow telecommunications n.novgorod telecommunications Voronezh telecommunications Moscow transport Chita telecommunications Rostov telecommunications Village of novaya Chara St. petersburg St. petersburg Manufacturing Manufacturing Manufacturing
7 498 4 500
7 498 4 500
JSCo yamal Railway Company novy urengoy transport CJSCo industry Center for the implementation of new Methods and technologies Moscow Science JSCo Magistral Railcar Design Center* Moscow Science CJSCo SamaratransteleCom Samara telecommunications CJSCo SibtransteleCom Krasnoyarsk telecommunications CJSCo SakhalintransteleCom yuzhno-Sakhalinsk telecommunications CJSo transteleCom-DV Khabarovsk telecommunications JSCo Baikal waters* irkutsk Manufacturing CJSCo BaikaltransteleCom irkutsk telecommunications JSCo trans-Baikal Mining Company* Chita Manufacturing infrastructure Development limited
Mongolia transport transport Manufacturing
43.43 40.45 40.00 40.67 39.90 39.90 34.90 35.00 34.29 50.00 49.33 31.00
900 1 513 2 000 300 2 000 2 000 1 400 2 000 350 2 526 000 tugrics 300 200
391 800 122 798 798 700 -800 -122 -798 -798 -700
391
28 567 148 62
28 567 148 62
JSCo Volgo-Vyatsk Suburban passenger Company CJSCo Railway implementation Center
Volgograd Rostov
238
appenDiCeS
Affiliated company Location Line of activity JSCo "RZD"'s Charter share (%) as of capital as 31 December of 31 December 2009 2009 (RUB mln.) Invested by JSCo "RZD" as of 1 January 2009 (RUB mln.) Received/ Invested by Disposed (-) JSCo "RZD" as (RUB mln.) of 31 December 2009 (RUB mln.)
llC industry Center for the Development and implementation of information Systems CJSCo talgorus* CJSCo uzhural-transteleCom CJSCo Moscow Railway implementation Center CJSCo Railway implementation Center CJSCo Railway implementation Center CJSCo St. petersburg teleport
Moscow St. petersburg
information Manufacturing
26.00 26.00 25.00 25.00 25.00 25.00 25.01 25.20 25.00 24.73 25.10 25.10 25.00 25.10 25.00
10 2 000 2 000 200 400 200 1 000 2 000 600 1 500 573 2 000 500 103 1 500
3 500 50 100 50 250 504 150 371 144 502 -144 -502 -250 -504 -150 -500
Chelyabinsk telecommunications Moscow Saratov irkutsk Manufacturing Manufacturing Manufacturing
50 100 50
St. petersburg telecommunications
CJSCo SevertransteleCom yaroslavl telecommunications CJSCo VolgatransteleCom Saratov telecommunications CJSCo ekza novokuibyshevsk Manufacturing CJSCo ural-transteleCom yekaterinburg telecommunications CJSCo Zap-SibtransteleCom novosibirsk telecommunications JSCo Caucasus Sea Ferry Service* Vladikavkaz transport JSCo Zabaikalstalinvest trans-Baikal Village of novaya Chara Manufacturing Mining and Metallurgy enterprise CJSCo translease leasing Company* St. petersburg Finance CJSCo Central information and technical-economic Research institute-iS Moscow Science CJSCo Zabaikalskoe ZHaSo* Chita insurance llC Southeast express editorial office* Voronezh Mass Media CJSCo Russian troika Moscow Manufacturing JSCo pool trans Kingisepp transport llC Murmansk transport Hub Management Company Murmansk transport CJSCo Russian Copper* Verkhniaya
pyshma Manufacturing transport transport transport transport Manufacturing Science transport transport Banking transport
371
100 000
100 000
24,00 22,19 50.00 25.00 50.00 25.00 25.50 30.00 50.00 50.00 50.00 25.00 36.00 40.10 49.99 45.00 49.33
50 2 500 100 944 000 100 000 250 000 1 000 3 703 129 820 34 102 3 872 700 37 240 000 11 700 1 670 150 3 000 000 300
12
12
236 000 50 000 62 500 255 7 327 64 910 17 051 9 310 000 1 170 670 -670 75 148 9 886 173 194 430 242 -49 072 1 358 369 -64 910 -255
236 000 50 000 62 500
Joint Venture trans-eurasia logistics GmbH llC aeroexpress* oy Karelian trans JSCo aK Zheleznye Dorogi yakutii the Breakers investments llC Bombardier transportation (Signal) CJSCo eurasia Rail logistics* SCo Moscow-tversakaya Suburban passenger Company JSCo Kit Finance investment Bank** JSCo Sodruzhestvo TOTAL Total subsidiaries and affiliated companies
Berlin Khimki Helsinki aldan amsterdam Moscow Moscow tver Moscow n.novgorod
7 327 17 051 9 310 000 1 170
75 148 9 837 101 330 267 162
*Provision for impairment of financial investments is made for these companies. ** Investments in JSCo KIT Finance Investment Bank amount to RUB 45.
239
annual RepoRt 2009
Appendix 11 Other financial investments (the share of JSCo "RZD" is less than 20%)
Company Location Line of activity Share of JSCo "RZD" (%) as of 31December 2009 Charter capital as of 31 December 2009 (RUB mln.) Invested by JSCo "RZD" as of 1 January 2009 (RUB mln.) Received/ Disposed (-) (RUB mln.) Invested by JSCo "RZD" as of 31 December 2009 (RUB mln.)
JSCo Compania ust-luga JSCo trade House RZD JSCo north-west Company for telecommunications and informatics JSCo Vladivostok industrial port* CJSCo tK Magistral* JSCo Murom points plant* JSCo Zolotoe Zveno* CJSCo lyudinovo-Kabelservis CJSCo peterkom/MS Consulting Company* CJSCo energet & Co JSCo povolzhie insurance Company* JSCo uraltransbank JSC VoStSiBZHaSo CJSCo triind* JSCo South primorsky terminal* JSCo noglinskaya Gas power Station* CJSCo transvok CJSCo prometey Sanatorium* all-Russia CJSCo nizhegorodskaya yarmarka JSCo ulyanovskenergo CJSCo SpiMeX Sberbank RF (JSCo)*** JSCo Volga territorial Generating Company*** Total Total interest in charter capitals
Kingsepp Moscow
transport Commerce telecommunica-
8.52 19.90
2 050 222 10 000
184 520 1 950
184 520 1 950
Murmansk Vladivostok ussuriysk
tions transport transport
17.54 17.00 13.92 13.33 13.85 10.80 10,00 10.00 9.71 3.50 1.38 3.00 7.40 1.67 0.12 0.17 0.34 0.19 5.00 0.02
998 1 794 78 443 485 650 100 000 6 55 2 104 249 571 8 000 290 2 300 300 000 203 990 59 041 54 515 276 686 750 000 30 011 859
175
175
Murom Manufacturing Khabarovsk Manufacturing lyudinovo Manufacturing St. petersburg advisory
15 224 90 10 815 -90
15 224 10 815
Moscow Manufacturing Kazan yekaterinburg irkutsk Vladivostok insurance Banking insurance transport
8 735 550
8 735 550
nogliki village Manufacturing telecommunicaermolino village Kabardinka village novgorod St. petersburg Moscow Social Commerce Financing Banking tions
250
-250
185 1 514 37 500 3 312 8733**** 9 002 264 641 17 580
185 1 514 37 500 12 045 9 002 282 221
ulyanovsk Manufacturing
Samara Manufacturing
45.00
694
194 694 883 135 854 500 330 549 383
240
appenDiCeS
Appendix 12 Accrued tax payments on taxes and levies of JSCo "RZD" for 2008-2009
Description 2008 2009 +/Deviation % Unit
total taxes and levies Federal budget Vat income tax other taxes payable to the federal budget Regional and local budgets income tax personal income tax property tax land tax transport tax Met water tax other taxes payable to regional and local budgets Non-budget funds pension Fund Social Security Fund Fund of the Mandatory Medical insurance accident insurance Fund
181 21.63 13.11 8.42 0.099 85.62 22.09 41.1 20.32 1.8 0.161 0.061 0.048 0.044 73.75 55.5 7.9 8.51 1.84
208.46 37.38 33.61 3.67 0.097 96.81 31.28 41.98 21.36 1.9 0.175 0.006 0.043 0.07 74.27 56.01 7.94 8.56 1.76
27.46 15.75 20.5 -4.75 -0.002 11.19 9.19 0.8793 1.05 0.0939 0.013 -0.055 -0.005 0.026 0.5233 0.5125 0.0415 0.0488 -0.0796
115.2 172.8 2.5 times 43.6 97.6 113.1 141.6 102.1 105.2 105.2 108.3 10.2 90.1 159.5 100.7 100.9 100.5 100.6 95.7
RuB bln.
Cash payments for taxes made by JSCo "RZD"

Description 2008 2009 (+/-) 2009 to 2008 (+/-) 2009 to 2008 Unit
Total taxes and levies including: Federal budget of which: Vat income tax Regional and local budgets of which: income tax personal income tax property tax land tax Mandatory social insurance funds including: unified social tax accident insurance Fund
184.5 25.0 15.4 9.5 85.9 24.7 40.5 18.9 1.7 73.6 71.8 1.8
194.3 24.4 21.0 3.3 95.3 30.0 42.0 21.0 2.0 74.7 72.8 1.8
+9.8 -0.6 +5.6 -6.2 +9.4 +5.3 +1.5 +2.1 0.3 +1.1 +1 0
105.3 97.7 136.5 34.7 110.9 121.5 103.7 111.1 117.6 101.5 101.4 100
RuB billion
241
annual RepoRt 2009
Appendix 13 Breakdown of financial investments of JSCo "RZD"

Indicator Financial investments in 2008 Received Disposals Financial investments in 2009 Deviation Unit
FinanCial inVeStMentS long-term investments, total Short-term investments, total StRuCtuRe oF lonG-teRM FinanCial inVeStMentS Long-term investments, total of which: investments in the equity of other companies, total including: investments in subsidiaries and affiliated companies Corporate securities loans granted Deposits other investments StRuCtuRe oF SHoRt-teRM FinanCial inVeStMentS Short-term investments, total including: Securities of organizations loans granted Deposits other investments
RuB billion 208 39 208 163 1 014 163 10 1 033 10 361 20 361 153 -19 153
195 194 0.1 8 4 0.3 39 0 0.0 39 0.0
138 137 0 26 0 0 1 014 0.0 3 1 011 0.0
2 2 0 7 1 0 1 033 0.0 0.0 1 033 0.0
331 330 0.1 27 3 0.3 20 0 3 17 0.0
136 136 0 18 -1 0 -19
3 -22 0
242
appenDiCeS
Appendix 14 Movements in the value of fixed assets of JSCo "RZD" with breakdown by fixed assets groups
Fixed assets group 2007 Historical cost Net book value Historical cost 2008 Net book value Historical cost As of 2009 Net book value Unit
Buildings Facilities Machinery and equipment Motor vehicles, including electric and diesel locomotives production equipment and tools, other fixed assets Total
336 1 786 351 434 208 11 2 917
300 1 473 216 279 132 8 2 275
390 2 159 458 550 275 12 3 569
339 1 717 270 350 168 8 2 658
392 2 291 518 623 301 13 3 837
333 1 762 283 387 173 8 2 773
RuB billion
Appendix 15 Structure of the freight stock of JSCo "RZD"

Car type/ year Available at the end of 2009 Average age, years
Covered platforms Gondola cars tank cars Refrigerator cars other transporter
42 657 32 109 203 160 480 962 58 526 1 362
26.7 27.8 19.5 25.3 24.4 26.1
243
annual RepoRt 2009
Appendix 16 Freight handling in 20082009

Freight Classification rating Actual, 2008 Handled, 2009 Deviation from 2008 +/- absolute % Share in the overall freight handling volume of the railway Unit
TOTAL Coal Coke peat Slates Flux metals iron ore non-ferrous metals ore Construction materials industrial commodities Granulated slags Refractory materials Cement timber transshipments Total, class 1 oil Fertilizers Sugar Meat Vegetables Salt Beet Grain Grinded grain Complete feed Mill cakes imports agricultural machines products Commodity goods livestock Total, class 2 Ferrous metals Steelworks Scrap metal non-ferrous metals Chemicals Fish Cotton paper Machinery and equipment Metal ware Cars Cargo in containers other and package freight Total, class 3
1 303.7 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 3 3 3 3 3 3 3 3 3 3 3 3 3 296.6 12.2 0.7 0.0 12.6 102.3 24.8 197.1 39.5 5.9 7.7 36.0 55.4 0.5 791.3 232.1 42.1 3.5 0.7 0.6 1.2 1.5 19.4 4.7 1.4 2.1 15.6 0.4 9.3 2.3 0.0 336.6 78.7 0.9 24.6 4.4 30.9 0.6 0.0 4.1 1.7 5.9 1.2 16.7 6.1 175.8
1 108.2 275.4 10.5 0.6 0.1 8.4 95.5 23.4 128.2 30.7 3.5 5.4 29.2 40.6 0.5 651.9 228.0 39.1 2.9 0.4 0.3 0.7 1.0 18.5 4.0 1.0 2.6 7.4 0.2 7.2 1.9 0.0 315.4 64.7 0.6 16.6 3.9 24.9 0.6 0.0 3.5 1.1 4.5 0.8 15.2 4.5 140.9
-195.6 -21.1 -1.7 -0.1 0.1 -4.2 -6.8 -1.4 -68.9 -8.7 -2.4 -2.3 -6.8 -14.8 -0.1 -139.4 -4.1 -2.9 -0.6 -0.2 -0.2 -0.4 -0.5 -0.9 -0.6 -0.4 0.6 -8.2 -0.2 -2.1 -0.4 -0.0 -21.2 -14.0 -0.3 -8.0 -0.6 -6.0 0.0 -0.0 -0.7 -0.7 -1.4 -0.5 -1.4 -1.6 -35.0
-15.0 -7.1 -13.7 -19.2 175.0 -33.5 -6.7 -5.8 -35.0 -22.1 -40.5 -29.7 -19.0 -26.7 -13.2 -17.6 -1.8 -7.0 -17.3 -32.3 -41.8 -38.3 -34.9 -4.4 -13.3 -29.3 27.8 -52.3 -40.5 -22.9 -15.9 0.0 -6.3 -17.8 -31.8 -32.6 -12.6 -19.3 1.6 -100.0 -15.7 -38.6 -23.2 -37.4 -8.6 -26.7 -19.9
100 24.9 0.9 0.1 0 0.8 8.6 2.1 11.6 2.8 0.3 0.5 2.6 3.7 0 58.8 20.6 3.5 0.3 0 0 0.1 0.1 1.7 0.4 0.1 0.2 0.7 0 0.6 0.2 0 28.5 5.8 0.1 1.5 0.4 2.3 0.1 0 0.3 0.1 0.4 0.1 1.4 0.4 12.7
absolute million tons
244
Railways Actual 2008 Completed by 2009 +/- abs. Deviation to 2008 % Share of railways in overall freight handling Unit
oktyabrskaya Kaliningradskaya (Kaliningrad) Moskovskaya (Moscow) Gorkovskaya (Gorki) Severnaya (northern) Severno-Kavkazskaya (north Caucasian) yugo-Vostochnaya (Southeastern) privolzhskaya (trans-Volga) Kuibyshevskaya (Kuibyshev) Sverdlovskaya (Sverdlovsk) yuzhno-uralskaya (South urals) Zapadno-Sibirskaya (west Siberian) Krasnoyarskaya (Krasnoyarsk) Vostochno-Sibirskaya (east Siberian) Zabaikalskaya (trans-Baikal) Dalnevostochnaya (Far east) Sakhalinskaya (Sakhalin) RUSSIA
106.92 2.34 86.48 45.44 69.2 82.1 86.94 39.63 66.65 133.28 95.43 259.62 82.26 75.91 17.08 51.74 2.74 1 303.74
88.6 1.97 70.1 36.93 57.58 64.47 79.8 32.4 59.13 104.75 74.3 246.85 68.59 66.84 15.23 38.22 2.4 1 108.16
-18.32 -0.37 -16.38 -8.51 -11.62 -17.64 -7.14 -7.23 -7.52 -28.53 -21.13 -12.77 -13.67 -9.07 -1.86 -13.52 -0.33 -195.58
-17.1 -15.8 -18.9 -18.7 -16.8 -21.5 -8.2 -18.2 -11.3 -21.4 -22.1 -4.9 -16.6 -11.9 -10.9 -26.1 -12.2 -15
8 0.2 6.3 3.3 5.2 5.8 7.2 2.9 5.3 9.5 6.7 22.3 6.2 6 1.4 3.4 0.2 100
absolute million tons
appenDiCeS
Freight handling by the Russian railways in 20082009
245
annual RepoRt 2009
Appendix 17 Freight traffic activity in 20082009 (pursuant to report TsO-12) (net of cargo luggage and back run of empty cars)
Freight Traffic volume, tons thousand Freight traffic, mln ton-km Revenue, RUB bln Average length of haul, km ROR RUB per 10 ton-km RUB per ton
2008 Total Coal Coke oil products Various ores Ferrous metals timber Minerals and construction materials Fertilizers Cereals other 2009 Total Coal Coke oil products Various ores Ferrous metals timber Minerals and construction materials Fertilizers Cereals other
Freight
1 481 307 335 872 12 795 248 232 149 044 96 269 58 629 345 911 43 521 29 571 161 464 1 232 393 306 587 10 768 240 798 136 153 77 060 42 201 234 846 39 246 24 256 120 478
2 110 641 672 827 28 962 360 311 142 715 161 307 78 168 263 091 76 537 39 882 286 840 1 861 234 652 260 26 668 365 272 136 126 145 527 59 763 167 312 60 556 32 401 215 349
710.1 111.8 9 181.6 35.5 80.1 27.5 67.2 20.1 17.3 160.1 629.8 100.9 7.6 192.1 33.4 68.1 22.8 49.1 17.9 12.8 125.2
1 425 2 003 2 264 1 452 958 1 676 1 333 761 1 759 1 349 1 776 1 510 2 127 2 477 1 517 1 000 1 888 1 416 712 1 543 1 336 1 787
3.4 1.7 3.1 5.0 2.5 5.0 3.5 2.6 2.6 4.3 5.6 3.4 1.6 2.9 5.3 2.5 4.7 3.8 2.9 3.0 4.0 5.8
479.4 332.9 700.1 731.5 238.4 832.0 468.2 194.3 461.6 585.6 991.5 511.1 329.1 709.5 797.7 245.2 883.6 540.2 208.9 455.1 528.1 1 039.2
Traffic volume Ton thousand % mln. ton-km
Freight traffic %% RUB bln.
Revenue %
Changes, 2009 vs. 2008 Total Coal Coke oil products Various ores Ferrous metals timber Minerals and construction materials Fertilizers Cereals other
-248 914 -29 285 -2 027 -7 434 -12 891 -19 209 -16 428 -111 065 -4 275 -5 315 -40 986
-16.8 -8.7 -15.8 -3 -8.6 -20 -28 -32.1 -9.8 -18 -25.4
-249 407 -20 567 -2 293 4 961 -6 590 -15 780 -18 405 -95 780 -15 982 -7 481 -71 491
-11.8 -3.1 -7.9 1.4 -4.6 -9.8 -23.5 -36.4 -20.9 -18.8 -24.9
-80.3 -10.9 -1.3 10.5 -2.1 -12 -4.7 -18.2 -2.2 -4.5 -34.9
-11.3 -9.8 -14.7 5.8 -6.0 -15.0 -16.9 -27.0 -11.1 -26.0 -21.8
246
appenDiCeS
Appendix 18 Tonnage handled and carriage duty for key customers of JSCo "RZD" in 20082009
Company Carriage duty, RUB bln. 2008 2009 Unit Traffic volume, mln. ton 2008 2009 Unit
oao Rosneft oil Company oao lukoil oil Company ooo evrazHolding oao SueK uK KuZBaSSRaZReZuGol oao Gazprom neft omsk and Moscow oil Refinery oao Mechel oao Metalloinvest Holding Company oao MMK oao tnK-Bp aFK Sistema nlMK oao Severstal oao Surgutneftegas po Kinef oao Sibuglemet Holding oao SDS ugol Holding Company uK pMKH oao RuSal Zao Fosagro aG oao ilim Group oao eurocement group oao uralkhim oao evrokhim Mineral and Chemical Company oao uGMK oao Russian Coal Company oao akron oao pavlovskgranit oao uralasbest oao Siberian Cement Holding Company oao Mordovcement
44.3 26.8 22.8 23.9 20.9 13.3 17.1 12.5 15.5 12.6 9.8 10.9 14.2 5.5 5.2 4.4 5.0 5.3 3.8 3.2 0.9 1.9 2.1 2.3 0.6 1.1 1.3 1.1 0.8 0.5
49.6 29.1 21.4 20.4 19.1 14.5 13.8 13.5 12.9 12.3 10.9 10.8 10.4 5.6 4.8 4.7 4.6 4.3 3.9 3.3 2.4 2.3 2.2 2.2 1.3 1.2 1.1 0.7 0.5 0.5
RuB bln.
47.9 39.3 56.8 78.4 45.9 15.6 46.0 37.6 20.3 19.1 10.5 24.5 29.1 15.4 9.9 10.3 13.3 9.7 10.6 3.0 5.5 3.4 7.1 4.9 5.2 3.2 6.5 5.1 2.3 2.6
47.8 38.5 56.5 72.1 45.5 16.2 34.1 32.2 16.3 17.9 10.9 25.6 26.6 15.6 10.0 11.8 11.4 8.7 10.8 3.3 12.5 3.7 7.2 4.6 5.3 3.9 5.2 3.3 1.8 2.3
mln. ton
247
annual RepoRt 2009
Appendix 19 Work safety indicators of JSCo "RZD" in 20082009

Indicators 2008 2009
expenses on work safety arrangements for all sources of funding (million rubles), including: expenses for working clothes, safety shoes and other personal protective equipment expenses on work safety arrangements per each employee, average for JSCo "RZD" , thousand rubles expenses on work safety arrangements per each employee, average for the railway network, thousand rubles amount of funding for the program for improving working Conditions and work Safety, billion rubles Sanitary maintenance buildings and premises built, reconstructed and repaired, pcs Heating places and eating rooms built, reconstructed and repaired, pcs locomotive booths were provided with extra strong glass, pcs locomotive booths provided with vibration-resistant drivers seats, pcs air purifiers installed, pcs Dry-cleaning machines installed for cleaning working clothes, pcs industrial washing machines installed, pcs Heat shield sets installed, pcs occupational Safety technology suites acquired for the electrification, energy supply, automatics, teleautomatics, communications and computer technology business units to protect employees against electric trauma, pcs Computer-based training and examination sets related to work safety supplied, pcs training facilities supplied for practicing first-aid measures, pcs Modular heating places provided for the employees of the railway car and transport management divisions number of people injured in accidents number of people killed in accidents number of people injured in accidents per 1,000 employees (general acc. rate) number of people killed in accidents per 1,000 employees (fatal acc. rate) number of working places assessed for compliance with the requirements for working conditions number of employees who completed a course or received other professional training in work safety
8 630.7 2 625.9 7.6 8.1 2.0 292 5 073 1 661 1 755 120 47 110 156
7 760.9 2 457.0 7.6 7.9 2.5 279 7 655 847 915 53 0 32 106
1 076 69 294 138 649 80 0.54 0.07 86 288 15 003
416 56 135 172 620 78 0.59 0.07 117 023 16 018
248
appenDiCeS
Appendix 20 Funding for the Program of occupational safety for units and railways
Units Level of funding Unit
locomotive (tst) Railcar (tsV) electrification and power supply (tse) Rails and structures (tsp) transportation (tsD) Freight and commercial operations (tsM) passenger (tsl) Signals and interlocking (tsSh) Safe transportation and ecology (tsRB) occupational safety (tsBt) Civil buildings (other) information and communications (tsiS) Surbubian passenger service (tsprig.) Total:
Railways
83.9 112.4 100.2 153.0 94.1 95.2 64.9 14.0 2.6 170.3 18.6 12.9 47.7
969.5
RuB million
Level of funding
Unit
oktyabrskaya Kaliningradskaya (Kaliningrad) Moskovskaya (Moscow) Gorkovskaya (Gorki) Severnaya (northern) Severno-Kavkazskaya (north Caucasian) yugo-Vostochnaya (Southeastern) privolzhskaya (trans-Volga) Kuibyshevskaya (Kuibyshev) Sverdlovskaya (Sverdlovsk) yuzhno-uralskaya (South urals) Zapadno-Sibirskaya (west Siberian) Krasnoyarskaya (Krasnoyarsk) Vostochno-Sibirskaya (east Siberian) Zabaikalskaya (trans-Baikal) Dalnevostochnaya (Far eastern) Sakhalinskaya (Sakhalin) Total:
94.0 12.6 117.3 51.2 66.6 50.7 62.7 57.8 51.7 55.7 58.4 65.1 46.0 56.2 58.1 55.8 9.6
969.5
RuB million
249
annual RepoRt 2009
Appendix 21 Information on Transportation Safety Violations

Transport safety violations 2008 2009 +/ % Unit
Crashes accidents traffic accident at railway crossing events, total: including cases when railcars in an organized train jumped off the tracks delay of the train for 1 hour and more cases when rolling stock ran off the tracks or collision during shunting operations
1 2 1 4 334 45 2 184 201
0 1 2 4 327 40 1 901 178
-1 -1 1 -7 -5 -283 -23
0 0 0 -0.16 -11 -12.96 -11.44
unit
Appendix 22 Main funds of the business unit dealing with civil works, water supply and sewage in 20082009, RUB billion
Description number 2008 value number 2009 value Unit
Heating supply system total heat sources, including: Central heat supply section water supply and wastewater collection systems total, including: utilities total utilities, including: technical premises and technical purpose facilities technical premises, including: Housing facilities of the Company total housing facilities, including: Social infrastructure facilities total, including: Total net book value:
unit 5 642 185 9 080 12 318 43 611 1 423 8 174 5.2 7.1 69.2 13 9 1.0 110.6 14.2 5 922 142 10 240 12 417 45 656 1 061 9 174 5.7 7.5 76.4 km unit 15.1
14 9 thousand sq.m 1.0 120.6 unit
250
appenDiCeS
RUB mln.
Appendix 23 Breakdown of accounts receivable and accounts payable

Description total 2008 including overdue total 2009 including overdue Unit
aCCountS ReCeiVaBle trade receivables notes receivable Settlements on claims taxes and levies advances issued payroll receivables, other accountable advances other accounts receivable For transportation services Total aCCountS payaBle trade payables payroll and other employee accounts payable Social security payables taxes and levies payable local administration funds notes payable advances received other payables advances received for transportation services Total
RuB million 12 225.6 57.4 646.6 10 351.8 25 484.5 318.9 30 201.8 20 883.3 100 169.9 100 861.5 14 653.2 4 520.4 8 814.8 0 0 17 587.4 22 574.2 40 459.8 209 471.2 1 022.0 0.3 237.5 0 286.1 0 249.2 147.0 1 942.1 1 570.0 1.2 0 0 0 0 20.5 72.9 0 1 664.6 10 031.3 44.5 654.9 993.5 28 897.3 302.8 21 380.8 18 090.9 80 396.0 63 420.2 14 366.7 4 261.8 14 782.3 0 0 17 280.5 146 188.8 48 041.9 308 342.2 1 017.1 950.3 0.3 211.0 0 189.5 0 227.2 196.3 1 774.6 940.9 1.2 0 0 0 0 17.3 57.7
Appendix 24 Economic benefit from implementation of resource saving facilities in 2009

Year Sales costs RUB mln. Economic benefit under the project RUB mln. mln. kWh Power supply for hauling operations RUB mln By stationary facilities mln. kWh RUB mln Diesel fuel consumption for traction operations Thousand tons
2008 2009 Total
4 838.1 1 882.7 6 720.8
1 386.2 90.8 1 477.0
86.4 4.2 90.6
133.0 5.2 138.2
65.7 11.5 77.2
112.6 18.8 131.4
9.3 0.9 10.2
136.0 14.1 150.1
251
Collateral received RUB mln. Unit
Total, of which: Roszheldorsnab
7 473.1
RuB million
oao RZD
promissory notes pledged as collateral for due performance of tender conditions and contractual relations bank guarantees pledged as collateral for due performance of tender conditions and contractual relations Bank guarantee of transCreditBank under the agreement with ooo inzhstroi (purchase of track machinery) bank guarantee of oao Capital trade Bank (purchase of track machineray) ulan-Bator railway property pledged as collateral under loan agreement
14.1 5 920.3 107.4 107.4 1 249.5
Collateral issued
Total, of which: Roszheldorsnab
7 107.8
oao RZD
Guarantee in favor of Siemens transportation Systems GmbH under bubcontract between oao tver Carriage works for RiC sleeping railcars concession agreement for transfer of the armenian railways to CJSCo South Caucasus Railway, created by JSCo "RZD" Guarantee as collateral for liabilities of CJSCo lokomotive Football Club
5 082.8 1 723.9 300.0
Reduction of operating expenses, including Heat energy Labor intencity Materials
Note
Thousand Gcal.
RUB mln.
person/ hour
RUB mln.
RUB mln.
economic benefit received in 2009 as a result of 2008 135.8 5.0 140.8 112.1 3.1 115.2 1 332 827 127 643 1 460 470 194.8 18.6 213.4 697.7 31.1 729 project implementation planned economic benefit in the amount of RuB 571.1 mln is expected in 2010
annual RepoRt 2009
Memo on collaterals received and issued in 2009
Full name of the open joint stock company:
Joint Stock Company Russian Railways (JSCo Russian Railways) Novaya Basmannaya 2, Moscow 107174 Russia Novaya Basmannaya 2 Moscow 107174 Russia +7 (499) 262-99-01 [email protected]
Abbreviated: Name in English:
Registered office:
Postal address:
Phone: e-mail:

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Annual report 2009

aCtivity Of the management and COntrOl BOdies Of jsCO russian railways

the COmpany's strategy and missiOn

summary Of the COmpanys OperatiOns and key COrpOrate events

Opening wOrds frOm the president Of russian railways, v. i. yakunin

General Shareholders Meeting

Railway development strategy

Achievements and key operating indicators

Overview of key corporate events

disClOsures and prOjeCtiOns

Members of the Board of Directors

general infOrmatiOn On jsCO russian railways

Brief CVs of members of the Board of Directors of JSCo Russian Railways

General legal information

Changes in statutory activities in 2009

Data on participation in meetings of the Board of Directors of JSCo Russian Railways

List of related parties

Meetings of the Board of Directors of JSCo Russian Railways

JSCo Russian Railways

Committees of the Board of Directors of JSCo Russian Railways

President of JSCo "Russian Railways"

Brief CVs of Members of the Management Board of JSCo Russian Railways

the COmpany's Current pOsitiOn in the industry

infrastruCture Of russian railways

Movement of Russian Railways' share of transport services market

Dynamics of freight turnover

enhancing transportation services in a time of recession

Condition of track infrastructure

Stage 3 of the Program for the Structural Reform of Russian Railways

evolution of competition in the industry

transportation services competitive environment

Condition of the power supply system

Structure of the holding company Russian Railways

Principles of government regulation and tariff policy applicable to Russian Railways

Improving the service quality

Automation and remote control

enhancement of transportation efficiency

Description of rolling stock

Performance analysis of Russian Railways' key subsidiaries

Russian Railways` asset management

internatiOnal aCtivities and implementatiOn Of prinCipal internatiOnal prOjeCts

innOvatiOn and teChnOlOgiCal develOpment Of russian railways

International traffic and key international projects

Innovation development of the Company and consistent technical policy

Functional strategy for transportation safety and security assurance

Outcome of cooperation with foreign railway administrations and transport agencies

Innovative technology and railway infrastructure development

Heavy freight services

Future of gas turbine locomotives

JSC Russian Railways and competitive advantages of "1520-gauge space"

Rapid and high-speed operations

Safe transportation Program

Information on unlawful interference in railway transport operation

finanCial and eCOnOmiC results

infOrmatiOn On interested-party transaCtiOns

Rational use of labor resources when there is less traffic

Revenue from transportation, infrastructure and locomotive hauling services

infOrmatiOn On majOr transaCtiOns

Development outlook inview of market trends and potential