Our Contribution to the Power & Utilities Sector Development In

Our Contribution to the Power & Utilities Sector Development in Russia and the CIS

2020

KPMG in Russia and the CIS kpmg.ru Contents

Global challenges and trends 4

Evolving industry model 6

Why KPMG? 7

Our contribution to the sector development 8

KPMG Global Power & Utilities practice 9

KPMG Power & Utilities practice in Russia and the CIS 10

Our selected projects in the sector 13

Recent KPMG thought leadership and industry insights 28

Corporate social responsibility 30 3 Introduction

Vassily Savin Head of Power & Utilities KPMG in Russia and the CIS Partner

The Power & Utilities sector is undergoing a major analysis is a prerequisite for high-quality development transformation now. In Russia and many countries in of the energy strategy for each CIS country, both the CIS, the sector is characterized by considerable individually and in case of interconnection of power obsolescence of major equipment, large losses, and utilities in the EAEU states. KPMG long-standing extensive regulation. power sector experience, our global expert network and multiple projects for power companies enable us Companies of the sector face significant challenges to develop effective strategic solutions. when pursuing their pricing policy that would enable active investment in expensive solutions. KPMG has been working closely with the leading Therefore, to improve its competitiveness, efficiency, Power & Utilities companies both in Russia and the and profitability the sector needs long-term tariff CIS and abroad. For decades, we have been helping solutions, optimal implementation of capacity supply companies work efficiently, go smoothly through agreements, application of the alternative boiler complicated development stages and achieve method, and access to the best available technology commercial success. and global practice. Our team includes experts from around the world Current global trends including decarbonization and having wide-ranging experience in generation, transition to digital solutions and energy efficiency transmission, and distribution of power and the call for development of flexible regulatory treatment utilities sector. Therefore, we are well positioned of market participants to ensure the stability of energy to provide professional support in meeting any systems. A series of blackouts in different countries challenges. We speak the same language with shows that regulators increasingly underestimate the our clients. Our experts apply their insights into new threats to the stable power supply created by management, financial, technical, regulatory, and risk cyber security issues and changes in the energy mix management issues to create maximum value for our of countries and entire regions. In addition, current clients and mitigate all possible risks. massive expansion of COVID-19 and the fall of oil Our goal is to provide highly professional prices due to disagreements between OPEC and comprehensive services based on our long-term Russia will cause significant slowdown in the world international experience and tailored to specific economy and additional pressure on conventional requirements of each client. generation throughout the world. CIS ministries of energy, antimonopoly services and natural monopoly In this paper, you will find detailed information about regulation agencies, system operators and various KPMG and learn how we can help your company. associations of energy producers and consumers We are willing to use our best efforts to address your need to consider the best practices and goal-setting issues. problems facing their foreign counterparts. Such an

The global Power & Utilities sector is now facing far- As for governments, they continue to actively reaching and unprecedented changes and challenges. support RES all around the world, including through competitive auctions rather than by imposing tariffs. These factors include extreme economic turbulence, The transformation in the sector is fueled by the global attention to climate change issues, lack of heavier household and industrial use of electronic liquidity in financial markets, growing urbanization devices thanks to the personal income growth. And and the advanced increase in electricity consumption, this inevitably leads to increased power consumption. major legislative and regulatory changes, new and emerging technologies, including digitalization of all The transportation industry is moving away from industries, and the burgeoning alternative energy. traditional energy sources and the world community wonders how much time is left for the internal In view of the expected sharp increase in electricity combustion engine. Bloomberg expects that by 2040 consumption in emerging markets (in particular, China the total number of electric vehicles will exceed and India) and the critical need for modernization and 540 million.* Low-carbon development issues are replacement of infrastructure facilities in developed high on the agenda, which also emphasizes the countries, the Power & Utilities sector will face a importance of the electric power industry in the number of serious problems and challenges in the world. All these changes occur amid the blurring of medium term. boundaries between producers and consumers and In the coming decades, energy consumption may the appearance of large developing countries on the change the entire global market for technology and scene. energy sources. Experts forecast that investment in In view of the foregoing, the right amount and focus renewable energy sources (RES) will account for two of investment, adequate choice of energy sources, thirds of all energy investment by 2040. adoption of effective technology, achievement of operational efficiency, and creation of customer value are the keys to success in the Power & Utilities sector.

*Electric Vehicle Outlook 2019, Bloomberg BNEF

Power infrastructure modernization and tariff Digitalization, robotization and regulation machine learning

—— Grid upgrades and construction of new generation —— Greater investment of power companies in digital facilities solutions, Big Data analysis, grid modernization —— Traditional tariff regulation and green auctions programs, Internet of Things, blockchain, cognitive computing, automation, and artificial intelligence —— Investment – the role of governments and private investors —— Rapid growth of SMART technology and consumer- tailored solutions —— Cybersecurity and risk management in the power sector are now high on the agenda of boards. The main question for the management now is how Decarbonization much to invest and how to manage this investment and alternative energy to mitigate risks

—— Renewable technology costs are reaching grid parity. Global markets experience continued growth of investment in renewable technologies amid declining costs to produce renewable energy and a lower price per kWh. And this trend is expected to Decentralization pick up —— Transition away from fossil fuel sources and —— Distributed generation regulation of CO2 emissions. Many countries continue to move away from coal-fired generation —— Microgrids and non-traditional utilities systems and replace it with more environmentally friendly —— Development of energy storage facilities facilities, reducing air pollution and complying with —— Focus on energy efficiency and demand response global climate change regulations —— Reduced need for centralized generation and —— Greater demand for power due to the increased supply as customers become more active in adoption of electric vehicles and building heating buying and selling electricity

Democratization

—— Increased engagement of end-users in the electricity market (e.g. generation, storage, and trading of electricity)

The power industry landscape is changing rapidly: new energy models appear and markets are forced to adapt to these changes quickly.

Customers Customers Customers of energy as a commodity, as well as new product and service offerings from retail providers

TMT companies Large TMT companies playing significant role in industry TMT convergence: Infrastructure-TMT- companies Energy generation, transmission and sales, transport sector. Generation Storage providers Storage providers Both grid-level and local storage, such as battery, compressed Transmission System Operator air, thermal, and other storage technologies

Retail product and Metering services service providers providers Metering services providers Including metering and device Network maintenance, service connects and integrator disconnects, and meter data storage and analytics

Energy wholesale markets Market Energy wholesale operations markets Including wholesale operators, Oil and gas, utility traders, investment coal companies banks, and financial traders that participate in energy markets Oil and gas, coal companies O&G majors and coal companies Regulators supply fuel to P&U companies and are very connected with each other. Primary energy suppliers become Network integrator Regulators more and more significant investors into Renewable energy sector The ‘transformed’ distribution utility Government regulatory that will serve as the integrator of the commissions, inclusive of new Market operations diverse mix of generation entities, or transformed regulatory bodies transmission entities, and retail and at the federal, regional, and Traditional grids and independent customer demand municipal level system operators that manage grid interconnections and other activities Transmission System Retail product and service Operator providers Generation Traditional high-voltage, interre- Marketers and sellers of power Including traditional, renewable gional transmission grid operators, as a commodity, as well as ‘new’ grid-level, distributed generation, Energy System resilience products and services customer generation

Long-term experience Highly skilled team Thanks to its extensive experience and expertise, We have assembled highly qualified industry KPMG Global Power & Utilities practice is well professionals working together as a single team. We positioned for successful implementation of power also draw on experienced industry experts who have projects. worked with generation, transmission, distribution, and service companies in the Power & Utilities sector.

In-depth understanding of the industry Our professionals leverage their in-depth knowledge of engineering and construction, finance, risk We help companies develop robust, sustainable, and management, economics, and regulation. flexible strategies and operating models that can This allows KPMG to create value and reduce risks adapt quickly in a dynamically unfolding future. We for its clients in the face of the major challenges and understand that the objectives are to demonstrate trends shaping the industry. efficiency and security in generation and distribution, as well as to make improvements in environmental performance in the process of power, gas, and water supply.

KPMG is a global, comprehensive Power & Utilities service provider.

Clear strategy Customer connection Our global Power & Utilities industry vision and key We have organized a network of energy priorities are embraced and consistently deployed by professionals working at the local, regional, and all KPMG member firms around the world. global level.

Broad scope Forward thinking KPMG offers a comprehensive range of services We continue to invest in innovation, thought ranging from simple to complex operating leadership, and refreshing our existing models, from straightforward function review and methodologies. We also constantly monitor benchmarking projects to full-blown business customer satisfaction and engagement quality. This transformation programs. provides a stable platform for future growth.

Our Power & Utilities Centers of Excellence conduct regular surveys of and issue analytical reports on the market environment, business trends, and regulatory aspects both at the global and local level. KPMG member firms invest significant time and resources in deepening our understanding of the sector. This enables us to provide clients with strategic and insightful services that are genuinely tailored to their needs and are based on a real understanding of their challenges.

KPMG Global Energy Institute (GEI) KPMG Global Energy Transformation Conference We share our knowledge on key Power & Utilities It is a global event for Power & Utilities CEOs organized topics not only internally, but also with our clients. by KPMG. Every year, it brings together over 300 energy executives, luminaries, investors, regulators, and other In 2007, we set up the KPMG Global Energy Institute interested parties from more than 40 countries around (GEI). Now the GEI interacts with its nearly 35,000 the globe. The goal of the Conference is to provide registered members through frequent audio and video participants with new insights, tools, and strategies to webcasts, publications, and white papers. help them be in line with the latest trends and manage The GEI organizes regular global energy conferences industry-related issues and challenges. Participants of in the US (Houston), Europe (Paris/Brussels), the Conference have the opportunity to network in an Singapore, Mexico, Brazil, and India. informal setting and share effective practices. Every year, preeminent speakers share their views on the industry prospects at the Conference.

For more information, please visit: For more information, please visit: https://home.kpmg/xx/en/home/industries/energy/ https://home.kpmg/xx/en/home/insights/2019/03/kpmg- power-utilities.html global-energy-transformation-conference-2019.html

2019 conferences Business breakfasts at KPMG offices

Global Energy Conference (Houston) KPMG experts regularly organize business breakfasts to discuss main problems and current issues facing sector executives. These events are attended by representatives Global Energy Transformation Conference (Paris) of some of the sector leaders in the CIS and many other companies. LatAm Energy Conference (Mexico) Both KPMG professionals from different functions of the firm and guest experts speak at these business ENRich 2019 (India) breakfasts.

We have a number of dedicated Power & Utilities Centers of Excellence in key locations around the world working together as one integrated global network. These Centers help KPMG professionals around the world share their experience and knowledge quickly and openly and support private and state-owned power companies, service and utility providers.

Vassily Savin Head of Power & Utilities, 150 KPMG in Russia and the CIS of global experience and knowledge Moscow, Russia sharing Berlin, Germany

Budapest, Hungary London, UK

Madrid, Spain

Tokyo, Japan Paris, France

Calgary, Canada Gurgaon, India

Dallas, USA Johannesburg, Singapore South Africa

Ted Surette KPMG Global Head of Power & Utilities São Paulo, Brazil Sydney, Australia

The Power & Utilities sector, like any other That is why the methods and approaches used by our industry, faces various challenges and Audit, Tax & Legal and Advisory practices are flexible risks. They include cost pressures, aging and insightful, enabling our professionals to tailor their knowledge and experience to your specific needs. infrastructure, geopolitical uncertainties, regulatory constraints, digitalization and cyber Our goal is to provide comprehensive services threats. KPMG in Russia and the CIS recognizes customized to the specific needs of each client. As a rule, expansion into new markets and industries goes that each and every business is different, with hand in hand with development of new services. its own internal and external objectives and challenges to meet. Thanks to our ability to listen to the opinions of our clients and analyze the challenges they face, we continue to improve our current offerings and develop KPMG has been working in Russia for 30 years, and new types of services tailored to our clients’ needs our main goal has always been to use the firm’s global both internationally and in Russia and the CIS. intellectual potential, combined with the practical experience of our Russian professionals, to help leading companies achieve their goals. In recent years, KPMG in Russia and the CIS has been one of the fastest-growing KPMG practices in the world.

KPMG provides professional KPMG is one of the leaders in providing audit and advisory services to: services to major Power & Utilities companies

KPMG top global clients include: ENEL, GDF Suez, E.ON, Fortum, RWE, Mitsui & Co., Mitsubishi, PGE Polska, EDP Energias de Portugal, Electrobras, Korea Electric Power, China State Grid, Chubu Electric Power, Energy Australia, Jemena, Eskom Holdings, 87% Power Assets, Singapore Power, AES, Tuas Power, Vattenfall, Western Power.

of the largest* Power & Utilities companies included in the RAEX-600 ranking, 2019

86% Our selected Power & Utilities clients in Russia and the CIS

Russia Belarus —— Enel Russia —— Modus Energy of the largest* Power & Utilities companies according to the —— EuroSibEnergo —— Modus Projects RBC-500 ranking, 2019 —— FGC UES —— Recovia —— Fortum Ukraine —— Gazprom Energoholding —— Hevel —— Donbasenergo —— Inter RAO —— DTEK —— Mosvodokanal —— Kievenergo —— Rosatom —— NNEGC Energoatom —— Rosvodokanal 74% —— Rusenergosbyt Armenia —— RusHydro —— Electric Networks of Armenia —— Russian Grids —— Siberian Generating Company Georgia —— T Plus —— Georgian State Electrosystem of the largest** Power & Utilities —— TNS Energo —— Georgian Water and Power companies from the Forbes 2000 list, 2017 —— Unipro —— Nenskra Hydro —— Sakrusenergo Kazakhstan Azerbaijan —— Ekibastuz GRES-1 and GRES-2 power plants —— Azerenerji —— CAEPCO —— Azerishiq —— Kazakhstan Utility Systems * Companies with revenue exceeding RUB50 bn —— KEGOC Uzbekistan ** Revenue in terms of KPMG services exceeds USD250,000 globally —— Samruk-Energy —— Uzbekenergo

KPMG in Russia and the CIS

Lviv Minsk Saint Petersburg

Moscow Nizhny Novgorod Kiev Voronez Perm Kazan 30 YEARS IN RUSSIA Rostov-on-Don Ufa Ekaterinburg

Krasnoyarsk Tbilisi Atyrau Yerevan Novosibirsk

Nur-Sultan Baku Vladivostok

Tashkent Almaty

Bishkek 9 23 5 500 countries offices professionals

Our awards

No. 1 Audit firm Leading Audit and KPMG in Russia KPMG in Russia – KPMG is a Top 5 KPMG in Ukraine is in Russia Advisory Firm is a top rated Tax Tier 1 Transfer Firm in Corporate in Best Lawyers 2020 in Kazakhstan Advisory Firm Pricing Firm Law/Mergers rating & Acquisitions, Taxation, and Dispute Resolution

2009–2018* 2010–2018 2014–2019 2014–2019 2018–2019 2020

KPMG in Russia KPMG in Russia KPMG in Ukraine KPMG in Pravo.Ru- KPMG ranked No. 2 KPMG in Ukraine in Legal 500 rating in Legal 500 rating recognized in Tier 1 300 best law firms among top-10 leading recognized among in Tax Law category in Commercial, in Tax Law rating Microsoft AI service Market Leaders in 2016 Corporate and M&A providers Ukrainian Law Firms category Rating Survey

2015–2018 2016, 2018 2019 2016–2019 2019 2016

KPMG recognized KPMG in Ukraine Russia & CIS Legal Awards 2018 Legal Awards 2016 KPMG one of the as Leading Financial recognized in 2018 colleagues win Deal names KPMG Law in recognizes KPMG in best international Advisor Market leaders: Advisory 2018 EMA Ukraine taxation leader Ukraine as Law Firm consultants on Russian Ukrainian legal firms Engagement Award of the Year M&A market rating in taxation

2018 2018 2018 2018 2016 2016–2017

* RAEX (Expert RA) Rating Agency, ratings of the largest audit firms in 2009-2018

2012—2017 гг. 2013—2017 гг. 2013—2017 гг.

Audit KPMG Audit team is recognized as one of the market leaders. Many of the largest Power & Utilities companies are among our audit clients.

Long cooperation with leading Power & Utilities companies has helped us build up extensive experience in the audit of financial statements and enabled us to provide deep insights in this area. We are well aware of the risks and challenges Power & Utilities companies face, and we are able to effectively assess these challenges and help our clients resolve them. In our work, we use both local knowledge and international experience and collaborate closely with our global KPMG network. KPMG is recognized as one of the leading audit firms in the market, which has been repeatedly proved in the annual RAEX rating (Expert RA).

Selected projects

EuroSibEnergo Mosvodokanal TNS Energo

Audit of financial Audit of financial Audit of financial statements according statements according statements according to international to international to international standards standards standards

2013—2020* 2016—2020 2012—2020

Atomenergoprom FGC UES TGK-13

2013—2020 2013—2017 2013—2017

* Hereinafter the period of service provision

Tax & Legal KPMG offers a wide range of tax and legal services and has unique experience of providing comprehensive tax support for projects implemented by Power & Utilities companies.

Cooperation and well-established communication with our clients and foreign partners have given us an in-depth understanding of tax issues when structuring Power & Utilities projects. We offer comprehensive project tax support services to Power & Utilities companies: ——Tax advisory services including the analysis and development of tax-efficient corporate, financing, and operating structures for projects ——Tax support of EPC (infrastructure) projects in the Power & Utilities sector ——Assisting with the receipt of tax rulings in foreign jurisdictions ——Tax structuring related to the management of personnel working in Russia and foreign jurisdictions ——Tax and accounting support for foreign assets of power companies ——Tax advisory services with respect to the rules on controlled foreign companies (CFC), including preparation and verification of CFC reporting ——Assistance with development of draft tax laws for governmental agencies and private companies.

Selected projects

Solar power company Power generating Boguchanskaya HPP Rusenergosbyt company Tax and legal advisory Transfer pricing tax Preparation Substantiation of services, advice on advisory services of documents tax accounting for antitrust laws substantiating the transactions with an prices used when selling incomplete package electric power and of primary documents, capacity to a related including those related company to losses and challenging of the hydroelectric of prices or amounts power plant of electric power by consumers

2019 2019 2016 2014

Nuclear power System operator of the OESK Russian Grids company Unified EnergySystem Preparation of Tax structuring of Preparation of a draft documentation related transactions to contract to provide a to construction deals, construct a power package of services, Tax support purchase of services, sale generation facility in including the services of during audits of capacity to related Russia under a capacity the sole executive body companies by the largest delivery agreement and related services, to Russian power generation and implementation distribution entities company of measures to decommission generation facilities

2013 2012 2012 2006—2014

Deal Advisory Thanks to a solid portfolio of Power & Utilities projects, the Deal Advisory team of KPMG in Russia and the CIS is one of the most experienced in the market for advisory services for this sector.

According to our clients and experts, our practice is the leader in Valuation in Russia and Central Asia. Our key services for major Power & Utilities companies include: ——Appraisal and valuation of the business, share capital, tangible and intangible assets ——М&A support and structuring of joint ventures ——Support for transactions to raise project/debt financing ——Restructuring support ——Financial modeling ——Commercial due diligence and market analysis ——Project management office (PMO) services ——Public-private partnership ——Energy system assessment, energy reforms and tariff regulation

Selected projects

Inter RAO — Electric Lenenergo Samruk-Energy Asian Development Ekibastuz GRES-2 Power Plants Bank power plant Valuation, financial, tax Valuation of the Leading financial and legal due diligence company and advisor (M&A) in the Fair value Development of the in the context of a its subsidiaries course of privatization determination for financial and economic potential acquisition and affiliates for of a number of power power companies in model for raising of a machine-building reorganization companies Uzbekistan finance to construct a facility in Russia purposes new generating unit. Valuation projects

2019 2019 2016—2019 2018—2019 2009—2019

Large utility RusHydro E.ON Connecting KEGOC Renova Group company Energies

Determination Valuation of two Determination of the Advisory services to Valuation of 100% of the fair value power companies market value of five support the acquisition of shares and fixed of T Plus and for the purpose of dams of the Angara of a generation facility assets (power subsidiaries for IFRS the purchase price HPP cascade transmission line) accounting purpose allocation (PPA) of Batys Transit

2018 2016 2016 2015 г. 2016—2019

Centrenergoholding Fortum Georgian power TGK-1 Mosenergo companies

Determination of the fair value of a Transaction HPP valuation Analysis of the Revaluation of fixed renewable energy advisory services on St. Petersburg heat assets, equipment facility in Europe acquisition of solar supply system, financial for installation, power plants model preparation for construction- heat generation and in-progress and distribution investment property for IFRS reporting purposes

2016—2019 2017—2018 2016—2018 2013—2015 2008—2011, 2014

Energy System assessment, Energy reforms and Tariff regulation

KPMG professionals have extensive experience of providing tariff policy and tariff regulation services. We use our in-depth understanding of the industry and vast expertise to provide our clients with comprehensive solutions in this area.

We provide our services to government bodies, companies subject to regulation, and investors. Our tariff policy and tariff regulation services include: ——Comprehensive analysis of the tariff regulation methodological framework, analysis of best practice ——Development of tariff methodologies and the regulatory regime ——Tariff modeling and scenario analysis ——Benchmarking of tariffs, expenses, and key performance indicators ——Determination of economically justified expenses ——Methodology of projects prioritization for an investment program ——Determination of economically justified profit ——Incentive-based regulation mechanisms ——Analysis of compliance with tariff decisions and approved investment programs ——Valuation of the regulatory asset base (RAB) ——Advice on resolution of disputes with regulators.

Selected projects

TNS Energo EBRD Tetra Tech EBRD

Analysis of tariff Development of Development of Review of electricity decisions in terms of recommendations to recommendations distribution tariff their compliance with improve tariff setting on the organization regulation in Armenia existing Russian laws mechanisms in the water of renewable energy (as part of transition supply and sewage sector auctions in Kazakhstan to the benchmarking of Kyrgyzstan tariff-setting method)

2019 2018—2019 2018—2019 2018

EBRD EBRD Inter RAO EBRD

Infrastructure Coordination within Advisory services on Belarus Sustainable Regulation and Tariff the project of reforming tariff regulation in Energy Finance Facility Policy Development: the system of tariffs various CIS countries (BelSEFF): assistance Implementation for in Kazakhstan (PMO): to EBRD and the electricity transmission electricity transmission Ministry of Energy of and distribution pilot and distribution, heat Belarus in analysis and project in Kazakhstan supply, water supply recommendations on and sewage tariffs for renewables

2016—2019 2016—2019 2016—2018 2014

System Reliability and Energy Planning

Our team has extensive experience of dealing with the largest power systems, including the energy union of post-Soviet countries – the Unified Energy System/ Interconnected Energy System (UES/IES), the European network ENTSO-e, and power systems of the Southeast Asia. This enables us to identify and apply the best practices of reliability management and market development.

We provide the following services to national ——Efficiency assessment for investment system operators, market operators, programs aimed at improving reliability government bodies, and international ——Preparation of development programs development institutions: independent for synchronous interconnections and assessment of the state and reliability risks international power markets of energy systems, investigation of the ——Development of scenarios for integration of causes of system blackouts, assessment independent power producers, distributed of the maturity of market, industry, and generation, and demand management corporate processes, and development of long-term growth programs. ——Development of scenarios for decarbonization, integration of renewable Our services include: energy facilities, and establishment of low- ——Independent audit of system reliability carbon power systems and investigation of system blackouts and ——Project office services for corporate incidents development programs and sector reforms ——Development of methodology to ——Advanced training of non-technical forecast demand, reserves and planning management of electric power companies procedures and investors in assessing system reliability ——Preparation of medium- and long-term risks, designing power and ancillary services development programs for bulk power markets, assessing ‘benefits and costs’, and systems, transmission power grids, making investment decisions dispatch control systems, and the market for ancillary services

Selected projects

Electricity company KEGOC SARPEX International Financial US Power in Azerbaijan Institute Utility Company

Program for System operator Development of the CAPS cross border Resilience and Risk rehabilitation and corporate concept of a single energy power and Modeling development of the transformation regional electricity auxiliary services power system of program market in South Asia trading concept Azerbaijan after a (KPMG in India) blackout

2019 2019 2019 2019 2019

Finance and Treasury Management KPMG offers expert solutions to manage the treasury function, the working capital, and corporate financial risks.

Treasury Working capital function management

KPMG is a leading advisory firm providing Our team has vast experience of determining professional services to corporate treasury functions the best structure of current assets, managing in Russia and the CIS. KPMG professionals hold accounts receivable, inventory, and other relevant international certificates and regularly elements of current assets, determining receive positive feedback from corporate treasuries the maximum possible level of short-term of major Russian and CIS companies. investment, managing short-term financing sources, etc.

Corporate Financial Risk Dynamic discounting Management platform

KPMG is always ready to examine and benchmark your KPMG has developed the first dynamic risk management functions, assist you in developing discounting platform in Russia – a web- an up-to-date system to manage liquidity, market, based platform for efficient direct interaction credit, and project risks taking into account the best between buyers and suppliers to agree early practice and industry specifics, including the regulatory payment discounts. This KPMG platform framework development, establishing a system of enables making mass trade deals online limits on the level of risks, building a scoring model and thereby ensures increased profitability to calculate limits for banks, and introducing machine and faster cash turnover for all parties to the learning to determine the credit quality of counterparties. transaction.

Selected projects

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Large Russian power Nuclear power Large energy dd.kpmg.ru company company company in Kazakhstan You can find more information about the Introduction of a new Analysis and Introduction of a new platform on our website: https://home. treasury and corporate improvement of the treasury and corporate finance system risk management finance system kpmg.com/ru/ru/home/ services/advisory/ system management-consulting/ finance- and-treasury-management/ dynamic- discount-platform.html 2017—2018 2017—2018 2017—2018

Nuclear power Nuclear power Large grid company Large Russian power company company company

Examination and Improvement of the Examination and Development of the benchmarking risk management optimization of target model of an (against foreign peer system the management integrated treasury companies) of the structure for the Group; risk management methodological system support of automation

2015—2018 2017 2017 2017

Strategy & Operations

KPMG Strategy & Operations team successfully implements projects to develop organizational structures and governance models and to drive business transformation for leading Russian and international Power & Utilities companies.

Thanks to our past and ongoing experience in the sector, we have gained considerable expertise in methodologies for strategy development, creation and reorganization of corporate centers, analysis and design of business processes and the KPI system. In cooperation with our clients, we identify key success factors and main cost drivers for the company. We help our clients implement efficient operating models, improve the price-quality ratio of outsourcing, reengineer processes, and enhance the corporate culture – and thus achieve significant cost reductions. Our team offers the following services: ——Formulation of the development strategy and evaluation of strategic options ——Development of the company’s market and portfolio strategies ——Preparation and delivery of strategic sessions and workshops ——Transformation of the operating model ——Cost optimization ——Establishment and optimization of Shared Service Centers ——Process outsourcing ——Improvement of the reliability of production lines and introduction of Lean, Six Sigma ——Management of business processes and investment.

Selected projects

Unipro Sakrusenergo Nuclear power company Increasing operational Benchmarking Creating and testing a efficiencies of the the company’s template solution to company’s units in the key performance manage risks inherent Russian power sector indicators against in nuclear power plant those of foreign construction projects peers

2013—2017 2016—2017 2013—2017

Procurement & Supply Chain

KPMG Procurement & Supply Chain is a unique team in the Russian market of advisory services combining best practice in supply chain management with practical industry experience gained at procurement departments of leading Russian companies.

We successfully implement complex projects to transform procurement systems and carry out targeted improvements to the procurement system: optimization of warehouse and transport logistics, support of procurement procedures, development and implementation of category and procurement strategies. The team has been successfully working both with private and state companies whose operations are governed by existing government procurement laws. We have gained unique experience and expertise in procurement operating models, development and implementation of KPIs for procurement departments, and price benchmarking. The results of our services can be easily put into practice and produce a positive effect on our clients’ financial performance.

Selected projects

Nuclear power Nuclear power company company

Analysis of the Procurement efficiency of tenders optimization

2018 2014

Risk Management, Forensic and Compliance KPMG Risk Consulting group consists of more than 150 professionals having diverse qualifications and experience. This allows us to put together highly efficient teams for each engagement.

Internal Audit, Risk & Compliance KPMG was the first to establish its Forensic Services professionals provide a full range practice in Russia among other Big 4 firms of services to assess and improve internal and has maintained its lead. Our Forensic audit and control systems. The most professionals provide a wide range of services relevant services for the Power & Utilities including: sector include: ——Investigation of fraud and unethical behavior of ——Independent assessment of the employees and counterparties effectiveness of the internal audit ——Development and independent assessment function, including its compliance of anticorruption compliance and fraud with international standards and best management systems practices of internal audit ——Expert witness services in legal proceedings ——Advice on development and ——Construction coordination, organization of enhancement of the system of internal the project management office, development control and risk management of policies and procedures to monitor project ——Development of key internal implementation and control the construction regulations. process ——Search for assets of individuals and legal entities; counterparty due diligence ——Data mining, copying and processing data in Selected projects accordance with laws for subsequent use in court ——Outsourcing of the ethics and anti-corruption hotline Russian Grids Power grid company ——Determination of the company status under FATCA and CRS, development of the company Compliance Comprehensive classification methodology for FATCA and CRS training assessment of the maturity of the existing purposes, preparation of recommendations to compliance system introduce certain provisions/clauses to relevant contracts for risk management purposes, and running training courses for employees 2017 2015 involved in FATCA and CRS projects.

Information and Cyber Security In today’s world, information has become one of the most valuable assets for almost every organization. Information and communication technology underpins nearly all business processes.

Information has a huge impact on social processes, so proper protection of the company’s data is key to its competitiveness and development. Our information risk management services include:

IT Management Cybersecurity

——IT strategy ——Information security strategy ——IT operating model (organizational ——Penetration testing structure, processes, financial model, staff ——Analysis of the security of the network infrastructure, and competencies, efficiency, sourcing) application systems, and payment devices ——IT architecture (data management, ——Assessment of employee awareness of information business applications, data transfer, security issues and development of training processing and storage infrastructure) programs ——Business continuity ——Implementation and assessment of the information security management system complying with ISO 27001:2013 ——Development of information security regulations ——Personal data protection services

Digitalization Controls and ERP

——Data analysis development strategy ——Implementation of GRC systems ——Data analysis operating model ——Introduction of separation of duties principles ——Automation of routine operations ——Implementation of automated control procedures ——Machine learning to automate the ——Analysis of business processes and IT systems decision-making process ——Advanced analytics ——Innovation in business Selected projects

Over the last decade, KPMG Information Risk Management team has implemented (as part of Major Russian power KES-Holding financial statement audit services) several hundreds company of IT audit projects, including a number of such projects for the Power & Utilities sector. These IT strategy SAP ERP development implementation projects have reduced the risk of misrepresentations quality control in financial statements. Moreover, we have developed recommendations that help our clients improve their internal IT controls and increase the level of 2017 2009—2010 confidentiality, integrity, and availability of critical data.

Data & Analytics KPMG Data & Analytics team brings together experts and academicians having deep knowledge of artificial intelligence (AI), machine learning, physics, neuroscience, and applied mathematics.

Thanks to our cooperation with KPMG ——Implementation of industrial data lakes as a Lighthouse, an international community single source of truth of data analysis professionals, we are ——Development and implementation of able to share our experience and keep predictive maintenance analytical systems up to date with global AI trends. With that help reduce repair costs and operating our AI resource platform KPMG Ignite, expenses, improve energy efficiency, stability, we are able to offer our clients the most and reliability of power plants and grids advanced AI tools, solution capabilities, ——Analysis of the root causes of deviations and accelerators designed to move from the production cycle, digital detection of quickly and capture the most value in this abnormal behavior of equipment, application era of exponential technology change. of modern methods of monitoring the Today, many of our products are based condition and assessing the risks of on modern AI and machine learning equipment and power plants technologies. These products help our ——Optimization of processes at power clients perform a wide variety of business generation, transmission, sale, and tasks and improve their efficiency. distribution facilities based on accumulated Our data analysis services for the data, combination of physical models, and Power & Utilities sector include: real-time predictive and prescriptive analytics ——Development of the data management ——Development and implementation of strategy, formulation of the company’s decision support systems, optimization of vision for data analysis in accordance the planning process, and improvement of with its business goals, and building design solutions. confidence in data, data management, data storage, and prepared reporting —— Establishment of artificial intelligence and predictive analytics centers of excellence, equipping staff with analytical tools, processes, and decision- making capabilities

Selected projects

Major power Power Large utility Large utility company company company company

Development Analysis, segmentation, Development of Analysis of utility data of the digital and construction of asset management transformation customer behavior tools to optimize strategy models to identify those investment customers who may leave the company

2018 2016 2018 2016

Major Projects Advisory

KPMG provides a variety of services related to analysis and support of investment and construction projects to optimize their implementation in terms of costs and time. Thanks to their own competencies and vast experience of KPMG, our clients are able to properly respond to the main challenges inherent in implementation of Power & Utilities projects.

Our services include:

Project Control and management monitoring

——Project office development ——Construction control / financial and ——Budget preparation and cost construction compliance monitoring management ——Financial and technical supervision ——Planning and schedule management ——Development of fraud and abuse ——Design management prevention mechanisms ——Support of PPP projects ——Procurement management ——Acting as the construction owner’s independent technical representative Optimization of ——Dispute resolution business processes ——Risk management ——Efficiency assessment and development of target business processes to manage the Expert review company’s capital construction projects ——Financial and technical review ——Implementation of software tools of investment and construction to manage capital construction projects projects (SAP, BIM) ——Budget analysis/estimated cost examination ——Design solutions review Selected projects

Hydroelectric power State district power Combined heat and Grid company complex in the south plant in Siberia power plant (CHPP) in in Kazakhstan of Russia the mid-Volga region

Legal and technical Analysis of the volume Organizational and Development of target analysis of an and cost of work to erect technical analysis of business processes investment project to scaffolding during repairs the reasons for delays for the capital projects build a hydroelectric and restoration of the in construction of the department as part of power plant in the power plant CHPP in the mid-Volga the holding company’s south of Russia region transformation

2018 2018 2017 2017

Sustainability Services

KPMG has many years of extensive experience in corporate governance and sustainability services in Russia and the CIS. Over these years, our professionals have gained considerable expertise enabling them to implement complex projects related to the economic, social, and environmental impact.

KPMG provides a full range of sustainability services: Non-financial reporting services: ——Formulation of sustainable development strategies and improvement of operations ——Development of the system to account for, sustainability consolidate, and present non-financial data ——Improvement of corporate governance ——Preparation of sustainability reports ——Identification, assessment, and ——Independent verification of non-financial management of non-financial risks statements ——Environmental and social assessment ——Preparation of annual reports and sustainable development reports Sustainability management ——Equipment reliability, occupational health system services: and safety (OHS). ——Comprehensive diagnostic review of the ——Models and analytic solutions for sustainability management system forecasting and quantitative modeling of nonfinancial risks ——Development of the strategy and the target sustainability management system Selected projects ——Development of target processes and sustainability management tools ——Solutions for forecasting energy prices, climate change and its impact Large distribution Nenskra Hydro company

Scoring of Building Operational risk counterparties using sustainability machine learning management management services: techniques to calculate system provisions under IFRS 9 for thousands of counterparties ——Identification and assessment of operational

2019 2016 risks ——Implementation of integrated solutions for management of risks related to occupational health and safety, reliability of production

KEGOC Samruk-Energy processes, environment and social risk management ——Development of client-tailored solutions to Development of target Improvement of corporate OHS processes governance ensure personnel safety, reduce environmental impact, increase reliability of operations, and reduce production risks ——Automated assessment of operational risks’ 2016 2010—2013 impact on company KPIs

Energy Efficiency Services

KPMG has considerable experience in comprehensive assessment of energy efficiency of power sector companies and enterprises from energy-intensive industries.

When implementing projects, we consider the context of the organization and evaluate various factors. Thanks to an in-depth analysis of processes and the risk-based approach, we are able to transform the system and achieve its high performance. KPMG provides a comprehensive range of services: ——Advice on implementation of energy management and environmental management systems (ISO 50001:2018, ISO 14001:2015), including as part of the integrated management system (IMS) ——Development of corporate policies, strategies, and internal regulations on energy efficiency management ——Industry-specific comparative analysis of energy efficiency indicators of processes ——Establishment of the KPI and monitoring system, assessment of achievable potential and determination of target KPI levels ——Assessment of effectiveness of energy programs, development of recommendations for implementation of global and regional best practices

Selected projects

Major metals & mining Major metals & Large power EBRD company mining company industry association

Benchmark analysis Development of the target Development of Belarus Sustainable of energy intensity model for the energy methodology for Energy Finance Facility of production and management system measuring project (BelSEFF): administration identification of best as part of the performance of EBRD credit lines practices and energy- transformation program through Belarusian partner efficient technologies. banks for energy efficiency Calculation of target KPIs and renewables projects financing 2019 2019 2019 2011—2019

Large power company EBRD, Enviros Power market trader Power grid company in Kazakhstan

Analysis of technical and Quantification of Analysis and Development of target financial aspects of EBRD greenhouse gas development of business processes as pilot program on Minsk emissions according recommendations part of the company’s residential sector energy to ISO 14064 to improve business transformation efficiency enhancement processes

2011—2018 2017 2016 2016

Leading the field means more than just having a Our experts regularly join key industry events and strong client base. Being the leader also means forums as speakers and moderators and their investing in developing thought leadership and comments on topical industry issues can be found in spearheading industry debates at various events. the business press, including Kommersant, Vedomosti, RBK, Forbes, Rossiyskaya Gazeta, etc. This helps us keep our clients at the forefront of progressive thinking and industry trends and gives our people the skills and knowledge to provide professional and customized services our clients require.

Eastern International Economic Arctic Forum Forum (EEF) Russian Business Week held by the Vedomosti Russian Union of Russian conference: Industrialists and Astana International Russian The Future of Entrepreneurs Economic Energy Forum Energy Week Renewable (RSPP) Forum (RIEF) (REW) Energy in Russia

2018 2020

Russian Atomexpo St. Petersburg INNOPROM KPMG Global “Power Grids” Investment International Energy International Forum Economic Transformation Forum Forum (SPIEF) Conference

Krasnoyarsk Kommersant: “Power Economic Industry: New Rules, New Forum (KEF) Opportunities” Conference

Power & Utilities Risks, 2019 NPP and Utilities Great Expectations|Deal making in the renewable energy sector

The future of HR 2019: In the Know Harvey Nash / KPMG CIO Winning the race for the customer or in the No: Power & Utilities Survey 2019

Connected energy: The Power of Digital The battle for growth Fueling the future

You can find our most recent industry-specific publicationshere (https://home.kpmg/xx/en/home/insights/2015/04/energy-publications.html).

KPMG is committed to being a responsible corporate citizen and is one of corporate charity leaders.

Our 2019 figures 3 355 226 Volunteer hours Intellectual volunteering hours 1 869 000 26 509 000 Employees’ Corporate donations donations

Projects we are proud of

KPMG sees corporate social responsibility as commitment to corporate values, respect for the individual, cooperation with local communities, investment into future generations, and environmental protection.

Our projects include:

KPMG Charitable Green initiatives Foundation The Foundation was established to promote the Promoting responsible environmental behavior among development of professional services for vulnerable our employees (collection of household appliances and children in Russia. We are well aware that our batteries for safe recycling and disposal, waste sorting, professional services have a great impact on the collection of necessary things and visits to animal economic success of our clients. We follow the same shelters, and other projects). approach in our corporate philanthropy. Professional services in the social area may also significantly improve the life of our clients. We are ready to make the investments. Every year, the Foundation “People, not Things” project helps eight leading non-profit companies providing In partnership with the best non-profit service professional services to socially and physically organizations, we offer our employees to make disadvantaged children and promoting up-to-date social investments in development of professional social technologies (https://www.kpmgfoundation.ru). services for vulnerable children. Regional non-profit organizations providing professional services to vulnerable children join the project. 2019 was the eighth year of the project. From the start of the “Confident Start” project, KPMG employees have in total donated 6,460,000 rubles to develop professional services for The program was launched in 2017 to provide children vulnerable children. with complicated and multiple developmental disorders with early intervention services. This approach has proven its effectiveness and has been successfully used in all developed countries of the Summer camp for children with world for over 30 years. Ninety Moscow families special needs near Lake Valdai taking care of children with such disabilities from their For the past eight years, KPMG employees have been birth to the age of three receive professional services traveling to the Valdai National Reserve where the at home. The services are aimed at developing new Center for Curative Pedagogics has a camp for children skills in children, improving the quality of their life, with developmental disorders. Here families raising preventing secondary complications, and supporting such children can enjoy the outdoors in comfort and their families. In 2018, the program received the meet other parents. Every year, KPMG volunteers prestigious CSR Leaders Award in the nomination of make their great contribution to the development of the Ministry of Economic Development of the Russian the camp’s infrastructure, building additions, repairing Federation (http://www.confidentstart.ru/). and improving the grounds and buildings. In 2019, over 100 employees from eight regional offices visited the camp.

Donor’s Days at KPMG

Annually, over 600 employees give blood to help Needed and Useful project treat young patients at federal Moscow clinics in cooperation with the Gift of Life charity foundation. Twice a year, in partnership with the Civic Assistance charity we collect needed and useful household goods, clothes, shoes, books, and toys for children and their parents who came to Russia as refugees or forced migrants.

Russia and the CIS

Vassily Savin Head of Power & Utilities, KPMG in Russia and the CIS Partner T: +7 (495) 937 4477 E: [email protected]

Ukraine Belarus

Dmitry Aleev Irina Vereschagina Head of Power & Utilities, Head of Power & Utilities, KPMG in Ukraine KPMG in Belarus Partner Partner T: +380 (44) 490 5507 T: +3 (751) 737 27 257 E: [email protected] E: [email protected]

Georgia and Armenia Uzbekistan

Vitaly Yakovlev Nodirbek Vakhidov Head of Power & Utilities, Head of Power & Utilities, KPMG in Georgia and Armenia KPMG in Uzbekistan Partner Partner T: +7 (495) 937 4477 T: +7 (343) 253 0900 E: [email protected] E: [email protected]

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