Strength in Evolution
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Strength in evolution Annual Report 2018 Report Annual En+ Group About the Report is a leading In this Annual Report, the terms “En+”, The Corporate Governance section “En+ Group”, “we”, the “Company” and covers the role and activities of the Board Strength in evolution vertically the “Group” in various forms shall mean of Directors (the “Board”), committees of En+ GROUP PLC and its subsidiaries the Board, and management team in integrated whose results are included in the running the business. The detailed consolidated financial statements Financials, accompanied by a report aluminium and prepared in accordance with the from the Group’s auditors, are included in A year of evolution International Financial Reporting this Report. power producer Standards. Unless stated otherwise, financial results This is the Annual Report of EN+ GROUP included in the 2018 Annual Report are of the company PLC. The Annual Report outlines the presented and calculated based on the Company’s strategy, business model, consolidated financial statements in 2018, and and internal control and risk prepared in accordance with the management processes. During 2018, the International Financial Reporting a continuing focus Company’s business was impacted by Standards. the imposition of the OFAC Sanctions Some numbers in the tables, charts and (defined below) beginning in April of 2018 diagrams in this Report may differ from on product evolution, and lasting through to the end the year. the sums of addends due to rounding. The OFAC Sanctions were lifted from the The En+ Group Annual Report was have created a stronger Company on 27 January 2019. The approved by the Board of Directors on Company has since adopted an 26 April 2019. enhanced compliance program and En+ for 2019 and beyond mechanisms, including at the Board level, to facilitate ongoing compliance with US sanctions and requirements following the removal of sanctions from the Company and its subsidiaries. Contents At a glance Sustainable Corporate Financial 2 The Group at a Glance development governance statements 3 Our history 68 Environmental protection 97 Timeline of corporate 125 Statement of Directors’ 4 2018 Key events and 77 Corporate responsibility governance changes Responsibilities WARNING figures 80 Social responsibility 97 Board of Directors 126 Independent Auditor's 6 Post sanctions The information presented in this Annual Report only Specially Designated Nationals List (the “OFAC The companies have also agreed to unprecedented 110 Committees Report development 84 Sustainable economic reflects the Company’s position during the review Sanctions”). The designated persons/entities included transparency for Treasury into their operations by development 114 Management team 132 Consolidated Statement period from 1 January 2018 to 31 December 2018 Mr Oleg Deripaska, a non-executive director of the undertaking extensive, ongoing auditing, certification, 8 A worldwide presence 119 Information for of Profit or Loss and (the “Review Period”) pursuant to the requirements of Company and its ultimate beneficial owner at the time and reporting requirements. All sanctions on 10 Our business model the Listing Rules (the “LR”) published by the UK’s that OFAC imposed sanctions, as well as the Deripaska continue in force.” shareholders and Other Comprehensive 12 Chairman’s review Financial Conduct Authority (the “FCA”) in its capacity Company, United Company RUSAL Plc. (“RUSAL”), The Company and RUSAL are continuing their Internal control investors Income as a competent authority under the Financial Services JSC EuroSibEnergo, and two of the Company’s direct compliance with requirements pursuant to the Terms 14 Our strategy and risk 134 Consolidated Statement and Markets Act 2000 (as amended) and the FCA’s major shareholders at the time, B-Finance Ltd. of Removal, a binding agreement between OFAC, the 16 Chief Executive Officer’s of Financial Position Disclosure Guidance and Transparency Rules (the (a BVI company), and Basic Element Limited (a Jersey Company, RUSAL, and JSC EuroSibEnergo including review management 135 Consolidated Statement “DTRs”). The LR and the DTRs together are the company), each controlled by Mr Deripaska. ongoing auditing, monitoring, and reporting “Rules”, unless otherwise specified. Accordingly, all On 27 January 2019, OFAC removed the Company, requirements associated with the Terms of Removal. 89 Internal Control System of Cash Flows forward-looking statements, analyses, reviews, UC RUSAL Plc, and JSC EuroSibEnergo from the The Company is implementing enhanced compliance 90 Risk management 137 Consolidated Statement discussions, commentaries, and risks presented in this Business review OFAC Sanctions. In removing the Company from the programs and mechanisms, including at the Board 91 En+ Group’s key risks of Changes in Equity Annual Report (excluding this warning and the OFAC Sanctions, OFAC stated: level, to address ongoing compliance with US 20 Industry position Corporate Governance section, or unless otherwise 93 Code of Corporate Ethics 138 Notes to the – “Under the terms of their removal from OFAC’s List sanctions and the requirements of the Terms of 22 Operational performance specified) are based on the financial information Removal. Due to the ongoing requirements and Consolidated Financial available to the Company covering the Review Period of Specially Designated Nationals and Blocked 22 Metals Segment Persons (“SDN List”), En+, RUSAL, and ESE have continued scrutiny by the US Congress of the OFAC Statements only. The forward-looking statements in this report are reduced Oleg Deripaska’s direct and indirect Sanctions removal, there is some risk that OFAC 42 Energy segment subject to risks and uncertainties, and are not shareholding stake in these companies and decides to re-impose the Sanctions on the Company. guarantees of future performance. 50 Management Discussion severed his control. This action ensures that the If the sanctions are re-imposed, it is highly likely that and Analysis Appendices Shareholders and potential investors should be aware majority of directors on the En+ and RUSAL boards the impact may be materially adverse to the business that on 6 April 2018, the Office of Foreign Assets will be independent directors – including and prospects of the Group. 202 Glossary Control of the Department of the Treasury of the – US and European persons – who have no business, 208 Contacts United States of America (the “OFAC”) designated professional, or family ties to Deripaska or any certain persons and certain companies which are other SDN, and that independent US persons vote controlled by some of these persons added to its a significant bloc of the shares of En+. A WORLDWIDE PRESENCE AT A GLANCE BUSINESS REVIEW SUSTAINABLE DEVELOPMENT INTERNAL CONTROL AND RISK MANAGEMENT CORPORATE GOVERNANCE FINANCIAL STATEMENTS En+ Group is a leading Our history vertically integrated aluminium 2 3 EN+ GROUP and power producer 2019 EN+ GROUP OFAC announced the removal of the Company and its subsidiaries from the SDN List on January 27 ANNUAL REPORT 2018 2018 ANNUAL REPORT 2018 We are unique among global natural resources companies. On April 6, the Office of Foreign Assets Control (OFAC) of Our business advantage stems from the full integration the Department of the Treasury of the United States of 2017 America designated certain legal and natural persons to mtpa of world- class hydro power assets that reliably and 3.9 its Specially Designated Nationals List (the SDN List), The En+ Group successfully completed its initial sustainably supply the energy required for the production of total aluminium capacity including, among others, the Company and its public offering of global depository receipts on subsidiaries the London Stock Exchange and the Moscow aluminium. In turn, our substantial production capabilities Exchange on November 3. The offer price was make us the largest aluminium producer outside of China set at USD 14 per share. The proceeds from the 1 IPO amounted to USD 1,500 million, making it the 19.6 GW biggest IPO of 2017 in London. In line with pre-IPO commitments, the proceeds from the With a well-established presence across The Group has a world-class market total installed electricity primary tranche of the offering were used for five continents and a strong operational research and analytics platform which capacity deleveraging: shortly after the listing, the Group hub in Siberia, combining the assets of provides valuable input to the Group’s 2013–2017 repaid its VTB loan in full, totalling both our Metals and Energy segments, long-term operational and financial – 100% of Krasnoyarsk HPP consolidated USD 942 million the Group is able to capture planning. – 92.5% of Irkutskenergo consolidated opportunities arising from its world class At the same time, our Energy segment – Dams previously leased by Irkutskenergo assets and scale. operates the largest and the most acquired The Group’s Metals segment has a cost-efficient network of power plants in – Debt portfolio proactively managed – over well-diversified sales platform which the Siberian region, which allows it to USD 2.5 bn debt refinanced at lower rates with allows it to efficiently access and efficiently and reliably cater to its core longer tenor operate in all key aluminium markets clients in Siberia, including the largest – New long-term power supply agreements including the United States, Western smelters operated by our Metals 2010 between EuroSibEnergo, Irkutskenergo and Europe, Japan and South East