Corporate Governance

TABLE OF CONTENTS WE TRANSFORM ENERGY INTO LIFE

4 | LETTER OF THE CHAIRMAN OF THE BOARD 35 | ACTIVITIES OF SALES COMPANIES IN 2018 54 | RISK MANAGEMENT AND INTERNAL CONTROL OF DIRECTORS Customer convenience is our main priority Energy industry of Kazakhstan is attractive for investors 54 | INTERNAL CONTROL AND AUDIT 38 | PROCUREMENT AND SUPPLY 6 | LETTER OF THE GENERAL DIRECTOR The history of CAEPCO JSC started Our objective is high efficiency and transparency 54 | CORPORATE RISK MANAGEMENT SYSTEM CAEPCO upgraded its generating capacities by 64.5 % in 2008 is inextricably connected of procurement with the development of the 55 | INTERNAL CONTROL STANDARDS 8 | KEY INFORMATION 39 | FINANCIAL AND ECONOMIC INDICATORS electricity sector of Kazakhstan. Focus on efficiency 56 | ANALYSIS OF SIGNIFICANT RISKS 8 | GEOGRAPHY OF OPERATIONS Basic performance indicators of AFFECTING PERFORMANCE the Corporation, achievements and 8 | KEY EVENTS OF THE HOLDING projects implemented over the past 44 | CORPORATE GOVERNANCE FOR 2008-2018 Over 10 years, we have built an effective decade in the industrial and social corporate governance system 14 | RECOGNITION spheres are our contribution to the Employees’ awards in 2018 in honor of the energy sector and the development 44 | GENERAL MEETING OF SHAREHOLDERS 10th anniversary of CAEPCO JSC of regions. In this report, we propose 44 | RESULTS OF THE GENERAL MEETING 15 | RESULTS OF THE INVESTMENT PROGRAM you to review the main events of OF SHAREHOLDERS FOR 2008–2018 CAEPCO JSC that had an impact on activities from 2008 to 2018, as well 44 | INFORMATION ON DIVIDENDS 16 | BUSINESS MODEL as to learn about our prospects and 45 | BOARD OF DIRECTORS 17 | PERFORMANCE INDICATORS FOR 2018 plans for the future. 45 | SELECTION AND APPOINTMENT

30 | ELECTRIC POWER TRANSMISSION 82 | ABOUT THE REPORT

31 | HEAT TRANSMISSION 82 | LIST OF TOPICS AND MATERIALITY MAP

97 | CONTACTS

2 3 LETTER OF CHAIRMAN OF THE BOARD OF DIRECTORS WE TRANSFORM ENERGY INTO LIFE

ENERGY INDUSTRY In 2018, CAEPCO celebrated the 10th anniversary of its activities in the electric power market of Kazakhstan. OF KAZAKHSTAN IS Throughout these years, the Company has been demonstrating ATTRACTIVE FOR INVESTORS steady growth and holding leading positions in many respects.

ALEXANDER KLEBANOV, CHAIRMAN OF THE BOARD OF DIRECTORS OF CAEPCO JSC

— What are the factors promoting the development and subsequent operation of facilities. Over 10 of the energy industry in the country? years, we have upgraded 64.5 % of our generating capacities, which allows improving energy security in — Successful implementation of the outlined the regions of our operations. plans became possible due to the development of energy facilities, which provide a stable energy It is worth noting the results in such an important supply throughout the years of independence of area of activity as corporate social responsibility. With Kazakhstan. Nursultan Nazarbayev, the first President the support of local administration (akimats), we of Kazakhstan, defined the development of the have built infrastructure objects that are important republican energy infrastructure as one of the key for the areas of our operations - Pavlodar and North objectives while repeatedly noting the importance of Kazakhstan regions: a kindergarten, a hostel, a attracting investors into modernization of the housing student house, a tennis center and other objects. In and utilities sector. In furtherance of the instruction of 2018, through the subsidiary PAVLODARENERGO, the President, in 2009, the Government adopted a rate we took part in the implementation of the project limiting program, which significantly increased the for swimming pool construction in Usolsk district investment attractiveness of the entire electric power of Pavlodar city, and an apartment building will be industry of Kazakhstan. commissioned in Pavlodar in 2019.

— What investors could CAEPCO attract? — What events of 2018 could you mention as strategically significant for the Corporation? — The European Bank for Reconstruction and Development (EBRD) became our key partner — In December 2018, according to the long-term by acquiring a share in the capital of CAEPCO to development strategy of CAEPCO, shares of the support projects for the modernization of generating EBRD and IIF were repurchased by CAPEC, which assets. Also, during the period of its formation, currently owns 92.75 % of the company’s shares. the Corporation attracted equity from the Islamic Also, a strategic investor represented by the Infrastructure Fund and Baiterek National Managing Baiterek Holding’s funds remains a shareholder of Holding. Due to the partnership with international the Corporation. It is also important to note that institutional investors, CAEPCO has become the the EBRD will continue cooperation with CAEPCO largest vertically integrated private company in the and will remain one of the partners in projects for power sector of Kazakhstan. Over the entire period modernization of the regional heat supply system. of 10 years, we have been working with shareholders who contributed their experience and the highest The past year ends an important development cycle standards to activities of CAEPCO. and thereby opens a new stage in the life of the Corporation. We will continue our activities relying — What are the results achieved by the Corporation upon high standards of corporate governance, over 10 years after the rate limiting program was accumulated experience and professionalism of launched? our employees. The Corporation will invest funds in the modernization of production facilities and — Enterprises of the Holding have implemented a construction of social facilities, as well as the number of major investment programs for renovation, promotion of sustainable growth, which ultimately will modernization and construction of energy generating improve the quality of life of our consumers and create facilities ensuring thereby the comprehensive favorable conditions for economic growth in regions. resolution of issues of financing, technical expertise

4 5 LETTER OF GENERAL DIRECTOR WE TRANSFORM ENERGY INTO LIFE

One of the key events in the power industry of Kazakhstan over CAEPCO UPGRADED the past 10 years is the adoption of the rate limiting program, which allowed the power market participants to commence the ITS GENERATING implementation of investment projects to upgrade the fixed CAPACITIES BY 64.5 % assets of the industry.

SERGEY KAN, GENERAL DIRECTOR OF CAEPCO JSC

— In your opinion, what is an important outcome of occupational health and safety. In this direction, special the limiting rate program? attention is paid to injury prevention and improving the labour conditions for employees. — From 2009 to 2015 - the validity period of the rate limiting program - the generating facilities with a total It is important to note that CAEPCO JSC actively capacity of about 3,791 MW were modernized, restored cooperates with state authorities and Atameken National and put into operation in the republic. Over the years, Chamber of Entrepreneurs through the participation in the Corporation’s share amounted to 14.9 % of the total the discussion and implementation of important state indicator. The program implementation has allowed initiatives. One example is the implementation of projects reducing the number of emergency shutdowns of for the reconstruction of heat supply systems in Pavlodar, generating units at power plants throughout the country. Ekibastuz and Petropavlovsk within the framework of Nurly Zhol state program. — What are the results achieved after continuing the program implementation? We pay special attention to the introduction of innovative solutions and process automation. In 2015, the Holding — From 2016 to 2018, CAEPCO introduced another commissioned its own Data Processing Center (DPC), 220 MW of upgraded and new capacities. In 2009– which includes all of its key information systems. 2018, generating capacities of CAEPCO were upgraded A single perimeter of DPC communication, computing by 64.5 %, which is one of the highest indicators among and engineering systems makes it possible to maintain energy companies of the country. It is important to the operation of IT-services of the Holding on a note that Pavlodar CHP-3 is the only CHP in Kazakhstan 24/7/365 basis. In 2018, a new data storage system upgraded by 70 %, in particular, the turbine room of the was introduced to accelerate data processing, improve plant was upgraded by 91 %. Since 2009, CAEPCO has fault tolerance and expand disk space. Server capacities allocated KZT 209 bln for modernization projects, taking of ASCAE system for the retail electric power market were into account all investment programs and borrowings. transferred to the DPC platform, centralized electronic In 2018, the Corporation implemented another major document management systems and process automated project – modernization of the turbine No. 6, the most control system were put into operation. powerful unit of the CIS and Europe driven by vibration insulators. — What are the plans of CAEPCO for further investment? — What is the priority in the implementation of projects? — In 2019, we plan to complete a transaction for purchase of CAPEC Green Energy LLP - this company — Ecological parameters have always been and remain is constructing the first phase of a wind power plant in an absolute priority: ash emissions at heat power plants Akmola region with a total capacity of 100 MW. We reduced by 70 % from 50,6 thousand tons in 2008 are building a diversified electric power holding and, to 14.3 thousand tons in 2018. Achievement of such therefore, in the future we intend to develop both coal- indicators became possible due to modernization of fired power and renewable energy sectors by actively generating equipment. applying innovations and improving the environmental parameters of the plants. I would like to especially note that an important goal of the Holding’s activities is to increase the level of

6 7 KEY INFORMATION WE TRANSFORM ENERGY INTO LIFE

GEOGRAPHY OF OPERATIONS

10 YEARS OF TRANSFORMING

73,629 163,795 169,312 224,675 ENERGY INTO LIFE! NORTH-KAZAKHSTAN PAVLODAR KEY EVENTS OF THE HOLDING REGION REGION FOR 2008-2018 SEVKAZENERGO JSC PAVLODARENERGO JSC

Petropavlovsk CHP-2 Pavlodar CHP-2, CHP-3

Petropavlovsk Heat Ekibastuz CHP Networks LLP — 234 km Pavlodar Heat North-Kazakhstan Regional Networks LLP — 762 km Electric Distribution Company JSC Pavlodar Regional Electric Distribution Sevkazenergosbyt LLP Company JSC

In 2018, electricity Pavlodarenergosbyt LLP output amounted to In 2018, electricity 3,211 mln kWh output amounted to е 3,815 mln kWh

Petropavlovsk Central-Asian Electric Power TURBINE GENERATOR The investment program was NORTH-KAZAKHSTAN Corporation Joint-Stock NO. 1 WAS approved for 2010-2015. REGION Company was founded, which RECONSTRUCTED AT Pavlodar united SEVKAZENERGO JSC, EKIBASTUZ CHP PAVLODARENERGO JSC and Ekibastuz Astanaenergosbyt LLP. The The European Bank sole founder at the date of for Reconstruction and PAVLODAR registration was Central-Asian Development purchased a REGION AKMOLA power-energy company JSC. 24.99 % stake in CAEPCO JSC. REGION Nur-Sultan

122,120 267,822 288,568 AKMOLA REGION Nur-Sultan

Akmola Electric ASTANAENERGOSBYT LLP Distribution Company JSC

AEDC-Energosbyt LLP

Electricity Heat 2008 2009 2010 consumers consumers

8 9 EVENTS AND FACTS WE TRANSFORM ENERGY INTO LIFE

KEY EVENTS OF THE HOLDING FOR 2008-2018

BOILER NO. 1 WAS NEW TURBINE NEW TURBINE TURBINE GENERATOR NO. 5 WAS NEW TURBINE GENERATOR NO. 2 WAS PUT INTO RECONSTRUCTED AT GENERATOR NO. 1 WAS GENERATOR NO. 4 WAS MODERNIZED AT PAVLODAR CHP-3 OPERATION AT PAVLODAR CHP-3 PAVLODAR CHP-2 PUT INTO OPERATION AT PUT INTO OPERATION AT BOILER NO. 3 WAS MODERNIZED AT TURBINE GENERATOR NO. 4 WAS PUT INTO OPERATION PAVLODAR CHP-3 PETROPAVLOVSK CHP-2 NEW BOILER NO. 1 WAS PAVLODAR CHP-3 AT PAVLODAR CHP-3 PUT INTO OPERATION AT NEW COOLING TOWER NEW BOILER NO. 8 WAS PUT INTO BOILER NO. 2 WAS PUT INTO OPERATION PAVLODAR CHP-3 NO. 2 WAS PUT OPERATION AT PETROPAVLOVSK AT PAVLODAR CHP-3 INTO OPERATION AT CHP-2 The Islamic Infrastructure PAVLODAR CHP-2 NEW COOLING TOWER NO. 5 WAS RECONSTRUCTED NEW BOILER NO. 6 WAS PUT INTO AT PAVLODAR CHP-3 Fund (Kaz Holdings TURBINE GENERATOR NO. OPERATION AT EKIBASTUZ CHP-2 Cooperatief U.A., 6 WAS MODERNIZED AT NEW TURBINE GENERATOR NO. 1 WAS MODERNIZED Amsterdam) became a PETROPAVLOVSK CHP-2 AT PETROPAVLOVSK CHP-2 shareholder of CAEPCO. CAEPCO acquired a 48.41 % stake in BOILER NO. 6 WAS Akmola Electric Distribution Company TURBINE GENERATOR NO. 7 WAS MODERNIZED MODERNIZED AT (AEDC) and thereby consolidated AT PETROPAVLOVSK CHP-2 PETROPAVLOVSK CHP-2. 100 % of the company’s shares. Earlier, a 51.59 % stake of the company was CAEPCO ranked among 15 national champions - competitive BOILER NO. 7 WAS transferred to the authorized capital of medium business companies of Kazakhstan. MODERNIZED AT CAEPCO by its controlling shareholder - PETROPAVLOVSK CHP-2 CAEPCO started the Central-Asian power-energy company A new power system control center of Pavlodar region was put implementation of a project JSC. into operation. On November 23, CAEPCO to introduce an automatic JSC held a Strategic Session system for commercial According to the Expert-200-Kazakhstan CAEPCO data processing center was opened in Pavlodar. in Astana (Nur-Sultan), accounting of electricity rating, CAEPCO was recognized as which was attended by top (ASCAE). the largest private energy company in PROFENERGY program was launched in CAEPCO subsidiaries managers of the Group of Kazakhstan. to support young professionals and attract graduates to A risk management system companies: Corporate Center enterprises. was introduced in CAEPCO (CC), PAVLODARENERGO A representative office of CAEPCO was Group of companies. JSC, SEVKAZENERGO JSC, opened in Astana (Nur-Sultan). Subsidiary funds of Baiterek National Managing Holding Astanaenergosbyt LLP and JSC - KIF ENERGY S.a r.l., Baiterek Venture Fund JSC and CKIF The Energetik tennis AEDC JSC. CAEPCO and ALSTOM Holdings signed ENERGY S.a r.l. became shareholders of CAEPCO. center was built at the a memorandum of cooperation and expense of the shareholder understanding for the supply of power In Petropavlovsk, Alakay kindergarten was commissioned. of CAEPCO JSC – CAPEC equipment. The facility was built as part of a public-private partnership JSC with the support of between the Akimat of the North-Kazakhstan region and the PAVLODARENERGO JSC. shareholder of CAEPCO JSC – CAPEC JSC with the support of SEVKAZENERGO JSC. 2011 2012 2013 2014 2015

10 11 EVENTS AND FACTS WE TRANSFORM ENERGY INTO LIFE

KEY EVENTS OF THE HOLDING FOR 2008-2018

BOILER NO. 5 WAS RECONSTRUCTED AT TURBINE GENERATOR NO. 6 WAS MODERNIZED PAVLODAR CHP-3 A new hostel was opened for 200 energy students of Pavlodar Assembly College. AT PAVLODAR CHP-3 NEW TURBINE GENERATOR NO. 5 WAS PUT INTO OPERATION AT PETROPAVLOVSK CHP-2 Establishment of a new enterprise - Ekibastuzteploenergo LLP as part of PAVLODARENERGO JSC. BOILER NO. 12 WAS MODERNIZED AT PETROPAVLOVSK CHP-2 A new 50-meter Ertis OLYMPIC swimming pool was built and opened with the participation of CAEPCO subsidiary - PAVLODARENERGO JSC. Adoption of 2016-2020 Development Strategy of CAEPCO JSC. SEVKAZENERGO JSC became a laureate in the nomination “For Contribution to the Environment” in CAEPCO JSC and Ural Turbine Plant signed a memorandum Paryz 2018 competition for socially responsible businesses. The awarding ceremony was attended by the (the third agreement) of cooperation in the field of Chairman of the Board of Directors of SEVKAZENERGO JSC Dyusenbay Turganov. modernization of generating equipment at the Corporation’s plants. During the VIII annual competition in Kazakhstan, the annual report of CAEPCO JSC became the nominee (third place) in the category “Best Disclosure of Information on Sustainable Development”. For the third CAEPCO subsidiaries signed a trilateral agreement to consecutive year, the Company’s annual report is among the top 5 best reports in the non-financial sector implement projects for the modernization of heat supply in Kazakhstan. systems of Pavlodar, Ekibastuz and Petropavlovsk with the European Bank for Reconstruction and Development and the CAEPCO JSC and Korea Electric The European Bank for Reconstruction and Development and the Islamic Infrastructure Fund withdrew Ministry of National Economy of the Republic of Kazakhstan Power Corporation (KEPCO) signed a from shareholders of CAEPCO JSC. under Nurly Zhol state infrastructure development program. memorandum of understanding and cooperation in the field of alternative The information and computation software complex energy sources and new energy AIDA SITDIKOVA, (INFOPRO) was put into commercial operation to support the technologies development. Director of Energy Resources Department for Eurasia: industrial process control at Pavlodar CHP-3. — By purchasing a share in the capital of CAEPCO JSC in 2009 the EBRD pursued several objectives, A 90-apartment small-family hostel was opened for employees including the provision of support to a newly founded private company during its establishment. of SEVKAZENERGO JSC and citizens of Petropavlovsk. This happened against the backdrop of the need to upgrade generating facilities and network systems and to improve the quality of customer service. I would like to note that the Company has successfully completed the tasks and implemented the investment program. However, any EBRD project for purchasing a share in joint stock companies has a certain life cycle. Our withdrawal from shareholders is necessary so that we can use this capital in new projects. In this regard, I can say that our mission in CAEPCO JSC has come to an end. We are proud of our long-standing cooperation; we are satisfied with our contribution to the development of the Company and will continue providing support to JSC as one of the creditors.

2016 2017

12 13 RECOGNITION WE TRANSFORM ENERGY INTO LIFE

RESULTS OF THE INVESTMENT PROGRAM FOR 2008-2018

TRANSFORMING ENERGY PAVLODAR EKIBASTUZ CHP-3 CHP INTO LIFE turbo generator no.1 (new); turbo generator no.1 (new); turbo generator no.2 (new); boiler no. 6 (new). EMPLOYEES’ AWARDS IN 2018 IN HONOR turbo generator no.4; turbo generator no.5; OF THE 10TH ANNIVERSARY OF CAEPCO JSC turbo generator no.6; cooling tower no.5 (new); boiler no.1 (new); VETERAN OF LABOR MEDAL EMINENT ENERGY WORKER AWARD PIN boiler no. 2; boiler no. 3; Vladimir Baranov Vladimir Shevtsov boiler no. 4; boiler no. 5. Technical Advisor, Akmola EDC JSC Director CHP-2, PAVLODARENERGO JSC Viktor Barmin Director of PCHP-2, SEVKAZENERGO JSC HONORED ENERGY WORKER AWARD Inna Rizen PIN OF THE MINISTRY OF ENERGY Ex-Deputy General Director for Economy and Finance, PAVLODARENERGO JSC OF THE REPUBLIC OF KAZAKHSTAN Mikhail Druzhinin Head of Thermal Automatics and Measurement “FOR THE CONTRIBUTION TO Department at ECHP, Ekibastuzteploenergo LLP THE POWER INDUSTRY” MEDAL

Sergey Kan AWARD OF THE CIS ELECTRICAL POWER General Director, Central-Asian Electric Power Corporation JSC COUNCIL

Dyussenbay Turganov HONORED ENERGY WORKER OF CIS TITLE First Deputy General Director, Central-Asian Electric Power Corporation JSC Vitaly Fesko Oleg Perfilov Deputy General Director for Production, General Director, PAVLODARENERGO JSC North Kazakhstan EDC JSC PETROPAVLOVSK PAVLODAR Feodor Bobkov CHP-2 CHP-2 Shift Master of ECHP boiler-turbine shop, HONORED ENERGY WORKER OF Ekibastuzteploenergo LLP KEA TITLE turbo generator no.1 (new); turbo generator no. 2; boiler no. 1; turbo generator no. 4 (new); turbo generator no. 5 (new); cooling tower no. 2 (new). Bagdat Oral EMINENT ENERGY WORKER OF turbo generator no. 6; turbo generator no. 7; Deputy General Director for Energy Sales, KEA TITLE boiler no. 6; boiler no. 7; Central-Asian Electric Power Corporation JSC boiler no. 8 (new); boiler no. 12. Svetlana Fedorova Alla Yazovskaya Director, AEDC-Energosbyt LLP Deputy General Director for Economy and Finance, GROWTH DYNAMICS Central-Asian Electric Power Corporation JSC Anatoly Kazanovsky General Director, North Kazakhstan EDC JSC Alexander Zinkevich General Director, Astanaenergosbyt LLP Galina Volkova Head of Customer Affairs Department, Pavlodar Heat Nikolay Obyedkov Networks LLP Head of Service Center No. 4, Astanaenergosbyt LLP 288 MW (30 %) 210 Gcal/h (7.6 %) 1,627 mln kWh 871 thous. Gcal Oleg Grigoryev installed electricity installed heat (30.1 %) (14.5 %) Head of boiler department at CHP-3, capacity capacity electricity heat PAVLODARENERGO JSC 1,218 MW 2,981 Gcal/h generation generation

14 15 KEY INFORMATION WE TRANSFORM ENERGY INTO LIFE

BUSINESS MODEL

FINANCIAL RESULTS PERFORMANCE INDICATORS CAPITAL FOR 2018 FOR 2018

Authorized capital − CAPITA L 46,043,272 thous. FINANCIAL NDICATORS

NATURAL CORE ACTIVITIES CAPITAL MODERNIZATION 143.880 bln sales INVESTMENT ACTIVITIES COMMISSIONING of a turbine generator 6,432.9 thous. tons Modernization of power equipment; No. 6 at Pavlodar CHP-3 1.6 bln coal consumption Reconstruction of heat and net income power networks; tons bln 7,700 Process automation. IMPLEMENTATION 1.58 oil fuel consumption total income for the year of the Environmental and Social Action Plan

3 905,512.9 thous. m 29,405 bln water consumption 5,188.625 mln environmental protection expenses; EBITDA

reduction in waste generation by 3.5 thous. tons 20.44 % PRODUCTION EBITDA margin% CAPITAL Injury rate reduction by 30 %; sales 0 occupational deaths; ENERGY 4 CHPs 4 companies GENERATION SALES OF HEAT AND thous. 84 thous. consumers are equipped with ASCAE. km km ELECTRICITY 996 49.4 activities aimed to sell electricity of heat of electricity mln kWh and heat to customers. 7,026 networks networks electricity

INSTALLATION 6,874 thous. Gcal HUMAN heat CAPITAL 3,153 heat metering devices. HEAT AND ELECTRICITY TRANSMISSION AND ENERGY SUPPLIED 10,782 31.7 % DISTRIBUTION TO CONSUMERS employees employees with energy transmission from IMPLEMENTATION of the (sales) higher education generating facilities to Stakeholder Engagement Plan. customers is carried out 1,048 people talent pool 7,907 (mln kWh) through electrical grids, which electricity 15 % staff turnover include power converters, power transmission lines and thous. Gсal PROFENERGY program 12,627 switchgears. heat

INTELLECTUAL CAPITAL ASSETS

Ellipse, Mobility,ASCAE, ASCAHE THESIS process automated control system, billing, boiler and turbine 37,375 bln generator automated control current assets system, Infopro 276,715 bln SOCIAL non-current assets CAPITAL HEAT AND ELECTRICITY 21,118 bln GENERATION investments 9 stakeholder groups combined heat and electricity Social policy generation at 4 CHPs of the Holding.

16 17 WE TRANSFORM ENERGY INTO LIFE

CORPORATION BUSINESS CORPORATION STRUCTURE PROFILE Baiterek NMH JSC CAEPCO IS THE LARGEST Central-Asian power-energy KIF ENERGY Baiterek Venture CKIF ENERGY PRIVATE HOLDING company JSC S.a.r.l. Fund JSC S.a.r.l. 10,782 people headcount of the Group of Companies Central-Asian Electric Power Corporation JSC is the largest vertically integrated 6.6 % Corporation’s share in the private holding in the electricity and heat electricity generation market in 2018 generation sector of Kazakhstan. In the 92.75 % 4.35 % 1.45 % 1.45 % regions where it operates, CAEPCO JSC More than 2 mln customers Group of Companies has a monopoly (including families) on electricity and heat production and distribution. 1,218 MW installed electricity capacity 2,981 Gcal/h installed heat capacity

CORPORATION RATING (JULY 23, 2018) FITCH RATINGS INTERNATIONAL RATING AGENCY • B+ • Outlook: Stable FULL LIST OF RATING ACTIIONS

• Long-term IDR in foreign and national currency 100 % 100 % 100 % 100 % • Affirmed at “B+”; outlook “Stable” • National long-term rating affirmed at “BBB(kaz)”; outlook “Stable” • Short-term foreign currency IDR affirmed at “B” PAVLODARENERGO JSC SEVKAZENERGO JSC Akmola EDC JSC Astanaenergosbyt LLP • Senior unsecured rating in the national currency affirmed at “B”/recovery rating «RR5» • National senior unsecured rating at “BB+(kaz)”

MISSION VISION VALUES EFFECTIVENESS as a sustainable achievement of the maximum possible results in everything we do. Improving the living standards for customers Central-Asian Electric Power Corporation JSC RESPECT for employees’ personal rights and creating favorable conditions for economic is a leader among private energy companies in and interests, customer requirements and BRAVENESS to resist what is unacceptable, and growth in the regions of operations by providing Kazakhstan. The Corporation operates in the cooperation conditions set by our partners and to assume responsibility for the consequences of first-class energy supply services for households, most challenging climate conditions in the north society. decisions taken. industries and social infrastructure facilities. of the country. The Corporation successfully CARE expressed in attempts to protect people The Corporation is implementing this mission uses the advantages of the holding structure OBJECTIVENESS suggesting remuneration against any harm or threat to health and by operating in accordance with international by combining dynamism and flexibility of its depending on the results achieved and providing environment. production, environmental, health protection business units (companies within the Group) equal rights for professional growth. and social responsibility standards. with stability and reliability of centralized HONESTY in relations and providing information TRUST in employees, which allows to delegate management on the Group level. necessary for our work. authority and impose responsibility for decisions and ways to implement them. The Corporation’s performance effectiveness is Employees of the Corporation are a team of based on its employees, whose value lies in their professionals who are striving for higher goals. high professionalism and the ability to work in a The Corporation’s relations with its customers team with a focus on results. and suppliers are based on the principles of respect and mutual responsibility.

18 19 CORPORATION BUSINESS PROFILE WE TRANSFORM ENERGY INTO LIFE

SUBSIDIARIES AKMOLA ELECTRICITY DISTRIBUTION COMPANY JSC PAVLODARENERGO JSC AEDC Joint-Stock Company (Akmola EDC JSC) PAVLODARENERGO Joint-Stock Company is an electric company engaged in transmission is a vertically integrated company consisting and distribution of electricity among customers of generation, transmission and distribution in Akmola region and the city of Nur-Sultan. facilities in the city of Pavlodar and Pavlodar region. A subsidiary of AEDC JSC – AEDC-Energosbyt LLP – buys electricity to Electricity generated by supply it to customers in Akmola region. PAVLODARENERGO JSC is supplied to customers in Pavlodar, Karaganda, Akmola and East-Kazakhstan regions.

SEVKAZENERGO JSC ASTANAENERGOSBYT LLP

SEVKAZENERGO Joint-Stock Company is a The company’s main area of business is vertically integrated company consisting of supplying electricity and heat to customers in generation, transmission and distribution the city of Nur-Sultan. For the convenience of facilities in the city of Petropavlovsk and its customers, Astanaenergosbyt LLP has eight North-Kazakhstan region. payment acceptance points and a call center, which processes data from electricity and hot Electricity produced by SEVKAZENERGO JSC is water meters and provides information on supplied to customers in the northern, central, energy supply issues. eastern and southern regions of Kazakhstan.

MAIN PRODUCTION CHARACTERISTICS

Renovation of Year NUMBER OF SUBSTATIONS BY TYPE Installed electricity Installed heat capacity, CHP equipment since of capacity, MW Gcal/h 2009, % foundation Substation type Pavlodar EDC JSC North-Kazakhstan EDC JSC Akmola EDC JSC

Pavlodar CHP-3 555 1,154 91.0 1972 220 kV 4 — 2

Pavlodar CHP-2 110 332 — 1961 110 kV 74 37 50

Ekibastuz CHP 12 782 100 1956 35 kV 102 121 193

Petropavlovsk CHP-2 541 713 49.7 1961 6-10 kV 3,585 2,234 3,360

TOTAL PTL LENGTH, KM TOTAL HEAT NETWORK LENGTH, KM NUMBER OF CONSUMERS BY REGION

PTL type Pavlodar EDC JSC North-Kazakhstan EDC JSC Akmola EDC JSC City Total, km Region Electricity Heat 220 kV 14.3 84.84 — Pavlodar region 224,675 169,312 110 kV 2,798.0 1,327.14 2,505.345 Pavlodar 420

35 kV 2,395.5 2,849.43 5,176.397 North-Kazakhstan region 163,795 73,629 Ekibastuz 342 6-10 kV 5,721.3 4,489.92 7,351.216 Akmola region 122,120 —

0.4 kV 4,429.6 4,470.49 5,752.515 Petropavlovsk 234 Nur-Sultan 288,568 267,822

20 21 WE TRANSFORM ENERGY INTO LIFE

4. Introduction of best 2016-2020 DEVELOPMENT management practices through continuous employee training in the field of new efficient STRATEGY technologies in operations and enterprise management: MAIN DIRECTIONS 1. Targeted market expansion with of accident risks and elimination -- creation of customer service guaranteed sales and low risks: of downtimes; centers based on a common IT- The Strategy of the Corporation -- geographic expansion of -- minimization of per-unit platform; determines the main directions operations of the Corporation’s generation costs for heat and -- transition to a uniform billing for business growth, management enterprises; electricity; system; projects and technology. The -- reduction of transmission losses strategic goal of CAEPCO JSC is -- implementation of growth -- maintaining relevant projects to enter new markets above the normal level for heat to build a vertically integrated certification for compliance with of energy generation and and electricity; private energy company providing international environmental, transmission. -- introduction of energy- occupational health and safety customers with consistent and saving and energy-efficient standards; reliable services through the 2. Enhancement of production The investment program is technologies in energy -- taking measures to decrease synergy of energy generation, efficiency through more production and transmission; implemented in three focus distribution, transmission and technologically advanced work-related injuries; areas: increase in output; energy -- building an effective guaranteed sales of both electricity production and upgrading the -- continuous employee training to efficiency; improving environmental environmental risk management enhance professional skills. performance. CAEPCO JSC constantly and heat. main production facilities and system. infrastructure: takes a number of measures The Strategy envisages activities in 3. Introduction of promising to reduce electricity and heat -- reconstruction and PROSPECTS OF the following four strategic areas: losses during transmission and to modernization of equipment projects through well-targeted THE INVESTMENT at power generation facilities innovation development; improve the reliability of heat and through implementation of promoting the development of PROGRAM electricity supply to consumers. investment programs, reduction “green” technologies. During 2009- 2020, transmission IMPLEMENTATION losses are expected to reduce as UNTIL 2020 follows: electricity - by 3.6 % (losses above the normal level were By 2020, thanks to the investment completely eliminated in 2014); CAEPCO WILL CONTINUE program implementation, the heat - by 7.2 %. equipment depreciation rate at ITS ACTIVE OPERATIONS generating facilities will decrease from 80 % to 56 %, the share of DYUSSENBAY TURGANOV fully renovated production assets , will make up 65 %, and harmful FIRST DEPUTY GENERAL DIRECTOR OF CAEPCO JSC emissions will reduce by 31 %.

The upgrading and replacement — What are the main development trends in the power country, they are still mainly based on obsolete Soviet sector of Kazakhstan? technologies. The capacity park is becoming obsolete, of the main equipment will drive its equipment should be upgraded and replaced. growth in the following areas: — The rate limiting program implemented in 2009 - 2015 demonstrated its effectiveness and increased energy security — What are the plans of the Company for • installed electrical capacity — in Kazakhstan. Today, the power industry is on the verge the next year? 288 MW or 31.0 %; of entering the Eurasian power market. Moreover, the electrical capacity market is also actively being introduced — In 2019, CAEPCO JSC intends to allocate • installed heat capacity — in Kazakhstan. CAEPCO JSC takes an active part in all KZT 14.5 bln to continue the implementation of the 210 Gcal/h or 7.6 %; industrial development processes. upgrading program. Regional subsidiaries will continue their work to develop power plants and generating • electricity generation — — Is there a need to continue upgrading equipment units by implementing the investment program for over 2,000 mln kWh or 38.2 %; at CHPs in Kazakhstan? upgrading production facilities at enterprises to ensure uninterrupted electricity and heat supply to consumers • heat distribution — — Yes, definitely. About 39 % of power plants in in Kazakhstan. However, the programs could be over 700 thous. Gcal or 12 %. Kazakhstan were built before 1980, and in 2016, the implemented only with government support in terms planned service life of 42 % steam turbines was exceeded. of adopting a rate policy to take into account all the Without upgrading the equipment, this figure will steadily grow. costs of energy producing companies. The National Energy Report of KAZENERGY Association for 2017 noted that despite the growth of generating capacities of the

22 23 WE TRANSFORM ENERGY INTO LIFE

Production and energy completion of major investment upgraded the capacities of electricity sector dynamics, % MARKET ANALYSIS projects and the output to the generation and consumption due 8 planned capacity of petrochemical to investments previously made by GDP dynamics of certain economies in 2018, % and non-ferrous industry enterprises. market participants. The production ECONOMIC 6 using renewable energy sources also OVERVIEW The growth dynamics in the energy continued to grow. Kazakhstan 4.1 4 In 2018, the economy of sector (electricity and heat, as well China 6.6 Kazakhstan was growing against 2 as gas distribution) was caused by At the end of 2018, the regulatory the background of the favorable Uzbekistan 5.0 an overall economic output growth authority decided to adjust the economic environment. The growth Turkey 3.5 0 and high rates in the industry: electric rate policy: starting from 2019 a was positively affected by trends in power industry demonstrated a seven-year period of fixed rates will Belarus 3.4 oil prices, which increased by 31 % -2 4.1 % increase, heat power grew commence for energy-producing from USD 54 in 2017 to USD 71 USA 2.5 by 1.5 %, and the gas sector output enterprises. The market structure dollars per barrel (average spot price Russia 2.3 -4 declined by 1.3 %. In the water becomes more sophisticated: the according to US EIA data). Other Eurozone 1.6 supply and sewage sector, a slight rate mechanism with an investment positive factors included the growth 2013 2014 2015 2016 2017 2018 decline (-1 %) was noted. component is replaced by the in demand and the conclusion of an 012345678 Source: SC MNE RK capacity market. Starting from July agreement for oil production quotas 2019, the common electricity market Industry 2019 OUTLOOK by the largest oil exporters within Source: SC MNE RK, Federal State Statistics Service, World Bank will be introduced in Kazakhstan Energy sector OPEC+. The accelerated growth of In 2019, despite the steadily to expand the export potential of the Russian Federation’s economy A 26 % increase in Kazakhstan were liquidated. The takeover of growing investment, the Ministry of domestic power industry. (2.3 %), keeping high growth exports (up to USD 60 bln) Kazkommertsbank JSC by Halyk Bank National Economy of the Republic rates in China (6.6 %) and a stable caused a further improvement of Kazakhstan JSC was completed, Dynamics of retail trade and real of Kazakhstan expects economic PRODUCTION AND moderate growth in the euro zone household income, % in the trade balance and a which resulted in appearance of a slowdown from 4.1 to 3.8 %. (1.6 %), which are the key foreign CONSUMPTION reduction in the current account market player concentrating more 15 International financial institutions trade partners of the Republic of deficit from - 5.1 bln US dollars than a third of all bank assets. and rating agencies forecast a In 2018, the energy sector of Kazakhstan - promoted an increase to -52 mln US dollars. Instability growth in the range of 3.0-3.5 %. Kazakhstan continued to grow: in Kazakhstan’s exports in terms of 10 value and volume. in emerging markets, declining According to the Ministry of Energy according to the national power confidence in currencies of Base NB RK rate and business of the Republic of Kazakhstan, oil system operator KEGOC JSC, loan rates in RK, % developing countries and sanctions production in 2019 will decrease electricity production at all 138 GDP dynamics in Kazakshatn, % 5 against the Russian Federation were 18 from 90 mln tons to 89 mln tons with power plants of Kazakhstan among negative macroeconomic reducing oil prices. The World Bank increased by 4.3 % and reached the 6 6.0 factors. Despite the favorable 0 expects oil prices to fall by an average level of 106.8 bln kWh. external economic conditions, the of 3 % while the International Energy 14 exchange rate of tenge raised from Agency does not exclude that prices The generation structure by 4.1 4.2 4.1 an average of 326 KZT/USD in -5 could fall by 14 %. The rate of fixed sources practically did not change: 4 2017 to 345 KZT/USD in 2018. capital expenditures may decline approximately 8 out of 10 kilowatts 2013 2014 2015 2016 2017 2018 10 compared to the 2018 level. High of energy are produced at coal-fired MONETARY POLICY Source: SC MNE RK rates in the economy will restrict power plants while the share of 2 private sector investment in the SME renewable energy sources (RES) is Retail trade In 2018, the monetary policy of segment. The consumer sector will growing but still insignificant in the Real household income the National Bank of the Republic 6 be negatively affected by the external energy balance.

1.1 of Kazakhstan (NB RK) remained inflation background. 1.2 0

within the boundaries of the inflation 01.01.17 01.07.17 01.01.18 01.07.18 01.01.19 targeting regime. The NB RK reached Inflation in RK, %

2013 2014 2015 2016 2017 2018 Source: NB RK ENERGY SECTOR the inflation target for 2018, which 15 Base rate Source: SC MNE RK was within the range of 5-7 %, OVERVIEW and three times reduced the base Rate on tenge-denominated corporate loans up to 1 year These factors contributed to 4.1 % rate - from 10.25 % to 9.00 %. In 2018, the electric power sector Rate on tenge-denominated GDP growth in Kazakhstan in 2018. However, in the face of the growing corporate loans from 1 to 5 years 10 of Kazakhstan kept growing having The growth was evenly distributed instability in foreign markets, in across all key economic sectors. The October 2018 the rate was increased growth was driven by the 4.1 % to 9.25 %. During the year, interest INDUSTRY Electricity production by source, mln kWh industry growth. The agricultural rates on short-term corporate loans 5 output increased by 3.4 %, decreased by about 3 percentage The accelerated industry growth was 2017 2018 Change, % 2018 ratio, % construction volumes also showed points (p.p.) from 15 % to 12 %, for affected by three factors. A 4.8 % TPP 82,420 86,795 5 % 81.3 % an increase by 4.1 %. The service long-term loans - by 5 p.p. from 17 growth in oil production (increase 0 sectors grew by 4.0 %. The growth to 12 %. in oil production at Kashagan field GTPP 7,410 9,119 23 % 8.5 % dynamics of fixed capital expenditures from 8.4 to 13.2 mln tons) caused 2013 2014 2015 2016 2017 2018 HEPP 11,610 10,343 -11 % 9.7 % reached the peak value over the past Two trends remained unchanged in a general growth acceleration in five years - 17 % after 5.5 % in 2017. the banking sector - reorganization the mining complex up to 4.6 % Source: SC MNE RK RES 428 540 26 % 0.5 % At the same time, the annual inflation and concentration: pursuant to the per year. The manufacturing sector Inflation Sources: KEGOC, KOREM rate decreased from 7.1 % to 5.3 %. decision of the NB RK, three banks grew by 4.0 % per year due to the Dynamics in prices for housing services

24 25 MARKET ANALYSIS WE TRANSFORM ENERGY INTO LIFE

Over 96 % of all electricity (21 % and 13 % of consumption, to 30 % of total electricity generated will depend on the quality, reliability Growth dynamics of retail electricity Limiting electricity rates for individual and heat rates in Kazakhstan, % energy-producing enterprises, produced is consumed domestically. respectively) zones experience in Kazakhstan. ERG-owned plants and efficiency indicators set by the KZT/kWh Kazakhstan is a net exporter: shortage of electricity and receive the control at least 16%, CAEPCO JSC - monopolist. in 2018, the negative balance missing volumes through trunk PTLs almost 7 %, and Kazakhstan 15 12 flow (net exports) to the Russian (North - South, North - East - South, Utility Systems - 4 %. INDUSTRY INVESTMENT Federation amounted to 3.6 bln kWh North - West), or from neighboring 10 (-21 % against the level of 2017), countries: Russia (West) and As for individual power plants, In 2018, the fixed capital 10 8 to the Central Asian countries - Uzbekistan (Central Asia). two largest enterprises increased expenditures in the energy sector

2.8 mln kWh (in 2017, imports generation during the year: Ekibastuz decreased by 13 %. The completion 6 exceeded export by 1.2 mln kWh). In 2018, the consumption grew by GRES-1 by 30 %, EEC - by 3 %. High of major investment programs, 5.3 % (up to 103.0 bln kWh) in all growth rates of Ekibastuz GRES-1 keeping a surplus of generating 5 4 three zones. Consumption in the capacities, a disincentive effect of Electricity production in RK and net were achieved due to the fact that power flow to UES of Kazakhstan, North zone increased by 4.6 % due the plant met the growing demand the reduction or freezing of rates - all 2 bn kWh to the growth in demand among in Pavlodar region and exported these factors caused a decrease in 0 0 120 1 major consumers: Aksu Ferroalloy electricity to the Russian Federation, overall capital expenditures. Foreign Plant, Kazakhstan Electrolysis Plant, but also sold electricity to the south investment in the sector sharply 2024 2025 2019 2020 2021 2022 2023 100 0 SSGPO JSC, Ust-Kamenogorsk regions of the country - Almaty increased (more than 8 times to 2013 2014 2015 2016 2017 2018 Source: Ministry of Energy of RK Titanium-Magnesium Plant and and Zhambyl regions, where the 2017). Source: SC MNE RK 80 -1 Kazzinc enterprises. In the South total consumption increased by Astana Energy Uralsk GTPP Heat Electricity zone, consumption grew by 6.2 % 1.5 bln kWh. The increase in the industry GRES-2 EEC GRES-1 60 -2 due to demand from Kazphosphate. investment was affected by several Bukhtarminsk WPP Sevkazenergo Karaganda-Energy Center The increase in output of Aktobe PRICING POLICY factors: launch of the capacity market Dynamics of fixed capital 40 -3 Pavlodarenergo Ferroalloy Plant, Atyrau Refinery and and enhancement of the operational expenditures in RK, % other large enterprises promoted a lowest values in the entire history efficiency at existing facilities. Gross FDI inflow in energy sector of 20 -4 30 7.6 % consumption growth in the of independent Kazakhstan. This Kazakhstan

0 -5 West zone. became possible due to measures MARKET OUTLOOK 400 1.60 % taken by the government of the 20

2013 2014 2015 2016 2017 2018 As of January 1, 2019, the total Republic of Kazakhstan in the The forecast balance until 2025 installed capacity of power plants end of 2018. According to the implies a 40 % growth in electricity 10 300 1.20 % Source: KEGOC in Kazakhstan amounted to comprehensive analysis results, output in the seven-year term Production 21,902 MW with the available rates for heat and electricity were relative to the actual figures of 0 200 0.80 % Net power flow (right scale) capacity of 18,895 MW. With the reduced depending on the region 2018 (including a 11 % increase annual maximum fixed in 2018 at from 3 to 37 % and from 2 to 22 %, in 2019) with a 31 % growth in -10 14,823 MW (a 4.4 % increase to respectively. consumption (9 % in 2019). The 100 0.40 % Electricity consumption in RK, bn kWh 2017), the Republic of Kazakhstan RES ratio in the energy balance will -20 still has a 22 % surplus of available As a result, the Ministry of Energy of continue to increase and by 2025 it 120 capacity. the Republic of Kazakhstan decided will reach 5 %. Renewable energy 2013 2014 2015 2016 2017 2018 0 0.00 % to fix limiting rates for each group of sources will account for about 25 % 100 Source: SC MNE RK

The electricity generation segment power plants for a seven-year period in the structure of the total newly 2013 2014 2015 2016 2017 2018

consists of one major player owned at the level of 2019. The Ministry of introduced capacity. Energy sector 80 *-at the end of 3Q 2018 Source: SC MNE RK by the government and several National Economy of the Republic of Industry private companies. Samruk-Energy Kazakhstan announced the transition The maximum electrical load in the FDI in energy sector, USD mln 60 Economy as a whole JSC (Ekibastuz GRES-1 and 2, AlES to a “stimulating rate setting policy”: forecast period will increase from Share of total gross inflow of FDI (right scale) 40 JSC, Moinak HEPP, etc.) produces up the rate and the profit of the entity 17,093 to 20,262 MW (+18.5 %), while a surplus of capacity (taking Forecast of electricity market balance for 2019-2025, bln kWh Electricity production at individual power plants of RK, into account the reserve) will 20 bln kWh decrease from 1,229 MW in 2019 150 0 to 391 MW in 2023, and by 2025 it Ekibastuz GRES-1 will amount to 934 MW. EEC (Aksu GRES) 2013 2014 2015 2016 2017 2018 Ekibastuz GRES-2 100 Source: KOREM Karaganda CHP-3 (Karaganda-Energocenter) Almaty CHP-1,2,3 West zone South zone (AlES) North zone Kazakhmys Energy GRES 50 Pavlodar CHP-2,3 (Pavlodarenergo) Historically, the power system of Bukhtarminsk water-power plant Kazakhstan includes three zones: Petropavlovsk CHP-2 (Sevkazenergo) North, South and West. North Pavlodar CHP-1 0 zone includes regions with energy- (Aluminum Kazakhstan) 2019 2020 2021 2022 2023 2024 2025 intensive industry; it produces and 0510 15 20 Source: Ministry of Energy of RK consumes 2/3 of total electricity Source: calculations based on KOREM data volume (66%) and has a surplus Other sources planned RES planned of electricity. South and West 2018 2017 Existing plants Surplus

26 27 WE TRANSFORM ENERGY INTO LIFE

PROJECTS filling was completed. The third stage PETROPAVLOVSK CHP-2 OF PERFORMANCE RESULTS AND IMPLEMENTED of the ash dump construction is in SEVKAZENERGO JSC progress. This is one of measures to IN 2018 ensure continuous operation of the The auto-transformer No. 7 was DEVELOPMENT PROSPECTS power plant and to create an ash replaced. PAVLODAR CHP-3 OF dump site enough for up to 10.5 PAVLODARENERGO JSC years of use. Building the dams at the 3d section OVERVIEW of the ash dump site No. 2 was The project for modernization of PAVLODAR CHP-2 OF started. This is one of the measures ELECTRICITY the turbo generator No. 6 was PAVLODARENERGO JSC to ensure continuous operation of GENERATION completed and the installed electrical the power plant and to create an ash capacity was increased by 15 MW Modernization of equipment in the dump site enough for up to 7 years In 2018, due to a planned increase to 125 MW. For the first time in fuel transportation department was of use. in heat supplies to customers the CIS, the foundation steel frame completed. of PAVLODARENERGO JSC, with vibration insulators was used Reconstruction of the heat the Corporation expected to during the project implementation. EKIBASTUZ CHP OF generation scheme at Petropavlovsk increase electricity generation by Turbo generator No. 6 was put into PAVLODARENERGO JSC CHP-2 is in progress. 0.8 % compared to 2017 (up to operation on November 6, 2018. 7,245 mln kWh) and heat supply Ekibastuz CHP continued the 2nd by 2.7 % compared to 2017 (up to The construction of the exhaust stack stage of construction of an ash dump 6,306 thous. Gcal). No. 2 was started and the foundation in the bed of Lake Tuz.

In fact, the Corporation reduced production by 3.8 % relative to 2017 to 7,026 mln kWh. Heat supplies increased by 11.9 % compared to 2017 to 6,874 thous. Gcal due to lower average ambient air temperatures during the heating RENOVATION OF 91% season of 2018 compared to 2017 (-8.2о С and -5.5о С, respectively) 2017 2018 OF TURBINE GENERATORS and an increase in heat consumption AT PAVLODAR CHP-3 in PAVLODARENERGO JSC and Electricity output, mln kWh 7,300 7,026 SEVKAZENERGO JSC by 12.1 % and 11.5 %, respectively. OLEG PERFILOV, Heat supply, thous. Gcal 6,142 6,874 MEMBER OF THE STRATEGIC AND TECHNICAL COMMITTEES OF THE BOARD OF DIRECTORS OF CAEPCO JSC, GENERAL DIRECTOR OF PAVLODARENERGO JSC

— What are changes occurred at Pavlodar CHP-3 of Kazakhstan and the CIS countries. The installation in 2018? and commissioning of all 12 vibration insulators and the installation of spring elements under the turbine condenser — We continued to upgrade the main equipment: the were performed under the supervision of engineers In 2018, as part of the turbo generator No. 6 of the plant was completely from Germany. The installation of the turbo generator investment program, the reconstructed, as a result of which the total installed was completed in record-breaking time - five and a half Corporation allocated a capacity of the entire combined heat and power months with a standard of 12 months. Besides the turbine plant is now 555 MW. Replacement of the turbo No. 6, the units No. 1,2,4 and 5 were modernized and total of bln generator became possible due to our cooperation reconstructed. ₸ 21.118 with Ural Turbine Plant, ELSIB Research and Production for further implementation Association (Novosibirsk), GERB company (Germany) — To what extent CHP-3 has been upgraded of a number of large-scaled and Sevkazenergoprom Design Institute. over 10 years? equipment modernization projects to increase generation, — What is the feature of the project? — Turbo generators at CHP-3 were upgraded by 91 % with the total costs amounting to KZT 35 bln. A total amount reduce transmission losses for — The new unit was installed on a steel frame weighing of KZT 55 bln was allocated over 10 years to upgrade electricity and heat, and improve 358 tons, which is supported by reinforced concrete PAVLODARENERGO JSC. The performance of such an environmental performance. pillars. Twelve GERB vibration insulators are installed extensive work became possible thanks to the limiting between the steel frame and the pillars. The uniqueness electricity rate program implemented in 2009-2015, of this project is that it is the only one in the territory as well as the full support from CAEPCO shareholders.

28 29 PERFORMANCE RESULTS AND DEVELOPMENT PROSPECTS OVERVIEW WE TRANSFORM ENERGY INTO LIFE

ELECTRIC POWER TRANSMISSION In the reporting year, CAEPCO JSC reducing the number of failures from • state funds in the framework of Group of companies completed 197 in 2017 to 168 in 2018. Nurly Zhol program – ₸ 9.3 bln; a number of projects to reduce In 2018, as part of investment programs, a total of 212.785 km of 0.4-10 kV power lines were constructed, electricity transmission and Modernization of heating networks • amortization deductions from reconstructed and re-fitted. distribution losses, as well as to in the cities of Pavlodar and Ekibastuz companies’ own – ₸ 7.35 bln. improve the reliability of supply to is expected to reduce heat losses by PAVLODAR EDC JSC consumers. In 2018, subsidiaries of up to 24,429.81 Gcal/year due to The aim of the project is to improve the Corporation reduced technical reconstruction and construction of reliability of heat supply and energy -- 23 km of 35 kV overhead power lines built; losses as follows: heat networks using pre-insulated efficiency, reduce losses and improve -- 35.0 km of 0.4-10 kV power transmission lines renovated, including 22 km of bare wires replaced with aerial bundled conductor lines; Pavlodar EDC JSC - 8.8 %; pipes and by up to 4,844.35 Gcal/ environmental performance by

-- 2,928 ASCAE devices installed; North-Kazakhstan EDC JSC - 8.4 %; year due to polyurethane insulation reducing CO2 emissions through -- three substations renovated: Akmola EDC JSC - 4.9 %. of renovated pipes; the wear rate of coal consumption savings due to • Pavlodar - replacement of oil circuit breakers with SF6 circuit breaker at six cells; such pipelines is expected to be zero. reduction of heat transmission losses • Bayanaul district - replacement of oil circuit breakers with SF6 circuit breaker at two cells; HEAT TRANSMISSION The number of technical incidents in networks. • Ekibastuz district - installation of 220 kV bus-section SF6 circuit breaker. declined from 1,067 failures in 2016 In 2018, 18.441 km of pipelines to 1,005 in 2018. As part of the project, the -- two module-type dry-insulated power transformer substations installed in the city of were fitted with polyurethane Corporation uses pre-insulated Pavlodar and equipped with vacuum switches, modern security and fire alarm systems; insulation: Automatic heat flow regulators, pipes which have better thermal -- five 10/0.4 kV oil-immersed power transformers replaced with new ones having greater capacity; industrial controllers and modems insulation characteristics and -- new 10 kV power distribution substations built in Pavlodar (PDS-2) and Aksu (PDS-1); Pavlodar city – 0.357 km are installed at heat-transferring improved reliability of equipment enterprises of the Corporation to compared to conventional pipes, as -- 31 industrial buildings renovated; Ekibastuz city – 3.845 km connect their mechanisms and well as a useful life of up to 25 years. -- construction and installation work started to build 110/10 kV North city substation, renovate 110/10 kV instrumentation with the dispatch Implementation of all of the above East city substation in Pavlodar 110/10 kV substation in Potanino; Petropavlovsk city – 0.260 km service. All equipment at heat measures of the program will save -- design estimate documentation developed for the reconstruction of two 110 kV substations in the city of Pavlodar and distribution facilities is integrated 109,000 tons of fuel and reduce CO construction of 35kV OHL in Kachirsky district; 2 In 2018, 18.441 km of pipelines into a single network, which allows emissions by 168,000 tons per year. -- two antenna-mast structures built; were fitted with polyurethane dispatchers to carry out real-time -- fire and security alarm systems installed at 5 facilities; insulation: monitoring of water pressure and Furthermore, the Corporation uses -- design estimate documentation developed for installing fire and security alarm systems at 47 facilities; temperature and to make prompt advanced technology to detect -- 11 sets of radio-relay communication installed with commissioning planned for the next year; Pavlodar city – 4.382 km decisions in case of an accident or the causes of heat losses, such as -- ADCS (automated dispatch control system) equipment installed at 110 kV substation. emergency. thermal imaging devices for pipeline Ekibastuz city – 0.492 km monitoring and diagnostics and NORTH-KAZAKHSTAN EDC JSC To reduce heat losses, a program ultrasonic flaw detectors. Thanks Petropavlovsk city – 13.567 km is implemented in 2016-2020 in to all of the above measures, heat the cities of Pavlodar, Ekibastuz and transmission losses by the end of -- 63.6 km of 0.4-10 kV power transmission lines renovated, including 49.505 km of aerial bundled conductor lines; The high level of wear of heating Petropavlovsk with a total budget of 2020 will be reduced by 9.1 % -- 42 km of wire replaced at 110 kV OHL Sovetskaya-Poltavka; networks in Petropavlovsk leads to ₸ 25.95 bln including: compared to 2015. -- 34 km of ground wire replaced at 110 kV Siberia-Troitskaya OHL and 49 km at 110 kV Presnovka-Troitskaya OHL; a significant number of technical -- 1,592 porcelain insulators replaced at 35 kV OHL PCHP-2 - Tyagovaya and 5,625 porcelain insulators at 110 kV failures. However, the use of • loan from the European Vozvyshenka-Kiyaly; polyurethane insulation allowed Bank for Reconstruction and -- overhaul of TDTN-10000/110 kVA transformer completed at 110/35/10 kV Vozvyshenka Development – 9.3 bln; substation with replacement of oil-filled bushings with RIP bushings; ₸ -- three 10/0.4 kV outdoor packaged transformer substations replaced; -- twenty two 10/0.4 kV transformers replaced; -- 25,000 kVA power transformer replaced at 110/10 kV substation no. 6; -- two RGA buildings renovated; -- obsolete SCADA-based sensor panel board replaced in the central control room; -- central control room renovated; -- 1,375 REM ASCAE devices and 25 WEM ASCAE devices installed; -- nine 10-110 kV substations renovated.

AKMOLA EDC JSC

-- 77.29 km of 35-110 kV overhead power lines built; -- 133.6 km of 110 kV overhead power lines renovated; -- 23.3 km of 35 kV overhead power lines renovated; -- 74.582 km of 0.4-10 kV power transmission lines renovated, including 73.73 km of bare wires replaced with aerial bundled conductor lines; -- 22 outdoor packaged transformer substations replaced; -- 2,310 induction meters replaced with electronic ones connected ASCAE network; -- seven 35-220 kV substations renovated.

30 31 PERFORMANCE RESULTS AND DEVELOPMENT PROSPECTS OVERVIEW WE TRANSFORM ENERGY INTO LIFE

In 2019, investment projects will MOBILITY include the following: Since June 2018, Akmola REC JSC • construction, renovation has been using Mobility mobile and upgrading of 0.4-10 kV application in its industrial electrical networks with a operations. In the reporting total length of 172.3 km as period, Mobility application follows: 46 km in North- was implemented in North- Kazakhstan EDC JSC, including Kazakhstan EDC JSC, and its 31 km of ABC lines, 53.48 km in implementation in Pavlodar EDC JSC Akmola EDC JSC, including is expected by the end of 2019. 51.87 km of ABC lines, and 72.82 km in Pavlodar EDC, The development and including 61.07 km of ABC lines; implementation of Mobility mobile application fully integrated with • construction and renovation of Ellipse system allows a user to 35-110 kV overhead lines with remotely issue work assignments, a total length of 127.5 km, split manage inventory and equipment between Pavlodar, Akmola and monitoring, provide quick access North-Kazakhstan EDCs to historical and regulatory data (22.1 km, 54.4 and 51 km, and work assignments. As part of respectively); Mobility project, a mobile application was designed for workers involved North-Kazakhstan EDC JSC. Over 84 indicators and elaborate scenarios • renovation of eight 35 kV in status monitoring in order to carry thousand consumers (15.7 % of the for identifying and responding to substations, including out field maintenance and repair of total number) use ASCAE systems. deviations. The results of the project Pavlodar EDC – 5, infrastructure facilities. were successfully demonstrated North-Kazakhstan EDC – 1, ASCAE/ASCAHE projects promotes to the President of the Republic of EQUIPMENT Pavlodar CHP-2 intends to renovate Akmola EDC – 2. PACS (ELECTRICITY AND HEAT) the implementation of state Kazakhstan. the condenser of turbo generator programs and projects the goal of RECONSTRUCTION No 2 to maintain the water-chemical PROCESS In November 2018, after successful which is to digitize housing and ASCAHE AND regime of the plant and the rated testing, the system for automatic public utilities and create “smart electrical load of the turbo generator AUTOMATION processing of applications from new cities” - integrated intelligent systems In 2018, the Corporation continued MODERNIZATION No. 2. customers was put into commercial for monitoring and managing urban to implement the project of PLANS FOR 2019 To improve productivity, operation in Akmola EDC JSC, infrastructure in Kazakhstan. automatic system for commercial Construction of the ash dump site will transparency and cost-effectiveness, North Kazakhstan EDC JSC and accounting of heat energy In 2019, as part of the investment be continued at Ekibastuz CHP. in 2018 CAEPCO JSC continued to Pavlodar EDC JSC. Thanks to the In 2018, in the framework of (ASCAHE). As of January 1, 2019, program, the Corporation will implement integrated projects for the implementation of this system, the Smart City project, Akmola EDC JSC a total of 3,102 heat meters were continue to implement a number of Petropavlovsk CHP-2 of modernization and automation of companies were provided with the installed almost 6,000 meters and installed. ASCAHE devices improve equipment modernization projects SEVKAZENERGO JSC will continue production, monitoring and related possibility to reduce and strictly 83 data collection and transmission the efficiency of heat data collection to increase generation, reduce the construction of the dam no. 3 of information systems. regulate timing for connecting devices (DCTDs) in Akkol. to monitor consumption of heat transmission losses for electricity ash dump No. 2, installation of 6AT consumers, as well as to simplify Information from ASCAE, along with and reduce overdue payments by and heat and improve environmental autotransformer and renovation of ELLIPSE and optimize the entire process data from a number of other sources, customers. Thanks to this system performance. the heat generation scheme. of connecting new customers to is transferred online to a common losses can be detected quickly, and In 2018, the implementation of Ellipse infrastructure facilities. information center created as part appropriate measures can be taken In 2019, due to the planned volume system (automated control system for of the project, which allows the city to prevent such losses and save heat of heat supply to consumers, managing production infrastructure) ASCAE/ASCAHE administration to analyze current in households. the Corporation intends to based on ABBEllipse system focused on increase electricity production by the development and implementation In 2018, CAEPCO JSC continued 6.0 % compared to 2018 up to In 2019, the Corporation of a catalog of typical operations, implementation of the program 7,444 mln kWh and heat supply by intends to allocate expenditure ratios and unit prices for providing consumers and key 11.9 % compared to 2018 up to ₸ 14,5 bln to implement for repairs. PAVLODARENERGO JSC, infrastructure facilities with “smart” 6,059 thous. Gcal. SEVKAZENERGO JSC and metering devices capable of both the investment program. Akmola EDC JSC use this system as recording and storing readings, and CHP-3 of PAVLODARENERGO JSC a powerful tool for internal control also remotely transmitting them intends to continue implementing a to monitor cost effectiveness of via various protocols to a common monitoring system at turbo generator A total of 3.95 km of heat networks maintenance and repair, reduce timing automatic system for commercial No. 6 to control vibration of the new using pre-insulated pipes will be built for budget planning for equipment accounting of electricity and heat foundation. and renovated in 2019, including maintenance and repair in subsidiaries. (ASCAE/ASCAHE). In the reporting 0.250 km in Pavlodar, 3.7 km in Ellipse ACSMPI is used to ensure the year, new “smart” electricity In 2019, Pavlodar CHP-3 will Petropavlovsk, as well as 1.3 km transparent spending of the repair metering devices were installed in the continue the 3rd stage of the ash of heat pipes with polyurethane budget, rapid inspection of the following quantities: about 6,000 dump construction which is expected insulation in Petropavlovsk. equipment condition, rational in Akmola EDC JSC, over 1,000 in to be completed in 2023. planning and use of resources. Pavlodar EDC JSC, nearly 1,400 in

32 33 PERFORMANCE RESULTS AND DEVELOPMENT PROSPECTS OVERVIEW WE TRANSFORM ENERGY INTO LIFE

BILLING instructions and control of their execution. The implementation of ACTIVITIES OF SALES In 2018, the implementation Thesis EDMS was carried out on a of a unified corporate billing phased basis, taking into account system in Astanaenergosbyt In 2018, Astanaenergosbyt the structure and specific nature of COMPANIES IN 2018 LLP was completed in terms of LLP successfully business of subsidiaries. payments for electricity and heat. implemented Billing PPC MEASURES TO PROVIDE In Pavlodarenergosbyt LLP, the The strategic advantages of BETTER CUSTOMER SERVICE system was implemented in terms of project (a user’s pocket implementing Thesis EDMS electricity for legal entities. personal computer include the standardization of • The company improves the designed to manage document management, significant work of the existing service Pavlodar EDC JSC and Pavlodar applications in the process optimization of business processes, centers and opens additional Heating Networks LLP implemented reduction in the time of making payment processing centers: the functionalities of energy- of taking readings of management decisions, and on March 14, 2018, as part of transmitting companies for data commercial metering improvement of management the on-site meeting of “Astana entry (installation/disconnection of devices and automatic efficiency in organizations. - Adaldyk alany” project office, metering devices (MDs), entry of MD data transmission in the the Chairman of the Agency for readings, calculation without using Thesis EDMS provides CAEPCO JSC Civil Service Affairs and Anti- MDs, calculation of violation acts, context of consumers with a flexible platform to automate Corruption A. Shpekbayev and disconnection/connection of heat of the billing system). other work processes. In particular, Akim of Astana (Nur-Sultan) chambers, etc.) and determining the Billing PPC system allows in 2018, the process of filing and city A. Issekeshev visited the amount of energy consumption by approving procurement requests was renovated central office of consumers. users to record readings automated. Astanaenergosbyt LLP. The from metering devices, guests were demonstrated Work was performed to unify and take pictures and remotely PLANS FOR PROCESS changes aimed at improving bring to a common approach the transfer them to the customer service: a staff call calculation algorithms for heat and AUTOMATION FOR button and a ramp were installed billing system. The system electricity consumption, as well as 2019 for people with disabilities, reporting and printing forms for can automatically detect tactile tiles were provided at the all subsidiary sales companies of the actual volume for entrance of the service center CAEPCO JSC. In the reporting year, the reporting month and -- To ensure a complete and and a pictogram was placed at a number of obsolete billing systems transparent service cycle, the front desk to facilitate space of interaction between energy and heat networks, submit were decommissioned. In the near verify the data obtained. implementation of the system orientation, and the waiting service suppliers and consumers, documents for entering into future, the developed system will be for automatic processing hall was significantly expanded. simplification of procedures electricity and heat supply implemented in SEVKAZENERGO JSC 1С: PRODUCTION PLANT of applications from new During the visit, the officials for energy supply to the public, contracts and obtain any other and Akmola EDC JSC. Transition to a MANAGEMENT customers in Pavlodar Heating saw the work process of the as well as improvement of services. single billing system in all subsidiaries Networks LLP and Petropavlovsk company and discussed the efficiency and availability of of CAEPCO JSC will make it possible In 2018, 1C:Management of Heating Networks LLP is issues of improving customer services provided by the energy • Sevkazenergosbyt LLP opened to automate and unify the accounting Production Plant information system expected until the end of 2019. service in other offices of company. Meetings of the a new utility payment center in of heat and electricity, as well as to was successfully implemented Astanaenergosbyt LLP. interdepartmental commission the City Mall shopping center, provide better services to consumers in all subsidiaries, which allowed -- Completion of The Billing project will be held on a regular basis. which reduced the burden on through prompt calculations of the the Holding to create a common for individuals is expected in the • JSC for retail consumers of the existing service centers and actual cost of electricity and heat information space to monitor the first half of 2019. AEDC-Energosbyt LLP, which • In November 2018, as part of made it possible to cover remote consumed, provide consumers financial and economic activities of allows users to monitor re-branding of service centers areas of the city with services. with remote service channels and enterprises, covering all core business -- Development and consumption limits, enter of Astanaenergosbyt LLP, a new a possibility to receive information processes of cost, tax and personnel implementation of functional current readings of electricity service center with a doubled • Service centers of through personal accounts. record keeping. processes of budget planning metering devices, print receipts, area of 440 m2 was presented Astanaenergosbyt LLP, and monitoring and cash see settlements on personal in Ansar business center. Pavlodarenergosbyt LLP and THESIS DOCUMENT AND TASK flow management within 1C: accounts, make payments, etc. Sevkazenergosbyt LLP have MANAGEMENT SYSTEM Management of Production • In December 2018, in the buttons for assessing the quality Plant information system. • To provide better customer framework of the Open of customer service as well as an By the end of 2018, all subsidiaries service, General Director Pavlodar project implemented electronic queue management of the Holding implemented THESIS -- During 2019, the Corporation of SEVKAZENERGO JSC by the city administration, an system. electronic document management will continue to develop Thesis initiated the creation of an additional service center of system (Thesis EDMS) and EDMS and implement financial, interdepartmental commission, Pavlodarenergosbyt LLP was automated the main document service, personnel and other which included representatives opened in the common public management processes: office, business processes of the of SEVKAZENERGO JSC group services office located at 25 records management, document Holding. of companies, government Krivenko St., Pavlodar, where management, assignment of bodies and public associations visitors can make payments, of Petropavlovsk. The get advice on energy supply commission held its first issues, file applications to meeting in December 2018, obtain technical specifications at which it addressed issues of connecting to electricity

34 35 ACTIVITIES OF SALES COMPANIES IN 2018 WE TRANSFORM ENERGY INTO LIFE

INCREASING CONSUMER services of the city and districts MOTIVATION of the region (disposal of solid household waste, • All sales companies of the house intercom systems, Holding actively cooperate cable television elevator with the media, where they maintenance). post information on working with debtors, rates and Pavlodarenergosbyt LLP and announcements for consumers. Sevkazenergosbyt LLP will commence • All offices of the Holding’s sales commercial operation of new companies constantly update 1C Billing software to unify and information on the terms of automate the metering of electricity payment for electricity and heat and heat. according to the terms of Model Contracts, as well as on liability for late payment and possible An additional utility payment window ways of making payment. will be opened in the service center of Sevkazenergosbyt LLP as part • The Corporation performs of execution of proposals made at work to raise public awareness. meetings of the interdepartmental To reduce household debt, Pavlodarenergosbyt LLP commission. systematically works with consumers in rural areas of Pavlodar region, e.g. it holds informational meetings with the public where issues of reducing debt are addressed. • Consumers who have debts for electricity and heat are proposed to draw up a schedule for debt repayment in installments. Thus, in 2018, over a thousand debt -- within the framework of -- Sevkazenergosbyt LLP repayment agreements were the consolidated payment will continue to work with CUSTOMER concluded with households. system, Pavlodarenergosbyt Kazakhtelecom JSC by LLP cooperates with utilities, including energy charges in CONVENIENCE IS OUR PLANS OF SALES COMPANIES condominium management a single payment document MAIN PRIORITY FOR 2019 bodies and other organizations for communication services that provide services to for consumers who live in Further expansion of the Unified consumers in Pavlodar region. remote areas of the region, as BAGDAT ORAL, Settlement Center: well as with other municipal DEPUTY GENERAL DIRECTOR FOR ENERGY SALES OF CAEPCO JSC

— What are the results achieved in 2018? — The basic principle is to ensure the sustainable development of the company by meeting the demands and expectations of — The sales companies across CAEPCO JSC Group sold consumers and other stakeholders. electricity in the amount of 4,499.7 mln kWh, showing an increase of 9 % compared to 2017. Sales of heat We are also committed to achieve a high quality of services in amounted to 12,627 thous. Gcal. Compared to the sales of electricity and heat as well as to ensure openness and previous, the sales volume increased by 16 %. availability of information.

In 2018, the number of consumers of CAEPCO JSC To improve the investment attractiveness of the enterprise Group of companies was 799,158 for electricity and and customer loyalty to the activities of our energy supplying 510,763 for heat, showing an increase of about 4 % organizations, we decided to implement a quality management compared to 2017. system at our enterprises to ensure compliance with the international ISO 9001 standard and its subsequent certification. It is important to note that in the reporting period we implemented a number of activities to improve the Sales companies of Astanaenergosbyt LLP, Sevkazenergosbyt LLP quality of customer service. and Pavlodarenergosbyt LLP have already been certified to verify compliance with ISO-9001:2015 in the field of “Providing heat — What principles are applied by sales companies and electricity sales services”, and we will continue working in this in their work? direction.

36 37 WE TRANSFORM ENERGY INTO LIFE

• Revenue from electricity transmission increased by KZT PROCUREMENT AND SUPPLY FINANCIAL AND 1,458 mln or 7.5 % due to the growth in the limiting rate -- a system of supplier pre-qualification (supplier base) for electricity transmission KPI EVALUATION SYSTEM was introduced; ECONOMIC by 5.6 % (from 4.27 KZT/ -- processes were revised and internal procurement kWh to 4.507 KZT/kWh), During 2018, the Group of companies took measures regulations were approved; INDICATORS and increase in the volume of to improve transparency and implement and effective electricity transmission through procurement planning system, KPI evaluation and -- Thesis electronic document management system was the networks by 150 mln kWh supplier pre-qualification system, updating internal implemented; The consolidated financial statements KZT 143,880 mln, which is or 7 %; documents regulating procurement processes. of the Corporation for 2018 have KZT 12,228 mln or 9.3 % more -- procurement organizational structure was approved. been prepared in accordance with compared to 2017, including: • Revenue from heat transmission In the reporting year, 1,901 contracts were concluded the International Financial Reporting income from sale and transmission of increased by KZT 1,666 thous., with a 85 % share of contracts signed with residents. PROCUREMENT PLANS FOR 2019: Standards and include the financial electricity increased by KZT 3,608 mln or 21.5 %, in particular, thanks The total budget for inventories for 2018 was over statements of subsidiaries from the or 3.67 %, income from sale and to increase in transmission KZT 10 bln. -- approval of the annual procurement plan; date of their acquisition. Principles of transmission of heat grew by volumes by 5.8 % across the accounting policies are the equal KZT 8,623 mln or 26 %, income Pavlodarenergo JSC and a At the end of the reporting period, the following -- implementation of the “Procurement Requests” for all enterprises of the Corporation. from other activities declined by 16.1 % growth in rates; objectives were accomplished: block through Tezis EDMS; The key financial and economic KZT 2.01 mln or 2.75 %. indicators demonstrate effectiveness • Revenue from heat sales, -- the annual procurement plan was implemented; -- development of a reporting form for supplies and efficiency of the operational The main factors which affected including the sales margin, -- KPI evaluation system was implemented; and payments. and financial activities, as well as income from sale in 2018 compared increased by KZT 6,957 mln or achievement of the Corporation’s to the previous year are as follows: 27.4 % due to increase in heat consumption by 1,762 thous. strategic development targets. • Revenue from electricity sales Gcal or 16.2 %, and earlier increased by KZT 2,150 mln or commencement of heating at INCOME FROM SALE OF OUR OBJECTIVE IS 2.72 % compared to 2017 due to socially significant facilities in PRODUCTS/SERVICES increase in commercial output of connection with a lower average HIGH EFFICIENCY AND electricity by 48 mln kW including daily outdoor temperature and In 2018, the Corporation produced increase by 45 mln kWh in AEDC extension of the heating season. TRANSPARENCY OF electricity and heat, including JSC and the growth in the limiting transmission and sale of purchased rate by 3,04 % in Group of PROCUREMENT energy, for a total amount of companies CAEPCO JSC;

ALEXANDER NIGAY, KEY FINANCIAL AND ECONOMIC INDICATORS FOR 2016 – 2018, KZT MLN DEPUTY GENERAL DIRECTOR FOR COMMERCIAL AFFAIRS OF CAEPCO JSC INDICATOR 2016 2017 2018 Income from core activities 122,123 131,652 143,880

— What are the challenges of CAEPCO Group of companies in the field Prime cost (93,198) (100,295) (114,310) of procurement? Gross profit 28,925 31,357 29,571

— Building effective procurement activities remains one of the important Expenses of the period (9,932) (11,178) (12,667) goals of the Corporation with a view to improving operational efficiency. The key priorities of CAEPCO JSC Group of companies in the field of Profit from operating activities 18,993 20,178 16,903 procurement include ensuring transparency during tenders, attracting Total EBITDA for the year * 31,263 31,865 29,405 more vendors for better business efficiency and reduced costs. Total EBITDA for the year, margin in % 25.6 % 24.2 % 20.44 % — What principles are important in the field of procurement? Goodwill impairment — (737) —

— First of all, this is ensuring equal opportunities for all Foreign exchange income/losses 404 181 (5,479) participants. During tenders, we are committed to an objective and fair selection of the winning bidder, the most Income tax expenses (3,547) (3,613) (2,232) profitable offer for the company in the framework of the Net profit for the year 11,264 10,639 1,600 bid documentation. An important factor in this question is proper planning of timing for commencement of Total income for the year 287,221 310,023 1,584 tender procedures, as well as their effective and timely implementation. All information about potential suppliers Assets 287,221 310,023 314,089 is verified thoroughly for compliance with the qualification Equity 140,835 149,785 144,665 requirements specified in the bid documentation. To reduce the corruption risk, the Group of companies has adopted an Anti- Capital expenditures on fixed assets 22,620 22,685 21,118 Corruption and Fraud Policy, which is communicated to all potential * Total EBITDA excludes exchange rate difference suppliers for review.

38 39 FINANCIAL AND ECONOMIC INDICATORS WE TRANSFORM ENERGY INTO LIFE

COST OF PRODUCTS caused an increase in expenses 2,460 mln or 7.7 % less compared to Operating EBITDA was chosen SERVICES SOLD under “Fuel” item (natural coal) by 2017. The main reasons of reduced as the main indicator of the KZT 1,887 mln, or 10.1 %, due operating efficiency include a decline Corporation’s operational In 2018, the cost of electricity and to increase in the average price for in gross income by KZT 1,786 mln efficiency. This indicator does heat sold was KZT 114,310 mln, coal, taking into account railway and increase in expenses of the not account for other income, which is KZT 14,015 mln or 14 % delivery costs, or 9 %. Moreover, period by KZT 1,489 mln. revenue from financing, non- more compared to 2017. This prices for petrol, diesel fuel, oil monetary component of exchange increase is due to higher operating and other fuels and lubricants also rate difference-related liabilities, expenses under such items as increased. Increase in “Repair” costs Total EBITDA for the year, KZT mln depreciation, amortization and “Electricity Sale Services”, “Purchased by KZT 962.5 mln was caused by an non-recurring or erratic cost items Heat”, “Fuel”, “Heat Sale Services”, increase in repair volumes in line with 32,000 that have no impact on the core “Remuneration of Labor”, “Repair”, the rate estimates approved for the operations of the Corporation. In “Purchased Electricity”, “Wear and year. Labor remuneration expenses 2018, operating EBITDA of the 31,000 Deprecation”. The cost structure increased by KZT 1,289 mln or Corporation was KZT 28,728 mln, of the Corporation is dominated 12 % due to the annual indexation which is KZT 2,777 mln or 9.66 % (45.5 %) by the cost of purchased and higher headcount. Depreciation 30,000 less compared to 2017. The main energy, including services related costs increased by KZT 412 mln (high-priority) margin segment in to its further distribution to or 4 % due to the introduction of the structure of operating EBITDA consumers. In 2018, these costs new fixed assets in 2018 totaling to 29,000 is the production of electricity and increased by KZT 8,498 mln, or KZT 21,118 mln. heat (KZT 20,006 mln), a decline

19.6 %, due to increase in the 31,263 31,865 29,405 of 8.1 % compared to 2017 is volume of energy purchased and DYNAMICS OF TOTAL EBITDA 28,000 caused by increase in the prime the cost of its transmission through 2016 2017 2018 cost of this activity. In the segment the networks of KEGOC JSC. The In 2018, EBITDA, excluding * Total EDITDA excludes exchange “Transmission and Distribution of and increasing of prime cost. In to higher rates for transmission of rate differences growth in production of heat energy exchange rate difference, amounted Electricity”, the indicator declined by the segment “Transmission and electricity. In the segment “Sales by 1,764 thous. Gcal or 16.24 % to KZT 29,405 mln, which is KZT KZT 2,132 mln due to decreasing of Distribution of Heat”, EBITDA of Electricity and Heat”, EBITDA electric transmission by 46 mln rWh increased by KZT 928 mln thanks declined by KZT 765 mln.

Operating EBITDA by segment, KZT mln 20,000 7,200 1,600 0 0 28,000

15,000 5,400 1,200 -125 -425 21,000 20,006 7,124 1,472 -437 -1,664 28,728 FOCUS 10,000 3,600 800 -250 -850 14,000 ON EFFICIENCY 5,000 1,800 400 -375 -1,275 7,000 ALLA YAZOVSKAYA, 0 0 0 -500 - 1,700 0 DEPUTY GENERAL DIRECTOR FOR ECONOMY Generation Electriciity Heat Sales Other Operating EBITDA AND FINANCE, CAEPCO JSC transmission transmission for 2018

CHANGES IN NET — What are the main tasks of the financial department? automated enterprise resource planning system based on Ellipse 8. For INCOME/LOSS example, the system is used to draw up budgets for maintenance and — Our activity is strategic. The financial department studies the repairs based on a detailed plan. All work is based on the equipment Income from operating activities in prospects for the industry development in the short and medium maintenance strategies and related schedules for the supply of 2018 amounted to KZT 16,903 mln term, due to which we can understand the market situation of the materials and spare parts, which makes it possible to optimize repair (11.7 % to the income from sales); company and the features of working in the existing conditions. and asset management costs. income decreased by KZT 3,275 mln Our objectives include control over operating expenditures, or 16.2 % due to the growth in cost consideration of receivables, financial planning and forecasting — What projects are especially noteworthy? of products sold by KZT 14,015 mln, in subsidiaries as well as in headquaters of CAEPCO. We also or 14.0 %, as well as an increase actively participate in budgeting within the framework of — Participation of the Holding in public-private partnership projects in expenses of the period by KZT specified rates. is of great importance. For example, in 2016, in the framework of 1,489 thous. Net financial expenses Nurly Zhol program, the Holding allocated its own funds along with increased by KZT 1,801 mln Across the Holding, financial specialists government grants and loans from the EBRD to implement projects of or 39 %. Net income for 2018 pay great attention to the issues of modernization and restoration of the centralized heat supply systems amounted to KZT 1,600 mln. Total automation, implementation of effective of Pavlodar, Ekibastuz and Petropavlovsk. The project was started in income for 2018 amounted to document management and improvement of 2018 and will be continued in the future. KZT 1,584 mln. business processes. Technologies used include an

40 41 FINANCIAL AND ECONOMIC INDICATORS WE TRANSFORM ENERGY INTO LIFE

FINANCIAL AND ECONOMIC INDICATORS BY SEGMENT FOR 2018, KZT MLN in line with the Corporation’s strategy. Long- term loans mainly include loans from the EBRD, Transmission Transmission Production of Sales of ADB, Sberbank of Russia JSC, which are issued and and Indicator electricity and electricity and Other Elimination Total to finance the long-term investment program distribution distribution heat heat of electricity of heat for reconstruction and modernization of the Corporation’s assets. Income from 67,936 24,939 9,476 106,140 93 (64,703) 143,880 core activities Total financial debt as of the end of the Prime cost (49,890) (18,290) (7,343) (102 822) — 64,035 (114,310) reporting year was equal to KZT 94,456 mln, while the Corporation maintains financial Gross profit 18,045 6,648 2,133 3,318 93 (667) 29,571 stability. Expenses of (5,190) (2,619) (1,920) (3,891) (1,942) 2,894 (12,667) the period CASH FLOW Income from In 2018, net inflow from operating activities operating 12,856 4,029 213 (573) (1,849) 2,227 16,903 activities amounted to KZT 21,525 mln. Financial (2,996) (821) (935) (356) 1,707 (3,452) (6,853) The most significant cash outflows expenses, net from investing activities amounting to Income/loss KZT 21,536 mln were caused by the from exchange (2,362) (2,382) (444) 1 (293) — (5,479) investment program of the current period, rate difference as well as payment of the debt on facilities Other income 121 480 871 473 158 (2,304) (201) completed in 2018. The change in cash from investing activities amounted to Impairment/ KZT 18,688 mln. Significant outflows from restoration of (21) (13) (290) 15 (230) — (538) financial assets financing activities are caused by repayment of bank loans in the amount of KZT 30,577 mln. Income tax (2,133) (239) (195) 2 334 — (2,232) The change in cash flow from financial activities expenses amounted to KZT 3,934 mln. Significant Net profit outflows from financing activities are caused 5,465 1,054 (780) (437) (173) (3,530) 1,600 of the year by repayment of bank loans in the amount of KZT 26,195 mln. The total net cash as of the Operating EBITDA by 20,006 7,124 1,472 (437) (1,664) 2,227 28,728 end of 2018 was KZT 1,302 mln. segment

Liabilities, KZT bln Assets, KZT bln ASSETS AND LIABILITIES 21,525

As of December 31, 2018, total 21,000 assets of the Corporation amounted 44 to KZT 314,089 mln, which is 1.3 % 45 100 16,000 more compared to 2017. As of December 31, 2018, the value of 249 261 277 101 116 69 fixed assets was KZT 260,133 mln, 11,000 or 83 % of the value of all assets. As a part of the large-scale investment program, the amount 6,000 Cash flow 2,358 from 150 145 of KZT 21,118 mln was spent in 141 investing Issue of 1,299 1,302 38 49 37 2018 on unfinished construction and activities bonds Dividend 1,000 acquisition of fixed assets, as well 2016 2017 2018 2016 2017 2018 as on commissioning of new and Equity Long-term assets Balance as of Cash flow Cash flow Balance as of upgraded facilities from the current 31.12.2017 from from 31.12.2018 Long-term liabilities Current assets -4,000 period and from the previous years. operating -2,732 - 2,489 financing Current liabilities activities activities Other financial assets include The Corporation has issued coupon -9,000 deposits with flexible conditions commercial bonds for the amount of partial replenishment and The issued share capital of the of KZT 1,441 mln (including withdrawal. Deposits consist of funds Corporation is 50 mln ordinary PAVLODARENERGO JSC totaling -14,000 accumulated by the Corporation for shares. As of December 31, 2018, KZT 1,441 mln with indexed interest loan service, investment program the value of completely paid ordinary rate of 12.5 %). These funds were financing and maintenance of the shares was KZT 46,043 mln. used to finance the investment -19,000 current assets. program and development projects -18,668

42 43 WE TRANSFORM ENERGY INTO LIFE

INFORMATION ON keep enough funds for its further To achieve the performance goals, SELECTION AND CORPORATE DIVIDENDS development. A decision on dividend the Board of Directors is guided by APPOINTMENT payout is made by the annual the following principles: The Corporation’s policy regarding General Meeting of Shareholders Members of the Board of Directors GOVERNANCE distribution, announcement, size, form based on the recommendation of • peer-review decision making of CAEPCO JSC are elected by the and terms of dividend payment is set the Board of Directors. In case of any with thorough discussion decision of the General Meeting of GENERAL MEETING RESULTS OF THE out in the Corporation’s Charter and unforeseen circumstances having a of issues using reliable and Shareholders of the Corporation. OF SHAREHOLDERS GENERAL MEETING the Dividend Policy of CAEPCO JSC. negative effect on the Corporation, complete information on the Pursuant to the Charter of CAEPCO the Board of Directors should Corporation’s activities in JSC, the Board of Directors should The General Meeting of Shareholders OF SHAREHOLDERS The main principles of the recommend the General Meeting of accordance with the highest consist of at least six persons, of is a supreme management body Corporation’s Dividend Policy Shareholders to refrain from dividend business standards; whom at least one third should be In 2018, the Corporation held 1 of the Corporation. Participation include: payout (announcement). independent directors. A member of annual and 4 extraordinary General in annual general meetings • non-admission of restrictions the Board of Directors of CAEPCO JSC Meetings of Shareholders which of shareholders, as well as in • balance between the interests In 2018, the annual General Meeting on the legitimate interests should be an individual only, who is addressed the following issues: extraordinary meetings announced approval of financial statements of the Corporation and its of Shareholders decided to pay and rights of shareholders to elected from among: by the Board of Directors or the of subsidiaries of CAEPCO JSC; shareholders in determining the dividends to shareholders of participate in the management executive body, is the primary way determining the procedure for amount of dividend payment; CAEPCO JSC for the fiscal year 2017 of the Corporation, receive 1. Shareholders being individuals; for shareholders to exercise their distribution of net income; review in the amount of KZT 2,127.8 mln. dividends, reports and rights, as reflected in the Charter of of applications from shareholders • improving investment information on the Corporation; 2. Persons recommended to the Corporation. regarding the actions of subsidiaries attractiveness, financial BOARD OF be elected to the Board of Shareholders of the Corporation may of CAEPCO JSC; choosing an audit sustainability, capitalization and DIRECTORS • ensuring a balance between Directors as representatives of make suggestions to the agenda of organization to audit the financial liquidity of the Corporation; the interests of shareholders of shareholders’ interests; the annual General Meeting, nominate statements of CAEPCO JSC and its The Board of directors of the the Corporation and maximum candidates to the Board of Directors subsidiaries; election of new members • ensuring market returns on Corporation determines strategic objectivity of decisions made by 3. Individuals who are not and its Committees, and convene to the Board of Directors of CAEPCO invested capital. goals and maintains the necessary the Board of Directors in the best shareholders of the Company meetings of the Board of Directors. JSC and its subsidiaries; determining operational control mechanisms, interests of shareholders; and who are not proposed the amount and terms of remuneration The Corporation intends to allocate including ongoing monitoring and for election to the Board of for newly elected members of the a certain portion of its net income evaluation of business performance. • providing the Corporation’s Directors as representatives of Board of Directors of CAEPCO JSC and to pay dividends in the amount that shareholders with reliable and shareholders’ interests. certain subsidiaries, etc. would allow the Corporation to To enhance the transparency of timely information. the Corporation’s activities, the General Director of CAEPCO JSC may Board of Directors includes three Remuneration for the Board of also be elected as a member of the independent directors who are not Directors and the executive body is Board of Directors, however, may not affiliated with the Corporation. determined by the decision of the act as the Chairman of the Board of The Board of Directors is headed General Meeting of Shareholders of Directors. OVER 10 YEARS, WE HAVE by the Chairman, who convenes CAEPCO JSC. The total amount of meetings of the Board of Directors remuneration paid to the Board of The Chairman of the Board of BUILT AN EFFECTIVE CORPORATE and presents their agenda based on Directors and the executive body in Directors of CAEPCO JSC is elected the recommendations received from 2018 was KZT 147.6 mln. from among its members by a GOVERNANCE SYSTEM members of the Board of Directors majority vote of the total number of and Committees of the Board of members of the Board of Directors by TALGAT ZHUMADILOV, Directors. show of hands. MANAGING DIRECTOR FOR CORPORATE DEVELOPMENT The term of office of members of the Board of Directors is determined by the General Meeting of Shareholders of CAEPCO JSC. The term of office of the Board of Directors expires — What is the corporate governance system of the Corporation? — What are factors contributing to enhancement of transparency on the date of the General Meeting and efficiency? of Shareholders, at which a new — The corporate governance system is a basis for all management Board of Directors is elected. Persons processes in the company. From the very beginning, — From the very beginning, the Board of Directors includes independent elected to the Board of Directors may corporate governance in CAEPCO JSC has been based on directors with extensive experience in core industries to ensure an efficient be re-elected any number of times. the highest international standards applied to operations and transparent corporate governance system. It is also important to note of our shareholders. For example, the European Bank the work of the Strategic, Audit, Technical and Social Affairs committees, for Reconstruction and Development in carrying out its which review thoroughly the aspects of activities in relevant areas. Besides activities promotes the sustainable development in an members of the Board of Directors, employees of the Corporation and its environmentally friendly and socially healthy manner. subsidiaries also participate in the work of the committees. In the course This policy was communicated by the Bank shareholder of our business activity, we comply with all applicable regulations and at meetings of the Board of Directors and, for sure, is standards and are committed to the principles of business ethics to ensure taken into account in our activities. sustainable development.

44 45 CORPORATE GOVERNANCE WE TRANSFORM ENERGY INTO LIFE

ANDREY KARYAGIN (born 1967)

MEMBER OF THE BOARD OF DIRECTORS

01.01.2014 – 01.01.2016 – Chairman of the Board of Astana Invest Investment House JSC;

01.01.2016 – 01.09.2017 – President of Astana Investment Corporation;

25.12.2017 – Chairman of the BoD of Astana Invest Investment House JSC;

15.01.2018 – Member of the BoD of PAVLODARENERGO JSC;

15.01.2018 – Member of the BoD of SEVKAZENERGO JSC;

15.01.2018 – Member of the BoD of Akmola Electric Distribution Company JSC;

MEMBERS OF THE BOARD OF DIRECTORS 29.01.2019 – re-elected as a member of the BoD of CAEPCO JSC (member of the BoD since 2017). (AS OF JANUARY 29, 2019)

FRANZ-JOSEPH KAISER (born 1949) TERM OF OFFICE OF ELECTED MEMBERS OF THE BOARD OF DIRECTORS IS 2 YEARS (UNTIL JANUARY 21, 2021) MEMBER OF THE BOARD OF DIRECTORS, INDEPENDENT DIRECTOR Is not affiliated with CAEPCO JSC and has not been as such for the past three years.

ALEXANDER KLEBANOV (born 1963) 17.11.1975 – 30.06.2009 – Partner at PricewaterhouseCoopers (PWC);

CHAIRMAN OF THE BOARD OF DIRECTORS 2005 – 30.06.2009 – PWC’s Project Partner for RAO UES of Russia;

Chairman of the BoD of CAEPCO JSC, Chairman of the BoD and shareholder of CAPEC JSC. 29.01.2019 – re-elected as a member of the BoD, independent director of CAEPCO JSC (member of the BoD since 2009).

20.08.2007 – Chairman of the BoD of CAPEC JSC; 16.03.2009 – Chairman of the BoD of CAEPCO JSC; MANFRED-JOSEPH KEHR (born 1947)

29.01.2019 – re-elected as a member of the BoD of CAEPCO JSC (member of the BoD since 2008). MEMBER OF THE BOARD OF DIRECTORS, INDEPENDENT DIRECTOR

Is not affiliated with CAEPCO JSC and has not been as such for the past three years.

SERGEY KAN (born 1968) 2003–2009 – Vice President of RWE Power International;

MEMBER OF THE BOARD OF DIRECTORS 2008–2010 – Managing Director, Senior Advisor at RWE Power International;

General Director of CAEPCO JSC, shareholder and member of the BoD of CAPEC JSC. 25.02.2011 – Chairman of the BoD at Rhein Ruhr Power;

01.08.2004 – Member of the BoD of CAPEC JSC; 25.10.2011 – Member of the BoD, Independent Director at CAEPCO JSC.

12.11.2007 – Executive Director of Caspian Offshore Construction LLP; 29.01.2019 – re-elected as a member of the BoD, independent director of CAEPCO JSC (member of the BoD since 2011).

01.02.2010 – President of Circle Maritime invest JSC; 31.05.2012 – Chairman of the BoD of Circle Maritime Invest JSC; ELDAR TABANOV (born 1968)

15.10.2015 – Chairman of the BoD of Kazakh Institute for Oil & Gas JSC; MEMBER OF THE BOARD OF DIRECTORS, INDEPENDENT DIRECTOR

28.09.2017 – President of CAEPCO JSC (in 2019, the position was renamed as General Director); 04.01.2013 – Member of the BoD, Independent Director of CAPEC JSC;

29.01.2019 – re-elected as a member of the BoD of CAEPCO JSC (member of the BoD since 2017). 01.01.2014 – 13.06.2017 - Member of the BoD, Independent Director of North-Kazakhstan Electric Distribution Company JSC;

09.09.2015 – 16.11.2016 – Deputy Chairman of the Board of Astana Community Entrepreneurship Corporation NC JSC;

ZHANDAR KUTBAY (born 1985) 13.10.2016 – Member of the BoD, Independent Director of Pavlodar Electric Distribution Company JSC;

MEMBER OF THE BOARD OF DIRECTORS 29.09.2017 – Director of City Box LLP;

01.07.2014 – 01.08.2015 - Advisor to the Chairman of the BoD of Astana Finance Bank JSC; 15.01.2018 – Member of the BoD, Independent Director of PAVLODARENERGO JSC;

01.08.2015 – 01.09.2017 - Investment Director, Deputy Chairman of the Board of Almex-Baiterek Fund LLP; 15.01.2018 – Member of the BoD, Independent Director of Akmola Electric Distribution Company JSC;

01.09.2017 – Chairman of the Board of Baiterek Venture Fund JSC; 15.01.2018 – Member of the BoD, Independent Director of SEVKAZENERGO JSC;

29.01.2019 – re-elected as a member of the BoD of CAEPCO JSC (member of the BoD since 2018). 29.01.2019 – re-elected as a member of the BoD, independent director of CAEPCO JSC (member of the BoD since 2017).

46 47 CORPORATE GOVERNANCE WE TRANSFORM ENERGY INTO LIFE

ORGANIZATIONAL STRUCTURE (IN 2019) PERFORMANCE consolidated financial statements of OVERVIEW OF CAEPCO JSC for 2017; determining the procedure for net income THE BOARD OF distribution of CAEPCO JSC for the GENERAL MEETING DIRECTORS fiscal year 2017 and the amount of OF SHAREHOLDERS dividend per one ordinary share of CAEPCO JSC; preliminary selection In 2018, the Board of Directors of an audit organization to audit the held 8 meetings. The Board of consolidated financial statements Strategic Planning Committee Directors focused on a number of CAEPCO JSC for 2018; review of key issues such as review of of activity reports of the Internal Internal Audit Department monthly and quarterly management Audit Department of CAEPCO JSC; reports; monitoring the execution review of activity reports of the of the consolidated business Risk Management Department Audit Committee plan of CAEPCO JSC for 2017; of CAEPCO JSC; election of Vice- introduction of adjustments to the President for Economy and Finance BOARD OF Risk Management Department consolidated business plan (budget) of CAEPCO JSC, election of a new DIRECTORS of CAEPCO JSC for 2018 and its member of the Technical Committee, Personnel, Remuneration and approval; preliminary approval of Audit Committee and Strategic Social Affairs Committee the annual financial statements of Committee of the Board of Directors Astanaenergosbyt LLP for 2017; of CAEPCO JSC, approval of a Corporate Secretary preliminary approval of the annual number of corporate documents, etc.

Technical Committee CAEPCO HAS IMPLEMENTED THE GENERAL DIRECTOR INVESTMENT PROGRAM AT A HIGH LEVEL

MANFRED-JOSEPH KEHR, Deputy Deputy Deputy First Deputy MEMBER OF THE BOARD OF DIRECTORS, General Director General Director General Director General Director INDEPENDENT DIRECTOR OF CAEPCO JSC for for for Economy and Finance Commercial Affairs Energy Sales — How would you comment on the Corporation performance results for 10 years?

— Over the years, CAEPCO has been actively transforming its business SHARE CAPITAL STRUCTURE by upgrading its energy assets. It is worth noting that this transformation has improved the efficiency of heat and electricity production, as well as reduced the level of environmental impact. By implementing the best practices of western As of December 31, 2018, peer companies, CAEPCO succeeded in implementing the the authorized capital of CAEPCO JSC was 46,043,272 thous. investment program. I’ve been working as a member of the Board of Directors for eight years and I am also a member of the Strategic and Technical Committees of the Board of Directors of CAEPCO JSC. I believe that the modernization of combined heat and power plants of a private company is an excellent example for Kazakhstan. 92.75 % 4.35 % 1.45 % 1.45 % — What are the challenges for the Board of Directors?

— The main objective of the Holding is to promote further development as the most modernized heat and electric Central-Asian KIF ENERGY S.a.r.l. CKIF ENERGY S.a.r.l. Baiterek Venture Fund JSC power company. Currently, we are developing a strategy power-energy for the next decade and constantly thinking about what company JSC the company should be in ten years. Therefore, it is very important for us to look forward. I am very glad that we all are working in a team for the benefit of the Corporation. 48 49 CORPORATE GOVERNANCE WE TRANSFORM ENERGY INTO LIFE

PERFORMANCE OVERVIEW OF THE COMMITTEES OF THE BOARD OF DIRECTORS

AS OF DECEMBER 31, 2018, THE BOARD OF DIRECTORS OF CAEPCO JSC HAD FOUR COMMITTEES:

Name Tasks Members Performance results

Strategic Enhancement of corporate M. Kehr In 2018, the Committee provided assistance to the Committee governance efficiency Chairman Board of Directors in improving the Corporation’s --monitoring of project planning and business development mechanisms. 7 members implementation S. Kan --monitoring of 1 meeting in D. Turganov implementation of the 2018 Corporation’s development G. Wood strategy Chai Chee Tak --assisting the Board of Directors in improving the A. Karyagin Corporation’s planning and business development O. Perfilov mechanisms

Audit Assisting the Board of Directors Kaiser F. In 2018, the Committee assisted the Board of Committee in the effective performance Chairman Directors in effective performing its regulatory of regulatory and oversight and supervisory functions, improving and functions strengthening the internal audit and risk 5 members A. Yazovskaya --Improvement and management systems. The Committee addressed 2 meetings in strengthening of the internal G. Wood issues relating to activities of Internal Audit and 2018 audit and risk management Risk Management Departments, including review Chai Chee Tak of relevant activity reports of departments, systems determined by the Board of Directors and shareholders. A. Karyagin approval of budgets, work plans, introduction of EXECUTIVE BODY --Advising the Board of amendments and additions to relevant corporate General Director is guided by the principles of action in Directors on matters regulations and procedures, etc. General Director is the sole executive body of the the best interests of shareholders, integrity, diligence, requiring actions on its part Corporation responsible for managing the Corporation’s prudence and vigilance. day-to-day operations and implementing a strategy

GENERAL DIRECTOR OF CAEPCO JSC Personnel, Development and E. Tabanov In 2018, the Committee assisted the Board Remuneration implementation of a uniform Chairman of Directors in building an effective corporate SERGEY KAN and Social Affairs human resources policy governance system. The Committee addressed Committee for the Corporation and issues relating to activities of the HR Department D. Turganov BRIEF BIOGRAPHY its subsidiaries building an of CAEPCO JSC and effective use of human effective governance system resources in CAEPCO JSC and its subsidiaries. 5 members A. Karyagin and implementation of its In 1998, Sergey Kan graduated from Almaty State University named after Abay. He has more than 20 years of 1 meeting in principles A. Nigay experience in the development, promotion and management of Kazakhstan companies and joint ventures with 2018 N. Konstantinova foreign participation in various areas of business in the Republic of Kazakhstan.

Since 2007 Mr. Kan has been holding the position of the Executive Director of Caspian Offshore Construction LLP. Since 2010 he has been holding the position of the President of a ship owning company Circle Maritime Invest JSC.

Since 2004 Mr. Kan is a member of the Board of Directors of Central-Asian power-energy company JSC. Technical Timely and effective M. Kehr In 2018, the Technical Committee ensured Committee monitoring of the status of Chairman effective participation of its members in the investment projects in the implementation of timely and effective monitoring Since 2015, he is the Chairman of the Board of Directors of Kazakh Institute of Oil & Gas JSC. Corporation of the Corporation’s investment projects. 6 members D. Turganov 2 meetings in G. Wood 2018 Chai Chee Tak Since 2017 Mr. Kan is a member of the Board of Directors of Central-Asian Electric Power Corporation JSC. G. Andreyev O. Perfilov Sergey Kan was awarded Parasat state order for significant contribution to the social, economic and cultural development of the country. He has a medal ”For Contribution to the Energy sector ”

50 51 CORPORATE GOVERNANCE WE TRANSFORM ENERGY INTO LIFE

to the Corporation’s activities, and also at monitoring and reducing risks, maintaining sustainable improvement of the Corporation’s financial performance and successful pursuing its stated goals.

Fundamental principles of the Corporate Governance Code:

• Justice

• Accountability

• Responsibility

• Transparency

• Environmental protection and social responsibility

• Effectiveness

• Control

In 2018, all the fundamental principles of the Corporate Governance Code were respected. CORPORATE ETHICS -- social responsibility of the EXTERNAL AUDIT company. The Corporation implements a Compliance with business ethics After change of management, the REMUNERATION POLICY CORPORATE CONFLICT OF Business Ethics Code approved by the across the Group of companies is auditor rotated from Deloitte LLP to GOVERNANCE CODE Board of Directors in 2010. monitored by executive officers PWC Kazakhstan LLP. The auditing Remuneration for the executive body INTEREST through the organization of activities services agreement was signed with is determined by the decision of the COMPLIANCE REPORT The document combines in accordance with prescribed ethical the company until 2021. Board of Directors of CAEPCO JSC. Conflict of interest is regulated in international standards of regulating principles and standards. In 2018, corporate governance the Code of Ethics (clause 5.6). business relations in four directions: Remuneration for General Director is practices of the Corporation This document provides for All employees of the Corporation -- business and professional ethics; determined based on the following fully met the requirements of responsibilities of employees, abuse adhere to standards and provisions of requirements: the Corporate Governance Code of official position, activities of -- organizational ethics; the Code. developed in accordance the employees inside and outside the -- corporate governance; • Remuneration shall consist of Joint-Stock Companies Act of company. fixed and variable parts; the Republic of Kazakhstan. The document is also based on the The principle of minimization of • The variable part of current international practices in the a conflict of interest is among remuneration depends on field of corporate governance and the fundamental anti-fraud and key performance indicators recommendations on application of corruption guidelines of the Fraud of General Director, his/her corporate governance principles by and Corruption Prevention Policy. qualification level and personal Kazakhstan’s joint stock companies. Pursuant to this principle, the contribution to the Corporation’s Corporation reduces a conflict of performance results for a certain The principles of the Corporate interest through effective distribution period with a view to motivating Governance Code are aimed of powers and responsibilities by General Director to work as per at formulating and introducing building a transparent organizational the highest quality standards; into the Corporation’s day-to- structure. day operations of the norms and • Social benefits, guarantees traditions of corporate behavior Activities of members of the Board and compensation payments that meet international standards of Directors are governed by the shall be provided to General and contribute to creating a positive relevant Regulations. Avoidance Director in accordance with image of the Corporation in the of a conflict of interest between the laws, internal regulations eyes of its shareholders, customers members of the Board of Directors of the Corporation and the and employees with a view to is stated in the section “Rights and employment contract. exercising the rights of shareholders Responsibilities of Members of the to the maximum extent possible Board of Directors” and improving their awareness as

52 53 WE TRANSFORM ENERGY INTO LIFE

“Management of investment ORGANIZATION OF RMS ACTIVITIES RISK MANAGEMENT activity”, “Customer service management”, “Tax accounting”, RISK RISK ANALYSIS RISK RISK “Accounting of fixed and intangibles IDENTIFICATION AND ASSESSMENT MANAGEMENT MONITORING AND INTERNAL assets”, “Personnel management”, “Revenue accounting and Detection of risks and their Determining the Identification, evaluation Monitoring the Action inclusion in the Corporate seriousness of risk impact and selection of the most Plan for risk management receivables”, “Procurement, contracts AUDIT Risk Register for further on production and effective method for (regularity, timeliness and and payments to creditors”. Also, the evaluation and financial and economic achieving goals by quality of implementation). IAD monitored the implementation of management. performance of the maximizing the positive INTERNAL CONTROL Internal auditors adhere to the its recommendations and conducted Corporation and minimizing the AND AUDIT following principles in the course of random checks to inspect fixed assets negative events that have their activities: integrity, objectivity, and inventories. The IAD submitted an impact on the activities To improve business processes and confidentiality and professionalism. an annual report and the activity of the Corporation enhance the effectiveness of decisions report for 10 months to the Board of made, the Company has established The offices of internal audit in the Directors and the Audit Committee. internal control mechanisms. To Corporation’s subsidiaries operate in INTERNAL CONTROL STANDARDS ensure independence and objectivity accordance with the requirements of its activities, the Internal Audit set by the IAD as well as the audit CORPORATE RISK The Corporation has established an internal control system (ICS) which includes a set of policies, processes, procedures, Department (IAD) reports directly methodology and practices adopted MANAGEMENT standards of conduct and actions combined into a single continuous process. The ICS is part of the administration to the Board of Directors of the in the Corporation. SYSTEM process in the Group of companies implemented by the Board of Directors, all executive, supervisory bodies and Corporation and is supervised by the employees. The ICS is aimed at ensuring the achievement of goals of the Group of companies and minimization of risks Audit Committee, which monitors Currently, the Corporation has a a The main goals of CAEPCO JSC in inherent in business activities. decisions and processes to ensure the functional internal control system, the field of risk management are reliability of financial reporting and to which provides reasonable assurance to reduce the negative impact of THE CORPORATION IDENTIFIES THREE LEVELS OF THE INTERNAL CONTROL SYSTEM: coordinate internal control and risk of effectiveness at all levels of control, events occurring in the course of management systems. including financial and operational activities of the Corporation, as Operational Financial Compliance control control, compliance with laws and well as to implement opportunities. Applies to the core business Refers to the preparation of reliable financial statements Focuses on compliance with laws The IAD operates in accordance regulations. To accomplish these goals, the objectives of the organization, to be published, including the interim, condensed financial and regulations governing the with the International Standards Corporation has a corporate risk including productivity, profitability statements, as well as any data derived from reports (for operations of the organization. on Auditing (ISA) developed by the In 2018, the IAD operated in management system (RMS) aimed and preservation of resources. example, income data) which are publicly available. Institute of Internal Auditors, as well accordance with the annual work at identification, assessment and as the current laws and regulations of plan approved by the Board of monitoring of all significant risks. Risk management activities in the Corporation are carried out by the Risk Management Department, which erports to the Board of the Republic of Kazakhstan and the Directors: it conducted evaluation of Risk management is carried out at all Directors of the Corporation. The Department operates in accordance with an annual work plan approved by the Board of Directors. Code of Ethics of internal auditors of effectiveness of the internal control levels: industrial enterprises, business CAEPCO JSC. system (ICS) in subsidiaries for units and at the level of the Group of the following business processes: companies. Work performed in 2018 Work planned for 2019 Risk management training for key employees of business units Risk management and internal control training for key employees and executives of the Group. of business units and executives of the Group. Updating the Risk Register and Risk Map of CAEPCO JSC Group. Updating the Risk Register and Risk Map of CAEPCO JSC and its subsidiaries. RISK GROUPS Analysis and testing of business processes: Analysis and testing of business processes: Strategic risks Financial risks Legal risks Operational risks “Payroll accounting”; “Investment activities”; --Regulatory risks --Financial statements --Violation of law --Technological risks “Control of distribution and metering of electricity consumption, “Warehouse stock management”; --Investment risks --Interest risks --Corruption and fraud risk --Procurement and supplies energy monitoring”; “Control of maintenance and repairs”. “Control of distribution and metering of heat consumption, --Project risks --Liquidity risk --Property risk --IT and information security energy monitoring”; --Reputation risks --Credit risks --Collection risks --Emergencies “Tax accounting”. --Market risks --Price risks --Regulatory risks --Human resources risks Updating the list of business processes exposed to the risk of Updating the list of business processes exposed to the risk of corruption and fraud. corruption and fraud. --Managerial risks --Foreign exchange risks --Environmental risks --Environmental risks As part of preparation for the introduction of ISO 9001:2015 Organization of work in line with the international quality --Credit risks --Managerial risks --Human resources risks --Interaction with contractors standard the following activities were implemented: standards (IQS): --Tax risks --Commercial risks Training in “ISO 9001:2015 Requirements” for heads of business Establishment of a work group to develop and introduce the IQS; --Professional risks units of CAEPCO JSC; Building a base of internal regulations of CAEPCO JSC; Training on the topic “Internal Auditor of ISO 9001:2015 Quality --Fuel risks Updating a base of internal regulations in line with the specified Management System” for employees of risk management requirements; --Reputation risks department in subsidiaries, Risk Management Department and Internal Audit Department of CAEPCO JSC; successful Development and approval of the quality policy and objectives; --Social risks examination and certification; Introduction of the IQS in business units of CAEPCO JSC; --Property risk Development of internal regulations as per ISO 9001:2015 IQS internal audit; requirements; Preparation of CAEPCO JSC for certification. --Managerial risks Updating the applicable internal regulations in line with ISO Risks are identified, evaluated and monitored. 9001:2015 requirements.

54 55 RISK MANAGEMENT AND INTERNAL AUDIT WE TRANSFORM ENERGY INTO LIFE

Risk Description of the ANALYSIS OF SIGNIFICANT RISKS AFFECTING PERFORMANCE Risk Factors Change Risk minimization measures level risk change Seventy-nine risks affecting the Corporation performance were identified in 2018 based on the new corporate Risk Register and the Risk Map updated in accordance with the approved Risk Management Policy. Failure of the 1. Power supply The risk was 1. Testing of the IT infrastructure Data Processing interruption. identified in 2018. restoration; Center (DPC, Risk Description of the 2. Communication 2. Development of an emergency IT Risk Factors Change Risk minimization measures Pavlodar) level risk change channel failure. infrastructure restoration plan for 3. Disturbance of corporate information systems; STRATEGIC RISKS containment area 3. Development of procedures in microclimate. subsidiaries for emergency operation 4. Server/network and interaction in the manual equipment failure. mode in case of failure of the key IT systems. Introduction of 1. Imperfection of Taking into account 1. Cooperation with the Ministry 5. Man-made the electrical laws in terms of the the introduction of Energy and the Committee for disasters. capacity electrical capacity of the electrical Regulation of Natural Monopolies, 6. Socio-political market and market and the capacity market Protection of Competition and factors. the balancing balancing electricity and the balancing Consumer Rights of the Ministry of electricity market. electricity market National Economy of the Republic of FINANCIAL RISKS market 2. Lack of a full ASCAE from 2019 and Kazakhstan on making proposals and system recording the existing unresolved comments to regulations governing actual consumption issues,the risk in the operation of the electrical rate. 2018 migrated capacity market and the balancing 3. Lack of statistics from the major electricity market. Growth of 1. Low level of In 2018, a 1. Claim-related work is carried out. on consumer load to the critical risk 2. Development of ASCAE system of receivables payment discipline decrease in overdue 2. Schedules for debt repayment in profiles. zone. wholesale consumers. among customers. receivables was installments are prepared. 4. Incomplete use of 3. Introduction of the software observed across 2. Decline in basic 3. Information on employees’ the existing software to work on the electrical capacity CAEPCO JSC, macroeconomic overdue debt for utilities, etc. is sent functionalities to market and the balancing electricity except indicators. to enterprises as and when needed. work on the electrical market. Astanaenergosbyt capacity market 4. Working with consumers in terms LLP with a slight and the balancing of providing daily schedules. growth in overdue electricity market 5. Monitoring of actual consumption receivables. via ASCAE system.

Change in 1. Changes on the At the end of 2018, 1. Conclusion of contracts in national Reducing the 1. Imperfection of In 2018, pursuant 1. Promoting and defending the the national currency exchange, KZT/USD exchange currency. rate by a legislation. to the order of interests of the Group through currency/ decrease or increase in rate decreased by 2. Monitoring the trends in exchange competent 2. Late communication the authorized associations and communities foreign currency the national currency 13% and during rates. authority of changes in body, a number (Kazakhstan Electricity Association, exchange rate rate. the year showed 3. Calculation and justification of the legislation to of subsidiaries Atameken National Chamber of volatility. The risk 2. Conclusion of currency position. responsible executives reduced rates for Entrepreneurs of Kazakhstan, etc.). contracts to supply migrated to the of the Corporation. heat and electricity 2. Participation in the development inventories and critical zone. transmission and of industry-specific laws and services in foreign distribution, as a regulations by submitting proposals currency. result of which the and interaction with working 3. Conclusion of loan risk level changed committees. agreements in foreign from major to currency. critical.

OPERATIONAL RISKS

Withdrawal of 1. Low average salary. The overall 1. Increasing the salary rate risk impact decreased risk probability remained unchanged qualified/key 2. Relocation to other turnover rate through the adoption of the Unified personnel countries. across the Holding Remuneration System (URS), as well 3. Low level of is stable. Analysis as the indexation of wages in the vocational training of of personnel Corporation. risk impact increased risk probability increased qualified staff for the management 2. Creating conditions for advanced energy industry, etc.е data indicates the training in the enterprise disciplines. growth and high 3. Implementation of programs turnover rates in to attract and adapt young risk impact remained unchanged risk probability decreased the subsidiary - professionals. Astanaenergosbyt LLP. medium risk high risk

56 57 WE TRANSFORM ENERGY INTO LIFE

SUSTAINABLE DEVELOPMENT STAKEHOLDER ENGAGEMENT PROCESS KEY STAKEHOLDERS EXPECTATIONS / INTERESTS ENGAGEMENT MECHANISM

Realizing its social responsibility to consumers, the Since 2013, the Corporation has been regularly publishing Government agencies • Ensuring reliable and uninterrupted Requests from the governmental and regulatory government, investors, employees, business partners Stakeholder Engagement Plan and Report with detailed and regulatory authorities supply authorities are processed. Employees of the Corporation participate in specialized and general and society, CAEPCO JSC adheres to the principles of quantitative and qualitative indicators, activities and • Openness and variability in meetings. sustainable development in its activities. sources of information dissemination. These documents working with consumers Visits of official delegations are arranged. are publicly available on the corporate website. • Infrastructure development • Tax deductions Social projects are implemented by agreement/ STAKEHOLDER ENGAGEMENT jointly with local authorities. LIST OF STAKEHOLDERS • Creation of jobs in the regions Stakeholder engagement is an important element of where the Corporation operates the sustainable development system. Thanks to a well- The Corporation has identified stakeholders in relation • Implementation of social programs established system of engagement, the Corporation to its decisions and activities to monitor the degree of its is aware of opinions, interests and wishes of its influence and to review response options. Stakeholders stakeholders. Keeping in mind high public significance are identified and selected based on the assessment of the Suppliers, Contractors • Creating a transparent competitive Tenders, meetings with contractors and customers of its operations, CAEPCO JSC implements a number of impact on current operations and strategic development, environment are arranged and held. Corporate web-site has a special feedback section. activities to expand and improve effective stakeholder as well as the current stakeholder engagement practices • Use of the market pricing engagement. of the Corporation. mechanism

Educational institutions • Promoting the development of Meetings with representatives of higher education industry-specific science and institutions are held in the regions of operations. THE CORPORATION COMMUNICATES WITH STAKEHOLDERS ON THE FOLLOWING SUBJECTS: education Employees of the Corporation participate in the • Establishment of a talent pool and activities of examination boards and certification Social Environmental Occupational health Economic succession planning commissions, as well as in accreditation of responsibility protection and safety security educational programs. • Use of innovation technology to PROFENERGY program is implemented and the Non-governmental reduce environmental impact Employees Employees Shareholders contest of scientific ideas is held on a year basis. organizations (NGOs)

Government agencies Government agencies and Suppliers, Contractors Local communities and regulatory authorities regulatory authorities Mass media (MM) • Transparency of business processes Every year, enterprises of the Corporation conduct • Providing free access to press tours, media briefings, press conferences, information on the Corporation issue press releases, and promptly respond to Local communities Local communities Trade union information requests.

Educational institutions Non-governmental organizations • Obtaining information on the Representatives of NGOs are regularly invited to (NGOs) Corporation’s development participate in press tours and public hearings held prospects during the year. Employees of the Corporation • Joint work participate in public meetings with representatives of small and medium business. Meetings are held • Reducing a negative environmental with leaders who support socially vulnerable people impact as well as with representatives of the consumer protection society. STAKEHOLDER ENGAGEMENT PROCESS

KEY STAKEHOLDERS EXPECTATIONS / INTERESTS ENGAGEMENT MECHANISM Trade union • Sustainable salary Interaction with trade unions is carried out through • Creating favorable working arrangement of meetings and handling requests in Employees • Obtaining information on the By means of corporate newsletters and websites. conditions the course of activities. Company’s development prospects There are e-mail boxes and phone hotline for A housing fund is formed, recreational and various employees’ appeals. Meetings are held between • Providing opportunities for • Accomplishment of strategic professional and personal events are arranged for employees, professional objectives the company management and employees. Labor skills contests are held. disputes are resolved by grievance committees with development the participation of representatives of both the • Social guarantees employer and the employee.

Shareholders • Transparency of business processes Interaction during meetings of shareholders. • Increase in shareholder value Every year, the Corporation and its subsidiaries Local communities, Consumers • Ensuring reliable and uninterrupted The Corporation has systemized its communications • High level of financial sustainability maintain the relevance of credit ratings assigned by electricity and heat supply with customers and arranged feedback via web-sites leading international rating agencies. • Consumer feedback and e-mail. Public hearings, round-table discussions To ensure mandatory disclosure of information, and other events are held. press releases are issued and presentations are held for investors and professional communities.

58 59 SUSTAINABLE DEVELOPMENT WE TRANSFORM ENERGY INTO LIFE

SOCIAL PROJECTS The company allocated funds to install electricity supply networks, CAEPCO JSC Group of companies including outdoor lighting, and is a socially responsible company, installation of water supply and which pays attention to the care of sewage networks and renovation of employees and contributes to the the pump station No. 21. improvement of the living conditions in the region as a whole. The project was implemented in the framework of the memorandum ENERGETIC CENTER IN on joint implementation of social PAVLODAR IS GROWING projects signed in 2016 between the TENNIS STARS administration of Pavlodar region and CAEPCO JSC. SMART HOUSE FOR POWER ENGINEERS

COZY ALAKAY KINDERGARTEN DORMITORY IN In 2017, the construction of a IN PETROPAVLOVSK PETROPAVLOVSK During the opening ceremony, an OUR CONTRIBUTION TO ERTIS nine-floor apartment building for emphasis was made that apartments OLYMPIC employees of PAVLODARENERGO Alakay kindergarten was opened On December 22, 2016, as part of will also be provided to 18 families JSC was commenced in Usolsk in Petropavlovsk on December 22, celebrating the 55th anniversary on the waiting list. On December 12, 2018, a district of Pavlodar city. 2015. The social facility was built of Petropavlovsk CHP-2 and new 50-meter Ertis OLYMPIC Commissioning of the building is within the framework of public- the Power Engineers’ Day, the STUDENT HOUSE IN swimming pool was opened in expected in summer 2019. private partnership between company held an official opening PAVLODAR Usolsk district of Pavlodar city. the administration of North of a 90-apartment small family PAVLODARENERGO JSC was The building with a total area of Kazakhstan region and dormitory for its employees In December 2017, the Student among the companies involved in 9.5 thousand square meters consists CAEPCO JSC’s shareholder - and citizens of Petropavlovsk. House was opened for Pavlodar the implementation of the social of 60 apartments that will be CAPEC JSC with the support of This project was implemented Assembly College. The hostel was project. provided to young employees under SEVKAZENERGO JSC. thanks to the public-private built at the expense of CAEPCO JSC the age of 35 years. It is important partnership of SEVKAZENERGO with the support of its subsidiary - The kindergarten with a total area JSC and administration of North PAVLODARENERGO JSC in the of almost 5 thousand square meters Kazakhstan region. framework of a memorandum accommodates cozy rooms equipped on joint implementation of Energetic tennis center was built in with everything needed for lessons, 90 small apartments, including 80 social projects signed with the 2011 at the expense of games and rest. Alakay kindergarten one-room and 10 two-room, have a administration of Pavlodar region. CAEPCO JSC’s shareholder - is designed for 320 children of total area of more than 4 thousand CAPEC JSC with the support of Petropavlovsk aged from 3 to 6 square meters. Each apartment has a The hostel for 200 students of PAVLODARENERGO JSC. years. separate kitchen and bathroom. Pavlodar Assembly College consists of furnished double and triple rooms The center consists of halls with At the time of opening, the Thanks to the project, with separate bathrooms. four tennis courts provided with kindergarten was fully staffed with SEVKAZENERGO JSC partially solved modern equipment that meets the 43 professional pedagogues to a pressing problem of providing The Student House has a gym and requirements of the International ensure upbringing and education of company housing to employees who a dance hall, laundry facilities and Tennis Federation (ITF). Specialists of children. do not have their own housing. kitchens with necessary appliances Energetic center pay great attention on each floor. The hostel is also to young athletes. equipped with an electronic pass system and video surveillance in On August 4, 2011, the President corridors. of the Republic of Kazakhstan, Nursultan Nazarbayev, during his Students who study welding (electric working trip to Pavlodar region and gas welders) and power supply The company installed external to note that the price of housing visited Energetic tennis center: (electricians of electric networks and utilities - electricity, water supply, includes the cost of external utilities electrical equipment) have a priority sewage and heat supply systems. and communications, amenities, — I like your tennis court very much. right for accommodation. The total cost of the project elevators and heating automation In my Message I noted the need of amounted to KZT 814,839,000, systems. motivating at least 30 percent of our In 2018, the hostel was transferred including installation of a heating population to go in for sports and I in the account of Pavlodar Assembly main with a total length of 1,603 m. It will be the first «smart» house see the results of implementing my College, a municipal state-owned The heating main is used to supply in Pavlodar. Temperatures in instruction - new sports complexes enterprise of the Department of heat to the pool and to reserve the apartments will be controlled using are being built, children are fond of Education of Pavlodar Region heat load, taking into account further special devices installed on radiators. physical culture. administration. development of the area. The house has a climate system and a water-cooling machine.

60 61 WE TRANSFORM ENERGY INTO LIFE

HEADCOUNT STRUCTURE OF CAEPCO JSC IN 2018 since 2017 and amounted to 5.3 %. HUMAN RESOURCES AND Considering the above mentioned Company name Headcount figures, the Company implements CAEPCO JSC 96 measures to promote mentoring SOCIAL POLICY and succession to ensure transfer of PAVLODARENERGO JSC 5,108 professional knowledge and skills, HUMAN RESOURCES EMPLOYEE HEADCOUNT AND Headcount dynamics, person SEVKAZENERGO JSC 2,561 and to gradually reduce the average MANAGEMENT POLICY SKILL LEVEL 10,800 employee age for achieving an AEDC JSC 2,404 optimal ratio between young pro- The human resources management As of December 31, 2018, the active employees and highly qualified Astanaenergosbyt LLP 613 policy of CAEPCO JSC is a Corporation headcount amounted to 10,600 mature workers. The average comprehensive system of interaction 10,782 persons. Total: 10,782 employee age across the Holding is with employees aimed at achieving 40 years. strategic goals of the Corporation. A slight increase of 1.7 % compared 10,400 to 2017 was caused by the planned EMPLOYEE STRUCTURE BY EMPLOYEE AGE STRUCTURE

The goal of the human resources introduction of new business units 10,540 10,603 10,782 CATEGORY AND SEX 10,200 management policy of CAEPCO JSC by subsidiaries of CAEPCO JSC and The Corporation’s employee age is to build a company with an filling vacancies. Due to the nature of activities, the structure is characterized by a high efficient corporate governance 10,000 Corporation’s employee structure is proportion of employees at the most system providing opportunities for 2016 2017 2018 dominated by men with a share of productive age - under 40 years old – maximizing employee potential. 62.1 %. The production personnel they make up 52.2 % of the total The Corporation is strengthening are mostly blue-collar workers with a headcount. The share of employees its human resources management including: share of men amounting to 74.5 %. over 60 years remained unchanged policy by hiring professional Total Employee category men women employees at various levels, retaining highly qualified staff, conducting persons % persons % persons % continuous personnel professional Headcount 10,782 100.0 6,697 62.1 4,085 37.9 training and development, providing opportunities for professional growth Managers 1,543 14.3 1,175 76.1 368 23.9 PROFENERGY – of proactive young specialists, creating a talent pool and succession White-collar workers 3,184 29.5 1,012 31.8 2,172 68.2 OUR CONTRIBUTION planning. Blue-collar workers 6,055 56.2 4,510 74.5 1,545 25.5 TO THE DEVELOPMENT NATALYA KONSTANTINOVA, MANAGING DIRECTOR FOR HUMAN RESOURCES MANAGEMENT

— What are the main objectives of several categories was launched. 70 employees were granted loans to on the schedule of rates. Structural units of the HR department using the HR department of CAEPCO? First of all, the project involves pay for the study; 93 people received their own forces and without involving third-party consultants evaluated students majoring in the energy bonuses for successful graduation. the positions and professions by their importance and involvement in — Our priority objective is still to disciplines; the second category the production process, and established the gradation and remuneration provide the subsidiaries of the includes graduates of higher and I would like to note that the levels. As a result of the project implementation, a mechanism was Holding with competent employees secondary special educational implementation of PROFENERGY created to motivate employees and differentiate wage increase depending and maintain the staff balance. On institutions, and the third category project promotes technical specialties on the performance results. Also, certain conditions were created to the one hand, we create conditions includes workers who receive and professions in the republic and enhance the employee’s social security and loyalty, and, as a result, the and attract young promising industry-specific on-the-job training. supports state programs for the Company’s competitiveness in the labor market. employees; on the other hand, we development of vocational training. motivate qualified employees for As part of the project, over three In addition, I would like to note the process unification and further development and transfer of years, the Corporation arranged — In your opinion, what areas of automation (this project involves 12 enterprises) as one of the most experience. practical training for 1,364 students; work are the most significant? significant and successful projects in the field of HR management. over 60 students filled the vacant As a result, we have automated the processes of staff — What measures are taken to positions in the period of summer — Based on monitoring of internal administration, time keeping, including for shift staff, staffing create a stable and efficient staff? holidays; scientific project contests and external factors that affect the structure and other processes. We have accomplished the goals to were arranged and personal personnel situation and taking into reduce labor costs of HR departments and minimized the risk of — In 2015, with the support of scholarships were awarded to account the main satisfaction criteria, accounting errors. These efforts allowed us to improve the quality the Board of Directors and the winners; 535 employees were a decision was made to transfer of work of human resources management departments and Management Board of the Holding, paid study leave in the amount subsidiaries of CAEPCO JSC to the enhance the efficiency of personnel records and human resources the PROFENERGY project covering of an average monthly salary; Unified Remuneration System based management across the Holding.

62 63 HUMAN RESOURCES AND SOCIAL POLICY WE TRANSFORM ENERGY INTO LIFE

Employee age structure (33,8 % of the total headcount) Turnover rate professions. These include 155 were trained in training centers persons (51 %) with technical/ of the Corporation. A total of 797 vocational training and 149 persons under 30 years 24.1 % employees received training in (49 %) with a college degree. related occupations in order to 30-40 years 28.1 % enhance the professional profile of ATTRACTING YOUNG the Corporation. SPECIALISTS 40-50 years 20.6 % STAFF TURNOVER In 2018, as part of the PROFENERGY

50-60 years 21.9 % 10.8 % 13.7 % 15.0 % project, subsidiaries of CAEPCO JSC In 2018, the turnover rate in the continued to implement the Program

over 60 years 5.3 % Corporation increased by 1.3 % aimed at supporting young specialists compared to 2017. The main reasons and improving their professional for staff resigning include: 2016 2017 2018 level with a view to attracting EMPLOYEE EDUCATION EMPLOYEE TRAINING AND graduates to key/critical positions -- relocation within Kazakhstan STRUCTURE DEVELOPMENT in the enterprises and retaining key (city/rural settlements); Employment rate, % employees. In 2018, compared to the previous Employee training and development -- relocation outside Kazakhstan (CIS countries, including Russia); year, the share of employees with a system of the Corporation covers the The following activities were carried college degree slightly increased and following areas: -- lack of financial satisfaction. out as part of the Program: the share of workers with technical/ To reduce the turnover rate, the In February 2018, within professional education decreased • compulsory professional following activities were further • 24 tours to production facilities; the framework of the across the Corporation due to training; implemented in 2018: Kazakh-German project motivation of workers to receive • A contest of science projects • Identifying payroll fund reserves higher education in extramural form • development of leadership skills; where winners, two aimed at introducing a and use these funds to raise 18.4 % 20.6 % 21.6 % dual form of education in of study. wages; students from Ekibastuz and • development of professional Petropavlovsk, received personal • Promotion of mentoring and Kazakhstan, 51 employees In 2018, a total of 50 employees competencies. corporate scholarships from incentives for young specialists; of SEVKAZENERGO Group of the Corporation obtained a PAVLODARENERGO JSC and college degree by correspondence To improve the effectiveness of • Financial and non-financial 2016 2017 2018 SEVKAZENERGO JSC; of enterprises completed training, including 35 employees activities and create safe working incentives for skilled workers; advanced training courses with a major in energy-related conditions, the Corporation carries • Improving social guarantees • 31 students were employed for mentors on the topic in accordance with collective disciplines; 53 employees finished out training in the corporate format TALENT POOL during summer; “Training Pedagogy at technical/vocational schools by based on individual development agreements. correspondence training, including plans. In the dynamics for 2016-2018, an In 2018, subsidiaries of CAEPCO JSC • 535 students were admitted for Workplace”. 48 employees who majored in increase in the hiring rate is observed created a talent pool of 1,048 senior, internship and pre-graduation professionally relevant disciplines. In 2018, 8,391 persons (77.8 % of across the Corporation. At the same middle and junior level managers to practical training, of which 68 In the framework of social the total headcount) were trained, time, the number of employed ensure the availability of the required students received payment and partnership with specialized educational institutions, the following In 2018, 197 employees continued including 6,398 production workers persons exceeds the number of personnel reserve to fill managerial signed employment contracts activities were implemented in 2018 studying at higher education (76.3 %) who received compulsory dismissed employees due to a positions at various levels. effective after graduation; on the basis of AEDC enterprises: institutions by correspondence training. In 2018, 3,646 employees planned headcount increase. 28 students were provided training, including 145 workers who Succession planning is based on accommodation for the period • introduction of a dual majored in professionally relevant individual programs of professional of internship at AEDC JSC; education system for students disciplines; 108 employees were Name 2016 2017 2018 and managerial training of of specialized educational obtaining technical/vocational succession pool members, including • employees of subsidiaries institutions in the city of Nur- Number of employees who received education by correspondence training, retraining, or professional 7,953 8,215 8,391 training in the Corporation’s own of CAEPCO JSC took part Sultan and Akmola region; training, 91 of them - in development, including: training centers, skills improvement, in examination and state professionally relevant disciplines. internships, mentoring, performance attestation boards responsible • tours for more than 175 Safety precautions, fire safety guidelines of management functions and for conducting graduation students to the existing and operating procedures (initial training, Education structure dynamics 5,786 6,022 6,398 proficiency testing, certification/ temporary employee relocation. In exams and assessment of substations, the company’s re-certification), courses for managers 2018, 120 persons from the talent graduation projects; training area in the village of pool were appointed to management Kabanbay Batyr and the control ISO9001, ISO14001, OHSAS1800 positions. • 25 employees received bonuses center of Akmola Inter-District 31.2 % 31.1 % 31.7 % quality management systems trainings for successful graduation; Electrical Networks; (including environmental protection, 52 157 131 internal audit and risk management External talent pool is also created 43.0 % 44.5 % 43.3 % issues) on an annual basis, including from • 142 employees were granted • a master class on the following among graduates. paid study leaves; topics was held in the company’s Related occupations training 652 722 797 training center for students: 25.8 % 24.4 % 25.0 % As many as 1,173 young specialists • 27 employees were granted «Providing first aid to electric 2016 2017 2018 Civil defense and emergency training 32 7 17 work at the Corporation’s interest-free loan for study shock victims», «Occupational secondary education enterprises, 304 of them were payment. health and safety»; Other (professional development, technical/vocational 1,431 1,307 1,048 seminars, workshops, etc.) employed in 2018, including 97 higher education persons for leading positions and

64 65 HUMAN RESOURCES AND SOCIAL POLICY WE TRANSFORM ENERGY INTO LIFE

Average pay increase rate in subsidiaries of CAEPCO JSC • familiarization courses and Goals Social package vocational guidance tours to the • Additional professional pension contributions at the rate of 5 %. company’s facilities were held Personnel motivation

+8.8 % for long-term • Bonus payment for professional competitions.

for school children to promote +12 % +5.3 % employment

+10.4 % • Rewards to celebrate anniversaries and holidays. energy professions; +7 % +5.4 % +13.9 % • Compensation of utilities costs, provision of benefits for dormitories and rental housing. +9.4 % • an energy club was created in • Transportation of employees to/from work. Effective compensation • Selling coal at cost to employees living in houses with furnace heating the gymnasium school No. 22 and benefits policy of the city of Nur-Sultan. • Subsidizing camp tours for children under 15 years old. • New Year gifts to children

EMPLOYEE MOTIVATION Support of employee • Insurance against occupational accidents and diseases. AND REMUNERATION working efficiency • Compulsory health insurance and health • Reimbursement of sanatorium and preventive treatment expenses PAVLODARENERGO SEVKAZENERGO Akmola EDC Astanaenergosbyt LLP Motivation and remuneration in the Group Group Group Corporation are aimed at improving • Financial support in case of pregnancy 2016 2017 2018 • Financial assistance for funeral services the efficiency and effectiveness Social support • Paid study leave of each employee. Employee’s of employees • sports and recreational events; • Retirement allowance wage implies objectivity of labor INTERACTION WITH TRADE • Veterans support program remuneration based on employee’s UNIONS • organization of leisure and performance assessment, his/ cultural events; Sports and recreational • Reimbursement of food expenses to participants of sports competitions her contribution to the production The enterprises of the Corporations activities • Reimbursement of expenses for cultural events and group recreation • celebration of commemorative process and the effectiveness of the have trade unions and conclude days and holidays; production process management collective agreements that provide system. social benefits and guarantees for • charity events. SOCIAL SUPPORT IN CASE OF MATERNITY OR PATERNITY employees and their families. Number of employees who took Number of employees who Number of employees who In 2018, the average salary in SOCIAL SUPPORT, GUARANTEES AND maternity/child care leave during were on maternity/child returned from maternity/ subsidiaries increased by 11.4 % In PAVLODARENERGO Group of Company name the year care leave as of the end of child care leave during compared to the level of 2017. companies, a Uniform Collective COMPENSATION the year the year Agreement was signed for 2016- women men total AEDC JSC optimized its headcount 2019. A Uniform Collective The social policy of CAEPCO JSC is PAVLODARENERGO Group 111 3 114 204 46 and allocated the released payroll Agreement of SEVKAZENERGO determined jointly with employees of companies fund to employees, due to which Group of enterprises was signed for and their representatives - trade SEVKAZENERGO Group 54 0 54 86 26 an average employee salary was 2018-2020. unions - and is implemented at of companies increased by an average of 13.9 %. the cost of subsidiaries of the Akmola EDC Group Enterprises of Akmola EDC JSC Corporation. 35 0 35 85 12 of companies NON-FINANCIAL INCENTIVES reviewed proposals from labor collectives for introduction of Astanaenergosbyt LLP 48 0 48 90 27 To increase motivation for changes to the Uniform Collective Total: 248 3 251 465 111 efficient performance, every year Agreement for a new period of the Corporation grants awards, 2019-2021. certificates of merit and honorary To perform social work with retired employees to receive quality diseases. In the rest house located in titles for achieving high production In developing the terms of the employees, collective agreements outpatient and inpatient medical Michurino village, Pavlodar region, results; relevant information is collective agreement, enterprises provide for the allocation of funds care both in the region where the the technical park was significantly published in corporate information of the Corporation adhere to the to the Councils of Veterans which company operates and in Nur-Sultan, upgraded, the pier was fully sources. principles of economic feasibility, operate at all enterprises of the which is especially important for renovated and the beach was cleaned sufficiency, joint responsibility and Corporation. Every year, the remote rural areas. and improved. Energetic complex In 2018, 144 employees received transparency. Corporation honors World War II is becoming increasingly popular corporate awards for performance and labor veterans by providing In September 2018, renewed among Kazakhstan and Russian efficiency as well as on the occasion Within the framework of social material support to non-working canteens with modern specialized bikers, who have chosen it for the of anniversaries of subsidiaries, 24 partnership, the following retired employees in the form of food equipment and tableware were annual Irtysh Dawns motorcycle employees and veterans received activities are held annually with the packages, cash rewards and coal opened at five enterprises of festival. state awards, 5 employee received participation of enterprises and trade supplies. Veterans are provided with PAVLODARENERGO JSC. awards from the CIS Electric Power unions: home care, invited to concerts and SEVKAZENERGO JSC took part Council, 58 veterans and employees celebratory dinners during World In May 2018, Energetic health care in Paryz competition for socially received awards from the Kazakhstan War II Victory Day celebrations. center and Energetic rest house were Name 2016 2017 2018 responsible businesses which is held Energy Association, among them 8 included in PAVLODARENERGO annually since 2008 and took the Number of employees in trade unions, employees were awarded the title 6,601 6,020 5,696 Enterprises of AEDC JSC provide Group of enterprises. As a result, third place in the nomination “For of Distinguished Energy Worker and person support to employees in the form of major changes occurred in medical Contribution to the Environment” 6 employees - the title of Honoured annual voluntary medical insurance institutions, including: introduction among large business entities of Percentage of total headcount, % 63 57 53 Energy Worker. which is the main social benefit of an updated medical care fund for Kazakhstan. offered to employees. Insurance workers; free treatment for workers programs allow the company’s with uncomplicated cardiovascular

66 67 HUMAN RESOURCES AND SOCIAL POLICY WE TRANSFORM ENERGY INTO LIFE

SPORTS AND RECREATIONAL Traditionally, on the eve of the this end, measures will be taken 2. Development and introduction of EVENTS Independence Day of Kazakhstan, to support young professionals key performance indicators (KPIs) AEDC JSC held an annual sports day and to implement projects for the to achieve strategic and operational To promote a healthy lifestyle, the in four sports: volleyball, chess, table introduction of key performance goals of the Corporation. following activities are carried out at tennis and arm wrestling – attended indicators and further process the Corporation’s enterprises: by the teams of the company. More automation. This includes: 3. Unification and improvement of than 50 employees took part in the a common list of social benefits and -- Providing fitness club competitions. The team of Akmola 1. In 2019, the Corporation will guarantees for employees of the memberships; Inter-District Electrical Networks continue implementing HR policies Corporation. became once again the winner in aimed at employee engagement -- Organization of active leisure; all sports. The second place was and professional development. To 4. Further implementation of taken by the team of the company’s this end, measures will be taken programs to improve the living -- Developing collective traditions; management staff, and the third to support young professionals conditions of production workers. place - by the team of Stepnogorsk and to implement projects for the -- Organization of annual Inter-District Electrical Networks. introduction of key performance 5. Further development and competitions and professional indicators and further process implementation of automated contests. All corporate and sports events are automation. This includes: processes in personnel record widely covered in the corporate keeping, employee assessment and Every year, employees of CAEPCO information sources, and participants -- Support of young professionals labor economics. subsidiaries take an actively of events and winners are awarded and promotion of personnel participate in sports and recreational memorable gifts. professional development; activities held both at the company as well as district, regional and PLANS FOR 2019 -- Development of mentoring; international levels. The practice of holding sports events within the In 2019, the Corporation will -- Key personnel development enterprises allows teams to take Pavlodar region, where they took the of 276 employees took part in the continue implementing HR policies program; award-winning places in external second team place. competitions in 2018. According aimed at employee engagement competitions. to the results of the year, the team and professional development. To -- Critical occupations program. In October 2018, the final of North Kazakhstan Electricity 2,765 employees of volleyball competition of the 47th Distribution Company JSC became PAVLODARENERGO Group of city sports day was held among the leader for the sixth consecutive companies attend sports complexes: production teams, where the team year. Sportsmen of the company swimming-pool, football and of PAVLODARENERGO JSC won became the best in sports such as volleyball sections, etc. The most the fourth place. Also, a futsal volleyball and futsal, as well as in popular sports competitions in competition was held during the table tennis, darts, track and field Pavlodar region are volleyball, sports day, where the team of athletics, chess, bowling and skating. skiing race, autumn cross, football, PAVLODARENERGO JSC won kettlebells, arm wrestling, chess, the fourth place among eight In 2018, the team of fishing. participating teams. SEVKAZENERGO JSC composed of 35 employees took part in In 2018, competitions were held in Every year, enterprises of Kyzylzhar city sports day and won 8 sports, in which 270 employees SEVKAZENERGO JSC conduct the third place among 18 teams of took part. 60 people participated in competitions in 14 sports, hold Petropavlovsk. city sports days held in enterprises of sports days and travel forums. A total

68 69 WE TRANSFORM ENERGY INTO LIFE

INFORMATION PUBLIC HEARINGS In 2018, subsidiaries of the Holding held public hearings on activities POLICY over the past year, at which issues of environmental protection, power The information policy of CAEPCO In 2018, as much as 7,316 generation, transmission and JSC is a set of actions, measures materials on activities of distribution were addressed. Public and procedures that assist to CAEPCO JSC Group of companies hearings were attended by consumers, manage dissemination of corporate were published in mass media representatives of public associations, information and create a consistent (including 1,342 for CAEPCO JSC, the media and government agencies. image of the Corporation among its 1,971 - PAVLODARENERGO JSC, target audience. 1,874 - SEVKAZENERGO JSC, PAVLODARENERGO JSC 507 - Akmola EDC, The main goals of information 1,622 - Astanaenergosbyt LLP). PAVLODARENERGO JSC held two disclosure are as follows: public hearings on environmental During the year, awareness-raising projects: AEDC JSC ANTI-CORRUPTION -- timely provision of information work was carried out among on all substantive matters stakeholders. Anti-crisis PR measures as to owners of apartments and -- Increase in the 1st stage of AEDC JSC held public hearings The Corporation is constantly pertaining to the Corporation and preventive measures were also private houses. The circulation of the ash dump site at CHP-3 involving consumers and other working to increase the in order to respect legitimate taken. the book is 5 thousand copies. (February 28, 2018); stakeholders to address the annual transparency of its activities. The rights of shareholders, investors Electronic version prepared by PR report on providing the regulated Anti-Corruption and Fraud Policy and other stakeholders, During the reporting year, PR services department of PAVLODARENERGO -- Industrial development of clay service for electricity transmission of the Corporation is an important providing them with appropriate of the Holding released 69 corporate JSC and CAEPCO JSC together with Beta rocks (April 28, 2018). and distribution. regulation in this area. information to make informed publications. heat service specialists is posted decisions or take any other on the PAVLODARENERGO and The main principles of the Policy action that could affect the HEAT FOR CAEPCO websites. Thanks to the include maintaining a high level of financial and business activities dissemination of information, corporate governance, zero tolerance of the Corporation, as well as EVERYBODY! the number of questions from to corruption and fraud, proper risk other information promoting condominium employees has assessment, minimizing conflicts of better understanding of the The “Heat for Everybody” collected decreased and the statistics of interest through effective distribution Corporation’s activities. book containing recommendations housing preparation for the heating of powers and responsibilities and technical specifications season has improved. The practice of and creation of a transparent -- providing publicly available in preparation for the heating preparing such collected books will organizational structure. information about the season became one of the major be applied in other subsidiaries. Corporation to all stakeholders; projects implemented in 2018. The key elements in strengthening The publication is addressed to this area are the development and -- improving openness and trust condominium employees, as well implementation of an effective anti- between the Company and corruption and fraud strategy, as its shareholders, potential well as prompt responding to related investors, market participants, events. The Corporation is building an government agencies and other appropriate culture of behavior and stakeholders; negative attitudes towards all corrupt SEVKAZENERGO JSC ASTANAENERGOSBYT LLP and fraud practices, and is striving -- improving corporate governance to minimize the risk of employee in CAEPCO JSC; Four public hearings were held at Astanaenergosbyt LLP held public involvement in such activities. which the following reports were hearings regarding the heat supply -- creating a positive corporate reviewed: services (November 9, 2018). The In 2018, no cases of corruption and image. event was arranged in pursuance of fraud were reported. -- Activity report of paragraph 5 of the National Action In 2018, CAEPCO Group of Petropavlovsk CHP-2 for Plan for the implementation of 2017 (April 5, 2018); companies regularly provided the Head of State’s Address to the information on its activities to the -- Activity report of people of Kazakhstan dated October above stakeholders by updating North-Kazakhstan EDC JSC for 5, 2018 “Growth in Prosperity web-sites of the Corporation and its 2017 (April 6, 2018); of Kazakhstan Citizens: Increase subsidiaries, providing information to in Income and Quality of Living mass media, responding to requests, -- Activity report of Conditions” and the instructions and by arranging public hearings, Petropavlovsk Heat Networks of the Committee on Regulation of press tours, round tables and other LLP for 2017 (April 7, 2018); Natural Monopolies and Protection events. During the year, a total of of Competition and Consumer Rights -- Activity report of 58 events were conducted involving of the Ministry of National Economy Sevkazenergosbyt LLP for mass media. of the Republic of Kazakhstan. 2017 (April 8, 2018).

70 71 WE TRANSFORM ENERGY INTO LIFE

Specific harmful emissions into the saving measures) at enterprises, -- renovation of the heat In 2018, Pavlodar Regional atmosphere in 2012–2018, generation scheme at the purpose of which is both Department of Ecology conducted ENVIRONMENTAL mg/MWh Petropavlovsk CHP-2 of to increase energy efficiency of an unscheduled inspection within SEVKAZENERGO JSC; 8 production processes and to reduce PAVLODARENERGO JSC to verify -- reconstruction of 7AT POLICY 13.08 13.31 13.76 13.83 14.56 14.44 15.02 greenhouse gas emissions. Thanks to compliance with environmental this program, in 2018 greenhouse auto-transformer of standards when disposing of ENVIRONMENTAL IMPACT ATMOSPHERIC AIR 6 SEVKAZENERGO JSC; gas (CO2) emissions decreased by production and consumption wastes, -- repair of boiler air heaters at MANAGEMENT PROTECTION 1.23 532.809 thous. tons. which did not reveal any violations of 1.31 1.29 1.06 1.02 1.06 1.08 plants No. 1, 3, 5 at CHP-3 of environmental regulations and other 4 PAVLODARENERGO JSC; An important goal of the In 2018, CAEPCO Group of Gross CO2 emissions from fuel regulatory requirements in the field Corporation’s investment activities is companies produced 7,025.1 mln combustion in 2018 compared to -- replacement of air-fuel mixture of waste management. 3.21 3.28 3.13 3.17 3.19 3.16 3.10 to reduce a negative environmental kWh of electricity and 6,874.2 2 2017 remained unchanged. burner pipes in boilers at impact of energy production. thous. Gcal of heat. 6,432.9 thous. plants No. 1, 3, 5 at CHP-3 of The Department of Ecology tons of Ekibastuz coal and 7.7 thous. The most significant measures PAVLODARENERGO JSC; for North-Kazakhstan region 1.07 0.98 0.96 0.98 0.96 1.3 In 2009-2018, the Corporation tons of mazut were consumed for 0 1 implemented in 2018 under the -- replacement of incandescent conducted one scheduled and two reduced ash missions by 70 %. energy production. The Corporation Energy Saving Program to reduce lamps with energy- saving ones unscheduled inspections across 2012 2014 2015 2016 2017 2018 At the end of 2008, before start uses non-renewable sources of raw 2013 greenhouse gas emissions include at CHP-3, Ekibastuz CHP of SEVKAZENERGO JSC. Following the of the investment program, the materials. the following: PAVLODARENERGO JSC. inspection results, administrative Ash SOx NOx concentrations of of ash, nitrogen power generation, bln kWh fines and damages amounted to and sulphur oxides released by Replacement of obsolete generating KZT 2,324.554 thous. enterprises of CAEPCO JSC into equipment with low energy GREENHOUSE GAS (СО ) the atmosphere were 1,094 and and environmental efficiency 2 Per-unit specific CO Gross CO emissions in 2012-2018, 1,425 mg/Nm3, respectively. At with modern facilities that meet EMISSIONS 2 2 emissions in 2012-2018, ton/MWh mln tons the end of 2018, these figures current environmental protection 3

were 286 and 1,386 mg/Nm , requirements is the most important The Corporation takes measures to 5.82 6.02 5.86 6.02 6.43 6.46 6.43 respectively. factor in reducing emissions by the monitor greenhouse gas emissions Corporation. and consumption of ozone-depleting In 2009–2014, all boilers at the substances. To monitor greenhouse plants of PAVLODARENERGO JSC gas emissions, the Corporation uses and SEVKAZENERGO JSC were a calculation method in accordance equipped with second-generation with regulations, which provides titanium emulsifiers, which allowed accounting of emissions from normal Gross harmful emissions into the the enterprises to increase the atmosphere in 2012–2018, (regular) production operations, degree of flue gas purification and thous. tons special processes (commissioning 9.3 9.0 8.8 9.1 9.8 9.7 9.7

reduce environmental charges. operations, process shutdown, 0.714 0.678 0.640 0.569 0.678 0.674 0.646 100 repair and maintenance) and

To ensure the continuity of the 5.82 6.02 5.86 6.02 6.43 6.46 6.43 emergencies. Reconstruction 2012 2013 2014 2015 2016 2017 2018 technological cycle and storage 75 of heat networks in Pavlodar, 2012 2013 2014 2015 2016 2017 2018 Specific greenhouse gas of ash waste for a period of up to Ekibastuz and Petropavlovsk, 14.7 16.2 16 17 18 15 15 CO (carbon dioxide) CO (carbon dioxide) emission rates decreased 25 years, work is carried out for the during 2016-2018 is expected to 2 2 coal consumption, mln tons by 4.2 %. construction of ash dump sites using 50 boost energy efficiency, reduce the innovation material to protect losses and improve environmental 45.7 46.5 soil against contamination. 42 44 43 44 47 performance standards: reduction 25 of CO2 emissions by decreasing the ENVIRONMENTAL coal consumption due to reduced

14.4 14.4 transmission losses in heat networks. PROTECTION MEASURES 17 14 14 13 14 0 To enhance the efficiency of The Corporation implements an 2012 2014 2015 2016 2017 2018 environmental protection activities, 2013 additional tool to reduce greenhouse

CAEPCO Group of companies Ash SOx NOx gas emissions - a program focused is planning and implementing coal consumption, mln tons on energy savings and overall fuel environmental protection measures efficiency, as new generating units aimed at reducing the environmental are making an increasing share impact of its activities and improving of generated energy, as well as the environmental efficiency and introduction of the ISO 50001 safety at its enterprises. In 2018, energy management system (energy the total cost of implementing such activities amounted to KZT 5,188.625 mln. During the period from late 2008 to 2018, harmful emissions into the atmosphere by enterprises of CAEPCO JSC decreased by 24.3 % (from 108.5 tons to 82.1 tons, including other emissions).

72 73 ENVIRONMENTAL POLICY WE TRANSFORM ENERGY INTO LIFE

WATER MANAGEMENT -- modernization of industrial -- repair of pipelines, stop ENVIRONMENTAL AND WATER RESOURCES closed-circuit water systems, and control valves for MANAGEMENT SYSTEM CONSERVATION recycled water systems, and service and drinking water the system for prevention of at CHP-3 and CHP-2 of Availability of the environmental contamination and depletion PAVLODARENERGO JSC; Use of water resources is an essential of water resources, namely: management system that is element of the production processes -- replacement and repair of stop developed, well-functioning and cleaning of tanks, grids of oil valves on service water pipelines, at enterprises and an important certified for compliance with the tanks No. 1-7; cleaning and fire-fighting pipes and heating function in the equipment cooling ISO 14001 standard is the most repair of filters of oil-cleaning networks at Ekibastuz CHP of process. Generating facilities of important indicator of a systematic units at turbo generators PAVLODARENERGO JSC. CAEPCO Group of companies are No. 2,3,6,7; cleaning of oil efficient work in the field of equipped with closed-circuit service coolers 5D, 2G, 4V, 2B, 5E, 3A, EFFICIENT HANDLING AND environmental protection, promoting water systems with cooling ponds 6B; maintenance of oil cleaning DISPOSAL OF PRODUCTION the Corporation’s competitive (Petropavlovsk) or cooling towers units at turbo generators WASTE capacity, increasing the market value (Pavlodar). No. 1-7 of SEVKAZENERGO JSC; of shares and creating a positive -- repairs of rotary screens No. Coal combustion residuals image in relations with external ISO/CD 50001 (Energy PLANS FOR 2019 Enterprises of CAEPCO Group of 2, 3, 4 at the central pumping representing 99 % of the total stakeholders. Management System). As a companies have drinking water station; routine repairs of amount of wastes are stored result, certificates of integrated As part of the Environmental Policy, supply systems, as well as storm borehole pumps No. 1, 2 and at specially equipped hydraulic During the reporting period TÜV management system (IMS) were the Corporation intends to further and household sewer systems. drainage pumps No. 1, 2, 3 engineering facilities – coal ash Rheinland Kazakhstan conducted granted and the Corporation’s improve environmental efficiency Water supply for domestic, drinking of the on-shore pumping dump sites. Compliance with supervisory and certification efficiency, effectiveness and focus and safety of its enterprises and and fire-fighting needs, as well station, pumps No. 2, 4 of the environmental regulations audits of CAEPCO subsidiaries on improvement were confirmed. minimize a negative environmental as sewerage, is carried out in a the central pumping station; of the Republic of Kazakhstan to verify compliance with the impact of their operations. To this centralized manner via municipal maintenance of the feed pump in creating new ash dump sites international standards ISO 14001 In 2018, AEDC JSC was successfully end, the Corporation intends to water supply and sewage networks No. 2, circulating pumps allows preventing environment (Environmental Management certified to verify compliance with implement environmental protection on a contractual basis. No. 1,2,3,4,5; overhaul of contamination by ash production System), ISO 9001 (Quality ISO 9001, 14001, 18001. plans and energy saving programs, the circulating pump No. 5, waste and ensuring stable CHP Management System), further upgrade obsolete equipment cleaning of the outlet channel of The whole amount of water used operation. OHSAS 18001 (Occupational Safety and comply with environmental SEVKAZENERGO JSC; by CAEPCO JSC is fresh water. The and Health Management System), regulations. Corporation does not use sensitive -- inspection of the underwater It should be noted that new water sources. section of intake chambers No. ash dump sites were built using 3 and 5 of the central pump the Canadian polysynthetic TOTAL WEIGHT OF GENERATED WASTE, THOUS. TONS In 2018, the Corporation consumed station, the underwater section geomembrane, which is a state- of the intake hopper of the a total of 905,512.9 thous. m3, of-the-art waste containment Indicator 2016 2017 2018 purge pipeline at Big White Lake, mostly via the closed-circuit water technology. It is a reliable and and the purge valve well DN 600 Coal combustion residuals 2,600 2,607.8 2,608.1 systems. In the reporting period, durable landfill liner ensuring mm at the on-shore pumping water discharge amounted to station of SEVKAZENERGO JSC; protection of soil and ground water Other types of waste 8.2 11.3 7.5 477.036 thous. m3. against contamination with chemicals -- monitoring of qualitative contained in clarified water of the WASTE BY HAZARD LEVEL, THOUS. TONS and quantitative water In 2018, the most important hydraulic ash removal system. characteristics (water analysis environmental activities related Indicator 2016 2017 2018 was conducted in accordance to water use and water discharge with the approved schedule) at Waste generated 2,607.6 2,619.1 2,615.6 include the following: PAVLODARENERGO JSC; Green list 2,607.2 2,618.7 2,615.2

Amber list 0.45 0.38 0.45 TOTAL WATER CONSUMPTION BY SOURCE, THOUS. M3 WASTES BY HANDLING METHOD, THOUS. TONS Indicator 2016 2017 2018 Indicator 2016 2017 2018 Total water used, including: 543,598.7 810,167.8 905,512.9 Waste generated 2,607.6 2,619.1 2,615.6 from surface water bodies 13,463.0 157,469.7 153,828.5 including coal combustion residuals 2,600 2,607.8 2,608.1 from third-party suppliers 24,466.4 23,791.289 53,067.4 Waste used at the enterprise 13.1 5.02 0.424

from closed-circuit water systems 505,669.3 628,906.8 698,617.0 Waste decontaminated 0 0.04 0.04

WASTE WATER DISCHARGED, THOUS. M3 Waste handed over to third parties* 7.1 6.27 7.148

Indicator 2016 2017 2018 Waste disposed at enterprise’s own sites 2,600 2,607.8 2,607.8

Total waste water generated 499.3 489.7 477.036 including coal combustion residuals 2,600 2,607.8 2,607.8

Discharged to third parties 499.3 461.5 471.736 *Note: In 2018, a total of 297.87 tons of coal combustion residuals from the ash dump site of SEVKAZENERGO JSC were sold to Discharged to surface water bodies 0 28.2 5.3 FlyAsh LLP under a contract.

74 75 WE TRANSFORM ENERGY INTO LIFE

during the operation of power supervision inspectors, as well OCCUPATIONAL and process equipment. In the as with state labor inspectors, reporting year, two peer reviews state supervision and control were conducted at enterprises authorities. Technical occupational HEALTH AND SAFETY of PAVLODARENERGO JSC and health and safety inspectors SEVKAZENERGO JSC. participate in the development and submission of proposals to the It is important to note that all “Occupational Safety” section of the combined heat and power plants collective agreement, as well as to of CAEPCO JSC are equipped with comprehensive programs and plans automatic external defibrillators of priority measures to improve designed to provide timely and occupational safety practices effective first aid to injured persons developed by authorities; monitor in case of a sudden cardiac arrest compliance with occupational before the ambulance crew arrives. safety guidelines at workplaces; represent the interests of trade union During the year, in furtherance of the members in government agencies OHS standard “Safety requirements and non-government organizations, for vehicles/pedestrians interaction courts of various instances when at production sites and facilities”, resolving labor disputes where the pedestrians and transport traffic OCCUPATIONAL HEALTH AND TECHNICAL OCCUPATIONAL Occupational Safety section of the schemes were developed in all SAFETY COUNCILS HEALTH AND SAFETY Labor Code applies. business units of subsidiaries. INSPECTORS SAFETY FIRST The events dedicated to the World Each subsidiary of CAEPCO JSC has Internal training of technical Labor Protection Day: The transition from mounting belts to its own occupational health and Each subsidiary has technical inspectors is scheduled for 2019. The main strategic goal of CAEPCO fall arrest harness is in progress. safety council, which consist of occupational health and safety -- an expanded OSH meeting Group of companies in the field representatives of the employer and inspectors, who interact with heads chaired by the First Deputy of occupational health and safety General Director of the the trade union, including technical of departments, the occupational (OHS) is to reduce the total Corporation; occupational health and safety health and safety service, operation number of accidents through the inspectors. Councils are headed by inspectors, industrial safety -- Month “Safe production”; implementation of preventive chairpersons who are also employees measures and introduction of best -- Competition of children’s of the enterprise. OHS practices. creativity on the topic “Labor protection through the eyes of In 2018, the number of Occupational health and safety the child”; The Corporation has implemented occupational injuries councils perform the following the Environmental and Social Action -- Family day of OSH; across the Group of functions: Plan (ESAP) in accordance with the -- a corporate contest of young -- examine the causes of policy of the European Bank for professionals on the topic companies decreased by occupational injuries and “Safety first”. 30 % and 50 % compared Reconstruction and Development. In diseases, analyze the the framework of the ESAP, CAEPCO to 2017 and 2016, effectiveness of occupational JSC published a publicly available Enterprises of the Holding continue respectively. There were safety measures, review report describing projects to improve implementing the practice of peer no occupational deaths in information and analytical occupational health and safety at its OHS review aimed at preventing materials about the actual state enterprises. injuries, accidents and incidents 2017 and 2018. of occupational safety in the organization’; According to the OHS Action Plan for 2018-2019, CAEPCO Group of -- analyze the results of employee companies implemented a number workplace certification; of activities: In the reporting year, -- submit proposals for the the OHS standard “Insulation of introduction of more energy sources” was approved and advanced technologies and put into effect at Petropavlovsk new equipment to ensure CHP-2 of SEVKAZENERGO JSC. safe working conditions and All subsidiaries approved and put eliminate heavy physical work; into effect the Instruction for the procedure and control of the use of -- participate in the review of mobile video recorders to improve occupational safety budgets, labor discipline and responsibility of compulsory social insurance the operational personnel involved in against industrial accidents and operational switching, preparation of occupational diseases; monitors workplaces, installation/removal of expenditures of the organization grounding at workplaces, etc. spent on improving occupational safety practices.

76 77 OCCUPATIONAL HEALTH AND SAFETY WE TRANSFORM ENERGY INTO LIFE

TIFR - Total Incident Frequency Rate FIFR - Fatality Incident Frequency Rate -- OHS standard “Confined Space TYPES AND per 1,000 employees per 1,000 employees CUSTOMER SAFETY INCIDENCE OF Entry”; The Corporation cares about safety OCCUPATIONAL and health of its customers. For -- OHS standard “Isolation of INJURIES this purpose, the Corporation Energy Sources»; carries out systematic awareness- raising campaigns and equipment -- guidelines concerning incentives In the reporting year, five accidents inspections. Subsidiaries of the to employees of CAEPCO JSC for occurred at enterprises of the Corporation introduce advanced compliance with occupational Corporation, three low-severity technologies and implement safe health and safety requirements. 0.91 0.63 0.47 and two severe accidents. working practices. In addition, CAEPCO JSC and its Classification of accidents by type 0.09 Top managers of each district subsidiaries have the following plans in 2018: 0 0 unit of the Corporation’s electrical for 2019: 2016 2017 2018 2016 2017 2018 distribution companies jointly with -- impact of harmful and occupational health and safety -- carrying out general corporate dangerous production factors specialists conduct awareness-raising competitions in professional and substances; Total injury frequency rate (TIFR) Fatality incident frequency rate EMPLOYEES OF THE campaigns among the population skills among business units of per 1,000 employees was (FIFR) per 1,000 employees was CORPORATION regarding safety precautions near electricity distribution companies -- electric shock; calculated using the following calculated using the following operating electrical installations and of CAEPCO JSC; formula: formula: EXPOSED TO HIGH power transmission lines. -- fall of an injured person. -- introduction of an integrated n x 1,000 n1 x 1,000 INJURY RISK Every year, out-of-school events automation system for all Causes of the accidents include: Fr = ------, where: Fr1 = ------, where: In 2018, various additional measures on electrical safety are held in aspects of labor protection, N N were implemented to ensure safety educational institutions in the regions which ensures consolidation and -- unsatisfactory labor of electrical works: where the Corporation operates. automation of OHS activities management; Letters containing a reminder of in the following areas: incident -- employees were provided with the basic electrical safety rules and management, audits, OHS risks, -- gross negligence of an injured n – total number of occupational injuries during the reporting period; special clothes and personal measures to prevent electrical injuries PPE (availability control), OHS person. equipment for protection against among children are sent for further training; n1 – total number of occupational fatalities during the reporting period; electric arc; distribution to the Department of Tables and charts below show the Education of the Akimats of North -- construction of a training area level and rates of occupational N – average headcount. -- use of mobile video recorders Kazakhstan, Pavlodar and Akmola of PAVLODARENERGO JSC to injuries in the Corporation. in PEDC JSC to improve labor regions, the Department of Education drill operating and maintenance discipline and responsibility of of the cities of Petropavlovsk and employees’ skills in maintenance Occupational injury rates operational personnel involved Pavlodar and heads of district and repair of overhead power in operational switching, departments of education. These lines and repair employees’ skills 2016 2017 2018 preparation of workplaces, activities are implemented to prevent in maintenance and repair of Headcount 10,540 10,549 10,782 installation/removal of injuries among third parties, namely heat networks. grounding at workplaces, etc.; school-aged children and college students. Number of injury cases 10 7 5 -- introduction of the OHS standard “Isolation of Energy To warn the public and personnel Number of injured persons/ 7/3 7/0 5/2 including women Sources” (equipment locking about danger, safety signs and and tagging, or LOTO (Lock inscriptions are placed on all electrical Number of fatalities 1 0 0 out/Tag out)) at Petropavlovsk installations operated in subsidiaries, CHP-2 to ensure safety of repair all equipment is protected against and commissioning works at unauthorized access by providing electrical installations; appropriate fences, locks and The incident recording, reporting and notification system of the Corporation blocking mechanisms. complies with the laws and regulations of the Republic of Kazakhstan and the -- provision of personnel of International Labor Organization (ILO). electrical distribution companies Regional and district media publish with individual voltage articles aimed to prevent injuries, The activities of contracting organizations involved at production facilities signaling devices (as additional including among children, and of the Corporation are controlled as follows: experts of subsidiaries conduct protection means to warn protect public health. inspections, briefings for personnel, and meetings with contractors. operating personnel at electrical installations) attached to the PLANS FOR 2019 In 2018, the Corporation spent KZT 780 mln on occupational health and worker’s protective helmet. safety activities and improvement of working conditions. All employees of In 2019, the Corporation intends to the Corporation’s enterprises are insured against accidents pursuant to the In 2018, there were no reported introduce and maintain the following Compulsory Workplace Insurance Act of the Republic of Kazakhstan. cases of electric shock or electric corporate OHS standards and arc burns when servicing electrical documents: installations.

78 79 WE TRANSFORM ENERGY INTO LIFE

CORPORATE EVENTS of Nur-Sultan city and the 10th anniversary of the Corporation. The In April 2018, on the eve of the event took place in Akmola region. World Safety Day, a children’s crafts competition “Labor Protection More than 200 employees of Through the Eyes of a Child” was CAEPCO Group of companies, as organized. According to the terms of well as representatives of the akimat the competition, employees’ children of Tselinograd district of Akmola and grandchildren prepared various region headed by akim Malgazhdar creative works (drawings, poems Tatkeyev took part in the action. or crafts) dedicated to occupational safety and health issues. During the “Environmental Task Force” event, more than 20 tons As part of the World Safety Day, of solid household garbage were the Family Day for Safety and removed from the banks of the Nura Health at Work was held with the River located 20 km from Akmol participation of employees’ children village, Akmola region. Employees and grandchildren aged 7 to 12 of CAEPCO Group of companies years and their parents. The event cleaned the coastal zone on both included a tour of the enterprise, sides of the Nura River, filled up old demonstration of video clips devoted fire pits and installed environmental to the enterprise and the issues protection posters. of «Electrical safety in everyday life», «Fire safety», and a children’s On December 20, 2018, a competition on electrical safety in solemn event devoted to the 10th life. anniversary of CAEPCO JSC was held in Nur-Sultan. Honorary guests of the On April 29, 2018, a competition event presented their congratulatory dedicated to the World Safety Day addresses to employees of the was held among young professionals Company. During the event, the in Pavlodar. Four teams from best employees of CAEPCO JSC and different regions of Kazakhstan took its subsidiaries were awarded and part in the competition on the stage honored. During the event, the Club of Cosmos Palace of Culture under of the cheerful and sharp-witted was the motto “Safety first!: «BezPravil» held with the assistance of employees (PAVLODARENERGO JSC), SevKaz of CAEPCO subsidiaries. (SEVKAZENERGO JSC), «Pristolichnyi Svet» (Akmola EDC) JSC and “Power” (ASTANAENERGOSBYT LLP).

Team members - auditors, risk managers, employees of security services, HR department, electricians and supervisors showed the skills of talented performers who could play any role dedicated to production issues. The competition consisted of three stages: «business card», exchange of jokes on the «biathlon» principle, as well as musical homework.

Each contest was opened with a video message from General became the most energetic team. The Lugovenko (Akmola EDC JSC) won Directors of CAEPCO subsidiaries audience favorite prize was awarded the nomination “Life and Soul of the devoted to labor protection issues. In to the team of SEVKAZENERGO JSC. Party”. the Contest of Young Professionals, Yelena Korpacheva, a member of the the team of PAVLODARENERGO team of PAVLODARENERGO JSC, On July 14, 2018, CAEPCO JSC and JSC won in the nomination became a winner in the nomination its subsidiaries - Akmola EDC JSC, “CAEPCO Champions”. The team «Golden Voice of CAEPCO». Amir AEDC-Energosbyt LLP and of Astanaenergosbyt LLP was Kakenov, a member of the team of ASTANAENERGOSBYT LLP held an recognized as the most musical SEVKAZENERGO JSC, was recognized “Environmental Task Force” event team, and employees of AEDC JSC as the best captain, and Olessya dedicated to the 20th anniversary

80 81 WE TRANSFORM ENERGY INTO LIFE

List of topics and Materiality Map

9 27 18 11 14 ABOUT THE REPORT

8 30 19 15 This Report was prepared by Central-Asian Electric Power Corporation JSC (CAEPCO JSC) on the basis of performance results of 2018. The Report provides information on activities 7 9 16 of CAEPCO JSC and its subsidiaries. 6 17 12 The document includes a Sustainable Development Report prepared in accordance with 3 5 20 the GRI Standards: “The main scenario of conformity”. The Report is prepared on an 27 30 22 annual basis. The previous Annual Report, which included 2017 Sustainable Development 4 7 2 21 29 Report, was published in July 2018. 25

Materiality for stakeholders 32 3 6 5 23 4 No substantial changes to the content of the report have been made, and the Corporation 31 28 currently follows the GRI Standards for information disclosure. Section “Index of GRI 2 8 1 Elements” contains a table explaining where to find standard reporting elements and 33 13 1 26 24 performance data. No external assurance review of the Report was performed.

0 1 2 345 678910 Materiality for the Corporation

No. Aspects No. Aspects

NOTES TO THE REPORT 1. Economic performance 18. Training and education

Top management positions of CAEPCO JSC are specified in this Report according to the Charter approved in 2019. 2. Market presence 19. Diversity and equal opportunities

3. Indirect economic impacts 20. Non-discrimination

Freedom of association and 4. Procurement practices 21. collective bargaining

5. Anti-corruption 22. Child labor MATERIAL ASPECTS AND 6. Anti-competitive behavior 23. Forced or compulsory labor BOUNDARIES 7. Materials 24. Safety practices 8. Power 25. Rights of indigenous people and minorities

9. Water 26. Respect for human rights In accordance with the Principles for defining the report content as per the GRI Standards, the assessment of materiality of topics disclosed in the Report was carried out. The materiality assessment procedure includes the following main steps: 10. Biodiversity 27. Local communities

11. Emissions 28. Assessment of vendor compliance with social criteria

Step 1. Identification of the widest analysis of topics in terms of their on its impact on the Corporation 12. Effluents and wastes 29. Public policy range of potentially important topics impact on the Corporation’s activities (horizontal axis) and its stakeholders Assessment of vendor compliance with related to sustainable development and development strategy. (vertical axis). The highest priority 13. 30. Customer health and safety based on the GRI Standards. was determined for aspects within environmental standards Step 3. In accordance with the red; they were given priority 14. Compliance with environmental requirements 31. Products and services labeling Step 2. Analysis of the extent of stakeholders’ opinion and strategic during preparation of the Report. impact of the listed topics within and plans of the Corporation, key topics Also the report partially discloses 15. Employment 32. Consumer privacy outside the Corporation. Selection were ranked to determine priorities aspects of the Orange area. Relations between employees of topics for further disclosure and develop the Materiality Map. 16. 33. Violations of social and economic legislation taking stakeholder engagement into An average score was attributed to and management consideration. Furthermore, priority each aspect of activity depending 17. Occupational health and safety

82 83 WE TRANSFORM ENERGY INTO LIFE

GRI STANDARD AND INDICATOR PAGE NUMBER, SECTION EXCEPTIONS/ GRI ELEMENT INDEX YEAR OF PUBLICATION COMMENTS GRI 102: General About the report information (2016) GRI STANDARD AND INDICATOR PAGE NUMBER, SECTION EXCEPTIONS/ 102-45 Consolidation basis Section “About the Report”, p. 82 YEAR OF PUBLICATION COMMENTS 102-46 Determining the content of the Section “List of topics and Materiality GRI 101: REPORTING PRINCIPLES (2016) report and boundaries Map”, p. 83 GRI 102: General Organization profile 102-47 List of material topics Section “List of topics and Materiality Map”, p. 83 information (2016) 102-1 Organization name Section “Business profile”, p. 18 102-48 Recalculation of data from past — Indicators were not 102-2 Areas of activity Section “Business profile”, p. 18 periods changed and are 102-3 Head office location Section “Business model”, p. 16 comparable with the data provided 102-4 Geography of operations Section “Contacts”, p. 97 in previous annual 102-5 Form of ownership Section “Geography of operations”,p. 8 reports of the 102-6 Sales markets Section “Geography of operations”,p. 8 Corporation Section “Subsidiaries”, p. 20 102-49 Changes in the report content — No changes 102-7 Company scale Section “Key performance indicators 102-50 Reporting period Section “About the Report”, p. 82 for 2018”, p. 17 102-51 Last publication date Section “About the Report”, p. 82 102-8 Personnel information Section “Human resources and social 102-52 Reporting cycle Section “About the Report”, p. 82 policy”, p. 62 102-53 Contact information for Section “Contacts”, p. 97 102-9 Supply chain Section “Business model”, p. 16 No changes questions about the report content 102-10 Significant changes in the Section “Organizational structure”, 102-54 GRI compliance level Section “About the Report”, p. 82 Company’s operations p. 48

Section “Share capital structure”, p. 48 102-55 GRI content index Section “GRI Element Index”, p. 84 102-11 Precautionary principles Section “Environmental protection Measures”, p. 72 102-56 External assurance Section “About the Report”, p. 82 102-12 Support for external initiatives Section “Environmental impact SIGNIFICANT TOPICS management”, p. 72 Section “Greenhouse gas emissions”, ECONOMICS p. 72 GRI 103: Management 103-1 Materiality and boundaries Section “List of topics and Materiality Section “Environmental management approach (2016) Map”, p. 83 system”, p. 75 103-2 Management approach Section “Financial and economic Comprehensive 102-13 Association membership — The Corporation indicators”, p. 39 economic policy is a member of covers all major the Kazakhstan topics in this area Electricity 103-3 Management assessment — Not conducted Association (KEA) GRI 203: Indirect 203-1 Infrastructure support Section ”Social projects”, p. 60 Strategy economic impacts 102-14 Management statement Section “Letter of Chairman of the (2016) Management Board”, p. 4 203-2 Significant indirect economic Section “Attracting young specialists”, impacts p. 65 Section “Letter of General Director”, p. 6 ENVIRONMENT Ethics and Integrity GRI 103: Management 103-1 Materiality and boundaries Section “List of topics and Materiality 102-16 Values, principles, standards Section “Corporate Governance Code approach (2016) Map”, p. 83 and rules of conduct Compliance Report”, p. 52 103-2 Management approach Section “Environmental impact Comprehensive management”, p. 72 environmental Corporate governance impact 102-18 Management structure Section “Organizational structure”, management policy p. 48 covers all major Section “Performance overview of the topics in this area committees of the Board of Directors”, 103-3 Management assessment — Not conducted p. 49 Materials Stakeholder engagement GRI 301: Materials 301-1 Materials used by weight or Section “Environmental impact 102-40 List of stakeholders Section “Stakeholder engagement”, (2016) volume management”, p. 72 p. 58 Water 102-41 Collective bargaining Section “Interaction with trade unions”, agreements p. 66 GRI 303: Water and 303-1 Use of water resources Section “Water management and water discharge (2018) resources conservation”, p. 74 102-42 Identification and selection of Section “Stakeholder engagement”, stakeholders p. 58 303-3 Water intake Section “Water management and water 102-43 Approaches to engagement Section “Stakeholder engagement”, resources conservation”, p. 74 p. 58 303-4 Water discharge Section “Water management and water 102-44 Key topics and concerns raised Section “Stakeholder engagement”, resources conservation”, p. 74 p. 58

84 85 GRI ELEMENT INDEX WE TRANSFORM ENERGY INTO LIFE

GRI STANDARD AND INDICATOR PAGE NUMBER, SECTION EXCEPTIONS/ GRI STANDARD AND INDICATOR PAGE NUMBER, SECTION EXCEPTIONS/ YEAR OF PUBLICATION COMMENTS YEAR OF PUBLICATION COMMENTS Emissions Local communities GRI 305: Emissions 305-1 Direct greenhouse gas emissions Section “Greenhouse gas emissions”, GRI 103: Management 103-1 Materiality and boundaries Section “List of topics and Materiality (2016) p. 72 approach (2016) Map”, p. 83 305-4 Intensity of greenhouse gas Section “Greenhouse gas emissions”, 103-2 Management approach Section “Stakeholder engagement”, emissions p. 72 p. 58 305-5 Reduction of greenhouse gas Section “Greenhouse gas emissions”, emissions (COR2R) p. 72 103-3 Management assessment — Not conducted 305-7 NOx, SOx and other significant Section “Atmospheric air protection”, GRI 413: Local 413-1 Programs aimed at local Section “Stakeholder engagement”, harmful emissions p. 72 communities (2016) community engagement, local p. 58 community impact assessment and Waste local community development GRI 306: Waste 306-2 Total mass of waste by type and Section “Efficient handling and disposal disposal method of production wastes”, p.74 Customer health and safety Compliance GRI 103: Management 103-1 Materiality and boundaries Section “List of topics and Materiality approach (2016) Map”, p. 83 GRI 307: Compliance 307-1 Information on non-compliance Section “Greenhouse gas emissions”, (2016) with environmental laws and p. 72 103-2 Management approach Section “Customer safety”, p. 79 regulations 103-3 Management assessment — Not conducted SOCIAL CATEGORY GRI 416: Customer 416-1 Evaluation of product safety Section “Customer safety”, p. 79 GRI 103: Management 103-1 Materiality and boundaries Section “List of topics and Materiality health and safety (2016) for the consumer approach (2016) Map”, p. 83 103-2 Management approach Section “Human resources policy”, Comprehensive HR Additional information p. 62 policy covers all Power industry protocol G4-EU1 Installed capacity Section “Business profile”, p. 18 major topics in this GRI G4 area G4-EU2 Power generation Section “Key performance indicators for 2018”, p. 17 103-3 Management assessment — Not conducted G4-EU3 Number of household, Section “Geography of operations”, Employment industrial, institutional and commercial p. 8 GRI 401: Employment 401-1 Headcount and staff turnover Section “Staff turnover”, p. 63 customer accounts (2016) Employee/management relations Length of aboveground and Section “Main production underground power transmission and characteristics”, p. 20 GRI 402: Employee/ 402-1 Minimum notice periods Section "Human resources and social distribution lines by control mode management relations regarding significant operational policy”, p. 62 (2016) changes Allocation of COR2R or equivalent Section “Greenhouse gas emissions”, emissions allowances p. 72 Health and safety GRI 403: Health and 403-1 Representation of employees Section “Occupational health and safety safety (2016) in official joint health and safety councils”, p. 77 committees with the participation of representatives of management and employees

403-2 Types and frequency of Section “Types and incidence of workplace injuries, occupational occupational injuries”, p.78 diseases, lost work day rate, absenteeism rate in the workplace, total number of work-related fatalities

403-3 Employees with high injury rates Section “Employees of the Corporation and high risk of occupational diseases exposed to high injury risk”, p. 79

Training GRI 404: Training and 404-2 Professional development Section “Personnel training and education (2016) programs development”, p. 64 Diversity and equal opportunities GRI 405: Diversity and 405-1 Composition of governing Section “Employees structure by equal opportunities bodies category and sex”, p. 63 (2016)

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FINANCIAL STATEMENTS

88 89 FINANCIAL STATEMENTS WE TRANSFORM ENERGY INTO LIFE

90 91 FINANCIAL STATEMENTS WE TRANSFORM ENERGY INTO LIFE

92 93 WE TRANSFORM ENERGY INTO LIFE

GLOSSARY, ABBREVIATIONS

–– is an electric line for transmission of electric power through the wires located in the open air ISO –– International Organization for Standardization. Overhead power line and attached by means of insulators and fittings to supports or brackets. KEGOC –– Kazakhstan Electricity Grid Operating Company JSC. Overhead transmission –– are meant for transmission of electric power over a distance by wires. lines OHSAS –– International occupational health and safety management system.

–– is a unit of measurement of thermal energy used for assessment in the heat power industry, COSO –– Committee of sponsoring organizations of the Treadway Commission Gigacalorie heating systems and the utilities sector. JSC –– Joint-stock company. –– is a derived unit used to specify the amount of heat produced or used by some equipment per Gigacalorie per hour a unit of time. AEDC, Akmola EDC –– Akmola Electrical Distribution Company JSC.

Cooling tower –– is a structure shaped like an exhaust tower providing stack effect. АSCAHE –– Automatic system for commercial accounting of heat energy. ASCAE –– Automatic system for commercial accounting of electricity. Goodwill –– is the difference between the price of a company and the fair value of all its assets. GDP –– Gross domestic product. –– is an incombustible residue (in the form of dust) which consists of mineral impurities left after Ash combustion of fuel. OHL –– Overhead lines.

–– is a place for collection and disposal of waste ash and slag generated during combustion of OTL –– Overhead transmission lines. Ash dump site solid fuel at combined heat and power plants. WPP –– Wind power plant. Calorie (cal) –– is an off-system unit for measuring the amount of heat. Gcal –– Gigacalorie. –– is a device for generating pressurized steam or hot water through fuel combustion, use of Boiler Gcal/h –– Gigacalories per hour. electric power, heat of exhaust gas or technological process. SPAIID –– State Program for Accelerated Industrial and Innovative Development. Power transmission line –– is a structure consisting of wires (cables) and auxiliary devices for transmission of electric (PTL) power from power plants to consumers. GRES –– State district power plant.

Megawatt –– is a unit of power measurement in electricity production. GTPP –– Gas turbine power plant.

Pavlodar HNs –– Pavlodar heat networks HEPP –– Hydroelectric power plant. EBRD –– European Bank for Reconstruction and Development. –– is an electric installation used for conversion and distribution of electric power and consisting Substation of transformers or other power converters, switchgear, control devices and auxiliary facilities. FARD –– Fly ash removal device. Available capacity of a –– is installed capacity of a generating unit (plant) minus its capacity limitations. kWh –– kilowatt per hour. unit (plant) SC MNE RK –– Statistic Committee of the Ministry of National Economy of the Republic of Kazakhstan. Combined heat and power plant (CHPP, –– is a thermal power plant generating not only electric power, but also heat supplied to MW –– Megawatt. cogeneration heating consumers in the form of steam and hot water. plant MNE RK –– Ministry of National Economy of the Republic of Kazakhstan.

Transformer (from NGO –– Non-governmental organization. –– is a device for converting any significant properties of energy (e.g., electric transformer, Latin transformare – to torque converter) or objects (e.g., photo transformer). transform, to convert EP –– Environment protection.

–– is a combination of a steam turbine, electricity generator and exciter united by one shaft train; Pavlodar EDC –– Pavlodar Regional Electric Distribution Company JSC. Turbine generator it converts potential energy of steam into electric power. PCHP-2 –– Petropavlovsk combined heat and power plant No.2. Installed capacity –– is an effective value of the turbine generators’ rated capacity. PE –– PAVLODARENERGO JSC. Installed heat capacity of –– is the sum of all rated heating capacities for all the equipment commissioned under the act and –– Republic of Kazakhstan. the plant designed for supplying heat to external consumers and steam and hot water for internal needs RK –– Power grid area. Installed electrical PGA –– is total effective capacity of all turbo and hydropower generators of power plants in the energy capacity of the energy system in accordance with their passports or specifications. ICS –– Internal control system. system BoD –– Board of Directors. Wet scrubber –– is a device for wet ash and dust removal operating in the phase inversion mode. ABC –– Aerial bundled conductor. CTF –– Clean Technology Fund. NK REDC –– North Kazakhstan Regional Electric Distribution Company JSC. –– an analytical indicator, which means earnings before interest, taxation, depreciation and EBITDA amortization. SKE –– SEVKAZENERGO JSC.

ESAP –– Environmental and Social Action Plan. MM –– Mass Media.

94 95 GLOSSARY, ABBREVIATIONS WE TRANSFORM ENERGY INTO LIFE

CONTACTS

CENTRAL-ASIAN ELECTRIC POWER CORPORATION JSC RMS –– Risk management system. Head Office of CAEPCO JSC: SPP –– Solar power plant. 2 Dostyk St., SAAD Business Center, Nur-Sultan, 050012, Republic of Kazakhstan INR –– Inventories. E-mail: [email protected] LLP –– Limited liability partnership. Tel.: +7 (7172) 64-57-50

TPP –– thermal power plant.

ECHP –– Ekibastuz CHP. NAME/POSITION CONTACT DETAILS CHP –– Combined heat and power plant.

CAPEC –– Central-Asian power-energy company JSC. INVESTOR AND SHAREHOLDER RELATIONS:

CAEPCO –– Central-Asian Electric Power Corporation JSC. ALLA YAZOVSKAYA , 2 Dostyk St., Deputy General Director for Economy and Finance, Nur-Sultan, Republic of Kazakhstan PP –– Power plant. CAEPCO JSC Tel.: +7 (7172) 64-57-50 NATALIA BUKSHA, 2 Dostyk St., Chief Accountant, CAEPCO JSC Nur-Sultan, Republic of Kazakhstan Tel.: +7 (7172) 64-57-50 TALGAT ZHUMADILOV, 2 Dostyk St., Managing Director for Corporate Development, Nur-Sultan, Republic of Kazakhstan CAEPCO JSC Tel.: +7 (7172) 64-57-50 PERSON IN CHARGE OF THE ANNUAL REPORT PUBLIC RELATIONS DEPARTMENT, CAEPCO JSC 2 Dostyk St., Nur-Sultan, Republic of Kazakhstan Tel.: +7 (7172) 64-57-50

AUDITOR The auditor of CAEPCO JSC is PwC Kazakhstan located at: 34 Al-Farabi, 4th Floor, AFD Business Center, Almaty, A25D5F6, Republic of Kazakhstan

Tel.: +7 (727) 330 32 00 Fax: +7 (727) 244 68 68

REGISTRAR Integrated Securities Registrar JSC (state registration certificate No. 1678–1910–02‑АО issued on 11.01.2012 by the Justice Department of Almaty).

96 97 FOR NOTES

WE TRANSFORM ENERGY INTO LIFE