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Jsc Ogk-2 Annual Report 2017

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Jsc Ogk-2 Annual Report 2017 JSC OGK-2 ANNUAL REPORT 2017 JSC OGK-2 ANNUAL REPORT 2017 This 2017 annual report (hereinafter referred to as the “Annual Report”) has been prepared using the information available to Joint-Stock Company “Second Wholesale Power Market Generating Company” (hereinafter, OGK-2, or the Company) at the time of its preparation. Some statements included in this Annual Report of the Company are forecasts for future events. Words such as “plans”, “will be”, “expected”, “will take place”, “estimates”, “will total”, “will occur”, and the like are forecasting by nature. Investors should not fully rely on the estimates and forecasts as they imply a risk of contradiction to reality. For this reason, the Company warns that the actual results or course of any events may significantly differ from forecast statements included in this annual report. Except as otherwise established by the applicable laws, the Company does not undertake to revise or confirm any expectations and estimates or publish updates and changes of forecast statements of the annual report as a result of any subsequent events or if new information becomes available. The information about the Company’s management staff is provided under the Federal Law No. 152-FZ “On Personal Data” dated July 27, 2006. 2 JSC OGK-2 ANNUAL REPORT 2017 Table of Contents 1. INFORMATION ABOUT THE COMPANY ............................................................................. 5 ADDRESS BY CHAIRMAN OF THE BOARD OF DIRECTORS OF JSC OGK-2, DIRECTOR GENERAL OF GAZPROM ENERGOHOLDING LLC D.V. FEDOROV ..... 10 ADDRESS BY DIRECTOR GENERAL OF JSC OGK-2 S.A. ANANYEV ........................ 11 1.1. Business Model ....................................................................................................................................... 12 1.2. Key Events ............................................................................................................................................... 14 1.3. Organizational Structure ...................................................................................................................... 16 1.4. Industry Overview ................................................................................................................................. 20 1.5. Competitive Overview ............................................................................................................................. 29 2. DEVELOPMENT PRIORITIES ................................................................................................ 34 2.1. Company's Mission and Development Priorities ............................................................................. 34 2.2. Facility Modernization Prospects for Until 2030 ............................................................................. 36 2.3. Project Efficiency .................................................................................................................................... 38 2.4. Key Performance Indicators ................................................................................................................ 39 2.5. Investment Program .............................................................................................................................. 39 2.6. Innovative Development ...................................................................................................................... 41 3. COMPANY PERFORMANCE IN 2017 ................................................................................. 43 Address by Deputy Director General for Economics and Finance ............................................................. 43 3.1. Operating indicators ............................................................................................................................. 44 3.2. Financial results (IFRS) ......................................................................................................................... 51 3.3. Financial results (RAS) .......................................................................................................................... 57 4. SUSTAINABLE DEVELOPMENT ......................................................................................... 60 4.1. Corporate values .................................................................................................................................... 60 4.2. Stakeholders ........................................................................................................................................... 61 4.3. Human Capital ........................................................................................................................................ 62 4.4. Social Partnership .................................................................................................................................. 68 4.5. Environmental Protection .................................................................................................................... 70 4.6. Supply Chain ............................................................................................................................................ 74 4.7. Supplier Relations and Anti-Corruption ............................................................................................ 77 5. RISK MANAGEMENT ............................................................................................................... 80 5.1. Corporate Risk Management System ................................................................................................. 80 5.2. Risk Classification and Assessment .................................................................................................... 82 5.3. Analysis of financial risks ..................................................................................................................... 94 6. CORPORATE GOVERNANCE ............................................................................................... 96 Address of the Corporate Secretary as Regards the Main Changes in the Company Corporate Governance for 2017 and Plans for the Near Future .................................................................................... 96 3 JSC OGK-2 ANNUAL REPORT 2017 Memorandum of the PJSC Gazprom Intentions in Respect to Controlled Companies: JSC Mosenergo, JSC MIPC, JSC OGK-2, JSC TGK-1. ........................................................................................................................ 97 6.1. Principles of Corporate Governance .................................................................................................. 98 6.2. OGK-2 Corporate Governance Improvements in 2017 and Plans for 2018. ............................. 100 6.3. Assessment of Compliance with the Corporate Governance Principles .................................... 101 6.4. Corporate Governance Structure ...................................................................................................... 103 6.5. Remuneration and Incentives ........................................................................................................... 124 7. SHAREHOLDER VALUE GENERATION ......................................................................... 127 LIST OF ANNEXES .................................................... ОШИБКА! ЗАКЛАДКА НЕ ОПРЕДЕЛЕНА. 4 JSC OGK-2 ANNUAL REPORT 2017 1. Information About the Company OGK-2 is one of Russia's largest power generating companies. Its installed electric capacity totals 18,998 MW; Its installed heal capacity totals 4,162 Gсal/h; It produces 6.0% of the total power produced by Russia's thermal power plants; OGK-2 Share Trade Dynamics at MICEX (ticker OGKB) As at December 31, 2017: market capitalization of 49.32 billion rubles; dividend yield (DY) of 2.87%; P/E – 7.4; EPS – 0.065; EV / EBITDA – 4.1 Competitive Advantages: • one of Russia's largest thermal power generating companies; • boasts a range of generating equipment that features a high degree of relevance (thus ensuring reliable power supply), a wide power control range, and high-speed load setting and resetting, which maximizes the capacity of these power plants and improves adherence to the consumption schedule; • has a number of power plants that are involved in the wholesale electricity and capacity market as system power and capacity regulators, being able to vary the fuel and energy balance depending on the fuel market situation; • some of the OGK-2 power plans are the backbone plants in the free-exchange zones; • power plant operations are becoming ever more efficient; • diversification of the fuel balance and its optimization depending on the situation in the fuel market. Development Prospects: • stable cash flow from the capacity payments for the CSA facilities. • plans to participate in the modernization program provided a guaranteed return on investment, which will enable more efficient equipment operations, lower fuel consumption, and lesser emissions; 5 JSC OGK-2 ANNUAL REPORT 2017 • coast optimization as a part of the Program to Improve Operating Efficiency and Reduce Expenses; • parametric optimization of the generating equipment. Fuel balance in 2017, % Financial results (IFRS) 2016 2017 2015 2016 2017 Increase Increase YoY YoY EBITDA, million 10,112 18,924 26,817 87.14% 41.71% rubles Revenue, million 112,233 134,398 141,308 19.75% 5.14% rubles Return, % 9.01% 14.08% 18.98% 5.07 4.90 6 JSC OGK-2 ANNUAL REPORT 2017 Debt burden (per IFRS) 2016 2017 2015 2016 2017 Increase Increase YoY YoY
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