Transcript of the beginning of the meeting:

Vladimir Putin: Mr Budargin, let us discuss the overall state of the system. I would like you to pay particular attention to the situation in Siberia in connection with the shortfalls in generation caused by the accident at the Sayano-Shusheskaya Power Plant and the need to organise power transfer, as we have agreed. I see that the work is on the whole under way and is fairly well organised. I would like you to dwell on this in more detail today. We shall then talk about your long-term investment programme. It is a big programme intended for three years and costing over 500 billion roubles. Is it 519 billion?

Oleg Budargin: It's 519.

Vladimir Putin: That's a substantial amount. But then your operation is big too. I would like to hear from you about the creation of the so-called smart networks, which we have discussed previously. That's one thing. And the second thing: I was recently in Ufa and I visited the transformer plant there. It's an excellent enterprise, new, beautiful and modern, but still you import 70% of your power transformers.

Oleg Budargin: 90%.

Vladimir Putin: 90%, so it's even more. Of course, not everything should be replaced with domestically produced equipment, but in some sectors it makes economic sense. It is a promising and sound solution. I am aware that you have such plans and I would like you to speak about them in detail.

Oleg Budargin: Pursuant to your instructions, the Federal Network Company maintains steady power supply via long-distance transmission lines, especially in Siberia. A lot of work has been done at the Siberian power hub; additional transmission lines have been built. Equipment has been created that ensures the required voltage in Siberian networks. So, we can safely say that our operation is steady in Siberia; it is steady throughout the Federal Network Company, but especially in Siberia.

We achieve this by proper organisation and quality personnel. You set the right task when we discussed this topic in October at the meeting devoted to the autumn and winter period paying particular attention to the wear and tear of the equipment. Your support on this matter is very important. Why? Because the government has approved our three-year investment programme. It did not only approve the parameters, but gave us an instrument for implementing the investment programme. We have adopted long-term tariff regulation, which enables us today to raise massive financial resources to implement the programme that ensures reliability.

In Siberia the flow is uninterrupted. In spite of adverse climatic conditions, there have been no power cuts. Most importantly, in spite of the high level of depreciation of equipment, over 50%, experienced local managers and experienced personnel enable us to keep the situation under control. We are already preparing for the following winter because we know there will be little time for repairs as all the lines will be in operation. And I have to say that our partners at the Sayano-Shushenskaya Station have done a great deal of work.

Vladimir Putin: We should go and see on the spot what they have done.

Oleg Budargin: They have done a good job. We had a good team working there. Igor Sechin doesn't let us relax. Our partners in the distribution networks and governors have paid great attention to this issue. Regional headquarters have been set up in Khakassia, the Krasnoyarsk Territory, in Kemerovo and in the Altai Territory. We coordinated this work.

We are preparing a major report, but we already have your approval and the approval of the deputy prime minister in charge of the sector for the construction of a transformer plant in Kolpino in St Petersburg. What you have seen is not quite good enough. We need something better. What we need is distribution networks. There are some good companies in this area. They have made some good transformers in Togliatti. Transformers in Moscow are performing well. But 90% of power transformers are imported. Therefore, we have come to an agreement with Silovye Mashiny, and we have prepared a project. The construction period is two and a half years. In this way we will not only meet domestic demand, but will be ready to enter the world market. Demand for transformers is there. We start in June. We believe this is a good start, good work, and if you find time in June we will drive in the first pile in your presence. Within two and a half years we will have a good, world-standard plant.

Vladimir Putin: What is the required amount of investment?

Oleg Budargin: 142 million dollars. It will be borrowed money. You approved our approach, which is to use part of the 519 billion not just for investment, but also for R&D.

We have earmarked 2% in support of science and I understand that you were supportive. We allocate 3% for the development of the domestic electrical engineering industry. The amount is enough to make us independent of import. I am not saying that we should get rid of all imports. In a good market it should be fifty-fifty. At present we import 70%.

I would like to touch upon another topic. You have set the task of building smart networks. That is the future of Internet energy systems. We will not just see everything and control everything. It will diminish losses, boost energy efficiency and make power supply steady. We will get rid of risks. The work has been approved by the Russian Academy of Sciences, and we have consulted with all our partners. We would like to ask you to put the Federal Network Company in charge of this work and we will accomplish it. This is a programme for decades. Elsewhere in the world they are starting on that. We cannot just trail behind. We are starting to implement this programme together with everybody else. We can make a special report on this, and we ask you to assign the job to us.

Vladimir Putin: Is this part of the investment programme?

Oleg Budargin: Yes, this is all included in the investment programme for three years. That is what we would like to have. Siberia has taught us a good lesson, just like your tough words about the need for reliability when you held a meeting at the situation centre. After all, the investment programme is not only about Siberia and about using the money, it is about greater reliability. Every rouble of the investment programme should contribute to reliability. In that sense Siberia was a good lesson.

We should develop in sync with the rest of the economy, with all the sectors and regions. This work is conducted mainly in the field of generation and we want to put our facilities into operation simultaneously with generation.

Number two. Our partners have done a lot of work on the East Siberia Pacific project. At the conference you chaired in Igarka you urged us to synchronise our work, perhaps even create something like a consortium of all those involved in the construction, in developing these fields for the East Siberia Pacific project with Transneft. We have already come to an agreement and we are in the process of synchronising our work. We have a common pool of contractors controlled from a single centre. We have assigned this job to Transneft and we transfer our investment resources to them so that there aren't too many participants on the same site, especially since it means more overhead costs.

As for the tasks connected with Siberia, the other ingredient of reliability is human resources. Today we have good personnel, but the average age and the prospects tell us that training of personnel is an urgent task. We have had a series of meetings with the heads of educational establishments. We have met with understanding. We will use our investment programme to create a solid material and technical base, departments and laboratories.

Vladimir Putin: On the basis of what school?

Oleg Budargin: The Moscow Energy Institute. They have a strong experienced team. We also cooperate with the St Petersburg Polytechnic Institute and have signed an agreement with them. We are not going to spread out too much. Experience shows that these institutes and universities have students from all over the country. The challenge we face is to provide them with an incentive to come back after they graduate. This is how we go about it. We sign an agreement with the governors on the implementation of our investment programme. I set two conditions to the governors: first, not to impede our investment programme because there are some issues with land that need to be resolved efficiently. And second, to provide our workers with housing. The governors have gone along with that.

Vladimir Putin: In other words, you place an order for the training of personnel?

Oleg Budargin: That's right.

Vladimir Putin: And you reserve workplaces for them?

Oleg Budargin: Yes, we reserve jobs.

Vladimir Putin: After they graduate from university?

Oleg Budargin: Yes, after graduation they come back home. First, they are familiar with the place and second, they are concerned not so much with pay as with having their own flats.

Vladimir Putin: The pay also matters.

Oleg Budargin: But we support it.

Vladimir Putin: What is the average wage in the industry?

Oleg Budargin: 25,000 roubles a month. That is enough, especially if we provide them with free housing.

Vladimir Putin: How much is a recent graduate paid?

Oleg Budargin: A new graduate would get about 15,000. We have no turnover of personnel. There is a waiting list, but what we need is not just a queue, but a queue of highly qualified specialists. Because every worker must be reliable.

Vladimir Putin: Of course that is very important, especially in light of our plans to invest in smart networks. If equipment becomes more sophisticated, we will need high-class specialists.

Oleg Budargin: Thank you very much for your support. The investment programme and the shift to long-term tariff regulation mean great responsibility. But it comes along with significant support.