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and region where the Issuer is a tax resident and/or carries out its principal activities.
In case of possible military conflicts, as well as a threat of terrorist exposure to the Issuer's facilities
(including under conditions of an aggravated international situation), there are possible risks of personnel death
and capital asset breakdown. The Issuer's region of registration and many regions of the Issuer's activities are
characterized by a peaceful political situation. The probability of military conflicts, a declaration of a state of
emergency and strikes in these regions is minimal, except for constituent entities of the Russian Federation
located on the border with Ukraine and in the North Caucasian Federal District. In connection with possible
escalation of the Georgian-Ossetian conflict, the described risk may arise in the region of the Issuer's activities
― the Republic of North Ossetia-Alania.
According to the results of sabotage at the Baksanskaya HPP (July 21, 2010) and detection of an
explosive device at the Irganayskaya HPP (September 7, 2010), the Issuer carried out comprehensive
reassessment of safety systems at every facility. According to its results, a comprehensive plan for protection
enhancement at the Issuer's facilities has
been implemented, within which changes in the ongoing safety program
at the Issuer's plants, including those in progress, have been introduced.
In case of this risk occurrence, the Issuer will take actions to mitigate the consequences thereof,
including:
Evacuation of personnel and construction equipment
located in close proximity;
Enhancement of security of the Issuer's facilities by engaging additional forces of the Ministry of Internal
Affairs of the Russian Federation in order to prevent risks.
Risks related to geographic features of the country and region where the Issuer is registered as a tax
resident and/or carries out its principal activities, including the heightened danger of natural disasters, possible
cessation of transportation due to remoteness and/or inaccessibility, etc.
Generally, the regions of the Issuer's activity are characterized by a well-developed transport
infrastructure and are not exposed to risks connected with termination of transport connection. In this respect,
some generating assets of the Issuer are located in remote areas with a severe, harsh climate, including in
Krasnoyarsk Krai and some areas of the Far Eastern Federal District. The Issuer constantly advances
technologies of access to and work in severe weather conditions of these areas. However, there is no guarantee
that the Issuer will not incur additional expenses in overcoming technical difficulties associated with climate and
accessibility of these areas, which may exert a negative influence on the Issuer's business, income, financial
standing, performance, and prospects. In the foreseeable future, these risks are assessed by the Issuer as
insignificant.
Risks also related to geographic features of regions include: risk of losses (for instance, lay up of fixed
assets) in connection with seismic activity, avalanches and mudslides, possible landslides and rain-caused floods,
as well as other adverse weather conditions (tornados, strong snowfalls and frost, etc.). The majority of the
Company's facilities is located in seismically quiet regions, however, such facilities as the Pauzhetskaya GeoPC
and the Verkhne-Mutnovskaya GeoPC are located in an earthquake zone with potential earthquake strength up to
9 on the Richter Scale. An emergency action plan has been developed in the event of earthquakes with
continuous monitoring of the situation. Transport connection is being elaborated in advance with a focus on the
aforesaid risk, cargo and personnel delivery scheme being optimized.
2.4.3. Financial Risks
Exposure of the Issuer to risks inherent in a change in interest rates, foreign currency exchange rates, due
to activity of the Issuer or due to hedging performed by the Issuer with a view to reduce adverse effects of the
above risks.
Exposure of the Issuer's financial standing, its liquidity, sources of funding, performance, etc., to a change
in currency exchange rate (exchange risks):
The financial status of the Issuer, its liquidity, sources of financing and performance results do not
depend
heavily on foreign exchange differences and interest rate changes.
The Issuer sells power on the domestic market of the Russian Federation. The settlements with suppliers
of the resources, accrual and receipt of payments from power consumers are performed mostly in the Russian
currency ― RUB. The influence of volatility of the national currency exchange rate of the Russian Federation on
the Issuer's financial status is assessed as insignificant.
The Issuer's obligations are also primarily denominated in rubles. Therefore, the Issuer's exposure to risk
of changes in foreign currency exchange rates is estimated by the Issuer as insignificant.
Expected actions of the Issuer in the event of a negative impact of changes in currency exchange rate and
interest rate on the Issuer's activity.
Due to the deteriorating of international situation, economic sanctions and other force majeure could
increase the risk of the Issuer's access to credit difficulties foreign counterparts, more expensive debt issuer,