ANNUAL 2018 REPORT

New Businesses and Products TVEL Fuel Company of Rosatom ANNUAL REPORT

New Businesses and Products TVEL Fuel Company of Rosatom ANNUAL REPORT 2018

Integrator companies Second Business Core Volunteering for new business development Development Activities TABLE OF CONTENTS 034 page 042 page 050 page

Message from the Chairman GOVERNANCE Human Capital 046 Small-Midsized Business Support of the Board of Directors 004 and Development 054 Corporate Governance Practice 024 HR policy 046 Message from the President 005 Support of Education 054 Production Support Office Functions 024 Staff Composition 046 Health Maintenance 055 006 Key Results Concentration of Production and Vacant Staff Involvement 047 Facilities Management 024 Natural Capital 056 2018 Milestones 008 Motivation and Reward System 048 Business Process Digitization 025 Environmental Impact 056 Non-Material Benefits for Employees 048 Expenses Related to Environment Protection 059 OVERVIEW OF TVEL FUEL COMPANY Development of Staff Capacities 048

PERFORMANCE RESULTS Nuclear and Radiation Safety 060 About Company 012 Personnel Training 048 Financial Capital 028 Rehabilitation of the Areas Contaminated World Market of Front End Nuclear Fuel Cycle 014 Partnership with Educational Institutions 049 by Radionuclides 060 Financial Results 028 Fabrication Market 014 Volunteering Activities 050 Manufactured Capital 030 Social Programs 050 062 Uranium Conversion and Enrichment Markets 014 CONTACT DETAILS Conventional Businesses 030 Occupational Health & Safety 051 Market Outlook for Front End Second Core and New Businesses 033 Nuclear Fuel Cycle 015 Social and Reputational Capital 052 New Businesses Map of TVEL Fuel Company 034 Position of the Company in the World Market Social Partnership in the Territories of the Front End of Nuclear Fuel Cycle 015 New Businesses Development of Presence 052 Milestones 2018 038 Agreements on Cooperation with the Regions Operating Results of TVEL Fuel Company Intellectual Capital 040 of Presence 052 in the NFC Front End Market 016 Innovative Activities in the Nuclear Industry 040 TASED Creation 053 Results of Existing Agreements and Contracts 016 Second Business Core Development 042 Formation of Social Accord Environment 054

Major Agreements and Contracts Intellectual Property 044 Signed in 2018 017 Corporate Science 044 Goals and Plans in the Midterm 017 Interaction with the Russian Academy of Sciences 044 Development Strategy 018 Involvement of Universities in Implementation Contribution to Sustainable Development 019 of Investment Projects 045 Business Model 020 Business-Accelerator 045

002 — 003 ANNUAL REPORT 2018 к содержанию

MESSAGE FROM MESSAGE FROM THE CHAIRMAN THE PRESIDENT OF THE BOARD OF The year 2018 was marked by stable and successful DIRECTORS growth in TVEL Fuel Company of Rosatom. Due to professional and coordinated teamwork Nuclear Fuel Division of Rosatom State Corporation, the Company managed to achieve new significant managed by TVEL JSC, has key importance results in the global nuclear fuel market. for consolidated financial indicators of the Russian The ten-year export orders portfolio for nuclear nuclear industry, achievement of the strategic goals products reached USD 13.3 billion set by Rosatom both for Russian and the global markets, and accomplishment of the largest projects for nuclear power of the 21st century

DEAR COLLEAGUES AND FRIENDS! DEAR COLLEAGUES!

In 2018, the company showed consistently high Rosatom State Corporation is committed to the UN TVEL develops innovative nuclear fuels that will of business partnerships, started collaborative production and financial performance, and also Sustainable Development Goals in all its operations, help to achieve a new level of NPPs operation safety, engagement with 77 new partners, 26 projects reached new heights in all key areas. A number of major and the Fuel Division contributes to the achievement and ensure economically efficient use of raw materials. under review are assessed as promising. All these contracts with foreign customers have been signed, of several at once, such as Affordable and Clean Energy, It stands to mention manufacturing of the first projects will give a start to promising high-tech new designs and modifications of nuclear fuel are being Responsible Consumption and Production, Sustainable experimental fuel assemblies with accident-tolerant businesses and create new jobs. actively developed and implemented. The Company Cities and Towns, Decent Employment and Economic nuclear fuel for VVER and PWR. obtained certain results in creation of fundamentally Growth, etc. Thus, the effective implementation TVEL Fuel Company gives priority attention new fuel products for Rosatom, in particular, the first of numerous projects by TVEL Fuel Company helps not In 2018, the Company gave a fresh impetus to the sustainable development of the cities and test samples of Russian accident-tolerant fuel for light only to solve the strategic tasks of the Russian nuclear to support the development of non-nuclear businesses. the regions of its presence. In 2018, the investment water reactors, as well as the world’s first batch industry, but also to confront global challenges. Total revenues from non-nuclear businesses amounted in environmental protection amounted more than of MOX fuel for fast neutron reactors. to RUB 13.5 billion in 2018. Development of new ideas RUB 2.2 billion. Developing its operations TVEL Fuel is facilitated and promoted by the business accelerator Company adheres to socially oriented policies that meet Relating to the development of non-nuclear businesses, launched in 2018, which can help to develop a project the needs of residents of the cities of presence. TVEL Fuel Company was the first in the nuclear industry from the idea stage to industrial implementation It is important for us to create comfortable and safe to introduce integrator companies in such new areas just within nine months. urban environment, provide favourable conditions as additive manufacturing and power storage. for the life and work of our employees and their It is significant that Rosatom may become both In the regions of operation TVEL successfully launched families, improve the conditions and quality of life a major customer of such products and a leading the business partnership program together with of people in Russian regions. player in the emerging Russian market. regional authorities. Working in close cooperation with the regional administrations, the Company prepared and approved five road maps for the development Yuri Olenin, Chairman of the Board of Directors of TVEL JSC

Natalia Nikipelova, President of TEVL JSC

004 — 005 ANNUAL REPORT 2018 KEY RESULTS к содержанию

Net income EBITDA margin

KEY RESULTS 49,204RUB mln 39.9% 2017 2016 2017 2016

55,008 RUB mln 46,212 RUB mln 41.5% 43.0%

Revenue (net) from the sales, Adjusted free cash flow, Labor efficiency, Average staff number, -9.6% RUB mln 16.0% RUB bln -12.5% RUB mln/pers.* 3.0% pers.

2018 163,173 2018 89.8 2018 7.4 2018 22,451

2017 21,793 2017 180,683 2017 77.4 2017 8.46

2016 21,127 2016 180,073 2016 83.9 2016 8.25

* Labor efficiency is calculated as revenue from sales + recognition of costs carried out by external financing / average number of employees.

Dividends paid in the reporting year, Foreign orders portfolio for products Total costs for occupational safety Gross tax liabilities (actually paid), 71.3% RUB mln 23.2% and services of FE NFC for a 10 year period, 9.5% and health measures, RUB bln 3.2% RUB mln USD bln

2018 35,071 2018 13.3 2018 2.08 2018 15,106

2017 1.90 2017 14,644 2017 20,468 2017 10.8

2016 1.97 2016 12,839 2016 28,233 2016 10.1

006 — 007 ANNUAL REPORT 2018 2018 MILESTONES к содержанию

2018 MILESTONES

JANUARY APRIL AUGUST OCTOBER DECEMBER

BULGARIA: RUSSIA: CZECH REPUBLIC: SWITZERLAND: RUSSIA: INDIA: The contract documents Implementation of the quality The fourth generation TVSA-Т. TVEL JSC and European Kovrov Mechanical Plant Signing the contract for fuel for nuclear fuel supply to Kozloduy management system NQA-1 mod.2 fuel with enhanced Organization for Nuclear completes the investment project pellets supply to Tarapur NPP NPP in 2018–2020 enter in TVEL JSC and in a number reliability and uranium capacity Research (CERN) sign “New Facility for Gas Centrifuges in India into force of enterprises of the Fuel is loaded into VVER-1000 an agreement to conduct R&D Production” Company reactor of the power unit No. 2 for superconducting materials CHINA: FINLAND: at Temelin NPP as part of the Future Circular RUSSIA: Signing of contract in the Czech Republic Collider (FCC) project. In October, Contracting with Fortum Power TVEL Fuel Company of Rosatom for nuclear fuel supply Chepetsky Mechanical Plant and Heat Oy for development ИЮНЬ starts production of new to CFR-600 fast neutron RUSSIA: proceeded to pilot production of a new modification of nuclear generation gas centrifuges reactor in China of superconducting strands fuel with increased uranium UZBEKISTAN: Chepetsky Mechanical Plant stable isotopes separation for FCC capacity for VVER-440 starts production of the new Supply of nuclear fuel in Loviisa NPP product — hafnium oxide RUSSIA: to the recommissioned research reactor at the Institute of Nuclear Start of industrial production Physics of the Academy of mixed uranium-and-plutonium NOVEMBER of Sciences of Uzbekistan SEPTEMBER MOX-fuel for BN-800 fast FEBRUARY neutron reactor RUSSIA: RUSSIA: RUSSIA: Novosibirsk Chemical RUSSIA: ИЮЛЬ The first batch of TVS-2M fuel Rusatom Additive Technologies Concentrates Plant produces with the second generation First experimental fuel (RusAT LLC), the nuclear industry and successfully passes quality anti-debris filter ADF-2 assemblies of Russian accident- integrator company for additive RUSSIA: check for the initial nuclear fuel (protects fuel from damage tolerant fuel are manufactured manufacturing business, starts loading of power unit No.1 TVEL Fuel Company starts and depressurization) is first for the further testing at MIR operations as a subsidiary of Belarus NPP business accelerator for start-ups time loaded into VVER-1000 research reactor of TVEL JSC and new ideas development reactor at power unit No. 1 of Rostov NPP RUSSIA: Loading of nuclear fuel into the reactor installations of the world’s first floating NPP Academic Lomonosov

008 — 009 ANNUAL REPORT 2018 OVERVIEW OF TVEL FUEL COMPANY к содержанию

OVERVIEW OF TVEL FUEL COMPANY

010 — 011 ANNUAL REPORT 2018 OVERVIEW OF TVEL FUEL COMPANY к содержанию

ABOUT THE COMPANY

Today TVEL Fuel Company* provides nuclear fuel to 76 energy reactors in Russia and 14 countries of Europe and Asia, these installations annually produce more than 400 billion kWh of electricity

* Collective name for TVEL JSC and its subsidiary companies. An optimal organizational format to develop non- Specific nature of the social environment where nuclear businesses for the Company is the creation TVEL Fuel Company operates is the presence of industry specific integrators. of industrial enterprises within the closed administrative territorial units (CATU): Seversk, Novouralsk, The enterprises of TVEL Fuel Company are located Zelenogorsk, and within the mono-town Glazov. in 10 regions of the Russian Federation, which renders These enterprises are town-forming organizations effective cooperation with partners in a wide range and major taxpayers. of issues and areas. All stages of activity comply with the strict requirements regarding nuclear and radiation, industrial, fire, environmental safety, as well as labor safety, physical protection of nuclear facilities and nuclear materials, emergency preparedness SCHEME 1

Competitive advantages of TVEL Fuel Company

TVEL Fuel Company of Rosatom (hereinafter referred Based on the expertize accumulated for the years -- Increase of price competitiveness by optimizing costs to as TVEL Fuel Company, TVEL FC, the Company) of nuclear production development, the Company -- Production concentration — optimization of duplicate functions Cost optimization Divesting non-core assets is one of the major players on the global market preserves the regularity of pace in development and production compaction -- of front end nuclear fuel cycle and the only nuclear of non-nuclear businesses. TVEL Fuel Company -- Development of new and low waste technologies fuel supplier to Russian NPPs. supplies to Russian and foreign markets a wide range -- Technological development of non-nuclear products and services in such areas Consolidating the assets of the Fuel Division as chemistry, metallurgy, energy storage, mechanical -- Possibility of improving the characteristics of nuclear fuel of Rosatom State Corporation, the Company includes engineering and additive technologies. (due to the fact that the Company’s framework concentrates the enterprises specialized in fabrication of nuclear Package supplies all technological stages of nuclear fuel production) fuel, uranium conversion and enrichment, production -- Increase of price competitiveness of gas centrifuges, as well as research, design and development organizations. Provision of load following mode, possibility of increasing reactor capacity Continuous improvement -- of consumer properties -- Extended fuel life and cycles of nuclear fuel -- High nuclear fuel burn-up

Use of various types -- increase of commercial attractiveness of fuel of raw materials -- decrease of nuclear fuel share in power generation cost kWh One out of every power reactors in the world proposal of reference solutions which have been operates on the fuel manufactured Reference fuel -- 6 by the Company tested and qualified in Russia

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The highest number of operating power units MARKET OUTLOOK FOR FRONT END POSITION OF THE COMPANY are located in Asia-Pacific region, North America NUCLEAR FUEL CYCLE ON THE WORLD MARKET OF THE FRONT END WORLD MARKET and Western Europe. At the moment 55 power units OF NUCLEAR FUEL CYCLE are under construction in 18 countries of the world. Front end nuclear fuel cycle market outlook depends OF FRONT END on the current state of the reactor fleet and periods TVEL Fuel Company is one of the global leaders FABRICATION MARKET of its operation, plans for construction of new in nuclear fuel production. NUCLEAR units, as well as the reserves of FE NFC accumulated FUEL CYCLE At the moment, more than 80% of the world reactor by various market players. According to different TVEL Fuel Company is the main supplier of fuel fleet consists of light water reactors (LWR), including scenarios in 2030 outlook, the nominal capacity for reactors of Russian design, as well as it is sufficiently PWR, BWR and VVER reactors. It is expected that within of the global reactor fleet will increase, competent to produce nuclear fuel for PWR and BWR According to IAEA PRIS, as of the end of 2018 the next ten years LWR will amount to about 90% of the difference is in growth rate. reactors and its components from reprocessed uranium there were 451 NPP power units in operation new reactors put into operation. (in cooperation with Framatome), and pellets for BWR worldwide, including 37* in the Russian Federation The Asian region remains the most promising market and PHWR reactors. TVEL Fuel Company elaborated Major foreign manufacturers of fuel for light water where the main construction of new units is in progress its own in-house design of fuel assemblies (FA) reactors are located in USA, Western Europe and Japan: and there are serious plans to build up the nuclear for PWR reactors — TVS-K fuel, which is under 76 reactors facilities. The demand is expected to reduce in FE NFC the pilot operation. are running on the Russian fuel -- Framatome (75.5% share belongs to EDF) — markets of Europe and North America due to ageing BWR and PWR; of the reactor fleet, decommissioning of the existing TVEL Fuel Company jointly with TENEX JSC facilities and small quantity of new projects aimed provides more than 1/3 of the needs in uranium Global Nuclear Fuel (joint venture at replacement of the retired facilities. enrichment services. * Taking into account the decommissioned power unit No.1 -- in Leningrad NPP and power unit No. 1 in Bilibino NPP. of GE и Hitachi) — BWR; In 2018, the Company continued to work in difficult -- Westinghouse (owned by Brookfield Business external conditions, facing a number of new challenges. Partners) — BWR, PWR and VVER. The nuclear power industry in the world developed TVEL Fuel Company’s share at a slower pace compared to previously made TVEL Fuel Company is the main supplier of fuel of the global fuel forecasts. Facilities surplus and low prices in the NFC for reactors of Russian design. 17% fabrication market markets remained. In foreign markets the Company had to deal with not always market-based instruments DIAGRAM 1 URANIUM CONVERSION of competitive struggle, expanded protectionism tools. AND ENRICHMENT MARKETS 2 The initiatives undertaken by TVEL JSC on improvement South Africa During the first half of the reporting period, the price 100% Russia of technical and economic features of fuel, America for conversion continued its decline which began development of new samples of fuel, including 1 11 in 2011, which is due to the surplus production facilities accident-tolerant, make the Company’s products more Countries North 36% Finland and presence of significant nuclear fuel reserves attractive for its customers both on the traditional fuel of CIS America Western and Eastern in various forms that resulted in excess of conversion 2 market for Russian-design reactors, and on the fuel Europe Europe and enrichment services over the current demand market of Western-design PWR reactors. 100% Hungary in the market. In recent years because of the current market conditions most suppliers of conversion and 57% NPP power units enrichment services do not use their production Ukraine in operation as of the end 7% China of 2018, ea. capacity to the full, and tend to reduce the volume 100% 100% of output or suspend the production completely. 100% Czech 1 Armenia Supplies of nuclear fuel Republic 2 Slovakia for commercial power reactors of Russian design The lowest SWU (separative work unit) price indicators 100% Bulgaria on the spot market — USD 34 per SWU — were Supplies of nuclear fuel and its recorded in the middle of 2018, then for the first time 2 components in cooperation since 2010, their growth began. By the end of 2018, with Framatome 12 112 30% India Asia-Pacific Western the SWU spot market price returned to the level Number of units Region Europe of the end of 2017 — USD 39 per SWU**. 37 Share of national nuclear 100% power capacity

* Considering operation of Leningrad NPP ** Data obtained from UxC. unit No. 1 until 22.12.2018.

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0001001110101111000111000010 000100111010111100011100001 0111010111100011100001001110 110010001110110111010111101 110010001110110111010111101 OPERATING RESULTS 110010001110110111010111101 OF TVEL FUEL COMPANY 10010001110110111011101110 IN THE NFC FRONT END MARKET 100100011101101110111000111

The assets of TVEL Fuel Company include all process cycles of nuclear fuel fabrication which makes it possible to offer products and services related to FE NFC in the form of package supplies

MAJOR AGREEMENTS AND CONTRACTS GOALS AND PLANS Implementing an integrated approach to work RESULTS OF EXISTING AGREEMENTS SIGNED IN 2018: IN THE MIDTERM: in the world market of FE NFC, the Company takes AND CONTRACTS: into account the current and perspective market trends fuel pellets supply contract for Tarapur NPP (India) increasing customer focus and maximum and challenges in own production activity. The result in 2018, the Company provided fuel supplies ------with BWR reactors; satisfaction of customer requirements; of this is the flexibility of contract pricing and optimal under all existing contractual obligations transport logistics, while the reliability of supply with observance of all deadlines; opening of a new international transport corridor fuel improvement and development of new samples, is ensured by the presence of several enterprises -- -- for Russian nuclear fuel supplies to the markets including accident-tolerant fuel; specializing in various areas of FE NFC. continued cooperation with foreign energy -- of Eastern Europe; companies and industrial partners with the view protection and strengthening of the position Within the framework of international obligations, TVEL of promoting TVS-K fuel; -- above-plan delivery of initial fuel loading to power in the traditional nuclear fuel markets, Fuel Company complies with the legislative requirements -- unit No.7 of Novovoronezh NPP; implementation of the annual supply program; established by supervisory authorities of the Customer’s -- continued cooperation with Framatome country and which are necessary for licensing of nuclear on producing at MSZ PJSC existing facilities nuclear fuel supply to CFR-600 reactor (China); implementation of the existing contracts, fuel and components for reactor core. fuel and components from reprocessed uranium -- -- development of cooperation with foreign energy according to Framatome technology for European a series of contracts on nuclear fuel companies and industrial partners with the view NPPs with PWR; -- TABLE 1 components supply for research reactors, of promoting TVS-K fuel at target markets; including to Egypt. the joint Kazakh-Russian uranium enrichment Key indicators of TVEL Fuel Company in the world market -- expanding the range and geography centre carried out all the events planned -- of the front end nuclear fuel cycle in 2018 of fuel supplies and its components for the year, including the delivery of products for research reactors of foreign design. under the concluded contracts; KEY INDICATOR VALUE -- start-up of the contract documents for nuclear Export proceeds, 961 fuel supply to Kozloduy NPP (Bulgaria) USD mln for the period 2018–2020.

Export orders portfolio 13.3 for products and services of FE NFC for a 10 year period, USD bln

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CONTRIBUTION TO SUSTAINABLE DEVELOPMENT DEVELOPMENT

STRATEGY Rosatom TVEL Fuel Company has long-term experience in supporting and developing “atomic” cities, creating a comfortable and safe environment, Mission of TVEL FC is to meet the requirements providing favorable conditions for human capital growth, improving the quality of the customers of Rosatom TVEL Fuel Company of life of people and caring for the environment both in the field of nuclear fuel cycle and in the related sectors, in strict compliance with requirements of safety, security, environmental and social awareness On 1 January 2016, seventeen Sustainable Prime cost of electric power generated using Development Goals (SDGs) of the 2030 Agenda TVEL brand fuel may compete with other types for Sustainable Development — adopted by world of power plants. The most considerable advantage leaders in September 2015 at an historic of NPP is the absence of emissions of aerosols and UN Summit — officially came into force. greenhouse gases in the atmosphere. Today, operating The Sustainable Development Goals are unique nuclear power plants annually prevent about 1.8 billion Development strategy and business plan in that they call for action by all countries, poor, rich tons of emissions. This is a great contribution of TVEL Fuel Company for the years 2015–2019 STRATEGIC VISION: and middle-income to promote prosperity while to the efforts combating climate change. were adopted by the Strategic Board of ROSATOM protecting the planet. Countries recognize that in December, 2014. The strategy of TVEL Fuel Company Fuel Division is the global leader in front end ending poverty must go hand-in-hand with strategies An important strategic direction of our activity is sets core performance indicators for mid-term of NFC and the related fields that build economic growth and addresses a range the development of new businesses outside FE NFC. and long-term outlook till 2030. of social needs including education, health, social Today, the annual revenue of TVEL Fuel Company from protection, and job opportunities, while tackling non-nuclear businesses is about RUB 13.5 bln. We wish climate change and environmental protection. to multiply it by the year 2030. This will allow to create TVEL Fuel Company faces the challenge to increase new jobs and ensure social stability in the cities of its presence in the world market of NFC fabrication TVEL Fuel Company shares the internationally presence. An additional impetus for economic growth SCHEME 2 up to 22% and preservation of more than one third accepted initiative. We have identified the most comes from the creation of TASED. Developing new of the enrichment world market by the year 2030 Strategic targets of TVEL Fuel Company relevant SDGs for our activities and actively support businesses, we operate in effective partnership with (including supplies through TENEX JSC). their achievement by the world community. regional authorities and the local business community. The key conditions for the development of the second SOCIAL AND ECOLOGICAL Nuclear fuel produced by TVEL Fuel Company is ACCEPTABILITY core business is the presence in TVEL Fuel Company operated by NPPs that command a large part in total of the necessary infrastructure and production facilities, power balance with a tendency to increase. as well as the required equipment, licenses and qualified staff.

INCREASED EFFICIENCY Within the framework of efficiency improvement, the priority is given to solving the tasks of compacting the production areas and activity optimization.

The main priorities are still careful attitude Growth in the markets to the environment, transfer of “clean“ areas of Front End of NFC after nuclear production to future generations, introduction of non-waste technologies and reduction of the “nuclear legacy“. Public Integrated Report Konstantin Sokolov, In terms of ensuring social acceptability, of TVEL JSC was prepared Vice-President for Communication, Second Business Core Development TVEL Fuel Company is one of the successful examples in accordance with the International Administration and Energy Efficiency, of social and charitable programs (support and Integrated Reporting Framework Chairman of the Committee development of small and medium-sized and GRI Standards on Public Annual Reporting of TVEL JSC business in cities, creation of new jobs, improvement of cities, etc.) in the territories of Rosatom State Corporation presence.

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MANAGEMENT SYSTEM, RESULTS OF CAPITAL TRANSFORMATION * Key performance indicators (KPI) of the President BUSINESS MODEL RISK MANAGEMENT FINANCIAL CAPITAL Gross tax Charitable Expenses Salaries and RESOURCES Adjusted free Proceeds from liabilities contributions related other benefits - Internal resources - External resources ACTIVITY OF cash flow sales of new Operational in the regions and social to environment provided to (AFCF), products, costs, of presence, projects, protection, employees, TVEL FUEL COMPANY RUB bln* RUB bln* RUB bln RUB bln RUB bln RUB bln RUB bln FINANCIAL CAPITAL 2018 321.5 8.3 91.3 15.1 1.8 2.2 29.3 - Undistributed profits and monetary assets R&D CLUSTER 2017 308.7 6.12 85.0 14.6 1.9 2.2 27.6 - Accumulated reserves of TVEL FC - Consolidated investment resources DECOMMISSIONING OF NUCLEAR - Industry reserves FACILITIES, WASTE DISPOSAL MANUFACTURED CAPITAL Means of the federal target programs - CORE ACTIVITY Production plan realization Labor New products Foreign orders portfolio for 10 years - Loans, credits, subsidies on the core areas of activity, efficiency, portfolio for 10 years, on FE NFC products and services, % RUB mln/pers.* RUB bln* RUB bln* SEPARATION AND SUBLIMATION MANUFACTURED CAPITAL COMPLEX: 2018 conversion and enrichment of uranium 100 7.4 23.8 13.3 - High technology production basis 2017 100 8.5 5.1 10.8 - Position in the global market of FE NFC NUCLEAR FUEL FABRICATION - Strong relations with Russian and foreign COMPLEX: customers and suppliers creation of FA for nuclear reactors INTELLECTUAL CAPITAL

- Competitive and high quality products and services Investments Number of new registered Share of innovative products GAS CENTRIFUGE COMPLEX: into R&D, intellectual property objects, in revenue, - Raw and other materials manufacture of gas centrifuges RUB bln ea. % - Public infrastructure (roads, communication facilities, etc.) and auxiliary equipment 2018 1.5 82 8.3 INTELLECTUAL CAPITAL 2017 1.2 108 6.1

- Intellectual property assets of TVEL FC SECOND CORE ACTIVITY - Global achievements of science and engineering HUMAN CAPITAL Percentage of Average - Domestic projects and national intellectual resources METALLURGY: Average staff specialists under training hours Average Personnel special metallurgy and titanium metallurgy, number, 35 years old, per employee salary, engagement, LTIFR* superconducting materials and super wires HUMAN CAPITAL pers. % RUB % - Skills, experience, competencies and capabilities MECHANICAL ENGINEERING: 2018 22,451 20.8 32.8 82,243 82 0.13 of TVEL FC employees instrumentation, equipment for NFC 2017 21,793 21.9 29.7 77,561 83 0.06 - Knowledge management system and Oil and Gas Industry - Safety culture - Experts, consultants CHEMISTRY: SOCIAL AND RELATIONSHIP CAPITAL stable isotopes, catalysts, fluorides, lithium and lithium products Government Public Customer Existing cooperation SOCIAL AND RELATIONSHIP CAPITAL orders, procurement, satisfaction Index, agreements with regions, %* % points ea. - Reputation of the Company and its enterprises ENERGY STORAGE: 2018 - Recognisable and reputable brand name energy storage devices based on chemical current 100 94 4.8 5 sources, electric power generators based on fuel - Internal relations of TVEL FC 2017 100 97 4.5 0 elements, materials for lithium-ion batteries - Reliable interrelations in supply chain Initiatives of the country, Rosatom State Corporation - ADDITIVE TECHNOLOGIES: NATURAL CAPITAL 3D printers, metal powders for 3D printing, Investments into the development NATURAL CAPITAL 3D printing services of radioactive waste and spent Energy saved nuclear fuel treatment technologies, Greenhouse No INES events Proprietary and leasable land resources - % heat energy electric energy gas emissions level 2 and above* - Water consumption and energy 2018 - Reuse of raw materials and waste, recycling materials SUSTAINABLE DEVELOPMENT 137.7 306.8 372.7 922.5 0 OF REGIONS OF OPERATION - Nuclear and radiation safety of TVEL FC facilities 2017 114.7 292.4 367.5 922.6 0 - Ecosystem state 020 — 021 ANNUAL REPORT 2018 GOVERNANCE к содержанию

GOVERNANCE

022 — 023 ANNUAL REPORT 2018 GOVERNANCE к содержанию

KMZ PJSC COMPLETED THE COMPACTION PROCESS FOR GAS CENTRIFUGES PRODUCTION TVEL Fuel Company implements a large project on concentration of all mechanical production facilities CORPORATE GOVERNANCE in Vladimir region at KMZ PJSC with the transition of the corresponding facilities and personnel from Tochmash VPA JSC (Vladimir). Tochmash VPA JSC, in its turn, plans the development of non-nuclear production and PRACTICE attraction of external resident investors to its production site. By optimizing production space and reducing energy consumption, the fixed costs of the two companies are planned to be almost halved by 2019. TVEL Fuel Company builds a corporate governance system Thus, the final stage of the investment project ”New facility for gas centrifuges production” was completed in 2018. in full concordance with the standards and requirements The project implementation included a set of measures, such as concentrating the production of gas centrifuges of Russian laws, taking into account international standards in one building, purchasing modern high-performance equipment, launching mass production of gas centrifuges and in reliance on Rosatom practice which ensures of new generations, increasing the level of automation and the quality of output products. the unity of nuclear industry enterprises management It resulted in achievement of a key indicator — reducing the cost of production by reducing the work in progress and the lead time of production processes due to the concentration of production in one building (before its start, the production of gas centrifuges was located in four buildings). Moreover, the company managed to reduce its production space more than twice — from 151.1 thousand sq. m to 71.6 thousand sq. m. The reduction of production costs was also due to the R&D results obtained by TVEL Fuel Company in the field of gas centrifuges of new generations. PRODUCTION SUPPORT OFFICE FUNCTIONS

The Company’s enterprises continued to improvethe BUSINESS PROCESS DIGITIZATION In October 2018, the Company approved the strategy efficiency of production support office functions. of information technologies development subject suggestions With the view to increase the efficiency and optimize to products areas. The implementation of this One of the key projects 2018 “Production planning 107, 138 for improvement (SFI) business processes, TVEL Fuel Company uses up-to- strategy will allow to commercialize the Company’s with the supply chain” had the following results: were presented in 2018 in TVEL Fuel Company enterprises, date information technologies (IT) and solutions. developments in the field of information technologies out of which were accepted for implementation, 96.6% and create an additional synergistic effect with 93.6% — implemented. -- reduced planning process lead time from In July 2018, TVEL Fuel Company approved the internal digitalization strategy of TVEL Fuel an application to the formation TVEL Fuel Company has a system of material incentives the IT strategy for 2018–2023 in terms of Company. The following is offered to foreign markets: of production sites plans by 25.3%; for personnel involvement in SFI: in 2018 process digitization. The strategy provides for the total premium amounted to the implementation of 135 information technology -- simulation modelling services and BIM design -- “right on time production according to volumes projects in 8 areas of development. Deadlines, of industrial facilities; and nomenclature” indicator was recorded more than RUB mln budget and internal business customers at 82.7% in MSZ PJSC, NCCP PJSC, 40 are determined for each project. -- predictive analytics solutions for big data processing; Centrotech SPA LLC, ChMP JSC. -- solutions for robotization and intelligent data The expected effect processing; from the implementation CONCENTRATION OF PRODUCTION of the IT strategy by 2030 amounts to RUB bln production of network equipment. AND VACANT FACILITIES MANAGEMENT 5.1 --

In 2018, within the framework of the industry project more than 200 thous. sq. m, while reducing the costs SCHEME 3 ”Branch Topology Concept” the Company successfully for maintenance and operation for more than implemented the program “Increasing the efficiency RUB 300 mln. The Investment Committee of TVEL JSC Key areas of projects implementation within the framework of IT strategy of areas use in TVEL Fuel Company”. In the reporting approved the implementation of the 7 “first wave“ period the Company’s enterprises developed, compaction projects. 10 compaction projects more within the framework of this program, the concepts are planned in 2019. Digital Engineering Production operational Maintenance and repair of sites development, 9 of which were approved production management management of production euipment by the Governing Board of TVEL Fuel Company. The sites development concept of TVEL Fuel Company is constantly updated and refined in terms of cost- According to the results of this program, the cutting and implementation of compaction projects. Company managed to reduce buildings area for The term of the program accomplishment is till 2022. Improvement of corporate Production Cybersecurity IT infrastructure functions efficiency safety

024 — 025 ANNUAL REPORT 2018 PERFORMANCE RESULTS к содержанию

PERFORMANCE RESULTS

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026 — 027 ANNUAL REPORT 2018 PERFORMANCE RESULTS к содержанию

FINANCIAL CAPITAL

TVEL Fuel Company maintains historically sustainable financial performance. Competent financial management combines efficient application of all financial instruments for implementation of strategic goals of the Fuel Division, and makes it possible to handle the current problems and to invest the funds providing thereby increase of other capitals used by the Company

FINANCIAL RESULTS

Changes in total revenue 2018 by 10% as compared (16.9%), and sales of other products (15.4%); to the previous reporting period are stipulated both R&D accounts for 2.6%. by one-time events, such as shipment in 2017 of initial loading fuel for new power unit of Rostov NPP, and Downward trend for net profit of the Company by changes in the orders volume under the contract (–11% as compared to 2017) is connected with conditions, and influence of prices and exchange rates. changes in total revenue and increase in revenue through exchange differences. The main part of revenue of TVEL Fuel Company comes from sales of nuclear fuel and its components (65.1%), Decrease in net profit had an impact on slight In 2018, the export products were sold to the total Following the results 2018, volume of sales from and rendering of conversions and enrichment services decline of profitability indices. amount of USD 961 mln. Sales of nuclear fuel and its general industrial activities increased by 22.8%, components amount to 93.7% — the largest share to RUB 13,494 mln. in the export revenue. DIAGRAM 2 DIAGRAM 3

Revenue (net) from sales, RUB mln Gross profit, RUB mln In 2018, share of revenue received from FA sales made 180,683 RUB 100,532 mln — 62% in total consolidated revenue. 100,000 200,000 180,087 163,173 81,281 75,020 Main consumers are Russian and European NPPs. 80,000 74,225 150,000 60,000 100,000 DIAGRAM 6 DIAGRAM 7 40,000 Distribution of revenue from nuclear fuel sales 50,000 20,000 by consumers’ geography,% 1 1 2016 2017 2018 2016 2017 2018 11 12 9 100 New energy DIAGRAM 4 DIAGRAM 5 80 41 42 Structure of revenue Metallurgy EBITDA, RUB mln 60 56 Net income, RUB mln from general 40 Chemistry 60,000 100,000 industrial activities 55,008 77,416 20 45 50 in 2017, 55,000 80,000 74,940 33 Machine building 65,259 49,204 50,000 60,000 Other products 46,212 2016 2017 2018 1 45,000 40,000 2 40,000 20,000 Asian European Russian 2016 2017 2018 2016 2017 2018 consumers consumers consumers

028 — 029 ANNUAL REPORT 2018 PERFORMANCE RESULTS к содержанию

MANUFACTURED CONVENTIONAL BUSINESSES SEPARATION-SUBLIMATION COMPLEX (SSC) COMPRISES A GROUP OF INTEGRATED PLANTS ENGAGED IN ENRICHMENT AND CONVERSION OF URANIUM. CAPITAL TVEL Fuel Company comprises three complexes for type-specific production of the front end nuclear In 2018 the plan of SSC enterprises for production of enriched uranium products and achievement TVEL Fuel Company consol idates the fuel cycle, and scientific and design assets. of the set capacity utilization factor was accomplished to the full extent. manufactured assets along the whole process chain of nuclear fuel production, and also The plans on production and sales of nuclear products 2018 MILESTONES 2019 PLANS controls strong scientific complex. Continuous and services in the reporting year have been fulfilled development and accumulated competences to the full extent, which ensures compliance with -- 5 sections of gas centrifuges -- commissioning of 5 sections of the unit No. 62 all contractual commitments of the Company of the 9th generation 9+ were at UEIP JSC; in the nuclear industry ensure both improvement to Russian and foreign customers and contributes commissioned at UEIP JSC. of fuel properties and creation of new to improvement of the Company image of the reliable commissioning of the unit No.1 and 4 sections high-technology businesses -- and responsible supplier. of the unit No.2 at PA ECP JSC.

NUCLEAR FUEL FABRICATION COMPLEX (NFFC) IS A GROUP OF SUBSIDIARY INDUSTRIAL ENTERPRISES THAT MANUFACTURE NUCLEAR FUEL FOR VARIOUS REACTORS.

In 2018, the plan of NFFC enterprises for production of nuclear fuel was implemented in full.

The planned volume of the manufactured fuel products for the year 2019 is determined in accordance with preliminary orders made by consumers based on the plans of primary charging and recharging.

P NN T PA 2018 MILESTONES 2019 PLANS TEL -- production of initial loading fuel for VVER-1200 -- production and delivery to the customer of initial P UEP reactor of the unit No.1 of Belarusian NPP loading fuel for the Unit No. 2 of Belarusian NPP; by NCCP PJSC; PA LL -- delivery of TVS-MOX for BN-800 reactor. -- production of startup zone TVS-1200 for power E unit No. 2 of Novovoronezh NPP-2 by NCCP PJSC;

PA EP -- qualification of zirconium components production by the American customer at ChMP JSC; AE NP -- production and delivery by MSZ PJSC to the Czech customer of new type fuel TVSA-T Competencies of enterprises of TVEL Fuel Company mod.2 for Temelin NPP;

Nuclear Fuel Fabrication Machine Building R&D -- delivery of 12 TVS-2M with new anti-debris filter Complex (ADF-2) for Rostov NPP;

-- completion of new site construction for uranium dioxide powder production using recovery Gas Centrifuge Complex Metallurgy Chemistry pyrohydrolysis at VPGU-600 plant at MSZ PJSC.

Separation- Sublimation New Energy Additive Technologies Complex

030 — 031 ANNUAL REPORT 2018 PERFORMANCE RESULTS к содержанию

GAS CENTRIFUGE COMPLEX (GCC) IS A GROUP OF SUBSIDIARY INDUSTRIAL ENTERPRISES SECOND CORE PRODUCING GAS CENTRIFUGES (GC) AND ACCESSORIES FOR ENTERPRISES AND NEW BUSINESSES OF THE SEPARATION-SUBLIMATION COMPLEX. Based on the competences of nuclear production Establishment of new high-technology Plans for batch production of GC-9, GC-9+ and pilot batches of new advanced GC were implemented development TVEL Fuel Company addresses businesses makes it possible to address to the full extent. Batch production of the advanced GC remains the medium-term objective. the priority task set by Rosatom State Corporation the variety of interlinked issues. to the enterprises of nuclear industry: development New technologies in nuclear production of non-nuclear businesses. 2018 MILESTONES gas centrifuge is considerably superior to its previous offer significant advantages to TVEL version, and its production cost is lower; Fuel Company in technological process, New businesses generate additional proceeds, Attainment of the required cost price contributing inparticular to increase in -- and consequently additional budget revenue of GS at KMZ PJSC; Commissioning of commercial GC9+ at UEIP JSC equipment capacity, rise of automation -- that may be allocated to address different issues (3 sections of the unit 61 and 3 sections of the unit 62). degree. This results in reduction of workforce in the regions of presence of TVEL Fuel Company. -- At KMZ PJSC — completion of works aimed requirements at nuclear production. at concentration of production of gas centrifuges Development of new non-nuclear businesses Objectives aimed at strengthening of the Company in one production building No.2; 2019 PLANS is a real opportunity to employ personnel positions on new markets require rapid growth dismissed due to optimization of main of scientific and technical potential, which in turn Commissioning of the first commercial section Preparation to production of the advanced GC; nuclear production and to ensure social -- -- implies need for improvement of R&D, projects, of the upgraded gas centrifuge of 9+ generation. stability in the regions of presence production, economy, promotions and sales In total 5 sections of GC9+ were commissioned Follow-on works on cost improvement -- management systems. Efforts are being made in 2018. Performance efficiency of the upgraded of GC production. to adapt the management systems to second business core development objects.

RESEARCH AND ENGINEERING COMPLEX REPRESENTS THE GROUP OF SUBSIDIARIES THAT INTEGRATE THE ACTIVITY IN THE FIELD OF IMPROVEMENT OF NUCLEAR PRODUCTION AND DECISIONS INTO THE SPHERES OF NON-NUCLEAR PRODUCTS.

For detailed information on TVEL Fuel Company performance in the field of research at the moment TVEL Fuel Company implements active projects for non-nuclear RUB mln and engineering works please refer to the Intellectual Capital. businesses direction, total amount of financing 34 without regard to pending themes and projects 443 in 2018 at post-investment stage RUB bln revenue from general 13.5 industrial activities SCHEME 4

Key directions of non-nuclear activity development of TVEL Fuel Company

Metallurgy Machine building Chemistry Energy storage Additive devices Technologies

- Special metallurgy - Instrument - Stable isotopes - Energy storage - 3D-printers engineering systems based Titanium metallurgy Catalysts Metal powders - - on chemical cells - - Euipment for 3D-printing - Superconductive - Fluorine compounds for NFC and oil - Electric power materials - Services and gas industry Lithium generators based - of 3D-printing - Superwire and lithium-based on fuel elements products - Materials for Li-Ion cells

032 — 033 ANNUAL REPORT 2018 PERFORMANCE RESULTS к содержанию

In 2017, the works started to bring out the most challenging and large-scale activity to integrators — RusAT LLC — branch integrator for “Additive technologies“ direction. independent legal entities. Core achievements of the main activity of the integrator: THE PURPOSE OF THE INTEGRATORS IS TO CONCENTRATE SALES AND MARKETING RESOURCES ON DEVELOPMENT OF MARKETABLE AND EFFICIENT -- development of the project of additive center formation of pre-order portfolio; for commercial production of medical KEY-ACTIVITY SPECIFIC BUSINESSES. -- -- increase of the company awareness implants NiI JSC; Currently there are two industry integrators. on the market due to competent application -- coordination of printers working out for NiI JSC, of marketing and PR-tools; UEIP JSC, RPA CNIITMASH JSC; Cathode Materials LLC — branch integrator for “Energy storage systems -- conclusion of 20 agreements on cooperation -- formation of the team of the leading developers based on chemical cells“ direction. with the market majors. of Russia for creation of modular software “Virtual 3D printer“ based on Logos software; Product strategy of the integrator was approved in 2018. Core achievements of the main activity of the integrator: PRODUCTION -- formation of the team on issues relating to commercial production of powders E-TRANSPORT INTERFACTORY TRANSPORT elaboration of design documentation for commercial -- at the enterprises of TVEL Fuel Company. -- elaboration and production of the prototype -- first commercial supplies of Li-ion energy storage 3D printer RusAT 300, completion of working out of energy storage system for passenger transport, systems. Installation of new equipment of design documentation for commercial printer tests with the customer with confirmation on the in-site e-transport of VMZ JSC; 600, production of two SKD sets “Printer-300“ HORIZONTAL INTERACTION at Centrotech SPA LLC site; of the stated specifications; -- new conclusions from Russian manufacturers -- coordination of liaison protocol of the integrator -- in 2019 — coordination of series delivery of interfactory e-transport concerning -- development of software for print file preparing with enterprises within the management system of the energy storage systems for passenger possibility of application of the manufactured which is notable for open architecture that enables of TVEL Fuel Company; e-transport. Li-ion storage systems. to set the precise characteristics of print parameters -- Coordination of cooperation chains of enterprises and to optimize the technology for certain products; within TVEL Fuel Company for development development of the project of engineering additive STATIONARY ENERGY STORAGE SYSTEMS -- of competences related to additive technologies center, FEED and purchase of equipment; inside the industry. -- start of production and delivery of energy storage systems for operating DC voltage systems, including to the out-of-the-industry customers.

New Businesses Map of TVEL Fuel Company

DIRECTIONS PRODUCTS BASIC ENTERPRISES SCOPE OF APPLICATION SUPPLIES GEOGRAPHY FACTORS FOR DEVELOPMENT IN 2018

METALLURGY Titanium metallurgy Seamless titanium tubes, ingots, ChMP JSC Different engineering industries: Russian Federation, Germany -- successful implementation of manufacturing (full range titanium forgings, rods, wire aircraft engineering, ship-building, program on production of rolled titanium production) engine-building, etc., medicine tubular products for industrial customer Afrikantov OKBM JSC for all placed orders; Special metallurgy Zirconium alloys ChMP JSC Electric Power, Machine Building, Russian Federation -- organization of production (within the framework of the Contract with Hermith Medicine, Metallurgy GmbH) of more than 40 new items of titanium Hafnium Russian Federation, Great Britain products that are in demand by foreign customers; Calcium metal Russian Federation, Estonia, -- establishment of new production site Kazakhsta, Norway, France, and organization of production of new Calcium injection wire Latvia, Belgium, Sweden. advanced products — metallurgical powder tantalum. Successful implementation of the contract for products delivery; Nickel filtering elements, powders Centrotech SPA LLC Russian Federation -- commissioning of the line for production of new products — iodide hafnium; -- increase in demand on the market of calciferous Superconductive Superconductive wires ChMP JSC Electric Power, Russian Federation injection materials for iron and steel industry; materials Medicine, Transportation, -- development and testing of the advanced items and superwire High-strength nanocomposite Research and Production Telecommunications Systems of calciferous injection materials. superwire Enterprise "Nanoelectro" LLC

034 — 035 ANNUAL REPORT 2018 PERFORMANCE RESULTS к содержанию

DIRECTIONS PRODUCTS BASIC ENTERPRISES SCOPE OF APPLICATION SUPPLIES GEOGRAPHY FACTORS FOR DEVELOPMENT IN 2018 CHEMISTRY Production of stable isotopes Production of 107 isotopes PA ECP JSC Industries, Medicine Russian Federation, -- rise in demand for isotope products of 21 chemical elements: SGChE JSC Research of new generation elementary foreign countries for international scientific projects; Ar, W, Ge, Fe, Ir, Cd, Si, Kr, particles properties, Agriculture, increase in demand for medical purposes Xe, Mo, Ni, Sn, Os, Pb, Metrology research in geology, biology, -- isotope products; Se, S, Te,C, Zn, B, Cr oceanology, etc. formation of the intergator strategy Lithium hydroxide-7, NCCP PJSC Transportation, Electric Power, Russian Federation, -- Lithium and lithium-based and establishment of organisational structures lithium metal, lithium chloride Metallurgy, Aircraft, Industries, foreign countries products for its implementation; Telecommunications Systems Materials for Li-Ion cells Lithium Ferrophosphate NCCP PJSC, Russian Federation -- highest competences in lithium Lithium cobaltate Katodnye Materialy compounds reprocessing; (Cathode Materials) LLC Electrolyte fluid -- flexible sales strategy in the unstable for lithium batteries, market conditions; lithium tetrafluoroborate -- improvement of national standards Catalysts Autocatalysts Ecoalliance LLC Industries, Transportation Russian Federation for clean exhaust of vehicle park; timely fulfilment of contract obligations. Fluorine compounds Extra pure fluorine hydrogen ECP JSC, SGChE JSC Nuclear, oil-producing -- and chemical industry MACHINE BUILDING Instrument engineering Car electrical equipment Tochmash VPA JSC Electric Power, Industries, Russian Federation -- increase in demand for home-made Transportation automotive products; Static frequency converters Centrotech SPA LLC Electric Power, Industries -- development of electric transport in the territory of the Russian Federation; Dosimeters, radiation meters -- development of ”green energy”; Controllers -- formation of the integrator strategy Printed circuit boards and establishment of organizational structures for its implementation; Connector boxes -- development of oil and gas industry Equipment for NFC Ball- and screw-type plugs Tochmash VPA JSC in the Russian Federation Upgrading of mining and processing directions. Stop valves

Units and components for gas centrifuges

Mining industry equipment Oil-fields equipment Centrotech SPA LLC Geological exploration, mining and processing of minerals ADDITIVE 3D printers Metal SLM 3D printers Centrotech SPA LLC Space industry, Machine building, Russian Federation -- elaboration of the Complex plan for development TECHNOLOGIES Medicine and introduction of additive technologies Metal powders 3D printing powders Centrotech SPA LLC, in the Russian Federation 2019–2025; under SLM, SLS ChMP JSC, VNIINM JSC -- development of the project specification and federal and EBM technologies project design passport ”Establishment of scientific centers for development of additive technologies”, expected scope of financing is RUB 4.4 bln.

ENERGY STORAGE Accumulators Lithium-ion energy Centrotech SPA LLC, Interfactory/passenger/special- Russian Federation DEVICES and generators, storage systems, Katodnye Materialy purpose transport, Electric power, -- Major cities’ initiative to use green e-transport; fuel elements electrochemical power sources (Cathode Materials) LLC Telecommunications systems -- substitution of conventional batteries (lead-acid) on solid fuel cells with new type batteries.

036 — 037 ANNUAL REPORT 2018 PERFORMANCE RESULTS к содержанию

NEW BUSINESSES DEVELOPMENT MILESTONES 2018

New products and technologies: Delivery contracts:

-- for the first time in the word PA ECP JSC has -- NCCP PJSC commissioned the facility for integrated -- ChMP JSC concluded contracts for delivery -- Centrotech SPA LLC concluded contract developed and implemented the process flow decontamination of lithium hydroxide-7 solution of large runs of calcium injection wire with with major manufacturer of electric transport of gas centrifuge nickel enrichment in radioisotope with the finished product manufacturing; the leading Russian manufacturers of steel for serial supply of the sets of energy storage 63Ni: production of the pilot batch of the products and rolled steel Severstal PJSC and MMK PJSC; system for passenger e-transport; with enrichment more than 69%. The product -- ChMP JSC successfully completed first pilot testing was shipped to the customer — FSUE MCP; of the advanced filler of injection wire for liquid -- increase in scope of delivery of titanium products -- large run of Molybdenum 100Мо isotope steel processing, new filler was elaborated for the European market within the framework was delivered for international scientific project -- PA ECP JSC produced and delivered a new as an alternative to silicocalcium; of the contract with Hermith GmbH. Commercial “AMoRE“ for research of neutrino properties. product — chrome 50Сr isotope for scientific production at ChMP JSC facilities of more In 2019 supplies of this isotope will continue. research in the field of neutrino physics; -- commencement of works on systematic introduction than 340 new listed titanium products that at the industry enterprises of new type energy are in demand by foreign consumers; Cooperation agreements: -- more than 20 thousand of disks of iridium 191Ir storage devices; isotope have been produced and delivered -- NCCP PJSC concluded contracts with new -- Agreement on scientific and technical cooperation to the Customers. It is planned to increase -- start of delivery of energy storage systems customers, that rank among the key world in the field of additive technologies was signed the scope of delivery in the following years; for interfactory transport and indoor application manufacturers of hi-tech lithium products, between RusAT LLC and German company Oerlikon to outer of Rosatom markets; for delivery of battery lithium metal to France, AM Gmbh within the forum ”ATOMEXPO 2018”; -- ChMP JSC commissioned the facility for production Korea and to the American market; of new product — iodide hafnium, mastered -- elaboration and production of the prototype -- RusAT LLC and VIAM FGUP (All-Russian Institute the industrial output of hafnium oxide of energy storage system for passenger transport, -- conclusion of three-year international contract of Aviation Materials Federal State Unitary and metallurgical powder tantalum; tests with the customer, and confirmation of the with the German company Nukem Isotopes Enterprise) signed the agreement on cooperation improved technology and produced pilot stated specifications with passenger e-transport GmbH for delivery of Germanium 72Ge isotope, in the sphere of elaboration of the Russian additive batches of high-purity hafnium tetrachloride on the intracity lines; which is used in semiconductor industry equipment to form the complete cycle of the parts for semi-conductor industry; for microcircuit production; manufacturing based on the unified principles; -- Ecoalliance LLC elaborated technology -- printing of first sample-demonstrators using and completed preproduction of automotive -- PA ECP JSC made final delivery of polycrystalline -- Within the V International Forum NDEXPO 2018 multipowder metal 3D printer of UEIP JSC that was catalysts systems intended to comply silicon 28Si under the international project RusAT LLC concluded mutual cooperation agreement created with co-funding of the Ministry of Education with Euro-6c environmental standard. ”Kilogram-3” for creation of new generation mass with 3D Systems — the company-manufacturer and Science of the Russian Federation and Rosatom Start of delivery of catalysts units for “pilot“ standard and determination of the fundamental of 3D printers and the Center of Additive State Corporation; and series assemblies of AURUS physical constant ”the Avogadro constant”; Technologies of Rostec State Corporation. motor vehicles. -- the integrator RusAT LLC developed the range of new 3D printers with plot area 300x300x300;

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100101 10010001101 1101101010111 100100010010

038 — 039 ANNUAL REPORT 2018 PERFORMANCE RESULTS к содержанию

RESULTS OF IMPLEMENTATION DIAGRAM 8 OF THE PROJECT ”MOVING TOWARDS ZERO FAILURE” IN 2018 Investments into R&D by TVEL JSC, RUB mln INTELLECTUAL -- In the reporting period, a trend toward decrease 2,000 CAPITAL in cases of FA failures is noted on NPP power 1,540 1,600 units with VVER-100. 1,500 1,195 Scientific and engineering efforts 1,154 of TVEL Fuel Company are aimed at development -- Increase in number of failed fuel assemblies on NPP of new types of nuclear fuel and structural with VVER-1000 reactor was 23.5% in 2018. 1,000 materials, and innovations development in non-nuclear sphere -- In 2018, the indicator of the parameter 500 ”Number of power units VVER-1000 without nuclear fuel failure” was 79%. 2016 2017 2018 2019 -- Manufacturing plants carried out remedial actions (план) following the results of the audit by Rosenergoatom SCHEME 5 The main goal of the scientific and engineering efforts Concern JSC, and implemented recommendations of TVEL Fuel Company is to ensure competitiveness based on the results of the partners’ experts visits. The main areas of scientific and technical of the products and safety of production and operation. Technical documentation (specification, operation activities of TVEL Fuel Company manuals, design documentation and production -- completion of the set of studies to substantiate INNOVATIVE ACTIVITIES processes) were adjusted. Fuel assemblies’ operation application of the alloys E110 and E125 based IN THE NUCLEAR INDUSTRY experience proved accuracy of technical solutions on zirconium sponge as the component material underlying the design; design criteria provide of fuel assembly for RBMK-1000. Innovative activity in the nuclear industry has crucial compliance with the requirements of the regulatory significance for long-term competitive ability documents for safe operation of fuel assemblies. With regard to development and business continuity of TVEL Fuel Company of accident-tolerant fuel: Improvement of existing structures, because the services and the products of FE NFC OPERATING RESULTS 2018 ON IMPROVEMENT creation of new types and technologies form the basis of corporate activity. OF NUCLEAR FUEL PROPERTIES -- implementation of the investment project of nuclear fuel production AND PRODUCTION TECHNOLOGIES ”Research and development of the process As regards active and newly commissioned NPP for production of new generation pressurized power units, the activity is aimed at: With regard to design and introduction fuel elements on silicon carbide”; of nuclear fuel and cores of Russian power reactor: -- increased burnup fraction -- production of two experimental fuel assemblies of unloaded nuclear fuel; -- commencement of operation of the improved under the investment project ”Development TVSA-T mod.2 on the unit No.2 of Temelin NPP of accident-tolerant fuel”. Each assembly contains -- improved operating life of FA; (Czech Republic) (improved fuel-element cladding, 24 normal fuel elements for VVER and PWR types Design and technological fuel pellets have no center opening, reinforced frame with four combinations of cladding materials development of the separation- -- improvement of nuclear fuel operation reliability; with 12 spacer grids and 3 mixing grids); and fuel composition. Fuel pellets are made both sublimation complex with conventional uranium dioxide and with -- proving FA operating efficiency under -- commencement of operation of TVS-2M uranium-molybdenum alloy with the increased the conditions of the increased capacity of power (12 pieces) with labyrinth anti-debris filter density and heat conduction. Claddings are units (for VVER-1000 to 107% from Nnom) (ADF-2) on the unit No.1 of Rostov NPP; made of zirconium alloy with chromium plate, subject to safety assurance. and of chrome-nickel alloy. Assemblies will be -- launch of production of the improved TVS-2M tested in the water loops of the research reactor MIR (with mixing grids and profiled fuel elements) in the Research Institute of Atomic Reactors SRC JSC. for operation conditions at the capacity level New markets entry strategy is ensured by activity 107% from nominal capacity; Innovative activities aimed at creation of new types of gas centrifuges, in the non-nuclear industry improvement of TVS-KVADRAT design (for PWR -- completion of operational-life and hydraulic testing reactors), new types of fuel for research reactors, of RK and FA prototypes with enhanced water- new cores for nuclear-powered icebreakers. uranium ratio (outer diameter of fuel elements — 8.9 mm) for Paks NPP and Loviisa NPP;

040 — 041 ANNUAL REPORT 2018 PERFORMANCE RESULTS к содержанию

DIAGRAM 9 “PRORYV” PROJECT With regard to capital construction in 2018: MOX-FUEL

Owing to current achievements the Russian -- completion of state expert assessment First batch of fuel assemblies Scope of non-nuclear businesses R&D financing, Federation holds all competences and displays of the adjusted design documentation with pellet MOX-fuel for BN-800 reactor RUB mln high-scale technological availability to maintain for construction of the power unit was produced and tested in 2018 innovative development of two-component nuclear with BREST-OD-300 reactor; at FSUE MCP — there were 300 270 power industry with reactors on fast and slow -- project documentation for creation of training neutrons with closed nuclear fuel cycle. “Proryv” and information center has been elaborated, project is the key component to this strategy 200 examined and approved; the centre is intended 134 implementation; its purpose is to develop the for training and maintenance of the required 103 technology and to present the possibility of nuclear high level qualification of the operating manufactured fuel assemblies 100 fuel cycle closure based on fast-neutron reactors. 8 staff of reactor and SNUP-fuel fabrication/ Closed fuel cycle will make it possible to increase refabrication module; efficiency of application of natural uranium, completion of delivery of main non-standard to solve the problem of SNF accumulation -- 2016 2017 2018 equipment for SNUP-fuel fabrication/ REMIX-FUEL and to provide the mankind with reliable refabrication module; the delivered equipment and long-term green power source. REMIX-fuel is the innovative type is unique and is unrivalled throughout the world; of fuel. In January 2018 the scientists R&D of the project stream “Proryv” in 2018: -- completion of construction works of main of the sectoral research institutes tested production building of SNUP-fuel fabrication/ the state of the fuel assemblies (standard Main R&D areas for non-nuclear businesses -- continuation of tests with innovative mixed development in 2018: nitride uranium plutonium fuel (SNUP-fuel), refabrication module. TVS-2M were loaded) with REMIX-fuel resulting in designed burn-up; in the reactor of the third unit of Balakovo NPP. The results proved operation capability -- development and creation of 3D printer; -- post-irradiation studies of the irradiated of the pilot fuel assemblies with innovative SNUP-fuel, resulting in permit for life fuel, no constraints were found for further -- development of low-power gas turbine engines; extension of ETVS-11 in BN-600; operation of assemblies. -- development of technology and creation -- development and approval of R&D program In 2019 it is planned to start adjustment of pilot-plant for lithium hydroxide production using on attainment of burn-up range up to 12% ha; of the technologies and production of fuel electrochemical conversion of lithium salts; assemblies consisting completely release of the second draft of FNP (Federal -- of REMIX-fuel. development of extraction technology Rules and Regulations) and Standards specific -- for lithium isotope separation; for the objects of new technology platform By 2025 it is planned to establish pilot of nuclear power industry; production of REMIX-fuel to provide loading -- development of new titanium alloys of Russian VVER-1000/1200 reactor, part of design codes required to justify safety and articles made therefrom; -- and to gain reference experience of BREST-OD-300 reactor were verified in production and operation of REMIX-TBS. and submitted to attestation by RTN. -- development of mass-produced GC design In case of successful results of the pilot for separation of isotopes of the 8th group operation, the fuel can be used on VVER- (iridium, nickel); 1000/1200 reactors after 2030, experimental irradiation of 62Ni for production SECOND BUSINESS CORE DEVELOPMENT and international market entry is possible. -- of 63Ni and processing of the obtained material; TVEL Fuel Company is engaged in development Scope of financing of non-nuclear businesses R&D of innovative areas of activities, such as additive in 2018 made RUB 134 mln. -- development of technology for production of high- technologies, new materials and alloys, new types of capacity condenser-type tantalum powders. isotope products, energy generators and storage units, R&D financing is associated with current objectives small-size gas turbine plants. The Company intends and plans for coming period. Changing market to increase revenue from sales of innovative products environment and need for economic risks from current level equal to RUB 800 mln to RUB 3,500 management are also taken into consideration, bln by 2020, subject to successful implementation of that is why scope of R&D financing is subject investment projects and implementation of M&A plans. to adjustment on an annual basis. R&D is being implemented with co-funding on the part Creation of new non-nuclear products is accompanied of the Ministry of Education. Amount of co-funding by scientific-research and engineering activity. in 2018 made RUB 58 mln.

042 — 043 ANNUAL REPORT 2018 PERFORMANCE RESULTS к содержанию

INTELLECTUAL PROPERTY TVEL Fuel Company INVOLVEMENT OF UNIVERSITIES SCHEME 6 is the holder of IN IMPLEMENTATION OF INVESTMENT PROJECTS As of the end of 2018 TVEL Fuel Company holds Goals of Accelerator 1,774 items of intellectual property. The objects Non-nuclear businesses are being developed protected by the law include inventions, utility in innovative areas of activities. Participation models, production secrets (know-how), software of the core universities of Rosatom State Corporation to growth for electronic computing machines, databases, makes it possible to attract the most ambitious 0 dynamics trademarks and industrial designs. 1,774 teams and scientific research results. items of intellectual property Cycle from idea In 2018 within the framework of implementation of the investment project "3D printers production MONTS to pilot sample design" R&D was completed for creation of automated TABLE 2 complexes of layer-by-layer synthesis of geometrically- of the existing technologies and technical re- complex metal parts (3D printer) with involvement Number of registered inventions, equipment of production capacities. These objectives of the leading universities of the Ministry of Education utility models, industrial designs and production can be accomplished by improvement of research of the Russian Federation (MISiS and the Institute Reduction * secrets (know-how), ea. and development efficiency, and by active of Laser and Welding Technologies of Saint-Petersburg of failure risk commercialisation of the research results. State Polytechnic Institute). Items of intellectual 2016 2017 2018 The United R&D Centre (RDC) has been established property by TVEL Fuel Company at VNIINM JSC; the high- BUSINESS-ACCELERATOR priority objective of the centre is development New competitive Russian Inventions 37 40 25 of new types of fuel. An infant business-accelerator for startups commercial products and new ideas started its activity in TVEL Fuel Company. This advanced type of search, selection and financing INTERACTION WITH THE RUSSIAN Foreign Inventions 3 1 8 of innovative projects is intended to provide rapid ACADEMY OF SCIENCES development of non-nuclear businesses; to reduce thetime of production, to promote to disclosure Staff involvement By the order of Federal State Budgetary Institution Russian Utility Models 3 5 4 of the best ideas and attraction of specialists both within and motivation of Science Joint Institute for High Temperatures and outside the Company, to pass to open innovations of the Russian Academy of Sciences (OIVI RAN) the work model. The expected result is increase in revenues was carried out on the theme "Creation of manufacturing Foreign Utility Models 0 0 0 from "the second core" of business and increase science for SNF plasma processing (stages 2017–2018): of share on new markets. development of principal process scheme, design of laser During the first cycle of business-acceleration, evaporator and system of correction of magnetic field". Russian Industrial Designs 0 0 0 Business-accelerator model of TVEL JSC supposes Purpose of the work: from September to December 2018, there partial financing of the best projects due to attraction were filed 42 applications, and 16 of them were of financial resources on the part of venture creation of the foundation for technology admitted to face-to-face review stage. Following Foreign Industrial Designs 0 0 0 -- funds and development institutions. There are of SNF plasma processing, including development the results of selection seven projects passed provided different forms of TVEL JSC participation of principal process scheme; acceleration, and three projects proceeded Production Secrets in the investment projects: from equity investment to investment stage. Among the submitted 61 62 45 (Know-How) of startup-company to employment of the project development of the design of experimental project there are: Chinese bushings and implants -- team of the authors of the idea. equipment for evaporation of separated composition of zirconium dioxide for oil industry and medicine, of substances; multipurpose plasma cutter for deep-water * Data for the years 2016–2017, published in the Annual Report preceding the reporting period, are clarified. operations, titanium powders for 3D print, This Annual Report presents updated data. -- improvement of the experimental facility electrolysis unit for production of high-purity for laboratory try-out on inactive materials hydrogen, drilling mud cleaning system, of plasma separation. and FDM technology for 3D printing CORPORATE SCIENCE Main objectives set to the scientific organizations of The obtained results can be applied to solve ROSATOM are connected with promotion of nuclear the problems of closed fuel cycle and to improve industry innovative development, growth of safety of nuclear industry. competitive ability of Russian products and services on the nuclear power market and on the market of radiation technologies due to improvement

044 — 045 ANNUAL REPORT 2018 PERFORMANCE RESULTS к содержанию

Principles of HR management ensuring the achievement years HUMAN CAPITAL staff density average age of employees of strategic goals 91% 45 Business development is entirely dependent young on professionalism, high responsibility and conscientious unwanted specialists Caring for people behavior of employees, therefore human capital if the key 2.4% staff turnover 20.8% under 35 years factor in the success of TVEL Fuel Company operation. The company is focused on continuous improvement DIAGRAM 11 of labor relations, creating conditions for efficient and safe Partnership work, ensuring career growth, a decent living standard Jobs creation in TVEL Fuel Company* and social well-being of employees in all enterprises included into the company management system 700 Security 609 600 522 500 404 HR POLICY Midterm HR Policy Development Plans: 400 373 development and further improvement 281 290 HR Policy of the Company is intended to ensure -- 300 of safety culture; 176 steady growth of labor efficiency, the balance 200 between the interests of its employees provision of incentive tools efficiency; -- 100 and the employer, rational use of professional -- development of professional qualifications system; and management capabilities in accordance with 2016 2017 2018 2018 2019 2020 2021 the long-term development strategy of the Company. -- development of the corporate culture; (plan) (actual) (plan) (plan) (plan) -- promotion of the employer brand. * Creation of new staffing positions at Fuel Company enterprises of the ongoing and new projects is indicated. STAFF COMPOSITION

The target staff figures are growing, which is due In 2018, 2,779 workers were employed by TVEL to the rapid development of general industrial activities. Fuel Company: 1,672 of hired employees are men, STAFF INVOLVEMENT The production and provision of non-nuclear services 564 — persons under 30 years old. The largest share entail not only the development of new markets outside of the hired employees is in Vladimir region (1,194), Much attention is given to personnel engagement Based on the survey results, the management NFC, but also the need to create substitute high-tech the smallest share — in Irkutsk region (34). in the industry. Personnel engagement, employees of each enterprise develops action plans aimed industries for the released qualified staff. involvement in business and success of the Company at increasing and maintaining the level of personnel have direct effect on business performance and engagement. Thanks to the work done, the Fuel efficiency. Engagement study is conducted annually Company takes top positions in personnel engagement at enterprises of the division and the industry under among the industry divisions year on year, the unified industrial slogan: "ROSATOM Cares About being among the "Best Employers of Russia". DIAGRAM 10 Your Opinion". In general, annual surveys allow to estimate staff sentiments at the enterprise, to assess Average Headcount of TVEL Fuel Company, pers. satisfaction with work conditions by 19 factors, and to determine the share of involved employees, who: 22,645 23,744 25,000 22,257 22,127 27,793 22,451 22,814 23,246 TABLE 3 20,000 -- recommend their company as a good employer to their relatives and friends; Personnel Engagement, % 15,000

10,000 -- strive to do the best job they can, improve production processes and come up 2016 2017 2018 5,000 with improving proposals; On average 82 83 82 2015 2016 2017 2018 2018 2019 2020 2021 -- intend to keep being employed for considered enterprises (plan) (actual) (plan) (plan) (plan) by the Company in future.

046 — 047 ANNUAL REPORT 2018 PERFORMANCE RESULTS к содержанию

MOTIVATION AND REWARD SYSTEM DIAGRAM 13

Incentive and reward policy in TVEL Fuel Company The average salary level in TVEL Fuel Company Average training hours per employee CRITICAL KNOWLEDGE (CK) is aimed at maintenance of salary competitiveness. (TVEL JSC included) made RUB 82,234, is the knowledge accumulated by organization The salary increase and indexation amounted which is 6% higher than in the previous year. in specific subject areas, as well as personal RUB 220 mln in the reporting period. 40.0 32.8 knowledge and experience of employees, 29.7 obtaining priority depending on the specifics 30.0 of the organization's activities in a resource- DIAGRAM 12 21.3 constrained environment.

20.0 The Fuel Division has implemented Average salary in TVEL FC (TVEL JSC included), RUB a systematic approach to preservation 90,000 of critical knowledge based on existing IAEA 10.0 knowledge management concepts. Within 85,370.8 the said approach, knowledge mapping has 85,000 82,887.0 82,243.0 been carried out with the subsequent formation 2016 2017 2018 of a knowledge map. Mapping the knowledge 77,561.0 80,000 of workers and organizations in general allows 74,648.2 to combine individual fragments of knowledge 75,000 kept in different places and get a general idea PARTNERSHIP WITH EDUCATIONAL of knowledge pattern of the organization and 70,000 INSTITUTIONS employees possessing certain knowledge. The final product of CK is the detailed Recruitment of promising young people is one 2016 2017 2018 2018 2019 program for the conservation of CK developed (plan) (actual) (plan) of the top priorities in HR policy of TVEL Fuel Company. for organization, including both methods for By hiring young specialists, the Company intends preserving critical knowledge and skills, as well to preserve and strengthen its position in the sphere as measures required to reduce the negative NON-MATERIAL BENEFITS FOR EMPLOYEES DEVELOPMENT OF STAFF CAPACITIES of science and advanced technologies impact from their loss. in the years ahead. System of non-material benefits for the employees People are an important asset of the Fuel Company, In addition, a mentorship program has been of TVEL Fuel Company is aimed to encourage which provides internal stability and business Cooperation with educational institutions is carried implemented in the industry aimed at the transfer professional growth, increase in efficiency and modernization. Traditionally, HR development out on the basis of the communication plan on work of key knowledge and skills, having following performance, attainment of the goals and the best final and training is one of the top priorities of HR policy with universities and graduates; the plan that is being objectives: results of activities, enhancement of the work quality of TVEL Fuel Company. continuously updated on an annual basis. and arrangement of conditions for creative activity. - ensuring continuity of generations In 2018, the enterprises of the Company offered in key technical positions; During the year 2018 in celebration of commemorative PERSONNEL TRAINING practical training to 600 students of higher educational - preservation and transfer of key days and anniversaries, about 3 thous. workers institutions and vocational secondary schools, knowledge and skills; and veterans of TVEL Fuel Company received rewards Within HR Development and Training Provisions, 38 of them were employed by TVEL Fuel Company. and bonuses for best performance, contribution the Company's enterprises regularly provide training In 2019, the Company expects 500 students to take - raising the professional level of employees; to development of enterprises of the Fuel Company to enhance competencies of their workers. Amount their practical training. increasing the level of motivation for young and nuclear industry, in particular: of investment training in 2018 made RUB 118.4 mln. - In the reporting year 13,123 employees of the Fuel workers' professional development. -- national awards — 5 employees; Company trained in least one program. -- awards of ROSATOM State Corporation — more TVEL Fuel Company enterprises regularly implement than 1,000 persons, including merit badges — sectoral and divisional training programs to enhance 174 workers and veterans, labor merit badges competencies of enterprises management "Veteran of Nuclear Power and Industry" — and employees. 161 persons;

-- awards of TVEL JSC — more than 1,000 persons.

048 — 049 ANNUAL REPORT 2018 PERFORMANCE RESULTS к содержанию

In 2018, the Change support team (CST) -- sanitary and resort treatment and recreation OCCUPATIONAL HEALTH & SAFETY in the nuclear industry was launched, within which of employees and their children; TOCHMASH VPA JSC the CST on volunteer movement was organized. The Company spent grand total** of RUB 2.08 bln AND KMZ PJSC SIGNED A STRATEGIC -- catering; or RUB 77.36 thous. per each employee on labor PARTNERSHIP AGREEMENT TVEL Fuel Company actively joined it and took part protection arrangements in 2018. WITH TOP UNIVERSITIES in the first environmental retreat of Rosatom State -- assistance to non-working pensioners; OF THE VLADIMIR REGION Corporation in Obninsk. Together with the city veterans, Accident frequency rate (determines the number In August 2018, a round table was representatives of the authorities and students of MEPI, -- sports and cultural events; of casualties per 1,000 of workers) FR in 2018 held at the site of Tochmash VPA JSC they planted trees as required by the city. was 0.19, injuries were recorded only at four on the prospects of manpower training -- benefits to employees in certain circumstances. enterprises. There were no fatal accidents for industrial enterprises of TVEL Fuel Another initiative was implemented at the end of 2018, at TVEL Fuel Company. One accident occurred Company located in the Vladimir region. "Santa Claus-in-charge". Essentially, employees of TVEL TVEL Fuel Company's social programs represent in the contracting organizations: the fatal case The meeting resulted in the signing JSC and VNIINM JSC voluntarily initiated and carried out a strong motivating factor. Total amount spent occurred in the contracting organization TuKor of two strategic partnership agreements a charity event to support children with disabilities from by the Company on its social programs LLC at the premises of UEIP JSC (the sufferer between KMZ PJSC and Tochmash VPA a boarding school in the town of Vyazniki, the Vladimir in 2018 made RUB 1,237 mln, was a man), the cause of injury was works JSC, on the one hand, and FSBEI HE region. Caring people of TVEL JSC and VNIINM or RUB 57.2 thous. per worker. organization deficiency. JSC together with Rusatom Overseas JSC collected Vladimir State University, as well as V.A. ** Including CFR 3 and CFR 4. more than 200 gifts from a wish-list and sent them Degtyarev KSTA, on the other hand. to children for a New Year's Day. Under the agreement, the parties agreed on mutually beneficial cooperation aimed The close work with Rosatom State Corporation at the development of economic relations, allowed TVEL Fuel Company to outline the principles LTIFR ratio of TVEL Fuel Company TVEL Fuel Company won the All-Russian educational, research and innovation of volunteering, understand the importance in 2018 was 0,13*, with Rosatom State Contest "Russian Business Leaders": and research activities, on training young of such activities and define the directions and Corporation's planned ratio no more than 0.3 Dynamics and Responsibility — 2018" specialists in the following areas: Instrument the scope of the movement development in 2019. held by the Russian Union of Industrialists Engineering and Information Measuring The very first steps proved that actions of the CST and Entrepreneurs in nomination Technologies, Quality Management, KPI of the volunteering movement cover more * This value is calculated taking into account the accident "For achievements in the field of occupational comprehensive subjects. In this regard, it was decided that occurred in December 2018 and the investigation Radio Engineering, Software Engineering, of which was completed in 2019. safety and health of workers". Design and Technology of Machine-Building to expand the geography of sustainable development Production, Technological Machines activities, which was approved and supported and Equipment, Mechatronics and Robotics by the management of Rosatom State Corporation. in the period 2019–2023. TVEL Fuel Company will continuously develop and promote initiative in this sphere at its enterprises.

VOLUNTEERING ACTIVITIES SOCIAL PROGRAMS

2018 has been declared the Year of the Volunteer. 9 Corporate Social Programs implemented Rosatom State Corporation approved an initiative by TVEL Fuel Company: for the development of volunteering in the context of a sustainable development management system -- non-state pension benefits; building. Corporate volunteering has a great social effect and, besides, it is good both for the -- voluntary health insurance; employees and for the State Corporation. Employees have the opportunity to improve their professional -- accident and sickness insurance; and interpersonal skills, develop their leadership potential. A company with a corporate volunteering -- assistance in housing programs; system demonstrates a high level of social responsibility, which contributes to its overall competitiveness, strengthens the employer's brand and helps build more effective interaction with stakeholders.

050 — 051 ANNUAL REPORT 2018 PERFORMANCE RESULTS к содержанию

SOCIAL PARTNERSHIP TASED CREATION IN THE TERRITORIES OF PRESENCE TASED (territory of the advanced social Creation of territories of advanced development and economic development) — is the part SOCIAL As a reliable supplier of nuclear fuel and uranium is one of the cities development directions. of a territorial entity of the Russian Federation enrichment services, TVEL Fuel Company strives AND REPUTATIONAL to maintain its status and improve its business Establishment of TASED in CATU is aimed at creation with the special legal regime for entrepreneurial CAPITAL reputation to foreign customers. Achievement of new jobs, increase of investment attractiveness and other activities of strategic objectives by the Company directly of CATU and level of development as compared TVEL Fuel Company seeks to organize depends on social and environmental acceptance to the average level of social and economic constructive interaction with stakeholders, in the regions and the territories of presence. development of the entities of the Russian Federation. ensure social and economic development The Company developed strategic initiatives and In 2018, draft resolutions of the Government of the territories of presence and consequently, target projects on social and economic development of the Russian Federation on the establishment In February 2019, Seversk, Novouralsk and Glazov formation of public acceptance of nuclear of the regions / territories of presence and ensuring of the TASED in CATU Novouralsk, Seversk and Glazov got the TASED status. About 3 thous. jobs industry in general their social stability. The "TVEL JSC Program for Regional were approved by federal authorities and sent for will be created there in the nearest three years Work and Social Projects" is being implemented, signing by the Government of the Russian Federation. systematizing the experience in this area. Application for establishment of TASED in CATU Zelenogorsk was approved by the government of the Krasnoyarsk Territory, ROSATOM State PRELIMINARY RESULTS Corporation, the Governor of the Krasnoyarsk Territory OF ROADMAPS IMPLEMENTATION and sent to the Ministry of economic development AGREEMENTS ON COOPERATION of the Russian Federation. RUB mln WITH THE REGIONS OF PRESENCE were900 directed to the budgets of the cities of presence In the furtherance of strategic goal on non-nuclear 215 assignments in 7roadmaps of TVEL Fuel Company enterprises in the framework TVEL Fuel Company applies cooperation agreements businesses development, the work started in 2018 of Cooperation Agreements implementation with the regions of its presence as the main mechanism on the selection of technological, commercial, for supporting cities of presence. scientific, educational and other partners outside 77 partners in regions TVEL JSC in the regions of the Company presence. DIAGRAM 14 Presently there are agreements between Rosatom State Corporation and Sverdlovsk region, Irkutsk region, This activity has become a new direction for TVEL Gross tax liabilities potential residents of TASED Tomsk region, Krasnoyarsk territory and the Udmurt JSC. Interaction with regional authorities, business 6 of TVEL Fuel Company, RUB bln Republic. Annually local government bodies, and scientific communities was carried out prospective projects (additive technologies, regional government agencies and TVEL JSC develop aimed at identification and development of joint energy storage units, oil and gas service, 16.0 15.1 14.6 and implement joint program of social and economic business projects of the second core, establishment metallurgical industry, chemistry 15.0 14.4 14.3 26 development of cities of presence of the Company's of cooperation, attraction of residents to TASED, 14.0 enterprises within the scope of signed agreements. industrial parks and clusters. Engagement of other Rosatom divisions 13.0 13.0 12.8 12.0 TVEL Fuel Company is a major taxpayer in the budgets 11.0 of various regions of the Russian Federation. Gross tax liabilities (actually paid) made RUB 15.1 bln roadmaps of cooperation with the regions of presence have been signed, in 2018 (RUB 14.6 bln in 2017).* 2016 2017 2018 2 roadmaps are ready for signature

Accrued Actually paid (excl. VAT) (excl. VAT) business missions strategic sessions have on regional enterprises Regional been organized, including 11 Work * The following taxes and contributions are accepted for calculation by organizations included in the Report outline: have been held those involving other divisions

• tax on profits paid by both organizations affiliated to the tax consolidated group and organizations that are not included in the tax consolidated group; • insurance contributions to extrabudgetary funds; • other taxes, fees and charges included in the expenses or the cost of non-current assets More meetings with Participation in regional (corporate property tax, land tax, state fees, etc.). than 0 regional management forums have been held The amount of VAT payable in 2016 amounted to RUB 6.1 bln, in 2017 — RUB 5.9 bln, in 2018 — RUB 7.2 bln. Total tax payments paid (including VAT payable to the budget) in 2016 amounted to RUB 19.0 bln, in 2017 — RUB 20.5 bln, in 2018 — RUB 22.3 bln. 052 — 053 ANNUAL REPORT 2018 PERFORMANCE RESULTS к содержанию

and competitive. In 2018, the Company spent School Technoparks RUB 75 mln on scheduled initiatives, RUB 95.8 mln students of school #ROSATOMVMESTE on unscheduled initiatives, and RUB 14.6 mln School Technopark network project is one the most technoparks (#ROSATOMTOGETHER) important ones among educational projects. 1,628 on competitive ones. The total amount of expenses took part in scientific for the provision of gratuitous assistance amounted It is an educational environment that allows to integrate and technical competitions #ROSATOMVMESTE contest was held to 184.6 million rubles. education, science and production resources to create in 2018 in 20 "atomic" cities as a sectoral conditions for innovative educational activities and framework for ongoing social projects. is a network of laboratories created in 2016–2017 SMALL-MIDSIZED BUSINESS SUPPORT based on 4 schools of CATU Seversk, Novouralsk of them became winners Alexey Likhachev, Director General AND DEVELOPMENT Lyceum No. 58, Glazov Physics and Mathematics and prize-winners of Rosatom State Corporation: Lyceum as well as 9 schools in CATU Zelenogorsk 521 Creation of new jobs and promotion of business supported by TVEL Fuel Company. “The production agenda of Rosatom is inextricably environment in the cities of presence are priority linked to the standard of living in our cities. In 2018, 3 new laboratories were opened: HEALTH MAINTENANCE You can not talk about production breakthroughs, directions of charitable activities for TVEL Fuel a programming laboratory at the Glazov Physics if the territory does not develop. We wish to direct Company for the last five years. and Mathematics Lyceum, a composite materials In the sphere of health, TVEL JSC assists in improving our strength and energy towards the development laboratory at the Novouralsk Lyceum No. 58 and the efficiency of medical institutions, improving living of social sphere, towards the development For example, "Businessman of the Year" contests an aerodesign and drones programming laboratory conditions of medical workers, acquisition of modern of life in the cities of the atomic industry. are held annually sponsored by TVEL Fuel Company at the Lyceum No. 174 in Zelenogorsk. equipment and support of health facilities #ROSATOMVMESTE, on the one hand, is aimed to encourage the most effectively developing small In total there are 28 laboratories. in the cities of presence. at consolidating and strengthening the already and midsized business entities. existing projects of the State Corporation, our traditional activities: working with children and In 2013, the Entrepreneurial Development Lean Polyclinic veterans, talented young people and large families. and Supporting Funds were organized in the territories On the other hand, the project acquired a new of the Company's presence in terms of co-funding Lean Polyclinic is a key healthcare project. The project quality, involving implementation of the word with local authorities and government bodies is aimed at enhancement of operating efficiency “together”: the cities could tell about themselves, of the RF constituent entities. The Funds issue loans, of medical and preventive institutions and the level their achievements and successes, learn more grants and subsidies to small and medium-sized of access to health care for the population of Glazov, about each other, make new useful contacts, business entities (SMBs) for the creation of new jobs, Zelenogorsk, Novouralsk, Seversk. exchange experience and best practices.” the development of new industries, participation in exhibitions and fairs and business missions.

TVEL Fuel Company was represented by CATU Due to funds' activities more than 1.8 thous. jobs Seversk, CATU Zelenogorsk, CATU Novouralsk, were created in 2013–2018 in Glazov, Glazov. Contest projects are aimed at promoting CATU Zelenogorsk, Novouralsk, Seversk. The children's clinics support is priority the development of health care, culture, direction 2019 education, urban environment improvement. SUPPORT OF EDUCATION AtomClasses Since 2017, TVEL JSC together with Rosatom State Corporation and the Ministry TVEL Fuel Company sponsors so called "AtomClasses", of Health of the Russian Federation has been operating in the cities of the Company's presence participating in implementation of a large- FORMATION OF SOCIAL (Angarsk, Glazov, Zelenogorsk, Kovrov, Novouralsk, scale project Lean Polyclinic. ACCORD ENVIRONMENT Seversk, Elektrostal). The AtomClasses are specialized classes in best schools of the cities with advanced The main tasks of the project are to reformat TVEL Fuel Company's contribution to social and teaching of physics and mathematics. The specific The laboratories work both during the logistics of medical facilities' processes, economic development of territories of presence feature of such classes is the profound study of nuclear the school year and during the vacation both for adults and children, to optimize implies both participation in the regional and physics and nuclear technologies. Such advanced time. For example, Seversk Physics the work at front desks and to shorten local budgets income base, and realization training will help the students to succeed at academic and Mathematics Lyceum has specialized the patient's polyclinic time of comprehensive social and charity programs. competitions, contests, school children's academic summer sessions in robotics held for 3 years achievements festivals. Further on, the AtomClasses for students of 4–6 classes Within the budget, TVEL Fuel Company implements graduates will be able to continue their education in scheduled gratuitous initiatives, unscheduled relevant technical universities.

054 — 055 ANNUAL REPORT 2018 PERFORMANCE RESULTS к содержанию

DIAGRAM 16

Total amount of energy saved by efforts to reduce energy consumption NATURAL CAPITAL and improve energy efficiency, in money terms under comparable conditions, RUB mln 500 Environmental acceptability remains the strategic priority 441.3 of TVEL Fuel Company. With knowledge that production 400 367.5 378.3 372.7 316.8 activities have an impact on the environment, the Company, 292.4 306.8 300 257.6 270.2 due to its industry specificity, implements a set of measures 236.7 aimed at reduction of the environmental impact by 200 the enterprises connected with current business tasks, and removal of the environmental "heritage" of the first 100 nuclear project

2016 2017 2018 (plan) 2018 (actual) 2019 (plan)

Electric power Thermal energy ENVIRONMENTAL IMPACT Energy Saving and Efficiency Improvement Program The facilities of enterprises of TVEL Fuel Company TABLE 4 are generally classified as the II category objects causing TVEL Fuel Company is one of the leaders in introduction moderate adverse environmental impact*. However, of automated systems for accounting of energy resources Primary energy sources consumption , mln GJ* there are four objects of the I category (metallurgical and methods to improve energy efficiency in the nuclear production) at ChMP JSC where continuous monitoring industry, including processes of energy inspections, of their environmental impact is maintained. No excess formation of long-term investment, organizational ENERGY 2016 2017 2018 2018 2019 of the specified standards was registered in 2018. and technical programs and specific activities for energy SOURCE (PLAN) (ACTUAL) (PLAN) efficiency. The Company's enterprises are involved in Energy Saving and Efficiency Improvement Program Coal 20.71 4.193 0 0 0 (further "the Program") since 2011. The Program was approved subject to the results of energy Gas 7.53 21.189 0.258 0.313 0.095 and thermovisional inspections held at the Company's organizations. DIAGRAM 15 Mineral oil 0.25 0.262 0 0 0

In 2018, the energy consumption by the subsidiaries Reduction of energy consumption at TVEL FC * Including generation of electricity and thermal energy by HPPs at TVEL Fuel Company’s subsidiaries. of TVEL Fuel Company was reduced by 5.49% enterprises in 2017 (as compared to 2015 ) In 2017, HPPs at ChMP JSC and UEIP JSC were taken over by OTEK JSC; in 2018, HPP at SGChE JSC will also be taken over. (165.99 mln kWh), heat energy — by 12.3% Starting from January 1, 2018, all HPPs of TVEL Fuel Company´s subsidiaries were excluded from the perimeter of the Company. in monetary terms, % In 2017 –2018, OTEK JSC was procuring coal for HPP at SGChE JSC. (288.04 thous. Gcal) as compared to the reference values 15 of 2015 under comparable conditions . The reduction 10.89 in energy resources consumption (as compared to 2015) 10 8.40 in monetary terms was 10.89% (RUB 1,082 mln) Use and Processing of Materials with the target indicator 6%. 5.79 6.00 5.00 In 2018, the total amount of industrial and consumer HPP at OTEK JSC began to account for the generated 5 3.00 Reduced energy consumption is not associated with waste of the Company's enterprises was decreased waste independently; the reduction in the volume of TVEL Fuel Company’s by 23.6% as compared to the level of 2017 production program, it was achieved through and made around 31.8 thous. tons. -- Implementation of the investment project the implementation of events within the framework “Concentration of Production Facilities of Tochmash 2016 2017 2018 of the Energy Saving and Energy Efficiency Reasons of waste reduction: VPA JSC and KMZ PJSC”. Plan Actual Improvement Program. -- Reorganization of waste record keeping in SGChE The bulk of waste (65.4%) is Hazard Class V JSC: during the first three quarters of 2017, (virtually hazardous) waste, mainly consisting of metal * According to the Clause 1 of the Article 4.2 of the Federal Law No. 7-FZ "On Environmental Protection" d/d January 10, 2002. SGChE JSC accounted for all wastes generated scrap and waste, which are delivered to specialized * The year 2015 was chosen as the base year due to the energy auditing of TVEL Fuel Company enterprises and the formation of the Energy in the process of production economic activity organizations for treatment and disposal. Saving and Energy Efficiency Program for the coming years. A similar survey is scheduled for 2020, which will also be considered baseline. of HPP at OTEK JSC; in the fourth quarter of 2017 Comparable conditions are understood as conditions that allow to compare indicators of the base and current periods. 056 — 057 ANNUAL REPORT 2018 PERFORMANCE RESULTS к содержанию

Water Consumption and Water Disposal In 2018, the volume of return water was 267.7 -- suspension of depleted uranium oxide concentrate EXPENSES RELATED mln m3. The share of return water of the total amount production at ChMP JSC; TO ENVIRONMENT PROTECTION In 2018, withdrawal of water by the enterprises of withdrawn water was 49%, the share of reused of the Company increased by 36% and made water in the total volume of withdrawn water was 14%. -- reconstruction of technological processes at MSZ In 2018, operating expenses of the Company 545.9 mln m3, water consumption for own PJSC, suspension and temporary closing enterprises for environment protection amounted needs decreased by 62% to 120.0 mln m3. of a number of production buildings for a year. to RUB 2,203.8 million. Thus, 257.1 mln m3 of water were disposed by the Company's enterprises (58.2% of the standard), Pollutant Emissions The largest volumes of emissions were reported The share of expenses is related to the activities which is the main share of water disposal. at ChMP JSC. This is due to technological processes for environment radiation safety assurance In 2018, total pollutant emissions into the atmosphere of chemical metallurgical production. (RUB 944 mln). Considerable expenses In 2018, the standard of water withdrawal was by the Company's enterprises decreased by 61.4% are related to collection and treatment of waste set at 669.6 mln m3, the actual volume of withdrawal and amounted to 1.5 thous. tons (48% of the set In 2018, greenhouse gas emission intensity amounted water (RUB 483 mln). was 81.5% of the set standard. standard). to RUB 5.65 tons/mln of revenue (in 2017 — RUB 5.11 tons/mln). The emissions from technological The share of environment protection expenses Reduction of pollutant emissions is explained by: processes form the bulk of greenhouse gas emissions of TVEL Fuel Company falls on SGChE JSC, UEIP JSC DIAGRAM 17 at TVEL Fuel Company. and NCCP PJSC. reorganization of emissions accounting at SGChE Emissions of ozone-depleting substances, tons -- JSC: during the first three quarters 2017, Seversk In 2018, total amount of payments for negative impact branch of OTEK JSC enjoyed the authorization on the environment increased by 2.2% as compared 259.1 for pollutants emissions obtained by SGChE JSC till to the previous year and amounted to RUB 11.01 mln. 260 265.4 the transfer of HPP property complex of SGChE JSC to OTEK JSC; 255 No emergencies and incidents 249.2 resulting in negative environmental 250 reduction in radioactive waste processing volumes -- impact occurred in 2018 at UEIP JSC in order to extract uranium from RW at the enterprises of TVEL 245 using high-temperature combustion method; Fuel Company 240 -- implementation of the investment project 2016 2017 2018 “Concentration of Production Facilities of Tochmash VPA JSC and KMZ PJSC”;

DIAGRAM 18 DIAGRAM 19

Carbon dioxide equivalent greenhouse gas emissions, thous. tons* 21 * The carbon dioxide emissions were taken into consideration 922.86 to determine greenhouse gases emissions, because carbon oxide emitted into the atmosphere from anthropogenic sources Environment radiation is oxidized to carbon dioxide. The indicators were determined safety assurance by computational method and recalculated in accordance with the Methodological Guidelines used to Quantify the Greenhouse Collection and treatment Gas Emissions by Organizations that Carry out Economic 922.63 of waste water and Other Activities in the Russian Federation, approved Environment by the Order No. 300 of the Ministry of Natural Resources Atmosphere air protection d/d June 30, 2015, namely: protection costs and prevention of climate change 922.48 1. Formula No. 2 of the Methodological guidelines 2 outlay of TVEL FC was used in computation. Waste treatment 2. The amount of CO2 emissions was calculated in 2018, by conversion from CO (multiplied by factor1.57). Protection and rehabilitation 3. Emissions of CH4 (methane) of UEIP JSC and emissions of lands, surface and ground water of perfluoromethane (freon 14) of ChMP JSC, subject to GWP specified in the Appendix No. 3 of the Methodological 8 Other activities in the sphere Guidelines, were also taken into account in calculating of environment protection the total amount of greenhouse gas emissions 2016 2017 2018 at TVEL Fuel Company. 22

058 — 059 ANNUAL REPORT 2018 PERFORMANCE RESULTS к содержанию

NUCLEAR AND RADIATION SAFETY FTP NRS-2 includes 17 events of TVEL Fuel Company TABLE 5 to the total amount RUB 38.0 billion, including Assurance of nuclear and radiation safety (NRS) RUB 33.8 billion out of the federal budget. Pollution of the environment with radionuclides (RN) of facilities of the Company enterprises, prevention The said arrangements will be performed at facilities and exclusion of any possibility of inadmissible of SGChE JSC, AECC JSC, UEIP JSC, NCCP PJSC, INDICATOR 2016 2017 2018 2019 exposure of the personnel, population and environment MSZ PJSC, VNIINM JSC. In this regard decommissioning (PLAN) to radiation are the key priorities of environmental of radiation sources in the laboratory of resource tests policy of TVEL Fuel Company. of OKB-Nizhny Novgorod JSC was completed ahead Emission of alpha-active RN 4.50 ⋅109 5.07 ⋅109 4.76 ⋅109 6.41 ⋅109 of schedule in 2016 instead of the planned 2018. into the atmosphere, Bq Federal Target Program "Nuclear and Radiation Safety Assurance for 2016–2020 and up to 2030" REHABILITATION Presence of areas contaminated 3.22 ⋅109 3.41 ⋅109 4.31 ⋅109 4.74 ⋅109 2 OF THE AREAS CONTAMINATED with RN, thous. m Within the strategic initiative "Environmental BY RADIONUCLIDES 9 9 9 9 Responsibility" of TVEL Fuel Company, the works Discharge of waste water 1.04 ⋅10 1.09 ⋅10 1.50 ⋅10 1.00 ⋅10 containing RN, Bq are ongoing for liquidation of "nuclear heritage", Lands contaminated with radionuclides are within including rehabilitation of contaminated areas. the area of professional responsibility of MSZ PJSC, NСCP PJSC, ChMP JSC and SGChE JSC. Since 2016 there is a new Federal Target Program "Nuclear and Radiation Safety Assurance In the reporting year, the emissions of radionuclides for 2016–2020 and up to 2030"(FTP NRS-2, into the atmosphere were within the permissible limits. http://фцп-ярб2030.рф)*. In the late 2018, the total area of territories * As amended by the Resolution of the RF Government contaminated with radionuclides subject to d/d December 22, 2014 No. 1641. rehabilitation amounted to 15,323.3 thous. m2.

The Company implements the concept of defence-in-depth based on physical barriers COMPETENCE CENTERS to ionizing radiation proliferation at all stages FOR DECOMMISSIONING of nuclear facilities life cycle.

In 2018, SGChE JSC, AECC JSC, CPTI JSC and VNIINM JSC have launched the process of forming competence centers for decommissioning nuclear and radiation hazardous facilities. The main goal of the competence centers for decommissioning of nuclear and radiation hazardous facilities is to perform works on NRHF decommissioning with their own resources both on their sites and in Russia, and abroad. No contamination of new areas occurred This area will allow the TVEL Fuel Company resulting from activities of the subsidiaries to create new jobs and receive additional revenue. of TVEL Fuel Company in the reporting Moreover, at the end of 2018 it was decided year. All identified contaminated areas are to elect TVEL JSC the responsible organization consequence of activities ofthe enterprises of the nuclear industry for the development focusing on improving the defensive of business for decommissioning of nuclear ability of the country during the period and radiation hazardous facilities. of the "nuclear shield" creation

060 — 061 ANNUAL REPORT 2018 к содержанию

CONTACT DETAILS

TVEL Joint Stock Company (TVEL JSC)

Address of location: 49 Kashirskoe Shosse, Moscow 115409, Russian Federation. Registered office: 24 Bolshaya Ordynka St, Moscow 119017, Russian Federation Tel.: +7 (495) 988-82-82 Fax: +7 (495) 988-83-83, ext. 6956 E-mail: [email protected] Official web-site:www.tvel.ru

COMMUNICATIONS DEPARTMENT: Director of Communications Department — Daria Vitalievna Ozerova E-mail: [email protected] Tel.: +7 (495) 988-82-82, ext. 7095, 6134, 8383 (fax) Department e-mail: [email protected]