/  Company overview / Opening address of the President of Russian Railways V. I. Yakunin

Opening address of the President of Russian Railways V. I. Yakunin

Opening address of the President of Russian Railways” V. I. Yakunin

Dear partners and colleagues,

In 2013, Russian Railways celebrated its 10th anniversary. During this year, we saw an increase in management efficiency, innovation, energy efficiency and human capital development. As a natural monopoly where the state owns 100% of our shares , the Company always maintains a balance between national and corporate interests in its operations.

Today, Russian Railways Group largely sets the rhythm of life for the country. It is a reliable partner of industry, makes a large- scale contribution to ensuring the mobility of the population, stimulates technical and technological innovations and is one of the largest investors in the real economy.

Russian Railways is responsible for 43% of the country’s rail freight turnover (over 85%, excluding pipelines) and approximately 30% of the country’s passenger traffic. It generates more than 1.6% of GDP, 1.3% of all tax revenues and 3.5% of investments into the country’s fixed assets.

In 10 years of operation, the Company has shipped more than 12.8 billion tonnes of freight, transported approximately 11.7 billion passengers, and invested RUB 4.3 trillion (at 2013 prices) into the renovation of property assets, rail upgrades and the implementation of large infrastructure projects. Extensive work was undertaken during the year to reduce the share of rail tariffs in the price of industrial enterprises’
end products. This was facilitated by the increased use of infrastructure and locomotives, as well as more than doubling transportation productivity over the past decade.

The Group includes 123 subsidiaries and affiliates, which are governed in accordance with Russian
and international standards. The Group employs more than one million people; 1.5% of all those employed in the country. Given the scale of its activities and the status of Russian Railways as one of the country’s largest employers, one of its key priorities is ensuring the stable development of human resources and the implementation of a policy of social responsibility towards employees, society and the state. Almost RUB 104 billion was allocated to these issues in 2013, and sealed with a collective agreement.

Despite all the challenges we faced in 2013, we successfully implemented several ambitious projects set by the state:

  • Construction of the infrastructure for the XXII Olympic Winter Games and XI Paralympic Winter Games 2014 in Sochi;
  • Providing passenger transport for the XXVII World Summer Universiade in Kazan;
  • Developing the key aspects of a new corporate governance system to meet current market conditions;
  • Undertaking extensive work to attract new investment in the development of the industry;
  • Acted on decisions made by President V.V. Putin to prepare for the implementation of two large-scale projects: the development of the Trans- Siberian and Baikal-Amur Mainlines and the construction of a high-speed railway between Moscow and Kazan.

Due to our timely response, we coped well with the economic crisis in 2013 and achieved a positive financial result in a difficult year. Work carried out by the Board of Russian Railways allowed to us decrease the Company’s expenses by almost RUB 100 billion more than originally planned, taking into account increased tax pressures. Main optimization activities included: an increase in internal operations (including improving the efficiency of technological processes), fixed assets conservation, a decrease in total overhauling volume, and effective interaction with suppliers and contractors to improve pricing policies. By freezing freight tariffs, we also laid the foundation for financial stability in the year ahead.

A mechanism for issuing infrastructure bonds was launched by Russian Railways with the support of the Russian Government. These bonds are unique, long-term investment tools with a guaranteed return of inflation +1% per annum, and have proved to be a popular and attractive way to preserve and increase savings for retirement.

In 2013, the total amount of bonds placed with a maturity of up to 30 years was RUB 150 billion.
With the mobilisation of all sources, the Russian Railways investment programme reached
RUB 467.2 billion, and the execution of important national projects was completed.

The procurement of 804 locomotives and 450 units of railcar rolling stock is unique amongst our investment projects. This is a record in post-Soviet history and represents a significant contribution by Russian Railways to the development of the domestic engineering industry. It reinforces existing rolling stock with advanced machinery due to long- term agreements with international manufacturers.

Decisions taken by the President of the Russian Federation and the Government in 2013 demonstrate the state’s decision to incorporate railway transport into its strategy. As such, the Group is at the forefront of the economic and socio-political life of Russia, guaranteeing its accelerated development.

I am confident that our work will continue to be at the heart of our country’s socio- economic activity, and we will make every effort to ensure that this remains the case.

Vladimir Ivanovich Yakunin

Vladimir Ivanovich